Hazeltine v. Blake

The opinion of the court was delivered by Fullerton, J. The question involved in this action is the validity of a warrant drawn by (he city of Olympia upon its sewer fund in payment for certain sewer pipe purchased by the city for, and used by it in the construction of, a city sewer. It is claimed by the appellant that the city was indebted at the time it purchased the material for which the- warrant was issued beyond the limit permitted by the constitution and statutes, and therefore incapable of entering into a valid contract creating further indebtedness. The constitution of this state (art. 8, § 6) prohibits a city from becoming indebted in any manner to an amount exceeding one and one-half per centum of its taxable property as shown by its last assessment for city purposes, without the assent of three-fifths of the voters therein voting at an election to he held for that purpose, and, in cases where such assent is obtained, to an amount exceeding- five per centum in all. From the facts disclosed by the record it appears that at the time the contract was entered into which gave rise to the issuance of the warrant in question the city of Olympia had outstanding obligations amounting to $243,561.78; that of these obligations $200,000 consisted of bonds issued with the assent of the voters (with the exception hereafter noted), — 233 — and the balance, $43,561.78, of warrants drawn upon its various funds, issued without the assent of the voters; that at the same time • the city had assets, consisting of unpaid taxes and cash in its various funds, amounting to the sum of $66,300.32; and that the value of its taxable property, as shown by its last assessment for city purposes, was $4,988,733. The indebtedness for which the warrant was issued was incurred without the assent of the voters of the city, and belongs to the first limitation mentioned. Its validity, therefore, is determined by determining the amount of the indebtedness of the city properly chargeable to that limitation at the time the contract was entered into which gave rise to its issuance. From the above recitals showing the financial condition of the city, at that time, it is apparent that the indebtedness of the city, unless its bonded indebtedness is included as a part thereof, did not of itself, nor when taken with the amount of the warrant, equal one and one-half per centum of its taxable property as shown by its last assessment. It is contended by the appellant that every debt of a municipality, no matter by what authority incurred, must be taken as a part of the first limitation, and that if these debts equal one and one-half per centum of its taxable property, the municipality is without power to incur a further indebtedness without the assent of the voters. As sustaining this contention the case of Hunt v. Fawcett, 8 Wash. 396 (36 Pac. 318), is cited and relied upon. While in the course of the opinion in that case some language was used which would seem to support the' appellant’s claim, the case was said in the later one of State ex rel. Barton v. Hopkins, 14 Wash. 59 (44 Pac. 134, 550), not to lay down the doctrine contended for. It was there held that a bonded debt of a county, incurred with — 234 — the assent of the voters for the purpose of building a court house, had no relation to the one and one-half per centum of indebtedness then owing by the county, or which might thereafter be incurred by it within that limitation; the court saying that whether an indebtedness incurred with the assent of the voters of a municipality was to be treated as an indebtedness belonging to its first or second limitation must be determined by the intent which is made to appear by the ratification of the proposition submitted, and that this intent must be gathered from the form of the proposition interpreted in the light of the facts existing at the time of the submission. This case was cited with approval in the still later case of Graham v. Spokane, 19 Wash. 447 (53 Pac. 714) ; and, while no discussion of the precise question was entered upon in the opinion, the effect of the decision was to affirm the proposition that an indebtedness could be incurred by a city which should remain independent of 'its one and one-half per centum limitation. The wisdom of this construction of the constitution we do not now feel called upon to discuss. It must be adhered to as announcing a rule of property. On the faith of this construction many debts have been incurred by municipalities which the contrary rule would render invalid, tn the loss of innocent persons who have every moral right to be protected. The real inquiry, then, is, was it intended-that the debt evidenced by the bonds in question should form any part of the first limitation? These bonds represent two several issues. The first was for $45,000, and was assented to in part by the requisite number of the voters of the city of Olympia, at an election held on the 28th day of April, 1890, voting upon a “proposition to allow the city council to incur an indebtedness for general municipal pur — 235 — poses to the amount of five per centum