Onnipauper LLC v. Dunston

• Court: Court of Appeals of North Carolina
• Decided: September 19, 2023
• Docket: 23-151
• Status: Published

Opinion

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA23-151

Filed 19 September 2023

Wake County, No. 22 CVD 4859

ONNIPAUPER LLC, Plaintiff,

v.

EUGENE DUNSTON, Defendant.

Appeal by Plaintiff from order entered 13 October 2022 by Judge David

Baker in Wake County District Court. Heard in the Court of Appeals 9 August

2023.

City of Oaks Law, by Hunter Blake Winstead & Jonathan W. Anderson, for Plaintiff-Appellant.

Legal Aid of North Carolina, Inc., by BreAnna VanHook, Christopher Stella, Pamela Thombs, Celia Pistolis, & Isaac W. Sturgill, for Defendant-Appellee.

CARPENTER, Judge.

Onnipauper LLC (“Plaintiff”) appeals from the trial court’s order dismissing

its complaint in summary ejectment and granting a money judgment to Eugene

Dunston (“Defendant”). On appeal, Plaintiff asserts the trial court erred by

concluding Plaintiff violated the North Carolina Debt Collection Act (the “NCDCA”).

After careful review, we agree with Plaintiff. Therefore, we reverse the trial court’s

order.

I. Factual & Procedural Background ONNIPAUPER LLC V. DUNSTON

Opinion of the Court

Starting in August 2019, Plaintiff rented a Raleigh property (the “Property”)

to Defendant. The Property is a single-family home with a well that supplies water

solely to the home. On 15 August 2019, the parties executed a rental contract (the

“Lease”). Under the terms of the Lease, Plaintiff agreed to rent the Property to

Defendant, and Defendant agreed to pay monthly rent of $1,175. Four days after

executing the Lease, the parties signed an amendment, modifying the “[t]otal rent”

to a monthly amount of $1,350. The amended Lease itemized the rent, detailing a

“[b]ase rent” of $1,175, a “[w]ater utility” amount of $125, and a “[w]asher[–d]ryer”

amount of $50. The water-utility amount refers to Defendant’s use of the well.

Plaintiff and Defendant later excluded the $50 washer–dryer amount from

Defendant’s total rent because Defendant did not use the washer or dryer.

Therefore, after the amendment, Defendant’s total rent was $1,300. Throughout

Defendant’s tenancy, a third party subsidized part of Defendant’s base rent, and

Defendant paid the difference plus the “[w]ater utility” amount. On 31 January

2022, Plaintiff gave Defendant a written notice to vacate the Property by 11 March

2022.

Defendant refused to leave the Property, so on 1 April 2022, Plaintiff filed a

complaint for summary ejectment against Defendant in Wake County Small Claims

Court. The complaint listed the “rate of rent” as $1,350. On 18 April 2022, the

small-claims magistrate ordered Defendant to vacate the Property. On 22 April

2022, Defendant appealed to Wake County District Court. On 2 June 2022,

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Defendant answered Plaintiff’s complaint, raised affirmative defenses, and asserted

counterclaims for violations of the NCDCA.

After a bench trial conducted on 23 August 2022, the trial court found

Plaintiff violated two provisions of the NCDCA. Specifically, the trial court found

“Plaintiff violated N.C. Gen. Stat. § 75-55(2) twenty-nine (29) times by attempting

to collect and collecting a fee for the provision of water that [it was] not legally

entitled to collect.” The trial court also found Plaintiff violated N.C. Gen. Stat. § 75-

54(4) by stating in its complaint that Defendant’s “rate of rent” was $1,350, rather

than $1,175. In support of these violations, the trial court found:

56. Pursuant to North Carolina General Statute § 42- 42(2) the landlord has a standing obligation to do whatever is necessary to put and keep the premises in a fit and habitable condition. Additionally, the landlord must comply with the provision of North Carolina General Statute § 42-42(4) by maintaining in good and safe working order, plumbing and other facilities provided by the landlord.

57. Access to running water is essential to the habitability of the leased premises. Thus, Landlord is not entitled to charge an additional fee to the tenant for upholding this basic statutory obligation to provide fit premises.

....

