Opinion
15096
June 4, 1940.
Before GASTON, J., Cherokee, October, 1939. Affirmed and appeal dismissed.
Four actions by the American Surety Company against Hamrick Mills, Musgrove Mills, Limestone Mills and Alma Mills to recover on a plea of subrogation penalties due on taxes due by the defendants to South Carolina and Cherokee County. From a judgment for plaintiff, defendants appeal.
Order of Judge Gaston follows:
The history of this litigation appears in the opinion of the Supreme Court in these cases filed August 1, 1939 ( 191 S.C. 362, 4 S.E.2d 308, 124 A.L.R., 1147), and in the opinion of the Supreme Court in the case of State Ex rel. Cherokee County v. Brown et al., 187 S.C. 223, 196 S.E., 889.
Each defendant paid the 1933 taxes assessed against it plus a two per cent. penalty which accrued prior to May 1, 1934. The present controversy relates to the right of plaintiff (as the substitute of the State) to enforce these defendants' liability for an additional penalty of five per cent. which the statute provided should accrue on all taxes delinquent on May 1, 1934.
On September 6, 1939, a petition for rehearing filed by respondents was denied by the Supreme Court and on that day the remittitur was sent down.
On September 25, 1939, plaintiff served on attorneys for the defendants notice that it would move before me as the presiding Judge in the Seventh Circuit at chambers at Spartanburg, S.C. on October 6, 1939, "for an order granting plaintiff judgment in each of these cases." The notice recited that "these motions will be based on the records in these cases, including the opinion and judgment of the Supreme Court."
Plaintiff's motion was heard by me at chambers at Spartanburg, S.C. on October 9, 1939, and was fully argued by the attorneys for all parties. Counsel representing the four defendants also served and filed at the hearing a written memorandum of "Points and Authorities," including a notice to plaintiff's attorneys that the defendants excepted to plaintiff's motion upon certain grounds which will be referred to hereafter.
At the hearing before me, counsel for plaintiff presented the record in the four cases, including the pleadings, the two stipulations entered into on December 27, 1938, and March 6, 1939, respectively, the exhibits referred to therein, and the decree of his Honor, Judge C.C. Featherstone, filed March 13, 1939. Plaintiff also presented copies of the appeal records in the Brown case and in these cases.
In response to my inquiry, it was stated by counsel representing the several parties that there were no issues in the case for a jury. It was further stated by counsel for the defendants that no motion to amend the answers had been noticed and that the defendants did not desire to amend and that they did not desire to offer further proof. The defenses set forth in the answer are detailed in the opinion of the Supreme Court.
After hearing the arguments of counsel and giving the matter due consideration, I am of the opinion that plaintiff's motion should be granted for the reasons set out below.
It has been settled by the Supreme Court on the appeal in these cases, that each of the defendants became liable for the additional five per cent. penalty as fixed by the statute law. The Supreme Court, in its opinion in these cases, said [191] S.C. 362, 4 S.E.2d 313, 124 A.L.R., 1147]: "At the time the checks of respondents were cashed, an additional penalty had accrued, and respondents were * * * indebted to the State and county in the amount of * * * the further accrued penalties."
The Supreme Court further held in the appeal of these cases that upon the treasurer's failure to collect "the treasurer and his surety * * * became obligated for the additional penalties."
The theory of the complaints in the present cases is that this liability of the four defendants has never been discharged by them; that the State has the right to recover in an action at law against each mill for the amount of the penalty it owes, and that the plaintiff has become subrogated to that right of the State as a result of its having paid the recovery against the principal and itself in the Brown case.
That defendants have not discharged their liability is admitted. That plaintiff has become subrogated to the rights of the State has been settled by the Supreme Court. The open question therefore related to the right of the State to proceed by action against delinquent taxpayers as plaintiff has proceeded against these defendants.
It is said in 25 R.C.L., page 1312, that subrogation "is the machinery by which the equity of one man is worked out through the legal rights of another."
Further in 25 R.C.L., page 1392, it is said: "Strictly speaking, there are two distinct causes of action in such cases — one consists of those facts that show the right to be subrogated to the rights of the creditor in the securities held by the latter; the other consists of those facts which show that the security may be enforced against the principal. In the natural order of precedence, the party must establish his right to be subrogated to the security before he can be permitted to enforce it."
When these cases were heard heretofore by Judge Featherstone and he held that the right to be subrogated did not exist in the plaintiff, it thereby became unnecessary for him to adjudge and he did not adjudge anything with reference to the rights of the State against the taxpayers to which plaintiff was seeking subrogation.
