{ "id": 8563023, "name": "STATE EDUCATION ASSISTANCE AUTHORITY v. BANK OF STATESVILLE", "name_abbreviation": "State Education Assistance Authority v. Bank of Statesville", "decision_date": "1970-06-12", "docket_number": "No. 44", "first_page": "576", "last_page": "598", "citations": [ { "type": "official", "cite": "276 N.C. 576" } ], "court": { "name_abbreviation": "N.C.", "id": 9292, "name": "Supreme Court of North Carolina" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "154 S.E. 2d 548", "category": "reporters:state_regional", "reporter": "S.E.2d", "pin_cites": [ { "page": "555" } ], "opinion_index": 0 }, { "cite": "270 N.C. 323", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8567865 ], "pin_cites": [ { "page": "331" } ], "opinion_index": 0, "case_paths": [ "/nc/270/0323-01" ] }, { "cite": "20 U.S.C.A. \u00a7 1077", "category": "laws:leg_statute", "reporter": "U.S.C.", "weight": 2, "pin_cites": [ { "page": "(a)" }, { "page": "(a)(2)(D)" } ], "opinion_index": 0 }, { "cite": "20 U.S.C.A. \u00a7 1075", "category": "laws:leg_statute", "reporter": "U.S.C.", "pin_cites": [ { "page": "(a)" } ], "opinion_index": 0 }, { "cite": "20 U.S.C.A. \u00a7 1071", "category": "laws:leg_statute", "reporter": "U.S.C.", "pin_cites": [ { "page": "(a)" } ], "opinion_index": 0 }, { "cite": "88 Stat. 1084", "category": "laws:leg_session", "reporter": "Stat.", "opinion_index": 0 }, { "cite": "20 U.S.C.A. \u00a7 996", "category": "laws:leg_statute", "reporter": "U.S.C.", "pin_cites": [ { "page": "(a)" } ], "opinion_index": 0 }, { "cite": "143 S.E. 2d 319", "category": "reporters:state_regional", "reporter": "S.E.2d", "pin_cites": [ { "page": "323" } ], "opinion_index": 0 }, { "cite": "265 N.C. 109", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8574532 ], "pin_cites": [ { "page": "114" } ], "opinion_index": 0, "case_paths": [ "/nc/265/0109-01" ] }, { "cite": "74 S.E. 2d 310", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "237 N.C. 52", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8605147 ], "opinion_index": 0, "case_paths": [ "/nc/237/0052-01" ] }, { "cite": "172 S.E. 377", "category": "reporters:state_regional", "reporter": "S.E.", "opinion_index": 0 }, { "cite": "205 N.C. 663", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8630940 ], "opinion_index": 0, "case_paths": [ "/nc/205/0663-01" ] }, { "cite": "244 A. 2d 281", "category": "reporters:state_regional", "reporter": "A.2d", "weight": 3, "year": 1968, "pin_cites": [ { "page": "290" }, { "page": "290" } ], "opinion_index": 0 }, { "cite": "80 S.E. 2d 904", "category": "reporters:state_regional", "reporter": "S.E.2d", "pin_cites": [ { "page": "914" } ], "opinion_index": 0 }, { "cite": "239 N.C. 682", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8628400 ], "pin_cites": [ { "page": "696" } ], "opinion_index": 0, "case_paths": [ "/nc/239/0682-01" ] }, { "cite": "50 S.E. 2d 545", "category": "reporters:state_regional", "reporter": "S.E.2d", "pin_cites": [ { "page": "549" } ], "opinion_index": 0 }, { "cite": "229 N.C. 450", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 12166520 ], "pin_cites": [ { "page": "455" } ], "opinion_index": 0, "case_paths": [ "/nc/229/0450-01" ] }, { "cite": "163 S.E. 2d 387", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "274 N.C. 343", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8560087 ], "opinion_index": 0, "case_paths": [ "/nc/274/0343-01" ] }, { "cite": "93 S.E. 2d 163", "category": "reporters:state_regional", "reporter": "S.E.2d", "pin_cites": [ { "page": "166" } ], "opinion_index": 0 }, { "cite": "244 N.C. 221", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2219528 ], "pin_cites": [ { "page": "225" } ], "opinion_index": 0, "case_paths": [ "/nc/244/0221-01" ] }, { "cite": "20 U.S.C.A. \u00a7 1078", "category": "laws:leg_statute", "reporter": "U.S.C.", "weight": 2, "pin_cites": [ { "page": "(a)(1)(C)" } ], "opinion_index": 0 }, { "cite": "20 U.S.C.A. \u00a7 1085", "category": "laws:leg_statute", "reporter": "U.S.C.", "weight": 2, "pin_cites": [ { "page": "(g)" }, { "page": "(a)" } ], "opinion_index": 0 }, { "cite": "168 S.E. 2d 401", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "275 N.C. 439", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8558876 ], "pin_cites": [ { "page": "448" } ], "opinion_index": 0, "case_paths": [ "/nc/275/0439-01" ] }, { "cite": "68 S.E. 155", "category": "reporters:state_regional", "reporter": "S.E.", "opinion_index": 1 }, { "cite": "152 N.C. 548", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 11272062 ], "opinion_index": 1, "case_paths": [ "/nc/152/0548-01" ] }, { "cite": "185 S.E. 654", "category": "reporters:state_regional", "reporter": "S.E.", "opinion_index": 1 }, { "cite": "210 N.C. 171", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8624701 ], "opinion_index": 1, "case_paths": [ "/nc/210/0171-01" ] }, { "cite": "75 N.C. 474", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8698003 ], "opinion_index": 1, "case_paths": [ "/nc/75/0474-01" ] }, { "cite": "135 S.E. 527", "category": "reporters:state_regional", "reporter": "S.E.", "opinion_index": 1 }, { "cite": "192 N.C. 604", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8625453 ], "opinion_index": 1, "case_paths": [ "/nc/192/0604-01" ] }, { "cite": "185 S.E. 6", "category": "reporters:state_regional", "reporter": "S.E.", "opinion_index": 1 }, { "cite": "209 N.C. 751", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2221321 ], "opinion_index": 1, "case_paths": [ "/nc/209/0751-01" ] }, { "cite": "127 S.E. 2d 262", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 1 }, { "cite": "257 N.C. 666", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8570023 ], "opinion_index": 1, "case_paths": [ "/nc/257/0666-01" ] }, { "cite": "144 S.E. 2d 821", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 1 }, { "cite": "265 N.C. 653", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8576632 ], "opinion_index": 1, "case_paths": [ "/nc/265/0653-01" ] }, { "cite": "154 S.E. 2d 532", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 1 }, { "cite": "270 N.C. 424", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8568636 ], "opinion_index": 1, "case_paths": [ "/nc/270/0424-01" ] }, { "cite": "9 S.E. 2d 365", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 1 }, { "cite": "217 N.C. 632", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8614729 ], "pin_cites": [ { "page": "637" } ], "opinion_index": 1, "case_paths": [ "/nc/217/0632-01" ] }, { "cite": "12 S.E. 2d 265", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 1 }, { "cite": "218 N.C. 673", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8623597 ], "opinion_index": 1, "case_paths": [ "/nc/218/0673-01" ] }, { "cite": "13 S.E. 2d 618", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 1 }, { "cite": "219 N.C. 342", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8623201 ], "pin_cites": [ { "page": "345" } ], "opinion_index": 1, "case_paths": [ "/nc/219/0342-01" ] }, { "cite": "129 S.E. 2d 465", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 1 }, { "cite": "258 N.C. 749", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8562682 ], "opinion_index": 1, "case_paths": [ "/nc/258/0749-01" ] }, { "cite": "167 S.E. 813", "category": "reporters:state_regional", "reporter": "S.E.", "opinion_index": 1 }, { "cite": "204 N.C. 203", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8614434 ], "opinion_index": 1, "case_paths": [ "/nc/204/0203-01" ] }, { "cite": "163 S.E. 2d 775", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 1 }, { "cite": "274 N.C. 398", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8560423 ], "pin_cites": [ { "page": "405" } ], "opinion_index": 1, "case_paths": [ "/nc/274/0398-01" ] }, { "cite": "172 S.E. 377", "category": "reporters:state_regional", "reporter": "S.E.", "opinion_index": 1 }, { "cite": "205 N.C. 663", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8630940 ], "opinion_index": 1, "case_paths": [ "/nc/205/0663-01" ] } ], "analysis": { "cardinality": 1487, "char_count": 57062, "ocr_confidence": 0.603, "pagerank": { "raw": 4.03580807328026e-08, "percentile": 0.2062479318292302 }, "sha256": "8dbc6e06399383a300649e03410937798ba0e2732df3d2a3373d9a98a9e4363a", "simhash": "1:4e0114332ed28f9e", "word_count": 9317 }, "last_updated": "2023-07-14T17:14:31.974326+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "STATE EDUCATION ASSISTANCE AUTHORITY v. BANK OF STATESVILLE" ], "opinions": [ { "text": "Bobbitt, C.J.