City of Cleveland v. Bradley County . ( 1999 )

I N T H E C O U R T O F A P P E A L S
A T K N O X V I L L E
FILED
APRIL 16, 1999
Cecil Crowson, Jr.
Appellate Court
Clerk
T H E C I T Y O F C L E V E L A N D , T E N N E S S E E ) B R A D L E Y C O U N T Y
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W I L L I A M P . B I D D L E , I I I , O F C L E V E L A N D F O R A P P E L L A N T
J A M E S S . W E B B O F C L E V E L A N D a n d B R I A N L . K U H N O F M E M P H I S F O R
A P P E L L E E
O P I N I O N
Goddard, P.J.
This is a declaratory judgment action initiated by the
City of Cleveland to determine whether the agreements it had with
Bradley County concerning the division of one-half of the Local
Option Revenue Tax were terminable. The City also sought its
share of various Capital Outlay Notes issued by Bradley County
for educational purposes.
I. FACTS
The 1963 Local Option Revenue Act1 authorized a county
to levy a local sales tax on all retail sales within the county.
Bradley County levied a local sales tax of 2.25%. This tax has
been collected by the State of Tennessee, for distribution to
Bradley County and the City by the Commissioner of Revenue for
the State of Tennessee since 1967.
T.C.A. 67-6-712 provides for one-half of the proceeds
to be distributed in the same manner as the county property tax
for school purposes. The second one-half is to be distributed
according to where the tax was collected, either inside the City
limits or outside in Bradley County. T.C.A. 67-6-712(a)(2)(C)
authorizes a county and city to enter into a contract to provide
for other distribution of the second one-half of the tax
collections.
On March 7, 1967, the Board of Mayor and Commissioners
of the City held a special called meeting dealing solely with the
issue of whether to enter into an agreement whereby the second
one-half of the collected tax receipts would be distributed in
the same manner as the county property tax for school purposes.
At that time most of the collected tax receipts would be
collected outside the City limits. The Notice and Waiver of Call
Meeting was signed by all the Commissioners and the Mayor. The
resolution was unanimously adopted and was signed by the Mayor.
On May 10, 1967, Bradley County and the City entered
into a Contract for the distribution of the other one-half of the
local sales tax receipts. The contract in pertinent part
provides for distribution as follows:
1
T . C . A . 6 7 - 6 - 7 0 1 , e t s e q .
2
1. One-half of the net proceeds from the local sales
tax received by Bradley County from the State of
Tennessee shall be used exclusively for school purposes
and shall be appropriated to Bradley County and the
City of Cleveland for school operational purposes as
provided in T.C.A. 67-3052(1).
2. The remaining one-half of the net proceeds from the
local sales tax received by Bradley County from the
Department of Revenue of the State of Tennessee, being
that portion distributable according to Section 67-
3052(2) of Tennessee Code Annotated, shall be
distributed between Bradley County and the City of
Cleveland by reversing the percentages in Paragraph 1
herein and distributing the same to the City of
Cleveland and Bradley County in accordance with the
reverse percentages of Paragraph 1.
3. This formula for the distribution of the second
one-half of the net proceeds from the local sales tax
shall be used to distribute the same until such time as
the average daily attendance of children in the two
school systems shall reach 50% percent for each system
at and from which time the second one-half of said
proceeds shall be distributed by each system, taking
the same per cent as it received in distribution of the
first one-half of said proceeds.
An amendment to the Contract was authorized by a
resolution of the Board of Mayor and Commissioners of the City,
at a regular meeting held on January 10, 1972. On February 21,
1972, the parties entered into an Amendment to the Contract,
agreeing that the funds from an additional sales tax to be levied
in Bradley County would continue to be divided in accordance with
3
the original Contract. It was signed by the Mayor. The City’s
Charter2 was silent as to the power to contract.
Bradley County entered into a Contract for
Administration of the Bradley County Local Sales and Use Tax with
the Department of Revenue of the State of Tennessee. The
Contract was effective as of June 1, 1967,3 and provided for its
termination in paragraph 7.4
2
T h e C i t y ’ s C h a r t e r , w h i c h w a s i n e f f e c t d u r i n g t h e r e l e v a n t t i m e
p e r i o d , p r o v i d e d a s f o l l o w s :
A r t i c l e 4
L e g i s l a t i v e b o d y t o b e B o a r d o f M a y o r a n d c o m m i s s i o n e r s
T h e l e g i s l a t i v e p o w e r o f T h e C i t y o f C l e v e l a n d s h a l l b e e x e r c i s e d
b y t h e B o a r d o f M a y o r a n d c o m m i s s i o n e r s e l e c t e d u n d e r t h e
p r o v i s i o n s o f t h e c h a r t e r o f s a i d C i t y .
* * *
A r t i c l e 1 8
G e n e r a l O r d i n a n c e P o w e r
T h e B o a r d o f M a y o r a n d C o m m i s s i o n e r s s h a l l h a v e s u c h p o w e r a n d
a u t h o r i t y t o p a s s a l l b y l a w s a n d o r d i n a n c e s n e c e s s a r y t o e n f o r c e
t h e p o w e r s h e r e i n g r a n t e d a s i s n o t i n c o n s i s t e n t w i t h t h e
C o n s t i t u t i o n a n d l a w s o f t h e U n i t e d S t a t e s , t h e S t a t e o f
T e n n e s s e e , o r t h e p r o v i s i o n s o f t h i s c h a p t e r .
