United Air Lines, Inc. v. State Tax Commission

• Decision Date: 09 March 1964
• Docket Number: No. 49953,49953
• Citation: 377 S.W.2d 444
• Parties: UNITED AIR LINES, INC., a Corporation, Respondent, v. STATE TAX COMMISSION of Missouri, and James M. Robertson, John A. Williams and J. Ralph Hutchison, As Members of the State Tax Commission, J. R. Towson, Secretary of the State Tax Commission, and Donald F. Warren, County Clerk of Clay County, Missouri, Appellants.
• Court: Missouri Supreme Court

Page 444

377 S.W.2d 444

UNITED AIR LINES, INC., a Corporation, Respondent, v. STATE TAX COMMISSION of Missouri, and James M. Robertson John A. Williams and J. Ralph Hutchison, As Members of the State Tax Commission, J. R. Towson, Secretary of the State Tax Commission, and Donald F. Warren, County Clerk of Clay County, Missouri, Appellants.

No. 49953.

Supreme Court of Missouri, En Banc.

March 9, 1964.

Opinion Modified April 13, 1964.

Thomas F. Eagleton, Atty. Gen., Joseph Nessenfeld, Asst. Atty. Gen., Jefferson City, for appellants.

John R. Moberly, Douglas Stripp, George T. Morton, Jr., Kansas City, for respondent, Watson, Ess, Marshall & Enggas, Kansas City, of counsel.

EAGER, Chief Justice.

United Air Lines, Inc., respondent, filed its petition for the review of an assessment order of the State Tax Commission, pursuant to Chap. 536, RSMo 1949, V.A.M.S.; we will refer generally, however, to the 1959 Revision, since the assessment was of the 1960 tax. More specifically, the Commission made an ad valorem assessment of $848,210 upon aircraft of United. On review, the order was reversed and the cause remanded with directions to fix an assessment not in excess of $264,287. The Commission, its members, and its Secretary appealed. A separate cross-appeal was taken by United on one phase of the matter, but that appeal has been dismissed and it will not be considered. We have jurisdiction because the appeal involves the construction of our revenue laws, specifically Chap. 155, being SB 179 of the Laws of 1959.

The facts were stipulated for the purposes of the review. Essentially, they were and are as now stated. United Air Lines, Inc. (to be designated as United) is an air carrier operating in interstate commerce pursuant to federal authority; it is a Delaware corporation, with its principal place of business in Chicago; it is not qualified to do business in Missouri. It operates over certificated routes in various states. During 1959, the year in which its operations are now involved, it did not operate intrastate between any points in Missouri, and the only Missouri airport at which it made scheduled landings and takeoffs was the Municipal Airport in Kansas City, Clay County, Missouri, where it also had and has a business office. During 1959 it made 1,510 arrivals and departures there. The length of the certificated routes in Missouri was 213 miles; overall, throughout United's system, the total length was 11,613 miles. Thus, the ratio of route miles in Missouri to total route miles was 1.83415%. The aircraft of United which operated in Missouri in 1959 flew a total of 281,231 air commerce miles; all of United's planes engaged in commerce flew, everywhere, a total of 129,862,887 air miles in 1959. Only two types of planes were used in Missouri in 1959, DC-6 Coaches and DC-7 First Class; the craft of these types flew, respectively, in Missouri and elsewhere, totals of 20,008,128 miles and 34,935,017 miles, or a total of 54,943,145 air miles. The ratio of air miles flown in Missouri to all air miles of United is .21655%; the ratio of miles flown in Missouri to all air miles flown by the types of planes operating in Missouri, is .51186%. The record contains no breakdown on the individual planes of these types.

As required by Sec. 155.020, United filed with the Commission a report as of January 1, 1960, listing 28 DC-6 Coaches and 38 DC-7 First Class craft, being the types used in Missouri in 1959; it also listed 41 Convair 340s, 9 DC-6 First Classes, 7 DC-6A Cargos, 36 DC-6B First Classes, 5 DC-6C Coaches, 15 DC-7 Coaches, and 15 DC-8 Jets, as being types of aircraft which were used outside of Missouri. Thus, United owned and listed 194 craft of nine types, 66 of which (of two types) had been flown in Missouri, whereas the remaining 128 had not. The original cost of all the 194 aircraft of United was $286,671,317; as depreciated by United this total cost had been reduced to $159,527,624; as depreciated by the Commission on the 'straight-line' basis (10% per year for seven years, 5% for the eighth year, and none thereafter), the cost was $168,824,483. The corresponding figures for the two types of planes flown in Missouri were: $96,525,498 (original cost); $40,066,282 (United's depreciated cost); $47,201,434 (Commission's depreciated cost). Of one type used in Missouri (DC-6 Coach) 24 of the 28 had been purchased in or prior to 1948, and 4 in 1950; of the other type (DC-7 First Class) all had been purchased in 1954-1957, inclusive. The result of the Commission's method of depreciation was that no valuation was permitted to go below 25% of the original cost. A good proportion of United's more expensive and newer planes were not flown in Missouri at all in 1959, and none of its 24 newest.

