Hanly v. Sims
| Decision Date | 16 December 1910 |
| Docket Number | 21,573 |
| Citation | 93 N.E. 228,175 Ind. 345 |
| Parties | Hanly v. Sims, Secretary of State, et al |
| Court | Indiana Supreme Court |
Rehearing Denied March 15, 1911, Reported at: 175 Ind. 345 at 356.
From Superior Court of Marion County (77,911); Vinson Carter Judge.
Suit by J. Frank Hanly against Fred A. Sims, as Secretary of State and others. From a judgment for defendants, plaintiff appeals.
Affirmed.
Hanly, McAdams & Artman, for appellant.
James Bingham, Attorney-General, Addison C. Harris, James W. Emison, Harrison Burns and Willoughby & House, for appellees.
OPINION
Appellant commenced this suit in the lower court as a taxpayer to enjoin the attestation, delivery and acceptance of certain bonds of the State known as the "Vincennes University Bonds," authorized by an act of the legislature, passed over the Governor's veto on March 9, 1907 (Acts 1907 p. 497), entitled "An act entitled an act providing for the issuing of bonds and coupons of the State of Indiana for the liquidation and payment of the claim of 'The Board of Trustees of the Vincennes University' against the State, in full and final settlement of said claim and of all other demands." Judgment below was rendered upon a demurrer, on the ground of insufficient facts, to each of the two paragraphs of complaint. The sustaining of the demurrer as to each paragraph is assigned as error.
The first paragraph of the complaint sought an injunction against the formal attestation, delivery to and acceptance by the board of trustees of the Vincennes University of bonds of the State payable to bearer in the aggregate amount of $ 120,548, which bonds were to be issued under and by virtue of the aforesaid act. The contention of appellant is that said act is unconstitutional and void for the following reasons: (1) It is in violation of article 10, § 5, of the Constitution of the State of Indiana, which provides that "no law shall authorize any debt to be contracted on behalf of the State, except in the following cases: To meet casual deficits in the revenue; to pay the interest on the state debt; to repel invasion, suppress insurrection, or, if hostilities be threatened, provide for the public defense." (2) It is in violation of article 4, § 24, of the Constitution of the State of Indiana, which provides that "no special act * * * making compensation to any person claiming damages against the State, shall ever be passed." (3) It is in violation of section twenty-one of our Bill of Rights, which provides that "no man's property shall be taken by law without just compensation." (4) It requires that the public funds be used for private purposes, and makes a gift of the public funds for private uses.
The second paragraph of complaint sets forth the same general facts as the first, and avers that at the time of the passage of said act the State was not indebted to the board of trustees of the Vincennes University in any sum on account of the matters embraced in the act and its preamble. Certain historical data, giving rise to this controversy and in support of the denial of liability, are set out in detail, the substance of which is as follows: That in 1804 the Congress of the United States granted to the Territory of Indiana, for the use of a seminary of learning, a township of land to be located in the Vincennes land district, and to contain 23,040 acres; that on October 10, 1806, the Secretary of the Treasury located and set apart, as constituting said grant, township two south, range 11 west, in the Territory of Indiana; that by an act of the territorial legislature approved November 29, 1806 (Acts 1806 p. 6), and supplemented by an act approved September 17, 1807 (Acts 1807 p. 436), the board of trustees of the Vincennes University was duly incorporated, and under authority given in its charter sold 4,000 acres of said land prior to January 22, 1820; that on January 22, 1822, 19,040 acres of said grant remained, which the State, through its General Assembly, erroneously assumed to own, and directed that it be sold and the proceeds paid into the state treasury; that the State did sell to numerous persons, prior to May 4, 1846, 16,840 acres of said real estate; that in 1844 the board of trustees of said university commenced suits in ejectment against various purchasers, who on that account memorialized the General Assembly of 1846, and an act was thereupon passed, and approved January 17, 1846 (Local Laws 1846 p. 233), entitled "an act to authorize the trustees of the Vincennes University to bring suit against the State of Indiana and for other purposes." That in pursuance of this act on May 4, 1846, suit was commenced in the Marion Circuit Court by said board of trustees against the State, in which a final judgment was rendered on May 21, 1849, in favor of the complainants for $ 48,778.02, of which $ 13,249.19 was paid by turning over to the board unpaid obligations for purchase money then in the hands of the State, and the remaining $ 35,528.83, with interest, was paid by the issuance of bonds, which had been fully redeemed and paid prior to March 9, 1907; that between May 4, 1846, and March 11, 1895, the State sold and conveyed, at given dates, 2,141.75 acres of said lands for a total consideration of $ 1,547.30; that in the general appropriation bill of March 11, 1895, the General Assembly made an appropriation in favor of the board of trustees of said university in full settlement of all claims against the State in the sum of $ 15,000, which amount was subsequently paid and accepted pursuant to said act. It is finally averred that at the passage of the act of 1907, supra, the State was not indebted to the board of trustees of the Vincennes University in any amount, and the issuance of "said bonds as in said act directed will be a gift and gratuity to said trustees, which the General Assembly has no authority to grant or bestow, and said act is therefore void and of no effect."
