Roan v. Connecticut Indus. Bldg. Commission

• Decision Date: 26 February 1963
• Citation: 150 Conn. 333,189 A.2d 399
• Court: Connecticut Supreme Court
• Parties: John T. ROAN v. CONNECTICUT INDUSTRIAL BUILDING COMMISSION et al. Supreme Court of Errors of Connecticut

Page 399

189 A.2d 399

150 Conn. 333

John T. ROAN v. CONNECTICUT INDUSTRIAL BUILDING COMMISSION et al.

Supreme Court of Errors of Connecticut.

Feb. 26, 1963.

Milton Sorokin, Hartford, with whom was Ethel S. Sorokin, Hartford, for plaintiff.

Palmer S. McGee, Jr., Hartford, for named defendant.

Albert L. Coles, Atty. Gen., for defendant State Bond Commission.

John W. Barnett, New Haven, for defendant Superior Industries Corporation of Connecticut.

Bruce W. Manternach, Hartford, for defendant Connecticut General Life ins. co.

Before MURPHY, SHEA and ALCORN, JJ., and COMLEY and THIM, Superior Court Judges.

MURPHY, Associate Justice.

The plaintiff seeks a declaratory judgment as to the constitutionality of Public Act No. 542, adopted by the 1961 General Assembly, now chapter 579 of the General Statutes, comprising §§ 32-10 to 32-22. The act created the Connecticut industrial building commission; authorized it to insure the mortgage payments on first mortgages of industrial projects if, in each case, the mortgage does not exceed 90 percent of the cost of the project, nor $5,000,000; and pledged the faith and credit of the state to the performance of the insurance undertaking. The total amount of insured mortgages is not to exceed $25,000,000 at any one time or such an amount as is approved by the state bond commission, whichever is lesser. The building commission has under consideration the application of the defendant Connecticut General Life Insurance Company for the insurance of a $990,000 mortgage loan to the defendant Superior Industries Corporation of Connecticut. Upon a Court has reserved the matter for the Court had reserved the matter for the advice of this court. ¹

The act defines an 'industrial project' as 'any new building or real estate improvement, including remodeling and refurbishing of existing property, in Connecticut and, if a part thereof, the land upon which it is located, all real property deemed necessary to its use, and the extension or provision of utilities, access roads and other appurtenant facilities, which is to be used or occupied by any industry for the manufacturing, processing or assembling of raw materials or manufactured products, or for industrially-connected research facilities, or warehousing, or which the commission determines will tend to provide gainful employment for the people of the state, increase the tax base of the economy and diversify and expand industry.' § 32-10. The governor is authorized to appoint five members to the building commission, at least two of whom shall be experienced in the field of industrial mortgage lending. § 32-11. The commission is to appoint and employ an executive secretary, who is to be its chief administrative officer; § 32-12; and who is to receive all applications submitted to it for insurance. § 32-15. Each application is to be forwarded to the Connecticut Development Credit Corporation, hereinafter called the credit corporation, for an investigation and report as to the advisability of approving the proposed loan for insurance by the commission. Payment to the credit corporation for its services is on a cost basis. Factors which the credit corporation must consider and report on are included in the act. A copy of each application for insurance is to be forwarded to the Connecticut development commission, which is also to receive a copy of the report of the credit corporation. The development commission may submit its recommendations to the building commission. Upon receipt of the report from the credit corporation and after such other action as the building commission deems appropriate, the building commission is to act on the application, but it is prohibited from approving any mortgage unless it finds the project to be financially sound. § 32-15.

The act permits the building commission to insure mortgage payments on approved projects upon such terms as it prescribes and as are provided in the act; adopt rules for the conduct of its business; request advice on projects from municipal officials or planning bodies in the locality involved; and acquire properties to safeguard the commission from losses. § 32-13. Provision is made for the procedure to be followed upon default by the mortgagor. § 32-17. Subject to certain prescribed limitations, mortgages are declared to be legal investments for insurance companies, banks, other financial institutions, fiduciaries and pension, profit sharing and retirement funds. § 32-19. The act created an industrial building mortgage insurance fund which is to be used as a nonlapsing, revolving fund to carry out the purposes of the act, and it authorized the state bond commission to issue bonds of the state in principal amounts not to exceed, in the aggregate, $25,000,000 to finance the fund. §§ 32-14, 32-22. The commission is required to fix the mortgage insurance premiums, to be paid by the mortgagors or mortgagees for the insurance of mortgage payments, at a rate not to exceed 2 percent per year on the outstanding principal obligation. § 32-18. The amount of the premium need not be uniform among the various loans insured. § 32-18.

