Cumberland Telephone & Telegraph Co. v. Hopkins

• Decision Date: 31 January 1906
• Citation: 121 Ky. 850,90 S.W. 594
• Parties: CUMBERLAND TELEPHONE & TELEGRAPH CO. v. HOPKINS, Police Judge, et al. LOUISVILLE & N. R. CO. v. SAME.
• Court: Kentucky Court of Appeals

90 S.W. 594

121 Ky. 850

CUMBERLAND TELEPHONE & TELEGRAPH CO. v. HOPKINS, Police Judge, et al.

LOUISVILLE & N. R. CO. v. SAME.

Court of Appeals of Kentucky.

January 31, 1906

Appeal from Circuit Court, Henry County.

"To be officially reported."

Separate suits by the Cumberland Telephone & Telegraph Company and the Louisville & Nashville Railroad Company against W. A Hopkins, police judge of the city of Eminence, and another to prohibit the enforcement of an occupation tax. From a judgment dismissing the petitions, plaintiffs appeal. Reversed.

Willis & Todd, Henry L. Stone, Thos. B. Harrison, Jr., and John Harding, for appellants.

G Allison Holland and D. A. Sachs, for appellees.

O'REAR J.

The two cases styled above present a common question, though the former presents in addition a single other question for decision. The cases were heard together in this court. Appellant telephone company operated a telephone exchange in the town of Eminence, in connection with its long-distance telephone service, extending through that town to other and remote points in and out of this state. Appellant Louisville & Nashville Railroad Company is a chartered railroad corporation, created by the laws of this state and operating lines of railroad in and out of the state, one of which passes through the town of Eminence. Eminence is a city of the fifth class of this state. Among its corporate powers conferred by the Legislature is section 3637, subsec. 4, Ky. St. 1903, which reads: "To impose and collect license fees and taxes on stock used for breeding purposes, and on all franchises, trades and occupations," but "not in conflict with the Constitution or laws of this State or of the United States." This power was expressly allowed by the Constitution by section 181 of that instrument, which is as follows: "Sec. 181. The General Assembly shall not impose taxes for the purposes of any county, city, town, or other municipal corporation, but may by general laws confer on the proper authorities thereof respectively the power to assess and collect such taxes. The General Assembly may, by general laws only, provide for the payment of license fees on franchises, stock used for breeding purposes, the various trades, occupations and professions, or a special or excise tax; and may, by general laws, delegate the power to towns, cities and other municipal corporations, to impose and collect license fees on stock used for breeding purposes, on franchises, trades, occupations and professions." The city of Eminence by its council enacted ordinances imposing a license fee of $50 per annum upon the business for handling for pay telephone messages in the city, and upon the business of selling railroad tickets in the city of Eminence or for handling freight for pay in said city an annual license fee of $25. Penalties were provided for carrying on either business without first having paid the license fees. These suits were brought against the police judge and the city for a writ of prohibition to test the constitutionality of the ordinances, each appellant being proceeded against for their violation. The circuit court dismissed the petitions, thereby holding the ordinances valid.

Railroad and telephone companies are required to pay to the state a franchise tax, as well as being required to pay a franchise tax to each county, city, or town in which it may be exercised, if such municipality imposes an ad valorem tax. Section 4077, Ky. St. 1903; section 174, Const. These companies are included in what are called "public service corporations," exercising powers and having privileges not enjoyed by natural persons or other corporations. The main point of contention is, what is the franchise upon which these taxes are imposed? A corporation's franchise may be one thing or another. The word is not always used with reference to the same meaning. It is sometimes regarded as the mere right to be a corporation. Again, it is treated as the right to do the particular and peculiar business for which the corporation was created. It is also spoken of as the right to do its business in a certain locality, as, for example, where the Constitution requires certain franchises to be sold by cities and towns. Section 164, Const. The other two qualities of a corporate franchise may have existed before the acquisition of the latter, and are therefore in a sense quite distinct from it. For the purposes of taxation, it may be all of them and more. Henderson Bridge Co. v. Commonwealth, 99 Ky. 623, 31 S.W. 486, 29 L. R. A. 73. While corporate franchises have long been recognized factors of incorporated beings, they have only recently come to be regarded as separate subjects of taxation. In the rapid development of these artificial creatures of the law (corporations) as means of holding and using property in active business, the corporate franchise has come to have a recognized value of enormous magnitude, when viewed in the aggregate. It is not the least --indeed, frequently is the greater--element of the corporation's wealth. That it should be taxed, should be made to bear its share of the public burden together with all other wealth, is fundamentally true in justice and in political economy. So far, no exact definition of it has been given upon which the courts have felt willing to finally rest the matter. And perhaps it is well enough for the present that this is so. Still certain qualities of the corporate franchise are so well known and classified as to be beyond dispute as being elements of its taxable value. The mere right to be a corporation is taxed, in the exacting of the organization tax upon its creation. This is collected once, and absolutely without reference to its property or whether it ever engages in the business contemplated by its articles. Section 4226, Ky. St. 1903. The right of certain corporations to do business in a city, which it must acquire (if acquired since the present Constitution) by purchase of the franchise from the city, includes the compensation for occupying the public thoroughfares of the city. But it also may include more than that, which will be further noticed in this opinion. Each of these are qualities of the general corporate franchise. Yet, as used in the taxing statute of this state, the word has a more comprehensive meaning. It is treated as property. It is property. It adds materially to the value of the tangible property of the corporation. The right to exercise the powers allowed to the corporation by law, the peculiar and exceptional privileges it enjoys, partaking partially of the quality of sovereignty, give to its use of its tangible property, as well as to its intangible property comprised within its capital stock, a value which otherwise could not attach to them, so that this privileged use becomes to the visible assets of the corporation what the leaven is to the loaf. While it may not be laid hold of separately, it is...