Richland Cnty. v. S.C. Dep't of Revenue

THE STATE OF SOUTH CAROLINA
In The Supreme Court
Richland County, South Carolina, Appellant/Respondent,
and
Central Midlands Regional Transit Authority,
Respondent,
v.
The South Carolina Department of Revenue and Rick
Reames, III, in his official capacity as its Director,
Respondents/Appellants,
v.
Richland PDT, a joint venture consisting of M.B. Kahn
Construction Co. Inc., ICA Engineering, Inc., and
Brownstone Construction Group, LLC, as a unit and
Individually, Third-Party Defendants.
Appellate Case No. 2016-001839
Appeal from Richland County
G. Thomas Cooper, Jr., Circuit Court Judge
Opinion No. 27775
Heard June 14, 2017 – Filed March 7, 2018
AFFIRMED IN PART, REVERSED IN PART AND
REMANDED
Andrew F. Lindemann, of Davidson & Lindeman, P.A.,
of Columbia, Benjamin E. Nicholson, V and
M. Elizabeth Crum, both of McNair Law Firm, P.A., of
Columbia, Ray N. Stevens and Ray E. Jones, both of
Parker Poe Adams & Bernstein, LLP, of Columbia and
Larry Smith, Richland County Attorney, of Columbia,
for Appellant/Respondent.
James E. Smith, Jr. and Dylan W. Goff, both of James E.
Smith, Jr., P.A., of Columbia, Jason P. Luther, Milton G.
Kimpson, Dana R. Krajack, Nicole M. Wooten and
Lauren Acquaviva, all of South Carolina Department of
Revenue, of Columbia, for Respondents/Appellants.
Elizabeth Van Doren Gray, Robert E. Tyson, Jr. and
Alexis K. Lindsay, all of Sowell Gray Robinson Stepp &
Laffitte, LLC, of Columbia, for Respondent.
Robert F. Lyon, Jr. and John K. DeLoache, both of
Columbia, for Amicus Curiae, South Carolina
Association of Counties.
JUSTICE KITTREDGE: This direct cross-appeal involves the scope of the
authority the Department of Revenue (DOR) to enforce various provisions of state
law relating to the imposition of a transportation penny tax by Richland County
(County) and the County's expenditure of the funds generated by the tax. After
DOR conducted an audit and informed the County that DOR intended to cease
future remittances to the County based on purported misuse of funds, the County
filed a declaratory judgment action in circuit court, arguing DOR lacked the
authority to stop payments and seeking a writ of mandamus compelling DOR to
continue remitting revenues. DOR counterclaimed seeking a declaration that the
County's expenditures were unlawful, an injunction to prohibit future unlawful
expenditures, and alternatively, the appointment of a receiver to administer the
County's tax revenues. Following a hearing, the circuit court issued a writ of
mandamus compelling DOR to remit the tax revenues, denied injunctive relief, and
refused to appoint a receiver. Both the County and DOR appealed. For the
reasons that follow, we affirm in all respects except we reverse the circuit court's
denial of DOR's request for injunctive relief. DOR is entitled to an injunction
requiring the County to expend the funds generated by the tax solely on
transportation-related projects in accordance with the law.
I.
Through the Optional Methods for Financing Transportation Facilities Act
(Transportation Act),1 the General Assembly has authorized the governing body of
a county to "impose by ordinance a sales and use tax in an amount not to exceed
one percent within its jurisdiction for a single project or for multiple projects and
for a specific period of time to collect a limited amount of money." S.C. Code
Ann. § 4-37-30(A) (Supp. 2017). This is commonly referred to as the "penny tax."
The types of projects permitted to be funded with such a tax are "highways, roads,
streets, bridges, mass transit systems, greenbelts, and other transportation-related
projects." Id. § 4-37-30(A)(1)(a)(i) (emphasis added). The revenues generated
from such a tax must be used in accordance with statutory restrictions imposed by
the General Assembly—namely, proceeds must be used for the capital costs of the
types of transportation projects identified in the Transportation Act. Id. § 4-37-
30(A)(15).
To implement a transportation penny tax, "[t]he governing body of a county may
vote to impose the tax authorized by this section, subject to a referendum, by
enacting an ordinance." Id. § 4-37-30(A)(1). The local ordinance must specify the
projects for which the proceeds of the tax are to be used; the length of time for
which the tax is to be imposed; "the estimated capital cost of the project or projects
to be funded in whole or in part from proceeds of the tax;" and the "anticipated
year the tax will end." Id. § 4-37-30(A)(1) (emphasis added). At issue in this case
is whether and to what extent certain costs qualify as "capital costs" and thus are
considered proper expenditures of penny tax revenues.
DOR was "created to administer and enforce the revenue laws of this State," S.C.
