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North Carolina State Board of Education v. State

Court of Appeals of North Carolina

September 19, 2017

NORTH CAROLINA STATE BOARD OF EDUCATION, Plaintiff,
v.
THE STATE OF NORTH CAROLINA and THE NORTH CAROLINA RULES REVIEW COMMISSION, Defendants.

          Heard in the Court of Appeals 9 August 2016.

         Appeal by Defendants from order entered 2 July 2015 by Judge Paul G. Gessner in Wake County Superior Court. No. 14 CVS 14791

          Campbell Shatley, PLLC, by Robert F. Orr, and Poyner Spruill LLP, by Andrew H. Erteschik, for Plaintiff-Appellee.

          Troutman Sanders LLP, by Christopher G. Browning, Jr., for Defendant-Appellant North Carolina Rules Review Commission.

          Attorney General Joshua H. Stein, by Special Deputy Attorney General Amar Majmundar, and Special Deputy Attorney General Olga Vysotskaya de Brito, for Defendant-Appellant The State of North Carolina.

          INMAN, JUDGE.

         This appeal presents a question of first impression: Does the North Carolina Rules Review Commission, an agency created by the General Assembly, have the authority to review and approve rules made by the North Carolina State Board of Education, whose authority is derived from the North Carolina Constitution? For the reasons explained in this opinion, we conclude the answer is yes.

         The North Carolina Rules Review Commission (the "Commission") and the State of North Carolina (collectively, "Defendants") appeal from a trial court's order granting summary judgment in favor of the North Carolina State Board of Education (the "Board") and denying Defendants' motion to dismiss. Defendants argue the trial court erred because the state constitution provides that the Board's power is "subject to laws enacted by the General Assembly, " and the General Assembly created the Commission and delegated its review power to the Commission by enacting laws. The Board, however, contends that review by the Commission encroaches on its constitutional authority and that the General Assembly's delegation to the Commission of authority to review and "veto" Board rules violates the separation of powers provision in the North Carolina Constitution.

         We hold that rules made by the Board are subject to statutes enacted by the General Assembly requiring review and approval by the Commission. We also hold that the General Assembly has not violated the separation of powers requirement by enacting an administrative procedure for state agencies and delegating to the Commission the power to review and approve-or disapprove-rules made by the Board. Accordingly, we reverse the trial court's order and remand to the trial court for entry of judgment in favor of Defendants.

         Procedural and Appellate History

         On 7 November 2014, the Board commenced this action against Defendants based upon the North Carolina Constitution. The Board's complaint sought a declaratory judgment preventing the Commission from exercising any authority over the Board and, specifically, controlling the Board's enactment of rules. The complaint alleged two as-applied challenges to the Commission's interpretation and application of N.C. Gen. Stat. § 150B-2(1a), the Administrative Procedure Act ("the APA"), one joint as-applied and facial challenge, [1] and four facial challenges to the Commission's enabling legislation.[2]

         The complaint did not identify any specific Board rule that had been thwarted by the Commission. The complaint alleged, however, the following:

Since its inception in 1986, the [Commission] or its staff has objected to or modified every rule adopted by the Board and submitted to the [Commission] for approval. Moreover, the Board has declined to adopt a number of rules that it otherwise would have adopted but for the fact that the [Commission] would have objected to these rules or struck them down.
In addition, the [Commission] review process typically takes a minimum of six months and often longer. Thus, when the Board adopts rules, they do not have the force and effect of law until at least six months later. In the intervening months or, in some cases, years, statewide education policy is effectively enjoined by the [Commission] review process. In this regard, the [Commission's] exercise of authority over the Board's rulemaking erodes the Board's ability to timely address critical issues facing our State in the area of education.

         The complaint asserted that the Board would no longer voluntarily submit its rules to the Commission for approval and would nevertheless deem its rules to have the immediate full force and effect of law. The complaint acknowledged that the Board's position is in direct conflict with the Commission's interpretation and application of the APA and the Commission's enabling legislation.

         On 12 January 2015, Defendants moved to dismiss the Board's complaint. The Board voluntarily dismissed without prejudice five of its seven claims, leaving only two as-applied challenges. The Board moved for affirmative summary judgment and the case was assigned to a single superior court judge. In a brief supporting their motion to dismiss and opposing the Board's motion for summary judgment, Defendants also argued that they were entitled to summary judgment in their favor.

