Graniteville Manufacturing Company v. Query/Opinion of the Court

The Graniteville Manufacturing Company, a corporation of South Carolina, brought this suit in the District Court of the United States to restrain the collection of certain stamp taxes imposed upon its promissory notes under Act No. 574, p. 1089, of the Acts of 1928 of that State. A motion for an interlocutory injunction was heard by three judges, as required by section 266 of the Judicial Code (U.S.C., tit. 28, § 380 (28 USCA § 380)). Holding that the plaintiff had no adequate remedy at law, the court granted an injunction with respect to notes made outside the state, but denied relief as to notes which were signed within the state. 44 F.(2d) 64.

There is no controversy as to the facts, which were stipulated and found by the court substantially as follows:

'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. * *  * 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 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 Angusta, 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..'

It is only as to the latter class of notes which were signed in South Carolina that the District Court upheld the tax. The tax as thus sustained is an excise tax, of a familiar sort, levied with respect to the creation of instruments within the state. So laid, the tax was not imposed upon property, or upon the transfer of property, situated beyond the jurisdiction of the state as was found to be the case in Union Refrigerator Transit Co. v. Kentucky, 199 U.S. 194, 26 S.C.t. 36, 50 L. Ed. 150, 4 Ann. Cas. 493; Frick v. Pennsylvania. 268 U.S. 473, 45 S.C.t. 603, 69 L. Ed. 1058, 42 A. L. R. 316; Farmers Loan & Trust Co. v. Minnesota, 280 U.S. 204, 50 S.C.t. 98, 74 L. Ed. 371, 65 A. L. R. 1000; Baldwin v. Missouri, 281 U.S. 586, 50 S.C.t. 436, 74 L. Ed. 1056; Beidler v. South Carolina Tax Commission, 282 U.S. 1, 51 S.C.t. 54, 75 L. Ed. -. It is simply a tax levied in relation to an act done within the tate in making an instrument. New York ex rel. Hatch v. Reardon, 204 U.S. 152, 27 S.C.t. 188, 51 L. Ed. 415, 9 Ann. Cas. 736; Brodnax v. Missouri, 219 U.S. 285, 31 S.C.t. 238, 55 L. Ed. 219. See, also, Nicol v. Ames, 173 U.S. 509, 519, 19 S.C.t. 522, 43 L. Ed. 786. We see no reason to doubt the validity of the tax as thus enforced.

Order affirmed.