author: HIGGINS, Commissioner.

text:
    COMMUNITY MEMORIAL HOSPITAL, a Not for Profit Corporation, Respondent, v. CITY OF MOBERLY, Missouri, et al., Appellants.
    No. 52562.
    Supreme Court of Missouri, Division No. 1.
    Dec. 11, 1967.
    Motion for Rehearing or to Transfer to Court En Banc Denied Jan. 8, 1968.

      Roy D. Williams, Williams, Williams & Reesman, Boonville, Edwards, Hess & Collins, Macon, for respondent, Community Memorial Hospital.
    Marion E. Lamb, Moberly, for appellants, City of Moberly and others.
   HIGGINS, Commissioner.

Action for declaratory judgment and in-junctive relief in which respondent had judgment exempting its real estate and personal property from taxation by County of Randolph and City of Moberly for years 1958 through 1965 and enjoining collection of taxes levied against those properties for the years in question. The judgment contained a finding that the properties were, during those years, “actually and regularly used exclusively for purposes purely charitable and not held for private or corporate profit.” Art. X, Sec. 6, Constitution of Missouri, V.A.M.S.; Sec. 137.100(5) V.A. M.S.

Respondent, Community Memorial Hospital (Osteopathic), was incorporated June 28, 1957, under the General Not-For-Profit Corporation Act of Missouri, Chapter 355, V.A.M.S., with purposes: “To establish and maintain a hospital for the care of persons suffering from illnesses or disabilities which require that the patients receive hospital care; to carry on any educational activities related to rendering care to the sick and injured or the promotion of health, which in the opinion of the Board of Trustees may be justified by the facilities, personnel, funds or other requirements that are or can be made available; to promote and carry on scientific research relating to the care of the sick and injured insofar as, in the opinion of the Board of Trustees, such research can be carried on in, or in connection with the hospital; to participate, so far as circumstances may warrant, in any activity designed and carried on to promote the general health of the community; to receive gifts, bequests, devises and other conveyances of personal and real property and to accept same with or without limitations or as endowments or as memorials or in trust for the benefit of or for any purpose or purposes for which the corporation is organized; to maintain an out-patient clinic and to foster, encourage and promote study, investigation and research in the art of diagnosis, healing and relieving human suffering and to foster and spread knowledge of medicine and treatment in relieving human suffering and disease; to procure the attendance of competent physicians and surgeons, (both D.O. and M.D.), nurses and attendants including laboratory technicians, scientists, and other persons necessary, usual or beneficial in carrying out the purposes of the corporation and to maintain free beds for such disabled and indigent persons and to furnish proper attendance for their care as may be admitted to the hospital, subject to such special rules and regulations as the Board of Trustees may establish from time to time for their admission, care and treatment. The hospital shall be conducted independent of sectarianism, and shall be open to any sect or creed. No charge for board, room, general nursing, medicines, medical care and attention shall be made of those patients who are unable to pay.”

Examination of respondent’s charter shows that there is no provision for stock shares. No dividends ever have been paid to any person, and no mileage or compensation has been paid to any person serving as a member of the board of trustees. No salaries have been paid to the medical staff which is open to all doctors, M.D. or D.O., upon application and qualification, and all income has been devoted to the hospital and its improvement. In the event of dissolution of respondent, “no part of the assets [over and above liabilities] shall be distributed to members of the corporation” unless provision be made against “diversion of such assets from not-for-profit purposes.” Section 355.230, V.A.M.S.

On July 1, 1957, Community Memorial Hospital acquired all the physical properties and assets of McCormick Osteopathic Hospital, a corporation organized under the General and Business Corporation Law of Missouri, for $75,000. (Three doctors who owned all the stock of this corporation, together with four laymen, were the first board of trustees in the Articles of Incorporation of Community Memorial Hospital.) The items so acquired consisted of Lots, 4, 5, and 6, Block 12, Burkholder’s First Addition to the City of Moberly, Missouri, upon which was situate a hospital building, hospital equipment and building contents, $3,000 bank account, $6,000 savings and loan account, and $120,000 accounts receivable. The three doctors who owned the McCormick Hospital each made a $1,500 gift “for operating account” and respondent executed interest-free promissory notes to each of the three doctors totaling $70,500 payable in ten years in $300 monthly installments for the purchase price of McCormick’s real estate and personal properties. Respondent also assumed $4,000-$6,000 in current liabilities of McCormick. Lots 1, 2, and 3, Block 12, Burk-holder’s Addition, were acquired March 27, 1962, by purchase from H. Mae McCormick, widow of Dr. W. H. McCormick, one of the owners of McCormick Hospital. These lots are contiguous to the hospital and are used as a unit with the hospital for driveway, parking, and physical therapy.

Merle Rice, respondent’s administrator since 1964, had been acquainted with the use by Community Memorial Hospital of its properties since its incorporation to time of trial; Clifford Falzone acted as administrator in parts of 1963 and 1964, and Wylie Mears had been chairman of the board of trustees for a year and a half and was an incorporator and on the board since organization of Community Memorial in 1957. All three testified that all the properties owned by Community Memorial had been used regularly and exclusively for hospital purposes and not for investment or other purposes. “It has been used by the general public, anyone that comes to the door,” and by both pay and indigent patients. Respondent’s rates for room and other hospital services are comparable and “run a little lower” than rates charged by other hospitals in the area; employees’ wages are average and the operation has been efficient in that assets have been improved and increased in value and indebtedness is practically retired.

Respondent’s hospital and services at all times have been available equally both to pay patients and those who could not pay. Average occupancy rate shows that the hospital has never operated at capacity and rooms and services always-have been available for both types of patients. Respondent’s financial reports show that in each year of operation from 1957 through 1965 respondent hospital and its services have been utilized for the benefit of persons who were unable to pay. In 1964 and 1965 approximately 9 per cent of respondent’s patients could not pay, and for the years 1957-1963 the average number of nonpaying patients was about 8 per cent or between 5 per cent and 10 per cent of all patients admitted each year. Respondent made efforts to collect from all patients who could pay and such payments constituted most of its income. Other income was received through participation in the vendor program of Missouri which makes payments for services rendered to patients on public assistance. Such payments do not cover all of such accounts and not all public assistance patients’ injuries or sicknesses come under the program.

Appellants have analyzed respondent’s financial reports for each of the fiscal years July 1, 1957 through June 30, 1965 to show that in that period respondent received $1,-878,497.49 from pay patients, and that services, including some bad debts, valued at $26,069.16 were claimed as charity. By further analysis they show a margin of $19,-458.11 income over expenses and no charity claimed for the first fiscal year, a negative balance of $1,549.84 and no charity claimed for the second fiscal year, $21,162.25 margin and no charity claimed for the third fiscal year, $20,821.61 margin and $1,526.72 charity for the fourth fiscal year, $10,537.07 margin and no charity claimed for the fifth fiscal year, $9,873.69 margin and $409.55 charity for the sixth fiscal year, $27,411.88 margin and $8,883.94 charity for the seventh fiscal year, $41,604.92 margin and $15,248.-98 charity for the eighth fiscal year. At the end of the eighth fiscal year, June 30, 1965, respondent’s net worth had increased to $184,822.37. All such margin of income over expenses in each year has been expended on improvement of building, facilities, equipment, services, and retirement of debts.

Respondent’s corporate charter and bylaws were submitted by the Prosecuting Attorney of Randolph County to the office of the Attorney General of Missouri, and Attorney General John M. Dalton on February 12, 1959 was of the opinion “that the charter and bylaws of the Community Memorial Hospital would not appear to prevent its being a charitable institution and entitled to tax exemption if, as a matter of fact, the operation of such hospital is such as to entitle it to be considered a charitable institution.” Respondent has filed an annual report with the Office of the Secretary of State of Missouri as required by the General Not-For-Profit Corporation Act. It has never paid unemployment compensation and it has not been required to file a state income tax return. Respondent received a refund from the United States Internal Revenue Service of income tax and interest for fiscal 1957 to 1958, and has since filed tax returns on IRS form 990-A, Return of Organization Exempt from Income Tax.

Until just prior to this litigation defendant Randolph County had entered orders exempting respondent from taxation and abating any assessments for that purpose for the years 1958 through 1963. On July 15, 1964, the Randolph County Court ordered extension of taxes for 1964 and “until a decision is made by the Circuit Court as •to the Community Memorial Hospital being a tax exempt institution. The Court further orders that if a decision is made by the Circuit Court that the Community Memorial Hospital is tax exempt the court will abate the taxes.” Appellant City of Mo--berly assessed taxes against respondent for all the years of its existence. Respondent did not pay the taxes thus levied on the ground it was a charitable institution exempt from taxation. In 1964 the city instituted legal proceedings for the collection of its taxes including advertising respondent’s property for sale for delinquent taxes, and this suit followed. Defendants County of Randolph and its taxing officials filed no pleadings and were adjudged in default; appellants City of Moberly and its taxing officials prosecute this appeal.

