Court Opinion

ID: 6821895
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:08:24.72878+00
Date Added: 2024-06-11T16:04:09.982995
License: Public Domain

Hudgins, C. J.,
concurring.
There are two trust funds involved in this litigation. These two trust funds are collected, invested, managed, and the income therefrom disbursed for two separate and distinct purposes by two separate and distinct boards—the Board of Trustees of the Virginia Retirement System and the State Board of Education. The former is hereinafter referred to as the Board of Trustees, the latter as the State Board.
The fund in the custody and under the management and control of the Board of Trustees as of June 30, 1948, totaled $21,411,970, including $6,452,850 paid by the public school teachers and $3,258,025 paid by other State employees. The General Assembly has appropriated to this fund $7,631,215 for the benefit of public school teachers and $3,475,061 for the benefit of other State employees. Under the management of the Board of Trustees this fund had earned approximately $572,000. The general purpose for which these sums are held and invested is to guarantee social security to teachers and other State employees through periods of sickness, injury, disability, and old age. Specific precautionary measures were adopted by the legislature to preserve this fund intact for the benefit of the beneficiaries named therein (Acts of 1942, Chapter 325, section 18, sub-sections a-f, inclusive).
The amount of this fund has grown from year to year as the advantages of the retirement system have been accepted by a larger number of teachers and other State employees. *19For the 1944-46 biennium there was appropriated from the State general fund $3,573,347.38. For the 1948-50 biennium there was appropriated from this same fund $7,658,550. These figures demonstrate that it is equally as important to the public school teachers and the other employees of the State as it is to all taxpayers for these trustees to exercise the highest degree of care consistent with good business judgment to protect this fund from all depreciation and loss.
Stripped of all circumlocution, the dominant question presented is whether the Board of Trustees may use trust funds under its control to purchase long-term “bonds, notes, and other evidences of debt” of the school boards of the counties, issued without submitting the question of incurring the indebtedness to the electors of the respective counties for approval.
The answer to the question depends upon whether the school boards have the authority without the approval of the electors of the respective counties to incur sucfi indebtedness. If a county school board has such authority, then the Board of Trustees may purchase the bonds direct from the local school board, from a licensed broker, from the State Board, or from any other party who has the legal right to sell them. If a school board has no authority to incur such indebtedness without the approval of the electors, then neither the Board of Trustees nor any other party can buy or sell an enforceable interest in such obligations.
The power of the legislature to authorize the State or any of its political subdivisions to incur a long-term debt is unlimited except where it is limited or restricted by the Virginia Constitution, the fundamental law of the land. Section 115-a of the Constitution in express terms prohibits any county or the school board of any county from contracting any long-term indebtedness unless the power so to do is conferred “by the General Assembly by general law.” The constitutional prohibition doesn’t stop there; the provision goes further and prohibits the General. Assembly from enacting any general statutes authorizing any county or any school board of any county to contract a long-term debt unless *20there is contained in such statute a provision submitting to the qualified voters of the county or district the question of contracting such debt. “And such approval shall be a prerequisite to contracting such debt. No script, certificate or any other evidence of county or district indebtedness shall be issued except for such debts as are expressly authorized in this Constitution or by the laws made in pursuance thereof.”
The prohibition of this constitutional provision limiting the power of the legislature is expressed in simple, clear, and unambigious language, and there seems to be no ground for misunderstanding the plain meaning of this inhibition.
We now turn to the pertinent statutes to ascertain the kind of debt that the legislature has authorized the school boards of the respective counties to contract; without submitting the question to the qualified voters, and the means adopted for the enforcement of the collection of such indebtedness. The indebtedness which the school board of any county is authorized to contract must be evidenced by a bond or note signed by the chairman of the county school board, attested by the clerk, payable in annual installments from 5 to 30 years to the Commonwealth of Virginia for the benefit of the literary fund, and bearing interest at 2% payable annually (Section 643).
