Bell v. City of New Bern

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.

NO. COA13-817
NORTH CAROLINA COURT OF APPEALS

Filed: 6 May 2014

ROBERT A. BELL and
JOAN A. BELL,
Plaintiffs,

v. Craven County
No. 12 CVS 1410
CITY OF NEW BERN and
TOWN OF TRENT WOODS,
Defendants.

Appeal by defendant Town of Trent Woods from order entered

17 January 2013 by Judge Benjamin G. Alford in Craven County

Superior Court. Heard in the Court of Appeals 11 December 2013.

Kirkman, Whitford, Brady, Berryman & Farias, P.A., by Neil
B. Whitford and Jane A. Gordon, for plaintiffs-appellees.

Teague, Campbell, Dennis & Gorham, L.L.P., by Bryan T.
Simpson and Natalia K. Isenberg, for defendant-appellee,
City of New Bern.

Turrentine Law Firm, PLLC, by S. C. Kitchen, for defendant-
appellant, Town of Trent Woods.

GEER, Judge.

Defendant Town of Trent Woods appeals from an order denying

its motion to dismiss the claims of Robert A. Bell and Joan A.

Bell for inverse condemnation, negligence, nuisance, trespass,
 -2-
and a permanent injunction, arising out of flooding damage

allegedly caused by the construction of a sewer pump station on

an intense watershed overflow lot and inadequate storm drain

pipes. To the extent that Trent Woods argues on appeal that

plaintiffs have failed to state a claim for relief, we dismiss

the appeal as interlocutory and not affecting a substantial

right.

With respect to Trent Woods' claim that it is entitled to

governmental immunity, a review of plaintiffs' complaint

establishes that the actions giving rise to plaintiffs' claims

involve the negligent maintenance of Trent Woods' storm drainage

system. Because it is well established that municipalities are

not performing governmental acts when maintaining storm drains,

governmental immunity does not apply, and the trial court

properly denied the motion to dismiss based on governmental

immunity.

Facts

In 2002, defendant City of New Bern and Trent Woods entered

into an agreement entitled "TRENT WOODS SEWER COLLECTION SYSTEM

AGREEMENT" ("the 2002 Agreement"). Under the 2002 Agreement,

New Bern agreed to finance the construction of a sewer system

for the residents of Trent Woods with an installment loan, and

Trent Woods agreed to reimburse New Bern. The system was to be
 -3-
built pursuant to the plans of the Project Engineer, Rivers and

Associates, Inc., and "with input and approval" from Trent

Woods. Once construction was complete, New Bern would bill

Trent Woods residents directly. In consideration for New Bern's

sewer collection and treatment service, Trent Woods agreed to

waive its right to receive $50,000.00 per year for eight years

from New Bern as required by a previous agreement between New

Bern and Trent Woods.

As part of the construction of the sewer system, New Bern

purchased lots 4, 5, and 6 of the Greenside Subdivision in Trent

Woods from G. Brant Cooper and Nancy E. Cooper for $150,000.00.

New Bern purchased these lots subject to restrictive covenants

in the lots' deed that the lots "shall be utilized as an intense

watershed overflow and are currently not approved for

development." Additionally, Trent Woods imposed conditions on

the developer that "[n]o pipe shall be placed in main drainage

ditch with a diameter less than 40" (inches)." As part of the

purchase of the lots, New Bern agreed to install a 42-inch

drainage tile which would run from the end of Greenside Court

underneath Country Club Road to a canal.

In the fall of 2004, New Bern completed construction of a

sewer pump station on lot 4 of the Greenside Subdivision, which

it operates and maintains. In constructing the pump station,
 -4-
New Bern increased the elevation of lot 4, brought in

approximately 9,700 cubic feet of fill, and clear cut trees from

the lot in violation of the restrictive covenants. By July

2010, New Bern had not fulfilled its obligation under the 2002

Agreement to install the 42-inch drainage pipe.

