Johnson v. Boundary School Dist. No. 101

• Decision Date: 28 January 2003
• Docket Number: No. 28629.,28629.
• Citation: 63 P.3d 457,138 Idaho 331
• Parties: Terry A. JOHNSON and Lorlene V. Johnson, husband and wife; and Richard W. Fairfield and Emmy Lou Fairfield, husband and wife, Plaintiffs-Appellants, v. BOUNDARY SCHOOL DISTRICT # 101; Boundary County Commissioners; Boundary County Treasurer Wilma Devore; and Zions First National Bank, Defendants-Respondents.
• Court: Idaho Supreme Court

63 P.3d 457

138 Idaho 331

Terry A. JOHNSON and Lorlene V. Johnson, husband and wife; and Richard W. Fairfield and Emmy Lou Fairfield, husband and wife, Plaintiffs-Appellants, v. BOUNDARY SCHOOL DISTRICT # 101; Boundary County Commissioners; Boundary County Treasurer Wilma Devore; and Zions First National Bank, Defendants-Respondents.

No. 28629.

Supreme Court of Idaho, Boise, December 2002 Term.

January 28, 2003.

Racine, Olson, Nye, Budge & Bailey, Pocatello, for appellant. Richard A. Hearn, Pocatello, argued.

Randall W. Day, Bonners Ferry, argued for respondent Boundary School District.

John R. Topp, Sandpoint, for respondent Boundary County.

Holland & Hart, Boise, for respondent Zions Bank.

WALTERS, Justice.

This appeal is from an order dismissing the plaintiffs' complaint for failure to post a bond for costs before the defendants moved to dismiss due to the failure to file the bond as prescribed by the statutes governing an election contest. Because only one of the three causes of action alleged a challenge to a school district election, invoking the election statutes, and because the statutes do not expressly provide that the bond requirement is jurisdictional, we reverse the dismissal and remand the matter for further proceedings on the merits of the plaintiffs' claims.

FACTS AND PROCEDURAL BACKGROUND

On February 5, 2002, a school district election was held, where the voters approved a levy to fund a lease-purchase agreement to build a new high school and to renovate existing school buildings in Boundary County. The Special Reserve Fund Levy, authorized by I.C. § 33-804A, was approved by sixty-four percent (64%) of the vote, exceeding the sixty (60%) percent required by I.C. § 33-804(2) to pass the measure. The levy authorized the collection of $970,000 per year for twenty years, with the additional taxes to be dedicated to payments on the lease-purchase agreement. As a further result of the election, the school district received State grant monies in partial support of the planned projects and became eligible to participate in the Idaho Safe Schools Facilities Loan Program authorized under I.C. § 33-804A(2). The lease-purchase agreement was entered into with Zions First National Bank.

Terry A. and Lorlene V. Johnson and Richard W. and Emmy Lou Fairfield, residents and voters within the district (hereinafter collectively "the Johnsons"), filed a three-count complaint in the district court, seeking declaratory and injunctive relief as well as invalidation of the levy. The first count of the complaint alleged that the purchase agreement entered into between the school district and Zions violated Art. VIII, Section 3 of the Idaho Constitution, because it created an indebtedness and liability that were not ordinary and necessary expenses and had not been submitted to a vote of the electorate. The second count of the complaint asserted that the agreement should be held void and the school district enjoined from collecting the taxes authorized by the levy. The third count of the complaint alleged that the election notice did not comply with the statutes governing school levy elections, which should invalidate the results.

Pursuant to I.R.C.P. 12(b)(6), the school district and Zions moved the district court to dismiss the complaint on the ground that the bond required by law had not been posted. The Johnsons thereafter submitted a motion to allow the filing of a bond. The district court heard the parties' arguments and orally granted Zions' motion to dismiss. Relying on I.C. § 34-2001A, which provides that only the school district may be sued, the district court held that Zions was not a proper party to the suit. The district court thereafter issued a memorandum decision, holding that I.C. § 34-2001A and § 34-2008 governed the action, and imposed on the complainants a requirement to file a cost bond. The district court interpreted the statutes to mandate the filing of the complaint and the bond within forty days of the contested election. Finding that failure to timely file the bond was jurisdictional and a complete defense to the action, the district court dismissed the complaint against the school district and denied the plaintiffs' motion for leave to file a bond.¹ The Johnsons have timely appealed from the district court's order. They claim the district court erred in holding that the bond must be filed within forty days of the election, and they dispute that the statutes governing challenges to a school district election are applicable to Counts I and II of their complaint. Accordingly, they contend that the dismissal of the complaint and the denial of leave to file a bond were improvidently decided and should be reversed.

