Balaam v. Pacific States Savings & Loan Co.

Plaintiff and defendant each own a serial bond issued under and by virtue of the Street Improvement Act of 1911 (Stats. 1911, p. 730), both bonds being liens upon the same lot, or piece of real property. The bond owned by the plaintiff was issued on the third day of October, 1925. The bond owned by the defendant was issued on the twenty-ninth day of October, 1926. The point in issue is whether the priority of the lien under which each of the parties hereto claim is fixed by the provisions of section 23 of the Improvement Act of 1911, or by section 66 of

Section 66 of the act provided that when bonds are issued to pay for any improvement under said act that: “The city treasurer shall, in addition to his other duties in the premises, report all coupon payments of principal upon said bonds to the street superintendent, who shall forthwith indorse the same upon the margin of the record of the assessment to the credit of which the same is paid, -and said assessment shall be a first lien upon the property affected thereby until the bond issued for the payment thereof, and the accrued interest thereon, shall be fully paid ...” (Stats. 1911, p. 730).

This court, in construing the act of 1911, held in the case of Woodill & Hulse Elec. Co. v. Young, 180 Cal. 667 [ 182 Pac. 422 , 5 A. L. R. 1296 ], that the lien imposed under this act which was last in time was first in priority. This decision was rendered in 1919 and prior to the amendments of section 23 of the act in 1921 and 1923. By the amendment of 1921 (Stats. 1921, p. 291) the following new provision was incorporated in section 23': “Such lien shall be subordinate to all special assessment liens previously imposed upon the same property, but shall have priority over all special assessment liens which may thereafter be created against the said property.” The amendment of this section in 1923 did not in any way change or affect this new provision added to the section in 1921. Section 66 has not been amended since the decision of Woodill & Hulse Elec. Co. v. Young, supra. The legislature did in that year, 1923, amend section 63 of said act. (Stats. 1923, p. 276.) This section prescribes the form of the bond issued in such proceedings. Prior to said amendment the bond recited that the amount of the bond “is a first lien upon the property affected”.

The bonds involved herein were both issued under said act after its amendment in 1923. Respondent contends that as the bonds were issued subsequent to 1923, the rule of priority announced in Woodill & Hulse Elec. Co. v. Young, supra, has been reversed and that the rule in force after the adoption of said amendments is that a lien for street improvements under said act which is first in time is first in priority. If section 23 of said act controls the priority of the respective liens under the two issues of bonds involved herein, then it is conceded that respondent’s position must be sustained. But the appellant contends that the priority of these respective liens is determined by section 66 of said act, which, as we have seen, provides that “the assessment shall be a first lien upon the property affected thereby”. It is likewise conceded that if the priority of the liens is to be determined by the provisions of section 66 of said act, the lien of the appellant must be given priority over that of the respondent.

Section 23 is found in part I of the Improvement Act of 1911. Part I of said act deals entirely with assessments for street improvements where the work is to be paid for in cash. No mention is made of assessments that are to be met by the issuance of bonds. In fact, bonds are not referred to in any section of part I of the. act excepting in section 28, which is a general statute relating to reassessments and providing that proceedings to issue such reassessments are made applicable to all assessments whether they are paid in cash or by an issue of bonds. The lien provided for in section 23' is given only for two years. It is enforceable by an action in court which may be commenced at any time after the final delivery of the warrant to the contractor and within two years thereafter. It does not run in favor of the holder of any bond, but is evidenced by the assessment on file in the office of the superintendent of streets. On the other hand, section 66 is contained in part III of said act. This part deals primarily with proceedings in which the assessments are payable not in cash but by serial bonds issued against the property affected. Under this section bonds may be issued in payment of assessments amounting to twenty-five dollars or more. All assessments under twenty-five dol

Respondent contends that there was but one type of lien contemplated by the act of 1911 and that section 23 applies with equal force to all liens created thereunder. We cannot agree with this contention. It is based upon the assertion that there is but one assessment whether the work is to be paid for in cash or by an issue of bonds, and that that assessment is the one provided for in section 23 of the act. But the proceedings preceding the making of this assessment are entirely different when the cost of the improvement is a cash transaction than when bonds are to be issued in payment of said improvement. At the very inception of proceedings involving a bond issue, by section 59 of the act (Stats. 1911, pp. 730, 758), the city council must determine whether “serial bonds shall be issued ... to represent assessments of twenty-five dollars or over for the cost of any work or improvement”. Section 61 provides that