The sole issue is whether, under these facts, respondent’s properties are tax exempt.

Pursuant to Section 6, Article X, Constitution of Missouri, V.A.M.S., the legislature enacted (1959 revision) Section 137.-100, V.A.M.S., which declares that certain “subjects are exempt from taxation for state, county or local purposes: * * *

“(5) All property, real and personal actually and regularly used exclusively for * * * purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefrom is used wholly for * * * charitable purposes.”

It is settled “that exemption statutes are strictly but reasonably (so as not to curtail the intended scope of the exemption) construed. * * * charitable use exemption depends upon the use made of the property and not solely upon the stated purpose of an organization.” Young Men’s Christian Ass’n, etc. v. Sestric, 362 Mo. 551, 242 S.W.2d 497, 502 [1, 2], “And * * * each tax exemption case is ‘peculiarly one which must be decided upon its own * * * facts.’ Taxation is the rule. Exemption therefrom is the exception. Claims for exemption .are not favored in the law.” Midwest Bible & Missionary Inst. v. Sestric, 364 Mo. 167, 260 S.W.2d 25, 29-30 [4-6], “The phrase ‘exclusively used’ has reference to the primary and inherent use as over against a mere secondary and incidental use,” Young Women’s Christian Ass’n v. Baumann, 344 Mo. 898, 130 S.W.2d 499, 502; and “ ‘dominant use’ or ‘principal use’ cannot be substituted for the words ‘used exclusively.’ ” State ex rel. Koeln v. St. Louis Y.M.C.A., 259 Mo. 233, 168 S.W. 589, 590.

Whether the avowed purposes of respondent are “purposes purely charitable” depends upon definition of “charity” and “charitable purposes.” Under a broad concept of those terms there can be no doubt that the stated corporate purposes of respondent are “charitable” within a reasonable definition of that term. Appellants even concede that respondent “provided by its charter and its bylaws for charitable work.” See Young Men’s Christian Ass’n, etc. v. Sestric, supra, 242 S.W.2d 1. c. 502 [3, 4], and note also the opinion of the Attorney General of Missouri.

The more limited question, then, is whether respondent exclusively used its properties for the charitable purposes stated in its articles of incorporation. Appellants summarize their contentions and arguments for a negative answer to this question (and for reversal of the trial court’s finding in the affirmative) : “Respondent has failed to prove its exception from the rule (of taxation) because the evidence shows:

“1. Respondent is not, in fact, operated as a charity.
“2. Respondent’s property is used for corporate profit.
“3. Respondent’s property is not used exclusively for purposes purely charitable.
“4. Respondent is a competitive commercial business operated for profit.
“5. Even if Respondent could be classed as a charitable institution, it has deviated so far from charitable use of its property that any tax exemption it might have had is lost.”

14 C.J.S. Charities § 2 e, p. 422, states that “the test which determines whether a hospital is charitable or otherwise is its purpose, that is, whether or not it is maintained for gain, profit, or advantage”; and this test is recognized in Northeast Osteopathic Hospital v. Keitel, 355 Mo. 740, 197 S.W.2d 970, 975 [8], An analogy to the principles determinative of the question here appears in the article on the general status of hospitals as charitable institutions and potential classification as “charities” within rules exempting charities from tort liability, 15 Am.Jur.2d 156-157, Charities § 148: “A corporation, the object of which is to provide a general hospital for sick persons, having no capital stock or provision for making dividends or profits, deriving its funds mainly from public and private charity and holding them in trust for the object of sustaining the hospital, and conducting its affairs for the purpose of administering to the comfort of the sick, without expectation or right on the part of those immediately interested in the corporation to receive compensation for their own benefit, is a public charitable institution. Moreover, the facts that a corporation established for the maintenance of a public hospital, by its rules requires of its patients payment for their board according to their circumstances and the accommodation they receive, that no person has individually a right to demand admission, and that the trustees of the hospital determine who are to be received, do not render it the less a public charity. A hospital cannot, however, without losing its character as a public charitable hospital, receive pay patients to such an extent as will exhaust its accommodations and prevent its receiving and extending hospital service to the usual and ordinary number of indigent patients applying for admission under proper rules and regulations adopted by the authority managing and controlling the operation of such hospitals, since a hospital purchased with funds donated for the purpose of establishing and operating a public charitable hospital must be conducted as such a hospital.” See also Koprivica v. Bethesda General Hospital, Mo., 410 S.W.2d 84, 85-86; Adams v. University Hospital, 122 Mo.App. 675, 99 S.W. 453, 456 [3].

Under the evidence in this case showing the use made of respondent’s properties, the Randolph County Court by a finding and order July 8, 1963, abated “all personal and real estate taxes against the property of the Community Memorial Hospital for the years 1958 through 1963, inclusive” for the reason “that said property is tax exempt by being owned by and used by a Charitable non-profit corporation;” and by a series of separate orders affecting the assessment and levy for each year against respondent’s property, also on July 8, 1963, “The (County) Court, after hearing the evidence, finds that said assessment is erroneous for the reason that same is used for purposes purely charitable and not held for private or corporate profit and is actually used and occupied for the purpose of the organization.”

Similarly, respondent has not been required to file a state income tax return, in that such is not required of corporations or associations “organized and operated exclusively for * * * charitable * * * purposes, no part of the net income of which inures to the benefit of any private stockholder or individual,” Section 143.120(6), V.A.M.S.; or to pay state unemployment compensation tax on “service performed in the employ of a corporation * * * organized and operated exclusively for * * * charitable * * purposes * * * no part of the net earnings of which inures to the benefit of any private shareholder or individual,” Section 288.034(6), V.A.M.S.; or to pay federal tax on income of “corporations * * * organized and operated exclusively for * * * charitable * * * purposes * * * no part of the net earnings of which inures to the benefit of any private shareholder or individual,” 26 U.S. C.A. § 501(c).

Admittedly, these direct or tacit administrative opinions and rulings of the Missouri Attorney General, Randolph County Court, Internal Revenue Service, and state revenue divisions are not controlling as are contested judicial rulings, but they “are entitled to respectful consideration,” Northeast Osteopathic Hospital v. Keitel, supra, 197 S.W.2d 1. c. 974 [6]; and under the evidence of this case, are indicative of the direction in which all the evidence points. That is to say that the stated evidence satisfies all the rules and requirements necessary to respondent’s exemption from taxation for the years in question on the ground its property was actually and regularly used for purposes purely charitable and not for private or corporate profit. Such considerations as whether a profit or loss was in fact realized or sustained, Young Men’s Christian Ass’n, etc. v. Sestric, supra, 242 S.W.2d 1. c. 505, or that some competition with private business exists, Missouri Goodwill Industries v. , Gruner, 357 Mo. 647, 210 S.W.2d 38, 41, Bader Realty & Investment Co. v. St. Louis Housing Authority, 358 Mo. 747, 217 S.W.2d 489, 493, or that pay patients are admitted for treatment, Northeast Osteopathic Hospital v. Keitel, supra, 197 S.W.2d 1. c. 975 [9], or that a large part of its revenue is derived from pay patients, Nicholas v. Evangelical Deaconess Home and Hospital, 281 Mo. 182, 219 S.W. 643, 646 [3], State ex rel. Alexian Brothers’ Hospital v. Powers, 10 Mo.App. 263, aff. 74 Mo. 476; 51 Am.Jur., Taxation, § 636, p. 607, are not determinative if, from all the evidence, it may be fairly said that the actual use made of the corporation’s property is consistent with the nonprofit features and charitable purposes expressed in the corporation’s articles of agreement. Such is this case. See also Voelker v. St. Louis Mercantile Library Ass’n, Mo., 359 S.W.2d 689, 694, 696, 697; St. Louis Council, Boy Scouts of America v. Burgess, 362 Mo. 146, 240 S.W.2d 684, 687 [3]; and, since Missouri’s general not-for-profit corporation act “appears to have been copied largely from the Revised Statutes of Illinois, S.H.A. Chapter 32, §§ 163a to 163a100,” see People ex rel. Cannon v. Southern Illinois Hospital Corp., 404 Ill. 66, 88 N.E.2d 20, granting tax exempt status to a nonprofit hospital corporation under similar circumstances.

