S. Siwel Co. v. County of Los Angeles , 27 Cal. 2d 724 ( 1946 )

CARTER, J.

I concur in the judgment of reversal and am in accord with the views expressed in the opinion prepared by Justice Edmonds, but I believe there are other grounds for reversal than those advanced in said opinion.

Briefly put we have a situation in which an improvement was carried out by the city of South Gate in a certain portion or district of that city. To defray the costs of it bonds were issued by the city. Those bonds were not general obligations of the city but their payment was secured by the levy of a special assessment on the property in the district which was benefited by the improvement. Economic conditions impelled the Legislature to enact laws for the relief of the property in the district and for the broad purpose of restoring that property to the tax rolls in order that the general revenue should not suffer. (Sts. and Hy. Code, §§ 1626, 1626.5, 1627, 1628.)

The position taken by respondents is that the relief legislation may be interpreted to mean that the county may purchase all of the bonds, cancel them and turn them over to the city. The latter may then cancel all or no part of the assessments which have been levied to retire the bonds. In other words, the city could collect all of the assessments and devote that money to whatever municipal purpose it desired in spite of the fact that the money enabling the city to so act came from the county. Such broad discretion in the city with respect to cancellation of assessments amounts in effect to a gift by the county to the city, for the county would have no control over the extent to which assessments were cancelled although it supplied the money for that purpose. The general taxpayers of the county would be compelled to pay for purely municipal activities of the city. To so interpret the act is to render it unconstitutional. Article IV, section 31, of the Constitution of California, provides: “The Legislature shall have no power to give or to lend, or to authorize the giving or lending, of the credit of the State, or of any county, city and county, city, township or other political corporation or subdivision of the State now existing, or that may be hereafter established, in aid of or to any person, association, or corporation, whether municipal or otherwise, or to pledge the credit thereof, in any manner whatever, for the payment of the liabilities of any individual, association, municipal or other corporation whatever; nor shall it have power to make any gift or authorize the making of any gift, of any public money or thing of value to any individual, municipal or other corporation whatever.” [Emphasis added.] In applying the foregoing provision of the Constitution this court stated in City of Oakland v. Garrison, 194 Cal. 298, 303 [228 P. 433] :

“Section 31 of article IV of the constitution provides in effect that the legislature shall have no power to authorize the making of any gift of any public money to any municipal corporation. It may reasonably be concluded, and we shall assume for the purposes hereof, that this provision would prevent the appropriation of county funds to a municipal corporation even for a public purpose, if that purpose were purely municipal and of no interest or benefit to the county as a political subdivision.” There are only two situations here involved in which the county may transfer its funds to a city without violating the Constitution. The first is where the purpose is to restore property to the county tax roll and thus lessen the burden of the general taxpayers of the county. The county thus benefits and the purpose of the transfer of funds and use thereof is a public one and no gift has been made. This ordinarily arises where the county cancels assessments in special assessment districts. Such was the case in County of San Diego v. Hammond, 6 Cal.2d 709, 728 [59 P.2d 478, 105 A.L.R. 1155], where this court stated: “Respondents further complain that the improvements for which bonds were issued in some instances included water mains or sanitary sewers, or both, and that the county could not in the first instance have levied a tax for such purposes. It will be noted, however, that we have not based our conclusion that the county may contribute toward the payment of said original bonded indebtedness upon the ground that the county could in the first instance have paid a part of the cost of said improvement, but upon the ground that the purpose of the payment of a portion of said indebtedness is to relieve the property in said delinquent districts of the heavy burden of taxes existing against it in order that the property may be restored to the tax rolls of the county and thereby and thereafter bear its proportionate share of the expense of maintaining said county.” [Emphasis added.] However, in the ease at bar, if the city may in its discretion refuse to cancel any assessments although the county has with its funds paid or cancelled the bonds, and may collect the assessments, the property will not be returned to the county tax roll for it has not been relieved of the assessments. The county and its general taxpayers have nof benefited and hence no county public purpose has been served. The only way that the desired result may be accomplished is that the assessments are necessarily cancelled to the extent that the county has used its funds to purchase and cancel the bonds.

The second county public purpose, and hence not a gift, which might be achieved would be where the money spent is used for improvements in which the county has an interest as distinguished from those of purely local city concern. We have no such situation here. There is no restriction upon what use may be made of the assessments collected by the city after the bonds have been retired. The statute under which the bonds were issued provides: “Any money remaining in any acquisition and improvement district interest and sinking fund after all of the bonds of the district have been retired shall be transferred to the general fund of the . . . municipality, as the case may be, whose legislative body has had jurisdiction over the proceeding and may by said body be used in repairing any public way in said district, regardless of whether a portion or all of the district as originally formed may have been included within one or more municipalities which did not include such portion or all of the district at the time the proceedings for the same were initiated. ’ ’ (Stats. 1925, p. 892, § 41.) It is very doubtful that that section has any application to the funds involved in the instant case, but even if it be assumed that it does, the money collected may be used for repairing public ways in the city in which the county has no conceivable interest. Hence there is a gift by the county to the city for a purely municipal purpose.

It is not to be supposed that the Legislature intended to authorize the county to give funds to the city and leave it to the arbitrary power of the latter to use them for other than county purposes, thus violating article IV, section 31, of the Constitution. And what is more, vest in the city the power to completely thwart the sole purpose of the relief statute, that is, to restore the property to the county tax rolls. It must necessarily follow that when the county, acting pursuant to the relief statute, buys the bonds and cancels them, the city must cancel the assessments in a corresponding amount.

The foregoing interpretation of the statute is fortified by the expressions therein that the bonds which may be purchased by the county are those connected with an improvement from which the county benefits.. It provides: “It is the intention of this section that the expenditures authorized in section 1625.5 shall not be made, and that the funds specified in section 1627 shall not be expended for any of the purposes authorized in sections 1626 and 1626.5, if the public highways, bridges or culverts are of only local use.” [Emphasis added.] (Sts. & Hy. Code, § 1628.) If the city may devote the money to purely local uses, the above safeguard is meaningless.

The relief legislation here involved contains the following provision: “Whenever as the result of the retirement, cancellation or redemption of bonds as in this section provided, the legislative body which conducted the proceedings for the issuance of such bonds by resolution duly passed determines that there is sufficient money in the interest and sinking fund or other proper fund to adequately provide for the retirement or payment of the penalties, interest and principal of all outstanding bonds of such district as the same are or shall fall due, such legislative body may, in its discretion, direct the cancellation or, if its taxes are collected through another legislative body it may in its discretion Toy resolution order such other legislative tody to direct the cancellation of all or any portion of the unpaid taxes and assessments and the penalties thereon and the lien thereof levied or to be levied for the payment of such penalties, principal and interest.” [Emphasis added.] (Sts. & Hy. Code, § 1626.) In view of the foregoing discussion it seems clear to me that should the city exercise its discretion by refusing to cancel all of the assessments when all bonds have been purchased by the county and surrendered to the city for cancellation, and the city should thereafter collect such assessments, it would be required to reimburse the county for the amount so collected. Obviously, this was never contemplated by the framers of the relief legislation.

Schauer, J., concurred.