Uhler v. City of Olympia

• Decision Date: 17 August 1915
• Docket Number: 12891.
• Citation: 151 P. 117,87 Wash. 1
• Court: Washington Supreme Court
• Parties: UHLER v. CITY OF OLYMPIA.

151 P. 117

87 Wash. 1

UHLER v. CITY OF OLYMPIA.

No. 12891.

Supreme Court of Washington

August 17, 1915

Department 1. Appeal from Superior Court, Thurston County; D. F. Wright Judge.

Action by J. H. Uhler against the City of Olympia. Judgment for defendant, and plaintiff appeals. Reversed and remanded, with instructions.

Ballinger Battle, Hulbert & Shorts, of Seattle, for appellant.

Geo Bigelow and P. M. Troy, both of Olympia, for respondent.

CHADWICK J.

This is a suit to test the validity of a series of bonds issued by the city of Olympia under the act of 1909. Session Laws 1909, p. 580; Rem. & Bal. Code, tit. 60. c. 33.

The city of Olympia purposed to purchase by way of condemnation a waterworks plant within the city of Olympia. It passed an ordinance declaring its purpose, and providing for the payment therefor, 'in the event the qualified voters at the said special election shall ratify the same,' by the issuance of special bonds payable only out of the fund to be created and established for the payment of the same. An election was thereafter duly held, and the plan was adopted by the voters, whereupon the city passed an ordinance declaring its intention to condemn the plant. The estimated cost as declared in the ordinance submitting the plant to the electors was fixed at the sum of $90,000, as near as may be. Among other things it was provided that the cost of purchasing, adding to, maintaining, conducting, and operating the waterworks should be paid out of the gross revenues received from the operation of the plant, including a fair charge for water used by the city. A trial was had to fix the value of the property. The jury returned a verdict of $88,500, with costs taxed at $376.30.

It was contended by the purchasers of the bonds that under the terms of the first ordinance, and by sections 7 and 9 thereof, the city might issue bonds in an unlimited amount against the waterworks plant, and therefore at their instance, as we were told in argument, the city passed an ordinance fixing the limit of the bond issue at $90,000 and no more. It is admitted that, in addition to the amount of the judgment and costs, the city has agreed with the purchasers of the bonds to pay out of the general funds of the city the sum of $4,500 by way of commissions and compensation to cover the cost of the preparation of bonds, legal expenses, etc. From an order sustaining a demurrer to the complaint plaintiff has appealed.

Many questions are raised in the record, one of which is that the bond issue, if permitted, will carry the city beyond its limit of indebtedness. We think that bonds issued under the special statute providing for the acquisition of a public utility, where the ordinance provides that the cost shall be paid out of the gross revenues of the system when acquired, is not a thing to be considered in estimating the debt limit of the city. The charge is upon those who use the water, and not upon others. The revenues to be received under the plan proposed are not moneys of the city. They do not partake of the character of general funds, nor can the general fund be invaded if they are not sufficient. The system for collecting revenues and for the payment of these special bonds, provided by statute and by the ordinance, is in principle the same as if they were collected to pay street assessments. In speaking of special improvements and assessments to pay for them, and the character of the moneys collected thereon, we said in Seattle v. Stirrat, 55 Wash. 560, 104 P. 834, 24 L. R. A. (N. S.) 1275, that such power----

'has nothing to do with the raising or disbursing of the public revenue. * * * Such laws, whether they be general or special, can have no reference to such funds as may come to a municipality through methods with which the public as a whole has no concern. * * * Our reasoning further finds assurance in the fact that indebtedness incurred for these purposes has been held to be no part of the general indebtedness or funds of a municipal corporation.'

The law and the ordinance provide that the bonds shall be paid without invasion of the general fund, and our holding in the Stirrat Case seems to be apposite to the present situation. It has been generally held, and the rule is, that the debt limitation does not apply to a debt that is a lien upon specific property and is not chargeable to the general fund. Dean v. Walla Walla, 48 Wash. 75, 92 P. 895.

The first objection to the bonds is that the ordinance is not a positive declaration upon the part of the city, but is made to depend upon a subsequent ratification by a vote of the people. The statute says that the council shall----

'provide therefor by ordinance, * * * and adopt the system or the plan proposed, * * * and the same shall be submitted for ratification or rejection to the qualified voters.' Section 8006.

