DocketNumber: NO. 2016-CA-001642-MR
Citation Numbers: 547 S.W.3d 526
Judges: Clayton, Combs, Lambert
Filed Date: 1/5/2018
Status: Precedential
Modified Date: 1/21/2022
Charlie Coleman, John P. Roth Jr. and Erik Hermes (hereinafter "the taxpayers") bring this appeal from the Campbell Circuit Court's grant of summary judgment to the Campbell County Library Board of Trustees (hereinafter "the Board"). The primary issue is whether the holding of an opinion (hereinafter "the Opinion") of the Court of Appeals, which harmonized statutes relating to public library ad valorem tax rates, is to be applied retroactively or prospectively only.
In Campbell Cty. Library Bd. of Trustees v. Coleman ,
*530KRS 132.023 and KRS 173.790 are both applicable to ad valorem taxing rates of a library taxing district formed by petition under KRS 173.720 and can be harmoniously interpreted to complement each other. KRS 132.023 generally controls the ad valorem tax rate assessed by a library taxing district formed by petition; however, KRS 173.790 is triggered if the library seeks to increase revenue from ad valorem taxes above 4 percent of the revenue generated from the compensating tax rate as set forth in KRS 132.023(1) and (3). Our construction of KRS 132.023 and KRS 173.790 gives effect to both statutes and honors what we believe the General Assembly intended.
Campbell Cty. Library Bd. ,
The case was remanded for proceedings consistent with the Opinion. The Kentucky Supreme Court denied the taxpayer's motion for discretionary review.
The Board moved for summary judgment on the remaining counts of the taxpayers' complaint. The taxpayers filed a cross-motion for summary judgment. The circuit court entered an agreed order limiting briefing solely to the issue of whether the Opinion should be applied retroactively or prospectively only. Following a hearing, the circuit court entered an order in which it applied the three-factor test for retroactivity set forth in Chevron Oil Co. v. Huson ,
The taxpayers raise four arguments: (1) that the circuit court order is contrary to the Opinion and violates the law-of-the-case doctrine; (2) federal due process and Kentucky law require the taxpayers to be provided with meaningful retroactive relief; (3) the order renders KRS 173.790 ineffective for periods prior to the Opinion, thereby violating Kentucky's separation of powers doctrine and; (4) even if prospective-only application was possible in this case, the circuit court erred in finding it justified here.
I. Whether the circuit court's order is contrary to the Opinion and violates the law-of-the-case doctrine; and whether the Board waived the issue of prospective-only application
The taxpayers' first argument questions the trial court's authority to determine that the Opinion is to be applied prospectively only. Because the Opinion does not expressly state that its holding is to be given prospective-only application, they contend the holding must apply both retroactively and prospectively, and, in the absence of any petition for rehearing or modification by the Board, this retroactive application has become the law of the case. "The law-of-the-case doctrine describes a principle which requires obedience to appellate court decisions in all subsequent stages of litigation. Thus, on remand, a trial court must strictly follow the mandate given by an appellate court in that case." Buckley v. Wilson ,
*531Williamson v. Commonwealth ,
The pertinent portion of the Opinion states that "the Campbell and Kenton Circuit Courts erred as a matter of law by concluding that KRS 132.023 was inapplicable to library districts formed by petition and erred by rendering the respective summary judgments so concluding. We hold that KRS 132.023 and KRS 173.790 are both applicable to library districts formed by petition and can be harmonized in their application as set out in this Opinion." Campbell Cty. Library Bd. ,
The Board argues that statements elsewhere in the Opinion do expressly and unmistakably direct a prospective-only application of the Court's holding, specifically the following passage discussing the principles of Wayne Public Library Board of Trustees v. Wayne County Fiscal Court ,
In Wayne, the Supreme Court addressed a second attack on the constitutionality of the provisions of KRS Chapter 173 as pertains to the petition method of forming public library districts in Kentucky. As noted, that legislation was enacted in 1964. In upholding the statutes, the Supreme Court in Wayne noted that "[w]hen over two-thirds of the library districts in Kentucky are the children of these statutes, there can be no doubt that many important and valuable rights, obligations and services have vested."Id. at 859 . That same logical common sense approach is also applicable to these cases now on appeal, notwithstanding that this Court has harmonized the statutes at issue.
Campbell Cty. Library Bd. ,
Although this passage may articulate policy grounds to support a prospective-only application, it does not provide an unambiguous directive to that effect.
