U.S. Supreme Court
Wells v. Savannah, 181 U.S. 531 (1901)
Wells v. Savannah
Argued April 9, 1901
Decided May 13, 1901
181 U.S. 531
Payment of taxes on account of property otherwise liable to taxation can only be avoided by clear proof of a valid contract of exemption from such payment.
The validity of such a contract presupposes a good consideration therefor. In this case, the ordinances exempting from taxation were only exemptions for the year in which the ordinance was passed, and the same rule applies to all the exempting ordinances.
The views of the Supreme Court of Georgia in this case are sustained by this Court.
The plaintiffs in error commenced this proceeding in the Superior Court of the State of Georgia, Chatham County, against the mayor, etc., of the City of Savannah and its city marshal, to enjoin the collection of taxes upon certain real estate in that city, of which they claim to be lessees from the city, and they allege that the taxes assessed upon such real estate are illegal; they also seek to recover from the city the amount of taxes theretofore paid by them on such real estate, under protest. The trial of the case resulted in a judgment for the city, which was, on appeal to the supreme court of the state, affirmed, and the plaintiffs have brought the case here on writ of error.
They claim that the levying and collection of the taxes referred to, under an ordinance of the city providing therefor, passed in 1878, constitute an impairment of the obligations of a contract between the city and the predecessors in title of the plaintiffs in error, made at the time the real estate was purchased, by which contract it was agreed that, on the payment of a certain annual sum, called "ground rent," to the city by the holders of the real estate, it was to be forever exempt from all city taxation.
Upon the trial of the action, these facts appeared: prior to chanroblesvirtualawlibrary
1790, the City of Savannah owned certain lots which were called "common lots," and on September 28 of that year, the common council passed an ordinance for disposing of a portion of them. Each lot, by the provisions of the ordinance, was to be valued by the city, and then put up for sale at public outcry, and the highest bidder, over and including the original valuation, was to have the lot, and if he chose to pay the whole amount of his bid in cash, he was to have a deed conveying it to him in fee simple, or he might, instead of making the whole cash payment, agree with the city to pay in cash the balance of his bid over to valuation, called the increase money, and also to pay a ground rent of five percent upon the amount of valuation, payable quarterly, and in that event the lot might be retained in his hands or in the hands of his heirs and assigns forever on payment of such ground rent. The ordinance further provided that at any time thereafter, the purchaser or his heirs or assigns should have the power to pay the original valuation money, with what rent might be due up to that time, in full discharge and extinguishment of the ground rent, and he or they should thereupon be entitled to the land in fee simple. The city was also to give a deed by way of bargain and sale to each purchaser of lots which should vest an absolute or conditional estate in the purchaser, according to the circumstances -- that is to say, an absolute one if the valuation and increase money should be paid down, or a conditional one if the valuation money should not be paid down, but which should become absolute if and when the valuation money should at any future time be paid into the treasury, which payment should be acknowledged by the mayor and a majority of the aldermen, under the seal of the city and attested by the city treasurer, to be indorsed on the deed. The ordinance continued:
"And the said conditional estates shall amount to this, that the use and occupation of the premises are forever secured to the purchaser and others claiming under him or her on payment of the ground rent, but on failure therein for the space of fifteen days after the same shall become due, the said premises are to revert to the corporation, who shall immediately thereafter possess the power of reentry, and having by means of
their proper officers exercised such power and given a notice thereof in writing posted on the premises, the lot or lots so entered upon, with all improvements thereon, are to be considered at the expiration of ten days thereafter as absolutely revested in the corporation, and the conditional estate therein determined, to all intents and purposes, as fully as if the same had not been bargained for or purchased, any sale or encumbrance or other act, made or suffered by the purchaser or purchasers or others under him, her, or them, to the contrary thereof in anywise notwithstanding."
Pursuant to such ordinance, the lands were sold and the purchasers of many of the lots elected to hold their purchases on ground rent payable quarterly, as stated in the ordinance. Deeds were thereupon executed on the part of the city and also were signed by the respective purchasers. Lands have been sold from time to time under ordinances of substantially the same character and containing language in substance the same up to 1872, since which time conditional sales have been abandoned.
