City of Middletown v. Ferguson
| Decision Date | 23 July 1986 |
| Docket Number | No. 85-996,85-996 |
| Citation | 495 N.E.2d 380,25 Ohio St.3d 71,25 OBR 125 |
| Parties | , 25 O.B.R. 125 CITY OF MIDDLETOWN, Appellee, v. FERGUSON, Auditor, et al.; Sticklen et al., Appellants. |
| Court | Ohio Supreme Court |
This cause concerns a dispute arising from the Manchester Road project in the city of Middletown ("city"), appellee herein. As early as 1963, the city first considered the widening and improvement of Manchester Road as part of its master plan for development. The city intended to upgrade the road from two lanes to a four-lane divided highway. Appellants herein are abutting property owners who opposed the Manchester Road project.
In 1975, the Ohio-Kentucky-Indiana Regional Counsel of Governments, an organization responsible for distributing federal highway improvement funds, resolved that federal monies would be allocated to improve Manchester Road.
The city's next step was to pass the necessary legislation. In May 1977, the city commissioners passed emergency Resolution No. R77-19, officially instructing the administration to proceed with the Manchester Road project. Detailed plans for the road improvement project were drawn up and presented to the Ohio Department of Transportation ("ODOT"), which acted as contracting authority for the actual work and served as a conduit for federal funds.
ODOT did approve the project and thereafter, on May 2, 1978, the city commissioners passed emergency Ordinance No. 078-93 directing the city manager to enter into contracts with ODOT for the improvement project. The ordinance set forth the parties' contractual obligations. A certified copy of the ordinance was signed by a city representative on May 12, 1978 and by ODOT on June 2, 1978. As provided by the ordinance, the city agreed to bear the full cost of the project, less federal funds received, and to maintain the road after completion of the project. ODOT was to supervise construction of the improvement. The full text of this ordinance was published in the Middletown Journal.
At the time of passage of Ordinance No. 078-93, the estimated construction cost was $1,185,000. The city expected federal funds to cover about seventy percent of the costs of the project, while it would bear the remaining thirty percent. It has been stipulated by both parties to the instant case that "[f]rom the inception of the Project, the City planned to finance most of its share of the cost by special assessments to the benefiting owners of * * * private property bounding or abutting Manchester Road * * *."
On May 8, 1979, pursuant to the passage of Ordinance No. 079-19, two public hearings on the road improvement project were held. It is stipulated that owners of twenty-seven of the affected properties, including all of the appellants herein, attended one or another of the hearings. Appellants and other citizens expressed safety concerns about increased traffic on Manchester Road and concerns about the proposed assessments. City officials explained the assessment process and responded to the safety concerns. The city then typed Summary Minutes and Recommendations from the meetings and mailed it to all affected property owners.
On January 20, 1981, the city commission adopted emergency Resolution No. R81-03, declaring the necessity to improve Manchester Road and stating that bonds should be issued in anticipation of the collection of assessments levied on affected property owners. A copy of this resolution was published in the Middletown Journal.
After enactment of the resolution, the city's director of public service prepared estimated assessments. Notice of the adoption of Resolution No. R81-03 and the estimated assessments were sent to all affected property owners. Five owners filed objections, which were resolved by the Assessment Equalization Board.
In March 1981, the city commission passed emergency Ordinance No. 081-44, stating its determination to proceed with the project and to levy the special assessments to pay the city's portion of the project's cost.
On June 9, 1981, several affected property owners filed with the clerk of the city commission a verified copy of an ordinance which they intended to make the subject of an initiative petition to be placed on the November ballot. The text of the proposed ordinance called for the repeal of "any and all further legislation" adopted by the city commissioners having reference to the widening and improvement of Manchester Road. The proposed ordinance also sought repeal of any and all commitments of the city of Middletown to the Manchester Road project.
