Gantenbein v. City of Pasco

Chadwick, J. The legislature of 1911 passed two acts, chapter 98, p. 441, and chapter 111, p. 510, each designed to aid and empower cities and towns to acquire the benefits of water for irrigation. The city of Pasco, acting by its council, submitted a proposition to acquire a water system under chapter 98, the system and source of supply suggested being the one owned by the Pasco Reclamation Company. This was defeated. The council then undertook to provide a system under the special assessment provision in chapter 111. An ordinance was passed providing for the laying of pipes throughout the several assessment districts created By the ordinance, and a contract with the Pasco Reclamation Company was authorized. It will be necessary to advert in some slight degree to the history of this company. Reference may be had to the case of Pasco Reclamation Co. v. Cox, 70 Wash. 549, 127 Pac. 107, where the plan of organization and the purposes of the company are set forth. The testimony in this case shows that the contract of the com — 637 — pany to furnish water to irrígate the lands described in the Cox case, all of which was outside of the city limits of Pasco, had been entered into under the mistaken belief that eighteen inches of water per annum were sufficient to raise and mature crops, whereas it has been practically demonstrated, and further in the opinion of experts, no less than twenty-four inches of water per annum are necessary. Certain of the councilmen of the city of Pasco owned land under the irrigation project of the reclamation company, and had subscribed to the contract considered in the Cox case. In the negotiations leading up to the contract, and as it seems, as an inducement to the city to enter into the contract with the reclamation company, it was proposed that, in the event the city entered into a contract with the company and issued bonds in the sum of $50,000 and provided for an annual maintenance charge, all to be collected under the special assessment plan, the company would furnish to each of the contracting parties under its ditches outside of the city, provided they signed up a new contract, six inches of water in excess of the amount originally contracted to be delivered, or a total of twenty-four inches per annum. That part of the reclamation company’s contract with the city of Pasco was as follows: “It is further understood and agreed that certain contracts have heretofore been given to divers and sundry persons granting perpetual water rights to be used upon and appurtenant to certain lands therein described, the quantity of water to be supplied thereunder being only eighteen acre inches per season at $5 and not to exceed six inches additional at thirty-five cents (35c) per inch on each acre of land; and, a part of the consideration accruing to each and all the parties to this contract, and especially to the city of Pasco, is the agreement herein by the Pasco Reclamation Company to furnish to the holders of said last named contracts twenty-four acre inches per acre of land at $5 per acre, during each irrigation season between April 1st and October 1st, and in order to expedite at the minimum cost the modification of said contracts so as to give the said con — 638 — tract holders the increased quantity of water herein offered to them, it is further stipulated that said contract holders may have and enjoy the benefit of said twenty-four acre inches of water per acre of land per irrigation season aforesaid by signifying their several and respective acceptances hereof in writing duly acknowledged and addressed and delivered to said Pasco Reclamation Company, of by joining in the execution of this agreement on or before the 1st day of September, 1912, the terms of said contracts to remain in force except as to the formation of said new corporation, the transfer of said system to it, and the quantity of water to be delivered.” The ordinances having been passed and the contract entered into, work was begun, and shortly thereafter this suit was instituted, plaintiff and others alleging the ordinances and contracts to be void for several reasons which will hereafter be noticed, and praying for a restraining order, and upon final hearing, a perpetual injunction. The case was tried out on its merits, and plaintiffs have appealed from an adverse decision. The jurisdiction of this and the lower court is challenged by the respondents. The challenge is based upon the statute providing for objections and hearings before the council, and upon the following cases: Broad v. Spokane, 59 Wash. 268, 109 Pac. 1014; Renard v. Spokane, 48 Wash. 345, 93 Pac. 517; Rucker Brothers v. Everett, 66 Wash. 366, 119 Pac. 807, 38 L. R. A. (N. S.) 582; Chandler v. Puyallup, 70 Wash. 632, 127 Pac. 293, and many cases from other jurisdictions. This court, in common with others, has held that it is competent for the legislature to create a special tribunal, either directly or indirectly to hear and determine all questions going to the regularity of proceedings brought under statutes providing for improvements made under the special assessment plan, as well as the amount to be charged against specific property; that the conduct of such board, commission, or committee will not be controlled through the use of extraordinary writs; that we will not in such proceed — 639 — ings question the motives of the officers; and that the party aggrieved must first submit to the judgment of the legislative tribunal and