Nicholson v. State Ed. Assistance Authority

• Decision Date: 11 July 1969
• Docket Number: No. 37,37
• Citation: 168 S.E.2d 401,275 N.C. 439
• Court: North Carolina Supreme Court
• Parties: H. Gilliam NICHOLSON v. STATE EDUCATION ASSISTANCE AUTHORITY, and the Members of its Board ofDirectors; George Watts Hill, J., Roger Gant, Jr., Victor E. Bell, J., Mrs.Carrie W. Harper, J. Russell Kirby, Arthur D. Wenger and H. Edmunds White andCollege Foundation,Inc. and Wachovia Bank & Trust Company, N.A.

Page 401

168 S.E.2d 401

275 N.C. 439

H. Gilliam NICHOLSON v. STATE EDUCATION ASSISTANCE AUTHORITY, and the Members of its Board ofDirectors; George Watts Hill, J., Roger Gant, Jr Victor E. Bell, J., Mrs.Carrie W. Harper, J. Russell Kirby Arthur D. Wenger and H. Edmunds White andCollege Foundation,Inc. and Wachovia Bank & Trust Company, N.A.

No. 37.

Supreme Court of North Carolina.

July 11, 1969.

Bailey, Dixon & Wooten, Raleigh, for plaintiff.

LAKE, Justice.

The authority of this Court, in a proper case, to declare an act of the Legislature unconstitutional was clearly established in Bayard v. Singleton, 1 N.C. 5, sixteen years prior to the comparable decision of the Supreme Court of the United States in Marbury v. Madison, 1 Cranch 137, 5 U.S. 137, 2 L.Ed. 60. That authority does not arise from any inherent power of this Court to review acts of the General Assembly and to declare invalid those which this Court disapproves or, upon its own initiative, finds to be in conflict with the Constitution. This Court and the General Assembly are coordinate branches of the State government. Neither is the superior of the other.

The authority of this Court to declare an act of the Legislature unconstitutional arises from, and is an incident of, its duty to determine the respective rights and liabilities or duties of litigants in a controversy brought before it by the proper procedure. To do so, this Court, in the event of a conflict between two rules of law, must determine which is the superior rule and, therefore, the rule governing the rights and liabilities or duties of the parties to the controversy before the Court. If there is a conflict between a statute and the Constitution, this Court must determine the rights and liabilities or duties of the litigants before it in accordance with the Constitution, because the Constitution is the superior rule of law in that situation. State v. Lueders, 214 N.C. 558, 220 S.E. 22.

When, in order to determine a controversy, properly before it, in accordance with the controlling rule of law, it becomes necessary for this Court to pass upon the constitutional validity of a legislative provision, it will not anticipate other questions of constitutional law not necessary to the decision of the precise controversy presented in the litigation before it. Person v. Doughton, 186 N.C. 723, 120 S.E. 481; Commissioners of Johnston County v. State Treasurer, 174 N.C. 141, 149, 93 S.E. 482, 2 A.L.R. 726.

Again, this Court will not determine the constitutionality of a legislative provision in a proceeding in which there is no 'actual antagonistic interest between the parties.' Bizzell v. Great American Insurance Co., 248 N.C. 294, 103 S.E.2d 348. 'Only one who is in immediate danger of sustaining a direct injury from legislative action may assail the validity of such action. It is not sufficient that he has merely a general interest common to all members of the public.' Charles Stores Co. v. Tucker, 263 N.C. 710, 140 S.E.2d 370. Accord: High Point Surplus Co. v. Pleasants, 263 N.C. 587, 139 S.E.2d 892; Watkins v. City of Wilson, 255 N.C. 510, 121 S.E.2d 861, cert. den. and app. dism., 370 U.S. 46, 82 S.Ct. 1166, 8 L.Ed.2d 398; Fox v. Board of Commissioners for County of Durham, 244 N.C. 497, 94 S.e.2d 482; Turner v. City of Reidsville, 224 N.C. 42, 29 S.E.2d 211.

A taxpayer, as such, does not have standing to attack the constitutionality of any and all legislation. Wynn v. Trustees, 255 N.C. 594, 122 S.E.2d 404; State ex rel. Carringer v. Alverson, 254 N.C. 204, 118 S.E.2d 408; Fox v. Board of Commissioners for County of Durham, supra; Turner v. City of Reidsville, supra. A taxpayer, as such, may challenge, by suit for injunction, the constitutionality of a tax levied, or proposed to be levied, upon him for an illegal or unauthorized purpose. See: Wynne v. Trustees, supra; Barbee v. Board of Comrs. of Wake County, 210 N.C. 717, 188 S.E. 314. The constitutionality of a provision of a statute may not, however, be tested by a suit for injunction unless the plaintiff alleges, and shows, that the carrying out of the provision he challenges will cause him to sustain, personally, a direct and irreparable injury, apart from his general interest as a citizen in good government in accordance with the provisions of the Constitution. D & W, Inc. v. City of Charlotte, 268 N.C. 577, 151 S.E.2d 241; Watkins v. City of Wilson, supra; Fox v. Board of Commissioners for County of Durham, supra; Sprunt v. Comrs. of New Hanover, 208 N.C. 695, 182 S.E. 655; Newman v. Comrs. of Vance, 208 N.C. 675, 182 S.E. 453.

