State Departments, Institutions, and Agencies

October 27, 1977 Subject: State Departments, Institutions, and Agencies; North Carolina State Bar; Board of Law Examiners; Judicial Standards Commission; Administrative Office of the Courts; Capital Planning Commission; Capital Building Authority; Department of Administration; Real Property; Public Building Contracts; Leasing; Full Faith and Credit of State; and Ad Valorem Taxation

Requested By: J. K. Sherron, Jr. State Property Officer Department of Administration

Questions: 1. What is the legal status of the following organizations:

(a): North Carolina State Bar
(b): Board of Law Examiners
(c): Judicial Standards Commission
(d): Administrative Office of the Courts
(e): North Carolina Pre-Paid Legal Services Corporation

What would be the proper designation of the grantee in a deed for the property involved?
Does the North Carolina State Bar have authority to mortgage real property and pledge the full faith and credit of the State?
Is the North Carolina State Bar required to follow the statutory provisions involving competitive bidding, the North Carolina Capital Planning Commission, the North Carolina Capital Building Authority and the Department of Administration in the selection and engagement of an architect, supervision of design, award of construction contract and supervision of construction in its proposed renovation of the property?
What procedures would the State Bar have to comply with to lease space in the building to others?
Who would receive the proceeds derived from lease’s?

Conclusions: (a), (b), (c), and (d) are all State agencies. (e), North Carolina Pre-Paid Legal Services Corporation, is a quasi-state agency.

"The North Carolina State Bar".
The Bar is statutorily authorized to mortgage real property but not pledge the full faith and credit of the State.
No.
Governor and Council of State approval of each proposed lease is required.
The North Carolina State Par.

FACTS

The North Carolina State Bar has an option to purchase property at 208 Fayetteville Street, Raleigh, North Carolina. The purchase price is payable upon delivery of good warranty deed from Grantor Hudson-Belk Company. The option cost will be credited against the purchase price. If the option is not exercised, Hudson-Belk retains the option cost.

The Bar intends to finance necessary renovation costs estimated at $450,000 to $600,000 by a mortgage loan on the property from a commercial lending institution.

Upon occupancy, the space not needed by the North Carolina State Bar is proposed to be occupied by the Board of Law Examiners, the Administrative Office of the Courts, the Judicial Standards Commission, and the North Carolina Pre-Paid Legal Services Corporation under lease arrangements.

Conclusion 1 (a), (b), (c), and (d)

The North Carolina State Bar is an agency of the State of North Carolina. G.S. 84-15. It is governed by a Council G.S. 84-17.

The Board of Law Examiners is a separate but related state administrative agency with judicial and legislative powers relating to admission to the practice of law. G.S. 84-24. Keenan v. Board of Law Examiners, 317 F. Supp. 1350 (E.D.N.Y. 1970).

The Judicial Standards Commission is a state body created by Article 30, Chapter 7A, General Statutes of North Carolina, to regulate the conduct of the judiciary.

The Administrative Office of the Courts is a state agency created by G.S. 7A-340.

Conclusion 1 (e)

G.S. 84-23.1(c) authorized the Council of the North Carolina State Bar to "initiate and cause the creation of a non-profit corporation" for the purpose of "providing the prepayment of legal services". It further authorized the Council to cause funds of the Bar to be "advanced or loaned to, or used for the benefit of the corporation".

The North Carolina Pre-Paid Legal Services Corporation was created pursuant to that statutory authority. Its Articles of Incorporation (Sec. III) state as its purposes – "To implement the responsibility of the North Carolina State Bar under Section 84-23.1 of the General Statutes of North Carolina . . ." and "To carry out all those functions and powers authorized by Section 84-23.1(c) of the General Statutes of North Carolina".

The initial registered address of the corporation is that of the Bar and its initial registered agent is the Secretary of the Bar (Sec. V).

A majority of the directors of the corporation are appointed by the Bar’s Council (Sec. IX, C2) and upon dissolution, all remaining assets of the corporation shall be transferred to the Bar (Sec. X).

