Opinion
No. ED 82934
January 13, 2004
Appeal from the Circuit Court of St. Charles County, Hon. Lucy D. Rauch.
Charissa L. Mayes, St. Charles, MO, for appellant.
James P. Gamble, St. Louis, MO, for respondent.
The St. Charles County Assessor ("assessor") appeals from the order of the State Tax Commission ("STC") setting aside the assessor's commercial classification of the real property located in St. Charles, Missouri, known as TownePlace Suites — Marriott ("property"), and instead classifying it as mixed-use real property, sixty percent residential and forty percent commercial, and assessing the property at $416,810 residential and $468,000 commercial. We affirm.
Viewed in the light most favorable to the judgment, the evidence shows the following. Dominion Hospitality, LLC ("Dominion") owns the real property located at 1800 Zumbehl Road in St. Charles, Missouri, known as TownePlace Suites — Marriott ("property"). Dominion advertises and operates this property as an extended-stay residential facility. It also accepts guests for short-term stays of less than thirty days. The property has ninety-five residential units, each of which has a full kitchen and an individual telephone line with voice mail. There are laundry facilities on the property for the use of the occupants of the units. Dominion also provides housekeeping services to each unit three times per week. At their arrival, each guest signs a registration card in which the guest agrees to stay at the property for the number of days indicated on the card. In return, Dominion agrees to provide housing space for them for that period. Those who indicate on the registration card that they intend to stay for thirty days or more are billed at a lower rate than guests who indicate that they will stay for a shorter period. The registration card also states that a person who agrees to an extended stay but departs early is subject to paying a higher daily cost for his accommodations. All guests and residents are billed for the state sales tax for the first twenty-nine days of their stay at the property. If a resident stays for thirty days or more, his living unit is not subject to the sales tax. The sales tax charged to his or her account for the first twenty-nine days is not paid to the State. The accumulated charge is supposed to be credited to the resident's account with Dominion.
The undisputed fair market value of the property in 2000 was $3,656,226. The assessor classified it as commercial property, which is assessed at thirty-two percent of its fair market value. Dominion appealed this classification and assessment for tax year 2000 to the St. Charles Board of Equalization, which affirmed the classification of the property as completely commercial on July 25, 2000. Dominion timely appealed to the STC in August 2000, asserting that the property was misclassified.
An evidentiary hearing was held before a hearing officer of the STC on July 2, 2002. Dominion presented testimony and documentary evidence concerning the use of the property in 2000. This included several computations of actual use by residents and guests. All of these computations of use compared the number of days of long-term stays to the number of days of all stays. These computations did not include any units that were not occupied. Assessor did not introduce any evidence, but did cross-examine Dominion's witnesses. Based on the evidence presented before the hearing officer, the STC found that the property was not used primarily for transient housing, but rather used for residential and commercial purposes, with the residential use being sixty percent. The STC concluded that where use by permanent residents makes up a substantial portion of the use of property, Section 137.016.4 RSMo (Supp. 1997) should apply and required the allocation of the assessment between residential and commercial use. The STC further concluded that the transient housing exclusion of Section 137.016.1(1) should not apply in such circumstances. The STC set aside the classification of the assessor, reclassified the property for tax year 2000 as sixty percent residential and forty percent commercial, and assessed the property for tax year 2000 at $416,810 residential and $468,000 commercial. Assessor appealed the order of the STC to the circuit court, which affirmed the decision of the STC. Assessor now appeals from the order of the STC.
A day of long-term stay is one by a resident who stayed at the property for thirty days or more. This included several residents whose stay at the property began in December of one year and ended in the following year.
Unless otherwise indicated, all further statutory citations are to RSMo (Supp. 1997).
On appeal, this Court examines the decision of the STC, and not the decision of the trial court. Daly v. P.D. George Co., 77 S.W.3d 645, 648 (Mo.App. 2002). This Court is limited to a determination of whether the decision is supported by competent and substantial evidence upon the entire record, or whether it was arbitrary, capricious, unreasonable, unlawful, or in excess of the STC's jurisdiction. Id. In reviewing the evidence, we consider it in the light most favorable to the administrative agency or board, together with all reasonable inferences therefrom, and if the evidence would support either of two opposed findings, we are bound by the administrative determination. Id.
