Badin Shores Resort Owners Ass'n, Inc. v. Handy Sanitary Dist.

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA17-718

Filed: 6 February 2018

Montgomery County, No. 15 CVS 477

BADIN SHORES RESORT OWNERS ASSOCIATION, INC., A/K/A BADIN SHORES

RESORT HOMEOWNERS ASSOCIATION, Plaintiff,

v.

HANDY SANITARY DISTRICT, Defendant.

Appeal by plaintiff from order entered 26 January 2017 by Judge Edwin G.

Wilson, Jr. in Montgomery County Superior Court. Heard in the Court of Appeals 29

November 2017.

Higgins Benjamin PLLC, by Gilbert J. Andia, Jr., for plaintiff-appellant.

Megerian & Wells, by Jonathan L. Megerian and Franklin E. Wells, Jr., for

defendant-appellee.

ZACHARY, Judge.

Plaintiff Badin Shores Resort Owners Association, Inc., also known as Badin

Shores Resort Homeowners Association (“BSR”), is a nonprofit corporation

representing the interests of homeowners in the planned unit development known as

Badin Shores Resort. Defendant Handy Sanitary District (“Handy”) is a sanitary

district created pursuant to N.C. Gen. Stat. § 130A-47 (2016) that provides water and

sewer utility services in various locations in North Carolina, including Montgomery

County, where BSR is located. The present appeal arises from a dispute regarding

BADIN SHORES RESORT OWNERS ASS’N, INC. V. HANDY SANITARY DIST.

Opinion of the Court

the terms of a contract executed by the parties in 2009. BSR appeals from the trial

court’s entry of summary judgment in favor of Handy and its dismissal of BSR’s

complaint against Handy. On appeal, BSR argues that Handy’s summary judgment

motion was not properly before the court, and that the trial court erred by granting

summary judgment in favor of Handy. After careful review, we conclude that BSR is

not entitled to relief and that the trial court’s order should be affirmed.

Factual and Procedural Background

In 2009, BSR operated its own wastewater collection system, treatment plant,

and associated spray field. On 12 March 2009, the parties signed a Wastewater

Services Agreement (hereafter “the Contract”) that provided for Handy to assume

responsibility for BSR’s wastewater services. Article II of the Contract stated that

“Handy shall provide full wastewater service to BSR under this Agreement beginning

no later [than] 90 days after the Badin Lake Area Sewer System [(hereafter “the

BLSP”)] is granted a full permit by DENR [(North Carolina Department of

Environment and Natural Resources)] and is fully operational.” Article V provided

that BSR would be charged a fee of $30.00 per occupied lot. Article VI stated that

Handy could adjust the rate charged to BSR “from time to time by action of the Handy

Board of Directors, in the ordinary course of Handy’s business” but that the base rate

charged to BSR would not be increased “before the [BLSP] is online and operational.”

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On 22 July 2010, Handy filed suit against BSR, alleging “that [BSR] had

refused [Handy’s] multiple attempts to provide the contracted-for services and

requested that the court issue an injunction ordering [BSR] to allow [Handy] to

provide wastewater services under the contract.” Handy Sanitary Dist. v. Badin

Shores Resort Owners Ass’n, 225 N.C. App. 296, 297, 737 S.E.2d 795, 797-98 (2013).

Handy also alleged that it was in the process of developing the BLSP, and that the

agreed-upon charge of $30.00 per occupied lot was an important part of the

consideration for Handy’s agreement to the Contract. “[BSR] filed a motion to

dismiss, answer, and counterclaim in response. [BSR] raised multiple affirmative

defenses, including that Article II of the Agreement contained an unfulfilled condition

precedent, namely that the North Carolina Department of Environment and Natural

Resources (“DENR”) had to issue a permit allowing operation of [BSR’s] sewer system

prior to operation of the system.” Id. at 297, 737 S.E.2d at 798. “On 9 March 2011,

the Superior Court entered a consent order requiring [BSR] to permit [Handy] to

enter its land and connect [BSR’s] properties to [Handy’s] sewer system, [and to]

maintain the current system[.] . . . The consent order ‘resolve[d] all pending claims

between the parties with prejudice.’ ” Id. at 298, 737 S.E.2d at 798.

On 20 January 2012, BSR filed a motion asking that the trial court order

Handy to appear and show cause why it should not be held in contempt of court for

its violation of the terms of the Contract incorporated into the consent order, as well

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as other terms of the consent order, entered on 9 March 2011. BSR alleged that,

although Handy had assumed operation of BSR’s wastewater system, it refused to

provide maintenance services to components of the wastewater system. “The

Superior Court, Montgomery County, entered an order to show cause on 23 January

2012, to which [Handy] responded with a counter motion to show cause, alleging in

part that because DENR has not yet issued a permit, it was not required to provide

services to [BSR]. . . . [B]y order entered 25 April 2012, [the trial court] made findings

of fact, concluded that Article II of the Agreement concerning the DENR permit was

not a condition precedent, and ordered [Handy] and [BSR] to perform all of their

contractual duties.” Id.

