Case Title: Clay v. Independent School District No. 1 of Tulsa County

Citation: 

Docket Number: 81882

State: oklahoma

Court: Oklahoma Supreme Court

Date: 1997-02-18T00:00:00Z

Document:
Clay v. Independent School District No. 1 of Tulsa County  Clay v. Independent School District No. 1 of Tulsa County 1997 OK 13 935 P.2d 294 68 OBJ 559 Case Number: 81882 Decided: 02/18/1997 Mandate Issued: 03/21/1997 Supreme Court of Oklahoma CHERYL CLAY, Assessor for Tulsa County, Oklahoma, Appellee, v. INDEPENDENT SCHOOL DISTRICT NO. 1 OF TULSA COUNTY, OKLAHOMA; CLYDE MOORE, CATHY NEWSOM, WALTER D. HUSHBECK, NANCY ALLEN, JUDY EASON-McINTYRE, DOUG DODD and DALE ELLIS, Members of Independent School District No. 1 of Tulsa county, Oklahoma; INDEPENDENT SCHOOL DISTRICT NO. 5 OF TULSA COUNTY, OKLAHOMA; MIKE FRANCISCO, BEN MAPLES, BILLIE MILLS, DON CHALMERS and TERRY ALMON, Members of Independent School District No. 5 of Tulsa County, Oklahoma; and INDEPENDENT SCHOOL DISTRICT NO. 11 OF TULSA COUNTY, OKLAHOMA; J.B. STIGAL, LARRY KORNEGAY, DALE ORR, CLAUDE MARSHALL and MARILYN HINKLE, Members of Independent School District No. 11. Appellants. CERTIORARI TO THE OKLAHOMA COURT OF APPEALS, DIVISION III ¶0 Assessor of Tulsa County filed suit to compel three school districts to pay their share of the costs for the assessor's ad valorem tax revaluation program. The Honorable Ronald L. Shaffer, District Judge of the District Court of Tulsa County, granted a writ of mandamus and commanded the school districts to pay their share of the costs. The school districts appealed and the Court of Appeals, Division III, affirmed. The school districts sought certiorari. CERTIORARI PREVIOUSLY GRANTED; OPINION OF THE COURT OF APPEALS VACATED; JUDGMENT OF THE DISTRICT COURT AFFIRMED IN PART AND REVERSED IN PART; CAUSE REMANDED TO THE DISTRICT COURT FOR FURTHER PROCEEDINGS David L. Fist J. Douglas Mann Jerry A. Richardson ROSENSTEIN, FIST & RINGOLD Tulsa, Oklahoma For Appellants, David Moss Tulsa County District Attorney J. Dennis Semler Assistant District Attorney Tulsa, Oklahoma For Appellee, John B. Turner Rebecca M. Fowler DOERNER, STUART, SAUNDERS, DANIEL ANDERSON & BIOLCHINI Tulsa, Oklahoma For Amicus Curiae Public Service Company of Oklahoma Roger K. Toppins Oklahoma City, Oklahoma For Amicus Curiae Southwestern Bell Telephone Company Deborah B. Barnes Tulsa, Oklahoma For Amicus Curiae Transok, Inc. SUMMERS, J., ¶1 A recently enacted statute requires the County Assessor to visually inspect and revalue real property for ad valorem taxation purposes. It provides for apportionment of the Assessor's revaluation costs among the local recipients of the tax revenues. The defendants are three Tulsa County school districts who have not paid their share of the Assessor's revaluation expense. The plaintiff is the Tulsa County Assessor, who wants them to do so. Must the school districts pay the Assessor, and if so what are the procedures the Assessor must use to get paid? We conclude that (1) the Assessor may use mandamus during the fiscal year to obtain payment from that year's school budget, and (2) if the Assessor's claims come after the end of the fiscal year the Assessor may get a judgment payable from the school's sinking fund when the revaluation expense was included in the school district's budget, and when the judgment complies with the Oklahoma Constitution and statues for judgments against school districts. For reasons to be explained our holding is prospective in part. ¶2 The case was tried in the District Court of Tulsa County. The result was that the trial court by way of mandamus ordered the school districts to pay their share. They appealed and the Court of Appeals affirmed. We have granted certiorari to resolve this matter of broad public concern. I. ¶3 The statutes requiring the Assessor to conduct a program for the visual inspection of taxable real property in the county for the purpose of ad valorem taxes are 68 O.S.1991 §§ 2820, 2821. The annual budget of the Assessor's office is submitted to the County Excise Board (or County Budget Board), and that board must make adequate provision for the costs of the inspection program. 68 O.S.Supp.1992 § 2822. The Assessor's cost of this inspection program is apportioned among the various recipients of revenues from the mill rates levied, including the county, all cities and towns, all school districts, and all sinking funds of such recipients. 68 O.S.Supp.1992 § 2823(B). The Assessor renders a statement to each of the jurisdictions, including school districts, that are required to pay their proportionate cost. That statement must include "The current fiscal year in which the charge has been incorporated in the jurisdiction's budget." 