Davis v. Smith

• Decision Date: 11 November 1943
• Docket Number: 14624.
• Parties: DAVIS et al., Constituting Board of Tax Assessors, v. SMITH et al.
• Court: Georgia Supreme Court

28 S.E.2d 148

197 Ga. 95

DAVIS et al., Constituting Board of Tax Assessors, v. SMITH et al.

No. 14624.

Supreme Court of Georgia

November 11, 1943

Syllabus by the Court.

Noninterest-bearing certificates of indebtedness issued by the State Highway Board of Georgia under the provisions of the act approved February 26, 1941 (Georgia Laws 1941, p. 596), and accounts receivable (1) for paving, due by a county in this State, and (2) a like unpaid balance due by the United States Government for work done and labor and materials furnished in the erection of airports for the United States Army, and held by the citizens of this State, are taxable as property, and are not exempt therefrom as falling within what is known as the instrumentalities rule.

A contractor partnership composed of E. Jack Smith, Jack Clark and R. L. Rivers, residents of Fulton County, Georgia, and W Corry Smith, a resident of Tennessee, filed a petition against Comer Davis, Reese Perry, and John C. Townley in their capacity as the board of county tax-assessors of Fulton County, and against Guy Moore as tax-receiver, and T. E Suttles as tax-collector of said county, and sought to enjoin the defendant tax officials from making any assessment against the plaintiff partnership by reason of its ownership of accounts receivable and of certificates of indebtedness described in the petition, for the calendar year 1942; and sought to enjoin the defendants from entering said assessments or from issuing executions based thereon, or from doing anything to force Smith, the contractor, to pay taxes on such accounts receivable and certificates of indebtedness. In the petition it was alleged as follows: Petitioner is in the contracting and construction business, and furnished paving materials to and performed certain work in constructing public highways and United States air-bases for the State of Georgia, various counties of Georgia, and the United States Government. On January 1, 1942, petitioner held and owned the following accounts due to it by the County of Camden, $1,102.14, the State of Georgia, $15,086.84, and the United States Government, $29,831.10. It held and owned certificates of indebtedness amounting to $117,050, issued to it by the Highway Department of Georgia, in accordance with the act of the General Assembly approved February 26, 1941 (Ga.L. 1941, p. 596). The indebtedness owing by Camden County represented an open account for furnishing and laying paving materials on a public highway in that county, commenced and completed within the year 1941, and performed under contract with Camden County. That this contract was not in writing, but was orally entered into on or about July 10, 1941, between petitioner and the Board of Commissioners of Camden County, under the terms of which it was agreed that petitioner would construct a public highway in the county, furnishing specified labor and materials, and that Camden County would pay a stated sum therefor. Although said work was done and said materials furnished before January 1, 1942, payment to petitioner was not made until afterward. Accordingly this item of $1,102.14, represented an open account receivable, due to petitioner on January 1, 1942. The indebtedness of the State represented an open account due for grading, draining, paving, furnishing paving materials, and constructing public highways in Liberty and Camden Counties, which work was commenced and completed within the year 1941, and was performed in accordance with the terms of a contract executed on October 8, 1941, between petitioner and the State Highway Board, a copy of said contract being attached to the petition. That the indebtedness of the United States Government represented an open account due for such work and materials used in constructing United States Army Airports at Savannah, which work was performed under contract with the U.S. Government; the amount of this indebtedness, due on January 1, 1942, being $29,831.10, the unpaid balance owed to petitioner on January 1, 1942.

