author: MILLER, Senior Judge.

text:
    Charles K. MONIN, Jr.; Monin Trucking, Inc. Trade Winds Transit, Inc., Appellants, v. Paul B. MONIN; Carolyn Backherms; Roger Leggett; Monin, Inc.; James A. Monin; Joseph E. Monin; Raphael Monin; William Monin; Linda Roby; Charles C. Simms, Iii; Martha Wheeler, Appellees. and Paul Monin; Carolyn Backherms; James A. Monin; Joseph E. Monin; Raphael Monin; William Monin; Linda Roby; Martha Wheeler, Cross-Appellants, v. Charles K. Monin, Jr.; Bardstown Warehousing, Inc.; Land Enterprises, Inc.; Roger Leggett; Monin Five, Inc.; Monin Trucking, Inc.; Donald Monin; Monin, Inc.; Trade Winds Transit, Inc.; Trans-American Freight Brokers, Inc., Cross-Appellees.
    Nos. 2003-CA-000193-MR, 2003-CA-000543-MR, 2003-CA-000659-MR.
    Court of Appeals of Kentucky.
    Dec. 30, 2004.
    As Modified Jan. 21, 2005.

      Marshall V. Gaither, PeWee Valley, KY, for Appellants/Cross-Appellees Charles K. Monin, Jr; Trade Winds Transit, Inc.; and Monin Trucking, Inc.
    John S. Kelley, Jr., Bardstown, KY, for Appellees/Cross Appellants Paul Monin; Carolyn Cross-Appellants Backherms; James A. Monin; Joseph E. Monin; Raphael Monin; William Monin; Linda Roby; Martha Wheeler.
    James H. Abell, Bardstown, KY, for Ap-pellee/Cross-Appellee Roger Leggett.
    Before COMBS, Chief Judge; BARBER, Judge; MILLER, Senior Judge.

      . Senior Judge John D. Miller sitting as Special Judge by assignment of the Chief Justice pursuant to Section 110.(5)(b) of the Kentucky Constitution and KRS 21.580.

   OPINION

MILLER, Senior Judge.

These appeals (Case 2003-CA-000193-MR and Case 2003-CA-000543-MR) and cross-appeal (Case 2003-CA-000659-MR) arise out of Civil Action No. 94-CI-00056 in the Nelson Circuit Court. We affirm in part, reverse in part, vacate in part, and remand.

FACTUAL AND PROCEDURAL BACKGROUND

In 1959, Charles K. Monin, Sr., and his wife Thelma, and Charles K. Monin, Jr. and his wife Rosalie, purchased approximately 150 acres of land in Nelson County, Kentucky. The land now adjoins the city limits of Bardstown and it is said constitutes some of the most valuable realty in Nelson County.

On May 21, 1975, Charles, Sr., and Charles, Jr., together with their respective wives, formed Monin, Inc. Each of the parties owned a 25% share of the corporation’s capital stock, of which it appears there were 2,000 shares outstanding.

Through deeds dated January 14, 1975, and March 29, 1982, the farm was deeded to Monin, Inc. It seems that the farm was the primary asset of the corporation.

Thelma died in 1984, with Charles, Sr., succeeding to her interest in the corporation, making him a 50% owner. In 1987 Charles, Sr. died. Under his will, his 50% share of Monin, Inc. stock passed to his ten children in equal shares. In January 1990, Charles, Jr.’s wife Rosalie died, with her interest passing to him.

At this point in time, Charles, Jr., owned 55% of the capital stock in Monin, Inc., and each of his other nine siblings owned 5% of the stock.

For divers reasons, the siblings fell into disagreement over the operation and management of the corporation. The disagreements, among other things, concerned Charles, Jr.’s occupancy and use of corporate property.

In February 1994, Charles, Jr., and Don filed the instant litigation against the remaining siblings. Through a counterclaim and third-party complaint filed November 12, 1996, the cross-appellants requested, inter alia, the dissolution of Monin, Inc. and the appointment of a Receiver to accomplish same. On August 15, 1997, the trial court entered an order granting the cross-appellants requests as to the dissolution of Monin, Inc., and the appointment of a receiver. On October 24, 1997, the trial court entered an order appointing one, Roger Leggett as Receiver with the power to wind up the affairs and liquidate the assets of the company. The trial court made the order final and appealable pursuant to CR 54.02. On appeal to this Court, the trial court’s dissolution of Monin, Inc., and appointment of a Receiver were affirmed. (Case No.l997-CA-002871-MR).

In December 2000, the cross-appellants named as additional third-party defendants six corporations controlled by Charles, Jr., to wit: Monin Trucking, Inc.; Trade Winds Transit, Inc.; Land Enterprises, Inc.; Trans-American Freight Brokers, Inc.; Bardstown Warehousing, Inc.; and Monin Five, Inc. The cross-appellants alleged that Charles, Jr., illegally used assets of Monin, Inc., for the benefit of himself and the corporations, including permitting the companies to occupy the property without paying fair rental value. The cross-appellants specifically alleged that Charles had illegally “diverted and arranged to be diverted corporate funds for the purpose of satisfying personal debts and obligations.” The cross-appellants sought reimbursement of the allegedly diverted assets on behalf of Receiver Leg-gett.

Leggett then filed an intervening complaint which, as amended, sought reimbursement from Charles, Jr., for the rental value of a residence located on Monin, Inc., property; rental for Monin, Inc., property used by the six corporations in the conduct of their business; reimbursement for the use of Monin, Inc., property for storage in the conduct of the corporations’ business activities; and reimbursement for checks cashed by Charles on Monin, Inc., checking accounts.

A bench trial was commenced on May 31, 2002, was resumed on July 12, 2002, and was concluded on August 16, 2002. In the meantime, Leggett filed motions seeking to evict Charles, Jr., and his businesses from the property or to require them to pay ongoing rent, requesting a 10% fee for payment as his compensation as Receiver, and requesting $15,000.00 in attorney fees for his legal counsel in the litigation.

The trial court rendered judgments dated November 22, 2002, January 13, 2003, February 12, 2003, and March 5, 2003. By these judgments Charles, Jr., was directed to pay the Receiver on his claims $11,555.90 in principal and prejudgment interest for wrongful withdrawals from Monin, Inc., accounts; $42,048.06 in principal and prejudgment interest for the past rental value of the farm residence; and $600.00 per month for ongoing rent of the farm residence.

Under the judgments Monin Trucking, Inc., and Trade Winds Transit, Inc., were ordered to pay the Receiver $242,952.53 in principal and prejudgment interest for past rental of the property for their use of the property for business activities and were assessed ongoing rental at the rate of $3,600.00 per month. The judgments granted the Receiver a fee of 7.5% of the sale proceeds of Monin, Inc., and legal fees in excess of $15,000.00.

On the cross-appellants’ claims of wrongful withdrawals from Monin, Inc., checking accounts, Charles, Jr., was ordered to 'pay the Receiver $44,749.03 in principal and prejudgment interest. The trial court denied claims against Charles, Jr.’s, other business interests based on lack of evidence and denied some of the claims of the cross-appellants as being barred by the statute of limitations. The trial court also rejected Charles, Jr.’s, counterclaim for reimbursement or credit for sums allegedly paid by him on behalf of Monin, Inc., but permitted credits for rental actually paid by the companies for their occupation of the land. The trial court denied the cross-appellants’ request for attorney fees.

We address the many issues raised in these appeals as best we can discern.

DIRECT APPEALS — CASES 2003-CA-000193-MR & 2003-CA-000543-MR

First, the appellants contend that the trial court lacked jurisdiction to grant judgment in favor of the cross-appellants on the basis that their claims constituted a shareholder derivative action under KRS 27JB.7-400 and that the cross-appellants failed to comply with the statutory requirements for bringing such an action.

Under their third-party complaint filed on December 13, 2000, the cross-appellants sought to recover from Charles, Jr., and/or the corporations under his control funds and assets which the cross-appellants claimed were improperly and illegally obtained from Monin, Inc., from February 13, 1987 (the date of Charles, Sr.’s, death) through October 24, 1997 (the date Leg-gett was appointed receiver of Monin, Inc.). The cross-appellants prosecuted their claims on behalf of Monin, Inc., with the understanding that any recovery made on those claims must be provided to Leg-gett for division under his mandate to ivind up the affairs of Monin, Inc. The cross-appellants were eventually granted a judgment “on behalf of Receiver Leggett” against Charles, Jr., in the sum of $44,749.93 plus post-judgment interest.

While the appellants, in the caption of their argument, have framed their argument as a jurisdictional issue,, we construe the issue as one of standing. As a court of general jurisdiction, the Nelson Circuit Court has jurisdiction over this type of case and over the parties. However, we agree with the appellants that the cross-appellants do not have standing to bring a claim seeking to recover misappropriated corporate assets on behalf of the Receiver.

“[T]he Supreme Court and this Court have consistently made it clear that a receiver is in no sense a representative of any party involved in a litigation; a receiver represents the appointing court, and only the court.” Rosenbalm v. Commercial Bank of Middlesboro, Ky.App., 838 S.W.2d 423, 429 (1992) (citing Rapp Lumber Co. v. Smith, 243 Ky. 317, 48 S.W.2d 17; 19 (1932); Crump & Field v. First Nat’l Bank of Pikeville; 229 Ky. 526, 17 S.W.2d 436, 439 (1929); Moren v. Ohio Valley Fire & Marine Ins. Co.’s Receiver, 224 Ky. 643, 6 S.W.2d 1091, 1093 (1928); and Cerwin v. Taub, Ky.App., 552 S.W.2d 675, 678 (1977)). We think it reasonably follows that the converse is true, and that a Receiver may not be represented by any party involved in litigation but, rather, must act in his own stead pursuant to the authority of the appointing court. We are aware of no authority which would permit the shareholders of a corporation, during the dissolution of a corporation and while the corporation is under the purview of a Receiver charged with winding up its affairs, to bring a lawsuit seeking to recover assets on the behalf of the Receiver. In short, that is the Receiver’s obligation, and to permit shareholders to independently bring their own lawsuits on behalf of a Receiver based upon their own judgments as to the winding up of the affairs of the corporation not only undermines the function of the Receiver, but may lead to haphazard and duplicative causes of actions based upon speculative theories by the various shareholders. The marshaling of the corporation’s assets is best left to the Receiver who is charged with such duty. KRS 271B.14-320.

