CITY OF SOMERSET V. PEGGY J. BELL; LEWIS BLANKENSHIP; CHARLIE MAC CORP.; WILLIAM CLOUSE; BRIAN COOKE; DAVID COTHRAN; CUMBERLAND LAKE SHELL; CUMBERLAND LUMBER COMPANY; CORLISS DAVIS; ROBERT & ARLENE FORD; JERRY & DONNA FOSTER; GRAND CENTRAL APARTMENTS; DOUG HAIL; RICK & LISA HALLORAN; HARTCO HARDWARE FLOORING, LP; STEVE HIERONYMUS; TIMOTHY L. HUGHES; HUGH HURST; J & M REALTY; FRANCIS & NANCY KAPFHAMMER; ROBERT LANKFORD; McGLOTHLIN & TODD CONSTRUCTION; NATIONWIDE LIFE INSURANCE; STEVE PARROTT; GARY & TAMARA PENCE; CHARLES F. PIERCE; RALS CONCRETE MATERIALS, INC.; FRED A. SCHULTZ; ROBERT SETSER; SOMERSET COUNTRY CLUB, INC.; HELEN STANTON; STONEYBROOK APARTMENTS; WILLIAM STRINGER; TRADEWAY, INC.; JAMES M. TUCKER; CV & CAROLYN WARNER; GERALD WEIGEL, JR.; JOSEPH WEIGEL; MICHELLE V. WILSON; WOODSTICK HOLDING COMPANY, INC.; MICHAEL CRESS; JAMES R. FOSTER; DONALD MOSS; JAMES & CINDA CREA; DAVID DORSEY; JOHN B. HAIL; DOYLE HALL; ROGER & LINDA HARNESS; JOE JACKSON; LEWIS MARCUM; HAROLD MEGARGEL; SOMERSET CYCLE CENTER; SOUTH MIDWAY SUPPLY, INC.; SHEILA THOMPSON; TRACTOR SUPPLY CO.; AM CON CONSTRUCTION PRODUCTS, INC.; KIRBY & KIM CORDELL; AND SPICEWOOD SERVICES
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January 21, 2005; 10:00 a.m.
TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2003-CA-001522-MR
CITY OF SOMERSET
V.
APPEAL FROM PULASKI CIRCUIT COURT
HONORABLE DANIEL J. VENTERS, JUDGE
CIVIL ACTION NO. 97-CI-00934
PEGGY J. BELL; LEWIS BLANKENSHIP;
CHARLIE MAC CORP.; WILLIAM CLOUSE;
BRIAN COOKE; DAVID COTHRAN;
CUMBERLAND LAKE SHELL;
CUMBERLAND LUMBER COMPANY;
CORLISS DAVIS; ROBERT & ARLENE FORD;
JERRY & DONNA FOSTER;
GRAND CENTRAL APARTMENTS;
DOUG HAIL; RICK & LISA HALLORAN;
HARTCO HARDWARE FLOORING, LP;
STEVE HIERONYMUS; TIMOTHY L. HUGHES;
HUGH HURST; J & M REALTY;
FRANCIS & NANCY KAPFHAMMER;
ROBERT LANKFORD;
McGLOTHLIN & TODD CONSTRUCTION;
NATIONWIDE LIFE INSURANCE;
STEVE PARROTT; GARY & TAMARA PENCE;
CHARLES F. PIERCE;
RALS CONCRETE MATERIALS, INC.;
FRED A. SCHULTZ; ROBERT SETSER;
SOMERSET COUNTRY CLUB, INC.;
HELEN STANTON; STONEYBROOK APARTMENTS;
WILLIAM STRINGER; TRADEWAY, INC.;
JAMES M. TUCKER; CV & CAROLYN WARNER;
GERALD WEIGEL, JR.; JOSEPH WEIGEL;
MICHELLE V. WILSON;
WOODSTICK HOLDING COMPANY, INC.;
MICHAEL CRESS; JAMES R. FOSTER;
DONALD MOSS; JAMES & CINDA CREA;
DAVID DORSEY; JOHN B. HAIL;
APPELLANT
DOYLE HALL; ROGER & LINDA HARNESS;
JOE JACKSON; LEWIS MARCUM;
HAROLD MEGARGEL; SOMERSET CYCLE CENTER;
SOUTH MIDWAY SUPPLY, INC.;
SHEILA THOMPSON; TRACTOR SUPPLY CO.;
AM CON CONSTRUCTION PRODUCTS, INC.;
KIRBY & KIM CORDELL;
AND SPICEWOOD SERVICES
AND
APPELLEES
NO. 2003-CA-001523-MR
REGGIE STRINGER AND ALL
OTHER PERSONS SIMILARLY SITUATED
CROSS-APPELLANTS
CROSS-APPEAL FROM PULASKI CIRCUIT COURT
HONORABLE DANIEL J. VENTERS, JUDGE
CIVIL ACTION NO. 97-CI-00934
V.
