Riesenberg v. Primary Realty Co.

Decision Date06 November 1923
Docket NumberNo. 17815.,17815.
Citation214 Mo. App. 43,258 S.W. 23
PartiesRIESENBERG v. PRIMARY REALTY CO.
CourtMissouri Court of Appeals

Appeal from St. Louis Circuit Court; John W. Calhoun, Judge.

Action by Adele G. Riesenberg against the Primary Realty Company. Judgment for defendant, and plaintiff appeals. Affirmed.

Leonard, Sibley & McRoberts, of St. Louis (Shepard Barclay, of St. Louis, of counsel), for appellant.

Byran, Williams & Cave, of St. Louis, for respondent.

BECKER, J.

Plaintiff below, appellant here, is the owner of a lot of ground which is held by respondent company, defendant below, under a 99-year lease. Plaintiff, having paid taxes on her net income to the federal government (for the years 1913 to 1918, inclusive) and to the state of Missouri for 1917, brought suit against the defendant company, seeking to recover a portion of the taxes so paid by her, alleging that under certain covenants of the lease, under which the defendant held said land, the defendant was obligated to pay such portion of the income taxes paid by plaintiff as had been paid by her on the income she derived from the rent reserved in said lease. The defendant filed a general denial to each of the counts of plaintiff's petition. A trial of the cause resulted in a judgment for the defendant, and plaintiff appeals.

One Harold R. Small, by his indenture of lease, demised and let to the defendant herein a lot of ground for a term of 99 years from and after March 1, 1906, at a yearly rental of $2,200. Said Small on January 1, 1907, sold the said lot to Adele G. Riesenberg. appellant, plaintiff below. The lease executed by Small, as lessor, provided that the lessee was to pay all taxes levied, assessed, or required to be paid on account of said demised premises or any portion thereof. The covenant as to taxes also contains this provision:

"* * * It being expressly agreed that nothing herein contained shall be construed so as to impose upon the lessee the duty of paying any collateral or direct inheritance tax which may be charged upon any inheritance derived from the lessor, or any income tax payable by lessor, except such income tax as would be payable on account of the rent herein reserved."

"That if any such tax, impositions, levies, or assessments shall remain unpaid after becoming due and payable, even before they begin to bear interest, the lessor may pay the same and the lessee shall and will repay the same or cause the same to be repaid, with interest thereon at the rate of 8 per cent. per annum from the time of the payment of the same until repayment thereon is made."

In a later passage of the lease we find this:

"The intention of this being that, during the existence of this lease, the lessor herein shall be entitled to the rents hereinabove reserved free from all charges, and that said lessor shall be entitled to no other profits or income from said property."

On this appeal we are asked to determine whether or not, under said tax covenants, the defendant is obligated to pay plaintiff any portion of the income tax which she has paid on her net income. The answer to this question calls for the construction of the tax clause of the lease, and the meaning of the language therein used, endeavoring, of course, to ascertain and give effect to the real intent of the contracting parties.

At the time the lease was entered into there was no legal limitation on the freedom of contract with reference to the lessee assuming the payment of taxes, income or otherwise, that might be assessed against the property itself, or against the lessor, by federal or state authority. Though there had been taxes on income, rents, and profits previously imposed, and their general nature was fixed and well known, yet at the time the lease in question was entered into there was no federal or state income tax law, so that that part of the tax covenant relating to the payment by the lessee of any income tax was at the time purely anticipatory. It was under these conditions and circumstances that the tax covenant was written into the lease in question.

At the outset it is manifest, in construing the language of the covenant in question, since the lessor is the sole beneficiary of the tax covenant, that under the recognized rule of construction, if there is more than one meaning permissible, that most favorable to the lessee must prevail. Park Bldg. Co. v. Yost Fur Co., 208 Mich. 349, loc. cit. 357, 358, 175 N. W. 431. The present federal income tax provides (as does also the Missouri state income tax) that there shall be levied, assessed, collected, and paid annually upon the entire net income received in the previous calendar year from all sources by every individual a tax of a certain per cent. upon such income, and the law further provides that the net income of a taxable person shall include all income derived from the ownership of property.

It is urged by plaintiff that a tax on the net income of a landlord, which is in part derived from rents arising out of property demised, is a tax on the rent as such and therefore payable by the tenant under the covenant we have under consideration in the instant case, and, furthermore, that the intent of the lease was to secure the rent reserved to the landlard "free from all charges" for income or other taxes. In support of this contention we are cited the following cases: Suter v. Jordan Marsh Co., 225 Mass. 34, 113 N. E. 580; Phila. City Ry. Co. v. Transit Co., 263 Pa. 561, 107 Atl. 329; Kimball v. Cotting,

229 Mass. 541, 118 N. E. 866, L. 3.. A. 1918C, 1189; Van Bell v. Brogan, 65 Pa. Super. Ct. 384; Id., 262 Pa. 363, 105 Atl. 511; Railroad. Co. v. Phila. Co., 249 Pa. 326, 95 Atl. 100; Railroad Co. v. Phila. & Reading Co., 265 Pa. 325, 108 Atl. 528. The defendant, on the other hand, contends that a tax on the net income of a taxable person is an excise tax on him, and in proportion to his net income or means of livelihood after deductions allowed shall have been made, and after the remainder shall have become available for his use and expenditure, and cannot be held to be a tax upon any one specific Item of income as such.

Plaintiff contends that the United States Supreme Court, in the case of Pollock v. Farmers' Loan & Trust Co., 158 U. S. 601, 15 Sup. Ct. 912, 39 L. Ed. 1108, in holding that "taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes," in effect ruled that a tax on the income from property was equivalent to a tax on the property from which it was derived, and that, therefore, a tax on the net income of landlord, which is in part derived from rents arising out of property demised, should be held to be a tax on such rents, and therefore be in effect an "income tax as would be payable on account of the rent" reserved. The Pollock Case, as we read it, decides no more than that the income tax (Act Aug. 27, 1894 [28 Stat. 509]) upon rents derived from property is a direct tax upon such property. Tho court in that case did not have under consideration, nor did it decide, that a tax upon the net income of a taxable person, after various deductions and exemptions allowed shall have been made, and after the...

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  • Bacon v. Ranson
    • United States
    • Missouri Supreme Court
    • December 31, 1932
    ... ... I, sec. 30; Ludlow-Saylor Wire Co. v. Wollbrinck, 275 Mo. 339, 205 S.W. 196; Riesenberg v. Primary Realty Co., 214 Mo. App. 43, 258 S.W. 23; Elliott v. Winn, 305 Mo. 105, 264 S.W. 391; ... ...
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    ... ... v. St. Louis Union Trust Co., 12 S.W. (2d) 432; Elliott v. Winn, 264 S.W. 391; Riesenberg v. Primary Realty Co., 214 Mo. App. 43, 258 S.W. 23; McFarland v. Gillioz, 327 Mo. 690, 37 S.W ... ...
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    • December 31, 1932
    ... ... 30; Ludlow-Saylor Wire Co. v. Wollbrinck, 275 Mo ... 339, 205 S.W. 196; Riesenberg v. Primary Realty Co., ... 214 Mo.App. 43, 258 S.W. 23; Elliott v. Winn, 305 ... Mo. 105, 264 ... ...
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