Township of Royal Oak v. City of Pleasant Ridge

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The township of Royal Oak filed a bill of complaint against the city of Pleasant Ridge for an accounting and for a decree directing that the defendant city of Pleasant Ridge pay to plaintiff whatever sum might be found due. Defendant filed an answer and cross bill asking for an accounting and settlement and for a decree that plaintiff pay whatever sum might be found to be due defendant. From the decree entered, defendant has appealed.

The dispute arises over bonds issued by the township of Royal Oak in October, 1926, as special assessment bonds. They were issued to pay for sewers and water mains under Act. No. 116, Pub. Acts 1923, as amended by Act No. 263, Pub. Acts 1925.^* After these bonds were issued, the city of Pleasant Ridge was incorporated within the township of Royal Oak. No settlement has been made between the township of Royal Oak and the city of Pleasant Ridge.

The statute (1 Comp. Laws 1929, § 2337 [Stat. Ann. § 5.2224]) provides that all debts owing by a township from which territory has been detached shall be apportioned, and each city or township shall be charged with and pay its share of the debts according to the apportionment. This apportionment shall be equitable and fair (1 Comp. Laws 1929, § 2339 [Stat. Ann. § 5.2226]); and if there is outstanding indebtedness, it may be apportioned and each municipality shall be liable for the indebtedness apportioned to it. 1 Comp. Laws 1929, § 2340 (Stat. Ann. § 5.2227). Upon the payment of any of its indebtedness existing prior to said change of boundaries by any township, the municipality which acquired part of the township shall be liable to pay to the township paying any such indebtedness its pro rata share of the indebtedness so paid. 1 Comp. Laws 1929, § 2341 (Stat. Ann. § 5.2228).

The question comes to this, whether the city of Pleasant Ridge is liable upon the special assessment bonds above mentioned, — that is, whether the special assessment bonds are a general liability of the township of Royal Oak.

Act No. 263, Pub. Acts 1925, which amends Act No. 116, § 1, Pub. Acts 1923, provides:

"In any township where there are platted lands, the plats of which have been duly approved and recorded, lying outside of the boundaries of incorporated villages, the township board shall have authority to make improvements by * * * laying storm sewers to care for surface waters in such streets and making extensions of water mains to provide water for fire protection and domestic uses in any such platted lands, and in unplatted lands contiguous thereto; to levy and collect special assessments to pay the cost thereof and to issue bonds in anticipation of the collection of said special assessments, subject to the terms and conditions hereinafter provided.

The above act also amended the title of Act No. 116, Pub. Acts 1923. Prior to the amendment in 1925, the act contained no provision for laying storm sewers or for the establishment of water mains to provide water for fire protection and domestic uses. The title, as amended by Act No. 263, Pub. Acts 1925, was broadened sufficiently to cover the amended act which provided that the township board was authorized to lay storm sewers to care for surface water in such streets and to make extensions of water mains for the purposes above mentioned, and "toprovide for making, levying and collecting of specialassessments to pay the cost thereof, and to issue specialassessment bonds in anticipation of the collection of suchspecial assessment taxes to provide the money with which to pay the cost of such improvement."

Section 2 of Act No. 116, Pub. Acts 1923, of which Act No. 263, Pub. Acts 1925, was an amendment, provides:

"Upon the filing of petitions verified both as to signature and ownership, signed by sixty-five per centum of the owners of the platted land and by all the owners of unplatted land to bemade into a special assessment district, in which any of the improvements specifiedin section one are desired by the owners of such land, the township board shall have power to construct and maintain such improvements, to determine the cost thereof, and to create,define and establish a special assessment district upon whichthe cost of such improvement shall be levied."

Section 3 of Act No. 116, Pub. Acts 1923, provides that the township board, before commencing any improvement, 1st, shall obtain from competent sources maps, plans and estimates of the proposed improvement; 2d, shall determine by resolution the cost of the proposed improvement; 3d, shall provide for the making of a special assessment upon each and every parcel of land in the special assessment district by benefits; 4th, and for the issuing and sale of special assessment bonds in anticipation of the collection of special assessment taxes; and, 5th, no such bonds shall be issued prior to the final confirmation of the assessment roll by the township board.

The power of townships to issue bonds is limited to statutory provisions therefor. "They (townships) have only such powers as the statute confers, and are subject to no obligations, except such as are derived from statutory provisions."Commissioners of Highways v. Martin, 4 Mich. 557, 560 (69 Am. Dec. 333). See, also, Bogart v. Lamotte Township, 79 Mich. 294;Chemical Bank Trust Co. v. County of Oakland, 264 Mich. 673. Neither the township of Royal Oak nor any officer thereof had any right to issue full faith and credit bonds of the township for the improvements made in the special assessment district in this case. The limit of their authority at the time these bonds were issued was to pledge the faith and credit of the township of Royal Oak for the payment of these special assessment bonds out of the deferred assessment instalments when collected.

The controlling aspect of this case is that no portion of the special assessment district is within the city of Pleasant Ridge. Instead the special assessment district is distantly removed from the city.

If there had been no severance of any portion of the township's territory, under numerous and uniform holdings of this Court, and in consequence of the hereinafter quoted provision contained in Act No. 58, § 3, Pub. Acts 1927^* (1 Comp. Laws 1929, § 2387; Whitman v. Township of Royal Oak, 269 Mich. 146), the matured obligations arising from these special assessment bonds, in the absence of funds derived from paid special assessments, would have been payable out of the township's general funds. But the issue in the instant case is whether under the facts presented the defendant city at this time should be compelled to satisfy a portion of these special assessment obligations out of its general funds.

