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Cooper v. Berger

Court of Appeals of North Carolina

December 3, 2019

ROY A. COOPER, III, individually and in his official capacity as GOVERNOR OF THE STATE OF NORTH CAROLINA, Plaintiff,
v.
PHILIP E. BERGER, in his official capacity as PRESIDENT PRO TEMPORE OF THE NORTH CAROLINA SENATE; TIMOTHY K. MOORE, in his official capacity as SPEAKER OF THE NORTH CAROLINA HOUSE OF REPRESENTATIVES; CHARLTON L. ALLEN, in his official capacity as CHAIR OF THE NORTH CAROLINA INDUSTRIAL COMMISSION; and YOLANDA K. STITH, in her official capacity as VICE-CHAIR OF THE NORTH CAROLINA INDUSTRIAL COMMISSION, Defendants.

          Heard in the Court of Appeals 15 October 2019.

          Appeal by Plaintiff from an order and judgment entered 9 April 2018 by Judge Henry W. Hight, Jr. in Wake County No. 17 CVS 6465 Superior Court.

          BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, L.L.P., by Daniel F. E. Smith, Jim W. Phillips, Jr., and Eric M. David, for Plaintiff-Appellant.

          NELSON MULLINS RILEY & SCARBOROUGH LLP, by D. Martin Warf and Noah H. Huffstetler, III, for Defendants-Appellees Philip E. Berger and Timothy K. Moore.

          No briefs filed by Charlton L. Allen and Yolanda K. Stith.

          INMAN, Judge.

         Plaintiff-Appellant Roy A. Cooper, III, the Governor of North Carolina, appeals from an order and judgment dismissing his claim challenging the General Assembly's appropriation of federal block grant funds awarded to the State in a manner inconsistent with the Governor's recommended budget. The Governor contends the federal funds are not within the General Assembly's constitutional authority to control, and that the General Assembly has interfered with the Governor's constitutional duty to faithfully execute the law.

         After careful review, and with the benefit of ample and able briefing and argument from the parties, we hold that the block grant funds are, despite their source in the federal government, subject to appropriation by the General Assembly. We affirm the trial court.

         FACTUAL AND PROCEDURAL HISTORY

         The record below shows the following:

         In 2017, the Governor filed suit against Defendants-Appellees Philip E. Berger, President Pro Tempore of the North Carolina Senate, and Timothy K. Moore, Speaker of the North Carolina House of Representatives (the "Legislative Defendants"), challenging the constitutionality of two session laws and six statutes.[1] While those claims were pending, the Governor and the General Assembly continued in the execution of their duties, which included the preparation of the State budget for the 2017-2019 biennium. The Governor submitted a recommended budget proposing, among other things, specific allocations of various federal block grant funds awarded to North Carolina. Those federal block grants included the Community Development Block Grant ("CDBG"), the Maternal and Child Health Block Grant ("MCHBG"), and the Substance Abuse Prevention and Treatment Block Grant ("SABG," collectively with the CDBG and MCHBG as the "Block Grants").

         The General Assembly disagreed with the Governor's proposed allocations of the Block Grants and passed the State budget as Session Law 2017-57 on 28 June 2017, which altered the allocations as follows:

         Community Development Grant

Item

Governor's Budget

S.L. 2017-57

Difference

Scattered Site Housing

$10, 000, 000

$0

($10, 000, 000)

Neighborhood Revitalization

$0

$10, 000, 000

$10, 000, 000

Economic Development

$13, 737, 500

$10, 737, 500

($3, 000, 000)

Infrastructure

$18, 725, 000

$21, 725, 000

$3, 000, 000

         Substance Abuse Grant

Item

Governor's Budget

S.L. 2017-57

Difference

Substance Abuse Services - Treatment for Children/Adults

$29, 322, 717

$27, 722, 717

($1, 600, 000)

Competitive Block Grant

$0

$1, 600, 000

$1, 600, 000

         Maternal and Child Health Grant

Item

Governor's Budget

S.L. 2017-57

Difference

Women and Children's Health Services

$14, 070, 680

$11, 802, 435

($2, 268, 245)

Every Week Counts[2]

$0

$2, 200, 000

$2, 200, 000

Perinatal Strategic Plan Support Position

$0

$68, 245

$68, 245

See 2017 N.C. Sess. Laws 57 §§ 11A.14. (a), 11L.1. (a), 11L.1. (y)-(z), 11L.1. (aa)-(ee), 15.1. (a), 15.1. (d) (collectively, the "Block Grant Appropriations").

         In response to passage of the State budget, the Governor amended his complaint to add a claim challenging the constitutionality of the Block Grant Appropriations. This new claim asserted that the "Block Grant Appropriations are unconstitutional because they prevent the Governor from performing his core function under [Article III, Section 5(4) of] the North Carolina Constitution to 'take care that the laws be faithfully executed[, ]" and, "[t]o the extent the Block Grant Appropriations are part of the State budget, they also violate Article III, Section 5(3) of the North Carolina Constitution because they encroach on the Governor's duty to administer the budget."[3]

         The Legislative Defendants filed a combined motion to dismiss and answer to the Governor's amended complaint. The Governor then filed a motion for partial summary judgment and permanent injunction declaring the Block Grant Appropriations unconstitutional "as applied in this case[.]" Two days later, the Legislative Defendants filed a motion for judgment on the pleadings as to that same claim. After briefing and argument, Judge Henry W. Hight, Jr., entered a combined order and judgment on 9 April 2018 resolving all motions in favor of the Legislative Defendants.

