13 So. 2d 559 | Ala. | 1943
Response to questions propounded by Senate.
Questions propounded by the Senate to the Justices of the Supreme Court under Code 1940, Title 13, § 34.
Questions answered.
Therefore be it resolved by the Senate of the State of Alabama:
That the Chief Justice and Associate Justices of the Supreme Court of Alabama or a majority of them are hereby requested to render to this body their written opinion as provided under Title 13, Article 3 of the Code of Alabama as to whether the said Bill, a copy of which is hereto attached and made a part hereof, violates or is in conflict with any provision of the Constitution of the State of Alabama, particularly Article XXII and Article XXIII thereof, or with any provision of an Act of the Legislature of Alabama approved April 17, 1933 (Act No. 177, General and Local Acts of Alabama, Extra Session 1933, page 189), or with any provision of an Act of the Legislature of Alabama approved February 8, 1935 (Act No. 50, General Acts of Alabama, Regular Session 1935, page 118).
The above Resolution was adopted by the Senate of Alabama on June 7th, 1943.
(Signed) J. E. Speight Secretary of Senate.
The pending act referred to in the resolution is as follows:
Be it enacted by the Legislature of Alabama:
Section 1. Funds held in trust pursuant to the provisions of the Income Tax Amendment to the Constitution of Alabama (Article XXII, Amendment No. XXV) for the payment of State of Alabama Refunding Bonds dated July 1, 1935, may be invested in United States Government Bonds constituting direct obligations of the United States whenever and to the extent that the amount of such funds so held in trust exceeds the amount of principal and interest maturing on any such Refunding Bonds within eighteen (18) months after the first day of the next calendar month.
Section 2. United States Government Bonds in which any such funds are invested pursuant to the provisions of this *458 Act shall be held in trust for the payment of State of Alabama Refunding Bonds dated July 1, 1935, and may be sold to provide funds for use in paying the principal of and interest on such Refunding Bonds or for use in purchasing such Refunding Bonds. Any Refunding Bonds so purchased shall be cancelled.
Section 3. For the purpose of making investments under the provisions of this Act, the State Treasurer, with the written approval of the Governor, shall make purchases and sales of United States Government Bonds and shall be the custodian of such United States Government Bonds, all of which shall be registered in the name of the State Treasurer of Alabama in trust for the Income Tax Fund.
Section 4. This Act shall become effective on the first day of August following the date of its enactment.
To the Senate of Alabama,
Montgomery.
Sirs:
In response to your inquiry of June 7, 1943, relative to Senate Bill No. 330, which authorizes the investment in United States Government Bonds of funds held in trust pursuant to the provisions of the Income Tax Amendment to the Constitution of Alabama (Article XXII, Amendment No. XXV) for the payment of State of Alabama Refunding Bonds dated July 1, 1935, we submit the following:
We note that Article XXII, Constitution, ordains that "all income derived from such tax (Income Tax) shall be held in trust for the payment of the floating debt of Alabama until all debts due on Oct. 1st, 1932, are paid and thereafter used exclusively for the reduction of state ad valorem taxes." And in Article XXIII, Amendment 26, "To create a sinking fund for the prompt and faithful payment of the floating indebtedness of the state and interest thereon, the net proceeds of any income tax which may be levied by the Legislature pursuant to law is hereby pledged." The floating indebtedness was by it also validated. The two articles are companion features and were submitted and approved at the same time. In re Opinions of Justices,
We held in an advisory opinion,
Such a fund cannot be diverted through the guise of an investment in State securities of a sort different from those for which it was pledged. See, Graham v. Horton,
Such funds can only be applied to the payment of the State obligations and purposes declared in Articles XXII and XXIII, supra. But it is not important that the method of doing so shall be by any standard formula, if the purpose declared in the Constitution is carried into effect. In re Opinions of Justices,
The provision for using the surplus to reduce the ad valorem taxes is not self-executing. In re Opinions of Justices,
We have under consideration the State as trustee of a fund created by authority of the Constitution, which must be applied to certain purposes and none other. This requirement is precise and exacting and cannot by any method be circumvented. But there is nothing in the Constitution as to the form in which the fund shall be maintained in the State Treasury or whether it shall be invested so as to earn an income during the period of its inactivity. The State is made an express trustee of the fund. Article XXII, supra.
By Section 74, Constitution, the legislature is prohibited from authorizing the investment of any trust fund by executors, administrators, guardian or other trustees, in bonds or stock of any private corporation.
The Legislature has undertaken to prescribe the power of trustees in making investments, of course, subject to section 74, supra. Title 58, §§ 47 to 55, Code of 1940; White v. White,
The general rule is well settled that where trust money cannot be applied *459 either immediately or within a short time to the purposes of the trust it is the duty of the trustee to make the fund productive by investment of it in some proper security. 65 C.J. 795, § 672.
In Ex parte Selma Gulf R. Co.,
This principle has been in substance approved in this State as applicable when the State is itself a trustee of funds held for a certain purpose. Ex parte Selma Gulf Railroad Co.,
But the State cannot now "lend money or its credit to any individual, association or corporation." Sections 23 and 93 (see Amendments 1 and 12), Constitution.
We think that we should eliminate as investments for State funds held in trust under the Income Tax Amendment (Articles XXII and XXIII, Constitution, supra), (1) any State of Alabama securities other than those for which the fund is pledged and held as security; (2) loans to any private individual, association or corporation; (3) bonds or stock of any private corporation. But this does not exclude bonds of the United States as a proper form of investment. The faith and credit of the United States is the foundation of all money values within its territory. If that is discredited, we have no financial security of any sort.
When the State has in its custody funds held in trust for certain purposes which cannot be applied to the purposes within a reasonably short time, with no prohibition to the contrary, we do not think the policy manifested by our Constitution in any of its features would prohibit the Legislature from authorizing and providing for an investment of them in the bonds of the United States of such description and bearing such interest and payable as may be selected pursuant to legislative authority, and held in trust until they are needed for the trust requirements, and then sold for that purpose.
It must be clearly understood that the income from such investments must be held in trust on the same terms and for the same purposes as is the principal.
We, therefore, wish to say in response to your inquiry, supra, that, in our opinion, the proposed act will not violate Article XXII or XXIII; nor conflict with the Act of April 17, 1933 (General and Local Acts 1933, Ex.Sess., page 189), which is supplementary to Article XXIII (the McDaniel Amendment [General and Local Acts of 1933, page 196]); nor does it seem to be in conflict with the Act of February 8, 1935, (Acts 1935, page 118), in which provision is also made for authority to invest the surplus income tax fund in the bonds for which the fund is pledged as security.
Respectfully submitted,
LUCIEN D. GARDNER Chief Justice
WILLIAM H. THOMAS VIRGIL BOULDIN JOEL B. BROWN ARTHUR B. FOSTER J. ED. LIVINGSTON THOMAS S. LAWSON Associate Justices