Edwards v. City of Renton

• Decision Date: 16 December 1965
• Docket Number: No. 37638,37638
• Citation: 67 Wn.2d 598,409 P.2d 153
• Court: Washington Supreme Court
• Parties: , 33 A.L.R.3d 1154 Robert L. EDWARDS and Jane L. Edwards, husband and wife, doing business as Renton Shopping Center, Appellants, v. The CITY OF RENTON, Respondent.

Page 598

67 Wn.2d 598

409 P.2d 153, 33 A.L.R.3d 1154

Robert L. EDWARDS and Jane L. Edwards, husband and wife doing business as Renton Shopping Center, Appellants, v. The CITY OF RENTON, Respondent.

No. 37638.

Supreme Court of Washington, Department 2.

Dec. 16, 1965.

Roberts, Shefelman, Lawrence, Gay & Moch, Seattle, for appellants.

Brightman, Holm, Bereiter & Stone, Renton, for respondent.

HAMILTON, Judge.

Plaintiffs initiated this suit against the City of Renton, a municipality of the second class, seeking recovery of the amount of $18,200 expended by plaintiffs for the installation of an intersectional traffic control signal. The trial court rendered judgment against the city in the sum of $12,132. Plaintiffs appeal. We reverse the judgment and remand for the introduction of further evidence.

Briefly, the salient facts are as follows: In 1959 and the early part of 1960, plaintiffs planned and commenced construction of a shopping center in the city of Renton. Access to and from the shopping center was to be by way of a city street intersecting Sunset Boulevard, a primary state highway, at a point where the boulevard was intersected by two other city streets. The State Highway Commission recommended and directed the installation of an appropriate traffic control signal at the intersection. The city recognized the need, and planning was commenced by the street and alley committee of the city council, which was in turn implemented by the city engineer. The city engineer contacted an electrical contractor, who had previously performed like services for the city, and an appropriate traffic signal for the complex intersection was designed. The design was accepted by the street and alley committee and approved by the State Highway Department. Funds, however, had not been appropriated in the 1960 city budget for the installation of such a signal. In the meantime, plaintiffs' shopping center was nearing completion, with an opening date scheduled in March, 1960. Discussions ensued between plaintiffs and representatives of the city. As a consequence, on January 26, 1960, the street and alley committee recommended and the city council adopted the following resolution:

'Item No. 4 of the Street and Alley Committee report was then read by the City Clerk in regard to the installation of a traffic signal at Renton Shopping Center access road connection to Sunset Boulevard, said installation cost estimated at $17,500.00. The majority report of the committee recommended the installation at city expense with initial cost to be paid by Renton Shopping Center under an agreement wherein Renton Shopping Center will be reimbursed from funds budgeted in 1961. Discussion followed and it was agreed that this installation would alleviate the problem of agress from Harlington Hill as well as providing a by-pass for 3rd and Rainier Avenues.'

Plaintiffs and the city engineer thereafter contacted the electrical contractor who had designed the signal. Pursuant to their request, and plaintiffs' assurance that they would pay the cost of installation, the contractor installed the signal before the March opening date of plaintiffs' shopping center. The cost of the signal and its installation was $18,200, including sales tax, which amount plaintiffs paid to the contractor. The installation was accepted by the city and integrated into its over-all traffic control system.

No bids for the design, manufacture, and installation of the signal were called for.

The city council, in making up the city's 1961 budget, appropriated funds for the purpose of reimbursing plaintiffs. A question thereafter arose as to the propriety of the contemplated reimbursement. When plaintiffs demanded repayment, the city refused and this suit followed.

The trial court concluded that the failure to call for bids and the failure to budget funds for the installation of the signal during 1960, the year the obligation was incurred, contravened RCW 35.23.352 and RCW 35.33.120, respectively, and rendered any agreement by the city to reimburse plaintiffs invalid and unenforceable. The trial court further concluded that, since the city had accepted the traffic signal and derived and retained the traffic control benefits thereof, plaintiffs were, upon equitable principles, entitled to recover the reasonable value of the benefits flowing to the city from the improvement. Finding that the fair and reasonable Value of the signal and its installation was $18,200, the trial court determined that the Value of the benefits flowing to the city was $12,132 and entered judgment in that amount.

