Carolina-Virginia Coastal Highway v. Coastal Turnpike Authority

74 S.E.2d 310 (1953) 237 N.C. 52

CAROLINA-VIRGINIA COASTAL HIGHWAY
v.
COASTAL TURNPIKE AUTHORITY et al.

No. 457.

Supreme Court of North Carolina.

January 30, 1953.

McMullan & McMullan, Washington, and Reed, Hoyt & Washburn, New York City, for plaintiff, appellee.

John A. Wilkinson, Washington, for defendants, appellants.

JOHNSON, Justice.

Our examination of the challenged statute impels the conclusion that it is repugnant to three sections of the State Constitution. For immediate purposes of decision, it would suffice to rest decision on one section only. However, against the eventuality that this would serve only to extend the litigation and lead to further adverse decisions following piecemeal amendatory legislation, we deem it appropriate to discuss the statute in the light of each section of the Constitution which it impinges. We treat them seriatim. The questions posed are these:

1. Whether the statute in attempting to authorize the Municipal Board of Control to "enter an order creating a municipal corporation" is invalid as being an attempt to delegate legislative power and authority contrary to the provisions of Article II. Section 1, of the Constitution?

2. Whether the amendatory act limiting the territorial scope of the statute to five of the 100 counties of the State, brings the statute into conflict with Article II, Section 29, of the Constitution, which forbids the General Assembly to "pass any local, private or special act * * * authorizing the laying out, opening, * * * (or) maintaining * * * of highways * *; (or) relating to ferries or bridges * *"?

3. Whether (assuming that the plaintiff may be clothed with corporate existence), in view of the provisions of the plaintiff's charter immunizing it from governmental control, the plaintiff is entitled to tax exemption as a municipal corporation within the purview of Article V, Section 5, of the Constitution?

It will add to clarity of understanding if we keep in mind these facts: (a) The Municipal Board of Control issued the plaintiff's so-called charter under the original act of 1949, before the passage of the amendatory act of 1951; (b) the original act is statewide in scope, and contains no express power authorizing the construction and operation of toll bridges—its express grant of powers relates only to toll roads; (c) the amendatory act limits the operation of the statute to five counties, and extends the express grant of powers to include toll bridges; (d) after the passage of the amendatory act, the plaintiff's charter was amended in form to confer on it the right to build a toll bridge over Croatan Sound; (e) Croatan Sound is not a link in the proposed toll road—the southern terminus of the proposed toll road is north of Nags Head, whereas Croatan Sound is several miles south of Nags Head and lies between Roanoke Island and the mainland at Manns Harbor.

1. The question of delegation of legislative power.—It is a settled principle of fundamental law, inherent in our constitutional separation of government into three departments and the assignment of the lawmaking function exclusively to the legislative department, that (except when authorized by the Constitution, as is the case in reference to certain lawmaking powers conferred upon municipal corporations usually relating to matters of local selfgovernment, Const.Articles VII, VIII, and IX; Durham Provision Company v. Daves, 190 N.C. 7, 128 S.E. 593, the Legislature may not abdicate its power to make laws or delegate its supreme legislative power to any other department or body. 11 Am. Jur., Constitutional Law, Sec. 214. See also Motsinger v. Perryman, 218 N.C. 15, 20, 9 S.E.2d 511; State v. Curtis, 230 N.C. 169, 52 S.E.2d 364, and cases there cited.

However, it is not necessary for the Legislature to ascertain the facts of, or to deal with, each case. Since legislation must often be adapted to complex conditions involving numerous details with which the Legislature cannot deal directly, the constitutional inhibition against delegating legislative authority does not deny to the Legislature the necessary flexibility of enabling it to lay down policies and establish standards, while leaving to designated governmental agencies and administrative boards the determination of facts to which the policy as declared by the Legislature shall apply. Durham Provision Company v. Daves, supra. Without this power, the Legislature would often be placed in the awkward situation of possessing a power over a given subject without being able to exercise it.

Here we pause to note the distinction generally recognized between a delegation of the power to make a law, which necessarily includes a discretion as to what it shall be, and the conferring of authority or discretion as to its execution. The first may not be done, whereas the latter, if adequate guiding standards are laid down, is permissible under certain circumstances. 11 Am.Jur., Constitutional Law, Sec. 234; See also Pue v. Hood, Com'r of Banks, 222 N.C. 310, 22 S.E.2d 896.

