Adams State Revenue Agent v. Lamb-Fish Lbr. Co.

1. .Municipal Corporations. Taxation. Exemptions. Manufactories. Code 1906, section S347. Constitution 1390, section 192. A municipal corporation has no power under Code 1896, section 3347, as authorized by Constitution 1890, section 192, to exempt by ordinance an existing and going manufactory from municipal taxation, in consideration of the owners not appealing from an ordinance extending the corporate limits to include it. 2. Same. ■And in case it does pass such an ordinance the municipality is not estopped thereby to collect municipal taxes on such manufactory. OPINION ON SUGGESTION OF ERROR. 3. Municipal Corporations. Extension of limits. . Collateral attack. Code 1906, section 3303-3305. An ordinance of a municipal corporation annexing territory to a town cannot be collaterally attacked, because of its municipal authorities not having, as provided by Code 1906, section 3305, inquired into the fact of publication and notice of the ordinance of extention, and adjudged that the same was made according to law, by one - who has waived his right of appeal under section 3303 of the Code of 1906, from the ordinance.

Appeal from the chancery court of Tallahatchie county. Hon. M. E. Denton, Chancellor. Suit by Wirt Adams, State Revenue Agent, for the use of the town of Charleston against the Lamb-Fish Lumber Company. From a judgment for defendant, complainant appeals. The facts are fully stated in the opinion of the court. The exemption ordinance is essentially a nullity for several reasons of substance and cannot operate to confirm the exemption claim, and even though the ordinance had been properly framed, adopted and published and applied to property within the jurisdictional limits of the municipality. As we proceed to. discuss the questions involving the substance of the exemption claim, it is well enough to bear in mind the general rule governing construction of exemption claims as approved in the case of Y. & M. V. B. B. Co. v. Thomas, 65 Miss. 562, as follows: “Statutes exempting persons or property from taxation, being in derogation of sovereign authority and of common right, are according to all authorities, strictly construed. As taxation is the rule and exemption the exception, the intention to create an exemption must be expressed in clear and unambiguous terms, and it cannot be taken to have been intended when the language of the statute on which it depends is doubtful, or uncertain. Legislation which relieves any species of property from its due proportion of the burdens of government, must be so clear that there can be neither reasonable doubt nor controversy in regard to its meaning.” Applying this rule we call the court’s attention to the fact that the manufactory sought to be exempted from taxation had been established and was in operation prior to the adoption of the so-called exemption ordinance. Section 3347, Code 1906, under which this exemption is claimed, begins with the significant words “To aid and encourage the establishment of manufactories, ” etc. We submit that the language of the statute clearly implies that it was the thought and purpose of the legislature, acting under the authority conferred by section 192 of the Constitution, to place in the hands, of municipal authorities a means whereby they could draw to such municipalities, manufactories, and induce them to locate and develop manufacturing enterprises in municipalities, the substantial inducements being the exemption from municipal taxation. If this was the purpose of such legislation, and that construction is justified by the language of the statute, then it was never intended to authorize municipal authorities to legislate a gift or bonus of taxes to an enterprise already in existence. Now, if the language clearly means that, -of course, no exemption could be held under this ordinance; and if the language is ambiguous and may mean that, and may not mean that, then the case of Railroad Co. v. Thomas, supra, the exemption being “in derogation of the sovereign authority and of common right,” must be denied. In the case of Yocona Cotton Mills v. Duke, 71 Miss. 790, it was held that the ordinance of the constitutional convention of 1890 exempting certain factories from taxation for a period of ten years, did not apply to existing factories. But if the court should resolve the doubt as to the legislative intent in favor of the exemption and against the rule in such cases as laid down in Railroad Co. v. Thomas, supra, we still maintain that the ordinance is void because it is class legislation, as it applies specially, solely and exclusively to the Lamb-Fish Lumber Company and its benefits and exemptions are not extended to other persons or corporations of the same class and in a like situation with the Lamb-Fish Lumber Company, and the exemption claimed is therefore obnoxious to section 112, of the Constitution of Mississippi, requiring taxation to be equal and uniform. It is also obnoxious to the fourteenth amendment of the constitution of the United States because it denies to others the equal protection of the laws afforded or attempted to be extended to the Lamb-Fish Lumber Co., and is also against the letter and the spirit of section 90 (h), of the Constitution of Mississippi, which prohibits the legislature from passing any local, private or special law exempting property from taxation. In Adams v. Railroad Co., 77 Miss. 271 et seg., the court exhaustively discusses an exemption contained in a railroad charter which was conferred by special legislative grant and which, applied solely and exclusively to the said railroad, and, while holding that the legislature had the power to select certain classes for taxation and to exempt other classes, yet the exemption in that case was declared void because it did not apply alike to all of the same class. The court expressly holds and reaffirms many previous holdings, that in order to make any such exemption