Kinkade v. Witherop

69 P. 399, 29 Wash. 10, 1902 Wash. LEXIS 547

• Court: Washington Supreme Court
• Decided: July 5, 1902
• Docket: No. 4004
• Status: Published

Opinion

The opinion of the court was delivered by

Fullerton, J.

The appellant’s action is in form an action toi remove a cloud from title1. Its purposes are to test the. constitutionality of the act of tlie legislature of this state entitled “An act providing for the organization and government of irrigating districts, and the sale of bonds arising therefrom, and declaring an emergency,” and the act amendatory thereof (Session Laws 1889-90, p. G71; Id., 1895, p-. 432), and to test the validity of certain bonds issued by the Middle Kittitas Irrigation District, a corporation organized pursuant to the statutes cited.

The question of the constitutionality of these statutes has been twice before this court; first in the ease of Board of Directors v. Peterson, 4 Wash. 147 (29 Pac. 995), and again in State ex rel. Witherop v. Brown, 19 Wash. 383 (53 Pac. 548). In the first of these cases it was said that, in view of the opinion of the trial court, and the concessions made on the .argument by counsel, but one question was presented for the decision of the court, viz., is an irrigation district formed under tlie provisions of the act a municipal corporation within ihe meaning of § 6, art. 8, of the state constitution ? it being conceded that, if the act contemplated the organization of a municipal corporation, it was void, owing to. its failure to comply with certain provisions of "the. constitution providing for the regulation of such corporations. This question was, therefore, the only question discussed in the opinion. But, notwithstanding this, we cannot think the court meant to* leave open a,11 other questions that might be urged against its constitutionality. The trial court had held the act unconstitutional, and the case was here on appeal from that decision. Prom the record it appeared that the district organized pursuant to the act was about to engage in a vast enterprise, costing a large sum of money. It was proposing to issue bonds to raise money to carry on that enterprise. These bonds the court knew would be sold by tbe district to persons who would purchase thorn relying upon the faith of its decision upholding the law. Certainly, the court, would not, under-these circumstances, have overruled the trial court on mere concessions of counsel had it conceived that any of the objections suggested were of merit) or that there were other reasons which if urged would require it to overturn the act. Aside from its inherent improbability, the whole tenor of the opinion is against such a conclusion, and we think the case is entitled to thei weight of an adjudication by this court not only upon the question discussed, but upon all questions that might be urged against the constitutionality of the law. This view of that, decision seems to have been taken by the court in thei second case cited. That, was a proceeding in mandamus-to compel the board of county commissioners of Kittitas county to levy a tax to pay certain interest that had accrued upon bonds issued by the district of which thei board of directors in the first action was appellant. The unconstitutionality of the act was again urged. The court, however, did not. discuss-the question, contenting itself with the statement that, it saw nothing to convince it that the act was unconstitutional. As stare decisis is the policy of the courts the question of the constitutionality of the act might be rested on these decisions, but as the appellant suggests the further • question, namely, that the act deprives him of his property without due process of law, and thus violates the federal constitution, we will notice for a moment the provisions of ’ the act, upon which the claim is founded.

