Neal Kurk v. Thomas Clow & a.

THE STATE OF NEW HAMPSHIRE

SUPREME COURT

In Case No. 2018-0239, Neal Kurk v. Thomas Clow & a., the
court on May 9, 2019, issued the following order:

Having considered the briefs and oral arguments of the parties, the court
concludes that a formal written opinion is unnecessary in this case. This case
arises out of the calculation of the Town of Weare’s 2018 default budget
pursuant to RSA 40:13 (Supp. 2017) (amended 2018). The defendants, the
Town of Weare, Thomas Clow, and other members of the town’s board of
selectmen, appeal orders by the Superior Court (Nicolosi, J.) denying their
motion to dismiss and granting the relief requested by the plaintiff, Neal Kurk.
On appeal, the defendants argue that the trial court erred in ruling that: (1) the
plaintiff has standing to bring this suit; (2) the 2018 default budget improperly
included the cost of certain contracts the town entered into in 2017; and (3) the
plaintiff was entitled to an award of attorney’s fees. We affirm, in part, and
reverse, in part.

The relevant facts follow. The town is a Senate Bill 2 town that passes its
budget by an official ballot pursuant to RSA 40:13. Under the statute, the
governing body of the town presents both a proposed operating budget and a
default budget to the voters. RSA 40:13. In the event the proposed operating
budget fails to pass, the default budget is imposed unless the governing body,
in this case the board of selectmen, elects to proceed to a special meeting
pursuant to RSA 40:13, XVI (Supp. 2018). RSA 40:13, X (Supp. 2018). The
default budget is defined as:

[T]he amount of the same appropriations as contained in the
operating budget authorized for the previous year, reduced and
increased, as the case may be, by debt service, contracts, and
other obligations previously incurred or mandated by law, and
reduced by one-time expenditures contained in the operating
budget. For the purposes of this paragraph, one-time expenditures
shall be appropriations not likely to recur in the succeeding
budget, as determined by the governing body, unless the
provisions of RSA 40:14-b are adopted, of the local political
subdivision.

RSA 40:13, IX(b) (Supp. 2017) (amended 2018). The board of selectmen
calculated a default budget for 2018 and published a document entitled “2018
Budget Worksheet” that included the default budget.
 In February 2018, after the default budget was published and before the
town voted, the plaintiff initiated a declaratory judgment action against the
defendants seeking a temporary and permanent injunction. He alleged that
$59,864 in budget increases were improperly included in the default budget
because they were the result of contracts entered into by the board of
selectmen after the last town meeting and without a vote by the citizens of
Weare. The plaintiff asserted that although the contracts were valid, they did
not qualify as “contracts . . . previously incurred” under the statute, and thus,
could not be included in the default budget without approval by the town. See
RSA 40:13, IX(b).

In response, the defendants filed both an answer contesting the merits
and a motion to dismiss for lack of standing. Following a hearing, the trial
court denied the defendants’ motion to dismiss and granted the relief requested
by the plaintiff. In its order, the trial court found that the plaintiff had
standing because he established that he would suffer actual, concrete harm in
the form of paying higher taxes if the default budget went into effect. On the
merits, the trial court found that the board of selectmen improperly included
the contested contracts in the default budget calculation. Engaging in
statutory interpretation, the trial court determined that the phrase “previously
incurred” set forth in RSA 40:13, IX(b) was ambiguous. The court then
considered the overall statutory scheme and concluded that the “contracts . . .
previously incurred” that increase the default budget must be previously voted
on at a town meeting. See RSA 40:13, IX(b). Accordingly, the trial court
ordered the defendants to remove the contracts identified by the plaintiff from
the default budget before presenting the budget at the upcoming deliberative
session.

Shortly thereafter, the plaintiff filed a motion for attorney’s fees, which
the trial court granted over the defendants’ objection. The trial court found
that the plaintiff conferred a substantial benefit on the public by providing the
citizens of Weare with an opportunity to provide “meaningful input” on the
“appropriation of money by the governing body” that increases the default
budget. The court determined that this benefit to the citizens of Weare
“extends beyond the confines of the instant litigation.” This appeal followed.

The defendants argue that the trial court erred when it found that the
plaintiff had standing to bring this lawsuit. Following briefing on appeal, the
plaintiff moved to strike the standing issue, arguing that a constitutional
amendment, approved by the voters of New Hampshire in the November 2018
election, grants him standing. The defendants counter that the constitutional
amendment does not apply retroactively. We need not reach this issue because
we conclude that the plaintiff has standing under the law in effect at the time
the case was decided in the trial court.