Amici curiae make the further contention that the Improvement Act of 1911 relating to bonds merely provides a convenient dexdce to permit payment of the assessment in installments and to that end continues the lien provided in section 23 and provides necessary methods of enforcing said lien. We may agree with this statement in so far as it declares that the provisions of the act of 1911 relating to the issuance of serial bonds provides a convenient device or plan to permit the payment of the assessment in installments rather than in one cash payment, but we find nothing in the act to justify the contention that the period of two years, provided by section 23, the life of the lien in case the assessment is payable in cash, has been extended to cover the life of the bond. There is not one word to be found in the whole act which supports such a statement. The act clearly creates two different distinct liens as we have, xve think, clearly shown. By section 23, the precise words used are, “the several amounts assessed shall be a, lien wpon the lands”. Which words the respondent concedes to be suffi

Amici curiae have set forth in their briefs excerpts from decisions of this court in which they claim that this court has held that no lien is created by the issuance of the bond and that the only lien provided for by the act is that given to secure payment of the assessment. Under the view we take of the case, as just stated, we think it is a matter of no consequence so far as the question herein is concerned whether the lien given secures the bond or the assessment. In either case, the character of the lien is fixed by section 66 of the act. The cases from which the above-mentioned excerpts are taken are: Hellman v. Shoulters, 114 Cal. 136 [ 44 Pac. 915 , 45 Pac. 1057 ], Chase v. City Treasurer of Los Angeles, 122 Cal. 540 [ 55 Pac. 414 ], German Sav. & Loan Soc. v. Ramish, 138 Cal. 120 [ 69 Pac. 89 , 70 Pac. 1067 , and Cohn v. Federal Construction Co., 171 Cal. 547 [ 153 Pac. 916 ]. Hellman v. Shoulters, supra, sustains the constitutionality of the act of March 17, 1891, relative to a system of street improvement bonds. Chase v. City Treasurer, supra, holds that an injunction will lie to restrain the threatened sale of real property to pay an amount claimed to be

Considerable has been said in the briefs presented by respondent as to the reasons why the act of 1911 was amended in 1921. It may possibly be that the legislature was prompted to amend section 23 of the act in 1921 by rea-' son of the decision of this court in the ease of Woodill & Hulse Elec. Co. v. Young, supra. Although this section of the act is barely mentioned in the decision along with sections 63 and 66 (p. 672), on page 674 of the decision the exact language of section 66, which creates the lien in favor of the owner of the bond, is quoted and commented on by the court, and is made the real basis of its decision. It would seem, therefore, that had the legislature intended to reverse the rule announced in this decision it would have amended section 66 as well as section 23 of the act. The fact that it did not make any change in section 66 after this court, in the Woodill & Hulse Elec. Co. v. Young case stressed the provisions of that section as it did in that decision, shows conclusively that its omission to do so was designedly done. Just why the legislature did not extend its efforts and amend section 66 of the act at the time it amended section 23 we are not advised. It is apparent that the rule making liens for street improvements superior to any subsequent liens of the same character would have a tendency to interfere with future public improvements, and might result in the cessation of all further improvements of the street thereby affected until the improvements already made were fully paid. The legislature might have considered that a cessation of public improvement for a period of two years, the life of the lien under section 23, would not

As the bonds held by the parties hereto are each secured by the lien created and defined by section 66 of said act, their priority must be determined by the provisions of said section. This section, as hereinbefore stated, provides that the lien shall be a first lien upon the property affected until the bond is paid. This court, in construing this very section, held in the case of Woodill & Hulse Elec. Co. v. Young, supra, that the lien subsequent in time was first 'in priority. As the bond owned by the appellant was issued over a year subsequent to the issuance of the bond of respondent, it must be given priority over the bond of the respondent.

Judgment is reversed.

Preston, J., Langdon, J., Shenk, J., Thompson, J., and Waste, G. J., concurred.

Rehearing denied.

Shenk, J., and Thompson, J., dissented.