State v. Tedder

STATE of Arkansas, Department of Finance and
Administration v. Brandon K. TEDDER

96-429                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered November 4, 1996


1.   Jurisdiction -- subject-matter jurisdiction -- question as to
     jurisdiction may be raised at any time. -- The question of
     subject-matter jurisdiction is always open and can be raised
     at any time; it does not matter how the question of subject-
     matter jurisdiction arises; the court can raise the issue on
     its own motion.

2.   Jurisdiction -- chancery court did not have subject-matter
     jurisdiction over remaining members of proposed class --
     chancellor erred in certifying class. -- Where the appellee
     was the only taxpayer who had requested a refund and had his
     application denied, the chancery court did not have subject-
     matter jurisdiction over the remaining members of the proposed
     class; appellee was the only was the only taxpayer who
     complied with Ark. Code Ann. 26-18-507(e)(2)(A) and thus
     caused the State, through appellant, to waive sovereign
     immunity; full compliance with the statute was necessary
     before sovereign immunity could be waived, and so the proposed
     class of taxpayers had not complied with the statute; the
     chancellor erred in certifying the class, and the case was
     reversed.      


     Appeal from Pulaski Chancery Court; Ellen B. Brantley,
Chancellor; reversed and remanded.
     Beth B. Carson, Chief Counsel, for appellant.
     Michael A. Skipper and Stephen W. Tedder, for appellee.

     Bradley D. Jesson, Chief Justice.
     This is an interlocutory appeal from an order certifying a
class action.  The appellee, Brandon K. Tedder, purchased a used
Ford Bronco for $4,900.00 and paid $220.50 in sales tax on the
vehicle.  He filed a claim with appellant Department of Finance and
Administration for refund of the $220.50 on the ground that the
sale of the used vehicle was exempt as an isolated sale under Ark.
Code Ann.  26-52-401(17)(Repl. 1992 and Supp. 1995).  Following
the Department's denial of the refund, Mr. Tedder filed suit in
chancery court on behalf of himself and all other taxpayers
similarly situated.  Following a hearing, the chancellor certified
a class of persons under Ark. R. Civ. P. 23 as "those persons,
parties, or entities who paid sales tax on the consideration for
used motor vehicles, trailers, or semi-trailers purchased from
another person, corporation, etc., not engaged in the business of
selling used motor vehicles, trailers. or semi-trailers, between
July 14, 1992 and February 12, 1995."  The Department appeals the
order of certification on the basis that the chancellor lacked
subject-matter jurisdiction to certify the class.  We agree with
the Department's argument and reverse and remand.
     Our constitution generally prohibits suits against the state. 
Ark. Const. art. 5,  20.  However, Ark. Code Ann.  26-18-
507(e)(2)(A) (Repl. 1992) permits a taxpayer to sue the state for
an improperly collected sales tax only after a refund has been
sought and refused or the Commissioner has not acted upon the
taxpayer's request.  Since Mr. Tedder is the only taxpayer who had
requested a refund and had his application denied, the Department
claims that the chancery court did not have subject-matter
jurisdiction over the remaining members of the proposed class.  In
State v. Staton, 325 Ark. 341, ___, ___ S.W.2d ___, ___ (October
28, 1996)(substituted opinion granting rehearing), we resolved this
issue in the Department's favor.  Recognizing strong fiscal public
policy concerns, we held that full compliance with the statute is
necessary before sovereign immunity is waived.    
     While the Staton case involved a final judgment, both parties
in the present case direct our attention to our opinion in Arkansas
State Bd. of Educ. v. Magnolia School Dist. No. 14, 298 Ark. 603,
769 S.W.2d 419 (1989), in which we held that, in an interlocutory
appeal from a certification order, we would only hear argument on
whether the trial court abused its discretion in certifying the
class under Ark. R. Civ. P. 23.  We agree with the parties that
Magnolia School District is distinguishable.  In that case, the
parties had provided no authority that the defenses of sovereign
immunity and lack of standing, would, if proven, deprive the
chancery court of jurisdiction.  298 Ark. at 604.  Conversely, in
this case, these issues have been fully developed.  As we
recognized in Staton, the question of subject-matter jurisdiction
is always open and can be raised at any time. Staton, slip op. at
4; see also Dent v. Wright, 322 Ark. 256, 909 S.W.2d 302 (1995);
Arkansas Dept. of Human Serv. v. Estate of Hogan, 314 Ark. 19, 858 S.W.2d 105 (1993).  It does not matter how the question of subject-
matter jurisdiction arises; we can raise the issue on our own
motion. Arkansas Dept. of Human Serv. v. Estate of Hogan, supra.
     In the case before us, Mr. Tedder was the only taxpayer who
complied with  26-18-507(e)(2)(A) and thus caused the state,
through the Department, to waive sovereign immunity.  Because the
proposed class of taxpayers had not complied with this statute, we
hold that the chancellor erred in certifying the class and reverse. 
     Reversed and remanded.  
     Newbern, Corbin, and Brown, JJ. dissent. See dissenting
opinions in State v. Staton, 325 Ark. 341, ___, ___ S.W.2d ___, ___
(October 28, 1996)(substituted opinion granting rehearing).