Can the State of North Carolina and its cities and counties accept bids and contract with out-of-state motor vehicle dealers who are not licensed in North Carolina, or does Article 12 of Chapter 20 require all dealers to hold an NC license to sell vehicles to public entities?

Plain-English summary

The Director of Purchase & Contract in the NC Department of Administration asked the AG: can NC accept bids and contracts from out-of-state motor vehicle dealers who are not licensed under NC's dealer licensing laws?

AG Michael F. Easley, with Chief Deputy AG Andrew A. Vanore Jr., Senior Deputy AG Reginald L. Watkins, and Special Deputy AG Hal F. Askins, said yes.

The reasoning has three layers:

Statutory purpose. N.C.G.S. § 20-285 declares the legislative purpose of Article 12 of Chapter 20 (the dealer licensing scheme): regulating manufacturers, distributors, dealers, salesmen, and their representatives doing business in NC, "in order to prevent frauds, impositions and other abuses upon its citizens and to protect and preserve the investments and properties of the citizens of this State." The purpose is to protect citizens. Not the State.

Statutory construction rule. The fundamental rule of statutory construction, per Buford v. General Motors Corp., is that legislative intent controls. The intent comes from "the express language used, but also from the [provision's] nature and purpose, and the consequences which would follow its construction one way or another." The State-not-bound rule (Yancey v. Highway Commission, Davidson Co. v. City of High Point) provides that a statute will not ordinarily bind the State unless the State is expressly mentioned. The dealer licensing statute does not expressly bind the State.

State self-protection through procurement controls. The AG distinguishes the State from individual citizens. Citizens can shop out of state if they want; the State must "deal within its boundaries" for many public-procurement transactions. Historically, NC has entertained bids from unlicensed out-of-state bidders, which has produced substantial savings and allowed the State to buy specialized vehicles not available from in-state dealers.

The State already has tools to protect itself in procurement: bidding controls, performance bonds, choice-of-law provisions, contractual terms and conditions, and (if it wanted) it could simply require bidders to be NC-licensed by contract. The State is also better positioned than individual citizens to investigate vendors and detect fraud. Quoting In re Guess, police powers are meant to protect citizens "against the consequences of ignorance and incapacity as well as of deception and fraud," not to protect a well-resourced state government from its own vendors.

So the legislature is presumed not to have intended to apply Article 12 to State procurement, because there is no need to and because the State-not-bound rule of statutory construction so suggests.

Bottom line. Article 12 does not restrict or prohibit the State from dealing with unlicensed dealers or manufacturers. The Department of Administration can entertain bids from out-of-state dealers without requiring NC dealer licenses.

The opinion is also useful for political subdivisions: the same logic applies to counties, cities, and other state political subdivisions making vehicle purchases. They can buy from out-of-state unlicensed dealers without the licensing being a bar.

Currency note

This opinion was issued in 1995. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. Article 12 of Chapter 20 has been amended multiple times since 1995. NC's procurement statutes (Chapter 143, Article 3) and state purchasing rules have also been updated. Anyone facing a current question about whether a particular bidder must be licensed should consult current Article 12, current procurement statutes, and current Department of Administration purchasing guidance.

Background and statutory framework

Most states have motor vehicle dealer licensing schemes that prohibit unlicensed retail sales to consumers. The licensing protects consumers from fly-by-night dealers, ensures that warranties and titles are honored, and creates a regulatory mechanism for trade-in fraud, odometer rollback, and other industry abuses. NC's scheme in Article 12 is in this category.

The State-not-bound rule is a venerable statutory construction principle. The Latin maxim is nullum tempus occurrit regi (no time runs against the king), often generalized to mean that general statutes do not apply to the sovereign unless the legislature expressly so provides. Yancey (1942) is a classic NC application. The rule reflects the structural premise that the sovereign is presumed to legislate for its subjects, not for itself. To bind itself, the sovereign must speak explicitly.

The application to dealer licensing fits the pattern. The licensing scheme protects citizens, not the government. Applying the licensing scheme to the State would frustrate the government's procurement purpose without serving any consumer-protection function. The State does not need consumer protection; it has its own procurement apparatus.

The practical implications are significant. NC's state and local government fleet is substantial (vehicles for state police, highway patrol, DOT, county sheriff departments, city public works, university motor pools). Specialized vehicles (heavy equipment, ambulances, fire trucks) often come from out-of-state manufacturers. Requiring NC-licensed dealers would have either raised costs (by limiting competition to in-state dealers who would need to source from elsewhere anyway) or made some procurements infeasible. The AG's reading preserves the procurement flexibility.

The opinion is also a small but useful example of how AG offices interact with procurement administration. The Purchase & Contract office presumably faced occasional pushback from NC dealers who saw out-of-state bidders winning state contracts and wanted to argue the licensing scheme should bar them. The AG's analysis settled that question and preserved the state's purchasing latitude.

Common questions

Can NC dealers sue to require out-of-state bidders to be licensed?

Probably not, given the AG's analysis. Standing would be a threshold problem (the dealer licensing scheme protects consumers, not competing dealers). Even if standing were established, the merits would favor the AG's reading. NC dealers' remedy is to lobby the legislature to amend Article 12 to expressly require licensing for state procurement transactions.

