Straus v. Ketchen

• Decision Date: 30 December 1933
• Docket Number: 6060
• Citation: 28 P.2d 824,54 Idaho 56
• Parties: EDWARD STRAUS, MILTON STRAUS and C. E. NICHOLSON, Petitioners, v. JANET A. KETCHEN, County Treasurer and Ex-officio Tax Collector of Ada County, Defendant
• Court: Idaho Supreme Court

28 P.2d 824

54 Idaho 56

EDWARD STRAUS, MILTON STRAUS and C. E. NICHOLSON, Petitioners, v. JANET A. KETCHEN, County Treasurer and Ex-officio Tax Collector of Ada County, Defendant

No. 6060

Supreme Court of Idaho

December 30, 1933

DRAINAGE DISTRICTS-IMPROVEMENT DISTRICTS-ASSESSMENTS-BONDS-PAYMENT-CONSTITUTIONAL LAW.

1. Drainage district is "local improvement district" within local improvement district code, notwithstanding drainage districts were not specifically included therein (I C. A., secs. 41-2501 et seq., 49-2501 et seq.).

2. Where particular local benefits are to be derived from organization of drainage district, and assessments can be made only according to benefits received, and liability so limited, district would be "local improvement district" within local improvement district code (I. C A., sec. 49-2501 et seq.).

3. Statutes and judicial decisions in force at time of issuance of drainage district bonds and applicable thereto become part of contract between bondholders and property owners of district same as if such statutes and judicial decision had been written into bond (I. C. A., sec. 41-2501 et seq.).

4. Issuance and sale of bonds by drainage district and purchase of such bonds create contractual relation between bondholders and property owners of district (I. C. A., sec. 41-2501 et seq.; Const. Ida., art. 1, sec. 16; Const. U.S. , art. 1 sec. 10).

5. Assessments for benefits from construction of drainage works constitute undivided lien against each piece of property within drainage district, to extent of assessment, and each bond issued by district has undivided lien against each piece of property to amount of assessment, and security continues until bonds are paid (I. C. A., sec. 41-2501 et seq.).

6. Statutory provision requiring drainage district bonds to be paid in their numerical order held mandatory, and bondholders have absolute right to rely thereon (I. C. A., secs. 41-2554, 41-2557).

7. Property owners of drainage district held not liable to pay assessments equal to amount of actual benefits inuring to respective parcels of land from improvements made (I. C. A secs. 41-2514, 41-2562).

8. State, in exercise of police power, held not authorized to pass laws which would impair obligations of contracts previously entered into pursuant to statutory authority (Const. Ida., art. 1, sec. 16; art. 11, sec. 8; Const. U.S. , art. 1, sec. 10).

9. Land owners of drainage district, holding bonds of district, held not entitled, under principles of set-off, to apply matured bonds and unpaid interest in payment of assessments for benefits (I. C. A., sec. 41-2501 et seq.).

10. Where obligation of drainage district under bonds was based upon special benefits, statutory provision changing such obligation into general obligations against property within district held to impair obligation of contracts as to any bonds issued prior to its passage (Laws 1921, chap. 218, sec. 8; I. C. A., sec. 41-2501 et seq.; Const. Ida., art. 1, sec. 16; Const. U.S. , art. 1, sec. 10).

11. Where original obligation of drainage district on bonds was based on special benefits accruing to property, statutory provisions changing such obligation into general obligations against property held in violation of constitutional provision requiring assent of two-thirds of qualified electors for creation on liability by subdivision of state exceeding in particular year income and revenue provided for such year (Laws 1921, chap. 218, sec. 8; I. C. A., sec. 41-2501 et seq.; Const., art. 8, sec. 3).

12. Statute authorizing land owner holding bonds of drainage district, to apply bonds and interest coupons in payment of liens and assessments against land held invalid as impairing obligation of contract between bondholders and land owners (I. C. A., sec. 41-2501 et seq.; Laws 1933, chap. 183; Const. Ida., art. 1, sec. 16; Const. U.S. , art. 1, sec. 10).

Original proceeding for a Writ of Mandate. Writ denied.

Writ of mandate denied and the proceeding dismissed. No costs allowed.

Thomas L. Martin, for Petitioners.

A drainage district is a local improvement district and the bonds issued thereby are local improvement district bonds. ( Elliott v. McCrea, 23 Idaho 524, 130 P. 785; In re Drainage Dist. No. 1, 29 Idaho 377, 161 P. 315; Burt v. Farmers' Co-operative Irr. Co., Ltd., 30 Idaho 752, 168 P. 1078; Sebern v. Cobb, 41 Idaho 386, 238 P. 1023; Booth v. Clark, 42 Idaho 284, 244 P. 1099.)

