Menefee Crushed Stone Co., Inc. v. Taylor

• Decision Date: 29 June 1988
• Citation: 760 S.W.2d 223
• Parties: MENEFEE CRUSHED STONE CO., INC., Plaintiff-Appellee, v. Dudley W. TAYLOR, Commissioner of Revenue for the State of Tennessee and Successor to Kathryn B. Celauro and Donald W. Jackson, and W.J. Michael Cody, Attorney General and Reporter for the State of Tennessee, Defendants- Appellants.
• Court: Tennessee Court of Appeals

Page 223

760 S.W.2d 223

MENEFEE CRUSHED STONE CO., INC., Plaintiff-Appellee, v. Dudley W. TAYLOR, Commissioner of Revenue for the State of Tennessee and Successor to Kathryn B. Celauro and Donald W Jackson, and W.J. Michael Cody, Attorney General and Reporter for the State of Tennessee, Defendants- Appellants.

Court of Appeals of Tennessee Middle Section, at Nashville.

June 29, 1988.

Application for Permission to Appeal

Denied by Supreme Court Oct. 31, 1988.

W.W. Berry, William W. Berry, Jr., Bass, Berry & Sims, Nashville, for plaintiff-appellee.

W.J. Michael Cody, Atty. Gen. and Reporter, Charles L. Lewis, Deputy Atty. Gen., William E. Young, Asst. Atty. Gen., Nashville, for defendants-appellants.

OPINION

LEWIS, Judge.

This is an appeal by the defendant, Dudley W. Taylor, Commissioner of Revenue for the State of Tennessee, from the Chancellor's judgment ordering the return of severance taxes paid under protest by plaintiff after finding the Commissioner could not impose a severance tax on plaintiff for limestone quarried by plaintiff before July 8, 1985. The Chancellor found that the chapter authorizing the tax, Chapter 410, Public Acts of 1985, was not effective until 8 July 1985. The Chancellor held that the collection of the tax before the effective date would violate Tenn. Const. Art. I, § 20, which prohibits retrospective laws.

This case commenced when the Commissioner assessed a severance tax against the plaintiff on June 10, 1985, upon minerals severed from the ground since June 5, 1984.

Plaintiff subsequently paid under protest to the Commissioner the severance tax which was assessed.

Plaintiff filed two complaints with the Tennessee Claims Commission questioning its liability for payment of the severance taxes. The plaintiff subsequently removed both the cases to the Chancery Court for Davidson County, Tennessee, pursuant to the provisions of Tenn.Code Ann. § 67-1-1805. ¹

Both complaints were consolidated for trial pursuant to an order of the Chancery Court for Davidson County. In both complaints, the plaintiff alleged that the severance tax as applied to it was unconstitutional and invalid because (1) both Chapter 953, Public Acts of 1984, which originally imposed a severance tax, and Chapter 410, Public Acts of 1985, which attempted to cure certain constitutional defects in Chapter 953, were invalid delegations of legislative power in contravention of Tenn. Const. Art. II, § 3; (2) Resolution 84-334, adopted by the Metropolitan Council of the Metropolitan Government of Nashville and Davidson County, Tennessee, pursuant to provisions of Chapter 953, Pub.Acts of 1984, was an unconstitutional exercise of state legislative power by the Metropolitan Council since it was based upon an unconstitutional delegation of legislative power and, thus, was invalid and ineffective to authorize an imposition of any severance tax in Davidson County, Tennessee; (3) Chapter 410 of the 1985 Public Acts was an attempt to tax the exercise of a privilege after the privilege had been exercised, and therefore violated both the provisions of Article 1, § 20 of the Constitution of the State of Tennessee, which provides "[t]hat no retrospective law, or law impairing the obligations of contracts, shall be made" and § 1 of the Fourteenth Amendment to the Constitution of the United States by depriving the plaintiff of its property without due process of law; and (4) the attempted retroactive application of the severance tax by Chapter 410, Public Acts of 1985, was ineffective because that Act lacked the wording which is constitutionally required for setting extraordinary effective dates.

The defendants answered the complaints, denying that the severance tax assessed against the plaintiff was improperly collected.

Following an evidentiary hearing, the Chancellor filed his Memorandum Opinion and found that (1) Chapter 410 of the 1985 Public Acts was a constitutional delegation of legislative power; (2) the Resolution 84-334 of the Metropolitan Council complied with requirements of Tenn.Code Ann. § 67-7-212 that the severance tax be approved by resolution of the local legislative body; (3) the effective date of Chapter 410, Public Acts of 1985, was July 8, 1985; and (4) the commissioner could not impose a severance tax on limestone quarried by the plaintiff before July 8, 1985, since this would violate the prohibition against retrospective laws contained in Tenn. Const. Art. I, § 20. Thereafter, the Chancellor entered judgment which incorporated his Memorandum Opinion. The judgment required the commissioner to refund all taxes paid by the plaintiff under protest on limestone quarried before July 8, 1985.

