State v. Banks

• Decision Date: 21 May 1921
• Citation: 198 P. 472,33 Idaho 765
• Parties: STATE OF IDAHO, on the Relation of D. W. DAVIS, Individually and as Governor of the State of Idaho; ROY L. BLACK, Individually and as Attorney General of the State of Idaho; and W. J. HALL, Individually and as Commissioner of Public Works of the State of Idaho, Plaintiffs, v. D. F. BANKS, Treasurer of the State of Idaho, Defendant
• Court: Idaho Supreme Court

198 P. 472

33 Idaho 765

STATE OF IDAHO, on the Relation of D. W. DAVIS, Individually and as Governor of the State of Idaho; ROY L. BLACK, Individually and as Attorney General of the State of Idaho; and W. J. HALL, Individually and as Commissioner of Public Works of the State of Idaho, Plaintiffs, v. D. F. BANKS, Treasurer of the State of Idaho, Defendant

Supreme Court of Idaho

May 21, 1921

STATE LEGISLATURE-CONSTITUTIONAL LAW-INDEBTEDNESS-APPROPRIATION-FISCAL AGENT.

1. The power of the state legislature in the creation of indebtedness, or the expenditure of state funds, or making appropriations is plenary, except as limited by the state constitution.

2. S B. No. 319, 1921 Session Laws, page 112, authorizing and directing the state treasurer to appoint a fiscal agent, is not in conflict with the state constitution.

3. Chapter 193 of the Session Laws of 1919, proposed Idaho state highway bonds, fourth issue, to vote of the people, meets the requirements of art. 8, sec. 1, of the state constitution and is a valid act of the state legislature.

Original application for writ of mandate. Denied.

Alternative writ quashed and peremptory writ denied.

Roy L. Black, Attorney General, Dean Driscoll, First Assistant, and James L. Boone, Assistant, for Plaintiff.

The legislative body is not without power to raise the interest rate on a bond issue submitted to the people, for the reason that the rate of interest was not one of the things required to be submitted. (Yesler v. City of Seattle, 1 Wash. 308, 25 P. 1014; Parkinson v. Seattle School Dist. No. 1, 28 Wash. 335, 68 P. 875.)

The legislature, under ordinary circumstances, laying aside the particular facts of this case, has full and ample authority to make an appropriation of the kind in question. (36 Cyc. 882.)

A commission may be paid a broker for the services in selling state bonds, even though under the state constitution the vote of the people was necessary to authorize the bonds and the act submitted to the people specified the rate of interest and that they should not be sold below par. (Church v. Hadley, 240 Mo. 680, 145 S.W. 8, 39 L. R. A., N. S., 248; Town of Manitou v. First Nat. Bank, 37 Colo. 344, 86 P. 75; Miller v. Park City, 126 Tenn. 427, Ann. Cas. 1913E, 83, 150 S.W. 90; Davis v. City of San Antonio (Tex. Civ. App.), 160 S.W. 1161; State v. West Duluth Land Co., 75 Minn. 456, 78 N.W. 115; Village of Ft. Edward v. Fish, 156 N.Y. 363, 50 N.E. 973; Armstrong v. Ft. Edwards, 159 N.Y. 315, 53 N.E. 1116; note, Ann. Cas. 1913E, 85; note, 39 L. R. A., N. S., 248; 2 Dillon on Municipal Corp., 1399.)

D. A. Dunning, for Defendant.

Interest, when provided for on the face of the instrument, is a part of the debt. (Broadfoot v. City of Fayetteville, 128 N.C. 529, 39 S.E. 20; Davis v. Harrington, 160 Mass. 278, 35 N.E. 771.)

If the debt cannot be created except with the approval of the people, and the interest is a part of the debt, then the legislature cannot created a different debt by a change in the rate of interest.

The terms and conditions of the bonds must substantially follow the act submitted. (Skinner v. City of Santa Rosa, 107 Cal. 464, 40 P. 742, 29 L. R. A. 512.)

The fact that securities have, in violation of law, been sold at less than their par value cannot be concealed or its effect destroyed by so flimsy a theory as a commission paid to the purchasers of the bonds. (Whelen's Appeal, 108 Pa. 162, 1 A. 88.)

The payment of a commission to a bank, which purchased an entire issue of bonds, subsequently disposing of the bonds to its customers, was held to be in substance and effect a discount in violation of the law requiring sale at par. (Bay City v. Lumbermen's State Bank, 193 Mich. 533, 160 N.W. 425; Hunt v. Fawcett, 8 Wash. 396, 36 P. 318; Franklin Ave. German Sav. Inst. v. Board of Education, 75 Mo. 408.)

