State Dept. of Revenue v. Reynolds Metals Co.

Decision Date18 November 1988
Citation541 So.2d 524
PartiesEx parte State of Alabama. (Re STATE DEPARTMENT OF REVENUE v. REYNOLDS METALS COMPANY). 87-728.
CourtAlabama Supreme Court

Don Siegelman, Atty. Gen., and B. Frank Loeb, Chief Counsel, and Ron Bowden, Asst. Counsel, Dept. of Revenue, and Asst. Attys. Gen., for petitioner.

Bruce A. Rawls and David D. Dowd III of Burr & Forman, Birmingham, for respondent.

HOUSTON, Justice.

The State of Alabama, Department of Revenue, appealed to the Court of Civil Appeals from a summary judgment granted to Reynolds Metals Company in the Circuit Court of Montgomery County, Alabama. The Court of Civil Appeals affirmed the judgment, 541 So.2d 523, and, thereafter, overruled the State's application for rehearing. The State then petitioned this Court for a writ of certiorari, which we issued to address the following question: Whether a levy of a license tax based upon gross receipts in the police jurisdiction is a valid levy even though the city is unable to relate the taxes levied upon a particular business within the police jurisdiction to the costs of city supervision and services rendered to that particular business. This Court answered that question "no" by a 5-4 vote in Ex parte City of Leeds, 473 So.2d 1060 (Ala.1985), affirming, Continental Electric Co. v. City of Leeds, 473 So.2d 1056 (Ala.Civ.App.1984). We conclude that Ex parte City of Leeds answered that question incorrectly; because that case was followed in the present case, the wrong standard was applied, and we must reverse and remand.

FACTS

Reynolds Metals Company, a Delaware corporation authorized to do business in the State of Alabama, has owned and operated facilities in Colbert County, Alabama, since 1941. Reynolds reclaims and manufactures aluminum and related products in facilities located outside the corporate limits, but within the police jurisdiction, of the City of Muscle Shoals.

Reynolds appealed to the Circuit Court of Montgomery County from final tax assessments imposed by the Department of Revenue on behalf of the City of Muscle Shoals. The final assessments were based on Reynolds's operations at its Colbert County facilities during the 19-month period beginning June 1, 1980, and ending December 31, 1981. These assessments were made under Muscle Shoals Ordinance No. 1011, which was adopted by the Muscle Shoals Board of Commission in 1980. Ordinance No. 1011 imposed a "privilege" or "license" tax on persons conducting business within the Muscle Shoals corporate limits and on persons conducting business outside the corporate limits but within the city's police jurisdiction.

The circuit court granted summary judgment for Reynolds, on the authority of Ex parte City of Leeds, supra, and set aside the tax assessments. The Court of Civil Appeals affirmed, also based upon Ex parte City of Leeds.

In Ex parte City of Leeds, this Court affirmed the judgment of the Court of Civil Appeals, which had held that the trial court erred in holding valid a business license schedule imposed on a business outside the corporate limits but within the police jurisdiction where the city had failed to reasonably relate the amount of the license tax imposed on the particular business to the services rendered to that business.

In response to our Ex parte City of Leeds decision, the Legislature amended Code 1975, § 11-51-91, 1 effective April 29, 1986. Even though this amendment was not in effect at the time of the assessment made in the case before us, our decision in this case will affect the validity of that amendment, for the amendment provides that "no calculation is required to be made by the municipal officials for the cost of services to any particular business or classification of businesses within the police jurisdiction so long as the total amount of such licenses collected in the police jurisdiction shall not be in an amount greater than the cost of services provided by the city or town to the police jurisdiction." An analysis of this Court's prior decisions shows that it was not a construction of legislative intention, but a finding of a lack of legislative power, that led to the majority decision in Ex parte City of Leeds. That was a 5-4 decision. This opinion will affect not only Reynolds Metals and the City of Muscle Shoals, but all cities and towns and all businesses located within the police jurisdiction, but not within the corporate limits, of cities and towns, before and after the amendment to § 11-51-91 that became effective on April 29, 1986.

Justice Shores, in Jackson v. City of Florence, 294 Ala. 592, 598, 320 So.2d 68, 73 (1975), wrote:

"As strongly as we believe in the stability of the law, we also recognize that there is merit, if not honor, in admitting prior mistakes and correcting them."