Section 155.040, which provides for the assessment of aircraft, is as follows: '1. The state tax commission shall assess, adjust and equalize the valuation of all aircraft operated in this state in air commerce by every airline company. The valuation apportioned to this state shall be the portion of the total valuation of the aircraft as determined by the state tax commission on the basis of the arithmetical average of the following two ratios:

'(1) The ratio which the certificated route miles of the airline company within the state bears to the total certificated route miles of the airline company;

'(2) The ratio which the miles flown by aircraft of the airline company within this state bears to the total miles flown by the aircraft of the airline company during the immediately preceding calendar year.

'2. In the event one ratio is inapplicable, then the apportionment shall be made on the basis of the remaining ratio alone.' Section 155.050 provides that the Commission shall apportion the valuation, as determined under Sec. 155.040 to the various governmental subdivisions 'in which the airline company has arrivals and departures.' Section 155.060, relied on in part by appellants, is (in so far as material here) as follows: 'Taxes levied on all aircraft under this chapter shall be levied and collected in the manner provided for the taxation of railroad property, and the county courts and other officials shall perform the same duties and may exercise the same powers in levying and collecting the taxes on aircraft as such officials are required to perform in the levy and collection of taxes on railroad property. * * *'

Section 155.020 (the 'reporting' section) requires that each airline company shall, on or before May 1st in each year, furnish to the Commission a sworn statement showing: '(1) The total length in this state of its certificated routes; (2) The total length of its certificated routes; (3) The total miles flown in this state by its aircraft during the next preceding calendar year; (4) The total miles flown by such aircraft during the next preceding calendar year; (5) The total number of all aircraft owned, used or leased by such airline company on the first day of January in each year, and the actual cash value thereof; (6) The other information the state tax commission requires to enable it to carry out the provisions of this chapter.' United filed the required report and it is largely from the report that the present facts are stipulated.

The Commission fixed the amount of its assessment ($848,210) by first taking the total value (depreciated cost) of all of United's aircraft, including those not operated in Missouri in 1959, a figure of $168,824,483; it applied to this its equalizing factor of 49%, thus resulting in an equalized valuation of $82,723,997 as its valuation of United's entire fleet. It then applied to that figure (the equalized value of all planes) the average of the two ratios provided in Sec. 155.040, the first being 1.83415%, the second .21655% and the average 1.02535%. The resulting figure was $848,210, which represents that part of the valuation apportioned to Missouri. The assessment was certified to the County Clerk of Clay County for the extension and levy of the taxes. The Circuit Court stayed those proceedings, and in its judgment enjoined the Clerk from levying taxes upon any valuation in excess of $264,287. We need not digest respondent's petition for review. It alleges, most fully, all necessary facts and all contentions developed in attacking the assessment. It will be more understandable to discuss the rulings of the trial court after the contentions of the parties have been elaborated and determined here. $The arguments here involve a supposed similarity of legislative intent in the airline statutes and the railroad assessment statute. Hence, we quote the material parts of Sec. 151.060, as follows: 'The state tax commission shall assess, adjust and equalize the aggregate valuation of the property of each one of the railroad companies in this state specified in section 151.020. * * * provided, that when any railroad shall extend beyond the limits of this state and into another state in which a tax is levied and paid on the rolling stock of such road, then the said commission shall assess, equalize and adjust only such proportion of the total value of all the rolling stock of such railroad company as the number of miles of such road in this state bears to the total length of the road as owned or controlled by such company.' (Italics ours.)

The basic issue here is whether the Commission was authorized by Chap. 155 to apply the average of the two ratios specified in Sec. 155.040 to the equalized valuation of all aircraft of United (as it did) or whether it should have been applied only to the equalized valuation of those 'aircraft operated in this state in air commerce,' or, in other words, only to the valuation of those planes which were flown in Missouri during 1959. An opinion was written in Division One in a substantially identical case involving Delta Air Lines, upholding the assessment as so made by the Commission; that case was transferred to the Court in Banc where...