City Of Atlanta v. Stokes Et Ux, 8932.

• Decision Date: 20 July 1932
• Docket Number: No. 8932.,8932.
• Parties: CITY OF ATLANTA. v. STOKES et ux.
• Court: Georgia Supreme Court

175 Ga. 201

165 S.E. 270

CITY OF ATLANTA.
v.
STOKES et ux.

No. 8932.

Supreme Court of Georgia.

July 20, 1932.

[165 S.E. 270]Syllabus by the Court.

1. Under provisions of the Act of Congress (38 USCA § 454), the court did not err in overruling the demurrer.

2. "It is settled law that property paid for in full with other property previously set apart in due and proper manner under the homestead and exemption laws takes the place of the latter, and is impressed with the homestead character." Broome v. Davis, 87 Ga. 584, 13 S. E. 749, and citations. The principle laid down in a case involving homestead and exemption rights, is applicable in this case, wherein is involved the question of exemption or nonexemption of property which was bought with any of the allowances made by the federal government under the provisions of the World War Veterans' Act (38 USCA § 454); the same being a part of the compensation allowed by the government for military service or injuries suffered by the party claiming the exemption while he was a soldier in the service of the United States in the World War.

3. The court did not err in admitting affidavits showing the sources of the funds, and the transmission of the title from grantors to grantees, for whatever it might be worth to the jury in tracing the fund. This would be true in the case of an implied trust.

GILBERT and ATKINSON, JJ., dissenting.

Error from Superior Court, Fulton County; Edgar E. Pomeroy, Judge.

Suit by Fred R. Stokes and wife against the City of Atlanta and another. To review the judgment, defendants bring error.

Affirmed.

Mr. and Mrs. Fred R. Stokes filed their petition against the city of Atlanta and Daniel, city marshal, praying that the defendants be restrained by injunction from enforcing by sale the collection of taxes assessed by the city against certain real estate, the home of petitioners, alleging that under the Act of Congress (38 USCA § 454), the property is exempt from taxation, because it was purchased with money paid to the petitioners by the government because of injuries sustained by them while they were each in the military service during the World War. The provision of the act upon which they rely is as follows: "The compensation, insurance, and maintenance and support allowance payable under Parts II, III, and IV, respectively, shall not be assignable; shall not be subject to the claims of creditors of any person to whom an award is made under Part II, III, or IV; and shall be exempt from all taxation."

Error is assigned upon the action of the court (1) in overruling a general demurrer to the petition; (2) in denying the motion of the defendant to strike the name of Mrs. Fred R. Stokes, on the ground that it appeared she was not a necessary party; (3) in admitting, on the application for interlocutory injunction, over objection of the city, certain evidence; (4) in granting an interlocutory injunction. The grounds of the general demurrer are: (1) That the petition does not state a cause of action; (2) if the statute of Congress which petitioners contend exempts their property from taxation does undertake to exempt property located in Atlanta from taxation by the city, the statute is unconstitutional, because the Federal Constitution does not contain any authority to Congress to so exempt property located in states and cities from taxation by such states and cities; (3) Congress is not authorized by any provision of the Federal Constitution to pass a statute exempting from taxation by a state or any agency thereof, such as a municipality, property located within such state or municipality; (4) the states constituting the Union are themselves sovereign, retain all authority not ceded to the Union, and have not granted to the United States authority to take away the

[165 S.E. 271]

power of the taxing authorities of the states to tax property located therein. The assignment based upon the refusal to strike the name of Mrs. F. R. Stokes as a party was not argued here.

