Title: Duckworth v. City of Kansas City
Citation: 243 Kan. 386, 758 P.2d 201
Docket Number: 61,421
State: Kansas
Issuer: Kansas Supreme Court
Date: April 29, 1988

243 Kan. 386 (1988)
758 P.2d 201
BILL L. DUCKWORTH and CHEMOLD SYSTEMS, INC., Appellants,
v.
THE CITY OF KANSAS CITY, KANSAS, Appellee.
No. 61,421

Supreme Court of Kansas.
Opinion filed April 29, 1988.
Edward H. Powers, Sr., of Kansas City, argued the cause and was on the brief for appellants.
Jody Boeding, assistant city attorney, argued the cause and was on the brief for appellee.
The opinion of the court was delivered by
ALLEGRUCCI, J.:
The plaintiffs, Bill Duckworth and Chemold Systems, Inc., filed the present action seeking declaratory relief against the City of Kansas City, Kansas. The plaintiffs' petition alleged that development loans authorized by the City of Kansas City were illegal and unconstitutional. The plaintiffs appeal the order of the district court granting the City's motion for dismissal.
*387 For the purpose of this appeal, the facts as stated in the plaintiffs' petition are accepted as true. In 1986, the plaintiffs remodeled property located at 846 State Avenue in Kansas City, Kansas, at a cost of $600,000. The plaintiffs financed their improvements of the property by obtaining private financing at 12% interest. On April 28, 1987, the plaintiffs applied for $150,000 in municipal community development funds from the City in order to make their property barrier-free for the purpose of hiring handicapped persons. The plaintiffs were informed on June 5, 1987, that their request would not be approved. The City did not assign any reason for its refusal other than a statement that other projects had priority.
The plaintiffs' petition also contends that, at approximately the same time, the City had decided to approve a loan of $2,000,000 to Robert G. Cotitta to remodel a building in downtown Kansas City. The petition states that the loan to Cotitta provided for 8% interest and deferred any substantial payments upon the loan for the first five years. Cotitta is a "bad credit risk" according to the plaintiffs' petition, which alleges that Cotitta had defaulted on a prior $200,000 loan from the City. The plaintiffs' petition also challenges the City's issuance of grants and loans of approximately $250,000 to the Granada Theatre in downtown Kansas City, Kansas. The plaintiffs allege that the recipients of these development funds from the City "will have a competitive advantage over the plaintiffs" because they will be able to rent their facilities "for less than the plaintiffs because of the lower interest rate and deferred payments agreed to by the City." The plaintiffs contend that the issuance of the loans by the City was made without appropriate standards and is unjust, discriminatory, and unconstitutional. In addition, plaintiffs contend that the method by which the loans were budgeted violates K.S.A. 79-2927 and K.S.A. 79-2934.
The plaintiffs first challenge the constitutionality of the municipal development loans by the City both on due process and equal protection grounds. A review of our decisions relating to the constitutional authority of governmental agencies to issue economic assistance requires us to reject plaintiffs' contention. In Ullrich v. Board of Thomas County Comm'rs, 234 Kan. 782, 676 P.2d 127 (1984), this court recognized that, as a general rule, the state legislature may appropriate public money for private *388 individuals so long as the appropriation promotes the public welfare. In Ullrich, this court stressed that the wisdom of a particular public policy could not be decided by the courts, but must be resolved by the legislature.
Although the issue in Ullrich was the constitutionality of transferring assets from the county hospital to a private nonprofit hospital, the rationale for our decision is applicable to the present case:
In State, ex rel., v. City of Pittsburg, 188 Kan. 612, 364 P.2d 71 (1961), and State ex rel. Tomasic v. City of Kansas City, 237 Kan. 572, 701 P.2d 1314 (1985), this court upheld the constitutionality of governmental assistance of private economic development for the purpose of promoting the overall economic welfare of the general public. Although both cases involve the grants of industrial revenue bonds rather than the issuance of loans by a city, the analysis for constitutional purposes is identical.
