CITY OF SHEPHERDSVILLE, KENTUCKY v. BULLITT COUNTY TRANSMISSION and CITY OF SHEPHERDSVILLE, KENTUCKY v. DR. B. C. MOSER, d/b/a Moser Chiropractic Office
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RENDERED: December 23, 1998; 2:00 p.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO. 1997-CA-002241-DG
CITY OF SHEPHERDSVILLE,
KENTUCKY
v.
DISCRETIONARY REVIEW FROM BULLITT CIRCUIT COURT
HONORABLE THOMAS L. WALLER, JUDGE
ACTION NO. 97-XX-0014
BULLITT COUNTY TRANSMISSION
AND
APPELLEE
NO. 1997-CA-002243-DG
CITY OF SHEPHERDSVILLE,
KENTUCKY
v.
APPELLANT
DISCRETIONARY REVIEW FROM BULLITT CIRCUIT COURT
HONORABLE THOMAS L. WALLER, JUDGE
ACTION NO. 97-XX-0009
DR. B. C. MOSER, d/b/a
Moser Chiropractic Office
AND
APPELLEE
NO. 1997-CA-002242-DG
CITY OF SHEPHERDSVILLE,
KENTUCKY
v.
APPELLANT
DISCRETIONARY REVIEW FROM BULLITT CIRCUIT COURT
HONORABLE THOMAS L. WALLER, JUDGE
ACTION NO. 97-XX-0010
APPELLANT
CHARLIE WRIGHT, d/b/a
Wright Electronics
AND
APPELLEE
NO. 1997-CA-002247-DG
CITY OF SHEPHERDSVILLE,
KENTUCKY
v.
APPELLANT
DISCRETIONARY REVIEW FROM BULLITT CIRCUIT COURT
HONORABLE THOMAS L. WALLER, JUDGE
ACTION NO. 97-XX-0013
KENTUCKY TANK, INC.
AND
APPELLEE
NO. 1997-CA-002248-DG
CITY OF SHEPHERDSVILLE,
KENTUCKY
v.
APPELLANT
DISCRETIONARY REVIEW FROM BULLITT CIRCUIT COURT
HONORABLE THOMAS L. WALLER, JUDGE
ACTION NO. 97-XX-0008
CATHY CURTSINGER, d/b/a
The Clip Joint
AND
APPELLEE
NO. 1997-CA-002249-DG
CITY OF SHEPHERDSVILLE,
KENTUCKY
v.
APPELLANT
DISCRETIONARY REVIEW FROM BULLITT CIRCUIT COURT
HONORABLE THOMAS L. WALLER, JUDGE
ACTION NO. 97-XX-0011
BULLITT COUNTY FEEDERS
SUPPLY COMPANY, INC.
APPELLEE
-2-
AND
NO. 1997-CA-002250-DG
CITY OF SHEPHERDSVILLE,
KENTUCKY
v.
APPELLANT
DISCRETIONARY REVIEW FROM BULLITT CIRCUIT COURT
HONORABLE THOMAS L. WALLER, JUDGE
ACTION NO. 97-XX-0012
MAXIMUM MACHINE COMPANY, INC.
APPELLEE
OPINION
REVERSING AND REMANDING
* * *
BEFORE:
GUDGEL, CHIEF JUDGE, GUIDUGLI, AND SCHRODER, JUDGES.
SCHRODER, JUDGE:
Discretionary review was granted in seven cases
involving the refund of business license fees paid pursuant to an
ordinance that this Court held void in an earlier action.
The
seven cases were consolidated and discretionary review was
limited to two issues:
the statute of limitations applicable to
a refund of said business license fees; and whether the Bullitt
Circuit Court erred in not applying the prior holdings of Griggs
v. Dolan, Ky., 759 S.W.2d 593 (1988); Board of Education of
Fayette County v. Taulbee, Ky., 706 S.W.2d 827 (1986); and St.
Ledger v. Commonwealth, Revenue Cabinet, Ky., 942 S.W.2d 893
(1997), cert. denied, _____U.S. _____, 118 S. Ct. 27, 138 L. Ed.
2d 1057 (1997).
The City of Shepherdsville, located in Bullitt County,
enacted a business license fee ordinance (990-212) on May 7,
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1990.
Said ordinance imposed a license fee on businesses which
was due July 1 of each year, beginning in 1990.
A number of
businesses/individuals (not a class action) filed suit to test
the legality of said ordinance.
On May 5, 1995, this Court (93-
CA-2829-MR) affirmed the judgment of the special judge, which
judgment held ordinance no. 990-212 void.
