1 Reported in 117 P.2d 189. Plaintiff Commercial Waterway District No. 1 of King county, which was organized many years ago under the provisions of Rem. Rev. Stat., § 9724 [P.C. § 1366] et seq., extensively improved the Duwamish river in King county, and the maximum benefits were duly assessed against adjacent real estate. Negotiable bonds and a considerable amount of construction *Page 476 warrants were issued by the district in payment of the cost of the improvement. There are now outstanding bonds in excess of one hundred seventy-five thousand dollars and construction warrants in excess of ninety thousand dollars. The unpaid bonds are long past due, with accumulations of interest. The district does not have general taxing power, and payment of the outstanding bonds and warrants can be made only from collection of the benefit assessments previously levied by the district against each parcel of real property within the district.
Plaintiff Carl R. Heussy is the owner of one of the district's unpaid bonds.
In 1927, defendant, King county, commenced a proceeding for the foreclosure of general taxes against a large number of parcels of real estate, including a considerable number of descriptions against which were unpaid assessments levied by plaintiff district. A great deal of this property was sold to the county, as no bidders appeared at the tax foreclosure sale.
On October 31, 1927, which was subsequent to the tax foreclosure sale, defendant county, by resolution passed by its board of county commissioners, established an airport and included within the airport a number of parcels of property which the county had acquired through the tax foreclosure proceeding, many of which parcels were subject to unpaid assessments levied by plaintiff waterway district. Thereafter the county expended in excess of one million dollars in the improvement of the airport, the facilities of which have been leased by the county to commercial companies operating air lines.
The county paid to the district, under date of November 15, 1928, the amount of the district's assessments against a number of tracts included within the airport, but failed to pay the assessments against other *Page 477 tracts included in the airport. Since establishing the airport, the county has made no effort to sell the property included within its boundaries, but has used, and apparently intends to continue to use, the property as an airport. The principal of the district's assessment which the county failed to pay to the district, amounts to $14,844.09. This action was instituted by the district and by Carl R. Heussy, as joint plaintiffs, to obtain a decree requiring the county to pay to the district the amount of the assessments above described, and also interest upon the assessments which the county paid to the district, that payment having included the principal only, without accrued interest.
The county pleaded affirmatively, in bar of the action, the statute of limitations, and laches of the plaintiffs. The cause was tried to the court, which found that all of the acts of defendant county of which plaintiffs complain had occurred more than twelve years prior to the institution of this action. From the foregoing finding, the court concluded that the action was barred by the statute of limitations, and that, because of their laches in not filing their complaint within a reasonable time after the occurrence of the acts, plaintiffs were not entitled to prevail. Judgment was entered dismissing the action. Plaintiffs have appealed.
Counsel for appellants insist that the statute of limitations and laches can not be successfully invoked to defeat an action brought by appellant district in a governmental capacity to enforce the sovereign power of taxation. Counsel for appellants also argue that respondent, since the tax foreclosure, has held title to the property in question in trust for the benefit of appellant district and other taxing units; therefore, the statute of limitations would not commence to run until repudiation of the trust by respondent, or the commission by respondent of acts hostile to, or in *Page 478 fraud of, the rights of beneficiaries of the trust, and of which appellants had actual knowledge, or of which knowledge must be imputed to them. Appellants contend that they did not have actual knowledge of the facts, and that such knowledge should not be imputed to them. While they admit that respondent had established the airport, they contend that they did not know that the property in question constituted a part of the airport.
[1] It is the settled law in this state that, when a county purchases land at a general tax foreclosure sale for want of other purchasers, the county takes and holds the land not in its proprietary capacity, but in trust for the state and the various taxing units within which the land lies. A resale of land by the county is but a part of the statutory tax collecting process, which is not complete until such resale is finally made by the county, to the end that the proceeds thereof shall be justly apportioned to the various funds entitled thereto. State ex rel.King County Water District v. Stacy, ante p. 248,116 P.2d 356.
The question whether, if a county holding tax foreclosed property as trustee sold that property to itself and held same in the county's proprietary capacity, the rule would be the same as to the distribution of the proceeds of the sale among the taxing units entitled thereto, is not presented. By this action, the waterway district, in its governmental capacity, sought to compel the performance of a statutory duty in the tax collecting process. The district is endeavoring to protect its interests in the tax collecting process, which is "an essential and basic attribute of sovereignty." Commercial Waterway District No. 1 v.King County, 197 Wash. 441, 85 P.2d 1067.
