State ex rel. Ashcroft v. City of Sedalia, WD

• Decision Date: 15 December 1981
• Docket Number: No. WD,WD
• Parties: STATE of Missouri, ex rel. John ASHCROFT, Attorney General of Missouri, and The Missouri Department of Labor and Industrial Relations, Division of Labor Standards, Plaintiff-Respondent, and International Brotherhood of Electrical Workers, Local 124, Plaintiff-Intervenor-Respondent, v. CITY OF SEDALIA, Mo., a Municipal Corporation, et al., Defendant-Appellant, and Medallion Electric Co., Defendant-Intervenor-Appellant. 31837.
• Court: Missouri Court of Appeals

Page 578

629 S.W.2d 578

STATE of Missouri, ex rel. John ASHCROFT, Attorney General

of Missouri, and The Missouri Department of Labor

and Industrial Relations, Division of

Labor Standards, Plaintiff-Respondent, and International Brotherhood of Electrical Workers, Local 124, Plaintiff-Intervenor-Respondent, v. CITY OF SEDALIA, Mo., a Municipal Corporation, et al.,

Defendant-Appellant,

and

Medallion Electric Co., Defendant-Intervenor-Appellant.

No. WD 31837.

Missouri Court of Appeals, Western District.

Dec. 15, 1981.

Motion for Rehearing and/or Transfer to Supreme Court

Overruled and Denied Jan.

19, 1982.

Applications to Transfer Denied March 16, 1982.

Alvin D. Shapiro, Stephen P. Dees, Stinson, Mag & Fizzell, Kansas City, for defendant-appellant.

John Ashcroft, Atty. Gen., Brenda Farr Engel, Asst. Atty. Gen., Jefferson City, for plaintiff-respondent.

Before KENNEDY, P. J., and SHANGLER and SOMERVILLE, JJ.

SOMERVILLE, Chief Judge.

The State of Missouri, ex rel. John Ashcroft, Attorney General of Missouri, and The Missouri Department of Labor and Industrial Relations, Division of Labor Standards (hereinafter State) brought suit pursuant to Section 290.335, RSMo 1978, to enjoin the City of Sedalia (hereinafter City) from "further work or payments" on an industrial development project financed by industrial revenue bonds issued by the City under authority of Art. VI, § 27, Constitution of Missouri. ¹

The State predicated its right to injunctive relief on the City's failure to comply with the Prevailing Wage Act, Section 290.210 et seq., RSMo 1978, in connection with work performed to carry out the industrial development project. More particularly, the State pleaded that the City failed to request the Missouri Department of Labor and Industrial Relations, Division of Labor Standards, to determine the prevailing rates of wages and otherwise comply with the provisions of Section 290.250, RSMo 1978. ²

The industrial development project involved purchase of a building and surrounding acreage by the City which it then leased to Gardner-Denver Company to renovate (by way of improvements and the installation of fixtures and machinery) and occupy for the purpose of manufacturing rotary screw compressors. The trial court granted the injunctive relief sought by the State but stayed its effective date pending an appeal by the City.

An issue of statewide interest and importance, alongside which all peripheral issues pale into obscurity, is at stake on appeal. Does the Prevailing Wage Act, Section 290.210 et seq., RSMo 1978, apply to an industrial development project consisting of improvements to and the installation of fixtures and machinery in an existing building owned by a municipality and leased to a private corporation, to be paid for from the proceeds of industrial revenue bonds, where work on the project is being performed by contractors under contracts let by the private corporation? The facts surrounding this admittedly knotty issue are neither complex or unduly prolix. Essentially, the salient facts upon which this issue pivots are found in various exhibits introduced by the parties. Testimony of witnesses called by the respective parties bears minimally, if at all, on the dispositive issue.

Pursuant to Art. VI, § 27, Constitution of Missouri, and Sections 100.010-100.200, RSMo 1978, ³ the City obtained approval of the project and the issuance of industrial revenue bonds to finance it from the Division of Commerce and Industrial Development, State of Missouri; thereafter, the following proposal was submitted at a special election held by the City and approved by a majority of the voters:

"Shall the City of Sedalia, Missouri, issue its industrial revenue bonds to the amount of $6,530,000 for the purpose of purchasing and improving an industrial plant to be leased and otherwise disposed of to Gardner-Denver Company, a Delaware corporation, for manufacturing and industrial development purposes, including real estate, buildings, fixtures, machinery and equipment, said bonds to be payable solely from the revenues derived from said project for industrial development and not to be a general obligation of said City."

