Great Am. Ins. Co. v. Gold, 450

• Decision Date: 01 March 1961
• Docket Number: No. 450,450
• Court: North Carolina Supreme Court
• Parties: GREAT AMERICAN INSURANCE COMPANY and Hardware Mutual Insurance Company of the Carolinas, Inc. v. Charles F. GOLD, Commissioner of Insurance, Berry C. Gibson, Henry L. Bridges, Charles F. Gold, I. Miller Warren and Clyde C. Carter, constituting The Board of Trustees of the North Carolina Firemen's Pension Fund; The North Carolina Firemen's Association; C. R. Puryear and Ray E. Scott.

Page 792

118 S.E.2d 792

254 N.C. 168

GREAT AMERICAN INSURANCE COMPANY and Hardware Mutual Insurance Company of the Carolinas, Inc. v. Charles F. GOLD, Commissioner of Insurance, Berry C. Gibson Henry L. Bridges, Charles F. Gold, I. Miller Warren and Clyde C. Carter, constituting The Board of Trustees of the North Carolina Firemen's Pension Fund; The North Carolina Firemen's Association; C. R. Puryear and Ray E. Scott.

No. 450

Supreme Court of North Carolina.

March 1, 1961

Joyner & Howison, Allen & Hipp, Raleigh, for appellants.

T. W. Bruton, Atty. Gen., Lucius W. Pullen, Asst. Atty. Gen., Taylor & Ellis, Raleigh, for appellees.

MOORE, Justice.

Plaintiffs challenge the constitutionality of three Acts of the General Assembly passed at the 1959 Session. These Acts and their general provisions are as follows:

(1) S.L.1959, c. 1211, codified as the sixth paragraph from the end of G.S. § 105-228.5. This section is a part of subchapter I of Chapter 105 of the General Statutes of North Carolina.

The Act levies a tax at the rate of 1% on the gross amount of premiums collected by each insurance company on contracts of insurance applicable to fire and lightning coverage, excluding marine and automobile policies. The Act does not apply to insurance written in unprotected areas, and does not apply to any policies written by farmers' mutual assessment fire insurance companies. The tax is payable to the Commissioner of Insurance.

(2) S.L.1859, c. 1212, entitled 'North Carolina Firemen's Pension Fund.' It is codified as Article 3, Chapter 118, of the General Statutes of North Carolina (G.S. §§ 118-18 to 118-32).

This Act establishes the North Carolina Firemen's Pension Fund to provide pension allowances and other benefits for eligible firemen, both regular and volunteer. For the purpose of administering the Fund a Board of Trustees is created, consisting of the Commissioner of Insurance, the State Auditor, and three members to be appointed by the Governor. The State Treasurer is made custodian of the Fund. Appropriations are to be made by the Legislature from the State's general fund for administrative expenses. Each eligible fireman is to pay $5 per month into the Pension Fund. Upon retirement, eligible firemen are to draw monthly pensions in accordance with the provisions of the Act. 'In no event shall the appropriation made by the General Assembly in future years exceed the amount of revenue collected from the one per cent (1%) tax on fire and lightning insurance premiums in the preceding bienniums.' The office of Secretary of the North Carolina Firemen's Pension Fund is created, with an annual salary of $8,000.

(3) S.L.1959, c. 1273. This is an appropriation measure and is not codified.

The Act appropriates funds, in maximum amounts, from the State's general fund to the North Carolina Firemen's Pension Fund for the biennium ending June 30, 1961, for administrative expenses and State contributions to the Pension Fund. The appropriations are to be paid in amounts, in any one fiscal year, not to exceed an amount equal to 1% of the amounts collected by insurance companies on contracts of insurance applicable to fire and lightning coverage, except marine and automobile insurance, within protected areas in North Carolina in the preceding calendar year.

