Highwoods Properties, Inc. v. City of Memphis

IN THE SUPREME COURT OF TENNESSEE

AT MEMPHIS

November 4, 2008 Session

HIGHWOODS PROPERTIES, INC. ET AL.

v.

CITY OF MEMPHIS

Appeal by Permission from the Court of Appeals

Chancery Court for Shelby County

No. CH-06-2070-1 Walter L. Evans, Judge

No. W2007-00454-SC-R11-CV - Filed July 27, 2009

The Plaintiffs filed an action for declaratory judgment seeking to set aside a consent judgment

entered in a lawsuit between property owners in an area of a proposed annexation and the City of

Memphis. The earlier lawsuit, which the Plaintiffs failed to timely join, was a quo warranto

challenge to an ordinance purporting to annex certain territory contiguous to the boundaries of the

City. The consent judgment provided for the annexation of the territory described within the

ordinance in two stages, with a portion of the area having an effective annexation date in 2006 and

the remainder having an effective date in 2013. The trial court dismissed the complaint and the

Court of Appeals affirmed. We granted permission to appeal in order to determine the propriety of

the challenge to the consent decree approving of the two-step annexation. We hold that (1) the

Plaintiffs are not authorized to file a declaratory judgment action challenging the consent judgment

as violative of the terms of the annexation ordinance; and (2) the consent judgment did not create

an unconstitutional taxing structure. The judgment of dismissal is, therefore, affirmed.

Tenn. R. App. P. 11; Judgment of the Court of Appeals Affirmed

GARY R. WADE , J., delivered the opinion of the court, in which JANICE M. HOLDER, C.J., CORNELIA

A. CLARK, and SHARON G. LEE , JJ., joined. WILLIAM C. KOCH , JR., J. filed a separate dissenting

opinion.

John S. Golwen, Colleen Denise Hitch, and Amy Charlyne Worrell, Memphis, Tennessee, for the

appellant, Highwoods Properties, Inc., Highwoods Realty LP, Highwoods/Tennessee Holdings, LP,

and AP Southeast Portfolio Partners, LP.

Jonathan C. Hancock, Ross Emerson Webster, Don Lester Hearn, Jr., Memphis, Tennessee, for the

appellee, City of Memphis.

OPINION

This appeal arises out of a declaratory judgment action filed by Highwoods Properties, Inc.,

Highwoods Realty Limited Partnership, Highwoods/Tennessee Holdings LP, and Southeast Portfolio

Partners, LP (the “Plaintiffs”), all of whom are landowners and developers, against the City of

Memphis (the “City”), challenging the annexation of adjacent territory known as Southwind-

Windyke Annexation Area No. 42 (“Area 42”). When the trial court granted a motion to dismiss by

the City, the Plaintiffs appealed. The Court of Appeals affirmed.

Factual and Procedural Background

The facts underlying this dispute are largely uncontested. On November 4, 1997, the

Memphis City Council enacted Ordinance No. 4513 (the “Ordinance”), adopting a proposal to annex

Area 42, a property adjacent to its city limits. The Ordinance provided as follows:

[T]he City of Memphis on its own initiative is authorized to annex territory if it

appears that the prosperity of the City of Memphis and of the territory will be

materially retarded, and the safety and welfare of the inhabitants and property thereof

endangered if said property is not annexed to the city of Memphis. . . .

....

[I]t was determined by the Council of the City of Memphis that the proposed

annexation reflects the planned and orderly growth and development of the City of

Memphis taking into consideration the characteristics of the City of Memphis and

those of the area proposed for annexation and is reasonable for the overall well being

of the City of Memphis and the proposed area to be annexed; that it appears that the

prosperity of the City of Memphis and the affected territory will be materially

retarded and safety and welfare of the inhabitants and property thereof endangered

if such area is not annexed to the City of Memphis; that, therefore, it is in the best

interest, safety and welfare of the inhabitants and property of said territory as well as

the municipality as a whole to annex [Area 42] to the boundaries of the City of

Memphis.

The Ordinance incorporated a detailed “Plan of Services” setting forth the expected dates by which

enumerated city services would be extended to the annexed area.

On December 3, 1997, a number of the property owners within Area 42 filed three separate

quo warranto proceedings challenging the propriety of the annexation. See Tenn. Code Ann. § 6-51-

103 (2005). All were timely filed within thirty days of the passage of the Ordinance. See State ex

rel. Bastnagel v. City of Memphis, 457 S.W.2d 532, 535 (Tenn. 1970). Pursuant to statute, the three

quo warranto actions were consolidated in the Chancery Court for Shelby County. See Tenn. Code

Ann. § 6-51-103(d) (“If more than one (1) [quo warranto] suit is filed, all of them shall be

consolidated and tried as one (1) in the first court of appropriate jurisdiction in which suit is filed.”).

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Although the record does not include the details of the litigation, the pleadings do establish that the

suit concluded in a settlement in 2006. None of the Plaintiffs in the present case, however, were

among the property owners involved in the 1997 litigation.

On December 29, 2005, while the consolidated 1997 challenges were still pending,

Highwoods Properties, Inc. (“Highwoods Properties”), one of the Plaintiffs in this litigation, filed

a separate quo warranto challenge to the annexation, seeking to have its suit consolidated with those

filed in 1997. A month later, Highwoods Properties filed an amended complaint, adding Highwoods

Realty Limited Partnership, Highwoods/Tennessee Holdings LP, and Southeast Portfolio Partners,

LP, as Plaintiffs. The Amended Complaint contained allegations that the City had “neither . . . the

ability nor the intent to render municipal services to the subject annexation area to the extent as other

areas already within the City of Memphis are receiving” and included assertions that the City had

initiated the annexation for the “imposition and collection of taxes [with] an intent to increase the

revenues of the City of Memphis . . . .” The Plaintiffs further contended that a “potential Consent

Judgment” between the City and the property owners in the 1997 consolidated actions “included

terms especially detrimental to the Plaintiffs and inconsistent with the ordinance . . . as passed.” On

March 3, 2006, the trial court dismissed the complaint as untimely. The Plaintiffs appealed and the

Court of Appeals affirmed the dismissal. Highwoods Props., Inc. v. City of Memphis, No. W2006-

00732-COA-R3-CV, 2006 WL 3628102 (Tenn. Ct. App. Dec. 14, 2006) (“Highwoods Properties

I”). There was no application for permission to appeal to this Court.

