City of Covington v. Commonwealth of Kentucky

• Decision Date: 20 February 1899
• Docket Number: No. 152,152
• Citation: 43 L.Ed. 679,19 S.Ct. 383,173 U.S. 231
• Parties: CITY OF COVINGTON v. COMMONWEALTH OF KENTUCKY
• Court: U.S. Supreme Court

173 U.S. 231

19 S.Ct. 383

43 L.Ed. 679

CITY OF COVINGTON

v COMMONWEALTH OF KENTUCKY.

No. 152.

February 20, 1899.

William Goebel, for plaintiff in error.

Ramsey Washington and W. S. Taylor, for the Commonwealth of Kentucky.

Mr. Justice HARLAN delivered the opinion of the court

The plaintiff in error, a municipal corporation of Kentucky, insists that, by the final judgment of the court of appeals of that commonwealth (39 S. W. 836), sustaining the validity of certain taxation of its waterworks property, it has been deprived of rights secured by that clause of the constitution of the United States which prohibits any state from passing a law impairing the obligation of contracts. That is the only question which this court has jurisdiction to determine upon this writ of error. Rev. St. U. S. § 709.

By an act of the general assembly of Kentucky approved May 1, 1886, the city of Covington was authorized to build a water reservoir or reservoirs within or outside its corporate limits, either in the county of Kenton or in any county adjacent thereto, and acquire, by purchase or condemnation in fee simple, the lands necessary for such reservoirs, and connect the same with the waterpipe system then existing in the city; to build a pumping house near or adjacent to the Ohio river, and provide the same with all necessary machinery and appliances, together with such lands as might be needed for the pumping house, and for connecting it with said reservoir or reservoirs. Section 21.

The declared object of that legislation was that the city and its citizens might be provided with an ample supply of pure water for all purposes. To that end, the city was authorized and empowered, by its board of trustees, to issue and sell bonds to an amount not exceeding $600,000, payable in not more than 40 years after date, with interest at a rate not exceeding 5 per cent. per annum; such bonds not, however, to be issued until the question of issuing them and the question of the location of the reservoir or reservoirs, whether above or below the city, should first be submitted to the qualified voters of the corporation at an election held for that purpose, and approved by a majority of the votes cast.

By section 31 of that act it was provided that 'said reservoir or reservoirs, machinery, pipes, mains and appurtenances, with the land upon which they are situated, shall be and remain forever exempt from state, county and city tax.' Acts Ky. 1885-86, p. 317, c. 897.

A subsequent act, approved February 15, 1888, authorized the city, in execution of the provisions of the act of 1886, to issue and sell bonds to the additional amount of $400,000. Acts Ky. 1887-88, p. 221, c. 137.

The scheme outlined in these acts received the approval of the majority of the votes cast at an election held in the city, and thereafter bonds to the amount of $600,000 and $400,000 were issued in the name of the city, and disposed of.

The proceeds of the bonds were duly applied by the city in building water reservoirs, in constructing the requisite approaches, pipes, and mains, in acquiring the lands necessary for the reservoirs and for its approaches and connections, in erecting a pumping house and providing it with necessary machinery and appliances, and in buying land for a pumping house and the connection thereof by pipes and mains with the reservoirs.

The entire works, upon their completion, passed under the control of the city which managed the same until March 19, 1894, by the commissioners of waterworks, under the act of March 31, 1879, c. 121 (Acts Ky. 1879, p. 93); and since March 19, 1894, they have been controlled under the act of that date (chapter 100), by a board, subject to such regulations as the city by ordinance might provide. Acts Ky. 1894, p. 278. By the latter act it was also provided that the net revenue derived from its waterworks by any city of the second class—to which class the city of Covington belongs—should be applied exclusively to the improvement or reconstruction of its streets and other public ways.

