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Leland v. Belville Order
Leland v. Belville Order
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The Town of Belville, the defendant, brings these motions to dismiss the
claims asserted by the plaintiffs, Town of Leland and H2GO Brunswick Regional Water
& Sewer (“H2GO”), pursuant to Rules 12(b)(1) and 12(b)(6) of the Rules of Civil
Procedure before the court. The court has considered the motions filed, arguments
made by the parties in court during its hearing on July 6, 2018, the briefs of the
The defendant contends that Leland lacks standing to bring those claims, and
court’s proper exercise of subject matter jurisdiction.” Neuse River Found., Inc. v.
Smithfield Foods, Inc., 155 N.C. App. 110, 113, 574 S.E.2d 48, 51 (2002) (quoting
Aubin v. Susi, 149 N.C. App. 320, 324, 560 S.E.2d 875, 878 (2002)). "If a party does
not have standing to bring a claim, a court has no subject matter jurisdiction to hear
the claim." Estate of Apple v. Commercial Courier Express, Inc., 168 N.C. App. 175,
In Mangum v. Raleigh Bd. of Adjustment, 362 N.C. 640, 642, 669 S.E.2d 279,
281 (2008) our Supreme Court has ruled that generally “[t]he North Carolina
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[O]nly one with a genuine grievance, one personally injured by a
statute, can be trusted to battle the issue. "The 'gist of the question of
standing' is whether the party seeking relief has 'alleged such a personal
stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation[s] of issues upon which
the court so largely depends for illumination of difficult constitutional
questions.'"
Stanley v. Dep't of Conservation & Dev., 284 N.C. 15, 28, 199 S.E.2d 641, 650
(1973) (quoting Flast v. Cohen, 392 U.S. 83, 99, 88 S. Ct. 1942, 20 L. Ed. 2d 947
(1968) (alteration in original) (quoting Baker v. Carr, 369 U.S. 186, 204, 82 S. Ct.
In determining who “suffer[s] harm”, the Court concluded that “it is not
necessary that a party demonstrate that injury has already occurred, but a showing
of “immediate or threatened injury” will suffice for purposes of standing. River Birch
Assocs. v. City of Raleigh, 326 N.C. 100, 129, 388 S.E.2d 538, 555 (1990) (citing
Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333, 342, 97 S. Ct. 2434, 53 L.
In 1993, the Supreme Court had concluded that one must have suffered some
“injury in fact” to have standing to sue. Dunn v. Pate, 334 N.C. 115, 119, 431 S.E.2d
178, 181 (1993). As recently as the opinion handed down in Neuse River Found.,
Inc. v. Smithfield Foods, Inc., 155 N.C. App. 110, 114, 574 S.E.2d 48, 52 (2002),
disc. rev. denied, 356 N.C. 675, 577 S.E.2d 628 (2003), the court required that three
legally protected interest that is (a) concrete and particularized and (b) actual or
imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the
speculative, that the injury will be redressed by a favorable decision. These criteria
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comprise the federal standard for standing found in Lujan v. Defenders of Wildlife,
504 U.S. 555, 560, 112 S. Ct. 2130, 119 L. Ed. 2d 351, 364 (1992).
In Cedar Greene, LLC v. City of Charlotte, 222 N.C. App. 1, 17, 731 S.E.2d
193, 204-05 (2012), rev'd, 366 N.C. 504, 739 S.E.2d 553 (2013) (adopting Court of
statute) the Supreme Court applied the standard previously set out in Goldston v.
State, 361 N.C. 26, 637 S.E.2d 876 (2006) and Mangum, supra. The court concluded
that the federal standard can be “instructive as to general principles … and for
comparative analysis.” Cedar Greene, 222 N.C. App. at 17, 731 S.E.2d at 204.
The original complaint in this case was filed on December 1, 2017, and an
amended complaint was filed on April 5, 2018. The complaint seeks a declaratory
First claim for relief: For a declaration that the challenged resolution, putative
transfer and agreements are void because they impair H2GO as a body corporate and
politic in contravention of N. C. Gen. Stat. Chapter 130A, Article II, Part 2.
