Eastern & Western Lumber Co. v. Patterson

COSHOW, J.,

Dissenting.

This is an appeal from a decree enjoining defendants from using the industrial accident fund of the State of Oregon to construct an office building for the state. The 1927 session of the legislature enacted the following statute:

“Section 1. The Oregon state board of control is hereby authorized and directed to cause to be constructed in Salem, Marion County, Oregon, a modern fireproof office building for the State of Oregon, and to invest the state industrial accident fund in an amount not to exceed the sum of $600,000.00 in said building.

“Section 2. To provide funds for the construction of said building the state treasurer is hereby authorized and directed to sell bonds in which said funds may be invested; such sales shall be made from time to time as requested by the Oregon state board of control, and the proceeds thereof shall be deposited in the state treasury to the credit of a fund which shall be known as the state office building fund. The state treasurer is hereby further authorized, in his discretion, to deposit to the credit of the said fund any uninvested part of the industrial accident fund in the state treasury; provided, the total amount thus deposited, including proceeds from the sale of bonds, shall not exceed the sum of $600,000. Said fund is hereby appropriated for the purpose of constructing the said office building for use by the various departments of the state of Oregon that may be assigned offices therein.

“Section 3. The secretary of state is hereby authorized and directed to audit all duly approved claims which have been incurred in pursuance of law

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and the foregoing appropriation, and to draw his warrant upon the state treasurer in payment thereof upon presentation of proper vouchers duly verified.

“Section

4.

The state office building shall stand for and be an investment of the industrial accident fund to the extent that same is used-in the construction of said office building or to the extent of any unrefunded balance thereof.

“Section 5. On the first day of July, 1927, and the first day of January and July annually thereafter, the state treasurer shall prepare and submit to the secretary of state duly verified vouchers for the amount of interest computed at 4% per cent per annum on the unrefunded amount of the industrial accident fund diverted for the purpose of this act. Interest shall begin to run from the date of transfer to the state office building fund of the different installments of the industrial accident fund.

“Section 6. There is hereby appropriated from the general fund semi-annually, beginning with July, 1927, the sum of $30,000 for the repayment to the industrial accident fund. The secretary of state shall, on the first day of July, 1927, and on the first day of January and July annually thereafter, by warrant, transfer from the general fund to the industrial accident fund the amount of said appropriation, and same shall be applied first to the payment of the amount of the verified vouchers submitted to the secretary of state on said dates by the state treasurer, pursuant to section 5 hereof, and the remainder, so far as may be required, shall be applied in refunding the principal of the industrial accident fund until the entire amount of the same, including interest, shall have been repaid.

“Section 7. It is hereby adjudged and declared that existing conditions are such that this act is necessary for the immediate preservation of the public peace, health and safety; and, owing to the urgent necessity of maintaining the public credit, an emergency is hereby declared to exist, and this act shall

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take effect and be in full force and effect from and after its approval by the governor.”

Plaintiffs attack this as unconstitutional on four different grounds, to wit: First, that said act attempts to create a debt and liability of the State of Oregon in excess of the sum of $50,000. Second, that said act makes appropriation for current expenses of the state and other subjects in violation of Article IX, Section 7 of the state Constitution. Third, that said act embraces more than one subject in violation of Article IV, Section 20 of the state Constitution. Fourth, that said act impairs the obligations of a contract in violation of Article I, Section 10 of the federal Constitution and of Article I, Section 21 of the state Constitution. A demurrer was interposed in behalf of defendants and overruled by the Circuit Court. This appeal is from the decree entered after defendants refused to further plead. •

The Workmen’s Compensation Act is an exercise of the police power of the state: Honnold on Workmen’s Compensation, p. 58, § 12, Workmen’s Compensation Act (0. J.), 15. The act itself specifies as a reason for its enactment

“That in determining the responsibility of the employer on account of injuries sustained by his workmen, a great and unnecessary cost is now incurred in litigation, which cost is divided between the workmen, the employers and

the taxpayers, who provide the public funds, without any corresponding benefit,

to maintain courts and juries to determine the question of responsibility under the law as it now exists, and that the state and its taxpayers are subjected to a heavy burden in providing care and support for such injured workmen and their dependents, and that this burden should, in so far as may be consistent with the

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rights and obligations of the people of the state, be more fairly distributed as in this act provided.” Or. L., § 6605.