61. Plaintiff was not entitled to collect fees from Defendant for the provision of unmetered well water. These charges are not lawful, and tenant is entitled to a reimbursement of all payments for water and sewer.

Thus, the trial court dismissed Plaintiff’s complaint with prejudice and awarded

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$25,876 to Defendant. Plaintiff timely appealed on 2 November 2022.

II. Jurisdiction

This Court has jurisdiction under N.C. Gen. Stat. § 7A-27(b)(2) (2021).

III. Issues

The issues on appeal are whether the trial court erred by concluding Plaintiff

violated N.C. Gen. Stat. § 75-54(4) (2021) and N.C. Gen. Stat. § 75-55(2) (2021).

IV. Standard of Review

When we review decisions from a bench trial, “findings of fact have the force

and effect of a verdict by a jury and are conclusive on appeal if there is evidence to

support them, even though the evidence might sustain a finding to the contrary.”

Knutton v. Cofield, 273 N.C. 355, 359, 160 S.E.2d 29, 33 (1968). But “[c]onclusions

of law drawn by the trial court from its findings of fact are reviewable de novo on

appeal.” Carolina Power & Light Co. v. City of Asheville, 358 N.C. 512, 517, 597

S.E.2d 717, 721 (2004). “‘Under a de novo review, the court considers the matter

anew and freely substitutes its own judgment’ for that of the lower tribunal.” State

v. Williams, 362 N.C. 628, 632–33, 669 S.E.2d 290, 294 (2008) (quoting In re Greens

of Pine Glen, Ltd. P’ship, 356 N.C. 642, 647, 576 S.E.2d 316, 319 (2003)).

“The label of fact put upon a conclusion of law will not defeat appellate

review.” City of Charlotte v. Heath, 226 N.C. 750, 755, 40 S.E.2d 600, 604 (1946).

Thus, findings of fact that are actually conclusions of law will be reviewed as

conclusions of law. Harris v. Harris, 51 N.C. App. 103, 107, 275 S.E.2d 273, 276

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(1981). And determinations reached by “application of legal principles” are

conclusion of law. In re Helms, 127 N.C. App. 505, 510, 491 S.E.2d 672, 675 (1997).

Here, the trial court made findings of fact asserting Plaintiff violated sections

75-54 and 75-55. These assertions, however, required an application of legal

principles; specifically, these assertions required application of statutory elements.

See N.C. Gen. Stat. §§ 75-54(4), 55(2). Because we are not bound by the trial court’s

labels, we will review these “findings of facts” as conclusions of law, as they were

reached by an application of legal principles. See Heath, 226 N.C. at 755, 40 S.E.2d

at 604; In re Helms, 127 N.C. App. at 510, 491 S.E.2d at 675. Accordingly, we will

review these conclusions of law de novo. See Carolina Power & Light, 358 N.C. at

517, 597 S.E.2d at 721.

V. Analysis

On appeal, Plaintiff argues the trial court erred in holding that it violated

N.C. Gen. Stat. §§ 75-54, -55. After careful review, we agree with Plaintiff on both

arguments. Because it is more involved, we will address section 75-55 first.

A. N.C. Gen. Stat. § 75-55(2)

Chapter 75 of our General Statutes contains the NCDCA, which prohibits

certain debt-collection activity. See N.C. Gen. Stat. §§ 75-51 to -55 (2021). Section

75-55 prohibits debt collectors from collecting debts “by unconscionable means,”

which includes “[c]ollecting or attempting to collect from the consumer all or any

part of the debt collector’s fee or charge for services rendered, collecting or

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attempting to collect any interest or other charge, fee or expense incidental to the

principal debt unless legally entitled to such fee or charge.” Id. § 75-55(2).

But before diving into the specific requirements of section 75-55, we must

first analyze the six threshold elements applicable to all NCDCA claims. Reid v.

Ayers, 138 N.C. App. 261, 263–66, 531 S.E.2d 231, 233–35 (2000). All NCDCA

claims require: (1) a consumer; (2) that owes a debt; (3) to a debt collector. Id. at

263, 531 S.E.2d at 233. Further, all NCDCA claims require: (4) the debt collector to

commit an unfair act; (5) that affects commerce; and (6) that proximately injures

the consumer. Id. at 266, 531 S.E.2d at 235. Because a section 75-55 claim is

conjunctive, including the threshold elements, we will walk through each element

until we reach a dead end or valid claim.