On June 27, 1994, the
City of Shepherdsville repealed ordinance no. 990-212 and enacted
a replacement ordinance, 994-317, effective July 1, 1994.
On
June 12, 1995, that unchallenged ordinance was superseded by
ordinance no. 995-345, effective July 1, 1995.
The refunds in
question are for the years 1990, 1991, 1992, and 1993.
The appellees seeking refunds were not parties to the
original law suit nor did they endorse their payments as “paid
under protest.”
The earlier action was not a class action.
An
application for a refund was not made before filing suit for a
refund in the district court.
Six suits were filed for a refund
in district court on September 25, 1996, and one was filed on
December 12, 1996.
KRS 92.280(2) is the enabling legislation for cities of
the second through sixth classes for levying and collecting a
license fee on franchises, trades, occupations, and professions.
See also Section 181 of the Kentucky Constitution and KRS 92.281.
Usually such ordinances also provide remedies for appealing said
assessments and applications for refunds.
However, “‘[T]he right
to a refund of illegally or improperly collected taxes does not
derive from the common law, but is a matter of legislative
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grace.’”
Commonwealth, Revenue Cabinet v. Gossum, Ky., 887
S.W.2d 329, 334 (1994) (quoting unspecified source).
In order to
argue entitlement to a refund, a taxpayer must bring
himself/herself within the terms of a statute (or municipal
ordinance) authorizing a refund.
Id. (citing Department of
Conservation v. Co-De Coal Co., Ky., 388 S.W.2d 614 (1964)).
“A
curative statute which provides a remedy must be strictly
followed in all respects.”
Gossum, 887 S.W.2d at 334 (citing
Norfolk and W. Ry. Co. v. McCoy, 288 Ky. 458, 156 S.W.2d 493
(1941)).
The appellees were successful in convincing the lower
courts that either the five-year statute of limitations of KRS
413.120(5) (an action for withholding personal property) or KRS
413.120(6) (an action for injury to the rights not arising on
contract and not otherwise enumerated) applied to the refunds of
occupational taxes.
We believe that KRS 134.590 is more on point
(refund of ad valorem taxes or taxes held unconstitutional).
134.590(3) provides:
KRS
(3) When it has been determined that city,
urban-county, county, school district, or
special district ad valorem taxes have been
paid to a city, urban-county, county, school
district, or special district when no taxes
were due or the amount paid was in excess of
the amount finally determined to be due, the
taxes shall be refunded to the person who
paid the tax.
This section, which was less than artfully drafted, could be
clearer.
However, we opine that it covers overpayments and
numerous taxes paid to a municipality or local government when
-5-
not due.
No one has suggested other curative legislation, and we
are reluctant to find the general assembly would want refunds of
ad valorem taxes but not occupational license taxes and the like.
Griggs, 759 S.W.2d at 595 infers that refunds of taxes in general
are covered.
Gossum, 887 S.W.2d 329, distinguishes refunds for
overpayment of taxes from refunds in which the constitutionality
of a tax scheme is at issue, and allows different statutes of
limitation for each.
However, KRS 413.120(3) deals with
municipalities, special districts, and local governments, not
state government.
It is the only provision for refunds from
these local entities.
The title of this statute includes refunds
of “. . . taxes held unconstitutional.”
Therefore, realizing
refunds are a matter of grace from the general assembly, we read
KRS 413.120(3) as authorizing local refunds on both overpayments
and where ordinances are found unconstitutional.
See River
Excursion Co. v. City of Louisville, 244 Ky. 811, 515 S.W.2d 470,
472 (1932); Ziedman & Pollie v. City of Ashland, 244 Ky. 279, 50
S.W.2d 557 (1932); Board of Education of Fayette County v.
Taulbee, 706 S.W.2d at 829; Griggs v. Dolan, 759 S.W.2d 593; see
also St. Ledger v. Commonwealth, Revenue Cabinet, 942 S.W.2d at
900.
KRS 134.590(6) sets a two-year statute of limitations,
from the date the taxes were paid, or when in litigation, two
years from the date of final decree:
-6-
(6) No refund shall be made unless an
application is made within two (2) years from
the date payment was made. If the amount of
taxes due is in litigation, the application
for refund shall be made within two (2) years
from the date the amount due is finally
determined. No refund for ad valorem taxes,
except those held unconstitutional, shall be
made unless the taxpayer has properly
followed the administrative remedy procedures
established through the protest provisions of
KRS 131.110, the appeal provisions of KRS
133.120, the correction provisions of KRS
133.110 and 133.130, or other administrative
remedy procedures.
Application of the statute of limitations and tolling
are subject to certain rules which are unique to taxing statutes
and ordinances.
