City of Oakland v. Williams

Petition for a writ of mandamus to compel Harry GL Williams, as the auditor of the City of Oakland, county of Alameda, to certify that there remained unexpended and unapplied a balance of an appropriated fund applicable to pay the estimated expense of a certain contract, according to the freeholders’ charter of the city of Oakland, section 131, awarded by the board of port commissioners of the City of Oakland to the J. Gr. Wilson Corporation for furnishing rolling steel door supplies proposed to be used in the construction of a warehouse which said board of port commissioners had contracted to construct and lease to Rosenberg Bros. & Co., a private corporation extensively engaged in packing, processing and shipping dried fruits a.nd related products in large shipments to domestic and foreign ports. Said warehouse, according to plans, will cost approximately $400,000 and occupy about seven acres of the hundreds of acres of vacant tide and submerged lands, filled and unfilled, lying between the uplands of said City of Oakland and the low-water marks of the San Francisco Bay and the Estuary San Antonio, which lands were .granted by the state to said city by an act approved May 1, 1911 (Stats. 1911, p. 1258), in trust for the uses and purposes therein named. Said warehouse is to be constructed at the Fourteenth Street Wharf Terminal, parallel to an existing transit shed of equal length and separated from said shed by public spur railroad tracks.

The authority of the board of port commissioners to enter into the lease and contract with said Rosenberg Bros. & Co. was challenged by two suits instituted in the superior court of the county of Alameda, wherein an injunction was sought in each action against said board and certain officials of said city, commanding them to desist and refrain from doing any act under or incurring any liability or obligations against said city by reason of said lease and contract, which threatened acts were claimed to be in excess of the power of said board on the ground that said contract attempted to obligate said eity to expend $400,000 of its funds for a private purpose. The auditor, as a measure of protection to himself and bondsmen, declined to indorse his certificate upon said lease and contract. By reason of the public importance of the matter the suits commenced

The main point pressed by intervener William F. Hammer, who was the plaintiff in the actions instituted in the superior court of the county of Alameda, is that said lease attempts to authorize the use of public funds for a private purpose, in violation of article I, section 14, state constitution.

The importance of the development of the natural harbor and seaport advantages which the City of Oakland, situate on the easterly side of the San Francisco Bay, with direct and spacious connection with the Pacific Ocean, offers to the immense agricultural and commercial districts of northern and central California, is not questioned. It is admitted that said city and port is the terminus of three transcontinental railroads and one intrastate railroad. In addition to these transportation lines, an immense volume of agricultural, orchard, dairy and general farm and ranch products of the state and factory products from without, is also carried into said city by many public transportation companies and by private conveyances, destined for foreign shipment, but because of the lack of reasonable harbor development and improvements vessels of reasonable tonnage were unable to enter said harbor. It is alleged, and not denied, that the declared policy on the part of the City of Oakland, which had been the subject of long public discussion, to adopt a comprehensive and concrete program of development has attracted and is still attracting manufacturers in all industrial lines to establish large factories and plants in said city and territory adjacent thereto, because of its favorable situs for the transportation of commerce to domestic and foreign ports and countries by both land and sea. Responding to this growing demand, the City of Oakland submitted the proposition of issuing bonds in the amount of $9,960,000, to be known as the Oakland Harbor Improvement Bonds, to the electors of said city, which issue was duly approved May 18, 1926. Said bond issue was for the following purposes:

“The acquisition, construction and completion by the City of Oakland of a certain municipal improvement on or near the Estuary of San Antonio and on or near the

western waterfront of said city, consisting of systems of wharves, docks, piers, slips, bulkheads, quays, and terminal facilities, including channels, water ways, turning basins, courses and docking spaces, roadways, trackage and approaches, transit sheds, warehouses, cold storage facilities, mechanical handling appliances, construction and maintenance equipment, fire boat and house therefor, the extension of the high pressure fire system of said city to said improvement, and such works, structures and property as may be necessary or convenient for the accommodation of shipping by rail or water, and also lands, rights of way; and other easements, property and property rights, necessary or appurtenant to said municipal improvement.”

