I N THECOUR TOFAPPEALSOFTENNES SEE EA STER N SEC TI O N

LAM AR ADVER TI SI NG OF ) KNOX C OUNTY TEN N ESSEE, I N

C. ) 03A 01- 9609- C

H - 00294 ) Pl a i ntif f

- A

pp e lla nt )

) ) HON. FR

EDER I CK D. M

c DONALD, v. ) C HANC ELLOR ) ) C I TY OFKNOXVI LLE ) ) D e f e nda nt - A

ppe l l e e ) R EVER SED AND R

EM ANDED

LA W R EN C E P. LEI BO

W I TZ O FK N O X V I LLE FO

R A PPELLA N T SHAR ON E. BOYC

EOFKNOXVI LLEFOR APPELLEE

O PI N I O N

G odda r d, P. J .

La m a r A dve r t i s i ngof Te nne s s ee ( La m a r ) app eal s f r om

an or de r of t he C

ha nc e r y C

our t of K

nox C ount y t ha t uphe l d t he va l i di t y of a pr ovi s i on of t he K noxvi l l e C

i t y C ode , A r t i c l e V

, Sect i on1 0

- N

( O r di n a nce) t h a t as s e s s e s a l i cen s e f ee pe r annum f or t he i ns pe c t i on of a l l e xi s t i ng gr ound a nd por t a bl e s i gns w i t hi n t he C

i t y of K

noxvi l l e . La m

a r ow ns a nd m

a i nt a i ns 3502

out door a dve r t i s i ng s t r uc t ur e s w i t hi n t he C

i t y of K

noxvi l l e a nd ha s c ha l l e nge d t he va l i di t y of t he or di na nc e .

La m a r ’ s cha l l e ng e r a i s e s num e r ou s i s s ue s . La m a r cl a i m

s t ha t the or di na nc e is inr e a litya ta xa nd , a s s uc h , re s ults in i m pe r m i s s i bl e doubl e t a xa t i on a s t o i t ; t ha t t he or di na nc e i s not uni f or m

a nd e qua l a s r e qui r e d by t he Te nne s s e e C ons t i t ut i on; t ha t t he or di na nc e i s i n vi ol a t i on of t he Equa l Pr ot e c t i on C l a us e of t he Four t e e nt h A

m e ndm e nt of t he C

ons t i t ut i on of t he U ni t e d St a t e s ; a nd t ha t t he or di na nc e i s i n vi ol a t i on of t he Fi r s t A m e ndm e nt of t he C

ons t i t ut i on of t he U ni t e d St a t e s . A

s a l r e a dy not e d, t he Tr i a l C our t uphe l d t he va l i di t y of t he or di na nc e . I n J une 1986, t he C i t y of K

noxvi l l e pa s s e d a n or di na nc e r e qui r i ng a n a nnua l i ns pe c t i on of a l l e xi s t i ng gr ound a nd p or t a bl e s i gn s f or com pl i a nce w

i t hzoni ng , el ect r i cal , m echa ni cal a nd a ny ot he r a ppl i c a bl e c ode s . A r t i c l e V

, Se c t i on 10- N

of t he K noxvi l l e C

i t y C ode r e a ds a s f ol l ow s :

N. A nnua l i ns pe c t i on f e e s . 1. I n a ddi t i on t o t he pe r m i t f e e s s e t f or t h i n Se c t i on M

, a nd c om

m e nc i ng on J ul y 1, 1987, a n a nnua l i ns pe c t i on f e e s ha l l be a s s e s s e d f or a ny e xi s t i ng gr ound s i gn or por t a bl e s i gn a s f ol l ow s : a . Si gns of f i f t y ( 50) s qua r e f e e t a nd l e ss. $12. 00 b. Si gns f i f t y- one ( 51) t o one hundr e d ( 100) s qua r e f e e t . . . . . 25. 00 c . Si gns one hundr e d one ( 101) t o f our hundr e d f i f t y ( 450) s qua r e f e e t.......................... 5 0 . 003 d. Si gns l a r ge r t ha n f our hundr e d f i f t y ( 450) s qua r e f e e t . . . . . 100. 00 2. These inspection fees shall not apply to any

