FILED

APRIL 16, 1999

Cecil Crowson, Jr.

Appellate Court

Clerk

IN THE COURT OF APPEALS 

 AT KNOXVILLE

THE CITY OF CLEVELAND, TENNESSEE ) BRADLEY COUNTY

) 03A01-9804-CV-00140

Plaintiff-Appellant )

)

 )

v . ) HON. EARL H. HENLEY,

 ) CHANCELLOR

)

BRADLEY COUNTY, TENNESSEE )

)

Defendant-Appellee ) AFFIRMED AND REMANDED

WILLIAM P. BIDDLE, III, OF CLEVELAND FOR APPELLANT

JAMES S. WEBB OF CLEVELAND and BRIAN L. KUHN OF MEMPHIS FOR

APPELLEE

O P I N I O N

 Goddard, P.J. 

This is a declaratory judgment action initiated by the

City of Cleveland to determine whether the agreements it had with

Bradley County concerning the division of one-half of the Local

Option Revenue Tax were terminable. The City also sought its

share of various Capital Outlay Notes issued by Bradley County

for educational purposes.

I. FACTS
1

T.C.A. 67-6-701, et seq .

2

The 1963 Local Option Revenue Act1 authorized a county

to levy a local sales tax on all retail sales within the county. 

Bradley County levied a local sales tax of 2.25%. This tax has

been collected by the State of Tennessee, for distribution to

Bradley County and the City by the Commissioner of Revenue for

the State of Tennessee since 1967.

T.C.A. 67-6-712 provides for one-half of the proceeds

to be distributed in the same manner as the county property tax

for school purposes. The second one-half is to be distributed

according to where the tax was collected, either inside the City

limits or outside in Bradley County. T.C.A. 67-6-712(a)(2)(C)

authorizes a county and city to enter into a contract to provide

for other distribution of the second one-half of the tax

collections.

On March 7, 1967, the Board of Mayor and Commissioners

of the City held a special called meeting dealing solely with the

issue of whether to enter into an agreement whereby the second

one-half of the collected tax receipts would be distributed in

the same manner as the county property tax for school purposes. 

At that time most of the collected tax receipts would be

collected outside the City limits. The Notice and Waiver of Call

Meeting was signed by all the Commissioners and the Mayor. The

resolution was unanimously adopted and was signed by the Mayor.

 

On May 10, 1967, Bradley County and the City entered

into a Contract for the distribution of the other one-half of the

local sales tax receipts. The contract in pertinent part

provides for distribution as follows:
3

1. One-half of the net proceeds from the local sales

tax received by Bradley County from the State of

Tennessee shall be used exclusively for school purposes

and shall be appropriated to Bradley County and the

City of Cleveland for school operational purposes as

provided in T.C.A. 67-3052(1).

2. The remaining one-half of the net proceeds from the

local sales tax received by Bradley County from the

Department of Revenue of the State of Tennessee, being

that portion distributable according to Section 67-

3052(2) of Tennessee Code Annotated, shall be

distributed between Bradley County and the City of

Cleveland by reversing the percentages in Paragraph 1

herein and distributing the same to the City of

Cleveland and Bradley County in accordance with the

reverse percentages of Paragraph 1.

3. This formula for the distribution of the second

one-half of the net proceeds from the local sales tax

shall be used to distribute the same until such time as

the average daily attendance of children in the two

school systems shall reach 50% percent for each system

at and from which time the second one-half of said

proceeds shall be distributed by each system, taking

the same per cent as it received in distribution of the

first one-half of said proceeds.

An amendment to the Contract was authorized by a

resolution of the Board of Mayor and Commissioners of the City,

at a regular meeting held on January 10, 1972. On February 21,

1972, the parties entered into an Amendment to the Contract,

agreeing that the funds from an additional sales tax to be levied

in Bradley County would continue to be divided in accordance with
2

The City’s Charter, which was in effect during the relevant time

period, provided as follows:

Article 4

Legislative body to be Board of Mayor and commissioners

The legislative power of The City of Cleveland shall be exercised

by the Board of Mayor and commissioners elected under the

provisions of the charter of said City.

* * *

Article 18

General Ordinance Power

The Board of Mayor and Commissioners shall have such power and

authority to pass all bylaws and ordinances necessary to enforce

the powers herein granted as is not inconsistent with the

Constitution and laws of the United States, the State of

Tennessee, or the provisions of this chapter.

Article 19

Passage of Ordinances and Resolutions

The style or introductory clause of all ordinances shall be: “Be

it ordained by the Board of Mayor and Commissioners of The City of

Cleveland.”

