Walker v. Alaska State Mort. Ass'n

• Decision Date: 30 June 1966
• Docket Number: No. 669,669
• Parties: William R. WALKER, on Behalf of himself and all other taxpayers of the State of Alaska, Appellant, v. ALASKA STATE MORTGAGE ASSOCIATION, Albert R. Vacura, Robert Petro, Donald Mellish, M. G. Gebhart, A. H. Romick, and the State of Alaska, Appellees.
• Court: Alaska Supreme Court

Page 245

416 P.2d 245

William R. WALKER, on Behalf of himself and all other taxpayers of the State of Alaska, Appellant, v. ALASKA STATE MORTGAGE ASSOCIATION, Albert R. Vacura, Robert Petro, Donald Mellish, M. G. Gebhart, A. H Romick, and the State of Alaska, Appellees.

No. 669.

Supreme Court of Alaska.

June 30, 1966.

John M. Conway, Atkinson, Wade & Conway, Anchorage, for appellant.

Warren C. Colver, Atty. Gen., Juneau, John K. Brubaker, Dist. Atty., Anchorage, for appellees.

Before NESBETT, C. J., and DIMOND and RABINOWITZ, JJ.

RABINOWITZ, Justice.

This is the second time that this case has reached us. On the first occasion the matter was remanded to the superior court because of dissatisfaction with the state of the record upon which the constitutional issues involved were determined on summary judgment. In our opinion in Ault v. Alaska State Mortgage Ass'n, ¹ we said:

We are not holding that summary judgment procedure in cases of this nature is unacceptable. We do hold that if summary procedure is employed in cases involving important public issues where any fact is in dispute the trial judge should not attempt to render a decision unless he is satisfied that the evidence, both pro and con, is sufficient to give him the necessary background of knowledge. ²

Subsequent to our remand, a two day trial was held during which detailed statistical exhibits were admitted and the court heard testimony from ten witnesses who were primarily experts in the fields of banking, mortage financing and housing. Our review of the record produced at this trial convinces us that the superior court had sufficient evidence before it to intelligently determine the broad constitutional issues which were raised. At the conclusion of the trial the lower court entered findings of fact, conclusions of law and a judgment which upheld the constitutionality of the legislation which created the Alaska State Mortgage Association. ³ We affirm the superior court's judgment.

Our affirmance of the superior court's declaration of constitutionality of the Alaska State Mortgage Association was to a large extent foreshadowed by our decision in DeArmond4 and our recent decision in Suber. ⁵

The 1961 act which created the Alaska State Mortgage Association contains the legislature's statement that it is

the policy of the state to promote the health, safety, and welfare of its citizens by the creation of a body corporate and politic, to exist and operate for the purposes resulting from the conditions caused by the lack of a permanent secondary source of funds for housing financing, thus providing additional financing secured by insured mortgages to persons, firms, or financial institutions who are unable to obtain such financing in the general market; thereby improving and stimulating the distribution of investment capital for housing. These purposes are considered necessary and are public purposes for which public money may be spent. (Emphasis furnished.) ⁶

To carry out this policy the Alaska State Mortgage Association was established as 'a public corporation and government instrumentality within the Department of Commerce, but having a legal existence independent of and separate from the state * * *.' ⁷ The act provided that the Association is to be governed by a five member board who are appointed by the governor. At the time this matter was heard in the superior court, the Board's membership consisted of 'three members of the Board of Commissioners of the Alaska State Housing Authority, its executive director, and the commissioner of commerce.' ⁸

Among the powers which were specifically granted to the Association and are pertinent here is the power to:

purchase and sell, at its own discretion, mortgages insured by the Federal Housing Administration, or mortgages obtained by the division of veterans affairs, Department of Commerce, which have been assigned, sold or pledged to the association in return for cash, notes, bonds or debentures of the association; * * *.

accept grants and subsidies from a federal or state agency, or a private person, and make agreements required as a condition to obtaining the grants and subsidies; * * *. ⁹

To enable the Association to enter the secondary financing field for housing mortgages, the act authorizes the Association to 'issue negotiable bonds, notes and debentures in principal amounts the board considers necessary to provide sufficient funds for achieving its purposes, including the purchasing of home mortgages * * *.' ¹⁰

