author: LAURA DENVIR STITH, Judge. WILLIAM RAY PRICE, JR., Chief Justice,

text:
    BRINKER MISSOURI, INC., Appellant, v. DIRECTOR OF REVENUE, Respondent.
    No. SC 90463.
    Supreme Court of Missouri, En Banc.
    Aug. 31, 2010.

      Ann K. Covington, Edward F. Downey, Carole L. lies, Bryan Cave LLP, Jefferson City, for Appellant.
    Jeremiah J. Morgan, Deputy Solicitor General, Attorney General’s Office, Jefferson City, for Respondent.
   LAURA DENVIR STITH, Judge.

Brinker Missouri, Inc. seeks review of an Administrative Hearing Commission decision correctly determining that Brink-er’s purchases of kitchen equipment and other items were not exempt from use tax pursuant to sections 144.030.2(4) and (5) and that Brinker’s purchases of non-disposable tableware, cutlery, chairs, tables and similar items for use by its customers were not exempt from use tax pursuant to section 144.615(6). Brinker does not qualify for the exemptions under sections 144.030.2(4) and (5) because its restaurants are not “plants” and because it prepares' and serves food rather than manufactures a product. Brinker also is not entitled to claim a resale exemption under section 144.615(6) or a sale exclusion under section 144.605(13). It neither permanently transfers nor charges its customers additional consideration for giving them the privilege of sitting in a chair and using silverware to eat their meals on a dish or drink their soup from a bowl or tea in a glass while sitting at a table. The Court rejects Brinker’s argument that use of these items constitutes a sale within the meaning of Missouri law. The commission’s decision is affirmed.

1. FACTUAL AND PROCEDURAL BACKGROUND

The material facts are not in dispute. Brinker Missouri, Inc., headquartered in Dallas, Texas, owns and operates 23 restaurants in Missouri, including Chili’s Grill & Bar, Romano’s Macaroni Grill, On the Border and Maggiano’s Little Italy. Each restaurant prepares and sells food and drink to the public and is subject to Missouri sales and use tax where applicable.

During the relevant period — October 1, 2003, to December 31, 2004 — Brinker purchased what it refers to as “kitchen machinery, equipment and parts” that it used to prepare food and drinks for its customers and to refrigerate or heat them pending serving. Although the record does not specify the specific nature of this “machinery” or “equipment,” it appears to refer to stoves, knives, refrigerators, cutting tables and similar items commonly found in kitchens, for the record states that Brinker’s restaurants use these items for cutting, cooking, mixing or blending ingredients such as for salsa; baking, frying or otherwise cooking raw foods; keeping its salsa and other food and drink ingredients chilled or warm during their preparation to prevent spoilage or to hold them until there was a need to assemble or mix them into the final food item; and generally presenting food and drinks to customers in an attractive way in individual servings.

Also during the period at issue, the restaurants run by Brinker were furnished with chairs, bar stools, tables, menus, dishes, tableware, glassware, booster seats, high chairs and similar items. Customers were served meals on the plates, from which they ate while sitting at the tables and using the silverware and glasses, as in other restaurants. The cost of these items was included in each restaurant’s overhead. Brinker charges the same prices for meals and drinks for dine-in consumption as for sales “to go.”

Brinker initially paid use tax for the period October 1, 2003, through December 31, 2004, but in October 2006, Brinker sought a refund of $54,034.86 of the use tax it had paid. The director denied $48,966.83 of the claim, and Brinker sought review of the denial of $44,183.93 of that amount to the commission. It argued that an exemption applied under sections 144.030.2(4) and (5) and section 144.615(6) on the kitchen equipment used to make food and prepare it for serving customers as well as on furniture, silverware, plates and similar items it used to serve its customers food. The commission denied Brinker’s claim. Brinker seeks review under Mo. Const, art. V, § 3.

II. STANDARD OF REVIEW

The commission’s decision shall be affirmed if: (1) it is authorized by law; (2) it is supported by competent and substantial evidence on the whole record; (3) mandatory procedural safeguards are not violated; and (4) it is not clearly contrary to the reasonable expectations of the General Assembly. § 621.193. “This Court reviews the AHC’s interpretation of revenue laws de novo.” Zip Mail Services, Inc. v. Dir. of Revenue, 16 S.W.3d 588, 590 (Mo. banc 2000). The commission’s factual determinations “are upheld if supported by ‘substantial evidence upon the whole record.’ ” Concord Publ’g House, Inc. v. Dir. of Revenue, 916 S.W.2d 186, 189 (Mo. banc 1996), quoting L & R Egg Co. v. Dir. of Revenue, 796 S.W.2d 624, 625 (Mo. banc 1990).

III. RESTAURANTS PREPARE RATHER THAN MANUFACTURE MEALS

Section 144.610.1 imposes a tax “for the privilege of storing, using or consuming within this state any article of tangible personal property.” Brinker admits this taxing provision applies to the items as to which it seeks a refund of use tax but argues that it is entitled to an exemption from Missouri use tax under sections 144.615(3) and 144.030.2(4) and (5) for the stoves, refrigerators, dispensers and other items it uses to prepare food and drink for its customers. Brinker bears the burden of showing that it qualifies for an exemption. Branson Props. U.S.A., L.P. v. Dir. of Revenue, 110 S.W.3d 824, 825 (Mo. banc 2003). “Exemptions from taxation are to be strictly construed against the taxpayer, and any doubt is resolved in favor of application of the tax.” Sw. Bell Tel. Co. v. Dir. of Revenue, 182 S.W.3d 226, 228 (Mo. banc 2005).

Section 144.615(3) exempts from use tax “[t]angible personal property, the sale of which ... would be exempt from or not subject to the Missouri sales tax under the provisions of subsection 2 and 3 of section 144.030.” (emphasis added).

Brinker argues that it qualifies for the exemptions provided in section 144.030.2(4) and (5), which it calls the “production exemptions.” Brinker’s theory is that when it cooks and serves food, it in effect is making a product; therefore, its restaurants qualify for these “production exemptions.” It says that the commission erred in holding that these exemptions apply only to manufacturers and not to retail sale restaurants, which merely engage in preparation of food to be served to restaurant diners.

Brinker reads the exemptions too broadly. Section 144.030.2(5) exempts machinery and equipment used to expand or establish manufacturing, mining and fabricating plants from sales tax, stating:

(5) Machinery and equipment ... purchased and used to establish new or to expand existing manufacturing, mining or fabricating plants in the state if such machinery and equipment is used directlg in manufacturing, mining, or fabricating a product which is intended to be sold ultimately for final use or consumption ...

(emphasis added). While Brinker is correct that this provision does not use the word “retail,” it does use the word “plants.” It expressly states that the machinery and equipment must be used for new or expanded plants that manufacture, mine or fabricate products intended to be sold ultimately for final use or consumption by others. Neither Chili’s, Macaroni Grill, On the Border nor Maggiano’s Little Italy are plants, and they do not fabricate, manufacture or mine products to be sold ultimately for final use or consumption. By its terms, this exemption simply does not apply to purchases of new or expanded kitchen equipment in Brinker’s restaurants. The commission did not err in’rejecting Brinker’s request for a refund of $21,588.19 in use tax it paid on new or expanded plant machinery and $1,909.56 in use tax it paid on new or expanded plant equipment.

Brinker also argues some of its kitchen equipment qualifies for an exemption for replacement machinery, equipment and parts under section 144.030.2(4), which states:

(4) Replacement machinery, equipment, and parts and materials and supplies solely required for the installation or construction of such replacement machinery, equipment, and parts, used directly in manufacturing, mining, fabricating or producing a product which is intended to be sold ultimately for final use or consumption ...

While section 144.030.2(4) does not repeat the reference to plants expressly, it says it applies to replacement machinery, equipment and parts. As just noted, machinery, equipment and parts qualify for the exemption only if they are used to establish new or expanded manufacturing, mining or fabricating plants. “[W]ords used in proximity to one another must be considered together.” Albanna v. State Bd. of Registration for Healing Arts, 293 S.W.3d 423, 431 (Mo. banc 2009). Moreover, statutory provisions are “not read in isolation but [are] construed together, and if reasonably possible, the provisions will be harmonized with each other.” Bachtel v. Miller Cnty. Nursing Home Dist., 110 S.W.3d 799, 801 (Mo. banc 2003). “Exemptions are interpreted to give effect to the General Assembly’s intent, using the plain and ordinary meaning of the words.” Branson Props. U.S.A., 110 S.W.3d at 825-26. The legislature did not intend to allow a use tax exemption for replacement machinery, equipment or parts that is broader than that for the equipment it replaces.

Brinker argues that this interpretation of the exemption is too narrow and that the words “manufacture” and “produce” should be read broadly to include preparing and cooking food. Brinker argues as though all that is required to avail itself of the exemption is simply to refer to preparing food as producing it and cooking food as manufacturing or transforming it.