The fact that both parties to an action, as in the present case, desire the determination of the constitutionality of an entire act of the Legislature and stipulate that certain questions, leading to such determination, are presented by the action for the determination of the Court is not binding upon the Court. Such stipulation does not require, or authorize, the Court to pass upon the constitutional questions not necessary to the determination of the right of the party who denies the validity of the legislation. State ex rel. Carringer v. Alverson, supra.

The plaintiff's allegation that he is a stockholder, or otherwise beneficially interested, in one or more corporations which pay taxes within the State, does not give him any greater right to attack the validity of any provision of the legislation in question than his own status as taxpayer would do. His allegations that these corporations have issued notes and bonds bearing interest, which are not exempt from taxation, and that the rates of interest on such notes and bonds are higher than they would be if such securities were so exempt do not add to his standing to attack the constitutionality of the legislation of which he complains. He does not allege, and there is nothing in the record to indicate, that if the legislation which he attacks were declared unconstitutional in its entirety the interest rates upon the notes and bonds of such corporations would be lower than they now are. Thus, in the present proceeding, we may not properly determine the constitutionality of any provision of the statutes attacked by the plaintiff, G.S. §§ 116--209.1 to 116--209.15, inclusive, unless such provision directly injures the plaintiff as taxpayer.

The plaintiff does not attack the validity of any portion of the Act of 1965 (G.S. § 116--201 to G.S. § 116--209), to which only minor amendments, not of consequence in this litigation, were made by the General Assembly of 1967. By the Act of 1965, the Authority was created, declared to be a political subdivision of the State and given certain powers, including the power to accept from any federal or private agency or from any person grants of money, and to use such funds for the purchase of obligations representing loans made to students in institutions of higher education for the purpose of enabling them to obtain an education. The validity of any act of the Authority, pursuant to G.S. § 116--201 to G.S. § 116--209, is not before us in this action.

The plaintiff attacks the validity of Chapter 1177 of the Session Laws of 1967 (G.S. § 116--209.1 to G.S. § 116--209.15). As the basis for such attack, he complains of the following actions and proposed actions:

1. In the 1967 Act, the General Assembly undertook to confer upon the Authority power to issue 'tax exempt revenue bonds Not pledging the credit of the State.' (Emphasis added.)

2. The General Assembly undertook to make available (or to confer upon the Authority the power to make available) the proceeds of 'these bonds' for financing loans to North Carolina students to enable them to obtain an education in an 'eligible institution,' as that term is defined in Title 20 of the United States Code.

3. The Authority adopted a resolution authorizing the issuance of $3,000,000 in five percent revenue bonds 'pursuant to the aforesaid Act,' a copy of which resolution is made a part of the complaint.

4. The Authority entered into 'certain contractual relationships' for the sale of the said bonds.

5. The Authority accepted an offer made on behalf of 'certain North Carolina banks' for the purchase of the said bonds and, by resolution, authorized their sale to such banks.

6. The Authority, by resolution, authorized the execution in its behalf of a tripartite contract between it, Wachovia Bank & Trust Company and College Foundation, Inc., which contract was executed, and a copy of which is made a part of the complaint.

7. The Authority issued the said bonds and sold them in accordance with the said contracts.

8. The proceeds from the sale of the said bonds 'have been used and expended' as prescribed in these contracts 'except for certain funds which are still on hand.'

9. The Wachovia Bank & Trust Company, as fiscal agent for the Authority, 'has expended bond proceeds for the purchase of student loans.'

10. The Wachovia Bank & Trust Company, as fiscal agent for the Authority, 'has expended bond proceeds * * * for various items of expense.'

11. The Wachovia Bank & Trust Company, as fiscal agent for the Authority, 'is collecting student loan payments' from College Foundation, Inc., pursuant to the above mentioned bond resolution and contracts.

12. The Wachovia Bank & Trust Company, as fiscal agent for the Authority, 'has paid' interest to bondholders as provided in the said bond resolution.

13. The Wachovia Bank & Trust Company, as fiscal agent for the Authority, 'has allocated and separated bond funds and proceeds in accordance with said bond resolution, contract and agreement.'

14. The Authority has, by resolution, authorized its officers and employees to proceed with steps for the issuance of 'an additional series of bonds in the amount of $3,000,000 pursuant to the aforesaid bond resolution' and is 'threatening' to issue such bonds 'under said resolution for use and expenditure in making or buying student loans during the academic year of ...