On May 10, 2006, during the course of the appeal by the Plaintiffs, the trial court approved

and entered a “Consent Final Judgment” in settlement of the 1997 challenge to the annexation. On

June 8, 2006, an “Amended Consent Final Judgment” superceding the initial judgment was approved

for entry. The amended judgment divided Area 42 into five sections, which appear below:

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The terms of the final settlement provided for each of the five sections of Area 42 to become a part

of the City; however, the annexation of areas A1, A2, and A3 (collectively “Area A”) was to become

effective on December 31, 2006, while the annexation of areas B1 and B2 (collectively “Area B”)

would be delayed until December 31, 2013.1

On October 24, 2006, during the pendency of their appeal in the quo warranto action, the

Plaintiffs, owning property located in Area A, filed suit for declaratory judgment asking the chancery

court to rule (1) “that the Consent Final Judgment and Amended Consent Final Judgment are

invalid” and (2) “that . . . Area 42 has not been annexed by the City.” As grounds, the Plaintiffs first

alleged that “[a] genuine dispute exists as to whether the . . . Ordinance, as amended through the

Consent Final Judgment and Amended Consent Final Judgment[,] is valid. (“Count I”).” The

Plaintiffs argued that the settlement constituted “an attempt to unlawfully circumvent the exclusive

procedures established by the General Assembly” by effectively amending the Ordinance to

incorporate the two-tiered annexation schedule, without enacting a new ordinance. Secondly, the

Plaintiffs alleged that the terms of the settlement are constitutionally invalid because they “subject[]

taxpayers in Areas A and B to different tax rates in violation of [article 2, section 28] of the

Tennessee Constitution. (“Count II”).”

In its motion to dismiss, the City argued that (1) the claims are barred by res judicata and

collateral estoppel; (2) the Plaintiffs do not have standing to file a declaratory judgment action

challenging the terms of a judgment to which they were not a party; (3) the complaint was untimely;

and (4) the Plaintiffs failed to join indispensable parties, specifically the property owners involved

in the 1997 consolidated litigation. On January 22, 2007, the trial court granted the motion to

dismiss “on all grounds set forth therein.”

On direct appeal, the Court of Appeals affirmed, concluding that there was “no authority to

vacate the annexation ordinance based upon the . . . procedural defects” alleged by the Plaintiffs.

Highwoods Props., Inc. v. City of Memphis, No. W2007-00454-COA-R3-CV, 2007 WL 4170821,

at *10 (Tenn. Ct. App. Nov. 27, 2007) (“Highwoods Properties II”). The court further concluded

that the Plaintiffs’ constitutional claims were without merit. Id. at *14.

Standard of Review

A Rule 12.02(6) motion under the Tennessee Rules of Civil Procedure seeks to determine

whether the pleadings state a claim upon which relief may be granted. Edwards v. Allen, 216

S.W.3d 278, 284 (Tenn. 2007). Such a motion tests only the legal sufficiency of the complaint, not

the strength of the proof. The resolution of the motion is determined by an examination of the

pleadings alone. Cook ex rel. Uithoven v. Spinnaker’s of Rivergate, Inc., 878 S.W.2d 934, 938

(Tenn. 1994) (citing Wolcotts Fin. Servs., Inc. v. McReynolds, 807 S.W.2d 708, 710 (Tenn. Ct. App.

1

This opinion refers to “Area A” and “Area B” for the purposes of clarity; however, as the map shows, neither

the subsections bearing “A” designations nor the subsections bearing “B” designations are contiguous. Thus, Area A

is, in fact, three areas, all of which border M emphis, but none of which share borders with each other. Similarly, Area

B consists of two areas, both of which border Memphis, but which do not border each other.

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1990)). For purposes of analysis, the motion contemplates that all relevant and material allegations

in the complaint, even if true and correct, do not constitute a cause of action. In considering a

motion to dismiss, courts must construe the assertions in the complaint liberally; the motion cannot

be sustained unless it appears that there are no facts warranting relief. Cook, 878 S.W.2d at 938

(citing Fuerst v. Methodist Hosp. S., 566 S.W.2d 847, 848-49 (Tenn. 1978)). On appeal, all

allegations of fact by the Plaintiffs must be taken as true. Stein v. Davidson Hotel Co., 945 S.W.2d

714, 716 (Tenn. 1997). Our scope of review is de novo with no presumption of correctness.

Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827, 836 (Tenn. 2008); Owens v. Truckstops of Am.,

915 S.W.2d 420, 424 (Tenn. 1996).

When called upon to construe a statute, we must first ascertain and then give full effect to

the General Assembly’s intent and purpose. Waldschmidt v. Reassure Am. Life Ins. Co., 271

S.W.3d 173, 176 (Tenn. 2008). Our chief concern is to carry out the legislature’s intent without

either broadening or restricting the statute beyond its intended scope. Houghton v. Aramark Educ.

Res., Inc., 90 S.W.3d 676, 678 (Tenn. 2002) (quoting Owens v. State, 908 S.W.2d 923, 926 (Tenn.

1995)). Every word in a statute “is presumed to have meaning and purpose, and should be given full

effect if so doing does not violate the obvious intention of the Legislature.” In re C.K.G., 173

S.W.3d 714, 722 (Tenn. 2005) (quoting Marsh v. Henderson, 424 S.W.2d 193, 196 (Tenn. 1968)).

When the statutory language is clear and unambiguous, we apply its plain meaning without

complicating the task. Eastman Chem. Co. v. Johnson, 151 S.W.3d 503, 507 (Tenn. 2004). When

a statute is ambiguous, however, we may reference the broader statutory scheme, the history of the

legislation, or other sources to discern its meaning. Parks v. Tenn. Mun. League Risk Mgmt. Pool,

974 S.W.2d 677, 679 (Tenn. 1998). We presume that the General Assembly was aware of its prior

enactments and knew the state of the law at the time it passed the legislation. Owens, 908 S.W.2d

at 926.

Analysis

The Plaintiffs have presented two arguments in support of their claim for declaratory relief.

As Count I, they argue that the consent judgment entered in the earlier settlement of the quo

warranto suits amounts to an impermissible, non-legislative amendment of the ordinance. As Count

II, the Plaintiffs allege that the consent judgment, if otherwise valid, imposes a system of taxation

that violates article II, section 28 of the Tennessee Constitution. The City has disputed both the

substance of these arguments and the Plaintiffs’ authority to initiate the declaratory judgment suit

under these circumstances.

