Horner's Market, Inc. v. Tri-County Metropolitan Transp. Dist. of Or., TRI-COUNTY

• Decision Date: 02 July 1970
• Docket Number: TRI-COUNTY
• Citation: 90 Adv.Sh. 795,467 P.2d 671,2 Or.App. 288
• Parties: HORNER'S MARKET, INC., an Oregon corporation, William S. Burghardt and Ellen Burghardt, husband and wife, and All Persons, Firms and Corporations Similarly Situated, Appellants, v.METROPOLITAN TRANSPORTATION DISTRICT OF OREGON, an Oregon municipal corporation, and Keith Hansen, its general manager, Department of Revenue, State of Oregon, and Charles H. Mack, its Director, Respondents.
• Court: Oregon Court of Appeals

Page 671

467 P.2d 671

2 Or.App. 288

HORNER'S MARKET, INC., an Oregon corporation, William S Burghardt and Ellen Burghardt, husband and wife and All Persons, Firms and Corporations Similarly Situated, Appellants, v. TRI-COUNTY METROPOLITAN TRANSPORTATION DISTRICT OF OREGON an Oregon municipal corporation, and Keith Hansen, its general manager, Department of Revenue, State of Oregon, and Charles H. Mack, its Director, Respondents.

Court of Appeals of Oregon, Department 2.

Argued and Submitted March 17, 1970.

Decided March 26, 1970.

Rehearing Denied April 22, 1970.

Review Denied July 2, 1970.

Robert Y. Thornton, Salem, argued the cause and filed the briefs for appellants.

Clifford B. Alterman, Portland, and Carl N. Byers, Salem, argued the cause for respondents. Carl N. Byers, Salem, filed the brief for respondents. With him on the brief were Kell & Alterman and Raymond M. Kell, Portland.

John D. Mosser, Portland, argued and filed a brief as amici curiae. With him on the brief were Donald J. Morgan, John R. Hay, Verne W. Newcomb and Jack B. Schwartz, Portland.

No appearance for Department of Revenue.

Before SCHWAB, C.J., and LANGTRY and FOLEY, JJ.

LANGTRY, Judge.

The plaintiffs, who are business owners and employers in Clackamas and Washington counties, have appealed from dismissal of their class suit which sought injunction against levying and collecting an employer payroll tax by defendants. The latter are the Tri-County Metropolitan Transportation District of Oregon and its Manager, and the Department of Revenue, State of Oregon, and its Director. The case was heard on demurrers and a stipulation of facts.

The District was duly formed on October 14, 1969, pursuant to Oregon Laws 1969, ch. 643, encompassing Washington, Clackamas and Multnomah counties. The exhibits included with the stipulation of facts indicate that before the District had an opportunity to complete financial organization pursuant to its organic law (ch. 643), Rose City Transit Co., the major mass transit system in the area, serving an area largely within the corporate boundaries of the City of Portland, became involved in labor and financial difficulties. These difficulties required the District to either take over the transit company or have it cease to operate. This would have left about 80 per cent of the population of the state's largest metropolitan area unserved by this mass transit system. The District took over the company on November 28, 1969.

Opportunity for federal aid and need for matching funds, operating revenues, and capital funds required immediate action if the District were to proceed under its purported legislative authority. Day-to-day operation was financed by fare-box income and bank loans. All matters in this statement of facts are before the court by reason of the demurrers and the stipulation of facts made in the lower court by the parties who stated that they 'mutually desire the Court to pass upon all of the issues raised * * * in their pleadings.' Upon oral arguments in this court, counsel agreed that the demurrers admit these facts.

Oregon Laws 1969, ch. 643, § 23, authorizes the board of the District to raise revenue and designates seven specific methods, any one or more of which may be used within the limits prescribed. One of these is '(7) Levy of a tax measured by employer payrolls under sections 34 and 35 of this Act,' limited to 6/10 of 1 per cent of gross payrolls. The District board on December 1, 1969, proposed such a tax of 1/2 of 1 per cent on employer payrolls in the District (except those exempted). The board introduced an Ordinance, No. 2, imposing the tax and explained it on December 12; a public hearing was held on December 18, and on the same date adopted it. As permitted by ch. 643, Ordinance No. 2 was made immediately effective by the inclusion of an emergency clause which recites the facts constituting the emergency. The State Department of Revenue is designated as the collecting agency, pursuant to ch. 643.

The District's demurrer to the complaint on grounds of no cause of suit stated was sustained and when plaintiffs refused to plead further the suit was dismissed. From that judgment plaintiffs appealed. Amici curiae, representing litigants who have other suits pending in lower courts, filed a brief in this court.