In furtherance of said comprehensive scheme of harbor development and improvement, and pursuant to the recommendation made by its consulting engineers, the city amended its freeholders’ charter (chap. 7, Stats, and Arndts. 1927, p. 1978) by providing for the establishment of a “port department.” Said charter amendment provides for the creation of a board of port commissioners, consisting of five members, vested with the exclusive control and charge of said harbor, as the successor of all the rights and powers formerly exercised by said city, and it is charged with the performance of all the duties formerly imposed upon said city, and is given such legislative and administrative powers as were deemed necessary to enable it “to promote and more definitely insure the comprehensive and adequate development of the Port of Oakland through continuity of control, management and operation.” The tide and submerged lands granted by the state to said city include an inner and an outer harbor. The inner harbor consists of a deep, navigable channel, known as the Estuary of San Antonio, which penetrates inland a distance of about six miles. The channel of this estuary is too narrow to permit the convenient turning and docking of ocean-going vessels. The outer harbor consists of basins, channels and other waters of San Francisco Bay. The board of port commissioners, in the exercise of the powers conferred upon it by said charter amendment and also by the “Oakland Harbor Improvement Bonds” proposition, completed, in October, 1927, at a cost in excess of $500,000, the construction of a large concrete wharf and transit shed,

The warehouse, now in course of completion pursuant to and under the lease contract made by said board with Rosenberg Bros. & Co., is built upon reclaimed tide and submerged lands which constitute a portion of the western waterfront of said city, at the rear of and adjacent to said Fourteenth Street Wharf Terminal, and parallel to an existing transit shed and separated therefrom by a public street and spur railroad tracks and thus, it is alleged, forms an adjunct to said Fourteenth Street Wharf Terminal. The building is to be of the warehouse and storage type, constructed of standard concrete, and is similar in style, structure and height to said transit shed.

The act of 1911 granting said tide and submerged lands, whether filled or unfilled, to the City of Oakland, provides:

“(a) That said lands shall be used by said city and its successors only for the establishment, improvement and conduct of a harbor and for the construction, maintenance and operation thereon of wharves, docks, piers, slips, quays and other utilities, structures and appliances necessary or convenient for the promotion, and accommodation of commerce and navigation and said city or its successors shall not at any time grant, convey, give or alien said lands

or any part thereof to any individual, firm or corporation for any purpose whatever; provided that said city or its successors may grant franchises thereon for limited periods, for wharves and other public uses and purposes and may lease said lands or any part thereof for limited periods for purposes consistent with the trusts upon which said lands are held by the state of California and with the requirements of commerce or navigation at said harbor.” (Italics supplied.)

Section 718 of the Civil Code (Stats. 1927, f). 1173) provides that the tide and submerged lands granted to any city by the state may be leased for a period not exceeding fifty years, unless a greater term is fixed by the state’s grant of the said lands. Said section further provides: “ . . . tidelands and submerged lands owned or controlled by any city, together with the wharves, docks, piers and other structures or improvements thereon and so much of the uplands abutting thereon as may in the judgment of the city council, or other governing body of the city be necessary for the proper development and use of its water front and harbor facilities, may be leased for a period not exceeding fifty years. Said tidelands, submerged lands and uplands may be leased only for industrial uses, the purpose of improvement and development of the harbor of said city, and the construction and maintenance of wharves, docks, piers or bulkhead piers or for other public uses and purposes consistent with the requirements of commerce or navigation at said harbor.” (Italics supplied.)

The act whereby said tide and submerged lands, both filled and unfilled, were granted by the state of California to said City of Oakland; the resolution or ordinance adopted upon the submission of the proposition to incur a bonded indebtedness in the ■ sum of $9,960,000, and the amendment of the freeholders’ charter of said city, constitute the several steps taken by said City of Oakland over a period of several years in the consummation of a long considered and comprehensive plan for harbor and industrial development and improvement of its waterfront area. The powers conferred upon the board of port commissioners by the amended charter (Stats, and Arndts. 1927, p. 1978) are many and the duty enjoined upon it to support and foster all aids to promote the commercial welfare of said port