Every ordinance and resolution upon final passage shall be signed

in open meeting by the Mayor or Mayor pro tem and at least one

other Commissioner, and it shall thereupon be delivered to the

City Clerk, whose duty it shall be to copy it in a book to be kept

for that purpose, together with the signature of the Mayor and

commissioners.. . .

3

It was executed by the parties on June 13, 1967.

4

7. CANCELLATION OF CONTRACT. It is understood and agreed that this

contract may be canceled upon the occurrence of any one of the following

events: 

a . The Department or County may give the other party six month’s notice

that it no longer desires the agreement to be effective.

b . The Department shall have the right to cancel this agreement immediately

upon any breach by the County of any provision of this agreement, or of

any provision contained in the statute, resolution of adoption, rules

and regulations pertaining thereto, or the terms of this agreement. In

the event of such cancellation by the Department, the Department’s

obligation shall extend only to make collection of the local tax for the

remainder of the current month, and make to the county a proper

distribution with respect to such collection.

c . The resolution imposing the local sales or use tax shall be repealed, as

provided for in Section 67-3055, T.C.A. 

4

the original Contract. It was signed by the Mayor. The City’s

Charter2 was silent as to the power to contract. 

Bradley County entered into a Contract for

Administration of the Bradley County Local Sales and Use Tax with

the Department of Revenue of the State of Tennessee. The

Contract was effective as of June 1, 1967,3 and provided for its

termination in paragraph 7.4
5

The City filed suit against Bradley County contending

that if the proceeds had been distributed in accordance with

T.C.A. 67-6-712(a)(2)(B), rather than according to the Contract

and the Amendment, the City claims that it would have received

from the sales tax collections the following additional amounts:

FISCAL YEAR ADDITIONAL REVENUES

1992-1993 $ 668,518

1993-1994 798,007

1994-1995 992,430

1995-1996 967,693

TOTAL $ 3,417,646

The City sought to have the trial court determine that

the Contract was ultra vires or as an alternative that the

Contract did not contain a termination clause and consequently it

was a Contract in perpetuity and therefore against public policy. 

If the trial court so found, then the City would be able to

terminate the Contract, which was it ultimate goal so that more

monies would flow into its coffers under the statutory division

of the second one-half of the tax proceeds.

B. THE CAPITAL OUTLAY NOTES

Beginning in 1989, Bradley County issued Capital Outlay

Notes for educational purposes pursuant to T.C.A. 9-21-101, et

seq. the Local Government Public Obligations Law. Each of the

Notes were issued pursuant to resolutions of Bradley County

Commission. In each resolution, Bradley County “pledged its

taxing power as to all taxable property in Bradley County,
6

Tennessee for the purpose of providing funds for the payment of

the principal and interest on the notes.”

DATE PURPOSE AMOUNT

2/20/89 Valley View School Project $ 262,000

9/18/89 Various School Projects 500,000

1/25/91 School Capital Projects 750,000

9/01/92 School Buses 102,000

2/26/93 School Capital Projects 775,000

6/29/93 School Capital Projects 3,500,000

12/05/94 School Capital projects 600,000

TOTAL $ 6,489,000

Bradley County repaid the Notes from tax revenues

collected on all property in Bradley County, including property

inside the corporate limits of the City. None of the proceeds of

the Notes was designated by Bradley County for the use of the

schools operated by the City. 

T.C.A. 49-3-1001, et seq., grants counties the

authority to issue bonds for educational purposes. From the

proceeds of any borrowing for school purposes, T.C.A. 49-3-

1001(b)(1) requires the trustee of Bradley County to pay over to

the City the amount of funds in the same ratio as the average

daily attendance between the City’s school system and the Bradley

County School System. During the years in which the Notes were

issued by Bradley County, the applicable average daily attendance

of students in the City‘s School System as a percentage of the

total enrollment of students in Bradley County was as follows:
7

ADA PERCENTAGE

YEAR CITY COUNTY

1986-87 32.48% 67.52%

1987-88 31.81% 68.19%

1988-89 32.27% 67.73%

1989-90 32.34% 67.66%

1990-91 32.33% 67.67%

1991-92 32.90% 67.10%

1992-93 32.99% 67.01%

1993-94 33.62% 66.38%

1994-95 33.61% 66.39%

1995-96 33.98% 66.02%

The City contended that it was entitled to $2,128.995,

which is its share of the funds based on the ADA in its schools.

