State Tax Com'n v. Administrative Hearing Com'n

• Decision Date: 09 November 1982
• Docket Number: No. 63065,63065
• Parties: STATE TAX COMMISSION of Missouri, Samuel C. Jones, et al., Petitioners, v. ADMINISTRATIVE HEARING COMMISSION, et al., Respondents.
• Court: Missouri Supreme Court

Page 69

641 S.W.2d 69

STATE TAX COMMISSION of Missouri, Samuel C. Jones, et al., Petitioners, v. ADMINISTRATIVE HEARING COMMISSION, et al., Respondents.

No. 63065.

Supreme Court of Missouri,

En Banc.

Nov. 9, 1982.

John Ashcroft, Atty. Gen., Richard L. Wieler, Asst. Atty. Gen., Jefferson City, Philip M. Baker, State Tax Com'n of Mo., Jefferson City, for petitioners.

James D. Eckhoff, Fordyce & Mayne, P.C., St. Louis, for respondents.

WELLIVER, Judge.

The State Tax Commission circulated a letter to assessors and certain taxpayers stating that it had adopted a described formula for determining the valuation of leased tangible personal property. The State Tax Commission now petitions pursuant to § 161.337, RSMo 1978, ¹ for review of the Administrative Hearing Commission's declaratory judgment holding that the letter constituted an agency rule that was invalid because of procedural defects. The dispositive issue is whether the legislature may constitutionally grant the Administrative Hearing Commission the power to make such a determination. We conclude that the decision of the Administrative Hearing Commission must be vacated.

I

The State Tax Commission on April 13, 1979, sent a letter to "all assessors and companies which lease tangible personal property" by which it adopted "the depreciated present day selling price new approach to value" for determining the valuation of leased tangible personal property. The State Tax Commission set forth a formula for computing valuation, ² specified that it should be utilized for the 1979 tax year, and directed that "[c]ompanies which lease tangible personal property should immediately take steps to file a revised return for 1979 which contains the information consistent with" the use of the suggested formula.

Thereafter, on May 7, 1979, respondent International Business Machines Corporation (IBM) filed a complaint with the Administrative Hearing Commission seeking to overturn the action of the State Tax Commission. IBM alleged, among other things, that the State Tax Commission had promulgated the valuation formula without following the rulemaking procedures specified in § 536.021 and requested the Administrative Hearing Commission to declare the valuation formula to be "a capricious, arbitrary, unfair, illegal, factually baseless and void purported exercise" of the State Tax Commission's authority.

The State Tax Commission moved to dismiss the complaint on the ground that the Administrative Hearing Commission lacked subject matter jurisdiction. That motion was overruled. At the same time, the Administrative Hearing Commission stayed implementation of the valuation formula and the order that the affected businesses file amended tax returns for 1979. The State Tax Commission then filed its answer. Among other things, the State Tax Commission admitted that its letter was issued without compliance with the rulemaking procedures required by § 536.021 but denied the applicability of that section.

The Administrative Hearing Commission held an evidentiary hearing. Both IBM and the State Tax Commission introduced numerous exhibits, and witnesses for both sides testified regarding the appropriateness and reasonableness of the valuation formula the State Tax Commission had adopted. The decision the Administrative Hearing Commission reached, however, focused only on the procedural, rather than the substantive, validity of the State Tax Commission's action. The Administrative Hearing Commission first found that it had the authority to render declaratory judgments ³ and then held that the State Tax Commission's letter "is a policy statement of general applicability and therefore a rule as defined under Section 536.010.4, RSMo 1978," and that it "has not been filed pursuant to Section 536.021.1, RSMo 1978, and therefore is void under Section 536.021.6, RSMo 1978." The State Tax Commission then filed this petition for review.

II

The State Tax Commission argues that the Administrative Hearing Commission acted under an unconstitutional grant of power and thus was without subject matter jurisdiction. Respondents contend that this Court is without jurisdiction to hear this petition for review because the constitutional challenge was not raised below and has not been preserved for review, but they concede this Court's jurisdiction if the State Tax Commission is permitted to present its constitutional claim. See Mo. Const. art. V, § 3; § 161.337.

