                IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                                August 17, 2011 Session

 STATE OF TENNESSEE ex rel. BETTYE GROOMS, ET AL. v. THE CITY
                 OF NEWPORT, TENNESSEE

                  Appeal from the Chancery Court for Cocke County
                   No. 08115    Telford E. Forgety, Jr., Chancellor


             No. E2011-00105-COA-R3-CV-FILED-OCTOBER 17, 2011


The City of Newport (“Newport”) sought to annex certain properties in Cocke County. A
number of affected parties (“the Plaintiffs”) objected to the annexation and filed a complaint
against Newport in the Chancery Court for Cocke County (“the Trial Court”). The Trial
Court held that the Plaintiffs had failed to carry their burden of proving that the annexation
was unreasonable or that the health, safety and welfare of the relevant citizens would not be
materially retarded without the annexation. The Plaintiffs then sought to amend their
complaint to allege that Newport was barred from annexation because of Newport’s allegedly
having defaulted on a prior plan of services from an earlier annexation. The Trial Court
denied the Plaintiffs’ motion to amend on the basis, in part, that the issue was not timely
raised, pled, or tried. The Plaintiffs appeal. We affirm the judgment of the Trial Court.


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


D. M ICHAEL S WINEY, J., delivered the opinion of the Court, in which C HARLES D . S USANO,
J R., and J OHN W. M CC LARTY, J.J., joined.


David L. Buuck, Knoxville, Tennessee, for the appellants, Bettye Grooms, Edna Bush, John
Clark, Clayton Owenby, Charles Edmonds, Donnie Miller, Kathy Miller, A. R. Kyker,
Tennessee Tobacco Sales, Inc., Kevin Wilder, Jimmy Miller, Jimmy Fox, Nora Freshour,
Arlie C. Mason, Patty Jenkins, and Elizabeth Dewey Strange.

Charlton R. Devault, Jr., Kingsport, Tennessee, and Terry Hurst, Newport, Tennessee, for
the appellee, the City of Newport, Tennessee.
                                          OPINION

                                         Background

               In 2008, Newport adopted Ordinance No. 2008-5, annexing certain territory
designated as Annexation Area #1 (“Area One”) near Highway 25W/70. Area One contains
25 distinct tracts. As required, Newport also adopted a Plan of Services for Area One. The
Plan of Services provided for, among other things, police protection, fire protection, street
maintenance and repair, and inspections and code enforcement. These provisions all stated
that no additional personnel or equipment were planned to meet these service needs of the
annexation, except for fire hydrants which were to be installed within three years of the
effective date of the annexation.

               Plaintiffs, bringing this action quo warranto, filed a complaint opposing the
annexation in August 2008. Plaintiffs essentially argued that the annexation was unnecessary
and thus unauthorized by applicable law. Newport filed an answer in opposition to the
Plaintiffs’ complaint, averring that it had statutory authority to enact the relevant annexation
ordinance. This case was tried in July 2010. Numerous witnesses testified. Cognizant of
all the evidence presented, we will focus on and summarize only certain key testimony.

                Among the witnesses to testify was Dennis Edmonds (“Edmonds”), operator
of a business in Area One, who expressed his opposition to the annexation. Edmonds
testified that his property tax would rise by 89.5 percent under the annexation. Edmonds also
testified that there was nothing in Newport’s plan of services for Area One that his business
did not already have. Edmonds testified that he received his electrical service and water from
Newport Utility Board. Edmonds also stated that he had concerns about Newport re-zoning
his area such that commercial use of his property would no longer be allowed.

              The gist of the testimony from witnesses opposing the annexation was that the
annexation was unnecessary and their taxes would increase. Dr. Shannon Grooms
(“Grooms”), a Principal with the Cocke County School Board whose mother owns a business
in Area One, also testified to his concern about the impact of imposing Uniform Building and
Fire Codes Enforcement on existing businesses. Grooms expressed skepticism that
annexation would improve this area. Grooms stated in his testimony:

       Q.     Okay. Well, maybe I misunderstood you then. Is it your testimony that
              before Annexation takes place you need all this development to spring
              up, is that what you’re telling me?

       A.     No, I don’t care if we never have a development out there. I’m just

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              saying I don’t want to pay your taxes based on something you’re
              accusing that will develop when it’s not there. And it’s a gamble to say
              that it’s going to be there. You can’t tell, or can you tell me if I pay
              more taxes and if we take on more restrictions that, can you tell me that
              you will guarantee me that in five years we’ll have growth. And the
              fact that my mother can generate enough business, bottom line, to pay
              that extra tax taxes [sic]?

