*1 ENGELKING, Plaintiff, D. F. BOARD of the
The INVESTMENT Idaho, Defendant.
No.
Supreme Court of Idaho.
June
Rehearing Aug. 18, Denied *2 Poole, Boise, plaintiff..
Roberts & Parry, Robertson, by- Daly Larson, & Nelson, Falls, Thomas G. Twin and Wallis. Churchill, & Boise, amici curiae. Robert M. Robson, Atty. Gen., Rich- Greener, ard H. Atty. Gen., Boise, Asst. defendant.
McQUADE, Justice. This case original pro arises from an ceeding in original this Court under its jurisdiction prohibition.1' to issue writs of Thus disputed there are no issues of fact- question presented The basic is- law whether or (S.L.1969), S.B. which' permit Fund’ the Idaho Endowment Investment Board to invest en bonds, notes, dowment fund assets in con securities, vertible debt and common or private corporations, stock of is- unconstitutional.
The facts relevant to this main issue several subsidiary issues are as follows. Congress In Organic enacted the Act Idaho, Territory 80S Stat. provided That act 14: enacted, “And be it That when further Territory the lands in the said shall surveyed, gov- under the direction of the States, prepara- ernment market, tory bringing the same into thirty-six sections numbered sixteen and township territory in each in said be, hereby, and the same are reserved purpose being applied to schools Territory, and in the states and said 7-402, 5, 9; 1-202,1-203; 7-401, 7-403, 1. Idaho I.C. I.C. §§ §§ 7-404. person beneficially to be hereafter erected out ad- territories interested same.” ministration assets. Until Congress Then in enacted the Idaho forms *3 Bill, as (1890), Admission Stat. 215 State, in placed only funds of the could be pro- 56 Stat. 48 That act amended a group of In this limited investments. part: vided in respect, provided: Idaho 9 § That “Sec. 4. sections numbered sixteen “Loaning permanent endowment funds. thirty-six every township and in said of permanent funds —The endowment State, and where sections, such or other than funds from the .dis- arising parts thereof, have been other- sold or position university to belonging of lands wise disposed the au- of or under state, shall be on United the loaned thority of act of other Congress, States, state, county, village city, or thereto, equivalent lands legal sub- warrants, district bonds or school state quarter of divisions not less than one regulations legislature under such the as section, to contiguous may and as as be may provide.” is the section lieu of which the same 8, 1968, people taken, on November the hereby granted are to said State approved of an amend- the State of Idaho support schools, for the of common such ment Idaho which to art. 9 indemnity lands be within to selected changed provide fol- legisla- said such manner as the : lows may provide, ture approval with of Secretary of Interior. permanent “The endowment funds other arising disposition than funds from the granted “Sec. That all lands 5. herein university the state belonging of lands purposes dis- educational shall be state, States, shall loaned on be United posed only public sale, proceeds of at village county, city, district or school permanent constitute school warrants, on such and bonds or state of which be ex- interest shall permitted other investments pended support schools. of said by law.” may, regula- But said lands under such legislature prescribe,
tions as the
imple-
Legislature acted to
The Fortieth
than
periods of
more
be leased for
not
by passing
ment this amendment
S.B.
years,
five
and such lands shall
approved
governor on
which
was
entry,
subject
pre-emption, homestead
re-
That
inter alia
March
1969.
act
entry
laws
or
under
land
other
Code, pealed Chapter 7,
Title
Idaho
States,
surveyed
whether
of the United
which
Investment Board
established an
unsurveyed, but shall
reserved
or
in-
given authority
determine
only.”
purposes
assets.
policy for
fund
vestment
endowment
expands
act
portion
The
of the
lands
proceeds
these
form
available
investment vehicles
number
Plaintiff
of Idaho.2
pur-
funds
endowment
Superintendent
Engelking,
F.
as State
D.
is
amendment
constitutional
suant to the
and ex
a mem
officio
of Public Instruction
Education,
as follows:
is
Board of
of the
ber
responsibility
with
charged by law
trustees
The board or its
“Section
regulations
rules
enforcing the
to,
they
hereby authorized
may, and
are
concerning schools
Education
Board of
funds
invest
control,3
thus,
its
under
institutions
following
the state
4;
2;
33-
33-902.
I.C.
I.C.
102; I.C.
67-1504.
following
manner and in the
investments
endowment fund invested in common or
or securities and none
preferred
others:
corporations
stock of
exceed
fifty per
(50%).
cent
In computing the
per cent
principal
amount of the
Bonds, notes,
“(3)
obligations
or other
fund which
be invested in common
guaran-
United States
those
or
preferred
corporations,
stock of
by,
of,
teed
or for which the
credit
board shall consider the cost of common
pledged for'payment
States is
stocks which
the fund
and interest or dividends
at
holding
computation
time
thereof.
not the current market value thereof.”
