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All opinions are subject to modification and technical correction prior to official publication in the North Carolina Reports and North Carolina Court of Appeals Reports. In the event of discrepancies between the electronic version of an opinion and the print version appearing in the North Carolina Reports and North Carolina Court of Appeals Reports, the latest print version is to be considered authoritative.
1. Penalties, Fines, and Forfeitures_monies from civil penalties and forfeitures_School
Technology Fund--constitutional requirement
Statutes which establish a Civil Penalty Fund for the collection of civil penalties and
forfeitures and mandate that the Fund's monies be transferred to a School Technology Fund for
allocation to local school districts based on student population are constitutional under N.C.
Const. art. IX, § 7, and the trial court erred by granting summary judgment for plaintiffs. The
General Assembly properly legislated the details necessary to effectuate a general constitutional
provision that revenue from civil penalties be used for public schools. N.C.G.S. §§ 115C-457.1,
-457.2, -457.3.
2. Penalties, Fines, and Forfeitures_remittance to schools_principles for determining
The North Carolina Supreme Court has articulated principles for determining whether
monetary payments to the State are remedial or punitive, in order to determine whether they
would fall under the constitutional provision requiring that revenue from civil penalties be used
for public schools. These monies must be fines for the breach of criminal laws or the clear
proceeds of payments intended to penalize the wrongdoer rather than to compensate a particularparty; they must be paid to the State or a department of the State; and the label attached to the
payment does not determine its nature.
3. Penalties, Fines, and Forfeitures_overweight vehicle penalties--remittance to schools
Overweight vehicle penalties are penal and belong to the public schools because they are
intended to penalize the wrongdoer rather than compensate a particular party. N.C.G.S. § 20-
118(e).
4. Penalties, Fines, and Forfeitures_lapse of motor vehicle insurance_remittance to
public schools
Penalties collected from the lapse of motor vehicle insurance are in the nature of
sanctions intended to penalize the wrongdoer and belong to the public schools. N.C.G.S. § 20-
309(e).
5. Taxation_prohibition on lawsuits to prevent_action to determine use of payments
for late fees_not prohibited
The statute that prohibits suits against the Secretary of Revenue to prevent the collection
of taxes did not apply to a declaratory judgment action to determine whether payments for late
filings and other failures to comply with the tax code belong to the public schools. Plaintiffs
sought a determination of the proper disposition of the amounts collected, not the prevention of
collection.
6. Penalties, Fines, and Forfeitures_additional taxes_failure to comply with revenue
code_not remitted to schools
Payments collected by the Department of Revenue for failure to comply with the tax code
do not belong to the public schools because they are assessed as an additional tax and are
remedial rather than punitive in nature.
7. Penalties, Fines, and Forfeitures_penalties for late unemployment insurance
payments_not remitted to public schools
Amounts collected by the Employment Security Commission for late payments to the
Unemployment Insurance Fund are in the nature of additional taxes and are thus remedial rather
than punitive, so that those payments do not belong to the public schools. N.C.G.S. § 96-10.
8. Penalties, Fines, and Forfeitures_penalties for university traffic and parking
violations_not remitted to public schools
Amounts collected by the Consolidated University of North Carolina campuses for traffic
and parking violations belong to the public schools when they are characterized as infractions,
prosecuted by the local district attorney, and any resulting penalties are imposed and collected by
the district court. Other payments do not belong to the schools because they are denominated
civil penalties, enforced by civil actions in the nature of debt, intended as compensation for the
expense of establishing and maintaining parking and transportation services, and enacted
pursuant to an equal constitutional provision. N.C.G.S. § 116-44.4(m); N.C. Const. art. IX, § 8.
9. Penalties, Fines, and Forfeitures_payment for late returns to university
libriaries_not remitted to public schools
Payments collected by the Consolidated University of North Carolina campuses for loss,
damage, or late return of library materials are remedial and do not belong to the public schools.
The payments are intended to insure the availability of library materials and to compensate the
universities for replacing materials, and were enacted pursuant to a constitutional provision that
is separate from the public schools provision. N.C.G.S. § 116-33; N.C. Const. art. IX, § 9.
10. Penalties, Fines, and Forfeitures_unauthorized substance taxes_not remitted to
public schools
Unauthorized substance taxes assessed against drug and illicit liquor dealers do not
belong to the public schools because prior panels of the Court of Appeals concluded that the tax
is intended for a remedial purpose. N.C.G.S. § 105-113.111.
11. Penalties, Fines, and Forfeitures_penalties for environmental violations_remittance
to public schools
Penalties collected for environmental violations are punitive in nature and belong to the
public schools. Monies paid for supplemental environmental project settlements, including
payments not made directly to the State, are paid because of a civil penalty against the violator,
are punitive in nature, and still belong to the public schools. N.C.G.S. §§ 143-215.6A, 143-
215.114A.
12. Penalties, Fines, and Forfeitures_penalties paid by schools_not remitted to public
schools
Payments made by local public school systems to various state agencies as fines or civil
penalties may not be used by the public schools. Otherwise, the offending unit would be unjustly
enriched by its own wrongdoing.
13. Penalties, Fines, and Forfeitures_penalties for late payment of license fees_not
remitted to public schools
Payments collected by certain state agencies for the late payment of occupational license
fees did not belong to the public schools because they are intended to compensate the collecting
agency for additional operating expenses incurred in collecting money due or compelling
performance of a license requirement. The payments are remedial rather than punitive in nature.
14. Statute of Limitations and Repose_fines and penalties_remittance to schools
The trial court correctly applied the three-year statute of limitations of N.C.G.S. § 1-52 to
an action by local school boards to recover payments already collected by the State which the
schools claimed were due them under the State constitution. The one-year statute of limitations
of N.C.G.S. § 1-54(2) is applicable to actions intended to collect civil penalties or forfeitures.
Judge HUNTER concurring in part and dissenting in part.
Tharrington Smith, L.L.P., by Michael Crowell and Kara L. Grice; Wallace, Morris & Barwick, P.A., by Edwin M. Braswell, Jr.; and Roberts & Stevens, P.A., by Cynthia Grady, for plaintiffs appellees.
Attorney General Roy Cooper, by Special Deputy Attorney General W. Dale Talbert and Assistant Attorney General Celia Latta, for defendants appellants Moore, Powell, McCoy, Kirk, Ward, Cooper, Tolson, Tippett, Howard, Broad, Moeser, Fox, Ross, Fain, Buell, Lunsford, Goodman, and Van Essen.
Young Moore and Henderson, P.A., by John N. Fountain and Reed N. Fountain, for defendants appellants O'Brien and Brooks.
Allen and Pinnix, P.A., by Noel L. Allen, for the North Carolina Board of Architecture and the North Carolina State Board of Mortuary Science, amici curiae.
Bailey & Dixon, L.L.P., by Carson Carmichael, III, for the North Carolina Licensing Board for General Contractors and the North Carolina Board of Pharmacy, amici curiae.
ELMORE, Judge.
This appeal arises from the State of North Carolina's attempts
to direct the collection and distribution of civil fines and
penalties within the constitutional mandate of Article IX, Section
7 of the North Carolina Constitution, which provides in pertinent
part as follows:
[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.
N.C. Const. art. IX, § 7. Plaintiff North Carolina School Boards
Association, an incorporated association representing all county
and city school boards in the state, is joined in this appeal by
the individual Boards of Education for Wake, Durham, Johnston,
Buncombe, Edgecombe, and Lenoir counties, which are the governing
bodies for the public schools in their respective counties. Defendants
(See footnote 1)
are, as of 14 December 2001, chief executive officers
of various State departments, agencies, institutions, and licensing
boards, each of which either (1) assesses and collects monetary
payments from individuals or entities for failing to comply with
certain statutory or administrative requirements, or (2)
administers State funds into which these payments are deposited and
distributed.
Plaintiffs brought this declaratory judgment action seeking a
determination that various monetary payments collected by
defendants are “penalties and forfeitures” or “fines collected . .
. for . . . breach of the penal laws of the State” belonging to the
public schools “in the several counties” under Article IX, Section
7. Defendants contend that none of the challenged payments fall
within the purview of Article IX, Section 7 because they are eachremedial, rather than punitive, in nature, and that defendants may
therefore retain and use the payments for purposes other than
maintaining free public schools.
