Oneida Farms Development, Inc. v. Town of Huntsville

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

August 27, 2015 Session

ONEIDA FARMS DEVELOPMENT, INC. v. TOWN OF HUNTSVILLE

Appeal from the Chancery Court for Scott County

No. 10259 Elizabeth C. Asbury, Chancellor

No. E2014-02179-COA-R3-CV-FILED-NOVEMBER 16, 2015

This case involves a quo warranto action challenging the validity and reasonableness of

an annexation ordinance. The trial court determined that, pursuant to Tennessee Code

Annotated § 6-58-111, the plaintiff failed to prove that (1) the annexation ordinance was

unreasonable for the overall well-being of the communities involved or (2) the health,

safety, and welfare of the citizens and property owners of the municipality and territory

would not be materially retarded in the absence of such annexation. The court therefore

dismissed the plaintiff’s complaint. The plaintiff timely appealed. Discerning no error,

we affirm the trial court’s judgment. Pursuant to an issue raised by the defendant, we

also determine the plaintiff’s complaint to have been timely and properly filed.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

Affirmed; Case Remanded

THOMAS R. FRIERSON, II, J., delivered the opinion of the court, in which D. MICHAEL

SWINEY and JOHN W. MCCLARTY, JJ., joined.

C. Patrick Sexton, Oneida, Tennessee, for the appellant, Oneida Farms Development, Inc.

Jon G. Roach, Knoxville, Tennessee, for the appellee, Town of Huntsville.

OPINION

I. Factual and Procedural History

On August 17, 2011, the Town of Huntsville (“the Town”) initiated annexation

proceedings involving certain properties located within the Town’s approved urban

growth boundary. One such affected property, nominated Parcel 10, is owned by the

plaintiff, Oneida Farms Development, Inc. (“OFDI”). OFDI’s parcel consists of

approximately 1,800 acres of raw, unimproved land and contains only dirt logging roads.

This property is contiguous to the Town’s boundary and surrounds the Town’s water

reservoir.

On August 24, 2011, the Town’s Board of Mayor and Aldermen met in regular

session and adopted Resolution 11-08-01, approving the plan to annex the subject

property. The Town’s Board of Mayor and Aldermen also adopted Resolution 11-08-04,

approving a plan of services that would be provided to the affected property. The

services to be provided included fire protection, garbage collection, maintenance of any

paved roads that might be built, and inspection services. A public notice was placed in

the Independent Herald, a newspaper of general circulation in Scott County, on

September 1, 2011.

On September 23, 2011, OFDI filed a Complaint for Declaratory Action, thereby

initiating the instant action. OFDI sought a temporary restraining order preventing the

second reading and adoption of the annexation ordinance. The trial court denied OFDI’s

request for injunctive relief. On September 28, 2011, the Town adopted Ordinance 11-

08-01, annexing the property, as well as Resolution 11-08-04, approving the proposed

plan of services. The Town filed a Motion for Summary Judgment in the instant action

on November 21, 2011, which was denied by the trial court. The Town thereafter sought

an interlocutory appeal regarding the ruling pursuant to Tennessee Rule of Appellate

Procedure 9. Although the trial court granted an interlocutory appeal, this Court denied

that request.

The trial court conducted a bench trial in this matter on September 17, 2014.

George Potter, the Town’s Mayor, testified regarding the significance to the Town of

annexing the property in question. Mayor Potter related that the Town began planning to

annex the subject property in 2004 in order to protect the lake and the Town’s water

supply. According to Mayor Potter, although the property was raw and undeveloped at

the time, the Town determined that it was important to “get ahead” of any development

so as to minimize the potential impact on the water reservoir. Mayor Potter explained

that the Town would provide numerous services, including fire protection, sewer, garbage

collection, street maintenance, street lighting, and inspections. Because the Town would

only collect $875 in property taxes on the subject property, Mayor Potter stated that this

would be such a miniscule portion of the Town’s overall revenue collection as to have

had no bearing on the Town’s decision.

Daniel Billingsley testified on behalf of OFDI as one of the officers of the

corporation. Mr. Billingsley reported that OFDI had no intention of developing the land

for any use other than cutting timber because the expense associated with residential

development would be too great. Although Mr. Billingsley admitted that a sewer line had

been installed through the property, he insisted that OFDI had no use for sewer

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connections as there were no structures on the land. Accordingly, OFDI also had no need

for electricity, water, garbage collection, street maintenance or lighting, or police

protection. Mr. Billingsley stated that fire protection would only protect against a forest

fire, which was of no concern to OFDI.