On 13 July 2010, Trent Woods entered into an agreement

("the 2010 Agreement") with New Bern that New Bern would

transfer lots 5 and 6 to Trent Woods. As part of the

consideration for the lots, Trent Woods released the City of New

Bern from any requirement to improve or maintain drainage in the

Greenside subdivision. Trent Woods further agreed to obtain

easements for drainage and agreed to indemnify New Bern for

liability arising out of any obligation regarding the

construction of a storm drainage system as provided in the

purchase contract from the developer. Trent Woods also agreed

to release to New Bern the sum of $150,000.00, which was the

amount held by Trent Woods as "retainage for the sewer project,"

as a final payment for the cost of the sewer system.

Plaintiffs own a house located in the Greenside Subdivision

of Trent Woods, approximately 600 feet from the sewer pump

station. On or about 28-30 September 2010, during heavy rains

from Tropical Storm Nicole, plaintiffs' property was flooded,

causing $50,000.00 in property damage. On or about 26-28 August
 -5-
2011, plaintiffs' property was again flooded during Hurricane

Irene, causing additional damages of $52,000.00. Prior to

September 2010, plaintiffs' property had never flooded.

Plaintiffs filed suit against New Bern and Trent Woods on

26 September 2012 asserting claims for inverse condemnation,

negligence, nuisance, trespass, and a permanent injunction.

Trent Woods filed a Motion to Dismiss on 19 October 2012 with a

supporting affidavit contending that Trent Woods did not have

insurance to cover plaintiffs' claims and, therefore, was

entitled to governmental immunity.

On 22 October 2012, plaintiffs filed their first amended

complaint alleging a waiver of sovereign immunity. Trent Woods

filed a second motion to dismiss on 14 November 2012 alleging

sovereign immunity, lack of personal and subject matter

jurisdiction, failure to state a claim, and failure to join a

necessary party. The trial court denied Trent Woods' Motion to

Dismiss in an order entered on 22 January 2013. Trent Woods

appealed the 22 January 2013 order to this Court.

Motion to Dismiss Appeal

We first address plaintiffs' motion to dismiss Trent Woods'

appeal. Trent Woods' appeal of the trial court's order denying

the motion to dismiss is interlocutory. "An interlocutory order

is one made during the pendency of an action, which does not
 -6-
dispose of the case, but leaves it for further action by the

trial court in order to settle and determine the entire

controversy." Veazey v. City of Durham, 231 N.C. 357, 362, 57

S.E.2d 377, 381 (1950).

"Generally, there is no right of immediate appeal from

interlocutory orders and judgments." Goldston v. Am. Motors

Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990). However,

an appeal from an interlocutory order is permissible "if (1) the

trial court certified the order under Rule 54(b) of the Rules of

Civil Procedure, or (2) the order affects a substantial right

that would be lost without immediate review." Boyd v. Robeson

Cnty., 169 N.C. App. 460, 464, 621 S.E.2d 1, 4 (2005). "[I]t is

the appellant's burden to present appropriate grounds for this

Court's acceptance of an interlocutory appeal[.]" Jeffreys v.

Raleigh Oaks Joint Venture, 115 N.C. App. 377, 379, 444 S.E.2d

252, 253 (1994). The record here does not, of course, contain a

Rule 54(b) certification, and therefore the burden is on Trent

Woods, as the appellant, to show that the interlocutory order

affected a substantial right that would be lost without

immediate review.

Trent Woods moved to dismiss the claims for negligence,

nuisance, trespass, and a permanent injunction based on the

defense of governmental immunity. It is well established that
 -7-
"'[t]he denial of a motion to dismiss based upon the defense of

sovereign immunity affects a substantial right and is thus

immediately appealable.'" Carl v. State, 192 N.C. App. 544,

550, 665 S.E.2d 787, 793 (2008) (quoting RPR & Assocs. v. State,

139 N.C. App. 525, 527, 534 S.E.2d 247, 250 (2000), aff'd per

curiam, 353 N.C. 362, 543 S.E.2d 480 (2001)). Thus, denial of

Trent Woods' motion to dismiss based on the defense of

governmental immunity is properly before us.

