In Duke Power Co. v. Bell, 156 S.C. 299, 152 S.E. 865 (1930), our supreme court made a specific determination that Duke Energy is a manufacturer.Summary of this case from Duke Energy Corp. v. S.C. Dep't of Revenue
April 25, 1930.
Before JOHNSON, J., Lancaster, April, 1929. Affirmed.
Action by the Duke Power Company against O.R. Bell, as County Treasurer of Lancaster County. Decree for plaintiff and defendant appeals.
The order of Judge Johnson is as follows:
This is an action for the recovery of certain county taxes and penalty, paid by the plaintiff under protest to the defendant as County Treasurer.
The cause came on to be heard at the April term of this Court. A jury trial was waived, and it was agreed by the parties that all issues of fact and of law raised by the pleadings should be determined by the Court. The issues thus raised were, for the most part, issues of law; but certain facts and conclusions of facts as alleged in the complaint not having been formally admitted by the answer, it was agreed that the plaintiff might introduce in evidence the affidavit of C.C. Sadler and that said affidavit, in so far as the facts therein stated were deemed relevant by the Court, should be treated and considered as testimony offered and adduced on behalf of the plaintiff.
The facts relevant to a determination of the issues raised, as alleged and admitted by the pleadings and established by the evidence, are as follows:
The Great Falls Power Company was a New Jersey corporation, which was duly domesticated in South Carolina during the years 1925, 1926, and 1927. By its charter it was authorized and empowered "to acquire, develop, control, and operate plants for the generation of electricity by water or other power" and "to manufacture, generate, accumulate, store, and sell electricity or electrical current." In March, 1925, the Great Falls Power Company owned, and for several years prior thereto had owned, a dam across Catawba River between the Counties of Lancaster and Fairfield. At the end of the dam in Fairfield County it owned and operated, and had for several years prior thereto owned and operated, a power station for the generation of electricity. By a Joint Resolution, approved the 5th day of March, 1925, hereinafter set out, the General Assembly of South Carolina exempted from all County taxes, except for school purposes, "manufactories" desiring to locate in the County of Lancaster and in certain other counties, not including the County of Fairfield, "for five (5) years from the time of their establishment." In June, 1925, the Great Falls Power Company commenced the construction of a power station on the Lancaster side of the dam above referred to. This plant, called the Cedar Creek Power Station, was put in partial operation in August, 1926, and was completed in September, 1926. Its construction required the taking out or removal of a considerable part of the old and the construction of an altogether new dam about two hundred fifty feet in length on the Lancaster side, which, however, was connected with the old dam. Said Cedar Creek Power Station was and is an electrical power plant, consisting of machinery and a brick building equipped with the apparatus, machinery, and appliances required for the generation and/or manufacture of electric current for lighting, heating, and power purposes. The capital stock of the Great Falls Power Company was largely in excess of One Hundred Thousand Dollars ($100,000.00), and the cost of the construction of the said Cedar Creek Power Station in Lancaster County was considerably in excess of One Million Dollars ($1,000,000.00). It would have been entirely practicable to have increased or enlarged the capacity of the Power Station on the Fairfield side of the river. Instead of so doing this Cedar Creek Power Station, which was entirely new construction, was erected on the Lancaster side of the river as a complete and self-contained unit for the generation of electric power. Homes for all necessary employees were erected near the station in the County of Lancaster. The property value of the Cedar Creek Power Station, so constructed in Lancaster County, was assessed for taxation for the year 1927, at Five Hundred and Thirty Thousand Dollars ($530,000.00).
On or about December 1, 1927, the Great Falls Power Company was merged into and consolidated with the Duke Power Company, a New Jersey corporation, domesticated in South Carolina. By its charter the Duke Power Company was authorized and empowered "to manufacture, generate, buy, sell, accumulate, store, transmit, furnish, and distribute electric current for light, heat, and power," and "to erect, buy, operate, lease, and let power plants and generating stations for the manufacture, generation, accumulation, storage, transmission, and distribution of electric current," etc. By the terms of the agreement of merger it was provided that upon the consummation of the act of merger "all and singular the rights, privileges, powers, and franchises" of the Great Falls Power Company should "be vested in said Duke Power Company"; and "all property, rights, privileges, powers, and franchises, and all and every other interest" of the said Great Falls Power Company should "be as effectually the property of the said Duke Power Company as they were of the said Great Falls Power Company."
