US FIRE INS. v. MINN. STATE ZOO. BD.
| Decision Date | 02 July 1981 |
| Docket Number | No. 51819.,51819. |
| Citation | 307 NW 2d 490 |
| Parties | UNITED STATES FIRE INSURANCE COMPANY, et al., Appellants, Marquette National Bank of Minneapolis, et al., Appellants, Mid America State Bank of Highland Park, et al., Appellants, v. MINNESOTA STATE ZOOLOGICAL BOARD, et al., Respondents. |
| Court | Minnesota Supreme Court |
White & Case, Laura B. Hoguet and Richard G. Greco, New York City, for United States Fire Ins. Co., et al.
Levitt, Palmer, Bowen, Rotman & Share, J. Patrick McDavitt and Matthew L. Levitt, Minneapolis, for United States Fire Ins. Co., et al., and Marquette Nat. Bank of Minneapolis, et al.
Winthrop, Weinstine & Sexton and Thomas J. Sexton, St. Paul, for Mid America State Bank of Highland Park, et al.
Warren Spannaus, Atty. Gen., and Richard S. Slowes, Sp. Asst. Atty. Gen., St. Paul, for respondents.
Oppenheimer, Wolff, Foster, Shepard & Donnelly, Elmer B. Trousdale and Edward M. Laine, St. Paul, on behalf of Smith Barney, Harris Upham and Co., Inc., amicus curiae.
Heard, considered, and decided by the court en banc.
The Minnesota Legislature created a State Zoological Board to administer a new zoo. Originally, the Zoo Board was given a standing appropriation. In 1977, the funding was changed to require biennial appropriations. Also, in 1977, the legislature authorized the Zoo Board to acquire a ride facility to enhance the public's ability to view the zoo but provided no appropriation to fund the acquisition. The Zoo Board proceeded to purchase a Zoo Ride, and certificates of participation to provide the funding were sold to the appellants and others. The Zoo Board failed to make the payments required, and the appellants elected to declare the entire balance due and sought judgment against the State of Minnesota.1 The trial court held that since there had been no appropriation by the legislature to fund the acquisition of the Zoo Ride, the State could not be subject to the claim of the appellants. The trial court also held that the State was not in default under the agreement. We affirm the trial court's decision that the State of Minnesota is not required to pay money under the contract, but reverse the trial court's holding that the State was not in default.
The defendant Zoo Board is an agency of the State of Minnesota established by Minn. Stat. §§ 85A.01-.05 (1980) (the "Zoo Act") to develop and maintain the Minnesota Zoological Garden in Dakota County, Minnesota, and to provide such lands, buildings, and equipment as the Board deems necessary for the parking, transportation, entertainment, education, or instruction of the public with regard to the Garden. By a 1977 amendment to the Zoo Act, the Zoo Board was authorized to:
acquire by lease-purchase or installment purchase contract, transportation systems, facilities and equipment that it determines will substantially enhance the public\'s opportunity to view, study or derive information concerning the animals to be located in the zoological garden, and will increase attendance at the garden.
Act of June 9, 1977, ch. 455, § 78, 1977 Minn.Laws 1398, 1441. This 1977 amendment further stated that "The contracts may provide for: (1) the payment of moneys over a twelve year period * * *; (2) the payment of money from any funds of the Zoo board not pledged or appropriated for another purpose * * *." Id.
The 1977 legislature also altered the method by which money was to be appropriated to the Zoo Board. This legislation provided as follows:
85A.04 ZOOLOGICAL GARDEN ACCOUNTS IN THE GENERAL FUND. Subdivision 1. MINNESOTA ZOOLOGICAL GARDEN GENERAL ACCOUNT. A Minnesota zoological garden account is created in the general fund. All receipts from the operation of the Minnesota zoological garden shall be deposited to the credit of such account and are hereby appropriated annually to the state zoological board to carry out the terms and provisions of this chapter. Money in this account may be expended as appropriated biennially for operation, capital improvements, and equipment of the Minnesota zoological garden, including lease rentals and for acquisition of wild and domestic animals therefor and for payment of the principal of and interest on Minnesota state zoological garden bonds.
Act of June 9, 1977, ch. 455, § 79, 1977 Minn.Laws 1398, 1441-42.
Pursuant to this statutory authority, the Zoo Board entered into two contracts dated August 19, 1977, with a nonprofit corporation called Zoo Ride, Inc. The first contract was a concession agreement pursuant to which Zoo Ride, Inc., agreed to build the Zoo Ride. The second contract was an installment purchase agreement, whereby the Zoo Board agreed to purchase the Zoo Ride from Zoo Ride, Inc., for a price of $8,412,640, and to pay for it in quarterly installments over a 16-year period with interest. The quarterly installments were to commence on January 1, 1978, and end on July 1, 1994. Interest alone was payable through January 1, 1980, and the first principal payment was to be made on April 1, 1980.
The installment agreement specifically provided in part:
5.01. The Board shall pay the Purchase Price for the System in Installment Payments, each comprising a portion of the Purchase Price and interest as specified in the attached Exhibit B, due at the times and in the amounts set forth in Exhibit B.
The installment agreement also provided that:
5.03. The Board covenants and agrees that it will include such Installment Payments in its annual or biennial budget to be submitted to the legislature, as the case may be, and will seek approval of its budget and appropriations sufficient to pay such Installment Payments. Moneys appropriated by the legislature for the payment of such Installment Payments, as indicated in the Board\'s legislatively approved budget, are pledged and allocated by the Board solely to make such payments.
By an assignment agreement and a fiscal agent agreement dated September 1, 1977, Zoo Ride, Inc., assigned its rights under the installment purchase agreement to an underwriter, Smith Barney, Harris Upham & Co., which in turn sold and assigned those rights, evidenced by "certificates of participation", to various investors. The plaintiffs in this action are all but one of the purchasers of these "certificates of participation" and, together, their holdings represent $4,612,640 of the $8,412,640 principal amount of the certificates.
The installment agreement contained a default provision which provided, in part, as follows:
Section 18. Default. If the Board either fails to pay any Installment Payment or any other amount herein provided when due and payable, or if the Board fails to perform promptly any of the other obligations or covenants herein, and such default continues for a period of thirty (30) days after the Corporation has given the Board written notice thereof, or if the Board declares bankruptcy under any applicable federal or state law, then in any such event, the Corporation may pursue any one or more of the following remedies (which shall be cumulative and exercisable concurrently or separately) as the Corporation in its sole discretion may determine * * *.
On default, Zoo Ride was given the following remedies: (1) to declare the unpaid balance immediately due and payable; (2) to take possession of the ride and sell it; (3) take possession of the ride and operate it pursuant to a separate "Concession Agreement."
In 1979, as part of an appropriations bill for the Zoo Board, the legislature enacted the following language: Act of June 5, 1979, ch. 333, § 27, 1979 Minn.Laws 988, 1005. This same act repealed two subdivisions in the Zoo Act that dealt with anticipated excess operating receipts over operating expenses. Id., § 108, 1979 Minn.Laws at 1044 (repealing Minn.Stat. § 85A.04, subd. 1a, subd. 1b (1978)).
On April 1, 1980, the Zoo Board failed to make the installment payment then due. Although the Board has made a partial payment since that time, it has not complied with the full terms of the installment payment schedule.
On April 24, 1980, the legislature enacted the following section of an appropriations bill, which, because of its extraordinary language, is included here in full:
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