State ex rel. McLeod v. Riley

• Decision Date: 20 May 1981
• Docket Number: No. 21456,21456
• Court: South Carolina Supreme Court
• Parties: STATE of South Carolina, ex rel. Daniel R. McLEOD, Attorney General, Plaintiff, v. Richard W. RILEY, Governor of the State of South Carolina, as ex officio Chairman and member of the State Budget and Control Board, Grady L. Patterson, Jr., Treasurer of the State of South Carolina, Earle E. Morris, Jr., Comptroller General of the State of South Carolina, Rembert C. Dennis, Chairman of the Finance Committee of the South Carolina Senate, and Tom G. Mangum, Chairman of the Ways and Means Committee of the South Carolina House of Representatives, as ex officio members of the State Budget and Control Board, Defendants, and STATE of South Carolina, ex rel. Daniel R. McLEOD, Attorney General, Plaintiff, v. Richard W. RILEY, Governor of the State of South Carolina, as ex officio Chairman and member of the State Budget and Control Board, Grady L. Patterson, Jr., Treasurer of the State of South Carolina, Earle E. Morris, Jr., Comptroller General of the State of South Carolina, Rembert C. Dennis, Chairman of the Finance Committee of the South Carolina Senate, and Tom G. Mangum, Chairman of the Ways and Means Committee of the South Carolina House of Representatives, as ex officio members of the State Budget and Control Board, Defendants. (two cases)

Page 612

278 S.E.2d 612

276 S.C. 323

STATE of South Carolina, ex rel. Daniel R. McLEOD, Attorney General, Plaintiff, v. Richard W. RILEY, Governor of the State of South Carolina,

as ex officio Chairman and member of the State Budget and

Control Board, Grady L. Patterson, Jr., Treasurer of the

State of South Carolina, Earle E. Morris, Jr., Comptroller

General of the State of South Carolina, Rembert C. Dennis,

Chairman of the Finance Committee of the South Carolina

Senate, and Tom G. Mangum, Chairman of the Ways and Means

Committee of the South Carolina House of Representatives, as

ex officio members of the State Budget and Control Board, Defendants, and STATE of South Carolina, ex rel. Daniel R. McLEOD, Attorney General, Plaintiff, v. Richard W. RILEY, Governor of the State of South Carolina,

as ex officio Chairman and member of the State Budget and

Control Board, Grady L. Patterson, Jr., Treasurer of the

State of South Carolina, Earle E. Morris, Jr., Comptroller

General of the State of South Carolina, Rembert C. Dennis,

Chairman of the Finance Committee of the South Carolina

Senate, and Tom G. Mangum, Chairman of the Ways and Means

Committee of the South Carolina House of Representatives, as

ex officio members of the State Budget and Control Board,

Defendants. (two cases)

No. 21456.

Supreme Court of South Carolina.

May 20, 1981.

Atty. Gen. Daniel R. McLeod, Deputy Atty. Gen. Frank K. Sloan, and Senior Asst. Atty. Gen. Karen L. Henderson, Columbia, for plaintiff.

M. William Youngblood, of Sinkler, Gibbs & Simons, Charleston, and John W. Foster, of Boyd, Knowlton, Tate & Finlay, Columbia, for defendants.

Kathleen E. Crum, of McNair, Glenn, Konduros, Corley, Singletary, Porter & Dibble, Columbia, amicus curiae for International Council of Shopping Centers.

W. Francis Marion and Joseph J. Blake, Jr., both of Haynsworth, Perry, Bryant, Marion & Johnstone, Greenville, amicus curiae for Greater Greenville Chamber of Commerce and Spartanburg Area Chamber of Commerce.

PER CURIAM:

These actions are brought in the original jurisdiction of this Court under the Uniform Declaratory Judgments Act, Sections 15-53-10 et seq., Code of Laws of South Carolina (1976) by the State of South Carolina on the relation of the Attorney General in order to determine the constitutionality of certain bond authorizations.

The first action challenges Section 6 of Act 518 of 1980, to the extent that it authorizes the issuance of State capital improvement bonds, the proceeds of which will be used to promote an alcohol fuel development program. This provision is alleged to be in violation of Article X, Sections 11 and 13(3) and Article I, Section 8 of the South Carolina Constitution. The second action challenges Section 10 of Act 518 of 1980, to the extent that it authorizes the issuance of industrial revenue bonds, the proceeds of which will be used to provide for computer and office facilities for entities which are not industrial or manufacturing enterprises and to provide for commercial shopping centers. This provision is alleged to be in violation of Article I, Section 3 of the South Carolina Constitution. In addition, the actions seek to enjoin further implementations of the legislation. Named as defendants are the various ex officio members of the State Budget and Control Board. ¹

In resolving these issues we are mindful of several principles of law which are fundamental to proper adjudication of constitutional challenges to statutory enactments. As restated by Bauer v. South Carolina State Housing Authority, 271 S.C. 219, 226, 246 S.E.2d 869 (1978).

