City of Englewood v. Wright

• Decision Date: 28 August 1961
• Docket Number: No. 19714,19714
• Citation: 364 P.2d 569,147 Colo. 537
• Parties: , 93 A.L.R.2d 1129 CITY OF ENGLEWOOD, a municipal corporation, and B. O. Beausang, individually and as Clerk of the said The City of Englewood, Plaintiffs in Error, v. B. B. WRIGHT, Kathryn Wright, Walter T. Powell, Virginia Wright Powell, Marlo F. Holland, Amelia Holland, and William R. Hagge, each individually as taxpayers in the City of Englewood and County of Arapahoe, and for and on behalf of themselves and all other similarly situate, Defendants in Error.
• Court: Colorado Supreme Court

Page 569

364 P.2d 569

147 Colo. 537, 93 A.L.R.2d 1129

CITY OF ENGLEWOOD, a municipal corporation, and B. O Beausang, individually and as Clerk of the said The City of Englewood, Plaintiffs in Error, v. B. B. WRIGHT, Kathryn Wright, Walter T. Powell, Virginia Wright Powell, Marlo F. Holland, Amelia Holland, and William R. Hagge, each individually as taxpayers in the City of Englewood and County of Arapahoe, and for and on behalf of themselves and all other similarly situate, Defendants in Error.

No. 19714.

Supreme Court of Colorado, En Banc.

Aug. 28, 1961.

Rehearing Denied Sept. 18, 1961.

Joseph W. Each, Englewood, for plaintiffs in error.

Creamer & Creamer, Denver, for defendants in error.

McWILLIAMS, Justice.

The question to be resolved is whether a 'license tax' imposed by the City of Englewood on any person who 'rents, leases or otherwise provides' residential or commercial property is valid and constitutional. The trial court held this 'license tax' to be unconstitutional and therefore 'null, void and of no effect', and accordingly enjoined Englewood from enforcing the ordinance in question as it relates and pertains to the renting of residential or commercial properties. By writ of error Englewood seeks reversal of this judgment.

In 1956 the City Council of Englewood passed Ordinance No. 17 which purported to establish and impose a 'business and occupational license tax for the purpose of raising municipal revenue and licensing and regulating the carrying on of all business, trades, occupation, and professions within the City of Englewood.' (Emphasis supplied.) The ordinance in so many words stated its purpose was to provide additional revenue to meet the increase in the cost of city government occasioned by the rising unit costs of all existing services and the obligation to provide additional and improved services. The avowed intent of the ordinance was that 'all income-producing business, trades, occupations and professions located and performed, within the City of Englewood shall be subject to a Business and Occupational Tax under this Ordinance.' Accordingly, the ordinance decreed that a license tax should be paid by such diverse business, trades, occupations and professions as banks, dancing schools, junk dealers, ambulance firms, circuses, real estate agencies, physicians, dentists, and attorneys. The present action involves only those persons who rent residential or commercial properties, and does not pertain to any other business sought to be taxed by this ordinance.

Section 4 of Ordinance No. 17 states that '* * * any of the following businesses * * * shall pay the license tax hereinafter specified * * *,' and Group I in said section reads as follows:

'Group I: Rental Units:

'Sub-Group 1: Residential rental units

'(a) Any person who rents, leases or otherwise provides one or more residential units for hire shall be subject to a tax of $3.00 per unit per year.

'(b) A residential unit shall be construed, by way of illustration, to mean a house, duplex, apartment hotel room, motel room, or other like unit, in which a person or family resides, either transiently or permanently.'

'Sub-Group 2: Commercial Rental units:

'(a) Any person who rents, leases or otherwise provides any number of commercial rental units for hire shall be subject to a tax of $4.00 per unit per year.

'(b) Commercial rental units shall be construed to be any type of premises or units rented for business purposes, not including units in which persons or families reside, as defined in Sub-Group 1(b) above.

'(c) This tax shall not be construed to be a tax on persons who pay rent or occupy rental units owned or leased for rental purposes by other parties.'

