Huber v. Groff

No. 13552

I N THE SUPREME C U T O THE STATE O MONTANA
OR F F

CHARLES W. HUBER,

P l a i n t i f f and Appellant,

WILLIAM A. GROFF , V I R G I N I A JELT,ISON ,
.
PAUL A. JOHNSON, JAMES J L A Y , DAN
ER
K. MIZNER, PAUL E. POLZIN, WARREN F.
VAUGHAN, a s members of and c o n s t i t u t i n g
t h e Bonrd of Housing of t h e S t a t e of
Montana,

Defendants and Respondents.

ORIGINAL PROCEEDING:

Counsel of Record:

For Appellant :

P a t r i c k F. Hooks argued, Townsend, Montana

For Respondents:

Moulton, Bellingham, Longo and Mather, B i l l i n g s ,
Montana
F r e d r i c D. Moulton argued, B i l l i n g s , Montana
Walter S. Murf i t t appeared, S p e c i a l A s s i s t a n t
Attorney General, Helena, Montana

Submitted : October 25, 1976

Decided BE6 2 9 3976
Filed :mc 2 8 f2T7
M r . J u s t i c e John Conway Harrison d e l i v e r e d t h e Opinion of t h e
Court.

T h i s i s an o r i g i n a l proceeding brought by Charles W. Huber,

p l a i n t i f f , a g a i n s t t h e members of t h e Board of Housing of t h e

s t a t e of Montana seeking a d e c l a r a t o r y judgment pursuant t o

Chapter 89, T i t l e 93, Revised Codes of Montana 1947. The Court

accepted o r i g i n a l j u r i s d i c t i o n pursuant t o Rule 1 7 ( a ) , M.R.App.Civ.

P. because t h e s h o r t n e s s of time b e f o r e t h e n e x t meeting of t h e

l e g i s l a t u r e made "due c o n s i d e r a t i o n i n t h e t r i a l c o u r t and due

a p p e a l t o t h i s Court a n inadequate remedy."

The p l a i n t i f f seeks t o have t h e "Housing Act of 1975"

which was passed a s Chapter 461, Laws of 1975, by t h e F o r t y - f o u r t h

L e g i s l a t u r e d e c l a r e d u n c o n s t i t u t i o n a l on s e v e r a l grounds:

F i r s t , p l a i n t i f f a l l e g e s t h e Act does n o t s e r v e a p u b l i c

purpose a s r e q u i r e d by A r t . V I I I , S e c t i o n 1, 1972 Montana C o n s t i t u -

tion.

Second, p l a i n t i f f a l l e g e s t h e bonds t h e Housing Board i n t e n d s

t o s e l l a r e s t a t e d e b t and v i o l a t e t h e requirements of A r t . V I I I ,

S e c t i o n 8 , 1972 Montana C o n s t i t u t i o n .

T h i r d , p l a i n t i f f a l l e g e s t h a t even i f t h e bonds a r e n o t

s t a t e d e b t , s e c t i o n 35-517, R.C.M., v i o l a t e s t h e s e p a r a t i o n of

powers s e c t i o n of t h e 1972 Montana C o n s t i t u t i o n and impinges on

t h e powers of t h e e x e c u t i v e v i o l a t i n g A r t . 111, S e c t i o n 1 and A r t .

V I , S e c t i o n 9.

F o u r t h , p l a i n t i f f a l l e g e s t h e e n t i r e A c t , and e s p e c i a l l y

s e c t i o n 35-517, v i o l a t e s A r t . V , S e c t i o n l l ( 5 ) .

F i f t h , p l a i n t i f f a l l e g e s t h e Act e n t a i l s an u n c o n s t i t u t i o n a l

d e l e g a t i o n of t h e l e g i s l a t i v e power.
 Sixth, plaintiff alleges the statutory flow of funds violates

Art. VIII, Section 12, Section 13 and Section 1 .
4
Seventh, plaintiff requests the Court resolve the statutory

conflict between section 5-1037, R.C.M. 1947, and the Housing Act

A brief look at the function of the proposed programs of

the Housing Board is necessary as background. The Housing Board
intends to issue what are basically revenue bonds. The legislature

granted these bonds tax exempt status and this status, along with

the fact that the bonds are issued by a carefully supervised.

governmental body, should reduce the risk factor resulting in a

significantly lower interest rate. The Housing Board's plan is
to take this low interest money and inject it into the state's
mortgage money market to make mortgage money available to "persons
and families of lower income." The Housing Board currently plans

to use only two of the statute's programs, the loan to lender

program and the mortgage repurchase program. Both programs operate

in a similar manner. The first program loans money to lending

institutions on the condition they loan that money within a speci-

fied time period to "persons or families of lower income". The

second program provides for the purchase of mortgages on the
condition that the money be lent to "persons or families of lower

income.'' Both programs have financial incentives which encourage
lending institutions to participate .
Before beginning discussion of plaintiff's specific allega-
tions we note the adoption of the 1972 Montana Constitution resulted
in a significant change in the constitutional framework in the
revenue and finance provisions. That change was the result of the
deletion of the
11889 Constitution's Art. XIII, Section 1 which prohibited the
lending of credit of the state to individuals and corporations.
This prohibition serves as the background for many of the older

cases in Montana and most cases in other states even today.

