Faxe v. City of Grandview, 33279

• Decision Date: 16 February 1956
• Docket Number: No. 33279,33279
• Citation: 294 P.2d 402,48 Wn.2d 342
• Court: Washington Supreme Court
• Parties: Swan J. FAXE, Respondent, v. CITY OF GRANDVIEW, a city of the third class, Appellant. Chris JENSON, Respondent, v. CITY OF GRANDVIEW, a city of the third class, Appellant.

Page 342

48 Wn.2d 342

294 P.2d 402

Swan J. FAXE, Respondent, v. CITY OF GRANDVIEW, a city of the third class, Appellant.

Chris JENSON, Respondent, v. CITY OF GRANDVIEW, a city of the third class, Appellant.

No. 33279.

Supreme Court of Washington, Department 2.

Feb. 16, 1956.

Gordon Blechschmidt, Grandview, Velikanje, Velikanje & Moore, Paul M. Goode, Yakima, for appellant.

Kenneth C. Hawkins, Yakima, Chaffee & Aiken, Sunnyside, for respondent.

A. C. Van Soelen, Arthur Schramm, Seattle, James Arniel, Wenatchee, Kenneth A. Cole, Seattle, Leslie R. Cooper, Everett, B. A. Farley and Paul F. Schiffner, Spokane, James B. Hovis, Elwood Hutcheson, Yakima, Ralph G. Swanson, Olympia, John McSherry, Jr., Cle Elum, Lawrence S. Cleman, Ellensburg, Bruce T. Rinker, Bellingham, amici curiae.

HAMLEY, Chief Justice.

This action brings into question an ordinance of the city of Grandview increasing rates for water service rendered outside the city limits.

Two nonresident customers, in separate suits which were later consolidated for trial and appeal, sought to have the ordinance declared void. They also sought an injunction prohibiting the city from charging nonresident customers a rate in excess of that fixed for residents. In addition, they asked that the city be ordered to refund the amount of the rate increase charged and collected since passage of the ordinance. In each case, the plaintiff alleged that the provision of the ordinance increasing water rates for nonresidents was void because such rates were discriminatory, arbitrary, unreasonable, and excessive.

The consolidated cases were tried before the court without a jury. The evidence tended to establish the following basic facts: Grandview, a city of the third class, has operated a water system for domestic, commercial, and industrial purposes since 1911. The initial construction of the distribution lines and well was financed by general obligation bonds in the amount of $18,000, issued in 1911, and $16,000, issued in 1918. These bonds have long since been paid by means of special tax levies on property within the city. All extensions and improvements to the system since then, with certain exceptions noted below, have been financed by water, and water and sewer, revenue bonds. The total replacement cost of the entire system, as of the date of the trial, was $633,926.

In January, 1949, an ordinance was enacted setting a minimum rate of $2.50 for the first three thousand gallons delivered to a resident user. The ordinance established an additional 30-cent charge above this minimum for nonresident users. The following year, plaintiff Swan J. Faxe, a nonresident, arranged to receive water service from the city. He did so by bearing the cost of installing a lateral line and meter, connected to the city's Orchard Tract main. This main carried water from a well outside the city to the city water system. Other nonresidents similarly situated made like arrangements. The cost to the nonresident customers of installing these laterals ranged from $100 to $1,134. Plaintiff Chris Jenson, also a nonresident, purchased his property after the laterals were installed, but while the 1949 water rates were still in effect.

Between 1949 and 1952, a need developed for an expanded water supply to meet growing water requirements both within and without the city limits. In order to finance a new revenue bond issue for this purpose, city officials determined that rate increases were necessary. This led to the enactment, on June 3, 1952, of the ordinance here in question. This ordinance increased certain commercial rates. It did not change the minimum monthly rate of $2.50 for residents. For nonresidents, however, it provided that, in lieu of the 30-cent surcharge previously in effect, there would be a minimum rate equal to 150 per cent of the minimum rate for residents. The effect of the ordinance was to raise nonresident rates from $2.80 a month to $3.75, while making no increase in the $2.50 minimum rate for residents of the city.

In enacting this ordinance, city officials relied largely upon the advice of the bonding company which handled the city's financing and of Don E. Gray, a consulting engineer employed by the city. The bonding company advised that the rate of $2.50 for a minimum supply for residents was a feasible maximum for service inside the city, and that any higher rate would reflect on the city's credit. A partial survey was made of the cost of delivering water to nonresidents. However, there was no analysis of the comparative costs of delivering water to residents and nonresidents.

