                                                                                           05/08/2019
                 IN THE SUPREME COURT OF TENNESSEE
                            AT KNOXVILLE
                      October 4, 2018 Session Heard at Nashville

                  SULLIVAN COUNTY, TENNESSEE, ET AL.
                                  v.
                 THE CITY OF BRISTOL, TENNESSEE, ET AL.

                  Appeal by Permission from the Court of Appeals
                        Chancery Court for Sullivan County
                No. B0024737, K0039409 John C. Rambo, Chancellor
                      ___________________________________

                            No. E2016-02109-SC-R11-CV
                       ___________________________________


This is one of five cases on appeal to this Court regarding the proper distribution of
liquor-by-the-drink tax proceeds between a county and a municipality within the county.
In each case, the county had not approved the liquor-by-the-drink sales, but the city had
approved such sales. The Commissioner of the Tennessee Department of Revenue, who
collects taxes on all liquor-by-the-drink sales, distributed tax proceeds to the defendant
cities in accordance with the liquor-by-the-drink tax distribution statute, Tennessee Code
Annotated section 57-4-306. The statute required the recipient cities to then distribute
half of their proceeds “in the same manner as the county property tax for schools is
expended and distributed.” Tenn. Code. Ann. § 57-4-306(a)(2)(A) (2013). In each case,
the recipient city distributed half of its tax proceeds to its own city school system and did
not share the proceeds with the county. The counties sued the cities, claiming that the
statute required the cities to distribute the tax proceeds as the counties distribute the
county property tax for schools, which is pro rata among all schools in the county based
on average daily attendance. In the instant case, the trial court granted summary
judgment for the defendant cities. The Court of Appeals affirmed, concluding that the
distribution statute was ambiguous and that the statutory framework, legislative history,
and other sources supported the trial court’s interpretation of the statute. Discerning no
error, we affirm.
               Tenn. R. App. P. 11 Appeal by Permission; Judgment of the
                              Court of Appeals Affirmed

HOLLY KIRBY, J., delivered the opinion of the Court, in which JEFFREY S. BIVINS, C.J.,
and CORNELIA A. CLARK, SHARON G. LEE, and ROGER A. PAGE, JJ., joined.

Daniel P. Street, Blountville, Tennessee, for the appellants, Sullivan County Board of
Education and Sullivan County, Tennessee.

K. Erickson Herrin, Johnson City, Tennessee, for the appellees, Cities of Bristol and
Kingsport, Tennessee.


                                             OPINION1

        The issues in this case are better understood with some knowledge of the
development of the pertinent liquor-by-the-drink statutes. Consequently, we offer some
background on the history of the statutes before we outline the facts and analyze the
issues.

                                 The Liquor-By-The-Drink Act

       During the years of federal prohibition (1920–1933), Tennessee had “bone dry”
laws, which criminalized the sale, purchase, receipt, possession, transport, and
manufacture of alcoholic beverages. City of Chattanooga v. Tenn. Alcoholic Beverage
Comm’n, 525 S.W.2d 470, 472 (Tenn. 1975); Tenn. Op. Att’y Gen. 79-215 (May 3,
1979). After prohibition ended, Tennessee enacted a “local option” law authorizing
counties to hold county-wide local option elections on whether to allow off-premises
(package) sales of alcoholic beverages within their borders. City of Chattanooga, 525
S.W.2d at 472; Chadrick v. State, 137 S.W.2d 284, 285 (Tenn. 1940); see also Templeton
v. Metro. Gov’t of Nashville & Davidson Cnty., 650 S.W.2d 743, 754 (Tenn. Ct. App.
1983). “The ‘bone dry law’ continued in effect in counties not electing to come under the
provisions of the local option law.” City of Chattanooga, 525 S.W.2d at 472; see also
Renfro v. State, 144 S.W.2d 793, 794 (Tenn. 1940).



