Acts Retirement-Life Cmtys., Inc. v. Town of Columbus

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA15-1333

Filed: 2 August 2016

Polk County, No. 11CVS36

ACTS RETIREMENT-LIFE COMMUNITIES, INC., Plaintiff,

v.

TOWN OF COLUMBUS, NORTH CAROLINA, Defendant.

Appeal by plaintiff and defendant from judgment entered 18 June 2015 by

Judge Jeffrey P. Hunt in Polk County Superior Court. Heard in the Court of Appeals

11 May 2016.

Parker, Poe, Adams & Bernstein L.L.P., by Benjamin Sullivan, for plaintiff.

Cranfill Sumner & Hartzog LLP, by Ryan D. Bolick and Virginia M. Wooten,
for defendant.

ELMORE, Judge.

In June 2002, the Town Council in the Town of Columbus, North Carolina

(defendant) voted to reclassify two water meters from commercial to residential at

Tryon Estates, a retirement facility owned and operated by ACTS Retirement-Life

Communities, Inc. (plaintiff). In response, plaintiff filed a complaint in February

2011. After a bench trial, the trial court ordered that the June 2002 reclassification

and concurrent change in billing methodology was arbitrary, capricious,

unreasonable, and unreasonably discriminatory in violation of N.C. Gen. Stat. §
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160A-314. Defendant appeals and plaintiff has filed a cross appeal. Because we

conclude that the statute of limitations bars plaintiff’s complaint, we reverse and

remand.

I. Background

Tryon Estates has received water and sewer services from defendant since it

opened in 1992. From 1992 through June 2002, defendant billed Tryon Estates at

the commercial rates for such services. On 18 June 2002, the Town Council held a

meeting in which it decided that two of the six water meters at Tryon Estates should

be classified as residential, not commercial, for billing purposes. One of the relevant

two meters serves, inter alia, 276 individual apartment units, and the other meter

serves ten villas, all located within the Tryon Estates community. The

reclassification took effect on 1 July 2002 and, based on defendant’s fee schedule

which contained different rates for residential and commercial water and sewer

services, resulted in plaintiff receiving higher monthly water and sewer bills.

On 9 February 2011, plaintiff filed a complaint in Polk County Superior Court

seeking a declaration that defendant’s decision to charge Tryon Estates the

commercial rate for some water and sewer services but the residential rate for others

(1) violated defendant’s Charter; (2) violated Article I, Section 1 of the North Carolina

Constitution; (3) was a form of discriminatory taxation in violation of Article I,

Section 1 and Article V, Section 2 of the North Carolina Constitution as well as the

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Fourteenth Amendment to the United States Constitution; and (4) violated the equal

protection and due process clauses of the Fourteenth Amendment to the United

States Constitution. Plaintiff also alleged a claim for relief based on unjust

enrichment and requested a permanent injunction requiring defendant to reclassify

the two water meters as commercial.

After defendant filed a notice of removal to the United States District Court

for the Western District of North Carolina, the federal district court filed a

Memorandum of Decision and Order remanding the matter to Polk County Superior

Court due to lack of subject matter jurisdiction under the Johnson Act, 28 U.S.C. §

1342. Subsequently, plaintiff filed a notice of dismissal of some of its claims under

Rule 41(a), dismissing its third, fourth, and sixth claims, solely to the extent they

relied on the United States Constitution or federal law. Prior to trial, defendant filed

a motion to dismiss and both parties filed motions for summary judgment, all of which

were denied. Finally, after a bench trial, the Honorable Jeffrey P. Hunt entered a

judgment in which he ordered the following:

By way of DECLARATORY JUDGMENT, this COURT
rules hereby that [defendant’s] June 2002 reclassifications
and concurrent changes in billing methodology, including
the application of base monthly charges per each individual
villa and apartment unit, is arbitrary, capricious, and
unreasonable and, in its effects on [plaintiff], is
unreasonably discriminatory, all in violation of N.C.G.S.