         On 29 June 2015, the trial court heard Defendants' motion to dismiss the Board's remaining two claims and the Board's motion for summary judgment on those claims. The first of these claims specifically asserts that the Commission's interpretation and application of N.C. Gen. Stat. § 150B-2(1a) to the Board violates Article IX, Section 5 of the North Carolina Constitution, the constitutional provision that grants the Board rulemaking authority. The second claim asserts that the Commission's interpretation and application of N.C. Gen. Stat. § 150B-2(1a) to the Board also violates Article I, Section 6, which requires the separation of powers, and Article II, Section 1, under which the General Assembly "may delegate a limited portion of its legislative power . . . ." N.C. Tpk. Auth. v. Pine Island, Inc., 265 N.C. 109, 114, 143 S.E.2d 319, 323 (1965).

         On 2 July 2015, the trial court entered an order allowing the Board's motion for summary judgment, [3] concluding:

Upon consideration of the plain language of the North Carolina Constitution, and the verified complaint, there is no genuine issue of material fact and Plaintiff is entitled to judgment as a matter of law pursuant to Rule 56 of the North Carolina Rules of Civil Procedure.

         Defendants timely appealed to this Court.

         The Board moved to dismiss Defendants' appeal pursuant to N.C. Gen. Stat. § 7A-27(a1), which provides that "[a]ppeal lies of right directly to the Supreme Court from any order or judgment of a court, either final or interlocutory, that holds that an act of the General Assembly is facially invalid on the basis that the act violates the North Carolina Constitution or federal law." N.C. Gen. Stat. § 7A-27(a1) (2015). On 2 March 2016, this Court granted the Board's motion.

         On 13 July 2016, the North Carolina Supreme Court entered a special order holding that the trial court's order did not facially invalidate an act of the General Assembly and remanded the appeal to this Court "for consideration of [D]efendants' challenges to the validity of the trial court's order on the merits."

         We therefore address the trial court's ruling and the parties' arguments on the Board's two remaining claims.

         Analysis

         To better guide our determination of the issues raised on appeal, we consider the historical background surrounding the Board, its creation and evolution, the General Assembly's adoption of the APA and creation of the Commission, and the relation of the Board to the Commission.

         I. Historical Context

         A. Creation and Evolution of the Board

         Public education in North Carolina predates the Board. Our state's first constitution (the "1776 Constitution") provided that "a school or schools shall be established by the Legislature, for the convenient instruction of youth, with such salaries to the masters, paid by the public . . . ." N.C. Const. of 1776, art. XLI.

         In 1825, the General Assembly enacted a statute to "create a fund for the establishment of Common Schools." Act of Nov. 21, 1825, ch.1, 1825 N.C. Sess. Laws 3-4. The statute established "a body corporate and politic, under the name of the President and Directors of the Literary Fund[, ]" to administer and invest money controlled by the Fund. Act of Nov. 21, 1825, ch.1, 1825 N.C. Sess. Laws 3-4. The statute named the Governor as President of the Literary Fund's board-the first governing body for public education in North Carolina. Act of Nov. 21, 1825, ch.1, 1825 N.C. Sess. Laws 3-4.

         The General Assembly allocated to the Literary Fund money from various revenue sources as well as all unoccupied swamp land in North Carolina, and vested the Literary Fund's board with the power to sell, invest, and otherwise exploit assets in the fund to generate revenue for public education and to build schools across the state. Act of Nov. 21, 1825, ch.1, 1825 N.C. Sess. Laws 3-4; Act of Feb. 10, 1855, ch. 27, 1854-55 N.C. Sess. Laws 50-62; see also Bd. of Educ. Of Duplin Cnty. v. State Bd. of Educ., 114 N.C. 313, 317-19, 19 S.E. 277, 277-78 (1894).[4] The Literary Fund was all but depleted as a result of the Civil War. See Jonathan Worth, Report of the President & Directors of the Literary Fund of North Carolina, Exec. Doc. 18, General Assembly Session 1866-67 (1867).[5]

         Following the Civil War, North Carolina adopted a new state constitution (the "1868 Constitution") which for the first time provided in its Declaration of Rights "a right to the privilege of education." N.C. Const. of 1868, art. I, § 27.[6] Unlike other declarations of rights, this provision did not restrict state government, but rather committed it to an affirmative duty. Orth, supra, at 52.

