In QBH I, homebuilders represented by James Scarbrough and a former law partner argued to the North Carolina Supreme Court that the Public Enterprise Statutes did not grant the Town of Carthage the necessary authority to charge water and sewer impact fees. The Supreme Court agreed. Chief Justice Newby wrote: “From the very formation of our State government, municipalities, in their various forms, have been considered creatures of the legislative will, and are subject to its control.” QBH I, 369 N.C. at 18. “Because the legislature alone controls the extension of municipal authority, the impact fee ordinances on their face exceed the powers delegated to the Town by the General Assembly, thus overstepping Carthage’s rightful authority.” Id. at 22.

In QBH II, the North Carolina Supreme Court agreed with the homebuilders (this time represented by John Scarbrough and a former law partner) that they had an “inherent right to recoup” the unlawful fees. QBH II, 371 N.C. at 73. Justice Ervin wrote: “Here, plaintiffs do not appear to have received any benefit from the payment of the challenged water and sewer impact fees that they would not have otherwise been entitled to receive…in an instance in which the only alternative was to submit to an illegal exaction or discontinue its business, the payment of money under such pressure has never been regarded as a voluntary act.” Id. at 75.