Plaintiffs also seek a determination that Article 31A of
Chapter 115C of the North Carolina General Statutes, which requires
(1) that “the clear proceeds of all civil penalties . . . collected
by a State agency” be deposited into a central Civil Penalty and
Forfeiture Fund (Civil Penalty Fund), and (2) that all funds
accruing to the Civil Penalty Fund be transferred to the State
School Technology Fund (School Technology Fund) for allocation to
local school units based on each unit's student population, is
unconstitutional and void because it violates the Article IX,
Section 7 mandate that all civil penalties “shall belong to and
remain in the several counties” and be “used exclusively for
maintaining free public schools.” Defendants contend that Article
31A of Chapter 115C is consistent with the general provisions of
Article IX, Section 7, and therefore constitutional, because it
ultimately provides for the distribution of all civil penalties to
local school administrative units and directs their use by the
State's public schools, albeit for the limited purpose of
implementing local school technology plans.
Finally, plaintiffs contend that their claims for the clear
proceeds of the challenged monetary payments are governed by a
three-year statute of limitations, while defendants maintain that,
should any of the challenged payments be adjudged civil penalties
subject to Article IX, Section 7, a one-year limitations period
applies to plaintiffs' claims. By order entered 14 December 2001, the Honorable Abraham Penn
Jones denied defendants' motion for summary judgment and granted
summary judgment in plaintiffs' favor on all claims. In ruling for
plaintiffs, Judge Jones' order expressly provided that the
following monetary payments are each “subject to Article IX,
Section 7, of the North Carolina Constitution and belong to and
shall be remitted to the public schools[:]”
1. Moneys collected by the Department of Transportation
from automobile dealers pursuant to G.S. 20-79(e) for
misuse of dealer plates . . . .
2. Moneys collected by the Department of Transportation
from the owners and operators of vehicles pursuant to
G.S. 20-118(e) for violation of weight limits . . . .
3. Moneys collected by the Department of Transportation
from automobile owners pursuant to G.S. 20-309(e) for
failure to have financial security in effect and from
insurers for failing to give notice of termination . . .
.
4. Moneys collected by the Department of Commerce
pursuant to G.S. 54-109.15(b) for credit unions' failure
to file reports timely . . . .
5. Moneys collected by the Employment Security
Commission pursuant to G.S. 96-10 for overdue employer
taxes, for the late filing of reports, and for bad checks
. . . .
6. Moneys collected by the Department of Revenue
pursuant to G.S. 105-113.89, -163.15, -163.41, -164.14,
-231 and -236 for late filings and underpayments and
failure to comply with statutory or regulatory tax
provisions . . . .
7. Moneys collected by the boards of trustees of the
campuses of the consolidated University of North Carolina
for violation of ordinances adopted by the trustees under
the authority of G.S. 116-44.4(h) for the regulation of
traffic and parking and the registration of vehicles . .
. .
8. Moneys collected by the boards of trustees of the
campuses of the consolidated University of North Carolina
pursuant to the authority granted by G.S. 116-33 for thelate return of materials from the university libraries .
. . .
9. Moneys collected by the Department of Health and
Human Services pursuant to G.S. 143-116.7 for violations
of departmental motor vehicle regulations on the grounds
of department institutions . . . .
10. Moneys collected by the Secretary of Revenue
pursuant to Article 2D of Chapter 105 of the General
Statutes, denominated as the state unauthorized
substances excise tax . . . .
11. Monies [sic] paid to support a Supplemental
Environmental Project (SEP), in settlement of an assessed
civil penalty pursuant to a settlement agreement with the
Department of Environment and Natural Resources. . . .
Specifically, the $50,125 paid by the City of Kinston to
Lenoir Community College on or about 31 March 1998 as a
SEP pursuant to a Consent Agreement and Settlement in
contested cases 97 EHR1177 and 97 EHR1380 in the Office
of Administrative Hearings is subject to Article IX,
Section 7 . . . and belongs to and shall be paid by the
Department of Environment and Natural Resources to the
Lenoir County Board of Education for the public schools
of that county.
12. The $80,000 collected by the Department of
Environment and Natural Resources from the Department of
Transportation as a mitigated penalty in settlement of
contested case 98EHR778 in the Office of Administrative
Hearings . . . belongs to and shall be paid by the
Department of Environment and Natural Resources to the
Buncombe County Board of Education and the Asheville City
Board of Education, based on the average daily membership
of each school system, for the use of public schools.
. . .
16. . . . [M]oneys that clearly constitute civil
penalties within the meaning of Article IX, Section 7, .
. . [which] have been paid by public school systems
themselves. . . . Specifically, the $11,000 paid by the
Edgecombe County Board of Education to the Division of
Water Quality of the Department of Environment and
Natural Resources on or about 24 April 1997 for failure
to comply with interim effluent limitations at the
Phillips School Wastewater Treatment Facility is subject
to Article IX, Section 7, and belongs to the public
schools and shall be paid by the Department of
Environment and Natural Resources to the Edgecombe County
Board of Education for the use of public schools in the
county.
Judge Jones' order also addressed the proper disposition of
monetary payments collected by state agencies and licensing boards
“for the late renewal of licenses or the late payment of licensing
fees” as follows:
17. . . . The court finds that the “clear proceeds” of
such moneys are subject to Article IX, Section 7 . . .
and belong to and shall be remitted to the public
schools. The court finds that “clear proceeds” means
that the moneys to be paid to the public schools may be
reduced by the costs of collecting and processing the
late renewal or late payment, not to include general
overhead, and that those costs may be retained by the
board or agency.
The order further provided that any statutes either (1)
authorizing the foregoing payments, or (2) governing the
disposition of these payments, violate Article IX, Section 7 “[t]o
the extent that [they] . . . provide that the moneys collected are
to go to agencies or for purposes other than the public schools.”
With respect to the constitutionality of Article 31A of
Chapter 115C of our General Statutes, Judge Jones' order provided
as follows:
14. Article IX, Section 7 . . . provides that the clear
proceeds of all penalties and fines and forfeitures
“shall belong to and remain in the several counties, and
shall be faithfully appropriated and used exclusively for
maintaining free public schools.” Because this provision
requires moneys to remain in the counties where the
violation which gave rise to the collection occurred,
Article 31A of Chapter 115C of the General Statutes,
which provides for remission of the proceeds of civil
penalties to the central state Civil Penalty and
Forfeiture Fund, violates Article IX, Section 7 . . . and
is declared unconstitutional and void.
15. By providing that the proceeds of all penalties and
fines and forfeitures are to remain in the counties where
collected, Article IX, Section 7 . . . vests with the
local board(s) of education for each county the control
of such funds and the discretion as to the best use of
those moneys for public education in the county.
Accordingly, to the extent that Article 31A of Chapter115C of the General Statutes directs that the monies
[sic] remitted to the Civil Penalty and Forfeiture Fund
are to be transferred to the State School Technology Fund
and are to be allocated to local school units exclusively
for school technology purposes, that statute violates
Article IX, Section 7 . . . and is declared
unconstitutional and void.
Judge Jones' order provides that it “shall be applicable to
each defendant who currently has control of the moneys to be paid
to the public schools, and each defendant shall be responsible for
compliance with this Order. . . . [T]he burden of assuring
expeditious and complete compliance with this Order shall be with
the defendants generally.” The order further provides that
“[p]laintiffs' claims are subject to a three-year statute of
limitations.” Operation and enforcement of the order were stayed
pending appeal.
All defendants save O'Brien and Brooks filed their notice of
appeal to this Court on 11 January 2002. Defendants O'Brien and
Brooks filed their notice of appeal on 14 January 2002.
This appeal presents issues of great importance to an array of
State departments, agencies, and licensing boards as well as to our
State's system of public education. Determination of how the
substantial monetary sums at issue here _ as much as $75,000,000.00
annually, according to defendants
(See footnote 2)
_ may be constitutionally
collected and distributed will have a significant and lastingimpact on agencies and institutions which play a vital role in the
lives of all North Carolinians. With this in mind, we turn now to
our analysis of the several issues presented by this appeal.
It is well settled that, when reviewing the constitutionality of a legislative act, the North Carolina appellate courts must accord the legislative act a “presumption of constitutionality.” Adams v. Dept. of N.E.R. and Everett v. Dept. of N.E.R., 295 N.C. 683, 690, 249 S.E.2d 402, 406 (1978). Our Supreme Court has articulated the appropriate standard of review as follows:
[T]he courts have the power, and it is their duty in proper cases, to declare an act of the General Assembly unconstitutional _ but it must be plainly and clearly the case. If there is any reasonable doubt, it will beresolved in favor of the lawful exercise of their powers by the representatives of the people.