First. Plaintiff contends the Housing Act of 1975, sections

35-501 through 35-526, R.C.M.1947, does not serve a public purpose.

Art. VIII, Section 1, Montana Constitution requires:.

"Tax purposes. Taxes shall be levied by general
laws for public purposes .It

This Court in Mills v. Stewart, 76 Mont. 429, 438, 247 P. 332,
held :
"The power to appropriate public funds and the power
to levy and collect taxes are identical. (Panchot v.
Leet, 50 Mont. 314, 146 Pac. 927; Gem Irrigation District
v. Van Deusen, 31 Ida. 779, 176 Pac.. 887; College v.
Hager, 121 Ky. 1, 87 S.W. 1125; 1 Cooley on Taxation
4th ed. sec. 177.)"

The question is twofold: (1) Is the purpose of the legis-
lation a public purpose? (2) Are the means selected reasonably

likely to accomplish that public purpose?

The purpose of the Housing Act of 1 9 7 5 . i ~
set out in

section 35-502:
"The legislature finds and declares that there is a
shortage in Montana of decent, safe, and sanitary
housing which is w d r n the financial capabilities of
i.t
lower income persons and families. In order to
alleviate the high cost of housing for these persons,
the legislature believes that it is essential that
additional public moneys be made available, through
the issuance of revenue bonds, to assist both private
enterprise and governmental agencies in meeting critical
housing needs .It
The basic means to be used to accomplish this purpose are set out
in section 35-505:
" 1 The board may: (a) make loans to lending institutions
()
under terms and conditions adopted by the board requiring
the proceeds to be used by the lending institution for the
making of mortgage loans for housing developments in the
state for persons and families of lower income;

"(b) invest in, purchase or make commitments to
purchase, and take assignments from lending institutions,
 of notes, mortgages and other securities evidencing
loans for the construction, rehabilitation, purchase,
leasing or refinancing of housing developments for
persons and families of lower income in this state, under
terms and conditions adopted by the board;

"(c) make, undertake commitments to make, and parti-
cipate in the making of mortgage loans, including federally
insured mortgage loans, and to make temporary loans and
'

advances in anticipation of permanent mortgage loans to
housing sponsors to finance the construction or rehabili-
tation of housing developments designed and planned for
occupancy by persons and families of lower income in this
state, under terms and conditions adopted by the board;

"d
() make, undertake commitments to make, and parti-
cipate in the making of loans to persons and families of
lower income for housing development, including without
limitation persons and families of lower income who are
eligible or potentially eligible for federally insured
loans, federal mortgages or other federal housing assistance,
when the board determines that mortgage loans are not
otherwise available, wholly or in part, from private lenders
upon reasonably equivalent terms and conditions, and under
terms and conditions adopted by the board. * * *"
The Housing Board has taken necessary administrative steps

to activate subsections (a) and ( ) section 35-505 and these pro-
b,

grams are ready to begin.

As this Court pointed out in Cottingham v, State Board of

Examiners, 134 Mont. 1, 10, 11, 328 P.2d 907:

"The constitutionality of a legislative act is presumed,
and this presumption must be overcome beyond a reasonable
doubt before this court may overturn an expression of
legislative will. *
**
"'As we have observed hitherto, the Constitution must
receive a broad and liberal interpretation consistent
with the purpose of the framers and the people in adopting
it, that it may serve the needs of a growing state; "the
proper interpretation of any constitutional provision
requires us to remember that it is a part of the organic
law---organic not only in the sense that it is fundamental,
but also in the sense that it is a living thing designed
to meet the needs of a progressive society, amid all the
detail changes to which a progressive society is subject."'"
In Willett v. State Board of Examiners, 112 Mont. 317, 322,

115 P.2d 287, the Court said:
 'I* * What
i s a ' p u b l i c purpose' i s a question
primarily f o r l e g i s l a t i v e determination, with which
we w i l l not i n t e r f e r e unless t h e r e had been a c l e a r
abuse of power. * * *"
A g r e a t majority of o t h e r s t 8 t e s which have considered

n e a r l y i d e n t i c a l l e g i s l a t i o n found housing t o be f o r a p u b l i c

purpose. S t a t e ex r e l . Warren v. Nusbaum, 59 Wisc.2d 391, 208

N.W.2d 780; Minnesota Housing Finance Agency v. H a t f i e l d , 297

Minn. 155, 210 N.W.2d 298; Vermont Home Mortgage Credit Agency

v. Montpelier National Bank, 128 V t , 272, 262 A.2d 445; N w J e r s e y
e

Mortgage Finance Agency v. McCrane, 56 N . J . 414, 267 A.2d 24;

