Summary
holding that third-party beneficiaries take rights under contract subject to all terms and conditions of the contract
Summary of this case from Industrial Electronics Corp. v. iPower Distribution Group, Inc.Opinion
No. 215.
Argued October 6, 1971. —
Decided November 5, 1971.
APPEAL from a judgment of the circuit court for Ozaukee county: MILTON L. MEISTER, Circuit Judge. Affirmed in part; reversed in part.
For the appellant there were briefs and oral argument by Lloyd S. Jacobson of Milwaukee.
For the plaintiff-respondent there was a brief and oral argument by John A. Meyer of Milwaukee.
For the intervening plaintiffs-respondents there was a brief by Gerold Huiras of Port Washington, and oral argument by Ralph J. Huiras.
The action was commenced on March 8, 1968, by the city of Mequon to recover on two promissory notes executed by the Lake Estates Company on May 6, 1963, and delivered to the city pursuant to a subdivision agreement entered into between the city and the subdivider on April 6, 1963. The agreement provided as a condition to subdivision approval that certain sums of money be paid to the city for park and recreation purposes in the proposed subdivision and to the Thiensville-Mequon Union High School District No. 1 and the Mequon-Thiensville Joint School District No. 10 for school purposes. On their motion of April 29, 1969, the school districts were joined as intervening plaintiffs in the action.
Both the notes and the agreement provided that the payments would not be required if the basic ordinance requiring such payment was repealed or held invalid.
The Lake Estates Company defended, claiming that the ordinance was repealed. After a trial on stipulated facts, the trial court found that the ordinance was not repealed and granted judgment to the plaintiffs on both notes. The defendant, Lake Estates Company, has appealed from the judgment.
The underlying ordinance was enacted by the city on March 6, 1962, and was designated as Ordinance 62-3. It imposed certain requirements on subdividers as conditions precedent for plat approval. The ordinance required that the subdivider provide and dedicate to the public use lands for school, park, and recreation needs of the public in the subdivision. The land was to be equal in value to $200 for each residential lot in the subdivision. In circumstances where the actual dedication and transfer of land to the public was not feasible, the subdivider was to pay in lieu thereof a fee of $120 per residential lot for school purposes and $80 per residential lot for park and recreation purposes.
The stipulation of facts indicates that the Mequon Common Council Committee on Finance on March 19, 1963, considered the proposed subdivision plat and the proposed agreement between the city and the subdivider relative to the subdivision and recommended that the agreement and plat be approved. At the adjourned March 19, 1963, common council meeting held on March 21, 1963, the report and recommendation of the committee was accepted. Subsequent thereto, on April 6, 1963, the agreement was executed on behalf of the city and subdivider, the notes were executed on May 6, 1963, and the plat was recorded that same day.
The agreement provided that the subdivider was to pay to the city $13,760, being the equivalent of $80 times 172 lots. It also provided for payment to the appropriate school district $20,640, being the equivalent of $120 times 172 lots. Clause 13(d) stipulated:
"Each payment above shall be due two (2) years after all subdivision improvements are finished and accepted by the city and only if the provision of the ordinance requiring such payment has not been repealed or held invalid. The subdivider reserves the right in making any such payment or transfer of land to pay or transfer without prejudice to subdivider's right to obtain a refund or retransfer if the ordinance is repealed or declared illegal in an action not commenced by subdivider."
Paragraph 14 of the agreement recited the provisions of sec. 3.08 of the Code of Ordinances and further recited that the proposed plat involved a cluster subdivision — that certain open space had been reserved for "the esthetic and recreational satisfaction of the surrounding residences" — and that the subdivider intended to install in this open space recreational improvements which would cost in excess of $100,000. Moreover, the agreement recited that, because of such circumstances unique to this subdivision, there were grounds for variances as provided by sec. 3.12 of the Code of Ordinances from the provisions of sec. 3.08; and that, because of such circumstances, paragraph 13 of the agreement was at variance with the requirements of sec. 3.08 of the ordinances. The agreement further recited that the subdivider contended that sec. 3.08 was illegal but that it agreed to waive its right to contest the legality of that ordinance. Sec. 3.12 of the City of Mequon Municipal Code merely provided that, where there has been a report and recommendation of the plan commission and where the common council found it inappropriate to literally apply the requirements of the ordinances, the council could, to effect substantial justice, waive or vary the provisions of the ordinances in respect to the approval of subdivisions.
The two notes that were executed on May 6, 1963, reiterated the provisions of the agreement that the sums contained therein would be payable:
". . . provided that the provision of section 3.08 of the Mequon Code of Ordinances requiring this payment shall not be repealed or held illegal, all as provided in paragraph 13 of the said agreement."
