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

                BRADLEY COUNTY SCHOOL SYSTEM, ET AL.
                                  v.
                  THE CITY OF CLEVELAND, TENNESSEE

                   Appeal by Permission from the Court of Appeals
                         Chancery Court for Bradley County
                    No. 2014-CV-84 Jerri S. Bryant, Chancellor
                      ___________________________________

                            No. E2016-01030-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 in favor of the city. 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. We affirm.

             Tenn. R. App. P. 11 Appeal by Permission; Judgment of the
                   Trial Court and 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.
James F. Logan, Jr., Cleveland, Tennessee, for the appellants, Bradley School System, by
and through the Bradley County Board of Education, and Bradley County, Tennessee.

Douglas S. Johnston, Jr., Nashville, Tennessee, for the appellee, City of Cleveland,
Tennessee.

Kristin Ellis Berexa and Mark E. McGrady, Nashville, Tennessee, for amicus curiae,
Municipal League Risk Management Pool, Inc.


                                             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).

        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

        1
         This appeal was consolidated with four other cases for oral argument only, as we will discuss in
more detail below.
                                                 -2-
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
sales.3 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.
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.”

        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-
       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.

                                           Bradley County

       The underlying facts in this case are essentially undisputed. The City of Cleveland
(“the City”) is located in Bradley County. The City has at all relevant times had its own
municipal school system separate from the Bradley County school system.

       In 2002, citizens of the City passed a referendum authorizing LBD sales within
City limits. The citizens of Bradley County rejected a similar referendum.

       Prior to the 2002 City referendum, the City had received LBD tax revenues from
lawful alcohol sales at private clubs within its corporate limits. After the referendum, the
City received LBD tax revenues from LBD sales at private clubs as well as other
approved establishments within its corporate limits. The City never distributed any of its
LBD tax proceeds to either Bradley County or the Bradley County School System.




        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.
                                                  -4-
       On April 14, 2014, the Bradley County School System, by and through the
Bradley County Board of Education, filed a lawsuit against the City in the trial court
below. The plaintiff sought, among other things, a declaratory judgment as to the rights
and obligations of the parties under the LBD Act and damages for past LBD tax proceeds
allegedly due under the Act “from the date of inception of the statute.”5 The trial court
later permitted Bradley County to participate in the case as an intervening plaintiff.
Hereinafter, we refer to the Bradley County School System and Bradley County
collectively as “the County.”

       In May 2014, the City filed a motion to dismiss the complaint for failure to state a
claim. It argued that the LBD Act was inapplicable to the County and, by extension, to
the Bradley County School Board, based on Tennessee Code Annotated section 57-4-
103(a). Tenn. Code Ann. § 57-4-103(a) (2013) (“This chapter shall be effective in any
jurisdiction which authorizes the sale of alcoholic beverages for consumption on the
premises in a referendum in the manner prescribed by § 57-3-106 . . . .”). After a
hearing, the trial court denied the City’s motion to dismiss.6

       Subsequently, the parties filed cross-motions for summary judgment. In July
2015, the trial court entered an order granting summary judgment in favor of the City.
The trial court noted that, under Tennessee Code Annotated section 57-4-103(a), the
distribution provision applied only to local political subdivisions that had authorized
LBD sales by referendum. Because the County had rejected a referendum authorizing
LBD sales, the trial court reasoned, it “has neither rights nor responsibilities under” the
LBD Act.7

        The County filed a motion to alter or amend arguing, among other things, that the
trial court had misinterpreted the LBD Act by overlooking the fact that the distribution
        5
          The plaintiff did not seek a specific amount in damages. It asked instead that the City be
required “to pay over unto the Bradley County School System that sum which is due under the statute . . .
together with prejudgment interest.”
        6
          The case was consolidated for purposes of argument with McMinn County Board of Education
v. City of Athens, No. 2014-CV-173. After the motion to dismiss was denied, the McMinn County case
and the instant case proceeded separately, and the McMinn County case is not at issue here.
        7
         The trial court noted that its conclusion was consistent with the 1980s opinions of the Attorney
General discussed in Coffee County Board of Education v. City of Tullahoma, No. M2017-00935-SC-
R11-CV, slip op. at 15-16 (Tenn. May 8, 2019). The court rejected the argument that the July 2014
amendment to the distribution statute demonstrated the Legislature’s original intent to require
municipalities to share LBD tax proceeds with other schools in the county pro rata.
                                                 -5-
statute applied to private club LBD sales regardless of whether the local political
subdivision had adopted LBD by referendum. The trial court denied the County’s motion
in part, reserving judgment on the question of whether private club LBD tax proceeds
received by the City prior to the 2002 referendum should have been shared with the
County.