YEAR GROSS AMOUNT ADA PERCENTAGE CITY’S SHARE

CITY COUNTY

1987-88 $ 262,000 31.81% 68.19% $ 83,342

1988-89 500,000 32.27% 67.73% 161,350

1989-90 750,000 32.34% 67.66% 242,550

1990-91 102,000 32.33% 67.67% 33,558

1991-92 4,275,000 32.90% 67.10% 1,406,475

1992-93 600,000 32.99% 67.01% 201,720

TOTALS $ 6,489,000 $ 2,128,995

 

II. HOLDING OF THE TRIAL COURT

Both parties filed motions for summary judgments based

upon the facts stated above and their respective theories. 

Chancellor Earl H. Henley, sitting by interchange, found in

regard to the declaratory judgment portion of the complaint that

Bradley County’s motion for summary judgment should be granted. 

The trial court found that the Contract was not ultra vires. 

Moreover, Chancellor Henley declared that the Contract was not a
8

Contract in perpetuity and that paragraph 3 of the Contract dated

May 10, 1967, set a specific time or event that triggered

termination of the Contract and the 1972 Amendment. Accordingly,

the Contract was not terminable by the City and should remain in

full force and effect according to the Contract’s terms.

As to the money judgment portion of the complaint,

Chancellor Henley found that the City’s motion for summary

judgment should be granted. He entered a judgment in favor of

the City against Bradley County in the amount of $2,128,995. 

This amount was the City’s pro rata share of the aggregate amount

of Notes issued by Bradley County for educational purposes.

The City appealed the portion of the judgment granting

Bradley County’s motion for summary judgment concerning the

Contract and the Amendment. Bradley County appealed the portion

of the final judgment denying Bradley County’s motion to dismiss

and granting the City’s motion for summary judgment on the money

judgment portion of the Complaint.

III. ISSUES

Each party presents one main issue with many sub-issues

for our consideration.

The City primarily contends that the trial judge was in

error in holding that the Contract and its subsequent Amendment

concerning the disposition of a portion of the Local Option Sales

Tax contained a specific time or event that triggered termination

of the Contract; therefore, the Contract was not in perpetuity

and terminable by the City.
9

Bradley County, however, claims that the Chancellor

Henley was in error in his granting the City’s Motion for Summary

Judgment as to the money judgment portion of the Complaint and in

entering a judgment awarding the City its pro rata share

($2,128,995) of the aggregate amount of the Notes issued by

Bradley County for educational purposes.

IV. LAW AND DISCUSSION

Both of the awards by the Chancellor in this matter

were based on motions for summary judgment. Since a motion for

summary judgment involves only a question of law, no presumption

of correctness attaches to the Chancellor’s decision. Our

standard of review of a trial court's grant of summary judgment

is well-settled: 

Tenn.R.Civ.P. 56.03 provides that summary judgment is

only appropriate where: (1) there is no genuine issue

with regard to the material facts relevant to the claim

or defense contained in the motion, Byrd v. Hall, 847

S.W.2d 208, 210 (Tenn. 1993); and (2) the moving party

is entitled to a judgment as a matter of law on the

undisputed facts. Anderson v. Standard Register Co.,

857 S.W.2d 555, 559 (Tenn. 1993). The moving party has

the burden of proving that its motion satisfies these

requirements. Downen v. Allstate Ins. Co., 811 S.W.2d

523, 524 (Tenn. 1991). When the party seeking summary

judgment makes a properly supported motion, the burden

shifts to the nonmoving party to set forth specific

facts establishing the existence of disputed, material

facts which must be resolved by the trier of fact.

Byrd, 847 S.W.2d at 215. 

Nelson v. Martin, 958 S.W.2d 643, 646-647 (Tenn.1997). 

We shall view the record in this matter in the light of

those requirements.
5

McQuillin Mun. Corp. § 15.02, Resolutions and Ordinances Distinguished

(3rd Ed.)

6

McQuillin Mun. Corp. § 15.02, Resolutions and Ordinances Distinguished;

§ 15.08, Nature, Requisites and Operation of Municipal Ordinances (3rd Ed.).

1 0

A. The Contract and Amendment were Ultra Vires.

The first sub-issue proffered by the City is that the

Contract and Amendment are ultra vires because they were

authorized by Resolution and not Ordinance as required by the

City’s Charter and were not adopted in accordance with the

provisions of the Charter. 