A r t i c l e 1 9
P a s s a g e o f O r d i n a n c e s a n d R e s o l u t i o n s
T h e s t y l e o r i n t r o d u c t o r y c l a u s e o f a l l o r d i n a n c e s s h a l l b e : “ B e
i t o r d a i n e d b y t h e B o a r d o f M a y o r a n d C o m m i s s i o n e r s o f T h e C i t y o f
C l e v e l a n d . ”
E v e r y o r d i n a n c e a n d r e s o l u t i o n u p o n f i n a l p a s s a g e s h a l l b e s i g n e d
i n o p e n m e e t i n g b y t h e M a y o r o r M a y o r p r o t e m a n d a t l e a s t o n e
o t h e r C o m m i s s i o n e r , a n d i t s h a l l t h e r e u p o n b e d e l i v e r e d t o t h e
C i t y C l e r k , w h o s e d u t y i t s h a l l b e t o c o p y i t i n a b o o k t o b e k e p t
f o r t h a t p u r p o s e , t o g e t h e r w i t h t h e s i g n a t u r e o f t h e M a y o r a n d
c o m m i s s i o n e r s . . . .
3
I t w a s e x e c u t e d b y t h e p a r t i e s o n J u n e 1 3 , 1 9 6 7 .
4
7 . C A N C E L L A T I O N O F C O N T R A C T . I t i s u n d e r s t o o d a n d a g r e e d t h a t t h i s
c o n t r a c t m a y b e c a n c e l e d u p o n t h e o c c u r r e n c e o f a n y o n e o f t h e f o l l o w i n g
e v e n t s :
a . T h e D e p a r t m e n t o r C o u n t y m a y g i v e t h e o t h e r p a r t y s i x m o n t h ’ s n o t i c e
t h a t i t n o l o n g e r d e s i r e s t h e a g r e e m e n t t o b e e f f e c t i v e .
b . T h e D e p a r t m e n t s h a l l h a v e t h e r i g h t t o c a n c e l t h i s a g r e e m e n t i m m e d i a t e l y
u p o n a n y b r e a c h b y t h e C o u n t y o f a n y p r o v i s i o n o f t h i s a g r e e m e n t , o r o f
a n y p r o v i s i o n c o n t a i n e d i n t h e s t a t u t e , r e s o l u t i o n o f a d o p t i o n , r u l e s
a n d r e g u l a t i o n s p e r t a i n i n g t h e r e t o , o r t h e t e r m s o f t h i s a g r e e m e n t . I n
t h e e v e n t o f s u c h c a n c e l l a t i o n b y t h e D e p a r t m e n t , t h e D e p a r t m e n t ’ s
o b l i g a t i o n s h a l l e x t e n d o n l y t o m a k e c o l l e c t i o n o f t h e l o c a l t a x f o r t h e
r e m a i n d e r o f t h e c u r r e n t m o n t h , a n d m a k e t o t h e c o u n t y a p r o p e r
d i s t r i b u t i o n w i t h r e s p e c t t o s u c h c o l l e c t i o n .
c . T h e r e s o l u t i o n i m p o s i n g t h e l o c a l s a l e s o r u s e t a x s h a l l b e r e p e a l e d , a s
p r o v i d e d f o r i n S e c t i o n 6 7 - 3 0 5 5 , T . C . A .
4
The City filed suit against Bradley County contending
that if the proceeds had been distributed in accordance with
T.C.A. 67-6-712(a)(2)(B), rather than according to the Contract
and the Amendment, the City claims that it would have received
from the sales tax collections the following additional amounts:
FISCAL YEAR ADDITIONAL REVENUES
1992-1993 $ 668,518
1993-1994 798,007
1994-1995 992,430
1995-1996 967,693
TOTAL $ 3,417,646
The City sought to have the trial court determine that
the Contract was ultra vires or as an alternative that the
Contract did not contain a termination clause and consequently it
was a Contract in perpetuity and therefore against public policy.
If the trial court so found, then the City would be able to
terminate the Contract, which was it ultimate goal so that more
monies would flow into its coffers under the statutory division
of the second one-half of the tax proceeds.
B. THE CAPITAL OUTLAY NOTES
Beginning in 1989, Bradley County issued Capital Outlay
Notes for educational purposes pursuant to T.C.A. 9-21-101, et
seq. the Local Government Public Obligations Law. Each of the
Notes were issued pursuant to resolutions of Bradley County
Commission. In each resolution, Bradley County “pledged its
taxing power as to all taxable property in Bradley County,
5
Tennessee for the purpose of providing funds for the payment of
the principal and interest on the notes.”
DATE PURPOSE AMOUNT
2/20/89 Valley View School Project $ 262,000
9/18/89 Various School Projects 500,000
1/25/91 School Capital Projects 750,000
9/01/92 School Buses 102,000
2/26/93 School Capital Projects 775,000
6/29/93 School Capital Projects 3,500,000
12/05/94 School Capital projects 600,000
TOTAL $ 6,489,000
Bradley County repaid the Notes from tax revenues
collected on all property in Bradley County, including property
inside the corporate limits of the City. None of the proceeds of
the Notes was designated by Bradley County for the use of the
schools operated by the City.
