Graniteville Mfg. Co. v. Query

• Decision Date: 17 October 1930
• Citation: 44 F.2d 64
• Court: U.S. District Court — District of South Carolina
• Parties: GRANITEVILLE MFG. CO. v. QUERY et al.

44 F.2d 64 (1930)

GRANITEVILLE MFG. CO. v. QUERY et al.

District Court, E. D. South Carolina.

October 17, 1930.

P. F. Henderson, of Aiken, S. C. (Hendersons & Salley, of Aiken, S. C., on the brief), for plaintiff.

Cordie Page, Asst. Atty. Gen. (John M. Daniel, Atty. Gen., on the brief), and J. Fraser Lyon, of Columbia, S. C., for defendants.

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

ERNEST F. COCHRAN, District Judge.

The plaintiff brought suit against the defendants, as members of the South Carolina Tax Commission, to enjoin them from enforcing the collection of certain documentary stamp taxes. The matter comes up upon an application for an interlocutory injunction, made before three judges, under the provisions of section 266 of the Judicial Code, as amended (Title 28, section 380, U. S. Code 28 USCA § 380).

The parties have entered into a written stipulation as to the facts of the case, which has been filed as a part of the record in the cause. The new Equity Rule 70½, recently promulgated by the Supreme Court, requires the courts of first instance, in deciding suits in equity, to find the facts and state the conclusions of law thereon, separately. Where all of the facts have been stipulated by the parties and made a part of the record, it would seem unnecessary to recite the facts in any opinion or decree made by the court, or make any special finding thereon. However, to avoid any uncertainty, we find all the facts as set forth in the stipulation, but do not deem it necessary to restate them in detail in this opinion, but will make only such brief statement as may be necessary for a proper understanding of the grounds of our decision.

The facts are substantially as follows:

The plaintiff is a South Carolina corporation, with its principal place of business at Graniteville, S. C., and is engaged in manufacturing in that state. An agent for the South Carolina tax commission recently made an examination at the offices of the plaintiff at Graniteville, and found there a number of notes, which plaintiff had executed to various banks outside of the state of South Carolina, and which had been paid. They were not stamped. The tax commission, pursuant to the laws of South Carolina, assessed a documentary stamp tax of $5,020.46 upon these notes, and notified the plaintiff that if it did not proceed to purchase documentary stamps in that amount and place the same upon the notes, they would proceed to issue execution and have the same levied upon plaintiff's property under the provisions of the South Carolina law. These notes were executed at various times from July 24, 1923, to March 12, 1930. The notes were all payable to banks, at their banking houses, respectively, outside of South Carolina; none of them being located or doing any business within that state. The custom and practice between the plaintiff and each of the banks was that in each instance, at the office of the bank, a line of credit was first established; that is, an agreement was made that the plaintiff's borrowing from the bank should never exceed a certain amount, each specific loan to be made thereafter being subject to acceptance by the bank. When a loan was desired, the bank having been notified that a loan would be desired at a certain date and an inquiry having been made of it as to the then existing discount rate, the note would be signed by the president or other executive officer of the plaintiff, and forwarded to the bank by mail. The note was subject to withdrawal and revocation by the plaintiff until it was actually received and accepted by the bank and the proceeds actually placed to the credit of the plaintiff in the bank. Each note was executed on a blank form, which reads as follows:

"Graniteville Manufacturing Company

"Graniteville, South Carolina

"No. ______ ______ 192 ___.

"On ______, for value received, we promise to pay $ ______ thousand dollars, to the order of ______ at their banking house in ______.

"Graniteville Manufacturing Company."

The date and amount involved and the name of the bank were filled in and the note made payable to the bank at its banking house (which was outside of South Carolina). Payment of the note was made to the bank at its banking house by the plaintiff sending checks from its office at Graniteville upon other banks; and when the note was paid, it was marked paid, or canceled, and returned to the plaintiff at Graniteville, S. C., and there kept. The plaintiff did not place any documentary stamps upon any of its notes that were negotiated and placed with banks outside of South Carolina; acting, as it believed, within its legal rights and with absolutely good faith, and not with any purpose of evading any just tax. The plaintiff from time to time borrowed funds and placed loans with banks located within the state of South Carolina, and always fully stamped said notes with South Carolina documentary stamps, as required by law.