If Judge Featherstone passed on the equitable question of subrogation only, it would follow that the judgment of reversal by the appellate Court would comprehend only that question. If so, then the other branch of the case relating to the nature of the rights of the State and the procedure for their enforcement, remain open questions for consideration and adjudication by the trial Court, unless otherwise settled by the record.
The cases having been remanded under such conditions, the motion noticed before me by plaintiff for judgment on the records requires inquiry into what issues if any remain to be determined by the Court under the pleadings and stipulations of the parties.
Taking one of the cases as illustrative of all, the complaint against Hamrick Mills alleges in Paragraph 4 that the mill owned taxable property assessed at $275,000.00, that the mill became liable for taxes and penalties aggregating $14,418.25, of which the treasurer collected the sum of $13,744.50, leaving an uncollected balance of $673.75 owing by the mill, and the prayer is for the recovery of that amount.
If no answer had been filed, plaintiff could have entered default judgment as for a liquidated demand under Section 586 of the Code. But defendant answered, admitting that the mill owned taxable property assessed at $275,000.00 and that the treasurer collected the sum of $13,744.50, but otherwise denying the allegations of the complaint. So that assuming that the amount of the levy for taxes is a fact to be proven, the answer thereby put in issue the allegation of the complaint that Hamrick Mills became liable for taxes on this property in the sum of $14,418.25. But on December 27, 1938, the parties entered into a formal stipulation that the Judgment Roll in the case of State Ex rel. Cherokee County v. Brown et al., supra, be considered as part of the proof introduced by plaintiff in these cases. It appears from the record (and it is not otherwise controverted) that Hamrick Mills became liable for taxes and penalties totaling $14,418.25. Since Hamrick Mills admits having paid only $13,744.50 of that total, it follows that Hamrick Mills still owes the State uncollected taxes amounting to $673.75.
As pointed out by the Supreme Court, there is therefore "no dispute as to the facts of this case."
The situation has some similarity to that of Interstate Chemical Corporation v. Farmington Corporation, 100 S.C. 196, 84 S.E., 710, 711. There, there was no issue joined because the answer had been stricken as sham. Here there is no issue joined because the stipulation has settled the only issue joined by the answer. In that case, the Court said: "The court might, upon a satisfactory showing by the defendant, allow another answer to be made. But the defendant has not asked that. It stands upon that already made. The plaintiff, then, is in open court, on an admitted debt. No valid showing has been made why judgment for the debts should not be given. He is in the same situation as if no answer had been made. He is in better situation, for the defendant has admitted that the debt is due and unpaid. * * * Judgment, therefore, in the case at bar, was allowable upon the very necessity of the case. There was nothing else to do."
But here the defendant has presented certain grounds for the disallowance of plaintiff's motion and has thereby raised issues of law which must be disposed of. While these grounds are not presented in the form of a demurrer to the complaint, in effect they constitute such a plea, raising the question whether plaintiff has stated a cause of action entitling it to the relief sought.
The first position taken by counsel for defendants is contained in the first four paragraphs of the statements of grounds and deals with the nature of the recovery in the Brown case. Defendants present the contention that the recovery in that case was for "damages" resulting from breach of duty by the treasurer. I think this question is not now open for consideration by this Court. The Supreme Court has said that "the treasurer and his surety * * * became obligated for the additional penalties" and that the recovery in the Brown case "was not based upon resulting damages from a breach of duty"; and that "it would appear beyond cavil that when appellant [American Surety Co.] paid the judgment procured in State v. Brown, supra, it paid a debt of respondents [the cotton mills]."
In the fifth paragraph, it is argued that the negligence of Brown is a bar to the relief now sought by the plaintiff. But the question of Brown's negligence was included in the inquiry whether "injustice will be done to the other party by the allowance of the equity" of subrogation. That question has been settled by the Supreme Court and may not be further considered by this Court.
Counsel say in Paragraph 6 that Judge Featherstone did not determine what, if any, rights the State now possesses to enforce collection of the unpaid taxes. As pointed out above, when Judge Featherstone held that the right of subrogation did not exist, it became unnecessary for him to decide anything with reference to what were the rights of the State. But because Judge Featherstone left that question open does not deprive the plaintiff of the relief to which the facts may entitle him. Plaintiff's right to subrogation having been established, and it being undisputed that the mills still owe the unpaid taxes to the State, it follows that plaintiff has the right to enforce collection by any means that the State would have the right to enforce it.
