STATE OWNED PERSONAL PROPERTY ‑- SALES OF ‑- CASH OR INSTALLMENT BASIS

AGO 1951 No. 18 - Apr 13 1951

Attorney General Smith Troy

STATE OWNED PERSONAL PROPERTY ‑- SALES OF ‑- CASH OR INSTALLMENT BASIS.

The state may, through the division of purchasing of the department of public institutions, sell state owned personal property other than for cash; and full compliance with statutory requirements should be followed and performance bond if appropriate.

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April 13, 1951

Honorable H. D. Van Eaton,Director
Department of Public Institutions
Olympia, Washington Cite as: AGO 51-53 No. 18

Attention: !ttH. R. Washington, Supervisor, Division of Purchasing

Dear Sir:

We acknowledge receipt of your request of this office for an opinion in which you ask whether the state may sell state owned personal property, which had been declared surplus by the department of highways, upon installment terms, rather than for cash.

Our conclusion is stated as follows:

ANALYSIS

It appears from your letter that the department of highways has declared surplus a certain motor ferry, and in compliance with the usual procedures, a bid call was made in which payment by the successful bidder shall be made [[Orig. Op. Page 2]] in full at the time of starting to remove the items purchased. The highest bid was $7,500.00 for cash, or by an alternative bid of $11,100.00 on terms. There appears to be no statutory provision delineating just how surplus state owned personal property may be sold from the view point of whether or not the entire purchase price must be paid at the time of delivery. The director of public institutions through the division of purchasing has the duty a power to make purchases of supplies and equipment for the state through the central stores, and to salvage, repair and service equipment and to provide an equipment pool for the various state agencies. Section 1 et seq., chapter 160, Laws of 1943, (§ 10898-1 et seq., Rem. Supp. 1943). In said statute, which incidentally does not say anything of the disposal of state owned personal property, the powers were conferred upon the director of finance, budget and business, which department however was changed in name to the department of public institutions by section 5, chapter 114, Laws of 1947, (§ 10789-10c Rem. Supp. 1947). The department of finance, budget and business was formerly known as the department of business control and the powers of the director are derived from those of the director of business control, who in turn inherited his powers from an earlier state department with similar powers. See section 21, chapter 176, Laws of 1935 (§ 10786-20 Rem. Supp.) whereby the director of finance, budget and business took over the powers, in the division of purchasing, of the division of purchasing of the department of business control. The power to sell personal property belonging to the state was provided in section 42, chapter 7, Laws of 1921, (Rem. Rev. Stat. § 10800). Said statute, in which the director of public institutions through the division of purchasing shall be substituted for the director of business control, reads in part as follows:

"The director of business control shall have the power, and it shall be his duty, when authorized in writing so to do by the department of efficiency, to sell or exchange any personal property belonging to the state for which the office, department, or institutions having custody thereof has no further use, at public or private sale and with or without notice, in the discretion of the director of business control, and to immediately report such sale or exchange to the department of efficiency, on forms to be furnished for that purpose, and to cause the moneys realized from the sale of any such personal property to be paid into the state treasury, accompanied by a statement showing the respective fund from which the [[Orig. Op. Page 3]] property sold was purchased, to which fund, the state treasurer shall credit such moneys: Provided, if such fund be not in existence at the time of the sale, the moneys shall be credited to the general fund."

It will be noted that nothing is contained therein which would limit the powers of the director to cash sales of said property.

Article VIII, section 5 of the Constitution of Washington provides "The credit of the state shall not, in any manner, be given or loaned to or in aid of any individual, association, company, or corporation." It appears, however, from an exhaustive study of all cases in which this section has been interpreted, as well as of the similar section covering municipal corporations, Article VIII, section 7, that the term "credit" is used in a limited sense, either where the state undertakes to go as surety, or becomes a debtor from making a purchase or issuing bonds. SeeGruen v. State Tax Commission, 35 Wn. (2d) 1, 211 P. (2d) 651. See alsoState ex rel. Wisconsin Development Authority v. Dammann, 280 N.W. 698;Hansen v. Independent School District No. 1, Ida. 98 P. (2d) 959, and a sale by the state under a credit arrangement is not unlawful as a violation of Article VIII, section 5,supra.

Furthermore, the law is generally stated as quoted in 25 R.C.L. page 388, States, section 21:

"The proprietary rights of a state are as absolute and unqualified as those of an individual. It may, in the absence of any self-imposed restrictions in its constitution, sell and dispose of its property upon its own terms and conditions for cash or upon credit; and it may also take, hold and enforce notes and obligations received from the purchasers of its property, the same as individuals can. * * *"

and is similarly stated in 49 Am.Jur. page 270, States, section 57. See also State of Wisconsin v. Torinus, et al., 49 N.W. 259; State ex rel. Equity Farms, Inc., v. Hubbard, (Minn.) 280 N.W. 9;Adkins v. Kalter, (Ark.) 287 S.W. 388. There appears to be no Washington case as to personal property, but it has long been conceded that the state may dispose of its land as it may see fit. Sequim Bay Canning Company v. Bugge, 49 Wash. 127, 94 Pac. 922.

[[Orig. Op. Page 4]]

It therefore follows that since the director of public institutions has the power to sell personal property, or to exchange it, and no statutory restrictions have been imposed other than as stated in Rem. Rev. Stat. 10800,supra, the general law would obtain, and the state, through its proper agency, may sell its personal property without restrictions and either for cash or upon credit, and furthermore, may take, hold and enforce notes and obligations received from the purchasers of its property.

This being true, the second part of your request relative to protective conditions to be included in sales agreement in which delivery will be made without payment in full, is in point.

We do not pass upon the question of the propriety of the state embarking on the practice of giving possession of its property to others without securing full payment therefor, but would recommend that every reasonable security device be used to protect the state's interest until the balance is paid in full. We would suggest that a chattel mortgage may be best in some instances, and conditional sales contracts in others, with full compliance with the statutory provisions relative thereto, such as, execution of the proper acknowledgments, recording of instruments, and the director in his discretion may also require full insurance against various losses, as well as a performance bond in order that the state may be protected so long as all of the purchase price has not been paid.

Very truly yours,

SMITH TROY
Attorney General