Robert D. Holloway, Inc. v. Pine Ridge Addition Residential Property Owners

ROBERT D. HOLLOWAY, INC. v. PINE RIDGE
ADDITION RESIDENTIAL PROPERTY OWNERS

97-748                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered April 9, 1998


1.   Judgment -- summary judgment -- standard of review. -- In reviewing
     summary-judgment cases, the appellate court need only decide
     if the trial court's grant of summary judgment was appropriate
     based on whether the evidence presented by the moving party
     left a material question of fact unanswered; the moving party
     always bears the burden of sustaining a motion for summary
     judgment; all proof must be viewed in the light most favorable
     to the resisting party, and any doubts must be resolved
     against the moving party; the moving party is entitled to
     summary judgment if the pleadings, depositions, answers to
     interrogatories and admissions on file, together with
     affidavits, if any, show that there is no genuine issue as to
     any material fact and that the moving party is entitled to a
     judgment as a matter of law. 

2.   Statutes -- presumption of constitutionality -- challengers' burden. --
     Acts of the General Assembly are presumed to be constitutional
     and will be struck down only when there is clear
     incompatibility between the act and the Arkansas Constitution; 
     where the trial court ruled that Ark. Code Ann. section 14-94-
     127 (Repl. 1998), regarding tax levies in connection with
     first liens for preliminary expenses in municipal property
     owners' improvement districts, was unconstitutional, appellees
     bore the burden of proving that the statute violated
     provisions of the Arkansas Constitution.

3.   Statutes -- construction -- principles. -- When the construction of
     a statute is at issue, the statute should be given that
     interpretation that will sustain rather than defeat it, and
     effect must be given, if possible, to every part of the
     statute; in construing a statute, the appellate court will
     presume that the General Assembly, in enacting it, possessed
     the full knowledge of the constitutional scope of its powers,
     full knowledge of prior legislation on the same subject, and
     full knowledge of judicial decisions under preexisting law;
     the court must also give effect to the legislature's intent,
     making use of common sense and giving words their usual and
     ordinary meaning.

4.   Taxation -- legislative power -- cannot be exercised in absence of
     statutory authority. -- The power of taxation, whether by general
     taxation or by local assessment, is a legislative power that
     cannot be exercised in the absence of statutory authority.

5.   Constitutional law -- separation of powers -- violated by absence of
     statutory language directing chancery court to use particular method of
     computing tax levy. -- The absence of language in Ark. Code Ann.
     section 14-94-127 directing the chancery court to use a
     particular method for computing a tax levy bestowed upon the
     judiciary a nondelegable power of the legislature in violation
     of the separation-of-powers provisions of the Arkansas
     Constitution.

6.   Constitutional law -- Ark. Code Ann.  14-94-127 held unconstitutional --
     summary judgment affirmed. -- The supreme court held that the
     chancery court correctly ruled that Ark. Code Ann.  14-94-127
     is unconstitutional and affirmed the trial court's order
     granting appellee's motion for summary judgment.


     Appeal from Pulaski Chancery Court; Collins Kilgore, Chancellor; affirmed.
     Ellis Law Firm, by: George D. Ellis, for appellant.
     Wright & Bonds, by: Barbara P. Bonds, for appellee Pine Ridge Residential Property
Owners Multi-Purpose Improvement District No. 9.
     Pike & Bliss, by: George E. Pike, Jr., for appellee Capitol Development Of Arkansas, Inc.

     W.H. "Dub" Arnold, Chief Justice.
     The constitutionality of Ark. Code Ann.  14-94-127 is the issue before us on appeal. 
The instant appeal challenges an order of the Pulaski County chancery court granting a motion
for summary judgment and holding section 14-94-127 unconstitutional.  Finding that the statute
unconstitutionally delegates to the chancery court a solely legislative function, we affirm.
     Appellant, Robert D. Holloway, Inc., an engineering firm in Maumelle, Arkansas,
performed professional engineering services in a total amount of $247,811.06, on behalf of
appellee Pine Ridge Addition Residential Property Owners Multi-Purpose Improvement District
No. 9.  After the appellant submitted plats to the City of Maumelle on December 27, 1989, the
City entered into an improvement district agreement with the district and the trustee, Worthen
Bank & Trust Co., N.A.  Appellant continued to perform engineering services for the district until
November 14, 1990, when it received and tabulated construction bids.  Following the City's
agreement with the district and the trustee, the project was abandoned for unknown reasons, and
the district never issued bonds to finance construction of the planned improvements.  To date,
the appellant has not been paid for the engineering services performed for the district.
     Pursuant to Ark. Code Ann.  14-94-127, the appellant filed a complaint on February 9,
1994, seeking judgment for the balance owed, the appointment of a receiver, and the levy of a
tax against the real property in the district in an amount sufficient to pay the judgment, interest,
costs, and attorney's fees.  Specifically, section 14-94-127 provides:
     If for any reason the improvement contemplated by any district organized under this
     chapter is not made, the preliminary expense shall be a first lien upon all the real property
     in the district and shall be paid by a levy of a tax on it.  The levy shall be made by the
     chancery court of the county and shall be collected by a receiver to be appointed by the
     court.
     