         The 1868 Constitution also devoted a separate Article to education, beginning with the premise that "[r]eligion, morality and knowledge being necessary to good government and happiness of mankind, schools and the means of education shall forever be encouraged[, ]" and providing for tuition "free of charge to all children of the State between the ages of six and twenty-one years." N.C. Const. of 1868, art. IX, §§ 1-2. It also established the State Board of Education as follows:

The Board of Education shall succeed to all the powers and trusts of the President and Directors of the Literary Fund of North Carolina, and shall have full power to legislate and make all needful rules and regulations in relation to free public schools and the educational fund of the State; but all acts, rules and regulations of said Board may be altered, amended or repealed by the General Assembly, and when so altered, amended or repealed they shall not be re-enacted by the Board.

          N.C. Const. of 1868, art. IX, § 9. The Board was composed entirely of ex-officio members, specifically the Governor, Lieutenant Governor, Secretary of State, Treasurer, Auditor, Superintendent of Public Works, Superintendent of Public Instruction, and the Attorney General. N.C. Const. of 1868, art. IX, § 7.

         In 1931, the General Assembly established the North Carolina Constitutional Commission, which recommended a constitutional amendment empowering the Board to "supervise and administer the free public school system of the State and make all needful rules and regulations in relation thereto[, ]" eliminating the word "legislate" from the Board's powers, and providing that "[a]ll the powers enumerated in this Section shall be exercised in conformity with this Constitution and subject to such laws as may be enacted from time to time by the General Assembly." The Report of the North Carolina Constitutional Commission, 33 (1932) (hereinafter the "1932 Report"). The Constitutional Commission proposed this amendment as part of an entirely rewritten state constitution. Id. at 5. A preamble to the proposed constitution noted that "the chief need is to relax many of the existing restrictions on the powers of the General Assembly, so as to allow more elasticity in shaping government policies, not only in respect to present conditions, but also in regard to future needed adjustments . . . ." Id. at 5. The General Assembly proposed the new constitution in 1933, but because of a technicality, the issue did not come before the voters.[7] John L. Sanders, Our Constitutions: A Historical Perspective, in North Carolina Manual 73, 77 (Liz Proctor ed., 2011).

         In 1938, the Governor's Commission on Education issued a 63-page report recommending that the General Assembly propose to voters the 1932 draft amendment regarding the powers of the Board, and urging that if the amendment was submitted to voters in an election "not entangled with other amendments which might be less worthy, the people of the state will adopt the amendment." Report and Recommendations of the Governor's Commission on Education, 31 (Dec. 1, 1938) (hereinafter the "1938 Report").[8]

         The Commission on Education reviewed the administrative challenge of a system governed by not only the Board but also by four other boards and commissions, and noted that "[t]here seems to be much duplication and some dual control in the workings of these various boards and unnecessary duplication in the work of school administrators." 1938 Report at 30. The Commission recommended that "all these boards should be consolidated under [the Board] and that the direction of all activities of the teaching profession should come from this central board." Id. at 30. To provide the public school system "immediate relief from scattered administration rather than wait for the long time goal of the proposed constitutional amendment, " the Commission also proposed that the General Assembly enact legislation to consolidate the work of the various boards and commissions and transfer their duties to the Board. Id. at 31.[9]

         In 1942, voters adopted a constitutional amendment proposed by the General Assembly making several changes to the governance and power of the Board. Thad Eure, North Carolina Manual, 239-43 (1943). One section of the amendment reduced the number of ex-officio members and provided for a majority of the Board to be appointed by the Governor. N.C. Const. of 1868 (amended 1942) art. IX, § 8; Act of March 13, 1941, ch. 151, sec. 1-3, 1941 N.C. Pub. Laws, 240-41. Another section of the amendment, central to the matter at hand, revised the Board's authority as follows:

The State Board of Education shall succeed to all the powers and trusts of the President and Directors of the Literary Fund of North Carolina and the State Board of Education as heretofore constituted. The State Board of Education shall have power to divide the State into a convenient number of school districts; to regulate the grade, salary and qualifications of teachers; to provide for the selection and adoption of the text-books to be used in the public schools; to apportion and equalize the public school funds over the State; and generally to supervise and administer the free public school system of the State and make all needful rules and regulations in relation thereto. All the powers enumerated in this section shall be exercised in conformity with this Constitution and subject to such laws as may be enacted from time to time by the General Assembly.