In that spirit, we must revisit Ex parte City of Leeds.

We start with the premise that the power of the Legislature, except as restrained by the Federal or State Constitution, is supreme in the enactment of statutory law and in the creation of subordinate governmental agencies, and in prescribing their powers and duties. State ex rel. Brooks v. Gullatt, 210 Ala. 452, 98 So. 373 (1923).

The Legislature prescribed municipalities' powers and duties by the enactment of what is now Code 1975, § 11-45-1:

"Municipal corporations may from time to time adopt ordinances and resolutions not inconsistent with the laws of the state to carry into effect or discharge the powers and duties conferred by the applicable provisions of this title and any other applicable provisions of law and to provide for the safety, preserve the health, promote the prosperity and improve the morals, order, comfort and convenience of the inhabitants of the municipality, and may enforce obedience to such ordinances."

The Legislature may authorize a municipal corporation, under the police power, to regulate and license businesses carried on within its corporate limits and within a prescribed, reasonable limit outside of its corporate limits, and to require the payment of such a sum for a license as is reasonably necessary for the protection of the lives, health, and property of the residents of this area, the maintenance of good order and quiet in this area, and the preservation of public morals in this area. Van Hook v. City of Selma, 70 Ala. 361, 45 Am.Rep. 85 (1881); Standard Chemical & Oil Co. v. City of Troy, 201 Ala. 89, 77 So. 383 (1917).

The Legislature, by the enactment of what is now Code 1975, § 11-40-10, provided:

"The police jurisdiction in cities having 6,000 or more inhabitants shall cover all adjoining territory within three miles of the corporate limits, and in cities having less than 6,000 inhabitants and in towns, such police jurisdiction shall extend also to the adjoining territory within a mile and a half of the corporate limits of such city or town.

"Ordinances of a city or town enforcing police 2 or sanitary regulations ... shall have force and effect in the limits of the city or town and in the police jurisdiction thereof and on any property or rights-of-way belonging to the city or town." (Emphasis supplied.)

Our research does not reveal that there was any general legislation dealing with police jurisdictions or licensing businesses located therein, in 1881, when Van Hook v. City of Selma, supra, was decided.

In 1879, the charter of Selma was amended by the Legislature to allow Selma to have and exercise within a specified territory, adjoining and outside of the city limits, all the police powers and jurisdiction conferred by the charter of the city. An ordinance was passed requiring a license fee of $10.00 to be paid by all persons selling goods, wares, and merchandise outside the city limits but within this "police jurisdiction." Van Hook refused to pay the license fee, was convicted of violation of this ordinance, and was fined $10.00. Upon appeal to the circuit court, his conviction was affirmed; he appealed to this Court. The question before this Court was the validity of the ordinance exacting this license fee. It was upheld.

This Court held that Selma was granted the right to regulate and license for police purposes merely; that police power had been held to embrace the protection of the lives, health, and property of the citizens, and the maintenance of good order and quiet of the community and the preservation of public morals; and that a "license for regulation, therefore, in such sum as may be reasonably necessary to promote these objects, in the district where the ordinance imposing it is designed to operate, may be construed to be the exercise of the police power, and not of the power of taxation." 70 Ala. at 363-64. (Emphasis supplied.) This Court further held that the amount exacted for a license designed for regulation is not confined to the expense of issuing it, but "that a reasonable compensation may be charged for the additional expense of municipal supervision over the particular business or vocation, at the place where it is licensed." 70 Ala. at 364-65. This Court also held that if the reasonableness of the ordinance was questioned, "it will be presumed to be reasonable unless the contrary appears on the face of the law itself, or is established by proper evidence." 70 Ala. at 365.

The City of Troy had no such provision in its charter, but this Court held that Code 1907, § 1251 (now Code 1975, § 11-45-1), conferred police powers on Troy "to provide for the safety, preserve the health, promote the prosperity, improve the morals, order, comfort, and convenience of the inhabitants of the municipality, and to enforce obedience to such ordinances;" and that this extended to the "police jurisdiction" as defined by Code 1907, § 1230 (now Code 1975, § 11-40-10). Standard Chemical & Oil Co. v. City of Troy, 201 Ala. 89, 77 So. 383 (1917).

The Legislature in 1923 passed an act (Act No. 434, Gen.Acts 1923, p. 580) that provided that any city with a population of not...

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