McGhee v. Arkansas State Bd. of Collection
Decision Date | 20 January 2005 |
Docket Number | No. 04-199.,04-199. |
Citation | 201 S.W.3d 375 |
Parties | Sharon McGHEE, Sidney McGhee, Clarice Davis, Roberto Salas, Charles Stewart, Henry Evans, and Ladonna Payte, individually and on behalf of a class of similarly situated persons, Appellants; v. ARKANSAS STATE BOARD OF COLLECTION AGENCIES and Rusty Guinn, Jerry Markham, Randy Bynum, Opal Lang, and James Mitchell, in their official capacities as Board Members of the Arkansas State Board of Collection Agencies, Appellees. |
Court | Arkansas Supreme Court |
Todd Turner and Dan Turner, Arkadelphia, for appellants.
Mike Beebe, Att'y Gen., by: Arnold M. Jochums, Ass't Att'y Gen., for appellee.
Richard C. Downing, Little Rock, Amicus Curiae.
This is an action pursuant to Article 16, Section 13, of the Arkansas Constitution to protect the taxpayers of the State of Arkansas from alleged misuse of public funds by the Arkansas State Board of Collection Agencies ("the Board") in licensing and regulating check-cashing businesses that charge usurious interest rates under the Check-Casher's Act, Ark.Code Ann. § 23-52-101, et seq. (Repl.2000 and Supp.2003). Our common law makes an illegal-exaction suit under Article 16, Section 13, of the Arkansas Constitution a class action as a matter of law. Worth v. City of Rogers, 351 Ark. 183, 89 S.W.3d 875 (2002). An illegal-exaction claim is by its nature in the form of a class action. Id. An illegal-exaction suit is a constitutionally created class of taxpayers, and suit is brought for the benefit of all taxpayers. Id.
The Board has established a Division of Check-Cashing to administer the licensing and regulation of payday lenders. Under the statute, licensed persons are authorized to sell currency or a check to another person in exchange for a check. See Ark.Code Ann. §§ 23-52-102(4)-109. Often check-cashers will offer a "deferred-presentment option" whereby the check-casher, in exchange for a fee, allows the customer the option to repurchase the customer's personal check before an agreed upon time. Ark.Code Ann. § 23-52-102(5). Prior to the filing of the current case, one of the appellants, Sharon McGhee, on behalf of a class of persons with causes of action against AAA Check Cashing, Inc. ("AAA"), had received a class-action monetary judgment against AAA as a result of deferred presentment transactions. In her capacity as class representative, McGhee had filed a claim with the Board to recover the damages awarded in the judgment from Old Republic Insurance Co., Inc., AAA's surety. At the time the present complaint was filed, the Board had not issued a ruling in that administrative proceeding.
In the complaint filed in the instant case, the appellants maintain that all transactions under the Check-Casher's Act involve interest rates that violate the usury provisions of the Arkansas Constitution. Ark. Const. Art. 16, § 13. Appellants further allege that the Board's Division of Check-Cashing has used public funds to finance its operations, and that such use constitutes an illegal exaction under Ark. Const. Art. 16, § 13. Appellants filed this case on April 23, 2003, seeking injunctive relief to prohibit the Board from the continued licensing of check cashers and a declaratory judgment that the Check Casher's Act is unconstitutional. Appellees responded to the suit by filing a motion to dismiss, asserting five grounds for dismissal: (1) that the claim for declaratory relief was barred while the administrative process was ongoing; (2) that the appellants lacked standing; (3) that the appellees were immune from suit; (4) that the appellants had failed to join all interested parties; (5) that the plaintiffs had failed to state facts upon which relief can be granted. Appellants responded and moved for partial summary judgment on their claim for declaratory relief. At the August 22, 2003 hearing, the circuit court stated, "It's not my place to declare something unconstitutional." Subsequently, the circuit court granted the appellees' motion to dismiss on all five grounds and ruled that the appellants' motion for partial summary judgment on the constitutionality of the statute was thus rendered moot. On appeal, the appellants argue the circuit court not only erred in dismissing the case, but also in determining that it could not rule on the constitutional issue, and in failing to grant the appellants' partial summary-judgment motion.
With regard to the constitutionality of the Check-Casher's Act, Ark.Code Ann. § 23-52-101, et seq., this court has jurisdiction to hear issues concerning the validity of an act of the General Assembly pursuant to Ark. Sup.Ct. R. 1-2(b)(6). In deciding whether a motion to dismiss a complaint was properly granted, we treat the facts alleged in the complaint as true and view them in the light most favorable to the plaintiff. Hodges v. Lamora, 337 Ark. 470, 989 S.W.2d 530 (1999). Furthermore, we look only to the allegations in the complaint and not to matters outside the complaint. Id.