1. Consumer

A “consumer” is “any natural person who has incurred a debt or alleged debt

for personal, family, household or agricultural purposes.” N.C. Gen. Stat. § 75-50(1)

(2021). Here, Defendant is a natural person who incurred this alleged debt for well-

water use at his home. Well-water use at one’s home is a personal, household

purpose. Defendant is therefore a consumer under the NCDCA. See id.

2. Debt

A “debt” is “any obligation owed or due or alleged to be owed or due from a

consumer.” Id. § 75-50(2). In Friday v. United Dominion Realty Trust, this Court

said that “past due” rent is debt under section 75-50. 155 N.C. App. 671, 678, 575

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S.E.2d 532, 537 (2003). Plaintiff points to Friday and federal-court interpretations

of the NCDCA for the proposition that “debt” requires the consumer to be in default,

meaning the payment must be past due. We think this is a misreading of “debt.”

When examining statutes, words undefined by the General Assembly “must

be given their common and ordinary meaning.” In re Clayton-Marcus Co., 286 N.C.

215, 219, 210 S.E.2d 199, 202–03 (1974). “Debt” is statutorily defined, but “owed”

and “due” are not. See N.C. Gen. Stat. § 75-50. Therefore, we look to the common

meaning of “owed” and “due.” See In re Clayton-Marcus Co., 286 N.C. at 219, 210

S.E.2d at 202–03. “Owe” is defined as “to be under obligation to pay or repay in

return for something received.” Owe, MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY

(11th ed. 2020). “Due” is defined as “owed or owing as a debt.” Due, MERRIAM-

WEBSTER’S COLLEGIATE DICTIONARY, supra. And contrary to Plaintiff’s position, the

Reid Court implied that payment timing is irrelevant to defining debt; the Reid

Court focused on whether there was an obligation to pay, not when the payment

was due. See Reid, 138 N.C. App. at 264, 531 S.E.2d at 234.

Here, Defendant was obliged to pay Plaintiff $125 each month to use a well.

Defendant’s obligation to pay accrued at the beginning of each month that

Defendant occupied the Property. Regardless of the timing of his payments,

Defendant was indebted to Plaintiff because Defendant was obliged to pay “in

return for something received,” well access. See N.C. Gen. Stat. § 75-50(2);

MERRIAM-WEBSTER’S, supra. Therefore, given the “common and ordinary meaning”

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of “debt,” Defendant owed Plaintiff a debt under the NCDCA. See In re Clayton-

Marcus Co., 286 N.C. at 219, 210 S.E.2d at 202–03.

3. Debt Collector

A “debt collector” is “any person engaging, directly or indirectly, in debt

collection from a consumer.” N.C. Gen. Stat. § 75-50(3). “Debt collector” is defined

broadly: “there is no regularity or primary purpose limitation.” Reid, 138 N.C. App.

at 265, 531 S.E.2d at 234. Here, the parties do not dispute that Plaintiff collected

money from Defendant, a consumer. Because we have established that the money

collected was a debt, Plaintiff is therefore a debt collector under the NCDCA. See

N.C. Gen. Stat. § 75-50(3); Reid, 138 N.C. App. at 265, 531 S.E.2d at 234.

4. Unfair Act

We must now determine whether Plaintiff committed an “unfair act.” Reid,

138 N.C. App. at 266, 531 S.E.2d at 235. “A practice is unfair when it offends

established public policy as well as when the practice is immoral, unethical,

oppressive, unscrupulous, or substantially injurious to consumers.” Marshall v.

Miller, 302 N.C. 539, 548, 276 S.E.2d 397, 403 (1981). Whether an act is unfair

depends on the facts of the case. Id. at 548, 276 S.E.2d at 403. Concerning

contractual obligations, “our state’s legal landscape recognizes that, unless contrary

to public policy or prohibited by statute, freedom of contract is a fundamental

constitutional right.” Hlasnick v. Federated Mut. Ins. Co., 353 N.C. 240, 243, 539

S.E.2d 274, 276 (2000).

