Dieck v. Unified School Dist. of Antigo, Langlade, Marathon and Shawano Counties
| Decision Date | 25 May 1990 |
| Docket Number | No. 89-2356,89-2356 |
| Citation | 157 Wis.2d 134,458 N.W.2d 565 |
| Parties | , 61 Ed. Law Rep. 1385 William DIECK, and James Tatro, on Behalf of Themselves and all others Similarly Situated, Plaintiffs-Appellants, d v. UNIFIED SCHOOL DISTRICT OF ANTIGO, LANGLADE, MARATHON AND SHAWANO COUNTIES, Wisconsin, Linda Szitta, Jeffrey Wagner, Michael Hunter, Gary Kieper, Nancy Igl, Thomas Hartman, Dr. Robert Keener, Shirley Nagel, Steven Brettingen, Antigo School Building Leasing Corporation, and First Wisconsin Trust Company, Milwaukee, Wisconsin, Defendants-Respondents. . Oral Argument |
| Court | Wisconsin Court of Appeals |
Richard J. Weber (argued), and David H. Perlman of Kelley, Weber, Pietz & Slater, S.C., on the brief, Wausau, for plaintiffs-appellants.
Thomas Terwilliger and Cassandra B. Westgate (argued), of Terwilliger, Wakeen, Piehler & Conway, S.C., on the brief, Wausau, for defendants-respondents.
Before CANE, P.J., and LaROCQUE and MYSE, JJ.
William Dieck and James Tatro, as members of a class (collectively plaintiffs), appeal a summary judgment in favor of the Unified School District of Antigo (district), school board members, and other parties to a complex lease purchase agreement for a new high school. The plaintiffs sought a declaratory judgment that the district lacked the power to enter into this transaction. Their central argument is that the district's transaction created an indebtedness that requires taxpayer approval. Because the transaction as presently constituted violates no laws, summary judgment in favor of the defendants was warranted, and we affirm.
For more than twenty years the voters of the district have refused to provide financing for the construction of a new high school. After numerous rebuffs, the district contracted to lease a new high school from the Antigo School Building Leasing Corporation (corporation), a ch. 181, Stats., corporation. The corporation will hold legal title to the new school. The First Wisconsin Trust Company (trustee) will hold the deed during the lease period. Instead of paying rentals to the corporation, the district will pay the holders of Certificates of Participation (certificates). The certificates will be insured against default under a bond insurance policy. During the lease period, the district can exercise its nonappropriation right under the contract and terminate the lease agreement. If the district continues to lease, it has the option to purchase the school for $10 at the end of the twenty-year period.
At present, portions of the transaction have not been finalized. Neither the certificates nor the bond insurance policy has been issued. In order for a court to exercise its jurisdiction and grant a declaratory judgment, four criteria must be satisfied. Sipl v. Sentry Indem. Co., 146 Wis.2d 459, 464, 431 N.W.2d 685, 687 (Ct.App.1988). One of these criterion is that the issue involved in the controversy be ripe for judicial determination. Id. "A matter is not ripe for declaratory relief unless the declaration 'is conclusive upon the controversy submitted to the court.' " Id. at 466, 431 N.W.2d at 688 (quoting Loy v. Bunderson, 107 Wis.2d 400, 411, 320 N.W.2d 175, 182 (1982)). As Sipl states, this test is jurisdictional and, if not met, strips the court of the power to hear the case as a matter of law. Id. at 464, 431 N.W.2d at 687. A trial court may also refuse to grant declaratory relief as a matter of discretion if "there are other controversies between the parties" or if "the declaration would be tangential to the underlying dispute." Id. at 465 n. 1, 431 N.W.2d at 687 n. 1 (citing American Med. Servs. v. Mutual Fed. S & L Ass'n, 52 Wis.2d 198, 204, 188 N.W.2d 529, 532 (1971)).
