Oregon Short Line Railroad Company v. Berg

• Decision Date: 03 December 1932
• Docket Number: 5818
• Parties: OREGON SHORT LINE RAILROAD COMPANY, a Corporation, Respondent, v. LAURA B. BERG, as Treasurer and Ex-officio Tax Collector of Bannock County, Idaho, BANNOCK COUNTY, a Municipal Corporation of the State of Idaho, and the CITY OF POCATELLO, a Municipal Corporation of the State of Idaho, Appellants
• Court: Idaho Supreme Court

16 P.2d 373

52 Idaho 499

OREGON SHORT LINE RAILROAD COMPANY, a Corporation, Respondent, v. LAURA B. BERG, as Treasurer and Ex-officio Tax Collector of Bannock County, Idaho, BANNOCK COUNTY, a Municipal Corporation of the State of Idaho, and the CITY OF POCATELLO, a Municipal Corporation of the State of Idaho, Appellants

No. 5818

Supreme Court of Idaho

December 3, 1932

MUNICIPAL CORPORATIONS-SPECIAL IMPROVEMENT DISTRICT BONDS-LIMITATIONS OF LIABILITY-CONSTITUTIONAL LAW.

1. Bonds of special assessment district held not general obligation of city, but only of district in rem (Laws 1927 chap. 257).

2. Payment of special improvement district's assessment against particular individual and property discharges such property from further liability on district bonds (C. S secs. 4026, 4151; Laws 1927, chap. 257, sec. 35).

3. Provision, required by statute to be written into special improvement district bonds, that payment of assessment against particular property discharges it from further liability on bonds became binding contract between district and bondholders, who could foreclose on defaulting property (C. S., secs. 4026, 4151; Laws 1927, chap. 257, sec. 35).

4. Due process in organization of special assessment district and issuance of bonds thereby was afforded by city's notice to all interested parties, hearing before council, and city's assessment of benefits for district (Const., art 1, sec. 13; art. 8, secs. 3, 4; Const. U.S. , Amend. 14; C S., secs. 4003-4012, 4129-4139; Laws 1927, chap. 257, secs. 10-20).

5. Notice of city's organization of special assessment district to taxpayer outside district was unnecessary to afford due process, where no burden was placed on his land (Const., art. 1, sec. 13; art. 8, secs. 3, 4; Const. U.S. , Amend. 14; C. S., secs. 4003-4012, 4129-4139; Laws 1927, chap. 257, secs. 10-20).

6. Statute authorizing municipality to create bond guaranty fund from general taxes to pay deficiencies in local improvement district assessments, without providing for notice to taxpayers, held void as not affording them due process (Laws 1929, chap. 134, sec. 9; Const., art. 1, sec. 13; art. 8, secs. 3, 4; Const. U.S. , Amend. 14).

7. Municipal special assessment district bonds constitute limited liability contracts, obligations of which are impaired by additional taxes on taxpayers in district for payment thereof (Const., art. 1, sec. 16; Const. U.S. , art. 1, sec. 10; C. S., secs. 4026, 4151; Laws 1927, chap. 257, sec. 35; Laws 1929, chap. 134, sec. 9).

APPEAL from the District Court of the Fifth Judicial District, for Bannock County. Hon. J. L. Downing, Judge.

Proceeding under Sess. Laws 1929, chap. 134, sec. 9. Judgment for plaintiff. Affirmed.

Judgment affirmed; costs to respondent.

Isaac McDougall, Merrill & Merrill and Jones, Pomeroy & Jones, for Appellants.

The enactment of chapter 134 of the 1929 Session Laws of Idaho was a valid exercise of legislative power, and said act and the whole thereof is constitutional. (Wicks v. City of Salt Lake, 60 Utah 265, 208 P. 538; Deseret Savings Bank v. Francis, 62 Utah 387, 217 P. 1114; Comfort v. City of Tacoma, 142 Wash. 249, 252 P. 929.)

Section 9 of chapter 134, as well as the entire act, is for a public purpose, and as such does not violate any constitutional provision. (Deseret Sav. Bank v. Francis, supra.)

Even if some of the money raised by the tax levy might profit an individual, this alone will not condemn the legislative enactment. The question is not who gets the money but is it for a public purpose. (City of Wilmington v. Walcott, 12 Del. Ch. 379, 112 A. 703; Payne v. Jones, 47 S.D. 488, 199 N.W. 472.)

H. B. Thompson, George H. Smith and L. H. Anderson, for Respondent.

The bonds of a special improvement district in the state of Idaho are not municipal obligations, but are liens upon the property improved, for which only the individual owners are liable. (C. S., sec. 4014, as amended by Laws 1927, p. 451; New First National Bank of Columbus v. City of Weiser, 30 Idaho 15, 166 P. 213.)

