### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE May 26, 1998 Ses sion SUNTRUST BANK, NASHVILL E v. RUTH JOHNSON
Appeal from the Chancery Court for Davidson County No. 95-2650-II Ernest B. Pellegrin, Special Chancellor

No. M1997-00202-COA-R3-CV - Filed December 13, 2000

This appeal involves a dispute between a commercial bank and the T ennesse e Department of Revenue regarding the bank’s claim for a refund of the sales taxes paid

in connection with defaulted retail installment sales contracts purchased from various automobile dealers. After the Department deniedi ts refu nd claim, the bank sued the Commissioner of Revenue in the Chancery Court for Davidson County seeking a refund. Both parties eventually sought a summary judgment. The trial court granted the Comm

issioner’s mo tion for summary judgment after concluding that it did not have jurisdiction to consider the ban k’s claim. Alternatively, the trial court held that the bank was not entitled to the requested r efund because i

twas not the deale

r who originally

remitted the sales tax to the Depar

tment. We ha ve determined that the trial court erred by determining that it lacke d juri sdicti on to consider the bank’s refund claim. However, we have also determined that the trial court correctly concluded that the

bank was not entitle

d to the requested re

fund because it

was not the dealer who remitted the sales tax at issue. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed in Part and Affirmed in Part

W ILLI AM C. K OCH , J R ., J., delivered the opinion of the court, in whichH ENRY F. T ODD , P.J., M.S., and B EN H. C ANTRELL , J., joined.

Michael Hinchion and Dianna Baker Shew, Nashville, Tennessee, for the appellant, SunTrust Bank, Nashville, N.A.

Paul G. Summers, Attorney General and Reporter, and Christine L

apps, Assistant Atto

rney Gene

ral, for the appellee, Ruth E. Johnson, Commissioner of Revenue.
OPINION

SunTrust Bank, Nashville

, N.A., formerly

known as Third National Bank, is a commercial bank doing business in Tennessee. It has entered into agreements with numerous automobile dea lers to provide financing for t

he dealers’ cus

tomers who desire

to purchase a ne

w automobile on cr

edit.1 Tenn. Code Ann. § 67-6-507(e)(1) ( 1998) authorizes a “credit” agai nst sales and use tax tha

t can be claimed
on a retur

n fil ed for th e period whe

n a worthl

ess accoun

t is ch arged off forfedera

l inc ome tax purposes. Sun Trust fail

ed to claim the cred its in this case when they were orig inally available, b ut its error is not f atal. Tenn. Code Ann. § 67-1- 1802(a)(1) (Supp. 2000) provides, in part, that the Commissioner of Revenue, with the approval of

the Attorney

General and Reporter, is empowered a nd directed

to refund to taxpayers al l taxes coll

ected or administ

ered by the Commissi

oner that are, on the dat

e of payment, pai

d in error or paid aga

inst any s

tatute, rule, or regul ation. The thrust of Tenn. Code Ann. § 67-1-1 802 is that a ta xpayer who initially f ails t o claim a c redit may

later, withi n the ti me period al

lowed by statute, claim a r

efund of t

he overpayme

nt resu lting from it s fail ure to i nitia lly cl aim the c

redi t. In thi s ca se, the C o mmissioner

does not take issue with the dif ference between a credit and a refund and instead asserts t hat the bank qualifies for neithe r. -2- These arrangements work

as follows. At the time of the sale of an automobile, the purchaser enters into a retail

installment sales c

ontract with the a

utomobile dealer

giving the dea

ler a security

interest in the automobile. The amount financed by the retail installment sales con tract i ncludes (1) the portion of the purchase price not paid by the purchaser at the time of deliver y, (2) the dealer’ s miscellaneous fees and charg es, and (3) the fu

ll amount of the sales tax due on the sale of the automobile.
Thereafter, the

automobile deale

r sells the retail

installment sales c

ontract to SunTrus

t at a discount. The dealer also assigns to SunTrust all its right, title, and interest in the retail installment sales contract. As a r

esult of this assignment, Su

nTrust becomes e

ntitled to any

and all paym

ents from the purchaser and succeeds to all the rights and interests of the automobile dealer. When SunTrust receives the r etail installment sa les contract, it pa

ys the deale

r the agreed u

pon amount, which includes the full amount of the sales tax due onthe sale of the automobile. Upon receiving these funds, the automobile dealer remits thesales tax due to the Tennessee Department of Revenue.

