Mines v. Del Valle

This action was instituted by plaintiff, a taxpayer of the city of Los Angeles, against certain officers of said city to compel the repayment by said officers into the treasury of said city of certain sums of money which plaintiff alleges were illegally paid out by said officers. The defendants are the members of the board of public service commissioners, the controller of the public service department, the auditor and treasurer, respectively, of the city of Los Angeles. The complaint sets forth that on the fourteenth day of May, 1923, the city council of said city of Los Angeles, by the passage of the resolution provided by law, called an election, at which there was submitted to the the electors of said city the proposition of incurring a bonded indebtedness in the amount of $35,000,000 for the purpose of the acquisition, construction and completion by

The defendants jointly answered said complaint and denied that they had unlawfully approved, allowed, or ordered paid any claim against said city or had unlawfully paid out of the treasury of said city any funds of said city upon any claim mentioned in said complaint. They also denied that by reason of any action on their part as alleged in said complaint the burden of taxation had been or would be materially or otherwise increased on the lands or property of plaintiff located in said city or upon any of the lands or property of the taxpayers therein. As a special defense defendants set up in their answer that the city of Los Angeles was then, and for more than five years prior thereto had been, the owner of, through the department of public service, of which the board of public service commissioners had charge and control, and during said time, through said department, had been and was then engaged in the business of operating, a system consisting of works and plants located inside and outside of said city for the generation of hydroelectric energy, lines

[1] At the outset, appellants contend that the judgment against them cannot stand, for the reason that the complaint, while alleging that respondent is a taxpayer, fails to show that he is a resident of the city of Los Angeles, and that an action of this character can only be maintained by a citizen and resident of the municipality in whose behalf the same is prosecuted. Appellants cite section 526a of the Code of Civil Procedure in support of this contention. This court has expressly ruled to the contrary (Osburn v. Stone, 170 Cal. 480 , 482 [ 150 Pac. 367 ] ; see, also, Crowe v. Boyle, 184 Cal. 117 , 152 [ 193 Pac. 111 ]).

[2] The next ground advanced by appellants for a reversal of the judgment is that as the answer contains denials putting in issue material allegations of the complaint, it was error on the part of the trial court to grant respondent’s motion for judgment on the pleadings. The only denials in appellants’ answer are (1) they deny that they unlawfully approved, allowed, or ordered paid or unlawfully paid any of the claims mentioned in the complaint, and (2) they deny that by reason of any of the acts of appellants set forth in said complaint the burden of taxation has been materially increased upon the property of respondent or upon any property in said city. As to the first of these denials we do not understand that appellants claim that it raises any issue of fact which requires or permits the introduction of evidence to sustain or disprove it. The other of the two denials of the answer likewise raises no issue of fact. [3] If money belonging to the city is illegally paid out by its officers, the inevitable result

[5] This question is fairly and comprehensively stated by appellants as follows: “The main, practical question, on the present controversy, is, whether the power revenue funds of the city may lawfully be expended upon publicity, in the form of newspaper ads, circulars, posters, banners and the like, addressed to the people of the city for the purpose of bringing about the approval of a popular bond issue designed to enable the city to enlarge its electric system and extend its electric power business.”

The city of Los Angeles at the time this controversy arose, and for some time prior thereto, was governed by a charter regularly adopted by the electors of said city and

“The Board of Public Service Commissioners shall have power:

“To manage and control ... all electric plants, works, systems and equipments, and all electric power belonging to the city.

“To construct, operate, maintain and extend . . . electric plants, works, systems and equipments, and other means for supplying the city and its inhabitants with electricity for light, power, heat and other purposes; ...”

Section 192 (h) of said charter empowers the board: “To control and order the expenditure of all moneys received from the sale or use of electric power, or otherwise in connection with the operation and management of the electric power works and systems of said city; provided, that all such moneys shall be deposited in the treasury of the city, to the credit of a fund to be known as the ‘Power Revenue Fund’; ...” By the same section it is provided that: “ . . . none of the money in said Power Revenue Fund, or coming under the control of said board in connection with the operation of electric power plants, works or systems of the city, shall be appropriated or used for any purpose or purposes other than the following, to-wit: . . . For the necessary expense of conducting, operating and maintaining and extending the business of said department pertaining to electric power, of the electric power works, plants, systems and equipments and of making all current and ordinary extensions, betterments and repairs.” A further provision of the charter, subdivision 50 of section 2, it is claimed by appellants, has some bearing upon the solution of the question in controversy. This provision reads as follows: “The city of Los Angeles shall have and it is hereby given and it hereby reserves unto itself, and the people of the city hereby reserve unto it, and the people of the state of California hereby grant unto it, and said city may hereafter exercise each and every of the powers which a municipal corporation might or could exercise under the constitution of the state of California; ...” Under these provisions of the charter the appellants contend that the board of public service commissioners, in the management and operation of the city’s electrical utilities and in the expenditures

