Ayer v. Commissioner of Administration

Decision Date23 March 1960
Citation340 Mass. 586,165 N.E.2d 885
PartiesFrederick AYER, Jr., et al. v. COMMISSIONER OF ADMINISTRATION et al.
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court

Calvin P. Bartlett, Boston (Herbert P. Gleason, Boston, with him), for petitioners.

Edward O. Proctor, Boston (Richard Ely and Alan L. Lefkowitz, Boston, with him), for respondents Massachustetts State Office Building Association and others.

Edward J. McCormack, Atty. Gen. (Joseph H. Elcock, Asst. Atty. Gen., with him), for respondents Commissioner of Administration and another.

Before WILKINS, C. J., and SPALDING, WILLIAMS, COUNIHAN, WHITTEMORE and CUTTER, JJ.

WILKINS, Chief Justice.

The petitioners are thirty taxable inhabitants of the Commonwealth, no more than six of whom are from any one county. The respondents are the Commissioner of Administration, the Treasurer and Receiver General, Massachusetts State Office Building Association (a corporation created by St.1958, c. 603), and the three members and directors of the Association. This petition is brought pursuant to G.L. c. 29, § 63, inserted by St.1937, c. 157, 1 to prevent the commissioner and the Treasurer and Receiver General from expending money and incurring certain obligations. Declaratory relief is also sought. G.L. c. 231A, § 6, inserted by St.1945, c. 582, § 1. The case is reserved and reported without decision by a single justice upon a case stated.

In issue is the constitutionality of St.1958, c. 603, entitled 'An Act incorporating the Massachusetts State Office Building Association as a non-profit membership corporation for the purpose of constructing a State office building to house various departments, commissions and agencies of the Commonwealth.' It was passed to be enacted by the House of Representatives on September 30, 1958, and by the Senate on October 1, 1958. This action was without 'a vote, taken by the yeas and nays, of two-thirds of each house of the general court present and voting thereon.' See § 3 of art. 62 of the Amendments to the Constitution. The act, carrying an emergency preamble, was approved by the Governor on October 3, 1958, and, if valid, became effective at once.

On September 2, 1959, the Commonwealth, acting by the commissioner, and the Association, acting by its president, entered into a so called 'contract of lease,' purportedly in accordance with St.1958, c. 603. The following day the document was approved by the Governor and Council. The commissioner and the Treasurer and Receiver General are each about to expend money raised, or to be raised, by the general taxation of the inhabitants of the Commonwealth and to incur obligations purporting to bind the Commonwealth pursuant to the 'contract of lease.' The Association and its members and directors are about to pledge as security, for the purpose of borrowing money, rentals payable under the 'contract of lease' by the Commonwealth to the Association, to enter into a trust agreement to borrow money by pledging rentals, and to issue and sell bonds whose repayment is secured by a pledge of rentals.

It is agreed that an actual controversy has arisen between the parties as to the constitutionality of c. 603 and the validity of the 'contract of lease,' and that all persons necessary for a determination by way of declaratory relief are made parties.

We first must outline the statute at some length. Anthony N. DiNatale, William F. Callahan, and Otis M. Whitney, and their successors, are 'made a corporation, by the name of Massachusetts State Office Building Association * * * for the purpose of constructing a state office building, to contain not less than five hundred thousand square feet of office space, for office, restaurant, garage, meeting and other like facilities for the use of the commonwealth * * *.' The building is to be constructed in the vicinity of the State House and the Suffolk County court house in an area which is 'a part of the government center project, so called' (§ 1). The named incorporators and their successors shall constitute the members of the Association and its board of directors. A vacancy is filled by the remaining members with no limitation except that there shall not be three members of the same political party. If there are no remaining members capable of acting, successor members are to be appointed by the Commissioner of Corporations and Taxation subject to the same limitation (§ 4).

The directors shall elect a president and a clerk from their own number, and 'shall appoint a treasurer and such other officers as they deem necessary, and may prescribe their duties and fix their tenure of office and compensation. No funds of the Association shall be paid to or distributed among its members other than as reimbursement for their actual expenses reasonably and necessarily incurred in the discharge of their duties * * *' (§ 5). The Association may employ, and fix the compensation of, engineers, architects, attorneys, accountants, experts, and advisers (§ 6). It may hold real and personal property in such amount as the directors may deem necessary or desirable for the purposes for which it was created, and after a lease with the Commonwealth shall have been entered into and the Association's bonds shall have been issued, it may take property, both public and private, by eminent domain (§ 7). The Commonwealth, acting through the Commissioner of Administration, may enter into a 'contract of lease' with the Association, the building to become the property of the Commonwealth upon the payment of all obligations of the Association (§ 8). Apart from certain easements, the Association shall have no power to dispose of or encumber the property except by the 'contract of lease' with the Commonwealth (§ 9).

