State ex rel. Thomson v. Giessel

• Decision Date: 11 October 1955
• Citation: 72 N.W.2d 577,271 Wis. 15
• Parties: STATE on relation of Vernon W. THOMSON, Atty. Gen., Petitioner, v. E. C. GIESSEL, Director of the Dept. of Budget and Accounts, Respondent.
• Court: Wisconsin Supreme Court

Page 577

72 N.W.2d 577

271 Wis. 15

STATE on relation of Vernon W. THOMSON, Atty. Gen., Petitioner, v. E. C. GIESSEL, Director of the Dept. of Budget and Accounts Respondent.

Supreme Court of Wisconsin.

Oct. 11, 1955.

Vernon W. Thomson, Atty. Gen., Warren H. Resh, Asst. Atty. Gen., for petitioner.

Louis Quarles, Spe. Counsel, Milwaukee, Charles S. Quarles, William K. McKibbage, Milwaukee, for respondent.

Fairchild, Foley & Sammond, Leon F. Foley, Lynford Lardner, Jr., Allen M. Taylor and Harry L. Wallace, Milwaukee, amici curiae.

STEINLE, Justice.

By the demurrer the respondent challenges the constitutionality of ch. 144, of the Laws of 1955, and the validity of the action taken or proposed thereunder by the state agencies as asserted in the complaint. The act amended sec. 20.41(5), repealed and recreated secs. 20.07(9m), 20.38(8) and (12)(a), 36.06(6) and 37.02(3), Stats. It created sec. 14.89, Stats. The purpose of the act is to provide means whereby the State Building Commission, University Board of Regents and the Board of Regents of the State Colleges may construct and finance buildings for use of the state. The principal parts of the enactment as applicable to the State Building Commission and to the respective Boards of Regents in substance are as follows:

'a. Each agency has the power either to sell any land which it owns, including the buildings thereon, to a nonprofit sharing corporation, or

'b. It has the power to lease land and buildings to a nonprofit sharing corporation for terms not to exceed fifty (50) years 'c. It has the power to lease or sublease back from nonprofit sharing corporations, land conveyed or leased as stated above, and such lease may be subject or subordinated to one or more mortgages.

'd. All plans, leases and conveyances must be submitted to the State Engineer and the Governor for approval.

'e. All revenues derived from the operation of any buildings thereon or constructed thereon must be devoted to the payment of the rentals due.

'f. The corporations each have the power to pledge and assign all revenues from said buildings and security for the payment of any rentals due or to become due.

'g. It has the power to agree on any lease or sublease, to impose fees, rentals or other charges in an amount sufficient to pay the rentals due or to become due upon the buildings.

'h. It has the power to apply all or any of the rental derived from the operation of existing buildings to the payment of any rentals due or to become due.

'i. It has the power to pledge and assign all or any of the revenues derived to the payment of rentals due or to become due under any lease or sublease.

'j. It has the power and the duty upon the receipt of notice to pay the rentals or any payments due or to become due to any assignee.

'The act further provides that the State shall be liable for any defaults under any lease or sublease, and that it may be sued, therefore, on contract pursuant to Chapter 285 except that the lessor need not file any claim with the Legislature prior to the commencement of the action.

'The act also amends certain provisions of Chapter 20, Wis.Stats., which provisions relate to the fees and other revenues derived from the operation of the University. Primarily, the amendments provide that any monies received under conveyance as outlined above shall be paid into the general fund and are applied, therefore, for the payment of rentals and other expenditures provided for under the lease.

The respondent challenges the validity of the act and of the action of the state agencies thereunder on ground that the same contravene one or more of the following constitutional provisions:

'Article VIII. Finance. * * *

'Contracting state debts. Section 4. The state shall never contract any public debt except in the cases and manner herein provided. * * *

'Public debt for extraordinary expense; taxation. Section 6. For the purpose of defraying extraordinary expenditures the state may contract public debts (but such debts shall never in the aggregate exceed one hundred thousand dollars). Every such debt shall be authorized by law, for some purpose or purposes to be distinctly specified therein; and the vote of a majority of all the members elected to each house, to be taken by yeas and nays, shall be necessary to the passage of such law; and every such law shall provide for levying an annual tax sufficient to pay the annual interest of such debt and the principal within five years from the passage of such law, and shall specially appropriate the proceeds of such taxes to the payment of such principal and interest; and such appropriation shall not be repealed, nor the taxes be postponed or diminished, until the principal and interest of such debt shall have been wholly paid.

