Algonquin Golf Club v. State Tax Com'n

Decision Date20 March 2007
Docket NumberNo. ED 87894.,ED 87894.
Citation220 S.W.3d 415
PartiesALGONQUIN GOLF CLUB, Golf Club Inv. Co., Bogey, Inc., Forest Hills Golf & Country Club, Log Cabin Club, St. Louis Country Club, Old Warson Country Club, Sunset Country Club and Westwood Country Club, Appellants, v. STATE TAX COMMISSION of Missouri and Philip A. Muehleheausler, Assessor of St. Louis County, Respondents.
CourtMissouri Court of Appeals

Byron E. Francis, Cynthia A. Petracek, St. Louis, MO, for Appellant.

Paula J. Lemerman, County Counselor Office, Clayton, MO, for Respondent.

GEORGE W. DRAPER III, Presiding Judge.

Algonquin Golf Club, et al., (hereinafter, "the Clubs") appeal from the trial court's judgment affirming the State Tax Commission's (hereinafter, "the STC") classification of certain portions of private golf courses and country clubs owned by the Clubs as commercial property. The Clubs raise one issue on appeal, challenging the classification of the amenities on the properties as commercial, and arguing the decision was not supported by competent and substantial evidence. We reverse and remand.

The facts are undisputed. The Clubs are not-for-profit, private country clubs. The properties at issue are large tracts of land occupied by golf courses in St. Louis County. Originally, the properties were classified entirely as residential property for ad valorem tax purposes. In 2003, the Assessor of St. Louis County (hereinafter, "the Assessor") reclassified the properties as part residential and part commercial. The land used as a golf course was classified as residential. The amenities adjacent to the golf course, such as pro shops, locker rooms, clubhouses, restaurants, and parking lots, were classified as commercial and subsequently assessed a value at the commercial tax rate. The Clubs' properties were then taxed in accordance with the new commercial classifications, which the Clubs appealed. The St. Louis County Board of Equalization upheld the classification. The Clubs appealed to the STC.

The STC held an evidentiary hearing. The parties stipulated to the admission of the written direct testimony of managers and other officers of the Clubs and various exhibits. The parties also stipulated to the admission of written direct testimony of Richard Shepard (hereinafter, "Shepard") and Dennis Walters (hereinafter, "Walters"), subject to cross-examination by the Assessor at the hearing. The Assessor did not offer any evidence, other than cross-examining the Clubs' experts. Further, the parties entered into an extensive stipulation with respect to many of the facts at issue. Those stipulated facts established the following:

The Clubs are private country clubs that operate on a not-for-profit basis. Each private country club has a golf course, pro shop, clubhouse, and other amenities ordinarily associated with a country club. These other amenities include: locker rooms, indoor/outdoor dining areas, entertainment facilities, bars, kitchens, swimming pools, fitness centers, offices, golf cart storage, maintenance buildings, tennis courts, and croquet courts. Not every property contains all of the above listed amenities.

The revenues generated through membership fees and sales of food or merchandise equal the Clubs annual operating expenses. Thus, the Clubs' operate on a "break-even" basis. The properties are used solely for social and recreational purposes. The Clubs' by-laws and rules prohibit use of the properties for trade, commerce, industrial or similar business purposes. The Clubs have operated in this manner for several decades.

The Clubs require membership in order to gain access to the property and employ an extensive, formal membership approval process. As a result, the use of the properties is not open to the public, nor is the public generally invited to use the property, except on a limited basis as guests of existing members.

The property use surrounding each of the Clubs is primarily single-family residences. There is no commercial development adjacent to any of the Clubs, with the exception of Sunset Country Club, which has a mixture of commercial and residential developments near it. None of the Clubs have direct access to arterial roads. All of the Clubs are serviced by available utilities, sewers, street lighting, and other public services.