Appellants cite Frisco Emp. Hospital Ass’n v. State Tax Commission, Mo., 381 S.W.2d 772, and Evangelical Lutheran Synod of Mo., Ohio and Other States v. Hoehn, 355 Mo. 257, 196 S.W.2d 134, both of which are to be distinguished from this case. In the former, “the facilities of appellant’s hospital are available only to members of appellant association. Many years have passed since there were any pay patients. The primary and apparently the sole use of the hospital is for the advantage of the members of plaintiff association.” 381 S.W.2d 1. c. 779. The same distinction applies to Trustees of Local 88, etc. v. State Tax Commission, Mo., 367 S.W.2d 549, also cited by appellant. The distinction between Evangelical Lutheran Synod, etc. v. Hoehn, supra, and this case is provided by Missouri Goodwill Industries v. Gruner, supra, 210 S.W.2d 3. c. 40: “In that case we denied tax exemption to a publishing corporation, organized as a subsidiary of the Lutheran Church, which did an extensive business in competition with commercial printing houses. The opinion says: 'A competitive commercial business operated for profit does not comply with that requirement, [purely charitable purposes] even though the profits are devoted to religion.’ We think that case was properly ruled, but it differs in important respects from the instant case. There the business was managed and operated in the same manner as any commercial enterprise for profit. True, the profits were turned over to the parent church corporation to be devoted to religious and charitable uses, but the primary purpose of the publishing company was to make profits, while the primary purpose of Goodwill is not to make profits, but to assist handicapped men and women * * Similarly, the purpose of respondent here is not to make profits but to devote any income in its operation to the charitable purpose of operating a hospital for the benefit of all who come to its doors whether as pay or indigent patients.

Judgment affirmed.

HOUSER and WELBORN, CC., concur.

PER CURIAM:

The foregoing opinion by HIGGINS, C., is adopted as the opinion of the court. All of the Judges concur.


source: Caselaw Access Project

author: BARRETT, Commissioner.

license: Public Domain

text:
    George BENSON et al., Appellants, v. ELEVEN-TWENTY ST. CHARLES COMPANY et al., Respondents.
    No. 52352.
    Supreme Court of Missouri, Division No. 2.
    Nov. 13, 1967.
    Motion for Rehearing or to Transfer to Court En Banc Denied Jan. 8, 1968.

      Blumenfeld, Kalishman, Marx & Tureen, Richard Marx, Shifrin, Treiman, Schermer & Susman, Louis B. Susman, St. Louis, for plaintiffs-appellants.
    R. H. McRoberts, R. H. McRoberts, Jr., St. Louis, for defendant-respondent, Eleven-Twenty St. Charles Co.
    Morris J. Levin, St. Louis, for defendants-respondents, M. H. Mandel and Burton Mandel, Bryan, Cave, McPheeters & McRoberts, Levin & Weinhaus, St. Louis, of counsel.
   BARRETT, Commissioner.

The individual parties, the Gitts and Ben-sons as plaintiffs and M. H. Mandel as defendant, are the owners of all the common stock of the corporate defendant Eleven-Twenty St. Charles Company. In this multiple-purpose action the Gitts and Ben-sons sought to have declared void the election of Mandel and his son, Burton, as directors of the corporate defendant; they also asked for the appointment of a receiver and eventually the dissolution and liquidation of the company. The trial court’s findings of fact and conclusions of law were all against the plaintiffs and they have appealed. Both parties assert that jurisdiction is appropriately in this court because the appeal involves the construction of Article 11, § 6 of the Missouri constitution relating to cumulative voting for corporate directors (Shapiro v. Tropicana Lanes, Inc., Mo., 371 S.W.2d 237), and as to liquidation a company worth more than one million dollars.

In very brief summary the facts are that in 1947 Mandel and his then friends, Dr. Gitt and George Benson, formed Eleven-Twenty Corporation with a capitalization of 10 shares of stock, 5 of which were issued to Mandel, 2½ to Dr. Gitt and 2½ to Benson. The Gitts have transferred ¼ share to their minor son, David, and ¼ share to their daughter, Barbara Ann. While Gitt and Benson claim that stock ownership was to be “equal,” that is, one-half to Mandel and one-half to Gitt and Benson, Mandel insisted on personal “control” and before the stock certificates were delivered to Gitt and Benson they entered into separate “Stockholders’ Agreements” with Mandel. These agreements provided that they could not sell their shares of stock without Man-del’s consent and in the event of a proposed sale Mandel had the first refusal to purchase at book value (which was defined and computed) and upon the deaths of Benson and Gitt he had “the absolute right to purchase” at book value. Indicative of Mandel’s insistence on “control” is the preamble to these documents: “Whereas, First Party (Mandel) intends at all times in view of the fact that he has discovered and promoted said deal, to retain absolute control of said corporation and said property,”

The sole purpose of forming the corporation was to purchase a “multi-story parking garage at 1120 St. Charles Street,” leased to Scruggs-Vandervoort-Barney, first at $25,000.00 a year and later at $40,-000.00 annually for a period of years. The purchase of this property from the Langen-berg family for $175,000.00 was accomplished in this manner: The capitalization of the company, $1000.00, the only cash outlay by the three promoters, was advanced $500.00 by Mandel, $250.00 by Gitt and $250.00 by Benson. The balance of the purchase price, $24,000.00, secured by a second deed of trust was borrowed, $9750.00 from Gitt, $9750.00 from Benson and $4500.00 from Mandel, and $150,000.00 secured by a first deed of trust from the Prudential Insurance Company. It is not necessary to detail the financial record and dealings of this company, it is sufficient to say that in its early years and up to June 1956, on their cash outlays of $250.00 and $500.00 Benson and Gitt received dividends of $11,800.00 each and Mandel $23,600.00 and in addition Gitt and Benson were paid salaries in excess of $40,000.00.

In 1949, at Mandel’s instigation, the company purchased the Berthold property for $85,000.00. The down payment of $10,-000.00 was advanced in loans from the Eleven-Twenty Company to Benson, $5000.-00, and Gitt $5000.00. In 1955 this property was sold and the three shareholders divided a gross profit of $172,506.20. Mandel and Gitt reinvested their net profits, $60,-000.00 and $30,000.00 in the parent company but Benson refused to reinvest his $30,-000.00 share and this was the end of the Benson-Mandel friendship and amicable business relationship. Mandel was of the opinion that Benson had “welshed” or “ratted out” and, thereafter, until Gitt and Man-del fell out, Gitt and Mandel voted together and against Benson on all corporate matters. Finally the Gitt-Mandel association, dating back to boyhood, came to an end and what had once been a pleasant social and business relationship among friends developed into bitter internecine stockholder warfare and finally into reciprocal implacable personal hatred. The result has been that since 1957 no dividends have been paid by the Eleven-Twenty Corporation and, of course, Benson and Gitt have received no sums of money from any of its enterprises. Nevertheless, it should be interpolated, over the years and particularly from the reinvestment of the Berthold profits, control of Associated Garages was acquired and three of its four garages have been sold, one to Sheraton-Jefferson Hotel for $800,000.00 and two others to the “stadium group” for large sums and that company is worth in excess of one million dollars.

This lawsuit was precipitated by the annual meeting of stockholders of the Eleven-Twenty Corporation on February 7, 1964. As of that date Mandel was the record owner of 5 shares of stock, Benson 2½ shares, Dr. Gitt 1 share, Charlotte Gitt 1 share and share was issued in the names of J. J. Gitt and Charlotte Gitt as trustees for David and share as trustees for Barbara. Benson and Gitt did not attend the annual stockholders’ meeting, instead their two attorneys appeared with proxies from Benson and Gitt and they attempted to cast, cumulatively voting, 7½ votes for each of their nominees for director, Benson and Gitt’s lawyer. Mandel ruled, however, that fractional shares could not vote and casting his votes for himself and his son, Burton, elected two directors. Gitt’s and Benson’s counsel declined to cast their votes, without counting fractional shares, so as to elect one director. Thus is presented the question of whether under Missouri law fractional shares of stock are entitled to vote in the election of corporate directors.

The appellants, the Gitts and Benson, claim that they were entitled through their proxies to vote their fractional shares thereby creating a deadlock in the election of directors and the management of the company. They contend, having thus created* an irreconcilable deadlock in the management of the company, that the court in the exercise of its equity jurisdiction should liquidate the corporation and distribute its assets. Handlan v. Handlan, 360 Mo. 1150, 232 S.W.2d 944. In this connection they contend that Mandel’s conduct in managing and controlling the corporation has been oppressive and illegal within the meaning of § 351.485, RSMo 1959, V.A.M.S., that he has violated a fiduciary relationship and for all these reasons there should be a decree of dissolution and liquidation. As indicated, the trial court found all these issues against the plaintiffs and in large measure the findings depend on credibility and while the transcript has been thoroughly considered deference is due the trial court and it may-only be said that his findings are supported, certainly the appellants’ claims in these respects do not appear as a matter of law and this court could not confidently make contrary findings of fact. Furthermore, as the parties must tacitly concede, the meritorious and determinative question is whether fractional shares are entitled to vote, if not, there is no deadlock in corporate management and the essence of plaintiffs’ claims fail.