Count I

The Plaintiffs argue that the Declaratory Judgment Act permits a challenge to the terms of

the 2006 consent judgment, which, they claim, revises the Ordinance. In response, the City

maintains that permitting an action for declaratory judgment by the Plaintiffs on this count, despite

their failure to file a timely quo warranto challenge eleven years ago, would circumvent the intent

of the General Assembly and the longstanding policy of this state limiting the power of courts to

intercede in the annexation process. Our resolution of this question requires a close analysis of the

historical role of courts in reviewing annexations, as well as the relevant statutes and constitutional

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provisions.

I. Background

In Hunter v. City of Pittsburgh, 207 U.S. 161 (1907), the United States Supreme Court

considered the efforts of citizens and taxpayers of Allegheny, Pennsylvania – as well as the City of

Allegheny itself – to block the consolidation of Allegheny with the larger City of Pittsburgh.

Allegheny and its citizenry raised a number of objections to the consolidation, including claims that

it violated the United States Constitution, both as an unlawful impairment of the obligations of

contracts under Article I, Section 10, and as a deprivation of property without due process of law

under the Fourteenth Amendment. Id. at 176-77. After the Supreme Court of Pennsylvania

addressed the relevant state law claims, see In re City of Pittsburg, 66 A. 348 (Pa. 1907), the United

States Supreme Court considered the federal constitutional challenge:

Municipal corporations are political subdivisions of the state, created as convenient

agencies for exercising such of the governmental powers of the state as may be

intrusted to them. . . . The number, nature, and duration of the powers conferred upon

these corporations and the territory over which they shall be exercised rests in the

absolute discretion of the state. . . . The state, therefore, at its pleasure, may modify

or withdraw all such powers, may take without compensation such property, hold it

itself, or vest it in other agencies, expand or contract the territorial area, unite the

whole or a part of it with another municipality, repeal the charter and destroy the

corporation. All this may be done, conditionally or unconditionally, with or without

the consent of the citizens, or even against their protest. In all these respects the state

is supreme, and its legislative body, conforming its action to the state Constitution,

may do as it will, unrestrained by any provision of the Constitution of the United

States.

Hunter, 207 U.S. at 178-79 (emphasis added).

Municipalities2 have a similar historical status under our state constitution. “[I]t was held

at an early day that the Legislature had complete control of municipal corporations, and may abolish

them at any time in its discretion.” Smiddy v. City of Memphis, 203 S.W. 512, 513 (Tenn. 1918)

(citing Luehrman v. Taxing Dist. of Shelby County, 70 Tenn. 425 (1879) (upholding private act

abolishing charter of the City of Memphis)); see also Caldwell v. Harris, 204 S.W.2d 1019, 1022-23

(Tenn. 1947) (upholding private act abolishing Town of Butler and liquidating its assets); City of

Memphis v. Memphis Water Co., 52 Tenn. (5 Heisk.) 495, 527 (1871) (“[M]unicipal . . . franchises

are always subject to the control of the legislative power for the purpose of amendment,

modification, or entire revocation.”). In Stocker v. City of Nashville, this Court described the nature

of a municipality as follows:

2

This Court has remarked that “we are not convinced that there is an ordinary meaning” for the term

“municipality.” Chapman v. Sullivan County, 608 S.W .2d 580, 582 (Tenn. 1980). For the purposes of this opinion,

“municipality” refers to a municipal corporation and its boundaries.

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A municipal corporation is a political, or governmental, agency of the state, which

has been constituted for the local government of the territorial division described[,]

and which exercises, by delegation, a portion of the sovereign power for the public

good. In its organization, and in the assignment of its powers and duties, the

Legislature acts supremely.

126 S.W.2d 339, 340 (Tenn. 1939) (quoting MacMullen v. Middletown, 79 N.E. 863, 864 (N.Y.

1907)). We have therefore held that “[i]t is elementary that the Legislature . . . may give and take

away as it chooses [a municipality’s] powers and privileges.” First Suburban Water Util. Dist. v.

McCanless, 146 S.W.2d 948, 950 (Tenn. 1941).

Traditionally, the power to alter the boundaries of a municipality has been viewed as a natural

result of the legislature’s broader power to establish and abolish municipal corporations: “To hold

that the legislature could not enlarge the corporate limits by an act passed for that purpose would be

to deny that it could create or abolish; for the greater includes the lesser in law, as in mathematics.”

Williams v. City of Nashville, 15 S.W. 364, 365 (Tenn. 1891). Thus, “[t]he unlimited power of the

Legislature to change municipal boundaries [was] declared by this Court so many times for so many

years that there could have been no doubt in the legislative mind as to the validity of” its power to

enlarge municipal boundaries. Bell v. Town of Pulaski, 184 S.W.2d 384, 386 (Tenn. 1945). The

power of the legislature to change municipal boundaries was not only unlimited but also exclusive.

Willett v. Corp. of Bellville, 79 Tenn. 1, 5 (1883) (“The boundaries of a municipal corporation as

fixed by the Legislature . . . can not be changed except by the Legislature, or in the mode specifically

prescribed by the Legislature.”). Moreover, an individual subject to a validly-enacted annexation

had no legal avenue through which to oppose it: “[t]he extension of the corporate limits of [a

municipality] was an exercise of governmental power of which the persons newly taken in could not

be heard to complain; they had no voice in the matter, no power to resist, nor was any legal right of

theirs infringed thereby.” McCallie v. Mayor & Alderman of Chattanooga, 40 Tenn. (3 Head) 317,

321 (1859).

Until 1955, the primary method in Tennessee for annexation of new territory to the borders

of a municipality was by private act of the General Assembly. Wallace Mendelson, Suggestions for

the Improvement of Municipal Annexation Law, 8 Vand. L. Rev. 1, 3 (1954); Joe M. Looney, Note,

Municipalities—Judicial Review of Annexation, 36 Tenn. L. Rev. 825, 825 (1969); see also

Hamilton County v. City of Chattanooga, 310 S.W.2d 153, 154-55 (Tenn. 1958). In 1953, however,

a limited constitutional convention proposed – and voters adopted – article XI, section 9 of the

Tennessee Constitution, including the provision that has come to be known as the “municipal

boundaries clause.” Frederic S. Le Clercq, Tennessee Annexation Law: History, Analysis, and

Proposed Amendments, 55 Tenn. L. Rev. 577, 580-82 (1988). The clause appears alongside

identical restrictions on the creation, merger, consolidation, and dissolution of municipalities: “The

General Assembly shall by general law provide the exclusive methods by which municipalities may

be created, merged, consolidated and dissolved and by which municipal boundaries may be altered.”