Maine S t a t e Housing Authority v. Depositors T r u s t Co., (Maine 1971),

278 A.2d 699; Opinion t o t h e Governor, 112 R . I . 139, 308 A.2d 802;

Johnson v. Penn. Housing Finance Agency, 453 Pa. 329, 309 A.2d 528;

Massachusetts Housing Finance Agency v. N w England Merchant's
e

National Bank, 356 Mass. 202, 249 N.E.2d 599 (overruling advisory

opinion Opinion of t h e J u s t i c e s , 251Mass. 716, 219 N.E.2d 18);

Walker v. Alaska S t a t e Mortgage Association (Alaska 1966), 416

P.2d 245; Gibson v. Smith, -r.
O App. -9 531 P.2d 724; I n t h e

Matter of t h e C o n s t i t u t i o n a l i t y of O.R.S. 456.720, -r.
O ,
537 P.2d 542; C a l i f o r n i a Housing Finance Agency v. E l l i o t , -Cal.
,!!T
tipre. 3 555 P.2d &9; S t a t e ex r e l . West Virginia Housing

Development Fund v. Copenhaver, 153 W.Va 636, 171 S.E.2d 545;

Rich v. Georgia, - .
Ga , 227 S.E.2d 761; West v. Tennessee

Housing Development Agency, (Tenn. 1974), 512 S.W.2d 275. The

lone s t a t e t h a t found t h i s l e g i s l a t i o n i s n o t f o r a p u b l i c purpose

i s Michigan where i n I n r e Advisory Opinion, 380 Mich. 554, 158 N.W.

2d 416, t h e Supreme Court of t h a t s t a t e found t h e a c t was f o r a

public purpose except a s i t r e l a t e d t o a unique s t a t e c o n s t i t u t i o n

provision which r e l a t e s t o c o n s t r u c t i o n of i n t e r n a l improvements
and which prohibited the state from being a party to such im-

provements. The Michigan court ruled the state was not a party

to the improvements. The housing statute was not found to violate

any other provision and was for a public purpose for all other
constitutional provisions.

This Court in Rutherford v. City of Great Falls, 107 Mont.

512, 86 P.2d 656, found a housing authority statute that allowed

the city to begin slum clearance projects was for public purpose.

The only difference between Rutherford and the instant case is
the means chosen to accomplish that end. In Minnesota Housing

Finance Agency v. Hatfield, 297 Minn. 155, 210 N.W.2d 298, 307,

it was pointed out:
"An interest subsidy mechanism is perhaps the most
unobtrusive method for the government to subsidize
housing costs and housing so subsidized is less likely
to be stigmatized with the tarnished image often asso-
ciated with public housing operated by housingredwklopment
authorities."

It is commendable the Montana legislature and the Housing

Board chose the interest subsidy means to assist persons in

attaining safe, sanitary and hedthful housing because it involves
very little direct government interference with the individual's
choice of the type of housing he wishes to live in. Because this

means is different from that chosen in Rutherford in no way

alters the fact the legislation was enacted to accomplish a public

purpose and is reasonably structured to accomplish this end. For

this reason the legislation does not violate Art. VIII, Section 1,
1972 Montana Constitution.
Second. Plaintiff questions whether the bonds the Housing

Board proposes to sell are state debt and therefore subject to

the provisions of Art. VIII, Section 8, 1972 Montana Constitution

which states :
 "No s t a t e debt s h a l l be c r e a t e d u n l e s s authorized
by a two-thirds v o t e of t h e members of each house
of t h e l e g i s l a t u r e o r a majority of t h e e l e c t o r s
voting thereon. N s t a t e debt s h a l l be c r e a t e d t o
o
cover d e f i c i t s incurred because a p p r o p r i a t i o n s exceeded
a n t i c i p a t e d revenue."
The l e g i s l a t u r e passed t h e Housing Act of 1975 by a two-

t h i r d s v o t e of t h e members of each house, but it i s c l e a r t h a t t h e

means taken by t h e sponsors of t h i s l e g i s l a t i o n t o avoid a c o n f l i c t

with t h e provisions of A r t . V I I I , Section 8 was t o have t h e Housing

Board finance i t s p r o j e c t s by revenue bonds, which a r e n o t s t a t e

debt; I f t h e l e g i s l a t i o n was intended t o c r e a t e s t a t e debt t h a t

i n t e n t would be c l e a r l y expressed i n t h e b i l l ' s t i t l e , o r it

would run c o n t r a r y t o A r t . V , Section l l ( 3 ) which r e q u i r e s :

"Each b i l l , except general a p p r o p r i a t i o n b i l l s and b i l l s
f o r t h e c o d i f i c a t i o n and g e n e r a l r e v i s i o n of t h e laws,
s h a l l contain only one s u b j e c t , c l e a r l y expressed i n i t s
t i t l e , I f any s u b j e c t i s embraced i n any a c t and i s n o t
expressed i n t h e t i t l e , only s o much of t h e a c t n o t so
expressed i s void."

