Infants v. Virginia Housing Development Authority

• Court: Virginia Supreme Court
• Writing for the Court: COMPTON; THOMPSON; CARRICO; POFF; CARRICO; THOMPSON
• Citation: Infants v. Virginia Housing Development Authority, 221 Va. 659, 272 S.E.2d 649 (1980)
• Decision Date: 26 November 1980
• Docket Number: No. 791533,791533
• Parties: INFANTS, and other persons under disability, etc., et al. v. VIRGINIA HOUSING DEVELOPMENT AUTHORITY et al. Record

Page 649

272 S.E.2d 649

221 Va. 659

INFANTS, and other persons under disability, etc., et al. v. VIRGINIA HOUSING DEVELOPMENT AUTHORITY et al.

Record No. 791533.

Supreme Court of Virginia.

Nov. 26, 1980.

J. Durwood Felton, III, Richmond (Felton & Fagan, Richmond, on brief), for appellants.

Lee F. Davis, Jr., Richmond (A. J. Brent; William B. Cave; Christian, Barton, Epps, Brent & Chappell, Richmond, on brief), for appellees.

Before CARRICO, HARRISON, COCHRAN, POFF, COMPTON and THOMPSON, JJ.

COMPTON, Justice.

In 1979, the General Assembly amended the Virginia Housing Development Authority Act, Code §§ 36-55.24 to 36-55.52, to empower appellee Virginia Housing Development Authority to finance housing, under limited circumstances, for persons and families of "other" than low and moderate income. In this bond validation proceeding instituted under Code § 15.1-214, the principal issue on appeal is whether the purposes supporting such financing are permissible public purposes under the Constitution of Virginia.

The Authority initiated this litigation in the court below to validate a proposed bond issue in the principal amount of $10 million, the proceeds of which will be used to finance the construction of multi-family housing permitted to be financed under the aforesaid Act as amended. The bonds are sanctioned by an Authority resolution, adopted June 19, 1979, entitled "A Resolution Authorizing the Issuance of Housing Bonds (Portsmouth) of the Virginia Housing Development Authority and for the Rights of the Holders Thereof."

After a reply raising certain constitutional objections had been filed, Code § 15.1-217, by a duly appointed guardian ad litem for infant defendants and other defendants under disability, and after a hearing, the trial court determined that the bonds should be validated. We granted defendants' appeal, filed under Code § 15.1-219, to the October 1979 final order below.

The Authority was created by the General Assembly in 1972 in response to the findings of a legislative Housing Study Commission, which had completed a review of housing needs in the Commonwealth. The study group recommended that a housing finance agency be established to stimulate, through low interest loans, the production of housing for low and moderate income persons within the State.

The Authority is not an agency within the State government but was created as a political subdivision of the Commonwealth; it is "a public instrumentality exercising public and essential governmental functions." Code § 36-55.27. The enabling legislation confers on the Authority, inter alia, the power to sue and be sued, the power to contract, the power to buy, sell and lease real property, and the power to borrow money and issue bonds. Code § 36-55.30. The Authority's major function is to attract capital, through the sale of tax-exempt bonds and notes, and to then utilize the proceeds to make mortgage loans for the development of rental and "ownership housing" for low and moderate income persons. 1979 Annual Report of the Virginia Housing Study Commission Reported to the Governor and The General Assembly of Virginia, H.Doc.No.24 at 25, 2 House and Senate Documents, 1980 Sess.

Under Code § 36-55.41, the Authority is authorized to establish one or more special funds, called "capital reserve funds," to be pledged as security for repayment of the bonds. The Capital Reserve Funds consist of any moneys appropriated or made available by the Commonwealth, any proceeds of sale of notes or bonds, and any "other" sums made available to the Authority for such fund. Under the Resolution, a Capital Reserve Fund is established for the present issue.

Prior to 1978, the purposes of the Act were limited to meeting the needs of low and moderate income families. In 1978, the General Assembly amended the Act by adding Code § 36-55.30:1 to permit the Authority to exercise its power "to increase the availability of housing to persons of all economic income and wealth levels." Acts 1978, ch. 508. The application of that amendment was limited to the City of Portsmouth.