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sec. 160A-314,1 et seq. and the case law of North Carolina.

The trial court awarded plaintiff compensatory damages in the amount of

$947,813.27, “representing the total of monthly overpayments paid by [plaintiff] since

February 2008, together with interest on that total from the date of the filing of this

action.” The trial court did not rule on plaintiff’s claims based on the North Carolina

Constitution, and it denied plaintiff’s request for injunctive relief. Both plaintiff and

defendant appeal.

II. Analysis

“It is well settled that when the trial court sits without a jury, the standard of

review on appeal is whether there was competent evidence to support the trial court’s

findings of fact and whether the conclusions of law were proper in light of such facts.

A trial court’s conclusions of law, however, are reviewable de novo.” Anthony Marano

Co. v. Jones, 165 N.C. App. 266, 267–68, 598 S.E.2d 393, 395 (2004) (citations

omitted).

At the outset, defendant claims that the trial court erred in concluding as a

matter of law that plaintiff’s complaint is not barred by the statute of limitations.

Defendant argues that the three-year statute of limitations in N.C. Gen. Stat. § 1-

1 N.C. Gen. Stat. § 160A-314(a) (2015) states, “A city may establish and revise from time to time
schedules of rents, rates, fees, charges, and penalties for the use of or the services furnished by any
public enterprise.” Moreover, “Schedules of rents, rates, fees, charges, and penalties may vary
according to classes of service, and different schedules may be adopted for services provided outside
the corporate limits of the city.” Id.

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52(2) and (5) (2009) began to run immediately after the June 2002 reclassification

took effect, and because plaintiff did not file suit until 9 February 2011, plaintiff’s

complaint is time-barred.

Plaintiff argues that the continuing wrong doctrine applies and that “[t]he

limitations period for [its] claims was not triggered by the Council’s June 2002

decision to change billing practices for Tryon Estates. That limitations period was

triggered only when [defendant] injured [plaintiff] by repeatedly sending bills that

overcharged for water and sewer.” Thus, plaintiff claims that “[e]ach illegal bill was

a separate wrong that triggered its own limitations period.”

In North Carolina, “[o]nce a defendant raises a statute of limitations defense,

the burden of showing that the action was instituted within the prescribed period is

on the plaintiff. A plaintiff sustains this burden by showing that the relevant statute

of limitations has not expired.” Horton v. Carolina Medicorp, Inc., 344 N.C. 133, 136,

472 S.E.2d 778, 780 (1996) (citations omitted). The parties do not contest that a three-

year statute of limitations applies to plaintiff’s claims, but they disagree as to when

plaintiff’s claims accrued.

“A cause of action generally accrues and the statute of limitations begins to

run as soon as the right to institute and maintain a suit arises.” Penley v. Penley, 314

N.C. 1, 20, 332 S.E.2d 51, 62 (1985) (citations omitted); see also N.C. Gen. Stat. § 1-

15(a) (2015). Our courts have accepted the “continuing wrong” or “continuing

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violation” doctrine as an exception to that general rule. Williams v. Blue Cross Blue

Shield of N.C., 357 N.C. 170, 179, 581 S.E.2d 415, 423 (2003) (citing Faulkenbury v.

Teachers’ & State Employees’ Ret. Sys. (Faulkenbury II), 345 N.C. 683, 694–95, 483

S.E.2d 422, 429–30 (1997)). In order for the doctrine to apply, there must be a

continuing violation, which “is occasioned by continual unlawful acts, not by

continual ill effects from an original violation.” Id. (quoting Ward v. Caulk, 650 F.2d

1144, 1147 (9th Cir. 1981)) (quotations omitted). This Court, however, has

“acknowledge[d] that the distinction between on-going violations and continuing

effects of an initial violation is subtle[.]” Faulkenbury v. Teachers’ & State Employees’

Ret. Sys. (Faulkenbury I), 108 N.C. App. 357, 369, 424 S.E.2d 420, 425 (holding that

the plaintiffs were suffering from the continuing effects of the defendants’ original

action of amending the statute),2 aff’d per curiam, 335 N.C. 158, 436 S.E.2d 821

(1993).