Glenn v. Board of Education, 210 N.C. 525, 529-530, 187 S.E. 781, 784 (1936). “In challenging the constitutionality of a statute, the burden of proof is on the challenger, and the statute must be upheld unless its unconstitutionality clearly, positively, and unmistakably appears beyond a reasonable doubt or it cannot be upheld on any reasonable ground.” Guilford County Bd. of Education v. Guilford Co. Bd. of Elections, 110 N.C. App. 506, 511, 430 S.E.2d 681, 684 (1993). Further, “[w]here a statute is susceptible of two interpretations, one of which is constitutional and the other not, the courts will adopt the former and reject the latter.” Wayne County Citizens Assn. v. Wayne Co. Bd. of Comrs., 328 N.C. 24, 29, 399 S.E.2d 311, 315 (1991). We examine the constitutionality of Article 31A of Chapter 115C in light of these principles.
The Civil Penalty Fund is established by N.C. Gen. Stat. § 115C-457.1 (2001), which provides in pertinent part:
(a) There is created the Civil Penalty and Forfeiture Fund. The Fund shall consist of 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.
(b) . . . . The Fund and all interest accruing to the Fund shall be faithfully used exclusively for maintaining free public schools.
N.C. Gen. Stat. § 115C-457.2 (2001) further mandates that:
The clear proceeds of . . . all funds which are civil
penalties or civil forfeitures within the meaning of
Article IX, Section 7 . . . shall be deposited in the
Civil Penalty and Forfeiture Fund. The clear proceeds of
such funds include the full amount of all such penalties
and forfeitures collected under authority conferred bythe State, diminished only by the actual costs of
collection, not to exceed ten percent (10%) of the amount
collected.
The statutory scheme is completed by N.C. Gen. Stat. § 115C-457.3
(2001), which provides that:
The Office of State Budget and Management shall transfer
funds accruing to the Civil Penalty and Forfeiture Fund
to the State School Technology Fund. These funds shall
be allocated to local school administrative units on the
basis of average daily membership.
The use of funds allocated to local school administrative units
from the School Technology Fund is limited to implementation of
local school technology plans. N.C. Gen. Stat. § 115C-102.6D
(2001).
The trial court concluded that “[b]ecause [Article IX, Section
7] requires moneys to remain in the counties where the violation
which gave rise to the collection occurred,” Article 31A of Chapter
115C of our General Statutes, “which provides for remission of the
proceeds of civil penalties to the central state [Civil Penalty
Fund], . . . is declared unconstitutional and void.” The trial
court further concluded that because “Article IX, Section 7 . . .
vests with the local board(s) of education for each county the
control of . . . and the discretion as to the best use of [the
clear proceeds of civil penalties] for public education in the
county,” the statutory scheme at issue here is unconstitutional and
void “to the extent that [it] directs that monies [sic] remitted to
the [Civil Penalty Fund] are to be transferred to the [School
Technology Fund] and are to be allocated to local school units
exclusively for school technology purposes.” We agree with defendants' contention that this statutory
scheme does not violate the plain language of Article IX, Section
7. Article IX, Section 7 provides only that the “clear proceeds of
all [civil] penalties . . . collected in the several counties . .
. shall belong to and remain in the several counties, and shall be
faithfully appropriated and used exclusively for maintaining free
public schools.” N.C. Const. art. IX, § 7. The constitutional
provision is silent, or at best ambiguous, regarding several
critical aspects of its operation and enforcement, including: (1)
the definition of “clear proceeds;” (2) the establishment of a
method for collecting these funds; (3) the establishment of a
method for distributing these funds among and within the “several
counties;” and (4) the specific educational purpose(s) for which
these funds may be used “for maintaining free public schools.”
Our Supreme Court has stated that where a constitutional
provision's “language is free from ambiguity . . . and the purpose
of the provision would be frustrated unless it is given immediate
effect, it will be held self-executing.” Kitchin v. Wood, 154 N.C.
446, 448, 70 S.E. 995, 996 (1911) (quoting Tuttle v. Nat. Bank of
Republic, 161 Ill. 497, 502, 44 N.E. 984, 985 (1896)). Because
Article IX, Section 7 requires generally that revenue collected
from civil penalties be used exclusively to support the State's
public schools, but fails to unambiguously specify how this is to
be accomplished, we conclude that this constitutional provision is
not self-executing and that it consequently requires legislation to
give it effect and a means for its enforcement. Id. It is a long-established principle that the General Assembly
possesses all legislative authority not expressly or impliedly
prohibited to it by the state or federal constitutions. Gwathmey
v. State of North Carolina, 342 N.C. 287, 303, 464 S.E.2d 674, 683-
684 (1995). Constitutional provisions “lay down general
propositions, and do not deal in details, leaving these to be
worked out by the Legislature.” Trustees University of North
Carolina v. McIver, 72 N.C. 76, 80 (1875). Our Supreme Court has
determined the “general proposition” laid down by the funding
provision of our Constitution's Education Article, found then in
Article IX, Section 5 and now in substantially the same form in
Article IX, Section 7, to be as follows:
It is manifest that Article IX, Section 5 [now Article
IX, Section 7], of the Constitution was designed in its
entirety to secure two wise ends, namely: (1) To set
apart the property and revenue specified therein for the
support of the public school system; and (2) to prevent
the diversion of public school property and revenue from
their intended use to other purposes.
Boney v. Kinston Graded Schools, 229 N.C. 136, 140, 48 S.E.2d 56,
59 (1948).
We hold that the General Assembly, by enacting Article 31A of
Chapter 115C, has properly legislated the details necessary to
effectuate the general proposition laid down by Article IX, Section
7 that the clear proceeds of civil penalties be set aside and used
exclusively for the support of our State's public schools. Article
31A of Chapter 115C provides a mechanism whereby these funds may
not be appropriated by the legislature or any agency, but instead
are remitted to the several counties to be used exclusively by the
public schools therein. We conclude that the statutory scheme'screation of the Civil Penalty Fund, its mandate that all funds
accruing thereto be transferred to the School Technology Fund for
allocation to local school units based on student population, and
its requirement that these funds be used to implement local school
technology plans are consistent with the intent and purpose of
Article IX, Section 7. We therefore reverse those portions of the
trial court's order which either (1) declare Article 31A of Chapter
115C of our General Statutes to be “unconstitutional and void,” or
(2) direct that any payments collected by a State agency or
department as an assessed “penalty” or in settlement of same be
paid to a specific city and/or county school board, rather than to
the Civil Penalty Fund for allocation to local school
administrative units pursuant to N.C. Gen. Stat. § 115C-457.3.
[2] By their next assignments of error, defendants contend that the trial court erred in concluding that several statutorily- authorized monetary payments collected by defendants are “penalties and forfeitures” or “fines collected . . . for . . . breach of the penal laws of the State,” and thus properly within the purview of Article IX, Section 7. The payments at issue are imposed for violations of various civil or administrative statutes and rules. These payments are denominated by the statutes authorizing them as “excise taxes,” tax “penalties” or “additional taxes,” traffic, parking, vehicle registration, and library “fines,” “late fees,” “civil penalties,” or simply “penalties.” Defendants argue that the clear proceeds of these monetary payments are not governed byArticle IX, Section 7 because, regardless of nomenclature, they are actually remedial rather than punitive in nature, and that defendants should therefore be allowed to retain and use these payments for purposes other than maintaining free public schools. Consequently, defendants except to the trial court's conclusion that the several statutes authorizing these monetary payments violate Article IX, Section 7 to the extent they “provide that the moneys collected are to go to agencies or for purposes other than the public schools.”
In considering defendants' contentions, we are guided by several principles articulated by our Supreme Court in previous decisions considering the applicability of Article IX, Section 7 to various statutorily-authorized monetary payments. First, our Supreme Court “[has] interpret[ed] the provisions of [Article IX, Section 7] . . . 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.” Mussallam v. Mussallam, 321 N.C. 504, 508-509, 364 S.E.2d 364, 366, reh'g denied, 322 N.C. 116, 367 S.E.2d 915 (1988) (emphasis added). Since none of the payments at issue in the present case are criminal fines, we are dealing here exclusively with the first Mussallam category of “funds for the public schools.”
