HIGHWOODS PROPERTIES, INC. et al. v. CITY OF MEMPHIS.
No. W2007-00454-COA-R3-CV
Supreme Court of Tennessee, at Memphis.
Nov. 4, 2008 Session. July 27, 2009.
Based upon our interpretation of the term “willfully” in section
Jonathan C. Hancock, Ross Emerson Webster, Don Lester Hearn, Jr., Memphis, Tennessee, for the appellee, City of Memphis.
OPINION
GARY R. WADE, J., delivered the opinion of the court, in which JANICE M. HOLDER, C.J., CORNELIA A. CLARK, and SHARON G. LEE, JJ., joined. WILLIAM C. KOCH, JR., J. filed a separate dissenting opinion.
The Plaintiffs filed an action for declaratory judgment seeking to set aside a consent judgment entered in a lawsuit between property owners in an area of a proposed annexation and the City of Memphis. The earlier lawsuit, which the Plaintiffs failed to timely join, was a quo warranto challenge to an ordinance purporting to annex certain territory contiguous to the boundaries of the City. The consent judgment provided for the annexation of the territory described within the ordinance in two stages, with a portion of the area having an effective annexation date in 2006 and the remainder having an effective date in 2013. The trial court dismissed the complaint and the Court of Appeals affirmed. We granted permission to appeal in order to determine the propriety of the challenge to the consent decree approving of the two-step annexation. We hold that (1) the Plaintiffs are not authorized to file a declaratory judgment action challenging the consent judgment as violative of the terms of the annexation ordinance; and (2) the consent judgment did not create an unconstitutional taxing structure. The judgment of dismissal is, therefore, affirmed.
This appeal arises out of a declaratory judgment action filed by Highwoods Properties, Inc., Highwoods Realty Limited
Factual and Procedural Background
The facts underlying this dispute are largely uncontested. On November 4, 1997, the Memphis City Council enacted Ordinance No. 4513 (the “Ordinance“), adopting a proposal to annex Area 42, a property adjacent to its city limits. The Ordinance provided as follows:
[T]he City of Memphis on its own initiative is authorized to annex territory if it appears that the prosperity of the City of Memphis and of the territory will be materially retarded, and the safety and welfare of the inhabitants and property thereof endangered if said property is not annexed to the city of Memphis....
....
[I]t was determined by the Council of the City of Memphis that the proposed annexation reflects the planned and orderly growth and development of the City of Memphis taking into consideration the characteristics of the City of Memphis and those of the area proposed for annexation and is reasonable for the overall well being of the City of Memphis and the proposed area to be annexed; that it appears that the prosperity of the City of Memphis and the affected territory will be materially retarded and safety and welfare of the inhabitants and property thereof endangered if such area is not annexed to the City of Memphis; that, therefore, it is in the best interest, safety and welfare of the inhabitants and property of said territory as well as the municipality as a whole to annex [Area 42] to the boundaries of the City of Memphis.
The Ordinance incorporated a detailed “Plan of Services” setting forth the expected dates by which enumerated city services would be extended to the annexed area.
On December 3, 1997, a number of the property owners within Area 42 filed three separate quo warranto proceedings challenging the propriety of the annexation. See
On December 29, 2005, while the consolidated 1997 challenges were still pending, Highwoods Properties, Inc. (“Highwoods Properties“), one of the Plaintiffs in this litigation, filed a separate quo warranto challenge to the annexation, seeking to have its suit consolidated with those filed in 1997. A month later, Highwoods Properties filed an amended complaint, adding Highwoods Realty Limited Partnership, Highwoods/Tennessee Holdings LP, and Southeast Portfolio Partners, LP, as Plaintiffs. The Amended Complaint contained
On May 10, 2006, during the course of the appeal by the Plaintiffs, the trial court approved and entered a “Consent Final Judgment” in settlement of the 1997 challenge to the annexation. On June 8, 2006, an “Amended Consent Final Judgment” superceding the initial judgment was approved for entry. The amended judgment divided Area 42 into five sections, which appear below:
The terms of the final settlement provided for each of the five sections of Area 42 to become a part of the City; however, the annexation of areas A1, A2, and A3 (collectively “Area A“) was to become effective on December 31, 2006, while the annexation of areas B1 and B2 (collectively “Area B“) would be delayed until December 31, 2013.1
On October 24, 2006, during the pendency of their appeal in the quo warranto action, the Plaintiffs, owning property located in Area A, filed suit for declaratory judgment asking the chancery court to rule (1) “that the Consent Final Judgment and Amended Consent Final Judgment are invalid” and (2) “that ... Area 42 has not been annexed by the City.” As grounds, the Plaintiffs first alleged that “[a] genuine dispute exists as to whether the ... Ordinance, as amended through the Consent Final Judgment and Amended Consent Final Judgment[,] is valid. (“Count I“).” The Plaintiffs argued that the settlement constituted “an attempt to unlawfully circumvent the exclusive procedures established by the General Assembly” by effectively amending the Ordinance to incorporate the two-tiered annexation schedule, without enacting a new ordinance. Secondly, the Plaintiffs alleged that the terms of the settlement are constitutionally invalid because they “subject[] taxpayers in Areas A and B to different tax rates in violation of [article 2, section 28] of the Tennessee Constitution. (“Count II“).”
