TRAYNOR, J., Dissenting. Plaintiff brought this action to obtain a refund of special assessments paid under protest. Plaintiff’s land was in a special assessment district within the city of South Gate, established under the Acquisition and Improvement Act (Stats. 1925, p. 849; Deering’s Gen. Laws, 1931, Act 3276(a))* for the improvement of Wright Road, a highway of general county use. The defendant city undertook the proceedings necessary to form the district and issued bonds totalling $43,400 to cover the cost of the improvement. Annual assessments were levied to cover interest and installments of principal on the bonds. Plaintiff paid the assessments levied against its land each year until 1934. It let the assessments for the years 1934 to 1937 become delinquent. Ninety-one per cent of the lands in the district were delinquent for that period, and the district failed to pay interest and installments of principal on the bonds as they fell due. Bonds amounting to $39,400 face value were delinquent as to interest, and bonds amounting to approximately $16,000 face value were delinquent as to principal.
Throughout that period property values declined, and there [736]was an overwhelming number of delinquencies on special assessments throughout the state, often exceeding the actual value of the lands assessed. Emergency legislation became necessary to rescue the special assessment districts from insolvency and to enable the lands therein to bear their share of the general tax burden. County boards of supervisors were given wide powers to relieve special assessment districts and to liquidate in whole or in part the indebtedness of such districts by purchasing and cancelling their bonds. The legislative bodies that conducted the proceedings for the issuance of the bonds were given discretionary power to cancel delinquent assessments of such districts if they determined that the relief of the district required such cancellation. The pertinent provisions of this legislation are quoted in the margin.* Pursuant to this legislation defendant county purchased the outstanding bonds and delivered them to defendant city for cancellation. The defendant city refused to exercise its power to cancel the delinquent assessments of the district. The county, which collected the city’s taxes, therefore collected the delinquent assessments levied against plaintiff's land for the years 1934 to 1937. Plaintiff paid the delinquent [737]assessments under protest and filed a claim with the county for a refund on the ground that the assessments were illegally collected. The county denied the claim maintaining that it was under a duty to collect the uncancelled assessments. The trial court upheld general demurrers interposed by both defendants to plaintiff’s complaint and entered a judgment of dismissal. Plaintiff appeals.
Plaintiff does not question the legality of the assessments as originally levied or the fact that the assessments on its property were delinquent while the bonds were still outstanding. Nor does it contend that the collections could be refunded had its assessments been paid before the bonds were cancelled. It does contend, however, that there is a fundamental principle of special assessment law that an assessment, even though validly levied and legally collectible when it became delinquent, becomes illegal after the bonds are retired, since its collection is no longer necessary to redeem the bonds. The alleged invalidity under this so-called principle arises, not from any defect in the assessments, but from [738]the fact that a property owner successfully delays payment of his share thereof until others have met the cost of the improvement represented by the bonds. There is no such principle of special assessment law. Nor could such a principle be adopted without repudiating the long established rule that special assessments are to be levied in accordance with benefits. To forgive the delinquent property owners solely because the nondelinquent owners or others have paid enough to meet the cost of the improvement would defeat the very object of making the levies in proportion to benefits and discriminate against those who pay their assessments. At the time of the levy, after the property owners are given notice and an opportunity to be heard, the share of each property owner in the burden is determined. It is impossible at that time to foresee what amount will actually be collected or in what order collections from each owner will be made. If the subsequent existence of funds in excess of the redemption price of the bonds invalidated the collection of delinquencies the shares of the individual property owners in the common burden would be fixed by the accidental course of the eollee[739]tions rather than by the fair distribution of that burden at the time of the levy.
In fixing the amount of an assessment, it is common practice for an assessing body to make the levy higher than it would have to if there were no delinquencies—a practice sanctioned by this court under the very act here in question. (American Securities Co. v. Forward, 220 Cal. 566, 572-577 [32 P.2d 343].) Only by anticipating delinquencies at the time of the levy can an assessment district expect to meet the payments on the bonds as they fall due. It does not, however, thereby forgive delinquent owners their share of the common burden. If collections of delinquent assessments became illegal as soon as the bonds were retired or enough money was on hand to retire them, delinquent property owners would reap a reward for their delinquency at the expense of those who paid their assessments. There would then inevitably be an overwhelming delinquency in the final years of any bond issue that would play havoc with the orderly collection of assessments. Many owners would soon learn that they could let their special assessments go delinquent without having to let their general taxes go delinquent (Loew’s Inc. v. Byram, 11 [740]Cal.2d 746 [82 P.2d 1]) and would depend on the payments of more conscientious owners to relieve them of the necessity of paying their own assessments.
