Schumacher v. City of Bozeman

No. 13672 IN THE SUPREME COURT OF THE STATE OF MONTANA 1977 DOUGLAS L. SCHUIVIACHER, M.D., et al., Plaintiffs and Appellants, THE CITY OF BOZEMAN, et al., Defendants and Respondents. Appeal from: District Court of the Eighteenth Judicial District, Honorable peter:% Meloy, Judge presiding. Counsel of Record: For Appellants: McKinley Anderson argued, Bozeman, Montana Drysdale, McLean & Screnar, Bozeman, Montana James J. Screnar argued, Bozeman, Montana Bennett and Bennett, Bozeman, Montana Lyman Bennett I11 argued, Bozeman, Montana For Respondents: Berg, Angel, Andriolo & Morgan, Bozeman, Montana Ben E. Berg Jr. argued, Bozeman, Montana Submitted: October 4, 1977 Decided :Bm) Filed: -- SPV - 13 a:-:? - I Clerk M r . J u s t i c e Gene B. Daly delivered the Opinion of t h e Court. I n t h e D i s t r i c t Court, County of G a l l a t i n , p l a i n t i f f s sought 1) a w r i t of prohibition t o r e s t r a i n t h e City of Bozeman from any f u r t h e r a c t i o n i n Special Improvement D i s t r i c t No. 565 t o e s t a b l i s h an o f f - s t r e e t parking f a c i l i t y i n t h e downtown area of Bozeman; 2) an injunction enjdning the City from s e l l i n g s p e c i a l improvement d i s t r i c t bonds o r assessing property i n Special Improvement D i s t r i c t No. 565; and 3) a judgment declaring i n v a l i d the proceedings of the City of Bozeman i n the c r e a t i o n of Special Improvement D i s t r i c t No. 565. The proceedings undertaken by the City of Bozeman i n the c r e a t i o n of Special Improvement D i s t r i c t No. 565 f o r the purpose of e s t a b l i s h i n g o f f - s t r e e t parking f a c i l i t i e s i n t h e downtown area may be chronologically summarieed: 1. On June 16, 1976, the City Commission by Resolution No. 1795 announced i t s i n t e n t i o n t o c r e a t e Special Improvement D i s t r i c t No. 565 f o r the purpose of e s t a b l i s h i n g an o f f - s t r e e t parking f a c i l i t y i n downtown Bozeman; designated the boundaries of the d i s t r i c t ; and, estimated the c o s t a t $750,000. 2. O t h e same day, June 16, 1976, the City Commission n a l s o provisionally passed Ordinanee No. 962, s e t t i n g f o r t h a proposed formula f o r the assessment of property t o finance the o f f - s t r e e t parking f a c i l i t y . A t the time of the adoption of the ordinance, t h e City Commission designated July 7 , 1976, a s the t i m e f o r hearing p r o t e s t s a g a i n s t t h e proposed formula. 3. On J u l y 30, 1976, the City Commission amended i t s o r i g i n a l resolution of i n t e n t i o n t o c r e a t e Special Improvement D i s t r i c t N o . 565 by Resolution No. 1802 and-designateed J u l y 21, 1976, a s t h e time f o r hearing p r o t e s t s a g a i n s t t h e c r e a t i o n of S p e c i a l Improvement D i s t r i c t No. 565. Notices of t h e t i m e and p l a c e of hearing were published and mailed a s required by s e c t i o n s 11-2204 and 11-2205, R.C.M. 1947. 4. On J u l y 7 and again on J u l y 21, 1976, t h e C i t y Coannission h e l d hearings on t h e proposed formula. They were attended by both proponents and opponents. A s a r e s u l t of t h e hearings t h e formula was amended t o include t h e d e f i n i t i o n of "park" and a s amended was f i n a l l y passed and adopted on J u l y 21, 1976. 5. T h e r e a f t e r , on J u l y 28, 1976, Resolution No. 1808 c r e a t i n g S p e c i a l Improvement D i s t r i c t No. 565 was passed and adopted by t h e City Commission. 6. O n August 18, 1976, p l a i n t i f f s f i l e d t h e i r complaint and t h e c o u r t issued a temporary r e s t r a i n i n g o r d e r and a w r i t of p r o h i b i t i o n , scheduling both f o r hearing on August 31, 1976. On t h e l a t t e r d a t e hearing was h e l d , evidence introduced and t h e r e a f t e r on September 27, 1976, t h e c o u r t made f i n d i n g s of f a c t and conclusions of law i n favor of defendants and judgment was entered on t h a t day quashing t h e w r i t of p r o h i b i t i o n , d i s s o l v i n g t h e i n j u n c t i o n and dismissing t h e a c t i o n . From t h a t f i n a l judgment, p l a i n t i f f s appeal. Appellants pres'ent a number of i s s