Opinion
14390
December 1, 1936.
Before GRIMBALL, J., Charleston, June, 1936. Affirmed.
Action by Cooper River Bridge, Incorporated, against the South Carolina Tax Commission, Walter G. Query, and others, commissioners.
Decree of Judge Grimball, requested to be reported, follows:
This matter came on to be heard before me on the 13th day of June, 1936, upon the complaint filed herein, and upon demurrers interposed by the South Carolina Tax Commission, and likewise by Walter G. Query, John P. Derham, and Frank C. Robinson, commissioners.
It may be well to state at the outset that inasmuch as counsel for the plaintiff informed the Court that it was not intended by the complaint to seek any personal judgment against the commissioners, and that none was being sought, it becomes unnecessary to consider the demurrer interposed on behalf of the individual commissioners.
The complaint was brought by the Cooper River Bridge, Inc., to recover a tax, together with interest, paid to the commission on the 29th day of September, 1934, in the sum of $1,861.90, together with interest thereon from said date, and which tax was paid under protest and notice given of the bridge company's intention to bring its action for its recovery, in accord with the provisions of statute, and no question is made as to the right of the plaintiff to institute and maintain its action.
The plaintiff, Cooper River Bridge, Inc., was enfranchised by Act of the Legislature of South Carolina approved the 17th of February, 1928, 35 Stat., p. 1775, and which authorized the building of a bridge connecting Charleston with the mainland lying to the east of the Cooper river, and fixed the charges of toll to be made by the bridge company, and which, under the provisions of said act, though they might be reduced, could in no event be raised. The bridge company, within the time provided by law, duly made and filed with the South Carolina Tax Commission its income tax return for the fiscal period ending July 31, 1930, as a domestic non-public utility corporation for profit, and in calculating its income deducted from its revenues the interest paid by it during said period, on its bonded indebtedness, and which reflected a loss for such period of $80,381.56, showing that plaintiff had no net income for said period and consequently was not liable for the payment of any income tax. It appears that the company likewise, as a domestic non-public utility corporation for profit, made its return for annual license fees required to be made by such corporation, upon forms furnished to it by the South Carolina Tax Commission, and has paid such annual license tax, pursuant to Article 8, Sections 2678 to 2690-A of the Code of 1932, which returns have been received and retained by the South Carolina Tax Commission and the taxes paid by plaintiff, accepted and retained by said commission on the basis of such return and it was not until the 27th day of October, 1933, that the commission notified plaintiff it considered the Cooper River Bridge, Inc., to be a public service corporation, within the terms of Section 2440 (b) of the Code of Laws of South Carolina, 1932, and, as such public utility corporation, it had no right to deduct the interest on its bonded indebtedness from its income.
The plaintiff immediately filed a protest against such ruling on the part of the defendant commission, and after conferences and correspondence the commission, on the 11th day of September, 1934, notified plaintiff that it had assessed it with a sum as the additional tax due by plaintiff on its income tax return for the period ending July 31, 1930, on the ground that it was a public service corporation, and notified it that unless payment was made within ten days, execution would issue, and which period was extended until October 15, 1934.
These facts alleged in the complaint must be taken as true upon this hearing on the demurrer filed.
The plaintiff further alleged in its complaint that under a proper construction of Section 2440 (b) of the Code of 1932, and of any other statutes pertaining thereto, it is not a public utility corporation within the purview of said Act, and should be allowed to deduct from its net income interest paid on its corporate bonds, and that it has been classified by the South Carolina Tax Commission for the purpose of annual license fee, as a domestic non-public utility corporation, the returns made by it upon forms furnished by the Tax Commission having been accepted, and the annual license taxes paid by it on the basis of a non-public utility corporation having been retained by the Tax Commission, and on the other hand the Tax Commission has treated the plaintiff as a public utility corporation for the purpose of assessing additional income taxes against it under Section 2440 (b) of the Code.
It is further alleged that when Section 2440 (b) of the Code was enacted, there was already on the statutes Section 8252 of the Code of 1932, defining a public utility as "every corporation and person furnishing or supplying in any manner gas, electricity, heat, electric power, water and street railway service, or any of them to the public, or any portion thereof, for compensation," and that the words "or other form of public service," in Section 2440 (b), can only refer to such corporations as are embraced in the statutory definition so adopted, in which class the plaintiff clearly does not fall.
