Sperry Corp. v. State Tax Com'n

• Decision Date: 07 August 1985
• Docket Number: No. 66382,66382
• Citation: 695 S.W.2d 464
• Parties: SPERRY CORPORATION, et al., Appellants, v. STATE TAX COMMISSION, Respondent.
• Court: Missouri Supreme Court

Page 464

695 S.W.2d 464

SPERRY CORPORATION, et al., Appellants, v. STATE TAX COMMISSION, Respondent.

No. 66382.

Supreme Court of Missouri En Banc.

Aug. 7, 1985.

Rehearing Denied Sept. 10, 1985.

Stephen B. Strayer, Joseph J. Mulvihill, Kansas City, for appellants.

Michael F. Dandino, Legal Counsel, John B. Williams, County Counselor, Kansas City, for respondent.

Earle B. Leadlove, St. Louis, amicus curiae.

ALMON H. MAUS, Special Judge.

By appeal to the Board of Equalization and the State Tax Commission, 33 taxpayers sought reductions in the Jackson County assessed valuations of certain tangible personal property for the years 1979, 1980 and 1981. The reductions were sought upon the common basis that, when compared with corresponding assessments of real property in that county, such assessed valuations denied the taxpayers the equal protection of the laws contrary to the Fourteenth Amendment to the Constitution of the United States. The reductions in valuation sought totaled approximately $13,415,367. The numerous appeals from the Board of Equalization were consolidated by the Commission. After a hearing upon a stipulation of facts, the Commission denied the appeals. Upon a petition for review, that decision was affirmed by the Circuit Court of Jackson County.

The taxpayers appeal to this Court. As a prelude, it is essential to observe the taxpayers do not appeal upon the sole basis that the valuations are arbitrary and excessive and not supported by competent and substantial evidence. See Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888 (Mo. banc 1978). As demonstrated by this opinion, the taxpayers' challenge involves the construction of revenue laws of this state within the meaning of Art V, § 3, Mo. Const. This Court has jurisdiction. State ex rel. Independence Sch. Dist. v. Jones, 653 S.W.2d 178 (Mo. banc 1983).

Relevant to 1979, the stipulation of facts established the following. The assessed valuations of the appellants' tangible personal property in question were 33 1/3 percent of true value. In Jackson County there had been no county-wide reassessment of real property values since 1940. In 1979, real property assessments "were maintained on the average at approximately 21.5 percent of true or fair market value." All real property added to the assessment rolls in that year "was assessed at 21.5 percent of true or fair market value to equalize said assessments with older real property assessments." Further, such assessed value "is equalized at said county-wide average in order to comply with the decision of the Missouri Supreme Court in Breckenridge Hotels Corporation v. Leachman, 571 S.W.2d 251 (Mo. en banc 1978) and with the decision of the U.S. Supreme Court in Sioux City Bridge Company v. Dakota County, Nebraska, 260 U.S. 441 [43 S.Ct. 190, 67 L.Ed. 340] (1923)." The stipulation added, "[t]he equalization formula used by Respondent to reach the 21.5 percent on real property added to the assessment rolls in 1979 is determined by assessing the land value at 33 1/3 percent of true value and assessing the improvement value at 54 percent of true value times 33 1/3 percent." Such action was taken pending the completion of a county-wide reassessment in 1981.

The stipulation established substantially identical facts relevant to 1980. The same is true in respect to 1981 with two exceptions. For that year, "the average county-wide assessment ratio on real property in Jackson County is 15.2 percent of true value in money." The stipulation further recited that the assessments of real property would not be updated or raised until the completion of the county-wide reassessment in 1984.

The appellants' sole point on appeal is that the assessed valuations complained of violated "the appellants' rights to equal protection of the laws as guaranteed by the Fourteenth Amendment to the Constitution of the United States, in that the decision and order of the State Tax Commission assessed appellants' personal property at a higher rate of assessment than real property, contrary to the constitution and revenue statutes of the State of Missouri." The point is multifarious. As developed by argument and citation of authorities, the appellants in reality present three contentions. First, that the disparity between the assessed valuations of real property and the tangible personal property in question per se established a violation of the Fourteenth Amendment. Second, that such disparity is prohibited by the uniformity requirement of the Constitution of Missouri and because of the violation of that requirement, the appellants have been denied the equal protection of the laws. Third, that the applicable statute of Missouri, § 137.115.1, directed that real property and tangible personal property be assessed at 33 1/3 percent of its true value and such disparity establishes an unconstitutional, discriminatory administration of that statute.