In support of their contention that fractional shares are entitled to vote the appellants point to the language of the constitutional and statutory provisions concerning cumulative voting of stock for directors and managers “each shareholder shall have the right to cast as many votes in the aggregate as shall equal the number of shares held by him” (Const.Mo. Art. 11, § 6), and “Each oustanding share entitled to vote under the provisions of the articles of incorporation shall be entitled to one vote on each matter submitted” (RSMo 1959, § 351.245(1)) and urges that “each shareholder” and “shares” in the constitution does not mean “each full share” and plainly admits of and includes “fractional shares.” They urge that under the statute and the constitution stock ownership carries three rights, the right to vote, the right to receive dividends and the right to a share of the corporation upon liquidation and that these values may not be destroyed by denial of the right to vote fractional “shares.”

Both appellants and respondents rely on § 351.300, RSMo 1959 (Laws Mo.1965, p. 532, amending Chapter 351 extensively but not § 351.300). Insofar as material here that statute provides that:

“A corporation may, but shall not be obliged to, issue a certificate for a fractional share, and, by action of its board of directors, may issue in lieu thereof scrip or other evidence of ownership which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or other evidence of ownership aggregating a full share, but which shall not, unless otherwise provided, entitle the holder to exercise any voting right, or to receive dividends thereon or to participate in any of the assets of the corporation in the event of liquidation.”

The appellants urge that in adopting this provision the legislature “differentiated” scrip and fractional shares, thereby recognizing “rights” in fractional shares not recognized in “scrip.” On the other hand, the respondents point to eleven sections of The General and Business Corporation Law of Missouri (RSMo 1959, § 351.010) and urge that the words “share” or “shares” do not and cannot mean “fractional shares.” The bylaws provide that “Each stockholder shall have one (1) vote for each share of stock having voting power, registered in his name on the books of the corporation.” The respondents, of course, rely on this provision of the bylaws and what is stated in the texts and annotations as “the rule that fractional shares of stock cannot be voted in the absence of express legislative authorization to that effect.” Annotation 98 A.L.R.2d 357, 361; 19 Am.Jur.2d § 636, p. 152; 47 Ky.L.J. 506, 510-511. 5 Fletcher, Cyclopedia Corporations, § 2045.1, p. 208, adds the comment, including a reference to the Missouri statute, that “Under the Model Business Corporation Act a certificate for a fractional share shall, but scrip shall not unless otherwise provided therein, entitle the holder to exercise voting rights.” This is a correct reference to the model act (see 1 Model Business Corporation Act Annotated, § 22, p. 373) but the annotator as well as others have erroneously assumed that the General Assembly of Missouri adopted Section 22 of the model act.

As the publishers of the Missouri Annotated Statutes note, 17A V.A.M.S. p. IV, Missouri “modeled” Chapter 351 on the Illinois law and while Illinois in 1957 (32 Smith-Hurd Ill.Supp.Laws of Ill.1957, p. 2192) amended its corporation code and specifically § 157.22 and adopted Section 22 of the model code providing that a fractional share “shall” have the right to vote, the Missouri legislature while revising its code in 1963 adopted in § 351.300 the Illinois statute as it was enacted in 1933 which provided for certificates for fractional shares “but which shall not, unless otherwise provided, entitle the holder to exercise any voting right”. 32 Smith-Hurd Ann. Ill.St. pp. 177-178. In view of the dates on which the various statutes were enacted or amended it must be inferred that the Missouri legislature acted advisedly when it adopted the older Illinois statute rather than Section 22 of the model act.

There is no purpose in considering the rationale of this point of view, the only case squarely in point under comparable legislation is Commonwealth ex rel. Cartwright v. Cartwright, 350 Pa. 638, 40 A.2d 30, 155 A.L.R. 1088. All the arguments advanced here were made in that case and rejected and while, as appellants urge, the case is not binding on this court, and its reasoning need not be adopted in toto, what it says as to legislation is peculiarly applicable and persuasive : “The legislature authorized the issue of certificates for fractional shares, but it did not authorize voting based on such shares. It could have done so, and it may even have intended to do so, but the fact is it did not do so.” The court concluded by its opinion by saying that the arguments in favor of voting fractional shares should be addressed to the legislature since in specifically providing to the contrary the legislature had acted advisedly.

While not necessarily forceful analogies, Missouri has adopted the view that Article 11, § 6 of the Constitution, and the statutes as well, permit the classification of both common and preferred stock as voting and nonvoting. State ex rel. Frank v. Swanger, 190 Mo. 561, 89 S.W. 872, 2 L.R.A.,N.S., 121; Shapiro v. Tropicana Lanes, Inc., Mo., 371 S.W.2d 237.

For the reasons indicated and upon this record fractional shares may not be voted for director and accordingly the judgment is affirmed.

STOCKARD and PRITCHARD, CC., concur.

PER CURIAM:

The foregoing opinion by BARRETT, C., is adopted as the opinion of the court.

All of the Judges concur.


text:
    PUBLIC MUTUAL CASUALTY COMPANY, a Corporation, Appellant, v. Robert D. SCHARZ, Superintendent, Division of Insurance, Department of Business and Administration, and Eugene G. Bushmann, Commissioner, Administrative Hearing Commission, Respondents.
    No. 52663.
    Supreme Court of Missouri, Division No. 1.
    Dec. 11, 1967.
    Motion for Rehearing or to Transfer to Court En Banc Denied Jan. 8, 1968.

      Max Sigoloff, St. Louis, for appellant.
    James P. Dalton, Willard C. Reine, Jefferson City, for respondents.
   HENRY J. WESTHUES, Special Commissioner.

This case involves the question whether Robert D. Scharz, Superintendent, Division of Insurance, Department of Business and Administration, was justified in refusing to grant petitioner, Public Mutual Casualty Company, a corporation, a license to do business. A hearing was had before Eugene G. Bushmann, Commissioner, Administrative Hearing Commission. The action of the superintendent was there sustained. On appeal to the Circuit Court of Cole County the order of denial was affirmed and petitioner appealed to this court. We shall refer to petitioner as Mutual, to defendant Scharz as superintendent, and to defendant Bushmann as commissioner.

Mutual was refused a license by the superintendent, who ruled Mutual had not complied with Section 379.235, RSMo, Cum.Supp.1965; in particular, the third condition prescribed by the section which reads as follows: “ * * * provided, however, that the total assets of the company shall not be less than one hundred thousand dollars of paid in premiums and a guaranty fund or contributed surplus of not less than three hundred thousand dollars which shall be held in cash or securities in which these insurance companies are authorized to invest ; * * *. ”

It was agreed that Mutual had a surplus of only $71,465.84. The superintendent ruled this item should be $300,000 as required by Section 379.235(3), V.A.M.S., supra.

The main contentions of Mutual were and are that the section does not apply to it and, further, that if the section is applicable to Mutual the law is unconstitutional and void as- being an ex post facto law. It is contended that Mutual was granted a charter in 1939 under the provisions of the law then in force. It is argued that Section 379.235 added an additional burden on Mutual and is therefore void as impairing the obligation of a contract. We shall dispose of these and other contentions after we relate the facts giving rise to this controversy.

Mutual obtained a certificate of incorporation in July 1939. The charter powers granted by the certificate were “to do the business of all lines of automobile insurance, and all other classes of casualty insurance except employer’s liability and workmen’s compensation insurance.”

Mutual applied for and was granted a license each year after 1939 and transacted business, having its principal place of business in the City of St. Louis, Missouri. The legislature in 1963 repealed and reenacted Section 379.235 and added the condition to obtaining a license of requiring “a guaranty fund or contributed surplus of not less than three hundred thousand dollars * * Mutual held á license which expired in March 1966. On February 25, 1966, the superintendent filed a complaint against Mutual asking that the license of Mutual be revoked. The violation charged was noncompliance with the provision requiring the guaranty of $300,000.

The case was not heard before the commissioner until after the license had expired. The parties treated the case as though the superintendent had refused to grant Mutual a license for the next year, that is, for 1966. We shall treat the case in like manner.

In the brief of the superintendent it is stated that “The annual license or Certificate of Authority issued appellant was not a contract with the State of Missouri in which appellant had vested property rights, but was a mere license and the legislature under its police power could amend and change the conditions under which appellant’s license could be renewed or revoked.”

It is our opinion that if the above statement of the superintendent is correct, Mutual’s points as to the unconstitutionality of the 1963 Act, supra, must be overruled.

The applicable rule is well stated in 44 C.J.S. Insurance § 56, p. 518, which reads in part as follows: “ * * * the insurance business is affected with public interest, it is competent for the state, under its police power or as creator or controller of corporations, to determine who may engage in the business within its boundaries, and to prescribe terms and conditions on which the business may be conducted, and generally to regulate the business and all persons engaged in it, whether as individuals, partnerships, voluntary associations, or corporations. Such regulations are valid even as applied to corporations already engaged in the business * * *. The state legislature may lawfully require insurance companies to act promptly on applications for insurance, to set aside or deposit a fund with a specified state insurance official for the security of policyholders, or to maintain a surplus in a specified amount * * ”

The above statements of law are supported by numerous cases from various states.