Mr. Billingsley acknowledged that the property’s subjection to the Town’s

planning commission rules would have no bearing on his ability to harvest timber. Mr.

Billingsley further acknowledged that if OFDI purposed to sell the property in the future,

having access to the sewer line would be of value. According to Mr. Billingsley, he

“committed to the people of Scott County” that if the land was developed, “it ought to be

in the Town of Huntsville.” Mr. Billingsley further explained that should any type of

residential development take place, annexation resulting in the provision of fire

protection, street maintenance, and other services would be beneficial to the property

owners.

Having taken the matter under advisement, the trial court entered an order on

September 26, 2014, incorporating its memorandum opinion. The court determined, inter

alia, that because the area annexed was within the Town’s urban growth boundary, the

provisions of Tennessee Code Annotated § 6-58-111 would apply. Pursuant to

Tennessee Code Annotated § 6-58-111(a), OFDI was required to prove that: (1) the

annexation ordinance is unreasonable for the overall well-being of the communit[y]

involved, or (2) [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.

The trial court found that the property in dispute adjoined the Huntsville Utility

District Reservoir, which supplied water to the Town and surrounding areas. As such,

the court also determined that protection of this lake reservoir was necessary for the

public health, safety, and welfare of the Town’s citizens. The court further found that the

Town had committed to provide services to the annexed property, including sewer,

garbage collection, street maintenance, inspections, and a zoning plan. The court noted

that OFDI’s representative, Mr. Billingsley, acknowledged that in the event of future

development, it would be beneficial for the property to be annexed. Further, the court

found a dearth of evidence that annexation was solely to increase the Town’s revenue

inasmuch as the tax revenue from OFDI’s property would be only $875 per year.

Based on the evidence presented, the trial court concluded that OFDI had failed to

prove that (1) the annexation ordinance was unreasonable for the overall well-being of

the community, or (2) the health, safety, and welfare of the citizens and property owners

of the municipality would not be materially retarded in the absence of such annexation.

The court therefore entered a judgment dismissing OFDI’s complaint. OFDI timely

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appealed.

II. Issues Presented

OFDI presents the following sole issue for our review:

1. Whether the trial court erred in determining that OFDI failed to prove that

the annexation ordinance was unreasonable.

The Town presents the following additional issue:

2. Whether OFDI’s Complaint for Declaratory Action and this appeal should

be dismissed due to OFDI’s failure to file a quo warranto proceeding

within thirty days of the annexation ordinance’s passage.

III. Standard of Review

With regard to a trial court’s findings of fact following a bench trial, Tennessee

Rule of Appellate Procedure 13(d) provides:

Unless otherwise required by statute, review of findings of fact by the trial

court in civil actions shall be de novo upon the record of the trial court,

accompanied by a presumption of the correctness of the finding, unless the

preponderance of the evidence is otherwise.

We review conclusions of law, however, de novo and without any presumption of

correctness. Campbell v. Fla. Steel Corp., 919 S.W.2d 26, 35 (Tenn. 1996) (citing

Hillsboro Plaza Enters. v. Moon, 860 S.W.2d 45, 47 (Tenn. Ct. App. 1993)).

IV. Annexation Ordinance

OFDI asserts that the trial court erred in determining that the annexation of the

property was reasonable. There is no dispute in this matter that the property in question

falls within the Town’s urban growth boundary. Regarding a municipality’s urban

growth boundary, our Supreme Court has explained:

Tennessee Code Annotated sections 6-58-101 to -116 (“Chapter 58”)

establish procedures by which a county must develop and adopt a

countywide growth plan for land use decisions within the county, including

annexations by municipalities. E.g., Tenn. Code Ann. § 6-58-107 (2005).

A county’s growth plan establishes urban growth boundaries for each

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municipality in the county. Tenn. Code Ann. § 6-58-107. A municipality’s

urban growth boundary demarcates the area in which the municipality is

projected to grow and in which the municipality’s annexation of territory is

presumptively reasonable. See Tenn. Code Ann. §§ 6-58-106(a)(1), -

111(a)(1) (2005); State ex rel. Tipton v. City of Knoxville, 205 S.W.3d 456,

460-61 (Tenn. Ct. App. 2006).

