City of Kingsport v. State ex rel. Crown Enterprises, Inc.

• Citation: 562 S.W.2d 808
• Court: Supreme Court of Tennessee
• Decision Date: 21 February 1978
• Parties: CITY OF KINGSPORT et al., Appellants, v. STATE of Tennessee ex rel. the CROWN ENTERPRISES, INC., et al., Appellees. 562 S.W.2d 808

Page 808

562 S.W.2d 808

CITY OF KINGSPORT et al., Appellants, v. STATE of Tennessee ex rel. the CROWN ENTERPRISES, INC., et al., Appellees.

562 S.W.2d 808

Supreme Court of Tennessee.

Feb. 21, 1978.

Ward Huddleston, Jr., W. E. Weber, Jr., Kingsport, for appellants.

Ernest F. Smith, Edwin O. Norris, Steven C. Rose, Hunter, Smith, Davis, Norris, Treadway & Hadden, Kingsport, for appellees.

OPINION

HENRY, Chief Justice.

This is a suit in the nature of a quo warranto proceeding instituted pursuant to Sec. 6-310, T.C.A., to contest the validity of an annexation ordinance of the City of Kingsport. The trial judge invalidated the ordinance. We reverse.

I. The Annexed Territory

The annexation ordinance was duly and regularly passed by the governing body of the City of Kingsport, and all statutory procedural requirements have been met.

The ordinance provides for the annexation of 806 acres situated generally astride U. S. Highway 11W (Stone Drive) and lying generally west and southwest of John B. Demis By-pass. These are two main arterial highways in Kingsport.

Lying south of Stone Drive are a number of retail and wholesale commercial establishments. Behind these establishments, and extending generally along the southern border of the annexed area, runs Reedy Creek. The record reveals that the flood plain of this stream, containing some 73 acres, is of significant importance to the City as a whole, and particularly to the business establishments located on the south side of Stone Drive.

The situs of a substantial portion of the annexed property is north of Stone Drive. Included within this is a tract containing approximately 309 acres which is the site of a planned extension of an exclusive residential subdivision.

Also included within the area north of Stone Drive, but not contiguous thereto, is a tract of 63 acres purchased by the Sullivan County Board of Education upon which it is planned to construct a new high school.

Abutting upon Stone Drive to the north is an 85 acre tract owned by Crown Enterprises, a diversified corporation consisting of about ten divisions.

Its principal subsidiary is Mason and Dixon Lines (M&D), one of the nation's largest trucking companies. This 85 acre tract, leased by Crown to M& D, serves as M&D's home office and as the nerve center of its operations, which are nationwide in dimension. In addition to its main office building, it also operates on this site a building-supply building, a terminal building and a maintenance-transportation building.

This 85 acre tract is wholly within the 806 acre annexed territory and is surrounded by the remaining 721 acres.

A major issue in the court below was whether M&D's Kingsport operation was "industrial" within the meaning and scope of Sec. 6-310, T.C.A. For reasons pointed out hereinafter we think its classification is of no critical significance. However, to clarify this issue, we hold that M&D's property is industrial in nature. ¹ The City of Kingsport so classified it for zoning purposes, electing not to treat it as commercial. We see no essential difference between zoning and annexation classifications. Indeed, a principal purpose of annexation is to govern land use by the application of sound zoning practices.

Other property is involved, but the foregoing recitations are sufficient to present the problem. Additionally it should be noted that the annexed area contains no residential units at this time.

M&D does not challenge the overall annexation plan; but it vigorously objects to the inclusion of the 85 acre tract, which consists of approximately 10.6% Of the total area. Its principal insistence is that it is an "industrial plant development" within the meaning of Sec. 6-310, T.C.A.; that the sole purpose of the annexation is to increase municipal revenue; and that M&D does not need any municipal services.

In this connection it contends that it is self-sufficient from a standpoint of the usual city services and that the total annexation will result in additional revenue of approximately $85,210.00, 56% Of which would be paid by M&D and Crown.

There is no disputed material fact.

II. The Burden of Proof

A substantial part of the record in this case is devoted to proof designed to establish that M&D's activity is industrial in character and, therefore, Sec. 6-310, T.C.A. comes into play to place the burden of proof squarely on the City.

