Tracfone Wireless, Inc. v. City of Springfield, s. SD34937

• Decision Date: 17 July 2018
• Docket Number: SD34948 Consolidated,Nos. SD34937,s. SD34937
• Citation: 557 S.W.3d 439
• Parties: TRACFONE WIRELESS, INC., Plaintiff/Appellant/Cross-Respondent, v. CITY OF SPRINGFIELD, Defendant/Respondent/Cross-Appellant.
• Court: Missouri Court of Appeals

557 S.W.3d 439

TRACFONE WIRELESS, INC., Plaintiff/Appellant/Cross-Respondent,

v.CITY OF SPRINGFIELD, Defendant/Respondent/Cross-Appellant.

Nos. SD34937

SD34948 Consolidated

Missouri Court of Appeals, Southern District, Division Two.

Filed: July 17, 2018

Motion for Rehearing and/or Transfer to Supreme Court Denied August 2, 2018

Application for Transfer Denied October 30, 2018

Appellant’s Attorney: John S. Kingston, of St. Louis, Missouri.

Respondent’s Attorney: Alexander W. Davis and Brett W. Roubal, of Springfield, Missouri.

WILLIAM W. FRANCIS, JR., P.J.

TracFone Wireless, Inc. ("TracFone") and City of Springfield ("City") have each appealed the trial court’s April 3, 2017 "Second Amended Judgment." See Rules 81.04(c) and 84.04(i).¹ TracFone’s appeal (SD34937) and City’s appeal (SD34948) were consolidated. TracFone raises one point of alleged trial court error, and City raises three points of alleged trial court error. Finding no merit in any of the points, we affirm the trial court’s judgment.

Factual and Procedural History

This appeal derives from TracFone’s action for declaratory judgment against City. TracFone filed its petition in Greene County, Missouri, seeking a judicial declaration that it was not subject to City’s gross receipts license tax ("license tax"), pursuant to Springfield Municipal Code of Ordinances, Article XI, § 70-452,² and owed no back taxes thereunder. City filed a counter-claim seeking a judicial declaration that TracFone was subject to City’s license tax, requesting damages in the form of back taxes owed by TracFone, that TracFone be enjoined from violating City’s license tax ordinance, and that City be awarded its costs and attorney’s fees.

TracFone and City filed competing motions for summary judgment. The trial court granted City’s motion and denied TracFone’s. The trial court found that there was no genuine issue of material fact that TracFone was subject to City’s license tax, and that the sole issue remaining was the amount of TracFone’s tax liability.

During a two-day bench trial, City and TracFone adduced conflicting evidence regarding the amount of TracFone’s liability, including expert witness testimony from TracFone’s expert, Thomas E. Hilton, and City’s expert, Dr. Penny Clayton.

The trial court entered its Second Amended Judgment on April 3, 2017. As relevant to this appeal, the trial court made the following findings:

55. The Court finds that TracFone is obligated to pay City 6% of its gross receipts from customers as measured by credit card billing addresses within the City of Springfield. Those amounts are reflected in trial exhibits 212-34 and 571 on a quarter-by-quarter basis beginning January 2007 and ending June 2016. That amount totals $585,278.03.

56. The Court has excluded in the calculation of TracFone’s gross receipts the amount received by TracFone from customers for internet access for the periods 2013 through 2015. The reason being that while the Court is satisfied TracFone has the ability to distinguish receipts for internet access for the entire back tax period, and they would not then be subject to tax, TracFone did not adequately respond to City’s timely request for this documentation in advance of trial except for the period 2013-2015. Therefore, for the periods in which TracFone provided City records removing internet access receipts, those receipts will not be subject to tax. For the periods in which TracFone did not provide City records removing internet access, those receipts will be included in the gross receipts and subject to the back tax.

57. The Court finds that TracFone owes back taxes to City, and that some of those tax obligations date back to January 2007. Therefore the Court will award additional damages to City as interest at the rate of 9% per annum on the past due tax obligation, on a quarterly basis for the amounts past due beginning January 2007 through June 2012 and 3% per annum on past due tax obligation on a quarterly basis for the amounts past due beginning June 2012 through June 2016. That amount totals $95,048.69. The interest calculation is made on the telephone access back taxes only, as the taxes included for internet access is included in the damage award only because TracFone did not provide City the data in advance of trial. The same analysis does not apply to interest.

58. The Court finds that TracFone had a reasonable good faith position that it did not owe a gross receipts tax to City based on the language of Springfield City Code Sec. 70-452. Similarly, despite being aware of TracFone’s business, and that TracFone was collecting sales tax within the City of Springfield, City never made any effort to notify TracFone of the gross receipts tax, never made any effort to review or audit TracFone’s books or business model, and never issued any notice of tax due or notice of delinquent tax obligation before filing a civil lawsuit. Therefore the Court does not award City additional damages as a penalty for non-payment of tax.