valid it must be extended to all of the same class and in the same situation. And the Adams case, supra, overrules Mississippi Mills v. Cook, 56 Miss. 40, in so far as the Mississippi Mills case is in conflict with Adams v. Railroad, and approves so much of it as is.consistent with it and also overrules the Lambert case, 70 Miss. 779, which lays down a rule at variance with the rule announced in the Adams case. The Mississippi Mills charter was claimed to furnish an exemption to it in common with ■all others in like situation, and to that extent the court in the Adams case, supra, approves the Mississippi Mills case. In Adams v. Tombigbee Mills, 78 Miss. 676, at pages 684 and 685, the rule of uniformity required in such exemptions is again reaffirmed. In Adams v. Kuykendall, 85 Miss. 583, an exemption was claimed from, liability to taxation on property of a certain kind by virtue of the charter provisions of the city of Vicksburg and an ordinance thereunder. The exemption was disallowed as being violative of the equality and uniformity rule of the Constitution and the ease further holds that an unconstitutional exemption may be disregarded and taxes collected and that the rule of uniformity in taxation required by section 112 of the Constitution applies to municipalities. The rule of the Constitution requiring uniformity of taxation is again discussed and reaffirmed in Adams v. Standard Oil Co., 53 So. 694. We might multiply authorities on this proposition ad infinitum, but it seems to us sufficient merely to direct the court’s attention to the language of the ordinance and cite the general rule. In proceeding to discuss the contentions made by the appellee in the court below, we shall undertake to show: 1st. That a municipality can only be estopped by some affirmative act of its own as shown by its minutes or other written contract duly and properly made in a manner provided by law, and may not be estopped by the verbal promises and representations of some of its citizens and officials. 2nd. That a municipality can never be estopped when acting in its public or governmental capacities and can only be estopped when acting in its private, as contradistinguished from its public or governmental capacities. The universal rule is that a municipality can only be estopped by some affirmative act of its own, as by some legislative enactment, grant, or contract' duly entered into in the manner provided by law and only then where the municipality is acting in its private as contradistinguished from its public or governmental capacities. Philadelphia, etc., Co., v. City of Omaha, 93 Am. St. Rep. 442; People v. City of Bock Island, 106 Am. St. Rep. 179; Flowers v. Logan County, 137 Am. St. Rep. 354. (Monographic note.) In this ease the matter under discussion involves the exercise of one of the highest prerogatives attaching to sovereignty — the right of taxation; and the representations, promises, and undertakings between citizens of the municipality and officers of the municipality acting in their private and not in their official capacity with the appellee and its predecessors, touching the matter of taxation, certainly lacked two of the essentials'of an estoppel. In the first place, no affirmative act of the municipality is shown prior to the erection of the appellee’s manufacturing establishment. Nothing that was done by the municipality, as such, was relied upon by the appellee as an inducement to it to erect its manufacturing establishment and to expend its money, or to do any other act involving burden or expense upon it. In the second place, the question involves not the act of the municipality in its private capacity, but affects its right to exercise a strictly public and governmental power. The municipality cannot be bound, either directly or indirectly, upon any promise, agreement or undertaking not shown by an order duly and properly entered upon the minutes of the board. The mayor and board of Aldermen of a municipality like the county board of supervisors, as this court has many times decided, must speak through their minutes, and in that way alone. Pass Christion v. Washington, 81 Miss. 472; Marion County v. Woulard, 77 Miss. 343; Dixon v; Green County, 76 Miss. 394. The learned chancellor in deciding the case adversely to the appellant, grounded his decision on the question of estoppel, and cited in support of his decision, the case of Moore v. City of New York, 73 N. Y. 238, decided April 9, 1878. We respectfully urge the court to read that decision for it is manifest that the chancellor was misled by it. In that case the city had made a contract for the doing of certain public work. The contract was perfectly valid on its face and the proceedings leading up to it were proper and regular in form and substance. It was contended by the city that the resolution had not been published in one of the large number of newspapers which were official journals, of the city. This was a matter that did not appear on the face of the record and the work was properly done and the city received the benefit of it. The court very properly held that in a case of that character and a contract of that nature, on the facts of that particular case, the city was estopped from pleading this mere irregularity to defeat a just demand against it. The motion to exclude the appellee’s testimony should have been sustained because such evidence sought to show a state of facts that would bind the municipality on the oral promises and agreements of some of the citizens and some of the officials of the town not evidenced by any writing or contract on the minutes of the municipality or signed by any person authorized to make such an agreement for the municipality. Furthermore, the said testimony for the appellee showing the expenditure of divers sums of money by the appellee for various purposes shows that such expenditures were voluntarily made by it, and primarily for its own benefit and such expenditures