Arsenal Credit Union v. Giles

Decision Date16 September 1986
Docket NumberNo. 67689,67689
CourtMissouri Supreme Court
PartiesARSENAL CREDIT UNION, et al., Plaintiffs-Appellants, v. Gwen GILES, et al., Defendants-Respondents.

Leon G. Kusnetzky, Kansas City, for plaintiffs-appellants.

Edward J. Hanlon, James D. Wilson, St. Louis, for defendants-respondents.

RENDLEN, Judge.

This case involves the tax on tangible personal property of certain Missouri credit unions. The central issue is whether § 148.620.3, RSMo Cum.Supp.1984, 1 (hereinafter § 148.620.3) which imposes a net income-based corporate franchise tax on credit unions and savings and loan associations to the exclusion of other taxation, violates Mo.Const. art. X, § 4(a) 2 and § 6 (1945 amended 1972 and 1982). 3

Suit was brought by ten credit unions (hereinafter appellants) contesting personal property taxes collected by the City of St. Louis from the appellants aggregating $18,942.58 for the tax year 1983. Gwen Giles and Ronald Leggett were named defendants (hereinafter respondents) in their respective official capacities as tax assessor and collector of revenue for the City of St. Louis. They were responsible for assessing and collecting taxes on tangible personal property owned by appellants within the city boundaries.

Appellants' three-count petition sought judgment declaring the assessment and taxation of their personal property illegal and void, and for recovery of taxes paid under protest. They further prayed for a preliminary injunction restraining future assessment or collection of such personal property taxes. By answer and counterclaim respondents asked for judgment declaring § 148.620.3, purporting to relieve appellants from taxes on personal property owned or held by them for their own use, unconstitutional and invalid. Thereafter, respondents moved for summary judgment and the court, without findings of fact or conclusions of law, granted summary judgment declaring § 148.620.3 violative of §§ 4(a), 4(b) and 6.1 of Article X of the Missouri Constitution. The case falls within this Court's original appellate jurisdiction under the provisions of Mo. Const. art. V, § 3.

Appellants raise the following contentions: 1) Respondents neither as city officials nor as individuals are aggrieved or injured parties and accordingly lack standing to challenge the constitutionality of the questioned statute; 2) Section 148.620.3 substitutes a tax on net income for any tax liability appellants would otherwise have under § 4(a) and does not create an exemption prohibited by § 6.1.

Addressing first the standing issue, we find appellants' challenge to respondents' right to pursue the constitutional issues raised in answer and counterclaim, not well taken. Appellants contend the questioned statute does not adversely affect respondents in the sense of an "injury in fact" and hence, respondents lack the requisite interest and are without standing to attack the statute's validity.

It has been aptly stated that for standing sufficient to attack the constitutionality of a statute a party must demonstrate he is "adversely affected by the statute in question...." See Ryder v. County of St. Charles, 552 S.W.2d 705, 707 (Mo. banc 1977). The rationale of the standing requirement is to assure that there is "a sufficient controversy between the parties [so] that the case will be adequately presented to the court." Id. 707. This Court on a fact situation substantially analogous to that at bar held a defendant (taxpayer) was "adversely affected" and had standing to challenge the constitutionality of a city license tax. City of Cape Girardeau v. Fred A. Groves Motor Company, 346 Mo. 762, 142 S.W.2d 1040, 1041, 1045 (1940). 4 The City of Cape Girardeau recovered approximately $1,100 by judgment in the trial court for a city license tax owed by the defendant Fred A. Groves Motor Company. Defendant asserted the city licensing ordinance violated Mo. Const. art. X, § 3 (1875), which required that taxes be uniform upon the same class of property. 5 Thus in a suit by the taxing authority for collection of taxes the taxpayer had sufficient interest and the requisite standing to raise the constitutional challenge under Article X, § 3. A real controversy existed between the taxpayer and the taxing authority assuring that the case would be and in fact was adequately presented to the courts.

