State ex rel. Security Savings Society v. Moss

Hadley, J. This action was brought to procure a writ of mandate to compel the treasurer of the town of Medical Lake to pay certain general fund warrants issued by said town. The treasurer declines to pay them, on the ground that they do not represent a valid 'indebtedness against the town. The judgment was against the relator, the holder of the warrants, and it has appealed. The town of Medical Lake was incorporated under the act of 1888, which act was thereafter declared'void by this court. The town reincorporated under the act of 1890, and. the reincorporation became effective June 12, 1890. It has been a municipal corporation of the fourth class under the laws of this state since the last named date. On the 17th day of Mny, 1889, the officers of the then void corporation entered into a contract with one Peter Lund, of the following. import-: In consideration of the sum of $8,645 said Lund agreed to improve Broad street in said town according to — 93 — plans and specifications then on file. The town undertook to pay for the work upon the completion of the contract, and agreed in the contract to proceed at once to levy a special assessment upon the property fronting upon the street to be improved, for the purpose of paying the contract amount. It was also agreed that the town should collect and pay over to the contractor the amount of such assessments without delay and in the shortest time possible under its charter and ordinances. It was further agreed that, if payment should become due and if the town should not have received sufficient money from such special assessments to make the payment, it should issue to the contractor its warrants for the amount of the deficiency, payable to him or his order “out of said fund.” The contract also contained the following: “And the said town of Medical Lake further agrees that, in case such warrants are issued and accepted by said Peter Lund, it will redeem and pay them before due, if presented, as fast as and whenever it collects and receives the money from such special assessments.” The work was completed, warrants were issued, and about $5,000 of the amount was collected and paid over. The remaining warrants were unpaid and were outstanding and unredeemed at the time of the reincorporation. After the reincorporation and on the 18th day of November, 1890, the council of the newly incorporated town passed an ordinance designated as No. 20 and entitled “An ordinance to ratify and confirm certain indebtedness of the town of Medical Lake.” Section 1 of the ordinance contained the following: “The following indebtedness heretofore incurred by the town of Medical Lake as heretofore incorporated . . . is hereby confirmed, ratified, recognized, and declared to be indebtedness of the town of Medical Lake as now organized.” Among other warrants mentioned in the section as representing indebtedness which was ratified, a number of the warrants issued for the Broad street improvement were sped — 94 — fied, the aggregate face amount of which was $2,537.10. Thereafter, on the 7th day of July, 1896, the council passed an ordinance known as Ordinance No. 67, and which was entitled as follows: “An ordinance providing for the changing of certain street grade warrants for general fund warrants.” After a preamble, § 1 of the ordinance is as follows: “That the mayor and town clerk be and are hereby authorized on the presentation to them of any grade fund warrants on either LeFevre or Broad street, to cancel the same and issue in lieu thereof warrants for the same amount and bearing the same date upon the general fund of the town of Medical Lake.” In pursuance of said ordinance above mentioned, unredeemed Broad street grade fund warrants were surrendered and in lieu thereof general fund warrants bearing the same date as the original grade fund warrants were issued. Appellant seeks by this action to compel payment of the last named warrants. Appellant contends that the contract for the improvement of Broad street created a general liability against the town, and not merely a liability against a particular district. It concedes that the contract provided for the creation of an assessment district and for a special assessment upon the property contained in the district, and that both parties to the contract proceeded upon the theory that the town had the same authority to create a special assessment district and to levy a special assessment as was conferred upon towns and villages by the act of the territorial legislature concerning special assessments, approved February 2, 1888, Laws 1888, page 16. It is pointed out, however, that the power did not exist under that act for the reason that it was limited in its operation to municipalities having a population of six thousand or more, and that the town of Medical Lake was not such a municipality. With the above-mentioned statute eliminated for the reason stated, appellant argues that the general incorporation act of 1888 also failed to attempt tc con — 95 — fer the power to create special assessment districts. Section £3 of that act, Laws 1888, page ££4, refers to the powers concerning streets, and is as follows: “To have streets and alleys opened, graded and repaired and the footways and sidewalks paved or planked at the expense of the occupants of the adjacent lots, or if any such owner or occupant fails to open, repair or pave or plank the same as required by ordinance, such board of trustees may cause the same to be done and may recover the full expense thereof, and the costs of the proceedings to obtain such recovery from such owner or occupant by action in the name of the corporation before any court of competent jurisdiction, and if any tenant be required to open, grade, repair or plank in front of the property occupied by him, the expense thereof is a good set-off against so much rent due the owner; but no tenant can be required to expend more than the rent due, and such charges are a lien upon the property and may be enforced and collected as other liens.” The first part of the above section was clearly intended to confer the power to improve streets at the expense of adjacent property, and that power by necessary inference included the further power to arrange a scheme for assessment districts in order to carry the expressed power into effect. Appellant argues, however, that the power was not intended to be included in the statute; that that part of the Broad'street contract which provided for issuing special fund warrants in payment of the contract price was unauthorized by the terms of the statute; and that the legal effect of the contract must therefore have been that the town agreed generally to pay for the work and to assume the burden of recovering the expenditure from the property owners. The inference is