The deeds contained a provision that,
"in consideration of the rent to be paid, and of the several covenants and agreements to be performed, [mayor and aldermen] have bargained and sold, and by these presents do bargain and sell, unto the said _____ _____ all that lot of land [describing it] . . . unto the said _____ _____ executors, administrators, and assigns, forever, on this express condition. Nevertheless, that _____ _____ the said _____ _____ executors and administrators and assigns"
shall pay rent as covenanted, and
"in case of failure herein for the space of twenty days after any of the said quarterly payments shall become due, that then the said lot and premises shall revert to the corporation of the said city, who shall immediately thereafter possess the power of reentry, and having, by means of their proper officers, exercised such power and given a notice thereof in writing, posted on the promises, the said lot, with all improvements thereon, shall be considered at the expiration of ten days thereafter, as absolutely revested in the corporation, and the estate by these presents created determined to all intents and purposes as fully
as the same had not been bargained for or purchased, any sale or encumbrance, or other act made or suffered by the said _____ _____ executors, administrators, or assigns, or others under him or them, to the contrary thereof in anywise notwithstanding."
The purchaser also covenanted to pay the annual rent and that, in case of failure, the city should have the lawful right of reentry as already provided for.
The deed also contained the following provision:
"And it is hereby declared to be the true intent and meaning of these presents, and all parties to the same, that, on payment of the said ground rent at the times and after the manner hereinbefore directed, the said _____ _____ heirs, executors, administrators, and assigns, shall and may from time to time, and at all times hereafter, peaceably and quietly have, hold, use, occupy, possess, and enjoy the said lot and premises, and receive and take the rents, issues, and peafter, peaceably and quietly have, hold, use, occupy, possess, and enjoy the said lot and premises, and receive and take the rents, issues, and peafter, peaceably and quietly have, hold, use, occupy, possess, and enjoy the said lot and premises, and receive and take the rents, issues, and profits thereof, and of every part thereof, to _____ and _____ own use, absolutely, without the let, suit, trouble, eviction or denial of the said corporation or of any person whatsoever acting under them or by virtue of their authority, subject only to such assessments and burthens as shall be in common with other lot holders in the said city."
It was also provided in the deed that the purchaser, his heirs, executors, or administrators, or assigns, might at any time pay into the city treasury the valuation money and the rent then due, in full discharge and extinguishment of such rent, and in that case there should be an acknowledgment of such payment under the seal of the city, signed by the mayor and a majority of the aldermen and attested by the city clerk, and indorsed on the deed,
"which shall then and from thenceforth vest an absolute estate, in fee simple, of and in the said lot and premises, in the said _____ _____ heirs and assigns to _____ and their only proper use and behoof forever."
It is admitted that the same character of deed has been executed for lots sold under other sales since 1790.
Extracts from the minutes of the proceedings of the common council of the city in regard to meetings of that body in 1790 chanroblesvirtualawlibrary
and thereafter were put in evidence, from which it appeared that the ordinance for the sale of these lots was induced by the fact that the expenses of the city government were more than its revenues, and these sales were provided for in the hope that the condition of the city's finances might thereby be improved. There was also put in evidence a notice of sale of lots, advertised in the Georgia Gazette of June 13, 1799, in which were specified the terms contained in the ordinance for the sale of the lots, and the advertisement contained the statement that the
"purchasers are at liberty to take a lease to him or her or his or her heirs and assigns forever of the lots so purchased at a ground rent of five percent on the valuation,"
An ordinance for laying off into city lots what was called the "Springfield Plantation," and providing for the sale of the same, passed in the year 1851, was also put in evidence, which contained substantially the same plan as that provided for in the ordinance of September 28, 1790, except that the conditional sale was to be for twenty-four years only. Although the lots mentioned in the petition of the plaintiffs in error in this case are not situated within the Springfield Plantation, the ordinance and the deed thereunder regarding those lots were put in evidence for the purpose of comparison with the ordinance of 1790, and the deeds executed thereunder, in order to show that the same language, except as to the term, was used in the instrument which granted a lease for but twenty-four years as was used in the other granting a perpetual term. There were also ordinances of February 27 and July 31, 1851, put in evidence, the former of which permitted one of two or more tenants in common or joint tenants to pay his proportion of the purchase money, and, upon such payment, he should receive a deed in fee, and any lessee of a city lot might, on application, have it divided into two or more parts and receive a lease for the same, and the other ordinance provided for increasing the depth of certain lots at an increased rent therefor, payable at the same time that the regular ground rents on these lots fell due.
A report of the mayor in 1854, to the common council, was put in evidence in which was a statement of the resources of chanroblesvirtualawlibrary
the City of Savannah, among which were designated 643 lots in 22 wards "under lease;" also two reports of the mayor, the one on October 31, 1855, and the other a year later, both containing similar statements as to the number of lots belonging to the city, which were "under lease," and similar reports from and including 1857, up to and including 1877, with the exception of the years 1864 and 1865, when no report was made by the mayors of the city. This class of evidence was offered for the purpose of showing that the title conveyed to the purchasers was under a lease, and that it was not a conditional estate subject to be terminated by a breach of a condition subsequent, and that the city recognized the conveyance as a lease, and not in truth as a conditional estate.
