McAllister v. Forrest City Street Imp. Dist. No. 11, 81-139

• Decision Date: 14 December 1981
• Docket Number: No. 81-139,81-139
• Citation: 274 Ark. 372,626 S.W.2d 194
• Parties: M. M. McALLISTER, et al., Appellants, v. FORREST CITY STREET IMPROVEMENT DISTRICT, NO. 11, et al., Appellees.
• Court: Arkansas Supreme Court

Page 194

626 S.W.2d 194

274 Ark. 372

M. M. McALLISTER, et al., Appellants, v.FORREST CITY STREET IMPROVEMENT DISTRICT, NO. 11, et al., Appellees.

No. 81-139.

Supreme Court of Arkansas.

Dec. 14, 1981.

Rehearing Denied Jan. 25, 1982.

Richard McCulloch, pro se.

Knox Kinney, Atty. for City of Forrest City and Sharpe & Morledge, P. A., Forrest City, for appellants.

William P. Van Wyke, of East Arkansas Legal Service, Forrest City, for appellees.

ADKISSON, Chief Justice.

Appellants are 12 property owners who have been assessed benefits by the city council of Forrest City pursuant to its establishment of Forrest City Improvement DistrictNo. 11, hereinafter District.The appellees include the District's commissioners, assessors, its attorney at the time the District was formed, and the City of Forrest City.Appellants brought this suit on October 17, 1979, in the St. Francis County Chancery Court to enjoin the District from collecting assessments from the appellants, to require the District to assess lands in the District omitted by fraud from assessment, and to award damages to appellants for fraud.The complaint was dismissed for failure to state grounds upon which relief could be granted.This is an appeal from that judgment.We affirm in part and reverse in part.

In considering a motion for judgment on the pleadings for failure to state facts upon which relief can be granted, Ark.Rules Civ.Proc. 12(b)(6), the facts alleged in the complaint are treated as true and are viewed in the light most favorable to the party seeking relief.Blagg v. Fred Hunt Co., 272 Ark. 185, 612 S.W.2d 321(1981).We have not considered any defenses that were raised or could have been raised in reaching our decision.

The District was created by OrdinanceNo. 1237 on June 9, 1969, pursuant to Ark.Stat.Ann. § 20-108(Repl.1968) which requires a finding by the city council that two-thirds of the property owners in value have signed the petition to create an improvement district.In 1970, OrdinanceNo. 1260 was enacted assessing benefits on specific parcels as recorded in the clerk's office.Ark.Stat.Ann. § 20-413(Repl.1968).Notice of the establishment of the District and of the assessments was duly published and no action was initiated in chancery court challenging the establishment of the District or the assessments within the 30 days allowed by statute; on appeal this notice is not challenged and is presumed to be sufficient.

Ark.Stat.Ann. § 20-416(Repl.1968) provides that if a suit is not brought within 30 days "(A)ll objections to the creation of the district or the validity of the assessment shall be forever barred and precluded."However, our cases have held that such districts can be collaterally attacked even after the 30-day limitation has expired if fraud or demonstrable mistake can be shown.Little Rock v. Katzenstein, 52 Ark. 107, 12 S.W. 198(1889).

Appellants rely on a letter written by the attorney for the District as a basis for the fraud.This letter was addressed to a local attorney with information copies to the mayor, one of the commissioners, and Mr. Charles M. Achinakian.This letter makes it clear that the property to be benefited by the improvements was not of sufficient value to justify the bond issue.The letter sought to include industrial plants and downtown businesses in the District for the purpose of increasing the valuation of the property, thereby making it easier to acquire the signature of two-thirds by value of all owners within the District.This letter assured the commercial and industrial owners that no assessment of benefits would be made by the District against their property even though they would be in the District.

Article 19, § 27 of the Arkansas Constitution provides:

Local improvements-Municipal assessments.-Nothing in this Constitution shall be so construed as to prohibit the General Assembly from authorizing assessments on real property for local improvements in towns and cities under such regulations as may be prescribed by law, to be based upon the consent of a majority in value of the property holders owning property adjoining the locality to be affected; but such assessments shall be ad valorem and uniform.

Cases interpreting this section have held that the inclusion of property in an improvement district is conclusive of the fact that such property is adjoining the locality to be affected by the improvement.Little Rock v. Katzenstein, supra.Furthermore, we stated in Freeze v. Improvement Dist. No. 16, 126 Ark. 172, 189 S.W. 660(1916), that property adjoining the locality to be affected is any property adjoining or near the improvement which is physically affected, or the value of which is commercially affected, to a degree in excess of the effect upon the property in the city generally, no matter how slight the excess benefit.In this case, we can presume that the property owners, by signing the petition to create the District, acknowledged that they would be benefited in some way.Therefore, appellants' argument that the commercial and industrial property owners received no benefits and were fraudulently included in the District is not well taken.Furthermore, appellants cannot rely on demonstrable mistake in the establishment of the District because the letter is not a part of the face of the record-the creation of the District was not void.

However, the trial court erred in dismissing the portion of the complaint which alleged fraud in the assessments of the District.Ark.Stat.Ann. § 20-401 provides:

As soon as said board of improvement shall have formed said plan, and shall have ascertained the cost of the improvement, it shall report the same to the city or town council, which shall appoint three (3) electors of the...