State ex rel. Washington Mut. Sav. Bank v. City of Bellingham

• Citation: 183 Wash. 415,48 P.2d 609
• Decision Date: 03 September 1935
• Docket Number: 25534.
• Parties: STATE ex rel. WASHINGTON MUT. SAV. BANK v. CITY OF BELLINGHAM et al.
• Court: Washington Supreme Court

48 P.2d 609

183 Wash. 415

STATE ex rel. WASHINGTON MUT. SAV. BANK v. CITY OF BELLINGHAM et al.

No. 25534.

Supreme Court of Washington

September 3, 1935

As Amended on Denial of Rehearing November 4, 1935.

Department 1.

Appeal from Superior Court, Whatcom County; Edwin Gruber, Judge.

Proceeding by the State of Washington, on the relation of the Washington Mutual Savings Bank, against the City of Bellingham and others, to compel the issuance of a writ of mandamus requiring the City of Bellingham to issue warrants in favor of relator in payment of bonds issued by the City of Bellingham, owned by the relator. From a judgment directing issuance of the writ, defendants appeal.

Affirmed.

Hobart S. Dawson, of Bellingham, for appellants.

Tim Healy, of Bellingham, and Tanner & Garvin, of Seattle, for respondent.

BEALS Justice.

This proceeding was instituted on the relation of Washington Mutual Savings Bank, a corporation, for the purpose of procuring a writ of mandamus requiring the city of Bellingham, a municipal corporation, and certain of its officers, to issue and appprove warrants in favor of relator, drawn upon the local improvement guaranty fund of the city of Bellingham, in payment of bonds numbered 8 to 28, inclusive, together with interest coupons attached thereto, issued by the city of Bellingham in connection with local improvement district No. 869 (this district having defaulted), the total amount of the face of the bonds owned by the corporation being $2,100. The superior court granted the relief prayed for by relator, and from the judgment directing that the writ issue the city and its officers have appealed.

It appears that the city of Bellingham established its local improvement district No. 869 pursuant to resolution of intention passed June 15 1926, the district having been established prior to January 1, 1927. It was provided that the cost of the improvement be assessed to the owners of property in the district, the ordinance setting up the district, which was enacted pursuant to the resolution above referred to, containing the following section: 'That the cost and expense of said improvement including all necessary incidental expenses, payable by the mode of 'Payment by Bonds,' shall be borne by and assessed to the property included in the assessment district hereafter created, in accordance with the special benefits conferred on such property in proportion to area and distance bank from the marginal lines of the street, and the City of Bellingham shall not be liable in any manner for any portion of the cost and expense of said improvement.'

Under date September 2, 1926, the city contracted for the work to be done, the contract, inter alia, providing: 'All of said payments shall be made by Local Improvement Warrants and bonds issued in accordance with the charter and ordinances of the city of Bellingham, and the laws of the state of Washington upon Local Improvement Fund District No 869 and the said parties of the second part agree to look solely to said Local Improvement Fund District No. 869 for the payment for said work, and in no event shall the city of Ellingham, in its corporate capacity, become liable under this contract for the payment of any sum whatsoever.'

The L. I. D. bonds issued in payment of the work, upon some of which respondent based this action, contain, among many others, the following provisions:

'Payable annually out of the fund established by ordinance No. 4464 of said city and known as Local Improvement Fund District No. 869 of Bellingham, and not otherwise, both principal and interest payable at the office of the treasurer of said city.'

'And the said Local Improvement Fund District No. 869 of Bellingham, has been established by ordinance for said purpose, and the holder or holders of this bond shall look only to said fund for the payment of either the principal or interest of this bond.'

'This bond is also issued pursuant to chapter 183, Session Laws of the Legislautre of the State of Washington for the year 1925.'

Prior to the issuance of any of these bonds, over $2,000 was expended in payment of statutory charges and in redeeming outstanding warrants, bonds totaling $3,700 being issued and sold. The assessment roll, as certified by the treasurer, called for assessments in the amount of $5,836.55.

Upon presentation by respondent of its bonds, the city admitted its liability thereon, through its local improvement guaranty fund, in an amount equal to 5 per cent. of $5,836.55, later pleading an admission of its liability to respondent in such an amount, referring in its amended answer to its admitted liability as in 'an amount equal to five per cent of the bonds or warrants issued' by the district. The trial court held that the city' liability was not so limited, but that, through its local improvement guaranty fund, the city was responsible to respondent up to an amount equal to five per cent. of the total amount of all local imporvement district bonds or warrants issued subsequent to April 7, 1926. In other words, the trial court held that chapter 183, p. 551, Laws Ex. Sess. 1925, provided for a complete guaranty of all bonds and warrants issued in connection with local improvement districts subsequent to April 7, 1926, up to the 5 per cent. of the total outstanding district obligations. It is stated that the trial court held that, if the statute above referred to did not have the effect of rendering the city liable as aforesaid, then that statute is indefinite and uncertain, and that, if such be the case, pursuant to the provisions of chapter 209, p. 308, Laws of 1927, a full and complete guaranty (upon the basis above referred to) is established, the latter law being construed to be retroactive to accomplish such a result.

Appellants contend that the trial court erred in holding that cahpter 183, p. 551, Laws Ex. Sess. 1925, should be construed in accordance with respondent's contention, or is indefinite and uncertain; in holding that the city of Bellingham is liable to respondent in any sum greater than the amount which it admits it should pay; in construing chapter 209, p. 308, Laws of 1927, as applying to bonds issued prior to the passage thereof; and in granting judgment in relator's favor, pursuant to such a construction of that statute. Appellant also contends that the trial court erred in sustaining demurrers interposed by respondent to appellants' answer and first amended answer, and in entering the judgment appealed from. The action was determined by the trial court upon the pleadings, respondent having demurred to the amended answer interposed by appellants to respondent's complaint, and the trial court having sustained this demurrer. The appellants then elected to stand upon their amended answer, and declined to plead further, whereupon the trial court entered judgment directing the issuance of the writ of mandate, which judgment is now Before us for review.

It appears that outstanding obligations of local improvement districts of the city of Bellingham, on account of local improvements ordered after April 7, 1926, aggregate a large sum--such an amount that 5 per cent. thereof greatly exceeds respondent's claim upon its bonds.

Prior to 1917, the owner of a municipal local improvement bond could rely for payment thereof only upon the fund raised by payment of assessments levied upon property within the district. The bondholder had no protection against defaulting districts, which, as time went on, became more and more numerous. Continued defaults in payment of these bonds lessened the value of all securities of that class, and affected the credit of the cities of this state. Remedial legislation was enacted in 1917 by chapter 138, p. 576, of the session laws of that year. By that act, it was provided that any city of the first class might, by ordinance, create a fund to secure the payment of local improvement bonds. The statute gave the cities the option of setting up such a fund or not, as they might deem wise.

By chapter 141, p. 454, Laws of 1923, the option to set up such a fund was extended to all cities and towns. The act last referred to was amended by chapter 183, p. 551, of the laws passed at the extraordinary session of 1925, which act established a guaranty fund for each city or town issuing local improvement bonds. This act became...