To facilitate analysis, we will address assessor's first and third points together. In his first point on appeal, the assessor contends that the STC erred in holding that the property should be classified as a mixed-use residential and commercial property because the property is primarily used for transient housing and therefore not residential property as defined in Section 137.016.1(1) RSMo. Assessor further contends that the majority of those staying at the property use it for less than thirty days, and those staying thirty or more days are not "permanent residents" as defined in 12 CSR 10-110.220(2). In his third point on appeal, the assessor argues that the STC erred in holding that the property should be classified as sixty percent residential and forty percent commercial because the evidence is "neither competent nor substantial and is misleading in that those percentages are based on projected data rather than actual data[,]" which overstate the amount of extended stay business that is done at the property.
Section 137.016.1(1) defines "residential property" as
all real property improved by a structure which is used or intended to be used for residential living by human occupants, vacant land in connection with an airport, land used as a golf course, and manufactured home parks, but residential property shall not include other similar facilities used primarily for transient housing. For purposes of this section, " transient housing" means all rooms available for rent or lease for which the receipts from the rent or lease of such rooms are subject to state sales tax pursuant to section 144.020.1(6) RSMo[.]
12 CSR 10-110.220(3)(B) states that a permanent resident is not subject to tax on his or her lease or rental payments at a hotel or motel. "Permanent resident" is defined as "[a]n individual who contracts in advance for a room for a period of thirty consecutive days or more and who actually remains a guest for thirty consecutive days or more." 12 CSR 10-110.220(2).
The first issue that must be addressed is the construction of Section 137.016.1(1) and 12 CSR 10-110.220. Statutory construction is a matter of law, not of fact. St Louis County v. B.A.P., Inc., 25 S.W.3d 629, 631 (Mo.App. 2000). Accordingly our review is de novo. Id. In interpreting statutes, the fundamental rule is that the intent of the legislature controls.Stockham v. Missouri Dept. of Agriculture, 87 S.W.3d 303, 309 (Mo.App. 2002). Likewise, in interpreting agency regulations, we look to the legislature's intent. Id. To ascertain legislative intent, we first examine the words used in the statutes and regulations. Id. A statute is not to be interpreted narrowly if such an interpretation would defeat the purpose of the legislation. B.A.P., 25 S.W.3d at 631. Moreover, it is presumed that every word, clause, sentence, and provision of a statute have effect; conversely, it is presumed that idle verbiage or superfluous language was not inserted into a statute. Id.
The definition of "permanent resident" for sales tax purposes under 12 CSR 10-110.220(2) is straightforward. A "permanent resident" has to contract for a room in advance for thirty or more days and actually remain a guest for thirty consecutive days. A room rented by a permanent resident is not subject to the state sales tax, and accordingly is not "transient housing" under Section 137.016.1(1). The issue is at what point, or by what measure, does real property become "primarily used for transient housing"? Classification of property is generally based on the actual use of the property. Pessin v. State Tax Commission, 875 S.W.2d 143, 144 (Mo.App. 1994).
The CSR does not mean that a permanent resident has to physically be present every day at the room that he is renting, provided that the rent for the room is paid for a period of thirty or more consecutive days. Any other interpretation would lead to absurd results.
Dominion contends that it introduced competent, substantial evidence that the property is not used primarily as transient housing, but rather actually used primarily as housing for permanent residents living at the property for extended-stays of thirty days or more. "'Substantial evidence, is evidence, which if true, has probative force; it is evidence from which the trier of fact reasonably could find the issues in harmony therewith.'"Sprint Communications Co., L.P. v. Director of Revenue, 64 S.W.3d 832, 834 (Mo. banc 2002), cert. denied 536 U.S. 960 (2002) (quoting Hermann v. D.O.R., 47 S.W.3d 362, 364 (Mo. banc 2001)). "Substantial" evidence is such relevant evidence as a reasonable mind might accept as sufficient to support a conclusion. P.D. George Co., 77 S.W.3d at 651.
