Wiggs v. Edgecombe County

JACKSON, Judge.

Edgecombe County and Edgecombe County Board of Commissioners (“defendants”) appeal an order granting summary judgment in favor of Jerry Wiggs (“plaintiff”) on plaintiff’s claims for declaratory and injunctive relief, denying defendants’ motion for summary judgment, and enjoining defendants from terminating payment of the special separation allowance. The trial court certified the order as a final judgment on 7 September 2005.

Plaintiff was employed as a law enforcement officer by the County of Edgecombe from 1 May 1976 to 31 March 2004. The County of Edgecombe is a member of the North Carolina Local Government Employees Retirement System (“Retirement System”). On 1 March 2004, plaintiff notified the Retirement System and the Edgecombe County Administrative Office of his intention to retire on 1 April 2004. On 31 March 2004, the Retirement System certified plaintiff as having thirty years of creditable service with the Retirement System. Plain*49tiff retired from his employment pursuant to North Carolina General Statutes, section 128-21(21) (2005) on 1 April 2004. On 1 April 2004, plaintiff began receiving his retirement benefits and his special separation allowance. Plaintiff continues to receive his special separation allowance since instituting this action.

In May 2004, plaintiff sought employment with the Raleigh-Durham Airport Authority, a member of the Retirement System. Upon advice from the Raleigh-Durham Airport Authority, plaintiff contacted Edgecombe County Manager Lorenzo Carmon (“Carmon”) regarding the possible effect of plaintiff’s re-employment with the Raleigh-Durham Airport Authority. When plaintiff contacted Carmon, the County of Edgecombe had no written policy regarding the cessation of the special separation allowance upon re-employment with an employer who is a member of the Retirement System.

On 7 June 2004, at defendants’ public meeting, Carmon informed defendants that plaintiff had asked to be employed by another member of the Retirement System, and to continue to receive his special separation allowance. Defendants instructed Carmon to draft a resolution that addressed the cessation of the special separation allowance (the “Resolution”). On 12 July 2004, defendants adopted the Resolution. The Resolution stated, in pertinent part, that:

In accordance with the action of the North Carolina General Assembly (G.S. 143-166.42), The County of Edgecombe will determine the eligibility of an applicant for the Special Separation Allowance for law enforcement officers and the following terms and conditions for that allowance will apply:
F. The separation allowance will terminate under the following conditions:
1. Upon retiree reaching age 62; OR
2. Upon retiree’s death; OR
3. Upon retiree’s re-employment in any capacity (fulltime, part time, temporary, permanent, contractual, etc.) by any local government participating in the NC Local Government Employees Retirement System.
G. If the separation allowance is terminated due to retiree’s reemployment, it will not be re-instated by Edgecombe County, *50regardless of the length of service with retiree’s new employer. However, the retiree may become entitled to a separation allowance from the new employer by working as a law enforcement officer a sufficient number of years to meet minimum eligibility requirements for the allowance.
H. The retiree shall notify Edgecombe County immediately if he/she is re-employed as described in Section F.3 and the County will review the re-employment to determine if there is any conflict pursuant to Section F.3. Any attempt to conceal such reemployment for the purpose of avoiding termination of the separation allowance shall constitute fraud.

On 4 October 2004, plaintiff filed a complaint against defendants alleging, inter alia, breach of contract, breach of fiduciary duty, bill of attainder, and seeking declaratory relief and a preliminary injunction. Defendants filed a timely answer denying plaintiffs allegations, and asserted the affirmative defenses of failure to mitigate and immunity. Plaintiff and defendants both filed motions for summary judgment.

After a hearing on the motions for summary judgment, on 7 September 2005, the Honorable Quentin T. Sumner entered an order granting plaintiffs motion for summary judgment for plaintiffs claims for declaratory and injunctive relief, denying defendants’ motion for summary judgment, and enjoining defendants from applying or enforcing the Resolution. We agree.