McQuillin Mun. Corp. § 15.01, Definitions (3rd Ed.)

p.54, defines the term “ordinance” as designating “a local law of

a municipal corporation, duly enacted by the proper authorities,

prescribing general, uniform, and permanent rules of conduct,

relating to the corporate affairs of the municipality...The

passage of an ordinance is, of course, a legislative act, a

legislative function, and equivalent to legislative action.” An

ordinance prescribes some permanent rule of conduct or

government, to continue in force until the ordinance is

repealed.5

A resolution can be any type of non-legislative action

and in effect encompasses all actions of the municipal body other

than ordinances. It deals with matters of a special or temporary

character and is simply an expression of opinion or mind or

policy concerning some particular item of business coming within

the legislative body’s official cognizance, ordinarily

ministerial in character and relating to the administrative

business of the municipality.6
7

Since then, the City of Cleveland has a new form of government and a

new Charter. The new Charter specifically provides that before the City of

Cleveland can contract it must pass an ordinance to do so.

8

Article 1 of the Charter provides for the Town of Cleveland to be a

“body politic and corporate” and gives the City the general powers to receive,

hold and dispose of personal property. 

Article 5 requires the members of the Board of Mayor and Commissioners

to hold regular monthly meetings. It is silent as to any called meetings. 

However, Article 20, which deals with franchise ordinances, says that a

franchise ordinance cannot be passed except on three readings with “not more

than one reading at the same meeting, or on any reading at any but a regular

meeting.” This implicitly indicates that there may be called or special

meetings.

Article 18 gives to the Board of Mayor and Commissioners the power to

pass all by-laws and ordinances necessary to enforce the powers in the

Charter. There is no mention of resolutions.

Article 19 details the passage of ordinances, bills, and by-laws. While

it cites “resolutions” in its heading, there is no reference to resolutions in

the body of the article.

Article 21 enumerates the miscellaneous powers and authority b y

ordinance of the Board of Mayor and Commissioners. The power to contract is

1 1

Resolutions need not be, in the absence of some express

requirement, in any set or particular form. Julian v. Mayor,

Councilmen & Citizens of Liberty City of Liberty, 391 S.W.2d 864

(Mo. 1965); McQuillin Mun. Corp. § 15.08, Nature, Requisites and

Operation of Municipal Ordinances, (3rd Ed.). A resolution,

particularly when used to express a ministerial act, need not

partake of any definite form and need not be a written

instrument. Steward v. Rust, 221 Ark. 286, 252 S.W.2d 816

(1952).

"Under Tennessee law, a municipal action may be

declared ultra vires for either of two reasons: (1)

because the action was wholly outside the scope of the

city's authority under its charter or a statute, or (2)

because the action was not undertaken consistent with

the mandatory provisions of its charter or a statute."

City of Lebanon v. Baird, 756 S.W.2d 236, 241 (Tenn. 1988).

We have conducted an exhaustive review of the Charter

as it was in 1967 and 1972.7 The Charter is totally silent as to

the method of passing a resolution and as to the power to

contract.8
not mentioned.

9

Mayor of City of Nashville v. Sutherland , 92 Tenn. 335, 21 S.W. 674

(1893); Crocker v. Town of Manchester , 178 Tenn. 67, 156 S.W.2d 383 (1941).

[footnote in original.]

1 2

Moreover, 19 Tenn. Juris., Municipal Corporations, §

70, states the following:

In determining the extent of the power of a

municipal corporation to make contracts, and in

ascertaining the mode in which the power is to be

exercised, the importance of a careful study of the

charter or incorporating act and of the general

legislation of the state on the subject, if there be

any, cannot be too strongly urged. Where there are

express provisions on the subject, these will, of

course, measure, as far as they extend, the authority

of the corporation. The power to make contracts, and

to sue and be sued thereon, is usually conferred in

general terms in the incorporating act. But where the

power is conferred in this manner, it is not to be

construed as authorizing the making of contracts of all

descriptions, but only such as are necessary and usual,

fit and proper, to enable the corporation to secure or

to carry into effect the purposes for which it was

created; and the extent of the power will depend upon

the other provisions of the charter prescribing the

matters in respect of which the corporation is

authorized to act. To the extent necessary to execute

the special powers and functions with which it is

endowed by its charter, there is, indeed, an implied or

incidental authority to contract obligations, and to

sue and be sued in the corporate name.9

The general rule is that where a charter commits the

decision of a matter to the council or legislative body alone,

and is silent as to the mode of its exercise, the decision may be

evidenced by resolution. Eichenlaub v. City of St. Joseph, 113

Mo. 395, 21 S. W. 8 (1893); Keenan & Wade v. City of Trenton,

130 Tenn. 71, 168 S.W. 1053 (1914). The rule unquestionably is

applicable to the performance of a ministerial act or

administrative business of a municipality. If there is not

general provision a charter outlining what must be done by

ordinance, and the charter does provide that some particular

things shall be done by ordinance, the implication is that
1 0 McQuillin Municipal Corporations, § 15.06, Nature, Requisites and

Operation of Municipal Ordinances (3rd Ed. Revised).