“To make provision for the needs of commerce, shipping and navigation of the port, to promote, develop, construct, reconstruct, alter, repair, maintain, equip and operate all waterfront properties, including piers, wharves, sea walls, docks, basins, channels, slips, landings, warehouses, floating or other plants or works, dredge and reclaim land, construct, equip and operate terminal trackage with sidings and turnouts and railroad connections between docks, piers and other port structures, and connect the same with main line tracks, and to establish, equip and operate all other facilities or aids incident to the development, protection and operation of the port, as may be deemed proper and de- . sirable in its judgment, and it may modify its plans from time to time as the requirements of commerce, shipping and navigation may demand, and as part of such development and operation to provide for tugs, dredges, fireboats, barges, cold storage plants and other publicly owned facilities or appliances incident to the operation, of the port, of such number and character and in such places as the board may deem feasible and proper.

“To take charge of, control and supervise the Port of Oakland, including all the waterfront properties, and lands adjacent thereto, or under water, structures thereon, and approaches thereto, storage facilities and other utilities, and all rights and interests belonging thereto, which are now or may hereafter be owned or possessed by the city of Oakland, including all salt or marsh or tide lands and structures thereon granted to the city of Oakland in trust by the state of California for the promotion and accommodation of commerce and navigation.”

It is not claimed by intervener that there was not then or that there was not at any time subsequent remaining sufficient unexpended and unapplied funds of said bond issue to pay the estimated expense of said lease contract or that the proceedings adopted by said city are in any way faulty, but it is claimed that the expenditure of public moneys for the construction of said warehouse for the uses to be made of it by the lessee amounts to lending the credit of the state, which is inhibited by article IV, section 31, state constitution, in aid of said lessee in

Public notice of intention to lease to the highest bidder, for a term of ten years, the filled parcel of tide-lands, which is the subject of this proceeding, comprising approximately seven acres, together with a warehouse to be erected thereon by said board at the cost of approximately $400,000, and calling for bids thereunder, was duly published and circulated. The notice sets out the form of lease adopted by said board, which is very full as to its purpose and the mutual obligations of lessor and lessee. It provides, among many other things, that said warehouse shall be used for the purpose of receiving, storing, warehousing, preparing and otherwise handling goods and for shipping the same and for other industrial uses which will promote commerce and shipping, but for no other purpose without the written consent of the lessor. The lessee is limited in the conduct of his business by the purposes above mentioned. The lessee shall be required to route for shipment by water from said Fourteenth Street Wharf Terminal, adjacent to said premises, all goods which shall be owned or the shipment of which shall be controlled by the lessee, and which shall be shipped by water in the conduct of said business, whether produced or packed at said warehouse or elsewhere, and which can be conveniently shipped from said terminal and not in excess of the cost to the lessee or consignee at which such goods may be shipped from any other established cargo pier, dock or terminal in general use in San Francisco or in Alameda County, to destination, including the cost of freight to, and the tolls and other regularly established charges incident to the handling of goods through and the shipment of said goods from such other established cargo pier, dock or terminal. The lessor is required to maintain and operate said Fourteenth Street Wharf Terminal in an efficient manner and as a public terminal for the accommodation of shipping by rail and water, including the handling of general cargo freight subject to what appear to be reasonable conditions. The lessee shall guarantee that the amount of goods which shall be routed and shipped by it annually during each of

Upon the execution of the lease the lessee is required to deposit $60,000 in gold coin as security for the faithful performance of its terms. We have set forth so much of said lease as tends to show that said warehouse was constructed and is to be used for a purpose in aid of and promotive of commerce and navigation.

The board, as a preliminary requisite, having found that it was necessary and convenient for the promotion and accommodation of shipping and commerce that said ware

Intervener assails certain provisions of the lease and seems to see in them a covert design on the part of the parties thereto to promote the private interests of Rosen

The questions of the necessity for the improvements and the adoption of the method by which they will be accomplished are matters resting in the judgment of the governing body, and courts will not interfere with the exercise of its judgment unless it appears that its proposed plans are not only not the best that might be adopted but that they are so inadequate and impracticable as to inevitably result in a waste of public funds. In other words, the judgment of the board as to the necessity for the construction of the building and the methods employed for its construction will not be disturbed except in cases where the exercise of judgment or discretion is shown to have been unquestionably abused.

