No. 13627
I N THE SUPREPIIF, COURT OF THE STATE O M N A A
F O T N
1977
K R N M.
A E DOUGLAS,
P l a i n t i f f and Appellant,
-vs-
T O A L.
H M S JUDGE, G o v e r n o r , e t a l . ,
Defendants and Respondents.
ORIGINAL PROCEEDING:
C o u n s e l o f Record:
For Appellant:
G a r r i t y a n d Keegan, H e l e n a , Montana
Donald A. G a r r i t y a r g u e d , H e l e n a , Montana
For Respondents:
Hon. Mike G r e e l y , A t t o r n e y G e n e r a l , H e l e n a , f l o n t a n a
W a l t e r S. M u r f i t t , S p e c i a l A s s i s t a n t A t t o r n e y G e n e r a l ,
a r g u e d , H e l e n a , Montana
Submitted: J u n e 1 3 , 1977
Decided: .? ;3
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Filed: :
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Mr. Justice Frank I. Haswell delivered the Opinion of the Court.
Appellant brought this action in the district court,
Lewis and Clark County, seeking a declaratory judgment that
Chapter 533, Laws of 1975, is unconstitutional. On cross motions
for summary judgment, the district court held the challenged
legislation to be valid and enforceable. ~ppellantappeals
the district court ruling to this Court.
Appellant is a citizen of the United States and the State
of Montana and is a resident of Lewis and Clark County, Montana.
Appellant owns both real and personal property in Lewis and Clark
County, and pays taxes thereon. Appellant is also a registered
elector within the county.
Respondents were at all times relevant to this action
the duly elected, qualified and acting members of the Board of
Examiners of the State of Montana. The Board of Examiners is
the body authorized to issue and sell state revenue bonds.
Chapter 533, Laws of 1975, was enacted by the 1975 Mon-
tana Legislature. This act, now codified as Title 89, Chapter
36, R.C.M. 1947, is an act providing for the development of
renewable natural resources. The purpose of this act and the
policies to be promoted thereby are set forth in section 89-3601,
R.C.M. 1947, as follows:
"In the development of the natural resources of
the state it is essential to distinguish between
those which are and those which are not renewable;
to make proper charges through taxation and other-
wise for the depreciation of nonrenewable resources;
and to invest a proper proportion of the tax and
other revenues from nonrenewable resources in the
replacement thereof with developments of renewable
natural resources that will preserve for the citizens
the benefit of the state's natural heritage and
to ensure that the quality of existing public re-
sources such as land, air, water, fish, wildlife
and recreational opportunities are not significantly
diminished by developments supported by this act.
In order to finance such developments it is neces-
sary to borrow in anticipation of the receipt of
the revenues, so that replacement will not lag
behind consumption. The purpose of this act is
to provide a procedure for borrowing in the most
economical way for this purpose, and to author-
ize the creation of debt to finance the first
stage of the program, and to describe the types of
projects, loans, and grants to be included in the
program. "
Three distinct programs for the development of renewable
resources are contemplated by this act: (1) renewable resource
development loans to farmers and ranchers, section 89-3603, R.C.M.
development
1947; (2) state renewable resource/grants to public agencies,
section 89-3604, R.C.M. 1947; and (3) state and local renewable
resource development loans to public agencies, section 89-3605,
R.C.M. 1947. Only the first program is challenged by appellant
in this action and therefore, all discussion found herein spec-
ifically relates only to this program.
In furtherance of the stated purposes and policies, the
act authorizes respondents, upon the request of the Department of
Administration or the Board of Natural Resources and Conserva-
tion, to issue and sell general obligation bonds of the state in
an amount not to exceed five million dollars. The purpose of
the bond sale is to finance the renewable resource development
program as described in and pursuant to the terms and conditions
of the act. The full faith and credit and taxing powers of the
state are pledged for the prompt and full payment of all renew-
able resource development bonds issued pursuant to this act.