u e s f o r review by t h i s Court which will be t r e a t e d i n order: F i r s t . Appellants a l l e g e t h e City d i d n o t have j u r i s d i c t i o n t o c r e a t e S p e c i a l Improvement D i s t r i c t (SID) 565, because 30 days had n o t elapsed a f t e r t h e adoption of Ordinance No. 962 when t h e C i t y passed Resolution No. 1808 c r e a t i n g SID 565. This 30 day requirement i s found i n s e c t i o n 11-1106, R.C.M. 1947. -3- This s e c t i o n i s not applicable because it does n o t apply t o s p e c i a l improvement d i s t r i c t s but only a p p l i e s t o matters of general l e g i s l a t i o n ~ o nwhich a l l e l e c t o r s whether taxpayers o r n o t , may vote. Carlson v. City of Helena, 39 Mont. 82, 113, 102 P. 39 (1909). Second. Appellants a l l e g e Ordinance No. 962 adopting a formula f o r assessment of o f f - s t r e e t i n g parking improvements, v i o l a t e s both the due process and the equal protection clauses of the Uniked-States and the 1972 Montana Constitutions, because: (a) The n o t i c e of hearing was defective. (b) The formula i s inequitable. (c) The c i t y unlawfully delegated a u t h o r i t y t o determine t h e formula f o r assessment. The formula had one very minor e r r o r which was corrected i n the course of the hearing by the addition t o the ordinance formula of the l e t t e r "P=existing parking" when the ordinance was f i n a l l y adopted. This did not make the n o t i c e of the hearing defective. A t t h e o u t s e t we recognize it i s fundamental t o assessments f o r s p e c i a l improvements t h a t the assessment be i n proportion t o the b e n e f i t s conferred hy the improvement. Smith v. City of Bozeman, 144 Mont. 528, 398 P.2d 462 (1965). The formula f o r assessment adopted by the City Commission includes a l l s i x f a c t o r s required by section 11-2224(1)(d), R.C.M. 1947, but i s divided b a s i c a l l y i n t o four components, being a r e a , d i s t a n c e , demand and assessed value. To support t h e i r claim t h a t the formula i s discriminatory, appellants r e f e r t o four separate property comparisons drawn from a computer c a l c u l a t i o n of 172 separately evaluated p r o p e r t i e s within the proposed SID 565. W note here t h a t the computer layouts a r e n o t assessments e made o r t o be made by the City of Bozeman under the adopted f o m l a , but r a t h e r a r e estimates of c o s t comparisons made i n a study conducted by t h e Parking Commission of the City of Bozeman. J u d i c i a l review of b e n e f i t s o r detriments t o t h e property owners i s premature u n t i l t h e a c t u a l assessments have been levied, and u n t i l then no c o n s t i t u t i o n a l question a s t o the v a l i d i t y of the formula of assessment can be r a i s e d o r con- sidered by t h e court. Murphy v. City of Bismarck, N.D. 1961, 109 N.W.2d 635. Appellants claim t h e assessment formula was conceived by an unlawful delegation of commission powers. The s t u d i e s r e l a t i n g t o a downtown parking f a c i l i t y were commenced by t h e Parking Commission of t h e City of Bozeman i n 1974. The o r i g i n a l study was financed through t h e City by a $10,000 appropriation. The.Downtown Development Association continued the study and advanced an a d d i t i o n a l $10,000, From the j o i n t e f f o r t s of these two e n t i t i e s , a formula was devised and estimates made a s t o the approximate c o s t of t h e f a c i l i t y t o a l l p r o p e r t i e s i n t h e proposed d i s t r i c t . A l l of t h i s information was submitted t o the City Commission j o i n t l y by t h e two organizations by a l e t t e r dated May 26, 1976. Thus, although the f a c t u a l information f o r explaining t h e application of the formula was gathered by both t h e City Parking Commission and the Downtown Development Associa- t i o n , the formula f o r assessment did not become e f f e c t i v e u n t i l a f t e r hearing by the City Commission and the f i n a l adoption by t h e City Commission. 