In First State Bank v. Town of Omro, No. 2015AP403 (Wis. Ct. App. Nov. 11, 2015) (recommended for publication), the Wisconsin Court of Appeals, District II, held that a municipality may use its police powers to build roads and levy special assessments against the land benefitted after a developer defaults in its obligation to build the roads.
In 2004, the Town of Omro executed a development agreement that required the developer to construct and finance roads in a subdivision. Five years later, only a few of the lots were sold and First State Bank acquired the remaining lots through foreclosure. None of the roads in the subdivision were paved; however, three of the lots fronted existing, already-paved roads outside the subdivision. In 2013, the Town – exercising its police power – authorized completion of the roads and specially assessed the Bank more than $200,000 for finishing the roads. The Bank challenged the Town’s special assessments. The court granted summary judgment to the Town affirming the special assessments. The Bank appealed.
The court of appeals affirmed the special assessments for the lots abutting the improved subdivision roads, but reversed and remanded the special assessments for the three lots not abutting the improved roads. The court first found that although the Town originally required the developer in the development agreement to pay for the public improvements, the agreement did not restrict the Town from exercising its police power to levy special assessments for public improvements. Second, the court rejected the Bank’s argument that the special assessments were improper because the road work was not a public improvement. Under Wis. Stat. § 236.20(4)(c), all roads shown on a final subdivision plat are dedicated to the public unless clearly marked as private. Third, the court rejected the Bank’s claim that the Town failed to comply with the special assessment statute in passing the preliminary and final resolutions as a “hypertechnical interpretation” of the statute. Finally, the Bank contended that the three lots not abutting the improved roads were not specially benefitted by the special assessments. The court found that this evidence raised a genuine issue of fact as to whether those lots received a special benefit. As a result, summary judgment was improper, and the court remanded the case for further proceedings on this issue.