Title: YOVETICH v McCLINTOCK
Citation: N/A
Docket Number: 12731
State: Montana
Issuer: Montana Supreme Court
Date: August 29, 1974

No. 12731 I N T H E S U P R E M E C O U R T O F T H E STATE O F M O N T A N A 1974 LOUIS YOVETICH, on behalf of himself and a l l other residents and property owners i n t h e County of Yellowstone, S t a t e of Montana, similarly situated, P l a i n t i f f s and Appellants, and STEVE TRENKA and M A B E L TRENKA, husband and wife, C L A Y T O N ORR, JOHN G L A N T Z and M O L L Y GLANTZ, husband and wife et a l . , P l a i n t i f f and Appellant Intervenors, -vs - M. E. McCLINTOCK, A.S. ROBERTS e t a l , Defendants and Respondents KOBER CONSTRUCTION C O M P A N Y , Yellowstone Electric Company, et a l . , Defendant and Respondent Intervenors, DAVID G. DRUM, WARREN F. VAUGHAN et a l . , Defendant and Respondent Intervenors. Appeal from: D i s t r i c t Court of the Thirteenth J u d i c i a l District, Honorable M. James Sorte, Judge presiding. Counsel of Record : For Appellants : Larry D. Herman argued, Laurel, Montana Ralph Herriott argued, Hysham, Montana For Respondents : Harold F. Hanser, County Attorney, argued, Billings Montana C. W. Jones argued, Billings, Montana Anderson, Symmes , Forbes, Peete and Brown, Billings, Montana Benjamin N. Forbes argued, Billings, Montana Crowley, Kilbourne, Hanson and Gallagher, Billings, Montana Moulton, Bellingham, Longo and Mather, Billings, Montana William H. Bellingham argued, Billings, Montana Submitted: June 14, 1974 Decided 'AW2'9 1974 M r . Justice John C. Harrison delivered the Opinion of the Court. This is an appeal from a judgment of the district court of Yellowstone County denying a petition for injunctive or declaratory relief against the Board of County Commissioners, Yellowstone County, for its method of funding the multi-use building presently being constructed at the fairgrounds in Billings, Montana. The facts disclose that on November 2, 1971, the voters of Yellowstone County approved the sale of general obligation bonds in the sum of $3,000,000 for the purpose of constructing and equipping a multi-use building at the fairgrounds in the City of Billings. The ballot presented to and approved by the voters read : "Shall the Board of County Commissioners be authorized to issue, negotiate and sell bonds of the County of Yellowstone in the amount of Three Million Dollars ($3,000.000.00) payable during a period of not to exceed twenty (20) years, redeemable on any interest due date after five (5) years; for the purpose of con- structing and equipping a Multi-Use Building at the Midland Empire Fairgrounds, Yellow- stone County, Montana, with a seating capacity of at least 10,000 and an arena of approxi- mately 250 feet by 400 feet." When the bond issue was approved, the county commission- ers had no access to a cost estimate of the building based on plans and specifications. In October 1972, the county commis- sioners employed architects who submitted a schematic design which set forth the size, shape, and cost of the building. The schematic design estimated the total cost of the building to be Toward the end of 1972, the county commissioners began to anticipate the receipt of federal revenue sharing funds. Consequently, the county commissioners made some refinements in and broadened the use of the building. These changes plus the existing severe inflation served to increase the cost of the building beyond the sum originally anticipated by the county commissioners. Bids for the construction of the multi-use building were opened on November 28, 1973 and contracts were awarded to the defendant-intervenor construction companies on December In January 1974, the county commissioners adopted a funding program which projected the cost of the building at $5,880,504.04. Three main sources of funds were to be utilized to meet this obligation: 1. Proceeds from the bond sale and interest thereon--- 2 . Principal and interest on fire in- surance proceeds resulting from the destruction of the previous building--- $ 358,591.26 3. Revenue Sharing Funds from the federal government, plus interest for entitle- ment periods one through six--- $2,009,188.68 TOTAL --- $5,896,410.83 Plaintiffs, as taxpayers and residents of Yellowstone County,protested the funding program and set forth three main issues for this Court to consider: 1. Does the funding program as adopted by the county commissioners of Yellowstone County violate section 16-807, R.C.M. 1947? 