Prior to the completion of the Cedar Creek Power Station in September, 1926, neither the Great Falls Power Company, the Duke Power Company, nor any of its affiliated corporations, owned or operated a power station or plant for the generation of electricity in the County of Lancaster. County taxes were charged upon said Cedar Creek Power Station in the sum of Ten Thousand Three Hundred and Thirty-five Dollars ($10,335.00). On January 31st, 1928, the plaintiff paid, under protest, to the defendant, as Treasurer of Lancaster County, the amount of said county taxes, and in addition thereto a penalty of one per cent (1%) thereof amounting to One Hundred Three and 35/100 Dollars ($103.35). Within thirty (30) days thereafter this suit was commenced by the plaintiff to recover the amount so paid.
The exempting Statute (34 St. at Large, 891), under the provisions of which the plaintiff seeks the recovery of said amount, is as follows:
"A Joint Resolution to Exempt Certain Manufactories in York, Richland, Lancaster, Georgetown, Greenwood, Marion, Sumter, Clarendon, Cherokee, Saluda, and Laurens Counties from County Taxes for a Period of Five Years.
"Section 1. Tax Exemption of Manufactories in Certain Counties. — Be it resolved by the General Assembly of the State of South Carolina: Any and all manufactories desiring to locate in the Counties of York, Richland, Lancaster, Georgetown, Greenwood, Marion, Sumter, Clarendon, Cherokee, Saluda and Laurens, with a capital of not less than one hundred thousand ($100,000.00) dollars shall be exempt from all county taxes, except for school purposes, for five (5) years from the time of their establishment.
"§ 2. All Acts or parts of Acts inconsistent herewith are hereby repealed.
"§ 3. This Resolution shall take effect immediately upon its approval by the Governor.
"Approved the 5th day of March, A.D., 1925."
In his answer the defendant sets up five defenses. For the purposes of this order, the positions taken and the points thus raised in the answer will be considered and disposed of as follows:
First: It is contended (second defense) that the said Cedar Creek Power Station is not a manufactory within the contemplation and meaning of the Statute.
That contention must be overruled under the authority of the decision of our court in the case of Columbia Railway, Gas Electric Co. v. South Carolina Tax Commission, 134 S.C. 319, 132 S.E., 611, wherein it was expressly held that a company engaged in the business of generating electricity is a manufacturer" within the meaning of the Statute imposing a tax upon a "corporation engaged in the business of manufacturing." The word "manufactory" means primarily a physical plant, or a place or building, where manufacturing is carried on. If a company engaged in the generation of electricity is a "manufacturer" for the purposes of a statute imposing a tax, the plant or structure wherein the process of generating such electricity is carried on is a manufactory for the purposes of a tax exempting statute. In re Consolidated Electric Storage Company (N.J. Ch.), 26 A. 983; Society for Establishing Useful Manufacturers v. Paterson, 88 N.J. Law, 123, 96 A., 92; Kentucky Electric Co. v. Buechel, 146 Ky., 660, 143 S.W. 58, 38 L.R.A. (N.S.), 907, Ann. Cas., 1913-C, 714; People ex rel. Brush Electric Mfg. Co. v. Wemple, 129 N.Y., 543, 29 N.E., 808, 14 L.R.A., 708; People ex rel. Edison Electric Illuminating Co. v. Wemple, 129 N.Y., 664, 29 N.E., 812; People ex rel. Edison Electric Light Co. v. Campbell, 88 Hun., 527, 34 N.Y.S., 711. I am, therefore, of the opinion and so find and hold, that the property assessed and taxed is a "manufactory" within the meaning of that word as used in the statute.
Second: It is contended further in this connection (third defense) that the said Cedar Creek Power Station is not a new manufactory within the contemplation and meaning of the statute, but is an addition to property in said County and State already being used for generating electricity, and as such is not exempt from taxation under the said statute.