The plaintiffs are seven persons who brought the present action not only for themselves but for all others similarly situated. Each of the seven owns and rents either residential or commercial property, or both, all situate in Englewood. Two of these seven are residents of Denver, the others all residing in Englewood. Apparently the plaintiffs paid the license tax for 1956 through 1959, but in 1960 refused to pay the tax and brought the present action, seeking to have the ordinance as it applies to them declared unconstitutional and to enjoin Englewood from collecting the tax.

In their complaint plaintiffs alleged that the tax sought to be collected is not truly a business or occupational tax, but actually an income tax in only slight disguise, or, if not an income tax, then a tax on real property, and in either event under the circumstances beyond the taxing power of Englewood. Also, it is averred, the tax is discriminatory in nature, and finally that the section of the ordinance which provides for a fine or imprisonment in jail for a violation thereof contravenes the constitutional prohibition against imprisonment for civil debt.

By answer Englewood generally alleged and contended that the portion of Ordinance No. 17 here under attack is constitutional, and by its counterclaim sought money judgment against each of the plaintiffs for the license tax due for 1960.

Evidence adduced on trial was brief and not in conflict. Some, but not all, of the plaintiffs appeared and testified as to their ownership and renting of residential and commercial properties situate in Englewood. Englewood, in support of its counterclaim, called its deputy clerk and treasurer who testified that the plaintiffs Wright owed as their license tax for 1960 the sum of $28; the plaintiffs Holland similarly owed $12; the plaintiff Hagge $6, but that the plaintiffs Powell had already paid in full their 1960 tax.

Some weeks after the conclusion of the trial proper, the trial court entered written findings, wherein it held, inter alia, (1) that the tax attempted to be extracted from these plaintiffs is either an income tax or a tax on real property, but in any event definitely not a business or occupational tax; (2) that the City of Englewood is 'without power to levy an income tax of any kind, such power being reserved to the general assembly under Article X, Section 17 of the Constitution of Colorado'; (3) that if this be a tax on real property, 'it is directly in violation of the Statutes of the State of Colorado and is null, void, and of no effect as violative of said Article XX of the Constitution of Colorado for the reason that provisions for taxation of real property are of state-wide concern and are controlled by Statutes of the State of Colorado, rather than by local or municipal ordinances'; (4) that said ordinance is unconstitutional in that it arbitrarily discriminates between commercial and residential rentals and 'capriciously and discriminatorily' imposes a higher rate on the former; and (5) that the right to rent one's property and to derive the monetary advantage therefrom is an 'inalienable right and incident of the ownership of real property' and, as such, not subject to the power of Englewood to impose a license tax thereon. Whereupon the trial court declared the ordinance as it relates to the renting of residential or commercial property 'null, void, and of no effect' and enjoined Englewood from enforcing the same. Englewood now seeks reversal of the judgment.

At the outset it should be stated that the City of Englewood, which at the time Ordinance No. 17 was passed, was a city of the second class, but which in 1958 became a home-rule city, has the undoubted power to impose a business or occupational tax for the sole purpose of raising revenue. See C.R.S. '53, 139-78-3(2), Article XX of the Colorado Constitution, and Sections 5 and 78 of the City Charter for the City of Englewood. Indeed, such is conceded by plaintiffs, who do not contest the power of Englewood to impose a business or occupational tax, but strongly urge that the proposed tax on the renting of property is not really a business or occupational tax, but is something else, either an income tax or a tax on real property.

It having been admitted that Englewood does have the authority and power to impose a business or occupational tax, the next question is whether those who rent residential or commercial property are thereby engaged in a business. If such persons are engaged in a business, then it must follow that they are subject to the tax. We not hold that the renting of residential or commercial property is a 'business' and as such is subject to the power to impose a business or occupational tax.

A throughtful analysis of what is involved in the renting of residential or commercial property reveals that such activity is a business. For example, it is common knowledge that many so-called luxury apartments have been recently erected in the Metropolitan Denver area. Frequently these are owned and operated by a corporation. The...