Opinion ID: 1206954
Heading Depth: 1
Heading Rank: 1

Heading: QUESTIONS I and VI

Text: Questions I and VI present essentially the same question, namely, whether the 1969 Act and the Corporation's activities pursuant thereto are for a PUBLIC PURPOSE. Article V, § 3, of the Constitution of North Carolina provides: This power of taxation shall be exercised in a just and equitable manner, for public purposes only, and shall never be surrendered, suspended, or contracted away. (Our italics.) The power to appropriate money from the public treasury is no greater than the power to levy the tax which put the money in the treasury. Mitchell v. North Carolina Industrial Development Financing Authority, 273 N.C. 137, 143, 159 S.E.2d 745, 749-750. Plaintiff asserts the 1969 Act is unconstitutional as violative of Article V, § 3, of the Constitution of North Carolina, and of Article I, § 17, of the Constitution of North Carolina, and of Section 1 of the Fourteenth Amendment to the Constitution of the United States, and is void because the purpose for which the Corporation was created is not a public purpose. If so, plaintiff, as taxpayer, may maintain this action to restrain defendants from paying to the Corporation and the Corporation from using the $500,000.00 appropriated out of the General Fund for the biennium commencing July 1, 1969. Mitchell v. North Carolina Industrial Development Financing Authority, supra; McIntyre v. Clarkson, 254 N.C. 510, 513, 119 S.E.2d 888, 890; Dennis v. City of Raleigh, 253 N.C. 400, 116 S.E.2d 923. Was the Corporation established for a public purpose? If so, the means of executing the project are for the General Assembly, and the General Assembly alone, to determine. Redevelopment Commission of Greensboro v. Security National Bank, 252 N.C. 595, 606, 114 S.E.2d 686, 696. A slide-rule definition to determine public purpose for all time cannot be formulated; the concept expands with the population, economy, scientific knowledge, and changing conditions. As people are brought closer together in congested areas, the public welfare requires governmental operation of facilities which were once considered exclusively private enterprises, Fawcett v. Mt. Airy, 134 N.C. 125, 45 S.E. 1092, and necessitates the expenditure of tax funds for purposes which, in an earlier day, were not classified as public. Keeter v. Town of Lake Lure, 264 N.C. 252, 141 S.E.2d 634. Often public and private interests are so co-mingled that it is difficult to determine which predominates. It is clear, however, that for a use to be public its benefits must be in common and not for particular persons, interests, or estates; the ultimate net gain or advantage must be the public's as contradistinguished from that of an individual or private entity. Briggs v. City of Raleigh, 195 N.C. 223, 141 S.E. 597. Sharp, J., in Mitchell v. North Carolina Industrial Development Financing Authority, supra, 273 N.C. at 144, 159 S.E.2d at 750. A legislative declaration which asserts in general terms that the statute under consideration is enacted for a public purpose, although entitled to great weight, is not conclusive. When the facts are determined, what is a public purpose is a question of law for the court. Redevelopment Commission of Greensboro v. Security National Bank, supra, 252 N.C. at 603, 114 S. E.2d 694. In its enactment of the 1969 Act, the General Assembly went far beyond a mere declaration as to public purpose. It made and set forth in Section 2 thereof its factual findings as to the conditions upon which it based its declaration as to public purpose, viz. : 1. (A)s a result of the spread of slum conditions and blight to formerly sound urban and rural neighborhoods and as a result of actions involving highways, public facilities and urban renewal activities there exists in the State of North Carolina a serious shortage of decent, safe and sanitary residential housing available at low prices or rentals to persons and families of lower income. This shortage is severe in certain urban areas of the State, is especially critical in the rural areas, and is inimical to the health, safety, welfare and prosperity of all residents of the State and to the sound growth of North Carolina communities. 2. (P)rivate enterprise and investment have not been able to produce, without assistance, the needed construction of decent, safe and sanitary residential housing at low prices or rentals which persons and families of lower income can afford, or to achieve the urgently needed rehabilitation of much of the present lower income housing. It is imperative that the supply of residential housing for persons and families of lower income affected by the spread of slum conditions and blight and for persons and families of lower income displaced by public actions or natural disaster be increased; and that private enterprise and investment be encouraged to sponsor, build and rehabilitate residential housing for such persons and families, to help prevent the recurrence of slum conditions and blight and assist in their permanent elimination throughout North Carolina. 