Opinion
April 4, 1939.
TAXATION: Lien on Transfer of Property: Declaratory Judgment. The lien for taxes due the State, etc., by a corporation as provided in Section 4598a, Laws 1937, against the assets of such corporation and making the payment of such taxes a condition precedent to the right of such corporation to transfer the whole or major portion of its assets without all taxes having been paid, which lien of the State, etc., does not attach until the corporation makes a sale or gift of the major part of its assets, is not unconstitutional as casting a cloud upon the title of the corporation owning property so affected by the statute.
Where several corporations filed suit against the Secretary of State, the State Auditor and other State officials and the collector of revenue for the city of St. Louis, alleging their ownership of property affected by Section 4598a, Laws 1937, and praying for a declaratory judgment under the Act of 1935, and that said Section 4598a be declared unconstitutional, their petition failed to state a cause of action; the court was without jurisdiction.
Appeal from Circuit Court of City of St. Louis. — Hon. Frank C. O'Malley, Judge.
REVERSED AND REMANDED ( with directions).
James A. Waechter and Donald Gunn for William F. Baumann; Edgar H. Wayman and Andrew J. Reis for Fred A. Renick.
(1) There is no justiciable controversy between the plaintiffs and these appellants. Declaratory Judgments by Borchard; Ashwander v. T.V.A., 297 U.S. 288, 80 L.Ed. 688, 56 Sup. Ct. 466; Nashville, C. St. L. Ry. Co. v. Wallace, 288 U.S. 249, 77 L.Ed. 730, 53 Sup. Ct. 345; Acme Finance Co. v. Huse, 192 Wn. 96, 73 P.2d 341; Washington Beauty College v. Huse, 80 P.2d 403; Parlor v. Buckner, 156 Tenn. 278, 300 S.W. 565; Revis v. Daugherty, 215 Ky. 823, 287 S.W. 28; Banning v. Marsh, 124 Neb. 207, 245 N.W. 775; Perry v. Elizabethton, 160 Tenn. 102, 22 S.W.2d 359; Joplin Waterworks Co. v. Jasper County, 327 Mo. 964, 38 S.W.2d 1068; School District v. Smith, 111 S.W.2d 167. (2) Their presence is not essential to bind them by the judgment, if any, herein rendered. City of Carondelet v. Picot, 38 Mo. 125; Holt v. Rea, 330 Mo. 1237, 52 S.W.2d 877. (3) The statute involved applies to every county in this State, and if these appellants are proper and necessary parties, then so are all other revenue officers of the State. In re Van Syckle, 118 N.J.L. 578, 194 A. 284; Arlington Oil Co. v. Hall, 130 Neb. 674, 266 N.W. 583; City and County of Denver v. Denver Land Co., 274 P. 743; Laws 1935, p. 219, sec. 11.
Roy McKittrick, Attorney General, Franklin E. Reagan and Edward H. Miller, Assistant Attorneys General, for Dwight H. Brown, Forrest Smith and Roy McKittrick.