Code Ann. § 12-4-10 (2014), and is authorized "to conduct audits involving all
taxes." Id. § 12-4-387 (2014). The scope of DOR's activities is quite broad;
indeed, DOR "employees and officers are acting within the scope of their
employment when administering any South Carolina statute which has not been
held to be unconstitutional or unlawful by a final decision of a court of competent
jurisdiction." Id. § 12-4-325(B) (2014) (emphasis added).
1
S.C. Code Ann. §§ 4-37-10 to -50 (Supp. 2017).
DOR administers and collects the penny tax in "the same manner that other sales
and use taxes are collected." Id. § 4-37-30(A)(8); id. § 12-36-2660 (2014)
(providing DOR "shall administer and enforce" the provisions of the Sales and Use
Tax Act). Monies generated through a tax imposed under the Transportation Act
are considered to be state tax revenues—not local tax revenues.2 See id. § 12-54-
15 (2014) (providing every tax imposed, along with increases, interest, and
penalties are considered owed "to the State"); id. § 4-37-30(A)(9) (providing taxes
authorized by the Transportation Act are subject to the general enforcement
provisions of the tax code).
Under these enabling provisions of the Transportation Act, on July 18, 2012, the
County enacted Ordinance No. 039-12HR (Ordinance) scheduling a referendum on
November 6, 2012, for the purpose of seeking approval from voters for a penny
sales and use tax (Penny Tax). The Ordinance referenced various provisions of the
Transportation Act and proposed the imposition of a tax for twenty-two years for
the following projects:
(d) The Sales and Use Tax shall be expended for the costs of the
following projects . . . for the following purposes:
(i) Improvements to highways, roads (paved and unpaved), streets,
intersections, and bridges including related drainage system
improvements. Amount: $656,020,644;
(ii) Continued operation of mass transit services provided by
Central Midlands Regional Transit Authority including
implementation of near, mid and long-term service improvements.
Amount $300,991,000; and
(iii) Improvements to pedestrian sidewalks, bike paths,
intersections and greenways. Amount: $80,888,356.
The Ordinance further provided:
2
In this regard, an "[a]ction may be brought at any time by the Attorney General,
in the name of the State, to recover taxes, penalties, and interest due under [Title
12]." S.C. Code Ann. § 12-54-17 (2014).
The imposition of the sales and use tax and the use of sales and use
tax revenue, if approved in the referendum, shall be subject to the
conditions precedent and conditions or restrictions on the use and
expenditure of sales and use tax revenue established by the
[Transportation] Act, the provisions of this Ordinance, and other
applicable law. Subject to annual appropriations by County Council,
sales and use tax revenues shall be used for the costs of the projects
established in this Ordinance, as it may be amended from time to time,
including, without limitation, payment of administrative costs of the
projects, and such sums as may be required in connection with the
issuance of bonds, the proceeds of which are applied to pay costs of
the projects. All spending shall be subject to an annual independent
audit to be made available to the public.
(emphasis added). Among other things, the parties dispute whether the County
properly characterizes certain costs as "administrative costs."
The referendum passed. The Penny Tax became effective beginning May 1, 2013,
and is authorized to run for twenty-two years (through April 30, 2035) to raise over
$1 billion for specified transportation projects throughout Richland County. Since
taking effect, the Penny Tax has generated around $5 million in revenues per
month for Richland County. Prior to this dispute, and in accordance with its
statutory mandate, DOR allocated and remitted net revenues to the State Treasurer
on a monthly basis. Those monies (with interest) were then distributed by the State
Treasurer to the County on a quarterly basis as required by the Transportation Act.
Specifically, section 4-37-30(A)(15) provides the State Treasurer is to hold these
funds in a designated account separate from the general fund of the state, and once
distributed, "these revenues and interest earnings must be used only for the purpose
stated in the imposition ordinance."
At some point after the Penny Tax became effective, DOR received information
concerning the County's possible misuse of Penny Tax funds. In April 2015, DOR
initiated an audit to determine the County's compliance with state tax laws,
specifically including the Transportation Act. See S.C. Code Ann. § 12-4-387("The Department of Revenue shall use available personnel to conduct audits
involving all taxes to promote voluntary compliance and to collect revenues for the
general fund of the State and designated accounts." (emphasis added)); id. § 12-54-
100 to -110 (authorizing DOR to conduct examinations and investigations and to
issue a summons for any person or political subdivision of the State requiring that
person or entity to appear, produce documents, and answer questions). The County
did not object to the audit or to DOR's authority to conduct it.
Following the audit, DOR informed the County that it had uncovered (1) evidence
of public corruption;3 (2) evidence of criminal violations of state tax laws4 and (3)
unlawful expenditures of Penny Tax revenues by County Council.
