Plaintiff, a resident and taxpayer of the state of North Dakota, by this action seeks to challenge the constitutionality of chapter 257, Sess. Laws 1927. This chapter provides:
“For the purpose of providing dormitories or residence halls to be used in connection with the University, agricultural college or any of the normal schools or other state educational institutions, and to permit the construction, financing and ultimate acquisition thereof, the state board of administration may convey a site for any such building upon the campus of any state educational institution (or) to an institutional holding association for a term not exceeding fifty years, upon condition that such association shall construct on the leased premises such building, with necessary appurtenanсes for dormitory or residence hall purposes, as the state board of administration shall approve, and shall lease the same to the state board of administration, upon such terms regarding rentals, maintenance, payment of indebtedness, and the ultimate transfer of title to the state for the use of the educational institution affected, as such board shall prescribe. . . .
“The state board of administration may contract to pay as rental for such property out of the net income derived therefrom and from other dormitory buildings on the same campus, a sum sufficient to pay the principal and the interest thereon of any indebtedness of the holding-association incurred for the construction of such building; on the amortization plan, or otherwise, and may pledge such income for that *439 purpose and enter into any other contract with such association as may be for the best interest of the educational institution affected. Provided, that the state shall incur no liability by reason of the exercise of the authority hereby granted to the state board of administration, and provided further, that any building and its appurtenances so constructed together with the site upon which it is located and all bonds or other evidences of debt issued by such association shall be exempt from taxation.”
Chapter 258, companion statute to chapter 25 Y, provides:-
“Non-profit sharing corporations to be known as institutional holding associations, may be formed for the purpose of erecting and managing buildings and their necessary appurtenances on the campus of the state university, the agricultural college, or any of the normal schools or other state educational institutions, in the manner, and with the rights, and subject to the restrictions and liabilities, prescribed by chapter 12 of the Civil Code of the Compiled Laws of 1913, except as herein otherwise provided. . . .
“The articles of incorporation shall set forth the name of the association, the place where its business is' to be transacted, the term for which it is to exist, the number of members and the conditions of membership and succession therein, the number of its directors and the names and residences of those who shall serve until their successors are elected and qualified, the purpose for which it is formed, and the amount of indebtedness authorized, and the plan for the payment thereof, and shall provide that the association is non-profit sharing, that its indebtedness shall be paid out of its net income from rentals, and that when all debts are paid its right and interest in the building site shall terminate and its property, including all buildings and improvements, shall become the property of the state. . . .
“Such association may construct buildings with their appurtenances only upon the campus of any such educational institution, according to plans and specifications therefor approved by the state board of administration, and as a prerequisite to its right so to do shall secure a site therefor from such board. The association may contract debts and issue bonds or other evidences' of indebtedness to construct such buildings, and to secure the payment thereof may mortgage its proрerty and pledge all rentals to be received therefor, but its debts shall not *440 exceed in amount the value of the property, both real and personal, actually owned by the association, and the provisions for the payment thereof’ shall be approved by the state board of administration. The association shall not issue corporate stock, nor shall any member thereof have or acquire any divisional share in its property, and all of its net income shall be applied to the payment of its indebtedness. When such indebtedness is paid the title to all buildings and improvements of the association shall be conveyed to and shall vest in the state. The transfer or conveyance of the property of the association, except in acсordance with the provisions of this act, is prohibited.”
The complaint after setting forth other appropriate matters of fact, alleges that a corporation to be known as the University Dormitory Association of Grand Dorks, North Dakota, has been organized pursuant to the provisions of chapter 258, supra; that this corporation was organized for the purpose of erecting a dormitory or dormitories on the campus of the state university; that the defendants, the board of administration, have approved the organization of such corporation and intend to proceed pursuant to the provisions of chapter 257, supra, to convey to such corporation a portion of the campus of the state university and enter into a contract or contracts with the corporation to lease such dormitories as may be erected thereon; that the acts in question are unconstitutional and void for that they are contrary to many of the prohibitions of the constitution of the state; and prays for injunctive relief. The defendants demurred to the complaint. The district court sustained the demurrer and this appeal is from the order entered accordingly.
