West Virginia Trust Fund, Inc. v. Bailey

• Decision Date: 28 March 1997
• Docket Number: No. 23939,23939
• Citation: 485 S.E.2d 407,199 W.Va. 463
• Parties: WEST VIRGINIA TRUST FUND, INC., a West Virginia Non-Stock, Non-Profit Corporation, as Trustee, Petitioner Below, Appellant, v. Honorable Larrie BAILEY, Treasurer of the State of West Virginia, Respondent Below, Appellee. STATE of West Virginia, ex rel. Honorable Darrell V. McGRAW, Jr., in his Official Capacity as the Attorney General of West Virginia, Petitioner Below, Appellee, v. WEST VIRGINIA TRUST FUND, INC., a West Virginia Corporation; and David Gardner, Chairman, West Virginia Trust Fund, Inc., Respondents Below, Appellants. Stanley L. KLOS, Petitioner Below, Appellee, v. Honorable Larrie BAILEY, Treasurer of West Virginia, Respondent Below, Appellee. STATE of West Virginia, ex rel. Stanley L. KLOS, Petitioner Below, Appellee, v. WEST VIRGINIA BOARD OF INVESTMENTS, a Body Corporate of the State of West Virginia, Respondent Below, Appellee, and West Virginia Trust Fund, Inc., a West Virginia Corporation, Respondent Below, Appellant.
• Court: West Virginia Supreme Court

Page 407

485 S.E.2d 407

199 W.Va. 463

WEST VIRGINIA TRUST FUND, INC., a West Virginia Non-Stock Non-Profit Corporation, as Trustee, Petitioner Below, Appellant, v. Honorable Larrie BAILEY, Treasurer of the State of West Virginia, Respondent Below, Appellee.

STATE of West Virginia, ex rel. Honorable Darrell V.

McGRAW, Jr., in his Official Capacity as the Attorney General of West Virginia, Petitioner Below, Appellee, v. WEST VIRGINIA TRUST FUND, INC., a West Virginia Corporation; and David Gardner, Chairman, West Virginia Trust

Fund, Inc., Respondents Below, Appellants.

Stanley L. KLOS, Petitioner Below, Appellee, v. Honorable Larrie BAILEY, Treasurer of West Virginia,

Respondent Below, Appellee.

STATE of West Virginia, ex rel. Stanley L. KLOS, Petitioner Below, Appellee, v. WEST VIRGINIA BOARD OF INVESTMENTS, a Body Corporate of the State of West Virginia, Respondent Below, Appellee and West Virginia Trust Fund, Inc., a West Virginia Corporation Respondent Below, Appellant.

No. 23939.

Supreme Court of Appeals of West Virginia.

Submitted Feb. 25, 1997.

Decided March 28, 1997.

[199 W.Va. 466] Syllabus by the Court

1. "In considering the constitutionality of a legislative enactment, courts must exercise due restraint, in recognition of the principle of the separation of powers in government among the judicial, legislative and executive branches. Every reasonable construction must be resorted to by the courts in order to sustain constitutionality, and any reasonable doubt must be resolved in favor of the constitutionality of the legislative enactment in question. Courts are not concerned with questions relating to legislative policy. The general powers of the legislature, within constitutional limits, are almost plenary. In considering the constitutionality of an act of the legislature, the negation of legislative power must appear beyond reasonable doubt." Syllabus Point 1, State ex rel. Appalachian Power Co. v. Gainer, 149 W.Va. 740, 143 S.E.2d 351 (1965).

2. "Legislative declarations of purpose in enacting law, or making an appropriation, while entitled to respect, will not be treated as conclusive, or as binding on this Court, where, from other facts, conditions and circumstances, appearing on the record, or from facts and events of which we may take judicial notice, it is clear that the real purpose of the legislation or appropriation involved was different from that declared." Syllabus Point 1, State ex rel. City of Charleston v. Sims, 132 W.Va. 826, 54 S.E.2d 729 (1949).

3. To determine if an entity is a state actor subject to constitutional duties or restrictions, the nature and extent of state involvement must be evaluated so as to determine if its actions are fairly attributable to the state.

4. West Virginia Trust Fund, Inc., is a state actor and an instrumentality of the State and is subject to the West Virginia Constitution, Article X, section 6 prohibition against the investment of state moneys towards becoming a joint owner or stockholder in any company or association.

5. The clear language of West Virginia Constitution, Article X, section 6, itself stands as a bar to state ownership of corporate stocks. Article X, section 6 is written as an unconditional proscription of any investment by the State towards becoming a joint owner or stockholder in any company or association. State ex rel. Gainer v. West Virginia Bd. of Investments, 194 W.Va. 143, 149, 459 S.E.2d 531, 538 (1995).

6. " 'Where a provision of a constitution is clear in its terms and of plain interpretation to any ordinary and reasonable mind, it should be applied and not construed.' Syl. Pt. 3, State ex rel. Smith v. Gore, 150 W.Va. 71, 143 S.E.2d 791 (1965)." Syllabus Point 1, State ex rel. Gainer v. West Virginia Bd. of Investments, 194 W.Va. 143, 459 S.E.2d 531 (1995).

7. The State cannot by circumvention or indirection avoid the meaning of plain words in the Constitution; therefore, the legislative declarations in W.Va. Code, 44-6B-2, which provide that the "state and other public employers ... have no proprietary interest" in state pension and workers' compensation funds are insufficient to avoid the clear language and meaning of West Virginia Constitution, Article X, section 6.

