On March 27, 1964 an earthquake and seismic waves caused extensive property loss and damage to the southcentral portion of the state.
On August 19, 1964 Congress amended the Alaska Omnibus Act
On September 7, 1964 a special session of the state legislature enacted legislation to implement Section 57 of the Alaska Omnibus Act. Chapters 1, 2 and 3 of that special session are involved in this case.
Section 1 of chapter 1 provides that
Section 2 contains an extensive declaration of the purpose of the statute. Section 3 authorizes the State Commissioner of Commerce to make grants to mortgagors for the purpose of retiring or adjusting mortgage obligations or other real property liens secured by one to four family dwellings that were destroyed or damaged in the earthquake and seismic waves of March 27, 1964, and directs the Commissioner of Commerce to prepare a plan to be submitted by the Governor to the President of the United States for the implementation of the purpose of Section 57 of the Alaska Omnibus Act.
Section 4 of chapter 1 provides that grants to mortgagors shall be approved only if the physical damage to the dwellings securing the home mortgage obligation or other real property lien amounts to 60% or more of the pre-earthquake value of the secured property. This section also provides that no grant on a single property shall exceed $30,000, and that the mortgagor shall be required to absorb the physical damage loss to the entire extent of his equity interest in the property and also shall be required to agree to pay up to $1,000 of the outstanding mortgage balance.
Chapter 2 of the 1964 special session provides for the expenditure of $5,500,000 to match grants of federal funds under Section 57 of the Alaska Omnibus Act, with such moneys to be obtained either from the proceeds of the sale of general obligation
Chapter 3 of the special session appropriates to the State Department of Commerce from the federal program receipts to be received by the state pursuant to section 57 of the Alaska Omnibus Act the sum of $5,500,000 for the purpose of adjusting or retiring the home mortgage obligations or other real property liens referred to in chapter 1.
Following the enactment of the foregoing statutes, and pursuant to section 3 of chapter 1, the Governor submitted to the President of the United States an Alaska Mortgage Adjustment Plan for the implementation of the purpose of section 57 of the Alaska Omnibus Act. This plan was approved on behalf of the President by the Housing and Home Finance Administrator on February 18, 1965. The purpose of the plan was to establish administrative guidelines for the program of grants for the retirement or adjustment of outstanding home mortgage obligations or other real property liens secured by one to four family homes destroyed or severely damaged by the March 27, 1964 earthquake and seismic waves.
For purposes of convenience, chapters 1, 2 and 3 of the 1964 special session of the Alaska legislature, and the Alaska Mortgage Adjustment Plan, will be referred to as the Alaska Mortgage Adjustment Program, or more simply, as the Program. Appellant, a taxpayer, brought this action for a declaratory judgment that the Program is unconstitutional and void, and to enjoin the appellees from carrying it out. The trial court entered judgment upholding the constitutionality of the Program. On this appeal appellant attacks the constitutionality and validity of the Program on various grounds, each of which will be considered separately.
The Alaska Constitution, Article IX, Section 8 provides:
It was stipulated that the consummation of the Program necessitated the creation of a state debt without ratification by the voters. Appellant contends that such ratification was required in order to validate the Program because it does not meet a natural disaster as provided in the constitution. It is appellant's position that the contracting of a state debt would be for the purpose of meeting a natural disaster in the constitutional sense only if it entailed necessary and immediate expenditures for emergency measures such as temporary shelter, medical services, soup kitchens, transportation for evacuees, bulldozing rubble, the tearing down of damaged buildings, and the like. Appellant urges that the justification for waiving the requirement of voter ratification would be the absence of an opportunity to hold an election because of the immediate need to provide emergency measures in the wake of a natural disaster, and that where there is involved as there is here an economic measure such as mortgage retirement or readjustment which does not involve immediate action, voter ratification of the state incurred debt was
The concept of "meeting natural disasters", within the meaning of the constitution, is one that is not capable of precise definition or description. Whether or not a particular debt contracted for by the state meets a natural disaster must be decided as each case arises and in the light of the particular facts and circumstances of each case.
A legislative program that involves contracting a state debt meets a natural disaster when it reasonably tends to cope with the effects of the disaster. That is what happened here. The destruction caused by the earthquake and seismic waves was a natural disaster. One of the direct effects of the disaster was the crushing financial burden placed on homeowners who lost their homes that were burdened by substantial mortgages. They were obliged to pay the mortgage debt, and at the same time were obliged to purchase or rent other homes to live in. The Program reasonably tended to cope with this effect of the disaster by making it possible for home owners to be relieved of the mortgage debt and resulting economic hardship in respect to homes that were damaged extensively and were no longer habitable.
The legislature recognized need for relief of this type when it stated in the declaration of purpose in chapter 1 of the 1964 special session that
This declaration by the legislature cannot be regarded as mere subterfuge or without adequate basis in fact. To give relief to those who have suffered economic hardship as the result of a natural disaster is to meet such disaster within the meaning of the constitution.