In conclusion, we hold that the cross-appellants do not have standing to pursue assets of Monin, Inc. or liabilities owed to Monin, Inc., on behalf of Receiver Leggett. We accordingly reverse that portion of the trial court’s judgment granting the cross-appellants a judgment in the amount of $44,749.93 against Charles, Jr., on behalf of Receiver Leggett.

Next, the appellants contend that the trial court erred in its determination that Charles, Jr., had made wrongful withdrawals from Monin, Inc., accounts between October 27, 1997, and April 9, 1998. The trial court determined that Charles, Jr., had no authority to make these withdrawals following the appointment of Leggett as Receiver in October 1997. The appellants contend that the withdrawals were proper because the trial court’s order dissolving the corporation and appointing Leggett as Receiver was stayed by super-sedeas bond during the period of the withdrawals and that the payments were made in good faith to satisfy obligations of Mo-nin, Inc. The trial court addressed this issue as follows:

After dissolution of Monin, Inc. and the appointment of Leggett as Receiver, Charles wrote checks totaling $8,436.48 on the Monin checking account. Charles argues that the checks were for expenses incurred by the corporation. However, the vast majority were paid to his attorney and CPA.
Resolution of this issue is simple. After Leggett was appointed Receiver on October 24, 1997, Charles had no authority to use Monin, Inc.’s checking account or any other of its assets. Leggett is entitled to judgment against Charles for the amount of those withdrawals, plus interest thereon at 8% per annum from April 9, 1998 (date of last check) to date hereof.

We begin our discussion by noting that this case was tried by the circuit court sitting without a jury. It is before this Court upon the trial court’s findings of fact and conclusions of law and upon the record made in the trial court. Accordingly, appellate review of the trial court’s findings of fact is governed by the rule that such findings shall not be set aside unless clearly erroneous. Ky. R. Civ. P. (CR) 52.01; Largent v. Largent, Ky., 643 S.W.2d 261 (1982). The trial court’s application of law, is of course, reviewed de novo.

The trial court’s finding that the “vast majority” of these expenditures were for Charles, Jr.’s, personal attorney and CPA is supported by substantial evidence and is, accordingly, not clearly erroneous. As the funds were not expended for corporate purposes, the trial court did not err in its determination that Charles, Jr., was liable for reimbursement of the expended funds.

As the expenditures in question were for personal use, we need not decide whether the appellants are correct in them claim that by posting a supersedeas bond Charles, Jr., retained the right to expend funds from the corporate accounts. Even if so, he did not enjoy the right to use corporate funds for personal purposes.

The appellants next contend that they are entitled to a new trial on the issue of rent imputed to Charles, Jr., for his use of the private residence located on Monin, Inc., property and to Monin Trucking, Inc., and Trade Winds Transit for their use of the commercial property located on Monin, Inc., property on the basis that Leggett was permitted to testify on his own behalf as an expert on the fair rental value of the property. The appellants allege that Leg-gett labored under a conflict of interest in testifying concerning the fair rental value of the property because he stood to profit personally from a higher rental value because his Receiver fee would be based, in part, on the rental value of the property and because he harbored personal animosity against Charles, Jr. The appellants also allege that Leggett did not follow the proper standards for appraising the fair rental value of the property.

Leggett was appointed Receiver of Monin, Inc., in October 1997. Leggett is a General Certified Appraiser who has been performing real estate appraisals since 1970. Leggett owns his own appraisal company, L/Appraisals. The company performed over 1000 appraisals, mostly in Nelson County, in 2001. The record discloses that Leggett also owns rental property and is familiar with the rental value of properties in Nelson County.

Kentucky Rule of Evidence (KRE) 702, which governs testimony by expert witnesses, provides that a witness qualified as an expert by knowledge, skill, experience, training, or education may provide opinion testimony if scientific, technical, or specialized knowledge will assist the trier of fact. A trial court’s determination as to whether a witness is qualified to give expert testimony under KRE 702 is subject to an abuse of discretion standard of review. Farmland Mut Ins. Co. v. Johnson, Ky., 36 S.W.3d 368, 378 (2000); Fugate v. Commonwealth, Ky., 993 S.W.2d 931, 935 (1999); Murphy by Murphy v. Montgomery Elevator Co., Ky.App., 957 S.W.2d 297, 299 (1997). “An abuse of discretion occurs when a ‘trial judge’s decision [is] arbitrary, unreasonable, unfair, or unsupported by sound legal principles.’ ” Farmland Mut. Ins. Co., 36 S.W.3d at 378 (quoting Goodyear Tire and Rubber Co. v. Thompson, Ky., 11 S.W.3d 575, 581 (2000)).

Given his past education and experience in the field of appraising, Leggett was qualified to express an expert opinion on the fair rental value of the residential and commercial property occupied by Charles, Jr., and his companies.

With regard to the allegation that Leggett labored under a conflict of interest, we note that the fact finder in the case, the trial judge, appointed Leggett as Receiver for Monin, Inc., and was fully aware of any potential conflict in weighing Leggett’s testimony. The trial judge was well-positioned to factor this into his determination as to the rental value of the property. Further, we note that the trial court did not accept Leggett’s recommendations of fair rental value in full, but, rather, determined a value less than that proposed by Leggett as to the residence. We believe that any conflict of interest on the part of Leggett, whether real or imagined, goes to the weight of his testimony and not to its admissibility. As such, the appellants are not entitled to a new trial on the rental issue on the grounds of Leg-gett’s alleged conflict of interest.

Next, the appellants contend that the trial court erred in its award of a fee to the Receiver of 7.5% of the gross proceeds of the sale of the Monin, Inc., property. The appellants allege that the fee was set without benefit of a hearing; that the Receiver has not provided services to justify a fee of 7.5%; and that the Receiver’s fee should be based upon a reasonable hourly rate.

Leggett filed a motion requesting approval of a fee equal to 10% of the purchase price ultimately derived from the sale of Monin, Inc., property. The cross-appellants objected to Leggett’s request and argued that the 5% fee for personal representatives as set forth in KRS 395.150, or a fee akin to the one authorized for trustees under KRS 386.180, would be more appropriate.

Charles objected in general to an allowance of any fee for Leggett. This blanket objection is, of course, not sustainable. KRS 271B.14-320 provides that “[the] court from time to time during the receivership ... may order compensation paid and expense disbursements or reimbursements made to the receiver ... from the assets of the corporation or proceeds from the sale of the assets.” Moreover, the general proposition of law is to the effect that “[i]n the absence of a statute or fixed rule of practice, the amount of a receiver’s compensation is within the sound discretion of the court; however, exercise of that discretion is not unbridled and the matter is discretionary only in the sense that there are no fixed rules to determine the proper allowance, and not in the sense that the courts are at liberty to give anything more than a fair and reasonable compensation or less than such compensation.” 75 C.J.S. Receivers § 477 (2002). Further, “[a]n order allowing compensation to a receiver should be made only after notice and a hearing, at which the parties interested have an opportunity of contesting the elaim[J” 75 C.J.S. Receivers § 478 (2002).

Through a pretrial order, the trial court ordered that the issue of the Receiver’s fee be tried with all other issues joined by the pleadings. However, the parties do not cite to the record of any such hearing, and it is unclear from the record whether a bona fide hearing on the Receiver’s fee ensued. As noted previously, the trial court fixed the Receiver’s fee at 7.5%. We view this as an arbitrary fixing akin to a real estate commission. Certainly Leggett should not be compensated upon a commission basis, especially where the principal asset of the corporation is real property; rather, he should be reasonably compensated for his services based, among other factors, upon his time, effort, skill, and expertise in marshaling, protecting, saving, and distributing proceeds upon termination of the receivership. See generally, Annotation, Measure and Amount of Compensation of Receiver Appointed by Federal Comi, 6 A.L.R. Fed. 817. We know of no authority, statutory or otherwise, for fixing a receiver’s fee upon a commission basis.

In view of the record before us, we are constrained to vacate the award of a 7.5% Receiver’s fee and remand for reconsideration, applying the aforementioned principals.

The appellants’ next argument is that the Receiver should be removed for failure to carry out his duties in a timely manner and to protect the assets of Monin, Inc.

The appellants provide minimal support for this argument. In total, the appellants’ argument is as follows: “Given the foregoing evidence of the Receiver’s admitted lack of impartiality, his failure to carry out his responsibilities, and inability to do his job as mandated by court order, and his excessive request for compensation, the Receiver should be dismissed by the court and replaced without compensation.”

We find no evidence supporting these allegations, nor have we been directed to any. In fact, it does not appear the circuit court ruled on this issue. CR 52.04 requires a motion for additional findings of fact when the trial court has failed to make findings on essential issues. Failure to bring such an omission to the attention of the trial court by means of a written request will be fatal to an appeal. Cherry v. Cherry, Ky., 634 S.W.2d 423 (1982). The thread which runs thorough CR 52 is that a trial court must render findings of fact based on the evidence, but no claim will be heard on appeal unless the trial court has made or been requested to make unambiguous findings on all essential issues. Vinson v. Sorrell, Ky., 136 S.W.3d 465, 471 (2004). Perforce, we are unable to address this issue.

Next, the appellants argue that the attorney fees awarded to counsel for the Receiver should be vacated subject to a hearing on the reasonableness of the fees. The appellants also allege that the trial court erred by sealing the itemized listing of the fees on the basis of attorney-client privilege.

In the course of this litigation, the trial court appointed Charles Simms, III, to represent Leggett through an order which set various conditions and limitations on that representation.

