THORN v. JEFFERSON COUNTY

MADDOX, Justice.

Can the Legislature require citizens in Jefferson County to pay a higher rate of ad valorem tax on the same class of property than citizens in other counties of the state are required to pay? We hold that, based on the material before us, we cannot find, as a matter of law, that the classification made by the Legislature is rational. We reverse and remand.

Plaintiffs, as taxpayers, brought a class suit to recover what they claim were "excess taxes" paid to the Jefferson County Tax Collector based upon the assessment ratios provided for in Title 51, § 17, Code of Ala. 1940 (Recompiled 1958), now § 40-8-1, Code 1975. They claimed that the levy of taxes based upon § 40-8-1, Code 1975, is unconstitutional because it constitutes a denial of equal protection and violates the Fourteenth Amendment to the Constitution of the United States in that they were required to pay ad valorem taxes to the Jefferson County Tax Collector on Class III based upon an assessment rate of 20% of the market value of the property while taxpayers in other counties were required to pay only at the rate of 15% of the market value of the property. In a final order granting the defendants' motions to dismiss, denying the plaintiffs' motion for partial summary judgment, the trial court opined:

"Plaintiffs' motion for partial summary judgment seeks a declaration that Section 40-8-1(e), Code of Alabama 1975 (and its predecessor, Tit. 51, § 17(5), Ala.Code 1940, as amended), is unconstitutional on its face, there being no issue as to any material fact with respect to that claim, thus entitling plaintiffs to judgment as a matter of law. In raising the constitutionality vel non of Section 40-8-1(e), plaintiffs submit no supporting affidavits or other evidence or testimony as provided by Rule 56, as plaintiffs contend that the question is solely a matter of law and should be considered as such. In the memorandum brief filed by plaintiffs they observe that Section 40-8-1(e) provides for an assessment for municipal and county tax purposes of fifteen percent (15%) of all Class III property in all counties except Jefferson and Morgan which provides for a twenty percent (20%) assessment, and claim that there is no rational basis for this distinction in assessment rates, and that the distinction `demonstrates a patent denial of equal protection in that residents of Jefferson County ... who own Class III property are not being treated equally with other Class III taxpayers'. Plaintiffs make the claim, unsupported by any facts or evidence, that this distinction constitutes a denial of equal protection and violation of the Fourteenth Amendment to the United States Constitution.

"The plaintiffs contend that Section 40-8-1(e), Code of Alabama 1975, and its predecessor Section 17(5), Title 51, Code of Alabama of 1940, as amended, violate the equal protection of the laws provision of the Federal Constitution. The plaintiffs thusly state the theory of such contention:

"`The statutory scheme at issue permits and compels the assessment of property of the same class at different ratios in different counties.' (First sentence in last paragraph on page 3 of plaintiffs' brief).

"To sustain such theory the plaintiffs rely on Weissinger vs. Boswell, D.C., 330 F.Supp. 615, herein called `Weissinger'.

"The Court agrees with the defendants that Weissinger does not hold that the equal protection of the laws clause of the Federal Constitution prohibits the assessment for municipal and county taxation of property of the same class at different ratios in different counties. Footnote 1 to the opinion in McCarthy v. Jones, [D.C.] 449 F.Supp. 480, decided subsequent to Weissinger and after the adoption of Amendment 325 to the Alabama Constitution says this:

"`Clearly there is no constitutional proscription against the adoption of different rates of taxation by the various local governmental units.' (emphasis added)

"By the sentence next quoted above, the Court in McCarthy repudiated the principle for which the plaintiffs cite Weissinger. Court decisions, legal encyclopedias and preeminent text writers sustain such repudiation.

"`On the other hand, taxes in different taxing districts in the state need not be uniform, where they are equal and uniform throughout the district for which the tax is levied. For instance, a county tax in one county may be based on a higher valuation or a higher rate than in another county.' (underscoring supplied) 1 Cooley's Law of Taxation (4th Ed.), pp. 649 and 650.