[2] Concededly, the county held the land, which *Page 479 was acquired by purchase at tax sale for want of another purchaser, in a governmental capacity as distinguished from a proprietary capacity; therefore, the statute of limitations is not a defense. No step in the tax collecting process is subject to the defense of the statute of limitations. Gustaveson v.Dwyer, 83 Wash. 303, 145 P. 458; Home Owners' Loan Corp. v.Tacoma, 4 Wash. 2d 166, 102 P.2d 832.
[3] The county was holding title as part of the tax collecting procedure in trust for the other taxing units. It was the statutory duty of the county to complete the tax collecting process by resale of the property and distribution of the proceeds derived therefrom to the various funds entitled thereto. The county, in establishing an airport, did not make any effort by condemnation procedure, or otherwise, to acquire any title to the property different from the title in trust it acquired by virtue of the tax foreclosure proceeding. The acts of the county, in establishing the airport in 1927, and the leasing of that airport to two transcontinental air lines, from which lease the county derived revenue, can not prejudice the rights of other taxing units — statutory cestuis que trustent — which are entitled to share in those proceeds.
It was the duty of the county to resell the property, to which it acquired title in trust for the other taxing units, and distribute, as prescribed by the statute, the proceeds from the sale; and until the resale was made the tax collecting process was not completed.
"The title acquired by the county in property at a general tax foreclosure sale becomes vested in the county, not in its proprietary capacity, but in trust for the state and for the other taxing municipalities within which the land is situated, with power and obligation on the part of the county to sell the land and fairly apportion the proceeds to the state, municipal, and other funds entitled thereto." State ex rel. *Page 480 Seattle v. King County, 4 Wash. 2d 589, 104 P.2d 575.
"The selling of tax foreclosed property is merely one step in the collection of general taxes, and in the absence of a contrary legislative intent, clearly expressed, it must be held that the sole authority to make such sales is vested by existing laws in the county commissioners or representatives of the general taxing authority.
"In the recent case of Sasse v. King County, 196 Wash. 242,82 P.2d 536, we said:
"`When a county purchases land at a general tax foreclosure sale, for want of other purchasers, the county takes and holds the land, not in its proprietary capacity, but in trust for the state and the various taxing municipalities within which the land lies. [Citing cases.]
"`A resale of the land by the county is but a part of the statutory tax collecting process, which is not complete until such resale is finally made by the county, to the end that the proceeds thereof shall be justly apportioned to the various funds entitled thereto. [Citing cases.]'" Commercial Waterway DistrictNo. 1 v. King County, 197 Wash. 441, 85 P.2d 1067.
Except the defense of the statute of limitations, it is not seriously contended that appellants are not entitled to the relief they seek. It is clear that the defense of the statute of limitations is not available to respondent county, as the action was instituted by the waterway district in a governmental capacity to compel the performance of a statutory duty in the tax collecting process.
Douglas County v. Grant County, 98 Wash. 355, 167 P. 928, is not in point. That was an action by one county against a new county upon a liability created by a statute, requiring the assumption of a proportionate share of the old county's indebtedness, and is in no wise analogous to an action instituted by a taxing unit in a governmental capacity to compel the performance *Page 481 of a statutory duty in the tax collecting process.
[4, 5] An additional reason urged by appellants is that, in any event, the county was acting as trustee, where the rule of express trust is applicable. That is, where, as in the case at bar, a fiduciary relationship is shown to exist and the trust has been violated, the statute of limitations does not commence to run against the beneficiary of the trust until the defrauded party has actual knowledge of the termination of the fiduciary relationship, or acts done by the trustee which are hostile to the rights of the beneficiary and of which the beneficiary has actual knowledge, or of facts from which knowledge must be imputed to the beneficiary. In New York Security Trust Co. v.Tacoma, 30 Wash. 661, 71 P. 194, we said:
"In considering the controversy, the relations of the city with the plaintiff must, we think, be controlling. The duty of the proper disbursement of its special improvement fund was imposed on the city. The general law requires the payment of these warrants in the order of their issuance. The charter of the city of Tacoma (1890), § 158, reads:
"`All moneys received or collected by the treasurer upon assessments for improvements of streets, highways or alleys, shall be kept as a separate fund and in no wise used for any other purpose whatever except for redemption of warrants drawn against such fund.'