Handy appealed to this Court from that order, arguing that the trial court

erred by ruling that Article II of the parties’ contract was not a condition precedent.

This Court noted that “ ‘[w]here the plain language of a consent judgment is clear,

the original intention of the parties is inferred from its words. The trial court’s

determination of original intent is a question of fact. On appeal, a trial court’s findings

of fact have the force of a jury verdict and are conclusive if supported by competent

evidence.’ ” Id. at 299, 737 S.E.2d at 798 (quoting Hemric v. Groce, 169 N.C. App. 69,

75-76, 609 S.E.2d 276, 282 (2005)). The opinion in Handy Sanitary then set out the

following unchallenged findings of fact from the trial court’s order:

3. On or about March 9, 2011, the Parties entered into a

Consent Order in which the contract executed the 12th day

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of March, 2009 (hereinafter “The Contract”) by the Parties

was incorporated into the Consent Order and all of the

terms of the contract, were reaffirmed, except as expressly

modified in the Consent Order.

4. The Contract entered into by the Parties states: . . .

B. Article II. Connection/Activation Date. Handy shall

provide full wastewater service to [Badin Shores] under

this Agreement beginning no later than 90 days after the

Badin Lake Area Sewer System is granted a full permit by

the North Carolina Department of Environment and

Natural Resources (DENR) and is fully operational.

...

E. Article IX (B). Handy will operate the existing collection

system and will maintain, make repairs, and install

replacements to that system as from time to time may be

necessary. . . .

(a) Handy will operate the [Badin Shores]

Wastewater System until the connection is made to

Handy’s Wastewater Collection System. Handy will

operate under the [Badin Shores] permit if permitted to do

so by DENR.

...

9. The Contract when taken as a whole and in connection

with the Consent Order entered to [sic] and executed by the

parties and filed with the Court [on] March 9, 2011 is clear

and unambiguous as it relates to the requirements of

Handy to assume the obligation of operating, maintaining,

repairing, and when and if necessary, replacing the

existing [Wastewater] Collection System within [Badin

Shores].

10. The Court after reviewing pages from the Fifth Edition

of Black’s Law Dictionary for the words assume, maintain,

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maintenance, obligate, obligation, operate, repair, and

replace find[s] those words to be clear and unambiguous

and that the Contract requires that Handy perform those

services pursuant to the terms of the Contract and the

Consent Order for the benefit of [Badin Shores] which

services are to include all costs for electricity needed to

operate, maintain, and or [sic] replace the [Badin Shores]

collection system. . . .

Id. at 299-300, 737 S.E.2d at 799. On the basis of these and other findings, the court

concluded in relevant part that:

3. The Wastewater] Services Agreement entered into

between the Parties on or about March 12, 2009 and the

Consent Order entered by the Court on or about March 9,

2011 are clear and unambiguous and Handy is required to

perform it’s [sic] obligations as set forth in the

[Wastewater] Services Agreement and Consent Order

without further delay. . . .

4. Paragraph II CONNECTION/ACTIVATION DATE of

the Wastewater Services Agreement as set forth

hereinabove is not a condition precedent and the Badin

Lake Area Sewer System does not need to be fully

operational and the Plaintiff does not need to be granted a

full permit by the North Carolina Department of

Environment and Natural Resources before the

contractual right arises for [Handy] to provide full

wastewater service to [BSR].

Id. at 300-01, 737 S.E.2d at 799-800.

In sum, following the parties’ execution of the initial contract, legal proceedings

were conducted in which (1) BSR argued unsuccessfully that it was not permitted or

obligated to allow Handy to provide wastewater services until the BLSP was “fully

operational” and had been granted “a full permit by DENR,” and (2) Handy argued

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unsuccessfully that, although it was providing wastewater services to BSR for a

monthly fee of $30.00 per occupied lot, it was not obligated to provide maintenance

services to BSR’s wastewater system until the BLSP was “fully operational” and had

been granted “a full permit by DENR.” In both instances, the trial court ruled that

the terms of the Contract did not establish as a condition precedent to the challenged

obligation that Handy have received a final “full permit” by DENR. In Handy

Sanitary, we observed that “[a]lthough [Handy’s] position before the trial court in the

contempt hearing and on appeal is the exact opposite of its position in the complaint,

[BSR] apparently raised neither estoppel nor judicial admissions below, as the trial

court made no mention of either in its order.” Id. at 301, 737 S.E.2d at 800. This

Court held that the consent order had established that Article II’s reference to the

BLSP’s being “fully operational” and having a “full permit” from DENR was not a

condition precedent to the parties’ obligations under the Contract:

The relevant language from the Agreement states that

“Handy shall provide full wastewater service to BSR under

this Agreement beginning no later than 90 days after the

Badin Lake Area Sewer System is granted a full permit by

. . . (DENR) and is fully operational.” . . . In [Handy’s]

complaint, it requested immediate access to [BSR’s] lots in

order to begin performance. . . . If [BSR] had been correct

that it was a condition precedent, [Handy] would not have

been entitled to specific performance as it had requested.

