State Ex Rel. University Board v. Hanson , 65 N.D. 1 ( 1934 )

I am unable to agree with the opinion prepared by Mr. Chief Justice Burr and concurred in by a majority of the judges. That opinion holds that the board of university and school lands is without power to make any compromise with a person against whom the board of university and school lands holds a real estate mortgage. The question involved is purely one of power; for it is not denied that the action of the board is beneficial rather than detrimental to the interests of the trust fund involved.

The board of university and school lands is not a statutory body. It was created by the Constitution and the powers and duties of the board are delineated therein. The framers of the North Dakota Constitution found themselves confronted with this situation: the United States, in the Enabling Act, had granted to the State of North Dakota large tracts of land for the support of the schools of the state and additional tracts for the support of institutions of higher learning and certain charitable institutions. Enabling Act, §§ 10-17. These lands were granted to the state in trust for certain specified institutions and purposes. The framers of the Constitution were required to make appropriate provision for an acceptance of the proposed grants. They accepted the grants on the condition on which they were made and specifically provided that "the property so granted should be a trust fund the principal of which should forever remain inviolate." N.D. Const. § 153. Having accepted the grants the framers were next confronted with the question, how should the trust be administered? Should some future legislative assembly be authorized to provide for the selection of the person or persons who should administer the trust and prescribe the powers and duties of such administrators or directors or should these matters be imbedded in the Constitution itself? The framers of the Constitution held the latter view and they specifically provided:

"The superintendent of public instruction, governor, attorney general, secretary of state and state auditor shall constitute a board of commissioners, which shall be denominated the `board of university and school lands,' and subject to the provisions of this article and any law that may be passed by the legislative assembly, said board shall have control of the appraisement, sale, rental and disposal of all school and university lands, and shall direct the investment of the funds arising therefrom in the hands of the state treasurer, under the limitations in § 160 of this article." North Dakota Const. § 156. (Section 160, North Dakota Constitution, refers to the appraisal and sale of the lands.)

It will be noted that § 156 of the Constitution provides not merely for the creation of a board to administer the trust property; but it also makes a general enumeration of the powers and duties of such board. It says: "Subject to the provisions of this article and any law that may be passed by the legislative assembly, said board shall have control of the appraisement, sale, rental and disposal of all school and university lands, and shall direct the investment of the funds arising therefrom in the hands of the state treasurer. . . ." It is significant that in speaking of the powers of the board concerning the investment of the funds to be derived from the sale of land the framers of the Constitution said that the board "shall direct such investment." The term thus employed is a very broad one. To "direct" means to control, to guide, to govern. Thus the governing board of a corporation is known as the board of directors, that is, they are the ones who direct.

The majority opinion, as I understand it, holds that the provisions of § 156 of the Constitution insofar as they provide for any action by the board of university and school lands are not self-executing. In my opinion this holding is clearly erroneous.

In dealing with the subject in question here the framers of the Constitution did not establish merely an outline or plan but they prescribed rather definite and elaborate rules. Thus in the section immediately following the one creating the board of university and school lands they provided:

"The county superintendent of common schools, the chairman of the county board, and the county auditor shall constitute boards of appraisal and under the authority of the state board of university and school lands shall appraise all school lands within their respective counties which they may from time to time recommend for sale at their actual value under the prescribed terms and shall first select and designate for sale the most valuable lands." N.D. Const. § 157.

The next section (§ 158) provides for the terms on which the lands may be sold. Section 162 of the Constitution enumerates the classes of securities in which the funds shall be invested.

The majority opinion places great stress upon the proviso in § 156 of the Constitution that the board of university and school lands "subject to the provisions . . . of . . . any law that may be passed by the legislative assembly . . . shall have control of the appraisement, sale, rental and disposal of all school and university lands, and shall direct the investment of the funds arising therefrom" and it is argued that this proviso manifests an intention on the part of the framers of the Constitution that the provision authorizing the board of university and school lands to direct the investment of the funds is not self-executing; and that the power conferred comes into being only when it has been called into action by appropriate legislation. In my opinion this reasoning is fallacious, is not warranted by the language employed, and ignores other provisions of the Constitution which must be read with it. Thus § 161 of the Constitution provides:

"The legislative assembly shall have authority to provide by law for the leasing of lands granted to the state for educational and charitable purposes; . . ."

And § 165 provides:

"The legislative assembly shall pass suitable laws for the safe keeping, transfer and disbursement of the state school funds; . . ."

It will be noted that § 157 of the Constitution recognizes the power of the board of university and school lands as regards the appraisal and sale of lands. It will also be noted that §§ 161 and 165 of the Constitution respectively authorize and require legislation relating to certain specific matters. The provision in § 156 of the Constitution referring to "any law that may be passed by the legislative assembly" must of course be read in light of §§ 161 and 165. It is rather significant, however, that while the Constitution makes detailed provision for the appraisal and sale of lands and enumerates the particular classes of securities in which investments may be made and authorizes the legislature to provide for the leasing of lands and requires it to pass "suitable laws" for the safe keeping, transfer and disbursement of the school funds there is no provision authorizing or directing the legislative assembly to enact any laws relating to the investment of funds.

