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Tulsa County v. Oklahoma Tax Commissioner

Court of Appeals of Oklahoma, Division II

February 9, 2018

INDEPENDENT SCHOOL DISTRICT NO. 2, TULSA COUNTY, OKLAHOMA; INDEPENDENT SCHOOL DISTRICT NO. 52, OKLAHOMA COUNTY, OKLAHOMA; INDEPENDENT SCHOOL DISTRICT NO. 71, KAY COUNTY, OKLAHOMA; INDEPENDENT SCHOOL DISTRICT NO. 20, MUSKOGEE COUNTY, OKLAHOMA; INDEPENDENT SCHOOL DISTRICT NO. 18, JACKSON COUNTY, OKLAHOMA; INDEPENDENT SCHOOL DISTRICT NO. 14, OTTAWA COUNTY, OKLAHOMA; INDEPENDENT SCHOOL DISTRICT NO. 105, BLAINE COUNTY, OKLAHOMA; and INDEPENDENT SCHOOL DISTRICT NO. 2, KIOWA COUNTY, OKLAHOMA, Plaintiffs/Appellees,
v.
OKLAHOMA TAX COMMISSIONER, STEVE BURRAGE; OKLAHOMA TAX COMMISSIONER, DAWN CASH and OKLAHOMA TAX COMMISSIONER, THOMAS E. KEMP, JR., Defendants/Appellants.

          Mandate Issued: 06/20/2018

          APPEAL FROM THE DISTRICT COURT OF OKLAHOMA COUNTY, OKLAHOMA HONORABLE PATRICIA G. PARRISH, TRIAL JUDGE

          Gary Watts, Tulsa, Oklahoma, Stephanie L. Theban, RIGGS, ABNEY, NEAL, TURPEN, ORBISON & LEWIS, P.C., Tulsa, Oklahoma and Robert A. Nance, RIGGS, ABNEY, NEAL, TURPEN, ORBISON & LEWIS, P.C., Oklahoma City, Oklahoma, for Plaintiffs/Appellees

          Marjorie L. Welch, FIRST DEPUTY GENERAL COUNSEL, Alan R. Leizear, ASSISTANT GENERAL COUNSEL, OKLAHOMA TAX COMMISSION, Oklahoma City, Oklahoma, for Defendants/Appellants

          JOHN F. FISCHER, PRESIDING JUDGE

         ¶1 Steve Burrage, Dawn Cash and Thomas E. Kemp, Jr., as the Commissioners of the Oklahoma Tax Commission (Tax Commission) appeal the district court's December 9, 2016 Journal Entry of Declaratory Judgment and Injunction entered in favor of eight Oklahoma Independent School Districts. The Tax Commission also appeals the denial of its motion to dismiss, based on the plaintiffs' failure to join all school districts as necessary parties, contained in the same judgment. The appeal has been assigned to the accelerated docket pursuant to Oklahoma Supreme Court Rule 1.36(b), 12 O.S.Supp. 2013, ch. 15, app. 1, and the matter stands submitted without appellate briefing. The Tax Commission has misconstrued the effect of a 2015 amendment to section 1104 of the Motor Vehicle License and Registration Act (47 O.S.2011 §§ 1101 through 1151.4) providing for the collection and apportionment of fees, fines and penalties to Oklahoma school districts. As a result, the Commission failed to distribute to the plaintiffs funds they were statutorily entitled to receive. The judgment of the district court is affirmed as modified.

         BACKGROUND

         ¶2 The plaintiffs are eight independent school districts that receive funds collected by the Tax Commission from motor vehicle fees, taxes and penalties pursuant to the Oklahoma Vehicle License and Registration Act. Section 1104 of the Act requires the Tax Commission to distribute a certain percentage of those collections to eligible school districts, including the plaintiffs. During the 2016 fiscal year, July 1, 2015 through June 30, 2016, the plaintiffs received fewer funds than they had received in some months of the 2015 fiscal year. [1] In this suit, they sought a declaratory judgment that their receipt of diminished funds occurred because the Tax Commission misinterpreted and, therefore, misapplied a 2015 amendment to section 1104. The plaintiffs also sought injunctive relief, preventing the Tax Commission from continuing to apply section 1104 as it had since the 2015 amendment.