3. (I)n accomplishing this purpose, the North Carolina Housing Corporation, a public agency and an instrumentality of the State, is acting in all respects for the benefit of the people of the State in the performance of essential public functions and serves a public purpose in improving and otherwise promoting their health, welfare and prosperity, and that the North Carolina Housing Corporation is empowered to act on behalf of the State of North Carolina and its people in serving this public purpose for the benefit of the general public. If the constitutionality of a statute    depends on the existence or nonexistence of certain facts and circumstances, the existence of such facts and circumstances will generally be presumed for the purpose of giving validity to the statute,    if such a state of facts can reasonably be presumed to exist, and if any such facts may be reasonably conceived in the mind of the court. This rule does not apply if the evidence is to the contrary, or if facts judicially known or proved, compel otherwise. 16 C.J.S. Constitutional Law § 100b, pp. 454-455. Accord: 16 Am.Jur.2d Constitutional Law § 143. In Velishka v. City of Nashua, 99 N.H. 161, 106 A.2d 571, 44 A.L.R.2d 1406, the Supreme Court of New Hampshire sustained the constitutionality of the Urban Development Law of that State. After stating the legislative findings and declarations of necessity relating to the elimination of blighted areas and the advancement of redevelopment projects, Chief Justice Kenison states: These legislative findings and declarations have no magical quality to make valid that which is invalid but they are entitled to weight in construing the statute and in determining whether the statute promotes a public purpose under the Constitution. Accord: Redevelopment Commission of Greensboro v. Security National Bank, supra, 252 N.C. at 611, 114 S. E.2d at 700. In State ex rel. v. W. Va. Housing Dev. Fund v. Copenhaver, 171 S.E.2d 545 (1969), the Supreme Court of Appeals of West Virginia sustained the constitutionality of the legislation which created The West Virginia Housing Development Fund. The West Virginia Act is similar to our 1969 Act and similar constitutional questions were presented and decided. Legislative findings set forth in Section 6 of the West Virginia Act are in accord, verbatim or in substance, with the legislative findings quoted from Section 2 of our 1969 Act. With reference thereto, Calhoun, J., for the Court, said: Legislative findings of fact which are made the basis of a legislative act are not thereafter open to judicial investigation. In the present case, whether the legislative findings of fact are conclusive need not be determined. Suffice to say, the facts set forth in the Stipulation confirm the legislative findings. There are no facts of which we may take judicial notice which tend to negate the legislative findings. On the contrary, current widespread publicity indicates an acute shortage of residential housing for persons and families of lower income. The General Assembly, exercising the police power of the State, may legislate for the protection of the public health, safety, morals and general welfare of the people. Accordingly, this Court upheld the constitutionality of the Housing Authorities Law, Chapter 456, Public Laws of 1935, which, as amended, is codified as Article 1, Chapter 157, of the General Statutes, G.S. §§ 157-1 through 157-39.8. Wells v. Housing Authority, 213 N.C. 744, 197 S.E. 693 (1938). It was held that a Housing Authority organized pursuant to the provisions of this 1935 Act was created for a public purpose and exercised an essential governmental function. Briefly stated, its public purpose was the elimination or rehabilitation of unsafe and unsanitary dwelling units in crowded and congested areas and the construction of housing projects to provide safe and sanitary dwelling units for rental to persons of low income. In Wells v. Housing Authority, supra, Seawell, J., for the Court said: The State cannot enact laws, and cities and towns cannot pass effective ordinances, forbidding disease, vice, and crime to enter into the slums of overcrowded areas, there defeating every purpose for which civilized government exists, and spreading influences detrimental to law and order; but experience has shown that this result can be more effectively brought about by the removal of physical surroundings conducive to these conditions. This is the objective of the act, and these are the means by which it is intended to accomplish it. Our decision in Wells v. Housing Authority was approved and followed in Cox v. City of Kinston, 217 N.C. 391, 8 S.E.2d 252 (1940), and in Mallard v. Eastern Carolina Regional Housing Authority, 221 N.C. 334, 20 S.E.2d 281 (1942). The 1935 Act conferred the power of eminent domain upon a Housing Authority created in accordance with its provisions and prescribed the procedural requirements incident to the exercise thereof. G.S. § 157-11; G.S. § 157-28. Later decisions based on the 1935 Act relate to such procedural requirements