The amici curiae brief questions the jurisdiction of the court to entertain the suit. The challenge goes to the original jurisdiction of the circuit court from which this appeal was taken. Amici curiae contend that ORS 305.410(1) since its amendment in 1965 (Oregon Laws 1965, ch. 6, § 2) provides that the Oregon Tax Court shall have exclusive jurisdiction of all questions arising under the tax laws of this state; therefore, this suit was commenced in a court without jurisdiction.

Several of the assignments of error relate to the constitutionality of the Act (ch. 643) under which the District was formed; thus, the suit is broader in scope than an attack upon the tax alone, for it challenges the existence of the District. ORS 305.410 cannot be construed to give the Tax Court original jurisdiction in such a matter, although the same suit challenges a tax. The circuit court, being Oregon's court of original general jurisdiction, was, therefore, the proper tribunal in which to commence this suit, and the Court of Appeals, under Oregon Laws 1969, ch. 198, § 1(2)(E), is the court having original appellate jurisdiction.

This is a suit in equity for an injunction. Equity, having taken jurisdiction, will decide all matters properly determinable in the suit.

Several of the constitutional challenges to the Act under which the District was created, and the District's actions relating to the tax, will be considered together.

Plaintiffs contend that the tax is discriminatory and therefore violates the equal protection provisions of the state and federal constitutions (Art. I, § 20 of the Oregon Constitution, and Fourteenth Amendment, United States Constitution); the Act unconstitutionally delegates legislative authority to the District board; that the Act violates Art. I, § 32 of the Oregon Constitution by imposing a tax without first submitting it to the voters of the District; that due process and home rule constitutional rights are denied; ¹ and that the levy of taxes by an appointive and unapportioned board denies equal protection under the Fourteenth Amendment to the United States Constitution.

In Cook v. Port of Portland, 20 Or. 580, 582, 27 P. 263, 13 L.R.A. 533 (1891), which settled the constitutionality of the Act by which the Port of Portland was created, Mr. Justice Robert S. Bean quoted 'Lord, J., in Cline v. Greenwood, 10 Or. (230) 241, 'Before a statute is declared void in whole or in part its repugnancy to the constitution ought to be clear and palpable, and free from doubt. Every intendment must be given in favor of its constitutionality' * * *.'

It is obvious that the legislature patterned the 1969 Act, particularly the part providing for appointment of the District board, after the Act of 1891 and later amendments thereto which created the Port of Portland. In that Act, and the one here questioned, powers of taxation are delegated to a board which is selected by the governor. The Port of Portland Act gives that board power to legislate by ordinance on internal affairs. ORS 778.250. Chapter 643, § 17, gives similar legislative powers to the District board.

After the Home Rule Amendment to the state constitution was adopted in 1906, serious question was again raised as to the constitutionality of amendments to the Port of Portland Act. In Rose v. Port of Portland, 82 Or. 541, 572--574, 162 P. 498, 508 (1917), the court said:

'* * * The legislative assembly cannot Create any corporation by a special law; but corporations of all kinds may be formed under appropriate general laws passed by the Legislative Assembly. * * * (I)t can enact a special law which amends the charter or act of incorporation of a municipality, other than a city or town. The Legislative Assembly can enact a general law affecting the charters or acts of incorporation of all * * * municipalities or districts * * *.

'The construction adopted here * * * carries out and preserves the idea of home rule without * * * denying the power of legislation to the sovereign people of the state at large or their agent and representative, the legislative assembly where, in the words of the Constitution itself, 'the legislative authority of the state shall be vested. " ² (Emphasis supplied.)

In The George W. Elder, 159 F. 1005 (D.Or.1908), cert. den. 232 U.S. 722, 34 S.Ct. 330, 58 L.Ed. 815 (1914), United States District Court said:

'One other point * * * is that the board of control of the port of Portland is made appointive and self-perpetuating, rather than elective, and that, therefore, the entire act, with all the amendments, is unconstitutional * * *. The Oregon Supreme Court seems to have settled the question otherwise (David v. Portland Water Committee, supra (14 Or. 98, 12 P. 174); State v. George, 22 Or. 142, 29 P. 356, 16 L.R.A. 737, 29 Am.St.Rep. 586; Eddy v. Kincaid, 28 Or. 537, 41 P. 156, 655), and I feel bound by the adjudication.' 159 F. at 1008.

The challenges under due process and equal protection provisions of the United States and state constitutions are broad in scope. Similar challenges have frequently been made in other cases. They usually relate to the organization and expansion of, or taxation by, municipal corporations. In Hunter v. City of Pittsburgh, 207 U.S. 161, 28 S.Ct. 40, 52 L.Ed. 151 (1907), the Pennsylvania legislature had provided for the annexation by the larger city of Pittsburgh of the adjoining city of Allegheny, even though the majority of the voters of the smaller city voted against it. In the appeal to the United States Supreme Court it was contended that this was a violation of the sanctity-of-contract and due process provisions of the United...