DOR identified specific expenditures it believed were problematic, including the
use of more than $554,000 in Penny Tax funds to organize and staff the County's
Small Local Business Enterprise (SLBE) Program, which was established as a
county-wide program intended to support all facets of County operations—not just
Penny Tax projects. These expenses included more than $200,000 in legal services
related to "SLBE Program Administration"; approximately $219,000 in personnel
costs; $122,000 for a software management system; and $13,000 for website
development. In noting these expenditures, DOR explained, "While a [SLBE]
program may be laudable, it is simply not allowed under the state laws governing
this type of [transportation] tax. If [County] Council wants to encourage small and
local business participation in County projects[,] it should do so with general fund
dollars—not with dollars approved by voter referendum for an earmarked
purpose."
DOR also noted the County was paying two public relations firms monthly
payments of $25,000 each for the provision of "public information services" in
addition to reimbursing these firms for expenses such as brochures, mailings,
business cards, website maintenance, catering, mileage, and computer and cell
phone allowances. It was unclear exactly what work these firms performed since a
fully operational public information office already existed within the County and
because no documentation existed to detail what specific services were provided,
the number of hours spent on these projects, or how much each service cost.
DOR further took issue with the more than $38,000 the County spent under a
vague and duplicative "mentor-mentee" arrangement whereby the County
3
DOR forwarded these findings to SLED for investigation.
4
According to DOR, this investigation resulted in criminal convictions of both the
former chair of County Council and the former president of the Central Midlands
Regional Transit Authority Board.
contracted with certain inexperienced individuals to perform more than $400,000
in real-estate and legal services, then paid each of those individuals and an
experienced contractor/vendor $200 per hour (for a combined cost of $400 per
hour) to "mentor" and "be mentored" and learn how to perform the very services
they were contracted to provide.
Faced with these dubious expenditures, the County put forward the position that all
these expenditures were properly characterized as "administrative costs" under the
Ordinance.
Nevertheless, the day following the audit, the County responded that it was
"shocked and alarmed" and expressed a willingness to "immediately invoke
measures to protect and preserve county money and assets" and reimburse any
inappropriate expenditures of Penny Tax funds that may have occurred. Over the
next several months, officials from DOR and the County continued written and in-
person discussions regarding the results of DOR's audit.
Primarily, DOR correctly asserted the County's expenditure of Penny Tax funds on
"administrative costs" that were unrelated to any specific transportation project
were improper as they exceeded the scope of the Transportation Act. DOR
informed the County that regardless of what "administrative costs" the County's
Penny Tax Ordinance purported to allow, only those costs allowable under the
Transportation Act were proper expenditures of Penny Tax funds. However, DOR
also acknowledged this might include certain limited transportation-related
administrative costs:
While some administrative costs may be appropriate expenditures
under the [T]ransportation [Act], the use of the term "capital costs" in
the statute gives some guidance on what administrative costs may be
properly allowable under the law. The term "capital cost" is not
defined in the law. However, "capital costs" are generally considered
one-time costs incurred for the creation or improvement of tangible
property, either real or personal, such as buildings, infrastructure[,]
and equipment. . . . The concept of "capitalized costs" for tax
purposes is described in detail in Internal Revenue Code (IRC)
§§ 263, 263A, and the accompanying regulations. . . . Since the
[Transportation Act] does not define "capital costs," these Internal
Revenue Code principles can be used to provide guidance as to which
costs are properly allowable under the [T]ransportation [Act].
In an effort to assist the County in identifying and implementing necessary
corrections to achieve compliance with state law, DOR explained the potential
utility of IRC §§ 263–263A and provided a five-page written guide to help the
County develop guidelines to determine which "administrative" costs could
appropriately be paid with Penny Tax funds. However, the County insisted it was
unnecessary to implement any additional cost-allocation standards (such as IRC
§§ 263–263A) to ensure future Penny Tax expenditures complied with the law.
Specifically, the County contended its financial recordkeeping procedures were
adequate and that more detailed substantive guidelines for determining whether
costs were Penny Tax eligible under the Transportation Act were not needed. In
response, DOR expressed concern that the County refused to "rectify a core
problem of the County's Penny Tax Program—the absence of a uniform standard
for determining qualifying expenditures to ensure all Penny Tax revenue is spent
specifically on transportation-related projects."
Following several additional meetings between County and DOR officials in an
effort to reach an agreement, DOR determined further action was necessary to
prompt the County's compliance with the law. On April 27, 2016, DOR informed
the County that, based on DOR's responsibility to administer the Penny Tax and
enforce revenue laws, DOR planned to immediately cease allocations of revenue to
the County's fund until the County adopted a method of evaluating qualifying
expenses and brought its Penny Tax program into compliance.
Less than a month later, the County filed this action seeking various forms of
relief, including a declaration that the County "is not subject to [DOR]'s directives,
demands, or orders on any matter related to [the] County's spending of the Penny
Tax Revenues," an injunction prohibiting DOR from issuing directives or demands
regarding the County's Penny Tax expenditures, and a writ of mandamus to compel
DOR to remit all future Penny Tax revenues to the State Treasurer for
disbursement to the County.