Second, in defining the types of payments encompassed by this first category of funds, the Court in Mussallam stated that because “[t]he term 'penal laws,' as used in the context of article IX,section 7, means laws that impose a monetary payment for their violation,” only payments which are “punitive rather than remedial in nature and [are] intended to penalize the wrongdoer rather than compensate a particular party” are subject to Article IX, Section 7. Id. at 509, 364 S.E.2d at 367 (emphasis added); see also D. Lawrence, Fines, Penalties, and Forfeitures: An Historical and Comparative Analysis, 65 N.C.L. Rev. 49, 65 (1986) (“. . . fines, penalties, and forfeitures as a group are distinguished as payments imposed as punishment. If a payment, however labelled, is imposed for some other purpose - - usually as compensation to a person or entity who has been harmed because of the violation - - then [Article IX, Section 7] does not apply”).
Third, 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. Craven County Bd. of Education v. Boyles, 343 N.C. 87, 91, 468 S.E.2d 50, 52 (1996); see also State ex rel. Thornburg v. House and Lot, 334 N.C. 290, 295, 432 S.E.2d 684, 687 (1993). Finally, our Supreme Court has stated that the label attached to the monetary payment does not control the determination of whether such a payment constitutes a penalty, forfeiture, or fine within the meaning of Article IX, Section 7. Craven County, 343 N.C. at 92, 468 S.E.2d at 53; see also Cauble v. City of Asheville, 301 N.C. 340, 344, 271 S.E.2d 258, 260 (1980), aff'd, 314 N.C. 598, 336 S.E.2d 59 (1985). Indeed, “it is neither 'the label attached to the money' nor 'the [collection] method employed,' but 'the nature of the offense committed' that determines whether thepayment constitutes a penalty” and is thus subject to Article IX, Section 7, or remedial and outside the constitutional provision's purview. Craven County, 343 N.C. at 92, 468 S.E.2d at 53 (quoting Cauble, 301 N.C. at 344, 271 S.E.2d at 260) (emphasis added); see also Donoho v. City of Asheville, 153 N.C. App. 110, 116, 569 S.E.2d 19, 22 (2002), disc. review denied, 356 N.C. 669, 576 S.E.2d 110-111 (2003). With these principles in mind, we examine each of the challenged monetary payments in the sequence in which they are addressed by the trial court's order.
A. Payments Collected by the Department of Transportation from Owners of Vehicles Which Exceed Axle-Weight Limits
[3] Our Legislature has placed certain restrictions on the
weight at which different types of vehicles may be lawfully
operated on the State's highways. N.C. Gen. Stat. § 20-118 (2001).
Subsection (e) of N.C. Gen. Stat. § 20-118, which is entitled
“Penalties,” provides that “the Department of Transportation shall
assess a civil penalty against the owner or registrant” of a
vehicle “for each violation of the . . . weight limits” set forth
therein. Defendants except to the trial court's ruling that
payments collected by the Department of Transportation (DOT)
pursuant to N.C. Gen. Stat. § 20-118(e) are subject to Article IX,
Section 7 and belong to the public schools. This assignment of
error is without merit.
While the statute clearly and repeatedly characterizes the
monetary payment authorized thereunder as a “civil penalty” or
“penalty,” under Craven County and Cauble, “the label attached to
the money does not control[]” the determination of whether it is a
penalty or breach of the State's penal laws within the meaning ofArticle IX, Section 7. Craven County, 343 N.C. at 92, 468 S.E.2d
at 53 (quoting Cauble, 301 N.C. at 344, 271 S.E.2d at 260). Since
assessments for violation of the weight limits are to be paid to
the DOT, a State agency, the payments provided for in N.C. Gen.
Stat. § 20-118(e) clearly “accrue to the state” within the meaning
of Craven County and House and Lot. Our analysis of whether these
payments are subject to Article IX, Section 7 therefore comes down
to a determination of whether the payments are punitive or remedial
in nature. Mussallam, 321 N.C. at 509, 364 S.E.2d at 367.
We hold that the payments authorized by N.C. Gen. Stat. § 20-
118(e) are punitive in nature and are therefore subject to Article
IX, Section 7. The statute authorizes assessment of a “civil
penalty” by the DOT against any person who engages in a proscribed
course of conduct, i.e., “unlawful[ly]” owning or operating a
vehicle above certain weight limits on the State's highways. N.C.
Gen. Stat. § 20-118; see also N.C. Gen. Stat. § 20-115 (2001) (“It
shall be unlawful for any person to drive . . . on any highway any
vehicle or vehicles of a size or weight exceeding the limitations
stated in this title . . . .”). We conclude that N.C. Gen. Stat.
§ 20-118(e) is a “penal law” because it “impose[s] a monetary
payment for [its] violation” and “is intended to penalize the
wrongdoer rather than compensate a particular party” for violation
of a proscribed course of conduct. Mussallam, 321 N.C. at 509, 364
S.E.2d at 367; see also Craven County, 343 N.C. 87, 468 S.E.2d 50
(moneys paid to the Department of Environment, Health and Natural
Resources pursuant to a settlement agreement for violations of
environmental laws held to constitute a penalty, fine, orforfeiture under Article IX, Section 7); House and Lot, 334 N.C.
290, 432 S.E.2d 684 (disposition of proceeds from sale of property
forfeited by owner for conduct in violation of RICO Act held
governed by Article IX, Section 7). As such, we hold that the
clear proceeds of payments collected by the DOT under N.C. Gen.
Stat. § 20-118(e) belong to the public schools pursuant to the
statutory scheme set forth in Article 31A of Chapter 115C of our
General Statutes.
We are unpersuaded by defendants' assertion that the weight
penalties are remedial, rather than punitive, in nature because
they are intended to compensate the State for deterioration of its
highways due to operation of overweight vehicles thereon. In
Craven County and House and Lot, our Supreme Court declined to
characterize payments made for violations of both the State's
environmental laws and its RICO Act as compensation for costs
incurred by the State due to its citizens' illegal conduct, and we
likewise decline to so characterize the payments at issue in the
present case.
B. Payments Collected by the Department of Transportation for
Lapses in Insurance Coverage
[4] Under N.C. Gen. Stat. § 20-309(e) (2001), the DOT may
collect a “civil penalty” of $50.00 from vehicle owners who allow
their motor vehicle insurance to lapse, as well as a “civil
penalty” of $200.00 from insurers who fail to give notice of
insurance termination to the DOT. Defendants except to the trial
court's ruling that these payments belong to the public schools,
contending instead that N.C. Gen. Stat. § 20-309 is remedial in
nature and that the payments authorized thereunder are thus notsubject to Article IX, Section 7. We disagree with defendants'
contention and affirm this portion of the trial court's order.
As with the vehicle weight-limit statute discussed above, N.C.
Gen. Stat. § 20-309(e) authorizes the DOT to collect a monetary
payment from individuals and entities which engage in certain
proscribed conduct, which in this case consists of (1) a car owner
allowing his motor vehicle insurance to lapse, or (2) an insurer
failing to notify the DOT of termination of a motor vehicle
insurance policy. Our Supreme Court has characterized the “civil
penalty” authorized under N.C. Gen. Stat. § 20-309(e) as “the
exclusive sanction for failure to give [the Department of Motor
Vehicles] the required notice of termination.” Allstate Ins. Co.
v. McCrae, 325 N.C. 411, 417, 384 S.E.2d 1, 4 (1989) (emphasis
added). Black's Law Dictionary defines a “sanction” as “[t]hat
part of a law which is designed to secure enforcement by imposing
a penalty for its violation or offering a reward for its
observance.” Black's Law Dictionary 1341 (6th ed. 1990). Because
we are bound by our Supreme Court's conclusion in McCrae that these
payments are in the nature of sanctions, we conclude that they are
“intended to penalize the wrongdoer rather than compensate a
particular party” and are thus punitive. Mussallam, 321 N.C. at
509, 364 S.E.2d at 367. Accordingly, we hold that the payments
authorized by N.C. Gen. Stat. § 20-309(e) are subject to Article
IX, Section 7 and belong to the public schools, pursuant to the
statutory scheme set forth in Article 31A of Chapter 115C of our
General Statutes.
C. Payments Collected by the Department of Revenue For
Failure to Comply with Regulatory or Statutory Tax Provisions
[5] Defendants assert the trial court erred in concluding that
payments collected by the Department of Revenue (DOR) under N.C.
Gen. Stat. §§ 105-113.89, -163.15, -163.41, -164.14, -231 and -236
(2001) for late filings, underpayments, and failure to comply with
various provisions of the North Carolina tax code are subject to
Article IX, Section 7. We agree, and therefore reverse this
portion of the trial court's order.