The t i t l e of t h e b i l l i n question reads:

"AN ACT TO BE KNOWN A THE HOUSING ACT O 1975;
S F
CREATING A BOARD O HOUSING AND PROVIDING F R ITS
F O
P W R AND DUTIES RELATING TO FINANCING TO ASSIST
O ES
PRIVATE ENTERPRISE AND GOVERNMENTAL AGENCIES TO MEET
HOUSING NEEDS," [Chapter 461, Laws of 1975.1

A two-thirds v o t e of t h e l e g i s l a t u r e i s an a l t e r n a t i v e

t o a vote a t a g e n e r a l e l e c t i o n and t h i s Court w i l l n o t f i n d t h e

l e g i s l a t u r e has approved t h e c r e a t i o n of a s t a t e debt u n l e s s i t i s

apparent t h a t was t h e obvious i n t e n t of t h e l e g i s l a t u r e . That

i n t e n t i s n o t present i n t h i s case.

W examine t h e Act t o s e e i f a s t a t e debt was c r e a t e d .
e

The Housing Act of 1975 a t s e c t i o n 35-520 reads:

"Credit of s t a t e not pledged. Obligations i s s u e d under
t h e provisions of t h i s a c t do n o t c o n s t i t u t e a debt o r
l i a b i l i t y o r o b l i g a t i o n o r a pledge of t h e f a i t h and c r e d i t
of t h e s t a t e b u t a r e payable s o l e l y from t h e revenues o r
a s s e t s of t h e board. A o b l i g a t i o n issued under t h i s a c t
n
 s h a l l contain on t h e face thereof a statement t o t h e
e f f e c t t h a t t h e s t a t e of Montana i s n o t l i a b l e on t h e
o b l i g a t i o n and t h e o b l i g a t i o n i s n o t a debt of t h e
s t a t e and n e i t h e r t h e f a i t h and c r e d i t nor t h e taxing
power of t h e s t a t e i s pledged t o t h e payment of t h e
p r i n c i p a l o f , o r t h e i n t e r e s t on, t h e obligation."

I n Fickes v. Missoula County, 155 Mont. 258, 264, 470 P.2d

287, t h e Court held t h a t financing p r o j e c t s by t h e use of revenue

bonds d i d n o t c r e a t e . a debt which would be s u b j e c t t o t h e require-

ments of t h e predecessor of A r t . V I I I , Section 8 , 1972 Montana

Constitution. A f t e r c i t i n g a s e r i e s of revenue bond cases t h i s

Court, i n Fickes, pbinted out:

"The common q u a l i t y of a l l t h e s e p r o j e c t s i s t h a t i n
each t h e r e i s e x p l i c i t provision t h a t t h e p u b l i c body
i s s u i n g t h e bonds does n o t o b l i g a t e i t s taxing power
t o pay f o r them. The same exact provision i s w r i t t e n
i n t o t h e law and t h e bonds involved i n t h i s c a s e , so t h a t
t h e same d e c i s i o n must n e c e s s a r i l y be made i n t h i s case."

That exact language would be a p p l i c a b l e h e r e , except t h e Housing

Act of 1975 contains an a d d i t i o n a l s e c t i o n , s e c t i o n 35-517, which

i s r e f e r r e d t o a s a "moral make-up clause" and reads :

"Maintenance of c a p i t a l reserve account. (1) I n o r d e r
t o a s s u r e t h e maintenance of t h e c a p i t a l r e s e r v e account,
t h e chairman of t h e board s h a l l on o r before September 1
i n t h e year preceding t h e convening of t h e l e g i s l a t u r e ,
d e l i v e r t o t h e governor a c e r t i f i c a t e s t a t i n g t h e sum,
i f any, required t o r e s t o r e t h e c a p i t a l r e s e r v e account
t o t h e minimum c a p i t a l reserve requirement. The governor
s h a l l include i n t h e executive budget submitted t o t h e
l e g i s l a t u r e , t h e sum required t o r e s t o r e t h e c a p i t a l r e s e r v e
account t o t h e sum of minimum c a p i t a l reserve requirements.
A l l sums appropriated by t h e l e g i s l a t u r e s h a l l be deposited
i n t h e c a p i t a l reserve account.

