State ex rel. Board of University and School Lands v. McMillan

• Decision Date: 06 August 1903
• Docket Number: 6731
• Citation: 96 N.W. 310,12 N.D. 280
• Court: North Dakota Supreme Court

96 N.W. 310

12 N.D. 280

STATE EX REL BOARD OF UNIVERSITY AND SCHOOL LANDS v. MCMILLAN, STATE TREASURER

No. 6731

Supreme Court of North Dakota

August 6, 1903

Original application for mandamus by the state of North Dakota, on the relation of the Board of University and School Lands, against D. H. McMillan, as state treasurer.

Writ denied.

Writ denied.

Newman Spalding & Stambaugh, for defendant.

The act of the legislature authorizing the issue of the bonds in question is unconstitutional and void, being in conflict with section 159 of constitution, in that it diverts a portion of the funds inviolably appropriated and applied to the support of the normal school, to the payment of interest and discount. It is immaterial that the interest is only four per cent, or that there is no danger of the bonds being sold at a sacrifice. If the power to dissipate the fund exist, it is unlimited. Newell v. People, 7 N.Y. 9.

The act is also in violation of section 11 of the Enabling Act. The state took the fund as a trust for the sole purpose of expending its income for "the support of the schools," and not to divert it to the payment of interest and discount on borrowed money. The state is trustee and its power must be strictly construed in favor of the United States and against the state.

Rice v. Minnesota & Northwestern R. R. Co., 66 U.S 358, 17 Law. Ed. 147; Ohio Life Ins. & T. Co. v Debolt, 16 How. 435, 14 L.Ed. 1005; Ashburner v. People of the State of California, 103 U.S. 575, 26 L.Ed. 415; Cornell University v. Fiske, 136 U.S. 152, 34 L.Ed. 427; State v. Ruth, 68 N.W. (S. D.) 190.

The position that the state is powerless to carry out the mandate of the constitution, to establish a system of free public schools throughout the state, "beginning with the primary and extending through all grades up to and including the normal and collegiate course," is untenable. It is true the constitution restricted the power of taxation, but it has placed a limitation upon the restriction. For twelve years the state has proceeded upon the theory that the restriction did not apply to money raised for school purposes and has levied two mills on the dollar for the support of common schools; and for two years pursued the same course with regard to higher institutions. The legislature was left with a free hand; it was to sustain a system of free public schools, from primary up, in a uniform manner by a general state tax, and not on a four mill levy, which should besides, supply the "expenses of the state government. "

The purpose for which the bonds were issued involves the use of the income of the permanent school fund for a purpose in conflict with section 11 of the Enabling Act and with section 159 of the constitution. The act provides "a fund for the erection and equipment of additional buildings and other needed improvements." The bonds are to be paid from the income of that portion of the "permanent school fund" belonging to that school; while section 11 of the Enabling Act provides that such "income shall be expended in the support of said school." Section 159 of the constitution shall provide that it "shall be inviolably appropriated and applied to the specific objects of the original grant." The purpose of the act is the support of the normal school. The word "support" does not include erection and equipment of buildings, and the making of improvements. Support does not mean create; it implies the previous existence of the thing supported. In early acts of congress making similar grants, the word "use" had a broader significance. The words "for the use of the institutions" cannot warrant the employment of funds "in the erection of buildings." Mitchell et al. v. Colgan, 54 P. 905 (Cal. ). The building of new school houses and purchase of sites do not come within the well defined exception of "support of common schools." Sheldon v. Purdy, 49 P. 228.

The act is unconstitutional and void, and the bonds issued under it void, so far as they create a contingent liability of the state for the payment of any portion of the interest thereon.

The state is the guarantor of the interest. The appropriation is void, in that it diverts taxes levied for other purposes to the payment of such interest. Under existing laws, there can be no "unappropriated" funds in the treasury. The tax levy must be based upon the aggregate of appropriations, permanent and temporary, and cannot exceed that sum. Houghton v. Austin, 47 Cal. 646; Savings and Loan Association v. Austin, 46 Cal. 416. The tax must be preceded by a law authorizing it, and stating the purposes to which it shall be applied, and the amount of the tax must necessarily be determinable before the tax can be lawfully levied. Section 175, Constitution.

The provision in question attempts to appropriate the money, without a levy of a tax to meet the appropriation. The amount of tax necessary cannot be levied, until a specific appropriation of a definite sum is made for the purpose, and the amount necessary for the purpose cannot be determined until the payment is due. But if the act is insufficient as an appropriation, the state must enact further laws to pay the deficiency of interest. The obligation is precisely the same as to pay any other debt. But it is conceded that the state debt already equals the constitutional limit. The obligation is, therefore, forbidden by the constitution. Section 182 Constitution.

