Case ID: sc_78/html/0445-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Chief Justice Pope. Messrs. Justice Jones and Woods", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

6702
    AETNA FIRE INS. CO. v. JONES, COMPTROLLER.
    Constitutional Law — Police Power — Taxation.-—The act, 25 stat., 619, providing for collecting from the fire insurance companies doing business in the incorporated cities and towns of this State a tax of two dollars on every one hundred dollars in premiums collected by them annually in such municipality and paying the fund to certain firemen’s associations, for benefits, gratuities and pensions, is unconstitutional, in that it is not a uniform tax, it is not levied for a public purpose, and it violates art. Ill, sec. 32 of the Constitution prohibiting granting pensions except for military, and naval service. Nor can it be sustained on the ground that the Legislature has the authority to pass it under the police power of the State.
    
      Petition by ¿Etna Fire Insurance Co.; Hamburg-Bremen Fire Ins. Co.; Home Ins. Co.; Hartford Fire Ins. Co.; Royal Fire Ins. Co.; North Carolina Home Ins. Co.; Williamsburg City Fire Ins. Co.; Globe Rutgers Ins. Co.; Milwaukee Mechanics Ins. Co.; Providenoe-Washington Ins. Co. and Germania Ins. Co. for injunction against A. W. Jones as Comptroller General.
    
      Messrs. King, Spalding & Little, Smith, Lee & Frost, and Alex. C. King, for petitioners,
    cite: One or more may join in a petition of this kind for beneñt of all: 4 S. C., 513; 13 S. C., 310; 54 S. C,, 448; 76 S. C., 162. This action is properly brought against this defendant: 20 L. R. A., 829. Has a court of equity juridictioh: 1 Pom. Eq. Jur., 277; Code 1902, 412, 413, 414; 4 S. C., 520; 11 S. C., 311; 23 S. C., 70; 35 S. C., 213. The act relates to more than one subject not expressed in its title: Art. Ill, sec. 17, Con.; 20 E. R. A., 827; 18 S. C., 466; 132 U. S., 464; 104 Ga., 544; 99 Ga., 54; 16 S. C., 47; 14 Col., 401; 26 La. An., 142, 699; 64 Mich., 657; 89 Mich., 295; 85 Pa., 191. Power to tax cannot be delegated: Art. Ill, sec. 1; Art. I, secs. 5, 13, Con. of 1895; Art. IV, Con. of U. S.; 30 S. C., 15. State cannot levy tax for municipal purposes: Art. VIII, sec. 6; Art. X, sec. 5, Con. of 1895; 15 Pac. R., 380; 50 N. W. R., 771; 34 S. G., 244; 71 N. W. R., 997. This tax is not warranted by constitution: Art. X of Con1. 1895; Code 1902, 325 to 331; 88 Am. Dec. 715; 64 N. Y., 99; 20 Wall, 663; 106 U. S., 500; 39 Pa. St, 82; 19 Fev. R., 872; 23 S. C., 62. Tax not uniform: 50 N. W. R., 771; 12 La. An., 802; 39 Pa. St, 73. Act is unconstitutional because it provides for pensions: Art. XIII, sec. 5; art. Ill, sec. 32; art. I, sec. 29, Con. 1895; 2 McC., 304; 75 S. C., 62; 56 L. R. A., 572; 63 L. R. A., 179; 66 S. C., 45; 45 S. W. R., 1099. This act is not a condition upon winch foreign corporations may do biisiness in this State: 20 L. R. A., 832; 86 Am. Dec., 236; 27 Sup. Ct. R., 285; 199 U. S., 401; 114 U. S., 270; 180 U. S., 452. Is the act contrary to public policy? 74 Am. Dec., 119. The whole act is unconstitutional: 114 U. S., 304; 100 U. S., 99; 71 N. W. R., 994. Collection of tax under unconstitutional act may be enjoined: 59 Ga., 807; 97 U. S., 531; 16 Ga., 102.
    
