Carso v. Board of Liquidation of State Debt

• Decision Date: 07 February 1944
• Docket Number: 37367.
• Citation: 17 So.2d 358,205 La. 368
• Court: Louisiana Supreme Court
• Parties: CARSO v. BOARD OF LIQUIDATION OF STATE DEBT.

17 So.2d 358

205 La. 368

CARSO v. BOARD OF LIQUIDATION OF STATE DEBT.

No. 37367.

Supreme Court of Louisiana

February 7, 1944

Rehearing Denied March 13, 1944.

Eugene Stanley, Atty. Gen., and W. C. Perrault, 2d Asst. Atty. Gen., for defendants-appellants.

Henican Bethea, James & Cleveland and C. Ellis Henican, all of New Orleans, for plaintiff-appellee.

O'NIELL, Chief Justice.

The Board of Liquidation of the State Debt is appealing from a judgment enjoining the board and its members from transferring money from the State's general fund to certain state agencies. The judgment declares unconstitutional Act No. 73 of 1936 and Section 15 of Act No. 266 of 1942, so far as these statutes purport to authorize the board to transfer money from the general fund to any of the state agencies in excess of the specific appropriations made by the Legislature.

The plaintiff is a taxpayer, suing in his capacity as such, and averring that the statutes--Act No. 73 of 1936 and Section 15 of Act No. 266 of 1942--are unconstitutional for the several reasons set forth in his petition. The Governor, as chairman of the board, ex officio, and as one of the defendants in the suit, did not contest the matter, but in his answer stated merely that he desired to abide by whatever judgment the court might render, and that, as only questions of law were presented, he denied the allegations of the petition merely to put at issue the question of constitutionality of the statutes under which a majority of the members of the board claimed authority to make the transfers of which the plaintiff complained.

The board of liquidation and a majority of its members challenge the plaintiff's right of action to maintain the suit in his capacity merely as a taxpayer. But, whatever difference of opinion may have prevailed heretofore on that question, it is now settled by several recent decisions of this court that a taxpayer, as such, has a right of action to enjoin a state official or state agency from disposing of public funds under authority of a statute which the taxpayer contends is unconstitutional. Graham v. Jones, 198 La. 507, 3 So.2d 761; Stewart v. Stanley, 199 La. 146, 5 So.2d 531; Ricks v. Close, 201 La. 242, 9 So.2d 534.

The board of liquidation and a majority of its members pleaded in the district court, by way of an exception to the jurisdiction of the court, that the suit was in effect if not in fact a suit against the State and was therefore forbidden by Section 35 of Article III of the Constitution, because the plaintiff was not authorized by the Legislature to file the suit. But it is begging the question to argue that a suit to prevent a state official or state agency from disposing of funds of the State in violation of the Constitution or of a law of the State is a suit against the State. Such a suit is not a suit against the State, in the meaning of Section 35 of Article III of the Constitution, if the defendant, state official or state agency, is proceeding in violation of law; and that question of course appertains to the merits of the case.