" 'Our Constitution is not a grant of power, but a limitation on what, absent limitations therein, would be a plenary power in the people or their elected representatives. Accordingly, it is not sufficient for us to find that an act is offensive to what may be prevailing notions of the proper sphere for state governments. It is necessary, in order for us to strike down an act of the General Assembly to find that it offends specific provisions of the state constitution which have limited and circumscribed legislative action in that area.' Elliott v. McNair, 250 S.C. 75, 84, 156 S.E.2d 421, 426 (1967); accord, Anderson v. Baehr, 265 S.C. 153, 217 S.E.2d 43 (1975), and Duke Power Co. v. Bell, 156 S.C. 299, 152 S.E. 865 (1930). 'This Court has repeatedly held that all reasonable doubt must be resolved in favor of the constitutionality of the act. If a constitutional construction of a statute is possible, that construction should be followed in lieu of an unconstitutional construction.' Casey v. S. C. State Housing Authority, supra, 264 S.C. at 312-3, 215 S.E.2d at 187."

We note, too, that all legislative action must serve a public rather than a private purpose. Whether an act does indeed serve a public purpose is primarily a question for the legislature to determine and this Court will not interfere unless the legislative determination is clearly wrong. Elliott v. McNair, 250 S.C. 75, 156 S.E.2d 421 (1967); Bauer v. South Carolina State Housing Authority, supra.

I

Section 6 of Act 518 of 1980 authorizes the issuance of general obligation bonds in the amount of $5,000,000 in order to finance an "alcohol fuel development loan program". ²

The Budget and Control Board is given authority to use $3,000,000 of the funds to purchase up to ninety percent of loans made by banking institutions to any individual or corporation for the purpose of producing fuel components or constructing facilities to produce fuel grade alcohol.

The plaintiff argues that this provision violates Section 11 and 13(3) of the State Constitution. Section 11 provides in part that: "The credit of neither the State nor any of its political subdivisions shall be pledged or loaned for the benefit of any individual, company, association, corporation ...." Section 13(3) provides, inter alia, that: "General obligation debt may not be incurred except for a public purpose ...."

The plaintiff contends that any benefit to the public arising out of the private loan program of Act 518, Section 6 is indirect and speculative at best. The primary beneficiary of the legislation is the private developer who will profit if the program succeeds. The plaintiff also points out that if the loan program fails, the State must ultimately pay for the venture since the public credit is pledged.

The defendants maintain that Section 6 serves a public purpose by supporting an alternative energy source. The General Assembly found that the enactment, "will subserve a public purpose by promoting the planting of grain crops and the development of a substitute for gasoline." The defendants take the position that the "public purpose" as so found is sufficient to weather the constitutional challenge.

While we would agree that the provision envisions some benefit to the public, we do not agree that the indirect and speculative nature of the proposed benefit is sufficient to pass constitutional muster. Section 11 of Article X now proscribes the pledging or loaning of public credit to benefit private enterprises without regard to incidental public benefit but this Court has long held the view in construing related provisions that general obligation bonds may not be issued for the primary benefit of private parties. Thus, Jacobs v. McClain, 262 S.C. 425, 429, 205 S.E.2d 172 (1974), quotes Feldman & Co. v. City Council of Charleston, 23 S.C. 57 (1884) for the proposition that:

"However certain and great the resulting good to the general public, it does not, by reason of its comparative importance, cease to be incidental. The incidental advantage to the public, or to the State, which results from the promotion of private interests, and the prosperity of private enterprises or business, does not justify their aid by the use of public money raised by taxation, or for which taxation may become necessary."

The private loan guarantee portion of Act 518, Section 6 clearly runs afoul of Sections 11 and 13(3) of Article X of the State Constitution.

Act 518, Section 6 also states:

"Provided, that not less than two million dollars authorized above for the Alcohol Fuel Development Loan Program shall be available for the development of alcohol fuel production facilities by South Carolina municipalities and counties and by agencies and institutions of the South Carolina state government."

While we are not prepared to state that a properly tailored legislative enactment seeking to promote the development of fuel alcohol by government entities never serves a public purpose, we nonetheless conclude that this provision must fall since it is not severable from the remainder of the section. The language in the provision holds forth the possibility that the governmental entity might apply these monies to private ventures, a condition violative of Article X, Section 11.

Even if the paragraph were allowed to stand alone, it would violate the constitutional provision for separation of legislative, executive and judicial powers at Article I, Section 8. The attempted delegation of legislative power to the Budget and Control Board here reposes an undefined discretion in the Board to set the direction and scope of the governmental loan program. Standing alone, the language in this portion of the act fails to state those primary standards necessary to accomplishing the stated purpose of the section. South Carolina State Highway Department v. Harbin, 226 S.C. 585, 86 S.E.2d 466 (1955).

II

Section 10 of Act 518 of 1980 revises the Industrial Revenue Bond Act (Codified at Sec. 4-29-10, et seq., Code of Laws of South Carolina (1976)). Among the amendments enacted, two are challenged in the second action. The first amendment challenged would allow the issuance of industrial revenue bonds to finance computer and office facilities for entities which are not industrial or manufacturing enterprises if at least one hundred full-time employees are employed within one year of...