The common and accepted definition of a bond is a writing under seal by which a person binds himself to pay a certain sum on or before a future date (Webster’s New International Dictionary, Second Edition). A bond “is a deed by which the obligor promises to pay a certain sum of money to another at the date appointed.” (Preston v. Hull, 23 Gratt. (64 Va.) 600, 14 Am. Rep. 153.) The common and accepted definition of a note is a written acknowledgement of a debt and a promise to pay. A debt is that which is due from one person to another; it is an obligation which one person is bound to pay to another; “that of which payment is liable to be exacted; due, obligation, liability.” (Webster’s New International Dictionary, Second Edition.) The following statutes provide most stringent measures for the enforcement of the payment of the bonds or notes *21executed by the county school boards. These may be enumerated as follows:
(1) Section 644 requires the board of supervisors of any county “in which the school board thereof has borrowed money from the Literary Fund” to “include in its levies, or appropriate a sum sufficient, as the case may be, to meet its liabilities on such contract.” If such school board fails to pay any installment promptly, then, upon written notice the county treasurer must pay all past due installments of interest or principal out of any funds in his hand belonging to the county.
(2) If the board of supervisors fails to make adequate provision for the prompt payment of the debt, then such failure must be deemed non-feasance in office; and if the Commonwealth’s attorney of such county fails to institute ouster proceedings for such non-feasance, then the Attorney-General is to forthwith institute such proceedings against all members of the board of supervisors guilty of such nonfeasance in office. (Section 644).
(3) The holder of such bonds or notes shall have a specific lien, for the payment of all principal and interest, on all lots, buildings, and additions thereto erected with the proceeds obtained from the bonds; and all such buildings shall be kept fully and adequately insured for the benefit of the holder and the policies of the insurance shall be kept in the office of the State Treasurer. (Section 645).
(4) The holder of such bonds or notes is given a specific lien “against all of the funds and income of said county ... as well as upon the property upon which that loan is made.” (Section 633).
(5) The holder of such bonds or notes is given the same rights that other creditors have to institute appropriate proceedings in the name of the Commonwealth, in the proper court, to recover any past due installments of principal or interest. (Section 635).
It thus appears that when a county school board contracts a debt under the provisions of the statutes cited, it becomes a debt of the county, a specific lien not only upon *22the lot which must be purchased with county funds, but also upon the buildings erected thereon from the proceeds of the loan, and a lien upon all the funds and income of the county. It is not only a debt in every sense of the word, but it is a secured debt.
Under this plan devised by the legislature the taxpayers of the county have no voice, no representative of their own selection, .to pass upon the advisability of incurring the indebtedness which creates a lien upon their property. The board of supervisors, whom the taxpayers of the county elect to legislate for them and pass upon the validity of all claims for and against the county, has no voice in determining whether or not such a debt shall be incurred. On the other hand, their failure to provide for the payment of such a debt out of the taxpayers’ money warrants their removal from office. Responsibility for the financial integrity of the county, so far as the schools are concerned, is entirely removed from the taxpayers themselves, as Code, section 642, provides: “No loan shall be made in any case in which the payment of the same with interest would in the judgment of the State Board of Education entail a too heavy charge upon the revenues of the county or city to which such loan is granted.”
It is conceded that the question of contracting the debts involved in this litigation was never submitted to the qualified voters of the respective counties for their approval or rejection. The provisions of the Constitution (section 115-a) expressly prohibit the General Assembly from authorizing the county school boards to incur any such indebtedness.
It is contended that it is not the proper exercise of judicial power to impose “such an arbitrary limitation” upon the authority of the General Assembly as to hold that the Board of Trustees may not purchase such bonds or notes. The Court is not imposing any such limitation. It is simply holding that a debt authorized by the legislature, which the Constitution in simple, plain, everyday language prohibits it from authorizing, is invalid. When the Constitution *23declares that the legislature shall not authorize the school board of any county to contract a long-term debt without submitting the question to the qualified voters for their approval, and the legislature proceeds to do just that, a court has no alternative in the matter but to point to the plain language of the constitutional provision and to declare that the act is invalid because the people have forbidden the legislature to exercise such power. The constitutional provision, in order to be understood, needs only to be read. It needs no elaboration, construction, or interpretation by the court. American-LaFrance, etc., Industries v. Arlington County, 164 Va. 1, 178 S. E. 783, 99 A. L. R. 929.
