American Mfrs. Mut. Ins. Co. v. Ingram
Decision Date | 07 October 1980 |
Docket Number | No. 15,15 |
Citation | 271 S.E.2d 46,301 N.C. 138 |
Court | North Carolina Supreme Court |
Parties | AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY v. John Randolph INGRAM et al. (appealed by Wake Anesthesiology Associates, Inc.) |
John R. Jordan, Jr., Robert R. Price, Henry W. Jones, Jr., Raleigh, for plaintiff-appellee.
Tharrington, Smith & Hargrove by Wade M. Smith and Steven Evans, Raleigh, for defendants-appellants.
This appeal poses the question whether Lumbermens Mutual can avoid its insurance contract with defendant appellants because the Health Care Liability Reinsurance Exchange Act was declared unconstitutional. We hold that the facts of this case require a negative answer.
It is a rule of statutory construction that a statute declared unconstitutional is void ab initio and has no effect. Board of Managers v. Wilmington, 237 N.C. 179, 74 S.E.2d 749 (1953); Idol v. Street, 233 N.C. 730, 65 S.E.2d 313 (1951); Sessions v. Columbus County, 214 N.C. 634, 200 S.E. 418 (1939); State v. Williams, 146 N.C. 618, 61 S.E. 61 (1908). This rule was best stated in Norton v. Shelby County, 118 U.S. 425, 442, 6 S.Ct. 1121, 1125, 30 L.Ed. 178, 186 (1886), where Justice Field, speaking for the Court, said: "An unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, as inoperative as though it had never been passed." Depending on the circumstances, courts have employed other rules which avoid the hard and fast consequences of the rule enunciated in Norton. A court may employ the rule that a statute is presumed valid until declared invalid; or, in a case-by-case analysis, an unconstitutional statute may be given some effect, for example, by way of estoppel or due to a mistake of law. O. Field, The Effect of an Unconstitutional Statute 2-8 (1935).
The United States Supreme Court itself has retreated from the broad statement set out in Norton.
Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371, 374, 60 S.Ct. 317, 318-19, 84 L.Ed. 329, 332-33 (1940); see also, Linkletter v. Walker, 381 U.S. 618, 85 S.Ct. 1731, 14 L.Ed.2d 601 (1965). In a later decision quoting in part from Linkletter and Chicot County, the United States Supreme Court stated:
"The process of reconciling the constitutional interests reflected in a new rule of law with reliance interests founded upon the old is 'among the most difficult of those which have engaged the attention of courts, state and federal ....' Consequently, our holdings in recent years have emphasized that the effect of a given constitutional ruling on prior conduct 'is subject to no set "principle of absolute retroactive invalidity" but depends upon a consideration of "particular relations ... and particular conduct ... of rights claimed to have become vested, of status, of prior determinations deemed to have finality"; and "of public policy in the light of the nature both of the statute and of its previous application.
Lemon v. Kurtzman, 411 U.S. 192, 198-99, 93 S.Ct. 1463, 1468, 36 L.Ed.2d 151, 160 (1973) (Citations omitted). This does not mean that every unconstitutional statute, "like every dog, gets one bite, if anyone has relied on the statute to his detriment." New York v. Cathedral Academy, 434 U.S. 125, 130, 98 S.Ct. 340, 344, 54 L.Ed.2d 346, 352 (1977). It does mean that a test of reasonableness and good faith is to be applied in determining the effect which a judicial decision that a statute is unconstitutional will have on the rights and obligations of parties who have taken action pursuant to the invalid statute.
Other courts have adopted such a test in deciding whether to give retroactive or prospective effect to their declaration that a statute is unconstitutional. See, e. g., Cardinal Glennon Memorial Hospital v. Gaertner, 583 S.W.2d 107 (Mo.1979); Wagshal v. Selig, 403 A.2d 338 (D.C.App.1979); Plumley v. Hale, 594 P.2d 497 (Alaska 1979); Cumberland Capital Corp. v. Patty, 556 S.W.2d 516 (Tenn.1977); Stanton v. Lloyd Hammond Farms, 400 Mich. 135, 253 N.W.2d 114 (1977); Perkins v. Eskridge, 278 Md. 619, 366 A.2d 21 (1976).
This Court has also retreated from the absolute rule that an unconstitutional statute is a nullity. In Roberson v. Penland, 260 N.C. 502, 133 S.E.2d 206 (1963), the plaintiffs entered into a consent judgment and executed a deed on the understanding that the defendant widower had a right to dissent from the will of his deceased wife. Following the execution of these documents, this Court held that the statute giving the husband the right to dissent was unconstitutional. The plaintiffs then sought, without success, to have the consent judgment and deed set aside. The Court said:
260 N.C. at 506, 133 S.E.2d at 208. The Court rejected application of the hard and fast rule in Norton and adopted the reasoning of the Chicot County case. It must therefore be recognized in this case that the unconstitutionality of the Reinsurance Exchange Act alone will not void ab initio Lumbermens' contract with defendant appellants.
For Lumbermens to escape the contract, the record must demonstrate that it entered into the contract involuntarily under coercion of the unconstitutional statute. As stated in McLean Coal Co. v. Pittsburg Terminal Coal Corp., 328 Pa. 250, 253, 195 A. 4, 6 (1937), and quoted with approval in Roberson v. Penland :
"The unconstitutionality of a statute is a defense to an action only when the liability is created by the statute in question; the invalidity of the act is of no avail when the liability arises from acts indicating the assumption of liability by parties who may, it is true, be acting only because the statute was passed, but who are, nevertheless voluntarily assuming a relationship which creates a liability."
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