S.D. Realty Co. v. Sewerage Commission of City of Milwaukee

• Decision Date: 28 November 1961
• Citation: 112 N.W.2d 177,15 Wis.2d 15
• Parties: S. D. REALTY CO., Appellant, v. SEWERAGE COMMISSION OF CITY OF MILWAUKEE et al., Respondents.
• Court: Wisconsin Supreme Court

Page 177

112 N.W.2d 177

15 Wis.2d 15

S. D. REALTY CO., Appellant, v. SEWERAGE COMMISSION OF CITY OF MILWAUKEE et al., Respondents.

Supreme Court of Wisconsin.

Nov. 28, 1961.

Taxpayer's action by plaintiff S. D. Realty Co. for a declaratory judgment against defendants Sewerage Commission of the city of Milwaukee, Metropolitan Sewerage Commission of Milwaukee county, L. & L. Operating Co., Inc., Abe Luber, Joseph Luber and Charles Lubotsky. Plaintiff sought to have an agreement dated November 14, 1956, and a lease dated December 15, 1958, declared void and the use of public funds for carrying out such lease declared illegal. The Sewerage Commission of the city of Milwaukee will be referred to hereinafter as the 'city commission;' the Metropolitan Sewerage Commission of Milwaukee county as the 'metropolitan commission;' and Abe Luber, Joseph Luber and Charles Lubotsky as the 'developers.'

In 1950 a strip of land approximately 175 feet in width, extending in a southeasterly direction from West Morgan Avenue to West Loomis Avenue in the city of Milwaukee, was conveyed by two deeds to the city commission. The south branch of the Kinnickinnic river flows lengthwise through this strip, which will be referred to hereinafter as the 'subject property.'

In 1956 the developers owned land on both sides of the subject property which they intended to develop as a shopping center. On November 14, 1956, an agreement affecting the subject property was entered into between the city commission and the developers. This agreement had been authorized by prior resolution adopted by the city commission. It recited that the subject property was owned by the Metropolitan Sewerage District (hereinafter referred to as the 'district') and that the district, in making the contract, was acting through the agency of the city commission.

The material provisions of this 1956 contract are: Developers were given the option at their expense to enclose the river on the subject property according to plans and specifications approved by the city commission, and to fill in the subject property to the level of the adjoining property. They were also given the right at their expense to surface the property and to use it for purposes of parking, pedestrian walks, and ingress and egress to the shopping center. The agreement was to run for a period of 99 years commencing January 1, 1957, and it provided for rent of $600 per year. Also, it obligated the city commission to deepen the river. Developers were required to commence construction within three years, and if they failed to complete the same within five years the agreement was to be void and possession of the subject property was to revert to the city commission.

After the making of this 1956 agreement, developers failed in an effort to induce the city of Milwaukee to expend city funds to enclose the river on the subject property. Thereafter, a lease was entered into by the city commission acting for the district, as lessor, and the L. & L. Operating Co., Inc. (developers' corporation), as lessee. The lease was authorized by the city commission and executed on December 15, 1958. It states that the lessor has commenced construction of a tunnel on the subject property to carry the south branch of the Kinnickinnic river, and that upon completion lessor will have no use for the surface over the tunnel and agrees to lease it upon the terms therein contained. Among these terms are obligations on the part of the lessee to fill the area above the tunnel to the level of the surrounding property and to grade and pave the surface. The term of the lease is 99 years, commencing January 1, 1960. Annual rent is set at $1,700 with a provision for adjustment after January 1, 1986, in accordance with changes in the cost of living index of the Bureau of Labor Statistics. In addition to the annual rent, lessee is obligated to reimburse lessor for the installation of the tunnel, together with 'the financing costs incurred,' in installments payable over the first 20 years of the lease term in accordance with a specified schedule. The lease restricts lessee from erecting any structures on the subject property and permits lessor to treat any failure of payment as a default entitling it to termination upon notice

Actually, work had not been commenced on the tunnel when the lease was executed. The contract for the construction was not awarded until March 2, 1959. This contract was countersigned by te city controller and approved by the city attorney on March 6, 1959, and the instant action was commenced on the same date. The construction has now been completed and the contractor has been paid the full contract price of $191,800.

After issue was joined, defendant city commission moved for summary judgment dismissing the complaint. This motion was granted and judgment was entered February 27, 1961, dismissing the complaint as to all defendants. From this judgment plaintiff has appealed.

Foley, Sammond & Lardner, Alan H. Steinmetz, Milwaukee, for appellant.

