Court Opinion

ID: 9687208
Source: CourtListenerOpinion
Date Created: 2023-08-24 16:18:51.151197+00
Date Added: 2024-06-11T18:18:24.792525
License: Public Domain

WINANS, Judge
(dissenting).
I dissent, initially by challenging the legal theory of the first sentence of the majority summary. Boe v. Foss did not limit itself to the proposition that existing dormitories constructed by state funds derived from taxation cannot be pledged to help pay the cost of new dormitories. Nothing was said in Boe about buildings having to be constructed by funds from taxes to make them subject to the constitutional debt provision. True it is that buildings built by taxes may not be so pledged, but Boe must be read more comprehensively than that. To sharpen the point a bit, I doubt very much that the campanile on the campus of SDSU, gift of a benefactor, or property given by the Federal Government, could be pledged for the payment of the bonds subject matter of the lawsuit. A dormitory would not present a different problem insofar as Boe is concerned, which says:
"More is involved in the case at bar. By their proceedings the Board of Regents has pledged to a special fund and to the payment of these revenue bonds, not only the net income of the facilities to be acquired with their proceeds, but also the net income, in an amount of not less than $500,000 of the dormitories presently in use at the college. Conceding that the holders of the proposed bonds must look solely to the special fund thus created for payment of principal and interest, the question arises whether, within the meaning of Sec. 2, Art. XIII, a debt is incurred because the Board of Regents, an agency of the state, with the sanction of the legislature, is pledging in payment of these bonds resources and revenues belong*751ing to the state in addition to the net income of the property to be acquired with their proceeds. Because of that pledge of additional property and resources of the state, we are solemnly persuaded that such a debt will be incurred.”
The key words in the quote from Boe, above, are: "* * * is pledging in payment of these bonds resources and revenues belonging to the state in addition to the net income of the property to be acquired with their proceeds."
In State College Development Ass'n v. Nissen, 66 S.D. 287, 281 N.W. 907, where the Board of Regents had proposed to finance the erection of two dormitories by using the net revenue from the dormitories-, this court held that the issuance of bonds for the construction of the two dormitories on the campus of the State College of Agriculture and Mechanic Arts, now SDSU, payable out of the revenues of the dormitories to be built, did not create an indebtedness within the meaning of the Constitutional Debt Limitation. The Court stated:
" * * * but under the facts in the instant case no contingency could arise imposing an obligation, moral or otherwise, upon the State of South Dakota, to levy a tax or to appropriate funds to pay any loss that may result from the transactions between the Board of Regents and the plaintiff association. Title to the buildings erected on the campus of the college will be in the State from the time of their erection and no encumbrance or lien thereon will be created. The bonds will not constitute a general obligation against the State. * * It has been held in other jurisdictions that the pledge of revenues from a utility or other property in payment thereof does not constitute an indebtedness."
Important words in the quote from Nissen are: "Title to the buildings erected on the campus of the college will be in the State from the time of their erection ¥
*752The Legislature has recognized the principle of ownership of the buildings they have authorized the Regents to construct on a revenue bond basis. For instance, Chapter 49 of the Laws of 1955, which was an act "Authorizing Board of Regents To Construct Dormitories on Revenue Bond Basis". Under this act, amended from time to time, buildings have been constructed on a revenue bond basis. It is specifically provided in Chapter 49, "The title to all such land and buildings shall be in the name of ihe state of South Dakota." Incidentally, or not so incidentally, this is the act construed in Boe v. Foss.
The decisions of this Court announced in Nissen and Boe are based on what is known as the limited special fund doctrine, which has been applied in other cases in South Dakota: Mettet v. City of Yankton, 71 S.D. 435, 25 N.W.2d 460; Clem v. City of Yankton, 83 S.D. 386, 160 N.W.2d 125.
