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    "judges": [
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    "parties": [
      "JOHN D. HOGAN and wife, JANET S. HOGAN, Plaintiffs v. THE CITY OF WINSTON-SALEM, Defendant"
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      {
        "text": "JOHNSON, Judge.\nDefendant City appeals from that part of the Order entered on 29 December 1994 granting plaintiffs\u2019 motion for summary judgment as to plaintiffs\u2019 seventh cause of action and declaring that the 20 August 1990 Amendment to Chapter 15, Article II of the Retirement Code of the City of Winston-Salem is unconstitutional as applied to plaintiffs. Plaintiffs appeal from that part of the Order granting defendant\u2019s motion for summary judgment as to plaintiffs\u2019 first, second, third, fourth, fifth and sixth causes of action.\nThe facts are as follows: Plaintiff was a sworn officer of the Winston-Salem Police Department for over twenty years and made mandatory payments into the City\u2019s Retirement Plan (the Plan) for police officers for over twelve years. Plaintiffs wife, Janet S. Hogan, became a beneficiary under the Plan in 1978. On 2 August 1989, plaintiff injured his back while working for the police department and during the scope of his employment.\nOn 20 August 1990, subsequent to plaintiffs injury, the Board of Aldermen enacted an ordinance to amend Chapter 15, Article II of the City Code which governs the Plan. Prior to the Amendment, and on the date of plaintiffs injury, the Retirement Code provided that if an officer was disabled from performing his duties, he was entitled to retire under the Retirement Code, and that the City \u201cdid not have the ability to transfer these members to other police duties.\u201d\nDefendant\u2019s interpretation and application of the Amendment to plaintiff took away the unqualified right of a disabled officer to obtain retirement when an injury prevented the officer from performing his sworn duties, instead, the City may transfer a disabled officer to other \u201cunsworn duties within the police department.\u201d\nParagraph (g) of Section 16 of the Amendment provides the following:\nUpon the recommendation of the Police Chief and/or the Personnel Director, subject to the review and recommendation of the Retirement Commission to the City Manager, an employee disabled for the purposes of sworn employment may be transferred to other sworn and nonsworn duties within the Police Department. Should a member of the plan desire transfer to a non-sworn position outside of the Police Department, the City will assist with the transfer, insofar as possible and practicable. The following provisions will apply to a transfer to another position under this section:\n(i) In the opinion of the medical review board the employee is capable of satisfactorily performing the new duties;\n(ii) The compensation of the new position is at least five (5) per cent higher than the employee\u2019s sworn compensation if the employee elects to remain an active member of the plan. The compensation of the new position is equal to the present compensation, if the employee elects to terminate from the city plan.\n(iii) The same rules for vesting of benefits and transfer of benefits are applied as in section 15-58.\n(iv) A disabled employee transferred to a non-sworn or other sworn position of lower pay range than the sworn position, will not be subject to limitations on merit pay increases applicable to the non-sworn position.\n(v) The City plan will reimburse to the City operating fund any cost differential resulting from the provisions of Section 16(g).\nOn 7 March 1991, Dr. Thomas opined that plaintiff was \u201ctotally and permanently disabled to return to his . . . usual occupation.\u201d On 15 March 1991, plaintiff submitted an application for retirement due to disability with the Retirement System Division of the Department of State Treasurer, State of North Carolina. On 15 March 1991, plaintiff also submitted an application for disability retirement from the Police Department, effective 1 June 1991. On 3 June 1991, plaintiffs treating orthopedic surgeon, Dr. Holthusen, rated plaintiff\u2019s permanent partial disability to his back at fifty percent. On 25 June 1991, Dr. Holthusen concluded that plaintiff was \u201ctotally and permanently disabled to return to his . . . usual occupation.\u201d\nDefendant alleged that the \u201cPolice Chief offered Mr. Hogan three non-sworn positions.