A drainage district is organized and functions under the police power of the state, and in furtherance of this power the legislature has the right to pass further or additional legislation, in the interest of the general welfare, and no individual has a right to complain that such legislation impairs the obligation of his contract.

Chapter 183, Idaho Session Laws 1933, is not unconstitutional and does not violate section 16, article 1 of the Constitution of the state of Idaho and section 10, article 1, of the Constitution of the United States. (Williams v. Baldridge, 48 Idaho 618, 284 P. 203; Halderman v. City of Astoria et al., 140 Ore. 160, 13 P.2d 358; State v. Blake et al., (Utah) 20 P.2d 871.)

A land owner in a drainage district who owns the bonds thereof has a right to offset the assessment of benefits due the district with the bonds of the district. (Amy v. Taxing District of Shelby County, 114 U.S. 387, 5 S.Ct. 895, 29 L.Ed. 172.)

Homer E. Martin, Prosecuting Attorney of Ada County, and Charles F. Reddoch, for Defendant.

A drainage district organized under the laws of this state is not a local improvement district, and bonds thereof are not local improvement bonds. (I. C. A., tit. 49, chap. 25.)

Distinguishing features of a local improvement district are that provision has been made for the property owner to pay the liability placed against his property by the assessment of benefits, both before and after the issuance of the bonds thereof, while no such provision has been made for a land owner within a drainage district.

The issuance and sale of the bonds providing therein for their payment in lawful money of the United States to be obtained by means of assessments against the property within the district created a contractual relation between the bondholders and the taxpayers within constitutional provisions prohibiting laws impairing the obligation of contracts. (San Diego County v. Childs, 217 Cal. 109, 17 P.2d 734; Security Trust & Savings Bank v. City of Los Angeles, 120 Cal.App. 518, 7 P.2d 1061.)

The contract existing between the bondholders and the taxpayers of the district providing a medium for payment of the bonds, the method of procuring the same, and the retirement thereof cannot be impaired by subsequent legislation. (U. S. Const., sec. 10, art. 1; Idaho Const., sec. 16, art. 1; 12 C. J., p. 1056, sec. 699, p. 1057, sec. 703; 6 R. C. L., p. 327, par. 317.)

WERNETTE J. Budge, C. J., Givens, Holden, JJ., MORGAN, J., Concurring.

OPINION

WERNETTE, J.

This is an original application for a writ of mandate to require the defendant, as county treasurer and ex-officio tax collector of Ada county, Idaho, to accept certain bonds of Drainage District No. 2, in Ada county, and cash tendered by petitioners, and issue receipts therefor showing full payment of the assessments for benefits made by the drainage district against petitioners' lands, described in the petition, and note the full payment thereof on the assessment-roll of said district, pursuant to the provisions of chapter 183, Session Laws 1933. The issues are presented by the petition, setting forth three distinct causes of action, the answer thereto, and a stipulation of facts between the parties.

Drainage District No. 2 is located in Ada and Canyon counties, and embraces an area of approximately 27,000 acres of land owned by 1,100 property owners. It is stipulated that the total benefits accruing to the lands in said district aggregate $ 1,943,939.74. Against this land there was made a total assessment, for benefits accruing to the separate tracts of land, in the sum of $ 650,817.51, for construction of works, expenses, etc. The assessment so made consisted of 1,945 separate assessments against the various tracts of real property within the district. To raise money for the construction of the drainage works the district issued and sold, under authority of the court, a total of $ 583,000 in bonds. The bonds were sold in two issues, the first issue dated August 1, 1920, maturing serially during the period of years from 1925 to 1934, and the second issue dated August 1, 1922, maturing serially from 1927 to 1940. Had the bonds been paid according to their maturities there would have been paid $ 404,000, leaving outstanding $ 179,000, in principal. Instead the district only paid in principal the sum of $ 95,000, leaving unpaid and outstanding $ 487,500 of the original issues. However, the district was able and did refund the bonds that matured in 1926, 1927, 1928, 1929, 1930, and about one-half of those maturing in 1931. And the refunding bonds issued August 1, 1926, in the total sum of $ 44,000, were certified under the provisions of chapter 218, Session Laws 1921. At the present time there are outstanding, past due and unpaid bonds in the sum of $ 165,000, which the district is unable to pay.

Annually the commissioners of the drainage district have levied an assessment against the lands in the district, based upon the assessment-roll, for the payment of interest on bonds, the creation of a sinking fund for the payment of principal, and for operation, maintenance and repair of the drainage works of the district. The aggregate amount of the assessments for the payment of bonds and creation of a sinking fund, for the payment thereof, from 1921 to 1932, inclusive, is...