Likewise, delinquent assessments are not forgiven when the money to purchase and retire the bonds comes from the general funds of the county. The relief given the district by the county under the emergency legislation of 1935 did not automatically cancel the delinquent assessments. Such assessments could have been cancelled under that legislation had the legislative bodies concerned, who alone have that authority, considered such cancellation necessary. (Sts. & Hy. Code, §§ 1626, 1626.5; Deering’s Gen. Laws, Act 3303 l, § 1; Stats. 1935, p. 1250.) That legislation expressly provides that cancellation of the assessments depends not only upon retirement of the bonds but on action of the appropriate legislative body. The authority to cancel assessments upon the retirement of the bonds is given by the same statutory provisions that vest in the legislative bodies the authority to purchase and retire the bonds, and it is a repudiation of those provisions for this court to hold that the assessments are automatically cancelled upon purchase and retirement of the bonds. There are many reasons why the statutes make such cancellation discretionary with such legislative bodies. Careful study must be made of any district before it can be determined which assessments should be cancelled and which not. Delinquencies may vary through the years preceding the last one, when there may be a total delinquency. If assessments for the last year only were cancelled, all property owners would be treated alike. It might be highly inequitable, however, to cancel the assessments of the earlier years when some paid and others did not. If the source of a district’s difficulty were an exceptionally large levy for a single year, the property might be rehabilitated by cancelling, not all the assessments, but only the assessment for that year.
The legislative body of the defendant city in the present case decided that the assessments should not be cancelled, and its judgment has been vindicated by the fact that the property was so rehabilitated that the assessments could be and were paid. In the absence of cancellation of the assessments under the relief legislation of 1935, their collection is governed by section 41 of the Acquisition and Improvement Act, which provides that assessments shall be “collected and enforced in the same manner and by the same persons and at the same [741]time and with the same penalties and interest as are other taxes for state and county purposes .. . and all laws applicable to the levy, collection and enforcement of taxes for state and county purposes ... (as the case may be) are hereby made applicable to said special assessment taxes.” The assessments against plaintiff’s property were validly levied and placed upon the tax rolls. Since they were never cancelled, but continued on the rolls as valid liens against the property, section 41 compels their collection unless enforcement of that section violates some constitutional provision.
The contention is advanced that collection of delinquent assessments after the county has purchased and cancelled the bonds would result in an impairment of contracts in violation of the federal as well as the state Constitution. This contention is based on the provision in section 41 imposing upon the municipality the duty to levy a special assessment tax in an amount clearly sufficient “to pay the principal and interest of said bonds as the same shall become payable.” The theory is that the language quoted forms part of the contracts of the property owner with the bond holders and the district and does not authorize an assessment except to obtain money to pay the principal and interest of the bonds. It will be noted that the foregoing provision refers to the “levy” of the assessment, and not to its collection. There is no contention that any of the levies in the present case were unnecessary for the purpose defined in the provision quoted; the alleged impairment of contracts cannot therefore result from any failure to observe that provision. Nor has there been any failure to comply with the “collection” provisions of section 41, which, as we have seen, compel the collection of assessments in the same manner as taxes for county purposes generally. The terms of any contract under the Acquisition and Improvement Act have thus been observed both as to the levy of the assessments and their collection. Moreover, the emergency legislation of 1935, pursuant to which the bonds were purchased and can-celled, did not enlarge the burden of plaintiff or other property owners but on the contrary materially reduced it. All the property in the district was relieved of the burden of assessments in subsequent years to meet accruing bond interest and principal. At the outset the property owners were entitled to relief from neither past nor future levies. Solely by virtue of a contribution by the county from its general funds have the owners been given relief from future levies. Such allevia[742]tion, which increased the value of their properties, cannot rationally be interpreted as an impairment of contract rights of either the delinquent or other owners. The contract clause of the Constitution is “intended to preserve practical and substantial rights, not to maintain theories.” (Faitoute Iron & S. Co. v. Asbury Park, 316 U.S. 502, 514 [62 S.Ct. 1129, 86 L.Ed. 1629].)