The evidence admitted over objection consisted of affidavits of Mr. and Mrs. Stokes, to the effect that Stokes was a soldier in the World War, and obtained the fund with which he paid for the property as compensation for wounds received while engaged in military service, under the statute mentioned; that the real estate involved was purchased from Mrs. Clark, who executed, first, a bond for title, and later a deed to Mr. and Mrs. Stokes; that Fred R. Stokes had his wife named in this deed, upon agreement that she would hold title in trust for him and at his request would execute a deed to him, and it was fully understood that it was not his intention to give her a half interest in the property; that later, under the same agreement, Stokes executed to his wife a deed to the property, reciting a consideration of $1,000. but that in fact no money was paid; that later the wife conveyed the property by deed to the husband, reciting a consideration of $10 and other valuable considerations, but that no consideration was paid; that Stokes has been in possession of the property since it was purchased: and that his wife had never paid any money on account of same nor claimed any interest therein. Mrs. Stokes' affidavit contained the further statement that she was a nurse in the World War, and that it had been necessary at times for her to use money received by her in compensation for injuries sustained to buy food and other necessities in order for her husband to meet the payments on the property.

The objections to this evidence were that the deed from Stokes to his wife could not be changed or added to or taken from by parol evidence, in the absence of a showing of fraud, accident, or mistake, and unless the deed was changed by petition for reformation; that the evidence undertook to set out an express trust, which could be done only in writing, and no such writing was alleged or proved; that a trust cannot be grafted on a deed by parol; that the evidence that the wife had conveyed property to the husband under the language of the deeds described in the affidavits should have been rejected, because no order was granted by the superior court of Fulton county authorizing a deed by the wife to her husband, and, in the absence of such order, any deeds were made void; that the husband, being of age, could not create a trust for himself in the property; and that payment of taxes to the city could not be avoided by reason of the fact that deeds had been made by Mrs. Ossie Ola Clark, from whom the property was purchased, direct to Mrs. Stokes, also a deed had been made by Stokes to his wife conveying a one-half interest in the prop erty, and subsequently Mrs. Stokes had reconveyed the property to Stokes.

J. L. Mayson, C. S. Winn, and J. C. Savage, all of Atlanta, for plaintiffs in error.

J. C. Miner, J. A. Setze, and J. S. Hall, all of Atlanta, for defendants in error.

RUSSELL, C. J. (after stating the foregoing facts).

If the question proposed for solution in this case were whether the state alone is empowered to levy taxes upon the property of its citizens, it should of course be answered in the affirmative. But the general rule as to taxation, like every other general rule, is subject to exceptions. In a broad sense, federal regulation as to direct taxation upon tangible property is not permissible. Except in well-defined instances, the power of levying direct taxation is a right reserved in express terms to all the commonwealths which as sovereign states compose this Union. All the propositions so well stated in the opinion of the dissenting justices, if confined simply to the ordinary rules governing taxation, may well be conceded. In the field of direct taxation, the power of the sovereign state is supreme, except when the exercise of that supreme right brings it into collision with the operation of a government instrumentality necessary to the existence of the federal government and the exercise of its powers upon a subject as to which exclusive jurisdiction was delegated to Congress in the Constitution of 1789. In the previous utterance by this court upon the same subject now before us, in Rucker v. Merck, 172 Ga. 793, 159 S. E. 501, the decision of the majority of the court as then constituted was not based upon any power of taxation inherent in Congress; for it was not imagined that Congress, in the passage of section 22, World War Veterans' Act (38 USCA § 454), was attempting to impose a tax; but the court held, basing its decision upon the admitted and unlimited right of Congress to make war, that Congress had the supreme right to say, without let or hindrance of any kind from any quarter, upon what terms it would reward faithful service in time of war as an instrument for the continuance of like faithful service if the need of the future should demand. As we still see the question here involved, it is not one of taxation, but a question as to whether the federal government has the right to determine, even to the minutest detail, what shall be the measures by which and the manner in which a war shall be begun, carried on, and concluded. To maintain the power to wage war, it is as much essential to the morale of the troops of a government that those who face death upon the field of Mars should have the right to anticipate rewards in the future, especially if they have been victorious, as to expect that they will receive the monthly compensation

[165 S.E. 272]

for service, which must be meager indeed in instances when their lives are actually exposed to danger. It seems strange, in view of the long line of decisions on this subject, that any one can suppose, even though the power of a state to tax generally is supreme, that that power may be used to hamper, hinder, annoy, harass, and impede the federal government in the exercise of its unlimited power to carry on war. Certainly no state should complain of the terms upon which the federal government rewards its soldiers, when the compensation, insurance...