Title: NILSON ENTERPRISES INC v CITY O
Citation: N/A
Docket Number: 80-110
State: Montana
Issuer: Montana Supreme Court
Date: December 18, 1980

No. 80-110 IN THE SUPREME COURT OF THE STATE OF MONTANA 1980 NILSON ENTERPRISES, INC., Plaintiff and Appellant, VS. CITY OF GREAT FALLS, Defendant and Respondent. Appeal from: District Court of the Eighth Judicial District, In and for the County of Cascade. Honorable Ronald D. McPhillips, Judge presiding. Counsel of Record: For Appellant: Jardine, Stephenson, Blewett and Weaver, Great Falls, Montana Gary W. Bjelland argued, Great Falls, Montana For Respondent: David V . Gliko, City Attorney, argued, Great Falls, Montana Submitted: November 24, 1980 Decided: DEc 1 5 1980 M r . J u s t i c e John Conway Harrison delivered t h e Opinion of t h e Court. ~ i l s o n Enterprises (taxpayer) appeals an adverse deci- sion of the Cascade County District Court, upholding an annexation by t h e City of Great F a l l s ( C i t y ) . Taxpayer f i l e d a complaint a g a i n s t t h e City on January 28, 1974, attempting t o recover a s p e c i a l improvement d i s - t r i c t assessment f o r t h e f i s c a l year ending June 30, 1974. The taxpayer had made t h e payment under p r o t e s t on November 30, 1973. The taxpayer charged t h a t t h e City had no j u r i s - d i c t i o n t o c r e a t e a s p e c i a l improvement d i s t r i c t , and, therefore, t h e assessment was i n v a l i d a s it was based on an i n v a l i d annexation, O n November 21, 1974, t h e City and t h e taxpayer entered i n t o a s t i p u l a t i o n agreeing t h a t , i f taxpayer made any f u r t h e r payments under p r o t e s t before t h e f i n a l determina- t i o n of the s u i t , it would not be required t o i n i t i a t e any o t h e r s u i t . O n June 2 1 , 1977, t h e p a r t i e s f u r t h e r stipu- l a t e d t o a set of f a c t s , agreed t h a t no evidentiary hearing o r t r i a l would be required, agreed t h a t a l l p a r t i e s would f i l e t h e i r motions f o r summary judgment on t h e record a s it stood, and f i n a l l y agreed t h a t t h e case would be ultimately decided a t t h e D i s t r i c t Court l e v e l , s u b j e c t t o appeal. The City and the taxpayer both f i l e d motions f o r summary judg- ment with supporting b r i e f s . O n January 16, 1980, t h e D i s t r i c t Court found i n favor of t h e City, determining t h a t t h e assessment and annexation w e r e proper. Taxpayer appeals. The f a c t s a r e undisputed. Taxpayer i s a Montana cor- poration doing business and owning real property i n cascade County. The City of Great F a l l s i s a municipal corporation, I n September 1972, t h e c i t y council passed a r e s o l u t i o n t o extend t h e boundaries of t h e City t o include two a d d i t i o n a l tracts of land, which were contiguous t o t h e municipal c i t y l i m i t s . Taxpayer's property, p r i o r t o annexation, was n o t contiguous t o t h e c i t y l i m i t s . A t a l l t i m e s during t h i s a c t i o n t h e S t a t e has had and s t i l l does have an i n t e r e s t i n t h e r e a l property described a s T r a c t s 1 and 2--namely, a highway pursuant t o a right-of- way deed. The annexation was approved by t h e mayor on Sep- tember 12, 1972. O n September 25, 1972, t h e C i t y declared i t s i n t e n t i o n t o c r e a t e a s p e c i a l l i g h t i n g d i s t r i c t , r e l y i n g on t h e annexation f o r i t s v a l i d i t y . Taxpayer was assessed and ordered t o pay taxes of $389.81 and d i d s o under pro- t e s t . Taxpayer has paid i t s assessment under p r o t e s t every f i s c a l year s i n c e 1974. A t t h e h e a r t of t h e i s s u e s r a i s e d by t h e taxpayer i s a challenge t o t h e v a l i d i t y of t h e C i t y ' s j u r i s d i c t i o n t o make assessments a g a i n s t t h e taxpayer's property. Taxpayer argues t h a t t h e a c t i o n s by t h e City, both t h e annexation and t h e assessments, a r e void - a b i n i t i o . Involved here i s a s t a t u t e which, i f properly followed, a u t h o r i z e s a c i t y t o assess a s p e c i a l improvement t a x on property o u t s i d e o f , y e t contiguous t o , t h e c i t y l i m i t s . The t a x l i a b i l i t y depends on whether t h e property i n i s s u e has been properly made con- tiguous t o t h e c i t y ' s boundaries. I f it has not, t h e r e i s no l i a b i l i t y . Taxpayer submits t h r e e i s s u e s f o r review: 1. Does a taxpayer who has been assessed s p e c i a l improvement taxes under a s t a t u t e authorizing t a x a t i o n of land which is "contiguous" t o a c i t y have t h e capacity t o challenge t h e annexation proceeding which made its own land contiguous t o t h e c i t y ? 