•The act is for the public welfare. The money contributed by the state is and that contributed by employers and employees becomes the property of the state. Those contributions comprise the industrial accident fund. This fund is to be invested by the state treasurer: Or. L., § 6625, as amended by Chapter 188, General Laws of Oregon of 1927.

“ * * The state treasurer shall, to such extent as shall appear to him to be advisable, keep the moneys of the unsegregated portion of the accident fund invested at interest in the class of securities authorized for the investment by banks of savings deposits under the laws of this state. The state treasurer shall be liable on his official bond for the safe custody of the moneys and securities of the accident fund and the segregated accident fund. ’ ’ Or. L., § 6638 as amended by General Laws of Oregon of 1925, page 204.

Other provisions for the investment of the fund are found in General Laws, 1921, Chap. 256.

The money is contributed for a definite purpose and the amounts so contributed are designated a certain fund for the purpose of administering the law according to its terms. This appeal has been very ably argued and much learning has been presented in both the briefs and oral arguments of counsel. It has been presented, however, by plaintiffs upon the theory that the fund thus created for the purpose of administering the Workmen’s Compensation Act will be depleted or invaded by the law assailed. That law does not authorize either. It specifically authorizes the investment not to exceed $600,000 of that fund in

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an office building belonging to tbe state, as does the fund, and expressly provides that said office building shall stand for and be an investment of the industrial accident fund. So that all that is done by the act under consideration is to change the form of the investment of the industrial accident fund. Instead of the state treasurer holding bonds as an investment of the accident fund he is to hold the office building as an investment of that fund. The act also provides for the payment of 4% per cent interest on the amount invested in the office building. Doubtless this is the equivalent of the interest that the state treasurer is able to get from the funds now invested. There is nothing in the act that indicates to any degree or in any manner that the legislature intended to divert any part of the industrial accident fund from the purpose for which it was created.

The act also appropriates the sum of $30,000 to be paid semi-annually to the industrial accident fund. Assuming that the entire sum of $600,000 will be invested in the office building the payment of $30,000 semi-annually to the fund as provided in the act will reconvert the amount invested in the office building with interest at 4% per cent per annum into other forms of investments in thirteen and one-half years. The act itself, therefore, manifests the intention of the legislature not only to invest the funds of the industrial accident fund in an office building but also provides that said form of investment is to be temporary. There is no language in the act that would justify the court in assuming that the legislature has or intended to divert any part of the industrial accident fund from its original purpose. We are not, therefore, called upon to discuss what the legislature might do with that fund if the Workmen’s Compen

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sation Act were repealed. We are not required to consider what some future legislature may enact. Such discussions are speculative entirely and have nothing to do with the act under examination. It was well said by Mr. Justice Harris in

Kinney

v.

Astoria,

108 Or. 514, 525 ( 217 Pac. 840 ):

“The judicial department must, when passing upon the nature of the purpose of a statute, base its decision upon the matters appearing upon the face of the statute, and possibly facts of which judicial notice may be taken may also be considered; but ordinarily a court cannot make an independent inquiry as to facts which do not appear in the statute and are discoverable only ontside of the provisions of the statute, and then, based upon such extraneous facts, say that the statute is unconstitutional.”

Plaintiffs do not rely upon facts in support of their argument that the act is unconstitutional but resort to imagination and summon the possibilities of a future legislature diverting the accident fund from its original purpose.

The legislature had directed the investment of the accident fund. Its power to so do is not questioned in this case. It then has the power to change the form of investment and that is all that is attempted to be done by the act involved in this case. The language of the act not only specifies that the fund to be used in the construction of the building is an investment of the fund but specifically describes the manner for changing the investment in the office building into money to be re-invested as the Workmen’s Compensation Act directs. There is no conversion or diversion of any part of the fund authorized by the act under consideration.

