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Sullivan County v. City of Bristol

Court of Appeals of Tennessee, Knoxville

December 27, 2017

SULLIVAN COUNTY, TENNESSEE ET AL.
v.
THE CITY OF BRISTOL, TENNESSEE ET AL.

          Session August 8, 2017

         Appeal from the Chancery Court for Sullivan County No. B0024737 John C. Rambo, Chancellor

         This is one of four separate actions currently before this Court with the common issue of whether the version of Tennessee Code Annotated § 57-4-306(a)(2)(A) in effect prior to the July 2014 amendment of that statute required a municipality governed by its own liquor-by-the-drink referendum and operating its own school system to share one-half of its liquor-by-the-drink tax revenue with the county in which the municipality was located when the county had not enacted a liquor-by-the-drink referendum. The county initially filed separate complaints against the two municipalities involved in this appeal, requesting declaratory judgment as to the county's asserted right to a portion of liquor-by-the-drink tax revenue collected within each municipality. The municipalities each respectively filed answers denying the county's claims, as well as counterclaims asserting that the county owed them a portion of liquor-by-the-drink tax revenue collected from private clubs located within the county but outside the incorporated limits of the municipalities. By agreement, the trial court subsequently consolidated the actions. Upon competing motions for summary judgment, the trial court granted partial summary judgment in favor of the municipalities and dismissed the county's claims, finding that the municipalities were entitled, respectively, to keep all liquor-by-the-drink tax monies distributed to them by the Tennessee Commissioner of Revenue ("the Commissioner"). The county filed a motion to alter or amend this judgment, and the municipalities filed a motion for summary judgment on their counterclaims. In a subsequent order, the trial court denied the county's motion to alter or amend and granted summary judgment in favor of the municipalities on their counterclaims, awarding money judgments against the county in favor of each municipality. The county has appealed solely the judgment dismissing its claims against the municipalities. Determining that the municipalities were not required under the applicable version of the statute to share their liquor-by-the-drink tax revenues with the county, we affirm the trial court's judgment.

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

          Daniel P. Street, Blountville, Tennessee, for the appellants, Sullivan County, Tennessee, and the Sullivan County Board of Education.

          K. Erickson Herrin, Johnson City, Tennessee, for the appellees, the City of Bristol, Tennessee, and the City of Kingsport, Tennessee.

          Thomas R. Frierson, II, J., delivered the opinion of the court, in which D. Michael Swiney, C.J., and Richard H. Dinkins, J., joined.

          OPINION

          THOMAS R. FRIERSON, II, JUDGE

         I. Factual and Procedural Background

         The facts underlying this action are essentially undisputed. Tennessee Code Annotated § 57-4-301(c) (2013 & Supp. 2017) provides for a tax "to include each and every retail" of an alcoholic beverage sold for consumption on the premises by various establishments delineated in section -301, such as restaurants, hotels, sports facilities, and private clubs. This tax is commonly referred to as a "liquor-by-the-drink tax." See Tenn. Code Ann. § 57-4-306 (2013 & Supp. 2017); Copper Cellar Corp. v. Jackson, 762 S.W.2d 560, 562 (Tenn. 1988). Tennessee Code Annotated § 57-4-306, originally enacted in 1967, prescribes the manner in which proceeds from the liquor-by-the-drink tax are to be distributed, primarily in support of public education. At issue in this action is the version of section -306 in effect prior to the Tennessee General Assembly's 2014 amendment of that statutory section ("2014 Amendment"). See 2014 Tenn. Pub. Acts, Ch. 901 § 1 (H.B. 1403). Particularly at issue is statutory language added to subsection -306(a)(2)(A) through an amendment made by the General Assembly in 1982 ("1982 Amendment"). See 1982 Tenn. Pub. Acts, Ch. 942, §§ 1-2 (S.B. 1817).

         The Cities of Bristol and Kingsport (collectively, "the Cities") each passed a liquor-by-the-drink referendum in 1984. The citizens of Sullivan County ("the County") had never had such a referendum put before them at the time this action was commenced. Prior to 1984 and at least since 1980, private clubs located within the Cities' boundaries legally sold liquor-by-the-drink for consumption on the premises, and the Commissioner distributed one-half of those revenues to the Cities pursuant to Tennessee Code Annotated § 57-4-306(a). Each of the Cities had continually operated its own separate school system since at least the 1967 enactment of the liquor-by-the-drink statutory scheme by the General Assembly. Since passage of the 1984 referendums, the Cities have continued to receive fifty percent of gross receipt taxes arising from sales of liquor by the drink. The Cities have not distributed any of their liquor-by-the-drink revenue to the Sullivan County Schools or to Sullivan County generally.