By the terms of the Joint Resolution the exemption is granted to "any and all manufactories desiring to locate * * * with a capital of not less than One Hundred Thousand Dollars ($100,000.00)." Even if it appeared that this Cedar Creek Power Station was an addition to or enlargement of an existing manufactory or plant within the County of Lancaster, it is by no means clear that such fact would take it out of the provisions of the Statute. In the view taken of the facts here, however, it is unnecessary to decide that question. The facts stated in the affidavit of plaintiff's witness, C.C. Sadler, in my opinion, clearly established that this Cedar Creek Power Station was not a mere addition to or enlargement of an existing plant or manufactory in the County of Lancaster; but was a new plant or manufactory. While one end of the old or previously existing dam was in Lancaster County, there had been no plant or manufactory for the generation of electricity on the Lancaster side of the river. The location and construction of this Cedar Creek Power Station, involving the expenditure and investment of capital in excess of One Million Dollars ($1,000,000.00) by a company with a capital stock largely in excess of One Hundred Thousand Dollars ($100,000.00), unquestionably resulted in the "establishment" of a manufactory with a capital in excess of One Hundred Thousand Dollars ($100,000.00), within the meaning of the statute. It is, therefore, so ruled and held.
Third: The contention is advanced (fourth and fifth defenses) that the exemption, if any, was personal to the Great Falls Power Company, was terminated by the merger of that Company into the Duke Power Company, and that this action cannot be maintained by the Duke Power Company.
The statute exempts from taxation "manufactories," and not the persons, natural or corporate, who may locate, establish, or own and operate such "manufactories." I think, and so hold, that the exemption from taxation granted by the statute is not a mere personal privilege or exemption, but an immunity attached to specific property, viz., "manufactories" which follows and passes with such properties, under the well-settled rule that "if the exemption as originally granted was not a personal privilege, but an immunity annexed to specific property, it will pass with the property as an appurtenance thereto." 37 Cyc., 898, § 5; see cases cited, note 73, 899; Columbia Water Power Company v. Campbell, 75 S.C. 47, 54 S.E., 833.
But, even if such immunity from taxation were a mere personal privilege or exemption, it was, in my opinion, saved to the Duke Power Company by the consolidation or merger agreement. By the terms of that agreement "all property, rights, privileges, powers, and franchises, and all and every other interest of" the Great Falls Power Company became as effectually the property of the said Duke Power Company as they were, or had been, of the merging corporation. I think that language is sufficiently broad to embrace the right of exemption conferred by the statute under the well-established general rule, which is thus stated in 37 Cyc., 913:
"Where a consolidation of two corporations takes place, one of which enjoyed an immunity from taxation, its property continues to be exempt in the hands of the consolidated company, if there is nothing in the statutes to prevent." See cases cited, 37 Cyc., note 91, 913.
Not only is there nothing in the exempting statute here to prevent the continuance of the exemption in this case, but, as pointed out above, it would seem, clearly, to be the legislative intent that the exemption should attach to the property and not to the person of the manufacturer. The defendant's contention in that regard must, therefore, be overruled.
Fourth: It is contended (first defense) that the exempting statute contravenes various provisions of the State and Federal Constitutions and is, therefore, null and void.
The plaintiff, in the argument before me, made the point that the defendant, as a public officer, sued in his official capacity and defending solely in that capacity, was not entitled to question the constitutionality of the exempting statute. That contention cannot be sustained. I think, and so hold, that the County Treasurer, who, in the collection of the taxes complained of, is the alter ego of Lancaster County, can, in an action for the recovery of taxes paid under protest, question the constitutionality of the statute, since he is acting in, and for the public interest and not against it, and the general rule, which prohibits an official from attacking the constitutionality of a statute when mandamus is sought to compel him to perform some duty required of him by that statute, has no application here. In my opinion, the nature of his office would probably, even in mandamus, permit him to question the Act in the instant case.
Proceeding to a consideration of the constitutional questions raised by the defendant, I think those questions may all be resolved by the proper application of certain fundamental principles of constitutional law and certain cardinal rules of construction, which are too well settled to require the extensive citation of authority. These are as follows: The supreme legislative power of the State is vested in the General Assembly. State v. Aiken, 42 S.C. 222, 20 S.E., 221, 26 L.R.A., 345. The provisions of the State Constitution are not a grant but a limitation of legislative power, so that the Legislature may enact any law not expressly, or by clear implication, prohibited by the Constitution of the State or nation. Fripp v. Coburn, 101 S.C. 312, 85 S.E., 774. The power of taxation is a legislative power, and knows no limitations, except those imposed expressly or by plain implication in the State or Federal Constitution. 26 R.C.L., 86. "The power to prescribe what property shall be taxed implies the power to prescribe what property shall be exempt, and, in the absence of a special constitutional provision to the contrary, the Legislature may exempt such classes of property from taxation as in its opinion the public policy of the State requires." 26 R.C.L., 297, § 262; Gibbons v. District of Columbia, 116 U.S. 404, 6 S.Ct., 427, 29 L.Ed., 680; Note 19 L.R.A., 78. Within such constitutional limitations "the necessity, utility, and expediency of legislation are for the determination of the Legislature alone." Santee Mills v. Query, 122 S.C. 158, 115 S.E., 202, 203. "Every presumption must be indulged in favor of the constitutionality of an act of the Legislature, and to justify a Court in pronouncing legislation unconstitutional, the case must be so clear as to be free from doubt and the conflict of the statute with the Constitution must be irreconcilable." Santee Mills v. Query, supra.
