Opinion
No. WD 57842.
OPINION FILED: May 2, 2000.
Appeal from the Administrative Hearing Commission, Honorable Sharon M. Busch, Commissioner.
Harvey M. Tettlebaum, Lowell D. Pearson and Terry M. Jarrett, Jefferson City, MO, Attorneys for Appellant.
Jeremiah W. (Jay) Nixon, Attorney General, Evan J. Buchheim, Assistant Attorney General, Jefferson City, MO, Attorneys for Respondent.
Before: Smith, P.J., and Howard and Holliger, JJ.
Greenbriar Hills Country Club (Greenbriar) appeals the decision of the Administrative Hearing Commission (the AHC) denying its § 536.087 application for the reasonable fees and expenses it incurred in protesting and ultimately prevailing on the decision of the Director of Revenue (the Director) applying Missouri sales tax to certain mandatory service charges paid to Greenbriar by its members.
All statutory references are to RSMo 1994, unless otherwise indicated.
Greenbriar raises two points on appeal. In both points, it claims that the AHC erred in denying its application for fees and expenses based upon its required finding, under § 536.087, that the Director's position, in the underlying agency proceeding and civil action arising therefrom, "was substantially justified," because its decision was arbitrary and capricious, unreasonable, unsupported by competent and substantial evidence, and was contrary to law.
We dismiss for a lack of jurisdiction.
Facts
Greenbriar is a country club located in Kirkwood, Missouri. It provides recreational and dining facilities to its members and their guests, and is organized and operated pursuant to Chapter 355, RSMo, as a not-for-profit corporation. Pursuant to 12 CSR 10-3.048(7), Greenbriar paid Missouri sales tax on its purchases of food and beverages instead of collecting and remitting sales tax to the Department of Revenue (the Department) on its sales of the same to members and their guests. It did not permit its members or their guests to tip its food and beverage staff. Instead, it billed its members for a monthly service charge in the amount of $35 per month. The service charge applied to all club members regardless of their class of membership or the amount of their food and drink purchases at Greenbriar's dining facilities for the month. The service charges paid were used exclusively by Greenbriar in payment of wages to its food and beverage staff.
On April 1, 1994, the Department sent to Greenbriar assessments asserting a sales tax liability, "plus additions to tax and interest," against it for the period of September 1, 1990, through August 31, 1993, in the aggregate amount of $48,797.45. The assessments were based on the Director's determination that the service charges Greenbriar charged its members were subject to Missouri sales tax. On June 16, 1994, Greenbriar paid the tax assessments to the Director under protest. On July 11, 1994, pursuant to § 144.700.2(1), Greenbriar filed with the Director a sales use/tax protest affidavit. On July 20, 1994, the Director denied the protest. On August 19, 1994, pursuant to §§ 144.700.2(2) and 144.261, Greenbriar filed a petition with the AHC contesting the Director's denial of its protest, contending that its service charges were exempted from sales tax pursuant to the Director's regulation 12 CSR 10-3.048(7) (8).
On or about April 3, 1996, the AHC issued its findings of fact and conclusions of law, agreeing with the Director that Greenbriar's service charges were subject to Missouri sales tax. However, the AHC went on to hold that because its decision unforeseeably overruled 12 CSR 10-3.048(7) (8), Greenbriar was not liable for the assessments of unpaid sales tax. Greenbriar appealed the AHC's decision to the Missouri Supreme Court. On December 17, 1996, the supreme court, in Greenbriar Hills Country Club v. Director of Revenue , 935 S.W.2d 36, 38-39 (Mo. banc 1996), reversed the decision of the AHC, holding that Greenbriar's service charges were not subject to Missouri sales tax.
On February 7, 1997, Greenbriar filed an application in the Missouri Supreme Court, pursuant to § 536.087, for reasonable fees and expenses incurred as the prevailing party in the underlying civil action arising from the sales tax proceeding with the Director, including its fees and expenses incurred in the agency proceeding and in seeking fees. Also on February 7, 1997, Greenbriar filed similar applications for fees and expenses in the Circuit Court of Cole County and with the AHC. On March 25, 1997, the supreme court entered the following order with respect to Greenbriar's application: "Appellant's motion for attorney's fees overruled."
The record on appeal does not reflect the disposition of Greenbriar's application for fees and expenses filed in the Circuit Court of Cole County.