      Attorney-General J. Fraser Lyon and Messrs. Von Kolnits & Waring and Mitchell & Smith, contra,
    cite: No federal question is here involved: 177 U. S., 28; 202 U. S., 246. Is act too broad for title: 21 S. C., 476; 11 S. C., 309; 23 S. C., 427; 36 S. C., 135; 58 S. C., 415; 71 S. C., 487; 74 S. C., 449. The act is not a delegation of legislative authority: 92 N. Y., 311; 140 111., 653. The act is a police provision: 23 So., 843; 93 N. Y., 313; 51 N. Y., 949.
    November 6, 1907.
   The opinion of this Court was delivered by

Mr. Chief Justice Pope.

This is a petition to this Court in its original juridiction. whereby the plaintiff insurance companies, for themselves and others in like situation, seek to have the comptroller-g'eneral enjoined from proceeding to collect certain taxes provided for by an Act of the General Assembly approved May 9, 1906, 25 Stat., 620, on the ground that the said act is unconstitutional, null, and void. Counsel for petitioners discuss at length the preliminary question as to the jurisdiction of this Court to hear the cause, but an identical question having been passed upon in the recent case of Ware Shoals Mfg. Co. v. Jones, Comptroller General, ante, 211, we proceed at once to the merits of the case.

The title of the act is : “An act requiring the payment of certain premiums to the fire departments of incorporated cities and towns by the fire insurance companies doing business in the State, for the purpose of creating a fund for the benefit of the members of the fire departments of such cities and towns, and providing for the collection and distribution of "the same.”

The act is as follows: Section 1. “Be it enacted by the General Assembly of the State of South Carolina: Every fire insurance company, corporation or association doing business in any incorporated city or town of this State, having or that hereafter may have a regularly organized fire department under the control of the mayor and council, or intendant and council of said city or town, and having in serviceable condition for fire duty fire apparatus and necessary equipments belonging thereto to the value of ($1,000) one thousand 'dollars, and upwards, shall return to the Comptroller General a just and true account verified by oath that the same is a true account of all premiums received from fire insurance business done in such incorporated cities or towns during the year ending December the 31st, or such portion thereof as they may have transacted such business in such cities and towns. Such returns must be made by said companies, corporations or associations within sixty days after the 31st day of December of each year.”

Section 2 requires such companies to pay within the said sixty days to the State Treasurer the sum' of two dollars on every one hundred dollars premiums collected on fire or lightning' insurance business done in said cities and towns.

Sections 3 and 4 require said insurance companies to- keep accurate books of account of all business -done in said cities and towns and provide a penalty for failure so to do.

Section 5 enacts that in case of failure to pay said tax or any penalty imposed, the Comptroller General shall have power to revoke any license previously issued to said companies.

Section/ 6. “The State Treasurer shall pay over the money collected from the insurance companies, associations or corporations doing business within the cities or towns having or that may hereafter have a regularly organized fire department as aforesaid in section 1 of this act, to- the treasurer of the firemen’s Relief Association to be composed of the members of the fire departments of such cities or towns, and to be .incorporated under the laws of this State; Provided, that all money so collected from the insurance companies, corporations or associations doing business within the cities or towns having or that may hereafter have a paid department, being such department in which the members are paid for full time or part of their time employed as firemen, and on duty at all times to. respond to all duties required of them, and otherwise in accordance, with the provisions of section 1 of this act, shall be paid by ihe State Treasurer to the treasurer of such city, and all the money so received shall be set apart and used by such cities or towns solely and entirely for the objects and purposes of this act by the Firemen’s Relief Association or Board of Trustees of Firemen’s Pension funds of such cities or towns under such provisions as shall 'be made by the mayor and council or board of trustees thereof.