The school fund cannot be invested in obligations of the state in excess of debt limit. Re Loan of School Funds, 32 P. 273, Newell v. People, 7 N.Y. 9.

The state treasurer may in his discretion refuse to pay any warrant that he is satisfied is drawn for an unlawful purpose, and it is always a sufficient answer in a mandamus proceeding for him to establish such unlawful purpose.

Bailey v. Lawrence Co., 51 N.W. 331; Keller v. Hyde, 20 Cal. 594, High Ex. Leg. Rem. sections 354 and 360. Dempsey v. Board, 20 S.E. 811; State v. Yeatman, 22 Ohio St. 546; State v. Langlie, 5 N.D. 594, 67 N.W. 958; State v. Heard, 18 So. Rep. 746; First National Bank of Topeka v. Hefflebower State Tr., 51 P. 225; Wilson v. Bradley, 48 S.W. 166; State ex rel. Wiles v. Albright, 11 N.D. 22, 88 N.W. 729.

C. N. Frich, attorney general, and Guy C. H. Corliss, for relators.

Section 156 of the constitution makes certain officers the Board of University and School Lands, and declares that such board shall have control of such lands, and direct the investment of the funds arising therefrom, in the hands of the state treasurer. The legal control of the funds is in this board, and the treasurer is the mere custodian of the uninvested money. The treasurer is merely a trustee. The board has absolute control over the fund with power to invest the same; when it has decided upon an investment, directed the auditor to draw a warrant, the duty of the treasurer is simply unescapable. He must pay the warrant. The treasurer cannot set up his judgment as to the legality of a contemplated investment as against the judgment of the board, when the law has entrusted such matter to the board's control. An officer is protected in executing a process fair on its face, although he may know facts outside of the process that render it void.

Webber & Hand v. Gay & Eysamen, 24 Wend. 485; The People v. Warren, 5 Hill. 440; Watson v. Watson, 9 Conn. 140; Taylor v. Alexander et al., 6 Ohio 147; Wall v. Trumbull, 16 Mich. 234; Erskine Collector, v. Hohnbach, 14 Wall. 613, 81 U.S. 1570, 20 L.Ed. 745; Orr v. Box, 22 Minn. 485; Brown v. Harris, 52 Mo. 306; The Mayor, etc., of City of Jefferson to use of Pacific R. R. v. Opal et al., 49 Mo. 190; Stutsman County v. Wallace, 142 U.S. 293, 12 S.Ct. 227; Harding v. Woodcock, 137 U.S. 43, 11 S.Ct. 6; Wilmarth v. Burt, 7 Metc. 257, 23 Am. & Eng. Enc. L., 379; Mechem on Public Officers, sections 768, 769; Throop on Public Officers, section 759; Thurston v. Martin, 5 Mason 300.

A ministerial officer cannot be held liable in such a case, where the precept or order under which he acts comes to him from the proper source, and is within the apparent authority of the body or officer issuing it.

Savacool v. Boughton, 5 Wend. 170; Bennet v. Burch, 1 Denio 141; Abbott v. Yost, 2 Id. 86; Sheldon v. Van Buskirk, 2 N.Y. 477; Watson v. Watson, 9 Conn. 140; Prince v. Thomas, 11 Id. 472; Neth v. Crofut, 30 Id. 580; Fox v. Wood, 1 Rawle 143; Waldron v. Lee, 5 Pick. 323; Donahoe v. Shed, 8 Metc. 326; Slomer v. Peo, 25 Ill. 70; Hill v. Figley, Id. 156; Dwinnels v. Boynton, 3 Allen 310.

If the officer had knowledge of facts outside of his certificate it would not affect the rule of protection.

Watson v. Watson, 9 Conn. 140; Wilmarth v. Burt, 7 Metc. 257; Brainard v. Head, 15 La.Ann. 489; Peo v. Warren, 5 Hill. 440; Brown v. Harris, 52 Mo. 306; Barr v. Combs, 45 P. 776; Erskine v. Hohnbach, 14 Wall. 613, 81 U.S. 570, 20 L.Ed. 745; Tyler v. Cass County, 1 N.D. 369, 48 N W. Rep. 232; Stutsman County v. Wallace et al., 142 U.S. 293, 12 S.Ct. 227; Staie v. Obert, 36 P. 64, 23 Am. & Eng. Enc. Law (2d Ed.) 379.

The bonds are bonds of the state within the meaning of section 162 state constitution, and proper securities in which to invest the school fund.

The debt created by the issue of these state obligations is not within the prohibition of section 182 of the constitution. The debt contemplated by this section is one that must be met by general taxation. The meaning of this provision of the constitution is, that there shall be no state indebtedness in excess of $ 200,000, to pay the principal and interest of which a state levy of taxes shall be necessary. The bonds issued by the trustees of the Normal School could never become a state debt in the sense of the constitution, for the taxable property of the state can never...