The complaint further alleges that the statute, Code, § 2440 (b), if construed as embracing the plaintiff within its terms, is unconstitutional, in that all public utility corporations have a right to charge rates to yield a return on their investment, and upon application to the Railroad Commission raise their rates to a figure sufficient to pay taxes and assessments and a reasonable return on their investment, whereas the plaintiff is by statute limited to certain tolls which can in no event be exceeded, and has no power to apply to the Railroad Commission, not being embraced within Section 8252 of the Code. So that the imposition on the plaintiff of taxes on gross income without deduction for interest paid on its bonded indebtedness, with no opportunity to plaintiff to raise its revenue, and no power in any board or body to permit an increase in its toll, operates as a classification without reason to support it, a confiscation of plaintiff's property and denies to plaintiff due process of law and of the equal protection of the laws, and the taking of property without just compensation.
To this complaint the South Carolina Tax Commission has filed a demurrer on the ground that the complaint fails to state facts sufficient to constitute a cause of action, in that it appears by the complaint that the alleged tax has been assessed and collected under a valid act of the General Assembly, which violates no provision of the Federal Constitution nor of the Constitution of South Carolina.
In construing the statutes under which the tax has been assessed, our Supreme Court has pointed out in numerous cases that the taxpayer must receive the benefits in cases of doubt in the enforcement of tax statutes. Atlantic Coast Lumber Corporation v. Derham, 171 S.C. 441, 172 S.E., 432; Columbia Railway, Gas Electric Co. v. Carter, 127 S.C. 473, 121 S.E., 377; Columbia Gaslight Company v. Mobley, 139 S.C. 107, 137 S.E., 211.
And has said that where the language relied upon to bring a particular person within a tax law is ambiguous or is reasonably susceptible of an interpretation that will exclude such person, then the person will be excluded, any substantial doubt being resolved in his favor. Fuller v. South Carolina Tax Commission, 128 S.C. 14, 121 S.E., 478.
And this likewise is the rule of construction laid down by the Supreme Court of the United States in the case of United States v. Merriam, 263 U.S. 179, 44 S.Ct., 69, 68 L.Ed., 240, 29 A.L.R., 1547, where that Court said that in statutes levying taxes, the literal meaning of the words employed is most important, for such statutes are not to be extended by implication beyond the clear import of the language used, and if the words are doubtful, the doubt must be resolved against the government and in favor of the tax payer.
The plaintiff's contention is that Section 2440, relating to income tax, provides, under the first subdivision thereof designated as (a) as to Corporations Generally, and then under subdivision (b), which is entitled "Railroads and Public Service Corporation — Basis of Ascertaining Net Income," and which reads that "the basis of ascertaining the net taxable income of every corporation engaged in the business of operating a steam or electric railroad, navigation company, waterworks company, light and gas company, power company, express service, telephone or telegraph business, sleeping car company, or other form of public service," shall be ascertained as set forth therein. The Tax Commission admits that the Cooper River Bridge, Inc., is not one of the corporations enumerated in the statute, but contends that the words "other form of public service" is broad enough to include the Cooper River Bridge as a public utility or public service corporation.
It seems to me that the doctrine of ejusdem generis is directly applicable to the question before me, and I am constrained to hold that the words "other form of public service" must be construed to relate to and embrace only such corporations as are of a similar nature or perform services of a similar kind to the companies expressly enumerated in the statute. One of the leading cases on this subject, and so quoted in Encyclopedias of Law and elsewhere, is the South Carolina case of Ex parte Joseph Leland, 1 Nott McC. (10 S.C.L.), 460, holding that: "It is a sound rule of interpretation, that when an author makes use, first, of terms, each evidently confined and limited to a particular class of a known species of things, and then, after such specific enumeration, subjoins a term of very extensive signification, this term, however general and comprehensive in its possible import, yet, when thus used, embraces only things `ejusdem generis,' i. e., of the same kind or species, with those comprehended by the preceding limited and confined terms. In a word, the last is restricted to the subject matter of the preceding terms." See likewise 19 C.J., p. 1255.
In a recent case, the Supreme Court of our State, in construing a statute giving receivers power to sue for stock-holders' liability, and which statute read that "any receiver" appointed to liquidate affairs of "any State Bank" may bring suit, etc., it was held that the word "any," being most general in its terms, must refer to the particular descriptive words preceding it, and under the doctrine of ejusdem generis must be restricted so as not to include receivers appointed by a federal Court. Biltrite Bldg. Company v. Elliott, 166 S.C. 534, at page 536, 165 S.E., 340.
In the case of Gist v. Craig, 142 S.C. 407, at page 446, 141 S.E., 26, 38, involving the construction of a will, where "bank stock, gold watch, all silver, household furniture, automobile, `and all personal property owned by me not mentioned herein'" was bequeathed, it was held under the doctrine of ejusdem generis that only personal property of a personal nature similar to that enumerated passed under the will and that it did not include certain choses in action.
