Title: City of Bremerton v. Kitsap Cty. Sewer Dist.

State: washington

Issuer: Washington Supreme Court

Document:

71 Wn.2d 689 (1967) 430 P.2d 956 THE CITY OF BREMERTON, Respondent, v. KITSAP COUNTY SEWER DISTRICT, Appellant.[*] No. 38801. The Supreme Court of Washington, Department Two. July 27, 1967. Niemeier & Hamilton, E.A. Niemeier, and C. Conrad Green, for appellant. Gerard N. Fisher, for respondent. BARNETT, J.[] In the 1940's the Washington State Pollution Commission required the respondent city of Bremerton (hereinafter referred to as "the city"), to build a sewage treatment plant and make other improvements to its sewage system. The ultimate cost of these improvements, as far as this case is concerned, was $1,214,735.41. Of this sum the state of Washington provided in matching funds the amount of $466,350.35; the United States Navy provided $100,000.31; and Local Improvement District No. 229 added $14,319.82. The remainder of the cost, $634,064.93, was the obligation of the city to provide. The city issued water and sewage revenue bonds and made other appropriations as their part in the financing arrangement. On February 15, 1950, the city and appellant Kitsap County Sewer District No. 1 (hereinafter referred to as *691 "the district"), contracted with each other for the stated objective of "eliminating pollution of the waters of Sinclair Inlet and Puget Sound." The objective was to be attained by an "adequate disposal of sewage" by the two municipal corporations. To this end it was agreed that the city would build a sewage disposal plant for the parties' joint use. The text of the contract will be quoted in its entirety since this appeal raises as an issue its proper interpretation. AGREEMENT Under the terms of the contract the district collected and paid over to the city the 50 cents per month charge made to the customers connected to the district's sewer lines until April 1, 1962, at which time the district discontinued making payments to the city. The city thereafter brought suit to enforce the agreement. The trial court found that one of the means of payment in the agreement, the provision for 50 cents per month to be added by the city to the water bill of each resident in the defendant district (the city operated the water system in the sewer district area), was beyond the power of the city to enforce. It is noted that neither of the parties operated under this provision. There has been no challenge to this particular finding; therefore, it is incontestable now. *694 The trial court did, however, give effect to the balance of the contract, ruling that the district was obligated to collect 50 cents per month from each user connected to its sewer lines and pay the collected amounts over to the city until the revenue bonds issued by the city were paid off or until other agreed upon events might occur which would then terminate the district's contractual obligations. The following findings of fact are the essence of the judgment of the trial court. III .... VII .... IX There are also involved in this appeal circumstances and legal questions entirely unrelated to the questions involving the contract between the parties. This second controversy was raised in a cross-complaint by the district against the city. The facts will be related as we meet the issues directly. On this appeal the appellant district presents two broad arguments supporting its contention that it should not have to continue to collect and pay over moneys to the city under the contract. One argument is a challenge to the validity of the agreement itself, and the other is that the trial court improperly interpreted the contract in deciding that the district's contractual obligations were to continue until such time as the city's revenue bonds were fully repaid, or the district was annexed by the city. The district has two prongs to its argument of invalidity of the contract. The first issue to be resolved is whether or not the contract created a general indebtedness which would have required prior approval by the voters of the district to be valid. Laws of 1941, ch. 210, § 17, p. 647 (now RCW 56.16.030) is the statute applicable at the time the contract was entered into, and it states: There is general statutory authority for sewer districts to enter into an arrangement for joint use of sewage facilities with other municipal corporations. Laws of 1941, ch. 210, § 48, p. 667, in effect at the time the contract was entered into, provided that Furthermore, Laws of 1947, ch. 212, § 3, p. 895 stated that These statutes allow the district to contract as it did in this case and to pay to another party as the managing party a portion of the expenses. We are not convinced that the contract created a general indebtedness of the sewer district thereby requiring a vote of its residents. There is only one case cited in support of the district's proposition that the contract created an indebtedness on its part, Edwards v. Renton, 67 Wn.2d 598, 409 P.2d 153 (1965). After a perusal of the Edwards case we find that it has absolutely no applicability to the case at hand. In the Edwards case, supra, we held that a second class city had no inherent power to borrow money nor could such power be inferred or implied from the statutory authority to contract or incur indebtedness. In the present case, however, we are not concerned with the authority of the district to act for it had the power to contract with the city for joint use of sewage