SCHOOL DISTRICT ‑- LEASES ‑- ADVANCE PAYMENTS

SCHOOL DISTRICT ‑- LEASES ‑- ADVANCE PAYMENTS

A school district of the second class may make advance payments for the lease or rental of property to supply classrooms needed by the district.

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                                                               November 23, 1954

Honorable Cliff Yelle
State Auditor
Legislative Building
Olympia, Washington                                                                                                              Cite as:  AGO 53-55 No. 347

Attention: Mr. A. E. Hankins

Dear Sir:

            In your letter of November 9, 1954, you asked the following question:

            "Can a second class school district make advance payments for the lease or rental of property to supply classrooms as needed by the district?"

            It is our opinion that a second class school district may make advance payments for the lease or rental of property to be used for classrooms.

                                                                     ANALYSIS

            At the close of the last school year the school building belonging to the Ocosta Consolidated School District was destroyed by fire.  In order to supply classrooms, the district entered into a lease for a building to be used for such purpose.  The lease covered the period between September 7, 1954, and June 1955, at a rental fee of $175.00 per month to be paid in advance in two installments; one in September and the other in January.

            It is a well recognized proposition of law that school districts, possess only such powers as are conferred upon them by legislative enactment.  State ex rel. School District No. 301 v. Clausen, 109 Wash. 37, 186 Pac. 319 (1919).  The power to lease real property for school purposes is specifically granted to the school  [[Orig. Op. Page 2]] directors under RCW 28.58.100, as follows:

            "Every board of directors, unless otherwise specially provided by law, shall:

            "* * *

            "(5) Purchase personal property in the name of the district and receive,lease, issue and hold for their districts real and personal property;" (Emphasis supplied)

            Thus the only issue to be determined here is whether a school district may pay in advance for such lease.

            It is clear that the directors of the school district may only expend such sums within one year as is set aside for that purpose in the budget.  RCW 28.58.130.  If the lease does not violate that limitation, then we must determine whether it violates any provisions of the constitution or statutes.  There is no statutory restriction relating to advance payments.  The constitution in Article VIII, § 7, however, provides that a municipal corporation may not lend money or credit to private parties.  School districts are municipal corporations within the meaning of that section.  Maxon v. School District, 5 Wash. 142, 31 Pac. 462 (1892); State ex rel. School District v. Grimes, 7 Wash. 270, 34 Pac. 836 (1893).

            The issue, then, is whether advance payments on a lease of a building for school purposes constitute a "loan" within Article VIII, § 7 of the Washington constitution.  The greatest argument that could be raised is that by paying the rent in advance the school district allowed the lessor to use the money before the district actually received benefit.  This argument was used in a January 24, 1927, Opinion of the Attorney General, in regard to an advance payment made by a water district to a contractor in return for the contractor's bond.  The Attorney General stated as follows:

            "It seems to us, furthermore, that payment to  [[Orig. Op. Page 3]] the contractor of the contract consideration prior to completion of any part of the contract would be in the nature of a mere gratuity, and would be lending the credit of the district at least to the extent that the contractor is enabled to secure the use of the money until such time as the contract is completed."

            It appears to us that a distinction can be made between the present situation and that opinion, and that no further extension of the rule should be necessary.  A lease is a conveyance of real estate.  State v. Morrison, 18 Wash. 664, 52 Pac. 228.  It carries a present interest and estate in the property involved for the period specified therein and gives exclusive possession of the property against everyone, including lessor.  Conway v. Time Oil Co., 34 Wn. (2d) 884, 210 P. (2d) 1012.  Therefore, the lessor gave up an interest in the property immediately upon the execution of the lease, and the school district (lessee) received an estate in land constituting a personal property right.  Thus when the district makes an advance payment it receives property in return, taking it out of the "loan" prohibition.

            A contract, on the other hand, is merely a promise on the part of the contractor to perform in return for payment.  There is no property right, but only a right to performance or remedy in case there is no performance.  The advance payment before a contract is performed, is more clearly within Article VIII, § 7 where no benefit has been received.  We do not, however, here express any opinion as to whether advance payment on a contract of such a nature is a violation of that section.

            A loan of money or credit under such a constitutional provision would appear to include only those transactions creating a borrower-lender relationship between the parties, where the borrower is obligated to repay the money borrowed.  Bannock County v. Citizens' Bank & Trust Co., 53 Idaho 159, 22 P. (2d) 674.  The Washington Supreme Court has said this provision may also apply in a situation where a city intends to purchase property and lease all of it to private parties.  Paine v. Port of Seattle, 70 Wash. 297, 126 Pac. 628 (1912).  This is the reverse side of the problem, however, and certainly has no application here.

             [[Orig. Op. Page 4]]

            Therefore, in our opinion, a school district may lease a building for classroom purposes and may make payments in advance under such lease.

Very truly yours,

DON EASTVOLD
Attorney General

EDWARD M. LANE
Assistant Attorney General