Royal Oak Tp. v. City of Pleasant Ridge

• Citation: 295 Mich. 284,294 N.W. 682
• Decision Date: 13 November 1940
• Docket Number: No. 109.,109.
• Parties: ROYAL OAK TP. v. CITY OF PLEASANT RIDGE.
• Court: Supreme Court of Michigan

295 Mich. 284

294 N.W. 682

ROYAL OAK TP.

v.CITY OF PLEASANT RIDGE.

No. 109.

Supreme Court of Michigan.

Nov. 13, 1940.

Suit in equity by the Township of Royal Oak against the City of Pleasant Ridge for accounting of moneys due plaintiff as its proportion of road and county drain assessments and township bonds for water and sewer improvements. Decree for plaintiff, and defendant appeals.

Modified and remanded.

Appeal from Circuit Court, Oakland County; H. Russell holland, judge.

Argued before the Entire Bench.

Arthur E. Moore, of Royal Oak, for defendant-appellant.

Robert C. Baldwin, of Hazel Park, for plaintiff-appellee.

BOYLES, Justice.

The township of Royal Oak, plaintiff herein, seeks an accounting from the city of Pleasant Ridge under Act No. 38, Pub.Acts 1883, 1 Comp.Laws 1929, §§ 2334-2344, Stat.Ann. §§ 5.2221-5.2231, for moneys which plaintiff claims defendant is liable for as its proportion of assessments for Covert roads, county drains and State roads assessed at large, and also on account of moneys claimed by plaintiff from the defendant as its proportionate share of bonds issued by the township for water and sewer improvements.

Several cities have been incorporated out of the original area of the plaintiff township, the first being the city of Royal Oak in 1926-7, next the city of Ferndale in 1927, and then the defendant herein, the city of Pleasant Ridge, on March 31, 1928. Subsequently, the cities of Berkley and Huntington Woods have been incorporated out of remaining territory of Royal Oak township.

Act No. 38, Pub.Acts 1883, provides for the adjustment of rights and liabilities on the division of territory between cities and townships. Section 4, 1 Comp.Laws 1929, § 2337, Stat.Ann. § 5.2224, provides that all debts owing by a township from which territory has been detached shall be apportioned in the same manner as personal property of such city or township, and each city and township shall be charged with its share of the debts according to such apportionment. Sections 5 and 6, 1 Comp.Laws 1929, §§ 2338, 2339, Stat. Ann. §§ 5.2225, 5.2226, provide for a meeting between the city and township as soon as practicable after the change of boundary, for settlement of their differences, at which meeting the designated representatives of each shall make a fair and equitable division of the personal property, and also apportion the indebtedness of the city and township between them. Section 7, 1 Comp.Laws 1929, § 2340, Stat.Ann. § 5.2227, provides that if these representatives fail to arrive at a settlement, either party may file a bill in chancery for an accounting, and for an apportionment of their debts; and the court may be decree apportion the amount of the indebtedness of the township for which the city shall be liable.

For some two years after the city of Pleasant Ridge was incorporated out of the area of Royal Oak township, March 31, 1928, no effort was made by these parties to apportion the assets and determine the relative liabilities. In 1930, and again in 1937, certain audits were made attempting to settle the rights of plaintiff and defendant in regard to apportionment of this indebtedness. These audits have been accepted (with certain reservations) as the basis for the decree of the court below.

The record indicates that there are two separate matters involved in the accounting. As to the first, the court below reached the conclusion that as of March 31, 1937, the defendant was indebted no the plaintiff in the net sum of $7,891.80 on account of defendant's liability for its share of county road and drain taxes, with interest to that date, after deducting certain credits due defendant from plaintiff on account of delinquent taxes. Appellant does not assign error on this finding and the decree of the court below is affirmed to that extent. Four per cent interest on $2,648.51 from March 31, 1937, will be added to the above sum, that being the rate agreed upon on the record by the parties.

The second and remaining question to be disposed of relates to whether the defendant is liable to plaintiff for the payment of a proportionate share of certain bond obligations incurred by plaintiff township for water and sewer improvements prior to 1928.

In October, 1926, the plaintiff township issued certain special assessment bonds socalled, referred to as bonds of special assessment rolls Nos. 5 to 11, inclusive, for the purpose of paying for certain sewer and water improvements made in platted lands within the township. These bonds were issued under the authority of Act No. 116, Pub.Acts 1923, as amended by Act No. 263, Pub.Acts 1925, 1 Comp.Laws 1929, §§ 2385-2388, Stat.Ann. §§ 5.2411-5.2414. Each bond so issued provided among other things as follows:

‘* * * or the prompt payment of this bond, both principal and interest, the collections from special assessment roll No. 11, together with the full faith and credit of the township of Royal Oak, are hereby irrevocably pledged.

