Kirkwood Drug Co. v. City of Kirkwood

• Decision Date: 08 March 1965
• Docket Number: No. 50937,No. 1,50937,1
• Citation: 387 S.W.2d 550
• Parties: KIRKWOOD DRUG COMPANY, Inc., a Corporation, Plaintiff-Appellant, v. CITY OF KIRKWOOD, a Municipal Corporation, and James M. Neely, Defendants-Respondents
• Court: Missouri Supreme Court

Page 550

387 S.W.2d 550

KIRKWOOD DRUG COMPANY, Inc., a Corporation, Plaintiff-Appellant, v. CITY OF KIRKWOOD, a Municipal Corporation, and James M Neely, Defendants-Respondents.

No. 50937.

Supreme Court of Missouri, Division No. 1.

March 8, 1965.

Richard M. Stout, Kirkwood, for appellant.

John R. Barsanti, Jr., James W. Singer III, Husch, Eppenberger, Donohue, Elson & Cornfeld, St. Louis, for defendants-respondents.

WALTER H. BOHLING, Special Commissioner.

This is a declaratory judgment action by plaintiff, Kirkwood Drug Company, Inc., a corporation, against defendants City of Kirkwood, a municipal corporation, and James M. Neely, collector of said City. Plaintiff, appellant here, questions the validity of the City of Kirkwood's Ordinance No. 3636 imposing license taxes on specific businesses, trades and occupations within said City in its application to druggists and retail merchants and the effectiveness of Sec. 304(e) thereof authorizing an investigation of the books, documents, records and papers of certain licensees to ascertain the accuracy of their returns for determining their proper annual tax. Al demand by the City to inspect plaintiff's books, etc., occasioned this action. Defendants filed a Motion for Summary Judgment (Civil Rule 74.04, V.A.M.R.) based upon the allegations in plaintiff's petition, an affidavit of defendant Neely and the attached exhibits therein referred to. Interrogatories submitted by plaintiff to defendants, with the answers thereto, were filed. Defendants' Motion for Summary Judgment, after hearing, argument and submission, was sustained and the Court entered its decree and declaratory judgment in favor of the defendants and against the plaintiff, holding said Ordinance No. 3636 'valid in all respects' as it applied to plaintiff. Plaintiff appealed.

The parties say this appeal involves a construction of the revenue laws of the State and vests jurisdiction here. It has been so held. See Mo.Const. Art. V, Sec. 3, V.A.M.S.; City of Berger v. La Boube, Mo., 260 S.W.2d 527; State to Use of Divine v. Collier, 301 Mo. 72, 256 S.W. 455. (Statutory references are to RSMo 1959 and V.A.M.S. unless otherwise indicated.)

Plaintiff operates a 'retail drug and general merchandise store in the City of Kirkwood,' a class three city and herein referred to as City. James M. Neely is the duly qualified and acting Collector of said City, having custory of the City's records relating to licenses under Ordinance No. 3636.

The City of Kirkwood, proceeding under Sec. 94.110, quoted in part infra, enacted Ordinance No. 3636, a comprehensive licensing ordinance effective June 15, 1950, prohibiting the conduct of the businesses, trades and occupations specified therein without first having paid for and obtained the annual license provided for in said ordinance (Sec. 304(a)).

Ordinance 3636 provides for the following, among other, licenses: 'Druggists 75cents per $1,000 of annual gross business; Minimum per year $10.00.' An identical license tax is imposed on 'Merchants (Wholesale and Retail).'

The Ordinance, Sec. 304(d), requires licensees, where the license is based on the annual 'gross business' or 'gross receipts,' to file between June 1st and July 1st an estimate of his or its aggregate gross business or gross receipts for the coming fiscal year and pay the fee based on said estimate. At the close of said fiscal year, June 30th next, each such licensee must file an 'adjusted return' showing said licensee's actual gross business or actual gross receipts for said fiscal year; and any over-payment or under-payment of said tax is then adjusted by a proper refund or an additional payment.

Section 304(e), relating to the statements required by Sec. 304(d), provides: 'The City Collector or his Deputies, or such other officer as the City Council may designate, shall be and are hereby authorized to investigate the correctness and accuracy of the statement required in the preceding section, and for that purpose shall have access at all reasonable times to the books, documents, papers and records of any person or persons, firm or corporation, association or partnership making such statement in order to ascertain the accuracy thereof.'