Some thirteen sections of the Constitution are devoted to the permanent school and institutional fund, the establishment of the board, the investment of funds, rental and sale of lands and matters incidental thereto. These provisions are so explicit as to permit the board to function in every field with the possible exception of the leasing of the lands, without legislative action. The framers of the Constitution designated the principal constitutional officers of the state as members of the board of university and school lands. Hence, immediately upon the state government coming into existence, the members of that board would ipso facto be qualified to enter upon their duties as members of such board. The very language of the constitutional provision creating the board and defining its powers indicate in the plainest manner that the framers of the Constitution did not contemplate that the powers granted to the members of the board should lie dormant or that the duties enjoined upon them should remain unperformed until some legislative assembly saw fit to act.

In the majority opinion reference is made to the decision of the Supreme Court of Nebraska in Fawn Lake Ranch Co. v. Cumbow,102 Neb. 288, 167 N.W. 75. The constitutional provision involved in that case reads as follows:

"The Governor, secretary of state, treasurer, attorney general, and commissioner of public lands and buildings shall, under the direction of the legislature, constitute a board of commissioners, for the sale, leasing, and general management of all lands and funds set apart for educational purposes, and for the investment of school funds, in such manner as may be prescribed by law."

The differences between § 156 of the North Dakota Constitution and the constitutional provision involved in the Nebraska case are too obvious to require discussion. A mere comparison is sufficient to demonstrate the inherent differences between the two. The Nebraska provision clearly required legislative action. It was not self-executing. The provision in the Nebraska Constitution was adopted in 1875. The framers of the North Dakota Constitution were doubtless familiar with the provisions of the Nebraska Constitution. They did not adopt the language of the Nebraska Constitution but chose to employ wholly different language. The North Dakota Constitution does not say that the duties of the members of the board of university and school lands shall be performed "under the direction of the legislature" and "in such manner as may be prescribed by law." It says that the board of university and school lands shall have control over certain property and shall direct the investment of funds arising therefrom "subject to the provisions of this article and any law that may be passed by the legislative assembly." In speaking of "any law that may be passed by the legislative assembly" they were, of course, mindful of the fact that they, in other sections in the same article, had authorized or required the legislative assembly to enact certain laws.

It is inconceivable to me that the framers of the Constitution intended to withhold from the board, which they said must "direct the investment" of funds, the power to perform the very duties they had so assigned. No such intention should be assumed in the absence of clear and explicit language to that effect. The provisions of the Constitution "are mandatory and prohibitory, unless, by express words, they are declared to be otherwise." N.D. Const. § 21. Here there is a clear mandate that the members of the board of university and school lands shall "direct the investment of funds." Yet it is said that notwithstanding this declaration the framers of the Constitution intended that the powers they had thus conferred should be brought into action only if and when the lawmakers saw fit to say the magic word. I believe the framers of the Constitution intended precisely what they said, namely, that the board of university and school lands should direct the investment of the trust fund which was to be placed under their charge. The general power to direct an investment includes the power to dispose of securities in which investment has been made when in the judgment of those charged with the duty of directing the investment that course seems wise and desirable. And the general power to direct investment of funds of necessity includes the power to dispose of securities in which investments have been made when this course becomes desirable to safeguard the fund, even though this may require a sale at less than the face of such securities. The only possible limitation that the Constitution places upon the power of the board of university and school lands in this regard is that such disposal must not impair the principal. It is not necessary to determine in this case whether this limitation exists as the action taken by the board here will not result in any impairment of the principal. On the contrary, it is undisputed that the action of the board, if carried out, will restore to the fund the full amount of the principal invested together with a considerable sum of interest earned thereon.

The majority opinion lays stress upon certain statutory enactments relating to the satisfaction of mortgages. These enactments, in my opinion, have no relation to the question involved here. These statutes were intended to provide the procedure for the discharge of mortgages in the normal course of the events, to which the statutes purport to apply. They were not, in my opinion, intended to, and do not affect or purport to limit the power of the board of university and school lands in dealing with a question of compromise or adjustment of an obligation represented by some security held by the board.

This is not a case of interpretation of the powers of statutory officers. The board whose power is brought in question here was created by the Constitution, and there was imbedded in the provision which created the board a specific mandate that the board "shall direct the investment" of certain funds. The legislature may not, even if it desires so to do, authorize any other person or persons to direct the investment of the funds in question here. The constitutional provision which created the board vests in it a wide discretion in the performance of the duties enjoined, except insofar as that discretion is limited by other provisions of the Constitution or by legislative enactment authorized by the Constitution. Fuller v. Board of University School Lands, 21 N.D. 212, 129 N.W. 1029.

In my opinion the act of the board brought in question here is one incidental to the general power to "direct the investment" of funds, and there is no provision of the Constitution and no legislative enactment which purport to inhibit such act.

I am authorized to say that Mr. Justice MOELLRING concurs in the foregoing views.