on-premises sign owned by an organization if said organization is exempt from taxation pursuant to paragraph (3) of subsection (C) of Section 501 of the Internal Revenue Code of 1954 as amended, if said organization submits proof of its tax-exempt status to the sign inspector. 3. The sign inspector shall make an annual

inspection of existing ground and portable signs for compliance with the provisions of zoning, electrical, and other city codes. The inspector shall attach a permanent numbered tag to each inspected sign and shall maintain records of all inspected signs.

I n pr e pa r a t i on f or t he a dm i ni s t r a t i on a nd e nf or c e m e nt of t he or di na nc e , a 1987 c ont r a c t w a s e nt e r e d i nt o be t w e e n t he C i t y of K

noxvi l l e a nd t he M e t r opol i t a n Pl a nni ng C om m i s s i on ( M

PC ) , w he r e by t he M

PC, a s a ge nt f or t he C i t y of K

noxvi l l e , w

a s t o pe r f or m

t he i ns pe c t i on dut i e s out l i ne d i n t he or di na nc e . Ew i ng J ohns on, di r e c t or of l ong r a nge pl a nni ng f or t he M PC, w a s a s ke d t o s upe r vi s e t he s ur ve y of t he s i gns f or t he C i t y of K

noxvi l l e . The M PC e m pl oye e s w

ho c a r r i e d out t he dut i e s unde r t he or di na nc e , a nd w

ho w e r e s upe r vi s e d by M r . J ohns on, di d not c onduc t el ect r i cal , m echa ni cal or co de i n s p ect i on s of t he s i gn s a s di r e c t e d by t he or di na nc e , but onl y i nve nt or i e d t he s i gns . The s e i ndi vi dua l s ha d no t ool s or e qui pm e nt f or us e i n t he i nve nt or y, ha d no t r a i ni ng i n e ngi ne e r i ng a nd m os t ha d onl y a hi gh s c hool e duc a t i on. The f or m s c om pl e t e d by t he s ur ve y t e a m c ont a i ne d a n e nt r y f or t he c ont e nt of t he s i gn a nd i f t he s i gn’ s pur pos e w

a s t o a dve r t i s e , a not a t i on w a s m a de on t he f or m

.4 St e ve El l i s w

a s t he n hi r e d a s t he C i t y Si gn I ns pe c t or t oins p e c t t he s i gn s a f t e r the yw e r e ini t i al l yinve nt or i e d . H e ha dnoexp e r i e nce or t r a i ni ngi nel ect r i cal or m echa ni cal i ns pe c t i ons a nd w a s not t r a i ne d i n t he c i t y e l e c t r i c a l c ode . I n f a c t, M

r . Ellis te s tif i e dtha t he di dnot kno w w h a t r e qui r e m

e nt s a r e cont a i ne di nt he ci t yel ect r i cal co de r e l a t i ngt ogr ound s i gns . M

r . El l i s c onduc t s t he s e s i gn i ns pe c t i ons by dr i vi ng t o t he s i gn l oc a t i on, vi s ua l l y i ns pe c t i ng t he s i gn, of t e n f r om hi s c a r , a nd not i ng on a f or m t he da t e of t he i ns pe c t i on a nd w he t he r t he s t r uc t ur e w

a s a ppr ove d or di s a ppr ove d by hi m s e l f . M

r . El l i s c onduc t s s t r i c t l y a vi s ua l i ns pe c t i on.

