State ex rel. Bd. of Governors of W. Va. University v. O'Brien

• Decision Date: 09 October 1956
• Docket Number: No. 10843,10843
• Citation: 142 W.Va. 88,94 S.E.2d 446
• Court: West Virginia Supreme Court
• Parties: The STATE of West Virginia ex rel. The BOARD OF GOVERNORS OF WEST VIRGINIA UNIVERSITY v. D. Pitt O'BRIEN, as Secretary of State of the State of West Virginia.

Page 446

94 S.E.2d 446

142 W.Va. 88

The STATE of West Virginia ex rel. The BOARD OF GOVERNORS OF WEST VIRGINIA UNIVERSITY v. D. Pitt O'BRIEN, as Secretary of State of the State of West Virginia.

No. 10843.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 5, 1956.

Decided Oct. 9, 1956.

Syllabus by the Court.

Chapter 7 of the 1956 Acts of the Legislature, relating to the issuance of bonds by the Board of Governors of West Virginia University to finance the costs of certain capital improvements, is not violative of Section 4 of Article X of the State Constitution, as authorizing the creation of a debt against the State.

William G. Thompson, Montgomery, Douglas Bowers, Beckley, for relator.

John G. Fox, Atty. Gen., Charles R. McElwee, Asst. Atty. Gen., for respondent.

GIVEN, Judge.

In this original proceeding in mandamus the Board of Governors of West Virginia University, a corporation created by the Legislature, seeks a peremptory writ requiring the defendant, D. Pitt O'Brien, Secretary of State, to place the Great Seal of the State on and attest a certain bond in the amount of one thousand dollars, being one of a series of bonds aggregating ten million dollars proposed to be issued by the board of governors of West Virginia University under authority of Chapter 7 of the 1956 Acts of the Legislature, Chapter 18, Article 11A, Supplement to Michie's 1955 Code, for purpose of financing the 'costs of providing new buildings for the college of agriculture, the agricultural experiment station, the agricultural extension division, the college of engineering, the engineering experiment station, and the school of mines of West Virginia University'. The matter is heard on the petition filed herein, the demurrer of defendant to the petition, certain depositions filed on behalf of petitioners, briefs and oral arguments. No question of fact is in dispute. The single contention of defendant raised by his demurrer is that the issuance of the bonds 'would create a debt against the State of West Virginia, in contravention of Article X, Section 4, of the West Virginia Constitution', which reads: 'No debt shall be contracted by this State, except to meet casual deficits in the revenue, to redeem a previous liability of the State, to suppress insurrection, repel invasion or defend the State in time of war; but the payment of any liability other than that for the ordinary expenses of the State, shall be equally distributed over a period of at least twenty years.'

Section 1 of Chapter 7 of the Act mentioned vests in the board of governors authority to 'issue revenue bonds of the state, not to exceed ten million dollars in principal amount thereof, to finance the costs of providing new buildings for the college of agriculture, the agricultural experiment station, the agricultural extension division, the college of engineering, the engineering experiment station, and the school of mines of West Virginia University. The principal of and interest on such bonds shall be payable solely from the special non-revolving fund herin provided for such payment * * *'. Section 2 provides that '* * * On and after the first day of July, one thousand nine hundred fifty-seven, there shall be paid into such special fund all fees collected under the provisions of section one, article one-a, chapter twenty-five of this code, from students at the university other than students in the schools of medicine, medical technology, dentistry, dental technology nursing and pharmacy, except such fees as are required by that section to be paid into other special funds.

'The board of governors shall have authority to pledge all or such part of the revenue paid into the special university capital improvements fund as may be needed to meet the requirements of the sinking fund established in connection with any revenue bond issue authorized by this article, including a reserve fund for the payment of the principal of and interest on such revenue bond issue when other moneys in the sinking fund are insufficient therefor; and may provide in the resolution authorizing any issue of such bonds, and in any trust agreement made in connection therewith, for such priorities on the revenues paid into the special fund as may be necessary for the protection of the prior rights of the holders of bonds issued at different times under the provisions of this article * * *'.

Section 3 relates to the manner in which such bonds may be authorized, the rights and duties of the bondholders, the form of the trust agreement authorized, and requires that such 'bonds shall be signed by the governor, and by the president of the board of governors, under the great seal of the state, attested by the secretary of the state * * *.' Section 4 authorizes the board to enter into an agreement with a trustee of the bondholders, setting forth the duties of the board in respect to '* * * the payment of the bonds, the fixing, establishing and collecting of the fees hereinbefore referred to, the acquisition, construction, improvement, maintenance, operation, repair and insurance of such building or buildings, the conservation and application of all moneys, the security for moneys on hand or on deposit, and the rights and remedies of the trustee and the holders of the bonds, as may be agreed upon with the original purchasers of such bonds * * *', and Section 5 relates to the manner of the payment of the bonds by the board of governors from the special university capital improvements fund into a special sinking fund, and declares that such fund 'is hereby pledged to and charged with the payment of the principal of the bonds of such issue and the interest thereon * * *'.

Section 6 of the Act reads: 'No provisions of this article shall be construed to authorize the board at any time or in any manner to pledge the credit or taxing power of the state, nor shall any of the obligations or debts created by the board under the authority herein granted be deemed to be obligations of the state.'

Section 1 of Article 1a of Chapter 25 of the Code, as amended, mentioned in Section 2 of the Act of 1956, reads, in so far as material here: 'The governing boards of state educational institutions shall fix enrollment, tuition, registration, and other fees for each semester or school term for the different classes or categories of students enrolling at the state educational institutions, and may include among such fees any one or more of the following: (1) Health service fees; (2) infirmary fees, and (3) student activities, recreational, athletic and extracurricular fees. All fees collected under (1), (2) and (3), shall be paid into special funds and shall be used only for the purposes for which the fees are collected * * *'.

The board of governors, as disclosed by the resolution duly adopted by the board, authorizing the issuance of the bonds, found and declared that the construction and equipment of the proposed buildings 'on land now owned by the State of West Virginia' were 'necessary and essential for the proper conduct, management and operation of West Virginia University'; that the estimated cost of such construction and equipment is ten million dollars; and that the revenue to be paid into the special fund, as above indicated, 'on and after the first day of July, one thousand nine hundred fifty-seven, will be sufficient to pay the principal of and interest on the Revenue Bonds to be issued pursuant to this resolution as the same mature and become due, and all sinking fund, reserve and other payments provided for in this resolution'.

The resolution authorizing the issuance of bonds provides that payment thereof and any interest thereon 'will be paid solely from said revenue which on and after the first day of July, one thousand nine hundred fifty-seven, is required by said Article II-A of Chapter 18 of the West Virginia Code (Michie 1955), as amended and supplemented, to be paid into the Special University Capital Improvements Fund, and shall not constitute a debt or obligation, general, special or otherwise, of the State of West Virginia.' The proposed bond to which the defendant refused to affix the seal, exhibited with the petition, provides that 'This bond does not constitute an indebtedness of the State of West Virginia within the meaning of any constitutional provisions or limitations'.

As above noted, the only question before the Court is whether the Act of the Legislature authorizing the issuance of the bonds would create a debt within the meaning of the constitutional provision quoted above. Petitioner contends that since the bonds are payable out of a special fund not derived from public taxation, the indebtedness to be created by the issuance thereof can not constitute a debt within the meaning of the constituional provision, while defendant contends that the issuance of the bonds will constitute such a debt, especially since part of the revenues required to be paid into such special fund will be derived from income to be received from existing facilities belonging to the State, which revenues have heretofore been applied to the maintenance or operation of the university, arguing that the requirement of the payment of such funds into the special fund will, of necessity, require additional revenues to be raised by taxation for the purposes of maintaining and operating the university.

The question posed is not easily answered. Perhaps any answer may leave disturbing doubts and uncertainties in the opinions...