Additionally, Trent Woods has sought immediate review of

the denial of its motion to dismiss plaintiffs' inverse

condemnation claim, which was not based on the defense of

sovereign immunity. Chapter 40A of the North Carolina General

Statutes governs the procedure for inverse condemnation actions,

N.C. Gen. Stat. § 40A-51 (2013), and provides for a bifurcated

process. First, under N.C. Gen. Stat. § 40A-47 (2013), the

judge must "hear and determine any and all issues raised by the

pleadings other than the issue of compensation, including, but

not limited to, the condemnor's authority to take, questions of

necessary and proper parties, title to the land, interest taken,

and area taken." Then, if the judge determines that a taking

has occurred, the parties proceed to the second stage to

determine how much compensation is due. N.C. Gen. Stat. § 40A-

49 (2013).
 -8-
This Court has held that N.C. Gen. Stat. § 40A-47 orders,

although interlocutory, affect a substantial right warranting an

immediate appeal because "[i]t would be an act of futility and

injurious to the interests of [a government] to otherwise compel

it to proceed through trial on the issue of damages if the trial

court's initial determination that a taking had occurred was in

error." Concrete Mach. Co. v. City of Hickory, 134 N.C. App.

91, 96, 517 S.E.2d 155, 158 (1999). See also City of Winston-

Salem v. Slate, 185 N.C. App. 33, 37, 647 S.E.2d 643, 646 (2007)

(holding N.C. Gen. Stat. § 40A-47 order resolving all issues

except issue of just compensation was immediately appealable as

affecting substantial right).

Trent Woods equates the denial of its motion to dismiss the

inverse condemnation claim to an order pursuant to N.C. Gen.

Stat. § 40A-47. However, unlike a N.C. Gen. Stat. § 40A-47

order, denial of a motion to dismiss does not determine any of

the merits of the underlying inverse condemnation claim.

Furthermore, denying immediate review does not result in forcing

the parties to proceed on the issue of compensation even though

there may have been no taking. Trent Woods has provided no

persuasive reason that the order in this case should be treated

like a § 40A-47 order for purposes of an interlocutory appeal.

Because Trent Woods has not identified any other substantial
 -9-
right that may be lost absent immediate appeal, we dismiss that

portion of Trent Woods' appeal.

Discussion

Trent Woods argues that the trial court erred in denying

its motion to dismiss plaintiffs' claims for negligence,

nuisance, trespass, and permanent injunction because it is

entitled to governmental immunity. Plaintiffs counter that

Trent Woods is not entitled to governmental immunity because it

was engaged in a proprietary function, and, to the extent that

Trent Woods' actions may be considered governmental, Trent Woods

waived its immunity by purchasing liability insurance.

We review the denial of a motion to dismiss based on the

defense of governmental immunity de novo. White v. Trew, 366

N.C. 360, 362-63, 736 S.E.2d 166, 168 (2013). Additionally,

when reviewing Rule 12(b)(1) motions, we may consider and weigh

matters outside the pleadings. Williams v. Devere Constr. Co.,

215 N.C. App. 135, 138, 716 S.E.2d 21, 25 (2011).

"Governmental immunity prevents municipal corporations from

being sued when they act in a governmental capacity, but does

not apply to actions which are proprietary." Kizer v. City of

Raleigh, 121 N.C. App. 526, 527, 466 S.E.2d 336, 337 (1996).

Therefore, "'[a]pplication of the doctrine depends upon whether

the activity out of which the tort arises is properly
 -10-
characterized as governmental or proprietary in nature.'"

Williams, 215 N.C. App. at 138-39, 716 S.E.2d at 26 (quoting

Bostic Packaging, Inc. v. City of Monroe, 149 N.C. App. 825,

826–27, 562 S.E.2d 75, 77 (2002)).

Trent Woods argues that plaintiffs' claims arise out of the

establishment and construction of a sewer system and, therefore,

involve governmental actions. Plaintiffs, however, contend that

their claims are based on Trent Woods' maintenance of a storm

drainage system and, therefore, involve non-governmental -- or

proprietary -- actions not entitling Trent Woods to governmental

immunity.