‘This bond is payable out of special sewer assessment roll No. 11 funds.’

A similar provision occurs in each bond except that the assessment roll number varies.

Plaintiff claims an accounting from defendant on the ground that these bonds were and are general obligation bonds of the plaintiff township, therefore, constitute an indebtedness of the township at the time the defendant city was carved out of Royal Oak township. Plaintiff claims, therefore, that defendant is liable for a proportionate share of this indebtedness under section 4 of Act No. 38, Pub.Acts 1883, 1 Comp.Laws 1929, § 2337, Stat.Ann. § 5.2224.

The record discloses that no part of the special assessment district against which the taxes for these improvements were levied by the township was taken over by the defendant city. On the contrary, the improvement district is in a portion of the township at a distance from the present territorial boundaries of the defendant city of Pleasant Ridge.

These bonds were issued under the provisions of Act No. 116, Pub.Acts 1923, as amended by Act No. 263, Pub.Acts 1925. This act authorizes any township to make improvements on platted lands lying outside the boundaries of incorporated villages; to levy and collect special assessments to pay the cost thereof and to issue bonds in anticipation of the collection of such special assessments. The township board is authorized to create and establish a special assessment district ‘upon which the cost of such improvement shall be levied.’ As to these provisions of the act, no subsequent change has been made. However, subsequent to the time of the issue of these bonds in 1926, section 3 of this act was amended by Act No. 58, Pub.Acts 1927, and the following provision added: ‘If any such special assessment fund is insufficient to pay such bonds and interest thereon when due, the township board shall advance the amount necessary to pay such bonds, and shall be reimbursed from such assessments when collected, or by re-assessment of the deficiency if necessary.’

In 1934, Act No. 24, Pub. Acts 1934, Ex. Sess., Comp.Laws Supp. 1940, § 2387, Stat.Ann. § 5.2413, further amended section 3 of the above act by providing that the township board may (instead of shall) advance the amount of the bonds from its general funds.

In 1931, the plaintiff township defaulted in the payment of these bonds. This resulted in litigation which was decided by this court in Whitman v. Township of Royal Oak, October, 1934, 269 Mich. 146, 256 N.W. 835, 836. This was a bill filed by bondholders against the township and others to compel payments due on the identical bonds now before the court in the instant case. In that case, the defendant township of Royal Oak claimed that the township originally had no power to issue these bonds on its general credit, and that the act of 1927 could not be made retroactive. Justice Edward M. Sharpe, the court unanimously concurring, held: ‘Under Act No. 58, P.A. 1927, the township was required to advance the amount of money necessary to pay the bonds, and to reimburse itself from special assessments when collected, or by reassessment of the deficiency if necessary. Under the holdings of Moore v. Harrison, 224 Mich. 512, 195 N.W. 306, and Regents of University of Michigan v. Pray, 264 Mich. 693, 251 N.W. 348, this act is constitutional. Nor is the township relieved from this obligation by the effect of Act No. 24, P.A.1934, Extra Session. The act in terms applies only to bonds issued subsequent to April 21, 1927, whereas the bonds here in question were issued in 1926. Moreover, prior to the time Act No. 24 took effect, the rights of the bondholders had become fixed and, on presentation of matured bonds, bondholders were entitled to payment out of the township's general fund. That this general liability of the township to pay was not released by Act No. 24, P.A.1934, Extra Session, see, also section 4-a as added to Rev.St. 1846, c. 1, by Act No. 25, P.A. 1931.’

In the case at bar, plaintiff cites the above as controlling, and claims that the bonds in question were the general obligation of the township, therefore, an indebtedness at the time of their issue for which the defendant city is proportionately liable.

This statute was again before the court in City of Highland Park v. Dearborn Township, 1938, 285 Mich. 440, 280 N.W. 820, 821, where certain bondholders joined with the city of Highland Park in bringing suit in equity to recover on matured bonds issued by Dearborn township, also seeking to compel a general tax levy for their payment. The bonds in question were issued subsequent to the effective date of Act No. 58, Pub. Acts 1927, which at that time provided that if any special assessment fund should be insufficient to pay such bonds, the township board shall advance the money and be reimbursed from the special assessments when collected, or by reassessment (later changed to may). The bonds were issued under the authority of this same act, No. 116, Pub. Acts 1923,...