Stanley v. Department of Conservation and Development, s. 80--82

• Decision Date: 10 October 1973
• Docket Number: Nos. 80--82,s. 80--82
• Court: North Carolina Supreme Court
• Parties: , 6 ERC 1189 John H. STANLEY on behalf of himself and all others of the same or like class v. The DEPARTMENT OF CONSERVATION AND DEVELOPMENT of the State of North Carolina and the Northampton Pollution Abatement and Industrial Facilities Financing Authority. Charles M. EDWARDS, on behalf of himself and all others of the same or like class v. The DEPARTMENT OF CONSERVATION AND DEVELOPMENT of the State of North Carolina and the Halifax County Pollution Abatement and Industrial Facilities Financing Authority. Charles Ray HENDERSON, on behalf himself and all others of the same or like class v. The DEPARTMENT OF CONSERVATION AND DEVELOPMENT of the State of North Carolina and the Jones County Polution Abatement and Industrial Facilities Financing Authority.

Page 641

199 S.E.2d 641

284 N.C. 15, 6 ERC 1189

John H. STANLEY on behalf of himself and all others of the

same or like class v. The DEPARTMENT OF CONSERVATION AND DEVELOPMENT of the State

of North Carolina and the Northampton Pollution

Abatement and Industrial Facilities

Financing Authority.

Charles M. EDWARDS, on behalf of himself and all others of

the same or like class v. The DEPARTMENT OF CONSERVATION AND DEVELOPMENT of the State

of North Carolina and the Halifax County Pollution

Abatement and Industrial Facilities

Financing Authority.

Charles Ray HENDERSON, on behalf himself and all others of

the same or like class v. The DEPARTMENT OF CONSERVATION AND DEVELOPMENT of the State

of North Carolina and the Jones County Polution

Abatement and Industrial Facilities

Financing Authority.

Nos. 80--82.

Supreme Court of North Carolina.

Oct. 10, 1973.

Taylor, Brinson & Aycock, Tarboro, for petitioners.

Atty. Gen. Robert Morgan; Chief Deputy Atty. Gen. Harry W. McGalliard, Raleigh, for defendant, Department of Conservation and Development.

Felton Turner, Jr., Jackson, for defendant, Northampton County Pollution Abatement and Industrial Facilities Financing Authority.

Rom B. Parker, Jr., Enfield, for defendant, Halifax County Pollution Abatement and Industrial Facilities Financing Authority.

James R. Hood, Trenton, for defendant, Jones County Pollution Abatement and Industrial Facilities Financing Authority.

SHARP, Justice:

The first question we consider is whether the petitioners, as taxpayers, have standing to challenge the constitutionality of the Act.

The Halifax, Jones, and Northampton Authorities have not spent--nor do they contemplate spending--any funds derived from taxation. As yet they have issued no bonds. However, they were created solely for the purpose of issuing tax-exempt revenue bonds to finance the projects specified in the Act and, if--and when--there is a 'successful resolution' of the constitutional questions with respect to their power to issue such bonds, they propose to issue them immediately.

Under our decisions '(o)nly those persons may call into question the validity of a statute who have been injuriously affected thereby in their persons, property or constitutional rights.' Canteen Service v. Johnson, 256 N.C. 155, 166, 123 S.E.2d 582, 589 (1962). See also Nicholson v. Education Assistance Authority, 275 N.C. 439, 168 S.E.2d 401 (1969); In Re Assessment of Sales Tax, 259 N.C. 589, 131 S.E.2d 441 (1963); Carringer v. Alverson, 254 N.C. 204, 118 S.E.2d 408 (1961); James v. Denny, 214 N.C. 470, 199 S.E. 617 (1938). The rationale of this rule is that only one with a genuine grievance, one personally injured by a statute, can be trusted to battle the issue. 'The 'gist of the question of standing' is whether the party seeking relief has 'alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions. " Flast v. Cohen, 392 U.S. 83, 99, 88 S.Ct. 1942, 1952, 20 L.Ed.2d 947, 961 (1968).

All parties to these proceedings, anxious to have resolved the legal questions which will determine the validity of the bonds, have requested the Court, 'in the public interest,' to decide the constitutional questions which have been raised. They also stipulate that each petitioner is, within the meaning of G.S. § 143--307, a party aggrieved by the Board's action in approving the issuance of the bonds and that each has standing to obtain judicial review of the Board's action. Standing, however, like jurisdiction, cannot be conferred by stipulation. When, as here, the facts with reference to a party's relation to a controversy are admitted, whether the party has standing to attack the constitutionality of a statute is a question of law, which may not be settled by the parties. Nicholson v. Education Assistance Authority, Supra; Carringer v. Alverson, Supra. Whenever it appears that no genuine controversy between the parties exists, the Court will dismiss the action Ex mero motu. Bizzell v. Insurance Co., 248 N.C. 294 ,103 S.E.2d 348 (1958).