(1) The court committed an error in overruling appellant's demurrer; the petition does not state a cause of action. Laws 1937, sec. 459a, p. 208. The State may impose a lien upon any property for any and all taxes owing by the taxpayer. Carey v. Keith, Inc., 250 N.Y. 216, 164 A. 912; Getchell v. Walker, 278 P. 93, 129 Or. 602; Union Central Life Ins. Co. v. Black 247 P. 486, 67 Utah, 268; Peckham v. Milllikan, 99 Ind. 352; Isaacs v. Decker, 41 Ind. 410; Bodertha v. Spencer, 40 Ind. 353; California Loan Trust Co. v. Weis, 50 P. 697, 118 Cal. 489. (2) Section 4598a contains but a single subject; the regulation and taxation of corporations is not a violation of Article IV, Section 28 of the Missouri Constitution. State ex rel. v. Danuser, 6 S.W.2d 907, 319 Mo. 799. The purpose of Article IV, Section 28 is to prevent fraud and deception upon members of the Legislature. State ex rel. v. Ranson, 73 Mo. 86; Asel v. City of Jefferson, 229 S.W. 1048, 287 Mo. 195; State v. Brodnax and Essex, 228 Mo. 25, 128 S.W. 177. (3) Section 4598a does not violate the uniformity provision of Article X, Section 3 of the Missouri Constitution. Corporations may be treated as a separate class. Mass. Bonding Ins. Co. v. Chorn, 274 Mo. 29, 201 S.W. 1122. The uniformity rule applies to the rate of levy of taxes. State ex rel. v. Switzler, 143 Mo. 287, 45 S.W. 245; Ex parte Asotsky, 5 S.W.2d 22, 319 Mo. 18; State ex rel. v. Schulte, 305 Mo. 124, 264 S.W. 654; State ex rel. Sedalia v. Standard Oil Co., 66 F.2d 757, 290 U.S. 706, 78 L.Ed. 607. The uniformity provision (Art. X. Sec. 3) does not apply to penalties. State ex rel. v. Koeln, 61 S.W.2d 750, 332 Mo. 1229. (4) Section 4598a does not take from respondents' property without due process of law. There is no right in Missouri to transfer property free and clear of taxes then due and owing thereon. (a) The public policy of this State has been to protect the State and its subdivisions by liens for debts due. Secs. 3153, 4647, 9937, R.S. 1929. (b) The highest evidence of the public policy of this State is the statutory law. Moorshad v. United Rys. Co., 203 Mo. 121, 96 S.W. 261. (c) Title of real estate may be divested either through transfer by the owner or default of the owner. State ex rel. v. Bader, 78 S.W.2d 835, 336 Mo. 259; Masterson v. Roberts, 78 S.W.2d 856, 336 Mo. 158. (d) All property of the owner may be subjected to a lien for taxes. Cooley, Taxation (4 Ed.), sec. 1236, p. 2459. Section 4598a is a penalty statute. (5) Section 4598a does not deny to respondents the equal protection of the laws in violation of the Fourteenth Amendment to the Constitution of the United States. State v. Mo. Pac. Ry. Co., 242 Mo. 366, 147 S.W. 118; State v. Freehold Inv. Co., 264 S.W. 702, 305 Mo. 88; Lindsley v. Natl. Carbonic Gas Co., 220 U.S. 61; White River Lbr. Co. v. Ark., 270 U.S. 692, 49 Sup. Ct. 457, 73 L.Ed. 903; Fort Smith Lbr. Co. v. Ark., 251 U.S. 532, 40 Sup. Ct. 304, 64 L.Ed. 396; Winona St. Paul Land Co. v. Minn., 159 U.S. 526, 16 Sup. Ct. 83, 40 L.Ed. 247; Fla. C. P. Ry. Co. v. Reynolds, 23 U.S. 471, 22 Sup. Ct. 176, 46 L.Ed. 283. (6) The burden of proof is upon respondents to establish beyond a reasonable doubt the unconstitutionality of the statute in question. Kavanaugh v. Gordon, 244 Mo. 722, 149 S.W. 547; State ex rel. Rodes v. Warner, 197 Mo. 656, 94 S.W. 962; Thomas v. Buchanan County, 330 Mo. 627, 51 S.W.2d 98.
Jones, Hocker, Gladney Grand, Joseph H. Grand and Lon Hocker, Jr., for respondents.