Tenn. Const. art. XI, § 9 (emphasis added).

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Cecil Sims, a delegate to the 1953 convention, characterized this portion of article XI, section

9 as the product of a “fight for the removal of . . . [a] cancer from the body politic” – the cancer

being the misuse of private acts against municipal governments. Journal and Proceedings of the

1953 Limited Constitutional Convention 910. As an example of the exploitation of the legislative

prerogative, Sims recounted the dissolution of the City of Memphis by private act in 1879:

And consider . . . our great sister City of Memphis, with all of its fine people and all

of its horses and wagons, and all of its fire engines, and all of its public property was

abolished as a municipality and the property it owned, and its people were transferred

to the State of Tennessee . . . and the great City of Memphis having been robbed of

its property paid for by the sweat and toil of its taxpayers, was humiliated by having

its property sequestered to the State . . . .

Id. (discussing Act of Jan. 29, 1879, 1879 Tenn. Acts 13); see also id. at 911 (“On three successive

occasions, the Charter of the City of Nashville was completely repealed and replaced by another

Charter, resulting from a factional fight in city politics, and enacted by the means of local legislation

over the protests of the people . . . .”). Under the municipal boundaries clause, Sims explained,

municipalities would be shielded from boundary alterations by private act just as they would be

shielded from dissolution by private act. Id. at 907 (“[O]n the somewhat perplexing questions of

extension of city boundaries, the creation of municipalities where none existed before, the merging

of cities and the consolidation and dissolution of municipalities, the exclusive power to govern . .

. is left in the General Assembly, to be implemented by general legislation.”); see also Frost v. City

of Chattanooga, 488 S.W.2d 370, 373 (Tenn. 1972) (“The Journal of th[e] Limited Constitutional

Convention reflects in detail the great evils that had arisen in regard to the Legislature enacting

legislation affecting only one county or municipality. In order to remedy such evils, the language

here relied upon and other language of Article 11, Section 9 was proposed by the Convention and

adopted by the people.”).

The legislature employed the authority granted under article XI, section 9 to enact chapter

113 of the public acts of 1955 (the “1955 Act”), establishing a general law governing the annexation

of land to the borders of existing municipalities. The 1955 Act provided for three mechanisms of

annexation: (1) a single referendum by the voters in the area to be annexed, Act of Mar. 1, 1955, §

3, 1955 Tenn. Pub. Acts 382, 384-85 (codified as amended at Tenn. Code Ann. §§ 6-51-104, -105

(2005)); (2) two concurrent referenda by, on the one hand, voters in the area to be annexed and, on

the other, voters within the annexing municipality, both of which must be successful to establish

annexation, id.; and (3) an ordinance of the annexing municipality, id. § 2 (codified as amended at

Tenn. Code Ann. § 6-51-102 (Supp. 2008)).

The third of these methods – annexation by ordinance of the annexing municipality – has

been described as “[t]he most innovative aspect of the 1955 Act,” Le Clercq, 55 Tenn. L. Rev. at

583, and a “radical change” from prior law, Hamilton County, 310 S.W.2d at 154. This Court later

explained the rationale for allowing a municipality to annex new territory on its own initiative:

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The whole theory of annexation is that it is a device by which a municipal

corporation may plan for its orderly growth and development. Heavily involved in

this is control of fringe area developments and zoning measures to the end that areas

of unsafe, unsanitary and substandard housing may not “ring” the City to the

detriment of the City as a whole. In a word, annexation gives a city some control

over its own destiny. The preservation of property values, the prevention of the

development of incipient slum areas, adequate police protection within a

metropolitan area, and the extension of city services to [t]hose who are already a part

of the city as a practical proposition, are the legitimate concern of any progressive

city.

City of Kingsport v. State ex rel. Crown Enters., Inc., 562 S.W.2d 808, 814 (Tenn. 1978) (emphasis

added). This decision of the General Assembly to vest annexation power in municipalities

themselves reflects the “perfectly obvious” conclusion “that the city fathers would know far more

about the needs and necessity of annexation than would the Legislature.” State ex rel. Senff v. City

of Columbia, 343 S.W.2d 888, 889 (Tenn. 1961).

The context of the passage of the 1955 Act reveals a corresponding intent by the General

Assembly to increase the power of municipalities to deal with developments on their peripheries.

The first decade following the Second World War had been marked by a major rise in public interest

in the abilities of cities to cope with growth immediately outside their borders.3 Robert Bruegmann,

Sprawl: A Compact History 121 (paperback ed. 2006). This rise in concern was typified in

3

The 1955 Act was not the only high-profile step taken by the General Assembly during the post-W ar decade

to answer growing concerns about the management of development outside the borders of cities. In 1951, the General

Assembly passed a private act creating a commission to investigate problems arising from the sizable population living

within the Nashville metropolitan area but outside the city’s borders. Act of Feb. 19, 1951, 1951 Tenn. Private Acts 665.

The act, signed by Governor Browning, explained that “the great concentration of people and their homes, institutions

and enterprises occupying the central portion of Davidson County constitute substantially one community and have a

common need for those services and facilities customarily supplied by a local government formed for such purposes.”

Id. However, the act observed, “less than half of the area and less than two-thirds of the population comprising this

community are served by such a local government, the remaining area and population being dependent upon the County

Government which is not constituted nor intended to render such services.” Id. at 665-66. The resulting report

concluded that “Nashville cannot hope to grow, nor can it safely expect to hold its own, while obsolete City limits

exclude over 90,000 urban dwellers and constitute a paralyzing strait-jacket on the community’s economic progress.”