T.C.A. 49-3-1001, et seq., grants counties the
authority to issue bonds for educational purposes. From the
proceeds of any borrowing for school purposes, T.C.A. 49-3-
1001(b)(1) requires the trustee of Bradley County to pay over to
the City the amount of funds in the same ratio as the average
daily attendance between the City’s school system and the Bradley
County School System. During the years in which the Notes were
issued by Bradley County, the applicable average daily attendance
of students in the City‘s School System as a percentage of the
total enrollment of students in Bradley County was as follows:
6
ADA PERCENTAGE
YEAR CITY COUNTY
1986-87 32.48% 67.52%
1987-88 31.81% 68.19%
1988-89 32.27% 67.73%
1989-90 32.34% 67.66%
1990-91 32.33% 67.67%
1991-92 32.90% 67.10%
1992-93 32.99% 67.01%
1993-94 33.62% 66.38%
1994-95 33.61% 66.39%
1995-96 33.98% 66.02%
The City contended that it was entitled to $2,128.995,
which is its share of the funds based on the ADA in its schools.
YEAR GROSS AMOUNT ADA PERCENTAGE CITY’S SHARE
CITY COUNTY
1987-88 $ 262,000 31.81% 68.19% $ 83,342
1988-89 500,000 32.27% 67.73% 161,350
1989-90 750,000 32.34% 67.66% 242,550
1990-91 102,000 32.33% 67.67% 33,558
1991-92 4,275,000 32.90% 67.10% 1,406,475
1992-93 600,000 32.99% 67.01% 201,720
TOTALS $ 6,489,000 $ 2,128,995
II. HOLDING OF THE TRIAL COURT
Both parties filed motions for summary judgments based
upon the facts stated above and their respective theories.
Chancellor Earl H. Henley, sitting by interchange, found in
regard to the declaratory judgment portion of the complaint that
Bradley County’s motion for summary judgment should be granted.
The trial court found that the Contract was not ultra vires.
Moreover, Chancellor Henley declared that the Contract was not a
7
Contract in perpetuity and that paragraph 3 of the Contract dated
May 10, 1967, set a specific time or event that triggered
termination of the Contract and the 1972 Amendment. Accordingly,
the Contract was not terminable by the City and should remain in
full force and effect according to the Contract’s terms.
As to the money judgment portion of the complaint,
Chancellor Henley found that the City’s motion for summary
judgment should be granted. He entered a judgment in favor of
the City against Bradley County in the amount of $2,128,995.
This amount was the City’s pro rata share of the aggregate amount
of Notes issued by Bradley County for educational purposes.
The City appealed the portion of the judgment granting
Bradley County’s motion for summary judgment concerning the
Contract and the Amendment. Bradley County appealed the portion
of the final judgment denying Bradley County’s motion to dismiss
and granting the City’s motion for summary judgment on the money
judgment portion of the Complaint.
III. ISSUES
Each party presents one main issue with many sub-issues
for our consideration.
The City primarily contends that the trial judge was in
error in holding that the Contract and its subsequent Amendment
concerning the disposition of a portion of the Local Option Sales
Tax contained a specific time or event that triggered termination
of the Contract; therefore, the Contract was not in perpetuity
and terminable by the City.
8
Bradley County, however, claims that the Chancellor
Henley was in error in his granting the City’s Motion for Summary
Judgment as to the money judgment portion of the Complaint and in
entering a judgment awarding the City its pro rata share
($2,128,995) of the aggregate amount of the Notes issued by
Bradley County for educational purposes.
IV. LAW AND DISCUSSION
Both of the awards by the Chancellor in this matter
were based on motions for summary judgment. Since a motion for
summary judgment involves only a question of law, no presumption
of correctness attaches to the Chancellor’s decision. Our
standard of review of a trial court's grant of summary judgment
is well-settled:
Tenn.R.Civ.P. 56.03 provides that summary judgment is
only appropriate where: (1) there is no genuine issue
with regard to the material facts relevant to the claim
or defense contained in the motion, Byrd v. Hall, 847
S.W.2d 208, 210 (Tenn. 1993); and (2) the moving party
is entitled to a judgment as a matter of law on the
undisputed facts. Anderson v. Standard Register Co.,
857 S.W.2d 555, 559 (Tenn. 1993). The moving party has
the burden of proving that its motion satisfies these
requirements. Downen v. Allstate Ins. Co., 811 S.W.2d
523, 524 (Tenn. 1991). When the party seeking summary
judgment makes a properly supported motion, the burden
shifts to the nonmoving party to set forth specific
facts establishing the existence of disputed, material
facts which must be resolved by the trier of fact.
Byrd, 847 S.W.2d at 215.
Nelson v. Martin, 958 S.W.2d 643, 646-647 (Tenn.1997).
We shall view the record in this matter in the light of
those requirements.
9
A. The Contract and Amendment were Ultra Vires.
The first sub-issue proffered by the City is that the
Contract and Amendment are ultra vires because they were
authorized by Resolution and not Ordinance as required by the
City’s Charter and were not adopted in accordance with the
provisions of the Charter.
