North Carolina School Boards Ass'n v. Moore

HUNTER, Judge,

concurring in part and dissenting in part.

While I agree with most of the majority opinion, I disagree with the majority’s conclusions that (I) the clear proceeds of payments collected by the North Carolina Department of Transportation (“DOT”) pursuant to N.C. Gen. Stat. § 20-118 (e) (2001) fall within the purview of Article IX, Section 7 of the North Carolina Constitution and therefore belong to the public schools, and (II) any penalty collected by a State agency from a public school or local school administrative unit should not be remitted to the Civil Penalty Fund for distribution among the state’s public schools. Accordingly, I respectfully dissent from those portions of the majority opinion but concur in the majority’s remaining holdings.

I.

As to the payments collected by DOT from owners of vehicles exceeding axle-weight limits: N.C. Gen. Stat. § 20-88 imposes an annual registration fee on property-hauling vehicles based upon their empty weight and heaviest load to be transported as declared by the owner or operator. N.C. Gen. Stat. § 20-88 (a) (2001). A vehicle driven which exceeds the declared weight for which the vehicle is registered is subject to the penalties set forth in N.C. Gen. Stat. § 20-118 (e). See N.C. Gen. Stat. § 20-88 (k) (2001). Subsection (e) of N.C. Gen. Stat. § 20-118 , which is entitled “Penalties,” provides that “the [DOT] shall assess a civil penalty against the owner or registrant of [a] vehicle ...” for each violation of the weight limits set forth in Section 20-118. N.C. Gen. Stat. § 20-118 (e) (2001).

Article IX, Section 7 of the North Carolina Constitution provides the following, in pertinent part:

[T]he clear proceeds of all penalties and forfeitures and of all fines collected in the several counties for any breach of the penal laws of the State, shall belong to and remain in the several counties, and shall be faithfully appropriated and used exclusively for maintaining free public schools.

*286 N.C. Const, art. IX, § 7. Our Supreme Court has interpreted this constitutional provision as identifying the following two distinct funds for the public schools: “(1) the clear proceeds of all penalties and forfeitures in all cases, regardless of their nature, so long as they accrue to the state; and (2) the clear proceeds of all fines collected for any breach of the criminal laws.” Mussallam v. Mussallam, 321 N.C. 504, 509 , 364 S.E.2d 364, 366 (1988). Further, our Supreme Court has defined “ ‘penal laws,’ ” as used in Article IX, Section 7, as “laws that impose a monetary payment for their violation.” Id. at 509 , 364 S.E.2d at 367 . The clear proceeds of all penalties and forfeitures which are punitive in nature and which are required to be paid to the state or to a department of the state are subject to Article IX, Section 7. Id. Monetary payments are “punitive rather than remedial in nature” if they are “intended to penalize the wrongdoer rather than compensate a particular party.” Id. The label attached to the monetary payment is not determinative of whether such payment constitutes a penalty, forfeiture, or fine within the meaning of Article IX, Section 7. Craven County Bd. of Education v. Boyles, 343 N.C. 87, 92 , 468 S.E.2d 50, 53 (1996).

The monies collected under N.C. Gen. Stat. § 20-118 (e) are paid to the DOT, a state agency, and therefore “accrue to the state” as is required in order to fall under the purview of Article IX, Section 7. Mussallam, 321 N.C. at 509 , 364 S.E.2d at 366 . Thus, the determinative issue becomes whether the payments collected pursuant to N.C. Gen. Stat. § 20-118 (e) are punitive or remedial in nature.

The weight penalties collected pursuant to N.C. Gen. Stat. § 20-118 (e) are remedial in nature and therefore, do not belong to the public schools. The term “remedial” is defined in part as “[a]ffording or providing a remedy; providing the means of obtaining redress.” Black’s Law Dictionary 1296 (7th ed. 1999). The penalties at issue are intended to compensate the state for the deterioration of its highways due to operation of overweight vehicles thereon and are thus remedial in nature. In an affidavit submitted to the trial court, David Allsbrook (“Allsbrook”), Deputy Chief for Operations of the DOT, testified that, “[a]lthough passenger cars have little or no effect on the deterioration of highway surfaces and bases, larger vehiclefs] and heavier loads contribute significantly to road deterioration and failures.” Allsbrook additionally stated that “[w]hile legal weight loads cause some deterioration^] loads in excess of the legal limit cause significantly more deterioration.” Although many factors contribute to road deterioration, according to Allsbrook, overweight vehicles *287 accelerate the deterioration of pavements which causes premature failures of the roadways which the DOT must repair. Moreover, the amount of monetary penalty that a violator must pay is calculated according to the number of pounds over the maximum amount of weight permitted under N.C. Gen. Stat. § 20-118 and the number of pounds over the declared weight for licensing purposes under N.C. Gen. Stat. § 20-88 , providing additional support that these monetary payments are remedial in nature.