The validity of the issue depends in any event upon a vote of the people, and it should not be held that an ordinance is bad because it says in words just what the law is--that the life of the ordinance and a pursuit of the plan will depend upon a vote of the people.

The case of Thompson v. Town of Sumner, 9 Wash. 310, 37 P. 450, is relied on. In that case the vote was whether the ordinance should be adopted, in which event the council would call an election upon the plan proposed. Granting that the decision of the court was right, it in no way affects the case at bar, where the election was not postponed, and the people after full notice voted upon the ultimate question. The ordinance was just as valid before as after the election. The people were not misled. They knew what they were voting on. They did not vote for or against the ordinance, but did vote for or against the acquisition by condemnation of the existing waterworks. Being ratified, the council passed an ordinance declaring its intention, and proceeded to carry out the will of the people.

This brings us to the main questions in the case. We will discuss them separately.

First. Has the city followed the plan proposed? Under the act of 1909 the city might have proceeded in either one of two ways. It might have provided for the issuance of general municipal bonds or warrants, or, as it did, for the acquisition of the waterworks and the creation of a special fund, to be sustained by the gross revenues of the waterworks system and out of which the bonds, with interest, are to be redeemed. The statute is the measure of the city's power in such cases, and the Legislature seems to have been careful to provide for the avoidance of any confusion, either upon the part of the council or the electors affected by the proposed plan. The whole act breathes the spirit of good faith. It says as plainly as a statute can that, if it is the purpose of the council to use any part of the general funds of the city, it shall be so provided. We are bound, therefore, to measure the subsequent conduct of the city by the limit of its power under the statute, and as accepted by the council when it passed the preliminary ordinance.

We are constrained to hold that the bond issue cannot be sustained under the existing ordinance. That a city acting under a special statute is bound by the terms of the statute, and must submit the plan that it intends to carry out, is too well settled to require any extended citation of authority. It was so held in Hansard v. Green, 54 Wash. 161, 103 P. 40, 24 L. R. A. (N. S.) 1273, 132 Am. St. Rep. 1107, and Alymore v. Seattle, 48 Wash. 42, 92 P. 932. This being so, it follows that, if the city pursues a plan different from that voted upon, it is exceeding its authority, and its act is void.

Coming to the case at bar, after the voters had fixed the amount of the bond issue at $90,000 as near as may be,' which would no doubt have sustained a greater issue, the city by subsequent ordinance forced the aid of the general fund by limiting the issue of its special fund bonds to the sum of $90,000. This is $4,500 more, as we shall see, than the purchaser of the bonds is willing to advance upon the security of the water system. This sum is not sufficient to pay the judgment and meet the payment of over $4,000 for expert witness fees and expenses incident to the trial, and the $4,500 which the city has promised to pay the purchasers of the bonds, to cover 'cost of preparation of bonds, legal expenses, etc.,' and the cost of making extensions and necessary repairs. The record discloses the fact that the city is proceeding to pay for these added expenses and commissions out of the general fund of the city. Certainly the law does not contemplate such a thing, for it provides in terms that where the council pursues the second alternative--that is, to purchase or acquire a waterworks system and pay for it out of the gross revenues, which are to be retained as a fund for the sole purpose of defraying the cost of the system and 'additions, betterments, or extensions thereto'--'such bonds and warrants and the interest thereon shall be payable only out of such special fund or funds.' Wash. Ore. Cor. v. Chehalis, 76 Wash. 442, 136 P. 681.

The ordinance under which this issue is put forth provides in terms and the questions put upon the ballot declared the purpose of the city to be to 'condemn and purchase purchase, acquire, add to, maintain, conduct and operate.' These declarations are comprehensive, and include everything incident to the accomplishment of its purpose. The citizens voted a proposition to purchase and maintain without resort to the general fund. They had no opportunity to say whether they would approve a plan that will admittedly take of the general funds of the city from $10,000 to $15,000. In the case of Hansard v. Green, 54 Wash. 161, 103 P. 40, 24 L. R. A. (N. S.) 1273, 132 Am....