Henry v. Rockey

• Decision Date: 15 July 1994
• Docket Number: No. S-93-828,S-93-828
• Citation: 518 N.W.2d 658,246 Neb. 398
• Parties: Daniel HENRY, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. Dawn E. ROCKEY, Treasurer of the State of Nebraska, et al., Defendants.
• Court: Nebraska Supreme Court

Page 658

518 N.W.2d 658

246 Neb. 398

Daniel HENRY, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. Dawn E. ROCKEY, Treasurer of the State of Nebraska, et al., Defendants.

No. S-93-828.

Supreme Court of Nebraska.

July 15, 1994.

Syllabus by the Court

1. Constitutional Law: Statutes: Proof. The burden of establishing the unconstitutionality of a statute is on the one attacking its validity.

2. Constitutional Law: Statutes: Proof. The unconstitutionality of a statute must be clearly demonstrated before a court can declare the statute unconstitutional, and all reasonable doubts will be resolved in favor of its constitutionality.

3. Claims: Legislature. As to claims approved by the State Claims Board in excess of $10,000, the Legislature has two affirmative duties: (1) to review the claim and (2) to make an appropriation for the claim if appropriate.

4. Constitutional Law: Statutes: Special Legislation. A legislative act violates Neb. Const. art. III, § 18, as special legislation in one of two ways: (1) by creating a totally arbitrary and unreasonable method of classification or (2) by creating a permanently closed class.

5. Statutes: Special Legislation. The test for statutes challenged under the special-laws prohibitions is that they must bear a reasonable and substantial relation to the object sought to be accomplished by the legislation.

6. Equity. Equity follows the law.

7. Legislature. The Legislature is not vested with unlimited power to make appropriations.

8. Legislature. The purpose of an appropriation bill is to make provision for lawfully taking money out of the state treasury.

9. Legislature. The Legislature is empowered to make appropriations to meet the legal obligations of the state.

10. Legislature. The Legislature is not empowered to make appropriations for purely charitable purposes.

11. Attorney Fees. Attorney fees and expenses may be recovered only where provided for by statute, or where the uniform course of procedure has been to allow such a recovery.

Paula B. Hutchinson and, on brief, David Edward Cygan, Lincoln, for plaintiff.

Don Stenberg, Atty. Gen., and Lisa D. Martin-Price, Lincoln, for defendants.

John W. DeCamp, of DeCamp Legal Services, P.C., Lincoln, for amicus curiae Commonwealth State Securities American Sav. Litigation Committee.

HASTINGS, C.J., and WHITE, CAPORALE, FAHRNBRUCH, and LANPHIER, JJ., HANNON, Judge, and BLUE, District Judge.

PER CURIAM.

This is an original class action wherein Daniel Henry, a Nebraska resident taxpayer, challenges the constitutionality of 1993 Neb.Laws, L.B. 657. In that law, the Legislature appropriated a total of $16.5 million over 4 bienniums to reimburse depositors of the failed Commonwealth Savings Company, State Security Savings Company, and American Savings Company (hereinafter, collectively, Commonwealth creditors).

We find L.B. 657 to be unconstitutional special legislation in violation of Neb. Const. art. III, § 18.

FACTS

The following facts have been stipulated by the parties:

On November 1, 1983, the Nebraska Department of Banking and Finance closed Commonwealth Savings Company and placed it in receivership. The district court for Lancaster County appointed the Department of Banking and Finance as receiver. Two other industrial loan and investment companies, State Security Savings Company and American Savings Company, have sought protection under the Bankruptcy Code but have not been placed into receivership as of the date of a stipulation of facts filed by the parties in this case.

Deposits in the three failed industrial loan companies were insured by the Nebraska Depository Institution Guaranty Corporation (NDIGC), created pursuant to the Nebraska Depository Institution Guaranty Act, Neb.Rev.Stat. § 21-17,127 et seq. (Reissue 1991). This act has not been repealed.

On January 4, 1985, the NDIGC surrendered all of its assets to the Commonwealth receiver, and thereafter had no assets to fulfill its guarantees of deposits. Various types of claims and lawsuits then ensued on behalf of the Commonwealth creditors. Eventually, a compromise amount of $8.5 million was approved for payment of a tort claim of the Commonwealth creditors against the State, and the Legislature appropriated that amount for payment to the Commonwealth receivership. The amount was paid in September 1985.

In return for the payment, both the district court for Lancaster County and the Legislature required the Commonwealth receiver to execute a release of "any and all claims and causes of action on behalf of the receivership and Commonwealth's depositors and creditors which they might have to that point against the State or the State's officers and employees arising out of the Commonwealth collapse, the regulation of Commonwealth and the NDIGC."

