Continental Elec. Co. v. City of Leeds

• Citation: 473 So.2d 1056
• Parties: CONTINENTAL ELECTRIC COMPANY, a Corporation v. CITY OF LEEDS, A Municipal Corporation. Civ. 4424.
• Decision Date: 08 August 1984
• Court: Alabama Court of Civil Appeals

Page 1056

473 So.2d 1056

CONTINENTAL ELECTRIC COMPANY, a Corporation v. CITY OF LEEDS, A Municipal Corporation.

Civ. 4424.

Court of Civil Appeals of Alabama.

Aug. 8, 1984.

Rehearing Denied Sept. 12, 1984.

Winston B. McCall, Jr., Birmingham, for appellant.

James E. Hill, Jr., Leeds, for appellee.

HOLMES, Judge.

This is a business license tax case.

At issue is the business license schedule of the city of Leeds as applied to businesses located outside the corporate limits but within the police jurisdiction of Leeds.

The statutory authority for such license taxes is section 11-51-91, Ala.Code (1975), which allows municipalities to collect taxes to defray the cost of municipal services provided to businesses in their police jurisdictions.

In the judgment appealed from, the learned trial judge found that the license fees were not arbitrarily fixed by the city of Leeds, but instead resulted from a reasonable effort on the city's part to relate the amount charged to the reasonable cost of municipal services provided. After having reviewed the record and the cases cited in briefs, we must reverse.

The business license tax statute has been the subject of several recent cases before this court and the Alabama Supreme Court. See City of Hueytown v. Burge, 342 So.2d 339 (Ala.1977); Atlantic Oil Co. v. Town of Steele, 283 Ala. 56, 214 So.2d 331 (1968); State v. Sanderson Equipment Co., 380 So.2d 298 (Ala.Civ.App.1979), cert. denied, 380 So.2d 299 (Ala.1980); Town of Newville v. Price, 372 So.2d 1314 (Ala.Civ.App.1979). Under that statute, a municipality may assess a license tax against businesses located outside the corporate limits of the municipality but within the police jurisdiction, not to raise revenue either directly or indirectly, but instead to reasonably reimburse the city for supervision of the businesses so located, including police and fire protection. City of Hueytown v. Burge, 342 So.2d 339 (Ala.1977). When such an assessment is made, it is presumed to be a valid exercise of the police power of the municipality, and not an attempt to raise general revenue, unless it is shown that the city has manifestly abused its power or invalidity appears from the face of the ordinance itself. Id.

Because the levy under the statute is presumptively valid, the challenger bears the burden of establishing affirmatively by competent evidence that abuse or invalidity exists. Id. The courts will not scrutinize the amount of the license fee too narrowly when it reflects a sincere effort on the part of the city authorities to fix the fee on a basis justified under law. Hawkins v. City of Prichard, 249 Ala. 234, 30 So.2d 659 (1947). However, when it appears that arbitrary figures were fixed for such license fees and that no effort was made to relate the fees charged to the reasonable cost of municipal supervision, it follows that the imposition of the taxes on police jurisdiction businesses was for general revenue purposes, an impermissible course of municipal action. City of Hueytown v. Burge, 342 So.2d 339 (Ala.1977).

Hawkins v. City of Prichard, 249 Ala. 234, 30 So.2d 659 (1947), set out guidelines municipalities should follow in fixing their license taxes:

"Cities in fixing their schedule of licenses should anticipate the amount to be needed for police, fire and sanitation, and other supervision, including use of its facilities, both within the city and in the police jurisdiction. And then allocate a reasonable amount of that for the police jurisdiction. And estimate the proper proportionate amount of that which should be chargeable to the various businesses there subject to a license tax by the city, so that each such business then licensed shall as near as possible pay an amount properly chargeable to its supervision and police protection, all of them together approximately covering the amount of the expense of the city for such purposes properly allocated to the police jurisdiction.

"....

"... Cities should by this time have learned that they cannot license for general revenue purposes businesses maintained solely in the territory of their police jurisdiction outside the city limits. Section 733, title 37 (pocket part), Code, does not confer on cities a right to assess licenses for such business equal in all instances to one-half the amount charged and collected as a license for like business within the corporate limits of the city. But that is the ceiling over which they cannot go. But under that ceiling the Constitution declares in effect that it must not exceed a reasonable sum as a charge for the supervision of that business."

Id. at 238-39, 30 So.2d at 663. A similar guideline was contained in Alabama Power Co. v. City of Carbon Hill, 234 Ala. 489, 175 So. 289 (Ala.1937): "[W]hen a city is exercising a right to tax only for the police supervision of a class of business, that sort of business must be classified in accordance with its merit rating in respect to the necessity for police supervision." Id. at 493, 175 So. at 292.

The case below was tried on depositions, stipulations, and other written evidence after the parties had filed cross-motions for summary judgment. Accordingly, the ore tenus rule has no application and we do not afford the usual presumption of correctness to the trial court's findings. Roberts v. Frit Industries, 437 So.2d 1038 (Ala.Civ.App.1983).

Our review of the evidence reveals the following: Pursuant to section 11-51-91, Ala.Code (1975), the city of Leeds enacted an ordinance which requires businesses operating outside the corporate limits but within the police jurisdiction of Leeds to procure a license. See Section 6-2, Code of Ordinances, City of Leeds, Alabama. The amount of the tax paid for such license is set at one-half the amount to which such business would be subject were such business carried on within the corporate limits of the city. The amount such business would be subject to were it carried on within the corporate limits is set out in section 6-1 of the ordinance code. (Section 6-1 establishes various classifications of businesses within the Leeds corporate jurisdiction according to the business activity in which the business is engaged.)

Leeds renders three types of municipal services to its police jurisdiction. Police service includes patrolling, dispatches to specific complaints, and detective work. Fire service includes inspection services and answers to fire calls. Ambulance service is also available.

For each of the two years here at issue (1981 and 1982), Continental Electric Company was classified as a "manufacturer" under ...