Thus, the issue of whether Article II was a condition

precedent was a central part of the controversy. . . . By

requiring immediate performance of the contractual duties

by both parties, the consent order necessarily disposed of

any potential condition precedent.

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Id. at 302-03, 737 S.E.2d at 800 (citations omitted).

On 20 November 2015, BSR filed suit against Handy, seeking damages for

claims arising out of Handy’s increase of the monthly rate per occupied lot for

provision of wastewater services. BSR’s complaint cited the language in Article VI,

stating that the per lot rate paid by BSR “may be adjusted from time to time” but that

the “base rate charged to BSR will not increase in any event before the Badin Lake

Area Sewer System is online and operational.” BSR alleged that the “BLSP is not

online and operational as those terms were understood in the [contract].” BSR sought

damages for breach of contract, violation of the requirements of N.C. Gen. Stat. §

130A-64, and unfair and deceptive trade practices. BSR also sought a declaratory

judgment establishing its rights under the parties’ contract.

On 28 December 2015, BSR filed a “Motion to Interplead Funds in Dispute,” in

which it asked to “be entitled to pay the amount in dispute . . . into an interest bearing

trust account . . . until the Court may resolve the dispute regarding the increase.”

(19-22) Following a hearing conducted on 19 January 2016, the trial court entered

an order on 21 March 2016 denying BSR’s motion and making “mixed findings of fact

and conclusions of law,” including the following:

2. [BSR] filed a motion for interpleader in this case

pursuant to Rule 22 of the North Carolina Rules of Civil

Procedure, alleging, among other things, that [Handy’s]

proposed rate increase is violative of the parties’ contract[.]

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...

3. At the request of the Court, counsel for both parties

conducted a conference telephone call with Michael

Leggett, the Environmental Engineer with the NCDENR

Division of Water Resources. Counsel reported to the

Court by email that Mr. Leggett stated that [the BLSP]

received its initial permit in 2009, which set out the scope

of the full Project. The first certification, for the force main

and pump stations, was issued in the summer of 2011.

Eight additional partial certifications have been issued for

the Badin Lake sewer system and those certified portions

are operational. Mr. Leggett agreed with counsel for Handy

that the system described in the permit is capable of

performing its intended function; however, only partial

certifications have been issued to date.

(emphasis added).

On 3 February 2016, Handy filed an answer in which it asserted various

defenses and moved to dismiss BSR’s complaint pursuant to N.C. Gen. Stat. § 1A-1,

Rule 12(b)(6) (2016) for failure to state a claim upon which relief could be granted.

Handy then filed a motion for judgment on the pleadings pursuant to N.C. Gen. Stat.

§ 1A-1, Rule 12(c) (2016) on 21 October 2016. On 3 January 2017, BSR filed a motion

seeking summary judgment on its claim for a declaratory judgment. In support of its

summary judgment motion, BSR submitted documents produced during discovery,

including the parties’ responses to interrogatories and requests for production of

documents. On 10 January 2017, Handy filed a motion seeking summary judgment

in its favor on all of BSR’s claims.

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On 17 January 2017, a hearing was conducted on BSR’s motion for summary

judgment on its declaratory judgment claim, and on Handy’s motions for summary

judgment on all claims and for dismissal of BSR’s complaint under N.C. Gen. Stat. §

1A-1, Rule 12(b)(6) and 12(c). On 26 January 2017, the trial court entered an order

granting summary judgment for Handy and dismissing BSR’s complaint. BSR noted

an appeal to this Court.

Standard of Review

Pursuant to N.C. Gen. Stat. § 1A-1, Rule 56(c) (2016), summary judgment is

properly granted “if the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show that there is no genuine

issue as to any material fact and that any party is entitled to a judgment as a matter

of law.” “When considering a motion for summary judgment, the trial judge must view

the presented evidence in a light most favorable to the nonmoving party.” In re Will

of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (internal quotation marks

omitted). In addition:

The party moving for summary judgment bears the burden

of establishing that there is no triable issue of material

fact. This burden may be met by proving that an essential

element of the opposing party’s claim is nonexistent, or by

showing through discovery that the opposing party cannot

produce evidence to support an essential element of his

claim or cannot surmount an affirmative defense which

would bar the claim.

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DeWitt v. Eveready Battery Co., 355 N.C. 672, 681, 565 S.E.2d 140, 146 (2002)

(internal quotation marks and citations omitted).

“[O]nce the party seeking summary judgment makes the required showing, the

burden shifts to the [non-moving] party to produce a forecast of evidence

demonstrating specific facts, as opposed to allegations, showing that he can at least

establish a prima facie case at trial.” Pacheco v. Rogers & Breece, Inc., 157 N.C. App.