2. Does a c i t y ' s f a i l u r e t o f i l e a land d e s c r i p t i o n , c e r t i f i c a t e of ownership, o r owner's statement of a d e s i r e t o have t h e land annexed render annexation proceedings void 3 . Does a taxpayer's f a i l u r e t o p r o t e s t annexation o r a s p e c i a l improvement t a x immediately a f t e r n o t i c e e s t o p it from challenging l a t e r ? .ie'?'cs Section 11-511, R.C.M. 1947 (now s e c t i o n 7-2-4444 et. seq., MCA), r e s t r i c t s t h e r i g h t of a municipality t o annex land i n which t h e S t a t e of Montana has any b e n e f i c i a l i n t e r - e s t , such a s t h e S t a t e of Montana had i n t h e property desig- nated as T r a c t s 1 and 2 i n t h i s case, This s t a t u t e provides i n p e r t i n e n t p a r t : "Contiguous land owned by government--desire f o r annexation--procedure. Whenever any land contiguous t o a municipality i s owned by t h e United S t a t e s o r by t h e s t a t e of Montana, o r by any agency, i n s t r u m e n t a l i t y , o r p o l i t i c a l subdivision of e i t h e r , o r whenever any of t h e foregoing have a b e n e f i c i a l i n t e r e s t i n any land contiguous t o a municipality, such land may be incorporated and included i n t h e muni- c i p a l i t y t o which it i s contiguous, and may be annexed t h e r e t o and made a p a r t thereof, i n t h e following manner: "1. The a d m i n i s t r a t i v e head of t h e owner of t h e land, o r t h e administrative head of the holder of a b e n e f i c i a l i n t e r e s t i n t h e land, s h a l l --- f i l e with t h e c l e r k of the municipality a d e s c r i p t i o n of t h e land, a c e r t i f i c a t i o n of - --- ownership -- o r of b e n e f i c i a l T n t e r e s t therein, and a statement t h a t t h e owner o f , o r t h e - - - -- holder - o f , - t h e b e n e f i c i a l i n t e r e s t --- i n t h e land d e s i r e s --- t o have it annexed. Whereupon, the qoverning body of t h e municipality s h a l l pass a r e s o l u t i o n r e c i t i n g i t s i n t e n t i o n t o annex t h e land and s e t t i n g a t i m e and place f o r a p u b l i c hearing thereon." Section 11-511, R.C.M. 1947. (See s e c t i o n s 7-2-4402, -4403, -4404, MCA). (Emphasis added.) O n May 24, 1972, i n response t o t h e C i t y ' s r e q u e s t f o r t h e of Montana S t a t e Highway Department's p o l i c y on annexation s t a t e highway land, Robert E. Champion, supervisor of t h e right-of-way s e c t i o n of t h e Montana Highway Department, s t a t e d : " I n general t h e r e would be no o b j e c t i o n s t o annexa- t i o n providing such a c t i o n precludes t h e levy of any assess- ment a g a i n s t t h e highway r i g h t of way." The C i t y a s s e r t s t h a t Champion's letter s u b s t a n t i a l l y complies with t h e requirements of t h e s t a t u t e even though nothing w a s f i l e d with t h e c i t y c l e r k . I n i t s d e c i s i o n i n favor of t h e City, t h e D i s t r i c t Court reasoned: "To prove t h a t t h e annexation was void a b i n i t i o , t h e p l a i n t i f f s argue t h a t t h e f i l i n g requirements of M.C.A., 1979, Section 7-2- 4403, r e q u i r i n g f i l i n g by t h e owner of a land d e s c r i p t i o n , a c e r t i f i c a t i o n of ownership, and a statement t h a t t h e owner d e s i r e d t o have t h e land annexed, w e r e n o t followed. These i r r e g u l a r i t i e s do n o t seem g l a r i n g enough t o deprive t h e City of j u r i s d i c t i o n . The Courts which have considered t h e matter have generally found t h a t a C i t y ' s annexation i s void f o r lack of j u r i s d i c t i o n i n only t h r e e (3) instances: 1) Where one c i t y a t - tempts t o annex p a r t of another c i t y ; 2) Where a c i t y attempts t o annex property n o t a d j a c e n t t o