Financing of the industrial development project with industrial revenue bonds was consummated, insofar as here deemed pertinent, by (1) a Lease Agreement between the City and Gardner-Denver Company, (2) a Bond Purchase Agreement between the City and Morgan Guaranty Trust Company of New York, purchaser of the industrial revenue bonds, (3) an Indenture of Trust between the City and The First National Bank of Chicago, trustee for the bondholders, and (4) a Guaranty Agreement between Gardner-Denver Company and The First National Bank of Chicago, trustee for the bondholders.

Neither the legality of the industrial revenue bonds issued by the City nor the legality of the various documents employed to consummate financing of the industrial development project with the proceeds of said industrial revenue bonds has been questioned on appeal. The cardinal issue, as previously noted, centers upon the applicability vel non of the Prevailing Wage Act, Section 290.210 et seq., RSMo 1978, to the industrial development project.

For purposes of expediency, germane provisions of the documents heretofore specifically mentioned will be compositely paraphrased. Accordingly, the following is reflected by those provisions deemed to warrant consideration. The tract of land and building situate thereon to be renovated was leased by the City to Gardner-Denver Company for a term of years in consideration of biannual rental payments sufficient to pay the interest on and retire the industrial revenue bonds upon maturity. Upon expiration of the lease and payment in full of any outstanding industrial revenue bonds, the City was obligated to sell and Gardner-Denver Company was obligated to purchase the tract of land and completed facilities for the sum and amount of One Thousand Dollars. In the Lease Agreement, Gardner-Denver Company was broadly designated "as the agent" of the City to renovate the existing building and install fixtures and equipment to adapt it for the purpose of manufacturing rotary screw compressors. The sense in which the term "agent" was used was neither explicated nor defined in the "Definitions" section or elsewhere in the Lease Agreement. Nor was such done in any of the other documents. It was clearly delineated, however, that Gardner-Denver Company was obligated to renovate the existing building and install all requisite fixtures and equipment and do so in accordance with its own plans and specifications. Contracts with various contractors who were to perform work on the project were to be let by Gardner-Denver Company. It is noted that only one contract of this type was contained in the record, and it was let merely by and in the name of Gardner-Denver Company. Gardner-Denver Company, within the limits of the proceeds of the industrial revenue bonds issued, was to be reimbursed by the trustee designated in the Indenture of Trust for all sums which Gardner-Denver Company expended in carrying out the industrial development project. Reimbursements were to be made by the trustee designated in the Indenture of Trust upon written orders from authorized representatives of Gardner-Denver Company. The proceeds of the industrial revenue bonds were held by the trustee designated in the Indenture of Trust and, to the extent required to defray the costs of the industrial development project, were disbursed to Gardner-Denver Company by way of reimbursement for costs incurred by it in carrying out the project. None of the bond proceeds were to be disbursed to the City. After Gardner-Denver Company was reimbursed for all costs incurred by it in carrying out the project, any excess industrial revenue bond proceeds were to be used by the trustee to retire the bonds. Gardner-Denver Company, by virtue of an assignment by the City, was to pay all rentals due under the lease to the trustee designated in the Indenture of Trust rather than to the City. The various documents meticulously guard against the City incurring any general obligation (Art. VI, § 27, Constitution of Missouri) or any pecuniary liability (Section 100.150, RSMo 1978) with respect to the industrial revenue bonds or any liability for costs incurred by Gardner-Denver Company in carrying out the industrial development project. Gardner-Denver Company, and it alone, was liable for costs incurred in connection with the industrial development project which exceeded the proceeds derived from the sale of the industrial revenue bonds. Gardner-Denver Company, and it alone, personally guaranteed payment of all amounts due the holders of the industrial revenue bonds. Collectively, the various documents neither contemplate nor suggest that contractors performing work on the project under contracts let by Gardner-Denver Company were to look, either in whole or in part, to anyone other than Gardner-Denver Company for payment.

The judgment of the trial court was accompanied by findings of fact and conclusions of law. In essence, the trial court found and concluded that the industrial development project in question fell within the definition of a "public works" as defined in Section 290.210(7) of the Prevailing Wage Act, RSMo 1978, and was, therefore, subject to all the provisions of the Prevailing Wage Act by reason of the statutorily declared policy of the State of Missouri set forth in Section 290.220, RSMo 1978.

Section 290.210, RSMo 1978, is captioned "Definitions". Paragraph (7) thereof defines "public works" as follows:

"(7) 'Public works' means all fixed works constructed for public use or benefit or paid for wholly or in part out of public funds. It also includes any work done directly by any public utility company when performed by it pursuant to the order of the public service commission or other public authority whether or not it be done under public...