IN THE COURT OF APPEALS OF NORTH CAROLINA No. COA 14

- 1115 Filed: 1 September 2015
Wake County, No. 12 CVS 002414 RICHMOND COUNTY BOARD OF EDUCATION, Plaintiff,

v. JANET COWELL , NORTH CAROLINA STATE TREASURER, in her official capacity only, DAVID T. MCCOY, NORTH CAROLINA STATE CONTROLLER, in his official capacity only, ART POPE, NORTH CAROLINA STATE BUDGET DIRECTOR, in his official capacity only, FRANK L. PERRY, SECRETARY OF THE N ORTH CAROLINA DEPARTMENT OF PUBLIC SAFETY, in his official capacity only, ROY COOPER, ATTORNEY GENERAL OF THE STATE OF NORTH CAROLINA, in his official capacity only, Defendant s . Appeal by Defendants from orders entered 23 May 2012 by Judge W. Osmand Smith, III, and 27 June 2014 by Judge Michael R. Morgan in Wake County Superior Court. Heard in the Court of Appeals 16 March 2015. George E. Crump, III, for the Plaintiff

- Appellee. Attorney General Roy A. Cooper, III, by Solicitor General John F. Maddrey, Assistant Solicitor General Gary R. Govert , and Special Deputy Attorney General Joseph Finarelli, for the Defendant s - Appellant s .
DILLON , Judge.

I. Background The question presented in this appeal is whether N.C. Gen. Stat. § 7A

304(a)(4b) violates Article IX, Section 7(a) of the North Carolina Constitution.R ICHMOND C NTY
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- Article IX, Section 7(a) mandates that the “clear proceeds” of all fines , penalties and forfeitures collected for the breach of the penal laws of the State “ shall belong to ” the counties and be “ used exclusively for maintaining ” our public schools. N.C. Const. art. IX, § 7(a) (2011 ). N.C. Gen. Stat. § 7A

- 304(a)(4b) requires that individuals convicted of an improper equip ment offense under our motor vehicle laws pay a $50.00 surcharge, in addition to any other penalty or cost authorized by law, and directs that the proceeds from the collection of this $50.00 surcharge be remitted to a fund administered by the State and use d to pay counties to hous e certain misdemeanor offenders in their jails (the “State Confinement Fund”)

. See also Justice Reinvestment Act of 2011 , 2011 N.C. Sess. Laws 192 , §§ 7(a)

- (c), (e) (codified at N.C. Gen. Stat. §§ 15A

- 1352, 148

- 32.1(b1), (b2) (201 1 )) (providing for inmate housing in county jails for misdemeanants whose sentences exceed ninety days ). The Richmond County Board of Education (“Plaintiff”) commenced this action, contending that the $50.00 surcharge falls within the ambit of A rticle IX, S ection 7(a) of our S tate C onstitution and, therefore, the clear proceeds therefrom must be used to fund education rather than be contributed to the State Confinement Fund. In this action, Plaintiff seeks a declaratory judgment that it is entitled to the $50.00 surcharge revenue collected in Richmond County and a monetary judgment in the
amount equal to the total $50.00 surcharge revenue collected in Richmond CountyR ICHMOND C NTY
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- that has been remitted to the State Confinement Fund

. D efendants are executive officers of the State of North Carolina involved in the administration of State funds and are being sued in their official capacities only. 1 All parties moved for summary judgment. The trial court granted summary judgment in favor of Plaintiff and denied Defendants’ motion for summary judgment

. Defendants appeal. 2 For the following reasons, we affirm. II. Standard of Review As this case is factually uncontested and involves the interpretation of statutes and our State Constitution, our review is de novo

. Shavitz v . City of High Point , 177 N.C. App. 465, 473

- 74, 630 S.E.2d 4, 11 (2006). III. Analysis Our courts have “the authority and responsibility to declare a law unconstitutional,” but only “when the [constitutional] violation is plain and clear.” Hart v. State , No. 372A14 at 3, 2015 N.C. LEXIS 655 *3, 2015 WL 4488553 *1 (N.C. July 23, 2015). In determining whether our General Assembly has exceeded its constitutional authority in the enactment of legislation, we must be mindful

– as our Supreme Court has recently held

– that the North Carolina Constitution “is not a

1 We granted Plaintiff’s uncontested motion for substitution of parties replacing David T. McCoy and Art Pope as Defendants with Linda Combs and Lee Roberts, respectively.