        1
         This appeal was consolidated with four other cases for oral argument only, as we will discuss in
more detail below.
                                                 -2-
        In 1967, the Legislature passed comprehensive legislation related to liquor sales
for on-premises consumption, i.e., liquor by the drink (hereinafter “LBD”). We refer to
this as “the LBD Act.” The LBD Act “authorize[s] the sale of intoxicating liquors by the
drink for consumption on the premises, impose[s] taxes upon such sales[,] and provide[s]
for the collection thereof.” Aetna Cas. & Sur. Co. v. Woods, 565 S.W.2d 861, 865 (Tenn.
1978). Initially, the LBD Act allowed only the largest counties to hold local option
elections. See Tenn. Code Ann. § 57-164 (1968). Gradually, in increments, the Act was
amended to allow all counties—as well as all municipalities—to approve LBD sales by
local option election. See 1987 Tenn. Pub. Acts, ch. 456 § 2; 1992 Tenn. Pub. Acts, ch.
711 § 1.

        In any jurisdiction that approves LBD sales, such sales can lawfully be made by
the establishments enumerated in the statutes, including restaurants, hotels, and sports
facilities. See Tenn. Code Ann. § 57-4-101 (2013). Private clubs are among the
enumerated establishments, but they are also permitted to sell LBD even in counties or
municipalities that have not adopted LBD.2

       Tennessee Code Annotated section 57-4-301(c) levies a 15% tax on all LBD
      3
sales. Tenn. Code Ann. § 57-4-301(c) (2013). We refer to this as “the LBD tax.”
Retailers collect the LBD tax from consumers and then forward the tax proceeds to the
Commissioner of the Tennessee Department of Revenue (“Commissioner”). See Tenn.

          2
          This has been the case since at least 1972. Tennessee Code Annotated section 57-4-101(a)(2)
authorizes private club sales “subject to the further provisions of [Chapter 4] other than § 57-4-103”
(which makes Chapter 4 applicable to jurisdictions that have voted for LBD sales by referendum). Tenn.
Code Ann. § 57-4-101(a)(2) (2013) (emphasis added). The italicized proviso has been interpreted to
allow clubs to “legally sell alcoholic beverages by the drink throughout the state, whether or not the area
in which such facilities are located are ‘wet’ or ‘dry’ for other purposes.” Tenn. Op. Att’y Gen. 79-215
(May 3, 1979). The parties in this case do not dispute that private clubs may sell LBD regardless of
whether the jurisdiction in which they are located has approved such sales.
          3
              That subsection provides:

                   (c) In addition to the privilege taxes levied in subdivision (b)(1), there is further
          levied a tax equal to the rate of fifteen percent (15%) of the sales price of all alcoholic
          beverages sold for consumption on the premises, the tax to be computed on the gross
          sales of alcoholic beverages for consumption on the premises for the purpose of remitting
          the tax due the state, and to include each and every retail thereof.

Tenn. Code Ann. § 57-4-301(c) (2013 & 2018).

                                                      -3-
Code Ann. § 57-4-302 (2013 & 2018). The Commissioner then distributes the LBD tax
proceeds in accordance with the statute at issue in this case, Tennessee Code Annotated
section 57-4-306. We refer to this as “the distribution statute.”

       This case involves the application of the distribution statute as it existed prior to
the enactment of a July 2014 amendment.4 The relevant versions of the distribution
statute required the Commissioner to distribute 50% of all LBD tax proceeds to
Tennessee’s “general fund to be earmarked for education purposes.” Tenn. Code Ann. §
57-4-306(a)(1). The Commissioner was directed to distribute the remaining 50% of the
tax proceeds back “to the local political subdivision” that generated the proceeds. Id. §
57-4-306(a)(2).

       Important to this appeal, the remaining provisions of the distribution statute
described what was to be done with the tax proceeds sent back to the originating local
political subdivision. The distribution statute said that half of those proceeds would go to
the general fund of the county, city, or town in which the taxes were generated. Id. § 57-
4-306(a)(2)(B). The other half, the distribution statute stated, “shall be expended and
distributed in the same manner as the county property tax for schools is expended and
distributed.” Id. § 57-4-306(a)(2)(A). Interpretation of this provision is the issue
presented to us in this case.

                                           Sullivan County

       The underlying facts in this case are essentially undisputed. The Cities of Bristol
and Kingsport (collectively, “the Cities”) are located in Sullivan County.5 The Cities
have at all relevant times had their own municipal school systems separate from the
Sullivan County school system.

