NOTE: Opinion filed at September Term, 1939 April 18, 1940; Motion for rehearing filed; motion overruled at May Term. 1940, May 7, 1940.
1. TAXATION: State Board of Equalization: Certiorari. On certiorari to the State Board of Equalization to review its proceedings in assessment for taxes of railroad property as between the city of St. Louis and St. Louis County, the Supreme Court is limited to the inspection of the record of respondents as shown by their return to the writ.
From such inspection the Supreme Court determines the question of lack of jurisdiction or abuse of jurisdiction of the inferior tribunal, or of such tribunal's exercise of excess jurisdiction, or other error in the proceedings which appear from the record of such tribunal as a matter of law.
A writ of certiorari does not serve the purpose of an appeal or writ of error, and all that can be done under it is either to quash or refuse to quash the record of which complaint is made.
2. TAXATION: Railroad Tracks: Lease. Where a terminal railroad association under an unwritten agreement with five railroad companies, whereby the association used the tracks and facilities of the railroad companies in the city of St. Louis and St. Louis County, maintained them in repair, made return for taxes thereon, the railroad companies having no rolling stock operating there, but all equipment, engines, etc., being the property of the Terminal Railroad Association using the main lines and tracks of the railroad companies, such unwritten agreement was an oral lease between the railroad companies and the Terminal Railroad Association.
In Missouri it is not essential that a lease be in writing; it may be oral.
3. TAXATION: Railroad Companies. On certiorari in the Supreme Court to review the proceedings of the State Tax Commission and the State Board of Equalization in relation to assessment for taxes on railroad tracks in the city of St. Louis and St. Louis County, the Terminal Railroad Association holding a lease on the tracks, a railroad company, under Sections 10011 and 10012, Revised Statutes 1929, is not only required to make a return for taxes on all railroad tracks that it owns, but also on all roadbeds that it leases.
Since the Terminal Railroad Association holds leases on the property of the railroad companies, which owned all the stock in five railroad companies, the taxes should be apportioned between the city of St. Louis and St. Louis County in the ratio of the number of miles of main line track that each has to the total number of miles of main line track that the Terminal Railroad Association owns or controls through leases.
As a matter of law the State Tax Commission erred in finding that the five railroads owning tracks in St. Louis County and the city of St. Louis should be assessed separately.
C.W. Detzen for relator.
(1) In providing for the assessment and taxation of railroads the Legislature intended to tax operating companies and the entire railroad systems controlled by them, rather than separate corporate entities holding title to small parts of the system, in order that the entire going value of the system, including intangible as well as tangible property, may be taxed. The Terminal Railroad Association of St. Louis should be assessed by respondents under the statutes for all of the property controlled and used by it in its railroad system, regardless of the fact that the record title to parts of its main line is held by separate corporations which it owns completely, and the respondents erred in rejecting the order of the county court determining that the association should be assessed for the property returned by the Terminal Railway and the Belt Terminal. Chap. 59, Art. XIII, R.S. 1929; State v. Wiggins, 208 Mo. 622, 106 S.W. 1005; Secs. 4812, 10010, R.S. 1929; Attorney General v. Boston, 124 N.E. 257; People v. Lohmer, 112 N.E. 181; McCoach v. Minehill, 228 U.S. 295; Lewellyn v. Pittsburgh, 222 F. 177; Traction v. Collector, 223 F. 984; State ex rel. v. Railroad, 215 Mo. 479, 144 S.W. 986. (2) A principal purpose of the railroad taxing law is to allocate the taxes on railroads between all counties which contribute to their success, and the courts will not permit evasion of this legislative purpose through the medium of holding companies, but will disregard the legal fiction of distinct corporation existences. Taxes on all of the property controlled and used in the operation of the railroad system of the Terminal Railroad Association of St. Louis, whether owned by it or held in the names of separate companies which it owns completely, should be allocated by respondents between the city and county of St. Louis in proportion to the number of miles of mainline track in each of those jurisdictions. Chap. 59, Art. XIII, R.S. 1929; Sec. 10010, R.S. 1929; Douglas v. Minneapolis, 150 N.W. 422; Chicago v. County, 99 Neb. 208; State v. Wiggins, 106 S.W. 1012, 208 Mo. 622; State v. Liberty, 53 S.W.2d 899, 331 Mo. 386; C., M. St. P. Ry. v. Minneapolis, 247 U.S. 487; Hunter v. Baker, 225 F. 1006; Westinghaus v. Allis, 176 F. 362; Fletcher, Cyclopedia of Corps., sec. 45, p. 63; United States v. Elgin, 298 U.S. 492.