As an initial matter, we believe it is worth observing:

Our courts have long noted that drawing
the line between municipal operations which
are proprietary and subject to tort
liability versus operations which are
governmental and immune from such liability
is a difficult task. Millar v. Wilson, 222
N.C. 340, 23 S.E.2d 42 (1942) (noting that
maintenance of public roads and highways is
recognized as governmental while imposing
liability on a municipality for negligent
failure to keep its streets and sidewalks in
reasonably safe condition as an "illogical"
but uniformly applied exception); Sides v.
[Cabarrus Mem'l Hosp. Inc.], 287 N.C. 14,
213 S.E.2d 297 (1975) (First, noting that
courts have applied one classification to an
activity in general while applying the
opposite classification to certain phases of
the same activity; Second, noting that
courts have applied a proprietary
classification to the exact activities that
courts have previously determined that
 -11-
expenditures for such activities, e.g.
airports, garbage removal and public parks,
are for a public purpose.). The
"application of the [governmental-
proprietary distinction] to given factual
situations has resulted in irreconcilable
splits of authority and confusion as to what
functions are governmental and what
functions are proprietary." Koontz v. City
of Winston-Salem, 280 N.C. 513, 186 S.E.2d
897 (1972).

Pulliam v. City of Greensboro, 103 N.C. App. 748, 751, 407

S.E.2d 567, 568 (1991).

As the parties' arguments demonstrate, courts in North

Carolina have treated municipal action involving a city's sewer

system differently than municipal action involving a city's

storm drainage system. When it comes to drainage systems, this

Court has adopted a bright-line rule that "storm drain

maintenance does not enjoy governmental immunity." Kizer, 121

N.C. App. at 528, 466 S.E.2d at 338. When it comes to sewer

systems, on the other hand, the classification of the activity

as governmental or proprietary is not as cut and dried.

"Historically, the establishment, construction, and

maintenance of a sewer system by a municipality for its

residents was a governmental function . . . ." Williams, 215

N.C. App. at 139, 716 S.E.2d at 26. However, "[i]n more recent

cases before this Court, recognizing the development of

municipal sewer services provided by privately owned public
 -12-
utility companies, we have declined to grant immunity on the

sole basis that sewer service was provided by a municipality."

Id. at 140, 716 S.E.2d at 26. Now, the focus has shifted to the

commercial aspect of the activity. "Although a 'profit motive'

is not dispositive in determining whether an activity is

governmental or proprietary in nature, see Schmidt [v. Breeden,

134 N.C. App. 248, 253, 517 S.E.2d 171, 175 (1999)], '[c]harging

a substantial fee to the extent that a profit is made is strong

evidence that the activity is proprietary.'" Bostic Packaging,

149 N.C. App. at 827, 562 S.E.2d at 77 (quoting Hare v. Butler,

99 N.C. App. 693, 699, 394 S.E.2d 231, 235 (1990)).

Here, plaintiffs allege that their property was flooded due

to the construction of a sewer pump station on an intense

watershed overflow lot in their subdivision and due to the

inadequacy of the 18-inch pipe in the main drainage ditch

running from lots 4, 5, and 6 of the subdivision to the nearby

canal. Trent Woods did not own, operate, or construct the lot 4

sewer pump station. The extent of Trent Woods' actions

regarding the sewer system was to reimburse New Bern for the

cost of its development and construction -- an action which, in

and of itself, did not form the basis of plaintiffs' claims

against Trent Woods.

Instead, plaintiffs based their claims on the allegations
 -13-
that Trent Woods assumed responsibility to improve and maintain

the storm drain system on the lots purchased for the sewer

system. As part of its drainage plan for the Greenside

subdivision, Trent Woods had imposed restrictive covenants on

lots 4, 5, and 6 that required the lots to be utilized as an

"intense watershed overflow." The construction by New Bern of

the sewer pump on lot 4 altered the natural storm drainage

patterns in the subdivision, and Trent Woods failed to remediate

the drainage problems by replacing the 18-inch culvert under

Country Club Road with a 42-inch culvert, despite having assumed

the duty to do so when it accepted the transfer of ownership of

lots 5 and 6. We conclude that Trent Woods' actions in this

case involved its failure to maintain its storm drainage system.