When the above act of May 1, 1886, was passed, there was in force a general statute of Kentucky, passed February 14, 1856, which provided, as to all charters and acts of incorporation granted after that date, that 'all charter and grants of or to corporations, or amendments thereof, and all other statutes, shall be subject to amendment or repeal at the will of the legislature, unless a contrary intent be therein plainly expressed: provided, that whilst privileges and franchises so granted may be changed or repealed, no amendment or repeal shall impair other rights previously, vested'; and that 'when any corporation shall expire or be dissolved, or its corporate rights and privileges shall cease by reason of a repeal of its charter or otherwise, and no different provision is made by law, all its works and property, and all debts payable to it shall be subject to the payment of debts owing by it, and then to distribution among the members according to their respective interests; and such corporation may sue and be sued as before, for the purpose of settlement and distribution as aforesaid.' 2 Rev. St. Ky. p. 121.

This statute was not modified by the general revenue statute of May 17, 1886, which took effect September 14, 1886, and became part of chapter 68 of the General Statutes of 1888. It constitutes section 1987 of the revision known as the 'Kentucky Statutes of 1894.' Nor has it been changed by any subsequent legislation in Kentucky.

The present constitution of Kentucky, adopted in 1891, contains the following provisions:

'Sec. 170. There shall be exempt from taxation public property used for public purposes: * * *.

'Sec. 171. 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.

'Sec. 172. All property, not exempted from taxation by this constitution, shall be assessed for taxation at its fair cash value, estimated at the price it would bring at a fair voluntary sale; and any officer, or other person authorized to assess values for taxation, who shall commit any willful error in the performance of his duty, shall be deemed guilty of misfeasance, and upon conviction thereof shall forfeit his office, and be otherwise punished as may be provided by law.'

By the Kentucky Statutes of 1894 it is provided:

'Sec. 4020. All real and personal estate within this state, and all personal estate of persons residing in this state, and of all corporations organized under the laws of this state, whether the property be in or out of this state, including intangible property, which shall be considered and estimated in fixing the value of corporate franchises as hereinafter provided, shall be subject to taxation, unless the same be exempt from taxation by the constitution, and shall be assessed at its fair cash value, estimated at the price it would bring at a fair voluntary sale.'

'Sec. 4022. For the purposes of taxation, real estate shall include all lands within this state and improvements thereon; and personal estate shall include every other species and character of property—that which is tangible as well as that which is intangible.'

'Sec. 4026. The following property is exempt from taxation: Public property used for public purposes. * * *' This act repealed all acts and parts of acts in conflict with its provisions, except the act of June 4, 1892, providing additional funds for the ordinary expenses of the state government, and the act amendatory thereof, approved July 6, 1892.

In the year 1895 certain lands acquired under the above act of May 1, 1886, and constituting a part of the Covington waterworks, were assessed for state and county taxation, pursuant to the statutes enacted after the passage of that act, and conformably as well to the constitution of Kentucky if that instrument did not exempt them from taxation. The taxes so assessed not having been paid, those lands, after d e notice, were sold at public outcry by the sheriff (who by law was the collector of state and county revenue); and, no other bidder appearing, the commonwealth of Kentucky purchased them for $2,187.24, the amount of the taxes, penalty, commission, and cost of advertising.

The present action was brought by the commonwealth to recover possession of the property so purchased.

The principal defense is that the provision in the act of May 1, 1886, that the reservoir or reservoirs, pumping house, machinery, pipes, mains, and appurtenances, with the land upon which they are situated, 'shall be and remain forever exempt from state, county and city taxes,' constituted, in respect of the lands in question, a contract between the city of Covington and the commonwealth of Kentucky, the obligation of which was impaired by the subsequent legislation to which reference has been made.

Referring to section 170 of the present constitution of Kentucky, declaring that 'there shall be exempt from taxation public property used for public purposes,' the court of appeals of Kentucky, in this case, said: 'It was followed by necessary statutory enactments, which, however, could neither curtail nor enlarge exemption from taxation, as prescribed by the constitution; and accordingly, in section 4020, Ky. St., adopted for the purpose of carrying out the provisions of section 170, is the identical language we have quoted. As it was manifestly intended by both the constitution and stat- ute to make subject to taxation all property not thereby in express terms exempted, it results that, unless the waterworks property of the city of Covington be, in the language or meaning of section 170, 'public...