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Blount County Board of Education v. City of Maryville

Court of Appeals of Tennessee, Knoxville

December 27, 2017

BLOUNT COUNTY BOARD OF EDUCATION ET AL.
v.
CITY OF MARYVILLE, TENNESSEE ET AL.

          Session August 8, 2017

         Appeal from the Chancery Court for Blount County No. 2014-053 Telford E. Forgety, Jr., 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 commenced the instant action by filing a complaint requesting declaratory judgment of its asserted right to a portion of liquor-by-the-drink tax revenue collected within the two municipalities involved in this appeal. Following the trial court's denial of a motion to dismiss filed by the municipalities, the municipalities filed a motion for summary judgment. The county subsequently amended its complaint to, in the alternative, request reimbursement of the portion of liquor-by-the-drink tax revenue it had previously distributed to the municipalities' respective school systems from liquor-by-the-drink gross receipts collected at private clubs located within the county but outside the incorporated limits of the municipalities. The county then filed a motion for partial summary judgment on the original issue of the cities' purported liability to share a portion of their liquor-by-the-drink tax revenue with the county. Following a hearing, the trial court granted summary judgment in favor of the municipalities, 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, which the trial court granted insofar as it found that the county's claims for alternative relief had not been properly before the court when the judgment was entered. Upon subsequent competing motions for summary judgment, the trial court granted summary judgment in favor of the municipalities on the alternative claims as well. The county has appealed. 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 but that the county was required to share tax revenue from liquor-by-the-drink sales within unincorporated areas of the county with all school systems in 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

          Robert N. Goddard, Maryville, Tennessee, for the appellant, Blount County Board of Education. Craig L. Garrett, Maryville, Tennessee, for the appellant, Blount County, Tennessee.

          Stephanie D. Coleman, Richard A. McCall, and Shelly L. Wilson, Knoxville, Tennessee, for the appellees, City of Maryville, Tennessee, and City of Alcoa, Tennessee. [1]

          Melanie E. Davis, Maryville, Tennessee, for the appellee, City of Maryville, 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 City of Maryville ("Maryville") passed a referendum authorizing liquor-by-the-drink sales in 1996, and the City of Alcoa ("Alcoa") passed such a referendum in 2004. The citizens of Blount County ("the County") had not approved a liquor-by-the-drink referendum at the time this action was commenced. Prior to Maryville's and Alcoa's (collectively, "the Cities'") respective approval of liquor-by-the-drink sales, private clubs located within each city's boundaries legally sold alcohol for consumption on the premises, and the Commissioner distributed one-half of those revenues to each municipality pursuant to Tennessee Code Annotated § 57-4-306(a). Each of the Cities had continually operated its own separate school system since before the 1967 enactment of the liquor-by-the-drink statutory scheme by the General Assembly, Maryville since 1913 and Alcoa since 1919.

         Since passage of their respective referendums, the Cities had continued to receive fifty percent of gross receipt taxes arising from sales of liquor by the drink. The Cities had not distributed any of their liquor-by-the-drink revenue to the Blount County Schools or to Blount County generally. Simultaneously, within the unincorporated areas of the County, private clubs had legally sold alcohol for consumption on the premises through the time this action was commenced. The Commissioner had distributed one-half of those funds to the County, which in turn distributed one-quarter (or one-half of the half it had received) among the school systems in the County, including those managed by the Cities.

         On May 23, 2014, the Blount County Board of Education ("the County Board") filed a complaint against the Cities in the Blount County Chancery Court ("trial court"), seeking declaratory judgment regarding the rights and responsibilities of the parties concerning the liquor-by-the-drink tax. The County Board requested, inter alia, an order directing the Cities to remit to the County "the amount of the Liquor Tax not distributed by [the Cities] to [the County Board] in the same manner as county property tax for schools is expended and distributed, " plus prejudgment interest. The County estimated the amount of back liquor-by-the-drink tax revenue it was purportedly owed to be approximately $503, 212.00 from Maryville and approximately $284, 601.00 from Alcoa.

