Beatty v. State Tax Com'n

Decision Date19 December 1995
Docket NumberNo. 78410,78410
Citation912 S.W.2d 492
PartiesJohn BEATTY, et al., Appellants, v. STATE TAX COMMISSION, Respondent, and Robert S. Rothchild, et al., Intervenors-Respondents.
CourtMissouri Supreme Court

David B. Rogers, Columbia, for appellants.

Jeremiah W. (Jay) Nixon, Attorney General, F. Martin Dajani, Carol Aikens, Assistant Attorneys General, Jefferson City, for respondent.

David J. Newburger, James P. Gamble, Bernard W. Gerdelman, St. Louis, for intervenors-respondents.

James G. Rittenbaum, Clayton, for amicus Missouri Association of School Administrators.

ROBERTSON, Judge.

House Bill No. 211, 1995 Laws of Missouri ____, West's No. 65, § A 256-261, repeals former section 137.016, RSMo 1994, and enacts a new section 137.016, RSMo 1995, effective August 28, 1995. H.B. 211 contains a broader definition of the term "residential property" than its predecessor and makes that new definition applicable as of January 1, 1995. Appellants in this case claim that the resulting reclassification of certain types of residential real property for purpose of assessing taxes for the 1995 tax year and the recoupment of lost tax revenue provision in section 137.016 operate retrospectively and violate several provisions of the Missouri and United States Constitutions.

The trial court found the statute constitutional. This appeal followed and raises issues involving the construction of a revenue law of this state. Exclusive appellate jurisdiction is vested in this Court by article V, section 3 of the Missouri Constitution. The judgment of the trial court is affirmed.

I.

Appellants John Beatty, Laura Beatty, and Robert Meyer reside in, own real property in, and pay real estate taxes to Pettis County, Missouri. Pettis County is a fourth-class county. § 48.020, RSMo 1994; Official Manual, State of Missouri 1995-1996, p. 792. Appellants JLB and Associates, Inc. ("JLB") is a Missouri corporation engaged in the business of contracting with owners of residential apartment properties containing more than four units for the purpose of decreasing the real property tax on such real property. JLB achieves lower real property taxes by filing condominium declarations on its clients' residential apartment properties. Until the passage of H.B. 211, the filing of the condominium declaration changed the tax classification of the property from commercial to residential. Residential property is taxed at nineteen percent of true value; commercial property is taxed at thirty-two percent of true value. § 137.115.5, RSMo 1994.

John Beatty is the president of JLB. On December 27, 1994, JLB and Curry Investment Company ("Curry") entered into a written contract under which JLB agreed to convert apartments owned by Curry to condominiums in order to reduce Curry's tax liability. Curry agreed to pay JLB fifty percent of the property tax savings realized for the first year of reclassification for property tax assessment purposes.

On June 1, 1995, the Governor approved H.B. 211. Former section 137.016 defined residential property as follows:

All real property improved by a structure which is used or intended to be used for residential living by human occupants and which contains not more than four dwelling units or which contains single dwelling units owned as a condominium or in a cooperative housing association or an independent living facility for the elderly.

[Emphasis added.] H.B. 211, section 137.016.1, alters the definition of residential property. Effective August 28, 1995, residential property is:

All real property improved by a structure which is used or intended to be used for residential living by human occupants, vacant land in connection with an airport, land used as a golf course, and manufactured home parks ...

This definition "shall apply to assessments made after December 31, 1994." H.B. 211, § 137.016.3.

Under H.B. 211, all residential property is taxed as residential property. It no longer matters how many apartment units the property contains.

The new statute also authorizes taxing districts to adjust their operating levy to recoup revenue lost as a result of the reclassification of residential structures containing five or more units. Taxing districts may not increase their levy beyond the "the highest tax rate in effect subsequent to the 1980 tax year." H.B. 211, § 137.016.2.

H.B. 211 eliminated the need for companies like JLB to continue in the business of converting apartments into condominiums for purposes of achieving real property ad valorem tax savings. Realizing this, JLB, the Beattys and Meyer ("appellants") filed a declaratory judgment action against the director of revenue and the State Tax Commission ("Commission") alleging that the retrospective application of the new section 137.016 violates a number of provisions of the Missouri and United States Constitutions. Appellants asked the trial court to issue a permanent injunction enjoining the application of H.B. 211 to 1995 tax bills, for a declaration that H.B. 211 is unconstitutional, and for an award of costs and attorneys' fees.

