Louchheim, Eng & People, Inc. v. Carson

241 S.E.2d 401 (1978) 35 N.C. App. 299

LOUCHHEIM, ENG & PEOPLE, INC.
v.
James H. CARSON, Jr., and North Carolinians for Carson, a Political Committee.

No. 7710SC205.

Court of Appeals of North Carolina.

February 21, 1978.

Akins, Harrell, Mann & Pike by Bernard A. Harrell, Raleigh, for plaintiff-appellant.

Tharrington, Smith & Hargrove by Wade M. Smith, Raleigh, for defendant-appellee.

HEDRICK, Judge.

In his first two assignments of error the plaintiff contends that the trial court erred in concluding on the basis of the pleadings that the plaintiff made a campaign contribution or expenditure in violation of the General Statutes of North Carolina. The statutes codified under Article 22A which regulate contributions and expenditures in political campaigns are of recent origin and have never been interpreted by the courts of this State. See G.S. 163-278.6—163-278.35 (1976), G.S. 163-278.36 (Supp.1977). General Statute 163-278.19 reads in pertinent part as follows:

Violations by corporations, business entities, labor unions, professional associations and insurance companies.—(a) Except as provided in G.S. 163-278.19(b), it shall be unlawful for any corporation, business entity, labor union, professional association or insurance company directly or indirectly:

(1) To make any contribution or expenditure. . . in aid or in behalf of or in opposition to any candidate or political committee in any election or for any political purpose whatsoever;. . ..

The term "contribution" as used in this statute is defined as "any advance, conveyance, deposit, distribution, transfer of funds, loan, payment, gift, pledge or subscription of money or anything of value whatsoever." G.S. 163-278.6(6) (emphasis added). The term "expenditure" is similarly defined as "any purchase, advance, conveyance, deposit, distribution, transfer of funds, loan, payment, gift, pledge or subscription of money or anything of value whatsoever." G.S. 163-278.6(9) (emphasis added). Thus, the advance of money or anything of value to a political candidate by a corporation, labor union or business entity constitutes an illegal contribution or expenditure within the meaning of this statute. The question presented in this case is whether the payments of money made by the plaintiff for media advertising in conjunction with defendant's campaign constitute "advances" as prohibited by the foregoing statutes.

In the pleadings as summarized and quoted above plaintiff described its own acts in the allegations that "plaintiff, in the defendant's behalf, and in reliance upon the assurance of payment, advanced money for the purchase of media advertising for defendant's campaign"; and "[t]hat the plaintiff corporate . . . paid for the cost of some advertising pending the receipt by the committee of campaign funds." Plaintiff in its brief recognizes that the inartful wording of its pleadings would seem to bring its conduct within the statutory prohibition but argues that the "overall sense" of the pleadings is to the contrary.

In ascertaining the meaning of the words in a particular statute the courts should keep one eye to the common definition of the word and one eye to the purposes of the statute and the evil to be remedied. Montague Brothers v. Shepherd Co., 231 N.C. 551, 58 S.E.2d 118 (1950). According to common usage, to "advance" money means "to furnish money for a specific purpose understood between the parties, the money or sum equivalent to be returned; furnishing money or goods for others in expectation of reimbursement." Blacks Law Dictionary 72 (rev. 4th ed. 1968).

The purpose of the federal statute regulating campaign contributions and expenditures by corporations and labor unions, 2 U.S.C. § 441b (1976) (formerly 18 U.S.C. § 610), which is similar in its language and scope to our own statute, is to protect the populace from undue influence by corporations and labor unions, and to insure the responsiveness of elected officials to the public at large. United States v. C.I.O., 335 U.S. 106, 68 S. Ct. 1349, 92 L. Ed. 1849 (1948); Annot., 24 A.L.R.Fed. 162 (1975). As we read G.S. 163-278.19, we perceive its purposes to be identical to those of its federal counterpart. Our Legislature, as well as Congress, has specified that the advance of money by a corporation in behalf of a political candidate is frustrative of these purposes.

Thus, with the definition of "advance" and the presumed intent of our Legislature in the enactment of the campaign contribution regulations in mind, we conclude that the payments made by plaintiff constituted illegal expenditures within the meaning of G.S. 163-278.19(a). In its reply plaintiff alleged that it expended substantial sums of money for the purchase of media advertising for the defendant's campaign until the defendant's committee could raise sufficient funds to cover these expenses. It is precisely this type of activity which could encourage favored treatment by an official once he is elected. We think the Legislature intended to curb such acts in its enactment of G.S. 163-278.19 and its inclusion of "advance" within the definitions of contribution and expenditure.

Plaintiff argues that the statute, so construed, would prohibit all credit transactions between corporations and candidates for public office. Such an expansive interpretation of the statute is not justified by our conclusion in this case. We do not think that the plaintiff's expenditures in the present case were typical of the ordinary extension of credit to a client for services rendered. In this regard, we find particularly illuminating the plaintiff's allegation "[t]hat at all times, the defendant knew that media advertising had to be currently paid and was aware of the laws and regulations concerning media expenses." Implicit in this contention is the knowledge on the part of the plaintiff of the illegality of its payments; from such knowledge it is reasonable to infer that plaintiff was aware that in paying the defendant's expenses, it was going beyond the mere extension of credit.

