Martin v. High Splint Coal Co.

• Decision Date: 26 March 1937
• Citation: 268 Ky. 11,103 S.W.2d 711
• Parties: MARTIN et al. v. HIGH SPLINT COAL CO. et al.
• Court: Kentucky Court of Appeals

103 S.W.2d 711

268 Ky. 11

MARTIN et al. v. HIGH SPLINT COAL CO. et al.

Court of Appeals of Kentucky

March 26, 1937

Appeal from Circuit Court, Franklin County.

Declaratory judgment action by the High Splint Coal Company and others against James W. Martin, commissioner of revenue, and others to annul and be relieved from requirements of ad valorem revenue statute (Ky.St. 1936, §§ 4019-1 to 4019-4). From a judgment in favor of the plaintiffs, the defendants appeal.

Affirmed.

B. M Vincent, Atty. Gen., and M. B. Holifield, Asst. Atty. Gen for appellants.

Edward C. O'Rear, of Frankfort, Tye, Siler, Gillis & Siler, of Williamsburg, E. L. McDonald, of Lexington, P. T. Wheeler, of Hazard, R. Miller Holland, of Owensboro, and J. W. Farmer, of Frankfort, for appellees.

Blakey Helm, of Louisville, amicus curiæ.

THOMAS Justice.

The appellees are three corporations and one individual. The business of some of them is that of mining coal from land in which such deposits are found; and some of them are engaged in extracting oil and gas where such deposits are found. Each of the plaintiffs owns in fee the mineral which they remove or the entire land in which it is found and in some instances the right to prosecute such business is conferred by leases owned by them, whereby they acquired the privilege to make such explorations. They filed this declaratory judgment action in the Franklin circuit court against the appellants as members of the Kentucky Tax Commission, whereby they sought to annul and be relieved from the requirements contained in the last sentence of section 3, chapter 98, being the ad valorem revenue statute enacted by the Legislature at its 1936 session and which is now contained in sections 4019-1, to and including section 4019-4 of Baldwin's 1936 Revision of Carroll's Kentucky Statutes. That sentence so attacked in plaintiffs' petition says: "The state tax commission shall have exclusive power in the assessment of all minerals." Plaintiffs in their petition attacked the validity of the inserted requirement upon a number of grounds, but the chief ones argued, and the only ones that we conclude approach merit, are (1) that the entire act (chapter 98, supra) in which the attacked requirement is contained is void; but, if mistaken in that, then (2) that if the chapter is not entirely void, then the provision sought to be eliminated by plaintiffs is itself void for many reasons, one of which is that it is incompetent for the Legislature to require assessment of property for local taxation to be made solely by a state agency. The trial court sustained ground 1 of plaintiffs' contention, and if that holding is correct, it will be unnecessary to discuss or determine ground 2, or any of the other grounds which we have disregarded as untenable--one of which was and is that the act violated the provisions of section 51 of our Constitution, but which, we repeat, we do not find to be well taken. We have given to this case our usual careful attention and we are driven to what we are convinced is the inescapable conclusion that the trial court was correct in holding that the entire chapter 98, supra, is void and the opinion will be confined to a discussion of that question alone.

In disposing of it, it is of vital importance to first ascertain the exact question for determination in the light of our constitutional provisions affecting the questions dealt with in the act referred to. In stating and making plain what the exact question is, it will be helpful, as we conclude to first state what it is not. Pursuing that course, it will be seen that the question is not whether it is competent for a Legislature to either classify or exempt property from taxation where there are no constitutional provisions prohibiting either classification or exemption. Where there are no such inhibiting provisions found in the Constitution of the taxing jurisdiction, courts are universal in their conclusion that both classification and exemption may be adopted by the Legislature without infringing upon the rights of any of the taxed citizens who may own property upon which the enacted tax is directed to be levied. Neither is this a case where only classification of property is permissible under the Constitution and which contains no inhibition against exemption from taxation. In such case, courts are somewhat divergent in their opinions as to whether the conferred right of classification also authorizes exemption from taxation within the discretion of the Legislature enacting the revenue statute. Lastly, this is not a case where the language of the Constitution is ambiguous, or of such doubtful phraseology as to create room for divergent interpretations, in which case the one adopted and pursued by the Legislature ordinarily will be accepted as the correct one. Counsel in their commendable zeal in support of their cause cite some cases fitting only some one or more of the situations that we have enumerated; but as will be later seen, they can have no application to this case because of provisions in our fundamental law eliminating such situations as factors in the determination of the true questions before us.