1 3

matters which are not specifically required to be dealt with by

ordinance may be dealt with otherwise.10

Under the facts of this case, the municipal action was

not outside the scope of the City’s authority because T.C.A. 67-

6-712(a)(2)(C) provides that a county and city may contract to

provide for other distributions of the one-half of the proceeds,

which is not allocated to school purposes. Since the Charter was

silent as to the contracting power of the City, but was specific

in other instances, we deduce that the City’s mayor had the

authority to enter into the Contract with Bradley County, since

it was for a system of free schools and at that time was in the

City’s best interest. 19 Tenn. Juris., Municipal Corporations,

§ 89 (1985). We find no merit in the City of Cleveland’s

assertion that the Contract is ultra vires.

Secondly, the City argues that if the Contract is found

not to be ultra vires then the term of the Contract is in

perpetuity for there is no termination clause in the Contract. 

Bradley County takes the position that even if the Contact

between the City and Bradley County contains no termination

provision, then the contract between Bradley County and the State

does and it was incorporated into the Contract between Bradley

County and the City. We do not need to address that issue,

however, because we are in agreement with the trial court that

paragraph 3 of the Contract contains the Contract’s termination

provisions. Paragraph 3 of the Contract provides that when the

average daily attendance of children in the two school systems

reaches fifty percent for each system then the distribution of
1 4

the proceeds would revert back to the division provided in the

Code. The Contract contains no provision for a continuation of

the division of proceeds after the point that the ADA equals 50%. 

That is, if the ADA at the City’s schools the year after the 50-

50 year go to 60%, the City does not receive 60% of the second

half of the tax proceeds. There is no further provision in the

Contract for the Contract to continue in effect in any manner. 

At this point, in order to deviate from the Code provisions, a

new contract would have to be negotiated. We find that the

Chancellor was correct in his holding that paragraph 3 was the

Contract’s termination clause. 

Thirdly, the City argues that the trial court’s

decision is against public policy in that future city council

members would be tied to a contract relating to government

matters. In support of its position the City quotes from

Shelbyville v. State ex rel. Bedford County, 220 Tenn. 197, 415

S.W.2d 139, 145 (1967) as follows:

Thus, where the contract involved relates to

governmental or legislative functions of the counsel,

or involves a matter of discretion to be exercised by

the council unless the statute conferring power to

contract clearly authorizes the council to make a

contract extending beyond its own term, no power of the

council so to do exists.

We do not agree, however, because our Tennessee

Legislature was the empowering authority which granted the right

to contract one-half of the proceeds of the local tax revenues. 

The Tennessee legislature also enacted T.C.A. 7-51-903 pertaining

to long-term contracts, which provides:

Except as otherwise authorized or provided by law,

municipalities are hereby authorized to enter into

long-term contracts for such period or duration as the
1 5

municipality may determine for any purpose for which

short-term contracts not extending beyond the term of

the members of the governing body could be entered;

provided, that the provisions of § 7-51-902 shall

govern the periods or terms of contracts, leases, and

lease-purchase agreements with respect to capital

improvement property. 

Our Supreme Court in 1985 addressed this issue in

Washington County Board of Education v. MarketAmerica, 693 S.W.2d

344 (Tenn. 1985). The City’s argument is basically the same as

was that of the plaintiff in Washington County Board of

Education. Justice Drowota opined: 

After carefully considering the respective

arguments of counsel and the relevant legal

authorities, this Court is of the opinion that the

contract entered into between MarketAmerica, Inc. and

the Washington County Board of Education is valid and

binding upon both parties. Because of the importance of

the issues in this case to local governments, we are

compelled to elaborate on our reasons for this

conclusion. 

* * *

Plaintiff's argument that Chapter 186 of the

Public Acts of 1983 acknowledged that counties were

without authority to enter into long-term contracts

prior to that legislation is not supported by the

legislative history. Senator Cohen and Representative

Burnett, the Senate and House sponsors of the bill,

indicated that the bill "only clarifies what cities

could always do." One sponsor further stated that the

legislation was intended to clarify the law in this

area because an opinion of the Attorney General had

suggested that counties lacked the capacity to enter

into contracts requiring payments beyond the current

fiscal year. The new legislation and the debate

concerning it illustrates that the legislature never

intended that Chapter 2 of Title 49 serve as a

limitation upon the authority of counties to enter into

long-term contracts.

Washington County Board of Education, at 348-349. We also find

that a valid Contract exists between the City and Bradley County. 

