State v. Clausen

• Decision Date: 11 September 1905
• Citation: 82 P. 187,40 Wash. 95
• Parties: STATE ex rel. CITY OF PORT TOWNSEND v. CLAUSEN, State Auditor.
• Court: Washington Supreme Court

82 P. 187

40 Wash. 95

STATE ex rel. CITY OF PORT TOWNSEND v. CLAUSEN, State Auditor.

Supreme Court of Washington

September 11, 1905

Application for a writ of mandamus by the state, on the relation of the city of Port Townsend, against C. W. Clausen, to compel respondent, as State Auditor, to issue a warrant on the State Treasurer to the relator. Denied.

Coleman & Ballinger and Vance & Mitchell, for plaintiff.

Frank C. Owings, for respondent.

FULLERTON J.

This is an application for a writ of mandamus, instituted by the city of Port Townsend against C. W. Clausen, as State Auditor of the state of Washington, to compel him to draw a warrant upon the State Treasurer in payment of certain bonds purchased by the board of state land commissioners as an investment for the permanent school fund. That the nature of the controversy between the parties may be understood, it is necessary to make a brief statement of the facts out of which it arises. By the act of March 16, 1901 (Laws 1901, p. 177, c. 85), the Legislature of the state of Washington enacted that, whenever the city council or other corporate authority of a city shall deem it advisable to exercise the authority conferred upon cities in relation to waterworks, sewerage, and works for lighting, heating, fuel, and power purposes, or any or all of these, the city council, or other corporate authority, shall provide therefor by ordinance, in which a system or plan for the proposed work shall be adopted and the costs thereof estimated as near as may be, all of which shall be submitted to the qualified electors of the city or town at a general or special election for ratification or rejection. The act further provides that, if an indebtedness is to be created by the construction of the proposed public works, such indebtedness and the amount thereof shall likewise be stated in the ordinance and be assented to by the qualified voters of the municipality; a majority vote being necessary to adopt the proposed plan, while the authority to become indebted must be assented to by three-fifths of the qualified voters voting at such election. Two forms of indebtedness are provided for in the act. The one provides for a general indebtedness of the city, for which general municipal bonds may be issued to an amount not exceeding 5 per centum of the taxable property of the city as shown on the last assessment roll made for municipal purposes. The other form is best described in the words of the act itself namely: '(b) A special fund may be created for the sole purpose of defraying the cost and expense of construction or acquirement of each class of improvements or lands contemplated, or any condemnation thereof, together with such interest as shall accrue upon the obligations issued therefor, into which said funds the authorities of said city or town may obligate and bind the city or town to set aside and pay a fixed proportion of the revenue or proceeds to be derived from the plan or system, lands or uses of which the said improvement forms the whole or part, so long as any obligations are outstanding against said fund. In fixing said proportion, the authorities of such city or town shall have due regard to the cost of operation and maintenance of the plan or system as constructed or added to, and shall not set aside into the special fund a greater proportion of the revenue and proceeds than, in their judgment, will be available over and above such cost of maintenance and operation. The city or town authorities may from time to time, by ordinance, transfer to any such special fund any other available funds of said city. Bonds or warrants may be issued against any such special fund to the amount of the cost or charges to be met therefrom. Such bonds or warrants shall be issued in denominations of not less than one hundred and not more than one thousand dollars, shall be numbered from one up consecutively, and shall bear interest not exceeding six per cent., payable semiannually, the principal of any such bonds being payable upon call of the city or town treasurer in the order of their numbers whenever there is in such special fund, after payment of interest on all outstanding bonds or warrants, a sufficient balance to pay the same. And any such bonds or warrants issued against any special fund as herein provided shall be a valid claim of the holder thereof only as against the said special fund, and the fixed proportion of special revenues obligated to be set aside therein, and shall not constitute an indebtedness of such city or town within the meaning of the constitutional provisions and limitations. The principal and interest of any such bonds or warrants shall be made payable at such place as may be designated. Each such bond or warrant shall state upon its face that it is payable from a special fund, naming the said fund and the ordinance creating it. Said bonds or warrants shall be printed, or engraved or lithographed on good bond paper, and a duly authenticated copy of this act, together with the whole or a summary of the ordinances of the city or town authorizing and directing the submission of such plan or system to the qualified voters of such city or town for ratification or rejection, and creating the special fund, shall be printed on each such bond or warrant, together with a printed copy of a signed statement by the mayor and clerks showing the result of such election. Said bonds or warrants shall be sold in such manner as the corporate authorities shall deem for the best interest of the city or town, or the corporate authorities may provide in any contract for the construction or acquirement of the proposed improvement that payment therefor shall be made only in such bonds and warrants at par value thereof. A register shall be kept of all bonds and warrants, which register shall show the number, date, amount interest, name of payee and where payable, of each and every bond or warrant issued or sold under the provisions of this subdivision. Upon the creation of any such special fund and the issuance of any such obligation against the same, the fixed proportion of revenue shall be set aside and paid into said special fund as provided in the ordinance creating said fund, and in case any or town shall fail to thus set aside and pay such fixed proportion as aforesaid, the holder of any bond or warrant against such special fund may bring suit or action against the city or town and compel such setting aside and payment.' Laws 1901, p. 179, c. 85.