"`It does not mean, however, that the taxes levied by or with respect to the various political subdivisions or taxing districts of the state must be at the same rate.'" (Underscoring supplied) 71 Am. Jur.2d 472, § 152 of State and Local Taxes.

"`Hence, there may be different rates of local taxation in such different subdivisions, provided there is uniformity within each particular county, municipality, or taxing district, and provided the purpose to be accomplished by the tax pertains to the district taxed, as discussed infra subdivision b of this section.' (Underscoring supplied) 84 C.J.S. 128, et seq., Section 38 of Taxation.

"Plaintiffs rely principally on the decision of the United States District Court for the Southern District of Alabama in McCarthy v. Jones, 449 F.Supp. 480 (1978). In McCarthy the District Court held that the application of Section 40-8-1(e) to seventeen counties involved in the case with respect to the assessment of Class II property at different rates so as to reduce assessment ratios as therein provided violated the equal protection clause of the Fourteenth Amendment to the United States Constitution as to the school of children who were plaintiffs in that case. The Court expressly held that the rates of assessment for county and municipal taxation in Jefferson County [were] not an issue in the litigation since the Jefferson County rates (as to Class III property) exceed the statutory rates for other counties. In McCarthy, the Court did hold that Amendment 325 to the Alabama Constitution was valid and that an assessment ratio in a county different from the assessment ratio in other counties could in a proper case be established by the Legislature.

"Section 1-1-16, Code of Alabama 1975, and Section 2 of Act No. 1216 of the 1973 Regular Session of the Legislature (Acts 1973, p. 2062), which act amended Title 51, Section 17(5), Code of Alabama 1940, each provide a severability clause which authorizes the Court to consider Section 40-8-1(e) (and its predecessor, Tit. 51, § 17(5), Ala.Code 1940, as amended) as they apply to Jefferson County alone, unaffected by provisions applicable to other counties. The United States Supreme Court has held that the equal protection clause of the United States Constitution relates to equality between persons rather than between areas. Salsburg v. State of Maryland, 346 U.S. 545, [74 S.Ct. 280, 98 L.Ed. 281] (1954); McGowan v. State of Maryland, 366 U.S. 420, [81 S.Ct. 1101, 6 L.Ed.2d 393] (1961); Toyota v. Hawaii, 226 U.S. 184, [33 S.Ct. 47, 57 L.Ed. 180] (1912). The Supreme Court of the United States has held that State legislatures are presumed to have acted within their constitutional power despite the fact that in practice, their laws result in some inequality and that a statutory discrimination will not be set aside if any state of facts reasonably may be conceived to justify it. McGowan v. Maryland, supra; Allied Stores of Ohio v. Bowers, 358 U.S. 522, [79 S.Ct. 437, 3 L.Ed.2d 480] (1959).

"The Alabama Supreme Court and the Court of Civil Appeals have held as valid laws relating to assessment of property in Jefferson County different from similar laws relating to most other counties in the State. Phillips v. Hinkle, 262 Ala. 330, 78 So.2d 800 (1955); Smith v. Pullman, Inc., 280 Ala. 295, 193 So.2d 516 (1966); State v. Kennedy, 52 Ala.App. 470, 294 So.2d 439 (1974).

"After consideration of the pleadings, arguments of counsel, and the authorities submitted by counsel, the Court is of the opinion and finds that the provisions of Section 40-8-1(e), Code of Alabama 1975, and of Tit. 51, § 17(5), Ala.Code 1940, as amended, separately and severally, providing that in Jefferson County taxable property shall be assessed for municipal and county taxation at the ratio of assessed value to fair and reasonable market value as to Class III property at twenty percent (20%), does not violate the equal protection clause of the Fourteenth Amendment to the United States Constitution, nor is invalid as being repugnant to the provisions of the Constitution of Alabama, or for any other reason alleged in the complaint as last amended. The Court accordingly further finds plaintiffs' motion for partial summary judgment is due to be denied. The Court deems and finds plaintiffs' claim with respect to the alleged patent invalidity of Section 40-8-1(e), Code of Alabama 1975, to be the sole claim upon which plaintiffs seek relief."

