Court Opinion

ID: 9672931
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:02:59.647832+00
Date Added: 2024-06-11T18:16:19.329424
License: Public Domain

BIEGELMEIER, Presiding Judge
(dissenting).
I concur with the dissent of Judge Rentto, and am impelled to comment further. If, instead of appropriating $1,325,000 (the actual cost) to build the facilities, the legislature may constitutionally create an arm of state government to do so and finance them from proceeds of bonds in that amount to be paid over a 25-year period for a total cost of $2,460,590 on the assumed 4% interest rate stated in the proposed construction lease ($2,886,423 on the 51/2% rate in the Building Authority Resolution authorizing the bonds), then it is for it to make that choice. It is indeed for the legislature to determine the wisdom and expediency of a statute within its power to enact; it is the responsibility of courts to determine if the statute is within or without the constitutional authority of the legislature.. Discussion of the statute and over 40 pages of single-spaced typewritten pages of resolutions, leases, bonds and other papers by which it is proposed the State Building Authority, the Boards of Regents and Charities and Corrections are to act to carry out the plan authorized by the statute under consideraion would require an extensive treatise. The majority opinion and Judge Rentto's dissent give the outline and purpose.
*652For purposes of discussion and assuming the Alice in Wonderland dividing of the State into three parties, we have the State, one of its Boards and a Building Authority it created on one side and the Bondholders on the other. The State created the Building Authority; the Building Authority causes a building to be erected (pays for it from proceeds of bonds it issues to Bondholders) then leases it to another State Board for a fixed sum of money which is required to be paid to the Building Authority out of appropriations to be made and taxes levied by later legislatures, which money in turn is then paid over to the Bondholders by the Building Authority thus completing the cycle. Drawing the veil from this ingeniously contrived cycle, the State erects a building, initially pays for it by issuing bonds and pays them out of what is called rents for a building it owns but which are appropriations made and taxes levied over a period of 25 years.
Section 1 of Art. XVII of the South Dakota Constitution provides, "No corporation shall be created * * * by special laws, except those for charitable, educational, penal or reformatory purposes, which are to be and remain under the patronage and control of the state". This Building Authority was so specifically created. Its officers are appointed by the Governor, it is authorized only to erect buildings for state purposes as the legislature shall by law direct. It must therefore be held to be a part of an arm of the State, its alter ego. The statute so reads and no one has otherwise contended. It is hornbook law one cannot do indirectly what one cannot do directly. The two parties involved are in reality the State and the Bondholders. Therefore it is a bond of the State payable, as the Resolutions provide, out of future appropriations and taxes.
I am mindful the Bond states it is payable "solely from the revenues derived from" a college classroom, auditorium building and training school kitchen and dining facility, and also the bond "shall not constitute an obligation of the State of South Dakota within the meaning of any provision of the Constitution or Statutes of the State" as the statute similarly declares. The last quoted clause is a self-serving declaration of no effect as *653the legislature has no authority to so declare and 'it seems an anomaly for a person or a state to borrow money and state in its "Bond" that the borrower "for value received hereby promises to pay to the bearer * * * the principal sum of Five Thousand Dollars ($5,000.)" even though it be out of special funds and yet not be held to be an obligation or debt of the borrower.
I for one do not believe the legislature which passed the Act ever expected the State would permit default to occur in payment of these bonds. Neither the legislature nor the people of this state would countenance default as morally (and perhaps legally) the State is bound to see that general appropriations are made to pay the bonds as they become due. This is the whole tenor of the Act and the general consensus of the public and financial world. Brokers who buy, sell and deal in these bonds advertise that the principal source of payment of "both these bonds and the State's general obligations is the same: appropriations from the State legislatures" and those bodies "have provided a clear record of financial support" for them.
The majority opinion refers to cases based on the special fund doctrine, but I conclude it does not rest the opinion on that doctrine. It could hardly do so because in none of those cases were the projects to be paid for out of taxes or appropriations, for in Nissen the buildings were to be paid for out of rents from college students; in Mettet from bridge tolls from users and in Clem from rentals paid by a private corporation. The cited In re State Warrants dealt with an appropriation out of taxes levied for the current year and constructively in the treasury, hardly applicable here where the obligation provides for appropriations for 25 years in the future.
Judge Rentto's opinion disposes of the taxes — rental device. I cannot subscribe to the view the agreement here to pay rent is not a debt — true, it is not due today, but no business will treat it as casually as the majority does. A lease for $3,650 a year due January 1st is an accrued debt of $3,640 on December 31st in any present day business or financial statement. Under such *654leases or contracts can it be said a person is free of debt on one day and in debt or perhaps bankrupt the next? That conclusion does not appear sound to me.
The record further shows the two Boards, pursuant to a request of the Authority, have passed resolutions authorizing and directing its officers to transfer to it described real estate owned by the State at the two institutions involved and also shows the instrument by which the transfer is to be made as permitted by § 4 of Ch. 276, Laws of 1967. The buildings are to be constructed on this property which is to be subject to the obligation in the bonds. Boe v. Foss, 76 S.D. 295, 77 N.W.2d 1, expressly held an attempt to make income from property presently owned by the State was a pledge of additional property and resources of the State which created a debt within the meaning of that term as used in the constitutional provision and thus impermissible.
Reasons for liberal and broad interpretations of the national constitution are not persuasive as to our state constitution. The people have amended it and approved incurring added debt when they deemed it necessary or desirable; in two instances they approved incurring debts of six (1920) and thirty, million dollars (1948). These actions confirm the observations made in the constitutional convention debates in support of this limitation that our constitution was easily amended and the convention should go cautiously before saddling a debt on the people without submitting it to a vote. Vol. II, p. 497. That was the philosophy obtaining in this court in Boe v. Foss, supra, when it wrote:
"If as some sincerely believe these organic debt limitations are unrealistic and hampering progress, the appeal must be to the sovereign people. To amend the constitution is not a function of the courts."
It remains my philosophy at this time.
I am authorized to state RENTTO, ]., concurs in this dissent.