It is the rule that a license is not a contract. 53 C.J.S. Licenses § 2, p. 448. The condition prescribed by the legislature contained in Section 379.235, supra, is within the police power of the state. Such statutes may be amended, repealed, and reenacted whenever the legislature deems it necessary for the benefit and protection of the general public. Section 379.235, supra, is not an ex post facto law. It was applicable to Mutual and all other such companies from the day the law took effect. Sections 379.205 to 379.310 were designated as specifically applicable to “mutual companies other than life and fire.” Section 379.230 empowers and authorizes companies organized under Section 379.205 to 379.310 to make contracts of insurance. Subsection (3) of Section 379.230 reads: “Automobile insurance. Against any or all loss, expense and liability resulting from the ownership, maintenance or use of any automobile or other vehicle.” The following Section 379.235, which was repealed and reenacted by the legislature begins with the words “No such company,” clearly making the condition in subsection (3) of that section applicable to Mutual. Note that the charter of Mutual authorizes it “to do the business of all lines of automobile insurance, and all other classes of casualty insurance except employer’s liability and workmen’s compensation insurance.” We rule that Section 379.235(3) applies to Mutual and all other like companies, as well as any companies that may be formed after the law took effect.

Mutual in its brief says “that the imposition and enforcement upon Appellant of Section 379.235 enacted in 1963 is constitutionally illegal, unreasonable, discriminatory, oppressive and wrongful.” We cannot agree. The Act applies alike to all companies in the same class of business as Mutual. The legislature has the authority to enact laws under the police power of the state and to change them from time to time so as to meet the changing economic conditions. Our state constitution expressly reserved such power. Article XI, Section 3, 1945 Constitution, V.A.M.S., reads as follows: “The exercise of the police power of the state shall never be surrendered, abridged, or construed to permit corporations to infringe the equai rights of individuals, or the general well-being of the state.” The Constitution of 1875 contained a similar section. See Art. XII, Sec. 5. This provision of the constitution is applicable to insurance companies. See 44 C.J.S. Insurance § 56, p. 518.

The judgment of the trial court is hereby affirmed.

PER CURIAM.

The foregoing opinion by HENRY, J. WESTHUES, Special Commissioner, is adopted as the opinion of the court. All concur.


author: PER CURIAM:

text:
    STATE of Missouri, Respondent, v. Carl Thomas WITT, Appellant.
    No. 51741.
    Supreme Court of Missouri, Division No. 2.
    Dec. 11, 1967.
    Motion for Rehearing or to Transfer to Court En Banc Denied Jan. 8, 1968.
    Norman H. Anderson, Atty. Gen., Jefferson City, Robert K. Spalding, Sp. Asst. Atty. Gen., Clayton, for respondent.

      C. LeRoy Snodgrass, Tuscumbia, for appellant.
   PER CURIAM:

On August 25, 1964, about 2:20 in the afternoon, the.nude and rapidly decaying body of Woodrow Wilson, age 27, was found in an unused septic tank in Eldon. Wilson weighed 115 to 120 pounds and his body was particularly identified by a “small,” crippled left arm. There were abrasions on his side and chest, four front teeth were knocked loose and his jaw was badly fractured. A pathologist said that there were three small fractures at the back and base of his skull, there had been a concussion and hemorrhage in his brain and it was the opinion of the doctor that these injuries and eventually his death resulted from “(a) blow or heavy fall in which the back of the head was struck on some smooth surface” — the blow could have been from a fist. In the information it was charged that on August 21, 1964, Carl Witt and Donald Marriott killed Wilson by beating him to death with their fists, from one of the admissions it was a permissible inference that Wilson was still alive when they stuffed his body in the septic tank. After a severance and change of venue to Moniteau County a jury found the appellant Witt guilty of murder in the second degree and fixed his punishment at thirty years’ imprisonment.

It was established, independently of any oral admissions Witt may have made, that Wilson was last seen in and around the Hilltop Tavern and other “beer joints” with Witt and Marriott and so upon Wilson’s disappearance inquiry and finally suspicion was directed to them. It is not necessary to review all the circumstances in detail, it is sufficient to say that with Witt’s oral admissions the state made a case but without them it is indeed doubtful that a case of second degree murder was made. Witt made different admissions to police and other officials on several occasions but only two were introduced, relied upon by the state and are involved upon this appeal, the first in the highway patrol office in Jefferson City to a patrol officer and to the sheriff and prosecuting attorney of Miller County and the second in the prosecuting attorney’s office in Tuscumbia to another patrol officer and to the sheriff and the prosecuting attorney of Miller County. In his motion to suppress evidence, in his objections upon, the trial of the cause and here Witt attacks these two separate admissions as well as others and in addition a search of his automobile but it is only necessary to a disposition of this appeal to consider whether his second series of admissions were obtained in circumstances violative of his state and federally protected constitutional rights — if so, it was manifest prejudicial error to admit them in evidence.

As to the first admissions, on August 26th, before he had been formally charged with the offense, Witt was taken to Jefferson City for a polygraph test but the test was not given because as Lieutenant Eidson said he made the admission “said that he would tell me as near as he could what happened, which he proceeded to do so. * * * He told me that they were down to this tavern, he and the deceased and third party * * * they were at the tavern, the three of them. They got in the car and left the tavern and drove a little ways and he and the deceased had an argument. They got out of the car, and he first told me that he slapped him, the deceased. And then they went on down the road a little ways, that is walked down the road a little ways, and the deceased fell down. He later told me a couple of times — just in conversation, that he hit the defendant. * * * The defendant said he hit the deceased. Then he said after they were down the road a little ways, the deceased fell down, and they picked him up and put him back in the car and drove around with him awhile. And then they took him up to the Eldon Concrete Block Factory (Witt’s place of employment) * * * and stopped near a septic tank, and he and the third party put him into the septic tank, put the deceased into the septic tank. * * * They did remove the clothing and the third party climbed upon the septic tank and he helped him climb up, helped get the deceased up.”

On this date, August 26, Witt had not been arrested or charged with Wilson’s murder and had not then employed a lawyer. The lieutenant testified that on that occasion and before Witt repeated his statement the prosecuting attorney advised him of his right to counsel and “he (Witt) asked you if you could represent him. * * * He asked him if he could or would represent him — something to that effect.” A warrant was issued and Witt was arrested the following day, August 27, and thereafter, failing to make bond, was held in the Miller County jail at Tuscumbia. Thereafter, between August 27 and September 4, the defendants, and their lawyers and the prosecuting attorney met in magistrate court to agree upon a date for a preliminary hearing, by then Witt had employed Mr. Snodgrass, and counsel for the state and the defendants agreed on a day, the following Tuesday. Accordingly, on September 4, 1964, a preliminary hearing was held and both Marriott and Witt were represented by counsel, the appellant by Mr. Snodgrass, the record recites that “Hon. William F. Berry, Jr., announces at this time that he is attorney for the defendant, Donald Eugene Marriott and that the Hon. Leroy Snodgrass is attorney for the defendant, Carl Thomas Witt.” Both defendants were bound over and on September 9, 1964, a transcript of the proceedings in magistrate court was filed in the circuit court and on September 21, 1964, the prosecuting attorney filed an information charging Marriott and Witt with Wilson’s murder on August 21, 1964. Also the record recites that on September 23, 1964, “come the Prosecuting Attorney of Miller County, Missouri, and come also the defendants in person and by their attorney, Leroy Snodgrass, and each defendant waives formal arraignment and enters his plea of not guilty.” On April 9, 1965, Witt through his counsel, Snod-grass, moved for a change of venue and on June 2, 1965, venue was changed to Moniteau County and beginning on June 16, 1965, Witt’s separate case was tried and throughout the proceedings, including his motion for a new trial, notice of appeal and on his brief in this court he has been represented by Mr. Snodgrass, his paid counsel.