were not made under any contract with the town that such expenditures should be made. See especially the testimony of - W. B. Burke, witness for appellee and manager of appellee’s business. If the municipality is to be estopped from exercising the power- to levy and collect taxes by the oral promises and agreements of some of its officers and some of its citizens, the-door will be opened wide to the wholesale evasion of taxes; and the question arises, how many citizens must verbally promise immunity form taxes to give rise to-a contract with the municipality via the estopped route? There is only one safe rule by which to determine the rights and liabilities of municipalities and parties dealing with municipalities in such cases and that rule is the one that has been fixed by this, court and consistently adhered to in many cases, the municipality must speak through its minutes and in that way alone. Pass Christian v. Washington, supra; Marion County v. Woulard, supra; Dixon v. Green County, supra. It cannot be seriously contended that the verbal promises of citizens and some of the officials of the town was an affirmative act of the municipality, or its act at all. The municipality c,an act and speak, as we have shown,, only through its minutes; albeit the parties making the promises or giving their assurance may have been acting in good faith, believing the municipality would not' extend its limits or, if so, that the appellee would be exempted from taxation. But this discussion is beside the mark for if the municipality in matters governmental cannot be estopped, the promises and representations of the citizens is of no moment; and the rights of the appellee must be measured strictly by the rules of law; it is a mere truism to say that the right-to levy and collect taxes is a public and governmental prerogative and not a private right, and one who deals-with the municipality touching governmental affairs must deal at arm’s length and is chargeable with full knowledge of the limitations on the' powers of officials to bind the municipality. The power conferred by the statute authorizing muncipalities to bestow special immunities from taxation being a governmental function is required to be exercised in strict conformity with the law. * • In the recent cause celebre, Smith, State Auditor v. State ex rel. McNeil, District Attorney, this court held that evidence showing “that the bonds were sold in good faith under the mistaken belief that the law was being complied with,” was immaterial and the court applied the law as it was written and did not consider as worthy .of consideration in the opinion in chief the contention that the state was estopped by the acts of its chief executive officers, and only noticed it in the opinion overruling the suggestion of error. Adv. Sheets, Southern Reporter, September 2, 1911. The principal proposition which I desire to submit and consider, is, that the municipality is estopped from denying either the regularity of the passage of the ordinance exempting the Lamb-Fish property from taxation, or its validity. In the discussion of this question, it is necessary to keep in mind the complex character of a municipal corporation. A municipal corporation, under our Act of Incorporation, performs certain functions or duties for the general public; certain others for what may be called the municipal public and they also perform functions relative to property rights held by the municipalty itself and owned as an indivdual owns property. It is necessary to keep in mind these various functions and complex character of a municipality, to prevent confusion of thought. A municipal corporation of course finds its power in the act, or charter-, by which it is created, and unless the authority is delegated by the charter, it does not exist. The best illustrations of cases in which the municipal authorities stand as the representatives of the general public, is in reference to its streets. Control of streets, their establishment and discontinuance, is committed to the municipal authorities, but so long as the streets are established they belong, not to the municipal corporation, but to the general public. Any citizen of the town of Jackson has as much right in the streets of Charleston as an inhabitant of that town, but the local municipal authorities of Charleston have control over thé streets, as the representatives, not only of the municipal public, but of the general public. Now, as to this class of rights, it seems to be well settled by many authorities that no estoppel can arise against the general public by reason of the action or non-action of municipal authorities. See Dillon on Municipal Corporations, sections 667 and 675. All powers executed by the municipal authorities in-reference to municipal property owned by the municipality as an individual might own it, are subject, to a large extent, to the same rules and principles which control in reference to action by individuals in reference to their property. A town may be the owner of its waterworks, of its lights, of its municipal buildings, of its parks and various other sorts of property devoted to public use. It may also be the owner of a street railroad operated for profit. Now, as to the operation of its road, it is controlled by precisely the same rules as would control if the road was owned by an individual. When it comes, to the management of its municipal property devoted to municipal public purposes, a different rule prevails. I have called the attention of the court to this distinction reconized in all the books, that the court may not be misled by general statements that a municipality is not bound by estoppel. It may be true that it is not bound by estoppel, when by invoking that principle it is sought to estop the general public, although it seems that the general public itself may be estopped under conditions. 