Second claim for relief: For a declaration that the challenged resolution,
putative transfer and agreements are void because they involve an improper transfer
of government functions.
Third claim for relief: For a declaration that the challenged resolution, putative
transfer and agreements are void because they are oppressive, the result of a
manifest abuse of discretion, in wanton disregard of the public good and contrary to
N. C. Gen. Stat. §130A-55 and N. C. Gen. Stat. Chapter 160A, Article 12.
Fourth claim for relief: For a declaration that the challenged resolution,
putative transfer and agreements are void because they involve an illegal debt
transfer that is unauthorized under North Carolina law and contrary to H2GO’s bond
order.
Fifth claim for relief: For a declaration that the challenged resolution, putative
transfer and agreements are void because they involve an illegal debt transfer in
violation of Section 7.09 of H2GO’s bond order.
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Sixth claim for relief: For a declaration that the challenged resolution, putative
transfer and agreements are void because it violates N. C. Gen. Stat. Chapter 159,
Article 5 [N. C. Gen. Stat. §§ 159-83(a) and (b)], N. C. Gen. Stat. § 159-93 and N.
C. Gen. Stat. §§ 159-96(a) and (d).
Seventh claim for relief: For a declaration that the challenged resolution,
putative transfer and agreements are void because they involve an illegal debt
transfer in violation of N. C. Gen. Stat. Chapter 159, Article 8 in that Belville is
incurring indebtedness and is contractually obligating itself to pay H2GO’s
indebtedness without issuing new revenue bonds. The system is significantly located
outside Belville’s corporate limits.
In considering a motion to dismiss for lack of standing, the allegations of the
plaintiff are deemed true and the supporting record is considered in the light most
favorable to the non-moving party. See Stone v. N.C. Dept of Labor, 347 N.C. 473,
477, 495 S.E.2d 711, 713, cert denied, 525 U.S. 1016, 119 S. Ct. 540, 142 L. Ed. 2d
449 (1998). The court may also consider and weigh matters that are outside of the
pleadings. Tart v. Walker, 38 N.C. App. 500, 502, 248 S.E.2d 736, 737 (1978).
invoke jurisdiction or provide notice of the subject of the suit to the opposing party.
See Mangum v. Surles, 281 N.C. 91, 99, 187 S.E.2d 697, 702 (1972). Further, “a
plaintiff must demonstrate standing separately for each form of relief sought.”
Friends of Earth, Inc. v. Laidlaw Envtl. Servs. (TOC) Inc., 528 U.S. 167, 185, 145 L.
The court finds that Town of Leland has shown an immediate and threatened
injury and thus has standing to bring this action. The Town of Leland generally
the H2GO sanitary district and makes up the majority of its service area. H2GO, a
regional public utility tasked with providing water and sewer service to over 10,000
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resident and commercial customers in northeast Brunswick, was organized and exists
The Town of Leland, through the causes of action listed above, has alleged that
into an agreement with the Town of Belville wherein it would convey the entirety of
its assets and debts, including the water and sewer systems, to Belville and then the
town would contract with H2GO to operate and maintain those systems with the right
on the part of Belville to terminate that contract. Leland further contends that the
transfer of the debt was done without the required preapproval of the Local
Government Commission and H2GO’s bondholder. Leland alleges that all of these
transactions by H2GO and Belville were brought about to avoid the probable
of commissioners that resulted when two new members were elected to the board
The standing of the Town of Leland arises from its contentions that the multiple
procedures of Chapter 130A, Article II, Part 2; (2) eliminates the discretion of future
elected H2GO’s Boards of Commissioners; (3) transfers the debt of H2GO without
proper prior approval from the Local Government Commission and the commission’s
bondholder; (4) were in wanton disregard of the public good and a manifest abuse
of discretion; (5) interferes with the contract between Leland and H2GO to handle
utility billing services for Leland residents; and (5) deprives Leland the benefit of the
governance and operation of the sanitary district created by the Commission of Public
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Health whose powers are granted to the district by the General Assembly and places
Leland has alleged a direct interest in the outcome of this controversy that will
“assure that concrete adverseness which sharpens the presentation of issues upon
which the court so largely depends for illumination of the issues.” Stanley v. Dep't
of Conservation & Dev., 284 N.C. 15, 199 S.E.2d 641 (1973) (quoting Flast v. Cohen,
392 U.C. 83, 99, 88 S. Ct. 1942, 20 L. Ed. 2d 947, 961 (1968). Although the town
pays, along with other account holders, fees for H2GO services. It has standing to
challenge the alleged illegal disbursement of district funds and property to Belville.
