Commonwealth v. West India Oil Refining Co.

• Decision Date: 17 June 1910
• Citation: 138 Ky. 828,129 S.W. 301
• Parties: COMMONWEALTH v. WEST INDIA OIL REFINING CO.
• Court: Kentucky Court of Appeals

129 S.W. 301

138 Ky. 828

COMMONWEALTH v. WEST INDIA OIL REFINING CO.

Court of Appeals of Kentucky.

June 17, 1910

Appeal from Circuit Court, Jefferson County, Chancery Branch, Second Division.

"To be officially reported."

Action by the Commonwealth against the West India Oil Refining Company. From a judgment for plaintiff for less than the relief demanded, both parties appealed to the circuit court where a judgment was rendered in favor of defendant, from which the Commonwealth appeals. Affirmed.

M. J Holt, for the Commonwealth.

Humphrey & Humphrey, for appellee.

HOBSON J.

The West India Oil Refining Company is a Kentucky corporation. Its principal place of business is in Jefferson county, but it has not transacted business of any kind in Jefferson county or in the state of Kentucky, or owned any property in the state, or had any officers or employés located in the state. All of its property has been, and is, located in Cuba and Porto Rico in the West Indies. It owns and has owned refineries in Cuba and Porto Rico. Its business is all done there. Its money was earned and kept there, and its accounts were due and payable there. On these facts the Jefferson county court held that the cash was not liable for taxation in Kentucky, but that the accounts were liable for taxation. Both parties appealed to the circuit court, which held that neither the cash, nor the deposit in bank there, nor the accounts had a taxable situs in the state of Kentucky, and dismissed the petition. From this judgment the commonwealth appeals.

Section 172 of the Constitution provides that "all property not exempt from taxation by this Constitution shall be assessed for taxation at its fair cash value." Section 4020, Ky St. (Russell's St. § 5912), provides that all "personal estate of persons residing in this state and of all corporations organized under the laws of this state whether the same be in or out of the state, including intangible property" shall be subject to taxation unless exempt. The appellee is a corporation organized under the laws of this state, its legal residence is in this state, and therefore, if the statute is constitutional, the property is taxable here. The validity of the statute was before the United States Supreme Court in Union Refrigerator Transit Company v. Kentucky, 199 U.S. 194, 26 S.Ct. 36, 50 L.Ed. 150. In that case a Kentucky corporation owned cars which had no situs in Kentucky. It was held by the Supreme Court that the Kentucky statute was unconstitutional, and that the cars could not be taxed here, as they had no situs here. That case follows Del., etc., R. R. Co. v. Pennsylvania, 198 U.S. 341, 25 S.Ct. 669, 49 L.Ed. 1077, where a similar ruling was made. In that case in taxing the franchise of the railroad, the state of Pennsylvania refused to deduct the value of coal which the railroad company had mined in Pennsylvania and shipped to other states. It was held that to assess this coal and tax it when it had no situs within the state was a taking of property without due process of law.

In Commonwealth v. Dun & Co., 126 Ky. 108, 102 S.W. 859, 31 Ky. Law Rep. 561, 10 L.R.A. (N. S.) 920, it appeared that Dun & Co. were nonresidents of the state, but had established a business in the state and managed it by resident agents having money in the bank, and debts due it here accumulated from the business. The court held the property taxable here; and after pointing out that the court had previously determined that the property of a nonresident temporarily in the state does not acquire a situs here, but is taxable at the domicile of the owner, the court said: "But this court has never held that when a nonresident of this state establishes a business in this state, from which money is derived, and other property is accumulated, such property should be relieved from taxation. In our opinion the accumulations from the business of appellee are not temporarily in this state, in the meaning of the decisions referred to. In this case we have a nonresident with an established business, agents residing here who manage it, and an income of over $40,000 annually. Its business received the same protection as the business of the citizens under the laws of the state, and should be compelled to share equally the burden. The obligation to pay taxes on property for the support of the government arises from the fact that it is under the protection of the government. Persons should not be permitted to avail themselves of the benefit of the laws of the state in the conduct of their business, within its limits, and then escape their due contribution to the public needs." This opinion followed the case of New Orleans v. Stempel, 175 U.S. 309, 20 S.Ct. 110, 44 L.Ed. 174, Louisville Ferry Co. v. Kentucky, 188 U.S. 385, 23 S.Ct. 463, 47 L.Ed. 513, and Board of Assessors v. Comptor National, 191 U.S. 388, 24 S.Ct. 109, 48 L.Ed. 232. Following these opinions this court, in Higgins v. Commonwealth, 126 Ky. 211, 103 S.W. 306, 31 Ky. Law Rep. 653, where the question was presented whether notes and other securities belonging to a nonresident of this state, but in the hands of a resident fiduciary for the purpose of controlling and investing them, were taxable at his place of residence in Kentucky, held them taxable, and among other things said: "There is, of course, a marked distinction between what is known as corporal personal property, such as live stock, lumber, or other material, and intangible personal property, like notes, bonds, and...