DOR and its Director filed an answer and counterclaims seeking declaratory and
injunctive relief, as well as the reimbursement of improper expenditures of Penny
Tax funds.5 Specifically, DOR sought injunctive relief prohibiting the County
5
DOR also asserted third-party claims against the County's project development
team (PDT) and its members M.B. Kahn Construction Co., ICA Engineering, Inc.,
and Brownstone Construction Group, LLC, including causes of action for civil
from making any further expenditures of Penny Tax funds until the County
adopted some form of substantive framework for evaluating whether expenditures
of Penny Tax funds qualify as allowable costs under the Transportation Act and,
alternatively, for the appointment of a receiver to marshal, administer, and enforce
the proper expenditures of Penny Tax monies. During the hearing before the
circuit court, the County challenged whether DOR had standing to seek injunctive
relief or seek the appointment of a receiver because, according to the County, DOR
has no interest in the County's Penny Tax program.
Following a hearing, the circuit court issued an order (1) granting the County's
petition for a writ of mandamus directing DOR to remit the outstanding Penny Tax
revenues; (2) finding DOR had "special interest" and "public importance" standing
to assert its motions, defenses, and counterclaims; and (3) denying all requests for
injunctive relief and DOR's request for the appointment of a receiver. Both parties
filed notices of appeal, upon a joint request of the parties, the appeal was certified
to this Court pursuant to Rule 204(b), SCACR.
II.
On appeal, the County argues DOR lacks standing to raise affirmative defenses and
counterclaims and that the circuit court erred in refusing the County's request for a
temporary injunction. In its cross-appeal, DOR argues the circuit court erred in
issuing a writ of mandamus and in denying its motions for an injunction and for a
receiver. We address each of these arguments in turn.
A. DOR's Standing to Pursue Affirmative Defenses and Counterclaims
The County argues the circuit court erred in finding DOR has standing to assert
defenses and counterclaims. Specifically, the County claims public importance
standing does not apply to an executive branch agency like DOR and that "special
interest" standing is neither available to nor established by DOR in this case. We
find DOR has standing in this case.
conspiracy and constructive fraud arising from improper self-dealing that led to the
PDT obtaining a $31 million contract from the County through an improper
procurement process. The circuit court dismissed DOR's third party claims on the
basis that DOR had no standing to assert claims against private parties and that the
PDT and its members were not proper third parties under Rule 14, SCRCP. The
dismissal of those claims is not the subject of this appeal.
In a dispute between two government agencies, "the complaining agency must at
least show that it has some special interest from which it is charged with
responsibility that may be adversely affected by the action attacked." Camp v. Bd.
of Pub. Works of City of Gaffney, 238 S.C. 461, 469–70, 120 S.E.2d 681, 685
(1961). When a state agency has significant duties relating to the subject matter of
the action, the agency's real and substantial interest in the case is established.
Charleston Cty. Sch. Dist. v. Charleston Cty. Election Comm'n, 336 S.C. 174, 181,
519 S.E.2d 567, 571 (1999) (finding State Election Commission's administrative
duties in regulating county commission's preparation and distribution of ballots and
statutory power to promulgate regulations established the entity's real and
substantial interest in the case). Moreover, a party who names a state agency in a
complaint and motion cannot thereafter claim the state agency lacks standing to
appear and defend itself in the action. Id.; see also Rule 13(a), SCRCP (A
counterclaim is compulsory "if it arises out of the transaction or occurrence that is
the subject matter of the opposing party's claim.").
Based on these authorities, the circuit court properly found that DOR's extensive
administrative, oversight, and enforcement responsibilities in the Transportation
Act and throughout Title 12 of the South Carolina Code confer upon DOR a duty
in ensuring the County's expenditures of Penny Tax revenues comply with the
revenue laws DOR is charged with enforcing. S.C. Code Ann. § 12-4-10 (2014)
(establishing DOR was "created to administer and enforce the revenue laws of this
State"); id. § 12-4-325(B) (setting forth the broad scope of DOR authority which
includes "administering any South Carolina statute which has not been held to be
unconstitutional or unlawful by a final decision of a court of competent
jurisdiction"); id. § 12-4-387 (DOR is authorized "to conduct audits involving all
taxes"); see id. § 4-37-30(A)(8) (providing the Penny Tax is administered and
collected by DOR in the same manner as other sales and use taxes); id. § 12-36-
2660 (providing DOR "shall administer and enforce" the provisions of the Sales
and Use Tax Act); see also id. § 4-37-30(A)(9) (providing taxes authorized by the
Transportation Act are subject to the general enforcement provisions of the tax
code). Because DOR is the agency statutorily tasked with administering the Penny
Tax program, and the expenditure of millions of dollars of Penny Tax revenues is
an issue of wide concern both to DOR and to the residents and taxpayers of
Richland County, the circuit court correctly determined DOR has standing, and we
affirm.6
6
The County also argues that principles of Home Rule and Separation of Powers
B. Writ of Mandamus
Next, DOR argues the circuit court erred in issuing a writ of mandamus directing it
to continue remitting all Penny Tax revenues to the State Treasurer despite its
concerns about improper expenditures, arguing its broad administrative powers
include the authority to determine whether Penny Tax revenues are being used in
accordance with the law. DOR seems to acknowledge it has a duty to remit Penny
Tax revenues; however, DOR strenuously argues that its specific role in
administering the Penny Tax and its general authority to enforce tax laws
demonstrate that its duty is not a ministerial one. Although we acknowledge
DOR's broad administrative duties, we reject DOR's argument. Our analysis is
controlled by the language of section 4-37-30 (A)(15), which we find imposes
upon DOR a ministerial duty to remit Penny Tax revenues. We therefore affirm.