facilities, see the statutes cited above, and it had statutory authority to make the charges necessary for the operation of its sewer system, Laws of 1945, ch. 140, § 9, p. 382 (now RCW 56.08.010). We are only concerned with whether or not the contract created an indebtedness. [1] Looking at the contract we find that the district did not borrow any money nor pledge any credit in its arrangement with the city. There is no indication that the district was obligated on the revenue bonds issued by the city. It was the residents of the district connected to the sewer lines who were to pay the monthly charge and the district merely agreed to act as an intermediary to collect the charge from the sewer users and transmit the amounts collected to the city. Other than the contractual obligation *698 to collect the monthly charge and pay over to the city, there is no liability on the part of the district, therefore, there is no general indebtedness. 64 C.J.S. Municipal Corporations § 1853 (1950). Since no indebtedness was created the agreement is not invalid as a means of creating a general indebtedness of the district without a vote of the residents of the district. The district's second argument for invalidity is that the contract is written with a time period which is uncertain, therefore, argues the district, such time period is unreasonable and it makes the contract unenforceable. [2] We view this argument in light of general considerations for contract construction. The following quotation is particularly applicable to the present circumstances and we entirely agree with it. The trial court found that the 50 cent charge was to continue until the revenue bonds issued by the city were paid or the sewer district was annexed by the city. The contract stated: [3] We start from the rule that "In the absence of an affirmative showing of unreasonableness, the contract is prima facie valid." Municipality of Metropolitan Seattle v. Seattle, 57 Wn.2d 446, 460, 357 P.2d 863 (1960). We are not presented with any showing that the time period determined by the trial court is not "reasonable in view of the *699 nature of the subject matter." Washington Fruit & Produce Co. v. Yakima, 3 Wn.2d 152, 163, 100 P.2d 8, 103 P.2d 1106, 128 A.L.R. 159 (1940). The contract was for the joint use of the new disposal facilities with the district agreeing to collect and pay over the monthly charge imposed upon its resident users in return for its right to use the facilities. Since the use will continue over a long period of time it is not unreasonable to find that the payments also should continue over an extended period of time. The term is definite in that the contractual obligations of the district will end when the city's revenue bonds are paid off or the district is annexed by the city. The contract stated that the length of the payment period for the bonds was 24 years. The record is void of any facts which indicate that this admittedly tentative period is grossly misstated. There is no affirmative showing by the district of unreasonableness of the terms of the contract. We hold that under the facts of this case the ruling of the trial court enforcing the contract was correct. The district's other attack on the trial court's determination is that the contract was not properly interpreted. The trial court found that the district was to continue to make collections and turn over the sums collected to the city until the city's revenue bonds were paid off or until the district is annexed and that these payments by the sewer users in the district were not only to compensate the city for constructing the disposal system, but also to pay for operation and maintenance. The district suggests that such an interpretation of the contract is inconsistent with other language of the contract and that it is unreasonable. [4] The general rules of contract interpretation are well known and settled. We repeat those basic considerations as we stated them in Dickson v. Hausman, 68 Wn.2d 368, 370, 413 P.2d 378 (1966). We deem it desirable to point out that neither in the contract nor elsewhere in the record is it indicated which party drew up the instrument. The contract is ambiguous and it is the court's duty to properly resolve this problem of interpretation. The objective is to determine what the parties intended which must be found from the language of the agreement due to the paucity of extrinsic evidence in the record on this matter. It is our opinion that at the time the agreement was entered into the parties did not intend that the cost to be assigned to the users in the district be only limited to a portion of the construction costs. The district bases this interpretation on specific language in the contract which is ambiguous and is inconsistent with other portions of the contract. It is pointed out in the district's brief that the contract in paragraph one states: Paragraph three states in part: However, when one reads the contract as a whole a purpose is stated that the inconsistencies of the agreement do not destroy; in fact, if this inconsistent and ambiguous language were to be given effect as urged by the district, the expressed intentions of the parties would be severely limited. The rest of the sentence in paragraph three begun above, reads: Although the charge to be billed by the city to the residents of the district was held to be invalid we find that this portion of the contract indicates that the parties intended that the users