Plaintiff says Sec. 304(e) authorizes the City to investigate a licensee's returns and inspect a licensee's records and may not stand. Plaintiff contends there is no legal grant of authority to the City to require such overlybroad inspections; and even if the City has some rights of investigation, plaintiff's rights against overly-broad inspections and to security from publicity of results should have been but was not protected by the declaratory judgment. Plaintiff here stresses Mayor, etc. City of Liberty v. Dealers Transport Co., Mo., 343 S.W.2d 40, 43; Cf. 26 U.S.C.A. Sec. 7213(a) and (b); Cf. V.A.M.S. Secs. 146.090 and 143.270. Plaintiff cites the City of Liberty case, supra, to the point that, as a general rule, courts in awarding declaratory relief should dispose 'of all questions of right, status, or other legal relations encountered in adjudicating the controversy * * *;' quoting from 26 C.J.S. Declaratory Judgments Sec. 161. See, however, Id., Secs. 27, 28, 30 and M.F.A. Mut. Ins. Co. v. Hill, Mo., 320 S.W.2d 559; Tietjens v. City of St. Louis, 359 Mo. 439, 222 S.W.2d 70[1-4]. The City of Liberty case is not determinative of the merits of any justiciable controversy here presented. Under plaintiff's other citations certain restrictions and safeguards, broadly stated, are set up against the inspection by or disclosure to third persons of information found in a taxpayer's state income or intangible tax return by the director of revenue or any of his agents. Secs. 143.270 and 146.090. And, under 26 U.S.C.A. Sec. 7213(a), (b), it is an offense for Federal officers, employees and other specified persons to make unauthorized disclosures of information in Federal income tax returns.

Plaintiff assumes Sec. 304(e), without stating wherein, authorizes 'overly-broad' inspections and states the only restriction on the investigation is that it be conducted at a reasonable time. Section 304(e) explicitly restricts the investigation to plaintiff's records establishing the accuracy or inaccuracy of plaintiff's annual gross business in its statements filed under Sec. 304(d), and, as plaintiff states, the investigation must be at a reasonable time.

'Subject to such limitations as the legislature, within constitutional limits, may deem proper to impose, power to license or impose license taxes includes: The power * * * of providing for the collection or enforcement of the payment of such fee or tax * * *.' 53 C.J.S. Licenses Sec. 10, p. 482. See also McQuillin, Municipal Corporations, 3rd ed., Secs. 44.131, n 79, 10.21, n 22; 64 C.J.S. Municipal Corporations Sec. 2074, nn 82-89.

Missouri cities are authorized to exercise taxing powers for corporate purposes under power granted to them by the General Assembly. Mo.Const. Art. X, Sec. 1. The General Assembly has vested Class Three cities with 'power and authority to levy and collect a license tax on * * * druggists, * * * wholesale merchants, merchants of all kinds' and other business activities. Sec. 94.110, Laws 1953, p. 295. No question exists as to the express authority of defendant City to impose a license tax on druggists and on merchants.

Section 94.150 provides: 'The enforcement of all taxes authorized by sections 94.010 to 94.180 shall be made in the same manner and under the same rules and regulations as are or may be provided by law for the collection and enforcement of the payment of state and county taxes * * *.' Missouri statutory provisions exist for investigating, examining or inspecting a taxpayer's records for the collection of proper state or county taxes. For instance: Income tax (Sec. 143.240); Intangible tax (Sec. 146.090); Cigarette tax (Sec. 149.090); Sales tax (Secs. 144.320 and 144.330); Use tax (Secs. 144.640 and 144.645); Merchants' tax (Sec. 150.055); Manufacturers' tax (Sec. 150.325). (See also Secs. 136.070-136.100 for like general powers of the state collector of revenue.)

In Ploch v. City of St. Louis, 345 Mo. 1069, 138 S.W.2d 1020, 1024, a cigarette license tax ordinance provision authorizing an examination of, among other things, 'cigarettes, vending machines and receptacles containing cigarettes' was considered valid, reasonable and in aid of the collection of the tax. Reasonable enactments granting taxing agencies inquisitorial powers to determine the accuracy of tax returns have been held not to conflict with the search and seizure, due process and other clauses of state and Federal constitutions. See 51 Am.Jur., Taxation, Sec. 671, cited by plaintiff; Gange Lumber Co. v. Henneford, 185 Wash. 180, 53 P.2d 743, 103 A.L.R. 513, and Annotation at 522; Commonwealth ex rel. v. Freeman, 20 Pa. Dist. & Co. R. 314; Paducah Automotive Trades Ass'n v. City of Paducah, 307 Ky. 524, 211 S.W.2d 660.

We hold the provisions of Sec. 304(e) for investigating licensees' tax returns are reasonable, in aid of the collection of the tax and authorized by Sec. 94.150 when read in connection with other statutes, cited supra.

Section 304(e) of ordinance 3636 imposes license taxes on many different business activities. In many instances it bases the tax on a 'flat sum per year'; in other instances the tax is based on a specified sum 'per $1,000 of annual gross business,' as is the license on druggists (plaintiff directs attention to nineteen such instances), and in still other instances it is based on a percentage of 'gross receipts' (plaintiff directs attention to seven such instances).

Plaintiff contends that since ordinance 3636 does not define the terms 'gross business' and 'gross receipts' or specify any difference in their meanings and since said terms have been used in the same connection in said ordinance, the ordinance is caused ot be uncertain and unenforceable against plaintiff. Morgan v....