No. 84-501
I N THE SUPREME COURT OF THE STATE O F MONTANA
1985
RAYMOND P. T O C C I , B E T T I J. T O C C I ,
VICTOR SURDAHL and E L O I S E SURDAHL,
P l a i n t i f f s and A p p e l l a n t s ,
THE C I T Y OF THREE FORKS, a munici-
p a l corporation,
D e f e n d a n t and R e s p o n d e n t .
APPEAL FROM: D i s t r i c t C o u r t of t h e E i g h t e e n t h J u d i c i a l D i s t r i c t ,
I n and f o r t h e C o u n t y of G a l l a t i n ,
T h e H o n o r a b l e J o s e p h B. G a r y , J u d g e p r e s i d i n g .
COUNSEL O F RECORD:
For Appellants:
M o r r o w , S e d i v y & B e n n e t t ; L y m a n H. Bennett, 111,
Bozeman, Montana
For Respondent:
Landoe, Brown Law O f f i c e , Bozeman, M o n t a n a
.
-
S u b m i t t e d on B r i e f s : March 7, 1985
Decided: May 2 3 , 1 9 8 5
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 assess-
ments 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 con-
struction bid and drawing up a municipal bond. This firm
acted as the city engineer of Three Forks. The City under-
took this work under the assumption that the SIDs would
result in a bond sale and. improvements.
The costs of designing and, planning the project to-
talled $7,831.19. This amount represents engineering servic-
es, 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 unsuc-
cessful 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 assess-
ments 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 assess-
ments 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 im-
provements 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 compensa-
tion of persons appointed by the city
engineer to take charge of and superin-
tend 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 judi-
cially 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 incor-
porated 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, 4 0 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 legis-
lative 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 proceed-
ed 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 assess-
ments 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 conclud-
ed 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 re-
viewed the City's set of specifications and plans before
drawing up his own plans. Additionally, one engineer testi-
fied 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 differ-
ences 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 1 9 8 2 . In any case, a property
owner ord.inarily cannot waive or become estopped from chal-
lenging 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, 1 4 4 Mont. 5 2 8 , 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, 1 9 8 3 .
The costs of the plaintiff's court proceedings shall be born
by the City of Three Forks pursuant to 5 7 - 1 2 - 4 2 5 8 , MCA.
We concur:
f /
hief Justice
F
(/