Brinker’s argument ignores the fact that it is seeking to take advantage of an exemption. “An exemption is allowed only upon clear and unequivocal proof, and doubts are resolved against the party claiming it.” Id. at 825. This Court will give the language used in the statute a narrow construction, not the exceedingly broad and peculiar meaning argued for by Brinker. Dir. of Revenue v. Armco, Inc., 787 S.W.2d 722, 724 (Mo.1990) (“Canons of construction direct that exemption statutes be strictly construed against the taxpayer”).

The narrow construction of this exemption also comports with the common sense understanding of the words used in the statute. “Absent a statutory definition, the primary rule of statutory interpretation is to give effect to legislative intent as reflected in the plain language of the statute.” Akins v. Dir. of Revenue, 303 S.W.3d 563, 565 (Mo. banc 2010). In lay terminology, one does not speak of a restaurant as manufacturing or producing food or drink; instead, restaurants prepare, cook and serve food and drink to their customers. This is how the term “restaurant” is used whenever it appears in Missouri’s taxing and tourism statutes. For example, section 144.010.1(10)(e) defines “sale at retail” in relevant part as sales of “meals and drinks furnished ” in a place where “meals or drinks are regularly served to the public” (emphasis added). Section 67.671.4(1) provides for a tourism tax on the sale of food and beverages “sold for consumption on the premises of all restaurants ... or other establishments which are primarily used to provide food and beverage services ” (emphasis added). Section 144.014.2 defines the word “food” and in so doing refers to “food prepared by such establishment for immediate consumption ... including, but not limited to, sales of food by any restaurant, fast food restaurant, delicatessen, eating house, or café.” Section 66.500(3) defines ‘food establishment’ as any “restaurant which sells food at retail....” Accord § 82.850.1(2), RSMo Supp.2009; § 92.325(3); § 94.805.

These definitions have in common that they treat restaurants as furnishing food and beverages to the public at retail, not as plants or production facilities that manufacture, mine, fabricate or produce food or drink. Had the legislature intended to include restaurants or restaurant equipment within the exemptions set forth in section 144.030.2, then it would have added the word “restaurant” to those statutes, as it did in the various statutes just cited when it wanted to impose or exempt certain establishments from various taxes, and just as it provided specific exemptions in other subsections of section 144.030 for items or processes ranging from “feed for livestock or poultry” and “grain to be converted into foodstuffs which are to be sold ultimately in processed form at retail,” § 144.030.2(1), to “materials, replacement parts, and equipment [for] aircraft, aircraft power plants, and aircraft accessories.” § 144.030.2(40) RSMo, Supp.2009.

The legislature did not include the words “restaurant” or “preparation” or “furnishing” or “serving” in § 144.030.2, nor did it elsewhere indicate that it intended the words “manufacturing,” “mining,” “fabricating” or “producing” to be used in a broad sense to include preparation and cooking of food for service in a restaurant. The commission did not err in denying Brinker’s request for refunds of $10,181.08, $1,310.54 and $297.59, respectively, paid in use tax on the replacement machinery, equipment and parts it used to prepare and cook food in its restaurants.

IV. A RESTAURANT DOES NOT SELL A CUSTOMER THE FURNITURE ON WHICH SHE SITS OR THE TABLEWARE SHE USES TO EAT

Brinker also seeks a refund of the use taxes it paid on the furniture at which customers sit and eat as well as on the items in and on which their food is served, arguing that it sells use of these items to its customers, albeit temporarily, and that this either exempts or excludes it from paying use tax on these items.

Section 144.610.1 imposes a use tax “for the privilege of storing, using or consuming within this state any article of tangible personal property.” The definition of “use” excludes from the terms of the use tax “the sale of property in the regular course of business.” § 144.605(13) (emphasis added); Westwood Country Club v. Dir. of Revenue, 6 S.W.3d 885, 887 (Mo. banc 1999). Brinker argues that this exclusion applies to it because it sells use of the tables, chairs, plates, glasses, cutlery and other items it uses to serve meals to its customers.

Section 144.605(7) defines “sale” as “any transfer, barter or exchange of the title or ownership of tangible personal property, or the right to use, store or consume the same, for a consideration paid or to be paid.... ” As such, for a transaction to constitute a sale or resale, three elements must be satisfied: (1) a transfer, barter, or exchange; (2) of the title or ownership of tangible personal property, or the right to use, store, or consume the same; (3) for consideration paid or to be paid. Kansas City Power & Light Co. v. Dir. of Revenue, 83 S.W.3d 548, 551 (Mo. banc 2002).

Brinker’s theory is that as it includes the cost of the tables, chairs, silverware and dishes with and on which it serves its customers in its overhead, then each time it serves food to its customers, those customers not only are purchasing the food Brinker has prepared but also are buying the right to use the furniture on which they sit and the table on which the server places their food and the silverware with which they eat. Brinker argues, therefore, that it should be considered to have obtained these service items and furniture solely for the purpose of “reselling” them to its customers with their food.

This argument proves too much. As every cost normally is included in overhead one way or another (at least if the business is to break even), it would mean that everything a customer touches in the restaurant in that sense is resold and not subject to use tax. That cannot be what the legislature intended when it enacted these statutes. A “transfer, barter, or exchange” of “the title or ownership of tangible personal property, or the right to use, store, or consume the same” does not occur when Brinker provides the benches, chairs, bar stools, tables, menus, dishes, tableware, glassware, booster seats and high chairs to supply meals to its customers conveniently. While Brinker customers do acquire temporary use in the sense that the reusable items are used as a mechanism to facilitate delivery of their food and drink, this degree of control is de minimus and does not rise to the level of an actual transfer of a right to use. The plates, tables and chairs are not in any real sense transferred to customers any more than a piece of the restaurant floor is transferred to a customer when he or she walks on it or a bottle of ketchup is transferred when a customer picks it up to use or inspect it or a menu is transferred to a customer who reads it.

The cases cited by Brinker to support a contrary position are inapposite. Those cases finding a sale when the cost was included in overhead did so because, in fact, title was passed from the taxpayer to a third party in exchange for a purchase, and, therefore, a permanent transfer had occurred. See, e.g., Kansas City Royals Baseball Corp. v. Dir. of Revenue, 82 S.W.3d 560, 561 (Mo. banc 2000) (with purchase of admission tickets, fans received outright title to promotional baseball caps, trading cards, baseball gloves, batting gloves and T-shirts); Aladdin’s Castle, Inc. v. Dir. of Revenue, 916 S.W.2d 196, 197 (Mo. banc 1996) (in exchange for tickets supplied by arcade games, customers could obtain outright title to arcade prizes); Sipco, Inc. v. Dir. of Revenue, 875 S.W.2d 589, 542 (Mo. banc 1994) (customers received outright title to the dry ice packaged in pork shipments and used to preserve the pork); King v. Nat’l Super Mkts., Inc., 653 S.W.2d 220, 222 (Mo. banc 1983) (customers received outright title to paper sacks the grocery store used to bag groceries).

In those few cases finding a sale took place absent a permanent transfer of possession and title, the taxpayer did not merely incorporate the cost of the items in overhead, as Brinker has done here, but charged an additional consideration for the right to use the item for an extended period. For example, in Ronnoco Coffee Co., Inc. v. Dir. of Revenue, 185 S.W.3d 676, 677 (Mo. banc 2006), the taxpayer sought a section 144.615(6) resale exemption for the use tax paid on certain coffee equipment. A grocery store could choose to buy the coffee equipment and pay one price for coffee beans it purchased from Ronnoco, or it could choose not to buy the coffee equipment but be permitted to use it so long as the store paid a higher price for coffee beans as well as a $1 loan fee for use of the equipment, subject to Ronnoco’s right to remove its equipment at any time. This Court held that Ronnoco’s charge of separate consideration for the “loan agreement” of the equipment constituted a transfer for consideration. Id. at 677-79.

Similarly, in Weather Guard, Inc. v. Dir. of Revenue, 746 S.W.2d 657, 657-58 (Mo. App.1988), the court of appeals held that insulation machines temporarily provided to customers pursuant to a “Rental Machine Agreement” constituted a transfer of a right to use the machines for consideration because an additional amount was charged for insulation purchased by those customers as compared with the price charged to customers who either bought the machines outright or used their own machines.