\u201d However, defendant admitted that \u201con June 16, 1991, the City and plaintiff John D. Hogan received notice from Dr. B.R. Thomas that John D. Hogan was unable to perform any of the alternative employee positions recommended by the City.\u201d\nOn 24 July 1991, plaintiff received notice from the State of North Carolina that his Disability Retirement was approved. Prior to the Amendment, a disabled officer whose retirement was approved under the State Plan would also be approved under the City Plan. The City denied plaintiffs request for retirement due to disability pursuant to an Amendment to the Plan which occurred after plaintiffs injury. The City used the Amendment to deny plaintiff his right to receive retirement benefits when he became unable to perform his sworn duties. Plaintiff alleges that he received no opportunity for a hearing regarding the City\u2019s decision.\nDuring plaintiff\u2019s employment, he was repeatedly told by the Chief of Police and other officers that defendant would look after him and that if he was injured \u201cin the line of duty\u201d he would be allowed to retire with \u201cno questions asked.\u201d When defendant failed to honor these promises after plaintiff\u2019s injury, plaintiff felt like defendant had abandoned him. Plaintiff began to have suicidal thoughts, began drinking heavily, and became very distraught. Plaintiff sought treatment for the distress he suffered from Dr. Jerry Noble, a licensed, practicing clinical psychologist in North Carolina. Dr. Noble\u2019s diagnosis of plaintiff was \u201cmajor [depression, single episode without psychotic features; generalized anxiety disorder; alcohol abuse intermittent, insomnia; and chronic pain.\u201d\nPlaintiffs filed suit against defendant, alleging seven causes of action: (1) Arbitrary and Capricious Conduct and Lack of Due Process under the United States Constitution, the North Carolina Constitution, the laws of the United States and the State of North Carolina; (2) Breach of Contract; (3) Intentional Infliction of Emotional Distress; (4) Negligent Infliction of Emotional Distress; (5) Failure to Notify Plaintiffs of their Continuation Rights under COBRA; (6) Bad Faith and Breach of Duty of Good Faith; and (7) Request for Declaration that the 20 August 1990 Amendment of Chapter 15, Article II of the Retirement Code of the City of Winston-Salem is Unconstitutional as Applied for Interference with Plaintiffs\u2019 Contractual Rights.\nThe first issue to be addressed in this appeal is whether the trial court erred in granting plaintiffs\u2019 motion for summary judgment as to their seventh cause of action and declaring that the 20 August 1990 Amendment of Chapter 15, Article II of the Retirement Code of the City of Winston-Salem was unconstitutional as applied to plaintiffs in this case.\nArticle I, Section 10, Clause 1 of the United States Constitution states, \u201cNo State shall. . . pass any . . . Law impairing the Obligation of Contracts . . . .\u201d This prohibition is applicable to municipalities. Northern P. R. Co. v. Minnesota ex rel. Duluth, 208 U.S. 583, 52 L. Ed. 630 (1908). In determining whether the Amendment in the case sub judice unconstitutionally impairs plaintiffs\u2019 contractual rights, this Court in Simpson v. N.C. Local Gov\u2019t Employees\u2019 Retirement System, 88 N.C. App. 218, 363 S.E.2d 90 (1987), aff\u2019dper curiam, 323 N.C. 362, 372 S.E.2d 559 (1988), adopted a three-step inquiry which became the basis for determining if the State, or in this case, the City, violated the Contract Clause. We must consider the following: (1) whether a contractual obligation arose under the statute; (2) whether the State\u2019s actions impaired an obligation of the State\u2019s contract; and (3) whether the impairment, if one existed, was \u201creasonable and necessary to serve an important public purpose.\u201d Id. at 225, 363 S.E.2d at 94.\nOur first inquiry is to determine whether plaintiffs had contractual rights in the Plan. Our Court has held that public employees have contractual rights in their pension funds. See Simpson, 88 N.C. App. 218, 363 S.E.2d 90; Faulkenbury v. Teachers' & State Employees' Retirement System, 108 N.C. App. 357, 424 S.E.2d 420, aff\u2019d per curiam, 335 N.C. 158, 436 S.E.2d 821 (1993); Woodard v. Local Governmental Employees\u2019 Retirement System, 108 N.C. App. 378, 424 S.E.2d 431, aff\u2019d per curiam, 335 N.C. 161, 435 S.E.2d 770 (1993). Defendant City argues that plaintiffs\u2019 contractual rights in the Plan did not vest because plaintiff had not been approved for retirement benefits pursuant to disability on the date that the Amendment was passed. However, the Court in Simpson stated that \u201c[i]n North Carolina the right of members of the Retirement System to retirement benefits vests after five years of creditable service.