Straus v. Tribout

• Decision Date: 04 January 1941
• Docket Number: 37024
• Parties: Samuel J. T. Straus, as Trustee, and William R. Orthwein, as Cotrustee, Appellants, v. Julius E. Tribout, Agnes C. Tribout, Chase Hotel Company, a Corporation, Defendants, Chase Hotel, Inc., a Corporation, Appellant, Respondent, State of Missouri, a Claimant, Appellant, Respondent
• Court: Missouri Supreme Court

146 S.W.2d 617

347 Mo. 149

Samuel J. T. Straus, as Trustee, and William R. Orthwein, as Cotrustee, Appellants, v. Julius E. Tribout, Agnes C. Tribout, Chase Hotel Company, a Corporation, Defendants, Chase Hotel, Inc., a Corporation, Appellant, Respondent, State of Missouri, a Claimant, Appellant, Respondent

No. 37024

Supreme Court of Missouri

January 4, 1941

Appeal from Circuit Court of City of St. Louis; Hon. Wm. C Connor, Judge.

Reversed.

Sullivan Reeder, Finley & Gaines for Samuel J. T. Straus Trustee, and William R. Orthwein, Cotrustee; Jones, Hocker, Gladney & Grand for Chase Hotel, Inc.

(1) The trial court had no jurisdiction to hear and determine the claims of the State of Missouri for franchise taxes herein. (a) The receiver, Henry W. Kiel, was a receiver of specific mortgaged property, and not a corporate receiver, and claims against the Chase Hotel Company cannot be engrafted on this action. Farmers' Bank v. Pomeroy, 233 N.W. 489; Scott v. Farmers' Loan & Trust Co., 69 F.2d 20; 16 Fletcher's Enc. of Corps., pp. 16, 21; Knickerbocker Trust Co. v. Tarrytown, 117 N.Y.S. 875; Kane v. Roxy Theatres Corp., 63 F.2d 756; Commerce Trust Co. v. Hood, 65 F.2d 283; United Trust Co. v. New York, etc., 5 N.E. 317; New York Title & Mtg. Co. v. Polk Arms, Inc., 186 N.E. 37. (b) After final decree of foreclosure and order of sale, the court was without jurisdiction to hear these claims in any event. State ex rel. v. Mulloy, 322 Mo. 281; 53 C. J. 98; Miller Bros. v. Perkins, 154 Mo. 638; Sedberry v. Gwynn, 282 Mo. 648. (2) The evidence is insufficient to authorize any finding that the alleged franchise taxes were due or owing, and the decree is unsupported by the evidence. State ex rel. v. Davis, 131 Mo. 462; State v. Phillips Pipe Line Co., 339 Mo. 459; R. S. 1929, secs. 4641-4648. (3) The trial court erred in holding and decreeing that the alleged franchise taxes are a prior lien, paramount to the mortgage deed of trust and chattel mortgages. (a) A corporate franchise tax under Revised Statutes 1929, Section 4648, is not like a personal property tax; it is a tax against the corporation, and not against specific property. Construction Co. v. Rink Co., 242 Mo. 252. (b) When the statute provides for a lien, the lien does not accrue until assessment. McAnnally v. Drainage Dist., 325 Mo. 354. (c) At the time these franchise taxes were attempted to be assessed, there were two estates in the mortgaged property, and the only asset of the Chase Hotel Company was an equity of redemption, which turned out to be worth nothing. There was no prior lien against mortgagee. Pease v. Iron County, 49 Mo. 127; Third Ave. B. & L. Assn. v. Prothero, 124 N. J. L. 193; Morrow v. Dows, 28 N.J.Eq. 459; Miller v. Anderson, 1 S.D. 539; Bibbins v. Clark, 90 Iowa 230; Lobban v. State, 9 Wyo. 377; Central Trust Co. v. Third Ave. Ry. Co., 136 F. 293; Scottish Amer. Mfg. Co. v. Minidoka County, 65 A. L. R. 663.

Roy McKittrick, Attorney General, Joseph A. Lennon and Russell C. Stone, Assistant Attorneys General for the State of Missouri; William G. Marbury of counsel.

(1) The assessments for franchise tax for the years 1933, 1934, 1935 and 1936, constitute a final assessment against Henry W. Kiel as receiver for the Chase Hotel Company. Sec. 4620, R. S. 1929; State ex rel. Ford Motor Co. v. Gehner, 27 S.W.2d 1, 325 Mo. 24; State ex rel. v. Danuser, 6 S.W.2d 907; State ex rel. v. Merchants' & Miners' Bank, 213 S.W. 815, 279 Mo. 228. (2) The receiver is liable for franchise taxes. State ex rel. Kopke v. Mulloy, 43 S.W.2d 806, 327 Mo. 1; Laumeier v. Sunray Products Co., 50 S.W.2d 640, 330 Mo. 542; State ex rel. Pettibone v. Mulloy, 52 S.W.2d 402, 330 Mo. 1084; State ex rel. Central States Life Ins. Co. v. McElhinney, 90 S.W.2d 124; Monticello Bldg. Corp. v. Monticello Inv. Co., 52 S.W.2d 545, 330 Mo. 1128; Sec. 4620, R. S. 1929; State v. Pierce Petroleum Corp., 318 Mo. 1020, 2 S.W.2d 790; Mo. Athletic Assn. v. Delk Inv. Co., 323 Mo. 765, 20 S.W.2d 51; Ozark Pipe Line Co. v. Minier, 266 U.S. 555, 69 L.E. 439. (3) Franchise taxes become a first and paramount lien against all property in which the corporation has any interest and thereby takes precedence over all liens and mortgages without regard to dates of such liens and mortgages. Sec. 4647, R. S. 1929; State ex rel. Mo. Pac. Railroad Co. v. Danuser, 6 S.W.2d 907; State ex rel. Marquette Hotel Inv. Co. v. State Tax Comm., 282 Mo. 213, 221 S.W. 721; Straus v. Tribout, 116 S.W.2d 106, 342 Mo. 511; Trust Co. v. Lot, 235 S.W. 150, 208 Mo.App. 261; Sec. 4598a, Laws 1937. (4) The State is entitled to penalties and interest on franchise taxes which are past due. Sec. 4648, R. S. 1929.