The City having received the benefit of its bargain in the early

years of the Contract period, is obligated to honor its Contract

with Bradley County during the period when Bradley County is
1 6

receiving its benefit. The City’s argument falls far short of

convincing us of any merit in its position on this issue.

Fifthly, the City argues that since Article 20 of the

Charter limits the power of the City to grant a franchise to only

20 years that therefore the Contract at issue here is void. By

its own wording, Article 20 deals specifically with franchises

and not to the disbursement of the local tax revenues at issue

here. Again, we find no merit in the City’s arguments on the

Contract interpretation portion of this matter and affirm the

Chancellor’s decision on this issue in toto.

B. AFFIRMATIVE DEFENSES FOR THE MONEY DEBT

At the outset of our discussion we will address Bradley

County’s affirmative defenses that the City’s complaint should be

dismissed because (1) the trial court did not have jurisdiction

because of the City’s failure to file a petition for writ of

certiorari, and, (2) because the City failed to make all persons

who have or claim any interest parties of this proceeding; and,

(3) the statute of limitations codified at T.C.A. 28-3-109

mandates the dismissal of the declaratory judgment action and

claims on any capital outlay notes issued before 1991.

1.

We will first address the issue of the City’s filing a

declaratory judgment rather than a writ of certiorari. In Fallin

v. Knox County Board of Commissioners, 656 S.W.2d 338 (Tenn.1983)

the Supreme Court held that T.C.A. 27-9-101, et seq., is not

applicable unless there is a judicial or quasi judicial

determination by the governmental board involved. The court,
1 7

treating the issue before it as one for declaratory judgment,

quoted with approval from Holdredge v. City of Cleveland, 218

Tenn. 239, 402 S.W.2d 709 (1966) as follows:

The remedy by certiorari provided in T.C.A. 27-

901, et seq., “was intended to have application only in

a review of an order or judgment rendered after a

hearing before a board or commission.” Stockton v.

Morris & Pierce, 172 Tenn. 197, 110 S.W.2d 480 (1927).

402 S.W.2d at 712.

We are convinced the validity of the ordinance

amending the zoning ordinance may be tested under our

Declaratory Judgment Act and that certiorari is not the

exclusive remedy. 402 S.W.2d at 713-14.

Fallin, at p. 341-342.

The issues before us here are not judicial or even

quasi judicial determinations and therefore, T.C.A. 27-9-101, et

seq., does not apply. 

2.

Bradley County next claims that all parties necessary

to this suit are not before this Court. Relying upon Huntsville

Utility District of Scott County v. General Trust Co., 839 S.W.

2d 397, 400 (Tenn.App. 1992), Bradley County then argues that the

Complaint should have been dismissed because all necessary

persons were not before the court. We disagree. 

All of the capital outlay notes have been repaid by

Bradley County, therefore, the City’s Board of Education and the

Bradley County School Board are not necessary or proper parties. 

The trustee of Bradley County is not a party to either the

contract or the amendment. No party is declaring that the

capital outlay notes were improperly issued or that the Local
1 1 T.C.A. 29-21-101, et seq.

1 8

Public Obligations Act is unconstitutional. As in any contract

action the parties to the contract are necessary parties, and the

parties to the contract and the amendment are before the court.

There is no merit to this argument.

3.

Bradley County’s third affirmative defense pertains to

the statute of limitations codified at T.C.A. 28-3-109. It

relies upon Ferguson v. Peoples National Bank of Lafollette, 800

S.W.2d 181, (Tenn. 1990). In this matter, however, T.C.A. 28-3-

109 has no application to either the Complaint for declaratory

judgment and/or the Complaint for money debt by the City. City of

Maryville v. Blount County, filed on January 6, 1993, an

unreported opinion of our Court, held that a municipality acts as

an arm of the state and is exempt from the statute of limitations

when it seeks to recover local education funding which should

have been allocated to it pursuant to state education

legislation. Bradley County’s argument on this issue also fails.

C. CAPITAL OUTLAY NOTES

Bradley County denies that it should share the proceeds

of the Capital Outlay Notes, which were issued for educational

purposes and declares that summary judgment is inappropriate.

Bradley County claims that the Notes were issued pursuant to the

Local Government Public Obligations Act,11 which does not require

a sharing of the proceeds.
1 2 T.C.A. 9-21-101, et seq.

1 3 T.C.A. 49-3-1001, et seq.

1 9

Its argument is predicated upon three cases: (1) Guffee

v. Crockett, 315 S.W.2d 646 (Tenn. 1958); (2) Board of Education

of Memphis City Schools v. Shelby County, 207 Tenn. 330, 339

S.W.2d 569 (1960); and, (3) Phillips v. Anderson County,

Tennessee, 698 S.W.2d 76 (Tenn.App. 1985).

