                        I N THE COURT OF APPEALS OF TENNESSEE

                                         EASTERN SECTI ON




LAMAR ADVERTI SI NG OF                          )   KNOX COUNTY
TENNESSEE, I NC.                                )   03A01- 9609- CH- 00294
                                                )
       Pl a i nt i f f - Appe l l a nt          )
                                                )
                                                )   HON. FREDERI CK D. M DONALD,
                                                                        c
       v.                                       )   CHANCELLOR
                                                )
                                                )
CI TY OF KNOXVI LLE                             )
                                                )
       De f e nda nt - Appe l l e e             )   REVERSED AND REMANDED




LAWRENCE P. LEI BOW TZ OF KNOXVI LLE FOR APPELLANT
                   I

SHARON E. BOYCE OF KNOXVI LLE FOR APPELLEE




                                   O P I N I O N




                                                                     Godda r d, P. J .




               La ma r Adve r t i s i ng of Te nne s s e e ( La ma r ) a ppe a l s f r om a n

o r d e r o f t he Cha nc e r y Cour t of Knox Count y t ha t uphe l d t he

v a l i d i t y of a pr ovi s i on of t he Knoxvi l l e Ci t y Code , Ar t i c l e V,

Se c t i o n 10- N ( Or di na nc e ) t ha t a s s e s s e s a l i c e ns e f e e pe r a nnum

f o r t h e 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

wi t h i n t he Ci t y of Knoxvi l l e .       La ma r owns a nd ma i nt a i ns 350
o u t d o o r a dve r t i s i ng s t r uc t ur e s wi t hi n t he Ci t y of Knoxvi l l e a n d

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



               La ma r ’ s c ha l l e nge r a i s e s nume r ous i s s ue s .               La ma r c l a i ms

t ha t t he o r di na nc e i s i n r e a l i t y a t a x a nd, a s s uc h, r e s ul t s i n

i mp e r mi 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 n o t

u n i f o r m a nd e qua l a s r e qui r e d by t he Te nne s s e e Cons t i t ut i on; t h a t

t h e o r d i 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 Cl a us e o f

t h e Fo u r t e e nt h Ame ndme nt of t he Cons t i t ut i on of t he Uni 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

Ame n d me nt of t he Cons t i t ut i on of t he Uni t e d St a t e s .                     As a l r e a d y

n o t e d , t he Tr i a l Cour 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 h e Ci t y of Knoxvi l l e pa s s e d a n or di na n c e

r e q u i 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 o r t a bl e s i gns f or c ompl i a nc e wi t h z oni ng, e l e c t r i c a l , me c ha ni c a l

a n d a n y ot he r a ppl i c a bl e c ode s .            Ar t i c l e V, Se c t i on 10- N of t h e

Kn o x v i l l e Ci t y Code r e a ds a s f ol l ows :



       N.      Annua l i ns pe c t i o n f e e s .

       1.       I n a ddi t i on t o t he pe r mi t f e e s s e t f or t h i n
       Se c t i on M a nd c omme n c i ng on J ul y 1, 1987, a n a nnua l
                       ,
       i n s 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
       g r ound s i gn or por t a bl e s i gn a s f ol l ows :

               a.      Si gns of f i f t y ( 50) s qua r e f e e t a nd
                       l es s .                                                   $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 h undr 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 . . . . . . . . . . . . . . . . . . . . . . . . . . 50. 00




                                                      2
               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 dmi ni s t r a t i on a nd e nf or c e me n t

o f t h e or di na nc e , a 1987 c ont r a c t wa s e nt e r e d i nt o be t we e n t he

Ci t y o f Knoxvi l l e a nd t he M t r opol i t a n Pl a nni ng Commi s s i on ( M
                                   e                                               PC) ,

wh e r e b y t he MPC, a s a ge nt f or t he Ci t y of Knoxvi l l e , wa s t o

p e r f o r 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 .     Ewi n g

J o h n s o n , di r e c t or of l ong r a nge pl a nni ng f or t he MPC, wa s a s ke d

t o s u p e r vi s e t he s ur ve y of t he s i gns f or t he Ci t y of Knoxvi l l e .



               The MPC e mpl oye e s who c a r r i e d out t he dut i e s unde r t h e

o r d i n a n c e , a nd who we r e s upe r vi s e d by M . J ohns on, di d not
                                                         r

c on d u c t e l e c t r i c a l , me c ha ni c a l or c ode i ns pe c t i ons of t he s i gn s

a s d i 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 .

