Pike v. Gunyou, C2-92-734
| Decision Date | 20 June 1992 |
| Docket Number | No. C2-92-734,C2-92-734 |
| Citation | 488 N.W.2d 298 |
| Parties | Earl A. PIKE, et al., Appellants, v. John GUNYOU, Commissioner of Finance of the State of Minnesota, et al., and Northwest Airlines, Inc., intervening defendant, Respondents. |
| Court | Minnesota Court of Appeals |
Syllabus by the Court
1. Minn.Stat. § 562.02 (1990) applies to a suit for declaratory judgment and injunctive relief that challenges the constitutionality of legislation authorizing the issuance of bonds and alleges that statutory prerequisites to the issuance of bonds have not been met.
2. Trial courts must exercise discretion in determining whether to require a surety bond pursuant to Minn.Stat. § 562.02, and must balance the statutory purposes of discouraging vexatious suits and avoiding substantial delay of public projects with the right to judicial review of constitutional questions and the efficacy of accelerated review on the merits.
3. A taxpayer action dismissed with prejudice under Minn.Stat. § 562.02, not having reached the merits, does not bar a similar suit by another taxpayer.
David R. Knodell, Minneapolis, for Earl A. Pike, et al.
Hubert H. Humphrey, III, Atty. Gen., Mark B. Levinger, Christie B. Eller, Asst. Attys. Gen., St. Paul, for John Gunyou, Com'r of Finance of the State of Minn., et al.
Donald W. Selzer, Jr., Oppenheimer, Wolff & Donnelly, St. Paul, (for respondent Metropolitan Airports Comm.).
Thomas Tinkham, Warren R. Spannaus, Leslie J. Anderson, Dorsey & Whitney, Minneapolis, for Northwest Airlines, Inc.
Considered and decided by WOZNIAK, C.J., and CRIPPEN and DAVIES, JJ.
This appeal was taken from the dismissal of appellants' lawsuit for failure to post a $30 million surety bond pursuant to Minn.Stat. § 562.02 (1990). Appellants argue the statute does not apply to their constitutional challenge to the validity of 1991 Minn.Laws ch. 350. In the alternative, appellants argue that the trial court abused its discretion by requiring a bond and in establishing the amount of the bond. We affirm.
1991 Minn.Laws ch. 350 was signed into law on May 30, 1991. The act authorizes bonds to finance construction of aircraft maintenance and repair facilities and to provide substantial financial assistance designed "to encourage and facilitate the retention and expansion of airline corporations' facilities, operations, and services in [Minnesota]." 1991 Minn.Laws ch. 350, art. 2, § 2. Although the act does not name a particular airline, all parties agree the purpose is to benefit Northwest Airlines, which is based in Minnesota and has many employees here.
The act authorized numerous transactions, but specific negotiations were required to arrive at terms to implement the provisions of the act. Article 3 of the act established
an interagency task force to coordinate the financial transactions authorized by [the] act, including bonds, financial assistance, and loan, lease, and other revenue agreements.
Id., art. 3, § 1, subd. 1. The interagency task force held numerous public meetings on the details of the various transactions. Negotiations continued between Northwest and state officials throughout 1991.
Proposed terms were presented to the legislative commission on planning and fiscal policy in November 1991 for it to make an advisory recommendation to the commissioner of finance. The legislative commission held hearings on the proposals in November and December 1991. Until the day of its vote, there was speculation as to whether or not the commission would approve implementation of chapter 350 and, if approved, on what terms. The commission modified the Metropolitan Airport Commission's proposal to include six terms not required by chapter 350, and it reached a "clear understanding" with all parties that a certain portion of the $270,000,000 proceeds from bonds to be issued by the Metropolitan Airports Commission could be used to prepay leveraged buy-out debt and for other (unspecified) preexisting debt and business purposes. The thrust of the agreements implementing chapter 350 was not known with certainty by appellants or others until March 29, 1992, when the final contracts were signed by Northwest, the state, and the Metropolitan Airports Commission. Bonds were to be issued on April 14, 1992, and proceeds were to be delivered to Northwest.
Appellants brought suit on April 2, 1992, four days after the contracts were signed. They allege that 1991 Minn.Laws ch. 350 is unconstitutional on its face because 1) it is a special law benefitting one corporation; 2) it does not serve a public purpose; 3) it constitutes a loan of the state's credit; 4) it includes an impermissible delegation of legislative powers to a commission; and 5) its tax credit and sales tax exemption provisions violate the state constitution's uniformity of taxation clause. In addition to these constitutional challenges, appellants also raise challenges arising from the contract terms, the commercial context, and the facts upon which the agreement was premised. Specifically, appellants allege respondents failed to comply with the statutory prerequisites for the issuance of bonds and that there is no credible evidence supporting the findings required by the statute regarding 1) the adequacy of security; 2) the likelihood that future revenues will be sufficient to pay all obligations; and 3) the fair market value of properties and international routes.
