Title: STATE EX REL CITY OF TOWNSEND v

State: montana

Issuer: Montana Supreme Court

Document:

No. 12940 I N THE SUPREME C O U R T OF THE STATE O F MONTANA 1975 THE STATE OF M O N T A N A , ex rel., THE CITY OF TOWNSEND, a municipal corporation, Relator, D. A. DAVIDSON, I N C . , a Montana Corpora t i o n , Respondent. ORIGINAL PROCEEDING : Counsel of Record: For Relator: P a t r i c k F. Hooks argued, Townsend, Montana For Respondent : Scribner and Huss, Helena, Montana William Scribner argued, Helena, Montana Filed : & , I fl .; y g ! : Submitted: January 14, 1975 Decided : JAN 3 0 1975 J u s t i c e FJesley Castles delivered the Opinion of t h e Court. This i s an o r i g i n a l proceeding f o r declaratory r e l i e f under T i t l e 93, Chapter 89, R.C.M. 1947, the Uniform Declaratory Judg- ments Act. Relator i s a municipality of the s t a t e of Montana, duly organized and existing a s a municipal corporation under the laws of Montana. Respondent i s a Montana corporation which, i n the course of i t s business, purchases f o r r e s a l e bonds issued by special improvement d i s t r i c t s with the s t a t e of Montana. O n March 5 , 1974, by resolution of i t s c i t y council r e l a t o r created, within t h e c i t y , Special Improvement D i s t r i c t No. 4 f o r the purpose of grading s t r e e t s , replacing e x i s t i n g gravel base course a s needed, placing asphaltic surface course, i n s t a l l i n g storm drainage pipes and i n l e t s a s need, a l l upon the s t r e e t s and avenues of the special improvement d i s t r i c t . Thereafter, on June 27, 1974, r e l a t o r awarded a contract f o r the construction of such improvements. Relator c i t y and the contractor intend t o proceed with the construction i n accordance with the contract when bonds of the special improvement d i s t r i c t a r e sold and the necessary funds a r e obtained f o r the financing of the work. By notice duly given and advertised according t o law, r e l a t o r requested bids f o r submission t o the c i t y council f o r the purchase of $264,000, par value, of Special Improvement D i s t r i c t No. 4 bonds f o r the financing of such construction. O n September 3, 1974, a bid was submitted by respondent and S t a t e Banlc of Townsend f o r the purchase of such bonds a t par with an accruing i n t e r e s t r a t e of 7.75% per annum. N o other bid was submitted. The bid was condi- tioned upon the issuance and f i l i n g of an opinion of the attorney general of the s t a t e of Montana, t o the e f f e c t t h a t c i t i e s and towns could lawfully issue and s e l l special improvement d i s t r i c t bonds bearing an i n t e r e s t r a t e i n excess of 7% per annum. The bid was accepted by the c i t y council and t h e r e a f t e r a contract was entered i n t o between r e l a t o r and the bidders, conditioned a s aforesaid, providing f o r the issuance of Special Improvement D i s t r i c t No. 4 bonds i n the sum of $264,000 bearing i n t e r e s t a t the r a t e of 7.75% per annum, and f o r the purchase thereof by the bidders a t par plus accrued i n t e r e s t t o the date of delivery. Thereafter, on November 27, 1974, the attorney general of the s t a t e of Montana issued an opinion s t a t i n g , i n e f f e c t , t h a t c i t i e s , towns and counties may lawfully issue and s e l l special improvement d i s t r i c t bonds o r warrants, bearing an i n t e r e s t r a t e i n excess of 7% per annum i f the special assessments paid by the property owners within the d i s t r i c t a r e appropriated f o r the payment of principal and i n t e r e s t on such bonds or warrants. Relator was then advised by respondent t h a t , notwithstanding the provisions of t h e i r contract and the attorney general's opinion, i t would continue t o refuse t o purchase the bonds f o r the claimed reason t h a t c i t i e s and towns a r e prohibited by law from issuing o r s e l l i n g special improvement d i s t r i c t bonds o r warrants bearing an i n t e r e s t r a t e greater than 7% per annum. Relator has made d i l i g e n t e f f o r t t o secure a purchaser f o r the bonds a t an i n t e r e s t r a t e of 7% o r l e s s but has been unable t o do so. By reason thereof, r e l a t o r i s informed and believes t h a t i t w i l l be unable t o proceed with such construction o r t o perform i t s obligations under the construction contract unless respondent p e r f o r m s u n c k r ' ~ p r o v i s i o n s of i t s contract f o r the purchase of the bonds. O n information and b e l i e f , r e l a t o r s t a t e d i n i t s application f o r declaratory judgment t h a t f o r the past several months c i t i e s , towns and counties of the s t a t e of Montana have been unable t o finance needed special improvements i n d i s t r i c t s created f o r t h a t purpose because the prevailing bond market w i l l not j u s t i f y the purchase of special improvement d i s t r i c t bonds bearing an i n t e r e s t r a t e of 7% or l e s s and t h a t the prevailing long term municipal bond i n t e r e s t r a t e s a r e unlikely t o come down i n the foreseeable future. The subject matter of this action is of great and widespread public concern and should be resolved at the earliest possible time. Due consideration of this question in the trial courts and final determination by an appeal to this Court is an inadequate remedy in that delay would ensue before a final decision could