\nWhether defendant is legally obligated to accept and pay for the three $1,000.00 Series B Bonds is the ultimate question for decision. The answer depends upon whether the validity of the Series B Bonds is subject to successful challenge by defendant on any of the grounds asserted by it.\nDefendant\u2019s offer to purchase was made with full knowledge of the provisions of the Bond Resolutions of August 29, 1968, and of August 21, 1969, and of the tripartite contracts referred to therein. Hence, we pass without discussion whether \u201cthe operating procedures followed by the Authority\u201d are \u201cin violation of the enabling legislation\u201d as now contended by defendant. Nothing appears to indicate that defendant is adversely affected by \u201cthe operating procedures followed by the Authority.\u201d\nAs stated in Nicholson v. Education Assistance Authority, 275 N.C. 439, 448, 168 S.E. 2d 401, 407: \u201cThe fact that both parties to an action, as in the present case, desire the determination of the constitutionality of an entire act of the Legislature and stipulate that certain questions, leading to such determination, are presented by the action for the determination of the Court is not binding upon the Court. Such stipulation does not require, or authorize, the Court to pass upon the constitutional questions not necessary to the determination of the right of the party who denies the validity of the legislation.\u201d (Our italics.)\nThree basic constitutional questions are presented, viz.:\n1. Do \u201cstudent loans\u201d made pursuant to Chapter 1177 constitute a use of public funds for a public purpose?\n2. May the General Assembly constitutionally exempt from taxation revenue bonds issued pursuant to Chapter 1177?\n3. Does Chapter 1177 provide sufficient legislative standards for making such \u201cstudent loans?\u201d\nThe Authority is an agency of the State. Its affairs are governed by a board of directors of seven members, each appointed by the Governor for a prescribed term. G.S. 116-203.\nThe sole function of the Authority is to facilitate college (and vocational) education of residents of this State at institutions of higher education (and post-secondary business, trade, technical, and other vocational schools). G.S. 116-202. It was authorized to \u201cacquire\u201d from banks or other lending institutions \u201ca contingent interest\u201d not exceeding 80% (100%) of any individual obligation. G.S. 116-206. (Note: The words and figures enclosed by parentheses indicate amendments made by Chapter 955, Session Laws of 1967.) The Authority is empowered, inter alia, \u201c(t)o receive and accept from any federal or private agency, corporation, association or person grants to be expended in accomplishing the objectives of the Authority , . G.S. 116-204(6). The Authority is authorized \u201c(t)o make .and enter into all contracts and agreements necessary or incidental to the performance of its duties and the execution of its powers under this act.\u201d G.S. 116-204(4). G.S. 116-209 provides that \u201c(t)he State Treasurer shall be the custodian of the assets of the Authority.\u201d\nThe facts concerning the status of the Foundation as \u201ca North Carolina nonprofit public educational service corporation\u201d and the membership of its governing board, are set forth sufficiently in the agreed statement of facts.\nThe 1965 Act which created the Authority provided for an appropriation of $50,000.00 from the Contingency and Emergency Fund. The $50,000.00 so appropriated, together with money obtained from other sources, including grants \u201cfrom any federal or private agency, corporation, association or person,\u201d (G.S. 116-204(6)) was constituted a trust fund. G.S. 116-209. This trust fund was for use \u25a0\u201cexclusively for the purpose of acquiring contingent or vested interests in obligations\u201d which the Authority was authorized to acquire.\nThe assets of this trust fund, now referred to as the \u201cReserve Trust Fund,\u201d were available and used solely or primarily as a guaranty fund in respect of student loans made by banks or other lending institutions through the College Foundation, Inc. (Foundation) and serviced by the Foundation.\nPrior to the enactment of Chapter 1177, the Foundation had qualified as an \u201celigible lender\u201d under the federal statutes. The term \u201celigible lender\u201d is defined in 20 U.S.C.A. \u00a7 1085(g). The student loans it made in behalf of banks or other lending institutions qualified for federal interest subsidy benefits, for federal guaranty benefits and for guaranty benefits provided by the Authority. The nature and extent of these benefits will be discussed in our consideration of loans made to students from the proceeds of sale of the Authority\u2019s Revenue Bonds.\nThe authority to issue and sell revenue bonds was conferred by Chapter 1177. It was provided that \u201c(b)onds issued under the provisions of this act (Chapter 1177) shall not be deemed to constitute a debt, liability or obligation of the State or of any political subdivision thereof or a pledge of the faith and credit of the State or of any such political subdivision, but shall be payable solely from the revenues and other funds provided therefor.\u201d G.S. 116-209.12. It also provided that revenue bonds issued under its authority \u201cshall at all times be free from taxation by the State or any local unit or political subdivision or other instrumentality of the State, excepting inheritance or gift taxes.\u201d G.S. 116-209.13.\nChapter 1177 provides that the Authority shall deposit the proceeds derived from the sale of its revenue bonds to the credit of a trust fund designated \u201cState Education Assistance Authority Loan Fund\u201d (Loan Fund). The Loan Fund is for use by the Authority in making student loans and in acquiring by purchase promissory notes or other legal instruments evidencing student loans made by banks, educational institutions, nonprofit corporations or other lenders. G.S. 116-209.3.\nPursuant to Chapter 1177, the Authority adopted the Bond Resolution of August 29, 1968, which provided for an initial issue of $3,-000,000.00 of Revenue Bonds, Series A, and for additional bonds, \u201cthe aggregate principal amount . . . outstanding at any time . . . not (to) exceed Twelve Million, Five Hundred Thousand Dollars ($12,500,000).\u201d The provisions of the Series A Bonds and attached interest coupons are set forth with particularity. The Series A Bonds are dated July 1, 1968, mature July 1, 1988, and bear interest from date at the rate of 5% per annum payable semiannually on the first days of January and July of each year. This Bond Resolution is set forth on Pages 27-100 of the record.\nThe $3,000,000.00 of Series A Bonds were sold to investors through the Wachovia Bank & Trust Company, which was designated in the Bond Resolution of August 29, 1968, as Fiscal Agent for the Authority, and the proceeds were used, pursuant to the terms of a \u201cTripartite Contract\u201d dated August 29, 1968, between the Authority, Wachovia Bank & Trust Company and College Foundation, Inc.\nThe \u201cTripartite Contract\u201d of August 29, 1968, referred to in the Bond Resolution of that date, provides for the purchase by the Authority from the Foundation of \u201cstudent obligations,\u201d listed on an attached inventory and evidencing \u201cstudent loans,\u201d for a total purchase price of $1,900,000.00, \u201cto be paid solely from the proceeds of Series A Bonds.\u201d It also provides for the purchase by the Authority from the Foundation of \u201cadditional student obligations,\u201d evidencing \u201cstudent loans\u201d to be made by the Foundation during the period of twelve months commencing September 1, 1968, \u201cthe purchase price of which shall not exceed the lesser of (i) One Million, One Hundred Thousand Dollars ($1,100,000) or (ii) an amount equal to the balance of the proceeds of the Series A Bonds available therefor.\u201d A recital preceding the contractual provisions recites that \u201cthe additional student obligations will bear interest at the rate of six percent (6%) per annum.