State ex rel. St. Louis Union Trust Co. v. Hoehn
| Decision Date | 06 July 1943 |
| Docket Number | 38505 |
| Citation | 173 S.W.2d 393,351 Mo. 382 |
| Parties | State of Missouri at the Relation of St. Louis Union Trust Company, a Corporation, and D. C. Berryman, as the Executors of the Will of William G. Yantis, Deceased, Relators, v. Arthur C. Hoehn, as Assessor of the City of St. Louis, Jesse A. Mitchell, Clarence Evans and Lawrence Boogher, as Members of the State Tax Commission of Missouri, Forrest C. Donnell, Dwight H. Brown, Roy McKittrick, Forrest Smith and Wilson Bell, as Members of the State Board of Equalization of Missouri |
| Court | Missouri Supreme Court |
Record of State Board of Equalization and State Tax Commission quashed.
Lowenhaupt Waite & Stolar and Bryan, Williams, Cave & McPheeters for relators.
(1) As William G. Yantis (now deceased) did not on June 1, 1941 have on deposit with the First National Bank in St. Louis moneys in the sum of $ 378,000 with which the Commission has assessed his estate, and had withdrawn said moneys and had delivered them and the title to them to another person in exchange for the title to and possession of treasury bills of the United States of America of the face value of $ 378,000 prior to June 1, 1941, which said treasury bills were held owned and possessed by the said William G. Yantis throughout said day, the assessment day, the said moneys were not assessable as of said date as moneys on deposit in bank no matter if the motive and purpose of the said Yantis in purchasing the treasury bills was to avoid or to escape taxation on the moneys. State ex rel. Orr v. Buder, 308 Mo. 237, 39 A. L. R. 1199; Owens v. Owens, 347 Mo. 80; Massey-Harris Co. v. Rich, 233 Mo.App. 509; In re Stevens' Estate, 116 S.W.2d 527; Gregory v. Helvering, Commissioner of Internal Revenue, 97 A. L. R. 1355, 293 U.S. 465; Morsman v Commissioner of Internal Revenue, 113 A. L. R. 441, 90 F.2d 18; Board of Commrs. of City of Hoboken v. State Board of Taxes and Assessments, 151 A. 364, 107 N. J. Law 35; People v. Ryan, 88 N.Y. 142; United States v. Isham, 84 U.S. 496; People ex rel. v. McCumber, 7 N.Y. 71; State Board of Tax Appeals v. New Jersey Inv. Co., 18 N. J. Misc. 185; State Board of Tax Appeals v. Universal Ins. Co., 18 N. J. Misc. 509; State Board of Tax Appeals v. Weyerhauser Timber Co., 18 N. J. Misc. 563; Shotwell v. Moore, 129 U.S. 590; Holly Springs Savs. & Ins. Co. v. Board of Supervisors of Marshall County, 52 Miss. 281; In re Dean's Estate, 166 S.W.2d 526; Stimpson v. Commissioner of Internal Revenue, 55 F.2d 815; Chisholm v. Commissioner, 29 B. T. A. 1339; Chisholm v. Commissioner of Internal Revenue, 79 F.2d 14; Wyndmoor B. & L. Assn. v. Power B. & L. Assn., 128 Pa. Sup. 236, 183 A. 367; Sec. 5074, R. S. 1939; State ex rel. Brown Contracting & Building Co. v. Cook, 181 Mo. 596; Booth v. Scott, 276 Mo. 1. (2) This court has consistently striven to preserve and maintain the powers placed in the separate departments of the government by the Constitution and will not encroach upon or usurp the powers conferred upon the General Assembly. Sec. 1, Art. IV, Mo. Constitution; Art. III, Constitution of Missouri; State v. Knapp, 327 Mo. 24; Kober v. Kober, 324 Mo. 378; State ex rel. American Asphalt Roofing Corp. v. Trimble, 329 Mo. 495; Sec. 10940, R. S. 1939.
Roy McKittrick, Attorney General, Tyre W. Burton, Assistant Attorney General, Joseph F. Holland, City Counselor, H. A. Hamilton and Albert Miller for respondents.
