Burwell v. South Carolina Tax Commission

The opinion of the Court was delivered by

Mr. Justice Marion.

This is a controversy without action, submitted upon an agreed statement of facts which will be set out in the report of the case.

For the purpose of assessing and collecting the State income tax, the tax commission disallowed the’ returns of the petitioners, who are husband and wife, made upon the theory that they were partners in an automobile business during .the year 1923, and charged the entire net income from said business against the petitioner, Ernest Burwell, the husband. That ruling is rested upon two grounds, which will be considered in order: (1) That under the laws of South Carolina the petitioner, Faith C. Burwell,. a married woman, was without legal capacity to enter into a contract of partnership with her husband, Ernest Burwell; (2) that the parol promise of the petitioner, Ernest Burwell, in consideration of marriage, to give his future wife one-half of his property, was within the statute of frauds and void, and hence the postnuptial settlement or partnership contract in conformity thereto was voluntary as to creditors, and of no effect.

Upon the first ground assigned respondent’s ruling cannot be sustained. We are of the opinion that under the provisions of the present Constitution (Const. 1895, art. 17, § 9) a married woman has power to enter into a contract of partnership with her husband. In so far as the law of this jurisdiction prior to the Constitution of 1895 is pertinent to the determination of this question, that law is sufficiently disclosed and declared by two of our decisions, which will be briefly reviewed;

In the case of Gwynn v. Gwynn, 27 S. C., 525; 4 S. E., 229, decided in 1887, it was held by this Court that under the provisions of the Constitution of 1868 (article 14, § 8), and of Section 2037 of the General Statutes of 1882, a married woman had' no power to enter into a contract of partnership with her husband or other person. That conclusion was rested upon premises which, in the language, substantially, of thé reporter’s syllabus of that case, may be thus stated: (1) That the Constitution of 1868 (article 14, § 8) did not confer upon a married woman, either expressly or impliedly “any general power to contract”; (2) that “while a married woman had, under the Act of 1870, a general and unlimited power to contract, the amendment of 1882 (Gen. Stat. 2037) limited her power to contract at all except ‘as to her separate property’ ”; and (3) that “therefore, under this law, a married woman could not enter' into a contract of partnership with her husband or other person, for such a relation involves an obligation to contribute one’s time and services, which a married woman has no right to control, and a personal liability for debts which she has no power to make, as such debts would arise from partnership contracts which she has no power to 'make, they not being contracts as to her separate property.”

The statute law construed in Gwynn v. Gwynn remained in force until the General Assembly in 1891 passed an act '(20 Stat. 1121) which conferred on a married woman the power “to bind herself by contract in the same manner arid to the same extent as though she were unmarried,” subject 'to the following proviso:

‘‘Provided, that nothing herein [contained] shall enable such, married woman to become an accommodation endorser, guarantor, or surety, nor shall she be liable on any promise to pay the debt or answer for the default or liability of any other person.”

In Vannerson v. Cheatham, 41 S. C., 327; 19 S. E., 614, decided in 1893, this Court construed the act of 1891, and held that by force of the proviso above set out a married woman was denied the capacity to assume one of the liabilities necessarily incident to the partnership relation, and hence that she had no power to form or enter into such a relation. That under the law as thus interpreted and declared in the foregoing cases a married woman had no power to enter into a partnership with her husband or other person prior to the adoption of the Constitution of 1895 is not open to question.

But that the position taken in Gwynn v. Gwynn, supra, and in Vannerson v. Cheatham, supra, however soundly grounded in the statutory provisions there considered, -is now, and has been since the adoption of the Constitution of 1895, wholly untenable would seem to be sufficiently apparent from a reading of the provisions of Section 9, art. 17, of that Constitution, which Section is as follows:

“The real and personal property of a woman held at the time of her marriage, or that which she may thereafter acquire, either by gift, grant, inheritance, devise or otherwise, shall be her separate property, and she shall have all the rights incident to the same to which an unmarried woman or a man is entitled. ' She shall have the power to contract and be contracted with in the same manner as if she were unmarried.”