"(2) A l l amounts appropriated t o t h e board by t h e
l e g i s l a t u r e under t h i s s e c t i o n c o n s t i t u t e advances t o
t h e board and, s u b j e c t t o t h e r i g h t s of t h e holders of
any bonds o r notes of t h e board, s h a l l be repaid t o t h e
s t a t e ' s g e n e r a l fund without i n t e r e s t from a v a i l a b l e
operating revenues of t h e board i n excess of amounts r e -
quired f o r t h e payment of bonds, notes o r o t h e r o b l i g a t i o n s
of t h e board, f o r maintenance of t h e c a p i t a l r e s e r v e
account and f o r operating expenses."
 A11 the objections to section 35-517 assume the very worst

combination of events will happen---that the mortgages invested

in will not provide enough revenue to pay off the bonds; that the

governor recommended and the legislature approved the loan provided

for and the land that secures the mortgages has lost value and,

the sale of the land would not cover the amount secured by the

mortgage. This is extremely unlikely because land values have

generally gone up and mortgagors have generally paid a portion

of the underlying debt before default and the land covers the full

amount of the debt remaining. There is little likelihood of resort

to the provisions of section 35-517 but nonetheless its provisions

must meet constitutional muster.
An Oregon court of appeals case, Gibson v. Smith,

O~-APP- ,531 P.2d 724, 728, reviews the difficulties the courts

in various jurisdictions have had with this provision in its

various forms :

''We have considered the opinions and conclusions of other
courts which have discussed the constitutionality of
housing acts with provisions similar to those questioned
at bar. All of them consider provisions like those in
ORS 456.720(5) to be ineffectual for their purported
purpose, but several leave them extant as expressions of
what the legislatures hope future legislatures will do.
Some strike such provisions because they are nullities.
In all cases, the crucial questions are decided on the
basis of the particular state's constitutional provisions.
In no case we have found have such acts been totally
struck down, and all hold they bear a public purpose.
Walker v. Alaska State Mortgage Association, supra;
Maine State Housing Auth. v. Depositors Trust Ca, 278 A.2d
699 (Me. 1971) (which held that the attempt to bind future
legislatures is ineffective, but that the attempt would be
interpreted so that the word 'shall' means 'may' in order
to give it the effect of expressing a 'hope' or 'aspiration'
that future legislatures would appropriate from general
funds in the event of revenue deficits); Massachusetts
Housing Finance Agency v, N.E. Merchants National Bank,
356 Mass. 202, 249 N.E.2d 599 (1969)(where the court inter-
preted the questioned provision much as did the Maine court
in Maine State Housing Auth, v. Depositors Trust Co., supra);
Constitutionality, PA 1966, No. 346, 380 Mich. 554, 158
I N.W. 2d 416 (1968) (in which the court held invalid a pro-
vision like that involved at bar); Minnesota Housing
 Finance Agency v. Hatfield, 297 Minn. 155, 210 N.
W.2d 298 (1973); New Jersey Mortgage Finance Agency v.
McCrane, 56 N.J. 414, 267 A.2d 24 (1970); Martin v.
Housing Corp., 277 N.C. 29, 175 S.E.2d 665 (1970);
Johnson v. Pennsylvania Housing Finance Agency, 453
Pa. 329, 309 A.2d 528 (1973); Vt. Home Mort. Cr. Agcy. v.
Mont. Nat. Bank, 128 Vt. 272, 262 A.2d 445 (1970);
State ex rel. v. Copenhaver, 153 W. Va. 636, 171 S.E.2d
545 (1969); and State ex rel. Warren v. Musbaum, 59 Wis.2d
391, 208 N.W.2d 780 (1973) (where the questioned provision
included the sentence about the governor including a
deficit in the reserve fund in a future budget, not the
sentence requiring an appropriation by a future legislature.
It did require a bill to pay the same to be introduced
in future legislatures, which the court said was a nullity.
Nevertheless, on the theory that the included provision was
a legislative attempt to invade executive authority, the
provision was held to be unconstitutional and a nullity)."

In Gibson the Oregon court found the equivalent section to section

35-517 in the Oregon statute to be unconstitutional as a viola-

tion of that state's constitutional provision equivalent to Art.

VIII, Section 8, 1972 Montana Constitution. The Oregon Supreme
Court in an original proceeding, In the Matter of the Constitu-

tionality of O.R.S. 456.720, (Ore.1975), 537 P.2d 542, 545, found
that the section, after an amendment which removed the mandatory

direction to the legislature to appropriate funds and replaced

it with permissive language, was constitutional. It pointed out:
"Intervenors regard the presence of a make-up provision
as a pledge of the state credit because a bond dealer or
vendor of certificates would point to the statute as an
assurance to potential buyers of the certificates of
indebtedness, that if the source of payment of the certi-
ficates should prove insufficient, a future legislature
would come to the rescue with an appropriation of state
funds to prevent or overcome a default. Certainly the
purchasers of the bonds cannot predicate such an expecta-
tion upon any legal obligation of the state because the
bonds themselves are required to contain a statement to
the contrary. If there is a pledge, then, it is at most
based upon a moral obligation which the members of future
legislatures might feel to meet the deficiency. We do
not interpret Article XI, $7 as prohibiting such a moral
and therefore unenforceable pledge. ** *"
Montana's version of this section is permissive in its direction
to the legislature and it is clear the Forty-fourth Legislature
did not bind a future legislature appropriate money.