City of Harriman v. Roane Cnty. Election Comm’n, 354 S.W.3d 685, 686 (Tenn. 2011).

It is well settled that Tennessee Code Annotated § 6-58-111(a) (2015) applies to

the annexation of territories within an urban growth boundary. See Highwoods Props.,

Inc. v. City of Memphis, 297 S.W.3d 695, 707 (Tenn. 2009); Tipton v. City of Knoxville,

205 S.W.3d 456, 461 (Tenn. Ct. App. 2006). Tennessee Code Annotated § 6-58-111

states in pertinent part:

(a) A municipality possesses exclusive authority to annex territory located

within its approved urban growth boundaries; therefore, no municipality

may annex by ordinance or by referendum any territory located within

another municipality’s approved urban growth boundaries. Within a

municipality’s approved urban growth boundaries, a municipality may use

any of the methods in chapter 51 of this title to annex territory; provided,

that if a quo warranto action is filed to challenge the annexation, the party

filing the action has the burden of proving that:

(1) An annexation ordinance is unreasonable for the overall

well-being of the communities involved; or

(2) The 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.

(b) In any such action, the action shall be tried by the circuit court judge or

chancellor without a jury.

OFDI contends that the annexation ordinance was unreasonable and that the only

purpose of the Town’s annexation of the subject property was to levy taxes, even though

the taxes on OFDI’s property amounted to only $875.00 per year. Furthermore, OFDI

insists that because it had no plans to develop the property, the Town will not provide any

municipal services immediately after the annexation because OFDI has no need of such

services.

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The Town correctly asserts that OFDI bears the burden of proving that (1) the

annexation ordinance was unreasonable for the overall well-being of the community

involved, or (2) the health, safety, and welfare of the citizens and property owners of the

municipality and territory would not be materially retarded in the absence of such

annexation, pursuant to the statute. Furthermore, the Town argues that the trial court was

correct in determining that OFDI did not carry its burden of proof. We agree.

Regarding the challenge to an ordinance annexing property within the

municipality’s urban growth boundary, this Court has previously elucidated:

“While other factors may be considered, the primary test of the

reasonableness of an annexation ordinance must be the planned and orderly

growth and development of the city, taking into consideration the

characteristics of the existing city and those of the area proposed for

annexation.” State ex rel. Collier v. City of Pigeon Forge, 599 S.W.2d 545,

548 (Tenn. 1980); accord Cox v. City of Jackson, No. 02A01-9701-CH-

00002, 1997 WL 777078, at *4 (Tenn. Ct. App. Dec. 18, 1997), perm. app.

denied June 22, 1998. Factors to be considered in assessing the

reasonableness of an annexation include:

a. the necessity for, or use of, municipal services;

b. the present ability and intent of the municipality to

render municipal services when and as needed; [and]

c. whether the annexation is for the sole purpose of

increasing municipal revenue without the ability and

intent to benefit the annexed area by rendering

municipal services.

Town of Oakland v. Town of Somerville, No. W2002-02301-COA-R3-CV,

2003 WL 22309498, at *5 (Tenn. Ct. App. Oct. 7, 2003), perm. app. denied

Mar. 22, 2004 (citing City of Kingsport v. State ex rel. Crown Enters., Inc.,

562 S.W.2d 808, 812 (Tenn. 1978); Saylors v. City of Jackson, 575 S.W.2d

264, 266 (Tenn. 1978)).

Sw. Tenn. Elec. Membership Corp. v. City of Jackson, 359 S.W.3d 590, 605 (Tenn. Ct.

App. 2010).

Applying the above-listed factors to the case at bar, we first consider OFDI’s

argument that its property, consisting of unimproved land, did not need and would not

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benefit from the provision of any services by the Town. Although Mr. Billingsley

maintained that fire protection for OFDI’s property was not necessary because he

believed it was beneficial to have “a good fire every now and then to clean it out,” he also

acknowledged that an uncontrolled forest fire on OFDI’s property could potentially

damage adjoining landowners’ properties. Furthermore, Mr. Billingsley’s disinterest in

fire protection services appears inconsistent with his stated plans to harvest timber from

the property. Mr. Billingsley also maintained that OFDI did not intend to develop the

subject property such that the provision of garbage collection, inspection services, and the

like would be of no utility to OFDI. He conceded, however, that if OFDI sold the

property or it was developed in the future, having access to the Town’s services would be

valuable and beneficial.