Our concrete inquiry here, therefore, is: Is the exemption granted by this statute expressly, or by clear implication, prohibited by any provision of the State or Federal Constitution invoked by defendant? The constitutional provisions invoked by defendant in that regard will be considered in the order of what is deemed to be the importance of the questions raised thereby.
(1) Section 1, Art. 10, of the State Constitution of 1895. The contention that the exemption granted by this statute is prohibited by this section of the State Constitution raises the most serious question presented. The language of this constitutional provision is as follows:
"Section 1. Taxation and Assessment. — The General Assembly shall provide by law for a uniform and equal rate of assessment and taxation, and shall prescribe regulations to secure a just valuation for taxation of all property, real, personal and possessory, except mines and mining claims, the products of which alone shall be taxed; and also excepting such property as may be exempted by law for municipal, educational, literary, scientific, religious or charitable purposes: Provided, however, That the General Assembly may impose a capitation tax upon such domestic animals as from their nature and habits are destructive of other property: and Provided further, That the General Assembly may provide for a graduated tax on incomes, and for a graduated license on occupations and business." (Italics added.)
That under this provision of the Constitution the power to exempt property from taxation for "municipal" and certain other named purposes is expressly reserved to the law-making department of the Government is entirely clear. The exception written into this section of the Constitution, reserving to the General Assembly the power to exempt property from taxation for certain purposes, is as much a part of the fundamental law as the provision requiring the General Assembly to provide for a uniform and equal rate of assessment and taxation "of all property." Our chief concern here, therefore, is with the proper construction and interpretation of the words municipal purposes as here used. In 42 C.J., 214, the term municipal purposes is thus defined:
" Municipal Purposes. A term without any definite technical import, defined as a public or governmental purpose. as distinguished from a private purpose; a purpose intended to embrace some of the functions of the government, local or general."
The word municipal, as used in another section of the Constitution, to wit, Section 11, Art. 7, providing that the General Assembly "may make special provision for municipal government," etc., has been held by our Court to refer to and embrace the governmental affairs of counties. State v. Touchberry et al., 121 S.C. 5, 113 S.E., 345; Grocery Co. v. Burnet, 61 S.C. 213, 214, 39 S.E., 381, 58 L.R.A., 687; Carroll v. York, 109 S.C. 1, 95 S.E., 121. Fortunately, however, the particular language of this section here under consideration has been very fully construed and interpreted by our Supreme Court in the case of Chester County v. White Bros., 70 S.C. 433, 50 S.E., 28, 32. In that case the precise question involved was whether the General Assembly could exempt from State, county, and municipal taxes the bonds of a county in the hands of a purchaser. The Circuit Court (Judge Gage) held that such exemption was prohibited by Sections 1 and 4 of Article 10. The Supreme Court, speaking through Mr. Justice Jones, in an exceedingly clear and able opinion, said:
"The fundamental error of the Circuit Court is in holding that the phrase `municipal purposes,' used in Section 1, in conjunction with property, means the same thing as `municipal property,' used in Section 4, and that the exemption might have been omitted from Section 1, or Section 4 might have been omitted altogether, and the same meaning accomplished as is compassed by the two sections. This method of construction violates the rule which requires that the language of a constitution should receive a natural and reasonable construction, and that different portions thereof should, if possible, receive a construction which would give some meaning to each of such provisions. The construction by the Circuit Court would strike from the Constitution the provision in Section 1, `and also excepting such property as may be exempted by law for municipal, educational, literary, scientific, religious or charitable purposes.' The phrase, `as may be exempted by law,' does not simply mean `as may be exempted by Section 4, Art. 10, of the Constitution,' but clearly includes such exemption as the Legislature may lawfully make for the purposes named. This provision of the Constitution implies that the Legislature has the power to exempt property from taxation for municipal or other specified purposes, provided the exemption is not expressly or impliedly prohibited by other portions of the Constitution. It is a well-established principle that the Legislature has all the power not denied it by the Constitution expressly or by necessary implication. Section 4, Art. 10, is mandatory, and is self-executing, so that further legislation would not be necessary to exempt from taxation all property falling within the specified classes, and the Legislature would have no power to tax what is therein exempt. But this section, in so far as it exempts property, is not a limitation on the power of the Legislature to make further exemptions falling within the exceptions contained in Section 1. Section 4 declares that the specified property shall be exempt, while Section 1 permits