Farrell v. State Bd. of Regents

• Decision Date: 02 September 1970
• Docket Number: No. 54194,54194
• Citation: 179 N.W.2d 533
• Parties: John FARRELL, Ralph E. Patterson, James E. Johnson, Nicholas J. Sutton, Jr., Elaine Spencer and Bonita J. Rees, Individually and Representative of Persons Similarly Situated, Appellants, v. STATE BOARD OF REGENTS of the State of Iowa, Stanley F. Redeker, Ray V. Bailey, Donald L. Show, Mrs. H. Rand Petterson, William B. Quarton, Casey Loss, Thomas O. Lauden, Ned E. Perrin, Ralph H. Wallace and R. Wayne Richey, Appellees.
• Court: Iowa Supreme Court

Page 533

179 N.W.2d 533

John FARRELL, Ralph E. Patterson, James E. Johnson, Nicholas J. Sutton, Jr., Elaine Spencer and Bonita J. Rees, Individually and Representative of Persons Similarly Situated, Appellants, v. STATE BOARD OF REGENTS of the State of Iowa, Stanley F. Redeker, Ray V. Bailey, Donald L. Show, Mrs. H. Rand Petterson, William B. Quarton, Casey Loss, Thomas O. Lauden, Ned E. Perrin, Ralph H. Wallace and R. Wayne Richey, Appellees.

No. 54194.

Supreme Court of Iowa.

Sept. 2, 1970.

Nolan, Lucas & Nolan, Iowa City, for appellants.

Richard C. Turner, Atty. Gen., and Arthur O. Leff, Special Counsel, Iowa City, for appellees.

RAWLINGS, Justice.

By class action in equity plaintiffs challenge validity of chapter 181, Acts of the Sixty-Third General Assembly, permitting issuance of self-liquidating bonds, by defendant State Board of Regents, to facilitate academic structural improvements at the three state universities, and for injunctive relief. Trial court held adverse to plaintiffs and they appeal. We affirm.

The cited Act provides, in part, the Board shall adopt a ten year building plan, subject to approval by both bodies of the legislature, and that annually the, board submit to the lawmaking body proposed projects to be undertaken in the ensuing year which, if approved by the legislature and governor, may then be effectuated.

By Senate Concurrent Resolution 44, both houses of the legislature approved the specific projects hereafter designated.

Senate Concurrent Resolution 45, having approval of the legislature and governor, authorized issuance of not to exceed $16,140,000 in bonds for the specific projects and undertakings therein described.

The legislature, by Senate File 696, chapter 50, Acts of the Sixty-Third General Assembly, appropriated $150,000 to reimburse the universities in the area of student tuition fees and institutional income to be expended for retirement of the bond debt authorized by S.C.R. 45, supra.

September 11, 1969, the Board adopted a resolution for issuance and sale of $1,155,000 academic revenue bonds in order to construct laboratories, classrooms, and offices for Aerospace and Civil Engineering, and Science Building #2 for the housing of zoology, entomology and psychology departments, all on the Iowa State University of Science and Technology campus at Ames. This particular bond issue apparently triggered the case now before us.

Projects at the State University of Iowa at Iowa City, and Northern Iowa University at Cedar Falls, await the outcome of this testing action, and if approved, the Board proposes to utilize the full bonding limit amounts authorized by S.C.R. 45 referred to above.

The statutes cited, resolution of the Board, and the bonds all provide they are not a state debt. Appropriated funds, designated fees collected and earmarked for other projects, such as funds from dormitories and other self-liquidating projects, are specifically excluded from any pledge or use for payment of the academic bonds in question.

Obligation for bonds issued, confined to student tuition fees and charges, with designated institutional income, will be adequate for the debt service schedule of required payments.

Interest rates on the bonds will depend upon their sale and a schedule to be determined for the required payments. As tuitions are collected there will be immediately extracted therefrom the amounts required for payment of the scheduled bonds and interest (sinking fund), and an accumulation required against any possible future deficiency for payment of the bonds (reverve fund). These will be set up, held, invested, and used as separate trust accounts for the bond debt service. They will not constitute general funds of any university.

'Institutional income', as defined by the Act and useable for bond payments, consists of earnings from sale of publications and other minor projects at the universities. If necessary such funds will be be used for bond debt service by a transfer to the special sinking and reserve trust funds. Bond issues presently authorized will obligate and use only a fraction of the tuition money collected. More specifically the record discloses that at all three institutions the present proposed bond issue can be easily liquidated by use of existing student fees and charges. Thus there need be no immediate resort to institutional income.

