Court Opinion

ID: 4719222
Source: CourtListenerOpinion
Date Created: 2021-08-12 02:35:03.534409+00
Date Added: 2024-06-11T08:07:34.692948
License: Public Domain

Mitchell, J.
This action was instituted by appellant, F. A. Twichell, as a taxpayer, to restrain the respondents, the city of Seattle and Puget Sound Traction, Light & Power Company, a corporation, from entering into a contract whereby $15,000,000 of utility bonds, payable from the revenues of the entire system, as provided for by ordinances of the city, are to be delivered to the traction company by the city in payment for the street railway system of the traction company in the city, which system the city is seeking to acquire as an addition and betterment to, and extension of, the city’s existing street railway system. He seeks further to enjoin the city from contracting for the purchase of electric energy for the operation of the street railway system, and also to enjoin the granting by the city of trackage rights to the Pacific Northwest Traction Company and the Puget Sound Electric Railway Company, called, respectively, the Everett and Tacoma interurbans, which have been operating their cars over the street railway tracks of the traction company within the limits of the city of Seattle; all things thus sought to be restrained being within and pursuant to the terms of an agreement between respondents.
To consummate its entire plan, the city passed four ordinances. The first one, No. 39,025, specifies and adopts the system or plan of additions, betterments and extensions of the city’s existing street railway system, provides for the acquisition of and payment for the street railway lines, property and equipment *41of the traction company and issuing bonds in payment therefor; and creates a special fund to pay the principal and interest of such bonds. This ordinance sets out a form to be substantially followed for the bonds and coupons.
The second ordinance, No. 39,069, is the purchase contract ordinance. It provides for the making of the contract of purchase and sale between respondents whereby the traction company sells to the city its entire street car system and property in the city for the sum of $15,000,000, payable in the utility bonds provided by ordinance No. 39,025, and sets out in haec verba a copy of the proposed contract. This ordinance also provides for a contract whereby the city agrees to purchase electric power from the traction company for the operation of the city’s street railways and pay for the same for a term of years.
The third ordinance, No. 39,070, provides for the making of an agreement with the company for the operation of interurban cars and trains of the Puget Sound Electric Railway (Tacoma Interurban) over certain of the tracks of the street car system to be acquired, among other things, in protection of the traction company’s existing contract with the interurban railway company. And the fourth ordinance, No. 39,071, is similar to No. 39,070 only it relates to the Pacific Northwest Traction Company, known as the Everett Interurban.
By his amended complaint, appellant Twichell, after alleging the contract for the purchase and sale of the property of the traction company for the sum of $15,-000,000, payable in utility bonds, pleads by number, title, and date of passage and approval, each of the four ordinances hereinbefore referred to, and then sets out with particularity much of the substance and *42effect of the ordinances and the plan and intentions of the respondents in support of the averment that the proposed bond issue, according to the manner and form outlined in the ordinances, is contrary to the power of the city under its charter and the laws of the state, threatening indebtedness of the city in excess of the amount permitted by the constitution of the state, and that the city intends to, and unless restrained will, issue and deliver said bonds to the traction company. He demands that the city be enjoined from issuing and delivering the bonds and that respondents be enjoined from completing the contract for the sale and purchase of the street car system and property.
To the amended complaint, the city answered with appropriate denials, and by affirmative answer and defense alleged that it already owns and operates a municipal street railway system and intends to acquire the system of the traction company to be operated in connection therewith; that, in order to adopt a plan for the acquisition of additions, and to acquire and operate the system of the traction company as an addition, betterment and extension of its present street railway system, it passed the ordinances referred to in the amended complaint, which ordinances are made a part of the city’s answer by appropriate reference and by setting them out m extenso, attached as exhibits A, B, C and D. The answer of the traction company to the amended complaint is to the same general effect as the answer of the city. To each of the affirmative answers and defenses, appellant Twichell demurred on the ground that the same, as it appears upon the face thereof, does not constitute a defense to the cause of action set out in the amended complaint.