         Maryville and Alcoa each filed a separate answer to the complaint on August 29, 2014, 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) Tennessee Code Annotated § 57-4-306(a) (2013) did not operate to require the Cities to remit any part of their respective portions of liquor-by-the-drink tax proceeds received from the Commissioner to the County's school system. The Cities further argued, inter alia, that the Blount County Board of Education was not a proper party to initiate and maintain an action against the Cities.

         On November 4, 2014, the County Board filed a motion to amend the complaint in order to add the County as a plaintiff. The Cities, acting together, filed a response objecting to the motion to amend on November 18, 2014. The Cities concomitantly filed a motion to dismiss the original complaint, and the County Board filed a response. On December 29, 2014, the County Board filed a motion for judgment on the pleadings pursuant to Tennessee Rule of Civil Procedure 12.03, and, in conjunction with Blount County, an amended motion to amend the complaint in order to add Blount County as a plaintiff. The Cities subsequently filed a reply, inter alia, again objecting to the County Board's motion to amend the complaint. Following a hearing conducted on June 2, 2015, the trial court entered an order on June 25, 2015, denying the Cities' motion to dismiss and granting the County Board's motion to amend the complaint. We will hereinafter refer to the plaintiffs collectively as "the County."

         In its June 2015 order, the trial court set the County's motion for judgment on the pleadings for subsequent hearing. The Cities then filed a motion for summary judgment on June 26, 2015, and the County filed its amended complaint on June 30, 2015, with the Cities subsequently filing an answer. On August 26, 2015, the County filed another motion to amend its complaint, adding, as pertinent to this appeal, alternative claims requesting reimbursement of the portion of liquor-by-the-drink tax revenue it had previously distributed to the Cities' respective school systems from liquor-by-the-drink gross receipts collected at private clubs located within the County but outside the incorporated limits of the Cities from November 1992 through the commencement of this action in August 2014. The County requested an alternative judgment against Maryville in the amount of $270, 572.75 and against Alcoa in the amount of $90, 602.12. The County then filed a motion for partial summary judgment on its original claims on October 1, 2015. Upon the August 2015 motion to amend and the Cities' supplemental response, the trial court conducted a hearing on October 20, 2015, and entered an order on November 9, 2015, granting the County's motion to amend the complaint to add the alternative claims.

         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 June 2015 and the County's motion for partial summary judgment filed in October 2015, the trial court entered an order on December 22, 2015, granting summary judgment in favor of the Cities and dismissing the County's amended complaint. In response to the Cities' argument that Title 57, Chapter 4 was inapplicable to the County, the court found that because the Commissioner had distributed to the County a portion of liquor-by-the-drink tax revenue collected from private clubs located within unincorporated areas of the County, "there has been a long-standing practical construction" that Tennessee Code Annotated § 57-4-306 applied to the County. The court also concluded that the language of Tennessee Code Annotated § 57-4-306(a) (2013) was ambiguous as to whether a municipality that operated its own school system and had passed a liquor-by-the-drink referendum was required to share the local political subdivision's portion of liquor-by-the-drink tax receipts with the County. However, upon analysis of the legislative history surrounding the 1982 Amendment and contemporaneous attorney general's opinions, the court determined that because the Cities operated their own school systems, they were not required to share their liquor-by-the-drink tax revenue with the County.

         In also dismissing the County's alternative claims, the trial court found that under Tennessee Code Annotated § 57-4-306 (2013), "it [was] not inappropriate that the County divided the [liquor-by-the-drink] funds it received (from private clubs, etc., located outside the Cities) pro-rata with the Cities." Upon the County's subsequent motion to alter or amend the December 2015 judgment, the court entered an order on June 21, 2016, finding that the alternative claims had not been properly before the court and amending the December 2015 order to dismiss solely the County's original claims.

