City of Olathe v. City of Spring Hill

512 P.3d 723

CITY OF OLATHE, Appellant/Cross-appellee,

v.CITY OF SPRING HILL and James Hendershot, City Administrator, City of Spring Hill, Appellees/Cross-appellants.

No. 124,156

Supreme Court of Kansas.

Opinion filed July 1, 2022.

Anthony F. Rupp, of Foulston Siefkin LLP, of Overland Park, argued the cause, and Matthew D. Stromberg and Sarah E. Stula, of the same firm, and Christopher M. Grunewald and Ronald R. Shaver, of City of Olathe, were with him on the briefs for appellant/cross-appellee.

Curtis L. Tideman, of Lathrop GPM LLP, of Overland Park, argued the cause and was on the briefs for appellees/cross-appellants.

Greg L. Musil and Brett C. Randol, of Rouse, Frets, White, Goss, Gentile, Rhodes PC, of Leawood, was on the brief for amicus curiae Bonita Station Investments, LLC.

The opinion of the court was delivered by Rosen, J.:

This is a tale of two cities. On March 23, 2006, the cities of Spring Hill and Olathe entered into a written agreement (Agreement) to restrict their future growth by establishing boundaries for annexing land lying adjacent to the two cities. Olathe agreed not to seek annexation of property south of the boundary line, while Spring Hill agreed not to seek to annex property north of the line. Each city reserved the right to annex land within their respective boundary lines. The cities cited several goals they hoped to achieve through the Agreement, including:

• Avoiding annexation and zoning disputes that could lead to illogical or premature annexations and unwanted development;

• Avoiding duplication of planning and provision of extraterritorial services; and

• Providing property owners clear indication of future city plans for annexation, provision of services, and comprehensive development.

The Agreement had no fixed expiration term. Instead, it was to "remain in effect until terminated," and termination could "occur only upon mutual consent of the parties."

In addition to the agreement with Spring Hill, Olathe entered into similar agreements in 1983 with Lenexa, in 1988 with Gardner, in 1989 with Gardner and DeSoto, and in 2005 with Overland Park.

On March 10, 2021, Olathe filed a petition in district court requesting declaratory judgment, a temporary restraining order, and preliminary and permanent injunctive relief. The petition alleged that on March 1, 2021, Spring Hill notified Olathe of its intent to annex land north of the boundary line. Spring Hill stated its plan was to pursue a commercial site development known as Project Extract. The Spring Hill Planning Commission discussed Project Extract at a public meeting on March 4, 2021. The narrow objective of the project was to annex land for development by a private enterprise, Carvana, that had already contracted with a property owner to purchase land on the Olathe side of the boundary for commercial development. The annexation project was set on the Spring Hill City Council agenda for March 11.

The petition further alleged that Olathe had recently instituted a comprehensive development plan designating residential and employment areas and planning for traffic flow and provision of services in a planned expansion that included land subject to the Agreement. Olathe asserted various harms that would result from Project Extract, including redesigning Olathe's development plans, undermining the future provision of services to the land lying within Olathe's Agreement boundaries, promoting uncertainty to both landowners and city planners, and opening Johnson County up to chaotic land grabs by municipalities seeking to protect their future growth options from their neighboring municipalities.

On that same day, March 10, the district court conducted a hearing on the motion for temporary restraining order and application for preliminary injunction. After hearing arguments from the parties, the court took the matter under advisement. On March 11, the district court granted a temporary restraining order pending an evidentiary hearing. The order restrained Spring Hill from annexing the disputed property or from undertaking actions in preparation for annexation. On May 19, the district court conducted an evidentiary hearing on Olathe's injunction request at which several witnesses testified.

On June 14, the district court entered judgment holding the Agreement unenforceable as a governmental action that could not bind subsequent City Councils. The court denied the request for injunctive relief. Hours later, the Spring Hill City Council adopted an ordinance to annex the land designated as Project Extract. The district court subsequently entered final judgment, referring back to the June 14 decision, and held the petition failed to state a cause of action upon which relief could be granted. The court then dismissed the suit.