Section 40-8-1(e), Code 1975, provides, on its face that Class III property in Jefferson and Morgan Counties will be taxed at a different rate than Class III property in other counties.1 The plaintiffs maintain that there is no rational basis for the distinction in assessment rates and that it is an arbitrary and grossly unequal application of the law.

The constitutional and statutory scheme for taxing property in Alabama has generated a substantial amount of concern and controversy over the past two or three decades. These disputes have been precipitated principally because of the failure of the Legislature and the taxing authorities to follow the mandates of the Constitution of 1901, which specifically provided for equality and ad valorem taxation. For example, § 211 and § 217 of the Constitution of 1901, provided, as follows:

"Sec. 211. Property taxes to be assessed in exact proportion to value of property.

"Sec. 217. Property of private corporations, associations and individuals to be taxed at same rate; exception as to religious, educational and charitable property.

The appellate courts of this state have interpreted these sections of the Constitution to mean that all property must be taxed at uniform ratios for ad valorem purposes. State of Alabama v. Alabama Power Co., 254 Ala. 327, 48 So.2d 445 (1950); Hamilton v. Adkins, 250 Ala. 557, 35 So.2d 183 (1948); State of Alabama v. Murphy, 45 Ala.App. 637, 235 So.2d 888 (1970).

In fact, this Court specifically said in the Alabama Power Company case, supra, that the intent manifested by § 211 and § 217 was, as follows:

Nevertheless, neither the Legislature nor the taxing authorities varied their taxing schemes. The inevitable happened in 1971, when a class action was filed in federal court, in which the plaintiffs alleged that the intentional and systematic refusal of state taxing officials to perform their duties in accordance with state law had denied them equal protection of the law under Amendment 14 to the Federal Constitution. A three-judge Federal District Court, noting that this Court had held that Alabama's own constitution had been interpreted as requiring "`uniformity and equality among all taxpayers, private corporations, associations and individuals alike', both as to ratio and percentage of taxation and also as to rate of taxation," declared Alabama's statutory scheme violated not only the Alabama Constitution, but also the Federal Constitution as well. Weissinger v. Boswell, 330 F.Supp. 615 (M.D.Ala.1971).

Alabama's answer to Weissinger was Amendment 325 which amended Section 217 of the 1901 Constitution to change the uniformity and equality among taxpayers to provide for three classes of property and to establish three different ratios of taxation for the three separate classes. The Legislature, in turn, enacted the statute under attack now, § 40-8-1(e).

It is apparent on the face of the statute that the Legislature has attempted to establish a class [specified counties] within a class [Class III property] by varying the assessment ratios between counties insofar as both Class II and Class III property are concerned.

As to Class II property, § 40-8-1(e) has already been declared unconstitutional by a Federal District Court in McCarthy v. Jones, 449 F.Supp. 480 (S.D.Ala.1978).

The Court, in McCarthy had to determine the identical constitutional question presented by the plaintiffs here. That Court framed the issue:

The Federal District Court resolved the issue on plaintiffs' Motion for Summary Judgment in the McCarthy case by entering an order declaring § 40-8-1(e) to be unconstitutional as repugnant to the provisions of the Fourteenth Amendment.

The McCarthy Court made the following finding:

The result reached in McCarthy followed a principle previously enunciated in Weissinger, where the Court stated:

Following the McCarthy decision, the Attorney General of Alabama was requested to give an opinion on the validity of Section 40-8-1(e) and was specifically asked:

"1. Does the decision of the Court in McCarthy, et al. v. Jones, et al., 449 F.Supp. 480 (D.C.Ala.1978), require assessment of all Class II property at 25% of fair market value and all Class III property at 15% of fair market value?" The Attorney General answered this question in the affirmative on May 25, 1978. The opinion states:

Following the decision in McCarthy and the Attorney General's opinion, the assessment ratio of property in both Jefferson and Morgan Counties was voluntarily reduced from 20% to 15% of market value.