The taxpayers argue that when an appellate opinion is silent, the silence speaks for retroactive application only and any contrary intention must be manifest. Kentucky jurisprudence "generally embrace[s] the idea that although legislation may only apply prospectively, judicial decisions generally apply retroactively." Branham v. Stewart ,
*532It does not address whether a newly-announced decision need be applied to the parties in the instant case. McKinney v. Pate ,
The Opinion in this case did not expressly decide the issue of retroactive or prospective applicability, and directed the case back to the trial court for further proceedings. "[I]t was the trial court's duty to interpret and apply the controlling appellate court decision." Buckley v. Wilson ,
The scope of a lower court's authority on remand of a case is not measured in terms of its jurisdiction, but by the direction or discretion contained in the appellate court's mandate. An appellate court might direct a trial court, such as by ordering a new trial or the dismissal of charges. With such a mandate, the trial court's authority is only broad enough to carry out that specific direction. Alternatively, and as is very often the case when the appellate court reverses a trial court, it simply grants the trial court the discretion to conduct further proceedings not inconsistent with the opinion. In such cases, ... the general principle is stated as follows:
The trial court may take such action, not inconsistent with the decision of the appellate court, as in its judgment law and justice require, where the case has been remanded generally without directions, or for further proceedings, or for further proceedings in accordance, or not inconsistent, with the opinion.
5 C.J.S. Appeal and Error § 978 at 481-83 (1993)citing Pieck v. Carran,289 Ky. 110 ,157 S.W.2d 744 (1941).
Hutson v. Commonwealth ,
Thus, the circuit court's action in deciding that the Opinion was to be applied prospectively only was well within the scope of its authority and discretion. Consequently, its order did not violate the law of the case doctrine. Furthermore, under these circumstances, the issue of retroactive applicability was not waived by the Board because the Opinion left the resolution of this issue to the circuit court.
II. Whether federal due process and Kentucky law require the provision of retroactive relief to the taxpayers
The taxpayers further argue that applying the Opinion prospectively only violates federal and state due process guarantees. "Since the collection of a tax constitutes a deprivation of property, federal due process standards require state and local governments to offer taxpayers procedural safeguards against 'unlawful exactions.' " Phillips v. Commonwealth ,
*533In addressing this issue in its order denying the taxpayers' motion to amend, alter or vacate, the circuit court held that the due process protections apply exclusively to those who have paid tax pursuant to a statute subsequently found to be unconstitutional, as in McKesson . The taxpayers correctly contend that the taxation need not be pursuant to an unconstitutional statute to trigger due process protections, citing Reich v. Collins ,
But our case law also provides that due process protections may be balanced against considerations of good-faith reliance and equity.
It is within the inherent power of a Court to give a decision prospective or retrospective application. It is further permissible to have a decision apply prospectively in order to avoid injustice or hardship. This is true where property rights are involved and parties have acted in reliance on the law as it existed, and a contrary result would be unconscionable.
Hagan v. Farris ,
The taxes in this case were collected in good faith by the library districts, in reliance on the advice of the Executive Branch. As the Opinion states:
The record in this case reflects that eighty library districts across Kentucky, created by petition under KRS Chapter 173, who have followed the tax provisions of KRS 132.023, would be adversely affected if the decisions of the Campbell and Kenton Circuit Courts were to stand. For over thirty years, without protest or challenge, the library districts created by petition have acted in good faith and conducted their affairs in accordance with the directions of the Executive Branch, which was charged by law to implement the applicable statutes in question. While our opinion today stands on the harmonization of these statutes, based on our interpretation of legislative intent, we believe the ultimate recourse for statutory change lies in the General Assembly, not the courts.
