State v. Liggett & Myers Tobacco Co.

• Decision Date: 01 December 1933
• Docket Number: 13726.
• Citation: 172 S.E. 857,171 S.C. 511
• Parties: STATE v. LIGGETT & MYERS TOBACCO CO.
• Court: South Carolina Supreme Court

172 S.E. 857

171 S.C. 511

STATE v. LIGGETT & MYERS TOBACCO CO.

No. 13726.

Supreme Court of South Carolina

December 1, 1933

Appeal from Common Pleas Circuit Court of Anderson County; G. B Greene, Judge.

Action by the State of South Carolina against the Liggett & Myers Tobacco Company. From a decree dismissing the complaint plaintiff appeals.

Reversed and plaintiff given judgment against defendant.

The decree directed to be reported is as follows:

Order.

This case was heard by me at my chambers in Anderson without a jury under the written consent by counsel of both of the parties.

This is a suit by the state of South Carolina against the defendant Liggett & Myers Tobacco Company, for a penalty under section 5 of the Act of the General Assembly of South Carolina approved March 24, 1922 (32 Stat. 1023, 1026).

Summing up the complaint briefly it alleged that chapter 47, vol. 3 Code of Laws for South Carolina 1922 (section 4028, et seq.), except in so far as its provisions might have been repealed or superseded by the Act of March 24, 1922, supra, are still in force and effect; that said act of 1922 provided that "each and every foreign corporation now doing business in the State of South Carolina, or that may hereafter apply for admission, shall, within sixty days, file with the Secretary of State a written stipulation or declaration" (section 1), setting forth the matters to be set forth in said document under the terms of the act; that section 2 of said act provides in addition that such corporations shall file in the office of the secretary of state copies of its charter, by-laws, etc., as provided by said act, and shall file annually thereafter with the secretary of state certain statements relative to its corporate organization; that the defendant is a tobacco manufacturing corporation chartered under the laws of New Jersey with a capital stock of several million dollars, and is extensively engaged in the manufacture and marketing of tobacco products and in the buying of tobacco for such purposes, and that for some time prior to the approval of the act of 1922 and since that date such corporation has been continuously doing business in South Carolina, and that it has property, agents, and representatives in this state in connection with the transaction of said business; that the said defendant has failed and continued to fail to comply with the provisions of the act of 1922 and with the requirements of chapter 47, vol. 3, Code of 1922, not superseded or repealed by said act, and is therefore liable to the penalties for such default described by section 5 of the act of 1922, to wit, penalty of $10 per day for each day of such default, for a period beginning sixty days after the approval of said act, to wit, March 24, 1922. The prayer for judgment is for the sum of $34,200, being the $10 per day penalty from and inclusive of the 25th day of May, 1922, to the date of suit.

The amended answer of the defendant admits the sovereignty of the state and the incorporation of the defendant, denies all of the remaining allegations except such as may be thereinafter admitted, and denies that it is doing business in the state in such a sense as to be subject to the provisions and penalties of the act referred to in the complaint.

By way of further answer the defendant alleges that the Act of March 24, 1922, supra, is entitled, "An Act to Provide a Schedule of Fees For The Admission of Foreign Corporations to do Business in The State," sets forth the requirements of said act as to the filing of papers by a foreign corporation and the payment of fees therefor, and alleges that the payment of domestication fees called for by Section 3 thereof was to precede or be coincident with the filing of any papers required to be filed. It further admits that it has not paid the filing fees for domestication under the terms of section 3 of said act, and alleges that the said act is unconstitutional, null, and void, in that the provisions thereof requiring payment by a foreign corporation of domestication fees in order to do business in the state of South Carolina, on the basis of its authorized capital, constitutes a regulation of and a burden on interstate commerce in violation of article 1, § 8, cl. 3, of the Constitution of the United States, and amounts to the taking of property without due process of law and in denial of the equal protection of the laws in violation of the Fourteenth Amendment of the Constitution of the United States, and of article 1, § 5, of the Constitution of South Carolina of 1895.