On October 4, 1995, the director of revenue filed a motion to dismiss claiming she lacks authority over the Commission, county collectors, or the processes of assessing, equalizing, or collecting real property taxes. The trial court sustained the director's motion, dismissing her from the action on October 6, 1995. Also on October 6, the trial court sustained the motions of several corporate and individual taxpayers ("intervenors") to intervene, permitted these intervenors to file answers to appellants' petition, and conducted a hearing on the motions of the parties for judgment on the pleadings. The trial court entered judgment in favor of respondents and assessed costs to appellants. This appeal followed.

II.

This appeal arises from a judgment entered on the pleadings. We take all well-pleaded facts as true. Madison Block Pharmacy v. U.S. Fidelity, 620 S.W.2d 343, 345 (Mo. banc 1981). The record does not reveal, nor could appellants have pled at the time of trial, facts that would support this Court's conclusion that Pettis County has applied H.B. 211 in a manner that violates the constitution. Therefore, we limit our review to appellants' claim that H.B. 211 is facially unconstitutional.

Statutes are presumed constitutional. Courts may not declare statutes unconstitutional unless they clearly contravene a constitutional provision. Doe v. Roman Catholic Diocese of Jefferson City, 862 S.W.2d 338, 340 (Mo. banc 1993). Where a party attacks the facial validity of a statute, a court may declare that statute unconstitutional only if there are no possible interpretations of the statute that conform to the requirements of the constitution. U.S. v. Salerno, 481 U.S. 739, 745, 107 S.Ct. 2095, 2100, 95 L.Ed.2d 697 (1987).

A final preliminary matter: The statutes relating to the assessment and levy of real property ad valorem taxes do not apply equally to every class of county in this state. Therefore, the discussion that follows relates only to fourth class counties.

A.

Appellant's first two points on appeal reveal the bifurcated nature of their interests in this litigation. The Beattys and Meyer charge that H.B. 211 violates article I, section 13 of the Missouri constitution because the statute operates retrospectively. JLB contends that H.B. 211 violates the contract clauses of the state and federal constitutions because the statute interferes with contracts between it and its clients. Both arguments depend for their success on a conclusion that H.B. 211 operates retrospectively. Indeed, appellants concede that their contract clause arguments fail if H.B. 211 does not operate retrospectively.

Article I, section 13 of the Missouri Constitution provides:

"That no ... law ... impairing the obligation of contracts, or retrospective in its operation ... can be enacted." Article I, section 10 of the United States Constitution states that "[n]o state shall ... pass any ... law impairing the obligation of contracts...."

The Beatty and Meyer appellants offer the following constitutional argument: (1) H.B. 211 did not take effect until August 28, 1995; (2) it purports to change the definition and therefore the tax classification of certain residential structures in effect on January 1, 1995; (3) because of that change in tax classification, the taxing districts in Pettis County may increase their tax levies to recoup revenue lost as a result of reclassification; (4) that appellants' taxes may increase above the amount they would have been required to pay had the January 1, 1995 tax classifications remained in effect; (5) that under section 137.075, RSMo 1994, they have a vested right to the tax liability for real property as of January 1, 1995; and (6) therefore, H.B 211 violates article I, section 13 because the statute operates retrospectively.

The Commission and the intervenors contend that tax liability is not determined as of January 1 and that no rights vested in appellants prior to August 28, 1995, the effective date of H.B. 211. This is because, they argue, no rights vest in a taxpayer until the tax rate is set and amount of the tax can be determined. Because the amount of appellants' taxes could not be determined prior to August 28, 1995, H.B. 211 does not operate retrospectively.

1.

Appellants are correct in their argument that H.B. 211 is retrospective. It intends by its clear language to apply to events that took place prior to August 28, 1995, the effective date of the statute.

The constitution does not forbid retrospective laws, however. Instead, it condemns laws that operate retrospectively. Dial v. Lathrop R-II School District, 871 S.W.2d 444, 447 (Mo. banc 1994).

A statute operates retrospectively--is retroactive--if it takes away or impairs a vested or substantial right or imposes a new duty in respect to a past transaction. Doe v. Roman Catholic Diocese of Jefferson City, 862 S.W.2d 338, 340 ...

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