2. Is the county commissioners' action in contracting with defendant construction companies ultra vires because it limits future boards in the exercise of their governmental powers? 3. Is the use of federal revenue sharing funds for the purpose of funding the multi-use building improper? In the first issue, plaintiffs argue that the county commissioners, in using revenue sharing funds to finance the project, violated the terms of section 16-807, R.C.M. 1947, the pertinent part of which states: " * * * No county must incur any indebtedness or liability for any single purpose to an amount exceeding forty thousand dollars ($40,000) without the approval of a majority of the electors thereof voting at an election to be provided by law." In State ex rel. Diederichs v. State Highway Commission, 89 Mont. 205, 211, 296 P. 1033, this Court explained the purpose of Art. XI11 § 2 of the 1889 Montana Constitution which forbade the legislature from incurring a debt or liability in excess of $100,000 without submitting the question to a vote of the people: "Knowing the tendency of governments to run in debt, to incur liabilities, and thereby to affect the faith and credit of the state in matters of finance, thus imposing addit- ional burdens upon the taxpaying public, the framers of the Constitution placed positive limitations upon the power of the legislative assembly to incur a debt or impose a liabil- ity upon the state beyond the limit prescribed, without referring the proposition to the elec- torate for its approval." Thus, the question to be decided here is whether the expenditure of revenue sharing funds creates an "indebtedness or liability" within the meaning of the statute thereby imposing ad- ditional tax burdens upon the residents of Yellowstone County. In State ex rel. Diederichs v. Board of Trustees of Missoula County High School, 91 Mont. 300, 307, 7 P.2d 543, the plaintiff sought to enjoin the Board of Trustees of Missoula County High School from applying fire insurance proceeds to rebuild a high school. In holding that the expenditure of the funds did not constitute an "indebtedness or liability" this Court stated: "It seems plain that the constitutional limi- tation does not apply to the expenditure of cash on hand provided for a specific purpose; but rather to the creation of an obligation to be met and paid in the future by the taxpayers. [Citing cases] . " Here, it is plain the revenue sharing funds are not an obligation to be "met and paid for in the future by the taxpayers". In State ex rel. Rankin v. State Board of Examiners, 59 Mont. 557, 197 P. 988, this Court held that the words "indebtedness or liability" meant the creation of a debt or obligation in excess of "cash on hand and revenues having a po- tential existence by virtue of existing revenue laws." See also: Graham v. State Board of Examiners, 116 Mont. 584, 155 P.2d 956. The expenditure of the federal revenue sharing funds does not incur an "indebtedness or a liability" of the county within the meaning of the statutory restriction. Section 16-807, R.C.M. 1947, was never intended to prevent the expenditure of revenue provided for a specific purpose as noted in Diederichs v. Board of Trustees of Missoula County High School, supra. Had the legislature intended that result, it would have used the term "expenditure" instead of the terms "indebtedness or liability". As stated, the manifest purpose of the statute is to prevent the taxpayers from being burdened with oppressive taxation. Here, the county commissioners are not obligating the taxpayers to pay any additional sums over and above the amount included in the bond issue to finance the project. The entire costs of construc- tion are to be paid from the bond issue, insurance proceeds and revenue sharing funds. Thus, the evil which the statute is de- signed to prevent, will never come into existence here. In the second issue plaintiffs argue the action of the county comrnis- sioners is ultra vires because it limits