St. Louis County v. State Tax Commission, s. 51775

Decision Date12 September 1966
Docket NumberNos. 51775,51787,s. 51775
Citation406 S.W.2d 644
PartiesST. LOUIS COUNTY, Missouri, Elmer E. Smith and Frank J. Antonio, and Berkeley School District, Respondents (Plaintiffs), v. STATE TAX COMMISSION of Missouri, John A. Williams, Howard L. Love and J. Ralph Hutchison, and Ozark Air Lines, Inc., Trans World Airlines, Inc., American Airlines, Inc., Central Air Lines, Inc., Braniff Airways, Inc., Eastern Air Lines, Inc., and Delta Air Lines, Inc., Appellants (Defendants), and City of St. Louis, Appellant (Intervenor). to 51792.
CourtMissouri Supreme Court

Joseph B. Moore, St. Louis County Counselor, Thomas W. Wehrle, Deputy County Counselor, Patrick Fiandaca, Asst. County Counselor, Clayton, for respondents, St. Louis County, Missouri, Elmer E. Smith, Frank J. Antonio.

Howard Elliott, Edward D. Weakley, St. Louis, for respondent, Berkeley School District.

Paul L. Bradshaw, Neale, Newman, Bradshaw, Freeman & Neale, Springfield, Dick H. Woods, John K. Bestor, George E. Gibson, Stinson, Mag, Thomson, McEvers & Fizzell, Kansas City, Thomas F. McGuire, City Counselor, St. Louis, Arnold Brannock, State Tax Commission of Missouri, Jefferson City, for appellants.

Norman H. Anderson, Atty. Gen., John H. Denman, Asst. Atty. Gen., Jefferson City, amicus curiae, for defendants-appellants.

George S. Hecker, Shepley, Kroeger, Fisse & Shepley, St. Louis, for Remmert-Werner, Inc., amicus curiae.

Kenneth S. F. Teasdale, Armstrong, Teasdale, Roos, Kramer & Vaughan, St. Louis, for Interstate Airmotive, Inc., amicus curiae.

HENLEY, Judge.

This opinion determines appeals in seven cases 1 in each of which the defendants and the City of St. Louis, as intervenor, appeal from a judgment of the Circuit Court of the County of St. Louis setting aside fidnings and an order of the State Tax Commission pertaining to the assessment for tax purposes of a leasehold interest of a defendant airline in real estate owned by the City.

The plaintiffs-respondents will be referred to as follows: St. Louis County, Missouri, the County; Frank J. Antonio, the assessor of St. Louis County, as the Assessor; Berkeley School District, the School District. The defendants-appellants will be referred to as follows: State Tax Commission of Missouri, John A. Williams, Howard L. Love and J. Ralph Hutchison, as the Commission; Ozark Air Lines, Inc., Trans World Airlines, Inc., American Air Lines, Inc., Central Air Lines, Inc., Braniff Airways, Inc., Eastern Air Lines, Inc., and Delta Air Lines, Inc., collectively as the Airlines. The intervenor-appellant City of St. Louis, will be referred to as the City.

The real estate involved is Lambert-St. Louis Municipal Airport, hereinafter referred to as the Airport, located in St. Louis County and owned and operated by the City. On January 1, 1963, each of the Airlines held a leasehold interest in parts of the Airport. The assessments involved are those made by the Assessor for the tax year 1963 on the leasehold interest of each Airline.

Each Airline and the City appealed the respective assessments to the St. Louis County Board of Equalization which, after a hearing, denied the appeals. Thereafter, each Airline and the City filed a joint appeal to the Commission where the seven appeals were consolidated for hearing. After hearing evidence, the Commission notified the parties by letter that it had found that the leasehold interests had no value as of January 1, 1963, and that the assessment should be 'no value or assessment of zero.' Within a few days after this letter the Commission made and entered findings of fact, conclusions of law and decision in each of the seven cases. Thereafter, the County, the School District and other plaintiffs filed petitions for review. The cases were submitted to the trial court on these petitions, the consolidated record made before the Commission, briefs and oral arguments of counsel. Thereafter, the trial court made and entered its findings and judgment in each case wherein it reversed and set aside the findings and decision of the Commission, and sustained the valuation and assessment of the Assessor and County Board of Equalization. After an unavailing motion to amend the judgment or, in the alternative, for a new trial, a notice of appeal to this court was filed in each case by the Commission, the airline involved and the City. On motion of all appellants, we ordered the cases consolidated for briefing, argument and hearing before the court en banc. Common questions of fact and law are involved. One opinion will suffice.