CITY OF SOMERSET, KENTUCKY
CROSS-APPELLEE
OPINION
AFFIRMING, IN PART, AND
REVERSING AND REMANDING, IN PART
** ** ** ** **
BEFORE:
BUCKINGHAM AND MINTON, JUDGES; MILLER, SENIOR JUDGE.1
MINTON, JUDGE:
A group of taxpayers, living in an area annexed
by the City of Somerset, brought a class action lawsuit in the
Pulaski Circuit Court, alleging that the City had improperly
collected ad valorem property taxes from them.
The circuit
court agreed, concluding that the City’s assessment and levy of
1
Senior Judge John D. Miller sitting as Special Judge by assignment
of the Chief Justice pursuant to Section 110(5)(b) of the Kentucky
Constitution and KRS 21.580.
2
taxes violated statutory requirements.
Later, the court
concluded that although the taxpayers were legally entitled to a
refund, they were precluded from recovering funds in a classaction lawsuit.
The Court also concluded that the taxpayers had
failed to exhaust administrative remedies.
Finally, the court
held that the taxpayers were not entitled to interest on their
refund.
On appeal, the City argues that the taxpayers’ class
was erroneously certified; that the taxpayers are not owed a
refund but, rather, that the City itself deserves compensation
for the value of the benefits it conferred on the taxpayers; and
that the taxpayers’ motion for a protective order to prevent
further discovery was erroneously granted.
On cross-appeal, the
taxpayers assert that their refund claim is not subject to
administrative remedies and that they are owed interest on their
refund.
Because we hold that the City is liable to the
taxpayers for refunds without interest and that the City is not
eligible for compensation for the value of benefits conferred on
the taxpayers, we affirm, in part.
Furthermore, because we
conclude that the class was properly certified and that the
taxpayers’ claims are not subject to exhaustion of
administrative remedies, we reverse and remand, in part.
3
PROCEDURAL HISTORY
In 1995, each of the taxpayers’ property was annexed
into the city limits of Somerset at the taxpayers’ request.
When land is annexed into a city, KRS2 81A.470 and KRS 81A.475
require the city responsible for the annexation to file accurate
maps of the annexed area within sixty days.
KRS 81A.470
provides as follows:
(1)
If the limits of a city are enlarged or
reduced, the city shall, within sixty
(60) days of the enlargement or
reduction, cause an accurate map and
description of the annexed,
transferred, or severed area, together
with a copy of the ordinance duly
certified, to be recorded in the office
of the county clerk of the county or
counties in which the city is located,
in the office of the Secretary of
State, and in the Department for Local
Government. . . .
(2)
No city which has annexed unincorporated or accepted transfer of
incorporated territory may levy any tax
upon the residents or property within
the annexed or transferred area until
the city has complied with the
provisions of subsection (1) of this
section, and of KRS 81A.475.
KRS 81A.475 further provides:
If any city annexes any unincorporated
area . . . it shall be the duty of the
legislative body of the city to provide
within sixty (60) days, to the county clerk
of the county in which the city is located,
a map clearly delineating the boundaries of
2
Kentucky Revised Statutes.
4
the area affected along with a list of the
names and addresses of those property owners
and registered voters who reside in the
area.
In an April 8, 2002, order granting partial summary
judgment to the taxpayers, the circuit court concluded that the
City had failed to file the proper maps as required by
KRS 81A.470 and 81A.475.
Therefore, the assessment of taxes
against the taxpayers living in the annexed area was held
improper.
