Opinion ID: 1597762
Heading Depth: 1
Heading Rank: 4

Heading: the relevance of public purpose.

Text: To say that Act No 346 does not contain an unconstitutional grant of State credit, is not, however, to conclude that the act is without constitutional infirmities. The power of the legislature to create corporate entities is carefully circumscribed by the Constitution. Article 15, § 1, of the Constitution of 1850, prohibited the legislature from creating corporations by special act, except for municipal purposes. The 1908 Constitution in article 12, § 1, repeated the prohibition but eliminated the words except for municipal purposes. This language was excluded from the Constitution of 1963. However, article 4, § 29, of the 1963 document, reads as follows: The legislature shall pass no local or special act in any case where a general act can be made applicable, and whether a general act can be made applicable shall be a judicial question. [8] Considering the fact that since the Constitution of 1908 the legislature has been required to create both private and municipal corporations by general law, it is obvious that general laws can be made applicable to accomplish this purpose. A closer scrutiny of the act, however, leads to the conclusion that it was not the intention of the legislature to create a corporation in the ordinary sense. Section 21, subd (4) of the act provides as follows: The authority shall be within the department of social services and shall exercise its prescribed statutory powers, duties and functions independently of the head of the department, except that all budgeting, procurement and related functions of the authority shall be performed under the direction and supervision of the head of the department of social services. Thus it would appear that the legislative intent was to create a quasi corporation rather than a corporation proper. The Constitution of 1963 does not address itself to the establishment of quasi corporations, but it has long been accepted that legislatures have the authority to give corporate capacity to certain agencies in the administration of civil government. And in so doing, they create neither private corporations nor municipal corporations, but instead a class of artificial entities which have been designated quasi corporations. As was stated in Huron-Clinton Metropolitan Authority v. Boards of Supervisors of Five Counties (1942), 300 Mich 1, on page 20: It was not intended, as we view the constitutional provision, to strip the legislature of the power to create specific and supplemental governmental agencies designed to function in a limited sphere in the accomplishment of public purposes for which existing municipal corporations either singly or in designated groups were not suited. Such agencies do not arise to the dignity of municipal corporations. They are lacking in very many of the powers which are commonly and necessarily characteristic of such corporations. They more closely resemble boards or commissions. The Huron-Clinton Case, above cited, quotes from Beach v. Leahy (1873), 11 Kan 23, as follows: The mere fact that these organizations are declared in the statute to be bodies corporate, has little weight. We look behind the name to the thing named. Its character, its relations, and its functions determine its position, and not the mere title under which it passes. In the last five cases cited the organizations were declared in the statute creating them to be bodies corporate, yet this made no difference in the rule. The conclusion to which these investigations has led us is, that among public corporations only corporations proper are included within the scope of article 12 of the State Constitution, and that a school district is only a quasi corporation, and not covered by its provisions. Further citations in the Huron-Clinton Case give us other criteria by which to determine whether the legislature has made an unconstitutional attempt to create a corporation by local or special act, or whether it has validly exercised its power to confer corporate powers upon an agency of State government, thus creating what is known as a quasi corporation. Such quasi corporations are described as bodies of citizens who have no personal nor private interests to be subserved, but are simply required by the State to do some public work. It is said that the reason for the constitutional restriction does not exist, where the State merely clothes one of its own agencies or instrumentalities with such corporate power. It is said that the conferring of corporate powers by the legislature upon agencies of the State, appointed to perform some public work, in the course of the administration of civil government, the more efficiently to perform the duties imposed, is not such an act as is prohibited by the Constitution. The Huron-Clinton Case distinguishes Farrell v. Port of Columbia (1907), 50 Or 169 (91 P 546, 93 P 254), on the ground that the corporation therein involved, which was created by special act, was designed and authorized to function in the field of private enterprise, doing business commonly done by transportation companies. The Court said it was not merely a governmental agency. In City of Ecorse v. Peoples Community Hospital Authority (1953), 336 Mich 490, at page 502, the Court says: We have here