The statute law provides as one of the means of collecting taxes "that the State may bring suit in Court for back taxes any time within ten years from the date when they should be paid." Section 2863, Code of 1932. Under Section 2569, Code of 1932, it is provided that such taxes "shall be considered and held as a debt payable to the State by a party against whom the same shall be charged." In Taylor v. Strauss, 95 S.C. 295, 78 S.E., 883, 885, the Supreme Court said that "under the statutes of this State * * * the amount due for taxes is a debt against the person listing the property for which he may be sued." See also Vallentine v. Robinson, 188 S.C. 194, 198 S.E., 197; Town of Cheraw v. Turnage, 184 S.C. 76, 78, 191 S.E., 831; Fuller v. Payne, 96 S.C. 471, 81 S.E., 176.
I hold therefore that the State had the right to sue these four defendants at law for the unpaid taxes and to enter judgment therefor. The plaintiff, being subrogated to the rights of the State, has the same right.
In Paragraph 7, counsel call attention to the fact that the opinion of the Supreme Court was limited to four questions only. These four questions served as the channels through which the Court arrived at its decision on the equitable question raised by the appeal. That the opinion was limited to equitable issue does not prevent later consideration of the issues at law.
In Paragraph 8, counsel point out that the Supreme Court's opinion did not specify what remedy, if any, would be available to the surety at this time. In deciding the appeal on the equity question, there was no need for the appellate Court to go into the matter of the remedy at law, and if there had been such need, its oversight would not deprive plaintiff of its right to a remedy.
But I think that in considering the fourth defense interposed by defendants' answers, i. e., the bar of the Statute of Limitations, the Supreme Court did indicate, by implication at least, that the plaintiff could sue at law to recover the uncollected taxes. This fourth defense was considered by the Court, not as having been decided by Judge Featherstone's decree, which did not pass on the issue there raised, but the Court considered it in connection with defendants' request for affirmance of Judge Featherstone's decree on certain grounds submitted by defendants, including the contention that the action stated in the complaint "is barred under the Statute of Limitations as alleged in defendants' fourth defense." In answering that position, the Supreme Court said that "the limitation for the bringing of an action by the State for the collection of taxes is fixed at ten years by Section 2863 of the Code; and appellant being subrogated to the rights of the State, has the same time in which to bring the action."
In the sixth paragraph, counsel suggest error in the judgment of the Supreme Court, in that the Supreme Court was without jurisdiction to remand the cause to the Circuit Court "for such further action as may be necessary."
I do not think that this Court may with property pass on the question suggested. If there was error in the judgment of the Supreme Court, it should have been corrected by means of a petition for re-hearing. Defendants filed a petition for re-hearing and it must be assumed that they thereby raised all proper questions assigning oversight or inadvertence on the part of the Supreme Court. In this view, counsel's objection next noted seems to concur.
In the tenth paragraph, counsel take the position "that the judgment of the Supreme Court cannot be altered, modified or enlarged upon by the Circuit Court and that the Circuit Court is powerless to do other than is specifically directed by the mandate of the appellate Court." This appears to be a statement of sound law; but adjudication on the merits of the controversies involved in these cases does not require either alteration, modification or enlargement of the judgment of the Supreme Court.
To the extent that those controversies remain unadjudicated upon the coming down of the remittitur of the Supreme Court, it would seem that it becomes "necessary" for the trial Court to take "such further action" as will bring about their final adjudication.
By the eleventh ground, counsel object that this Court is without jurisdiction or authority to enter up judgment in this case because the Supreme Court "has left open substantial issues yet to be determined." Counsel further submit that these open issues relate to (a) the nature of the remedies, if any, possessed by the State, (b) whether the surety may proceed other than as prescribed under Section 2845, 2847, 2853 and 2855 of the Code, and (c) whether the Supreme Court intended that the above numbered sections must be followed by the surety.
I have already held that the State possesses the right to sue a delinquent taxpayer for the unpaid tax.
Of the Code sections referred to, Sections 2845 and 2847 relate to the payment of an illegal or wrongful tax under protest and its recovery by action. I think these sections have no application to the present situation. If the taxes are illegal or wrongful in any way, the defendants could have so pleaded in their answer; and in fact their several affirmative defenses present the contention that the taxes are illegal and wrongful.
As to Sections 2853 and 2855, they relate to the collection of delinquent taxes by means of execution issued to the sheriff and levied by him. If that was the only procedure available to the State, the statute permitting the recovery of delinquent taxes by suit would be of no effect.