Despite its determination that the taxpayers were owed
a refund, the court found the statute relied upon by the
taxpayers inapplicable to the payment of city ad valorem taxes.
Since no other specific statute regarding the proper means of
refund had been brought to its attention, the court left open
the issue of the taxpayers’ remedy.
The April 8, 2002, order also dismissed a counterclaim
filed by the City.
The City had sought to recover the value of
the benefits that the taxpayers had received as a result of the
annexation of their property.
But the court held that the
City’s claim was without merit since it was not supported in any
way by law.
Finally, the order granted the taxpayers a protective
order to prevent the City from deposing the affected property
owners.
The court reasoned that the only purpose for the City’s
5
request for pursuing discovery was to develop its counterclaim
for the alleged value of benefits conferred upon the taxpayers.
Since the counterclaim had been dismissed, discovery was deemed
unnecessary.
Therefore, the Court granted the taxpayers’
motion.
The case was continued on the docket of the Pulaski
Circuit Court pending further proceedings to determine the
remedy available to the taxpayers.
Finally, on June 18, 2003,
the court issued an order addressing the taxpayers’ remedies.
The court reaffirmed its earlier ruling regarding the City’s
violation of KRS 81A.470 and 81A.475.
But the court concluded
that the relief requested by the taxpayers under KRS 134.590
could not be granted because the taxpayers had failed to exhaust
certain administrative remedies.
The court also held that the class of taxpayers had
been improperly certified because precedent dictated that an
application for a tax refund must be brought individually.
The
court further concluded that since the entitlement-to-refund
issue had been fully and fairly litigated, the individual
taxpayers could apply for a refund without having to re-argue
the issues of law.
Finally, the court held that the taxpayers were not
eligible for interest on their refunds and that the City’s
argument regarding the inequitable benefit received by the
6
taxpayers was baseless.
The court made the order final and
appealable and this appeal followed.
THE CITY’S APPEAL
The City makes four main arguments:
first, the court
erroneously certified the taxpayers’ class; second, a refund of
taxes is unfair because the taxpayers requested annexation;
third, the circuit court erroneously dismissed the City’s
counterclaim for the value of services; and, fourth, the court
erroneously granted the taxpayers’ protective order preventing
the City from proceeding with discovery.
We disagree with the
City on all four points.
The City’s first argument is that the circuit court
improperly certified the taxpayers as a class for the purposes
of this lawsuit.
In support of its argument, the City cites
KRS 134.590, Bischoff v. City of Newport,3 and Board of Education
of Fayette County v. Taulbee.4
Relying on Swiss Oil
Corporation v. Shanks,5 both Bischoff and Taulbee held that a
class action is not available for tax refunds;6 rather, taxpayers
must bring actions for refunds individually.
3
733 S.W.2d 762 (Ky.App. 1987).
4
706 S.W.2d 827 (Ky. 1986).
5
270 S.W. 478 (Ky. 1925).
6
Bischoff, supra at 763; Taulbee, supra at 828.
7
In Swiss Oil, the
Court interpreted the language of KS7 163, the predecessor to
KRS 134.590(6), which stated a taxpayer may not receive a refund
for taxes improperly paid “unless application be made in each
case within two years from the time when such payment was made.”
The Swiss Oil court held that the term “in each case” necessarily implied:
[T]hat the application for a refund must be
made by the party entitled thereto, or some
one authorized by him to make such demand,
and that each claim shall be made separately.
It is therefore clear that the demand made by
the plaintiff upon the auditor for the
aggregate claimed to be due it, and others
for whom it had no authority to act, was not
such a demand as the statute contemplates.8
When Bischoff and Taulbee were decided, the language
of KRS 134.590(6) remained similar to that of KS 163.
The
applicable portion of the statute read, “[n]o refund shall be
made unless application is made in each case within two (2)
years from the date payment was made.”9
But, in 1996, the
General Assembly amended KRS 134.590(6).10
The pertinent section
of the statute now reads, “[n]o refund shall be made unless an
application is made within two (2) years from the date payment
was made.”
In the amended version of the statute, the
7
Kentucky Statutes.
8
Swiss Oil, supra at 478-479.
9
KRS 134.590(6) (emphasis added).
