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pressing difficulty was to resolve constitutional doubts over the validity of the program.
The act permitted loans to religiously affiliated hospitals, and the bonds could not be
sold until the underlying First Amendment question was answered: Could public funds
be used for such a purpose?
To resolve that issue a test case was arranged. The commission recommended that
the board approve loans to three hospitals with varying degrees of religious affilia-
tion—Greater Baltimore Medical Center (GBMC), which had a historical but very
loose tie with the Presbyterian Church; Church Home and Hospital in Baltimore,
which had a somewhat stronger and more direct affiliation with the Episcopal Church;
and St. Joseph's Hospital in Baltimore, owned and operated by an order of Catholic
nuns. The board approved nominal loans of $25,000 to each hospital and so set the
stage for the challenge.33
As it turned out, the case involved more than just the church-state issue, which
the Court of Appeals had little difficulty in resolving in favor of the act.34 Also at issue
was the scope of the delegation of final approval authority to the board and an un-
anticipated conflict of interest question arising from the fact that the state treasurer,
John A. Luetkemeyer, who voted for the three loans, happened to be on the board of
trustees of one of the hospitals. These matters also were decided in the board's favor,
but in reaching that result the court, for the first time in many years, was forced to
take a good look at the kind of agency the board had become.
The court had some difficulty with what appeared to be the unbridled discretion
vested in the board. Although there were fairly definite statutory criteria governing
the commission's decision-making process, neither those criteria nor the commission's
recommendations themselves were binding on the board. Indeed there were no stan-
dards set forth in the act governing the board's approval or disapproval of an appli-
cation.
The court observed that the role of the board in choosing among applications and
fixing the amounts to be awarded was characteristic of the functions of an adminis-
trative agency and that the fact that it was comprised of three important elected
officials did not exclude the board "from the operation of the legal principles applicable
to administrative agencies." The general delegation of power "in regard to the creation
of State debt," said the court, might not suffice if it were construed as authorizing a
delegation to the board "without the imposition of any standards to canalize its dis-
cretion." In the end, however, after what looks like some fancy judicial footwork, the
court found an implied directive that the board "should be guided by the same broad
criteria for the public welfare" as guided the commission. Thus it said:
That, in the delegation of authority to the board, there is no express statutory provision
that its decisions cannot be arbitrary or unreasonable is immaterial. Such a limitation is
implied as a necessary condition of the validity of the delegation. We find that there are
implied limitations upon the exercise of the board's authority under the Act that its de-
cisions should be made in consideration of the adequacy of hospital facilities throughout
the State, that the recommendations of the Commission, while not binding upon the board,
are to be taken as a guide to it in its determinations, and that its decisions are not to be
arbitrary or capricious but to be made in the public interest.35