At the hearing, Dominion introduced testimony and documentary evidence concerning the arrivals and departures of guests and the duration of their actual stays, and reports for the period from January 2000 to December 2000 on occupancy rates. Dominion's evidence of the use of its property was based on the total number of days in a year that each occupied room was actually used for an extended stay, and dividing that by the total number of days that each room was occupied by any guest or permanent resident. This evidence indicated that approximately sixty percent of the actual room use was by permanent residents.
Assessor contends that whether the property is used primarily for transient housing should be determined by comparing the number of permanent residents to the number of total guests that stayed at the property in tax year 2000. According to assessor, this would show that only seven percent of the guests in 2000 were permanent residents. Computing actual use of the property using this method, however, could easily be misleading. Nearly all of the rooms at the property could be actually, physically used by permanent residents for an entire year, but if there were a high turnover rate of transient guests in just a few rooms, transient guests would constitute a majority of the total guests even though they would account for a small minority of actual room usage.
Assessor argues that turnover is "the very lifeblood of the hotel business[.]" While this may be true, Dominion markets the property as an extended-stay facility, and it is apparently designed as such, and turnover is not necessarily "the very lifeblood" of an extended-stay facility, which is designed to attract guests to stay for prolonged periods.
Assessor also argues that Dominion's annual revenue from permanent residents does not indicate that sixty percent of its business is due to extended stays from permanent residents. Calculating the income derived from permanent guests as a percent of total income in order to determine actual use of the property can also be misleading. Permanent residents presumably pay less per day than most transient guests, particularly if the transient turnover rate for rooms is high, exclusive of the sales tax that transient guests pay that permanent residents do not have to pay.
Assessor asserts that Dominion's revenue for 2000 from permanent residents is 26.86 percent of its total revenue based on information from Dominion's December 2000 FLASH report. While that number is on that document, nothing identifies that figure with Dominion's revenues, or explains what the number means, other than the term "ES REVPAR". There is no indication of whether that figure is a percentage or some other measurement.
As noted, Dominion's evidence on property use was based on the total number of days that each occupied room was actually, physically used for an extended stay, and dividing that by the total number of days that each room was occupied by any guest or permanent resident. This evidence showed that approximately sixty percent of actual room use was by permanent residents. This constituted substantial evidence of the actual use of such a property, and supports the conclusion that it was used primarily for non-transient housing.
This case is similar to that of E.R. Southtech, Ltd. V. Arapahoe County Board of Equalization, 972 P.2d 1057 (Colo.App. 1999). That case involved a rental complex used to provide short-term and long-term accommodations. The taxpayer appealed the classification of the classification of the property as twenty-one percent residential and seventy-nine percent commercial, but did not challenge the overall valuation of the property. Id. at 1058. In the hearing before the Board of Assessment Appeals ("BAA"), the functional equivalent of Missouri's STC, the taxpayer introduced evidence of the actual use of the property showing the breakdown between short-term occupancy of its units (less than thirty days) and long-term occupancy (thirty days or more) to show that the proper classification should be fifty percent residential and fifty percent commercial. Id. The Arapahoe County Board of Equalization argued that the property should be classified as entirely commercial because "its predominant use was as a hotel." The BAA held that the property should be classified as fifty percent residential and fifty percent commercial. Id.
Although there are considerable similarities, there are some factual differences between that case and the case at hand Most notably, the Arapahoe County Board of Equalization had previously classified the subject real property as mixed-use residential and commercial, and did not contend that the property should be classified entirely as commercial until the hearing before the Board of Assessment Appeals. The taxpayer in that case also introduced several years worth of records to show that the property should be classified as fifty-fifty mixed-use residential and commercial, and included sales tax records.