Here, the chairs, tables, dishes, tableware and similar items are used to serve or supply the food conveniently to Brink-er’s customers and allow them to have a place at which to sit to eat it. No additional charge is made to customers for the privilege of sitting in a chair, eating at a table, or using glasses or silverware. Customers are not charged different sums depending on how many of these serving items they use or at what kind of chair or table they sit, and “to go” customers are charged the same price for food as are eat-in customers. To charge a separate fee certainly would be detrimental to the Brinker’s business because customers come to Brinker’s restaurants to eat the food, not to rent use of bowls, cups and tables; the items as to which a use tax exclusion or exemption is sought are used simply as a delivery mechanism for what customers are buying — the food and beverages. Brinker fails to show, within the meaning of the statutes, a transfer of a right to use the furniture, menus, dishes, glassware, booster seats, high chairs and other items.it provided at its restaurants for consideration. It cannot avail itself of an exemption under section 144.615(6) or an exclusion under section 144.605(13).

V. CONCLUSION

For the foregoing reasons, the decision of the commission is affirmed.

TEITELMAN, RUSSELL, WOLFF, BRECKENRIDGE, and FISCHER, JJ., concur.

PRICE, C.J., dissents in separate opinion filed.

WILLIAM RAY PRICE, JR., Chief Justice,

dissenting.

The majority holds that Brinker is not entitled to tax exemptions under sections 144.030.2(4) and (5), RSMO 2000, because restaurants are not “plants” and because Brinker does not manufacture a product. I respectfully disagree with the majority on both points.

I. Restaurants Are Plants.

Section 144.030.2(4) allows tax exemptions for replacement equipment “used directly in manufacturing, mining, fabricating or producing a product which is intended to be sold ultimately for final use or consumption.” § 144.030.2(4). Section 144.030.2(5) allows tax exemptions for:

Machinery and equipment ... purchased and used to establish new or to expand existing manufacturing, mining or fabricating plants in the state if such machinery and equipment is used directly in manufacturing, mining, or fabricating a product which is intended to be sold ultimately for final use or consumption.

§ 144.030.2(5) (emphasis added).

Because “plants” are not defined in the statute, the majority properly turns to the dictionary, which defines a plant as “the land, buildings, machinery, apparatus, and fixtures employed in carrying on a trade or a mechanical or other industrial business.” Webster’s Third New International Dictionary 1731 (emphasis added). The majority fails, however, to finish the process by examining the definition of “trade.” The dictionary defines a trade as “an occupation requiring manual or mechanical skill and training.” Id. at 2421. Cooking and preparing food is a trade that requires manual skill and training. Brinker’s restaurants are “land, buildings, machinery, apparatus, and fixtures employed in carrying on a trade” and fit within the language of sections 144.030.2(4) and (5) according to the dictionary definitions used by the majority.

Prior decisions of this Court repeatedly have allowed a broad interpretation of manufacturing plants and processes for purposes of this exemption. Southwestern Bell Tele. Co. v. Dir. of Revenue, 78 S.W.3d 763 (Mo. banc 2002) (telephone company performing telecommunications services); DST Sys., Inc. v. Dir. of Revenue, 43 S.W.3d 799 (Mo. banc 2001) (newspaper publishing); Bridge Data Co. v. Dir. of Revenue, 794 S.W.2d 204 (Mo. banc 1990) (financial company that supplied information about securities traded on public markets), abrogated on other grounds by International Bus. Mach. Corp. v. Dir. of Revenue, 958 S.W.2d 554 (Mo. banc 1997).

II. Cooking Is Manufacturing Under the Statute.

The process of preparing food for consumption by Brinker’s patrons is manufacturing. Manufacturing is “the alteration or physical change of an object or material in such a way that produces an article with a use, identity, and value different from the use, identity, and value of the original.” Branson Prop. USA, L.P. v. Dir. of Revenue, 110 S.W.3d 824, 826 (Mo. banc 2003). Acts that fall outside subdivisions (4) and (5) generally involve repairing or transmitting products rather than creating output that has a distinct use, identity or value. See Utilicorp United v. Dir. of Revenue, 75 S.W.3d 725, 729 (Mo. banc 2001) (transmitting or distributing electricity); Unitog Rental Services v. Dir. of Revenue, 779 S.W.2d 568, 570-71 (Mo. banc 1989) (cleaning and repairing uniforms); State ex rel. AMF Inc. v. Spradling, 518 S.W.2d 58, 61-62 (Mo.1974) (retreading or recapping tires).

Again, this Court repeatedly has allowed a broad interpretation of what output is sufficient to be considered manufacturing. See Concord Publ’g House, Inc. v. Dir. of Revenue, 916 S.W.2d 186, 191 (Mo. banc 1996) (manipulating and affixing words onto a page to create a newspaper); Jackson Excavating v. Administrative Hearing Comm’n, 646 S.W.2d 48, 51 (Mo.1983) (treating and purifying water); Wilson & Co., Inc. v. Department of Revenue, 531 S.W.2d 752, 755 (Mo.1976).

In Wilson, this Court held that converting live hogs into marketable portions of food fit for human consumption was manufacturing. Id. Like in Wilson, Brinker’s restaurants also take raw ingredients and transform them into articles ready for human consumption. The resulting food is distinct from the original ingredients, and the finished product is generally twice as valuable as the original ingredients. For the purposes of section 144.030.2, there can be no valid distinction between a facility that prepares food for wholesale consumption and one that prepares food for retail consumption.

The legislature enacted sections 144.030.2(4) and (5) to “encourage the production of items ultimately subject to sales tax and to encourage the location and expansion of industry in Missouri.” Concord Publ’g House, 916 S.W.2d at 190. By applying an unduly narrow construction to this exemption, the majority frustrates the legislative intent of creating jobs and nurturing small business in Missouri.

For the foregoing reasons, I respectfully dissent.

      . All statutory references are to RSMo 2000 unless otherwise indicated.

      . One of Brinker’s restaurants supplies food to other restaurants also.

      . As relevant here, "plants" are defined as "the land, buildings, machinery, apparatus, and fixtures employed in carrying on a trade or a mechanical or other industrial business.” Webster's Thir£> New International Dictionary 1731. The restaurant business that Brinker undertakes is not a trade, nor is it a mechanical or other industrial business.

      . This allocation of the burden of proof is rooted in statute. In UtiliCorp United, Inc. v. Dir. of Revenue, 75 S.W.3d 725, 727 n. 5 (Mo. banc 2001), this Court explained:
      Section 136.300.1 states in part: "With respect to any issue relevant to ascertaining the tax liability of a taxpayer all laws of the state imposing a tax shall be strictly construed against the taxing authority in favor of the taxpayer. The director of revenue shall have the burden of proof with respect to any factual issue relevant to ascertaining the liability of a taxpayer....” However, section 136.300.2 states in full: "This section shall not apply to any issue with respect to the applicability of any tax exemption or credit.” Section 621.050.2 states in part: "In any proceeding before the administrative hearing commission under this section the burden of proof shall be on the taxpayer....” Thus this Court has concluded that, while it is the director’s burden to show a tax liability, it is the taxpayer's burden to establish the right to an exemption.

      . See § 144.020.1(6) (tax on “meals and drinks furnished at any ... restaurant ... ”).

      . The director argues that this property is subject to the use tax because it is not bought for sale and that the issue is whether it is held for resale and so qualifies for an exemption to the use tax for tangible personal property otherwise subject to tax but, “held by processors, retailers, importers, manufacturers, wholesalers, or jobbers solely for resale in the regular course of business." § 144.615.6 (emphasis added). The practical consequence of whether to consider the claim under one or the other statute is its effect on the burden of proof; the burden is on the director to prove that a sale is included rather than excluded from tax, UtiliCorp, 75 S.W.3d at 727 n. 5, but if it is included, then the burden is on the taxpayer to show that an exemption to an otherwise applicable tax applies, see Branson Props. U.S.A., 110 S.W.3d at 825. For purposes of this case, however, this Court need not determine under which provision the use of these items to serve and provide food to restaurant customers would fall because either would require Brinker to transfer its furniture, tableware or other items to its customers, which it does not do.


source: Caselaw Access Project

author: PATRICIA BRECKENRIDGE, Judge.

license: Public Domain

text:
    In re Renae EHLER, Respondent.
    No. SC 90652.
    Supreme Court of Missouri, En Banc.
    Aug. 31, 2010.

      Alan D. Pratzel, Chief Disciplinary Counsel, Jefferson City, pro se.
    Ehler, Keytesville, pro se.
   PATRICIA BRECKENRIDGE, Judge.

The Office of Chief Disciplinary Counsel (OCDC) seeks to discipline the law license of Renae Lynn Ehler for multiple violations of the rules of professional conduct in her representation of a client in a dissolution proceeding and another client in an unrelated civil case. The preponderance of the evidence proves Ms. Ehler violated Rule 4-1.1, Competence, by failing to correctly calculate and deliver the amount of money owed to a client and an opposing party and by failing to provide opposing counsel with requested discovery information to avoid a default judgment against her client; Rule 4-1.3, Diligence, by failing to pay money owed to a client and an opposing party in a timely fashion and by failing to provide opposing counsel with discovery information to avoid a default judgment against her client; Rule 4-1.4, Communication, by failing to communicate with clients and opposing counsel; Rule 4-1.15, Safekeeping Property, by misappropriating and mishandling client funds and by fading to properly maintain a client trust account; and Rule 4-8.4, Misconduct, by violating other rules of professional conduct and by engaging in conduct involving deceit and misrepresentation.