8. The West Virginia Trust Fund Act, W.Va. Code, 44-6B-1 to -12 [1996], is unconstitutional as it violates the unconditional constitutional proscription against the State becoming a joint owner or stockholder in any corporation or association, as set forth in West Virginia Constitution, Article X, section 6.

9. The powers and duties of the state treasurer are only as specified by the Constitution and by rules of law prescribed pursuant thereto.

James K. Brown, and Wendel B. Turner, Jackson & Kelly, Charleston, for Appellants

[199 W.Va. 467] West Virginia Trust Fund, Inc., and David Gardner.

Daynus Jividen, Senior Assistant Attorney General, for Appellee Larrie Bailey.

Deborah L. McHenry, Managing Deputy Attorney General and Rory L. Perry, II, Assistant Attorney General, for Appellee Darrell V. McGraw, Jr.

David J. Sims, Yahn & Sims, Wheeling, for Appellee Stanley L. Klos.

David L. Wyant, Shuman, Annand & Poe, Charleston, for Appellee Board of Investments.

Thomas J. Gillooly, Charleston, for Amici Curiae, The West Virginia Public Employees Retirement System Assoc., Inc., The West Virginia Assoc. of Counties, and The West Virginia Federation of Teachers.

Gary G. Markham and Kenneth G. Webb, Jr., Bowles, Rice, McDavid, Graff & Love, Charleston, for Amicus Curiae, Consolidated Public Retirement Board.

Marvin W. Masters and Richard A. Monahan, Masters & Taylor, L.C., Charleston, for Amicus Curiae, West Virginia Troopers Association.

Thomas A. Heywood, Bowles, Rice, McDavid, Graff & Love, Charleston, for Amicus Curiae, West Virginia Business & Industry Council.

William B. McGinley, Charleston, for Amicus Curiae, West Virginia Education Association.

Alison E. Patient, Charleston, Jennifer B. Walker, and M.E. "Mike" Mowery, for Amicus Curiae, West Virginia Legislature, President Earl Ray Tomblin and Speaker Robert Kiss.

STARCHER, Justice:

These four consolidated actions require us to interpret West Virginia Constitution, Article X, section 6, the constitutional prohibition against the State becoming a joint owner or stockholder in any company or association. In its 1996 session, the Legislature enacted the West Virginia Trust Fund Act, W.Va. Code, 44-6B-1 to -12, ("the Act") in an attempt to reconcile this restriction with the legislative goal of promoting the fiscal well-being of several State pension and workers' compensation funds. The proponents of the Act, in the proceedings before this Court, argue that the Act creates a non-stock, non-profit corporation called West Virginia Trust Fund, Inc. ("Trust Fund, Inc."), which will act independently of state government for purposes of investing certain funds. The Act will allow the State to place five state employee pension funds and the workers' compensation and coal workers' pneumoconiosis funds into an irrevocable trust fund managed by West Virginia Trust Fund, Inc., acting as the trustee of those funds. As trustee, Trust Fund, Inc., may then invest up to 60% of these funds in corporate equities. The proponents contend that these invested funds will then be owned by Trust Fund, Inc., and the State will no longer have any ownership interest. By placing ownership of the moneys with Trust Fund, Inc., it is contended that the investment of the moneys is insulated from the constitutional prohibition.

The circuit court rejected these arguments and declared the entire Act unconstitutional primarily on two grounds: (1) the Act violated West Virginia Constitution Article X, section 6, and (2) the Act usurped the inherent constitutional duties of the state treasurer. Accordingly, the circuit court ordered the dissolution of West Virginia Trust Fund, Inc.

After careful consideration, we conclude that West Virginia Trust Fund, Inc., is, to a highly significant degree, a state actor and instrumentality of the State. Therefore, the West Virginia Trust Fund Act essentially allows the State to indirectly invest employee pension funds and the workers' compensation and coal workers' pneumoconiosis funds towards becoming a joint owner or stockholder in companies and associations. Accordingly, we find that the Act is unconstitutional, and affirm the circuit court's decision in that regard. However, we disagree with the circuit court's finding that the Act interferes with the inherent constitutional duties of the office of state treasurer. I.

Facts and Background

A. Legislative Action--1990

Effective August 31, 1990, the Legislature enacted W.Va.Code, 12-6-9(j) ¹ which allowed a state agency, the West Virginia Board of Investments, ² to invest state employee pension funds in "[a]ny corporate stock of any private corporation...." W.Va.Code, 12-6-9(j)[1990]. The West Virginia Board of Investments was and remains a "body corporate of the state" ( W.Va.Code, 12-6-3 [1996] ) charged with consolidating and managing "moneys, securities and other assets" of the state. W.Va.Code, 12-6-5(11)[1996]. In State ex rel. Gainer v. West Virginia Bd. of Investments, 194 W.Va. 143, 459 S.E.2d 531 (1995) we addressed W.Va.Code, 12-6-9(j) [1990] to determine whether corporate stock purchases by the Board of Investments were permissible under West Virginia Constitution, Article X, section 6. That constitutional provision, enacted in 1872, states (with emphasis added):

The credit of the State shall not be granted to, or in aid of any county, city, township, corporation or person; nor shall the State ever assume, or become responsible for the debts or liabilities of any county, city, township, corporation or person; nor shall the State ever hereafter become a joint owner, or stockholder in any company or association in this State or elsewhere, formed for any purpose whatever.

In Gainer, the appellee Board of...