Under the Program public moneys were used to adjust or retire mortgage obligations or other real property liens secured by one to four family dwellings which were damaged by the earthquake or seismic waves to the extent of 60% or more of their pre-earthquake value. Following the earthquake, and at the time the Program was under consideration, it was estimated roughly that the number of qualifying dwellings represented about $11 million dollars in mortgage obligations. However, after the Program became operative, and at the time of the trial in the court below, it became apparent that the number of dwellings qualifying for relief under the Program represented only about $1.5 million dollars in mortgage obligations out of total mortgage investments in Alaska of over $100 million dollars.
Appellant contends that since the benefits of the Program extend only to a relatively small and restricted class of mortgagors and mortgagees, private purpose alone will be satisfied and no public purpose will be achieved, and therefore public funds are being expended for non-public purposes in violation of the Alaska Constitution, Article IX, Section 6 which provides:
The basic objective of government is to protect and promote the health, safety and general welfare of the people. When a condition of affairs appears in the state
The destruction caused by the earthquake and seismic waves threatened to impair the general welfare of a segment of the people of this state. One whose mortgaged home was severely damaged or destroyed was faced with an economic catastrophe. His home was unlivable, he had no insurance to compensate for the loss, he still owed the mortgage debt, and he was obliged to incur new and additional indebtedness in order to find another place to live.
The Program was formulated to relieve to a limited extent the effects of the crushing financial burden thus placed upon homeowners. Under the Program one would absorb the physical damage to his home to the full amount of his equity interest in the property and pay $1,000 of the outstanding mortgage balance. The rest of the mortgage would be paid for from appropriated funds of the United States and the state. This would free the homeowner of the burden of a mortgage debt for a non-existent or non-livable home and enable him to incur a new debt to purchase a new home.
We cannot say that the means chosen by the legislature to meet the effects of a natural disaster did not effect a public purpose. Relief and support of the poor has long been recognized as an obligation of government and a public purpose.
The legislature chooses the means to effect a public purpose in the exercise of a broad discretion. The courts will not interfere with the exercise of that discretion unless it is clearly shown that the legislative determination that a public purpose will be served by the means chosen is arbitrary and without any reasonable basis in fact.
There is no such showing here. The paramount purpose of the Program is the relief of those saddled with economic hardship. Any private advantage, such as to those holding mortgages on the damaged or destroyed homes, is incidental and subordinate. The fact that some private purpose may be derived from the Program will not alone invalidate it.
We hold that the Program effects a public purpose and is not in violation of article IX, section 6 of the state constitution.
The Program is limited in its application to those persons owning one to four family dwellings, encumbered by a mortgage or other real property lien incurred for the purpose of financing or refinancing the purchase
Before there could be a finding of a denial of equal protection, it would have to appear that the difference in application of the Program between those homeowners covered by it and those excluded from its coverage was the result of a deliberate and intentional plan to discriminate against the latter, or was based upon some unjustifiable or arbitrary classification.
There is a rational basis for the distinction made between those covered by the Program and those not covered. As to the 60% damage limitation, the evidence showed that such figure was arrived at to cover losses that could not be adequately covered under the Small Business Administration Disaster Loan Program, and was based on an estimate as to the amount of indebtedness a homeowner could reasonably be expected to carry if he refinanced his existing mortgage indebtedness and borrowed money for the rehabilitation of his dwelling. In addition, the evidence showed that few, if any, mortgagors just barely missed qualifying under the 60% rule, since the damage to dwellings was either fairly minor or fairly major.
The limitation of the Program's benefits to owners of one to four family dwellings also has a reasonable basis. The evidence produced in the trial court showed that such persons constituted a distinct class of property owners, that is, those who build a dwelling for their own use and for the purpose of renting from one to three units, but who are not primarily engaged in the business of renting real property. Those who are primarily engaged in that business would be able to handle their earthquake losses under the Small Business Administration and tax adjustment programs. Similarly, the basis for not including business or commercial properties in the Program could have been the differences in income tax treatment between businesses and homeowners which made the Small Business Administration loan program attractive to businesses but unattractive to homeowners.
Finally, the Program is not constitutionally objectionable because it is limited to mortgage indebtedness incurred to finance or refinance the purchase or improvement of dwellings, and does not include a mortgage indebtedness incurred for some other purpose or an indebtedness not secured by a mortgage, such as a personal note. Such a choice of those who may benefit from the Program is not arbitrary. It is a matter of common knowledge that the usual and traditional method of financing the purchase or improvement of a home is by way of a mortgage or other lien device such as a deed of trust, and that in the vast majority
In arguing that there is a denial of equal protection, appellant's basic contention is that the Program has not been extended as far as it might have been. Such an argument concedes that the Program is beneficial as far as it goes — the complaint being that it does not go far enough. But the demands of equal protection do not require that there be perfect equality and uniformity, or that the entire field of governmental action be covered by one legislative enactment.