This arrangement works well aslong as the purchase r continues making

the payment

s required by the retail installment

sales contract.

However, a port

ion of new car pur

chasers eventu

ally default on their contrac

tual obligations.

SunTrust bears the

risk of loss in this circu

mstance because it purchases the retail installment sales contracts without recourse. Accordingly, when a purchaser defaultson a retail installment sales contract, SunTrust must repossess and dispose of the automo bile, usually at a loss. It later charge s off each of these losses for federal income tax purposes. During the period covered by the bank’s Tennessee sales and use tax returns filed in calendar year 1991, over 450 retail in

stallment sales co

ntracts purchas

ed by SunTru

st went into defaul

t. For eachof these contracts, SunTrust wrote off the outstanding portion of the indebtedness as an
unco llectible

bad debt. The total amount of the write-offs during the period at issue was nea rl y $2,000,000. In December 1994, SunTrust filed a claim with the Department of Revenue seeking
a $105,356.66 refund representing the amount of the sales tax attributable to the defaulted installmentsale s contracts. 1 The Department denied the claim in February 1995 based on Te nn. Comp. R. & Regs. r. 1320-5-1-.52(3) (1990) which stated that banks purchasing retail installment sales contracts without recourse are not entitled to a sales tax refund.-3-

Believing that it was entitled to the requested r

efund, SunTrust fi

led suit a gainst the Commissionerof Revenue in the C hancery Co

urt f or Davidson County. Both parties eventua

lly agreed that the material facts were undisputed and filed motions for summary judgment. In an order entered on July 31, 1997, the trial court held that it did not have jurisdiction to consider SunTrust’s refund claim because SunTrust had not initially remitted the sales tax to th e Stat e. In an alternative ruling, the trial court co

ncluded that,

even if it hadjurisdiction over SunTrust’s claim, SunTrust was
no t entitled to a refund because it was “not the dealer who paid the taxes at issue in this dispute, whic h is an explicit condition of relief under Tenn. Code Ann. § 67-6-507(e).” SunTrust has appealed.

I.

T HE J USTICIABILITY OF S UN T RUST ’ S R EFUND C LAIM
The threshold issue in th is case involves th

e trial court’s su

bject matterjurisdiction over SunTrust’s claim. The Commissioner ar gued, and the trial court apparently agr eed, that the trial court lacked jurisdiction over

SunTrust’s complaint seeking a tax refund under Tenn. Code Ann. § 67-1-1802(c)(1) (Supp. 2000) beca use SunTrust w as not a “taxpay er” for jurisdic

tional purposes. This argument unnec

essarily sc

rambles two dis

tinct c oncepts – subject matter jurisdiction and standing. We have conclude d that the t rial court clearly had subject matter jurisdiction over SunTrust’s refun

d claim and that SunT

rust also had stand

ing to assert it.

A. T HE T RIAL C OURT ’ S S UBJECT M ATTER J URISDICTI ON
As we have repeatedly said, the concept of subject matter jurisdiction implicates a court’s authority to hear and decide

a particular type of case. Meighan v. U.S. Sprint Communications Co. , 9 24 S.W.2d 632, 639 (Tenn. 1996); Cashion v. Robertson , 955 S.W.2d 60, 63 (Tenn. Ct. App. 1997). A court derives its subject matter jurisdiction from the Constitution of Tennessee or from a legis lative act, Kane v. Kane , 547 S.W.2d 559, 560 (Tenn. 1977), and thus it cannot exerci s e jurisdictional powers that have not been conferred on it directly or by necessary implication. Dishmon v. Shelby

State Cmty. Coll. , 15 S.W.3d 477, 480 (Tenn. Ct. App. 1999).

