In re Opinion of the Justices

• Decision Date: 16 April 1925
• Citation: 128 A. 812
• Parties: In re OPINION OF THE JUSTICES.
• Court: New Hampshire Supreme Court

128 A. 812

In re OPINION OF THE JUSTICES.

Supreme Court of New Hampshire.

April 16, 1925.

Opinion of the Justices of the Supreme Court in response to questions asked in a resolution of the House of Representatives. Questions answered.

Dwight Hall, of Dover for the College.

Frank N. Parsons, of Franklin, for the present procedure.

John R. McLane, of Manchester, and Fred C. Demond, of Concord, opposed.

On March 31, 1925, the House of Representatives adopted the following resolution:

Whereas, the Legislature is considering a reorganization of the methods of bookkeeping and accounting now in use in the office of the state treasurer in relation to trust funds held by the state, and

Whereas, in this consideration questions have arisen as to the legal right and duty of the state in certain particulars, and

Whereas, these questions are of importance and material upon the determination of the proper course to be pursued:

Therefore, be it resolved, that the Speaker of the House be and hereby is directed to obtain from the Justices of the Supreme Court at the earliest possible date their opinions upon the following questions:

I. Under the provisions of the Act of Congress approved July 2, 1862 (12 Statutes at Large, p. 503, c. 130), chapter 2732 of the Session Laws of 1863 and chapter 4216 of the Session Laws of 1866, the state holds a fund of $80,000 known as the "Agricultural College Fund." Prior to September 1, 1884, this fund was invested in bonds of the state of New Hampshire, which matured on that date. Since then the fund has not been separately invested, but has appeared on the books of the state treasurer as a liability, and the state has appropriated, and semiannually paid to the beneficiary, the sum of $2,400 as interest on said fund.

Do the above acts and proceedings of the state constitute a compliance with the obligations of the state with respect to the grant of the fund?

II. Under the provisions of chapter 73 of the Laws of 1883, the state holds a fund known as the "Teachers' Institute Fund." The fund has not been separately invested, but has appeared on the books of the state treasurer as a liability. The state annually credited interest to the fund at the rate of 6 per cent. until May 31, 1896. Since then, in accordance with chapter 57 of the Laws of 1895, the state has credited interest at the rate of 4 per cent. Varying sums have been paid from the treasury each year for the expenses of teachers' institutes and charged to this fund, whose principal, amount on the books of the treasurer is now $59,723.37.

Do the above acts and proceedings of the state constitute a compliance with the obligations of the state under the act of 1883 with respect to this fund?

III. The state holds a fund known as the "Benjamin Thompson Trust Fund." The following exhibits are transmitted relative to this fund:

(1) A copy of the report of the state treasurer for 1892, in which appear copies of the will of Benjamin Thompson and of the contract made by the state with the executors of the will. Reference is also made to chapter 12 of the Laws of 1891, chapter 125 of the Laws of 1903, and chapter 131 of the Laws of 1909.

(2) A schedule showing for each year from 1910 to 1924, inclusive, the amount of the fund, the amount of the original securities, the amount of other investments, and the balances.

(3) A schedule of the cost or appraisal of all securities of the fund which have been sold or which have matured since the fund became accumulated in 1910; also of the receipts from their sale or maturity.

(4) A statement of the income received from the securities since 1910, of the average annual rate thereof, of the actual amounts paid by the state above the income received from securities, and of the average rate paid by the state on balances not invested in securities.

(5) A schedule showing the list of securities now held, together with the original appraised value of such securities and the approximate present market value thereof.

A. Have the acts and proceedings of the state of New Hampshire from 1910 to the present time been in compliance with the obligations of the state, with respect to (1) the principal of the fund; (2) the income of the fund?

B. What is the obligation of the state, for the future, with respect to—

1. Accounting for capital gains or capital losses which may result from the sale or maturity of securities received from the executors of Benjamin Thompson in September, 1891, and now held?

2. The payment of income to the Trustees of the University of New Hampshire?

To the House of Representatives:

Tour Inquiries relate to the obligations of the state in relation to certain funds. It is our understanding that you mean legal obligations as distinguished from those which rest upon other grounds. As to questions of expediency, our opinions could not be required. Opinion of the Justices, 72 N. H. 601. 603, 54 A. 950.