\u201d\nThe Bond Resolution adopted by the Authority on August 21, 1969, provided for an additional issue of Revenue Bonds, Series B, of $1,500,000.00, \u201con a parity with the Series A Bonds,\u201d consisting of 1,500 bonds of $1,000.00 each, dated July 1, 1969, maturing July 1, 1989, and bearing interest from date at the rate of 5%% Per an_ num, payable semiannually on the first days of January and July of each year. It was provided that, except as to designation (Series B instead of Series A), the amount of the issue, the date, the maturity, and the interest rate, and the change of name from Wachovia Bank & Trust Company to Wachovia Bank & Trust Company, N.A., Series B Bonds were to be in the form prescribed in the Resolution of August 29, 1968, for Series A Bonds.\nA \u201cSupplemental Tripartite Contract\u201d of August 21, 1969, between the Authority, the Foundation and Wachovia Bank & Trust Company, N.A., relates specifically to the Series B Bonds. It provides for the purchase by the Authority from the Foundation of \u201c1969-1970 student obligations,\u201d evidencing student loans made by the Foundation during the period of twelve months commencing September 1, 1969, \u201cthe purchase price of which shall not exceed the lesser of (i) One Million, Five Hundred Thousand Dollars ($1,500,-000) or (ii) an amount equal to the balance of the proceeds of the Series B Bonds available for the purchase thereof.\u201d The recital in the preamble preceding the \u2022 contractual provisions states that the additional funds for student assistance activities are available for loans \u201cto students who are residents of the State of North Carolina and were enrolled in educational institutions on the date such loan was made and bearing interest at the rate of seven percent (7%) per annum . . . .\u201d\nIn this Court, the parties have filed a supplement (Supplement) to their original agreed statement of facts. This Supplement discloses, inter alia, the following:\nThe Foundation, acting as \u201celigible lender\u201d for the Authority., made 5,548 student loans for the period 1968-1969, which the Authority acquired by use of the proceeds from the sale of its Series A Revenue Bonds. The family income of 94% of the students who obtained these loans was $10,000.00 or less.\nThe Foundation, acting as \u201celigible lender\u201d for the Authority, has made 2,418 (additional) student loans, which the Authority has acquired or is obligated to acquire by use of the proceeds of sale of its Series B Revenue Bonds. The family income of 90% of the students who obtained these loans is $10,000.00 or less.\nAll of these student loans qualify for the federal interest subsidy and the federal guaranteed loan program. 20 U.S.C.A. \u00a7 1078. The proceeds from the sale of both Series A and Series B Bonds are used exclusively to acquire such student loans and to provide for the expenses of issuing the bonds.\nIn respect of a student loan, including all of those referred to above, which qualifies as a \u201cGuaranteed Student Loan,\u201d the federal assistance is twofold:\n1. INTEREST SUBSIDY. As to loans made prior to June,. 1969, which were financed with the proceeds from the sale of the-Series A Bonds, the Federal Government pays 6% interest thereon plus an administrative fee of 1%. As to loans made subsequent to-June 1, 1969, financed with the proceeds from the sale of the Series B Bonds, the Federal Government pays 7% interest thereon (and more under special circumstances). These payments are made currently. They continue during the entire time the student is in college or vocational school. They exceed the amount necessary to meet, the interest payments on the bonds during the same period.\n2. PARTIAL GUARANTEE IN EVENT OF DEFAULT. When a student borrower defaults, the Federal Government pays 80% of the amount in default and 100% in the event of the student\u2019s death or disability. Where default occurs, the remaining 20% of the amount thereof is paid by the Authority from its Reserve-Trust Fund which, as of April, 1970, had assets of $923,657.00. These assets were held, as provided by the 1965 Act, by the State Treasurer.\nThe Fiscal Agent, under the tripartite contracts, acts as agent off the Authority with reference to the issuance and sale of the bonds, the receipt and disbursement (as directed) of proceeds from bond sales, and the receipt and disbursement of the funds in a Sinking Fund established for payment of the bonds. The assets of the Sinking Fund include all receipts made on account of student loans from the Federal Government, the student borrower and the Reserve Trust Fund.\nAdditional factual data will be set forth in connection with our consideration of specific legal questions.\nChapter 1177 is valid if and only if the purpose for which the proceeds from the sale of the bonds is authorized and required is adjudged a public purpose.\nSection 1, Article IX, of the Constitution of North Carolina, provides: \u201cReligion, morality, and knowledge being necessary to good government and the happiness of mankind, schools and the means of education shall forever be encouraged.\u201d Section 2 contains a mandate that the General Assembly provide for a State public school system. Section 3 contains a mandate that the board of commissioners of each county in the State provide the funds for the buildings and equipment necessary for the maintenance and operation of schools within the county for the constitutional term. Constantian v. Anson County, 244 N.C. 221, 225, 93 S.E. 2d 163, 166; Harris v. Board of Commissioners, 274 N.C. 343, 163 S.E. 2d 387, and cases cited. Section 6 provides for the maintenance by the General Assembly of the University of North Carolina; and Section 7 provides that \u201cthe benefits of the University, as far as practicable, be extended to the youth of the State free of expense for tuition . . . .\u201d Unquestionably, the education of residents of this State is a recognized object of State government. Hence, provision therefor is for a public purpose. Green v. Kitchin, 229 N.C. 450, 455, 50 S.E. 2d 545, 549; Jamison v. Charlotte, 239 N.C. 682, 696, 80 S.E. 2d 904, 914.\nIn Clayton v. Kervick, 244 A. 2d 281 (N.J. 1968), the action was for a declaratory judgment in respect of the New Jersey Educational Facilities Authority. The statute which created the Authority declared it to be \u201ca public body corporate and politic\u201d and an instrumentality exercising \u201cpublic and essential governmental functions.\u201d The Authority was authorized to issue revenue bonds for the construction of facilities, e.g., dormitories, for lease by participating institutions of higher education. In sustaining the constitutionality of the statute, the court stated that the cited constitutional provisions \u201cwere designed to insure that public money would be raised and used only for public purpose\u201d; and \u201c(t)hat the furtherance of higher education is a proper public purpose is beyond dispute.\u201d Id. at 290.\n13] Subject to constitutional limitations, methods to facilitate and achieve the public purpose of providing for the education or training of residents of this State in institutions of higher education or post-secondary schools are for determination by the General Assembly.\n]1] The people of North Carolina constitute our State\u2019s greatest resource. The agreed facts disclose that bond proceeds are to be used solely to make loans to meritorious North Carolinians of slender means and thereby minimize the number of qualified persons whose education or training is interrupted or abandoned for lack of funds. In our view, and we so hold, the bond proceeds are used for a public purpose when used to make such loans.\nOf course, it is expected that a student loan will inure to the private benefit of the person who obtains it. It is equally true that the education provided throughout our entire school system is intended to inure to the benefit of the individual who obtains it. However, the fact that the individual obtains a private benefit cannot be considered sufficient ground to defeat the execution of \u201ca paramount public purpose.\u201d Clayton v. Kervick, supra, at 290.\nThe proceeds from the sale of the Series B Bonds have been used for or are committed to the purchase of specific student obligations representing loans heretofore made by the Foundation. Questions as to the identity of the persons to whom the loans were made or the identity of the institutions they attend are not raised and in any event do not adversely affect defendant.