THE STATE OF ARIZONA, ex rel. Joe Conway, Attorney General, Appellant,
PAUL H. VERSLUIS and ELLEN H. VERSLUIS, His Wife, Appellees
APPEAL from a judgment of the Superior Court of the County of Maricopa. Howard C. Speakman, Judge. Judgment reversed.
Mr. Joe Conway, Attorney General, and Mr. Albert M. Garcia, Assistant Attorney General, for Appellant.
Messrs. Woolf & Shute, for Appellees.
[58 Ariz. 370] LOCKWOOD, C.J.
This is an action by the State of Arizona against Paul H. Versluis and Ellen H. Versluis, his wife, called defendants, and various other parties, asking for a personal judgment against one Lucy Wedgworth on a promissory note executed by her and her deceased husband John W. Wedgworth in favor of the state, and for the foreclosure of a mortgage given by them on certain farm lands for the purpose of securing payment of the note above referred to. All the parties, except the Versluises, defaulted. The latter appeared and set up various defenses to the action, which we shall consider at the proper time and place. Judgment was rendered in [58 Ariz. 371] favor of defendants, and from such judgment the state has appealed.
The facts may be stated as follows: On January 31, 1919, John W. and Lucy Wedgworth borrowed $1,500 of certain of the permanent funds of the state created by section 28 of the Enabling Act and the Constitution of Arizona, and to secure said loan gave to the state the note and mortgage aforesaid. The loan was approved by the state treasurer, the secretary of state and the governor. Interest was paid on said note up to July 1, 1932, and $100 was paid on the principal. In the latter part of 1936, defendants learned from the state treasurer that the said note and mortgage was long since due and unpaid, and believing that the state had abandoned its interest in the mortgaged property, purchased from Lucy Wedgworth and the surviving children of
herself and her deceased husband all their interest in said premises. Thereafter defendants went into possession of the land and improved the same by the expenditure of large sums of money thereon. In 1938 the county treasurer offered the land in question for sale for the delinquent taxes due thereon for the years 1933 to 1937, and defendants purchased it at such sale, the usual treasurer's certificate of purchase being issued to them. Thereafter this suit was brought.
Defendants' first contention is that the note and mortgage in question were void because sections 108 to 113 of chapter 5 of the acts of the Second Special Session of the Second Legislature are unconstitutional, and the mortgage sought to be foreclosed herein is, therefore, void. This requires some examination of the law applicable to the handling of the permanent funds of the state.
In 1910 Congress passed a law providing for the admission of Arizona to the Union, commonly referred [58 Ariz. 372] to as the Enabling Act. Amongthe provisions thereof was one granting to the new state a large amount of the public lands therein, owned by the United States, the amounts and purposes of the grant being set forth in sections 24 and 25 of the Act. Some of these purposes implied the eventual disposal of the lands and the expenditure of the capital proceeds; others clearly stated that the proceeds were to be held as a permanent fund and the income only used. It was further provided by section 28 of the Act as follows:
"A separate fund shall be established for each of the several objects for which the said grants are hereby made or confirmed, and whenever any moneys shall be in any manner derived from any of said land the same shall be deposited by the state treasurer in the fund corresponding to the grant under which the particular land producing such moneys was by this act conveyed or confirmed. No money shall ever be taken from one fund for deposit in any other, or for any object other than that for which the land producing the same was granted or confirmed. The state treasurer shall keep all such moneys invested in safe, interest-bearing securities, which securities shall be approved by the governor and secretary of state of said proposed state, and shall at all times be under a good and sufficient bond or bonds conditioned for the faithful performance of his duties in regard thereto, as defined by this act and the laws of the state not in conflict herewith."
The Constitution of Arizona, following the Enabling Act, provided in article 10, sections 1, 2 and 7, that these lands and the proceeds thereof were accepted and held in trust to be disposed of only as provided in the Enabling Act and the Constitution for the purposes set forth therein, and copied verbatim that portion of the Enabling Act above quoted.
At first there was no special legislation to carry into effect these provisions of the Constitution, if they [58 Ariz. 373] were not self-executing, but in 1915 the governor called a special session of the Legislature to consider various matters, among these being the following:
"1. To define the powers and duties of the Land Commission, with respect to management, control, disposition and administration of the state and school lands, and to make suitable appropriations for the maintenance of such commission and the exercise of the powers and the performance of the ...