| Ky. Ct. App. | Oct 9, 1890
Lead Opinion
delivered the opiirioit of the court.
The real estate and improvements thereon of the appellee, the Louisville Water Company, were assessed for State and county taxes for the year 188?, at the value of two million two hundred and fifteen thousand dollars. The taxes amount to eleven thousand three hundred and seventy-one dollars and seven cents; and the tax-bills therefor being in the hands of the sheriff, and he about to seize and sell thereunder certain property of- the appellee in use in its business, it, by this suit, enjoined him from so doing, the principal ground upon which it claims relief being that its property is by law exempt from assessment and taxation. This • claim is based • upon an act of the Legislature of April 22, 1882, and which reads as follows:
“1. That it shall be the duty of the Louisville Water Company to furnish water to the public fire cisterns and public fire-plugs or hydrants of the city of Louisville for fire protection free of charge.
“2. The sinking fund of the city of Louisville' being
Upon the hearing in the lower court the appellee moved to make the temporary injunction, which had been granted, perpetual, while the appellant, inasmuch as the property of the company in use can not be seized and sold, thus depriving the local public of the benefits derived from it, moved that it be compelled by rule to pay the taxes into court, or failing to do so, that its property be placed in a receiver’s hands until enough should be realized to pay them. This relief was also asked in the answer, to which a demurrer was sustained. The motion of the appellant was overruled, and the injunction perpetuated, the court not only holding that the property of the company could not be seized and sold, but that it was not liable for the taxes.
The constitutionality of the act supra is involved. It is claimed for the company that it has a vested right to the exemption resting in contract. That by the passage of the act of the Legislature, and its acceptance by the company, a contract was entered into ■which entitles it to the exemption. As such a privilege is in derogation of the common right; as the exemption of one person from taxation places an additional burden upon the other tax-payers of the State, it will not be presumed, but must appear by clear grant.
As the language of the act in this case is plain, it becomes the delicate duty of this court, keeping in mind the presumption in favor of legislative action, to determine whether, in its enactment, the Legislature has gone .beyond the constitutional limit.
The first section of our Bill of Rights provides that “no man or set of men are entitled to exclusive, separate public emoluments or privileges from the community, but in consideration of public services.”
The appellant contends, first, that if it were true the Legislature was moved to the passage of the act upon the idea of the rendition of a public service, yet, in fact, the company renders no such public servicé as the Constitution contemplates; and, second, that this was not the reason for its enactment, and that it is altogether unsupported by any valid consideration, or such as the Constitution recognizes.
We shall pass- by the question whether the rendition of a local public service, as to furnish the city of Louisville with water, is a valid consideration for an exemption from State taxation, thereby imposing an additional burden upon all the balance of the people of the State, or whether it is a governmental duty of the State to furnish to a city water for fire protection and sanitary purposes free of charge, either by direct taxation upon all the people of the State, or indirectly by an exemption from taxation in favor
We think it evident that the furnishing of water by the company to the city for fire protection free of charge was not what induced the passage of the. act. Its recitals, aside from the express statement in it of the reason, make this quite plain. It says:
“The sinking fund of the city of Louisville, being the owner of the stock of the Louisville Water Company, and said water company, by virtue thereof j, is the property of the city of Louisville, therefore, the Louisville Water Company is hereby exempted from the payment of taxes of all kinds, of whatever character, State, municipal and special.”
According to the legislative recital the sinking fund of the city owns the entire stock of the water company. There is nothing in the record showing otherwise, and it must, therefore, be assumed to be true. While the sinking fund department is a separate corporation from that of the city proper, yet it is merely the moneymaking branch of the municipal government. It has charge of its funds and its investments, whether in bank, railroad, water company stocks, or other valuable and money-making securities.
We see, therefore, that the property and rights of the water company belong to the city. While, therefore, the act recites that it shall be the duty of the water company to furnish water to the public fire
We have, therefore, an express recital by the Legislature of its reason for the attempted exemption, and that this was the true and only one is confirmed
A municipal corporation has a double character. In one it acts strictly in its governmental capacity. In the other for the profit or convenience of its citizens. Considered in the latter light, it occupies the attitude of a private corporation merely, while in the former it is an arm of the State government, or a part of its political power. It is an imperiuvi in imperio. The property necessary to the exercise of those duties which are strictly governmental is exempt from taxation, but this is not so of that which is held by the municipality for the comfort of its citizens, individually or collectively, or for money-making purposes merely. While the sinking fund of the city of Louisville is a distinct corporation, yet it is owned by the city, and merely controls its funds. It discharges no governmental duties, and was created merely to make money for the city. It may invest the funds in stocks of any character, if they are likely to bring good returns, like any other private corporation. It will hardly be contended that if it were to invest surplus money in a private manufacturing company, that the Legislature could constitutionally exempt that company from taxation. In short, the city in its private and not its governmental character owns the stock and property of the water company, and this ownership is not necessary to the execution of its duties as a political or governmental
It was said in Bailey v. City of New York, 3 Hill, 539: “But if the grant was for purposes of private advantage and emolument, though the public may derive a common benefit therefrom, the corporation ■(the city), quoad hoc, is to be regarded as a private company. It stands on the same footing as would .any individual or body of persons upon whom the like special franchises had been conferred.”