2 McQuillin, Municipal Corporations, 3rd ed, 510.41, p. 856, summarizes the law on delegation: "* * * Thus, t h e council may c r e a t e committees o r o t h e r bodies t o i n v e s t i g a t e given methods, t o procure i n - formation, t o make r e p o r t s and recoamendations, the committee may be given a u t h o r i t y t o employ p r i v a t e consultants, but t h e council alone must f i n a l l y d e t e r - mine every subject committed t o i t s d i s c r e t i o n and judgment. " And f u r t h e r i n 4 McQuillin, 3rd ed., Municipal Corporations, 513.51, p. 573, i t i s s t a t e d : "While it i s t r u e t h a t the council may not delegate i t s power t o a committee, when i t r a t i - f i e s t h e a c t of the committee i n due form it becomes t h e a c t of the council.'' Third. Appellants contend the determination by the City C o d s s i o n t h a t s i n g l e family residences and churches would not be s p e c i f i c a l l y benefited by a downtown parking f a c i l i t y was a r b i t r a r i l y a v i o l a t i o n of t h e equal protection and due process clauses of t h e United S t a t e s and Montana Constitutions. The record d i s c l o s e s no evidence was offered showing t h a t churches and s i n g l e family residences would be benefited by the o f f - s t r e e t parking f a c i l i t y and therefore should be assessed. Jenner v. City Council of City of Covina, 164 C.A.2d 490, 331 P.2d 176;181 (1958), i s almost i d e n t i c a l on t h e f a c t s and i s s u e s presented here. I n Jenner the parking d i s t r i c t consisted of 1 6 1 parcels, two were churches and 72 were r e s i d e n t i a l . Testimony before t h e assessing board and i n court indicated these properties would n o t be benefited. The t r i a l c o u r t found the omission of t h e r e s i d e n t i a l property from the d i s t r i c t was n o t a r b i t r a r y , unreasonable o r an abuse of d i s c r e t i o n . O n appeal, the 8uperior Court of Los Angeles County, held the evidence supported t h e findings t h a t t h e d i s t r i c t was properly formed; t h a t t h e assessments were i n keeping with the b e n e f i t s ; and the s t a t u t e was not unconsti- t u t i o n a l on t h e ground t h a t i t permitted docal a u t h o r i t i e s t o omit property from the d i s t r i c t . ,The D i s t r i c t Court of Appeal of California affirmed saying: "Absent a showing of fraud o r mistake, the d e t e r - mination of the City Council t h a t c e r t a i n property would not be benefited by t h e c r e a t i o n of the parking d i s t r i c t i s conclusive. *** I n Larsen v. City and County of San Francisco, 182 Cal. 1, a t page 14, 186 P. 757, a t page 763, i n an analogous s i t u a t i o n , t h e court s t a t e d t h a t 'under t h e p r i n c i p l e s established i n t h i s s t a t e and elsewhere, t h i s f i n a l decision of the supervisors a s t o the property benefited *** i s con- c l u s i v e , unless attacked on the ground of fraud o r m i s - take.' A examination of the record f a i l s t o d i s c l o s e n any fraud, mistake o r a r b i t r a r y a c t i o n on the p a r t of t h e City Council i n f i x i n g the boundaries of the d i s t r i c t . " 331 P.2d 181. The c l e a r r a t i o n a l e of ' t h e s e cases i s t h a t i f reasonable men might disagree a s t o whether s i n g l e family residences and churches w i l l o r w i l l not be s p e c i a l l y benefited by an o f f - s t r e e t parking f a c i l i t y , then i n t h e absence of a c l e a r showing of fraud o r mistake, the determination of the City Commission t h a t such property w i l l not be s p e c i a l l y benefited i s conclusive. 14 McQuillin, Municipal Corporations, 3rd ed., 538.186. Fourth. Appellants contend an o f f - s t r e e t parking f a c i l i t y i n downtown Bozeman i s a general government b e n e f i t r a t h e r than a s p e c i a l b e n e f i t t o the p r o p e r t i e s within the s p e c i a l improvement district. Appellants c i t e no cases supporting t h e i r contention. There i s a u t h o r i t y d i r e c t l y on point and s p e c i f i c a l l y deciding t h a t a downtown parking f a c i l i t y i s a s p e c i a l b e n e f i t t o the property i n t h e v i c i n i t y of t h e f a c i l i t y . I n Northern P a c i f i c Railway Co. v. City of Grand Forks, N.D. 1955, 73 N.W.2d 348, 350, the North + Dakota Court answered the same contention: "The c o n s t i t u t i o n a l