Sande v. City of Grand Forks

• Court: North Dakota Supreme Court
• Writing for the Court: VOGEL; ERICKSTAD
• Citation: Sande v. City of Grand Forks, 269 N.W.2d 93 (N.D. 1978)
• Decision Date: 26 July 1978
• Docket Number: No. 9466,9466
• Parties: David L. SANDE and Deloris J. Sande, Plaintiffs and Appellants, v. CITY OF GRAND FORKS, a Municipal Corporation, and Urban Renewal Agency of Grand Forks, a Quasi-municipal Corporation, Defendants and Appellees. Civ.

Page 93

269 N.W.2d 93

David L. SANDE and Deloris J. Sande, Plaintiffs and Appellants, v. CITY OF GRAND FORKS, a Municipal Corporation, and Urban Renewal Agency of Grand Forks, a Quasi-municipal Corporation, Defendants and Appellees.

Civ. No. 9466.

Supreme Court of North Dakota.

July 26, 1978.

Rehearing Denied Aug. 16, 1978.

John G. Shaft, of Shaft, McConn & Fisher, Grand Forks, for plaintiffs and appellants.

Robert Vaaler, of Vaaler, Gillig, Warcup, Woutat & Zimney, Grand Forks, for defendants and appellees.

VOGEL, Justice.

This is an appeal from a judgment dismissing with prejudice the complaint of the plaintiffs, Mr. and Mrs. Sande, seeking damages of $538,206.28 from the City of Grand Forks and the Urban Renewal Agency of Grand Forks (hereinafter Agency) due to an alleged failure of the Agency to act in accordance with Federal regulations in providing relocation assistance. The City has been dismissed from the case.

In 1972, the Agency established an Urban Renewal District which included property owned and operated by the Sandes as a bus depot. The Agency reached an agreement with the Sandes for the purchase of the property. The Sandes moved their business to another location on approximately May 31, 1975. Certain changes were required to be made in the new building in order to meet city requirements. Mr. Sande obtained an estimate of the cost of such alterations and discussed with the director of the Agency the possibility of the Agency's providing funds for such changes. The Sandes alleged that the director of the Agency informed them that such alterations could not be paid for by the Agency under its rules and regulations. The Greyhound Bus Company terminated the Sandes' contract. The Sandes allege that the information given to them by the director was erroneous because it was based upon old rules and regulations which had been revised to allow a liberalization of Government reimbursement of allowable expenses for alteration or improvement of structures or premises. The Sandes claim that if the director had correctly followed the revised rules and regulations there could have been no rejection of the claim for funds to cover the cost of alterations and they would have been able to continue their bus depot business.

Apparently the Sandes did not make formal application to the Agency for relocation funds until after their contract with the Greyhound Bus Company was terminated. Such claim for funds was rejected by the Agency on February 13, 1976, on the bases that (1) the proper procedure for submitting claims had not been followed and (2) the claim was for changes, alterations, or improvements which actually had never been made and would not be made. The Agency granted a rehearing on April 14, 1976, and thereafter affirmed its initial rejection of the Sandes' claim. The Sandes next appealed to the Department of Housing and Urban Development, which on July 9, 1976, affirmed the action of the Agency.

This action was commenced on January 19, 1977, and a hearing was held on September 8, 1977, at which time the Agency moved for dismissal of the case based upon a failure to state a claim upon which relief could be granted. The court requested that a motion for summary judgment be submitted. This was done, and supporting and opposing affidavits were filed. The motion was granted, but the judgment is one for dismissal. We believe this is an inadvertent misnomer. We will treat the judgment as the district court no doubt intended, as a summary judgment, as permitted by Rule 12(b), N.D.R.Civ.P.

In its findings of fact, conclusions of law, and order for judgment the court concluded that (1) the Sandes did not exhaust their administrative remedies; (2) the City of Grand Forks and the Agency are immune from suits of the nature involved here; and (3) the Sandes are precluded from maintaining this suit due to their failure to file timely claims pursuant to Chapter 295, Section 4, of the 1975 Session Laws, and Chapter 303, Section 16, of the 1977 Session Laws (codified as Note to Section 32-12.1-01, N.D.C.C.).

The issues as presented by the appellants Sande are as follows:

1. Whether the Agency is a political subdivision of the State of North Dakota.

2. Whether the Agency is immune from suit in this case.

3. Whether the Sandes' failure to file a timely claim pursuant to Section 4 of Chapter 295 of the 1975 Session Laws precludes their maintenance of this suit.