In this case, however, we hold that the petitioners have standing to assail the constitutionality of the Act and that a genuine controversy between them is ripe for decision. See Lide v. Mears, 231 N.C. 111, 56 S.E.2d 404 (1949).

Petitioners have alleged, Inter alia, that in G.S. § 159A--8 the Act unconstitutionally purports to authorize the issuance of bonds which are exempt from all taxes except inheritance and gift taxes. If this purported exemption is unconstitutional petitioners will be injured unless its invalidity is judicially declared for the exemption of any property from its fair share of the public burden, to that extent, increases the burden imposed upon all other taxable property. 'A taxpayer injuriously affected by a statute may generally attack its validity. Thus, he may attack a statute which . . . exempts persons or property from taxation, or imposes on him in its enforcement an additional financial burden, however slight.' 16 C.J.S. Constitutional Law § 80, at 247--248 (1956).

In Price v. Philadelphia Parking Authority, 422 Pa. 317, 221 A.2d 138 (1966) it was held that the exemption of property from taxation reduces the tax base and has the same effect upon a taxpayer as the unlawful expenditure of tax funds even though he is unable to establish any injury other than his interest as a taxpayer. See also Village of Moyie Springs v. Aurora Mfg. Co., 82 Idaho 337, 353 P.2d 767 (1960). In Martin v. Housing Corp., 277 N.C. 29, 175 S.E.2d 665 (1970), and in Webb v. Port Commission, 205 N.C. 663, 172 S.E. 377 (1934), this Court, without discussion, permitted taxpayers, as such, to attack the constitutionality of acts which exempted certain revenue bonds from taxation.

Ordinarily, the interest rate on tax-free revenue bonds of a state agency is appreciably lower than that of the bonds of a private corporation, for their tax-exempt feature makes possible a more favorable sale. Education Assistance Authority v. Bank, 276 N.C. 576, 174 S.E.2d 551 (1970). Indeed, the tax advantage is the primary appeal which such bonds have for investors. Mitchell v. Financing Authority, 273 N.C. 137, 159 S.E.2d 745 (1968). If, therefore, the bonds which the Authorities propose to issue cannot constitutionally be made tax exempt the only reason for the method of corporate financing provided by the Act In recognition of this fact Albemarle's contract with each of the Authorities provides: 'The CORPORATION and the AUTHORITY reiterate and agree that the implementation and legal effectiveness of this Agreement are wholly dependent and conditioned upon the successful resolution of the legal questions hereinbefore mentioned. . . .'

It is quite clear, therefore, that pending a definitive decision from this Court, these Authorities are effectively stymied, for it cannot be known whether they are bodies corporate or, in effect, nonentities. We concur in the view that the public interest requires that we now decide whether the Act is constitutional in whole or in part. Smith v. County of Mecklenburg, 280 N.C. 497, 187 S.E.2d 67 (1972).

The provisions of G.S. § 159A--21 also make an immediate decision appropriate. This section provides that if the Board's approval of the bonds is not challenged by the procedure outlined in G.S. § 143--309 within thirty days after notice of such approval has been published, an authority's power to issue the bonds and the legality thereof shall be conclusively presumed, 'and no court shall have authority to inquire into such matters.' Since petitioners instituted this proceeding for judicial review within the prescribed time the question whether they could thereafter have contested the tax exemption which G.S. § 159A--8 purported to give these bonds is not before us. Manifestly, however, in the face of the limitation imposed by G.S. § 159A--21, any taxpayer who desired to contest the exemption might reasonably apprehend that he would lose his right to do so if he waited until the bonds had been issued and sold, or offered for sale. Cf. Harper v. Schooler, 258 S.C. 486, 189 S.E.2d 284 (1972). For this reason, all other considerations aside, we think it would be inappropriate to hold that the question is not for decision.

Both factual and procedural differences distinguish these three petitions for review of the Board's administrative approval of the Authorities' proposed bond issues from the case of Nicholson v. Education Authority, Supra. In Nicholson, an action for a mandatory injunction, the plaintiff taxpayer sought to nullify all prior transactions between the defendant State Education Assistance Authority (Education Authority) and all others and to enjoin the issuance of a second series of bonds which it proposed to issue. Its first series of bonds in the amount of $3,000,000 had been sold at a private sale. This Court held that, on the basis of Nicholson's allegations, which showed no threat of immediate irremediable injury to him, he was not entitled to injunctive relief. The opinion did not specifically discuss the question of the plaintiff's right as a taxpayer to contest in that action the constitutionality of the tax exemption which G.S. § 116--209.13 (1971 Supp.) conferred upon the bonds of the Education Authority. We note that the act creating the Education Authority contained no such limitation upon a taxpayer's right to contest the legality of the bonds as does G.S. § 159A--21. We also note that, in a properly constituted action for a declaratory judgment (G.S. § 1--253 et seq.), this Court has since passed upon the constitutionality of the act creating the Education Authority and the validity of its bonds. Education Assistance Authority v. Bank, Supra.

We proceed, therefore, to the decisive questions raised by petitioner-appellants' assignments of...