On appeal, defendants argue that they were entitled to summary judgment because: (1) the Resolution lawfully precludes plaintiff from receiving the special separation allowance upon his re-employment with another member of the Retirement System; (2) the Resolution was reasonable and necessary to serve an important public purpose; and (3) defendants did not violate the Bill of Attainder Clauses in either the United States or North Carolina Constitution.

We first address whether the Resolution lawfully precludes plaintiff from receiving the special separation allowance upon his reemployment with another member of the Retirement System and whether the Resolution was reasonable and necessary to serve an important public purpose. Defendants contend that Campbell v. The City of Laurinburg, 168 N.C. App. 566, 608 S.E.2d 98 (2005), controls in this case. We hold that Campbell is distinguishable.

*51In Campbell, in 1991, the Laurinburg City Council, as the governing body, established that any officer who was receiving the special separation allowance would forfeit the allowance upon employment by another local government or agency thereof. Campbell, 168 N.C. App. at 568, 608 S.E.2d at 98. On 30 August 1999, after thirty years of service, the plaintiff retired from the City of Laurinburg Police Department and began receiving a special separation allowance pursuant to North Carolina General Statutes, section 143-166.42.1 Id. at *52567, 608 S.E.2d at 98. In October 2001, the plaintiff became employed with the Scotland County Sheriff’s Office, and the City ceased payment of the special separation allowance pursuant to their 1999 resolution and North Carolina General Statutes, section 143-166.42. Plaintiff sued, and we held that the City “acted congruent with its designated authority under N.C. Gen. Stat. § 143-166.42 and consistent with the General Assembly’s intent in determining that for their law enforcement officers, becoming employed by another local government agency . . . would be grounds to cease payment of the separation allowance.” Id. at 572, 608 S.E.2d at 101. Therefore, the City, as the governing body, ceased payments pursuant to their previously established and enacted resolution.

Here, however, defendants had not previously established and enacted any resolution pursuant to their authority under North Carolina General Statutes, section 143-166.42. In fact, defendants passed the Resolution in July 2004, over three months after plaintiff retired and began receiving his special separation allowance. We hold that North Carolina General Statutes, section 143-166.42 creates the option and affirmative duty for counties to enact a resolution in advance of a law enforcement officer’s re-employment, in order to comply with the provisions of North Carolina General Statutes, section 143-166.41(c). In contrast to the dissenting opinion, we believe that this option and affirmative duty exists because the plain language of North Carolina General Statutes, section 143-166.42 states that “[a]s to the applicability of . . . G.S. 143-166.41 to locally employed officers, the governing body for each unit of local government shall be responsible for making determinations of eligibility for their local officers . . . .” (emphasis added). Thus, the General Assembly gave the governing body for each local government the discretion to act or not to act, creating an option and affirmative duty to enact a resolution. Nothing in the plain language of the statute or legislative history shows the General Assembly did not create the option for local governments to act. Otherwise, the General Assembly would have provided that the provision of North Carolina General Statutes, section 143-166.41 would apply to local governments as a matter of law.

The dissenting opinion also misinterprets our reading of North Carolina General Statutes, section 143-166.41(c). The issue at bar is whether plaintiff had a vested contract right, not whether the General Assembly intended North Carolina General Statutes, section 143-166.41(c) to apply to the local governmental officers such that a *53local officer’s special allowance would terminate automatically upon employment by the State, but would not terminate upon his commencing employment with another local governmental entity who was participating in the Retirement System. Accordingly, the dissenting opinion misstates and fails to accurately summarize our reasoning.

In addition, the dissenting opinion reasons that “the State has nothing to do with the funding of that allowance.” In actuality, the special separation allowance is paid with county, not State, funds.2 Thus, local and State officers are not treated the same, particularly because the source of funds for the county is tax revenues collected by the State for the county’s benefit. Accordingly, county officers have a contractual right to receive a special separation allowance pursuant to North Carolina General Statutes, section 143-166.42, absent the county’s adoption of a resolution providing otherwise prior to the county officers’ vesting of their contractual right.