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 When the relevant facts are not in dispute, we review de novo the trial
court’s determination on standing. State v. Actavis Pharma, 170 N.H. 211, 214
(2017). “[S]tanding under the New Hampshire Constitution requires parties to
have personal legal or equitable rights that are adverse to one another, with
regard to an actual, not hypothetical, dispute, which is capable of judicial
redress.” Duncan v. State, 166 N.H. 630, 642-43 (2014) (citations omitted).

The defendants contend that the plaintiff lacks standing because he
alleges the same harm as every other taxpayer and fails to allege an actual, as
opposed to hypothetical, harm. As to the defendants’ first point, the plaintiff
counters that there is no requirement that a party suffer a “unique injury” to
establish standing. We agree with the plaintiff. Although a person’s status as
a taxpayer is not, by itself, sufficient to establish standing, taxpayer status in
conjunction with an injury or an impairment of rights can confer standing. See
Baer v. N.H. Dep’t of Educ., 160 N.H. 727, 730-31 (2010); see also Duncan,
166 N.H. at 645 (to bring a declaratory judgment action under RSA 491:22, a
party must establish that some right of the party has been impaired or
prejudiced by the application of a rule or statute). The United States Supreme
Court discussed what kind of personal injury confers standing and held that:

As a general matter, the interest of a federal taxpayer in seeing
that Treasury funds are spent in accordance with the Constitution
does not give rise to the kind of redressable “personal injury”
required for Article III standing. Of course, a taxpayer has
standing to challenge the collection of a specific tax assessment as
unconstitutional; being forced to pay such a tax causes a real and
immediate economic injury to the individual taxpayer.

Hein v. Freedom From Religion Foundation, Inc., 551 U.S. 587, 599 (2007).

Here, the plaintiff contends that the calculation of the default budget will
impair his personal rights by illegally increasing his taxes. Specifically, he
asserts that the town’s default budget proposed to “take money from his
pocket,” without the legislative body’s approval of the contracts, in violation of
RSA 40:13. This is not simply a case where a plaintiff asserts standing as a
taxpayer and contests the spending or allocation of the funds at issue. See
Duncan, 166 N.H. at 646 (petitioner’s claim that a program will result in “net
fiscal losses” to local governments does not articulate a personal injury); Baer,
160 N.H. at 730-31 (holding that petitioners lacked standing as taxpayers
because they failed to demonstrate how certain waiver rules that allowed their
taxes to be used to finance certain schools in the community impaired or
prejudiced their rights). Instead, the plaintiff here is contesting the collection
of a specific tax assessment, arguing that it is based upon an unlawful default
budget calculation. Although the increased taxes will impact all of the
taxpayers in the town, not just the plaintiff, that does not mean that the
plaintiff’s personal rights are not sufficiently impaired to confer standing.

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 The defendants further assert that the plaintiff lacks standing because
the alleged increase in his taxes would occur only if the town did not vote to
adopt the proposed budget, a vote which had not yet taken place when the
hearing was held in this matter. The plaintiff counters that he would have
suffered “real prejudice and real injury if the town [had been] permitted to
include the challenged contracts in its default budget” because, under the
default budget, the town asserted the right to collect his money as taxes.

Despite the defendants’ contention that the plaintiff’s alleged injury was
merely hypothetical at the time he filed suit, it was not a speculative injury, as
was the harm alleged in Duncan. In Duncan, the plaintiffs challenged a tax
credit program, arguing that it would impose net fiscal losses on New
Hampshire governments and would take state funding away from public
schools. Duncan, 166 N.H. at 646-47. There, we held that the plaintiffs lacked
standing because the purported personal injury ― the loss of money to local
school districts as a result of certain legislation creating a tax credit program ―
was speculative. Id. at 646-67. Specifically, the prospect that the net fiscal
losses would occur “require[d] speculation about whether a decrease in
students [would] reduce public school costs and about how the legislature
[would] respond to the decrease in students attending public schools,
assuming that occurs.” Id. at 647. Consequently, the plaintiffs could not
demonstrate whether local governments would, in fact, experience “net fiscal
losses.” Id. By contrast, here, the plaintiff alleges a concrete, actual injury
that he would directly suffer if the default budget were to be imposed. The
increased taxes were not an abstract possibility; the default budget had been
calculated and published as the budget that the town would adopt in the event
that the residents rejected the proposed operating budget and did not elect to
hold a special meeting. See RSA 40:13, X. Accordingly, the plaintiff has
standing.