John J. Fleming, City Atty., Ewald L. Moerke, Jr., Harvey G. Odenbrett, Asst. City Attys., Milwaukee, for respondent Sewerage Comm. of City of Milwaukee.

Albert B. Houghton, Milwaukee, for respondent Metropolitan Sewerage Comm.

Sidney Usow, Milwaukee, for respondents Luber, Lubotsky and L. & L. Operating Co., Inc.

CURRIE, Justice.

While the 1958 lease does not expressly abrogate the 1956 agreement, the provisions of the lease are inconsistent with those of the agreement. Furthermore, it is conceded that the developers did not commence construction of the installation to enclose the river within three years of the date of the agreement, and thus under its own terms the agreement has ceased to exist. Therefore, we shall forego any further consideration of the 1956 agreement in this opinion because any issue relating thereto is moot.

The remaining issues to be considered on this appeal are:

(1) Is plaintiff entitled to maintain this taxpayer's action attacking the validity of the 1958 lease and the expenditures made by the city commission pursuant thereto?

(2) Who had legal title to the subject property at the time this lease was executed?

(3) If title was vested in either the district or the city commission, did any power exist to lease such public property for a private purpose?

(4) If question 3 is answered in the affirmative, could the city commission make such a lease without approval or participation by the metropolitan commission?

(5) Did the expenditure by the city commission of the $191,800, to construct the tunnel through the subject property, constitute an illegal expenditure of public funds for a private purpose?

Right of Plaintiff to Maintain Action

Defendants advance four reasons why they deem plaintiff is not entitled to maintain this action: (1) that plaintiff has failed to allege that it has sustained, or will sustain, some pecuniary loss; (2) that plaintiff is seeking to protect its own private interests rather than those of taxpayers as a class; (3) that the action is barred by laches; and (4) that the controversy is now moot.

In order to maintain a taxpayer's action, it must be alleged that the complaining taxpayer and taxpayers as a class have sustained, or will sustain, some pecuniary loss; otherwise the action could only be brought by a public officer. McClutchey v. Milwaukee County (1941), 239 Wis. 139, 300 N.W. 224, 917, 137 A.L.R. 628, and cases cited therein. However, a taxpayer does have a financial interest in public funds which is akin to that of a stockholder in a private corporation. Roberts v. City of Madison (1947), 250 Wis. 317, 320, 27 N.W.2d 233; 52 Am.Jur., Taxpayers' Actions, p. 4, sec. 4. The instant complaint alleges that a greater expenditure of public funds will be required to construct the tunnel than would be the case if the river branch would be carried through an open water course; that such additional expense serves no public purpose but only the private purposes of the developers and L. & L. Operating Co., Inc.; and that such expenditure is, therefore, illegal.

Any illegal expenditure of public funds directly affects taxpayers and causes them to sustain a pecuniary loss. This is because it results either in the governmental unit having less money to spend for legitimate governmental objectives, or in the levy of additional taxes to make up for the loss resulting from the expenditure. Though the amount of the loss, or additional taxes levied, has only a small effect on each taxpayer, nevertheless it is sufficient to sustain a taxpayer's suit. Bechthold v. City of Wauwatosa (1938), 228 Wis. 544, 550, 277 N.W. 657, 280 N.W. 320. In Wagner v. City of Milwaukee (1928), 196 Wis. 328, 330, 220 N.W. 207, 208, it was stated:

'The illegal disbursement of this money would constitute an invasion of the funds of the city in which each individual taxpayer has a substantial interest, notwithstanding the fact that the payment of this sum would not necessarily result in increased taxation. The fact that the ultimate pecuniary loss to the individual taxpayer may be almost infinitesimal is not controlling.' (Emphasis supplied.)

Defendants alude to the fact that plaintiff's motivation for bringing this suit is its ownership of a competing shopping center. However, a private interest does not preclude a plaintiff from maintaining a taxpayers' suit, as long as the public interest is also involved. Chippewa Bridge Co. v. Durand (1904), 122 Wis. 85, 108, 99 N.W. 603. Cf. Druml Co. v. Knapp (1959), 6 Wis.2d 418, 421, 94 N.W.2d 615.

Defendants also contend that plaintiff is barred from pursuing any possible remedy by the doctrine of laches, in that the suit was not initiated until March, 1959, despite the fact that plaintiff had knowledge of the arrangement at least since the date of the 1956 agreement. However, the 1956 agreement did not obligate the expenditure of any public funds for enclosing the stream. The 1958...