The Court previously suspended Ms. Ehler’s license for six months for prior violations of the rules of professional conduct that were of the same nature as her current violations. It stayed her suspension and imposed a two-year term of probation. She committed some of the current acts of professional misconduct while she was on probation. The effort to educate Ms. Ehler and assist her in modifying her professional behavior to comply with the rules of professional conduct has failed. In light of the severity of her acts of misconduct and this Court’s progressive application of discipline, disbarment is appropriate. Therefore, Ms. Ehler is disbarred.

Factual and Procedural Background

Ms. Ehler was licensed to practice law in Missouri in October 1997. In October 2005, this Court disciplined Ms. Ehler for the following rule violations:

• Rule 4-1.3, Diligence, for failing to act on behalf of clients and failing to return money owed to them in a timely fashion after express request by clients;
• Rule 4-1.4, Communication, for failing to communicate with clients regarding their cases’ status;
• Rule 4-1.15, Safekeeping Property, by failing to properly maintain a client trust account and failing to deliver money when due;
• Rule 4-1.16, Declining or Terminating Representation, for failing to refund unearned fees and unused costs to former clients in a timely manner following withdrawal from representation.
• Rule 4-8.1, Bar Disciplinary Matters, for failing to reasonably respond to the OCDC.

The Court suspended her license for six months but stayed that suspension and placed her on probation for a term of two years. As a condition of her probation, Ms. Ehler was required to consult with a practicing attorney from Columbia who was a law office practice management consultant. That attorney worked with her regularly over the two-year period on how to handle her office practices and manage her client trust account. The probation terms also required her to consult with a Moberly attorney who served as a mentor for Ms. Ehler. Ms. Ehler’s term of probation ended January 28, 2008.

The present disciplinary action arises out of complaints regarding Ms. Ehler’s representation of R.K. in a dissolution proceeding and her representation of C.G. in a lawsuit for unpaid water bills.

The Dissolution

In 2007, R.K. hired Ms. Ehler to represent her in a dissolution action against H.M. Ms. Ehler filed the dissolution action as counsel for R.K. Another attorney represented H.M.

The parties reached a settlement on the day the dissolution was to be tried, January 16, 2008, and that settlement was approved by the trial court after a hearing that day. As part of the settlement, the couple’s real and personal property was to be sold and the net proceeds divided equally between the parties after the payment of all debts. The court also ordered that R.K.’s name be changed. Ms. Ehler was to receive the proceeds of the sales of property, pay the parties’ debts and then distribute the net proceeds to them. She also was to file a proposed dissolution decree.

R.K. expected to receive her dissolution decree within six weeks. When she did not receive it, she repeatedly called Ms. Ehler to inquire about the delay. Finally, R.K. obtained the assistance of Bobby Wheeler, another lawyer, and he took her over to the courthouse to get a copy of the decree. It had not been filed. The proposed dissolution decree was filed only after the court issued an order to Ms. Ehler to appear and show cause why she should not be held in contempt for failure to provide the proposed judgment. After the dissolution decree was filed, Mr. Wheeler procured a copy for R.K. It contained a scrivener’s error; it misstated R.K.’s first name. Mr. Wheeler filed a motion to correct the judgment, and the corrected judgment was issued July 10, 2008, almost seven months after the hearing at which the court approved the settlement and directed Ms. Ehler to file the proposed dissolution decree.

Following the dissolution settlement, Ms. Ehler received several checks from the sales of the marital property and income tax refunds and deposited the checks into her trust account. On February 19, 2008, she deposited into the trust account two federal income tax refund checks totaling $1,225.63. On June 6, 2008, she deposited a check in the amount of $52,481.22 for the net proceeds from the sale of marital real property. On July 7, 2008, she deposited a check in the amount of $13,832.66 for the net proceeds from the sale of the marital personal property. The sum total of those checks is $67,539.51.

On June 25, 2008, Ms. Ehler sent a letter to H.M.’s attorney outlining her distribution plan for the marital assets. She listed several creditors, including herself for attorney’s fees, who needed to be paid before any money could be distributed to the parties. The sum total of the debt was $18,380.41, although Ms. Ehler’s letter erroneously listed the amount as $18,636.64. In July 2008, Ms. Ehler paid herself and the creditors.

At this point, the remaining balance should have been $49,159.10 for equal distribution to H.M. and R.K. However, during the dissolution proceeding, H.M. and R.K. each paid bills to creditors. Because of the difference in payment, R.K. should have received $24,782.31 from the net proceeds and H.M. should have received $24,376.79. In September 2008, Ms. Ehler mailed a $20,460.44 check to R.K. H.M. did not receive his portion of the proceeds. H.M.’s attorney repeatedly contacted Ms. Ehler in an effort to acquire his client’s money. As of January 29, 2009, Ms. Ehler still owed R.K. $4,321.87 and H.M. $24,376.79.

R.K. recognized a discrepancy between the amount she received and the amount she was owed. She contacted Ms. Ehler and requested an accounting of the parties’ marital funds. Ms. Ehler never provided R.K. with the requested accounting. R.K. then filed a complaint with the OCDC.

The C.G. Representation

C.G. and his wife, D.G., hired Ms. Ehler to represent C.G. in the defense of a lawsuit involving a claim for unpaid water bills. C.G. wished to assert the defense that he had not lived at the property where the water bills had been generated during the relevant time period because he was living in Iowa at the time. C.G. had his wife, D.G., deliver to Ms. Ehler his employment and tax records, his son’s school records, and rental receipts as documentary evidence that he had lived in Iowa during the relevant time period for which the water bills were generated. After Ms. Ehler received the documents, C.G.’s only contact with her was a telephone conversation when she told him a court date had been continued and that she would contact him with the new court date.

Prior to that time, Ms. Ehler told C.G. that the opposing party had interrogatories he needed to answer and read the questions to him over the phone. He told her he easily could answer the questions, and it was agreed that Ms. Ehler would send the interrogatories to him that he was required to complete. She never did so.

Ms. Ehler appeared in court July 28, 2008, to respond to a motion filed by the plaintiff water district seeking sanctions for C.G.’s failure to respond to its discovery requests. In court, Ms. Ehler did not use the documentary evidence received from C.G. Ms. Ehler told the court C.G. had not provided her with the information necessary to respond to the interrogatories. As a sanction for failing to comply with discovery requests, the court entered a judgment by default against C.G. in the amount of $1,900. C.G. did not appear for the hearing when the motion for sanctions was heard because he did not know that the motion had been filed or that there was a court date. Additionally, Ms. Ehler did not inform C.G. of the default judgment entered against him, and he found out about the judgment through a Case.net search conducted by his wife. As a result of the default judgment, C.G.’s wages were garnished and his credit rating was damaged. C.G. filed a complaint against Ms. Ehler with the OCDC.

OCDC Investigation

After receiving complaints from R.K. and C.G., the OCDC investigated Ms. Ehler’s law practices and audited her trust account for 2007-2008. The audit revealed Ms. Ehler made 12 payments for her personal and office utility bills out of the trust account. In 2007, there were over $2,000 in utility payments withdrawn from the account. In 2008, $1,120.20 was withdrawn from the account. As of January 29, 2009, Ms. Ehler’s trust account balance was $26,847.58; $253.74 of that amount was subject to an IOLTA lien. The trust account balance was $2,104.82 less than the amount due to H.M. and R.K.

After the audit, the OCDC directed Ms. Ehler to pay H.M. and R.K. the balance owed to them. The OCDC staff went with Ms. Ehler to her bank, where she obtained a cashier’s check made payable to R.K. for $3,066.70 and a cashier’s check made paying to H.M. for $23,527.14. She still owes H.M. and R.K. $2,104.82.

The OCDC filed an information against Ms. Ehler. A disciplinary panel heard the matter and, on November 12, 2009, found R.K., H.M., and C.G. to be credible witnesses. In regard to R.K.’s complaint, the panel found Ms. Ehler violated the following rules of professional conduct:

• Rule 4-1.1, Competence, by failing to correctly calculate the money owed to H.M. and R.K. and by failing to deliver the correct amount to them;
• Rule 4-1.3, Diligence, by failing to timely deliver the money owed to H.M. and R.K.;
• Rule 4-1.4, Communication, by failing to communicate with R.K. about the money owed and by failing to communicate with H.M. and his attorney about the money owed;
• Rule 4-1.15, Safekeeping Property, by failing to properly maintain a client trust account and failing to deliver funds to H.M. and R.K., and, instead, utilizing portions of that money for other purposes;
• Rule 4-8.4, Misconduct, by engaging in conduct involving deceit and misrepresentation.

