Meyers v. City of Idaho Falls

• Decision Date: 10 May 1932
• Docket Number: 5814
• Citation: 11 P.2d 626,52 Idaho 81
• Parties: A. MEYERS, PERCY F. FREEMAN, S. A. MATTHIEU, RALPH C. ZIMMERMAN and LEON W. CURTISS, Respondents, v. THE CITY OF IDAHO FALLS, a Municipal Corporation, and ALVINA M. WILSON, Treasurer of the City of Idaho Falls, Respondents; AMERICAN NATIONAL BANK, a Corporation, M. L. HOLZMAN and E. H. CONKLING, Intervenors and Appellants
• Court: Idaho Supreme Court

11 P.2d 626

52 Idaho 81

A. MEYERS, PERCY F. FREEMAN, S. A. MATTHIEU, RALPH C. ZIMMERMAN and LEON W. CURTISS, Respondents, v. THE CITY OF IDAHO FALLS, a Municipal Corporation, and ALVINA M. WILSON, Treasurer of the City of Idaho Falls, Respondents;

AMERICAN NATIONAL BANK, a Corporation, M. L. HOLZMAN and E. H. CONKLING, Intervenors and Appellants

No. 5814

Supreme Court of Idaho

May 10, 1932

MUNICIPAL CORPORATIONS-SPECIAL IMPROVEMENT DISTRICTS-BONDS-PAYMENT OF BONDS-CONSTITUTIONAL LAW.

1. Special improvement districts within cities and villages operating under general municipal laws are creatures of statute (C. S., sec. 3999 et seq., and sec. 4121 et seq.).

2. Funds collected by city by special assessments are trust funds pledged to payment of "public improvement bonds" issued against special improvement districts (C S., sec. 3999 et seq., and sec. 4121 et seq.).

3. Codified sections providing for numerical priority and equality, respectively, of special improvement district bonds, held "in pari materia," to be construed together so that each may be given effect if possible (C. S secs. 4021, 4023, 4149, 4150).

4. In construing statutes in pari materia, history of legislation should be scanned to discover uniform and consistent legislative purpose (C. S., secs. 4021, 4023, 4149, 4150).

5. Though codified section providing for numerical priority of special improvement district bond is mandatory in form, form must give way to legislative intent in case of conflict (C S., secs. 4021, 4149).

6. Statute held to impose lien for equal benefit of special improvement district serial bonds, and method of payment where funds are sufficient, numerical priority section being directory only (C. S., secs. 4021, 4023, 4149, 4150).

7. Where, by reason of default in payment of special assessment and general taxes on land in special improvement districts final fund is insufficient to pay all serial bonds outstanding, fund must be distributed pro rata among unpaid bonds, regardless of numerical priority (C. S., secs. 4021, 4023, 4149, 4150).

8. That special improvement bonds set out law providing for numerical priority but not law providing for equality, held not to render inapplicable, as illegally impairing obligations of contracts, law providing for equality (C. S., secs. 4021, 4023, 4149, 4150).

9. Constitutional prohibition against impairment of obligations of contract is directed at legislative, not judicial, action.

APPEAL from the District Court of the Ninth Judicial District, for Bonneville County. Hon. C. J. Taylor, Judge.

Action for a writ of mandate and an injunction. Judgment for plaintiff. Affirmed.

Judgment affirmed. Costs to respondents.

Paul T. Peterson and J. Wesley Holden, for Appellants.

Whenever there shall be sufficient money in any local improvement fund against which bonds have been issued, over and above the amount sufficient for the payment of interest on all unpaid bonds to pay the principal of one or more bonds, the treasurer shall call in and pay such bonds, which shall be called and paid in their numerical order. (C. S., secs. 4021, 4149; Johnson v. McGraw, 139 Wash. 139, 245 P. 915; State ex rel. Moses v. Walters, 156 Wash. 664, 287 P. 874.)

Local improvement district bonds were and are payable in their numerical order, although the fund of the district was and is insufficient to pay all. (C. S., secs. 4021, 4149; Johnson v. McGraw, supra; State ex rel. Moses v. Walters, supra; 2 Dillon on Municipal Corporations, 5th ed., p. 1293; 6 McQuillin on Municipal Corporations, sec. 2413, note 14.)

Otto E. McCutcheon and Ralph L. Albaugh, for Respondents.

The pro rata rule requires the holders of notes and bonds secured by the same mortgage or trust deed to share ratably in the proceeds of the mortgaged security when it is insufficient to pay all. (50 A. L. R. 546, and cases cited at p. 550; 4 Thompson on Corporations, 3d ed., sec. 2270; First Nat. Bank of Aberdeen v. Andrews, 7 Wash. 261, 38 Am. St. 885, 34 P. 913.)