Cmty. Servs. Comm’n for Davidson County and the City of Nashville, A Future for Nashville: A Report 3 (1952). The

effort spurred by the 1951 private act culminated in the effective consolidation of the governments of the City of

Nashville and its surrounding county – creating what is today referred to as the M etropolitan Government of Nashville

and Davidson County, Tennessee. See Metro. Gov’t of Nashville & Davidson County, Tenn., Charter §§ 1.01, 1.02;

Frazer v. Carr, 360 S.W .2d 449 (Tenn. 1962) (upholding consolidation of the city and county governments); State ex

rel. Schmittou v. City of Nashville, 345 S.W .2d 874, 878 (Tenn. 1961) (describing efforts associated with the 1951

private act); Carole Stanford Bucy, The anniversary of Metropolitan government is worth celebrating, Tennessean

(Nashville), Apr. 1, 2008 (online ed.) (“The idea of complete consolidation first surfaced in a report, A Future for

Nashville, published in 1952 by the Community Services Commission . . . . It did not receive much attention until

County Judge Beverly Briley endorsed the idea in a speech to the Rotary Club three years later.”).

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Tennessee by a law review article in which Wallace Mendelson argued that the state’s law of

municipal annexation was inadequate to the problems faced by cities. Mendelson, 8 Vand. L. Rev.

at 3-4. The article provided model statutory sections to establish new methods of annexation. Id.

at 13-18. Professor Mendelson’s suggestions were apparently considered and, in part, modified and

adopted by the General Assembly in the drafting of the 1955 Act. See Hamilton County, 310 S.W.2d

at 155 (“[O]bviously the draftsman [of the 1955 Act] had the benefit of Professor Mendelson’s

article, as much of the phraseology is identical; else this is the greatest coincidence since John

Adams and Thomas Jefferson died on the same day.”); Central Soya Co. v. City of Chattanooga, 338

S.W.2d 576, 577 (Tenn. 1960) (citing Mendelson, 8 Vand. L. Rev. 1, and stating that the 1955 Act

was passed “with the above in mind”). Specifically, the 1955 Act’s provisions permitting annexation

by ordinance appear to be based in significant part on the second of Professor Mendelson’s four

proposals. Compare Act of Mar. 1, 1955, § 2 with Mendelson, 8 Vand. L. Rev. at 15-16.

The 1955 Act granted “[a]ny aggrieved owner of property lying within territory which is the

subject of an annexation ordinance” a right to challenge the ordinance via a timely filed quo

warranto action alleging that the annexation “reasonably may not be deemed necessary for the

welfare of the residents and property owners of the affected territory and the municipality as a whole

and so constitute[s] an exercise of power not conferred by law.”4 Act of Mar. 1, 1955, § 2(b). In

Morton v. Johnson City, this Court narrowly construed the scope of judicial review in such a

challenge:

[I]f it is a fairly debatable question as to whether or not the ordinance is reasonable

or unreasonable[,] the courts certainly are not going to take any hand in it one way

or the other. . . . [If the question is, as a matter or law, fairly debatable,] the court

should take the matter away from the jury and conclude in favor of the ordinance.

333 S.W.2d 924, 930-31 (Tenn. 1960). In the ensuing years, the Court repeatedly cited Morton for

the proposition that, if the reasonableness of an annexation is fairly debatable, then any quo warranto

action in opposition must fail and the annexation be permitted to move forward. State ex rel. Spoone

v. Mayor of the Town of Morristown, 431 S.W.2d 827, 829 (Tenn. 1968); State ex rel. Robbins v.

City of Jackson, 403 S.W.2d 304, 306 (Tenn. 1966); State ex rel. Hardison v. City of Columbia, 360

S.W.2d 39, 41-42 (Tenn. 1962); State ex rel. Cathey v. City of Knoxville, 364 S.W.2d 912, 913

(Tenn. 1962); State ex rel. Campbell v. Mayor of the Town of Morristown, 341 S.W.2d 733, 734-35

(Tenn. 1960).

In 1974, the General Assembly enacted a series of amendments to the 1955 Act (the “1974

Amendments”), including a new provision establishing that, in a quo warranto challenge to an

annexation ordinance, “[t]he municipality shall have the burden of proving that an annexation

4

“The propriety of quo warranto as a remedy for attacking the legality of municipal annexation proceedings

has often been affirmed by the courts.” 18 A.L.R.2d 1255, Proper remedy or procedure for attacking legality of

proceedings annexing territory to municipal corporation, § 7 (W estlaw 2009). The 1955 Act was intended to “mesh in”

some, but not all, of the provisions associated with quo warranto actions. State ex rel. Southerland v. Town of

Greeneville, 297 S.W .2d 68, 71 (Tenn. 1956).

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ordinance is reasonable for the overall well-being of the communities involved.” Act of Mar. 28,

1974, § 4, 1974 Tenn. Pub. Acts 1111, 1113 (codified at Tenn. Code Ann. § 6-51-103(c) (2005)).

This section of the 1974 Amendments “destroyed all presumptions of validity and demolished the

‘fairly debatable’ rule” established by Morton. Crown Enters., Inc., 562 S.W.2d at 812; see also

Pirtle v. City of Jackson, 560 S.W.2d 400, 401 (Tenn. 1977). Moreover, in State ex rel. Moretz v.

City of Johnson City, 581 S.W.2d 628, 631-32 (Tenn. 1979), this Court concluded that a challenge

to the reasonableness of an annexation in quo warranto included the entitlement to a trial by jury,

a development that, as a practical matter, had a significant adverse effect upon the expansion of

municipal territories.5

In 1998 (shortly after the City of Memphis enacted Ordinance No. 4513 in regard to the

annexation of Area 42) the General Assembly adopted additional amendments further refining the

procedures for annexation and quo warranto challenges. Act of May 1, 1998, 1998 Tenn. Pub. Acts

1157 (the “1998 Amendments”); see also State ex rel. Tipton v. City of Knoxville, 205 S.W.3d 456,

465-68 (Tenn. Ct. App. 2006) (upholding constitutionality of 1998 Amendments), perm. app. denied

(Tenn. 2006).6 Under the 1998 Amendments, local governments in each county adopt a

comprehensive growth plan identifying “urban growth boundaries,” “planned growth areas,” and

“rural areas” therein. Act of May 1, 1998, §§ 1, 5 (codified as amended at Tenn. Code Ann. §

6-58-101, -104 (2005)). A municipality may annex an area within its urban growth boundaries using

methods established by the 1955 Act, and a property owner challenging that annexation via a quo

warranto proceeding will bear the burden of showing that the annexation “is unreasonable for the

overall well-being of the communities involved” or that “[t]he health, safety, and welfare of the

citizens and property owners of the municipality and territory will not be materially retarded in the

absence of such annexation.”Act of May 1, 1998, § 12(a) (codified as amended at Tenn. Code Ann.