Intervener contends that the clause of the lease which grants to the lessee said building “for the purpose of receiving, storing, warehousing, preparing, and otherwise handling goods and for shipping the same and for other industrial uses which will promote commerce and shipping” gives to the lessee the right to use said building for unlimited purposes which may not at all correlate with the carrying out of the trust with which said board is charged by tfle express provisions of the charter of said

Intervener places much emphasis upon the fact that the board had no control of the management of said private corporation and for that reason the present transaction falls within the. rule announced in Egan v. San Francisco, 165 Cal. 576 [Ann. Cas. 1915A, 754, 133 Pac. 294 ]. Cases of this character are not in point. The board in the instant case does not propose to participate in or share in the profits arising from the operation of the business conducted by Rosenberg Bros. & Co., nor is its interest in said corporation’s financial success in any degree different from the interest that a landlord may ordinarily feel in his tenant’s success. The Rosenberg Bros. & Co. transaction constitutes but a single unit in a comprehensive plan adopted with the purpose of improving and developing a harbor in which deep water vessels may find anchorage, promotive of commerce and navigation, and not with the primary purpose of promoting the business success of said corporation, although such a result may be an incident of said purpose. The board is primarily interested in the development and commercial success of said harbor, and as to it, it exercises exclusive control. Its relation with said corporation is that of landlord and tenant. Nor is there impressive persuasiveness in the claim that said warehouse building cannot, in the light of the situation presented, be lawfully leased for the exclusive use of said corporation

In the case of In re Mayor of New York, 135 N. Y. 253 [ 31 Am. St. Rep. 825 , 31 N. E. 1043 ], involving a proceeding to condemn wharf and other properties as a part of a plan of putting under public ownership all wharves and piers in the city of New York, the question of exclusive use was disposed of in the following pertinent language:

“If the necessity for exclusive use exists, such necessity ought to be recognized by the city, and the attempt to supply such necessity is an attempt to fulfill a public duty. The fact of exclusive use by the lessee must be considered with reference to all other property of a like nature possessed by the city, and at which all necessary and proper facilities may be afforded for the remainder of the commerce of the port.

“ . . . The circumstances surrounding the case must be viewed in all aspects. The act plainly contemplates, through all its provisions, the fact that there will always remain, under the direct control and possession of the city, sufficient piers and docks for the accommodation of all commerce which may seek our port, and which has no special pier or dock leased to the owner of the vessel desiring dock facilities.

“Considering the large extent of the property of this description owned and to be owned by the city, together with the fact that there is no absolute direction to the city to lease the smallest portion thereof to anyone, we become at once convinced that the leasing which will be actually carried on under this permission will amount to no more than a special regulation of the manner in which a comparatively small portion of the whole property of this nature owned by the city shall be used for the legitimate ends of commerce.

“This mere permission to use property by leasing it to others, when the whole surrounding circumstances are examined, cannot be regarded as providing for its private use.

“When used by lessees under the facts already stated, the use is a public one. The use is public while the property is thus leased, because it 'fills an undisputed necessity existing in regard to these common carriers by water,

who are themselves engaged in fulfilling their obligations to the general public; obligations which could not otherwise be properly or effectually performed. And in filling the necessity for such accommodations, the city or the state is only performing its public duty.”

Also directly in point is Marchant v. Mayor etc. City of Baltimore, 146 Md. 513 [ 126 Atl. 884 ].

The object of the board in erecting said warehouse was not the promoting of the business of drying and processing fruits, but it was built with the view that it would develop said harbor and harbor commerce, which is clearly a public purpose. '

It cannot be successfully argued that the public had the right to occupy each and every portion of said expansive tide-land area granted to said city. If this were so, a lessee would have no security of possession. Public property in the control of a private party may, nevertheless, serve a public purpose as an aid to, or a part of a general plan. The contention of intervener that said warehouse cannot be leased for an exclusive use to said corporation can find support only upon the assumption that said warehouse and site constitute the whole and all there is of the project. Such is not the case. It is but a unit of a comprehensive plan. The board is commanded by said city charter “To make provision for the needs of commerce, shipping and navigation of the port, to promote, develop, construct, reconstruct . . . and operate all waterfront properties, including piers, wharves . . . warehouses . . . and operate all other facilities or adds incident to the development . . . of the port as may be deemed proper and desirable in its judgment.” (Italics supplied.) Said board is not attempting to lease or pass into the exclusive use of a private corporation all or any considerable part of the vast land acreage upon which other warehouses- must be constructed as provided by charter as the commercial growth of the harbor shall require. The present warehouse, which intervener claims is not immediately needed, is but the beginning of an extensive plan of harbor improvement. Provision should be made in all cases for future growth.

