Nashville Gas & Heating Co. v. City of Nashville
| Decision Date | 14 June 1941 |
| Parties | NASHVILLE GAS & HEATING CO. v. CITY OF NASHVILLE et al. |
| Court | Tennessee Supreme Court |
Appeal from Chancery Court, Davidson County; R. B. C. Howell Chancellor.
Suit for declaratory judgment and for an injunction by the Nashville Gas & Heating Company against the City of Nashville and others. From a decree overruling a demurrer, the City of Nashville appeals.
Decree reversed, and suit dismissed.
In 1911 the City of Nashville, pursuant to charter powers, granted authority to the Gas Company, complainant below, by ordinance formally accepted, to "construct, acquire, maintain and operate gas works in the city of Nashville, county of Davidson, State of Tennessee, and to manufacture, sell and supply gas in said city, and to buy, use and maintain pipes and extend existing conduits and mains, with all the necessary and proper attachments, connections and appurtenances below the surface of the streets, avenues sidewalks, alleys and public grounds, and on the bridges and viaducts of the city of Nashville, as the boundaries thereof are now and may thereafter be, for the supply and distribution of gas, and for the same purpose to erect and maintain therein all necessary posts for lamps and lanterns, and to make connections for customers with such pipes and mains, for the term of forty years," subject to specified conditions as to the making of excavations, laying of pipes, etc., in the streets, alleys, and sidewalks, for the preservation thereof and the protection of the public. Provisions were also made concerning the quality and quantity of gas to be furnished the City and the public and the rates to be charged for such service.
By Section 12 of the ordinance it was provided,
Also, directly pertinent here, by Section 14 it was provided: "That in consideration of the rights and licenses hereby granted to the Nashville Gas & Heating Company, and in addition to the payment required to be made as hereinbefore provided in Section 12, said company shall pay to the Mayor and City Council of Nashville five (5) per centum of its gross receipts from the sale of gas, and also from the sale, at a fair market value, of by-products, unless and until said Mayor and City Council of Nashville--and the voters of the city at an election held for such purpose, according to the provisions of the law, shall ratify such, grant a license or right to any other company to engage in the same or a similar business to that of the Nashville Gas & Heating Company, and such other companies shall actually engage in business or the city itself engage in such business at which time all payments provided for in this section shall cease; Provided, that nothing herein contained shall be construed to prevent the city from granting a license or right to a natural gas company. ***."
Invoking application of a clause contained in Section 31, Chapter 21, of the Act of 1939, amending the general revenue act, Chapter 192 of 1937, the Gas Company filed this bill under the Declaratory Judgment Law seeking a declaration and decree that, "by virtue of the statutes of the State of Tennessee, and particularly by virtue of the enactment of Section 31 of Chapter 21 of the Public Acts of 1939, it is relieved of the obligation of paying, and is not obligated further to pay, five per cent of its gross receipts, as specified in Section 14 of the aforesaid franchise ordinance of the City of Nashville, approved October 10, 1911, it having made such payment for the period prior to the time of the enactment of Chapter 21 of the Public Acts of 1939;" and praying also for an injunction restraining the City from enforcing further payments of the 5 per cent. gross receipts under the contract hereinbefore described.
The determinative question, as we conceive it, is whether or not this clause of the general revenue act invoked by the Gas Company shall be construed as expressing the intention of the Legislature to abrogate this contract and deprive the City of Nashville of the compensation therein provided to be paid by the Gas Company for the rights granted and enjoyed.
The brief for the Gas Company thus concisely states the issues presented to this court, raised by demurrer of the City:
The chancellor overruled the demurrer of the City raising these questions, and the City has appealed.
In arriving at the meaning to be given to the language relied on by the Gas Company, it is helpful to look not only to the language contained in Section 31 of Chapter 21, Acts of 1939, and its context in this section, but to the history and setting of this amendatory clause and its position as a part of the general revenue laws of the State.
Chapter 108 and the amendatory Chapter 192 of the Acts of 1937 "provide for general revenue for the State of Tennessee, and the counties and municipalities thereof," as the title recites. Item G of Chapter 108 fixes a privilege tax of 3 per cent on gross receipts of gas, water electric dealers and distributors; Chapter 192, passed at the same legislative session, reduced this tax to 1 1/2 per cent on gas companies. This Item G of the revenue bill provided that, "This tax shall not apply to cities or other political subdivisions of the State owning and operating gas companies," etc.; that, "It is the intention of this Item to levy a tax for the privilege of engaging in intrastate commerce," etc.; that, "There shall be credited upon the tax hereby imposed any taxes paid under the Franchise Tax Law and under the Excise Tax Law during the calendar year," etc.; and that, "The tax hereby imposed shall be administered and collected in accordance with Article III, Section 2 of this Act," which applies to all privilege taxes fixed on the gross receipt basis, such as soft drink bottlers and manufacturers, telephone and telegraph companies and other public utilities. It is of interest, in this connection, to observe that Section 2 of Article II of this revenue act, in which section appears Item G imposing the tax on gas companies, provides that "the tax herein stated" is for State purposes only and that, "no county or municipality may impose any tax upon the privileges mentioned in this section," etc. (That the subject of this legislation is a tax is thus emphasized by repeated recitation.) It thus appears that if the contractual payment of the Gas Company to the City of Nashville was or is a "tax" within the class dealt with in the revenue act, then its collection was prohibited by the express terms of this section of the act itself. We think it quite obvious from the foregoing review that the legislative provisions in the general revenue act of 1937, imposing a tax on the gross receipts of gas and other utilities, had no intended reference or application to this special contractual obligation based on gross receipts of the Nashville Gas & Heating Company.
Now it was this State and County general tax law which was amended by Section 31 of Chapter 21 of the Acts of 1939, by adding to Item G, "to be a part of said paragraph the following":
"Any person, firm or corporation engaged in the business of manufacturing gas or of distributing manufactured gas that is now required by municipal ordinance or franchise to pay a gross receipts, privilege, franchise or license tax to any municipality or county in Tennessee shall not be entitled to said reduction of one and one-half (1 1/2) per cent, but shall be required to pay an amount equal to three (3%) per cent of the gross receipts derived from intrastate business in this state, and by reason of said requirement any such person, firm or corporation shall be and is hereby relieved from paying any such gross receipts, privilege, franchise or license tax to any municipality or county in Tennessee."
We have seen that the act before amended had no application to a contract for compensation such as we are considering, that it was clearly dealing with a different type of charge against the gross receipts of gas and other utilities, a privilege tax in the strict sense, for State revenue purposes. Is this amendment to be construed as radically departing from this classification and so enlarging the scope of the subject of the legislation as to abrogate this contract?
It has been seen that Item G, which exacts payment of this percentage of gross receipts, expressly and repeatedly refers to the charges as a "tax," a privilege tax, and such it is. The revenue act...
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