Wring v. City of Jefferson

• Decision Date: 13 March 1967
• Docket Number: No. 52445,52445
• Citation: 413 S.W.2d 292
• Court: Missouri Supreme Court
• Parties: Leonard WRING, Vernon Ward, James Padgett, Arthur Hardy, Henry Rudin and James A. Davis, Respondents, v. CITY OF JEFFERSON, Missouri, John G. Christy, Mayor of the City of Jefferson, Missouri, Interco Incorporated, Stern Brothers & Co. and Glore Forgan, Wm. R. Staats, Inc., Appellants.

Page 292

413 S.W.2d 292

Leonard WRING, VernonWard, James Padgett, Arthur HardyHenry Rudin and James A. Davis, Respondents, v.CITY OF JEFFERSON, Missouri, John G. Christy, Mayor of the City of Jefferson, Missouri, Interco IncorporatedStern Brothers & Co. and Glore ForganWm. R. Staats, Inc., Appellants.

No. 52445.

Supreme Court of Missouri, En Banc.

March 13, 1967.

Rehearing Denied April 10, 1967.

Harold Gruenberg, J. F. Souders, St. Louis, for respondents, Gruenberg, Schobel & Souders, St. Louis, of counsel.

Thomas P. Rose, City Atty., Jefferson, for appellantsCity of Jefferson, and John G. Christy, Mayor.

Robert B. Fizzell, Jr., Jerry T. Powell, Richard E. Petrie, Stinson, Mag, Thomson, McEvers & Fizzell, Kansas City, Henry P. Andrae, Alex G. Bartlett, Hendren & Andrae, Jefferson City, William H. Armstrong, Armstrong, Teasdale, Kramer & Vaughan, St. Louis, for appellantsInterco Inc., Stern Bros. & Co. and Glore Forgan, Wm. R. Staats, Inc.

Norman H. Anderson, Atty. Gen., C. B. Burns, Jr., Asst. Atty. Gen., Jefferson City, amicus curiae.

Amos Wight, City Counselor, City of Nevada, amicus curiae.

STORCKMAN, Chief Justice.

This is a suit for an injunction to restrain the City of Jefferson from carrying out a project of industrial development undertaken pursuant to § 27, Art. 6, of the Constitution of Missouri, 1945, as amended November 8, 1960, V.A.M.S., and August 17, 1965, and §§ 71.790 to 71.850, RSMo 1965 Cum.Supp., V.A.M.S.The trial court issued the injunction and the City and other defendants have appealed.The questions presented on appeal are whether the City is lawfully authorized to sell the proposed industrial plant to Interco Incorporated, whether the City is required to let the contract for the construction of the industrial plant, and whether the proposed lease of the plant grants Interco immunity from taxation.

The facts of the case are not in dispute.The evidence on the more essential features is documentary and other evidence relates largely to the identity and status of the plaintiffs.At a special election held June 14, 1966, in the City of Jefferson, better known as Jefferson City, the following proposal was approved by a vote of 2732 to 86:

'Proposition to issue the industrial revenue bonds of the City of Jefferson, Missouri, to the amount of $8,500,000 for the purpose of purchasing and constructing an industrial plant to be leased to Interco Incorporated, a Delaware corporation, for manufacturing and industrial development purposes, including real estate, buildings, fixtures and machinery, said bonds to be payable solely from the revenues derived from a project for industrial development and not to be a general obligation of said City.'

The City Council had adopted a resolution approving the project on May 16, 1966.An application was made to the Division of Commerce and Industrial Development of the State of Missouri in accordance with the requirements of §§ 71.803,71.807and71.810, RSMo, Cum.Supp.1961, V.A.M.S.The Industrial Development Commission of the Division approved the plan of industrial development, first on May 20, 1966, as the result of a telephone and mail ballot, and thereafter by formal approval given at a meeting held in St. Louis on July 12, 1966.

The City and Interco propose to enter into an agreement providing in essence that the proceeds of the $8,500,000 revenue bonds will be used to pay the cost of constructing an industrial plant in Jefferson City which will be known as the International Shoe Company Distribution Center and which will be responsible for the distribution of shoes throughout the United States.The City will lease the industrial plant to Interco, Inc., at rentals sufficient to retire the bonds as they become due and to pay the interest thereon.The bonds will be payable only from rentals due under the lease and the City has no obligation or authority to levy taxes to pay principal or interest on the bonds.The City has entered into a contract to sell the bonds to the defendants, Stern Brothers & Co. and Glore Forgan, Wm. R. Staats, Inc., investment bankers of Kansas City and Chicago, respectively.The basic term of the lease is twenty-five years and six months.The lease grants Interco an option to purchase the industrial plant upon payment of the principal and interest due on all outstanding bonds and the sum of one dollar to the City.Other pertinent provisions of the lease will be discussed in connection with the questions presented.When the plant in Jefferson City becomes operative, which is estimated to be sometime in 1968, Interco proposes to close its warehouse in the City of St. Louis.Interco, in accordance with its agreement, paid all the costs and expenses of the election held in Jefferson City, at which the issue of revenue bonds was approved.