It is further contended that the county should have held the bonds instead of cancelling them to prevent the collection of the delinquent assessments from becoming invalid. The assessments continued on the tax rolls as valid liens against the property involved, however, and no statute or rale of law made their validity dependent on the county’s holding the bonds until the assessments were paid. Bonds were essential in the relationship between the city, the bondholders, and the property owners. The redemption of the bonds eliminated all outside creditors and made it unnecessary for the county to retain the bonds, for the rights of defendants depended, not on the county’s acquiring the rights of the bondholders, but on the relief legislation under which the bonds were purchased and cancelled and the delinquent assessments continued on the tax rolls. That legislation empowered the legislative bodies granting relief to such districts to determine the extent of the relief and the conditions under which it should be granted. In the present case they determined that the relief should not extend to the cancellation of the delinquent assessments but that such assessments should be collected. The statutory authority to retain the levied but unpaid assessments on the tax rolls after the claims of the bondholders are satisfied enables the agency, which, under authority of the same statute satisfied those claims, to obtain reimbursement for part of its advances. Reimbursement is in order here as in other instances where creditors of insolvent debtors accept payment by third parties in settlement of their claims and such parties are subrogated to the claims of the creditors. (See 4 Williston, Contracts, (Rev. ed.) 3628, 3664; 4 Pomeroy, Equity Jur. (5th ed.) 640; McClintock, Equity, 210; 50 Am. Jur., Subrogation, §§ 28, 70; 23 Cal. Jur. 920; Meyers v. Bank of America, 11 Cal.2d 92, 94 [77 P.2d 1084]; Brantley v. Kelly, 226 Ala. 47 [145 So. 649].) If the purchase and cancellation of bonds by a county, contemplated by the relief legislation, resulted in automatic extinguishment of all delinquent assessments in the district, the legislative bodies involved would have no discretion with [743]respect to the cancellation of such assessments as provided by the Legislature, nor could a county obtain reimbursement through collection of delinquent assessments for any funds advanced to relieve a district in distress. Such a rule would not only discourage advances and thus serve to defeat the purposes of the relief legislation, but would conflict with its express provisions that the legislative bodies may use assessments to effect the relief of the district (Deering’s Gen. Laws, Act 33031, § 3) and may cancel them in their discretion. (Sts. & Hy. Code, § 1626; Deering's Gen. Laws, Act 3303 l, § 1.)
The county in the present case has elected not to reimburse its general fund out of the collection of delinquent assessments as it could have done under the provisions of the relief legislation. The provisions of the Acquisition and Improvement Act therefore control the disposition of the money collected. Under section 41 of that act, all collections on assessments are credited to the interest and sinking fund prescribed by that section, and “any money remaining in any acquisition and improvement district interest and sinking fund after all the bonds of the district have been retired shall be transferred to the general fund of the county, or 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.” Thus if assessments were collected in sufficient amounts to retire the bonds, subsequent collections of delinquent assessments would be credited to the acquisition and improvement district interest and sinking fund and would be money remaining therein within the meaning of section 41. It is immaterial that the excess arises out of advances by the county rather than from the fact that the percentage of delinquencies was lower than anticipated when the assessments were levied. Pursuant to section 41, therefore, the money collected would be transferred to the general fund of the city of South Gate to be used by it in repairing any public way in the district.
It is contended that only money that was paid into the interest and sinking fund before the retirement of the bonds can be regarded as “remaining” therein upon such retire[744]ment. The money collected, however, must be credited to the interest and sinking fund and remains therein if it is not used to pay interest and principal of the bonds, whether or not it was in the fund when the last bond was retired. The meaning of the provision is clear; any money credited to such interest and sinking fund shall be used primarily to pay interest and principal of the bonds, credits in excess of the total amount required shall be transferred to the city’s general fund to be used for repairs of public ways in the district. Plaintiff contends that since there are only a few small public ways in the district, excepting state and county highways, the city does not need the money to repair such ways. The statutory provision, however, does not presuppose that at the time of the transfer of the money to the general fund of the city there is any actual need to repair public ways in the district, nor does it provide any time limit within which the money must be used for that purpose. The fact that the predictable expenses for such repairs are low, given the present system of public ways in the district, does not make the transfer invalid. The system of public ways in the district may be changed or the needs for repairs may increase. In any event, even if the cost of such repairs were low, the use of the money by the city would merely extend over a longer period than usual. Furthermore, a court cannot foresee in litigation concerning the collection of delinquent assessments whether the city will make proper use of the amount to be transferred to its general fund. It would be time enough to consider such question if the city’s use of this money were challenged in an appropriate proceeding.
