City of Walnut Creek v. Silveira

• Decision Date: 01 February 1957
• Citation: 47 Cal.2d 804,306 P.2d 453
• Court: California Supreme Court
• Parties: CITY OF WALNUT CREEK, a Municipal Corporation, Petitioner, v. Edward J. SILVEIRA, City Treasurer of the City of Walnut Creek, Respondent. S. F. 19671.

Page 453

306 P.2d 453

47 Cal.2d 804

CITY OF WALNUT CREEK, a Municipal Corporation, Petitioner, v. Edward J. SILVEIRA, City Treasurer of the City of Walnut Creek, Respondent.

S. F. 19671.

Supreme Court of California, In Bank.

Feb. 1, 1957.

John A. Nejedly, City Atty., Walnut Creek, Kirkbride, Wilson, Harzfeld & Wallace, Charles J. Williams, San Mateo, Clark A. Barrett, San Francisco, Kenneth I. Jones, Jr., Arthur J. Harzfeld and Ernest A. Wilson, San Mateo, for petitioner.

Richard M. Ramsey, Richard B. Maxwell and F. L. Manker, Santa Rosa, for respondent.

CARTER, Justice.

By this proceeding in mandamus the petitioner, city of Walnut Creek, seeks to compel the city treasurer to issue certain bonds. The bonds were authorized to be issued pursuant to the Limited Obligation Bond Law of 1955, Stats.1955, ch. 1847, Government Code, §§ 43648-43702. Mandamus is an appropriate remedy to compel respondent treasurer to sign the bonds if the proposed issue meets the requirements of the law since the acts demanded are ministerial duties. City of Oxnard v. Dale, 45 Cal.2d 729, 731, 290 P.2d 859.

The act here involved is applicable only to cities with a population of 4,000 or less, which population is not more than one-seventh of the total population of the city and the unincorporated urban area within a radius of three miles of its limits. Section 6 of Article XI of the state Constitution provides that 'Corporations for municipal purposes shall not be created by special laws; but the Legislature shall, by general laws, provide for the incorporation, organization, and classification, in proportion to population, of cities and towns, which laws may be altered, amended, or repealed * * *.' ¹ The primary question presented here is whether the act here involved is a valid general law within the constitutional meaning or invalid special legislation.

The city of Walnut Creek is a 'general law city', Gov.Code, § 34102. The 1949 merged version of the Classification Act and Municipal Corporation Bill was repealed in 1955, Stats.1955, ch. 624, p. 1120, and the Legislature established 'chartered cities' and 'general law cities.' (See, Gov.Code, § 34100 et seq.) Pursuant to the Limited Obligation Bond Law, the city of Walnust Creek, after notice duly given, and a hearing, determined that the population formula was met and adopted a resolution in accordance with its findings, Gov.Code, §§ 43648, ² 43649. Thereafter, at a regular meeting, the city council, by a two-thirds vote, passed and adopted a resolution that the public interest and necessity demanded the acquisition construction and completion of certain municipal improvements and provided for a municipal bond election. At a subsequent meeting an ordinance was adopted which called for a special election in the city of Walnut Creek to submit to the electors of the city a proposition for incurring a bonded indebtedness to cover the cost of said improvements. Notice was duly given. At a subsequent meeting, one section of the ordinance was amended and notice duly given thereof. The election was duly and regularly called and held in the manner provided by law; two-thirds of the votes cast at the election were in favor of, and authorized the issuance of the limited obligation bonds. ³

The Limited Obligation Bond Law of 1955 defines limited obligation bonds as bonds which are to be paid solely from sales and use taxes imposed and to be imposed and collected by the city, § 43650. The law also provides that the bonds shall state that they are to be paid only from such revenues, §§ 43651, 43654; that the term of the bonds shall not exceed 31 years and that 'The outstanding bonds shall not at any one time exceed an amount for which the average installments of principal and interest will exceed 66 2/3 percent of the net revenues to be derived from the imposition of sales taxes at the rate established at the time of calling the election at which the proposition of authorizing their issuance is submitted, as determined by an independent audit and report made by a certified public accountant.' § 43654.1. The general credit, or taxing power, of the city is not liable for the payment of the bonds or interest thereon; only the revenues derived from the sales and use tax are liable therefor, § 43663.

