Court Opinion

ID: 4719516
Source: CourtListenerOpinion
Date Created: 2021-08-12 02:35:17.472168+00
Date Added: 2024-06-11T08:07:35.373113
License: Public Domain

Mackintosh, J.
(dissenting)—The statute provides “that the city may issue and sell bonds bearing interest not exceeding six per cent per annum, payable semiannually.” For two reasons, the arrangement sanctioned by the majority of the court in this case violates the foregoing provision of the statute. In the first place, the scheme adopted is not the issuance of bonds bearing interest at the rate of six per cent. The bonds bear the interest rate of five per cent, which is expressly provided for in the bonds, with a reduction below the par value as a discount, and its character is not changed by calling it interest, for it is not interest. The second reason is that the statute expressly calls for interest payments semiannually, and, adopting the majority view that the discount is, in effect, interest, makes the interest payable not according to the statute, five per cent interest being payable semiannually, and the balance in a lump sum; that is, it is paid at the time the deduction from the face value of the bonds is made.
This court, in Spear v. Bremerton, 90 Wash. 507, 156 Pac. 825, frowned on a similar subterfuge, but we now seem to have smiled again at the present exhibition of high financing. The case of Uhler v. Olympia, 87 *585Wash. 1, 151 Pac. 117, 152 Pac. 998, in effect, overruled the case of Yesler v. Seattle, 1 Wash. 308, 25 Pac. 1014, but we now seem to have revived that case and made it the basis for the present decision. It would seem that express constitutional and statutory-provisions regulating the creation of a municipal indebtedness should receive some consideration in determining the validity of the methods adopted in the issuance of municipal obligations, but the decision in this case and others involving similar questions would indicate that the industry of creating public indebtedness is to be fostered at the expense of clear and explicit provisions of the law. When this industry has developed to such an extent that the taxpayer is no longer able to bear the burden, the courts will probably revert to fundamental principles and hold that constitutions and statutes are to be followed in the creation of municipal bonded indebtedness; but until such time, there seems to be no hope that such provisions will be given the consideration accorded them when considering transactions between private individuals.
It might be suggested that the proper way to issue six per cent bonds would be to issue them directly, and not to attempt by artifice to issue them by calling them five per cent bonds.
For the two foregoing reasons stated, I cannot agree with the opinion of the court.