The Association may borrow not more than $30,000,000, the loan to be represented by bonds or other evidences of indebtedness issued under a trust agreement, and for their payment may pledge the rentals from the Commonwealth which are to be subject to a first lien in favor of bondholders. The terms and price of sale of the bonds shall be as determined by the Association 'to be for the best interests of the Association.' The bonds are not subject to the Sale of Securities Act, G.L. c. 110A (§ 10). 'No bonds or other evidences of indebtedness * * * shall constitute a debt of the commonwealth or a pledge of the faith and credit of the commonwealth, but * * * shall be payable solely from the funds of the Association' (§ 14). The Association shall not be required to pay taxes or assessments upon the building, and the bonds or other evidences of indebtedness, their transfer and the income from them (including any profits made on their sale) shall be free from taxation by the Commonwealth (§ 11). Until the building has become the property of the Commonwealth, the Association shall pay $200,000 annually to the city, the first payment to be made in the year in which it shall first receive the proceeds of any borrowing, other than a temporary loan in anticipation of permanent financing (§ 12).

We note that the act contains no provision for financial accountability, and that no means are prescribed for supervising the awarding and the performance of the building contract under safeguards similar to those in G.L. c. 7, §§ 30A-30J, inserted by St.1953, c. 612, § 5, and as amended, and G.L. c. 149, §§ 44A-44L.

The petitioners, in attacking the statute upon a variety of constitutional grounds, make the following contentions: (1) There has been a violation of § 3 of art. 62 2 of the Amendments to the Constitution of the Commonwealth, in that the statutory scheme is in substance a borrowing of money by the Commonwealth without a vote, taken by the yeas and nays, of two thirds of each house of the General Court present and voting. (2) If the Association is construed to be a corporation which is privately owned and managed, (a) there has been a violation of § 1 of art. 62 2 in that there is authorized a loan of the credit of the Commonwealth; and (b) there is authorized a delegation of the executive power of expenditure in violation of arts. 6 and 7 of the Declaration of Rights. (3) If the members of the Association are public officers, the portions of the statute relating to their appointment, tenure, and succession violate arts. 5, 6, 7, 8, and 18 of the Declaration of Rights and Part II, c. 1, § 1, art. 4, of the Constitution. (4) There is a delegation of the legislative power of appropriation in violation of art. 30 of the Declaration of Rights.

Since we are of opinion that the first ground must be upheld, we shall confine our discussion to that ground. In so doing, we make no intimation as to the validity of other objections.

Article 62 was adopted in 1918 following the Constitutional Convention of 1917-1918. See Opinion of the Justices, 337 Mass. 800, 807-808, 152 N.E.2d 90. It was aimed at borrowing by the Commonwealth. A study of the proceedings of the convention, and a fair reading, as a whole, of the pertinent portions of the debates (vol. 3, pp. 1217-1234) show that the purpose was to put 'fetters on the * * * Legislature' (p. 1233). 3 It was pointed out that in forty-four States of the Union there was some constitutional restriction on the contracting of debts or loans by the State (pp. 1221-1222). It was said that this Commonwealth, which was one of the four having no such restriction, had the second highest State debt, which was increasing out of proportion to population and out of proportion to valuation (p. 1223).

If the Commonwealth itself were to borrow on bonds issued by it for the purpose of erecting an office building, this courld be done 'only by a vote, taken by the yeas and nays, of two-thirds of each house of the general court present and voting thereon.' Section 3 of art. 62 of the Amendments to the Constitution. The question is whether this is substantially the situation presented by the corporation...

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    ...of such legislative acts, generally holding them unconstitutional as in violation of debt limitations. Ayer v. Commissioner of Administration, 340 Mass. 586, 165 N.E.2d 885; State Office Building Commission v. Trujillo, 46 N.M. 29, 120 P.2d 434; State ex rel. Public Institutional Building A......
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