To determine whether plaintiff is suffering from a continuing violation, we

consider “the policies of the statute of limitations and the nature of the wrongful

conduct and the harm alleged.” Id. at 368, 424 S.E.2d at 425 (citing Cooper v. United

States, 442 F.2d 908, 912 (7th Cir. 1971)). “ ‘[I]f the same alleged violation was

committed at the time of each act, then the limitations period begins anew with each

2 See Liptrap v. City of High Point, 128 N.C. App. 353, 358–61, 496 S.E.2d 817, 820–22 (1998), for a
thorough analysis on the history of Faulkenbury I and Faulkenbury II and the continuing wrong
doctrine.

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violation . . . .’ ” Williams, 357 N.C. at 179–80, 581 S.E.2d at 423 (quoting Perez v.

Laredo Junior Coll., 706 F.2d 731, 733 (5th Cir. 1983)).

Here, the trial court did not specifically rely on the continuing wrong doctrine

but appears to have applied it. Regarding the statute of limitations, the trial court

concluded as a matter of law the following:

For purposes of the applicable statute of limitations
asserted by [defendant] herein, each monthly invoice
presented by [defendant] to [plaintiff] since [defendant’s]
June 2002 reclassification and billing methodology change
was an additional independent wrongful act committed by
[defendant]. The three-year statute of limitations applies
and does not act to bar the claims for relief of [plaintiff]
herein. However, [plaintiff] may only recover damages
against [defendant] for overcharges asserted by [plaintiff],
and paid by [plaintiff] under [defendant’s] June 2002
reclassification and changes in billing methodology, for
that period of time beginning three years before the date
upon which [plaintiff] filed the Complaint in this action.

Before we analyze whether the continuing wrong doctrine applies, we must

first determine when plaintiff’s cause of action accrued. Under the general rule

regarding the statute of limitations stated above, plaintiff’s cause of action accrued

on 1 July 2002 when the reclassification took effect and plaintiff had the right to

institute and maintain a suit. See Penley, 314 N.C. at 20, 332 S.E.2d at 62.

Accordingly, based on the three-year statute of limitations, plaintiff would have had

to file suit prior to 1 July 2005.

On appeal, plaintiff argues, consistent with the trial court’s conclusion, that

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each monthly bill was a “separate wrong,” and based on the continuing wrong

doctrine, plaintiff’s February 2011 complaint is not time-barred.

In determining if the continuing wrong doctrine applies, we consider “the

policies of the statute of limitations and the nature of the wrongful conduct and the

harm alleged.” Faulkenbury I, 108 N.C. App. at 368, 424 S.E.2d at 425. Our Supreme

Court has stated, “Statutes of limitation are intended to afford security against stale

claims.” Estrada v. Burnham, 316 N.C. 318, 327, 341 S.E.2d 538, 544 (1986),

superseded by statute on other grounds as stated in Turner v. Duke Univ., 325 N.C.

152, 381 S.E.2d 706 (1989). “With the passage of time, memories fade or fail

altogether, witnesses die or move away, evidence is lost or destroyed; and it is for

these reasons, and others, that statutes of limitations are inflexible and unyielding

and operate without regard to the merits of a cause of action.” Id.

While plaintiff submits a number of cases on the continuing wrong doctrine

and a series of hypotheticals indicating that the statute of limitations defense cannot

“grandfather repeated wrongdoing,” we agree with defendant that plaintiff has

mischaracterized its own claims to attempt to avoid the statute of limitations. On

appeal, plaintiff argues that defendant had a continuing legal duty to comply with

N.C. Gen. Stat. § 160A-314, which grants a city the authority to establish and revise

“schedules of rates,” and each monthly bill violated that duty. Yet, the actual

wrongdoing of which plaintiff complained was defendant’s decision to reclassify two

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water meters at Tryon Estates from commercial to residential, which occurred in

June 2002.

