Nash v. Town of Tarboro

• Decision Date: 09 April 1947
• Docket Number: 90
• Citation: 42 S.E.2d 209,227 N.C. 283
• Parties: NASH v. TOWN OF TARBORO et al.
• Court: North Carolina Supreme Court

42 S.E.2d 209

227 N.C. 283

NASH v. TOWN OF TARBORO et al.

No. 90

Supreme Court of North Carolina

April 9, 1947

The plaintiff, a taxpayer in the Town of Tarboro brought this action on his own behalf and that of the other taxpayers similarly situated to restrain the municipality from issuing bonds and levying taxes for the acquisition or construction of a hotel in the town, which it proposed to own and maintain, and from the levy of taxes to retire said bonds. The plaintiff contends that the proposed action is in contravention of Article V. Section 3, of the Constitution requiring that taxes be levied and collected only for a public purpose.

The Session Laws of 1945, Chapter 413, purports to authorize the acquisition, or construction of the hotel, the issuance of the bonds, and the levy of the tax, provided the project be approved by a majority of the qualified voters at an election to be called by the Board of Commissioners. Pursuant to the authority thus given the Board passed an ordinance providing for the issue of bonds in the sum of $250,000 and the levy of a tax, if approved as provided in the statute. The election was duly called and held, and the result was favorable to the issuance of the bonds and the levy of the tax.

The case develops no disagreement as to the facts, or claim of procedural defects.

In its further answer the defendant pointed out that the Town of Tarboro has 8,000 inhabitants; that it contains only one hotel, out of repair and with inadequate facilities, and of such a character and reputation that those having occasion to visit the town decline to patronize it, but secure accommodations in neighboring towns. It is pointed out that by reason of this condition the general welfare and convenience of both the residents of the town and those who have business there, and the economic interests of the town have greatly suffered and will continue to be impaired if the situation is not remedied.

The matter came up for a hearing before Stevens, J., who, after making findings of fact and conclusions of law, entered a judgment sustaining the validity and constitutionality of the statute, the ordinance and the acts pursuant thereto, the proposed bond issue and the tax levy, and denied the injunction and dismissed the action. From this judgment the plaintiff appealed, assigning error.

George M. Fountain, of Tarboro, for plaintiff-appellant.

Lyn Bond and Philips & Philips, all of Tarboro, for defendants-appellees.

DENNY Justice.

This appeal presents only one question: Is the cost of construction, maintenance and operation of a hotel by a municipality a 'public purpose', within the meaning of Article V, Section 3, of our Constitution? The cited section provides: 'Taxes shall be levied only for public purposes. ' It must be conceded, therefore, that the defendant is without authority to proceed with the proposed project unless the above question is answered in the affirmative. For it is settled with us beyond question, that there can be no lawful tax which is not levied for a public purpose. Briggs v. City of Raleigh, 195 N.C. 223 141 S.E. 597; Commissioners of Johnston County v. State Treasurer, 174 N.C. 141, 93 S.E. 482, 2 A.L.R. 726; Jones v. City of Portland, 245 U.S. 217, 38 S.Ct 112, 62 L.Ed. 252, L.R.A.1918C, 765, Ann. Citizens Savings & Loan Ass'n v. City of Topeka, 20 Wall. 655, 87 U.S. 655, 22 L.Ed. 455; Haesloop v. City Council of Charleston, 123 S.C. 272, 115 S.E. 596; Burns v. Essling, 156 Minn. 171, 194 N.W. 404; State ex rel. Kansas City v. Orear, 277 Mo. 303, 210 S.W. 392; 44 C.J. 1270; 38 Amer.Jur., 85; McQuillin Municipal Corporations, Vol. 6, 2d Ed., p. 337; Cooley on Taxation, Vol. 1, 4th Ed., Sec. 174. In Amer.Jur., supra, it is said: 'A state legislature can neither compel nor authorize a municipal corporation to expend any of its funds for a private purpose, and consequently, since practically every undertaking of a municipality does or may require the expenditure of money, a municipal corporation cannot, even with express legislative sanction, embark in any private enterprise, or assume any function which is not in a legal sense public. If there is any restriction implied and inherent in the spirit of American Constitutions, it is that the government and its subdivisions shall confine themselves to the business of government, for which they were created, but if a specific provision prohibiting the expenditure of public funds for private purposes is required, it is found in the clause which forbids the taking of property for other than public uses; for since the funds of a municipality are necessarily directly or indirectly raised by taxation, the expenditure of money by a municipality for private purposes does or may necessarily result in the taking of the property of individuals under the guise of taxation for other than public uses. ' The difficulty, however, arises in deciding what is and what is not a public purpose. And, while the initial responsibility for the determination of this question rests with the legislature, its determination is not conclusive. 'In its final analysis, it is a question for the courts. ' Briggs v. City of Raleigh, supra [195 N.C. 223, 141 S.E. 601]. Yarborough v. North Carolina Park Commission, 196 N.C. 284, 145 S.E. 563; Cobb v. Atlantic Coast Line R. Co., 172 N.C. 58, 89 S.E. 807; In re Opinion of the Justices, 118 Me. 503, 106 A. 865; Kinney v. City of Astoria, 108 Or. 514, 217 P. 840; People ex rel. Horton v. Prendergast, 220 A.D. 351, 222 N.Y.S. 29; Id., 248 N.Y. 215, 162 N.E. 10; Cooley on Taxation, Vol. 1, Sec. 187.