and to the selection of sites for housing projects. In In re Housing Authority of City of Charlotte, 233 N. C. 649, 65 S.E.2d 761 (1951), and in Housing Authority of the City of Wilson v. Wooten, 257 N.C. 358, 126 S.E.2d 101 (1962), it was held, inter alia, that a Housing Authority had wide discretion in the selection and location of a site for a housing project; that it was not required to select a site in a slum area as the site for a low-rent housing project; and that the fact that a few isolated properties in an area to be taken and dismantled were above the average standard of slum properties, or that some few desirable homes would be taken, did not affect the public character of the condemnation proceeding. It is noted that statutory provisions relating to a Housing Authority created in accordance with the 1935 Act include the following: The bonds and other obligations of an Authority (and such bonds and obligations shall so state on their face) shall not be a debt of any city or municipality and neither the State nor any such city or municipality shall be liable thereon, nor in any event shall such bonds or obligations be payable out of any funds or property other than those of said authority. G.S. § 157-14. G.S. § 157-26 provides that the property of such Housing Authority shall be exempt from State and local taxes and fees; and that the (b)onds, notes, debentures and other evidences of indebtedness of such Housing Authority shall be exempt from taxes. In Housing Authority of Los Angeles County v. Dockweiler, 14 Cal.2d 437, 94 P. 2d 794 (1939), the Supreme Court of California considered California legislation which contained provisions substantially the same as those of our Housing Authorities Law. The opinion of Shenk, J., cites a decision from each of fifteen States, including our decision in Wells v. Housing Authority, supra, in which the constitutionality of similar statutes had been fully sustained as against onslaughts similar in character to those here urged. Later cases in accord are cited in Humphrey v. City of Phoenix, 55 Ariz. 374, 102 P.2d 82, 86 (Ariz.1940). Housing Authority of Los Angeles County v. Dockweiler, supra, at 803, decides a question which was not expressly raised and considered in Wells v. Housing Authority, supra, namely, that (t)he tax exemption available to the property of housing authorities included bonds issued by them and the income therefrom. Decisions in accord from other jurisdictions are cited by Shenk, J. In Redevelopment Commission of Greensboro v. Security National Bank, supra, this Court upheld the constitutionality of the Urban Redevelopment Act, Chapter 1095, Session Laws of 1951, which, as amended, is now codified as Article 37, Chapter 160, of the General Statutes, G.S. § 160-454 through G.S. § 160-4741.1. It was held that the condemnation of blighted and slum areas within a municipality and the sale or exchange thereof to any redeveloper for residential, recreational, commercial, industrial or other uses or for public use in accordance with the redevelopment plan (G.S. § 160-464) under safeguards to prevent such areas from reverting to slum areas, was in the interest of the public health, safety, morals and welfare, and therefore such condemnation was for a public purpose. The opinion of Parker, J. (later C. J.), states: It may be that the measure may prove eventually to be a disappointment, and is ill advised, but the wisdom of the enactment is a legislative and not a judicial question. The General Assembly has the right to experiment with new modes of dealing with old evils, except as prevented by the Constitution. Id., 252 N.C. at 612, 114 S.E.2d at 700. Later cases which hold that lands acquired for the purposes and in the manner set forth in the Urban Redevelopment Law meet the public purpose test include the following: Redevelopment Commission of Greensboro v. Hagins, 258 N.C. 220, 128 S.E.2d 391 (1962); Horton v. Redevelopment Commission, 259 N.C. 605, 131 S.E.2d 464 (1963). The constitutional questions raised in connection with statutes such as our Urban Redevelopment Law are discussed fully and clearly by Schaefer, J., in People ex rel. Gutknecht v. City of Chicago, 414 Ill. 600, 111 N.E.2d 626 (1953), and cases cited therein. The dwelling accommodations provided by a project of a Housing Authority created pursuant to G.S. Chapter 157 are available at the lowest possible rentals to persons of meager income. G.S. § 157-29 provides: It (Housing Authority) shall not accept any person as a tenant in any housing project if the person or persons who would occupy the dwelling accommodations have an annual net income in excess of five times the annual rental of the quarters to be furnished such person or persons, except that in the case of families with three or more minor dependents, such ratio shall not exceed six to one;    When the annual net income of the tenant(s) exceeds the prescribed limit, he (they) must move to other dwelling accommodations. The evident function of the Corporation created by the 1969 Act is to assist persons and families