Section 7. “All money collected and received under the provisions of this act shall be held in trust and used as a fund for the relief of any member of the fire department of such city or town who may be injured or disabled, and for the relief of, or the payment of gratuities to the widow or those dependent upon any member of such fire department who may be killed; for the payment of necessary funeral expenses of any member of such fire department, and for the purchase of accident insurance upon the members of such fire department; Provided, further, that the boards of trastees of such cities having- pension funds may also use said money for pensions to* superannuated and disabled firemen: Provided, that the fire department of such city or town should also be a member of the State Firemen’s Association of this State.”

The act is attacked on numerous grounds., but we think the pivotal question is, has the General Assembly power to enact such legislation. In other words, is the constitution violated in that the tax here under consideration is not urn-form’ and for no public purpose. That the imposition is an attempted exercise of the taxing power conferred by the constitution, the respondent practically admits in that it is sought to sustain the exaction on the ground that it is for a public purpose. “A tax,” according to Webster’s Dictionary, “is a rate or a sum of money assessed on the person or property of a citizen by the government for the use of the nation or state.” Cooley in his Constitutional Limitations, sec. 479, says: “Taxes are burdens or charges imposed by the legislature upon persons or property to raise money for public purposes.” Applying either of these rules to the legislation here in question, if it be conceded that the aid of firemen is a public purpose, it clearly falls under the head of taxation, for all of the requirements are fulfilled, namely, that it is an imposition on persons or property by the government for a public purpose. In the case of Henderson v. Insurance C. (Ind.), 20 L. R. A., 827, where a question almost identical was under consideration, it is said that the decided weight of authority holds that such impositions are attempts at taxation, and the cases of San Francisco v. Ins. Co., 74 Cal., 113; State v. Wheeler, 33 Neb., 563; Philadelphia Association for Relief of Disabled Firemen v. Wood, 39 Pa. St., 73; State v. Merchants Ins. Co., 12 La. An., 802, are quoted as sustaining that view.

The respondent here contends, however, that the imposition is not a tax, but is one of the conditions upon which foreign insurance companies are permitted to do business in this State. Such a contention, we think, cannot be sustained. Tn the first place, the act is general, applying both to domestic and foreign corporations. In the second place, the act itself does not purport to be conditional. It applies to “every fire insurance company, corporation or association doing business ini incorporated cities or towns in this State.” The participle “doing” is important here as throwing light on the intention of the Degislature. The word implies that the corporations are already in existence and are carrying on business. The license has already issued. True; the act does provide that under certain circumstances, the certificate shall be revoked, but we regard this as merely a means for securing the collection of the imposition and not as a con-

dition subsequent. That the Legislature might have imposed1 such a condition upon foreign corporations, as well as domestic corporations, it is not our duty here to decide; suffice it to say that no such condition was imposed.

Again, the respondent contends that the present enactment is a lawful exercise of the police power, inherent in the State as a sovereignty, the exercise looking to the protection of the property of all the citizens of the State. Perhaps no subject is more fraught with difficulty than is the proper* limiting and defining of the police power of a sovereign State. Generally courts refuse to attempt such definition, leaving each case to be decided as it arises. In our State, however, in the comparatively recent case of Stehmeyer v. City Council, 53 S. C., 259, 282, where this power is discussed at length and numerous authorities are reviewed, the court with deference lays down the following: “The police power is that attribute of sovereignty in a State, by which it clothes the Legislature with power to. regulate persons — natural and artificial — and property, in accordance with the provisions of the State Constitution, in all matters relating to the public health, the public morals, and the public safety.” Again, in the case of Beer Company v. Mass., 97 U. S., 25-33, it is said: “Whatever difference of opinion may exist as to the extent and boundaries of the police power, and however difficult it may be to render a satisfactory definition of it, there seems to be no doubt that it does extend to the protection, health and property of the citizens, and to the preservation of good order and the public morals.”