         On May 30, 2014, Sullivan County and the Sullivan County Board of Education (collectively, "the County") filed separate complaints against, respectively, the City of Bristol ("Bristol") and the City of Kingsport ("Kingsport") in the Sullivan County Chancery Court ("trial court"), seeking declaratory judgments regarding the rights and responsibilities of the parties concerning the liquor-by-the-drink tax. The County requested, inter alia, orders directing each of the Cities to remit to the County "the full amount of unremitted tax revenues" plus prejudgment interest. The County estimated the amount of back liquor-by-the-drink tax revenue it was purportedly owed to be at least $758, 239 from Bristol and at least $1, 340, 037 from Kingsport.

         Bristol and Kingsport each filed an answer to the respective complaints on March 16, 2015, asserting, as pertinent to this appeal, that (1) Title 57, Chapter 4 of the Tennessee Code was not applicable to the County because the County had not authorized liquor-by-the-drink sales; (2) the County's complaint failed to state a claim upon which relief could be granted pursuant to Tennessee Rule of Civil Procedure 12.02(6); and (3) the County's claim was prohibited by Section 29 of Article II of the Tennessee Constitution.[1] Each City also denied that Tennessee Code Annotated § 57-4-306(a) (2013) operated to require any payment of its portion of liquor-by-the-drink tax proceeds received from the Commissioner to the County's school system.

         Bristol and Kingsport concomitantly filed counterclaims, asserting that, pursuant to Tennessee Code Annotated § 57-4-306(a) (2013), each municipality was entitled to a portion of any liquor-by-the-drink tax revenue received by the county trustee that should have been distributed to all school systems operating within the County "in accord with the average daily attendance of the students residing within the County, but being educated at the expense of the municipalities." Upon Bristol's and Kingsport's subsequent unopposed motions to consolidate the County's complaints against them and their counterclaims against the County, the trial court entered an order of consolidation on August 10, 2015.[2]

         In the meantime, the General Assembly amended Tennessee Code Annotated § 57-4-306(a)(2), effective July 1, 2014, setting forth, inter alia, a detailed process by which counties that were owed funds by municipalities under Tennessee Code Annotated § 57-4-306 could seek those funds and negotiate settlements as applicable. See 2014 Tenn. Pub. Acts, Ch. 901 § 1 (H.B. 1403). The 2014 Amendment included a distinction between the liquor-by-the-drink tax proceeds received by a local political subdivision in the time period spanning July 1, 2014, until June 30, 2015, and those proceeds received after July 1, 2015, when, according to the 2014 Amendment, the statute would revert back to its pre-amendment language. See Tenn. Code Ann. § 57-4-306(b)-(c) (Supp. 2014); 2014 Tenn. Pub. Acts, Ch. 901 § 1 (H.B. 1403). However, the General Assembly has also amended Tennessee Code Annotated § 57-4-306 each year since the 2014 Amendment, extending the amended language in subsequent years, one year at a time. See 2015 Tenn. Pub. Acts, Ch. 220 §§ 1, 2 (S.B. 990); 2016 Tenn. Pub. Acts, Ch. 885 §§ 1, 2 (H.B. 1691); 2017 Tenn. Pub. Acts, Ch. 346 §§ 1, 2 (S.B. 1262).

         Upon the Cities' motion for summary judgment filed in September 2015 and the County's motion for summary judgment filed in November 2015, the trial court conducted a hearing on December 23, 2015. The court took the matter under advisement, subsequently entering a "Final Order" on February 2, 2016, granting partial summary judgment in favor of the Cities and dismissing the County's complaints. In response to the Cities' argument that Title 57, Chapter 4 was inapplicable to the County, the court found that although under Tennessee Code Annotated § 57-4-103(a), solely local political subdivisions that had authorized liquor-by-the-drink sales, such as the Cities in this action, were to receive fifty percent of gross sale tax receipts from the Commissioner, nothing in subsection -103(a) prevented the Cities from sharing such tax revenue with the County's school system. However, the court concluded that the language of Tennessee Code Annotated § 57-4-306(a) unambiguously did not require the Cities to share the local political subdivision's portion of liquor-by-the-drink tax receipts with the County. The court further determined that even if the language of subsection -306(a) were found to be ambiguous, "the legislative history supports this Court's interpretation of the statute that municipalities operating their own school system are not required to share these funds with the other local governments."