a matter of health, which is a question of statewide concern and in which the legislature has a large area of discretion. The defendant authority is a State agency and, as such, is not a municipal corporation or a body created by the municipalities here involved but by the State itself. See Huron-Clinton Case, supra . The legislation in question, not being local in nature, does not require the vote of the local electors for its approval under article 5, § 30, Constitution 1908. Thus it would appear that the State housing development authority as created by Act No 346 is not an unconstitutional attempt to create a corporation by a special act, if in fact, it is merely a quasi corporation, that is the clothing of an agency or instrumentality of State government with corporate powers to perform some public work in the course of the administration of civil government. The act is largely ambiguous on this subject. On the one hand, it calls the authority a public body corporate and politic, and on the other hand, it says the authority shall be within the department of social services. We must, as has been stated, look behind the name to the thing named. We must examine its character, its relations, and its functions to determine, indeed, whether it is an agency or instrumentality of State government. This examination leads us to a consideration of the purposes sought to be accomplished by the law. If those purposes are public purposes, if the work of the entity is a public work, then the State housing development authority is a State agency or instrumentality and its creation is a constitutional exercise of legislative power. If those purposes are not public purposes, or the work of the entity not a public work, then Act No 346 is an unconstitutional attempt to create a body corporate by special act without a two-thirds majority in the legislature and the approval of the electorate. [9] If those purposes are not public purposes, there may be further constitutional infirmities. Article 3, § 6, Constitution 1963, provides: The state shall not be a party to, nor be financially interested in, any work of internal improvement, nor engage in carrying on any such work, except for public internal improvements provided by law. Article 4, § 30, Constitution 1963, provides: The assent of two-thirds of the members elected to and serving in each house of the legislature shall be required for the appropriation of public money or property for local or private purposes. [10] The public purpose issue then, has three faces. First, as it relates to the question of whether the State housing development authority is a State agency, a mere quasi corporation, and not a corporation proper. Second, as it relates to the authority of the State to engage in a work of internal improvement. Third, as it relates to the constitutionality of an appropriation to the use of the authority by less than two thirds of the legislature. [11] In this discussion of public purpose, it is good to bear in mind that constitutional government concerns itself with means and not with ends. Thus, it is often the case that when courts indulge in a discussion of whether or not a specific piece of legislation exhibits a valid public purpose, they are actually attempting to decide whether the means which the legislation proposes to employ are valid and proper to accomplish an admittedly public purpose. In a footnote to the majority opinion in City of Gaylord v. Gaylord City Clerk (1966), 378 Mich 273, there appears a quotation from Justice COOLEY in People, ex rel. Detroit & H.R. Co., v. Township Board of Salem (1870), 20 Mich 452, in which Justice COOLEY makes it clear that what is a public purpose for the valid exercise of regulations under the police power may not be a public purpose for the exercise of the power of eminent domain and, further, that the expenditure of public funds may not be regarded as being made for a public purpose where some other exercise of governmental authority might be valid to accomplish the same end. Putting it very simply, we have building codes which are a valid exercise of the police power to insure that our people will live in safe and sanitary dwellings. We are accustomed to say that such codes accomplish a valid public purpose. But an act appropriating hundreds of millions of public dollars to completely rewire or fireproof every building in the State is quite a different thing than electrical building code or a set of fireproofing regulations. Such enactments would not be literally distinguishable on the basis of the purpose they are intended to accomplish. Both are aimed at the same public purpose, to wit, the safety of our people. The enactments would be distinguishable only on the basis of the means employed. Direct expenditures would probably be struck down as unconstitutional while regulatory measures would be upheld as constitutional. And in both cases, the Court, if precedent were to be followed, would engage in a discussion of whether or not the specific enactment was directed to a proper public purpose. In the discussion that follows then, the question of public purpose will be treated separately as it relates to the three means which are at issue here, (1) creation of a State agency, (2) construction of internal improvement, (3) expenditure of public funds.