City of Milwaukee v. Firemen's Relief Ass'n of City of Milwaukee

• Citation: 42 Wis.2d 23,165 N.W.2d 384
• Decision Date: 07 March 1969
• Docket Number: No. 170,170
• Parties: CITY OF MILWAUKEE, a municipal corporation, Respondent, v. The FIREMEN'S RELIEF ASSN. OF the CITY OF MILWAUKEE, Appellant. *
• Court: United States State Supreme Court of Wisconsin

Page 384

165 N.W.2d 384

42 Wis.2d 23

CITY OF MILWAUKEE, a municipal corporation, Respondent, v. The FIREMEN'S RELIEF ASSN. OF the CITY OF MILWAUKEE Appellant. ^*

No. 170.

Supreme Court of Wisconsin.

March 7, 1969.

Quarles, Herriott, Clemons, Teschner & Noelke, Milwaukee, L. C. Hammond, Jr., and John S. Holbrook, Jr., Milwaukee, of counsel, for appellant.

John J. Fleming, City Atty., Richard F. Maruszewski, John F. Cook and Maurice L. Markey, Asst. City Attys., Milwaukee, Harry G. Slater, Deputy City Atty., Milwaukee, of counsel, for respondent.

HEFFERNAN, Justice.

In the portion of this case appealed earlier, we commended the opinion in the Associated Hospital Service Case to the attention of the trial court. In that case, this court concluded that, under sec. 74.73, Stats., a taxpayer was not entitled to recover interest from a city for the city's use of the money refunded to the taxpayer.

The majority of the court relied, as did the trial court in this instance, upon Schlesinger v. State (1928), 195 Wis. 366, 218 N.W. 440, 57 A.L.R. 352. The rationale of that case was simply that the failure of a tax refund statute to provide for the payment of interest is indicative of the legislature's intent to deny interest. Citing cases from other jurisdictions, we stated, at page 369, 218 N.W. at page 441, 'Such a statute 'plainly indicates that interest is not recoverable.''

The majority opinion in Associated Hospital Service made it clear that it considered the rule followed indefensible from the viewpoint of justice or logic. Mr. Chief Justice Brown, speaking for the majority, stated at page 192 of 18 Wis.2d, at page 101 of 118 N.W.2d:

'Our preference would be to affirm the judgments of the learned trial court, recognizing that the city ought not to profit by the uncompensated use of respondent's money illegally exacted and withheld and the respondent correspondingly injured. If we could see our way clear to affirm the learned trial court without doing violence to what seems to us to be the law as laid down by the statute, sec. 74.73, in which no interest is provided upon a refund, we would gladly do so.'

Mr. Justice Currie, speaking for the dissenting members of the court, pointed out that the Schlesinger Case, supra, was a doubtful precedent, in that at least two then recent cases, Yawkey-Bissell Corp. v. Town of Langlade (1952), 261 Wis. 524, 53 N.W.2d 174, and Associated Hospital Service v. City of Milwaukee (1961), 13 Wis.2d 447, 109 N.W.2d 271, 88 A.L.R.2d 1395, were in direct conflict with Schlesinger, inasmuch as they permitted the taxpayer to collect interest upon the refund of illegally paid taxes. In view of this tangle of conflicting precedent, Mr. Justice Currie pointed out that the court was not bound by the rule that the interpretation of a statute given by the court becomes a part of the statute itself when the legislature does not subsequently act to amend the statute. Under the state of precedential history existing in 1962, where the mandates of this court were in conflict, it could not be said in which of the conflicting precedents the legislature had acquiesced.

Moreover, it should now be noted that the legislature has at last spoken and has clearly expressed its view that the interpretation given by this court to sec. 74.73, Stats., in Associated Hospital Service v. City of Milwaukee (1962), 18 Wis.2d 183, 118 N.W.2d 96, does not constitute the expression of the present legislative will. The legislature, by ch. 157 of the Laws of 1967, amended sec. 74.73 to provide that a taxpayer is entitled not only to a refund of the principal as he was theretofore, but also 'interest at the legal rate computed from the date of filing the claim.'

It thus appears that precedents that were, in 1962, at best dubious interpretations of the legislative will are now clearly contrary to the expressed legislative intent.

The question before us is a broader one than that now controlled by the statute permitting the payment of interest on tax refunds payable pursuant to the procedures of sec. 74.73, Stats.