Therefore, under Kizer, Trent Woods is not entitled to

governmental immunity.

Nevertheless, Trent Woods argues that it is entitled to

governmental immunity because the culvert under Country Club

Road is part of the state highway system, and, therefore, it is

the State's responsibility. See Milner Hotels, Inc. v. City of

Raleigh, 271 N.C. 224, 226, 155 S.E.2d 543, 545 (1967) ("[T]he

Highway Commission is under a statutory obligation with

reference to the construction, maintenance and repair of all

city streets, including culverts which support city streets,
 -14-
which constitute a part of the State Highway system."). Trent

Woods contends that under Colombo v. Dorrity, 115 N.C. App. 81,

86, 443 S.E.2d 752, 756 (1994), governmental immunity applies to

the negligent maintenance of streets and culverts that are a

part of the State Highway system, even when the city has assumed

a contractual duty to maintain the culvert.

Trent Woods misconstrues the holding of Colombo. The issue

in Colombo was whether the City of Durham was entitled to

immunity for negligently failing to clear vegetation that

obscured a stop sign on a street that was a part of the state

highway system, but ran within the municipal limits of the City

of Durham. Id. at 82, 443 S.E.2d at 754.

The plaintiff argued that the case fell within the common

law exception to the doctrine of governmental immunity that

applies when "a municipality creates a dangerous condition in

its streets that proximately causes injury to a person using the

street." Id. at 85, 443 S.E.2d at 755. This Court determined

that the common law exception did not apply because the street

in question, although within the municipal limits of the city of

Durham, was a part of the state highway system and not the

city's street. Id. at 86, 443 S.E.2d at 756. Although the City

of Durham had contracted with the State to maintain the street,

the contract did not change the status of the street as part of
 -15-
the state highway system. Id. Because the common law exception

only waived immunity when the municipality creates a dangerous

condition on its own street, the exception did not apply in that

case, and the City was entitled to immunity. Id. Colombo's

limited holding has no application to this case.

Trent Woods also argues that it is entitled to immunity

because the 2010 Agreement with New Bern was void under N.C.

Gen. Stat. § 159-28(a) (2013). In support of this contention,

Trent Woods cites Data Gen. Corp. v. Cnty. of Durham, 143 N.C.

App. 97, 103, 545 S.E.2d 243, 247-48 (2001), which held that

Durham County was entitled to immunity for Data General's breach

of contract claim because the contract was invalid under N.C.

Gen. Stat. § 159-28(a). The holding in Data General was based

on the rule that "'whenever the State of North Carolina, through

its authorized officers and agencies, enters into a valid

contract, the State implicitly consents to be sued for damages

on the contract in the event it breaches the contract.'" Data

General, 143 N.C. App. at 102, 545 S.E.2d at 247 (quoting Smith

v. State, 289 N.C. 303, 320, 222 S.E.2d 412, 423-24 (1976)).

Here, in contrast to the facts of Data General, Trent Woods

is not being sued for breach of contract, and therefore the

validity of the 2010 Agreement has no bearing on whether Trent

Woods is entitled to governmental immunity. To the extent the
 -16-
validity of the 2010 Agreement is relevant to showing that Trent

Woods assumed a duty to maintain the culverts, that issue goes

to the merits of plaintiffs' claims, which is not properly

before us.

In conclusion, we hold that the trial court did not err in

denying Trent Woods' motion to dismiss based on the defense of

governmental immunity. Because plaintiffs' claims for

negligence, nuisance, trespass, and a permanent injunction arose

out of Trent Woods' actions in failing to maintain its storm

drain system, Trent Woods was acting in a non-governmental

capacity and is not entitled to sovereign immunity. Because of

this holding, we need not address whether Trent Woods waived

immunity by purchasing insurance coverage.

Affirmed in part; dismissed in part.

Judges BRYANT and CALABRIA concur.

Report per Rule 30(e).