Comfort v. City of Tacoma
| Decision Date | 02 February 1927 |
| Docket Number | 20073. |
| Citation | 142 Wash. 249,252 P. 929 |
| Parties | COMFORT et ux. v. CITY OF TACOMA et al. |
| Court | Washington Supreme Court |
Appeal from Superior Court, Pierce County; Card, Judge.
Suit by A. B. Comfort and wife against the City of Tacoma and others. Judgment sustaining a demurrer, and plaintiffs appeal. Affirmed.
Homer T. Bone, of Tacoma, for appellants.
Preston Thorgrimson & Turner, of Seattle, amici curiae.
E. K Murray, Leo Teats, Bartlett Rummell, John H. Binn, and D. D Schneider, all of Tacoma, for respondents.
The purpose of this suit is to test the validity and constitutionality of what is known as the local improvement guaranty fund provided for by statute. To achieve that result, this action was brought to set aside a tax levy made by the city of Tacoma in 1925 for the benefit of its local improvement guaranty fund. Upon the sustaining of a demurrer plaintiffs have appealed.
A brief history of the statutes and ordinances and their purposes will be helpful to an understanding of the points raised. Prior to 1917, many of the cities of the state of Washington had outstanding local improvement bonds which were unpaid, and practically valueless. The failure to meet these bonds at maturity was due to many causes, including the lack of necessary restrictions to prevent pyramiding assessments, but the ultimate result thereof was to impair the credit of the cities of the state, and a consequent lowering of the value of the bonds. Countless numbers of these bonds were purchased by persons unskilled in such matters who failed to grasp the fact that the obligations which the bonds represented were not legally those of the city, but were restricted to the particular fund created by the assessment, although bearing upon their face words indicating to the casual observer a promise to pay by the municipality.
The Legislature, in an endeavor to remedy this state of affairs, passed a statute (Laws of 1917, c. 138) which provided, in substance, that any city of the first class could by ordinance create a fund for the guarantee of the payment of the local improvement bonds issued subsequent to the passage of the ordinance. Such cities were empowered to levy taxes to meet the requirements of the fund, and, upon payment of any bond, were to be subrogated to all the rights of the holder, and the proceeds of the bond was to be a part of the fund. Warrants could be issued against such fund, but each year at the time of making the budget and levy the amount of such levy should be sufficient, with the other resources of the fund, to pay all warrants issued the preceding year. It provided that no holder or owner of any bond issued under the act and ordinance should have any claim against the city, except from the assessments paid in and the guaranty fund. The act also contained a provision limiting the amount of local improvement work. The city council of Tacoma duly passed the necessary ordinance to come under the provisions of the act.
Thereafter the Legislature, by chapter 141, Laws of 1923, amended the act to include all cities and towns and changed the limitations as to the amount of assessment. The city of Tacoma thereupon passed a new ordinance to come under the provisions of the act of 1923. In 1925, the guaranty act was amended making it mandatory upon all cities and towns to establish a guaranty fund, but that act is not here in question because the levy here sought to be set aside was made under the act of 1923.
The first contention of appellant is that, since the contracts entered into for improvement work by the city of Tacoma with its contractors provided that the contractors would accept the bonds issued for the work, and not look beyond the local assessment funds for payment, the contractor cannot receive any benefit from the guaranty funds, nor can he pass to a third person that right which he does not possess.
But we think that appellant goes too far in saying that the contractor has bargained away his right to look to the guaranty fund for reimbursement. True, the ordinance authorizing the particular work does not mention the guaranty fund, but the law of the state gives that right to all holders of bonds when the city by ordinance comes within its provisions. The effect, then, is to import into every contract the law of the state that the bonds issued therefor will be in the form provided by statute as to character and manner of payment. The bonds when issued provided that they would be paid from the local assessment fund and the guaranty fund, and comply with the law. Nor does this law impair the obligation of a contract in contravention of section 10, art. 1, of the United States Constitution, since the law was in effect when the contracts were entered into.
It is next urged that to tax appellants' property, which receives no special benefit, to guarantee a payment of bonds issued against other property, is contrary to law, because the whole theory of local assessments is one of special benefits to the property assessed. But this is not a special assessment. The city has the right to initiate local improvements and to pay the whole cost thereof out of general taxes. This tax is imposed on all alike, and is general in its application. A benefit accrues to every property owner because the additional guaranty of the bonds is reflected naturally in the increased price at which the bonds sell, thereby reducing the cost of all improvements. In time every property owner will come within some improvement district either for original improvements or for new improvements to take the place of those worn out or obsolete, and thus receive a benefit at that time by reason of the increased value of the bonds.
The main and serious question raised in this case is whether bonds issued under the provisions of the guaranty law become a debt of the city, for, if they are, they increase the debt of the city of Tacoma beyond the 1 1/2 per cent. statutory limit without a vote of the people, and the statute authorizing their issuance becomes unconstitutional.
It is admitted at the outset by appellant that under our decisions these local improvement bonds, if issued without the guaranty, are not debts of the city. Dean v. Walla Walla, 48 Wash. 75, 92 P. 895; Schooley v. Chehalis, 84 Wash. 667, 147 P. 410; Uhler v. Olympia, 87 Wash. 1, 151 P. 117, 152 P. 998. It is said, however, that, by placing them under the guaranty act, the city thereby becomes liable for their payment and a debt is created. The pertinent sections of the act are as follows:
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