Toole County Irr. Dist. v. State

• Decision Date: 17 April 1937
• Docket Number: 7666.
• Parties: TOOLE COUNTY IRR. DIST. v. STATE et al.
• Court: Montana Supreme Court

67 P.2d 989

104 Mont. 420

TOOLE COUNTY IRR. DIST. v. STATE et al.

No. 7666.

Supreme Court of Montana

April 17, 1937

Rehearing Denied May 18, 1937.

Appeal from District Court, Toole County; R. M. Hattersley, Judge.

Action by Toole County Irrigation District against the State of Montana and others. From a judgment for plaintiff, defendants appeal.

Affirmed.

E. K Matson, Atty. Gen., C.J. Dousman, Asst. Atty. Gen., and W. M Black, of Shelby, for appellants.

Louis P. Donovan, of Shelby, for respondent.

STEWART Justice.

This is an appeal from a judgment of the district court of Toole county.

The plaintiff and respondent, an irrigation district, brought action against the State of Montana, the state board of land commissioners, and the county treasurer of Toole county. The purpose of the action was to have the court declare certain levies of irrigation assessments valid liens upon certain lands now owned by the State of Montana, and that plaintiff has a right to collect the assessments from the State. Defendants, appellants, filed a demurrer to the complaint on the ground that it did not state a cause of action. The court overruled the demurrer. Defendants then filed an answer, to which the plaintiff demurred on the ground that the facts pleaded did not constitute a defense. The court sustained this demurrer. Defendants elected to file no further pleadings and allowed a declaratory judgment to be entered against them. See section 9835.1 et seq., Rev.Codes.

From the complaint it appears that the Toole County Irrigation District is now, and ever since the 4th of September 1919 has been, a public corporation duly organized and created in accordance with the provisions of chapter 146, Laws of 1909 and acts amendatory thereof; that an area consisting of 282,191.63 acres was included within the boundaries of the district; that at the time of its creation, 10,567.52 acres of this land constituted 40 separate tracts which were owned by certain private individuals, but which were subject to first mortgage liens in favor of the State; that subsequently and prior to the time that the assessments in question were levied, the State had become the title owner of these tracts; that the mortgagors had conveyed their titles to the State by quitclaim deeds to prevent foreclosure by the State; and that the loans secured by them had been made from the State permanent school fund.

The complaint further alleges that between September 4, 1919, and May 13, 1922, the board of commissioners of the irrigation district proceeded with preliminary matters in the construction of the irrigation system, and caused necessary topographical surveys, maps, plans, and profiles to be made under the direction and supervision of an irrigation engineer; that by these preliminaries the district incurred an indebtedness; that the district then issued warrants as authorized by law; that thereafter, for the purpose of taking up these outstanding warrants, it issued and sold funding bonds in the sum of $238,000; and that bonds in the sum of $111,625 are still outstanding and unpaid. The bonds were to mature in 1930.

In 1926, 1927, and 1928, the district board of commissioners duly adopted resolutions for the levy of special assessments of 20 cents an acre upon all the lands within the district, including the lands so acquired by the State of Montana, for the purpose of creating a sinking fund with which to pay the bonds at maturity. The State refused to pay the assessments so levied against its lands, and the county treasurer subsequently offered them for sale, but there was no bidder. Thereafter Toole county bid in each tract for the amount of tax, penalty, and interest thereon. No tax deed was ever issued and no application therefor has ever been made, because the State of Montana and the state board of land commissioners have at all times asserted that the assessments and levies of taxes on the lands so acquired from the mortgagors after the issuance of the bonds were illegal and invalid; and that these lands now belonging to the State--although included within the irrigation district while in private ownership, but covered by mortgages to the State--were exempt from taxation or assessment.

Upon this statement of facts the district court in its declaratory judgment upheld plaintiff's position that the assessments were good and valid, and constituted a lien on the lands. The parties offered no evidence, and the court therefore based its judgment on the pleadings.