We are aware of the principle that "in taxation, even more than in other fields, legislatures possess the greatest freedom in classification." Madden v. Kentucky, 309 U.S. 83, 88, 60 S.Ct. 406, 408, 84 L.Ed. 590 (1940). We are also conscious that the Supreme Court of the United States held that a statute must be held constitutional in light of the Equal Protection Clause of the Fourteenth Amendment, if any state of facts can be conceived that would sustain it. Allied Stores of Ohio v. Bowers, 358 U.S. 522, 528, 79 S.Ct. 437, 441, 3 L.Ed.2d 480, 486 (1959).

We are also mindful that a statutory discrimination should not be set aside if any state of facts reasonably may be conceived to justify it. McGowan v. State of Maryland, 366 U.S. 420, 81 S.Ct. 1101, 6 L.Ed.2d 393 (1961).

The taxpayers recognize and admit that the Equal Protection Clause of the United States Constitution and the decisions in Weissinger and McCarthy do not require that the assessment rates of Class III property must be uniform across the State of Alabama. They candidly admit that if the Alabama Legislature has some reasonable consideration of difference or policy in taxing Class III property in Morgan and Jefferson Counties at different rates than the other 65 counties in the State of Alabama, they would not be entitled to recover. The taxpayers do submit, however, that the decision of the Legislature to require taxation of property in Morgan County and Jefferson County at a higher rate than in the other 65 counties, in the absence of a showing of a rational basis for such classification, was arbitrary and capricious.

In brief, able counsel for one of the appellees states as follows:

It is the law, of course, that a party attacking a statute has the burden of overcoming the presumption of constitutionality, of negativing every conceivable or reasonable basis which might support the classification, and of showing clearly that the statute is unjustly discriminatory or that the classification is essentially arbitrary or unreasonable. Discrimination is the essence of classification and does violence to the constitution only when the basis of the discrimination is unreasonable. The taxpayers do not meet their burden, therefore, by merely showing that they are taxed at a different rate.

In order to sustain the grant of the motions to dismiss, we would have to take judicial notice that the Legislature had a rational basis upon which to base its classification in this statute. This we cannot do. The taxpayers have alleged that the classification is arbitrary and capricious. They have the burden to prove this, but they are at least entitled to have their day in court. There may be a rational reason why the Legislature selected Jefferson and Morgan Counties for special classification. We do not now hold that there was no rational basis for the legislation, but we would point out that it is difficult for this Court to understand why citizens of Jefferson County should be taxed at a higher rate than citizens of Mobile County and Montgomery County. Why should citizens of Morgan County be taxed at a higher rate than citizens of Madison County? While it is not required, it would be very helpful if the Legislature, when classifying as in this instance would spell out in some specifics, the purpose of the classification. It would aid the Court in the event of an attack upon this statute in determining what the legislative intent was. In any event, whether the classification is valid or invalid should be determined after a full presentation of evidence, with the burdens resting upon the parties as hereinabove enumerated.

The taxpayers also claimed that the trial court erred in refusing to permit their suit to be maintained as a class action. While § 40-10-160, Code 1975, sets forth a statutory procedure for the refund of ad valorem taxes, the taxpayers contend they did not have to pursue that statutory remedy because they claimed that the assessment was void and illegal. We agree with the taxpayers. In Graves v. McDonough, 264 Ala. 407, 88 So.2d 371 (1956), this Court held that the statutory procedure for refund of taxes does not apply where the assessment complained of is void and illegal. There, this Court held:

Taxpayers also rely on Shanks v. Winkler, 210 Ala. 101, 97 So. 142 (1923), which held, under the statutory remedy for a refund of taxes, a class action was a permissible vehicle to restrain the enforcement of an invalid tax. While the Shanks case did not discuss the question of the recovery of previously collected taxes, this Court did hold that the taxpayers could maintain the class action.

We hold that a class action was a proper remedy for the recovery of any taxes which were paid illegally, but we limit that recovery to the two taxable years next preceding the filing of the complaint. This limitation on recovery would correspond to the statutory scheme which requires that a taxpayer seek a refund within two years. §§ 40-10-160 & 166, Code 1975.

The cause is due to be reversed and remanded for proceedings consistent with this opinion.

REVERSED AND REMANDED.

