J.C. Nichols Co. v. City of Kansas City

• Decision Date: 21 September 1982
• Docket Number: No. WD,WD
• Citation: 639 S.W.2d 886
• Parties: J.C. NICHOLS COMPANY, et al., Respondents, v. CITY OF KANSAS CITY, Missouri, Appellant. 32500.
• Court: Missouri Court of Appeals

Page 886

639 S.W.2d 886

J.C. NICHOLS COMPANY, et al., Respondents, v. CITY OF KANSAS CITY, Missouri, Appellant.

No. WD 32500.

Missouri Court of Appeals Western District.

Sept. 21, 1982.

Ilus W. Davis (argued), Aaron A. Wilson, City Atty., Kansas City, for appellant.

Reed O. Gentry (argued), Field Gentry, Benjamin & Robertson, Kansas City, for respondents.

Before NUGENT, P.J., and TURNAGE and LOWENSTEIN, JJ.

NUGENT, Presiding Judge.

This action by taxpayers of Kansas City, Missouri, sought both a declaratory judgment that a lease to a private firm of property owned by the city, formerly used as a fire and police station, was illegal and void and an injunction to prohibit the city from carrying out the lease. The trial court found the lease to be illegal and void and granted the injunction. The defendant appeals from that order. We reverse.

In 1916, the City of Kansas City purchased the property at 63rd Street and Baltimore Avenue, using bond funds created from proceeds of general obligation bonds, and constructed a building used as a police and fire station on the site. In February, 1977 the city ceased using the building as a police station, and in August, 1978 closed the fire station. The city determined that its other departments had no need for the building, and the property became surplus property.

Shortly thereafter, the city began proceedings to determine the ultimate fate of the property. At a meeting of the City Council's Finance and Audit Committee, held January 4, 1979, plaintiffs proposed that the property be sold, the building razed, and the land used as a parking lot. Plaintiff J.C. Nichols indicated a desire to acquire the property for that purpose. Other interested citizens, among them the president of the Morningside Neighborhood Association, proposed restoring the building. Over the months that followed, representatives of the Wornall Homes Association, the North Hyde Park Homes Association, the Historic Kansas City Foundation, the Landmark Commission, area residents, and numerous other homes associations, spoke in favor of leasing the property to a person who would restore the structure.

On March 16, 1979, the total value of both the land and building was appraised at $120,000. The appraiser also estimated $100,000 would be necessary to bring the building into compliance with City Code requirements, and that an additional $25,000 would be required to finish the interior.

On June 28, 1979, a ten-year lease to the high bidder, Haas Motors, Ltd., was approved by the Finance and Audit Committee.

The lease required the lessee to pay rent of $12,000 per year, bring the building up to Code standards, make all necessary repairs, and recognize the purpose of the city "to maintain the neighborhood and preserve the building".

Plaintiffs filed suit to restrain the city from carrying out the lease, and the matter was submitted to the trial court on the pleadings, including the Stipulation of Parties as to Issues, Parties' Contentions, and Facts. The court's conclusions of law included the following: (1) plaintiffs are proper parties in interest "upon the contention and the proof that the public interests are involved in preventing the unlawful expenditure and disposition of public property and funds"; (2) the public property acquired by the city may not be diverted from public use and used for a private purpose other than for a "purely temporary period"; (3) the lease to Haas Motors, Ltd. is a private and not a public use; (4) surplus city property no longer needed for its original public use must be either devoted to some other public use or disposed of in "final form"; and (5) a lease is not an act which "finally disposes of such property". Based on these conclusions, the court found the lease to be illegal and void, and defendant was enjoined from carrying out the lease.

This case presents issues of considerable importance and potential impact for city management in Missouri. First, we must determine whether a taxpayer has standing to bring an action against the city when the action does not challenge the expenditure of public funds, but is brought to enjoin an alleged misuse of public property. Second, because the city is expressly empowered under its charter to lease property for a public purpose, we must determine whether a lease of public property to a private firm takes on a public purpose when the city declares its purpose to include maintenance of the neighborhood and preservation of the building. Third, if we do not find such a public purpose, we are asked to determine whether the city is permitted under its charter to lease surplus property for a purely private purpose.

Because this appeal is before us on a stipulation of facts and does not involve a resolution by the trial court of conflicting testimony, the only question before this court is whether the trial court drew the proper legal conclusions from the facts stipulated. Schroeder v. Horack, 592 S.W.2d 742 (Mo.1979) (en banc).