Roy McKittrick, Attorney General, and Tyre W. Burton, Assistant Attorney General, for respondents; E.H. Wayman, Andrew J. Reis and Francis Finley of counsel.
(1) The State Tax Commission and the State Board of Equalization, having acted within their jurisdiction, their determination is final and conclusive. Wait v. A., T. S.F. Ry. Co., 204 Mo. 491, 103 S.W. 60; State ex rel. Miller v. O'Malley, 117 S.W.2d 321, 342 Mo. 641; State ex rel. Kennedy v. Remmers, 340 Mo. 131, 101 S.W.2d 71; State ex rel. Shartel v. Skinker, 25 S.W.2d 478, 324 Mo. 955; State ex rel. Ball v. State Board of Health, 325 Mo. 41, 26 S.W.2d 777; State ex rel. v. Gilbert, 164 Mo. App. 139, 148 S.W. 125; State ex rel. Brunice v. Franklin, 283 S.W. 712, 220 Mo. App. 232; R.S. 1929, secs. 9854, 10017; R.S. 1929, Art. XIII, Chap. 59. (2) The action of the State Board of Equalization and the State Tax Commission in rejecting the order of the county court, which took the view that the Terminal Railroad Association should be assessed for the property returned by the St. Louis Terminal Railway Company and the St. Louis Belt Terminal Railway Company, should be affirmed. (a) The St. Louis Terminal Railway Company and the St. Louis Belt Terminal Railway Co., being distinct corporate entities, their roads being neither leased nor branch lines, were railroad companies within the meaning of Chapter 59, Article XIII, Revised Statute 1929, and each must make separate returns and be separately assessed. State ex rel. Hammer v. Wiggins Ferry Co., 208 Mo. 622, 106 S.W. 1005; Chap. 59, Art. XIII, R.S. 1929; R.S. 1929, secs. 10011, 10012; United States v. Baltimore, etc., Ry. Co., 226 U.S. 14, 57 L.Ed. 104, 33 Sup. Ct. 5; Paragraph 4 of Section 5 of the Interstate Commerce Act, as amended by Act of Congress 1933, 49 U.S.C.A., Title 49, Sec. 5, Par. 4 (1939 Cumulative Pocket Part, pp. 34, 35); Pullman's Palace Car Co. v. Mo. Pac. Ry. Co., 115 U.S. 587, 29 L.Ed. 499, 6 Sup. Ct. 195; Clark v. A., T. S.F. Ry. Co., 319 Mo. 865, 6 S.W.2d 954; First Natl. Bank v. Davids, 43 Iowa 424; Guenther v. Patch, 140 N.Y.S. 223, 155 A.D. 27; City of Jeffersonville v. Louisville Bridge Co., 169 Ind. 645, 83 N.E. 337; People ex rel. Shipton v. Dunleith Dubuque Bridge Co., 152 N.E. 526, 322 Ill. 99; State ex rel. Milwaukee Term. Railroad Co. v. Superior Court of King County, 103 P. 469. (b) The doctrine of corporate entity being one of substance and validity should be ignored with caution and only where used as a subterfuge or to accomplish an unlawful purpose, which is not present in this case, and respondents having determined as a fact that no such intimate relationship exists as to justify disregard of the corporate entity, their determination must be upheld. Pickwick Corp. v. Welch, 21 F. 669; St. Louis Union T. Co. v. Oregon Annual Conference, etc., 14 F. Supp. 41; Darlington Lbr. Co. v. Mo. Pac. Ry. Co., 243 Mo. 224, 147 S.W. 1052; Walker v. Gulf I. Ry. Co., 269 F. 885; United States v. Elgin, Joliet Eastern Ry. Co., 298 U.S. 492, 80 L.Ed. 1300, 56 Sup. Ct. 841; State ex rel. Hammer v. Wiggins Ferry Co., 208 Mo. 622, 106 S.W. 1005.
Arthur V. Lashly, Maurice P. Phillips, Marvin E. Boisseau, Oliver J. Miller, Glen Mohler, Arthur U. Simmons, Lashly, Lashly, Miller Clifford and Atwood Atwood for the School Districts and Municipalities of St. Louis County, amici curiae.