A court’s subject ma

tter juris dicti on depends on the nature of the cause of action and the reli ef so ught. Landers v. Jones , 872 S.W.2d 674, 675 (Tenn. 1994). It does not depend upon the conduct or the agreement of the parties, Shelby County v. Ci ty of Memphis , 211 Tenn. 410, 413, 365 S.W.2d 291, 292 (1963). Thus, the parties cannot confer subject matter jurisdiction on a court by appearance, plea, consent, silence, or waiver. Caton v. Pic-Walsh Freight Co. , 211 Tenn. 334, 338, 364 S.W.2d 931, 93 3 (1963); Dishmon v. Shelby State Cmty. Coll. , 15 S.W.3d at 480. Without subject matter jurisdictio

n, a court cannot

enter valid , enfo rceable orders. Brown v. Brown , 198 Tenn. 600, 610, 281 S.W.2d 49 2, 497 (1955); Riden v. Snider , 832 S.W.2d 341, 343 (Tenn. Ct. App. 1991).-4-

No Tennessee court has subject matter jurisdiction to entertain a suit

against the State unless the State has consented to be sued. Shell v. State , 893 S.W.2d 416, 420 (Tenn. 1995); Pool v. State , 987 S.W.2d 566, 5 68 (Tenn. Ct. A pp. 1998). This consent may be given only by the General Ass emb ly, Tenn. Const. art. I , § 17; Quinton v. Board of Claims , 165 Tenn. 201, 215-16, 54 S.W.2d 953, 958 (1932), and wh

en consent is g

iv en, suits may

be brought only

in the manner spec

ifically prov ided by t he General Assembly. State ex rel. Allen v. Cook , 171 Tenn. 605, 609, 106 S.W.2d 858, 860 (1937); Crowe v. John W. Harton Mem ’l Hosp. , 579 S .W.2d 888, 890 (Tenn. Ct. App. 1979).

Tenn. Code Ann. § 67-1-1 802(c)(1)specifically allows taxpaye rs whose claim for a tax refun d has been denied to fil

e suit against the

Commissioner within

six months after the denial of the claim. These suits must be filed in the “appropriate chancery court of this state.” F or the purposes of the statute, a chancery court is “appropriate” if it meets the venue provisions in Tenn. Code Ann. § 67-1- 1803(a) (1998) which requires that suits against the Commissioner be filedeither (1) in the Chancery Courtfor Davidson Count y, (2) in the chancery court in the

county of the taxpayer’s domicile, or (3) in the chancery court of

the county w

here the taxpay

er’s principal p

lace of business

is located. The designationof the Chancery Court for Davidson

County as a pr

oper forum for r

eso lving dispute s betweentaxpayers a

nd the Commissioner v

ests the Chancery

Courts for Davidso

n County with the adjudicatory

power, i.e., subject matter jurisdiction, to determine controversies such as the present
one. Accordin

gly, the tr ial court’s conc

lusion that it lacke

d jurisdiction over

SunTrust’s refun

d claim is incorrect.

B.

S UNTRUST ’ S S TANDING TO S EEK A S ALES T AX R EFUND
In contrast

to subject matter jurisdiction, standing is a judge-made doctrine used to determine whether a particular plaintiff is entitled to judicial relief. Knierim v. Leatherwood , 542 S.W.2d 806, 808 (Tenn. 1976); National Gas Distribs. v. Sevier County U til. Dist. , 7 S.W.3d 41, 44 (Tenn. Ct. App. 1999); Metropolitan Air Research Testing Au th. v. Metropolitan Gov’ t of Nashville , 842 S.W.2d 611, 615 (Tenn. Ct. App. 1992). It requires the court to determine whether the plaintiff has
a sufficiently personal

stake in the outcom

e of the controve

rsy to warrant a judicial resolution of the dispute. Browning-Ferris Indus., Inc. v. City of Oak Ridge , 644 S.W.2d 400, 402 (Tenn. Ct. App. 1982); Barbara Kritchevsky, Justiciability in Tennessee, Part Two: Standing , 15 Mem. St. U.L. Rev. 179, 183-84 (1985) (“Kritchevsky”). To e stablish standing, a plaintiff must show: (1) that it has sustained a di sti nct and pal pab le i nju ry, (2) that the injury was caused by the challenged conduct, and (3) that the injury is one that can be addressed by a remedy that the court is empowered to give. In
re Youngblood , 895 S.W.2d 322, 326 (Tenn. 1995); National Gas Distribs. v. Sevier County Util. Dist. , 7 S.W.3d at 44.