legislative discretion in exempting other property not named in Section 4, provided the exemption is for municipal purposes or other purposes named. The Constitution does not require that all property shall be taxed, but it only requires that all property not exempt under the Constitution, and not exempt by a valid act of the Legislature, shall be taxed. So that, whenever the right of the Legislature to exempt property from taxation is disputed, the question is whether such exemption is expressly or impliedly forbidden by the Constitution. If the exemption falls within the classes named in Section 4, we need go no further. If the exemption does not fall within Section 4, then we may inquire if it falls within the legislative discretion to make exemptions, implied in Section 1. If the exemption does not fall directly within either of these sections, then the question might still remain whether the sovereign power of the Legislature is so far restricted by the Constitution as not to permit the exemption made — as, for example, wearing apparel, or a limited amount of provisions for the present subsistence of the family.
"We limit our inquiry in this case to the question whether the exemption would be sustained under Section 1. There is a clear distinction between an exemption of property for municipal purposes, as permitted in Section 1, and an exemption of municipal property used exclusively for public purposes, as granted in Section 4. In the latter, the ownership must be in the municipality; in the former, it need not be. In the one, the use of the property must be exclusively for a public purpose; in the other, the exemption must be for a municipal purpose."
Upon the ground in substance, that the bonds were "to be converted into money for the exclusive use of the County for an admittedly public and corporate purpose"; that they merely represented "the tax which the county must pay in the future during a series of years, thus relieving the county of the necessity to pay at once by an enormous single tax"; and that the bonds were "but the substitute for the public burden discharged by the purchaser's money," the Court concluded and held that the exemption from taxation of such bonds in the hands of a purchaser was an exemption for "a municipal purpose" within the meaning of this constitutional provision, and that there was "nothing in the Constitution which forbids the exemption in question."
Under the foregoing decision it is not open to question, I think, that the term municipal purposes as used in this section of the Constitution is the equivalent of, or fairly embraces, county purposes; that is, an exemption for county purposes is an exemption for municipal purposes if within the scope of the legitimate governmental purposes of a county for which the Legislature may provide by law. If so, our sole remaining inquiry is whether the exemption granted by this statute is an exemption granted for a legitimate governmental purpose of the County of Lancaster. Since, in the absence of constitutional restriction, the power of the Legislature to exempt from taxation is as broad as its power to tax, and since under this provision of Section 1, Article X, the power of the Legislature to exempt from taxation for municipal purposes is expressly reserved the Legislature's discretionary power to determine what is a municipal or county purpose is as broad as its discretionary power to determine any question of legislative or governmental policy. That it is within the legislative power to exempt from taxation manufactories, or manufacturing enterprises, as a matter of public or governmental policy, is well settled. At the time of the adoption of our Constitution of 1895, the policy of exempting property used in a manufacturing industry was more or less common among the States of the American Union. See 26 R.C.L., 328, § 287. It was, indeed, a policy recognized and expressly approved and sanctioned in our fundamental law (Sec. 8, Art. 8, Con. of 1895) The rationale of that policy is very well stated by the Rhode Island Court in the case of Crafts v. Ray, 22 R.I. 179, 46 A., 1043, 1045, 49 L.R.A., 604, holding that an exemption from taxation for ten (10) years of two private corporations on condition that they locate manufacturing property in a town was not unconstitutional. It is a matter of common knowledge that during the past quarter of a century many of the towns and cities of this State have availed themselves of the self-executing provision (Section 8, Art. 8) of the Constitution of 1895 and exempted manufacturing enterprises from taxation. It is also a matter of common knowledge that within the past few years the pressure of economic conditions which made it desirable for towns and cities to encourage the investment of capital in manufacturing enterprises by exempting such property from taxation for a limited period has extended to and become equally as exigent for counties and even for the States themselves. Ours is distinctively an industrial age, and the prosperity of counties and of states, as well as of cities and towns, is becoming increasingly dependent upon the opportunity afforded their people for employment in manufacturing industries and upon the taxable value of property devoted to and used in manufacturing enterprises. The conditions are keenly competitive, and it is not surprising that within the past few years a large number of the counties of this State have sought and received authority from the Legislature to exempt manufactories located within their borders from county taxes for a limited period of years.
