Opinion ID: 1755473
Heading Depth: 1
Heading Rank: 2

Heading: Payments In Lieu of Taxes

Text: North Courtland's amended complaint added four allegations to its original complaint. First, North Courtland, claiming to be a third-party beneficiary of the contract between the TVA and Courtland, alleged that Courtland had failed to comply with § 2 of the contract's Schedule of Terms and Conditions and had thereby breached the contract. The relevant parts of § 2 provide: 2. Payments of or in Lieu of Taxes. (a) To the extent revenues are available after the satisfaction of all items set forth in paragraphs (1), (2), and (3) of section 6(a) of the contract[ [1] ] of which these Terms and Conditions are a party, Municipality may take each year from the electric system, in lieu of taxes, an amount representing the fair share of the cost of government properly to be borne that year by its electric system.... (b) It shall be the responsibility of Municipality to provide for such distribution as may be required by law or as it deems appropriate under the provisions of Section 13 of the TVA Act to the State, counties and any other municipal corporations in which it operates of any tax equivalents so collected by Municipality in lieu of State, county and other municipal taxes. North Courtland alleged that Courtland had willfully refused to comply with its obligation to distribute to North Courtland any portion of collected tax equivalent payments or payments in lieu of taxes. [2] Second, North Courtland alleged that Courtland had been unjustly enriched by its failure to distribute the payments. Third, North Courtland alleged that, as a result of its failure to distribute the payments, Courtland had converted property of North Courtland. Finally, North Courtland alleged that Courtland had breached a fiduciary duty owed to North Courtland by its imposition of a three percent (3%) tax upon North Courtland. Section 2(c) of the Schedule of Terms and Conditions provides that the [m]unicipality agrees that it will not impose any tax or other charge not expressly provided for in this contract upon the property or operations of its electric system, or upon the sale, purchase, use or consumption of electric energy supplied thereby. In its entry of a summary judgment, which, as noted previously, we consider to be a complete summary judgment, the trial court necessarily held that none of the claims in the amended complaint raised a genuine issue of material fact and that Courtland was entitled to a judgment as a matter of law on each of those claims. We disagree. Our review of the record in a light most favorable to North Courtland leads us to conclude that Courtland failed to make a prima facie showing that there was no genuine issue of material fact. Therefore, the burden did not shift to North Courtland to establish an issue of material fact. The trial court erred in entering a summary judgment in favor of Courtland on the claims alleged in North Courtland's amended complaint. In the interest of facilitating the efficient disposition of this cause on remand, we adopt the rationale of the Supreme Court of Tennessee in Rutherford County v. City of Murfreesboro, 205 Tenn. 362, 326 S.W.2d 653, cert. denied, 361 U.S. 919, 80 S.Ct. 257, 4 L.Ed.2d 187 (1959), in its resolution of whether Rutherford County was entitled to any interest in tax equivalent payments received by the City of Murfreesboro. Initially, the court quoted the 1940 amendment to 16 U.S.C. § 831 l : Nothing herein shall be construed to limit the authority of the Corporation in its contracts for the sale of power to municipalities, to permit or provide for the resale of power at rates which may include an amount to cover tax-equivalent payments to the municipality in lieu of State, county and municipal taxes upon any distribution system or property owned by the municipality, or any agency thereof, conditioned upon a proper distribution by the municipality of any amounts collected by it in lieu of State or county taxes upon any such distribution system or property; it being the intention of Congress that either the municipality or the State in which the municipality is situated shall provide for the proper distribution to the State and county of any portion of tax equivalent so collected by the municipality in lieu of State or county taxes upon any such distribution system or property. 205 Tenn. at 366, 326 S.W.2d at 654-55 (emphasis added in Rutherford County ). The court construed the amendment in the following manner: We think it perfectly clear that the 1940 amendment means, if we may be permitted to paraphrase, that TVA has the discretion in making such contracts with municipalities either to include a provision for tax equivalent payments as therein described or to omit any such provision; but if such a provision be included, it must be conditioned upon a proper distribution by the municipality of any such amounts collected in lieu of State or County taxes upon any such distribution system or property. If this is not the proper construction of that amendment, then it must be said that Congress used quite a good many words unnecessarily and pointlessly, because otherwise under Sec. 10 of the TVA Act, the Authority already had unlimited power to include such terms for resale as might be necessary or desirable for carrying out the purposes of the Act. As we see it, the only discretion is that which is vested in TVA whether to include the provision for payment of tax equivalents, but if such provision be included, it is on condition that the municipality make proper distribution to the respective governmental units. .... ... [W]e think that the language `conditioned upon a proper distribution' can only mean that the municipality must distribute these tax equivalents fairly and as a replacement of lost taxes as among the several governmental units; otherwise the municipality would be allowed to make a profit on the operation by collecting these tax equivalents and then retaining all of them for itself. 205 Tenn. at 367-69, 326 S.W.2d at 655-56 (emphasis added in Rutherford County ).