"Whether to issue a writ of mandamus lies within the sound discretion of the trial
court, and an appellate court will not overturn that decision unless the trial court
abuses its discretion." Charleston Cty. Sch. Dist. v. Charleston Cty. Election
Comm'n, 336 S.C. 174, 179, 519 S.E.2d 567, 570 (1999) (citing Jolly v. Marion
Nat'l Bank, 267 S.C. 681, 685–86, 231 S.E.2d 206, 208 (1976); Linton v. Gaillard,
203 S.C. 19, 23, 25 S.E.2d 896, 898 (1943)). "An abuse of discretion arises where
the trial court was controlled by an error of law or where its order is based on
factual conclusions that are without evidentiary support." Id. (citing Tri-County
Ice and Fuel Co. v. Palmetto Ice Co., 303 S.C. 237, 242, 399 S.E.2d 779, 782
(1990)).
preclude a finding that DOR has standing to pursue its defenses and counterclaims.
We reject these arguments and affirm the circuit court pursuant to Rule 220(b)(1),
SCACR, and the following authorities: S.C. Code Ann. § 4-9-25 ("All counties of
the State, in addition to the powers conferred to their specific form of government,
have authority to enact regulations, resolutions, and ordinances, not inconsistent
with the Constitution and general law of this State . . . ." (emphasis added));
Riverwoods, LLC v. Cty. of Charleston, 349 S.C. 378, 386, 563 S.E.2d 651, 656
(2002) (where a county ordinance is inconsistent with the enabling act, "the
County's assertions regarding Home Rule provide it no refuge"); Knotts v. S.C.
Dep't of Nat. Res., 348 S.C. 1, 7, 558 S.E.2d 511, 514 (2002) ("Separation of
powers is not predicated on differentiating between who actually spends the
money, but on whether [one governmental] branch assumes powers belonging to
another branch of government.").
"To obtain a writ of mandamus requiring the performance of an act, the petitioner
must show: (1) a duty of respondent to perform the act; (2) the ministerial nature of
the act; (3) the petitioner's specific legal right for which discharge of the duty is
necessary; and (4) a lack of any other legal remedy." Wilson v. Preston, 378 S.C.
348, 354, 662 S.E.2d 580, 582–83 (2008) (citing Riverwoods, LLC v. County of
Charleston, 349 S.C. 378, 563 S.E.2d 651 (2002)). A writ of mandamus "'is
designed to promote justice, subject to certain well-defined qualifications. Its
principal function is to command and execute, and not to inquire and adjudicate.'"
Charleston Cty. Sch. Dist. v. Charleston Cty. Election Comm'n, 336 S.C. 174, 182,
519 S.E.2d 567, 571–72 (1999) (quoting Willimon v. City of Greenville, 243 S.C.
82, 86–87, 132 S.E.2d 169, 170–71 (1963)).
"The duties of public officials are generally classified as ministerial and
discretionary (or quasi-judicial)." Wilson v. Preston, 378 S.C. 348, 354, 662
S.E.2d 580, 583 (2008) (citing Redmond v. Lexington Cty. Sch. Dist. No. Four, 314
S.C. 431, 445 S.E.2d 441 (1994)). "The character of an official's public duties is
determined by the nature of the act performed." Id. (citing Long v. Seabrook, 260
S.C. 562, 197 S.E.2d 659 (1973)). "The duty is ministerial when it is absolute,
certain, and imperative, involving merely the execution of a specific duty arising
from fixed and designated facts." Id. (citation omitted). "It is ministerial if it is
defined by law with such precision as to leave nothing to the exercise of
discretion." Id. "In contrast, a quasi-judicial duty requires the exercise of reason
in the adaptation of means to an end, and discretion in determining how or whether
the act shall be done or the course pursued." Id.The relevant statutory provision provides:
The revenues of the tax collected in each county pursuant to this
section must be remitted to the State Treasurer and credited to a fund
separate and distinct from the general fund of the State. After
deducting the amount of refunds made and costs to the Department of
Revenue of administering the tax, . . . the State Treasurer shall
distribute the revenues and all interest earned on the revenues while
on deposit with him quarterly to the county in which the tax is
imposed, and these revenues and interest earnings must be used only
for the purpose stated in the imposition ordinance.
