Greenbriar Hills Country Club v. Director of Revenue
| Decision Date | 20 March 2001 |
| Citation | 47 S.W.3d 346 |
| Parties | (Mo.App. S.D. 2001) Greenbriar Hills Country Club, Appellant, v. Director of Revenue, Missouri Department of Revenue, Respondent. SC82805 0 |
| Court | Missouri Court of Appeals |
Appeal From: Petition for Review of a Decision of the Administrative Hearing Commission
Counsel for Appellant: Harvey M. Tettlebaum, Lowell D. Pearson and Terry M. Jarrett
Counsel for Respondent: Evan J. Buchheim
Opinion Summary: Greenbriar Hills Country Club protested sales taxes it paid on its members' service charges. In a previous case on appeal (Greenbriar I), this Court held the charges were not subject to sales tax. Greenbriar now seeks review of an Administrative Hearing Commission decision denying its section 536.087 application for reasonable attorney's fees and expenses in the previous action.
Court en banc holds: The AHC's decision is vacated for lack of jurisdiction. The Court recalls the mandate in Greenbriar I, orders reasonable attorney's fees and expenses to Greenbriar, and orders appointment of a Master to calculate them.
1) Section 536.087.3 requires the application for fees to be filed in the court, agency, or commission that rendered the final disposition or judgment for the prevailing party. If Greenbriar prevailed in this Court, then jurisdiction of the fee issue falls in this Court.
2) There is no conflict between section 536.087, under which Greenbriar filed, and section 136.315, which the Director argued governed applications for attorney's fees in tax cases. The legislature has provided two remedies; Greenbriar chose, appropriately, section 536.087.
3) Section 536.087 requires the prevailing party to seek fees within thirty days of the final disposition or judgment. Greenbriar did not prevail in the 1996 AHC action; Greenbriar prevailed in this Court. Greenbriar filed its application thirty days after this Court's mandate issued. That the Court no longer had jurisdiction after the mandate's issuance is an anomaly not anticipated by the legislature when enacting section 536.087. This is a case of first impression for this Court. In the interest of equity, this Court will treat Greenbriar's improvidently overruled original application for fees as a motion to recall the Court's mandate in Greenbriar I. This Court sustains the motion and, in light of the confusion, treats the application as being timely filed.
4) The Director of Revenue failed to meet its burden of establishing that the Department's position in the original AHC proceeding had a reasonable basis in fact and law. The Director repudiated long-standing regulations. The Director's decision could have been made prospectively, negating Greenbriar's litigation expense. Section 536.087.3 specifically provides that determining "substantial justification" shall be based on the record in the agency for which the fees are requested. The Director had argued there was no ambiguity in the applicable statute, which was only viable by repudiating a regulation and ignoring precedent.
5) The fee award encourages private parties to challenge unreasonable government behavior.
Dissenting opinion summary: The dissenting author believes that this Court's decision in Greenbriar I, which exempted the club's retail charges for meals and drinks from sales tax as not being sold to the public, was incorrect. The sales to members should be considered sales to the public, such that the club is not excluded from the tax. In any event, there is no conflict with the amusement tax, which should apply. Greenbriar I and its progeny should be overruled. The state's position was substantially justified, and attorney's fees should not be awarded.
Greenbriar Hills Country Club (Greenbriar) seeks review of a decision of the Administrative Hearing Commission (AHC) denying its section 536.087 application for reasonable attorney's fees and expenses.1 Greenbriar incurred these expenses when prevailing in an action against the Director of Revenue (Director) for inappropriately assessing Missouri sales tax upon service charges paid to Greenbriar by its members. We vacate the decision of the AHC for lack of jurisdiction, order reasonable attorney's fees and expenses be awarded to Greenbriar, and order the appointment of a Master for the calculation of the fees and expenses to be assessed against the Director.
A review of the facts and procedural history of this case is instructive. Greenbriar is a country club located in Kirkwood, Missouri, and provides recreational and dining facilities to its members and their guests. Pursuant to 12 C.S.R. 10-3.048(7), Greenbriar exercised the alternative of paying sales tax on its food and beverage purchases as opposed to collecting and remitting tax on its sales of the same. Members, and their guests, were prohibited from tipping its food and beverage staff, and in lieu of these tips, Greenbriar directly billed its members a monthly service charge of $35. The service charges were used exclusively in payment of wages to Greenbriar's food and beverage staff.