4. Whether the Sandes exhausted their administrative remedies and rights to judicial review.

I

We conclude that the Grand Forks Urban Renewal Agency is a municipal corporation.

The basic statutes on municipal corporations are found in Chapter 40-01, N.D.C.C. Section 40-01-02 provides:

"Municipalities shall be bodies politic and corporate under the name and style of 'city of ______' and under such name, may sue and be sued, contract and be contracted with, acquire and hold real and personal property for corporate purposes, and have an official seal which may be changed at pleasure."

Chapter 40-58 deals with urban renewal. Section 40-58-16 says, in part:

"Urban renewal agency. 1. There is hereby created in each municipality a public body corporate and politic to be known as the 'urban renewal agency' of the municipality: Provided, that such agency shall not transact any business or exercise its powers hereunder until or unless the local governing body has made the finding prescribed in section 40-58-05 and has elected to have the urban renewal project powers exercised by an urban renewal agency as provided in section 40-58-15."

Section 40-58-15 provides, in part:

"Exercise of powers in carrying out urban renewal project. 1. A municipality may itself exercise its urban renewal project powers as herein defined or may, if the local governing body by resolution determines such action to be in the public interest, elect to have such powers exercised by the urban renewal agency created by section 40-58-16 . . ."

Thus the quoted sections of the applicable law recognize that a city's functions as to urban renewal may be exercised by the city or it may delegate them to an urban renewal agency. A city, which is a body "politic and corporate," may act itself as an urban renewal agency or it may create a new "body corporate and politic" to exercise those same functions. From this language we conclude that the agency, when created by a city, is a municipal corporation.

II

Until April 8, 1975, municipal corporations were not liable in tort. On December 5, 1974, this court, in Kitto v. Minot Park District, 224 N.W.2d 795 (N.D.1974), declared that governmental immunity was abolished in North Dakota, with three important exceptions: first, the decision applied immediately to the parties in the Kitto case; second, it applied to all other cases prospectively only, effective 15 days after the adjournment of the Forty-fourth Legislative Assembly of the State of North Dakota; and, third, the right to recover in tort against local governments or political subdivisions was subject to certain limitations:

"A further limitation on the scope of decision should be observed. In certain other jurisdictions abolishing the doctrine, an immunity has been retained for certain acts which go to the essence of governing. See Parish v. Pitts, 244 Ark. 1239, 429 S.W.2d 45 (1968); Spanel v. Mounds View School District No. 621, 264 Minn. 279, 118 N.W.2d 795 (1962). We do not contemplate that the essential acts of governmental decision-making be the subject of judicial second-guessing or harassment by the actual or potential threat of litigation. We hold that no tort action will lie against governmental units for those acts which may be termed discretionary in character. Included within this category are acts traditionally deemed legislative or quasi-legislative, or judicial or quasi-judicial, in nature. The exercise of discretion carries with it the right to be wrong. It is for torts committed in the execution of the activity decided upon that liability attaches, not for the decision itself. In this regard, there is substantial experience in dealing with a discretionary function exception under the Federal Tort Claims Act, which may provide a useful source of reference. In adopting this exception we do not embrace the 'governmental' and 'proprietary' functions distinction which Justice Frankfurter termed the 'quagmire that has long plagued the law of municipal corporations.' Indian Towing Co. v. United States, 350 U.S. 61, 76 S.Ct. 122, 100 L.Ed. 48 (1955). We seek a more narrow and a more rational ground for limiting liability." 224 N.W.2d at 804-805.

At the Forty-fourth Legislative Assembly (1975), the Legislature responded to the Kitto case by enacting a statute effective April 8, 1975, providing for limitations on municipal tort liability. Chap. 295, 1975 S.L. The validity of this enactment is not challenged. It provides for a "discretionary function" exception to liability:

"SECTION 2. (LIABILITY OF POLITICAL SUBDIVISIONS LIMITATIONS.)

"1. . . .

"2. . . .

"A political subdivision shall not be liable for any claim based upon an act or omission of an employee of a political subdivision, exercising due care, in the execution of a statute or regulation, whether or not such statute or regulation be valid, or based upon the exercise or performance, exercising due care, or the failure to exercise or perform a discretionary function or duty on the part of a political subdivision or its employees, whether or not the discretion involved be abused. The sovereign immunity of the state is not waived in any manner by this Act, and the provisions of this Act shall not be construed to abrogate the immunity of the state. Nothing contained in this Act shall be construed to obligate the fund or political subdivisions for an amount which is more than the limitations upon liability imposed by this Act. Any payments to persons under the provisions of this Act shall constitute payment in full of...