At the conclusion of the proceedings, Simms tendered a request to the trial court of fees totaling $15,225.00. Simms submitted an itemized list of services rendered from June 18, 2001, through September 5, 2002. AH charges were based upon a $100.00 per hour cap as imposed by the trial court. The trial court further took “judicial notice of the activities involving Simms’ representation of Leggett, and the fact that those activities support Simms’ claim that he had expended 150.25 hours on behalf of Leggett.”

KRS 271B.14-320(5) provides that “[t]he court from time to time during the receivership or custodianship may order compensation paid and expense disbursements or reimbursements made to the receiver or custodian and his counsel from the assets of the corporation or proceeds from the sale of assets.”

The $100.00 per hour cap set by the trial court is not unreasonable. Moreover, the appellants have not identified any factors to refute the trial court’s determination that the quantity of hours is reasonable. “A receiver, being entitled to the assistance of counsel in proper cases, will be allowed reasonable and proper fees in this behalf[.]” 75 C.J.S. Receivers § 466 (2002). The trial court “fixes the compensation, if any, to be allowed for the services of an attorney for a receiver, ... [and] is vested with discretion in the matter.” 75 C.J.S. Receivers § 468 (2002). In sum we hold that the trial court did not abuse its discretion in setting a fee for Mr. Simms of $15,225.00 based upon 150.25 hours at $100.00 per hour.

The trial court did not address the issue of the sealing of the attorney fees invoice, a fact which prevents our review of the issue. However, we note that the itemization of a legal services invoice would not appear to fall within the attorney-client privilege as such a listing is not a communication by Leggett to Simms, nor is such a listing work product as it does not involve the thought processes of Simms in evaluating and litigating Leggett’s claims. See KRE 503.

The appellants’ last argument is that the trial court erroneously denied Charles, Jr., an offset, reimbursement, or credit for amounts he spent out of pocket on behalf of Monin, Inc.

The appellants allege that $7,000.00 in rental payments made by Monin Trucking, Inc., was not properly credited in the final judgment calculation. On page 10 of the trial court’s November 22, 2002, order, the trial court acknowledged the validity of the payments and stated “Charles, Monin Trucking, Inc., and Trade Winds Transit, Inc. should be given credit for those payments.” It is unclear from the later orders whether these offsets were properly credited to the appellants. We accordingly remand for clarification by the trial court. If the appellants are correct and the offsets were not included in the final judgment calculation, a $7,000.00 offset should be credited to the appellants.

The appellants also contend that they are entitled to an offset of $4,960.56 consisting of a payment of $438.78 for insurance premiums paid on the farmhouse; $2,941.53 for property taxes paid on the farm; and $1,580.25 for City of Bards-town/Industrial District taxes paid. The appellants allege that the expenses were paid by Charles, Jr., out of his own pocket, and that he is accordingly entitled to an offsetting credit in the judgment calculation. While it appears that the appellants raised these offsets during the trial proceedings, it does not appear that the appellants’ entitlement to the credits was addressed in either the trial court’s November 22, 2002, order or in any of the three subsequent orders, nor does it appear the appellants brought the omission to the attention of the trial court.

As the appellants did not make the proper request for findings concerning these offsets subsequent to the trial court’s November 11, 2002, order, the issue is not properly preserved for our review. CR 52.04; Vinson v. Sorrell, 136 S.W.3d at 471; CR 52.04. Accordingly we are unable to address same.

CROSS-APPEAL — CASE 2003-CA-000659-MR

In their cross-appeal, the cross-appellants contend that, for various reasons, the trial court erred in its ruling that a portion of their claims was barred by the statute of limitations. The trial court allowed only those claims which existed within the five years immediately prior to December 13, 2000, the date the cross-appellants first raised them claims seeking reimbursement for amounts allegedly wrongfully withdrawn from Monin, Inc. by Charles, Jr.

Based upon our disposition of the cross-appellants claims in the direct appeal wherein we held that the cross-appellants did not have standing to prosecute a claim on behalf of Receiver Leggett, all issues raised by the cross-appellants in their cross-appeal are moot. Hence, we need not address those issues on the merits.

CONCLUSION

In conclusion, we affirm as to all issues raised in these appeals with the exception that we reverse as to the money judgment in the amount of $44,749.03 awarded to the cross-appellants on behalf of the Receiver.

We remand as to the issue of whether the appellants were given proper credit for $7,000.00 the trial court determined they were entitled to as an offset against the judgment for rental. The trial court shall reconsider this issue.

We further vacate the award of a 7.5% Receiver’s fee and remand for reconsideration of the compensation to be awarded in light of the authorities cited herein.

Finally, let us note that litigation among these parties has been expensive and time consuming for all concerned. Having ordered the dissolution of Monin, Inc., it seems to us that the trial court, through its Receiver, should hastily conclude the mar-shalling of the assets of Monin, Inc., and the winding up of the affairs of the corporation. We note that in its final distribution of the assets of the corporation, the trial court has broad equitable powers. Hopefully these powers will be used to bring about a quick and proper determination of this matter.

For the foregoing reasons the judgments of the Nelson Circuit Court are affirmed in part, reversed in part, vacated in part, and remanded for additional proceedings consistent with this opinion.

ALL CONCUR.

      .It appears that from the date of purchase Charles, Jr., and his wife (before her death) occupied the farm house located on the property. It also appears that Charles, Jr., has used a portion of the land, at various times, as a base of operations for certain of his business interests.

      . Charles K. Monin, Jr., Donald Monin, Paul Monin, Carolyn Backherms, James A. Monin, Joseph E. Monin, Raphael Monin, William Monin, Linda Roby and Martha Wheeler are the ten children of Charles, Sr. and Thelma.

      . The record reflects that, for the most part, the alignment of interests has been Charles, Jr. and Don against the remaining eight siblings.


source: Caselaw Access Project

author: TAYLOR, Judge.

license: Public Domain

text:
    Kenneth BROWN, Appellant, v. Wayne SHELTON, Appellee.
    No. 2004-CA-000282-MR.
    Court of Appeals of Kentucky.
    Dec. 30, 2004.

      Anne W. Miller, O’Koon Hintermeister, PLLC, Louisville, KY, for Appellant.
    Ilam E. Smith, Pedley Zielke Gordinier & Pence, PLLC, Louisville, KY, for Appel-lee.
    Before TACKETT, TAYLOR, and VANMETER, Judges.
   OPINION

TAYLOR, Judge.

Kenneth Brown brings this appeal from a January 9, 2004, Judgment of the Jefferson Circuit Court. We reverse and remand.

The underlying dispute involves a claim for damages stemming from an alleged breach of a commercial lease. Appellee initially filed a forcible detainer petition in the Nelson District Court, and an order of eviction issued therefrom. To recover unpaid rent, appellee then instituted this action in the Jefferson Circuit Court. Thereafter, appellee moved for summary judgment; however, the court denied same by order entered October 17, 2003. Ky. R. Civ. P. (CR) 56.

The action was subsequently tried by the court without a jury on December 5, 2008. CR 39.02. After appellee’s presentation of evidence but before appellant had presented his case, appellee moved for directed verdict under CR 50.01. The court granted the motion, and judgment in favor of appellee was entered on January 9, 2004. This appeal follows.

Appellant’s sole contention is that the circuit court erred by granting a directed verdict. We must agree.

We initially emphasize that a directed verdict is clearly improper in an action tried by the court without a jury. Morrison v. Trailmobile Trailers, Inc., Ky., 526 S.W.2d 822 (1975)(holding that a directed verdict is improper in a bench trial); see also, 7 Kurt A. Philipps, Jr., Kentucky Practice, CR 50.01 cmt.5 (5th ed.1995). In an action tried by the court without a jury, the appropriate procedural mechanism for early dismissal is found in CR 41.02(2), which reads:

In an action tried by the court without a jury, after the plaintiff has completed the presentation of his evidence, the defendant, without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. The court as trier of the facts may then determine them and render judgment against the plaintiff or may decline to render any judgment until the close of all the evidence. If the court renders judgment on the merits against the plaintiff, the court shall make findings as provided in Rule 52.01.

Under the plain terms of CR 41.02(2), a defendant may move for dismissal at the close of plaintiffs presentation of evidence during a bench trial. We view the scope of CR 41.02(2) as being narrowly limited to dismissal in favor of a defendant. As such, CR 41.02(2) cannot be read as providing the procedural mechanism for a judgment in favor of a plaintiff at the close of plaintiffs presentation of evidence. Our interpretation of CR 41.02(2) is consistent with recent dictum of the Kentucky Supreme Court in Moore v. Asente, Ky., 110 S.W.3d 336 (2003):

By labeling his motion one for “judgment of the pleadings” the Asentes’ counsel likely misspoke. More than likely, the Asentes’ lawyer was moving for an involuntary dismissal under CR 41.02(2), which is similar to a motion for a directed verdict, CR 50.01, but utilized in actions “tried by the court without a jury-” CR 41.02(2). Although a trial court may grant judgment for the defendant [under CR 41.02(2)] if “upon the facts and the law the plaintiff has shown no right to relief,” a judgment for the plaintiff would not be appropriate at this point in the proceedings because the defendant has not yet completed his proof.

Id. at 345 n. 17 (citations omitted).

In sum, we hold a directed verdict under CR 50.01 is improper in a trial by the court without a jury. CR 41.02(2) governs an action tried by the court without a jury. Under the provisions of CR 41.02(2), a defendant may move for dismissal after plaintiffs presentation of evidence; however, a plaintiff may not move for judgment after his presentation of evidence. Accordingly, we are of the opinion the circuit court erred by granting a directed verdict in favor of appellee.

We additionally observe that CR 52.01 requires the court to make specific findings of fact and separate conclusions of law before rendering judgment in a bench trial. Skelton v. Roberts, Ky.App., 673 S.W.2d 733 (1984). The language found in this rule is mandatory. Id.; Standard Farm Stores v. Dixon, Ky., 339 S.W.2d 440 (1960). Here, the trial court made no findings of fact or conclusions of law. On retrial, the court should make specific findings of fact and conclusions of law as required by CR 52.01.