§ 6-58-111(a) (Supp. 2008)). Moreover, the case will be heard without a jury. Tenn. Code Ann. §

6-58-111(b). If, however, the municipality wishes to annex an area outside its growth boundaries,

it must either propose an amendment to the growth plan or rely on the referendum annexation

method. Act of May 1, 1998, § 12(c)-(d) (codified as amended at Tenn. Code Ann. § 6-58-111(c)-

(d) (2008)). Thus, the 1998 Amendments reflect a balance. While, on one hand, the new restrictions

5

One legal scholar described Moretz and the 1974 Amendments as, respectively, “the most devastating judicial

and legislative blows to municipal annexation in the . . . history of the 1955 Act,” with Moretz being “probably the more

ruinous of the two” because it “makes municipal annexation hostage to the caprice of even a single hold-out juror.” Le

Clercq, 55 Tenn. L. Rev. at 639.

6

The 1998 Amendments were drafted to create a statutory scheme that:

(1) Eliminates annexation or incorporation out of fear;

(2) Establishes incentives to annex or incorporate where appropriate;

(3) More closely matches the timing of development and the provision of public services;

(4) Stabilizes each county’s education funding base and establishes an incentive for each county

legislative body to be more interested in education matters; and

(5) Minimizes urban sprawl.

Act of May 1, 1998, § 3 (codified as amended at Tenn. Code Ann. § 6-58-102 (2005)).

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discourage annexations that extend beyond a city’s predicted area of growth, on the other, the 1998

Amendments assure that a municipality will not bear the burden of proof in a quo warranto

challenge when it does exercise its power within predicted boundaries. See Tipton, 205 S.W.3d at

460 (discussing “significant differences” in quo warranto procedures under the 1998 Amendments

and the “older framework”).

II. The Plaintiffs’ Cause of Action

The Plaintiffs do not dispute that they failed to file a timely quo warranto challenge. This

issue was resolved by the Court of Appeals in Highwoods Properties I, 2006 WL 3628102, at *7.

Instead, the Plaintiffs argue that they now have a cause of action under the Declaratory Judgment Act

to challenge what they have characterized as the “amendment” of the annexation ordinance by the

2006 consent judgment.7 We disagree.

Under the principles of our constitution, the General Assembly “could have delegated to the

municipalities the authority to annex with no right of judicial review absent constitutional restraint.”

Bastnagel, 457 S.W.2d at 534. The right to challenge an annexation is thus a “statutory right” that

“in its very origin is limited.” Brent v. Town of Greeneville, 309 S.W.2d 121, 123 (Tenn. 1957).

We have stated that “[w]ithin the four corners of [the quo warranto] statute lies the entire

jurisdiction and authority of the Courts to review the actions of municipalities in enacting annexation

ordinances.” City of Oak Ridge v. Roane County, 563 S.W.2d 895, 897 (Tenn. 1978). Thus, “the

courts have no power to vacate an annexation ordinance for purely procedural defects,” because no

such authority has been granted by statute. City of Watauga v. City of Johnson City, 589 S.W.2d

901, 906 (Tenn. 1979). Rather, the general rule is that defects in an annexation ordinance must be

presented in the context of a challenge to its reasonableness or necessity by way of a timely quo

warranto challenge. City of Oak Ridge, 563 S.W.2d at 898; see also City of Knoxville v. State ex

rel. Graves, 341 S.W.2d 718, 721 (Tenn. 1960) (holding that allegation that ordinance was passed

without a public hearing “should be considered in connection with the question of the reasonableness

of the ordinance”).

In State ex rel. Earhart v. City of Bristol, however, we recognized an exception (other than

a constitutional challenge) to the rule and held that, in certain situations where no quo warranto

action is statutorily available, it is permissible to challenge an ordinance’s validity with a declaratory

judgment action. 970 S.W.2d at 953. In Earhart the validity of an ordinance enacted several years

7

A declaratory judgment action is a relative novelty in the law. Snow v. Pearman, 436 S.W .2d 861, 863 (Tenn.

1968) (observing that “the declaratory judgment procedure does not come to the jurisprudence of Tennessee from

antiquity”). The common law did not allow a suit in either law or equity absent an actual and present injury. Clein v.

Kaplan, 40 S.E.2d 133, 137 (Ga. 1946). In recent years, however, declaratory judgment actions have gained popularity

as a proactive means of preventing injury to the legal interests and rights of a litigant. See Colonial Pipeline, 263 S.W .3d

at 836-37 (discussing history of declaratory judgments). In its present form, the Tennessee Declaratory Judgment Act

grants courts of record the power to declare rights, status, and other legal relations. Tenn. Code Ann. § 29-14-102(a)

(2000). The Act also conveys the power to construe or determine the validity of any written instrument, statute,

ordinance, contract, or franchise, provided that the case is within the court’s jurisdiction. Tenn. Code Ann. § 29-14-103

(2000). “[W ]hether to entertain a declaratory judgment action is, in certain situations, largely discretionary with the trial

judge.” State ex rel. Earhart v. City of Bristol, 970 S.W .2d 948, 954 (Tenn. 1998).

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earlier was challenged because the annexed area contained no “people, private property, or

commercial activity.” Id. at 954; see State ex rel. Collier v. City of Pigeon Forge, 599 S.W.2d 545,

547 (Tenn. 1980) (“[L]ong and lean . . . annexations, so long as they take in people, private property,

or commercial activities and rest on some reasonable and rational basis, are not per se to be

condemned.” (emphasis added)). Annexations containing no people, private property, or commercial

activities, by necessity, cannot be challenged in a quo warranto action, because only an “aggrieved

owner of property that borders or lies within territory that is the subject of an annexation ordinance

prior to the operative date thereof” may file such a challenge. Tenn. Code Ann. § 6-51-103(a)(1)(A)

(emphasis added). We held, therefore, that the action for declaratory judgment was permissible, but

limited our holding in two key ways. First, we permitted only challenges to ultra vires acts, that is,

tests of “[t]he validity of an annexation ordinance alleged to exceed the authority delegated by the

legislature.” Earhart, 970 S.W.2d at 954. Second, we stated that it is only “where the quo warranto

proceeding is not available, [that] alternative equitable remedies are not barred.” Id. at 952 (citing

65 Am. Jur. 2d Quo Warranto § 7 (1972) (“[W]here the remedy by quo warranto is available, it is

usually held that there is no concurrent remedy in equity, unless by virtue of statutory provision.”))