2 This appeal is the second in this proceeding. In the first appeal, we affirmed the trial court’s denial of Defendants’ motion to dismiss based on sovereign immunity and on lack of standing. Richmond Cnty. Bd. of Educ. v. Cowell , ___ N.C. App. ___, 739 S.E.2d 566 (2013)

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- grant of power, but a limit on the otherwise plenary police power of the State.” Id. at 11, 2015 N.C. LEXIS 655 *1 3, 2015 WL *5

. On appeal, Defendants argue (1) that the trial court erred in c oncluding that the $50.00 surcharge falls within the ambit of Article IX, Section 7 ; and , (2) assuming the trial court did not so err, that the trial court otherwise erred in ordering Defendants to repay “all sums” generated by the $50.00 surcharge in Rich mond County rather than some lesser amount representing the “clear proceeds” of the $50.00 surcharge revenue

. 3 We address each argument in turn. A. The North Carolina Constitution P rohibits our General Assembly from A ppropriating the $50.00 S urcharge Reve nue to H ouse P risoners We hold that the trial court correctly concluded that the $50.00 surcharge falls within the ambit of Article IX, Section 7(a) . T herefore, our General Assembly exceeded its constitutional powers by enacting legislation which directs that the

revenue from the $50.00 surcharge collected in Richmond County be remitted to the State Confinement Fund to pay for the housing of prisoners

. We begin this portion of our analysis with a brief review of the historical context surrounding the adoption of Article IX, Section 7(a) of our Constitution. We

3 In its brief, Plaintiff argues that the trial court erred in limit ing its award to the $50.00 surcharges collected in Richmond County , and not granting relief to the local school administrative units in all 100 counties. However, Plaintiff has not cross - appeal ed. T herefore, this argument has been not been properly preserved for our review

. See, e.g. , Bd. or Dirs. o f Queens Towers Homeowners’ Ass’n, Inc. v. Rosenstadt , 214 N.C. App. 162, 16 9 , 714 S.E.2d 765, 770 (2011) (“[T] he proper procedure for presenting alleged errors that purport to show that the judgment was erroneously entered and that an altogether different kind of judgment should have been entered is a cross

- appeal. ”)

. Furthermore , the local school administrative units of the other 99 counties in our State are not parties to this action.R ICHMOND C NTY
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- then turn to our Supreme Court’s watershed decision in Mussallam v. Mussallam , 321 N.C. 504, 364 S.E.2d 364 (1988) , in which it interpreted the phrase “penal law” within the meaning of Arti cle IX, Section 7(a) expansively, to include not only criminal laws, but all “ [punitive] laws that impose a monetary payment for their violation. ” Id. at 509, 364 S.E.2d at 367. Applying the interpretation established by Mussallam to the present case, we then conclude that the $50.00 surcharge imposed by N.C. Gen. Stat. § 7A

- 3 04(a)(4b) is punitive in nature and, furthermore , that the surcharge is imposed for a breach of the penal laws of our State , notwithstanding that violating the statute is not a crime . Therefore, we hold that the $50.00 surcharge falls within the ambit of Article IX, Section 7(a). The pertinent language in Article IX, Section 7(a) became part of our State Constitution in 1875. See David M. Lawrence, Fines, Penalties, and Forfeitures: An Historical and Comparative Analysis , 65 N.C. L. Rev. 49, 60 (1986). Article IX, Section 7(a) specifically states 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 ma intaining free public schools. N.C. Const. art. IX, § 7(a) (2011)

. Troubled by the historic disregard displayed by our General Assembly in failing to fund public education adequately , the framers of Article IX, Section 7(a) adopted the provision for the purpose of dedicating certainR ICHMOND C NTY
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- revenue to education, thereby limiting the power of the General Assembly to appropriate said revenue for any other purpose. See Lawrence, supra at 59

- 60. Prior to the Civil War , p ublic school funding was left entirely t o l egislative control , with no constitutional restrictions placed on our Ge neral Assembly

. Bd. of Educ. of Vance Cnty. v. Town of Henderson , 126 N.C. 689, 698 , 36 S.E. 158, 161 (1900) (Faircloth, J., concurring in result ). In 1825, the General Assembly established a statewide Literary Fund , direct ing that the profits derived th erefrom pay “ for the support of the common and convenient S chools” of our State. 4 Lawrence, supra at 53. However, during the Civil War, the General Assembly regularly raided th e Literary Fund ; a nd , as recently noted by our Supreme Court, the Fund “was almost completely depleted by war’s end.” Hart at 15, 2015 N.C. LEXIS 655 *18, 2015 WL *7. Following the Civil War, the framers of the Constitution of 1868 were interested in establishing a constitutionally

- protected fund dedicated to public educatio n. Id. Accordingly, the framers incorporated a provision requiring that certain sources of revenue

– including, among other sources, the net proceeds of f ines, penalties, and forfeitures

– be placed in a State “irreducible education al fund.” N.C.