       In 1984, citizens of both Cities passed referendums authorizing LBD sales within
their city limits. The County has never passed a referendum regarding LBD sales.


        4
         The distribution statute was amended substantially effective July 1, 2014, after the five lawsuits
herein were filed. See 2014 Tenn. Pub. Acts, ch. 901 § 1 (H.B. 1403). Unless otherwise specified,
references to the distribution statute are to the version in the 2013 volume of the Tennessee Code
Annotated, which sets forth the statute as it existed at the time these lawsuits were filed and before the
July 2014 amendment.
        5
           The City of Kingsport is also located in part in Hawkins County, but Hawkins County is not a
party to this appeal.
                                                  -4-
However, since at least 1980, private clubs have legally sold LBD in the Cities and in
unincorporated areas of the County.

        On May 30, 2014, the Sullivan County Board of Education and Sullivan County
filed separate complaints against the Cities. Both sought declaratory judgment as to the
rights and obligations of the parties concerning LBD tax proceeds. The cases were
ultimately consolidated. Hereinafter we refer to the Sullivan County Board of Education
and Sullivan County collectively as “the County.”

       The County also sought damages from the Cities for its pro rata share of LBD tax
proceeds distributed to the Cities since 1980.6 The County alleged that the distribution
statute required the Cities to remit half of their LBD tax proceeds to the County, to
distribute pro rata among all schools in the County.

       The Cities denied liability. They also asserted counterclaims against the County
based on distribution reports attached to the County’s complaints. The distribution
reports showed that the County had been receiving LBD tax proceeds from the sale of
LBD in private clubs for many years, but that it had never redistributed those proceeds
pro rata to the other schools in the County. The Cities claimed in their counterclaims that
the County owed them damages for their pro rata share of LBD tax proceeds unlawfully
withheld.7

       Subsequently, the parties filed cross-motions for summary judgment. In their joint
motion for summary judgment, the Cities argued that the distribution statute was
ambiguous and that the statute’s legislative history and longstanding rules of statutory
construction supported a ruling in the Cities’ favor. In its motion, the County asserted
that the plain language of the distribution statute required the Cities to distribute their
LBD tax proceeds pro rata across all schools in the County.

      In February 2016, the trial court entered an order granting the Cities’ motion for
summary judgment and denying the County’s motion on the main allegations in the
County’s complaint. The trial court first concluded that the distribution statute was
unambiguous in favor of the Cities’ interpretation. The County’s interpretation, the trial

       6
           The County sought $758,239 in damages from Bristol and $1,340,037 from Kingsport.
       7
         In their counterclaims, Bristol alleged damages of $88,000, and Kingsport alleged damages of
$245,000.

                                                 -5-
court reasoned, required a two-part distribution scheme, whereby the Commissioner
would distribute LBD tax proceeds to the Cities, and then the Cities would be required to
distribute half of those proceeds in accordance with an average daily attendance formula.
“Nowhere does the language require the municipalities to distribute the funds according
to the average daily attendance.” The trial court also concluded that the distribution
statute plainly did not require the Cities to turn over half of their LBD tax proceeds to the
County for redistribution, because this would require “a third distribution scheme” that is
not required by the statute.8 For these reasons alone, the trial court held, the Cities were
entitled to summary judgment. In the alternative, the trial court said that, even if the
statute were ambiguous, the legislative history supported the trial court’s conclusion that
cities operating their own school systems were not required to share their LBD tax
proceeds with county schools.

        The Cities then filed a joint motion for summary judgment on their counterclaims
against the County. In September 2016, after discovery and further briefings by both
parties, the trial court entered an order granting summary judgment for the Cities. It
ordered the County to pay $107,286 to Kingsport and $75,802 to Bristol, amounts that
reflected each City’s pro rata share of the undistributed private club LBD tax proceeds
received by the County between 1980 and 2013. The County appealed the trial court’s
grant of summary judgment on its claim for LBD tax proceeds, but it did not challenge
the trial court’s grant of summary judgment on the Cities’ counterclaims.9