At the outset we find to be without merit defendants'
contention that plaintiffs' claims involving these payments should
be dismissed on the grounds that the Secretary of Revenue cannot be
sued for declaratory relief pursuant to N.C. Gen. Stat. § 105-267.
N.C. Gen. Stat. § 105-267 (2001) provides in pertinent part that
“[n]o court of this State shall entertain a suit of any kind
brought for the purpose of preventing the collection of any tax .
. . .” This provision does not apply to the instant case, however,
because plaintiffs neither owe any tax liability to the DOR, nor
are they attempting to prevent the collection of a tax.
Plaintiffs' claims against the Secretary of Revenue were not
“brought for the purpose of preventing the collection of any tax”
from plaintiffs; they were instead brought seeking a determination
as to the proper disposition of amounts collected by the DOR as
statutorily-denominated “penalties” or “additional taxes.” We
conclude that plaintiffs' declaratory judgment action with respect
to the Secretary of Revenue is therefore not precluded by N.C. Gen.
Stat. § 105-267.
[6] However, we agree with defendants' assertion that the
various payments denominated as “penalties” or “additional taxes”under the challenged portions of Chapter 105 of our General
Statutes (the North Carolina Revenue Act) are remedial, rather than
punitive, in nature, and we therefore hold the trial court's
conclusion that these payments belong to the public schools under
Article IX, Section 7 was erroneous. Mussallam, 321 N.C. at 509,
364 S.E.2d at 367.
Civil tax penalties and additions to tax for fraud,
negligence, and substantial understatement of tax liability under
the federal Revenue Act have consistently been determined to be
remedial, rather than punitive, in nature. See Helvering v.
Mountain Producers Corp., 303 U.S. 391, 401, 82 L. Ed. 917, 923
(1938); Thomas v. C.I.R., 62 F.3d 97, 100 (4th Cir. 1995); Little
v. C.I.R., 106 F.3d 1445, 1454 (9th Cir. 1997); U.S. v. Alt, 83 F.3d
779, 781 (6th Cir. 1996), cert. denied, 519 U.S. 872 (1996); Ames
v. Commissioner, 112 T.C. 304 (1999). In holding that the civil
fraud penalty contained within the federal Revenue Act was remedial
rather than punitive in nature, the United States Supreme Court
stated as follows:
The remedial character of sanctions imposing additions to
a tax has been made clear by this Court in passing upon
similar legislation. They 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, 303 U.S. at 401, 82 L. Ed. at 923 (emphasis added). In
so holding, the Court, noting that the civil fraud penalty was
introduced into the federal Revenue Act under the heading “Interest
and Additions to the Tax,” stated that “[o]bviously all of these
'Additions to the Tax' were intended by Congress as civil incidentsof the assessment and collection of the income tax.” Id. at 405,
82 L. Ed. at 925.
Significantly, the penalties provision of the North Carolina
Revenue Act, which is similar to the penalties provision of the
federal Act, provides that “[p]enalties assessed by the Secretary
under this Subchapter are assessed as an additional tax.” N.C.
Gen. Stat. § 105-236 (2001) (emphasis added). Moreover, our
Legislature has provided that “[u]nless the context clearly
requires otherwise, the terms 'tax' and 'additional tax' include
penalties and interest as well as the principal amount.” N.C. Gen.
Stat. § 105-228.90(b)(7) (2001) (emphasis added). We conclude that
the “[p]enalties assessed . . . as an additional tax” under N.C.
Gen. Stat. § 105-236 and other provisions of the North Carolina
Revenue Act for failure to comply with the tax code are remedial,
not punitive, in nature, and we hold that they are not subject to
Article IX, Section 7 and thus do not belong to the public schools.
Mussallam, 321 N.C. at 509, 364 S.E.2d at 367.
D. Payments Collected by the Employment Security Commission
from Employers for Overdue Contributions to the Unemployment
Insurance Fund, Late Filing of Wage Reports, and Tendering a
Worthless Check
[7] Defendants contend the trial court erred in concluding
that payments the Employment Security Commission (ESC) is entitled
to collect under Chapter 96 of our General Statutes (the Employment
Security Act) from employers for late contributions to the
Unemployment Insurance Fund are subject to Article IX, Section 7.
These payments are statutorily characterized as “[a]n additional
penalty in the amount of ten percent (10%) of the taxes due” from
the employer as its contribution to the Fund. N.C. Gen. Stat. §96-10(a) (2001) (emphasis added). Defendants also except to the
trial court's ruling that amounts the ESC is authorized to collect
from employers as (1) a “late filing penalty” for failure to timely
file certain reports, and (2) a “penalty” for tendering a worthless
check in payment of its contributions, belong to the public schools
as well. N.C. Gen. Stat. § 96-10(g), -(h) (2001).
We agree with defendants' assertion that N.C. Gen. Stat. § 96-
10 both (1) defines employers' contribution to the Unemployment
Insurance Fund as a “tax,” and (2) provides that the penalties the
statute establishes for various transgressions by employers
relating to payment of these contributions are part of these
“taxes.” In determining whether these penalties are punitive or
remedial in nature, each party applies the same analysis it applied
in analyzing the penalties collected by the Department of Revenue
under the Revenue Act for failure to comply with various provisions
of the North Carolina tax code. As with the payments collected as
penalties under the Revenue Act, we agree with defendants'
contention that the payments collected as penalties under the
Employment Security Act are in the nature of “additional taxes” or
“tax penalties.” As such, we conclude (1) these payments collected
as penalties are part of employers' contributions to the
Unemployment Insurance Fund; (2) employers' contributions to the
Unemployment Insurance Fund are “taxes;” and (3) these payments
collected as penalties under the Employment Security Act are
“additional taxes” and thus remedial, rather than punitive, in
nature. Helvering, 303 U.S. at 401, 82 L. Ed. at 923. We
therefore hold that the payments collected by the ESC pursuant toN.C. Gen. Stat. § 96-10 are not subject to Article IX, Section 7
and do not belong to the public schools, and we reverse this
portion of the trial court's order. Mussallam, 321 N.C. at 509,
364 S.E.2d at 367.
E. Payments Collected by the Boards of Trustees of the
Consolidated University of North Carolina Campuses for Violation of
Ordinances Regulating Traffic, Parking, and Vehicle Registration
[8] Defendants contend the trial court erred in concluding
that payments collected under N.C. Gen. Stat. § 116-44.4(h) by the
boards of trustees of the several University of North Carolina
(UNC) campuses as “penalties” for the violation of campus traffic
and parking ordinances are subject to Article IX, Section 7. We
agree and hold that these payments do not belong to the public
schools.
Article IX, Section 8 of the North Carolina Constitution
provides in pertinent part that “[t]he General Assembly may enact
laws necessary and expedient for the maintenance and management of
The University of North Carolina and the other public institutions
of higher education.” N.C. Const. art. IX, § 8. Defendants argue,
and we agree, that our Legislature acted within this constitutional
grant of power by enacting N.C. Gen. Stat. § 116-44.4 (2001), which
gives the trustees of each UNC campus the authority to adopt
ordinances regulating traffic and parking on their respective
campuses. The trustees may choose to treat violations of these
ordinances as either (1) “infraction[s] as defined in G.S. 14-3.1”
punishable by a “penalty” of up to $50.00, or (2) “civil penalties”
assessed in amounts “graduated according to the seriousness of the
offense or the number of prior offenses by the person charged.” N.C. Gen. Stat. § 116-44.4(g), -(h) (2001). Violations
characterized by the trustees under N.C. Gen. Stat. § 116-44.4(g)
as “infractions” are prosecuted by the local district attorney, and
any resulting penalties are imposed and collected by the district
court. N.C. Gen. Stat. §§ 15A-1114; 15A-1116 (2001). “The
proceeds of penalties for infractions are payable to the county in
which the infraction occurred for the use of the public schools.”
N.C. Gen. Stat. § 14-3.1(a) (2001). There is therefore no doubt
that the proceeds of penalties collected for violation of campus
traffic and parking ordinances as “infractions” under N.C. Gen.
Stat. 116-44.4(g) belong to the public schools.