I think the city should not be held so obligated. As just above noted, the city took over no part of the special assessment district. If the city had taken over a portion of the special assessment district it would be obligated to advance money from its general funds to pay its portion of unpaid matured bond indebtedness, if there was no money in the special assessment fund. So to hold is in full accord with the acts of the legislature applicable to such situations. 1 Comp. Laws 1929, § 2344 (Stat. Ann. § 5.2231). But since in the instant case the city did not take over any portion of the assessment district it should not be required to advance from its general funds any portion of the past due and unpaid payments on the special assessment obligations. Instead this duty is upon the township. This conclusion is in harmony with our holding in Moore v. Harrison, 224 Mich. 512, in which the county was not relieved from advancing from its general funds by reason of the fact that certain lands within the county and in the special assessment district had been deeded by the auditor general to the State of Michigan as State homestead lands, and in consequence thereof the county could not reimburse itself by means of further collection of assessments against the land so deeded. In other words, the property which still remained in the county subject to assessment had to bear the burden of producing money in the general fund to be advanced in payment of the defaulted special assessment obligations. See, also, Graves v. Bliss, 235 Mich. 364, and Highland Park v. Dearborn Township, 285 Mich. 440.

To hold otherwise than above indicated would be to involve the city in a course of taxation for the purpose of raising money to meet obligations with which it has no concern. The full amount of this bonded indebtedness must eventually be paid by special assessments on lands wholly within the township limits. If the law is so administered, serious complications will be avoided but which otherwise would arise incident to any attempt on the part of the city to enforce collections or reassessments of the special assessments in township territory over which the city can have no governmental control.

The statutory authority for issuing these special assessment bonds is the amendment found in Act No. 263, Pub. Acts 1925. At the time these bonds were issued the legislature had not empowered a township to pledge its full faith and credit for payment of bonds of the type under consideration, nor has the township had such power at any time. When issued these bonds were definitely designated as special assessment bonds. They are still such. In the ordinary course their payment must ultimately be by collection of special assessments in the designated assessment district. They are special assessment bonds notwithstanding that Act No. 58, Pub. Acts 1927, provides:

"If any such special assessment fund is insufficient to pay such bonds and interest thereon when due, the township board shall advance the amount necessary to pay such bonds, and shall be reimbursed from such assessments when collected, or by reassessment of the deficiency if necessary."

The title to the above act confers only the power upon the township "to issue special assessment bonds." Since no power is given the township or its officers to issue general or full faith and credit township bonds, it must follow that the bonds issued under the previously cited statutory authority still remain special assessment bonds notwithstanding Act No. 58, Pub. Acts 1927.

Appellee relies upon Whitman v. Township of Royal Oak, supra, as authority for its contention that the bonds involved in the instant case and which were issued in 1926 became, by virtue of the provisions of Act No. 58, Pub. Acts 1927, "general obligation bonds of plaintiff's township." The case does not so hold.

In effect the above-quoted provision from Act No. 58, Pub. Acts 1927, did no more than place the township by force of law substantially in the position of a guarantor obligated to advance money for the prompt payment of the bonds, if at any time funds derived from collection of the special assessments were insufficient to pay amounts due and payable; but the act provides that for amounts so advanced out of its general funds the township is to be reimbursed from subsequent collections of special assessments. The above-quoted statutory provision could not and did not work a transformation of these special assessment bonds into general obligation bonds.

The circuit judge found: "It is undisputed that the plaintiff township has advanced no money out of its general funds for the redemption of any of said bonds." Nor does it appear from this record that because of inability to obtain from the special assessments or reassessments funds sufficient to pay the bonds in full, the township may eventually have to pay a balance due on these bonds from its general funds. Should such a condition ultimately come about, there might then be room for the contention that the contingent statutory liability to advance money from the township's general funds had accrued and that payment, when made, was necessitated because it was then a general obligation of the township contracted before the severance of township territory by the defendant city. In that event the question would be presented as to whether the defendant city of Pleasant Ridge would not be liable for payment of its proportionate share of the general liability of the township which had accrued because of inability, if such should happen, to derive sufficient funds from the special assessments or reassessments to discharge in full the bond indebtedness. Suffice to say that on this appeal we do not have before us nor are we herein passing upon such a case; but a reservation might well be made in the decree to be entered in this case covering such a contingency.

We think the circuit judge was in error in holding the bonds in question were general obligations of the township whereby its "full faith and credit" were pledged. This appeal does not involve all of the issues adjudicated by the decree entered in the circuit court; but appellant's brief does not ask relief except as to the phase of the case hereinbefore considered. A decree may be taken in this Court modifying the circuit court decree in the particular herein considered, but otherwise the decree heretofore entered in this case will stand. Costs of this Court to appellant.

BUSHNELL, C.J., and SHARPE, CHANDLER, McALLISTER, and WIEST, JJ., concurred with NORTH, J. BUTZEL, J., concurred in the result.

^* See 1 Comp. Laws 1929, § 2385 et seq. (Stat. Ann. § 5.2411 etseq.). — REPORTER.

^* Amended by Act No. 24, Pub. Acts 1934 (1st Ex. Sess.) (See Comp. Laws Supp. 1940, § 2387, Stat. Ann. § 5.2413). — REPORTER.