*43After the filing of the answers, intervening appellant, Charles E. Horton, as a taxpayer, filed a complaint in intervention in the action. Other than the allegation that none of the provisions or plans of either of the four ordinances involved was ever submitted to the voters, and that the three ordinances other than the bond ordinance are drawn more positively and completely into the controversy, if possible, the complaint in intervention, while exhibiting more detail and particularity, may be taken, for the purposes of this case as we view it, similar to the amended complaint of Twichell. To the complaint in intervention, each respondent filed a general demurrer. The trial court sustained the demurrers of respondents to the complaint in intervention and overruled the demurrers to the affirmative answers and defenses of respondents to the amended complaint of Twichell. Appellant and intervening appellant each electing to stand upon the issues as made, the trial court entered a judgment of dismissal, from which this appeal is prosecuted by both complainants.
The principal contentions in the case center upon ordinances No. 39,025 and No. 39,069. Section 8005, Eem. Code, authorizes any incorporated city or town within the state, among other things, to construct, condemn and purchase, purchase, acquire, add to, maintain, operate or lease cable, electric and other railways within the limits of such city or town for the transportation of freight and passengers, and to fix, alter, regulate and control fares and rates to be charged thereon. Section 8006 of the code provides that, whenever the city council, shall deem it advisable that the city shall purchase, acquire or construct any public utility mentioned in § 8005, it shall provide therefor by ordinance specifying’ the system or plan *44proposed and the estimated cost thereof and submit the same to the qualified voters, except in certain cases where no submission shall be necessary, as follows :
1 ‘ (1) When the work proposed is an addition to, or betterment of, or extension of, or an increased water supply for, existing water-works, or an addition, betterment or extension of an existing system or plant of any other public utility mentioned in section 8005 hereof, for which no general indebtedness is to be incurred by such city or town ... ; or
“(2) Where in any charter of any city or town in the state of Washington heretofore or hereafter adopted by a vote of the people, an article or provision has been adopted authorizing the city council or other corporate authorities of such city to provide by ordinance for acquiring, opening or operating any of said public utilities, for which no general indebtedness is to be incurred by such city or town.”
The city of Seattle has a charter, art. 4, section 18, subdiv. 15 (a) of which confers upon the city council the right, by ordinance, to exercise certain powers, ' similar to those granted by § 8005 of the code. Section 8008 of the code provides:
“Whenever the common council or other corporate authorities of any such city or town shall be authorized to exercise any of the powers conferred by section 8005 hereof without submitting any proposition as provided in subdivision first and second of section 8006 hereof, the common council or other corporate authorities shall have power to create a special fund or funds for the sole purpose of defraying the cost of such public utility or addition, betterment or. extension thereto, into which special fund or funds the common council or other corporate authorities of such city or town may obligate and bind the city or town to set aside and pay a fixed proportion of the gross revenues of such public utility, or any fixed amount out of and not exceeding a fixed proportion of such revenues, or a fixed amount without regard to any fixed pro*45portion, and to issue and sell bonds or warrants bearing interest not exceeding six per centum per annum, payable semi-annually, executed in sucb manner and payable at such times and places as the common council or other corporate authorities of such city or town shall determine, but such bonds or warrants and the interest thereon shall be payable only out of such special fund or funds.”
The city, by ordinance No. 39,025, upon declaring that public interest and welfare require that the city acquire the street railway lines, property and equipment of the traction company as additions and betterments to and extensions of its existing municipal street railway system, determines and specifies the amount available for the payment out of the gross revenues into a special fund for the payment of the $15,000,000 bonds and interest; adopts and specifies, by setting forth in detail, the plan or system proposed; gives the number, amounts and dates of maturity of the bonds, bearing interest at five per cent per annum, stating:
“Said bonds shall be an obligation only against the special fund created and established in section 5 of this ordinance;”
Section 5 creates and establishes a special fund to be called “Municipal Street Railway Bond Fund, 1919,” into which the gross revenues of the municipal street railway system shall be paid for the payment of the bonds and interest; and in the form of the proposed bond set out in the ordinance it is stated that it is payable “solely out of the special fund of the city of Seattle known as the ‘Municipal Street Railway Bond Fund, 1919,’ ” created and established by the ordinance. As to the contract ordinance, No. 39,069, it requires no notice here other than to say it provides for the purchase and sale pursuant to the *46plan contained in ordinance No. 39,025, and that the consideration to he paid by the city is the sum of $15,000,000 in utility bonds, as authorized by that ordinance.