That the municipal purpose, from the standpoint of a county, subserved by the exemption from taxation for a limited period of years of a manufactory located or constructed within the county is not essentially different from that subserved by the exemption from taxation of county bonds in the hands of purchasers (Chester County v. White, supra), would seem to be apparent. The ultimate object of exemption in either case is to promote the interests and to lighten the burden of the taxpayers of the county. With respect to an exemption of property of the character here in question, in the case of Crafts v. Ray, supra, it is said:
"The theory of the transaction is that a public benefit will accrue to the town and its inhabitants by the introduction of the business enterprise, equivalent to an exemption from taxes for a certain time, and on this ground it is offered. Suppose the offer is not accepted, and the manufacturer does not build in the town. The plaintiff's tax, for example, would be just the same in either case. A's money is not taken to be given to B., but, for a time, B. is not taxed. Possibly A.'s tax might be a trifle smaller if B. should be taxed for his added property, but how does this differ in principle from other exemptions to which we have already referred? It is a question of policy, with which the Court has nothing to do, the legislature having the power to decide. * * * The property of a town is benefited, both in value and income, by the introduction of business and the consequent increase of inhabitants. When, therefore, one erects a factory under a contract of exemption, the consideration for which is an expected public benefit, the case is quite different from that of a pure gift. * * * As stated in Colton v. City of Montpelier, 71 Vt., 413, 45 A., 1039, by the Supreme Court of Vermont, in regard to a similar statute: `The primary object of this statute is not to aid and benefit private persons for private ends, but its purpose is to benefit the public at large by increasing, in the end, the resources of the State and its taxable property through the establishment of new industries.'"
I think there is ample basis in reason for the adoption of such a legislative policy. If so, it follows that the exemption of "manufactories" from county taxation for a limited period of years is a "municipal" purpose within the power reserved to the General Assembly by this section of the Constitution. At all events, in view of the foregoing considerations, I am far from being satisfied beyond a reasonable doubt that the exemption granted by this statute was not for a "municipal" purpose within the meaning of the constitutional provision. Defendant's contention in that regard must, therefore, be overruled.
(2) Section 5, Art. 10, of the State Constitution of 1895. This section provides that taxes shall "be uniform in respect to persons and property within the jurisdiction of the body imposing the same," and that the "General Assembly shall require that all the property, except that herein permitted to be exempted within the limits of municipal corporations, shall be taxed for corporate purposes," etc. The equality and uniformity clause of this section is, in substance, exactly the same as that contained in Section 1, except that it is directed and applied to taxation by and within a taxing subdivision of the State. In this section, as in Section 1, property "herein permitted to be exempted," etc., is expressly excepted. The word "herein," as is clearly disclosed by the context, embraces the whole of Article 10, if not the whole of the Constitution itself. If, as we have seen, the exemption here in question is for a municipal purpose within the meaning of the exception or reservation contained in Section 1, it follows, of course, that it is not prohibited by this Section 5 of Article 10.
(3) Section 6 of Article 1, of the State Constitution. This section provides that "all property subject to taxation shall be taxed in proportion to its value." Obviously, property which under the power expressly reserved to the General Assembly may be, and has been, lawfully exempted from taxation, is not "subject to taxation," and this section has no application. See 26 R.C.L., 252, § 223; Farris v. Vannier, 6 Dak., 186, 42 N.W., 31, 3 L.R.A., 713.
(4) The Fourteenth Amendment to the Constitution of the United States, and Section 5 of Article 1 of the State Constitution. It is contended that the "due process" and "equal protection of the laws" clauses of these provisions are infringed by the statute.
