University of South v. Franklin County

• Decision Date: 27 July 1973
• Parties: The UNIVERSITY OF the SOUTH et al., Complainants-Appellees, v. FRANKLIN COUNTY, Tennessee et al., Defendants-Appellants.
• Court: Tennessee Court of Appeals

Page 779

506 S.W.2d 779

The UNIVERSITY OF the SOUTH et al., Complainants-Appellees, v. FRANKLIN COUNTY, Tennessee et al., Defendants-Appellants.

Court of Appeals of Tennessee, Middle Section.

July 27, 1973.

Rehearing Denied Sept. 9, 1973.

Certiorari Denied by Supreme Court March 4, 1974.

Joe R. Hickerson, Winchester, Robert L. Lancaster, Sewanee, and Kelly & Cameron, South Pittsburg, for complainants-appellees.

Lynch, Lynch & Lynch, Winchester, for defendants-appellants, Franklin County, Roy T. Crownover, County Judge, Jesse, T. Farris, Tax Assessor and Cortner McNutt, County Trustee.

David M. Pack, Atty. Gen., and William C. Koch, Jr., Asst. Atty. Gen., for the Board of Equalization of State of Tenn.

OPINION

PURYEAR, Judge.

This is a declaratory judgment suit which was precipitated by Franklin County's 1969 assessment, for the purpose of taxation, certain property of the University of the South at Sewanee, and certain leasehold interests in other property at Sewanee owned by the University and which has been leased by it for terms of years to various persons and corporations.

The bill was filed by the University and also joining therein as complainants were Robert S. Lancaster, Charles E. Cheston, Henry T. Kirby-Smith, William J. Hamilton and W. Hoyte Baker, lessees of property owned by the University, individually, and as class representatives of other lessees similarly situated. We will hereinafter refer to the latter mentioned complainants as 'the lessees.'

Named as defendants were Franklin County, Tennessee, Roy T. Crownover, County Judge, Jesse T. Farris, County Tax Assessor, and Cortner McNutt, County Trustee, and we will hereinafter refer to these defendants collectively as 'the county', unless we refer to one or the other of them by name or title.

The Equalization Board of the State of Tennessee obtained leave of the trial Court to intervene in the suit as a party defendant and we will hereinafter refer to this defendant as 'The State Board.'

The complainants aver in said bill that the County has illegally assessed for taxation certain of their property which is exempt from taxation. Other allegations are made in the bill but they are not germane to the issues raised on this appeal.

In addition to praying for a judgment or decree declaring said property as exempt from taxation, complainants pray for an injunction restraining the defendants from taking any steps to enforce collection of taxes on said property; that the assessments be declared null and void, and for general relief.

The County, the Tax Assessor, the County Trustee and the County Judge filed a joint answer denying that said property of complainants which had been assessed was exempt from taxation and denying that said property had been illegally assessed but averring that said property was subject to taxation by the County and was properly and legally assessed therefor.

The State Board filed a separate answer generally taking the same position as that taken by the County and the County Officials in their answer.

Several interlocutory orders were entered from time to time but since none of them are germane to the issues raised on this appeal, no further mention of them is necessary.

The case came on to be heard before the Chancellor on August 31st, September 1st, and September 2nd, 1970, as a result of which the Chancellor rendered and filed a memorandum opinion in which he held, inter alia, that the property which the University and its lessees claimed as tax exempt was not subject to taxation by the County and a decree was entered accordingly. We will hereinafter refer to some specific provisions of such decree.

From said decree the County of Franklin, the County Judge, County Tax Assessor, County Trustee and the State Board of Equalization have prayed and perfected an appeal to this Court and assigned error.

The complainant, University of the South, is a Tennessee corporation, by a charter granted by the General Assembly of the State of Tennessee in January, 1958, by virtue of Chapter 29, of the Acts of 1957--58.

The pertinent provisions of the Charter of incorporation are Sections 9 and 10 of said Chapter 29, Acts of 1857--58, which are as follows:

'SEC. 9. Be it further enacted, That said University shall be established and located at Sewanee, on the Cumberland Mountain, in or near Franklin County, or at any other point that the Board of Trustees may hereafter designate in the State of Tennessee; the site to be selected by said Trustees, or by such person or persons as they may appoint, which site shall continue until changed by the Trustees according to the provisions of the Constitution.