Viewed in the light thus far given, appellants may not complain, for the purchase of a public utility payable from the revenues of the utility is not the creation of a,debt within the meaning of the constitution. Rem. Code, §8008; Dean v. Walla Walla, 48 Wash. 75, 92 Pac. 895; Seattle v. Stirrat, 55 Wash. 560, 104 Pac. 834, 24 L. R. A. (N. S.) 1275; Uhler v. Olympia, 87 Wash. 1, 151 Pac. 117, 152 Pac. 998.
Appellants contend, however, that because of certain provisions of the ordinances and of the statute, now to be noticed, a general indebtedness is contemplated or involved; and also, that the proposed transaction may not be consummated without the ratification of the voters. If the completion of the purchase and sale as planned would create a general debt, it would doubtless require the sanction of the voters of the city, otherwise not so. Section 8008, already referred to, in speaking of the special fund to be created by the city council, further provides:
“In creating any such special fund or funds the common council or other corporate authorities of such city or town shall have due regard to the cost of operation and maintenance of the plant or system as constructed or added to, and to any proportion or part of the revenue previously pledged as a fund for the payment of bonds, warrants, or other indebtedness, and shall not set aside into such special fund a greater amount or proportion of the revenue and proceeds than in their judgment will be available over and above such cost of maintenance and operation and the amount or proportion, if any, of the revenue so previously pledged.”
*47In connection with this statutory provision, our attention is called to certain provisions of the plan or system ordinance, No. 39,025, in section 5 thereof, to the effect that the city, after providing for the special fund,
“does hereby irrevocably obligate and bind itself to pay into such fund out of the gross revenues of the municipal street railway system”
sufficient to meet the payments of interest and principal of the bonds as they fall due, stating the amounts and maturity of the same,
“and such fixed amounts out of such gross revenues are hereby pledged to such semi-annual payments of. interest and such annual payments of principal, and shall constitute a charge upon such gross revenues superior to all other charges whatsoever, including charges for maintenance and operation;”
and the obligation of the city in the bonds to pay them with interest, although out of the special fund,
“even though the balance of such gross receipts thereafter remaining may be insufficient to pay the cost of maintaining and operating said system and said additions and betterments thereto and extensions thereof. ’ ’
We are not persuaded by the argument of appellants in support of this contention. One will notice, from that portion of § 8008 of the code first quoted herein, that there are three methods by either of which the city council may determine the amount to set aside and pay out of the special fund for the utility bonds, viz.: (1) a fixed proportion of the gross revenues of the public utility; (2) a fixed amount out of and not exceeding a fixed proportion of such revenues; or (3) a fixed amount without regard to any fixed proportion. The latter, or third plan, is the one adopted by the city council in the present case and *48manifestly, from the standpoint of power, the city council was fully authorized to prefer and adopt it. Now, having adopted that plan, it became necessary, under the directions and mandate of § 8008 of the code, in creating the special fund and specifying the amount to be set aside into it to be used in paying for the utility, to have due regard to the cost of operation and maintenance of the system as constructed or added to and to any proportion or part of the revenues previously pledged, and not to set aside into such special fund a greater amount than in the judgment of the city council will be available over and above the cost of operation and maintenance and revenues previously pledged.
The city council kept the statute in mind, for section 2 of ordinance No. 39,025 contains the following:
“The gross revenues to be derived from the operation of the municipal street railway system of the City of Seattle, including the additions and betterments to, and extensions thereof, herein provided for, at the rates of transportation charged, and to be charged, upon the entire system, will be sufficient in the judgment of the council and of the corporate authorities of the city to meet all expenses of operation and maintenance, including the operation and maintenance of the proposed additions, betterments and extensions, and to providé all proportions or parts of revenues previously pledged as a fund for the payment of bonds, warrants and other indebtedness, with interest thereon, heretofore made payable out of the revenues of the existing municipal street railway system, and to permit the setting aside in a special fund, out of the gToss revenues of the entire system, amounts sufficient to pay the interest on the bonds hereby authorized to be issued, as such interest becomes due and payable, and to pay and redeem all of such bonds at maturity. ’ ’
*49And further on in the same ordinance, with particularity and detail, are set out the amounts and maturity of the bonds and interest.