A t tr i a l, La m

a r c a lle dSt e ve H a r b , a c e r tif i e dpub lic account a nt , t ot e s t i f yas anexp e r t w i t ne s s . M

r . H a r bpr e p a r e d c ha r t s c onc e r ni ng t he a m ount of t i m

e t ha t M

r . El l i s r out i ne l y s pe nt pe r f or m

i ng hi s j ob of i ns pe c t i ng s i gns . Ba s e d upon M r . El l i s ’ r e por t s a nd de pos i t i on t e s t i m ony, M r . H a r b c a m

e t o t he c onc l us i on t ha t M r . El l i s s pe nds a n a ve r a ge of 5. 478 m i nut e s on e a c h i ndi vi dua l s i gn i ns pe c t i on. M r . H a r b a l s o de t e r m

i ne d t ha t t he a ve r a ge c os t f or t he C i t y f or t hi s i ns pe c t i on s e r vi c e w a s $1. 59 pe r s i gn.

A l l f unds ge ne r a t e d by t hi s s i gn i ns pe c t i on pr oc e s s a r e pl a c e d i nt o t he ge ne r a l a c c ount of t he C i t y of K

noxvi l l e . The s i gn i ns pe c t i on f e e s a r e not s e gr e ga t e d. The f or m w hi c h t he C

i t y s i gn i ns pe c t i on bi l l s a r e pr i nt e d on i s t he s a m e f or m t ha t i s5

us e d f or t he a d va l or e m t a xe s t he C

i t y l e vi e s on bus i ne s s . The C ityFi na nc e D

e p a r t m e nt ha s r e s p on s i bilityf or c olle c ting de l i nque nt s i gn i ns pe c t i on f e e s a nd t he Ta x C ol l e c t i on D

i vi s i on of t he C

i t y Fi na nc e D

e pa r t m e nt pur s ue s t he c ol l e c t i on of t he s e f ees i nt he s a m

e m a nne r as t he ycol l ect de l i nque nt t a xe s . W e m u s t f i r s t de t e r m

i ne w he t he r t he i n s p ect i onf ee i s a c t u a llyw

ha t it pur p or t s tob e or w he t he r it is inr e a litya t a x. I n Te nne s s e e , t a xe s a r e di s t i ngui s he d f r om f e e s by t he obj e c t i ve s f or w

hi c h t he y a r e i m

pos e d. I f i t i s pr i m a r i l y f or t he pur pos e of r a i s i ng r e ve nue , i t i s a t a x. H ow e ve r , i f i t s pur pos e i s f or t he r e gul a t i on of s om e a c t i vi t y unde r t he pol i c e pow e r of t he gove r ni ng a ut hor i t y, i t i s a f e e . M e m phi s R e t a i l Li quor D

e a l e r s ’ A

s s oc i a t i on, I nc . v. C i t y of M

e m phi s , 547 S . W

. 2d 244 ( Te nn. 1977) ; S& PEnt e r pr i s e s , I nc . v. C i t y of M

e m phi s , 672 S . W . 2d 213 ( Te nn. A

pp. 1983) . Si nc e a m

uni c i pa l i t y i nc ur s c os t s i n di s c ha r gi ng c e r t a i n dut i e s c r e a t e d by t hi s t ype of or di na nc e , i t i s onl y r e a s ona bl e t o r e qui r e t hos e be ne f i t i ng f r om t he s e r vi c e t o de f r a y t he c os t s c om

m e ns ur a t e w

i t h t he e xpe ns e s i nc ur r e d by t he m uni c i pa l i t y. I t i s onl y r e qui r e d t ha t t he f e e s be a r s om e r e a s ona bl e r e l a t i on t o t he e xpe ns e i nvol ve d a nd i t i s no obj e c t i on t o a r e gul a t or y l i c e ns e t ha t i t pr oduc e s m or e i nc om

e t ha n i s r e qui r e d f or i t s a dm i ni s t r a t i on a nd e nf or c e m e nt . S &

