Massachusetts Housing Finance Agency v. New England Merchants Nat. Bank of Boston

• Decision Date: 11 June 1969
• Citation: 356 Mass. 202,249 N.E.2d 599
• Parties: MASSACHUSETTS HOUSING FINANCE AGENCY v. NEW ENGLAND MERCHANTS NATIONAL BANK OF BOSTON et al. 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 599

249 N.E.2d 599

356 Mass. 202

MASSACHUSETTS HOUSING FINANCE AGENCY v. NEW ENGLAND MERCHANTS NATIONAL BANK OF BOSTON et al.

¹

Supreme Judicial Court of Massachusetts, Suffolk.

Argued May 8, 1969.

Decided June 11, 1969.

John F. Bok, Boston, for plaintiff.

Joseph W. Bartlett, Boston, for defendants.

Charence A. Roberts, David M. Roseman, Thomas J. Gallagher, Jr., and Harley M. Smith, Boston, for Greater Boston Real Estate Board, amicus curiae.

George M. Hughes and James W. Perkins, Boston, for Interfaith Housing Corporation and another, amici curiae.

Before WILKINS, C.J., and WHITTEMORE, CUTTER, SPIEGEL, and REARDON, JJ.

CUTTER, Justice.

The plaintiff (MHFA) brings this bill for declaratory relief to determine whether two conditions (see fn. 7, infra, and related text of this opinion) of a purchase and sale agreement made by MHFA with the defendants (the banks) have been met. The banks' answer admits the allegations of the bill. It is stipulated in effect that the pleadings may be treated as constituting a case stated. The case was reported without decision by the single justice.

MHFA is 'a body politic and corporate' established by St.1966, c. 708, as amended by St.1968, cc. 671, 709, and 761, § 21. ² Section 5(a) of the Act purports to authorize MHFA to make first mortgage loans to such sponsors of multi-dwelling projects as in MHFA's judgment,, 'have promise of supplying well planned, well designed apartment units which will provide housing for low income persons or families in locations where there is a need for such housing.' ³ MHFA has 'issued commitments (which have been accepted) to provide construction and permanent mortgage financing to * * * four applicants.' Two of these (Interfaith Housing Corporation of Cambridge and Interfaith Housing Corporation) are nonprofit corporations organized under G.L. c. 180. One is a limited dividend corporation. One is a limited dividend partnership. Each applicant is attempting to carry out a housing project. ⁴ MHFA has adopted somewhat imprecise, general regulations governing rental determinations, see § 6(a) of the Act, and the terms of tenant selection plans. ⁵ Section 7(a) of the Act, requires plans to contain criteria ⁶ and income limits for tenant selection 'which may vary with the size and circumstances of the' applicant family and its income. Section 7(a) also provides that 'income limits shall be sufficiently flexible to avoid undue economic homogeneity among * * * tenants * * *, but for the purpose of initial selection, the annual income of the applicant shall not exceed five times the annual rental for the unit to be occupied' (emphasis supplied). Section 7(b) provides that annually 'tenants whose * * * incomes * * * increase' so that they 'exceed six times the rental then being charged * * * shall have * * * (their) rental * * * increased to a figure (not in excess of the market rate rental) which will equal one-sixth of the tenant's then net annual income.'

To raise funds required during the coming twelve months period, MHFA arranged to sell to the banks $7,000,000 temporary MHFA notes to be issued pursuant to § 8 of the Act. On April 7, 1969, the banks notified MHFA that they would not accept delivery of the notes and transmitted to MHFA a copy of an opinion of the banks' counsel which (doubtless largely on the basis of Opinion of the Justices, 351 Mass. 716, 219 N.E.2d 18) raises sertious doubt about the constitutional validity of the Act.

The agreement for the sale of the notes provided, among other things, that the 'obligations of * * * (MHFA) to issue * * * and the * * * (banks) to purchase the (n)otes are subject to' various conditions, the most important of which is '(1) (t)hat the (n)otes, when issued, shall be valid obligations of * * * (MHFA) enforceable in accordance with their terms and duly authority by the Act and the Constitution of The Commonwealth.' Condition (2) is somewhat similar ⁷ and calls for assurance that certain conditional assistance from future appropriations to ensure the repayment of MHFA's notes will be constitutionally permissible. ⁸

In considering the banks' refusal to accept the noties consideration must be given to somewhat complicated, interdependent provisions of the Act in addition of those already mentioned. Among these is § 2 of the Act ⁹ (entitled 'Declaration of Public Necessity'), much relied on by MHFA as justifying the scheme adopted to carry out the Act's purpose. The basic purpose of the Act is expressed in the final sentence of § 2, viz. 'It is * * * imperative that the cost of mortgage financing, which materially affects rental levels * * * be made lower so as to reduce rental levels for * * * low income * * * families, that * * * housing for * * * families displaced by public action or natural disaster be increased, and that private enterprise be encouraged to build housing which will prevent the recurrence of slum conditions * * * by housing persons of varied economic means in the same projects * * *.'