Third Section 35-517 presents a second difficulty due

to the mandatory language in its direction that the governor

include the Housing Board's appropriation request in his budget .
In State ex rel. Warren v. Nusbaum, 59 Wis.2d 391, 208 N.W.2d

780, the Wisconsin Supreme Court found such a mandatory direction

violated that state's constitutional provision which said the

governor "shall communicate to the legislature, at every session,
the
the condition oflstate, and recommend such matters to them for
The
their consideration as he may deem expedient." /equivalent section

the 1972 Montana Constitution, Art. VI, Section 9, provides :
"Budget and messages. The governor shall at the
beginning of each legislative session, and may at
other times, give the legislature information and
recommend measures he considers necessary. The
governor shall submit to the legislature at a time
fixed by law, a budget for the ensuing fiscal period
setting forth in detail for all operating funds the
proposed expenditures and estimated revenue of the
state."
The Constitutional Convention Notes point out that the difference

between this section and the corresponding section in the 1889

Montana Constitution' that:
is

"Makes it mandatory that Governor send budget
to legislature. Otherwise no change except in
grammar. II
This Court in State ex rel. Normile v. Cooney, 100 Mont.
391, 403, 47 P.2d 637, stated:
"'The separation of the government into three great
departments does not mean that there shall be "no
common link of connection, or dependence, the one
upon the other in the slightest degree1''(&8tory's
Commentaries on the Constitution, sec. 525); it means
that the powers properly belonging to one department
shall not be exercised by either of the others. (Const.
Art.IV, sec.1.) There is no such thing.as absolute
independence. ' "
-12 -
Budgeting is one-of those common links. The executive depends

on the legislature for funding and because the legislature must

set the state's budget in a ninety day session every other year,

and because this is a period when there are numerous other matters

to attend to, the legislature must also rely on the executive to

provide the information it needs to budget intelligently. By

statute, section 79-1015, R.C.M. 1947, the governor is required to

submit the budget in a certain form with specified contents.

The governor is prohibited from altering any legislative appropria-

tion request by section 79-1013, R.C.M.1947.
It is this difference, the mandatory budget requirement,
that creates the difference between Montana and Wisconsin. There

was no constitutionally prohibited invasion of the executive's

power when the legislature required in section 35-517 that the

governor include the Housing Board's request in his budget.

Fourth Difficulty presented by section 35-517 is also
whether an appropriation made pursuant to that section would

violate Art. V, Section 11(5), 1972 Montana Constitution which

reads :
"No appropriation shall be made for religious, charitable,
industrial, educational, or benevolent purposes to any
private individual, private association, or private corpora-
tion not under control of the state."

This is one of the sections of the 1972 Constitution directed
to the legislature. Art. V, Section ll(6) allows challenge on
the ground of noncompliance with the section only within two years
of a statute's effective date. This challenge is within that
time period.

The predecessor section in the 1889 Constitution was

Art. V, Sec. 35, which read:
 "No a p p r o p r i a t i o n s h a l l be made f o r c h a r i t a b l e ,
i n d u s t r i a l , educational o r benevolent purposes t o
any person, corporation o r community not under t h e
a b s o l u t e c o n t r o l of t h e s t a t e , nor t o any denomina-
t i o n a l o r s e c t a r i a n i n s t i t u t i o n o r a s s o c i a t i o n . I1

The Convention Notes i n d i c a t e t h e r e was no change between t h e

new and t h e o l d provision except a s t o grammar. I t m u s t ' t h e n be

assumed t h e 1972 Montana C o n s t i t u t i o n expresses t h e i n t e n t of

t h e framers more p r e c i s e l y . This i s s i g n i f i c a n t because t h e r e

a r e d i f f e r e n c e s i n t h e wording of t h e 1889 and 1972 s e c t i o n s .

The 1889 s e c t i o n had t h e word " a b ~ o l u t e 'before t h e word "control1'
~

and t h e 1972 s e c t i o n adds t h e word "private" before person,

a s s o c i a t i o n , and corporation. I n Veterans1 Welfare Comm'n v.

V.F.W. & D.A.V., 141 Mont. 500, 510, 379 P.2d 107, t h i s Court

i n d i s c u s s i n g t h e d i f f e r e n c e between a l i n e item a p p r o p r i a t i o n t o

t h e p r i v a t e v e t e r a n s ' organizations and a p p r o p r i a t i o n s t o t h e

housing a u t h o r i t y i n Rutherford and t o t h e Montana Armory Board,

i n Geboski v. Montana Armory Board, 110 Mont. 487, 103 P.2d 679,

said:
11 1
However, t h e d i s t i n c t i o n between those cases and
t h e c a s e a t b a r i s t h e d i s t i n c t i o n between a p r i v a t e
corporation and a public c o r p o r a t i o n , t h e f u n c t i o n s
of t h e l a t t e r of t h e two being under t h e c o n t r o l of t h e
s t a t e . I n a l l t h r e e of t h e cases above r e f e r r e d t o t h e
c o u r t was c a r e f u l i n pointing out t h a t t h e agency was a
p u b l i c corporation under t h e c o n t r o l of t h e s t a t e and
i n t h e n a t u r e of a municipal corporation. ' I 1

The Montana Housing Board i s n o t a p r i v a t e corporation, i t i s a

public corporation. I t received a l l of i t s powers d i r e c t l y from

t h e l e g i s l a t u r e and i t s d u t i e s and r e s p o n s i b i l i t i e s a r e s e t out

c l e a r l y by t h e s t a t u t e which c r e a t e d i t . A r t . V , Section 1 1 ( 5 ) ,

1972 Montana C o n s t i t u t i o n , i s not a p p l i c a b l e t o a p p r o p r i a t i o n s

under s e c t i o n 35-517, R.C.M. 1947.
 Fifth Plaintiff alleges the Housing Act of 1975 entails

an unconstitutional delegation of legislative power violating Art.