The other fund involved is a trust fund set apart by section 134 of the' Constitution as a “permanent and perpetual” trust fund. This fund includes the literary fund on hand when the Constitution was adopted, augmented from time to time by the proceeds of all public lands donated by Congress for public school purposes, all escheated lands, all waste and unappropriated lands, all property accruing to the State by forfeiture, all fines collected for offenses committed against the State, and such other sums as the General Assembly may appropriate. It is further provided (Constitution, section 135; Code, sections 632-33) that this fund, known as “The Literary Fund,” shall be invested and managed by the State Board of Education, the principal of which shall always remain unimpaired and entire and the annual income arising therefrom shall be dedicated exclusively to the support and maintenance of the public schools in the State. This purpose is wholly separate and distinct from the purpose for which the Board of Trustees of the Virginia Retirement System holds and invests the trust fund entrusted to its care, custody and management.
It is contended that this court in Board of Supervisors v. Cox, 155 Va. 687, 156 S. E. 755, held that a loan made to a county school board out of the literary fund by the Board of Education did not come within the inhibition set forth in section 115-a of the Constitution.
The majority of the court did so declare and said:
*24“We are of opinion that the amendment, section 115-a, has no application whatever to Literary Fund loans to local school boards.”
The primary reason advanced for so holding was set forth in the following language (page 701): “The major portion of this fund arises from forfeitures and fines collected through the various courts in the counties and cities of the State. The counties and cities are acting, in the collection of this portion of the fund, as agencies o| the State and the theory of the system is that the money so derived should go back to those counties and cities in the form of loans, equally distributed among them, for educational purposes. The school boards of the counties and cities in procuring loans from the literary fund for building schoolhouses are likewise acting as agencies of the State in assisting in carrying out the mandatory duty imposed by the Constitution that an efficient free school system shall be maintained.”
It is contended that the legislature may authorize the Board of Trustees to transfer a part of the State retirement fund to the State Board and, when this transfer is made, by some metamorphosis, this part of the retirement fund becomes a part of the literary fund, and hence, within the influence of the decision in the Cox Case.
The legislature has power to augment the “permanent and perpetual literary fund” by appropriation of funds under its exclusive control, but it has no power to augment the literary fund by any appropriation of funds entrusted to its care by the public school teachers and other State employees for a specific, definite purpose; nor can it, without breach of covenant with these public school teachers and other State employees, transfer to the literary fund, money it has allocated to the retirement fund.
The statute, in mandatory terms, requires the Board of Trustees to collect the interest or income from all the funds entrusted to its care for the benefit of the public school teachers and other State employees. The Constitution (section 135) requires, in mandatory terms, that the legislature *25and the State Board, by whom it acts, apply all the annual interest collected from the literary fund “to the schools of the primary and grammar grades for the equal benefit of all the people of the State.” The income from all the assets of each of these separate trust funds cannot be intermingled. All of such income must go wholly for one purpose or the other.
It is conceded that the decision in the Cox Case went no further than to hold that, inasmuch as the literary fund was a fund dedicated to public school purposes, the State Board could make a part of that fund available for a loan to the county school boards for public school purposes, and that section 115-a of the Constitution did not apply to such a transaction.
In that case, however, the literary fund was regarded as a “permanent and perpetual” fund which would be augmented from time to time, principally in comparatively small amounts realized from the collection of fines throughout the State. There was no suggestion either in the argument, in the briefs, or in the conference of the members of the Court in the Cox Case, as to the power of the legislature to authorize the State Board to make a permanent sale of such county school bonds held as a part of the assets of the literary fund and reinvest the proceeds of such sale in county obligations issued without the approval of the electors. Such transactions would give to the State Board not only the control of unlimited sums which are not a part and were never intended to be a part of the “permanent and perpetual literary fund” but would give to the State Board the power to determine what sums should be raised by local taxation to supplement the funds provided by the State for the support of local schools of the respective counties. The legislature cannot delegate a power which the Constitution forbids it to exercise.
