Phil Crowley Steel Corp. v. King, 55638

• Decision Date: 05 September 1989
• Docket Number: No. 55638,55638
• Parties: PHIL CROWLEY STEEL CORPORATION, Petitioner-Appellant, v. Richard A. KING, Director of Revenue, State of Missouri, Respondent-Respondent.
• Court: Missouri Court of Appeals

Page 800

778 S.W.2d 800

PHIL CROWLEY STEEL CORPORATION, Petitioner-Appellant, v. Richard A. KING, Director of Revenue, State of Missouri Respondent-Respondent.

No. 55638.

Missouri Court of Appeals,

Eastern District,

Division Three.

Sept. 5, 1989.

Motion for Rehearing and/or Transfer to Supreme Court

Denied Oct. 4, 1989.

Application to Transfer Denied Nov. 14, 1989.

Thomas J. Frawley, Lawrence G. Gillespie, Edgar, Frawley & Gillespie, Webster Groves, for petitioner-appellant.

William L. Webster, Atty. Gen., Mark S. Siedlik, Asst. Atty. Gen., Jefferson City, for respondent-respondent.

HAMILTON, Judge.

Appellant-Phil Crowley Steel Corporation (hereinafter Crowley) appeals from the circuit court's denial of its petition for review of a sales and use tax assessment for the period July 1, 1975 through May 31, 1977. We reverse and remand this cause for further proceedings.

Following an audit, informal hearing, and timely appeal, the Department of Revenue (hereinafter Department) conducted an evidentiary hearing on March 28, 1979, before Assistant General Counsel Dennis Hoffert concerning an assessment of sales and use tax of $21,053.74 for the period of July 1, 1975 through May 31, 1977.

Crowley presented two witnesses: Lucille Okenfuss, a retired bookkeeper who worked for Crowley during the assessment period, and Phillip Crowley, president of Crowley. Okenfuss explained a complicated method of bookkeeping using pages from her purchase records compiled during the assessment period. She stated that Crowley purchased materials from both in-state and out-of-state suppliers for use in construction jobs within and outside of Missouri. During the assessment period, Okenfuss had paid use tax regardless of whether the vendor was a Missouri or an out-of-state vendor. Okenfuss testified that, as a result, she had to cross-reference the purchase journal with the job number and job description in order to determine whether sales or use tax was due. Okenfuss then used the listing of tax liability cross-referenced with the job description to point to disagreement with the assessed liability. She testified that Crowley had paid tax on some of the jobs for which the audit assessed liability. Further, she testified that some jobs listed as Missouri jobs were really Illinois jobs and that some of the materials purchased were used in the plant. Some of the materials listed as a basis for liability were actually used in jobs for tax-exempt organizations. She further testified to duplicate entries on the listing of tax liability. Phillip Crowley testified on aspects of the business and corroborated portions of the Okenfuss testimony.

Following the hearing, Phillip Crowley submitted a thirty-two page affidavit detailing tax paid on assessed items, tax paid in Missouri for Illinois jobs, jobs listed as a basis for Missouri liability which were actually Illinois jobs, items purchased as component parts in the manufacturing process, materials bought for expansion of the plant facility, and duplicate items. Crowley's affidavit indicates a balance due of $1,319.26.

The Department of Revenue presented Charles Jaegers, an auditor, and Robert Waugh, the supervising auditor. Jaegers explained the audit process and testified that he used Crowley's purchase journals and relied on Mr. Pochon, an employee of Crowley, for additional clarification. He talked neither to Phillip Crowley nor to Lucille Okenfuss during the trial. Jaegers assessed the sales and use tax liability at $21,053.74. He did testify, however, that at least one duplicate listing existed and that he was unable to determine where Crowley used all the materials purchased.