10
1996 Ky. Acts 344, §2.
8
legislature removed the phrase “in each case.”
The taxpayers
argue that the omission of these words reflects the General
Assembly’s intent that a class action is now an appropriate
vehicle for relief in tax refund cases.
Since there has been no
case law since the 1996 amendment interpreting the effect of
this omission, we are compelled to address the issue.
The interpretation of a statute is a question of law.11
For that reason, it is suitably before this Court.
When
interpreting a statute, “it is appropriate to consider the
‘contemporaneous facts and circumstances which shed intelligible
light’ on the intention of the legislative body.”12
When a
statute is amended, the presumption is that the legislature
intended to change the law.13
Our Supreme Court has held that
“[i]n determining legislative intent certain presumptions are
indulged. One of these is that . . . where a clause in an old
enactment is omitted from the new one, it is to be inferred that
the Legislature intended that the omitted clause should no
longer be the law.”14
Likewise:
11
Kenton County Fiscal Court v. Elfers, 981 S.W.2d 553, 556 (Ky.App.
1998).
12
Id. at 558, quoting Mitchell v. Kentucky Farm Bureau Mutual
Insurance Company, 927 S.W.2d 343, 346 (Ky. 1996).
13
Whitley County Board of Education v. Meadors, 444 S.W.2d 890, 891
(Ky. 1969).
14
Inland Steel Co. v. Hall, 245 S.W.2d 437 (Ky. 1952).
9
[w]here a statute is amended or re-enacted
in different language, it will not be
presumed that the difference between the two
statutes was due to oversight or
inadvertence on the part of the Legislature.
On the contrary, it will be presumed that
the language was intentionally changed for
the purpose of effecting a change in the law
itself.15
We infer from the changes made to the whole of
KRS 134.590 that the General Assembly meant to change existing
law.
In both section (6) of the statute, which is applicable to
taxes imposed by cities and local municipalities, and
section (2), which is applicable to state taxes, the legislature
altered the language of the statute by deleting the phrase “in
each case.”
Considering the historical significance of that
phrase, beginning in the Swiss Oil case, we must conclude that
the intent of the legislature was to amend that portion of the
statute limiting refunds for ad valorem taxes to individual
claims.
Even if the change was unintentional, its effect was to
alter key language of a statute, which, for some seventy years
before the amendment, had been interpreted by the courts to
limit tax refunds to individual claims.
We hold that the General Assembly omitted the phrase
“in each case” from KRS 134.590 with the intent to change the
law.
The effect was to alter the statute to permit taxpayers
requesting a refund for an ad valorem tax to bring the claim as
15
Eversole v. Eversole, 185 S.W. 487, 489 (Ky. 1916).
10
a class action.
Therefore, certification of the taxpayers’
class action was proper.
The second and third arguments raised by the City are
interrelated and, therefore, can be discussed as one.
The City
argues that since the taxpayers requested the annexation, it
would be inequitable to refund the taxes simply because the City
made a clerical error by failing to file the appropriate maps.
Specifically, the City claims if the taxes are refunded, the
taxpayers should be liable to the City for the value of benefits
received as a result of the annexation of their property.
We
believe these arguments to be completely misplaced, and we adopt
the language used by the circuit court in dismissing the City’s
claim:
The Defendant, City of Somerset, had argued
that rules of equity should be applied and
that the Plaintiff, as well as others
similarly situated, should not be entitled
to refunds of the improperly levied tax
because they received certain benefits which
accrued to property owners in areas annexed
to the City of Somerset. There is no place
in this litigation for that kind of
analysis. The Defendant argues that persons
in the annexed area involved in this case
received the benefit of city police
protection, city fire protection, gas and
water utilities at rates paid by city
property owners, as well as other tangible
and intangible benefits of city residents.
A fair and equitable tax system can exist
only when the laws enacted for such are
properly followed. No community could
withstand a system of taxation which allowed
for the collection of taxes, or the
11
refunding of improperly collected taxes,
based upon the degree to which one
benefitted [sic] from government services.