McQuillin Mun. Corp. § 15.01, Definitions (3rd Ed.)
p.54, defines the term “ordinance” as designating “a local law of
a municipal corporation, duly enacted by the proper authorities,
prescribing general, uniform, and permanent rules of conduct,
relating to the corporate affairs of the municipality...The
passage of an ordinance is, of course, a legislative act, a
legislative function, and equivalent to legislative action.” An
ordinance prescribes some permanent rule of conduct or
government, to continue in force until the ordinance is
repealed.5
A resolution can be any type of non-legislative action
and in effect encompasses all actions of the municipal body other
than ordinances. It deals with matters of a special or temporary
character and is simply an expression of opinion or mind or
policy concerning some particular item of business coming within
the legislative body’s official cognizance, ordinarily
ministerial in character and relating to the administrative
business of the municipality.6
5
M c Q u i l l i n M u n . C o r p . § 1 5 . 0 2 , R e s o l u t i o n s a n d O r d i n a n c e s D i s t i n g u i s h e d
( 3 r d E d . )
6
M c Q u i l l i n M u n . C o r p . § 1 5 . 0 2 , R e s o l u t i o n s a n d O r d i n a n c e s D i s t i n g u i s h e d ;
§ 1 5 . 0 8 , N a t u r e , R e q u i s i t e s a n d O p e r a t i o n o f M u n i c i p a l O r d i n a n c e s ( 3 r d E d . ) .
1 0
Resolutions need not be, in the absence of some express
requirement, in any set or particular form. Julian v. Mayor,
Councilmen & Citizens of Liberty City of Liberty, 391 S.W.2d 864
(Mo. 1965); McQuillin Mun. Corp. § 15.08, Nature, Requisites and
Operation of Municipal Ordinances, (3rd Ed.). A resolution,
particularly when used to express a ministerial act, need not
partake of any definite form and need not be a written
instrument. Steward v. Rust, 221 Ark. 286, 252 S.W.2d 816
(1952).
"Under Tennessee law, a municipal action may be
declared ultra vires for either of two reasons: (1)
because the action was wholly outside the scope of the
city's authority under its charter or a statute, or (2)
because the action was not undertaken consistent with
the mandatory provisions of its charter or a statute."
City of Lebanon v. Baird, 756 S.W.2d 236, 241 (Tenn. 1988).
We have conducted an exhaustive review of the Charter
as it was in 1967 and 1972.7 The Charter is totally silent as to
the method of passing a resolution and as to the power to
contract.8
7
S i n c e t h e n , t h e C i t y o f C l e v e l a n d h a s a n e w f o r m o f g o v e r n m e n t a n d a
n e w C h a r t e r . T h e n e w C h a r t e r s p e c i f i c a l l y p r o v i d e s t h a t b e f o r e t h e C i t y o f
C l e v e l a n d c a n c o n t r a c t i t m u s t p a s s a n o r d i n a n c e t o d o s o .
8
A r t i c l e 1 o f t h e C h a r t e r p r o v i d e s f o r t h e T o w n o f C l e v e l a n d t o b e a
“ b o d y p o l i t i c a n d c o r p o r a t e ” a n d g i v e s t h e C i t y t h e g e n e r a l p o w e r s t o r e c e i v e ,
h o l d a n d d i s p o s e o f p e r s o n a l p r o p e r t y .
A r t i c l e 5 r e q u i r e s t h e m e m b e r s o f t h e B o a r d o f M a y o r a n d C o m m i s s i o n e r s
t o h o l d r e g u l a r m o n t h l y m e e t i n g s . I t i s s i l e n t a s t o a n y c a l l e d m e e t i n g s .
H o w e v e r , A r t i c l e 2 0 , w h i c h d e a l s w i t h f r a n c h i s e o r d i n a n c e s , s a y s t h a t a
f r a n c h i s e o r d i n a n c e c a n n o t b e p a s s e d e x c e p t o n t h r e e r e a d i n g s w i t h “ n o t m o r e
t h a n o n e r e a d i n g a t t h e s a m e m e e t i n g , o r o n a n y r e a d i n g a t a n y b u t a r e g u l a r
m e e t i n g . ” T h i s i m p l i c i t l y i n d i c a t e s t h a t t h e r e m a y b e c a l l e d o r s p e c i a l
m e e t i n g s .
A r t i c l e 1 8 g i v e s t o t h e B o a r d o f M a y o r a n d C o m m i s s i o n e r s t h e p o w e r t o
p a s s a l l b y - l a w s a n d o r d i n a n c e s n e c e s s a r y t o e n f o r c e t h e p o w e r s i n t h e
C h a r t e r . T h e r e i s n o m e n t i o n o f r e s o l u t i o n s .
A r t i c l e 1 9 d e t a i l s t h e p a s s a g e o f o r d i n a n c e s , b i l l s , a n d b y - l a w s . W h i l e
i t c i t e s “ r e s o l u t i o n s ” i n i t s h e a d i n g , t h e r e i s n o r e f e r e n c e t o r e s o l u t i o n s i n
t h e b o d y o f t h e a r t i c l e .