The “due regard” clause of the statute is a guide to point the way—a curb or limitation upon the manner in which the city council shall exercise its judgment in determining the fixed amount of the gross revenues derived from the utility to constitute the special fund for the payment of the utility. The finding, and expression of judgment of the city council in that portion of the ordinance just above set out, reflects observance of the “due regard” clause of the statute; and when the city council has thus proceeded and determined, it has exhausted its power with reference to the creation of the special fund, and the contract becomes fixed and settled as against that fund. Whether or not the ordinance and bonds provide for a preference in favor of the bonds and interest out of the gross revenues of the system is unimportant to the integrity of the obligations, as demands upon the special fund, because the latter part of § 8008 of the code covers the matter by providing as follows:
“When any such special fund shall have been heretofore or shall be hereafter created and any such obligation shall have been heretofore or shall hereafter be issued against the same, ... a fixed amount without regard to any fixed proportion, of revenue shall be set aside and paid into said special fund as provided in the ordinance creating such fund, and in case any city or town shall fail to thus set aside and pay said fixed proportion or amount as aforesaid, the holder of any bond or warrant against such special fund may bring suit or action against the city or town and compel such setting aside and payment.”
In noticing the decisions of this state, it will be borne in mind that, by the whole of § 8008 of the code, that portion thereof as to the manner of ere*50ating the special fund is applicable whether the proposition has been submitted to the voters or not, provided no general indebtedness is to be incurred. In the case of Griffin v. Tacoma, 49 Wash. 524, 95 Pac. 1107, it was said:
“The same ordinance also created such special fund by setting aside from the gross revenues all proceeds derived from the water works system now belonging to, or which may hereafter belong to, the city at least fifty per cent thereof, exclusive of revenue for water used by the city for municipal purposes, and provided that all moneys so set aside and placed in such special fund shall he applied solely to payment for the aforesaid construction, and to other expenses necessarily incidental to such construction.”
In the case, the record of which has been examined, the opposition to the plan contended that the city was at liberty, because of the words “at least fifty per cent thereof,” to put the whole of the gross revenues into that special fund, leaving the operation and maintenance of the plant necessarily to be paid out of the general revenues of the city. However, further on in the opinion it was said:
“It is next suggested that the proposed pledging of the water receipts and the transfer from the general to the special fund, will obligate the city for new indebtedness which it cannot incur by reason of the constitutional limitation upon that subject. This court has already held that the mere pledge of the water receipts as a special fund does not create a debt against the municipality within the meaning of the constitutional inhibition. Winston v. Spokane, 12 Wash. 524, 41 Pac. 888; Faulkner v. Seattle, 19 Wash. 320, 53 Pac. 365; Dean v. Walla Walla, 48 Wash. 75, 92 Pac. 895.”
This case has often been cited and relied on since, in this state.
*51The later case of Scott v. Tacoma, 81 Wash. 178, 142 Pac. 467, was a case in which the ordinance, after providing for a special fund derived from the gross revenues of the municipal railway for paying the principal and interest of the utility bonds, provided:
“All the moneys so set aside and placed in said fund shall be applied solely to the payment of the obligations issued against the same, with interest thereon, 3 3
In the opinion the court held such plan did not create a debt, and specifically referred to and relied upon the case of Griffin v. Tacoma, supra.
The case of Schooley v. Chehalis, 84 Wash. 667, 147 Pac. 410, was a case involving two kinds of funds, one a general fund and the other a special fund, which latter was to meet the payment of interest and principal of the public utility bonds, and the ordinance provided that the latter or special fund
“Should be used solely for the purpose of paying the principal and interest of the bonds issued against the water system, and that such bonds should be a first and direct lien on the entire gross revenues of the water system.”
In the case it was contended by the party opposing the bond issue that the money the city was to pay for the purchase of the old water system, to be taken over by the new plan, would constitute an indebtedness of the city which, taken in connection with indebtedness already existing, would exceed the constitutional limit. But the court held otherwise because, by the plan of the city, the amount to be paid for the old water works was made a charge upon the revenues of the water system, following the rule announced in earlier cases in this court, including the case of Faulkner v. Seattle, 19 Wash. 320, 53 Pac. 365.