future boards in the exercise of their governmental functions. We disagree. In Bennett v. Petroleum County, 87 Mont. 436, 447, 288 P. 1018, a taxpayer brought suit to enjoin the county commissioners of Petroleum County from leasing a building to be used as a court- house for a period of four years with an option to renew the lease for an additional four year period. The plaintiff contended, inter alia, that the lease was void because it extended beyond the t e r m s of o f f i c e of individual members of t h e board, of county commissioners. A t t h e t i m e t h e l e a s e was entered i n t o , Section 4465 Rev. Codes 1921, a s amended by Chap 38, Laws of 1929 author- ized t h e board t o lease r e a l property necessary f o r t h e use of t h e county. This Court upheld the v a l i d i t y of the l e a s e with these words: "The s t a t u t e s p e c i f i c a l l y confers t h e power t o so c o n t r a c t upon t h e board of county commis- sioners, t h e body e x i s t i n g a t t h e t i m e , and t h e mere f a c t t h a t t h e term of o f f i c e of a member of t h e body which so c o n t r a c t s may ex- p i r e before t h e c o n t r a c t , does not i n any manner a f f e c t its v a l i d i t y . Were t h e r u l e of law otherwise, t h e business of counties would be very g r e a t l y hampered and a t t i m e s , sus- pended, with r e s u l t i n g damage. The board of county commissioners functions f o r t h e munici- p a l corporation i n i t s authorized powers a s a continuous body, and while t h e personnel of i t s membership changes, t h e corporation continues unchanged. The county has power t o c o n t r a c t , and its c o n t r a c t s a r e t h e c o n t r a c t s of its board of county commissioners, n o t of t h e individual members thereof." W e agree with t h i s reasoning. B y s t a t u t e , t h e board of county commissioners has t h e power t o e r e c t a r e c r e a t i o n c e n t e r . Section 16-1008A, R.C.M. 1947. Since t h e board has t h i s power, it can e n t e r i n t o construction c o n t r a c t s t h a t extend beyond t h e terms of o f f i c e of t h e individual members of t h e board. Were t h e r u l e otherwise, t h e board would be unable t o e n t e r i n t o long-term construction c o n t r a c t s t o e r e c t public buildings a s contemplated by s e c t i o n 16-1008A, R.C.M. 1947. Such a r e s u l t would be detrimen- t a l t o t h e r e s i d e n t s of Yellowstone County. P l a i n t i f f s cornerstone much of t h e i r argument on t h i s i s s u e i n what t h i s Court recently held i n Burlington Northern v. Flathead County, 162 Mont. 371, 512 P.2d 710, 30 St.Rep. 684, and Burlington Northern v. Richland Co., 162 Mont. 364, 512 P.2d 707, 30 St.Rep. 691. The holding i n those two cases was based on an i n t e r p r e t a t i o n of s e c t i o n 16-807, R.C.M. 1947, which i s r e l i e d upon by t h e p l a i n t i f f s here. However, t h i s case is f a c t u a l l y d i f f e r e n t than t h e above cases f o r t h e r e t h e county commissioners attempted, by use of t h e taxing a u t h o r i t y , t o circumvent Section 5, A r t i c l e XI11 of t h e 1889 Montana S t a t e Constitution and section 16-807, R.C.M. 1947, by budgeting excessively i n order t o obtain and expend a built-up reserve i n subsequent f i s c a l years. Here, p l a i n t i f f s t r e a t t h e revenue sharing fund payments a s money budgeted and un- expended a t t h e end of t h e f i s c a l year. Further, they argue t h a t these funds should be placed i n t h e general fund t o be used t o reduce taxes i n subsequent years. To so hold would be f o r t h i s Court t o eliminate many, i f not a l l , of t h e permissible expenditures allowed by Congress under section 31, C.F.R. 51.31. Too, it would mean t h a t revenue sharing funds, unless spent p r i o r t o J u l y 1 of each f i s c a l year, would be used only t o reduce taxes. To c a r r y o u t t h e purposes of t h e revenue sharing a c t it must be given a more l i b e r a l i n t e r p r e t a t i o n . I t was contemplated by Public Law 92-512 (revenue sharing s t a t u t e ) Section 103, and it was t h e expectation of t h e President and Congress i n passing and