Bradley County avers that the trial court’s reliance

upon Guffee was misplaced in that it only dealt with an intrastatutory interpretation of what was T.C.A. 49-701 (now T.C.A.

49-3-1001, et seq.) dealing with the issuance of school bonds. 

Rather, it argues that the issue before us is the inter-statutory

interpretation between two separate statutes - the Local

Government Public Obligation Act12 and the School Bond Act.13

Guffee was decided in 1958 prior to the adoption of the

Local Government Public Obligation Act in 1986. Moreover, Board

of Education of Memphis City Schools and Phillips were also

decided before the adoption of the Local Government Public

Obligation Act. Therefore, the court in those cases did not take

the School Bond Act into consideration in its determination on

any of the cases. 

We find that there is no conflict between the Local

Government Public Obligation Act of 1986 and the School Bond Act

and the cases cited by the parties. 

D. THE ATTORNEY GENERAL’S OPINIONS
2 0

Lastly, Bradley County argues that the Attorney

General’s Opinions should carry great weight with this Court and

that we should find that Bradley County has no obligation to

share the Notes proceeds with the City. In Washington County

Board of Education, 693 S.W.2d at 348, Justice Drowota, addressed

the issue of an opinion by the Attorney General to the effect:

It appears that the present lawsuit was precipitated in

part by an opinion of the Attorney General for the

State of Tennessee that concluded that the Washington

County Board of Education was without the necessary

authority to enter into the contract with

MarketAmerica. That opinion, dated February 25, 1983,

relied solely upon this Court's decision in Brown and

previous opinions of the Attorney General. The Attorney

General observed that the duration of the contract and

the provision requiring documentation that future

boards would be bound were the principal deficiencies

of the contract. Although opinions of the Attorney

General are useful in advising parties as to a

recommended course of action and to avoid litigation,

they are not binding authority for legal conclusions,

and courts are not required or obliged to follow them. 

On this point, we find Judge John B. Hagler’s

Memorandum Opinion in the City of Sweetwater v. Monroe County, an

excellent review of the Attorney General’s Opinions, and directly

to the point in this matter. Judge Hagler stated:

In arguing that the pro rata standard does not apply to

a “loan,” Monroe County relies primarily, and

reasonably, on a series of Attorney General Opinions

going back to 1980. In 1980, the Attorney General

opined that the proceeds of capital outlay notes

(issued under T.C.A. 5-10-105, et seq., repealed in

1988) need not be prorated even though all taxable

property in a county was subject to a tax to retire the

notes. Op. Atty. Gen. No. 80-290 (June 10, 1980). 

Relying upon this opinion, the Attorney General in 1988

opined that “general obligation bonds” issued pursuant

to the “Local Government Public Obligations Act of 1986

(T.C.A. 9-21-101, et seq.) Which superseded all earlier

statutes dealing with bonds and notes, are not subject

to the mandated proration of T.C.A. 49-3-1003. Op.

Atty. Gen. No. 88-110 (June 2, 1988). Likewise,

relying on his 1980 and 1988 opinions, the Attorney

General opined in 1989 and 1993 that the proceeds of

capital outlay notes also issued under the new 1986
1 4 The Board of Trustees of the Trenton Special School District v. The

Gibson County Legislative Board, et al. , Ct. App. Western Section, December 4,

1981, TAM 7/5-10.

2 1

statute did not have to be shared. Op. Atty. Gen. No.

U89-19 (March 10, 1989); U03-09 (February 2, 1993).

Although opinions of the Attorney General do not carry

the weight of court opinions, they must be accorded

great consideration not only because of the expertise

that office develops in advising state and local

governments but also because of the reliance upon these

opinions by governmental authorities.

Nevertheless, the Court is forced to conclude that,

while the 1980 opinion, dealing with certain specific

language in the then-current “capital outlay notes”

statute, may have been correct, the subsequent opinions

in 1988, 1989, and 1993 are incorrect.

A short analysis of these opinions is necessary to show

that the Attorney General failed, after the 1980

opinion, to take account of specific language in the

1986 statute. The Attorney General in 1980, while

recognizing the authority previously cited here, was

impressed by the following language in T.C.A. 5-10-

501(s)(7), which, at that time, governed the issuance

of capital outlay notes:

“The provisions of clause ‘one’ of the first

Paragraph and the provisions of the second

paragraph of this section (which related to

school funding) shall be in addition to and

supplemental to all other provisions of other

laws of the State of Tennessee, provided that

whenever the application of these provisions

conflicts with the application of such other

provisions, these provisions shall prevail.”