A hearing on Greenbriar's application filed with the AHC was held on December 5, 1997, and April 2, 1998. On December 17, 1998, the AHC issued its findings of fact and conclusions of law, denying the application. The AHC found that, pursuant to § 536.087.1, Greenbriar was not entitled to fees and expenses because the Director's position in the underlying case, that Greenbriar's service charges were subject to sales tax, was substantially justified. On January 19, 1999, Greenbriar appealed the AHC's denial of its application directly to the Missouri Supreme Court, pursuant to § 536.087.7. In Greenbriar Hills Country Club v. Director of Revenue , 2 S.W.3d 798 (Mo. banc 1999), the supreme court held that:
While we had appellate jurisdiction of the underlying case, which involved construction of a revenue law, we have no jurisdiction of appeals of subsequent decisions involving the award of attorney fees. As applied here, section 536.087.7 purports to grant this Court jurisdiction of an appeal beyond and contrary to that authorized by the constitution. Thus, that provision as applied here is unconstitutional, and this Court does not have the necessary appellate jurisdiction over this appeal.
Id. at 800. The supreme court, pursuant to MO. CONST. art. V, § 11, ordered the cause transferred to this court. Id.
This appeal follows.
Jurisdiction
Before we can address the merits of Greenbriar's claims raised on appeal, we must first address the Director's contention that the AHC lacked jurisdiction to consider Greenbriar's application for fees and expenses. This is so in that, if the AHC lacked jurisdiction to consider the application, we would be deprived of jurisdiction to entertain this appeal on the merits, requiring us to dismiss. Two Pershing Square, L.P. v. Boley , 981 S.W.2d 635, 639 (Mo.App. 1998) (holding that a judgment entered in excess of or beyond the jurisdiction of the trial court is void and an appellate court has no jurisdiction to review it on the merits, but is limited to dismissing the appeal and remanding the cause for dismissal by the circuit court).
The Director contends that the AHC lacked jurisdiction to consider Greenbriar's § 536.087 application for fees and expenses on two grounds: (1) claims for fees and expenses incurred in tax proceedings arising under Chapter 144, RSMo, such as Greenbriar's, are governed exclusively by § 136.315; and (2) even if Greenbriar's application could have been filed pursuant to § 536.087, it was untimely because it was not filed with the AHC, where the Director contends Greenbriar first prevailed in the underlying case, within thirty days of the AHC's final disposition of the case, as required by § 536.087.3. In response, Greenbriar contends that: (1) its application was proper under either § 536.087 or § 136.315; and (2) its § 536.087 application to the AHC was timely filed because its application was not due within thirty days of the AHC's final disposition in that it did not first prevail before the AHC, as the Director contends. For the reasons discussed, infra, we hold that, even assuming, arguendo, that Greenbriar's application for fees and expenses could properly be filed pursuant to § 536.087, as it contends, the AHC did not have jurisdiction to consider its application such that this court has no jurisdiction to entertain this appeal on the merits, requiring us to dismiss it.
Section 536.087 authorizes the recovery by prevailing parties of reasonable fees and expenses incurred in certain agency proceedings or civil actions arising therefrom and provides, in pertinent part:
1. A party who prevails in an agency proceeding or civil action arising therefrom, brought by or against the state, shall be awarded those reasonable fees and expenses incurred by that party in the civil action or agency proceeding, unless the court or agency finds that the position of the state was substantially justified or that special circumstances make an award unjust.
2. In awarding reasonable fees and expenses under this section to a party who prevails in any action for judicial review of an agency proceeding, the court shall include in that award reasonable fees and expenses incurred during such agency proceeding unless the court finds that during such agency proceeding the position of the state was substantially justified, or that special circumstances make an award unjust.
3. A party seeking an award of fees and other expenses shall, within thirty days of a final disposition in an agency proceeding or final judgment in a civil action, submit to the court, agency or commission which rendered the final disposition or judgment an application which shows that the party is a prevailing party and is eligible to receive an award under this section, and the amount sought, including an itemized statement from any attorney or expert witness representing or appearing in behalf of the party stating the actual time expended and the rate at which fees and other expenses are computed. The party shall also allege that the position of the state was not substantially justified. . . .
4. A prevailing party in an agency proceeding shall submit an application for fees and expenses to the administrative body before which the party prevailed. A prevailing party in a civil action on appeal from an agency proceeding shall submit an application for fees and expenses to the court. The filing of an application shall not stay the time for appealing the merits of a case. When the state appeals the underlying merits of an adversary proceeding, no decision on the application for fees and other expenses in connection with that adversary proceeding shall be made under this section until a final and unreviewable decision is rendered by the court on the appeal or until the underlying merits of the case have been finally determined pursuant to the appeal.
Under these provisions of the statute, there is no dispute that Greenbriar would be entitled not only to recover the fees and expenses it incurred in appealing the AHC's decision to the Missouri Supreme Court, but also those incurred during the proceedings before the AHC, provided we find, as Greenbriar contends, that the AHC erred in holding that the Director's position in the underlying proceeding was substantially justified.