STANDARD OF REVIEW

On appeal from the dismissal of a complaint pursuant to Rule 12(b)(6), I.R.C.P., the nonmoving party is entitled to have all inferences from the record viewed in its favor. Orthman v. Idaho Power Co., 126 Idaho 960, 961, 895 P.2d 561, 562 (1995). In order to withstand a motion to dismiss, the nonmoving party must allege all essential elements of the claims presented. If the plaintiff can prove no set of facts upon which the court could grant relief, the complaint should be dismissed. See Gardner v. Hollifield, 96 Idaho 609, 611, 533 P.2d 730, 732 (1975).

DISCUSSION

The Johnsons challenge the district court's dismissal of the complaint against the school district based on their failure to timely file a bond as required by I.C. § 34-2001A. They argue that their claims do not assert "grounds of contest" enumerated in the statute which applies exclusively to challenges to the election process or election results. They argue, therefore, that the district court concluded in error that their claims were in the nature of an election contest and subject to the procedural requirements of the statute, including the bond filing prescribed by I.C. § 34-2008.

We begin with a review of the record, specifically the complaint that recites facts related to the levy election conducted in February 2002. The introductory paragraphs of the complaint set forth the exact language found on the ballot regarding the levy. The complaint also recites the terms of the lease-purchase agreement entered into between the school district and Zions under which the school district agreed to pay $18,291,006.94 over twenty years for the construction of a new high school and for the renovation of existing schools.

Count I of the complaint alleged that the lease purchase agreement was executed without a two-thirds vote of the electorate and, therefore, violated Article VIII, § 3 of the Idaho Constitution, which bars the creation of any indebtedness in excess of the income and revenue provided for a given year except upon an election.² The relief requested was a declaration that the agreement was unlawful and invalid. Contrary to the district court's conclusion, however, Count I is not an election challenge to the levy to raise money for payment of the lease purchase agreement, but a declaratory judgment action challenging the validity of the agreement with the bank to finance the building of and repair to schools. The question posed is whether the contract between the school district and Zions is valid, i.e., whether it violates the state constitutional provision against incurring indebtedness that exceeds income and cannot be discharged within one year.

Count II sought to enjoin the collection of the duly passed levy, which was to be dedicated to the payment of the lease-purchase agreement, which the plaintiffs contend is unconstitutional. This second count also is not an election contest but another challenge to the validity of the agreement by way of declaratory judgment. It challenges the mill levy to the extent of questioning whether the lease purchase agreement can be discharged by the levy, but it does not challenge either the election procedures or the ultimate vote approving the mill levy.

Consequently, the lack of a cost bond required for an election contest is irrelevant to Count I and II, and the district court's dismissal based on the absence of a timely bond filing was error. Although the claims do not dispute the levy per se but only the manner in which the money can be spent, they present a controversy that is appropriate for judicial determination in a declaratory judgment action. See Weldon v. Bonner County Tax Coalition, 124 Idaho 31, 36, 855 P.2d 868, 873 (1993), citing Harris v. Cassia County, 106 Idaho 513, 516, 681 P.2d 988, 991 (1984). We hold that the Johnsons are entitled to pursue their declaratory judgment action.

Count III, which asserted a claim that the notice of the levy was defective, is unquestionably an election challenge. The essence of the claim is that, although the ballot provided that the levy "shall be utilized for the purpose of abating the unsafe and unhealthy conditions at existing district school facilities," the notice failed to fully state the purpose of the levy, i.e., to make payments on an agreement that is allegedly violative of the state Constitution.

In light of a statutory procedure for the contest of an election, the remedy...