Petitioner alleged: that the certificates of indebtedness referred to evidenced an indebtedness in said amount due to petitioner by the State of Georgia for work done and performed under contract with the State; that the State Highway Department contracted for such materials by inviting bids from contractors engaged in furnishing such materials, and by awarding contracts to those making the lowest bid; that petitioner was the lowest bidder; that after the delivery of said materials, the State Highway Department, so long as funds were available for such purposes, paid to petitioner monthly for the materials furnished and delivered during the preceding month; that at the time the State Highway Department was indebted to petitioner for such materials in various sums aggregating the principal sum of $117,050.68, the said Highway Department being without funds sufficient to liquidate said indebtedness, thereupon issued to petitioner certificates of indebtedness aggregating said sum, which certificates were issued in accordance with the act of the GeneralAssembly of Georgia, approved February 26, 1941 (Ga.L.1941, p. 596). Petitioner alleged that said accounts receivable and said certificates of indebtedness are not subject to taxation in Fulton County or the State of Georgia; that the threatened taxation of them would deprive petitioner of his constitutional rights guaranteed to him by the State Constitution, art. 1, sec. 1, par. 3, and by the Fourteenth Amendment to the United States Constitution; that it would seriously affect the salability of all petitioner's property, and would greatly annoy petitioner, because said property is actually being used by petitioner in constructing runways and other pavement on United States army airports.

The defendants demurred to the petition, on the grounds: that no cause of action is set forth; that the petition shows no equity; that it fails to disclose any reason why the accounts receivable and certificates of indebtedness are not subject to tax in Fulton County; that the allegations relating to the unconstitutionality of the threatened assessment and taxation of petitioner's accounts are without merit, for the reason that petitioner shows no legal reason why such assessment and such taxation would deprive it of its property without due process of law; that the allegations seek only an alleged constitutional right by reference only to a clause of the Constitution, without setting forth the reason of the basis of said attack, or any facts which disclose lack of due process in the conduct of the defendants; that it appears from the petition that each species of the described property owned by petitioner is property subject to ad valorem tax in Fulton County for the year 1942, and property which the Constitution and laws of Georgia require to be taxed. The defendants demurred specially to those portions of the petition relating to accounts due petitioner by Camden County, the State of Georgia, and the United States Government, and those relating to certificates of indebtedness issued to petitioner by the State Highway Department, and to all portions of the petition relating respectively to indebtedness owing to petitioner by Camden County and by the State of Georgia and by the United States Government, upon the grounds: (a) that said portions of the petition set forth no cause of action, and (b) it affirmatively appears that the respective accounts and the certificates of indebtedness are taxable property, owned on January 1, 1942, by petitioner, and as such subject to tax in Fulton County.

The demurrer was overruled, and the defendants excepted.

E. H. Sheats, Standish Thompson, and W. S. Northcutt, all of Atlanta, for plaintiffs in error.

Morgan Belser, of Atlanta, for defendants in error.

GRICE Justice.

Taxation is the rule, and exemption the exception. Athens City Waterworks Co. v. Mayor, etc., of Athens, 74 Ga. 413; Pacific Co. v. Johnson, 285 U.S. 480, 491, 52 S.Ct. 424, 76 L.Ed. 893. What is here sought to be taxed are accounts receivable, due by the government of the United States in the one instance, and Camden County in the other, and a certificate of indebtedness issued by the State Highway Board of Georgia by virtue of the act approved February 26, 1941 (Ga.L.1941, p. 596). Section 5A of that act provides in express terms that, 'No acknowledgment, evidence of debt or chose in action issued by virtue of this Act shall bear any interest for the past or future.' The indebtedness of the United States Government represents an amount due by it for certain work and material used in constructing United States Army airports at Savannah, the account representing an unpaid balance. That due by Camden County represents an open account for services and paving materials on a public highway in that county. The certificate of indebtedness issued by the State Highway Board represents money due to the defendant in error by the State highway authorities for work done and materials furnished in the building of roads. Defendant in error was a contractor doing work on several projects out of which these debts grew. It is and was not an officer of the government, the State or the county. Ordinary, bills receivable and accounts receivable are personal property and subject to be taxed. Code, §§ 92-102, 92-6215. None of the several species of property in question has been specifically exempted by the Constitution of this State nor the statutes passed in conformity therewith. If any of it be exempt, it must be because it falls within what is known as the instrumentalities rule. The first time that rule was mentioned in the decisions of this court was in Penick v. Foster, 129 Ga. 217, 58 S.E. 773, 12 L.R.A.,N.S., 1159, 12 Ann.Cas. 346,...