The zoning for each of the properties is dependent upon the municipality in which it is located. Generally, the zoning in each municipality permits using the property for, among other things, residential use and as private golf courses. The present zoning scheme prohibits commercial building or use as a public golf course. Further, each municipality specifically limits the use of the property to the uses enumerated under the applicable ordinances. In the case of Sunset Country Club, Sunset Hills does not permit commercial use and will not issue a conditional use permit for commercial buildings. Four of the properties are subject to an indenture, duly recorded with the Recorder of Deeds, which restricts the use of the properties to private country clubs or single-family residences, and specifically prohibits any use for a commercial purpose.1 Additionally, six country clubs cannot be converted to public golf courses because these properties are subject to zoning ordinances that do not allow special permits to be issued for such a conversion.2 Furthermore, the parties agreed there would be issues regarding available utilities, sewers, street lighting, and public services with respect to capacity if any of the properties were redeveloped as commercial property.

After reviewing all of the evidence, the STC issued its findings of fact and conclusions of law. The STC recognized all of the stipulated facts and cited the eight factors for determining classification from Section 137.016.5 RSMo (2000).3 The STC determined Zimmerman v. Missouri Bluffs Golf Joint Venture, 50 S.W.3d 907 (Mo.App. E.D.2001) controlled its decision. The STC stated:

The Commission has applied those factors to the facts at hand and finds that the immediate most suitable economic use for all the properties would be as golf courses. The Commission is not persuaded that current zoning restrictions and certain legal covenants would present sufficient obstacles to prohibit the conversion of these courses to public golf courses. All other factors, including immediate prior use; location; availability of water, electricity, gas, sewers, street lighting, and other public services for such property; size of such property; and access of such property to public thoroughfares, support this conclusion.

The STC concluded the residential classification could not attach to the land or improvements used for the amenities of the Clubs. Therefore, the STC determined those portions must be classified as commercial property. The Clubs sought review of the STC's decision in St. Louis County Circuit Court. The circuit court affirmed the STC's decision. The Clubs appeal.

On appeal, this Court examines the underlying decision of the administrative agency, the STC, and not the judgment of the trial court. Shipman v. Dominion Hospitality, 148 S.W.3d 821, 822 (Mo. banc 2004). While undertaking this review, we are limited to determining whether the decision constituted an abuse of discretion, whether it was supported by competent and substantial evidence on the record as a whole, or whether it was arbitrary, capricious, or unreasonable. Daly v. State Tax Com'n, 120 S.W.3d 262, 266 (Mo.App. E.D.2003). We consider the evidence in the light most favorable to the Commission, together with all reasonable inferences therefrom. Daly v. P.D. George Co., 77 S.W.3d 645, 648 (Mo.App. E.D.2002).

This Court is hesitant to substitute our judgment for the STC in matters of property tax assessment. Savage v. State Tax Com'n, 722 S.W.2d 72, 75 (Mo. banc 1986). If the evidence supports either of two opposing findings, we are bound by the STC's determination. Daly, 120 S.W.3d at 269. Unless there is clear abuse, we will defer to the STC. Id. "When an administrative decision is based on the agency's interpretation and application of the law, we review the administrative conclusions of law and its decision de novo, and we make corrections to erroneous interpretations of the law." Twelve Oaks Motor Inn, Inc. v. Strahan, 96 S.W.3d 106, 109 (Mo.App. S.D.2003). The STC interpreted Section 137.016 to reach its decision; therefore, we independently review its determination de novo. Missouri Bluffs, 50 S.W.3d at 910.

In its sole point on appeal, the Clubs argue the circuit court erred in affirming the STC's decision because it was not supported by competent and substantial evidence, was arbitrary and capricious, and was unauthorized by law. The Clubs allege the STC failed to apply the factors set forth in Section 137.016.5 when determining the proper classification of the amenities at the country clubs. Further, the Clubs argue the undisputed evidence establishes use as a public golf course is not the immediate most suitable economic use. Rather, the Clubs claim the undisputed evidence supports the finding that the immediate most suitable economic use for the properties is to convert them to residential homes. As a result, the amenities should be classified as residential for tax assessment purposes.

Section 137.016.1(1) defines "residential property" to include, inter alia, "land used as a golf course." The Clubs do not dispute the residential classification of the land at the country clubs that is used as a golf course, nor do the Clubs attempt to argue on appeal that the amenities should be considered as a part of the "land used as a golf course," and as a result, should receive residential classification. Cf. Missouri Bluffs, 50 S.W.3d at 912. Rather, the Clubs focus on the STC's alleged failure to apply the...

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