Th e s e i ndi vi dua l s ha d no t ool s or e qui pme nt f or us e i n t he

i n v e n t o r y, ha d no t r a i ni ng i n e ngi ne e r i ng a nd mos t ha d onl y a

h i g h s c hool e duc a t i on.    Th e f or ms c ompl e t e d by t he s ur ve y t e a m

c o n t a i n e 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

p u r p o s e wa s t o a dve r t i s e , a not a t i on wa s ma de on t he f or m.


                                                3
                St e ve El l i s wa s t he n hi r e d a s t he Ci t y Si gn I ns pe c t or

t o i ns p e c t t he s i gns a f t e r t he y we r e i ni t i a l l y i nve nt or i e d.      He

h a d n o e xpe r i e nc e or t r a i ni ng i n e l e c t r i c a l or me c ha ni c a l

i n s p e c t i ons a nd wa 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 .       In

f a c t , M . El l i s t e s t i f i e d t ha t he di d not know wha t r e qui r e me nt s
           r

a r e c on t a i ne d i n t he c i t y e l e c t r i c a l c ode r e l a t i ng t o gr ound

s i gns .    M . 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
              r

t h e s i g n 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 n d 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 whe t he r

t h e s t r uc t ur e wa s a ppr ove d or di s a ppr ove d by hi ms e l f .           M . El l i s
                                                                                       r

c o n d u c t s s t r i c t l y a vi s ua l i ns pe c t i on.



                At t r i a l , La ma r c a l l e d St e ve Ha r b, a c e r t i f i e d publ i c

a c c ou n t a nt , t o t e s t i f y a s a n e xpe r t wi t ne s s .    M . Ha r b pr e pa r e d
                                                                          r

c h a r t s c onc e r ni ng t he a mount of t i me t ha t M . El l i s r out i ne l y
                                                           r

s p e n t p e r f or mi 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 mony, M . Ha r b c a me t o t he
                                                             r

c o n c l u s i on t ha t M . El l i s s pe nds a n a ve r a ge of 5. 478 mi nut e s on
                           r

e a c h i n di vi dua l s i gn i ns pe c t i on.        M . Ha r b a l s o de t e r mi ne d t ha t
                                                         r

t h e a v e r a ge c os t f or t he Ci t y f or t hi s i ns pe c t i on s e r vi c e wa s

$ 1 . 5 9 p e r s i gn.



                Al 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

p l a c e d i nt o t he ge ne r a l a c c ount of t he Ci t y of Knoxvi l l e .             The

s i g n i n s pe c t i on f e e s a r e n ot s e gr e ga t e d.    The f or m whi c h t he Ci t y

s i g n i n s pe c t i on bi l l s a r e pr i nt e d on i s t he s a me f or m t ha t i s



                                                    4
u s e d f o r t he a d va l or e m t a xe s t he Ci t y l e vi e s on bus i ne s s .         Th e

Ci t y Fi na nc e De pa r t me nt ha s r e s pons i bi l i t y f or c ol l e c t i ng

d e l i n q u e nt s i gn i ns pe c t i on f e e s a nd t he Ta x Col l e c t i on Di vi s i o n

o f t h e Ci t y Fi na nc e De pa r t me nt pur s ue s t he c ol l e c t i on of t he s e

f e e s i n t he s a me ma nne r a s t he y c ol l e c t de l i nque nt t a xe s .



                  W mus t f i r s t d e t e r mi ne whe t he r t he i ns pe c t i on f e e i s
                   e

a c t ua l l y wha t i t pur por t s t o be or whe t he r i t i s i n r e a l i t y a

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

o b j e c t i ve s f or whi c h t he y a r e i mpos e d.     I f i t i s pr i ma r i l y f or

t h e p u r pos e of r a i s i ng r e ve nue , i t i s a t a x.       Howe ve r , i f i t s

p u r p o s e i s f or t he r e gul a t i on of s ome a c t i vi t y unde r t he pol i c e

p o we r o f t he gove r ni ng a ut hor i t y, i t i s a f e e .         M mphi s Re t a i l
                                                                          e

Li q u o r De a l e r s ’ As s oc i a t i on, I nc . v. Ci t y of M mphi s , 547 S. W 2 d
                                                                   e                 .

