No. 13627 INTHE SUPREPIIF, COURT OF THE STATE OF MONTANA 1977

KAREN M. DOUGLAS, Plaintiff and Appellant,

-vsTHOMAS L. JUDGE, Governor, etal., Defendants and Respondents.

ORIGINAL PROCEEDING: Counsel of Record: For Appellant: Garrity and Keegan, Helena, Montana Donald A. Garrity argued, Helena, Montana For Respondents: Hon. Mike Greely, Attorney General, Helena, flontana Walter S. Murfitt, Special Assistant Attorney General,

argued, Helena, Montana

Submitted: June 13, 1977 Decided:

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## -Mr. Justice Frank 

### I. Haswell delivered the Opinion 

### of the Court. Appellant brought this action in the district court, Lewis and Clark County, seeking a declaratory judgment that Chapter 533,Laws of 1975, is unconstitutional. On crossmotions for summary judgment, the district court held the challenged legislation to be valid and enforceable. ~ppellant appeals the district court ruling to this Court. Appellant is a citizenof the United States and the State of Montana and is a resident of Lewis and Clark County,Montana. Appellant owns both real and personal property in Lewis and Clark County,and pays taxes thereon. Appellant is also a registered elector within the county. Respondentswere at all times relevant to this action the duly elected, qualified and acting members of the Board 

### of Examiners of the State of Montana. The Board of Examiners is the body authorized to issue and sell state revenue bonds. Chapter 533, Laws of 1975,was enacted by the 1975Montana Legislature. This act, now codified as Title 89,Chapter 36, R.C.M. 1947,is an act providing for the development of renewable natural resources. The purpose of this act and the policies to be promoted thereby are set forth in section 89-3601, R.C.M. 1947,as follows: "In the development of the natural resources of the state it is essential to distinguish between those which are and those which are not renewable; to make proper charges through taxation and otherwise for the depreciation of nonrenewable resources; and to invest a proper proportion of the tax and other revenues from nonrenewable resources in the replacement thereofwith developments of renewable natural resources that will preserve for the citizens the benefit of the state's natural heritage and to ensure that the quality of existing public resources such as land, air, water, fish,wildlife and recreational opportunities are not significantly diminished by developments supported by this act. In order to finance suchdevelopments it is necessary to borrow 

### in anticipation 

### of the receipt of the revenues, so that replacement will not lagbehind consumption. Thepurpose of this act is to provide a procedure for borrowing in themost economicalway for this purpose, and to authorize the creation of debt to finance the first stage of the program, and to describe the types of projects, loans,and grants to be included in the program.

### " Three distinct programs for the development of renewable

resources are contemplatedby this act: (1)renewable resource development loans to farmers and ranchers, section 89-3603, R.C.M. development 1947; (2) state renewable resource/grants to public agencies, section 89-3604,R.C.M. 1947; and (3) state and local renewable

resourcedevelopment loans to public agencies, section 89-3605, R.C.M. 1947. Only the firstprogram is challenged by appellant in this action and therefore, all discussion found herein specifically relates only to this program. In furtheranceof the stated purposes and policies, the act authorizes respondents,upon the requestof the Department of Administration or the Board of Natural Resources and Conservation, to issue and sell general obligation bonds of the state in an amount not to exceed fivemillion dollars. The purpose of the bond sale is to finance the renewable resource development program as described in and pursuant to the terms and conditions of the act. The full faith and credit and taxing powers of the state are pledged for the prompt and full payment of all renewable resource development bonds issued pursuant to this act. The proceeds of a11 renewable resourcedevelopment bonds issued pursuant to this act, other than refunding bonds, are required to be deposited as received in a clearance fund account. Themoneys on hand in this accountmay be used only to pay costs of the renewable resource developmentprogram upon the order of the Department ofAdministration or the Board ofNatural Resources and Conservation. The Board of Natural Resources and Conservation is authorized upon proper application and upon recommendationof theDepartment of Natural Resources to make renewable resource development loans from the account established by this act to farmers and ranchers of the statewho,without regard to their form of business organization: (a)Are citizensof the United States and are citizens and residents of the State of Montana; (b)have sufficient farming or ranching training and experiencewhich, in the opinion of the Department, is sufficient to assure the likelihood of the successof the proposed operations; and (c)are orwill become owner-operators of farms and ranches. These private loans to farmers and ranchersmay be made for any worthwhile project for the conservation, management, utilization, development or preservation of the land, water, fish, wildlife, recreational and other renewable resources in the state; and for the refinancing of existing indebtedness incurred in the expansion or rehabilitation of projects for thosepurposes. The loansmay not exceed the lesser of $100,000 or 80percent of the fair market value of the security given therefor,may not exceed a term of thirty years,and shall bear interest at a rate established by the Board of Natural Resources and Conservation not to exceed onepercentage point greater than the prevailing interest rate on renewable resourcedevelopment bonds authorized by the act. Private loans are to be securedby a lien upon the project constructedwith the proceeds thereof. By a resolution adopted December 5, 1975,the Board of Natural Resources and Conservation requested the Board of Examiners to issue and sell bonds of the state to implement this act. his action was filed thereafter and the sale and issuance of the bonds has been stayed during the pendency of this appeal. Three issues are before this Court on appeal:

