Board of Councilmen v. Stone

108 Ky. 400 | Ky. Ct. App. | 1900

Opinion op the coukt by

JUDGE HOBSON

Reversing.

By .'articles of incorporation of the Erankfort Water Company, its principal j>lace of transacting business- is the city of Erankfort. The general nature of the business proposed to be transacted by the corporation is the construction and operation of waterworks in and near the city of Frankfort, for supplying the city and the inhabitants of the city and of its vicinity with water for public and private purposes. The pumping station, reservoirs, and a part of its mains are without the city. Jts tangible property outside of the -city was valued for the year 1895 at $54,540, for the year 1896 at $55,000, for the. year 1897 at $58,400. Its tangible property within the city was valued for the year 1895 at $20,460, for the year 1896 at $20,000, and for the year 1897 at $16,520. The State board of valuation fixed the value of its franchise for the year 1895 at $88,740, for the year 1896 at $85,000 and for the year 1897 at $79,891. The board then apportioned the valuation of the franchise between the city and the taxing districts outside of the city substantially in the proportion that the tangible property of the company was within the city or in the taxing districts outside of the city; thus apportioning to the city of the valuation of the franchise for the year 1895, $24,-014.34, for the year 1896, $22,666.60, and' for the year 1897, $17,615.97. The city complains of this apportionment; in-' sisting that the board had no authority to apportion the valuation of the franchise of the water company between it and the taxing districts outside of the city, and that the whole of it was taxable for oity purposes. This is the only question to be determined in the case.

Section, 3374, Kentucky Statutes, for the government of cities of the class to which Frankfort belongs, is as follows: “All real and personal estate within the city on the tenth day of January in the year in which the assessment shall be made, and all corporations having their chief office or place of business in the city on said date and the franchises of same, shall be subject to assessment and taxation for all local and municipal purposes, unless exempt from taxation by the Constitution, and the same shall be assessed at its fair cash value estimated at the price it would bring at a fair, voluntary sale.” It is conceded1 that the chief office or place of business of the water company is in Frankfort, and, unless this section is modified by some other provision of the statute, its franchise is subject to assessment and taxation by the city.

Section 4077, Kentucky Statutes, provides: “Every railway company or corporation and every incorporated bank, trust company, guarantee or security company, gas company, water company, ferry company, bridge company, street railway company, express company, electric light company, electric power company, telegraph company, press dispatch company, telephone company, turnpike company, palace car company, dining car company, sleeping car company, chair car company and every other like company, corporation or association, also every other corporation, company or association, having or exercising any special or exclusive privilege or franchise not allowed by law to natural persons, or performing any public service, shall in addition to the other taxes imposed on it by law, annually pay a tax on its franchise to the State and a local tax thereon to the county, incorporated city, town and taxing district where its franchise may be exercised. The auditor, treasurer and Secretary of State are hereby constituted a board of valuation and assessment, for fixing the value of said franchise, except as to turnpike companies, which are provided for in section four thousand and ninety-five of this article, the place or places where such local taxes are to be paid by other corporations on their franchises, and how apportioned, where more than one jurisdiction is entitled to a share of such tax, shall be determined by the board1 of valuation and assessment, and for the discharge of such other duties as may be imposed on them by this act. The auditor shall be chairman of said board, and shall convene the same from time to time as the business of the board may require.” It is insisted that under this section the board of valuation had authority to determine how the tax on the franchise of the water company should be apportioned between the city and the taxing districts outside of the city, ini which a larger part of its tangible property was situated; but it will be observed that the section refers to a number of corporations, such as railroads, telegraph, telephone, express, sleeping, palace, dining, or chair car-companies, which, from the nature of the case, are not ordinarily confined to one jurisdiction; and section 4081 provides how the valuation of the franchise shall be apportioned in the case of such corporations, in these words: “Such corporate franchise shall be liable to taxation in each county, incorporated city, town or district through or into which such lines pass, or are operated, in the same proportion that the length of the line in such county, city, town or district bears to the whole length of lines in the State-, less the value of any tangible property assessed or liable to -assessment in any such county, city, town, or taxing district" This is the only provision in the entire article directing how an apportionment shall be made; and, if the board of valuation have the power to make an apportionment of the franchise tax of any of the other corporations to be assessed under section 4077, it is clear that the statute has prescribed no basis on which the apportionment is to be made.

It would seem, therefore, th-at section 4081 must be read in connection with section 4077, and, that the'ap-por-tiomneni which the board of valuation is authorized to-make by section 4077 is that prescribed by section 4081; for, if the Legislature had intended to empower the board to apportion the franchise tax of other corporations between different jurisdictions, it is hard to understand why section 4081 should have been expressly limited to the corporations named in it. Banks, trust companies, guaranty companies, and the like, exercise their franchises throughout the State to some extent, and no apportion-■ ment of their franchise tax among the different jurisdictions would be practicable. Not only so, but these sections must be read with section 3874, above quoted, which was enacted by the pame Legislature, and plainly contemplates the taxation by the city of the franchises of all corporations, like the water company, having their chief office or place of business in the city. Moreover, the record shows that in every substantial sense the franchise of the Frankfort Water Company is exercised only in Frankfort.

While the purpose of the company, as set out in its articles of incorporation filed in the county clerk’s office, was to furnish the inhabitantts of the city and vicinity with water, and it does furnish water to some persons outside the city, it has no exclusive privilege as to persons outside of the city. The franchise primarily in view under section 4077 is any special or exclusive privilege not allowed by law to natural persons. The special or exclusive privileges of the Frankfort Water Company were conferred upon it by the ordinance of the city council adopted July 28, 1884, and by the act of the General Assembly entitled, “An act for the benefit of the water company of Frankfort, Kentucky,” approved March 11, 1886. By the ordinance the franchise was granted the water company to construct and operate, in and near the city, waterworks for supplying the city and the inhabitants of the city and its vicinity with water. The water mains and their appurtenances, and all the privileges, franchises, and immunities connected therewith, owned by the city, were turned over to the water company: and the franchise thus granted in the existing or future limits of the city was perpetual, subject to the right of the city to purchase the plant on the terms set out in the ordinance. This ordin-anee had, of course, no extraterritorial effect, and conferred no authority beyond the limits of the city. The act of the Legislature (see Sess. Acts 1885-86, p. 648) recites the fact that the conporation was formed “for the business of constructing and operating water works in and near the city of Frankfort, for supplying the said city and its inhabitants- with water for public and private purposes,” and then confirms it as a body politic and corporate, empowering it to construct and operate the water, works “for the supply of said city and its inhabitants with water,” and the contract made by the city in the ordinance above referred to is ratified.

Under this ordinance and the act of the General Assembly, the only exclusive privilege or franchise conferred upon the water company which was not allowed by law to natural persons was the franchise of furnishing to the city and its inhabitants water for public and' private purposes. This franchise must be exercised wholly within the city. The fact that the company pumps its water out of the river, and stores it in reservoirs without the city, in order to deliver it to the city and its inhabitants, in the exercise of its franchise, does not affect the rights of the parties. The franchise does not consist in pumping the water or in maintaining the reservoirs. This is' only a means of exercising the franchise, which is the supplying of the city and its inhabitants with water.

It follows from these conclusions that the board was without authority to apportion the tax on the franchise of the water company between the city and the taxing districts outside of the city. The tangible property owned by the water company outside the city may be taxed by the taxing "districts in which it is situated, but the tangible property within the city and the franchise of the corporation are all liable to taxation by the city. Judgment reversed, and cause remanded for a judgment and other, proceedings not inconsistent with this opinion.

Petition for rehearing filed and overruled.