The Department of Revenue (Department) assessed Greenbriar a sales tax liability, "plus additions to tax and interest," in the amount of $48,797.45 based upon the Director's determination that Greenbriar's service charges were subject to Missouri sales tax. Greenbriar paid the taxes, but pursuant to section 144.700.2(1) filed a sales use/tax protest affidavit. The Director denied the protest, whereupon Greenbriar filed a petition with the AHC contending that its service charges were exempt from the sales tax pursuant to 12 C.S.R. 10-3.048(7) & (8).
The AHC determined that Greenbriar's service charges were subject to Missouri sales tax; however, it also held that because its decision unforeseeably overruled 12 C.S.R. 10-3.048(7) & (8), Greenbriar was not liable for the assessments. Greenbriar appealed to this Court invoking jurisdiction under Article V, section 3, and on December 17, 1996, in Greenbriar Hills Country Club v. Director of Revenue2 (Greenbriar I), the Court reversed the decision of the AHC holding that Greenbriar's service charges were not subject to Missouri sales tax. This decision was based on this Court's determination that Greenbriar's service charges were part of its charges for meals and drinks which were not sold to the general public, but rather exclusively to its own members. Section 144.020(6), and the negative implication derived therefrom, controlled and excluded Greenbriar's service charges from taxation. This decision became final when the time for filing a motion for rehearing, and responses, thereto, expired; i.e. January 2, 1997 as no such motion was filed.
On February 7, 1997, thirty days following the mandate, Greenbriar filed an application for reasonable fees and expenses incurred as the prevailing party in the underlying civil action arising from the sales tax proceeding with the Director. Due to the inherent confusion from the wording of section 536.087, Greenbriar filed fee applications in this Court, the Circuit Court of Cole County, and the AHC. On March 25, 1997, this Court overruled Greenbriar's motion.
A hearing on the application filed with the AHC was held on December 17, 1998, and the AHC denied the application.3 The AHC found that Greenbriar was not entitled to attorney's fees and expenses for failure to demonstrate that the Director's position in the underlying case was not substantially justified as required under section 536.087.2. On January 19, 1999, Greenbriar appealed this denial directly to this Court. In Greenbriar Hills Country Club v. Director of Revenue4 (Greenbriar II), this Court held it had no jurisdiction "as section 536.087.7 purports to grant this Court jurisdiction of an appeal beyond and contrary to that authorized by the constitution."5 Pursuant to Article V, section 11, the cause was transferred to court of appeals.
The court of appeals held that the AHC never had jurisdiction over the application for fees and expenses, thus negating its jurisdiction. The court of appeals determined that the sole entity with jurisdiction was this Court. Upon application, transfer was granted to resolve the jurisdictional issues as well as the merits of Greenbriar's application.
While neither of the parties has raised the issue of jurisdiction, as an initial matter, this Court must establish if it has jurisdiction to rule on an application for reasonable attorney's fees and expenses as provided under section 536.087. This Court is a court of limited jurisdiction, and it has a duty to determine the question of its jurisdiction sua sponte.6 An examination of the pertinent portions of section 536.087 is necessary to determine if an application for fees and expenses is within the purview of this Court.
The underlying case, Greenbriar I, was appropriately before this Court under Article V, section 3, because the case involved the construction of the revenue laws of this state. Section 536.087.3 requires the application for fees to be filed in the court, agency, or commission that rendered the final disposition or judgment for the prevailing party. An original application for attorney's fees and expenses timely filed under section 536.087, subsections 1 through 5, is part and parcel of this original cause of action.7 If it is determined that Greenbriar prevailed in our Court, jurisdiction on the determination of fees falls within this Court's jurisdiction, and the AHC's decision on Greenbriar's application for fees and expenses will be vacated for lack of jurisdiction.
Our inquiry, however, only begins with having established that this Court has jurisdiction to entertain a section 536.087 application for attorney's fees and expenses. We must next decide if Greenbriar's application was timely filed under the...
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