The state is now paying’ a large sum of money annually for the use of other buildings. At the present

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time that sum is $36,481.50 per annum. This amount is likely to grow larger with the growth of the state. The state has a large amount of money in the accident fund. Under the law that fund must be invested. Instead of investing the money in liquid securities the act assailed directs the investment in an office building which is to belong to the state. The same legislature which enacted the act involved in the instant case also passed an act authorizing the collection of rent from certain of the state’s bureaus and commissions which are to use space in said office building. The legislature thereby provided revenue to meet in part the appropriations in the act under consideration: Gen. Laws 1927, Chap. 383. Thus the taxpayers of the state, without any additional tax but with the expenditure of a comparatively small amount of the general fund of the state, will receive an office building. This is made possible by requiring the bureaus and commissions now paying rent to private parties for office space away from the capitol to continue paying rent, but to the state, while occupying space in the office building belonging to the state. So that instead of these various agencies of the state paying rental to private owners of property they áre paying the rent to the state itself. By this arrangement the state invests in absolute safety the accident fund which will bear the reasonable income of 4% per cent per annum. The state by the continuous paying of rental for the use of office space by its various bureaus and commissions obtains a permanent office building. In thirteen and one-half years the amount appropriated by the state for that purpose will retransfer the investment of the accident fund into other forms of securities. The rentals collected by the state provide a revenue almost suffi

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cient to meet the appropriation made by the act. The money is appropriated semi-annually. Taxes are payable semi-annually. The appropriation in the act is continuous to be paid from anticipated revenue. The anticipated revenue is largely from expected rentals and the balance from the general fund. No additional tax is contemplated or provided for. Such appropriations are lawful in this state:

Kinney

v.

Astoria,

108 Or. 514 ( 217 Pac. 840 );

Holmes

v.

Olcott,

96 Or. 33 ( 189 Pac. 202 );

Wingate

v.

Clatsop County,

71 Or. 94, 102 ( 142 Pac. 561 ). There is no presumption that the appropriation will create a debt. The presumption is the contrary. The state will have its office building. The accident fund is kept intact, kept invested and kept earning an income. By the same act ample provision is made for reconverting the investment in the office building into such other securities as the legislature may authorize. Unless an act appropriating money shows on its face the creation of an indebtedness it will be presumed that the appropriation is made from funds on hand or anticipated:

Wingate

v.

Clatsop County ,

above. There is no presumption of the unconstitutionality of an act of the legislature. In legal contemplation the state has an inexhaustible fund from which to meet its obligations: Const., Art. I, § 18; 20 C. J. 832 et seq., § 269;

Branson

v.

Gee,

25 Or. 462 ( 36 Pac. 527 , 24 L. R. A. 355);

Oregonian Ry. Co.

v.

Hill,

9 Or. 377, 381 . It does not appear either in the act or from the complaint that the amount appropriated exceeds in any sum the revenue in the state treasury and the revenue anticipated.

The state owns the accident fund. It will own the office building. If investing the accident fund in an office building creates an indebtedness against the

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state the state is now indebted for that fund. The most the act assailed does is to change the form of investment. Whom does' or will the state owe? There is no creditor. Our conclusion is that Chapter 322, Gen. Laws 1927, does not create an indebtedness against the state in violation of the Constitution.

Since it is conceded that the state has the power to invest the accident fund it naturally follows that the legislature is authorized to direct that power. Changing the form of the investment of that fund does not create an indebtedness. The only

indicia

of indebtedness in the act is the payment of 4% per cent interest and the appropriation of $60,000 payable in equal semi-annual installments. But this is merely a transfer of that amount from the general fund to the accident fund. It is not the payment of a debt because there is no creditor. There must be a creditor and a debtor where a debt exists. Reconversion of the money invested in the office building into liquid securities is an expression of the legislative intent to invest permanently the accident fund in liquid securities. That policy may be changed by the legislature whenever it wills so to do.