(emphasis added).

While citing Earhart as authoritative support for their contentions, the Plaintiffs have failed

to overcome either of the barriers identified in that case. As an initial matter, they have neither

raised a colorable claim that the Ordinance is void, nor, despite their protestations to the contrary,

challenged any specific augmentation of the Ordinance. Reduced to its essence, the challenge by the

Plaintiffs is to a single aspect of the court’s approved settlement of the earlier lawsuit attacking the

reasonableness of the Ordinance; that is, the City’s consent to delay the planned annexation of Area

B until 2013. A delay in the effective date of the annexation fits more neatly within the classification

of procedural defects, as defined by City of Oak Ridge and City of Watauga – issues that we held

must be presented in a quo warranto proceeding and considered in the context of the reasonableness

of the annexation. We completely agree with the assessment of the Court of Appeals that our limited

holding in Earhart did not overrule the longstanding principle, articulated in those cases, that

Tennessee courts have no authority to vacate an annexation based on procedural defects, except

insofar as those defects bear on the questions presented in a timely quo warranto action.

Moreover, the Plaintiffs cannot avail themselves of Earhart because they, unlike the claimants

in Earhart, could have filed a timely quo warranto challenge.8 “Subject to some exceptions, a

declaratory judgment action should not be considered where special statutory proceedings provide

an adequate remedy.” Colonial Pipeline, 263 S.W.3d at 838 (citing Katzenbach v. McClung, 379

U.S. 294, 296 (1964)). If the Plaintiffs had filed a timely quo warranto challenge, their cause of

action would have been consolidated with the other timely-filed challenges pursuant to Tennessee

Code Annotated section 6-51-103(d). The Plaintiffs, as parties in a single, consolidated quo

8

It appears from the record that the Plaintiffs owned property in the annexation area at the time the Ordinance

was enacted. Even if they had acquired the property later, however, it is of no consequence. An individual who acquires

title to land within an annexation area after the time period for a challenge has expired is not entitled to a new cause of

action.

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warranto case, would have had a seat at the table throughout the litigation and could have rejected

any offer of settlement by the City. Indeed, the allegations in the Highwoods Properties I complaint

effectively confirm that, if they had filed a timely quo warranto challenge, they would have been

able to prevent the adoption of any “especially detrimental” terms within the consent judgment. The

Plaintiffs – having allowed their special statutory cause of action to expire – are not entitled to a

second bite of the apple under the Declaratory Judgment Act.

The quo warranto procedures established by the General Assembly are the product of over

half a century of experience and reflect a careful balance between the interests of municipalities and

the concerns of individuals who object to the annexation of their property. This legislative remedy

“avoid[s] the specter of numerous successive suits by private parties attacking the validity of

annexations,” “because the judgment settles the validity of the annexation on behalf of all property

holders in the affected area.” Earhart, 970 S.W.2d at 952 (quoting Alexander Oil Co. v. City of

Seguin, 825 S.W.2d 434, 437 (Tex. 1991)). To sustain the propriety of this litigation would permit

the piecemeal litigation that the quo warranto procedures are designed to prevent. We do not believe

that the General Assembly intended to permit such a result. Thus, the Court of Appeals’ holding on

Count I must be affirmed.

Count II

As a preliminary matter, we agree with the Court of Appeals that Count II, unlike Count I,

is a proper question for the courts. “The importance of correctly resolving constitutional issues

suggests that constitutional issues should rarely be foreclosed by procedural technicalities.” Colonial

Pipeline, 263 S.W.3d at 844-45 (quoting In re Adoption of Female Child, 42 S.W.3d 26, 32 (Tenn.

2001)). The stringent restrictions on any challenge to an annexation apply only when constitutional

issues are not at stake. See City of Oak Ridge, 563 S.W.2d at 897 (“[A]bsent constitutional

infirmities, the rights that now exist are limited to those granted in Section 2(b) of that act, codified

in T.C.A. § 6-310, grammatical paragraphs one, three, and four.” (emphasis added)). Moreover, the

Plaintiffs’ allegations in Count II challenge the taxation scheme incident to the annexation and not

the propriety of the annexation itself.

The Plaintiffs argue that the consent judgment approving the annexation, even if otherwise

valid, establishes a system of taxation that contravenes the equality and uniformity requirements of

article II, section 28 of the Tennessee Constitution, because it permits the City to levy a municipal

tax on the inhabitants of Area A while, at the same time, levying no corresponding tax on the

inhabitants of Area B. The Court of Appeals rejected the argument:

[Plaintiffs’] complaint that they are forced to pay City of Memphis taxes for a longer

period than other property owners, whose land is not yet part of the City, does not

implicate the “equal and uniform clause” of Article II, Section 28. . . . There is

nothing in the record to suggest that the City of Memphis or any other taxing

authority is implementing different tax rates within its own borders. Area B will not

be annexed into the city limits of Memphis until 2013, so it is not necessary that Area

A and Area B property be taxed at the same rate at this time. They are currently in

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different jurisdictions for purposes of this analysis.

Highwoods Properties II, 2007 WL 4170821, at *12.

I. Background

The relevant language of article II, section 28 of the Tennessee Constitution provides that

“[e]ach respective taxing authority shall apply the same tax rate to all property within its

jurisdiction.” This language was adopted by a 1971 constitutional convention and approved by

general election on August 3, 1972. See generally Sherwood Co. v. Clary, 734 S.W.2d 318, 320

(Tenn. 1987) (“Article 2, § 28, of the Tennessee Constitution was extensively revised by an

amendment adopted in 1972.”); Snow v. City of Memphis, 527 S.W.2d 55, 58 (Tenn. 1975)

(discussing history of the 1972 amendment of section 28); So. Ry. Co. v. Fowler, 497 S.W.2d 891,

893 (Tenn. 1973) (same). Prior to 1972, however, the Constitution of 1870 imposed a similar

restriction. Article II, section 28 required that “[a]ll property shall be taxed according to its value,

that value to be ascertained in such manner as the legislature shall direct, so that taxes shall be equal

and uniform throughout the state.” See Albert v. Williamson County, 798 S.W.2d 758, 759 n.1

(Tenn. 1990). Article II, section 29 of the 1870 Constitution applied this restriction to taxation by

municipalities:

The General Assembly shall have power to authorize the several counties and

incorporated towns in this state, to impose taxes for county and corporation purposes

respectively, in such manner as shall be prescribed by law; and all property shall be

taxed according to its value, upon the principles established in regard to state

taxation.

