City of Louisville v. Babb

Decision Date26 February 1935
Docket NumberNo. 5276.,5276.
Citation75 F.2d 162
PartiesCITY OF LOUISVILLE et al. v. BABB, County Treasurer.
CourtU.S. Court of Appeals — Seventh Circuit

Arthur B. Bensinger, of Louisville, Ky., and Wilmer T. Fox, of Jeffersonville, Ind., for appellants.

Merle N. A. Walker, of Indianapolis, Ind., and Walter E. Prentice, L. A. Douglass, and Joseph H. Warder, Sr., all of Jeffersonville, Ind., for appellee.

Before SPARKS and FITZHENRY, Circuit Judges, and LINDLEY, District Judge.

FITZHENRY, Circuit Judge.

This is an appeal from a decree in favor of defendant in an action wherein plaintiffs (appellants here) sought to enjoin Charles V. Babb, treasurer of Clark county, Ind., from levying and collecting taxes upon their property located in that county. The property consists of the part of a bridge, connecting the cities of Louisville, Ky., and Jeffersonville, Ind., which lies within the State of Indiana, together with the administration building, tollhouses, tools, etc. and the real estate upon which the bridge and other property are located.

The facts in the case are not disputed, and are briefly stated in the opinion of the District Judge, from which we quote:

"* * * On February 25, 1928, there was enacted by Congress a law `Authorizing the City of Louisville, Kentucky, to Construct, Maintain, and Operate a Toll Bridge across the Ohio River at or near said City.' 45 Stat. 146.

"There was also enacted by the General Assembly of the State of Kentucky an act providing for the incorporation of the plaintiff Louisville Bridge Commission (hereinafter referred to as the Commission) for the purpose of the construction, operation, and repair of such bridge. Pursuant to such law, the Commission came into existence, and did construct the bridge in question connecting the cities of Louisville, Ky., and Jeffersonville, Ind. The title to all the real estate upon which the bridge, office building, tollhouses, etc., are located was taken in the name of the city of Louisville and now stands in the name of such city. The bridge was constructed by the Commission, and bonds were issued by the city of Louisville for the payment of the construction thereof. The bridge, pursuant to the act of Congress, was to be, and is, a tollbridge. Every person using such bridge is required to pay toll for the privilege thereof, including the city of Jeffersonville, Ind., and the United States government. The police officers of Jeffersonville, however, are exempt therefrom when in the pursuit of persons who have committed crimes and are fleeing from arrest. A schedule of tolls for the use of such bridge was prepared by the plaintiffs, placed in effect, and is still effective. The construction of the bridge was not for the purpose of profit, but the schedule of tolls provides sufficient income for the payment of the cost of maintenance, operation, and repair thereof, and also provides a sinking fund sufficient to pay the bonds and interest thereon as they mature. The plaintiff Commission will continue the operation of the bridge until the bonded indebtedness thereon has been fully paid, at which time such Commission will cease to function and will pass out of existence. The city of Louisville will then assume the duty of operating such bridge, and tolls may be collected, unless provision is otherwise made, for the cost of maintenance, operation, and repair thereof. The bridge is open to the use of the public, provided the users thereof pay the required toll. Thousands of persons throughout the United States and foreign countries pass over this bridge. * * *

"Prior to the commencement of this suit, a taxpayer of Clark county, Ind. (in which county the bridge in question is located), filed two suits in the Clark circuit court against the auditor of such county, in which suits the plaintiff sought to mandate the auditor to place upon the tax duplicates of such county the property in question. The auditor was represented in such suits by the county attorney, and also by Mr. Wilmer T. Fox, one of counsel for plaintiffs in this action, and who, in the litigation in the Clark circuit court, while attorney of record for the auditor, was employed and compensated by the Louisville Bridge Commission, one of the plaintiffs in this suit. The Clark circuit court, after a full hearing, held that the property was not exempt from taxation, under the Act of 1929, supra Acts Ind. 1929, c. 94, and entered a decree mandating the auditor to have the same entered upon the tax duplicates of the county. No appeal was taken from this decree, and in compliance therewith, the auditor did place the property upon the tax duplicates and certify the same to Charles V. Babb, county treasurer."