Every presumption favors the validity of the statute. Courts have no more right to declare the appropriation of said $60,000 a debt against the state than they have to hold the appropriation of $82,750 for various purposes under House Bill 577 of the same session a debt. The presumption is that the money is in the treasury to meet the appropriation.

It is a cardinal rule of construction that all legislation on the same subject must be construed together:

Taggart

v.

School Dist. No.

1, 96 Or. 422, 427 ( 188 Pac. 908, 1119 ). This principle applies with special force where different acts on the same subject

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were enacted at the same legislative session. Chapter 383 of 1927 Laws authorizes the collection of rent from certain boards and commissions which will occupy the office building. The rent so collected will be placed in the general fund. What possible purpose can the state have for collecting from its boards and commissions rent except the purpose of meeting the appropriation for the payment semi-annually of $30,000 to reconvert the accident fund invested in the office building into liquid securities? So, if by some mental contortion the amount to be invested in the office building can be termed a debt, without either creditor or debtor, a source of revenue has been provided for paying that indebtedness in due course. Chapter 322, Laws 1927, does not therefore create a debt within the constitutional inhibition against contracting a debt exceeding $50,000:

Wingate

v.

Clatsop County,

71 Or. 94, 102 ( 142 Pac. 561 ). This result is attained not by jugglery of words or trickery of expression, but by collecting rental from certain users of the building until the building shall have been paid for.

The second ground of attack on said act is that it makes an appropriation for current expenses and also contains provisions on other subjects in violation of Article IX, Section 7 of the state Constitution. This ground is based upon the assumption that the state is borrowing money from the accident fund. But as shown above the state is not borrowing. It is merely using its own.

The act does not purport to pay current expenses. The only appropriation is for “repayment to the industrial accident fund.” The money is not borrowed from the industrial accident fund but is an investment of those funds. The state would be both bor

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rower and lender if the use of the fund constitutes a loan. It is true the language of the act is “repayment.” The court will look to the entire act to ascertain the intent of the legislature and not be controlled by the meaning of words taken from their context. It is lawful for the legislature to provide for the payment of the building it proposes to construct. The payment for the structure is a necessary element of the law authorizing its construction. Payment is directly connected with the primary object of the act which is the construction of an office building. The investment of the accident fund is directly connected with the primary purpose of the act. It would be impracticable to require the legislature to enact separate statutes for all the incidental matter relating to the primary object of the act. The investment of the accident fund and the appropriation for the purpose of reconverting the fund into other forms of security are so closely related to the primary purpose that the act does not offend Article IX, Section 7 of the state Constitution:

Evanhoff

v.

State Industrial Acc. Com.,

78 Or. 503 ( 154 Pac. 106 ).

The act does not conflict with the provisions of Article IV, Section 20 of the Constitution because it does not embrace more than one subject and matters properly connected therewith. The subject is clearly expressed in the title:

First State Bank of Sutherlin

v.

Kendall Lumber Co.,

107 Or. 1 ( 213 Pac. 142 ). The act does not attempt to regulate the investment of the accident fund generally but in so far only as it is incidental to and directly connected with the construction of the office building.

The act does not impair the obligation of a contract within the meaning of either Article I, Section 10 of the federal Constitution or Article I, Section 21

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of the state Constitution. The relation between the state and the employers and employees is not contractual. The first section of the act indicates in part the reason for its enactment. It is a general law enacted for the benefit of the people of the state. The state in its sovereign capacity has contributed a large amount to the fund. The amount contributed by the other contributors is the property of the state. There is a contractual relation between the employers and the employees who are within the act. Neither the contributing employers or employees retain any interest in the amount contributed. The state by general law has been a contributor to the fund and has undertaken to administer it for the purpose for which it was created and according to the terms of the act. The fact that the Workmen’s Compensation Act in this state is voluntary does not change the purpose and spirit of the act. Whether the Workmen’s Compensation Act is compulsory or voluntary its enactment is an exercise of the police power of the state. It is for the general welfare. Its purpose is not only to reheve, as far as humanly possible the suffering of those who are injured, many whom with their families are likely to become public charges, but was also intended to relieve the taxpayers of the state of a large part of the burden of maintaining courts:

Mountain Timber Co.

v.