The collection of the annual registration fee and penalties for overweight vehicles is further analogous to the penalties under the North Carolina tax code for late filings, underpayment or failure to comply with the tax code, which the majority concludes, and in which I concur, are remedial and not subject to Article IX, Section 7 of the North Carolina Constitution. “All taxes levied under [Article 3 of the Motor Vehicle Act of 1937] are compensatory taxes for the use and privileges of the public highways of this State.” N.C. Gen. Stat. § 20-97 (2001). Thus, the annual registration fees under N.C. Gen. Stat. § 20-88 are taxes for the use of the roads and highways of this State. As the proceeds from these taxes and the penalties are credited to the Highway Fund in order to finance the maintenance of the roads, it follows that these penalties are indeed remedial and not punitive.

Just as the income tax penalties are “provided primarily as a safeguard for the protection of the revenue and to reimburse the Government for the heavy expense of investigation and the loss resulting from the taxpayer’s fraud,” Helvering v. Mitchell, 303 U.S. 391, 401 , 82 L. Ed. 917, 923 (1938) (footnote omitted), so to are penalties for overweight vehicles directly designed to safeguard the state’s highways and reimburse the state for the expense of enforcing the weight restrictions and repairing roads damaged by overweight vehicles. Thus, I would hold that the monetary payments collected under N.C. Gen. Stat. § 20-118 (e) are remedial in nature and therefore, do not belong to the public schools.

II.

I also disagree with the majority’s holding that payments made by local public school systems to state agencies, including the $11,000.00 civil penalty paid by the Edgecombe County Board of Education to DENR for failure to comply with interim effluent limitations at the Phillip’s School Wastewater Treatment Facility, should not be remitted to the Civil Penalty Fund.

*288 As with all civil penalties paid to state agencies, the determining factor in deciding whether the payments collected from public school systems are subject to Article IX, Section 7 and belong to the public schools is whether those penalties are “punitive” or “remedial” in nature. See Mussallam, 321 N.C. at 509 , 468 S.E.2d at 367 . Thus, it is necessary to undertake a case-by-case determination of whether civil penalties paid by local public school systems are remedial or punitive in nature. As to penalties for environmental violations by local school systems, the majority opinion, in which part I concur, has already determined that civil penalties paid by environmental violators are punitive in nature and subject to Article IX, Section 7. Even though the environmental violator may be a school system, this does not change the punitive nature of civil penalties assessed by DENR, and those environmental penalties remain subject to Article IX, Section 7. The majority correctly notes that “[p]ublic policy in this jurisdiction, buttressed by the uniform decisions of [the North Carolina Supreme Court], will not permit a wrongdoer to enrich himself as a result of his own misconduct.” Davenport v. Patrick, 227 N.C. 686, 689 , 44 S.E.2d 203, 205 (1947). This public policy, however, does not mandate that the remaining school systems should be punished for the wrongdoing of another; it simply mandates that the offending school system be removed from the calculation of how to distribute the funds collected from the offending school system among the remaining public school systems.

The majority approach ignores the fact that as we have upheld the constitutionality of the Civil Penalty Fund, the penalty assessed against the Edgecombe County Board of Education would be distributed among all the eligible local school systems and not simply recycled back to Edgecombe County • Schools. Therefore, under the majority analysis and using 2001-02 average daily membership figures for North Carolina and Edgecombe County Schools, out of an $11,000.00 civil penalty, Edgecombe County would be denied only $64.35 while the remaining school systems would lose $10,935.65. 3 The better approach is to remit the civil penalty to the Civil Penalty Fund and distribute it among the eligible school systems while simply omitting Edgecombe County from the distribution. This method has the dual benefit of providing the inno *289 cent local public school systems with funds from a punitive civil penalty and to receive the benefits of the entire $11,000.00 without allowing the offending school system to be enriched in any way by its own wrongdoing.

Thus, I would hold that the $11,000.00 civil penalty assessed against the Edgecombe County Board of Education for environmental violations is punitive and subject to Article IX, Section 7, however, in determining how to distribute the penalty among the eligible school systems from the Civil Penalty Fund, the average daily attendance of Edgecombe County public schools should not be included in the calculation. Further, none of the proceeds of the penalty should be disbursed to the Edgecombe County Board of Education and this case should be remanded to the trial court to implement that calculation.

. The North Carolina Public Schools Statistical Profile 2003 lists Total Average Daily Membership for North Carolina Public School Systems in 2001-02 as 1,289,523 and Average Daily Membership for Edgecombe County Schools during that year as 7,544. North Carolina Department of Public Instruction, North Carolina Public Schools Statistical Profile, 4, 160 (2003).