I have carefully read the opinion by the Supreme Court and find nothing to indicate that the Supreme Court intended that the plaintiff must proceed under these Code sections.
By Paragraph 12, counsel say that the State and county ratified the treasurer's act of accepting the checks and issuing official receipts in full for the taxes. This is in substance the re-raising of a question decided in the Brown case. It has been held that the act of Brown in accepting the checks was not his act as a public official, but was his act as the agent of the defendants. The principle of ratification would therefore not be applicable.
Defendants submit that plaintiff's motion contemplates that "the Court order summary judgment to be entered."
It has not been questioned that under Sections 37 and 38 of the 1932 Code, the Circuit Judge presiding in the Seventh Circuit has power to hear and determine the merits of these cases at chambers. Plaintiff's motion is based "on the records in these cases" and the records embrace the pleadings and the stipulations as a result of which there remained "no dispute as to the facts."
According to Section 592, of the 1932 Code, "a trial is the judicial examination of the issues between the parties, whether they be issues of law or of fact." There are no issues of fact, and the issues of law raised by defendants have been fully argued by counsel who have announced that they have nothing further to offer. The Court has examined the resulting issues, and it would seem that the adjudication now made is after "trial" and not summary in nature.
But if it should be regarded that plaintiff's motion is in the nature of a motion for judgment on the pleadings, the stipulations cannot be ignored but must be regarded to the extent that they admit or deny the facts alleged in the complaint. "Where neither of the parties has ever asked to be relieved from the terms of the stipulation which they have formerly entered into, they must be held still bound * * * by their agreement to admit the facts stated in the agreement." Brown v. Pechman, 55 S.C. 555, 33 S.E., 732, 735.
The rule is stated to be that judgment on the pleadings should be granted "when under the admitted facts the moving party would be entitled to judgment on the merits without regard to what the findings might be on the facts on which issue is joined." 21 Ruling Case Law, 594; 15 Ruling Case Law, 579. Here there remain no facts on which issue has been joined and it therefore becomes solely a question of law whether under the admitted facts plaintiff would be entitled to judgment on the merits. The issue of law thus raised being now adjudged in plaintiff's favor, it may be that Section 651 of the Code becomes operative entitling plaintiff to enter judgment as by default. But whether or not that section applies, I think judgment for plaintiff is "allowable upon the very necessity of the case" and because there is "nothing else to do." Interstate Corporation v. Farmington Corporation, supra.
As in Kohn v. Stork, 108 S.C. 79, 93 S.E., 391, 393, "there was no issue left for trial by court or jury."
It is therefore ordered, adjudged and decreed that defendants' objections be and the same are overruled and that American Surety Company, the plaintiffs, have judgment against the defendants in the amounts stated below, which include interest to October 16, 1939, and for the costs of this action, to wit:
Against defendant Hamrick Mills for the principal sum of $673.75 and interest in the sum of $58.95, making altogether the sum of $732.70.
Against defendant Musgrove Mills for the principal sum of $490.00 and interest in the sum of $42.88, making altogether the sum of $532.88.
Against defendant Limestone Mills for the principal sum of $673.75 and interest in the sum of $58.95, making altogether the sum of $732.70.
Against defendant Alma Mills for the principal sum of $567.00 and interest in the sum of $49.62, making altogether the sum of $616.62.
Messrs. Wolfe and Fort, for appellants, cite: Jurisdiction: 14 S.C. 358; 22 S.C. 220; 36 S.C. 541; 22 S.C. 304; 186 S.C. 133; 195 S.E., 253; 34 C.J., 201.
Messrs. Carlisle, Brown Carlisle, for respondent.
June 4, 1940. The opinion of the Court was delivered by
The well-considered order of Judge Gaston, from which the appeal comes to this Court, which refers to and relies upon the opinions of this Court in the cases of State ex rel. Cherokee County v. Brown, 187 S.C. 223, 196 S.E., 889, and American Surety Company v. Hamrick Mills (4 cases), 191 S.C. 362, 4 S.E.2d 308, 124 A.L.R., 1147, and the stipulations of counsel in the present case, correctly disposes of the issues before him; and it renders unnecessary any further consideration of the exceptions presented in this appeal.
The order of Judge Gaston is adopted as the opinion of this Court. Let it be so reported.
The judgment is affirmed and the appeal is dismissed.
MESSRS. JUSTICES BAKER, FISHBURNE and STUKES and MR. ACTING ASSOCIATE JUSTICE J. STROM THURMOND concur.