of lower income who desire and seek residential housing elsewhere than as tenants in a low-cost housing project. Such persons would include those who were or are ineligible to be tenants in a housing project. The Corporation is not vested with the power of eminent domain. Unlike a Housing Authority, it does not seek to acquire real property for the purpose of providing low-rental dwelling accommodations. Rather, its function is to foster the planning, construction and financing of modest residences which would not otherwise be available to persons and families of lower income. The 1969 Act confers upon the Corporation all the powers necessary or convenient to carry out and effectuate its purposes and provisions, including the twenty-one specific powers set forth in Section 5 thereof. In the present context, it is sufficient to quote the first four of these powers, viz. (1) To make or participate in the making of insured construction loans to sponsors of land development or residential housing; provided, however, that such loans shall be made only upon the determination by the Corporation that construction loans are not otherwise available, wholly or in part, from private lenders upon reasonably equivalent terms and conditions; (2) To make or participate in the making of insured mortgage loans to sponsors of residential housing; provided, however, that such loans shall be made only upon the determination by the Corporation that mortgage loans are not otherwise available, wholly or in part, from private lenders upon reasonably equivalent terms and conditions; (3) To purchase or participate in the purchase of insured mortgage loans made to sponsors of residential housing or to persons of lower income for residential housing where the Corporation has given approval prior to the initial making of such loan; provided, however, that any such purchase shall be made only upon the determination by the Corporation that mortgage loans were, at the time such approval was given, not otherwise available, wholly or in part, from private lenders upon reasonably equivalent terms and conditions; (4) To make temporary loans from the housing development fund   . (Our italics.) The legislative findings and the Stipulation establish the existence of a serious shortage of decent, safe and sanitary housing available at low prices or rentals to persons and families of lower income and also the inability of private enterprise and investment, without assistance, to meet that need. Unquestionably, when construction of residential housing is made possible by the Corporation's assistance, all persons in the building industry benefit from such construction. Such benefit is similar to that which results from the construction of any public project, e. g., public buildings, school buildings, highways, etc. Too, the persons and families of lower income who will occupy such residential housing as owners or tenants will benefit from the existence and availability thereof. Although these benefits will flow from the Corporation's authorized activities, its raison etre, the reason and justification for its existence, is to make available decent, safe and sanitary housing to persons and families of lower income who cannot otherwise obtain such housing accommodations. The General Assembly, with good reason, was fully aware that the acquisition of homes by persons and families of lower income gives them a stake in the preservation of our society. Nothing could contribute more to the stability of our institutions than the acquisition of homes by an everincreasing proportion of our people. Plaintiff relies upon Mitchell v. North Carolina Industrial Development Financing Authority, supra, in which this Court held unconstitutional the North Carolina Industrial Development Financing Act, Chapter 535, Session Laws of 1967, codified as Chapter 123A of Volume 3B (1969 Cumulative Supplement) of the General Statutes, G.S. §§ 123A-1 through 123A-27. In distinguishing the Industrial Development Financing Act from the Housing Authorities Act, Sharp, J., said: The State does not engage in a private enterprise when it undertakes a project of slum clearance. Wells v. Housing Authority, 213 N.C. 744, 197 S.E. 693 (1938). Slums are a serious menace to society; they breed both disease and crime. As Seawell, J., pointed out in Wells v. Housing Authority, supra, the State can combat these two evils in overcrowded areas only by `the removal of physical surroundings conducive to these conditions.' Id. at 748, 197 S.E. at 696. The existence of a slum area proves the impotency or unwillingness of private enterprise to cope with the problem and `where community initiative has failed and authority alone can prevail,' government must deal with the emergency created. Id. at 748, 197 S.E. at 696. (Our italics.) Mitchell v. North Carolina Industrial Development Financing Authority, supra, 273 N.C. at 157-158, 159 S.E.2d at 759. In these and other respects, the Industrial Development Financing Act is distinguishable from the 1969 Act now under consideration. There the State was