We find nothing in the Program which contravenes the equal protection requirements of the federal and state constitutions.
Payments to Lienors.
The Alaska Mortgage Adjustment Plan provides that payments of mortgage debts under the Program shall be made directly to the lienors (mortgagees). Appellant claims that this provision is unlawful since chapter 1 provides in section 4 that the mortgagors, rather than the mortgagees, may apply for relief under the act.
We disagree with appellant. The provision in the Program for payment to lienors is merely a method of administering the Program, and probably the best method of assuring that appropriated funds will be used for the express purpose of reducing mortgage indebtedness. The Program was never intended as a grant of money to homeowners to be used as they wished, but was intended solely to reduce mortgage indebtedness. Furthermore, section 4 of chapter 1 provides that the Commissioner of Commerce "shall * * * prevent unjustified payments or gains to mortgagors or mortgagees." Payments of the amount of the mortgage indebtedness to the mortgagees, rather than to the mortgagors, helps to accomplish that purpose.
Chapter 1 provides for the payment of home mortgage obligations or "other real property liens" secured by one to four family dwellings. The Mortgage Adjustment Plan prepared under the authority of chapter 1 provides that the following obligations are eligible for retirement or adjustment under the Program:
Appellant contends that the inclusion of special assessments and the exclusion of real property taxes in the Mortgage Adjustment Plan is improper.
We disagree with appellant. A home mortgage obligation is generally incurred for the purpose of financing the purchase or improvement of one's home. The term "home mortgage obligation or
Delegation of Legislative Power.
Section 3 of chapter 1 provides that the Commissioner of Commerce shall:
Appellant contends that such a provision in the statute unconstitutionally delegated legislative power to the Commissioner of Commerce, the Governor and the President, for the reason that the law did not become complete until those persons had acted.
There was no unconstitutional delegation of legislative power. The Commissioner of Commerce was required to prepare a plan which would effectuate the purposes of Section 57 of the 1964 Amendments to the Alaska Omnibus Act. The purposes and standards of Section 57 are explicit and detailed. The legislature has made them binding upon the Commissioner. Such a limited delegation of legislative power, where adequate standards are provided, is permissible.
Deeds of Trust.
Appellant acknowledges that deeds of trust are "home mortgage obligations or other real property liens", eligible for retirement or adjustment under the Program. Appellant argues, however, that where a deed of trust is involved no deficiency may be enforced against the debtor, and therefore a grant under the Program would pay a debt that the debtor is not obligated to pay, would amount to a gift of public funds to certain creditors, and would constitute an expenditure of public funds for a non-public purpose.
Appellant's argument is untenable. AS 34.20.100,
The Mortgage Adjustment Plan provides that:
Appellant contends that the creation of the Alaska Mortgage Adjustment Agency is a change in the organization of the executive branch of government requiring the force of law within the meaning of the Alaska Constitution, Article III, Section 23,
Appellant's position is untenable. The Commissioner of Commerce is authorized by chapter 1 to prepare a plan to implement the purpose of section 57 of the Alaska Omnibus Act, to enact rules and regulations and do all other things necessary to effectuate the purpose of chapter 1, and to hire, define the duties and fix the compensation of personnel necessary to effectuate the purpose of chapter 1.
One Subject Rule.
The Alaska Constitution, article II, section 13 provides:
The title of chapter 1 of the 1964 special session reads:
Appellant contends that the foregoing constitutional requirement has been violated for two reasons: (1) the title of chapter 1 is broader than the act itself in a way which is misleading and deceptive because the title indicates that all homeowners are covered, whereas in fact only a limited class are covered by the act, and (2) section 5 of chapter 1 imposes criminal sanctions
The title of chapter 1 is not deceptive or misleading. It does not state, nor does it infer, that all homeowners are covered by the act. The legislature was not required to enumerate in the title the particular kinds or class of homeowners that were eligible for relief.
Nor does chapter 1 cover more than one subject. The purpose of the constitutional requirement that every bill be confined to one subject, like a similar provision in Alaska's Organic Act when it was a Territory,
The provision for criminal sanctions in section 5 of chapter 1 does not amount to a separate subject of legislation unrelated to the subject expressed in the title of the act. Section 5 is fairly incidental to the general subject expressed in the title of grants to homeowners, because the effect of that section is to assure good faith compliance with the act. It was proper to include section 5 without special mention in the title of chapter 1.
The superior court entered a judgment declaring that the Program was legal, constitutional and valid in every respect, and ordering that appellant's complaint be dismissed insofar as it contained a prayer for injunctive relief. That judgment is affirmed.
Alaska Const. art. I, § 1 provides in pertinent part: