Court Opinion

ID: 3411865
Source: CourtListenerOpinion
Date Created: 2016-07-05 19:29:43.279831+00
Date Added: 2024-06-11T12:32:20.976052
License: Public Domain

Prior to the time chapter 134, Sess. Laws 1929, became effective, the City of Pocatello organized Local Special Improvement District No. 28. Whether under chap. 257, Sess. Laws 1927, or the statutes in effect prior thereto, the record does not disclose, and is perhaps not material, inasmuch as the portions of chap. 257, Sess. Laws 1927, and the statutes in effect prior thereto as bearing on the controversy herein, are substantially the same.
Special local assessment improvement district bonds were issued and sold, and later when insufficient funds were realized from the district to pay the bonds, September 13, 1929, the city made a levy for the benefit of the said district of .063 cents on each one hundred dollars of value of taxable property in the city, under sec. 9, chap. 134, Sess. Laws 1929, which authorizes municipalities to create a guarantee fund for general taxes levied on the entire municipality, with which to pay deficiencies in special local assessment improvement districts.
Respondent paid its tax under protest, and herein seeks to recover it, contending that said sec. 9 is unconstitutional and void, as in violation of sec. 4, art. 8, and sec. 13, art. 1, Constitution of the state of Idaho, and the Fourteenth Amendment to the Constitution of the United States.
The bonds considered herein were not general obligations of the city, only of the district, in rem (Blackwell v. Village ofCoeur d'Alene, 13 Idaho 357, at 371, 90 P. 353), and had for security only the property within the district, and when the particular assessment levied against any particular individual and separate piece of property was paid, its share or proportion of the bonded indebtedness was liquidated; in other words, such piece of property was discharged from any further liability or obligation upon the bonds. This provision by statutory requirement (C. S., secs. 4026, 4151; sec. 35, chap. 257, Sess. Laws 1927, p. 457) was written into the bond, and of course became the binding contract between the bondholder and the district (Neighbors of Woodcraft v. City of Rupert, 51 Idaho 215,4 P.2d 360), the city being obligated *Page 503 
only to make the necessary collections and payment, and if any piece of property defaulted, the bondholders had the right to foreclose on the same. (Blackwell v. Village of Coeur d'Alene,supra; Broad v. City of Moscow, 15 Idaho 606, 99 P. 101; NewFirst Nat. Bank v. City of Weiser, 30 Idaho 15, 166 P. 213;New First Nat. Bank v. Linderman, 33 Idaho 704, 198 P. 159.)
Due process as to the organization of the local special assessment district and the issuance of bonds as obligations on the property within the district was afforded by the notice to all parties interested, given by the city following its ordinance of intention, and hearing before the council as to the organization of the district, and later assessment of benefits by the city for, and in connection with, the district. (C. S., secs. 4003-4012, 4129-4139; secs. 10-20, chap. 257, Sess. Laws 1927.) As to the taxpayer within the district, the only notice with regard to what liability would attach to his property and the liability fixed by the bonds and the assessment of benefits and charges in connection therewith was of course limited to the particular assessment on his individual separate and particular piece of property. As to any taxpayer of the city without the district, no notice as such was given, and since no burden was placed upon his land by the organization of the assessment district, or anything in connection therewith, or with the issuance of bonds therefor, no notice was necessary. (Stark v. McLaughlin, 45 Idaho 112, at 130, 261 P. 244.) In other words, under the doctrine of the cited case, if no burden was to be imposed upon what we might term an external taxpayer, that is, one without the district, but within the city, no notice was required. But if any burden had been contemplated, notice and a hearing were required to afford due process. (Davidson v. Board of Administrators,96 U.S. 97, 24 L. ed. 616, 619; Brown v. City of Denver,7 Colo. 305, 3 P. 455, 458; Hibben v. Smith, 191 U.S. 310,24 Sup. Ct. 88, 48 L. ed. 195, 200; Londoner v. City and County ofDenver, 210 U.S. 373, 28 Sup. Ct. 708, 52 L. ed. 1103, 1112;King *Page 504 v. City of Portland, 184 U.S. 61, 22 Sup. Ct. 290,46 L. ed. 431, 436; Williams v. Eggleston, 170 U.S. 304, 18 Sup. Ct. 617,42 L. ed. 1047.)
We are not herein concerned with whether or not in the first instance the legislature might authorize the city to pay for these improvements, partly by special assessments charged against the abutting or contiguous property and partly by general levy (Parsons v. District of Columbia, 170 U.S. 45,18 Sup. Ct. 521, 42 L. ed. 943), but whether, where the indebtedness in the first instance was, specifically by statute, by the terms of the bonds themselves, by decisions of this court, and by notice and hearing and municipal ordinance, made a liability only upon the property within the district and the liability of each individual piece of property limited thereto, may now, as to the residue of such indebtedness unpaid, be made a general obligation on the city, binding all the taxpayers within the municipality where the external taxpayer had no notice, and so far as the terms of the statutes themselves were concerned (Caldwell v. Village of MountainHome, 29 Idaho 13, at 23, 156 P. 909), had no right to a hearing as to the organization of the district in the first place, and where the internal taxpayer was given notice and had a hearing only as to a limited liability upon his property and with specific declarations, contractual, statutory and judicial, that such was the limit of his liability.
Such original liability was not within the contemplation of sec. 3, art. 8, of the Constitution. (McGilvery v. City ofLewiston, 13 Idaho 338, 90 P. 348.)
If now, by sec. 9 of the 1929 act, it is converted into a general obligation, it comes within the purview of said section (Byrns v. City of Moscow, 21 Idaho 398, 121 P. 1034), and yet no taxpayer has had notice of, or chance to be heard as to, such transmutation.
Furthermore, while a tax is considered not a contract, the bond and the obligation thereof as between the bondholder and the property owner within the improvement district clearly becomes a contract of limited liability. *Page 505 
To now in effect increase the liability upon these bonds to the extent of the special additional tax on internal taxpayers would, to that extent, impair the obligation of their contract by increasing their liability. (Const., art. 1, sec. 16; Const. U.S., art. 1, sec. 10; Bacon v. Road Improvement District,157 Ark. 309, 248 S.W. 267; Union Gas  Oil Co. v. Diles, 200 Ky. 188,254 S.W. 205; O'Connor v. Hartford Accident  IndemnityCo., 97 Conn. 8, 115 A. 484, 486, in which the court said: "Any law which changes the intention and legal effect of the original parties, giving to one a greater and to the other a less interest or benefit in the contract, impairs its obligation. The extent of the change is immaterial. Any deviation from its terms by hastening or postponing the time of performance which it prescribes, or imposing conditions not included in the contract, or dispensing with the performance of those that are included, however small and unimportant they may appear to be in their effect, impairs the obligation of a contract.")
In In re Fidelity State Bank of Orofino, 35 Idaho 797, 809, 31 A.L.R. 781, 209 P. 449, 451, this court said:
"The statutes of this state . . . . as well as the decisions of this court, became a part of the contract of special deposit when the deposit was made.
"In the case of Von Hoffman v. Quincy, 4 Wall. (U.S.) 535,18 L. ed. 403, the court said: 'It is also settled that the laws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it, as if they were expressly referred to or incorporated in its terms. This principle embraces alike those which affect its validity, constructions, discharge, and enforcement.' "
If it be contended that either class of taxpayers, internal or external, has an opportunity to be heard before the city council when the ordinance creating the guarantee fund, after the theretofore organized districts have become a closed chapter except as to payment thereof, constitutes due process, we are met with this situation: The internal delinquent taxpayer because of whose delinquency *Page 506 
a deficiency has arisen in the district, in the first instance, had a hearing, i. e., as to the organization of the district which is now not accorded the external taxpayer who is yet called upon to pay for the defaults of the internal taxpayer. Indirectly there is thus saddled on to the external taxpayer an indebtedness concerning the incurring of which he had neither notice nor hearing; and as to the internal taxpayer who has paid his assessment, the imposition of a different and additional obligation than the one concerning which he had a notice and hearing.