N.C. Const. of 1868 (amended 1942), art. IX, § 9 (emphasis added).

         The 1942 amendment eliminated the provision for the Board to have the "full power to legislate." Id. It also eliminated the provision that the Board's rules could be "altered, amended or repealed" by the General Assembly and instead provided that "[a]ll the powers enumerated in this section shall be exercised in conformity with this Constitution and subject to such laws as may be enacted from time to time by the General Assembly." Id.

         In an article advocating that voters adopt the 1942 amendment, one educator explained that because most of the Board's members were elected to fill other offices unrelated to education, the Board "could not possibly do the job of administering a growing public school system." Ralph W. McDonald, Guy B. Phillips, Roy W. Morrison & Edgar W. Knight, The Constitutional Amendment for a State Board of Education in North Carolina, 25 The High Sch. J., no. 6, 265, 266 (Oct. 1942). "From time to time, therefore, the Legislature has been forced to set up boards and commissions to carry out duties and responsibilities which, under the Constitution, the State Board of Education was supposed to exercise." Id. at 266-67. The other boards and commissions included the State School Commission, the Board of Vocational Education, the Board of Commercial Education, and the State Textbook Commission. Id. Even the Literary Fund, which the Board was created to replace after the Civil War, remained vested with education funds and provided loans for school construction and improvements. N.C. Code 1935 (Michie), § 5683.

         In 1955, the General Assembly reorganized public education laws and established a statewide uniform system of public schools in a chapter of the General Statutes. Act of May 26, 1955, ch. 1372, sec. 1, 1955 N.C. Sess. Laws 1527. These statutes have been amended over time and are now codified in Chapter 115C of the General Statutes, titled "Elementary and Secondary Education." N.C. Gen. Stat. § 115C-1 (2015).

         Our state constitutional provisions for public education have not materially changed since 1942. Following the General Assembly's proposal in 1969 for a complete revision of the 1868 Constitution, Act of July 2, 1969, ch.1258, sec. 1, 1969 N.C. Sess. Laws 1461, and the voters' adoption of the revision in the general election of 1970, the Constitution was amended to its current form. N.C. Const. of 1970;[10] see also Sanders, supra, at 80-87. The section delineating the Board's powers was renumbered and revised to provide:

The State Board of Education shall supervise and administer the free public school system and the educational funds provided for its support, except the funds mentioned in Section 7 of this Article, and shall make all needed rules and regulations in relation thereto, subject to laws enacted by the General Assembly.

N.C. Const. of 1970, art. IX, § 5. A report by the North Carolina State Constitution Study Commission stated that Article IX, Section 5 "restates, in much abbreviated form, the duties of the State Board of Education, but without any intention that its authority be reduced." Report of the State Constitutional Study Commission, 87 (1968) (hereinafter the "1968 Report").

         B. Enactment of the APA and Creation of the Commission

         In 1973, the General Assembly enacted the APA, initially adopted as Chapter 150A of the General Statutes. The original APA declared that its purpose "shall be to establish as nearly as possible a uniform system of administrative procedure for State agencies." N.C. Gen. Stat. § 150A-1(b) (Cum. Supp. 1977). The APA provides a comprehensive statutory scheme for procedures to allow and require, inter alia, notice to the public of proposed rules, public input regarding proposed rules, and due process for individuals affected by administrative rules and decisions.

         The APA was rewritten and recodified as Chapter 150B effective 1 January 1986, and its purpose restated to "establish[] a uniform system of administrative rule making and adjudicatory procedures for agencies" and to ensure that rulemaking, advocacy, and adjudication "are not all performed by the same person in the administrative process." N.C. Gen. Stat. §§ 150B-1(a) and 150B-1(b) (Cum. Supp. 1985).

         The APA does not explicitly list the Board as a state agency, but it defines "agency" as meaning "an agency or an officer in the executive branch of the government of this State and includes the Council of State, the Governor's Office, a board, a commission, a department, a division, a council, and any other unit of government in the executive branch." N.C. Gen. Stat. 150B-2(1a) (2015). The APA expressly and fully exempts from its application several state agencies listed in N.C. Gen. Stat. § 150B-1(c), exempts from its rulemaking provisions several other state agencies listed in N.C. Gen. Stat. § ...


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