The plaintiff challenges the constitutionality of this legislation on three grounds: (1) It authorizes the use of public funds and the pledging of the faith and credit of the state for a private benefit which is not incidental to any public purpose. (2) It authorizes the delegation of legislative power to the building commission without adequate standards to guide the commission. (3) It authorizes the delegation of legislative power to a private corporation, the Connecticut Development Credit Corporation, and grants it an exclusive public emolument.

At the outset, it must be borne in mind that, in testing the constitutionality of an act of the legislature, we are not to assess it in the light of what we think of the wisdom and discernment of the law-making body in the particular instance. Rather we are bound to approach the question from the standpoint of upholding the legislation as a valid enactment unless there is no reasonable ground upon which it can be sustained. Cyphers v. Allyn, 142 Conn. 699, 705, 118 A.2d 318; Lyman v. Adorno, 133 Conn. 511, 514, 52 A.2d 702. The burden of proving unconstitutionality rests on the plaintiff. His main argument that the act authorizes the use of public funds for private benefit and is devoid of a public purpose revolves around the claim that the benefit is to accrue to the mortgagee who is authorized to loan money on the project, with the state assuming the loss if the mortgagor defaults or is unable to meet his commitments. That the lenders derive a protection that ordinarily would not exist cannot be denied. But that is merely incidental to the principal reason for this legislation. The legislature was aware that Connecticut, the most industrialized state in the nation, faced competition in retaining its present industries and attracting new industries. Other states had enacted legislation to facilitate the financing of construction for new industry and the renovation and modernization of existing facilities. While the population of Connecticut was increasing, the number of industrial employees was decreasing. Substantial unemployment existed in many industrial areas, and factories which for many years had, in each instance, been the sole industry in a certain area had closed down. Existing plants, to a large extent, are so obsolete and inefficient that considerable manufacturing space is required merely to replace them, and it is also necessary to construct new buildings to provide for the expansion of industry generally. Capital to finance industrial construction is not as readily available as it is for other purposes. Banks and insurance companies are limited by statute in making mortgage loans. §§ 36-70, 36-99, 38-143. Without additional help of an emergency nature, the industrial growth of the state is likely to be impeded and the economy of the state vitally affected.

The act itself does not contain a specific statement of the public purpose sought to be achieved by it. It therefore becomes necessary to consider the entire act to ascertain whether such a purpose can be determined from it. It cannot be denied that the prosperity of this state and the general welfare of its public are dependent upon a healthy, growing industrial complex, diversified in character, housed in modern, up-to-date facilities geared to the technological advances of our times. Providing gainful employment for our people will increase their purchasing power, improve their living conditions, relieve the demand for unemployment or welfare assistance and advance the general economy. New or modernized buildings will add properties to the tax lists and increase the tax base to the general good of the community. That the industry which seeks an insured mortgage may initially benefit by the program because it stimulates the availability of otherwise unattainable financing, or that the mortgagee, who without such insurance would be unable to provide a loan to the extent permitted by the act, could in the event of default call upon the building commission to redeem his investment, is incidental to the prime purpose of the act and is not sufficient to defeat it. Lyman v. Adorno, 133 Conn. 511, 516, 52 A.2d 702. We conclude that the act sufficiently states a public purpose and is not unconstitutional by reason of the fact that the purpose is not spelled out with clarion specificity. Barnes v. New Haven, 140 Conn. 8, 17, 98 A.2d 523.

The commission is an administrative agency of the state. Throughout the years, the number of such agencies has increased in both the federal and the state governments because the problems facing legislative bodies are such that without the agencies many important laws beneficial to the public need could not be administered. In creating an agency to administer a law complete in itself and disigned to...