445, 448, 579 S.E.2d 505, 507 (2003) (internal quotation omitted). Thus, “when a

moving party has met his burden of showing that he is entitled to an award of

summary judgment in his favor, the non-moving party . . . must . . . forecast sufficient

evidence to show the existence of a genuine issue of material fact in order to preclude

an award of summary judgment.” Steele v. Bowden, 238 N.C. App. 566, 577, 768

S.E.2d 47, 57 (2014) (citations omitted). See also N.C. Gen. Stat. § 1A-1, Rule 56(e)

(2016):

When a motion for summary judgment is made and

supported as provided in this rule, an adverse party may

not rest upon the mere allegations or denials of his

pleading, but his response, by affidavits or as otherwise

provided in this rule, must set forth specific facts showing

that there is a genuine issue for trial. If he does not so

respond, summary judgment, if appropriate, shall be

entered against him.

“The standard of review for summary judgment is de novo.” Forbis v. Neal, 361

N.C. 519, 524, 649 S.E.2d 382, 385 (2007) (citation omitted). “ ‘Under a de novo

review, the court considers the matter anew and freely substitutes its own judgment’

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for that of the lower tribunal.” Craig v. New Hanover Cty. Bd. of Educ., 363 N.C. 334,

337, 678 S.E.2d 351, 354 (2009) (quoting In re Appeal of The Greens of Pine Glen Ltd.

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

Timeliness of Defendant’s Motion for Summary Judgment

BSR argues first that with respect to BSR’s claims for breach of contract,

violation of the provisions of N.C. Gen. Stat. § 130A-64, and unfair and deceptive

trade practices, Handy’s summary judgment motion was “not properly before the trial

court.” BSR correctly notes that N.C. Gen. Stat. § 1A-1, Rule 56(c) provides that a

summary judgment “motion shall be served at least 10 days before the time fixed for

the hearing” and that, in the present case, Handy’s summary judgment motion was

served seven days before the hearing, rather than ten days. We conclude, for several

reasons, that BSR is not entitled to relief on this basis.

It is well-established that “[a] party who is entitled to notice of a motion may

waive notice. A party ordinarily does this by attending the hearing of the motion and

participating in it.” Collins v. Highway Commission, 237 N.C. 277, 283, 74 S.E.2d

709, 714-15 (1953) (citation omitted). In the present case, BSR attended the hearing

and participated in it, without requesting a continuance, objecting, or arguing that

BSR needed more time to prepare. In fact, after informing the court that Handy’s

motion was served seven days prior to the hearing rather than the ten days that is

required by statute, BSR’s counsel immediately added, “I don’t think this is important

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necessarily.” BSR’s participation in the hearing is similar to the facts of cases such

as Raintree Corp. v. Rowe, 38 N.C. App. 664, 248 S.E.2d 904 (1978), in which this

Court held that:

At the hearing on the motions to dismiss, plaintiff

stipulated to the use of documents outside the pleadings,

[and] participated in oral arguments. . . . Plaintiff did not

make a timely objection to the hearing on 15 September

1977. Plaintiff did not request a continuance. Plaintiff did

not request additional time to produce evidence pursuant

to Rule 56(f). On the contrary, plaintiff participated in the

hearing through counsel. The 10-day notice required by

Rule 56 can be waived by a party. The notice required by

this rule is procedural notice as distinguished from

constitutional notice required by the law of the land and

due process of law. By attending the hearing of the motion

on 15 September 1977 and participating in it and failing to

request a continuance or additional time to produce

evidence, plaintiff waived any procedural notice required.

Raintree, 38 N.C. App. at 667-668, 248 S.E.2d at 907 (citation omitted). We conclude

that BSR waived any objection to the timeliness of the service of Handy’s summary

judgment motion.

Moreover, it is axiomatic that in order to “ ‘obtain relief on appeal, an appellant

must not only show error, but . . . must also show that the error was material and

prejudicial, amounting to denial of a substantial right that will likely affect the

outcome of an action.’ ” Bogovich v. Embassy Club of Sedgefield, Inc., 211 N.C. App.

1, 14, 712 S.E.2d 257, 266 (2011) (quoting Starco, Inc. v. AMG Bonding and Ins.

Services, 124 N.C. App. 332, 335, 477 S.E.2d 211, 214 (1996)). Thus, a party is not

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entitled to relief where the party “makes no argument, showing, or claim that [the

party] was prejudiced in any way by” an error. Crutchfield v. Crutchfield, 132 N.C.

App. 193, 196, 511 S.E.2d 31, 34 (1999). In addition, Rule 61 provides that:

No error in either the admission or exclusion of evidence

and no error or defect in any ruling or order or in anything

done or omitted by any of the parties is ground for granting

a new trial or for setting aside a verdict or for vacating,

modifying, or otherwise disturbing a judgment or order,

unless refusal to take such action amounts to the denial of

a substantial right.

N.C. Gen. Stat. § 1A-1, Rule 61 (2016).

Furthermore, the hearing was conducted in order to rule on Handy’s motion

for judgment on the pleadings pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(c), which

provides in relevant part that:

If, on a motion for judgment on the pleadings, matters

outside the pleadings are presented to and not excluded by

the court, the motion shall be treated as one for summary

judgment and disposed of as provided in Rule 56, and all

parties shall be given reasonable opportunity to present all

material made pertinent to such a motion by Rule 56.