The complaint seeks a declaratory judgment that the statute is unconstitutional and a permanent injunction to prevent 1) the issuance of any bonds authorized by chapter 350; 2) the expenditure of bond proceeds for anything but repayment of principal; 3) the use of tax revenues to pay principal or interest on the bonds; 4) the allowance of tax credits and exemptions permitted by the statute; and 5) loans from the Metropolitan Airports Commission's "special construction fund."
On April 10, 1992, respondents moved the trial court, pursuant to Minn.Stat. § 562.02, for an order requiring appellants to post a surety bond of $819 million. After a hearing, appellants were ordered to post a $30 million bond by April 14, when the first bonds authorized by chapter 350 were due to be issued. Appellants moved for reconsideration, submitting evidence that it would take at least one month to procure a bond in that amount, but they did not indicate that they would be able to provide a bond even if they were given additional time. On April 14, 1992, the trial court refused to extend the deadline and ordered that the action be dismissed with prejudice for appellants' failure to post the bond.
Appellants filed this appeal from the judgment of dismissal on April 16, 1992. We ordered expedited briefing and oral argument.
The Metropolitan Airports Commission bonds ($270 million) were sold prior to oral argument held before this court on May 6, 1992. We have not been informed of the disbursement of the proceeds, nor how the opinion of bond counsel addressed the challenge then before this court.
1. Does Minn.Stat. § 562.02 (1990) apply to this action?
2. Must the trial court exercise discretion in ordering the bond under Minn.Stat. § 562.02 (1990)?
3. Does a dismissal with prejudice of this action bar a similar suit by another taxpayer?
4. Did the trial court, under the facts of this case, abuse its discretion in ordering appellants to post a bond as a condition of continuing their suit?
5. Did the trial court abuse its discretion in setting the amount of the bond and the deadline for posting?
Our supreme court has held that taxpayers who allege an illegal expenditure of tax money which "will likely have the effect of increasing the over-all tax burden of the community" may bring a declaratory judgment action to challenge the constitutionality of the underlying statute. Arens v. Village of Rogers, 240 Minn. 386, 391-92, 61 N.W.2d 508, 513-14 (1953), appeal dismissed, 347 U.S. 949, 74 S.Ct. 680, 98 L.Ed. 1096 (1954); see also St. Paul Area Chamber of Commerce v. Marzitelli, 258 N.W.2d 585, 588 (Minn.1977) (); Almquist v. City of Biwabik, 224 Minn. 503, 505, 28 N.W.2d 744, 745 (1947) (). 1 However, the legislature and courts have recognized that such suits may cause costly delays in public projects. The right to sue is not unfettered, and Minn.Stat. § 562.02 (1990) may pose a significant barrier to some taxpayer suits.
"Section 562.02 was adopted in 1957 for the apparent purpose of discouraging vexatious lawsuits by irresponsible litigants." Village of Elbow Lake v. Otter Tail Power Co., 281 Minn. 43, 46, 160 N.W.2d 571, 574 (1968). The statute protects taxpayers against inordinate delays in the implementation of legislative decisions by encouraging those who wish to challenge the decision of a governmental body "to commence their actions before any substantial damage will result from a delay in the prosecution of the project." Gram v. Village of Shoreview, 259 Minn. 145, 154, 106 N.W.2d 553, 559 (1960).
The statute at issue reads:
Whenever any action at law or in equity is brought in any court in this state questioning directly or indirectly the existence of any condition or thing precedent to, or the validity of any action taken or proposed to be taken, by any public body * * * in the course of the authorization or sale * * * of bonds [or] the making of a contract for [a] public improvement * * *, such public body may move the court for an order requiring the party * * * bringing such action to file a surety bond. * * * If the court determines that loss or damage to the public or taxpayers may result from the pendency of the action or proceeding, the court may require such party, or parties, to file a surety bond, which shall be approved by...
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Pike v. Gunyou, C2-92-734
...exceeded the bounds of appropriate appellate review. 1 We therefore vacate the majority and concurring opinions of the court of appeals, 488 N.W.2d 298, and direct that those opinions shall have neither dispositional nor precedential value. Accordingly, we confine our review to scrutiny of ......