In the case of Citizens Savings & Loan Association v. City of Topeka, supra, in considering what is a public purpose, the Court said: 'It is undoubtedly the duty of the Legislature which imposes or authorizes municipalities to impose a tax, to see that it is not to be used for purposes of private interest instead of a public use, and the courts can only be justified in interposing when a violation of this principle is clear and the reason for interference cogent. And in deciding whether, in the given case, the object for which the taxes are assessed falls upon the one side or the other of this line, they must be governed mainly by the course and usage of the government, the objects for which taxes have been levied, what objects or purposes have been considered necessary to the support and for the proper use of the government, whether State or municipal. Whatever lawfully pertains to this and is sanctioned by time and the acquiescence of the people may well be held to belong to the public use, and proper for the maintenance of good government, though this may not be the only criterion of rightful taxation. But in the case before us, in which the towns are authorized to contribute aid by way of taxation to any class of manufacturers, there is no difficulty in holding that this is not such a public purpose as we have been considering. If it be said that a benefit results to the local public of a town by establishing manufacturers, the same may be said of any other business or pursuit which employs capital or labor. The merchant, the mechanic, the innkeeper, the banker, the builder, the steamboat owner are equally promoters of the public good, and equally deserving the aid of the citizens by forced contributions. No line can be drawn in favor of the manufacturer which would not open the coffers of the public treasury to the importunities of two thirds of the business men of the city or town.' 61 C.J. 90.

In determining whether or not a tax is for a public purpose, when considered in the light of custom and usage, as pointed out above, courts should also take into consideration the fact, that a purpose not theretofore considered public, but by reason of changed conditions and circumstances, may be so classified. Stevenson v. Port of Portland, 82 Or. 576, 162 P. 509; 61 C.J., 90. This principle has been applied in determining what is a necessary expense within the meaning of Article VII, Section 7, of our Constitution. Prior to the decision of this Court in the case of Fawcett v. Mount Airy, 1903, 134 N.C. 125, 45 S.E. 1029, 63 L.R.A. 870, 101 Am.St.Rep. 825, the expense incurred by a municipality for the purpose of building and operating plants to furnish water and lights to its citizens was not considered a necessary expense. The urgent need, however, for the establishment and maintenance of such facilities in our towns and cities, to protect the health of the citizens thereof, fully justified the judicial determination that the cost of construction and maintenance of such plants, is a necessary expense within the meaning of the Constitution.

A municipal corporation is a political subdivision of the State and 'can exercise only such powers as are granted in express words, or those necessary or fairly implied or incident to the powers expressly conferred, or those essential to the accomplishment of the declared objects and purposes of the corporation,' 37 Amer.Jur. 722. Brumley v. Baxter, 225 N.C. 691, 36 S.E.2d 281, 162 A.L.R. 930; Clayton v. Liggett & Myers Tobacco Co., 225 N.C. 563, 35 S.E.2d 691; Brown v. Board of Com'rs of Richmond County, 223 N.C. 744, 28 S.E.2d 104; Kennerly v. Town of Dallas, 215 N.C. 532, 2 S.E.2d 538; Madry v. Town of Scotland Neck, 214 N.C. 461 199 S.E. 618; Kennedy v. City of Nevada, 222 Mo.App. 459, 281 S.W. 56. Such a corporation has both governmental and proprietary powers. Millar v. Town of Wilson, 222 N.C. 340, 23 S.E.2d 42; Asbury v. Town of Albemarle, 162 N.C. 247, 78 S.E. 146, 44 L.R.A.,N.S., 1189. A municipal corporation in the exercise of a proprietary right, just as in the exercise of a governmental power, cannot invoke the power of taxation or the right of eminent domain except for a...