Because we hold that Campbell is distinguishable, the appropriate issue is whether a change in the law, which affected plaintiff’s right to receive a special separation allowance, violated Article I, section 10 of the Constitution of the United States, which provides in part that “[n]o state shall... pass any... law impairing the obligation of contracts.” U.S. Const, art. I, § 10.

We previously have held that plaintiffs, as members of the North Carolina Local Governmental Employees’ Retirement System, have a contractual right to rely on the terms of the retirement plan if the terms existed at the moment their retirement rights became vested. Simpson v. N.C. Local Gov’t Employees’ Retirement Sys., 88 N.C. App. 218, 224, 363 S.E.2d 90, 94 (1987), aff’d per curiam, 323 N.C. 362, 372 S.E.2d 559 (1988). Our Supreme Court later ruled that “when the General Assembly enacted laws which provided for certain benefits to those persons who were to be employed by the state and local governments and who fulfilled certain conditions, this could reasonably be considered by those persons as offers by the state or local government to guarantee the benefits if those persons fulfilled the *54conditions.” Faulkenbury v. Teachers’ & State Employees’ Retirement Sys., 345 N.C. 683, 691, 483 S.E.2d 422, 427 (1997). Thus, Article 3 of Chapter 128 of the North Carolina General Statutes creates contractual obligations. Simpson, 88 N.C. App. at 225, 363 S.E.2d at 94. Article I, section 10 of the Constitution of the United States provides in part: “No state shall. . . pass any . . . law impairing the obligation of contracts.” U.S. Const, art. I, § 10. Similarly, Article I, section 19 of the North Carolina Constitution, the “law of the land clause,” provides that “no person shall be . . . disseized of his freehold, liberties, or privileges, or... deprived of his ... property, but by the law of the land.” N.C. Const, art. I, § 19. Our courts “reserve the right to grant relief against unreasonable and arbitrary state statutes under article I, section 19 of the Constitution of North Carolina in circumstances under which no relief might be granted by the due process clause of the fourteenth amendment^]” Lowe v. Tarble, 313 N.C. 460, 462, 329 S.E.2d 648, 650 (1985). “Whether a state statute violates the law of the land clause ‘is a question of degree and reasonableness in relation to the public good likely to result from it.’ ” Id. (quoting In re Hospital, 282 N.C. 542, 193 S.E.2d 729 (1973)). Thus, under the “law of the land” clause, the test is to weigh the degree and reasonableness of depriving plaintiff a special separation allowance against the public good likely to come from it. In conjunction with the test under the law of the land clause, if a contractual obligation arose under statute, a reviewing court must determine (1) whether the state’s actions impaired an obligation of the state’s contract, and (2) whether the impairment, if any, was reasonable and necessary to serve an important public purpose. Simpson, 88 N.C. App. at 225, 363 S.E.2d at 94.

Here, plaintiff began his employment with the Edgecombe County’s Sheriff Office as a Deputy Sheriff on 1 May 1976. On 31 March 2004, the Retirement System certified plaintiff as having thirty years of creditable service with the Retirement System effective 31 March 2004. Therefore, on 31 March 2004, plaintiff’s contractual right to receive the special separation allowance became a vested contractual right. As of that time, Edgecombe County had declined to exercise its authority pursuant to North Carolina General Statutes, section 143-166.42 to restrict plaintiff’s ability to collect this special separation allowance should he choose to accept employment with any local government participating in the North Carolina Local Government Employees Retirement System.

On 12 July 2004, defendants enacted the Resolution that sought to rescind plaintiff’s contractual rights under the Retirement System *55to receive a special separation allowance. Therefore, defendants’ Resolution impaired the obligation of the state’s contract with plaintiff under the Retirement System to provide a special separation allowance pursuant to North Carolina General Statutes, section 143-166.42.