In considering the challenge to the constitutionality of the act thus interposed by the plaintiff, we must remember certain rules that control in the consideration of such questions. Every reasonable presumption is in favor of the constitutionality of a statute enacted by the legislature. State ex rel. Linde v. Taylor,
Plaintiff strenuously contends that chapter 257, the act in question, violates the provisions of § 25 of the Constitution in that it attempts to delegate legislative power to an administrative board. Section 25 of the Constitution, as amended, vests the legislative power in the legislative assembly and in the people through the initiative and referendum. State ex rel. Langer v. Olson,
The appellant contends that chapter 257 confers upon the board of administration the power to determine as to the necessity for dormitories for the various educational institutions, the number that shall be built, the character of the buildings to be built, the cost thereof, the manner in which they shall be paid for, the terms upon which these dormitories shall ultimately be conveyed to the state, the power to pledge the property of the state (the income from the dormitories) through any рeriod up to fifty j^ears, and the power to enter into any other contract that may be for the best interests of the particular institution affected, and that all of these powers are legislative and not administrative.
It is difficult, if not impossible, to lay down exactly the line that marks the distinction between administrative and legislative functions. As was said by the Supreme Court of the United States in Mutual Film Corp. v. Industrial Commission,
Without passing upon the validity of the statute in delegating power to the board in the other respects challenged by the plaintiff, it seems to us that when the legislature empowered the board to expend moneys of thе state without any limitation as to the amount thereof other than is imposed by the elastic provisions of chapter 257, it violated the rule laid down in the case of State ex rel. Rusk v. Budge,
But there is another ground urged by the plaintiff on account of which the act must be held unconstitutional. Section 182 of the Constitution provides:
“. . . No further indebtedness (than that now existing) shall be incurred by the state unless evidenced by a bond issue which shall be authorized by law for certain purposes to be clearly defined. Every law authorizing a bond issue shall provide for levying an annual tax or make other provision sufficient to pay the interest semi-annually and the principal within thirty years from the date of the issue of such bonds. . . . No debt in excess of the limit named herein shall be incurred except for the purpose of repelling invasion, suppressing insurrection, defending the state in time of war or to provide for public defense in case of threatened hostilities.”
The plaintiff contends that.chapter 257, supra, in effect authorizes the state board of administration to incur a state indebtedness contrary
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to the provisions of this section of the Constitution. He argues that though chapter 257 specifies that “the state shall incur no liability by reason of the exercise of the authority hereby granted to the board of administration,” nevertheless the authority given by the statute to the board of administration to enter into the contracts and convey and pledge the property of the state, that is, sites for the buildings and the income from the dormitories, in effect is authority to create a debt within the meaning of that term as used in § 182. It seems to us that there is substance to this contention. An examination of chapter 258, supra, discloses that the corporation contemplated by this statute is, as the attorney general has argued in this case, a corporation organized for a public purpose. It is non-profit sharing. No stock is issued. Its members acquire no divisional share in its property. It takes life at the command of the board of administration. It has no power to contract except in accordance with the will of the board of administration. It functions merely to the extent of holding property and issuing bonds. Its net income must be devoted to the payment of its debts. And when its debts are paid its property becomes the property of the state. In effect it is an agency of the state, a device resorted to in order to enable the state through the board of administration to erect certain improvements for the state. It is to this sort of a corporation that the board of administration conveys (the site) and pledges and pays (the income from its dormitories) the property of the state, and it is this sort of a corporation that on the security of this property thus pledged and conveyed and of thе buildings erected by it under the direction of the board of administration, issues bonds and procures money with which to erect these buildings. Though the statute provides that the state shall incur no liability by reason of anything that may be done by the board under the authority thus conferred, and though no bonds of the state are issued, nevertheless the fact remains that the property of the state is mortgaged and pledged and to that extent there is an obligation to pay on the part of the state. Thus it seems to us there is created a debt within the meaning of that term as used in the constitutional prohibition. In our judgment the case of State ex rel. University & School Lands v. McMillan,
“. . . This particular scheme of finance, while indigenous in the state, is not without its parallels. The state of New York at an early date engaged largely in works of internal improvement. It built and owned the Erie canal, and in doing so- incurred a large state indebtedness, with the result that the entire subject was placed under constitutional control in 1846. The net annual revenue from the canal amounted approximately to $800,000. The Constitution required that the net revenues should be applied as follows: First, a fixed sum to-pay the interest and apply on the principal of what was known as the 'canal debt;’ second, another fixed sum to apply upon the state debt known as the 'general fund debt;’ third, a definite sum to the general revenue fund of the state. It was then provided that, after satisfying-the above requirements, 'the remainder of the revenues of the said1 canal shall in each fiscal year be applied in such manner as the legislature shall direct to the completion of the Erie canal enlargement and the Genesee valley and Black River canals until the said canals shall' be completed.’ In order to hasten the completion of the canal, the legislature of 1851 passed an act authorizing the comptroller to issue-canal revenue certificates to the amount of $9,000,000, payable out of the surplus revenue of the canals above the amounts required by the constitutional provisions above referred to, and required that said certificates 'shall purport on their face to be issued by virtue of this act and without any other liability, obligation or pledge on the part of *447 the state than such as is contained in this act.’ Elsewhere the act provided that 'the state shall in no event be liable to make up any deficiency in the canal revenue or to redeem the certificates from any other source than the canal revenues, as directed by the act.’ The question as to whether this act was in violation of the provisions of the Constitution forbidding the creation of a state debt in excess of $1,000,000 was presented to the Supreme Court of New York in the case of Rodman v. Munson,13 Barb. 63 , and to the court of Appeals in Newell v. People, 7 N. Y. 9. In both cases it was held, after careful consideration, and upon cogent reasoning, that the act authorized the creation of a state debt within the meaning of the Constitution, and this although the act in terms attempted to exempt the state from liability for any deficiency that might arise in the fund pledged for its payment. In addition to other reasons, the act was held to violate the Constitution in two respects: (1) It applied a part of the revenues to the payment of interest, instead of to the completion work, and (2) it authorized the contracting of a debt by the state in excess of the state debt limit. Ruggles, Ch. J., in discussing the question whether it created a state debt, used the following language, which meets our full approval: 'It makes no difference whether the debt is contracted on the general credit of the state or on the credit of a fund belonging to the state. When the interest on a loan is raised by a tax it comes from the pockets of the people individually, when it is paid out of a fund belonging to the people, it is paid out of their common purse. In respect to the profit and loss of the transaction, the objection is as great to the one mode of borrowing as to the other. The chief object of the restraint imposed by the twelfth section of article 1 of the Constitution (the debt-limit section) upon the contracting of public debt was to protect the people against the exhausting burden of paying interest.’ Johnson, J., in a concurring opinion, said: 'If language has any meaning, the legal effect of the act-, if valid, is at least to devote so much of the surplus revenues of the canals as shall actually be recеived after 1851 to the creation of a fund to pay the canal revenare certificates and the interest thereon. If this can be done in regard to one source of revenue, we see no reason why the same thing may not be done in regard to every source of revenue of the state, including not only all revenue which may arise from property, but also all which *448 may be realized by the exercise of the power of taxation. Such an anticipation of revenue would no more create a debt than this bill does. It may be objected that there is a distinction between a pledge of the revenues of property owned by the state and of the revenues to be derived from taxation; but the distinction does not affect the question. Whatever consumеs the revenues of the property of the state tends to render a resort to taxation necessary just to the extent to which the revenues from property have been consumed. It is, therefore, a matter of entire indifference whether one or another part of the resources of the state is drawn upon; for the substantial effect upon the financial condition of the state is the same in either case. If the constitutional provision against incurring debts permits such a scheme as this to be effectual, it is of small moment to inquire what it prohibits, for it provides no practical restraint whatever upon the power of the legislature. To attribute such an intention to the convention or to the people as to permit the one and prohibit the othеr is to attribute them an entire incapacity to comprehend the subject on which they were acting, and the effect of their own language. State obligations assume every form which can tempt the possessor of money to part with it to the government, and are varied from time to time as one or the other seems most likely to accomplish the purpose of putting out promises and getting money in return. In all thc-se forms one common attribute is found, and one only, to-wit, that, in consideration of money advanced to the state, the state promises whatever it is that will be most likely to procure money to be advanced, it matters not what; and that which is thus promised is debt. It may relate only to the income of particular property, or it may embrace the wholе resources of the state. The extent of the obligation does not affect or qualify its nature. So long as there is an obligation assumed by the state, it constitutes a debt; something due from the state.’ We also quote from the concurring opinion of Edmunds, J. Upon this point he said: ‘It is said that it is not a debt, but merely anticipating the resources of the state as derived from the canals. Now, it seems to me that all debt, whether by individuals or states, is merely an anticipation of resources. Then, again, it is said that it is no debt because only a-portion of the resources of the state are devoted to the repayment. Does the fact that every householder has certain property that *449 Í9 not liable for tbe payment of his debts destroy, or even change, the character of thе obligation that rests upon him to repay money that he has borrowed ? These, and such like suggestions, which were made to us on the argument, have not had the effect to persuade me that borrowing money is not contracting a debt.’ The views of Brown, J., who wrote the opinion in Rodman v. Munson, supra, in which the same act was involved, are expressed in language equally dear: ‘I cannot do otherwise than regard it as a loan — a loan of money to be repaid at a future day; not from the taxable property of the people of the state, or from the resources and revenues of the state generally, but qualifiedly and specially from that portion of its resources known as the “remainders of the canal revenues.” ’ There cannot be a loan of monеy without a lender and a borrower, and there cannot be a contract of lending without creating a debt and an obligation to repay in some form and to some extent. The time of repayment may be postponed to a distant day. The contract may provide that payment may be made in property, in current coin, or in a depreciated currency. It may be payable, as in the case of the canal certificates, from the proceeds of the income of certain specific property, but it remains a debt notwithstanding. The particular form or medium of payment, or the specific source from whence the means of payment is to be derived, may lessen or circumscribe the obligation of the debtor, but it cannot efface the obligation, or transform it into something which is to be recognized by another name, until the source from whence it is to proceed has failed, and the means of its payment is extinguished.”