Acting under and in pursuance of this statute, the city of Port Townsend on February 16, 1904, duly passed an ordinance adopting a system and plan for supplying 'the city and its inhabitants, Ft. Warden, and Ft. Flagler, and other persons within and without the city with water, declaring the estimated cost thereof, and creating an indebtedness in the sum of $250,000.' The ordinance provided for the creation of a fund called therein the 'Olympic Gravity Waterworks Fund of Port Townsend,' into which it was proposed to pay 75 per centum of the gross receipts of the waterworks plant when completed, and such further sum as the city of Port Townsend should from time to time by ordinance transfer from the receipts of the plant or from its general revenues. For the purpose of acquiring funds to construct the works, it was proposed by the ordinance to issue bonds against, and payable solely out of, this special fund in the sum of $250,000, in denominations as fixed by the statute, and payable at the call of the city treasurer, the same to bear interest not to exceed 6 per centum per annum, payable semiannually; such bonds to be sold in such manner and at such rate of interest, not exceeding 6 per centum, as the city council should deem to the best interest of the city. In short, it was the purpose of the city authorities to provide for the construction of a system of waterworks for the benefit of the city, and to pay for the same out of a special fund derived from the revenues of the system when completed, in accordance with the terms of the statute above cited. The plan proposed by the ordinance was thereafter submitted to the qualified electors of the city of Port Townsend, and was ratified and adopted by the requisite majorities of the electors voting at such election. Bonds were subsequently issued pursuant to this authorization, and on March 20, 1905, the proper city authorities of the city of Port Townsend tendered the bonds to the state of Washington as an investment for its permanent school fund. The board of state land commissioners, in whom the statute vests the power to invest this fund, accepted the tender, and by resolution, as by law required, directed that the entire issue be purchased at the par value thereof, and that $150,000 of the amount of such purchase be taken and paid for immediately, and the balance within six months from that date. They city thereupon tendered the bonds to the State Auditor and demanded that he issue to it a warrant on the State Treasurer for the sum of $150,000. This Auditor refused to issue the warrant, and these proceedings were instituted to compel him so to do.

The Auditor, in his return to the alternative writ, bases his refusal to issue the warrant on several grounds; the principal one, and the only one we have found it necessary to consider, being that the attempted investment is in violation of article 16, § 5, of the state Constitution, which, as amended in 1894, provides that 'none of the permanent school funds of this state shall ever be loaned to private persons or corporations, but may be invested in national state, county, municipal, or school district bonds.' Before proceeding to a notice of the questions...