In regard to C.G.’s complaint, the panel found Ms. Ehler violated the following rules of professional conduct:

• Rule 4-1.1, Competence, by failing to provide to opposing counsel the information requested in discovery so as to avoid a judgment against her clients;
• Rule 4-1.3, Diligence, by failing to provide to opposing counsel the information requested in discovery so as to avoid a judgment against her clients.

The panel found that aggravating factors were present, including a prior disciplinary offense, a dishonest or selfish motive, a pattern of misconduct, multiple offenses, and an indifference to making restitution. It also found the presence of mitigating factors, including Ms. Ehler’s personal and emotional problems due to her ongoing divorce and her cooperation with the OCDC in the proceedings. The panel recommended disbarment.

Ms. Ehler filed her rejection of the panel’s recommendation, which brings the matter before this Court.

Standard of Review

“Professional misconduct must be proven by a preponderance of the evidence before discipline will be imposed.” In re Crews, 159 S.W.3d 355, 358 (Mo. banc 2005). This Court reviews the evidence de novo, independently determines all issues pertaining to credibility of witnesses and the weight of the evidence, and draws its own conclusions of law. In re Belz, 258 S.W.3d 38, 41 (Mo. banc 2008). The panel’s findings of fact, conclusions of law, and the recommendations are advisory and, this Court may reject any or all of the panel’s recommendations. In re Coleman, 295 S.W.3d 857, 863 (Mo. banc 2009).

Violation of Rule 4-1.1 Competence

Rule 4-1.1 requires a lawyer to represent a client competently. Competent representation includes “the legal knowledge, skill, thoroughness, and preparation reasonably necessary to complete the representation.” Crews, 159 S.W.3d at 359. Ms. Ehler’s conduct in R.K.’s dissolution and her representation of C.G. demonstrates a lack of competence for which discipline is appropriate.

The evidence shows Ms. Ehler has violated rule 4-1.1 by failing to correctly calculate the money owed to H.M. and R.K. and by failing to deliver the correct amount to them from the proceeds of their sale of marital property. After selling the couples’ marital property, Ms. Ehler was directed by the circuit court to collect the proceeds of the sale and appropriately dispense the proceeds. Ms. Ehler’s failure to properly calculate the amount due the parties and then disperse the proper amount to the parties was incompetent representation of R.K. by Ms. Ehler.

Ms. Ehler claims that no one ever suggested that her calculations were incorrect and that, if anyone did, she would have checked her calculations and made the correction. This claim is directly contradicted by R.K.’s testimony that she noticed a discrepancy in the amount paid to her and requested an accounting from Ms. Ehler, which Ms. Ehler failed to give her.

In regard to C.G.’s representation, Ms. Ehler’s actions also show incompetence. Ms. Ehler failed to give C.G. the interrogatories that he was required to complete and return to opposing counsel. Her incompetence caused a default judgment to be entered against C.G. Ms. Ehler incompetently represented C.G.

Violation of Rule 4-1.3 Diligence

Rule 4-1.3 states, “[a] lawyer shall act with reasonable diligence and promptness in representing a client.” Ms. Ehler failed to timely deliver the money owed to H.M. and R.K, thereby violating Rule 4-I.3. In July 2008, Ms. Ehler’s client trust account contained a substantial amount of money that belonged to R.K. and H.M. Ms. Ehler presented R.K. with a check for the incorrect amount in September 2008. H.M. was not paid his portion of the proceeds until the OCDC directed Ms. Ehler to pay him in January 2009. The untimely delivery of client funds shows Ms. Ehler’s lack of diligence and amounts to a violation of Rule 4-1.3.

The diligent representation of a client is particularly important because “[a] client’s interests often can be adversely affected by the passage of time or the change of conditions!.]” Rule 4-1.3, comment 3. In some instances, “the client’s legal position may be destroyed.” Id. Ms. Ehler’s lack of diligence caused C.G. to lose the ability to defend against the lawsuit. Her failure to give the interrogatories to C.G. denied him the opportunity to put forth a defense. Her conduct “destroyed” C.G.’s legal position. By failing to provide opposing counsel with discovery, C.G. was not allowed to present what may have been a meritorious defense, and a default judgment was entered against him as a sanction pursuant to Rule 61.01(b)(1). Ms. Ehler’s representation of C.G. and her handling of R.K.’s dissolution show a lack of diligence and violate Rule 4-1.3.

Violation of Rule 4-1.4

Communication with a client is essential to maintain a productive attorney-client relationship. Rule 4-1.4 requires a lawyer to keep a client reasonably informed about the status of a matter and to promptly comply with reasonable requests for information. Ms. Ehler violated this rule throughout her representation of R.K.

R.K. repeatedly contacted Ms. Ehler seeking information about her dissolution decree. She also repeatedly requested information about the sale of the marital property and when she would be receiving her portion of the proceeds. Ms. Ehler also failed to communicate with H.M.’s lawyer when he inquired about the proceeds from the marital property sales. “When a client makes a reasonable request for information, Rule 4-1,4[] requires prompt compliance with the request....” Rule 4-1.4, comment 4. When a prompt response is not feasible, the attorney or the attorney’s support staff must acknowledge the information request and inform the client when he or she can expect a thoughtful response. Id. Ms. Ehler has violated Rule 4-1.4.

Violation of Rule 4-1.15

The OCDC alleges Ms. Ehler has violated Rule 4-1.15, Safekeeping Property, by failing to properly maintain a client trust account, failing to deliver funds to H.M. and R.K. and, instead, utilizing portions of that money for her own purposes. Rule 4-1.15(c) requires a lawyer to keep all client property or third-party property in the lawyer’s possession separate from the lawyer’s own property. This rule also requires that complete records of the client trust account be maintained and preserved for a period of at least five years, and an accounting must be completed promptly on a client’s request. Additionally, Rule 4-1.15(f) requires a lawyer, on receipt of client funds, to promptly notify the client and deliver the funds to the client.

The evidence shows that Ms. Ehler failed to properly maintain her client trust account. She admits to not regularly balancing her trust account. She admits she lost all of her financial records because of a crashed computer hard drive and that, during her probation, the consulting attorney instructed her to create a data backup system, which Ms. Ehler did not do. Ms. Ehler also did not assist the OCDC in reconstructing her financial records. Moreover, when asked by R.K. for an accounting of her trust account, Ms. Ehler did not prepare or provide the accounting.

The record also shows that Ms. Ehler mishandled client funds by failing to timely deliver funds to R.K. and H.M. Ms. Ehler received proceeds from the auction of the couple’s marital property in July 2008. Ms. Ehler first paid herself, along with other creditors, in July 2008. R.K. received her first installment in September 2008. At that time, H.M. did not receive his portion of the proceeds. Although Ms. Ehler claims she sent H.M. a check that was not cashed, she did not reissue a check, present any evidence of such a check or make any effort to stop payment of any check, despite repeated requests from H.M.’s attorney that H.M. be paid. Ms. Ehler only paid R.K. and H.M. the remaining money in her client trust account after the OCDC directed her to pay them in January 2009. Ms. Ehler failed to promptly deliver client funds, thereby violating Rule 4-1.15.

Ms. Ehler has also misappropriated client funds by paying her personal bills with funds from her client trust account. The OCDC’s audit of the client trust account shows that in 2007-2008, Ms. Ehler had 12 withdrawals from the account to pay personal utility bills and office utility bills. The audit additionally shows that, as of January 2009, there should have been $2,104.82 in her trust account available to pay to H.M. and R.K. Paying personal expenses from a client trust account clearly is prohibited by Rule 4-1.15.

Ms. Ehler has not held her client’s property “with the care required of a professional fiduciary.” Rule 4-1.15, comment 1. She has mishandled her client trust account and misappropriated client funds. Her repeated Rule 4-1.15 violations alone warrant discipline.

Violation of Rule 4-8.4

Rule 4-8.4 defines professional misconduct for which an attorney may be disciplined. Rule 4-8.4(a) states that “[i]t is professional misconduct for a lawyer to: (a) violate or attempt to violate the Rules of Professional Conduct.” By violating rules of professional conduct, Ms. Ehler “has necessarily violated Rule 4-8.4(a).” In re Caranchini, 956 S.W.2d 910, 916 (Mo. banc 1997).

Ms. Ehler also has violated Rule 4-8.4(c) in the handling of her client trust account. Rule 4-8.4(c) provides that it is professional misconduct for a lawyer to “engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.” Ms. Ehler knowingly used client funds to pay for her personal expenses directly from her client trust account. Converting client funds necessarily involves deceit and misrepresentation. Therefore, she has violated Rule 4 — 8.4(c).

