Nichols v. South Carolina Research Authority
| Decision Date | 25 March 1986 |
| Docket Number | No. 22632,22632 |
| Citation | 351 S.E.2d 155,290 S.C. 415 |
| Court | South Carolina Supreme Court |
| Parties | Richard S. NICHOLS, individually and on behalf of all others similarly situated, Respondent, v. The SOUTH CAROLINA RESEARCH AUTHORITY and Robert E. Henderson, as Director of the South Carolina Research Authority, Appellants. . Heard |
Stephen G. Morrison, George B. Wolfe and Arthur L. Coleman, all of Nelson Mullins, Grier & Scarborough, Columbia, for appellants.
Charlton deSaussure, Jr., of Sinkler, Gibbs & Simons, Columbia, for respondent.
Atty. Gen. T. Travis Medlock, Chief Deputy Atty. Gen Joseph Wilson, II, and Sr. Asst. Atty. Gen. Kenneth P. Woodington, Columbia, for S.C. Coordinating Council for Economic Development, amicus curiae.
Richard S. Nichols (Nichols), a South Carolina citizen and taxpayer, brought this class action for declaratory and injunctive relief to determine the constitutionality of Act No. 50 of 1983, as amended by Acts Nos. 308 and 309 of 1984 (the Act). See S.C. Code Ann. § 13-17-10 et seq. (Supp.1985). The Circuit Court held several provisions of the Act to be unconstitutional, and certain actions contemplated by the South Carolina Research Authority (the Authority) to be ultra vires. We affirm in part and reverse in part.
Additionally, we overrule so much of Byrd v. County of Florence, 281 S.C. 402, 315 S.E.2d 804 (1984), as holds that industrial development is not a public purpose for which public revenues may be appropriated and expended.
The Act creates the Authority in order "to promote the development of high technology industries and research facilities in South Carolina" and "to enhance the research capabilities of [South Carolina's] public and private universities." S.C.Code Ann. § 13-17-20 (Supp.1985).
The Authority's primary function is to construct and thereafter to operate three research parks. The State Budget and Control Board transferred some 1500 acres of real property to the Authority for this purpose. Additionally, the Authority is empowered to borrow money and to issue revenue bonds to finance its activities. See S.C. Code Ann. § 13-17-70(8) (Supp.1985).
The Authority has stipulated it intends to pledge the 1500 acres to secure obligations of private firms which locate in its industrial parks. It plans to offer real estate for sale at less than full market value in order to attract new industries. The Authority also contemplates entering into joint ventures with certain industries.
The Authority contends the Circuit Court erred in holding that its proposed activities would contravene certain constitutional and statutory provisions. It argues these provisions are inapplicable because it is not an agency of the State.
The Authority's appeal presents five issues:
(1) Whether the Authority is an agency of the State;
(2) Whether the mortgaging of the Authority's 1500 acres would constitute a pledge of the State's credit;
(3) Whether the Authority may enter into joint ventures with private firms (4) Whether the Authority may transfer its property for less than full market value; and
(5) Whether a provision of the Act giving the Authority an election to comply with the Advanced Refunding Act is unconstitutional as special legislation.
In addition, we granted the Authority permission to argue against the precedent of Byrd, supra. Accordingly, as a sixth issue we determine:
(6) The precedent of Byrd.
The threshold inquiry is whether the Authority is an agency of the State. The parties agree that if the Authority is held not to be a State agency, certain of the remaining issues are mooted because various alleged constitutional and statutory proscriptions would be inapplicable.
The Circuit Court held the Authority to be a State agency, reasoning as follows:
(1) The Act itself recites that the Authority is a "corporation owned completely by the people of the state." S.C.Code Ann. § 13-17-90 (Supp.1985).
(2) The Authority is empowered to issue revenue bonds under the Advanced Refunding Act, S.C.Code Ann. § 11-21-10 et seq. (1976), which is applicable to public agencies.
(3) Public agencies include the State of South Carolina, its agencies and institutions and every other agency or political entity of the State authorized to issue general obligation or revenue bonds. S.C.Code Ann. § 11-21-10(5) (Supp.1985).
(4) In 1984, the Act was amended to exempt the Authority from various general law provisions applicable to State agencies and employees. See S.C.Code Ann. § 13-17-170 (Supp.1985). If the Authority were not an agency, such legislation would have been unnecessary.
We agree with the reasoning cited above and hold the Authority to be an agency of the State.
