Mesker Bros. Industries, Inc. v. Leachman

• Decision Date: 10 November 1975
• Docket Number: 58887,Nos. 58886,No. 2,s. 58886,2
• Citation: 529 S.W.2d 153
• Parties: MESKER BROTHERS INDUSTRIES, INC., Appellant, v. George C. LEACHMAN, Collector of Revenue, and Frank J. Antonio, Assessor, St. Louis County, Missouri, Respondents. MESKER INDUSTRIES, INC., Appellant, v. George C. LEACHMAN, Collector of Revenue, and Frank J. Antonio, Assessor, St. Louis County, Missouri, Respondents
• Court: Missouri Supreme Court

Page 153

529 S.W.2d 153

MESKER BROTHERS INDUSTRIES, INC., Appellant, v. George C. LEACHMAN, Collector of Revenue, and Frank J.

Antonio, Assessor, St. Louis County, Missouri,

Respondents.

MESKER INDUSTRIES, INC., Appellant, v. George C. LEACHMAN, Collector of Revenue, and Frank J.

Antonio, Assessor, St. Louis County, Missouri, Respondents.

Nos. 58886, 58887.

Supreme Court of Missouri, Division No. 2.

Nov. 10, 1975.

Donald S. Hilliary, Clayton, for appellant.

George W. Lang, II, Asst. County Counselor, Clayton, for respondents.

HENRY I. EAGER, Special Commissioner.

This appeal involves the liability of a manufacturer in St. Louis County for manufacturers' taxes (Chapter 150, RSMo 1969) ¹ on 'work in process.' The specific section involved is § 150.310, which provides in pertinent part as follows: '* * * 1. Every manufacturer in this state shall be licensed and taxed on all raw material and finished products, as well as all the tools, machinery and appliances used by them, in the same manner as provided by law for the taxing and licensing of merchants; * * *.' The present appeal includes two cases which were consolidated here; they involve the same plaintiff and the same issues but for taxes of different years (1972 and 1973). All the substantive facts were stipulated, and the cases were tried together in the Circuit Court. Plaintiff (whose name was slightly changed between the filing of the two suits) is a manufacturer of steel doors and frames and is required to be licensed as a manufacturer under Section 150.310. The forms for the required return included a space for 'work in process,' and the accompanying explanation required that item to include labor, factory overhead and 'burden.' In 1971 plaintiff filed its return for the 1972 tax which included amounts for raw materials, work in process and finished products; it received a statement for a total license tax of $23,662.67, of which $6,119.99 represented work in process. Plaintiff did not appeal the assessment to the Board of Equalization, but its President and Counsel appeared before the Board on December 30, 1971, prior to payment, and discussed the item of work in process, claiming that it was improperly included; they were told (by Mr. Zafft, a member of the Board) that the Board would not remove the item but would only determine whether the value allocated to it was 'lawful and fair.' On December 31, 1971, plaintiff paid the full tax, but by two checks (one for the $6,119.99) accompanied by a letter in which it 'amended' its return by removing the item of work in process, and stated that the tax therefor was paid under protest because that item of property was not taxable under the terms of § 150.310. The letter also stated that plaintiff had been advised that if the tax was not paid in full at that time, a license would not be issued for 1972 and the nonpayment would be certified to the Prosecuting Attorney for appropriate action; also, that the payment was thus being made involuntarily. The work in process was not returned or taxed as personal property, but only as a part of the manufacturers' tax. The valuations and rates would have been the same under either classification. It is true that if a manufacturer fails to pay his tax in full, no license will be issued, and that the Department of Revenue of the county will certify the nonpayment to the Prosecuting Attorney. On March 21, 1972, plaintiff filed the first of the present suits under Section 139.031 (the 'protest statute') seeking recovery of the amount paid under protest and an injunction against collection.

For 1973 plaintiff failed to file a return and its work in process was assessed at $111,320. That valuation is not contested; the 'work in process' was not returned or assessed as personal property. Plaintiff did not appeal that assessment to the Board of Equalization. It again paid the controverted sum ($8,474.75) under protest with a protest letter as described above for the 1972 tax. On March 26, 1973, plaintiff filed suit under Section 139.031 for the recovery of the controverted sum paid for 1973 and for an injunction against collection.