In Booth v. Groves, 43 Idaho 703, 255 P. 638, the court had under consideration the constitutionality of an act requiring all those within the tentative and preliminary confines of a drainage district to pay a flat fee of not in excess of $1 an acre, to defray the preliminary expenses of organization and petition to the district court, looking to the permanent establishment of such district. The court held the imposition of this burden, considered as a special assessment, unconstitutional, because no hearing constituting due process was afforded the land owner. No distinguishing features making the principle of this case inapplicable are suggested. If, at the time the ordinance authorizing the guarantee fund, a taxpayer could question anything which might have been raised at the time the city contemplated the organization of the taxing district, to be effective, it would injuriously affect the bondholder, and counsel for appellants does not contend for any such right. Furthermore, the statutes limit the time within which such protests or objections could be effectively made. (C. S., secs. 4009-4012; C. S., sec. 4137; sec. 11, chap. 257, Sess. Laws 1927, p. 445; Blackwell v. Village of Coeur d'Alene,supra; Caldwell v. Village of Mountain Home, supra.)
Counsel for appellants cite two Utah cases and one Washington case as sustaining the constitutionality of this act. InWicks v. Salt Lake City, 60 Utah, 265, 208 P. 538, the court did not consider the statute therein involved with regard to the due process clause of the Constitution as to the payment for theretofore organized districts, and *Page 507 
in Deseret Sav. Bank v. Francis, 62 Utah, 85, 217 P. 1114, the sole question involved was whether or not the act was mandatory or merely directory.
In Comfort v. City of Tacoma, 142 Wash. 249, 252 P. 929, the sole question involved from the constitutional standpoint was whether or not the guarantee fund increased the debt limit of the municipality beyond the constitutional limitations. It will be noticed that Washington has held it unlawful for a duly organized municipality to attempt to assume as legal and binding obligations, indebtedness incurred for special improvements as local assessments, by an illegally organized predecessor municipality (State v. Moss, 44 Wash. 91,86 P. 1129), and this rule has been followed in State v. City ofBlaine, 44 Wash. 218, 87 P. 124; Pratt v. City of Seattle,111 Wash. 104, 189 P. 565, 571; State v. Hastings, 120 Wash. 283,207 P. 23.
New York Life Ins. Co. v. Board of Commrs., 106 Fed. 123, cited by appellants, considered first the retroactive feature of the act under consideration, which point is not involved herein; and second, the moral obligation of the county to make good a fund which the county in the first instance had established, later found to be unconstitutional, not in substituting the county's obligation for an obligation of a separate or inferior division or branch or arm of the county, wherein the obligation in the first instance was not a general obligation of the county as herein.
Appellants argue that there is a moral obligation resting on the city to make good the defaulted bonds and keep the credit of the city good. There is an equal moral obligation resting on the city as well as a legal and constitutional one, to respect and regard the rights of the taxpayer. The bondholder, when he purchased, knew the nature of the security he was purchasing and its limited value, and it was through no fault of the now additionally burdened payer of the bond obligation that such original security has proved faulty. As pointed out above, the external taxpayer has had no process at all, and the internal, of a limited kind. As to the morals, they are *Page 508 
certainly no more than equal as between the bondholder and the taxpayer, and the constitutional safeguards which are entitled to some consideration, as well as the fundamental rights of the taxpayer, are entirely on his side.
Section 9 does not afford the taxpayer due process, and is therefore void. (Porter v. City of Lewiston, 41 Idaho 324,238 P. 1014; Chambers v. McCollum, 47 Idaho 74, 272 P. 707.)
Judgment affirmed; costs to respondent.
Lee, C.J., and Varian, J., concur.