The proceeds of a11 renewable resource development bonds
issued pursuant to this act, other than refunding bonds, are
required to be deposited as received in a clearance fund account.
The moneys on hand in this account may be used only to pay costs
of the renewable resource development program upon the order of
the Department of Administration or the Board of Natural Resources
and Conservation.
The Board of Natural Resources and Conservation is author-
ized upon proper application and upon recommendation of the
Department of Natural Resources to make renewable resource
development loans from the account established by this act to
farmers and ranchers of the state who, without regard to their
form of business organization:
(a) Are citizens of the United States and are citizens
and residents of the State of Montana;
(b) have sufficient farming or ranching training and
experience which, in the opinion of the Department, is sufficient
to assure the likelihood of the success of the proposed operations;
and (c) are or will become owner-operators of farms and ranches.
These private loans to farmers and ranchers may be made
for any worthwhile project for the conservation, management,
utilization, development or preservation of the land, water, fish,
wildlife, recreational and other renewable resources in the state;
and for the refinancing of existing indebtedness incurred in the
expansion or rehabilitation of projects for those purposes. The
loans may not exceed the lesser of $100,000 or 80 percent of the
fair market value of the security given therefor, may not exceed
a term of thirty years, and shall bear interest at a rate estab-
lished by the Board of Natural Resources and Conservation not to
exceed one percentage point greater than the prevailing interest
rate on renewable resource development bonds authorized by the
act. Private loans are to be secured by a lien upon the project
constructed with the proceeds thereof.
By a resolution adopted December 5, 1975, the Board of
Natural Resources and Conservation requested the Board of Examiners
to issue and sell bonds of the state to implement this act. his
action was filed thereafter and the sale and issuance of the bonds
has been stayed during the pendency of this appeal.
Three issues are before this Court on appeal:
(1) Whether the use of the bond moneys authorized by
Chapter 533, Laws of 1975, for the purpose of lending money to
private individuals is a violation of Article VIII, Section 1,
1972 Montana Constitution, as authorizing the levy of taxes
for other than a "public purpose"?
(2) Whether the use of the proceeds of said bonds for
loans to private individuals violates Article V, Section 11,
1972 Montana Constitution, as an appropriation to a private
individual not under control of the state?
(3) Whether Chapter 533, Laws of 1975 constitutes an
invalid delegation of legislative authority to the Department of
Natural Resources and Conservation?
Article VIII, Section 1, 1972 Montana Constitution provides:
"Taxes shall be levied by general laws for public
purposes."
The crux of this issue is a determination of what is a "public
purpose" within the framework of this action.
The clear purpose of this act is to provide for the develop-
ment of renewable resources in order that future generations of
Montanans may enjoy such resources.
In view of the mandate of Article I Montana Con-
stitution that: "The state and each person shall maintain and
improve a clean and healthful environment in Montana for present
and future generations" we feel the purpose of this act is a
"public purpose". Furthermore, we have previously stated that
" * * * What is a 'public purpose' is a question primarily for
legislative determination, with which we will not interfere un-
less there has been a clear abuse of power. * * *" Willett v.
State Board of Examiners, 112 Mont. 317, 322, 115 P.2d 287; Huber
v. Groff, Mont . , 558 P.2d 1124, 33 St.Rep. 1304. We
find no hint of such abuse of power in the instant case.
Appellant further charges that the renewable resource
development act violates Article V, Section 11(5), 1972 Montana
Constitution. This section provides:
"No appropriation shall be made for religious,
charitable, industrial, educational or benevolent
purposes to any private individual, private asso-
ciation, or private corporation not under control
of the state."
In effect, appellant argues that the sale of the renewable re-
source development bonds and the lending of the proceeds there-
from to farmers and ranchers constitutes an appropriation of
money for persons not under the control of the state.