Section 78 of the act (Lays 1889-90, pi. 703) provides that the board of directors of an irrigation district, organized under the provisions of the act may commence a special proceeding in the courts, “in and by which the proceedings - of said board and of said district providing for and authorizing the issue and sale of the bonds of said district, whether said bonds or any of them have or have not then been sold, may be judicially examined, approved and confirmed.” The schema provided for this purpose authorized the board of directors of the district to file in the superior court of the county in which the lands of the district, or some portion thereof, are situated, a petition praying, in effect, that the proceedings had in the issuance of bonds he examined, approved, and confirmed by the court; that the court shall fix a time for hearing the petition, and shall thereupon direct the clerk to give notice of its filing, and of the time and place fixed for its hearing; and that “the notice shall bei given and published in the same manner and for the same length of time, that a notice of a special election provided for by this act to* determine whether the bonds of said district shall he issued is required to' be given and published,” — 'that is to say, no personal service of tira notice is required. The appellant argues that, inasmuch as the act creates a lien upon all of the lands in the district for the amount of the bonds issued, and provides that such lands may he taxed in invlturn and sold for the non-payment of such tax, it is, in effect, a law depriving the owners of their property, and is without due process of law, because it attempts to provide that the legality of the bond issue may ha established in a proceeding had upon substituted service, while the law is that a person, before he can be disturbed in his property rights, must be personally served with summons or notice when he resides wilhin the jurisdiction of the court, and can he so personally served. The case of In re Smith's Petition, 9 Wash. 85 (37 Pac. 311, 494), is cited as maintaining the position. In that case the act of March 9, 1893 (Laws 1893, p. 237), providing for the establishmentí of county roads, was held unconstitutional upon the ground, among others, that it did not provide for personal service of notice upon resident land owners whose lands would be taken in part by the establishment of the road. While a distinction might be pointed out between the principle of that case and the case in hand, we cannot think it applicable, even were it conceded tbat tbe rule there announced would apply to a proceeding of the character of the one before ns. If it he true that the notice provided for is not sufficient to render a judgment entered in a proceeding had thereunder of binding .force against such of the resident land owners of the district who are not personally served, and who do not appear and contest the proceeding, that fact would not render the whole act void, nor would it in any manner affect the validity of the proceedings had in the organization of the district, •or the validity of the proceedings leading up' to the bond issue. This part of the act was intended to furnish the officers of the district a means by wbicb they could have the validity of the proceedings had in the organization of the district submitted to the judgment of the court as to their sufficiency when, in their judgment, it was deemed so advisable; hut it was not made obligatory upon tbe officers to so1 submit it, nor was it made an essential part of the proceedings necessary io effect an organization of the district, or to effect an issuance of bonds thereafter. If, therefore, the legislature sought to give such judgment a greater effect than it could constitutionally have for lack of personal service, it would affect the judgment only, and could have m hearing upon the question whether the proceedings had for tbe organization of the district, or the issuance of bonds after the district was organized, wei'a without due process of law. The validity of these proceedings must he determined from an examination of the proceedings themselves, and the laws applicable thereto., not from the examination of the law enacted to provide a special means for testing their validity in the courts.

The appellant does, not seem to contend that the provisions of the act controlling the issuance of the bonds violate any other provision of the federal constitution, and we have not felt called upon to discuss the question. As authorities, however, upholding similar statutes where such questions were raised, we cite the following: Hagar v. Reclamation District, 111 U. S. 701 (4 Sup. Ct. 663); Fallbrook Irrigation District v. Bradley, 164 U. S. 112 (17 Sup. Ct. 56); Chicago, B. & Q. R. R. Co. v. Chicago, 166 U. S. 226 (17 Sup. Ct. 581).