In keeping with the advice of the experts, the 1952 ordinance was designed to provide 150 per cent of the revenue bond debt service, after paying the expense of operation and maintenance. The rates under the new ordinance yield to the city $1,881 more a year from the one hundred sixty-five nonresident users than they paid prior to its enactment. The 50 per cent differential thus exacted from nonresidents of Grandview is to be compared to differentials ranging from 20 per cent to 300 per cent paid by nonresident water customers of several other cities of Washington.

There are fifty-five fire hydrants within the city limits and one outside. Several of those within the city limits are across the street from nonresidents. Neither resident nor nonresident customers pay any additional water rate for standby service from these hydrants. The city fire hydrants and city fire department equipment have been used in fighting fires beyond the city limits, no charge being made for such service.

All mains and laterals, both inside and outside the city, are flushed by the city without charge. The city also performs certain repair and maintenance services without charge. It costs about 11.2 cents more per month to read the meters of nonresident customers than to read the meters of resident customers.

A connection to the city water system has the effect of increasing the value of the real estate served. Within the city, this redounds to the benefit of the city through increased assessed valuations for tax purposes. While the assessed valuation of real estate served outside the city is likewise increased, this does not financially benefit the city.

In the past, some overhead expenses attributable to the operation of the city water system have been paid out of the city's general fund. Among such items were salaries, insurance premiums, legal expenses, and a judgment. New accounting procedures have been established, however, under which this expense will hereafter be borne by the water department.

Upon this showing, the trial court entered findings and a decree favorable to plaintiffs. The court found and concluded that the increased nonresident rates and the provision of the ordinance effectuating such increase were 'discriminatory, arbitrary, unreasonable, excessive,' and therefore void. Enforcement of the ordinance was enjoined, and plaintiffs obtained judgments against the city in sums equal to the amounts of the increase paid by them since passage of the ordinance.

The city appeals, challenging each of the quoted reasons given for declaring the ordinance void.

Appellant and respondents appear to agree that, in rendering water service to respondent nonresidents, Grandview is under a duty to fix rates which are just and reasonable, not unduly discriminatory, and not arbitrarily arrived at.

With regard to the fixing of rates which are just and reasonable, this duty is prescribed by statute. See RCW 80.40.010, Laws of 1951, chap. 252, § 1.

With regard to the imposing of rates which are not unduly discriminatory, appellant predicates such duty upon Art. I, § 12, of the state constitution. This provision forbids the passage of any law granting special privileges or immunities. While agreeing that Grandview has such a duty and apparently concurring in the view that Art. I, § 12, gives rise thereto, respondents also rely upon common-law principles as establishing such a duty.

The tests to be applied in determining whether the duty to fix nondiscriminatory rates has been breached are substantially the same, whether such duty is based upon the constitutional provision or common-law principles. Compare State ex rel. Bacich v. Huse, 187 Wash. 75, 59 P.2d 1101, with Durant v. City of Beverly Hills, 39 Cal.App.2d 133, 102 P.2d 759, and Caldwell v. City of Abilene, Tex.Civ.App., 260 S.W.2d 712. We will therefore assume, without deciding, that such a duty exists by virtue of Art. I, § 12, of the state constitution.

The duty of Grandview to avoid arbitrary action in fixing such rates is implicit in the other named duties with which the city is chargeable.

The basic question presented on this appeal, therefore, is whether the city of Grandview breached any of these duties.

We will first consider the duty of Grandview to fix nondiscriminatory rates for water service to these nonresidents. Art. I, § 12, of the state constitution, provides that no law shall be passed granting to any citizen, class of citizens, or corporation other than municipal, privileges or immunities which, upon the same terms, shall not equally belong to all citizens or corporations.

The aim and purpose of this constitutional provision is to secure equality of treatment to all persons without undue favor on the one hand or hostile discrimination on the other. Compliance with this aim and purpose requires that the legislation under examination apply alike to all persons within a class, and reasonable ground must exist for making a distinction between those within and those without a designated class. State ex rel. Bacich v. Huse, 187 Wash. 75, 59 P.2d 1101.

For the purpose of fixing rates, the 1952 ordinance placed nonresident water users in a class separate from resident water users. There is no contention or finding that the ordinance does not apply alike to all persons within the nonresident class. Therefore, under the rule...