The preamble to the act in controversy, after reciting certain historical matters and the fact that a commission consisting of the Secretary, Auditor and Treasurer of State was created in 1903 to investigate and report as to the merits of said claim, and the finding of this commission concludes as follows: "Whereas, the State of Indiana has not rendered to said board of trustees adequate compensation for said lands and the losses thereby sustained, and there is equitably and justly due to said board of trustees by reason thereof said sum so found due by said state officers, amounting to $ 120,548, which sum, in bonds of the State, with interest coupons, said board of trustees will accept in full settlement and payment of said claim and all demands against the State; therefore, be it enacted," etc.
Appellant first insists that the statute before us is invalid, because it purports to authorize a debt to be contracted on behalf of the State for an unauthorized purpose. Prior to 1851 the State had engaged in financing the construction of canals railroads and other internal improvements, which eventually resulted in much extravagance and many vexatious contentions. The section of the present Constitution, restricting the contracting of debts on behalf of the State, and others of like nature, were designed to prevent the State from incurring debts on such account to be paid in the future, and to withdraw and withhold the State's credit from the promotion and construction of public works remotely related to the primary functions of government. The manifest purpose of the General Assembly, in enacting the statute assailed by appellant, was not to contract a debt, but to pay and discharge a preexistent, outstanding obligation. The consideration for the act and contemplated payment was not to be received in the present or in the future, but had been received long before, even prior to the adoption of the constitutional provision upon which appellant relies. This clause of the Constitution does not purport to forbid the payment of an existing debt out of the current revenues. City of Aurora v. West (1857), 9 Ind. 74, 77. If the General Assembly had elected so to do, it might have paid the acknowledged liability to the university, and thereby caused a casual deficit in the revenues, and then would have authority under this provision of the Constitution to go into the money market and contract a debt, by borrowing money to replenish the treasury. If such a thing might be legally accomplished by indirection, it certainly may be done directly. The bonds authorized by the statute in question were designed merely to transform the State's existing liability or indebtedness from an unliquidated claim into a definite amount payable at a particular time. The essence of the debt or liability, and hence the debt itself, was long before existent, and the statute in controversy merely authorized the execution of such evidences of the indebtedness as in the absence of money would be acceptable as payment. This court, in construing article 13 of the state Constitution, which prohibits municipal corporations from creating a debt in excess of two per cent of their taxable property, said: "The issuing of new bonds to provide, at their par value, for the payment of an old debt, or the substitution of new evidences of a preexisting debt, is not, in any legal or proper sense, the creation of a new indebtedness." Powell v. City of Madison (1886), 107 Ind. 106, 114, 8 N.E. 31. See, also, City of Logansport v. Dykeman (1888), 116 Ind. 15, 21, 17 N.E. 587; Aetna Life Ins. Co. v. Lyon County (1890), 34 F. 329; Aetna Life Ins. Co. v. Lyon County (1897), 82 F. 929. It is certainly clear that the issuance of bonds in settlement and payment of an obligation acknowledged to be...
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