In this appeal appellant questions the constitutionality of the legislation which created the Alaska State Mortgage Association on principally five grounds. Appellant initially contends that the act is unconstitutional in that it attempts to create an independent agency (which is not in fact within the Department of Commerce) in violation of article III, section 22 of the Alaska Constitution which provides:

All executive and administrative offices, departments, and agencies of the state government and their respective functions, powers, and duties shall be allocated by law among and within not more than twenty principal departments, so as to group them as far as practicable according to major purposes. Regulatory, quasi-judicial, and temporary agencies may be established by law and need not be allocated within a principal department. ¹¹

In the DeArmond case, ¹² a similar contention of unconstitutionality was advanced as to legislation which created the Alaska State Development Corporation. In sustaining that legislation, we wrote:

We are not inclined to pass judgment on the means selected by the legislature to accomplish legitimate purposes unless they are clearly in violation of the constitution. In this case we believe the corporation is essentially what the legislature says it is: an instrumentality of the state within the Department of Commerce, with a legal existence separate from the state and that no provision of section 22 of article III has been violated. ¹³

The reasons which compelled this conclusion in the DeArmond case are also present in this case. Here, as in DeArmond, the act specifically provides that the Association's status is that of a public corporation within the Department of Commerce possessing a legal existence independent of and separate from the state. Despite this provision, appellant contends that the Association 'is not subject to such control by the executive as to support a finding that the legislature has placed the Association firmly within the Department of Commerce.' The thrust of appellant's argument is that the placing of the Association within the Department of Commerce is merely a 'matter of form' and 'is not determinative of whether Section 22 of Article III of the Constitution has been violated.'

We find that substantially the same factors of executive control are present in this case which we found persuasive in DeArmond where we held that the Alaska State Development Corporation was within the Department of Commerce.

The Association is required to submit to the governor and the legislature a comprehensive annual report describing the operations, fiscal transactions, financial condition, and future plans of the Association. ¹⁴ The financial records of the Association are subject to annual audit by the legislative auditor. ¹⁵ Certified copies of the minutes of every meeting of the Association are required to be sent to the governor. ¹⁶ Further, as in DeArmond, the Commissioner of Commerce has a permanent seat on the governing board of the Association which should 'in the ordinary course of events, give him considerable influence on the board.' ¹⁷ The Association's three board members from the Board of Commissioners of the Alaska State Housing Authority are appointed by the governor and serve at his pleasure. ¹⁸ Therefore, the governor is empowered to remove any member of the governing board of the Association at his pleasure. ¹⁹

Also relevant is our observation in DeArmond ²⁰ where we said:

The fact that the statute decleares that the corporation shall have a legal existence independent of and separate from the state does not add weight to appellant's argument. This is nothing more than a declaration of the legal relationship that most corporations have with respect to their creators.

We, therefore, hold that the Alaska State Mortgage Association is within the Department of Commerce and that article III, section 22 of the Alaska Constitution has not been violated.

Appellant additionally contends that the members of the governing board of the Association were not appointed in accordance with the provisions of article III, section 26 of the Alaska Constitution which provides:

When a board or commission is at the head of a principal department or a regulatory or quasi-judicial agency, its members shall be appointed by the governor, subject to confirmation by a majority of the members of the legislature in joint session, and may be removed as provided by law. They shall be citizens of the United States. The board or commission may appoint a principal executive officer when authorized by law * * *.

Our holding that the Association is within the Department of Commerce is dispositive of this issue. The superior court found that the Association's board members 'were not confirmed by a majority of the members of the legislature in joint session as is required by Article III, Section 26 for members of boards at the head of principal departments of the State.' ²¹ Since the board of the Association is not at the head of the Department of Commerce, article III, section 26 of the Alaska Constitution does not govern the appointment of its members. ²²

Appellant next argues that the Association will not achieve a legitimate public purpose and that the use of public money and credit by the Association will violate article IX, section 6 of the Constitution of the State of Alaska. This section of our constitution provides:

No tax shall be...