Daniel v. Jones
| Decision Date | 09 April 1998 |
| Docket Number | No. 97-634,97-634 |
| Citation | 332 Ark. 489,966 S.W.2d 226 |
| Parties | Darin DANIEL and Dana Honeycutt-Daniel, on Behalf of Themselves and The Citizens, Residents, Taxpayers and Inhabitants of White County, Arkansas, Appellants, v. The Honorable Glen JONES, County Judge of White County, Arkansas et al., Appellees. |
| Court | Arkansas Supreme Court |
Jerry Kelly, Carlisle, H. Gregory Campbell, Mark W. Nichols, Little Rock, for Appellants.
Mike Beebe, Donald Raney, Searcy, Leon Holmes, J. Madison Barker, C. Tad Bohannon, Little Rock, for Appellees.
This is a class-action suit claiming an illegal exaction. Appellants Darin Daniel and Dana Honeycutt-Daniel, on behalf of themselves and the citizens, residents, taxpayers, and inhabitants of White County, appeal the judgment of the White County Chancery Court dismissing their claim against Appellees, the White County judge, members of the quorum court, the county treasurer, the mayors of the various cities in White County, and the State of Arkansas. Appellants' claim concerns a county ordinance passed by a majority of voters that imposed a countywide one-percent (1%) sales tax. The ballot reflected that the revenues generated from the sales tax would be used for five designated purposes. It is not disputed that the tax revenues are being used for purposes other than those stated on the ballot. On appeal, Appellants argue that using the tax proceeds for purposes other than those designated on the ballot violates Article 16, § 11, of the Arkansas Constitution of 1874 and Ark.Code Ann. § 26-74-308 (Repl.1997). Our jurisdiction of this appeal is pursuant to Ark. Sup.Ct. R. 1-2(a)(1) & (17)(vi), as the issues raised require our interpretation of the Arkansas Constitution and acts of the General Assembly. We find merit to Appellants' argument and reverse.
The relevant facts are not in dispute and were stipulated to by all parties. On July 19, 1989, the White County Quorum Court adopted Ordinance No. 89-14 to set a special election to submit for the voters' approval the levy of a one-percent (1%) countywide sales tax. Ordinance No. 89-14 provided in part:
BE IT ENACTED BY THE QUORUM COURT OF THE COUNTY OF WHITE, STATE OF ARKANSAS: AN EMERGENCY ORDINANCE TO BE ENTITLED: AN ORDINANCE TO PLACE BEFORE THE VOTERS OF WHITE COUNTY A PROPOSAL FOR A COUNTY WIDE ONE PERCENT (1%) SALES TAX AND FOR OTHER PURPOSES.
That pursuant to Act 991 of 1981 the General Assembly of Arkansas empowered the various Quorum Courts of the respective Arkansas counties with the authority to call an election for the levy of a one percent (1%) county wide sales tax. That said election shall be held within one hundred and twenty (120) days of the ordinance calling for the election. ( [Ark.Code Ann. § ] 26-74-307)
That the County is in need of additional funding to maintain the present level of services now provided to the people of White County and to enable the County officials to plan for future growth and services and solid waste management.
That the ballot title shall be as follows:
[ ] "For adoption of a one percent (1%) sales tax within White County."
[ ] "Against adoption of a one percent (1%) sales
tax within White County."
On August 15, 1989, the county quorum court adopted Ordinance No. 89-17 as an amendment to Ordinance No. 89-14. Ordinance No. 89-17 reflected in pertinent part:
Be it enacted by the Quorum Court of the County of White, State of Arkansas: An Ordinance to be entitled:
An Ordinance to designate the use of the revenue generated by the 1% sales tax that will appear on the Ballot during a Special Election Tuesday August 22, 1989.
SECTION 6. That it is the consenses [sic] of the White County Quorum Court, that revenues generated from the imposition of the tax be divided as follows:
A. 50% County Road
B. 25% County General
C. 5% Volunteer Fire Departments
D. 10% Non-Mandated Services
E. 10% Capital Improvements
A special election was held on August 22, 1989, wherein the voters were presented with the ballot for Ordinance No. 89-17, which read in pertinent part:
COUNTY SALES TAX
An ordinance to adopt a one percent (1%) sales tax within White County.
