State ex rel. Gainer v. West Virginia Bd. of Investments, 22574

• Citation: 194 W.Va. 143,459 S.E.2d 531
• Decision Date: 31 May 1995
• Docket Number: No. 22574,22574
• Parties: , 64 USLW 2080 STATE of West Virginia ex rel. Glen B. GAINER III, Auditor of the State of West Virginia, Petitioner Below, Appellant, v. The WEST VIRGINIA BOARD OF INVESTMENTS, Respondent Below, Appellee.
• Court: Supreme Court of West Virginia

Page 531

459 S.E.2d 531

194 W.Va. 143, 64 USLW 2080

STATE of West Virginia ex rel. Glen B. GAINER III, Auditor of the State of West Virginia, Petitioner Below, Appellant, v. The WEST VIRGINIA BOARD OF INVESTMENTS, Respondent Below, Appellee.

No. 22574.

Supreme Court of Appeals of West Virginia.

Submitted Jan. 18, 1995.

Decided May 31, 1995.

Syllabus by the Court

1. "Where a provision of a constitution is clear in its terms and of plain interpretation to any ordinary and reasonable mind, it should be applied and not construed." Syl.Pt. 3, State ex rel. Smith v. Gore, 150 W.Va. 71, 143 S.E.2d 791 (1965).

2. "Moneys earned by public employees and contributed to a public employees' retirement plan, including the employers' contribution which has been earned by the public employees, become part of the corpus of the trust and are not thereafter state funds for expropriation or use for any purpose other than that for which the moneys were entrusted." Syl.Pt. 21, Dadisman v. Moore, 181 W.Va. 779, 384 S.E.2d 816 (1989).

3. Until funds are withdrawn and paid out to individual members of the Public Employees Retirement System, the state has a beneficial ownership interest in such funds arising from the statutory trust relationship created by the enactment of the West Virginia Public Employees Retirement Act, West Virginia Code §§ 5-10-1 to -54 (1994 & Supp. 94).

4. "The amounts expropriated from the retirement trust funds for purposes other than those for which the funds were collected constitute a public debt owed by the state to the trust funds, and such expropriation must be remedied by recompense through appropriation." Syl.Pt. 23, Dadisman v. Moore, 181 W.Va. 779, 384 S.E.2d 816 (1989).

5. "The Board of Investments has a fiduciary relation with the PERS trust and participants and must invest employee earned pension system assets consistently with the highest standards of fiduciary duty. It must utilize competent, educated, and trained financial managers to seek and manage high quality investments and to avoid speculative commercial and industrial ventures and schemes." Syl.Pt. 25, Dadisman v. Moore, 181 W.Va. 779, 384 S.E.2d 816 (1989).

6. West Virginia Code § 12-6-9(j) (1991) is invalid and unenforceable as it violates the all-encompassing proscription found in Article X, Section 6 of the West Virginia Constitution against the state becoming a stockholder in any company or association.

Robin K. Welch, Sp. Asst. Atty. Gen., Charleston, for appellant.

Frances A. Hughes, Managing Deputy Atty. Gen., Charleston, for Atty. Gen.

Daniel R. Schuda, Joanna I. Tabit, Steptoe & Johnson, Charleston, for appellee.

WORKMAN, Justice.

Glen B. Gainer, III, as Auditor of the State of West Virginia, appeals from the June 14, 1994, order of the Circuit Court of Kanawha County denying his request for injunctive and declaratory relief to prohibit the Appellee West Virginia Board of Investments ("Board") from investing certain monies from the consolidated pension fund in corporate stocks. ¹ After reviewing this matter in full, we conclude that the lower court erred in determining that West Virginia Code § 12-6-9(j) (1991) ² is not violative of Article X, Section 6 of the West Virginia Constitution. Accordingly, we reverse the decision below.

The underlying declaratory judgment action was initiated following the issuance of an attorney general's opinion addressing the following question: "[i]s it lawful for the West Virginia Board of Investments to invest the trust funds in the 'consolidated pension fund,' which represents monies of the Public Employees Retirement System ["PERS"], in corporate stock of any private corporation or association?" ³ The advisory opinion issued by the attorney general on July 13, 1993, stated that the Board's investment of consolidated pension funds in corporate stocks violated article X, section 6 of the state constitution as well as the fiduciary principles enunciated in Dadisman v. Moore, 181 W. Va. 779, 384 S.E.2d 816 (1989).