To do such would enable every taxpayer to,
in effect, have his or her own tax rate,
based upon their degree of satisfaction with
the government. Presumably, every citizen
achieves a benefit from the government. We
would not argue that those who have overpaid
their income taxes should forego the refund
which they are due under the income tax laws
simply because they enjoyed the benefit of
all that state and local government can do
for them. If equity is to be taken into
account, then we must judge not only the
benefits achieved by city residence, but
also we would have to reckon with the
burdens and dissatisfaction of some
taxpayers with city services. Therefore,
the Court concludes that the City is
entitled to no relief on account of the fact
that it provided city services to the
annexed area.
We affirm the circuit court’s decision to dismiss these issues.
Finally, the City argues that the circuit court
erroneously granted the taxpayers’ motion for a protective order
to prevent discovery.
The City wanted to depose the taxpayers
to discover what benefits they received as a result of the
annexation.
Because the only purpose of the discovery was to
bolster the City’s counterclaim, the grant of the protective
order was proper.
order:
Again, we quote from the circuit court’s
“The only relevance for such an inquiry relates to the
City’s counterclaim to recover from such persons the value of
the benefits they received.
As much as the Court has concluded
12
that the Defendant’s counterclaim must be dismissed, the
information sought by that discovery has become immaterial.”
Therefore, the decision of the circuit court granting the
taxpayers’ motion for a protective order is affirmed.
THE TAXPAYERS’ CROSS-APPEAL
The taxpayers argue, first, that KRS 131.110 does not
apply to a refund of ad valorem taxes and, second, that they are
eligible for interest on the taxes they paid.
taxpayers’ first contention.
We agree with the
But we disagree with their second
assertion because interest is not payable on a refund of ad
valorem taxes.
The City did not file a brief addressing the
taxpayers’ cross-appeal.
Counsel for the City assured us at
oral argument of this case that the City’s original brief
addressed the issues raised in the cross-appeal.
But upon
further inspection of the City’s brief, we cannot find any
mention of the taxpayers’ claims.
Therefore, we may assume that
the City concedes these issues; nonetheless, for purposes of
clarity and in the interest of diligence, we will discuss the
taxpayers’ arguments fully.
The first argument regarding the applicability of
KRS 131.110 is supported by our recent decision in Light v. City
13
of Louisville.16
In Light, the appellants challenged a tax rate
fixed by the City of Louisville in levying ad valorem property
taxes.
Appellants argued that the City failed to meet certain
prerequisites before increasing the tax rate.
Consequently,
they sought reimbursement from the city for the taxes paid.
The trial court dismissed the action, claiming the
Kentucky Board of Tax Appeals (KBTA) had jurisdiction over the
case.
The trial court stated that the appellants would first be
required to exhaust their administrative remedies under
KRS 131.110 before further pursuing the action.
We reversed, holding that the taxpayers exhausted
their administrative remedies by filing a claim requesting a
refund from the city.
We cited KRS 131.340(1), which vests the
KBTA with “exclusive jurisdiction to hear and determine appeals
from final rulings, orders, and determinations of any agency of
state or county government affecting revenue and taxation.”17
Recognizing that the city is not an arm of state or county
government, the Court stated:
We conclude that the General Assembly
intended the Kentucky Board of Tax Appeals
to have jurisdiction only over issues
involving revenue and taxation matters to be
addressed by an administrative arm of
central state government. By this we mean
the administration of taxes such as the
16
93 S.W.3d 696, 698 (Ky.App. 2002).
17
KRS 131.340(1) (emphasis added).
14
state ad valorem tax, the income tax, the
corporations’ license tax, the sales and use
tax, and selective excise taxes. These are
the subject matter of KRS Chapter 131-143A.18
We held that although various provisions of the
statutes referred to city tax rates and revenues, “those
references, without more, [did] not amount to the addressing of
city revenue and taxation matters ‘by an administrative arm of
central state government.’”19
We further held:
Although it is true that all taxing power
originally emanates from the state, the
exercise of such power which has been
granted for local purposes falls “within the
discretion of the city governing authority.”
Simply put, it is clear that the city is not
an agency “serviced by the Department of
Revenue” for purposes of local ad valorem
real property taxes, and that such taxes do
not come within the ambit of “the subject
matter of KRS Chapter 131-143.”20
Finally, we stated:
Most pertinent to this appeal is
KRS 134.590(6), which permits the refund of
ad valorem taxes only if they are
unconstitutional, or if “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.”