       Around the same time, three other cases involving the same issue regarding the
distribution statute were appealed to the Court of Appeals for the Eastern Section. See
Blount Cnty. Bd. of Educ. v. City of Maryville, No. E2017-00047-COA-R3-CV, 2017 WL
6606855 (Tenn. Ct. App. May 26, 2017) (“Blount Cnty.”); Bradley Cnty. Sch. Sys. ex rel.
Bradley Cnty. Bd. of Educ. v. City of Cleveland, No. E2016-01030-COA-R3-CV, 2017
WL 6598557 (Tenn. Ct. App. Dec. 27, 2017) (“Bradley Cnty.”); Washington Cnty. Sch.
Sys. ex rel. Washington Cnty. Bd. of Educ. v. City of Johnson City, No. E2016-02583-
COA-R9-CV, 2017 WL 6603656 (Tenn. Ct. App. Dec. 27, 2017) (“Washington Cnty.”).
A motion to consolidate was filed, and the Court of Appeals for the Eastern Section
entered an order “granting the motion ‘only to the extent that these cases shall be set for

        8
         The trial court determined that, even though the distribution statute did not apply to Sullivan
County for purposes of receiving LBD tax proceeds from the Commissioner, “Sullivan County is not
precluded by section 57-4-103(a)(1) from receiving [LBD] tax revenue.”
        9
         The trial court’s ruling on the Cities’ counterclaims is not at issue in this appeal. The County
concedes in its appellate brief that “it should have shared its [LBD] tax revenue with [the] Cities.”
                                                 -6-
oral argument on the same docket and on the same day.’” Sullivan Cnty. v. City of
Bristol, No. E2016-02109-COA-R3-CV, 2017 WL 6598559, at *3 (Tenn. Ct. App. Dec.
27, 2017) (quoting order). Pursuant to the order, the intermediate appellate court held
arguments in this case and in the three other cases on the same day before the same panel
of judges.

       On December 27, 2017, the Eastern Section panel of the Court of Appeals
contemporaneously issued separate decisions in all four cases, including this one, holding
in favor of the city defendants.10 See Sullivan Cnty., 2017 WL 6598559, at *17; see also
Blount Cnty., 2017 WL 6606855, at *21; Bradley Cnty., 2017 WL 6598557, at *17;
Washington Cnty., 2017 WL 6603656, at *17. The appellate court first determined that
the distribution statute was ambiguous regarding whether cities that operate their own
school systems were required to remit a portion of their LBD tax proceeds to their
counties when the counties had not approved LBD sales by referendum. See Sullivan
Cnty., 2017 WL 6598559, at *8; Blount Cnty., 2017 WL 6606855, at *9; Bradley Cnty.,
2017 WL 6598557, at *8; Washington Cnty., 2017 WL 6603656, at *10. After
considering the statutory framework, legislative history, and other sources, the Eastern
Section panel held that the distribution statute directed the cities to expend and distribute
half of their LBD tax proceeds in the manner in which the county property taxes would
be expended and distributed within the cities, that is, for the benefit of the cities’ own
school systems. See Sullivan Cnty., 2017 WL 6598559, at *17; Blount Cnty., 2017 WL
6606855, at *21; Bradley Cnty., 2017 WL 6598557, at *17; Washington Cnty., 2017 WL
6603656, at *17.

        About a month later, on January 23, 2018, the Court of Appeals for the Middle
Section reached the opposite conclusion in a factually similar case. Coffee Cnty. Bd. of
Educ. v. City of Tullahoma, No. M2017-00935-COA-R3-CV, 2018 WL 522423, at *4
(Tenn. Ct. App. Jan. 23, 2018). In Coffee County, the Middle Section panel
acknowledged the four decisions issued by the Eastern Section panel but disagreed with
the analysis in those decisions. Id. at *3-4 (noting that it did “not disagree with [its]
learned cohorts lightly”). Rather, the Middle Section panel deemed the distribution
statute unambiguous and held that, on its face, the statute plainly required municipalities
to distribute the tax proceeds in the same manner that the counties distribute county
property taxes for schools. The Middle Section declined to consider anything outside the
text of the specific provision. Id. at *3.