For instance, “The filing of a lawsuit does not
automatically entitle a plaintiff to a refund without further
action.”
Board of Education of Fayette County v. Taulbee, 706
S.W.2d at 829; see also Griggs v. Dolan, 759 S.W.2d at 596.
Even
after a final determination of the litigation, the statute is not
self-executing, and it does not trigger a refund.
The individual
taxpayer must make an application for a refund from the taxing
authority.
Taulbee, 706 S.W.2d at 829.
Filing an administrative
application for a refund is necessary before a separate judicial
action can be filed for a refund.
Bischoff v. City of Newport,
Ky. App., 733 S.W.2d 762, 763 (1987).
state and local taxes.
This rule applies to both
Id.; St. Ledger v. Commonwealth, Revenue
Cabinet, 942 S.W.2d 893.
The requirement that the individual taxpayer make an
application for a refund applies whether the suit is by
individuals or by class action.
Board of Education of Fayette
-7-
County v. Taulbee, 706 S.W.2d at 829; Griggs v. Dolan, 759 S.W.2d
593.
Applications or actions for refunds cannot proceed as class
actions.
Bischoff v. City of Newport, 733 S.W.2d at 763 (citing
Taulbee, 706 S.W.2d 827).
After a successful class action
contesting the tax is final, individual members of the class must
make individual application for a refund within the two-year
statute of limitation from the date of finality.
Id.
Under KRS
134.590(6), if the suit contests the amount due, assessments, and
so forth, the statute of limitations begins from the date paid,
or if a timely application is made, it is tolled until two years
from the date of final judgment determining the amount.
706 S.W.2d at 829.
Taulbee,
If the suit contests the constitutionality of
a statute or ordinance, the statute of limitations runs from the
date of finality of the judgment holding the tax statute or
ordinance unconstitutional.
759 S.W.2d at 594.
Bischoff, 733 S.W.2d at 764; Dolan,
Thus, Dolan distinguishes Taulbee to the
extent that Taulbee would require an application for a refund to
be filed two years from the date of payment and not toll the twoyear period if the litigation involved the method of assessments,
amounts due, and the like.
Taulbee would toll the statute if the
constitutionality were being litigated and would allow the
application for a refund to be filed after a final judgment.
Griggs recognizes the distinction between applications for
refunds of taxes paid based on improper assessments, not due,
from applications for refunds of unconstitutional taxes.
However, as to local governments and refunds under KRS
-8-
134.590(6), the Court interpreted the statute to toll the need
for filing an application for a refund in either case where
litigation ensued.
Griggs, 759 S.W.2d at 595-96.
St. Ledger v.
Commonwealth, Revenue Cabinet, 942 S.W.2d at 900, distinguished
between a refund of local taxes and state taxes, recognizing a
distinction on the state taxes between contesting the
constitutionality of such and the amount thereof.
Also, the
Court recognized KRS 134.590(1) and (2) were different from
section 6 of said statute in that sections l and 2 required
“. . . the filing of a refund application within two years of
payment, not two years from the date of the filing of the
lawsuit.”
Id.
In order to qualify under an application for a refund,
the individual requesting a refund must have standing.
Standing
requires the applicant be a member of the class in a class action
or a party to the suit contesting the constitutionality of the
tax ordinance.
If an applicant for a refund is not a party, the
judgment is unenforceable.
Board of Education of Fayette County
v. Taulbee, 706 S.W.2d at 830; CR 19; Griggs v. Dolan, 759 S.W.2d
at 596.
Applying the facts of our seven individual appeals to
the rules and procedures discussed above, we note that the
original action questioning the ordinance (which imposed a
license fee) was not certified as a class action, nor were any of
the parties, other than the City of Shepherdsville, a party to
the earlier action which voided the occupational license fee
-9-
ordinance.
Also, the parties in question did not request a
refund from the City of Shepherdsville within two years from the
time the last taxes were paid (July 1, 1995).
Where an ordinance
makes no provision or forms for refunds, a written request to the
taxing authority would suffice.
Under Griggs v. Dolan, 759
S.W.2d at 596, “if no litigation is filed in two years, the time
for administrative application will expire after two years elapse
from the date payment was made.”
For the foregoing reasons, those parts of the judgments
which ordered refunds, costs, and interest are reversed and the
matters are remanded with directions to dismiss said actions.
GUIDUGLI, JUDGE, CONCURS.
GUDGEL, CHIEF JUDGE, DISSENTS.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEES:
Mark E. Edison
Shepherdsville, Kentucky
John E. Spainhour
Shepherdsville, Kentucky
-10-
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