City Of Richmond v. Va. Ry. & Power Co

• Decision Date: 13 March 1919
• Citation: 98 S.E. 691
• Court: Virginia Supreme Court
• Parties: CITY OF RICHMOND . v. VIRGINIA RY. & POWER CO.

98 S.E. 691

CITY OF RICHMOND .

v.VIRGINIA RY. & POWER CO.

Supreme Court of Appeals of Virginia.

March 13, 1919.

Appeal from Chancery Court of Richmond.

Suit by the City of Richmond against the Virginia Railway & Power Company. Decree for defendant, and the plaintiff appeals. Reversed and remanded.

This is a suit in equity by the city of Richmond having for its object the enforcement of the lien of certain city taxes assessed in the year 1913 for that year, and also for the preceding years, 1909, 1910, 1911, and 1912, on certain real estate belonging to the Virginia Railway & Power Company located in the territory which was embraced in the city of Manchester prior to the annexation of the latter with the city of Richmond, which occurred in 1910. The bill prays for a renting or sale of said real estate, or a part thereof to enforce the payment of said taxes and interest thereon, and for general relief.

The real estate aforesaid consists of approximately 29 acres, including the Manchester Canal and certain appurtenant water rights.

The railway and power company acquired this real estate, along with a large amount of other property, by deed of date June 29, 1909, from certain special commissioners of court in execution of a decree of sale thereof, along with such other property, under which decree such company became its purchaser. The total consideration for such purchase and conveyance was $8,100, 000. It does not appear in evidence what part thereof was the consideration paid by the railway and power company for the said real estate. Such real estate was assessed by the State Corporation Commission at a valuation of $200,750 for state taxation for the years 1909 to 1913, inclusive, and it was on such valuation that the city taxes aforesaid were assessed; and there is a stipulation of counsel in the record which provides, in substance, that such valuation should be adopted by the commissioner in chancery in stating an account of the fee-simple value of said real estate under the requirements of a decree in the cause before us made in pursuance of the statute in such case made and provided.

The railway and power company's title to said real estate traces back of its said deed of 1909 to a sale and conveyance thereof by the city of Manchester in 1881 to the Rich-mond & Alleghany Railroad Company, a predecessor in title of the railway and power company.

It was covenanted in a written contract evidencing the last-named sale, and in the last-named conveyance, as follows:

"That a part of the consideration for the purchase by the party of the second part of said property is that the city of Manchester is to and does hereby exempt said property forever from taxation by its authorities, either direct or indirect, general or special, and also all improvements or other property now thereon or which may hereafter be added thereto."

$200,000 was the amount of the money consideration paid to the city of Manchester by its said vendee and its successors in title (the Virginia Railway & Power Company itself having paid a part thereof evidenced by certain bonds of the city of Manchester assumed by such vendee but what part does not appear in evidence), in accordance with the terms of the last-named sale and conveyance; of which, in accordance with the evidence in the cause, only about $100,000 was paid for the real estate, and the remaining $100,000 was paid as the consideration for three other things, viz.: (1) For said city tax exemption; (2) for the dismissal of a certain suit then pending of the city of Manchester against the Richmond & Danville Railroad Company for damages for alleged injuries done by it and others to certain water rights of the city and the release of all such claims of damages; and (3) for certain rights, so far as the city of Manchester could give them, of laying certain railway tracks in certain localities in such city and of contracting with another railroad company for the use of certain of its tracks in such city or for building tracks alongside or near to such tracks and connecting therewith, etc. But what portion of such $100,000 was for the said tax exemption, and what for the other subjects (1) and (2) aforesaid, does not appear in evidence. There is evidence in the cause, however, tending to show that such tax exemption "was a most vital part of the consideration, was thoroughly discussed by the attorneys for the railroad company and the city attorneys for the city of Manchester, * * * was considered by them to be proper and legal and necessary, " and that perhaps the purchase would not have been made but for the tax exemption covenant aforesaid.