then appeal. There has been much misuse of the word “jurisdiction” in the cases. There is a vast difference between jurisdiction and the exercise of jurisdiction. That the courts have jurisdiction to construe contracts cannot be denied, for it is granted by the constitution. If any of the cases cited seem to hold otherwise, they should not be followed; for in the same cases the jurisdiction of the courts is not only admitted but asserted when it is said that the aggrieved party may come to the courts by appeal, the only question decided being that the legislature may define remedies and direct procedure. The jurisdiction of the court is not defeated or taken away; it is only postponed. “A court of equity has no rightful authority to interfere with the enactment of municipal ordinances, merely because it may question the expediency of the measures, the motives inducing their enactment, or the regularity of the proceedings by which they are being enacted; it is limited solely to an inquiry into the question of power.” Broad v. Spokane, 69 Wash. 268, 109 Pac. 1014. “It undoubtedly is a general rule that the courts will not interfere with an action of a body exercising legislative functions, to correct mere errors or mistakes in its proceedings, or to prevent the passage of a law or ordinance duly pending before a legislative body, because it may conceive that the law or ordinance will be ineffective if passed, but clearly the courts have power to inquire into the validity of a law or ordinance after it has passed the legislative body and an attempt to enforce if is made or threatened to the injury of the personal or property rights of the citizen. The courts have exercised this power since the foundation of the government, and it is not necessary now to enter into a discussion of the principles that are thought to justify it.” Smith v. Centralia, 65 Wash. 573, 104 Pac. 797. This brings us, then, to the only question open in this case, whether the city of Pasco, acting through its present — 640 — council, had power to contract as it did. One or two propositions are advanced by appellant, which it is asserted so tinged the whole proceeding with constructive fraud as to void the contract, and that for this reason a court of equity has unquestioned jurisdiction. We shall not go into a discussion of the difference between, and the effect of, the two statutes first referred to in this opinion, or whether the proceeding might be sustained by reference to Rem. & Bal. Code, § 7685, but will assume that the proceedings and contract are good under one or the other of them, unless they are avoided, (1) by the interest of the counoilmen or some of them who voted for the ordinance, and (2) by any law or rule of public policy which would prohibit a city from entering into a contract which is beneficial to those residing outside of the corporate limits of the city when made at the cost of its property owners. To support the first proposition, appellant relies upon the case of Northport v. Northport Townsite Co., 27 Wash. 543, 68 Pac. 204, while respondent relies on Shaw & Hodgins v. Waldron, 55 Wash. 271, 104 Pac. 272, 28 L. R. A. (N. S.) 735. These cases 'were all decided upon the same statute. Rem. & Bal. Code, § 7702: “No officer of such city shall be interested, directly or indirectly, in any contract with such city, or with any of the officers thereof, in their official capacity, or in doing any work or furnishing any supplies for the use of such city or its officers in their official capacity; and any claim for compensation for work done, or supplies or materials furnished, in which any such officer is interested, shall be void, and if audited and allowed, shall not be paid by the treasurer. Any wilful violation of the provisions of this section shall be a ground for removal from office, and shall be deemed a misdemeanor and punished as such.” It is said by respondent that the Shaw case distinguishes the Northport case, and that under it the city councilmen, when considering the assessment roll, can correct any irregularity and reject all illegal claims. In the Shaw case, an independent contractor had completed an improvement. He — 641 — had purchased supplies of various persons, firms, and corporations. Among others, he dealt with the mayor of the town of Snohomish. It was contended that this leaven of illegality voided the whole contract, and that no recovery could be had on any part of it. We held, that the contract intended by the statute was the one entered into by the officer, that when he was denied a recovery, the purpose of the law was accomplished, and that the main contract would be void only pro ta/nto. In other words, where the nonrecoverable items could be eliminated, the assessment roll would be made up and become a lien for the aggregate of the remaining items. We suggested that possibly the Northport case had failed to note the difference between valid and invalid claims, and said the statute is aimed at the officer and intended to prevent a recovery on his part, or to the extent of his interest, when the claim is asserted by another. But we did not intend to question the broad rule of statutory and general policy as defined in the Northport case. The legality of the principal contract — the one with the city — could in no way be affected by a subsequent dealing with an officer, or a contract on his part to furnish supplies or material; and if this were a case where a recovery was sought by an officer or one claiming