Bonds,
“(4)
notes, or
obligations
*4
April
On
the Endowment
In-
Fund
of the state of
political
Idaho and its
vestment Board held
meeting
its initial
subdivisions,
bonds, notes,
or
and other
determined to invest the
endow-
obligations of other
states and their
ment fund
in
political
accordance with Sec-
subdivisions, provided
such
tion 9 of S.B.
bonds,
notes or
obligations
or
issuing agency for other than the state
Engellcing
Plaintiff
thereafter
a
filed
of Idaho
political
and its
subdivisions
petition
prohibi-
for an alternative writ of
have an AAA rating
higher by
or
a com-
prohibit
tion to
the Investment
from
Board
monly
rating
known
service.
making those
public
investments with
“(5) Bonds or
any corporation
notes of
endowment fund
grant-
assets. This Court
organized, controlled
ed
operating
prohibition
with-
the alternative
on
writ of
in
May
United States which
A
question
have an
1969. The
now is whether
rating
higher
or
commonly
prohibition
a
known
should be made absolute.
rating service.
Plaintiff
broadly
Engelking
chal-
first
“(6) Corporate obligations designated as
lenges
ground
pro-
S.B. 1277 on the
that its
corporate
securities,
convertible debt
but
visions
private
allow state
in the
investment
within the
provided
limits hereinafter
sector
economy contrary
of the
stock,
the investment of
upon conversion. Const,
It
that
should be noted
attack,
this
if
invalidate
successful
“(7) Obligations
by mortgages
secured
proposed
by the Endowment
investment
constituting a
upon
prop-
first lien
real
Fund
(Board)
Investment Board
in securi-
in
erty
the state of
are
Idaho which
private corporations,
ties
those
fully
guaranteed
insured or
as to
made with
school fund assets.
payment
principal by
of the
govern-
provides
pertinent
in
ment of the
agency
any
States or
part:
thereof.
“Loan
prohibited
state’s credit
“(8)
preferred
Common or
stocks of cor-
—Hold-
ing
corporation
stock in
prohibited—
provided
porations,
that no more than
* * * .—The credit
the state shall
twenty-five per
(25%)
cent
prin-
not,
manner,
any
given,
in
loaned
cipal
or
any
amount
one
en-
to,
individual,
or in aid of
associa-
dowment fund
com-
invested in
tion, municipality
corporation;
nor
preferred
mon or
corporations
stock of
directly
indirectly,
shall the state
be-
year
first
following
the enactment
come
Thereafter,
association or
hereof.
stockholder
per
cent of
* *
corporation
*.”
principal amount of the fund invested in
common or
corpora-
stock of
original
This
con-
tions
be increased at
direction
adopted
stitution
in 1890 and was
investment board
than
no more
present
to its
form in 1920.
per
ten
(10%)
cent
in any
calendar
one
year except
that at
that,
time shall
against
no
Plaintiff asserts
per
cent of the
amount
provision,
this
S.B. 1277 must fall. How-
ever,
remedy
consider the
3rd.
the Parliament both
that
fails to
What
assertion
appointed
cure the dis-
fact that
was authorized
resolved and
S.B. 1277
ease
1968 amendment to
commonwealth.
conflict,
Thus,
any,
be
if
the real
and, 4th. The
the rem
true reason of
provisions, one
tween
constitutional
two
edy;
Judges
and then
of all the
the office
a recent
original
general
and the other
always
to make such construction
amendment,
specific
a stat
not between
mischief,
suppress
and advance
*
provision. This
* *
ute and a constitutional
remedy
add force and
general rules of
Court has held that “[t]he
remedy, according
life to the cure and
statutory
apply
the amend
construction
to the true intent of the makers of
ment
well as
constitution”4 as
Act, pro
publico.”
bono
provisions generally.5 In this
constitutional
Moreover,
that
held
Court
often
object
respect,
to be
fundamental
“[t]he
provisions apparently
must
conflict
provi
sought
construing
a constitutional
possible.8 Only
an
reconciled if at all
when
intent of
sion is to ascertain the
will
presents
irreconcilable
itself
conflict
provision must be con
[,]
framers
and the
principles
seek
court
recourse
interpreted
manner as to
strued or
in such
subsequent provisions prevail
over
*5
de
people,
fulfill the intent
never to
9
prior
provisions
provisions
specific
or that
6
determining
feat
con
it.” One method of
prevail
provisions,10
general
over
legislative
stitutional
intent which
by implication.11
partial
repeal
involves
heritage
both ancient
relevance
modern
generally
This
is
favored.12
doctrine
not
succinctly
by
stated
Lord Coke:
case,
apparent
present
In the
“ * * *
in-
the sure and true
Const,
8,
art.
conflict occurs between Idaho
terpretation
general
statutes
Const,
2,
9, 11,
amend
and Idaho
art.