While signatures for the initiative petition were being collected, on June 23, 1981, the city commission passed emergency Resolution No. R81-41 approving final plans for the project and appropriating approximately $330,000 from its general fund representing the city's share of the project cost. This sum was paid to ODOT by the city and a formal contract between the parties was executed concurrently with the passage of the resolution.
Pursuant to the contract, ODOT apparently let bids for the construction phase of the project. On July 27, 1981, ODOT awarded a contract for the construction to SK Construction Company. Construction on the project commenced.
Meanwhile, on July 24, 1981, the Butler County Board of Elections validated sufficient signatures to have the initiative ordinance placed on the November ballot. At the November 3, 1981 general election, the voters approved the initiative ordinance, thus repealing "any and all" Manchester Road enabling legislation and any and all commitments of the city to the project. At the time of passage of the initiative ordinance, construction on the road widening and improvement was nearly sixty percent complete.
Although the effect of the initiative ordinance would have been to halt further construction on the project, the city believed the ordinance to be an unconstitutional impairment of an obligation of a contract and allowed construction to continue. The project was completed by July 1, 1982.
On June 7, 1983, in conformance with previously passed enabling legislation, the city commission enacted ordinances levying the special assessments and providing for the issuance of bonds by the city to pay for its portion of the construction costs. The bonds were to be retired by funds generated from the anticipated collection of assessments.
At that point, the salability of the bonds became an issue in light of the initiative ordinance and its possible effect on the prerequisite enabling legislation for the levying of the assessments. The city then brought a bond validation action, pursuant to R.C. 133.71 et seq., to establish its authority to issue the bonds and to establish that all of its previous resolutions and ordinances relating to the Manchester Road project were lawful and enforceable. Appellants, Judy F. Sticklen, James L. Deger, Mary S. Rice and Frederick H. Cranford, owners of property affected by the project, became named defendants to the action in an attempt to block assessments against their properties.
At trial, the city contended that the entire initiative ordinance was void ab initio as an unconstitutional impairment of the city's contractual obligations with ODOT for construction of the project. Appellants claimed that the city had no standing to sue. Appellants also argued that in the event that the portion of the initiative ordinance purporting to halt construction on the project was unconstitutional, that portion of the ordinance repealing assessments could be severed off and given full force and effect.
The trial court held (1) that the city had special statutory standing to bring its suit; (2) that the initiative's repeal of the assessment ordinance did not impair the city's contractual obligations; (3) that the primary aim of the initiative ordinance, to halt construction of the project, would have been an unconstitutional impairment of an obligation of a contract had construction been stopped; and (4) that the portion of the ordinance pertaining to assessments could not properly be severed from the portion of the ordinance halting construction. Therefore, the trial court decided that the entire initiative ordinance was unconstitutional and thus void. In its judgment entry of April 10, 1984, the trial court held that the city had the authority to issue its bonds and that all proceedings taken by the city in connection with the Manchester Road project were lawful and valid.
The court of appeals affirmed. It reasoned that the initiative ordinance did impair the city's then-existing contractual obligations with ODOT on the effective date of its passage by the voters and that the ordinance was therefore void ab initio.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Squire, Sanders & Dempsey, John R. Gall, C. Craig Woods, Columbus, and Sheldon A. Strand, Law Director, Middletown, for appellee.
Carl Morgenstern Co., L.P.A., Carl Morgenstern and Roger S. Gates, Hamilton, for appellants.
In this case the elected representatives of the citizens of Middletown, the city commissioners, carefully conceived a plan to widen and improve Manchester Road. The commissioners diligently and openly passed all necessary legislation to carry their plan to completion. Unfortunately, a significant number of citizens were opposed to the road improvement project. These citizens sought to halt the project by using their reserved initiative power. In this conflict between a city government and its citizens, we must decide whether the initiative ordinance passed by the Middletown voters unconstitutionally impaired the city's contractual obligations in the road improvement project.
We realize that initiative repeal of the necessary project-related legislation was the only course open to the citizens opposing the project. 1 Nevertheless, had this initiative been brought at an earlier time, before there was an executed contract,...
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