The foregoing facts apply to all of the notes; but with reference to the place where the notes were signed, they may be divided into two classes. Prior to December 1, 1924, the plaintiff's executive officers resided in Augusta, Ga., and all of its notes, up to that time, were signed by its executive officers in Augusta, Ga., and mailed from there to banks outside of South Carolina, and those notes were never in the state of South Carolina until after they were paid and returned to the plaintiff at its office at Graniteville, S. C. But after December 1, 1924, plaintiff's executive officers resided at Graniteville, S. C., and the notes executed subsequent to that time were signed by those officers at Graniteville, S. C., placed in the mail there for delivery to the bank outside of South Carolina, and, upon payment, were later returned to the plaintiff at Graniteville, S. C. The plaintiff owns a large cotton factory and real estate and much personalty in Aiken county, S. C., which would be subject to levy and sale under the laws of South Carolina.

The first question is whether or not the plaintiff has an adequate remedy at law. Unless there is an adequate remedy at law, an injunction is a proper remedy. But the remedy at law must be plain, full, and complete, and where the remedy at law is doubtful, the taxpayer is not compelled to speculate as to what the decision of the court of law will be, whether state or federal, but is entitled to an injunction. Davis v. Wakelee, 156 U. S. 680, 15 S. Ct. 555, 39 L. Ed. 578; Union Pacific R. Co. v. Weld County, 247 U. S. 282, 38 S. Ct. 510, 62 L. Ed. 1110; Dawson v. Kentucky Distilleries, 255 U. S. 296, 41 S. Ct. 272, 65 L. Ed. 638. See, also, Southern Ry. Co. v. Query (D. C.) 21 F.(2d) 333, 337, where a number of other Supreme Court decisions supporting the same propositions are cited.

The authority for the imposition of stamp taxes, during the time the plaintiff's notes were executed, is found in various acts of the Legislature of South Carolina, beginning in 1923; the last act being Act No. 574 of the Acts of the General Assembly of South Carolina of 1928 (pp. 1089-1142), approved March 10, 1928. All of them contain the following provisions:

"There shall be levied, collected and paid, for and in respect of the several bonds, debentures or certificates of stock and indebtedness, and other documents, instruments, matters and things mentioned and described in Schedule A of this Act, or for or in respect of the vellum, parchment, or paper upon which such instrument, matter or things, or any of them, are written or printed, by any person who makes, signs, issues, sells, removes, consigns or ships the same or for whose benefit or use the same are made, signed, issued, sold, removed, consigned, or shipped, the several taxes specified in such schedule. * * *

"Schedule A

"* * * Promissory notes, except bank notes issued for circulation * * * and for each renewal of same. * * *"

It was conceded by the counsel for the defendants that there is no remedy at law by which these taxes can be recovered after payment, unless it is contained in section 29 of the Act of 1928. That section is as follows:

"§ 29. Parts of Act Independent — Taxes to be Paid under Protest Sue for Recovery. — That if any clause, sentence, paragraph or part of this Act shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder of this Act, but shall be confined in its operation to the clause, sentence, paragraph or part thereof directly involved in the controversy in which such judgment shall have been rendered. No caption of any Section or set of Sections shall in any way affect the interpretation of this Act or any part thereof: Provided, That the collection of the license taxes imposed under the provisions of this Act shall not be stayed or prevented by any injunction, writ or order issued by any Court or Judge thereon. In all cases in which any license or tax is required to be paid hereunder by any person, firm or corporation and the Tax Commission shall claim the payment of the taxes so assessed, or shall take any step or proceedings to collect the same, the person, firm or corporation against whom such license taxes are charged, or against whom such step or proceedings shall be taken, shall, if he conceives the same to be unjust or illegal for any reason, pay the said taxes notwithstanding, under protest, in such funds and monies as the South Carolina Tax Commission shall be authorized to receive, and upon such payment being made said South Carolina Tax Commission shall make proper note that the same was paid under protest and notify the State Treasurer that such taxes were paid under protest; that the person, firm or corporation so paying said license taxes may at any time within thirty (30) days after making such payment, but not afterwards, bring an action against the said South Carolina Tax Commission for the recovery...