City of Louisville v. Louisville Ry. Co.

Citation111 Ky. 1,63 S.W. 14
PartiesCITY OF LOUISVILLE v. LOUISVILLE RY. CO. [1]
Decision Date28 May 1901
CourtCourt of Appeals of Kentucky

Appeal from circuit court, Jefferson county, chancery division.

"To be officially reported."

Action by the city of Louisville against the Louisville Railway Company to recover taxes. Judgment for defendant, and plaintiff appeals. Reversed.

Henry Lane Stone, for appellant.

Humphrey Burnett & Humphrey and St. John Boyle, for appellee.

WHITE J.

In these two cases the city of Louisville, by and through its city attorney, brought actions against the appellee Louisville Railway Company, for taxes for the years 1893, 1894, 1895 1896, 1897, and 1898, alleged to be due and unpaid. These taxes were alleged to be due on franchise, as assessed by the state board of valuation and assessment for the years 1893, 1894, 1895, 1896, and 1897, and upon assessments by the county assessor for 1894, 1895, 1897, and 1898. The amount of tax sought to be recovered is about $311,188. To these actions appellee filed answers containing some 15 paragraphs, in which there are specific denials of all allegations as to the assessment of the property and levy of the taxes; the denials being made in lack of knowledge or information sufficient to form a belief, although all these matters must be of record at the proper office. Other paragraphs presented matters of defense, pleading a contract with the appellant city to pay a license tax in lieu of all taxes; pleading the repeal of the statute authorizing the assessment by the state board of valuation and assessment of the franchise for the purpose of city taxation by the enactment of the charter of appellant; pleading that the valuation of the franchise as fixed by the board was too great and excessive, because a part of its track and plant extended beyond the limits of the city. These are among the defenses presented by the answer of appellee. A demurrer to several of these paragraphs was sustained by the court, and as to others overruled. While the two cases were pending an agreement of compromise was entered into by and between the appellee company and D. F. Murphy, city assessor, and J. B. Camp, tax receiver on behalf of the city, by which it was agreed that on payment of $177,093.48 in full compromise and satisfaction of all taxes, except on real estate, and in addition to license tax theretofore paid of $122,312.68, making a total sum of $299,406.16 for those years, the two suits for taxes would be dismissed, settled, at the cost of the defendant. This agreement was approved by the mayor, Charles P. Weaver, and subsequently by resolution of the general council of the city. This compromise agreement was made under a resolution of the general council approved January 11, 1896, as follows: "Be it resolved by the general council of the city of Louisville that the city attorney, the tax receiver, and the assessor are hereby appointed and constituted a board having power and authority to compromise any and all claims for back taxes by the city of Louisville against individuals where said claims, in the opinion of said board, are in any wise doubtful, or where, in the opinion of said board, said compromise will redound to the substantial benefit of the city." In this compromise agreement the city attorney did not participate, and did not agree thereto. On the approval of the compromise agreement by the general council, the amount of $177,093.48 was paid by appellee, as stipulated. The resolution approving the compromise agreement provided: "Sec. 2. That the city attorney be instructed to dismiss all suits pending between the city of Louisville and the Louisville Railway Company involving taxes claimed by the city against the said railway company." After these matters of compromise had been completed, the appellee filed an affidavit showing the compromise, payment, and order to the city attorney to dismiss suits, and asked the court to order dismissal. The court took the matter of dismissal under advisement, pending which the city attorney took proof on the controverted facts. The court, after having considered the motion, ordered the two actions dismissed, settled, over the protest and objection of the city attorney. There was no trial on the merits,--only the order of dismissal, from which these appeals are prosecuted.

Appellee has entered motions in this court to dismiss the appeals, the same reasons being given as are presented why the judgment and order of dismissal in the court below should be affirmed. It is contended by counsel for appellee that as appellant is a municipal corporation, and governed by the act of July 1, 1893, relating to cities of the first class, it has full power, by and through its general council, to manage the affairs of the city in such way and manner as they may deem best, and, while it is not contended that the general council could accept less than the sum due on a fixed liability, it may, on all doubtful or unliquidated matters, compromise with the party, and accept less than the full sum claimed, or may pay by way of compromise in excess of what they deem justly due. The contention of counsel, as we understand it, is that in all matters where the sum due the city is not finally fixed and certain, and where there is any controversy as to the right to collect or as to the sum due, the general council may agree with the party on any basis they deem proper, and finally adjust the matter, and thus bind the municipality the same as a natural person might bind himself by compromise agreement; that this power exists to compromise tax claims by the city, as well as any other that might arise. On the other hand, the city attorney contends that, because of section 52 of the constitution, the compromise is ultra vires and void, as beyond the power of the general council. Upon this question the whole case depends; for, if the compromise agreement is binding on appellee, the order of dismissal was proper, as there could have been no final recovery by appellant.

Section 52 of our constitution reads: "The general assembly shall have no power to release, extinguish or authorize the releasing or extinguishing, in whole or in part, of the indebtedness or liability of any corporation or individual to this commonwealth or to any county or municipality thereof." This provision was not contained in any previous constitution of this state, and this section has never been construed by this court, so far as we are advised. Similar constitutional provisions are found in the constitutions of the states of California, Colorado, Illinois, Louisiana, Montana, Missouri, Nebraska, Texas, and Wyoming, and possibly others that we have overlooked. The charter of appellant, at section 2742, Ky. St., sets forth the powers granted to it by the legislature. It reads: "That the inhabitants of cities of the first class are hereby continued corporate by the name and style which they now bear, with power to govern themselves by such ordinances and resolutions for municipal purposes as they may deem proper, not to conflict with this act, nor the constitution and laws of the state, nor of the United States; with power to contract and be contracted with; to sue and be sued; to defend and be defended in all courts; to acquire property for municipal purposes or otherwise; to hold the same and all property and effects now belonging to them in their own names or in the names of others, to the use of the city for the purposes and intents for which the same were granted or dedicated; to use, manage, improve, sell and convey, rent or lease the said property, and have the like powers over property hereafter acquired; to have a common seal, and change it at pleasure, and act with or without a seal." Section 2783 provides: "The general council shall have the power to pass, for the government of the city, any ordinance not in conflict with the constitution of the United States, the constitution of Kentucky and the statutes thereof." The question is presented, is the compromise agreement and the resolution approving the same contrary to the state constitution (section 52, supra)?

In the state of Louisiana, where the constitutional provision is almost identical with ours, a case arose questioning the validity of a compromise made by the city of New Orleans with the Crescent City Railroad Company for municipal taxes; the action being by an individual taxpayer. The court said "We pass to the question of the power of the municipal council to compromise with a delinquent taxpayer, and release him from payment of part or all of his taxes, while a suit for reduction of his assessment is pending before the courts. It is well settled that corporations have such powers as are given to them. There are special laws applying in matters of taxation. The constitution specially prohibits the general assembly, and, it follows, subordinate municipal corporations, from releasing or extinguishing any tax indebtedness to the state, or due to any of its municipalities. It devolves upon us to determine in the case before us for decision whether the tax indebtedness here of the Crescent City Railway was within the scope of the prohibition. There had been a final assessment made. While the assessing authorities have the rolls in their possession in an incomplete state, they may reduce the assessment, but not after the assessment has passed from their hands. All taxpayers have the right to appear before the board of assessors of the parish of Orleans until the 20th of March, and in other parishes until the first day in November, and should be heard regarding overvaluation of property, but not after those dates. The question of value of property assessed after the filing of the taxpayer's suit passes from the assessor and revising...

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