*52In the case of Faulkner v. Seattle, the same contention was made as is made in the case at bar (except here there is no showing or allegation as to what the expenses of operation and maintenance would be) and the court said:-
“It is conceded that bonds issued only against a fund to be created from the revenues of the system would not create a debt against the city. Winston v. Spokane, 12 Wash. 524 (41 Pac. 888). But it is contended in this ease that under the allegations of the complaint a debt would be created because the city proposes to bind itself to devote 75 per cent, of the gross receipts to the payment of the bonds and that it further appears that the remaining 25 per cent, would not be sufficient to cover the operating expenses of the system. But, conceding this to be true, we are of the opinion that it does not appear that any debt would be created by the contract. ’ ’
The statutes and decisions above referred to recognize a marked distinction between the creation of a debt and the creation of a condition upon which a debt might arise. In this case we have to do only with the question of the power of the city, not matters of propriety or policy. Neither the complaints nor the ordinance advise one what proportion of the anticipated gross revenues is considered sufficient to meet the obligations for the payment of the traction company’s property, and the consequent remainder for expenses of operation and maintenance. By the ordinance, one is simply told that, in the judgment of the city council, the gross revenues will be sufficient for all such purposes. In exercising that judgment, the city council exercises a legislative power over which the courts have no control. Ewing v. Seattle, 55 Wash. 229, 104 Pac. 259.
We are satisfied the proposed plan and bonds will not create any indebtedness against the city and that *53the city council has authority to consummate the purchase without the sanction of the qualified voters.
What we have already said disposes adversely of another contention of appellants that, in pledging the whole of the” gross revenues of the street railway system, if necessary, to pay the bonds and interest, the city council acted arbitrarily and in disregard of the statute to have due regard for the expenses of operation and maintenance of the system. All presumptions are contrary to such claim, while the ordinances and allegations of the complaints, as already seen, are wholly wanting in the discovery or statement of any facts suggesting arbitrariness on the part of the city council.
As to the contract for electric power provided for in ordinance No. 39,069 the city finds and declares the necessity therefor, for the purpose of operating the street railway system subsequent to the additions and extensions proposed. The ordinance and contract provide:
“Payment for power for which the city is obligated hereunder to pay in each calendar month, shall be made on the 25th of the next succeeding calendar month from the revenues derived from the municipal street railway system.”
The contract is within the power of, and its desirability within the judgment of, the city council.
As to the agreement contained in ordinance No.. 39,070, concerning the Puget Sound Electric Railway, commonly called the Tacoma Interurban, the ordinance recognizes a traffic agreement outstanding between the traction company and the interurban railway, recites that effective, regular and expeditious interurban train service is of advantage to the public, and gives the interurban the right, upon certain ex*54pressed terms and conditions, to a joint user with the city of certain of the tracks of the municipal street-railway system, specifically declaring it to be “granting a mere right to the railway to operate its cars over certain portions of said system.” The ordinance further provides:
“All payments required of the city hereunder shall be paid only out of the revenues of the municipal street railway system.”
We understand this is not a lease of any of the municipal street railways necessitating the calling for bids within the contemplation of ch. 137, Laws of 1917, p. 573. The agreement provided for by the ordinance does not divest the city of dominion over the property or even relieve it of the burden of maintenance and repairs. It is but a traffic agreement, the interurban railway company paying for “trackage rights” on a “car mile” basis.
Ordinance No. 39,071, relating to the Everett interurban railway, is similar to the other and requires no other notice here.
All four of these ordinances are designed to accomplish the main purpose of the acquisition by the city of the traction company’s street railway property as an addition to, and extension of, the already existing municipally-owned street car system, according to the power and authority granted by the statutes and the city charter. All of the ordinances are closely interrelated, and each of the last three tie and refer to the plan or system ordinance No. 39,025 by containing specific reference thereto. We are satisfied the power of the city has been exercised in the manner provided by the law. That inquiry limits the province of the court.
*55It results that the judgment appealed from must he, and it is, affirmed.
Holcomb, Main, Fullerton, Tolman, Parker, and Mount, JJ., concur.