         The trial court concluded that the federal block grant funds "are designated for the State of North Carolina and will be paid into the State Treasury." It also concluded that "Article V, Section 7 of the Constitution unambiguously states that no money can be drawn from the State Treasury without an appropriation[, ]" and rejected the Governor's argument that the federal block grants constitute "custodial fund[s]" exempt from the constitutional and statutory budgetary and appropriations processes as without precedent under state law. The trial court ultimately concluded that: (1) the Governor failed to allege and forecast evidence "that the challenged portions of Session Law 2017-57 violate his duty to take care that the laws be faithfully executed or otherwise encroach on his duty to administer the budget;" and (2) that, therefore, the challenged provisions of Session Law 2017-57 are not unconstitutional.

         Judge Hight certified the order and judgment for immediate appeal pursuant to Rule 54(b) of the North Carolina Rules of Civil Procedure. The Governor appeals.

         ANALYSIS

         I. Appellate Jurisdiction

         In general, no right of immediate appeal from an interlocutory order exists. Paradigm Consultants, Ltd. v. Builders Mutual Ins. Co., 228 N.C.App. 314, 317, 745 S.E.2d 69, 72 (2013).

However, there are two avenues by which a party may immediately appeal an interlocutory order or judgment. First, if the order or judgment is final as to some but not all of the claims or parties, and the trial court certifies the case for appeal pursuant to N.C. Gen. Stat. § 1A-1, Rule 54(b), an immediate appeal will lie. Second, an appeal is permitted under N.C. Gen. Stat. §§ 1-277(a) and 7A- 27(d)(1) if the trial court's decision deprives the appellant of a substantial right which would be lost absent immediate review.

N.C. Dep't of Transp. v. Page, 119 N.C.App. 730, 734, 460 S.E.2d 332, 334 (1995) (citations omitted). Because the order and judgment at issue in this case was final as to the Governor's challenge to the Block Grant Appropriations and certified by the trial court for immediate appeal pursuant to Rule 54(b), we possess jurisdiction to hear the Governor's appeal. See, e.g., Estate of Tipton By & Through Tipton v. Delta Sigma Phi Fraternity, Inc., ___ N.C.App. ___, ___, 826 S.E.2d 226, 231-32 (2019) (holding a grant of partial summary judgment on less than all claims was subject to immediate appeal when the order contained a Rule 54(b) certification).

         II. Standard of Review

         A trial court's entry of judgment on the pleadings-or of summary judgment- is subject to de novo review on appeal. See N.C. Concrete Finishers, Inc. v. N.C. Farm Bureau Mut. Ins. Co., 202 N.C.App. 334, 336, 688 S.E.2d 534, 535 (2010) (acknowledging de novo review applies to entry of judgment on the pleadings); In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) ("Our standard of review of an appeal from summary judgment is de novo[.]" (citation omitted)). "Judgment on the pleadings is properly entered only if 'all the material allegations of fact are admitted[, ] . . . only questions of law remain,' and no question of fact is left for jury determination." N.C. Concrete Finishers, 202 N.C.App. at 336, 688 S.E.2d at 535 (quoting Ragsdale v. Kennedy, 286 N.C. 130, 137, 209 S.E.2d 494, 499 (1974)) (alteration in original). Summary judgment "is appropriate only when the record shows that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." Jones, 362 N.C. at 573, 669 S.E.2d at 576 (citation and internal quotation marks omitted).

         Our Supreme Court has recently explained the standard of review for constitutional questions:

We review constitutional questions de novo. In exercising de novo review, we presume that laws enacted by the General Assembly are constitutional, and we will not declare a law invalid unless we determine that it is unconstitutional beyond reasonable doubt. In other words, the constitutional violation must be plain and clear. To determine whether the violation is plain and clear, we look to the text of the constitution, the historical context in which the people of North Carolina adopted the applicable constitutional provision, and our precedents.

State ex rel. McCrory v. Berger, 368 N.C. 633, 639, 781 S.E.2d 248, 252 (2016) (citations and quotations omitted).

         III. Historical and Legislative Context

         The Governor's appeal presents an as-applied constitutional challenge to the Block Grant Appropriations identified in his complaint, but it turns on a broader constitutional issue of first impression: whether the North Carolina Constitution permits the General Assembly to appropriate federal funds designated to the State through federal block grants. This Court has not previously been presented with this issue. Our Supreme Court was presented with-and declined to answer-this exact query in Advisory Opinion In re Separation of Powers, 305 N.C. 767, 779, 295 S.E.2d 589, 594-95 (1982). There, the Supreme Court demurred because "[t]he briefs and materials ...


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