\nThe student loans authorized thereby being for a public purpose, we hold that Chapter 1177 does not unconstitutionally authorize use of public funds in violation of Section 3, Article V, or of Section 17, Article I, or of Section 7, Article I, of the Constitution of North Carolina, or of Section 1 of the Fourteenth Amendment to the Constitution of the United States.\nThe parties present for decision whether the provisions of Chapter 1177 which exempt Authority\u2019s revenue bonds from taxation contravene Section 5, Article V, of the Constitution of North Carolina. Section 5, Article V, provides that \u201c(p)roperty belonging to the State or to municipal corporations shall be exempt from taxation\u201d and enumerates other properties the General Assembly may exempt from taxation. The enumerated properties do not include bonds issued by the State or any State agency, whether revenue bonds or full faith and credit bonds.\nIn Webb v. Port Commission, 205 N.C. 663, 172 S.E. 377, this Court considered the same question in connection with revenue bonds issued for a public purpose by the Port Commission of Morehead City. With reference thereto, the Court said: \u201cThe provision in the act by which the Port Commission was created that its property and the bonds that may be issued and sold as authorized by the act shall be exempt from taxation by the State, or any of its political subdivisions, is valid. The General Assembly has the power to so provide, for the reason that the property of the Port Commission will be held, and the bonds will be issued solely for public purposes. Whatever doubt there may be as to the validity of this provision, by reason of section 3 of Article V of the Constitution of this State, must be, under well-settled principles of constitutional construction, resolved in favor of its validity.\u201d\n\u201cIt is generally considered that the legislature of a state has the power to exempt state and municipal bonds from taxation, since if such bonds are exempt from taxation the state or municipality will be able to issue them on more favorable terms and may then save more money than it would lose by being deprived of the right to tax them. The legislature may exempt such securities from taxation, although the constitution enumerates the subjects of exemption, and does not specifically name government securities, and even in the face of a constitutional declaration forbidding passage of laws exempting \u2018any property.\u2019 \u201d 51 Am. Jur. Taxation \u00a7 567, p. 558. Since the tax-exempt feature makes possible a more favorable sale of revenue bonds and thereby 'contributes substantially to the accomplishment of the public purpose for which they are issued, we hold that the General Assembly may exempt them from taxation by the State or any of its subdivisions.\nIn accord with Webb v. Port Commission, supra, we hold that the provisions of Chapter 1177 which exempt the student loan revenue bonds from taxation do not violate Section 5, Article V, of the Constitution of North Carolina.\nDefendant contends the provisions of Chapter 1177, which purport to authorize the Authority to make or purchase \u201cstudent loans\u201d are violative of Section 8, Article I, and of Section 1, Article II, of the Constitution of North Carolina.\nSection 8, Article I, provides: \u201cThe legislative, executive, and supreme judicial powers of the government ought to be forever separate and distinct from each other.\u201d Section 1, Article II, provides: \u201cThe legislative authority shall- be vested in two distinct branches, both dependent on the people, to wit: A Senate and a House of Representatives.\u201d The question is whether, in respect of determining to whom student loans should be made, the General Assembly delegated its legislative authority without providing sufficient standards for a guide.\n\u201cIt is settled and fundamental in our law that the legislature may not abdicate its power to make laws nor delegate its supreme legislative power to any other coordinate branch or to any agency which it may create. Coastal Highway v. Turnpike Authority, 237 N.C. 52, 74 S.E. 2d 310. It is equally well settled that, as to some specific subject matter, it may delegate a limited portion of its legislative power to an administrative agency if it prescribes the standards under which the agency is to exercise the delegated powers.\u201d Turnpike Authority v. Pine Island, 265 N.C. 109, 114, 143 S.E. 2d 319, 323, and cases cited.\nG.S. 116-209.2 provides: \u201cAs used in this act, the term \u2018eligible institution\u2019 shall' have the same meaning as the definition of such term in section 996 and section 1085 of Title 20 of the United States Code and the term \u2018student loan\u2019 shall mean loans to residents of this State to enable them to obtain an education in an eligible institution.\u201d 20 U.S.C.A. \u00a7 1085(a) provides: \u201cThe term \u2018eligible institution\u2019 means (1) an institution of higher education, (2) a vocational school, or (3) with respect to students who are nationals of the United States, an institution outside the States which is comparable to an institution of higher education or to a vocational school and which has been approved by the Commissioner for purposes of this part.\u201d 20 U.S.C.A. \u00a7 996(a), which has been repealed (88 Stat. 1084), contained a definition of \u201celigible institution\u201d which was not in conflict with that prescribed in \u00a7 1085(a).\nChapter 1177 authorizes the Authority \"to develop and administer programs and perform all functions necessary or convenient ... for qualifying for loans, grants, insurance and other benefits and assistance under any program of the United States now or hereafter authorized fostering student loans.\u201d G.S. 116-209.3. The Authority was authorized \u201cto contract with the United States of America or any agency or officer thereof . . . respecting the carrying out of the Authority\u2019s functions under this act.\u201d G.S. 116-209.6. These provisions disclose the General Assembly was well aware of the federal, State and private programs of low-interest insured loans to students in institutions of higher education and other post-secondary schools.\nPertinent provisions of the federal statutes are set forth in summary or verbatim below.\nThe declared purpose of the federal legislation is to enable the Commissioner of Education \u201c(1) to encourage States and nonprofit private institutions and organizations to establish adequate loan insurance programs for students in eligible institutions (as defined in section 1085 of this title), ... (3) to pay a portion of the interest on loans to qualified students which are made by a State under a direct loan program meeting the requirements of section 1078-(a) (1) (B) of this title, or which are insured under this part or under a program of a State or of a nonprofit private institution or organization which meets the requirements of section 1078(a)(1)(C) of this title, and (4) to guarantee a portion of each loan insured under a program of a State or of a nonprofit private institution or organization which meets the requirements of section 1078(a)(1)(C) of this title.\u201d 20 U.S.C.A. \u00a7 1071(a).\nTo qualify for the federal assistance, consisting of (1) interest subsidy and (2) partial guaranty in the event of default, as set forth above, the \u201cadjusted family income\u201d of the student-borrower must be \"less than $15,000.00 at the time of execution of the note or written agreement evidencing such loan.\u201d'20 U.S.C.A. \u00a7 1078(a)(1)(C). The total of the loans made to a student in any academic year may not exceed $1,500.00. The aggregate insured unpaid principal amount of all such insured loans made to any student shall not at any time exceed $7,500.00. 20 U.S.C.A. \u00a7 1075(a).\nA loan by an eligible lender is insurable \u201conly if'\u2014 (1) made to a student who (A) has been accepted for enrollment at an eligible institution or, in the case of a student already attending such institution, is in good standing there as determined by the institution, and (B) is carrying at least one-half of the normal full-time workload as determined by the institution, and (C) has provided the lender with a statement of the institution which sets forth a schedule of the tuition and fees applicable to that student and its estimate of the cost of board and room for such a student . . .