Albert, 798 S.W.2d at 760 (emphasis added). These provisions, read together, “require that there

shall be uniformity of valuation and assessment of property for purposes of taxation, and that the tax

levy for any given purpose shall be uniform throughout the territory to which it is applied.” King

v. Sullivan County, 160 S.W. 847, 848 (Tenn. 1913); see also Earnest v. Greene County, 198 S.W.

417, 418 (Tenn. 1917).

Over one hundred years ago, the Court concluded that a private act annexing new territory

to the City of Memphis, but exempting the newly-annexed area from certain city taxes for a ten-year

period, violated sections 28 and 29 of article II of the 1870 Constitution:

This court is of opinion that sections 3 and 4 of chapter 6 are clearly unconstitutional

and void, inasmuch as they exempt the annexed territory from taxes for fire, light,

and police protection for 10 years, and for the same time expressly prohibit the

district from having the advantages of this protection. The court is of opinion that

taxation must always be uniform and equal throughout the extent of the same

jurisdiction; that state taxes must be equal and uniform throughout the state; that

county taxes must be equal and uniform throughout the county; and that a city tax

must be equal and uniform throughout the city, so far as revenues for current

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expenses or future wants are concerned . . . .

Jones v. City of Memphis, 47 S.W. 138, 139 (Tenn. 1898). In many contexts, “the [amended]

language of the equal and uniform clause has the same meaning as the 1870 version.” Albert, 798

S.W.2d at 761; but see Sherwood Co., 734 S.W.2d at 320 (discussing effect of amendment on

application of equal and uniform clause to different classifications of property).

II. Equality and Uniformity of Taxation in Area 42

The Plaintiffs insist that the terms of the consent judgment permit the City to impose a

scheme of taxation in direction violation of Jones. They base their claim on the following language

in section 6-51-103(d):

Should the court find the ordinance to be unreasonable, or to have been done by

exercise of powers not conferred by law, an order shall be issued vacating the

ordinance and the municipality shall be prohibited from annexing, pursuant to the

authority of § 6-51-102, any part of the territory proposed for annexation by such

vacated ordinance for a period of at least twenty-four (24) months following the date

of such order. In the absence of such finding, an order shall be issued sustaining the

validity of such ordinance, which shall then become operative thirty-one (31) days

after judgment is entered unless an abrogating appeal has been taken therefrom.

Tenn. Code Ann. § 6-51-103(d) (emphasis added). While acknowledging that the language in the

consent judgment provides otherwise, the Plaintiffs contend that both Areas A and B became part

of the City thirty-one days after the entry of that judgment, because, by the terms of this statute, the

entire ordinance had become “operative.” Because both areas have been annexed by the terms of

the legislation, but only Area B is subject to city taxes, the Plaintiffs argue that an unequal taxing

scheme is the result.

This argument rests on a faulty assumption that there is no difference between the effective

date of the ordinance and the effective date of the annexation. In our view, although the entire

ordinance became operative thirty-one days after the entry of the consent judgment, the very terms

of that judgment also properly delay the annexation of Area B until a later date. See Bastnagel, 457

S.W.2d at 534-35 (holding that the date on which an annexation ordinance becomes operative is not

necessarily “the actual date of annexation”). The actual date of annexation for Area B has been

merely postponed by a term contained within the judgment approved by the trial court as reasonable

under the circumstances.9 As stated, the Plaintiffs may not contest this portion of the consent

judgment as an impermissible modification of the Ordinance. Because Area B is not part of the City,

there has been no violation of the equality and uniformity provisions of article II, section 28.

9

The Plaintiffs make a significant point of arguing that “operative” and “effective” are synonymous. The issue

in this case, however, is not whether there is a difference between an ordinance being operative and the ordinance being

effective. The issue is whether there is a difference between an ordinance being operative and a portion of the annexation

described in the ordinance being effective.

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Moreover, our ruling on this issue does not create the risks identified by the Court in Jones:

The logical result of the contrary holding as to taxation would be that, in every city,

taxes might be different in different wards, and on different streets; in every county,

taxes might be different in every civil district; in the state, taxes might be different

in every county, and in each division,—all clearly in violation of the constitution and

our whole theory of equal and uniform taxation. So, also, it cannot be maintained

that a section of territory may be brought within the city limits, and made part of the

city, and yet be excluded by express enactment from the benefits extended to other

portions of the city.

47 S.W. at 139. In this instance, we are not dealing with territory “brought within the city limits, and

made part of the city.” To uphold the system of taxation within the City in no way approves of the

establishment of different levels of taxation “in different wards, and on different streets” of a

municipality.

Conclusion

In summary, the relevant and material allegations in the Plaintiffs’ complaint, even if true and

correct, do not constitute a cause of action upon which relief may be granted.10 The motion to

dismiss, therefore, was properly granted. We are not empowered to reconsider the wisdom of the

City’s annexation of Area 42 or its consent to the terms of the 2006 judgment. Rather, we confirm

Tennessee’s longstanding policy, as embodied in our Constitution and statutes, that the role of the

courts in the annexation process is limited. With rare exception, the appropriate avenue by which

to contest an annexation and, therefore, to assure full participation in any challenges as to its

propriety, is the filing of a timely action in quo warranto. Further, while the constitutionality of the

system of taxation within a municipality may be subject to challenge under the Declaratory Judgment

Act, the effect of the Ordinance at issue did not violate the terms of article II, section 28 of the

Tennessee Constitution.

The judgment of the Court of Appeals is affirmed. Costs are assessed to the Plaintiffs, for

which execution may issue if necessary.

______________________________

GARY R. WADE, JUSTICE

10

Because we affirm the trial court’s decision on the above-stated grounds, we are not required to address the

additional questions raised by the City: whether dismissal was warranted by the Plaintiffs’ failure to join indispensable

parties in their suit; whether the Plaintiffs had standing under the Declaratory Judgment Act; and whether the Plaintiffs’

complaint was barred by the doctrines of res judicata and collateral estoppel.

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