On July 16, 1963, the city enacted Ordinance 63-23, which recited, "Section 3.08 of the City of Mequon Code of Ordinances is hereby repealed and recreated to read as follows."
The ordinance as so passed re-created with only minor differences the portions of original 3.08 (Ordinance 62-3) pertaining to the dedication of areas or in-lieu payments for recreation and open space needs. The in-lieu payment remained at $80 per residential lot. The portions of original 3.08 relating to the dedication of lands for school purposes or in-lieu payments were not re-created by Ordinance 63-23.
After the city's acceptance of the public improvements, the city made demand for payment on the notes. Upon the subdivider's refusal to pay, an action was commenced by the city for judgment on both notes. The defendant answered, denying liability and affirmatively asserting the terms of the agreement and of the notes which provided that payment was to be made only if sec. 3.08 of the Ordinances had not been repealed or held illegal. The answer recited that the ordinance had been repealed. The school districts subsequently intervened, claiming their rights under the notes and sec. 3.08 of the original ordinance. The subdivider contested the intervention on the grounds that the school districts had lost their rights by virtue of the repeal of sec. 3.08 and that, in any event, the statute of limitations had run in regard to the school districts' cause of action. The motion to intervene was granted, and on the stipulated facts the trial court concluded that the rights of the parties were fixed at the time the plat was approved by the common council on March 21, 1963, that basic Ordinance 3.08 (62-3) was in effect, and that the subsequent ordinance and agreement did not alter the rights of the parties.
Judgment was entered on both notes, and the defendant subdivider, Lake Estates Company, has taken this appeal.
The defendant's argument on this appeal as it pertains to the city's claim for the sums due for recreational purposes is simply that sec. 3.08 was repealed and, pursuant to the terms of the agreement, no sums were to be due the city in that event or if the ordinance was found to be illegal. The city acknowledges that Ordinance 63-23 repealed sec. 3.08 but argues that, by virtue of the simultaneous re-creation of the provisions relating to the dedication of lands for recreation purposes or payments in lieu thereof, Ordinance 63-23 was not a repeal as contemplated in the agreement and the notes. We agree with the city's contention in this respect.
The new ordinance retained the requirement of the dedication of land for park and recreation use. The requirement of an in-lieu payment of $80 per lot remained the same.
In accordance with the rule of State ex rel. Cities Service Oil Co. v. Board of Appeals (1963), 21 Wis.2d 516, 527, 124 N.W.2d 809:
"It is well settled that the effect of the repeal of a statute and its re-enactment at the same time in substantially the same words is to continue the statute in uninterrupted operation."
In the instant case the repeal and re-creation of the portions of the ordinance pertaining to the dedication of land or the making of in-lieu payments was simultaneous. Where a statute or ordinance is repealed and re-created in a simultaneous action, and where a portion of an original ordinance or statute is retained in the recreated enactment in substantially the same form, there is no repeal of the provisions that appeared in the original enactment. The provisions that are not re-enacted are of course repealed.
Under the facts of this case, the requirement that the subdivider pay $80 per lot to the city was not repealed, and the subdivider cannot avoid payment by reliance upon the exculpatory clause of its agreement and notes. It is equally clear that Ordinance 63-23 expressly repealed those provisions of sec. 3.08 which required the dedication of land or the payment of money for the school districts. New sec. 3.08 made no reference to such dedications or payments.
In view of the clear repeal of the provisions relating to in-lieu payments for school purposes, the school districts could not and have not prosecuted their claim on the ground that the underlying ordinance remains in effect. Rather, they assert that the original sec. 3.08 was in effect at the time the agreement and notes were executed, that the subdivider by its conduct in submitting a plat for approval was bound by the terms of the ordinance, and that the city's acceptance of that plat while original 3.08 was in effect resulted in a contract from which the subdivider cannot be exonerated by reason of a later repeal. In legal theory, the school districts' basic premise is correct.
"A proposition or offer made to the proper corporate authorities and an acceptance of the terms thereof by an ordinance, resolution or motion constitutes a contract. . . . an ordinance granting a right, accepted and acted upon by the grantee, becomes an irrevocable contract." 10 McQuillin, Municipal Corporations (3d ed.), p. 218, sec. 29.03.
It is not a fact in this case that the subdivider made an offer to the corporate authorities to accept the terms contained in the ordinance. Rather, the subdivider made a counteroffer on terms different than provided in the ordinance; and the city, in accordance with its purported authority under sec. 3.12, varied the provisions of sec. 3.08 to conform with the subdivider's counteroffer. An acceptance was made on terms not expressly provided for in sec. 3.08.