(1) By the statutes pertaining to the assessment and taxation of railroads it was the intention of the Legislature to give the State Tax Commission authority to assess for taxation only a complete operating entity or an entity actively engaged in transportion by rail. Such an entity referred to as a "railroad" in the statutes is the "System" or combined units considered as a whole and not its mere property owning affiliates separately. Chap. 59, Art. XIII, R.S. 1929. This may be directly inferred from the language employed in the many sections and acts making up the railroad taxing statutes. (a) Only a railroad in its dynamic sense was intended to make a return to the state instead of to the local assessor. Sec. 10010, R.S. 1929. The term "every railroad company" means every person, association or corporation in charge of the operation of a railroad. State v. Wiggins Ferry Co., 208 Mo. 622, 106 S.W. 1012. (b) The terms "belonging to" or "owned by" as used in the statutes in reference to dynamic property are used interchangeably with the terms "control of," "hired," or "leased," and are intended to carry the meaning of "use of property in operation of transportation by rail," and not mere static ownership. Because the county court is to return all property to the State Tax Commission controlled by a railroad if it is omitted in its return. Sec. 10014, R.S. 1929. Because all property leased by a railroad if used in its operation is to be returned. Sec. 10010, R.S. 1929. Although under all other circumstances leased property is taxed in the hands of the owner. State ex rel. Glenn v. Bridge Co., 134 Mo. 321; State ex rel. Zeigenhein v. Thompson, 149 Mo. 441. Because hired property is ordinarily taxed in the hands of the owner, but when used in the operation of a railroad it is to be returned to the State Tax Commission for assessment. Sec. 10009, R.S. 1929. Because the Commission itself may find and include in its valuation or assessment of a "railroad" all property used, hired, leased, controlled and owned by it, if no return is made to it. Sec. 10014, R.S. 1929. (2) This clearly appears from a study of the compulsions underlying the adoption of the statutes and which gave them birth. The manifest purpose considered historically is important. Wallace v. Woods, 340 Mo. 452. "The reason for the law is the life of the law." State ex rel. Pollock v. Becker, 289 Mo. 660, 233 S.W. 641. A study of the pre-existing conditions should be made. State ex rel. City v. Hackman, 293 Mo. 313. (a) It was the amalgamation of local railroads into multi-county systems and later state-wide systems which created the necessity for a state assessing agency. Tendencies in Railroad Taxation by Prof. Roswell C. McCrea, 15 Annals of Am. Academy, p. 335; Taxation of Railroads by Wilbur O. Hedrick, Wynkoop, Hallenbeck Co., Lansing, 1912; 5 State Taxation of Railroads. (b) It was also the wealth and earning power represented in the combined unit, not the separate local units, which was intended to be reached by a state assessing agency. (c) It was the necessity for devising a method for equal distribution of rolling stock between the subdivision through which the railroad ran that suggested a central agency. (3) This may also be determined by the practical application or operation of the law and the inequalities produced by any other solution. Bowers v. Mo. Mutual, 62 S.W.2d 1058. (a) For seven years the State Tax Commission and the Board of Equalization have assessed the system and allocated it as such. This solution seems the practical one, and created few, if any, inequalities in practice. Special consideration should be given to the solution by the authorities charged with the administration of the law. State ex rel. Union Elec. v. Baker, 316 Mo. 853; State ex rel. v. Cupples Station, 283 Mo. 115. Some consideration should be given to the silence of the Legislature for those seven years. City of Huntsville v. Eatherton, 182 S.W. 767. Acquired rights should be considered. 2 Sutherland on Statutory Construction, 897. (b) The taxing of properties in the hands of a nonoperating company invades the field and jurisdiction of the local assessors, under Section 10024. State ex rel. Zeigenhein v. Frisco, 117 Mo. 1; Rio Grande, etc., v. Salt Lake, 101 P. 586; Neeley v. Buchanan, 54 S.W. 995; City of Detroit v. Detroit Mfg. Ry., 113 N.W. 365, 149 Mich. 530; People v. D. D. Bridge Co., 152 N.E. 526, 322 Ill. 99; State ex rel. v. Hannibal Ry. Co., 97 Mo. 348. (c) The intangible values represented by the going railroad cannot be reached when an entity other than the operating unit is assessed. People v. State Board, 125 N.Y.S. 895; City v. Louisville Bridge Co., 83 N.E. 337. (d) The intangible values represented in a going concern cannot be equally distributed between the counties through which the railroad runs unless it is assessed in the hands of the operating unit. State Railroad Tax Cases, 92 U.S. 575, 23 L.Ed. 663. (e) In interstate relationships it would be unconstitutional to assess property of a railroad located outside of a State, unless the system were assessed upon its "grand value" as a going concern and that portion taken for State taxation which is represented by the number of miles of the road within the State. Pittsburgh, etc., Ry. Co. v. Backus, 154 U.S. 421, 38 L.E. 1031; State ex rel. v. Wiggins Ferry Co., 208 Mo. 622, 106 S.W. 1012. (f) If the law contemplates spreading all rolling stock between the counties, then assessing a unit of a larger operating company serves to prevent such a spread.
