Sullivan Cnty. v. City of Bristol
| Citation | 575 S.W.3d 316 |
| Decision Date | 08 May 2019 |
| Docket Number | No. E2016-02109-SC-R11-CV,E2016-02109-SC-R11-CV |
| Parties | SULLIVAN COUNTY, Tennessee, et al. v. The CITY OF BRISTOL, Tennessee, et al. |
| Court | Supreme Court of Tennessee |
Daniel P. Street, Blountville, Tennessee, for the appellants, Sullivan County Board of Education and Sullivan County, Tennessee.
K. Erickson Herrin, Johnson City, Tennessee, for the appellees, Cities of Bristol and Kingsport, Tennessee.
Holly Kirby, J., delivered the opinion of the Court, in which Jeffrey S. Bivins, C.J., and Cornelia A. Clark, Sharon G. Lee, and Roger A. Page, JJ., joined.
This is one of five cases on appeal to this Court regarding the proper distribution of liquor-by-the-drink tax proceeds between a county and a municipality within the county. In each case, the county had not approved the liquor-by-the-drink sales, but the city had approved such sales. The Commissioner of the Tennessee Department of Revenue, who collects taxes on all liquor-by-the-drink sales, distributed tax proceeds to the defendant cities in accordance with the liquor-by-the-drink tax distribution statute, Tennessee Code Annotated section 57-4-306. The statute required the recipient cities to then distribute half of their proceeds "in the same manner as the county property tax for schools is expended and distributed." Tenn. Code. Ann. § 57-4-306(a)(2)(A) (2013). In each case, the recipient city distributed half of its tax proceeds to its own city school system and did not share the proceeds with the county. The counties sued the cities, claiming that the statute required the cities to distribute the tax proceeds as the counties distribute the county property tax for schools, which is pro rata among all schools in the county based on average daily attendance. In the instant case, the trial court granted summary judgment for the defendant cities. The Court of Appeals affirmed, concluding that the distribution statute was ambiguous and that the statutory framework, legislative history, and other sources supported the trial court’s interpretation of the statute. Discerning no error, we affirm.
The issues in this case are better understood with some knowledge of the development of the pertinent liquor-by-the-drink statutes. Consequently, we offer some background on the history of the statutes before we outline the facts and analyze the issues.
During the years of federal prohibition (1920–1933), Tennessee had "bone dry" laws, which criminalized the sale, purchase, receipt, possession, transport, and manufacture of alcoholic beverages. City of Chattanooga v. Tenn. Alcoholic Beverage Comm'n , 525 S.W.2d 470, 472 (Tenn. 1975) ; Tenn. Op. Att'y Gen. 79-215 (May 3, 1979). After prohibition ended, Tennessee enacted a "local option" law authorizing counties to hold county-wide local option elections on whether to allow off-premises (package) sales of alcoholic beverages within their borders. City of Chattanooga , 525 S.W.2d at 472 ; Chadrick v. State , 175 Tenn. 680, 137 S.W.2d 284, 285 (1940) ; see also Templeton v. Metro. Gov't of Nashville & Davidson Cnty. , 650 S.W.2d 743, 754 (Tenn. Ct. App. 1983). "The ‘bone dry law’ continued in effect in counties not electing to come under the provisions of the local option law." City of Chattanooga , 525 S.W.2d at 472 ; see also Renfro v. State , 176 Tenn. 638, 144 S.W.2d 793, 794 (1940).
In 1967, the Legislature passed comprehensive legislation related to liquor sales for on-premises consumption, i.e., liquor by the drink (hereinafter "LBD"). We refer to this as "the LBD Act." The LBD Act "authorize[s] the sale of intoxicating liquors by the drink for consumption on the premises, impose[s] taxes upon such sales[,] and provide[s] for the collection thereof." Aetna Cas. & Sur. Co. v. Woods , 565 S.W.2d 861, 865 (Tenn. 1978). Initially, the LBD Act allowed only the largest counties to hold local option elections. See Tenn. Code Ann. § 57-164 (1968). Gradually, in increments, the Act was amended to allow all counties—as well as all municipalities—to approve LBD sales by local option election. See 1987 Tenn. Pub. Acts, ch. 456 § 2; 1992 Tenn. Pub. Acts, ch. 711 § 1.