Thus in this background is presented the problem whether the second interrogation of Witt and the introduction in evidence of the incriminating admissions obtained on that occasion by the prosecuting attorney, the sheriff and the patrolman, in the absence of and without notice to his attorney, Mr. Snodgrass, infringed his constitutional rights as a matter of law and therefore demands the granting of a new trial. Massiah v. United States, 377 U.S. 201, 84 S.Ct. 1199, 12 L.Ed.2d 246; Spano v. People of State of New York, 360 U.S. 315, 79 S.Ct. 1202, 3 L.Ed.2d 1265; Escobedo v. State of Illinois, 378 U.S. 478, 84 S.Ct. 1758, 12 L.Ed.2d 977; Miranda v. State of Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694; Clewis v. State of Texas, 386 U.S. 707, 87 S.Ct. 1338, 18 L.Ed.2d 423. Or to briefly summarize, these facts and circumstances present the problem: Witt had and was represented by counsel when he first appeared in magistrate court to fix a date for his preliminary on September 1, 1964, after that appearance the sheriff of Miller County at the request of the prosecuting attorney removed Witt from his jail cell, took him to the prosecuting attorney’s office and there together with a highway patrolman he was further interrogated by all three officials and finally'made the admissions involved here — all without notice to his lawyer, Snodgrass. On the motion to suppress Witt said that on that occasion the prosecuting attorney inquired whether he had a lawyer and he replied, “Yes, Leroy Snod-grass.” The highway patrolman, both on the motion to suppress and on the trial, testified that the prosecutor informed Witt that “he had a right to a lawyer” but Witt nevertheless proceeded to repeat what he had previously said in Jefferson City and, furthermore, made other and additional incriminating admissions. While the sheriff said that the prosecuting attorney advised Witt of “his constitutional rights” and only “wanted him to repeat what he had told before about this case,” he testified that he did not hear Witt say that he had a lawyer and he did not hear the prosecutor ask him “at any time if he had an attorney.” In the trial of the cause in June 1965 as to whether when he took him to the prosecutor’s office on September 1, 1964, he knew whether Witt was then represented by a lawyer the sheriff said, “I knew that you (answering Snodgrass) had talked to him, but there has been attorneys into the jail, but I don’t know who personally represented him.” The prosecuting attorney did not testify at the trial but on the motion to suppress the court inquired whether he desired “to make a statement for the record” and this is his reply: “Yes. For the record in regard to testimony given by the defendant Witt through questioning by Mr. Snodgrass in regard to an interview of the defendant conducted in the prosecuting attorney’s office at which the prosecuting attorney, Officer Rohls and Officer or Sheriff Hensley were present. I wish to state at the time of this interview with the defendant, that I had been advised by Mr. Snodgrass, attorney for the defendant Witt, when the defendant was brought before the Magistrate, that he, Mr. Snodgrass, was representing him only at that appearance and that he had not been otherwise retained. That W. F. Berry, who is at this time representing the Defendant Marriott had not appeared in Court on behalf of either the defendants at the time of this examination, and had not been informing the prosecuting attorney that he was representing either party. And that at the time of the interview I had no knowledge that either of the defendants was represented by counsel until I was informed by the Defendant Marriott that he had been advised by counsel not .to make a statement and the Defendant Marriott was immediately released and returned to jail.”

This case and its record are unlike State v. Turnbough, Mo., 388 S.W.2d 781, in two -important respects. First, in this case “constitutional grounds” against the introduction in evidence of Witt’s admissions were urged in a separate motion to suppress, kept alive throughout the trial and are fully set forth in his motion for a new trial and constitute the foundation for his assignment of error in this court. Second and most important, upon the principal trial Witt did not himself testify to all the essential facts contained in his admissions. Commonwealth v. McCarthy, 348 Mass. 7, 200 N.E.2d 264; State v. Linder, Mo., 412 S.W.2d 412. Witt did testify, as of course was his right, (RSMo 1959, § 491.010, V.A.M.S.) but the subject matter of his examination in chief was purposefully very narrow, thus restricting the cross-examination. RSMo 1959, §§ 546.260, 491.070, V.A.M.S. In fact he gave no evidence relating to the substantive offense or to any admissions he may have made. The sum total of Witt’s testimony was that he was 29 years old, had gone to the fifth grade in a country school, had been an odd jobs farm worker and had never been convicted of a prior offense.

As others have observed, the question involved here is not simply the right to counsel “but with waiver of the assistance and advice of counsel who was at the time representing the defendant.” State v. Herman, 3 Ariz.App. 323, 414 P.2d 172, 174. At the time of the second interrogation a warrant had been issued and served, Witt was in jail, and he had been formally charged in magistrate court. Furthermore he or someone for him had employed counsel and defendant and counsel together with the prosecuting attorney had met in magistrate court and agreed upon a future date, 3 days away, for the preliminary hearing. In Massiah v. United States, 377 U.S. 201, 84 S.Ct. 1199, 12 L.Ed.2d 246, decided May 18, 1964, the appellant had been indicted, employed counsel and released on bond. Unknown to Massiah his code-fendant had permitted narcotic agents to “bug” his (the codefendant’s) automobile. In this manner and in the absence of appellant’s counsel the agents listened to and upon his trial testified to the incriminating statements made by him in the course of his conversation with his coindictee. Applying the principles of the Spano case the court concluded that “the petitioner was denied the basic protections of that guarantee when there was used against him at his trial evidence of his own incriminating words, which federal agents had deliberately elicited from him after he had been indicted and in the absence of his counsel.”

While there is some conflict in the point of view of the three officials, the prosecuting attorney, the sheriff and the patrolman, no one claims that he asked Witt if he wanted his lawyer present or told him that he was entitled to have him present. Only the patrolman claims that Witt was advised on this occasion, not of the right to the presence of his lawyer while being again • interrogated, but of his general right to counsel. Basically the position of the prosecuting attorney and the sheriff was that it was their understanding that Witt only employed counsel for his preliminary hearing and that therefore they had a right to pursue their interrogation. This point of view ignores the fact that Witt did then have counsel, that the preliminary was three days away and they had all appeared in court, according to the transcript, and so of course the prosecuting attorney, if not the sheriff and the patrolman, was bound to know that Witt had a lawyer and that Witt was being interrogated without notice- to the lawyer. Neither the sheriff nor the prosecutor made the slightest effort to communicate with the lawyer even though he lived in Tus-cumbia and advise him that they were about to conduct another secret out-of-court interrogation of his client.

Witt’s Jefferson City admissions have been set forth in their entirety and while they are indeed incriminating, they are lacking in specific detail in several respects and fail to clearly reveal motive and the essentials of second degree murder. And while the state claims that in the Tuscumbia interrogation he was only asked to repeat what he had said in Jefferson City, the second interrogation produced several specific details and illuminated the first interrogation considerably. For example, it was there revealed for the first time that Wilson was probably not dead when Witt and Marriott stuffed him in the septic tank — the patrolman, repeating Witt, said that “He had groaned” as they put him in the tank. In Jefferson City Witt had admitted removing Wilson’s clothes but there was then no indication of just why and when this had occurred. It was in the second admissions that Witt said, after hitting Wilson, that he and Marriott loaded him into Witt’s automobile and drove around to one or more taverns and had more beer and sandwiches before they placed him in the septic tank. Then too in Tuscumbia to both the sheriff and the patrolman he first said that he did not know or remember what had happened to Wilson’s clothes or where they had been removed and discarded. But the sheriff finally testified that Witt had admitted that it was while they were driving around: “I believe he stated that was the time they got rid of the clothes.” In and of themselves these isolated details may seem to be rather insignificant, but in the context of the trial the precise time at which Wilson’s clothes were removed may become cogently significant. From Witt’s Jefferson City admissions there was only an argument and, as he called it, “a fight” — the inference supporting perhaps the fight of sodden drunks. But upon the trial of the cause it developed that just before the three of them left the Hilltop Tavern Wilson produced a twenty dollar bill from which he bought and paid for not to exceed three beers. The change from the twenty dollar bill, approximately $19.00, was not accounted for upon the trial, it does not appear to have been in his clothes when they were found strewn along the “sawmill road” and so, possibly, a jury could infer from these additional circumstances some motive other than a drunken fight for the beating of Wilson and the removal of his clothes.

This is not to say that mere unlawful questioning in and of itself invalidates all subsequent criminal proceedings, “it was the use of Massiah’s incriminating statements, and the correlative prejudice to the defendant, which required reversal of the conviction thus obtained.” United States v. Guerra, 2 Cir., 334 F.2d 138, 145. Since the Spano and Massiah decisions several jurisdictions have applied their principles but peculiarly applicable here is the Arizona case, State v. Herman: “In the instant case, the police officers knew that the defendant was represented by counsel. The defendant had been arrested and defendant’s attorney had appeared before the Justice of the Peace to set bond and the date of the preliminary examination. We therefore hold that the statements (and the fruits thereof) obtained from the defendant after arrest and arraignment before the Justice of the Peace and while he was represented by counsel, are inadmissible because said statements were obtained outside the presence of defendant’s attorney. To allow interrogation of an accused outside the presence of his attorney is as much a denial of the right of counsel as the refusal to allow an accused to obtain the services of an attorney. Where, as here, the defendant had an attorney of record from the time of the arraignment in the Justice Court, the defendant may not be questioned outside the pr esence of counsel without counsel’s permission.” (414 P.2d 1. c. 175-176). Other jurisdictions applying this rule and reversing convictions because of its prejudicial infringement are State v. Gallagher, 97 Ariz. 1, 396 P.2d 241; Commonwealth v. McCarthy, supra; Williams v. State (Fla.App.) 188 So.2d 320, and State v. Longmore, 178 Neb. 509, 134 N.W.2d 66.

