Case Summary for March 1, 2001

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Case Summary for March 1, 2001

THE FOLLOWING DOCKET SUMMARIES ARE PREPARED BY THE COURT'S STAFF FOR THE INTEREST AND CONVENIENCE OF THE READER. THE SUMMARIES MAY NOT INCLUDE ALL ISSUES PENDING BEFORE THE COURT AND DO NOT REFLECT ANY OPINION OF THE COURT ON THE MERITS OF A CASE. COPIES OF ALL BRIEFS FILED WITH THE COURT ARE AVAILABLE AT THE SUPREME COURT BUILDING, COURT EN BANC DIVISION. SUMMARIES ARE UNOFFICIAL AND SHOULD NOT BE QUOTED OR CITED.

SC81399 consolidated with SC83200
Missouri Merchants and Manufacturers Association, et al. v. State of Missouri, et al. Francis Flotron, Jr., et al. v. Roger Wilson, Governor, et al.
Cole County
Hancock Amendment; conservation sales tax and tax credits

Generally, the Hancock Amendment (Article X, section 16-24) uses a formula of total state revenue (TSR) minus revenue limits to produce tax refunds, if any. Missouri Merchants and Manufacturers Association, the Missouri Chamber of Commerce and various corporate and individual taxpayers brought an action challenging the calculation and distribution of Hancock refunds. The MMMA action was certified as a class of all state income taxpayers. They claim the state wrongly excluded tax credits in calculating total state revenue and failed to distribute refunds based on tax liability not reduced by tax credits. In a second action, certain individuals and corporations (Flotron action) claim the proceeds of the conservation sales tax had been improperly excluded from TSR. The Flotron plaintiffs intervened in the MMMA action and act as co-representative for the class. The court held that total state revenue need not be recalculated to include all credits and that refunds should be based on the amount of taxes paid, not amount of tax credits used. MMMA et al. appealed. The court also held that the Hancock Amendment's revenue limit must be recalculated, excluding the conservation sales tax from TSR in the base year, and Hancock Amendment refunds are due. The state defendants cross-appealed.

MMMA et al. argues: (1) The court erred in ruling that tax credits that reduce tax liability are not TSR. All credits reduce tax liability. Therefore, this interpretation renders the differentiation between "credits based on actual tax liability" and "credits not related to actual tax liability" meaningless, renders more than half of the definition of total state revenue surplusage, and enables the legislature to circumvent the Hancock revenue limit. (2) The court erred in denying refunds based on tax liability to taxpayers who used redeemed credits to pay their tax liability. If the tax credits are TSR, refunds should be paid. Moreover, constitutional language provides refunds based on tax "liability," not tax payment.

The state responds: (1) Redeemed tax credits should not be included in TSR. The Hancock Amendment does not require adding nonrevenue items. To the extent tax credits are used to reduce tax liability, they relate to tax liability and are not required to be in the TSR. Or, if any part of redeemed tax credits are to be in TSR, it should be limited to the amount of redeemed tax credits that are refundable, that is, that exceed the taxpayer's tax liability. (2) Relief should not be retroactive. The Hancock Amendment does not constitute consent to the entry of a monetary award against the state. The court erred in certifying the class. (3) Tax credits are a reduction in one's tax liability and only the reduced amount is paid to the state. It is not a way to pay liability owed as MMMA contends. They are not included in TSR.

On cross-appeal, the state argues the court erred in ruling the base year ratio should be recalculated. The Hancock Amendment's provision regarding voter approval of taxes allows TSR to exceed the revenue limit by the amount of the voter-approved tax but does not permit voters to redefine the revenue limit. An earlier Court opinion did not address the base year ratio or the revenue limit or require that either be recalculated. The declararion that additonal Hancock refunds were due to a class of plaintiffs was in violation of the state's sovereign immunity.

State Auditor McCaskill argues the trial court erred in holding that conservation sales tax revenues must be removed from the base year ratio. The Court has ruled that the voter-approved spending of the sales tax revenues went into effect after the calculation of the tax and spending ceiling.

Cross-respondents MMMA et al. argue: The court did not err in holding that revenues from the conservation sales tax are excluded from TSR, requiring refunds. There is only one definition of TSR and that definition applies wherever the term TSR is used in the Hancock formula. Exclusion of the conservation sales tax moneys from FY 1980-81 results in a lower base year ratio that should be used in Article X, section 18(a), which results in additional refunds due taxpayers for FY1995-1999.