S.C. Code Ann. § 4-37-30 (A)(15) (emphasis added).
Here, in the course of conducting an audit, DOR discovered County expenditures
which it believed to be a glaring misuse of Penny Tax funds. Despite DOR's broad
investigative and enforcement powers, it is beyond dispute that the relevant duty is
set forth in section 4-37-30(A)(15) and that the legislature's use of the term "must"
in a statute means that the action is mandatory. S.C. Police Officers Ret. Sys. v.
City of Spartanburg, 301 S.C. 188, 191, 391 S.E.2d 239, 241 (1990). "Under the
rules of statutory interpretation, use of words such as 'shall' or 'must' indicates the
legislature's intent to enact a mandatory requirement." Collins v. Doe, 352 S.C.
462, 470, 574 S.E.2d 739, 743 (2002). Because the Legislature's use of mandatory
language is unambiguous, this Court has no right to impose another meaning. See
Hodges v. Rainey, 341 S.C. 79, 85, 533 S.E.2d 578, 581 (2000) ("Where the
statute's language is plain and unambiguous, and conveys a clear and definite
meaning, the rules of statutory interpretation are not needed and the court has no
right to impose another meaning." (citation omitted)). We therefore find the circuit
court correctly concluded DOR's duty to remit Penny Tax funds is ministerial, and
we affirm the writ of mandamus.
C. Denial of Injunctive Relief
Both parties argue the circuit court erred in denying their respective requests for
injunctive relief. Specifically, the County contends it is entitled to a temporary
injunction prohibiting DOR from issuing directives, demands, or orders that the
County adopt and implement appropriate safeguards to ensure that expenditures of
Penny Tax funds are proper under the Transportation Act. Conversely, DOR
argues it is entitled to an injunction forbidding the County from making further
expenditures of Penny Tax revenues until the County adopts and implements
appropriate compliance safeguards. For the reasons that follow, we affirm the
circuit court's denial of the County's motion but reverse the denial of DOR's
request for an injunction. DOR has established its entitlement to an injunction
preventing the County from expending Penny Tax funds in violation of the
Transportation Act.
1. The County's Motion for Temporary Injunction
"An order granting or denying an injunction is reviewed for abuse of discretion."
Strategic Res. Co. v. BCS Life Ins. Co., 367 S.C. 540, 544, 627 S.E.2d 687, 689
(2006) (citation omitted). "An injunction is a drastic remedy issued by the court in
its discretion to prevent irreparable harm suffered by the plaintiff." Scratch Golf
Co. v. Dunes West Residential Golf Properties, Inc., 361 S.C. 117, 121, 603 S.E.2d
905, 907 (2004) (citation omitted). "To obtain an injunction, a party must
demonstrate irreparable harm, a likelihood of success on the merits, and the
absence of an adequate remedy at law." Denman v. City of Columbia, 387 S.C.
131, 140, 691 S.E.2d 465, 470 (2010) (citation omitted)). "[I]n order to receive the
aid of a Court of equity to enjoin a public corporation or department of government
in the performance of actions or duties provided by statute, there must be
allegations or showing that the public department or corporation has exercised its
power in an arbitrary, oppressive or capricious manner." Headdon v. State
Highway Dep't, 197 S.C. 118, 14 S.E.2d 586, 588 (1941).
The circuit court denied the County's motion for a temporary injunction finding
that, in light of the circuit court's issuance of a writ of mandamus ordering DOR to
remit and allocate Penny Tax revenues, the County could not show it would suffer
irreparable harm and therefore an injunction was unnecessary. On appeal, the
County argues that, even if it receives Penny Tax revenues, it nevertheless
continues to suffer irreparable harm by virtue of what the County characterizes as
DOR's "interfer[ence] with the County's implementation and operation of its Penny
Tax Program." We disagree.
The circuit court properly found that, in light of the writ of mandamus directing
DOR's continued remittance of Penny Tax Revenues, the County will not suffer
any "negative financial consequences" and therefore the County cannot show
irreparable harm. Accordingly, a preliminary injunction is unnecessary. See
Poynter Invs., Inc. v. Century Builders of Piedmont, Inc., 387 S.C. 583, 586, 694
S.E.2d 15, 17 (2010) (explaining a "preliminary injunction should issue only if
necessary to preserve the status quo ante"). Further, DOR's actions in auditing the
County and administering the Penny Tax are squarely within DOR's statutory
duties and do not warrant an injunction. See S.C. Code Ann. § 12-4-325(B)
(setting forth the broad scope of DOR authority which includes "administering any
South Carolina statute which has not been held to be unconstitutional or unlawful
by a final decision of a court of competent jurisdiction" (emphasis added)); id.§ 12-4-387 (DOR is authorized "to conduct audits involving all taxes"); 42 Am.