Upon this particular record and assignment of error and for the reasons indicated the judgment is reversed and the cause remanded.


text:
    STATE of Missouri ex rel. STATE HIGHWAY COMMISSION of Missouri, Plaintiff-Appellant, v. Leroy P. LANGLEY et al., Exceptions of Ray L. Batman et al., Defendants-Appellants.
    No. 52425.
    Supreme Court of Missouri, Division No. 1.
    Dec. 11, 1967.
    Motion for Rehearing or to Transfer to Court En Banc Denied Jan. 8, 1968.

      Robert L. Hyder, Chief Counsel, Earl H. Schrader, Jr., Darold W. Jenkins, Asst. Counsel, Kansas City, for plaintiff-appellant.
    Rufus Burrus, Independence, for defendants-appellants.
   HIGGINS, Commissioner.

Action in condemnation to secure easements and property rights necessary to location and construction of Interstate Route 1-70 in Jackson County, Missouri. The landowners, defendants Batman, et al., excepted from the commissioners’ award and both plaintiff and defendants appeal from the ensuing jury verdict and judgment of $13,000.

The landowners had evidence ot damages ranging up to $25,000 which is more than $15,000 in excess of the $7,500 to $8,850 to which the commission’s evidence indicates the landowners to be entitled. State ex rel. State Highway Commission v. Kendrick, Mo., 383 S.W.2d 740, 743 [3].

Defendants’ land from which plaintiff’s appropriation was made was an 80-acre tract lying about a quater mile northeast of Blue Springs, Missouri, and about sixteen miles east of Kansas City, Missouri. Its east side fronted for a quarter mile on Adams Dairy Road, a north and south hard-surfaced county road. The property was also situated a quarter mile north of R. D. Mize Road and a quarter mile south of Duncan Road, both east and west hard-surfaced county roads. Improvements consisted of a two-story frame house, barn, hog houses, chicken houses, and sheds. It was fenced on the perimeter, cross-fenced, and used as a cattle and grain farm.

The appropriation was made January 28, 1960, and was a taking of 19.128 acres in a rectangle 300 feet wide and 2,675.9 feet long, running east and west near the center of the 80-acre tract. After the taking 33 acres of the original tract remained north of the right of way and 28 acres remained south of the right of way. None of the buildings were taken; they remained on the north portion of the remainder. Access from the south remainder was fully appropriated and limited; an outer roadway was provided along the north remainder between Missouri Highway No. 7 on the west and Adams Dairy Road on the east. No underpass was provided for the intersection of Adams Dairy Road and 1-70.

Owners’ testimony by defendant Ray Batman placed the before-taking value at $60,000, $750 per acre. He testified that the appropriation reduced the before-taking value $24,000 to $25,000, resulting in an after-taking value of $36,000 to $35,000.

Defendants’ witness Van Trump set the value before taking at $48,000 to $60,000, and the total damage at $17,500 to $27,500.

Defendants’ witness Parr valued the tract at $52,000 before the taking and $28,960 after the taking, a difference of $23,040.

Defendants’ witness Eggiman used before and after-taking figures of $54,000 and $32,583.20.

Plaintiff’s witness Rule set the before-taking value at $30,150 and the after-taking value at $21,300, a difference of $8,850.

Plaintiff’s witness Vanderpool used figures of $28,000 and $20,500, a difference of $7,500.

Upon cross-examination of defendant Ray Batman, plaintiff, over objection, was permitted to adduce testimony from Mr. Batman that he bought the 80 acres in 1959 for $32,500. Colloquy preceded and followed receipt of this testimony, most of which involved defendants’ theory of objection that the sale was not competent evidence because it was a “forced sale.” The court overruled the objection and, in the course of the colloquy, informed the jury of a stipulation between the parties “that the property which is the subject of this taking was purchased by the defendants, in this case Mr. and Mrs. Batman, as reflected in the file of the court, Probate Court of Jackson County, Missouri, Estate No. 11084, in the matter of the Estate of Ethel May Peterson, deceased. That on August 5, 1959, the Probate Judge of Jackson County ordered the real estate to be sold at a private sale, in order that the obligations of the estate might be paid, and that the property was sold pursuant to that order to Mr. and Mrs. Batman for the sum of $32,500 on September 17, 1959, and that a title was received by the administrator’s deed.”

Defendants’ point is that the court “erred in admitting the sale price ($32,500) * * because it was at a forced sale to pay debts of the estate of the decedent and was not a sale by one ‘willing but not obligated to sell it, and is bought by one willing or desirous to purchase it but who is not compelled to do so’ as was set out in Instruction No. 3, and such testimony was prejudicial, harmful and resulted in an adverse verdict of the jury of an amount greatly less than the amount to which the land owners were entitled.”

“It is the established rule in this state, and generally, that the price an owner paid for property being condemned is admissible as some evidence of its value at the time of appropriation. That rule applies unless circumstances appear which destroy the relevancy or probative value of that otherwise relevant and highly important evidence. For example, the purchase must have been recent and not remote in point of time. Marked changes in conditions or values must not have occurred since the sale. The sale must have been voluntary in the sense that the seller and buyer were each capable and desirous of protecting his interest. The sale must not have been a forced sale, such as a tax or foreclosure sale.” State ex rel. State Highway Commission v. Rauscher Chevrolet Co., Mo., 291 S.W.2d 89, 92 [4], 55 A.L.R.2d 773. See also MAI 15.01 defining “fair market value”; Kirst v. Clarkson Const. Co., Mo.App., 395 S.W.2d 487, 496-497 [13]; State ex rel. State Highway Commission v. Ogle, Mo.App., 402 S.W.2d 605, 610 [1-3]; and see Nichols on Eminent Domain, 3rd Ed., Vol. 5, § 21.2, pp. 413-414, where the conditions to be satisfied for admission of the price paid for property subject to appropriation are expressed:

“(a) The sale must be bona fide;
“(b) The sale must be voluntary, not forced;
“(c) The sale must have occurred relevantly in point of time; and
“(d) The sale must cover substantially the same property which is the subject of the appropriation action.”

Examples of “forced sales” in addition to tax and foreclosure sales, and of other circumstances which destroy the relevancy or probative value of the otherwise relevant evidence in the price an owner paid for property being condemned may be found in Kansas City & G. Ry. Co. v. Haake, 331 Mo. 429, 53 S.W.2d 891, 895 [9], sales under deeds of trust or executions, and 894 [5], assessed valuation by public official not participated in by the landowner; State ex rel. Kansas City P & L Co. v. Salmark, Mo., 350 S.W.2d 771, 772 [1], amounts paid by the condemning party to other owners for other condemned property.

Defendants argue that the purchase by defendant Batman in the probate court sale was a forced sale and within the exceptions to admissibility noted in State Highway Commission v. Rauscher Chevrolet Co., supra.

The landowner, Mr. Batman, testified that immediately prior to the appropriation on January 28, 1960, his 80-acre tract was worth $60,000. He acquired the 80 acres, from which 19.128 acres were taken, at the probate court sale in August 1959 (administrator’s deed is dated September 17, 1959), less than six months prior to the taking, and he made no improvements or changes to the tract between acquisition and condemnation. Thus, the requirements of relevancy in point of time and of covering substantially the same property are shown to have been met. Mr. Batman testified also that, even though the sale was a private sale in the probate court, it was conducted as an auction at which there were bidders other than he; the court supervised the sale; he was the highest bidder; he considered the land “worth the money”; the sale was fair as opposed to any consideration that he “stole the land”; and there is no contention of bad faith on either side. Such circum-' stances prove the sale was bona fide in that it was made “in or with good faith; honestly, openly, and sincerely; without deceit or fraud.” Black’s Law Dictionary, 4th Ed., p. 223.

Missouri courts have not considered the specific question whether a probate sale is in the nature of a “forced sale”; however, the question has been answered in Redevelopment Agency of City of Santa Monica v. Zwerman, 240 Cal.App.2d 70, 49 Cal.Rptr. 443, and the reasoning of that case is adopted in denying defendants’ contention here. “Apart from the statement, made without discussion of reasons, by a divided court in * * * (State v. Styner (1937) 58 Idaho 233, 72 P.2d 699), and an ambiguous statement in Nichols on Eminent Domain (3rd Ed., § 21.32 pp. 463-465, we are cited to no authority holding that a probate sale is, per se, noncomparable; nor has our own research found any such authority.

“On principle we can see no reason to exclude probate sales in arriving at an opinion as to value. * * *

“The law has regularly excluded reliance on true ‘forced sales’ such as those under execution, or under foreclosure (citing, among others, Kansas City & G. Ry. Co. v. Haake, supra, and State Highway Commission v. Rauscher Chevrolet Co., supra), but such sales involve the element not only of some haste, but of a compulsion on the part of the property owner to take whatever price is offered by the highest bidder, regardless of its relation to actual value or to the owner’s willingness to accept that price. For the same reason, sales at auction, if the sale is ‘without reserve’ are ‘forced’ and inadmissible.

