Wells v. Savannah

Background

A group of people who bought long-term leased city lots challenged a city ordinance that began taxing those leased 'ground-rent' lots. The buyers relied on a 1790 ordinance, deeds made under it, decades of local practice, and statements by city officials to argue the city had agreed the lots would be forever free from city taxes. The city and later ordinances did not consistently tax the lots for many years, and the buyers pointed to that history as evidence of an exemption.

Reasoning

The Court asked whether there was a clear, binding contract that exempted the lots from taxation. It said the law requires strong proof of any tax exemption and a valid consideration for it. The deeds signed by both the city and purchasers expressly stated the lots were 'subject to all such assessments and burthens as might be in common with other lotholders in the city,' which the Court read as including taxes. Occasional statements by officials, annual ordinances that waived taxes for single years, or long nonuse of the taxing power do not prove a perpetual contractual exemption. The purchasers' possession and the form of their title made them effectively owners and therefore liable to ad valorem taxation under the deeds’ terms. The Court therefore affirmed the Georgia court’s ruling denying an injunction.

Real world impact

The ruling means owners of similar long-term leased or ground-rent lots cannot claim a perpetual tax exemption based on old deeds or decades of non-taxation. Cities may assess such property when deeds show they are subject to assessments. Property owners who rely on informal statements or past practice should not expect permanent immunity from municipal taxes.