       10
           The decisions were all issued by the same appellate panel, and the legal analysis is
substantively identical in each opinion.
                                             -7-
       We granted permission to appeal in this case and in the four similar cases arising
out of both the Eastern and Middle Sections of the Court of Appeals to resolve the split
among the appellate courts on the proper interpretation of the distribution statute.11

                                       STANDARD OF REVIEW

       We review a trial court’s ruling on a motion for summary judgment de novo
without a presumption of correctness in the lower court’s decision. Rye v. Women’s Care
Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 250 (Tenn. 2015) (citing Bain v. Wells, 936
S.W.2d 618, 622 (Tenn. 1997)). Summary judgment is appropriate when “the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
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.” Tenn. R. Civ. P. 56.04; Rye,
477 S.W.3d at 250.

       As we have indicated, the relevant facts in the instant appeal are undisputed, and
the issues involve only the interpretation of statutes. Issues of statutory interpretation are
questions of law, which are also reviewed de novo without a presumption of correctness.
Beard v. Branson, 528 S.W.3d 487, 494-95 (Tenn. 2017) (quoting Kiser v. Wolfe, 353
S.W.3d 741, 745 (Tenn. 2011)); Circle C Constr., LLC v. Nilsen, 484 S.W.3d 914, 917
(Tenn. 2016).

                                               ANALYSIS

        The primary issue on appeal involves the proper interpretation of the distribution
statute as it existed when this lawsuit was filed in May 2014.12 At that time, the statute
read:


        11
          This case was consolidated with the other four cases for oral argument only. This opinion
resolves only the dispute between Sullivan County and the Cities of Bristol and Kingsport. Separate
opinions are being issued in each of the other four cases.
        12
            As noted above in footnote 4, the distribution statute was amended substantially in July 2014,
after this lawsuit was filed. See 2014 Tenn. Pub. Acts, ch. 901 § 1 (H.B. 1403). As explained in Coffee
County, however, we need not delve into the particulars of the amendment because it does not apply in
this case and it does not inform our interpretation of the pre-July 2014 versions of the statute. See Coffee
Cnty. Bd. of Educ. v. City of Tullahoma, No. M2017-00935-SC-R11-CV, slip op. at 22 (Tenn. May 8,
2019).

                                                   -8-
              (a) All gross receipt taxes collected under § 57-4-301(c) shall be
       distributed by the commissioner as follows:

                   (1) Fifty percent (50%) to the general fund to be earmarked
            for education purposes; and

                   (2) Fifty percent (50%) to the local political subdivision as
            follows:

                    (A) One half (1/2) of the proceeds shall be expended and
               distributed in the same manner as the county property tax for
               schools is expended and distributed; provided, however, that
               except in [Bedford County]13 any proceeds expended and
               distributed to municipalities which do not operate their own
               school systems separate from the county are required to remit
               one half (½) of their proceeds of the gross receipts liquor-by-
               the-drink tax to the county school fund; and

                     (B) The other one half (1/2) shall be distributed as
               follows:

                          (i) Collections of gross receipts collected in
                    unincorporated areas, to the county general fund; and

                          (ii)    Collections of gross receipts in
                    incorporated cities and towns, to the city or town
                    wherein such tax is collected.

Tenn. Code Ann. § 57-4-306(a)(1)–(2) (2013) (emphasis added). The italicized portion
of the statute, which we call “the local education provision,” is the specific provision in
dispute in this case. The question is whether municipalities with their own school
systems were required to expend and distribute their LBD tax proceeds with other
schools in the county pro rata, that is, “in the same manner as the county property tax for
schools is expended and distributed” by the county. Id. § 57-4-306(a)(2)(A) (2013).



       13
           It is undisputed that the statutory language omitted and replaced by the bracketed language
describes the population parameters of Bedford County.
                                                -9-
       We examined the proper interpretation of the distribution statute at length in
Coffee County, the case arising out of the Middle Section Court of Appeals and released
on the same date as this opinion. See Coffee Cnty. Bd. of Educ. v. City of Tullahoma, No.
M2017-00935-SC-R11-CV, slip op. at 22 (Tenn. May 8, 2019) (hereinafter “Coffee
Cnty.”). After fulsome analysis, we concluded in Coffee County that the local education
provision in the distribution statute “required a municipality with its own school system
to expend and distribute half of its LBD tax proceeds in the same manner that the county
property tax for schools is expended and distributed within the municipality, which is for
the benefit of the municipality’s own school system.” Id. at 22. In that case, because the
City of Tullahoma had its own school system, we held that the city “was not required to
share its LBD tax proceeds with the [c]ounty” during the relevant time period.14 Id. at
22.