§
§
* *
*
things
four
are
be discerned
loaning of
ed in
that the
1968.
believe
We
and considered:—
Const,
2,
8,
art.
credit clause
Idaho
§
was the
law before
1st. What
common
amendment
be reconciled with the
making
of the Act.
Const,
9,
11, precisely because
Idaho
art.
§
prohibits
only loaning
2nd.
and de-
it
State’s
What was the mischief
Const,
8,
2,
not
does not
fect for which the
did
credit.
Idaho
art.
common law
§
The
provide.
prohibit
loaning
funds.
of State
Employment Security Agency
Robison,
S'ee,
g.,
4.
9.
Idaho Mutual
v.
e.
Benefit Assn.
Dist.,
800,
88 Idaho
65 Idaho
at
P.2d
v. Joint
384,
“A” School
793
154
156 at 159
Class
Lloyd
(1965);
(1944),
Cor-
400 P.2d
and numerous
there cited.
377
cases
poration
County, 53 Idaho
v. Bannock
18,
Woodall,
5. Lewis v.
city,
district
Of
village or school
bonds
course,
leg-
validity
regulations
state
under
of Section
warrants
challenged. Because we
may provide,
islature
also be loaned
is not
reach
result,
this
per-
apparent
between
on
conflict
such
investments as
other
Const,
(Emphasis
mitted
art.
as
added).
law?”
the stockholder
art.
question
people
It is this
clause
which the
answer-
2, is
and need not be re-
affirmatively,
authorizing legis-
ed
avoided
thus
If the
lative
solved.
amendment to
action
“loan”
fund
* * *
permitted pur-
expressly
had
“on
investments.”
loans,
stock
course,
chase of
as
as
different
attorney general’s
Of
well
statement
problem
purpose
presented.
been
to the
that
have
effect
the funds
private
could “be invested in the
sector of
argued
The Board
that the as-
also has
the economy
government
as well as in
bonds
public
sets
at all
school fund do not
and state
question
warrants.” The
sub-
pur-
constitute the
credit of
mitted to the
ambig-
voters was somewhat
poses
Its
of Idaho
con-
uous
its
a “loan”
“in-
reference to
on an
tention,
curiae,
in contrast to that of amicus
general’s
vestment.”
attorney
state-
upon
public
theory
is based
that
ment was ambiguous because an “invest-
proceeds
consists
ment”
purchase
include the
of both
govern-
given
the federal
lands
trust
debt
equity
securities and
stock and could ment as settlor
of Idaho as
to the State
only
have been intended to refer
trustee for the
of a common school
benefit
former.
system,
beneficiary
of the trust. Under
legal
theory,
holds
title
In this situation we
believe
ownership.
assets,
beneficial
not the
important
loosely
word “loan” must
Therefore,
does with
whatever
the State
construed
types
include
of “invest
assets,
actually
its
is not
these
credit
own
Instead,
“loan,”
ment.”
the word
used
Plaintiff,
hand,
loaned.
the other
on
in Idaho
and as
extended
through
argued that
we must
look
scope
amendment,
by the 1968
must
that
formalities of trust
and find
law
carry the meaning that
there must
abe
system
fact
guarantee
repayment
full
there
sovereign
therefore
State and
well as interest. There
an
must be
uncon
*7
merger
legal and
be a
in the State of
must
promise
ditional
repay
principal
to
the
sum
equitable
and
State’s
titles
the fund
the
to
originally
purchase
lent.16 The
of stock
Along these same
credit is indeed loaned.
thus is not authorized
the 1968 amend
lines,
Const,
plaintiff
argued that
the State
11,
ment to Idaho
art.
the
Const,
contrary
own stock
to Idaho
would
purchaser
guarantee
of
of
stock obtains no
be
simply
it would
the
art.
because
repayment
capital.
full
of invested
Stock
The Board
registered owner of such stock.
purchases
possibility
capital
offer
the
of
pur-
all stocks
counters with the fact that
subject
gain,
they
but
also are
to the
so
name not
by it
in the
of
chased
will be held
capital
risk of
Convertible
loss.
bonds
the
but of the trustee.
purchased,
privilege
but the conversion
Therefore,
may not
that the amend-
be exercised.
we hold
Because we
decided
have
itself does
9(6)
9(8)
that
and
of S.B. 1277
art.