\u201d 20 U.S.C.A. \u00a7 1077(a). \u00a7 1077(a)(2) sets out in detail the content of \u201ca note or other written agreement\u201d evidencing an insurable student loan including the times and terms of repayment. Subject to enumerated exceptions, such note is to provide for repayment \u201cof the principal amount of the loan in installments over a period of not less than five years (unless sooner repaid) nor more than ten years beginning not earlier than nine months nor later than one year after the date on which the student ceases to carry at an eligible institution at least one-half of the normal full-time academic workload as determined by the institution . . . .\u201d\nThe interest rate on an insurable loan may not exceed the maximum prescribed by the Secretary of Health, Education and Welfare. 20 U.S.C.A. \u00a7 1077(a)(2)(D). The Secretary cannot prescribe a maximum interest rate in excess of 7% on the unpaid principal balance of the loan. 20 U.S.C.A. 1077(b).\nThe foregoing indicates clearly that Congress has established sufficient standards in respect of loans that qualify for the interest subsidy and for the 80% insurance or guaranty. The agreed statement of facts (Supplement) discloses that all loans made and to be made from the proceeds of the sale of bonds are qualified for the federal assistance.\nPersons who obtain \u201cstudent loans\u201d are unable to make payment on account of interest or principal until completion of their education by graduation or otherwise. The assistance of the Federal Government and coordination with its program are prerequisite to the functioning of the North Carolina student loan program:\nAlthough not set forth in express terms, we think it implicit in the provisions of Chapter 1177, that the General Assembly contemplated and intended that no loans would be made from the proceeds from the sale of tax-exempt revenue bonds except student loans made in compliance with the standards prescribed by the federal legislation and therefore qualified for the federal assistance referred to above. Seemingly, the General Assembly realized that its specification of more precise standards for \u201cstudent loans\u201d might impede the functioning of the Authority and render it unable to qualify from time to time for the federal assistance upon which its program depended.\nWe are of the opinion, and so hold, that the only student loans the Authority is authorized to make or purchase are student loans which qualify under the federal statutes for federal assistance in respect of interest subsidy and guaranty. When the minimum standards prescribed by Chapter 1177 (G.S. 116-209.2), to wit, \u201cloans to residents of this State to enable them to obtain an education in an eligible institution,\u201d are supplemented by the standards prescribed by the federal legislation, the legislative standards are sufficient. \u201cTo construe the statute otherwise would raise a serious question as to its constitutionality; and it is well settled that a statute will not be construed so as to raise such question if a different construction, which will avoid the question of constitutionality, is reasonable.\u201d Milk Commission v. Food Stores, 270 N.C. 323, 331, 154 S.E. 2d 548, 555.\nWhether the North Carolina student loan program is wise or unwise is for determination by the General Assembly. Whether the tax-exempt revenue bonds should be approved for investment by fiduciaries and for deposit \u201cfor any purpose for which the deposit of bonds or obligations of the State is now or may hereafter be authorized by law,\u201d G.S. 116-209.10, is for determination by the General Assembly. Whether the purchase of these bonds is wise or unwise is for determination by the investor. Our function relates solely to the validity of the Series B Bonds.\nHaving determined that Chapter 1177 does not violate any of the provisions of the State or Federal Constitutions referred to in the questions posed by the parties in the agreed statement, the judgment of the court below is affirmed.\nAffirmed.", "type": "majority", "author": "Bobbitt, C.J." }, { "text": "LAKE, J.,\ndissenting:\nThe bonds which the plaintiff proposes to deliver to the defendant state upon their respective faces. \u201cThis bond shall not be deemed to constitute a debt, liability or obligation of the State of North Carolina or of any political subdivision thereof,\u201d and that the plaintiff, itself, \u201cshall not be obligated to pay this bond or the interest\u201d thereon, except from the revenues and other funds pledged for such payment.\nEach bond further states, \u201cThis bond, its transfer and the income therefrom * * * shall at all times be free from taxation by the State of North Carolina or any local unit or political subdivision or other instrumentality of the State, excepting inheritance or gift taxes.\u201d\nAlthough the Legislature, in G.S. 116-209.13, undertook to grant such tax exemption, it is my view that the bonds, if issued, will be subject to the tax presently levied by G.S. 105-202 upon intangible personal property and to any tax hereafter lawfully levied generally upon bonds and other evidences of indebtedness, To the extent that the statute, under which these bonds are proposed to be issued, purports to grant an exemption of these bonds from the intangible property tax, it is, in my opinion, in violation of Article V, \u00a7 5, of the Constitution of North Carolina, and, therefore, is ineffective.\nArticle Y, \u00a7 5, of the Constitution, is entitled \u201cProperty Exempt from Taxation.\u201d It provides:\n\u201cProperty belonging to the State, counties and municipal corporations shall be exempt from taxation. The General Assembly may exempt cemeteries and property held for educational, scientific, literary, cultural, charitable or religious purposes, and, to a value not exceeding three hundred dollars ($300.00), any personal property. * * *\u201d\nThis constitutional provision applies to ad valorem taxes on property only. Sykes v. Clayton, Commissioner of Revenue, 274 N.C. 398, 405, 163 S.E. 2d 775; Stedman v. Winston-Salem, 204 N.C. 203, 167 S.E. 813. As we said in the Sykes case, however, it does apply to \u201cthe taxation of real and personal property, tangible and intangible, according to the value thereof.\u201d Thus, it applies to the intangible property tax levied by G.S. 105-202 upon bonds and other evidences of indebtedness. In Sale v. Johnson, Commissioner of Revenue, 258 N.C. 749, 129 S.E. 2d 465, Parker, J., later C.J., speaking for the Court, said, \u201cThe power to exempt, from taxation, as well as the power to tax, is an essential attribute of sovereignty.\u201d However, the sovereign is the State, not the Legislature. The Legislature, like this Court, is subject to the restrictions placed upon it by the sovereign in the Constitution. In Rockingham County v. Elon College, 219 N.C. 342, 345, 13 S.E. 2d 618, in Hospital v. Guilford County, 218 N.C. 673, 12 S.E. 2d 265, and in Odd Fellows v. Swain, 217 N.C. 632, 637, 9 S.E. 2d 365, this Court recognized that the Legislature has no authority to exempt from ad valorem taxation any property, except by virtue of this provision of the Constitution.\nThese bonds, if and when issued, will be property. They will be property of the same kind as is a note, or a bond, of an individual student, or of his parent, given to the defendant bank in consideration of a loan of money to such student or parent for use by the student in paying his expenses in attending a school or college. When issued, they will be held by the plaintiff bank, or by its transferee, for the purpose of receiving the interest due thereon, as it falls due, and receiving the principal at maturity. Use of such interest and principal, when collected, by the holder of the bond is completely unrestricted. The purpose of the bank, or of its transferee, in holding these bonds will be precisely the same as its purpose in holding any other bond or note evidencing a loan made by the bank. Consequently, the exemption of the bonds from taxation cannot be supported on the basis of the purpose for which they are to be held. It is obvious that the bonds, in the hands of the bank or of its transferee, will not constitute property held for educational, scientific, literary, cultural, charitable or religious purposes. They will be held as any other property is held for investment.