DISTRICTS ‑- PORT ‑- LEASES ‑- BOND OF LESSEE

DISTRICTS ‑- PORT ‑- LEASES ‑- BOND OF LESSEE

Port district may not accept municipal general obligation bonds as security for performance of lease under RCW 53.08.080.

                                                                   - - - - - - - - - - - - -

                                                                   June 27, 1955

Honorable George W. Sibbald
Prosecuting Attorney
Cowlitz County Court House
Kelso, Washington                                                                                                              Cite as:  AGO 55-57 No. 105

Attention:  !ttMr. Richard L. Norman
            Deputy

Dear Sir:

            You have requested our opinion as to the legal possibility of posting municipal general obligation bonds, of the Port of Astoria, Oregon, a Vancouver school district, and the Port of Kalama, as security for the performance of contracts of lease with the Port of Kalama.

            In our opinion, none of these bonds would be legally sufficient for the purpose stated.

                                                                     ANALYSIS

            The giving of security for performance of leases with a port district is governed by RCW 53.08.080, § 9, chapter 65, Laws of 1955, providing in relevant part that:

            "A [port] district may lease all lands, wharves, docks, and property owned and controlled by it, upon such terms as the port commission deems proper:  Provided, That no lease shall be for a period  [[Orig. Op. Page 2]] longer than fifty years, and each lease shall be secured by a bond, with surety satisfactory to the port commission, in a penalty not less than the rental for one‑sixth of the term, * * *"  (Emphasis supplied)

            We think this statute plainly contemplates a surety bond, in which the surety binds himself to pay the lessor a fixed sum in the event of default or failure in performance by the lessee.

            The municipal bonds proposed as security for faithful performance by the lessee might in fact constitute adequate collateral security.

            The two methods of securing a particular contract are not precisely the same, however.  The surety undertakes a personal obligation, whereas the port could move only against the property pledged in the case of collateral security.  SeeCope v. Cope, 5 Tenn. App. 169.  The general practice in cases where public officers or bodies are required to take or furnish bonds is to secure the bond of an approved surety company pursuant to the provisions of chapter 48.28 RCW; since such companies are registered with and approved by the Insurance Commissioner.

            We conclude that only that type of bond required by the state could lawfully be taken by the port commission in connection with such a lease; and that the municipal general obligation bonds described above would not be legally sufficient.

Very truly yours,

DON EASTVOLD
Attorney General

MAURICE M. EPSTEIN
Assistant Attorney General