59. City has requested that Attorney’s fees be assessed as additional damages against TracFone. Attorney’s fees may only be assessed if allowed by statute, or by contractual agreement, or if special circumstances exist. "[W]ith few exceptions, each litigant must bear his own attorney’s fee." Henry v. Farmers Ins. Co. 444 S.W.3d 471 (Mo. App. 2014), citing: David Ranken, Jr. Tech Inst. v. Boykins , 816 S.W.2d 189, 193 (Mo. banc. 199[1]). As the Missouri Supreme Court noted, "courts have rarely found the very unusual circumstances that permit the award of attorney’s fees" in the absence of a statutory or contractual provision allowing such fees, Ranken, 816 [S].W.2d at 193.

60. The Court finds no statute, or contract, or special circumstance apply to this case to support an award of Attorney’s fees.

This appeal followed. In one point on appeal, TracFone asserts the trial court erred in finding that TracFone owed $680,326.72 in back taxes and interest to City because the trial court’s determination that TracFone is a "home service provider," under the Mobile Telecommunications Sourcing Act ("MTSA"),³ precludes City from taxing TracFone.

In its cross-appeal, City asserts in three points that the trial court erred: (1) in its interpretation and application of City’s license tax ordinance because the ordinance was construed to only apply to a portion of TracFone’s receipts (revenue sorted by credit card billing address zip codes), when the license tax requires that the license tax be applied to all of TracFone’s receipts from providing telecommunications services within City (revenue sorted by Activation Zip Codes); (2) in denying City an award of penalties; and (3) in its application of the Internet Tax Freedom Act ("ITFA")⁴ to TracFone’s gross receipts.

Principles of Review

We must affirm the trial court’s judgment unless there is no substantial evidence to support it, the judgment is against the weight of the evidence, or the judgment erroneously declares or applies the law. Rule 84.13(d); Murphy v. Carron , 536 S.W.2d 30, 32 (Mo. banc 1976).

The parties correctly assert that several of the matters at issue are legal, and our review is de novo —but de novo as to what? De novo as to those matters of law properly lodged by the parties, pursuant to Rule 84.04,⁵ and consistent with attendant principles of appellate review. We grant relief if an appellant demonstrates —within these confines—that a different outcome is required.⁶ In other words, an appellant must show: (1) preserved legal error, and (2) resulting prejudice. If an appellant fails in either respect, we affirm.⁷

Even in de novo review, we will affirm on any basis supported by the record. Braughton v. Esurance Insurance Company , 466 S.W.3d 1, 7-9 (Mo. App. W.D. 2015). Generally speaking, this means that prejudice will not be found in a bench-tried case unless an appellant shows that there was no authorized route by which the trial court could have arrived at its result. If an outcome-sustaining route is left unchallenged or undefeated, the judgment must be affirmed. See STRCUE, INC. v. Potts , 386 S.W.3d 214, 219 (Mo. App. W.D. 2012). "By not challenging [a trial court’s] express and implicit findings" on appeal, a party "waive[s] any claim" that necessarily runs counter to those findings. Houston v. Roadway Express, Inc. , 133 S.W.3d 173, 178 (Mo. App. S.D. 2004).

It is an appellant’s burden (as the moving party) to overcome our presumption that the judgment of the trial court is correct.⁸ "An appellate court’s role is to review specifically challenged trial court rulings, not to sift through the record to detect possibly valid arguments." Smith v. City of St. Louis , 395 S.W.3d 20, 29 (Mo. banc 2013). This narrow role reflects the interwoven policy interests governing appellate review, including the reviewing court’s duty not to act as advocate for any party;⁹ the efficient use of judicial resources; notice and fairness to the parties; judicial decision-making based on fully-briefed issues;¹⁰ and the law’s preference for finality of judgments.¹¹

Our review of the arguments put forward by TracFone and City is in accord with these salient principles.

Analysis

TracFone’s Point I: Mobile Telecommunications Sourcing Act

TracFone argues that the trial court erred in finding that TracFone owed $680,326.72 in back license taxes and interest per the MTSA.

The trial court found that TracFone is a "home service provider" under the MTSA. TracFone argues that "[b]ecause TracFone is not authorized by law or contract to provide commercial mobile radio service in Missouri, it has no ‘licensed service area’ in Missouri. Thus, Springfield cannot encompass a licensed service area for TracFone and cannot impose a tax, charge, or fee on TracFone."

At oral argument, counsel for TracFone admitted that it owed the awarded amount, but suggested the trial court’s route in arriving at the amount was errant. We review matters of law de novo , but "this Court is primarily concerned with the...