“But a probate sale, in this state, has none of these characteristics. They are surrounded by elaborate statutory provisions to insure that the sale price is in accord with the value placed on the property by the inheritance tax appraisers (Prob. Code § 780 et seq.), the probate court being expressly enjoined to see that the sale price ‘is not disproportionate to the value’ (Prob.Code § 785). It is true that real property may be sold in the course of probate in order to raise cash, either for the payment of claims or to facilitate division of assets among the heirs or beneficiaries. But private sales not infrequently are made for similar reasons. In any case of reliance on a sale alleged to be ‘comparable,’ the other party may show any special circumstances which render the price atypical. But the fact that the sale was in probate does not, by itself, show that the price obtained was without value in determining the market value of other comparably situated property. Since defendants here object to the use (of the sales) solely because they were in probate, and make no contention that they were prevented from showing anything unusual in connection with those sales, the evidence was properly admitted and used.” 49 Cal.Rptr. 1. c. 446-447 [1-6]. See also State ex rel. State Highway Commission v. Schutte Investment Co., Mo., 334 S.W.2d 241, 246 [3], where in condemnation of property occupied by buildings declared uninhabitable by city authorities, record would not sustain owner’s contention that sale to it had not been an arm’s-length transaction in that the estate could not afford to rehabilitate the property and that accordingly the court erred in admitting evidence of the price paid for the property.

Mr. Batman was present to protect his interest in acquiring the land at the probate sale; and under the law in the footnotes above the interest of the seller, the Estate of Ethel May Peterson, was required to be protected by the probate court and there is no showing or contention that the probate court failed of its duty. Thus, this probate sale was not “forced” because it was one in which the interests of both buyer and seller were protected. State Highway Commission v. Rauscher Chevrolet, supra.

During the cross-examination of Mr. Batman he stated that he bought the 80-acre tract “to make a profit on it,” and that he and Mrs. Batman on November 6, 1961, conveyed the tract less the 19 acres condemned to Batman Farms Company, a corporation in which he owned “quite a little share of it, but my three kids and thirteen grandkids own a big share of it.” Plaintiff then sought to elicit the purchase price paid the Batmans by the Batman Farms Company. Defendants objected on the theory the transaction was a family transaction and therefore not at arm’s length. The court first overruled the objection but, after further argument and colloquy, sustained the objection. Plaintiff then asked if Mr. Batman was the major stockholder in the corporation and he admitted he owned the controlling interest and, after a lengthy explanation of the way the corporation acquired the land, he was asked if the corportaion gave him $24,000 worth of stock for the 61 remaining acres, to which he replied, “I imagine it went in there at cost.” Plaintiff then offered the deed from Batmans to the corporation for purposes of showing actual consideration and fair market value after the taking of $24,000 represented by $26.40 in revenue stamps and to rebut the description of a family transaction at less than fair market value. The court sustained defendants’ objection that the transaction represented by the deed was a family transaction. Plaintiff then made an offer of proof by the deed to show that it contained $26.40 in revenue stamps representing a consideration of $24,000 and that it was material in rebutting Mr. Batman’s computation of damages at $24,000 to $25,000, and in supporting plaintiff’s evidence of $8,500 damages, i. e., $32,500 purchase price less $8,500 damages, leaving a remainder valued at $24,000. The offer was refused and thereafter Mr. Batman testified that at trial the corporation still owned the land, that nothing had been done to it or taken from it, and that the transfer from Batmans to the corporation was “a legitimate, open, aboveboard sale.” Plaintiff renewed its offer of the deed during the testimony of Mr. Rule in plaintiff’s case, plaintiff offering to prove that the deed bore $26.40 in revenue stamps representing a consideration of $24,000 and that since the deed described the original 80 acres less the 19.128 acres taken, it was the identical land and was evaluated after the taking by the landowner himself at $24,000, thereby supporting plaintiff’s theory of damages from this witness at $8,-500. Defendants renewed their objection on the theory of family transaction and argued further that if the deed was admitted it would require explanation bringing in inadmissible matter, the commissioners’ award.

Plaintiff contends that where the landowner paid $32,500 for an 80-acre tract September 17, 1959, and conveyed the remainder without any changes November 6, 1961, by deed containing revenue stamps showing a consideration of $24,000, and then sought to prove that the taking diminished the value of the remainder more than $8,500, evidence of the sale of the remainder by the landowner for $24,000 was material and relevant in rebutting defendants’ claim of damages and supporting its own theory of damages. Plaintiff charges the court with error in the refusal of the proffered evidence.

Where the landowner in a condemnation action has himself placed a value on the land, such may be shown against him. See St. Louis, O. H. & C. Ry. Co. v. Fowler, 142 Mo. 670, 44 S.W. 771, 772 [1], where the court properly permitted plaintiff to introduce in evidence an assessment list made by the defendant in which the defendant himself placed a value on the land subject of condemnation. Cf. Kansas City & G. Ry. Co. v. Haake, supra, where an assessed valuation by an officer not participated in by the landowner is inadmissible. ‘If it can be shown (under Missouri law) that the landowner nas himself placed a value on the property in question, whether for taxation or otherwise, or has in some way assented or even acquiesced in fixing the valuation, then such evidence might well be proper on cross-examination and as contradictory of such witness.’ ” Dubinsky Realty Co. v. Lortz, 8 Cir., 129 F.2d 669, 673-674 [6]. In State Highway Commission v. Ogle, supra, the plaintiff commission appropriated a part of a tract leaving a remainder which the landowner testified was worth $750. Cross-examination elicited that the landowner had sold the remainder prior to trial for $2,500. The ruling permitting the sale price of the remainder to remain in evidence was sustained because “evidence which is legally competent, relevant and material on the issue of market value is admissible, and should not be excluded; and unless the evidence is wholly lacking in probative value, the weight to be given it, including remoteness and change of circumstances from the date of taking to the date of sale, is for the jury under appropriate instructions.” 402 S.W.2d 1. c. 610-611 [3],

Mr. Batman and his codefendants were attempting to show damages ranging up to $25,000. He paid $32,500 for the tract less than six months before the taking and did nothing to it prior to the taking in January 1960 or to the sale to Batman Farms Company November 6, 1961. The transfer of the tract less the 19 acres taken to Batman Farm Company was by warranty deed containing $26.40 in revenue stamps representing a consideration of $24,000 and, under plaintiff’s theory, tended to prove a difference in before and after-taking values of $8,500. Such stamps placed on the deed by the landowner-seller himself were a reliable source of information as to the actual consideration and after-taking value of the property because, even though the expressed consideration (in this case $10) is usually open to inquiry, revenue stamps are “attached pursuant to federal statute, the violation of which is made a crime. With this sanction * * * the amount of revenue stamps attached to the deeds may be said to have been a reliable source of information as to the amount of the consideration paid for the property described therein.” Ramming Real Estate Co. v. United States, 8 Cir., 122 F.2d 892, 895 [11, 12],

Under these authorities the amount of revenue stamps on the deed between defendant Batman and the Batman Farms Company was material and relevant on the issue of after-taking market value and computation of damages. Plaintiff’s theory of the case would be prejudiced by exclusion of such evidence and it was error, therefore, for the court to do so. Defendants would, of course, be entitled to show any circumstances which render the price thus shown atypical, Redevelopment Agency of City of Santa Monica v. Zwerman, supra; however, it would be their problem in doing so to avoid mention of the commissioners’ award, an inadmissible matter.

For the error in refusing the evidence proffered by plaintiff, the judgment is reversed and the cause remanded for retrial.

HOUSER and WELBORN, CC., concur.

PER CURIAM:

The foregoing opinion by HIGGINS, C., is adopted as the opinion of the court.

All of the Judges concur.

      . Section 473.503, Y.A.M.S., provides: “Before an executor or administrator sells * * * any real estate, * * * unless the order of court directs that he be permitted to use the appraisal filed with the inventory, he shall have it appraised by two disinterested residents of the county in which the land lies.” And under Section 473.500, Y.A.M.S., “If real property is to be sold at private sale it ⅜ * * shall not be sold for less than three-fourths of the appraised value * * *."

      . Section 473.513, Y.A.M.S., requires that the administrator or executor report his sale of real estate and that “The court shall examine the report and if satisfied that the sale ⅜ * * has been at the price and terms most advantageous to the estate ⅜ * *, shall approve the same and order the executor or administrator to make a deed * * * ”; and under Section 473.517, “If the report and proceedings of the executor or administrator are not approved by the court, his proceedings shall be void. (And the court) may order a new sale * * ⅜.”