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“In the absence of statutory proscription or public policy violation, it is

beyond question that parties are free to contract as they deem appropriate . . . .” Id.

at 244, 539 S.E.2d at 277. Because parties are free to contract as they please, see id.

at 244, 539 S.E.2d at 277, and because we are not moral arbiters—we do not deem a

practice “immoral, unethical, oppressive, unscrupulous, or substantially injurious”

unless the contract is prohibited by the General Assembly or other controlling

authority, see Marshall, 302 N.C. at 548, 276 S.E.2d at 403. Therefore, we must

determine whether the well-use provision is “contrary to public policy or prohibited

by statute” to determine whether Plaintiff committed an unfair act under the

NCDCA. See Hlasnick, 353 N.C. at 243, 539 S.E.2d at 276; Reid, 138 N.C. App. at

266, 531 S.E.2d at 235.

Here, in addition to the “base rent,” the parties mutually agreed that

Defendant would pay Plaintiff $125 each month to use the well. And for twenty-

nine months, Defendant paid Plaintiff to use the well. Yet the trial court found the

well-use provision “unlawful” under N.C. Gen. Stat. § 42-42 (2021). If the provision

was indeed unlawful under section 42-42, it would be against public policy and

therefore unfair under the NCDCA. See Marshall, 302 N.C. at 548, 276 S.E.2d at

403. Accordingly, we must analyze the legality of the well-use provision to

determine if it was “unfair” under the NCDCA.

i. N.C. Gen. Stat. § 42-42

Under section 42-42, landlords must “provide fit premises” for tenants. See

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N.C. Gen. Stat. § 42-42. Specifically, landlords must “[m]ake all repairs and do

whatever is necessary to put and keep the premises in a fit and habitable

condition,” id. § 42-42(2), and landlords must “[m]aintain in good and safe working

order and promptly repair all electrical, plumbing, sanitary, heating, ventilating,

air conditioning, and other facilities and appliances supplied or required to be

supplied by the landlord,” id. § 42-42(4).

Here, the trial court found the well-use provision unlawful under subsections

42-42(2) and (4) because Plaintiff was “not entitled to charge an additional fee to the

tenant for upholding this basic statutory obligation to provide fit premises.” In

other words, the trial court found Plaintiff violated subsections 42-42(2) and (4)

because Plaintiff was not entitled to separately charge Defendant for providing a fit

premises. Nothing in our statutes or caselaw supports this proposition. Plaintiff is

required to provide a fit premises; it is not required to do so for free. See id. § 42-

42(2), (4).

As mentioned above, Defendant and Plaintiff contracted for Defendant to pay

$125 per month for well access. Defendant paid, and Plaintiff provided. No

evidence suggests the Property was unfit for Defendant, and no evidence suggests

that a separate well-use fee is prohibited by section 42-42. Therefore, Plaintiff did

not violate section 42-42 by charging Defendant a well-use fee. See id. § 42-42(2),

(4).

ii. N.C. Gen. Stat. § 42-42.1

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Defendant also asserts Plaintiff’s well-use provision is unlawful under N.C.

Gen. Stat. § 42-42.1 (2021) because Plaintiff is required to charge for water based on

a metered measurement. So according to Defendant, the well-use provision is

prohibited and therefore unfair under the NCDCA. We disagree.

Under section 42-42.1, “[f]or the purpose of encouraging water, electricity,

and natural gas conservation, pursuant to a written rental agreement, a lessor may

charge for the cost of providing water or sewer service to lessees pursuant to [N.C.

Gen. Stat.] 62-110(g) . . . .” id. § 42-42.1(a) (emphasis added). Generally, “may”

does not mandate; “may” merely permits. Campbell v. First Baptist Church, 298

N.C. 476, 483, 259 S.E.2d 558, 563 (1979). Nonetheless, we will analyze section 62-

110 to confirm the general understanding of “may” is applicable here.

Subsection 110(g)(1) of Chapter 62, titled “Public Utilities,” provides that “all

charges for water or sewer service shall be based on the user’s metered consumption

of water, which shall be determined by metered measurement of all water

consumed.” N.C. Gen. Stat. § 62-110(g)(1) (2021). In a preceding section, however,

Chapter 62 provides:

authority shall be vested in the North Carolina Utilities Commission to regulate public utilities . . . . Nothing in this Chapter shall be construed to imply any extension of Utilities Commission regulatory jurisdiction over any industry or enterprise that is not subject to the regulatory jurisdiction of said Commission.