In Volume 22, page 938, of the A. & E. Ency. of Law the following proposition sustained by much authority is laid down: “In order that a statute or ordinance may be sustained as an exercise of the police power, the courts must be able to see (1) that the enactment has for its object the prevention of some offense or manifest evil, or the preservation of the public health, safety, morals, or general welfare; and (2) that there is some clear, real substantial connection between the assumed purpose of the enactment and the actual provisions thereof, and that the latter do in some plain, appreciable, and appropriate manner tend towards the accomplishment of the object for which the power is exercised. The police power cannot be used as a cloak for the invasion of personal rights or private property, neither can it be exercised for private purposes, or for the exclusive benefit of particular individuals or classes.” In other words, the exercise must have in view the good of the citizens of the sovereignty as a whole.

This brings us then to the question as to whether or not the legislation here under consideration has in view a public purpose. The money secured from the imposition on the insurance companies is to “be held in trust and used as a fund for the relief of any member of the fire department of such city or town who may be injured or disabled, and for the relief of, or the payment of gratuities,'to the widow or those dependent upon any member of such fire department who may be killed, for the payment of necessary funeral expenses of any member of such fire department and for the purchase of accident insurance upon the members of such fire departments” and ini certain cases to be used for the payment of pensions. New York and Alabama and perhaps one or two other States, proceeding upon the theory that the prevention of conflagrations is a public duty which prior to the establishment of fire departments devolved upon the community, that in discharging these duties the firemen sustain such relation to the public as to become, in the true sense, public servants, have sustained the position that such enactments are for public purposes. Trustees of Exempt Firemen’s Benevolent Fund v. Roome, 93 N. Y., 313; Phoenix Assurance Company of London v. Fire Department of Montgomery, 23 So., 843. In each of these cases, however, the legislation was sustained on the ground that it provided conditions upon which foreign insurance companies would be permitted to carry on business in the State. The above reasoning as to the publicity of the purpose of such enactments was considered and expressly repudiated by the Indiana Court in the case of Henderson v. Ins. Co., supra. A like view is maintained in Philadelphia Association v. Wood, supra, where the Court uses this language, at page 81: “Of course there was a good motive for this. The relief of the disabled firemen is a purpose worthy of society. And firemen contribute much to save insurance companies from losses. And hence it is inferred that insurance companies ought to contribute to the support of those who have been disabled in working for their benefit. But the same argument might be quite as effectually used as a reason for imposing a burden in favor of this society, upon those who obtain insurance, and much more upon those who do not insure at all. Therefore, since the chief characteristic of justice is its equality, the justice of this provision is very far from being apparent. An untrained and unthoughtful benevolence is very apt to be unjust to those interests which do not attract its special attention.” Likewise in Lousiana v. Merchants Ins. Co., supra, the Court says, at page 808: “But in the case before us there is no property improved or assessed; all is conjectural and arbitrary; one class of corporations is taxed an invariable sum for the benefit of another class; there is no possibility of ascertaining whether the tax is a quid pro quo; the fire companies are not compelled by the law to do anything for the insurance companies; a bounty is secured to the fire department by confiscating the money of the defendants, without providing that any service shall be rendered to the defendants by the fire departments; and even if this could, for a moment, be regarded as an assessment for benefits conferred, its inequality N glaring; every owner of buildings and other combustible property in New Orleans, who is either wholly or in part his own underwriter, is presumed to be benefited by the fire department in the same way as the insurance companies are. Why should the companies alone pay for this common benefit?”

The question is exceedingly close and difficult and the authorities, as we have seen, are conflicting, but we are inclined to give adherence to the latter view. Especially where the benefits go to a Firemen’s Benefit Association the public purpose seems to be lacking. Therefore, we hold that the act cannot, be sustained on the ground' that it is a police regulation, the important characteristic, publicity of purpose, being wanting.