         On March 3, 2016, the County filed a motion to alter or amend the February 2016 judgment. The Cities filed a motion for summary judgment on their counterclaims on April 20, 2016. Following a hearing, the trial court entered a "Rule 58 Final Order" on September 29, 2016, designating the February 2016 order as "interlocutory, " denying Sullivan County's motion to alter or amend, and granting summary judgment in favor of the Cities on their counterclaims. Finding that, pursuant to Tennessee Code Annotated § 57-4-306(a) (2013), "[l]iquor-by-the-drink revenue collected by the State of Tennessee and distributed to Sullivan County must be placed in the county's school fund and apportioned by the county trustee among the county schools and the two municipal school systems on the basis of average daily attendance, " the court awarded monetary judgments against the County in the stipulated amounts of, respectively, $75, 802 in favor of Bristol and $107, 286 in favor of Kingsport. These money judgments awarded on the Cities' counterclaims are not at issue on appeal.

         The County timely appealed the grant of summary judgment insofar as the judgment dismissed the County's complaints against the Cities. Upon a motion to consolidate filed by the appellants in a separate action sharing the same overarching question of statutory interpretation, this Court entered an order on May 26, 2017, granting the motion "only to the extent that these cases shall be set for oral argument on the same docket and on the same day."[3]

         II. Issues Presented

         Sullivan County presents two issues on appeal, which we have restated as follows:

1. Whether the trial court erred by declining to find that the version of Tennessee Code Annotated § 57-4-306(a)(2)(A) in effect prior to the 2014 Amendment required the Cities, as municipalities governed by their own liquor-by-the-drink referendums and operating their own school systems, to share one-half of their liquor-by-the-drink tax revenue with the County when the County had not enacted a liquor-by-the-drink referendum.
2. Whether the trial court erred by declining to find that the pre-2014 version of Tennessee Code Annotated § 57-4-306(a)(2) required that one-half of all liquor-by-the-drink sales tax revenue received by the Cities must be distributed in support of education in the same manner as the County property tax is distributed.

         The Cities present an additional issue, which we have similarly restated as follows:

3. Whether the trial court erred by declining to dismiss the County's claims on the basis that redistribution by the Cities of their liquor-by-the-drink sales tax revenue to the County and for a purpose not beneficial to the Cities would violate Article II, Section 29 of the Tennessee Constitution.

         III. Standard of Review

         The grant or denial of a motion for summary judgment is a matter of law; therefore, our standard of review is de novo with no presumption of correctness. See Rye v. Women's Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 250 (Tenn. 2015); Dick Broad. Co., Inc. of Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653, 671 (Tenn. 2013) (citing Kinsler v. Berkline, LLC, 320 S.W.3d 796, 799 (Tenn. 2010)). As such, this Court must "make a fresh determination of whether the requirements of Rule 56 of the Tennessee Rules of Civil Procedure have been satisfied." Rye, 477 S.W.3d at 250. "Statutory construction is a question of law that is reviewable on a de novo basis without any presumption of correctness." In re Estate of Tanner, 295 S.W.3d 610, 613 (Tenn. 2009).

         As our Supreme Court has explained concerning the requirements for a movant to prevail on a motion for summary judgment pursuant to Tennessee Rule of Civil Procedure 56:

We reiterate that a moving party seeking summary judgment by attacking the nonmoving party's evidence must do more than make a conclusory assertion that summary judgment is appropriate on this basis. Rather, Tennessee Rule 56.03 requires the moving party to support its motion with "a separate concise statement of material facts as to which the moving party contends there is no genuine issue for trial." Tenn. R. Civ. P. 56.03. "Each fact is to be set forth in a separate, numbered paragraph and supported by a specific citation to the record." Id. When such a motion is made, any party opposing summary judgment must file a response to each fact set forth by the movant in the manner provided in Tennessee Rule 56.03. "[W]hen a motion for summary judgment is made [and] . . . supported as provided in [Tennessee Rule 56], " to survive summary judgment, the nonmoving party "may not rest upon the mere allegations or denials of [its] pleading, " but must respond, and by affidavits or one of the other means provided in Tennessee Rule 56, "set forth specific facts" at the summary judgment stage "showing that there is a genuine issue for trial." Tenn. R. Civ. P. 56.06. The nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., 475 U.S. [574, ] 586, 106 S.Ct. 1348');">106 S.Ct. 1348 [(1986)]. The nonmoving party must demonstrate the existence of specific facts in the record which could lead a rational trier of fact to find in favor of the nonmoving party. If a summary judgment motion is filed before adequate time for discovery has been provided, the nonmoving party may seek a continuance to engage in additional discovery as provided in Tennessee Rule 56.07. However, after adequate time for discovery has been provided, summary judgment should be granted if the nonmoving party's evidence at the summary judgment stage is insufficient to establish the existence of a genuine issue of material fact for trial. Tenn. R. Civ. P. 56.04, 56.06. The focus is on the evidence the nonmoving party comes forward with at the summary judgment stage, not on hypothetical evidence that theoretically could be adduced, despite the passage of discovery deadlines, at a future trial.