             The Mayor of Newport, Mayor Connie Ball (“Ball”), testified to the benefits
from Newport that Area One receives already. Among the services Area One receives from
Newport is city police cruisers patrolling the highway through Area One. Ball also stated
that Newport keeps the highway clean and lit for travelers. Ball stated that with annexation,
Area One would receive city garbage collection, though not for bulk containers.

               Ron Fugatt, General Manager of Newport Utilities, testified that county
residents pay a higher minimum cost for water than city residents for residential purposes.
Fugatt testified regarding sewage:

       Q.     Okay. Now, there are numerous businesses and houses that are still on
              septic out there, is that correct?

       A.     Well, in this particular, in this particular, you know, section, there
              appears to be nine that must have their own septic system.

       Q.     Now, if we could go on with regard to what the plans are out there.
              Was Newport Utilities Board asked by the City of Newport to look at
              putting in lines if this area were annexed?

       A.     Yes, sir. I think one of the things, I’ve listened to the testimony, the
              Annexation Plan, of course, was done several years ago, and there was
              an estimate done, it was an estimate. Recently in light of updating that
              estimate and actually doing a little bit more detail design we have come
              up with some more definitive answers on the design, as well as the cost
              associated with that design.

Twelve parcels in Area One were on sewer at the time of trial.

              Randy Ragan (“Ragan”), Fire Chief for Newport, testified about the capacities
of the Newport Fire Department. Newport has two fire stations. The county fire department,
while based in Area One, services all of Cocke County. Ragan testified that while the city

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fire department had a mutual aid agreement with the county fire department, the agreement
“doesn’t mean that you have to go, there’s no duty past my jurisdiction, which is the City of
Newport.” Ragan acknowledged that whether annexation occurred or not, his department
would continue to provide good services to citizens so long as the budget was kept up.
Regarding confusion as to jurisdiction in emergency calls, Ragan stated:

       Q.     Alright. So there’s really not a lot of confusion there, because you’ve
              already got, if there’s a wreck, the 911 Dispatcher is going to send it to
              you, if there’s a wreck on Highway 25/70, right?

       A.     The only time there’s a concern is, is it a City property or is it not a City
              property. We know that, like we talked about Falcon a little bit, we
              know Falcon is not in the City.

       Q.     Well, you refused to fight a fire at Falcon?

       A.     No, I haven’t yet.

       Q.     Alright. Well, because your main thing is to protect property and lives
              and worry about the jurisdictional issues later on, right? Isn’t that what
              you do as a fireman?

       A.     Our job is to protect life and property, but yes, I have to worry about
              jurisdictional the minute I get the call. That’s why when we had the
              last call when we got called on, on 25-E, in the County, we had to call
              people from off duty and send the reserve truck to fight that fire,
              because it was outside the City Limits.

              Walter Cole (“Cole”) of the Newport Housing Authority testified. Cole
compiled the information for the Annexation Study at the request of the previous City
Council. Cole stated that the annexation of Area One was reasonable: “Well, you had, for
a couple of reasons, one of them was the confusion with emergency services, which you’ve
already heard today. Also, the protection of property values, dealing with Zoning and Codes,
having continuous outline there.” Cole indicated that Area One currently enjoys certain
services from Newport in the form of street lighting and emergency calls.

              Cole testified that the County lacks zoning and building codes. Cole stated that
zoning, land use regulation and building codes would promote harmonious land use. Zoning
and building codes would come about through annexation of Area One.



                                               -4-
             James Finchum (“Finchum”), Deputy Police Chief for Newport, testified.
Finchum testified that Highway 25W/70 was patrolled by the city police at least once per
hour. Finchum testified that confusion surrounding departmental jurisdiction in the context
of answering calls was “a constant problem for us.”

              Assistant Superintendent of Streets David Hill testified that Newport cleans the
Highway 25/70 corridor through Area One. In winter, Newport conducts snow removal
along Highway 25/70 near Area One properties. Hill testified that people from Area One
currently use the city’s Recycle center. Under annexation, the garbage would be collected
by the city.

