Duke Power Co. v. South Carolina Tax Commission

• Decision Date: 06 January 1936
• Docket Number: No. 3906.,3906.
• Citation: 81 F.2d 513
• Parties: DUKE POWER CO. et al. v. SOUTH CAROLINA TAX COMMISSION.
• Court: U.S. Court of Appeals — Fourth Circuit

81 F.2d 513 (1936)

DUKE POWER CO. et al. v. SOUTH CAROLINA TAX COMMISSION.^*

No. 3906.

Circuit Court of Appeals, Fourth Circuit.

January 6, 1936.

H. J. Haynsworth, of Greenville, S. C., and J. H. Marion, of Charlotte, N. C. (W. S. O'B. Robinson, Jr., and J. C. McGowan, both of Charlotte, N. C., on the brief), for appellants.

Claude K. Wingate, of Columbia, S. C. (John M. Daniel, Atty. Gen., and J. Fraser Lyon, of Columbia, S. C., on the brief), for appellees.

Before PARKER and NORTHCOTT, Circuit Judges, and COLEMAN, District Judge.

PARKER, Circuit Judge.

This is an appeal from a judgment sustaining demurrers and dismissing two consolidated actions instituted by the Duke Power Company and the affiliated Southern Public Utilities Company to recover taxes paid under protest pursuant to the South Carolina Power Tax Act (Act S. C. May 9, 1931, 37 St. at Large, p. 357 Code 1932, § 2558 et seq.), for the generation and sale of electric power during the month of November, 1933. Other actions have been instituted by the same parties in the court below to recover such taxes paid for other months, but have not been tried pending the final determination in these consolidated cases, which have been brought up on appeal for the purpose of determining the questions involved. After the decision below, the portion of the act authorizing the payment of taxes under protest and suit for their recovery was repealed by the Legislature of South Carolina; and a motion to dismiss the appeal has been made on the ground that the consent of the state to be sued has been withdrawn by the repealing act.

Three questions are presented for our determination by the motion and the appeal: (1) Whether, in view of the passage of the repealing act of the South Carolina Legislature, there is jurisdiction in the federal courts to proceed further with the hearing of the action; (2) if so, whether the South Carolina Power Tax Act should be construed as requiring that the generation tax imposed by it be applied to the current as generated, or merely to the current as sold after the elimination of station and line or system loss; and (3) whether, if the former construction be adopted, the act does not violate the due process and equal protection clauses of the Fourteenth Amendment by discriminating against those manufacturers of electricity who produce and sell their product within the state. We shall discuss these questions in the order in which they have been stated.

1. The question of jurisdiction.

The South Carolina Power Tax Act of May 9, 1931, provided, in section 4 thereof (brought forward as section 2561 of the Code of 1932), that the collection of the taxes thereby imposed should not be restrained or enjoined by any court or judge, but that any person claiming taxes required to be paid under the act to be unjust or illegal for any reason might pay such taxes under protest and sue for their recovery.¹ Appellants made payment of taxes under written protest, and promptly instituted suits for recovery pursuant to the provisions of this act. The case at bar was heard and decided in the court below on April 11, 1935 (Duke Power Co. v. Query (D.C.) 10 F.Supp. 669), as a test case to govern the other cases which were pending involving the same questions; but before appeal from the judgment could be taken the Legislature of South Carolina, on April 27, 1935, 39 St. at Large, p. 276, § 2, repealed the proviso of section 4 of the act, which forbade injunction and provided for payment under protest and suit for recovery.² The question which arises is whether the effect of this repealing act was to take away the right of appellants to proceed with the suits which had theretofore been instituted.