In the case of Vassey v. Spake, 83 S.C. 566, 65 S.E., 825, 826, the Court, in construing a statute which read, "Wherever, in any action for assault, battery, false imprisonment, libel, slander, malicious prosecution, criminal conversation or seduction, or in any other action for damages for torts, the amount recovered shall be less than one hundred dollars, the total amount of costs * * * shall not exceed the amount so recovered in the action," suit was brought for damages for malicious trespass on real estate, and the Court held that such action was not included under the term "any other action for damages."
Our Court laid down the doctrine of ejusdem generis in the case of Henderson v. McMaster, 104 S.C. 268, at page 272, 88 S.E., 645, 646, in these words: "The rule (no citation is necessary) in the construction of a statute is that general words — and it makes no difference how general — will be confined to the subject treated of."
I do not see anything in the cases cited by the defendant which would support me in finding that under these words "or other form of public service" the Cooper River Bridge is such a public service corporation as is enumerated under subdivision (b) of Section 2440 of the Code, and therefore cannot be allowed to deduct interest paid on its bonded indebtedness in arriving at its net taxable income.
I am strengthened in my conviction that such a construction is the correct one by giving consideration to other pertinent Sections of the Code, for Section 8252 of the Code, giving to the Railroad Commission power and jurisdiction to supervise and regulate the service of every "public utility" in this state, reads: "The term `Public Utility', when used herein includes every corporation and person furnishing or supplying in any manner gas, electricity, heat, electric power, water and street railway service, or any of them, to the public, or any portion thereof, for compensation * * * and whenever such corporation or person performs a service or delivers a commodity to the public, or any portion thereof, for which compensation is required, such corporation or person is hereby declared to be a public utility subject to the jurisdiction and regulation of the railroad commission."
And our Supreme Court, in considering the above section, held that the business of operating motor vehicles for hire was not within the commission's regulatory jurisdiction. Shealy et al., Railroad Commission v. Taylor et al., 128 S.C. 365, 122 S.E., 491.
Tollbridge companies have been in existence in this State for many years, and it does not seem fair to assume that the General Assembly having taken the trouble to enumerate a number of corporations which unquestionably are public service corporations, intended to include bridge companies and tollgate companies which are not strictly public service corporations. It would have been a simple matter to have included them in the list if it had meant to do so. Not having included them, it is fair to assume that the General Assembly did not intend so to do.
In addition to this Section 2678 requires railroads, express companies, navigation companies, telephone and telegraph companies, power companies, etc., to furnish information as to earnings, etc. No such requirement is made of bridge companies or tollgate companies, showing that the General Assembly intended to treat these companies in the same category as other non-utility corporations.
It was on this theory that the Tax Commission has required and accepted the annual returns of plaintiff as a domestic non-public utility corporation.
Certainly the question is one of doubt and ambiguity, for it appears from the complaint that it was not until more than three years after the filing of its income tax return that the commission itself reached the conclusion that the bridge company was a public service corporation, and this, taken with the fact that it was accepted as a non-public utility corporation for the purpose of the license tax, certainly tends to show doubt that the Cooper River Bridge should be included under Section 2440, and as the Court said in the case of Fuller v. South Carolina Tax Commission, where the language is ambiguous or is reasonably susceptible of an interpretation that would exclude the person called on to pay the tax, any substantial doubt should be resolved in its favor, and such person should be excluded.
It is therefore ordered, adjudged, and decreed that the demurrer be, and the same is hereby, overruled, with leave to the defendants to answer within twenty days if so minded.
Messrs. John M. Daniel, Attorney General, and Claude K. Wingate, for appellants, cite: Where road dedicated to public use: 143 S.C. 104; 141 S.E., 180; 124 S.C. 302; 117 S.E., 599; 133 S.C. 139; 130 S.E., 514. Construction of statute: 166 S.C. 536; 59 S.C. 225; 37 S.E., 818; 83 S.C. 566; 65 S.E., 825; 36 Cyc., 1120.
Messrs. Mitchell Horlbeck, for respondent, cite: Construction of statute: 1 N. McC., 460; 19 C.J., 1255; 166 S.C. 536; 142 S.C. 466; 83 S.C. 566; 104 S.C. 217; 263 U.S. 244; 127 S.C. 473; 139 S.C. 107; 128 S.C. 14; 171 S.C. 441; 139 S.C. 108; 127 S.C. 482; 128 S.C. 365. Collection of toll: 51 C.J., 1; 158 U.S. 435.
December 1, 1936. The opinion of the Court was delivered by
The facts and issues involved in this appeal are fully stated in the decree of his Honor, Judge Grimball, which will be reported. We are in accord with the conclusions reached by him and with his disposition of the case.
Accordingly, the exceptions thereto are overruled, and the judgment of the lower Court is affirmed.
MR. CHIEF JUSTICE STABLER and MESSRS JUSTICES BONHAM and BAKER and MR. ACTING ASSOCIATE JUSTICE A.L. GASTON concur.