louisville/jefferson County Metro Revenue Commission v. Ventas, Inc.

RENDERED: FEBRUARY 11, 2022; 10:00 A.M.
NOT TO BE PUBLISHED

Commonwealth of Kentucky
Court of Appeals

NO. 2021-CA-0235-MR

LOUISVILLE/JEFFERSON COUNTY APPELLANT
METRO REVENUE COMMISSION

APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE MARY M. SHAW, JUDGE
ACTION NO. 19-CI-000899

VENTAS, INC. APPELLEE

OPINION
AFFIRMING

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BEFORE: CLAYTON, CHIEF JUDGE; COMBS AND JONES, JUDGES.

COMBS, JUDGE: This is a declaratory judgment action commenced by a

taxpayer, Ventas, Inc., the appellee herein. Appellant, Louisville Metro Revenue

Commission (the Commission) appeals from an order of the Jefferson Circuit

Court denying its motion to dismiss. The Commission contends that the circuit

court erred by rejecting its assertion that governmental immunity precludes

prosecution of the action. After our review, we affirm the order of the circuit court
holding that the Commission is not entitled to invoke the protection of

governmental immunity.

Ventas, Inc., operates as a national healthcare real estate investment

trust (“REIT”) and transacts business in multiple jurisdictions. While it maintains

corporate offices in Louisville, fewer than 1% of its real estate assets are located in

the area. Moreover, none of Ventas’s Louisville area activity relates to the

operation of REIT properties and the revenue produced by them. Nevertheless, the

Commission subjects 10% of Ventas’s income to the occupational license tax. The

Revenue Commission rejected Ventas’s claim that the tax imposed is illegal, and it

refused to vary its method of apportionment. Ventas paid the tax as calculated by

the Revenue Commission.

On February 8, 2019, Ventas filed a declaration of rights action

against the Revenue Commission. Ventas sought a declaration that it is entitled to

a variance from the standard apportionment formula used by the Revenue

Commission to calculate its occupational license tax. Ventas challenged the

Revenue Commission’s calculation as grossly out of proportion to the business that

it transacts in the Louisville area. It complained that the Revenue Commission’s

refusal to apportion its tax liability in a manner that fairly represents the extent of

its business violates the provisions of: the Louisville Metro Code of Ordinances

110.06(F); the Metro Revenue Commission’s Regulation 3.14(c); Kentucky

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Revised Statute (KRS) 67.753(4); and the Due Process and Commerce Clauses of

the United States Constitution. In its answer, the Revenue Commission asserted

that the circuit court lacked subject matter jurisdiction. After a period of

discovery, Ventas filed an extensive motion for summary judgment.

In response, the Revenue Commission filed a motion to dismiss the

action on the ground that principles of sovereign immunity apply to bar Ventas’s

request for declaratory relief. Ventas resisted the motion. The circuit court agreed

with Ventas and concluded that the Revenue Commission’s immunity did not

preclude the taxpayer’s declaratory judgment action, and by order entered on

February 8, 2021, it denied the motion to dismiss. This appeal followed.

Before addressing the issue presented on appeal, we must consider

whether our jurisdiction has been properly invoked. Breathitt County Bd. of Educ.

v. Prater, 292 S.W.3d 883 (Ky. 2009). Ordinarily, our review is confined to final

judgments, orders, and decrees. Commonwealth v. Farmer, 423 S.W.3d 690 (Ky.

2014). An order denying a motion to dismiss is deemed interlocutory.

Nevertheless, because sovereign immunity shields not only against liability but

also against the expense of unwarranted litigation, we take jurisdiction and review

the circuit court’s resolution of this issue even in the absence of a final order.

Meinhart v. Louisville Metro Government, 627 S.W.3d 824 (Ky. 2021); Sheets v.

Ford Motor Co., 626 S.W.3d 594 (Ky. 2021). Our review is strictly limited to the

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single issue of whether the Revenue Commission’s immunity precludes this

declaratory judgment action. Baker v. Fields, 543 S.W.3d 575 (Ky. 2018).

Because this issue involves a question of law, we review it de novo. University of

Louisville v. Rothstein, 532 S.W.3d 644 (Ky. 2017).

Sovereign immunity acts as a limit upon the power of the judiciary.

Beshear v. Haydon Bridge Co., Inc., 416 S.W.3d 280, 291 (Ky. 2013) (Haydon

Bridge II). The doctrine prohibits the assertion of legal claims against a

government’s treasury where the sovereign has not consented to an action against

it. Id.

Louisville Metro Government is entitled to sovereign immunity.

Jewish Hospital Healthcare Services, Inc. v. Louisville/ Jefferson County Metro

Government, 270 S.W.3d 904 (Ky. App. 2008) (citing Cullinan v. Jefferson

County, 418 S.W.2d 407 (Ky. 1967), overruled on other grounds by Yanero v.