The payments in dispute here, then, are only those resulting
from violations of campus traffic and parking regulations which the
trustees have denominated as “civil penalties,” rather than
“infractions,” under N.C. Gen. Stat. § 116-44.4(h). These
penalties are collected according to procedures established by the
trustees, which “may be enforced by civil action in the nature of
debt.” N.C. Gen. Stat. § 116-44.4(h). Our Legislature has
directed that the penalties collected under this statute must be
placed in a trust account on each campus and used only for the
following purposes:
(1) To defray the cost of administering and enforcing
[campus parking and traffic] ordinances . . .;
(2) To develop, maintain, and supervise parking areas and
facilities;
(3) To provide bus service or other transportation
systems or facilities, including payments to any public
or private transportation system serving University
students, faculty, or employees;
(4) As a pledge to secure revenue bonds for parking
facilities issued under Article 21 of this Chapter;
(5) Other purposes related to parking, traffic, and
transportation on the campus.
N.C. Gen. Stat. § 116-44.4(m) (2001). Defendants argue, and we
agree, that the “civil penalties” imposed by N.C. Gen. Stat. § 116-
44.4(h) are intended to compensate each campus for the expense of
establishing and maintaining parking- and transportation- related
services, rather than to penalize individuals who violate campus
parking and traffic ordinances. Craven County, 343 N.C. at 92, 468
S.E.2d at 53 (the “nature of the offense committed” determines
whether a payment constitutes a penalty). We therefore hold that
N.C. Gen. Stat. § 116-44.4(h) is remedial in nature, and that the
payments collected pursuant to the statute are not subject to
Article IX, Section 7. Mussallam, 321 N.C. at 509, 364 S.E.2d at
367.
Moreover, we note that our Legislature acted pursuant to a
constitutional provision separate and apart from Article IX,
Section 7 in enacting N.C. Gen. Stat. § 116-44.4. We conclude that
because our Legislature enacted N.C. Gen. Stat. § 116-44.4 pursuant
to a clear grant of constitutional authority to establish a
mechanism for administering the “maintenance and management” of
traffic and parking on each UNC campus, this statute is
constitutional under Article IX, Section 8 of our Constitution,
which is a co-equal provision with Article IX, Section 7. N.C.
Const. art. IX, § 8; see also Stephenson v. Bartlett, 355 N.C. 354,
409, 562 S.E.2d 377, 413 (2002) (Parker, J., dissenting) (it is a“fundamental principle” that one section of the North Carolina
constitution cannot violate another).
We hold that the clear proceeds of payments collected pursuant
to N.C. Gen. Stat. § 116-44.4(h) are not subject to Article IX,
Section 7, and we reverse this portion of the trial court's order.
F. Payments Collected by the Boards of Trustees of the
Consolidated University of North Carolina Campuses for Loss,
Damage, or Late Return of Materials Borrowed from University
Libraries
[9] Defendants also assert the trial court erred in concluding
that payments collected from individuals by the trustees of each
UNC campus for loss, damage, or late return of materials borrowed
from campus libraries are subject to Article IX, Section 7. The
constituent UNC institutions assess and collect these payments
pursuant to authority granted to their trustees by N.C. Gen. Stat.
§ 116-33, which provides in pertinent part as follows:
Each board of trustees shall promote the sound
development of the institution within the functions
prescribed for it. . . . Each board shall serve as
advisor to the Board of Governors on matters pertaining
to the institution and shall also serve as advisor to the
chancellor concerning the management and development of
the institution. The powers and duties of each board of
trustees, not inconsistent with other provisions of this
Article, shall be defined and delegated by the Board of
Governors.
N.C. Gen. Stat. § 116-33 (2001). Applying similar reasoning as in
our holding above that campus parking and traffic penalties do not
belong to the public schools, we hold that UNC campus library fines
imposed under this statute are not subject to Article IX, Section
7. We agree with defendants' argument that because these fines are
intended to (1) ensure the availability of library materials and
(2) compensate each UNC campus for costs incurred in replacing lostor damaged materials, they are remedial rather than punitive in
nature, and therefore are not subject to Article IX, Section 7.
Mussallam, 321 N.C. at 509, 364 S.E.2d at 367; see also Craven
County, 343 N.C. at 92, 468 S.E.2d at 53.
Moreover, as with the statute authorizing collection of
penalties for violation of campus parking and traffic ordinances,
we note that our Legislature acted pursuant to a constitutional
provision separate and apart from Article IX, Section 7 in enacting
N.C. Gen. Stat. § 116-33. Article IX, Section 9 of the North
Carolina Constitution provides that “[t]he General Assembly shall
provide that the benefits of The University of North Carolina and
other public institutions of higher education, as far as
practicable, be extended to the people of the State free of
expense.” N.C. Const. art. IX, § 9. We conclude (1) that the
broad authority granted to UNC campus trustees under N.C. Gen.
Stat. § 116-33, including the authority to assess fines for the
loss, damage, or late return of campus library materials, is
intended to promote the remedial purpose of keeping the cost of an
education at the several UNC campuses as low as possible; and (2)
that because N.C. Gen. Stat. § 116-33 advances this remedial
purpose, the statute is constitutional under Article IX, Section 9
of our Constitution, which is a co-equal provision with Article IX,
Section 7. Stephenson, 355 N.C. at 409, 562 S.E.2d at 413.
We hold that the clear proceeds of payments collected pursuant
to N.C. Gen. Stat. § 116-33 are not subject to Article IX, Section
7, and we therefore reverse this portion of the trial court's
order. G. Payments Collected by the Department of Revenue From
Persons Dealing in Unauthorized Substances
[10] Defendants except to the trial court's ruling that
payments collected pursuant to Article 2D of Chapter 105 of our
General Statutes belong to the public schools under Article IX,
Section 7. These payments, denominated as “unauthorized substance
taxes,” are assessed against “dealers” who possess “controlled
substances” or “illicit spiritous liquor.” N.C. Gen. Stat. §§ 105-
113.105 through 105-113.113 (2001). The statutory scheme requires
dealers to report their possession of these unauthorized substances
to the Secretary of Revenue, and to pay a substantial “excise tax”
based on the amount of the substance in their possession. N.C.
Gen. Stat. §§ 105-113.107, -113.109. In return, dealers receive
“revenue stamps” which they must affix to the unauthorized
substance before selling it. N.C. Gen. Stat. § 105-113.108(a).
“Penalties” and interest are assessed against any “dealer who
possesses an unauthorized substance to which a stamp has not been
affixed. . . .” N.C. Gen. Stat. § 105-113.111 (2001).
In enacting this statutory scheme, our Legislature provided
that “[t]he purpose of [Article 2D of Chapter 105] is to levy an
excise tax to generate revenue for State and local law enforcement
agencies and for the General Fund.” N.C. Gen. Stat. § 105-113.105
(2001). The Department of Revenue must remit seventy-five percent
of each unauthorized substance tax collected “to the State or local
law enforcement agency that conducted the investigation of a dealer
that led to the assessment,” and the remainder goes to the General
Fund. N.C. Gen. Stat. § 105-113.113(b) (2001). Defendants contend
the trial court erred in striking down this portion of thestatutory scheme and ruling that the clear proceeds of unauthorized
substance taxes instead belong to the public schools under Article
IX, Section 7. We agree and reverse the trial court's ruling.
In State v. Ballenger, 123 N.C. App. 179, 472 S.E.2d 572
(1996), aff'd per curiam, 345 N.C. 626, 481 S.E.2d 84, cert.
denied, 522 U.S. 817, 139 L. Ed. 2d 29 (1997), a panel of this
Court considered the constitutionality, for double jeopardy
purposes, of the unauthorized substances tax as imposed under a
previous statutory scheme and held that the tax “does not have such
fundamentally punitive characteristics as to render it violative of
the prohibition against multiple punishments for the same offense
contained in the Double Jeopardy Clause.” Ballenger, 123 N.C. App.
at 184, 472 S.E.2d at 575 (emphasis added). In so holding, we
stated that the statutory scheme “is a legitimate and remedial
effort to recover revenue from those persons who would otherwise
escape taxation when engaging in the highly profitable, but illicit
and sometimes deadly activity of possessing, delivering, selling or
manufacturing large quantities of controlled drugs.” Id. (emphasis
added); see also State v. Woods, 136 N.C. App. 386, 389-390, 524
S.E.2d 363, 365, disc. review denied, 351 N.C. 370, 543 S.E.2d 147
(2000); State v. Adams, 132 N.C. App. 819, 820, 513 S.E.2d 588,
589, disc. review denied, 350 N.C. 836, 538 S.E.2d 570, cert.
denied, 528 U.S. 1022, 145 L. Ed. 2d 414 (1999).
