Alabama State Bridge Corporation v. Smith , 217 Ala. 311 ( 1928 )

After due consideration, I am of the opinion that the act in question offends section 93 as amended, sections 213, 106, 111 and 45 of the Constitution of 1901. As introduced in the House, the title read:

"A bill to be entitled an act to amend the incorporation lawsof Alabama, so as to provide for and authorize an incorporation by the Alabama highway director, the president of the state board of administration, and the chairman of the state tax commission for the purpose of constructing or causing to be constructed, bridges and approaches, for public use, on, or connecting highways in this state; to prescribe its powers and duties; to exercise the right of eminent domain; to provide for raising the necessary funds for such purpose; to prescribe the rights and powers of the purchasers of any bonds issued; to maintain and operate such bridges; to operate any such bridge or bridges for toll until the costs of construction and maintenance shall have been paid, and to provide for thepayment of interest on said bonds by the state of Alabama."

The first section of the bill contained the following:

"Be it enacted by the Legislature of Alabama, that theincorporation laws of Alabama be amended so as to provide for and authorize the incorporation by the Alabama highway director," etc.

On its passage through the House, among other amendments offered and adopted were amendments striking from the title of the bill and section 1 thereof the words italicized above.

The act as passed, for all intents and purposes, incorporates and charters the three persons designated, in their official character, as a corporation, the proceedings prescribed being pro forma, merely, with but a single object in view — the naming of the corporation. The first section of the act names the "Alabama highway director" as the president, and directs that "the vice president and secretary" be selected and designated by the three members. The general powers conferred are that it shall have succession by its corporate name for 20 years, sue and be sued and defend; to make and use a corporate seal, and to alter the same at pleasure; to own, hold and dispose of property, real and personal; to borrow money and secure the same by mortgage or deed of trust; to contract debts, issue notes, bonds, or other negotiable papers, mortgage, pledge, or otherwise transfer or convey "its real and personal and mixed property to secure the payment of money borrowed or any debts contracted; to appoint and employ such officers and agents as the business of the corporation may require; to wind up and dissolve itself, or be wound up and dissolved in the manner in this article provided."

In addition to these general powers, which are the essential attributes of the ordinary private business corporation, the act provides for "powers special," and recites:

"The main purpose of the corporation shall be to construct, maintain and operate bridges at the points herein named, and across the streams herein referred to, as well as the approaches thereto. The corporation is authorized to make the necessary surveys, soundings and borings, to determine the design of each bridge, and make or procure the proper plans and drawings, excepting however, that such bridge shall be of the standard design of the state highway commission of Alabama,and shall be in conformity with the laws of the United Statesand the requirements of the War Department."

The act provides:

"For the purpose of providing funds for the building of the bridges herein authorized, the corporation is hereby authorized to borrow money from time to time in such amounts as it may be deemed best, and as the Governor may approve, and to execute therefor the notes or bonds of the corporation, signed by the three members thereof, and attested by the secretary of state, and to secure said notes or bonds and mortgage, to pledge thebridges and the tolls collected from said bridges for such time as may seem proper to said corporation, with the approval ofthe Governor. The tolls collected from said bridges, as hereinafter provided, shall be kept in a separate fund by thestate treasurer, and are hereby specially pledged for the payment and retirement of the notes, bonds and mortgage, principal and interest, as the same become due, until the whole of them shall be paid. * * * The interest on said bonds may be paid out of the residue of the receipts from gasoline tax collected by the state under the excise gas tax act approved January 25, 1927, and known as the gasoline tax act after there has been taken from that fund the amount necessary to meet all of the primary purposes to which said gas tax fund is pledged under article XXA as an amendment to the Constitution of the state, and as provided for in section 10 of the act approved January 25, 1927; or the interest may be paid out of the net receipts from the convict department as authorized by amendment to section 93 of the Constitution, declared by proclamation on November 17, 1908; or the interest may be paid out of any fundsin the treasury as authorized by the amendment to section 93 ofthe Constitution, as set out above. Such an amount of money asmay be necessary to pay the interest herein provided for ishereby appropriated out of any monies in said funds not otherwiseappropriated. The payments herein provided for shall be made onthe requisition of the corporation, approved by the Governor,and by warrants drawn by the state auditor upon the statetreasurer, designating the fund out of which said interest may be paid. * * * The proceeds of such notes or bonds shall be turned into the state treasury, and shall be carried in a special bridge account to the credit of the corporation, andshall be subject to be drawn on by the corporation, upon theapproval of the Governor. * * * Said corporation herein provided for shall build and construct fifteen bridges in Alabama under the provisions of this act but all of said fifteen bridges shall be located by the state highwaycommission of Alabama."