On the issue of standing, then, we must decide whether the trial court could properly conclude from the stipulated facts that plaintiffs are proper parties in interest.

The question of taxpayer standing in Missouri has a long and evolving history. As early as 1873, the Missouri Supreme Court held that county taxpayers had sustained the requisite private injury to challenge a subscription by the county to the capital stock of a private railroad because they "are the individual sufferers, rather than the public. The people out of the county bear no part of the burden; nor do the people within the county, except the tax- payers .... It is therefore an injury peculiar to one class of persons, namely the tax-payers of the county of Macon." Newmeyer v. Missouri and Mississippi Railroad Co., 52 Mo. 81, 89 (1873).

Since Newmeyer, proof of an illegal expenditure of public funds has been repeatedly held to be sufficient to show the private pecuniary interest required for standing, simply because the illegal expenditure will necessarily cause the tax burden to increase, and the taxpayer will be called upon to bear the increased burden. The taxpayer is not required to show a direct interest different from that of other taxpayers because the right to sue does not stand on a special damage to the taxpayer, but on a larger principle of public interest. The extent of the taxpayer's actual damage is, therefore, immaterial and need not be shown. Everett v. County of Clinton, 282 S.W.2d 30 (Mo.1955); Berghorn v. Reorganized School District No. 8, 364 Mo. 121, 260 S.W.2d 573 (1953); Castilo v. State Highway Commission, 312 Mo. 244, 279 S.W. 673 (1925) (en banc); Stocke v. Edwards, 295 Mo. 402, 244 S.W. 802 (1922) (en banc); Civic League of St. Louis v. City of St. Louis, 223 S.W. 891 (Mo.1920); Missourians for Separation of Church and State v. Robertson, 592 S.W.2d 825 (Mo.App.1979); Collins v. Vernon, 512 S.W.2d 470 (Mo.App.1974).

In the early years of this century, the cases suggested as well that an actual expenditure from the public treasury was not always necessary for taxpayer standing. In Harris v. Langford, 277 Mo. 527, 211 S.W. 19 (1919), the Missouri Supreme Court held that taxpayers had standing to enjoin an illegal agreement between county officials and a local bank for a deposit of public funds. Although no actual expenditure by the county was at issue, the taxpayers were permitted to challenge the officials' failure to obtain bids from other banks simply because they were prosecuting the action on behalf of themselves and other interested taxpayers and had "the legal right to do so". Id., at 21.

Similarly, in Hight v. City of Harrisonville, 328 Mo. 549, 41 S.W.2d 155 (1931) (en banc), plaintiffs were held to have standing to challenge the purchase of electrical equipment by the city even though the equipment would be paid for only out of net revenues of the electric plant. This holding was based on plaintiffs' "interest in the electric distribution system ... necessarily affected by the contract." Id., at 158. Hight is the only case to which plaintiffs direct us in support of their contention that an expenditure of public funds is not necessary for taxpayer standing. However, Missouri law on this point has evolved beyond that 1931 case.

By contrasting two similar cases, we can see that the movement toward permitting standing in the absence of proof of an illegal expenditure of public funds was short-lived. In Civic League of St. Louis v. City of St. Louis, 223 S.W. 891 (Mo.1920), plaintiffs had been permitted to bring an action to enjoin fiscal officers from paying the salary of the superintendent of excavations based on their allegation that the office was illegally held. However, nineteen years later in Smith v. Hendricks, 136 S.W.2d 449 (Mo.App.1939), on very similar facts where plaintiffs sought to enjoin the continued employment of a bus driver alleged to be unqualified for the position, the court interpreted Newmeyer to permit standing only where the tax burden would be increased, and held that because it would cost as much to hire a qualified driver as an unqualified one, the taxpayers lacked standing. Instead, where the tax burden is not increased, the court held at 454 that "the remedy is the elective franchise."

We find no case decided in Missouri in the last thirty years in which a challenge to government activity was permitted when an illegal expenditure of public funds was not at issue. In Berghorn v. Reorganized School District No. 8, 364 Mo. 121, 260 S.W.2d 573 (1953), plaintiffs sought an injunction against expenditures of public tax monies for parochial schools. In Everett v County of Clinton, 282 S.W.2d 30 (Mo.1955), the expenditure of public funds to purchase and operate a rock quarry was at issue. In Missourians for Separation of Church and State v. Robertson, 592 S.W.2d 825 (Mo.App.1979), plaintiffs challenged the administration of financial assistance programs which...