be had, making it impossible for cities, towns and counties to proceed with necessary construction of-improvements in the forth- coming construction season. There are no disputes of fact and only a single issue of law is involved, namely, whether cities, towns and counties have authority to issue and sell special improve- ment district bonds and warrants bearing an interest rate in excess of 7 % per annum. For these reasons it is appropriate and proper for this Court to accept original jurisdiction of this proceeding to insure a just and speedy determination of the question involved. The 1971 amendments to the special improvement district laws were a part of a package of amendments relating to interest rates on state, county, city and school district indebtedness. This legislation, House Bill 15, was revised many times before it was finally passed. Sections 2 and 3 of the bill, now codified respectively as sections 79-2602 and 79-2603, R.C.M. 1947, are significant: "79-2602. Rate of interest on bonds to be determined by governing bodies---limitations and exceptions. Bonds of a political subdivision shall bear interest at such rate or rates as its governing body shall determine, ex- cept that no such rate shall exceed seven percent ( 7 % ) except revenue bonds issued under the terms of sections 11-2401 through 11-2414, sections 11-2217 through 11-2221, and sections 11-4101 through 11-4110, R.C.M. 1947, which rate shall not exceed nine percent ( 9 % ) . I I "79-2603. Rate of interest on special assessments to be determined by governing bodies---limitations. All special assessments levied by a political subdivision shall bear interest at such rate or rates as its governing body shall determine, except that no such rate shall ex- ceed the greater of seven percent ( 7 % ) per annum, or in the event that the special assessments are appropriated for the payment of principal and interest on bonds issued by the political subdivision, the rate of interest on said bonds. " (Emphasis added. ) Section 79-2602, i f read alone, would lead one t o conclude t h a t a l l bonds of p o l i t i c a l subdivisions, except the revenue bonds therein specified, carry a maximum i n t e r e s t r a t e of 7%. Section 79-2603, with respect t o special improvement bonds indi- cates the contrary by authorizing a greater r a t e of i n t e r e s t on special assessments i n those cases where the special improvement bonds bear a higher r a t e of i n t e r e s t than 7%. Originally section 2 of House B i l l 15 provided f o r a general maximum r a t e on a l l bonds of 8%, except i n those cases where the lowest of two o r more competitive bids was higher than 8%, (in which event there was no l e g a l maximum). As so o r i g i n a l l y drawn there was no inconsistency between sections 2 and 3. The exception allowing a l e g a l r a t e i n excess of 8% was, however, deleted from the b i l l on i t s f i r s t revision i n the House, while the underlined portion of section 3 was retained. Thereafter, through a s e r i e s of amendments, a great number of existing code sections pertaining t o i n t e r e s t r a t e s on c i t y , county and school d i s t r i c t indebtedness were in- cluded i n the b i l l . Some existing code sections were amended t o d e l e t e a l l reference t o a maximum r a t e of i n t e r e s t , among those were sections r e l a t i n g t o special and r u r a l improvement d i s t r i c t s ; others were amended by changing the maximum r a t e of i n t e r e s t . O n . i t s f i n a l revision, the Senate committee of the whole reduced the general maximum i n t e r e s t r a t e i n section 2 t o 7%. The controversy here involves whether t o give some meaning t o the underlined portion of section 79-2603, R.C.P.I. 1947. Relator contends t h a t the retention of the underlined portion indicates a l e g i s l a t i v e i n t e n t t h a t the i n t e r e s t r a t e on special assessment bonds should be allowed t o exceed 7%. Respondent, on the other hand, contends t h a t t h e underlined portion i s redundant and the c l e a r wording of section 79-2602, R.C.M. 1947, should control. This Court w i l l presume that t h e l e g i s l a t u r e would not pass useless o r meaningless l e g i s l a t i o n ; and a l s o must harmonize s t a t u t e s give r e l a t i n g t o the same subject and/effect t o each. S t a t e ex r e l . Dick I r v i n , Inc. v. Anderson, M o n t . , 525 P.2d 564, 31 St.Rep. 482. W e must presume t h a t t h e l e g i s l a t u r e had some purpose i n mind when it retained t h e underlined portion of section 79-2603. In order t o give t h a t phrase any meaning what- soever, we must hold i n accord with t h e contentions of r e l a t o r . Therefore, (1) a municipality or county acting i n behalf of a l e g a l l y formed special improvement d i s t r i c t under the provisions of T i t l e 11, Chapter 22, o r T i t l e 16, Chapter 16, R.C.M. 1947, may i s s u e and s e l l bonds o r warrants bearing an i n t e r e s t r a t e i n excess of 7% per annum, and (2) t h e contract between r e l d t o r and respondent f o r the purchase of the bonds referred t o herein i s binding upon the p a r t i e s , notwithstanding the f a c t t h a t the bonds a r e t o bear i n t e r e s t a t the r a t e of 7.75% per annum. Judgment f o r r e l a t o r . I ' 1 --,,-A-~-L;- J-L--L-:AL-~LL-L ---- --- 1 J u s t i c e I W e Concur: Chief J u s t i c e ................................. d Justices.