1 Cooley on Municipal Corporations, section 675. Now a municipality, just as a private person, cannot 'be estopped in reference to a matter as to which it has no authority to act or to contract. A married woman, under our old laws, or a minor, having no authority to make a contract, cannot be bound by estoppel and municipal authorities having no power over a subject cannot be bound by mere nonaction, or what is calledestoppel. In other words, a municipal corporation may always defend by invoking the rule of ultra vires. There is a great difference however, when the question involved, is whether the municipal authorities had any power under any circumstances over the subject matter, and where, the general power existing, the question is, whether municipal authoirties are estopped because the existing power was irregularly or improperly exercised. If the municipal authorities of Charleston had no power under its charter and under the general law, to exempt the property of the Lamb-Fish Lumber Company from municipal taxes, then no action taken by that body could result in exemption -and no representation or conduct or contract would be sufficient to create the exemption. In other words, you could not, by estoppel, confer a power which the municipal authorities, in no event, could have. But where, as' here, the municipal authorities had power over .the general subject and this power, if exercised in a particular way would have given the right of exemption, or proposition is, that since the municipal authorities might have created by contract or stipulation, the exemption, it may be estopped to deny that the exemption exists by reason of its acts and conduct. Mr. Dillon says: “The general principle of law is settled beyond controversy that the agents, officers, or even city council of a municipal corporation, cannot bind the corporation by any contract which is beyond the scope of its powers, or entirely foreign to the purposes of the corporation, or which (not being legislatively authorized) is against public policy. This doctrine grows out of the nature of such institution, and rests upon reasonable and solid grounds. The inhabitants are the corporators; the officers are but the public agents of the corporation. The duties and powers of the officers as public agents of the corporation are prescribed by statute or charter, which all persons not only may know, but are bound to know. The opposite doctrine would be fraught with such danger and accompanied with such abuse that it would soon end in the ruin of municipalities, or be legisatively overthrown. These conditions vindicate both the reasonableness and necessity of the rule that the corporation is bound only when its agents or officers, by whom it can alone act, if it acts at all, keep within tha limits of the chartered authority of the corporation. The history of the workings of municipal bodies has demonstrated the salutary nature of this principle, and that it is the part of true wisdom to keep the corporate wings clipped down to the lawful standard. It results from this doctrine that contracts not authorized by the charter, or by the legislative act, that is, within the scope of the powers of the corporation under any circumstances, are void and in actions thereon the corporation may successfully interpose the plea of ultra vires, setting up as a defense its own want of power under its charter or constituent statute to enter into the contract. In favor of bona fide holders of negotiable securities, the corporation may be estopped to avail itself of irregularities in the exercise of power conferred; but it may always show that under no circumstances had the corporation power to make a contract of the character in question. This subject has already been referred to, and will be considered in a subsequent portion of the present chapter. The mere fact, however, that a city, in makinga contract for a public improvement within its corporate powers, promises to make payments in negotiable bonds, which it has no power to issue, does not make the entire contract ultra vires; and therefore if work be done under such contract the city will be liable therefore. Contracts ultra vires or invalid. Agreebly to the foregoing principles, a corporation cannot maintain an action on a bond or a contract which is invalid, as where a city, without authority, loaned its bonds to a private company, and took from it a penal bond, conditioned for the faithful application of the city bonds to payment for works which the city had no power to construct or assist in constructing. The remedy in such case must be in some other form than in an action to enforce the contract.So, a contract by a city to waive its right to go on with the laying out of a street or not, as it might choose is it seems, against public policy and it is void if it amounts to a surrender of its legislative discretion. So, a promise to pay a public corporation, or its agents, a premium for doing their duty is illegal and void; and a contract will not be sustained which tends to restrain or control the unbiased judgment of public officers. But a promise by individuals to pay a portion of the expense of public improvements, does not necessarily fall within this principle, and such promise is not void as being against public policy; and if the promisors have a peculiar and local interest in the improvement, their promise is not void for want of consideration, and may be enforced against them. So, on the other hand, a party making with a city a contract which is ultra vires is not estopped to set up its want of authority to make it.” “Any positive acts infra vires by municipal officers which may have induced the action of the adverse party and where it would be inequitable to permit the corporation to stultify itself by retracting what its officers had done, will work an estoppel.” . 1 Dillon on Municipal Corporations, 417, note 2, citing Martell y. East St. Louis, 94 111. 67; Roby y. Chicago, 64 111. 447; Chicago Railroad v. Joliet, 79 111. 39; Logan Co. y. Lincoln, 81 111. 156.