Section 536.087 "was patterned after the federal Equal Access to Justice Act, 28 U.S.C. § 2412 (1982)." McMahan v. Missouri Dep't of Soc. Servs., Div. of Child Support Enforcement , 980 S.W.2d 120, 125 (Mo.App. 1998). "The intent of the statute is 'to require agencies to carefully scrutinize agency and court proceedings and to increase accountability of the administrative agencies.'" State, Div. of Child Support Enforcement v. Grimes , 998 S.W.2d 807, 810 (Mo.App. 1999) ( quoting Hernandez v. State Bd. of Registration for the Healing Arts , 936 S.W.2d 894, 901-02 (Mo.App. 1997) (citation omitted)). "Section 536.087 has a broad public policy purpose 'to ensure the legitimacy and fairness of government and the law so that contests between private citizens and the government are decided on the merits of the matter and not on the costs.'" McMahan , 980 S.W.2d at 125 ( quoting Wadley v. State, Dep't of Soc. Servs., Div. of Child Support Enforcement , 895 S.W.2d 176, 179 (Mo.App. 1995)). "Section 536.087 . . . provides compensation to a prevailing party in an action against the state for all aspects of a litigation with the state, including fees and expenses incurred in seeking fees, if the state's position in the action was not substantially justified." Hernandez , 936 S.W.2d at 902 .
"By [the statute's] passage, the legislature has waived the sovereign immunity of the state and consented to be sued for expenses and fees to the extent set forth in the statute." State Bd. of Registration for the Healing Arts v. Warren , 820 S.W.2d 564, 565 (Mo.App. 1991). Thus, in passing § 536.087, the state has "prescribed the manner and the extent to be sued and the procedure to be followed." Id. "[W]here the legislature has specified the circumstances in which attorney's fees may be recovered for unjustified governmental litigation, it is not [the court's] place to enlarge upon it." Consolidated Pub. Water Supply Dist. No. C-1 v. Kreuter , 929 S.W.2d 314, 317 (Mo.App. 1996).
Pursuant to § 536.087.3, a prevailing party seeking an award of fees and expenses must, within thirty days of a final disposition in an agency proceeding or a final judgment in a civil action arising from an agency proceeding, submit its application to the court, agency, or commission which rendered the final disposition or judgment. McMahan , 980 S.W.2d at 123 . A final disposition in an agency proceeding or a civil action occurs "whenever the decision disposes of all issues as to all parties." Davis v. Angoff , 957 S.W.2d 340, 343 (Mo.App. 1997). "[T]he thirty day filing period commences whenever a 'final disposition' is reached in either an 'agency proceeding' or a 'civil action.' An agency decision, as well as a court decision, therefore, can trigger the onset of the thirty day filing period." Id. "The thirty day filing requirement is jurisdictional." Id. As such, "[f]ailure to request attorney's fees within thirty days of a final disposition in an agency proceeding or a final judgment in a civil action deprives the court or agency of jurisdiction to consider the request." Id.
Section 536.087.4 provides, in pertinent part, that a "prevailing party in an agency proceeding shall submit an application for fees and expenses to the administrative body before which the party prevailed. A prevailing party in a civil action on appeal from an agency proceeding shall submit an application for fees and expenses to the court." As such, a prevailing party seeking to recover its fees and expenses, under § 536.087, must file its application for the same before "the tribunal where it first prevailed" in the underlying case, be it an administrative agency or a court. State ex rel. Division of Transp. v. Sure-Way Transp., Inc. , 948 S.W.2d 651, 658 n. 8 (Mo.App. 1997). See Missouri Comm'n on Human Rights v. Red Dragon Restaurant, Inc. , 991 S.W.2d 161, 172-73 (Mo.App. 1999) (holding that the party seeking fees and expenses had improperly filed its § 536.087 application in the Missouri Court of Appeals, when it first prevailed before the Circuit Court of Cole County, such that the court of appeals lacked jurisdiction to hear its application). Hence, under § 536.087.3 .4, Greenbriar was required to file its application for fees and expenses before the court or agency where it first prevailed in the underlying case, within thirty days of its final disposition or judgment. On the face of things, there is some question as to whether Greenbriar first prevailed before the AHC or the Missouri Supreme Court. The question arises from the fact that although the AHC held that Greenbriar's service charges in question were subject to Missouri sales tax, it further held, pursuant to § 143.903, that it was not subject to the assessments totaling $48,797.45 for the past due sales taxes on the service charges because, based on the Director's existing regulations, its decision was "unexpected."
