Title: Moore v. Smotkin
Citation: 283 P.2d 1029, 79 Ariz. 77
Docket Number: 5870
State: Arizona
Issuer: Arizona Supreme Court
Date: May 17, 1955

79 Ariz. 77 (1955) 283 P.2d 1029 Thad MOORE, Warren Peterson and William E. Stanford, as members of and constituting the Arizona State Tax Commission, Appellants, v. Ed. E. SMOTKIN and G.W. Bromley, a partnership doing business under the name and style of American Homes Association, Appellees. No. 5870. Supreme Court of Arizona. May 17, 1955. *78 Robert Morrison, Atty. Gen., D. Kelly Turner, Asst. Atty. Gen., for appellants. James Elliott Dunseath, Tucson, James E. Flynn, Phoenix, for appellees. STRUCKMEYER, Justice. This action originated in the Superior Court of Pima County, Arizona, for the recovery of $9,311.57 paid under protest to the State Tax Commission. Judgment was entered in favor of appellees and against appellant Tax Commission, the court finding that appellees' business activities were not subject to the occupation tax imposed by the Excise Revenue Act of 1935 as amended, specifically Section 73-1303, A.C.A. 1939, as follows: *79 The appellees conducted their business essentially in the following manner, viz.: The purchase of a tract of land, its subsequent improvement as the owners by laying of streets, water, gas and electric conduits, its division into suitable lots, the construction of houses upon such lots and the sale of house and lot as an integral unit. Before entering into a discussion of the principal question at issue, several ancillary questions presented by the parties will be disposed of summarily. First, this court has heretofore stated in unequivocal language the construction to be given to the Excise Revenue Act: Second, while appellees seriously urge that they are speculative builders in the business of speculative building, we are not so much concerned with what label appellees use to describe their business activity, being inclined to agree with Shakespeare: Third, we believe and the Tax Commission ultimately concedes that the decision in this case does not turn on whether the appellees are or are not licensed as contractors under the particular provisions of Section 67-803, A.C.A. 1939 as amended. Even if the appellees were licensed as contractors, the question would still remain to be determined whether that particular portion of the business activities here sought to be taxed is contracting. Fourth, we do not think that this case is controlled by the decision in White v. Moore, 46 Ariz. 48, 46 P.2d 1077. Therein we held that the incidental business activity of a banking institution in the renting of office and storage space was subject to the provision of the act providing for a tax on gross income derived from rentals even though the principal business of banking was not taxable under the act. We did not say that an integrated, unitary commercial operation involving in part the doing of that which would ordinarily be taxable was subject to the act or that an *80 integrated, unitary business could be arbitrarily partitioned so as to tax a portion of the business covered by the act. Here the Tax Commission seeks only to tax that portion of appellees' income which it believes is derived from the construction of houses; therefore this cause can be fully adjudicated by a determination of whether that portion of appellees' business against which the tax was levied and collected is actually within the "business of contracting." Semasiologically the words "contractor" and "contracting" are derivatives of the word "contract". A "contract" in a strict legal sense when used as a noun means an agreement or the instrument evidencing it. 17 C.J.S., Contracts, p. 289. In its full and more liberal significance it has the well defined meaning of being the expression by two or more persons of the common intention to effect their legal relations. The word "contractor" is aptly described: The definition of a "contractor" in its general sense, applied to a business as set forth above, seems to be universally accepted under a variety of circumstances ranging through the fields of mechanic's liens, workmen's compensation, etc. It has the approval of this court. Barker v. General Petroleum Corp., 72 Ariz. 187, 232 P.2d 390; Alexander v. Alexander, 51 Ariz. 269, 76 P.2d 223. Our examination of the authorities leads us to the conclusion that there is a thread common to all definitions of "contract", "contracting" and "contractor" which can best be stated to be that it takes at least two parties to establish a contractual relationship; that one person must agree with another. To be a contractor one person must have entered into an agreement with another to perform work for the other. We believe that this compels the conclusion that one cannot be in the business of contracting without first having entered into a contractual relation with another by which the contractor undertakes to erect buildings or in some manner to improve property or construct works. Our conclusion is the same as that reached in Mississippi under an almost identical statute: The Tax Commission argues that an agreement to build a house of a certain specification for another is within the meaning of the term "business of contracting." If such were the case here, we would be inclined to agree. In some instances appellees did enter into sales contracts prior to the completion of the houses. We point out, however, that the sales agreement, although labeled "Sales Contract", did not contain any promise to build a house or any reference to a building of any kind. It was simply a promise to convey a given piece of real property, a lot, for a stated price on a particular day in the future. Moreover, the transaction was subject to the condition that it be accepted by the prospective purchaser. This was at most a tentative agreement to purchase which might or might not be consummated. A similar situation was presented in State v. Tabasso Homes, Inc., 3 Terry 110, Del., 28 A.2d 248, 255, wherein Tabasso Homes, Inc., was indicted under a criminal statute as a contractor who paid out moneys prior to paying in full the claims of labor and materials. It was held that: We believe that the meaning of the term "business of contracting" is so well established and understood that it cannot be said to encompass owners who construct buildings or other improvements on their own property. Affirmed. LA PRADE, C.J., and UDALL, WINDES, and PHELPS, JJ., concurring.