A r t i c l e 2 1 e n u m e r a t e s t h e m i s c e l l a n e o u s p o w e r s a n d a u t h o r i t y b y
o r d i n a n c e o f t h e B o a r d o f M a y o r a n d C o m m i s s i o n e r s . T h e p o w e r t o c o n t r a c t i s
1 1
Moreover, 19 Tenn. Juris., Municipal Corporations, §
70, states the following:
In determining the extent of the power of a
municipal corporation to make contracts, and in
ascertaining the mode in which the power is to be
exercised, the importance of a careful study of the
charter or incorporating act and of the general
legislation of the state on the subject, if there be
any, cannot be too strongly urged. Where there are
express provisions on the subject, these will, of
course, measure, as far as they extend, the authority
of the corporation. The power to make contracts, and
to sue and be sued thereon, is usually conferred in
general terms in the incorporating act. But where the
power is conferred in this manner, it is not to be
construed as authorizing the making of contracts of all
descriptions, but only such as are necessary and usual,
fit and proper, to enable the corporation to secure or
to carry into effect the purposes for which it was
created; and the extent of the power will depend upon
the other provisions of the charter prescribing the
matters in respect of which the corporation is
authorized to act. To the extent necessary to execute
the special powers and functions with which it is
endowed by its charter, there is, indeed, an implied or
incidental authority to contract obligations, and to
sue and be sued in the corporate name.9
The general rule is that where a charter commits the
decision of a matter to the council or legislative body alone,
and is silent as to the mode of its exercise, the decision may be
evidenced by resolution. Eichenlaub v. City of St. Joseph, 113
Mo. 395, 21 S.W. 8 (1893); Keenan & Wade v. City of Trenton,
130 Tenn. 71, 168 S.W. 1053 (1914). The rule unquestionably is
applicable to the performance of a ministerial act or
administrative business of a municipality. If there is not
general provision a charter outlining what must be done by
ordinance, and the charter does provide that some particular
things shall be done by ordinance, the implication is that
n o t m e n t i o n e d .
9
M a y o r o f C i t y o f N a s h v i l l e v . S u t h e r l a n d , 9 2 T e n n . 3 3 5 , 2 1 S . W . 6 7 4
( 1 8 9 3 ) ; C r o c k e r v . T o w n o f M a n c h e s t e r , 1 7 8 T e n n . 6 7 , 1 5 6 S . W . 2 d 3 8 3 ( 1 9 4 1 ) .
[ f o o t n o t e i n o r i g i n a l . ]
1 2
matters which are not specifically required to be dealt with by
ordinance may be dealt with otherwise.10
Under the facts of this case, the municipal action was
not outside the scope of the City’s authority because T.C.A. 67-
6-712(a)(2)(C) provides that a county and city may contract to
provide for other distributions of the one-half of the proceeds,
which is not allocated to school purposes. Since the Charter was
silent as to the contracting power of the City, but was specific
in other instances, we deduce that the City’s mayor had the
authority to enter into the Contract with Bradley County, since
it was for a system of free schools and at that time was in the
City’s best interest. 19 Tenn. Juris., Municipal Corporations,
§ 89 (1985). We find no merit in the City of Cleveland’s
assertion that the Contract is ultra vires.
Secondly, the City argues that if the Contract is found
not to be ultra vires then the term of the Contract is in
perpetuity for there is no termination clause in the Contract.
Bradley County takes the position that even if the Contact
between the City and Bradley County contains no termination
provision, then the contract between Bradley County and the State
does and it was incorporated into the Contract between Bradley
County and the City. We do not need to address that issue,
however, because we are in agreement with the trial court that
paragraph 3 of the Contract contains the Contract’s termination
provisions. Paragraph 3 of the Contract provides that when the
average daily attendance of children in the two school systems
reaches fifty percent for each system then the distribution of
1 0
M c Q u i l l i n M u n i c i p a l C o r p o r a t i o n s , § 1 5 . 0 6 , N a t u r e , R e q u i s i t e s a n d
O p e r a t i o n o f M u n i c i p a l O r d i n a n c e s ( 3 r d E d . R e v i s e d ) .
1 3
the proceeds would revert back to the division provided in the
Code. The Contract contains no provision for a continuation of
the division of proceeds after the point that the ADA equals 50%.
That is, if the ADA at the City’s schools the year after the 50-
50 year go to 60%, the City does not receive 60% of the second
half of the tax proceeds. There is no further provision in the
Contract for the Contract to continue in effect in any manner.
At this point, in order to deviate from the Code provisions, a
new contract would have to be negotiated. We find that the
Chancellor was correct in his holding that paragraph 3 was the
Contract’s termination clause.
Thirdly, the City argues that the trial court’s
decision is against public policy in that future city council
members would be tied to a contract relating to government
matters. In support of its position the City quotes from
Shelbyville v. State ex rel. Bedford County, 220 Tenn. 197, 415
S.W.2d 139, 145 (1967) as follows:
Thus, where the contract involved relates to
governmental or legislative functions of the counsel,
or involves a matter of discretion to be exercised by
the council unless the statute conferring power to
contract clearly authorizes the council to make a
contract extending beyond its own term, no power of the
council so to do exists.
We do not agree, however, because our Tennessee
Legislature was the empowering authority which granted the right
to contract one-half of the proceeds of the local tax revenues.
The Tennessee legislature also enacted T.C.A. 7-51-903 pertaining
to long-term contracts, which provides:
Except as otherwise authorized or provided by law,
municipalities are hereby authorized to enter into
long-term contracts for such period or duration as the
1 4
municipality may determine for any purpose for which
short-term contracts not extending beyond the term of
the members of the governing body could be entered;
provided, that the provisions of § 7-51-902 shall
govern the periods or terms of contracts, leases, and
lease-purchase agreements with respect to capital
improvement property.
