Puget Sound Power & Light Co. v. City of Seattle

NETERER, District Judge (after stating the facts as above). The right of the parties is determined by what they did. The city can act only by ordinance. Section 18, art. 4, Charter; Hotel Cecil Co. v. Seattle, 104 Wash. 460, 177 Pac. 347. And the statute is the measure of its power. Uhler v. Olympia, 87 Wash. 1, 151 Pac. 117, 152 Pac. 998. Section 9488, Rem. C. S., empowers the city “ * * * to purchase, * * * maintain [and] operate * * * electric and other railways, _ * * * ” and when the purchase price of the utility is paid, not from the general fund, as here, the city council shall create a special fund for “the sole purpose of defraying the cost of such public utility, * * • * ” into which special fund the city council may bind the city to set aside and pay a fixed proportion of the gross revenues of such public utility, and to issue and sell bonds payable at such times as the council shall determine, but such bonds and the interest thereon shall be payable only out of such fund. In creating the special fund the council shall have due regard to the cost of operation and maintenance, and to any proportion of the revenues previously pledged, and shall not set aside into such special fund a greater proportion of’ the revenue than in its judgment will be available over the cost of maintenance and operation and amounts previously pledged. Section 9491, Rem. C. S. [447] When the city concludes to purchase the utility, the council shall provide therefor by ordinance, which shall specify and adopt the system or plan proposed (section 9489, supra), the wisdom of which is plain, for the electors have a veto power by referendum, so that the delegated power must be executed within the limit of authority pursuant to the adopted plan or system, as was stated by the Supreme Court in Hansard v. Greene, 54 Wash. 161, at page 165, 103 Pac. 40, 42 (24 L. R. A. [N. S.] 1273, 132 Am. St. Rep. 1107): “The payment is as much a part of the 'plan or system’ as the purchase and a method should be provided in the ordinance.” The city council, by Ordinance No. 39025, adopted a plan or system for the purchase of the railway for $15,000,000 in utility bonds, and therein created a, special fund, to be called “Municipal Street Railway Bond Fund, 1919,” and provided for the payment of part of the revenues of the municipal street railway system as a fund for the payment of the bonds, as in the ordinance provided, and on the same day passed Ordinance No. 39069 (contract ordinance), by which the railway system was purchased for $15,000,000 in utility bonds authorized by Ordinance No. 39025, in which ordinance is embodied the contract, which provides transfer by warranty deed free and clear from all liens and incumbrances, and the further provision that within 45 days from date, and prior to delivery of the bill of sale, releases from certain liens and judgments set out in the certificate will be furnished, and follows the further provisions: “The parties hereby forever release and discharge each other from each and every claim, demand, and right of action of whatsoever kind and description arising and accruing from the beginning of the world to the date of this agreement, excepting those claims, rights, demands, obligations, actions and judgments herein expressly mentioned,” and “taxes levied * * * for the year 1919 shall be paid before * * * delinquent by the respective parties hereto in amounts proportional to the respective periods of time that said parties are respectively in possession of said property during the year 1919.” The minds of the parties met on the date of the execution of the contract, February 10, 1919. The contract contemplated a transfer of the railway system free and clear of every incumbrance, no provision being made in the plan or system for the payment of any tax, nor was the transfer made subject to any taxes. The delay in the execution of the contract by exchange of bonds and transfer of title and possession was occasioned, no doubt, by the litigation in Twichell et al. v. Seattle, 106 Wash. 32, 179 Pac. 127. The taxes became a lien from the date of the assessment (section 11272, Rem. C. S.), which was March 15th, two weeks prior to the transfer and more than one month after the contract. The city agreed to pay a proportional part of the tax for 1919. If the transfer had been made two weeks prior, no taxes could have been assessed. The agreement with relation to the taxes for 1919 was a supplemental understanding to cover the emergency approaching, and was not within the plan or system provided by Ordinance No. 39025. The payment of the tax was not a part of the system or plan. This is also apparent from the argument of this [448] plaintiff in the Twichell Case, supra. The city council, in adopting the plan or system ordinance, performed a specially delegated function, and the power given by Ordinance No. 39069 is limited by the provisions of Ordinance No. 39025, supra, to the payment for the utility of $15,000,000. > ' > Impressing the lien for $401,017.16 or any part in effect increases the purchase price by that amount, which the court may not do. The special fund is burdened with the cost, $15,000,000, maintenance and operating expense, interest charges, charges for betterments, improvements, etc. All funds provided were necessary for maintenance and interest (see Twichell v. Seattle, supra), and the limit of the' provisions made at the time was known to the plaintiff and the plaintiff accepted the agreement of the city to pay such proportion of the 1919 tax, and may not now assert a claim against the fund, depletion of which would cause default in the payment of interest on the utility 4bonds, of which nearly $3,000,000 have been paid, and invite foreclosure, or sell the utility to pay the tax and deprive the public of its use. The plaintiff must be relegated to its legal remedy against the city. The tax collecting officers were within their authority in collecting the tax. Decision, June 5, 1924. Good conscience does not seem to me, under the circumstances, to dictate subrogation, nor has the court power to so decree. If the plaintiff so elects, the cause may be transferred to the law side for further proceedings. The right of subrogation is denied.