Rye, 477 S.W.3d at 264-65 (emphasis in original). Pursuant to Tennessee Rule of Civil Procedure 56.04, the trial court must "state the legal grounds upon which the court denies or grants the motion" for summary judgment, and our Supreme Court has instructed that the trial court must state these grounds "before it invites or requests the prevailing party to draft a proposed order." See Smith v. UHS of Lakeside, Inc., 439 S.W.3d 303, 316 (Tenn. 2014).

         IV. Distribution of Liquor-by-the-Drink Tax Revenue

         The County contends that the trial court erred by finding that the version of Tennessee Code Annotated § 57-4-306(a)(2)(A) (2013) in effect prior to the 2014 Amendment did not require the Cities to share one-half of their liquor-by-the-drink tax revenue with the County's school system. The Cities assert that the trial court properly interpreted the governing statute as directing that because the Cities each operated their own school systems, the portion of their liquor-by-the-drink revenue not paid into the state's general education fund was to be split between each City's respective school system and the City itself. Upon careful review, we determine that the governing statute was ambiguous in that the distribution scheme for a city operating its own school system could be reasonably interpreted in more than one way. Having therefore analyzed the surrounding statutory scheme, the legislative history, and other applicable authorities, as well as the record in this action, we conclude that the trial court did not err in determining that the Cities were not required to share one-half of their liquor-by-the-drink tax revenue with the County's school system.

         In conducting this analysis, we adhere to the following longstanding principles of statutory interpretation:

When dealing with statutory interpretation, well-defined precepts apply. Our primary objective is to carry out legislative intent without broadening or restricting the statute beyond its intended scope. Houghton v. Aramark Educ. Res., Inc., 90 S.W.3d 676, 678 (Tenn. 2002). In construing legislative enactments, we presume that every word in a statute has meaning and purpose and should be given full effect if the obvious intention of the General Assembly is not violated by so doing. In re C.K.G., 173 S.W.3d 714, 722 (Tenn. 2005). When a statute is clear, we apply the plain meaning without complicating the task. Eastman Chem. Co. v. Johnson, 151 S.W.3d 503, 507 (Tenn. 2004). Our obligation is simply to enforce the written language. Abels ex rel. Hunt v. Genie Indus., Inc., 202 S.W.3d 99, 102 (Tenn. 2006). It is only when a statute is ambiguous that we may reference the broader statutory scheme, the history of the legislation, or other sources. Parks v. Tenn. Mun. League Risk Mgmt. Pool, 974 S.W.2d 677, 679 (Tenn. 1998). Further, the language of a statute cannot be considered in a vacuum, but "should be construed, if practicable, so that its component parts are consistent and reasonable." Marsh v. Henderson, 221 Tenn. 42, 424 S.W.2d 193, 196 (1968). Any interpretation of the statute that "would render one section of the act repugnant to another" should be avoided. Tenn. Elec. Power Co. v. City of Chattanooga, 172 Tenn. 505, 114 S.W.2d 441, 444 (1937). We also must presume that the General Assembly was aware of any prior enactments at the time the legislation passed. Owens v. State, 908 S.W.2d 923, 926 (Tenn. 1995).

         In re Estate of Tanner, 295 S.W.3d at 613-14.

         A. Ambiguity of Tennessee Code Annotated § 57-4-306(a)(2)(A) (2013)

         The version of Tennessee Code Annotated § 57-4-306 in effect when this action was commenced provided in pertinent part:

(a) All gross receipt taxes collected under § 57-4-301(c) shall be distributed by the commissioner as follows:
(1) Fifty percent (50%) to the general fund to be earmarked for education purposes; and
(2) Fifty percent (50%) to the local political subdivision as follows:
(A) One half (½) of the proceeds shall be expended and distributed in the same manner as the county property tax for schools is expended and distributed; provided, however, that except in counties having a population of not less than twenty-seven thousand nine hundred (27, 900) nor more than twenty-seven thousand nine hundred twenty (27, 920), according to the 1980 federal census or any subsequent federal census, any proceeds expended and distributed to municipalities which do not operate their own school systems separate from the county are required to remit one half (½) of their proceeds of the gross receipts liquor-by-the-drink tax to the county school fund; and
(B) The other one half (½) shall be distributed as follows:
(i) Collections of gross receipts collected in unincorporated areas, to the county general fund; and
(ii) Collections of gross receipts in incorporated cities and towns, to the city or town wherein ...

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