City of Atlanta v. Barnes, No. S02A1338

• Decision Date: 10 March 2003
• Docket Number: No. S02A1338, No. S02A1478.
• Citation: 578 S.E.2d 110,276 Ga. 449
• Parties: CITY OF ATLANTA v. BARNES et al. City of Atlanta v. Salo.
• Court: Georgia Supreme Court

578 S.E.2d 110

276 Ga. 449

CITY OF ATLANTA v. BARNES et al.

City of Atlanta v. Salo.

Nos. S02A1338, S02A1478.

Supreme Court of Georgia.

March 10, 2003.

Reconsideration Denied April 11, 2003.

Lemuel H. Ward, Michelle L. Thomas, Rosalind R. Newell, Atlanta, for appellant.

Decker & Hallman, Robert D. Feagin, Atlanta, Winburn, Lewis, Barrow & Stolz, Irwin W. Stolz Jr., Athens, for appellees (case no. S02A1338).

Sonja L. Salo, Atlanta, pro se (case no. S02A1478).

BENHAM, Justice.

The City of Atlanta (hereinafter "Atlanta") imposes an occupation tax, the coverage of which includes attorneys who maintain an office and practice law within Atlanta. In 1999, a group of such attorneys, the Barnes appellees, filed a demand for refund of the taxes they had paid for 1996, 1997, and 1998, asserting that the tax was an unconstitutional regulation of the practice of law. One year later, the refund demand not having been acted upon, they sued Atlanta, again alleging that the occupational tax was an unconstitutional precondition on the practice of law, and seeking a refund of taxes paid. The trial court certified two classes in the Barnes case: Class One consists of all attorneys who have paid the occupational tax but have not made pre-litigation claims for refunds pursuant to OCGA § 48-55-380, and was certified for the constitutional claim only; Class Two consists of all attorneys who have paid the tax and have made a claim for refund, and was certified for both the constitutional and refund claims. The trial court granted the Barnes appellees' motion for summary judgment on the constitutional claim, ruling the tax was an unconstitutional precondition on the practice of law. In a separate action, appellee Salo filed suit against Atlanta alleging the tax was unconstitutional and asking for declaratory judgment. Salo has not paid the tax. The trial court dismissed Salo's complaint, but later reversed itself after it granted summary judgment to the Barnes appellees. Salo was then granted the declaratory relief she sought. Atlanta appealed the rulings in both cases and the appeals have been consolidated for decision.

1. We consider first the constitutionality of Atlanta's occupation tax ordinance. In Sexton v. City of Jonesboro, 267 Ga. 571, 481 S.E.2d 818 (1997), this Court considered an occupation tax similar to that involved in this case and held it to be an unconstitutional regulation of the practice of law, regulation of which is reserved by Georgia's constitution to this Court. The trial court in the present case considered Atlanta's occupation tax scheme in light of the holding in Sexton and found it unconstitutional as it applied to lawyers. Atlanta enumerates as error that finding.

This Court made clear in Sexton that municipalities may impose an occupation tax that includes lawyers within its scope so long as the tax is a revenue measure only and does not act effectively as a precondition or license for engaging in the practice of law. Id. In concluding that the Jonesboro tax ordinance did act as a precondition to practicing law, this Court enumerated a number of elements showing the true nature of the tax ordinance: registration and payment were required prior to transaction of business for that year; a certificate was required to be obtained and displayed; and non-payment of the tax could result in criminal sanctions. At the time of the decision in Sexton, the occupation tax ordinance in place in Atlanta contained those same features, but Atlanta began amending the ordinance in 1998 in an attempt to avoid the problems infecting the Jonesboro occupation tax ordinance. Nevertheless, the trial court found, the ordinance presently in place still requires payment of the tax in advance of practicing law and still creates the possibility of incarceration of lawyers who engage in the practice of law but refuse to pay the tax after being ordered by a court to do so. Based on those factors, we agree with the trial court that Atlanta's ordinance remains indistinguishable in effect from the ordinance struck down in Sexton: payment of the tax is a precondition to the practice of law, and incarceration for practicing law without payment of the tax would impede the practice of law whether that incarceration is directly for practicing while delinquent, as was the case in Sexton, or indirectly for that conduct by means of a citation for contempt of court. The trial court's holding that the ordinance is unconstitutional was correct.

2. Atlanta contends that the trial court erred in failing to sever from the ordinance the part it found unconstitutional. "`Where one portion of a statute is unconstitutional, this court has the power to sever that portion of the statute and preserve the remainder if the remaining portion of the Act accomplishes the purpose the legislature intended. (Cits.)' [Cit.]" Dawson v. State, 274 Ga. 327, 335 (6), 554 S.E.2d 137 (2001). We note that the trial court did sever the unconstitutional portion of the ordinance from the remainder in that it struck down the ordinance only so far as it applies to lawyers. The difficulty with going further with the concept of severance is that what would have to be severed in order to make the ordinance constitutional as it applies to lawyers, the requirement that the tax be paid as a precondition of practicing law in Atlanta, is the heart of the ordinance. "When an unconstitutional portion of a statute is so connected with the general scope of the statute that to sever it would result in a statute that fails to correspond to the main legislative purpose, or give effect to that purpose, the statute must fall in its entirety." State of Ga. v. Jackson, 269 Ga. 308, 312 (1), 496 S.E.2d 912 (1998). The requirement that the tax be paid prior to practicing law in Atlanta could not be severed without radically rewriting the ordinance, which is not a judicial function. McCabe v. Lundell, 199 Ga.App. 639(2), 405 S.E.2d 693 (1991). The trial court did not err in failing to find the unconstitutional portion of the ordinance severable.

3. The suit in this case was brought pursuant to OCGA § 48-5-380(c), which provides in pertinent part as follows:

Any taxpayer whose claim for refund is denied by the governing authority of the county or municipality or whose claim is not denied or approved by the governing authority within one year from the date of filing the claim shall have the right to bring an action for a refund in the superior court of the county in which the claim arises.

Considering a similar provision in a tax refund statute pertaining to taxes collected by the State, this Court held in Henderson v. Carter, 229 Ga. 876, 879(2), 195 S.E.2d 4 (1972), that

"[the refund] statute provides the method by which refunds and suits for refunds may be made by taxpayers. It does not provide for the bringing of a class action in either instance. The State has waived her sovereign immunity only to the extent provided by the express terms of this statute. It follows that a class action in the instant case is not authorized."

Relying on that decision, Atlanta contends there can be no class actions in tax refund suits and enumerates as error the trial court's certification of the Class Two plaintiffs for the refund claim.

Assuming without deciding that the limitations on statutory waivers of immunity are the same for municipalities as they are for the State,¹ and that the holding in Henderson would, therefore, apply here, we deem it necessary to reconsider the holding in that case. The decision in Henderson provides no analysis or authority for its broad holding that class actions are not allowed in tax refund cases. Reconsidering that holding, we conclude that its negative implication does not necessarily follow from the premise that sovereign immunity is waived only to the extent provided for by the express terms of the statute. When a statute provides the right to bring an action for a tax refund against a governmental body, that statute provides an express waiver of immunity and establishes the extent of the waiver (the amount of the refund), but does not purport to provide for the form of action to be utilized. By participating as a plaintiff in a class action that includes a claim for a tax refund, a taxpayer is unquestionably bringing an action for a refund, which is what the statute permits. We conclude, therefore, that the holding in Henderson that there can be no class actions brought for tax refunds was error and that Henderson must be overruled, as must ca...