In 1979, the 1978 amendment was repealed by a further amendment. Acts 1979, ch. 374. Under the Resolution in this case, the bonds at issue here are authorized solely for the purpose of making loans to finance developments pursuant to the 1979 amendment. That amendment, inter alia, made extensive changes in Code § 36-55.25 which sets forth the legislative findings and declaration of necessity; it also added § 36-55.30:2 to the Act. These changes appear in italics and by strikeovers as follows:

§ 36-55.25. Finding and declaration of necessity.-It is hereby declared: (a) that there exists within this Commonwealth a serious shortage of sanitary and safe residential housing at prices or rentals which persons and families of low and moderate income can afford; that this shortage has contributed to and will contribute to the creation and persistence of substandard living conditions and is inimical to the health, welfare and prosperity of the residents of this Commonwealth; (b) that it is imperative that the supply of residential housing for such persons and families and for persons and families displaced by public actions or natural disaster be increased; (c) that private enterprise and investment have been unable, without assistance, to produce the needed construction or rehabilitation of sanitary and safe residential housing at prices or rentals which persons and families of low and moderate income can afford and to provide sufficient long-term mortgage financing for residential housing for occupancy by such persons and families; (d) that a concentration of persons and families of low and moderate income even in standard structures does not eliminate undesirable social conditions; (e) that the governing body of a city may in its discretion determine that it is necessary to the preservation of the financial viability of such city and the health, welfare and prosperity of its residents that the population of such city be maintained as economically mixed by providing housing for persons and families of other than low and moderate income in order to broaden the tax bases of such areas; (f) that in providing sanitary and safe residential housing at prices or rentals which persons and families of low and moderate income can afford it may at times be necessary or desirable to provide housing for persons and families of other than low and moderate income; and (g) that private enterprise and investment be encouraged both to sponsor land development and build and rehabilitate residential housing for such persons and families of low and moderate income and to build housing which will prevent the recurrence of slum conditions by housing persons of varied economic means in the same projects or area, and that private financing be supplemented by financing as provided in this chapter in order to help prevent the creation and recurrence of substandard living conditions and to assist in their permanent elimination throughout Virginia.

It is further declared that in order to provide a fully adequate supply of sanitary and safe dwelling accommodations at rents, prices, or other costs which such persons or families can afford and to stabilize or recover a necessary economic mix in urban areas the legislature finds that it is necessary to create and establish a State housing development authority for the purpose of encouraging the investment of private capital and stimulating the construction and rehabilitation of residential housing to meet the needs of such persons and families or to stabilize such areas through the use of public financing, to provide construction and mortgage loans and to make provision for the purchase of mortgage loans and otherwise.

It is hereby further declared to be necessary and in the public interest that such State housing development authority provide for predevelopment costs, temporary financing, land development expenses and residential housing construction or rehabilitation by private sponsors for sale or rental to persons and families of low and moderate income and others; further, to provide mortgage financing for the purposes of supplying sanitary and safe dwelling accommodations at rents, prices or other costs which such persons or families can afford or of stabilizing urban areas, including without limitation, long-term federally insured mortgages; further, to increase the construction and rehabilitation of low and moderate income housing through the purchase from mortgage lenders authorized to make loans in the Commonwealth of mortgage loans for residential housing for persons and families of low and moderate income in this Commonwealth; further, to provide technical, consultative and project assistance services to private sponsors; further, to assist in coordinating federal, State, regional and local public and private efforts and resources; to guarantee to the extent provided herein the repayment of certain loans secured by residential mortgages; and further, to promote wise usage of land and other resources in order to preserve the quality of life we value so highly in Virginia.

Under certain extraordinary conditions as specified in § 36-55.30:1 the HDA may vary from the intent of the preceding findings and declarations.

It is hereby further declared that all of the foregoing are public purposes and uses for which public moneys may be borrowed, expended, advanced, loaned, or granted, and that such activities serve a public purpose in improving or otherwise benefiting the people of this Commonwealth that the necessity of enacting the provisions hereinafter set forth is in the public interest and is hereby so declared as a matter of express legislative determination.

§ 36-55.30:2. Housing Rehabilitation Districts; Economically Mixed Projects.-(a) Whenever it appears to the governing body of any city that a portion of such city (i) is blighted or...