In its motion to dismiss, the City argued that (1) the claims are barred by res judicata and collateral estoppel; (2) the Plaintiffs do not have standing to file a declaratory judgment action challenging the terms of a judgment to which they were not a party; (3) the complaint was untimely; and (4) the Plaintiffs failed to join indispensable parties, specifically the property owners involved in the 1997 consolidated litigation. On January 22, 2007, the trial court granted the motion to dismiss “on all grounds set forth therein.”
On direct appeal, the Court of Appeals affirmed, concluding that there was “no authority to vacate the annexation ordinance based upon the ... procedural defects” alleged by the Plaintiffs. Highwoods Props., Inc. v. City of Memphis, No. W2007-00454-COA-R3-CV, 2007 WL 4170821, at *10 (Tenn.Ct.App. Nov. 27, 2007) (“Highwoods Properties II“). The court further concluded that the Plaintiffs’ constitutional claims were without merit. Id. at *14.
Standard of Review
A Rule 12.02(6) motion under the
Analysis
The Plaintiffs have presented two arguments in support of their claim for declaratory relief. As Count I, they argue that the consent judgment entered in the earlier settlement of the quo warranto suits amounts to an impermissible, non-legislative amendmеnt of the ordinance. As Count II, the Plaintiffs allege that the consent judgment, if otherwise valid, imposes a system of taxation that violates article II, section 28 of the Tennessee Constitution. The City has disputed both the substance of these arguments and the Plaintiffs’ authority to initiate the declaratory judgment suit under these circumstances.
Count I
The Plaintiffs argue that the Declaratory Judgment Act permits a challenge to the terms of the 2006 consent judgment, which, they claim, revises the Ordinance. In response, the City maintains that permitting an action for declaratory judgment by the Plaintiffs on this count, despite their failure to file a timely quo warranto challenge eleven years ago, would circumvent the intent of the General Assembly and the longstanding policy of this state limiting the power of courts to intercede in the annexation process. Our resolution of this question requires a close analysis of the historical role of courts in reviewing annexations, as well as the relevant statutes and constitutional provisions.
I. Background
In Hunter v. City of Pittsburgh, 207 U.S. 161, 28 S.Ct. 40, 52 L.Ed. 151 (1907), the United States Supreme Court considered the efforts of citizens and taxpayers of Allegheny, Pennsylvania—as well as the City of Allegheny itself—to block the consolidation of Allegheny with the larger City оf Pittsburgh. Allegheny and its citizenry raised a number of objections to the consolidation, including claims that it violated the United States Constitution, both as an unlawful impairment of the obligations of contracts under Article I, Section 10, and as a deprivation of property without due process of law under the Fourteenth Amendment. Id. at 176-77, 28 S.Ct. 40. After the Supreme Court of Pennsylvania addressed the relevant state law claims, see In re City of Pittsburg, 217 Pa. 227, 66 A. 348 (1907), the United States
Municipal corporations are political subdivisions of the state, created as convenient agencies for exercising such of the governmental powers of the state as may be intrusted to them.... The number, nature, and duration of the powers conferred upon these corporations and the territory over which they shall be exercised rests in the absolute discretion of the state.... The state, therefore, at its pleasure, may modify or withdraw all such powers, may take without compensation such property, hold it itself, or vest it in other agencies, expand or contract the territorial area, unite the whole or a part of it with another municipality, repeal the сharter and destroy the corporation. All this may be done, conditionally or unconditionally, with or without the consent of the citizens, or even against their protest. In all these respects the state is supreme, and its legislative body, conforming its action to the state Constitution, may do as it will, unrestrained by any provision of the Constitution of the United States.
Hunter, 207 U.S. at 178-79, 28 S.Ct. 40 (emphasis added).