Cross-respondents Flotron et al. argue: (1) The conservation sales tax was excluded from TSR by voters prior to the definition and calculation of the base year total state revenues. The election occurred on November 4, 1980 and the Fiscal year 1980-81 was not capable of definition or calculation until June 30, 1981. (2) An earlier decision excludes the conservation sales tax from TSR and mandates recalculation of the base year ratios. The court's decision excludes the conservation sales tax from TSR, while the state's current base year ratio includes TSR for the year ended June 30, 1981, and thus the state's current base year ratio unconstitutionally inludes the conservation sales tax specifically ordered excluded by this Court. (3) Article X, section 18(b) waives sovereign immunity. It mandates refunds, and no other remedy to enforce it exists.

SC83203
Phillip Williams v. Jennifer Williams
Platte County
Marital dissolution, amended judgment

In this dissolution of marriage proceeding, the trial court amended its original judgment within 30 days after entry. The wife appealed.

The wife argued Rule 75.01 allows the trial court during the 30 day period following entry of judgment, for good cause, to amend its judgment, but only after giving the parties reasonable notice and an opportunity to be heard, which she was not given.

The Western District of the Court of Appeals transferred the case to the Supreme Court based on the issue of whether a violation of Rule 75.01 for failure to give required notice and the opportunity to be heard results in the amended judgment being void or only voidable.

The wife also argues the court failed to value and/or divide all marital property as section 452.330 requires; the court erred in valuing certain marital property; the court made a finding of domestic violence but failed to make specific findings that the custody and visitation arrangement best protects the child; the court's attribution of income to the wife for child support purposes was unsupported; the court should have awarded her maintenance; and the court should have considered the disparity in the parties incomes and property division to award her attorney fees.

No respondent's brief was filed.

SC82552
Miss Kitty's Saloon, Inc., d/b/a Million Dollar Fantasy Ranch v. Missouri Department of Revenue, et al.
Johnson County, Cole County
Adult cabaret background check and sales tax statute and order

As authorized by sections 573.503 and 573.505, Johnson County voters approved in 1997, and the county commission ordered, a background check on all employees of adult cabarets, with a 10% sales tax on retail sales in the cabaret to fund the checks. Miss Kitty's Saloon, Inc., a nude-dancing establishment known as the Million Dollar Fantasy Ranch, was the only adult cabaret in Johnson County. The cabaret challenged the statutes and order imposing the checks and tax. The court upheld their constitutionality. The cabaret appeals.

The cabaret argues: (1) The statutes and order authorizing the checks and tax violate equal protection. They are not rationally related to a legitimate state interest. (2) The statutes and order also violate due process. They do not provide a rational basis for the amount of the sales tax in relation to the announced objective but are based on a arbitrary, punitive plan.

The Department of Revenue, its director, and Johnson County respond: (1) There is no equal protection violation. The statutes and tax do not involve a suspect class, do not infringe on fundamental rights, and are rationally related to a legitimate state interest. (2) They comply with due process. They have a rational basis in relationship to their objective. The tax is set at the statutory limit. The tax itself is not arbitrary or capricious.

SC82988
State Farm Mutual Automobile Insurance Company and State Farm Fire & Casualty Co. v. Michael J. Esswein and Glennetta Esswein, and Chrysler Ins. Co.
St. Louis County
Auto insurance coverage

The mother/driver rented a van and was involved in a one-car accident that rendered her son quadriplegic. This suit involved a dispute as to which insurance policies and provisions applied. Among the policies, the rental agreement provided for the minimum financial responsibility in all states, except Ohio, where the accident happened. The court found that the insurance policy on the van was ambiguous as to coverage in Ohio and determined there was no limit to liability in that state. That insurer (Chrysler) appeals.

The insurer argues: (1) This Court lacks jurisdiction because the application to transfer to this Court was not filed within 15 days of the denial of rehearing/transfer by the Court of Appeals. (2) The driver never requested or contracted for unlimited coverage. The policy states the coverage is limited to that required by the state in which the auto is being used. Any ambiguity cannot reasonably be construed to provide unlimited coverage. (3) To the extent the parties did not agree on insurance limits, the court should supply reasonable limits in the circumstances, to comport with the parties' intentions and expectations, which would be the minimum financial responsibility limits in Ohio.

The son responds: (1) The application for transfer was timely filed within 15 days of denial of is motion for rehearing/transfer. (2) The appeal should be dismissed because the notice of appeal was filed more than 10 days after the trial court judgment became final. (3) The insurer has preserved no issues for review because every argument is raised for the first time on appeal, not at trial. (4) The insurance policy states the liability limits endorsement does not apply in Ohio. So the policy has no limit for accidents there.