The corporation is not subject to regulation under the insurance statutes (Chapter 58, General Statutes of North Carolina) as are private insurance companies. G.S. 84-23.1(c), (d).

Although its organizational form is that of a non-profit corporation, it is obvious that the corporation was created and is controlled by a state agency pursuant to statutory authority. It is, therefore, at least a quasi-state agency.

Conclusion 2

G.S. 84-15 creates "The North Carolina State Bar". G.S. 84-17 and 84-23 authorize "The North Carolina State Bar" to acquire real property "in the same manner as any private person or corporation". Private persons and corporations take conveyances of real property in their own names.

A similar grant of authority in the North Carolina State Ports Authority is found in G.S. 143-218(3). G.S. 143-218.1 expressly provides that conveyances "shall name The North Carolina State Ports Authority" as grantee".

While the statutes here involved are not equally specific, it is our opinion that the proper designation of the grantee should be in its statutory name – "The North Carolina State Bar".

Conclusion 3

A commercial loan and deed of trust is proposed to finance needed renovations of the property.

G.S. 84-17 and 84-23 give the Bar statutory authority to "encumber" real property.

Similar authority was granted the North Carolina Ports Authority by G.S. 143-218(3).

Article V, Sec. 3 of the Constitution of North Carolina limits the authority of the General Assembly to incur debt. Under its prior language, a lease by the Ports Authority which did not pledge the credit of the State was held constitutionally valid. Ports Authority v. Trust Co., 242

N.C. 416 (1955).

Likewise in Turnpike Authority v. Pine Island, 265 N.C. 109 (1965), revenue bonds of the Turnpike Authority which did not plege the credit of the State was held constitutionally valid.

In both instances, the applicable statutes expressly prohibited a pledge of the credit of the State. The statute here involved is silent on the subject. However, it is a general rule of construction that statutes are presumed to be constitutional and if susceptible of two interpretations, the constitutional interpretation will be adopted. 7 Strong, N.C. Index 2d, Statutes Sec. 4.

It is, therefore, our opinion that the Bar is not authorized to pledge the full faith and credit of the State for repayment of the debt proposed to be created. The lending institution must look solely to the property and the assets of the Bar as security for the indebtedness and the deed of trust should expressly so provide.

Conclusion 4

The pertinent language of Chapter 841, Session Laws of 1977, amending the State Bar’s powers in G.S. 84-17 and 84-23, provides:

"Notwithstanding any other provisions of law, the North Carolina State Bar shall have the power and authority to hold, rent, encumber, alienate and otherwise deal with real . . . property in the same manner as any private person or corporation, subject only to the approval of the Governor and Council of State as to the acquisition, rental, encumbering, leasing and sale of real property."

From the language contained in Chapter 841, particularly that language above quoted, it appears that the intent of the General Assembly was to give to the State Bar complete discretion when dealing with real property, subject only to the approval of the Governor and the Council of State. It is, therefore, unnecessary for the State Bar to follow the competitive bidding requirements of

G.S. 143-129, or to submit for prior approval to the State Department of Administration any plans and specifications for contemplated renovation work, as is generally required of State agencies by G.S. 143-341.

Under the facts pertinent to this discussion, and since the State Bar intends to finance the necessary renovation costs by a mortgage loan of the property, this would be an encumberance. Therefore, any proposed renovations must be submitted to and approved by the Governor and Council of State.

Conclusion 5

G.S.: 146-30, applicable generally to almost all State agencies, requires deposit of net proceeds with the State Treasurer. However, the provisions of G.S. 84-17 and 84-23 as amended by Chapter 841, Session Laws of 1977, would exempt the Bar from the provisions of G.S. 146-30.

There is a similar exemption for mental hospitals by reason of G.S. 122-19. See North Carolina Attorney General’s Opinion dated October 4, 1977, to Marvin K. Dorman, Jr., Division of Budget and Management (to date unpublished).

It is therefore our opinion that the Bar would be entitled to the proceeds derived from leases.

Rufus L. Edmisten Attorney General

Andrew A. Vanore, Jr. Senior Deputy Attorney General