Boe v. Foss

CourtSupreme Court of South Dakota
Citation76 S.D. 295,77 N.W.2d 1
Docket NumberNo. 9577,9577
PartiesHenry A. BOE, Plaintiff, v. Joe FOSS, Governor of the State of South Dakota; Morris G. Hallock, Secretary of Finance of the State of South Dakota; The Board of Regents of Education of the State of South Dakota; Frank Gellerman, Byron Helgerson, Laurence W. Robinson, Eric Heidepreim, Lem Overpeck, Lucille H. Dory, and Harry J. Eggen, all being members of and constituting the Board of Education of the State of South Dakota, Defendants.
Decision Date04 May 1956

M. Q. Sharpe, John W. Larson, Kennebec, for plaintiff.

George J. Danforth, Jr., Sioux Falls, Phil Saunders, Atty. Gen., Walter Mueller, Asst. Atty. Gen. for defendants.

SMITH, Judge.

The plaintiff taxpayer has invoked our original jurisdiction to arrest the proceedings of His Excellency, the Governor of this state, and of its Finance Commissioner and Board of Regents of Education in connection with the financing of the construction of three dormitory buildings on the campus of the State College of Agriculture and Mechanical Arts at Brookings, South Dakota, on the grounds that such proceedings are in excess of the jurisdiction and powers of the named officers and board.

It is provided by Ch. 49, Laws 1955, that when it deems dormitory and apartment housing necessary and feasible at any educational institution under its control, the Board of Regents, with the consent and approval of the Governor and the Secretary of Finance, may construct, furnish and equip such buildings, and finance such construction, furnishings and equipment by issuing revenue bonds to the payment of which it is authorized to pledge not only the 'income' of the buildings so constructed at a particular institution, but also, for a period of not to exceed ten years the 'net income' of dormitory and apartment housing then existing at such institution. The act provides that the title to such buildings shall be and remain in the state, and that 'No indebtedness, bond or obligation incurred or created under authority of this act shall be or become a lien, charge or liability against the state of South Dakota nor against the Board of Regents, nor against the property or funds of the state, except to the extent of the income hereinabove authorized to be pledged.'

At a meeting held December 2, 1955, the Board of Regents adopted a resolution to construct a women's dormitory, a men's dormitory, and an apartment building on the campus of the South Dakota State College of Agriculture and Mechanical Arts, estimated to cost respectively $750,000, $750,000 and $400,000, and to provide funds for such construction to issue revenue bonds in the aggregate of those amounts pursuant to the provisions of the above cited Ch. 49, Laws 1955. The resolution provided: 'That the bonds to be issued under the provisions of the foregoing Resolution shall be payable solely from and secured by an irrepealable first and prior pledge of the net revenue of the respective new buildings herein authorized, until such bonds are paid in full and that in addition thereto by a pledge of the net revenues of all or such of the existing dormitory facilities at said institution, not otherwise pledged, for a period of ten years as may be required by the purchasers of said bonds, and in an amount of not less than $500,000 payable in amounts of not less than $50,000 per annum for 10 consecutive years, and the Board of Regents does hereby covenant that so long as any of the bonds herein authorized to be issued remain outstanding and unpaid, that it will not issue any additional obligations payable from the revenues of the buildings hereby pledged. That all gross revenues, including revenues from dining halls and food facilities, shall be kept in and credited to separate accounts from which there shall be paid all expenses of operation, repair and maintenance, including utilities and heating, and a sufficient amount retained to pay estimated costs of current operations during ensuing month, and balance deemed net revenues and shall be transferred to Bond Revenue Redemption Fund. Out of said fund shall be paid all principal of and interest on bonds issued hereunder and the balance therein shall create a reserve equal to principal and interest falling due on said bonds during the next succeeding twelve months. Any balance in said fund shall be used to redeem bonds on the next redemption date in the manner as may hereinafter be provided.' The resolution also states: 'The bonds to be issued under the terms of this Resolution shall contain the following provision: 'No indebtedness, bond or obligation incurred or created under the authority of this act shall be or become a lien, charge or liability against the state of South Dakota nor against the Board of Regents, nor against the property or funds of the state, except to the extent of the income hereinabove authorized to be pledged.'' Other details of the resolution are without relevance to the issues we are to consider. The resolution of the Board of Regents was subsequently approved by the Governor and the Secretary of Finance.