(1) Whether the use of the bond moneys authorized byChapter 533, Laws of 1975, for the purpose of lending money to private individuals is a violation ofArticle VIII, Section 1, 1972Montana Constitution,as authorizing the levy of taxes for other than a "publicpurpose"? (2) Whether the use of the proceeds of said bonds for loans to private individuals violates Article V, Section 11, 1972Montana Constitution,as an appropriation to a private individual not under control of the state? (3)Whether Chapter 533, Laws of 1975 constitutesan invalid delegation of legislative authority to the Departmentof Natural Resources and Conservation? ArticleVIII, Section 1, 1972Montana Constitution provides: "Taxes shall be levied by general laws for public purposes." The crux of this issue is a determination ofwhat is a "public purpose" within the framework of this action. The clear purpose of this act is to provide for the development of renewable resources in order that future generationsof Montanans may enjoy such resources. In view of the mandate ofArticle I Montana Constitution that: "The state and each person shall maintain and improve a clean and healthful environment in Montana for present and future generations"we feel the purpose of this act is a "public purpose". Furthermore,we have previously stated that 

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## * * * What is a 'publicpurpose' is a questionprimarily for legislative determination, with which we will not interfereunless there has been a clear abuse ofpower. 

## * * *" Willett 

### v. State Board of Examiners, 112Mont. 317, 322, 115 P.2d 287; Huber

v. Groff, Mont

# . , 558 P.2d 1124, 33 St.Rep. 1304. We find no hint of such abuse of power in the instant case. Appellant further charges that the renewable resource development act violates Article

### V, Section 11(5), 1972MontanaConstitution. This sectionprovides: "Noappropriation shall be made for religious, charitable, industrial, educational or benevolent purposes to any private individual, private association,or private corporation not under control of the state." In effect, appellant argues that the sale of the renewable resource development bonds and the lending of the proceeds therefrom to farmers and ranchers constitutes an appropriation of money forpersons not under the control of the state. There can be no doubt that Article

### V, Section 11(5), 1972Montana Constitution,prohibits the appropriation of funds for the use of any private individual, association or corporation not under state control. We have previously held, however, that the sale of revenuebonds in order to raisemoney for residential loans to low income citizens under the supervisionof the Montana Housing Board, a public corporation,was not a violation of this section. Huber, supra. We are confrontedwith a similar situationherein and the result must be the same. Initially it is important to recognize that the funds in question herein are not appropriated for the use of private persons, corporations or associations. The funds are appropriated for the use of the Department of Natural Resources and Conservation. This department is then in turn directed by the renewable

resourcedevelopment act to dispose of these funds as directed by this act. All funds derived from the sale of the renewable resource development bonds are to be deposited in the clearance fund account. Sections 89-3606 and 89-3609,R.C.M. 1947. Thesemoneys

are to be used by the Board of Natural Resources and Conservation to make loans to farmers and ranchers for the development and preservation of renewable resources. The loansmay be made only upon the proper application and recommendation of the Department ofNatural Resources and Conservation. Section 89-3603,

### R.C.M. 1947.Total control over the granting of these loans is vested in the Department of Natural Resources and Conseryation. We hold that sufficient control over the appropriated funds is vested in the state and the mandate ofArticle V, Section ll(5) ismet. Finally,appellant assails this act on the grounds of

an unconstitutional delegation of legislativepower to the Board of Natural Resources and Conservation since the legislature failed to establish adequate standards and guides for the determination of projects eligible for renewable resourcedevelopment loans. When the Legislature confers authority upon an administrative agency, itmust lay down the policy or reasonsbehind the statute and also prescribe standards and guides for the grant of power which has been made to the administrative agency. Bacus

v. Lake County, 138Mont. 69, 354 P.2d 1056. The following general rule found in 73 C.J.S. Public Administrative Bodies and Procedure, S 29,pp. 324, 325,has been often cited by this Court: "The law-making power may not be granted to an administrativebody to be exercised under the guise of administrative discretion. Accordingly, in delegating powers to an administrativebody with respect to the administration of statutes, the legislaturemust ordinarily prescribe a policy, standard, or rule for their guidance andmust not vest themwith an arbitrary and uncontrolled discretion with regard thereto,and a statute or ordinancewhich is deficient in this respect is invalid. In other words, in order to avoid the pure delegation of legislativepower by the creation of an administrative agency, the legislaturemust set limits on such agency's power and enjoin on it a certain course of procedure and rules of decision in the performance of its function;and, if the legislature fails to prescribe with reasonable clarity the limits of power delegated to an administrative agency, or if those limits are too broad, its attempt to delegate is a nullity. 

