Adams v. City of St. Louis, 59745

• Decision Date: 10 April 1978
• Docket Number: No. 59745,59745
• Citation: 563 S.W.2d 771
• Parties: Jacob ADAMS and Glen Akers et al., Appellants, v. The CITY OF ST. LOUIS and John K. Travers, Respondents.
• Court: Missouri Supreme Court

Page 771

563 S.W.2d 771

Jacob ADAMS and Glen Akers et al., Appellants, v. The CITY OF ST. LOUIS and John K. Travers, Respondents.

No. 59745.

Supreme Court of Missouri, En Banc.

April 10, 1978.

Morris J. Levin, Gerald Kretmar, St. Louis, for appellants.

James J. Wilson, Associate City Counselor, St. Louis, for respondents.

RENDLEN, Judge.

This appeal, involving construction of the revenue laws of the State and the City of St. Louis comes here under Art. V, § 3, Mo.Const. (1945) as amended. See Petrolene v. City of Arnold, 515 S.W.2d 551, 552(1) (Mo.1974). Plaintiffs, who are employees or former employees of General Motors Corporation (GM) and members of the United Auto Workers (UAW), brought their action against the City of St. Louis (City) and its Collector of Revenue to recover earnings taxes paid under protest upon Supplemental Unemployment Benefits (SUB) received by them and to enjoin future collections and prevent prosecution of those failing to pay such tax.

SUB payments had been made to plaintiffs under the terms of a collective bargaining agreement between UAW and General Motors, the tax consequence of which turns on whether payments are "compensation earned," hence subject to the St. Louis Earnings Tax Ordinance, § 145.020, Revised Code, City of St. Louis. While the trial court denied relief and ordered plaintiff's petition "dismissed with prejudice" no substantial dispute exists concerning the essential facts, instead the issue becomes one of construction and application of the law.

The prime grant of taxing power to the state and its political subdivisions is contained in Art. X, § 1, of the Missouri Constitution, 1945, which declares:

"The taxing power may be exercised by the general assembly for state purposes, and by counties and other political subdivisions under power granted to them by the general assembly for county, municipal and other corporate purposes."

Requisite enabling legislation for the City's earnings tax is found in § 92.110, RSMo 1969, providing in pertinent part "Tax may be levied on earnings and profits (St. Louis) Any constitutional charter city in this state which now has or may hereafter acquire a population in excess of seven hundred thousand inhabitants, . . . is hereby authorized to levy and collect, by ordinance, . . . an earnings tax on the salaries, wages, commissions and other compensation earned by its residents; on the salaries, wages, commissions and other compensation earned by nonresidents of the city for work done or services performed or rendered in the city; . . . ." (Emphasis added.)

Under authority of the statute, the City of St. Louis adopted the following ordinance imposing a 1% Tax on salaries, wages, commissions and other earnings:

"Section 145.020 (Revised Code of The City of St. Louis) A tax for general revenue purposes of 1% Is hereby imposed on (1) salaries, wages, commissions and other compensation earned after July 31, 1959, by resident individuals of the City, . . . and on (2) salaries, wages, commissions and other compensation earned after July 31, 1959, by nonresident individuals of the City, for work done or services performed or rendered in the City; . . . ." (Emphasis added.)

The enabling statute and the taxing ordinance refer only to income received as compensation for services including salaries, wages, commissions and other compensation earned. In so doing, imposition of the tax is limited to earnings of the types designated because an ordinance or statute enumerating the subjects on which it operates is generally construed "as excluding from its effects all those not expressly mentioned." Parvey v. Humane Society of Missouri, 343 S.W.2d 678 (Mo.App.1961). In their brief defendants concede "(t)here is no question that the City of St. Louis cannot impose a tax upon income (emphasis added) as the enabling legislation . . . (does not) . . . authorize the imposition of such a tax." An earnings tax of the type under consideration has been described as ". . . a species of income or excise tax. However, it is limited to earnings from work and services, (emphasis ours) and does not include other kinds of income such as interest on investments, rents, dividends, capital gains and the like." State ex rel. Agard v. Riederer, 448 S.W.2d 577 (Mo.banc 1969). See also Carter Carburetor Corporation v. City of St. Louis, 356 Mo. 646, 203 S.W.2d 438 (banc 1947) and Walters v. City of St. Louis, 364 Mo. 56, 259 S.W.2d 377 (banc 1953). The issue is thus narrowed from the broad notion, "income" to the more limited concept, "earnings."

Defendant's principal argument is that benefits paid employees under the SUB plan are deferred compensation, earned by an employee "through acquisition of credit units while working but which is paid to him when he is unemployed," and thus are earnings subject to the tax. In response, plaintiffs contend SUB benefits are not earnings, deferred or otherwise, and are not within the circumscribed taxing authority of the City. An understanding of the plan is essential to a resolution of these issues.

The SUB plan grew from UAW's desire for a guaranteed annual wage during its 1955 contract negotiations with the nation's principal automobile manufacturers. From that collective bargaining process emerged, not the sought-after guaranteed annual wage but an agreement by which GM would pay at least five cents per employee-hour into an independent trust fund designed to supplement the members' unemployment payments during lay-off periods. The fund impinged on the wage offer and constituted part of an economic package, the cost of which affected resources available for other features such as wages, premiums, overtime, vacations, holidays, pension and insurance.

General Motors contributes to the fund, the employees do not and payments made cannot revert to the employer. When the fund attained a level at or above a maximum determined by the contract (a situation occurring in the late 1950's), GM was permitted to suspend payments; however, in such situations (under a 1961 amendment) the five cents per hour payments were allocated to an alternative use. On at least one occasion, excess funds accumulated and were paid directly to employees as a year end bonus but this scheme for distribution of surplus was abandoned in 1967. Since that time the maximum level has never been reached and accordingly all employer payments have gone directly to the fund.

When the SUB plan was devised, it was not readily ascertainable whether its operation would render recipients ineligible for state unemployment benefits. To prevent that possibility a proviso was added that at least "2/3 of the states in which GM operated" must accept the "notion of supplementation," otherwise the payments would be diverted from the fund to other fringe benefits agreed by the UAW and GM, or if no agreement could be reached, to increase the hourly wage by that amount. Of significance is the provision that no benefit payments may be made if the fund falls below a prescribed level which produces a "first-come, first-served" quality with a potential for defeating claims asserted after the fund sinks below the agreed minimum.

Eligibility for SUB payments is conditioned on laid-off employees qualifying for state unemployment benefits, registering with the state unemployment office, (this includes being available for suitable work by an employer other than GM) and employees must have been laid off for lack of work. Payments do not diminish state unemployment benefits and the length of time an employee receives payment is determined from his credit units earned. No credit units may be earned until an employee has been employed for one year though they accrue thereafter at the rate of 1/2 unit for each thirty-two hour (or more) work week. On the other hand, the amount or magnitude of such payments is determined by the employee's prior earning rate.

The plan is a privately funded device providing eligible employees with a formulated percentage of their after tax wages when benefits are combined with state unemployment payments.

While it might well be argued that payments by GM into the fund constitute earnings (a point we do not decide), payments from the fund to laid-off employees are not for services rendered but instead are manifestations of the plan. Readily identifiable features distinguishing SUB payments from deferred earnings include the following: Benefit payments are made not by the employer but by an independent managing trustee free of control of General Motors; benefits are not for past services but for present unemployment; plaintiffs are not employees of the trust fund and it cannot be said that benefit payments result from any...