As to this, it may be conceded that the line of demarkation between those essentially legislative functions which must be exercised by the Legislature itself, and those of an administrative nature, or involving mere details, which may be conferred upon another body or administrative agency, is sometimes vague and difficult to define or discern. Durham Provision Company v. Daves, supra.

Nevertheless, the legislative body must declare the policy of the law, fix legal principles which are to control in given cases, and provide adequate standards for the guidance of the administrative body or officer empowered to execute the law. This principle is implicit in the general rule prohibiting the delegation of legislative power, and is affirmed by numerous authoritative decisions of this Court. Motsinger v. Perryman, supra; Durham Provision Company v. Daves, supra; State v. Harris, 216 N.C. 746, 6 S.E.2d 854, 128 A.L.R. 658; State v. Curtis, supra. See also Annotation, 79 L. Ed. 474, 487.

In short, while the Legislature may delegate the power to find facts or determine the existence or nonexistence of a factual situation or condition on which the operation of a law is made to depend, or another agency of the government is to come into existence, it cannot vest in a subordinate agency the power to apply or withhold the application of the law in its absolute or unguided discretion. 11 Am. Jur., Constitutional Law, Sec. 234.

In the case at hand we are at grips with the question whether the statute, which invests in the Municipal Board of Control discretionary power to create a municipal corporation for the purpose of constructing and operating a toll road and a toll bridge, fails to lay down adequate standards for guidance, and is for that reason subject to attack as an unwarranted delegation of legislative power.

The term "municipal" relates not only to a town or city as an incorporated territorial entity, but it also pertains to local self-government in general and, in a broader sense, to the internal government of the State. In the latter, broader sense, a corporation formed for purely governmental purposes is a municipal corporation. Wells v. Housing Authority of City of Wilmington, 213 N.C. 744, bottom of page 750, 197 S.E. 693; Mallard v. Eastern Carolina Regional Housing Authority, 221 N.C. 334, 20 S.E.2d 281; Webb v. Port Commission of Morehead City, 205 N.C. 663, 172 S.E. 377; Brumley v. Baxter, 225 N.C. 691, 36 S.E.2d 281, 162 A.L.R. 930. See also Const. Article VII, Sec. 7.

But whether a municipal corporation be a unit of local self-government in the sense of being an incorporated territorial area having inhabitants, or a mere governmental agency of the State, clothed with the requisite attributes of government necessary to make it a municipal corporation, in either event such corporation is but a creature, an instrumentality, an agent of the State. 37 Am.Jur., Municipal Corporations, Sec. 4. See also Lee v. Poston, 233 N.C. 546, 64 S.E.2d 835.

This being so, the power to create or establish municipal corporations, to enlarge or diminish their powers, or to dissolve or abolish them altogether, is a political function which rests solely in the legislative branch of the government. 37 Am.Jur., Municipal Corporations, Sec. 7; Starmount Co. v. Town of Hamilton Lakes, 205 N.C. 514, 171 S.E. 909; Webb v. Port Commission, supra; Cox v. City of Kinston, 217 N.C. 391, 8 S.E.2d 252; Greensboro-High Point Airport Authority v. Johnson, 226 N.C. 1, 36 S.E.2d 803.

Ordinarily "no delegation of legislative functions is involved in general laws providing for the incorporation of municipal corporations, fixing the conditions on which they may be created, and leaving to some officer or official body the duty of determining whether such conditions exist, * * *." 37 Am.Jur., Municipal Corporations, Sec. 8; Lyon v. City of Payette, 38 Idaho 705, 224 P. 793; Boone County v. Town of Verona, 190 Ky. 430, 227 S.W. 804; Carrithers v. City of Shelbyville, 126 Ky. 769, 104 S.W. 744, 17 L.R.A.,N.S., 421.