There can be no doubt that Article V, Section 11(5),
1972 Montana Constitution, prohibits the appropriation of funds
for the use of any private individual, association or corpor-
ation not under state control. We have previously held, however,
that the sale of revenue bonds in order to raise money for resi-
dential loans to low income citizens under the supervision of
the Montana Housing Board, a public corporation, was not a vio-
lation of this section. Huber, supra. We are confronted with
a similar situation herein and the result must be the same.
Initially it is important to recognize that the funds in
question herein are not appropriated for the use of private
persons, corporations or associations. The funds are appropriated
for the use of the Department of Natural Resources and Conserva-
tion. This department is then in turn directed by the renewable
resource development act to dispose of these funds as directed
by this act.
All funds derived from the sale of the renewable resource
development bonds are to be deposited in the clearance fund
account. Sections 89-3606 and 89-3609, R.C.M. 1947. These moneys
are to be used by the Board of Natural Resources and Conservation
to make loans to farmers and ranchers for the development and
preservation of renewable resources. The loans may be made only
upon the proper application and recommendation of the Department
of Natural Resources and Conservation. Section 89-3603, R.C.M. 1947.
Total control over the granting of these loans is vested in
the Department of Natural Resources and Conseryation. We hold
that sufficient control over the appropriated funds is vested
in the state and the mandate of Article V, Section ll(5) is met.
Finally, appellant assails this act on the grounds of
an unconstitutional delegation of legislative power to the Board
of Natural Resources and Conservation since the legislature
failed to establish adequate standards and guides for the deter-
mination of projects eligible for renewable resource development
loans.
When the Legislature confers authority upon an adminis-
trative agency, it must lay down the policy or reasons behind the
statute and also prescribe standards and guides for the grant of
power which has been made to the administrative agency. Bacus
v. Lake County, 138 Mont. 69, 354 P.2d 1056. The following gen-
eral rule found in 73 C.J.S. Public Administrative Bodies and
Procedure, S 29, pp. 324, 325, has been often cited by this Court:
"The law-making power may not be granted to an
administrative body to be exercised under the
guise of administrative discretion. Accordingly,
in delegating powers to an administrative body
with respect to the administration of statutes,
the legislature must ordinarily prescribe a policy,
standard, or rule for their guidance and must not
vest them with an arbitrary and uncontrolled dis-
cretion with regard thereto, and a statute or
ordinance which is deficient in this respect is
invalid. In other words, in order to avoid the
pure delegation of legislative power by the creation
of an administrative agency, the legislature must
set limits on such agency's power and enjoin on it
a certain course of procedure and rules of decision
in the performance of its function; and, if the
legislature fails to prescribe with reasonable
clarity the limits of power delegated to an admin-
istrative agency, or if those limits are too broad,
its attempt to delegate is a nullity.
" * * * On the other hand, a statute is complete
and validly delegates administrative authority
when nothing with respect to a determination of
what is the law is left to the administrative
agency, and its provisions are sufficiently clear,
definite, and certain to enable the aqency to know
its rights and obligations." (Emphasis supplied.)
Bacus, supra; City of Missoula v. Missoula County, 139 Mont.
256, 362 P.2d 539; Huber, supra.
What are the standards and guides supplied to the Board
of Natural Resources and Conservation to be used in its deter-
mination of projects eligible for renewable resource development
loans? Section 89-3603(3) authorizes the Board of Natural
Resources and Conservation to make loans to farmers and ranchers
" * * * for any worthwhile project for the conservation, management,
utilization, development, or preservation of the land, water, fish,
wildlife, recreational and other renewable resources in the
state * * *". The act further specifies the eligibility require-
ments of prospective borrowers, maximum loan limits, maximum re-
payment periods and requires the establishment of a lien in favor
of the state upon the project.
The Montana rule to be used in the evaluation of the
validity of delegations of power to administrative agencies was
carefully analyzed in Bacus at pp. 80, 81, where we stated:
"In the case of Chicago, M. & St. P. R. Co. v.