It is believed that the framers of the constitution desired to distinguish between a purpose and a work, and that those words were used in our constitution so that the legislature would not be foreclosed or rendered powerless to create a debt for an object as distinguished from a work which the people of Idaho would approve in a referendum. Paxton v. Baum, 59 Miss. 531, construes the word "object" to mean, "the end aimed at; the thing sought to be accomplished." In State v. De Hart, 109 La. 570, 33 So. 605, "object" is construed to mean, "the aim or purpose." In Scarborough v. Smith, 18 Kan. 399, it is held that "object" means, "the thing sought to be attained." "The object of the statute is the aim or purpose of the enactment." (Allopathic State Board of Medical Examiners v. Fowler, 50 La. Ann. 1358, 24 So. 809.)

DUNN, J. Rice, C. J., and Budge and McCarthy, JJ., concur. LEE, J., Dissenting.

OPINION

DUNN, J.

This is an original application by the Governor, Attorney General and Commissioner of Public Works of the state, individually as taxpayers and in their several official capacities, for a writ of mandate directed to the defendant, D. F. Banks, as State Treasurer, to compel him to employ a fiscal agent or broker to procure or assist in procuring a bidder for the Idaho state highway bonds, fourth issue, and to take such steps as may be necessary for the sale of said bonds.

The petition sets forth that pursuant to the provisions of chapter 193 of the laws of the state of Idaho for the year 1919, which directed the defendant as State Treasurer to issue and sell a series of state bonds of the par value of $ 2,000,000, to be known as Idaho state highway bonds, fourth issue, upon approval by the people at the next general election and pursuant to the constitution and laws of the state of Idaho, the question whether or not such bond issue should be authorized for the laying out, surveying and constructing of state highways was submitted to the electors of the state of Idaho on the second day of November, 1920, and that a majority of all the votes cast on said proposition at such election were in favor of the issuance of such bonds, and that the result of said election has been determined and certified as required by law. That thereafter the said State Treasurer gave due notice of the intention of the state to sell said bonds and invited bids therefor to be submitted on or before the thirty-first day of January, 1921, and that five bids were received, the highest of which was $ 87,420 below the par value of said bonds; that by the provisions of said chapter it is required that said bonds shall be sold at not less than par and upon the best terms offered and at the lowest rate of interest named by any bidder, not exceeding the rate of five per cent per annum; that all of said bids were rejected for the reason that they were below par of said bonds; that it is now, and at all times since the said chapter 193 became effective has been, and will be for an indefinite period in the future, impossible to sell said bonds at par to bear said rate of interest without the employment of a fiscal agent as hereinafter set forth, by reason of the fact that the rate of interest of money on loans is now, and for some time past has been, and for an indefinite time in the future will be in excess of five per cent per annum and the market for bonds of the character and of the interest rate provided in said chapter 193 below par.

That by an act of the sixteenth session of the legislature of the state of Idaho, known as Senate Bill No. 319, 1921 Sess. Laws, p. 112, approved March 8, 1921, which said act became effective immediately upon its passage and approval, the said State Treasurer was and is directed to employ a fiscal agent or broker to assist in procuring a bidder at not less than par and accrued interest for said bonds, for whose compensation and expenses the said treasurer is authorized and directed to expend the sum of not to exceed $ 97,500, for the entire bond issue, and proportionately for any part thereof, to be paid on payment for the bonds by the purchaser furnished, for which purposes the sum of $ 97,500 is appropriated by said act.

That relators have demanded of said defendant that he proceed to employ such fiscal agent or broker and again call for bids for said bonds and proceed to sell and issue the same pursuant to the provisions of said chapter 193, but that said defendant has failed and refused to employ such broker or fiscal agent or to take any other steps or proceedings whatever for the sale or issuance of said bonds, and still continues to so fail and refuse, and alleges as his reason and ground therefor that the said bonds cannot be sold for par bearing interest at the rate of five per cent per annum without employment of a fiscal agent or broker as provided by the said act of the sixteenth session of the legislature, and that said act is invalid and unconstitutional.

The petition further alleges the lack of funds in the hands of the state to proceed with the construction of the system of highway heretofore laid out and partially constructed, or to enable it to provide funds to carry on the large amount of work that is necessary to be done by it in co-operation with the federal government and with the several counties and highway districts of the state in order to obtain the financial assistance in the construction of the state highways that will be available if the said bonds can be sold and the money derived therefrom used in the construction of the highways throughout the state, and that without the funds to be derived from such sale much of the unfinished work done on this system of highways whose construction has been undertaken by the state of Idaho will be lost.

The petition further alleges that in addition to the matters hereinbefore stated some question has been raised as to the validity of the said act known as ...