Appropriate Discipline

This Court finds by a preponderance of the evidence that Ms. Ehler has committed the above violations of the rules, amounting to multiple acts of professional misconduct. Having determined that Ms. Ehler has committed multiple acts of professional misconduct, the remaining issue is the appropriate disciplinary sanction.

The purpose of attorney disciplinary proceedings is “to protect the public and maintain the integrity of the legal profession.” Coleman, 295 S.W.3d at 869. In imposing discipline, this Court considers the ethical duty violated, the attorney’s mental state, the extent of actual or potential injury caused by the attorney’s misconduct, and any aggravating or mitigating factors. Id. This Court looks to the ABA STANDARDS FOR IMPOSING LAWYER SANCTIONS for guidance when imposing attorney discipline but considers the ABA Standards advisory. Id.

“The most important ethical duties are those obligations which a lawyer owes to clients.” ABA Standards for Imposing Lawyer Sanctions 423 (1992). Those duties include safekeeping of client property, Rule 4-1.15; the duty of diligence, Rule 4-1.3 and Rule 4-1.4; the duty of competence, Rule 4-1.1; and the duty of candor, Rule 4-8.4(c). Id. Ms. Ehler knowingly has violated all of these rules, and her ethical violations have caused financial harm and hardship to her clients, R.K. and C.G., and to an opposing party, H.M., who had a settlement agreement with her client. Furthermore, “[misconduct involving subterfuge, failing to keep promises, and untrustworthiness undermine[s] public confidence in not only the individual but in the bar.” In re Donaho, 98 S.W.3d 871, 874 (Mo. banc 2003). To protect the public and maintain the integrity of the profession, a substantial discipline must be imposed in these circumstances. Id.

When this Court finds an attorney has committed multiple acts of misconduct, “the ultimate sanction imposed should at least be consistent with the sanction for the most serious instance of misconduct among the violations.” Coleman, 295 S.W.3d at 870 (internal citations omitted). Ms. Ehler’s most egregious act of misconduct is her misappropriation of client funds and mishandling of her client trust account. Disbarment is appropriate for misappropriation of client funds. Belz, 258 S.W.3d at 41; see also ABA standards 4.11 (“Disbarment is generally appropriate when a lawyer knowingly converts client property and causes injury or potential injury to a client.”). In addition, “[disbarment is generally appropriate when a lawyer engages in a pattern of neglect with respect to client matters and causes serious are potentially serious injury to the client.” ABA Standards 4.41(c). Under these legal principles, disbarment would be the appropriate discipline for Ms. Ehler. Nonetheless, this Court will consider mitigating and aggravating factors. Belz, 258 S.W.3d at 42.

Factors suggested by the ABA Standards that may be considered in aggravation relevant to Ms. Ehler’s conduct are prior disciplinary offenses, dishonest or selfish motive, a pattern of misconduct, multiple offenses, and an indifference to making restitution. ABA Standards 9.22. Ms. Ehler has prior disciplinary offenses of violating the rules governing diligence, communication, safekeeping of property, terminating representation and bar disciplinary matters. Her current offenses involve violation of three of the ethic rules for which she previously was disciplined.

Another aggravating factor is that Ms. Ehler’s behavior shows a dishonest and selfish motive. She repeatedly converted client funds for her own personal use. Her current violations also evidence a pattern of misconduct and involve multiple offenses. She repeatedly has behaved with a lack of diligence and failed to provide competent representation to her clients. Regarding her representation of R.K., her failure to respond to the inquiries of her client and counsel for the opposing party shows a pattern of failure to communicate. Finally, her mishandling and misuse of her trust fund during 2007 and 2008 show a pattern of failure to properly maintain her trust account and deliver funds to clients promptly.

Ms. Ehler also has shown an indifference to making restitution, which is another aggravating factor. Ms. Ehler has known that she owes over $2,000 to H.M. and R.K. since she met with an attorney and investigator from the OCDC on January 29, 2009. As of oral arguments, 15 months later, she has made no effort to make restitution. While she claims personal financial problems preclude her from paying her clients their money, it is because of her misuse of her client funds that she lacks the money to pay her clients.

Ms. Ehler argues her personal problems should mitigate the severity of the punishment. Mitigating factors do not constitute a defense to a finding of misconduct. Bek, 258 S.W.3d at 42. Rather, these factors constitute “factors that may justify a reduction in the degree of discipline to be imposed.” ABA Standards 9.31. Although this Court acknowledges that Ms. Ehler’s ongoing, acrimonious divorce and single parenting could tax her emotionally and financially, these facts do not excuse or condone Ms. Ehler’s misappropriation of client funds. Her cooperation with the OCDC regarding the current violations is commendable, but, again, cooperation does not minimize the gravity of her offenses or the fact that she committed repeated and multiple violations of the rules of professional conduct that were very similar in nature to those for which her license was suspended and she was placed on a two-year term of probation. Consideration of the aggravating and mitigating circumstances weigh in favor of disbarring Ms. Ehler.

Moreover, the sanction of disbarment is also consistent with a progressive disciplinary scheme, which is recommended by the ABA Standards and applied by this Court previously. See generally ABA Standards. Ms. Ehler’s license was suspended by this Court in 2005, her suspension was stayed, and she served a two-year term of probation. The purpose of probation is to educate, rehabilitate, and supervise the attorney in order to enable the attorney to modify his or her professional behavior. See Coleman, 295 S.W.3d at 871. Consistent with that general purpose, Ms. Ehler’s two-year probation was intended to teach her how to manage her law practice — particularly, how to manage her client trust account. Ms. Ehler had the opportunity to be trained by a law management consultant and to have the advice and support of a mentor. Instead of learning from these opportunities, Ms. Ehler repeated the same acts of misconduct that warranted her stayed suspension and placement on probation. Most egregiously, Ms. Ehler withdrew money from her client trust account to pay personal expenses while she still was on probation for violating the same ethical rules for which she now is being disciplined.

Conclusion

In 2005, Ms. Ehler received a six-month license suspension, which was stayed, and a two-year term of probation for mishandling client funds and for lacking diligence in representing of clients. During her probation, she participated in law practice management training, which included instruction on how to manage her client trust account. Although not discovered during the term of her probation, she mishandled her client trust account and misappropriated client funds while on probation. Additionally, Ms. Ehler regrettably still does not understand the basics of competent and diligent representation. Under a progressive disciplinary scheme, Ms. Ehler’s inability to improve her legal practice, her now habitual acts of professional misconduct, and the severity of those acts warrant disbarment. To protect the public and restore integrity to the profession, Ms. Ehler is disbarred.

All concur.

      . Ms. Ehler’s current violations of the rules of professional conduct all occurred before December 31, 2008. Ms. Ehler's trust account violations occurred from January 2007 to December 2008, so they are governed by the version of Rule 4-1.15 in effect from January 1, 2007, to December 31, 2008. Therefore, unless otherwise indicated, all citations are to the 2009 Missouri Supreme Court Rules and Rules of Professional Conduct, which contain the text of the rules in effect at the time of Ms. Ehler's conduct. The subsequent amendments to the rules do not change the essence of the rules.

      . The 2005 Missouri Supreme Court Rules and Rules of Professional Conduct applied to this disciplinary action.

      . C.G. currently is married to D.G. C.G. was married to V. at the times relevant to the water bill dispute.

      . Rule 4-1.15 was amended in 2009. The content of Rule 4-1.15(f) now is found in Rule 4 — 1.15(i).


author: ROBERT S. BARNEY, P.J.

text:
    Ramone LANDA, Appellant, v. STATE of Missouri, Respondent.
    No. SD 30218.
    Missouri Court of Appeals, Southern District, Division One.
    July 27, 2010.

      Brocea Smith, Asst. Public Defender, St. Louis, for Appellant.
    Chris Koster, Atty. Gen. and Shaun J. Mackelprang, Asst. Atty. Gen., Jefferson City, for Respondent.
   ROBERT S. BARNEY, P.J.

Ramone Landa (“Movant”) appeals the motion court’s denial without an evidentia-ry hearing of his “Amended Motion to Vacate, Set Aside or Correct the Judgment and Sentence ...” filed pursuant to Rule 29.15. Following this Court’s dismissal of Movant’s direct appeal based on the escape rule, the motion court also dismissed his postconviction action for the same reason. He now raises two points of motion court error relating to his lack of a knowing and voluntary waiver of a trial by jury and his assertion that his counsel was ineffective for advising him to waive his right to a trial by jury.

