Aberg v. Moe

• Decision Date: 11 March 1929
• Citation: 198 Wis. 349,224 N.W. 132
• Parties: ABERG ET AL. v. MOE ET AL.
• Court: Wisconsin Supreme Court

198 Wis. 349

224 N.W. 132

ABERG ET AL.

v.MOE ET AL.

Supreme Court of Wisconsin.

March 5, 1929.

Dissenting Opinion March 11, 1929.

Appeal from a judgment of the Circuit Court for Dane County; A. G. Zimmerman, Judge.

Action by Wm. J. P. Aberg and others, as Trustees of the Trust for the Members of University Co-op. Company, against Carl Moe and others and the Regents of the University of Wisconsin. From an adverse judgment, the plaintiffs and the Regents appeal. Reversed and remanded, with directions.--[By Editorial Staff.]

Action begun June 28, 1927; judgment entered June 25, 1928. The plaintiffs were the owners of certain property located on the corner of State and Lake streets in the city of Madison. The property is situated within an area suitable for university purposes and designated as such by act of the Legislature. The plaintiffs submitted to the board of regents a proposition in the form of a letter under date of June 12, 1926, as follows:

Reference is made to my letter to you of August 4, 1925, and d your reply of August 26, 1925, relating to transfer of the University Co-Operative Company property to the Regents.

Our building has now been completed including financing, and we are prepared to deliver to you a Warranty Deed to the premises subject to the $75,000 Trust Mortgage payable in annual payments over a period of ten years, which the University Co-Operative Company will pay as the bonds become due and payable. The Trust Indenture is dated May 1st, 1926 and runs to the Bank of Wisconsin of Madison, Wisconsin, as Trustee. It is executed ‘by the Trust for the Members of the University Co-Operative Company’ and was recorded May 21st, 1926 at 4:10 P. M. in Volume 349 of Mortgages on Page 7, in the office of the Register of Deeds, Dane County, Wisconsin. For your further information and records, I am enclosing a copy of this Trust Indenture.

I believe the proposed lease should be prepared by the Attorney General's Department since the Attorney General would undoubtedly have to approve any draft of a lease prepared by me. The terms thereof are substantially set forth in my letter of August 4th, 1925; term is to be thirty years, and I would suggest that such term commence July 1st, 1926; repairs, maintenance, improvements, upkeep and insurance to be paid by the Co-Op. The lessee should have the right to rebuild at its expense in case of destruction of the premises by fire.

We should be saved harmless by the lessor from all other expenses of every nature, and particularly taxes. I have in mind the possibility of the Legislature attempting by future legislation to assess our leasehold and if such action were taken, we would stand in a position of having conveyed property without any adequate return, and in such action by the Board of Trustees, would be subject to criticism.

The amortization plan which I worked out originally calls for setting aside the sum of $3,000 the first year, and a similar amount with an annual increase of $100 each year thereafter until the amount of $4,500 has been reached in the fifteenth year, and $4,500 per year from and after the fifteenth year until the end of the term. If the Regents desire to use the property for their own purposes, they should pay as liquidated damages the difference between the amounts accumulated by us to such date, and the actual costs of the building and ground. For the purpose of computing such difference, our reserve fund should be figured on a three per cent semi-annual interest basis. Although it was not stated in my original proposition, I feel that a period of say ten years; possession should be guaranteed us.

The foregoing is simply a rough sketch of points which I feel should be covered by lease and I shall be glad to take up with you or any one else charged with the duty of preparing a lease, any further details which may arise. This lease should be prepared immediately so that it may be submitted to the Executive Committee which, I am informed, meets on June 18th.

You are already familiar with the title to the property and I merely wish to add that good merchantable title now stands ‘In the Trust for the Members of the University Co-Operative Company,’ subject only to the Trust Mortgage noted above.”

Upon receipt of this proposal the following motion was adopted by the board of regents: “That the business manager be authorized to complete arrangements for the transfer and leasing of the University Co-Operative Company property in accordance with plans previously approved by the regents, and as provided in Mr. Aberg's letter of June 12th, 1926 insofar as the modifications suggested in his letter are legal.”

