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NO. COA97-617
NORTH CAROLINA COURT OF APPEALS
Filed:  3 March  1998
AMERICAN GREETINGS CORPORATION, J.O. TOMS and wife, EUNICE H.
TOMS,J. DONALD TOMS, FREDERIC E. TOMS, and RANDY C. TOMS,
Petitioners
v.
THE TOWN OF ALEXANDER MILLS, a North Carolina Municipal
Corporation,
Respondent
Appeal by petitioners from judgment entered  19 December  1996
by  Judge  Zoro  J.  Guice,  Jr.  in  Rutherford  County  Superior  Court.
Heard in the Court of Appeals  13 January  1998.
Van  Winkle,  Buck,  Wall,  Starnes  &  Davis,  P.A.,  by  Albert  L.
Sneed, Jr. and Craig D. Justus, for petitioners-appellants.
Herbert  L.  Hyde;  and  Arledge,  Oglesby,  Williams,  Martelle,
L.L.P.,  by  Richard  P.  Williams  and  Robert  K.  Martelle,  for
respondent-appellee.
WALKER, Judge.
The petitioners in this action both own property adjacent to
the  respondent  Town  of  Alexander  Mills                                   (the  Town).     American
Greetings, Inc. (AGI) is the owner of a 26.31 acre tract of land on
which it operates an industrial manufacturing facility.   J. Donald
Toms, Frederic E. Toms and Randy C. Toms are the owners of a  33.53
acre  farm  (the  Toms  farm)  which  they  acquired  in  1986  from  their
parents, J.O. Toms and Eunice H. Toms, with the parents reserving
a life estate for themselves.   Since the conveyance, two residences
have been maintained on the property, the main residence in which




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the parents reside and a tenant house which was rented to a family
of eight for a number of years.
The  Town  is  a  municipal  corporation  in  Rutherford  County,
North  Carolina  with  a  population  of  less  than  5,000  persons.    As
such, its actions are governed by Chapter 160A, Article 4A, Part 2
of  the  North  Carolina  General  Statutes.    See  N.C.  Gen.  Stat.  §§
160A-33 et seq.  (1994).
On  10  July  1995,  the  Town  adopted  a  Resolution  of  Intent  to
Annex pursuant to N.C. Gen. Stat.  §  160A-37  (1994).    The property
it  sought  to  annex  included  a  total  of  30.6  acres,  consisting  of
the entire  26.31 acre AGI tract and 4.29 acres from the Toms farm.
The  Town  then  filed  a  report  of  plans  for  the  extension  of
city services to the proposed annexation area pursuant to N.C. Gen.
Stat.                                                                         §                                                             160A-35   (1994)   which   complied   with   the   statutory
requirements  on  its  face.     Following  a  public  hearing  on  the
proposed  annexation,  the  Town’s  Board  of  Alderman  enacted  the
ordinance  on  11  September  1995.    The  petitioners  appealed  to  the
superior court pursuant to N.C. Gen. Stat. § 160A-38(a)(Cum. Supp.
1997)  for  judicial  review  of  the  ordinance.     After  a  non-jury
trial,  the  superior  court  entered  an  order  upholding  the  Town’s
annexation ordinance.   The petitioners then appealed to this Court
pursuant to N.C. Gen. Stat.  §  160A-38  (h)(Cum. Supp.  1997).
In                                                                            1957  the  North  Carolina  General  Assembly  created  the
Municipal  Government  Study  Commission  (the  Commission)  to  study,
among  other  things,  the  increasing  difficulties  experienced  by
municipalities  across  the  state  in  providing  for  their  sound