What about warranty service and recalls for state-purchased vehicles?

Those are contractual matters. The state's procurement contracts typically address warranty, recall, and service obligations as separate terms. An out-of-state dealer or manufacturer that wins a state contract must perform on those terms, even if not separately licensed under Article 12.

Does this apply to leased vehicles?

The opinion does not directly address leases, but the same logic plausibly applies. State procurement covers both purchase and lease. The State-not-bound rule does not turn on the transaction's form.

What about state-owned vehicle disposition (auctioning surplus vehicles)?

The opinion does not address disposition, only acquisition. State surplus vehicle sales typically go through state surplus auctions, which have their own statutory framework. The dealer licensing question would not normally apply to surplus sales by the State.

Source

• Landing page: https://ncdoj.gov/opinions/applicability-of-north-carolina-motor-vehicle-dealer-licensing-laws/

Citations

• N.C.G.S. § 20-285
• Article 12 of N.C.G.S. Chapter 20
• Buford v. General Motors Corp., 339 N.C. 396, 451 S.E.2d 293 (1994)
• Yancey v. Highway Commission, 222 N.C. 106, 22 S.E.2d 256 (1942)
• Davidson Co. v. City of High Point, 85 N.C. App. 26, 354 S.E.2d 280 (1987)
• In re Guess, 327 N.C. 46, 393 S.E.2d 833 (1990)

Original opinion text

September 25, 1995

Mr. John Leaston
Director, Purchase & Contract
Administration Building
Raleigh, N.C. 27603-8003

RE: Advisory Opinion: Applicability of North Carolina Motor Vehicle Dealer Licensing Laws to Motor Vehicle Dealers Who Contract with the State of North Carolina.

Dear Mr. Leaston:

This letter is in response to a request for an advisory opinion as to whether the State of North Carolina and its political subdivisions may accept bids or contract with out-of-state motor vehicle dealers who are not licensed in this state. Upon review and analysis of the dealer licensing laws found in Article 12 of N.C.G.S. Chapter 20, it is concluded that out-of-state dealers who contract directly with the State of North Carolina and its political subdivisions are not required to be licensed under Article 12 when participating in transactions with the State or its political subdivisions.

G.S. 20-285 provides, "The General Assembly finds and declares that the distribution of motor vehicles in the State of North Carolina vitally affects the general economy of the State and the public interest and the public welfare, and in the exercise of its police power, it is necessary to regulate and license motor vehicle manufacturers, distributors, dealers, salesmen, and their representatives doing business in North Carolina, in order to prevent frauds, impositions and other abuses upon its citizens and to protect and preserve the investments and properties of the citizens of this State."

The stated purpose is to protect the citizens of the state by regulating those who sell vehicles and not those who buy them. The fundamental rule of statutory construction is that the intent of the legislature controls. That intent is determined, "not only from the express language used, 'but also from the [provision's] nature and purpose, and the consequences which would follow its construction one way or another.'" Buford v. General Motors Corp., 339 N.C. 396, 409, 451 S.E.2d 293, 300 (1994). Another rule of statutory construction is that laws are made for the government of citizens and not the State itself. Therefore, a statute will not ordinarily bind the State unless the State is expressly mentioned therein. Yancey v. Highway Commission, 222 N.C. 106, 22 S.E.2d 256 (1942). Davidson Co. v. City of High Point, 85 N.C. App. 26, 354 S.E.2d 280 (1987).

Unlike citizens who may go out of state to purchase vehicles if they wish, the State must deal within its boundaries. Historically, the practice of the State has been to entertain bids from unlicensed out-of-state bidders which has allowed the State to obtain the lowest available prices for vehicles. This has resulted in substantial financial savings to the State. Additionally, it has allowed the State to deal directly with manufacturers and dealers of specialized vehicles who may not have dealerships established in North Carolina.

The exercise of police powers by a state is necessarily an infringement on freedoms of action, and are restricted to matters affecting the health, safety and welfare of its citizens in order to "secure them against the consequences of ignorance and incapacity as well as of deception and fraud." In re Guess, 327 N.C. 46, 52, 393 S.E.2d 833, 836 (1990). The State has the ability to protect itself in its business dealings by virtue of controlling the bidding process and establishing the terms and conditions of the contracts, including but not limited to the inclusion of performance bonds, choice of governing laws, terms and conditions of delivery and could if deemed necessary require bidders to be licensed in this state. The State is also in a better position than an individual to investigate those with whom it deals and has the resources to protect itself against possible frauds and abuses. It is inconceivable that the legislature considered it necessary to protect the State from vendors with whom it deals in the same manner that it protects the public at large. Therefore, it is reasonable to assume that the legislature did not intend to protect the State as an entity, but only the citizenry in enacting this law.

Based on the statement of purpose provided by the legislature, Article 12 of Chapter 20 was not intended to restrict or prohibit the State from dealing with unlicensed dealers or manufacturers.

MICHAEL F. EASLEY
Attorney General

Andrew A. Vanore, Jr.
Chief Deputy Attorney General

Reginald L. Watkins
Senior Deputy Attorney General

Hal F. Askins
Special Deputy Attorney General