question i s general i n nature and resolves i n t o the question of whether i n any circumstances t h e s p e c i a l assessment de- v i c e can be used t o defray the c o s t of a public o f f s t r e e t parking l o t without doing violence t o t h e Constitution. A a f f i r m a t i v e answer t o t h i s n question depends upon whether property, i n the v i c i n i t y of t h e parking l o t , which has been c o n s t i t u t e d a s p e c i a l assessment d i s t r i c t , derives a s p e c i a l b e n e f i t from the improvement i n addi- t i o n t o the general b e n e f i t i n which t h e whole c i t y shares. " e have no doubt but t h a t property i n the W v i c i n i t y of a parking l o t derives s p e c i a l b e n e f i t therefrom. P a r t i c u l a r l y i s t h i s t r u e i n the case of a congested business d i s t r i c t which had i t s development before automobiles and trucks had become t h e g r e a t convenience and problem t h a t they a r e today. I n recent years there has been a trend toward a d e c e n t r a l i z a t i o n , evidenced by t h e removal of many businesses from congested areas t o outlying d i s t r i c t s where parking l o t s f o r customers were a v a i l a b l e . It i s generally acknowledged and l o g i c a l l y so, t h a t the provision of parking space _ i n the v i c i n i t y of a congested mercantile a r e a , by making i t conveniently a c c e s s i b l e t o t r a d e , tends t o reverse t h i s trend and thus s t a b i l i z e business i n the area. This i s a s p e c i a l b e n e f i t s u f f i c i e n t t o j u s t i f y s p e c i a l assessments .'I 73 N.W.2d 350. Fifth. Appellants contend the method of the measurement of distance i n the d i s t r i c t i s i n e r r o r and cannot stand. This argument i s apparently based on the idea t h a t the formula f a i l s t o properly account f o r distance because it measures distance on a s t r a i g h t l i n e r a t h e r than t h e a c t u a l walking distance. In I t h i s respect t h e s t a t u t e , s e c t i o n 1 - 2 2 1 , R.C.M. 1947, does not specify the means of measuring distance and therefore i t would seem t h e City has the l i b e r t y of s e l e c t i n g the most common, uniform, standard and s h o r t e s t distance between two p o i n t s , i . e . t h e s t r a i g h t l i n e , r a t h e r than the c i r c u i t o u s and meandering routes suggested by appellants. I f the City had selected appel- l a n t s ' method of measuring i t woudd seem t o impose a more d i f f i - c u l t problem on the City Cornmission t o apportion the assessment t o a t t a i n equity of b e n e f i t . Sixth. Appellants question the s t a t u t o r y a u t h o r i t y of t h e City t o purchase an o f f - s t r e e t parking f a c i l i t y . They r e l y on s e c t i o n 11-2201, R.C.M. 1947, t o support t h e i r position. ~ e ' f i n d support f o r t h a t proposition when the s e c t i o n no i s read a s a whole with p a r t i c u l a r reference t o the f i r s t paragraph which s t a t e s i n p a r t : "* * * the c i t y counsel of each municipality *** i s hereby invested with j u r i s d i c t i o n t o acquire p r i v a t e property f o r r i g h t of way ***under t h e proceedings h e r e i n a f t e r described." (Emphasis added.) Subparagraph (4)(a) of section 11-2201 s p e c i f i c a l l y authorizes formation of s p e c i a l improvement d i s t r i c t s f o r o f f - s t r e e t parking f a c i l i t i e s . F i n a l l y , subparagraph (4) (e) of s e c t i o n 11-2201, s t a t e s : "(e) A improvement d i s t r i c t formed f o r t h e purposes n - - of e s t a b l i s h i n g a pedestrian mall o r o f f - s t r e e t parking may be financed i n accordance with t h e provisions of s e c t i o n 11-2214, R.C.M. 1947, and/or i n accordance with the methods of financing s e t f o r t h f o r the construction of water o r sewer systems a s s e t f o r t h i n section 11-2218, R.C.M. 1947." (Emphasis added.) With no ambiguity the s t a t u t e authorizes the a c q u i s i t i o n of p r i v a t e property, and purchase i s n o t excluded, f o r s p e c i a l improvement d i s t r i c t s f o r the purposes s p e c i f i c a l l y authorized. F i n a l l y , financing i s authorized by assessment o r