residing in the district would help pay for construction and for maintenance, operation and repairs. It does not follow from the fact that the charge is invalid that the stated purpose of the charge is also to be deleted from the contract. The district also urges that it should only pay 9.38 per cent of the cost of pumping plants and disposal system. But to decide that that is the extent of the district's obligation would nullify the provisions to the effect that the district would be contractually obligated until the city's revenue *702 bonds were paid off or until the district was annexed. The instrument reads, "[T]his agreement shall continue for the full time necessary to pay off all indebtedness of the system...." This provision supports the expressed intention that the district was to pay for maintenance, operation and repairs as they can occur only over a period of time and it is over a period of time that the defendant and its resident sewer users gain the benefit of the agreement. The cross claim by the defendant arises from facts entirely unrelated to those involving the contract above discussed. The city of Bremerton operates its water system beyond its own boundaries. It happens to supply the water in the area of the appellant sewage district and the district is one of its customers. In 1963 the city, under the authority of an ordinance, installed new water pipes outside its municipal boundaries to supersede old pipes to which the district was connected. Six-inch cast-iron mains were used to supersede the existing one and one-half to two-inch pipes. The district claimed that its water supply by the old pipes was adequate and refused to pay a charge in the amount of $186.18 made by the city to defray the cost of the new mains. The total was computed on a rate of $2.75 per front foot charge to customers outside the city. The city cut off the water supply to the district's building. The district made this cross claim for damages resulting from its loss of water, but at the trial it waived its claim for damages and only asked that its water service be resumed. The trial court in its conclusions of law stated that The district appeals from this adverse decision of the trial court. It bases its appeal on three different grounds which we will consider in the order presented by the district. The district's first argument is that the city did not have authority to replace water lines outside its limits. Finding of *703 fact No. 12 states "That plaintiff Water Department owned all of the pipes and water supply system within the defendant District, having acquired the same by purchase and grant over the prior years." Although the district assigns error to this finding of fact it does not argue that there is no evidence to support the above-quoted portion, hence we will accept the ownership as established. The language of the Laws of 1959, ch. 90, § 6, p. 533 (effective at the time the new pipes were installed) leaves us no doubt that the city can operate and maintain the water service outside its boundaries and make the necessary charges for the service and costs of replacement. We quote from that statute: It was decided in Spear v. Bremerton, 90 Wash. 507, 156 Pac. 825 (1916), under an earlier version of the above-cited statute, that a city could sell water outside its own boundaries. But the district urges that the Spear case, supra, is authority for its contention that the city did not have any authority for repairing the water lines outside its corporate boundaries. We cannot agree with such an interpretation of the Spear case, supra. We merely held in that case that there was no statutory authority for "one city to take over a [water] distributing system in another city." (Italics ours.) Spear v. Bremerton, supra, at 511. We find the cited *704 statute permits the city's ownership of the water system in the sewer district area and that the city was empowered to make the replacements to the water line and charge therefor. [5] Next, argues the district, there was no necessity for the new water mains. Inquiry into the propriety of a determination of necessity is beyond our realm without assertions of fraud or bad faith, which the district does not make in this appeal. In Blade v. Town of LaConner, 167 Wash. 403, 407, 9 P.2d 381 (1932) we said: The city, by statute, had "full power to regulate and control the use, distribution, and price" of its water service. Laws of 1959, ch. 90, § 6, p. 533. [6] Finally, the district argues that the rates for putting in the new water lines are discriminatory and unreasonable. It states, "Although cities may be permitted to discriminate in the rate of a water charge to non-resident users as opposed to resident users, the same is not true of the charge for costs of replacements. Such a charge must be based upon and related to the reasonable cost of said replacement." However, the district has cited no authority for *705 the proposition that there can be no discrimination in rates charged for replacement expenses. As to the second phase of this argument, the charge for replacement being unreasonable, the trial court found that the charge was reasonable and commensurate with costs. We feel the record supports this finding. The judgment is affirmed. FINLEY, C.J., HILL, HUNTER, and HAMILTON, JJ., concur. [*] Reported in 430 P.2d 956. [] Judge Barnett is serving as a judge pro tempore of the Supreme Court pursuant to Art. 4, § 2(a) (amendment 38), state constitution.