Opinion ID: 1993394
Heading Depth: 1
Heading Rank: 5

Heading: Questions in respect of the Term of the Proposed State Bonds, the Public Purpose thereof, and the Lending of the State's Credit.

Text: The appellants contend that while the State bonds to be issued under the Act meet the fifteen year requirement of Article III, Section 34 of the Maryland Constitution, that Section of the Constitution is violated by Section 568F of the Act which authorizes the use of the State funds for loans to qualifying hospitals for a term up to 40 years. We find the contention to be without merit. In Lerch v. Maryland Port Authority, 240 Md. 438, 214 A.2d 761 (1965), we held constitutional an act authorizing the Maryland Port Authority to issue its revenue bonds to finance an international trade center. There was no provision requiring the payment of the bonds within fifteen years. One of the contentions made by the taxpayers who attacked the validity of the act was that the Authority's bonds would constitute a debt in the constitutional sense. We held that the statute did not authorize the creation of a debt by the State. While the constitutionality of the statute in Lerch was attacked because of the alleged use of the State's property, the historical and decisional background of the credit clause of the Maryland Constitution, discussed in Lerch, is applicable here. It is only the State bonds to be issued which will constitute a State debt, and these bonds are to comply with the constitutional conditions. The use of the proceeds for loans to hospitals does not make those loans State debts; the credit of the State is not involved. Johns Hopkins Univ. v. Williams, 199 Md. 382, 86 A.2d 892 (1952) and Melvin v. Board of County Comm'rs of Anne Arundel County, 199 Md. 402, 86 A.2d 902 (1952), held that the State did not violate the constitutional restrictions on debt when it sold bonds and gave the proceeds in cash to Johns Hopkins University or Anne Arundel General Hospital. The appellants seek to distinguish these cases on the ground that in them the proceeds of the sale of the bonds were given to the institution, while here the monies are to be lent. The distinction, in our opinion, is unsound. The credit clause does not compel the State to give monies to institutions to effectuate its purpose instead of getting the monies back by the repayment of loans. Lerch, Johns Hopkins Univ., Finan v. Mayor & City Council of Cumberland, 154 Md. 563, 141 Atl. 269 (1928) and Adams v. County Comm'rs of St. Mary's County, 180 Md. 550, 26 A.2d 377 (1946) and the cases therein cited, are dispositive of the appellants' contention that the loans to hospitals authorized by the Act are not for a public purpose, in violation of Articles 15 and 23 of the Maryland Declaration of Rights and Section 34 of Article III of the Constitution. In Finan, the Court sustained a municipal bond issue of the City of Cumberland, part of the proceeds of which was to be advanced to the Allegany Hospital of Sisters of Charity. The advance apparently was a gift, conditioned only on the continued operation of the hospital. In answering the contention that the advance to the hospital was not for a public purpose, Chief Judge Bond, for the Court, said, at 565, 567: The Allegany Hospitals of Sisters of Charity is undoubtedly a private corporation, for it was regularly organized as such, elects its own managers and is in no way subject to public authority or control. University of Maryland v. Williams, supra; St. Mary's Industrial School v. Brown, 45 Md. 310, 329. Its work is in large part charitable, but it also takes pay patients, as all economically conducted hospitals do. The trial court came to the conclusion, after an exhaustive consideration of the questions raised, that the appropriation to it was valid; and this court has come to the same conclusion.    Long before, [ St. Mary's Industrial School v. Brown ] it had been decided that public funds might under proper legislative authority be appropriated to aid private agencies performing services to the community which were public in nature. University of Maryland v. Williams, supra; St. John's College v. State, 15 Md. 330. And from the beginning of the state government it had been the policy and practice to accomplish public purposes indirectly by such means; and all constitutions promulgated since the beginning had been framed unquestionably in full knowledge of this policy and practice, and in none was anything inserted or changed to interfere. The appellants contend that the Maryland cases involving sectarian institutions have been overruled by recent decisions of the Supreme Court of the United States construing the establishment of religion clause of the First Amendment. We shall discuss the constitutionality of the Act under these decisions in a subsequent portion of this opinion.