Henry v. Town of Oakville

• Decision Date: 25 August 1981
• Docket Number: No. 3756-II,3756-II
• Citation: 30 Wn.App. 240,633 P.2d 892
• Parties: Robert HENRY, Respondent, v. The TOWN OF OAKVILLE, Washington, a municipal corporation; Harry Miller; Clarence Graham; Carl Lindholm; Grace Meile; Edgar McCready; and Norlin V. Nachatilo, Appellants.
• Court: Washington Court of Appeals

Page 240

30 Wn.App. 240

633 P.2d 892

Robert HENRY, Respondent, v. The TOWN OF OAKVILLE, Washington, a municipal corporation Harry Miller; Clarence Graham; Carl Lindholm Grace Meile; Edgar McCready; and Norlin V. Nachatilo, Appellants.

No. 3756-II.

Court of Appeals of Washington, Division 2.

Aug. 25, 1981.

Dan Glenn, Buzzard & Glenn, Olympia, for appellant.

Jack L. Burtch, Aberdeen, for respondent.

Maureen J. Dightman and Cynthia M. Weed, Seattle, amicus curiae.

PETRIE, Judge.

The Town of Oakville appeals an adverse judgment in an action in which plaintiff, Robert Henry, successfully challenged the validity of the notice requirements of the Open Public Meetings Act of 1971 for special and adjourned meetings. RCW 42.30.080 .090. The trial court invalidated three town ordinances which had authorized a bond issue for water system improvements and established new water rates to repay the bond debt. The threshold issue before this court, however, is whether the trial court had authority to resolve the issues presented when the holder of the bonds was neither named nor served as a party defendant. We conclude that it did not have authority to consider the validity of these ordinances in the absence of the bondholder.

The 1970 comprehensive water and sewer plan for Grays Harbor County recommended construction of certain water system improvements for the Town of Oakville, a fourth class town of 625 inhabitants. ¹ The town council decided to finance the improvements through water system bonds. On October 15, 1973, at a council meeting "continued" from a regular meeting of October 8, the council enacted Ordinance 283 authorizing a $32,000 bond issue. Pursuant to payment provisions in the ordinance, the town later enacted two ordinances increasing water rates to pay the bond debt (Ordinances 287 and 289).

Plaintiff objected to the new water system. After his initial protests against the system proved ineffective, he brought this action seeking (1) a judgment declaring that the ordinances had been adopted contrary to law and were void; (2) an injunction against future enforcement of the ordinances; (3) damages from the individual council members; and (4) attorney's fees and costs. The only defendants named were the town itself and the individuals who were members of the town council at the times it acted on these ordinances. Before the case went to trial, the town council met in a regular session and ratified each ordinance. The ratification ordinances are not in evidence.

After a bench trial, the court ruled that the Open Public Meetings Act of 1971 required advance written notice of special and adjourned meetings be given to local newspapers, regardless of whether the newspapers had filed a request for such notice. Because the town counsel provided no such notice for the special and adjourned meetings at which the ordinances were approved, the court held they were void under the act. RCW 42.30.060. ² The trial court specifically rejected proposed findings of fact intended to reflect that proper notices of adjourned meetings had been posted pursuant to RCW 42.30.090 and that proper notices had been posted after passage of the basic ordinances pursuant to RCW 35.27.300. ³ Nevertheless, the court failed to find that the proper notices had not been posted. The court also ruled that the ratification had been invalid. ⁴ In a post-trial brief filed in support of its motion for reconsideration, the town for the first time challenged the court's jurisdiction on the ground the bondholder was not a party. The record before us does not contain the trial court's express response to this objection. Nevertheless, the court entered judgment. We therefore infer that the motion for reconsideration was considered and denied. Defendant town appealed.

