                   IN THE COURT OF APPEALS OF TENNESSEE
                       WESTERN SECTION AT NASHVILLE
             _______________________________________________

TOWN OF MORRISON,

      Plaintiff-Appellant,

Vs.                                            Warren Chancery No. 4578
                                               C.A. No. 01A01-9508-CH-00332
WARREN COUNTY, TENNESSEE,

      Defendant-Appellee.
_________________________________________________________________________

               FROM THE WARREN COUNTY CHANCERY COURT

                     THE HONORABLE JEFFERY F. STEWART




                          B. Timony Pirtle of McMinnville
                               For Plaintiff-Appellant

                       Larry B. Stanley, Sr., of McMinnville
                            For Defendant-Appellee




             VACATED IN PART, AFFIRMED IN PART AS MODIFIEDB

                                    Opinion filed:

                 FILED
                  December 18,
                      2001

                 Cecil Crowson, Jr.
                  Appellate Court Clerk

                                               W. FRANK CRAWFORD,
                                               PRESIDING JUDGE, W.S.



CONCUR:

ALAN E. HIGHERS, JUDGE
DAVID R. FARMER, JUDGE
     This appeal involves a dispute between Warren County, Tennessee and

the Town of Morrison, a municipality located within Warren County, regarding

the disposition of the revenue generated by the county local option sales tax.

On March 21, 1988, plaintiff, Town of Morrison (hereinafter Morrison), filed a

complaint for declaratory judgment against defendant, Warren County. The

complaint alleges that under T.C.A. § 67-6-712 (Supp. 1995), a justiciable

controversy exists between the parties concerning their respective rights to

distribution of the county local option sales tax revenue. The complaint avers

that the Warren County local option sales tax was adopted in 1969 and

increased in 1976 and 1985. Morrison alleges that since 1969 the tax revenues

have been collected by the Tennessee Department of Revenue and distributed

to Warren County, but Warren County has refused to pay Morrison its share of

the taxes as required by T.C.A. § 67-6-712 (2)(B).      The complaint seeks a

declaration of the rights of the parties to the sales tax revenues, and an

accounting of, and a judgment for, Morrison's share of the local option sales tax.

      The facts are virtually undisputed. In 1969, the citizens of Warren County

voted to consolidate the school systems into a single county-wide system, and

a one cent local option sales tax was approved by voter referendum to fund

the consolidation. The distribution of the tax revenue is provided for in T.C.A. §

67-6-712 (Supp. 1995) which states in pertinent part:

             67-6-712. Distribution of revenue. - (a) The tax levied
             by a county under this part shall be distributed as
             follows:

             (1) One half (1/2) of this proceeds shall be expended
             and distributed in the same manner as the county
             property tax for school purposes is expended and
             distributed; and

             (2) The other one half (1/2) as follows:


                                        2
             (A) Collections for privileges exercised in
             unincorporated areas, to such fund or funds of the
             county as the governing body of the county shall
             direct;

             (B) Collections for privileges exercised in incorporated
             cities, and towns, to the city or town in which the
             privilege is exercised;

             (C) However, a county and city or town may by
             contract provide for other distribution of the one half
             (1/2) not allocated to school purposes.

                          *                  *                   *

      On January 24, 1969, Charles Lawrence, who at the time was the Mayor

of the Town of Morrison, entered into a contract on behalf of the Town with

Warren County. The contract authorized Morrison's share of the local option

sales tax to be paid into the Warren County general fund. The contract was not

attested by Morrison's city recorder, nor was there any ordinance or resolution

from the Board of Aldermen which authorized the mayor to sign the contract on

behalf of Morrison. By letter dated August 24, 1970, the mayor of Morrison

notified Warren County that the January 24, 1969, contract was void, and that

in the future Morrison should be paid its share of the tax revenue. Apparently

Warren County did nothing in response to this letter.

