Chadwick v. City of Crawfordsville

Decision Date29 January 1940
Docket Number27275.
Citation24 N.E.2d 937,216 Ind. 399
PartiesCHADWICK, County Treasurer, et al. v. CITY OF CRAWFORDSVILLE.
CourtIndiana Supreme Court

Appeal from Montgomery Circuit Court; Edgar A. Rice, Judge. [Copyrighted Material Omitted] [Copyrighted Material Omitted]

John B. Newlin, of Crawfordsville, and Harvey Hartsock and Charles M. Wells, both of Indianapolis, for appellants.

Raymond O. Evans, of Crawfordsville, for appellee.


(Petition for rehearing granted. The opinion filed December 22, 1939 is withdrawn, and this opinion substituted.)

The appellee sued to enjoin the appellant treasurer from collecting taxes for the year 1938 and subsequent years upon that part of the appellee's municipal electric light plant and distribution system devoted to the manufacture and sale of electricity for commercial and domestic use. The appellant Thomas, a taxpayer, intervened by leave of court as a defendant.

The complaint is based on chapter 15 of the Acts of 1939 (Acts 1939, p. 24), which provides: 'That every city and town in the State of Indiana shall be exempt from any and all taxes, either real or personal, on properties or services and income therefrom, for any purpose whatsoever, on its public schools, public libraries, on its municipally owned parks, golf courses, playgrounds, swimming pools, hospitals, waterworks, electric utility, gas and heating plants, sewage treatment and disposal plants, cemeteries, auditoriums, gymnasiums, and any and all other municipally owned property, utility or institution: Provided, however, That this act shall not exempt any city or town from the requirement to pay the tax upon its gross receipts under the Gross Income Tax Law.' Section 2 repeals all laws in conflict therewith, and section 3 is an emergency clause providing that the act shall be in full force and effect from and after its passage. The act was approved February 23, 1939. The defendants demurred to the complaint for want of facts. It is asserted in the memoranda that the complaint is based solely upon the statute above referred to; that the statute contravenes Article 10, Section 1, of the Constitution of Indiana; and that the act is not retroactive. The demurrers were overruled, the defendants declined to piead further, and there was judgment as prayed.

Error is predicated upon the overruling of the demurrers.

Article 10, Section 1, of the Constitution of Indiana, provides: 'The General Assembly shall provide, by law, for a uniform and equal rate of assessment and taxation; and shall prescribe such regulations as shall secure a just valuation for taxation of all property, both real and personal, excepting such only for municipal, educational, literary, scientific, religious, or charitable purposes, as may be specially exempted by law.' It was early held that the purpose for which property is used is controlling, and that property owned by a private individual operating an educational institution for his private profit may be exempted under the Constitution. City of Indianapolis v. Sturdevant, 1865, 24 Ind. 391. This case has been cited with approval repeatedly, and was followed in Vink, Treasurer, v. Work, 1902, 158 Ind. 638, 64 N.E. 83. In Travelers' Insurance Co. v. Kent et al., 1898, 151 Ind. 349, 50 N.E. 562, 51 N.E. 723, it was held that the lands of a private owner used and occupied by a lessee for school purposes are not exempt, and the reasoning was followed in Spohn v. Stark, Treasurer et al., 1926, 197 Ind. 299, 150 N.E. 787, where it was held that property rented to the Indiana National Guard for armory purposes, and used for such purposes, is not exempt from taxation.

In City of Crawfordsville et al. v. Braden, 1892, 130 Ind. 149, 159, 28 N.E. 849, 852, 14 L.R.A. 268, 30 Am.St.Rep. 214, it was held that municipal corporations have the power to safeguard and protect health and property; that they have power to light the streets and public places, and to construct and own plants for the purpose of generating electricity for that purpose; that there is a public interest in furnishing power for electric lights to private consumers; and that: 'To do so is, in our opinion, a legitimate exercise of the police power for the preservation of property and health. * * * A light thus produced is safer to property and more conducive to health than the ordinary light. Produced by the heating of a filament of carbon to the point of incandescence in a vacuum, there is nothing to set property on fire, or to consume the oxygen in the surrounding air, and thus render it less capable of sustaining life and preserving health.' The same public purpose has been found in the furnishing of pure water for private use from a municipally-owned and operated waterworks plant.