The general rule, of course, is that the repeal of a statute has the effect of blotting it out as completely as if it had never existed and of putting an end to all proceedings under it. 59 C.J. 1189, 1190, and cases there cited. But it is equally well settled that a repealing act ought not be construed, if any other construction is possible, as intended to affect rights which have vested under the act repealed or as requiring the abatement of actions instituted for the enforcement of such rights. 59 C.J. 1191; Calder v. Bull, 3 Dall. 386, 1 L. Ed. 648; Eastland v. County of Clackamas 32 F. 24, 34 (Per Deady, J.); Couch v. Jeffries, 4 Burrows, 2460 (Per Mansfield, L. J.); Dash v. Van Kleeck, 7 Johns. (N. Y.) 477, 503, 5 Am.Dec. 291. In the case last cited, one of the landmarks of constitutional law, Chief Justice Kent in holding that a statute ought never be construed so as to "defeat a suit already commenced, upon a right already vested," "if it be susceptible of any other" construction, said: "The very essence of a new law is a rule for future cases. The construction here contended for, on the part of the defendant, would make the statute operate unjustly. It would make it defeat a suit already commenced, upon a right already vested. This would be punishing an innocent party with costs, as well as divesting him of a right previously acquired under the existing law. Nothing could be more alarming than such a subversion of principle. A statute ought never to receive such a construction, if it be susceptible of any other, and the statute before us can have a reasonable object and full operation without it. In the case of Beadleston v. Sprague, 6 Johns. 101, this court unhesitatingly acknowledged the principle, that a statute is not to be construed so as to work a destruction of a right previously attached. We are to presume, out of respect to the lawgiver, that the statute was not meant to operate retrospectively; and if we call to our attention the general sense of mankind on the subject of retrospective laws, it will afford us the best reason to conclude, that the legislature did not intend in this case to set so pernicious a precedent. How can we possibly suppose, that in so unimportant a case, when there were no strong passions to agitate, and no great interest to impel, that the legislature coolly meant the prostration of a principle which has become venerable for the antiquity and the universality of its sanction, and is acknowledged as an element of jurisprudence?"

There can be no question but that appellants had a vested right with respect to the moneys paid under protest pursuant to the provisions of the statute. The state took and held such moneys subject to the duty of refunding them, if the court should hold that they were not properly collected; and, in the event of such holding, claims for their repayment were given preference over all other claims against the state treasury. It was almost as though they were to be held in escrow by the state authorities to abide the determination of the suit instituted for their recovery. The repeal of the statute authorizing payment under such conditions and suit for the recovery of the amounts so paid, ought not be construed, under the authorities above cited, as destroying rights with respect to payments already made under such a statute, or as abating suits instituted for their recovery, but as applying prospectively, if such a construction is reasonably possible, which we think it is. And that it was the intention of the Legislature that the repealing statute should be construed to operate prospectively and not to affect rights acquired and actions commenced under the statute repealed, appears from the fact that the section of the statute repealed embraces a prohibition against the granting of injunctions to restrain the collection of taxes as well as the provision permitting payment under protest and suit for recovery. The intention of the repealing act was evidently to restore the right to injunctive relief for the future, and for the future to withdraw the right of payment with suit for recovery.

This construction of the statute is required if violation by the Legislature of the most elementary principles of reason and justice is to be avoided. The act of 1931 had taken away the right to enjoin the collection of taxes thought to be illegal or unjust, and in lieu of that right had given, as an adequate remedy at law, the right to pay under protest and sue for recovery. To take away the right of the taxpayer to proceed with such suit, after he had been deprived of the right to proceed in equity under the promise of the state that he should have such right, and after the state had collected the disputed taxes by virtue of such promise, would be so unreasonable and unjust, that we ought not indulge the presumption that an honorable public body such as a state Legislature intended its acts to have any such effect. As said by the Supreme Court in United States v. Kirby, 7 Wall. 482, 19 L.Ed. 278, and quoted with approval in Sorrells v. United States, 287 U.S. 435, 447, 53 S.Ct. 210, 214, 77 L.Ed. 413, 86 A.L.R. 249: "All laws should receive a sensible construction. General terms should be so limited in their application as not to lead to injustice, oppression, or an absurd consequence. It will always, therefore, be presumed that the legislature intended exceptions to its language, which would avoid results of this character. The reason of the law in such cases should prevail over its letter." Certainly the "sensible" construction of the repealing statute here under consideration is that it was intended to apply prospectively and not to cases where rights had accrued with respect to payments made under the statute repealed.

Another reason why we must interpret the repealing statute as operating prospectively, and not as taking away the rights of plaintiff with respect to moneys paid and suits instituted under the statute repealed, is that to give it the latter interpretation would unquestionably render it unconstitutional; and it is well settled that not only is an interpretation of a statute which would render it unconstitutional to be avoided, but also one which would raise a grave question as to...