\nThe bonds, when issued, will be the property of the bank or of its transferee, not that of the issuing Authority. Consequently, except in the unlikely event of a subsequent transfer to a municipal corporation, a county, the State, or an agency of one of these, exemption of the bonds from the intangible property tax cannot be supported on the basis of the status of the holder of the bonds.\nThe mandatory exemption granted by the first sentence of Article V, \u00a7 5, of the Constitution, depends upon the status of the owner of the property \u2014 the State, counties or municipal corporations. The authority conferred upon the General Assembly to exempt property owned by others is limited to property held for one or more of the specified purposes. Hospital v. Guilford County, supra; Odd Fellows v. Swain, supra. Thus, neither the mandatory exemption nor the permissive exemption granted or authorized by Article V, \u00a7 5, of the Constitution, extends to these bonds in the hands of the defendant or its transferee. It is well settled that exemptions from taxation, constitutional as well as statutory, are to be strictly construed against the claim of exemption and in favor of the taxing power. Isaacs v. Clayton, Commissioner of Revenue, 270 N.C. 424, 154 S.E. 2d 532; Yacht Co. v. High, Commissioner of Revenue, 265 N.C. 653, 144 S.E. 2d 821; Chemical Corp. v. Johnson, Commissioner of Revenue, 257 N.C. 666, 127 S.E. 2d 262; Benson v. Johnston County, 209 N.C. 751, 185 S.E. 6; Rich v. Doughton, 192 N.C. 604, 135 S.E. 527; R. R. v. Commissioners, 75 N.C. 474.\nIt has been settled by decisions of this Court that, notwithstanding Article Y, \u00a7 5, of the Constitution, the Legislature may exempt from taxation obligations of the State and those of its political subdivisions. Mecklenburg County v. Insurance Co., 210 N.C. 171, 185 S.E. 654; Pullen v. Corporation Commission, 152 N.C. 548, 68 S.E. 155. The reason for this rule is not shown in the majority opinion in either of these decisions. It is stated in the dissenting opinion of Clark, C.J., in the Pullen case and lies in the circumstance that the exemption of the State\u2019s own obligation from taxation enables the State to obtain a lower interest rate on its indebtedness so that the effect is approximately the same as if the obligation were taxed. See also 51 Am. Jur., Taxation, \u00a7 567.\nThis exception to the limitation of Article V, \u00a7 5, of the Constitution, upon the power of the Legislature to exempt property from ad valorem taxation, has no application to the present case for the reason that these bonds expressly state that they are not obligations of the State or of any of its political subdivisions. Even the plaintiff Authority, itself, is not obligated to pay the principal of or the interest upon these bonds except by application of the specified revenues and other funds pledged for that purpose. Thus, the attempted exemption of these bonds from the ad valorem intangible property tax cannot be supported on the ground that it will result in a lowering of interest rates otherwise payable by the State or by one of its subdivisions.\nIn Webb v. Port Commission, 205 N.C. 663, 172 S.E. 377, the Port Commission of Morehead City was authorized by statute to issue bonds in order to provide funds with which to build terminals, wharves, piers, warehouses and other port facilities for general public and common carrier use. Clearly, this was a purpose for which the State, or its municipality, could have issued its own bonds pledging its general credit, which bonds could have been exempted from taxation under the decisions above cited. The statute authorizing the issuance of the bonds provided that they would be exempt from State, county and municipal taxation. The statute further provided that the bonds were payable solely from the income of the commission from wharfage fees and the like, although there was a provision for a tax upon property within the city for the purpose of supplying any deficiency of such funds if, but only if, such tax was approved by a vote of the people of the city. The statute authorized and contemplated the private sale of the entire bond issue to the Reconstruction Finance Corporation, an agency of the Federal Government. The commission contemplated marketing the bonds in that manner. The authority of the Port Commission to issue the bonds was attacked on the ground that the statute was a violation of Article VIII, \u00a7 1, of the Constitution of North Carolina, in that it was an attempt to create a corporation by a special act of the General Assembly. This was the basic attack though other questions were also raised, including the validity of the provision for tax exemption. Connor (George W.), J., in his opinion, stated:\n\u201cThe provision in the act by which the Port Commission was created that its property and the bonds that may be issued and sold as authorized by the act shall be exempt from taxation by the State, or any of its political subdivisions, is valid. The General Assembly has the power to so provide, for the reason that the property of the Port Commission will be held, and the bonds will be issued solely for public purposes. Whatever doubt there may be as to the validity of this provision, by reason of section S of Article V of the Constitution of this State, must be, under well settled principles of constitutional construction, resolved in favor of its validity. Certainly, if the bonds are sold to an agency of the United States Government, as contemplated by the act, the provision is valid so long as the bonds are held by such agency, or by any person, firm or corporation holding the same by purchase from such agency.\u201d (Emphasis added.)\nMr. Justice Connor cited no authority for this pronouncement. His opinion makes no reference whatever to Article V, \u00a7 5, of the Constitution. His opinion makes it clear that he regarded the bonds as exempt from taxation because they were to be issued to a Federal agency (The Reconstruction Finance Corporation). Obviously, bonds held by an agency of the United States would be exempt from State taxation. This, no doubt, explains the rather casual treatment of the tax exemption, considered without respect to the status of the holder of the bonds.\nAt the time the Port Commission case was decided, this was a five-judge Court. Stacy, C.J., and Brogden, J., dissented. Their opinion does not mention the matter of tax exemption. Adams, J., concurred in result on the ground that the statute did not violate Article VIII, \u00a7 1, of the Constitution, his concurring opinion making no reference to the validity of the provision for tax exemption. Clark-son, J., also concurred in a separate opinion, which contained no discussion of the tax exemption but stated that the applicability of Article' VIII, \u00a7 1, of the Constitution, was the \u201conly serious question\u201d and was the question which the Court, in its order setting the-case for argument, had directed counsel to argue.\nThus, the statement in the opinion of Connor, J., in the Port Commission case concerning the validity of the provision for tax exemption of revenue bonds issued by the Port Commission, cannot be deemed a clear-cut determination by this Court of the validity under Article V, \u00a7 5, of the Constitution, of a purported grant of tax exemption to revenue bonds, declaring that they are not obligations of the State or of any of its political subdivisions, which bonds are issued to and held by private investors for investment purposes only. With the utmost respect for the opinion of our distinguished predecessor upon this Court, I cannot regard his statement, unsupported by authority and not mentioning Article V, \u00a7 5, of the Constitution, as conclusive or persuasive, upon this question which is presented for the first time in the present case.\nI, therefore, conclude that Article V, \u00a7 5, of the Constitution of this State, renders invalid the legislative grant of an exemption of these bonds from the intangible property tax. This provision of the Constitution has no application to an exemption of the interest payable upon these bonds from income taxation. Article V, \u00a7 3, permits the General Assembly \u201cto classify property and other subjects for taxation,\u201d subject only to the limitations that the power shall be exercised on a statewide basis and \u201cin a just and equitable manner.