revenue bond sales. Seventh. The most serious matter we a r e asked t o review concerns t h e voting p a r t i c i p a t i o n on the s p e c i a l improvement d i s t r i c t i n question by Commissioner Taylor, who i s alleged t o have a f i n a n c i a l i n t e r e s t i n the d i s t r i c t parking. P r i o r t o t h e c r e a t i o n of t h e SID, Commissioner Taylor purchased business property within the boundaries of the SID with i n t e n t t o remodel f o r o f f i c e use. On April 20, 1976, Taylor applied f o r a building permit and was denied because he only provided for 51 off-street parking stalls instead of the 191 required by the area zoning. Taylor appealed to the Board of Adjustment and hearing was had and appeal denied on May 4, 1976. Taylor applied again after the resolution to form the SID was passed and upon which he voted. He was again denied because of the 51 off-street parking stalls and the present-requirement for 183 stalls. Taylor again appealed to the Board of Adjustment. We note here there is nothing in the record to indicate what transpired at the hearing on appeal before the Board of Adjust- ment. A variance was approved for 88 off-street parking stalls for Commissioner Taylor. The question is whether the voting participation of Commissioner Taylor, disqualified because of his interest, voids the entire proceedings even though his vote was not needed to constitute the required number to pass SID No. 565 and there were no dissents. Generally a city councilman may not vote on an issue in which he has a direct or indirect interest. Not every interest of a councilman is considered to disqualify him; each instance is necessarily a factual question. For example, it is generally held that the fact a councilman has an interest in property within a proposed special improvement district does not disqualify him from acting on the formation of the district. 4 McQuillin, Municipal Corporations, 3rd ed., 913.35a. The tests of disqualification are variously stated, in some instances by statute. In 4 McQuillin, Municipal Corporations, 3rd ed., $13.35, p. 529, it is stated that disqualification is warranted: "* * * whenever a public official, by reason of his personal interest in a matter, is placed in a situation of temptation to serve his own pur- poses, to the prejudice of those for whom the law authorizes him to act. I t Taylor would not be disqualified from voting on whether to create a special improvement district solely because he owned property within the district. However, here, Taylor had an appeal before the local Board of Adjustment requeeting a variance from the number of off-street parking stalls he would have to provide for his business property. The difference between the number of required stalls and the number he proposed in his building permit was substantial--- approximately 183 stalls required as opposed to 51 proposed. The resolutions creating the special improvement district to finance building additional off-street parking were passed in June and July, 1976. Whether these resolutions actually had any effect on the Board of Adjustment's August 4, 1976 decision to grant Taylor the variance is unknown. The variance, however, saved him substantial additional expenditure. As a city commissioner, Taylor is entrusted with certain duties and responsibilities to carry out the governing func- tions of the city. His position places him on a different level of review regarding his business transactions, than would be that of the ordinary citizen. All courts that have considered the issue are agreed if a disqualified commissioner's vote was necessary to constitute the number required for passage, such a vote renders the entire proceeding void. Not all jurisdictions, however, are agreed as to what effect a vote by a disqualified commissioner has on the proceedings where his vote is not necessary to pass the issue. Some jurisdictions hold that such a vote has no effect on the validity of the proceedings. Others hold that such a proceeding - is void, while still others hold that it is only voidable. 