Municipalities2 have a similar historical status under our state constitution. “[I]t was held at an early day that the Legislature had complete control of municipal corporations, and may abolish them at any time in its discretion.” Smiddy v. City of Memphis, 140 Tenn. 97, 203 S.W. 512, 513 (1918) (citing Luehrman v. Taxing Dist. of Shelby County, 70 Tenn. 425 (1879) (upholding private act abolishing charter of the City of Memphis)); see also Caldwell v. Harris, 185 Tenn. 209, 204 S.W.2d 1019, 1022-23 (1947) (upholding private act abolishing Town of Butler and liquidating its assets); City of Memphis v. Memphis Water Co., 52 Tenn. (5 Heisk.) 495, 527 (1871) (“[M]unicipal ... franchises are always subject to the control of the legislative power for the purpose of amendment, modification, or entire revocation.“). In Stocker v. City of Nashville, this Court described the nature of a municipality as follows:
A municipal corporation is a political, or governmental, agency of the state, which has been constituted for the local government of the territorial division described[,] and which exercises, by delegation, a portion of the sovereign power for the public good. In its organization, and in the assignment of its powers and duties, the Legislature acts supremely.
174 Tenn. 483, 126 S.W.2d 339, 340 (1939) (quoting MacMullen v. Middletown, 187 N.Y. 37, 79 N.E. 863, 864 (1907)). We have therefore held that “[i]t is elementary that the Legislature ... may give and take away as it chooses [a municipality‘s] powers and privileges.” First Suburban Water Util. Dist. v. McCanless, 177 Tenn. 128, 146 S.W.2d 948, 950 (1941).
Traditionally, the power to alter the boundaries of a municipality has been viewed as a natural result of the legislature‘s broader power to establish and abolish municipal corporations: “To hold that the legislature could not enlarge the corporate limits by an act passed for that purpose would be to deny that it could create or abolish; for the greater includes the lesser in law, as in mathematics.” Williams v. City of Nashville, 89 Tenn. 487, 15 S.W. 364, 365 (1891). Thus, “[t]he
Until 1955, the primary method in Tennessee for annexation of new territory to the borders of a municipality was by private act of the General Assembly. In 1953, however, a limited constitutional convention proposed—and voters adopted—article XI, section 9 of the Tennessee Constitution, including the provision that has come to be known as the “municipal boundaries clause.” The clause appears alongside identical restrictions on the creation, merger, consolidation, and dissolution of municipalities: “The General Assembly shall by general law provide the exclusive methods by which municipalities may be created, merged, consolidated and dissolved and by which municipal boundaries may be аltered.”
Cecil Sims, a delegate to the 1953 convention, characterized this portion of article XI, section 9 as the product of a “fight for the removal of ... [a] cancer from the body politic“—the cancer being the misuse of private acts against municipal governments. As an example of the exploitation of the legislative prerogative, Sims recounted the dissolution of the City of Memphis by private act in 1879:
And consider ... our great sister City of Memphis, with all of its fine people and all of its horses and wagons, and all of its fire engines, and all of its public property was abolished as a municipality and the property it owned, and its people were transferred to the State of Tennessee ... and the great City of Memphis having been robbed of its property paid for by the sweat and toil of its taxpayers, was humiliated by having its property sequestered to the State....
Id. (discussing
The legislature employed the authority granted under article XI, section 9 to enact chapter 113 of the public acts of 1955 (the “1955 Act“), establishing a general law governing the annexation of land to the borders of existing municipalities. The 1955 Act provided for three meсhanisms of annexation: (1) a single referendum by the voters in the area to be annexed,
The third of these methods—annexation by ordinance of the annexing municipality—has been described as “[t]he most innovative aspect of the 1955 Act,” and a “radical change” from prior law. Hamilton County, 310 S.W.2d at 154. This Court later explained the rationale for allowing a municipality to annex new territory on its own initiative:
The whole theory of annexation is that it is a device by which a municipal corporation may plan for its orderly growth and development. Heavily involved in this is control of fringe area developments and zoning measures to the end that areas of unsafe, unsanitary and substandard housing may not “ring” the City to the detriment of the City as a whole. In a word, annexation gives a city some control over its own destiny. The preservation of property values, the prevention of the development of incipient slum areas, adequate police protection within a metropolitan area, and the extension of city services to [t]hose who are already a part of the city as a practical proposition, are the legitimate concern of any progressive city.
City of Kingsport v. State ex rel. Crown Enters., Inc., 562 S.W.2d 808, 814 (Tenn. 1978) (emphasis added). This decision of the General Assembly to vest annexation power in municipalities themselves reflects the “perfectly obvious” conclusion “that the city fathers would know far more about the needs and necessity of annexation than would the Legislature.” State ex rel. Senff v. City of Columbia, 208 Tenn. 59, 343 S.W.2d 888, 889 (1961).
The context of the passage of the 1955 Act reveals a corresponding intent by the General Assembly to increase the power of municipalities to deal with developments on their peripheries. The first decade following the Second World War had been marked by a major rise in public interest in the abilities of cities to cope with growth immediately outside their borders. This rise in
The 1955 Act granted “[a]ny aggrieved owner of property lying within territory which is the subject of an annexation ordinance” a right to challenge the ordinance via a timely filed quo warranto action alleging that the annexation “reasonably may not be deemed necessary for the welfare of the residents and property owners of the affected territory and the municipality as a whole and so constitute[s] an exercise of power not conferred by law.”4
[I]f it is a fairly debatable question as to whether or not the ordinance is reasonable or unreasonable[,] the courts certainly are not going to take any hand in it one way or the other.... [If the question is, as a matter or law, fairly debatable,] the court should take the matter away from the jury and conclude in favor of the ordinance.
206 Tenn. 411, 333 S.W.2d 924, 930-31 (1960). In the ensuing years, the Court repeatedly cited Morton for the proposition that, if the reasonableness of an annexation is fairly debatable, then any quo warranto action in opposition must fail and the annexation be permitted to move forward. State ex rel. Spoone v. Mayor of Morristown, 222 Tenn. 21, 431 S.W.2d 827, 829 (1968); State ex rel. Robbins v. City of Jackson, 218 Tenn. 322, 403 S.W.2d 304, 306 (1966); State ex rel. Hardison v. City of Columbia, 210 Tenn. 514, 360 S.W.2d 39, 41-42 (1962); State ex rel. Cathey v. City of Knoxville, 211 Tenn. 304, 364 S.W.2d 912, 913 (1962); State ex rel. Campbell v. Mayor of the Town of Morristown, 207 Tenn. 593, 341 S.W.2d 733, 734-35 (1960).
In 1974, the General Assembly enacted a series of amendments to the 1955 Act (the “1974 Amendments“), including a new provision establishing that, in a quo warranto challenge to an annexation ordinance, “[t]he municipality shall have the burden of proving that an annexation ordinance is reasonable for the overall well-being of the communities involved.”
In 1998 (shortly after the City of Memphis enacted Ordinance No. 4513 in regard to the annexation of Area 42) the General Assembly adopted additional amendments further refining the procedures for annexation and quo warranto challenges.
II. The Plaintiffs’ Cause of Action
The Plaintiffs do not dispute that they failed to file a timely quo warranto challenge. This issue was resolved by the Court of Appeals in Highwoods Properties I, 2006 WL 3628102, at *7. Instead, the Plaintiffs argue that they now have a cause of action under the Declaratory Judgment Act to challenge what they have characterized as the “amendment” of the annexation ordinance by the 2006 consent judgment. We disagree.
Under the principles of our constitution, the General Assembly “could have delegated to the municipalities the
In State ex rel. Earhart v. City of Bristol, however, we recognized an exception (other than a constitutional challenge) to the rule and held that, in certain situations where no quo warranto action is statutorily available, it is permissible to challenge an ordinance‘s validity with a declaratory judgment action. 970 S.W.2d at 953. In Earhart the validity of an ordinance enacted several years earlier was challenged because the annexed area contained no “people, private property, or commercial activity.” Id. at 954; see State ex rel. Collier v. City of Pigeon Forge, 599 S.W.2d 545, 547 (Tenn.1980) (“[L]ong and lean ... annexations, so long as they take in people, private property, or commercial activities and rest on some reasonable and rational basis, are not per se to be condemned.” (emphasis added)). Annexations containing no people, private property, or commercial activities, by necessity, cannot be challenged in a quo warranto action, because only an “aggrieved owner of property that borders or lies within territory that is the subject of an annexation ordinance prior to the operative date thereof” may file such a challenge.
While citing Earhart as authoritative support for their contentions, the Plaintiffs have failed to overcome either of the barriers identified in that case. As an initial matter, they have neither raised a colorable claim that the Ordinance is void, nor, despite their protestations to the contrary, challenged any specific augmentation of the Ordinance. Reduced to its essence, the challenge by the Plaintiffs is to a single aspect of the court‘s approved settlement of the earlier lawsuit attacking the reasonableness of the Ordinance; that is, the City‘s consent to delay the planned annexation of Area B until 2013. A delay in the
Moreover, the Plaintiffs cannot avail themselves of Earhart because they, unlike the claimants in Earhart, could have filed a timely quo warranto challenge.8 “Subject to some exceptions, a declaratory judgment action should not be considered where special statutory proceedings provide an adequate remedy.” Colonial Pipeline, 263 S.W.3d at 838 (citing Katzenbach v. McClung, 379 U.S. 294, 296, 85 S.Ct. 377, 13 L.Ed.2d 290 (1964)). If the Plaintiffs had filed a timely quo warranto challenge, their cause of action would have been consolidated with the other timely-filed challenges pursuant to
The quo warranto procedures established by the General Assembly are the product of over half a century of experience and reflect a careful balancе between the interests of municipalities and the concerns of individuals who object to the annexation of their property. This legislative remedy “avoid[s] the specter of numerous successive suits by private parties attacking the validity of annexations,” “because the judgment settles the validity of the annexation on behalf of all property holders in the affected area.” Earhart, 970 S.W.2d at 952 (quoting Alexander Oil Co. v. City of Seguin, 825 S.W.2d 434, 437 (Tex.1991)). To sustain the propriety of this litigation would permit the piecemeal litigation that the quo warranto procedures are designed to prevent. We do not believe that the General Assembly intended to permit such a result. Thus, the Court of Appeals’ holding on Count I must be affirmed.
Count II
As a preliminary matter, we agree with the Court of Appeals that Count II, unlike Count I, is a proper question for the courts. “The importance of correctly resolving constitutional issues suggests that constitutional issues should rarely be foreclosed by procedural technicalities.” Colonial Pipeline, 263 S.W.3d at 844-45 (quoting In re Adoption of Female Child, 42 S.W.3d 26, 32 (Tenn.2001)). The stringent restrictions on any challenge to an annexation apply only when constitutional issues are not at stake. See City of Oak Ridge, 563 S.W.2d at 897 (“[A]bsent constitutional infirmities, the rights that now exist are limited to those granted in Section 2(b) of that act, codified in
The Plaintiffs argue that the consent judgment approving the annexation, even if otherwise valid, establishes a system of taxation that contravenes the equality and uniformity requirements of article II, section 28 of the Tennessee Constitution, because it permits the City to levy a municipal tax on the inhabitants of Area A while, at the same time, levying no corresponding tax on the inhabitants of Area B. The Court of Appeals rejected the argument:
[Plaintiffs‘] complaint that they are forced to pay City of Memphis taxes for a longer period than other property owners, whose land is not yet part of the City, does not implicate the “equal and uniform clause” of Article II, Section 28.... There is nothing in the record to suggest that the City of Memphis or any other taxing authority is implementing different tax rates within its own borders. Area B will not be annexed into the city limits of Memphis until 2013, so it is not necessary that Area A and Area B property be taxed at the same rate at this time. They are currently in different jurisdictions for purposes of this analysis.
Highwoods Properties II, 2007 WL 4170821, at *12.
I. Background
The relevant language of article II, section 28 of the Tennessee Constitution provides that “[e]ach respective taxing authority shall apply the same tax rate to all property within its jurisdiction.” This language was adopted by a 1971 constitutional convention and approved by general election on August 3, 1972. See generally Sherwood Co. v. Clary, 734 S.W.2d 318, 320 (Tenn. 1987) (“Article 2, § 28, of the Tennessee Constitution was extensively revised by an amendment adopted in 1972.“); Snow v. City of Memphis, 527 S.W.2d 55, 58 (Tenn.1975) (discussing history of the 1972 amendment of section 28); So. Ry. Co. v. Fowler, 497 S.W.2d 891, 893 (Tenn.1973) (same). Prior to 1972, however, the Constitution of 1870 imposed a similar restriction. Article II, section 28 required that “[a]ll property shall be taxed according to its value, that value to be ascertained in such manner as the legislature shall direct, so that taxes shall be equal and uniform throughout the state.” See Albert v. Williamson County, 798 S.W.2d 758, 759 n. 1 (Tenn.1990). Article II, section 29 of the 1870 Constitution applied this restriction to taxation by municipalities:
The General Assembly shall have power to authorize the several counties and incorporated towns in this state, to impose taxes for county and corporation purposes respectively, in such manner as shall be prescribed by law; and all property shall be taxed acсording to its value, upon the principles established in regard to state taxation.