We now turn to whether the impairment was reasonable and necessary to serve an important public purpose. Defendants argue that the Resolution was necessary to conserve taxpayer money and to prevent “double dipping,” meaning that the Resolution prohibits an employee from retiring from the Retirement System, to begin collecting the special separation allowance, and then become re-employed with the Retirement System. However, we note that defendants failed to articulate an important public purpose sufficient to justify impairing plaintiff’s contractual right. Following the rationale in Faulkenbury and Simpson, the argument to improve the Retirement System, conserve taxpayer dollars, or to correct inequities in the Retirement System is insufficient to avoid the constitutional prohibition against impairing contractual rights. Therefore, we conclude that the. Retirement System created a vested contractual right that defendants impaired through a means that was not reasonable and necessary to serve an important public purpose. Accordingly, defendants’ assignment of error is overruled.

Because we hold that defendants’ Resolution violated Art. I, section 10 of the Constitution of the United States, and Article I, section 19 of the North Carolina Constitution, we do not address whether defendants violated the Bill of Attainder Clauses in the United States or North Carolina Constitution. Accordingly, we affirm the trial court’s entry of summary judgment.

AFFIRM.

Judge TYSON concurs. Judge GEER dissents in a separate opinion.

. N.C. Gen. Stat. § 143-166.42 (2006) provides that “[o]n or after January 1, 1987, the provisions of G.S. 143-166.41 shall apply to all eligible law-enforcement officers as defined by G.S. 128-21(llb) or G.S. 143-166.50(a)(3) who are employed by local government employers, except as may be provided by this section. As to the applicability of the provisions of G.S. 143-166.41 to locally employed officers, the governing body for each unit of local government shall be responsible for making determinations of eligibility for their local officers retired under the provisions of G.S. 128-27(a) and for making payments to their eligible officers under the same terms and conditions, other than the source of'payment, as apply to each State department, agency, or institution in payments to State officers according to the provisions of G.S. 143-166.41.”

On 15 July 1986, the North Carolina General Assembly enacted N.C. Gen. Stat. § 143-166.42, which states that local law enforcement officers retiring before age sixty-two are to receive the same special separation allowance afforded to State law enforcement officers under N.C. Gen. Stat. § 143-166.41. Bowers v. City of High Point, 339 N.C. 413, 415, 451 S.E.2d 284, 286 (1994).

N.C. Gen. Stat. § 143-166.41 provides, in pertinent part, that: “(a) Notwithstanding any other provision of law, every sworn law-enforcement officer as defined by G.S. 135-l,(llb) or G.S. 143-166.30(a)(4) employed by a State department, agency, or institution who qualifies under this section shall receive, beginning on the last day of the month in which he retires on a basic service retirement under the provisions of G.S. 135-5(a) or G.S. 143-166(y), an annual separation allowance equal to eighty-five hundredths percent (0.85%) of the annual equivalent of the base rate of compensation most recently applicable to him for each year of creditable service. The allowance shall be paid in 12 equal installments on the last day of each month. To qualify for the allowance the officer shall:

(1) Have (i) completed 30 or more years or creditable service, or (ii) have attained 65 years of age and completed five or more years of creditable service; and

(2) Not have attained 62 years of age; and

(3) Have completed at least five years of continuous service as a law enforcement officer as herein defined immediately preceding a service retirement.

(c) Payment to a retired officer under the provisions of this section shall cease at the first of:

(1) The death of the officer;

(2) The last day of the month in which the officer attains 62 years of age; or

(3) The first day of reemployment by any State department, agency, or institution, except that this subdivision does not apply to an officer returning to State employment in a position exempt from the State Personnel Act in an agency other than the agency from which that officer retired.”

. The General Assembly, in 1986 Session Laws, Chapter 1019, House Bill 2130, authorized local governments to levy an additional one-half cent sales tax, and provided for local government employers of law enforcement officers to contribute an amount of participating local officers’ monthly compensation to the Supplemental Retirement Income Plan to be credited to the designated individual accounts of participating local officers, and for the special separation allowance for local officers pursuant to North Carolina General Statutes, section 143-166.42.