Consolidation Coal Co. v. Martin

• Decision Date: 07 June 1940
• Docket Number: No. 8152.,8152.
• Citation: Consolidation Coal Co. v. Martin, 113 F.2d 813 (6th Cir. 1940)
• Parties: CONSOLIDATION COAL CO. v. MARTIN et al.
• Court: U.S. Court of Appeals — Sixth Circuit

113 F.2d 813 (1940)

CONSOLIDATION COAL CO. v.MARTIN et al.

No. 8152.

Circuit Court of Appeals, Sixth Circuit.

June 7, 1940.

COPYRIGHT MATERIAL OMITTED

Allen Prewitt, of Frankfort, Ky. (George B. Martin, of Catlettsburg, Ky., Edward C. O'Rear and Allen Prewitt, both of Frankfort, Ky., and Tusca Morris, of Fairmont, W.Va., on the brief), for appellant.

Jesse K. Lewis and A. E. Funk, both of Frankfort, Ky. (Hubert Meredith, A. E. Funk, and Jesse K. Lewis, all of Frankfort, Ky., on the brief), for appellees.

Before SIMONS, ALLEN, and ARANT, Circuit Judges.

ALLEN, Circuit Judge.

This is an appeal from a decree of the District Court in an action for declaratory relief under Title 28 U.S.C. § 400, 28 U. S.C.A. § 400, seeking a temporary and permanent injunction against a certification of assessments for a franchise tax under §§ 4077 to 4082, inclusive, Carroll's Kentucky Statutes.Appellant attacks that part of the decree which holds that in relation to the operations hereinafter described, it is liable for a franchise tax for each of the years 1933, 1934, and 1935, under § 4077, Carroll's Kentucky Statutes, which in its pertinent portion reads as follows:

"Every railway company or corporation, gas company, water company, ferry company, bridge company, street railway company, express company, electric light company, electric power company, telegraph company, press dispatch company, telephone company, bus line company, palace car company, dining car company, sleeping car company, chair car company, tank car company, coal car company, pipe line company, and every other like company, corporation or association, also every other corporation, company or association having or exercising any special or exclusive privilege or franchise not allowed by law to natural persons, or performing any public service, shall, in addition to the other taxes imposed on it by law, annually pay a tax on its franchise to the state, and a local tax thereon to the county, incorporated city, town, and taxing district, wherein its franchise may be exercised."

Appellant, a Delaware corporation engaged in the mining of coal, has properties located in five counties and twenty-two taxing districts of Kentucky.It constructed electric power plants at Van Lear and at Jenkins, and bought an electric transmission line for the purpose of operating its mining machinery and lighting its various buildings and tenant-houses.

During the period in controversy appellant owned the entire territory of the city of Van Lear, Kentucky, with the exception of the right of way owned by the Chesapeake & Ohio Railway Company and certain buildings owned by the board of education of Van Lear.Substantially the same situation existed with reference to the town of Jenkins, except that a small area known as East Jenkins, within the corporate limits of Jenkins, was privately owned.In the conduct of its coal-mining business appellant has built and maintained numerous dwelling-houses, school buildings, churches, structures for recreation, and other buildings essential not only for the family life of its employees, but for the community life of the mining camps.During the years in question appellant has furnished electric light under contract for its tenants, who have paid an established charge therefor, and also for certain non-tenants, and has sold the greater part of its surplus power to the Elk Horn Coal Corporation, a mining company.The average percentage of the surplus power thus disposed of to Elk Horn is about 99% a year.While appellant alleges that it has repeatedly refused to sell power to certain individuals (a fact which upon the motion to dismiss must be taken as true), during the years involved it has either sold power direct to practically all who applied for or used it, or has sold it to individuals who in turn have resold it to others.

Appellees have assessed a franchise tax upon that part of appellant's property and business which is directly connected with the sale of electric light and power, under § 4077, Carroll's Kentucky Statutes.

It is in brief appellant's contention that providing electric light current to its tenants, employees and a few non-tenants is an activity purely incidental to its coal mining business, not such as to constitute it a public utility.It urges that the sale of its surplus power generated for the purpose of its mining operations to another mining company under private contract does not constitute it a public utility, and that the insignificant separate sales to non-tenants fail to alter its status as a private producer of electric power.

The statute establishes three classes of companies or corporations which are subject to the tax: (1) those whose business is expressly named in the section and those engaged in like or similar business; (2) those which have or exercise any special or exclusive privilege or franchise not allowed by law to natural persons; (3) those performing any public service.Louisville Tank Line Co. v. Commonwealth, 123 Ky. 81, 93 S.W. 635.It was within the power of the legislature to declare by statute what corporations and companies are subject to taxation thereunder.Providence Banking Co. v. Webster County, 108 Ky. 527, 57 S.W. 14.

If appellant's operation falls within any one of these three classifications, the tax is rightly assessed.

In construing § 4077, we are bound to follow the decisions of the courts of Kentucky.Morehead v. New York ex rel. Tipaldo, 298 U.S. 587, 609, 56 S.Ct. 918, 80 L.Ed. 1347, 103 A.L.R. 1445;Bacon & Sons v. Martin, 305 U.S. 380, 59 S.Ct. 257, 83 L.Ed. 233.

Under the Kentucky decisions, the decree of the District Court was...