         ¶3 In summary, the plaintiffs argue that the statute requires the Tax Commission to distribute at least the same amount of funds distributed in the corresponding month of the previous year, or a proportionate amount thereof, rather than distribute a percentage of the funds collected based on average daily attendance, as it had been doing. The Tax Commission argues that its interpretation of the 2015 amendment to section 1104 is correct, and that the district court should defer to the Tax Commission's "great expertise" in interpreting tax statutes. The Tax Commission also filed a motion to dismiss, arguing that the declaratory judgment statute required the joinder of all school districts that receive a portion of motor vehicle collections, because the amount each received would be affected by any relief obtained by the plaintiffs. The Tax Commission appeals the district court's judgment granting the plaintiffs' motion for summary judgment and enjoining the Tax Commission from apportioning motor vehicle collections to the school districts based on average daily attendance. The Tax Commission also appeals that portion of the district court's judgment denying the motion to dismiss.

         STANDARD OF REVIEW

         ¶4 Appellate review of the ruling on a motion to dismiss involves a de novo consideration as to whether the petition is legally sufficient. Indiana Nat'l Bank v. Dep't of Human Servs., 1994 OK 98, ¶ 2, 880 P.2d 371. Title 12 O.S.2011 § 2056 governs the procedure for summary judgment in this case. A motion for summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." 12 O.S.2011 § 2056 (C). An order granting summary judgment disposes of issues that are "purely legal" and is subject to the de novo standard of appellate review. Carmichael v. Beller, 1996 OK 48, ¶ 2, 914 P.2d 1051. De novo review involves a plenary, independent, and non-deferential examination of the district court's rulings of law. Neil Acquisition L.L.C. v. Wingrod Inv. Corp., 1996 OK 125, n.1, 932 P.2d 1100.

         ¶5 The dispositive legal issue in this case requires the interpretation of 47 O.S.2011 § 1104. Legal issues involving statutory interpretation are also questions of law, subject to de novo review. Raymond v. Taylor, 2017 OK 80, ¶ 9, ___ P.3d ___ (citing Head v. McCracken, 2004 OK 84, ¶ 4, 102 P.3d 670; Fulsom v. Fulsom, 2003 OK 96, ¶ 2, 81 P.3d 652). "[S]tatutes are construed to determine legislative intent in light of the general policy and purpose that underlie them." Troxell v. Okla. Dep't of Human Servs., 2013 OK 100, ¶ 4, 318 P.2d 206.

         ANALYSIS

         I. The Tax Commission's Motion to Dismiss

         ¶6 The Tax Commission's motion to dismiss cites 12 O.S.2011 § 1653: "When a declaratory relief is sought, all persons shall be made parties who have or claim any interest which would be affected by the declaration...." According to the Tax Commission, all of the school districts that receive a portion of motor vehicle collections would be affected by any declaratory judgment in favor of the plaintiffs, because any increase in the amount distributed to the plaintiffs would reduce the amount available for distribution to the non-plaintiff school districts. The Tax Commission contends, therefore, that those school districts "shall be made parties." Id. The Tax Commission cites no authority, other than the language of the statute, for the proposition that "shall" as used in section 1653 is mandatory. Nonetheless, that is a common tenant of statutory construction. "The use of 'shall' by the Legislature is normally considered as a legislative mandate equivalent to the term 'must', requiring interpretation as a command." Oglesby v. Liberty Mut. Ins. Co., 1992 OK 61, ¶ 19, 832 P.2d 834 (emphasis added). But, as the plaintiffs point out, the word "shall" in section 1653 has not always been interpreted as mandatory, requiring the joinder of all parties who have an interest that may be affected by the litigation.

