In re Opinion of the Justices

• Decision Date: 02 February 1937
• Parties: In re OPINION OF THE JUSTICES.
• Court: New Hampshire Supreme Court

190 A. 425

In re OPINION OF THE JUSTICES.

Supreme Court of New Hampshire.

Feb. 2, 1937.

Opinion of the Justices of the Supreme Court in answer to questions propounded by resolution of the Governor and Council.

Fred C. Demond and Robert W. Upton, both of Concord, for New Hampshire Water Resources Board.

December 28, 1936, the Governor and Council adopted a resolution that the opinion of the Justices of the Supreme Court be required upon the following questions of law stated therein to be important and raised upon solemn occasion:

(1) Is Laws 1935, chapter 121, section 17, constitutional?

(2) If Laws of 1935, chapter 121, is constitutional in part only, is section 17 constitutional in so far as it authorizes the pledge of the full faith and credit of the state to guarantee the payment of bonds issued in accordance with said chapter for the purpose of raising money to construct a dam on the Connecticut river in Pittsburg to be operated generally in accordance with the terms of a proposed contract voluntarily entered into by certain water users on the Connecticut river and New Hampshire Water Resources Board, a copy of which is transmitted herewith, and are the provisions of said chapter conferring the power of eminent domain constitutional in so far as they may be exercised for the construction of said dam at Pittsburg?

The following answer was returned: To His Excellency the Governor and the Honorable Council:

The resolution of the Governor and Council passed December 28, 1936, relates to a project for the construction by a state agency of a dam across the Connecticut river in Pittsburg. As our opinion should not go beyond assistance to you in the performance of your executive duties (Opinion of the Justices, 73 N.H. 621, 62 A. 969, 5 L.R.A.(N.S.) 415, 6 Ann.Cas. 283; Opinion of the Justices, 75 N.H. 613, 614, 72 A. 754), we have considered the questions submitted only as they bear upon the validity of the Pittsburg project.

We answer the first question in the affirmative. In reaching this conclusion we have considered whether the act (Laws 1935, c. 121) in reality proposes to grant public aid to private industry. To the extent of such a purpose it would be invalid.

It is a recognized principle of constitutional law that taxes may not be imposed for the benefit of private persons or for private uses. State v. Express Co., 60 N.H. 219; Eyers Woolen Co. v. Gilsum, 84 N.H. 1, 146 A. 511, 64 A.L.R. 1196, and cases cited.

"It is an underlying principle of our government that money raised by taxation can be used only for public purposes and not for the advantage of private individuals. The power to levy taxes is founded on the right, duty and responsibility to maintain and administer all the governmental functions of the state, and to provide for the public welfare. To justify any exercise of the power requires that the expenditure which it is intended to meet shall be for some public service, or some object which concerns the public welfare. The promotion of the interests of individuals, either in respect of property or business, although it may result incidentally in the advancement of the public welfare is, in its essential character, a private and not a public object.' Lowell v. Boston, 111 Mass. 454, 460, 461, 15 Am.Rep. 39." Opinion of the Justices, 231 Mass. 603, 611, 612, 122 N.E. 763, 766. "It may therefore be safely asserted that taxation for the purpose of raising money from the public to be given or even loaned to private parties, in order that they may use it in their individual business enterprises, is not recognized as for a public use." Cooley, Taxation, p. 90.

The prosperity of a particular private industry may be a matter of public concern, but such an industry may not be aided at the expense of the state. There is no power of the Legislature to pass "wholesome and reasonable" laws if they are "repugnant or contrary to" the Constitution. Const, pt. 2, art. 5. The subject is fully considered in Eyers Woolen Co. v. Gilsum, 84 N.H. 1, 11, 12, 146 A. 511, 64 A. L.R. 1196, and the decision in that case is of authority which we do not regard as doubtful.

How far a public utility may be state-aided is a question not so readily answered. As defined by statute (Pub.Laws c. 236, § 4), such a utility is an enterprise for furnishing the public with various forms of stated service, of which electricity, with its products of light, heat, and power, is one. Railroads are not included, although in the legal aspects of relationship with the public and of regulatory control they are closely allied with utilities.