On appeal, plaintiffs challenge the trial court's conclusions as to the validity of the reimbursement agreement and the measure of recovery applied. In short, plaintiffs contend that the city's agreement to repay them for the cost of installing the signal was simply a financial arrangement to expedite a necessary improvement; that such an arrangement does not contravene either the bid statute or the budget law; and that, in any event, plaintiffs were entitled under the circumstances to recover the reasonable Value of the signal as contrasted to the reasonable Value of the benefits flowing to the city from the signal.

We find no merit in plaintiff's contention that they had a valid and enforceable contract with the city for repayment of the funds advanced.

Stripped to the bare bones, the transaction between plaintiffs and the City of Renton amounted to a borrowing of funds by the city for the installation of an improvement for which moneys had not been regularly appropriated.

Municipal corporations do not possess inherent power to borrow money. Authority to do so must be found in appropriate legislative provisions. Plaintiffs have, in the instant case, pointed to no statutory authority permitting a city of the second class to borrow money in such a fashion as here attempted, and we have found none. Power to do so should not and will not be inferred or implied from a general statutory authority permitting municipalities to enter into contracts or to incur indebtedness. 15 McQuillin, Municipal Corporations § 39.07 (3d ed. 1950); 2 Antieau, Municipal Corporation Law § 15.00 (1965). Though the purpose for which the funds were to be expended can be characterized as infra vires, the manner in which the funds were obtained was ultra vires, and the purported repayment agreement was accordingly void.

Even if the foregoing were not true, it can hardly be gainsaid that the 'financial arrangement' here undertaken contravenes the purpose, intent and spirit of the pertinent municipal budget and bid statutes. ¹

The purposes, generally, of statutory municipal budgeting requirements are to inculcate sould business principles and practices into the municipal economy, with particular reference to avoidance of waste, extravagance, and ill-considered expenditures, and to give the members of the tax paying public a better understanding of the financial affairs of the municipality and the anticipated disposition of public moneys, 15 McQuillin, Municipal Corporations § 39.39, at 125 (3d ed. 1950); 2 Antieau, Municipal Corporation Law § 15.31, at 453 (1965).

And, the objects of statutory bidding requirements in connection with the letting of municipal contracts are to prevent fraud, collusion, favoritism, and improvidence in the administration of public business, as well as to insure that the municipality receives the best work or supplies at the most reasonable prices practicable. 10 McQuillin, Municipal Corporations § 29.29 (3d ed. 1950); 1 Antieau, Municipal Corporation Law § 10.11, at 688 (1965).

It should be axiomatic that plans, schemes, or devices which thwart or circumvent the wholesome objects and purposes of such statutory provisions are invalid.

We turn now to the second issue presented by this appeal, that is, the extent, if any, of plaintiffs' right to recover the moneys or benefits advanced. A solution to this issue is complicated by the fact that, though the city had power to otherwise lawfully contract for the installation of the traffic signal, the particular financial arrangement with plaintiffs was ultra vires and installation of the traffic signal was carried out in violation of the budget and bid statutes. Thus, any recovery allowed plaintiffs cannot rest on the void and unenforceable contract; it must rest, if at all, upon a theory of quasi-contract or unjust enrichment.

There is some division and conflict of authority on the question of whether and when a recovery may be had against a municipality for money, goods, or services furnished to and retained by a municipality under an ultra vires contract. The greater weight of authority would appear to deny recovery, particularly where the contract involved is clearly beyond the scope of the municipal powers, is prohibited by constitutional or statutory provisions, or is contrary to public policy. 84 A.L.R. 936; 110 A.L.R. 153; Hailey v. King County, 21 Wash.2d 53, 149 P.2d 823, 154 A.L.R. 351; 10 McQuillin, Municipal Corporations § 29.111 (3d ed. 1950); 1 Antieau, Municipal Corporation Law § 10.03 (1965). There is, however, respectable authority cited in the foregoing annocations and texts which permit a recovery where the public improvement furnished to and retained by the municipality is within the scope of its authority to provide, although the contract by which the benefit was supplied is ultra vires yet not Malum in se, malum prohibitum, or manifestly violative of public policy.

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