The three Acts are so inter-related and inter-dependent as to constitute only one piece of legislation. The legislation was divided into separate enactments in an attempt to avoid the constitutional objections inherent in the 1957 Act which purported to create a firemen's pension fund. S.L. 1957, c. 1420; American Equitable Assurance Co. of New York v. Gold, 249 N.C. 461, 106 S.E.2d 875; American Equitable Assurance Co. v. Gold, 248 N.C. 288, 103 S.E.2d 344. The three 1959 Acts, taken together, violate the Fourteenth Amendment to the Constitution of the United States and Article I, sections 7 and 17, Article II, section 14, and Article V, sections 3 and 7, of the Constitution of North Carolina. The Acts attempt to confer a special privilege on a special class, to create an arbitrary and unreasonable classification for tax purposes, to provide non-uniform taxation, to provide for a private rather than public purpose, and to impose a tax not uniform throughout the State. The legislation was not adopted in accordance with constitutional provisions, and is vague and uncertain. Enforcement of the Acts would irreparably injure plaintiffs and they have no adequate remedy at law.

Defendants demur to the ocmplaint on the following grounds: (1) The court has no jurisdiction of the parties or the subject matter of the action, for that (a) this is an action against the State, which has not consented to be sued in this manner, (b) plaintiffs are not interested persons, within the menaing of G.S. § 1-254, in a construction of Chapters 1212 and 1273, (c) a suit under the Declaratory Judgments Act will not lie to test the validity of a tax, and (d) an advisory opinion on the correctness of an executive interpretation is sought; (2) there is a misjoinder of parties and causes; and (3) the complaint does not state facts sufficient to constitute a cause of action.

The court below sustained the demurrer and dismissed the action. The judgment assigns the following reasons for the dismissal of the action (numbering ours): (1) 'this is an action against the State of North Carolina to restrain or avoid the collection of a tax, and this court is without jurisdiction over the subject matter of the action, the State of North Carolina not having permitted itself to be sued in this manner and there being other remedies provided by law for the adjudication of plaintiffs' cause of action,' and (2) 'the complaint fails to state a cause of action against the defendants' of which the court has jurisdiction.

The Commissioner of Insurance is a constitutional officer of the State and a member of the Council of State. Art. III, sections 13 and 14, Constitution of North Carolina. Among the duties imposed upon him as such official is the levying and collecting of certain taxes to 'provide revenue for the necessary uses and purposes of the government and State of North Carolina.' G.S. § 105-1; G.S. § 105-228.5; G.S. § 105-228.9. With respect to the assessment and collection of such taxes 'the Commissioner of Insurance is * * * given the same power and authority as is given to the Commissioner of Revenue * * *.' G.S. § 105-228.9. The taxes to be collected by the Commissioner of Insurance for general State purposes are set out in G.S. § 105-228.5. S.L.1959, c. 1211, the validity of which is challenged in this action, was made a part of G.S. § 105-228.5, and purports to be a tax for general fund purposes of the State.

The Board of Trustees of the North Carolina Firemen's Pension Fund, under S.L. 1959, c. 1212, purports to be an agency of the State charged with the duty, among others, of administering moneys appropriated from the general fund of the State.

The acts of the Commissioner of Insurance and the Trustees of the North Carolina Firemen's Pension Fund, of which plaintiffs complain, if performed, would be performed in their official capacities. The purpose of this suit is to have the challenged legislation declared invalid, prevent a collection of the tax by the Commissioner, and forestall expenditure by the Trustees of funds made available by reason of the tax. In other words, it is sought to prevent a State official and agency from performing official duties. In essence, it is a suit against the State. Buchan v. Shaw, 238 N.C. 522, 78 S.E.2d 317; Prudential Insurance Co. of America v. Powell, 217 N.C. 495, 8 S.E.2d 619; O'Neal v. Wake County, 196 N.C. 184, 145 S.E. 28; Rotan v. State, 195 N.C. 291, 141 S.E. 733.

'It is axiomatic that the sovereign cannot be sued in its own courts or in any other without its consent and permission. Except in a limited class of cases the State is immune against any suit unless and until it has expressly consented to such action. * * * An action against a Commission or Board created by Statute as an agency of the State where the interest or rights of the State are directly affected is in fact an action against the State.' Prudential Insurance Co. of America v. Powell, supra [217 N.C. 495, 8 S.E.2d 621]. The State is immune from suit unless and until it has expressly consented to be sued. It is for the General Assembly to determine when and under what circumstances the State may be sued. When statutory provision has been made for an action against the State, the procedure prescribed by statute must be...