Plaintiff also challenges the trial court's conclusion that "[t]he statute makes no distinction between the advertent and inadvertent advancement or expenditure of funds." This conclusion was apparently addressed to the plaintiff's claim in connection with the check which was submitted by the defendant and returned for lack of sufficient funds. The plaintiff's assessment of the trial court's ruling on this point appears in its brief as follows:

What the trial court is really saying here is that if the candidate pays a firm for its services by check, and the check turns out bad, the obligation is then converted into an "inadvertent contribution" and thus falls within the prohibition of the statute.

We are in no position to determine the accuracy of the plaintiff's statement as to the trial judge's purpose in including the foregoing conclusion. However, we regard the worthless check as nothing more than an acknowledgement by the defendant that the plaintiff had advanced money in his behalf. Our analysis has focused on the acts of the plaintiff in advancing money for the purchase of media advertising for the defendant from July to October, 1974. The fact that the defendant recognized a "moral" obligation to the plaintiff on 28 October 1974 and attempted to satisfy it in part with a worthless check does not alter the complexion of plaintiff's prior illegal acts. And if the obligation itself is unenforceable then a check representative of such obligation cannot be made the basis of a claim. Corbett v. Clute, 137 N.C. 546, 50 S.E. 216 (1905).

Plaintiff next contends that the statute, G.S. 163-278.19, is unconstitutional as construed by the trial court. Plaintiff argues that the trial court's construction of the statute would permit an unconstitutional infringement upon its rights to contract and carry on a lawful business activity which are embodied in the due process clause of the United States Constitution, U.S. Const. amend. XIV, amend. V; and the law of the land clause of the North Carolina Constitution, N.C. Const. art. I, § 19.

Freedom to contract and engage in a lawful business activity are rights guaranteed by the state and federal constitutions. Muncie v. Insurance Co., 253 N.C. 74, 116 S.E.2d 474 (1960); Alford v. Insurance Co., 248 N.C. 224, 103 S.E.2d 8 (1958). However, these rights are not absolute, and limitations thereon imposed by the Legislature are not violative of the constitutional provisions so long as they are reasonable in light of the purposes to be accomplished. Morris v. Holshouser, 220 N.C. 293, 17 S.E.2d 115 (1941). Plaintiff argues that the statute in issue, as construed by the trial court, is arbitrary in its contravention of constitutional rights.

As previously stated, in order to prevent undue corporate and union influence on federal elections, Congress deemed it necessary to prohibit contributions and expenditures in behalf of political candidates from these sources. The federal courts have examined the encroachment on constitutional rights inherent in specific applications of the statute. The prohibition of direct contributions of money or advances of money by a corporation has been found reasonably related to a permissible State objective. United States v. Chestnut, 394 F. Supp. 581 (S.D.N.Y.1975), aff'd, 533 F.2d 40 (2d Cir. 1976). On the other hand, where the statute was construed to prohibit a national bank from making a fully secured loan to a political candidate, it was found to violate the fifth amendment by intruding into the normal course of business of the bank without sufficient relationship to the objective of the statute. United States v. First National Bank of Cincinnati, 329 F. Supp. 1251 (S.D.Ohio 1971).

Plaintiff's constitutional claims were premised on the assumption that the trial court's construction of G.S. 163-278.19 would bar all credit transactions between businesses and political candidates. Such a construction would raise constitutional questions of a different magnitude than those presented by our more limited construction and might well involve an unreasonable intrusion on constitutional rights. In any event, the plaintiff's payment of the defendant's advertising expenses were clearly advances as prohibited by the statute; and the prohibition thereof constitutes only a minimal intrusion on plaintiff's constitutional rights, and is clearly reasonable in light of the purposes to be accomplished by the statute. We hold that the statute on its face, and as applied by the trial court, is constitutional.

The plaintiff in this case has sought to enforce an obligation arising out of a transaction which we have found to be in violation of G.S. 163-278.19. If this Court were to lend its aid and compel the defendant to repay money advanced contrary to the statute, the policy declared by the Legislature in the enactment of that statute would be frustrated. Thus we will follow the advice offered by our Supreme Court at an earlier time: "[W]hen the court discovers that it is invoked to aid in enforcing an illegal transaction, the court ex mero motu will withdraw its hand." Cansler v. Penland, 125 N.C. 578, 581, 34 S.E. 683, 684 (1899). See also McArver v. Gerukos, 265 N.C. 413, 144 S.E.2d 277 (1965). The plaintiff's acts, as reflected in the pleadings, preclude its recovery in the courts of this State for money advanced in the amount of $19,349.26.

However, what we have heretofore said relates only to the plaintiff's claim for $19,349.26. We are unable to determine on the basis of these pleadings whether plaintiff's claim for $2,902.39 based on "commissions" is barred as an illegal contribution or expenditure to a political candidate pursuant to G.S. 163-278.19. The pleadings do not establish whether the "commissions" were earned by the plaintiff in connection with the illegal advancement of $19,349.26. Since the pleadings do not reflect an insurmountable bar to plaintiff's claim of $2,902.39, this portion of the judgment for defendant must be reversed. Furthermore, the judgment for defendant from which the appeal was taken makes no disposition of defendant's counterclaim.

The result is: that portion of the judgment dismissing plaintiff's claim against the defendant for $19,349.26 is affirmed; that portion of the judgment dismissing plaintiff's claim for commissions of $2,902.39 is reversed and remanded to Superior Court for further proceedings with respect to plaintiff's claim for $2,902.39 and defendant's counterclaim.

Affirmed in part.

Reversed and remanded in part.

BRITT and WEBB, JJ., concur.