Great Atlantic & Pacific Tea Co. v. Doughton

• Decision Date: 10 October 1928
• Docket Number: 249.
• Citation: 144 S.E. 701,196 N.C. 145
• Parties: GREAT ATLANTIC & PACIFIC TEA CO. et al. v. DOUGHTON, Commissioner of Revenue of North Carolina.
• Court: North Carolina Supreme Court

144 S.E. 701

196 N.C. 145

GREAT ATLANTIC & PACIFIC TEA CO. et al. v. DOUGHTON, Commissioner of Revenue of North Carolina.

No. 249.

Supreme Court of North Carolina

October 10, 1928

Appeal from Superior Court, Wake County; Cranmer, Judge.

Action by the Great Atlantic & Pacific Tea Company and others against Rufus A. Doughton, Commissioner of Revenue of North Carolina. Judgment for plaintiffs, and defendant appeals. Affirmed.

The above-entitled action was begun in the superior court of Wake county on December 5, 1927, to recover money paid by each of the plaintiffs to defendant, commissioner of revenue of North Carolina. The said money was paid as a license tax for the privilege of maintaining and operating in this state chain stores as defined by statute. The money was demanded of plaintiffs by defendant under and by virtue of the provisions of section 162 of chapter 80, Public Laws 1927. Prior to the commencement of this action, each of the plaintiffs had complied with the requirements of section 464 of chapter 80 Public Laws 1927. It was agreed by and between plaintiffs and defendant that plaintiffs might join in one action, rather than bring separate actions, for the recovery of the money paid by each of the plaintiffs.

Plaintiffs demand the return to them of said money upon the ground that the statute, under and by virtue of which it was demanded and paid, is null and void (1) for that said statute contravenes section 3 of article 5 of the Constitution of North Carolina; and (2) for that its enactment by the General Assembly of this state was in violation of section 1 of the Fourteenth Amendment to the Constitution of the United States.

By consent, a trial by jury of the issues of fact arising upon the pleadings was waived, and the court heard the evidence offered by both plaintiff and defendant, and from said evidence found the facts in controversy. Upon these facts and the facts admitted in the pleadings, the court was of opinion that section 162 of chapter 80, Public Laws 1927, the statute under and by virtue of which the money was demanded and paid, is null and void.

In accordance with this opinion, judgment was rendered that plaintiffs recover, each, the money paid to defendant, as a license tax, together with penalties collected, interest and costs. From this judgment, defendant appealed to the Supreme Court.

Dennis G. Brummitt, Atty. Gen., and Frank Nash and Walter D. Siler Asst. Attys. Gen., for appellant.

Sullivan & Cromwell, of New York City, and Tillett, Tillett & Kennedy, of Charlotte, for Great Atlantic & Pacific Co.

Pender, Way & Foreman, of Norfolk, Va., and McLean & Stacy, of Lumberton, for David Pender Grocery Co.

Perry & Kittrell, of Henderson, for Rose's 5, 10, and 25 Cent Stores, Inc.

Davies, Auerback & Cornell, of New York City, and Pou & Pou, of Raleigh, for F. W. Woolworth Co.

Gwinn & Pell, of New York City, and Pou & Pou, of Raleigh, for J. C. Penny Co.

Douglas, Armitage & McCann, of New York City, and Pou & Pou, of Raleigh, for G. R. Kenny Co., Inc.

Murray Allen, of Raleigh, for Milner Stores, Inc., L. S. Hereford Co., Inc., and Guilford-Forsyth Grocery Co.

W. C. Newland, of Lenoir, for Carolina Stores, Inc.

Tillett, Tillett & Kennedy, of Charlotte, for L. B. Price Mer. Co.

R. H. Sykes, of Durham, for M. Samuels Co.

CONNOR J.