The corporation is authorized to employ toll keepers, fix and collect tolls for the uses of bridges and approaches by the public. The tolls so collected are to be paid into the state treasury through the corporation, and kept in a "toll bridge account," which "shall be available to the corporation for the maintenance of the bridges constructed under this act, and the residue * * * from time to time be applied and paid out by the corporation for the retirement of the notes or bonds hereinabove authorized, and when the cost of all the bridges built under this act has been repaid, all of said bridges shall be immediately opened as free bridges to the traveling public, and shall thereafter be maintained as a part of the state highway system."

"The corporation is authorized to acquire by donation, or in its own name condemn by eminent domain such property, including gravel pits or other road material as may be necessary to carry out the purposes of this act, and for that purpose to bring and prosecute all necessary condemnation suits, and the AttorneyGeneral and circuit solicitor in each case shall act as attorney for the corporation without additional compensation, and any judgment rendered or allowance * * * agreed upon by the corporation shall be paid as a part of the expense of building said bridge."

The corporation is hereby authorized and empowered to build such bridges either by contract, or on force account. All contracts entered into by the corporation in connection with the building of these bridges shall be in writing, prepared bythe Attorney General of the state of Alabama, and in conformity with the requirements of the state highway commission, and allcontracts shall be approved by the Governor. In the sale of notes, bonds, or mortgages, the corporation shall have the right and power to agree with the lender of the money in default of the payment of principal and interest, either or both, and, in the event of foreclosure, that the purchaser at the sale shall have the right to operate the bridge upon the rate of toll provided herein, for such length of time as thecorporation may agree may be necessary for the lender to get return of the money, with interest not exceeding 6 per cent.,and expenses of foreclosure, including expenses of operation and maintenance.

"The maximum amount of bonds outstanding at any time shallnot exceed five million dollars."

The act provides for a dissolution of the corporation, at any time, by the filing of a formal declaration to that effect with the secretary of state, and "upon the filing of said certificate, the corporation shall cease, and all of itsproperty rights shall pass to the state of Alabama."

The foregoing résumé of the scope and provisions of the act is useful in developing its major subject and applying to it the constitutional limitations on legislative authority.

The last amendment of section 93 of the Constitution of 1901, proposed through the act of October 22, 1921, and adopted at the general election in November, 1922, superseding all other amendments to this section, provides that:

"The state shall not engage in works of internal improvement, nor lend money or its credit in aid of such, except as may be authorized by the Constitution of Alabama or amendments thereto; nor shall the state be interested in any private orcorporate enterprise, or lend money or its credit to any individual, association, or corporation, except as may beexpressly authorized by the Constitution of Alabama, oramendments thereto; but when authorized by laws passed by the Legislature the state may appropriate funds to be applied to the construction, repair and maintenance of public roads, highways, and bridges in the state; and when authorized by appropriate laws passed by the Legislature, the state may at a cost of not exceeding ten million dollars engage in the work of internal improvement, of promoting, developing, constructing, maintaining, and operating all harbors or seaports within the state or its jurisdiction, provided, that such work or improvement shall always be and remain under the management and control of the state, through its state harbor commission, or other governing agency. The adoption of this amendment shall not affect in any manner any other amendment to the Constitution of Alabama which may be adopted pursuant to any act or resolution of this session of the Legislature."