We turn first to the question whether the trial court had jurisdiction to proceed in a declaratory judgment action challenging the validity of ordinances authorizing the issuance of municipal bonds and providing for their payment in the absence of the bondholder, here the Farmers Home Administration of the United States Department of Agriculture. The failure to join an affected party in a declaratory judgment action relates directly to the trial court's jurisdiction. Williams v. Poulsbo Rural Telephone Ass'n, 87 Wash.2d 636, 643, 555 P.2d 1173 (1976). An objection grounded in the failure to join an affected party may properly be considered for the first time on appeal. Williams v. Poulsbo Rural Telephone Ass'n, supra ; RAP 2.5(a). Thus, defendant's bringing the matter to the trial court's attention on a motion for reconsideration was timely.

Plaintiff would avoid the application of the Uniform Declaratory Judgments Act provisions relating to parties, RCW 7.24.110, and ignore the fact his complaint was labeled one for declaratory relief. Instead, plaintiff argues this court should apply the joinder rules of CR 19(a). Whether we apply the statute or the rule, however, we conclude the bondholder was a necessary party to this action and the court should not have considered the merits of the ordinances.

RCW 7.24.110 provides in part:

When declaratory relief is sought, all persons shall be made parties who have or claim any interest which would be affected by the declaration, and no declaration shall prejudice the rights of persons not parties to the proceeding.

The bonds are revenue bonds, issued pursuant to the town's authority under RCW 35.92.100 and payable only from

the special fund of the Town known as the "Farmers Home Administration Water Revenue Bond Redemption Fund" ...

Ordinance 283. The authorizing ordinance established the special fund to pay and secure the principal and interest on the bonds. The ordinance required the town to impose and collect rates and charges sufficient to permit the fund to meet the town's obligations on the bonds. To ensure these obligations were met, the town council therefore enacted Ordinance 287, revising the town water rates. Later, the town council enacted Ordinance 289 as an amendment to Ordinance 287 to provide separate rates for industrial users.

As provided in Ordinance 283, the bonds were duly issued and sold to the Farmers Home Administration. The first payment was due January 1, 1976, with annual payments due thereafter for 40 years. The judgment before this court, however, declares all three ordinances null and void. As plaintiff requested, the judgment also forever enjoins the town from enforcing these ordinances or taking any further action regarding the authority granted in them.

Plaintiff argues that the bondholder's interest is not "affected" by this declaration and the bondholder is not prejudiced. He points out in support of his argument that the bondholder, as a good-faith purchaser, could maintain an independent and probably successful action to recover on the bonds despite the invalidity of the ordinances. Town of Thompson v. Perrine, 103 U.S. 806, 26 L.Ed. 612 (1881) (judgment that bonds invalid of no effect on bona fide purchaser not party to action and said judgment no defense to action by bondholders on bonds); see also, Johnson v. Berg, 147 Wash. 57, 265 P. 473 (1928); RCW 35.92.100; RCW 62A.8-202(2)(b). While we acknowledge the availability of such a remedy, we do not interpret this availability to disqualify the bondholder as a person claiming "an interest which would be affected by the declaration" of invalidity. On the contrary, the very fact this judgment leaves the bondholder in a position in which it must sue to enforce its rights demonstrates to us its qualification as a party with an affected interest. The declaratory judgment statute requires that such a party be joined.

Furthermore, CR 19(a) provides in part:

A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if ... (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (A) as a practical matter impair or impede his ability to protect that interest

(Emphasis added.)

A necessary party under CR 19(a) has recently been defined definitively as one who "has sufficient interest in the litigation that the judgment cannot be determined without affecting that interest or leaving it unresolved." Harvey v. Board of County Comm'rs of San Juan County, 90 Wash.2d 473, 474, 584 P.2d 391 (1978). It is clear, as we have already indicated, that the Farmers Home Administration has an interest in the subject matter such that the judgment would affect its interest and would, in fact, impede its ability to protect that interest.

Plaintiff's reliance on 28 U.S.C. § 1491 as a bar to state jurisdiction is misplaced. That statute merely gives the United States Court of Claims jurisdiction to hear contract actions against the United States, United States v....