Although the city argues that a taxpayer’s
18
Light, 93 S.W.3d at 697-698, quoting Board of Education of
Russellville Independent Schools v. Logan Aluminum, Inc., 764 S.W.2d
75, 78 (Ky. 1989).
19
Id. at 698.
20
Id. (citations omitted).
15
appeal from an administrative denial of a
refund must be taken to the KBTA rather than
to the circuit court, our review of the
statutes cited in KRS 134.590(6) establishes
that each of those statutes refers to
disputes concerning PVA assessments rather
than to disputes involving city tax rates.
Hence, we conclude that there is no merit to
the city’s contention that KRS 134.590
expands the KBTA’s jurisdiction to include
appeals such as the one involved in the
instant action.
We also conclude that the trial court erred
by finding that the KBTA has jurisdiction
over this dispute because the city’s
ad valorem tax is part of an integrated
state tax system. Although a city which
chooses to utilize PVA valuation assessments
must adhere to certain steps before it may
increase its ad valorem real property tax
rate, the city sets that tax rate, and the
tax money collected is retained by the city
and does not enter the state revenue system.
Moreover, although KRS 133.120(10)
specifically requires appeals from PVA
assessments to be taken to the KBTA, the
method for appealing city ad valorem tax
rates is not mentioned in KRS Chapters 131143. Given this fact, we are simply not
convinced that the city’s ad valorem real
property tax rate is part of our integrated
state tax system, or that this action
contesting such rates falls within the
KBTA’s jurisdiction. We hold, therefore,
that appellants fully exhausted their
administrative remedies by seeking a refund
of the property taxes paid from the city,
and that the trial court erred by dismissing
this action on the ground that the KBTA had
exclusive jurisdiction over this dispute.21
21
Id. at 698-699.
16
Thus, we ultimately decided that the appellants’ claim for a
refund of local ad valorem property taxes, based upon the fixing
of an improper tax rate, was not subject to the administrative
remedy procedure listed in KRS 134.590.
We believe Light to control this case.
Although we
recognize that the taxpayers in this case, unlike the appellants
in Light, are not challenging the City’s tax rate, we agree with
the assessment that “the statutes cited in KRS 134.590(6) . . .
refer [] to disputes concerning PVA assessments . . . .”22
Since
the dispute in the instant case does not concern the City’s PVA
assessment but, rather, the City’s violation of KRS 81A.740, we
believe the same analysis iterated in Light is applicable here.
The refund requested in this case does not implicate the
administrative remedy procedures required by KRS 134.590(6).
The refund is based solely on the improper assessment of a local
tax and, therefore, falls outside the scope of the KBTA.
We
agree with Light that a city’s ad valorem property tax is not
part of the integrated state tax system.
As such, we believe
the taxpayers exhausted their administrative remedies when the
request for a refund was filed.
The circuit court erred when it
held the taxpayers must further exhaust the administrative
remedies cited in KRS 134.590(6) before receiving a refund.
Therefore, we reverse the decision of the circuit court on this
22
Id. at 698.
17
issue and remand for a determination of the amount of refund
that is owed each of the taxpayers in this suit.
The taxpayers’ second argument that they are eligible
for interest on the taxes they paid is mistaken.
The general
rule is that “unless authorized by statutes, interest is not
collectible on taxes due the state, county, or subdivision
thereof, nor on a refund thereof.”23
Although the taxpayers
argued in their brief that KRS 131.183 applies to their refund,
counsel conceded during oral arguments that the statute does
not, in fact, apply.
However, the taxpayers still argue that
KRS 360.010 is applicable to their claim.
We must disagree.
KRS 360.010 applies to the legal
interest rate applicable to bank loans, not to tax refunds.
To
apply the statute to this case would be a stretch we are not
willing to make.
The only other statute that could provide a basis for
the taxpayers’ recovery of interest would be KRS 134.590, the
statute authorizing the refund of local ad valorem taxes.
But,
nothing in that statute expressly states that interest is
recoverable.
In Commonwealth of Kentucky, Revenue Cabinet v.
St. Ledger,24 this Court addressed the repayment of
23
Commonwealth ex rel. Allphin v. St. Matthews Gas & Electric Shop,
Inc., 286 S.W.2d 911, 912 (Ky. 1956) (emphasis added).