therefore drawn that there was a general promise to pay on the part of the town, made before its legal existence, and that such promise was ratified and became enforcible against the taxpayers after the legal incorporation. We have said we think the statute should be construed as having been intended to include the power to make special assessments. Then, in — 96 — the light of the terms of the statute and in view of the contract and what was done by the contractor and the people within the territory that afterwards became the town of Medical Lake, what did they intend and undertake to do? An ordinance was passed for the grading of Broad street. It created an assessment district for the purpose of paying the expenses, and provided for bids and for letting the contract to do the work. Bids were made in pursuance of the ordinance, the contract was let in terms as above stated, warrants were issued on a special fund for the grading of Broad street, and the property holders paid the larger part of the assessments. These facts, we think, establish beyond controversy that the intention of all parties was merely to rely upon special assessments, and that, even if the town of Medical Lake had been a valid corporation at that time, there would have been no general liability against the town which would have compelled the issuance of general fund warrants under the decisions of this court. German American Sav. Bank v. Spokane, 17 Wash. 315, 49 Pac. 542, 38 L. R. A. 259; Wilson v. Aberdeen, 19 Wash. 89, 52 Pac. 524; Rhode Island Mtg. etc. Co. v. Spokane, 19 Wash. 616, 53 Pac. 1104; Potter v. Whatcom, 25 Wash. 207, 65 Pac. 197. Appellant insists that, notwithstanding the above decisions, this case must fall within the decision of Abernethy v. Medical Lake, 9 Wash. 112, 37 Pac. 306. If there exists any conflict in principle between that decision and those above cited, it should be said that the cases first cited are the later decisions of this court. There is, however, an important distinction between the case at bar and Abernethy v. Medical Lake. In that case a street contract had been let by the void corporation, and the work had not been completed when the valid corporation came into existence. It was proposed to the bondsmen of the contractor who held the incompietedcontract, that if they would finish the work the town would “ratify the indebtedness incurred upon said street.” A con — 97 — tract of that kind was entered into between the bondsmen and the valid corporation, and the work was completed. An ordinance was then passed declaring a certain sum to be the indebtedness of the town, but the warrants issued were limited to “LeFevre street grade fund.” There was no such fund, and the treasurer refused payment for want of funds. The consideration for the new contract and for doing the incompleted work was that, the town should undertake to pay. There was then a corporation capable of contracting, and it received something of value from the contractors which it did not before possess, viz., a completed and improved street which was before incomplete and unprepared for public travel. It was held that the town was liable and should pay from its general fund. In the case at bar, however, the street work was completed before the valid corporation came into existence. No new contract was made, no work was done, and the corporation received nothing that did not exist when it was- created. Abernethy v. Medical Lake does not appear to have been decided on the theory which is urged in the case at bar, viz., that a promise existed before the legal existence of the town, but upon the ground that the town made a contract after its creation and, having received something of value therefrom, it by ordinance declared the debt to be its own. We therefore think that case must be distinguished from this one. Appellánt concedes that the contract under which the street work was done was invalid for the reason that the municipal corporation, which was a party to it, was illegally organized and could not make a contract, but it is argued that the corporation could ratify the contract after it was legally created, provided there was sufficient consideration for such ratification. State ex rel. Traders Nat. Bank v. Winter, 15 Wash. 407, 46 Pac. 644, is cited as authority for this contention. The indebtedness involved in that case was of a general nature, incurred by the void corporation of the town of Colville. — 98 — After it became legally incorporated, the town by ordinance ratified the indebtedness and assumed its payment. This court held that, in view of the moral obligation and of two legislative acts found respectively in Laws of 1891, page 279, and Laws of 1893, page 183, the validation was effective. We have said that the indebtedness ratified was of a general character such as is enforcible by general taxation against valid municipalities, and the statutes mentioned relate to the validation of such general obligations. It was not held that a special indebtedness for street improvements incurred by a void municipality and which could not have been a liability against general taxpayers even if the municipality had had a legal existence could, after the legal creation of the corporation, be so ratified by the corporation as to convert the liability from that of a special indebtedness to a general one enforcible against all the taxpayers. Such a view we think is not maintainable by sound reasoning, and it has not been so held by this court. Avoiding the force of this, appellant, as we have seen, contends that the obligation was originally a general one of moral force against all the taxpayers, and that ordinance No. 20 of the valid municipality above mentioned was an effective ratification. Within our view as above expressed, it was, however, never intended that the indebtedness should be paid by the general taxpayers, and they were never parties to any moral agreement to pay it. We think it is manifest that it was intended, both by the contractor and the acting trustees for the taxpayers, that the abutting property owners alone should pay this indebtedness. Ordinance No. 67 merely authorized an exchange of the grade fund warrants for others on the general fund. There was no consideration for the general fund warrants except the indebtedness represented by the grade warrants, and since the latter could not be made a charge against the general taxpayer, it follows that payment of the warrants in question cannot be so enforced. Other questions involving the constitutional limit of in — 99 — debtedness and res adjudicate, are argued, but inasmuch as the court made no findings upon those subjects, and as they are not necessary to a determination of the case, we shall not discuss them. The judgment is affirmed. Mount, C. J., Fullerton, Root, Crow, and Dunbar, JJ., concur.