\u201d This section expressly empowers the General Assembly to make provision for deductions from gross income in the computation of taxable income. In the absence of a constitutional limitation upon the power of the General Assembly to exempt the interest payable upon these bonds from income taxation, the power to exempt being an essential attribute of sovereignty, as declared in Sale v. Johnson, Commissioner of Revenue, sufra, this provision in the act authorizing the issuance of the bonds here in question is within the legislative authority.\nThe act provides in G.S. 116-203, \u201cThere is hereby created and constituted a political subdivision of the State to be known as the \u2018State Education Assistance Authority.'\" \u201d However, in G.S. 116-209.1 it provides, \u201cAny of the foregoing provisions of this act which shall be in conflict with the provisions hereinbelow set forth shall be repealed to the extent of such conflict.\u201d In G.S. 116-209.12 it provides, \u201cBonds issued under the provisions of this act shall not be deemed to constitute a debt, liability or obligation of the State or of any political subdivision thereof or a pledge of the faith and credit of the State or of any such political subdivision, but shall be payable solely from the revenues and other funds provided therefor.\u201d While somewhat confusing, the net effect of these three sections of the act is, at least, that the Authority is not to be considered a political subdivision of the State for the purpose of determining the effect and validity of these bonds.\nThe plaintiff contracted to deliver to the defendant bonds totally exempt from State, county and municipal taxation. The bonds the plaintiff now proposes to deliver are, in my opinion, subject to the intangible property tax now levied by the State and to such other taxes as may lawfully be levied upon intangible personal property. The variance is substantial. Since the defendant is not being tendered the bonds it contracted to purchase, it should not be compelled to receive and pay for the bonds which the plaintiff now offers to it. It is my view that the superior court erred in adjudging that the bonds, themselves, are exempt from taxation and that the defendant must accept and pay for these bonds.", "type": "dissent", "author": "LAKE, J.," } ], "attorneys": [ "Attorney General Morgan, Deputy Attorney General McGalliard and Staff Attorney Blackburn for plaintiff appellee.", "Bailey, Dixon, Wooten & McDonald, by Kenneth Wooten, Jr., and Sowers, Avery & Crosswhite, by Isaac T. Avery, Jr.; for defendant appellant." ], "corrections": "", "head_matter": "STATE EDUCATION ASSISTANCE AUTHORITY v. BANK OF STATESVILLE\nNo. 44\n(Filed 12 June 1970)\n1. Colleges and Universities; Taxation \u00a7 7\u2014 loans to college students \u2014 revenue bonds \u2014 public purpose\nThe issuance of revenue bonds by the State Education Assistance Authority pursuant to Chapter 1177, Session Laws of 1967, and the use of the proceeds therefrom by the Authority for the sole purpose of making loans to meritorious college and vocational students of slender means, thereby minimizing the number of qualified persons whose education or training is interrupted, held, for a public purpose.\n2. Schools \u00a7 1; Taxation \u00a7 7\u2014 education of residents \u2014 public purpose\nThe education of residents of this State is a recognized object of State government; hence, provision therefor is for a public purpose. N. C. Constitution, Art. IX, \u00a7\u00a7 1, 2, 3, 6, 7.\nS. Colleges and Universities\u2014 higher education \u2014 duty of General Assembly\nSubject to constitutional limitations, methods to facilitate and achieve the public purpose of providing for the education or training of residents of this State in institutions of higher education or post-secondary schools are for determination by the General Assembly.\n4. Colleges and Universities; Taxation \u00a7 21\u2014 college loan revenue bonds \u2014 exemption from State taxation \u2014 public purpose\nThe provisions of Chapter 1177, Session Laws of 1967, that exempt student loan revenue bonds from taxation by tbe State or by any of its subdivisions do not contravene N. C. Constitution, Art. V, \u00a7 5, which provides that property belonging to the State or to municipal corporations shall be exempt from taxation, the enumerated properties in Art. V, \u00a7 5, not including bonds issued by the State or any State agency, since the tax-exempt provisions make possible a more favorable sale of the revenue bonds and thereby contribute substantially to the accomplishment of the public purpose for which they are issued.\n5. Colleges and Universities; Constitutional Law \u00a7 7\u2014 student loan program \u2014 delegation of legislative authority \u2014 sufficiency of loan standards\nChapter 1177, Session Laws of 1967 (G.S. 116-209.1 et seq.), which authorizes the State Education Assistance Authority to issue revenue bonds and to use the proceeds therefrom for the making of loans to \u201cresidents of this State to enable them to obtain an education in an eligible institution,\u201d provides sufficient legislative standards whereby the Authority can determine to which students the loans should be made, where it is implicit in Chapter 1177 that all loans made from the bond proceeds shall be made in compliance with the standards of federal legislation which supplement the loan program of the Authority. N. C. Constitution Art. I, \u00a7 8 and Art. II, \u00a7 1.\n6. Colleges and Universities\u2014 student loan program \u2014 determination of recipients\nThe only student loans that the Education Assistance Authority is authorized to make or purchase are student loans which qualify under the federal statutes for federal assistance in respect of interest subsidy and guaranty.\n7. Statutes \u00a7 4\u2014 construction as to constitutionality\nA statute will not be construed so as to raise a serious question as to its constitutionality if a different construction which will avoid the question of constitutionality is reasonable.\nLake, J., dissenting.\nAppeal by defendant from Bailey, J., at February 9, 1970 Civil Session of Waice Superior Court, certified, pursuant to G.S. 7A-31, for review by the Supreme Court before determination by the Court of Appeals.\nThis action is for a declaratory judgment, G.S. 1-253 et seq., determinative of the validity of $1,500,000.00 of Revenue Bonds, Series B, consisting of 1,500 bonds of $1,000.00 each, issued by the State Education Assistance Authority (Authority). North Carolina banks offered to purchase the entire issue of $1,500,000.00 at par and accrued interest. The offers included that of the Bank of Statesville for the purchase of three $1,000.00 bonds. The Bank of Statesville is ready, able and willing to accept and pay for these bonds if and when they are.adjudged valid; otherwise, it refuses to do so.\nThe Authority was created and constituted \u201ca political subdivision of the State\u201d by Chapter 1180, Session Laws of 1965, referred to hereafter as the 1965 Act. (The provisions of the 1965 Act were designated G.S. 116-201 through G.S. 116-209). The 1965 Act provided: \u201cThe exercise by the Authority of the powers conferred by this Act shall be deemed and held to be the performance of an essential governmental function.\u201d G.S. 116-203.\nChapter 1177, Session Laws of 1967, referred to hereafter as Chapter 1177, amended the 1965 Act, \u201cbeing G.S. 116-201 to 116-209 of the 1965 Cumulative Supplement,\u201d by adding at the end thereof sections designated G.S. 116-209.1 through G.S. 116-209.15. Chapter 1177 authorized the Authority to issue student loan revenue bonds in an aggregate principal amount outstanding at any time not exceeding $12,500,000.00.\nThe case was submitted to Judge Bailey on an agreed statement of facts which, in addition to matters set forth above, contained the provisions quoted (with immaterial deletions) below.