Elmwood Cemetery Ass'n v. South Carolina Tax Commission, 19177

• Decision Date: 26 February 1971
• Docket Number: No. 19177,19177
• Citation: 255 S.C. 457,179 S.E.2d 609
• Court: South Carolina Supreme Court
• Parties: ELMWOOD CEMETERY ASSOCIATION, Respondent, v. SOUTH CAROLINA TAX COMMISSION, Appellant.

Page 609

179 S.E.2d 609

255 S.C. 457

ELMWOOD CEMETERY ASSOCIATION, Respondent, v. SOUTH CAROLINA TAX COMMISSION, Appellant.

No. 19177.

Supreme Court of South Carolina.

Feb. 26, 1971.

Atty. Gen. Daniel R. McLeod, Asst. Attys. Gen. Joe L. Allen, Jr., and G. Lewis Argoe, Jr., Columbia, for appellant.

Henry H. Edens, Charles F. Cooper, Columbia, for respondent.

LEWIS, Justice:

This controversy between respondent, Elmwood Cemetery Association, and appellant, South Carolina Tax Commission, arises out of the attempt of appellant to require respondent to pay income tax to the State. From a ruling by the lower court holding that Elmwood was not subject to the tax, the Tax Commission has appealed.

In 1966, the Tax Commission made an assessment against Elmwood for income tax allegedly due and unpaid for the years 1949--1963, inclusive, in the total amount of $41,120.58, plus penalty of $10,280.10, and interest of $10,863.14, for a total tax liability of $62,263.91. Elmwood was issued a charter in 1940 by the State as an eleemosynary cemetery corporation, pursuant to the provisions of Section 12--751 et seq. of the 1962 Code of Laws, and has resisted the foregoing assessment under a claim that it is exempt from the payment of income tax by the terms of Section 65--226(3) of the 1962 Code of Laws, which exempts from the payment of such tax:

'Cemetery Corporations and corporations organized for religious, charitable, scientific or educational purposes or for the prevention of cruelty to children or animals, No part of the net earnings of which inures to the benefit of any private stockholder or individual.' (Emphasis added).

This is the second action brought by Elmwood in its efforts to avoid the payment of the income tax assessed against it. The first, Elmwood Cemetery Ass'n. v. Wasson, 253 S.C. 76, 169 S.E.2d 148, sought a declaratory judgment that Elmwood was exempted by the above quoted provisions of Section 65--226(3) from the payment of income tax. We there denied the declaratory relief sought, holding that the exclusive remedy for contesting an alleged erroneous assessment of income tax was by the payment under protest of the tax claimed to be illegal and a suit at law for the recovery of the sum so paid, in accordance with Sections 65--2661 and 65--2662, 1962 Code of Laws.

Following the filing of our opinion in the above case, Elmwood instituted this action, alleging that it had, on August 14, 1969, paid under protest the tax, interest, and penalty due under the assessment for the year 1949, as permitted by Section 65--2661; that it was, during 1949, and has been continuously since, a non-profit cemetery corporation without capital stock, no part of the net earnings of which inures to the benefit of any private stockholder or individual; and that it was therefore exempt from the payment of income tax as provided by the above quoted terms of Section 65--226(3) and should be refunded the amount paid for 1949. The complaint then alleged that the Tax Commission was seeking to collect income tax from Elmwood for years subsequent to 1949 and that it was entitled to a declaratory judgment relieving it from the payment of the tax assessed for the additional years.

It is therefore apparent that Elmwood sought in this action (1) to recover the tax paid under protest for the year 1949 and (2) a declaratory judgment that it was not liable for the tax assessed for the subsequent years, although such tax had not been paid under protest as required by Sections 65--2661 and 65--2662.

The answer of the Tax Commission admitted that the tax, penalty and interest had been paid under protest for the year 1949; but expressly denied that Elmwood qualified for the exemption from income tax permitted by Section 65--226(3), supra. As a second defense, the answer alleged that, since the entire amount of the tax assessed for the years 1949--1963 had not been paid and because of the exclusive remedy provided by Sections 65--2661--65--2662, the tax liability for the year 1949 or for subsequent years could not be determined in this action.

On October 10, 1969, approximately thirty (30) days after the issues were joined, Elmwood noticed a motion on the tenth day thereafter for summary judgment in its favor, in accordance with Circuit Court Rule 44, as amended, upon the ground that there was no genuine issue as to any material fact and it was entitled to a judgment in its favor as a matter of law. The motion stated that it would be based 'upon the pleadings and matters of record which are made a part of the pleadings by reference, and upon the affidavit, with copy of charter, attached hereto.' The charter referred to in the motion was that of the Elmwood Cemetery Association. The affidavit was that of Charles F. Cooper, attorney for Elmwood, and stated, in substance, of his own personal knowledge, Elmwood had been a non-profit cemetery corporation since 1944, and that at no time had any of the net earnings of such corporation inured to the benefit of any private stockholder or individual.

When the motion for summary judgment came on to be heard by the lower court, no showing was made by the Tax Commission by affidavit that there was any genuine issue for trial, in so far as this record reveals. The only additional showing made was that of Elmwood and upon that basis the lower court granted summary judgment on December 1, 1969 for the recovery of the tax paid under protest for the year 1949. In addition, the lower court held, in effect, that Elmwood was exempt from the payment of income tax for the years subsequent to 1949.

The lower court was clearly without jurisdiction to determine the liability of Elmwood for the payment of income tax for the years subsequent to 1949, since none of the tax assessed for these years had been paid. Elmwood Cemetery Ass'n. v. Wasson, supra, 253 S.C. 76, 169 S.E.2d 148. The payment of the tax assessed for 1949 gave Elmwood no right to challenge, nor the court to determine, the tax liability for subsequent years for which none of the tax assessed had been paid. Therefore, so much of the order of the lower court as holds that Elmwood was exempt from the payment of income tax for the years subsequent to 1949 was void and is accordingly reversed.

The sole remaining question is whether the lower court erred in permitting recovery by Elmwood for the tax paid under protest for the year 1949.

The Tax Commission first contends that Elmwood failed to comply with the statutory requirement that the tax assessed be paid before an action could be brought to contest the...