Plaintiffs cite Lynn v. West, 134 F.3d 582 (4th Cir. 1998),
cert. denied, 525 U.S. 813, 142 L. Ed. 2d 36 (1998) in support of
their contention that the unauthorized substances tax is subject to
Article IX, Section 7 under Mussallam because the tax is actuallypunitive, rather than remedial, in nature. In Lynn, the Fourth
Circuit Court of Appeals concluded that a previous version of North
Carolina's unauthorized substances tax “has enough punitive
features that its nature is that of a criminal penalty, not a civil
tax.” Lynn, 134 F.3d at 589. However, it is well-settled that
with the exception of decisions of the United States Supreme Court,
federal appellate decisions are binding upon neither the appellate
nor trial courts of this State. State v. Wambach, 136 N.C. App.
842, 843-844, 526 S.E.2d 212, 213 (2000). Moreover, absent
modification by our Supreme Court, a panel of this Court is bound
by the prior decision of another Court of Appeals panel addressing
the same issue. State v. Harris, 157 N.C. App. 647, 656, 580
S.E.2d 63, 69 (2003). Because our Supreme Court has declined to
conclude that the unauthorized substances tax is punitive in
nature, we are bound by the conclusions of prior panels of this
Court that this tax is intended for a remedial purpose. Harris,
157 N.C. App. at 656, 580 S.E.2d at 69; Woods, 136 N.C. App. at
389-390, 524 S.E.2d at 365; Adams, 132 N.C. App. at 820, 513 S.E.2d
at 589. We therefore hold that payments collected under Article 2D
of Chapter 105 of our General Statutes are not subject to Article
IX, Section 7 and do not belong to the public schools. Mussallam,
321 N.C. at 509, 364 S.E.2d at 367.
H. Money Paid by an Environmental Violator to Perform or Fund
a Third Party's Performance of a “Supplemental Environmental
Project” in lieu of Paying a Civil Penalty
[11] Our Legislature has authorized the Department of
Environment and Natural Resources (DENR) to assess civil penalties
against individuals and entities who violate certain statutory andregulatory requirements designed to protect the environment. N.C.
Gen. Stat. § 143-215.6A (2001) (assessing civil penalties for
violation of water quality laws); N.C. Gen. Stat. § 143-215.114A
(2001) (assessing civil penalties for violation of air quality
laws). When a civil penalty is assessed, DENR may also collect
from an environmental violator “the reasonable costs of any
investigation, inspection, or monitoring survey which revealed the
violation . . . .” N.C. Gen. Stat. § 143-215.3(a)(9) (2001). The
statutes authorizing these civil penalties expressly provide that
“[t]he clear proceeds of civil penalties assessed . . . shall be
remitted to the Civil Penalty and Forfeiture Fund,” from which,
pursuant to our holding in Part I of this opinion, they are to be
transferred to the School Technology Fund for use by the state's
public schools. N.C. Gen. Stat. § 143-215.6A(h1); see also N.C.
Gen. Stat. § 143-215.114A(h).
Since at least 1998, however, DENR's Division of Water Quality
has implemented a policy whereby environmental violators are
allowed to voluntarily undertake a “supplemental environmental
project” (SEP) in lieu of paying some portion of an assessed civil
penalty. According to a 1998 DENR memorandum, a SEP is defined as
a project that is “beneficial to the environment and/or to public
health that a[n environmental violator] agrees to perform as part
of a settlement to an enforcement action.” According to the same
memorandum, DENR's purpose in allowing a SEP is to “provide
opportunities for environmental benefit as a result of negotiated
settlements where some portion of the settlement agreement may be
in the form of a [SEP].” Defendants contend the trial court erred in ruling that
“[m]onies paid to support a [SEP], in settlement of an assessed
civil penalty pursuant to a settlement agreement with [DENR], are
subject to Article IX, Section 7 . . . and belong to and shall be
remitted to the public schools.” Defendants also specifically
challenge the trial court's conclusion that “the $50,125 paid by
the City of Kinston to Lenoir Community College on or about 31
March 1998 as a SEP pursuant to a Consent Agreement and Settlement
. . . is subject to Article IX, Section 7 . . . and belongs to and
shall be paid by [DENR] to the Lenoir County Board of Education .
. . .” We do not agree with defendants' contentions and affirm
this portion of the trial court's order, to the extent that it
provides that monies paid in support of a SEP are subject to
Article IX, Section 7. Pursuant to our holding in Part I of this
opinion, however, we reverse that portion of the trial court's
order directing DENR to pay to the Lenoir County Board of Education
the $50,125.00 DENR received from the City of Kinston on 31 March
1998 in support of a SEP, and hold that DENR must instead remit
these moneys to the Civil Penalty Fund.
The DENR memorandum announcing implementation of the SEP
option for environmental violators defines a SEP as “part of a
settlement to an enforcement action” and states that DENR is
implementing the policy “to provide opportunities for environmental
benefit as a result of negotiated settlements.” In Craven County,
our Supreme Court held that payments made by an environmental
violator to DENR pursuant to a settlement agreement following
assessment of a civil penalty were subject to Article IX, Section7, stating that “[t]he fact that the monies were paid pursuant to
a settlement agreement does not change the nature of these
payments. The monies were still paid because of a civil penalty
assessed against [the environmental violator].” Craven County, 343
N.C. at 91, 468 S.E.2d at 52. In the present case, we conclude
that payments by an environmental violator, including the City of
Kinston, to support a SEP as part of a settlement agreement are
“still paid because of a civil penalty assessed against the
[environmental violator]” and as such are punitive in nature and
therefore subject to Article IX, Section 7. Id.
With respect to the payment made by the City of Kinston, we
are unpersuaded by defendant's argument that because the payment
was made to Lenoir Community College in support of a SEP, it did
not “accrue to the state” and thus was not subject to Article IX,
Section 7. The only reason the City of Kinston paid the $50,125.00
to Lenoir Community College rather than DENR is because DENR,
acting without any statutory or regulatory authority to do so,
unilaterally implemented its policy of allowing SEPs as an
alternative to enforcing the State's environmental laws through the
imposition of civil penalties. As our Supreme Court stated in
Boney v. Kinston Graded Schools, one of the “wise ends” for which
Article IX, Section 7 was designed was “to prevent the diversion of
public school property and revenue from their intended use to other
purposes.” Boney, 229 N.C. at 140, 48 S.E.2d at 59; see also Shore
v. Edmisten, Atty. General, 290 N.C. 628, 633, 227 S.E.2d 553, 558
(1976) (holding that statutes and judgments purporting to directpayment of a fine anywhere other than for the use of the public
schools violate Article IX, Section 7).
We hold that any monies paid in support of a SEP, including
the $50,125.00 paid by the City of Kinston to Lenoir Community
College on or about 31 March 1998, are subject to Article IX,
Section 7 and must be remitted by DENR to the Civil Penalty Fund
for allocation to local school administrative units pursuant to
N.C. Gen. Stat. 115C-457.3.
We note that by their brief's twelfth assignment of error,
defendants contend “[t]he trial court erred when it concluded
'investigative costs' collected by [DENR, pursuant to N.C. Gen.
Stat. § 143-215.3(a)(9)] as part of an enforcement action against
a[n environmental] violator belong to the county school funds.”
However, because defendants concede in their brief that “the trial
court did not specifically find that 'investigative costs' assessed
and collected by [DENR] are civil penalties under [Article IX,
Section 7],” asserting instead that “the general conclusion of law
challenged by this assignment of error could be read as supporting
that position,” we decline to address this assignment of error as
it is not properly before this Court. See N.C.R. App. P. 10(b).
I. Civil Penalties Paid by Local Public School Systems to
State Agencies
[12] Defendants except to the trial court's ruling that
payments “which clearly constitute civil penalties” made by local
public school systems themselves “remain subject to Article IX,
Section 7 . . . and belong to the public schools and shall be
remitted by the collecting state agencies to the public schools.”
Defendants also specifically challenge the trial court's rulingthat “the $11,000 paid by the Edgecombe County Board of Education
to [DENR's Division of Water Quality] on or about 24 April 1997 for
failure to comply with interim effluent limitations at the Phillips
School Wastewater Treatment Facility is subject to Article IX,
Section 7 . . . and shall be paid by [DENR] to the Edgecombe County
Board of Education for the use of the public schools in that
county.” We agree with defendants and reverse this portion of the
trial court's order.