Intervener further objects to the uses which are to be made of said warehouse, claiming that they are not strictly

Intervener has cited a number of cases which hold that statutes attempting to authorize cities or counties to engage in the manufacture and sale of cement, or to issue bonds and donate them to a private manufacturing enterprise for the purpose of encouraging the establishment of factories or private industries within the taxing district in which said factories are proposed to be located, are void. Such cases as In re City and County of San Francisco v. Boyle, 195 Cal. 426 [ 233 Pac. 965 ], have no bearing upon the principle of law which must rule the decision in the instant case.

A number of cases are to be found in which the principle of law here involved was applied to situations quite analogous to the instant case, and the said several courts held that the power sought here to be exercised was a power properly conferred upon the governing body. The case of Veterans’ Welfare Board v. Jordan, 189 Cal. 124 [ 22 A. L. R. 1515 , 208 Pac. 284 ], answers many of the objections urged by intervener against the power of the board of port commissioners to enter into the lease which is here under attack. It cannot be doubted that said board is fully authorized to construct warehouses for purposes which intervener terms general uses by the public. It is the use which is to be made of said warehouse which furnishes the grounds of intervener’s protest. In the Veterans’ Welfare Board case, supra, this court adopted as a part of its decision the language of the supreme court of the United States pronounced in Green et al. v. Frazier et al., 253 U. S. 233 [ 64 L. Ed. 878 , 40 Sup. Ct. Rep. 499 , see, also, Rose’s U. S. Notes], in sustaining the validity of the Home Building Association of North Dakota, which, because of its appositiveness to the several questions raised in the instant case, is reproduced:

“What is a public purpose has given rise to no little judicial consideration. Courts, as a rule, have attempted no judicial definition of a ‘public’ as distinguished from a ‘private’ purpose, but have left each case to be determined by its own peculiar circumstances. Gray, Limitations of Taxing Power, section 176, ‘Necessity alone is not the test by which the limits of state authority in this

direction are to be defined, but a wise statesmanship must look beyond the expenditures which are absolutely needful to the continued existence of organized government, and embrace others which may tend to make that government subserve the general well-being of society, and advance the present and prospective happenings and prosperity to the people’: Cooley, Justice, in People v. Salem, 20 Mich. 452 [ 4 Am. Rep. 400 ]. Questions of policy are not submitted to judicial determination, and the courts have no general authority of supervision over the exercise of discretion which under our system is reposed in the people or other departments of government. Chicago B. & Q. R. R. Co. v. McGuire, 219 U. S. 549 , 569 [ 55 L. Ed. 328 , 31 Sup. Ct. Rep. 259 ]; German Alliance Ins. Co. v. Lewis, 233 U. S. 389 [ 58 L. Ed. 1011 , 34 Sup. Ct. Rep. 612 , L. R. A. 1915C, 1189, see, also, Rose’s U. S. Notes].

“With the wisdom of such legislation, and the soundness of the economic policy involved, we are not concerned. Whether it will result in ultimate good or harm it is not within our province to inquire.”

It appearing to this court that said lease and contract was lawfully entered into and is a valid, subsisting contract between the parties thereto, and no sufficient legal cause having been shown why said auditor of the City of Oakland should not attach his certificate to said lease and contract, it is, therefore, the order of this court that a writ of mandate do issue commanding said auditor to attach his official certificate to said lease and contract in the manner and as provided by the charter and laws of said City of Oakland.

Richards, J., Shenk, J., Preston, J., Langdon, J., Waste, C. J., and Curtis, J., concurred.

Rehearing denied.

ALL the Justices concurred.