Court Opinion

ID: 8195850
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:19:09.650492+00
Date Added: 2024-06-11T16:40:46.035626
License: Public Domain

Eschweiler, J.
(dissenting). However necessary or praiseworthy the ends reached by the decision in this action may be, or however certain repayment may be, I cannot concur in a decision upholding the means and methods used for obtaining such ends.
No one could successfully contend that the board of regents of the University could have gone to these defendants *530and obtained directly from them loans of these trust funds to the amounts and for the purposes that are being authorized by this decision. A direct loan by the regents would clearly be in violation of the constitutional limitation upon the state’s power to contract debts under the conceded present condition of its outstanding obligations. The failure here to follow the direct, open and above-board method of attempting a direct loan by the regents, they who want this money and they who are to spend it, is an admission that the desired funds cannot be obtained except coupled with the possible taint that may go with indirection or subterfuge.
That the advancing of these large sums aggregating over seven hundred thousand dollars by the defendants, trustees, is a loan by them of those funds is clear. The trustees in so advancing these trust funds are making a loan and they thereby assume the position of a creditor; inevitably the other party to this transaction is a borrower and a forthwith, downright debtor. No words by the legislature or anybody else can other than colorably change that situation. This transaction cannot be read out of the legal definition of the word “debt” as used in the constitution and as defined in State ex rel. Owen v. Donald, 160 Wis. 21, at p. 59, 151 N. W. 331. This prior express ruling on such a question is, as I view it, being merely brushed aside and disregarded by the majority opinion here, which, as I read it, views the matter as though there were but one side in this matter — that of the borrower, — and not considering it as a two-party arrangement. The suggestion by the majority that there is no debt because the regents may, at their option, at any time hereafter abandon the several building projects, and that there would be then no ways or means, by legal proceedings, to compel the regents or the state to replace the depletion in the trust funds, would, if correct, place the defendants as custodians of trust funds and making loans with such a contingency, in a position not to be envied. It surely cannot be *531treated as a gift, for as trustees they have no power to make gifts. They can make no legitimate advance of such funds, either under any statute or under any heretofore recognized doctrine concerning the duties and powers of trustees, except and unless there be present an express or implied obligation by a responsible, tangible debtor, in good faith, to repay the same. They have neither express nor implied power to advance their funds to a mere shadow of a creditor. The money is in fact being presently advanced for the state of Wisconsin, as represented in this particular transaction by its University, and is to be used by it. Sec. 36.06 (6). For money so used there exists a moral obligation, which would and should be fully as binding as any legal obligation could be, upon the state of Wisconsin, to see to it that moneys so taken from such trust funds (for the conservation of which the state itself is bound) are replaced in the trust funds, as though there had been an express promise on the part of the state to so repay. The resort under sec. 36.06 (6) to the purely euphonious phrase, “provided, that nothing herein contained shall authorize the regents to incur any state debt for the construction of such buildings, equipment or improvements,” is rather more of a confession of the weakness of than a strengthening bulwark to this scheme to enable public officials to do by indirect that which they could not do by direct methods. Even a legislative declaration that in some particular instance two and two are no longer four, but zero, does not alter the inexorable mathematical result obtained by simple addition.
This being so clearly the obtaining of over $700,000 to be used for state purposes by state officials, I think it is prohibited by the language as well as by the spirit of art. VIII of the constitution, so carefully, stringently, and wisely limiting the otherwise uncontrollable legislative and administrative impulses to mortgage the future for the desires of the present. This transaction cannot be upheld as being within *532sec. 6 of said article, permitting the incurring of a public debt for the defraying of “extraordinary expenditures,” and if, by any elasticity of construction, it could be classed as an “extraordinary expense,” then it would still meet the barrier therein contained of the $100,000 limitation, which is concededly now existing. Of course it cannot come under sec. 7 of said article, permitting the borrowing of money for war purposes.
Finally, sec. 10, art. VIII, expressly and emphatically prohibits the state from contracting any debt for works of internal improvement or from being a party in carrying on such works. The use of these funds so being transferred from a trust fund under the control of one set of state officials to be spent by another set of state officials is for a work of internal improvement within the meaning of that provision in the constitution. State ex rel. Owen v. Donald, 160 Wis. 21, 76, 151 N. W. 331. Though these two sets of officials, the borrower and the lender, do not appear- to be dealing with each other very much at arms’ length, nevertheless they carry on all their doings as agents of the state. Not a dollar of this money is to be used except as directed and controlled by the board of regents, and therefore it is the state itself which is thus a party, in truth and in fact, in carrying on such works of internal improvement.' Can there be any doubt but that if it were not recognized that the good faith of the state itself is back of the promises to repay this wholesale incursion into trust funds that the defendant trustees never would have ventured to advance these funds? I think that such good faith of the state is relied upon in this transaction, as much so as though it had been so expressly written, and in italics, in the pro forma obligations signed by the nondescript, financially irresponsible, corporation created for evasion purposes.
It has always been recognized as the right, if not always as the absolute duty, of a court clothed with the equitable *533jurisdiction which is here properly invoked, to apply its X-rays to all masks and covers and see through to the real substance. Friedman v. Wis. Acceptance Corp. 192 Wis. 58, 60, 210 N. W. 831; Cunneen v. Kalscheuer, 188 Wis. 448, 451, 203 N. W. 737, 206 N. W. 917; Camp v. Boyd, 229 U. S. 530, 559, 33 Sup. Ct. 785; 10 Ruling Case Law, 380; 21 Corp. Jur. 204. The feeblest possible of Roentgen rays would disclose that the board of regents and not .this corporate shell are the borrowers to whom these funds are being loaned.
By the present decision a way seems now to be pointed out and sanctioned by which solemn constitutional provisions may be disregarded to an unlimited extent, and through the organization of mere dummy corporations (and no express legislative authority for such seems necessary) works of public improvement may be carried on by state officials borrowing trust funds through such shadowy substitutes, from other state officials.
Although it is said in the majority opinion, “the sufficiency of the security tendered by the building corporation to the Annuity Board has not been challenged, and we give that matter no consideration,” nevertheless I think, and particularly so as to the field house, the propriety or sufficiency of the security tendered to the defendants should be considered by this court, where, as here, a direct challenge is made to the power and authority of the defendants to make these advances, and that such an important question should not be, as it is, passed over here. If sufficient facts are not now before the court on such question they should be required to be presented before the loans in this case are approved by a formal judgment which will stand as a precedent for future times as to the handling of trust funds, and especially so where there are the strict statutory provisions as to the nature and kind of security proper to be taken for any loans by defendants.