Westwood Partnership v. Gogarty, ED 80647.
| Decision Date | 28 January 2003 |
| Docket Number | No. ED 80846.,No. ED 80647.,No. ED 80847.,ED 80647.,ED 80846.,ED 80847. |
| Citation | 103 S.W.3d 152 |
| Parties | WESTWOOD PARTNERSHIP, et al., Respondents, v. Maurice M. GOGARTY, County Assessor, Appellants, and State Tax Commission of Missouri, Douglas W. Burnett, Bruce E. Davis, and Sam D. Leake, Defendants. Norman Ellinwood, et al., Respondents, v. Mary King, City of St. Louis Assessor, Appellant. and State Tax Commission of Missouri, Douglas W. Burnett, Bruce E. Davis, and Sam D. Leake, Defendants. Pine King Associates, L.P., Respondent, v. Mary King, City of St. Louis Assessor, Appellant. and State Tax Commission of Missouri, Douglas W. Burnett, Bruce E. Davis, and Sam D. Leake, Defendants. |
| Court | Missouri Court of Appeals |
Patricia A. Hageman, Donald G. Dylewski, Robert J. Droney, St. Louis, MO, for appellant.
James C. Owen, Katherine S. Walsh, Chesterfield, MO, James P. Gamble, St. Louis, MO, for respondent.
The St. Louis County Assessor ("County Assessor") and the City of St. Louis Assessor ("City Assessor") respectively appeal from the judgments of the Circuit Court of St. Louis County and of the Circuit Court of the City of St. Louis. The county circuit court ordered that the sixty-six cases set out in Appendix A to its judgment ("Appendix A cases") be remanded to the State Tax Commission ("Commission") with directions to enter decisions in favor of Westwood Partnership et al. ("taxpayers") classifying the properties listed in Appendix A as "residential property" for tax purposes. The county circuit court also ordered that the cases set out in Appendix B to its judgment be remanded to the Commission to consider all evidence of discrimination based on lack of uniformity and equalization of property taxes.1 The city circuit court ordered that the decisions of the Commission and the Commission hearing officer relating to taxpayers' properties in the City of St. Louis ("City") at issue be reversed, and remanded the cases to the Commission with directions to reassess those properties as residential for purposes of levying property taxes thereon.
These cases represent the vestiges of the so-called "rule of four," which refers to the definition of "residential property" contained in Section 137.016.1(1) RSMo 1994.2 The Missouri Supreme Court in Associated Industries v. State Tax Commission, 722 S.W.2d 916 (Mo. banc 1987), appeal dismissed sub nom. Albertus v. State Tax Commission of Missouri, 483 U.S. 1014, 107 S.Ct. 3254, 97 L.Ed.2d 754 (1987), found that it was unable to say that the legislature lacked any rational basis for enacting the statute, and that it was constitutional on its face. However, it was readily apparent that the "rule of four," while apparently simple to state, was difficult to apply in practice. In several subsequent opinions the Supreme Court clarified the "rule of four," effectively carving out significant exceptions to the rule.
In 1989 the Supreme Court held that the State Tax Commission could not instruct county assessors to consolidate structures on a single parcel of land or contiguous parcels of land owned by the same owner in order to classify the property as commercial. Rothschild v. State Tax Commission of Missouri, 762 S.W.2d 35 (Mo. banc 1988). The Supreme Court further stated that the language of Section 137.016 plainly showed a legislative intent that the focus of the statutory classification was on each individual structure and not on the number of structures on a parcel, its location, or the identity of the owner. Id. at 37.
Several years later, the Supreme Court held that buildings that were physically connected were separate structures for purposes of Section 137.016.1(1) when they were not interdependent. Morton v. Brenner, 842 S.W.2d 538, 542 (Mo. banc 1992). Structures were held to be separate if the connecting walls were "structural," which ran continuously from the roof to the basement foundation with no structure-to-structure openings, and the walls were load or weightbearing. Id.