This court has jurisdiction for the reason, among others, that the County of St. Louis is a party in each of the appeals. Article V, § 3, Constitution of Missouri, V.A.M.S.

The findings, conclusions of law and decision of the Commission were, in summary: (1) that the formula or method used by the Assessor in assessing the value of the leasehold interests was improper and erroneous and resulted in assessing the value of the fee to the Airlines; (2) that as of January 1, 1963, the contractual rental was substantially in excess of the fair market value rental for comparable space in the St. Louis metropolitan area and at other comparable airports; (3) that the greater weight of the credible evidence was that as of the assessment date the contractual rental was substantially in excess of the fair market value rental; (4) that the leasehold interests of the Airlines on the assessment date were of no value, that the fair and proper value for tax assessment purposes was 'zero or no value,' and that the assessments by the Assessor were unfair, unlawful, improper and arbitrary; (5) that a lessee's interest in a leasehold is real property within the meaning of the law and as such must be assessed at its true value in money, or at such percentage thereof as may be fixed by law, if such leasehold interest in fact has value; (6) that, therefore, the assessments of the Assessor should be, and are, reversed and set aside. We do not reach or rule the interesting question posed in (5) above. The trial court, in a twenty-seven page memorandum setting out its findings and judgment, reversed and set aside the decision of the Commission (except that finding and conclusion of the Commission stated in (5) immediately above) and sustained the assessed valuation of the Assessor and County Board of Equalization. We reverse the judgment of the trial court and remand the cases.

The leases from the City to each of the Airlines conveyed space to be occupied by each, either exclusively or in common with one another, within and adjacent to certain buildings at the Airport, primarily the Terminal building and cargo buildings and, in the case of TWA, a hangar building. All leases expired July 31, 1965, and none contained a right of renewal beyond that date. Ozark also had two other leases for space at the Airport not related to space leased by any of the other six. One of these was for office space in what is called the 'old' Terminal building; the other for space in a metal hangar building with adjoining office space, and a concrete ramp area. The latter leases provided for their termination (and vacation of those premises by Ozark) upon completion by the City of new facilities to be occupied by Ozark in the fall of 1964. All of the lease agreements limited the use which the Airlines could make of the premises solely to the conduct of air transportation business and functions incident thereto, and precluded the lessees from assigning the lease (other than to a successor) or subletting the premises (other than to an auxiliary business) without written permission of the lessor. In addition to the space leased in the buildings above mentioned, the Airlines had license to use in common with all other aircraft the landing strips, runways, taxi-ways, runway lights, public address and P.A.X. telephone systems and similar facilities for which they paid 'activity or landing fees' as distinguished from rent. In addition to the rentals, each Airline also paid its own electricity, janitor service and similar expenses.

At the request of the Assessor the Airlines furnished him with the square footage of space leased from the City, the annual rents paid therefor, and the expiration date of their leases. The rentals paid for the year 1962 were as follows:

                Ozark     $  97,483.86
                TWA         191,670.50
                American     80,691.00
                Central      10,657.00
                Braniff      23,690.01
                Eastern      43,334.25
                Delta        40,246.69
                

Thereafter the Assessor notified the Airlines that the assessed valuation of their respective leasehold interests in the Airport for tax purposes for the year 1963 was as follows:

                Ozark     $ 259,980.00
                TWA         506,650.00
                American    209,830.00
                Central      23,300.00
                Braniff      63,170.00
                Eastern     109,860.00
                Delta        48,420.00
                

The formula used by the Assessor to determine the valuation to be assessed to each leasehold was set out in a letter from the Assessor, as follows:

'The average monthly rents paid by the lessee multiplied by a factor of ninety-six (96), in our opinion, determines the value of the leased property. This value is then reduced to one-third (1/3), which in effect becomes the assessed value.

'In the determination of these leased property values, 1962 rents were used * * *.

'In the determination of the leased property values of the airlines, the cost of landing fees, public address system, P.A.X. telephone system, fuel oil, and electricity are excluded.'

In other words, in assessing the leaseholds at one-third of what he determined to be true value, the Assessor took the average monthly rent paid by each Airline, multiplied that by the factor of ninety-six and divided the product by three. The factor of ninety-six selected by the Assessor represents a remaining lease term of eight years. As of the assessment date the remaining life of the lease terms of the Airlines was two years and seven months with the...

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