SC81399 consolidated with SC83200
Missouri Merchants and Manufacturers Association, et al. v. State of Missouri, et al. Francis Flotron, Jr., et al. v. Roger Wilson, Governor, et al.
Cole County
Hancock Amendment; conservation sales tax and tax credits

Generally, the Hancock Amendment (Article X, section 16-24) uses a formula of total state revenue (TSR) minus revenue limits to produce tax refunds, if any. Missouri Merchants and Manufacturers Association, the Missouri Chamber of Commerce and various corporate and individual taxpayers brought an action challenging the calculation and distribution of Hancock refunds. The MMMA action was certified as a class of all state income taxpayers. They claim the state wrongly excluded tax credits in calculating total state revenue and failed to distribute refunds based on tax liability not reduced by tax credits. In a second action, certain individuals and corporations (Flotron action) claim the proceeds of the conservation sales tax had been improperly excluded from TSR. The Flotron plaintiffs intervened in the MMMA action and act as co-representative for the class. The court held that total state revenue need not be recalculated to include all credits and that refunds should be based on the amount of taxes paid, not amount of tax credits used. MMMA et al. appealed. The court also held that the Hancock Amendment's revenue limit must be recalculated, excluding the conservation sales tax from TSR in the base year, and Hancock Amendment refunds are due. The state defendants cross-appealed.

MMMA et al. argues: (1) The court erred in ruling that tax credits that reduce tax liability are not TSR. All credits reduce tax liability. Therefore, this interpretation renders the differentiation between "credits based on actual tax liability" and "credits not related to actual tax liability" meaningless, renders more than half of the definition of total state revenue surplusage, and enables the legislature to circumvent the Hancock revenue limit. (2) The court erred in denying refunds based on tax liability to taxpayers who used redeemed credits to pay their tax liability. If the tax credits are TSR, refunds should be paid. Moreover, constitutional language provides refunds based on tax "liability," not tax payment.

The state responds: (1) Redeemed tax credits should not be included in TSR. The Hancock Amendment does not require adding nonrevenue items. To the extent tax credits are used to reduce tax liability, they relate to tax liability and are not required to be in the TSR. Or, if any part of redeemed tax credits are to be in TSR, it should be limited to the amount of redeemed tax credits that are refundable, that is, that exceed the taxpayer's tax liability. (2) Relief should not be retroactive. The Hancock Amendment does not constitute consent to the entry of a monetary award against the state. The court erred in certifying the class. (3) Tax credits are a reduction in one's tax liability and only the reduced amount is paid to the state. It is not a way to pay liability owed as MMMA contends. They are not included in TSR.

On cross-appeal, the state argues the court erred in ruling the base year ratio should be recalculated. The Hancock Amendment's provision regarding voter approval of taxes allows TSR to exceed the revenue limit by the amount of the voter-approved tax but does not permit voters to redefine the revenue limit. An earlier Court opinion did not address the base year ratio or the revenue limit or require that either be recalculated. The declararion that additonal Hancock refunds were due to a class of plaintiffs was in violation of the state's sovereign immunity.

State Auditor McCaskill argues the trial court erred in holding that conservation sales tax revenues must be removed from the base year ratio. The Court has ruled that the voter-approved spending of the sales tax revenues went into effect after the calculation of the tax and spending ceiling.

Cross-respondents MMMA et al. argue: The court did not err in holding that revenues from the conservation sales tax are excluded from TSR, requiring refunds. There is only one definition of TSR and that definition applies wherever the term TSR is used in the Hancock formula. Exclusion of the conservation sales tax moneys from FY 1980-81 results in a lower base year ratio that should be used in Article X, section 18(a), which results in additional refunds due taxpayers for FY1995-1999.

Cross-respondents Flotron et al. argue: (1) The conservation sales tax was excluded from TSR by voters prior to the definition and calculation of the base year total state revenues. The election occurred on November 4, 1980 and the Fiscal year 1980-81 was not capable of definition or calculation until June 30, 1981. (2) An earlier decision excludes the conservation sales tax from TSR and mandates recalculation of the base year ratios. The court's decision excludes the conservation sales tax from TSR, while the state's current base year ratio includes TSR for the year ended June 30, 1981, and thus the state's current base year ratio unconstitutionally inludes the conservation sales tax specifically ordered excluded by this Court. (3) Article X, section 18(b) waives sovereign immunity. It mandates refunds, and no other remedy to enforce it exists.

end