(1) The constitutional provisions invoked all require that every act operating on a limited class bear a reasonable and just relation to the classification. Mo. Const., Art. II, Sec. 30, Art. IV, Sec. 53, Art. X, Sec. 3; U.S. Const., Amend. XIV; State v. Jacksonville T. Co., 41 Fla. 374, 27 So. 221; State ex inf. Barker v. Southern, 265 Mo. 275, 177 S.W. 640; State ex rel. v. Ashbrook, 154 Mo. 375, 55 S.W. 627, 48 L.R.A. 265, 77 Am. St. Rep. 765; Mo. Const., Art. IV, Sec. 54; State ex inf. Gentry v. Armstrong, 315 Mo. 298, 286 S.W. 705; State v. Julow, 129 Mo. 163, 31 S.W. 781; In re French, 315 Mo. 75; Cotting v. K.C. Stock Yards, 183 U.S. 79. (2) A corporation is a "person" within the meaning of the Constitution. Cement Co. v. Gas Co., 255 Mo. 1, 164 S.W. 468; Ann. Cas. 1915C, 151. (3) For certain purposes the separate legislative classification of corporations is valid; for other purposes, invalid. State ex inf. v. Standard Oil Co., 218 Mo. 1, 116 S.W. 902; Russell v. Croy, 164 Mo. 69, 63 S.W. 849; Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389; State ex rel. v. Shipman, 290 Mo. 65, 234 S.W. 60; Columbia Terminals Co. v. Koeln, 319 Mo. 445, 3 S.W.2d 1021; State ex rel. Mo. State Life Ins. Co. v. Gehner, 320 Mo. 691, 8 S.W.2d 1068; Ward v. Board of Equalization, 135 Mo. 309, 36 S.W. 648; State ex rel. v. Cairo Bridge Term. Co., 100 S.W.2d 441, 340 Mo. 190; Secs. 4641, 4648, R.S. 1929. (4) The challenged act bears no reasonable and just relation to the separate classification of corporations. Laws 1937, p. 208, sec. 4598a; Secs. 4569, 4572, 4647, 4648, R.S. 1929; U.S. Const., Amend. XIX; In re French, 315 Mo. 75. (5) Where a bill is not multifarious, but descends to details in its title, it is always possible to pronounce, ex post facto, a single subject which would have done for a title. Fidelity Adjustment Co. v. Cook, 339 Mo. 49, 95 S.W.2d 1162; Thomas v. Buchanan County, 330 Mo. 634; Massey-Harris Harvester Co. v. Fed. Reserve Bank, 340 Mo. 1133, 104 S.W.2d 385; State ex rel. v. Danuser, 319 Mo. 799, 6 S.W.2d 907. (6) The challenged act deals with no less than four distinct subjects. Laws 1937, p. 204, Title, Prefix; Chap. 32, R.S. 1929; State ex inf. Crain v. Moore, 339 Mo. 492, 99 S.W.2d 17; Williams v. Rathburn, 332 Mo. 1208, 61 S.W.2d 708. (7) Where a bill and its title are both multifarious, the whole enactment fails. State v. Hurley, 258 Mo. 275; State ex rel. Penal Institutions v. Becker, 329 Mo. 1041; State v. Lancaster Co., 17 Neb. 87; Colonial Inv. Co. v. Nolan, 131 So. 178.
John C. Meredith, amicus curiae, for Real Estate Board of Kansas City and Kansas City League of Building Loan Associations.
(1) The lien and prohibition against sale in Section 4598a is the taxation of a property right. Art. II, Secs. 4, 30, Mo. Const.; Amend. V.U.S. Const.; State v. Julow, 129 Mo. 163; Liggett Co. v. Baldbridge, 49 Sup. Ct. 57, 278 U.S. 104; Kentucky Finance Corp. v. Paramount Auto Exchange Corp., 43 Sup. Ct. 636, 262 U.S. 544; Cement Co. v. Gas Co., 255 Mo. 1; State ex rel. v. Revelle, 257 Mo. 529; McClung v. Pulitzer Publ. Co., 279 Mo. 370. (2) Property for the purpose of taxation ad valorem can only be divided into two classes, the property taxed and the property exempt, and the taxation must be uniform under our constitutional provision. State ex rel. Tompkins v. Shipman, 290 Mo. 65; Art. X, Secs. 3, 4, Mo. Const. (3) This Section 4598a divides property taxed by general law ad valorem into several classes, without any reasonable basis for the classification. Quaker City Cab Co. v. Commonwealth of Pa., 48 Sup. Ct. 553, 277 U.S. 389; Liggett Co. v. Baldbridge, 49 Sup. Ct. 57, 278 U.S. 106.