      In 1976 and in 1985, increases in the local option sales tax were approved

by referendum of the voters. By letter of March 18, 1986, Morrison, through

counsel, demanded its share of the sales tax revenue. Warren County refused

to give any of the revenue to Morrison, and on March 21, 1988, the present suit

was filed.

      The chancellor found that the proof established the existence of either a

contract or "at least an implied contract" between Morrison and Warren County

regarding the 1969 sales tax, and that Morrison was estopped from voiding the

contract. The chancellor also found that there was no contract between

                                        3
Morrison and Warren County regarding the 1976 and 1985 sales tax increases.

Finally, the chancellor found that Morrison did not protest the distribution of the

tax until suit was filed; therefore, Morrison is estopped from collecting its share

of the revenue generated by the 1969 sales tax. The final order provides:

              1. That the 1969 sales tax increase in Warren County
              shall continue to be used for education without regard
              to the locale of its collection.

              2. That the Trustee for Warren County shall pay to the
              Plaintiff the lump sum of $23,158.25 which represents its
              distributive share of sales tax collection from the 1976
              and 1985 increases beginning March 1, 1990 through
              November, 1991.

              3. That the Trustee for Warren County shall, beginning
              in January, 1992, pay to the Plaintiff its statutory share
              of sales tax generated from the 1976 and 1985
              increases, each and every month, as determined by
              the Department of Revenue, State of Tennessee.

       The Town of Morrison has appealed, and the first issue presented for

review, as stated in its brief, is:

              Whether the Trial Court erred in applying the doctrine
              of implied contract to enforce the unauthorized act of
              the former Mayor of plaintiff in executing a contract
              permitting defendant to retain the plaintiff's share of
              the local option sales tax which was not supported by
              resolution or ordinance approved by the Mayor and
              Aldermen of plaintiff?

       Morrison first asserts that the contract is void as an ultra vires action,

because the power to contract away the town's tax revenue is not authorized

by the town's charter or other legislative acts. Municipalities "may exercise only

those express or necessarily implied powers delegated to them by the

Legislature in their charters or under statutes." City of Lebanon v. Baird, 756

S.W.2d 236, 241 (Tenn. 1988). T.C.A. § 67-6-712 (a)(2)(C) expressly provides that

a city or town "may by contract provide for other distribution" of its share of the

local option sales tax. Therefore, Morrison is specifically authorized to contract


                                          4
in this manner by the Legislature.

      Warren County does not contest Morrison's assertion that the January,

1969 contract that provides for Morrison's share of the local option sales tax to

be paid to the county general fund was not executed as required by the town's

charter. Our Supreme Court, addressing such a situation in City of Lebanon

stated:

            When the city has attempted to enter [sic] a contract
            that is ultra vires because it was not entered into in the
            authorized manner, the issue is often presented as to
            whether the concepts of equitable estoppel or
            implied contract are applicable. In addition to the
            equities of the case, the application of these concepts
            depends on whether the contract is executory or
            partially or fully performed. The law of municipal
            corporations in Tennessee has long recognized the
            difference between executory and performed
            contracts with cities. As this court noted in Mayor and
            City Council of Nashville v. Hagan, 68 Tenn. 495, 507
            (1876); "where the contract is executory the
            corporation cannot be bound unless made in
            pursuance of provisions of its charter; but where the
            contract is executed, and the corporation has
            enjoyed benefit of the consideration, an assumpsit will
            be implied."