The foundation for the trial court's conclusion was and is that although our Constitution, when first promulgated in 1891, absolutely prohibited classification of property for ad valorem taxation, the amendment to section 171 of that instrument adopted in 1915 prescribed for classification of property for taxation for both state and local purposes; but, that section 170 of that document (which section was not expressly referred to in the 1915 amendment to section 171) not only enumerated and expressly prescribed what property should be exempted from taxation, but that it also expressly said, "All laws exempting or commuting property from taxation other than the property [exempted] above mentioned shall be void." Having reached that conclusion, the learned trial judge easily came to the further one that the attempted exemption of real estate from all state taxation by chapter 98, supra, was in direct conflict with the express provisions of section 170 of our Constitution, and that when such attempted exemption is eliminated therefrom, it became and was patent that the Legislature would have enacted no part of that act without the invalid exemption was retained in it. Therefore, under the well-known prevailing rule in such instances, the court declared the entire act invalid, and which had the effect to restore the ad valorem levies made in chapter 148, page 665, Acts of 1934, and which became section 4019 in Baldwin's 1934 Service Supplement to Carroll's Kentucky Statutes. Although chapter 98, supra, attempted to expressly repeal the 1934 chapter (148), the latter was almost literally re-enacted by section 2 of the 1936 act, but with the exception of the insertion of the phrase, "except real estate." The levy made in both chapters 148 of the 1934 act, and 98 of the 1936 act for state revenue was at the rate "of fifty cents (50¢) upon each one hundred dollars ($100.00) of the value of all property which is directed by law to be assessed for taxation," and both of them classified deposits in banks and trust companies, and building and loan associations, and placed a different rate on them, and it is the right to exempt real estate that furnishes the storm center of this litigation.

Section 170 of our Constitution, as we have already indicated, makes certain specific exemptions from taxation. It starts out by saying "There shall be exempt from taxation," etc., then follows an enumerated list of property which shall be exempted from taxation, and at the close of that list the language hereinbefore inserted, "and all laws exempting or commuting property from taxation other than the property above mentioned shall be void," is employed. Section 171, prior to the adoption of the 1915 amendment thereto, was in one paragraph, expressed in these words:

"The General Assembly shall provide by law an annual tax, which, with other resources, shall be sufficient to defray the estimated expenses of the Commonwealth for each fiscal year. Taxes shall be levied and collected for public purposes only. They shall be uniform upon all property subject to taxation within the territorial limits of the authority levying the tax; and all taxes shall be levied and collected by general laws."

The 1915 amendment reframed that paragraph so as to read:

"The general assembly shall provide by law an annual tax, which with other resources, shall be sufficient to defray the estimated expenses of the Commonwealth for each fiscal year. Taxes shall be levied and collected for public purposes only and shall be uniform upon all property of the same class subject to taxation within the territorial limits of the authority levying the tax; and all taxes shall be levied and collected by general law."

Some changes in phraseology and arrangement were made, but the fundamental one was the insertion of the words "of the same class" in the last sentence of the old section as it appeared before the amendment. Before that amendment, the section provided that taxes "shall be uniform upon all property subject to taxation," etc., but in remodeling it through the adoption of the 1915 amendment, it was made to read, "Taxes shall be levied and collected, *** and shall be uniform upon all property of the same class subject to taxation," etc. (Our italics.) In addition to making that change in the first paragraph of the amendment to the old section, there was added to it by the amendment two other new paragraphs--one relating to local taxation, and the other one prescribing for an approval by the entire people of the state of described statutes enacted under the amended section;...