At the University of Iowa, in Iowa City, the amount of present student fees collected is 20 times that required for debt service on the proposed bond issue. An increase of only $1 per semester for each student will produce $30,000 a year for debt service.

The 19,000 students at Iowa State University, Ames, pay $200 for each of three quarters, of which $24 is set aside, including a $7 building fee, and $176 goes into general operating funds. $1.75 per quarter out of each student's tuition will be sufficient to retire the presently authorized $1,155,000 bond issue.

At the University of Northern Iowa, Cedar, Falls, the situation is similar.

Whenever bonds are authorized and issued, the treasurer will skim from the tuitions, fees and charges collected at each institution, that portion necessary for bond debt service, immediately placing it in a special trust fund to be held and used for that purpose only. As indicated above, there will be two parts to such trust: (1) the sinking fund, being the amount required for payment of principal and interest according to the schedule, and (2) the reserve fund, useable only if the sinking fund should ever be insufficient.

In the event student fees should sometime prove to be inadequate for payment of debt service currently required, the institution confronted with such a situation will have several alternatives. First, utilize institutional income as authorized by the Act and Board resolution. Second, increase student fees and charges. Third, retrench and curtail operations.

The Board is, however, obligated to charge and collect sufficient student fees which, with institutional income, will suffice to meet the debt schedule.

Propositions urged by plaintiffs in support of a reversal are, trial court erred in, (1) failing to find and hold the Act invalid and void as violating Article I, section 6, of the Iowa Constitution, and section 1 of the Fourteenth Amendment to the United States Constitution, because plaintiffs, and other students similarly situated, will be charged tuition for payment of bonds and interest thereon for the construction of buildings, structures and facilities which will never be used by them, and from which they will receive no benefits other than those enjoyed by members of the general public from whom no tuition or other charges are exacted for such purposes, thereby depriving plaintiffs of their property without due process and denying to them equal protection of the law; (2) failing to find and hold the Act invalid and void because it violates Article III, section 1, Constitution of Iowa, in that it attempts to grant an improper delegation of legislative and judicial authority; (3) failing to find and determine the Act is in violation of Article VII, sections 2 and 5, Constitution of Iowa, because the same permits the Board to incur an indebtedness of the State of Iowa in excess of $250,000 without imposing a direct tax for payment thereof and without approval of the voters of this state; (4) in failing to find and determine that 'student fees, tuitions and charges' and 'institutional income' of universities under jurisdiction of the Board are public funds of the State of Iowa and cannot be used except as appropriated by the General Assembly pursuant to Article VII, section 5, Constitution of Iowa.

I. At the threshold, these observations in Graham v. Worthington, 259 Iowa 845, 850--851, 146 N.W.2d 626, being singularly appropriate, are here repeated: 'Our review is de novo. Section 624.4, Code, 1962, and rule 344, R.C.P.

'* * *

'It is of course understood the legislature may enact any law desired provided it is not clearly prohibited by some provision of the Federal or State Constitution. (Authorities cited).

'And in Green v. City of Mount Pleasant, 256 Iowa 1184, 1196, 131 N.W.2d 5, this court held: The judicial branch of the government has no power to determine whether legislative Acts are wise or unwise, nor has it the power to declare an Act void unless it is plainly and without doubt repugnant to some provision of the Constitution. There is no presumption against constitutional validity of a statute. Every reasonable presumption must be called to support the Act. A challenging party must overcome these presumptions and negative every reasonable basis which will sustain the statute. (Authorities cited). (Emphasis supplied).

'Then in State v. Fairmont Creamery Co., 153 Iowa 702, 711, 133 N.W. 895, 42 L.R.A.,N.S., 821, we said: 'The Constitution was intended to announce certain basic principles to serve as the perpetual foundation of the state. It was not intended to be a limitation upon its healthful development, nor to be an obstruction to its progress. New days bring new problems. Legislation must meet these problems as they come; otherwise our plan of government must prove inadequate. Manifestly, we ought not to be swift to adopt such a technical or strained construction of the Constitution as would unduly impair the efficiency of the Legislature to meet its unavoidable responsibilities.'

'(Authorities cited)

'Also, if the constitutionality of an Act is merely doubtful or fairly debatable, the courts will not interfere. (Authorities cited).'

And Severson v. Sueppel, 260 Iowa 1169, 1174, 152 N.W.2d 281, 284, contains this pertinent statement: 'In interpreting a statute we look to the object to be accomplished, the evils sought to be remedied, or the purpose to be subserved and place on it a reasonable or liberal construction which will best effect its purpose rather than one which will defeat it.'

Thus, in undertaking to void...