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economic  development  and  growth  under  existing  laws.    N.C.  Sess.
Laws H.R.J. Res.  51  (1957).
The  Commission  issued  two  reports  which  were  dated  1958  and
1959.    In these reports, the Commission expressed concern for the
need to balance the rights of property owners against the need for
“soundly-governed,   financially   stable,   attractive-to-live-in
cities, with a high quality of municipal services.”   Report of the
Municipal  Government  Study  Commission,  p.  6  (Supp.  1959).    After
examining the problems experienced by certain “case study cities,”
the Commission made recommendations on a new annexation procedure
which  would  take  into  consideration  these  concerns.     One  such
recommendation was that “[t]he land must be presently developed for
urban purposes or undergoing urban development,” meaning that:
(1) there has been substantial subdivision of
land  into  lots  and  tracts  of  five  acres  or
less,  and/or                                                                            (2)  there  has  been  substantial
residential,                                                                commercial   or                                   industrial
development  along  the  streets  or  highways  or
in    small    communities,    settlements    or
subdivision, and/or  (3) there is a reasonable
expectation  that  land  not  already  subdivided
or developed will soon be developed by reason
of  being  a  logical  service  area  into  which
municipal  water  and  sewer  systems  should  be
extended,  or  by  reason  of  being  adjacent  to
land  now  subdivided  or  developed  for  urban
purposes.
Id.  at  p.11.    However,  the  Commission  found  that  a  municipality
should not attempt to annex “large tracts of agricultural or vacant
land where no evidence of urban development can be shown.”    Id.
After   considering   the   Committee’s   reports,   the   General
Assembly enacted legislation in 1959, now found in Chapter 160A of
the  North  Carolina  General  Statutes,  which  announced  that  “sound




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urban   development   is   essential   to   the   continued   economic
development  of  North  Carolina,”  and  that  municipal  boundaries
should  be  extended  in  order  to  provide  governmental  services  to
areas   being   used   intensively   for   residential,   commercial,
industrial,  institutional  and  governmental  purposes  in  order  to
protect the health, safety and welfare of citizens in those areas.
N.C.  Gen.  Stat.                                                              §                                      160A-33                             (1994).    However,  the  authority  of  a
municipality to expand its boundaries is not unlimited and must be
exercised in accordance with specific statutory requirements.   See
R.R.  v.  Hook,  261  N.C.  517,  520,  135  S.E.2d  562,  565  (1964);  see
also  Huntley  v.  Potter,                                                     255  N.C.                              619,                                627,                                         122  S.E.2d                                                           681,      686
(1961).
When  a  party  appeals  from  a  municipality’s  adoption  of  an
annexation  ordinance,  and  there  is  a  prima  facie  showing  of
substantial  compliance  with  the  applicable  statute,  the  party
opposing  annexation  has  the  burden  of  showing,  by  competent
evidence, that the municipality failed to substantially comply with
the statutory requirements.   Thrash v. City of Asheville, 327 N.C.
251,                                                                           255,                                   393  S.E.2d                         842,                                         845                                                                   (1990).   “Substantial  compliance
                                                                                                                                                                                                       means compliance with the essential requirements of the Act.”   Id.
                                                                               (Citation omitted).
                                                                                                                                                                                                       The  applicable  statute  here  is  N.C.  Gen.  Stat.                           §                          160A-36,
                                                                                                                      which provides in pertinent part:
(a) A municipal governing board may extend the
municipal corporate limits to include any area
which    meets    the    general    standards    of
subsection                                                                     (b),    and    which    meets    the
requirements of subsection  (c).




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(c)  The  area  to  be  annexed  must  be  developed
for  urban  purposes.  An  area  developed  for
urban purposes is defined as any area which is
so developed that at least sixty percent (60%)
of the total number of lots and tracts in the
area  at  the  time  of  annexation  are  used  for
residential,                                                                  commercial,                                               industrial,
institutional or governmental purposes, and is
subdivided  into  lots  and  tracts  such  that  at
least   sixty   percent                                                       (60%)   of   the   total
acreage, not counting the acreage used at the
time of annexation for commercial, industrial,
governmental    or    institutional    purposes,
consists of lots and tracts five acres or less
in size.  .  .
N.C. Gen. Stat.  §  160A-36  (1994).
Subsection                                                                    (c)   of   the   statute   contains   two   tests   for
determining the availability for annexation, the “use test” and the
“subdivision test.”   Lithium Corp. V. Bessemer City, 261 N.C. 532,
538,                                                                          135  S.E.2d                                               574,          579   (1964).   Under  the  use  test,  the
municipality must show that at least 60% of the lots and tracts in
the   proposed   area   are   actually   being   used   for   other   than
agricultural purposes, i.e., residential, commercial, industrial,
governmental or institutional purposes.   Id.   Under the subdivision
test, the municipality must show that at least 60% of the acreage,
not  counting  the  acreage  being  used  for  commercial,  industrial,
governmental or institutional purposes, consists of lots and tracts
of  five  acres  or  less  in  size.     Id.     In  this  appeal,  we  are
presented with the question of whether the Town has substantially
complied with the subdivision test requirement of the statute.
When  applying  the  subdivision  test,  “the  central  inquiry  is
the   degree   of   actual   urbanization   of   the   proposed   area.”