In short, the taxpayer who strove to avoid the tax by raising the validity issue in Groves had standing to make his constitutional attack. He would have been "adversely affected" if required to pay the tax and conversely the taxing authority would have been "adversely affected" if it could not collect the tax. Substantially the same factors occur in the case at bar. The city attempts to collect the personal property tax but the taxpayers (instead of refusing to pay the tax--as in Groves ) paid under protest and brought suit for recovery of their taxes contending that § 148.620.3 provides an escape from the city's personal property taxing ordinance. Responding to this suit respondents under Article X, §§ 4(a) and 6.1, challenged the validity of § 148.620.3. The respondents are "adversely affected" by the exemption statute which if found valid and construed as requested by the taxpayer would deny the city its opportunity to collect the personal property taxes aggregating $18,942.58. Additionally, the issues have been vigorously litigated so it cannot be said the case has not been "adequately presented to the court."

This is not a request for an advisory opinion in a non-adversary proceeding by parties who wish advice on the law. See Groves, 142 S.W.2d at 1045. It is instead a hotly contested claim by taxpayers asserting a statutory exemption as a bar to the city's power to tax met head on by the city's counterclaim challenging the validity of such exemption. Under the Groves analysis either party has standing to present the validity issue. The stake is almost $19,000, who other than the taxpayer and the taxing authority would be better positioned to raise the question of the validity of a statute exempting the taxpayer from an ordinance of the taxing authority?

Arguments similar to those of appellants that local government units are "mere arms of the state" with no independent right to attack statutes that affect them--have been expressly rejected in favor of a standing doctrine concerned primarily with "sufficient controversy between the parties" regarding matters which "directly affect them." Ryder, 552 S.W.2d at 707. The fact that respondents are local taxing officials, is not an impediment to their assertion of invalidity because "taxes are levied by counties and they have such additional taxing powers as the legislature may grant [citation omitted] and, representing the state at large and in some measure themselves and other local units of government, counties have indeed a vital interest in all questions relating to the levy and assessment of taxes." In re St. Joseph Lead Co. v. State Tax Commission, 352 S.W.2d 656, 661 (Mo.1961).

This is a case calling for a substantive definition of respondents' rights under the challenged taxing scheme to protect and enforce the rights of the city. The construction and validity of the questioned statute impinges directly on the duties of tax officials sued by appellants and on the future legal relations of the parties. It presents a proper request for declaratory judgment by respondent tax officials, State Tax Comm'n v. Admin. Hearing Comm'n, 641 S.W.2d 69, 75 (Mo. banc 1982) and at issue are not only the monies allegedly collected without authority and currently held by respondents, compare City of Jackson v. Heritage Savings and Loan Ass'n., 639 S.W.2d 142, 145 (Mo.App.1982), but also future taxes if any to be assessed upon appellants' personal property. These matters were adequately alleged in respondents' counterclaim for declaratory judgment and are properly before this Court.

Now to the merits. The Missouri Constitution clearly expresses the people's intent that only a limited number of properties may be exempted from taxation. In Mo. Const. art. X, § 6 (1945) 6 certain properties were specifically exempted while others might thereafter be exempted by the general law. The specifically exempted properties were real and personal property of 1) the state 2) counties 3) other political subdivisions and 4) nonprofit cemeteries. The properties for which exemptions were permitted, if so provided by general law, were the real and personal property not held for private or corporate profit and used exclusively for a) religious worship b) schools and colleges c) purposes purely charitable or d) agricultural and horticultural societies. The section concluded with this ringing declaration "All laws exempting from taxation property other than the property enumerated in this article, shall be void." (Emphasis added.) At the general election in 1972, Article X, § 6 7 was amended so that the list of specifically exempt property set forth in the original provision of the 1945 Constitution as well as the list of items for which exemptions might be permitted under the general law remained intact but the amendment added the following items for which exemptions might be permitted a) household goods b) furniture and c) wearing apparel and articles of personal use and adornment owned and used by a person in his home or dwelling place. Again, the amended article closes with the prohibition found in the original article of 1945 that all laws exempting property other than those enumerated shall be void.

In 1982 § 6 was again submitted for amendment. See supra, note 3. The amendment, approved as § 6.1, retained the list of specifically exempted properties and those for which exemptions were permissible under the 1972 amended section but added to the list of specifically exempted items the following: all personal property a) held as industrial inventories, including raw materials, work in progress...

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    ...judgment raises a case or controversy and meets the constitutional justicability requirements. See Arsenal Credit Union v. Giles, 715 S.W.2d 918, 921 (Mo. 1986) (en banc) (concluding that a case or controversy existed regarding a claim for declaratory judgment on the constitutionality of a ......
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