For the foregoing reasons, the Judgment of the Jefferson Circuit Court is reversed and this cause is remanded for proceedings not inconsistent with this opinion.

ALL CONCUR.


author: MINTON, Judge. BUCKINGHAM, Judge,

text:
    CITY OF SOMERSET, Appellant, v. Peggy J. BELL; Lewis Blankenship; Charlie Mac Corp.; William Clouse; Brian Cooke; David Cothran; Cumberland Lake Shell; Cumberland Lumber Company; Corliss Davis; Robert Arlene Ford; Jerry Donna Foster; Grand Central Apartments; Doug Hail; Rick Lisa Halloran; Hartco Hardware Flooring, LP; Steve Hieronymus; Timothy L. Hughes; Hugh Hurst; J M Realty; Francis Nancy Kapfhammer; Robert Lankford; McGlothlin Todd Construction; Nationwide Life Insurance; Steve Parrott; Gary Tamara Pence; Charles F. Pierce; Rals Concrete Materials, Inc.; Fred A. Schultz; Robert Setser; Somerset Country Club, Inc.; Helen Stanton; Stoneybrook Apartments; William Stringer; Tradeway, Inc.; James M. Tucker; CV Carolyn Warner; Gerald Weigel, Jr.; Joseph Weigel; Michelle V. Wilson; Woodstick Holding Company, Inc.; Michael Cress; James R. Foster; Donald Moss; James Cinda Crea; David Dorsey; John B. Hail; Doyle Hall; Roger Linda Harness; Joe Jackson; Lewis Marcum; Harold Megargel; Somerset Cycle Center; South Midway Supply, Inc.; Sheila Thompson; Tractor Supply Co.; Am Con Construction Products, Inc.; Kirby Kim Cordell; and Spicewood Services, Appellees, and Reggie Stringer and All other Persons Similarly Situated, Cross-Appellants, v. City of Somerset, Kentucky, Cross-Appellee.
    Nos. 2003-CA-001522-MR, 2003-CA-001523-MR.
    Court of Appeals of Kentucky.
    Jan. 21, 2005.

      Joe L. Travis, Daniel G. Yeast, Somerset, KY, for appellant.
    D. Bruce Orwin, Somerset, KY, for ap-pellees.
    Timothy Eifler Louisville, KY, Amicus Curiae Brief on Behalf of Eric and Connie Light.
    Before BUCKINGHAM and MINTON, Judges; MILLER, Senior Judge.

      . Senior Judge John D. Miller sitting as Special Judge by assignment of the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and KRS 21.580.

   OPINION

MINTON, Judge.

A group of taxpayers, living in an area annexed by the City of Somerset, brought a class action lawsuit in the Pulaski Circuit Court, alleging that the City had improperly collected ad valorem property taxes from them. The circuit court agreed, concluding that the City’s assessment and levy of taxes violated statutory requirements. Later, the court concluded that although the taxpayers were legally entitled to a refund, they were precluded from recovering funds in a class action lawsuit. The Court also concluded that the taxpayers had failed ■ to exhaust administrative remedies. Finally, the court held that the taxpayers were not entitled to interest on their refund.

On appeal, the City argues that the taxpayers’ class was erroneously certified; that the taxpayers are not owed a refund but, rather, that the City itself deserves compensation for the value of the benefits it conferred on the taxpayers; and that the taxpayers’ motion for a protective order to prevent further discovery was erroneously granted. On cross-appeal, the taxpayers assert that their refund claim is not subject to administrative remedies and that they are owed interest on their refund. Because we hold that the City is liable to the taxpayers for refunds without interest and that the City is not eligible for compensation for the value of benefits conferred on the taxpayers, we affirm, in part. Furthermore, because we conclude that the class was properly certified and that the taxpayers’ claims are not subject to exhaustion of administrative remedies, we reverse and remand, in part.

PROCEDURAL HISTORY

In 1995, each of the taxpayers’ property was annexed into the city limits of Somerset at the taxpayers’ request. When land is annexed into a city, KRS 81A.470 and KRS 81A.475 require the city responsible for the annexation to file accurate maps of the annexed area within sixty days. KRS 81A.470 provides as follows:

(1) If the limits of a city are enlarged or reduced, the city shall, within sixty (60) days of the enlargement or reduction, cause an accurate map and description of the annexed, transferred, or severed area, together with a copy of the ordinance duly certified, to be recorded in the office of the county clerk of the county or counties in which the city is located, in the office of the Secretary of State, and in the Department for Local Government....
(2) No city which has annexed unincorporated or accepted transfer of incorporated territory may levy any tax upon the residents or property within the annexed or transferred area until the city has complied with the provisions of subsection (1) of this section, and of KRS 81A.475.

KRS 81A.475 further provides:

If any city annexes any unincorporated area ... it shall be the duty of the legislative body of the city to provide within sixty (60) days, to the county clerk of the county in which the city is located, a map clearly delineating the boundaries of the area affected along with a list of the names and addresses of those property owners and registered voters who reside in the area.

In an April 8, 2002, order granting partial summary judgment to the taxpayers, the circuit court concluded that the City had failed to file the proper maps as required by KRS 81A.470 and 81A.475. Therefore, the assessment of taxes against the taxpayers living in the annexed area was held improper.

Despite its determination that the taxpayers were owed a refund, the court found the statute relied upon by the taxpayers inapplicable to the payment of city ad valorem taxes. Since no other specific statute regarding the proper means of refund had been brought to its attention, the court left open the issue of the taxpayers’ remedy.

The April 8, 2002, order also dismissed a counterclaim filed by the City. The City had sought to recover the value of the benefits that the taxpayers had received as a result of the annexation of their property. But the court held that the City’s claim was without merit since it was not supported in any way by law.

Finally, the order granted the taxpayers a protective order to prevent the City from deposing the affected property owners. The court reasoned that the only purpose for the City’s request for pursuing discovery was to develop its counterclaim for the alleged value of benefits conferred upon the taxpayers. Since the counterclaim had been dismissed, discovery was deemed unnecessary. Therefore, the Court granted the taxpayers’ motion.

The case was continued on the docket of the Pulaski Circuit Court pending further proceedings to determine the remedy available to the taxpayers. Finally, on June 18, 2003, the court issued an order addressing the taxpayers’ remedies. The court reaffirmed its earlier ruling regarding the City’s violation of KRS 81A.470 and 8ÍA.475. But the court concluded that the relief requested by the taxpayers under KRS 134.590 could not be granted because the taxpayers had failed to exhaust certain administrative remedies.

The court also held that the class of taxpayers had been improperly certified because precedent dictated that an application for a tax refund must be brought individually. The court further concluded that since the entitlement-to-refund issue had been fully and fairly litigated, the individual taxpayers could apply for a refund without having to re-argue the issues of law.

Finally, the court held that the taxpayers were not eligible for interest on them refunds and that the City’s argument regarding the inequitable benefit received by the taxpayers was baseless. The court made the order final and appealable and this appeal followed.

THE CITY’S APPEAL

The City makes four main arguments: first, the court erroneously certified the taxpayers’ class; second, a refund of taxes is unfair because the taxpayers requested annexation; third, the circuit court erroneously dismissed the City’s counterclaim for the value of services; and, fourth, the court erroneously granted the taxpayers’ protective order preventing the City from proceeding with discovery. We disagree with the City on all four points.

The City’s first argument is that the circuit court improperly certified the taxpayers as a class for the purposes of this lawsuit. In support of its argument, the City cites KRS 134.590, Bischoff v. City of Newport, and Board of Education of Fayette County v. Taulbee. Relying on Swiss Oil Corporation v. Shanks both Bischoff and Taulbee held that a class action is not available for tax refunds; rather, taxpayers must bring actions for refunds individually. In Swiss Oil, the Court interpreted the language of KS 163, the predecessor to KRS 134.590(6), which stated a taxpayer may not receive a refund for taxes improperly paid “unless application be made in each case within two years from the time when such payment was made.” The Swiss Oil court held that the term “in each case” necessarily implied:

[T]hat the application for a refund must be made by the party entitled thereto, or some one authorized by him to make such demand, and that each claim shall be made separately. It is therefore clear that the demand made by the plaintiff upon the auditor for the aggregate claimed to be due it, and others for whom it had no authority to act, was not such a demand as the statute contemplates.

When Bischoff and Taulbee were decided, the language of KRS 134.590(6) remained similar to that of KS 163. The applicable portion of the statute read, “[n]o refund shall be made unless application is made in each case within two (2) years from the date payment was made.” But, in 1996, the General Assembly amended KRS 134.590(6). The pertinent section of the statute now reads, “[n]o refund shall be made unless an application is made within two (2) years from the date payment was made.” In the amended version of the statute, the legislature removed the phrase “in each case.” The taxpayers argue that the omission of these words reflects the General Assembly’s intent that a class action is now an appropriate vehicle for relief in tax refund cases. Since there has been no case law since the 1996 amendment interpreting the effect of this omission, we are compelled to address the issue.

The interpretation of a statute is a question of law. For that reason, it is suitably before this Court. When interpreting a statute, “it is appropriate to consider the contemporaneous facts and circumstances which shed intelligible light on the intention of the legislative body.” When a statute is amended, the presumption is that the legislature intended to change the law. Our Supreme Court has held that “[i]n determining legislative intent certain presumptions are indulged. One of these is that ... where a clause in an old enactment is omitted from the new one, it is to be inferred that the Legislature intended that the omitted clause should no longer be the law.” Likewise:

[w]here a statute is amended or re-enacted in different language, it wfll not be presumed that the difference between the two statutes was due to oversight or inadvertence on the part of the Legislature. On the contrary, it will be presumed that the language was intentionally changed for the purpose of effecting a change in the law itself.

