Estes v. City of Gadsden

• Citation: 266 Ala. 166,94 So.2d 744
• Decision Date: 07 March 1957
• Docket Number: 7 Div. 331
• Parties: Hoyt ESTES et al. v. CITY OF GADSDEN et al.
• Court: Alabama Supreme Court

Page 744

94 So.2d 744

266 Ala. 166

Hoyt ESTES et al. v. CITY OF GADSDEN et al.

7 Div. 331.

Supreme Court of Alabama.

March 7, 1957.

Rehearing Denied May 9, 1957.

Hawkins & Rhea, Gadsden, and Kerr & Cain, Alabama City, for appellants.

Roberts & Orme and Lusk, Swann & Burns, Gadsden, for appellees.

STAKELY, Justice.

Plaintiffs in this case (appellants) seek a declaratory judgment and injunction against the enforcement of Municipal Ordinance No. 1758 enacted by the Board of Commissioners of Gadsden on June 2, 1956, and the rules and regulations adopted by the city for the enforcement of the ordinance. The case was submitted for final decree on the original complaint as amended, answer as amended of the defendants and on the testimony heard orally before the court, all as noted by the register.

Upon a consideration of the matter Judge Robert M. Hill, who was specially assigned to this case, entered a final decree upholding the validity of the ordinance. In connection with the final decree he filed an able opinion to which we shall not hesitate from time to time to refer.

The ordinance imposes an annual license fee for the privilege of engaging in or following any trade, occupation or profession within the corporate limits of the city and covers all salaried or wage-earning employees. It applies to any clerk, laborer, tradesman, manager or official, or other employee, including nonresidents of the city, where the relationship of employer-employee exists, who are engaged in the doing of any kind of work or the rendering of any kind of personal services or the holding of any kind of position or job within the city, provided the work or services are done within the city. It does not include those businesses, professions or occupations already covered by a prior adopted general license schedule, Ordinance No. 1749. Domestic servants employed in private homes and ministers of religion are exempted.

The ordinance prescribes the measurement of the tax to be: 'One percent of the gross receipts of each such person' and gross receipts is defined to 'include the total gross amount of all salaries, wages, commissions, bonuses, or other money payment of any kind, or any other consideration having monetary value, which a person receives from, or is entitled to receive from or be given credit for by his employer for any work done or personal service rendered in any trade, occupation or profession, including any kind of deductions before 'takehome' pay is received. * * *' Allowances for traveling and other expenses incurred for work done for the employer are not included in gross receipts as to amounts actually so spent.

Provision is made in the ordinance for the allocation of compensation where only a part of it is earned within the city. Other sections provide for withholding of the license fee by employers; the making of returns by employees under certain conditions; the enforcement of the ordinance by the City Director of Revenue or agent who is given authority to examine books, papers and records of employers and licensees; the city commission is given the authority to prescribe and adopt by resolution rules and regulations for enforcement. There are other provisions in the ordinance which need not be here specifically referred to except that the ordinance contains the usual severability clauses and a clause providing that all conflicting ordinances are repealed to the extent of any conflict existing. The effective date of the ordinance is fixed at July 1, 1956, and it is further provided that the ordinance shall be in force and effect from year to year thereafter until repealed.

The rules and regulations for the most part follow rather closely the wording of the authority given in the ordinance itself. They provide questionnaire procedures, establish a test for determining whether relationship of employer-employee exists, define an individual contractor as distinguished from an employer, and reiterate that partenrs of a firm or an officer of a firm or corporation shall pay the tax if he receives a salary for personal services rendered in business.

It should be clearly understood at the outset that the wisdom, propriety or expediency of the ordinance is not a matter for review by this court. That is the province of the law-making body of the city. The court's duty is to consider the constitutionality and the validity of the ordinance under the constitution and laws of the State of Alabama.

