City of Newport v. Commonwealth

• Decision Date: 26 April 1899
• Parties: CITY OF NEWPORT et al. v. COMMONWEALTH. [1]
• Court: Kentucky Court of Appeals

50 S.W. 845

106 Ky. 434

CITY OF NEWPORT et al. v. COMMONWEALTH. ^[1]

Court of Appeals of Kentucky.

April 26, 1899

Appeal from circuit court, Franklin county.

"To be officially reported."

Action by the commonwealth against the Newport Waterworks and the city of Newport to recover taxes. Judgment for plaintiff, and defendants appeal. Affirmed.

Horace W. Root, for appellants.

W. S Taylor and M. H. Thatcher, for the Commonwealth.

DU RELLE, J.

The secretary of the Newport Waterworks made a verified statement, as required by section 4078, Ky. St., in order for the board of valuation and assessment to determine the value of its franchise for taxation for the year 1894, upon which statement that board proceeded to value and assess the corporate franchise of the Newport Waterworks.

Suit was brought in the Franklin circuit court for the taxes of that year, alleging that the Newport Waterworks was a corporation, having and exercising privileges and franchises not allowed by law to natural persons. Summons having been served upon the president and chief officer of the board of waterworks trustees, there were filed a demurrer, a special demurrer for want of jurisdiction of the defendant, the Newport Waterworks, and an answer, in which the Newport Waterworks alleged that there did not and never had existed a corporation of that name, and denied that it was a corporation, or was organized or doing business as such. A few days after the filing of these pleadings, and before they were acted upon, the commonwealth amended its petition making the city of Newport a party defendant, alleging that it was a municipal corporation, a city of the second class that it owned and operated the Newport Waterworks; that, by the terms of its charter, it was authorized to, and did, own and operate the waterworks, and charge tariff rates for water, as other companies; that the waterworks were not used by the city for governmental purposes, but as a private enterprise, the accounts thereof being kept distinct and independent of the governmental affairs of the city, all citizens who used the water being charged the regular tariff rate; that the city, so far as the waterworks and waterworks property were concerned, was engaged in the business of an ordinary water company, operating the works for profit; that while not a corporation, the Newport Waterworks was used and operated as a water company, and had a secretary, duly elected by the city of Newport, the owner of the property, and duly selected as such secretary by the commissioners of the waterworks, who had theretofore been selected as such commissioners by the city, as provided in its charter; and that by said secretary the report to the board of valuation and assessment was made. Subsequently, the city entered its objection to the filing of the amended petition, and moved to set aside the filing, on the ground that neither at the time of the institution of the action, nor before, nor since was there any such defendant or corporation as the Newport Waterworks, and, therefore, there was no action commenced, or in being, to which the amendment could be made. This objection, and the demurrer to the petition, were overruled, and a judgment rendered, which was afterwards, by agreement, set aside, and an answer filed by the city of Newport pleading to the merits. An agreed statement of facts was filed, the case submitted, and judgment rendered against the city for the tax.

It is first urged that it was error to permit the amended petition to be filed, making the city of Newport a party defendant upon the ground that there was no action pending against any natural or artificial person, and, therefore, nothing to be amended; that an amendment presupposes a real action or proceeding already pending in court; that, in this case, there was nothing to which an amendment could go, because there was no petition stating, or attempting to state, a cause of action against any real person, natural or artificial; and that the original petition was a nullity. It is further urged that this case is not one of misnomer, or of a suit against a real person by a wrong name, or against one person erroneously sued under the name of another,--in which cases it seems to be conceded that an amendment might be made, under the authority of section 134 of the Civil Code of Practice, and the cases of Heckman's Adm'r v. Railroad Co., 85 Ky. 631, 4 S.W. 342, and Railroad Co. v. Hall, 12 Bush, 131. Upon the other hand, it is urged on behalf of the commonwealth that as the city, by its own officers, caused the report for franchise tax to be made in the name of the Newport Waterworks, and the waterworks were distinct in management from the city government, being controlled by commissioners selected by the city, and by whom water rates were fixed, the waterworks were, in effect, a quasi corporation, or a company or association, within the meaning of sections 4077, 4078, Ky. St. But, without going into that question, it seems to us that the amendment and the original petition may be considered together as an original petition against the city of Newport, to which the city entered its appearance without reservation. Nor does the case of Houston v. Kidwell (Ky.) 14 S.W. 377, cited by counsel for appellant, seem to us to be in conflict with this view. That was an action for a new trial. The petition was erroneously dismissed. Afterwards, an amended petition was filed alleging the discovery of additional evidence, but which was merely cumulative. The judgment dismissing the original petition was not appealed from, and it was held that the amended petition could not be treated as a petition, for the reason that the relief sought was res adjudicata by the final judgment on the first petition, from which no appeal had been taken. Nor does the citation from Newm. Pl. & Prac. p. 288, apply. That refers to a case where the wrong person brings an action for a liability existing, but existing in favor of another person than the plaintiff. And, while it is there said that "the foregoing rules apply, for the most part, equally to a mistake in the name of the defendant as of the plaintiff," that does not apply to a case like this, where the original petition is good upon its face, but a mistake has been made in the name of the party upon whom the liability rests, as the owner of specific, described property. In such case, there would seem to be little difference whether the owner was sued originally by the name of another existing person (as in the Heckman's Adm'r and Hall Cases, supra) or was sued by the name of a nonexistent person. The question whether the city might have taken advantage of the mistake by special entry of its appearance and dilatory pleading is not here presented, as it appeared without reservation. The answer presents several defenses: First. That the city was authorized, by act of the legislature, to build and operate a waterworks system, and has built such system, and operates it through a board styled the "Commissioners of Waterworks," having issued $800,000 of bonds, $708,000 of which are still outstanding; that it exercises no right or privilege with respect to its waterworks which a natural person might not do; that its waterworks are situated within its corporate limits, or upon its own land outside the limits; that the report made by the secretary of that board was erroneous; that, including the interest upon the bonded debt created to build and operate the waterworks, the expense of operation was more than $35,000 in excess of the actual receipts; that the waterworks department of the city is not a paying institution, and its actual receipts in any year since the act authorizing it to be built have not been sufficient to meet both its operating expenses and the interest upon the bonds issued to build it, but that the city, by the annual levy and collection of a tax, meets and pays off the interest and bonds of the waterworks falling due in each year; that it will not be self-sustaining for many years to come; and that its tangible property used in connection with the waterworks system was, in the year 1894 and subsequent years, assessed by the state for taxation, and taxes thereon paid. Second. That the city exercises no special or exclusive privileges or franchises not allowed by law to natural persons, with respect to its waterworks; that the works are used for governmental purposes, and not as a private enterprise; that the accounts of the waterworks are not kept distinct and independent of the governmental affairs of the city; that it is not engaged in the business of an ordinary water company, and that the waterworks are not a private enterprise, operated for profit. Third. That, by an act adopted March 8, 1878, it was provided that the waterworks should be exempt from county and state taxation so long as it should be unproductive; and that it has been unproductive since its establishment. Fourth. That the imposition of a franchise tax is in violation of the state constitution, and also in violation of subsection 1, § 10, art. 1 of the federal constitution, prohibiting the passage of a law...