We infer from the changes made to the whole of KRS 134.590 that the General Assembly meant to change existing law. In both section (6) of the statute, which is applicable to taxes imposed by cities and local municipalities, and section (2), which is applicable to state taxes, the legislature altered the language of the statute by deleting the phrase “in each case.” Considering the historical significance of that phrase, beginning in the Swiss Oil case, we must conclude that the intent of the legislature was to amend that portion of the statute limiting refunds for ad valorem taxes to individual claims. Even if the change was unintentional, its effect was to alter key language of a statute, which, for some seventy years before the amendment, had been interpreted by the courts to limit tax refunds to individual claims.

We hold that the General Assembly omitted the phrase “in each case” from KRS 134.590 with the intent to change the law. The effect was to alter the statute to permit taxpayers requesting a refund for an ad valorem tax to bring the claim as a class action. Therefore, certification of the taxpayers class action was proper.

The second and third arguments raised by the City are interrelated and, therefore, can be discussed as one. The City argues that since the taxpayers requested the annexation, it would be inequitable to refund the taxes simply because the City made a clerical error by failing to file the appropriate maps. Specifically, the City claims if the taxes are refunded, the taxpayers should be liable to the City for the value of benefits received as a result of the annexation of their property. We believe these arguments to be completely misplaced, and we adopt the language used by the circuit court in dismissing the City’s claim:

The Defendant, City of Somerset, had argued that rules of equity should be applied and that the Plaintiff, as well as others similarly situated, should not be entitled to refunds of the improperly levied tax because they received certain benefits which accrued to property owners in areas annexed to the City of Somerset. There is no place in this litigation for that kind of analysis. The Defendant argues that persons in the annexed area involved in this case received the benefit of city police protection, city fire protection, gas and water utilities at rates paid by city property owners, as well as other tangible and intangible benefits of city residents. A fair and equitable tax system can exist only when the laws enacted for such are properly followed. No community could withstand a system of taxation which allowed for the collection of taxes, or the refunding of improperly collected taxes, based upon the degree to which one benefitted [sic] from government services. To do such would enable every taxpayer to, in effect, have his or her own tax rate, based upon their degree of satisfaction with the government. Presumably, every citizen achieves a benefit from the government. We would not argue that those who have overpaid their income taxes should forego the refund which they are due under the income tax laws simply because they enjoyed the benefit of all that state and local government can do for them. If equity is to be taken into account, then we must judge not only the benefits achieved by city residence, but also we would have to reckon with the burdens and dissatisfaction of some taxpayers with city sendees. Therefore, the Court concludes that the City is entitled to no relief on account of the fact that it provided city services to the annexed area.

We affirm the circuit court’s decision to dismiss these issues.

Finally, the City argues that the circuit court erroneously granted the taxpayers’ motion for a protective order to prevent discovery. The City wanted to depose the taxpayers to discover what benefits they received as a result of the annexation.

Because the only purpose of the discovery was to bolster the City’s counterclaim, the grant of the protective order was proper. Again, we quote from the circuit court’s order: “The only relevance for such an inquiry relates to the City’s counterclaim to recover from such persons the value of the benefits they received. As much as the Court has concluded that the Defendant’s counterclaim must be dismissed, the information sought by that discovery has become immaterial.” Therefore, the decision of the circuit court granting the taxpayers’ motion for a protective order is affirmed.

THE TAXPAYERS’ CROSS-APPEAL

The taxpayers argue, first, that KRS 131.110 does not apply to a refund of ad valorem taxes and, second, that they are eligible for interest on the taxes they paid. We agree with the taxpayers’ first contention. But we disagree with their second assertion because interest is not payable on a refund of ad valorem taxes.

The City did not file a brief addressing the taxpayers’ cross-appeal. Counsel for the City assured us at oral argument of this case that the City’s original brief addressed the issues raised in the cross-appeal. But upon further inspection of the City’s brief, we cannot find any mention of the taxpayers’ claims. Therefore, we may assume that the City concedes these issues; nonetheless, for purposes of clarity and in the interest of diligence, we will discuss the taxpayers’ arguments fully.

The first argument regarding the applicability of KRS 131.110 is supported by our recent decision in Light v. City of Louisville. In Light, the appellants challenged a tax rate fixed by the City of Louisville in levying ad valorem property taxes. Appellants argued that the City failed to meet certain prerequisites before increasing the tax rate. Consequently, they sought reimbursement from the city for the taxes paid.

The trial court dismissed the action, claiming the Kentucky Board of Tax Appeals (KBTA) had jurisdiction over the case. The trial court stated that the appellants would first be required to exhaust their administrative remedies under KRS 131.110 before further pursuing the action.

We reversed, holding that the taxpayers exhausted their administrative remedies by filing a claim requesting a refund from the city. We cited KRS 131.340(1), which vests the KBTA with “exclusive jurisdiction to hear and determine appeals from final rulings, orders, and determinations of any agency of state or county government affecting revenue and taxation.” Recognizing that the city is not an arm of state or county government, the Court stated:

We conclude that the General Assembly intended the Kentucky Board of Tax Appeals to have jurisdiction only over issues involving revenue and taxation matters to be addressed by an administrative arm of central state government. By this we mean the administration of taxes such as the state ad valorem tax, the income tax, the corporations’ license tax, the sales and use tax, and selective excise taxes. These are the subject matter of KRS .Chapter 131-143A.

We held that although various provisions of the statutes referred to city tax rates and revenues, ‘-‘those references, without more, [did] not amount to the addressing of city revenue and taxation matters ‘by an administrative arm of central state government.’ ” We further held:

Although it is true that all taxing power originally emanates from the state, the exercise of such power which has been granted for local purposes falls “within the discretion of the city governing authority.” Simply put, it is clear that the city is not an agency “serviced by the Department of Revenue” for purposes of local ad valorem real property taxes, and that such taxes do not come within the ambit of “the subject matter of KRS Chapter 131-143.”

Finally, we stated:

Most pertinent to this appeal is KRS 134.590(6), which permits the refund of ad valorem taxes only if they are unconstitutional, or if “the taxpayer has properly followed the administrative remedy procedures established through the protest provisions of KRS 131.110, the appeal provisions of KRS 133.120, the correction provisions of KRS 133.110, and 133.130, or other administrative remedy procedures.” Although the city argues that a taxpayer’s appeal from an administrative denial of a refund must be taken to the KBTA rather than to the circuit court, our review of the statutes cited in KRS 134.590(6) establishes that each of those statutes refers to disputes concerning PVA assessments rather than to disputes involving city tax rates. Hence, we conclude that there is no merit to the city’s contention that KRS 134.590 expands the KBTA’s jurisdiction to include appeals such as the one involved in the instant action.
We also conclude that the trial court erred by finding that the KBTA has jurisdiction over this dispute because the city’s ad valorem tax is part of an integrated state tax system. Although a city which chooses to utilize PVA valuation assessments must adhere to certain steps before it may increase its ad valo-rem real property tax rate, the city sets that tax rate, and the tax money collected is retained by the city and does not enter the state revenue system. Moreover, although KRS 133.120(10) specifically requires appeals from PVA assessments to be taken to the KBTA, the method for appealing city ad valorem tax rates is not mentioned in KRS Chapters 131-143. Given this fact, we are simply not convinced that the city’s ad valorem real property tax rate is part of our integrated state tax system, or that this action contesting such rates falls within the KBTA’s jurisdiction. We hold, therefore, that appellants fully exhausted their administrative remedies by seeking a refund of the property taxes paid from the city, and that the trial court erred by dismissing this action on the ground that the KBTA had exclusive jurisdiction over this dispute.

Thus, we ultimately decided that the appellants’ claim for a refund of local ad valorem property taxes, based upon the fixing of an improper tax rate, was not subject to the administrative remedy procedure listed in KRS 134.590.

We believe Light to control this case. Although we recognize that the taxpayers in this case, unlike the appellants in Light, are not challenging the City’s tax rate, we agree with the assessment that “the statutes cited in KRS 134.590(6) ... refer [] to disputes concerning PVA assessments ....” Since the dispute in the instant case does not concern the City’s PVA assessment but, rather, the City’s violation of KRS 81A.470, we believe the same analysis iterated in Light is applicable here. The refund requested in this case does not implicate the administrative remedy procedures required by KRS 134.590(6). The refund is based solely on the improper assessment of a local tax and, therefore, falls outside the scope of the KBTA. We agree with Light that a city’s ad valorem property tax is not part of the integrated state tax system. As such, we believe the taxpayers exhausted their administrative remedies when the request for a refund was filed. The circuit court erred when it held the taxpayers must further exhaust the administrative remedies cited in KRS 134.590(6) before receiving a refund. Therefore, we reverse the decision of the circuit court on this issue and remand for a determination of the amount of refund that is owed each of the taxpayers in this suit.

The taxpayers’ second argument that they are eligible for interest on the taxes they paid is mistaken. The general rule is that “unless authorized by statutes, interest is not collectible on taxes due the state, county, or subdivision thereof, nor on a refund thereof.” Although the taxpayers argued in their brief that KRS 131.183 applies to their refund, counsel conceded during oral arguments that the statute does not, in fact, apply. However, the taxpayers still argue that KRS 360.010 is applicable to their claim.

Wemust disagree. KRS 360.010 applies to the legal interest rate applicable to bank loans, not to tax refunds. To apply the statute to this case would be a stretch we are not willing to make.

The only other statute that could provide a basis for the taxpayers’ recovery of interest would be KRS 134.590, the statute authorizing the refund of local ad valorem taxes. But, nothing in that statute expressly states that interest is recoverable. In Commonwealth of Kentucky, Revenue Cabinet v. St. Ledger, this Court addressed the repayment of unconstitutional taxes. We noted that KRS 134.590, the statute applicable to unconstitutional taxes, “does not authorize the payment of interest. By contrast, KRS 134.580, the statute applicable to all refunds except those of ad valorem and unconstitutional taxes, does authorize interest.” Since the applicable statute did not expressly authorize the payment of interest, we held that the taxpayers were not entitled to interest on their refunds.