Emmet T. Carter, amicus curiae.
This case comes to the writer on reassignment.
This is an original proceeding by certiorari in this court at the relation of the county of St. Louis to review the proceedings of respondents as members of the State Tax Commission and the State Board of Equalization in connection with the assessment of taxes of the Terminal Railroad Association of St. Louis, St. Louis Merchants' Bridge Terminal Railway Co., St. Louis Transfer Railway Co., whose tracks are only in the city of St. Louis, St. Louis Terminal Railway Co., which has tracks both in the city of St. Louis and the county of St. Louis, and the St. Louis Belt and Terminal Railway Co., whose tracks are located only in the county of St. Louis. Collectively, these railroads have main line tracks of 13.69 miles in the county of St. Louis and 12.79 miles of main line tracks in the city of St. Louis.
This suit is really a contest between the county of St. Louis and the city of St. Louis to determine the proper proportions of taxes each is to receive from these railroad companies. The railroad companies apparently have no interest in the outcome of this litigation as both relator and respondents say the taxes paid by these companies will be approximately the same, regardless of how this litigation is determined.
In the recent case of State of Missouri, at the relation of St. Louis Union Trust Co. et al. v. Neaf as Assessor of St. Louis County, et al., 346 Mo. 86, 139 S.W.2d 958, we held in a certiorari of this kind that we are limited to an inspection of the records of respondents as shown by their return to our writ. From such inspection we are to determine the question of lack of jurisdiction or abuse of jurisdiction of the inferior tribunal, or of such tribunal's exercise of excess jurisdiction, or other error in the proceedings which appear from the record of such tribunal as a matter of law. It does not serve the purpose of an appeal or writ of error, and all that can be done under it is either to quash or to refuse to quash the record of which complaint is made.
From respondents' records we find that for the year 1938 each of the above-named railroad companies made separate tax returns to the proper taxing authorities of this State. When the duplicate statements of the property of the St. Louis Terminal Railway Co. and the St. Louis Belt and Terminal Railway Co., were examined by the county court of the county of St. Louis, pursuant to Section 10014, R.S. Mo., 1929, that court made an order disapproving these returns on the grounds that they should have been made by the Terminal Railroad Association. This order was filed with respondent, the State Tax Commission, which held a hearing on the matter of the assessment of the five corporations, denied the claim of St. Louis County, and ordered them assessed separately. St. Louis County appealed to the State Board of Equalization which affirmed the order of the Tax Commission.
The findings of fact of the Tax Commission show that for the years 1932, 1933, 1934, 1935, 1936, and 1937, the Terminal Railroad Association of St. Louis made the only tax returns for these five companies. This latter company owns all the stock in the other four railroad corporations, and these four companies have no rolling stock, but all the engines, cars and other equipment are the property of the Terminal Railroad Association, who maintains the property of the other companies through its employees. Nor do these other companies receive any revenue or have any bank account. Each of the five railroad corporations has its own set of officers and directors and has at all times made since their creation separate franchise and other corporate returns to the State of Missouri. In the year 1925, with the approval of the Interstate Commerce Commission, the Terminal Railroad Association entered into a formal written lease for 99 years with the St. Louis Merchants' Bridge Terminal Railway Co., and the St. Louis Transfer Railway Co., for the consideration of one dollar and the payment of the lessor's taxes and all corporate assessments and expenses, to maintain the property in good condition.
In reference to the relation between the Terminal Railroad Association and the St. Louis Terminal Railway Co., and the St. Louis Belt and Terminal Railway Co., the respondents found as follows:
"That the Terminal Railroad Association of St. Louis has no written contract or written lease agreement with the St. Louis Terminal Railway Company, or with the St. Louis Belt and Terminal Railway Company, but had and exercises the use of their roadbeds, main lines and side tracks for railroad purposes, under an unwritten working agreement, and in consideration of such use maintains the lines in repair and pays their corporate expenses and taxes;
"That any and all taxes assessed against the mileage mentioned here are, and the payment of corporate expenses and maintenance for many years have been, paid exclusively by the Terminal Railroad Association of St. Louis, in consideration of the use of their lines, tracks and appurtenances;
"That during the entire year of 1938 the Terminal Railroad Association of St. Louis operated over and used all the main lines and side tracks listed in the schedule in paragraph 3 above, and in so operating the same used its own rolling stock, physical appurtenances, personnel and money . . ."