Subject matter jurisdiction concerns "the nature of the cause of action or the relief sought" and exists only when the tribunal "has the right to proceed to determine the controversy or question in issue between the parties, or grant the relief prayed." Cantrell v. City of Caruthersville, 359 Mo. 282, 290, 221 S.W.2d 471, 476 (1949). See also Weatherford v. Spiritual Christian Union Church, 163 S.W.2d 916, 918 (Mo.1942). The defense of lack of subject matter jurisdiction may not be waived, Sisk v. Molinaro, 376 S.W.2d 175, 177 (Mo.1964); Rule 55.27(g)(3), and subject matter jurisdiction cannot be conferred by consent or agreement of the parties, Simmons v. Friday, 359 Mo. 812, 825, 224 S.W.2d 90, 98 (1949); State ex rel. Lambert v. Flynn, 348 Mo. 525, 532, 154 S.W.2d 52, 57 (banc 1941), by appearance or answer, United Cemeteries Co. v. Strother, 342 Mo. 1155, 1161, 119 S.W.2d 762, 765 (1938), or by estoppel, Simmons, 359 Mo. at 825, 224 S.W.2d at 98. The lack of subject matter jurisdiction may be raised at any stage in the proceedings, even for the first time in this Court. State v. Rogers, 351 Mo. 321, 325, 172 S.W.2d 940, 942 (1943); Strother, 342 Mo. at 1161, 119 S.W.2d at 765. The State Tax Commission properly raised its constitutional challenge, and we have jurisdiction. ⁴

III

In 1978 the legislature, by enacting S.B. 661, purported to empower the Administrative Hearing Commission to render declaratory judgments regarding the validity of agency rules. ⁵ S.B. 661, sec. 1, §§ 161.333, 536.050(2), 79th Gen.Assem., 2d Reg.Sess., 1978 Mo.Laws 441, 452-53, 459. Section 536.050(2) provides:

The validity or applicability of any rule, regulation, resolution, announced policy, applied policy, or any similar official or unofficial interpretation or implementation of state agency authority, other than in a contested case or in a law enforcement proceeding, may be determined in an action to be brought by the filing of a written complaint with the administrative hearing commission by any interested person, or duly constituted entity, who is affected by such interpretation or implementation in a manner or to a degree distinct and different from other members of the general public. The complaint shall set forth the manner or degree in which the agency action or position affects the complainant, and the reasons for believing such action or position to be invalid or inapplicable to the complainant.

Section 161.333 provides:

Commission to make declaratory judgments respecting validity of administrative rules.--The administrative hearing commission shall conduct hearings, make findings of fact and conclusions of law, and issue decisions in those cases involving complaints filed pursuant to the provisions of section 536.050, RSMo.

The Administrative Hearing Commission found that together these sections gave it the authority to render a declaratory judgment that the State Tax Commission's action was invalid. The State Tax Commission now asserts that these sections conflict with the Missouri Constitution.

In assessing the constitutionality of legislative enactments we are guided by several well-established principles. Statutes are presumed constitutional and will be held otherwise only if they clearly contravene some constitutional provision. In re Trapp, 593 S.W.2d 193, 202 (Mo. banc 1980), appeal dismissed, 456 U.S. 967, 102 S.Ct. 2226, 72 L.Ed.2d 840 (1982); Prokopf v. Whaley, 592 S.W.2d 819, 824 (Mo. banc 1980). Statutes must, if possible, be construed as consistent with the Constitution. Cascio v. Beam, 594 S.W.2d 942, 946 (Mo. banc 1980); State Highway Commission v. Spainhower, 504 S.W.2d 121, 125 (Mo.1973). We are reluctant to declare statutes unconstitutional and must resolve all doubts in favor of their validity. State ex rel. McClellan v. Godfrey, 519 S.W.2d 4, 8 (Mo. banc 1975).

Article II, § 1 of the Missouri Constitution requires that

[t]he powers of government shall be divided into three distinct departments--the legislative, executive and judicial--each of which shall be confided to a separate magistracy, and no person, or collection of persons, charged with the exercise of powers properly belonging to one of those departments, shall exercise any power properly belonging to either of the others, except in instances in this constitution expressly directed or permitted.

The purpose of the doctrine of separation of powers, recognized as "vital to our form of government," State ex inf. Danforth v. Banks, 454 S.W.2d 498, 500 (Mo. banc 1970), cert. denied, 400 U.S. 991, 91 S.Ct. 452, 27 L.Ed.2d 449 (1971), is to prevent the abuses that can flow from centralization of power. While the autonomy of the legislative, executive, and judicial branches lies at the heart of our system of government, "a careful study of the whole Constitution will ... demonstrate that it was not the purpose to make a total separation of these three powers." Rhodes v. Bell, 230 Mo. 138, 150, 130 S.W. 465, 468 (1910). Each branch constitutes only a part of a single government and must interact harmoniously with the other two. The independence of the branches must be "consistent with that chain of connection that binds the whole fabric of the Constitution in one indissoluble bond of union and amity." Id. at 151, 130 S.W. at 468. From a pragmatic standpoint it is obvious that some overlap of functions necessarily must occur. The complexity of modern government demands the delegation of some administrative and decisional authority to executive agencies because of...