No. 84-501 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1985 

RAYMOND P. TOCCI, BETTI J. TOCCI, 

VICTOR SURDAHL and ELOISE SURDAHL, 

Plaintiffs and Appellants, 

THE CITY OF THREE FORKS, a municipal corporation, 

Defendant and Respondent. 

APPEAL FROM: District Court of the Eighteenth Judicial District, 

In and for the County of Gallatin, 

The Honorable Joseph B. Gary, Judge presiding. 

COUNSEL OF RECORD: 

For Appellants: 

Morrow, Sedivy & Bennett; Lyman H. Bennett, 111, 

Bozeman, Montana 

For Respondent : 

Landoe, Brown Law Office, Bozeman, Montana 

.- 

Submitted on Briefs: March 7, 1985 

Decided: May 23, 1985 

Filed: ;y\;4,! 5: j 

Clerk 
Mr. Chief Justice 3. A. Turnage delivered the Opinion of the 

Court. 

Landowners appeal a judgment of the Gallatin County 

District Court upholding special improvement district assessments by the City of Three Forks. The assessments were made 

to recapture engineering and legal expenses in creating a SID 

for improvements which were never completed by the City. The 

project was completed privately after the municipal bond 

failed to sell. Finding neither a statutory basis for the 

assessment nor a benefit to the property involved, we reverse 

the judgment of the District Court. 

Raymond Tocci on beha.lf of himself and other landowners 

petitioned the City of Three Forks in 1977 for the creation 

of several special. improvement districts. Acting on these 

requests the City Council created four SIDs in 1978. The 

purpose of the SIDs was to provide water and sewer services 

for parcels that Tocci wished to develop. 

The City proceeded to contract with the engineering 

firm of Thomas, Dean & Hoskins to design a water and sewer 

system and estimate its cost for purposes of letting a construction bid and drawing up a municipal bond. This firm 

acted as the city engineer of Three Forks. The City undertook this work under the assumption that the SIDs would 

result in a bond sale and. improvements. 

The costs of designing and, planning the project totalled $7,831.19. This amount represents engineering services, publication, title search and legal services associated 

with creating the four SIDs. The low bid for construction of 

the project was approximately $50,000. The City was unsuccessful in its attempts to sell a bond for the SIDs. 
Subsequent to the unsuccessfu~ sale the developer 

retained his own engineering firm to design the project and 

at his own cost improved the property with water and sewer 

facilities. 

The question then arose as to which party would pay the 

creation costs of the abandoned SIDs. The City's engineering 

firm of Thomas, Dean & Hoskins filed suit against the City of 

Three Forks for $5,211.89 representing its consulting fee. 

The parties negotiated a settlement whereby the City paid 

$4,000 to the engineering firm. 

In October 1982 the City Council voted to assess Tocci 

and the other property owners the costs of creating the SIDs. 

Following this assessment, which Tocci objected to, the 

plaintiffs in the present lawsuit under protest paid assessments of $7,121.94 in 1983. Shortly thereafter, Tocci and 

Surdahl filed the present lawsuit to recover their tax 

payments. 

Facts reflecting our discussion above were stipulated 

and a nonjury trial was held June 27, 1984. The trial court 

concluded as a matter of law that the defenda.nt City was 

properly authorized to incur the creation costs of the SIDs 

and to assess the same against the plaintiffs. 

In a memorandum attached to the court's order of August 

15, 1984, the court noted that it was the developer that 

started the SID process by petitioning the City for the 

improvements. The court stated that the developer was aware 

that the bond might not sell and that this party shou1.d 

assume the risk of nonsale. Furthermore, the court found the 

property owners could have used the engineering (sewer and 

water) plans the City had contracted for, rather than those 
of the independent engineering firm with which Tocci had 

contracted: 

". . . It would be inequitable and 

unjust to simply Leave those financial 

expenditures [SID creation costs] on the 

CITY'S back when it is the property 

owners and clearly not the CITY who 

benefit. 

". . . Therefore, as a matter of equity, . . . the Court holds that the assessments made by THE CITY OF THR.EE FORKS 

are valid as against the Plaintiffs." 

The property owners appeal and raise this issue: 

May a city levy SID assessments against property for 

creation costs of anticipated improvements when those improvements are not constructed on the property by the city? 

The starting and. ending point for our discussion on 

this issue will be the plain language of the statutes that 

authorize assessments for special improvement districts. 

Section 7-12-4201, MCA, states that: "All costs and expenses 

incurred in the construction of any improvements specified in 

part 41 in any improvement district shall be paid for by 

special improvement district bonds or warrants. . ." The 

appellants have emphasized the mandatory language of this 

provision in their briefs before this Court. It is obvious 

that the City of Three Forks did not comply with the letter 

of this law when they compelled the developers to pay for 

certain creation costs of improvements rather than completing 

a bond sa.le. 

The costs at issue here are clearly anticipated by the 

language of 5 7-12-4201, MCA. That statute makes reference 

to costs specified in part 41 of title 7, chapter 12, MCA. 

Incidental expenses are defined in part 41 to be: 
". . . the compensation of the city 

engineer for work done by him, the cost 

of printing and advertising as provided 

in this part and part 42, the compensation of persons appointed by the city 

engineer to take charge of and superintend any of the work mentioned in this 

part, or the expenses of making the 

assessment for any work authorized by 

this part." Section 71-2-4101. (7), MCA. 