On May 12, 1994, the Appellant filed a petition in circuit court seeking a temporary injunction and declaratory judgment consistent with the opinion issued by the attorney general. Following a hearing on these issues on May 12, 1994, the circuit court issued an order on June 14, 1994, concluding that "West Virginia Code § 12-6-9(j) [1990] is not violative of article X, section 6 of the Constitution of West Virginia. " This ruling was expressly predicated on the maxim that a legislative enactment is presumptively constitutional combined with the court's finding that article X, section 6 "was enacted to prevent the State from engaging in the operation of business or enterprise rather than to prevent the State from seeking dividend income from an investment." See Syl. Pt. 2, in part, State ex rel. State Bldg. Comm'n v. Moore, 155 W. Va. 212, 184 S.E.2d 94 (1971) (recognizing that " 'negation of legislative power must be manifest beyond reasonable doubt' "). This appeal challenges the circuit court's reasoning and conclusions.

I.

In 1990, the legislature amended West Virginia Code § 12-6-9 to include subsection j, thereby permitting the Board to invest up to twenty percent of the PERS consolidated pension fund in corporate stock. The Appellant argues that West Virginia Code § 12-6-9(j) is unconstitutional on its face based on the following underscored constitutional language:

The credit of the State shall not be granted to, or in aid of any county, city, township, corporation or person; nor shall the State ever assume, or become responsible for the debts or liabilities of any county, city, township, corporation or person; nor shall the State ever hereafter become a joint owner, or stockholder in any company or association in this State or elsewhere, formed for any purpose whatever.

W.Va. Const. art. X, § 6 (emphasis supplied).

Conversely, the Appellee maintains that the constitutional proscription found in section six of article ten does not stand as a bar to investing a legislated portion of the consolidated fund in corporate stocks. To support its position, the Appellee references the legislative intent behind the enactment of the subject constitutional language. In State ex rel. Dyer v. Sims, 134 W. Va. 278, 58 S.E.2d 766 (1950), rev'd on other grounds, 341 U.S. 22, 71 S.Ct. 557, 95 L.Ed. 713 (1951), this Court explained:

The purpose of Section 6 of Article X was to guard against the granting of the credit of the State in aid of any county, city, township, corporation or person, or the assumption of their debts or liabilities; and against the State becoming a joint owner or stockholder in any company or association.... The purposes of the section are well known, being to guard against the mistakes of the mother Commonwealth of Virginia in granting aid to counties, and particularly in granting aid to organizations for the purposes of so-called public improvements, and in becoming stockholders of such organizations.

134 W. Va. at 289, 58 S.E.2d at 773 (emphasis supplied).

The Appellee chooses to view the historical basis of prohibiting credit from being extended for the development and private operation of public improvements such as canals, turnpikes, and railroads as the sole intent underlying the enactment of article X, section six. See Almond v. Day, 197 Va. 782, 787-88, 91 S.E.2d 660, 664-665 (1956). As the Day decision readily acknowledges, Virginia and at least thirty-eight other states have constitutional provisions concerning the prohibition of stock subscriptions or credit by the state. See id. at 788-89, 91 S.E.2d at 665 (quoting 152 A.L.R. 495). Article X, Section Six of the West Virginia Constitution and similar other state constitutional provisions dealing with stock or credit proscriptions were clearly drafted in response to the historical occurrence of numerous unwise credit extensions having been made by the states during the early nineteenth century. See Day, 197 Va. at 787-88, 91 S.E.2d at 664-65; see generally Stewart E. Sterk and Elizabeth S. Goldman, Controlling Legislative Shortsightedness: The Effectiveness of Constitutional Debt Limitations, 1991 Wis.L.Rev. 1301, 1306-12. The constitutional language at issue, however, is not limited or restricted in scope to prohibiting the state from analogous stock for credit arrangements.

Although the language at issue is grouped with language which bars the state from granting credit to any entity, the specific language at issue is stated unambiguously: "nor shall the State ever hereafter become a joint owner, or stockholder in any company or association in this State or elsewhere, formed for any purpose whatever." W. Va. Const. art. X, § 6. In resolving this issue of constitutional interpretation, we are bound by the well-established precept that "[w]here a provision of a constitution is clear in its terms and of plain interpretation to any ordinary and reasonable mind, it should be applied and not construed." Syl. Pt. 3, State ex rel. Smith v. Gore, 150 W. Va. 71, 143 S.E.2d 791 (1965).

We do not accept the Appellee's argument that the purpose of article X, section six was limited to the avoidance of stock for credit transactions similar to those engaged in during the early nineteenth century. In examining the legislative intent underlying an analogous Arizona constitutional provision, the court in State v. Northwestern Mutual Insurance Co., 86 Ariz. 50, 340 P.2d 200 (1959), summarized, "[t]hus ..., the evil to be avoided was the depletion of the public treasury or inflation of public debt by engagement in non-public enterprises." Id. at 53, 340 P.2d at 201; accord Engelking v. Investment Bd., 93 Idaho 217, 222, 458 P.2d 213, 218 (1969); Day, 197 Va. at 791, 91 S.E.2d at 667. Without exception, this concern that public debt be curtailed permeates the adoption of every constitutional provision which imposes restrictions on the lending of credit by the state or prohibits the state from being a...