               Steve Thompson (“Thompson”), Superintendent of Newport City School
System, testified regarding the Newport Grammar School. Thompson described a number
of benefits of the Newport Grammar School, including a Special Enrichment Program
whereby Newport gave the school $9,000 in extra money that year. Thompson stated that
while students from the county whose parents are not residents of Newport may attend
Newport Grammar School, they, unlike children from within Newport, have to pay tuition.
Thompson stated that Newport does not provide transportation for students. Thompson also
acknowledged that both city and county schools adhered to the Tennessee curriculum.

                Glenn Rosenoff (“Rosenoff”), Regional Director of the Upper East Tennessee
Region for the State of Tennessee, Department of Economic and Community Development,
Local Planning Assistance Office, testified. Rosenoff was qualified as an expert in planning.
Rosenoff testified that the plan of services for Area One was reasonable with respect to,
among other things, fire protection, supply of water, and street lighting. Rosenoff stated that,
given Newport’s size of a little over four square miles as opposed to Cocke County’s 430
square miles, Newport has an advantage in terms of providing services as Newport
constitutes a “a smaller more compact geographical area.” Rosenoff added that it was his
opinion that both Newport and Area One would benefit from the annexation. Rosenoff
testified to the benefit afforded by zoning under annexation:

               The intent is to provide harmonious development, the intent is to have
       land use management that is compatible to one another, or if there’s
       incompatible, then Zoning would have such things as Site Plan Review. In
       Site Plan Review you have the possible provisions of having landscape buffers
       or fencing, buffers that would separate lands that are not compatible.

Rosenoff stated that he was aware of certain confusion in the delivery of emergency services.
Rosenoff later acknowledged that under any circumstances, he would advise the fire
department to coordinate regarding jurisdictional issues.

                                              -5-
               Roger Greene (“Greene”) testified last. Greene was called by the Plaintiffs as
a “rebuttal witness.” Greene stated that his residence was annexed into Newport around
1985. Greene testified that he lacks sewer or garbage pick-up. Earlier, Town Planner Mark
Robinson had testified on cross-examination by the Plaintiffs’ counsel that sewer service was
under the plan of services for Greene’s annexation. Robinson stated that sewer was available
to Greene but as to having it run up to him, “[t]hat’s between him and the Newport Utilities.”
Greene’s testimony formed the basis for an argument first raised in closing arguments by the
Plaintiffs asserting that, because Newport allegedly defaulted on a plan of services in a prior
annexation, the present annexation is barred.

              At the end of the two day trial, the Trial Court ruled in favor of Newport. The
Trial Court stated, inter alia:

               In short, for all these reasons, the Court simply, as I’ve already said, I
       cannot hold that the plaintiffs have carried the burden of proof here to establish
       that this, under 658-111, that this Annexation is unreasonable for the overall
       well being of the communities involved.
               Or that 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.

                The Plaintiffs timely filed their Motion to Amend Pleadings to Conform to
Evidence. Therein, the Plaintiffs requested that they be allowed to amend their complaint
to allege that the present annexation is barred under Tenn. Code Ann. § 6-51-102(b)(5) based
on Newport’s alleged default on an earlier plan of services. At a hearing in November 2010,
the Trial Court denied the Plaintiffs’ motion. The Trial Court ruled that the issue was not
pled. The Trial Court also questioned whether the applicable law was retrospective and
noted that the default had not been established through any formal mechanism.

              In December 2010, a comprehensive order with transcripts attached, reflecting
the outcomes of both the July 2010 trial and November 2010 hearing, was entered. The
Plaintiffs appeal.

                                          Discussion

               We restate the issues raised on appeal as follows: 1) whether the Trial Court
erred in declining to hold that Newport’s alleged default on a prior plan of services bars the
annexation in the instant appeal; and 2) whether the Trial Court erred in holding that the
annexation was lawful.



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               Our review is de novo upon the record, accompanied by a presumption of
correctness of the findings of fact of the trial court, unless the preponderance of the evidence
is otherwise. Tenn. R. App. P. 13(d); Bogan v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001).
A trial court's conclusions of law are subject to a de novo review with no presumption of
correctness. S. Constructors, Inc. v. Loudon County Bd. of Educ., 58 S.W.3d 706, 710 (Tenn.
2001).

               We first address whether the Trial Court erred in declining to hold that
Newport’s alleged default on a prior plan of services bars the annexation at issue in this case
now on appeal. Following the Trial Court’s ruling in favor of Newport on the annexation,
the Plaintiffs moved to amend the pleading pursuant to Rule 15.02 of the Tennessee Rules
of Civil Procedure to include the default issue. In their complaint, the Plaintiffs did cite to
“T.C.A. 6-51-102”, but failed either to make any factual allegations concerning any alleged
earlier default or cite to the specific sub-section concerning the consequences of default by
Newport under a plan of services. On appeal, Plaintiffs argue that the issue was tried by
express or implied consent.