Olathe and Spring Hill filed timely notices of appeal and cross-appeal and docketed their respective appeals with the Court of Appeals. While the appeal was pending, the district court entered an order staying its judgment pending appeal. The order enjoined the parties from pursuing land annexations beyond the boundary line set out in the Agreement. Then, on August 19, Spring Hill filed a motion with the appellate courts to stay, modify, or vacate the district court's stay pending appeal. On September 2, the Court of Appeals denied the motion, and, in the alternative, issued its own stay and injunction during the pendency of this appeal. On September 23, this court granted Olathe's motion to transfer the case to the Supreme Court.

Discussion

The enforceability of municipal contracts and their legal effect may be determined de novo by the appellate courts regardless of the construction by the trial court. See Jayhawk Racing Properties, LLC v. City of Topeka , 313 Kan. 149, 153-54, 484 P.3d 250 (2021).

At the core of this appeal, and governing our decision, is a longstanding common law rule that an elected governing body may not use its legislative power to constrain future governing bodies to follow general policy decisions. This is a rule that extends across the various jurisdictions in this country and has long been recognized in Kansas.

As early as 1872, this court has held that "in deciding what past laws shall stand, and what be repealed, each legislature is free and absolute.... ‘One legislature cannot abridge the powers of a succeeding legislature." Gilleland v. Schuyler , 9 Kan. 569, 580, 1872 WL 660 (1872). As recently as 2021, this court reiterated this principle in holding that "[o]ne [C]ity [C]ouncil may not bind a subsequent one to its political decisions involving the exercise of government functions." Jayhawk Racing , 313 Kan. 149, Syl. ¶ 6, 484 P.3d 250.

As this court has explained, in the context of federal constitutional law, "the Contract Clause does not require a state to adhere to a contract that surrenders an essential attribute of its sovereignty," such as contracts that limit a state's power to act in the future. Partners v. U.S.D. No. 214, 284 Kan. 397, Syl. ¶ 3, 403, 160 P.3d 830 (2007).

In Edwards County Comm'rs v. Simmons , 159 Kan. 41, Syl. ¶ 6, 151 P.2d 960 (1944), this court held:

"In determining the question of validity of a contract made by a board or other governmental agency extending beyond the official term of the contracting board or officials, one test generally applied is whether the contract is an attempt to bind successors in matters incident to such successors’ administration and responsibilities, or whether it is a commitment of a sort reasonably necessary for protection of the public property, interests or affairs being administered. In the former case the contract is generally held to be invalid and in the latter case valid."

The Simmons court held that a municipal legislative body lacks the authority to make " ‘a contract longer than [its] life’ " when " ‘no necessity exist[s].’ " 159 Kan. at 53, 151 P.2d 960 (quoting Fisk v. Board of Managers , 134 Kan. 394, 398, 5 P.2d 799 [1931] ).

The essence of this rule lies in the fundamental philosophy of American democracy. Within the constraints of constitutionally protected rights, it is the will of the electorate that determines policy decisions. If an elected governing body is allowed to bind future bodies to a particular course of action, the effect is to silence the will of voters in the future. The Commonwealth Court of Pennsylvania explained the doctrine that an elected entity may not enter into contracts the duration of which extends beyond the terms for which the members of the entity were elected:

"[T]he doctrine here at issue has its roots in our fundamental notions of democratic government. We select public officials, legislative or executive, whom [sic ] we believe will carry out the policies intended by the electorate. If they fail to do so, or if the people conclude that new policies are in order, they can be voted out of office. To allow an elected body to perpetuate its policies beyond its term of office would frustrate the ability of the citizenry to exercise its will at the ballot box." Lobolito, Inc. v. N. Pocono Sch. Dist. , 722 A.2d 249, 252 (Pa. Commw. Ct. 1998), aff'd in part, rev'd in part 562 Pa. 380, 755 A.2d 1287 (2000).

To hold otherwise would invite elected governing bodies to make their policies permanent, defeating the ability of future voters to set their own courses, leading to archaic legislation, stagnation, and an inability to respond to changed circumstances.

The Pennsylvania Supreme Court set out this reasoning in this way:

"The obvious purpose of the rule [that a legislative body cannot take action that will bind its successors in the performance of governmental functions] is to permit a newly appointed governmental body to function freely on behalf of the public and in response to the governmental power or body politic by which it was appointed or elected, unhampered by the policies of the predecessors who have since been replaced by the appointing or electing power. To permit the outgoing body to ‘hamstring’

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