       The County concedes that the distribution statute required it to distribute part of its
private club LBD tax proceeds to the Cities. It claims that, under the distribution statute,
the Cities should in turn be required to share their LBD tax proceeds with the County.
We rejected a similar argument in Blount County, one of the four parallel Eastern Section
cases on this issue.15 In Blount County, we noted that disparity under the distribution
statute between what is required of a county and what is required of a city is logical
because “the citizens of [the cities] are necessarily also citizens of [the county]. But the
reverse is not true at all. [The] citizens of [the county] that live outside [the cities] are not
citizens of [the cities].” See Blount Cnty. Bd. of Educ. v. City of Maryville, No. E2017-
00047-SC-R11-CV, slip op. at 12 (Tenn. May 8, 2019) (quoting trial court). The manner

        14
           The County in this case argues that its interpretation should prevail based on the similarities
between the language in the distribution statute and a provision in the Local Option Revenue Act
(LORA), which was enacted four years before the LBD Act. See 1963 Tenn. Pub. Acts., ch. 329 § 4;
Tenn. Code Ann. § 67-6-712(a)(1) (2018) (providing that half of the taxes levied under LORA are to be
distributed to the county trustee and that one half of those proceeds “shall be expended and distributed in
the same manner as the county property tax for school purposes is expended and distributed”). We
rejected this argument in Coffee County noting that, although this LORA provision is nearly identical to a
part of the local education provision, “the taxes involved in the statutes are substantially different from
each other, and the LORA statute does not have a ‘1982 proviso’ counterpart.” Coffee Cnty., slip op. at
14 n.21.
        15
           In Blount County, the county raised the alternative argument that, if the defendant cities were
not required to share their LBD tax proceeds, then it was entitled to reimbursement of private club LBD
tax proceeds that had previously been paid to the defendant cities. We disagreed based on our analysis in
Coffee County. See Blount Cnty. Bd. of Educ. v. City of Maryville, No. E2017-00047-SC-R11-CV, slip
op. at 11-12 (Tenn. May 8, 2019).

                                                  - 10 -
in which counties and cities are required to distribute LBD tax proceeds, we noted, is a
decision that was “within the Legislature’s prerogative to make.”16 Id.

       Thus, the issue presented here is substantively indistinguishable from the issue
decided in Coffee County. Based on our holding in Coffee County, we hold that the
distribution statute did not require the Cities to share half of their LBD tax proceeds with
the County and other school systems in the County pro rata. Rather, the local education
provision directed the Cities to expend and distribute the education portion of their LBD
tax proceeds in support of their own municipal school systems.

       Accordingly, we affirm the trial court’s grant of summary judgment in favor of the
Cities. All other issues raised on appeal and not specifically addressed herein are
pretermitted by our decision.

                                             CONCLUSION

      The decisions of the trial court and the Court of Appeals are affirmed. Costs on
appeal are to be taxed to Appellants Sullivan County Board of Education and Sullivan
County, as well as their surety, for which execution may issue, if necessary.




                                                           _________________________________
                                                           HOLLY KIRBY, JUSTICE




        16
          As we noted in Coffee County, our interpretation of the distribution statute is not based on the
perceived “fairness” of that statute. Coffee Cnty. slip op. at 22-23 n.29. Any “argument concerning
perceived fairness of the tax distribution scheme provided by the statute would properly be directed to the
General Assembly rather than to this Court.” See Sullivan Cnty., 2017 WL 6598559, at *17; see also
Blount Cnty., 2017 WL 6606855, at *18; Bradley Cnty., 2017 WL 6598557, at *16; Washington Cnty.,
2017 WL 6603656, at *17.

                                                  - 11 -