under him, we would not hesitate to apply the rule of the Hodgvns case. But it is not. There is no money demand that can be eliminated. The interest of the affected councilmen lies in the collateral benefit to be received by them, which, because of its nature, is impossible of segregation so as to leave the main contract unimpaired. This case, therefore, necessarily falls within that part of the statute which says, “No officer of such city shall be interested directly or indirectly in any contract with such city.” Here three of the councilmen whose votes were necessary had a direct personal interest — an interest not general to all the citizens within the corporate limits of the city or the assess — 642 — ment districts. If it were so, no legal objection could be urged. If we assume that the contract was an advantage to the reclamation company (and the law will so presume), the offending councilmen were, to the extent of their interest, sharers in that advantage. They found relief from a contract to furnish an inadequate supply of water, and substituted therefor one that was designed to make their desert land fruitful and remunerative. While the statute does not in terms say that a contract so passed is void, the courts have with one accord held that they are so, for it is within the positive meaning of the words “no officer shall be interested” in any contract. If we hold that, notwithstanding the prohibition of the statute, such contracts can be sustained, then we have written the statute out of the books. There can be no middle ground where the prohibition of the statute enters into the letting of the original contract. State ex rel. Gladwin v. Cheney, 67 Wash. 151, 121 Pac. 48, was a case of this kind. As said in the Northport case: “Long experience has taught law makers and courts the innumerable and insidious evasions of this salutary principle that can be made, and therefore the statute denounces such a contract if a city officer shall be interested not only directly, but indirectly. However devious and winding the chain may be which connects the officer with the forbidden contract, if it can be followed and the connection made, the contract is void.” The question whether the contract is beneficial cannot enter into the inquiry. When it is made to appear that the councilmen were placed in such a position that their interest might conflict with their fiduciary relation, the inquiry is-closed and the bar of the statute falls. Our conclusion is supported by the following texts and the cases cited therein: 2 Dillon, Municipal Corporations (5th ed.), 772; McQuillan, Municipal Corporations, 513; 28 Cyc. 650. Coming now to the second proposition, we are of the opin — 643 — ion that the contract is contrary to public policy. We must presume, that the original contract between the outside subscribers and the reclamation company was fair; that the company was furnishing all the water that it could supply with fair profit to itself at the price charged, and that it would not have relaxed its contract but for the contract with the city. Now, if the company in consideration of the collateral contract, the cost of which is met by the citizens within the corporate limits of Pasco, voluntarily furnished this additional water without cost to the landowners, and the testimony shows that there are about 15,000 acres, the presumption follows that the residents within the proposed assessment districts are paying for this extra allowance for the benefit of those outside of the limits of the city. Water in the arid areas of this state is a thing of value, and in the absence of a positive showing, courts will judicially notice the fact that irrigation companies will not make it a subject of gift. We cannot hold that any public improvement within a city can be allied with separate contract rights outside the municipality. To do so would put the hazard of litigation upon the city or upon the owners of property therein, and this is a consequence which the law would not tolerate. Counsel for the city of Pasco make the point that the case should not turn upon a construction of the contract, because to do so would be to ignore § 31 of the public service commission law, which is designed to protect all patrons of public service corporations from impositions in the way of excessive or unreasonable rates; that if it should now or hereafter appear that the contract is burdensome to the citizen, the commission and the courts can force a reasonable rate irrespective of statute or contract. Granting, without admitting, that this might be true if the only question before us was one of rates, the principle cannot enter or control this case, for the contract being made in contravention of the statute and of public policy, it matters not whether it is beneficial or subject to correction at the end of an inquiry or — 644 — a lawsuit. In law it is not merely an irregular contract, but it is as if no contract had ever been entered into. As a part of the plan, the city let contracts for piping systems to be laid through the assessment districts. These contracts are attacked because not let to the lowest bidder. There is no showing of fraud, and therefore the contract cannot be objected to on the ground urged. The case falls within the rule announced in Stern v. Spokane, 60 Wash. 325, 111 Pac. 231. The case is reversed, and remanded with instructions to enter a decree in accordance with this opinion. Crow, C. J., Gose, Parker,, and Mount, JJ., concur.