(emphasis added).

N.C. Gen. Stat. § 1A-1, Rule 12(c) (2016).

In this case, matters outside the pleadings were presented to the trial court,

which required the court to treat Handy’s motion under Rule 12(c) as a summary

judgment motion.

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At the hearing, BSR did not request a continuance, object, or ask for more time

to prepare. In addition, BSR does not argue that it was prejudiced by the fact that

the hearing on Handy’s summary judgment motion was conducted seven days after

service, rather than the statutorily required ten days. We conclude that (1) the trial

court appropriately treated Handy’s motion under Rule 12(c) as a motion for

summary judgment; (2) BSR waived any objection to the fact that Handy’s motion

was served seven days before the hearing, rather than ten days before; and (3) BSR

has failed to establish that it suffered any prejudice. As a result, BSR is not entitled

to relief on the basis of this argument.

Breach of Contract

BSR argues that the trial court erred by granting summary judgment for

Handy on its claim for breach of contract. BSR alleges that the evidence before the

trial court created a genuine issue of material fact as to the reasonableness of the

rate hike, and that the trial court erred as a matter of law in its interpretation of the

contractual requirement that the rate not be raised until the BLSP was “online and

operational.” We conclude that these arguments lack merit.

Reasonableness of Rate Hikes

BSR argues that the trial court erred by granting summary judgment for

Handy, on the grounds that the evidence raised genuine issues of material fact as to

whether the rate increase imposed by Handy was reasonable. We disagree.

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Preliminarily, we review certain features of sanitary districts. N.C. Gen. Stat.

§ 130A-47(a) (2016) provides that “[f]or the purpose of preserving and promoting the

public health and welfare, the Commission may create sanitary districts without

regard for county, township or municipal lines.” (N.C. Gen. Stat. § 130A-2(1a) (2016)

defines “Commission” as “the Commission for Public Health.”). Pursuant to N.C. Gen.

Stat. § 130A-50(b) (2016), the “sanitary district board shall be composed of either

three or five members as the county commissioners in their discretion shall

determine.” This statute also provides that the sanitary district board members shall

serve terms of either two or four years, must reside in the sanitary district, and are

“elected at each biennial election.” N.C. Gen. Stat. § 130A-64 (2016) authorizes a

sanitary district board to impose service charges for wastewater treatment:

A sanitary district board shall apply service charges and

rates based upon the exact benefits derived. These service

charges and rates shall be sufficient to provide funds for

the maintenance, adequate depreciation and operation of

the work of the district. If reasonable, the service charges

and rates may include an amount sufficient to pay the

principal and interest maturing on the outstanding bonds

and, to the extent not otherwise provided for, bond

anticipation notes of the district. Any surplus from

operating revenues shall be set aside as a separate fund to

be applied to the payment of interest on or to the

retirement of bonds or bond anticipation notes. The

sanitary district board may modify and adjust these service

charges and rates.

It is an “accepted principle . . . that courts may not interfere in a given case

with the exercise of discretionary powers conferred on these local administrative

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boards for the public welfare, unless their action is so clearly unreasonable as to

amount to an oppressive and manifest abuse of discretion.” Halifax Paper Co. v.

Roanoke Rapids Sanitary Dist., 232 N.C. 421, 430, 61 S.E.2d 378, 385 (1950) (internal

quotation marks omitted).

In support of its motion for summary judgment, Handy submitted the affidavit

of Darrell Hinnant, Handy’s general manager, in which Mr. Hinnant averred in

relevant part that:

2. . . . [Handy] is a quasi-municipal corporation, and its

Board is “a body politic and corporate,” N.C.G.S. 130A-55.

3. The governing board of the [Handy] Sanitary District

sets water and sewerage rates in accordance with statute,

and the fixing of said rates is a legislative action on the part

of the board. . . .

4. Handy has operated a water distribution system in parts

of Davidson, Montgomery, and Randolph counties since the

1970s. It has, within the past 15 years, undertaken to

provide wastewater services as well, and has developed the

. . . (BLSP) to provide wastewater services in areas

surrounding Badin Lake. . . .

5. . . . As part of the BLSP, Handy and BSR entered into a

contract for the supply of sewer system services by the

[Handy] Sanitary District to [BSR]. . . . Handy initially

charged BSR a bulk rate . . . [of] $30 per occupied lot within

BSR. Unlike other users of the sewage system provided by

[Handy, BSR] was never charged, and is not now being

charged with any usage amount per gallon over the bulk

rate charged.

6. Handy, in accordance with paragraph VI of the contract,

notified BSR that the monthly rate charged for sewerage

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service to each lot in [BSR’s] development would increase

from the original contract rate of $30 to $58.00. This

increase in rates is the same as the increase throughout the

sanitary district and is a reflection of the costs of operating

the sewerage system, including the debt service for the

project.