P Ent e r pr i s e s , I nc . v. C i t y of M

e m phi s , s upr a .6 The C i t y of K

noxvi l l e a r gue s t ha t a l t hough t he f e e pe r s i gn i s m

or e t ha n t he a c t ua l e xpe ns e i nc ur r e d by t he i ns pe c t i on, t he f e e m

us t onl y be a r s om e r e a s ona bl e r e l a t i ons hi p t o t he e xpe ns e s i nvol ve d. The C i t y of K

noxvi l l e a s s e r t s t ha t a c ha r ge of $100 f or a s i gn i ns pe c t i on of a s i gn l a r ge r t ha n 450 s qua r e f eet i s r eas on a bl e . Thi s ar gum e nt i s m

a de de s pi t e t he f act t ha t t he C i t y Si gn I ns pe c t or a dm i t s t ha t hi s i ns pe c t i ons a r e onl y vi s ua l i ns pe c t i ons a nd of t e n i nvol ve s ne ve r l e a vi ng hi s c a r . I n s uppor t of t hi s a r gum e nt , t he C

i t y of K

noxvi l l e r e l i e s upon M e m phi s R e t a il Li quor D

e a l e r s ' , s upr a . I n M e m phi s R e t a il Li qu or D

e a l e r s ' , t he Supr e m e C our t uphe l d a C

i t y of M

e m phi s or di na nc e t ha t i m pos e d a n i ns pe c t i on f e e upon w hol e s a l e r s a nd r e t a i l e r s of a l c ohol i c be ve r a ge s . The Te nne s s ee Le gi s l a t ur e p a s s e da s t a t ue t h a t al l o w e dm uni c i p a l i t i e s t o c ha r ge a f e e f or l i quor i ns pe c t i on of no m or e t ha n f i ve p e r cent of t he w

hol e s a l e pr i ce of al c ohol i c b e ve r a g e s . Pur s u a nt t o t he pr e c e di ng gr a nt e d a ut hor i t y, t he C i t y of M

e m phi s pa s s e d a n or di na nc e w

hi c h i m

pl e m e nt e d t he f i ve pe r c e nt i ns pe c t i on f e e . The l i quor de a l e r s c ha l l e nge d t he or di na nc e be c a us e t he r e ve nue ge ne r a t e d by t he or di na nc e i s 200 t i m e s t he c os t of r e gul a t i on.

I n uphol di ng t he or di na nc e , t he C our t c onc e de d t ha t a c ha l l e nge ba s e d upon t he di s pa r i t y i n t he f e e c ha r ge d a nd c os t of r e gul a tioninthi s c a s e m i ght b e v a lidif the a c tivityr e gul a t e d w a s a nyt hi ng ot he r t ha n t he l i quor bus i ne s s . The C our t r e l i e d upon t he St a t e ' s i nhe r e nt pol i c e pow e r t o s ubj e c t t he l i quor1 The Court quoted with approval a decision of the Supreme Court of

Illinois which stated as follows:

"It is true, as a general proposition, that a regulatory license fee must bear 'some reasonable relation' to the expenses involved in the supervision and inspection of the licensed business. (citations omitted.) But this general proposition 'does not apply where the license charge is imposed on those occupations which, while they are tolerated, are recognized as being hurtful to public morals, productive of disorder, or injuries to the public such as the liquor traffic' . . . the amount of the license fee may itself have a permissible regulatory effect." Memphis Retail Liquor Dealers’ Associationat page 246, quoting Lalumio v. Fasseas , 171 N.E.2d 43, 44 (Ill. 1960). 7 t r a f f i c t o s t r i c t s upe r vi s i on or pr ohi bi t i on be c a us e i t i s pot e nt i a l l y, i f not a c t ua l l y, da nge r ous t o t he publ i c he a l t h, m or a l i t yandw

e l f a r e . 1Fur t he r m or e , th e St a t e Le gi s l a t ur e a ut hor i z e d a f i ve pe r c e nt i ns pe c t i on f e e on a l c ohol i c be ve r a ge s w i t h no r e qui r e m

e nt t ha t t he f e e be a r a ny r e l a t i ons hi p t o t he c os t of t he i ns pe c t i on.