V, Section 1, 1972 Montana Constitution. The Court stated in
Milk Control Board v. Rehberg, 141 Mont. 149, 161, 376 P.2d 508:
"* * * Concerning adequate standards and guides in
delegation of legislative power, this court has stated
the rule as follows: If the legislature fails to
prescribe with reasonable clarity the limits of power
delegated to an administrative 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 agency to know its rights and obligations."
In this case, plaintiff argues the statute is too vague
as to the term "persons ard families of lower income". The
legislature set out its definition of this term in section 35-

"'Persons and families of lower income' means persons
and families, with insufficient personal or family
income who require assistance under this act,' as
determined by the board, taking into consideration:

" a the amount of the total personal and family
()
income available for housing needs;

"(b) the size of the family;

" c the eligibility of persons and families under
()
federal housing assistance of any type based on lower
income or a functional or physical disability;
"d
() the ability of persons and families to compete
successfully in the normal housing market and to pay the
amount at which private enterprise is providing decent,
safe, and sanitary housing;
" e the availability and cost of housing in
()
particular areas; and
If(£) nkeds of particular'persons.or families due.to
age ,or physical handicaps .I'
 A l l t h a t i s l e f t f o r t h e agency t o do t o place a f i g u r e

on t h e income l i m i t f o r "persons and f a m i l i e s of lower income'' i s

t o i n q u i r e i n t o the f a c t s a s t h e s t a t u t e d i r e c t s and make t h e

determinations required by t h e s t a t u t e . The agency has heeded t h i s

l e g i s l a t i v e d i r e c t i v e and adopted a program r u l e which s e t s o u t

t h e s e same b a s i c c o n s i d e r a t i o n s i n g r e a t e r d e t a i l . See: M.A.C. 22-3.18

(6) S1840. Pursuant t o t h i s program r u l e t h e Housing Board adopted

$16,000 a s t h e upper l i m i t . W note here
e (1) t h i s Act i s aimed

a t a s p e c i f i c category of persons, those whose income i s s t a b l e but

because of t h e high p r i c e of money cannot a f f o r d t o buy a home. It

i s obvious those with l i t t l e o r no income cannot a f f o r d t o purchase

a home no matter how low t h e i n t e r e s t r a t e ; (2) t h e f a c t u a l bases

of t h e determinations made by t h e Board c o n s t a n t l y change and t h e

l e g i s l a t u r e meets only once every two years. The agency may meet

a s o f t e n a s i s necessary and may change t h e income l e v e l a s t h e

f a c t s which serve a s t h e b a s i s f o r i t s o r i g i n a l determination change.

The delegation of t h i s power does n o t v i o l a t e any c o n s t i t u t i o n a l

prohibitions. It i s a c l e a r , d e f i n i t e , and c e r t a i n d i r e c t i o n t o t h e

agency which enables t h e agency t o know i t s r i g h t s and o b l i g a t i o n s .

S i x t h P l a i n t i f f charges t h e flow of funds under t h e Act

v i o l a t e s A r t . V I I I , Sections 12, 13, 14,1972 Montana C o n s t i t u t i o n .

The Housing Act of 1975 provides f o r two methods of c r e a t i o n

and issuance of i t s revenue bonds, by r e s o l u t i o n a s s e t out i n s e c t i o n

35-508(1), o r by t r u s t indenture a s s e t out i n s e c t i o n 35-513.

The bonds issued under t h e f i r s t procedure ( s e c t i o n 35-508(1))

would follow a complex procedure f o r d e p o s i t with t h e s t a t e t r e a s u r e r

i n t h e s t a t e fund with accounts i n various s t a t e fund accounts and

p a r a l l e l a c t accounts.Bythe a l t e r n a t i v e provision ( s e c t i o n 35-513),

t h e funds would be handled by much t h e same system b u t t h e proceeds
from t h e bond s a l e would be handled by t h e t r u s t e e . Section 35-513,

R.C.M. 1947, provides i n p e r t i n e n t p a r t :