signing t h e Act t h a t many new c a p i t a l improvements would be made by t h e various municipal and county governments throughout t h e country. W e note t h a t i n passing t h e Act, and s e t t i n g a s i d e t r u s t funds through December 1976, and making necessary t h e expending of o r obligating t h e funds within two years of r e c e i p t thereof, t h a t Congress intended t h e various governing u n i t s could and would r e l y on receiving same through December 1976. W e can f i n d no v i o l a t i o n of section 16-807, R.C.M. 1947, nor is t h i s finding contra t o our holdings i n t h e Flathead County and Richland County cases. I n t h e t h i r d i s s u e , p l a i n t i f f s argue t h a t t h e expenditure of revenue sharing funds f o r t h e purpose of financing a r e c r e a t i o n center is i l l e g a l because t h e revenue sharing a c t f o r b i d s t h e c a p i t a l expenditure of funds f o r recreation-type buildings. The State and Local Assistance Act, P.L. 92-512, Section 103, 1972, more commonly known as the Federal Revenue Sharing Act, allocates federal revenues to state and local governments to be used only for "priority expenditures". The act has defined "priority expenditures" as ordinary and necessary maintenance and operating expenses for public safety, environmental protec- tion, public transportation, health, recreation, libraries, social services for the poor or aged, financial administration, and ordinary and necessary capital expenditures authorized by law. 31 U.S.C.A. § 1222. To qualify for the funds a unit of local government must establish a trust fund to deposit all payments received and use the funds for "priority expenditures". A penalty of 110% of the amount expended is assessed against the local government if funds are allocated in violation of the Act. See: 31 U.S.C.A. 5 1243(a) (3). The local government is also required to provide for the expendi- ture of the funds in accordance with the applicable laws dealing with the expenditure of its own revenues. See: 31 U.S.C.A. 5 1243 (a) (4) . Plaintiffs argue that the funds are illegally spent be- cause a recreation center is not an "ordinary and necessary capi- tal expenditure authorized by law." We disagree with such a res- trictive reading of the Act. See Murphy v. McClintock, 160 Mont. 355, 503 P.2d 1013, 29 St.Rep. 883; Skaggs Drug Centers v. Mont. Liquor Control, 146 Mont. 115, 404 P.2d 511. The word "ordinary" is defined in Black's Law Dictionary (4th ~d.1 as: "Regular; usual; normal; common; often re- curring; according to established order; settled; customary; reasonable; not charac- terized by peculiar or unusual circumstances; belonging to, exercised by, or characteristic of, the normal or average individual." The word "necessary" is defined in Black's Law Dictionary (4th Ed. ) as: "This word must be considered in the connection in which it is used, as it is a word susceptible of various meanings. It may import absolute physical necessity or inevitability, or it may import that which is only convenient, useful, appropriate, suitable, proper, or conducive to the end sought. It is an adjective expressing degrees, and may express mere convenience or that which is indispensable or an absolute physical necessity. It may mean something which in the accomplishment of a given object cannot be dis- pensed with, or it may mean something reasonably useful and proper, and of greater or lesser bene- fit or convenience, and its force and meaning must be determined with relation to the particular object sought. " The Federal Revenue Sharing Act is broad in scope with the purpose of aiding local givernments defray the cost of capital expenditures. It accordingly appears to us that the words "ordinary and necessary" should be construed liberally and with latitude. It is our opinion that the multi-use building in question is "reasonable", "useful" and "proper", and within the terms of the Act. The judgment of the district court is affirmed. Justice I We concur: (2' L Hon. Paul Hatfield, ~ ~ $ , g ~ k ~ Judge, sitting in plac Justice Frank I. Haswell. Mr. Justice Thomas Dignan, District Judge, sitting in place of Mr. Chief Justice James T. Harri~on~dissents. District Judge