Pursuant to and as a result of such negotiations the plaintiffs conveyed the property in question to the regents of the University of Wisconsin on July 12, 1926. On July 30, 1926, the regents caused to be executed and delivered to the plaintiffs a lease of the property which had theretofore been deeded to them, for a term beginning on the 1st day of July, 1926, and ending on the 1st day of July, 1956, which contained the following covenants and agreements:

1. To pay as rent for said demised premises the existing g mortgage of $75,000.00 against the said premises held by the Bank of Wisconsin, Trustee, dated May 1, 1926, recorded May 21, 1926, in Volume 349 of Mortgages on page 7, in the office of the Register of Deeds of Dane County, together with interest thereon, as and when the same shall become due, and as rent.

2. To pay all special assessments which may be legally assessed on said premises during the continuance of the tenancy hereby created, and to pay, when due and payable, all charges for water furnished to the demised premises, and as rent.

3. To maintain and pay for adequate fire insurance on the building and improvements on said premises, the loss, if any under such policies, to be payable to the lessee as its interest may appear at the time of such loss, and as rent.

4. To keep and maintain, at the expense of the lessee, the demised premises and all parts thereof in good and substantial repair and condition.

The lessee reserves the right to sublet said premises, or any part thereof, and any subleasee or assignee shall have the rights and privileges of his assignor. Lessee also reserves the right to alter and remodel said premises in such manner as lessee finds necessary for its use and purposes.

In the event that said demised building, or any part thereof, shall be rendered untenantable by fire or other casualty, the lessee reserves the right, at its option, to restore, rebuild or remodel the same at its own expense.

The lessor shall not be liable for any damages occasioned by failure to keep said premises in repair, shall in no wise be liable for any damages which might result from water, snow or ice in or about the said premises or the entrances thereto, and the lessee agrees to save the lessor harmless by reason of personal injury to any person or persons on or about the premises.

If, during the period of this lease, the lessor should at any time desire to terminate said lease by right of eminent domain, the lessee agrees to accept as liquidated damages a sum equal to the difference between One Hundred and Sixty-five Thousand Dollars ($165,000), the present value of the premises, and the total amounts of the principal and interest accumulated by lessee as a Building Fund Reserve, which lessee hereby agrees to set up from and after July 1, 1926, in the following amounts: $3,000 for the year ending July 1, 1927, and a similar amount for each year thereafter, increasing at the rate of $100.00 per year for the next fourteen years thereafter, and from and after the fifteenth year, until the expiration of this lease, the sum of $4,500 per annum, such sum, so reserved, to be computed, for the purposes of this lease, on a 4% interest basis, compounded semi-annually.

It is further agreed that this lease shall inure to the benefit of and be binding upon the successors and assigns of the respective parties hereto.”

The assessors of the city of Madison for the year 1926 assessed the lease to the plaintiffs upon a valuation of $160,000, which the court held to be the fair value of the property. A tax of $3,440 was extended on this assessment, and the plaintiffs began this action to enjoin the city treasurer of the city of Madison from taking any steps to collect the tax. There was a trial before the court, and in addition to the facts stated the court found: That the Governor of the state never approved in writing the acquisition of the property by the regents nor otherwise than verbally to one of the members of the board of regents. That “the deed or conveyance from plaintiffs to the regents was not intended as a gift. Nor did the regents render any consideration for it other than the lease back to plaintiffs. The regents had no present use for the property, and no funds had been made available for its acquisition. By the lease the regents attempted to bind the state for a thirty-year term at a nominal rental, meanwhile surrendering all control and dominion over the property, which was to continue in commercial use by plaintiffs. The lease purported to reserve to the regents the right to acquire possession by eminent domain but only upon the agreed basis set forth in the lease to which they attempted to bind the state. The purpose of the parties in the giving of the deed and lease (rather than the making of a conveyance by plaintiffs reserving a thirty-year term upon the conditions of the lease) was artificially to create the status in plaintiffs of lessees of a tax exempt lessor. The parties entered into the transaction upon the assumption that the deed of the property to the regents with a lease back to plaintiffs would operate to exempt the property, and all interests therein, from taxation. The tax saving to plaintiffs to accrue from the supposed exemption was the important inducement to the transaction.”

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