BETTY DONOHO,
Plaintiff,
and
THE BUNCOMBE COUNTY BOARD OF EDUCATION,
Intervenor Plaintiff,
v.
THE CITY OF ASHEVILLE, COUNTY OF BUNCOMBE and WESTERN NORTH
CAROLINA REGIONAL AIR POLLUTION CONTROL AGENCY,
Defendants.
Van Winkle, Buck, Wall, Starnes & Davis, P.A., by Albert L.
Sneed, Jr., for plaintiff appellant.
Roberts & Stevens, P.A., by Cynthia S. Grady, for intervenor
plaintiff appellant.
Siemens Law Office, P.A., by A. James Siemens, for Western
North Carolina Regional Air Pollution Control Agency; Robert
W. Oast, Jr., for the City of Asheville; and Stanford K.
Clontz, for County of Buncombe, defendant appellees.
McCULLOUGH, Judge.
Plaintiff Betty Donoho is a taxpayer and resident of
Asheville, North Carolina. On 30 June 2000, she instituted this
lawsuit and sought both a declaratory judgment and injunctive
relief. Plaintiff requested that the trial court (1) enjoin the
City of Asheville and Buncombe County from forming a charitable
clean air trust fund; and (2) divert funds intended for the
charitable clean air trust fund to attorney fees and various schoolboards.
The facts leading to plaintiff's lawsuit are as follows: the
Western North Carolina Regional Air Pollution Control Agency (the
Agency) was created in 1970 as a local air pollution control agency
pursuant to N.C. Gen. Stat. § 143-215.112(c)(1) (2001). The Agency
was formed by a joint agreement between the local governments of
Haywood County, Buncombe County, and the City of Asheville after
those entities determined that “it is in the best interest of the
citizens of their respective localities that a Regional Air
Pollution Control Program be established to administer and enforce
an effective Air Pollution Control Program throughout Buncombe and
Haywood Counties and the City of Asheville[.]” The Agency existed
in the same form until 1995, when it was reaffirmed pursuant to
Article 20, Chapter 160A of the North Carolina General Statutes,
which allows units of local government to jointly exercise their
powers.
On 30 June 2000, Haywood County officially withdrew from the
Agency. The remaining members continued to operate the Agency
until 13 July 2000, when the North Carolina Environmental
Management Commission (the Commission) ratified a new agreement
between Buncombe County and the City of Asheville to form the
present local agency, the Western North Carolina Regional Air
Quality Agency.
When the original Agency was terminated on 13 July 2000, it
had an approximate fund balance of $800,000.00. About half that
amount represented the proceeds of Title V permit fees, while theother half represented a combination of funds, including proceeds
of civil penalties assessed for violations of local ordinances
which adopted state and federal air quality standards. While the
Agency existed, Buncombe County held and administered the Agency's
funds. On 31 January 1997, the Buncombe County Board of Education
(the Board) wrote a letter demanding payment of all the fines
collected by the Agency to the school board. On 7 March 1997,
Buncombe County refused the Board's request.
The Agency intends to remit these remaining funds to a clean
air trust fund, the purpose of which will be to leverage grants and
other revenues to improve air quality in the City of Asheville and
Buncombe County. Plaintiff's 30 June 2000 lawsuit requested the
following types of relief:
1. That the Court enter an injunction
restraining the City and the County from
paying over said monies to the said
Charitable Trust until the Court can
determine what amount thereof represents
fines and penalties subject to the
constitutional requirement alleged and
whether or not the payments are otherwise
legal.
2. That the Court enter a Declaratory
Judgment as to the liability of the City,
the County and the Western North Carolina
Air Pollution Control Agency to pay over
fines and penalties to the appropriate
School Fund.
3. That the Court enter an Order of Mandamus
to the County and the City to pay over
the funds declared by the Court to be
subject to the constitutional
requirement.
4. That the Courts declare whether or not
any payment of these funds to the Trustis legal and, if so, to what extent.
5. That the Court award the Plaintiff [her]
attorney's fees in accordance with law.
6. That the Court determine the amount of
excess fees pursuant to G.S. § 143-
215.3(a)(1d) which should be remitted to
the agency administering the program for
the next fiscal year and order that said
sums be paid to said agency.