On July 8, 1966, the plaintiffs filed in the Circuit Court of Cole County their petition to enjoin the consummation of the project described.The plaintiffJames A. Davis is a resident, a registered voter and a taxpayer of the City of Jefferson.The defendant City owns the land upon which the warehouse is to be constructed.The right of the City to dispose of the industrial plant including the land, the building to be constructed thereon and the machinery and equipment to be purchased is in controversy.In these circumstancesthe plaintiff Davis is qualified to maintain the action.Hight v. City of Harrisonville, 328 Mo. 549, 41 S.W.2d 155, 158(1);64 C.J.S.Municipal Corporations§ 2152.

On August 15, 1966, the trial court entered its judgment and decree dismissing the petition with respect to the members of the Industrial Development Commission of the Division of Commerce and Industrial Development.The judgment and decree restrained and enjoined the defendantsCity of Jefferson, Mayor Christy, and Interco, Incorporated, from entering into or giving effect to the proposed lease between the City and Interco, and restrained and enjoined the City, Mayor Christy, Stern Brothers & Co., and Glore Forgan, Wm. R. Staats, Inc., from issuing, or purchasing or arranging for the sale of the $8,500,000 issue of industrial bonds.

The attorney general of Missouri represented the members of the Industrial Development Commission until they were dismissed from the case by the trial court.After the appeal was taken the attorney general applied to this court and was granted leave to file a brief as amicus curiae which we have before us in addition to the briefs of the parties.

The first issue presented is whether the City is authorized to sell the proposed industrial plant to Interco in accordance with the option granted by the lease, particularly Article XVII.The constitutional authority on which this project is based is § 27 of Art. 6 of the Missouri Constitution, which at the relevant time was constituted as follows:

'Section 27.Any city or incorporated town or village in this state, by vote of four-sevenths of the qualified electors thereof voting thereon, may issue and sell its negotiable interest bearing revenue bonds for the purpose of paying all or part of the cost of purchasing, constructing, extending or improving any of the following: (1) revenue producing water, gas or electric light works, heating or power plants; ((2) plants to be leased or otherwise disposed of pursuant to law to private persons or corporations for manufacturing and industrial development purposes, including the real estate, buildings, fixtures and machinery;) or (3) airports; to be owned exclusively by the municipality, the cost of operation and maintenance and the principal and interest of the bonds to be payable solely from the revenues derived by the municipality from the operation of the utility (or the lease of the plant.)'Brackets and italics added.

Section 27 of Art. 6 relating to revenue bonds was new in the 1945Constitution and except for changes in form and punctuation, its original content was the same as that part of § 27 set out above which is not enclosed by brackets; in other words, it related to traditional municipal functions such as water, gas and electric light works.At the general election on November 8, 1960, a constitutional amendment, PropositionNo. 4, relating to industrial development plants, was adopted; this added a new section, No. 23(a), to Art. 6, and made certain amendments to § 27.

The new section, 23(a), relates to general obligations of a city, incorporated town or village having less than 400,000 inhabitants and so far as pertinent to the present inquiry provided that such municipality 'may become indebted for and may purchase, construct, extend or improve plants to be leased or otherwise disposed of pursuant to law to private persons or corporations for manufacturing and industrial development purposes, including the real estate, buildings, fixtures and machinery'.At the same time, § 27 of Art. 6 was amended by including industrial plants as a new subject for which revenue bonds could be issued.This amendment to § 27 consisted of the part included in brackets except the words that are italicized.SeeLaws 1959, pp. 10a-11a, House Joint ResolutionNo. 11, §§ 1 and 2.By another constitutional amendment adopted August 17, 1965, the words italicized consisting of 'or otherwise disposed of pursuant to law' were added to § 27 as heretofore set out and designated.RSMo1965, Cum.Supp., § 27, p. 28;Laws 1965, House Joint ResolutionNo. 11.Thus, the Missouri Constitution conferred on municipalities the power and authority to purchase, construct, extend or improve plants for manufacturing and industrial development purposes.By virtue of § 23(a), these projects could be financed by the issuance of general obligation bonds; under § 27 revenue bonds could be issued.Both 23(a) and 27 at the time the instant project was initiated provided in identical language that such plants could be 'leased or otherwise disposed of pursuant to law'.

Sections 71.790 to 71.850,...