An understanding of the second objection necessitates-a brief statement of the facts. The Middle Kittitas Irrigation District was organized in 1891. Shortly after its organization it authorized, in the manner provided by statute, an issue of bonds in the aggregate amount of two* hundred thousand dollars. It also entered into a contract with one Peter Costello for the construction of an irrigating canal and irrigating works, by the terms of which Costello was to be paid monthly ninety per centum of the value of the work as it progressed, on estimates returned by the engineer in charge. To procure the money to meet these payments, theboard of directors of the district entered' into a contract with Clough & Graves, for the sala of the entire issue of the bonds above mentioned, to. be paid for at ninety per centum of their par value, $25,000 worth on July 1, 1894, and $25,000 worth every thirty days theretafter until the whole amount should be taken. Clough & Graves were unable to* comply with their contract, and, as a consequence, the district was unable to meet the sums due Costello on his estimates as they became: due. In satisfaction of one of these estimates, for which he had received a, warrant, on the district treasurer amounting to $18,300, Costello agreed to accept the bonds of the district at ninety per centum of their face value. An arrangetment was thereupon made between the president, of the hoard of. directors and secretary of the district acting for the district and Clough & Graves and Costello, by which bonds of the face value of $20,000 were delivered to Costello in satisfaction of the amount of the estimate'. The action of the president and secretary was afterwards ratified by the district’s hoard of directors. These bonds the appellant claims were illegally issued, and do not constitute an, indebtedness of the district. The objections urged against them are that there was, no consideration for their issue, that they were not paid for in cash, that-they provided for the payment, of more interest than the statute permitted, and that they are not negotiable in form. That the bonds were issued to Costello, for an indebtedness of $18,300 actually due him from, the district abundantly appears from the record, and we cannot see how it can be said that there was no consideration for their issue. If the statute contemplated or required a sale for cash, we think the transaction between the parties amounted to that. The bonds had been contracted to Clough & Graves and were to, he delivered to them when they paid to the district the purchase price agreed upon. If Costello had paid Clough, & Graves $18,300 for the $20,000 worth of bonds received by him, and Clough & Graves had paid this sum to the district, and thei district had again paid it out to' Costello, the transaction would have been admittedly legal. 31ut the actual transaction between the parties amounted to that. Costello' had a right to' purchase the bonds from Clough & Graves. Clough & Graves owed the district and the district owed Costello-. If the parties chose to satisfy these ,mutual obligations by transferring the bonds, certainly it was not necessary to the legality of the transaction that they actually pass, the money between them. The claim that the bonds provided for the payment of more interest than the statute permitted is based upon the facts that the contract, with Clough & Graves provided that the bonds should draw interest “from and after the date of the payment therefor,” and that the bonds were dated on July 1st, and drew interest from! that date, while the payment was made in September following. It may be doubted whether these facts, were they all that appeared, would have invalidated the bonds; bnt it appears that Costello>paid$300more for the bonds than hei was obligated to do under his agreement to purchase them to' make up for this accumulated interest. This was. at least a suj>stantial compliance with the contract, and, as it violated no provision of the statute, neither the district nor any of its members can he heard toi complain. The last part of the objection is based upon thei provision of the statute which requires bonds issued by an irrigation district to be “negotiable in form.” The bonds, issued recited, among other things', that “All of the said bonds and the interest thereon, to ha paid by revenue derived from an annual tax upon thei real property of the district, . . .” It is said that commercial paper payable out of a particular fund is not negotiable, and hence these bonds are not negotiable in form. The recital objected to correctly recites the source from which the statute provides, the bonds shall bei paid, and thei language used isi a part of the language of the statute authorizing their issuance. But wei are unable to see how this recital can change the nature of the bonds. Were they silent on the matter, — that is, did they contain nothing more by way of recital than the mere promise to pay a fixed sum at a certain time, — the law itself would read the recital into each bond issue, and they would he no more negotiable in fact without the recital than with it. The statute must mean, therefore; that the bonds shall contain words of negotiability, not that they shall he in form deceptive of their actual effect. But we do not mean to, say thei bonds, are not negotiable in fact. On the contrary, it is- the plain purpose of the statute to make them negotiable, and the law will, for that reason, hold them so; notwithstanding they may not comply with the rules, of negotiability prescribed by the law merchant or the common law. As was said by the supreme court of the United States in Mercer County v. Hacket; 1 Wall. 83:

“This, species of bonds, is, a modem invention, intended to pass by manual delivery, and to, have, the qualities of negotiable paper; and their value depends, mainly upon this character. Being issued by states and corporations, they are necessarily under seal. But there, is nothing immoral or contrary to> good policy in making them negotiable, if the necessities, of commerce require that they should he so,. A mere technical dogma of the courts- o-f the common law1 cannot prohibit the commercial world from inventing or using any species of security not known in the last! century. Usage of trade and commerce are acknowledged by courts as part, of the common law, although they may have been, unknown to, Bracton or Blackstone. And this malleability to' suit the necessities and usages of the mercantile1 and commercial world is one of the most valuable characteristics, of the common law. When a corporation covenants to, p,ay to- hearer and gives a bond with negotiable qualities, and by this means obtains funds for the accomplishment! of the useful enterprises, of the day, it cannot he allowed to- evade the payment by parading some obsolete judicial decision that a bond, for some technical reason, cannot he made payable to- hearer. That these securities are treated as negotiable by the commercial usages of the whole civilized world, and have received the- sanctions of judicial recognition, not only in this court, but of nearly every state in thei Union, is well known and admitted.”

It appeal's that the trial court entered a judgment immediately upon filing its. findings of fact and conclusions of law, which, were filed in the absence of and without notice to the appellant’s counsel. It is contended that the statute (§ 5052, Ballinger), inasmuch as it allows the party desiring to except to the findings five days in which to do so after service of the same upon him when signed subsequently to the hearing and in his absence, contemplates that the judgment shall not be entered until the exceptions are filed, or the time for excepting has expired. While, perhaps, this may he the better practice, as it gives to thei trial court an opportunity to review its findings in tbe light of the exceptions, it does not constitute reversible error. Tbe losing party may still except within the time, and appeal in the regular way. It does not drive him, as the appellant, suggests, to a motion or petition to vacatei, in order to have the judgment reviewed on appeal.

Binding no substantial error in tbe record, the judgment appealed from will stand affirmed.

Hadley, Anders, Mount, Dunbar and White, JJ., concur.

Beavis, O. J., concurs in result.