In taking up these questions, the inquiry at once arose whether they did not concern vested rights of the New Hampshire College of Agriculture and the Mechanic Arts; and if they did, whether we ought to express an opinion. In view of the fact that the college is merely a state educational institution, created, managed, and in the main supported by the state, it appeared doubtful whether it could be said to have rights, in a legal sense, as against the state. Further consideration of this question was rendered unnecessary by the action of the college. It appeared by counsel and disclaimed any right to complain of the treatment which the state has accorded to it in the past, or now accords to it, in relation to the subjects of inquiry. In this situation, it seemed clear to us that your questions should be answered.

I. The first question relates to the federal grant of 1862. 12 U. S. St. at Large, c. 130, p. 503. Under this act certain funds came to the state for the use of the college. The act provides that the state may invest the fund in "stocks" of the United States, or of the states, etc. Id. § 4. The Legislature provided that the fund might be invested in the bonds of this state. Laws 1866, c. 4216, § 7. The same thing was done in New York (Cornell University v. Fiske, 136 U. S. 152, 184, 10 S. Ct. 775, 34 L. Ed. 427) and in other states. When the bonds matured in 1884, the item was entered upon the books of the state treasurer as a state debt, and the state has paid to the college 6 per cent. thereon annually since that time. This procedure was in accordance with the legislative direction. Laws 1883, c. 83. The act further declares that—

"The same shall be held * * * as a trust fund for the benefit of said college until otherwise ordered by the Legislature." Id. § 2.

The limitation upon the investment by the act of Congress is not expressed with any technical accuracy. The term "stocks" of a state merely refers to state obligations. It does not prescribe the form that such obligations shall take. It would seem that any form which fairly established the obligation would be sufficient. The form here adopted is the acknowledgment of a sum due, which as between individuals would carry an obligation to pay interest. It has been so treated here, both in the provision of the statute and the practice under it, and the college has had the benefit of a much higher rate of interest than ordinarily would have been obtained by an investment in state bonds.

The procedure is attacked upon the ground that a trustee cannot invest trust funds in his own obligations. We do not think that there was ever any intent that this rule should apply to the states in the administration of federal funds for the benefit of land grant colleges. The bonds of any state were made legal investments for every other state, and if there had been a purpose to exclude the home state from the same right, it would have been expressed. In this aspect of the inquiry, there is no difference between the bond of the state and any other form of its obligation. The practice for the state to invest the fund in its own obligations, or (what is the same thing so far as the security of the fund is concerned) to treat it as an outstanding obligation of the state, was adopted when the fund was first received and has been followed ever since. It is assumed that this action was reported to Congress (12 U. S. Sts. at Large, p. 503, c. 130, § 8), and that no objection to this mode of procedure has ever been made by the donor. This of itself is convincing proof that the procedure adopted does no violence to the donor's purpose. The practice of nearly 60 years, acquiesced in by all who are interested in the subject, is not to be lightly disregarded. It is not to be set aside and declared invalid for technical reasons, nor because the policy of the law inhibits an individual trustee from acting in the manner adopted.

It is our opinion that the acts and proceedings of the state constitute a compliance with the obligations of the state, with respect to the grant of this fund.

II. The Teachers' Institute fund is a creation of the state out of its own funds. No other party has any interest in the matter either as donor, trustee, or beneficiary. It follows that as to this subject the state has no obligations, in any legal sense.

III. Your third inquiry relates to dealings with the property left to the state by Benjamin Thompson, and designed to benefit the New Hampshire College of Agriculture and the Mechanic Arts.

The state being sovereign, and not generally subject to suit, except by its consent, its liabilities are limited accordingly. Kaemmerling v. State, 81 N. H. 405, 128 A. 6. But while it is not subject to legal proceedings, the validity of contracts it may make is a question of law as to which the Legislature is entitled to advice, in order that legislative action may be determined upon the ground that if the state has promised it will not fail to perform. Opinion of the Justices, 72 N. H. 601, 54 A. 950.

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