The same analysis applies here as in St. Ledger. KRS 134.590 is equally applicable to the refund of ad valorem taxes as it is to unconstitutional taxes. The statute does not explicitly allow for interest on refunds of ad valorem taxes. Therefore, we cannot infer intent to require the payment of interest. We reject the taxpayers’ claim that they are owed interest on their refunds, and we affirm the circuit court’s denial of this motion.

DISPOSITION

For the reasons discussed in this opinion:

1) We affirm the circuit court’s grant of summary judgment for the Appel-lees/Cross-Appellants on the issue of the Appellant/Cross-Appellee’s improper levy and collection of taxes;

2) We reverse the circuit court’s denial of the Appellees/Cross-Appellants’ right to a tax refund, and we remand the case to the circuit court for further proceedings aimed at awarding such refund; and

3) We affirm the circuit court’s ruling on all other issues.

MILLER, SENIOR JUDGE, CONCURS.

BUCKINGHAM, JUDGE, CONCURS, IN PART, AND DISSENTS, IN PART.

BUCKINGHAM, Judge,

concurring in part and dissenting in part.

I concur with most portions of the majority opinion. However, I respectfully dissent from the portion of the opinion allowing the taxpayers to seek refunds as a part of their class action suit.

The circuit court certified this case as a class action and determined that the City had not been authorized to collect ad valo-rem taxes on the taxpayers’ real property. But the circuit court did not allow the taxpayers to seek refunds as a class. Citing the Taulbee and Swiss Oil eases, the court concluded that class action relief was not available for the refund of taxes.

As noted by the majority, the Taulbee and Bischojf cases hold that “an action for a refund of taxes paid may not proceed as a class action.” Bischoff, 733 S.W.2d at 763. This conclusion was reached by the Taulbee and Bischojf courts based on the emphasis in the Swiss Oil case on the words “in each case” as used in the predecessor statute to KRS 134.590(6). Because those three words were omitted when the statute was amended in 1996, the majority reasons that class action relief is now available for the refund of taxes. More specifically, the majority remands this case to the circuit court for further proceedings to award tax refunds to the members of the class. I believe the majority has erroneously resolved this issue.

First, assuming that the majority is correct that the removal of the words “in each case” from the statute opened the door for class actions for tax refunds, that does not mean the circuit court in this case was required to allow the taxpayers to proceed in that manner. There is no right to litigate a claim as a class action, and CR 23 provides only that the court may certify a class action if the plaintiffs satisfy the requirements of the rule. See Southwestern Refining Co., Inc. v. Bernal, 22 S.W.3d 425, 439 (Texas 2000). In fact, whether a class should be certified is a matter within the discretion of the trial court, and the trial court’s decision is final absent an abuse of that discretion. See Sowders v. Atkins, 646 S.W.2d 344, 346 (Ky.1983). See also 32B AM.JUR.2D Federal Courts §§ 1821 and 2203 (1996). Assuming the majority was correct in its holding that the removal of the words from the statute by the legislature now authorizes class actions for tax refunds, then the case should be remanded for the circuit court to determine whether the class action should be maintained in this case based on the requirements in CR 23.

Second, the taxpayers could not seek refunds as a class in this case because not all members of the class met the jurisdictional amounts for maintaining an action in circuit court. The district courts have exclusive jurisdiction of amounts in controversy not exceeding $4,000. KRS 24A.120(l)(a). Therefore, the circuit courts have jurisdiction of amounts in controversy exceeding $4,000. See KRS 23A.010(1). In this case most of the individual claims for tax refunds were within the exclusive jurisdiction of the district court, although a few were within the jurisdiction of the circuit court.

In Lamar v. Office of Sheriff of Daviess County, 669 S.W.2d 27 (Ky.App.1984), this court held that a class action could not be maintained where none of the individual claims was equal to or exceeded the statutory jurisdictional amount of thé circuit court. Id. at 31. Although that case is distinguishable from this case since some members of the class in this case meet the jurisdictional requirements of the circuit court, the Lamar court relied on Zahn v. International Payer Co., 414 U.S. 291, 94 S.Ct. 505, 38 L.Ed.2d 511 (1973), a case involving similar facts from the U.S. Supreme Court under the applicable federal civil rule concerning class actions. In the Zahn case, the Supreme Court affirmed a ruling by a lower court refusing to permit a case to proceed as a class action. 414 U.S. at 302, 94 S.Ct. 505. The court reasoned that every member of the class must satisfy the jurisdictional amount before the case may proceed as a class action. Id. at 301, 94 S.Ct. 505. In short, I conclude that this court should have affirmed the trial court and not allowed the ease to proceed as a class action for tax refunds since all members of the class did not meet the jurisdictional requirements for maintaining an action in circuit court.

Third, the class action should , not have been allowed to proceed in this case because there is no indication that all members of the class had filed a claim for refund within two years from the date of the payment of the tax as required by KRS 134.590(6). “In a purported class action refund suit, all class members must have filed a refund claim, and the suit is not maintainable on the basis of the refund claim filed by the class representative.” 35A AM.JUR.2D Federal Tax Enforcement § 966 (2001). As the Kentucky Supreme Court said in the Taulbee case, “KRS 134.590(6) is not self-executing. Application for refund must be made individually.” Id. at 829. See also McConnell v. United States, 295 F.Supp. 605 (E.D.Tenn.1969) and Agron v. Illinois Bell Telephone Co., 325 F.Supp. 487, 488 (N.D.Ill.1970). Neither the circuit court nor this court may speculate whether all members of the class were jurisdietionally capable of bringing a refund action. See Lipsett v. United States, 37 F.R.D. 549, 552 (S.D.N.Y.1965). Like those members of the class who failed to meet the jurisdictional amount for filing their claim in the circuit court, those who failed to timely apply for a refund likewise are jurisdic-tionally prohibited from being members of the class.

Fourth, I disagree with the majority’s opinion that the' effect of the removal of the words “in each case” from KRS 134.590(6) was to alter the statute so as to permit taxpayers requesting refunds for ad valorem taxes to bring their claims by way of class action. KRS 134.590(6) does not relate to the manner in which a civil suit may be filed for tax refunds. Rather, the statute sets a two-year period of time within which one may apply for a refund. Eliminating the words “in each case” has no impact on whether taxpayers may proceed by class action to obtain refunds.

In short, Kentucky law does not allow a class action to seek tax refunds. See Taulbee and Bischoff. More importantly, a class action for tax refunds was properly denied in this case because numerous members of the class were jurisdietionally incapable of maintaining an action in circuit court. I would affirm the trial court on this issue.

      . Kentucky Revised Statutes.

      . 733 S.W.2d 762 (Ky.App.1987).

      . 706 S.W.2d 827 (Ky.1986).

      . 208 Ky. 64, 270 S.W. 478 (1925).

        .Bischoff, supra at 763; Taulbee, supra at 828.

      .Kentucky Statutes.

      . Swiss Oil, supra at 478-479.

      . KRS 134.590(6) (emphasis added).

      . 1996 Ky. Acts 344, § 2.

      . Kenton County Fiscal Court v. Elfers, 981 S.W.2d 553, 556 (Ky.App.1998).

      . Id. at 558, quoting Mitchell v. Kentucky Farm Bureau Mutual Insurance Company, 927 S.W.2d 343, 346 (Ky.1996).

      . Whitley County Board of Education v. Meadors, 444 S.W.2d 890, 891 (Ky.1969).

      . Inland Steel Co. v. Hall, 245 S.W.2d 437 (Ky.1952).

      . Eversole v. Eversole, 169 Ky. 793, 185 S.W. 487, 489 (1916).

      . 93 S.W.3d 696, 698 (Ky.App.2002).

      . KRS 131.340(1) (emphasis added).

      . Light, 93 S.W.3d at 697-698, quoting Board of Education of Russellville Independent Schools v. Logan Aluminum, Inc., 764 S.W.2d 75, 78 (Ky.1989).

      . Id. at 698.

      . Id. (citations omitted).

      . Id. at 698-699.

        .Id. at 698.

        . Commonwealth ex rel. Allphin v. St. Matthews Gas & Elec. Shop, Inc., 286 S.W.2d 911, 912 (Ky.1956) (emphasis added).

      . 955 S.W.2d 539, 544 (Ky.App.1997).

      . Id. at 544.

      . The action by the circuit court in initially certifying the class and determining the validity of the tax but then not allowing the action for refunds to proceed by class action was proper. See Bischoff, 733 S.W.2d at 763. See also 59 AMJUR.2D Parties § 106 (2002), concerning de-certification of a class.

      . Kentucky Rules of Civil Procedure.


author: MICHAEL A. WOLFF, Judge.

text:
    MEDICINE SHOPPE INTERNATIONAL, INC., Respondent, v. DIRECTOR OF REVENUE, Appellant.
    No. SC 85781.
    Supreme Court of Missouri, En Banc.
    Jan. 25, 2005.
    Jeremiah W. (Jay) Nixon, Atty. Gen., James R. Layton, State Solicitor, Jefferson City, for Appellant.
    Richard E. Lenza, William B. Prugh, Kansas City, for Respondent.
   MICHAEL A. WOLFF, Judge.

Introduction

The director of revenue urges the Court to overturn its 21-year-old decision in Brown Group, Inc. v. Administrative Hearing Commission, 649 S.W.2d 874 (Mo. banc 1983), interpreting a corporate tax statute. The Court’s decision, however, has been followed these past 21 years: the judicial interpretation has become woven into the fabric of the statute, its interpretation has been incorporated into the director’s taxation forms, and the statutory provision has been left untouched by the General Assembly.

An incorrect or otherwise undesirable interpretation of a statute can be changed by the General Assembly. The General Assembly’s inaction has sometimes been interpreted to be approval of the Court’s reading of a statute. Legislative inaction, however, can just as well mean that the forces arrayed in favor of changing the law are matched by the forces against changing it. In truth, the match does not have to be an even one, for the legislative process in our republican form of government is designed more to prevent the passage of legislation than to encourage it. An incorrect judicial interpretation of a, statute may also stand simply because the legislature has paid no attention to it. Thus, it is speculative to infer legislative approval from legislative inaction.