A party prevails in an action for purposes of § 536.087 when it "obtains a favorable order, decision, judgment, or dismissal in a civil action or agency proceeding[.]" § 536.085(3). "The legislative history of the [Equal Access to Justice Act] indicates that the term 'prevailing party' is not limited 'to a victor only after entry of a final judgment following a full trial on the merits.'" White v. Missouri Veterinary Med. Bd. , 906 S.W.2d 753, 755 (Mo.App. 1995) (citation omitted). "A party will be deemed prevailing if he obtains a settlement of the case; if the plaintiff has sought a voluntary dismissal of a groundless complaint; or even if he does not ultimately prevail on all issues." Id. "The touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties in a manner which Congress sought to promote in the fee statute." Id. ( citing Texas State Teachers Ass'n v. Garland Indep. Sch. Dist. , 489 U.S. 782, 792-93, 109 S.Ct. 1486, 1494, 103 L.Ed.2d 866, 878 (1989)).
In White v. Missouri Veterinary Medical Board , 906 S.W.2d 753 (Mo.App. 1995), the Missouri Veterinary Medical Board (the Board) filed a complaint with the AHC seeking a determination that White's veterinary license was subject to discipline. Id. at 754. In its complaint, the Board claimed eight allegations of misconduct on the part of White as cause for discipline. Id. After a hearing before the AHC, the Board prevailed on two of the charges, and the AHC found that cause existed to discipline White's license. Id. After a disciplinary hearing, the Board revoked his license. Id. White subsequently filed an application with the AHC seeking his reasonable fees and expenses incurred by him in defending the six charges that the Board had not prevailed upon before the AHC, which the AHC denied. Id. On appeal, after determining that a partially prevailing party may receive an award for fees and expenses under § 536.087, id. at 755-56, the court of appeals held that White was not entitled to receive such an award because:
After reviewing the underlying action, it is our view that the significant issue presented by the Board's claim against appellant is whether appellant's veterinary license was subject to discipline. Although the Board was not able to prove all of the factual allegations claimed as cause for discipline, appellant did not prevail on the significant issue of the underlying litigation. Further, the legal relationship of the parties was altered in the manner sought by the Board and opposed by appellant. Appellant cannot be considered a "prevailing party" for the purposes of sections 536.085(3) and 536.087.1.
Id. at 756. As such, according to White , a party is a prevailing party for purposes of § 536.087 when it prevails on the "significant issue" in the underlying case.
Applying the foregoing principles of law, we are in agreement with Greenbriar, as it states in its reply brief, that it "was not a 'prevailing party' in the underlying case. The AHC plainly ruled against Greenbriar: 'Because the sales tax applied to the meal and drink charges of which the service charges are a part, the sales tax also applies to the service charges,'" both past and future, which was the significant issue in the case. In this respect, it further stated, "Thus, on April 3, 1996, when the AHC rendered its decision, the law was that Greenbriar was not a prevailing party because it did not meet the White test. [ Id. ] Greenbriar had not prevailed on the significant issue. In fact, it had not prevailed on any issue." Hence, Greenbriar, by its own admission, first prevailed, for purposes of § 536.087, before the Missouri Supreme Court on December 17, 1996, when it held in Greenbriar Hills Country Club v. Director of Revenue , 935 S.W.2d 36 (Mo. banc 1996), that Greenbriar's service charges were not subject to Missouri sales tax. Id. at 39. As a consequence, under § 536.087.3 .4, any application by Greenbriar for fees and expenses was required to be filed in the supreme court, not the AHC.
The record reflects that on February 7, 1997, Greenbriar filed an application for fees and expenses in the Missouri Supreme Court, which was "overruled" on March 25, 1997. Pursuant to § 536.087.3, the application was required to be filed within thirty days of the court's final judgment of December 17, 1996. However, Greenbriar did not file its application for fees and expenses in the supreme court until February 7, 1997. As such, it would appear that Greenbriar's application in the supreme court was not timely filed. In any event, the timeliness of its application in the supreme court is of no consequence to our disposition of this appeal.
On appeal, Greenbriar is challenging the denial of its application for fees and expenses filed before the AHC. However, because its application was required to be filed with the Missouri Supreme Court, it was not properly before the AHC, depriving it of jurisdiction over the same. As such, we are deprived of appellate jurisdiction to entertain this appeal as to that application and are required to dismiss for a lack of jurisdiction. Two Pershing Square, L.P. , 981 S.W.2d at 639 .
Conclusion
For the reasons stated, we dismiss Greenbriar's appeal for a lack of jurisdiction and remand the cause to the AHC with directions to enter its order dismissing Greenbriar's application for fees and expenses for a lack of jurisdiction.
Howard and Holliger, JJ., concur.