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## * * * On the other hand, a statute is complete and validly delegatesadministrative authority when nothing with respect to a determination of what is the law is left to the administrative agency,and its provisions are sufficientlyclear, definite, and certain to enable the aqency to know its rights and obligations." (Emphasissupplied.)Bacus, supra;City of Missoula v. Missoula County, 139Mont. 256, 362 P.2d 539; Huber, supra. What are the standards and guides supplied to the Board of Natural Resources and Conservation to be used in its determination of projects eligible for renewable resourcedevelopment loans? Section 89-3603(3) authorizes the Board of Natural Resources and Conservation tomake loans to farmers and ranchers 

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## * * * for anyworthwhile project for the conservation, management, utilization, development,or preservation of the land,water,fish, wildlife, recreational and other renewable resources in the state

## * * *". The act further specifies the eligibility requirements of prospective borrowers, maximum loan limits, maximum repayment periods and requires the establishmentof a lien in favor of the state upon the project. The Montana rule to be used in the evaluation of the validity of delegationsofpower to administrative agencieswas carefully analyzed in Bacus at pp. 80, 81,where we stated: "In the case of Chicago,M. & St. P. R. Co. 

### v. Board of R. R. Com'rs, 76 Mont. 305, 314, 315, 247 P. 162, 164, this court has stated: "'Wethink the correct rule as deduced from the better authorities is that if an act but authorizes the administrative officer or board to carry out the definitely expressed will of the Legislature,although procedural directions and the things to be done are specified only in general terms, it is not vulnerable to the criticism that it carries a delegation of legislative power.' This rule has been approved inNorthern Pacific R. Co. v. Bennett, 83Mont. 483, 272 P. 987; Barbour

### v. State Board of Education, 92Mont. 321, 13 P.2d 225; State ex rel. City of Missoula v. Holmes, 100Mont. 256, 47 P.2d 624,100A.L.R. 581; Statev. Andre, 101Mont. 366, 54 P.2d 566; State ex rel. Stewartv. District Court, 103Mont. 487, 63 P.2d 141;and Thompsonv. Tobacco Root Co-op State Grazing Dist., 121Mont. 445, 193 P.2d 811. See also Statev. Johnson, 75Mont. 240, 243 P. 1073. "Wedo not disagree with this established rule as enunciated by these Montana authorities. However, the case at bar does not fallwithin the purview of this rule."The Court in Bacus continued by laying down the following rule to be used to determine the sufficiencyof guidelines laid down by legislative enactments: "In the case of Statev. Stark, 100Mont. 365, 371, 52 P.2d 890, 892, this court has stated: "'Delegation of power to determine who are within the operation of the law is not a delegation of legislativepower. 

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## * But it is essential that the Legislature shall fix some standard by which the officer or board to whom the power is delegated may be governed, and not left to be controlled by caprice.' "Weagree with this statementof the law and go furtherby saying that the standardmust not be so broad that the officer or board will have unascertainable limits within which to act." This rule has been followed closelyby a number of subsequent

cases. Pattiev. Oil & Gas Cons. Comm'n, 145Mont. 531, 402 P.2d 596; State ex rel. Bennett

### v. Stow, 144 Mont. 599, 399 P.2d 221; City of Billings v. Smith, 158Mont. 197, 490 P.2d 221. The standards and guides laid down by this actprove to be insufficientwhen analyzed by the Bacus test. In effect, the only limit on the power to loanmoney for a certain project is the Board of Natural Resources and Conservation's subjective determination of whether a project isworthwhile. The parameters which define a project eligible for the loans contemplated by this actmust be more clearly defined. In its present form, insufficient guidelines are provided to the Department of Natural Resources and Conservation in order for it to fully know its rights and obligations under this act. The constitutional infirmity discussed above relating to the loanprogram to farmersand ranchers is not present in the remaining two programs contemplated by this action. Section 89- 3604,whichdeals with state renewable resource grants to public agencies,provides: "Thedepartment of administrationmay recommend to the governor that grants from the renewableresource development account

## * * * be made to any department, agency,board, commission,or other division of state government. Unless specifically authorized by the legislature,no bond proceeds shall be used for the purpose ofmaking grants 

## * * **I' This section furtherprovides: "Thegovernor shall submit those grant proposals having his approval to the legislature. 

## * * * Those grant proposals approved by the legislature shall be administered by the department." Section 89-3605, R.C.M. 1947, which deals with state and local renewable resource development loans,provides: "Thedepartment of administrationmay recommend to the governor that loansbe made 

## * * * to any department, agency, board, commission or other division of stategovernment or to any city, county, or other political subdivisionor local government body of the state." Again, legislative approval of these loans is required. In the programs contemplated by sections 89-3604 and 89-3605 strict control is maintained by the legislature over the disbursement of funds from this program in the form of grants

or loans. No unconstitutional delegation of legislative power ispresent herein. We therefore, reverse the judgment of the district court and remand thismatter with instructions to declare those portions of Title 89,Chapter 36, R.C.M. 1947,which provide for renewable resource development loans to farmers and ranchers unconstitutional

as an unlawful delegation of legislativepower.