Our Supreme Court in 1985 addressed this issue in
Washington County Board of Education v. MarketAmerica, 693 S.W.2d
344 (Tenn. 1985). The City’s argument is basically the same as
was that of the plaintiff in Washington County Board of
Education. Justice Drowota opined:
After carefully considering the respective
arguments of counsel and the relevant legal
authorities, this Court is of the opinion that the
contract entered into between MarketAmerica, Inc. and
the Washington County Board of Education is valid and
binding upon both parties. Because of the importance of
the issues in this case to local governments, we are
compelled to elaborate on our reasons for this
conclusion.
* * *
Plaintiff's argument that Chapter 186 of the
Public Acts of 1983 acknowledged that counties were
without authority to enter into long-term contracts
prior to that legislation is not supported by the
legislative history. Senator Cohen and Representative
Burnett, the Senate and House sponsors of the bill,
indicated that the bill "only clarifies what cities
could always do." One sponsor further stated that the
legislation was intended to clarify the law in this
area because an opinion of the Attorney General had
suggested that counties lacked the capacity to enter
into contracts requiring payments beyond the current
fiscal year. The new legislation and the debate
concerning it illustrates that the legislature never
intended that Chapter 2 of Title 49 serve as a
limitation upon the authority of counties to enter into
long-term contracts.
Washington County Board of Education, at 348-349. We also find
that a valid Contract exists between the City and Bradley County.
The City having received the benefit of its bargain in the early
years of the Contract period, is obligated to honor its Contract
with Bradley County during the period when Bradley County is
1 5
receiving its benefit. The City’s argument falls far short of
convincing us of any merit in its position on this issue.
Fifthly, the City argues that since Article 20 of the
Charter limits the power of the City to grant a franchise to only
20 years that therefore the Contract at issue here is void. By
its own wording, Article 20 deals specifically with franchises
and not to the disbursement of the local tax revenues at issue
here. Again, we find no merit in the City’s arguments on the
Contract interpretation portion of this matter and affirm the
Chancellor’s decision on this issue in toto.
B. AFFIRMATIVE DEFENSES FOR THE MONEY DEBT
At the outset of our discussion we will address Bradley
County’s affirmative defenses that the City’s complaint should be
dismissed because (1) the trial court did not have jurisdiction
because of the City’s failure to file a petition for writ of
certiorari, and, (2) because the City failed to make all persons
who have or claim any interest parties of this proceeding; and,
(3) the statute of limitations codified at T.C.A. 28-3-109
mandates the dismissal of the declaratory judgment action and
claims on any capital outlay notes issued before 1991.
1.
We will first address the issue of the City’s filing a
declaratory judgment rather than a writ of certiorari. In Fallin
v. Knox County Board of Commissioners, 656 S.W.2d 338 (Tenn.1983)
the Supreme Court held that T.C.A. 27-9-101, et seq., is not
applicable unless there is a judicial or quasi judicial
determination by the governmental board involved. The court,
1 6
treating the issue before it as one for declaratory judgment,
quoted with approval from Holdredge v. City of Cleveland, 218
Tenn. 239, 402 S.W.2d 709 (1966) as follows:
The remedy by certiorari provided in T.C.A. 27-
901, et seq., “was intended to have application only in
a review of an order or judgment rendered after a
hearing before a board or commission.” Stockton v.
Morris & Pierce, 172 Tenn. 197, 110 S.W.2d 480 (1927).
402 S.W.2d at 712.
We are convinced the validity of the ordinance
amending the zoning ordinance may be tested under our
Declaratory Judgment Act and that certiorari is not the
exclusive remedy. 402 S.W.2d at 713-14.
Fallin, at p. 341-342.
The issues before us here are not judicial or even
quasi judicial determinations and therefore, T.C.A. 27-9-101, et
seq., does not apply.
2.
Bradley County next claims that all parties necessary
to this suit are not before this Court. Relying upon Huntsville
Utility District of Scott County v. General Trust Co., 839 S.W.
2d 397, 400 (Tenn.App. 1992), Bradley County then argues that the
Complaint should have been dismissed because all necessary
persons were not before the court. We disagree.
All of the capital outlay notes have been repaid by
Bradley County, therefore, the City’s Board of Education and the
Bradley County School Board are not necessary or proper parties.
The trustee of Bradley County is not a party to either the
contract or the amendment. No party is declaring that the
capital outlay notes were improperly issued or that the Local
1 7
Public Obligations Act is unconstitutional. As in any contract
action the parties to the contract are necessary parties, and the
parties to the contract and the amendment are before the court.
There is no merit to this argument.
3.
Bradley County’s third affirmative defense pertains to
the statute of limitations codified at T.C.A. 28-3-109. It
relies upon Ferguson v. Peoples National Bank of Lafollette, 800
S.W.2d 181, (Tenn. 1990). In this matter, however, T.C.A. 28-3-
109 has no application to either the Complaint for declaratory
judgment and/or the Complaint for money debt by the City. City of
Maryville v. Blount County, filed on January 6, 1993, an
unreported opinion of our Court, held that a municipality acts as
an arm of the state and is exempt from the statute of limitations
when it seeks to recover local education funding which should
have been allocated to it pursuant to state education
legislation. Bradley County’s argument on this issue also fails.
