Preview:

IN THE SUPREME COURT OF THE STATE OF KANSAS

No. 102,731

STATE OF KANSAS, ex rel. ROBERT D. HECHT, DISTRICT ATTORNEY
THIRD JUDICIAL DISTRICT,
Appellee,

v.

THE CITY OF TOPEKA, KANSAS; NORTON BONAPARTE, CITY MANAGER OF THE CITY OF TOPEKA; MUNICIPAL SERVICES GROUP, INC.; LAWSON SOFTWARE AMERICAS, INC.;
Appellees,


and SCHREIB-AIR, INC.,  
Appellant.


SYLLABUS BY THE COURT

1.
In general, the cash-basis law, K.S.A. 10-1101 et seq., prohibits municipalities from creating indebtedness in excess of funds actually on hand in the treasury of the municipality. Contracts entered into by municipalities in violation of the cash-basis law are void.

2.
When a city signs a contract that it is not legally allowed to enter into, the contract is ultra vires, void and unenforceable.

3.
If a contract was made in express violation of the law, it is unenforceable and not even estoppel may save the agreement.

4.
One contracting with a municipal corporation is bound at his or her peril to know the authority of the municipal body with which he or she deals.

5.
One of the few authorized exceptions to the proscription against a municipality creating indebtedness in excess of funds actually on hand in its treasury is a lease-purchase agreement. But in order for a lease-purchase agreement to be valid under the cash-basis law, it must be approved by a majority vote of all members of the governing body of the municipality.

Appeal from Shawnee District Court; LARRY D. HENDRICKS, judge. Opinion filed February 1, 2013. Affirmed.

Thomas M. Rhoads, of Glaves, Irby and Rhoads, of Wichita, argued the cause and was on the brief for appellant.  

Robert J. Perry, special prosecutor, argued the cause, and Chadwick J. Taylor, district attorney, was with him on the brief for appellees.

The opinion of the court was delivered by

Per Curiam:  The City of Topeka attempted to purchase a new police helicopter. The State filed an action seeking a declaratory judgment that the agreement between the City and Schreib-Air, Inc. (Schreib-Air), the helicopter dealer, was "invalid, void ab initio, and ultra vires" in violation of the Kansas cash-basis law, K.S.A. 10-1101 et seq. The State also requested a writ of quo warranto stating that the City and the city manager acted without valid and lawful authority and that any agreements entered into as a result were invalid, unlawful, and void. Ultimately, the district court granted summary
judgment in favor of the State. Schreib-Air appealed. We transferred the case from the Court of Appeals to this court pursuant to K.S.A. 20-3018(c). We now affirm.  

FACTS

The facts of this case are largely undisputed. On June 26, 2007, the Topeka City Council adopted Resolution No. 7972 authorizing a lease-purchase agreement between the City and Municipal Services Group, Inc. (MSG) to finance the purchase of a Robinson helicopter. That resolution, however, was vetoed by the mayor on July 2, 2007. The council members in favor of the resolution attempted to override the veto on July 24, 2007, but failed to acquire the necessary six votes to do so.  

On December 4, 2007, the council approved by a five-to-three vote a "communication" authorizing the city manager to enter into a lease-purchase agreement for the purpose of purchasing the Robinson helicopter. The communication authorized two contracts:  one with Schreib-Air to purchase the helicopter and one with MSG to finance the purchase. The communication identified the purchase price, the interest rate for financing the purchase, the total to be paid over 5 years broken down into principal and interest ($820,371.90:  $740,000 principal and $80,371.90 interest), the annual payment amount ($164,074.38), and the funding source

Download 102731.pdf

Kansas Law