The inhibition of this section of the Constitution, impinged by the act under consideration, is that the state shall not be interested in any corporation or corporate enterprise engaged in internal improvement, nor lend its money or credit to such corporation, unless authorized by the Constitution itself, or an amendment thereto. In re Opinions of the Justices, 209 Ala. 593,96 So. 487; Garland v. Board of Revenue, etc., 87 Ala. 223,6 So. 402.

While this amendment contemplates and authorizes the state, in its own name and right, and through its duly constituted agencies, to engage in the work of internal improvements to the extent of building and maintaining public highways and bridges, and improving, maintaining, and operating seaports within its jurisdiction, it expressly prohibits the state from functioning through a corporation, and prohibits such corporation becoming a governmental agency to carry on such work.

That the act creates a corporation to engage in internal improvements is too obvious to permit of argument — this much is conceded by the majority. The corporate entity so created possesses all of the characteristics and powers of a private corporation, except it is without corporate stock, owns no property, and has no immediate prospects of acquiring property, except through its power to borrow money, and has no financial character other than such as may be reflected by the shadow of the state standing behind, on whose credit and through whose officers and agents it must function, if at all. It has the power of voluntary dissolution without the consent of its creator. Yet, adopting the cognomen, "Alabama State Bridge Corporation," it has the color and some of the attributes of a governmental agency with the power to contract debts, borrow money, and issue notes, bonds, and mortgages therefor, "withthe approval of the Governor," limited by the provision that the bonded debt which it is authorized to contract shall not exceed at any one time $5,000,000, the proceeds of such bonds to be turned into the state treasury and disbursed, as other state funds, on the warrant of the state auditor. The interest on such bonded debt to be paid by the state, and to this end the Legislature has made an appropriation in the act of "any funds in the treasury as authorized by the amendment to section 93 of the Constitution, as set out above." Acts 1927, pp. 280, 281.

Taking a perspective view of the act, and what might follow, it is not plausible to contend that the quoted amendment confers power on the Legislature to set up such a hybrid corporation as a governmental agency — a mere man of straw — without financial character or resources, to engage in works of internal improvement, with the power to contract debts on which the state engages to pay interest, with authority to shirk all responsibility by a voluntary dissolution, with one of two results, that such obligations as it had contracted as a governmental agency would fall upon the shoulders of the state, or no one would be liable to those who advanced money on the obligations of such agency to further such internal improvements. The state, at least, would be liable for the interest, and, inasmuch as all of the funds are to be paid into the state treasury, and all of the holdings of such corporation, on its dissolution, pass to the state, it seems, on principles of equity, that the state cannot avoid liability for the principal. Either this, or the state might aid in perpetrating the fraud to its own benefit. Such result as the last is beneath the dignity of a sovereign state, and is unthinkable.

If the "Alabama Bridge Corporation" is a governmental agency representing and acting for a sovereign state — and it is either this or it is a private corporation — in making internal improvements of the state's public highways, on what theory or principle can the state say that the debts its agency contracts are not the debts of the state? The statute does not exempt the state from liability, and the money obtained on bonds issued or notes and mortgages given is to be paid into and received by the state treasury, and can only be paid out on the warrant of the state auditor. All the improvements made inure to the benefit of the state in the improvement of its public highways — a work which the state has undertaken. The corporation, viewed in this light, is a child of the state, and, on its dissolution, all of its property and rights of property become the property of the state. The state, when it contracts debts, must act through some one of its agents, and here we have an agency of the state empowered to borrow money to be turned into the state treasury, acting by legislative sanction, and the debts so contracted, on every principle of law and equity, are the debts of the state.

"A state entering into a contract lays aside its attributes of sovereignty, and binds itself, substantially, as one of its citizens does when he enters into a contract. * * * The Legislature may avoid payment of the obligations of the state by failure or refusal to make the necessary appropriation, and this is true although that body cannot impair the obligations of contracts; but after an appropriation has been made, the state cannot withdraw such appropriation when this would amount to an impairment of the obligation of its contract." 6 R. C. L. 334, § 326; Carr v. State, 127 Ind. 204, 26 N.E. 778, 11 L.R.A. 370, 22 Am. St. Rep. 624; In re Ayers, 123 U.S. 443,8 S.Ct. 164, 31 L.Ed. 216. The fact that payment of the principal of the debt may be defeated by the failure of the Legislature to make an appropriation does not alter the fact that the debt has been contracted by the state through its duly authorized agent. This view renders the act violative of section 213 of the Constitution.