Such challenges have been recognized for decades against local officials in Stratford
v. City of Greensboro, 124 N.C. 111-12, 32 S.E. 394, 395 (1899), county officials in
Freeman v, Board of County Commissioners, 217 N.C. 209, 7 S.E.2d 354 (1940) and
state officials in Lewis v. White, 287 N.C. 625, 216 S.E.2d 134 (1975).
The court finds that the Town of Leland has raised sufficient particularized
allegations that affect the plaintiff, which when taken as true, meet the criteria of a
threatened or imminent injury under Goldston and Mangum that could be redressed
passed by defendant, H2GO, the transfer of H2GO’s property and the debt to the
defendant, Town of Belville, or the agreements entered into between Belville and
H2GO. Instead, the court holds only that the Town of Leland has standing to
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challenge the actions of the Town of Belville as unlawful or the result of a manifest
abuse of discretion, in wanton disregard of the public good. The burden is upon the
The Town of Belville contends that the plaintiffs’ claims should be dismissed
pursuant to this rule for failure to state a claim upon which relief can be granted.
This motion tests the legal and factual sufficiency of the pleadings. Sutton v. Duke,
277 N.C. 94, 99, 176 S.E.2d 161, 163 (1970). In applying the rule, the allegations
in the complaint are taken as true, but conclusions of law are not. A complaint should
not be dismissed for insufficiency unless it appears to a certainty that plaintiff[s] [are]
entitled to no relief under any state of facts which could be proved in support of the
claim. Id. at 103, 176 S.E.2d at 166 In addition, while the concept of notice pleading
12(b)(6). Stanback v. Stanback, 297 N.C. 181, 204, 254 S.E. 2d 611, 626 (1979).
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A. The defendant contends that the Transfer Declaratory Claims are subject
to dismissal.
In support of its N.C. Gen. Stat. § 1A-1, Rule 12(b)(6) motion to dismiss the
defendant contends:
a. The transfer declaratory claims are subject to dismissal because N.C. Gen.
governmental units.
From the exhibits, it appears that H2GO authorized the transfer of all of its
real and personal property, and Belville similarly authorized its acceptance. The
plaintiffs claim that constitutionally the General Assembly can create a sanitary
district which will be “a body politic and corporate,” but the defendant and H2GO
cannot use N.C. Gen. Stat. § 160A-274(b) to indirectly dissolve that local government
entity. The plaintiffs contend further that the authority and procedures to dissolve a
sanitary district are provided for in various sections of N.C. Gen. Stat. Chapter 130A
which would not permit the effective dissolution of this sanitary district through these
controversy between the parties which a declaratory judgment would serve to clarify
b. The transfer declaratory claims are subject to dismissal because the boards
Early Supreme Court cases instruct us that “courts may not interfere with
discretionary powers conferred on these local administrative boards for the public
and manifest abuse of discretion.” Newton v. School Committee, 158 N.C. 180, 188,
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73 S.E. 886, 887 (1912). “Courts have no right to pass on the wisdom with which
[governmental units] act. Courts cannot substitute their judgment for that of the
[governmental units] honestly and fairly exercised.” Barbour v. Carteret County, 255
N.C. 177, 181, 120 S.E.2d 448, 451 (1961). However, in Barbour the court found
that the allegations in the complaint supported the conclusion that the county
funds. These allegations, admitted for the purpose of considering the motion to
dismiss, manifested bad faith and stated a cause of action to be heard on the merits.
Even though the plaintiffs must overcome the presumption of legality afforded
to public officials, Leland and H2GO have set out in the amended complaint sufficient
and Barbour.
c. The transfer declaratory claims are subject to dismissal because the transfer
does not eliminate H2GO as a political entity or strip away its governmental
discretion.