               As Newport never expressly consented to trial of the default issue, we must
determine whether the issue was tried by implied consent. Whether the issue of a default of
a prior plan of services bars the instant annexation was tried by implied consent hinges on
the issues that actually were litigated, and the failure to amend or to request an amendment
is not dispositive. McLemore v. Powell, 968 S.W.2d 799, 803 (Tenn. Ct. App. 1997). This
Court in McLemore explained:

              Generally speaking, trial by implied consent will be found when the
       party opposed to the amendment knew or reasonably should have known of the
       evidence relating to the new issue, did not object to this evidence, and was not
       prejudiced thereby. Id. As the Tennessee Supreme Court stated in Zack
       Cheek Builders, Inc. v. McLeod:

              “Implied consent . . . is much more difficult to establish (than
              express consent) and seems to depend on whether the parties
              recognized that an issue not presented by the pleadings entered
              the case at trial. A party who knowingly acquiesces in the
              introduction of evidence relating to issues that are beyond the
              pleadings is in no position to contest a motion to conform.
              Thus, consent generally is found when evidence is introduced
              without objection, or when the party opposing the motion to
              amend himself produced evidence bearing on the new issue.”



                                              -7-
       Id. (quoting 6 Wright & Miller, Federal Practice and Procedure § 1493, at
       462–63 (1971)). Trial by implied consent is not shown by the presentation of
       evidence that is relevant to an unestablished issue when that evidence is also
       relevant to the established issue. Hiller v. Hailey, 915 S.W.2d 800, 805 (Tenn.
       App. 1995) (citations omitted).

McLemore v. Powell, 968 S.W.2d 799, 803 (Tenn. Ct. App. 1997). The Trial Court's
determination with respect to the issue of implied consent “must be upheld unless there has
been an abuse of discretion.” Hobbs v. Hobbs, 987 S.W.2d 844, 847 (Tenn. Ct. App. 1998).

               In the instant case, the Trial Court found that the default issue “came way too
late” and “was not pled.” We agree. The Plaintiffs did not name Greene as a witness prior
to the trial. Greene, not a named party in this case, testified at the very end of the July 2010
trial about an issue that had not been properly raised. We also note that Greene was called
by the Plaintiffs as a “rebuttal” witness apparently to rebut testimony elicited not by
Newport’s counsel but instead by the Plaintiffs’ counsel on cross-examination. Newport was
given neither adequate time nor notice to contest this late raised issue. The Plaintiffs
correctly state that Newport did not object to Greene’s testimony, but do we not consider this
fact dispositive. It is apparent from the record as a whole that Newport, understandably so,
was unaware that Greene’s testimony was in support of any default issue, or, indeed, that any
alleged default under a prior plan of services was even an issue.

               The Plaintiffs’ post-trial motion to amend pleadings to conform was
insufficient to salvage the default issue. The Trial Court properly denied the motion. The
default issue was neither pled nor properly litigated, Greene’s eleventh hour “rebuttal”
testimony notwithstanding. We hold that there was no trial of the default issue by either
express or implied consent. We affirm the judgment of the Trial Court as to this issue.

             We next address whether the Trial Court erred in holding that the annexation
was lawful. According to Tenn. Code Ann. § 6-58-111(a):

       (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:



                                              -8-
           (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.

Tenn. Code Ann. § 6-58-111(a) (2011).1

               The Plaintiffs do not contest on appeal that Area One falls within Newport’s
urban growth boundary. The Plaintiffs do, however, argue that the health, safety and welfare
“of the citizens and property owners of [Newport] and [Area One]. . .” would not be impaired
if Area One were not annexed. Tenn. Code Ann. § 6-58-111(a)(2) (2011). Both parties cite
to State ex rel. Tipton v. City of Knoxville, 205 S.W.3d 456 (Tenn. Ct. App. 2006), an
Opinion addressing an annexation and containing analysis relevant to the instant appeal.
Tipton articulates the applicable standard for this issue: “[U]nder § 6–58–111(a)(2),
Plaintiffs were required to 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. at 462. Tipton conducted its analysis relative to three aspects: (1) whether the territory
currently, materially benefits from services provided by the city; (2) whether the territory
would materially benefit from additional city services after the annexation; and (3) whether
the city would materially benefit from annexation. Id. at 465. We will address these
considerations as well. The Plaintiffs in the appeal now before us, as challengers of the
annexation, have the burden of proof on this issue.

