Industrial Development Authority of City of Chesapeake v. Suthers

• Decision Date: 12 June 1967
• Court: Virginia Supreme Court
• Parties: INDUSTRIAL DEVELOPMENT AUTHORITY OF the CITY OF CHESAPEAKE v. Harold F. SUTHERS, Chairman, etc.

Page 326

155 S.E.2d 326

208 Va. 51

INDUSTRIAL DEVELOPMENT AUTHORITY OF the CITY OF CHESAPEAKE v. Harold F. SUTHERS, Chairman, etc.

Supreme Court of Appeals of Virginia.

June 12, 1967.

Harry Frazier, III, Richmond (Jack H. Spain, Jr., Hunton, Williams, Gay, Powell & Gibson, Richmond, on brief), for petitioner.

James M. Pickrell, Norfolk (James A. Johnson, Norfolk, Kellam & Kellam, Virginia Beach, on brief), for respondent.

Before EGGLESTON, C.J., and SPRATLEY, BUCHANAN, SNEAD, I'ANSON, CARRICO, and GORDON, JJ.

ORIGINAL PETITION FOR WRIT OF MANDAMUS

CARRICO, Justice.

This original proceeding for a writ of mandamus (Code, § 17--96) brings under consideration the constitutionality of the Industrial Development and Revenue Bond Act and the validity of certain actions taken pursuant thereto.

The Act was adopted by the General Assembly at its 1966 session and is set out in Chapter 651, Acts of Assembly, 1966, p. 998 and in Code, §§ 15.1--1373 to 15.1--1390. (1964 Repl.Vol.)

The Act authorizes the governing body of any county, city, or twon to create by ordinance an industrial development authority as a political subdivision of the Commonwealth with such public and corporate powers as are set forth in the Act to acquire, own, lease, and dispose of properties for the promotion of industry and the development of trade in such county, city, or town.

On September 13, 1966, the council of the city of Chesapeake adopted an ordinance creating the Industrial Development Authority of the City of Chesapeake, which we will hereafter call the Authority.

Following its creation, the Authority by assignment succeeded to the interest of the Chesapeake Port and Industrial Authority in an Interim Financing Agreement which had been entered into on May 25, 1966, between the Port Authority, Evans Products Company, the city, and the Virginia National Bank.

Evans, a Portland, Oregon, firm, early in 1966 indicated a disire to establish a manufacturing plant on the East Coast. Officials of Chesapeake encouraged Evans to locate in their city. Evans expressed a willingness to do so provided the Port Authority would acquire an acceptable site, construct thereon and equip a plant, and lease the facilities to Evans.

The cost of the project was proposed to be financed by revenue bonds to be issued by the Port Authority. However, bond counsel for the Port Authority would not approve the validity of the proposed bonds without a decision from this court supporting the Port Authority's power to issue the bonds.

Evans was unwilling to delay construction of the plant until completion of the litigation. Consequently, the Interim Financing Agreement was entered into under which it was agreed that the Virginia National Bank would lend the Port Authority $2,000,000 or more to finance the Evans project, that the Port Authority would repay the loan from the proceeds of the sale of tax exempt revenue bonds to be issued when approval was given therefor by bond counsel, and that Evans would guarantee payment of the loan if such bonds were not issued.

The assignment to the Authority of the Port Authority's interest in the Interim Financing Agreement was made pursuant to the provisions of the Agreement. After the assignment, the Authority borrowed funds from the Bank, purchased a suitable site, and undertook construction of the plant.

The Authority, by resolution, authorized the issuance of revenue bonds in the aggregate principal amount of $3,400,000 to be secured by an Indenture of Mortgage and Deed of Trust. Proceeds from the sale of the bonds were to be used to discharge all obligations incurred by the Authority to acquire land and to construct and equip the Evans plant. The Authority also authorized the execution of a lease of the project to Evans for a period of twenty-five years.

The Authority directed its chairman and its secretary, acting on its behalf, to execute and deliver the Indenture and the lease. The respondent in this proceeding, Harold F. Suthers, the chairman of the Authority, refused to execute the documents, posing seven questions challenging the constitutionality of the Industrial Development and Revenue Bond Act and the validity of certain of the actions of the Authority with regard to the Evans transaction. The Authority's petition for a writ of mandamus seeks the resolution of those questions and the award of a writ requiring the respondent to execute the documents in question.

