Custom Built Homes Co. v. Kansas State Commission of Revenue and Taxation
| Decision Date | 24 January 1959 |
| Docket Number | No. 41125,41125 |
| Citation | 184 Kan. 31,334 P.2d 808 |
| Parties | CUSTOM BUILT HOMES CO., Inc., Appellant, v. KANSAS STATE COMMISSION OF REVENUE AND TAXATION, Appellee. |
| Court | Kansas Supreme Court |
Syllabus by the Court
1. Where one, engaged in business as a contractor for the construction and sale of houses, purchases unassembled prefabricated house units from a Minnesota manufacturer by a written sales contract calling for delivery 'F.O.B. building site in Wyandotte County, Kansas,' it is held the contractor is subject to the payment of a 'use' tax within the contemplation of the Kansas Compensating Tax Act (G.S.1949, 79-3701 et seq.).
2. Where a court, either trial or appellate, is called upon to determine the intention of the parties to a written sales contract, its first duty is to survey the instrument in its entirety and apply pertinent rules of interpretation. Ambiguity in a written instrument does not appear until the application of pertinent rules of interpretation to the face of the instrument leaves it genuinely uncertain which one of two or more meanings is the proper meaning.
3. The initial letters 'F.O.B.' frequently found in contracts for goods to be shipped stand for the words 'free on board'. In contracts of this character judicial knowledge may be taken of the meaning of this expression and parol evidence is ordinarily not needed in its interpretation.
4. It is well settled if parties to a sales contract agree in terms providing for shipment F.O.B. destination, the seller assumes the payment of freight and the transportation is for his acount, with the ordinary presumption therefrom that the property interest in the goods is not intended to pass until the goods reach the destination indicated.
5. 'F.O.B. building site in Wyandotte County, Kansas,' has a clear and unambiguous meaning, and, in the absence of a contrary intention between the parties to a sales contract appearing from the face of the instrument, a contract calling for delivery of merchandise from a manufacturer in Minnesota in accordance therewith means that title to the merchandise passes upon delivery to the buyer free on board the means of conveyance at the building site in Wyandotte County, Kansas.
6. It is immaterial that some of the reasons given by the trial court in arriving at its ultimate conclusion may have been erroneous. Where the judgment rendered by the trial court is supported by the facts in the case, and must necessarily have been rendered under the law on the facts presented, it will not be reversed because the court adopted a wrong theory of the law, and based its judgment on such erroneous theory.
7. The imposition of a use tax by Kansas is not violative of the interstate commerce clause of the Federal constitution merely because the merchandise was transported to Kansas from the State of Minnesota. When merchandise transported in interstate commerce has arrived at its destination and is there held for use or disposal, it passes under the protection of state law and becomes subject to the taxing and police power of the state. Such tax is not upon the operations of the interstate commerce but upon the privilege of use after interstate commerce has ceased.
Charles W. Hess, Kansas City, and Edward H. Sondker, Topeka, argued the cause, and John W. Breyfogle, Jr., Olathe, and Charles P. Dribben, Kansas City, Mo., were with them on the brief for appellant.
Michael A. Barbara, Topeka, argued the cause, and Clarence J. Malone and Dean Burkhead, Topeka, were with him on the brief for appellee.
The State Commission of Revenue and Taxation of the State of Kansas sustained an assessment for Compensating Tax made by the Director of Revenue based upon the use, storage or consumption of tangible personal property within the State of Kansas pursuant to G.S.1949, 79-3703 as amended, against Custom Built Homes Co., Inc., appellant. The District Court of Johnson County upon appeal affirmed the order of the Tax Commission and the appellant has duly perfected its appeal to this court.
The question presented is whether under a sales contract the appellant used, stored or consumed prefabricated house sections as tangible personal property within the State of Kansas after said sections had ceased to be a part of interstate commerce and prior to their becoming affixed as real estate within the state.
The decision is controlled by a determination of when title passed to the property which is the subject of the sales contract.
Custom Built Homes Co., Inc., hereafter called appellant, is a Kansas corporation having its principal place of business in Johnson County, Kansas. During the period in question, from October 1, 1951, to September 30, 1955, the appellant was engaged in the business of home development and the sale of prefabricated houses in the Stony Point Heights Addition in Wyandotte County, Kansas.
Appellant entered into a contract to purchase prefabricated houses from Page & Hill Homes, Inc., a Minnesota corporation, hereafter called Page-Hill. Under the contract Page-Hill was 'to furnish and deliver F. O. B. building site in Wyandotte County, Kansas, one hundred Ninety' (emphasis added) prefabricated house units at the prices and under the terms and conditions specified. Among the provisions of the contract are the following:
(The record does not disclose whether the 'Agreement to Pay form' was introduced in evidence and the parties have not seen fit to present anything in the record concerning the time or manner of payment.)
Under the terms of the contract, Page-Hill delivered from its factory in Minnesota the prefabricated sections to the building site. Delivery was made by Page-Hill trucks operated by Page-Hill drivers. The complete and prefabricated wall and petition sections included the exterior trim, siding, building paper, sheeting, studs, foil insulation, sheet rock, interior trim, windows and frames, doors, door frames and hardware already attached. The interior partitions were also complete and prefabricated in the same complete manner. The ceiling sections were complete and prefabricated with the trim already in place. The roof sections were prefabricated containing joists and insulation.
In its development of Stony Point Heights Addition appellant purchased the lots and erected such foundations as were necessary and constructed thereon a platform constituting the floor joists and the subflooring from raw materials upon which the Kansas sales tax was paid. The complete house, disassembled, came with the truck, excluding deck material, oak floors, nails, furnace and wiring. These were all purchased locally and installed by the appellant through its subcontractors or laborers.
As a part of the financing of the construction in Stony Point Heights Addition Page-Hill took a blanket mortgage on the lots to which the prefabricated houses were attached.
Appellant employed five carpenters and two laborers. When the Page-Hill truck arrived at the Stony Point Heights Addition in Wyandotte County, the driver was directed by an employee of the appellant to a specific house foundation--the building site. The truck proceeded to the building site and usually parked on the street immediately in front of the foundation. The truck was then unloaded in the following manner: The Page-Hill driver unhooked his tractor from the semi-trailer and installed a boom on his tractor. He would 'unbutton' the canvas covering the semi-trailer, sometimes with assistance from appellant's employees, and then back up his tractor to the semi-trailer and hook on to a section of panel which would be approximately twenty-four feet long. These panels were loaded on the semi-trailer in proper sequence for assembly on the foundation at the time of unloading. Appellant's employees, the laborers, would steady the panels hanging from the boom on the tractor, one on each side, as the driver would carry the section by means of the crane to the foundation. The panel, held by the crane, would be placed on the foundation guided by the laborers. Appellant's carpenters would then nail down the panel, applying from one to three nails. One of the carpenters would climb up the panel and release the hook of the crane. Appellant's carpenters would steady the panel until the next section was installed and hooked on to the one previously unloaded. This process was used for all sections, interior and exterior, except the roof and ceiling sections. The roof and ceiling sections were unloaded by appellant's employees, placed in the appellant's truck and installed manually by appellant's employees. All the labor and carpenter work was done by appellant's employees while the house was under construction, except such work as was done by appellant's subcontractors. The Page-Hill driver drove the tractor and remained in the cab where he operated the power take-off which controlled the crane. Loose items loaded on the...
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