Other parts of said amended answer related to the filing of the annual statements required under section 2 of said act, and alleged the unconstitutionality of said section as requiring the payment of fees based on the authorized capital. At the hearing counsel for the state admitted that in the complaint in this action they were not making any claim for a penalty on account of the failure of the defendant to file the annual statements, as the corporation could not be required to file annual statements until it had become domesticated. Such parts of the answer as attack the statute in reference to the filing of annual statements are, therefore, immaterial.

The amended answer further sets up the claim that, as the suit is for a penalty by the state of South Carolina and the cause of action arose and accrued more than two years prior to the commencement of the action, the same is barred by the two-year statute of limitations of force in South Carolina, and alleges that in any event the said penalties which accrued more than two years prior to the commencement of this action are barred by the said statute.

The allegations of paragraphs 8, 9, and 10 of the amended answer setting up certain facts in connection with the defendant's business in South Carolina and elsewhere are admitted to be true by the stipulation, which will be hereinafter referred to, and such allegations will be set forth in connection therewith.

A written stipulation between the parties admits certain facts to be true, to wit:

That the defendant is a corporation of New Jersey engaged in manufacturing and marketing tobacco products and buying tobaccos for such purposes, and is doing an extensive business consisting in the aggregate of foreign, domestic, interstate, and intrastate business.

That, while the defendant was under the impression that the acts done in furtherance of its business in South Carolina did not constitute doing business in said state within the terms of the statutes requiring foreign corporations to domesticate, such company is now willing to agree, in view of the decisions of the courts with reference to similar courses of practice by other corporations, that it was doing business at the time of the enactment of the act of 1922, and is now doing business in the state within the meaning of the terms of the statute. That said defendant has not at any time since March 24, 1922, tendered the requisite papers for filing to the secretary of state and is not domesticated under any law of this state at present.

That the allegations of paragraphs 8, 9, and 10 of the amended answer are admitted. These paragraphs allege that at the time of the passage of the aforesaid act in 1922 it had an authorized capital of $65,752,700, and an outstanding capital of $55,933,700, and at the time of the commencement of this action the authorized capital of said defendant company was $134,139,800, and the outstanding issued capital was $100,937,075, and at all times between the year 1922 and the present time the authorized capital of said corporation has been in excess of the amount of the outstanding capital thereof.

That the defendant is a manufacturer of cigarettes, smoking and chewing tobacco and other forms in which tobacco is used, and the sale of such products in interstate and foreign commerce, and that said company has no manufacturing plant in South Carolina, and all of its products sold in said state are shipped therein from other states.

That the business of the defendant company in the state of South Carolina is only a very small fractional part in amount of the interstate business done in said state; and the total business done in said state is a very small percentage of the total business thereof. That in the year 1922 the property owned by this defendant in South Carolina was valued at $33,099, whereas the total value of all of its property was $138,770,849. In 1930 the value of the property of said company in South Carolina was $33,099, whereas the value of all of its property was $174,793,201. The leaf tobacco purchased in South Carolina in 1922 was of the value of $437,348, whereas the total leaf tobacco purchased in that year by said defendant was of the value of $35,040,764. In 1930 the leaf tobacco purchased in South Carolina amounted to $522,341, and the total purchases of leaf tobacco amounted to $18,947,581. In 1922 the intrastate business done in said state by the defendant company was $102,000, the interstate business done in said state was $2,622,000, and the total business of the company in 1922 was $168,000,000. In 1930 the intrastate business in South Carolina amounted to $75,000, the interstate business in said state amounted to $1,949,000, and the total business of said company amounted to $250,000,000.

There being no dispute as to the facts involved, on the legal questions raised, I have concluded as follows:

1. The statement of the defendant in the stipulation to the effect that it was not aware that it was doing business in the state within the terms of the statute is no defense.

2. Section 333, Code Civil Proc. 1922, states the period of limitation as "within two years: *** 2. An action upon a Statute, for a...