Moreover, as stated throughout the trial court’s judgment, the relief granted

“invalidat[ed]” the June 2002 reclassification. In relevant part, the trial court made

the following conclusions of law:

3. [Defendant’s] June 2002 reclassification of two of
[plaintiff’s] meters and [defendant’s] concurrent changes in
its billing methodology . . . unreasonably discriminate
against [plaintiff], which ultimately result in overcharging
of [plaintiff] each month . . . .

4. Likewise, just as [defendant’s] June 2002 reclassification
of two of [plaintiff’s] meters and [defendant’s] concurrent
changes in its billing methodology . . . is unreasonably
discriminatory in its effects on [plaintiff,] these actions by
[defendant] were arbitrary, capricious, [and]
unreasonable . . . .

5. As a result, [plaintiff] has been overbilled and has
overpaid each billing period, for water and sewer services
since [defendant] implemented its June 2002
reclassification and concurrent changes in billing
methodology, as described herein.

....

13. [Plaintiff] is entitled to recover the amount of
overpayments it has paid each month as a result of
[defendant’s] reclassifications . . . .

14. [Plaintiff] has carried its burden of proof in showing
that [defendant] has acted arbitrarily, capriciously, and
unreasonably in its June 2002 reclassifications and the
changes in its monthly billing methodology and the
implementations thereof; as well as showing that the same

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was, in its effect as to [plaintiff], unreasonably
discriminatory; as well as showing its damages.

In sum, the trial court concluded that the reclassification and change in billing was

unlawful. The overcharges were resulting damages. Such a conclusion, however, is

inconsistent with our application of the continuing wrong doctrine.

We conclude that there was not a continuing violation, “occasioned by

continual unlawful acts,” but rather only “continual ill effects from an original

violation.” Williams, 357 N.C. at 179–80, 581 S.E.2d at 423. The only alleged

unlawful act was the June 2002 reclassification. The higher monthly bills constituted

the continual ill effects from that reclassification. The Town Council did not

reclassify the water meters at Tryon Estates as residential or commercial each

month. Because the same alleged violation was not committed each month, the

limitations period cannot begin anew. See id. at 179, 581 S.E.2d at 423.

Plaintiff waited over eight-and-a-half years to challenge the Town Council’s

decision to reclassify two meters at Tryon Estates. Since the June 2002 decision,

three new town managers have served, there were four changes to the Town Council,

and plaintiff had paid over one hundred monthly bills. Plaintiff had the option, which

it pursued, to attempt to negotiate with defendant.3 However, plaintiff cannot now

3 We note that the federal district court concluded that “[p]laintiff was given notice and a chance to be
heard on the change in classification[;]” that “[d]efendant acknowledge[d] that it met and
communicated with the [p]laintiff’s representatives before making the reclassification[;]” and that
“after the initial reclassification, the [p]laintiff repeatedly communicated with the [d]efendant to

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challenge the Town Council decision by claiming that it is affected by a continuing

wrong. Accordingly, we hold that the statute of limitations bars plaintiff’s claims.

III. Conclusion

Because we conclude that the statute of limitations bars plaintiff’s claims, we

reverse and remand the trial court’s order, and we do not reach the parties’ additional

arguments.

REVERSED AND REMANDED.

Judges McCULLOUGH and ZACHARY concur.

request that the meters be reclassified as commercial.” ACTS Ret.-Life Cmtys., Inc. v. Town of
Columbus, No. 1:11CV50, 2012 WL 727033, at *6 (W.D.N.C. Mar. 6, 2012). Plaintiff represented to
the federal district court that it had “ample notice and an opportunity to be heard,” as the Johnson Act
only applied “if a rate order was ‘made after reasonable notice and hearing.’ ” Id. (citing 28 U.S.C. §
1342).

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