The record reveals Movant was charged by “Information” on May 10, 2006, with the class A felony of drug trafficking in the second degree, a violation of section 195.223, for possessing “[six] grams or more of a mixture or substance containing cocaine base, a controlled substance, knowing of its presence and illegal nature.” Movant filed a written “Waiver of Right to Trial by Jury” on March 19, 2007, and on April 19, 2007, the morning of trial, he was examined on the record in relation to that waiver of jury trial. Following a bench trial, the trial court convicted Movant of the crime charged. Movant then failed to appear at his sentencing. See State v. Landa, 288 S.W.3d 325 (Mo.App.2009). Approximately four months later he was apprehended in Illinois and returned to Missouri where he was then sentenced by the trial court to fifteen years in the Missouri Department of Corrections. Id. Movant then appealed his conviction to this Court and that appeal was dismissed based on the escape rule because “[b]y absconding [prior to being sentenced], [he] forfeited his right to appeal.” Id. at 326.

Prior to the decision in his direct appeal, Movant filed a pro se Rule 29.15 motion. Then, after his direct appeal was dismissed, Movant retained counsel and his amended Rule 29.15 motion was filed. In his motion, Movant raised the following two claims:

8(a). Movant’s waiver of jury trial was not voluntary, knowingly and intelligently made because Movant did not understand the rights attendant [to] a jury trial. Had Movant known that a bench trial would provide him no benefit and would merely prejudice him, he would not have waived his right to a jury trial.
8(b). Trial [counsel] failed to exercise the customary skill and diligence that a reasonably competent attorney would exercise under similar circumstances, and as a result thereof, Movant was prejudiced. Specifically, trial counsel advised Movant to waive his right to a jury trial when there was no beneficial reason to do so under Movant’s circumstances.

The motion court dismissed Movant’s Rule 29.15 motion without an evidentiary hearing on October 26, 2009. Relying on the escape rule, the motion court made the following determinations in its “Findings of Fact and Conclusions of Law:”

[t]he escape rule has been applied to deny relief under a postconviction motion where the movant failed to appear for sentencing. The rule applies only to errors that occur before and up to the time of the escape; a defendant is entitled to challenge any errors occurring after he has been captured....
Missouri does not follow a per se dismissal rule. The relevant inquiry is whether the escape adversely affected the criminal justice system; the decision to dismiss a case for this reason is left to the sound discretion of the court. There is no threshold or bright line to determine what period of time needs to pass before applying the escape rule. Flights justifying dismissal have ranged from ten and one-half years to fifteen days. Movant willfully failed for some four months to appear for sentencing, and this constituted an escape. By failing to appear, he may have lost the opportunity to seek postconviction relief.
Movant’s failure to appear for sentencing and the necessity for the authorities to travel from Kennett, Missouri, to Chicago, Illinois, and return him to court in Kennett adversely affected the criminal justice system. This court applies the escape rule, and it should enter judgment dismissing the case, rather than overruling it because it lacks merit.

(Internal citations omitted). Accordingly, the motion court dismissed Movant’s Rule 29.15 motion and did not consider it on its merits. This appeal by Movant followed.

Appellate review of a motion court’s ruling on a Rule 29.15 motion for postconviction relief is limited to a determination of whether the motion court’s findings of fact and conclusions of law issued in support thereof are clearly erroneous. Rule 29.15(k); see Moss v. State, 10 S.W.3d 508, 511 (Mo. banc 2000). “The findings of the motion court are presumptively valid.” Fry v. State, 244 S.W.3d 284, 285 (Mo.App.2008). “Findings and conclusions are clearly erroneous if, after a review of the entire record, the appellate court is left with the definite impression that a mistake has been made.” State v. Taylor, 944 S.W.2d 925, 938 (Mo. banc 1997).

Here, the motion court dismissed Movant’s Rule 29.15 motion based on the escape rule and the fact that Movant absconded from the law prior to his sentencing. The escape rule is a judicially-created doctrine that “operates to deny the right of appeal to a defendant who escapes justice. A defendant who flees justice also loses the opportunity to seek postconviction relief.” State v. Troupe, 891 S.W.2d 808, 809 (Mo. banc 1995) (internal citations omitted); see Stevens v. State, 306 S.W.3d 175, 176 (Mo.App.2010). The rationale behind the escape rule is that “ ‘[tjhose who seek the protection of this legal system must ... be willing to abide by its rules and decisions’ ” and “ ‘may not selectively abide by the decisions of the courts....’” Troupe, 891 S.W.2d at 810 (quoting State v. Wright, 763 S.W.2d 167, 168-69 (Mo.App.1988)). The escape rule provides that those defendants who choose to abscond “ ‘show[ ] [their] reluctance to accept the decision of the trial court or to await the vindication of [their] rights by th[e] court ...’” such that they forfeit their right to both direct appeals and to postconviction relief. Id.

Here, Movant clearly absconded prior to his sentencing and was not captured for some four months. The escape rule was clearly applicable in the present matter and the motion court’s determination to apply the escape rule was not error. With that being said, Movant does not challenge the motion court’s dismissal of his Rule 29.15 motion based on the escape rule. Instead, he brings two points directed at the merits of his amended Rule 29.15 motion. Neither of Movant’s points relied on was addressed by the motion court in its decision to “enter judgment dismissing the case, rather than overruling it...“Since our review is limited to the determination of whether the motion court was clearly erroneous in dismissing [Movant’s] Rule 29.15 motion ...,” this Court cannot review Movant’s two points relied on as the issues in his points relied on were dismissed by the motion court. Thomas v. State, 31 S.W.3d 23, 25 (Mo.App.2000). As Movant does not challenge the dismissal, there is nothing for this Court to review. Based on the foregoing, we affirm the motion court’s dismissal of Movant’s Rule 29.15 motion for postconviction relief. See id.

The judgment of the motion court is affirmed.

LYNCH and BURRELL, JJ., CONCUR.

      . All rule references are to Missouri Court Rules (2009).

      . All statutory references are to RSMo Cum. Supp.2001.


author: GARY W. LYNCH, Presiding Judge.

text:
    In re the MARRIAGE OF Sondra Jean JAMES and Jack J. James. Sondra Jean James, Petitioner-Respondent, v. Jack J. James, Respondent-Appellant.
    No. SD 29958.
    Missouri Court of Appeals, Southern District, Division Two.
    Aug. 13, 2010.

      Richard L. Schnake, Neale <& Newman, L.L.P., Springfield, MO, for Appellant.
    Christopher J. Swatosh, Ava, MO, for Respondent.
   GARY W. LYNCH, Presiding Judge.

Jack J. James (“Husband”) appeals the trial court’s judgment dividing the marital property from his marriage with Sondra Jean James (“Wife”). The trial court found that J & K Land Company, Inc. (“J & K”), although not owned by Husband or Wife, had previously held marital property for them, and that Husband squandered, fraudulently hid, and fraudulently conveyed over $2,660,000.00 in marital property, including that held by J & K. Husband argues on appeal that the trial court erred in awarding him the marital property, if any, held by J & K and the interest, if any, in the real estate he transferred to his son and daughter-in-law, while awarding Wife a money judgment of $1,500,000.00. Husband contends the trial court lacked authority to award Husband property that is owned by non-parties, and Husband was prejudiced as a result because it materially affected the division of marital property. Husband also contends that the trial court erred in basing the marital property division on values that were not reasonably proximate to the effective date of the distribution of the property. Finding that the trial court’s division of property was based on Husband’s misconduct in squandering, transferring, and hiding assets, which is an exception to both the non-party ownership and date of valuation rules, we affirm the judgment.

Factual and Procedural Background

In 1996, Wife filed a Petition for the dissolution of her marriage to Husband, alleging a marriage date of December 28, 1980, in Matamoras, Mexico, with a separation on June 18, 1996. In his Answer, Husband denied that the parties were ever married.

Before trial, the parties engaged in significant discovery. On Wife’s motion, the trial court, on October 29, 1997, enjoined the parties from transferring or encumbering any property. That order has remained in effect continuously since that date.

The first trial in this case occurred on May 18 and 14, 1999, and a judgment dissolving the marriage, but deferring all other issues for a later hearing, was entered on October 29, 1999. Husband filed a timely appeal, and the judgment was affirmed. James v. James, 45 S.W.3d 458 (Mo.App.2001) (“James I ”).

At the second trial held on May 13, 2009, on the remaining deferred issues, Wife testified that the parties had begun various business ventures in 1979 and thereafter, which continued after their marriage in 1980. The umbrella entity for most of these ventures was J & K, of which Wife was initially the president. Although this was a corporation, she and Husband operated it for their own exclusive benefit, depositing their income into corporate accounts and expending corporate funds for most of their personal expenses in addition to business expenses. At Husband’s request, for reasons unexplained at trial, however, the corporate stock was never owned by him. It was initially owned by Wife’s parents, who “never got a penny” from it. Later, in 1990 or 1991, following Husband’s threats to kill her son if she did not get the stock transferred, Wife had her parents transfer all stock ownership into the name of Husband’s son, Jerry James, without the son’s knowledge.

