U.S. Fidelity & Guaranty Co. v. City of Newberry

• Decision Date: 11 January 1972
• Docket Number: No. 19350,19350
• Citation: 186 S.E.2d 239,257 S.C. 433
• Court: South Carolina Supreme Court
• Parties: UNITED STATES FIDELITY AND GUARANTY COMPANY, Respondent, v. CITY OF NEWBERRY and Thomas Buzhardt, as Finance Director of said City, Appellants.

Page 239

186 S.E.2d 239

257 S.C. 433

UNITED STATES FIDELITY AND GUARANTY COMPANY, Respondent, v. CITY OF NEWBERRY and Thomas Buzhardt, as Finance Director of

said City, Appellants.

No. 19350.

Supreme Court of South Carolina.

Jan. 11, 1972.

R. Aubrey Harley, of Harley & Verner, Newberry, and Frank K. Sloan, Columbia, for appellants.

Bernard Manning, Columbia, and Robert D. Schumpert, of Pope & Schumpert, Newberry, for respondent.

BUSSEY, Justice.

In this action plaintiff-respondent seeks to recover the sum of $4,568.02 paid under protest to the defendant-appellant City of Newberry as a business license tax for the year 1968. The case is a sequel to that of United States Fidelity & Guaranty Co. v. City of Newberry, 253 S.C. 197, 169 S.E.2d 599, wherein the taxpayer was denied recovery of its business license tax for the year 1967.

The key facts of the present case are either admitted in the pleadings or established by uncontroverted evidence. The plaintiff is engaged in writing fire and casualty insurance in the City of Newberry from which it had gross receipts in 1967 totaling $228,401.00, the sum of $213,335.00 being derived from casualty insurance premiums and the sum of $15,066.00 being derived from fire insurance premiums, and it was required to pay two per cent of the foregoing total for a license to do business in Newberry in 1968.

The plaintiff's business is, of course, a lawful and useful one and the defendant City of Newberry makes no attempt to regulate plaintiff's business, except to require a license for its conduct. Admittedly, the conduct of a fire and casualty insurance business presents no special, disproportionate or out of the ordinary expense to the defendant city, or strain upon its facilities, and enterprises engaged in such business do not require any special services of the city.

The ninth paragraph of the complaint, admitted by the answer, is as follows:

'9. No business enterprise of any type or class is required to pay a license tax at a rate greater than one (1) dollar for each one thousand ($1,000.00) dollars of its 1967 gross receipts (after the first $1,000.00 dollars of gross receipts), with three (3) exceptions, namely: The business license tax for each 'Life, Health, Accident, Hospital' insurance company is levied at the rate of three ($3.00) dollars for each 1,000 dollars of its 1967 gross receipts; that for each 'Crackers, cakes, Tobaccos, etc. (delivered without prior order)' enterprise is levied at the rate of three ($3.00) dollars for each 1,000 dollars of its 1967 gross receipts; and each fire and casualty insurance company, plaintiff's class, is taxed at the rate of two per cent, or twenty ($20.00) dollars for each 1,000 dollars of its 1967 gross receipts.'

From the foregoing it clearly appears that the license tax rate charged plaintiff and other property insurers in its class is nearly seven times as great as that charged the two next highest categories, and approximately twenty or more times as much as charged all other catogories or classifications.

The matter came before the lower court on plaintiff's motion for summary judgment, such being based on the pleadings, the 1968 ordinance, certain affidavits and depositions previously taken from three officials of the City of Newberry in office at the time of the adoption of the ordinance, to-wit: the Mayor, the City Manager, and the Chairman of City Council's Committee on License Ordinances. The record reflects no objection on the part of the defendants to any of the evidence offered, or to the court disposing of the matter on plaintiff's motion for summary judgment.

It is well established by prior decisions of this Court that within the purview of Article VIII, Section 6, of the South Carolina Constitution, and Code Sec. 47--271, governing municipalities of the size of Newberry, such municipality had the power to classify the various businesses and professions for the purpose of license taxes and to impose reasonable amounts upon the respective classes graduated, nevertheless, according to gross income. While the Constitution and the statute together require that the tax must be reasonable, 'The fact that one class may pay more proportionately than other classes does not of itself make the license fee unreasonable or arbitrary since this is largely within the discretion of City Council.' City of Columbia v. Putnam, 241 S.C. 195, 127 S.E.2d 631. As was pointed out in the opinion in the prior case between these parties, in the absence of positive evidence to the contrary, the license tax here imposed upon the plaintiff is presumed to be reasonable and not to be interfered with by the courts, unless its unreasonableness and oppressiveness are clearly apparent, the burden of proving invalidity being upon the plaintiff.

In the instant case the lower court concluded that the plaintiff had met the burden of proving the ordinance to be unreasonable and invalid as to it; that there was no rational basis for a classification whereby the plaintiff and other property insurers are taxed at a rate twenty or more times greater than that imposed on most other businesses, and that in imposing such, the City Council of Newberry had abused its discretion. While we are mindful of the proposition that an ordinance, such as the one here in question, is presumed to be both reasonable and otherwise valid, and not to be struck down unless 'palpably arbitrary, capricious or unreasonable', Colonial Life & Accident Ins. Co. v. South Carolina Tax Commission, 233 S.C. 129, 103 S.E.2d 908, we are, nevertheless, constrained to the view that the lower court had a sound factual basis for concluding that the plaintiff had, at least prima facie, met the burden of proving the tax palpably unreasonable.

It is conceded that the city had the right to classify for the purpose of license taxes and considerable discretion as to the rate to be imposed upon the respective classifications, but the cardinal issue here is whether the city had any rational basis for such a gross disparity and differentiation between the rate charged property insurers, such as the plaintiff, and those charged to the various other business and professional licensees.

'Differences in organization, management, and type of business transacted are sometimes sufficient to justify the classification, but acts or ordinances which arbitrarily impose different rates of taxation or different terms and conditions on different occupations or privileges, without any reasonable basis for such distinctions are void as a denial of equal protection of the laws.' 16A C.J.S. Constitutional Law § 529, p. 423.

The foregoing principles have been consistently recognized and applied in decisions of this Court. In Laurens v. Anderson, 75 S.C. 62, 55 S.E. 136, this Court was called upon to rule on an ordinance exempting Confederate veterans from paying city business license taxes. The city had arrested Anderson for selling without a license and the defendant claimed the exemption. This Court held that the exemption was unconstitutional because it attempted to create a classification for special treatment for which there was no...