In State, ex rel., v. City of Pittsburg, this court upheld the constitutionality of the issuance of revenue bonds, stressing the limited ability of the courts to review the wisdom of a particular *389 legislative enactment as long as the enactment was designed to serve a public purpose. We said:
We adopted the same view later in State ex rel. Tomasic v. City of Kansas City. As long as a governmental action is designed to fulfill a public purpose, the wisdom of the governmental action generally is not subject to review by the courts. We said:
The standards for review of the constitutionality of the challenged governmental actions in the context of the equal protection clause is also directed at the existence of a rational basis for the governmental actions. In Manhattan Buildings, Inc. v. Hurley, 231 Kan. 20, 643 P.2d 87 (1982), the court reviewed the rules relating to such cases.
The same rule was announced in Clark v. Walker, 225 Kan. 359, 590 P.2d 1043 (1979). We said:
There is nothing in the record to contradict the City's statement of its purpose in issuing its initial loan to the Granada Theatre. The City's resolution approving the issuance of the loan stated that its purpose was to
The district court found that the loans were designed to serve a valid and legitimate public service, stating:
We agree. The need for redevelopment efforts in the central city area of major urban centers is an important public concern, the legitimacy of which cannot be reasonably questioned. In addition, the plaintiffs have failed, in the present case, to present any support for the view that the issuance of the municipal development loans was arbitrary and wholly without any rational relationship to the purpose which the City sought to achieve. The plaintiffs may take issue with the wisdom of granting the municipal development loans to individuals other than themselves, but the courts are not the proper forum for reviewing the City's wisdom in issuing those loans.
Plaintiffs argue in their brief to this court that defendant City has conceded the arbitrary nature of the loans in question. The argument the plaintiffs make is essentially that the City, by accepting the truthfulness of the factual allegations contained in the petition for the purposes of consideration of the motion to dismiss, also admitted to those portions of the petition characterizing the issuance of the loans as arbitrary, discriminatory, and without standards. Although the consideration of a motion to dismiss requires accepting the factual allegations contained in a petition as true, there is nothing which requires a court to treat the legal conclusions contained within the petition as also being true. The petition's allegations that the loans were arbitrary, discriminatory, and without standards were not facts, but legal conclusions, the truth of which the City has not admitted but has continued to vigorously deny. Plaintiffs also argue that the issuance of the loans was accomplished without appropriate standards. All of the authority cited by the plaintiffs for this argument relates to cases involving the delegation of power from a legislative body to a subordinate entity. As the district court noted, there is no authority supporting the proposition that a legislative body (whether the state legislature or, as here, a city council acting under the Home Rule Amendment) is required to comply with standards under which it will pass legislation.
The plaintiffs next contend that the loans violated K.S.A. 79-2927 et seq. These statutes require budgets to be balanced. *392 K.S.A. 79-2935 provides that it is unlawful for a governing body to incur a debt, and any indebtedness "incurred" shall be void. The City, in the instant case, did not incur a debt. We note plaintiffs complain that the district court did not address this issue. The district court's failure becomes understandable upon a reading of the petition. Halfway through paragraph numbered 12 of the thirteen-page petition is the following: "Said expenditure was not only discriminatory and made by ordinance without standards but was an unbudgeted item and unlawful under the provisions of K.S.A. 79-[2927] et seq. Such expenditure was from a fund maintained by the defendant City for each Councilman." The petition, and more specifically the quoted sentence, does not state a cause of action based upon a violation of K.S.A. 79-2927 et seq.
Finally, the defendant contends that the plaintiffs are estopped from asserting their claim of unconstitutionality of the legislation authorizing the granting of municipal development loans. The City argues that the plaintiffs' action in attempting to obtain loans for the renovation of their own property estops them from arguing the unconstitutionality of the granting of municipal development loans to other individuals. Because of our determination that the municipal development loans are constitutional, it is not necessary to address this issue.
The judgment of the district court is affirmed.