Murray v. Charleston

ERROR to the Supreme Court of the State of South Carolina.

In 1783, the State of South Carolina incorporated the city of Charleston. Among other powers conferred upon it was that of making 'such assessments on the inhabitants of Charleston, or those who hold taxable property within the same, for the safety, convenience, benefit, and advantage of the city, as shall appear to them expedient.'

Under this power, there was an ordinance of the city, ratified March 22, 1870, 'to raise supplies for the fiscal year ending Dec. 31, 1870.' Sect. 1 authorizes and requires the city appraiser to assess a tax of two cents upon the dollar of the value of all real and personal property in the city, for the purpose of meeting the expenses of the city government for the current fiscal year.

Sect. 3 directs that the tax assessed on city stock shall be retained by the city treasurer out of the interest thereon, when the same is due and payable.

A similar ordinance was ratified March 1, 1871, for the fiscal year ending Dec. 31, 1871.

The tax was accordingly assessed. That upon the city stock was retained out of the interest due on it to the holders thereof.

Murray, as a holder, brought suit, Nov. 17, 1871, in the Court of Common Pleas for the county of Charleston against the city council of Charleston, to recover the amount of the tax which the treasurer had retained out of the interest due to him, alleging that the said tax was illegal.

The answer of the council, among other matters, sets forth that the stock was duly assessed, and that it was not expressly exempted from taxation by the ordinance under which it was issued.

The court tried the case without a jury, and found the following facts: 1. That the plaintiff has been, since January, 1870, the holder and owner of $35,262.33 of six per cent stock issued by defendant, the interest thereon payable quarterly. 2. That the plaintiff is not a resident of Charleston, but a resident of Bonn, Germany. 3. That the defendant owed the plaintiff for interest on his said stock the several sums set forth in the fourth paragraph of the complaint, on the several days therein named, and that it paid the same to him, less certain sums retained. 4. That the several sums so retained by the defendant, amounting in all to $440.75, were by the defendant kept as the amount of taxes due from the said plaintiff to the said city, being a tax at the rate of two per cent per annum upon the principal of said stock, said tax being imposed by virtue of the ordinance of the said city council of Charleston, ratified March 22, 1870, entitled 'An ordinance to raise supplies for the fiscal year ending Dec. 31, 1870,' and a similar ordinance, ratified March 1, 1871, to raise supplies for the fiscal year ending Dec. 31, 1871, and that said stock was not specifically exempted from taxation by the ordinance under which it was issued. 5. That the plaintiff, by his agent, protested against the deduction of said tax, and duly entered his protest on each receipt for interest on said stock.

The court announced as conclusions of law: 1. That the city council of Charleston, as a municipal corporation, has a right, under the constitution and laws of the State, to tax the property of the plaintiff invested in stock issued by it, said stock not being specifically exempted by law from taxation, nor being exempt from taxation by the ordinance under which it was issued. 2. That the city council of Charleston had a right to collect the tax imposed on the property of the plaintiff in said stock by retaining the amount of such tax out of payments made to the plaintiff on account of the interest due thereon, and the plaintiff cannot recover the same.

Judgment was accordingly rendered, whereupon Murray appealed to the Supreme Court, and in his notice of appeal set forth the following grounds: 1. That paintiff, being resident in a foreign country, is not liable to the tax levied and retained by the city council. 2. That the laws of the State do not authorize the city council to levy and retain a tax upon its own stock. 3. That the levying and retaining of said tax is a violation of good faith in the contract of loan, and impairs the obligation of said contract, and is, therefore, unconstitutional and void. The Supreme Court affirmed the judgment of the Court of Common Pleas, and held that the stock was taxable property within the city, and that the right of taxing it 'existed at the time of the contract, and so entered into it as to become one of its necessary elements and attributes. The obligation of the contract was not impaired by the imposition of the tax, because it was a property which attached to the contract.'

Murray then sued out this writ of error.

Mr. James Conner for the plaintiff in error.

1. This court has jurisdiction. The plaintiff in error, in seeking to reverse the judgment of the Court of Common Pleas, specifically assigned in his notice of appeal that the tax impaired the obligation of his contract with the city. The constitutionality, therefore, of the ordinances levying the tax, which were passed in the exercise of an alleged authority derived from the State, was thus directly drawn in question and necessarily involved; and neither court could have decided adversely to him without affirming their validity.