Next the defendants argue that the statute authorizes the selectmen to
enter into the challenged contracts and include them in the default budget.
The plaintiff does not dispute the selectmen’s authority to enter into the same
contracts. See, e.g., RSA 41:10-a (2012) (allowing selectmen to appoint and
compensate members of the New Hampshire bar to serve as municipal
prosecutors); RSA 105:1 (Supp. 2018) (selectmen may designate one of the
police officers as chief of police). However, the parties disagree as to whether
those contracts could be included in the default budget as defined in RSA
40:13, IX(b).

The defendants argue that the reference in RSA 40:13, IX(b) to “contracts
. . . previously incurred,” allows them to include in the default budget contracts
they entered into after the last town meeting. Furthermore, they contend that
nothing about the purpose of the default budget “limits the contracts to be
included in the default budget to the amounts previously approved by town
meeting.”

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 Resolution of this issue requires that we engage in statutory
interpretation. We review the trial court’s statutory interpretation de novo.
Franciosa v. Hidden Pond Farm, 171 N.H. 350, 355 (2018). In matters of
statutory interpretation, we are the final arbiter of the intent of the legislature
as expressed in the words of a statute considered as a whole. Id. We first look
to the language of the statute itself, and, if possible, construe that language
according to its plain and ordinary meaning. Id. We interpret legislative intent
from the statute as written and will not consider what the legislature might
have said or add language that the legislature did not see fit to include. Id. We
construe all parts of a statute together to effectuate its overall purpose and
avoid an absurd or unjust result. Id. Moreover, we do not consider words or
phrases in isolation, but rather within the context of the statute as a whole. Id.
This construction enables us to better discern the legislature’s intent and to
interpret statutory language in light of the policy or purpose sought to be
advanced by the statutory scheme. Id. When statutory language is
ambiguous, however, we will consider legislative history and examine the
statute’s overall objective and presume that the legislature would not pass an
act that would lead to an absurd or illogical result. See STIHL, Inc. v. State of
N.H., 168 N.H. 332, 334-35 (2015).

The defendants contend that the trial court erred in finding the statute
ambiguous. In support of their argument, the defendants rely upon the
dictionary definition of the term “incur,” and conclude that, because the term is
defined as meaning to “become liable or subject to,” see Webster’s Third New
International Dictionary 1146 (unabridged ed. 2002), the identified contracts ―
which, all parties agree, were legitimately entered into ― were previously
incurred and properly included in the default budget. We disagree. The
phrase “contracts . . . previously incurred” fails to specify precisely when such
contracts were entered into or whether they required approval by the legislative
body of the town. In addition, the entire subsection defining “default budget”
does not provide context beyond a reference to the previous year’s budget.
Thus, because the “language is subject to more than one reasonable
interpretation,” we agree with the trial court that the statutory provision is
ambiguous. Attorney General, Dir. of Charitable Trusts v. Loreto Publ’ns, 169
N.H. 68, 74 (2016) (quotation omitted).

We also agree with the trial court that this ambiguity can be resolved by
examining the overall statutory scheme, specifically RSA chapter 32. Although
the defendants contend that it is irrelevant and only addresses the actions the
selectmen may take during the year after the budget is adopted, RSA chapter
32, the Municipal Budget Law, provides significant guidance for the creation of
the budget. It does not apply solely to post-budget approval; rather, sections of
the chapter also apply to the creation of the budget before it is enacted by the
town. See, e.g., RSA 32:4 (2000), :5, II (Supp. 2018), :5-b (Supp. 2018), :5-c
(Supp. 2018), :6 (2000), :8 (2000). For instance, RSA 32:5, II prohibits the
governing body or budget committee from making alterations to a proposed

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budget without providing a hearing. RSA 32:8 provides that “[n]o board of
selectmen . . . shall pay or agree to pay any money, or incur any liability
involving the expenditure of any money, for any purpose in excess of the
amount appropriated by the legislative body for that purpose, or for any
purpose for which no appropriation has been made.” We have previously noted
that the purpose of RSA chapter 32 was “to establish some uniformity in the
manner of appropriating and expending public moneys in the various
municipalities of the State and to establish the safe ceiling on the total
indebtedness beyond which a municipality could not expend money.” Ashley v.
School Dist., 111 N.H. 54, 56-57 (1971) (citation omitted). We agree with the
trial court’s interpretation that “[n]one of the safeguards set forth in RSA
chapter 32 have any force and effect if the board of selectmen is capable of
unilaterally increasing the default budget by an unchecked amount.”
Therefore, the defendants’ interpretation of the statute undermines the overall
purpose of the statutory scheme.