Davis, 65 S.W.3d 510 (Ky. 2001)). As an agency of Louisville Metro Government

performing an integral government function, the Revenue Commission is entitled

to assert governmental immunity, an extension of sovereign immunity. See Bryant

v. Louisville Metro Housing Authority, 568 S.W.3d 839 (Ky. 2019). Where, as

here, an agency acts in a governmental capacity, governmental immunity is

functionally equivalent to sovereign immunity. Id.

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 The Revenue Commission argues that the declaratory judgment action

is barred by its governmental immunity because, if successful, Ventas will use the

circuit court’s judgment to recover money from it in the form of a tax refund. We

disagree.

The Declaratory Judgment Act is promulgated at KRS Chapter 418. It

provides, in part, as follows:

In any action in a court of record of this Commonwealth
having general jurisdiction wherein it is made to appear
that an actual controversy exists, the plaintiff may ask for
a declaration of rights, either alone or with other relief;
and the court may make a binding declaration of rights,
whether or not consequential relief is or could be asked.

KRS 418.040. The provisions of KRS 418.045 include examples of when a

declaratory judgment may be requested and specifically recognizes that a

declaratory judgment may be granted when a person’s rights are affected by a

statute or other government regulation. Once the court has issued a declaration of

rights by judgment, order, or decree, further relief based upon that declaration may

be granted whenever necessary or proper. KRS 418.055.

In Commonwealth v. Kentucky Retirement Systems, 396 S.W.3d 833

(Ky. 2013), the Supreme Court of Kentucky held that the Commonwealth’s

sovereign immunity did not preclude a declaratory judgment action. In Retirement

Systems, a group of county employees sought a declaration that a statute affecting

their retirement benefits was unconstitutional. Id. at 835. The Commonwealth

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moved for dismissal on the basis of sovereign immunity. Id. at 836. The trial

court denied the motion. Id.

On appeal, the Supreme Court of Kentucky noted that a declaratory

judgment action is not a claim for damages, but simply a request that the plaintiffs’

rights under the law be declared. It observed that a declaratory judgment action is

qualitatively different from an action requiring the state to pay out money

damages. “There is no harm to state resources from a declaratory judgment . . .

the state is merely taking a position on what a plaintiffs (sic) rights are in the

underlying controversy.” Id. at 838. Retirement Systems made clear that the

Commonwealth’s sovereign immunity does not preclude a declaratory judgment

action. The Revenue Commission does not address this opinion.

Nor does it address the Supreme Court of Kentucky’s opinion in

University of Kentucky v. Moore, 599 S.W.3d 798 (Ky. 2019). In Moore, the high

Court reiterated that sovereign immunity does not bar an action against the state or

its agencies where the relief sought does not involve the use of public funds.

Without mentioning Moore, the Revenue Commission would

distinguish its holding by contending that a refund claim is implicit in the

declaratory judgment action filed by Ventas and that a refund “presents a harm to

state or governmental resources that implicates sovereign immunity.” However,

the only claim presented in the complaint filed by Ventas is one for declaratory

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judgment. Ventas did not request a refund for an overpayment of taxes. Instead, it

simply asked the circuit court to decide whether it was entitled to relief in the form

of an alternative and equitable apportionment. Consequently, the declaratory

judgment action did not impinge upon the Revenue Commission’s governmental

immunity. See Haydon Bridge II, 416 S.W.3d 280. Moreover, the refund

provisions of KRS 67.778(2) and Louisville Metro Code of Ordinances 110.10

constitute a limited waiver of immunity.

Alternatively, the Revenue Commission contends that relevant

ordinances, administrative regulations, and statutes governing tax collection and

refunds provide Ventas with an exclusive remedy. It contends that these

provisions preclude the declaratory judgment action pursued in this matter. We

regard this argument as a variation upon the Revenue Commission’s contention

that Ventas’s request for declaratory relief constitutes a refund claim. However,

because we are persuaded that a refund is not at issue, the provisions pertaining to

a refund are irrelevant. Moreover, “[a]n ordinance . . . cannot forbid what a statute

expressly permits. . . .” Kentucky Restaurant Ass’n v. Louisville/Jefferson County

Metro Gov’t, 501 S.W.3d 425, 428 (Ky. 2016) (citing City of Harlan v. Scott, 290

Ky. 585, 162 S.W.2d 8, 9 (1942)).

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 The Jefferson Circuit Court is vested with jurisdiction to consider the

issue presented by Ventas in its declaratory judgment action. The court did not err

by denying the Revenue Commission’s motion to dismiss.

Accordingly, we affirm the order of the Jefferson Circuit Court

denying the motion to dismiss.

ALL CONCUR.

BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:

Michael J. O’Connell Mark A. Loyd
Jefferson County Attorney Bailey Roese
Stephanie M. Bruns
Laura M. Ferguson Louisville, Kentucky
I. Joel Frockt
Assistant Jefferson County
Attorneys
Louisville, Kentucky

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