it i n a contravention of s t a t u t e , and 3) Where a c i t y attempts t o annex with- o u t consent of t h e landowners of t h e new t e r r i t o r y . Annot., 13 ALR2d 1279, 1292 (1950); Barton v. Stucky, 121 Okla. 226, 248 P. 592 (1926). P l a i n t i f f s a l l e g e none of these. " Taxpayer a s s e r t s t h a t t h e r e e x i s t s a f o u r t h ground f o r i n v a l i d a t i n g a c i t y ' s annexation a s being void ab i n i t i o : where a c i t y f a i l s t o comply with a l l t h e mandatory require- ments of s t a t u t o r y law. 2 McQuillin, Municipal Corporations, Sec. 7.29 a t 422; Pool v. Town of Townsend (1920), 58 Mont. ". . . I f , then, t h e Codes provide t h e means by which an a d d i t i o n becomes a p a r t of a c i t y o r town and s u b j e c t t o i t s j u r i s d i c t i o n , the means s o provided must be held t o be exclu- sive." Pool, 58 Mont. a t 304, 191 P. a t 386. The continued v a l i d i t y of Pool was r e c e n t l y underscored twice by t h i s Court i n Gregory v. C i t y of Forsyth (19801, Mont. - , 609 P.2d 248, 37 St.Rep. 277, 279, and Balock v. Town of Melstone (1980), Mont . , 607 P.2d 545, The Court i n G r e g o r y , 603 P.2d a t 252, s t a t e d : "The general r u l e i s t h a t municipal boun- d a r i e s may be extended only a s prescribed by law. 2 McQuillin, Municipal Corporations, Sec. 7.14 a t 317 (3rd rev. ed. 1979). Since t h e j u r i s d i c t i o n of a c i t y t o extend i t s boundaries i s a s p e c i a l power, conferred by t h e l e g i s l a t u r e , a s u b s t a n t i a l compliance with a l l t h e mandatory requirements of s t a t u t o r y l a w i s e s s e n t i a l . McQuillin supra, Sec. 7.29 a t 422; Pool v. Town of Townsend (1920), 58 Mont. 297, 304, 191 P. 385, 386." The g i s t of taxpayer's argument i s t h a t t h e C i t y nei- t h e r complied with t h e s t a t u t o r y requirements nor secured t h e S t a t e ' s consent, and t h a t e i t h e r f a i l u r e denied t h e C i t y of t h e j u r i s d i c t i o n t o v a l i d l y annex t h e property and levy assessments a g a i n s t it. The C i t y ' s view i s t h a t Champion's l e t t e r served a s evidence of t h e S t a t e ' s consent and t h a t it a l s o served a s s u b s t a n t i a l compliance with s t a t u t o r y require- ments. W e f i n d f o r t h e taxpayer. A s t o t h e i s s u e of consent, w e conclude t h a t t h e C i t y had a q u a l i f i e d o r c o n d i t i o n a l consent a t b e s t . The consent by t h e S t a t e of Montana, t a c i t l y given by Champion i n h i s May 24 letter, w a s c l e a r l y s u b j e c t t o t h e absence of any levy a g a i n s t t h e highway right-of-way. Although n o t i f i e d of t h e c o n d i t i o n a l nature of t h e S t a t e ' s consent t o t h e annexa- t i o n , t h e C i t y promptly l e v i e d an assessment a g a i n s t t h e property i n t e r e s t of t h e S t a t e . By a f f i d a v i t i n t h e record, Champion s t a t e d with regard t o h i s May 24 letter: "This statement embodied the p o l i c y of m y o f f i c e and s u b j e c t t o t h e provision regarding assessment a g a i n s t t h e Montana Department of Highways r i g h t of way, m y o f f i c e had no ob- j e c t i o n t o such annexation on t h e d a t e of t h a t letter. However, s i n c e t h e annexation took place, t h e C i t y of Great F a l l s has l e v i e d assessments a g a i n s t t h e property of t h e S t a t e of Montana highway r i g h t of way. These assessments have n o t been paid by t h e S t a t e and have been strongly r e s i s t e d . "Also, n e i t h e r m y o f f i c e nor, t o t h e b e s t of m y knowledge and b e l i e f , any o t h e r o f f i c e of t h e S t a t e of Montana, Department of Highways, has ever f i l e d with t h e Clerk of t h e C i t y of Great F a l l s a d e s c r i p t i o n of t h e land t o be annexed, a c e r t i f i c a t i o n of ownership o r of b e n e f i c i a l i n t e r e s t t h e r e i n , o r a statement t h a t t h e Department of Highways d e s i r e d t o have t h e land annexed. "The Department of Highways has and w i l l con- t i n u e t o resist any levy of assessments a g a i n s t i t s highway r i g h t of way pursuant t o t h e an- nexation of t h i s land and t h e c r e a t i o n of t h e