C. CAPITAL OUTLAY NOTES
Bradley County denies that it should share the proceeds
of the Capital Outlay Notes, which were issued for educational
purposes and declares that summary judgment is inappropriate.
Bradley County claims that the Notes were issued pursuant to the
Local Government Public Obligations Act,11 which does not require
a sharing of the proceeds.
1 1
T . C . A . 2 9 - 2 1 - 1 0 1 , e t s e q .
1 8
Its argument is predicated upon three cases: (1) Guffee
v. Crockett, 315 S.W.2d 646 (Tenn. 1958); (2) Board of Education
of Memphis City Schools v. Shelby County, 207 Tenn. 330, 339
S.W.2d 569 (1960); and, (3) Phillips v. Anderson County,
Tennessee, 698 S.W.2d 76 (Tenn.App. 1985).
Bradley County avers that the trial court’s reliance
upon Guffee was misplaced in that it only dealt with an intra-
statutory interpretation of what was T.C.A. 49-701 (now T.C.A.
49-3-1001, et seq.) dealing with the issuance of school bonds.
Rather, it argues that the issue before us is the inter-statutory
interpretation between two separate statutes - the Local
Government Public Obligation Act12 and the School Bond Act.13
Guffee was decided in 1958 prior to the adoption of the
Local Government Public Obligation Act in 1986. Moreover, Board
of Education of Memphis City Schools and Phillips were also
decided before the adoption of the Local Government Public
Obligation Act. Therefore, the court in those cases did not take
the School Bond Act into consideration in its determination on
any of the cases.
We find that there is no conflict between the Local
Government Public Obligation Act of 1986 and the School Bond Act
and the cases cited by the parties.
D. THE ATTORNEY GENERAL’S OPINIONS
1 2
T . C . A . 9 - 2 1 - 1 0 1 , e t s e q .
1 3
T . C . A . 4 9 - 3 - 1 0 0 1 , e t s e q .
1 9
Lastly, Bradley County argues that the Attorney
General’s Opinions should carry great weight with this Court and
that we should find that Bradley County has no obligation to
share the Notes proceeds with the City. In Washington County
Board of Education, 693 S.W.2d at 348, Justice Drowota, addressed
the issue of an opinion by the Attorney General to the effect:
It appears that the present lawsuit was precipitated in
part by an opinion of the Attorney General for the
State of Tennessee that concluded that the Washington
County Board of Education was without the necessary
authority to enter into the contract with
MarketAmerica. That opinion, dated February 25, 1983,
relied solely upon this Court's decision in Brown and
previous opinions of the Attorney General. The Attorney
General observed that the duration of the contract and
the provision requiring documentation that future
boards would be bound were the principal deficiencies
of the contract. Although opinions of the Attorney
General are useful in advising parties as to a
recommended course of action and to avoid litigation,
they are not binding authority for legal conclusions,
and courts are not required or obliged to follow them.
On this point, we find Judge John B. Hagler’s
Memorandum Opinion in the City of Sweetwater v. Monroe County, an
excellent review of the Attorney General’s Opinions, and directly
to the point in this matter. Judge Hagler stated:
In arguing that the pro rata standard does not apply to
a “loan,” Monroe County relies primarily, and
reasonably, on a series of Attorney General Opinions
going back to 1980. In 1980, the Attorney General
opined that the proceeds of capital outlay notes
(issued under T.C.A. 5-10-105, et seq., repealed in
1988) need not be prorated even though all taxable
property in a county was subject to a tax to retire the
notes. Op. Atty. Gen. No. 80-290 (June 10, 1980).
Relying upon this opinion, the Attorney General in 1988
opined that “general obligation bonds” issued pursuant
to the “Local Government Public Obligations Act of 1986
(T.C.A. 9-21-101, et seq.) Which superseded all earlier
statutes dealing with bonds and notes, are not subject
to the mandated proration of T.C.A. 49-3-1003. Op.
Atty. Gen. No. 88-110 (June 2, 1988). Likewise,
relying on his 1980 and 1988 opinions, the Attorney
General opined in 1989 and 1993 that the proceeds of
capital outlay notes also issued under the new 1986
2 0
statute did not have to be shared. Op. Atty. Gen. No.
U89-19 (March 10, 1989); U03-09 (February 2, 1993).
Although opinions of the Attorney General do not carry
the weight of court opinions, they must be accorded
great consideration not only because of the expertise
that office develops in advising state and local
governments but also because of the reliance upon these
opinions by governmental authorities.
Nevertheless, the Court is forced to conclude that,
while the 1980 opinion, dealing with certain specific
language in the then-current “capital outlay notes”
statute, may have been correct, the subsequent opinions
in 1988, 1989, and 1993 are incorrect.
A short analysis of these opinions is necessary to show
that the Attorney General failed, after the 1980
opinion, to take account of specific language in the
1986 statute. The Attorney General in 1980, while
recognizing the authority previously cited here, was
impressed by the following language in T.C.A. 5-10-
501(s)(7), which, at that time, governed the issuance
of capital outlay notes:
“The provisions of clause ‘one’ of the first
Paragraph and the provisions of the second
paragraph of this section (which related to
school funding) shall be in addition to and
supplemental to all other provisions of other
laws of the State of Tennessee, provided that
whenever the application of these provisions
conflicts with the application of such other
provisions, these provisions shall prevail.”