The basis for Su

nTru st’s standing in this case begins to emerge when we consider two elementary

points of law. The first point is that a potential tax refund claim is a chose in action. See generally Cullen v. Bragg , 350 S.E. 2d 798, 799-80 0 (Ga. Ct. App. 1986 ); Harpel v. Craig , 97 N.E.2d741, 743 (Mass. 1951). The second point is that a “chose in action”

is a right to proc

eed in-5-

a court of law to procure the payment of a sum of money

. Can Do, Inc. Pension & Profit Sharing Plan & Suc cessory Plans v. M anier, Herod, Holl

abaugh & Sm

ith , 922 S.W.2d 865, 866 (Tenn. 1996). In this case, SunTrust’s complaint alleges that it has a specific interest – the right to a sales tax refu nd – for whi ch i t de sir es j udi cia l re dres s. T he fa ct t hat Sun Tru st m ay arguably have been deprivedof its asserted sta tuto ry r ight to a sales tax refund is sufficient to give SunTrust standing to maintain this suit. SunTrust’s complai

nt asserts that, fo

r the purpose

of the refund statute, that its legal status should be deemed to be thesame as a “dealer who has paid the tax imposed by this chapter.” This asserti o n differentiates SunTrust from the purchasers of tangible personal property who unsuccessfully

sought sales ta

x refunds in Beare Co. v. Olsen , 711 S.W.2d 603 (Tenn. 1986) and Reimann v. Huddl eston , 883 S.W.2d 135 (Tenn. Ct. App. 1993). In those cases, the purchasers asserted that they were

entitled to refund

s because the burden of the

sales tax ultimately

fell on them. The courts denied the purchasers’ standing to seek refunds in these cases be

cause the refund statut

e provides refunds only to those who paid the tax, not to persons upon whom the “incidence of the tax may ultimately fall.” Beare Co. v. Olsen , 711 S.W.2d at 605; Reimann v. Huddleston , 883 S.W.2d at 136. SunTrust is traveling another route in this

case. Here SunT

rust is arguing

that it stepped into the shoes of the original taxpayer by virtue of the assig

nment of the reta

il installment sales

contract.
The focus of a standing analysis in not on the merits of the plaintiff’s case. Metropolitan Air Research Testing Auth. v. Me tropolitan Gov’t of Na

shville , 842 S.W .2d at 6 15. Therefore, we decline the Commissioner’s invitation to use the question of SunTrust’s standing as a vehicle f or deciding the merits of

its refund claim. Kritchevsky, 15 Mem. St. U.L. Rev. at 233-34. SunTrust assertsin its complaint that, by virtue of the

assignment of the

retail installment

sales contracts , it has succeeded, as a matter of law, to the automobile dealers’ statutory refund rights. For the

purpose of a standing analy sis, we should take this assertion as c

orrect even thou

gh we may u

ltimately disagree with SunTrust’s legal arguments. Acco rdi ngly, the trial court’s conclusion that Sun

Trust lacked standing to pursue a

refund claim unde

r these circumsta

nces is erroneous. We will, therefore, proceed to the su

bstance of SunTru

st’s refund claim

. II. S UN T RUST ’ S R EFUND C LAIM
SunTrust’s claim

for a refund und

er Tenn. Code Ann. § 67-6-507(e)( 1) presents a question of first impression regarding Tennessee’s sales tax law. We are called upon to determine whether the purchaser of a retail installment sales contract from a dealer who actually remitted the sales tax resulting from the sale of tangible personal property is

entitled to the same

“bad debt” sale

s tax credit that the dealer itself would have been entitled to had it not assigned its rights. Arriving at the answer is essentially

an exercise in sta

tutory const

ruction because

SunTrust’s rights , if

any, must be

found in Tenn. Code Ann. §

67-6-507(e)(1 ) and other rele vant portions of the

Retailers’ Sales

Tax Act.2 Arthur H. Nor thrup, The Measure of Sales Taxes , 9 Vand. L. Rev. 237, 254-56 (195 6) (pointing out that the

legislature must decide whether t o provide for a credit or refund f or bad deb ts, and if it decide s to provid e for a cred it
or refund, it also ha s the prerog ative to decide how much the credit or refund will be and under what circumstances the credit or refund will be permitted).
-6- A.