2. The stock in question, although it be registered and the certificates transferable only on the books of the city,-a provision for the greater security of the holder,-does not differ in its legal effect from an ordinary money-bond. It is a chose in action, attesting his right to demand a specific sum at stated intervals, and the city's correlative obligation to pay it. Having, in this instance, its situs at a foreign domicile, it is not subject to the taxing power of Charleston, which is confined to persons and property within the limits of the city. Railroad Company v. Jackson, 7 Wall. 262; Tappan v. Merchants' National Bank, 19 id. 490; State Tax on Foreign-Held Bonds, 15 id. 300; The City of Davenport v. The Mississippi & Missouri Railroad Co. et al., 12 Iowa, 539; Hunter v. Board of Supervisors, 33 id. 379; The State v. Ross, 3 Zab. (N. J.) 517; Collins v. Miller, 43 Ga. 336; Johnson v. City Council of Oregon City, 3 Oreg. 13.

3. The ordinances impose a tax upon a subsisting contract, and alter its terms by withholding part of the stipulated interest due thereon. They thus impair its obligation. The city cannot, by the exercise of its taxing power, find a justification in morals or in constitutional law for a breach of its contract. Weston and Others v. City Council of Charleston, 2 Pet. 449; 3 Hamilton, Works, 519; Jelison v. Lee et al., 3 Woodb. & M. 376.

Mr. Philip Phillips, Mr. R. B. Carpenter, and Mr. James B. Campbell, contra.

1. Murray did not, in the Common Pleas, put his right to recover upon the ground that the ordinances levying the tax, and directing that it be retained from the interest due upon his stock, were in violation of the Constitution of the United States, nor did he invoke the protection of that instrument. When the Supreme Court of a State is asked to reverse the judgment of a subordinate court, error in the record must be shown, and no question can be made on any new matter presented in the appellate court; and, to enable a party here to ask a reversal of a judgment of the Supreme Court, it is not sufficient to show that a Federal question was, by an assignment of error, raised for the first time in that court. Fisher's Lessee v. Cockerell, 5 Pet. 248.

2. The act of South Carolina granting the charter was in force prior to the adoption of the Federal Constitution, and neither it nor the ordinances passed pursuant to it are subject to the clause which forbids a State to pass a law impairing the obligation of contracts. No jurisdiction, therefore, exists here. Owings v. Speed et al., 5 Wheat. 420; League v. De Young, 11 How. 185. The failure of the State court to give full effect to a contract does not in itself furnish grounds for review. Knox v. Exchange Bank, 12 Wall. 379.

3. The stock was not exempt from taxation by an ordinance of the city or a law of the State. Neither the decision of the Supreme Court, holding that it was personal property within the city, and that the ordinances imposing the tax were passed in the execution of a power conferred by the charter and justified by its terms, nor the imputed injustice and oppression of the tax, furnish grounds for review here. Providence Bank v. Billings, 4 Pet. 514; Mills v. St. Clair County, 8 How. 569; Satterlee v. Mathewson, 2 Pet. 380; West River Bridge Company v. Dix, 6 How. 507; Veazie Bank v. Fenno, 8 Wall. 533. The taxing power of the several States, except where restrained by the Federal or the State Constitution, extends to every species of property which exists by their authority or is introduced by their permission. McCullogh v. The State of Maryland, 4 Wheat. 316; Weston and Others v. City Council of Charleston, 2 Pet. 449; New Orleans v. Clark, 95 U.S. 644; Lane County v. Oregon, 7 Wall. 71. Exemption from its exercise can never be claimed by mere implication, but only from clear and express declaration; and if such exemption be a mere gratuity, the act granting it may be modified or repealed in like manner as other legislation. Tucker v. Ferguson, 22 Wall. 527; West Wisconsin Railroad Co. v. Board of Supervisors of Trempealeau County, 93 U.S. 595. In this case, there is not even the slightest implication, nor presumption arising from the nature of the contract or otherwise, that the city renounced the right of taxing the stock.

4. Murray insists upon his non-residence. Tangible personal effects and real estate in Charleston are taxed there; and if sound reasons can be given for discriminating in favor of this property, they should be presented to the legislature, as they do not touch the case in its judicial aspects. If a citizen holds certificates of stock which may be taxed, his transfer of them to a non-resident does not create a new obligation, nor exclude the law from operating upon them. The same elements of consideration exist in each case, and the judgment must be the same. In Catlin v. Hull (21 Vt. 152), debts due to non-residents were taxed. The court said that the doctrine as to the situs of personal property did not conflict with the actual jurisdiction over it by the State where it is situated, or with the right to subject it, in common with other property, to share the burden of the government by taxation, and that this had been the settled practice of that State, not only in reference to tangible property, but to that which is incorporeal; and the late Chief Justice Tilghman held that personal property, if invisible (consisting of debts), has a locality in the place where the debtor resides. Story, Contr., sect. 383.