4 The Literary Fun d was largely comprised of stock in North Carolina

- chartered banks, including the Bank of Newbern and the Bank of Cape Fear, the first banks chartered in our State. See M.C.S. Noble, A History of the Public Schools of North Carolina 45

- 48 (1930). In fact , the Bank of Newbern’s Raleigh branch was located adjacent to our Capitol in a building that was eventually torn down in 1911 to make way for the Ruffin Building, which housed our Supreme Court from 1913 to 1938 , and houses our Court today. See E.C. Waug h, North Carolina’s Capital, Raleigh 38 (1967).R ICHMOND C NTY
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- Const. art. IX, § 4 (1868) (stating further that this fund was to be “sacredly preserved” and “faithfully appropriated for establishing a nd perfecting .

. . a system of Free Public Schools”). The framers also included a provision requiring the respective counti es to support the public schools, in recognition of the importance of their role in our State’s public education system

. See i d. § 3 ( providing that each county must maintain the public schools therein for at least four months of each year , and that county commissioners who fail in this requirement “sh all be liable to indictment”). However, d espite strong language prohibiting the use of the money in the newly constitutionalized education fund for any other purpose , its diversion by our General Assembl y continued, and because the assets in the fund were meager to begin with, little money from it ever reached our State’s public schools. See Lawrence,
supra at 59. Furthermore, many c ounties struggled to meet their obligations under the new constitutiona l provisions because county commissioners could not levy taxes without voter approval. See Lane v. Stanly , 65 N.C. 153, 156 (1871)

. Thus , against the backdrop of a history of inadequate public school funding , legislative diversion of constitutionally ded icated funds, and the impotence of local government , the framers of the Constitution of 1875 adopted the language in Article IX, Section 7(a) for the purpose of securing to each county a constitutionally

- protected source of revenue to aid in meeting its obligation to support our State’s public school s . See Lawrence,
supra at 58

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- In Mussallam v. Mussallam , 321 N.C. 504, 364 S.E.2d 364 (1988) , our Supreme Court

– recognizing that the scope of Article IX, Section 7(a) only extends to the clear proceeds of fines, penalties, and forfeitures collected “ for [] breach of the penal laws of the State”

– interpret ed the phrase “penal laws” within the meaning of this provision broadly, to include not only fines imposed for violations of criminal law , but also oth er noncriminal “ laws that impose a monetary payment for their violation. ” Id. at 509, 364 S.E.2d at 367 . Specifically, the Court held that the constitutional provisi on creates “two distinct funds for the public schools.” Id. at 509, 364 S.E.2d at
366. First, the Court identified the revenue derived from the collection of fines for violation of our State’s criminal laws as subject to the provision , observing that “[o] ne could not legitimately argue that the violation of a criminal law is not a ‘ breach of the penal laws. ’” Id. at 509, 364 S.E.2d at 367. However, the Court went on to interpret the phrase “penal law s ” to include all “laws that impose a monetary payment for their violation,” provided that “[t] he payment is punitive rather than remedial in n ature and is intended to penalize the wrongdoer rather than compensate a particular party. ” Id. Accordingly , under Mussallam , the test is whether the imposition of payment for the violation of a statute is punitive or remedial in nature. I d. Applying Mu ssallam to the present case, we note initially that the $50.00 surcharge is imposed on individuals “convicted” of an improper equipment “offense.”R ICHMOND C NTY
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- See N.C. Gen. Stat. § 7A

- 304 (a) (4b) (2011)

. Specifically, N.C. Gen. Stat. § 7A

304(a)(4b) provides :

To provide for contractual services to reduce county jail populations, the sum of fifty dollars ($50.00) for all offenses arising under Chapter 20 of the General Statutes and resulting in a conviction of an improper equipment offense , to be remitted to the [ Statewide Confinement Fund ]

. Id. (emphasis added). Improper equipment offenses are found generally in Chapter 20, Article 3, Part 9 of our General Statutes, entitled “The Size, Weight, Construction and Equipment of Vehicles.” See, e.g. , id. § 20

- 115 ( “ It shall be unlawful for any person to drive

. . . any vehicle

. . . which are not so

. . . equipped as required in this title ”). Improper equipment offenses are infractions. Id. § 20

- 176(a). As such, they are not crimes. Id. § 14

- 3.1 ( defining “infra ction” as “ a noncriminal violation of law not punishable by imprisonment” ). However, though violation s of these statutes do not constitute crimes, such violations nonetheless constitute “breach[es] of the penal laws of the State” within the meaning of Art icle IX, Section 7(a)

. See, e.g. , id. ( imposing “a penalty of not more than one hundred dollars”). W e note that the additional $50.00 surcharge is imposed only on those individuals who have been found responsible for a n improper equipment offense. See id. § 7A

- 304 (a) (4b)

. Furthermore, the monetary penalty imposed for committing an improper equipment offense under Chapter 20 of the General Statutes is punitive rather than remedial in nature. T he imposition of this payment , therefore, falls within the a mbitR ICHMOND C NTY
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- of Article IX, Section 7(a). See Mussallam , 321 N.C. at 509 , 364 S.E.2d at 367. We are mindful that the General Assembly has affixed the l abel “cost” to this surcharge , suggesting that it is remedial

. See N.C. Gen. Stat. § 7A

- 304(a) (2011)

. Our Su preme Court, however, has held that “the label attached .