While the trial court concluded that payments made by local
public schools to various State agencies “clearly constitute civil
penalties within the meaning of Article IX, Section 7,” we note
that in light of our holdings in the several foregoing sections of
this opinion, these payments may or may not be subject to Article
IX, Section 7. The determinative factor is whether the authority
under which each payment is collected is “punitive” or “remedial”
in nature. Mussallam, 321 N.C. at 509, 364 S.E.2d at 367; see also
Craven County, 343 N.C. at 92, 468 S.E.2d at 53. However, a case-
by-case analysis of the different payments made by local public
schools to various state agencies is unnecessary, because we hold
that any money collected by a State agency from a public school or
local school administrative unit should not be remitted to the
Civil Penalty Fund for ultimate distribution among the State's
public schools.
Our Supreme Court has stated that “[p]ublic policy in this
jurisdiction, buttressed by the uniform decisions of this Court,
will not permit a wrongdoer to enrich himself as a result of his
own misconduct.” Davenport v. Patrick, 227 N.C. 686, 689, 44S.E.2d 203, 205 (1947). If payments collected as civil penalties
from public schools remain subject to Article IX, Section 7 and are
utilized by the public schools under the statutory scheme set forth
in Article 31A of Chapter 115C of our General Statutes, the
offending unit will receive back from the School Technology Fund a
portion of the fine or penalty assessed against the unit. See N.C.
Gen. Stat. § 115C-457.3. The offending unit will thus be unjustly
enriched by its own wrongdoing, in the sense that it will retain
the use of money which would otherwise have been paid in its
entirety to a State agency as a consequence of the offending
units's wrongdoing.
We hold that payments collected by State agencies as fines or
civil penalties assessed against a public school or local school
administrative unit, including the $11,000.00 paid to DENR by the
Edgecombe County Board of Education on or about 24 April 1997, need
not be remitted to the Civil Penalty Fund, but may instead remain
with the collecting State agency, where they may be used for
purposes other than maintaining public schools.
J. Payments Collected by State Agencies and Licensing Boards
for Licensees' Failure to Timely Comply with Licensing Requirements
[13] Defendants assert the trial court erred in ruling that
payments collected from individuals by “numerous state agencies and
licensing boards . . . for the late renewal of licenses or the late
payment of license fees” are subject to Article IX, Section 7.
Noting that our Legislature has granted various occupational
licensing boards the authority to assess and collect “late fees” or
“penalties” from their licensees for failure to timely renew their
licenses, defendants argue that these payments are remedial, ratherthan punitive, in nature, and therefore outside the scope of
Article IX, Section 7. We agree, and we reverse this portion of
the trial court's order.
Under N.C. Gen. Stat. § 87-22 (1997), the version of the
statute in effect at this litigation's commencement, the North
Carolina Board of Examiners of Plumbing, Heating, and Fire
Sprinkler Contractors (Plumbing and Heating Board) is authorized to
assess a “penalty for nonpayment” in the amount of 10% of the
annual licensing fee for each month a licensee delays renewal, with
the condition that the “penalty for nonpayment shall not exceed the
amount of the annual fee.” Similarly, pursuant to the version of
N.C. Gen. Stat. § 87-44 in effect at this litigation's
commencement, the North Carolina Board of Examiners of Electrical
Contractors (Electrical Board) may collect $25.00 from each
licensee who renews late. Likewise, the North Carolina Board of
Cosmetic Art Examiners (Cosmetic Board), pursuant to N.C. Gen.
Stat. §§ 88B-6, -21 (2001), collects payments ranging from between
$10.00 to $25.00 from license holders for late renewal of licenses.
Finally, the North Carolina State Bar (State Bar) collects a “late
fee” of $30.00 for members' late payment of annual dues under N.C.
Gen. Stat. § 84-34 (2001).
Only payments which are “punitive rather than remedial in
nature and [are] intended to penalize the wrongdoer rather than
compensate a particular party” are subject to Article IX, Section
7. Mussallam, 321 N.C. at 509, 364 S.E.2d at 367 (emphasis added).
The label attached to the monetary payment does not control the
determination of whether such a payment constitutes a penalty,forfeiture, or fine within the meaning of Article IX, Section 7.
Craven County, 343 N.C. at 92, 468 S.E.2d at 53; see also Cauble,
301 N.C. at 344, 271 S.E.2d at 260.
Based on the record before us, we conclude that the payments
collected by the Plumbing and Heating Board, the Electrical Board,
the Cosmetic Board, and the State Bar are intended not as a means
to punish delinquent license holders, but rather to compensate the
collecting agency for additional operating expenses incurred in
collecting money due or compelling performance of a licensing
requirement. Each entity's director maintains that these
assessments are used to fund its operations and/or to administer
its regulatory program. The assessments themselves are for such
small dollar amounts that we discern no punitive intent in the
statutes authorizing them. We hold that the payments collected by
the Plumbing and Heating Board, the Electrical Board, the Cosmetic
Board, and the State Bar for late renewal of occupational licenses
or late payment of license fees are remedial in nature and
therefore not subject to Article IX, Section 7. Mussallam, 321
N.C. at 509, 364 S.E.2d at 367.
III. Statute of Limitations
[14] By their final assignment of error, defendants except to
the trial court's conclusion that plaintiffs' claims are subject to
the three-year statute of limitations found in N.C. Gen. Stat. § 1-
52. Defendants contend that N.C. Gen. Stat. § 1-54(2) should apply
instead, limiting plaintiff's claims to payments collected within
one year preceding the filing of the complaint. We disagree. N.C. Gen. Stat. § 1-54(2) (2001) provides that a one-year
limitations period applies to actions brought “[u]pon a statute,
for a penalty or forfeiture, where the action is given to the State
alone, or in whole or in part to the party aggrieved . . . except
where the statute imposing it prescribes a different limitation.”
Our Supreme Court has construed this statute to “apply to a civil
action by the State to collect unpaid civil penalty assessments.”
Ocean Hill Joint Venture v. N.C. Dept. of E.H.N.R., 333 N.C. 318,
323, 426 S.E.2d 274, 278 (1993) (emphasis added). We have held
that “G.S. Sec. 1-54(2) applies only to actions based on statutes
which expressly provide for a penalty or forfeiture, the purpose of
which is punitive.” Miller v. C.W. Myers Trading Post, Inc., 85
N.C. App. 362, 368, 355 S.E.2d 189, 193 (1987) (emphasis in
original).
Our appellate courts have construed N.C. Gen. Stat. § 1-54(2)
as applicable to actions commenced by the State upon a statute to
collect civil penalties or forfeitures. However, because the case
at bar involves claims by the School Boards Association and various
local school boards to recover payments provided to the public
schools by Article IX, Section 7, which payments have already been
collected by the State, we hold that N.C. Gen. Stat. § 1-54(2) is
not applicable. We conclude that the trial court correctly applied
the three-year limitations period provided in N.C. Gen. Stat. § 1-
52 (2001) for “an action . . . [u]pon a liability created by
statute” or “[a]gainst a public officer, for a trespass, under
color of his office.” In so holding we are mindful of this Court's
previous determination that “a statute of limitations should not beapplied to cases not clearly within its provisions, . . . and that
where there is doubt as to which statute of limitations should
apply, the longer statute should be chosen.” Holley v. Coggin
Pontiac, 43 N.C. App. 229, 240-241, 259 S.E.2d 1, 8, disc. review
denied, 298 N.C. 806, 261 S.E.2d 919 (1979) (citation omitted).
In summary, we hold that the statutory scheme set forth in
Article 31A of Chapter 115C of our General Statutes, which directs
that payments determined to constitute penalties, fines, or
forfeitures within Article IX, Section 7's meaning be remitted by
the collecting agency to the Civil Penalty Fund, transferred to the
School Technology Fund, and distributed to local public school
administrative units based on student population for the
implementation of school technology plans, is constitutional. Of
the several payments collected by various State agencies,
institutions, and licensing boards which the trial court held to be
subject to Article IX, Section 7, we affirm the trial court's order
as to some of these payments and reverse the trial court as to
others, as discussed fully in Part II of this opinion. Finally, we
hold that plaintiffs' claims are subject to a three-year
limitations period.
Affirmed in part and reversed in part.
Judge HUNTER concurs in part and dissents in part.
Judge BRYANT concurs.
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 ofTransportation (“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.
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 remainin the several counties, and shall be faithfully appropriated and used exclusively for maintaining free public schools.
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 paymentscollected 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 vehicle[s] 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 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.
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 shouldbe 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. (See footnote 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 innocent 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 environmentalviolations 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.
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