On June 7, 1984, a different assistant general counsel for the Department of Revenue, Mary Ann Gerber, issued a decision that the assessment of $21,053.74 by the auditors was correct. The findings of fact issued by Ms. Gerber consist of five numbered paragraphs. Paragraph one identifies Crowley as a Missouri corporation accepting jobs within and outside Missouri. Paragraph two states the audit results. Paragraph three outlines the basis for the auditor's assessment, but fails to refer to any of the additional evidence presented at the hearing or in Crowley's affidavit. Paragraphs four and five simply state the dates of the informal and formal hearings following the assessment. The basis for the decision is the taxpayer's failure to meet its burden of proving error.

Section 536.140 RSMo.1986 sets forth the scope of review for administrative agency actions. Review is of the Director of Revenue's decision, not of the judgment of the circuit court. Knapp v. Missouri Local Gov't Employees Retirement Sys., 738 S.W.2d 903, 912 (Mo.App.1987). Review is limited to a determination of whether the Director's decision is supported by competent and substantial evidence upon the whole record; whether it was arbitrary, capricious, or unreasonable; or whether the Director abused his discretion. Section 536.140.2 RSMo.1986; Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Comm'n, 669 S.W.2d 548, 552 (Mo. banc 1984); Hermel, Inc. v. State Tax Comm'n, 564 S.W.2d 888, 894 (Mo. banc 1978). The evidence must be considered in the light most favorable to the agency decision in question, along with all reasonable inferences that support it. Shell Oil Co. v. Director of Revenue, 732 S.W.2d 178, 180 (Mo. banc 1987). Further, if the evidence would support different findings, the reviewing court is bound by the agency's decision. Hermel, 564 S.W.2d at 894.

On appeal, Crowley contends (1) the assessment decision is arbitrary and capricious because the findings of fact upon which it is based, which merely set forth a procedural chronology of the case, fail to resolve any factual disputes, and (2) both the five year delay between hearing and decision, and the change in hearing officer denied Crowley due process.

In its first point, Crowley asserts that the Director of Revenue failed to comply with § 536.090 RSMo.1978, requiring every decision in a contested case to include findings of fact. The statute states, that "[t]he findings of fact shall be stated separately from the conclusions of law and shall include a concise statement of the findings on which the agency bases its order." § 536.090 RSMo.1978. The exact nature of these findings and the degree of particularity has not been accurately defined. State ex rel. Empire Dist. Elec. Co. v. Public Serv. Comm'n, 714 S.W.2d 623, 628 (Mo.App.1986). Courts have attempted, however, to set limits of acceptability and to devise tests for the sufficiency of findings. One such test is that the findings be "sufficiently definite and certain or specific under the circumstances of the particular case to enable the court to review the decision intelligently and ascertain if the facts afford a reasonable basis for the order without resorting to the evidence." Glasnapp v. State Banking Bd., 545 S.W.2d 382, 387 (Mo.App.1976) (quoting 2 Am.Jur.2d Administrative Law § 455). Neither a summary of the testimony nor ultimate conclusions is sufficient. See Iron County v. State Tax Comm'n, 480 S.W.2d 65, 69-70 (Mo.1972). The findings must

constitute a factual resolution of the matters in contest before the commission; must advise the parties and the circuit court of the factual basis upon which the commission reached its conclusion and order; must provide a basis for the circuit court to perform its limited function in reviewing administrative agency decisions; must show how the controlling issues have been decided.

St. Louis County v. State Tax Comm'n, 515 S.W.2d 446, 448 (Mo.1974) (citing Iron County, 480 S.W.2d 65). A number of courts agree that a mere chronology of events is insufficient. St. Louis County, 515 S.W.2d at 448; Iron County, 480 S.W.2d at 70-71; see, e.g., St. John v. City of North Kansas City, 690 S.W.2d 419, 421 (Mo.App.1985); Anderson v. Missouri Clean Water Comm'n, 675 S.W.2d 115, 117 (Mo.App.1984). Furthermore, this court is not permitted to consider that the agency found facts in accordance with the result reached. Webb v. Board of Police...