The two cases were tried together before the Court and judgments entered for the defendants, without opinion. The parties stipulated to what the testimony of a certified public accountant would have been if offered by plaintiff and admitted. It was, in substance: that 'work in process' and finished goods are distinctly different and mutually exclusive entities; that work in process is raw material which has been altered after energy has been spent upon it so that it is no longer identifiable in its original form; that inventory in manufacturing includes three separate and distinct classes of personal property, i.e., finished goods, work in process, and raw materials. Objections were preserved to the stipulated testimony,--that it would constitute an invasion of the province of the court, that it was irrelevant and incompetent as a legal construction of the statute, that the legislative intent could not be supplied by parole evidence, and for other reasons.

Before reaching the merits we are met with respondents' contention that the judgment here should be for defendants because plaintiff failed to avail itself of the statutory administrative procedure by appealing to the Board of Equalization, and if necessary, to the State Tax Commission; this, they say, constituted an adequate remedy at law. The plaintiff proceeded in each case under § 139.031(1), which is as follows: 'Any taxpayer may protest all or any part of any taxes assessed against him, except taxes collected by the director of revenue of Missouri. Any such taxpayer desiring to pay any taxes under protest shall, at the time of paying such taxes, file with the collector a written statement setting forth the grounds on which his protest is based, and shall further cite any law, statute, or facts on which he relies in protesting the whole or any part of such taxes.' This section appears in the general Chapter on 'Payment and Collection of Current Taxes.' It is conceded that plaintiff complied therewith and also with subsection (2) requiring the filing of suit within 90 days. This statute was enacted in 1969, certainly for some purpose; one purpose obviously was to relieve the taxpayer of the payment of interest and penalties, but the statute may also be used to avoid sanctions which might otherwise be applied, such as here, the refusal to renew plaintiff's license. The statute is broad in form and its title includes, '* * * procedures for the recovery of taxes erroneously or illegally collected' (Laws 1969, p. 249); it is applicable in all counties in the state, and it contains no special limitations. The action required is not necessarily an action in equity, but it would seem to include some features thereof, and plaintiff here states some equitable grounds for relief. We may consider the adequacy of another remedy or remedies. The only one suggested is that of an appeal to the Board of Equalization. Those provisions appear in Chapter 138, and are applicable statewide. The function of these Boards is to adjust the valuations of the assessor by raising or lowering them, to give notice thereof, and to hear appeals from such valuations. This power is expressly extended to a review of Merchants' and Manufacturers' taxes in first class counties by § 138.120. It is not stated in these statutes that the remedy by appeal to the Board is exclusive of all other remedies. In this case it is stipulated that plaintiff's representatives were told by a member of the Board (upon an informal appearance) that the Board would not remove the item of 'work in process' from plaintiff's assessment, but would only determine whether the valuation allocated to it was lawful and fair. There is no contest here on that valuation and, in fact, plaintiff concedes that it is proper (on both years) if the item is taxable at all. Chapter 150 of our statutes clearly indicates that a manufacturer cannot lawfully operate without a license and that a license for the ensuing year will be refused unless the assessed taxes are paid in full. It was stated in plaintiff's protest letter that it had been advised that a license would be refused if the tax was not paid in full at that time; and defendants seem to concede this. In this case the issue was not really one of valuation (although possibly the total value might have been considered) but of statutory construction. In view of the foregoing it is unnecessary to consider any other reason advanced by plaintiff to support its right to proceed as it did. We conclude that plaintiff had the right to pay the taxes under protest and file these suits under § 139.031.

The cases of Cupples-Hesse Corp. v. Bannister, 322 S.W.2d 817 (Mo.1959), and Brinkerhoff-Faris Trust & Savings Co. v. Hill, 323 Mo. 180, 19 S.W.2d 746 (banc 1929), did not involve the applicability of § 139.031 which was enacted in 1969, and both involved only questions of valuation. The opinion in John Calvin Manor, Inc. v. Aylward, 517 S.W.2d 59 (Mo.1974), recognizes the broad scope of § 139.031 as a means of testing the legality of a tax, although stating that it is not the proper remedy for a mere reevaluation. Under all the facts and circumstances here, including the fact that plaintiff would have been denied a license if the taxes were not promptly paid in full, we hold that plaintiff was not precluded from proceeding under § 139.031 as it has done here.

This brings us to the merits. The sole issue is whether § 150.310(1), imposing the license tax on 'raw material and finished products,' includes work in process. An amicus brief has been filed here on behalf of McDonnell Douglas Corporation; its principal contention is that if work in process is taxable at all, which it denies (citing recognized rules of construction and many cases), it must be valued and taxed merely at the value of its raw material...