\u201d Simpson, 88 N.C. App. at 219, n. 2., 363 S.E.2d at 91, n. 2. See also North Carolina General Statutes \u00a7 128-27(c) (1994) (a member of the State plan must have \u201cfive or more years of creditable service\u201d before eligibility for disability retirement unless injured in an accident in the line of duty). As it is undisputed that plaintiff had attained more than five years of creditable service before his injury, before the date of the Amendment and before the date he submitted his application for disability retirement, defendant\u2019s argument is without merit. Further, Section 15-56 of defendant City\u2019s Plan requires a member to have \u201cfive (5) or more years of creditable service\u201d prior to becoming eligible for disability retirement. This Court has stated that:\n[a] public employee has a right to expect that the retirement rights bargained for in exchange for his loyalty and continued services, and continually promised him over many years, will not be removed or diminished. Plaintiffs... had a contractual right to rely on the terms of the retirement plan as these terms existed at the moment their retirement rights became vested.\nSimpson, 88 N.C. App. at 224, 363 S.E.2d at 94.\nDefendant City contends that in accordance with Griffin, they can amend or make changes in the Retirement Disability Plan and apply the Amendment to members who had not yet retired on disability retirement at the time the change became effective. Griffin v. Bd. of Com\u2019rs. of Law Officers Retirement Fund, 84 N.C. App. 443, 352 S.E.2d 882, dismissal allowed and disc. review denied, 319 N.C. 672, 356 S.E.2d 776 (1987) (rights do not vest until the date of disability retirement). Defendant\u2019s argument that this Court\u2019s previous opinion in Griffin is more applicable than the Supreme Court\u2019s per curiam affirmation of this Court\u2019s decision in Simpson is without merit.\nOur second inquiry is whether the Amendment impaired plaintiffs\u2019 contractual rights. Defendant\u2019s argument that plaintiffs suffered no impairment of their contractual rights is unpersuasive. Although it is evident that plaintiffs will not suffer significant reductions in the retirement allowances, plaintiffs will, however, suffer an impairment, in that, they would be denied their right to retirement benefits \u2014 a right that they were entitled to on the date plaintiff was injured within the course of his employment, and a right upon which they had relied upon prior to the Amendment. In finding that an impairment of contractual benefits has occurred, it must be shown that there were \u201csignificant reductions\u201d in the retirement benefits. See Simpson, 88 N.C. App. at 225, 363 S.E.2d at 94; Faulkenbury, 108 N.C. App. at 371, 424 S.E.2d at 427. The Amendment at issue in the instant case completely deprives plaintiff of his right to disability retirement upon being injured in the line of duty. Plaintiff would be required to perform nonsworn duties even though his physician has concluded that he is unable to perform in the three nonsworn positions that defendant offered. This is a significant reduction or impairment of plaintiffs\u2019 rights in that they would be denied benefits that they would have received prior to the Amendment. Accordingly, the second prong was met.\nOur third inquiry is whether the Amendment was reasonable and necessary to serve an important public purpose. Defendant City\u2019s, Finance Director, Loris Colclough, in an affidavit, stated that the purpose of the Amendment was to permit disabled officers to transfer to another position so that they could continue to have productive employment with the City at the same salary and pay increases that they would have received in their sworn position. The City has not presented any evidence that the Amendment was reasonable and necessary to protect an important state interest in relation to the facts of this case, particularly in reference to this plaintiff who has been employed with the City for over twenty years and became vested in the retirement system prior to the time the policy changes were enacted. Rather, the City\u2019s evidence is only relevant to show that the Amendment was to benefit and to allow officers to remain employed in nonsworn duties rather than retire upon their disability. Although commendable, this purpose is not reasonable and necessary as it pertains to this plaintiff. In Simpson, the Court stated that it was not