             The evidence shows that Area One already enjoys certain benefits from
Newport. Newport police patrol the highway corridor through Area One. The testimony
shows that Newport cleans and performs snow removal for the highway corridor through
Area One. Newport also makes its Recycle Center available to Area One residents. Newport
provides water and electricity to various Area One citizens. In short, it is clear that Area
One, while not receiving the full benefits from Newport as it will under annexation, already
receives a measure of benefits from Newport.

              The Plaintiffs’ argument notwithstanding, we find that the evidence does not
preponderate against the Trial Court’s finding that annexation will materially benefit people
and businesses in Area One. Area One stands to gain from more efficient, concentrated
police and fire service. While the testimony was not entirely clear as to the level of


           1
               While the statute was amended in 2010, the relevant provisions remain unchanged from the prior
version.

                                                        -9-
confusion caused by officials sometimes not knowing whether emergency calls came from
within the correct jurisdictional zone, we find, as did the Trial Court, that Area One would
materially benefit from police and fire services that officially focus on a much smaller
domain of territory than all of Cocke County. In any event, based on the evidence, we
believe that annexation will reduce the likelihood of serious jurisdictional confusion in
emergency situations. Additionally, Area One children will have tuition-free access to
Newport Grammar School, not an insignificant benefit. We also acknowledge that the Plan
of Services provides for city services in the area of sanitation, lighting, and water. Water,
in fact, will be cheaper within Area One under the annexation as county residents now pay
more for that service than do city residents.

              Newport likewise stands to benefit from annexation of Area One. A review
of the maps in this case reveals a sprawling city with incorporated areas stretching out in a
number of somewhat contorted ways. Annexation of Area One, as shown by the evidence
and as reflected by geography, brings greater uniformity to a somewhat haphazard city
boundary. Also, we regard helping to rectify the serious jurisdictional problems facing the
emergency services as a significant benefit for Newport as well as to Area One.

                The Plaintiffs further argue that the annexation of Area One was motivated
purely by designs for additional revenue and thus was unreasonable. We have reviewed the
evidence and respectfully find that this argument is without merit. Alderman Goddard
testified that the only benefit of annexation was additional revenue at no cost. On the other
hand, Alderman Thornton testified that “[r]evenue was never discussed as anything for this
area.” Thornton also stated that a purpose for annexation was to bring greater uniformity in
codes and service to Area One. Mayor Ball testified that the need for growth was a
motivation for the annexation. While Ball did later testify that increasing the tax base was
essential for the welfare of Newport, it is inaccurate to state that the evidence reflects that
the sole purpose of the annexation was to increase revenue.

              Some of the Plaintiffs’ evidence consisted of testimony in opposition to
annexation on the basis of having to pay higher city taxes. Others alleged that annexation
was unnecessary. Nevertheless, we are constrained by Tennessee law to objectively evaluate
the material benefits and reasonableness of the annexation rather than decide this case based
upon the Plaintiffs’ dissatisfaction with annexation.

              The preponderance of the evidence supports the Trial Court’s findings and
ultimate conclusion that the Plaintiffs failed to meet their burden under Tenn. Code Ann. §
6-58-111(a) (2011). There is sufficient evidence in the record to demonstrate that failure to
annex will materially retard the health, safety and welfare of the relevant parties in Area One
and in Newport. We reiterate that the evidence preponderates against a finding that the

                                             -10-
annexation in this case is based solely upon an intent to raise more revenue. We affirm the
judgment of the Trial Court in all respects.

                                        Conclusion

               The judgment of the Trial Court is affirmed. This cause is remanded to the
Trial Court for collection of costs below. Costs on appeal are taxed to the appellants, Bettye
Grooms, Edna Bush, John Clark, Clayton Owenby, Charles Edmonds, Donnie Miller, Kathy
Miller, A. R. Kyker, Tennessee Tobacco Sales, Inc., Kevin Wilder, Jimmy Miller, Jimmy
Fox, Nora Freshour, Arlie C. Mason, Patty Jenkins, and Elizabeth Dewey Strange, and their
sureties, if any, for which execution may issue if necessary.




                                                    _________________________________
                                                    D. MICHAEL SWINEY, JUDGE




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