Colby v. City of Medford

• Citation: 85 Or. 485,167 P. 487
• Parties: COLBY ET AL. v. CITY OF MEDFORD ET AL.
• Decision Date: 19 September 1917
• Court: Supreme Court of Oregon

167 P. 487

85 Or. 485

COLBY ET AL. v. CITY OF MEDFORD ET AL.

Supreme Court of Oregon

September 19, 1917

Department 1.

Appeal from Circuit Court, Jackson County; F. M. Calkins, Judge.

Separate complaints in one suit by Charles D. Colby and William Stailey against the City of Medford, its Mayor, Councilmen Recorder, and Treasurer. Decree for the defendants, and plaintiffs appeal. Reversed as to Colby, and affirmed as to Stailey.

This suit was commenced against the city of Medford, its mayor councilmen, recorder, and treasurer, by Charles D. Colby, who is not only making certain contentions because of the methods previously pursued by the city in raising moneys with which to pay the interest on the bonded indebtedness for improvements, the expense of which had been charged to abutting property by levying special benefit assessments, but he is also attacking an alleged charter amendment, known as the "Hanson plan," which was designed to enable the city to refund all its bonded and other indebtedness for paving, sewers, and water mains. After Colby had filed his complaint, and with the consent of all parties, William Stailey filed a separate complaint in this suit against the same parties who had been named as defendants in the Colby complaint; and hence this proceeding really involves two suits, which for convenience have been consolidated into one suit. The assault made by the Stailey complaint is especially directed against the special benefit assessments which the city levied on abutting property, while the Colby complaint admits the regularity of all the improvement proceedings, as well as the validity of all the original special benefit assessments. No evidence was offered by any of the parties in the circuit court, and the suit was tried and decided on such admissions as are found in the pleadings, together with certain admissions contained in a written stipulation entered into by the parties concerning the facts and the issues. While most of the facts are either admitted in the pleadings or agreed upon in the stipulation, there are yet some conflicting allegations which the parties were unable to reconcile.

We can more readily understand the nature of this complicated controversy if we first look to the voluminous pleadings and extract from them and the stipulation a condensed statement of the transactions which brought about the conditions existing in the latter part of 1916, at which time it was deemed advisable to submit some method to the legal voters for refunding part or all of the indebtedness of the city and then it will be appropriate to notice the provisions of two different methods which were devised and submitted to the legal voters, one being known as the "Medynski plan" and the other as the "Hanson plan." After referring to the causes which produced the conditions found to exist in 1916, and explaining the provisions of the Medynski and Hanson plans, attention can be directed to such facts as particularly affect Colby, and then to those facts which form the basis of the contentions made by Stailey.

Commencing with the year 1907, and ending with the year 1913, the city of Medford made extensive improvements. Streets were paved sewers were constructed, and water mains were laid. The city levied special benefit assessments against the abutting property for the purpose of raising funds to pay for these improvements. The expense of the pavement, sewers, and water mains aggregated a large sum, and the cost of the paving alone was approximately $1,000,000. After receiving notice of the special assessments levied against their property for paving and sewers, most of the abutting property owners made application under the statute, commonly known as the "Bancroft bonding act" (L. O. L. §§ 3245-3253), to pay their assessments in 10 annual installments; and then the city issued bonds as provided by the Bancroft bonding act. The charter contains provisions which are modeled after the Bancroft bonding act and enable the owner of abutting property to pay an assessment, levied on his property for the laying of water mains, in installments by filing an application with the city, and the city can then issue bonds in an amount equal to such an assessment; and although it is not in terms alleged in the pleadings that applications were so made under the charter, it is nevertheless a fair inference to say that many of the owners of property assessed for water mains applied for and were granted the right to pay their water main assessments in installments. While the parties were unable to agree upon the number, yet they do agree that some of the abutting property owners neither paid their assessments nor brought themselves within the Bancroft bonding act. In some instances, where the property owner had not applied for the right to pay his assessment in installments, the city continued the assessment on the lien docket without attempting to enforce collection. Some of the abutting property against which special assessments were levied was not worth as much as the amount of the assessment either before or after the street improvement was completed, although the special benefit assessment was less than the valuation of the property as shown by the last tax roll of the county. The assessed valuation appearing on the county tax roll was always greater than the amount of the special assessment on a lot, but the real value of a given lot was in some instances less than the amount of the special assessment imposed upon such lot for a street improvement. With the opening of the year 1914, many of the property owners began to discuss and question the validity and amount of the assessments levied against their property for the various improvements, with the result that, in addition to those who had neither paid their assessments in full when due, nor applied for the privilege of paying in installments, many property owners who had brought themselves under the Bancroft bonding act refused to pay the installments that matured in the years 1914, 1915, and 1916. The bonds which the city had issued under the Bancroft bonding act carried interest, and this interest was payable semiannually. Because of the failure of some of those who had not brought themselves within the Bancroft bonding act to pay the whole of their assessments when due, and on account of the refusal of many of the property owners who had come under the Bancroft bonding act to pay the annual installments, principal and interest, there were no moneys in the treasury with which to pay the interest due each year on the bonds which had been issued under the Bancroft bonding act; and it therefore became necessary for the city to take some steps to raise enough money to satisfy the interest. Instead of exercising the power given to it by its charter, and enforcing the collection of delinquent assessments by selling the property charged with the assessment, the city resorted to general taxation; and in each of the years 1914, 1915, and 1916 a tax was levied on all the taxable property in Medford for the purpose of raising money with which to pay interest on the outstanding bonds. By October, 1916, the city had become indebted in large sums. A portion was for the general expenses of the city, and was represented by outstanding warrants; a part was for water mains, and was represented by water main bonds issued by authority of the charter; and the remainder of the indebtedness was for street improvements and sewers, and in the main was represented by bonds issued under the provisions of the Bancroft bonding act. This was the condition of the finances of the city when, on October 3, 1916, the Medynski plan was submitted, and on December 19, 1916, the Hanson plan was submitted for approval or rejection by the voters at an election to be held on January 9, 1917.

Each plan was a refunding plan, although one proposed to refund more of the indebtedness than the other. The Medynski plan was designed to refund the paving indebtedness only, while the Hanson plan proposes to refund all the existing indebtedness incurred in the improvement of streets and in laying sewers and water mains. The two plans are different in other respects. The Medynski plan relies entirely upon general taxation to pay the indebtedness; but the Hanson plan looks primarily to the abutting property for the funds.

The Medynski Plan.--This plan proposed to declare street improvements public necessities, to release all property from the liens of assessments for street improvements, and to reimburse property owners who had made any payments on assessments for street improvements. It provides that the city shall assume all indebtedness for street improvements and refund the debt by the issuance of bonds; that the city shall pay the indebtedness for street improvements by levying a tax on all taxable property within the municipality; and that the time for the ultimate payment of the indebtedness shall be extended, by dividing the debt into 15 equal payments, to run for a period of 20 years, with interest, the interest to be paid annually during the first 5 years, and the payments on the principal to commence in the sixth year.

The Hanson Plan.--This alleged charter amendment is entitled:

"An act to amend the charter of the city of Medford, by adding thereto a new chapter, to be known as chapter 14, consisting of sections 139 to 170, both inclusive, relating to special assessments for local improvements for paving and otherwise including sewers and water mains heretofore levied and assessed, providing for the collection thereof and the enforcement of such liens and assessments and the issuance and sale of refunding bonds therefor, to read as follows."

The opening section reads thus:

"All unpaid assessments...