State v. City of Seattle

• Decision Date: 23 July 1913
• Court: Washington Supreme Court
• Parties: STATE ex rel. GRANT SMITH & CO. v. CITY OF SEATTLE.

133 P. 1005

74 Wash. 438

STATE ex rel. GRANT SMITH & CO. v. CITY OF SEATTLE.

Supreme Court of Washington

July 23, 1913

Department 2. Appeal from Superior Court, King County; R. B. Albertson Judge.

Mandamus by the State, on relation of Grant Smith & Co., against the City of Seattle, to compel the city to make a supplemental or reassessment on private property for a public improvement. Decree for relator, and defendant appeals. Reversed and remanded, with directions.

Jas. E Bradford, Howard A. Hanson, and James Kiefer, all of Seattle for appellant.

Preston & Thorgrimson and Turner & Hartge, all of Seattle, for respondents.

MORRIS J.

In this action respondents, the contractors in the local improvement known as the Denny Hill regrade, sought to compel the city to levy supplemental reassessments upon private property in the amount of $76,112.19. To this demand the city pleaded an offset of $47,696.11, accrued interest on certain bonds delivered to the contractors, and offered to levy further assessments to make up the difference between these two amounts. This offer was rejected by the court below, and judgment went for the respondents as prayed for.

The facts material to the inquiry here are about as follows: The city, having determined upon the improvement, which consisted in the regrading of portions of several parallel avenues, and comprising locally what is known as the Denny Hill regrade, called for bids under which the contract was let to the respondents. This contract provided that the contractors should slope back upon private property to the extent of one to one and remove the earth involved in such slope as part of the cost and expense of the regrading. The regrade involved various deep cuts, and the removal of the remaining earth upon the private property to the approximate new level of the streets. To this end a provision was inserted in the contract, by which the contractors bound themselves to excavate the earth from any private property in the district when so requested by the property owner at the same rate per cubic yard as was involved in the contract with the city. Under this provision the contractors, in a large number of cases, entered into contracts with various owners of abutting property to remove the earth on such private property 'so as to bring the level thereof to an even grade with the street or streets abutting the same, as established by city ordinance.' After commencing work upon this contract, and when approximately 26 per cent. of the work had been completed, the city confirmed an assessment roll for the estimated cost and the expense of the improvement, and paid to the contractors upon this roll in March, 1909, about $62,000. On May 10, 1909, bonds in the principal sum of $741,757.01 were drawn up and dated by the city comptroller for delivery to the contractors, from time to time, in various amounts as called for by monthly estimates. These bonds, which under the law were obligations against the local improvement district, but not against the city as a whole, were payable 10 years from and after the date of their issue, with interest at the rate of 6 per cent. per annum; each bond having attached thereto 10 coupons representing each year's interest on the bond. Under the terms of the contract, it was provided that no claim should be made for any portion of the contract price until, in pursuance of law, charter, and ordinance, the bonds could legally be issued. The contractors thereafter assumed the financing of the improvement, up to such time as under this provision of the contract the bonds could be legally issued. Each month after the commencement of the work a monthly engineer's estimate was made up of the work during the preceding calendar month. Upon this estimate the contractor received a warrant for 70 per cent. of the work; some of these warrants being redeemed in March, 1909, from the first proceeds of collection upon the assessment roll amounting to the cash payment of $62,000. Those warrants not redeemed in this manner were exchange for bonds later. It was further provided in the contract that after the confirmation of the assessment roll, there should be delivered to the contractors' bonds in the face amount of 70 per cent. of the work done during the preceding calendar month, as shown by the monthly estimate. This amount was due and payable on or about the 25th of each month. To these bonds, so delivered from time to time, were attached all interest coupons, and at the time of the several monthly deliveries certain interest had accured from the date of the bonds, May 10, 1909. It was further provided that 30 per cent. of the cost and expense of the amount should be reserved by the city for the protection of lien claimants. This reserve was withheld from each monthly payment, and under the contract did not become payable until 30 days after official notification to the city comptroller that the contract had been completed and accepted. This 30 per cent. reserve became payable to the contractors on April 25, 1911, and bonds therefor were delivered to the contractors on April 29, 1911. The accrued interest upon these bonds so delivered amounted to $31,090.44. This item, together with the accrued interest upon the several monthly estimates subsequent to May 10, 1909, amounted to $47,696.11. It is the accrued interest in this latter amount that the city urged as an offset to the demand of the contractors that the city take necessary steps to levy assessments in the full sum of $76,112.19. In considering the payment of the various monthly estimates, the city council passed a monthly budget ordinance, ordering payments to the various local improvement contractors operating under the several contracts throughout the city. This ordinance directed the payments to the contractor of bonds in the principal sum of 70 per cent. of the monthly estimate, and provided for the payment of such additional sum as 'may be required to pay all interest that may legally accrue on the warrants and bonds under this ordinance.'

Our attention has not been called to any other provision of statute, charter, ordinance, or contract for the delivery to the contractors of coupons representing the interest which had accrued between the date of the bonds and their delivery. It is the city's position now that such delivery was without authority, and that the contractors have already received, on account of the improvement, this sum of $47,696.11, representing the accrued interest, to which they were not entitled, and that such payment is in excess of the cost and expense of the improvement, and that the city is without power to assess private property for more than the cost and expense of the improvement, and therefore the city is entitled, in this proceeding, to offset the amount of such accrued interest. Other material facts necessary to a proper understanding of the situation here involved may be referred to.

In Schuchard v. Seattle, 51 Wash. 41, 97 P. 1106, it was held that property, receiving damages in condemnation proceedings under the old law, where damages were offset against all benefits and a verdict returned for the excess was exempt from special assessments, either upon the condemnation assessment roll or upon the local improvement assessment roll. This holding had a direct effect upon a number of assessments in the Denny Hill local improvement assessment roll, and apparently involved approximately $70,000 of such assessments. The city, seeking to relieve itself from this situation, directed the contractors to slope back upon private property only to the extent of three-fourths to one, instead of one to one, as provided for in the original contract, leaving the wedge thus created to be removed at the cost of the property owner. Under this modification of the contract, the contractors proceeded with the improvement, and sought to, and in many cases did, collect from the several property owners who had signed private agreements for the removal of the earth upon their lots an amount representing the cost of removing this additional wedge. About this time an action was brought against the contractors by one of the owners of abutting property who had signed such an agreement, claiming that such modification of the contract was void, and...