Dixie Lumber Co. of Cherryville, Inc. v. North Carolina Department of Environment, Health & Natural Resources

Citations: 563 S.E.2d 212; 150 N.C. App. 144; 2002 N.C. App. LEXIS 407Docket: COA01-739

Court: Court of Appeals of North Carolina; May 7, 2002; North Carolina; State Appellate Court

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Dixie Lumber Company of Cherryville, Inc. appeals a trial court's affirmation of the North Carolina Department of Environment and Natural Resources’ Final Agency Decision, which denied reimbursement from the Commercial Leaking Petroleum Underground Storage Tank Cleanup Fund for cleanup costs incurred from two underground petroleum storage tanks on its property. The Environmental Department's denial was based on its determination that Dixie Lumber was the operator of the tanks and had not paid the requisite fees. 

During a contested case hearing, Judge Beryl E. Wade found that Dixie Lumber was indeed the operator and recommended denial of the reimbursement claim, a recommendation that was adopted by the Final Agency Decision with additional findings and conclusions. On judicial review, Superior Court Judge Sanford L. Steelman, Jr. upheld this decision. 

Dixie Lumber contended that the trial court erred in concluding that the findings and conclusions in the Final Agency Decision were supported by substantial evidence and were not arbitrary or capricious. The appellate court explained that the standard of review for agency decisions depends on the nature of the alleged error, requiring 'de novo' review for legal errors and a 'whole record' test for substantial evidence claims. Dixie Lumber claimed that the denial of reimbursement was unsupported by substantial evidence and that the Environmental Management Commission acted outside its authority in adopting certain rules. However, the appellate court found that Dixie Lumber did not challenge the appropriateness of the trial court’s applied standards of review and concluded that the trial court had properly applied the correct standards to assess the agency's decision.

The trial court determined that the Final Agency Decision by the Department of Environment and Natural Resources was supported by substantial, competent, and material evidence, and was neither arbitrary nor capricious. The "whole record test" was applied, which involves a comprehensive review of the entire record to assess the presence of substantial evidence. Substantial evidence is defined as relevant evidence that a reasonable mind would accept as sufficient to support a conclusion. The central legal issue in the appeal was whether Dixie Lumber was correctly classified as the "operator" of the underground storage tanks under N.C. Gen. Stat. 143-215.94A. Dixie Lumber failed to contest any findings of fact from the Final Agency Decision, making those findings binding. The court found substantial evidence supporting the classification of Dixie Lumber as the operator based on testimony indicating an officer of the company was the contact for the tanks, and that the company used and maintained the tanks. Despite conflicting evidence, the court emphasized that the "whole record" test prevents it from substituting its judgment for that of the agency. Furthermore, the trial court did not err in concluding that the Environmental Department acted within its statutory authority regarding Dixie Lumber's denied reimbursement from the Commercial Fund. The trial court applied "de novo" review appropriately for the alleged error of law.

G.S. 143-215.94B establishes the Commercial Fund and outlines the disbursement criteria. Operators of commercial petroleum underground storage tanks must pay an annual fee to the Secretary of Environment and Natural Resources: $200 for tanks up to 3,500 gallons and $300 for larger tanks. According to N.C. Gen. Stat. 143-215.94E (1999), operators are not eligible for reimbursement from the fund if they have not paid their annual fees, particularly if these fees were due before the discovery of any leaks. Dixie Lumber acknowledges that their fees were unpaid at the time of leak discovery but argues that the statute does not impose a time limit for fee payments, suggesting fees can be settled post-discovery before seeking reimbursement. However, N.C. Admin. Code tit. 15A, r. 2P.0401(b) states that reimbursement eligibility is contingent on the payment of fees prior to discovery. Dixie Lumber claims this regulation conflicts with G.S. 143-215.94E (g)(3) and is invalid, but the court disagrees, asserting that the Environmental Management Commission has the authority to adopt the rule to enforce the relevant statutes. The court upheld the trial court’s order affirming the agency's decision. Judges McCULLOUGH and THOMAS concurred.