"It is generally held that the legislature, in enacting general statutes governing the incorporation of municipal corporations, which describe the conditions precedent to incorporation, may confer upon a court or other agency the power and duty to ascertain the existence of the facts set forth in the statute upon which it will become effective and to see that all legal forms have been complied with. When such facts are found to exist and the required legal forms have been complied with, the law directs the creation of the municipal corporation. If the legislature vests no power in the courts or other body or individual other than to determine the existence of the facts set forth in the law itself, contingent upon the existence of which the law comes into operation, it does not constitute a delegation of legislative power." 37 Am.Jur., Municipal Corporations, Sec. 8. See also McQuillin, Municipal Corporations, 3rd Ed., Vol. 1, Sec. 3.05.

However, by the decided weight of authority, the rule is that "if the statute requires or authorizes the court or other agency to pass upon questions of public policy involved, or to exercise any discretion as to whether the municipal corporation should be created, or to render any other assistance than the determination of facts, there is an attempted delegation of legislative power and the statute is invalid." 37 Am.Jur., Municipal Corporations, Sec. 8; In Re North Milwaukee, 93 Wis. 616, 67 N.W. 1033, 33 L.R.A. 638.

We come now to test the statute at hand by the foregoing principles. As to the provisions of the statute prescribing (1) the minimum number of persons required to join in the petition to the Municipal Board of Control, (2) the requirements of the petition as to description of the proposed project, listing of the names of the persons across whose lands the toll road is to be constructed, etc., and (3) the requirements providing for a time and place for hearing, and publication of notice of the hearing, it may be conceded that these and similar procedural requirements present only questions of fact which may properly be inquired into and determined by the Municipal Board of Control, without further rules or standards for guidance, and we see in them no unauthorized delegation of legislative power.

But there is more to the statute than that. It provides that at the hearing on the petition, at which "the matter shall be tried as an issue of fact * * *. The Municipal Board of Control shall determine whether or not the laying out, construction and operation of the toll road is in the public interest and whether all the requirements of this Act have been substantially complied with and, if the Municipal Board of Control shall so find, it shall enter an order creating a municipal corporation and fixing the name of the same, * * *." Thus the Legislature attempts to delegate to an administrative agency the crucial question whether a toll road or toll bridge in any given instance will be "in the public interest". Necessarily this involves questions of vital public policy requiring the exercise of discriminating legislative statecraft—particularly so in view of the existence of our statewide system of highways, G.S. §§ 136-1 to 136-101 and the recently created "North Carolina Turnpike Authority" with power and authority to lay out, construct and operate turnpikes and toll roads on a statewide basis. Chapter 894, Session Laws of 1951, now codified as G.S. § 136-89.12 et seq.

Manifestly, the power to determine whether the construction and operation of a toll road or toll bridge in any given instance will be "in the public interest" is purely a legislative question to be resolved only in the exercise or under the direction of legislative powers of guidance and control. Yet, the statute attempts to confer on the Municipal Board of Control the naked, arbitrary power to make this determination, without standards of legislative guidance of any kind, thereby attempting to clothe the members of this administrative agency with apparent power in their unguided discretion to give or withhold the benefits of the law in any given case or cases.

It necessarily follows from what we have said that the statute is violative of Article II, Section 1, of the State Constitution which inhibits the Legislature from delegating its supreme legislative power to any other department or body.

2. The question whether the amendatory act brings the statute into conflict with Article II, Section 29, of the State Constitution.—This section of the Constitution provides in pertinent part that the "General Assembly shall not pass any local, private or special act or resolution * * * authorizing the laying out, opening, altering, maintaining, or discontinuing of highways, streets, or alleys; relating to ferries or bridges; * * * nor shall the General Assembly enact any such local, private or special act by the partial repeal of a general law, * * *. The General Assembly shall have power to pass general laws regulating matters set out in this section."

As bearing on the question whether the amendatory act, Chapter 993, Session Laws of 1951, transforms the statute into a "local act" within the meaning of the Constitution, it is significant that the act authorizes the construction and operation of toll roads and toll bridges only within five counties of the State.

In Idol v. Street, 233 N.C. 730, 65 S.E.2d 313, 315, in which Article II, Section 29, of the Constitution was construed and applied, the Court said: "a `local act' is one operating only in a limited territory or specified locality."

In State v. Dixon, 215 N.C. 215 N.C. 161, 1 S.E.2d 521, an act which excepted from its provisions 64 of the 100 counties in the State was held to be a local or special act and invalid under Article II, Section 29, of the Constitution.