Any doubt as to the constitutionality of section 1626 of the Streets and Highways Code is resolved by the constitutional amendment adopted November 3, 1936, adding section 31 (c) to article IV: “No provision of the Constitution shall be construed as a limitation upon the power of the Legislature to provide by general law for the refunding, repayment or adjustment, from public funds raised or appropriated by the United States, the State, or any city, city and county, or county for street and highway improvement purposes, of assessments or bonds, or any portion thereof, which have become a lien upon real property, and which were levied or issued to pay the cost of street or highway improvements or of opening and widening proceedings which may be or may have become of more than local benefit. Any such acts of the [745]Legislature heretofore adopted are hereby confirmed and declared valid and shall have the same force and effect as if adopted after the effective date of this amendment. ’ ’ The county’s expenditure in the present ease to redeem bonds issued for the improving of a highway of general county use was made pursuant to legislation expressly confirmed and declared valid by this constitutional amendment.
Plaintiff’s contentions find no support in the cases on which it relies. There is no question as to the validity of the assessments as originally levied or as to the fact that the assessments were a valid lien upon plaintiff’s property when they became delinquent and when the bonds were still outstanding. The cases cited that concern assessments invalid when levied are therefore not in point. Thus, in Connelly v. San Francisco, 164 Cal. 101, 103 [127 P. 834], the levy was void because no bonds had been sold or contracted to be sold at the time it was made. In Hellman v. Los Angeles, 147 Cal. 653 [82 P.313], the levy was void because the ordinance providing for it described bonds that were not in existence. In Smith v. Santa Monica, 162 Cal. 221, 223 [121 P. 920], land condemned by the state for a park was held immune from sale under a tax lien on the ground that the lien was “merged and lost in the title which the state itself has taken.” (See, also, 48 Am.Jur. 644.) In the present case no title has been established paramount to the lien of the assessments. Plaintiff relies particularly on two lines of cases that are clearly distinguishable. In the first, the improvement was abandoned before completion. (Grimes v. County of Merced, 96 Cal.App. 76 [273 P. 839]; Bradford v. City of Chicago, 25 Ill. 349; Valentine v. City of St. Paul, 34 Minn. 446 [26 N.W. 457]; City of San Antonio v. Peters (Tex. Civ. App.), 40 S.W. 827; City of San Antonio v. Walker (Tex. Civ. App.), 56 S.W. 952.) In the second, the actual cost of the improvement was less than the original estimate. (Paving Dist. No. 5 v. Fernandez, 144 Ark. 550 [223 S.W. 24]; City of Chicago v. Fisk, 123 Ill.App. 404; In re Schneider, 136 App.Div. 444 [121 N.Y.S. 9]; Wolfe v. Edgewood Borough, 58 Pa.Super. 38.) Thus in ail these cases the assessments exceeded the value of the improvements. In the present case, however, the plaintiff has received the full benefit of the improvements and has not been assessed beyond its cost. In fact, even with the payments in question, it has paid less than its pro rata share of the cost of the project. All the property owners in the district should be treated alike. [746]The allowance to plaintiff of a refund of the payments of its delinquent assessments creates an unfair discrimination against the other property owners who paid their assessments and who, as plaintiff concedes, are not entitled to a refund, and gives plaintiff a windfall as a reward for its delinquency.
Gibson, C. J., concurred.
This act was repealed in 1933 (Stats. 1933, p. 948) with a saving clause that the repeal did not affect any bonds theretofore issued or any assessments theretofore levied.
Sections 1626, 1626.5, 1627, and 1628 of the Streets and Highway Code (as amended by Stats. 1935, pp. 2178, 2199, Stats. 1937, p. 160), provide:
“1626. In accordance with the provisions of sections 1627 and 1628, the boards of supervisors in their respective counties may purchase or redeem at a discount, and may at any time in their discretion cancel or retire bonds of any special assessment district, for the payment of which special assessments, levied wholly or partly in accordance with the assessed value of lands, or levied by direct assessment, have been or are to be levied, if the proceeds of such bonds are or have been used exclusively for the acquisition of rights of way or easements for, or for the construction, maintenance, improvement or repair of highways, bridges or culverts within such county or any city therein. The board may also pay any portion of the principal or interest of, or transfer such amount as the board deems proper to the interest and sinking fund for the discharge and payment of, any of such bonds. Such bonds may be redeemed or purchased at not to exceed eighty per cent of the face value of the unpaid principal and interest of such bonds. 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 by resolution order such other legislative body to direct the cancellation of all or any portion of the unpaid taxes and assessments and the penalties thereon and the lien [737]thereof levied or to be levied for the payment of such penalties, principal and interest. Such direction to cancel taxes shall be made to and the cancellation shall be made by the officer having control of the record thereof, with the written consent of the district attorney, county counsel, city attorney or other legal advisor of the legislative body directing the cancellation. Whenever only a portion of such taxes, assessments and liens are cancelled, it may be according to any uniform plan which in the discretion of such legislative body is deemed equitable. Where such property has been deeded to the State or other subdivision for such delinquent taxes or assessments a credit in similar amount shall be allowed upon the amount necessary to redeem. The officer who makes the cancellation of taxes, assessments and liens as hereinabove provided shall notify the State Controller or corresponding officer of such other subdivision of the credit which shall be allowed upon the right of redemption and such State Controller or such other officer shall thereupon allow such credit; provided, however, that in all respects except the collection and disbursement of redemption money the tax deed shall not be affected and shall remain unimpaired.