The plenary power of the General Assembly to exempt from taxation for "municipal" purposes having been expressly reserved by Section 1 of Article 10 of our State Constitution, the General Assembly's exercise of that power in conformity with the "due process" and "equal protection" provisions of the State and Federal Constitutions is governed by the same rules and principles which control the exercise of the legislative power of a State generally. Obviously, the Court's only concern here is with the application of the fundamental rule that a State Legislature has the right to make reasonable classifications of persons and property for public purposes. It is elementary that if the classification bears a reasonable relation to the legislative purpose sought to be effected, and if the constituents of each class are all treated alike under similar circumstances and conditions, the equal protection of the laws' provisions of the Constitutions is fully complied with. Alderman v. Wells, 85 S.C. 507, 67 S.E., 781, 27 L.R.A. (N.S.), 864, 21 Ann. Cas., 193; Santee Mills v. Query, 122 S.C. 158, 115 S.E., 202; State v. Touchberry, 121 S.C. 5, 113 S.E., 345; Bell's Gap R. Co. v. Pennsylvania, 134 U.S. 232, 10 S.Ct., 533, 535, 33 L.Ed., 892; Magoun v. Illinois Trust Savings Bank, 170 U.S. 283, 18 S.Ct., 594, 42 L.Ed., 1037. That the classification adopted here bears a reasonable relation to the purpose sought to be effected and that the exemption bears equally upon all members of the class within the taxing district under similar conditions, within the scope and meaning of the equal protection of the laws' clause of the State Constitution, would seem to be conclusively demonstrated by the fact that the Constitution-makers themselves recognized the validity of such a classification by writing it into that instrument itself in Section 8 of Art. 8 thereof, providing that all cities and towns "may exempt * * * manufactories established within their limits," etc. A classification for the precise legislative or governmental purpose with which we are here concerned, sanctioned by the Constitution itself, cannot soundly be held to violate the general provision as to equal protection of the laws contained in that Constitution. See Alderman v. Wells, supra; Murph v. Landrum, 76 S.C. 21, 56 S.E., 850, 852. If so, it is not in violation of the Fourteenth Amendment. In the case of Bell's Gap R. Co. v. Pennsylvania, supra, the Supreme Court of the United States said:
"The provision in the fourteenth amendment, that no state shall deny to any person within its jurisdiction the equal protection of the laws, was not intended to prevent a State from adjusting its system of taxation in all proper and reasonable ways. It may, if it chooses, exempt certain classes of property from any taxation at all. * * * We think we are safe in saying that the fourteenth amendment was not intended to compel the states to adopt an iron rule of equal taxation. If that were its proper construction, it would * * * render nugatory those discriminations which the best interests of society require; which are necessary for the encouragement of needed and useful industries, and the discouragement of intemperance and vice, and which every state, in one form or another, deems it expedient to adopt."
Defendant's contentions in this regard must, therefore, be overruled.
(5) Section 34, Article 3, of the State Constitution, providing that, "in all other cases, where a general law can be made applicable, no special law shall be enacted." Since, as was said by the Court in Murph v. Landrum, supra, "each county in the state is a separate taxing district, and has public and corporate purposes to be accomplished by means of taxation limited alone to citizens or property within its territory," it is patent that a law which is special in the sense that it imposes a tax, or grants an exemption, limited in application and incidence to persons or property within a certain county does not contravene the provisions of Section 34 of Article 3. That is so not only from the very nature of the matter to be dealt with but by virtue of the provisions of Section 11, Article 7, expressly empowering the General Assembly to "make special provision for municipal government." State v. Touchberry, supra.
For the reasons indicated, the attack upon the constitutionality of the statute cannot be sustained. The exempting statute under which the plaintiff seeks recovery being a valid legislative enactment, it follows that the plaintiff is entitled to the relief sought. It is accordingly,
Ordered, That the plaintiff have judgment against the defendant for the sum of Ten Thousand, Four Hundred, Thirty-eight and 35/100 Dollars ($10,438.35), with interest thereon from January 31st, 1928; and for the costs of this action.