\n\u201c3. At the present time, a large number of North Carolina residents are, as students, pursuing educational courses beyond the public school level; that the educational facilities of the State and of private institutions in this State and throughout the country have been greatly enlarged and expanded to meet the needs for the education of a greater number of students seeking education beyond the level of the public school system; that to meet the cost of their education, many students are in need of money and are borrowing funds to pay for their education, generally upon terms which provide for repayment after the completion of their education; that sufficient loan funds are not available through the normal channels of commercial lending and financing to meet this need of North Carolina residents; nor are student loans attractive to commercial lenders because the students seeking loans usually are persons who are not fully in income producing situations, and furthermore, the commencement of repayment of principal is deferred; that without moneys which can be made available to needy students through the State\u2019s student loan program administered by the Authority, and financed through the issuance by the Authority of student loan revenue bonds, many of these North Carolina Students will not be able to complete their formal education, or pursue educational courses beyond the public school level.\n\u201c4. . . .\n\u201c5. That acting under and by virtue of the provisions of Chapter 1177 . . . the Authority has acquired and is purchasing student loan obligations made pursuant to the Authority\u2019s commitments to purchase said obligations, said 'student loans\u2019 being those which have enabled North Carolina students to continue their education in 'eligible institutions\u2019 as these terms are defined in G.S. 116-209.2.\n\u201c6. Acting pursuant to said Chapter 1177, the Authority did on August 29, 1968, adopt a bond resolution (Exhibit A) providing for the issuance and sale of a series of bonds designated as Series \u2018A\u2019 Bonds in the total sum of $3,000,000.00, . . . that the Authority sold the Series 'A\u2019 Bonds to investors through its Fiscal Agent, Wa-chovia Bank & Trust Company, N.A., pursuant to a contract (Exhibit B) between the Authority, Wachovia Bank & Trust Company, N.C., and College Foundation, Inc., dated August 29, 1968, . . . under which Wachovia Bank & Trust Company, N.A., as Fiscal Agent, (hereinafter referred to as \u2018Fiscal Agent\u2019) undertook the duties of consummating the sale of the bonds to bidders whose proposals had been accepted by the Authority, disbursing of bond proceeds to purchase student loans, and administering of bond revenues for the Authority; and under which same contract, the Authority agreed to purchase and did purchase certain student loans of North Carolina residents from College Foundation, Inc., said loans having been made to enable North Carolina residents to pursue their education in \u2018eligible institutions\u2019; and that College Foundation, Inc., agreed to sell and did sell certain student loan obligations to the Authority and agreed to administer the collection of these student loans for the Authority, and to remit the proceeds to the Authority\u2019s Fiscal Agent, Wachovia Bank & Trust Company, N.A., as is more fully set out in Exhibit B; that the $3,000,000.00 realized from the sale of its Series \u2018A\u2019 Bonds was fully expended by the Authority in accordance with the bond resolution during the school year 1968-1969.\n\u201c7. Th,e Authority\u2019s Bond Resolution of August 29, 1968 (Exhibit A) in addition to providing for the initial issue, provided for additional series of bonds to be issued to an aggregate principal amount outstanding at any time not exceeding $12,500,000.00.\n\u201c8. For the school year 1969-1970, the Authority determined that additional loan funds, which would not otherwise be available were needed by North Carolina students, during this school year in at least the amount of $1,500,000.00; and upon making this determination and finding, the Authority then proceeded with the issuance of additional student loan revenue bonds.\n\u201c9. On the 21st day of August, 1969, at a meeting duly called and held in its offices in Raleigh, North Carolina, the Authority adopted a resolution (Exhibit C) . . . providing for the issuance\nunder authority of Chapter 1177 . . . and of its bond resolution of August 29, 1968 (Exhibit A), of a series of bonds, designated as its Series \u2018B\u2019 Revenue Bonds, in the total amount of $1,500,000.00, in units of One Thousand Dollars, to bear interest at the rate of five and one-half (5%%) percent; and it further, by resolution (Exhibit D), authorized execution of and there was duly executed a supplemental tripartite agreement (Exhibit E) with its Fiscal Agent, Wachovia Bank & Trust Company, N.A., and College Foundation, Inc., for sale and expenditure and administration of the bond proceeds ....\n\u201c10.\n\u201c11.\n\u201c12. The funds which were realized by the Authority from the sale of its Series \u2018B\u2019 Bonds have been used or are committed for use prior to the close of the academic year 1969-70 in purchasing loans made to 2,140 students, with the average loan being in the amount of approximately $700.00; that in addition to the loans which were made with these funds, 1,039 applications were rejected by College Foundation, Inc., of which number one-half would have received favorable action if sufficient additional loan funds had been available; that in addition to those loans made or loan applications rejected by College Foundation, Inc., a survey of the Authority, as to loan needs of North Carolina residents for the academic year 1969-1970, indicates that 2,069 students in \u2018eligible institutions,\u2019 as that term is defined in G.S. 116-209.2, expressed to these institutions a need for loans with which to continue their education.\n\u201c13.\n\u201c14.\n\u201c15. College Foundation, Inc., is a North Carolin\u00e1 nonprofit public educational service corporation organized and operating for the purpose of making loans to North Carolina students for education purposes and is an \u2018eligible lender\u2019 under the insured student loan program administered by State Education Assistance Authority, and as such has made over ninety (90%) percent of the loans which have qualified for this program; and the members of the said corporation by its certificate of incorporation are: The Governor of the State of North Carolina; the Chairman of the North Carolina Board of Higher Education; the Treasurer of the State of North Carolina; the Chairman of the Board of Conservation and Development of the State of North Carolina; the Chairman of the Board of Directors of the Business Development Corporation of North Carolina, and the governing trustees of the corporation by its certificate of incorporation are appointed by the Governor of North Carolina.\u201d\nIn their agreed statement, the parties listed eleven legal questions on which they sought a judicial declaration or adjudication. Six relate to whether Chapter 1177 is violative of designated constitutional provisions. Five relate to whether \u201cthe operating procedures followed by the Authority\u201d are violative of \u201cthe enabling legislation,\u201d i.e., Chapter 1177.\nThe court answered each of the legal questions in favor of plaintiff. The judgment concludes as follows:\n\u201cIT IS, THEREFORE, upon motion of attorneys for the plaintiff, State Education Assistance Authority, ORDERED, ADJUDGED AND DECREED that the three Series \u2018B\u2019 Student Loan Revenue Bonds, being Bonds Nos. B-476, B-477 and B-478, hereinbefore referred to, have been duly and legally authorized and duly and legally sold to the Bank of Statesville, and that the said revenue bonds, when delivered in accordance with the agreement of the Authority and the Bank of Statesville, will be valid and binding obligations as revenue bonds of the Authority, in accordance with the tenor thereof, and that such bonds shall be exempt from all taxation within this State as provided by G.S. 116-209.13.\n\u201cIT IS FURTHER ORDERED, ADJUDGED AND DECREED that, upon delivery of the said bonds in accordance with the said agreement, the defendant, Bank of Statesville, shall accept and pay for the same in accordance with its agreement therefor which was made by said bank.\u201d\nDefendant excepted and appealed. On appeal, defendant assigns as error the \u201csigning and entering of the judgment.\u201d\nAttorney General Morgan, Deputy Attorney General McGalliard and Staff Attorney Blackburn for plaintiff appellee.\nBailey, Dixon, Wooten & McDonald, by Kenneth Wooten, Jr., and Sowers, Avery & Crosswhite, by Isaac T. Avery, Jr.; for defendant appellant." }, "file_name": "0576-03", "first_page_order": 602, "last_page_order": 624 }