The defendants further argue that in February 2018, when this case was
decided by the trial court, the term “previously incurred” did not equate to
“previously approved” as evidenced by the subsequent amendment to RSA
40:13, adopted shortly after the trial court’s decision.1 See Laws 2018, 241:2.
Specifically, the defendants argue that according to a report by a legislative
subcommittee of the municipal and county government committee, the
amendment to RSA 40:13 sought to redefine “contracts” and we should give
weight to this report. See Supervisory Union 29 v. N.H. Dep’t of Educ., 125
N.H. 117, 122 (1984). The defendants contend that because the subcommittee
report includes the word “redefining,” then we should conclude that the
amendment’s purpose was to redefine “contracts.” The plaintiff counters that
we should look to the full committee report that was subsequently provided to
the entire House of Representatives, which contains contradictory language
and demonstrates that the statutory language is meant to be construed in the
same manner as did the trial court. We agree with the plaintiff.

The circumstances in Supervisory Union 29 are similar to those present
here. Id. In that case, we noted that comments concerning prior law which are
contained in the legislative history of a subsequent amendment enacted by a
subsequent legislature, although not controlling, are entitled to some
consideration. Id. We held that the legislative history of the amendment at
issue supported the conclusion that, by the amendment, the legislature
intended to clarify or interpret an ambiguity in the existing law and not to
effect a change in legal rights. Id. at 123.

1 The amendment to RSA 40:13 added a definition of “contracts,” defining it as: “contracts

previously approved, in the amount so approved, by the legislative body in either the operating
budget authorized for the previous year or in a separate warrant article for a previous year.” RSA
40:13, IX(c) (Supp. 2018).

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 We come to a similar conclusion here. The full committee report
discussing the amendment to RSA 40:13 provides, in part, that:

The bill . . . adds a definition, recently tested in superior court, to
stipulate that “contracts” and their amounts are those included in
the previous year’s operating budget or in previous separate
warrant articles. Defining how contracts are to be used in the
construction of default budgets is intended to align this element of
default budget construction more clearly with the concept that a
default budget should freeze the previous year’s budget in place.

N.H.H.R. Jour. Vol. 40, at 45 (Mar. 2, 2018) (discussing HB 1307).

The legislative history does not indicate that we should construe the
statute differently than did the trial court. The subsequent amendment merely
clarifies the term “contract” ― it does not effect a change in legal rights. Thus,
based upon the statutory scheme as a whole, we conclude that RSA 40:13, IX
requires that the “contracts . . . previously incurred” that increase the default
budget be previously voted on at a town meeting. Accordingly, the default
budget defined by the statute captures multi-year contracts, such as collective
bargaining agreements, that had been approved at a prior town meeting and
which reduce or increase, “as the case may be,” the subsequent annual
appropriation set forth in the default budget. RSA 40:13, IX. Similarly, a
default budget also captures any other multi-year contract provided that the
full, multi-year cost of the contract was disclosed and discussed at the town
meeting during which the contract was approved. Therefore, we affirm the trial
court’s decision to grant the plaintiff declaratory relief.

Next, the defendants argue that the trial court erred in awarding the
plaintiff attorney’s fees based upon its finding that the plaintiff conferred a
substantial benefit to the public. More specifically, the court found that the
plaintiff’s lawsuit conferred upon the voters of Weare the benefit of providing
them with an opportunity to decide whether to appropriate funds towards
contracts entered into by the board of selectmen that increase the default
budget. The court noted that the budget process impacts every citizen of
Weare and “the practical effect of including the challenged contracts in the
default budget is the appropriation of money by the governing body without
any meaningful input by the voters of the town.”

We review a trial court’s award of attorney’s fees under our
unsustainable exercise of discretion standard, giving deference to the trial
court’s decision. Shelton v. Tamposi, 164 N.H. 490, 501 (2013). When
reviewing a trial court’s award of attorney’s fees, we will uphold the trial court’s
factual findings unless they are erroneous as a matter of law or unsupported
by the evidence. Taber v. Town of Westmoreland, 140 N.H. 613, 615 (1996).
To be reversible on appeal, the trial court’s discretion must have been exercised

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for reasons clearly untenable or to an extent clearly unreasonable to the
prejudice of the objecting party. Shelton, 164 N.H. at 501.

