Opinion ID: 524344
Heading Depth: 3
Heading Rank: 1

Heading: The Construction Fund

Text: 80 Relying on the special fund doctrine, the district court limited the source from which PDM could collect its judgment to the Construction and Revenue Funds of WNP-4/5. PDM argues that the special fund doctrine does not apply and that Mod. 33 obligated WPPSS to pay from other funds. 81 WPPSS is a joint operating agency formed under Wash.Rev.Code Sec. 43.52.360. It is a municipal corporation and, with few exceptions, has all the powers granted a public utility district. See Wash.Rev.Code Secs. 43.52.360; 43.52.391. It may create special funds for varied purposes, including the construction of a utility. See Wash.Rev.Code Secs. 43.52.375; 43.52.3411; 54.24.018(3); 54.24.030(1); 54.24.040; 54.24.050. 82 The special fund doctrine applies to joint operating agencies. See Public Util. Dist. No. 1 v. WPPSS, 104 Wash.2d 353, 705 P.2d 1195, 1206 (1985). Once created, a special fund generally may not be used for any other purpose and the claims payable from it are usually not payable from another fund. Id. (citing 15 E. McQuillin, Municipal Corporations Sec. 39.45 (3d ed. 1985)). 83 Resolution 890 established WNP-4/5 as a separate utility and the Projects Construction Fund as a special fund. See WPPSS, 705 P.2d at 1201 n. 4, 1210. To determine whether the special fund doctrine applies, we employ a four-step analysis. See id. at 1206-11. First, the joint operating agency must have the power to create the special fund. Next, it must create the special fund. Third, the revenues pledged to the fund must not include revenues from other projects. Finally, it must assign the money to create a lien. 84 The Construction Fund meets these requirements. First, the language and policy behind the statutes governing joint operating agencies indicate that WPPSS has the power to create a special fund to pay the cost of construction for WNP-4 and WNP-5. See Sec. 43.52.3411; Sec. 54.24.030; WPPSS, 705 P.2d at 1207, 1210. 85 Next, viewing Resolution 890 as a whole, the parties created a special fund. They intended to establish a special fund to pay the cost of construction of each project and intended to limit the funds pledged to the Construction Fund. Section 6.8 of Resolution 890 states in part: 86 Construction Fund; Application of Proceeds and Sale of Bonds. There is hereby created a special fund of the System to be known as the Projects Construction Fund (hereinafter referred to as the Construction Fund), which shall be held in trust by the System. 87 (emphasis added). Section 6.9 of Resolution 890 states in part: 88 Cost of Construction. Payment of the Cost of Construction of each Project shall be made from the moneys in the Construction Fund. 89 (emphasis added). The directory term shall mandates payment from the Construction Fund. See WPPSS, 705 P.2d at 1206. Together these two sections demonstrate that the parties intended this fund to be the sole source of payment of construction costs. See id. at 1209. These sections also demonstrate that the parties intended to limit the funds pledged for payment of the construction costs to the Construction Fund. 90 Third, the language of Section 6.8 of Resolution 890 demonstrates that the parties limited the pledge to the revenues of WNP-4/5. Section 6.8 refers to funds deposited to the Construction Fund. Only revenues from bonds issued in connection with WNP-4/5 go into the fund. The conclusion that the parties limited the pledge to WNP-4/5 revenues is also consistent with the statutory scheme because WNP-4/5 is a separate utility. WPPSS, 705 P.2d at 1210. 91 Finally, Wash.Rev.Code Sec. 54.24.040 demonstrates the legislature's intent to assign funds pledged to a special fund by a joint operating agency. The statute provides: 92 It is the intention hereof that any pledge of the revenues or other moneys or obligations made by a district shall be valid and binding from the time that the pledge is made; that the revenues or other moneys or obligations so pledged and thereafter received by the district shall immediately be subject to the lien of such pledge without any physical delivery or further act, and that the lien of any such pledge shall be valid and binding as against any parties having claims of any kind in tort, contract, or otherwise against a district irrespective of whether such parties have notice thereof. Neither the resolution nor other instrument by which a pledge is created need be recorded. 93 (emphasis added). 94 Although the WPPSS court relied on a resolution rather than a statute for the assignment of funds, this difference does not affect the outcome here. WPPSS held that Resolution 1199 equitably assigned the funds pledged. Section 54.24.040 tracks the language of that resolution. Resolutions of municipal corporations are similar to legislative acts. One dealing with the corporation has notice of its resolutions. See, e.g., State ex rel. Bain v. Clallam County Bd. of County Comm'rs, 77 Wash.2d 542, 463 P.2d 617, 621 (1970). WPPSS's board exercises the joint operating agency's legislative power, and its resolutions become a matter of public record. See Sec. 43.52.360; Clallam, 463 P.2d at 621. As in Resolution 1199 in WPPSS, here the interaction of Resolution 890 and section 54.24.040 equitably assigns the funds pledged. 95 PDM argues that in WPPSS an agreement specifically required payment from a special fund. It argues that the special fund doctrine does not apply because Mod. 33 has no similar limitation. 96 Although the court in WPPSS examined the agreement as one of the documents, it did not hold that the special fund doctrine required the parties to limit payment contractually to proceeds out of the special fund. There the parties executed the agreement as part of the entire transaction creating the fund. See 705 P.2d at 1207. The court examined all documents to ascertain the parties' intent. Here, the Construction Fund was created seven years before Mod. 33 existed. Mod. 33 has no bearing on whether the parties intended to create a special fund when Resolution 890 was executed. 97 PDM argues that Mod. 33 obligated WPPSS to pay the counterclaim regardless of the existence of the Construction Fund. It argues that WPPSS may incur general obligations and that Mod. 33 created one. 98 That argument ignores the status of joint operating agencies as municipal corporations and the application of the special fund doctrine to this case. Because Resolution 890 created a special fund for the payment of the Cost of Construction, Mod. 33 does not apply. PDM was bound by notice of the limitations imposed on WPPSS by Resolution 890's provisions dealing with the Construction Fund. See Clallam, 463 P.2d at 621; Findley v. Hull, 13 Wash. 236, 43 P. 28, 29 (1895). In effect, the resolution became a contractual provision that the parties could not alter. See, e.g., Soule v. City of Seattle, 6 Wash. 315, 33 P. 384, 386 (1893). 99 Assuming, as PDM argues, that WPPSS had the power and the requisite intent to create a general obligation, it would have been an invalid attempt by WPPSS to contract beyond its authority. In Pratt v. Seattle, 111 Wash. 104, 189 P. 565, 570 (1920), a deficiency resulted when Seattle could not collect part of a special assessment for street improvements. A later ordinance assumed the deficiency as a general indebtedness. The court said: 100 [T]he special assessment obligation was not one that the city had power to voluntarily assume after the completion of the local improvements; they having been initiated and carried to completion with the avowed purpose on the part of the city that their entire cost shall be paid for from funds to be raised by special assessments against property benefited thereby. 101 Id. 189 P. at 571. In light of Pratt, WPPSS, after creating the Construction Fund, could not assume the deficiency by contract. See also Lester N. Johnson Co. v. City of Spokane, 22 Wash.App. 265, 588 P.2d 1214, 1220 (1978).