In the recent case of Fairfax County Industrial Development Authority v. Coyner, 207 Va. 351, 150 S.E.2d 87, we had before us the question of the constitutionality of Chapter 643, Acts of Assembly, 1964, p. 975. In that legislation, the General Assembly created industrial authorities for the county of Fairfax and the cities of Virginia Beach and Danville. We upheld the financing of industrial development by the Fairfax Authority by the use of revenue bonds similar to those proposed to be issued by the Authority in this case.

The respondent contends, however, that there are substantial differences between the legislation creating the Fairfax Authority and the Act presently under review and that those differences render the Act unconstitutional. We turn now to the respondent's contentions.

I.

The respondent contends that legislature unlawfully delegated its power when it authorized the local governing bodies to create industrial authorities as political subdivisions of the state, rather than to create such authorities itself, as it did in the case of the Fairfax Authority.

Such delegation of power, the respondent first says, is violative of § 154 of the Constitution, which provides that the creation of corporations and the amendment of corporate charters shall not be by special act but shall be provided for by general laws.

The respondent then argues that 'a political subdivision such as that in issue here is in the nature of a municipal corporation' and that the Act 'permits a municipality to create what amounts to a corporation by special act, in direct contravention of Section 154.'

But § 154 does not apply to municipal corporations. The section is a part of Article XII of the Constitution entitled 'Corporations.' Section 153, another part of that article, provides that the term 'corporation' as used in the article shall 'exclude all municipal corporations.' This court noted the clear exclusion of municipal corporations from the application of Article XII of the Constitution in the case of Strawberry, Etc. v. Starbuck, 124 Va. 71, 78, 97 S.E. 362.

Moreover, the prohibition of § 154 is against the creation of corporations by special act. The legislation before us is not a special act but a general law applicable throughout the state, conferring upon the governing body of 'any county or incorporated city or twon' the authority to exercise the powers thereby granted. (Code §§ 15.1--1374, 15.1--1375, 15.1--1376.)

The respondent next says that the Act contravenes § 39 of the Constitution providing for the separation of the powers of government.

The respondent relies upon the case of Carolina-Virginia Coast H. v. Coastal Turnpike Auth., 237 N.C. 52, 74 S.E.2d 310, in which the North Carolina Supreme Court declared invalid an act of the legislature which vested in an administrative board the authority to determine whether construction of a toll highway or bridge would be in the public interest. The court held that the legislation was 'violative of Article II, Section 1, of the State Constitution which inhibits the Legislature from delegating its supreme legislative power to any other department or body.' 74 S.E.2d, at p. 318.

Here, we are not dealing with the delegation of power to a mere administrative agency foreign to the legislative process but to the local governing bodies which are a part of the legislative arm of the state. The legislature, in enacting the Act before us, has determined that the promotion of industry and the development of trade by industrial authorities are in the public interest. That determination is presumed to be correct. Fairfax County Industrial Development Authority v. Coyner, supra, 207 Va., at p. 351, 150 S.E.2d 87.

With the guideline of public interest before them, the local governing bodies are empowered to determine when local conditions, with which they are far more familiar than is the legislature, warrant the creation of industrial authorities and then, by the adoption of ordinances, to trigger into effect the powers conferred upon such authorities by the General Assembly. There is no question that the council of the city of Chesapeake acted in the public interest when it created the Authority.

The same argument as is advanced here concerning the separation of the powers of government was advanced in the case of Farquhar v. Board of Supervisors, 196 Va. 54, 82 S.E.2d 577, where we considered the constitutionality of the Virginia Water and Sewer Authorities Act (Code, §§ 15.1--1239 to 15.1--1270) under which the city of Alexandria, Virginia, Sanitation Authority had been created.

The Virginia Water and Sewer Authorities Act delegated to local governing bodies the power to create by ordinance sewer and other similar authorities. (Code, § 15.1--1241.)

In answer to the objection that such a delegation of power was unlawful because it was violative of the constitutional admonition that the legislative, executive, and judicial departments should be kept separate and distinct, we stated, 'We see in the Act no breach of that injunction.' 196 Va., at p. 70, 82 S.E.2d, at p. 587.

Respondent's final argument in support of his contention that there is an unlawful delegation of power involved in the Act is that the type of organization in issue here may be created only by the General Assembly because § 147 of the Constitution provides that public welfare and other public and charitable institutions 'shall be established and operated by the Commonwealth under such organization and in such manner as the...