Wistuber v. Paradise Valley Unified School Dist., 17187

• Decision Date: 20 June 1984
• Docket Number: No. 17187,17187
• Citation: 687 P.2d 354,141 Ariz. 346
• Parties: , 20 Ed. Law Rep. 292 Florence WISTUBER, Peggy Deise and Florence Nelson, Plaintiffs-Appellants, Cross-Appellees, v. PARADISE VALLEY UNIFIED SCHOOL DISTRICT: Dr. Douglas L. Dickerson, Superintendent; Board of Trustees, Thomas Horne, Eric Bistroe, Nancie Lane, Guy Loehn and John P. Morgan, Jr., Defendants-Appellees, Cross-Appellants.
• Court: Arizona Supreme Court

Page 354

687 P.2d 354

141 Ariz. 346, 20 Ed. Law Rep. 292

Florence WISTUBER, Peggy Deise and Florence Nelson, Plaintiffs-Appellants, Cross-Appellees, v. PARADISE VALLEY UNIFIED SCHOOL DISTRICT: Dr. Douglas L. Dickerson, Superintendent; Board of Trustees, Thomas Horne, Eric Bistroe, Nancie Lane, Guy Loehn and John P. Morgan, Jr., Defendants-Appellees, Cross-Appellants.

No. 17187.

Supreme Court of Arizona, In Banc.

June 20, 1984.

Smith & Curtis by Paul C. Jacobson, David W. Curtis, Phoenix, for plaintiffs-appellants, cross-appellees.

Lewis & Roca by John P. Frank, Walter Cheifetz, Phoenix, for defendants-appellees, cross-appellants.

FELDMAN, Justice.

Petitioners brought a special action, as taxpayers, to declare invalid a portion (Proposal 98) of a collective bargaining agreement between the Paradise Valley Unified School District (District) and the local Classroom Teachers' Association (Association). Petitioners allege that Proposal 98 violates Ariz. Const., art. 9, § 7. ¹ The trial court entered judgment on the merits in favor of the District. The judgment was based on legal memoranda in lieu of trial, Proposal 98 and an affidavit of the District's Superintendent of Schools. Petitioners appealed and the District cross-appealed seeking attorneys' fees. We took jurisdiction on a motion to transfer pursuant to Ariz.R.Civ.App.P. 19(a), 17A A.R.S., to resolve an apparent conflict between two prior decisions of the Court of Appeals.

By its agreement with the Association, the District released the Association president from teaching duties but continued to pay a portion of the president's salary. ² The Association paid the president an additional sum. In return for her released time the president agreed to pursue a number of activities and undertake duties that inure to the benefit of the District. These included providing information to a number of groups, meeting monthly and logging time with the Assistant Superintendent for personnel. ³

In his uncontroverted affidavit the School Superintendent notes that "[i]f the Association President did not perform all of the above activities, the District would have to hire a full-time qualified person to perform them." He notes further that "the Association pays $6,800 of the Association President's annual salary and the District pays $19,200." He concludes that "the District is saving between $5,800 and $15,800 under the current arrangement compared to what it would have to pay if a full-time Director of Employee Relations were hired."

Nevertheless, petitioners assert that "Proposal 98 is void and illegal on its face as authorizing a gift of public monies to a private association" in contravention of Ariz. Const., art. 9, § 7. Given the stipulated facts, we find the contention without merit because (1) the agreement serves a public purpose and (2) there is neither donation nor subsidy to a private association.

It is axiomatic that a governmental body may disburse funds only for a public purpose. Proctor v. Hunt, 43 Ariz. 198, 201, 29 P.2d 1058, 1059 (1934) ("money raised by public taxation ... can only legally be spent for [public] purposes and not for the private or personal benefit of any individual"). In City of Glendale v. White, 67 Ariz. 231, 236, 194 P.2d 435, 438 (1948) this court stated "the term 'public purpose' is incapable of exact definition and changes to meet new developments and conditions of times...." The services performed by the Association President aid the District in performing its obligations. Her functions fit well within the Board's statutorily granted discretion to employ persons for other than classroom teaching. See A.R.S. § 15-343(A); A.R.S. § 15-502(A).

Petitioners argue that there is a conflict between two opinions of the court of appeals concerning the standard by which to measure whether there is a donation or subsidy in violation of art. 9, § 7. In Heiner v. City of Mesa, 21 Ariz.App. 58, 515 P.2d 355 (1973), a city sought to deed 10.9 acres of land to a private, non-profit hospital without consideration. The court of appeals rejected the constitutional challenge, and held that

[t]he public benefit [the promise to use the hospital for care of the sick, a public purpose] removes the contemplated deed from the restrictions of § 7 of Article 9 of the Constitution and constitutes a valid and valuable consideration under the circumstances presented to us in this case.