. . does not control, ” see Cauble v. City of Asheville , 301 N.C. 340, 344, 271 S.E.2d 258, 260 (1980) , though we are to consider the label used by the General Assembly in deciding “ whether the payme nt

. . . comes within the purview of Article IX, Section 7 ,” see North Carolina Sch. Bds. Ass’n v. Moore , 359 N.C. 474, 488, 614 S.E.2d 504, 512 (2005). However , based on how our General Assembly has directed that the proceeds from the $50.00 surcharge

ar e to be used and based on our Supreme Court’s decisions interpreting the language in Article IX, Section 7(a), we hold that the $50.00 surcharge is punitive , rather than remedial , in nature. While not all monetary payments imposed on those who violate

our State’s noncriminal laws fall within the am bit of Article IX, Section 7(a) , o ur Supreme Court has recognized that there are limitations “as to the purposes for which monies may be used and still b e considered ‘remedial. ’ ” Id. at 496, 614 S.E.2d at 517. I t is “plain and clear , ” here, that the $50.00 surcharge is not remedial because the revenue generated therefrom is not used to reimburse the State for an expense incurred because of improper equip ment violations . Instead , the revenue is used to house prisoners , see N.C. Gen. Stat. § 7A

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- possible punishment for the commission of an improper equipment offense , see id. § 14

- 3.1

. Based on our conclusion that t he $50.00 surcharge authorized by N.C. Gen. Stat. § 7A

- 304(a)(4b) falls within the ambit of Article IX, Section 7(a) of the North Carolina Constitution, Defendants’ first argument is overruled. B. Defendants M ust R epay “ A ll Sums ” Defendants next argu e that the trial court erred in ordering it to pay back “all” of the proceeds received into the State Confinement Fund from the $50.00 surcharge

revenue collected in Richmond County , contending that Plaintiff is only entitled to the “clear proceeds” therefr om . We disagree

. Defendants are correct that Article IX, section 7(a) requires only the “clear proceeds” from fines, penalties , and forfeitures within its ambit be used for public education. See, e.g. , Cauble , 301 N.C. at 345, 271 S.E.2d at 261. Defenda nts , therefore, argue that “the remedy ordered by the [trial] court was incorrect[,]” citing N.C. Gen. Stat. § 115C

- 437, which provides a definition of “clear proceeds” as the full amount “diminished only by the actual costs of collection, not to exceed te n percent (10%) of the amount collected.” The trial court , however, did not order “all sums” to be paid to Plaintiff (Richmond County Board of Education), but rather to “Richmond County. ” We construe “Richmond County” in the trial court’s order as its cle rk of superior court

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- The $50.00 surcharges were originally paid by the improper equipment offenders in to the clerk’s office. That office was required to remit the money to the State Confinement Fund pursuant to N.C. Gen. Stat. § 7A

- 304(a)(4b). However, a s we have declared that the remittance of the $50.00 surcharges collected in Richmond County to the State Confinement Fund is unconstitutional, we hold it is appropriate

– as the trial court ordered

– that this money be paid back to the clerk’s office in Richmond County . It will then be the duty of the clerk’s office to disburse this money properly pursuant to N.C. Gen. Stat. § 115C

- 452, which provides that “[t]he clear proceeds of all penalties and forfeitures and of all fines collected in the General Court of Justice in each county shall be remitted by the clerk of the superior court to the county finance officer [to be further remitted to the local school administrative unit(s) in the county

. ] ” Id. (emphasis added). 5 We note that Plaintiff is the so le local school administrative unit in Richmond County. IV. Conclusion For the foregoing reasons, we affirm the trial court’s order denying Defendants’ motion for summary judgment and granting summary j udgment in favor of Plaintiff.

5 Another statute

– N.C. Gen. Stat. § 115C

- 457.1

– addresses the proper disposition of civil fines, penalties , and forfeitures collected by a State agency , as opposed to those collected in the General Court of Justice. Specifically, p u rsuant to authority granted by Article IX, S ection 7(b) of our State Constitution, our General Assembly directs that these civil fines, pena lties , and forfeitures are not to be remitted to the finance officer of the county where collected , but rather to the State to be placed into the Civi l Penalty and Forfeiture Fund.R ICHMOND C NTY
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- AFFIRMED

. Judge s STROUD and DAVIS concur .