         ¶7 In Reed v. City of Bartlesville, 1973 OK CIV APP 2, ¶ 11, 510 P.2d 1013, this Court observed: "In spite of the word 'shall' the joinder requirement [in section 1653] is not mandatory in the sense that all parties who might be affected by a declaration must be joined but only those necessarily and directly affected thereby." Reed held that all property owners affected by a zoning ordinance were not required to be joined in a declaratory judgment action challenging that ordinance. The Reed Court relied, in part, on an article written at the time section 1653 was adopted. See George B. Fraser, Oklahoma's Declaratory Judgment Act, 32 Okla.B.J. 1447 (1961). In that article, Professor Fraser stated that "the joinder requirement is not mandatory in spite of the use of the word 'shall.'" Id. at 1450. And, in a footnote, he concluded: "Obviously, when the validity of a statute is challenged, all interested persons cannot be joined." Id. at n.32. This Court has concluded that "nonjoinder is not an automatic deficiency." Constr. Res. Corp. v. Courts, Ltd., 1979 OK CIV APP 1, ¶ 12, 591 P.2d 335.

         ¶8 In Oliver v. City of Tulsa, 1982 OK 121, 654 P.2d 607, the Supreme Court cited Reed, Construction Resources and decisions from other jurisdictions in support of its holding that one of the five hundred members of an association was the proper and only necessary party to a declaratory judgment action. That member sought a determination of rights pursuant to a collective bargaining agreement, and "there was no showing of any controversy between him and any members of the association." Id. ¶ 38. However, the Court reversed that portion of the judgment awarding specific sums of money to individual members of the association, based on its finding that they were "necessary parties in a proceeding to determine whether they were entitled to personal judgments." Id. ¶ 39.

         ¶9 Although we agree with the authority that "shall" as used in section 1653 is not mandatory, that does not resolve the joinder issue raised by the Tax Commission's motion to dismiss. The manner in which section 1104 is interpreted affects the interests of the plaintiffs and some of the non-plaintiff school districts differently. As the Tax Commission points out, only a limited amount of money is available for distribution to the eligible school districts. And, the amount received by any particular school district is not the same if distributed based on average daily attendance rather than on a historical basis determined by an amount previously received.

         ¶10 However, the issue framed by the plaintiffs is not how much money each district should receive for the 2016 fiscal year. The issue is whether the Tax Commission's interpretation of the 2015 amendment to section 1104 is correct. As the plaintiffs acknowledged in their response to the Tax Commission's motion to dismiss, their petition does not seek any monetary relief; it is limited to "declaratory and injunctive relief." And the plaintiff school districts "are not asking for any money back from the Tax Commission [or from] any school district. They simply want the apportionments to be correct in the future." [2] When the issue is the proper construction of a statute, it is not always necessary that all parties potentially affected by the result be joined in the action. See, e.g., Naifeh v. State ex rel. Okla. Tax Comm'n, 2017 OK 63, 400 P.3d 759 (deciding the constitutionality of a proposed tax without joinder of all potential beneficiaries of the tax); Murray Cnty. v. Homesales, Inc., 2014 OK 52, 330 P.3d 519 (deciding all counties' rights to collect taxes pursuant to the Documentary Stamp Tax Act, 68 O.S.2011 §§ 3201 through 3206, in an action brought by only two of the seventy-seven affected counties); Deutsche Bank Nat'l Trust v. Brumbaugh, 2012 OK 3, 270 P.3d 151 (construing provisions of Article Three of the Oklahoma Uniform Commercial Code in a mortgage foreclosure action involving only one of numerous affected lenders); In re: Initiative Petition No. 379, 2006 OK 89, 155 P.3d 32 (holding invalid an initiative petition filed by a "diverse political and economic group of Oklahoma citizens," but not all of the qualified voters). Because the plaintiffs' case is consistent with these types of cases, we find it ...


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