Jur. 2d Injunctions § 158 (in order to enjoin a governmental agency from
exercising its discretion, a complainant must show the agency's actions are outside
its statutory duties, or that the agency intends to act in bad faith, arbitrarily,
capriciously, or in a "wantonly injurious manner"). We therefore affirm.7
7
As an alternative sustaining ground, we also find the County has woefully failed
2. DOR's Motion for Injunction
Turning to DOR's request for injunctive relief, DOR contends the circuit court
erred in finding it failed to demonstrate irreparable harm in support of its motion
for an injunction because, as DOR asserted to the circuit court, the taxpayers of
Richland County would suffer irreparable harm if the County is not required to
follow the law. We agree.
It is axiomatic that the County's Ordinance may not expand the scope of
expenditures authorized in the enabling provisions of the Transportation Act,
which requires a nexus between expenditures and a transportation-related capital
project. See, e.g., S.C. Code Ann. § 4-37-30(A)(1)(a)–(c); Sinkler v. County of
Charleston, 387 S.C. 67, 76–78, 690 S.E.2d 777, 781–82 (2010) (invalidating a
county ordinance that failed to establish a development scheme as contemplated by
the relevant enabling legislation and rejecting the county's argument that the
flexibility and authority conferred by the enabling legislation authorized the county
to employ measures beyond the scope of the enabling legislation); Holler v.
Ellisor, 259 S.C. 283, 287, 191 S.E.2d 509, 510 (1972) (observing that local
government enactments and regulations "must be authorized by the enabling act, at
least, where they are enacted pursuant to the authority conferred by such act, and
they can be no broader than the statutory grant of power"). A proper expenditure
of Penny Tax funds must be tethered to a specific transportation-related capital
project or the administration of a specific transportation project.
to demonstrate a likelihood of success on the merits with regard to its interpretation
of the Transportation Act. See, e.g., Sinkler v. County of Charleston, 387 S.C. 67,
76–78, 690 S.E.2d 777, 781–82 (2010) (invalidating a county ordinance that failed
to establish a development scheme as contemplated by the relevant enabling
legislation and rejecting the county's argument that the flexibility and authority
conferred by the enabling legislation authorized the county to employ measures
beyond the scope of the enabling legislation); Holler v. Ellisor, 259 S.C. 283, 287,
191 S.E.2d 509, 510 (1972) (observing that local government enactments and
regulations "must be authorized by the enabling act, at least, where they are
enacted pursuant to the authority conferred by such act, and they can be no broader
than the statutory grant of power"). To the contrary, DOR has presented a
compelling prima facie case that some of the County's expenditures of Penny Tax
revenues are in violation of the Transportation Act.
In light of the County's many suspect expenditures of Penny Tax funds, DOR
requested an injunction against the County prohibiting the further expenditure of
Penny Tax funds until the County "adopts IRC 262/263A or some other acceptable
alternative as a standard to be used to determine when expenditures are proper
within the [Transportation] Act." Under these compelling circumstances, we find
an injunction is appropriate. To ensure objective criteria establishing compliance
with the Transportation Act, the County shall be subject to guidelines for
determining whether expenses are properly allocable to a specific transportation
project, or the direct administration of a specific transportation project.
Accordingly, the County is hereby enjoined from violating the Transportation Act.
We direct the circuit court, no later than thirty days following remand, to enter the
preliminary injunction in accordance with this opinion.8
D. DOR's Motion for the Appointment of a Receiver
Lastly, DOR contends the circuit court erred in denying its motion for the
appointment of a receiver. We disagree and find no abuse of discretion. We
affirm the circuit court's refusal to appoint a receiver.
South Carolina Code section 15-65-10 sets forth the circumstances under which the
appointment of a receiver is appropriate. Before judgment is rendered,
A receiver may be appointed by a judge of the circuit court . . . on the
application of either party when he establishes an apparent right to
property which is the subject of the action and which is in the
possession of an adverse party and the property, or its rents and
profits, are in danger of being lost or materially injured or impaired
....
Id. § 15-65-10(1).
"[T]he appointment of a receiver is within the discretion of the circuit judge."
8
The injunction is effective today. We require the circuit court to issue a
standalone injunction consistent with this opinion. We trust the County will
comply with the injunction, but in the event of any alleged violation of the
injunction, any enforcement action or rule to show cause shall be heard in the
circuit court, subject to appellate review as provided by law.
Midlands Util., Inc. v. S.C. Dep't of Health & Envtl. Control, 301 S.C. 224, 228,
391 S.E.2d 535, 538 (1989) (citing Kirven v. Lawrence, 244 S.C. 572, 137 S.E.2d
764 (1964)). "The appointment of a receiver is a drastic remedy, and should be
granted only with reluctance and caution." Id. (citing Vasiliades v. Vasiliades, 231
S.C. 366, 98 S.E.2d 810 (1957)). "[A]s a rule, a receiver will not be appointed
during the progress of a cause, unless there is the strongest reason to believe that
the plaintiff is entitled to the relief demanded in his complaint, and there is danger
that the property will be materially injured before the case can be determined."