The questions presented upon this appeal will be considered under three headings: (1) The jurisdictional questions; (2) whether this bridge is immune from taxation because constructed, maintained, and operated in furtherance of an act of Congress which has created a federal policy to secure a bridge free of tolls; (3) the constitutionality of the Indiana statute exempting the property from taxation.

It is contended by appellee that the case is not properly before this court (a) because appellants have an adequate remedy at law and (b) the questions have been adjudicated by the Circuit Court of Clark County, Ind., and appellants are estopped from prosecuting this action, though not parties to that suit, because they had knowledge of its institution and pendency and participated in the trial thereof.

(a) Have appellants an adequate remedy at law? The Indiana statutes provide certain remedies for aggrieved taxpayers. None of these, however, are available in a federal court of law, and it has been held that a remedy in the state court is not enough. Chicago, Burlington, etc., Co. v. Osborne, 265 U. S. 14, 44 S. Ct. 431, 68 L. Ed. 878; City Bank Farmers' Trust Co. v. Schnader, 291 U. S. 24, 54 S. Ct. 259, 78 L. Ed. 628; National Surety Co. v. State Bank (C. C. A.) 120 F. 593, 61 L. R. A. 394; Risty v. Chicago, etc., R. Co., 270 U. S. 378, 46 S. Ct. 236, 240, 70 L. Ed. 641. In the last-cited case the court said:

"* * * The test of equity jurisdiction in a federal court is the inadequacy of the remedy on the law side of that court and not the inadequacy of the remedies afforded by the state courts."

(b) Are appellants estopped from prosecuting this action, because the questions presented in this case have been adjudicated by the circuit court of Clark county, Ind.? While the city of Louisville and the Louisville Bridge Commission had knowledge of the suit in the circuit court and participated in the trial through their attorneys, they filed no intervening petition and were never made parties to the suit. The record shows that counsel for appellants did not have complete control of the defense in that action. We think the District Court properly held that no duty devolved upon them to appear voluntarily and intervene, and their failure to appear cannot preclude their seeking protection against the judgment entered. Chase National Bank v. Norwalk, 291 U. S. 431, 54 S. Ct. 475, 78 L. Ed. 894.

Will the taxation of appellants' property within the state of Indiana, by that state, be a violation of the provisions of the Constitution of the United States? We find nothing in the act of Congress authorizing the construction of this bridge which might properly be construed as forbidding the state to impose taxes. A tax levied by the state of Indiana would not be a tax upon interstate business. Henderson Bridge Co. v. City of Henderson, 173 U. S. 592, 19 S. Ct. 553, 43 L. Ed. 823.

Is the statute of the state of Indiana which attempts to exempt bridges of this character from taxation constitutional? The Constitution of the state of Indiana, article 10, § 1, reads as follows:

"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 especially exempted by law."

In an act approved March 11, 1929, Acts of 1929, p. 296, c. 94, the General Assembly of the state of Indiana attempted to exempt bridges of the character here in question from taxation. It is admitted that in passing this statute the Legislature had in mind the particular property here involved. The act reads as follows:

"Section 1. Be it enacted by the general assembly of the State of Indiana, That the following property shall be exempt from taxation: Any bridge now or hereafter constructed wholly within the State of Indiana across a navigable stream or now or hereafter constructed across a stream forming a boundary of this state, and the real estate and personal property appurtenant thereto, when owned either by the State of Indiana or by any municipality or political subdivision thereof or by another state or by any municipality or political subdivision of such other state, if such bridge be free of tolls or if such bridge shall have been authorized or consented to by an act of congress: Provided, That, except for tolls necessary for the proper maintenance, repair and operation of such bridge and its approaches under economical management, the same shall be operated free of tolls after a sinking fund shall have been provided from tolls sufficient for the amortization of the cost of the bridge and its approaches, including reasonable interests and financing cost."

The District Court held this statute to be unconstitutional because the property named fell within none of the exceptions named in the pertinent provisions of the Constitution. It is contended by appellants that the property falls within the class which may be excepted because it is for a "municipal purpose."

The burden of proof, where the constitutionality of a...

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