7. That the costs of this action be taxed to
the City of Asheville and the County of
Buncombe.
On 10 October 2000, the Board was permitted to intervene.
On 25 June 2001, the trial court considered several motions by
the parties, including the City of Asheville's motions to dismiss,
Buncombe County's motion for partial summary judgment, the Agency's
motions to dismiss and motions for partial summary judgment, and
plaintiff Donoho's motion for partial summary judgment (which was
joined in by the Board). At this point, plaintiff and the Board
conceded that the Title V permit fees were not at issue in this
case and the trial court issued an order dismissing the Title V
claim on 15 May 2001. On 25 June 2001, the trial court granted the
Agency's motion for summary judgment and concluded the civil
penalties assessed by the Agency were not assessed by a state
agency and were not assessed pursuant to a penal law of the state.
Plaintiff Donoho and the Board appealed.
On appeal, plaintiff and the Board argue the trial court erred
in concluding that the fines levied for the violations of the local
ordinances and regulations were not subject to Article IX, Section
7 of the North Carolina State Constitution. They further arguethat such assessments were, in reality, for violations of the penal
laws of the State. After careful consideration of the record and
the arguments of the parties, we agree with plaintiff Donoho and
the Board and reverse and remand the case to the trial court for
proceedings consistent with this opinion.
In North Carolina, air pollution control is governed by
Chapter 21B of the North Carolina General Statutes. In that
Chapter, the state granted the Department of Environment and
Natural Resources the power to administer the air quality program
for the state. See N.C. Gen. Stat. § 143-215.106 (2001). The
statutory scheme for regulating air pollution is a statewide
framework achieved through the exercise of the State's police
power; the fines and penalties collected are also part of the State
regulatory scheme. N.C. Gen. Stat. § 143-215.114A(h) (2001)
specifies that “[t]he clear proceeds of penalties provided for in
this section shall be remitted to the Civil Penalty and Forfeiture
Fund in accordance with G.S. 115C-457.2.” N.C. Gen. Stat. § 115C-
457.2 states:
The clear proceeds of all civil penalties
and civil forfeitures that are collected by a
State agency and are payable to the County
School Fund pursuant to Article IX, Section 7
of the Constitution shall be remitted to the
Office of State Budget and Management by the
officer having custody of the funds within 10
days after the close of the calendar month in
which the revenues were received or collected.
Notwithstanding any other law, all funds which
are civil penalties or civil forfeitures
within the meaning of Article IX, Section 7 of
the Constitution shall be deposited in the
Civil Penalty and Forfeiture Fund. The clear
proceeds of such funds include the full amountof all such penalties and forfeitures
collected under authority conferred by the
State, diminished only by the actual costs of
collection, not to exceed ten percent (10%) of
the amount collected.
Funds so deposited are then allocated to local school
administrative units pursuant to N.C. Gen. Stat. § 115C-457.3
(2001).
Under N.C. Gen. Stat. § 143-215.111(3) (2001), the North
Carolina Environmental Management Commission has the power “[t]o
encourage local units of government to handle air pollution
problems within their respective jurisdictions and on a cooperative
basis, and to provide such local units technical and consultative
assistance to the maximum extent possible.” The local governments
are, in turn, allowed to establish local air pollution control
programs pursuant to the terms and conditions of N.C. Gen. Stat.
§ 143-215.112 (2001). N.C. Gen. Stat. § 143-215.112(b) provides
the sole method by which local governments may establish and
administer an air pollution control program:
(b) No municipality, county, local board
or commission or group of municipalities and
counties may establish and administer an air
pollution control program unless such program
meets the requirements of this section and is
so certified by the Commission.
Moreover, under N.C. Gen. Stat. § 143-215.112(c)(4), certified
local air pollution control programs are authorized to adopt
ordinances, resolutions, rules, or regulations necessary to
establish and maintain an air pollution control program and will
not be approved by the Commission unless they do so. “Each governing body, or its authorized agent, shall have the
power to assess civil penalties under G.S. 143-215.114A.” N.C.