Under the Act, the Authority is empowered:
... [T]o secure the payment of the obligations or any part by mortgage, lien, pledge, or deed of trust, on all or any of its property ... S.C.Code Ann. § 13-17-70(8) (Supp.1985).
To mortgage, pledge, hypothecate, or otherwise encumber the property, real, personal, or mixed, or notes, bonds, evidences of indebtedness, or other obligations of the authority; provided the authority shall have no authority to pledge the credit and the taxing power of the State or any of its political subdivisions ... [Emphasis supplied]. S.C.Code Ann. § 13-17-70(12) (Supp.1985).
The Authority has stipulated it "intends in some instances to pledge its assets through mortgage or other encumbrance of its property to secure the obligations of high technology industries which locate in its research parks."
The issue here, stated simply, is whether the Authority may mortgage the 1500 acres of real property transferred to it by the State Budget and Control Board. The Circuit Court held such a mortgage would violate the above-emphasized proviso of § 13-17-70(12) which proscribes the pledging of the State's credit. We disagree.
The Authority concedes it is proscribed from pledging the State's credit, but contends a mortgage of the 1500 acres would not do so. We agree.
Nichols relies upon two decisions of this Court for his contention that the mortgaging of the Authority's 1500 acres constitutes a pledge of the State's credit. His reliance is misplaced.
The first, Casey v. South Carolina Housing Authority, 264 S.C. 303, 215 S.E.2d 184 (1975), involved Act 1171 of the 974 General Assembly, which created a $10,000,000 Guaranty Fund to service bonds issued for low cost housing.
Section 14 of Act 1171 required (1) that the Authority report to the Budget and Control Board "the sum, if any, required It is patent that § 14, by its provisions which required the raising of revenue to restore funds necessary to eliminate deficits in the Guaranty Fund, did pledge the State's credit.
to restore the Guaranty Fund to the Guaranty Fund Requirement prescribed in Section 7"; (2) that, in turn, the Budget and Control Board report annually to the General Assembly "the amount necessary to fund such deficit"; [290 S.C. 420] (3) that, "[a]ll sums appropriated by the General Assembly for such restoration shall be deposited in the Guaranty Fund." [Emphases supplied].
Accordingly, we held in Casey:
We are of the opinion that the Act commits the State of South Carolina and, by so doing, pledges its credit to make good any deficit arising because of default under both the Direct Mortgage Loan Program and the Mortgage Purchase Program.
The infirmity in Casey which struck down Act 1171 is absent here. We agree with the Authority that the 1500 acres represent a known, quantifiable asset imposing no potential taxpayer liability, now or in the future. Clearly, the holding in Casey does not apply here.
Next, Nichols cites Clarke v. South Carolina Public Service Authority, 177 S.C. 427, 181 S.E. 481 (1935). In Clarke the constitutionality of Act 887 of the 1934 General Assembly was challenged. Under the Act "[t]he Authority was likewise authorized, without in any way pledging the faith, credit and taxing power of the State, to finance the construction of said project by borrowing money to be evidenced by bonds secured by a foreclosable mortgage on the project."
After holding the Act constitutional the opinion in Clarke contains dicta in which reference is made to decisions of other jurisdictions forbidding the mortgaging of public property under certain circumstances. However, the opinion also cites with approval other such decisions which specifically hold that the mortgaging of public property, when authorized by legislative Act, does not constitute a pledging of the State's credit. See Hughes v. State Board of Health, 260 Ky. 228, 84 S.W.2d 52 (1935); Brockenbrough v. Board of Water Com'rs, 134 N.C. 1, 46 S.E. 28 (1903); Haesloop v. City Council of Charleston, 123 S.C. 272, 115 S.E. 596 (1923), in which an ordinance donating city owned land to a private developer for erection of a tourist hotel was held valid as a public purpose.
Accordingly, we hold that the mortgaging of the 1500 acres by the Authority does not constitute a pledging of the State's credit.
The Authority has stipulated it intends to engage in joint ventures by receiving "... some degree of ownership in ... high technology firms." The Circuit Court held the Act gives the Authority no express or implied powers to enter into joint ventures with private businesses. Moreover, the Court held such undertakings would violate S.C. Const. art. X, § 11:
... Neither the State nor any of its political subdivisions shall become a joint owner of or stockholder in any company, association, or corporation.
The Authority contends this provision is inapplicable because it is not an agency of the State. As discussed above, we hold the Authority is a State agency.
The constitution clearly prohibits public agencies, such as the Authority, from engaging in joint ownership with private parties. We agree with the Circuit Court and...
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