The Colorado Court of Appeals noted that Colorado's statute defining residential real property "does not include hotels and motels." Id. at 1059. It further observed that the term "hotels and motels" is statutorily defined for property tax purposes as "establishments which are primarily engaged in providing lodging . . . and which are predominantly used on an overnight or weekly basis." Id. The Colorado Court of Appeals stated that to the extent that the property was used as a hotel, it was undisputed that it could not be classified as residential as a matter of law. Id. It further noted that those particular statutes did not address the mixed-use of property, which was addressed in a separate statute. Id. It observed that "if a particular improvement 'is used as a residential dwelling unit and is also used for any other purpose,' the statute requires that 'each portion' of the property must be 'allocated to the appropriate classes' and valued accordingly for property tax purposes." Id. The Colorado Court of Appeals concluded that a mixed-use classification and allocation on that basis is appropriate if the property is "partially put to residential use and partially put to commercial hotel use." Id. In support of this, the court also noted the main factor to be considered in determining proper classification for property tax purposes is the actual use of the property on the date of assessment. Id. The court also found "that the longer-term use of a certain percentage of the units for extended stays of 30 days or more constituted residential use." Id. at 1060. It noted that apartments are classified as residential property for tax purposes, and that "the distinction between rentals of accommodations for less than 30 days or for 30 days or more is recognized for sales tax purposes." Id. In Colorado, as in Missouri, rentals for thirty days of more are exempt from sales tax. Id. We find the holding of the Colorado Court of Appeals in Southtech to be persuasive.
Missouri's statute defining residential property, section 137.016.1(1) excludes "facilities used primarily for transient housing[,]" which essentially is the same as the relevant Colorado property tax statutes. "Primarily" and "predominantly," used respectively by Missouri and Colorado, both mean the same thing, i.e., "for the most part." Webster's Ninth New Collegiate Dictionary (1991).
Similarly, apartments in Missouri are generally classified as "residential property". See section 137.106.1(1). See also Alpha One Properties, Inc. v. State Tax Commission of Missouri, 887 S.W.2d 390 (Mo. banc 1994); Morton v. Brenner, 842 S.W.2d 538 (Mo. banc 1992); and Rothschild v. State Tax Commission of Missouri, 762 S.W.2d 35 (Mo. banc 1988).
Assessor also contends that Dominion's extended stay guests did not contract in advance to stay for thirty or more days, and therefore are not permanent residents. At the hearing, Dominion introduced copies of a number of registration cards filled out by guests at the beginning of their stays at the property. Dominion also introduced testimony relating to the registration cards in general. Assessor argues that the registration cards signed by guests indicating how long they intend to stay at the property are not contracts because "there is no legal consideration, no mutuality of agreement, and no mutuality of obligation". Assessor further asserts that the STC's finding that there were adequate contracts is against the weight of the evidence, "and is arbitrary, capricious and unreasonable."
"The essential elements of a contract are: (1) competency of the parties to contract; (2) subject matter; (3) legal consideration; (4) mutuality of agreement; and, (5) mutuality of obligation." Baris v. Layton, 43 S.W.3d 390, 396 (Mo.App. 2001).
The registration cards meet the basic requirements for a contract: Dominion offers a room or rooms to the guest for the period of time indicated on the registration card, which includes the guest's arrival and scheduled departure dates, at a certain rate, also on the registration card. The guest accepts the offer by signing the card, or by actually staying at the property, agreeing to stay for the scheduled period and to pay for the living space. The consideration for the contract is Dominion's promise to make the rental unit available for the guest's use for the scheduled period, and the guest's promise to pay Dominion for the use of the room(s) and to stay for the duration indicated on the registration card.
There is also mutuality of obligation. Neither party's promises are illusory. An illusory promise is one in where the words are in promissory form but promise nothing. Magruder Quarry Co., L.L.C. v. Briscoe, 83 S.W.3d 647, 650 (Mo.App. 2002). However, the tendency of the law is to uphold a contract by finding that the promise was not illusory when it appears that the parties intended a contract. Id. Courts often find that a seemingly illusory promise is accompanied by an implied promise to use "best efforts" or "reasonable efforts" to fulfill the promise.Id. As a consequence, an implied obligation of good faith is sufficient to avoid finding a contract null and void due to an illusory promise. Id. at 650-51.