Action under the Declaratory Judgment Act (Laws, 1935, pp. 218, 220; Mo. Stat. Ann., sec. 1097a et seq., p. 1388). The petition alleged that plaintiffs are business corporations duly organized by law and liable for the payment of taxes and fees to the officers of the City of St. Louis and State of Missouri; that Section 4598a, Laws of Mo. 1937, pages 208 and 209, establishes a lien for the payment of taxes and fees due the State or its political subdivisions, and avoids the sale of property exceeding fifty per cent of the taxpayers' assets when said taxes and fees have not been paid, but limits the operation of said section to corporations; that the section casts a cloud on the title to plaintiffs' property, in this, that plaintiffs are unable to transfer their property except subject to the lien aforesaid, and are unable to transfer more than half of their assets with assurance to the purchaser that the title he takes is valid; that persons and companies engaged in the business of insuring the title to property have, because of the cloud cast by the law aforesaid, refused to insure the title to property transferred by a corporation since the effective date of the law; that said section violates certain provisions of the State and Federal Constitutions, and that plaintiffs are entitled to have the question of the validity of said section determined under the Declaratory Judgment Act.
Defendants demurred to the petition on the ground that it did not state a cause of action under said act. The demurrers were overruled and defendants answered by general denial. Thereupon plaintiffs filed a motion for judgment on the pleadings, which was sustained. The court ruled that the section violated said provisions of the Constitutions and was invalid. Judgment accordingly and defendants appealed. The section under consideration follows:
"All taxes, or fees, . . . due . . . the State . . ., or any political subdivision thereof, by any . . . corporation, . . . are hereby declared to constitute a . . . lien . . . against the assets of such corporation, . . . and said lien shall not be lost on said assets by any transfer thereof. The payment of all taxes which are due . . . by any corporation, . . . is hereby declared to be a condition precedent to the right of said corporation, . . . to sell, give away, assign or transfer the whole or the major portion of its assets . . ., and any such sale, gift, assignment or transfer . . . without all taxes . . . having been paid . . . prior to the sale, gift, assignment or transfer of such assets, is hereby declared to be null and void."
Plaintiffs contend that the section casts a cloud on the title to their property.
We do not think so. The intention of the Legislature must be determined from a consideration of the whole section. It consists of two sentences. The first sentence establishes a lien. The time at which the lien attaches is fixed by the second sentence. In other words, the lien declared in the first sentence does not attach until the corporation makes a sale or gift of the whole or major part of its assets, at which time the lien must be discharged before a valid transfer can be effected under said section. The section is penal and similar to Section 7774c, Revised Statutes 1929, relating to the sale of motor vehicles. It follows that, absent such a sale or gift, there is no lien on the plaintiffs' assets.
In this situation we do not think the petition states a cause of action under the Declaratory Judgment Act. There is no allegation therein from which it may be inferred that there is even a remote possibility of plaintiffs selling or giving away the whole or major part of their assets. They have no "present interest" in the determination of the question of the validity of the section. Furthermore, the existence of the "ripening seeds of a controversy" cannot be inferred from any allegation in the petition. Furthermore, we cannot assume that plaintiffs will not pay the taxes and fees assessed against them. We think that the trial court was without jurisdiction to rule the question of the validity of the section under the Declaratory Judgment Act. [Heller et al. v. Shapiro, 87 A.L.R. 1201, l.c. 1215, 1216; Washington-Detroit Theatre Co. v. Moore, 68 A.L.R. 105, 118; DeCharett II, by Gdn. ad litem, et al. v. St. Matthews Bank Trust Co. et al., 50 A.L.R. 34, l.c. 47; Anway v. Ry. Co., 12 A.L.R. 26, l.c. 71.]
The judgment should be reversed and the cause remanded with directions to dismiss the plaintiffs' petition. It is so ordered. All concur.