There is no common-law or equitabl e c ause of action to r ecover taxes volun

tarily paid i

n error. City of Birmingham v . Pig gly Wiggly Ala

bama Distrib . Co., 638 So. 2d 759, 765 n.5 (Ala. 1994); Department

of Revenue v. Bank of America , 752 So. 2d 637, 641 ( Fla. Dist. Ct. App. 2000); Commonwealth

v. Gossum , 887 S.W.2d 329, 334 (Ky. 199 4); Bowman v. Goad , 703 A.2d 144, 145 (Md. 1997). These actions, including actions seeking refunds or cred

its for credit sal

es that become baddebts, 2 are a matter of legislative grace, Estate of Bohn v. Waddell

, 848 P.2d 324, 331 (A

riz. Ct. App. 1992); District of Columbia v. Keyes , 362 A.2d 729, 732 (D.C. 1976); SC O A Indus., Inc. v. Howlett , 337 N.E.2d 305, 310-11 (Ill. App. Ct. 1975); Philadelphia Gas W orks v. Commonweal

th , 741 A.2d 841, 846 (Pa. Commw. Ct. 1999). They are, therefore, entirely creatures of statute, and suits for r efun ds, credits, or exemptions must comply with the substantive and procedural requirements in the statute. Jack Daniel Distillery, Lem Motlow Prop., Inc. v. Olsen , 716 S.W.2d 496, 497 (Tenn. 1986); Griffith Motors, Inc. v. King , 641 S.W.2d 200, 201 (Tenn. 1982); Reimann v. Huddleston , 883 S.W.2d at 136.

In this case, SunTrus

t seeks to take advantage of the sales tax credit allowed by Tenn. Code Ann. § 67-6-507(e)(1). Thus, our task is to determine whether the Gen er al Assembly enacted the statute to enable entities like SunTrust to claim a credit or a refund. The sole purpose of statutory construction is to ascertain an d then togive effect to the General Assembly’s purpose as reflected in the sta tute’s language. Lavin v. Jordon , 16 S.W.3d 362, 365 (T enn. 2000). Our a

nalysis must begin with the words of the statute itself, Riggs v. Burson , 941 S.W.2d 44, 54 (Tenn. 1997); Realty Shop, Inc. v. RR Westminster Holding, Inc. , 7 S.W.3d 581, 602 (Tenn. Ct. App. 1999), and we must
avo i d stretching the statute’s language to encompass a meaning that outstrips the Genera l Assembly’s expressed intent. In re Adoption of Baby Z, 724 A.2d 1035, 1061 (Conn. 1999).

A court’s construction of a statute will morelikely hew to the General Assembly’s expressed intentif the court approaches the statutory text believing that the General Assembly chose its words del ibe rat ely. Tidwell

v. Servomation-Willoughby Co. , 483 S.W.2d 98, 100 (Te nn. 1972); Mid-South Indoor Horse Racing, Inc

. v. Tennessee Sta

te Racing Comm’n , 798 S.W.2d 531, 537 (Tenn. Ct. App. 1990). A court should construe the statute’s language in the context of the entire statute and in light of the statute’s general purpose. BellSouth Telecomms., Inc. v. Greer, 972 S.W.2d 663, 673 (Tenn. Ct. App. 1997). Unless

th e context re quires otherwise, a court should also give the words in the statute their natural and ordinary meaning. State ex rel. Metro. Gov’t v. Spicewood Creek Watershed Dist. , 848 S.W.2d 60, 62 (Tenn. 1993).

In addition to these g ene ral principles of statutory construction, we must also consider the rules of construction sp

ecifically applicable to tax statutes. Statutes imposing a tax should be3 Nashville Cl ubho use Inn v. J ohnson , No. M 1998-0 0898-C OA-R3 -CV, 20 00 W L 2799 07, at *2 (T enn. Ct. App. M ar. 16, 20 00), perm. app. denied (Tenn. Oct. 2, 2000) (Recommend ed for Publication).