The sales tax money is to be used as follows:
50% for County Road
25% for County General
5% for Volunteer Fire Departments
10% for Non-Mandated Services (includes Extension Office, Program for Aging, County Library and Veterans Office)
FOR adoption of a one percent (1%) sales tax within White County
AGAINST adoption of a one percent (1%) sales tax within White County
The voters approved the measure. White County began levying and collecting the sales tax on October 1, 1989, and is currently doing so. Since October 1, 1989, the State of Arkansas has received the tax monies collected and remitted the funds to the county and its cities on a per capita basis. White County receives a check each month from the State Treasurer for approximately 45.50% of the sales tax collected. Upon receipt of the county's share of the revenues, the county treasurer prepares a report allocating those funds as set out in the foregoing ballot. The remaining 54.50% of the sales tax monies, however, is distributed by the State Treasurer among the cities on a per capita basis. The cities then use their shares of the tax proceeds for their own purposes. Neither Ordinance No. 89-14, Ordinance No. 89-17, nor the actual ballot disclosed to the voters that the cities within the county would receive a portion of the sales tax proceeds, or that such proceeds would be used for purposes other than those designated in Ordinance No. 89-17 and the ballot. Nor do the ballot and ordinances reveal the method by which the sales tax is to be collected and distributed to the various governmental entities. The ordinances and the ballot further do not mention that the State Treasurer would deduct the sum of three percent (3%) from the sales tax collected as a service fee, pursuant to Ark.Code Ann. § 26-74-313 (Repl.1997).
On June 22, 1995, Appellants filed their complaint pursuant to Article 16, § 13, of the Arkansas Constitution, requesting that the trial court declare the levy and collection of the one-percent (1%) sales tax an illegal exaction. Appellants requested further that the trial court grant an injunction to prevent county officials from collecting the sales tax and a mandatory injunction ordering the refund and return of taxpayer monies illegally exacted, after apportionment of reasonable attorney's fees pursuant to Ark.Code Ann. § 26-35-902 (Repl.1997). Subsequent amended complaints were filed, wherein Appellants claimed, among other things, that the sales tax monies were being levied and collected in violation of Article 16, § 11, of the Arkansas Constitution and section 26-74-308. Specifically, they contended that because the ballot and Ordinance No. 89-17 declared particular uses for the revenues generated from the sales tax, all such revenues must be spent only for those designated purposes, and for nothing else. They claimed that because the ballot and ordinances failed to disclose that portions of the sales tax proceeds would be distributed to the cities, it was illegal to give them any share of such proceeds.
Appellees filed a motion to dismiss the complaints pursuant to ARCP Rule 12(b)(6), insisting that the sales tax was being collected in accordance with Arkansas law and that Appellants had failed to state sufficient facts upon which relief could be granted. They asserted that Act 991 of 1981, now codified at Ark.Code Ann. §§ 26-74-301 to -314 (Repl.1997), requires that portions of the sales tax collected be distributed to the cities within the county levying the tax. They contended that Act 991 does not contain any exceptions to the State Treasurer's statutory duty to distribute portions of the tax to the cities, and that the county imposing the tax has no responsibility or control over the distribution of the proceeds. Additionally, Appellees asserted that Act 991 provides that cities within the county may spend their shares of the tax revenues for any purpose for which their general funds or the county's general funds may be used. They argued further that the designation on the ballot of how the revenues generated from the tax would be spent referred only to the way in which the county's share of those revenues would be spent, and that this should have been evident to the voters by the fact that the ballot referred to such uses as "County Road" and "County General."
The trial court agreed with Appellees and granted their motion to dismiss. The trial court ruled that Act 991 is the authority by which this sales tax was implemented, and that just as the Act enables the county to levy such a tax, it also limits the power of the county to undertake such action. The court found that Act 991 directs the State Treasurer to distribute the sales tax collected to the county and the cities on a per capita basis after the State Treasurer deducts a three-percent (3%) service charge. See section 26-74-313. The trial court found further that the State Treasurer had fulfilled such statutory duties in this particular instance. 1 The trial court ruled that the designation on the ballot by the quorum court of the proposed uses of the tax revenues, as provided in section 26-74-308(c), pertained only to the county's share of the revenues, and that the designation by the county as to its intended uses of the revenues could not bind the cities as to how they must use their shares of the revenues. To allow the county to control the cities' shares, the trial court reasoned, would empower the counties beyond that authority specifically delegated to them by the General Assembly.
The trial court also found that section 26-74-308(c), included in Act 278 of 1983, makes no reference to the cities or state and speaks in terms of proceeds derived from the tax, rather than revenues collected. Ac...
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