The city sold the bonds on August 14, 1956, at such a price that the average annual installments of principal and interest on the total proposed bond issue of $2,000,000 will not exceed 66 2/3 per cent of the net revenues to be derived from sales taxes imposed at the rate of 1 per cent which was the rate established at the time of the adoption of the ordinance calling the election at which the issuance of the bonds was authorized. The respondent, city treasurer, refused to issue the bonds and this proceeding followed. This was in accord with the statutory provision. ⁴

Limited Obligation Bond Law as a valid general law with respect to classification: It should be noted, preliminarily, that two principles concerning population classification and legislation based thereon have been established in this state, see, Rauer v. Williams, 118 Cal. 401, 50 P. 691; Ex parte Jackson, 143 Cal. 564, 569, 570, 77 P. 457: (1) That there must be a reasonable basis for such classification with respect to the subject matter of the legislation; and (2) that the legislation must relate to a municipal affair.

(1) Reasonable basis rule: In Darcy v. Mayor, etc., of San Jose, 104 Cal. 642, 645, 646, 38 P. 500, 501, it was said that 'Legislatures and courts are not at liberty to disregard a policy so plainly manifested in the fundamental law. But, while the sovereign will is thus plainly expressed in the fundamental law, the rule must not receive an interpretation too absolute. It will not be presumed that it was intended to deprive the legislature of all power to adapt its laws to the varying conditions of its inhabitants. From necessity, it has been held that the legislature may classify, in order that it may adapt its legislation to the needs of the people. If this cannot be done, laws will not always bear equally upon the people. This classification, however, must be founded upon differences which are either defined by the constitution or are natural, and which will suggest a reason which might rationally be held to justify the diversity in the legislation. It must not be arbitrary, for the mere purpose of classification, that legislation really local or special may seem to be general, but for the purpose of meeting different conditions naturally requiring different legislation. Dougherty v. Austin (94 Cal. 601, 28 P. 834, 29 P. 1092, 16 L.R.A. 161); City of Pasadena v. Stimson, 91 Cal. 238, 27 P. 604.'

In the case under consideration, the legislation was intended to classify a small city with a large surrounding urban population so as to permit such small city to finance local improvements to accommodate the influx of people from the surrounding unincorporated area. For city residents and taxpayers alone to bear the burden of financing such improvements would obviously be inequitable. The only type of municipal revenue which is available from residents living outside the city is a sales and use tax within the city since such a tax would bear equally upon both residents and non-residents. It is stated by the city, and not denied by the respondent, that as of 1954 there were 115 cities of under 4,000 population in the state although there are no available figures as to whether all of these could meet the second population test set forth in the Limited Obligation Bond Law. It is argued by petitioner, and not denied by respondent, that the greatest single problem of municipalities today is the improvement and development of municipal facilities in order to keep pace with the needs precipitated by the growth within and without their boundaries. The Limited Obligation Bond Law was passed as 'an urgency measure necessary for the immediate preservation of the public peace, health or safety within the meaning of Article IV of the Constitution and shall take effect immediately. The facts constituting such necessity are:

'There is presently an unprecedented population growth under way within the State and the cities therein. In many cities this growth has caused the facilities within the commercial area of a city to be taxed beyond the general means of the city or for which no general benefit exists beyond the commercial area therein. The proceeds of sales taxes are derived from the sale of merchandise within such commercial areas and constitute an appropriate means of revenue for relieving the conditions existing within said commercial areas.

'Other improvements required by reason of said growth are of a more general benefit. However, by reason of said unprecedented growth, property taxes have seriously increased and it is required that other sources of revenue be provided to pay the costs of needed improvements.' Stats.1955, ch. 1847, § 2, pp. 3429, 3430.

We said in Dribin v. Superior Court, 37 Cal.2d 345, 351, 352, 231 P.2d 809, 813, 24 A.L.R.2d 864, that 'The following pertinent principles are well established: 'Wide discretion is vested in the Legislature in making the classification and every presumption is in favor of the validity of the statute; the decision of the Legislature as to what is a sufficient distinction to warrant the classification will not be overthrown by the courts unless it is palpably arbitrary and beyond rational doubt erroneous. (Citations.) A distinction in legislation is not arbitrary if any set of facts reasonably can be conceived that would sustain it.' (Sacramento M. U. Dist. v. Pacific G. & E. Co. (1942), 20 Cal.2d 684, 693, 128 P.2d 529; see also In re Herrera (1943), 23 Cal.2d 206, 212, 143 P.2d 345; Reclamation District No. 1500 v. Riley (1923) 192 Cal. 147, 156, 218 P. 762.) 'The existence of facts supporting the legislative judgment is to be presumed and the burden of...