JONES, SHORES and BEATTY, JJ., concur.

BLOODWORTH, ALMON and EMBRY, JJ., concur specially.

TORBERT, C. J., and FAULKNER, J., dissent.

BLOODWORTH, Justice (concurring specially).

I concur in Mr. Justice MADDOX' opinion for the Court except that I do not agree that the statute is not facially unconstitutional. I think it is.

ALMON and EMBRY, JJ., concur.

TORBERT, Chief Justice (dissenting):

I respectfully dissent from the opinion of the majority of the court.

Appellants, plaintiffs below, filed a motion for partial summary judgment in which they argued Code 1975, § 40-8-1(e), "is unconstitutional on its face and that the plaintiffs, as to this issue, are entitled to judgment as a matter of law" because "there is no issue as to any material fact." I agree with the appellants that the issue of whether Code 1975, § 40-8-1(e), is unconstitutional on its face is purely a question of law, but I would hold the statute constitutional on its face, and thus affirm the decision of the trial court.

Appellant's case below was based solely on a demonstration that under Code 1975, § 40-8-1(e), municipal and county taxes for Class III property were assessed at a 15% rate for all counties except Jefferson and Morgan where the ad valorem rate was 20%, and an allegation that the distinction "demonstrates a patent denial of equal protection in that, the residents of Jefferson County ... who own Class III property are not being taxed equally with other Class III taxpayers." As pointed out by the trial court in its final order "Plaintiffs make the claim, unsupported by any facts or evidence, that this distinction constitutes a denial of equal protection and violation of the Fourteenth Amendment to the United States Constitution." I would hold that a mere showing that taxpayers in different counties are treated differently, coupled with an unsupported allegation that the difference in treatment is arbitrary, capricious and without a rational basis, is insufficient to demonstrate that the statute which exacts the different tax rates for different counties is unconstitutional on its face.

The basic tenet of the equal protection clause is not that all persons must be treated equally, but rather that all persons SIMILARLY SITUATED must be treated equally. It has long been recognized by the United States Supreme Court that a state legislature may make classifications among its citizens based on the district or county in which these citizens live. In reference to the equal protection clause of the Fourteenth Amendment, the United States Supreme Court has held:

The proposition of law that the equal protection clause applies to persons similarly situated rather than all persons within a state was reiterated by the Supreme Court of the United States in Salsburg v. State of Maryland:

The contention of the appellants that the difference in the ad valorem tax rate between Jefferson County and other counties under Code 1975, § 40-8-1(e), renders that section violative of the Equal Protection Clause on its face is erroneous as a matter of law.

Similarly the United States Supreme Court held in Northwestern Laundry v. Des Moines:

In cases such as this one where there is no suspect class involved nor any fundamental right the rules of law which govern the constitutionality of a statute assailed on equal protection grounds are inveterate. The equal protection clause does not take from the state the power to classify, but allows the state a wide scope of discretion in this regard, and avoids what is done only when it is without any reasonable basis and therefore is purely arbitrary. When the classification in such a law is called into question, IF ANY STATE OF FACTS REASONABLY CAN BE CONCEIVED THAT WOULD SUSTAIN IT, THE EXISTENCE OF THAT STATE OF FACTS AT THE TIME THE LAW WAS ENACTED MUST BE ASSUMED, and the burden is on the assailant to prove that there is no conceivable rational basis for the statute. Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78, 31 S.Ct. 337, 55 L.Ed. 369 (1911); Quong Wing v. Kirkendall, 223 U.S. 59, 32 S.Ct. 192, 56 L.Ed. 350 (1912); McGowan v. State of Maryland, 366 U.S. 420, 81 S.Ct. 110, 6 L.Ed.2d 393 (1961).

In Allied Stores of Ohio v. Bowers, 358 U.S. 522, 79 S.Ct. 437, 3 L.Ed.2d 480 (1959), the U. S. Supreme Court upheld against an equal protection challenge a state statute which exempted from taxation all property of nonresidents held for storage but taxed all such property of residents, reasoning:

The strength of the presumptions in favor of rationality of any legislative classification and the burden on the assailant of that statute are increased if the statute challenged is a tax statute.