In Perry v. Keene, 56 N.H. 514, the Legislature was held to have the right to authorize towns to appropriate money to aid in railroad construction. In State v. Railroad, 75 N.H. 327, 337, 338, 74 A. 542, 547, the subject is thus discussed: "The Legislature has authority to use the powers and funds of the state to secure the construction and maintenance of railroad. * * * The Legislature has no authority to grant a public bounty except in aid of a public purpose. Perry v. Keene, 56 N.H. 514. Such a grant is therefore always subject to the condition or trust that the corporation shall assume an obligation to the state to fulfill the purposes of the grant. * * * The aid may be in the form of a donation of funds, a grant of a monopoly, or a delegation of the power of eminent domain. * * * The trust upon which a railroad receives any of these public bounties is that it will maintain its road as a thoroughfare for the benefit and use of the public upon the payment of reasonable charges." In Canaan v. District, 74 N.H. 517, 70 A. 250, 262, in which the exemption from taxation of property situated in a town and owned and used for public purposes by another municipality was in issue, the court stated the proposition that "If the ownership were entirely private, such private character would not invalidate a general tax exemption granted by the Legislature under constitutional power to provide for the common benefit, protection, and security."

The view that to justify public aid to a private enterprise serving a public purpose, there must be some obligation to the public assumed by the enterprise in consideration for the aid, is discussed in Eyers Woolen Co. v. Gilsum, supra, 84 N.H. 1, 15, 16, 146 A. 511, 518, 64 A.L.R. 1196, with reference to the distribution of electricity, which of itself is said not to be a public use or purpose and the distributor of which must be more than "a strictly private corporation," to entitle the Legislature to confer quasi-governmental privileges upon it. The public must acquire a right. There must be "a trust imposed upon the donation." If the distributor "is a public agent, exercising powers for the public advantage, which are subject to legislative control and enforcement" (McMillan v. Noyes, 75 N.H. 258, 263, 72 A. 759, 762), it has met the test of eligibility.

But there still remains the question of the degree and manner to and in which public aid may be granted. The grant of the power of eminent domain is less doubtful than that of a grant of money or of a tax exemption. In eminent domain the owner whose property is taken is merely forced to exchange it for its value. He makes no contribution and suffers no loss. There is full and measured restitution for the seizure of his property. Eyers Woolen Co. v. Gilsum, supra, 84 N.H. 1, 13, 146 A. 511, 64 A.L.R. 1196. Similarly, in the grant by the state of a monopoly or exclusive privileges, what is taken from others is not what they have, but only the opportunity to acquire. It is more a matter of regulation in the public interest than an exaction from individuals.

In the case of a utility, the enterprise is primarily undertaken by reason of the profit motive. A venture involving service to the public is regarded prospectively by its promoters as one of financial success to its owners. It is as a money-making business that it is entered into and engaged in. Service to the public is thought to be sufficiently promising of a return on the investment to induce it. Whatever direct aid it receives from the public helps it. The public is benefited from the aid it grants because the aid helps to obtain or improve or maintain the service. But the public need of the creation, maintenance, or increase of the service must exist to justify the aid therefor. It must be given for the public use and purpose, and if the public is already adequately served, its aid is essentially for a private purpose. The indirect public advantage of industrial welfare and general prosperity is not a valid reason for the aid. Even if the public advantage takes specific form, such as work for those in need of employment and without employment dependent on public assistance, public aid to the employer is a violation of the constitutional principle against taxation for private purposes. Avoidance of proper public charges may not be accomplished by financial assistance to a private enterprise. If, to attain a proper objective of government, financial assistance might be thus furnished an existing enterprise, it would be equally valid to furnish it to establish a new one.

The woolen mill in the small town of Gilsum may have been as much needed for the town's healthy economic life as the Manchester & Keene Railroad was for the city of Keene, in proportionate equality. But public aid to the mill was forbidden by reason of its wholly private character. No public service was to be rendered in return for the aid. So, with the railroad and the utility, if the aid does not impose the obligation of the service, it is improperly granted. Aid to a utility is forbidden except in protection of the public welfare and interest. And the protection must be in a needed service furnished the public by the utility as a condition of the aid. Without the condition the protective principle is inapplicable. Unconditional aid is not a proper charge of government to be met...