Albert, 798 S.W.2d at 760 (emphasis added). These provisions, read together, “require that there shall be uniformity of valuation and assessment of property for purposes of taxation, and that the tax levy for any given purpose shall be uniform throughout the territory to which it is applied.” King v. Sullivan County, 128 Tenn. 393, 160 S.W. 847, 848 (1913); see
Over one hundred years ago, the Court concluded that a private act annexing new territory to the City of Memphis, but exempting the newly-annexed area from certain city taxes for a ten-year period, violated sections 28 and 29 of article II of the 1870 Constitution:
This court is of opinion that sections 3 and 4 of chapter 6 are clearly unconstitutional and void, inasmuch as they exempt the annexed territory from taxes for fire, light, and police protection for 10 years, and for the same time expressly prohibit the district from having the advantages of this protection. The court is of opinion that taxation must always be uniform and equal throughout the extent of the same jurisdiction; that state taxes must be equal and uniform throughout the state; that county taxes must be equal and uniform throughout the county; and that a city tax must be equal and uniform thrоughout the city, so far as revenues for current expenses or future wants are concerned....
Jones v. City of Memphis, 101 Tenn. 188, 47 S.W. 138, 139 (1898). In many contexts, “the [amended] language of the equal and uniform clause has the same meaning as the 1870 version.” Albert, 798 S.W.2d at 761; but see Sherwood Co., 734 S.W.2d at 320 (discussing effect of amendment on application of equal and uniform clause to different classifications of property).
II. Equality and Uniformity of Taxation in Area 42
The Plaintiffs insist that the terms of the consent judgment permit the City to impose a scheme of taxation in direct violation of Jones. They base their claim on the following language in section
Should the court find the ordinance to be unreasonable, or to have been done by exercise of powers not conferred by law, an order shall be issued vacating the ordinance and the municipality shall be prohibited from annexing, pursuant to the authority of
§ 6-51-102 , any part of the territory proposed for annexation by such vacated ordinance for a period of at least twenty-four (24) months following the date of such order. In the absence of such finding, an order shall be issued sustaining the validity of such ordinance, which shall then become operative thirty-one (31) days after judgment is entered unless an abrogating appeal has been taken therefrom.
This argument rests on a faulty assumption that there is no difference between the effective date of the ordinance and the effective date of the annexation. In our view, although the entire ordinance became operative thirty-one days after the entry of the consent judgment, the very terms of that judgment also properly delay the annexation of Area B until a later date. See Bastnagel, 457 S.W.2d at 534-35 (holding that the date on which an annexation ordinance becomes operative is not necessarily “the actual date of annexation“). The actual date of annexation for Area B has been merely postponed by a term contained within the judgment approved by
Moreover, our ruling on this issue does not create the risks identified by the Court in Jones:
The logical result of the contrary holding as to taxation would be that, in every city, taxes might be different in different wards, and on different streets; in every county, taxes might be different in every civil district; in the state, taxes might be different in every county, and in each division,—all clearly in violation of the constitution and our whole theory of equal and uniform taxation. So, also, it cannot be maintained that a section of territory may be brought within the city limits, and made part of the city, and yet be excluded by express enactment from the benefits extended to other portions of the city.
47 S.W. at 139. In this instance, we are not dealing with territory “brought within the city limits, and made part of the city.” To uphold the system of taxation within the City in no way approves of the establishment of different levels of taxation “in different wards, and on different streets” of a municipality.
Conclusion
In summary, the relevant and material allegations in the Plaintiffs’ complaint, even if true and correct, do not constitute a cause of action upon which relief may be granted.10 The motion to dismiss, therefore, was properly granted. We are not empowered to reconsider the wisdom of the City‘s annexation of Area 42 or its consent to the terms of the 2006 judgment. Rather, we confirm Tennessee‘s longstanding policy, as embodied in our Constitution and statutes, that the role of the courts in the annexation process is limited. With rare exception, the appropriate avenue by which to contest an annexation and, therefore, to assure full participation in any challenges as to its propriety, is the filing of a timely action in quo warranto. Further, while the constitutionality of the system of taxation within a municipality may be subject to challenge under the Declaratory Judgment Act, the effect of the Ordinance at issue did not violate the terms of article II, section 28 of the Tennessee Constitution.
The judgment of the Court of Appeals is affirmed. Costs are assessed to the Plaintiffs, for which execution may issue if necessary.
WILLIAM C. KOCH, JR.
SUPREME COURT JUSTICE
WILLIAM C. KOCH, JR., J., dissenting.
At the heart of this case is the operation of the checks and balances that influence
I.
On November 4, 1997, the Memphis City Council enacted an ordinance to annex several tracts of real property referred to as “Area 42.” The effective date of this ordinance was January 1, 1998. On December 3, 1997, several owners of the property located in Area 42 filed three quo warranto proceedings in the Circuit Court for Shelby County challenging the reasonableness of the annexation. These cases were consolidated but then languished in the courts for years.