'I* ** A t r u s t indenture may c o n t a i n provisions f o r
p r o t e c t i n g and enforcing t h e r i g h t s and remedies of t h e
bondholders a s a r e reasonable and proper and n o t i n
v i o l a t i o n of law, including covenants s e t t i n g f o r t h e
d u t i e s of t h e board i n r e l a t i o n t o t h e e x e r c i s e of i t s
powers, t h e custody, safeguarding and a p p l i c a t i o n of a l l
moneys. The board may provide by a t r u s t indenture f o r
t h e payment of t h e proceeds of t h e bonds and t h e revenues
of t h e t r u s t e e under t h e t r u s t indenture of another
depository, and f o r t h e method of disbursement, with
safeguards and r e s t r i c t i o n s a s i t determines. * * *"
This method i s consis t e n t with s e c t i o n 79-306(3), R.C.M. 1947,

which s t a t e s :

"Nothing i n t h i s chapter s h a l l impair o r otherwise
a f f e c t any covenant entered i n t o pursuant t o law by
any agency o r i n s t i t u t i o n r e s p e c t i n g t h e segregation,
d e p o s i t , and investment of any revenues o r funds pledged
f o r t h e payment and s e c u r i t y of bonds o r o t h e r o b l i g a t i o n s
authorized t o be issued by such agency, and a l l such funds
s h a l l be deposited and invested i n accordance with such
covenants notwithstanding any provision of t h i s chapter."

The chapter r e f e r r e d t o i s e n t i t l e d "Deposit and Investment of

S t a t e Funds". The c o n s t i t u t i o n a l provisions which p l a i n t i f f argues

t h e s e procedures v i o l a t e r e q u i r e t h a t t h e l e g i s l a t u r e s h a l l by law

i n s u r e s t r i c t a c c o u n t a b i l i t y of a l l revenue received and money spent.

The chapter provides f o r a u n i f i e d investment program and r e q u i r e s

t h a t t h e r e be an a p p r o p r i a t i o n made by law, and a warrant drawn

by t h e proper o f f i c e r before money be paid out of t h e t r e a s u r y .

It i s c l e a r t h e l e g i s l a t u r e provided by law f o r s t r i c t

a c c o u n t a b i l i t y of t h e funds. A proper t r u s t e e f o r t h e bond revenue

i s required and t h e r e a r e provisions which a u t h o r i z e a l e g i s l a t i v e

a u d i t a t any time of t h e Board's books and a y e a r l y a u d i t . The t r u s t

indenture r e q u i r e s a monthly r e p o r t t o t h e s t a t e t r e a s u r e r a s t o

a l l indenture funds and bonds of record and accounts must be kept

and be open t o inspection by t h e s t a t e t r e a s u r e r , t h e t r u s t e e s and

holders of more than f i v e percent of t h e outstanding bonds.
 The Constitution's provision for the unified investment

fund does not require that all agencies participate regardless

of the nature of the agency. Where, as here, the agency is not

using state funds and is setting up what amounts to its own special-

ized investment fund with a particular purpose, it is reasonable
to allow, as the legislature did, the agency to take care of its

own funds in a manner appropriate to its function.

The Constitution's provisions for payment out of the

treasury only on a warrant and pursuant to an appropriation pre-

sents no problem, for the trust indenture funds are not deposited
with the treasurer and the funds received from the sale of the
resolution bonds are by statute deemed continuously appropriated.

q1
Section 35-52 c , R.C.M. 1947.
)
This Court discussed a similar provision in Geboski v.

Montana Armory Board, 110 Mont. 487, 493, 103 P.2d 679, where it

said:

"Section 14 relates to the method of handling the
deposits of (f) state monies. The money raised here by
the sale of bonds becomes a special fund to be disbursed
for the erection of proposed buildings. This money is
not derived by taxation and consequently need not be
handled in that manner."
Seventh The last issue raised is the conflict between the

Housing Act of 1975 and section 5-1037, R.C.M. 1947, which prohibits

state banks from borrowing funds without prior approval of the
department of business regulation. Here, recourse to the rule of
statutory construction which provides that where a specific statute
conflicts with a general statute the specific controls over the
general to the extent of any repugnancy. State ex rel. Browman v.

Wood, - ,
Mont , 543 P,2d 184, 32 St. Rep, 1136; Montana Ass'n
of Tobacco and Candy Distributors v. State Board of Equalization,

- 18 -
156 Mont. 1 0 8 , 476 P.2d 7 7 5 ; I n r e Stevenson's E s t a t e , 87 Mont.

4 8 6 , 289 P. 566. It i s c l e a r t h a t s t a t e banks may p a r t i c i p a t e

i n t h e Housing Board's programs without t h e p r i o r approval of t h e

department of business r e g u l a t i o n because t h e l e g i s l a t u r e by i t s

d e f i n i t i o n of "lending i n s t i t u t i o n ' ' c l e a r l y intended t o cover

s t a t e banks and thereby made t h e necessary determination t h a t s t a t e

banks may p a r t i c i p a t e .

A d e c l a r a t o r y judgment i s entered i n accordance w i t h t h e

foregoing opinion.
n

W, Concur:
e f I

M r . J u s t i c e Frank I. Haswell, took no p a r t i n t h i s Opinion.