If it be said that the exemption should be upheld if it be, in fact, supported by any valid consideration, although the recited one be invalid,, we reply that the real consideration, and the one which moved the parties to the transaction, is to be regarded. The one acted upon by the Legislature, and expressed in the act, and which must have been understood by the city, was the simple fact that it owned the stock in the water company. This was not a valid consideration, and we have already seen that mere incidental pro
The appellee, by this suit, came into court asking equitable relief by injunction or the exercise of an extraordinary remedy. Asking equity, it may well be required first to do equity; and being in court, and liable for the tax, and the chancellor being in possession of the case, while its property in use in its business could not be seized, it should have been required to pay the taxes into court; or failing to do so within a reasonable time, the management .of it should have been intrusted to a receiver until enough was realized to pay them and the costs of the proceedings. (Louisville Water Company v. Hamilton, 81 Ky., 517" court="Ky. Ct. App." date_filed="1883-12-20" href="https://app.midpage.ai/document/louisville-water-co-v-hamilton-7131462?utm_source=webapp" opinion_id="7131462">81 Ky., 517.)
The judgment is reversed, and cause remanded, with directions to render a judgment as above indicated.
Dissenting Opinion
dissenting, delivered the following opinion:
In determining the constitutionality of the act in question, it is only necessary to consider sections one and two. Section one provides “that it shall be the
“Sec. 2. The sinking fund of Louisville being the owner of the stock of the Louisville Water Company, and the said water company, by virtue thereof, is the property of the city of Louisville, therefore, the Louisville Water Company is hereby exempted from the payment of all taxes, of all kinds, of whatever character, State, municipal and special.”
It is the settled doctrine of this State that no exemption of one’s property from taxation is valid where like property of another is taxed, unless the exemption proceeds from the consideration of public service. Such legislation, in the absence of this consideration, is in direct violation of the Bill of Rights that prohibits the granting of such a special immunity. Nor can it be maintained that the public service constituting the consideration for the exemption must be for the discharge of a duty for which an appropriation from the State Treasury might be made, or that the public •service should directly benefit the whole people of the State. If this be the correct rule, seminaries of learning and all charitable institutions could receive no support in the way of legislative exemption. It is not necessary, however, to review the cases on this subject, as the opinion of the majority of the court is based upon the idea that no consideration exists in this case for the exemption, and I shall, therefore, consider that question alone, being satisfied, after a careful examination of the record, that the exemption
The city of Louisville purchased all, or nearly all, of the stock of the water company, and was, at the time the exemption was made, the sole owner of the property, with the exception of one or two shares of the stock. It is, therefore, argued that because the city owned the entire stock it was immaterial whether it received a penny or thousands of dollars for furnishing this water; it was but a charge in the first place to the city, and then a payment back to it of the money expended, and for that reason the supply of water for public purposes could not have constituted the consideration for relieving the company from taxation, and the only motive inducing the Legislature to- grant the privilege consisted in the fact that the city owned the water company, as recited in the second section of the act.
It is further argued, and so adjudged in the principal opinion, that the city can only be regarded as a stockholder in a private corporation, and not as the owner • of this stock • in its governmental capacity. The city of Louisville contains near two hundred thousand inhabitants, and has within its corporate-limits public buildings belonging to the Federal Government, and its own court buildings and other prop
It seems to me neither just nor equitable to consider the municipality as the owner of a private corporation when attempting to impose such taxation on the tax-payer, who is the real party to this action, and who receives nothing but the water he uses and drinks in the way of private gain. The Legislature, viewing the question in this light, granted the exemption, and to make it binding on the State, at least so long as it stands unrepealed, required the performance of a public duty that the city has never failed to discharge.
The Supreme Court, in 115 U. S., 691, in the case of the Louisville Gas Co., held that the distribution ■of gas in densely populated districts was a matter of which the public could assume control, and in supplying it for public and private use was such a public service as authorized the grant of the exclusive privilege. The same doctrine was recognized by that court in the case of the New Orleans Water-works Co., 115 U.S., 674" court="SCOTUS" date_filed="1885-12-07" href="https://app.midpage.ai/document/new-orleans-water-works-co-v-rivers-91489?utm_source=webapp" opinion_id="91489">115 U. S., 674. Why the State may not impose upon a municipality the performance of a service for the public good I am unable to perceive. It is but a subordinate agency of the State government. Here the entire expense of furnishing water is placed upon the tax-payers of the city, and this is proper, because they are the real beneficiaries; but