68 O.S.Supp.1992 § 2823 (D)(1). ¶4 The school districts seek to have the payments of the revaluation expense come from the sinking fund. The definition of a sinking fund is provided by 62 O.S.1991 § 331: Fourth. All funds required to be provided by ad valorem tax levy to pay outstanding indebtedness created under authority of Section 26 and/or Section 27, Article 10, Constitution, are hereby declared to constitute the "Sinking Fund" of such county or other municipal subdivision, to be used for the payment of coupons, bonds, and judgments as provided by law. Additionally, the sinking fund of a district "shall consist of all money derived from ad valorem taxes or otherwise as provided by law for the payment of bonds and judgments and interest thereon." 70 O.S.1991 § 1-119. ¶5 For a school district to budget the revaluation cost to a sinking fund that cost must qualify as an outstanding indebtedness created under authority of Sections 26 and/or 27 of Article 10 of the Constitution, or to pay judgments, bonds, or interest thereon. Clearly, § 26 does not include the Assessor's revaluation costs, since indebtedness created by § 26 requires a vote of the people for that purpose, and payment of the revaluation costs is not made by such an election.1 The same may be said for § 27 indebtedness created by a vote of the people at an election held for that purpose.2 ¶6 Sinking funds are used to pay coupons, bonds, and judgments. ¶7 The school districts argue that the revaluation payments need not be budgeted and paid from the general funds of the districts as annual expenses. They contend that the unbudgeted payments may be paid from sinking funds if the districts allow judgments to be taken against the districts in the amounts of the payments. We disagree. ¶8 The statutory scheme indicates that school districts pay the revaluation expenses for a current fiscal year during that fiscal year. The revaluation expense for a particular year is incorporated into the budget of the school district for that year. ¶9 We have explained that our State Constitution requires school districts "to carry on their operations upon a cash, or pay as you go plan." School Dist. No. 2 v. Gossett, II. ¶10 Our Constitution states that political subdivisions of the State must operate on a cash basis to prevent indebtedness extending beyond one year, unless the public has authorized the debt by an election held for that purpose. City of Del City v. Fraternal Order of Police, Lodge No. 114, ¶11 In determining whether a particular obligation is a "debt" within the scope of § 26 this Court has looked to the nature of the obligation and the remedy to enforce the obligation. ¶12 The duty to pay the revaluation expense is quasi-contractual. A quasi- contractual obligation is one where the remedy is the same as where the obligation is contractual. Shebester v. Triple Crown Insurers, Before final judgment in any suit based on contract shall be rendered against any municipality by any court of any county in the State of Oklahoma, . . . proof shall be made to the court of the existence, character and amount of outstanding legal indebtedness of said municipality, which proof shall include . . . 3. An itemized statement of the indebtedness proposed to be converted into a judgment, so classified as to show, in separate exhibits, all items of questionable legality, if any, and the reasons of said officer or officers therefor: (a.) The appropriations against which each warrant was drawn or claim accrued if in judgment, and if within the limits purposes thereof as provided by law; No judgment shall be rendered against any municipality by any court until the provisions of Section 2 hereof, have been fully complied with. Any judgment rendered in violation of the provisions of this act shall be void and of no effect. There are, to be sure, some quasi-contractual obligations of a governmental entity not subject to the provisions of ¶13 Many obligations are imposed by law which require school districts to expend money on them. The fact that these obligations are imposed by law does not excuse a district from budgeting these items in the district's fiscal budget, and a judgment against a school district is not authorized against an unbudgeted expense of this nature. ¶14 For example, in 1928 school officials requested an appropriation for their budget to buy new buses. Protest of Carter, ¶15 This Court explained that legislatively required expenditures for pupil transportation had to be pursuant to a "valid appropriation for that purpose." Id. In other words, fiscal year expenses of a subdivision of the State are to be paid from funds collected to pay fiscal year expenses, and not from other funds. Similarly, the legislatively required fiscal year revaluation expense paid by a school district must be pursuant to a valid appropriation for that purpose. ¶16 The view of the school districts is that an item required to be paid from an annual fiscal budget may remain unbudgeted and then paid from sinking funds in the form of a