On December 29, 2005, Highwoods Properties, Inc. (“Highwoods“), also an owner of property in Area 42, filed a quo warranto action in the Circuit Court for Shelby County. In an amended complaint filed one month later, Highwoods and other parties alleged that a “potential [c]onsent [j]udgment” between the City of Memphis and the 1997 plaintiffs was not only detrimental to the Highwoods parties but also inconsistent with the terms of the 1997 annexation ordinance.
As it turned out, the 1997 plaintiffs and the City of Memphis had settled their almost ten-year-old dispute. Their agreement effectively amended the 1997 annexation ordinance. Instead of simultaneously annexing all of Area 42, the compromise called for annexing part of Area 42 on December 31, 2006, and the remainder of Area 42 on December 31, 2013. Neither the city attorney nor the 1997 plaintiffs obtained the Memphis City Council‘s approval or ratification of their compromise.
The trial court dismissed the Highwoods parties’ quo warranto complaint on March 3, 2006. On June 8, 2006, the trial court entered a final judgment by consent disposing of the consolidated 1997 quo warranto complaints. This judgment approved and made the compromise two-step annexation of Area 42 part of the decree. On October 24, 2006, the Highwoods parties filed a new complaint for declaratory judgment in the Circuit Court for Shelby County challenging the validity of the compromise two-step annexation process included in the June 8, 2006 order. The Highwoods parties stated that the compromise two-step annexation unlawfully circumvented the statutory annexation procedures by effectively amending the original 1997 ordinance without action by the Memphis City Council.
The City moved to dismiss the Highwoods parties’ declaratory judgment complaint on several grounds, including the ground that the complaint was not timely filed. In its January 22, 2007 order, the
II.
The power of annexation is essentially legislative in character. City of Kingsport v. State ex rel. Crown Enters., Inc., 562 S.W.2d 808, 811 (Tenn.1978); 2 Dennis Jensen & Gail O‘Gradney, McQuillin Law of Municipal Corporations § 7.10 & n. 2 (3d ed. 2008). Prior to the mid-1950s, this power was wielded by the General Assembly through the enactment of private acts. Wallace Mendelson, Suggestions for the Improvement of Municipal Annexation Law, 8 Vand. L.Rev. 1, 3 (1954). The General Assembly‘s power was considered to be plenary. Thus it was conceded that the General Assembly could change municipal boundaries at its “pleasure,” Daniel v. Mayor of Memphis, 30 Tenn. (11 Hum.) 582, 583-84 (1851), and that there could be no judicial review of the General Assembly‘s actions, McCallie v. Mayor of Chattanooga, 40 Tenn. (3 Head) 317, 321 (1859).
In 1953, the citizens of Tennessee ratified an amendment to article XI, section 9 of the Tennessee Constitution thаt authorized the General Assembly to delegate its annexation power to the municipalities themselves. This amendment contained a “municipal boundaries clause” that provided that “[t]he General Assembly shall by general law provide the exclusive methods by which municipalities may be created, merged, consolidated and dissolved and by which municipal boundaries may be altered.”
In 1955, as a result of this amendment to Article XI, Section 9, the General Assembly enacted the statutory framework that has governed annexations ever since.1 These statutes provide two methods of annexation—the ordinance method2 and the referendum method.3 With specific regard to annexations accomplished by ordinance, the General Assembly provided affected property owners with a limited right of judicial review. Aggrieved property owners were given the statutory right to challenge the reasonableness of the annexation by filing a “suit in the nature of a quo warranto proceeding.”
The annexation statutes themselves provided the basis for these reasonableness challenges.
Eventually, the reasonableness inquiry was broadened to include procedural defects in the passage of the annexation ordinance. In 1978, this Court observed that even though
[t]he courts are not exрressly or impliedly authorized to void a municipal ordinance for failure of the municipality to give notice, hold a public hearing, or submit a plan of services to the local planning commission[,] ... a city would be unable to carry the burden of proving that the annexation was reasonably necessary for the welfare of the residents and property owners of the affected territory and the municipality as a whole without a public hearing after the required notice.
City of Oak Ridge v. Roane County, 563 S.W.2d at 897-98. One year later, we narrowed City of Oak Ridge v. Roane County by stating that to be actionable, the procedural defects in the enactment of an annexation ordinance must result in “constitutional infirmities.” City of Watauga v. City of Johnson City, 589 S.W.2d 901, 905 (Tenn.1979).