In the instant case, the City of Milwaukee, for a period of over sixty years, has withheld money that by statute rightfully ought to have been paid to the Firemen's Relief Association. The principal sum owed for the years not barred by limitation is acknowledged to be payable, but it is contended, following the rationale of Associated Hospital Service and Schlesinger, that no interest is payable on an obligation of a municipal corporation unless such obligation of payment is clearly imposed by statute. The question raised on this appeal is simple to state, but poses a question that has long remained subject to inconsistent and contradictory answers. That question is: Does a municipal corporation, as that term is used in Holytz v. City of Milwaukee (1962), 17 Wis.2d 26, 115 N.W.2d 618, referring to all units of government in Wisconsin, including the state, have the same obligation to pay interest on its debts that falls upon every other person or corporation within the state?

There seems to be little uniformity in the rule from jurisdiction to jurisdiction. Michigan, for example, treats the obligation of government to pay interest in the same manner that it does the obligation of the private citizen. Banish v. City of Hamtramck (April 5, 1968), 9 Mich.App. 381, 157 N.W.2d 445, 454. The Pennsylvania court stated in Mauch v. Pittsburgh Pension Board (1956), 383 Pa. 448, 452, 119 A.2d 193, 194:

'Nor can defendant escape the duty to pay interest on the theory that as a municipal agency it is under no duty to pay it unless the statute or express contract provides for it. The reason for the rule (as applied to the state) is that 'The government is presumed to be always ready to pay, and it would be against public policy to declare it otherwise.' Philadelphia v. Commonwealth, 276 Pa. 12, 14, 119 A. 723. (Italics supplied.) But here the actual facts overcome any such presumption. Defendant unjustly refused to pay until made to do so by court decision.'

Some states, among them Illinois, do not permit the collection of interest from a municipal corporation except when authorized by statute or unless the fund has been unlawfully obtained by the municipality or lawfully obtained but unlawfully withheld. Board of Trustees of Police Pension Fund of Glen Ellyn v. Village of Glen Ellyn (1949), 337 Ill.App. 183, 85 N.E.2d 473.

There is even disagreement as to what constitutes the majority rule prevailing in the country:

'* * * the general rule is that a municipal corporation is not chargeable with interest on claims against it without express agreement therefor * * *.' 17 McQuillan, Municipal Corporations (1967 Rev.Vol.), p. 98, sec. 48.09.

'The majority rule is that a municipal corporation is to be treated like a private debtor for the purpose of applying prevailing law governing interest on general obligations, and may be held liable for interest where a private debtor would be.' Rhyne, Municipal Law, pp. 804, 805, sec. 31--9.

'The authrities are not in accord as to the liability of a municipal corporation for interest upon claims against it in the absence of special contract or statutory provision for interest.' 38 Am.Jur., Municipal Corporations, Interest on Claims, p. 380, sec. 672.

It is apparent that the diversity of authority in other jurisdictions makes out-of-state precedent of little value.

The inconsistency of our own precedents is equally dismaying. In Rice v. Ashland County (1902), 114 Wis. 130, 89 N.W. 908, a county clerk accepted funds in payment for a deed to certain lands owned by the county. Subsequently, the deed proved to be valueless. On suit for recovery of the purchase price, the trial court awarded interest to the buyers from the time the money was paid to the clerk. This court held that judgment to be in error, that interest was payable but only upon the demand of the creditor for the refund of the principal amount paid.

In 1908, this court decided Appleton Water Works Co. v. City of Appleton (1908), 136 Wis. 395, 117 N.W. 816. The city's alleged obligation was one in contract for services. Although the court held that, since no adequate demand to pay had been made, the obligation to pay the principal and, hence, the interest on the principal had not commenced, the court said at page 399, 117 N.W. at page 817:

'Neither are we disposed to follow those cases which hold that a municipal corporation is not liable for interest on an indebtedness due from it in the absence of an express promise to pay. If the question is an open one in this state at all, no good reason is apparent why, after a claim is properly presented to a municipal corporation and payment is duly demanded, such claim should not draw interest if interest would be allowable on a like claim against an individual.'

Only five years later, this court in Wilcox v. Porth (1913), 154 Wis. 422, 143 N.W. 165, came to what appears to be the opposite conclusion to that arrived at in the Appleton Case, although it cited that case as authority. In Wilcox, this court said, at pages 427, 428, 143 N.W. at page 167:

'* * * there was no express promise to pay interest on the amount due the contractor * * *. Under the circumstances Mr. Hill was not in a position to make a claim for interest upon any express promise, nor was he in position to set interest running on the amount claimed by him by a simple demand of payment.'

In 1914, State v. City of Milwaukee, 158 Wis. 564, 149 N.W. 579, was decided. It is upon this case that the appellant herein principally relies. The respondent herein contends that the rule of this case is inapplicable.

In that case the city had withheld fine money that ought to have been paid over to the state, and used it for its own municipal purposes. The statute imposing the obligation to pay over the fine monies, like the statute in the instant case requiring the payment of a portion of the fire rate,...