2 4 4 ( Te nn. 1977) ; S & P Ent e r pr i s e s , I nc . v. Ci t y of M mphi s , 67 2
                                                                       e

S. W 2 d 213 ( Te nn. App. 1983) .
    .



                  Si nc e a muni 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 o n a 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 h e c o s t s c omme ns ur a t e wi t h t he e xpe ns e s i nc ur r e d by t he

mu n i c i p a 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 ome

r e a s o n a 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

o b j 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 mor e i nc ome

t h a n i s r e qui r e d f or i t s a dmi ni s t r a t i on a nd e nf or c e me nt .      S & P

En t e r p r i s e s , I nc . v. Ci t y of M mphi s , s upr a .
                                            e




                                                  5
                The Ci t y of Knoxvi l l e a r gue s t ha t a l t hough t he f e e pe r

s i g n i s mor 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 o n ,

t h e f e e mus t onl y be a r s ome r e a s ona bl e r e l a t i ons hi p t o t he

e x p e n s e s i nvol ve d.     The Ci t y of Knoxvi l l e a s s e r t s t ha t a c ha r g e

o f $ 1 0 0 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 e e t i s r e a s ona bl e .    Thi s a r gume nt i s ma de de s pi t e t he f a c t t ha t

t h e Ci t y Si gn I ns pe c t or a d mi 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 .          In

s u p p o r t of t hi s a r gume nt , t he Ci t y of Knoxvi l l e r e l i e s upon

M mp h i s Re t a i l Li quor De a l e r s ' , s upr a .
 e



                I n M mphi s Re t a i l Li quor De a l e r s ' , t he Supr e me Cour t
                     e

u p h e l d a Ci t y of M mphi s or di na nc e t ha t i mpos e d a n i ns pe c t i on f e e
                         e

u p o n wh ol 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 nn e s s e e Le gi s l a t ur e pa s s e d a s t a t ue t ha t a l l owe d muni c i pa l i t i e s

t o c h a r ge a f e e f or l i quor i ns pe c t i on of no mor e t ha n f i ve

p e r c e nt of t he whol e s a l e pr i c e of a l c ohol i c be ve r a ge s .         Pur s ua nt

t o t h e pr e c e di ng gr a nt e d a ut hor i t y, t he Ci t y of M mphi s pa s s e d a n
                                                                     e

o r d i n a n c e whi c h i mpl e me nt e d t he f i ve pe r c e nt i ns pe c t i on f e e .      Th e

l i q u o r 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

g e n e r a t e d by t he or di na nc e i s 200 t i me 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 Cour t c onc e de d t ha t a

c h a l l e n ge ba s e d upon t he d i s pa r i t y i n t he f e e c ha r ge d a nd c os t o f

r e g u l a t i on i n t hi s c a s e mi ght be va l i d i f t he a c t i vi t y r e gul a t e d

wa s a n y t hi ng ot he r t ha n t h e l i quor bus i ne s s .          The Cour t r e l i e d

u p o n t h e St a t e ' s i nhe r e nt pol i c e powe r t o s ubj e c t t he l i quor



                                                   6
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

p o t e n t 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,
                                     1
mo r a l i t y a nd we l f a r e .       Fur t he r mor e , t h e St a t e Le gi s l a t ur e

a u t h o r 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

wi t h n o r e qui r e me 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 o s t o f t he i ns pe c t i on.



                   W f i nd t ha t t he de c i s i on i n M mphi s Re t a i l Li quor
                    e                                      e

De a l 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 n n o t be c ons i de r e d ha r mf ul t o t he publ i c he a l t h, mor a l i t y a nd

we l f a r e .     As a r e s ul t , we hol d t ha t out door a dve r t i s i ng s i gn

i n s p e c t i on f e e s mus 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 v i c e s r e nde r e d by t he muni c i pa l i t i e s .



                   W f i nd t he de c i s i on i n M r t i n M di a v. He mpf i e l d
                    e                               a         e

To wn s h i p Zoni ng He a r i ng Boa r d , 671 A. 2d 1211 ( Pa . Commw. Ct .

1 9 9 6 ) , pe r s ua s i ve on t he i s s ue of whe t he r t he f e e c ha r ge d be a r s a

r e a s o n a 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

mu n i c i p a l i t i e s .   The or di na nc e c ha l l e nge d i n M r t i n M di a
                                                                       a         e

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 nd



         1
            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’ Association at page 246, quoting Lalumio v.
Fasseas, 171 N.E.2d 43, 44 (Ill. 1960).

                                                      7
r e g u l a t i on o f b i l l boa r ds wi t h He mpf i e l d Towns hi p.        At t r i a l , t h e

s i g n i n s 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.       He a l s o a dmi t t e d t ha t f or s ome i ns pe c t i ons , no one got o u t

o f t h e c a r a nd i n s ome c a s e s t he c a r di d not s t op movi ng.                  An

e x p e 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 o n

c os t wa s muc h l e s s t ha n t h e f e e c ha r ge d.           Ba s e d upon t he s e f a c t s ,

t h e c o u r t s t r uc k down t he or di na nc e .