         On June 29, 2016, the Cities filed a motion for summary judgment on the County's alternative claims regarding those liquor-by-the-drink tax monies that the County had previously shared with the Cities' school systems. The County responded by filing its own motion for summary judgment on its alternative claims on August 5, 2016. Following a hearing conducted on December 7, 2016, the trial court again granted summary judgment in favor of the Cities, dismissing the County's alternative claims. The court found that, pursuant to Tennessee Code Annotated § 57-4-306(a) (2013), the County was required to share the liquor-by-the-drink tax revenue it received from private club sales collected in unincorporated areas of the County with the Cities' school systems in the same manner as the county property tax was expended and distributed, by average daily attendance in each school system located within the County. The court entered an order to this effect, incorporating its memorandum opinion, on December 22, 2016.

         The County timely appealed. 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."[2]

         II. Issues Presented

         Blount County presents the following 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.
3. Whether the trial court erred by finding that the County was required to share with the Cities the liquor-by-the-drink sales tax revenue received from the Commissioner, for receipts collected in unincorporated areas of the County, in the same manner as the county property tax for schools is distributed.

         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 such tax is collected.
(b) Notwithstanding subdivision (a)(2), the fifty percent (50%) of the gross receipt taxes allocated to local political subdivisions by subdivision (a)(2) and collected in a municipality which is a premier tourist resort shall be distributed to and expended by such municipality for schools in such municipality.

Tenn. Code Ann. § 57-4-306 (2013).

         The applicable version of Tennessee Code Annotated § 57-4-301(c) (2013), referenced in subsection -306(a), provided:

(c) In addition to the privilege taxes levied in subdivision (b)(1), there is further levied a tax equal to the rate of fifteen percent (15%) of the sales price of all alcoholic beverages sold for consumption on the premises, the tax to be computed on the gross sales of alcoholic beverages for consumption on the premises for the purpose of remitting the tax due the state, and to include each and every retail thereof.[3]

         Subsection -301(b)(1) (2013 & Supp. 2017) sets forth privilege taxes to be paid to the alcoholic beverage commission by "[e]ach applicant for an on-premises consumption license" during the application process and on an ongoing basis as the privilege is exercised, according to such criteria as the type of seller, seating capacity, and percentage of gross sales. Subsection -301(c), in both its prior and current versions, thus adds to the privilege taxes levied in -301(b)(1) the fifteen-percent, liquor-by-the-drink tax applied to alcoholic beverages consumed on the premises. Pursuant to subsection -306(a)(1), which remains unchanged since the version governing here, all of the gross receipt liquor-by-the-drink taxes are to be distributed by the Commissioner, with fifty percent allocated to the state's general fund, where they are earmarked for education purposes. Tenn. Code Ann. § 57-4-306(a)(1) (2013 & Supp. 2017). Up to this point, the clarity of section -306 is not in dispute.

         At issue in this action is the second fifty percent of the gross receipt taxes, which, under the governing version of the statute, were to be distributed to the "local political subdivision." See Tenn. Code Ann. § 57-4-306(a)(2) (2013). Particularly at issue is the distribution of the twenty-five percent (half of the fifty percent returned to the local political subdivision by the Commissioner) as set forth in subsection -306(a)(2)(A). The phrase, "local political subdivision, " is not expressly defined in Title 57, Chapter 4. In general, a "political subdivision" may be defined as "[a] division of a state that exists primarily to discharge some function of local government." Black's Law Dictionary 1197 (8th ed. 2004). For example, within Tennessee's Governmental Tort Liability Act, a "governmental entity" is defined in part as "any political subdivision of the state of Tennessee including, but not limited to, any municipality, metropolitan government, county, utility district, school district . . . ." Tenn. Code Ann. ยง 29-20-102(3)(A) (2012 & Supp. 2017) (emphasis added). Accordingly, the County and each of the Cities are local political subdivisions ...


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