With regard to the second factor, it was undisputed that the Town approved a plan

of services in conjunction with the annexation of the subject property. In addition to fire

and police protection services, the proof demonstrated that the Town would install a main

sewer line to the border of OFDI’s property at an estimated cost of $5,000. Any future

residents would then pay a reduced rate for sewer service. The Town also committed to

provide garbage collection services, maintain any future streets, provide street lighting,

provide inspection services, and develop a zoning plan. As stated previously, OFDI did

not question the Town’s intent to provide the listed services. OFDI merely questioned

whether such services would be of any benefit to the property as it presently exists.

In a prior case where landowners opposed annexation and claimed to neither want

nor need municipal services, our Supreme Court explained:

The failure of a city to extend its corporate boundaries to embrace

contiguous areas of growth and development is an abdication of

responsibility. The time to annex is in the incipient stage of growth, lest the

basic purpose of annexation be frustrated and the public interest suffer by

the annexation of substandard areas.

***

[W]e have not overlooked the insistence of the appellants that they neither

wanted nor needed the city services and that they had service equal to or

exceeding those provided by the city. This is an old and familiar tune. Its

factual accuracy is debatable.

We do not consider the need for city services to be of controlling

significance. True, this is a factor to be taken into consideration along with

others, but, as this Court held in City of Kingsport [v. State ex rel. Crown

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Enters., Inc., 562 S.W.2d 808, 814 (Tenn. 1978)], “(t)he whole process of

annexation would be frustrated if the city could only annex those properties

then in need of city services.” 562 S.W.2d at 814. Moreover, this record is

replete with testimony showing a need for services provided by the city. A

part of the basis for appellants’ lack of need lies in the fact that already the

city is directly providing some services and the annexed area is the indirect

beneficiary of other services stemming from its proximity to the city.

The people and property owners of an area proposed for annexation

have neither the moral nor legal right to stand aloof from the incorporated

community of which they are a de facto part, enjoying most of the benefits,

but disclaiming their duty to participate in providing these essential

services. Nor do they have the right to block the orderly growth and

development of the corporate community. The statutory test is the “overall

well-being” of both the annexing city and the annexed community. This

record shows a benefit to both; a detriment to neither.

While other factors may be considered, the primary test of the

reasonableness of an annexation ordinance must be the planned and orderly

growth and development of the city, taking into consideration the

characteristics of the existing city and those of the area proposed for

annexation.

State ex rel. Collier v. City of Pigeon Forge, 599 S.W.2d 545, 547-48 (Tenn. 1980).

Based on this precedent, we conclude that OFDI’s purported lack of desire to avail itself

of available services provided by the Town is not dispositive when the Town has

committed to providing valuable services as needed.

As to factor three, whether the annexation is for the sole purpose of increasing

municipal revenue without the ability and intent to benefit the annexed area by rendering

municipal services, we conclude that the evidence preponderates in favor of a

determination that it is not. The Town has committed to providing numerous services for

a large parcel of property when the revenue amounts to a mere $875 per year. Regarding

its purpose for the annexation, the Town represented that annexation of the property in

question was necessary to protect the water reservoir and “[get] ahead of development”

that might impact the water supply. The evidence at trial demonstrated that such

protection of the water supply was necessary for the health and welfare of citizens of the

Town and other communities served by the water reservoir. We determine this to be a

valid and reasonable basis for the Town’s annexation of the subject property. We

therefore conclude that OFDI did not meet its burden of proving that the annexation

ordinance was unreasonable for the overall well-being of the community involved.

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We also determine that OFDI failed to prove that the health, safety, and welfare of

the citizens and property owners of the municipality and territory would not be materially

retarded in the absence of this annexation.1 As this Court has explained:

“[P]roving lack of material retardation necessarily requires proof that

annexation will not materially benefit the municipality and territory.” State

ex rel. Tipton v. City of Knoxville, 205 S.W.3d 456, 462 (Tenn. Ct. App.

2006). Therefore, a party challenging an annexation under subsection (2)

must “prove that annexation would not materially benefit the health, safety,

and welfare of the citizens and property owners of the City and the affected

territory.” Id.

Sw. Tenn. Elec. Membership Corp., 359 S.W.3d at 606.