This question was determined adversely to the contention of the Attorney General in School Board v. Shockley, 160 Va. 405, 168 S. E. 419. There the constitutionality of Chapter 173 of the Acts of 1930 was challenged. This act *26directed the board of supervisors of Carroll county, in addition to all other levies, to impose annually for a three-year period, a tax of 50 cents on each $100 of assessed value of both real and personal property within the county, to be used for the purpose of erecting a high school in the town of Hillsville, the county seat. Judge Chinn, speaking for the Court, referred to the fact that section 129 of the Constitution imposed a mandatory duty on the General Assembly to establish and maintain an efficient system of free schools and that sections 130-136 create State and local agencies charged with the management, control, and operation of the free school system. After quoting the pertinent parts of section 136 of the Constitution, he said:
“Considering these clear and unqualified provisions, as placed in the Constitution, and in connection with the related provisions thereof, it is obvious that it was the purpose of this section to vest in the local authorities of each county and school district of the State the exclusive power to determine what additional sums, if any, should be raised by local taxation to supplement the funds provided by the State for the support of the schools in the respective counties and school districts; and the exclusive power to levy the tax for school purposes on the property' specified, if any is imposed, subject only to the limitation that if any tax at all is levied it shall not ‘exceed in the aggregate in any one year a rate of levy to be fixed by law.’
“The local authorities of each county and school district being thus vested with the exclusive power to impose local taxes for school purposes under this section, the necessary implication is that the General Assembly is prohibited by the Constitution from exercising that power.”
The result of the contention of petitioner would be to' authorize the State Board to lend $1,000,000 to the county school board of one county, then sell the evidence of that debt to the Board of Trustees for $1,000,000, and use that $1,000,000 to lend to another county school board. This process could be repeated at least one hundred times, once or more for each county in the State. If the legislature can *27authorize the Board of Trustees to use the retirement fund to purchase such obligations from the State Board, then it can authorize the Highway Commission, or any insurance .company, or investment banker to purchase such obligations.
The argument advanced in support of the constitutionality of the statutes is based on the assumption that the Board of Trustees has no right to use retirement funds to buy county school bonds not approved by the taxpayers from the county school board but has the right to. buy the same bonds if they have become a part of the literary fund. When such bonds are under the control of the State Board, we held in the Cox Case that they are a part of the literary fund. But when such bonds are sold by the State Board to the Board of Trustees or to other parties, they cease to be a part of the literary fund and become a fund held for an entirely different purpose. The Board of Trustees should not be permitted to do indirectly what it is illegal for it to do directly. The theory advanced makes the State Board a mere broker clothed with exclusive power to buy and sell county school bonds issued without the 'approval of the taxpayers of the respective counties. For the Court to put its stamp of approval upon such transactions would render the provisions of sections 115-a and 136 of the Constitution complete nullities.
It seems to me that the only reasonable conclusion which can be reached is that when the electors of the State adopted the Constitution, they deprived the legislature of the power to disburse the income derived from the permanent and perpetual literary fund except for the benefit of the schools. It cannot authorize the income from the retirement fund to be used except for the benefit of the public school teachers and other State employees without breaking its covenant with them. Nor can. the legislature, except as hereinafter stated, transfer any part of the literary fund to the retirement fund without violating the inhibition prescribed by the Constitution.
Prior to 1942, the public generally and the school teachers in particular thought that the legislature had not made ade*28quate provision to compensate the school teachers through periods of sickness, injury, disability, and old age. In 1942, the legislature took steps to remedy this situation. The literary fund had increased from $10,000,000 to approxi-. mately $15,000,000, and it was thought that the income from this latter sum plus other funds authorized by section 135 of the Constitution was too much to be devoted to the schools of the primary and grammar grades. Hence, a resolution was introduced and passed by the General Assembly at its regular 1942 session, amending section 134 of the Constitution to the elfect that the General Assembly might set apart so much of the principal of the literary fund as should exceed $10,000,000 “for public school purposes, including the Teachers’ Retirement Fund, to be held and administered in such manner as may be provided by general law.” This amendment to the Constitution was adopted by the electors on November 7, 1944. Under the provision of this constitutional amendment, the General Assembly in 1946 (Item 72 of the Budget Bill, Acts 1946, page 799), and in 1948 (Item 76 of the Budget Bill, Acts 1948, page 1151), allocated to the Virginia Retirement System from the literary fund $2,000,000 for the retirement of public school teachers of the State. At the former session it was estimated that during the biennium 1946-48, the school teachers themselves would pay into the retirement fund the sum of $3,-005,000, and for the biennium 1948-50, $3,557,840.