24
955 S.W.2d 539, 544 (Ky.App. 1997).
18
unconstitutional taxes.
We noted that KRS 134.590, the statute
applicable to unconstitutional taxes, “does not authorize the
payment of interest.
By contrast, KRS 134.580, the statute
applicable to all refunds except those of ad valorem and
unconstitutional taxes, does authorize interest.”25
Since the
applicable statute did not expressly authorize the payment of
interest, we held that the taxpayers were not entitled to
interest on their refunds.
The same analysis applies here as in St. Ledger.
KRS 134.590 is equally applicable to the refund of ad valorem
taxes as it is to unconstitutional taxes.
The statute does not
explicitly allow for interest on refunds of ad valorem taxes.
Therefore, we cannot infer intent to require the payment of
interest.
We reject the taxpayers’ claim that they are owed
interest on their refunds, and we affirm the circuit court’s
denial of this motion.
DISPOSITION
For the reasons discussed in this opinion:
1)
We affirm the circuit court’s grant of summary
judgment for the Appellees/Cross-Appellants on the issue of the
Appellant/Cross-Appellee’s improper levy and collection of
taxes;
25
Id. at 544.
19
2)
We reverse the circuit court’s denial of the
Appellees/Cross-Appellants’ right to a tax refund, and we remand
the case to the circuit court for further proceedings aimed at
awarding such refund; and
3)
We affirm the circuit court’s ruling on all other
issues.
MILLER, SENIOR JUDGE, CONCURS.
BUCKINGHAM, JUDGE, CONCURS, IN PART, AND DISSENTS, IN
PART.
BUCKINGHAM, JUDGE, CONCURRING, IN PART, AND
DISSENTING, IN PART:
majority opinion.
I concur with most portions of the
However, I respectfully dissent from the
portion of the opinion allowing the taxpayers to seek refunds as
a part of their class action suit.
The circuit court certified this case as a class
action and determined that the City had not been authorized to
collect ad valorem taxes on the taxpayers’ real property.
But
the circuit court did not allow the taxpayers to seek refunds as
a class.
Citing the Taulbee and Swiss Oil cases, the court
concluded that class action relief was not available for the
refund of taxes.26
26
The action by the circuit court in initially certifying the class
and determining the validity of the tax but then not allowing the
action for refunds to proceed by class action was proper. See
Bischoff, 733 S.W.2d at 763. See also 59 AM.JUR.2D Parties § 106
(2002), concerning de-certification of a class.
20
As noted by the majority, the Taulbee and Bischoff
cases hold that “an action for a refund of taxes paid may not
proceed as a class action.”
Bischoff, 733 S.W.2d at 763.
This
conclusion was reached by the Taulbee and Bischoff courts based
on the emphasis in the Swiss Oil case on the words “in each
case” as used in the predecessor statute to KRS 134.590(6).
Because those three words were omitted when the statute was
amended in 1996, the majority reasons that class action relief
is now available for the refund of taxes.
More specifically,
the majority remands this case to the circuit court for further
proceedings to award tax refunds to the members of the class.
I
believe the majority has erroneously resolved this issue.
First, assuming that the majority is correct that the
removal of the words “in each case” from the statute opened the
door for class actions for tax refunds, that does not mean the
circuit court in this case was required to allow the taxpayers
to proceed in that manner.
There is no right to litigate a
claim as a class action, and CR27 23 provides only that the court
may certify a class action if the plaintiffs satisfy the
requirements of the rule.
See Southwestern Refining Co.,
Inc. v. Bernal, 22 S.W.3d 425, 439 (Texas 2000).
In fact,
whether a class should be certified is a matter within the
27
Kentucky Rules of Civil Procedure.
21
discretion of the trial court, and the trial court’s decision is
final absent an abuse of that discretion.
See Sowders v.
Atkins, 646 S.W.2d 344, 346 (Ky. 1983).
See also 32B AM.JUR.2D
Federal Courts §§ 1821 and 2203 (1996).
Assuming the majority
was correct in its holding that the removal of the words from
the statute by the legislature now authorizes class actions for
tax refunds, then the case should be remanded for the circuit
court to determine whether the class action should be maintained
in this case based on the requirements in CR 23.