Emphasis added. This special language convinced the

Attorney General that this “separate authority” for the

issuance of capital outlay notes was not subject to the

requirement for allotting a portion of the note

proceeds to municipal or special school districts even

though the taxable property within such districts were

subject to the county’s taxing power. Op. Atty. Gen.

No. 80-290. The Attorney General acknowledged that

this “creates risk” of double taxation within the

school districts but noted that double taxation itself

is not unconstitutional where it is “plain that the

legislature intended such result.” Id.

However, the unreported Court of Appeals’

decision,14 which resulted when the parties to whom the

Attorney General rendered the opinion brought an action

for Declaratory Judgment, declined to follow the

Attorney General’s analysis. Although finding

proration unnecessary with respect to capital outlay

notes, the court reached this conclusion only by

striking down that portion of the county’s resolution

pledging a levy on all taxable property in the county. 

The Court was of the opinion that the statute, which

authorized the issue of capital outlay notes prohibited

the county from levying ad valorem taxes for the
1 5 It is possible the court misread this prohibition as applying to

capital outlay notes when, in fact, it appears to have applied only to “grant

anticipation notes.” T.C.A. § 5-10-501(b)(6). Or, perhaps this court is

missing some link in the legislative chain.

2 2

payment of such notes.15 The upshot is that the court

left undisturbed the principle that pro rata allocation

is necessary whenever there is a pledge to levy on all

taxable property in the county.

Following the 1980 opinion, the Attorney General

opined in 1988, 1989, and 1993 that the proceeds of

general obligation bonds and capital outlay notes,

issued under the new Local Government Public

Obligations Act of 1986, T.C.A. 9-21-101 et seq., are

not subject to the pro rata distribution requirements

of T.C.A. 49-23-1003. The Attorney General found, in

each of the three opinions, that no provision of the

new Act requires pro rata distribution among school

systems within a county and that T.C.A. 9-21-124, like

the earlier statute he construed in 1980, provides that

if the “provisions of this law conflict with any other 

provisions of law or are inconsistent with any other

provisions of law, the provisions of this chapter shall

prevail with respect to all bonds and notes issued

under this chapter.”

Unfortunately, the Attorney General in each of

these later opinions overlooked another provision in

the Local government Public Obligations Act of 1986

which was not in the “old capital outlay notes”

statute:

9-21-107. Powers of Local

Governments./All local governments have the

power . . .to:

*******************************************

(4) pledge the full faith, credit and

unlimited taxing power of the local

government as to all taxable property in the

local government or a portion of the local

government, if applicable, to the punctual

payment of the principal of and interest on

the bonds or notes issues to finance any

public works project. . .

********************************************

(5) in the case of a county or metropolitan

government which contains within its

boundaries a special school district and/or

incorporated city or town maintaining a

public school system separate from the county

or metropolitan government public school

system, the tax pledge authorized by

subdivision (4), when pledged to the payment

of bonds or notes issued to finance the

construction of public schools of the county

or metropolitan government serving outside

the territorial limits of such special school

district and/or incorporated city or town,

may be a pledge of taxes to be levied only

upon taxable property within that portion of

the county or metropolitan government lying
2 3

outside the territorial limited of such

special school district and/or incorporated

city or town. . .”

There could not be a clearer statement of the

legislative intent that the only way to avoid

proration, as required by T.C.A. 49-3-1003, is a pledge

of taxes to be levied only upon taxable property within

that portion of the county lying outside the

territorial limits of a city. Therefore, there is

no”conflict,” as existed with the earlier statute,

between the statute relating to general public

obligations and the statute relating to school

financing, and reading them in pari materia, the result

is that the proceeds of general obligation bonds,

capital outlay notes, and all other bonds and notes are

considered “school bonds” and are subject to the

proration mandate of T.C.A. 49-3-1003.

We affirm the decision of the Chancellor in respect to

the decision requiring Bradley County to share the proceeds of

the Notes with the City. 

V. CONCLUSION

There being no dispute as to any material fact in this

matter, the Trial Court correctly granted Bradley County’s motion

for summary judgment on the declaratory judgment portion of the

Complaint and correctly granted the City’s motion for summary

judgment on the money debt. For the reasons stated above, the

judgment of the Trial Court is affirmed and the cause remanded

for collection of costs below. Costs of this appeal are adjudged

equally against the parties and their sureties.

_______________________________

Houston M. Goddard, P.J. 

CONCUR:

________________________________

Herschel P. Franks, J.
2 4

 (Not Participating) 

Don T. McMurray, J.