Covenants of good faith and fair dealing are implied in every contract in Missouri. Id. at 651. However, when terms that directly nullify the implied covenants of good faith and reasonable efforts are present, the contract is void for lack of mutuality. Id. at 652. Assessor argues that the language in the registration card so nullifies the implied covenants of good faith and reasonable efforts. The registration card states
RATES ARE DETERMINED BY LENGTH OF STAY. SHORTENING YOUR STAY MAY CONSTITUTE AN EARLY CHECK OUT ADJUSTMENT TO YOUR ACCOUNT, PAYABLE AT DEPARTURE. EXTENSIONS ARE ACCEPTED ON AN AVAILABLE BASIS.
This language does not nullify the covenants of good faith and reasonable efforts, and does not indicate that there is no obligation on the part of the guest. Rather, it warns the guest of a potential consequence of breaching the agreement, and that Dominion is not promising that a room will be available if the guest wants to stay longer than the period agreed upon. The language is more akin to a provision for measure of damages than a nullification of obligations. There is no language that relieves the guest of his promise and obligation to pay rent for the living space. There is sufficient legal consideration and mutuality of obligation to satisfy the requirements of a contract. The registration cards are contracts sufficient to qualify a person as a "permanent resident" pursuant to 12 CSR 10-110.220(2), provided that the guest agrees at the time of registration to stay for thirty or more days and actually stays thirty days or more.
Assessor also argues that the registration card does not constitute a contract because Dominion has a statutory lien as an innkeeper under Section 419.070 if a guest fails to pay for accommodations, and cannot sue for breach of contract. The statutory innkeeper's lien against non-paying guests is not an exclusive remedy, nor does it prohibit a suit for breach of contract. See Sections 419.060 and 419.070. Even if there were such an exclusive remedy provision, it would not invalidate an otherwise valid contract.
The registration card does not purport to serve as a lease, and Dominion advertises that it does not require leases. However, 12 CSR 10-110.220(2) requires that in order for a person to be a permanent resident that he contract in advance to stay for thirty days or more, not that he enter into a lease for at least thirty days. A lease is a contract, but contracts do not have to be leases.
Assessor contends that the STC erred in classifying the property as sixty percent residential and forty percent commercial because the documentary evidence introduced at the hearing used misleading, speculative data, not actual data. We disagree. The record does not indicate that the evidence is speculative rather than actual data. In cross-examination by assessor, Christopher Stabile, who supervises the financial operations of Dominion and is the custodian of records for Dominion, stated that the figures used in the exhibits, which assessor used as an example, reflected actual occupancy of rooms at the property for January 2000.
In his reply brief, assessor argues that Dominion's evidence concerning the average occupancy rate for the tax year 2000 is irrelevant and immaterial for that tax year, "as the assessment and levy on the property was complete prior to December 31, 2000, and its tax liability was fixed as a sum certain as a matter of law[,]" and vested in Dominion some time prior to September 20th of the tax year. Assessor did not raise this issue in any of its points relied on in its initial brief, and it is therefore not preserved for appeal. Rule 84.04(d); City of Riverside v. Progressive Investment Club of Kansas City, Inc., 45 S.W.3d 905, 913 n. 1 (Mo.App. 2001). The evidence introduced by Dominion concerning occupancy rates of permanent residents and total guests during 2000 is illustrative of its general occupancy rates and property use. Because the property did not open for business until February 1999, there is no available evidence for occupancy rates for previous years. There was competent and substantial evidence to support the STC's classification of the property as sixty percent residential and forty percent commercial, and accordingly, that the property is not primarily used for transient housing. While there is a substantial use of the property for transient housing, transient housing is not the primary use. Points denied.
In his second point on appeal, assessor asserts that the STC erred in holding that the property should be classified as mixed-use property pursuant to Section 137.016.4 because Section 137.016.1(1) applies and excludes it from residential classification due to its primary use as transient housing, which indicates that the most suitable economic use of the property is as a hotel or other commercial enterprise. Assessor further contends that the property is a "commercial hotel business" within the normal meaning and understanding of that phrase.
