Board of Financial Control v. County of Henderson
181 S.E. 636
N.C.
1935
Check Treatment
ClaRKSON, J.

The city of Asheville had certain collateral notes to protect its deposits in the Central Bank and Trust Company of Ashe-ville when the bank broke. To collect and settle the many matters in which Asheville and Buncombe County were interested in, from the failure of this and other banks, the General Assembly set up the Board ■of Financial Control of Buncombe County, the plaintiff in this action.

Under this set-up the plaintiff acquired an office building in Hender-sonville, Henderson County, N. 0., by conveyance, on 13 November, 1931, and since that time has rented it as an office building to various persons and corporations who operate private businesses. There are certain taxes assessed against said property by Henderson County for the years 1932, 1933, 1934, and 1935. The plaintiff has contracted to sell the land in controversy, but the purchaser requires a title in fee simple, free and clear of all taxes.

The question involved: Is the real property, owned by the Board of Financial Control of Buncombe County, created by chapter 253 of the Public-Local Laws of 1931, exempt from the payment of ad valorem tax? We think not.

In Bourne v. Board of Financial Control of Buncombe County, 207 N. C., 170, this Court held that the Board of Financial Control for Buncombe County is a corporation with certain enumerated powers and in effect that said board was the collecting or liquidating agent of the city of Asheville and county of Buncombe.

So the question in this controversy narrows itself down: Can the city of Asheville, a municipal corporation, acquire business property in another county, hold and rent it, without the payment of taxes in that *572 county? We think not. The property is not held or used for any governmental or necessary public purpose, but for purely business purposes.

If a municipal corporation can go into a rental business and escape taxation, it would have a special privilege not accorded to others wlm are in a like business. The Constitution of North Carolina, Art. Y, sec. 5, is as follows: “Property belonging to the State, or to municipal corporations, shall be exempt from taxation. • The General Assembly may exempt cemeteries and property held for educational, scientific,, literary, charitable, or religious purposes; also wearing apparel, arms for muster, household and kitchen furniture, the mechanical and agricultural implements of mechanics and farmers; libraries and scientific instruments, or any other personal property, to a value not exceeding, three hundred dollars.”

N. C. Code, 1931 (Michie), sec. 7880 (2), is as follows: “The following property shall be exempt from taxation under this article: (a) Property passing to or for the use of the State of North Carolina, or to or for the use of municipal corporations within the State or other political subdivisions thereof, for exclusively public purposes,” etc.

In 3 A. L. R., pp. 1441-2, is the following: “However, in at least one jurisdiction it has been held that although the Constitution or statute in express terms exempts state or municipally owned property from taxation, it will be implied that the intention was to exempt such property only when devoted to a public use. Atlantic & N. C. R. Co. v. Carteret County (1876), 75 N. C., 474, wherein it appeared that a tax was levied on the interest of the State in a railroad. Holding that the constitutional exemption did not apply to property of the State held for business purposes, the Court said: ‘Although this language is general, yet we do not think it was intended to embrace this case. The Capitol is not taxed, because the State would be paying out money just to receive it back again, less the expense of handling it. And if taxed for local purposes it would to that extent embarrass the State government. Nor is it any hardship upon the locality to have the property exempt, as the advantages from it are supposed to compensate for the exemption. And, as with the Capitol, so with other property. But where the State steps down from her sovereignty and embarks with individuals in business enterprises, the same considerations do not prevail. The State does not engage in such enterprises for the benefit of the State as a State, but for the benefit of individuals or communities — at least, this is generally so— and if the State gets no taxes she may get nothing. Suppose, for illustration, that the plaintiff should declare no- dividends and consume the whole earnings in current expenses. In that case the State, as a State, would never derive anything from the road except the taxes. At any rate, we do not think the exemption in the Constitution embraces the *573 interest of the State in business enterprises, but applies to the property of the State held for State purposes.’ ”

In the ease of Village of Watkins Glen v. Hager, County Treasurer, 252 N. Y., pp. 146-1, Supplement, it was held: “That property acquired by municipality is used to produce income without definite plan for use for public held not to constitute Folding for public use,’ exempting property from taxation (Tax Law, sec. 4, subd. 3).” At page 151 is the following: “It has been held in many cases in other jurisdictions that the exemption is limited to property actually devoted to a public use, or to some purpose or function of government. Town of Hamden v. City of New Haven, 91 Conn., 589, 101 A., 11, 3 A. L. R., 1435; Traverse City v. East Bay Township, 190 Mich., 327, 157 N. W., 85; Essex County v. Salem, 153 Mass., 141, 26 N. E., 431; Atlantic & N. C. R. Co. v. Board of Comrs. of Carteret County, 75 N. C., 474.” It will be noted that Atlantic & N. C. R. Co. case is cited.

In Collector of Taxes of Milton v. City of Boston, 180 N. E. Rep., 116 (Mass.), at p. 117, is the following (Bugg, C. J.) : “The exemption from taxation, in view of the principle on which it rests, cannot justly be extended to property owned by one municipality within the bounds of another, not actually devoted to a public use or held with the design within a reasonable time to devote it to such use. Essex County v. Salem, 153 Mass., 141, 26 N. E., 431; Burr v. Boston, 208 Mass., 537, 540, 95 N. E., 208, 34 L. R. A. (N. S.), 143.” Lewis v. N. Y. & N. E. R. Co., 26 N. E. Rep., 431.

It will be noted that the Atlantic & N. C. R. Co. case, supra, decides that under the Constitution of North Carolina, the property is taxable unless devoted to a public use. The North Carolina statute, section 7880 (2), supra, says “for exclusively public purposes.”

In Andrews v. Clay Co., 200 N. C., 280, the facts were that the town of Andrews was a municipal corporation. The facts, pp. 280-1: “The said land was owned and used by the plaintiff during said years as the site of a power plant for the generation of electricity, which was transmitted over wires from said power plant in Olay County to the town of Andrews in Cherokee County, and there used by said town of Andrews for lighting its streets and municipal buildings, and for distribution among the citizens of said town for domestic and commercial purposes. The revenue derived from the distribution and sale of electricity to-citizens of said town was used to pay the expenses of maintaining and operating its electric light and power plant. The town of Andrews purchased the land in Clay County and constructed its power plant thereon under the authority of an act of the General Assembly of this. State. It paid for said land and for the construction of said power plant out of funds raised by the issuance and sale of its municipal *574 bonds.” In tbe above case the assessment made by Clay County was held invalid.

The town of Andrews was operating a municipal electric plant — a public use or purpose. Fawcett v. Mt. Airy, 134 N. C., 125. A necessary expense — Const, of N. C., Art. VII, sec. 7; Webb v. Port Commission, 205 N. C., 663 (673); Mfg. Co. v. Aluminum Co., 207 N. C., 52 (59). The purpose for which the land was used in the Andrews case, supra, being for a public purpose or use, is distinguishable from the present case, where the use was private, for business purposes.

For the reasons given, the judgment below is

Reversed.