The specific language relied upon by appellants in support of this claim and in justification of said expenditure by said board of public service commissioners is that found in section 192(g) of the charter whereby said board is given the power to manage and control all electric plants and works belonging to the city, and “To construct, operate, maintain and extend . . . electric plants, works, systems and equipments, ...” and by section 192(h) of the charter whereby said board is empowered to expend and use money in the power revenue fund for the purpose of “conducting, operating and maintaining and extending the business of said department pertaining to electric power,” and particularly upon the words “extend electric plants, works,” etc., and' “extending the business of said department.” It is argued by appellants that as the charter expressly gives to said board the authority to extend the electrical plants and works under its charge, it is thereby given implied power to do all acts and things necessary to execute the power expressly given. The right to extend said system being expressly given, appellants contend that one of the necessary steps in the extension of said system is providing the funds with which to make said extension and as it is admitted the funds necessary for this purpose could only be raised by means of a bond issue, that said board was authorized to expend a reasonable amount of said funds to insure the success of said bond issue. The vice of this argument is in 'assuming that the raising of the necessary funds is any part of the power to extend said electrical system. We may all concede that the system cannot be extended without funds with which to carry on such extension. But the raising of the money to extend said system is one thing and the extension of it is an entirely different and distinct power. [6] The provisions of the charter giving to the board of public service commissioners power to extend the electrical plants and works of said city and to expend the funds in the power fund for the purpose of extending said public utility in our opinion refer simply to the physical management of the same and cannot be enlarged to include another and distinct power,

Our attention has been directed to the recent case of In re East Bay etc. Water Bonds of 1925, decided by this court and reported in 196 Cal. 725 [ 239 Pac. 38 ], in which there is to be found language to the effect that the ordinary newspaper notice is ineffective in notifying the electors of a city of an approaching bond election. Conceding this to be true, we do not understand that appellants are before this court simply contending that the expense incurred and paid out by them was for giving notice to the voters of said city of the approaching election. It is alleged in the complaint, and not denied by appellants, that said funds were used for the purpose and with the intent of influencing the voters of said city to vote in favor of said bond issue. In addition to the pleadings, appellants in their brief state that the practical question presented by this controversy is whether the power funds of the city may be lawfully expended for the purpose of bringing about the approval of a bond issue. We apprehend that if the only payments made by appellants in connection with said bond campaign had been those which were incurred in giving what might be termed public notice of said election in addition to that provided by statute,- this proceeding would not be before us, although we seriously question whether said board would have the power to extend the funds in the power fund for such purpose. But, be that as it may, the pleadings in this proceeding, as well as the admission of counsel for

As we have already observed, the sole reliance of appellants in so far as the charter is concerned, is upon the words “extend” and “extending,” used in said sections 192(g) and 192(h). The word “extension” in an action almost precisely the same as that in which the words “extend” and “extending” are used in said sections of the charter of Los Angeles, has been the subject of judicial consideration by this court. By the charter of the city and county of San Francisco (see. 16, art. XII), the board of supervisors are authorized to make appropriations from receipts of any public utility operated by said city for the purpose of “extensions and improvements.” Said city was operating a municipal railway system. Under this provision of the charter the board of supervisors passed an ordinance whereby it sought to appropriate a sum of money from the receipts of said municipal railway for the purpose of investigating the condition and availability of a privately owned railway system operated in said city, with a view of purchasing the whole or a part of said private system. A taxpayer of the city brought an action to enjoin the expenditure of the money so appropriated. The trial court gave judgment in favor of the plaintiff and on appeal said judgment was affirmed by the district court of appeal. A petition to hear said cause in the supreme court was denied and in denying the same this court said: 11 Without regard to any other question discussed in the opinion of the district court of appeal, we are satisfied that the charter of San Francisco, as now written, does not authorize the payment of money from the funds of the municipal railway system for the purpose of investigating the condition and availability of a part- or the whole of another street railway with a view to its purchase. The purposes for which expenditures from such fund can be made are carefully specified in section 16, article XII, of the charter, which, we think, excludes any such expenditure as here proposed. Such an

If the power to expend the public funds of the city for the purpose of extending a public utility operated by said city cannot be used by the board in charge of said public utility for the purpose of investigating a privately owned utility with a view of purchasing the latter, surely the power could not be claimed for said board to expend such public money in an endeavor to induce the electors of said city to vote in favor of a bond issue, the proceeds of which were to be used to extend the public utility system under its charge. The last case referred to presents a situation so similar to that involved in the present controversy that we regard it as practically conclusive of the question involved in the present proceeding.