Sections
ment to Idaho
stock,
purchases
we do not
are unconstitutional under Idaho
not
of
authorize
arguments
rely upon
just-mentioned
but that
even as
these
Sections
have the
9(3), 9(4),
arguments
are constitutional
of the Board. These
imprecision
repay-
involving only
as
“loans” which
of
additional weaknesses
House,
698, 119
and Benefit
S.E.2d
United States
Use
of
son
Ga.
Jackson,
94, pp. 656-
First National Bank of
Miss. v.
note
O.J.S.
Guaranty Co.,
Fidelity
&
States
F.Supp.
(D.Okla.1965);
Isaac
technicality.
theory,
accepted,
excepts
The trust
if
11 of
expressly
Section
S.B. 1277
only
applied to
operation
would validate S.B. 1277
as
from the
the
of
Idaho Uniform
assets,
public
Principal
the investment of
fund
and Income Act
school
made
otherwise
only
public
applicable
then
of
school
to investments
en-
of
representing
proceeds
fund
of
dowment fund assets
distributions]
“[such
* * *
federal
lands.
as
be in conflict
section
with
Constitution,
include funds other than
endowment funds
3 of article 9 of the Idaho
as
public
just
public
applies
fund
it
public
school
as
school
It is
to
fund.”
clear, however,
entirely
school fund contains assets other than those
whether this
given
it
govern-
exception
to
in trust
the federal
embodied
the first
of
sentence
assets,
applied
ment. As
to these latter
Section
of
was intended also
S.B. 1277
except
public
S.B. 1277 would still be invalid.
this
to
Both
school fund from the
argument
theory
operation
trust
and the
that we
of the last
of
sentence
Section
must,
accept
purposes,
constitutional
provides:
1277. The latter sentence
S.B.
registered
owner
true
of stock as the
“All net
losses from
income
net
from
(cid:127)owner of the stock suffer as well
be dis-
investments or securities shall
technicality,
rely
undue
hesitate to
we
participating
tributed
each
fund
to
upon them in the decision of this sub-
daily
average
same ratio as
fund’s
each
question.
stantial constitutional
daily
average
balance
the total
bears to
balance
funds.”
participating
Finally, plaintiff argues that Sec
re
language
To the extent that
provides for
tion 11 of
S.B.
quire
public
fund to be
income of the
school
adjustments
net
income and
losses
distributed
other funds and losses
permanent endowment
among the various
public
other funds
distributed
to be
contrary
funds, is
fund, and to
extent that such
school
That constitutional
states:
despite the first
might
distributions
be made
remain
“Public school
that the last
sentence of
we hold
Section
intact.—
public
state shall
school fund
11 is
sentence
Section
unconstitutional
intact;
forever remain inviolate and
applied
fund. We must
expended in
interest thereon
shall be
terms
give full
to the
effect
of the schools of
maintenance
9, 3,
not in
so that the fund will
(cid:127)state,
among
and shall
distributed
depletion
princi
subject to
manner be
districts
several counties
pal
regard,
follow
or interest.
In this
we
pre-
the state
such manner
many
involving
cases
this or similar
fund,
part of this
scribed
law. No
protected them from
funds which have
interest,
ever be trans-
depletion.17
ap-
ferred to
or used or
2,1,
S of
alterna-
Paragraphs
3 and
except
provided.
propriated
as herein
Para-
prohibition are vacated.
tive writ of
*8
be the custodian
The state treasurer shall
graphs
and 6
the alternative writ
4
fund,
se-
and the same shall be
of this
prohibition are
absolute.
made
may
curely
profitably
invested as
supply
prohibited
permanently
law directed. The state shall
The defendant is
commingling
per-
man-
from
losses
and restrained
thereof
ner
manent
fund with
occur.”
school endowment
Fenton,
F.Supp.
Foss,
620, 83 N.W.2d
v.
76 S.D.
United States
Eagleson,
(1957); Melgard
(D.Idaho 1939);
Peterson,
31 Idaho
v.
v.
State
(1939);
(1918);
rel.
ex
Par
P. 655
61 Idaho
P.2d 603
Jonasson,
Diefendorf,
23 P.2d
Moon v.
78 Idaho
v.
53 Idaho
sons
236, (1933);
Sprague
Fitzpatrick,
(1956);
ex rel.
5 Id
State v.
Straub,
400 P.2d
In re Mon
Or.
aho
51 P.
Legacy Fund,
143 Mont.
No costs allowed. to the risk capital loss. Convertible bonds purchased, but the conversion McFADDEN, J., DONALDSON, C. J., privilege Therefore, not be exercised. WARD, JJ., LODGE and D. concur. we hold that 9(6) Sections of S.B. * * 1277 are unconstitutional Sec- Rehearing On tion specifically denoted as viola- McQUADE, tive Justice. sec. amend- ed, petition defendant on rehearing because of the privilege of converti- queries if the precluded Court purchase bility of the bonds authorized therein.