In 1990, the Legislature appropriated an additional $33.8 million for Commonwealth depositors. That appropriation was declared unconstitutional. See Haman v. Marsh, 237 Neb. 699, 467 N.W.2d 836 (1991).

On January 25, 1991, the Commonwealth creditors filed a claim with the Office of Risk Management under Nebraska's State Tort Claims Act, Neb.Rev.Stat. § 81-8,209 et seq. (Reissue 1987 & Cum.Supp.1990). On August 13, 1992, the claimants filed a letter requesting that the previously filed tort claim in the amount of $100,902,500 be converted into a miscellaneous claim, which then became claim No. 91-310, under the State Miscellaneous Claims Act, Neb.Rev.Stat. § 81-8,294 et seq. (Cum.Supp.1992).

On November 16, 1992, the State Claims Board approved the claim in the amount of $16.5 million and forwarded its decision to the Legislature for review and appropriation of funds. The Ninety-third Legislature, First Session, enacted L.B. 657 for payment of miscellaneous items of indebtedness in claim No. 91-310. L.B. 657 appropriated (1) $11,100 from the General Fund for "FY1993-94," (2) $11,100 from the General Fund for "FY1994-95," and (3) an additional $16,477,800 from the General Fund, to be disbursed in equal amounts over the following 3 bienniums if the act is challenged in court and upheld as constitutional. L.B. 657 was approved by the Governor on June 7, 1993, and had an operative date of July 1.

On August 23, 1993, Daniel Henry, individually and on behalf of all others similarly situated, filed in this court an "Application for Leave to Commence an Original Action" pursuant to Neb. Const. art. V, § 2. Plaintiff's application was sustained on September 22. Upon application of plaintiff, this court issued a temporary restraining order on October 7 prohibiting the disbursement of funds appropriated pursuant to L.B. 657 until further order of the court.

In his "Original Verified Petition for Declaratory and Injunctive Relief," plaintiff challenges the constitutionality of L.B. 657, requests permanent injunctive relief, and requests an award of attorney fees and costs. Dawn E. Rockey, Treasurer of the State of Nebraska; Lawrence S. Primeau, director of the Department of Administrative Services of the State of Nebraska; and James A. Hansen, director of the Department of Banking and Finance of the State of Nebraska, were named as defendants in their official capacities.

The Commonwealth State Securities American Savings Litigation Committee also filed a brief as amicus curiae in support of defendants.

ISSUES PRESENTED

The issues defined by plaintiff's petition in this original action are whether L.B. 657 is (1) special legislation in violation of article III, § 18, of the Nebraska Constitution; (2) an appropriation in excess of the biennium in violation of article III, § 22, of the Nebraska Constitution; and (3) an unconstitutional delegation of legislative authority to the judiciary.

STANDARD OF REVIEW

The burden of establishing the unconstitutionality of a statute is on the one attacking its validity. Bamford v. Upper Republican Nat. Resources Dist., 245 Neb. 299, 512 N.W.2d 642 (1994). The unconstitutionality of a statute must be clearly demonstrated before a court can declare the statute unconstitutional, and all reasonable doubts will be resolved in favor of its constitutionality. In re Applications A-16027 et al., 242 Neb. 315, 495 N.W.2d 23 (1993).

ANALYSIS

SPECIAL LEGISLATION

Plaintiff contends that L.B. 657 represents the Legislature's attempt to circumvent this court's decision in Haman v. Marsh, 237 Neb. 699, 467 N.W.2d 836 (1991), and to do indirectly what it could not do directly, as indicated by the legislative history of the bill. Plaintiff argues that L.B. 657 is special legislation both because it creates a totally arbitrary and unreasonable method of classification and because it was enacted for the benefit of a closed class, the Commonwealth creditors being a class permanently closed to future members. Plaintiff claims that the taking of money from one class to pay the claims of another class is a violation of the due process and equal protection rights guaranteed by the federal and state Constitutions.

Defendants seek to distinguish the present case from Haman by arguing that L.B. 657 is not a substantive bill, but merely an appropriations bill enacted to pay claim No. 91-310 pursuant to the State Miscellaneous Claims Act, § 81-8,294 et seq. Therefore, they reason, L.B. 657 cannot constitute special legislation. Defendants urge that it is the State Miscellaneous Claims Act which the court must find to be unconstitutional special legislation before the court can find L.B. 657 to be unconstitutional. Thus, our first inquiry must be whether L.B. 657 may constitute special legislation.

We note that 1990 Neb.Laws, L.B. 272A, which this court found unconstitutional in Haman, was also an appropriations bill. Defendants cite no authority for the proposition that an appropriations bill cannot constitute special legislation, nor has our research revealed any such authority. In fact, the express language of the State Miscellaneous Claims Act, as applied to L.B....