It cannot be doubted that incidentally the public derives much benefit from fire departments of municipal corporations. Any organization that tends to enhance the value of property or the security of its possession, that gives work to unemployed persons in a given locality, or bridles powers hitherto unused, is certainly after a manner beneficial to the public at large. The wealth and welfare of a State lies in the well-being of its individual citizens. Thus, if a factory employing hundreds of hands and annually turning out thousands of dollars’ worth of products is built or a mine which yearly puts on the market hundreds of tons of mineral is opened up, the incidental benefit to the public is great, yet the highest legal tribunal of the country has held that public funds cannot be appropriated for such a purpose. Loan Association v. Topeka, 20 Wallace, 663. A fire department is a municipal institution. Its organization and control is purely a matter of municipal concern. True, interest in the establishment of such agencies would extend further than the municipal boundaries, but whether that interest could be manifested in action on the part of the General Assembly, otherwise than to encourage, seems a matter of doubt, the spirit of our law being that the Legislature may invest municipal governments with power, leaving the exercise of it to their discretion and corporate needs.

In the present case the Legislature has gone further than attempting to raise money for fire departments, municipal organizations, in that it seeks to raise a-fund by taxation for what seems to us merely a benevolent purpose. The money collected under the act of 1906 is not for the use of the fire department 'but is to be paid to certain firemen’s associations for benefits, gratuities and pensions. These associations are incorporated under the law and their sole purpose is to take charge of the funds collected and disburse them in the manner provided for by the act. As was said in the cases above quoted from, such a purpose is certainly a worthy one. And it no doubt would1 be a source of much comfort to the members of the various departments' and would have tendency to allure men to1 the vocation, but can this effect justify the seemingly arbitrary appropriation of the income of the insurance companies?

It is argued that the fire company by its work saves the insurance company from loss, and therefore the insurance company should compensate them. Let us see what this argument would lead to. It is well known that all insurance companies regulate their rate by the risk and expense relative to the insurance of a certain piece of property. Therefore the only reasonable view is that the insurance companies would in the end make the insured pay the gratuities to the associations. It is likewise well known that in all cities and towns there are numerous persons who do not cany insurance. Now it cannot be denied that such persons are even more benefited by the fire departments than those who carry insurance, for their entire risk is entrusted to the efficiency of such departments. Under the enactment being considered the class of citizens who carry insurance must pay the whole of the imposition while the latter get the benefits and have no burden to bear. On this reasoning the tax is not uniform.

That the fireman’s work is a meritorious one and that he deserves the highest regard of the community for the faithful performance of his duties are facts that cannot be controverted. Yet his work is not altogether gratuitous. More and more is it the present day tendency to establish paid departments. In these the members are paid for their services. In the volunteer departments, too, the members are usually compensated in one way or another. There is also the fact that where it is made a permanent vocation, as is usually the case in the paid departments, the individual assumes the responsibility of his own free will. That it is fraught with danger no one will deny, but it is not necessarily more dangerous than other callings in which numbers of men are employed daily. Can the engineer of a locomotive dashing across the country at the rate of from fifty to ninety miles an hour or the miner working hundreds of, feet below the surface of the earth be said to be more secure than the fireman who answers the alarm bell? Can one be said to render a greater service to humanity than the other? We think not. Nor can it be said that the fireman’s duty is more public than that of the engineer. There are numerous callings in a sense quasi public, but not of such nature as to justify the State in granting gratuities or pensions on the ground that the services are public.

Any speculation as to- this subject, however, is estopped by the constitutional inhibition, Art. Ill, sec. 32. which provides : “The General Assembly * * * shall not grant pensions except for military and naval service.” A pension has been defined to be an annuity from the government for services rendered in the past. That the pensions provided for by the act of 1906 fall within this rule is evident. The money is to be obtained by a governmental enactment and is to be paid to superannuated or disabled firemen who in time past had been in active service.

We do not deem it necessary to continue the discussion further. In our opinion the act is clearly unconstitutional.

Therefore it is the judgment of this Court, that the petition be granted and the prohibition issue as prayed for.

Messrs. Justice Jones and Woods

concur on the ground that the statute violates Art. Ill, sec. 32 of the Constitution.