The maxim that "equality is equity" raises the presumption in favor of "equality of right," and therefore the rights to a preference must be proved. (21 C. J. 206.)

Irrespective of statutes, a fund raised by a municipality for a special purpose is a trust fund, and equity will in a proper case interfere to prevent its diversion. (McQuillin on Municipal Corporations, sec. 2170; Broughton v. Pensacola, 93 U.S. 266, 268, 23 L.Ed. 896, 897; Meriweather v. Garrett, 102 U.S. (12 Otto) 472, 26 L.Ed. 197; Dillon on Municipal Corporations, sec. 2428.)

LEEPER, J. Lee, C. J., and Varian, J., concur. Budge and Givens, JJ., dissent.

OPINION

LEEPER, J.

During the year 1920 and thereabouts the City of Idaho Falls created and organized eight local improvement districts, five of them under the provisions of article 6, chapter 163, of the Idaho Compiled Statutes, for street improvements, and three of them under the provisions of chapter 171, Idaho Compiled Statutes, for sewer improvements. Each of the districts was duly and regularly organized as required by law, the improvements were made and bonds issued to pay therefor. Each series of bonds is substantially identical in form, the bonds being due ten years from date and numbered serially from one upward. The bonds were in the course of time disposed of to various persons. The City of Idaho Falls thereafter proceeded to make a levy upon the property in each district sufficient on its face to retire all of the bonds issued against each district within ten years, together with interest thereon, according to their terms. The interest on all of the bonds has been kept up, and as time went on certain bonds of each issue were called and paid in their numerical order whenever sufficient funds were accumulated. In each district default has been made in the payment of the special assessments due on certain parcels of the less valuable property, whereby the total fund paid in is considerably less than the face value of the bonds issued against the district. As to practically all of this defaulted property, similar default was made in the payment of general taxes and title thereto has passed to the county, whereby the lien of the bonds has been divested and the security of the bondholders to that extent diminished. All of the unpaid bonds in each of the eight districts are now past due. There are now in the hands of the city treasurer of the City of Idaho Falls certain funds, representing the final collection of assessments in each district, which aggregate some $ 42,000. This money as apportioned to the various funds is the final payment which will be made in each by the taxpayers therein, and all property as to which assessments have been paid in full are relieved and discharged of any further liability. On account of the non-payment of a part of the assessments, the funds on hand for each district are insufficient by a large margin to cover all of the unpaid bonds, and inasmuch as the delinquent lands have been lost as security on account of the paramount lien for general taxes, it is clear that the remaining bonds cannot be paid except in so far as the funds on hand in each district will go. The question immediately before us for decision is this: Shall the outstanding bonds of each series be paid in numerical order until each particular fund is exhausted, or shall the fund on hand be prorated among all of them?

The matter is presented to us in the form of an action wherein plaintiffs, owners of the unpaid bonds aforesaid, pray for the issuance of a writ of mandate directed to the City of Idaho Falls and its treasurer, requiring the payment to them of their pro rata share of each of the aforesaid funds. An alternative writ was issued, and the defendants were temporarily restrained from otherwise disposing of the funds. The defendants denied generally. The American National Bank, M. L. Holzman and E. H. Conkling thereafter filed complaints in intervention wherein they set forth that they were the owners of bonds in certain of the districts which were of a lesser serial number than those owned by plaintiffs, and prayed that the city treasurer be permitted to pay their bonds in full according to their numerical priority after the payment of interest on all of the bonds. The intervention was allowed, the issues were framed by proper pleadings, and the facts were stipulated. The lower court entered judgment in favor of the plaintiffs, directing the city treasurer to pay their bonds pro rata with all the others outstanding and unpaid in each respective district out of the fund applicable thereto, and further ordered that the alternative writ of mandate and the temporary injunction theretofore issued be made permanent.

Special improvement districts within cities and villages of Idaho which operate under the general municipal laws are purely creatures of the statute. It is unnecessary to enter into a detailed discussion of the local improvement statutes, except to suggest that the various street improvement districts with which we are concerned were created under the provisions of article 6, chapter 163, of the Idaho Compiled Statutes, and the sewer districts were created under the provisions of chapter 171 of the Idaho Compiled Statutes. The two statutes are substantially the same, and no distinction need be made between them for the purposes of this opinion.

The ordinances creating the improvement districts are passed after certain preliminary proceedings, for street improvements under C. S., sec. 4005, for sewer improvements under C. S., sec. 4132. In substance these ordinances define and describe the property to be included within the district direct the particular improvement to be made, and provide for the assessment of the cost thereof pro rata...