New Hampshire adheres to the American Rule; that is, absent statutorily
or judicially created exceptions, parties pay their own attorney’s fees. Board of
Water Comm’rs, Laconia Water Works v. Mooney, 139 N.H. 621, 628 (1995).
One judicially created exception is the substantial benefit theory, by which
attorney’s fees may be awarded when a litigant’s action confers a substantial
benefit upon the general public. Bedard v. Town of Alexandria, 159 N.H. 740,
744 (2010).

The defendants argue that if we affirm the trial court on the merits, that,
at most, amounts to a finding of an erroneous application of the law by the
board of selectmen, which is not sufficient to award attorney’s fees. In support
of its argument, the defendants rely upon Taber, where we recognized that
“[w]e have never held that forcing the losing party to a strict adherence to the
law is a sufficient benefit conferred on nonparties to justify awarding attorney’s
fees to the prevailing party.” Taber, 140 N.H. at 615. Here, even though the
trial court determined that “[t]he impact on third parties to this lawsuit is . . .
much more concrete than in Taber, and is more significant than merely forcing
‘strict adherence to the law,’” see id., we disagree.

In reaching our decision in this case, we, like the trial court, conclude
that RSA 40:13, a statute that we have not previously had an occasion to
interpret, is ambiguous. It is undisputed that the board of selectmen did not
intentionally violate the statute. Rather, the board simply disagreed with the
plaintiff’s interpretation and application of RSA 40:13 to the default budget,
which led to a disparity of less than $60,000 between the previous year’s
budget and the 2018 default budget originally presented to the voters. While
“[t]he good or bad faith of the defendants is not a consideration in the award of
attorney’s fees under th[e substantial benefit] exception,” Claremont School
Dist. v. Governor (Costs and Attorney’s Fees), 144 N.H. 590, 595 (1999)
(quotation omitted), we hold that, as a matter of law, the disparity here at issue
did not confer a “substantial benefit” upon the voters of Weare.

Moreover, to the extent that the trial court rationalized its award of
attorney’s fees on the benefit of ensuring the voters a more meaningful
opportunity to approve those contracts that the governing body enters into
which increase the default budget, we conclude that such reasoning is
speculative and unsupported by the evidence. In this case, the citizens of
Weare did not vote on the contested contracts; instead, the selectmen were
ordered to remove the contracts from the default budget. Neither we, nor the
trial court, can infer what impact, if any, the opportunity to vote on the
challenged contracts, or the board of selectmen’s removal of these contracts
from the 2018 default budget had, on the decision the voters made in 2018 or
will make in any subsequent year.

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 Nonetheless, the plaintiff maintains that the public interest in this case
is similar to the interest that supported the award of attorney’s fees in Irwin
Marine, Inc. v. Blizzard, Inc., 126 N.H. 271 (1985). There, we concluded that
the plaintiff had conferred a substantial benefit upon the citizens and
taxpayers of Laconia by insisting upon a requirement of fairness in the city’s
public bidding procedures. See Irwin Marine, Inc., 126 N.H. at 277. The
plaintiff argues that, as in Irwin Marine, his efforts “prevent[ed] the government
from taking action that deprives the public of a government that exercises fair
powers of administration while looking after the public weal.” Although the
plaintiff’s primary purpose in litigating the case may not have been to advance
his “own personal benefit,” see Taber, 140 N.H. at 616, the record in this case
does not suggest that his intended purpose was to rectify an injustice or
unfairness with the selectmen’s governance of the town’s affairs.

In fact, the plaintiff’s counsel made the following representations to the
trial court at the hearing:

The town . . . has been very responsive and helpful. This is not a
situation where we’re claiming that . . . they’re up to no good . . . .
to their credit, they show all their work . . . they’re not hiding what
they’re doing. They’re putting it all out [there] for people to see
. . . . It’s just our position that what they’re showing when they do
show their work is something that’s outside the scope of what
they’re permitted to do.

The facts in this case are more aligned with the sentiment expressed in Taber,
where we reasoned that “forcing the losing party to a strict adherence to the
law is [not] a sufficient benefit conferred on nonparties to justify awarding
attorney’s fees to the prevailing party.” Id. at 615. Accordingly, we conclude
that, under these unique circumstances, the trial court’s award of attorney’s
fees is an unsustainable exercise of its discretion.

Affirmed in part;
reversed in part.

LYNN, C.J., and HICKS, BASSETT, HANTZ MARCONI, and DONOVAN,
JJ., concurred.

Eileen Fox,
Clerk

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