judgment. When an expense is to be paid from the ordinary tax revenues and those revenues are expended without payment of the expense, the resulting payment of the judgment from the sinking fund could result in an additional property tax levy on the citizens to pay the judgment. ¶17 We conclude that an Assessor attempting to obtain a money judgment against a school district to be paid by sinking funds must comply with III ¶18 The District Court issued a writ of mandamus to compel the immediate payment of the revaluation expenses by the defendants. On appeal the parties discuss whether the District Court was correct in issuing the writ, and whether the District Court properly exercised review over the Excise Board. ¶19 The District Court attempted to exercise jurisdiction (1) as an appellate tribunal reviewing the Excise Board, and (2) on an application for a writ of mandamus by the Assessor. The former was improper but the latter was authorized. Neither Oklahoma's Administrative Procedures Act ( ¶20 The schools challenged the payments to be made to the Assessor by invoking their statutory right to appear before the Excise Board to provide "comments, information and documentation" concerning the budget submitted by the Assessor. ¶21 Section 951 provides for review of certain acts involving the exercise of a judicial function. ¶22 The proper remedy for an Assessor seeking payment during the fiscal year is by an application for mandamus in the District Court against the school districts, and when proper, against the Excise Board as well. When an Excise Board fixes appropriations for a school district at a lesser amount than it was its legal duty to do, the board may, during the fiscal year, correct the district's appropriations. Lowden v. Caddo County Excise Bd., ¶23 During the fiscal year the Assessor may file an original action in the District Court for a writ of mandamus, and thereby compel the school board to include in its budget, and the Excise Board to approve, an appropriation for the revaluation expense. ¶24 In a mandamus proceeding to compel payment of the revaluation expense the Assessor must show both that the amount sought was included in the Assessor's budget and in the school district's budget. If the money was appropriated for the school district's expense then mandamus is the preferred remedy to compel payment during the fiscal year. ¶25 The school districts say they now have no money to pay, and the fiscal year lapsed prior to the appeal being filed in this Court. We have explained that payment of an annual or current expense is not to be paid from the revenues of a subsequent fiscal year. Tulsa County Excise Bd. v. Texas-Empire Pipe Line Co., ¶26 But the fact that mandamus should be denied does not excuse a school district from paying an assessor when the revaluation expense was appropriated for the budget of the school district. When a lawful appropriation was made for an expense, that expense was incurred and went unpaid, and the fiscal year has lapsed, then the creditor, Assessor or otherwise, obtains a judgment against the school district. For example, in Tulsa County Excise Bd. v. Texas-Empire Pipe Line Co., ¶27 In sum, the proper procedure is for the Assessor to bill a school district for payment as required by statute. If the bill is unpaid the Assessor files mandamus during the fiscal year to require the amount to be paid, and if necessary for the amount to be included in the school district's budget. Once the item is in the budget the Assessor may still recover the amount even if the fiscal year has lapsed during the proceeding. ¶28 The Assessor sought mandamus in the District Court to compel payment. The record shows that the amounts sought were included in the Assessor's budget. However, the record is silent as to whether the amounts were appropriated for the fiscal budgets of the school districts. The school districts rely upon Board of County Commissioners, etc. v. City of Muskogee, ¶29 In City of Muskogee, supra, we did say in a footnote that the failure of an excise board to allocate funds or provide an additional levy would not operate to defeat a valid statutory obligation. Id. The statutory language evinces legislative intent that once the revaluation cost is included in a recipient's budget, it is a legal and valid expenditure. Nowhere do we find either in § 2481.4 or in the statutory revaluation scheme that the legislature had intended for the excise board to increase a recipient's millage for that entity's reimbursement to the county of its assessed share. Id The "recipient's budget", i.e., the school district's budget, must include the revaluation cost to make that cost a valid and legal expenditure. Id. We reaffirm that holding. ¶30 We also said in Muskogee that excluding a legitimate government expense item from a city's budget could not immunize the city from liability for a