7. [Handy] sets its rates for sewage by calculating the

amount necessary to charge each user in order to pay for

the service; that is, the rate is set by the board, at a public

hearing, in the amount necessary for the sanitary district

to pay for the cost of furnishing sewer service to all its

customers. In 2015, the Handy Sanitary District board

initially believed that a rate of $66 per month would be

necessary to cover the expenses of the Sanitary District’s

sewerage service. . . . In June 2015, however, it became

apparent that the loan that the Handy Sanitary District

had obtained from the State of North Carolina to pay for

the completion of the sewer project could be repaid without

an interest charge. With that reduction in expenses for the

Sanitary District, the adopted rate per customer became

$58.00 per month in place of the $66.00 originally

proposed. This rate, which is in place today, was again

calculated in an amount sufficient to pay the expenses of

the sanitary district. The calculations supporting the

setting of that rate appear in [Handy’s] responses to

requests for production labeled 8-2.

8. The base rate charged [BSR] for sewerage service is

identical to that charged for every other customer receiving

such service, with the exception that [BSR] does not pay

any usage rate over the base rate charged. That is, [BSR]

is charged a slightly more favorable rate than any other

customer of [Handy].

9. Handy Sanitary District’s sewage service would not be

able to continue to operate if rates charged were lower than

the $58 rate currently in place.

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Opinion of the Court

Mr. Hinnant’s affidavit established that, as Handy’s general manager, he was

an appropriate spokesperson for Handy. The affidavit explained the criteria by which

Handy set the current per lot rate for sewer service. We conclude that Mr. Hinnant’s

affidavit constituted prima facie evidence that the rate set by Handy was reasonable.

“If the movant demonstrates the absence of a genuine issue of material fact, the

burden shifts to the nonmovant to present specific facts which establish the presence

of a genuine factual dispute for trial.” Will of Jones, 362 N.C. at 573, 669 S.E.2d at

576. It is thus well-established that:

“[A]s a general rule, upon a motion for summary judgment,

supported by affidavits, ‘an adverse party may not rest

upon the mere allegations or denials of his pleading, but

his response, by affidavits or as otherwise provided in this

rule, must set forth specific facts showing that there is a

genuine issue for trial. If he does not so respond, summary

judgment, if appropriate, shall be entered against him.’ ”

Pacheco, 157 N.C. App. at 448, 579 S.E.2d at 507 (quoting Spinks v. Taylor, 303 N.C.

256, 263, 278 S.E.2d 501, 505 (1981) (quoting N.C. Gen. Stat. § 1A-1, Rule 56(e)). “To

hold otherwise . . . would be to allow plaintiffs to rest on their pleadings, effectively

neutralizing the useful and efficient procedural tool of summary judgment.”

Roumillat v. Simplistic Enterprises, Inc., 331 N.C. 57, 64, 414 S.E.2d 339, 342 (1992).

On appeal, BSR argues that the parties produced conflicting evidence raising

a genuine issue of material fact regarding the reasonableness of Handy’s rate

increase. In support of this contention, BSR directs our attention to the fact that in

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Opinion of the Court

its complaint and in its responses to Handy’s interrogatories, BSR alleged that the

rate set by Handy was unreasonable. BSR has not identified any evidence that it

presented in support of its contentions. BSR instead simply contends that the

allegations in its verified complaint constitute competent evidence on the issue of the

reasonableness of Handy’s rate increase.

It is true that a “ ‘verified complaint may be treated as an affidavit if it (1) is

made on personal knowledge, (2) sets forth such facts as would be admissible in

evidence, and (3) shows affirmatively that the affiant is competent to testify to the

matters stated therein.’ ” Spinks, 303 N.C. at 264, 278 S.E.2d at 505-06 (quoting Page

v. Sloan, 281 N.C. 697, 705, 190 S.E.2d 189, 194 (1972)). In addition, “verified

responses . . . [to] Interrogatories and Requests for Admission . . . are also appropriate

for the court’s consideration in ruling on summary judgment.” In re Dispute over the

Sum of $375,757.47, 240 N.C. App. 505, 511, 771 S.E.2d 800, 805 (2015) (citation

omitted). However, the facts of the present case do not support BSR’s contention that

the allegations in its complaint or its answers to interrogatories should be treated as

statements in an affidavit. BSR alleged in its complaint “upon information and belief”

that the rate increase imposed by Handy was the result of Handy’s “mismanagement

of the BLSP project.” In its response to Handy’s interrogatory, BSR similarly

asserted that the increase was not based upon increased costs incurred by Handy,

was not within “one and one-half percent (1.5%) of the median household income,”

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Opinion of the Court

and that the increase was the result of Handy’s “mismanagement of the [BLSP.]”

BSR did not, however, support its allegations with evidence pertaining to any of these

contentions, and thus failed to establish that these assertions were “made on personal

knowledge,” that they stated “facts as would be admissible in evidence,” or that BSR

would be “competent to testify to the matters stated therein.” Id. For the reasons

discussed above, we conclude that the trial court did not err by concluding that there

were no genuine issues of material fact regarding the reasonableness of Handy’s rate

hike.