       After further briefing, the trial court granted summary judgment to the City in toto
and denied the County’s motion to alter or amend. The trial court explained that it had
“been provided no authority stating that pre-referendum taxes collected from private
clubs should be allocated differently.” Accordingly, the trial court entered a final order
granting summary judgment in favor of the City and dismissing the complaint. The
County filed a timely appeal from the trial court’s decision.

       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.”); Sullivan Cnty. v. City of
Bristol, No. E2016-02109-COA-R3-CV, 2017 WL 6598559 (Tenn. Ct. App. Dec. 27,
2017); 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.”). The County in the instant case filed a motion to
consolidate the four cases, 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 oral
argument on the same docket and on the same day.’” Bradley Cnty. Sch. Sys. ex rel.
Bradley Cnty. Bd. of Educ. v. City of Cleveland, No. E2016-01030-COA-R3-CV, 2017
WL 6598557, at *3 (Tenn. Ct. App. Dec. 27, 2017) (“Bradley Cnty.”) (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.8 See Bradley Cnty., 2017 WL 6598557, at *17; see also
Blount Cnty., 2017 WL 6606855, at *21; Sullivan Cnty., 2017 WL 6598559, 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

        8
         The decisions were all issued by the same panel, and the legal analysis is substantively identical
in each opinion.
                                                  -6-
counties when the counties had not approved LBD sales by referendum. See Bradley
Cnty., 2017 WL 6598557, at *8; see also Blount Cnty., 2017 WL 6606855, at *9;
Sullivan Cnty., 2017 WL 6598559, 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.9 See Bradley Cnty., 2017 WL 6598557, at *17; see also
Blount Cnty., 2017 WL 6606855, at *21; Sullivan Cnty., 2017 WL 6598559, 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.

       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.10




        9
           Although the Court of Appeals affirmed the trial court’s decision in the instant case, it
specifically rejected the trial court’s stated basis for its conclusion. Bradley Cnty., 2017 WL 6598557, at
*8 (noting that Section 57-4-103(a)(1) “did not necessarily exempt the City from the general requirement
of [the distribution statute] of distributing one-half of its liquor-by-the-drink revenue in the manner of
county property tax distribution”).
        10
           This case was consolidated with the other four cases for oral argument only. This opinion
resolves only the dispute between Bradley County and the City of Cleveland. Separate opinions are being
issued in each of the other four cases.
                                                  -7-
                                       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 issue on appeal involves the proper interpretation of the distribution statute as
it existed when this lawsuit was filed in April 2014.11 At that time, the statute read:

               (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:



        11
            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. slip op. at 22.

                                                   -8-
                    (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]12 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).

       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


       12
           It is undisputed that the statutory language omitted and replaced by the bracketed language
describes the population parameters of Bedford County.
                                                -9-
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. Id. at 22.
       The issue in the instant case is substantively indistinguishable from the issue
decided in Coffee County. We did not specifically address the City’s argument based on
Section 57-4-103(a) in Coffee County, because doing so was unnecessary based on our
interpretation of the distribution statute. The same is true for the instant case. Therefore,
based on our holding in Coffee County, we hold that the distribution statute did not
require the City to share half of its LBD tax proceeds with the County and other school
systems in the County pro rata. Rather, the local education provision directed the City to
expend and distribute the education portion of its LBD tax proceeds in support of its own
municipal school system. Our conclusion applies to all LBD tax proceeds paid to the
City—those generated from pre-2002 referendum LBD tax proceeds from private club
sales as well as those generated post-referendum. For this reason, we affirm the trial
court’s grant of summary judgment in favor of the City, albeit on a different basis.

                                       CONCLUSION

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




                                                    _________________________________
                                                    HOLLY KIRBY, JUSTICE




                                           - 10 -