Section 137.016.4 permits mixed-use classification of real property, and mandates that the county assessor allocate the percentage of real monetary value devoted to each use of the property that is classified differently. Assessor states that "devote", according to Webster's II New College Dictionary (2001), means "To give or apply (one's time, attention or self) entirely to a particular activity or cause[,]" and argues that the term "devoted" in the statute means that "the application of more than one classification to a piece of real property should be according to the percentage of the property applied entirely to a specific use." According to the assessor, this would require that a majority of the physical space of the property be used exclusively for extended-stays of thirty or more days to qualify for a classification as residential property. Dominion notes that Webster's Third New International Dictionary of the English Language (1986) defines "devote" in several ways, including "to provide (something) for use[,]" which does not require that property be used exclusively for one purpose.
Section 137.016.4 states in part:
Where real property is used or held for use for more than one purpose and such uses result in different classifications, the county assessor shall allocate to each classification the percentage of the true value in money of the property devoted to each use; . . .
A number of statutes, including some relating to property taxes, use the term "devoted" modified by "primarily", "exclusively", "solely" or similar terms. The Missouri Constitution, Art. X, Section 7, relating to relief from taxation, uses the term "devoted exclusively" as well. "It is a general rule of statutory construction that the legislature will not be presumed to have included superfluous language in a statute." Norwin G. Heimos Greenhouse, Inc. v. Director of Revenue, 724 S.W.2d 505, 508 (Mo. banc 1987). The application of this general rule to the many statutes that modify "devoted" by "exclusively" or similar language strongly suggests that the legislature did not intend for "devoted" to mean dedicated entirely or exclusively to one use or purpose; otherwise the modifiers of "devoted" in those statutes would be superfluous. Accordingly, "devoted" in Section 137.016.4 does not mean the same thing as "devoted exclusively". It does not mean that sixty percent of the physical property at issue has to be used exclusively for extended-stays of thirty days or more by a guest for it to qualify as sixty percent residential property.
See sections 71.525.2(2), 195.010(19), 197.020.2, 209.258.2, 254.020(3), 307.250 (Article VII(b)), 313.040(1)(a), 361.170.3, 369.324.5, 370.107.2, 374.150.2, 376.960(7), 383.130(3), 386.370.4, 389.1005.5, 622.015, and 622.300.4 RSMo 2000.
That the property is used in part for commercial purposes is irrelevant, inasmuch as apartments and condominiums, which are generally classified as residential property, also have commercial purposes. See Alpha One Properties, Inc. v. State Tax Commission of Missouri, 887 S.W.2d 390 (Mo. banc 1994); Morton v. Brenner, 842 S.W.2d 538 (Mo. banc 1992); and Rothschild v. State Tax Commission of Missouri, 762 S.W.2d 35 (Mo. banc 1988). Those cases dealt with Section 137.016.1(1) RSMo. 1986 and Section 137.016.1(1) RSMo 1994, which were repealed in 1995, and the so-called "Rule of Four" and found property that was clearly used commercially nevertheless qualified as residential under the language of the statute. The Supreme Court specifically noted that if the assessment system had loopholes, major or minor, that 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. Alpha One Properties, 887 S.W.2d at 391-92. We note also that farming is generally a commercial activity, but farmland is classified as agricultural. Section 137.016.1(2) RSMo 2000.
Note that a small portion of farmland is classified as residential if there is a house or dwelling located on it.
Assessor contends in his reply brief that it is an "administrative impossibility" for assessors to comply with the results of the STC's decision in the case at hand As the Supreme Court stated in Alpha One Properties, 887 S.W.2d at 391-92, it cannot judicially legislate away loopholes created by the legislature, and this is correct even if such loopholes create administrative burdens.