Aside from any provision of the city charter or of the statute authorizing the bond issue, appellants contend as the city is operating, not in its governmental, but in its proprietary character, a municipal system whereby it supplies to its inhabitants electricity for light, power, heat, and other purposes, that it has all the powers of a private corporation engaged in like business. This assertion is supported by a formidable array of authorities from the various courts of this country, including our own, as well as extracts from leading text-writers upon the subject. But in all this array of authority appellants have not presented a single adjudicated case or a line from any text-writer which goes to the extent to which appellants are asking this court to go in holding legal the expenditures made by them from the public funds of said city. [8] That the powers of a city of a proprietary character are given a more liberal construction than those which are strictly governmental in character is settled beyond controversy by the decisions of our courts, and this rule is approved by our best text-writers. But, conceding this to be true, it does not follow that a municipality in exercising its powers in its proprietary capacity has the authority to do any act or thing which its officers may think necessary for the proper conduct or maintenance of the business in which it is engaged. Among the cases cited by appellants in support of their last contention is

The pleadings herein, as well as the result of the election, show that the sentiment existing among the electors of said city as to the advisability of issuing said bonds was divided. While the proposition to issue bonds received a majority of the votes east at the election it did not receive, a two-thirds favorable vote as required by the statute in order that the bonds might be issued. It must be conceded that the electors of said city opposing said bond issue had an equal right to and interest in the funds in said power fund as those who favored said bonds. To use said public funds to advocate the adoption of a proposition which was opposed by a large number of said electors would be manifestly unfair and unjust to the rights of said last-named electors and the action of the board of public service commissioners in so doing cannot be sustained unless the power to do so is given to said board in clear and unmistakable language. [9] As already stated, we find nothing either in the charter of the city or in any statutory enactment or otherwise which confers such authority upon said board of public service commissioners. Appellants . allege that the power companies, operating competing utilities in said city, formed a large part of the opposition to said bond issue and that these power companies employed workers and speakers to oppose said bonds; furthermore, that large quantities of printed matter containing misleading, deceptive and untruthful reports against said bond issue were disseminated among the voters of said city. Appellants therefore seek to justify the expenditures complained of herein by asserting that the same were necessary in view of and for the purpose of correcting the misinformation disseminated among the voters of said city. The possibility that these conditions might arise might well have been considered by the framers of the charter when defining and limiting the powers of the board of public service commissioners of said city and provisions might have been made therein to meet such conditions. But, whether considered or not, it is apparent to us that the framers of said charter have made no such provision. Therefore, these matters can have no controlling effect upon the court when endeavoring to

[10] Finally, appellants contend that as the money was paid out honestly and in the belief that it was within the authority of the board of public service commissioners to use the funds of the city in payment of said expenditures, no recovery can be had against appellants. In support of this contention they cite the case of Osburn v. Stone, supra, and direct attention to the following language of this court used therein: “it is proper in closing this discussion to say that the trial court will recognize the discretion which in many matters is and of necessity must be vested in public officials, and will recognize, moreover, that for an honest, even though mistaken, exercise of discretionary powers, no public officer is responsible.” There can be no question of the good faith and honest intention of the appellants. There is not the faintest suggestion that any of them acted in this matter with any other motive than a desire to faithfully and honestly execute the duties of their respective offices and to perserve and protect the public trust committed to them by the people of said city. While this court approved the rule set forth in the above quotation from the case of Osburn v. Stone, supra, yet in the same decision is to be found the following language: “The converse of the argument is that the powers of municipal officers are well defined. Their modes of procedure in all matters of expenditure are pointed out with particularity. They are given by law a legal adviser, and, if not, are fully empowered to employ one. There is no occasion whatsoever for their taking any step without such advice. There is no reason for their ever making any illegal expenditure of the public’s moneys. To countenance the making by these officials of an illegal expenditure in one case is to open wide the door for like expenditures in every case.” In

In a very recent case decided by us during the present month (Mahoney v. City and County of San Francisco et al., ante, p. 248 [ 257 Pac. 49 ]), we held that under the complaint therein the auditor and treasurer of the city and county of San Francisco were liable for the repayment of moneys approved and paid out by them upon a contract entered into by the board of supervisors of said municipality, and which was beyond the powers of said board to make. There was no question of the good faith and honesty of intention of said officers in auditing and paying out said money, but as the contract under which it was expended was not within the powers of the board, its payment was illegal and said officers were held liable for its repayment.

The ease of Osburn v. Stone, supra, in so far as the legal principles therein decided, bears a striking similarity to the present action. The sum and substance of that decision is that public funds illegally or unlawfully paid out by a public official can upon a suit by a taxpayer be recovered and the officer or officers responsible for said illegal or unlawful payment compelled to repay the same into the treasury of said city.' Such in all its essential features is the present proceeding as presented by the complaint and answer thereto. The complaint under the authority of Osburn v. Stone, supra, states a good cause of action against ap

The judgment is affirmed.

Richards, J., Preston, J., Seawell, J., Langdon, J., and Waste, C. J., concurred.

Rehearing denied.

Shenk J., and Langdon, 3"., dissented.