persuaded by the explanation given by the Deputy Treasurer and Director of the Retirement Systems Division in an affidavit which stated that the changes made to the retirement requirements were made to correct inequities in the system and that the changes were reasonable and necessary to serve an important state interest. Simpson, 88 N.C. App. 218, 363 S.E.2d 90. Likewise, the evidence in this action does not show that the Amendment was necessary and reasonable to protect an important state interest where an officer has become vested prior to its enactment. The Amendment is unreasonable as pertains to plaintiffs because they are being denied an unequivocal right to disability retirement upon being disabled, by an Amendment which became effective after plaintiffs injury occurred. While there may be an issue of material fact as to whether the Amendment was reasonable and necessary in relation to officers who had not become vested at the time of its enactment, there is no genuine issue of material fact as to whether the Amendment was reasonable and necessary as to an officer who had become vested prior to its enactment. Accordingly, as there was no genuine issue as to any material fact, plaintiffs were properly granted summary judgment as a matter of law.\nPlaintiffs also argue that the Amendment violated the due process guarantees of the United States and North Carolina Constitutions; however, we need not address this argument in light of our holding that plaintiffs\u2019 grant of summary judgment was without error.\nPlaintiffs\u2019 cross-appeal from that portion of the trial court\u2019s Order granting summary judgment in favor of defendant, and dismissing plaintiffs\u2019 first, second, third, fourth, fifth and sixth causes of action.\nPlaintiffs first argue that the trial court erred by granting summary judgment on its second claim for breach of contract. We disagree. Defendant may amend ordinances so long as the amendment is not unconstitutional. As we have affirmed the trial court\u2019s decision that the Amendment herein is unconstitutional as applied to plaintiff in that his contractual rights have been impaired, no breach of contract occurs until the Retirement System fails to deliver plaintiffs\u2019 vested benefits according to the previous unamended contract. Thus, summary judgment was properly granted on this claim.\nPlaintiffs next argue that the trial court erred by granting summary judgment on plaintiffs\u2019 claim for breach of duty of good faith. Plaintiffs contend that defendant breached its \u201ccovenant of good faith and fair dealing\u201d by passing the Amendment and depriving plaintiffs of benefits. Plaintiffs\u2019 claim for breach of an implied covenant of good faith and fair dealing is without merit. See Phillips v. J. P. Stephens & Co., Inc., 827 F. Supp. 349, 352 (M.D.N.C. 1993); Amos v. Oakdale Knitting Co., 331 N.C. 348, 359, 416 S.E.2d 166, 173 (1992).\nPlaintiffs also argue that the trial court erred by granting summary judgment on their claim for arbitrary and capricious conduct and lack of due process under the United States Constitution, the North Carolina Constitution and the laws of the United States and the State of North Carolina. A review of the evidence reveals that plaintiffs were not denied due process as they received notice and had an opportunity to be heard, and they have failed to show that the denial of the benefits was arbitrary or capricious. Additionally, as plaintiffs failed to allege a claim under \u00a7 1983 in their complaint and to argue this claim before the trial court, they may not argue this claim on appeal. See Gilbert v. Thomas, 64 N.C. App. 582, 586, 307 S.E.2d 853, 856 (1983). Thus, summary judgment was properly granted.\nPlaintiffs argue that the trial court erred by granting summary judgment on their claim for failure to notify plaintiffs of their continuation rights under COBRA. Our review of the record reveals that plaintiff had notice of his rights concerning coverage; therefore, this argument is without merit.\nPlaintiff also argue that the trial court erred by granting summary judgment on plaintiffs\u2019 claim for intentional infliction of emotional distress and negligent infliction of emotional distress. These arguments must also fail in that plaintiffs failed to produce a sufficient forecast of evidence to survive summary judgment on these claims.\nFor the foregoing reasons, the trial court\u2019s Order is affirmed.\nAffirmed.\nJudge WYNN concurs.\nJudge WALKER concurs in part and dissents in part.",
        "type": "majority",
        "author": "JOHNSON, Judge."