“Online and Operational”

BSR also argues that the trial court erred by granting summary judgment for

Handy, on the grounds that the court failed to properly interpret the language in the

Contract. Specifically, BSR challenges the court’s interpretation of the contractual

provision in Article VI stating that BSR would initially be charged a monthly rate of

$30.00 per occupied lot, that Handy may change the rate “from time to time . . . in the

ordinary course of Handy’s business,” but that Handy would not increase the per lot

rate “before the [BLSP] is online and operational.” BSR contends that the BLSP will

not be “online and operational” until it has received a final permit from DENR. We

conclude that this argument lacks merit.

“In construing contracts ordinary words are given their ordinary meaning

unless it is apparent that the words were used in a special sense. The terms of an

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Opinion of the Court

unambiguous contract are to be taken and understood in their plain, ordinary and

popular sense.” Harris v. Latta, 298 N.C. 555, 558, 259 S.E.2d 239, 241 (1979)

(internal quotation marks and citations omitted). The meaning of operational is

“[e]ngaged in operation; able to function.” BLACK’S LAW DICTIONARY 1124 (8th ed.

2004).

The record establishes that the parties executed the Contract in March, 2009.

As discussed above, in 2011 the parties entered into a consent judgment, pursuant to

which Handy began to provide wastewater services to BSR. Four years later, in June,

2015, Handy informed BSR’s customers that the monthly per lot rate was being

raised. At that point, certifications had been issued by DENR for the individual

sections of the BLSP. BSR does not dispute that Handy serves between 900 and 1000

customers in BSR, and more than 2350 customers in the BLSP. BSR also concedes

that Handy did not raise its rates until the State required Handy to begin repaying

the construction loan that enabled Handy to build the BLSP, which was several years

after Handy began providing wastewater services to BSR. In addition, the affidavit

of Handy’s general manager avers in relevant part that:

10. The NCDENR Division of Water Services issued the

[BLSP] its initial permit in 2009. This permit set out the

full scope of the project. The first certification, for the force

main and pump stations, was issued in the summer of

2011. Eight additional partial certifications have been

issued for the [BLSP], and those certified portions are now

in operation. [Handy] has been collecting and treating

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Opinion of the Court

sewage from [BSR] for more than five years now, and its

sewerage system is online [and] fully operational.

Thus, at the time that Handy implemented a rate hike, the construction was

substantially complete and the BLSP was operating to provide wastewater services

to BSR. And, as discussed above, in its order denying BSR’s motion for interpleader,

the court found that the environmental engineer for DENR “agreed with counsel for

Handy that the system described in the permit is capable of performing its intended

function.” We conclude that Handy did not raise its base rate until after the BLSP

was “online and operational” in the ordinary meaning of the term.

In urging us to reach a different conclusion, BSR contends that the BLSP

cannot be considered to be “operational” until it has received a final certification from

DENR. BSR “recognizes that the plain meaning of the words ‘online’ and ‘operational’

might provide some support for [Handy’s] position.” BSR argues, however, that the

context of the Contract suggests that the parties intended a specialized meaning,

under which Handy’s receipt of a full permit from DENR, rather than its completion

of the BLSP and provision of wastewater services to more than 2300 customers,

determines when the BLSP is “operational.”

BSR asserts that “the term ‘operational’ cannot be equivalent to the mere

‘connection’ of [BSR] to the [BLSP]” and that “[i]f only connection was required, the

parties would have expressed that requirement[.]” BSR then argues that, if the

Contract had been interpreted so that the BLSP were deemed to be “operational”

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Opinion of the Court

immediately upon the connection of BSR’s customers to Handy’s wastewater service,

Handy might then have attempted improperly to raise the per lot rate prior to

completion of the BLSP. BSR devotes much of this argument to challenging the idea

that Handy could have raised its rates as soon as BSR’s customers were connected to

Handy. It is undisputed, however, that Handy did not attempt to raise the per lot

rate immediately upon connection. Because Handy never asserted a right to raise

the per lot rate based merely upon connection to its system, we find it unnecessary to

consider whether Handy could reasonably have taken such a position in the past.

BSR also argues that the position taken by Handy in Handy Sanitary was

inconsistent with an interpretation of the Contract that would have allowed Handy

to raise the per lot rate upon connection. Handy Sanitary did not address the

meaning of “online and operational.” Moreover, as discussed above, Handy did not

impose a rate increase upon connection, which diminishes the legal relevance of this

argument.

Furthermore, we observe that there are two undisputed circumstances that

support both BSR’s contention that it would have been improper for Handy to raise

its per lot rate in 2011, as well as Handy’s decision to impose a rate increase in 2015.

First, Handy did not raise the per lot rate until construction was completed and the

State required Handy to repay its construction loan. This is an external, “real world”

circumstance that created an additional expense for Handy and supports its need to

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Opinion of the Court

increase rates. Secondly, in 2011, Handy connected to the 900 - 1000 customers in

BSR. The mathematical calculation of a rate increase imposed at that time would

have involved dividing the additional expense by some 900 customers. In contrast,

by the time Handy actually sought a rate increase, it was serving more than 2350

customers, which allowed Handy to distribute the increased cost among a greater

number of customers, thus reducing the necessary per lot increase. These two

circumstances -- the additional expense of repaying the construction loan, and the

increased number of customers -- bear a substantive relationship to Handy’s need to

increase its per lot rate. In contrast, Handy’s receipt of its final permit from DENR

has no apparent relationship to Handy’s expenses or its need to raise rates.