Hyde, C. Bradley and Dalton, CC., concur.

OPINION

HYDE

This is a proceeding to collect corporation franchise taxes, begun by intervening petition filed by the State in this action for foreclosure of a deed of trust and chattel mortgage. The trial court entered judgment for $ 2273.42, the principal amount of the franchise taxes claimed to be due, for the years 1933, 1934, 1935 and 1936, but denied judgment for any interest and penalties; and ordered that such "amount of $ 2273.42 is and shall be a first prior and paramount lien against all of the properties" herein involved. All interested parties have appealed and file a joint abstract. We have jurisdiction because the construction of the revenue laws of this State is involved, within the meaning of Section 12, Article 6, of our Constitution.

This suit was commenced to foreclose a deed of trust (on the building) and chattel mortgage (on the contents) given to secure payment of funds borrowed to build and furnish the hotel building, known as the Chase Hotel, in St. Louis. This trust deed (containing a chattel mortgage) was made October 1, 1921, by Julius E. Tribout and wife. Default by the Chase Hotel Company, subsequent owner, occurred in 1931, and at that time possession was given to plaintiffs, as trustees for the bondholders, who commenced this foreclosure suit in June, 1931. In this suit, the trustees asked that an accounting be had to determine the amount due; that, "to satisfy the amounts found to be due," the mortgaged premises and personal property "be ordered sold;" and that "the equity of redemption of defendants in and to said property be forever foreclosed." Defendant Chase Hotel Company, owner of the property by mesne conveyances from the Tribouts, unsuccessfully asserted the defense of usury in the trial court and in this court. [Straus v. Tribout, 342 Mo. 511, 116 S.W.2d 106.] In November, 1931, after filing of answer and cross petition, plaintiffs filed a supplemental petition asking that a receiver be appointed "in accordance with the provisions of Section 2 of Article IX of said mortgage (this mortgage provision was set out in this supplemental petition), such receiver to enter into possession of the mortgaged property and hold, manage and operate the same under the orders of this court." The court appointed Henry W. Kiel as receiver "of all and singular the property and premises described in the petition and particularly the property described in or referred to in the trust deed and chattel mortgage dated October 1, 1921," and confirmatory chattel mortgages executed in 1923 and 1929. The receiver was "directed to immediately take possession of said property and premises and to operate, manage and conduct the hotel known as the Chase Hotel," and was "authorized to operate all departments of said hotel." He was given power to employ help, to enter into utility service contracts, and to repair, redecorate and rehabilitate the property and premises. This order also enjoined "the Chase Hotel Company and its officers, directors, agents and employees . . . from interfering or in any manner whatsoever disturbing the Receivers' possession." In February, 1935, the court entered a decree of foreclosure and appointed a Special Commissioner to sell the property and premises. After the unsuccessful appeal of the owner to this court, sale was made on October 31, 1938, to a Bondholder's Committee. Order confirming the sale was made December 1, 1938. The State's claim for 1933 and 1934 franchise taxes of the Chase Hotel Company was filed in October, 1934; claim for 1935 franchise tax was filed in March, 1936; and claim for 1936 franchise tax was filed in September, 1936.

It is the contention of the Attorney General (based on Section 4647, R. S. 1929) that the State has a lien for these franchise taxes, for 1933, 1934, 1935 and 1936, which "takes precedence over all liens and mortgages (upon the corporation's property) without regard to dates of such liens and mortgages." It is also contended that the receiver was the receiver of the corporation, Chase Hotel Company, used its corporate franchise and became liable for payment of these franchise taxes. The order appointing the receiver provided that he "is authorized to pay all taxes, whether now due or hereafter becoming payable." The receiver did register the corporation in order to comply with Section 4620, R. S. 1929, and made the annual statements required of a corporation by Section 4642, R. S. 1929. He described his position, in these reports, as "Circuit Court Receiver of properties of the above named corporation." It also appeared from the testimony of the attorney for the corporation that the last meeting of its board of directors "was in the early part of 1932;" that the officers filed the anti-trust affidavit "for the first year or two thereafter;" that it had no property other than that covered by the trust deed and chattel mortgage herein foreclosed, except some uncollected accounts and funds in its bank account at the time of default; and that the trustees contended that such money and accounts had been turned over...