validly incurred obligation. Id. IV. ¶31 School districts challenged the act of the Assessor in moving twenty-two employees from the regular budget to the revaluation budget. The Excise Board has discretion in determining the budget of the Assessor. This determination may be reviewed in a mandamus proceeding in the trial court with subsequent appeal to this Court. Humphrey v. Denney, Conclusion ¶32 In our case today the Assessor's remedy was to use mandamus during the fiscal year to compel the school boards and Excise Board to (1) include the revaluation expenses in the budgets of the schools, and (2) compel the districts to make immediate payments to the Assessor. Mandamus is inappropriate once the fiscal year has lapsed, and the fiscal year beginning July 1, 1992 was completed before the appeal was filed in this Court. Once the budgets of the school districts were made during the fiscal year to include the payments due that year, the lapse of the fiscal year would be no bar to obtaining a civil judgment against the school districts for the budgeted amounts left unpaid. The fiscal year has lapsed and no showing has been made that the budgets of the school districts included the payments they were required by law to make to the assessor. However, we decline to remand this case for the Assessor to make this showing. ¶33 The suit against the school districts was filed approximately three months after the mandate issued in Board of County Commissioners, etc. v. City of Muskogee, supra. The school districts relied upon this opinion in the trial court, and requested that the judgment against the school districts be paid from three annual sinking fund levies. We agree that City of Muskogee could have been relied upon by the school officials for this proposition. ¶34 We recognize that judgments may have been obtained and payments made to Assessors in compliance with City of Muskogee. We decline to cast any shadow of legal impropriety upon such judgments, and we thus make our ruling herein prospective, beginning July 1, 1997. Harry R. Carlile Trust v. Cotton Petroleum, ¶35 We emphasize that the revaluation expense must be included in a school district's budget before an Assessor may obtain a judgment against a school district for that expense. The revaluation expense must be included in a school district's budget before an Assessor may obtain a mandamus order compelling immediate payment. If the revaluation expense is not included in the school district's budget the Assessor must compel by mandamus the appropriate officials to include the expense in the school district's budget, and this may be done in a prior mandamus proceeding or in a mandamus proceeding that both orders those officials to include the item in the budget and the school officials to make immediate payment. In sum, a judgment to compel payment of the revaluation expense, whether by mandamus during the fiscal year or sinking fund judgment after the fiscal year, must be based upon that expense being included in the budget of the school district. ¶36 The amounts sought from the school districts are for current fiscal expenses incurred during the July 1, 1992 - June 30, 1993 fiscal year. The lapse of the fiscal year would ordinarily moot this mandamus proceeding. However, in light of Board of County Commissioners v. City of Muskogee, supra, we affirm the judgment against the school districts based upon the following conditions to be satisfied upon remand to the District Court. ¶37 The Assessor shall show that the amounts sought from the school districts were actually expended by the Assessor. She must show that the funds now sought by a judgment against the school districts are necessary to repay or replenish a public fund that was used to cover those expenses actually made by the Assessor in fiscal year July 1, 1992- June 30, 1993, and that should have been funded by the payments from the school districts. The Assessor is not entitled to a judgment against the school districts and thereby obtain funds to be used for purposes other than the expenses for the fiscal year 1992-1993. ¶38 If the Assessor makes this post-judgment showing the judgment of the District Court shall stand affirmed as to the liability of the school districts. Payment of this judgment shall conform to Board of County Commissioners, etc. v. City of Muskogee, supra, where we explained that such an order "represents a sinking fund obligation which may be paid either out of surplus revenues in the sinking fund or from three annual sinking fund levies." Id, ¶39 The opinion of the Court of Appeals is vacated. The judgment of the District Court is affirmed in part and reversed in part, subject to the requirements imposed herein, and the case is thus remanded for disposition. KAUGER, C.J., SUMMERS, V.C.J., HODGES, LAVENDER, SIMMS, WILSON, WATT, JJ. - Concur HARGRAVE, OPALA, JJ. - Dissent FOOT