I. We must first determine what we may consider a preliminary contention to the effect that the ordinance was defectively passed in that some of the provisions of § 422, Title 62, Code of 1940, and possibly that some of the provisions of §§ 456, 462, Title 37, Code of 1940, were not observed. However, as shown by the amended minutes introduced in evidence, all statutory requirements were observed in the passage of the ordinance. It is argued that the amendment is of no avail because it is not an effort to make the original minutes speak the truth as to what actually happened, but only reveals that on July 31, 1956, the city went through a formality attempting to do then what it had not done on the date of passage of the ordinance, June 2, 1956. It appears, however, from the amended minutes that the minutes of June 2, 1956, were 'amended nunc pro tunc to correct and actually set forth what was said and done at such meeting,' referring to the meeting of June 2, 1956. The court found that no intervening rights of third persons arose in the interim and, therefore, the city commission had the right to amend, if such was necessary, to make the minutes speak the truth. We may add there is nothing before the court to indicate that the minutes do not speak the truth. The fact that the amendment was made after this suit was filed is immaterial. Harris v. Town of East Brewton, 238 Ala. 402, 191 So. 216; City of Guntersville v. Walls, 252 Ala. 66, 39 So.2d 567.

II. It is earnestly insisted that the ordinance levies a tax not authorized or permitted by the constitution or the general law of Alabama. We observe here that municipalities and counties being political subdivisions of the state have no inherent power of taxation but have only such taxing power as is delegated to them by the legislature. But 'upon them, in the absence of special constitutional restriction, the general assembly may confer the taxing power in such measure as it deems expedient,--'in other words, with such limitations as it sees fit as to the rate of taxation, the public purposes for which it is authorized and the objects (the persons and property) which shall be subjected to taxation.'' Frazier v. State Tax Commission, 234 Ala. 353, 175 So. 402, 403, 110 A.L.R. 1479.

Under § 733, Title 37, Code of 1940, authority is granted by the legislature to cities to fix and collect licenses for any business, trade and profession in the exercise of its police power. In § 735, Title 37, Code of 1940, the legislature has provided that, 'All municipalities shall have the power to license any exhibition, trade, business, vocation, occupation, or profession not prohibited by the constitution or laws of the state, which may be engaged in or carried on in the city or town * * *. The power to license conferred by this article may be used in the exercise of the police power as well as for the purpose of raising revenue * * *.' In the instant case the parties agree and the court found that the tax in question is not levied under the police power, § 733, Title 37, Code of 1940, but is a revenue measure.

Section 89 of the Constitution of 1901 prohibits municipalities from passing any laws inconsistent with the general law of the state. In the case of Smalley v. City of Oneonta, 253 Ala. 663, 46 So.2d 201, 203, in dealing with a privilege license of bricklayers within the city, this court said:

'The State may delegate its power to municipal corporations to license occupations within the limits of the city coextensive with the power of the State to do so and this power is limited only by the due process and equal protection provisions of the constitution. * * * The due process provision would prevent a license tax either for revenue or regulation to be confiscatory. Equal protection is satisfied when all persons of the same class fairly made are subject to the same amount and terms of such tax law. * * *

'This power to license which the State has and which it has conferred upon cities is not for the purpose of extending a privilege to one to engage in a business in which he does not have the absolute right to do so without such permit. Because the employment is for lawful gain and is a natural and inherent right does not exempt it from being a taxable event. 'But natural rights, so called, are as much subject to taxation as rights of less importance. An excise is not limited to vocations or activities that may be prohibited altogether. It is not limited to those that are the outcome of a franchise. It extends to vocations or activities pursued as of common right. What the individual does in the operation of a business is amenable to taxation just as much as what he owns, at all events if the classification is not tyrannical or arbitrary 'Business is as legitimate an object of the taxing power as property.'' * * *'

In Van Hook v. City of Selma, 70 Ala. 361, this court also said: 'The power of the State to authorize the license of all classes of trades and employments cannot be doubted. And there is just as little doubt of the power to delegate this right to municipalities, either for the purpose of revenue, or that of regulation. Ex parte City Council [of Montgomery], in re Knox, 64 Ala. 463; Cooley on Const.Lim. 581.'

It is argued that the tax involved in the instant ordinance is in reality either an income tax or a property tax and not a license or privilege tax and as such is prohibited by § 214 of the Constitution which limits property taxes to 65/100th of one percent on...