In addition to seeking legislative change of an incorrectly interpreted statute, a party in a subsequent case may ask the court to re-examine and overrule its previous case. The doctrine of stare decisis — to adhere to decided cases — promotes stability in the law by encouraging courts to adhere to precedents. But, the adherence to precedent is not absolute, and the passage of time and the experience of enforcing a purportedly incorrect precedent may demonstrate a compelling case for changing course. American history is replete with examples of instances where experience and the changing needs of society trump adherence to precedent and demonstrate the fallacy of an earlier interpretation.

These considerations come into play in this case, where the director of revenue seeks a judicial overruling of this Court’s previous interpretation of the taxation statute at issue in this case — the single-factor apportionment provisions of section 143.451.2.

The statute allows a corporation that has business income from Missouri and from other states to apportion its total business revenue by a formula so as to determine the income that Missouri will tax. Missouri law offers the apportionment statute as an alternative to keeping track, dollar by dollar, of income that has a requisite connection to Missouri so that it can, consistent with the United States constitution, be subjected to Missouri’s income tax. See generally Dow Chemical Co. v. Director of Revenue, 834 S.W.2d 742 (Mo. banc 1992); Maxland Development Corp. v. Director of Revenue, 960 S.W.2d 503 (Mo. banc 1998).

The question is whether the corporation can exclude so-called “passive” investment income — -earned on non-operating excess funds invested by the corporation’s parent company in another state — before applying the formula for determining what portion of its income Missouri may tax.

Expressing the statutory language as a formula, the revenue of a corporation that is subject to Missouri tax equals:

Where NI is net income; Sw is the amount of sales or business wholly within Missouri; Sp is the amount of sales or business partly within and partly outside Missouri; and St is total sales or business from all sources.

The specific question is whether the non-Missouri investment income — earned on money swept from the Medicine Shoppe accounts on a daily basis through an agreement with Medicine Shoppe’s corporate parent — should be included in the formula as part of Medicine Shoppe’s “net income.” This investment income — made under an investment agreement between the Ohio parent and Missouri subsidiary — • totals millions of dollars for the tax years in question.

The Investment Agreement

Medicine Shoppe is a Delaware corporation with its headquarters in St. Louis. All of Medicine Shoppe’s offices and officers, and all but a couple of its employees, are located in Missouri. Medicine Shoppe is a franchisor of retail pharmacies throughout the United States and provides a system, and services that support that system, for the franchisees to run their retail pharmacy operations. ' Medicine Shoppe, in 1995, became a wholly owned subsidiary of Cardinal Health, an Ohio corporation with its headquarters in Dublin, Ohio.

After becoming a Cardinal Health subsidiary, Medicine Shoppe entered into an investment agreement with its corporate parent in 1997. Under the agreement, any funds in Medicine Shoppe’s bank accounts at the end of each day in excess of those needed for operating expenses are transferred to a Cardinal Health “corporate concentration account.” Cardinal Health invests the funds in this account for Medicine Shoppe’s benefit. The investable funds remain the assets of Medicine Shoppe, but Cardinal Health has control over the funds in the account and the investment decisions. Cardinal Health pays Medicine Shoppe interest on the invested funds at a rate of return of 7.72% per annum that is credited to the investa-ble funds account on a monthly basis.

Medicine Shoppe’s Missouri Income Tax Returns

The income tax periods at issue are July 1, 1998, through June 30, 1999 (“1998”), July 1, 1999, through June 30, 2000 (“1999”) and July 1, 2000, through June 30, 2001 (“2000”). For 1998, 1999 and 2000, Medicine Shoppe’s income was included in consolidated federal income tax returns that Cardinal Health filed. Medicine Shoppe filed separate Missouri returns and separate returns in other states.

Missouri law, as noted, allows a corporation doing business within and without Missouri alternative methods to allocate and apportion its income for Missouri income taxation. On its 1998, 1999 and 2000 Missouri income tax returns, Medicine Shoppe calculated its taxable income by using the single-factor apportionment method of section 143.451.2(2)(b). Medicine Shoppe classified and reported the interest on its investments through its agreement with Cardinal Health as non-Missouri source income that' was not subject to Missouri’s taxation and, hence, was not included in the apportionment formula.

The director of revenue disallowed the classification of the interest as non-Missouri source income and issued notices of deficiency for 1998, 1999 and 2000. Medicine Shoppe timely protested the notices of deficiencies and timely appealed the director’s final decisions to the Administrative Hearing Commission. This Court has jurisdiction. Mo. Const, art. V, sections 3 and 18.

Non-Missouri Source Investment Income

The language of section 143.451 is clear that only income from sources entirely within or partially within Missouri is subject to Missouri corporate income taxation. “The source of income has been defined as the place where the income was produced.” Bass Pro Shops, Inc. v. Director of Revenue, 746 S.W.2d 97, 98 (Mo. banc 1988). Under the source of income concept, income produced or sourced outside Missouri is excludable from income subject to Missouri taxation.

Two early cases involving Union Electric’s non-Missouri source income give background to this Court’s decision in Brown Group in 1983, though neither case involved the single-factor apportionment statute. In Union Electric Co. v. Coale, 347 Mo. 175, 146 S.W.2d 631, 635 (1940) (Union Electric I), this Court held that dividends from stock in foreign corporations that had no capital or business operation in Missouri were not subject to Missouri income tax for 1936 because they were not Missouri source income. The Court held that the source of income is the place where it was produced and that the income in question was not produced in this state. Id.

Brown Group, Inc. v. Administrative HeaHng Commission, 649 S.W.2d 874, applied the Union ElectHc cases to the single-factor apportionment formula and directly addressed the question of whether certain non-Missouri source income should be excluded from the net income amount in the formula. At issue in that case was Brown Group’s royalty income, paid by a Japanese corporation for the use of trade names, shoe designs and shoe patterns developed by a wholly-owned subsidiary of Brown Group. This Court directly addressed the director’s argument — which is the same as the argument in this case— that “when a taxpayer elects under sec. 143.451.2(2) to apportion income using the single factor formula it is precluded from allocating any of its income prior to apportionment and that the legislature intended to levy and apportion tax upon the entire net income.” Id. at 879.

Brown Group relied on A.P. Green Fire BHck Co. v. MissouH State Tax Commission, 277 S.W.2d 544 (Mo.1955), to determine what is non-Missouri source income — the “source of income” is the place in which the trademarks, trade names and manufacturing processes are used and the income produced. Id. at 547. That means, the Court said, that the source of Brown Group’s income from royalties from a Japanese company were wholly outside Missouri, as the trade names and manufacturing processes were used and the income was produced in Japan and other foreign countries. “Since the royalties were a source of income wholly without Missouri,” this Court held, “they do not figure in the taxing formula.” The kind of income ex-eluded from the formula — and, hence, from Missouri taxation — is so-called “passive” investment income from outside Missouri.

Passive Investment Income

This Court acknowledged in Medicine Shoppe International v. Director of Revenue, 75 S.W.3d 731 (Mo. banc 2002) (.Medicine Shoppe I), that “[t]he Union Electric cases retain vitality to the extent that they recognize that wholly passive investments outside the state of Missouri are not included in the taxation formula used to determine Missouri taxable income.” Id. at 735.

The issue in Medicine Shoppe I was whether Medicine Shoppe’s income from loan origination fees and interest income on money loaned to non-Missouri franchisees was non-Missouri source income and, thus, not subject to apportionment. Medicine Shoppe I held that the “brains” of the operation were in Missouri but other portions of the income producing effort were performed in some other state; the sales or amount of business transacted were partly within and partly without Missouri for purposes of the apportionment fraction. Id. at 734 citing Bank Building and Equipment Corporation of America v. Director of Revenue, 687 S.W.2d 168, 171 (Mo. banc 1985).

The facts in this case are different from Medicine Shoppe I, in part, because Medicine Shoppe became a subsidiary of Cardinal Health in 1995. The question in this case is whether the interest income at issue is like that in the Union Electric cases — wholly “passive” non-Missouri income — and not included in the calculation of Missouri income tax, or is like that in Medicine Shoppe I — generated by efforts within Missouri sufficiently active to be considered an “efficient cause” that contributes directly to the production of income, even though not entirely in Missouri.

The record does not show how and where Cardinal Health invested the funds it received from Medicine Shoppe pursuant to the investment agreement. It is undisputed, however, that the funds from Missouri were controlled by the Ohio-based parent corporation and the only decision over which Medicine Shoppe has any control is whether to terminate the investment agreement.

Appropriately applying these principles, the Administrative Hearing Commission determined that the investment income from Cardinal Health is not income from sales or business transacted for Missouri income tax purposes. Therefore, the commission concluded the income from Cardinal Health is not income from sales or business transacted for purposes of calculating the single-factor apportionment fraction. Based on this conclusion, the commission calculated Medicine Shoppe’s tax liability for the three years at issue.

The commission’s decision was authorized by law and supported by competent and substantial evidence upon the entire record. Under this Court’s standard of review, the commission’s decision is upheld.

Conclusion

The state of Missouri and its corporate taxpayers have had 21 years of applying the Brown Group holding to the single-factor apportionment taxation statute. This decision has been undisturbed by subsequent legislation. The decision is reflected in the director’s corporate income tax forms that allow the taxpayer to remove certain “non-Missouri source income,” such as interest, dividends, royalties and rental income, from its income prior to the application of the apportionment fraction. The director notes that nothing in the statute suggests a category of income that is excluded from net income (i.e. non-Missouri source income) before the net income is multiplied by the apportionment factor. That may be true, but Brown Group — reflected in the director’s forms that are used and relied upon by taxpayers — is the current interpretation. In these circumstances, the Court’s interpretation is presumed to be correct, and, in effect, has become part of this statute. If the interpretation is incorrect — and it does result in the loss of millions of dollars in revenue — the General Assembly is the proper place for amendment to the statute.