As before stated, the legislative records show that the bill in its original form, both in its title and body, proposed to amend the general laws of the state authorizing the organization of private corporations, and on its passage through the House it was so amended as to confer corporate power and authority on the three associated persons named in the act, to wit, the highway director, the president of the tax commission, and the president of the board of administration, bringing it within the category of a special law, as defined by section 110 of the Constitution in these words:

"A special or private law within the meaning of this article is one which applies to an individual, association, or corporation,"

— and in this respect violated section 111 of the Constitution.

This act being a special law, not within the exceptions of section 106 of the Constitution, and it not affirmatively appearing that notice of the intention to apply therefor was given as required by that section, the mandate of the Constitution is that:

"The courts shall pronounce void every special, private or local law which the journals do not affirmatively show was passed in accordance with the provisions of this section." Constitution of 1901, § 106.

This court, speaking through one of its great Chief Justices, as to the effect of the Constitutional requirement that "each law shall contain but one subject" which must "be clearlyexpressed in its title," said:

"The unity of subject is an indispensable element of legislative acts; but it is not the only element; the subject must be 'clearly expressed in its title.' The purpose of this requisition is, as expressed in the second proposition of the exposition of Judge Cooley, 'to prevent surprise or fraud upon the Legislature by means of provisions in bills of which the title gives no intimation, and which might, therefore, be overlooked, and carelessly and unintentionally adopted.' The third proposition must be deemed, and by all authority is deemed, of equal importance — 'to fairly apprise the people, through such publication of legislative proceedings as is usually made, of the subjects of legislation that are being considered, in order that they may have opportunity of being heard thereon, by petition or otherwise, if they so desire.'

"When there is fair expression of the subject in the title, all matters reasonably connected with it, and all proper agencies or instrumentalities, or measures, which will or may facilitate its accomplishment, are proper to be incorporated in the act, and, as usually said, are cognate or germane to the title. But, as was said in Astor v. Railway Co., 113 N.Y. 110,20 N.E. 598 [2 L.R.A. 789]. 'The title must be such, at least, as fairly to support or give a clue to the subject dealt with in the act, and, unless it comes up to this standard, it falls below the constitutional requirement.' " Lindsay v. U.S. S. L. Ass'n et al., 120 Ala. 156, 24 So. 171, 42 L.R.A. 783.

As stated by other authorities of equal force:

"Another abuse that developed in legislative bodies was the practice of enacting laws under false and misleading titles, thereby concealing from the members of the Legislature, and from the people, the true nature of the law so enacted. It is to prevent surreptitious legislation in this manner that the subject or object of a law is required to be stated in the title." 25 R. C. L. 83, § 83; First National Bank of Evergreen v. Hagood, Tax Assessor, 206 Ala. 308, 89 So. 497; Carter County v. Sinton, 120 U.S. 517, 7 S.Ct. 650, 30 L.Ed. 701; Pillans v. Hancock, 203 Ala. 570, 84 So. 757; Wallace v. Ball,205 Ala. 623, 88 So. 442; State ex rel. Bassett, et al. v. Nelson, 210 Ala. 663, 98 So. 715; Stallings v. Nowell et al.,214 Ala. 118, 107 So. 47.

The title of the act in question, both as originally offered and as subsequently amended, foreshadowed the authorization of the formation of a private corporation, and in the title there is no suggestion that the subject of the act was the creation of a governmental agency with such large powers as this act proposed to create, and the enactment was in violation of section 45 of the Constitution of 1901.

I am therefore of opinion that the rulings of the circuit court were well considered, and that the decree appealed from should be affirmed.

SOMERVILLE and THOMAS, JJ., concur in so much of the foregoing opinion as relates to sections 93 and 213 of the Constitution.