Court Opinion

ID: 9548185
Source: CourtListenerOpinion
Date Created: 2023-08-07 17:59:00.54503+00
Date Added: 2024-06-11T15:18:35.874971
License: Public Domain

Goodloe, J.
(dissenting) — Because I believe that Const. art. 1, § 11 (amend. 34) and Const. art. 8, § 5 are violated by this legislative scheme, I respectfully dissent.
Const. art. 1, § 11 (amend. 34)
Admittedly, State Health Care Facilities Auth. v. Spellman, 96 Wn.2d 68, 633 P.2d 866 (1981) addressed an article 1, section 11 challenge to a similar legislative scheme and found the legislation not to be constitutionally infirm. Spellman carefully, and I believe correctly, answered the "money" component of article 1, section 11. However, it gives short shrift to the "property" component.
I believe Spellman erred in finding that "property" was not conferred by use of the tax exempt status. With respect to "property", Spellman said:
Defendant contends that the ability given to the hospitals to borrow money at a lower than normal rate of interest because of the tax exempt status of that interest is somehow "property" under Const. art. 1, § 11. No citation other than York v. Stone, 178 Wash. 280, 285, 34 *850P.2d 911 (1934), is given in support of this proposition. That case held a right of occupancy of real estate did constitute property and that the term "property" embraced "every interest or estate which the law regards of sufficient value for judicial recognition." We do not find this definition to be particularly useful in this case.
While the hospitals do receive something of value under the act, no property is "appropriated or applied to" anyone by the Authority. The State gives nothing but its blessing; it passes its conceptual hands over the bonds to permit a favored federal tax treatment.
Spellman, at 73.
Although Spellman did not find the York v. Stone, 178 Wash. 280, 34 P.2d 911 (1934) definition of property very helpful, it did not offer its own definition or explain why the government's unique tax exempt status is not "property". Nor does the majority in this case define or explain it. "Property" cannot simply be lumped together with "money". The term "property" was explicitly added by the founding fathers of the Washington State Constitution, after consideration of alternative language referring only to money. See Journal of the Washington State Constitutional Convention, 1889, at 499-500 (B. Rosenow ed. 1962).
Surprisingly "property" has only infrequently been defined by this court. The court in Lee & Eastes, Inc. v. Public Serv. Comm'n, 52 Wn.2d 701, 704, 328 P.2d 700 (1958), quoting from prior cases, said:
"Property is a word of very broad meaning and when used without qualification may reasonably be construed to include obligations, rights and other intangibles as well as physical things." Investment & Securities Co. v. Robbins (1943, E. D. Wash., N. D.), 49 F. Supp. 620 [, 622-23]. And property ". . . is a term of broad significance, embracing everything that has exchangeable value, and every interest or estate which the law regards of sufficient value for judicial recognition." York v. Stone, (1934), 178 Wash. 280, [285,] 34 P. (2d) 911; Washington Fruit & Produce Co. v. Yakima (1940), 3 Wn. (2d) 152, 100 P. (2d) 8, 128 A. L. R. 159.
I find this definition is useful. Tax exempt status fits within *851this definition because tax exempt status can be classified as either a right or an intangible, which has sufficient value and is judicially recognized.
This public property will be applied for the support of religious establishments and therefore is unconstitutional under article 1, section 11.
Const. art. 8, § 5
The majority opinion states that the court has "struggled" in prior decisions addressing the constitutional prohibition against "loan of credit". Majority opinion, at 845. "Struggle" is a nice term for what can only be accurately described as "jumping all over the board".
In State Health Care Facilities Auth. v. Ray, 93 Wn.2d 108, 605 P.2d 1260 (1980), the court addressed an article 8, section 5 challenge to the legislation reviewed in Spellman. Ray recognized the tax exempt revenue bonds as "loans of credit". Ray, at 109.
[A] state or municipal corporation lends its credit whenever it allows its unique governmental status or authority to be utilized for the purpose of enabling a private corporation or individual to obtain property or money that it could not otherwise acquire for the same price. A state or municipality can "lend its credit" without incurring any actual indebtedness.
Here, the credit that would be loaned would stem from the unique ability of a public agency, under the Internal Revenue Code, to borrow money at a lower rate of interest than would otherwise have to be paid by a private party.
(Italics mine.) Ray, at 113-14.
Despite this determination, Ray was able to find the involved bonds constitutional by incorporating the Const. art. 8, § 7 "poor and infirm" exception into Const. art. 8, § 5.
In a later case, State Housing Fin. Comm'n v. O'Brien, 100 Wn.2d 491, 671 P.2d 247 (1983), the court, examining a similar bond scheme under loan of credit analysis, announced that state status and state liability are compo*852nents of "state credit", relying on In re Marriage of Johnson, 96 Wn.2d 255, 634 P.2d 877 (1981), a plurality decision not involving tax exempt revenue bonds.
O'Brien stated: "Certainly, the lending of credit clause was not intended to insulate taxpayers from all risk and debt accruing from the public decisions of their governing representatives." O'Brien, at 495. I believe the lending of credit clause was meant to prohibit lending of the State's credit, regardless of the risk involved. The O'Brien statement that presence of safeguards makes loans of credit permissible, O'Brien, at 495, flies directly in the face of the clear, unambiguous constitutional language of article 8, section 5: "The credit of the state shall not, in any manner be given or loaned to . . ."
To allow the constitutional mandate against "lending of credit" to be abrogated by finding that a "state concern" is involved if there are sufficient safeguards is to judicially declare the death knell for the mandate. Many worthy areas of state concern exist and many of these would be benefited by a grant of the State's unique tax exempt status and blessing. However, no state concern can be furthered at the expense and demise of a constitutional mandate, absent constitutional amendment.
However, it is not necessary to overrule O'Brien as that opinion is liberally sprinkled with "needy" language to find that it, like Ray, falls within the "needy and infirm" exception. O'Brien, at 496-98.
The majority in this case says: "The State's tax exempt status simply is not credit". Majority opinion, at 847. It does not discuss, distinguish, or explain the language in Ray.
I believe Ray was correct in its characterization of tax exempt status as a loan of credit, and, because these bonds are not within the needy and infirm exception, I would hold that article 8, section 5 is violated.
Brachtenbach and Callow, JJ., concur with Goodloe, J.