That the foregoing language of the makers of our organic law very clearly evinces an intent wholly to emancipate a married woman from her connom-law disabilities as to property rights and to confer on such married woman the power to contract generally, free from restriction of any kind, we think is too clear to warrant argumentative discussion. In the case of Green v. Cannady, 77 S. C., 193; 57 S. E., 832, the Court, in discussing the question whether a deed executed in 1882 created an estate by the entirety or a tenancy in common, used this language:

“Through many controversies arising under the act of 1882, the Court held that a married woman’s right of contract was by that act limited to contracts as to her separate property, but the sweeping provisions of the Constitution of 1895 have unfettered woman as to her right to contract, thus showing the policy of this State in the emancipation of married women from the ancient rules of the common law touching their property rights.”

That the effect of these “sweeping provisions of the Constitution of 1895” was to abrogate any statutory restriction upon the power of a married woman to contract would seem to have been accorded due recognition by the General Assembly of this State. See the pertinent statute law as now embodied in sections 5537-5540, Vol. 3, Code 1922. Thus the proviso in the act of 1891 (20 Stat. 1121), prohibiting a married woman from becoming liable on any promise to pay the debt, or answer for the default or liability of any other person, etc., which was made the basis of the decision in Vannerson v. Cheatham, supra, was not carried into the Civil .Code of 1902 (Section 2668), and has not since appeared in any codification of the statute law of the State (Civ. Code 1912, § 3761; Volume 3, Code 1922, § 5540)!

If the effect of this provision of the Constitution of 1895 was to free a married woman from all the common-law disabilities of coverture as to' property rights, and to confer an unlimited power to contract, as we think it was, we know of no valid reason which would justify the Courts in withholding the power or in denying the right of a married woman to enter into a contract of partnership with her husband. Any reason for denying such right or capacity would apparently have to be grounded in the proposition that by implication “a disability as to business transactions and contracts, springing from the common-law notion of the unity of the husband and wife, still obtains.” But when we consider the changes wrought in the common-law status of a married woman by the present Constitution and statutes — “that they withdraw from the husband the ownership, control, disposition and enjoyment of the wife’s estate; that the same are secured to her as though she were a feme sole; that the right to her personal services and the fruits of her labor are denied to him and given to her; that her will is freed from the dominion of his as to all property rights; that she may without his consent enter into the closest business relations with third persons”— there would seem to be no room for the legitimate indulgence of that implication. As was said by the Mississippi Court in Toof v. Brewer, 96 Miss., 19; 3 So., 571 (from which case the expressions quoted in the foregoing sentence are taken) :

“She [the wife] is one, and the husband is one. Each has the capacity to contract. Both may desire to contract. Partnership is a lawful subject matter of contract, and there is nothing in the law which, either expressly or by necessary implication, forbids them from contracting.”

We have been cited to no decisions of this Court, and have found none, which in the light of the .provisions of our present Constitution furnishes or suggests any sound reason for a contrary view. See, in that connection, the following decisions, considering in one aspect or another the rights of married women: Witsell v. Charleston, 7 S. C., 88. Ross v. Linder, 12 S. C., 592. Pelzer, Rodgers & Co. v. Campbell & Co., 15 S. C., 581; 40 Am. Rep., 705. Clinkscales v. Hall, 15 S. C., 602. Witte v. Wolfe, 16 S. C., 256. Witte v. Clarke, 17 S. C., 313. McLure v Lancaster, 24 S. C., 273; 58 Am. Rep., 259. Habenicht v. Rawls, 24 S. C., 461; 58 Am. Rep., 268. Aultman & Taylor Co. v. Rush, 26 S. C., 517; 2 S. E., 402. Brown v. Thompson, 27 S. C., 500; 4 S. E., 345. Brown Bros. v. Prevost, 28 S. C., 123; 5 S. E., 274. Aultman & Taylor v. Gilbert, 28 S. C., 303; 5 S. E., 806. Booker v. Wingo, 29 S. C., 116; 7 S. E., 49. Livingston v. Shingler, 30 S. C., 159; 8 S. E., 842. Taylor v. Barker, 30 S. C., 238; 9 S. E., 115. Hagan v. Hoover, 33 S. C., 219, 11 S. E., 725. Weisiger v. Wood, 36 S. C., 424, 15 S. E., 597. Connor v. Edwards, 36 S. C., 563; 15 S. E., 706. Christensen v. Wells, 52 S. C., 497; 30 S. E., 611. McGee v. Cunningham, 69 S. C., 470; 48 S. E., 473. Green v. Canady, 77 S. C., 193; 57 S. E., 832.