‘ ‘ 1626.5. In accordance with the provisions of sections 1627 and 1628, the boards of supervisors, in their respective counties, may appropriate money to refund, repay and adjust, and may refund, repay and adjust, by any method established by law, the principal, or any portion of the principal, of any special assessments or bonds issued to represent special assessments, which have become liens on lands and which have been levied under the direct or specific assessment method to pay for the acquisition of rights of way or easements for, or the construction, maintenance, improvement or repair of public highways, bridges, or culverts within such county or any city therein. If the board of supervisors shall appropriate money to refund, repay or adjust assessments or bonds levied or issued by a city, it may delegate to the legislative [738]body of such city the disbursement of the funds appropriated therefor, on such terms and conditions as may be agreed upon by the board and the city.
‘1627. The expenditures authorized in sections 1626 and 1626.5 may be made from: (a) The general fund of the county . . .
“1628. Before any expenditures are made under the authority of section 1626.5 or of sections 1626 or 1626.5 and 1627, the board of supervisors of the county shall, by a resolution adopted by a four-fifths vote of the members of the board, determine that the bonds or assessments, or the portions thereof, under consideration were issued or levied to acquire rights of way or easements for, or to construct, maintain, improve or repair public highways, bridges or culverts of general county use, and not of a purely local use. It is the intention of this section that the expenditures authorized in section 1626.5 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.”
Act 3303Í, DBering’s General Laws, (Stats. 1935, p. 1250), provides: Section 1. “The legislative body of any city or county, or city and county, of the State of California, acting individually or in conjunction with any other such legislative body or bodies, wholly or partly within the boundary of which any special assessment district has been created, and the outstanding bonds or indebtedness of which district are payable by taxes or assessments levied wholly or partly in accordance with the assessed value of lands or property, shall be and it is hereby fully and completely authorized and empowered, on the consent of the owners or holders of such bonds or indebtedness, to purchase, adjust, liquidate or cancel such bonds or indebtedness, or any part of them or it, and to carry out any plan or plans for the purchase, adjustment, liquidation, or cancellation of such bonds or indebtedness, or any part [739]of them or it, and if necessary or advisable to carry out such plan or plans under the bankruptcy laws of the United States of America, and any amendments thereto now or hereafter adopted, or under any law or laws of the State of California, enacted for the purpose of the purchase, adjustment, refunding, liquidation or cancellation of bonds or indebtedness of special assessment districts. In carrying out any such plan or plans the legislative bodies herein mentioned are fully authorized and empowered to adjust, waive or cancel in whole or in part, any tax or taxes, assessment or assessments, penalty or penalties and interest heretofore levied or taxed against any of the property or properties in such special assessment district which have been taxed or levied for the purpose of meeting the bonds or indebtedness of such special assessment districts.”
Section 2. "Such legislative body or bodies shall be and hereby are also fully and completely authorized and empowered to enter into any plan, contract, agreement, escrow or trusteeship having for its purpose the purchase, adjustment, liquidation or cancellation of the outstanding bonds or indebtedness of such districts.”
Section 3. “Such legislative body or bodies are hereby also fully and completely authorized and empowered in connection with the furtherance, consummation or conclusion of any such plan or plans, contracts, agreements, escrows or trusteeships to appropriate and use any and all necessary funds, moneys, taxes, assessments and contributions, from whatsoever source derived, for the furtherance, consummation and conclusion of the purchase, adjustment, liquidation or cancellation of any bond or bonds, indebtedness or indebtednesses, in whole or in part of such districts, and to pay from such funds, moneys, taxes, assessments and contributions all expenses necessary to carry on the furtherance, consummation and conclusion of such plan or plans.”