undertaking to subsidize particular private industries which were in competition with other unsubsidized private industries. As pointed out by Sharp, J., in Mitchell v. North Carolina Industrial Financing Authority, supra at 159, 159 S.E.2d at 760, the Authority's primary function was to acquire sites and to construct and equip facilities for private industries and to bait corporations which refuse to become industrial citizens of North Carolina unless the State gives them a subsidy. The Corporation's authorized activities respond to a serious need of deep public concern but do so only when the planning, construction and financing of residential housing is not otherwise available to persons and families of lower income. We are of opinion and hold that the 1969 Act was enacted for a PUBLIC PURPOSE and that the Corporation's authorized activities pursuant thereto are for a PUBLIC PURPOSE. The only decisions in other jurisdictions involving legislation similar to our 1969 Act which have come to our attention are the following: (1) State ex rel. W. Va. Housing Dev. Fund v. Copenhaver, supra, decided December 9, 1969, involved the West Virginia Housing Development Act, which consists of statutes enacted in 1968 and 1969 and is now codified in Volume 10 of the West Virginia Code, 1970 Cumulative Supplement, as Chapter 31, Article 18. This West Virginia statute contains substantially (often verbatim) the same provisions as our 1969 Act. Its constitutionality was fully sustained. In all respects, this West Virginia decision is in accord with our decision in the present case. (2) In re Advisory Opinion on Constitutionality of Act No. 346 of Public Acts of 1966, 380 Mich. 554, 158 N.W.2d 416 (1968), in which the Supreme Court of Michigan rendered an advisory opinion relating to the constitutionality of the Michigan statutes (Volume 8 of Michigan Compiled Laws, Sections 125.1401 et seq., including 1969 Cumulative Pocket Part) which created the Michigan State Housing Development Authority. The Michigan legislation was approved in all respects except the following: The Michigan statutes provided for a Housing Development Fund similar to the Housing Development Fund created by our 1969 Act. The Michigan statutes also provided for a Capital Reserve Fund for use in discharging the obligations of the Development Authority. In the context of specific provisions of the Constitution of Michigan, the opinion expressed was that, although an appropriation to the Development Authority for the purpose of administration was for a proper public purpose, an appropriation to the Housing Development Fund or to the Capital Reserve Fund of the Development Authority was not for a proper public purpose. The only decision cited in support of this conclusion is Opinion of the Justices to the House of Representatives, 291 Mass. 567, 195 N.E. 897, 98 A.L.R. 1364 (1935). The 1969 Massachusetts decision referred to below was decided subsequent to the advisory opinion in the Michigan case. In the Michigan case, the Court, after expressing the opinion that an appropriation for the Housing Development Fund or for the Capital Reserve Fund was not for a proper public purpose, stated: This does not mean, however, that the State can, under no circumstances, appropriate public money to such funds. Constitution 1963, art. 4, § 30, 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.' (3) Massachusetts Hous. F. Ag. v. New England Mer. Nat. B., 249 N.E.2d 599 (Mass.1969), in which the Supreme Judicial Court of Massachusetts considered questions relating to the constitutionality of the Massachusetts statutes which created the Massachusetts Housing Finance Agency. Volume 2A of Massachusetts General Laws Annotated, Appendix to Chapter 23A, 1970 Cumulative Pocket Part. This decision revises substantially the views expressed in Opinion of the Justices, 351 Mass. 716, 219 N.E.2d 18 (1966), an advisory opinion. Generally, the 1969 Massachusetts decision is in accord with our decision in the present case. (4) Vermont Home Mtg. Cr. Ag. v. Montpelier Nat. Bank, 262 A.2d 445 (Vt. 1970), in which the Supreme Court of Vermont upheld as against attack on constitutional grounds the statute creating the Vermont Home Mortgage Credit Agency. Volume 3 of Vermont Statutes Annotated, Title 10, Chapter 11B, §§ 241-253a, 1969 Cumulative Pocket Supplement. Although this Vermont decision is in accord with our decision in the present case in several particulars, there are material differences between the Vermont statute there considered and our 1969 Act. (5) New Jersey Mortgage Finance Agency v. McCrane, Jr., 56 N.J. 414, 267 A.2d 24, decided July 6, 1970, in which the Supreme Court of New Jersey upheld as against attack on constitutional grounds the New Jersey Mortgage Finance Agency Law. L.1970, c. 38, N.J.S.A. 17:1B-4 et seq. New Jersey Session Law Service, 1970 Regular Session, pp. 84-95. Although there are differences between the provisions of the New Jersey Law and our 1969 Act, the main thrust of the New Jersey decision is in accord with our decision in the present case.