Gen. Stat. § 143-215.112(d)(1)(1a) (2001). Violations of the
ordinances, resolutions, rules or regulations of the local programs
can carry criminal penalties ranging from misdemeanors to felonies.
See N.C. Gen. Stat. § 143-215.112(d)(1) and N.C. Gen. Stat. § 143-
215.114B (2001). Buncombe County's response to plaintiff's request
for admissions acknowledged that all penalties in this case were
assessed pursuant to N.C. Gen. Stat. § 143-215.112(c)(1)(a) and
N.C. Gen. Stat. § 143-215.114A.
Defendants argue the fines were levied for violations of local
regulations, standards and permits of the Agency, which were
peculiar to its operation as a local air pollution control program.
Plaintiffs, on the other hand, argue that the fines and penalties
were collected under authority conferred by the state and were
required to be paid to school boards under N.C. Gen. Stat. § 115C-
437 and Article IX, Section 7 of the North Carolina Constitution.
Article IX, Section 7 states:
County School Fund.
All moneys, stocks, bonds, and other
property belonging to a county school fund,
and the 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.
Additionally, N.C. Gen. Stat. § 115C-437 (2001), which interprets
N.C. Const. Art. IX, Section 7, states that: The clear proceeds of all penalties and
forfeitures and of all fines collected for any
breach of the penal laws of the State, as
referred to in Article IX, Sec. 7 of the
Constitution, shall include the full amount of
all penalties, forfeitures or fines collected
under authority conferred by the State,
diminished only by the actual costs of
collection, not to exceed ten percent (10%) of
the amount collected.
N.C. Gen. Stat. § 115C-437 (emphasis added).
The phrase “all fines collected for any breach of the penal
laws of the State” is included in the definition of “clear
proceeds” in § 115C-437. The only remaining questions are whether
the statute encompasses other civil penalties and whether the
penalties in the case sub judice were collected under authority
conferred by the state. Appellants believe both questions should
be answered in the affirmative, because the only authority to levy
the fines comes from state law. On this point, our Supreme Court
stated:
The crux of the distinction lies in the nature
of the offense committed, and not in the
method employed by the municipality to collect
fines for commission of the offense. A “fine”
is “a sum of money exacted of a person guilty
of a misdemeanor, or a crime.” State v.
Addington, 143 N.C. 683, 686, 57 S.E. 398, 399
(1907); State v. Rumfelt, [241 N.C. 375, 85
S.E.2d 398 (1955).] The constitution mandates
that “all fines collected in the several
counties for any breach of the penal laws of
the State” be appropriated to the school fund.
The inquiry addressed by [Board of Education
v. Henderson, 126 N.C. 689, 36 S.E. 158
(1900)], then, was whether the monies in
dispute were collected for violations of the
criminal laws of the State or for violations
of city ordinances.
Cauble v. City of Asheville, 301 N.C. 340, 344, 217 S.E.2d 258,260-61 (1980), aff'd, 314 N.C. 598, 336 S.E.2d 59 (1985) (emphasis
in original). The Board correctly points out that several statutes
refer to the State's ultimate responsibility in the area of air
pollution and air quality. See N.C. Gen. Stat. § 143-211 (2001)
(stating that “[i]t is hereby declared to be the public policy of
this State to provide for the conservation of its water and air
resources[]” and affirming “the State's ultimate responsibility for
the preservation and development of these resources[]”); § 143-
215.106 (referring to “the air quality program of the State[]”);
§ 143-215.105 (2001) (air pollution control); and § 143-215.112
(State Commission's role in reviewing and certifying all local air
pollution control programs).
These statutes all reinforce the concept that the actions of
the local Agency are actually those of the State Commission and
that, in essence, the State allows local agencies to act in lieu of
the Commission if standards at least as strong as the State
standards are adopted and such are enforced by local ordinances.
See generally 24 Strong's N.C. Index 4th Principal and Agent §§ 1-
3, 8-10 (1993); and 3 Am. Jur. 2d Agency §§ 1-8 (2002) (principles
of agency law). In sum, the only power conferred upon the Agency
to levy fines is that power conferred by State law; when the
penalties were levied, they were levied only for a violation of the
ordinance enacted pursuant to that authority.