4 Act of May 1, 1973, ch. 798, 1974 T enn. Pub. Acts 1370. The General Assembly enacted Tenn. Code Ann. § 67-6-507(e)(2), (3)

in 1985 [Act of May 21, 1985, ch. 423, 1985 Tenn. Pub. Acts 857] an d Tenn. Code Ann. § 67-6- 507(e)(4) i

n 1991 [Act of

Mar. 11, 1991, ch . 38, § 1, 1991 Tenn. Pub.Acts 46]. These lat ter thr ee subsect

ions do not figure into this

opinion.
-7- construedstrictly ag

ainst the govern

ment. Steele v. Industrial Dev. Bd. , 950 S.W.2d 345, 348 (Tenn. 1997); Covington Pike Toy ota, Inc. v. Cardwe

ll , 8 29 S.W.2d 132, 135 (Tenn. 1992). However, statutes granting exemptions from taxation should be construed strictl y against the taxpayer, AFG Indus., Inc. v. Cardwell

, 835 S.W.2d 583, 584-85 (Tenn. 1992); Herald v. Johnson , 19 S.W.3d 241, 244 (Tenn. Ct. App. 2000), because they are in derogation of the State’s sovereignty. Anderson v. Security Mills , 175 Tenn. 197, 205, 133 S.W.2d 478, 481 (1939). Thus, exemptions from taxation must “positively

appear” in

the statutes themselves, and no subject of taxatio

n will be excluded if it comes within the “fair purview” of the statutes. English’s Estate v. Crenshaw , 120 Tenn. 531 , 537-38, 110 S .W. 210, 211 (1908); Nashville Clubhouse Inn v. Johnson , ___ S.W.3d ___, ___ (Tenn. Ct. App. 2000). 3

B.
SunTrust, like others seeki ng a tax refund or

credit, has the burden of

demonstrating th

at it is entitled to the relief it se eks. AFG Indus., Inc. v

. Cardwell , 835 S.W.2d at 584-85 ; Nuclear Fuel Servs., Inc. v. Huddleston , 920 S. W.2d 659, 661 (Tenn. Ct. App. 1995); see also Consolidated Accessories Corp. v. Franchise Tax Bd. , 208 Cal. Rptr. 74, 76 (Ct. App. 1984); Asmer v. Livingston , 82 S.E.2d 465, 466 (S.C. 1954); Lacey Nursery Ctr., Inc. v. Department of Revenue , 905 P.2d 338, 343 (Wash. 1995). Pers on s seeking relief generally car ry their burden by demonstrating that they fit within the language of the statute authorizing the credit or the refund. SunTrust has not followed this path in this case for thesimple reason that the plain meaning of the language in Tenn. Code Ann. § 67-6-507(e)( 1) cannot be stre tched to include e

ntities in SunTrust’s

circumstances. Tenn. Code Ann. § 67-6-507(e)(1), which was enacted over the Governor’s veto in 1974, 4 provides that:

A dealer who has paid the tax imposed by this chapter on any saleas defined in § 67-6-102 may take credit in any return filed under the provisions of this chapter for th e tax paid by the dealer on the unpaid balance due on

accounts which, duringthe period covered by the current return, have been found to be worthless and are ac tuall y charged off fo r federal income tax purposes; provided, that if any accounts so charged

off are therea

fter in whole

or in part paid to the dealer, the amou

nts so paid

shallbe included in the first return filed aft er s uch col lec tio n an d th e ta x pa id a ccor din gly.5 This provision is now found at Tenn. Comp. R. & Regs. r. 1320-5-1-.52(2) (2000).
-8- By the statute’s plain terms, the sa les tax credit is ava

ilable only to

the “dealer who has paid the tax imposed by this c

hapter.” T his language i s unambiguous and

cannot reasona

bly be constr

ued to include th e assign ees of de alers who have paid

the sales tax.