This appeal was duly docketed in this court at spring term, 1928, after the call of appeals from the Seventh Judicial district. It was heard on May 3, 1928, pursuant to a special order. Full and exhaustive briefs were filed in behalf of both appellant and appellees. The contentions of the parties were fully and ably presented at the hearing, by their respective counsel, in their oral arguments. The question to be decided by this court involves the validity of a statute duly enacted by the General Assembly of this state, for the purpose of raising revenue for the payment, in part, of the expenses of the state government, and of appropriations for the support of the state's educational, charitable, and penal institutions, and for other state purposes. Section 443, c. 80, Public Laws 1927. The validity of the statute is challenged by the plaintiffs in this action upon the ground that it is in violation of provisions of both the state and Federal Constitutions, and therefore null and void. In view of the importance of this question, both to plaintiffs and to the state, the appeal was continued, upon an advisari, to this term. After a careful examination of authoritative decisions of the Supreme Court of the United States, and also of decisions of this court, and of courts of other states, pertinent to the question to be decided, we have concluded that there was no error in the trial of the action in the superior court of Wake county. Appellant's assignments of error in this court cannot be sustained. The judgment is therefore affirmed.

Plaintiffs are retail merchants, engaged in business in this state. Some of them are corporations; the others are partnerships. The partnerships are composed of citizens of this state. Some of the corporations are organized under the laws of this state; others are organized under the laws of other states. All of the latter have domesticated under the laws of this state, and are therefore authorized to do business in this state. Each of the plaintiffs maintains and operates in this state six or more stores or mercantile establishments, all under the same general management, supervision, or ownership, by means of which they carry on their business as retail merchants. Plaintiffs have paid all taxes levied upon or assessed against them or their property, for which they were liable, under the laws of this state, prior to the commencement of this action. The stores maintained and operated by plaintiffs do not increase fire hazards, do not endanger the health or morals of the communities in which they are established, and do not require increased or additional police protection, different from stores maintained and operated by other merchants doing a like or similar business, who are not required by the provisions of section 162 of chapter 80, Public Laws 1927, to pay a license tax. The license tax demanded of plaintiffs and paid by them, under and by virtue of said statute, is not imposed in the exercise of the police power of the state; it is imposed upon persons, firms, corporations, or associations who are, by the terms of the statute, liable therefor, in the exercise of the power to levy taxes solely for revenue purposes.

Each of the plaintiffs had paid the license tax demanded by the defendant, commissioner of revenue of North Carolina, under and by virtue of the provisions of section 162 of chapter 80, Public Laws 1927, which is as follows:

"Section 162. Branch or Chain Stores.-That any person, firm, corporation or association operating or maintaining within this State, under the same general management, supervision or ownership, six or more stores or mercantile establishments, shall pay a license tax of $50 for each such store, or mercantile establishment in the State, for the privilege of operating or maintaining such stores or mercantile establishments."

There are merchants doing a like or similar business within this state as that done by plaintiffs who are not required by the provisions of this statute to pay a license tax, for the reason that they maintain aind operate less than six stores or mercantile establishments by means of which they carry on their business. These merchants are exempt by the statute from the payment of any license tax; they exercise the same privilege as that exercised by the plaintiffs, without paying to the state any license tax for such privilege. The only real and substantial difference between merchants who are required, and those who are not required, to pay a license tax to the state for the privilege of carrying on their business, under and by virtue of the statute, is the number of stores or mercantile establishments maintained or operated by them. Plaintiffs and other merchants who maintain or operate within this state, under the same general management, supervision, or ownership, six or more stores or mercantile establishments, are required by the statute to pay a license tax for each such store or mercantile establishment, including the five, which if they did not maintain or operate as many as six would be exempt from any license tax.

Each of the plaintiffs has paid, under protest in writing, the license tax for which under the terms of the statute it is liable, as required by the defendant, commissioner of revenue of North Carolina. Having complied with all the requirements of section 464 of chapter 80, Public Laws 1927, by this action, they demand the return to them of the money so paid. They allege and contend that upon the face of the statute, and upon the facts admitted in the pleadings and found by the court, from the evidence, the classification made in the statute, for the purpose of taxation only, is arbitrary, unreasonable, and unjust, there being no real and substantial difference between the plaintiffs, who are required to pay, and other merchants, doing a like or similar business, who are not required to pay, a license tax for the privilege of carrying on their several businesses.

Section 3 of article 5 of the Constitution of North Carolina provides that:

"Laws shall be passed taxing, by a uniform rule, all moneys, credits, investments in bonds, stocks, joint-stock companies, or otherwise; and, also, all real and personal property, according to its true value in money."

It is held in Redmond v. Commissioners of the Town of Tarboro, 106 N.C. 122, 10 S.E. 845, 7 L. R. A. 539, that the words "all real and personal property," used in the second clause...