62 C.J.S. Municipal Corporations $402. Although we have not previously dealt with this question, the legislature has passed statutes governing city councilmen and connnissioners in an analogous situation. No city councilman nor commissioner may be interested, directly or indirectly, in any contract with the city. Sections 11-3127 and 11-3214, R.C.M. 1947. Section 11-3214 also provides the commission may declare void any contract in which a commissioner is or may be interested. New York, New Jersey and Iowa hold that a vote cast by a commission member who is disqualified renders the proceedinq either void or voidable, even though the disqualified membeh vote was not needed to pass the issue. Baker v. Marley, 8 N.Y. 2d 365, 208 N.Y.S.2d 449, 170 N.E.2d 900 (1960); Aldom v. Borough of Roseland, 42 N.J.Super. 495, 127 A.2d 190, 197 (1956); Wilson v. Iowa City, Iowa 1969, 165 N.W.2d 813, 820. These decisions do not clearly distinguish between whether the action of the comission is void or merely voidable. Often such a decision is governed by statute. See: Section 11-3214, R.C.M. 1947. Numerous reasons are given for declaring such action void or voidable. Pyatt v. Mayor & Council of Borough of Dunellen, 9 N.J. 548, 89 A.2d 1, 5 (1952), states: ''Public policy forbids the sustaining of munici- pal action founded upon the vote of a member of the municipal governing body in any matter before it which directly or immediately affects him individually ." Other courts hold that when a municipal body passes on resolutions and ordinances, it acts in a quasi-judicial manner. If any of the council members who participated as a quasi-judge were at the time disqualified by reason of private interest at variance with the impartial performance of his public duty, such proceedings are void. Aldom v. Borough of Roseland, supra; Pyatt v. Mayor & Council of Borough of Dunellen, supra. The bias of the interested person taints the action of the whole body. Pyatt v Mayor & Council of Borough of Dunellen, supra. . In Piggott v. Borough of Hopewell, 22 N.J.Super.106, 91 A.2d 667, 670 (1952), this was found to be so for two reasons: "'First, the participation of the disqualified member in the discussion may have influenced the opinion of the other members; and, secondly, such participation may cast suspicion on the impartiality of the decision. [Citing cases.] It being impossible to determine whether the virus of self-interest affected the result, it must needs be assumed that it dominated the body's deliberations, and that the judgment was its product. 111 The cases which have held the vote of a disqualified commissioner does not vitiate the proceedings where his vote was not needed to pass the issue have rejected the two factors considered in Piggott. See: Singewald v. Minneapolis Gas Company, 274 Minn. 556, 142 N.W.2d 739 (1966); Eways v. Reading Parking Authority, 385 Pa. 592, 124 A.2d 92 (1956); Marshall v. Ellwood City Borough, 189 Pa. 348, 41 A. 994 (1899). The rationale behind Eways and Marshall is that the "illegal1'vote does not affect the "legal1'votes. The Marshall court downplays the influence the "illegal" voter may have on the "legal" voters, particularly when there is a large group of voters and only one illegal voter. As our discussion reveals there seems to be no question on the issue of Commissioner Taylor being disqualified under the circumstances t h a t e x i s t e d . There i s a l s o no question t h a t h i s vote was not required t o pass the ordinance which opens the proceedings t o a wide range of opinion a s t o v a l i d i t y , a s here- t o £ore discussed. Although Montana has n o t t r e a t e d t h i s matter j u d i c i a l l y , t h e l e g i s l a t u r e has spoken through i t s enactment of s e c t i o n 1& 1£ &, - R.C.M. 1947, which i s l e g a l l y and e t h i c a l l y analogous t o the i n s t a n t s i t u a t i o n and permits a c i t y commission o r council t o examine the f a c t s , and, i f so moved, t o void the transaction. A s heretofore s t a t e d , we a r e lacking f a c t s i n the record before us t o make determinations beyond the l e g a l finding t h a t the City Commission o r Council could i n i t i a l l y examine the t r a n s - a c t i o n and make a finding. However, i n case of r e f u s a l t o a c t by t h e Commission o r Council o r an adverse finding t o the p e t i t i o n e r s , t h e r e would be the customary recourse t o t h e courts. The judgment of the d i s t r i c t cou W e Concur]: