William A. Straub, Inc. v. City of St. Louis, 57713

• Decision Date: 11 March 1974
• Docket Number: No. 57713,No. 2,57713,2
• Citation: 506 S.W.2d 377
• Parties: WILLIAM A. STRAUB, INC., et al., Appellants, v. CITY OF ST. LOUIS et al., Respondents
• Court: Missouri Supreme Court

Page 377

506 S.W.2d 377

WILLIAM A. STRAUB, INC., et al., Appellants, v. CITY OF ST. LOUIS et al., Respondents.

No. 57713.

Supreme Court of Missouri, Division No. 2.

March 11, 1974.

Jesse E. Bishop, St. Louis, for appellants.

Edwin Grossman, St. Louis, co-counsel for appellant William A. Straub, Inc.

Robert C. McNicholas, City Counselor, James J. Wilson, Associate City Counselor, St. Louis, for respondents City of St. Louis and Raymond Bartunek, Successor in Office to Joseph C. Sansone of the City of St. Louis.

Francis P. Dorsey, St. Louis, for respondent John K. Travers, Collector of Revenue of the City of St. Louis.

FINCH, Acting Presiding Judge.

This appeal involves the assessability and taxability by the City of St. Louis of certain tangible personal property owned by American National Bank in St. Louis (hereinafter Bank) and leased by it to the other appellants for use in their respective businesses. Interpretation of revenue laws of the State of Missouri (§§ 137.495 and 148.110) ¹ is involved, which vests jurisdiction of this appeal in this court. Mo. Const. Art. V, § 3, V.A.M.S. We reverse and remand with directions.

The Bank, in addition to its regular banking activities, was engaged in the business of leasing personal property. It executed written leases with the other appellants whereby it leased personal property for use in their respective businesses. The Straub lease covered certain cash registers and refrigeration equipment, the Tobey lease a computer, and the Herring lease various drug store fixtures, show cases and refrigeration equipment. The leases were for eight year terms at rentals comparable to those of other companies in the leasing business. There were no options in lessees to purchase, although testimony indicated that normally the lessee might purchase the property for its fair market value at the expiration of the lease. The printed lease forms specified that all taxes on leased property should be paid by the lessees, but the Straub lease contained an inserted typewritten provision excepting personal property taxes from that obligation.

In 1970 the City Assessor, acting pursuant to § 137.495, ² assessed the leased items of personal property to the respective lessees in possession thereof. ³ He followed this course because the state statutes did not permit the City to assess that property for personal property tax purposes to the Bank as owner. Taxation of banks (state and federal) was covered by §§ 148.010 through 148.110. Section 148.030 established a tax of seven per cent of net income of banks, less certain enumerated credits for other taxes paid, and § 148.110 ⁴ made such tax a substitute for various other taxes, including all taxes on all tangible personal property. The City received the proceeds of this tax, less two per cent for collection thereof. § 148.080.

These 1970 assessments against the three lessee appellants were appealed to the Board of Equalization of the City of St. Louis, which affirmed the action of the Assessor. The three taxpayers then filed petitions for review with the State Tax Commission, which, after conducting a hearing, held the assessments to be invalid, saying 'we regard Section 148.110 as explicit and exclusive and absolutely declarative of the intentions of the General Assembly.' The City then filed its petition for review with the Circuit Court, ⁵ which reversed the Tax Commission, holding that §§ 137.495 and 137.075 authorized assessment of tangible personal property to one in possession thereof, and that appellants, as lessees and possessors of the property in question, were properly assessed under said statutory provisions. The court held that what it described as an exemption to the Bank under § 148.110 was not available to customers leasing property from the Bank. In addition, the court expressed the opinion that the lease agreements were in effect financing and security agreements. This appeal followed.

Section 137.495, which is set out in full in footnote 2, is applicable to the City of St. Louis. It provides that tangible personal property is assessable to those 'owning or controlling' it. This is consistent with the provisions of § 137.075, the general statutory provision relative to assessment of property, wherein it is provided that 'every person owning or holding' such property on the first day of January shall be liable for taxes thereon.

This court in State ex rel. Rudder v. Haphe, 326 Mo. 460, 31 S.W.2d 788 (1930), considered the predecessor section to § 137.075 and concluded that under its provisions property could be assessed to the one holding as well as to the one owning property. In the course of its opinion, the court said, 31 S.W.2d l.c. 790:

'From the foregoing it appears that every person owning or holding property on the 1st day of June is liable for the taxes thereon for the ensuing year, that it is the duty of every person to list with the assessor all taxable property owned by him, or under his care, charge, or management, and that personal taxes constitute a debt against the person assessed with such taxes, the person named in the tax bill. If the person who holds or has under his care, charge, and management personal property is liable for the taxes thereon, such taxes may be assessed against him or in his name; and, when so assessed, they constitute a personal debt for which a personal judgment against him may be recovered.'

Subsequently, l.c. 791, the court stated further:

'* * * Both the person 'owning' and the person 'holding' personal property are liable for taxes thereon, and such taxes may be assessed against either or both.'

Such reasoning is equally applicable to the provisions of § 137.495, which was enacted subsequent to the Haphe decision.

At the outset, it should be recognized that this case does not involve an attempt by the City to tax a leasehold interest in the personal property in question. Appellants argue that it does, but we reject that contention. This is an ad valorem tax on the personal property itself. The City simply availed itself of the option established by § 137.495 to assess the property to the holders thereof.

The key issue in this case is whether appellant lessees must pay the taxes levied as a result of such assessments in view of the fact that the Bank has paid the tax provided for by § 148.030. This involves interpretation of § 148.110. The City argues and the trial court held that it provides an exemption from tangible personal property to banks, that such exemption is not transferrable, and that others, such as appellant lessees, may not take advantage of such exemption. Consequently, says the City, § 148.110 does not relieve appellant lessees of the tax assessed against them as holders pursuant to § 137.495. The fallacy in this argument is that the statute does not speak in terms of exemption from taxation. An exemption exists in situations wherein some person, corporation or institution is excused from some obligation. For example real property used for religious purposes is exempted from real estate taxes. In contrast, § 148.110 states an intention on the part of the General Assembly to substitute a different tax, namely, the seven per cent tax on income, for other specified taxes, including the one on tangible personal property. The seven per cent income tax is expressly stated to be a substitution for the personal property tax. One is in lieu of the other. An exemption from tax is not involved.

While § 137.495 authorizes assessment of personal property to the owner, the holder, or both, the tax may be...