SEC. 10. Be if further enacted, That said University may hold and possess as much land as may be necessary for the building, and to such an extent as may be sufficient to protect said Institution and the students thereof, from intrusion of evil-minded persons who may settle near said Institution. Said land, however, not to exceed ten thousand acres, One thousand acres of which, including buildings and other effects and property of said Corporation, shall be exempt from taxation, so long as said land belongs to said University.' (emphasis supplied)

Shortly after its charter of incorporation was granted, the University commenced to acquire tracts of land in the vicinity of Sewanee, in Franklin County, some of which tracts of land were acquired by purchase and others by gift.

In 1861 the Board of Regents of the University designated and defined approximately one thousand acres of the land it had acquired as a reserve for the purpose of tax exemption pursuant to Section 10, Chapter 29, of the Acts of 1857--58, describing said one thousand acres by metes and bounds, according to an old survey, as follows:

'University Reservation of 1,000 Acres (1861)

Commencing at a stake (at head of Gipson's path) at the junction of two branches of a creek in section 12, range 21 near the point where the 'corso' crosses bridge (from this stake a chestnut oak bears S 24 degrees E 4 feet, and an oak in edge of road bears N 61 degrees W 13 feet).

Thence west 2,428 feet to a stake which is 141 1/2 feet southwest of corner of sections 11 and 12 ranges 26 and 27.

Thence S 45 degrees W. 3,818 1/2 feet to a hickory tree 5 inches in diameter at intersection of sections 18 and 19 ranges 33 and 34. This hickory is 50 feet easterly from 'corso' and 100 feet easterly from branch.

Thence S 45 degrees E. at 5,500 feet to turnpike, at 6,788 feet ends at stake at intersection of sections 3 and 31 ranges 21 and 22. From this stake a dogwood 8 inches thick bears S 30 degrees E 17 feet; a dogwood stump bears N 78 degrees W 6 feet.

Thence N 45 degrees E at 1,550 feet crosses road leading from turnpike to depot; at 4,400 feet crosses road, at 6,600 feet crosses road to coal banks; at 7,161 feet ends line at stake in branch, said stake being 60 feet down stream from a large rock in the branch. From this stake a holly bears N 60 degrees W 9 feet and a chestnut oak bears S 49 1/2 degrees W 11 feet. From this stake the intersection of Sections 17 and 18 ranges 8 and 9 bears N 45 degrees 204 feet.

Thence down the channel of said branch to its emergence from University lands.

Thence westerly following edge of University lands to the creek from whence the first line started, and up the channel of said creek to the beginning stake.'

Since that time, most of the buildings of the University have been located within the boundaries of this original reserve of one thousand acres.

Also since approximately 1867, the University has, from time to time, divided certain portions of its property into lots, both within and without the boundaries of the original reserve, many of which lots have been leased by the University to various persons and corporations and upon which the lessees thereof have constructed residences, offices, stores and other buildings in which various types of business enterprises are now located.

From 1867 up to the date the instant litigation was commenced, the University has used several different forms of lease contracts, all of which provide, however, that buildings and other improvements in said leased premises are to be constructed by the lessees thereof and all of which leases provide that in the event taxes are levied on said property the lessee shall be responsible for the payment thereof.

Many of the residences constructed upon these leased premises are quite expensive and others not so expensive, but all of these improvements are of some value to the lessees and it is these leasehold estates which constitute a part of the property which was assessed for taxation by the County in the year 1969.

The instant litigation is not the first which has arisen out of a dispute between the County, on the one hand, and the University and its lessees, upon the other. The first such litigation resulted from a dispute which erupted between the University and the County, when in 1887, the County undertook to assess certain lots or parcels of land owned by the University and the case which resulted from that assessment, University of South v. Skidmore (1888), 87 Tenn. (3 Pickle) 155, 9 S.W. 892, was finally determined by the Tennessee Supreme Court. In its opinion in that case the Supreme Court referred to the reserve of one thousand acres and the property therein which the County was seeking to assess for taxation in the following language:

'The one thousand acres have been laid off as designated by metes and bounds, and upon this the buildings of the university have been erected, together with professors' houses, etc. A part of this one thousand acres along the line of the railroad has been subdivided into town lots, streets laid off and graded; along these dwelling-houses and store-houses and a hotel have been erected, and rented to persons upon leases extending from one year to thirty-three years, and with renewal options given to the tenants in some...