The first rationale given by the circuit court for granting the appellees' motion to dismiss was "that the claim for declaratory relief is barred while the administrative process is ongoing." Appellees, in support of this ruling, note the existence of a previous action that was commenced before the Board. However, the parties in both actions are not the same. Here, all Arkansas taxpayers are the appellants; whereas, Sharon McGhee filed the administrative complaint before the Board only on behalf of persons with causes of action against AAA, i.e., certain customers of AAA. Furthermore, the issues in both cases are not similar. In the case before the Board, the issue was whether Old Republic Insurance Co., Inc., as a surety, was liable on a judgment against the insured, AAA Check Cashing, Inc. Here, the issue is the alleged misuse of public funds to support the Board's Division of Check-Cashing and the constitutionality of Ark.Code Ann. § 23-52-101, et seq. While Appellant Sharon McGhee does have to wait for the Board's judgment before appealing the surety question, the pendency of that administrative process does not prevent the appellants from filing a new and separate cause of action for illegal exaction. Accordingly, we conclude that the circuit court erred when it found that the claim was barred by this unrelated administrative claim.
The dissent argues that the appellants must exhaust all administrative remedies before an illegal-exaction suit may be brought against the Board in the circuit court. As posited by the dissent, the doctrine of exhaustion of administrative remedies not only requires parties to follow through on matters already before the agency, but also requires them to bring an illegal-exaction claim before the agency prior to filing suit. Yet, neither the appellants nor the appellees have cited a case in which an illegal-exaction suit was initiated before a board, agency or commission, and our research discloses none. This court has, however, decided at least four cases involving the actions of a board in which an illegal-exaction suit was initiated either in circuit court or chancery court. Carwell Elevator Co., Inc. v. Leathers, 352 Ark. 381, 101 S.W.3d 211 (2003); Leathers v. Gulf Rice Arkansas, Inc., 338 Ark. 425, 994 S.W.2d 481 (1999); State Bd. of Workforce Educ. v. King, 336 Ark. 409, 985 S.W.2d 731 (1999); Chandler v. Board of Trustees of the Teacher Retirement System, 236 Ark. 256, 365 S.W.2d 447 (1963). All of those suits were initiated in circuit or chancery court, decided, and appealed. This court decided the appeals without imposing an exhaustion-of-administrative-remedies requirement.
At least two other reasons militate against imposing such a requirement upon suits filed by citizens to enjoin "the enforcement of any illegal exaction whatever" under Article 16, Section 13 of the Arkansas Constitution. First, it is well established that Ark. Const. Art. 16, § 13 is self-executing and imposes no terms or conditions upon the right of the citizen to file suit to prevent an illegal exaction. Saunders v. Neuse, 320 Ark. 547, 898 S.W.2d 43 (1995); Martin v. Couey Chrysler Plymouth, Inc., 308 Ark. 325, 824 S.W.2d 832 (1992); Starnes v. Sadler, 237 Ark. 325, 372 S.W.2d 585 (1963).
Second, the dissent's proposed application of the exhaustion-of-administrative-remedies doctrine, if adopted by this court, would preclude a taxpayer from bringing an illegal-exaction suit if any proceeding involving another taxpayer is pending before an agency, board or commission that is the subject of the challenge. Here, a group of plaintiffs — certain customers of AAA — filed a claim with the Board seeking to hold AAA's surety liable on a judgment against its insured. The dissent urges that the existence of that claim precludes any other taxpayer from bringing an illegal-exaction suit for the benefit of all taxpayers under Ark. Const. Art. 16, § 13. As noted earlier, an illegal-exaction suit is a constitutionally created class of taxpayers, and suit is brought for the benefit of all taxpayers. Worth v. City of Rogers, supra. The end result of that approach would be that any taxpayer involved in a proceeding before an agency must raise an illegal exaction claim under Ark. Const. Art. 16,s § 3, thereby effectively foreclosing any other taxpayer from bringing such a suit in circuit court. Furthermore, even if there is no proceeding pending before the agency, taxpayers would be required to institute illegal-exaction claims at the board level before they could file suit in circuit court. Such a result is not supported by the Arkansas Constitution or our case law.
In its second finding on the motion to dismiss, the circuit court determined that the appellants lacked standing. Appellants' standing to pursue an illegal-exaction claim is governed by Ark. Const. Art. 16, § 13, which states,
Any citizen of any county, city, or town may institute suit, in behalf of himself and all...
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