Wife further testified that although the parties had separated shortly before, she returned to the marital home on August 10, 1996, to pick up some personal effects, at which time Husband abused her by binding her with wire, cutting off portions of her hair, and burning her with cigarettes, and that Husband later pleaded guilty to criminal assault for his actions in this incident. Wife testified that she took only a Corvette automobile, a Ford Bronco vehicle, and various items of personal property.

In regard to the property left behind with Husband, she testified that around the time of the separation, the parties had $120,000.00 in cash in a safe deposit box; cash on hand of $6,400.00; and account receivables from car sales of $1,050,000.00 held by J & K. Although she had not received any of these receivables after separation, Husband had personally cashed a receivables check for $3,275.49 after the separation. Husband acknowledged that he had personally received some of the account receivables of the sold cars. However, he denied that there was ever any marital property, perhaps due to his persistent contention that there had never been any marriage, despite the contrary ruling by this Court in James I.

Wife also testified as to the value of items of property that were subject to Husband’s direction and control after the separation. She testified that they owned the cars sold by Trader’s Market, a division or subsidiary of J & K, and that there were fifty-four cars at the time of the separation, with a present value of $162,000.00. There was also a 1965 Ford Mustang with a value of $50,000.00 at the time of trial. Regarding the real estate, Husband had conveyed the marital residence (“the residence”) to his son and daughter-in-law, Jerry and Michelle James, on September 29, 1997, and Wife testified that it was worth between $125,000.00 and $150,000.00 at the time of trial; Husband had conveyed a parcel of real estate to third parties by the name of McNamara in June 1997, and it was worth $50,000.00 at the time of trial; and the Eagle Rock post offiee land, the only parcel of real estate still titled in either Husband’s or Wife’s name at the time of trial, was worth $45,000.00 at the time of trial. Of the property retained by Wife after the separation, she testified that the Corvette automobile had a present value of $5,000.00.

Husband’s financial statements dated May 31,1996, and October 7, 1997, and the J & K financial statements dated June 30, 1995, and May 31, 1996, were admitted in evidence.

The trial court entered a judgment dividing the marital property on June 16, 2009. The trial court found that Husband had been unwilling to comply with discovery; had “at every point attempted to engage in a scheme and/or conspiracy in order to defraud [Wife] of her marital rights,” which conduct the trial court supported with findings related to several specific instances of Husband’s actions; had physically assaulted Wife; had used his secretary to create a fictitious mortgage company along with fictitious liens against real estate in the marital estate; had access to the marital property after the parties’ separation, most of which had been transferred or hidden; “purposefully hid assets that [the trial] court would have considered marital property;” and had “squandered, fraudulently hidden, and fraudulently conveyed over $860,000.00 of marital property, that was in his name and over $1.8 million in assets held by [J & K].”

In its judgment, the trial court awarded each party the marital property in their respective possessions, with Husband receiving the marital property that he had squandered, hidden, and fraudulently conveyed, which included the marital property, if any, held by J & K and the residence he conveyed to his son and daughter-in-law, as well as the Eagle Rock post office property, which was still in existence as marital property. In addition, Wife was awarded a judgment against Husband for $1,500,000.00. Husband timely appealed.

Standard of Review

Because this is a court-tried case, we review pursuant to the well-known principles enunciated in Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). We will affirm the trial court’s judgment unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law. Id. “[W]e accept as true the evidence and reasonable inferences therefrom in the light most favorable to the prevailing party and disregard contradictory evidence.” Deck v. Deck, 64 S.W.3d 870, 873 (Mo.App.2002). We recognize the superior position of the trial court in assessing factors such as credibility, sincerity, and character of the witnesses. Id.

Discussion

Husband’s first point contends that the trial court erred in dividing the martial property because it did not have authority to award him the former marital residence or the marital property held by J & K, in that the owners of that property were not parties in this case. To support the proposition that “the trial court may not classify and distribute as marital property items of property that third persons own[,]” Husband relies upon In re Marriage of Thomas, 199 S.W.3d 847, 865-66 (Mo.App.2006) (finding error in award to wife of assets owned by husband’s corporation that was his separate property); Comninellis v. Comninellis, 99 S.W.3d 502, 512 (Mo.App.2003) (finding no error in setting aside corporate assets to husband as his separate property where corporation was a party, while noting general rule that “a court may not exercise control over property belonging to a corporation, even if one of the spouses is the sole shareholder of that corporation.”), and Bullard v. Bullard, 929 S.W.2d 942, 946 (Mo.App.1996) (finding error in award to wife of residence titled in her parents’ names as part of her share of marital property). Husband then argues he was prejudiced because the judgment of $1,500,000.00 in favor of Wife is “not just because it reflects the value of other parties’ property that the court had no jurisdiction [] to award to [Husband].”

Husband’s second point contends that the trial court erred in basing its property division, including its $1,500,000.00 award to Wife, on stale property valuations. Husband points out that the trial court expressly rested its judgment on Husband’s financial statements dated May 31, 1996, and October 7, 1997, and the J & K financial statements dated June 30, 1995, and May 31, 1996, and did not have before it any evidence of valuation of J & K, or any of its assets, at the time of trial. Citing Tarneja v. Tarneja, 164 S.W.3d 555 (Mo.App.2005), Husband argues the trial court’s reliance on these twelve- to fourteen-year-old values violated the general rule that the valuation of martial property should be reasonably proximate to the date in which the division of property is to be effective. Id. at 562-63.

We consider both points together because Husband is correct as to the general rule in both. “ ‘[A]s a general rule, the appropriate date for valuing marital property in a dissolution proceeding is the date of trial.’ ” Farnsworth v. Farnsworth, 108 S.W.3d 834, 841 (Mo.App.2003) (quoting Conrad v. Conrad, 76 S.W.3d 305, 314 (Mo.App.2002)). ‘“Thus, under this rule, if a marital asset does not exist at the time of trial, the trial court cannot value and include that asset in its division of marital property.’ ” Id. Stated another way, property owned on the date of trial by a third party, who is not a party to the dissolution action, does not exist as marital property and cannot be valued or divided as such. See Thomas, 199 S.W.3d at 865-66; Bullard, 929 S.W.2d at 946.

“There is an exception to the general rule, however, where a spouse is found to have secreted or squandered marital assets in anticipation of the marriage being dissolved. In such a case, the court may hold that spouse liable for the value of the secreted or squandered assets.” Farnsworth, 108 S.W.3d at 841 (internal citations omitted). Husband did not address this exception in his brief.

Here, Wife’s monetary judgment was based upon the trial court’s findings that Husband had “squandered, fraudulently hidden, and fraudulently conveyed” marital property that could have been divided. Husband’s squandering and hiding of marital property deprived the trial court of the ability to ascertain the continued existence of and the exact nature and extent of the squandered and hidden marital property at the time a division of marital property was to become effective. Such actions remove this case from the application of the general rule and bring it squarely within the exception.

In his reply brief, Husband argues that the trial court’s monetary award to Wife could not have been made to compensate Wife for Husband’s squandering and hiding of marital assets because the trial court’s judgment “expressly purported to award [Husband] property in the hands of nonparties.” Husband assumes that these awards are inconsistent and that such inconsistency should be resolved in his favor. We see no inconsistency. When a trial court finds that one party has secreted or squandered marital assets, the trial court may properly hold that party liable for the loss of those marital assets by awarding those assets to him or her. In re Marriage of Wood, 262 S.W.3d 267, 278 (Mo. App.2008); see, e.g., Spinabella v. Spinabella, 293 S.W.3d 34, 37-38 (Mo.App.2009) (finding no abuse of discretion in award of dissipated IRA to the party who squandered or secreted it), and Wright v. Wright, 1 S.W.3d 52, 62 (Mo.App.1999) (upholding award of dissipated proceeds from sale of a car while acknowledging that the effect is to reduce the selling party’s property award accordingly).

Here, the trial court was prevented from ascertaining, valuing, and dividing specific martial property at the time of trial because Husband’s wrongful squandering and hiding of that property denied it the information necessary to do so. As to point one, Husband has cited us no authority, and we can find none, that prevents a trial court from making a general award of squandered or hidden marital property to the responsible party and at the same time making a monetary award in favor of the other spouse to compensate for such wrongful conduct. As to point two, Husband has not challenged the trial court’s utilization of the 1995 through 1997 financial statements in determining the amount of martial property squandered and hidden by him from that time up until the date of trial. Both of Husband’s points are denied.

Decision

The trial court’s judgment is affirmed.

SCOTT, C.J., and RAHMEYER, J., concur.

      . Husband does not challenge these findings.

      . Although Husband’s use of the word "jurisdiction” has no application in this context, see Hightower v. Myers, 304 S.W.3d 727, 733 (Mo. banc 2010), we understand Husband's contention to be that the trial court lacked any legal, i.e. constitutional, statutory, rule, or common law authority to take such action.