We note that the contracted firm of Thomas, Dean & Hoskins 

was acting as the city engineer of Three Forks at the time of 

this project. The incidental, creation, or start-up costs 

are considered part of "the cost and expenses of making the 

improvements within such special improvement district" by the 

language of $$ 7-12-4169 (I), MCA. Thus, the statutory scheme 

of part 41 and part 42 of chapter 12 clearly states that 

creation costs of an SID, incurred by the city engineer and 

the city generally, shall be payable by SID bonds. 

The statutory language being plain and unambi.guous, we 

refrain from reading into the language a second mode of 

payment for expenses other than a SID bond. It is true that 

the contingency presented by the facts before us is not 

addressed by statute. Respondent City would have us judicially read into the statutes, language to the extent that: 

"if the SID bond does not sell, the incidental costs of the 

district shall be assessed against the petitioning property 

owners. " 

To make this construction we would have to act in 

derogation of the general principle that a City's power to 

levy is strictly construed. Morse v. Kroger (1930), 87 Mont. 

54, 285 P. 185. What would be particularly offensive to our 

common law would be the enlargement of a City's assessment 

power without a statutory basis. A municipality's power to 

tax and levy assessments warrants special consideration apart 
from our Constitution's general mandate that powers of incorporated cities be liberally construed. Art. XI, Section 

4 (2) , 1972 Mont. Const. 

The respondent City urges this Court to accept the 

City's judgment as conclusive, absent proof of fraud or 

mistake. See, Stevens v. City of Missoula (~ont. 1983), 667 

P.2d 440, 40 St.Rep. 1267. We accept this guideline, but 

find that here there was a clear mistake made by the City of 

Three Forks. The erroneous mistake was one of law when the 

municipality strayed outside its statutory power to assess 

property for improvement. The standard to which a city is 

held in SID procedures has been stated: 

11 I . . . The statute having defined the 

measure of the power granted., and also 

the mode by which it is to be exercised, 

the validity of the action of the legislative body of the municipality must be 

determined by an answer to the inquiry 

whether it has departed. substantially 

from the mode prescribed..'" Smith v. 

City of Bozeman (1965) , 144 Mont. 528, 

541, 398 P.2d 462, 469, quoting from 

Shapard v. City of Missoula (1914), 49 

Mont. 269, 279, 1.41 P. 544, 547. 

Here there was a substantial departure from the assessment 

mandate of S 7-12-4201, MCA. Lacking power to assess SID 

incidental expenses apart from a bond sale, the City proceeded irregardless. 

This Court is not blind to the equitable appeal of 

apportioning the expenses of this project to the party who 

initiated the process and had the most to gain from its 

successful completion. However, the precedent of a-ffirming 

such a decision would create an unnecessary burden and risk 

on future petitioners for SIDs. Municipalities that question 

the marketability of a SID bond sale have other means of: 

insuring their incidental expenses will be paid; there is no 
demonstrated need to judicially recognize an after-the-fact 

assessment when bonds do not sell. 

A second problem in the reasoning of the lower court 

concerns the finding of a benefit. The theory upon which a 

municipality may levy assessments for special improvements is 

that the property will be benefited by the improvements to 

the extent of the burden imposed. Smith v. City of Bozeman, 

144 Mont. 528, 398 P.2d 462. It is fundamental to assessments for special improvements that the assessment be in 

proportion to the benefits conferred by the improvement. 

Schumacher v. City of Bozeman (1977), 174 Mont. 519, 571 P-2d 

1135. 

We are unable to discern from the record what benefit 

the property received in this case. The trial court concluded that the developer could have used the plans prepared by 

the City's engineering firm. In fact the developer did not 

use them, but hired his own engineering firm to develop plans 

for construction. The mere existence of a set of plans that 

were suitable for use does not support a finding of a 

benefit. 

There was testimony in the record that Mr. Tocci reviewed the City's set of specifications and plans before 

drawing up his own plans. Additionally, one engineer testified that he felt the property was benefited by the City 

first completing an acceptable design plan. However, the 

final plans used by Tocci were not carbon copies of the City 

design. Different areas were serviced by the two designs and 

different pipe was used. Testimony established other differences as well. 

We have been unable to find any precedent in Montana or 

elsewhere for a finding of benefit based on the preparation 
of engineering plans, when those plans are not used in the 

construction of improvements. The connection of these plans 

to the improvements is simply too tenuous to be affirmed as 

an assessable benefit. 

As a final matter the City argues that the plaintiffs 

are estopped from questioning the validity of the assessment 

because of their participation in the proceedings. It cannot 

be seriously contend-ed that the mere act of petitioning for a 

SID bars any subsequent challenge to the assessment process. 

The plaintiffs timely objected to the City's assessment once 

the City Council acted in 1982. In any case, a property 

owner ord.inarily cannot waive or become estopped from challenging the validity of an assessment which is void. by reason 

of an inherent defect such as lack of statutory power to 

assess. See Smith v. City of Bozeman, 144 Mont. 528, 398 

The cause is reversed and remanded. The District Court 

sha1.l order the taxes previously paid under the assessment 

returned to the pla-intiffs with interest from July 28, 1983. 

The costs of the plaintiff's court proceedings shall be born 

by the City of Three Forks pursuant to 5 7-12-4258, MCA. 

fF hief Justice 

We concur: / (/