Messrs. Gregory Gregory for appellant, cite: Exemption statute: 34 Stat., 891. Exemption statute strictly construed: 37 Cyc., 890. Cooley Taxation, 4th Ed., Sec. 572; 16 S.Ct., 471; 6 U.S. 461; 89 U.S. 215; 99 U.S. 348; 143 U.S. 192; 64 A.L.R., 110; 25 A.L.R., 27; 153 Mass. 185; 69 L.R.A., 776; 115 S.C. 108; 151 Ky., 758. Statute to induce new plants, not enlargements or improvement of old: 143 Ky., 258; 149 Ky., 149; L.R.A., 1916-D, 108; 142 Ky., 759; 170 Ky., 557. Exemption is a gratuity and may be revoked: 26 R.C.L., 304; 22 S.Ct., 888; 19 Mich., 259. Exemption personal and not assignable: 26 R.C.L., 308; 205 U.S. 236; 239 U.S. 126; 49 S.E., 506; 3 S.Ct., 193; 21 S.Ct., 240; 5 S.Ct., 813; 23 S.Ct., 860; 28 S.Ct., 401; 89 Md., 89. Merger eliminated Great Falls Power Company: Cooley Taxation 4th Ed., Sec. 722; 205 U.S. 236; 60 L.R.A., 34; 7 R.C.L., 155; 3 Civ. Code 1922, page 1452; 92 U.S. 265; 14 S.Ct., 592. Exemption is discrimination against other corporations: 64 L.Ed., 989; 247 U.S. 350; 28 S.Ct., 7; 30 S.Ct., 287; 17 S.Ct., 255; 75 S.C. 62; 53 S.C. 259; 53 S.C. 285. Statute violates Section 1, Article 10, Constitution of S.C. 1895: 10 S.E., 845; 20 S.E., 526; 37 Cyc., 735-36; 3 S.Ct., 193; 255 U.S. 288; 21 S.Ct., 240; 14 S.Ct., 592; 101 U.S. 153; 37 S.Ct., 693; 41 Calif., 351; 13 Am. Rep., 143; 68 Ill., 530; 28 L.R.A., 65; 59 Ill., 142; 99 U.S. 309; 178 Pa. St., 171; 35 S.E., 73; 78 S.E., 807; 54 S.E., 729; 69 Ind., 375; 53 N.E., 168; 16 Am. Rep., 375; 43 S.E., 362; 52 S.E., 638; 68 L.R.A., 92; 2 A.L.R., 465; 9 Wis. 378; 3 Ohio St., 15; 30 L.R.A., 218; 34 L.R.A., 725; 12 A.L.R., 552; 106 Md., 281; 64 L.R.A., 34; 43 A.L.R., 673; 75 S.C. 62; 106 S.C. 185; 59 S.C. 396; 66 S.C. 37; 6 S.C. 1; 56 S.C. 516; 53 S.C. 259; 25 S.Ct., 303; 43 L.R.A., 498; 20 S.E., 526; 139 Miss., 675. " Public purpose." 23 S.C. 57; 87 U.S. 655; 106 U.S. 487; 111 Mass. 454; 6 Fed. Cases, 221; 64 N.Y., 91; 86 Fed., 597; 75 S.C. 34. Special act, when general law could be made applicable: 99 S.C. 475; 59 S.C. 110; 62 S.C. 247; 66 S.C. 219; 109 S.C. 1; 110 S.C. 505; 106 Md., 281.
Messrs. Williams Stewart, J.H. Marion and J.C. McGowan, for respondent, cite: Statute clear and unambiguous: 25 R.C.L., 960-961. Exemption was annexed to specific property and passed with property: 37 Cyc., 898; 95 Pac., 187; 119 N.W., 202; 71 Atlantic, 328; 75 S.C. 34; 30 Am. Dec., 423; 12 S.W. 685; 3 L.Ed., 303; 76 N.W., 217. Property enjoying immunity continues exempt in consolidated company: 117 U.S. 129; 92 U.S. 677; 15 Wall, 460. Power of exemption: 74 S.C. 433. Public purpose: 123 S.C. 272. Powers of municipal corporation: 1 Dillon, Mun. Corp., Sec. 89; 73 S.C. 83; 123 S.C. 272. Right to invoke due process clause applies only to corporations affected: 6 R.C.L., 89, 92; 132 S.E., 673. No discrimination against existing factories: 49 L.R.A., 604. No infringement of equal protection clause: 253 U.S. 412. General law not practicable: 76 S.C. 21; 121 S.C. 5.
April 25, 1930. The opinion of the Court was delivered by
The decree of his Honor, Judge Johnson, is entirely satisfactory to this Court, and for the reasons stated therein it is affirmed.
MR. CHIEF JUSTICE WATTS and MESSRS. JUSTICES BLEASE, STABLER and CARTER concur.