Id. § 62-2(b) (2021) (emphasis added).

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The General Assembly was clear: Chapter 62 governs only public utilities.

Id. And this Court has confirmed the clarity: “Chapter 62 of the North Carolina

General Statutes defines and prescribes the way public utilities are regulated

within the state.” State ex rel. Utils. Comm’n v. Cube Yadkin Generation LLC, 279

N.C. App. 217, 220, 865 S.E.2d 323, 325 (2021); see also, e.g., State ex rel. Utils.

Comm’n v. N.C. Waste Awareness & Reduction Network, 255 N.C. App. 613, 616,

805 S.E.2d 712, 714 (2017) (“The Public Utilities Act, found in Chapter 62 of our

General Statutes, gives the Commission the power to supervise and control the

‘public utilities’ in our State.”); State ex rel. Utils. Comm’n v. Carolina Util.

Customers Ass’n, 163 N.C. App. 46, 48, 592 S.E.2d 221, 223 (2004) (“Chapter 62 of

our statutes governs public utilities . . . .”).

Concerning water use, a “public utility” is a person “owning or operating in

this State equipment or facilities for . . . [d]iverting, developing, pumping,

impounding, distributing or furnishing water to or for the public for compensation.”

N.C. Gen. Stat. § 62-3(23)(a)(2) (2021). A “public utility” is not, however, a person

who “furnishes such service or commodity only to himself, his employees or tenants

when such service or commodity is not resold to or used by others.” Id. § 62-

3(23)(d)(4). In other words, subsection 62-3(23)(d)(4) exempts those who solely

provide water in a landlord–tenant relationship from public-utility regulation.

Cube, 279 N.C. App. at 220, 865 S.E.2d at 326 (citing N.C. Gen. Stat. § 62-

3(23)(d)(4)) (stating that “[subs]ection 62-3(23)(d) exempts from the definition of a

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‘public utility’ an entity acting in a landlord/tenant relationship”).

Here, Plaintiff is a landlord, Defendant was Plaintiff’s tenant, and the

Property is a single-family dwelling with a well as its water source. Plaintiff rented

Defendant access to the well, and that “service or commodity [was] not resold to or

used by others.” See N.C. Gen. Stat. § 62-3(23)(d)(4). Thus, Plaintiff falls squarely

within the landlord–tenant exemption and is not regulated as a public utility under

Chapter 62. See id.; Cube, 279 N.C. App. at 220, 865 S.E.2d at 326. Therefore,

Plaintiff is not required to charge for water consumption based on a metered

measurement. See N.C. Gen. Stat. § 62-3(23)(d)(4); Cube, 279 N.C. App. at 220, 865

S.E.2d at 326.

Returning to the use of “may” in section 42-42.1: The landlord–tenant

exemption supports the generally understood meaning of “may.” It is permissive.

See Campbell, 298 N.C. at 483, 259 S.E.2d at 563; N.C. Gen. Stat. § 42-42.1(a).

Section 42-42.1 states lessors may comply with section 62-110, and Chapter 62 has

a landlord–tenant exemption. See N.C. Gen. Stat. §§ 42-42.1(a), 62-3(23)(d)(4).

With the exemption, Chapter 62 does not govern landlords who provide water to

“tenants when such service or commodity is not resold to or used by others.” See id.

§ 62-3(23)(d)(4). In other words, lessors who qualify for the landlord–tenant

exemption are not regulated as public utilities under Chapter 62. See id.

So when section 42-42.1 states “a lessor may” choose to comply with section

62-110, the statute merely permits compliance with section 62-110. See Campbell,

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298 N.C. at 483, 259 S.E.2d at 563; N.C. Gen. Stat. § 42-42.1(a). It does not require

compliance. Otherwise, “may” would mandate metered measurement as a public

utility and would clash with the landlord–tenant exemption. See N.C. Gen. Stat. §

62-3(23)(d)(4). Because “may” is generally understood to permit, and that general

understanding supports the landlord–tenant exemption, the permissive meaning

applies to section 42-42.1. See Campbell, 298 N.C. at 483, 259 S.E.2d at 563; N.C.