In any jurisdiction that approves LBD sales, such sales can lawfully be made by the establishments enumerated in the statutes, including restaurants, hotels, and sports facilities. See Tenn. Code Ann. § 57-4-101 (2013). Private clubs are among the enumerated establishments, but they are also permitted to sell LBD even in counties or municipalities that have not adopted LBD.2
Tennessee Code Annotated section 57-4-301(c) levies a 15% tax on all LBD sales.3 Tenn. Code Ann. § 57-4-301(c) (2013). We refer to this as "the LBD tax." Retailers collect the LBD tax from consumers and then forward the tax proceeds to the Commissioner of the Tennessee Department of Revenue ("Commissioner"). See Tenn. Code Ann. § 57-4-302 (2013 & 2018). The Commissioner then distributes the LBD tax proceeds in accordance with the statute at issue in this case, Tennessee Code Annotated section 57-4-306. We refer to this as "the distribution statute."
This case involves the application of the distribution statute as it existed prior to the enactment of a July 2014 amendment.4 The relevant versions of the distribution statute required the Commissioner to distribute 50% of all LBD tax proceeds to Tennessee’s "general fund to be earmarked for education purposes." Tenn. Code Ann. § 57-4-306(a)(1). The Commissioner was directed to distribute the remaining 50% of the tax proceeds back "to the local political subdivision" that generated the proceeds. Id. § 57-4-306(a)(2).
Important to this appeal, the remaining provisions of the distribution statute described what was to be done with the tax proceeds sent back to the originating local political subdivision. The distribution statute said that half of those proceeds would go to the general fund of the county, city, or town in which the taxes were generated. Id. § 57-4-306(a)(2)(B). The other half, the distribution statute stated, "shall be expended and distributed in the same manner as the county property tax for schools is expended and distributed." Id. § 57-4-306(a)(2)(A). Interpretation of this provision is the issue presented to us in this case.
The underlying facts in this case are essentially undisputed. The Cities of Bristol and Kingsport (collectively, "the Cities") are located in Sullivan County.5 The Cities have at all relevant times had their own municipal school systems separate from the Sullivan County school system.
In 1984, citizens of both Cities passed referendums authorizing LBD sales within their city limits. The County has never passed a referendum regarding LBD sales. However, since at least 1980, private clubs have legally sold LBD in the Cities and in unincorporated areas of the County.
On May 30, 2014, the Sullivan County Board of Education and Sullivan County filed separate complaints against the Cities. Both sought declaratory judgment as to the rights and obligations of the parties concerning LBD tax proceeds. The cases were ultimately consolidated. Hereinafter we refer to the Sullivan County Board of Education and Sullivan County collectively as "the County."
The County also sought damages from the Cities for its pro rata share of LBD tax proceeds distributed to the Cities since 1980.6 The County alleged that the distribution statute required the Cities to remit half of their LBD tax proceeds to the County, to distribute pro rata among all schools in the County.
The Cities denied liability. They also asserted counterclaims against the County based on distribution reports attached to the County’s complaints. The distribution reports showed that the County had been receiving LBD tax proceeds from the sale of LBD in private clubs for many years, but that it had never redistributed those proceeds pro rata to the other schools in the County. The Cities claimed in their counterclaims that the County owed them damages for their pro rata share of LBD tax proceeds unlawfully withheld.7
Subsequently, the parties filed cross-motions for summary judgment. In their joint motion for summary judgment, the Cities argued that the distribution statute was ambiguous and that the statute’s legislative history and longstanding rules of statutory construction supported a ruling in the Cities' favor. In its motion, the County asserted that the plain language of the distribution statute required the Cities to distribute their LBD tax proceeds pro rata across all schools in the County.
In February 2016, the trial court entered an order granting the Cities' motion for summary judgment and denying the County’s motion on the main allegations in the County’s complaint. The trial court first concluded that the distribution statute was unambiguous in favor of the Cities' interpretation. The County’s interpretation, the trial court reasoned, required a two-part distribution scheme, whereby the Commissioner would distribute LBD tax proceeds to the Cities, and then the Cities would be required to distribute half of those proceeds in accordance with an average daily attendance formula. "Nowhere does the language require the municipalities to distribute the funds according to the average daily attendance." The trial court also concluded that the distribution statute plainly did not require the Cities to turn over half of their LBD tax proceeds to the County for redistribution, because this would require "a third distribution scheme" that is not required by the statute. 8
For these reasons alone, the trial court held, the Cities were entitled to summary judgment. In the alternative, the trial court said that, even if the statute were ambiguous, the legislative history supported the trial court’s conclusion that cities operating their own school systems were not required to share their LBD tax proceeds with county schools.
The Cities then filed a joint motion for...
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