Fundamental to analysis of the appellants' contentions is recognition of Art. X, § 4(a), of the Constitution of Missouri which provides: "All taxable property shall be classified for tax purposes as follows: class 1, real property; class 2, tangible personal property; class 3, intangible personal property." For the years in question, this constitutional provision clearly established three classes of property for the purpose of taxation. This classification was carried forward in the crucial constitutional provision concerning uniformity. Art. X, § 3, Mo. Const. Section 137.115.1, RSMo 1978, did provide that real and tangible personal property should be assessed at 33 1/3 percent of its true value. However, that statute did not, and could not, abolish the classification established by constitutional provision.

When this separate classification of real property and tangible personal property is recognized, it is clear the appellants' first contention has no validity. Expressions of the limited nature of the restraints placed upon the taxing power of the states by the Fourteenth Amendment include the following.

The provision in the Fourteenth Amendment, that no State shall deny to any person within its jurisdiction the equal protection of the laws, was not intended to prevent a State from adjusting its system of taxation in all proper and reasonable ways. It may, if it chooses, exempt certain classes of property from any taxation at all, such as churches, libraries and the property of charitable institutions. It may impose different specific taxes upon different trades and professions, and may vary the rates of excise upon various products; it may tax real estate and personal property in a different manner; it may tax visible property only, and not tax securities for payment of money; it may allow deductions for indebtedness, or not allow them. All such regulations, and those of like character, so long as they proceed within reasonable limits and general usage, are within the discretion of the State legislature, or the people of the State in framing their Constitution. But clear and hostile discriminations against particular persons and classes, especially such as are of an unusual character, unknown to the practice of our governments, might be obnoxious to the constitutional prohibition. It would, however, be impracticable and unwise to attempt to lay down any general rule or definition on the subject that would include all cases. They must be decided as they arise. We think that we are safe in saying, that the Fourteenth Amendment was not intended to compel the State to adopt an iron rule of equal taxation.

Bell's Gap R.R. Co. v. Pennsylvania, 134 U.S. 232, 237, 10 S.Ct. 533, 535, 33 L.Ed. 892, 895 (1890), quoted in Puget Sound Power & Light Co. v. King County, 264 U.S. 22, 26-29, 44 S.Ct. 261, 263-264, 68 L.Ed. 541, 546 (1923).

The States have a very wide discretion in the laying of their taxes. When dealing with their proper domestic concerns, and not trenching upon the prerogatives of the National Government or violating the guaranties of the Federal Constitution, the States have the attribute of sovereign powers in devising their fiscal systems to ensure revenue and foster their local interests. Of course, the States, in the exercise of their taxing power, are subject to the requirements of the Equal Protection Clause of the Fourteenth Amendment. But that clause imposes no iron rule of equality, prohibiting the flexibility and variety that are appropriate to reasonable schemes of state taxation. The State may impose different specific taxes upon different trades and professions and may vary the rate of excise upon various products. It is not required to resort to close distinctions or to maintain a precise, scientific uniformity with reference to composition, use or value.

Allied Stores of Ohio v. Bowers, 358 U.S. 522, 526-527, 79 S.Ct. 437, 440-441, 3 L.Ed.2d 480, 484-485 (1959). However, "[t]he State must proceed upon a rational basis and may not resort to a classification that is palpably arbitrary. The rule often has been stated ... that the classification 'must rest upon some ground of difference having a fair and substantial relation to the object of the legislation.' " Allied Stores of Ohio v. Bowers, supra, 358 U.S. at 527, 79 S.Ct. at 441, 3 L.Ed.2d at 485.

These principles were not impinged upon by Sioux City Bridge Co. v. Dakota County, Neb., 260 U.S. 441, 43 S.Ct. 190, 67 L.Ed. 340, 28 A.L.R. 979 (1922). The pivotal issue in that case was not what constitutes unconstitutional discrimination. It was whether or not the taxpayer could cause the excessive valuation of its property to be lowered to that of comparable property or was relegated to attempting to cause property assessed below its true value to be raised to a valuation comparable with its property. Indeed, the Court remanded that case for a further hearing upon the issue of discrimination and invited "attention to the well-established rule in the decisions of this court, cited above, that mere...