756 S.W.2d at 243.

      In City of Lebanon, the Supreme Court, in dealing with the question of

estoppel or implied contract, said:

                 Ultimately, the application of estoppel or implied
             contract must be determined on the facts and
             equities of the particular case. The principles of
             estoppel are well settled and not every case will
             require application of estoppel or of implied contract.
             The classic case of estoppel in the present context is
             the acceptance of the benefits of a contract and the
             subsequent refusal of a city to pay for the benefits
             received. See, e.g., Trull v. City of Lobelville, 554
             S.W.2d 638, 641-642 (Tenn.App. 1976). For estoppel to
             arise, the act must have been done with the
             knowledge that it would be relied upon and the other
             party has acted in reliance without either knowledge
             of the true state of affairs or the means of learning the
             true state of affairs. E.g., Early Co. v. Williams, 135

                                        5
             Tenn. 249, 261, 186 S.W. 102, 105 (1916). "When both
             parties have the same means of ascertaining the truth,
             there can be no estoppel." Id. (citations omitted). See
             also Rambeau v. Farris, 186 Tenn. 503, 508, 212 S.W.2d
             359, 361 (1948). Moreover, when entering a contract
             with a municipality, "[o]ne dealing with municipal
             officers, boards, or committees is bound at his peril to
             take notice of the limitation of their authority." Kries &
             Co. v. City of Knoxville, 145 Tenn. 297, 305, 237 S.W. 55,
             57 91921). The contents of a city charter are public
             and readily available to all who deal with a city.
             Nashville v. Sutherland & Co., 92 Tenn. 335, 339-340, 21
             S.W. 674, 675 (1893).

756 S.W.2d at 244.

      Warren County is charged with the knowledge to be obtained from

Morrison's charter. Even if the county is not charged with that knowledge, in

August, 1970, Warren County was notified that the 1969 contract was not

authorized by the city. The contract itself has no time limit, and its purpose is to

annually distribute the sales tax receipts to Warren County.          The contract

provides for the receipts to be paid into the county general fund, and obviously

the county relied upon the receipts in planning its budget requirements.

      The suit in this case was not filed until March of 1988, some nineteen years

after the execution of the contract and some eighteen years after Morrison's

letter asserting that the contract was void. Warren County argues that equitable

estoppel and the doctrine of laches should prevent Morrison from voiding the

contract. In Hannewald v. Fairfield Communities, Inc., 651 S.W.2d 222 (Tenn.

App. 1983), this Court said:

                 Laches is based on equitable estoppel. State v.
             McPhail, 156 Tenn. 459, 2 S.W.2d 413 (1928); Clark v.
             American Nat'l Bank and Trust Co. of Chattanooga,
             531 S.W.2d 563 (Tenn.App.1974). Laches is more than
             mere delay, and depends on the facts and
             circumstances of each individual situation:

                     Long delay alone in the prosecution of a
                     claim is insufficient for the application of
                     the doctrine of laches. The present

                                          6
                     circumstances of the parties must be
                     considered.      There must be actual
                     acquiescence or that implied from the
                     circumstances of the case, in the
                     conduct of the defendant. Whether or
                     not such exists is dependent upon the
                     facts.    And whether the facts are
                     sufficient is dependent upon the Court
                     applying those facts. One Court may
                     reach a different conclusion than
                     another.

             Clark, supra, at 573.

               The delay must materially affect the right of another
             for the doctrine of laches to apply. Robertson v. Davis,
             169 Tenn. 659, 90 S.W.2d 746 (1936); Hamilton Nat'l
             Bank v. Woods, 34 Tenn. App. 360, 238 S.W.2d 109
             (1951). In fact, this has been held to be the most
             important factor:

                     . . . the determinative test as to laches,
                     which may be available as a successful
                     defense, is not the length of time that has
                     elapsed, but whether, because of such
                     lapse of time, the party relying on laches
                     as a defense has been prejudiced by the
                     delay.

             Brister v. Estate of Brubaker, 47 Tenn. App. 150, 162-63,
             336 S.W.2d 326, 332 (1960). Finally, "the determination
             of all issues on questions of laches and estoppel is the
             function of the chancellor, and his decision thereon
             will not be reversed on appeal unless it is clearly
             shown to be wrong." Freeman v. Martin Robowash,
             Inc., 61 Tenn. App. 677, 690-91, 457 S.W.2d 606, 612
             (1970).