While in a number of other jurisdictions, under enabling laws which for various reasons have been construed not to remove all the disabilities of coverture, and not to confer an unlimited power to contract, the right of a married woman to enter into a contract of partnership with her husband has been denied, the views herein announced seem to be in accord with the conclusion reached by all the Courts of other States which have had occasion to determine the question under enabling laws which wholly remove the disabilities of coverture, and confer on married women an unlimited power to contract. Thus the right of a married woman to enter into a partnership agreement with her husband has been upheld in Alabama (Marcrum v. Smith, 206 Ala., 466; 91 So., 259; 20 A. L. R., 1303, and cases therein cited), in Georgia (Burney v. Savannah Grocery Co., 98 Ga., 711; 25 S. E., 915; 58 Am. St. Rep., 342), in Illinois (Heyman v. Heyman, 210 Ill., 524; 71 N. E., 591), in Indiana (Anderson v. Citizens’ Nat. Bank, 38 Ind. App., 190; 76 N. E., 811), in Iowa (Hoaglin v. Henderson, 119 Iowa, 720; 94 N. W., 247; 61 L. R. A., 756; 97 Am. St. Rep., 335), in Kentucky (Louisville & N. R. Co. v. Alexander, 27 S. W., 981), in Mississippi (Jones v. Jones, 99 Miss., 600; 55 So., 361), in Missouri (Dunifer v. Jecko, 87 Mo., 282), in New York (Suau v. Caffe, 122 N. Y., 308; 25 N. E., 488; 9 L. R. A., 593); and in Vermont (Lane v. Bishop, 65 Vt., 575; 27 A., 499). See note, collating and reviewing authorities, 20 A. L. R., 1304-1317.

The tax commission’s second position — that the partnership agreement was rendered ineffective by reason of the invalidity of the antenuptial contract under the statute of frauds- — is, we think, likewise untenable. If after her marriage the petitioner, Faith C. Burwell, had power as a married woman to enter into- a contract of partnership with her husband, it would seem to be wholly immaterial, in so far as the tax commission’s rights are concerned, whether the agreement made before and in consideration of the marriage was within the statute of frauds and void, or not. The only effect, as we apprehend, of the invalidity of the antenuptial agreement would be to make the postnuptial transfer of property by the husband to the wife for partnership purposes a voluntary transfer or conveyance, subject to attack by creditors to the same extent as any other voluntary transfer of property for the benefit of the wife. Even, however, if it be conceded that the transfer from the husband to the wife was voluntary, the admitted facts do not establish that it was a transfer or conveyance in fraud of the State’s rights as a tax- creditor or otherwise. No taxes due or accrued at the time of the transfer are involved. Nor does it appear that the transfer was actually made with fraudulent intent to evade the payment of taxes to accrue in the future. In that situation we know of no sound basis in reason or authority for the position that, because a transfer of property not otherwise invalid results in a yield of less taxes from the transferee than would have resulted if the property had remained the property of the transferor, such result of itself should entitle the State to impeach the transfer as fraudulent, and treat it as nonexistent for the purpose of levying taxes.

It is accordingly ordered and decreed that the prayer of the petitioners be granted, and that the respondents be and are hereby restrained from enforcing collection from the petitioner, Ernest Buuwell, of the additional tax claimed by reason of disallowing the partnership return and the separate returns of petitioners as copartners constituting said partnership.

Injunction granted.

Messrs Justices Watts, Fraser and Cothran concur. Mr. Chief Justice Gary did not participate.