On every occasion that the constitutionality of a state taxation statute has been challenged on equal protection grounds, the U. S. Supreme Court has uniformly held that the discretion accorded to the legislature is extremely broad and the challenger must negative every conceivable rational basis for the statute because the power to tax is essential to the very existence of the state.1

In the majority opinion this court states "There may be a rational reason why the legislature selected Jefferson and Morgan Counties for special classification." If the remotest possibility exists that the legislature had a rational basis for its statute then the constitutionality of the statute must be sustained particularly where as here the challenge is to the face of the statute. The majority urges the legislature to specify reasons why citizens of Morgan and Jefferson Counties should be taxed at a higher rate. The U. S. Supreme Court has held that it is not the province of the judiciary to request the legislature to specify the purpose of a statute and the means by which the legislature intends to achieve that end, and then substitute its own judgment for that of the legislature.

The purpose of the legislature in enacting a tax statute and the means chosen to achieve that purpose are not matters for judicial scrutiny but rather matters of legislative discretion and no tax statute should be declared unconstitutional unless the challenger has negatived every conceivable rational basis for the statute.

The taxpayers in the instant case have not even alleged in their complaint that they can negative every conceivable rational basis for the statute. Originally, on their motion for partial summary judgment, the taxpayers insisted that the difference in treatment of Jefferson County taxpayers and taxpayers of other counties in itself demonstrated that the legislative purpose behind § 40-8-1(e), and the means chosen to reach that purpose were arbitrary and capricious, and thus the statute as a matter of law is unconstitutional on its face. Clearly this is not the law. In briefs the taxpayers changed their theory arguing that because they had successfully demonstrated that taxpayers in Jefferson and Morgan Counties are treated differently from taxpayers in the other sixty-five counties in Alabama, the burden shifted to the defendants to demonstrate that the state had a rational basis for the statute. Just as clearly, this is not the law. The burden rests on the taxpayers to prove every element of their prima facie case including in an equal protection challenge to a tax statute that there is no conceivable rational basis for the statute. Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 364, 93 S.Ct. 1001, 35 L.Ed.2d 351 (1973); Salsburg v. Maryland, 346 U.S. 545, 553, 74 S.Ct. 280, 98 L.Ed. 281 (1954).

In the recent case of Fox v. Rosewell, 55 Ill.App.3d 860, 13 Ill.Dec. 570, 371 N.E.2d 287 (1977), the Illinois Appellate Court was faced with a case on all fours with the instant case. In that case a real estate taxpayer challenged on equal protection grounds the constitutionality of an Illinois tax statute which imposed a higher tax rate on those taxpayers living in the more populous areas of the state. The trial court took judicial notice of facts which differentiated populous Cook County from other Illinois counties which conceivably could support a rational basis for the legislature's classification.

The Illinois Appellate Court affirmed the trial court's decision dismissing the complaint for failure to specifically set forth the facts relied on to rebut the presumption of constitutionality, i. e., to set forth facts which negative every conceivable rational basis for the statute.

The Court of Appeal of Louisiana stated the rule governing the sufficiency of complaints which challenge the constitutionality of a statute in the following manner:

In order to survive a motion to dismiss in a case where the constitutionality of a tax statute is at issue the complaint must not only allege that similarly situated taxpayers have been treated differently but also that there is no rational basis for the difference in treatment and set forth specifically in the complaint those facts relied upon in making the allegations. In the instant case appellants not only failed to set forth in the complaint the specific facts relied upon to rebut the presumption of constitutionality but also admitted "there is no material issue of fact" and relied solely on a challenge to the face of the statute. In basing their challenge to the constitutionality of Code 1975, § 40-8-1(e), solely on a demonstration that Jefferson County taxpayers are treated differently from taxpayers of other counties, coupled with an unsupported allegation that the legislature had no rational basis upon which to make this classification, plaintiffs have failed to state a claim entitling them to relief. Borrowing once again from the language of the Illinois Appellate Court:

I would affirm the trial court's decision which granted defendants' motion to dismiss.