'Public debt for public defense. Section 7. The legislature may also borrow money to repel invasion, suppress insurrection, or defend the state in time of war; but the money thus raised shall be applied exclusively to the object for which the loan was authorized or to the repayment of the debt thereby created. * * *

'Credit of state. Section 3. The credit of the state shall never be given, or loaned, in aid of any individual, association or corporation. * * *

'Internal improvements. Section 10. The state shall never contract any debt for works of internal improvement, or be a party in carrying on such works; but whenever grants of land or other property shall have been made to the state, especially dedicated by the grant to particular works of internal improvement, the state may carry on such particular works and shall devote thereto the avails of such grants, and may pledge or appropriate the revenues derived from such works in aid of their completion. Provided, that the state may appropriate money in the treasury or to be thereafter raised by taxation for the construction or improvement of public highways or the development, improvement and construction of airports or other aeronautical projects or the acquisition, improvement or construction of veterans' housing. Provided, that the state may appropriate moneys for the purpose of acquiring, preserving and developing the forests of the state; but there shall not be appropriated under the authority of this section in any one year an amount to exceed two-tenths of one mill of the taxable property of the state as determined by the last preceding state assessment.'

'Article XI. Corporations. * * *

'Acquisition of lands by state and cities; sale of excess. Section 3a. The state or any of its cities may acquire by gift, purchase, or condemnation lands for establishing, laying out, widening, enlarging, extending, and maintaining memorial grounds, streets, squares, parkways, boulevards, parks, playgrounds, sites for public buildings, and reservations in and about and along and leading to any or all of the same; and after the establishment, layout, and completion of such improvements, may convey and such real estate thus acquired and not necessary for such improvements, with reservations concerning the future use and occupation of such real estate, so as to protect such public works and improvements, and their environs, and to preserve the view, appearance, light, air, and usefulness of such public works.'

With reference to the first and second causes of action alleged in the complaint, the respondent specifically contends that: (a) the Regents by consenting to an assignment or pledge by the University Building Corporation of the Regents' obligation to pay rentals, and by making an investment in the equity of the properties, loaned the credit of the State contrary to art. VIII, sec. 3 of the State Constitution, and (b) that the transactions in their entirety, although in form leases and releases, were actually contracts of purchase, and thereby created state debts contrary to art. VIII, secs. 4, 6, and 7 of the State Constitution.

With reference to the first cause of action it is further contended that sec. 36.06(6)(b), subds. 8 and 9, Stats., by authorizing the Regents to agree to pay rentals for the indoor practice building out of income derived from the operation of existing buildings, thereby permits the creation of a state debt contrary to art. VIII, secs. 4, 6, and 7 of the State Constitution.

With reference to the second cause of action it is further maintained that the building of a dormitory for students on property not located on or adjacent to the University campus is a work of internal improvement within the purview of art. VIII sec. 10 of the State Constitution, and to is prohibited thereby.

With reference to the third cause of action it is contended (a) that the property is state land even though the Wisconsin State Building Corporation holds legal title, and that a debt is created in violation of art. VIII, secs. 4, 6, and 7 of the State Constitution; (b) that the State cannot convey real property which is necessary for the construction or improvements, i. e., public buildings, without violating art. XI, sec. 3a of the State Constitution; (c) that the State Building Commission by consenting to a pledge by the building corporation of the commission's obligation to pay rentals, loaned the credit of the State contrary to art. VIII, sec. 3 of the State Constitution; and (d) that the entire transaction, although in form a sale of land and lease back, was actually a contract of purchase for the building and thereby created a state debt contrary to art. VIII, secs. 4, 6 and 7 of the State Constitution.

We shall first consider whether the state loans its credit in violation of sec. 3, art. VIII when consenting to the assignment or pledging of the rentals by the respective building corporations to the banks and to the insurance company as to the transactions embraced in all of the causes of action asserted in the complaint; and also with reference to its making of an investment in the equity of the properties in connection with the indoor athletic practice...