                     The Cour t i s mi n df ul t ha t t he r e i s a pr e s umpt i on i n

f a v o r o f 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

v a l i d i 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 d i t y.      S & P Ent e r pr i s e s , s upr a .    W f i nd t ha t La ma r ha s
                                                                  e

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 .

As p r e v i 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 e c t r i c a l o r me c ha ni c a l i ns pe c t i ons of t he s i gns a s i ns t r uc t e d

b y t h e 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 n s p e 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 mor e , La ma r

p u t o n pr oof de mons 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 h e s i g n 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

d e mo n s 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 o n a 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 n s p e c t or .



                     Af t e r de t e r mi 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 e a l i t y a t a x, we mus t n e xt de t e r mi ne whe t he r t he or di na nc e i s a n

i mp e r mi s s i bl e doubl e t a xa t i on.        Doubl e t a xa t i on i s pr ohi bi t e d b y

t he Te n ne s s e e Cons t i t ut i on unl e s s i t i s pl a i n t ha t t he



                                                     8
l e g i s l a t ur e i nt e nde d t o t a x t he s a me pr ope r t y t wi c e .                          St a l c up v .

Ci t y o f Ga t l i nbur g , 577 S. W 2d 439 ( Te nn. 1978) .
                                     .                                                         I f a s t a t ut e i s

e n a c t e d by t he Te nne s s e e Le gi s l a t ur e , whi c h a l l ows f or doubl e

t a x a t i o n, t he s t a t ut e mus t c ont a i n l a ngua ge whi c h pl a i nl y

i n d i 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 umpt i on

a g a i n s t s uc h a n i nt e nt i on.              W l l i a ms v. M s s a c hus e t t s M ua l Li f e
                                                       i               a                     ut

I n s u r a n c e Co. , 221 Te nn. 508, 427 S. W 2d 845 ( 1968) .
                                                .



                   La ma r pa ys a gr os s r e c e i pt s t a x t o t he Ci t y on r e ve n u e

g e n e 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

d i s c u s s e d or di na nc e i s a s e c ond t a x t ha t La ma r mus t pa y t he Ci t y
                         2
o f Kn o x vi l l e .         Thus , La ma r i s s ubj e c t t o doubl e t a xa t i on.                             Th e

Ci t y o f Knoxvi 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 g i s l a t ur e i nt e nde d t o do ubl e t a x a dve r t i s i ng c ompa ni e s .

Th e r e f o r e , we 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 mp e r mi s s i bl e doubl e t a xa t i on.



                   Si nc e we f i nd t he f i r s t i s s ue t o be di s pos i t i ve , we d o

n o t a d d r e s s t he ot he r i s s ue s r a i s e d by La ma r .                       Fur t he r mor e , i t i s

we l l e s t a bl i s he d t ha t a c our t wi l l not pa s s on t he i s s ue of t he

c o n s t i t ut i ona l i t y o f a s t a t ut e unl e s s i t i s a bs ol ut e l y ne c e s s a r y

f o r t h e de t e r mi 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 t o t he l i t i ga t i on.                W s t v. Ca r r , 212 Te nn. 367, 37 0
                                                               e

S. W 2 d 469 ( 1963) .
    .                                  Cour t s s houl d a voi d de a l i ng wi t h




         2
                     W d o n o t f i n d i t n e c e s s a r y t o d e c i d e wh e t h e r t h e a b o v e d i s c u s s e d
                      e
o r d i n a n c e i s a n a d 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 a d v e r t i s i n g c o mp a n i e s .



                                                              9
c o n s 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 o n s .

St a t e v . Ki 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 udgme nt of t he Tr i a l

Co u r t i s r e ve r s e d.   The $19, 577 pa i d i nt o t he Re gi s t r y of t he

Co u r 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 ma r ,

a n d t h e c a us e i s r e ma nde d t o t he Tr i a l Cour t f or s uc h f ur t he r

p r o c e e d i ngs a s ma 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

wh i c h a r e , a s a r e c os t s o f a ppe a l , a dj udge d a ga i ns t t he Ci t y.



                                              _______________________________
                                              Hous t on M Godda r d, P. J .
                                                         .


CONCUR:



_ _ _ _ _ _ _ _________________________
Ch a r l e s D. Sus a no, J r . , J .



_ _ _ _ _ _ _ _ __________________ ______
W l l i a m H. I nma n, Sr . J .
  i




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