     After the district filed its answer, appellee Capitol Development of Arkansas, Inc. moved
to intervene in the action, arguing that the district owned no real or personal property and,
ultimately, any tax assessed pursuant to the statute would be levied solely on Capitol
Development's property because it owned all of the real property encompassed by the district. 
Capitol Development simultaneously moved for summary judgment, asserting that section 14-94-
127 was unconstitutional because it gave the chancery court legislative discretion in determining
a method to assess and levy a tax.  The chancery court granted both the motion to intervene and
the motion for summary judgment and held that section 14-94-127 is an unconstitutional
delegation of legislative taxing power in violation of the separation of powers provisions of the
Arkansas Constitution.
     In reviewing summary judgment cases, this Court need only decide if the trial court's
grant of summary judgment was appropriate based on whether the evidence presented by the
moving party left a material question of fact unanswered.  Further, the moving party always bears
the burden of sustaining a motion for summary judgment.  All proof must be viewed in the light
most favorable to the resisting party, and any doubts must be resolved against the moving party.
The moving party is entitled to summary judgment if the pleadings, depositions, answers to
interrogatories and admissions on file, together with affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law.  Ark. R. Civ. P. 56;  McCutchen v. Huckabee, 328 Ark. 202, 943 S.W.2d 225
(1997).
     Moreover, we note that acts of the General Assembly are presumed to be constitutional
and will be struck down only when there is clear incompatibility between the act and the
Arkansas Constitution.  Here, where the trial court held section 14-94-127 unconstitutional, the
appellees bear the burden of proving that the statute violated provisions of the Arkansas
Constitution.  McCutchen, 328 Ark. at 207; McDougal v. State, 324 Ark. 354, 922 S.W.2d 323
(1996).
     Significantly, when the construction of a statute is at issue, the statute should be given that
interpretation that will sustain rather than defeat it, and effect must be given, if possible, to every
part of the statute.  In construing a statute, we will presume that the General Assembly, in
enacting it, possessed the full knowledge of the constitutional scope of its powers, full knowledge
of prior legislation on the same subject, and full knowledge of judicial decisions under preexisting
law.  McLeod, Comm'r of Revenues v. Santa Fe Trail Transp. Co., 205 Ark. 225, 168 S.W.2d 413 (1943).  We must also give effect to the legislature's intent, making use of common sense
and giving words their usual and ordinary meaning.  Kyle v. State, 312 Ark. 274, 849 S.W.2d 935
(1993).
     Here, however, the issue at bar involves not the interpretation of two conflicting statutory
provisions but the absence of "magic language" that the appellant argues can be read into the
statute to save it, and the appellees claim that the missing language defeats the statute. 
Specifically, the contested magic language is "upon the assessed value for county and state
taxation."
     Analogous statutes, involving the payment of preliminary expenses when a planned
improvement project is abandoned, have been held constitutional or would likely pass
constitutional muster.  See e.g., Ark. Code Ann.  14-92-238, 14-317-131, 14-318-124 (1987
& Repl. 1998).  These statutes permit a chancery court to assess and levy taxes to pay
preliminary expenses by (i) determining the total amount of preliminary expense, and (ii)
spreading a tax throughout the district, via a legislatively defined method, sufficient to pay the
expense.  Significantly, these statutes do not vest the chancery court with any discretion to
determine the method of levying the tax.  However, pursuant to section 14-94-127, the chancellor
could choose to compute the tax by distributing the burden over the real property within the
district in proportion to (i) the assessed value for county and state taxation, or (ii) anticipated
benefits.
     In Harrill v. Board of Comm'rs of Clinton Road Water Pipe Line Improvement Dist. No.
328 of Pulaski County, 282 Ark. 348, 668 S.W.2d 538 (1984), pursuant to a nearly identical
statute to the one at issue, a chancellor was authorized to determine the amount of preliminary
expense, but the computation of the tax was merely a matter of distributing the burden over the
total assessed value of the property within the district.  Notably, the statute involved in Harrill
did not vest the chancellor with any discretion in selecting the method of levying the tax.  The
statute was upheld precisely because the legislature did not delegate discretion in the assessment
of the tax levy but retained that power by defining the specific method to levy the tax.  Id. at
351.
     Also, in Neterer v. Dickinson & Watkins, 153 Ark. 5, 239 S.W. 722 (1922), an early case
relied upon by the Harrill court, the statute at issue authorized the payment of preliminary
expenses, upon abandonment of an improvement project, to be paid by a tax levy on the real
property within the district in proportion to the county assessment.  However, the Neterer court
held that expenses were not properly payable from funds raised by taxation of "assessed benefits"
because the statute prescribed the "assessed value" method.  The Neterer decision also concluded
that a court must find the authority, in the statute itself, to impose taxes to pay preliminary
expenses of an abandoned improvement district.  Id. at 10-11.
     The power of taxation, whether by general taxation or by local assessment, is a legislative
power that cannot be exercised in the absence of statutory authority.  Quapaw Cent. Business
Improvement District v. Bond-Kinman, Inc., 315 Ark. 703, 870 S.W.2d 390 (1994).  Here, the
absence of language in section 14-94-127 directing the chancery court to use a particular method
for computing the tax levy bestows upon the judiciary a nondelegable power of the legislature
in violation of the separation of powers provisions of the Arkansas Constitution.  See Ark. Const.
art. 4,  1, 2.
     The absence of the "magic language" from section 14-94-127 designating a particular
method of tax computation may well have been an oversight.  Unfortunately, that oversight cost
the appellant $247,811.06 and failed to afford it the same privilege and protection extended to
professional firms working with other types of improvement districts whose projects are
abandoned.  Nevertheless, the chancery court correctly held that Ark. Code Ann.  14-94-127 is
unconstitutional, and we affirm the trial court's order granting appellee Capitol Development's
motion for summary judgment.