Second, the taxpayers could not seek refunds as a
class in this case because not all members of the class met the
jurisdictional amounts for maintaining an action in circuit
court.
The district courts have exclusive jurisdiction of
amounts in controversy not exceeding $4,000.
KRS 24A.120(1)(a).
Therefore, the circuit courts have jurisdiction of amounts in
controversy exceeding $4,000.
See KRS 23A.010(1).
In this case
most of the individual claims for tax refunds were within the
exclusive jurisdiction of the district court, although a few
were within the jurisdiction of the circuit court.
In Lamar v. Office of Sheriff of Daviess County,
669 S.W.2d 27 (Ky.App. 1984), this court held that a class
action could not be maintained where none of the individual
claims was equal to or exceeded the statutory jurisdictional
amount of the circuit court.
Id. at 31.
22
Although that case is
distinguishable from this case since some members of the class
in this case meet the jurisdictional requirements of the circuit
court, the Lamar court relied on Zahn v. International Paper
Co., 414 U.S. 291, 94 S.Ct. 505, 38 L.Ed.2d 511 (1973), a case
involving similar facts from the U.S. Supreme Court under the
applicable federal civil rule concerning class actions.
In the
Zahn case, the Supreme Court affirmed a ruling by a lower court
refusing to permit a case to proceed as a class action.
414 U.S. at 302.
The court reasoned that every member of the
class must satisfy the jurisdictional amount before the case may
proceed as a class action.
Id. at 301.
In short, I conclude
that this court should have affirmed the trial court and not
allowed the case to proceed as a class action for tax refunds
since all members of the class did not meet the jurisdictional
requirements for maintaining an action in circuit court.
Third, the class action should not have been allowed
to proceed in this case because there is no indication that all
members of the class had filed a claim for refund within two
years from the date of the payment of the tax as required by
KRS 134.590(6).
“In a purported class action refund suit, all
class members must have filed a refund claim, and the suit is
not maintainable on the basis of the refund claim filed by the
class representative.”
§ 966 (2001).
35A AM.JUR.2D Federal Tax Enforcement
As the Kentucky Supreme Court said in the Taulbee
23
case, “KRS 134.590(6) is not self-executing.
refund must be made individually.”
Application for
Id. at 829.
See also
McConnell v. United States, 295 F.Supp. 605 (E.D. Tenn. 1969)
and Agron v. Illinois Bell Telephone Co., 325 F.Supp. 487, 488
(N.D. Ill. 1970).
Neither the circuit court nor this court may
speculate whether all members of the class were jurisdictionally
capable of bringing a refund action.
See Lipsett v. United
States, 37 F.R.D. 549, 552 (S.D.N.Y. 1965).
Like those members
of the class who failed to meet the jurisdictional amount for
filing their claim in the circuit court, those who failed to
timely apply for a refund likewise are jurisdictionally
prohibited from being members of the class.
Fourth, I disagree with the majority’s opinion that
the effect of the removal of the words “in each case” from
KRS 134.590(6) was to alter the statute so as to permit
taxpayers requesting refunds for ad valorem taxes to bring their
claims by way of class action.
KRS 134.590(6) does not relate
to the manner in which a civil suit may be filed for tax
refunds.
Rather, the statute sets a two-year period of time
within which one may apply for a refund.
Eliminating the words
“in each case” has no impact on whether taxpayers may proceed by
class action to obtain refunds.
In short, Kentucky law does not allow a class action
to seek tax refunds.
See Taulbee and Bischoff.
24
More
importantly, a class action for tax refunds was properly denied
in this case because numerous members of the class were
jurisdictionally incapable of maintaining an action in circuit
court.
I would affirm the trial court on this issue.
BRIEF AND ORAL ARGUMENT FOR
APPELLANT:
BRIEF AND ORAL ARGUMENT FOR
APPELLEES:
Joe L. Travis, Esq.
Daniel G. Yeast, Esq.
Somerset, Kentucky
D. Bruce Orwin, Esq.
Somerset, Kentucky
AMICUS CURIAE BRIEF ON BEHALF
OF ERIC AND CONNIE LIGHT:
Timothy Eifler
Louisville, Kentucky
25
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