As previously explained, the evidence in this matter established that the

annexation’s purpose was to protect the Town’s water supply, which would clearly

benefit the health, safety, and welfare of the Town’s citizens. Furthermore, Mr.

Billingsley admitted that any future development of OFDI’s property would be benefitted

by the services provided by the Town following annexation. Therefore, the annexation

was mutually advantageous to the Town and to OFDI, materially benefitting the health,

safety, and welfare of the citizens and property owners of the Town and the affected

territory. We conclude that the trial court did not err in determining that OFDI failed to

meet its burden of proving the annexation ordinance to be unreasonable.

V. Procedural Challenges

The Town contends that OFDI’s Complaint for Declaratory Action and this appeal

should be dismissed due to OFDI’s failure to file a quo warranto proceeding within thirty

days of the annexation ordinance’s passage. Thus, the Town’s argument appears to be

two-fold: (1) that the action filed by OFDI was not a proper quo warranto action and (2)

that it was untimely because it was filed before the ordinance was passed.

With regard to the type of action filed by OFDI, our Supreme Court has made

clear 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.” See Highwoods Props., 297 S.W.3d at 708 (citing City of Oak

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OFDI framed its issue on appeal as one involving the reasonableness of the annexation ordinance. A

review of OFDI’s arguments reveals that OFDI is referring to overall reasonableness as discussed in Sw.

Tenn. Elec. Membership Corp., 359 S.W.3d at 606, as opposed to mere reference to the first prong of

Tennessee Code Annotated § 6-58-111(a).

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Ridge v. Roane Cnty., 563 S.W.2d 895, 897 (Tenn. 1978)). In the instant action, although

OFDI’s complaint was styled as a “Complaint for Declaratory Action,” the complaint

referenced Tennessee Code Annotated § 6-51-103 (2015), which is the statute addressing

quo warranto actions to contest annexation ordinances.2 Furthermore, within its

complaint, OFDI specifically averred that it was contesting “the validity of the

ordinance” and that the proposed ordinance “was not reasonable for the overall well

being of the community or municipality.” We determine that OFDI properly asserted a

quo warranto challenge to the ordinance at issue. See, e.g., State ex rel. Garrett v. City of

Norris, No. E2013-02355-COA-R3-CV, 2014 WL 4260848 at *5 (Tenn. Ct. App. Aug.

28, 2014) (“While [the plaintiff’s] complaint was not a model of clarity, it articulated

sufficient facts and cited relevant law such that [the defendant] was apprised of a

challenge to the annexation of the Territory.”). See also Brundage v. Cumberland Cnty.,

357 S.W.3d 361, 371 (Tenn. 2011) (holding that courts should give effect to the

substance of a pleading rather than its form or title).

Regarding the timeliness of the action, the Town argues that the complaint, which

was filed five days prior to the final passage of the ordinance at issue, was untimely

because it was premature. The Town insists that because Tennessee Code Annotated § 6-

51-103 provides that a quo warranto action must be filed prior to the ordinance’s

operative date, and Tennessee Code Annotated § 6-51-102 (2015) provides that the

ordinance becomes operative thirty days after its final passage, this thirty-day window

following final passage of the ordinance is the only time period within which a timely

quo warranto action may be filed. The Town cites no authority, however, for this

position. The cases upon which the Town seeks to rely only involve quo warranto

actions that were filed after expiration of the thirty-day period. See Highwoods Props.,

297 S.W.3d at 707; Allen v. City of Memphis, 397 S.W.3d 572, 582 (Tenn. Ct. App.

2012). We find no basis to hold that a quo warranto action filed days before the final

passage of the ordinance is untimely as premature. This action was filed prior to the

ordinance’s operative date, in accordance with Tennessee Code Annotated § 6-51-103,

and is therefore timely.

2

Tennessee Code Annotated § 6-51-103 (2015) provides in pertinent part:

Any 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 a suit in the nature of

a quo warranto proceeding in accordance with this part, § 6-51-301 and title 29, chapter

35 to contest the validity thereof on the ground that it 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 constitutes an exercise of power not conferred by

law.

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VI. Conclusion

For the foregoing reasons, we determine that the trial court’s judgment is correct

and should be affirmed. Costs on appeal are assessed to the appellant, Oneida Farms

Development, Inc. This case is remanded to the trial court, pursuant to applicable law,

for collection of costs assessed below.

_________________________________

THOMAS R. FRIERSON, II, JUDGE

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