In the last major case involving Section 137.016.1(1), the Supreme Court held that apartment complexes held in the condominium form of ownership were "residential property" under Section 137.016.1(1), even if one party owned all of the condominium units and operated the property "in a manner typical of an income-generating apartment complex." Alpha One Properties, Inc. v. State Tax Commission of Missouri, 887 S.W.2d 390, 391-92 (Mo. banc 1994). All the taxpayer had to do in that case to avoid paying taxes at the commercial rate was merely to file a condominium declaration pursuant to statute. Id. at 392. The Supreme Court noted that if the assessment system had loopholes, major or minor, the Court could not judicially legislate them away, but rather had to presume that the legislature intended such, or if not, it was the duty and function of the legislature to take corrective action, not the courts. Id. The legislature subsequently eliminated the "rule of four" by amendment in 1995. Sections 137.016.1.(1) and 137.016.3 RSMo (Supp.1995).
Taxpayers are the owners of apartment buildings in the City and in St. Louis County. For the period from 1989 through 1994 certain properties of taxpayers were classified as commercial property under the "rule of four" definition contained in Section 137.016.1(1), rather than as residential property. For each year in the period, taxpayers appealed the classifications of their properties to the appropriate Boards of Equalization ("Boards") of St. Louis County and of the City. Following the decisions from the Boards, taxpayers then appealed the assessments and classification of their properties to the Commission.
In sixty-two of the cases heard by the St. Louis County Board of Equalization, a majority of the members of the Board attended each hearing, as taxpayers had requested. In those sixty-two cases a majority of the Board wrote, signed, and issued a decision, but it was a different majority from that present at the respective hearings. Of the two Board members that issued the decision, one had attended the hearing and the other had not. Due to the lack of recordkeeping, the latter Board member had no written or recorded account of the hearing to consider in making his or her decision. In four additional cases involving taxpayers that were heard by the Board, only one member wrote signed, and issued the decision on the case, so that the decision was not issued by a majority of the Board.3 These sixty-six cases ("Appendix A cases") were among those appealed to the Commission.
Taxpayers asserted several general grounds to the Commission for reversing the St. Louis County Board of Equalization's decisions: First, they claimed that they were entitled to prevail in the Appendix A cases because the Board's decisions had not been made by the same majority of the Board that heard each case; second, they asserted that some of the properties should have been classified as residential rather than commercial under Section 137.016.1(1) due to their structure; and third, they argued that all of the properties of taxpayers should be classified as residential due to unconstitutional discrimination resulting from the lack of uniformity of assessment. Discovery took place and various pre-hearing proceedings were held. The Commission denied taxpayers' motion for summary judgment regarding the alleged procedural errors in the Appendix A cases. The Commission ordered taxpayers to make an offer of proof. The Commission hearing officer reviewed taxpayers' proposed evidence at a pre-hearing conference, and concluded that taxpayers had no admissible evidence, and excluded the evidence proffered by taxpayers. The Commission subsequently affirmed the decisions of the Boards.
Taxpayers thereafter appealed the decisions of the Commission to the appropriate circuit courts. The St. Louis County Circuit Court found that the St. Louis County Board of Equalization did not comply with the statutory requirements of Section 138.135.3 RSMo and Section 138.040 RSMo regarding Board hearings and decision-making. The court further determined that as a consequence of the Board's failure to comply with the procedural requirements of these statutes that taxpayers automatically should have prevailed in their appeals to the Board pursuant to Section 138.135.3, and there was no need for taxpayers to appeal to the Commission. The court remanded the Appendix A cases to the Commission with directions that it enter decisions in favor of taxpayers and to classify the properties as residential. In examining the constitutional challenges, the court determined that St. Louis County was the authority levying the taxes, but that the Commission had to consider infracounty uniformity and inter-county equalization as well, and that taxpayers had a right to present evidence regarding both. The court considered taxpayers' offer of proof, which consisted of the evidence excluded by the Commission, and found that taxpayers "adequately present claims of discrimination due to lack of uniformity and equalization[,]" which the Commission should have considered. The court also found that County Assessor had the burden of proof regarding the classification of taxpayers' properties as commercial. The court remanded the non-Appendix A cases to the Commission for consideration of all evidence of discrimination.
In the cases before the Circuit Court of the City of St. Louis, the court found that the Commission "had no administrative discretion to exercise, but was limited to determining whether in fact assessment practices differed between similarly situated counties in Missouri, with regard to property containing more than four dwelling units." The court determined that the State of Missouri was the territorial...
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