To support their argument that this is a suit against the State, the appellants rely particularly upon State v. Liberty Oil Co. 154 La. 267, 97 So. 438, and State ex rel. Louisiana Trust & Savings Bank v. Board of Liquidation, 136 La. 571, 67 So. 370. Those decisions are not appropriate to this case. State v. Liberty Oil Company was a summary proceeding to collect a license tax for the sale of gasoline, and in the answer to the suit the defendant set up a reconventional demand for license taxes paid under protest before the suit was filed. This court observed that the reconventional demand was not made as an off-set against the demand made by the State but was made as a direct action to obtain a judgment against the State. In the present suit the plaintiff is not asking for a judgment against the State in any sense. The case of State ex rel. Louisiana Trust & Savings Bank v. Board of Liquidation, and the companion cases entitled State ex rel. Commercial Nat. Bank v. Board of Liquidation of State Debt, and State ex rel. Commercial-Germania Trust & Savings Bank v. Board of Liquidation of State Debt, 136 La. pages 571-587, 67 So. 370-375, were suits to control the board of liquidation in the exercise of its authority and discretion in the matter of selecting the banks to serve as the fiscal agencies with which to deposit the State's funds, under the terms of Act No. 205 of 1912, p. 415. The plaintiffs averred that in their bid for a part of the funds to be deposited they had offered a higher rate of interest than the successful bidders had offered. In the opinion rendered in the case (136 La. loc. cit. 585, 67 So. loc. cit. 375) it was said that the words 'to select' had a controlling meaning concerning the performance of the duties of the board, and that it was the province of the board to use all reasonable and appropriate means to secure to the State the best terms and the highest rate of interest consistent with the safekeeping of the State's funds and prompt payment when demanded. In other words, the duty of the board to let the funds to the highest bidder was qualified by the phrase 'consistent with the safety of such funds'. The suits of the complaining banks, therefore, did not have for their object the prevention of a violation of a statutory duty of the board, but had for their object the controlling of the board in the exercise of its judgment or discretion. For that reason the opinion rendered in the cases appertains more to their merits than to the plea that the suits were in effect suits against the State. The object of the present suit is not to control the board of liquidation in the exercise of its judgment or discretion, but to prevent the board from proceeding under authority of two statutes which are alleged to be unconstitutional. Such a suit against a state official or state agency is not a suit against the State, in the meaning of Section 35 of Article III of the Constitution.

The board of liquidation and a majority of its members filed an exception of no cause or right of action; but, inasmuch as the exception is founded upon the contention of the defendants that Act No. 73 of 1936 and Section 15 of Act, No. 266 of 1942 are not unconstitutional, the exception appertains entirely to the merits of the case.

It was admitted by the members of the board, on the trial of the case, that they intended to make the appropriations or transfers of money from the general fund to the state agencies referred to in the plaintiff's petition. For that reason the only question is whether Act No. 73 of 1936 and Section 15 of Act No. 266 of 1942, under which the board intended to make the appropriations or transfers from the general fund to the state agencies in excess of the specific appropriations made by the Legislature, are, to that extent, unconstitutional.

It is not disputed that Act No. 73 of 1936 purports to confer upon the Board of Liquidation of the State Debt unlimited authority in the matter of transferring money from the State's general fund to any of the agencies of the State, and to that end authorizes the board to disregard the specific appropriations made by the Legislature, and even to suspend the provisions of any law providing for the appropriation or deposit or expenditure or dedication of public funds, for such length of time as a majority of the members of the board may in their judgment deem necessary, to avoid an impairment of the faith and credit of the State or of any parish, municipality or political subdivision of the State. The act provides:

'Section 1. Be it enacted by the Legislature of Louisiana, That when a majority of the members thereof shall determine that it is necessary on account of the postponement of taxes, the unavoidable delay in the assessment of property, or for the protection of the faith and credit of the State or of any of its parishes, municipalities, political subdivisions, public boards or corporations, or to adjust the financial affairs of the State so that there may be no impairment of the faith and credit of the State or of its obligations, the Board of Liquidation of the State Debt be, and it is, hereby authorized to suspend the provisions of any law of this State providing for the appropriation, deposit, expenditure or dedication of public funds for such periods of time, and from time to time, as in the opinion of such majority may be necessary to prevent impairment of the faith and credit, contracts or obligations of the State or any such parish, municipality, political subdivision, board or corporation; and the Board of Liquidation of the State Debt may, when a majority of said board shall determine that it is necessary to protect the faith and credit of the State, or of any of its parishes, municipalities, political subdivisions, boards or corporations, or to adjust the financial affairs of any of them, or that it is to the best interests of any of them, transfer any sum of money appropriated, deposited or dedicated by any law of this State from the purpose for which such appropriation, deposit or dedication was made to other purposes by decreasing, adding to or increasing one or more items, or adding new items, of appropriation, deposit or dedication or by providing that such increases or additions shall be paid out of the general fund.

'Section 2. That in determining the questions of fact to form the basis of the proper exercise of the authority conferred by this act, the Board of Liquidation of the State Debt shall consider full and as nearly accurate information as possible relative to the amounts necessary to pay out and the probable receipts from all sources of revenue, may require reports of the State Treasurer and the State...