21 Wash. 206 | Wash. | 1899
The opinion of the court was delivered by
This is an application to restrain the defendants, the governor and state auditor, from issuing a state bond for sale to the permanent school fund of the state under the act of the legislature providing for the investment of the permanent school fund in state bonds, approved March 8, 1899 (Laws 1899, p. 67). The facts
“ The state may, to meet casual deficits or failure in revenues, or for expenses not provided for, contract debts, but such debts, direct and contingent, singly or in the aggregate, shall not at any time exceed four hundred thousand dollars ($400,000), and the moneys arising from the loans creating such debts shall be applied to the purpose for which they were obtained, or to repay the debts so contracted, and to no other purpose whatever.”
Section o, art. 16, of the constitution specifies that the permanent school fund may be invested in national, state, county or municipal bonds.
1. ISTo qiiestion is made upon the investment of the permanent school fund in the bonds of the state. They are the class of securities authorized for its investment by the constitution. This fund has been created by the constitution, and can be used for no other purpose than the maintenance of common schools, and the interest is devoted to that purpose. The principal is irreducible. The question for determination here is whether the state exceeds the debt limit in the issuance of the bond in question. Relator contends that the indebtedness of the state is increased by the issuance of the bond. It must be borne in mind that the permanent school fund is held in the state treasury in trust for the purposes created by the constitution, and that it is made the duty of the treasurer, upon the investment of this fund in the bond, to transfer at once from such fund to the state general fund the par value of the bond, and the amount so transferred to the general fund shall be used at once in the redemption of outstanding’ general fund warrants. Section 6 of the same article (8) of the constitution limits municipal indebtedness, and should receive the same construction as § 1 relative to state indebtedness. Section 6 has been the subject
2. The foregoing conclusions may be distinguished from those arrived at by the court in State ex rel. Jones v. McGraw, 12 Wash. 541 (41 Pac. 893). In that case the act of the legislature of March 22, 1895 (Laws 1895, p. 462), was construed. By § 1 of the act a loan and interest fund was created in the state treasury and a board of finance constituted. To this board, by § 2 of the act, was given authority to fund the outstanding warrants of the general, military and tide land funds of the state by the issuance of bonds payable solely out of the fund created. The board of finance was directed to issue bonds and offer the same for sale after published notice. The court, following the authority of Doon Township v. Cummins, 142 U. S. 366 (12 Sup. Ct. 220), determined that the issuance and sale of bonds under the act in question by the finance board increased the indebtedness of the state beyond the constitutional limitation at that time. The case before the supreme court of the United States arose upon the construction of an Iowa statute, as follows:
*210 “ The treasurer of such district is hereby authorized to sell the bonds provided for in this act at not less than their par value, and apply the proceeds thereof to the payment of the outstanding bonded indebtedness of the district, or he may exchange such bonds for outstanding bonds par for par.”
And the court there observed:
“ There is a wide difference in the two alternatives which this statute undertakes to authorize. The second alternative, of exchanging bonds issued under the statute for outstanding bonds, by which the new bonds, as soon as issued to the holders of the old ones, would be a substitute for and an extinguishment of them, so that the aggregate outstanding indebtedness of the corporation would not be increased, might be consistent with the constitution. But under the first alternative, by which the treasurer is authorized to sell the new bonds, and to apply the proceeds of the sale to the payment of the outstanding ones, it is evident that, if new bonds are issued without a cancellation or surrender of the old ones, the aggregate debt outstanding, and on which the corporation is liable to be sued, is at once and necessarily increased, and, if new bonds, equal in amount to the old ones, are so issued at one time, is doubled; and that it will remain at the increased amount until the proceeds of the new bonds are applied to the payment of the old ones, or until some of the obligations are otherwise discharged. ... It would be inconsistent alike with the words and with the object of the constitutional provision, framed to protect municipal corporations from being loaded with debt beyond a certain limit, to make their liability to be charged with debts contracted beyond that limit depend solely upon the discretion or the honesty of their officers.”
And the other case referred to in the opinion of the court — Bannock Co. v. C. Bunting & Co., (Idaho) 37 Pac. 277 — follows the same course of reasoning. But the argument upon which the conclusion is based in State ex rel. Jones v. McGrow, supra, is not applicable to the case at
We conclude that the issuance of the bond is valid, and the writ is therefore denied.
Gordon, O. J., and Dunbar, Fullerton and Anders, •JJ., concur.