Two other jurisdictions, N evada an d Washington, have construed their bad debt sales tax credit statutes to permit the assignee of the automobile dealer to receive a credit or

refund when the purchaser subsequently defaults on the retail installment

contract. Howe

ver, in both jurisdictions, the stat utory defin

itions of “dealer” or “retailer” and “person” were broad enoug h to include an assigneeof a

dealer or retailer. Puget Sound Nat’l Bank v. Department of Revenue , 868 P.2d 127, 130 (Wash. 1994); Nev. Op. Att’y Gen. No. 2000-08, 2 000 WL 246660, at *2 (Nev. A.G.) (Feb. 7, 2000). The corresponding definitions of “dealer” and “person” in the Retailers Sales Tax Act are notsimilarly broad. Tenn. Code Ann. § 67-6-102(7)(C) (Supp. 2000) (“dealer”); Tenn. Code Ann. § 67-6-102(21) (“person”). According ly, our sales tax statutes provide no basis for stretching the meaning of “dealer who has paid the tax imposed by this chapter” to include a dealer

’s assignees. T he Florida courts ha

ve reached the

same conclusion w

ith regard to sta

tutory lang

uage virtually identical to Tenn. Code Ann. § 67-6-507(e)(1). Department of Revenue v. Bank of America , 752 So. 2d at 641.

Our interpretation of the clear langua ge in Tenn. Code A

nn. § 67-6-507(e) (1) is buttressed by the Department’s long-standing interpretation of the statute. This interpretation is reflected in a regulationenacted

twenty-six years ago.

Approximately one month after the statute’s effective date, the Department promulgated Tenn. Comp. R. & Regs. r. 1320-5-1-.52(3) 5 providing that:

A bank or other financial institution purchasing contra cts “without recourse” from dealers selling tangible person al pro perty may not claim any deduction or cre

dit for any unpaid balances remaining due
on any property which has been sold by the othe r dealer on a sec

urity agreement

or other title retained

instrument, and later

repossessed, or which resulted from any other action to enforce the lien. Despite SunTrust’s assertions to the contrary, we do not view this rule as inconsistent with the plain meaning of Tenn. Code Ann. § 67-6-507(e)(1). In fact, we find that the rule is based o

n an entirely reasonable interpretation of the statute. We will, therefore, give great weight to the Department’s interpretation reflected in the rulebecause, at least as far asthis record shows, this interpretation has been consistently administered by the Depa rt ment without challenge over a long period of time. Covington Pike Toyota, Inc. v. Cardwell , 829 S.W.2d at 134; see also General Motors Acceptance Corp. v. Jackson , No. A00A1 315, 2000 W L 1701983, at *3 (Ga. Ct. App. Nov. 15, 2000) (denying a sales tax refund claim submitted by the assignee of an automobile dealer).-9- C.

SunTrust has not, and indeed cannot, cast itself as a “dealer who has paid the tax imposed by this chapter” because neither the fact s nor the language of Tenn. Code Ann. § 67-6-507(e)(1)
su ppor tthis claim. Howeve r, it asserts that it

should be allowed t

o pursue the claim

s that these dealers could have ass

e rted because the dealers have assigned SunTrust all their right, title, and interest in the retail insta

llment sales contr

acts. This assign

ment argument is

not without some weig ht and ha s been adopted in a t least two other ju

risdictions. Howe

ver, we do not find

it persuas iv e here because of the plain language of Tenn. Code Ann. § 67-6-507(e )(1) and Tenn. Comp. R. & Regs. r. 1320-5-1-.52(3).

The parties do not dispute that SunTrust purchased the retail installment sales contracts that eventually

defaulted or that SunTrust took a broad assignment of all the automobile d

ealers’ right

, title, and interes

t in these contrac

ts. The operative

terms of the assig

nment are as follo

ws:
FOR VALUE RECEIVED, we, the undersign ed Seller, he reby s el l, assign, andtransfer unto Third National Bank (herein called “Assignee”) all moneys due and to bec ome due u nder, and all our right, title, interest and remedies (but not our obligations) in and under the within contract and the Goods therein described, and we authorize Assignee to do every act and thing in our name or oth erwise which Assign ee ma y deem adv isable to enforce the ter

ms of said co

ntract.
Whilethe assignment transfers all the dealer’s “rig

ht, title, interest a

nd remedies” und

er the retail installmentsales contract, it authorizes the ba

nk “to do every act

and thing . . . [the bank] may deem advisable to enforce the terms of s aid con tract.” Nowhere in the assignment does the dealer explicitly assign to the bank

its right to obtain a bad debt sales tax credit under Tenn. Code Ann. § 67-6-507(e)(1).