W e f i nd t ha t t he de c i s i on i n M e m phi s R e t a il Li qu or D eal e r s ’ i s di s t i ngui s ha bl e f r om t he c a s e a t ba r . The s i gns c a nnot be c ons i de r e d ha r m f ul t o t he publ i c he a l t h, m or a l i t y a nd w e l f a r e . A

s a r e s ul t , w

e hol d t ha t out door a dve r t i s i ng s i gn i ns pe c t i on f e e s m us t be a r a r e a s ona bl e r e l a t i ons hi p t o t he s e r vi c e s r e nde r e d by t he m uni c i pa l i t i e s . W e f i nd t he de c i s i on i n M a r tinM

e di a v . H

e m pf i e l d Tow ns hi p Zoni ng H

e a r i ng Boa r d , 671 A . 2d 1211 ( Pa . C

om m w . C t . 1996) , pe r s ua s i ve on t he i s s ue of w he t he r t he f e e c ha r ge d be a r s a r e a s ona bl e r e l a t i ons hi p t o t he s e r vi c e s r e nde r e d by t he m uni c i pa l i t i e s . The or di na nc e c ha l l e nge d i n M a r tinM

e di a a s s e s s e d a $100 l i c e ns e f e e pe r a nnum f or t he i ns pe c t i on a nd8

r e gul a tionof billb o a r d s w ithH e m pf i e l dTo w

n s hi p . A

t tr i a l, th e s i gn i ns pe c t or t e s t i f i e d t ha t he c onduc t e d vi s ua l i ns pe c t i ons onl y. H

e a l s o a dm

i t t e d t ha t f or s om e i ns pe c t i ons , no one got out of t he c a r a nd i n s om e c a s e s t he c a r di d not s t op m ovi ng. A

n e xpe r t t e s t i f i e d f or t he pl a i nt i f f a nd opi ne d t ha t t he i ns pe c t i on c o s t w a s m uc hl e s s t ha nt he f ee cha r g e d . Ba s e dup ont he s e f act s , t he c our t s t r uc k dow n t he or di na nc e . The C our t i s m

i ndf ul t ha t t he r e i s a pr e s um pt i on i n f a vor of va l i di t y of a n or di na nc e , a nd t he one que s t i oni ng t he va l i di t y of t he or di na nc e ha s t he bur de n of pr oof t o s how i t s i nv a l i di t y . S &

P Ent e r pr i s e s , s upr a . W e f i nd t ha t La m

a r ha s s a t i s f i e d t ha t bur de n a nd t ha t t he or di na nc e i s i n r e a l i t y a t a x. A s pr e vi ous l y s t a t e d, t he s i gn i ns pe c t or di d not c onduc t e l ect r i cal or m

echa ni cal i n s p ect i on s of t he s i gn s as i n s t r uc t e d by t he s t a t ut e . The s i gn i ns pe c t or c onduc t e d onl y vi s ua l i ns pe c t i ons of t he s i gns , of t e n f r om hi s c a r . Fur t he r m or e , La m

a r put on pr oof de m

ons t r a t i ng t he di s pa r i t y i n t he a c t ua l c os t of t he s i gn i ns pe c t i ons a nd t he f e e s c ha r ge d. The r e c or d c l e a r l y de m ons t r a t e s t ha t t he s i gn i ns pe c t i on f e e s di d not be a r a r e a s ona bl e r e l a t i ons hi p t o t he s e r vi c e s r e nde r e d by t he s i gn i ns pe c t or . A

f t e r de t e r m

i ni ng t ha t t he s i gn i ns pe c t i on f e e s a r e i n r eal i t ya t a x , w

e m u s t ne xt de t e r m

i ne w he t he r t he or di n a nce i s an i m pe r m i s s i bl e doubl e t a xa t i on. D oubl e t a xa t i on i s pr ohi bi t e d by t he Te nne s s e e C