None of these cases addressed the question of whether the statutory quo warranto proceeding authorized by
The decision in State ex rel. Earhart v. City of Bristol is significant for a second reason. The declaratory judgment action in the case had been filed approximately two years after the challenged annexation ordinance had become effective. Thus, even though the Court did not directly address the question of the time within which the declaratory judgment action must be filed, the decision approving the declaratory judgment action necessarily means that declaratory judgment actions challenging annexation ordinances on grounds other than reasonableness need not be filed within thirty days after the effective date of the challenged annexation ordinance. I concur completely with this conclusion.
Because of its legitimate concern about piecemeal challenges to annexation ordi-
III.
For the purposes of this case, I will concede the appropriateness of the limitations that the Court is placing on declaratory judgments that challenge annexation ordinances. I part company with the Court because I have concluded that the Highwoods parties’ declaratory judgment action meets both of the Court‘s requirements for declaratory judgment actions challenging an annexation ordinance.
The first requirement is that a quo warranto action cannot be available to the parties filing the declaratory judgment action. The Court has decided that the Highwoods parties cannot satisfy this requirement because they could have filed a quo warranto in late 1997 or early 1998. True enough. To challenge the reasonableness of the 1997 annexation ordinance, the Highwoods parties would have been required to file a timely quo warranto action. However, the Highwoods parties are not asserting a reasonableness challenge or even a preliminary procedural defect in this case.
In this prоceeding, the Highwoods parties are squarely challenging the legality of the settlement of the 1997 litigation regarding the original annexation ordinance. They are asserting that the negotiation and acceptance of this settlement which varies from the terms of the original 1997 annexation ordinance is ultra vires. As is well stated by the Court, the Highwoods parties have requested the invalidation of the June 8, 2006 consent final judgment because
“[a] genuine dispute exists as to whether the ... Ordinance, as amended through the Consent Final Judgment and Amended Consent Final Judgment[,] is valid.” The Plaintiffs argued that the settlement constituted “an attempt to unlawfully circumvent the exclusive procedures established by the General Assembly” by effectively amending the Ordinance to incorporate the two-tiered annexation schedule, without enacting a new ordinance.
The Highwoods parties could not have asserted this claim by quo warranto or
The second requirement is that the party filing the declaratory judgment action must be claiming that the annexation ordinance was ultra vires. The Highwoods parties are asserting just such a claim. They claim that by allowing a city attorney and private parties to amend an annexation ordinance without ratification or approval from the city‘s legislative body, the annexation became ultra vires and invalid because it exceeds the annexation authority delegated by the General Assembly.
Two years ago, the Court of Appeals addressed the challenge to the validity of an annexation ordinance that had been modified by consent order. Distinguishing between a reasonableness challenge and an ultra vires challenge, the court concluded that the party challenging the annexation ordinance “lost its legal right to challenge annexation of its property on the grounds of reasonableness thirty days after passage of the annexation ordinance when it did not file a quo warranto proceeding.” Blount v. City of Memphis, No. W2006-01191-COA-R3-CV, 2007 WL 1094155, at *4 (Tenn.Ct.App. Apr. 13, 2007). Nevertheless, the court held that the bar to challenging the reasonableness of the annexation ordinance did “not preclude, impair or impede [the party‘s] ability to litigate its claim that the ‘new’ or ‘modified’ ordinance is invalid in a declaratory judgment action.” Id. at *4. I agree with the reasoning of the Court of Appeals in this case.
The Highwoods parties’ declaratory judgment action is aimed precisely at the invalidity of the modified annexation ordinance. Their complaint alleges that the city attorney and private parties may not modify a duly enacted annexation ordinance. If the Highwoods parties are correct and such authority does not reside with the city attorney and private parties, then the 2006 consent decree modifying the 1997 annexation ordinance cannot be given legal effect because the compromise ordinance has not been ratified or adopted by the Memphis City Council.
IV.
I share the Court‘s concern about piecemeal annexation litigation. However, I am equally concerned about the preservation of the careful balancing of interests that the General Assembly engaged in when it empowered municipal legislative bodies to annex adjoining property by ordinance. This case reveals a potentially problematic unbalancing of these compromises because in this case, an executive branch official—the city attorney—and private parties appear to be performing a legislative act with the city‘s legislative body sitting on the sidelines. It is my belief that the Highwoods parties are entitled to present to the courts the important issue of whether such an approach to annexation is ultra vires and to have the issue decided on the merits.
WILLIAM C. KOCH, JR.
SUPREME COURT JUSTICE