We note that other jurisdictions have coped with similar situations involving taxation and mixed-use. In District of Columbia v. Willard Associates, 655 A.2d 1237 (D.C. 1995), a taxpayer brought suit because the mayor of the District of Columbia ("District") did not apportion its property between two classifications. The District tax law required annual assessments of all real property in the District, and provides for the classification of real property as "mixed use" when the uses of the real property fall within multiple classes. Id. at 1238-39. The relevant statute also provides that the Mayor of the District must "'devise a method for apportioning, by class, real property whose uses fall within more than 1 class.'" Id. at 1239 (quoting D.C. Code Section 470813(f)(2) (1990 Supp. 1994). The statute permits the Mayor to require real property owners to submit "such information" regarding the uses of the property "at a time and in a form prescribed" as the Mayor thinks will assist in the apportionment of the property for classification purposes.Id. The Mayor of the District also has the power to promulgate necessary rules and regulations to carry out the provisions of the statute. Id. at 1239 (quoting D.C. Code Section 47-814). The burden was on the taxpayer to comply with the Mayor's request for information about the uses of the property in order to qualify, at least potentially, for mixed-use classification, and to provide that information in the manner and form set forth by the Mayor.
In Lutheran Outdoors in South Dakota, Inc. v. South Dakota State Board of Equalization, 475 N.W.2d 140 (S.D. 1991), the issues involved whether property, two church camps owned and used by a religious organization qualified for a tax exemption where the property was also used by a non-exempt group, and how, for tax purposes, should the property be apportioned between exempt and non-exempt when the property was not being used by anyone. The statutes provided for partial exemptions based on actual usage where the property was mixed-use between exempt and non-exempt purposes, and set forth methods for calculating the taxable percentage of the property, which the court applied based on how the property was being used and by what organization on individual days. Id. at 143-46. Agreeing with the taxing body, the court held that in determining the taxable percentage of the property's appraised value, the total number of days that the property was being used for non-exempt purposes should be divided by the number of days of actual use of the property. Id. at 145-46. The 104 days when no one was actually using the property for camping was allocated between exempt and non-exempt status equal to the percent allocation between exempt and non-exempt for actual use. Id. Despite the apparent difficulty of the situation, the matter proved capable of resolution by apportioning the idle use of the property between the two different classifications, exempt and non-exempt, based on the actual, measurable use. Similarly, there should be no more difficulty in determining when rooms at the property in this case are idle, and in allocating the percentages for tax purposes between residential and commercial for the "idle" room days.
As noted in the analysis of assessor's first and third points, there is substantial evidence to support the STC's classification of the property as sixty percent residential and forty percent commercial. The STC did not err in classifying the property as mixed-use property, sixty percent residential use, forty percent commercial use. Point denied.
The order of the State Tax Commission is affirmed.
William H. Crandall Jr., J., concurs.
Lawrence E. Mooney, J., dissents in separate opinion.
DISSENTING OPINION
In this issue of first impression, the tax classification of an "extended-stay hotel," an admittedly commercial enterprise, as partially residential is not supported by the law or the evidence.
Let us begin with consideration of the law. Our review is de novo, and we make corrections to erroneous interpretations of the law. St. Louis County v. State Tax Com'n., 562 S.W.2d 334, 337-38 (Mo.banc 1978). I find little value in considering decisions of other states based on different records and statutes. The focus of my consideration is Missouri's tax-classification statute.
As to be discussed, subsections 1 and 4 of Section 137.016 RSMo (2000) provide:
1. As used in section 4(b) of article X of the Missouri Constitution, the following terms mean:
(1) "Residential property", all real property improved by a structure which is used or intended to be used for residential living by human occupants, vacant land in connection with an airport, land used as a golf course, and manufactured home parks, but residential property shall not include other similar facilities used primarily for transient housing. For the purposes of this section, "transient housing" means all rooms available for rent or lease for which the receipts from the rent or lease of such rooms are subject to state sales tax pursuant to section 144.020.1(6), RSMo;
4. Where real property is used or held for use for more than one purpose and such uses result in different classifications, the county assessor shall allocate to each classification the percentage of the true value in money of the property devoted to each use; except that, where agricultural and horticultural property, as defined in this section, also contains a dwelling unit or units, the farm dwelling, appurtenant residential-related structures and up to five acres immediately surrounding such farm dwelling shall be residential property, as defined in this section.