The subdivider's proposed agreement recited that it considered the ordinance requirements illegal and that it would not be bound in the event the ordinance was repealed. The agreement was considered by the finance committee on March 19, 1963. The agreement on the recommendation of the committee was accepted and approved by the common council at the adjourned March 19th meeting held on March 21, 1963. The plat was approved by council resolution on the same day. The agreement as approved by the council specifically provided a variance from the provisions of sec. 3.08 of the Code of Ordinances. Thus, the subdivider's counteroffer to the city was conditional and was to be effective only if the variance from the provisions of sec. 3.08 was granted. The facts are that the subdivider did not accept the terms of original sec. 3.08 but filed the plat only under the terms of the variance.
If it was within the authority of the city council to grant such variance, the schools as a third-party beneficiary to the contract took only the rights accorded them by the contract and were bound by the restrictions therein, including the proviso that no payment was to be made if underlying sec. 3.08 was repealed. We said in Winnebago Homes, Inc. v. Sheldon (1966), 29 Wis.2d 692, 700, 139 N.W.2d 606:
"`It has been repeatedly held by this court that when a right has been created by contract, the third party claiming the benefit of the contract takes the right subject to all the terms and conditions of the contract creating the right.'"
It should also be pointed out, whatever the rights of the school districts, that their assertion that they are entitled to recover on the note is incompatible with their position that the agreement is invalid, for the notes are clearly referable to the terms of the agreement. The schools cannot claim to be third-party beneficiaries of the agreement between the city and the subdivider and simultaneously disavow crucial and controlling conditions of the contract.
Having determined that the contract between the subdivider and the city was not a mere acceptance of the terms of sec. 3.08, the question remains whether the city had the authority to enter into the contract which resulted from the approval of the agreement.
Ch. 236, Stats., delegates powers to the cities to approve subdivision plats. While it is hornbook law that cities, as creatures of the legislature, have only such powers as are expressly granted to them and such others as are necessary and convenient to the powers expressly granted, it is clear, in regard to plat approvals, that discretion, within limits, was granted to the municipalities. Sec. 236.13(1)(b) provides that plat approval shall be conditioned upon compliance with municipal, town, or county ordinances. Where the governing board has a planning agency, as does the city of Mequon, sec. 236.45 (2) states that ordinances may provide other approving requirements for such subdivision. The general declaration of legislative intent appearing in sec. 236.45(1) indicates that the purpose of the law is to permit a municipality to adopt regulations encouraging the most appropriate use of land throughout. Sec. 236.45(2)(b) directs that any ordinance adopted by a municipality shall be liberally construed in favor of the municipality. This reserves to the city a broad area of discretion in implementing subdivision control provided that the ordinances it adopts are in accord with the general declaration of legislative intent and are not contrary, expressly or by implication, to the standards set up by the legislature. This is a grant of wide discretion which a municipality may exercise by ordinance or appropriate resolution.
Sec. 3.12 of the Mequon Ordinances provided that variance from the basic provisions could be granted in the interests of substantial justice and in accord with the basic principles of subdivision control. When the city adopted the agreement and specifically found that the reasons for the variances were consonant with the objectives of sec. 3.12 and made specific findings that showed that the variances granted comported with the legislative intent, "the most appropriate use of land," it fully complied with the statutes and was acting within the delegated authority conferred by the legislature. The council under its ordinances had the power to vary the provisions of sec. 3.08 of the Ordinances, and its exercise of that power in the instant case was within the ambit of its statutory discretion.
Moreover, the agreement ratified by the council was supported by substantial consideration. The subdivider surrendered its right to attack the validity of the basic ordinance, and we take judicial notice that, at the time of the execution of the agreement, the legality of such ordinances had not been decided. In addition, the subdivider covenanted to provide open space areas and recreation facilities. The agreement between the city and the subdivider is valid and is determinative of the rights of the schools, as third-party beneficiaries as well as the rights of the immediate parties.
Accordingly, we conclude that the express repeal of the provisions of sec. 3.08 of the Mequon Municipal Code terminated the subdivider's obligation to make payment of the sums designated for school purposes. Although the defendant at trial also claimed that the schools' cause of action was barred by the statute of limitations, the trial court made no finding in that respect. Our determination is on the merits also. We conclude that the agreement was valid, and since the ordinance did not repeal the provisions which required the subdivider to make payment for recreation purposes, the judgment on the note in the sum of $17,963.33 plus costs and disbursements and interest must be affirmed. The ordinance which required in-lieu payments for school purposes was repealed and, under the terms of agreement, the subdivider's obligation to make that payment was terminated, and the judgment in that respect must be reversed.
By the Court. — The portion of the judgment awarding $17,963.33 to the city, plus costs and disbursements and interest, is affirmed; that portion of the judgment awarding $26,945 to the city and assigning such sum to the school districts is reversed.