Campbell Cty. Library Bd. ,
In light of these unique facts, this case presents one of the rare occasions when a court is justified in exercising its discretion "to make application of a holding prospective only[.]" Branham v. Stewart ,
III. Whether prospective-only application of KRS 173.790 violates the separation of powers doctrine
Section 27 of the Kentucky Constitution mandates separation among the three branches of government and Section 28 specifically prohibits incursion of one branch of government into the powers and functions of the others. Legislative Research Comm'n By & Through Prather v. Brown ,
We are unable to find any legal authority in Kentucky to support this theory. Justice Scalia's concurring opinions in James B. Beam Distilling Co. v. Georgia ,
IV. Whether the circuit court misapplied the Chevron Oil factors, thereby working a manifest injustice on the taxpayers
Finally, the taxpayers argue in the alternative that, even if the Chevron Oil analysis is applicable, the facts of this case do not support the circuit court's decision. Chevron Oil provides three factors for the court to use in determining whether a decision is to be applied retroactively: first, it "must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, ... or by deciding an issue of first impression whose resolution was not clearly foreshadowed"; second, the court "must weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation."; and third, the court must weigh "the inequity imposed by retroactive application, for '(w)here a decision of this Court could produce substantial inequitable results if applied retroactively, there is ample basis in our cases for avoiding the 'injustice or hardship' by a holding of nonretroactivity.' " Chevron ,
As to the first Chevron factor, the circuit court found that there was no clear, past precedent regarding the proper statute to use in calculating the tax rate, and that the Board was given conflicting guidance by the Office of the Attorney General and the Kentucky Department for Library and Archives (KDLA). The taxpayers argue that the Board did not in fact rely on this guidance and actually disregarded the recommendation of the KDLA contained in the Kentucky Public Library Trustee Manual, which advised that tax districts could increase their tax rate significantly by the same method by which they were established; hence, those districts established by petition under KRS 173.720 could only increase their rate by petition. The taxpayers also argue that informal guidance from the KDLA and opinions of the Attorney General do not constitute "legal precedent," and that the plain language of KRS 173.790 was the sole, clear past "legal *535precedent" expressly applicable to library districts organized by petition.
The fact that a panel of this Court wrote a twenty-two-page Opinion reversing two well-reasoned circuit court opinions and expressly stated that the library districts acted in good faith in accordance with the directions of the Executive Branch for over thirty years supports the circuit court's finding that there was no clear past precedent on this issue and that this was also an issue of first impression whose resolution was not clearly foreshadowed. Thus, the Opinion meets the first Chevron factor in that it established a new principle of law meriting prospective application only.
In respect to the second factor, the circuit court found that the Opinion's harmonization of the two statutes was intended to avoid adversely affecting the libraries which had used KRS 132.023 in setting their ad valorem tax rates, and that consequently retroactive application of the new rule would not further its operation. The taxpayers argue that this approach confuses the purpose of the Opinion with the purpose of the harmonized rule itself. They contend that the common purpose and effect of both the harmonized statutes is to protect taxpayers, not library districts, and that a prospective application frustrates the purpose of the new rule by legitimizing and perpetuating tax increases made in 2000, 2003 and 2004 without a voters' petition.
But the Opinion construes KRS 173.790"as a method available to a library taxing district seeking to increase the revenue from ad valorem taxes over 4 percent of the revenue generated from the compensating tax rate as permitted by KRS 132.023." Campbell Cty. Library Bd. ,
Thirdly and finally, the circuit court determined that retroactive application of the decision would cause "substantial inequitable results" because it might require the refund of taxes that would severely deplete the resources of numerous public libraries. This conclusion was founded on the Opinion, which expressed serious concerns about the adverse consequences on eighty library districts, in existence for over thirty years, if the original decision of the Campbell Circuit Court holding that KRS 173.790 was the controlling statute was allowed to stand. The appellants characterize the circuit court's conclusion as ill-founded because there is nothing in the record to show that any library district other than the Campbell Board has ever sought to increase its tax rate by more than four percent without a petition of the voters. According to the taxpayers, their research shows only the Campbell Board has ever violated KRS 173.790 as harmonized by the Opinion. They emphasize that prospective-only application will allow the Board not only to retain excessive tax revenues improperly but to maintain those inflated rates by means of a petition of voters. Even if we accept the taxpayers' claim that retroactive application of the Opinion will impact solely the Campbell County Library Board and no other, the Board maintains that that retroactive application would require the refund of millions of dollars already spent on facilities, books, staff and other library operations. Under the circumstances, the circuit court did not abuse its discretion in weighing the evidence and deciding that retroactivity would lead to substantial inequitable results.
*536Conclusion
For the foregoing reasons, the order of the Campbell Circuit Court granting summary judgment and the order denying the motion to amend, alter or vacate are affirmed.
ALL CONCUR.
A similar action was also brought by a group of taxpayers in Kenton County. The Kenton Circuit Court ruled that KRS 173.790 was the controlling statute and that the Kenton County Library Board had improperly relied upon KRS 132.023 to increase the ad valorem tax rate. The circuit court denied the plaintiffs a refund for "overpaid" ad valorem taxes. In the first appeal to this Court, the Kenton County case was consolidated with the Campbell County case. The Kenton County plaintiffs are not parties to the present appeal.