State ex rel. Preston v. Ferguson

170 Ohio St. (N.S.) 450
CourtOhio Supreme Court
DecidedMarch 30, 1960
DocketNo. 36283
StatusPublished

This text of 170 Ohio St. (N.S.) 450 (State ex rel. Preston v. Ferguson) is published on Counsel Stack Legal Research, covering Ohio Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State ex rel. Preston v. Ferguson, 170 Ohio St. (N.S.) 450 (Ohio 1960).

Opinions

Matthias, J.

The first question for determination in this cause may adequately be framed as follows:

Does Section 5501.112, Eevised Code, authorize, and do the agreement between relator and the School Employees Eetirement Board and the actions of the parties thereunder amount to, the creation of a debt of the state in violation of Sections 1, 2c, or 3 of Article VIII, Ohio Constitution?

Section 1, Article VIII of our Constitution, provides:

“The state may contract debts, to supply casual deficits or failures in revenues, or to meet expenses not otherwise provided for; but the aggregate amount of such debts, direct and contingent, whether contracted by virtue of one or more acts of the General Assembly, or at different periods of time, shall never exceed seven hundred and fifty thousand dollars; and the [453]*453money, arising from the creation of such debts, shall be applied to the purpose for which it was obtained, or to repay the debts so contracted, and to no other purpose whatever.”

Section 2 of Article VIII states in part:

“In addition to the above limited power, the state may contract debts to repel invasion, suppress insurrection, defend the state in war, or to redeem the present outstanding indebtedness of the state * *

And Section 3 of the same Article provides:

“Except the debts above specified in Sections one and two of this Article, no debt whatever shall hereafter be created by, or on behalf of the state.”

Before determining whether the agreement in dispute creates a debt of the state in violation of the above constitutional provisions, it will first be necessary to examine the statute authorizing such agreements. If the statute is invalid because it constitutes such an illegal authority, then it must follow that the agreement, authorized by that statute, must also fall. The statute in.question, Section 5501.112, Revised Code, after authorizing the Director of Highways to purchase real property that he deems will be necessary for the improvement of the state highway system, proceeds to authorize him to enter into agreements with the School Employees Retirement Board (and other enumerated state agencies) concerning acquisition of land for such improvements. Under such agreements, the Director of Highways acts as agent of the board in the purchase of the land but such land is purchased with the board’s funds and title in fee simple is taken in the name of the board. The concluding part of the statute relates to the subsequent purchase of the property by the Director of Highways on behalf of the state from the board. When the latter purchase is consummated title then is vested in the state of Ohio.

The essential provisions of Section 5501.112, Revised Code, as pertinent to the objection that it authorizes an illegal debt must now be set out:

“* * * Each such agreement may not extend beyond the then current two-year period for which appropriations to the Department of Highways shall have been made by the General Assembly. The agreements may contain options for the [454]*454renewal thereof for an additional period or periods, of not exceeding two years each; provided, however, that no snch agreement may be renewed to extend beyond five years from the date of the original agreement.

“* * * during the effective period of each such agreement the director shall purchase such property from the * * * retirement board whenever such a highway improvement contract is let, or upon expiration of such agreement, whichever date is earlier.”

It seems clear that expenditures for the acquisition of highway rights of way, such as involved here, are not in the nature of an expense that is inseparable, inherent and absolutely necessary to the carrying on of the functions of government or any department of government made necessary by provision of law. In other words, the expenditure here is not a “current expense of government” which would render it a nondebt and remove it from the inhibition of Article VIII of the Constitution. See State, ex rel. Ross, v. Donahey, 93 Ohio St., 414, 113 N. E., 263.

And Section 2 of Article VIII of the Constitution, which permits the state to contract debts in certain specified instances of extreme state emergency, obviously is not applicable here. And, of course, the expenditure here exceeds $750,000, the maximum amount of debt allowable under Section 1 of Article VIII. It is clear, therefore, that the prohibition of Section 3 of Article VIII, to wit, that no debt whatsoever may be created by or on behalf of the state, must determine the validity of the expenditure in question, since the exceptions in Sections 1 and 2 have no application.

The finance and expenditure system of this state and the constitutional prohibition against debts were ably and elaborately dealt with by Judge Swan in the leading case of State v. Medbery, 7 Ohio St., 522. For more than one hundred years this landmark case has represented the law of this state on the subject of state indebtedness. In that controversy, the Ohio Board of Public Works, pursuant to statutory authorization, had entered into contracts on behalf of the state, obligating the state to pay to certain contractors $1,375,000 for material and repairs of certain canals within the state for a period [455]*455of five years. The court held the contracts to he invalid. That determination was based upon the fact that such contracts created illegal debts of the state in that they constituted present obligations to pay money at a future time, without appropriations and revenue provided.

In his opinion, written in 1857 and interpreting the provisions of the Constitution of 1851, Judge Swan pointed out that the keystone of our whole system of finance and expenditure is the constitutional provision prohibiting the Legislature from making any appropriation of funds for a period exceeding two years. (Section 22, Article II of the Constitution.) A moment’s reflection upon this cardinal principle may serve to point up its extreme intrinsic value. The reasons for its significance were well stated by Judge Swan in his opinion at page 541:

(Quoting pertinent constitutional provisions.) “1. The General Assembly at each biennial session determine the amount of the expenditure for the two years of their official term, in all cases not otherwise predetermined by the provisions of the Constitution; 2. They must take the responsibility of making the necessary appropriations for this purpose, otherwise no money can be paid; 3. They must assess a tax upon their constituency sufficient in amount to meet the appropriations.

“There is a wholesome, practical wisdom in the two constitutional provisions, which require appropriations for expenditures, and the assessment of taxes to meet them, to be made by the same General Assembly. Each member is thus compelled, during his official term, to visit upon his constituents the pecuniary consequences of his sanction of liabilities to be incurred and of appropriations made. * * * Payment not only goes hand in hand with expenditure, but wasteful expenditures, instead of being concealed or mitigated by delay of payment or the creation of debts, must be immediately made known to the people through the demands of the tax gatherer for the money.”

Are the contracts in the Medbery case distinguishable from the agreement at bar.

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Related

Flynn v. Bachner
134 N.W. 451 (Michigan Supreme Court, 1912)
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Cite This Page — Counsel Stack

Bluebook (online)
170 Ohio St. (N.S.) 450, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-ex-rel-preston-v-ferguson-ohio-1960.