The Act in § 1(d) defines 'low income persons or families' as 'those * * * whose annual income is less than the amount necessary to enable them to obtain * * * decent, safe and sanitary housing without the expenditure of over twenty-five per cent of such income for basic shelter rent plus the additional cost * * * of heat and hot water.' Any precision in § 1(d) is somewhat reduced by the definition of '(a)nnual income' in § 1(e) as 'a family's or person's gross annual income less such reasonable allowances for dependents (other than spouse) and for medical expenses as MHFA determines.' See, however, fn. 12, infra.

By § 5(b) MHFA is authorized to make loans to mortgagors 'whether nonprofit or organized for profit' and may set its interest rates and charges. See § 5(c). The Act, § 5(c) and (d), contains provisions to limit the profit received by mortgagors. Prior to making a loan commitment, see § 5(g), MHFA must make the findings described in the margin. ¹⁰ By § 6(b) it is provided that in 'each project financed * * * not less than twenty-five per cent of the units * * * shall be rented at all times to low income * * * families at the adjusted rental. (See fn. 5.) The remaining units * * * shall be made available at rentals not lower than the below-market rental for the unit and sufficiently high as determined by MHFA to achieve and maintain a fiscally sound project.' Section 6(c) directs that 'rentals received * * * in excess of the belowmarket rental * * * shall be applied, pursuant to * * * (MHFA) regulations * * * to reduce rentals from the belowmarket rental (see fn. 5) to achieve and reduce adjusted rentals' for low income persons.

Section 8 of the Act permits MHFA to issue negotiable bonds and notes to carry out its corporate purposes upon terms and conditions which need not be stated in detail. By § 12 it is stated that MHFA 'will be performing an essential governmental function' and that the Commonwealth 'covenants with * * * holders * * * of the notes and bonds * * * that the (MHFA) notes and bonds * * * and the income therefrom shall at all times be free from taxation.' Later in this opinion (see part 3) there is discussion of § 9 of the Act which provides that the credit of the Commonwealth and its subdivisions shall not be deemed to be pledged.

The banks contend that the Act is invalid, and hence that the conditions precedent (see fn. 7) to their obligation to purchase the MHFA notes have not been met, for three principal reasons, viz. (1) that the Act is not supported by any proper public purpose within Part II, c. 1, § 1, art. 4, of the Constitution of the Commonwealth, at least to the extent that the Act affords rental benefits to families of moderate income; (2) that unduly broad legislative powers have been delegated to MHFA without the provision of proper standards to govern their exercise; and (3) that § 9B(c) of the Act (see fn. 13, infra) improperly requires the Legislature to make appropriations in future years in certain specified circumstances. We discuss below each of these contentions.

We recognize, of course, that the Act resembles the bill (1966 House Bill No. 3696; see 1965 House Doc. No. 4040) considered by the Justices in Opinion of the Justices, 351 Mass. 716, 219 N.E.2d 18. See 1966 Ann.Surv.Mass.Law, § 15.38; note, 80 Harv.L.Rev. 1811. A majority of the Justices there advised (p. 728, 219 N.E.2d 26) that, '(S)o far as the purpose of * * * (that) bill is to provide housing for families of moderate income the bill does not appear to be confined to a public purpose. The possibility that the rents paid by moderate income families, possibly up to seventy-five per cent in a project, will subsidize lower rents paid by low income families is too indirect and uncertain to enable us to say that expenditures of tax money under this bill will be for a public purpose.'

When called upon, as we are now sitting as a court, to deal again with questions once considered in our advisory capacity, we regard it as our duty to consider the issues anew and to guard against any influence which might arise from the prior advisory consideration of the same questions. See Perkins v. Westwood, 226 Mass. 268, 271--272, 115 N.E. 411; Dodge v. Prudential Ins. Co., 343 Mass. 375, 379--380, 179 N.E.2d 234. Our advisory opinions, as the Perkins case indicates, are not 'binding authorities,' but are 'open to reconsideration and revision' (see also Lowell Co-op. Bank v. Co-operative Cent. Bank, 287 Mass. 338, 345, 191 N.E. 921), particularly when (as in the present instance) the legislative proposals, once considered in an advisory capacity, have been subsequently modified and clarified.

1. The intention of the complex statutory provisions of the Act is to make available mortgage financing at favorable interest rates to housing projects in which, in general, one quarter of the tenants will be in the 'low income' category and the other tenants will be of moderate...