The court further cites with approval Joliet v. Alexander,
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It is urged by tbe defendants tbat tbe McMillan Case is not a com trolling authority for the reason that the statute and the facts differ materially from those here involved. While there are some differences in these respects it seems to us the reasoning of the McMillan Case is apt in the instant case and that the New York and Illinois cases therein referred to and approved substantially parallel the instant case. Defendants urge that in the instant case the income from the dormitories of the several educational institutions never reaches the treasury of the state hut goes into special funds known as institutional funds where it remains until it is disbursed. They contend that since this is so and since any obligations resulting from contracts made by the hoard of administration pursuant to the authority conferred by chapter 257 are payable only out of these special funds, therefore no debts ai’ise agaixxst the state oxx account of such coxxtracts. To our xnixxds the fact that the dormitory ixxcome goes into the so-called ixxstitntional fnxxds and xxot into the state treasury caxx make xxo difference. Whether paid ixxto the treasury or xxot this ixxcome is, nevertheless, the property of the state and is usеd ixx the support axxd maixxtexxance of the several institutions. A similar argument was advanced to sustain the validity of the statute challenged in the McMillan Case. The court there analyzed the contention axxd held that it could not he sustained; that so loxxg as the institutions were maintained aixd supported by the state aud taxation was resorted to, every dollar which was diverted from the funds would have to he restored by taxation and, therefore, the obligation was in effect against the state axxd would he paid by the state. It •may he, but as to -this we express no opinion, that the theory for which the defendants coxitexxd in this respect would fit. the case if no property of the state, neither the sites nor the dormitory income, were conveyed or pledged axxd if the coxxtracts made by tbe board of administration with the institutional building corporation were for the purchase of dormitories erected on laxxds xxot belonging to the state, to be paid for wholly oxxt of the income from such dormitories so purchased. See Winston v. Spokane,
Finally, the defendants contend that no debt will be incurred contrary to the constitutional inhibition, for the reason that any contract that may be entered into by the board pursuant to the statute will require only annual payments which will be met during the several years of the contract out of the annual income from the dormitories. Defendants’ theory in this regard is that under the contract there will be no present debt other than for the current installments; that as to future installments there will be no debt until the same fall due. We are unable to agree with them. The statute contemplates, regardless of the devices employed to accomplish its purpose or any disguises that it may wear, that the state shall procure dormitories to be erected for it. It further contemplates that it shall take over these dormitories immediately as they shall be built. It further contemplates that the state shall pay for these dormitories in installments as may be arranged, during a period not exceeding fifty years. The contract is not a contract for services to be performed in the future. It is a purchase of property which is immediately delivered. Nor is a mere future contingent liability created under it. Nor is the contract one entered into in anticipation of taxes already levied. It seems to us that the proposition thus advanced is answered adversely to the defendants by the case of Anderson v. International School Dist.
We are thus forced to the conclusion that the contract authorized by chapter 257, and which the defendants are about to enter into pursuant to that statute, will result in a debt against the state within the meaning of the term “debt” as used in § 182 of the Constitution.
The plaintiff in his complaint alleges “that the state of North Dakota has reached the debt limit as provided by § 182 of the Constitution, and that any debt created under the provisions of chapter. 257 will be *454 in excess of the constitutional debt limit and the current funds of the state raised by taxation or otherwise.” This the demurrer admits. Furthermore, chapter 257 authorizes contractual obligations that will run for a period of fifty years. Clearly § 182 of the Constitutiоn contemplates that no debt shall be incurred unless evidenced by a bond issue, nor for a longer term than thirty years. So it is beyond question that the contract, which the plaintiff alleges the defendants are about to enter into, will result in a debt which they cannot be authorized to contract, and that the statute contravenes the constitutional prohibition. Therefore on this account, as well as on account of its violation of the provisions of § 25 of the Constitution, chapter 257 must be held unconstitutional and void. While other grounds are urged by the plaintiff in support of his challenge to the statute, it is unnecessary for us to pass upon them in view of our holding as heretofore expressed.
’ The district court erred in sustaining the demurrer to the complaint and the order made in that behalf therefore must be and it is reversed.