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Shackelford  v.  City  of  Wilmington,  490  S.E.2d  578,  583  (N.C.  Ct.
App.  1997).    This Court has held:
[T]he  accuracy  of  a  subdivision  test  must
reflect  actual  urbanization  of  the  proposed
area.                                                                         The                                                   [Town’s]    subdivision    test
calculations must reflect actual urbanization,
not  reliance  on  some  artificial  means  of
making an annexation appear urbanized.
Asheville Industries, Inc. v. City of Asheville, 112 N.C. App. 713,
719,  436 S.E.2d  873,  877  (1993)(citation omitted).    Therefore, in
order for the Town to comply with the statutory requirements, there
must  exist  some                                                             “actual,  minimum  urbanization”  of  the  proposed
annexation property.   Thrash v. City of Asheville, 327 N.C. at 257,
393 S.E.2d at  846.
In  Shackelford  v.  City  of  Wilmington,  supra,  this  Court  was
confronted  with  a  similar  issue.    There,  the  City  of  Wilmington
enacted  an  annexation  ordinance  which  included  certain  property
referred to as the “Landfall Property.”   Petitioners contended that
in  order  for  land  to  be  considered  subdivided,                         “it  must  be
subdivided into lots that ‘are located on streets laid out and open
for travel and  [that] have been sold or offered for sale as lots’”
in accordance with N.C. Gen. Stat. § 105-287 (d)(1997).                       490 S.E.2d
at                                                                            582.                                                  However,  this  Court  found  sufficient   evidence  of
urbanization,  in  that  the  “Landfall  Property”  was  actively  being
developed; final subdivision plats had been recorded which showed
the entire area as being subdivided into lots and tracts five acres
or  less  in  size;  and,  twelve  of  the  lots  had  already  been  sold.
Id. at  583.




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The facts of this case are inapposite to those of Shackelford
v. City of Wilmington, in that the 4.29 acre tract is not currently
under active development; a plat has never been recorded by either
party  which  shows  the  subdivision  of  the  Toms  farm  into  lots  and
tracts  of  five  acres  or  less  in  size;  and,  there  is  no  evidence
that  the  Toms  family  intends  to  sell  any  portion  of  the  farm.
Therefore, the  4.29 acre tract is not sufficiently  “urbanized” to
satisfy the statutory requirements.
We  find  further  support  for  this  in  the  Commission’s                  1958
report.     There,  the  Commission  suggested  that  in  determining
whether property was ripe for annexation, “[t]here [was] competent
evidence to suggest that the average population density justifying
the need for [annexation] is from one to two dwellings per acre, or
from  four  to  eight  persons  per  acre.”    Report  of  the  Municipal
Government  Study  Commission,  p.                                            11     (1958);  see  also  Rogers  v.
Municipal  City  of  Elkhart,  1997  WL  739470  (Ind.  1997)(where  the
Court noted that property may be characterized as urban if  “[t]he
resident population density of the territory sought to be annexed
is at least three  (3) persons per acre.” Id. at  2).   In this case,
the 33.53 acre Toms farm contains two occupied houses surrounded by
acres  of  fields.    This  is  not  sufficient  to  justify  a  need  for
annexation of the  4.29 acre tract.
After  a  careful  review  of  the  record,  we  conclude  that  the
petitioners have met their burden of showing by competent evidence
that  the  Town  has  failed  to  comply  with  the  subdivision  test




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                                 requirement  under  N.C.  Gen.  Stat.                                                        §   160A-36   (c),  and  the  trial
                                                                         court erred in affirming the annexation ordinance.
Reversed.
Judges EAGLES and WYNN concur.

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