Before the legislature had the power to make this transfer of the $2,000,000 from the literary fund, it was necessary to submit the question to the electors of the State in the form of a constitutional amendment. This part of the literary fund, having been definitely transferred to the retirement fund, ceased to be a part of the literary fund, and must therefore be administered by the Board of Trustees for the benefit of the public school teachers.
It will be noted that the provisions of section 115-a of the Constitution apply only to counties, districts of the counties, and to school boards of the school districts and school boards of the counties. None of the provisions ap*29plies to municipalities. The only constitutional limitation placed upon municipalities regarding the issue of bonds or other interest-bearing obligations, except for certain non-pertinent exceptions, is that the total amount of such indebtedness shall not exceed 18% of the assessed valuation “of the real estate in the city or town subject to taxation as shown by the last preceding assessment for taxes.” There being no constitutional inhibition, the legislature has power to authorize the municipal subdivisions of the State to borrow money, within the limits stated, from the State Board of Education or from other parties without submitting the question to the electors of the respective municipalities for their approval.
It is contended that such conclusions will give the municipalities an advantage over the counties in the erection of school houses. There is a difference between the method by which a county may incur a long-term debt and the method by which a municipality may incur such a debt, but it is a difference which the electors have themselves placed in the Constitution, the fundamental law of the State. This difference must be recognized and observed not only by the courts but by the members of the legislature and all State and county officials. The court cannot be influenced in its decisions by whether the constitutional provision is wise or expedient, when the meaning of the language contained therein is clear and explicit.
It -is quite true that the Constitution (section 129) imposes upon the General Assembly a mandatory duty to establish and maintain an efficient system of public free schools throughout the State. It provides that this mandatory duty shall be performed under the supervision of a State Board of Education (section 130) and a Superintendent of Public Instruction (section 131). The same Constitution, in mandatory terms, prohibits the legislature from authorizing a county school board to incur a long-term debt without the approval of the electors of the county. The same Constitution (section 127) prohibits any municipality from incurring an indebtedness which exceeds 18% of the as*30sessed valuation of the real estate within such municipality. There is nothing inconsistent in these mandatory provisions. The provisions are not conflicting. Indeed, when the plenary power of the legislature to provide the means to maintain and establish an efficient public school system is considered, the inhibitions contained in these provisions are minor. Whether they are major or minor, however, the inhibitions are nevertheless in the Constitution and must be given effect. The legislature in adopting means to establish and maintain an efficient school system must do so within the framework of the Constitution.
It is stated in the dissenting opinion that the provisions of section 129 of the Constitution are in conflict with the provisions of section 115-a. While I do not agree that the two sections are in conflict, even if such were the case, the provisions of section 115-a must be given effect as that section was adopted by a vote of the people in 1928, 26 years after the provisions of section 129 became effective by proclamation and not by popular vote.
“As the latest expression of the will of the people a clause in a constitutional amendment will prevail over a provision of the constitution or earlier amendment inconsistent therewith, for an amendment to the constitution becomes a part of the fundamental law, and its operation and effect cannot be limited or controlled by previous constitutions or laws that may be in conflict with it.” 16 C. J. S., Constitutional Law, p. 67. See 11 Am. Jur., Constitutional Law, sec. 54, p. 664.
The substance of the argument in the dissenting opinion is that the provisions of section 115-a are unwise and inexpedient. The proper place in which to present such an argument is on the hustings before the electors and not in a judicial forum where the language of the Constitution must be construed as it is written.
For the reasons stated, it is my opinion that those parts of the statutes involved which purport to authorize the Board of Trustees to purchase from the State Board obligations of the county school boards, incurred without the *31approval of the electors of the respective counties, are invalid; and that those parts of the statutes involved which authorize the Board of Trustees to purchase such obligations of the school boards of the municipalities from the State Board are valid.
The foregoing are additional reasons for my approval of the views expressed in the majority opinion.
Eggleston, Spratley, Buchanan and Miller, JJ., concur in this opinion.