Id. at 64, 515 P.2d at 361 (emphasis supplied).

This aspect of Heiner was disapproved by a different panel of the court of appeals in City of Tempe v. Pilot Properties, Inc., 22 Ariz.App. 356, 362, 527 P.2d 515, 520-21 (1974). In Pilot Properties the city attempted to lease valuable property for a rental of $1.00 per year to a professional baseball team in return for the lessee's agreement to build a ballpark for use, inter alia, as a municipal ballpark. At the end of the lease term the ballpark would revert to the city. The court found that the propriety of the transaction could not be decided in the abstract. The court stated that merely because the private entity "uses public funds or property for a 'public purpose' is not sufficient, in and of itself, to remove that use from the provisions" of the Constitution. Id. at 362, 527 P.2d at 521. There must also be "consideration" which is not "so inequitable and unreasonable that it amounts to an abuse of discretion," thus providing a subsidy to the private entity. Id. at 363, 527 P.2d at 522 (quoting City of Phoenix v. Landrum & Mills Realty Co., 71 Ariz. 382, 388, 227 P.2d 1011, 1014 (1951)). ⁴

The constitutional prohibition was intended to prevent governmental bodies from depleting the public treasury by giving advantages to special interests (Industrial Development Authority of County of Pinal v. Nelson, 109 Ariz. 368, 372, 509 P.2d 705, 709 (1973)) or by engaging in non-public enterprises. State v. Northwestern Mutual Insurance Co., 86 Ariz. 50, 53, 340 P.2d 200, 201 (1959). Of course, either objective may be violated by a transaction even though that transaction has surface indicia of public purpose. The reality of the transaction both in terms of purpose and consideration must be considered. A panoptic view of the facts of each transaction is required. Id. at 53-54, 340 P.2d at 202. We believe the Pilot Properties rule to be the better one. The public benefit to be obtained from the private entity as consideration for the payment or conveyance from a public body may constitute a "valuable consideration" but the Constitution may still be violated if the value to be received by the public is far exceeded by the consideration being paid by the public. Of course, in reviewing such questions, the courts must not be overly technical and must give appropriate deference to the findings of the governmental body. Therefore, we confine the Heiner rule to its facts (see note 4, ante) and approve the rule expressed in Pilot Properties.

Petitioners argue that if the Pilot Properties rule is adopted as the law of this state the case must be remanded for a finding on whether the consideration paid by the District was equitable and reasonable in light of the services to be performed by the Association President. On these facts, we disagree. Acknowledging that many of the obligations imposed upon the Association President by Proposal 98 are duties which she might have performed in any event as Association President, it still seems obvious that the duties imposed upon her by the proposal are substantial, and the relatively modest sums required to be paid by the District not so disproportionate as to invoke the constitutional prohibition. Of course, we do not sit as finders of fact. The facts presented by the District in the affidavit of the Superintendent make a prima facia showing of proportionality. The petitioners had an opportunity to present evidence on disproportionality of consideration; instead, at the beginning of the trial, they chose to submit the matter on the legal memoranda, the affidavit, and the words of the contract. On this record it is apparent that they did not carry their burden and it is doubtful that they could have proved any serious disproportion in consideration. The Pilot Properties rule was satisfied. It was not the burden of the District to prove that its contract was reasonable. The burden of proof was on those who challenged that contract. See City of Phoenix v. Landrum & Miller Realty Co., 71 Ariz. at 388, 227 P.2d at 1014. We will not assume disproportionality of consideration.

Cross-Appeal for Attorney's Fees

The District claims it is entitled to attorney's fees under A.R.S. § 12-341.01. Under that statute attorney's fees may be awarded in an action arising out of contract in the context of a special action for mandamus relief. ⁵ Ash, Inc. v. Mesa Unified School District No. 4, 138 Ariz. 190, 193, 673 P.2d 934, 937 (App.1983). The District considers Ash new law and argues that the trial court, unaware that it could award such fees, used no discretion in denying the District's request for attorney's fees. We believe Ash simply applies the recognized precedents upholding a discretionary award of attorney's fees.

Moreover, this action differs from the type of contract action at issue in Ash. Here, petitioners are challenging the constitutionality of the action of a public body. An award of attorney's fees would be contrary to public policy in this case because it would have a chilling effect on other parties who may wish to question the legitimacy of the actions of public officials. Where aggrieved citizens, in good-faith, seek a determination of the legitimacy of governmental actions, attorney's fees should not usually be awarded. Courts exist to hear such cases; we should encourage resolution of constitutional arguments in court rather than on the streets. If an action brought against a governmental body is groundless or frivolous, or is brought for the purpose of harassing that body, ...