While Cauble dealt with overtime parking fines levied pursuant
to N.C. Gen. Stat. § 14-4, N.C. Const. Art. IX, Section 7 also
encompasses penalties or forfeitures. A “penal law” is any statelaw, the violation of which results in a fine, penalty or
forfeiture. See N.C. Const. Art. IX, Section 7. We hold that a
local ordinance, which is enacted pursuant to authority delegated
by the state and the Commission and passed to enforce state-
mandated air quality standards, is such a law. See Craven County
Bd. of Education v. Boyles, 343 N.C. 87, 468 S.E.2d 50 (1996)
(monies paid to Department of Environment, Health and Natural
Resources pursuant to a settlement agreement for violations of
environmental laws held to constitute a penalty, fine, or
forfeiture under Article IX, Section 7 of the North Carolina
Constitution) . Absent the statutory scheme described above, the
Agency had no legal right to exist, much less assess penalties for
violations of air quality standards. The local program acts, in
effect, as an agent for the state and its failure to properly
enforce the adopted air quality standards will result in the
Commission supplanting the local agency. See N.C. Gen. Stat.
§ 143-215.112.
While the penalties were not payable to the State Treasurer
(i.e., “accrue to the State”), this fact is not determinative of
the case's outcome. Several cases have held that the phrase
“accrue to the State” should be taken in the context in which it
was developed -- as opposed to being payable to a private party.
See Katzenstein v. R.R. Co., 84 N.C. 688 (1881); Hodge v. R.R., 108
N.C. 24, 12 S.E. 1041 (1891); Mussallam v. Mussallam, 321 N.C. 504,
364 S.E.2d 364, reh'g denied, 322 N.C. 116, 367 S.E.2d 915 (1988);
State ex rel. Thornburg v. House and Lot, 334 N.C. 290, 432 S.E.2d684 (1993); and Craven County, 343 N.C. 87, 468 S.E.2d 50.
In Mussallam, our Supreme Court stated:
We interpret the provisions of section 7
relating to the clear proceeds from penalties,
forfeitures and fines as identifying two
distinct funds for the public schools. These
are (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.
. . . The term “penal laws,” as used in the
context of article IX, section 7, means laws
that impose a monetary payment for their
violation. The payment is punitive rather
than remedial in nature and is intended to
penalize the wrongdoer rather than compensate
a particular party. See D. Lawrence, Fines,
Penalties, and Forfeitures: An Historical and
Comparative Analysis, 65 N.C.L. Rev. 49, 82
(1986). Thus, in the first category, the
monetary payments are penal in nature and
accrue to the state regardless of whether the
legislation labels the payment a penalty,
forfeiture or fine or whether the proceeding
is civil or criminal.
Mussallam, 321 N.C. at 508-09, 364 S.E.2d at 366-67. In the
present case, both Buncombe County and the Agency admitted the
penalties they assessed were punitive in nature and were intended
to punish violators of the Agency's ordinances, resolutions, rules
and regulations. In that regard, the present case is similar to
Craven County, where payments in settlement of a civil penalty were
subject to the constitutional mandate of Article IX, Section 7 and
thus payable to the school board. We believe this interpretation
of the phrase “accrue to the State” comports with the plain
language of N.C. Const. Art. IX, Section 7 and N.C. Gen. Stat. §
115C-437. It would be anomalous for violations of state-mandated air
quality standards to result in civil penalties allocated to local
school boards in all counties where the Commission enforces the
state air pollution laws but a similar violation in the counties
with local programs approved by the Commission experienced a
different result. If such were the case, every county and local
governmental unit could circumvent the state constitution by
setting up a local air quality enforcement unit pursuant to state-
delegated authority, and thereby develop a new revenue stream,
while depriving the schools of funds directed to them by Article
IX, Section 7 of the North Carolina Constitution.
After careful examination of the record and the arguments of
the parties, we conclude the trial court erred in granting partial
summary judgment in favor of defendants. The trial court's
judgment and order are reversed and the case is remanded to the
trial court for entry of summary judgment in favor of plaintiff
Donoho and the Buncombe County Board of Education.
Reversed and remanded.
Judges TIMMONS-GOODSON and BRYANT concur.
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