State v. City of Tacoma

• Decision Date: 30 June 1917
• Docket Number: 14121.
• Parties: STATE ex rel. NATIONAL BANK OF TACOMA v. CITY OF TACOMA et al.
• Court: Washington Supreme Court

166 P. 66

97 Wash. 190

STATE ex rel. NATIONAL BANK OF TACOMA v. CITY OF TACOMA et al.

No. 14121.

Supreme Court of Washington

June 30, 1917

Department 2. Appeal from Superior Court, Pierce County; C. M Easterday, Judge.

Mandamus by the State, on the relation of the National Bank of Tacoma against the City of Tacoma and others. From an adverse judgment, relator appeals. Affirmed.

Hayden, Langhorne & Metzger, of Tacoma, for appellant.

U. E Harmon and Frank M. Carnahan, both of Tacoma, for respondents.

HOLCOMB J.

Upon sustaining a demurrer to the application of the relator for a writ of mandate directed to the city of Tacoma and certain of its officers, the court dismissed the action, and the relator appeals.

The facts as set forth in the application for the writ, together with an amending stipulation, are, in substance, as follows On October 6, 1909, the city of Tacoma initiated local improvement district No. 693 having for its object the improvement by planking and guttering the road in an outlying section of the city. The improvement district was regularly created and the improvement duly completed and accepted. In part payment of the contract price the city caused to be issued and delivered to the contractor 64 bonds of the local improvement district, aggregating $6,312.30. These bonds were issued pursuant to city ordinances Nos. 1388, 3923, and 4154. These bonds by their terms matured August 9, 1915, at which time there remained outstanding and unpaid bonds Nos. 27 to 64, inclusive, which are now and were at the time of the institution of this action in the possession of the relator. There is not now, and has not been since the maturity of these bonds, any moneys in the fund of local improvement district No. 693 to be applied to the payment of the bonds, or any of them. Previous to the initiation of this improvement the city council of Tacoma had enacted Ordinance No. 3377, which remains unamended and unrepealed by any express ordinance referring and relating thereto. This ordinance is entitled, 'An ordinance creating a fund to be known as 'Local Improvement District Surplus Fund," and authorizing the disposition of such moneys, and, after defining what shall constitute the fund and providing for its immediate endowment by the transfer to it of the surplus moneys remaining in the funds of the several improvement districts which at that time had been paid out in full, contains the following:

'Section 3. That no moneys shall be taken or used from said local improvement district surplus fund, except under the following conditions: (a) When the date has expired for the final call of bonds in any local improvement district of the city of Tacoma, and there remains outstanding any bond or bonds against said local improvement district on account of an insufficient amount of money in the local improvement district fund, then the city treasurer shall transfer from the local improvement district surplus fund to such local improvement district fund such an amount as shall be needed to call and retire such bond or bonds. Said bond or bonds, however, upon the redemption as above provided, shall be assigned to the city of Tacoma and retained by it and become its property, and shall not be canceled or cease to be a lien upon property in the local improvement district, subject to assessment until all the assessments made in such district have been paid either directly or through foreclosure proceedings on behalf of said city.'

When the bonds issued in local improvement district No. 693 were delivered to the contractor, he went to the relator accompanied by Ray Freeland, then one of the city councilmen and city treasurer. To induce the bank to buy the bonds Freeland represented to it that the local improvement district surplus fund created by Ordinance No. 3377 provided a guaranty for the payment of the bonds in the event that the special assessments levied to retire the bonds should fail to provide enough funds for that purpose, and that the fund was created for the express purpose of making certain the ultimate payment of local improvement district bonds, and particularly of those issued in outlying improvement districts, and that the fund had been used, and was then being and would be used, to pay bonds of improvement districts which remained outstanding after the date fixed for their final call, in cases where there were insufficient funds in the local improvement district fund out of which such bonds should have been paid in the first instance. Relying upon these representations and upon the existence of the local improvement district surplus fund, the bank purchased the bonds. They reached maturity, and the last 38 remained unpaid. At that time there were outstanding previously matured bonds of but two other local improvement districts, to wit, Nos. 704 and 542, in which districts the total outstanding bonds amounted to $5,200. In the meantime by Ordinance No. 5192, passed January 15, 1913, the city had transferred $10,000 from the local improvement district surplus fund to the general fund. That ordinance is also set out in full. At this time, and in fact during all of the times referred to, there was and still remains in force Ordinance No. 3201, set out in full, which in brief provides that, whenever any money is by ordinance transferred from one fund of the city to any other fund of the city, such sums so transferred shall be by the proper officers transferred back to the original fund whenever there is a sufficient amount in the fund transferred to pay back the amount so transferred. When these bonds reached maturity and were unpaid, the relator demanded of the city that it take over the bonds, using the moneys of local improvement district surplus fund, and if there were insufficient moneys in that fund, then that it retransfer from the general fund all or a sufficient part of the $10,000 transferred by Ordinance No. 5192 to the general fund to pay the bonds and accrued interest. The demand was refused, and this action resulted.

The contention of the appellant is that Ordinance No. 3377, creating a fund to be known as 'Local Improvement District Surplus Fund,' created a rotating fund out of which the bonds of the several local improvement districts within the city might be cared for without incurring any general liability upon the part of the city and without subjecting the individual bondholders to the expense and trouble of maintaining an action of foreclosure upon the particular property within the district which had suffered default in the payment of the assessment levied against it; that it provided, in effect, that, so long as there should remain after the discharge of all obligations, bonds or otherwise, surplus moneys arising from the excess penalty and interest of other local improvement districts, the city would use them for the purchase of defaulted bonds of other districts, and would itself undertake the collection of such bonds in the manner prescribed by law and relieve the...