At the time of said 1881 sale, the reservoir of the city of Manchester was supplied with water from the said Manchester Canal by pumps furnished and operated by the city. The contract of sale of 1881 aforesaid contained an agreement that the city of Manchester might "continue to have the use of the water from said canal to the same extent it now has, " but it was therein provided that in no event should this water be drawn off in excess of "a total of eighty feet (cubic) per second during twenty-four hours, this amount to include the supply to the reservoirs and the power necessary to pump the same"; and there was the additional provision that the city should have "the right of ingress, egress and regress to and from said pumps so long as they are so used as aforesaid." The deed aforesaid of 1881 conformed to such agreement on the subject of such water supply.

Such use of such water ceased following the annexation of the city of Manchester to the city of Richmond and before this suit was instituted.

There were a number of leases of certain of said water rights, from the city of Manchester to various manufacturing and other companies and persons, existing at the time of said 1881 sale and conveyance, which were for terms of years expiring at different times, but which it seems, from the evidence in the cause (the leases themselves not being in evidence), were renewable at the option of the leaseholders provided the terms thereof were complied with, which made such leases possible perpetual leases. By the contract and deed of 1881 aforesaid, the vendee and grantee thereunder took said real estate subject to such leases and covenanted "to carry out * * * the covenants" with the lessees in all of such agreements. It is shown in evidence, however, that the rental return to such vendee from such leases was some $5,000 per year in excess of all expense to it of carrying out such covenants, so that this undertaking was a benefit and not a burden, and has so continued in the hands of subsequent owners of said real estate down to the railway and power company, which received its conveyance of said real estate with notice of said leases and now holds such real estate subject to such of said leases as have not been forfeited under the provisions thereof.

The said real estate was acquired by the city (then the town) of Manchester in 1769, when Col. William Byrd, the founder thereof, as well as of the city of Richmond, laid off the town of Manchester in blocks and streets. The real estate involved in this suit was set apart as a "common forever." See Mayo v. Murchie, 3 Munf. (17 Va.) 358, decided in 1811, for a history of the subject. The town of Manchester was chartered by act of the Legislature in 1769 (8 Henlng's St. at Large, p. 421); and, under subsequent acts of Assembly authorizing it so to do, the leases aforesaid were made. In 1871, the town became the city of Manchester by act of Assembly approved March 20th of that year (Laws 1874, c. 118).

It is in evidence that the city of Manchester was in the year 1875 seriously financially embarrassed and so continued, or grew worse, until the sale aforesaid was made in 1881, having difficulty in paying the outstanding interest on its bonded indebtedness; but that such sale wholly relieved it from such embarrassment, and that the sale was madefor that purpose on the part of the city of Manchester.

The legislative authority under which the city of Manchester inserted said city tax exemption covenant in said 1881 contract of sale and deed is contained in Acts of Assembly 1874-75, p. 264, and, so far as material, is as follows:

" * * * It shall be lawful for the common council of the city of Manchester * * * to make sale of the Commons, including the water power * * * of said city, by such mode and upon such terms as said common council shall deem proper."

It is a concessum in the cause that the common council of the city of Manchester made the sale and conveyance aforesaid and included therein the city tax exemption covenant aforesaid.

It is in evidence that the city of Manchester, after 1881 and until its separate corporate existence was extinguished by the annexation aforesaid, assessed no city taxes against said real estate or leaseholds or other water rights appurtenant to such real estate. Prior to 1881, as such property belonged to such city, it, of course, assessed no city taxes against it and derived no revenue by taxation from it.

The decree under review dismissed the bill of the city of Richmond, holding, as per the memorandum opinion of the court made a part of the decree, in substance, that the tax exemption covenant aforesaid is valid, that it ran with the land, and that the railway and power company holds said real estate exempt from municipal taxation.

H. R. Pollard and Geo. Wayne Anderson, both of Richmond, for appellant.

E. R. Williams, A. B. Guigon, and T. J. Moore, all of Richmond, for appellee.

SIMS, J. (after making the foregoing statement). We will consider and pass upon the questions raised by the assignments of error and the positions of the appellant, the city of Richmond, and the railway and power company, the appellee, in their order as stated below:

1. Is the municipal tax exemption above set forth valid?

If such question depended for its decision upon the inquiry as to the...