One of the genera

l principles of the

law of ass ignments is that the assignee “steps into the shoes of the assignor” with regard to the matters covered by the assignme nt. Aetna Cas. & Sur. Co.
v. Tennessee Farmers Mut. Ins. Co. , 867 S.W.2d 321, 323 (Tenn. Ct. App. 1993) ; Bins wanger Southern (N.C.), Inc. v. Textron, Inc. , 860 S.W.2d 862, 865 (Tenn. Ct. App. 1993); Brummitt Tire Co. v. Sinclair Refining Co. , 18 Tenn. App. 270, 281, 75 S. W.2d 1022 , 1028 (1934). Thus, an assignment

does not extinguish the underlying contract, but rather it transfers the assignor’s contract rights against the other contracting party to the assignee who succeeds to the assignor’s rights under the underlying contract. Pacific Eastern Corp. v. Gulf Life Holding Co. , 902 S .W.2d 946 , 959 (Tenn. Ct. App. 1995).

We understand and a

pprove of the polic

y favorin g the free assignability of commercial instruments. However, in this c ontext, the traditional principles of stat utory constr

uction applicable to statutes granting taxcredits, deductions, or exemptions, should prevail over general assignment principles. Department of Revenue v. Bank of America , 752 So. 2d at 64 3-44; Puget Sound Nat’l Bank v. Department o

f Rev enue , 868 P.2d at 133 (Utter, J., dissenting). Statutes providing6 The General Ass embly is presumed t

o know the e

xisti ng stat e of the l aw on the subj ect under consider

ation when it enacts legislation. Lavin v. Jor don , 16 S.W .3d at 368 ; Blanke nship v. E state of Ba in , 5 S.W.3d 647, 651 (Tenn. 1999).
-10- exceptions from taxation should b e construed stric

tly agains tthe taxpayer. The General Assembly is presumably aware of this rule of construction, as well as Tenn. C o mp. R. & Regs. r. 1320-5-1- .52(3). 6 It is also reasonable to assume that the General Assembly is aware

that automobile dealers customarily

assi gn retail installment sales contracts

to banks and other

financial instituti

ons. Department

of Revenue v. Bank of America , 752 So. 2d at 643 (sta ting that “it is re asonable to
assume that the legislature is cognizant of the business practice of dealers with

regard to assignment of installment contracts to banks”). A ccordingly, it is reasonable to assume that the General Assembly did not intend to enable assignees of dealers to claim bad debt sales tax credits

or refunds when it enacted Tenn. Code Ann. § 67-6-507(e)(1) beca use, for the p ast twenty-six years, it has acquiesced

in the Department’s interpretation of Tenn. Code Ann. § 67 -6-507(e)(1) a s reflected in Tenn. Comp. R. & Regs. r. 1320-5-1-.52(3). General Motors Acceptance Corp. v. Jackson , 2000 WL 1701983, at *3 (according great deference to the administrative construction of Georgia’s bad debt sales tax credit statute that had been acquiesced in by the legislature)

. In summary, we

find that the plain,

unamb iguous language of Tenn. Code Ann. § 67-6- 507(e)(1) provides that only aut omobile dealers w

ho have paid

the sales tax arising from the sale of
a new car may claim the bad debt sales tax credit. We also find that Tenn. Comp. R. & Regs. r. 1320-5-1-. 52 (3) is consistent with Tenn. Code Ann. § 67-6-507(e)(1). Accordingly, we c onclude that SunTrust has failed to carry its burden of demonstrating that it is clearly entitled to the relief it seeks and, therefore, that the trial court’s alternative conclusion that SunTrust is not entitled to a refund under Te

nn. Code Ann. § 67-6

-507(e)(1) is c

orrect.
III.

We reverse the portion of the order dismissing S unTrust’s complaint on jurisdictional grounds and affirm the alternative conclusion that SunTrust is not entitled to a refundor credit under Tenn

. Code Ann. § 67-6-507(e)(1). The case is remanded to the trial court for whatever furthe r proceedings cons istent with this opinion may be required. We ta

x the costs of this app

eal to SunTrust Bank and its surety for which execution, if necessary , may issue.

___________________________________ WILLIA M C. KOCH, JR., JUDGE