A law which requires an owner of property within a municipality to pay special improvement taxes on instalments of another property owner, to redeem special improvement bonds which are not general obligations of the municipality held by a third person, is in violation of Const., art. 8, sec. 4, and art. 1, sec. 13, Federal Const., 14th Amendment. (White v. Pioneer Bank & Trust Co., 50 Idaho 589, 298 P. 933; Stanley v. City of Great Falls, 86 Mont. 114, 70 A. L. R. 166, 284 P. 134, 139; Citizens' Saving & Loan Assn. v. Topeka, 20 Wall. 655, 22 L.Ed. 455.)

GIVENS, J. Lee, C. J., and Varian, J., concur. LEEPER, J., Mr. Justice Budge, Dissenting.

OPINION

GIVENS, J.

Prior to the time chapter 134, Sess. Laws 1929, became effective, the City of Pocatello organized Local Special Improvement District No. 28. Whether under chap. 257, Sess. Laws 1927, or the statutes in effect prior thereto, the record does not disclose, and is perhaps not material, inasmuch as the portions of chap. 257, Sess. Laws 1927, and the statutes in effect prior thereto as bearing on the controversy herein, are substantially the same.

Special local assessment improvement district bonds were issued and sold, and later when insufficient funds were realized from the district to pay the bonds, September 13, 1929, the city made a levy for the benefit of the said district of 063 cents on each one hundred dollars of value of taxable property in the city, under sec. 9, chap. 134, Sess. Laws 1929, which authorizes municipalities to create a guarantee fund for general taxes levied on the entire municipality, with which to pay deficiencies in special local assessment improvement districts.

Respondent paid its tax under protest, and herein seeks to recover it, contending that said sec. 9 is unconstitutional and void, as in violation of sec. 4, art. 8, and sec. 13, art. 1, Constitution of the state of Idaho, and the Fourteenth Amendment to the Constitution of the United States.

The bonds considered herein were not general obligations of the city, only of the district, in rem (Blackwell v. Village of Coeur d' Alene, 13 Idaho 357, at 371, 90 P. 353), and had for security only the property within the district, and when the particular assessment levied against any particular individual and separate piece of property was paid, its share or proportion of the bonded indebtedness was liquidated; in other words, such piece of property was discharged from any further liability or obligation upon the bonds. This provision by statutory requirement (C. S., secs. 4026, 4151; sec. 35, chap. 257, Sess. Laws 1927, p. 457) was written into the bond, and of course became the binding contract between the bondholder and the district (Neighbors of Woodcraft v. City of Rupert, 51 Idaho 215, 4 P.2d 360), the city being obligated only to make the necessary collections and payment, and if any piece of property defaulted, the bondholders had the right to foreclose on the same. (Blackwell v. Village of Coeur d' Alene, supra; Broad v. City of Moscow, 15 Idaho 606, 99 P. 101; New First Nat. Bank v. City of Weiser, 30 Idaho 15, 166 P. 213; New First Nat. Bank v. Linderman, 33 Idaho 704, 198 P. 159.)

Due process as to the organization of the local special assessment district and the issuance of bonds as obligations on the property within the district was afforded by the notice to all parties interested, given by the city following its ordinance of intention, and hearing before the council as to the organization of the district, and later assessment of benefits by the city for, and in connection with, the district. (C. S., secs. 4003-4012, 4129-4139; secs. 10-20, chap. 257, Sess. Laws 1927.) As to the taxpayer within the district, the only notice with regard to what liability would attach to his property and the liability fixed by the bonds and the assessment of benefits and charges in connection therewith was of course limited to the particular assessment on his individual separate and particular piece of property. As to any taxpayer of the city without the district, no notice as such was given, and since no burden was placed upon his land by the organization of the assessment district, or anything in connection therewith, or with the issuance of bonds therefor, no notice was necessary. (Stark v. McLaughlin, 45 Idaho 112, at 130, 261 P. 244.) In other words, under the doctrine of the cited case, if no burden was to be imposed upon what we might term an external taxpayer, that is, one without the district, but within the city, no notice was required. But if any burden had been contemplated, notice and a hearing were required to afford due process. ( Davidson v. Board of Administrators, 96 U.S. 97, 24 L.Ed. 616, 619; Brown v. City of Denver, 7 Colo. 305, 3 P. 455, 458; Hibben v. Smith, 191 U.S. 310, 24 S.Ct. 88, 48 L.Ed. 195, 200; Londoner v. City and County of Denver, 210 U.S. 373, 28 S.Ct. 708, 52 L.Ed. 1103, 1112; King v. City of Portland, 184 U.S. 61, 22 S.Ct. 290, 46 L.Ed. 431, 436; Williams v. Eggleston, 170 U.S. 304, 18 S.Ct. 617, 42 L.Ed. 1047.)

We are not herein concerned with whether or not in the first instance the legislature might authorize the city to pay for these improvements, partly by special assessments charged against the abutting or contiguous property and partly by general levy (Parsons v. District of Columbia, 170 U.S. 45, 18 S.Ct. 521, 42 L.Ed. 943), but whether, where the indebtedness in the first instance was, specifically by statute, by the terms of the bonds themselves, by decisions of this court, and by notice and hearing and municipal ordinance, made a liability only upon the property within the district and the liability of each individual piece of property limited thereto, may now,...