Boe, supra, is authority for the proposition that income pledged to pay bonds from property presently owned by the state is a pledge of the resources of the state, and is consequently a prohibited debt within the meaning of the Constitution, and is also authority together with State College Development Association, supra, for the proposition that pledging income to be derived from the facility built by revenue bonds to the payment of those building bonds does not create a constitutionally prohibited debt.
In McFarland v. Barron et al., 1969, 83 S.D. 639, 164 N.W.2d 607, this Court by a divided decision sustained bonds proposed to be issued by the South Dakota Building Authority to construct and equip buildings at state institutions with the power to lease the building to state agencies under leases providing that rent be payable solely from appropriations to be made by the Legislature. The Court held that this lease arrangement did not violate debt limitation provisions of the Constitution. A clear distinction was made between the factual situation of the McFarland case and the Boe case, supra. In McFarland the obligation of the state to pay the rents, which would in turn pay off the bonds, was optional with the legislature. The Court held:
*753"The leases must contain a provision that rents shall be payable solely from appropriations to be made by the legislature and any revenues derived from the operation of the leased premises. In ihe event of nonpayment of rents by the State, the building or facility may be leased to others for suitable purposes. A lease may be made for a term of one year from the time a building is completed and ready for occupancy, 'with an option to the lessee to extend the term for one year from the expiration of the original term and for one year from the expiration of each extended term until the original term of the lease has been extended for a total number of years to be agreed upon at a rental which, if paid for the original term and for each of the full number of years for which the term of the lease may be extended, will amortize the total cost of the erection of the building and appurtenances."
Rental payments could come only if the appropriations were made. The matter would be within the exclusive control of the legislature. It is clear from a reading of the McFarland decision that while the court divided in reaching its decision, the judges were unanimous in support of Boe v. Foss, supra.
The majority opinion cites Beaumont v. Faubus, 239 Ark. 801, 394 S.W.2d 478, as authority for the position they take. There is no similarity in that case and the one we decide for South Dakota. In Beaumont they are discussing bond issues where the "full faith and credit" of the State of Arkansas is pledged to the payment of the refunding bonds, which were also "full faith and credit" bonds. We are involved in revenue bonds where originally at least no "full faith and credit" of this state is involved. If our case is a "full faith and credit" of the state of South Dakota, could there be any question that such bonds would not be considered debt and in excess of the constitutional limits?
They also cite Talkington v. Turnbow, 190 Ark. 1138, 83 S.W.2d 71. This case also throws no light on our problem. The bonds there discussed were "valid, outstanding subsisting obligations *754against said county". The bonds in our case that are refunded are not "valid, outstanding subsisting obligations against" the state of South Dakota.
Many of the states which originally embraced a limited or special fund doctrine have later rejected it, and have adopted the "broad special fund doctrine". We have been asked to reconsider. We find in 16 Am.Jur.2d, Constitutional Law, § 60, beginning at page 232, the following rules governing uniformity of construction:
"Constitutions do not change with the varying tides of public opinion and desire. The will of the people therein recorded is the same inflexible law until changed by their own deliberative action. Thus, a cardinal rule in dealing with constitutions is that they should receive a consistent and uniform interpretation, so that they shall not be taken to mean one thing at one time and another thing at another time, even though the circumstances may have so changed as to make a different rule seem desirable. In accordance with this principle, a court should not allow the facts of the particular case to influence its decision on a question of constitutional law, nor should a statute be construed as constitutional in some cases and unconstitutional in others involving like circumstances and conditions. Moreover, the courts should never allow a change in public sentiment to influence them in giving a construction to a written constitution not warranted by the intention of its founders.
It has been said that the rule of stare decisis is peculiarly applicable in the construction of written constitutions."