Gen. Stat. § 42-42.1(a). Thus, section 42-42.1 does not require lessors to follow

section 62-110, and Plaintiff’s well-use provision is lawful. See N.C. Gen. Stat. § 42-

42.1(a). But as discussed above: Even if section 42-42.1 required lessors to comply

with section 62-110, Plaintiff would be exempt from compliance because of the

landlord–tenant exemption, and the well-use provision would still be lawful. See id.

§ 62-3(23)(d)(4).

We conclude Plaintiff’s well-water provision does not violate sections 42-42 or

42-42.1. Therefore, the well-water provision does not violate public policy and is not

unfair under the NCDCA. See Marshall, 302 N.C. at 548, 276 S.E.2d at 403.

Hence, Defendant failed to satisfy a threshold NCDCA element, and Defendant

therefore failed to establish a section 75-55 claim. See Reid, 138 N.C. App. at 266,

531 S.E.2d at 235; N.C. Gen. Stat. § 75-55(2). Because the elements of such a claim

are conjunctive, we need not address its remaining elements.

B. N.C. Gen. Stat. § 75-54(4)

Section 75-54 prohibits debt collectors from “[f]alsely representing the

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character, extent, or amount of a debt against a consumer or of its status in any

legal proceeding.” N.C. Gen. Stat. § 75-54(4). “To prevail on a claim for violation of

[section 75-54], one need not show deliberate acts of deceit or bad faith, but must

nevertheless demonstrate that the act complained of ‘possessed the tendency or

capacity to mislead, or created the likelihood of deception.’” Forsyth Mem’l Hosp.,

Inc. v. Contreras, 107 N.C. App. 611, 614, 421 S.E.2d 167, 169–70 (1992) (quoting

Overstreet v. Brookland, Inc., 52 N.C. App. 444, 453, 279 S.E.2d 1, 7 (1981)). But

like any other NCDCA claim, section 75-54 requires the threshold NCDCA

elements. See Reid, 138 N.C. App. at 263–66, 531 S.E.2d at 233–35. For efficiency’s

sake, we will start with the proximate-injury element. See id. at 266, 531 S.E.2d at

235 (listing the final NCDCA element as an act “proximately causing injury”).

Here, the Lease itemized the rent, detailing a “[b]ase rent” of $1,175, a

“[w]ater utility” amount of $125, and a “[w]asher[–d]ryer” amount of $50.

Defendant suggests Plaintiff violated section 75-54 because Plaintiff’s complaint

listed Defendant’s “rate of rent” as $1,350, which Defendant contends is inaccurate

because he did not owe a washer–dryer fee, and because the well-use fee was

unlawful.

We have already established the well-use provision was lawful. But as

Defendant points out, Plaintiff waived the washer–dryer fee, lowering the rent to

$1,300. Thus, the actual rent was $1,300, and Plaintiff’s complaint listed the rent

as $1,350. Defendant, however, was not proximately injured by Plaintiff’s “false

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representation.” Defendant never overpaid because of Plaintiff’s error. Indeed,

Defendant failed to pay any rent after Plaintiff filed its complaint. Nor did

Plaintiff’s error deceive Defendant. Defendant only alleged Plaintiff deceived him

due to the unlawfulness of the well-use provision, but as detailed above, we

conclude the provision was lawful. Further, Plaintiff agreed to waive the washer–

dryer fee, and Defendant never argued that he paid, or was misled, about the fee.

Therefore, Plaintiff did not violate section 75-54 because Defendant was not

proximately injured by Plaintiff’s error. See Reid, 138 N.C. App. at 266, 531 S.E.2d

at 235. Accordingly, we conclude the trial court erred when it found Plaintiff

violated section 75-54. See id. at 266, 531 S.E.2d at 235; N.C. Gen. Stat. § 75-54(4).

VI. Conclusion

In sum, we hold the trial court erred in concluding Plaintiff violated sections

75-54 and 75-55. Thus, we reverse the trial court’s order.

REVERSED.

Judge TYSON and Judge FLOOD concur.

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