As a predicate for further discussion, we here quote the pertinent part of Sec. 6-310, T.C.A.:

Should the territory hereafter sought to be annexed be the site of substantial industrial plant development, a fact to be ascertained by the court, the municipality shall have the burden of proving that the annexation of the site of the industrial plant development is not unreasonable in consideration of the factors above mentioned, including the necessity for, or use of municipal services by the industrial plant or plants, and the present ability and intent of the municipality to benefit the said industrial plant development by rendering municipal services thereto when and as needed. The policy and purpose of this provision is to prevent annexation of industrial plants for the sole purpose of increasing municipal revenue, without the ability and intent to benefit the area annexed by rendering municipal services, when and as needed, and when such services are not used or required by the industrial plants.

We think that much of this controversy could have been eliminated had due regard been given to the history of Sec. 6-310, T.C.A.

Prior to the enactment of Chapter 113, Public Acts of 1955 (carried into the Code as Sec. 6-308, et seq.), the sole and exclusive method of extending the boundaries of a municipal corporation was by legislative action. The 1955 Act delegated the legislative authority of annexation to the municipalities of the state. That authority could be exercised by the municipality by ordinance, passed either upon the initiative of its governing body, or pursuant to a petition signed by a majority of residents and property owners in the affected area. Annexation by referendum was also provided for.

In the initial act aggrieved property owners were given the right to contest the validity of the annexation on the ground that "it 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 constitutes an exercise of power not conferred by law." See Sec. 6-310.

This provision produced a series of cases articulating the "fairly debatable" standard.

The first case to construe the provision was Witt v. McCanless, 200 Tenn. 360, 292 S.W.2d 392 (1956). There the Court correctly noted that the power of annexation is legislative in character, the Court's only duty being to determine the reasonableness of the annexation ordinance.

Thereafter, there came before the Court the leading case construing the annexation-by-ordinance statutes, Morton v. Johnson City, 206 Tenn. 411, 333 S.W.2d 924 (1960). There the proof was conflicting, and perhaps the reasonableness of the annexation might be classified as marginal. In sustaining the annexation, the Court again recognized that annexation was legislative or political in character and pointed out that the courts should not interfere in such matters. Specifically, the Court said:

(T)he correct legal principle to apply is . . . if 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.

206 Tenn. at 426, 333 S.W.2d at 930.

It is evident that the "fairly debatable" standard would result in upholding all annexations except those characterized by blatant bad faith.

In State v. City of Columbia, 208 Tenn. 59, 343 S.W.2d 888 (1961), the Court followed Morton, supra, equating the act of the city governing body with the act of the legislature and holding that "an annexation, so long as it complies with the statute, has the same force and effect and is subject to the same attacks, only as annexation would be if done by the Legislature." Id. at 61-62, 343 S.W.2d at 889. The Court further noted the presumption in favor of the ordinance and that those who contest it have the burden of proving it to be unreasonable.

Next in chronological order, we note Chapter 220, Public Acts of 1961, sometimes known as the industrial amendment. This act (see paragraph 5, Sec. 6-310, T.C.A.) governs the annexation of industrial property and provides, in relevant part, that "the municipality shall have the burden of proving that the annexation . . . is not unreasonable."

This Court reiterated the "fairly debatable" standard in State v. City of Jackson, 218 Tenn. 322, 403 S.W.2d 304 (1966), and again in State v. Mayor and Aldermen of Morristown, 222 Tenn. 21, 431 S.W.2d 827 (1968). In the latter case the Court responded to the argument that all annexations are fairly debatable and, therefore, this standard "destroys judicial review" thusly:

The rule does not destroy judicial review, but limits its scope to the court's determining whether the proposed annexation is so palpably unreasonable and unnecessary as to be an arbitrary and oppressive exercise of delegated legislative power. It is stated in 37 Am.Jur., Municipal Corporations, Sec. 28, that annexation is exclusively a legislative power and great latitude must necessarily be accorded the legislative discretion. The fairly debatable rule does no more than insure this latitude of legislative discretion. (Emphasis supplied).

222 Tenn. at 27, 431 S.W.2d at 829.

Perhaps the strongest statement on the limitation on court review of annexation will be found in State v. City of Memphis, 224 Tenn. 514, 457 S.W.2d 532 (1970):

(T)he Legislature has plenary power to alter municipal boundaries and absent constitutional restraint, such is not open for review by the courts. The Legislature in enacting Chapter 113,...