      },
      {
        "text": "Judge Walker\nconcurring in part and dissenting in part.\nI respectfully dissent from the majority\u2019s opinion affirming the trial court\u2019s granting of plaintiffs\u2019 motion for summary judgment as to plaintiffs\u2019 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.\nThe 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\u2019n 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\u2019t Employees\u2019 Retirement System, 88 N.C. App. 218, 224, 363 S.E.2d 90, 94, aff\u2019d, 323 N.C. 362, 372 S.E.2d 559 (1988).\nWhile 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\u2019s application of this test.\nUnder 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\u2019 and State Employees\u2019 Retirement System, 108 N.C. App. 357, 424 S.E.2d 420, aff\u2019d 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\u2019s 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 \u201cas plaintiffs stand to suffer significant reductions in their retirement allowances as a result of the legislative amendment under challenge.\u201d Id.\nFinally, 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 \u201cproper resolution\u201d on this third'part of the test.\nIn 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 \u201cat least some deference to legislative policy decisions to modify these contracts in the public interest. . . .\u201d Id. at 1019. The Court explained:\nThe Contract Clause, however, does not require the courts \u2014 even where public contracts have been impaired \u2014 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. . . . \u201cMerely 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.\u201d\nId. at 1021-22 (quoting East New York Sav. Bank v. Hahn, 326 U.S. 230, 234, 90 L. Ed. 34, 37 (1945)).\nIn the present case, defendants offered an affidavit from the City\u2019s Finance Manager, Ms. Colclough, tending to show that the goal of the amending ordinance was to \u201cprotect the financial stability of the retirement plan\u201d 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\u2019s granting of summary judgment and remand the case for a determination on this issue.",
        "type": "concurring-in-part-and-dissenting-in-part",
        "author": "Judge Walker"
      }
    ],
    "attorneys": [
      "James and Jones, P.L.L.C., by Randolph M. James and Howard C. Jones II, for plaintiffs.",
      "Womble Carlyle Sandridge & Rice, by Roddy M. Lig\u00f3n, Jr., Gusti W. Frankel, and Steven D. Draper, for defendant."
    ],
    "corrections": "",
    "head_matter": "JOHN D. HOGAN and wife, JANET S. HOGAN, Plaintiffs v. THE CITY OF WINSTON-SALEM, Defendant\nNo. COA95-305\n(Filed 6 February 1996)\nRetirement \u00a7 9 (NCI4th); Constitutional Law \u00a7 143 (NCI4th)\u2014 amendment to retirement code \u2014 unconstitutional impairment of disabled officer\u2019s contract\nPlaintiff police officer\u2019s contractual rights were unconstitutionally impaired by defendant city\u2019s amendment of its retirement code after plaintiff\u2019s injury which took away the unqualified right of an officer to obtain retirement disability benefits when an injury prevented the officer from performing his sworn duties and permitted defendant to transfer the officer to unsworn duties since (1) plaintiff, who had worked for more than twenty years as a sworn police officer of defendant, had vested contractual rights in the retirement plan after five years of creditable service; (2) plaintiff and his wife would suffer significant reductions in their retirement allowances as a result of the amendment; and (3) the impairment was not reasonable and necessary to serve an important public purpose, as defendant\u2019s evidence was only relevant to show that the amendment was to benefit and to allow officers to remain employed in nonswom duties rather than retire upon their disability, but this purpose was not reasonable and necessary as it pertained to this plaintiff.\nAm Jur 2d, Constitutional Law \u00a7\u00a7 592, 597, 690; Municipal Corporations, Counties, and Other Political Subdivisions \u00a7\u00a7 495, 500, 852.\nVested right of pensioner to pension. 52 ALR2d 437.\nJudge Walkek concurring in part and dissenting in part.\nAppeal by plaintiffs and defendant from Order entered 29 December 1994 by Judge William H. Freeman in Forsyth County Superior Court. Heard in the Court of Appeals 6 December 1995.\nJames and Jones, P.L.L.C., by Randolph M. James and Howard C. Jones II, for plaintiffs.\nWomble Carlyle Sandridge & Rice, by Roddy M. Lig\u00f3n, Jr., Gusti W. Frankel, and Steven D. Draper, for defendant."
  },
  "file_name": "0414-01",
  "first_page_order": 448,
  "last_page_order": 458
}
