St. Louis County v. Prestige Travel Inc.

• Citation: 344 S.W.3d 708
• Decision Date: 28 June 2011
• Docket Number: No. SC 91228.,SC 91228.
• Parties: ST. LOUIS COUNTY, et al., Appellants,v.PRESTIGE TRAVEL, INC., et al., Respondents.
• Court: United States State Supreme Court of Missouri

344 S.W.3d 708

ST. LOUIS COUNTY, et al., Appellants,

v.PRESTIGE TRAVEL, INC., et al., Respondents.

No. SC 91228.

Supreme Court of Missouri, En Banc.

June 28, 2011.

Joe D. Jacobson, Martin M. Green, Jonathan F. Andres, Fernando Bermudez, Green Jacobson PC, Clayton, for County and Visitors Commission.James Bennett, Jennifer S. Kingston, Dowd Bennett LLP, Clayton, Elizabeth B. Herrington, McDermott Will & Emery LLP, Chicago, Brian Stagner, Chad Arnette, Kelly Hart & Hallman LLP, Ft. Worth, TX, James Karen, Jones Day, Dallas, Terrence J. O'Toole, Bryan Cave, St. Louis, for Online Travel Companies.State Solicitor James R. Layton, Attorney General's Office, for Attorney General, who filed a brief as a friend of the Court.ZEL M. FISCHER, Judge.

Appellants, St. Louis County and St. Louis Convention and Visitors Commission (“CVC”) filed suit against Prestige Travel, Inc. and numerous other online travel companies that facilitate the booking of hotel and motel rooms via the internet.¹ St. Louis County and CVC argued Prestige and the other companies were required to pay hotel and tourism taxes imposed by §§ 502.500 to 502.550 of the revised ordinances of St. Louis County and §§ 67.601 to 67.626, RSMo 2000.² Prestige moved to dismiss the petition, and the circuit court overruled the motion. Shortly thereafter, H.B. 1442, specifically exempting online travel companies such as Prestige from the tax, was passed. Prestige filed a motion to reconsider its motion to dismiss, and the circuit court dismissed the case. St. Louis County and CVC appeal. Judgment affirmed.

Facts

St. Louis County and CVC filed suit against Prestige. They alleged that Prestige contracted with hotel/motel operators for hotel rooms at negotiated discount rates and then sold or resold the rooms to transient guests at a marked-up price. Prestige then remitted only the discount price to the hotel/motel operator and kept the difference. St. Louis County and CVC alleged that Prestige did not collect the taxes required by §§ 502.500 to 502.550 of the revised ordinances of St. Louis County (the “hotel tax”) and §§ 67.601 to 67.626 (the “tourism tax”). Specifically, St. Louis County and CVC alleged that Prestige did not collect the hotel and tourism taxes as a percentage of the marked-up price, but rather as a percentage of the lower discount price, or Prestige did not collect these taxes on the hotel rooms they sold or resold.

Prestige moved to dismiss the petition on the ground that only those who operate hotels or motels within St. Louis County are required to collect and remit the hotel and tourism taxes. Prestige also argued that these taxes did not apply to the amount paid by transient guests in excess of the discount price paid by Prestige to hotel/motel operators because the difference between the marked-up price and the discount price was not a room charge, but rather Prestige's compensation for its reservation services. The circuit court overruled Prestige's motion to dismiss.

While the case was pending, House Bill No. 1442 (“H.B.1442”) was enacted, titled “An Act to repeal [eleven statutory sections] and to enact in lieu thereof nineteen new sections relating to taxes....” The bill included section 1, which provides:

Notwithstanding any other provisions of law to the contrary, any tax imposed or collected by any municipality, any county, or any local taxing entity on or related to any transient accommodations, whether imposed as a hotel tax, occupancy tax, or otherwise, shall apply solely to amounts actually received by the operator of a hotel, motel, tavern, inn, tourist cabin, tourist camp, or other place in which rooms are furnished to the public. Under no circumstances shall a travel agent or intermediary be deemed an operator of a hotel, motel, tavern, inn, tourist cabin, tourist camp, or other place in which rooms are furnished to the public unless such travel agent or intermediary actually operates such a facility.... This section is intended to clarify that taxes imposed as a hotel tax, occupancy tax, or otherwise shall apply solely to amounts received by operators, as enacted in the statutes authorizing such taxes.

Prestige filed a notice of supplemental authority and motion for reconsideration requesting the circuit court reconsider its ruling on the motion to dismiss. St. Louis County and CVC filed a response to the motion to dismiss admitting that H.B. 1442 “eviscerate[ed]” their claims but preserving “their right to challenge the enactment of the statutory revisions” in that H.B. 1442 “violates the original purpose, single subject, and clear title requirements of Missouri's Constitution.”