On April 7, 1806, an ordinance was passed by the city council for raising a fund for the support of a "watch" in the city, which provided that a tax should be levied on property therein, "including all lots held by lease from the corporation," but on November 24, 1806, an ordinance was passed providing
"that so much of the first section of the aforesaid ordinance as imposes a tax on lots held by lease from the corporation . . . be and the same is hereby repealed."
It was admitted that every annual tax ordinance to raise revenue for the city passed by the mayor and aldermen from the above date, November 24, 1806, up to and including the ordinance of January 22, 1857, used the words "excepting lots held by lease from the corporation." On December 11, 1857, the tax ordinance provided as follows:
"SEC. 4. The following real property shall be exempt from taxation, to-wit: each lot of land held at the time of the passage of this ordinance upon the payment of ground rent to the mayor and aldermen, of the class commonly called city lots."
The annual report of the mayor for the year 1871 was also put in evidence, in which the following language occurs:
"It is not known to the foreign public that a very large part of the real estate in the city consists of lots sold on condition of the payment of ground rent, and are therefore not the subject of taxation, and are not included in the assessments."
It was also admitted that lots known as "ground rent lots" chanroblesvirtualawlibrary
were never in fact assessed for taxation from 1790 until some time after the passage of the ordinance of May 29, 1878, and that those lots were omitted from the assessment books made in 1807 and every year thereafter down to the assessment book made out in the year 1878, and that in fact no city taxes were ever levied on them until after the resolution of the common council of November 17, 1889, under which they have been for the first time assessed for city taxation for the year 1890.
It was also admitted that no taxes were in fact assessed or levied under the ordinance of April 7, 1806, above mentioned. The holders of these city lots have always paid state and county taxes, and street improvements, and assessments for sidewalks, and all other assessments and burdens common to lot owners in the said city, except city taxes. A report of the finance committee made in 1872 and signed by the chairman was also put in evidence, in which it was stated as follows:
"The reason why city lots are not taxed beyond the ground rent is that the city is understood to have bound itself not to tax them."
"The ordinance of 1790, which was the first to provide for the sale of lots on these terms, contains a stipulation that the purchaser of such a lot, and all claiming under him, shall have the use, etc., upon paying the ground rent. This ordinance has been followed either in terms or substance by all succeeding ordinances providing for such sale."
"It is of no moment that the stipulation does not appear in the deeds; the ordinances contain the real terms of the contracts and control the deeds whenever the latter depart from them or conflict with them. And as the city has never taxed such lots, it is difficult to resist the conclusion that such was the design when the ordinance of 1790 was framed."
The ordinance of May 29, 1878, provided that--
"Every person and corporation owning real property in said city, including improvements, shall pay a tax upon said property of two and one-half percent of the value thereof, including ground rent lots, except on such property as may be exempt from taxation under the laws of this state. "
The city is given full power of taxation by state legislation. Code of 1863, sec. 4756; Code of 1882, sec. 4847.
Oral evidence was also given from which it appeared that, on sales of the property under various ordinances of the same nature as that of 1790, the city marshal by whom the sales were made
"would announce that, so long as the lots were held under ground rent plan, they would be free from city taxes. These announcements were made under authority of the committee. And often when the bidding would lag, the marshal would remind the bystanders that there was only a twenty percent cash payment required, and that there was no city taxes, but only an annual ground rent."
One of the witnesses, who was himself at the time of some of the sales an alderman between 1858 and 1869, stated:
"I, as a city official, in good faith, have made the statement and directed the marshal so to announce when making sales of city lots under my supervision as chairman of the committee on public sales and city lots, and under the common and universal construction of the city deeds, the absence of any reservation of a right to tax the lots sold under ground rent has always been construed as an agreement not to tax."
Another witness said that he would not say that the City of Savannah ever at any time formally agreed not to tax ground rent lots; he did not know of any official action taken thereon by the city.
The above are substantially the facts upon which the contention of the plaintiffs in error that their lots are exempt from city taxation is founded. There is no evidence that any of them bought their lots at a sale where an announcement of exemption was made, or that they purchased them under the belief that they were forever legally exempt from all city taxation.
They also claim that the deed itself, irrespective of the above testimony, necessarily and, by its terms, implies a perpetual exemption from all city taxation upon the lots so long as the ground rent is paid. chanroblesvirtualawlibrary