The Constitution permits the exemption of property 'for municipal, educational, literary, scientific, religious, or charitable purposes.' The word 'municipal,' in the narrower sense, means pertaining to a local governmental unit, commonly, a city or town. In its broader sense it means pertaining to the public or governmental affairs of a state or nation or of a people. In one sense the term 'municipal purposes' is broad enough to cover any purpose which government may achieve, while in the narrower sense the term may refer only to cities and towns and such other local governmental agencies as may be established for special purposes. For a discussion of the various meanings, see Root v. Erdelmeyer, Treasurer et al., 1872, 37 Ind. 225, and City of Louisville et al. v. Babb, County Treasurer, 7 Cir., 1935, 75 F.2d 162. It is clear that this court and courts generally have viewed the operation of an electric plant by a city for the furnishing of lights and power for its own use and the use of its inhabitants as an exercise of the police power. If this is the purpose, it is a governmental purpose that is served under a power generally vested in cities and towns, and therefore a municipal purpose under either the broad or the more restricted meaning of the word 'municipal,' and it must be concluded that the exemption of property for such a use is within the constitutional provision. It is true that when the opinion in the Crawfordsville case was written, the court and the public generally thought of electricity as useful principally for lighting, and that now probably its predominant use is for power. Much of this power is used for domestic purposes, however, which are as conducive to public health, cleanliness, and safety as the use of modern lighting. It is also used commercially to furnish power in factories. This avoids the necessity for the operation of a multitude of private power plants, with the possibility of incidental smoke and soot and greater fire hazard, so that even in this use a public purpose within the police power can be seen. It is also probably true, although it does not appear in the record, that electric current is furnished to consumers outside of the city which owns and operates the plant. The public duty to protect the health and welfare of the citizen outside of the limits of cities rests primarily upon the Legislature, and in exempting these plants from taxation, regardless of the extent of their operations, the Legislature doubtless found a public interest in the protection and welfare of the citizens of the state.

The record of the Constitutional Debates discloses that the member of the Convention who introduced Section 1 of Article 10 in the form in which it was adopted, thought of the word 'municipal' as referring to 'the property of municipal corporations.' He said: 'I have prepared these sections with some degree of care, and I think they will meet the object intended. According to the provisions contained in them, all the property of the State, whether belonging to individuals or to corporations, must be taxed--with what exception only? Why, school houses churches, the property of municipal corporations, and property devoted to benevolent or eleemosynary purposes, so far as the Legislature may see fit to exempt such property.' Debates in Indiana Convention, 1850, Vol. 1, pp. 941, 942. It is noted that the provision of the Constitution says that property may be exempted for 'municipal purposes,' and that the member proposing it construed the clause as meaning that 'the property of municipal corporations' might be exempted. The constitutional provision for exemption is based on the purpose for which property is used, while the proposing member seems to construe it as providing for an exemption because of ownership. All property of cities and towns was not exempted at first, but after a short time statutes were enacted exempting all such property, and such has been the law until the Act of 1933 (Acts 1933, ch. 190, § 16, p. 928), which taxed that part of public utility plants owned by cities which was used for the purpose of selling service to private persons. See Borgman et al. v. City of Fort Wayne, 1939, Ind.Sup., 18 N.E.2d 762. The Act of 1933 is the only act repealed by the repealing clause of the statute here in question to which our attention has been called. We know of no case in which the legislative authority to exempt such property was questioned. In Lowe v. Board of Com'rs, 1884, 94 Ind. 553, 555, this court expressed the view that: 'Lands held by public corporations for public purposes are exempt from taxation,' and that such exemption 'well comports with our Constitution and our statutes, which everywhere evince an intention to relieve from taxes and assessments property owned by the public * * *.' Thus the Legislature early construed the Constitution as authorizing it to exempt from taxation the property of cities and towns, the public has long acquiesced in this interpretation, and this court by the...

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