While it is true respondents have found there was no "written lease" between the Terminal Railroad Association and the two railroad companies, yet it did find that the former company did use the roadbeds, main lines and side tracks for railroad purposes and for such use agreed to maintain the lines in repair and to pay their corporate expenses and taxes.
We are of the opinion that this "unwritten agreement" was an oral lease between the two companies and the Terminal Railroad Association, as contemplated by our statute in reference to taxing railroads.
"A lease is generally regarded as a conveyance or grant of an estate in real property for a limited term with conditions attached, and in this connection has been defined as a conveyance to a person for life or years, or at will, in consideration of a return of rent or other recompense, and as a conveyance of any lands or tenements, usually in consideration of rent or other annual recompense, made for life, for years, or at will, but always for a less time than the lessor has in the premises." [35 C.J., sec. 381, page 1140.]
Respondents admit that this is a correct definition of a lease, because in their brief they define a lease as follows: "A contract by which one conveys lands, tenements or hereditaments for life, for a term of years or at will, or for any less interest than that of the lessor, usually for a specified rent or compensation."
Nor is it essential that a lease in this State be in writing; it may be oral. [Jenkins v. Womach, 164 Mo. App. 38, 147 S.W. 223; 35 C.J. 1148, sec. 401.]
Respondents say that it cannot be a lease because paragraph 4 of Section 5 of the Interstate Commerce Act provides that all railroad leases must be approved by the Interstate Commerce Commission. We are not concerned with whether it is the type of lease that must be approved by the Interstate Commerce Commission or whether the Interstate Commerce Act has been violated; we are concerned only with the interpretation of our taxing statute in reference to railroads, the controlling sections of which were enacted in the year 1883. They are as follows:
Section 10011 — "All railroads now constructed, in course of construction, or which shall hereafter be constructed in this state, and all other property, real, personal or mixed, owned, hired or leased by any railroad company or corporation in this state, shall be subject to taxation for state, county or other municipal or local purposes, and taxes levied thereon shall be levied in the manner hereinafter set forth."
Section 10012 — "On or before the first day of January in each and every year, the president or other chief officer of every railroad company . . . shall furnish to the state auditor a statement, duly subscribed and sworn to by said president or other chief officer, before some officer authorized to administer oaths, setting out in detail the total length of their road . . . including branch or leased roads, the entire length in this state, and the length of double or sidetracks, with depots, water tanks and turntables, the length of such road, double or sidetracks in each county, municipal township, incorporated city, town or village through or in which it is located in this state; the total number of engines and cars of every kind and description, including all palace or sleeping cars, passenger and freight cars, and all other movable property owned, used or leased by them on the first day of June in each year, and the actual cash value thereof."
As we read these sections, a railroad company is not only required to make a return on all railroad tracks that it owns, but also on all roadbeds that it leases.
Under Section 10022, the "board shall apportion the aggregate value of all property hereinbefore specified belonging to or under the control of each railroad company, to each county, municipal township, city or incorporated town in which such road is located, according to the ratio which the number of miles of such road completed in such county, municipal township, city or incorporated town shall bear to the whole length of such road in this state." (Italics ours.) In determining the length of the road for the purpose of apportionment, only the length of its main track is to be considered. [State ex rel. Murphy et al. v. Stone et al., 119 Mo. 668, 25 S.W. 211.]
Since we have held that the Terminal Railroad Association holds leases on the property of the St. Louis Terminal Railway Co., and the St. Louis Belt and Terminal Railway Co., it necessarily follows that the roads of these two companies are "under the control" of the Terminal Railroad Association. Therefore, the taxes due from the five railroad should be proportioned between the city of St. Louis and the county of St. Louis in the ratio of the number of miles of main line track that each has to the total number of miles of main line track that the Terminal Railroad Association owns or controls through leases.
From an inspection of the record before us, we are of the opinion as a matter of law that respondents erred in finding that the five railroads in question should be assessed separately.
From what we have said, it follows that the record of respondents should be quashed. It is so ordered. All concur.