Morgan v. Watts, 19136

• Decision Date: 11 December 1970
• Docket Number: No. 19136,19136
• Citation: 178 S.E.2d 147,255 S.C. 212
• Court: South Carolina Supreme Court
• Parties: J. Philip MORGAN, Individually and Representing the Taxpayers of Berkeley County and of the State of South Carolina, Appellant, v. William A. WATTS, Auditor of Berkeley County, J. M. Williams, Treasurer ofBerkeley County, the South Carolina Tax Commission, Central Electric PowerCooperative, Inc., The South Carolina Public Service Authority, and Daniel R.McLeod asAttorney General of the State of South Carolina, Respondents.

Page 147

178 S.E.2d 147

255 S.C. 212

J. Philip MORGAN, Individually and Representing the Taxpayers of Berkeley County and of the State of South Carolina, Appellant, v. William A. WATTS, Auditor of Berkeley County, J. M Williams, Treasurer ofBerkeley County, the South Carolina Tax Commission, Central Electric PowerCooperative, Inc., The South Carolina Public Service Authority, and Daniel R.McLeod asAttorney General of the State of South Carolina, Respondents.

No. 19136.

Supreme Court of South Carolina.

Dec. 11, 1970.

William L. Shipley, Moncks Corner, for appellant.

W. D. Simpson and Dennis, Dennis & Bishop, Moncks Corner, Theodore B. Guerard, of Sinkler, Gibbs, Simons & Guerard, Charleston, Roberts, Jennings & Thomas, Asst. Attys. Gen., Joe L. Allen, Jr., and G. Lewis Argoe, Jr., Columbia, for respondents.

BRAILSFORD, Justice.

The exemption from ad valorem taxes formerly enjoyed by privately owned electric cooperatives in this State was removed by Act No. 432 of 1969 (56 Stat. 740). However, Section 18 of the Act provides that 'all property leased to and operated by the South Carolina Public Service Authority for the generation or transmission of electric power shall, for all tax purposes, be considered the property of the Authority.' Property of the Authority is exempt from such taxes by Section 59--8, Code of 1962, and the apparent intent of the legislature in adopting Section 18 was to insure that this exemption should extend to extensive electrical facilities in the possession of and operated by the Authority under four contracts with Central Electric Power Cooperative, Inc.

This property consists of electrical transmission or generation systems, which were constructed by Central over a period of some eighteen years, with funds borrowed from the United States Government through the Rural Electrification Administration, at a total cost of.$47,579,000.00. In effect, Central was merely the eligible conduit through which these funds were made available for the expansion of the Authority's electrical system at favorable interest rates. In each instance, as stated in the order of the circuit court, 'the rental payments to be made by the Authority are equal to the amount of principal and interest becoming due on the applicable loan and, in each instance, the Authority may acquire title to the leased property upon the payment of the debt except in the case of the A-B System, which under the terms of that agreement automatically becomes the Authority's property when the indebtedness is paid. In the meantime, the Authority operates and maintains the leased property exclusively as a part of its electric power generation and transmission system. In fact, it was conceded at the hearing that it would be extremely difficult, if not impossible, to separate the leased properties from the rest of the Authority's system. * * *'

The plaintiff brought this taxpayer's action to challenge the constitutionality of Section 18 of the Act and the legality of the tax exemptions claimed thereunder. The circuit court resolved all issues in favor of the Authority and Central, and plaintiff has appealed. He charges that Section 18 of the Act is unconstitutional, basically, because it undertakes to exempt privately owned property from taxation.

This constitutional challenge is without merit under the fundamental principle that the power of taxation rests in the legislature, subject only to constitutionally imposed limitations. Plaintiff invokes Article X, Section 1 of the South Carolina Constitution, which requires 'a uniform and equal rate of assessment and taxation, * * * of all property * * *.' But this mandate expressly excepts 'such property as may be exempted by law for municipal, * * * purposes * * *.' The words 'municipal purposes' in this section of the Constitution are used in the broad sense of a public or governmental purpose, as distinguished from a private purpose. Ellerbe v. David, 193 S.C. 332, 8 S.E.2d 518 (1940). We held in Clarke v. South Carolina Public Service Authority, 177 S.C. 427, 181 S.E. 481 (1935), that the generation and transmission of electric power by the Authority is a public and governmental function for the benefit of the people of South Carolina. Since the property in question is an integral part of the system through which the Authority performs this public function, its exemption from taxation falls within the 'municipal purposes' exception to the equality mandate relied upon by plaintiff. Cf. Duke Power Co. v. Bell, 156 S.C. 299, 152 S.E. 865 (1930); Byrd v. Blue Ridge Rural Electrical Cooperative, 215 F.2d 542 (4th Cir. 1954). Nor does the exemption of this property, as authorized by Article X, Section 1, conflict with Section 4 or 5 of the same article, as plaintiff contends. The self-executing provisions of Section 4 create certain exemptions, which admittedly do not include Central's property, but this section may not be construed as a limitation on the authority of the legislature to grant others. Chester County v. White, 70 S.C. 433, 50 S.E. 28 (1905). Section 5, which requires that all property within the limits of municipal corporations shall be taxed for corporate purposes, expressly excepts from this requirement property which the Constitution permits...