Carnegie-ill I No Is Steel Corp. v. Alderson

• Decision Date: 03 July 1945
• Docket Number: No. 9668.,9668.
• Citation: 34 S.E.2d 737
• Parties: CARNEGIE-ILL I NO IS STEEL CORPORATION . v. ALDERSON.
• Court: West Virginia Supreme Court

34 S.E.2d 737

CARNEGIE-ILL I NO IS STEEL CORPORATION .

v.ALDERSON.

No. 9668.

Supreme Court of Appeals of West Virginia.

July 3, 1945.

Syllabus by the Court.

1. The Act of Congress officially referred to as Public Act No. 819, 4 U.S.C. A. § 12 et seq., deprives persons engaged in business the operations of which are located upon a reservation owned by the United States Government of immunity from the provisions of a statute of the State of West Virginia imposing an occupational tax, the claimed immunity resting upon the lack of territorial jurisdiction on the part of the State.

2. A concern engaged exclusively in producing war material for the use of the United States Government at a time of national emergency, with machinery and in a plant leased from the Government and under contracts providing a fixed unit price to be paid by the Government, is not to be treated as exercising a sovereign function of the Federal Government and therefore exempt from a state tax, in the absence of an Act of Congress recognizing the claimed exercise.

Appeal from Circuit Court, Kanawha County.

Suit by the Carnegie-Illinois Steel Corporation to enjoin George P. Alderson, in dividually and as State Tax Commissioner, from paying into the state treasury tax money paid under protest. From a decree of dismissal, complainant appeals. Affirmed.

Arthur S. Dayton and J. Newton Harman, both of Charleston, for appellant.

Ira J. Partlow, Atty. Gen., and Kenneth E. Hines, Asst. Atty. Gen., for appellee.

KENNA, Judge.

This proceeding was brought under the provisions of Code, 11-13-8, in the Circuit Court of Kanawha County by Carnegie-Illinois Steel Corporation against George P. Alderson, as Tax Commissioner of the State of West Virginia and individually for the purpose of enjoining him from paying into the treasury of the State of West Virginia $8,696.49 paid to him by the complainant under protest to meet a quarterly assessment under the West Virginia Business and Occupation Tax Act, Code, § 11-13-1 et seq, for the quarter beginning January 1, 1941, and ending March 31 of that year. From an order sustaining a demurrer to the bill of complaint and dismissing the cause this appeal was granted upon the petition of the complainant below.

The allegations of the bill of complaint fully set out the circumstances, contractual and otherwise, under which the complainant is operating as lessee under a written lease from the United States Government and for its exclusive benefit the factory usually known as "The Naval Ordnance Plant" in South Charleston, Kanawha County, for the purpose of performing part of the processes essential to the manufacture of armor plate and deck plate used in the construction of war ships. At various times under what is called a "lump sum" or fixed price basis, contracts for the manufactured product, being separate and distinct from the lease dated January 4, 1940, under which the Steel Company is occupying the plant, the latter agreement having been preceded by a similar lease dated June 8, 1939, were entered into. The substance of these several contracts is set up in the bill.

The lease of the plant was for an indeterminate period of not more than three years, revocable at the discretion of the Secretary of the Navy or by the complainant upon sixty days notice in writing, granted the use of the machinery, equipment and facilities at a stated monthly rental and provided that there should be an ad-ditional monthly rental for each furnace used. The lease further recited a number o, f material contracts that the Steel Company had entered into with the Government of the United States, and contained an express provision that the use of the armor plate plant by the lessee should be confined solely to the manufacture of armor plate and deck plate for the use of the Federal Government. The bill of complaint also alleges the general terms of the so-called "lump sum" contract, which we do not consider necessary to recount here except to state that there is provision for highly rigid and continuous inspection apparently accompanied by the arbitrary right to reject by the Navy Department, the contractor being required to proceed with production in spite of disputes which might arise.

The bill of complaint alleges in some detail the circumstances and history concerning the acquisition of the government reservation in South Charleston and the construction thereon of the Naval Ordnance Plant, showing that the plant was completed in the latter part of the year 1918 at the end of the first World War and that its intended use as a factory was abandoned by the Government until after the date of the first lease with the complainant, or June 8, 1939, and that during the intervening period following its construction it had been placed in the custody of the armed forces of the United States.

The bill of complaint also alleges that the Naval Ordnance Plant is the only plant owned by the United States Government for the manufacture of armor plate or deck plate and that complainant and two other companies are the only concerns in the United States that have the technical organization required to produce either.

After alleging the fact that the leases of the complainant of the property at South Charleston and the contracts for armor plate and deck plate entered into by it with the Federal Government were for the purpose of meeting a national emergency, the bill of complaint proceeds to assign ten specific grounds of relief as follows: First, that the activities performed by the complainant were upon property within the exclusive jurisdiction of the United States Government because title thereto was vested in it, regardless of the so-called "Buck Act", which did not alter the effect of a pre-existing lease, the effective date of the act in question being January 1, 1941; sec ond, that the complainant, in performing the activities in question, was, in contemplation of law, an instrumentality of the United States Government; third, that the complainant was an agent carrying out a sovereign function; fourth, that to collect the levy in question would impose a substantial burden upon the Government of the United States in exercising a sovereign function; fifth, the same as four except that it relates to hindering a sovereign function; sixth, that it is in violation of the sovereign immunity from taxation of the United States Government; seventh, that the levy referred to is beyond the jurisdiction of the State of West Virginia; eighth, that it is in violation of the Constitution of the United States as an invasion of the powers, jurisdiction and immunity of the Federal Government; ninth, that to impose the tax is beyond the legal and territorial jurisdiction of the State of West Virginia, its officers and agents; and tenth, that the tax is in violation of Article 1, Section 1 of the Constitution of the State of West Virginia.

The assigned grounds of demurrer were: First, that the affirmative allegations of the bill of complaint show that the complainant is subject to the tax imposed; second, that the so-called "Buck Act" authorizes the imposition of a privilege tax by the different states upon businesses, occupations or activities conducted therein upon property owned by the United States Government; third, the allegations of the bill of complaint show that the tax imposed is not a tax upon the lease of complainant from the United States Government nor upon the contracts between the plaintiff and it, but is a tax imposed upon the privilege of doing business within this State, the amount of which is gauged by the gross return from that business; fourth, there is no federal legislation exempting plaintiff from the tax imposed; fifth, the allegations of the bill of complaint fail to show that the complainant is an instrumentality of the United States Government; sixth, that the assessment in question does not impose a direct burden upon the United States Government, though the allegation of the bill of complaint that in the future it will increase the cost of complainant's product may be true; and eighth, that the imposition of the tax in question violates no statutory nor constitutional provision.

In sustaining the demurrer to the bill of complaint the trial chancellor did notdistinguish as between the eight assigned grounds and since, with the exception of the ground predicated upon the so-called "Buck Act", they are so intimately related as to invite common discussion in the opinions of the Supreme Court of the United States that our judgment must undertake to follow, we will not attempt to further divide the principal question into what may be its components as has been done by the demurrant.

As to the effect of what has become popularly known as the "Buck Act", Public Act No. 819, 54 Stat. 1059, 4 U.S. C.A. § 14, upon the then recognized immunity of the United States Government, the only indication of the attitude of the United States Supreme Court to which we have been referred or could find is that of the case of Kiker v. City of Philadelphia, 346 Pa. 624, 31 A.2d 289, decided by a divided Court, to the judgment of which the United States Supreme Court declined a writ of certiorari. 320 U.S. 741, 64 S.Ct. 41, 88 L.Ed. 439. The case involved the...