Emphasis added. This special language convinced the
Attorney General that this “separate authority” for the
issuance of capital outlay notes was not subject to the
requirement for allotting a portion of the note
proceeds to municipal or special school districts even
though the taxable property within such districts were
subject to the county’s taxing power. Op. Atty. Gen.
No. 80-290. The Attorney General acknowledged that
this “creates risk” of double taxation within the
school districts but noted that double taxation itself
is not unconstitutional where it is “plain that the
legislature intended such result.” Id.
However, the unreported Court of Appeals’
decision,14 which resulted when the parties to whom the
Attorney General rendered the opinion brought an action
for Declaratory Judgment, declined to follow the
Attorney General’s analysis. Although finding
proration unnecessary with respect to capital outlay
notes, the court reached this conclusion only by
striking down that portion of the county’s resolution
pledging a levy on all taxable property in the county.
The Court was of the opinion that the statute, which
authorized the issue of capital outlay notes prohibited
the county from levying ad valorem taxes for the
1 4
T h e B o a r d o f T r u s t e e s o f t h e T r e n t o n S p e c i a l S c h o o l D i s t r i c t v . T h e
G i b s o n C o u n t y L e g i s l a t i v e B o a r d , e t a l . , C t . A p p . W e s t e r n S e c t i o n , D e c e m b e r 4 ,
1 9 8 1 , T A M 7 / 5 - 1 0 .
2 1
payment of such notes.15 The upshot is that the court
left undisturbed the principle that pro rata allocation
is necessary whenever there is a pledge to levy on all
taxable property in the county.
Following the 1980 opinion, the Attorney General
opined in 1988, 1989, and 1993 that the proceeds of
general obligation bonds and capital outlay notes,
issued under the new Local Government Public
Obligations Act of 1986, T.C.A. 9-21-101 et seq., are
not subject to the pro rata distribution requirements
of T.C.A. 49-23-1003. The Attorney General found, in
each of the three opinions, that no provision of the
new Act requires pro rata distribution among school
systems within a county and that T.C.A. 9-21-124, like
the earlier statute he construed in 1980, provides that
if the “provisions of this law conflict with any other
provisions of law or are inconsistent with any other
provisions of law, the provisions of this chapter shall
prevail with respect to all bonds and notes issued
under this chapter.”
Unfortunately, the Attorney General in each of
these later opinions overlooked another provision in
the Local government Public Obligations Act of 1986
which was not in the “old capital outlay notes”
statute:
9-21-107. Powers of Local
Governments./All local governments have the
power . . .to:
*******************************************
(4) pledge the full faith, credit and
unlimited taxing power of the local
government as to all taxable property in the
local government or a portion of the local
government, if applicable, to the punctual
payment of the principal of and interest on
the bonds or notes issues to finance any
public works project. . .
********************************************
(5) in the case of a county or metropolitan
government which contains within its
boundaries a special school district and/or
incorporated city or town maintaining a
public school system separate from the county
or metropolitan government public school
system, the tax pledge authorized by
subdivision (4), when pledged to the payment
of bonds or notes issued to finance the
construction of public schools of the county
or metropolitan government serving outside
the territorial limits of such special school
district and/or incorporated city or town,
may be a pledge of taxes to be levied only
upon taxable property within that portion of
the county or metropolitan government lying
1 5
I t i s p o s s i b l e t h e c o u r t m i s r e a d t h i s p r o h i b i t i o n a s a p p l y i n g t o
c a p i t a l o u t l a y n o t e s w h e n , i n f a c t , i t a p p e a r s t o h a v e a p p l i e d o n l y t o “ g r a n t
a n t i c i p a t i o n n o t e s . ” T . C . A . § 5 - 1 0 - 5 0 1 ( b ) ( 6 ) . O r , p e r h a p s t h i s c o u r t i s
m i s s i n g s o m e l i n k i n t h e l e g i s l a t i v e c h a i n .
2 2
outside the territorial limited of such
special school district and/or incorporated
city or town. . .”
There could not be a clearer statement of the
legislative intent that the only way to avoid
proration, as required by T.C.A. 49-3-1003, is a pledge
of taxes to be levied only upon taxable property within
that portion of the county lying outside the
territorial limits of a city. Therefore, there is
no”conflict,” as existed with the earlier statute,
between the statute relating to general public
obligations and the statute relating to school
financing, and reading them in pari materia, the result
is that the proceeds of general obligation bonds,
capital outlay notes, and all other bonds and notes are
considered “school bonds” and are subject to the
proration mandate of T.C.A. 49-3-1003.
We affirm the decision of the Chancellor in respect to
the decision requiring Bradley County to share the proceeds of
the Notes with the City.
V. CONCLUSION
There being no dispute as to any material fact in this
matter, the Trial Court correctly granted Bradley County’s motion
for summary judgment on the declaratory judgment portion of the
Complaint and correctly granted the City’s motion for summary
judgment on the money debt. For the reasons stated above, the
judgment of the Trial Court is affirmed and the cause remanded
for collection of costs below. Costs of this appeal are adjudged
equally against the parties and their sureties.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
H o u s t o n M . G o d d a r d , P . J .
C O N C U R :
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
H e r s c h e l P . F r a n k s , J .
2 3
( N o t P a r t i c i p a t i n g )
D o n T . M c M u r r a y , J .
2 4