H2GO’s funds and assets to Belville and allegedly allows Belville to govern the system
and set rates for water and sewer services. The plaintiff has set out sufficient facts,
if proven, to support the substantive elements of its claim that these actions
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B. The defendant contends that the Debt Declaratory Claims are subject to
The defendant contends that the obligations set out in the Transfer Agreement
would not be transferred until the Local Government Commission’s approval was
and Sewer Systems executed on November 27, 2018, provides that “[p]rior to the
expiration of the term under the parties’ contemporaneous Operating Agreement, the
District shall obtain the approval of the North Carolina Local Government Commission
The plaintiffs contend that the “Assignment and Bill of Sale,” executed also on
November 28, 2017, assigned the 2012 SunTrust Revenue Bond (item # 117) from
These documents create an actual, real and genuine controversy that arises
out of the parties’ opposing contentions. In addition, the plaintiff raised other alleged
violations of Chapter 159, Article 5 “Revenue Bonds,” which, if proven, would require
the court to determine, what, if any, effect it would have on the legality of the actions
transactions.
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N.C. Gen. Stat. Chapter 159, Article 8, entitled “Financing Agreements and
other Financing Arrangements” excludes from the coverage of this article agreements
made in connection with the issuance of revenue bonds, special obligation bonds …,
or of general obligation bonds …” The court finds that the alleged resolution, transfer,
and agreements described in the complaint are related to the issuance of the water
and sewer system revenue bonds by H2GO to provide funding to the system.
Based upon this exclusion, the plaintiff’s Seventh Cause of Action based on
and arising out of N. C. Gen. Stat. Chapter 159, Article 8 is dismissed. The motions
to dismiss the plaintiffs’ Fourth, Fifth, and Sixth Claims for Relief pursuant to N.C.
The court, as well as the parties in this case, could not find any cases that
address the fact situation before the court and whether an undue influence claim
could arise from an entity exercising improper influence over another entity. The
court finds that H2GO, however, has alleged sufficient facts, which if taken as true,
D. The defendant contends that H2GO’s fiduciary duty and constructive fraud
claim is subject to dismissal because no fiduciary duty can exist between negotiating
or contracting parties.
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As above, the court finds that H2GO has alleged sufficient facts, when taken
E. The defendant contends that H2GO’s quiet title claim is subject to dismissal
because Belville is now the record owner of the real property at issue and H2GO
The court finds that the allegations in the complaint state that the Agreement
to Convey Water and Sewer Systems, executed on November 28, 2017 by Brunswick
Regional Water and Sewer H2GO, conveyed to Belville at closing, “free and clear of
liens and encumbrances, the Water and Sewer Systems by delivering Warranty Deeds
for the District’s real property and an Assignment and Bill of Sale for the District’s
personal property …” On that same date and time, H2GO executed an “Assignment
and Bill of Sale” with attached exhibits describing in detail a compilation of the
personal and real property conveyed. These deeds were executed and properly
recorded.
H2GO has not alleged any facts to establish his title. All of the pleadings and
exhibits indicate that Belville is now the owner of these properties. The complaint
seeks a declaration finding that the Agreement to Convey Water and Sewer Systems
and the Assignment and Bill of Sale are void and of no effect. If ultimately successful
on its claims for relief, the plaintiffs contend the appropriate remedy would be that
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Pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(6), the defendant’s motion to
dismiss the Eleventh Claim for Relief seeking an order quieting title in the real
dismissal because no violations by Belville are alleged and the allegations of violations
The plaintiff, Town of Leland, has set out in the amended complaint sufficient
facts to support the substantive elements of a claim alleging an open meetings law
violation against H2GO. Because of the effect on Belville should Leland obtain a
successful result in bringing this cause of action, the court at this time is going to
which the court may order other persons be made parties if they have or claim any
voiding the action that the suit seeks to set aside. The court, in its discretion,
reserves the right to enter further orders based upon that statutory authority.
Summary
Based on the foregoing, the court orders that the plaintiffs Seventh Claim for
The defendant’s motions to dismiss the remaining Claims for Relief are denied.
It is ordered that filed copies of this order be mailed to counsel for all of the
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This the 14th day of August, 2018.
___________________________
Judge Presiding
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