"It seems, under these provisions, that, so long as the relations constituted by them existed between the holder of the warrant and the city, the latter's duty was that of custodian of a trust fund; and, unless there was notice to plaintiff or knowledge by him of these changed relations, the bar of the statute ought not to attach. It appears the question presented here has been virtually determined heretofore, in Potter v. NewWhatcom, 20 Wash. 589 (56 P. 394, 72 Am. St. Rep. 135). The statute of limitations was held not to run until notice or knowledge came to plaintiff. The *Page 482 city there was described as sustaining a trust relation. InBidwell v. Tacoma, 26 Wash. 518 (67 P. 259), there was misappropriation by the city of the money from a redemption fund applicable to the payment of delinquent tax certificates, and it was adjudged that the statute of limitations did not commence to run until demand for its payment had been made, or knowledge on the part of the plaintiff of refusal of the city to pay the amount, acquired."
There is an utter lack of evidence to support the finding that appellants had knowledge of the adoption of the resolution establishing the airport. The finding that appellants acquiesced in the appropriation of the tax foreclosed property by acceptance from the county out of county funds other than funds received from the sale of tax foreclosed property in payment on account of assessments due to appellant district for improvement of the property, is an erroneous conclusion.
The use by the county of the property as an airport, after having made extensive improvements, is not consistent with the holding by the county of the title in trust for the various taxing units interested in the proceeds from resale of the property. There is no evidence that the commissioners of the waterway district were aware that King county was holding title, other than as trustee, to the property against which waterway assessments were unpaid. That is to say, the record is bare of evidence that the commissioners of the waterway district knew that King county had assumed ownership over the tax foreclosed property, was claiming it in a proprietary capacity, and had improved the property as an airport.
Respondent did not sustain the burden incumbent upon it of proving that the waterway district had knowledge, which was essential to start running of the statute of limitations, of the use to which the *Page 483 county was subjecting the tax foreclosed property, title to which the county was holding as a statutory trustee.
The only testimony on the subject of knowledge was that of one of the commissioners of the district during all of the time in question. He testified that he did not have any knowledge as to what assessments had been paid and what assessments had not been paid. This witness was not interrogated respecting his knowledge of the use by the county of the property as an airport.
Counsel for respondent argue that knowledge is imputable to the commissioners of the waterway district of the act of the county in acquiring the tax foreclosed property for an airport because of a payment by the county of twenty thousand dollars to the district and, subsequent to that initial payment, the district persistently insisted upon further payment from respondent county.
There is no evidence to sustain an inference that the commissioners were aware of the acts of the county and that the district was seeking to collect the assessments due to the district. We have read the testimony which is supposed to support respondent's argument on this phase of the case. All that is disclosed by that evidence is that the waterway district commissioners were not aware that the delinquent interest had not been paid to the district "until we started this suit." Instead of the commissioners of the district making specific demands, as argued by respondent, the only evidence on this subject is the testimony of one of the commissioners to the effect that he was not aware that the waterway commissioners ever had, prior to the commencement of this action, any knowledge of the situation.
The extent of the information brought home to the waterway district was that each month the treasurer *Page 484 for the county issued a statement of the collections and disbursements made. There is nothing in these monthly statements which would inform, or charge with knowledge, the commissioners of the waterway district, or any bondholders who might have read those monthly statements, that the trustee county was misappropriating tax foreclosed property.
We are unable to find any statute — in the absence of such sanctioning statute, surely, it will be conceded the county is without authority — which vests the county with authority to itself determine by resolution of its board of commissioners that it is no longer holding title to tax foreclosed property in trust. The county is devoid of authority to repudiate the trust relationship created by the statute. If a county may not, by failure to improve tax foreclosed property held by it as statutory trustee, acquire a right to the property different from the one given to it by the statute — certainly none will in earnest contend it may — it would hardly be seriously insisted that, by the expenditure of its own funds to improve the property for use as an airport, the county could acquire any right different from the one given to it by the statute.
The judgment is reversed, and the cause remanded with direction to the trial court to grant to the appellants the relief for which they pray.
ROBINSON, C.J., STEINERT, BLAKE, MAIN, and JEFFERS, JJ., concur.