Appellants urge three assignments of error; they resolve themselves into the single question whether or not the court erred in rendering judgment in favor of the plaintiff and against the defendants. We shall consider them all together. In order, however, that it may be understood what statutes the question involves, we shall make a brief review of the provisions which we deem pertinent to a decision.

Our first Irrigation District Act was passed in 1907 (Laws 1907, c. 70). Since that time various of its sections have undergone amendment and modification, as well as repeal. With regard to the organization of a district, section 2309, Revised Codes 1907, provided in effect that within a prospective irrigation district a majority of the holders of title, or evidence of title, representing a majority of the acreage of the lands, could propose the organization of such district. This section remained very much the same until 1921, and then section 7166 added some additional provisions concerning co-operation with the United States under federal reclamation laws. In 1925, however, the majority of holders requirement was changed to 60 per cent., representing 60 per cent. of the acreage. Another change--the most significant change so far as the present litigation is concerned--required that when any land sought to be included in an irrigation district was covered by mortgage or other lien, the owner thereof had to procure first the written consent of the mortgagee before proposing the establishment and organization of such irrigation district. Laws 1925, c. 112,§ 1. This is the present status of the law on that point as now contained in section 7166, Revised Codes. Note that at the time of the creation of Toole County Irrigation District in 1919, the law required no such permission or consent by the mortgagee.

No appeal was taken from the judgment of the district court confirming and ratifying the proceedings of the board of commissioners and the issuance of the bonds, and the same therefore became final. Furthermore, in 1923 the Legislature passed an act validating irrigation districts and their acts. This provision is now contained in section 7231.1, Revised Codes. Finally, this court decided the case of Drake v. Schoregge, 85 Mont. 94, 277 P. 627, wherein it declared the validity of the Toole County Irrigation District. Therefore all doubt on that point is at rest. See, also, to the same effect, Tomich v. Union Trust Co. (C.C.A.) 31 F. (2d) 515.

The next sections deal with the question of the bonds. The first one concerns the petition for bonds to provide the necessary funds for the construction of an irrigation system. That section is now 7210, Revised Codes. Originally, in the Session Laws of 1909 (section 40, chapter 146), this section provided, among other things, as follows: "Upon the filing of such petition the board of commissioners shall by appropriate order or resolution *** provide for the levy of a special tax or assessment as in this Act provided on all the lands in the district for the irrigation and benefit of which said district was organized and said bonds are issued, *** sufficient in amount to pay the interest on and principal of said bonds when due." Five subsequent legislative sessions amended this section, but the language just quoted remained intact. From this history a fair inference would be that it was the intention of the Legislature in each instance to include as assessable lands all lands within the district, no exemption having been made of State lands.

The next section, now 7213, Revised Codes, was first enacted as section 43, chapter 146, Laws of 1909. At that time it read as follows: "All bonds issued hereunder shall be a lien upon all the lands originally or at any time included in the district for the irrigation and benefit of which said irrigation district was organized and said bonds are issued; *** and all such lands shall be subject to a special tax or assessment for the payment of the interest on and principal of said bonds; and said special tax or assessment shall constitute a first and prior lien on the lands against which levied to the same extent and with like force and effect as taxes levied for state and county purposes." Three legislative assemblies amended this section, but none of the amendments attempted to change the provision just quoted.

Through the period of the organization of the Toole County Irrigation District and to the present time this section has been in effect, except that a few necessary additions have been added to provide for liens of bonds where a contract between the district and the United States was involved. Thus it will be observed that at no time, either before or after the date of the organization of this district, did the Legislature ever show any intention to consider such bonds as anything but first and prior liens upon all the lands. Equally as interesting is the fact that through its evolution to its present form, the section nowhere makes any exemption with regard to lands to be assessed. See 19 R.C.L. § 192, p. 412; 41 C.J. § 461, p. 523.

Section 7232, Revised Codes, had its origin in the act of 1909. It deals with the tax, or assessment, to pay bonds and interest. The subsequent amendments made no change in the...