651 S.W.2d at 228.

      The chancellor found that Morrison was estopped from declaring the

contract void. The record indicates that Morrison allowed Warren County to rely

upon the sales tax receipts in planning and carrying out its governmental

responsibilities, and that the county, in reliance on these receipts, refrained from

taking other measures to raise revenues. We agree with the chancellor that the

facts of this case justify imposing the doctrine of equitable estoppel against


                                         7
Morrison to bar it from recovering the tax revenue paid to Warren County from

1969, the year the contract was signed, through 1988, the year this action was

filed. Since Warren County relied on the tax receipts in planning its budget and

Morrison only objected to Warren County's retention of the revenue through two

letters and later impliedly acquiesed in the county's actions, Morrison should be

estopped from recovering the tax revenue paid to Warren County prior to the

institution of this action. Morrison should not be estopped, however, from

recovering the tax revenue collected in the years following 1988 (that is, from

1989 forward), because Morrison's institution of this action in 1988 in conjunction

with the fact that Warren County was aware or should have been aware that

the contract was ultra vires under the town's charter, was sufficient to alert

Warren County that it could no longer rely on Morrison's share of the tax receipts

in planning its budget. Moreover, at the time Morrison filed suit, the obligations

of the parties under the contract were executory with respect to disbursement

of the tax revenue collected in the years following 1988. As previously stated,

"The law of municipal corporations in Tennessee has long recognized the

difference between executory and performed contracts with cities." City of

Lebanon v. Baird, 756 S.W.2d 236, 243 (Tenn. 1989). "[W]here the contract is

executory the corporation cannot be bound unless made in pursuance of

provisions of its charter; but where the contract is executed, and the corporation

has enjoyed the benefit of the consideration, an assumpsit will be implied." Id.

(quoting Mayor and City Council of Nashville v. Hagan, 68 Tenn. 495, 507 (1876)).

By filing suit in 1988, Morrison sought to void an ultra vires contract under which

its obligations to Warren County were executory; therefore, equitable estoppel

should not be applied to bar Morrison from recovering its lawful share of future

tax revenues. Accordingly, the trial court's order awarding Warren County the


                                        8
future revenue generated by the sales tax, is vacated. The Town of Morrison is

entitled to recover its portion of the sales tax paid under the contract from the

date of filing suit.

       The second issue for review, as stated in appellant's brief, is:

              Whether the trial court erred in applying the doctrine
              of equitable estoppel to bar the right of plaintiff to
              recover its lawful share of the local option sales tax
              from defendant through the day of the trial of this
              cause?

       Warren County does not contest the chancellor's ruling concerning the

1976 and 1985 sales tax increase. Morrison asserts that the chancellor erred in

finding that it "had not protested the distribution until the filing of this suit." As we

previously noted, Morrison did notify Warren County that it was voiding the

contract; however, Morrison then delayed filing suit for about eighteen years.

We have discussed the equitable estoppel and laches doctrines, and for the

same reasons we have heretofore stated, they should be applicable for the

1976 and 1985 tax increases. The chancellor should have allowed recovery of

the taxes from the date of filing suit, and the order of the trial court is modified

to that extent.

       In summary, the order of the trial court concerning the 1969 sales tax

receipts is vacated, and the Town of Morrison is awarded its share of the 1969

local option sales tax revenue from the date of filing suit. The order of the trial

court concerning the 1976 and 1985 sales tax increase is modified to award

judgment to Town of Morrison for its share of those taxes from the date of filing

suit. The case is remanded to the trial court for further proceedings to determine

the amounts due the Town of Morrison. The order of the trial court in all other

respects is affirmed. Costs of the appeal are assessed against Warren County.

                                          ____________________________________
                                          W. FRANK CRAWFORD,

                                           9
                                    PRESIDING JUDGE, W.S.
CONCUR:


_________________________________
ALAN E. HIGHERS, JUDGE

________________________________
DAVID R. FARMER, JUDGE




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