We conclude that at the time Handy raised its per lot rate, the BLSP was

“online and operational” in the ordinary meaning of those words. We further conclude

that the trial court did not err by rejecting BSR’s proposed interpretation of the

Contract, and that BSR is not entitled to relief on the basis of this argument.

BSR’s Claim for Violation of N.C. Gen. Stat. § 130A-64

BSR also brought a claim against Handy for violation of N.C. Gen. Stat. § 130A-

64(a) (2016), which provides in relevant part that a “sanitary district board shall

apply service charges and rates based upon the exact benefits derived. These service

charges and rates shall be sufficient to provide funds for the maintenance, adequate

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Opinion of the Court

depreciation and operation of the work of the district. . . . The sanitary district board

may modify and adjust these service charges and rates.”

In its complaint, BSR alleged “upon information and belief” that Handy’s rate

increase was not reasonable, having been required by Handy’s “mismanagement” of

the BLSP project. For the reasons discussed in connection with BSR’s claim for

breach of contract, we conclude that Handy produced prima facie evidence that the

rate increase was reasonable, and that BSR failed to respond with factual evidence,

as opposed to unsubstantiated allegations, that the rate increase was unreasonable.

We conclude that the trial court did not err by granting summary judgment for Handy

on this claim.

BSR’s Claim for Unfair and Deceptive Trade Practices

BSR argues next that the trial court erred by granting summary judgment for

Handy on BSR’s claim for unfair and deceptive trade practices. Much of BSR’s

argument on this issue is devoted to its contention that the court erred by considering

Handy’s motion for summary judgment, on the grounds that it was not served ten

days prior to the hearing. For the reasons discussed above, we reject this argument.

BSR then argues that a sanitary district is not entitled to sovereign immunity,

and notes that, pursuant to N.C. Gen. Stat. § 130A-55 (2016), a “sanitary district

board shall be a body politic and corporate and may sue and be sued in matters

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Opinion of the Court

relating to the sanitary district.” BSR thus frames the issue as being whether a

sanitary district is entitled to immunity from all lawsuits against it.

However, the question presented by Handy’s summary judgment motion was

not whether a sanitary district was generally immune from suit, but whether it could

properly be sued for unfair and deceptive trade practices. In this regard, we observe

that “[sanitary] districts have been defined as quasi-municipal corporations.” State

ex rel. East Lenoir Sanitary Dist. v. Lenoir, 249 N.C. 96, 100, 105 S.E.2d 411, 414

(1958) (citing Halifax Paper Co. v. Roanoke Rapids Sanitary Dist., 232 N.C. 421, 61

S.E.2d 378 (1950)). “We have previously held that ‘the consumer protection and

antitrust laws of Chapter 75 of the General Statutes do not create a cause of action

against the State, regardless of whether sovereign immunity may exist.’ ” Rea Constr.

Co. v. City of Charlotte, 121 N.C. App. 369, 370, 465 S.E.2d 342, 343 (1995) (quoting

Sperry Corp. v. Patterson, 73 N.C. App. 123, 125, 325 S.E.2d 642, 644 (1985)). We

conclude that, regardless of whether a sanitary district is entitled to sovereign

immunity, as a quasi-municipal corporation it cannot be sued for unfair and deceptive

trade practices.

Moreover, “[i]t is well recognized . . . that actions for unfair or deceptive trade

practices are distinct from actions for breach of contract, and that a mere breach of

contract, even if intentional, is not sufficiently unfair or deceptive to sustain an action

under N.C.G.S. § 75-1.1. . . . ‘[A] plaintiff must show substantial aggravating

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BADIN SHORES RESORT OWNERS ASS’N, INC. V. HANDY SANITARY DIST.

Opinion of the Court

circumstances attending the breach to recover under the Act, which allows for treble

damages.’ ” Branch Banking and Trust Co. v. Thompson, 107 N.C. App. 53, 62, 418

S.E.2d 694, 700 (1992) (quoting Bartolomeo v. S.B. Thomas, Inc., 889 F.2d 530, 535

(4th Cir. 1989)). In this case, BSR’s complaint alleges “upon information and belief”

that Handy misrepresented the expected total cost of the BLSP. BSR did not support

this contention with any evidence before the trial court, and does not argue on appeal

that Handy’s alleged breach of contract was accompanied by “substantial aggravating

circumstances.” We conclude that the trial court did not err by granting summary

judgment for Handy on BSR’s claim for unfair and deceptive trade practices.

Conclusion

For the reasons discussed above, we conclude that the trial court did not err by

granting summary judgment for defendant and that its order should be affirmed.

AFFIRMED.

Judges STROUD and ARROWOOD concur.

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