Board of R. R. Com'rs, 76 Mont. 305, 314, 315,
247 P. 162, 164, this court has stated:
"'We think the correct rule as deduced from the
better authorities is that if an act but author-
izes the administrative officer or board to
carry out the definitely expressed will of the
Legislature, although procedural directions and
the things to be done are specified only in gen-
eral terms, it is not vulnerable to the criti-
cism that it carries a delegation of legislative
power.' This rule has been approved in Northern
Pacific R. Co. v. Bennett, 83 Mont. 483, 272 P. 987;
Barbour v. State Board of Education, 92 Mont. 321,
13 P.2d 225; State ex rel. City of Missoula v.
Holmes, 100 Mont. 256, 47 P.2d 624, 100 A.L.R. 581;
State v. Andre, 101 Mont. 366, 54 P.2d 566; State
ex rel. Stewart v. District Court, 103 Mont. 487,
63 P.2d 141; and Thompson v. Tobacco Root Co-op
State Grazing Dist., 121 Mont. 445, 193 P.2d 811.
See also State v. Johnson, 75 Mont. 240, 243 P.
1073.
"We do not disagree with this established rule as
enunciated by these Montana authorities. However,
the case at bar does not fall within the purview of
this rule."
The Court in Bacus continued by laying down the follow-
ing rule to be used to determine the sufficiency of guidelines
laid down by legislative enactments:
"In the case of State v. Stark, 100 Mont. 365,
371, 52 P.2d 890, 892, this court has stated:
"'Delegation of power to determine who are within
the operation of the law is not a delegation of
legislative power. * * * But it is essential that
the Legislature shall fix some standard by which
the officer or board to whom the power is delegated
may be governed, and not left to be controlled
by caprice.'
"We agree with this statement of the law and go
further by saying that the standard must not be
so broad that the officer or board will have un-
ascertainable limits within which to act."
This rule has been followed closely by a number of subsequent
cases. Pattie v. Oil & Gas Cons. Comm'n, 145 Mont. 531, 402
P.2d 596; State ex rel. Bennett v. Stow, 144 Mont. 599, 399 P.2d
221; City of Billings v. Smith, 158 Mont. 197, 490 P.2d 221.
The standards and guides laid down by this act prove to
be insufficient when analyzed by the Bacus test. In effect, the
only limit on the power to loan money for a certain project is
the Board of Natural Resources and Conservation's subjective
determination of whether a project is worthwhile. The parameters
which define a project eligible for the loans contemplated by
this act must be more clearly defined. In its present form, in-
sufficient guidelines are provided to the Department of Natural
Resources and Conservation in order for it to fully know its rights
and obligations under this act.
The constitutional infirmity discussed above relating to
the loan program to farmers and ranchers is not present in the
remaining two programs contemplated by this action. Section 89-
3604,which deals with state renewable resource grants to public
agencies, provides :
"The department of administration may recommend
to the governor that grants from the renewable
resource development account * * * be made to any
department, agency, board, commission, or other
division of state government. Unless specifically
authorized by the legislature, no bond proceeds
shall be used for the purpose of making grants
* * **I'
This section further provides:
"The governor shall submit those grant proposals
having his approval to the legislature. * * *
Those grant proposals approved by the legislature
shall be administered by the department."
Section 89-3605, R.C.M. 1947, which deals with state
and local renewable resource development loans,provides:
"The department of administration may recommend to
the governor that loans be made * * * to any de-
partment, agency, board, commission or other divi-
sion of state government or to any city, county,
or other political subdivision or local government
body of the state."
Again, legislative approval of these loans is required.
In the programs contemplated by sections 89-3604 and
89-3605 strict control is maintained by the legislature over the
disbursement of funds from this program in the form of grants
or loans. No unconstitutional delegation of legislative power
is present herein.
We therefore, reverse the judgment of the district court
and remand this matter with instructions to declare those portions
of Title 89, Chapter 36, R.C.M. 1947, which provide for renewable
resource development loans to farmers and ranchers unconstitutional
as an unlawful delegation of legislative power.