The question here is whether there can be a consolidation of the bonds and the payment thereof from the consolidated revenues without violating Boe, supra. Under the facts before us the bonds for the dormitory authorized in 1958 will be replaced by bonds which pledge the income from the facility constructed in 1958 to pay the proposed bond issue. This commits the 1958 structure in *755substance to the payment of this consolidated bond issue, without which the facility constructed with the 1958 bonds will be free, when the 1958 bonds are paid off, to contribute to the state general fund. The same is true for the other structures. As the bonds are paid off for each particular structure, the income will contribute to the state general fund. In the only case law we could find on this question of consolidation, the Rhode Island Supreme Court in 1962, Opinion To Governor, 94 R.I. 464, 181 A.2d 618, held this could not be done. The court was requested by the governor to advise whether the board of trustees of state colleges could modify the pledge previously made of net revenues of existing federally financed auxiliary academic service enterprises at the University of Rhode Island, so as to consolidate them to meet the consolidated debt service and whether a pledge by the Board of Trustees from an existing nonfederally financed auxiliary academic service facility to meet debt service on an existing or future federally financed service facility would create a prohibited debt. The Court held that the consolidation violated the debt limitation of the Rhode Island Constitution and reviewed the factual background as follows:
"The construction of the Memorial Union was financed by contributions from students, the alumni and friends of the university. The housing facilities were financed by loans from the Federal Housing and Home Finance Agency created by an act of Congress, for which bonds were issued by the trustees. Each housing unit was the subject of a separate bond issue and the obligations so incurred were to be discharged by the application of the revenue received from students renting the particular unit involved.
Although the housing accommodations of the several units are comparable, the rentals charged students are not uniform because of the varying costs of construction resulting from site conditions. Since the interest and debt service charges payable to the federal agency must be met for the financing of each particular unit by the revenue received ihereform, obvious inequities result from the lack of uniformity in the amount of rent charged. *756In an effort to equalize room rental rates the board has requested the Federal Housing and Home Finance Agency to consent to a combining of the several loan agreements, as it says, 'into one consolidated loan agreement, and in so doing, to utilize the revenue of the more revenue-productive project or projects to augment amortization of the less revenue-productive projects.' It appears that the proposal has received tentative approval.
Furthermore, the board is planning to construct an addition to the Memorial Union and additional dormitories for men. Such construction is contemplated within the immediate future and application has been made to the Federal Housing and Home Finance Agency to include the financing thereof in the proposed consolidated loan. We are further informed that the finance agency has reserved the necessary funds pending a determination of the question of consolidation. Although the revenue hereafter received from the Memorial Union, which revenue comprises the proceeds from the book store, snackbar, bowling alleys and other recreational facilities, is to be allocated in redemption of the pledge contained in the proposed consolidated agreement, the Memorial Union addition is to be partially financed by applying thereto the sum of $100,000 which has been accumulated from students' fees and such proceeds as herein previously enumerated."
After quoting the Rhode Island statute which generally provided for appropriation by the general assembly to meet a school's budget to the extent it was not met by student fees, operation of dormitories and auxiliary educational enterprises, etc., the Court stated the following:
"It is clear from the foregoing that revenue from housing and recreational facilities, not otherwise encumbered, is to be available to the legislature when considering annual appropriations for the over-all operation of the university. The elimination of such revenue *757from consideration by the legislature would result in increased appropriations out of the general revenue of the state.
Moreover, as the more revenue-productive, existing facilities were amortized under the terms of outstanding agreements, the revenue therefrom would fall within the provisions of § 16-31-7. It follows that the proposed consolidation would presently result in the pledging of the state's credit for the obligations therein assumed.
It is clear therefore that even if the proposed new construction were eliminated from the proposed consolidated agreement the consolidation of the existing obligations for the purpose of equalizing rentals charged students would inevitably result in the incurring of a prohibited debt as the more revenue-productive facilities were amortized and the revenue therefrom became general.”
The above Rhode Island case we believe used the same approach to the debt issue and constitutional interpretation that this court pursued in Boe v. Foss, supra. The decision in Boe v. Foss turned on the Constitution which has not changed.
I would grant the Writ of Prohibition as requested, and look to a constitutional revision, if the people desire it.