Ehrlich v. City of Racine

• Decision Date: 01 February 1965
• Citation: 132 N.W.2d 489,26 Wis.2d 352
• Parties: Kingston W. EHRLICH et al., d/b/a Greater North Bay Land Co., Respondents, v. CITY OF RACINE, a municipal corporation, Appellant.
• Court: Wisconsin Supreme Court

Page 489

132 N.W.2d 489

26 Wis.2d 352

Kingston W. EHRLICH et al., d/b/a Greater North Bay Land Co., Respondents, v. CITY OF RACINE, a municipal corporation, Appellant.

Supreme Court of Wisconsin.

Feb. 1, 1965.

Jack Harvey, City Atty., Racine, for appellant.

Brown & Black, Racine, for respondents.

GORDON, Justice.

The contract, which was entered into voluntarily by the city of Racine, is now challenged by that municipality as being violative of sec. 1, art. VIII of the Wisconsin constitution, which provides that: 'The rule of taxation shall be uniform * * *.' The objective of this clause has been interpreted to be 'to protect the citizen against unequal, and consequently unjust taxation.' Weeks v. City of Milwaukee (1860), 10 Wis. 186 (*242), 201 (*257).

The primary issue before us is whether the technique used in paragraph B, which is quoted above, offends the uniformity requirement of the state constitution.

When the legislature attempted to establish a reduced tax rate for agricultural lands, this court held the effort void. Knowlton v. Board of Supervisors of Rock County (1859), 9 Wis. 378 (*410) The legislature can, with uniformity exempt property from taxes, but it cannot partially exempt particular property. 'There cannot by any medium ground between absolute exemption and uniform taxation,' said the court in Knowlton v. Board of Supervisors of Rock County, supra at 392 (*424) If the legislature is constrained by this constitutional restriction, then a fortiori a municipality is also bound by it.

In examining the contract, and particularly paragraph B, we conclude that it provides for a partial exemption from taxes of the plaintiffs' land. To be sure, such tax preference is accomplished by indirection; it requires the plaintiffs to pay the same assessment that other landowners pay, but under the provisions of this contract, the plaintiffs are subsequently entitled to what amounts to a rebate. We are unable to give judicial absolution to a two-stage tax differential which would be a constitutional transgression if done in one stage. In Earles v. Wells (1896), 94 Wis. 285, 299, 68 N.W. 964, 968, this court said:

'The method by which the attempt was made may be regarded as ingenious, but it should be remembered, as indicated by one of the cases cited, that the city could not do by indirection what it could not do directly.'

In finding the contract valid, the trial court relied primarily upon Monroe Water Works Co. v. City of Monroe (1901), 110 Wis. 11, 85 N.W. 685, and the plaintiffs urge that we should affirm on the basis of that case. In the Monroe Case, at page 18, 85 N.W. at page 687, the court stated:

'The rule is equally well established that it is competent for a city and a company to be rendered, the city of services to be rendered, the city will pay a sum equal to the amount of municipal taxes to be levied. Ludington Water-Supply Co. v. City of Ludington, 119 Mich. 480, 78 N.W. 558; Cartersville Improvement Gas & Water Co. v. City of Cartersville , 16 S.E. 25; Grant v. City of Davenport, 36 Iowa, 397. Of course, it must appear that the sum so stipulated to be paid is a fair and just allowance to compensate for the actual value of the services to be rendered, and that the stipulation is bona fide, and not in the nature of an evasion of the law against exemption from taxes. The stipulation in this case is not subject to this objection. The water company agrees to furnish water for flushing gutters and sewers; also for school and public buildings, brinking and display fountains, and for sprinkling streets in the business portion of the city. In consideration thereof, the city is to pay annually a sum equal to certain taxes to be levied. There is nothing in this arrangement that we can perceive suggesting any exemption from assessment or taxation. On the contrary, it expressly contemplates the levy of a tax, and provides merely that, in addition to hydrant rents, the city shall pay a varying sum for the other services mentioned. If the agreement is sufficiently definite to be enforced, no reason is apparent why the city should not live up to its agreement.'

By its own terms, the Monroe Case applied to a situation in which services were to be rendered and, thus, is distinguishable from the facts in the instant case. In the case at bar, the consideration to the city of Racine was twofold: The land in question was annexed to the city, and the city received an easement for a storm sewer. Neither part of this consideration is comparable to the continuing services in Monroe.

The reasoning of the Virginia court in Richmond v. Va. Ry. & Power Co. (1919), 124 Va. 529, 542, 98 S.E. 691, is applicable, even to the extent of having a special category when the consideration consists of services to the city:

'No authority has been cited before us extending the doctrine of the cases next above discussed to the point of holding that a municipality may, for any other valuable consideration than services to it such as aforesaid, contract away its taxing power, and that such contract will be held not to be a tax exemption. And, on principle, it will be at once perceived that such a broad power of contract would annul all constitutional provisions against exemption of property from taxation. It is not a question of the presence or absence of a valuable consideration to support tax exemptions against which such constitutional provisions are directed. There has seldom, if ever, arisen a case of tax exemption where such a consideration was not supposed by the taxing authority to exist at the time, and a supposedly sufficient consideration. But the evil of allowing such a power to exist, even in the Legislature, is so manifest that the rules of construction applicable to every alleged tax relinquishment, above adverted to, and the constitutional inhibitions which are now in force in Virginia against the exercise of such a power, have been adopted, and have their foundation deep-seated in principles which are immutable under our form of government.'

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