Hogan v. City of Winston-Salem , 121 N.C. App. 414 ( 1996 )

Judge Walker

concurring in part and dissenting in part.

I respectfully dissent from the majority’s opinion affirming the trial court’s granting of plaintiffs’ motion for summary judgment as to plaintiffs’ seventh cause of action and declaring that the 20 August 1990 Amendment of Chapter 15, Article II, of the Retirement Code of the Code of the City of Winston-Salem was unconstitutional.

The question of whether an act unconstitutionally impairs the right to contract and violates the United States Contract Clause is one courts must resolve on a case by case basis. Bailey v. State of North Carolina, 330 N.C. 227, 244, 412 S.E.2d 295, 305 (1991), cert. denied, 504 U.S. 911, 118 L. Ed. 2d 547 (1992). Not every impairment of contractual obligations by a state violates the Contract Clause. Maryland State Teachers Ass’n v. Hughes, 594 F. Supp. 1353, 1360 (D. Md. 1984). In acting to protect the general welfare of its citizens and in exercising its police power, a state may constitutionally impair its contractual obligations. Simpson v. N.C. Local Gov’t Employees’ Retirement System, 88 N.C. App. 218, 224, 363 S.E.2d 90, 94, aff’d, 323 N.C. 362, 372 S.E.2d 559 (1988).

While I agree with the majority that determining whether a state unconstitutionally impairs the Contract Clause involves the application of a tripartite test that was elucidated by the United States Supreme Court and adopted by the Simpson Court, I disagree with the majority’s application of this test.

Under this test, the court first ascertains whether or not a statute creates a contractual obligation. Simpson, 88 N.C. App. at 225, 363 S.E.2d at 94. The Simpson Court has already answered that question for us, and we accordingly hold that a contractual obligation exists. Id. -, see also Faulkenbury v. Teachers’ and State Employees’ Retirement System, 108 N.C. App. 357, 424 S.E.2d 420, aff’d per curiam, 335 N.C. 158, 436 S.E.2d 821 (1993). Second, the court must determine if the actions of the state legislature impaired the obligation of the state’s contract. Simpson, 88 N.C. App. at 225, 363 S.E.2d at 94. Again, Simpson guides us in our present holding that there is an impairment of rights “as plaintiffs stand to suffer significant reductions in their retirement allowances as a result of the legislative amendment under challenge.” Id.

Finally, the court must determine whether the impairment was reasonable and necessary to serve an important public purpose. Simpson, 88 N.C. App. at 225, 363 S.E.2d at 94. In Simpson, the Court remanded for a “proper resolution” on this third'part of the test.

In applying the third prong of the tripartite test, we are guided by the opinion in Baltimore Teachers Union v. Mayor and City of Baltimore, 6 F.3d 1012 (4th Cir. 1993), cert. denied, - U.S. -, 127 L.Ed.2d 435 (1994). In Baltimore Teachers Union, the court emphasized that the judiciary must give “at least some deference to legislative policy decisions to modify these contracts in the public interest. . . .” Id. at 1019. The Court explained:

The Contract Clause, however, does not require the courts — even where public contracts have been impaired — to sit as superlegis-latures .... Not only are we ill-equipped even to consider the evidence that would be relevant to such conflicting policy alternatives; we have no objective standards against which to assess the merit of the multitude of alternatives. . . . “Merely to enumerate the elements that have to be considered [in determining whether the public welfare decision was reasonable] shows that the place for determining their weight and their significance is the legislature, not the judiciary.”

Id. at 1021-22 (quoting East New York Sav. Bank v. Hahn, 326 U.S. 230, 234, 90 L. Ed. 34, 37 (1945)).

In the present case, defendants offered an affidavit from the City’s Finance Manager, Ms. Colclough, tending to show that the goal of the amending ordinance was to “protect the financial stability of the retirement plan” as well as to permit a disabled officer to continue productive employment with the City at the same salary for performing unsworn duties. Instead of losing benefits by being forced to retire early, police officers were guaranteed the right to work as long as they were physically able to perform any work for the Police Department or the City. The plaintiff has not produced any evidence to show that the amendment was unreasonable and unnecessary. Based on this record, I would find that there is a genuine issue of material fact regarding whether the amending ordinance was reasonable and necessary. Accordingly, I would reverse the trial court’s granting of summary judgment and remand the case for a determination on this issue.