The decision of the Administrative Hearing Commission with regard to the calculation of Medicine Shoppe’s lawful tax liability for the tax years 1998, 1999 and 2000 is affirmed.

All concur.

      . The statute at issue, section 143.451, RSMo, has been amended twice since Brown Group was issued — in 1988 and 1997. These amendments added four new subsections, but none of these changes were relevant to the provisions interpreted by the Court in Brown Group.

      . " '[W]here a court of last resort construes a statute, and that statute is afterwards re-enacted, or continued in force, without any change in its terms, it is presumed that the legislature adopted the construction given to it by the court.’ ” Jacoby v. Missouri Valley Drainage Dist. of Holt County, 163 S.W.2d 930, 939, 349 Mo. 818 (Mo.1942) quoting Handlin v. Morgan County, 57 Mo. 114, 116 (1874).
      ‘The fact that the legislature has not seen fit by amendment to express disapproval of a contemporaneous or judicial interpretation of a particular statute, has been referred to as bolstering such construction of the statute, or as persuasive evidence of the adoption of the judicial construction. In this respect, it has been declared that where a judicial construction has been placed upon the language of a statute for a long period of time, so that there has been abundant opportunity for the lawmaking power to give further expression to its will, the failure to do so amounts to legislative approval and ratification of the construction placed upon the statute by the courts, and that such construction should generally be adhered to, leaving it to the legislature to amend the law should a change be deemed necessary.’ ” State ex rel. Howard Elec. Coop. v. Riney, 490 S.W.2d 1, 9 (Mo.1973) quoting 50 Am.Jur. Statutes s 326, pp. 318-319. See also Ex parte Carey, 306 Mo. 287, 267 S.W. 806 (Mo.1924); Schawacker v. McLaughlin, 139 Mo. 333, 40 S.W. 935 (Mo.1897); Easton v. Courtwright, 84 Mo. 27 (1884); State ex inf. Gentry v. Meeker, 317 Mo. 719, 296 S.W. 411 (Mo.1927); State ex rel. Steed v. Nolte, 345 Mo. 1103, 138 S.W.2d 1016 (Mo.1940); Bailey v. Canadian Shield General Ins. Co., 380 S.W.2d 378 (Mo.1964).

      . The state constitution’s method for enacting legislation is modeled upon the federal government. Of federal legislation, it is said:
      The Framers believed that the Constitution’s requirements of bicameral approval and presentment to the President (with the possibility of a veto) would assure that most social and economic problems would not generate legislation at all, because the two bodies would have different views about what should be done. Federalist Papers # 73.

      William Eskridge, Jr. et al., Cases and Material'on Legislation: Statutes and the Creation of Public Policy 67 (3d ed.2001).

      . " ‘[Ljegislative inaction has been called a "weak reed upon which to lean" and a "poor beacon” to follow in construing a statute.’ ” Goldberg v. State Tax Com’n, 639 S.W.2d 796, 813 (Mo.1982) (Higgins, J., dissenting) quoting 3 Sutherland Statutory Construction, s 49.10, p. 291.

      . Judicial re-interpretation is particularly apt with respect to constitutional principles, because the amendment process — even in states like Missouri that more readily amend their constitutions than does the United States — is cumbersome and an amendment simply to overrule an incorrect precedent is much more difficult than a legislative change to correct an unwarranted interpretation of a statute.

      . All statutory references are to RSMo 2000 unless otherwise indicated. The statute provides:
      143.451. Division of interstate income
      1. Missouri taxable income of a corporation shall include all income derived from sources within this state.
      2. A corporation described in subdivision (1) of subsection 1 of section 143.441 shall include in its Missouri taxable income all income from sources within this state, including that from the transaction of business in this state and that from the transaction of business partly done in this state and partly done in another state or states. However:
      (1) Where income results from a transaction partially in this state and partially in another state or states, and income and deductions of the portion in the state cannot be segregated, then such portions of income and deductions shall be allocated in this state and the other state or states as will distribute to this state a portion based upon the portion of the transaction in this state and the portion in such other state or states.
      (2) The taxpayer may elect to compute the portion of income from all sources in this state in the following manner:

      (b) The amount of sales which are transactions wholly in this state shall be added to one-half of the amount of sales which are transactions partly within this state and partly without this state, and the amount thus obtained shall be divided by the total sales or in cases where sales do not express the volume of business, the amount of business transacted wholly in this state shall be added to one-half of the amount of business transacted partly in this state and partly outside this state and the amount thus obtained shall be divided by the total amount of business transacted, and the net income shall be multiplied by the fraction thus obtained, to determine the proportion of income to be used to arrive at the amount of Missouri taxable income. The investment or reinvestment of its own funds, or sale of any such investment or reinvestment, shall not be considered as sales or other business transacted for the determination of said fraction.

      . In the event of a shortfall on any particular day, Cardinal health is to transfer an amount of investable funds necessary to restore a zero balance to Medicine Shoppe's operating account. However, the record does not reflect that this has ever been done.

      . This Court continued:
      "We hold fast to the basic precept that tax statutes are to be strictly construed in favor of the taxpayer and against the taxing authority. Staley v. Missouri Director of Revenue, 623 S.W.2d 246, 250 (Mo. banc 1981). The Director’s argument that upon election by the taxpayer to use the single factor formula, all income from any source must be included in the base income is out of phase with that principle.” 649 S.W.2d at 880-81.

      . See Buchholz Mortuaries, Inc. v. Director of Revenue, 113 S.W.3d 192, 193 (Mo. banc 2003); Concord Publishing House v. Director of Revenue, 916 S.W.2d 186, 189 (Mo. banc 1996).


author: RICHARD B. TEITELMAN, Judge.

text:
    MURPHY COMPANY MECHANICAL CONTRACTORS AND ENGINEERS, Respondent, v. DIRECTOR OF REVENUE, Appellant.
    No. SC 86096.
    Supreme Court of Missouri, En Banc.
    Jan. 25, 2005.

      Jeremiah W. (Jay) Nixon, Attorney General, Nikki Loethen, Gary L. Gardner, Assistant Attorneys. General, Jefferson City, for appellant.
    Janette M. Lohman, James W. Erwin, Thompson and Coburn L.L.P., St. Louis, for respondent.
   RICHARD B. TEITELMAN, Judge.

The Administrative Hearing Commission found that Murphy Company Mechanical Contractors & Engineers is an “engineering firm” within the meaning of section 144.030.2(28), RSMo 2000, and was exempt from sales and use taxation on its purchase of certain computer equipment. Murphy is an engineering firm under section 144.030.2(28) because it provides professional engineering services as defined in section 327.181 and holds a license and certificate of authority to offer engineering services in Missouri pursuant to section 327.401.2. The decision of the Administration Hearing Commission is affirmed.

FACTS

Murphy is a “design-build” contractor that provides both construction and engineering services. Since 1983, the company has held a license to provide engineering services in Missouri. Murphy employs several hundred construction workers as well as a staff of professional engineers and technical draftsmen. Approximately 40% of Murphy’s contracts are design-build contracts. These design-build contracts constitute approximately 20% of Murphy’s revenues.

During the 1999, 2000 and 2001 tax periods, Murphy- purchased computers and computer software for which it claimed an exemption from sales and use tax as an “engineering firm” under section 144.030.2(28). The Director of Revenue (“director”) conducted sales and use tax audits regarding the purchase of the computers and computer software and assessed sales taxes of $8,233.44 and use taxes of $53,617.85, plus interest. Murphy appealed to the Administrative Hearing Commission. The commission reversed, finding that Murphy is an engineering firm within the meaning of section 144.030.2(28) and was entitled to the sales and use tax exemption for the purchase of computers and computer software. The commission also found that Murphy was liable for sales tax of $984.49 and use tax of $13,854.12, plus interest because it did not establish that certain items were computers or computer software. The director appeals, arguing that Murphy is not an “engineering firm” under section 144.030.2(28).

ANALYSIS

This Court reviews the commission’s interpretation of revenue law de novo. Southwestern Bell Telephone Co. v. Director of Revenue, 78 S.W.3d 763, 765 (Mo. banc 2002). The commission’s “factual determinations are upheld if they are supported by the law and, after reviewing the whole record, there is substantial evidence to support them.” Id. As a tax exemption, section 144.030.2(28) is to be construed strictly, but reasonably, against the taxpayer. Id.

Section 144.030.2(28) exempts from sales and use taxation:

Computers, computer software and computer security systems purchased for use by architectural or engineering firms headquartered in this state. For the purposes of this subdivision, “headquartered in this state” means the office for the administrative management of at least four integrated facilities operated by the taxpayer is located in the State of Missouri.

The director acknowledges that Murphy provides engineering services but contends that the company is not an engineering firm under section 144.030.2(28) because Murphy is “primarily” a contractor or design-build contractor. Section 144.030.2(28) rebuts the director’s argument because the statute imposes no requirement that a firm engage primarily in providing engineering services for the exemption to apply. Moreover, in other subsections of section 144.030.2, the general assembly expressly required that the item in question be used “primarily” for a particular purpose before the tax exemption applies. The absence of the word “primarily” in section 144.030.2(28) establishes that a company providing engineering services need not employ a certain number of engineers or derive a certain percentage of its revenue from engineering services in order to avail itself of the section 144.030.2(28) tax exemption.

While section 144.030.2(28) lacks a definition of “engineering firm,” Murphy qualifies as an engineering firm because it provides professional engineering services as defined in section 327.181 and holds a license and certificate of authority to offer engineering services in Missouri pursuant to section 327.401.2. Murphy is, therefore, an engineering firm for purposes of section 144.030.2(28).

The decision of the Administrative Hearing Commission is affirmed.

All concur.

      . All subsequent citations are to RSMo 2000.

      . Section 144.030.2(26) exempts the sale of fuel utilized by waterborne vessels "which are used primarily in or for the transportation of property or cargo, or the conveyance of persons for hire.” Section 144.030.2(30) exempts barges "which are used primarily in the transportation of property or cargo on interstate waterways.”