There are several aspects of the current controversy that are not ripe for declaratory judgment. There is disagreement over what form the certificates and the bond insurance policy will take when and if they are issued. Plaintiffs urge us to rule based on the sample documents contained in the initial agreement. They contend that the trial court erred by not taking a sample bond insurance policy into account and by failing to strike portions of an affidavit characterizing the requirements for such a policy. Defendants argue that the certificates and the bond insurance policy may The trial court, in the exercise of its discretion, might have refused to examine the entire transaction because the certificates and the bond insurance policy are critical to it. Nonetheless, the trial court chose to rule on the remainder of the issues raised by the agreement, and doing so was not an abuse of discretion. The issues raised, apart from those concerning the certificates and the bond insurance policy, are sufficiently separate and developed to permit a declaration of rights. If the trial court had rejected the basic framework of the agreement, the specifics of the certificates and the bond insurance policy would have been irrelevant. Thus, the trial court had the power to address the declaratory judgment motion as it related to those documents that have been signed and in which there is no anticipation of changes. See Sipl, 146 Wis.2d at 468 n. 4, 431 N.W.2d at 688-89 n. 4. In fact, the district argues that had the court not ruled on the validity of the underlying agreement, the transaction would have stalled and the other issues would have been moot.
differ [157 Wis.2d 139] in significant ways from the samples if and when they are issued. Defendants have discussed removing the district as a signatory on the certificates and having the corporation sign them instead. Defendants also may make wholesale changes in the language of the bond insurance policy and are at least exploring the idea of issuing uninsured certificates. There is language, particularly in the sample bond insurance policy and other documents describing the as yet unprocured policy, that concerns us. However, ruling on the extent of the district's obligations under the documents before they are issued and when the parties have not stipulated to their eventual contents would not be "conclusive upon the controversy submitted to this court," since they may eventually be issued and challenged in substantially different form. Therefore we do not examine the sample documents. 1
Both parties filed motions for summary judgment and agree that the issues before the court are matters of law amenable to summary judgment. Summary judgment methodology has been set out by this court on numerous occasions. In re Cherokee Park Plat, 113 Wis.2d 112, 115-16, 334 N.W.2d 580, 582-83 (Ct.App.1983). Our methodology is the same as the trial court's and our review is de novo. Id. at 115-16, 334 N.W.2d at 582.
Article XI, sec. 3, of the Wisconsin Constitution limits the debt a school district, or other municipal corporation, may incur. It provides both a limitation on the amount of the debt and a requirement that the district levy an irrepealable direct tax sufficient to pay off the interest yearly and the principal within twenty years.
The Wisconsin Supreme Court has developed a number of tests to determine whether indebtedness has been incurred under the constitution. See Kiernan, Wisconsin Municipal Indebtedness: Part I--The Power to Become Indebted and Its Limits, 1964 Wis.L.Rev. 173, 197. For our purposes, one is dispositive. If a municipality may avoid its obligation or if there remain conditions precedent to it, there is no indebtedness. Id. 2
The defendants argue that the nonappropriation clause in the lease purchase agreement renders their obligations conditional [T]he leases provide that the obligation to pay rent is subject to available appropriations by the Legislature. Since there is no binding obligation on the part of the state to pay rent for the full terms of the leases, it is inconceivable that a debt is incurred or that a purchase of the property is contemplated.
and therefore the agreement does not create debt under the constitution.
State ex rel. Thomson v. Giessel, 271 Wis. 15, 37, 72 N.W.2d 577, 588 (1955); see also Note, State and Municipal Lease-Purchase Agreements: A Reassessment, 7 Harv.J.L. & Pub. Pol'y 521, 536 (1984).
Plaintiffs attempt to distinguish Thomson in several ways. Their major argument is that we must look beyond form to substance. They claim that this transaction is not a true lease; rather, it is a disguised installment purchase plan. They point to the fact that the district leases the school for twenty years for an amount allegedly higher than its fair market value and then receives the property by exercising a $10 purchase option. 3 The key fact, however, is that the lease can be terminated, by nonappropriation, each year. Because the district may terminate the agreement on an annual basis by nonappropriation, whether it is intended that the property be purchased and whether the purchase option is for a nominal sum are not relevant to the constitutional analysis.
It is true that under prior cases it has been held that when the property automatically becomes the municipality's at the end of a "lease," the transaction is in reality a purchase agreement. In Earles v. Wells, 94 Wis. 285, 68 N.W. 964 (1896), the court struck down a "lease" agreement where a city issued bonds that covered the total purchase price of a water plant, and where the plant was to revert to the city after the lease period. Earles was distinguished in Stedman v. City of Berlin, 97 Wis. 505, 73 N.W. 57 (1897). The Stedman and Earles transactions were in most respects similar, except at the end of the Stedman lease the municipality had an option to purchase, rather than automatically acquiring the facility as a right. The Stedman court found that this feature allowed the municipality to avoid the constitutional restrictions on incurring indebtedness. Id. at 512-13, 73 N.W. at 59-60.
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