It is manifest that the act in question, as amended, is an act "authorizing the laying out, opening, altering, maintaining, or discontinuing of highways, streets, or alleys", and is also an act "relating to ferries or bridges".

It necessarily follows that the statute is repugnant to Article II, Section 29, of the State Constitution and is therefore void.

The cases relied on by the defendants are distinguishable.

3. The question of tax exemption.—Conceding, without deciding, that the plaintiff may be clothed with corporate existence, nevertheless we are constrained to the view that it is not a municipal corporation within the purview of Article V, Section 5, of the Constitution of North Carolina, which provides: "Property belonging to the State or to municipal corporations shall be exempt from taxation."

In order to come within the constitutional orbit of tax exemption, a corporation must be an instrumentality, an agent, a department, or an arm of the State in the sense of being at least a subordinate branch of the state government or of a local subdivision thereof and subject to governmental visitation and control, so that ordinarily the interests and franchises pertaining to the corporation are either the exclusive property of the government itself or are under the exclusive control of some agency or political subdivision thereof. See 37 Am.Jur., Municipal Corporations, Sections 4 and 6; 18 C.J.S., Corporations, § 18; 13 Am.Jur., Corporations, Section 17; McQuillin Municipal Corporations, 3rd. Ed., Vol. 1, Sections 2.01 through 2.27. See also Drainage Commissioners v. C. A. Webb & Co., 160 N.C. 594, 76 S.E. 552; Southern Assembly v. Palmer, 166 N.C. 75, 82 S.E. 18.

In the case at hand it is noted that the plaintiff is set up as a corporate entity, controlled by a "governing board" appointed by the ten original petitioners and incorporators, without the intervention of any agency or official of the government. Both the challenged statute and the charter issued thereunder by the Municipal Board of Control direct that the governing board so selected shall serve for a period of six years, or until their successors are duly elected and qualified, with further provision that the successors to the governing board shall be chosen by the board members themselves. It is further provided that any vacancy occurring at any time in the membership of the governing board shall be filled by the remaining members.

Thus, the exclusive direction and control of the corporation is vested in a self-perpetuating body, created in its inception without governmental intervention of any kind.

Moreover, the statute expressly directs that the corporation may "fix * * * charge and collect" such toll fees as it deems proper "without obtaining the consent or approval of any department, division, commission, board, bureau, or agency of the State, and without any other proceedings * * *." G.S. § 136-89.6(g).

The statute further provides that when such tolls shall be so fixed they "shall not be subject to supervision or regulation by any other commission, board, bureau or agency of the State." G.S. § 136-89.6.

Manifestly, a corporation so set up beyond the ambit of governmental visitation and control may not be classified as a tax exempt municipal corporation within the meaning of the Constitution. Its status as fixed by the controlling provisions of the statute is that of a private corporation. 18 C.J.S., Corporations, § 18. And this is so notwithstanding the recitals in the statute to the effect: (1) that the corporation "shall be operated entirely for the benefit of the public," (2) that certain financial reports shall be filed with the State Highway and Public Works Commission, and (3) that the Highway Commission shall have the option to purchase the property of the corporation on the open-end basis set out in the statute. These recitals are neutralized and stripped of effectiveness by the provisions which expressly immunize the corporation from any kind of governmental visitation or control.

The decisions in Webb v. Port Commission, supra, and in Wells v. Housing Authority, supra, relied on by the defendants, are distinguishable. In the Webb case, admittedly a borderline case as disclosed by the dissenting opinion by Brodgen, J., concurred in by Stacy, C. J., the power to appoint the members of the governing board of the corporation was vested in the commissioners of Morehead City. Thus, in that case the corporation was under the direct control of the governing officials of a local subdivision of the State government. Similarly, in the Wells case, the members of the governing board of the local housing authority were appointed by the board of commissioners of the City of Wilmington, and in that manner the housing authority was kept within the orbit of governmental control on the local level. In the instant case there is no such control. The governing board functions as in the case of any private corporation.

The other authorities cited and relied on by the plaintiff have been carefully examined. They are either factually distinguishable or not considered authoritative with us.

It follows from what we have said that the judgment below is reversed.

PARKER, J., took no part in the consideration or decision of this case.