Washington,

243 U. S. 219 ( 61 L. Ed. 685 , Ann. Cas. 1917D, 642, 37 Sup. Ct. Rep. 260). It is true this court in

West

v.

Koser,

104 Or. 94 ( 206 Pac. 542 ), spoke of the act as being a contract between the employer, employee and the state. Reading the entire opinion, however, it clearly appears that the learned justice writing the opinion did not intend to use the word “contract” in the sense it is used in the Constitution. It will be observed also

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that the then Chief Justice did not concur in the statement that:

“There is no douht of the existence of a contract between employer, the employee and the state.”

The later case of

Spitzer

v.

The Annette Rolph,

110 Or. 461, 475 ( 218 Pac. 748 , 223 Pac. 253 ), the opinion in which was written by the same justice who wrote the majority opinion in

West

v.

Koser ,

above, more accurately expresses the relation of the beneficiaries of the accident fund in this language:

“The rights of a workman here to compensation from the state industrial accident fund arise from a contract, either express or implied, between employee and employer embraced within the terms of the act:

West

v.

Kozer,

104 Or. 94 ( 206 Pac. 542 ).”

It thus appears that it was not the intention of the writer of the opinion in

West

v.

Kozer

to hold that the state was a contracting party in the sense in which the word “contract” is generally used or as it is used in the state Constitution. In the case of

Butterfield

v.

State Industrial Acc. Com.,

111 Or. 149 ( 223 Pac. 941 , 226 Pac. 216 ), the point under consideration was the right of the State of Oregon to appeal in an action against the State Industrial Accident Commission. The excerpt from

West

v.

Kozer

there appearing was not quoted for the purpose of showing that the state sustains a contractual relation with the employers and employees but for the purpose of explaining the former opinion holding that the State of Oregon, not being a party to the action, could not appeal.

Butterfield

v.

State Industrial Acc. Com.,

above, is not an authority supporting the position taken by plaintiffs that the state has contracted to keep the accident fund in certain forms of investments indefinitely.

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But we repeat that the act does not manifest any intention to impair to any extent the accident fund. It is kept intact. It is kept invested. Plaintiffs have not alleged any way or manner in which they are injured or can be injured, except by calling to their aid their imagination of what some future legislature may do. Speculation as to future acts of the legislature can never be a proper basis for declaring an act un-j constitutional. The invalidity of an act must appear on its face beyond a reasonable doubt before the court will declare it unconstitutional:

Kinney

v.

Astoria ,

quoted above;

Miller

v.

Henry,

62 Or. 4 ( 124 Pac. 197 , 41 L. R A. (N. S.) 97).

The acts of the legislature directing the investment of the accident fund in specified securities and providing for the distribution of the surplus in excess of $300,000 do not operate to render unconstitutional said Chapter 322. The legislature having the power to invest the funds may change the form of the investments from time to time as, in its judgment, is for the best interests of the fund. We cannot assume that the legislature will at any time dissipate that fund. The presumption is that it will sacredly guard and protect it. Every legislature since the enactment of the statute has clearly manifested that intention. The same intention is clearly manifested in said Chapter 322.

The decree should be reversed and one entered here dismissing the suit.

McBride 'and Belt, JJ., concur in this opinion.

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For appellants there was a brief over the name of

Mr. I. H. Van Winkle,

Attorney General, with an oral argument by

Mr. Willis S. Moore,

Assistant Attorney General.

For respondents there was a brief over the names of

Messrs. Wilson & Reilly

and

Messrs. Carey & Kerr,

with oral arguments by

Mr. Jas. B. Kerr

and

Mr. Jas. G. Wilson.

Mr. Roy F. Shields

and

Mr. Fred H. Paulus, amici ctoriae.