on s titutionunl e s s it is pl a i ntha t the2 W e d o n o t f i n d i t n ecess a r y t o d eci d e w h e t h e r t h e ab o v e d i scuss e d o r d i n a n ce i s an ad v a l o r e m t a x o r a p r i v i l e g e t a x o n ad v e r t i s i n g co m p a n i es. 9 l e gi s l a t ur e i nt e nde d t o t a x t he s a m e pr ope r t y t w

i c e . St a l c up v. C ityof G

a tlinbur g , 577 S . W . 2d 439 ( Te nn. 1978) . I f a s t a t ut e i s e na c t e d by t he Te nne s s e e Le gi s l a t ur e , w hi c h a l l ow

s f or doubl e t a xa t i on, t he s t a t ut e m us t c ont a i n l a ngua ge w hi c h pl a i nl y i ndi c a t e s s uc h a n i nt e nt i on a nd t he r e i s a l s o a pr e s um pt i on a ga i ns t s uc h a n i nt e nt i on. W illia m s v . M a s s a c hu s e tts M

ut u a l Li f e I ns ur a nc e C

o. , 221 Te nn. 508, 427 S . W . 2d 845 ( 1968) . La m a r pa ys a gr os s r e c e i pt s t a x t o t he C i t y on r e ve nue ge ne r a t e d f r om

l e a s i ng out door a dve r t i s i ng s i gns . The a bove di s c us s e d or di na nc e i s a s e c ond t a x t ha t La m a r m us t pa y t he C

i t y of K noxvi l l e . 2Thus , La m a r i s s ubj e c t t o doubl e t a xa t i on. The C i t y of K

noxvi l l e poi nt s t o no l a ngua ge t ha t i ndi c a t e s t he Le gi s l a t ur e i nt e nde d t o doubl e t a x a dve r t i s i ng c om pa ni e s . The r e f or e , w

e hol d t ha t t he a bove di s c us s e d or di na nc e r e s ul t s i n i m pe r m i s s i bl e doubl e t a xa t i on. Si nc e w

e f i ndthe f i r s t i s s ue tob e di s p o s i t i ve , w e do not a ddr e s s t he ot he r i s s ue s r a i s e d by La m a r . Fur t he r m

or e , i t i s w e ll e s t a b lis he dtha t a c our t w ill not p a s s onthe is s ue of the c on s titution a lityof a s t a t ut e unl e s s it is a b s ol ut e l yne c e s s a r y f or t he de t e r m

i na t i on of t he c a s e a nd of t he pr e s e nt r i ght s of t he p a r t i e s tothe li t i g a t i on . W e s t v . Ca r r , 212 Te nn. 367, 370 S . W . 2d 469 ( 1963) . C our t s s houl d a voi d de a l i ng w i t h10

c ons t i t ut i ona l que s t i ons a bs t r a c t l y or i s s ui ng a dvi s or y opi ni ons . St a t e v . K

i ng , 635 S . W

. 2d 113 ( Te nn. 1982) . For t he r e a s ons s t a t e d a bove , t he j udgm e nt of t he Tr i a l C our t i s r e ve r s e d. The $19, 577 pa i d i nt o t he R e gi s t r y of t he C our t , pl us a c c r ue d i nt e r e s t , i s di r e c t e d t o be pa i d t o La m a r , a nd t he c a us e i s r e m a nde d t o t he Tr i a l C our t f or s uc h f ur t he r pr oc e e di ngs a s m

a y be ne c e s s a r y a nd c ol l e c t i on of c os t s be l ow w hi c har e , as ar e co s t s of app eal , adj udg e dag a i n s t t he C i t y .

_______________________________ H ous t on M

. G odda r d, P. J . CONC UR:

________________________________ C ha r l e s D

. Su s a no , J r ., J .

________________________________ W i l l i a m H . I nm a n , Sr . J .