On June 5, 1984, the Governor signed Chapter 953, Public Acts of 1984, which authorized counties to levy a severance tax. Section 1 of Chapter 953 provided that "[a]ny county legislative body, by resolution is authorized to levy a tax on all sand, gravel, sandstone, chert and limestone severed from the ground within its jurisdiction." Section 8 of Chapter 953 provided that the act "shall not become effective for the imposition of the tax within any county in this state unless it is approved by a two-thirds ( 2/3) vote of the county legislative body" and that "[s]uch county legislative body shall approve or disapprove this act within one hundred twenty (120) days of the effective date of this act for ratification purposes." The provisions of Chapter 953 were subsequently codified at Tenn.Code Ann. §§ 67-7-201--67-7-211.

The Metropolitan Council of the Metropolitan Government of Nashville and Davidson County, pursuant to Chapter 953, adopted Resolution 84-334 on August 21, 1984, and certified the Resolution on August 27, 1984. Resolution 84-334 provided that the Council approve Chapter 953 and specifically stated: "tax on any and all sand, gravel, sandstone, chert, and limestone as they are or may be defined by said Public Chapter 953 as the same may be amended, is hereby levied." The Resolution set the tax rate at fifteen ($.15) cents per ton. Resolution 84-334 became effective on August 21, 1984.

On October 1, 1984, the Tennessee State Attorney General issued an opinion which concluded that Chapter 953, Public Acts of 1984, was constitutionally suspect. The Attorney General reiterated this conclusion in an opinion on March 13, 1985, stating that "it is the opinion of this Office that Chap. 953 is unconstitutional." According to this opinion, Chapter 953 violated the fundamental constitutional principal that "the power conferred upon the legislature to make laws cannot be delegated by that department to any other body or authority." The Attorney General noted that a true local option would not violate this principal but reasoned that Chapter 953 was not a true local option since if no county legislative body approved it within 120 days then the legislative enactment would never go into effect. The Attorney General opined that under these circumstances the commissioner of revenue would be justified in declining to administer the provisions of Chapter 953.

On May 28, 1985, in order to correct any perceived defects in Chapter 953, the Governor signed Chapter 410 of the Public Acts of 1985. Chapter 410 amended several provisions of Tenn.Code Ann. §§ 67-7-201--67-1-211 relative to the imposition of the tax on minerals severed from the ground. Specifically, § 3 of Chapter 410 repeals Tenn.Code Ann. § 67-7-210. Section 4 of Chapter 410 added the following new provision:

(a) The tax authorized by this part shall be levied pursuant to the provisions of this part in any county upon the adoption of a resolution by two-thirds ( 2/3) vote of the county legislative body of such county. The presiding officer of the county legislative body shall certify a copy of the resolution to the secretary of state and the commissioner of the department of revenue.

(b) In addition, no tax shall be collected by the department of revenue pursuant to such county legislative action until the first day of a month occurring at least thirty (30) days after the receipt of a certified copy of such action by the department of revenue.

(c) Any county legislative body that has by private act enacted prior to June 5, 1984, levied a tax on the severance of sand, gravel, sandstone, chert or limestone may continue such tax at a rate not to exceed the rate established in §§ 67-7-201--67-7-211, and such private act shall remain in force and effect in such county for all other purposes; provided, however, that any adjustment required by §§ 67-7-201--67-7-211, in the rate effective in such county shall take effect on the first day of the month following June 5, 1985.

These provisions have been codified at Tenn.Code Ann. § 67-7-212.

Section 5 of Chapter 410 re-enacted the text of Tenn.Code Ann. Title 67, Chapter 7, Part II, excluding § 67-7-210 and incorporated this text in Chapter 410 as a part of that act. Furthermore, § 6 of Chapter 410 expressly stated that "[a] resolution adopted by any county legislative body in conformance with Section 3 on or after June 5, 1984, shall be effective for the collection of the tax authorized herein." And § 8 provided in part that the "provisions of Sections 2 through 5 of this Act shall be retroactive to June 5, 1984, so as to authorize levy of the tax herein from that date, the public welfare requiring it."

The plaintiff is engaged in the business of quarrying and selling limestone from a quarry located in Davidson County, Tennessee. The plaintiff received a memorandum dated June 10, 1985, from Jerry Davis, Director of the Miscellaneous Tax Division of the Department of Revenue of Tennessee. The memo advised that Chapter 410 of the Public Acts of 1985, had been enacted and authorized any county legislative body to levy a tax on limestone and other type of rock which were severed from the ground. The memo further stated that Chapter 410 was retroactive to June 5, 1984, making any resolution adopted by two-thirds...