of the assessed valuation of all the property within the limits of said city.” At that time the aggregate indebtedness of the city amounted to the sum of $37,524.85, its assets to the sum of $5,727.29, and the value of its taxable property, as shown by its last assessment, was $1,144,641. The second issue was for the sum of $155,000, and was assented to by the requisite number of voters of the city at an election held on the 17th day of August, 1891, voting upon a proposition submitted in the following form: “Shall the city of Olympia for municipal purposes borrow $155,-000, and issue its negotiable bonds therefor ?” At that time the aggregate indebtedness of the city, exclusive of the first issue of bonds, amounted to the sum of $113,-056.49, its assets to the sum of $45,815.41, and the value of its taxable property, as shown by its last assessment, was $5,597,455. It will thus be seen that at the time of the first issue of bonds the city had outstanding warrants in excess of the amount to which it could lawfully become indebted without the assent of the voters amounting to nearly $15,000, and that at the time of the last issue, the margin between the amount to which it might lawfully become indebted without the assent of the voters and the amount to which it was indebted, excluding the first bond issue, was something less than $17,000. Tested by the reasoning of the case of State ex rel. Barton v. Hopkins, supra, it is clear that the first issue of bonds up to the amount that could be lawfully issued within the second limitation, must be held to belong to that limitation. Here, as there, the warrants then outstanding against the city filled to overflowing the limit to which it could become indebted without the assent of the voters. Before any further indebtedness could be incurred, the second limitation must be trenched upon, and, as the status of a debt — 236 — of a municipality is fixed at the time of and by the terms of its authorization, this debt of necessity belongs to the second limitation, as no power then existed to make it a part of the first. The intent as to the second issue seems equally clear, bio assent of .the voters is required by a municipality to enable it to incur a debt within the first limitation. This it may do without such assent, and it may cause such indebtedness to be evidenced by warrants drawn upon its treasurer, or by bonds issued, pursuant to the requirements of the statutes. The assent of the voters is required only in cases where it is sought to incur a debt within the second limitation. Whenever, therefore, a municipality asks and obtains the assent of its voters to the incurring of a debt, the presumption arises from the very act itself that it is the intent to incur a debt within that limitation within which a debt can not be incurred without such assent; and, although this presumption is not conclusive in every instance, it must be so where it is not overcome either by an express declaration to the contrary or such a state of facts as will leave the question equally free from doubt. In the case before us there is no express declaration of the intent. It is shown, however, that the combined issue of bonds is greater than three and one-half per centum of the value of the taxable property as shown by the last assessment preceding the second issue, and from this it is argued that it could not have been the intent to put them alone within this limitation. But this over-issue occurred at the time of the first issue. The value of the taxable property of the city at that time — the one and one-half per centum limitation being full — permitted a further indebtedness of only $40,062.43%, while the bond issue was for $45,000. If this difference be deducted from the total amount, the remainder is well — 237 — -within the limitation. While it appears from the record before us that this overissue can form no part of the indebtedness belonging to the second limitation, the status of the remainder is not affected by that fact. The over-issue was the act of the officers having in charge the execution of the power conferred by the assent of the voters, and their acts cannot affect the validity or status of such of the bonds as were properly issued within the power conferred. But we do not wish to be understood as expressing an opinion as to the validity or invalidity of this overissue. It is not necessary to do so in order to determine the validity of the warrant in question, for, if we add this surplus sum to the general indebtedness owing by the city belonging to the first limitation, the warrant is still within that limitation. • We conclude, therefore, that so much of the debt evidenced by the bonds in question as was properly incurred under the authority conferred by the assent of the voters belongs to the second limitation, and that the warrant in question is a valid obligation of the city of Olympia, which must be paid, in the order of its issuance, out of the fund set apart for the payment of obligations belonging to its class. The judgment of the lower court is affirmed. Reavis, O. J., and Dunbar and Anders, J.I., concur.