At bar it was stated that plans are afoot for several million dollars of construction at the institutions controlled by the Board of Regents pursuant to the provisions of Ch. 49, Laws 1955.

The principal ground put forward by the plaintiff taxpayer for arresting the described proceedings is that the resolution provides for the issuance of revenue bonds, which, when executed, issued and sold will be and constitute a debt of the State of South Dakota exceeding the sum of $100,000 contrary to Sec. 1, Art. XIII of the constitution of South Dakota, and also exceeding one-half of one percent of the assessed valuation of the property of the state other than rural credits, contrary to Sec. 2, Art. XIII of the constitution of the State of South Dakota.

Sec. 2, Art. XIII of our constitution reads as follows: 'For the purpose of defraying extraordinary expenses and making public improvements, or to meet casual deficits or failure in revenue, the state may contract debts never to exceed with previous debts in the aggregate one hundred thousand dollars, and no greater indebtedness shall be incurred except for the purpose of repelling invasion, suppressing insurrection, or defending the state or the United States in war and provision shall be made by law for the payment of the interest annually, and the principal when due, by tax levied for the purpose or from other sources of revenue; which law providing for the payment of such interest and principal by such tax or otherwise shall be irrepealable until such debt is paid: Provided, however, the state of South Dakota shall have the power to refund the territorial debt assumed by the state of South Dakota, by bonds of the state of South Dakota.'

The provisions of Sec. 1, Art. XIII to which the taxpayer plaintiff makes reference reads as follows: 'For the purpose of developing the resources and improving the economic facilities of South Dakota, the state may engage in works of internal improvement, may own and conduct proper business enterprises, may loan or give its credit to, or in aid of, any association, or corporation organized for such purposes. * * * The limit of indebtedness contained in Section 2 of this article shall not apply to the provisions of this section, but the indebtedness of the state for the purposes contained in this section shall never exceed one-half of one per cent of the assessed valuation of property of the state, * * *.'

It seems manifest that Sec. 1, Art. XIII is without relevance. The provisions of that section of our constitution, to which plaintiff points, were introduced by way of amendment in November 1918 pursuant to Ch. 163, Laws 1917, for the purpose of granting powers the sovereign people had theretofore withheld from their government. Traditionally, dormitory facilities and services have been deemed an essential part of the function of maintenance of an educational institution by our states. State ex rel. Fatzer v. Board of Regents of State of Kansas, 167 Kan. 587, 207 P.2d 373, and cf. State College Development Ass'n v. Nissen, 66 S.D. 287, 281 N.W. 907. Long before this amendment of 1918 our state had provided these facilities and services at its educational institutions. Therefore, we conclude that in the sense those terms are employed in this section of the constitution, the state neither engages in 'works of internal improvement' nor does it conduct a 'business enterprise' when it constructs and operates these facilities at its educational institutions. In so functioning it is engaged in a work of education.

Of interest in this connection is the abridgement of the opinion of the late Mr. Justice Mitchell appearing in the syllabus of Rippe v. Becker, 56 Minn. 100, 57 N.W. 331, 22 L.R.A. 857, and quoted with approval in State ex rel. Thomson v. Giessel, 267 Wis. 331, 65 N.W.2d 529, at page 535, as follows: ""Works of internal improvement,' as used in the constitution, means, not merely the construction or improvement of channels of trade and commence, but any kind of public works, except those used by and for the state in performance of its governmental functions, such as a State Capitol, State University, Penitentiaries Reformatories, Asylums, Quarantine Buildings, and the like, for the purpose of education, the prevention of crime, charity, the preservation of public health, furnishing accommodations for the transaction of public business by state officers, and other like recognized functions of state government."'

The response of the defendants to the contention of the plaintiff that the proposed issue of revenue bonds is proscribed by the organic debt limitation, first quoted supra, is that because the state is not bound to pay the bonds in any event, and they are payable solely out of a special fund which is not directly fed by tax revenues, they do not constitute such a debt as is contemplated by this...

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