(1) The Missouri State Tax Commission made the assessment under Section 11028, Revised Statutes of Missouri, 1939, and the action of Commission was duly approved by the State Board of Equalization. The property was subject to assessment for taxation under the provisions of Sections 10940 and 10950, Revised Statutes of Missouri, 1939. The Tax Commission adjudged the assessment at $ 378,000, and that a tax thereon should be paid. The taxing power of the State is vested in the Legislature. Art. X, Sec. 1, Const. of Missouri; Garrett v. St. Louis, 25 Mo. 505; State ex rel. v. Burton, 266 Mo. 711, l. c. 719; In re Birmingham Drain. Dist., 274 Mo. 140; In re Sanford, 236 Mo. 665; Mudd v. Wehmeyer, 323 Mo. 707, 19 S.W.2d 891; State ex rel. v. Gehner, 315 Mo. 1126, 280 S.W. 416. (2) The taxing power of the State is inherent in the Legislature, and it has absolute power to assess property, levy taxes thereon, and provide the general plan and scheme by which to carry out such purposes, subject to the limitations of the State and Federal Constitutions. Glasgow v. Rouse, 43 Mo. 479; Am. Un. Express Co. v. St. Joseph, 66 Mo. 675; In re Sanford, supra; State ex rel. v. Wabash Ry. Co., 319 Mo. 302, 3 S.W.2d 378; State ex rel. v. St. Louis, 318 Mo. 870, 2 S.W.2d 713. (3) Where there is a temporary change or concealment of property, or a colorable conversion of taxable money into non-taxable securities made just before the time for assessment and with the intention of restoring the property to its original form immediately thereafter, liability for taxes cannot be evaded, because such transactions constitute a colorable subterfuge. Liability for taxes cannot be evaded by a transaction constituting a colorable subterfuge. Such securities having been purchased with the sole intent of evading taxation, such action on the part of the taxpayer was fraudulent in law, and rendered the sum so converted subject to taxes. Holly Springs Sav. & Ins. Co. v. Board of Supervisors of Marshall County, 52 Miss. 281; Crowder v. Riggs, 153 Ind. 158; Jones v. Seward County, 10 Neb. 154; Sisler v. Foster, 72 Ohio St. 437; Shotwell v. Moore, 129 U.S. 590, 32 L.Ed. 827; In re Peoples Bank of Vermont, 203 Ill. 300; People ex rel. v. Hunt, 311 Ill. 291; Collins v. Becklenberg, 236 Ill.App. 324; Mitchell v. Leavenworth County, 9 Kan. 344, affirmed in 91 U.S. 206, 23 L.Ed. 302; Whiting Finance Co. v. Hopkins, 199 Cal. 428; Whiting Finance Co. v. Hopkins, 2 P.2d 461; Wood v. McCook Water & Waterworks Co., 97 Neb. 215; Stifel v. Brown, 24 Mo.App. 102; Highland Park Indp. School Dist. v. Republic Ins. Co., 80 S.W.2d 1053; Shoenberg v. Comr., 77 F.2d 446; See also 101 A. L. R. 200. (4) The act of the taxpayer whereby money, subject to taxation, is temporarily invested in government securities, primarily exempt from taxation, for the purpose of evading taxation, is fraudulent as against the State, or a municipality, entitled to the taxes. Money which is temporarily invested in such securities for the purpose of evading taxation is not exempt from taxation. Mitchell v. Leavenworth County, supra; Ogden v. Walker, 59 Ind. 460; Shotwell v. Moore, supra; Griffin v. Heard, 78 Tex. 607; In re Peoples Bank of Vermont, supra; People ex rel. v. Hunt, supra; Collins v. Becklenberg, supra; Ransom v. City of Burlington, 111 Iowa 77; Wood v. McCook Water & Waterworks Co., supra; Stifel v. Brown, supra; Highland Park Indp. School Dist. v. Republic Ins. Co., supra; Shoenberg v. Comr., supra. (5) William G. Yantis converted $ 378,000 of his bank account into nontaxable government securities on May 26, 1941. On June 4, 1941, these identical securities were reconverted into cash and redeposited in the same bank to the credit of the same account from which the cash was originally withdrawn. The $ 378,000 was, on June 4, 1941, restored to the condition in which it would have been liable for taxation on June 1, 1941. This was improper conduct on the part of the taxpayer and an evasion of the taxing laws of the State. See authorities cited under Points (3) and (4). (6) When it becomes a question between the taxpayer and the State, and that question relates to the purpose of the purchase of nontaxable securities, and the facts tend to show that such purpose was the evasion of taxation, then the courts look upon such transaction as fradulent in law, and of such character that the beneficiaries thereof cannot be allowed, under the cloak of an apparent legitimate transaction, to thus avoid their duty and responsibility to the State. In re Peoples Bank of Vt., 203 Ill. 300; People ex rel. v. Hunt, 311 Ill. 291; Collins v. Becklenberg, 236 Ill.App. 324; Auditor General v. Bassett's Estate, 246 Mich. 440; Jones v. Seward Co., 10 Neb. 154; Ransom v. City of Burlington, 111 Iowa 77. (7) The question is, was the transaction an investment, or, was it a colorable attempt to avoid taxation? Where the facts show that the transaction, i. e., the exchange of the money for nontaxable securities, was made shortly prior to the tax assessing date and that the securities were reconverted into cash immediately following the assessment date, the transaction is a fraud against the State entitled to the taxes. Chisholm v. Commissioner of Internal Revenue, 79 F.2d 14; Johnson v. Commissioner, 86 F.2d 710; Morsman v. Commissioner, 90 F.2d 18; Electrical Securities Corp. v. Commissioner, 92 F.2d 593; Gregory v. Helvering, 293 U.S. 495, 79 L.Ed. 596. (8) Transactions for the purpose of escaping taxation must be construed jealously against the taxpayer. The question is always whether the transaction under scrutiny is in reality what it appears to be in form. The court should examine the form used by the taxpayer for the accomplishment of his purpose, and should not lend him its aid by resolving doubt in his favor. Tazewell Elec. L. & P. Co. v. Strother, 84 F.2d 327; Shotwell v. Moore, supra; Morsman v. Commissioner, supra; And authorities cited under (7) above. (9) The purpose which counts is one which defeats or contradicts the apparent transaction -- not the purpose to escape taxation. In this case the purpose of the transaction (to evade taxation) contradicts and defeats the apparent transaction (that it was an investment). Gregory v. Helvering, 293 U.S. 465, 79 L.Ed. 596; Electrical Securities Corp. v. Commissioner, 92 F.2d 593.
Hyde, J. All concur except Gantt, J., absent.
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