appurtenant s p e c i a l l i g h t i n g d i s t r i c t . " Contrary t o t h e finding of t h e D i s t r i c t Court, t h e taxpayer d i d challenge t h e annexation on t h e i s s u e of t h e S t a t e ' s consent. Any consent given by t h e S t a t e w a s c l e a r l y forsaken by t h e C i t y ' s d e c i s i o n t o levy an assessment a g a i n s t t h e S t a t e ' s property. Without t h e property owner's consent t h e C i t y w a s without t h e j u r i s d i c t i o n t o proceed with t h e annexation. The annexation was void - ab i n i t i o . Annot., 13 A.L.R. 2d 1279, 1292 (1950). Moreover, w e r e a f f i r m t h i s C o u r t ' s d e c i s i o n s i n Pool, Balock and Gregory, supra. When s t a t u t o r y language provides t h e manner i n which a c i t y o r town may annex a p o r t i o n of contiguous property, it must completely and s t r i c t l y comply with t h e s t a t u t e ' s requirements. Annexation, and t h e t a x a t i o n implications t h a t accompany it, should n o t be approached l i g h t l y . The procedure should n o t be haphazard. Although Gregory reaffirmed the r u l e of s u b s t a n t i a l compli- ance, t h e complete f a i l u r e t o secure t h e documents necessary t o t h e proper annexation of property i s n o t s u b s t a n t i a l compliance. The complete disregard of t h e mandates of what i s now s e c t i o n 7-2-4403, MCA, was an e r r o r f a t a l t o t h e C i t y ' s power t o annex. A s t o t h i s taxpayer's standing t o challenge t h e annexa- t i o n , we concur with t h e D i s t r i c t C o u r t ' s c i t a t i o n of t h e applicable law. Applying t h e r u l e of Sharkey v. Butte (1916), 52 Mont. 16, 155 P. 266, t h e lower c o u r t quoted t h i s Court: " . . . where such proceedings are void - ab i n i t i o f o r want of j u r i s d i c t i o n of t h e s u b j e c t m a t t e r , a s here, e q u i t y w i l l a f f o r d r e l i e f t o t h e property owner whose taxes would be increased i f h i s property were included within t h e c i t y ' s l i m i t s . " 52 Mont. a t 23. See a l s o 62 C.J.S. Municipal Corporations, , § 66 a t 178 (1949). Having determined t h a t t h e proceedings by the C i t y of Great F a l l s w e r e indeed void a t ' i n c e p t i o n f o r want of proper j u r i s d i c t i o n , w e a r e convinced t h a t t h i s taxpayer has stand- i n g and i s e n t i t l e d t o r e l i e f . 6+hw ' p - This Court i s f u r t h e r persuaded t h a t t h e p r i n c i p l e s of estoppel do n o t serve t o deny t h e taxpayer r e l i e f . Although t h e C i t y cites our d e c i s i o n i n Power v. C i t y of Helena (1911), 43 Mont. 336, 116 P. 415, and persuaded t h e ~ i s t r i c t Court t h a t a f a i l u r e by a taxpayer t o p r o t e s t a s p e c i a l assessment o r improvement t a x when given an opportunity t o do so a t a public hearing, e s t o p s t h e taxpayer from a l a t e r challenge, t h e r e l i a n c e on t h a t d e c i s i o n i s improper. I n Power, t h e j u r i s d i c t i o n of t h e C i t y t o annex and assess w a s n o t challenged a s being void - ab i n i t i o . I n t h a t opinion, although we found Power to have been estopped from chal- lenging the assessment, we also wrote: "Of course, if the fact that plaintiff's prop- erty cannot receive any benefit from the im- provement appeared from the face of the city's proceedings, --- the want of jurisdiction would - be apparent, - - and a collateral attack upon the -- assessment could be maintained. But such is not the case h e r e . " 43 Mont. at 343. (Empha- sis added.) Where there is a substantial defect in the original proceedings, which operates to deprive a city of the juris- diction to act from the outset, estoppel will not bar a taxpayer's prayer for relief. We note with disapproval that this case, after submis- sion to the trial judge, languished in the hands of the district judge some 415 days. In our opinion, this period between submission and decision was far too long and unneces- sary. Judicial delay in this decision has caused additional costs to the City and unnecessary expense to the taxpayer. For lack of the State's consent and failure of the City of Great Falls to comply with the requirements of the stat- ute, we reverse. . - , - We concur: phief J u s t i c e , , i , , ,,&lLI Justices \