The circuit court conducted a hearing on Prestige's motion for reconsideration. The circuit court then dismissed the petition with prejudice. St. Louis County and CVC appeal.

Standard of Review

This Court has exclusive jurisdiction over this appeal under article V, section 3 of the Missouri Constitution as the appeal involves the validity of a statute of this State. “Constitutional challenges to a statute are reviewed de novo.” Rentschler v. Nixon, 311 S.W.3d 783, 786 (Mo. banc 2010). “An act of the legislature carries a strong presumption of constitutionality.” Missouri Ass'n of Club Executives v. State, 208 S.W.3d 885, 888 (Mo. banc 2006). “A statute is presumed valid and will not be held unconstitutional unless it clearly contravenes a constitutional provision.” Rentschler, 311 S.W.3d at 786. The person challenging the validity of the statute has the burden of proving the act “clearly and undoubtedly” violates the constitution. Id. Further, “[t]axing statutes must be construed strictly, and taxes are not to be assessed unless they are expressly authorized by law.” St. Louis Country Club v. Admin. Hearing Comm'n of Missouri, 657 S.W.2d 614, 617 (Mo. banc 1983).

Analysis

Constitutional Challenges1. Article III, section 39(5)

St. Louis County and CVC argue that H.B. 1442 violates article III, section 39(5) of the Missouri Constitution in that it attempts to extinguish without consideration the indebtedness of Prestige for the accrued room taxes. To prevail in this argument, St. Louis County and CVC must show that Prestige owed an indebtedness, liability, or obligation to St. Louis County prior to the effective date of H.B. 1442 and that H.B. 1442 extinguished that indebtedness, liability, or obligation without consideration. See Beatty v. State Tax Comm'n, 912 S.W.2d 492, 498 (Mo. banc 1995).

Prestige responds that St. Louis County and CVC waived their constitutional challenge based on article III, section 39(5). “It is firmly established that a constitutional question must be presented at the earliest possible moment ‘that good pleading and orderly procedure will admit under the circumstances of the given case, otherwise it will be waived.’ ” Callier v. Dir. of Revenue, State of Mo., 780 S.W.2d 639, 641 (Mo. banc 1989) (quoting Meadowbrook Country Club v. Davis, 384 S.W.2d 611, 612 (Mo.1964)). To properly raise a constitutional question, one must:

(1) raise the constitutional question at the first available opportunity; (2) designate specifically the constitutional provision claimed to have been violated, such as by explicit reference to the article and section or by quotation of the provision itself; (3) state the facts showing the violation; and (4) preserve the constitutional question throughout for appellate review.

United C.O.D. v. State, 150 S.W.3d 311, 313 (Mo. banc 2004). Prestige contends that because St. Louis County and CVC failed to raise the article III, section 39(5) challenge in their response to Prestige's motion for reconsideration or in their notice of appeal, this challenge was waived.

The Missouri rules do not recognize a motion for reconsideration, and St. Louis County and CVC were not required to file a response to Prestige's motion for reconsideration. However, they did file a response and raised constitutional claims based on other constitutional provisions discussed below but failed to make a challenge based on article III, section 39(5).

St. Louis County and CVC waived their article III, section 39(5) constitutional challenge by failing to raise it at the earliest opportunity. Although there are no cases directly on point, this case is analogous to those in which a party failed to raise a constitutional claim in a motion for new trial following a court-tried case.

To preserve a constitutional question for review in this Court, it must be raised at the earliest possible opportunity; the relevant sections of the Constitution must be specified; the point must be preserved in the motion for new trial, if any; and, it must be adequately covered in the briefs.

In re H.L.L., 179 S.W.3d 894, 897 (Mo. banc 2005). Like a motion for new trial in a court-tried case, a response to a motion for reconsideration is not required, but when one is filed, constitutional claims must be raised. This is in keeping with the general rule that a constitutional question must be presented at the earliest opportunity. Callier, 780 S.W.2d at 641.

Even if this challenge was not waived, it lacks merit. To find a violation of article III, section 39(5), it is essential to determine whether the statutes as they existed prior to the enactment of H.B. 1442 imposed a tax on Prestige. There are two relevant statutes at issue: the hotel tax and the tourism tax.

Section 67.657.4 authorizes the governing body of a county to “submit to the voters of the county a tax not to exceed the three and one-half percent on the amount of sales or charges for all sleeping rooms paid by the transient guests of hotels and motels situated within the county involved, and doing business within such county....” In accordance with the enabling statute, St. Louis County imposed the hotel tax set out in revised ordinances of St. Louis County §§ 502.500 to 502.550. The hotel tax imposes a tax of three and one-half percent on “the amount of sales or charges for all...