First, contrary to the hotel's claim, the statute requires that the hotel be classified not by its use, but rather its availability for use. In its definition of "residential property," the legislature has made plain that the benefits of this designation shall not flow to "facilities used primarily for transient housing." See Section 137.016.1(1). And "transient housing" is defined as "all rooms available" for short-term occupancy. Id. (Emphasis added.) Although property is generally classified by its use, that rule has no application here where it is not its use, but rather its availability for use, that the legislature has specified must determine a property's classification. Thus, because here all the hotel rooms were available for short-term occupancy, the clear language of the statute compels the denial of the hotel's quest for residential classification.
Second, the statute forbids a mixed-use classification under our circumstances. Although Missouri law generally allows mixed-use classifications of property by virtue of subsection 4 of the tax-classification statute, the legislature has made an exception as to facilities used "primarily" for transient housing in its definition of "residential property" in subsection 1. To the extent there is a repugnancy between classifying property as mixed-use or by its primary use for "transient housing," the chronologically later specific disqualification of subsection 1 would prevail over the earlier more general provision of subsection 4. Laughlin v. Forgrave, 432 S.W.2d 308, 313 (Mo.banc 1968). Therefore, if a facility makes more than half its rooms available for short-term occupancy, the property is entirely disqualified from a residential classification. Thus, the property's classification is dependent on whether its facilities are primarily available for short-term occupancy, not on what percentages of use might be ascribed to short-term and extended-stay occupants.
Third, although Missouri law does allow a mixed-use classification when distinct spatial components, which are easily verifiable, are present, Missouri law has never permitted a mixed-use classification when differing temporal components, which may be impossible to verify, are posited. For example, an apartment over a retail store may qualify for a mixed-use classification as partially residential and partially commercial based on the relative values of the spaces. But a simple retail shop in which the owner claims he sleeps over is not entitled to a partial residential classification based on his claimed hours of slumber. To hold otherwise would impose an extraordinary burden on an assessor.
In the tax-classification statute, the Missouri legislature has especially disqualified "transient housing" from residential classification based on its primary availability for short-term occupancy. Section 137.016.1(1). The legislature rightly recognized that, absent such legislation, an assessor would be hard-pressed to effectively contest a hotel's mixed-use classification because, rather than merely classifying and valuing parcels of property as he typically does, he might need to audit a hotel's entire operation. I would enforce the disqualification as enacted.
Even if the tax classification at issue was not forbidden as a matter of law, the evidence is insufficient to sustain the hotel's classification as partially residential. To qualify its guests as "permanent residents," the guests must "contract in advance for a period of thirty consecutive days or more." 12 CSR 10-110.220(2). The existence of a contract necessitates a "meeting of the minds" which the court determines by looking to the intention of the parties as expressed or manifested in their words or acts. Gateway Exteriors, Inc. v. Suntide Homes, Inc., 882 S.W.2d 275, 279 (Mo.App.E.D. 1994). Here, not only did the typical guest depart long before thirty days had elapsed, but also he never contracted for an extended stay. The hotel now claims that such a contract resulted from the hotel guest's registration. However, the hotel's own witnesses conceded that the guest had no duty or obligation for an extended stay by virtue of the registration form. Further, no guest who checked out early was ever billed or sued for an extended stay. The only claimed "enforcement" of this concededly nonexistent duty was by virtue of a higher room rate that the hotel equates to a liquidated-damages provision. However, this is simply differential pricing, a standard business practice, which would be expected since additional expenses accrue with more frequent turnover of guests. Further, the language in the registration form invites such "early check-outs." The registration form does not warn that an obligation is created to pay the room rate for the full extended stay. Rather it merely advises the guest that "shortening your stay may constitute an early check out adjustment to your account." This assurance that there will be no long-term obligation is reinforced by the hotel's advertisement that "no lease is required." This is not designed to educate the travelling public as to the distinction between a lease and a license. Instead, the hotel needed to reassure the wary registrant that no long-term commitment would ensue. Thus, the parties' own words and acts reveal their true intentions. There was no contract for an extended stay. Without such a contract, this commercial facility was disqualified from residential classification and its attendant tax benefits.
I respectfully dissent.