Pelzer v. Hughes, 27 S.C. 408, 416, 3 S.E. 781, 785 (1887) (internal quotation
marks and citation omitted).
In affirming the denial of DOR's initial request for a receiver, we recognize that the
trial court can order the repayment of any improper expenditures from the County's
general fund.9 We trust that Richland County will abide by the injunction. If,
however, Richland County violates the injunction, DOR may renew its request for
the appointment of a receiver.
III.
Based on the foregoing, we affirm the trial court's issuance of a writ of mandamus,
affirm the denial of the County's request for injunctive relief, reverse the denial of
DOR's request for injunctive relief, affirm the refusal to appoint a receiver, and
remand this case for further proceedings.
AFFIRMED IN PART, REVERSED IN PART AND REMANDED.
HEARN, FEW and JAMES, JJ., concur. BEATTY, C.J., concurring in part
and dissenting in part in a separate opinion.
9
In addition to the challenged expenditures that gave rise to this litigation, we
further recognize it may be contended that the County expended Penny Tax funds
contrary to the Transportation Act during the pendency of this appeal. If the circuit
court determines the County violated the Transportation Act during the pendency
of the appeal by expending Penny Tax funds on matters unrelated to a
transportation project or unrelated to the direct administration of a transportation
project, the circuit court shall order the County to repay the improper expenditures
from the County's general fund.
CHIEF JUSTICE BEATTY: I concur in part and dissent in part with the majority's
decision. I concur with the majority's decision in all respects other than the extent
of the injunction the majority authorizes the circuit court to grant to DOR, and the
inference that DOR has broad powers to enforce any constitutional South Carolina
statute.
DOR requested an injunction to prohibit Richland County from making any
further expenditures of transportation penny tax revenue until the county adopted a
penny tax expenditure evaluation process suitable to DOR. Notwithstanding the
majority's statutory citations, DOR's demand in this regard is void of any statutory
authority, and far exceeds its statutory authority to enforce the revenue statutes of
this state.
In my view, DOR's enforcement authority in this case is limited to a legal
challenge to the improper expenditure of penny tax revenue. Thus, I agree with the
majority that DOR cannot refuse to disburse penny tax revenue to Richland County.
If DOR mounts a legal challenge to an improper expenditure, the available relief
should be limited to an injunction of further use of penny tax funds for the identified
improper expenditure and the reimbursement of the improperly expended funds.
The Optional Methods for Financing Transportation Facilities Act is like every other
law, it cannot be enforced until it is violated. Although there are allegations of past
violations, the remedy authorized by the majority will allow DOR to impose its
preferred method of project evaluation to future project expenditures when no
violation as to those expenditures has been identified.
DOR has no statutory authority to micro-manage a county's governing entity
by demanding a particular project evaluation process, or any other evaluation
process, be used in determining which expenditures are in compliance with the
transportation penny tax statute. To allow DOR to make such a demand of a county
government, in effect, gives DOR pre-approval authority of each project. In my
view, this would be a clear violation of the County Home Rule Act. S.C. Code Ann.
§§ 4-9-10 to -1230 (1986 & Supp. 2017). Specifically, the code section that
authorizes county government "to provide for an accounting and reporting system
whereby funds are received, safely kept, allocated and disbursed." Id. § 4-9-30(8)
(1986). The majority's grant of plenary authority to DOR leaves the county with no
recourse but to resort to preemptive litigation. I would limit DOR's injunction to
those expenditures declared improper by the circuit court.
Additionally, I disagree with the majority's inference that section 12-4-325(B)
imbues DOR with authority to enforce any constitutional South Carolina statute. In
my view, this interpretation of section 12-4-325(B) is taken out of context and may
be misleading.
Section 12-4-325 is entitled "Defense and indemnification of Department of
Revenue employees and officers." Subsection (B) of section 12-4-325 states in
pertinent part:
Department of Revenue employees and officers are acting within
the scope of their employment when administering any South Carolina
statute which has not been held to be unconstitutional or unlawful.
S.C. Code Ann. § 12-4-325(B) (2014). I do not interpret this statute to grant
broad powers or authority to DOR. In my view, this language refers to the
employment status of employees when performing their work-related duties.
Moreover, the powers and duties of DOR are found in sections 12-4-310 and 12-4-
320. See S.C. Code Ann. § 12-4-310 (Supp. 2017) (identifying and enumerating the
mandated powers and duties of DOR); id. § 12-4-320 (2014) (identifying and
enumerating the permissive powers and duties of DOR). Neither section authorizes
DOR to require that a county use the DOR's preferred method of project evaluation.