Danville Traction & Power Co v. City Of Danville

• Decision Date: 10 June 1937
• Citation: 191 S.E. 592
• Court: Virginia Supreme Court
• Parties: DANVILLE TRACTION & POWER CO. v. CITY OF DANVILLE.

191 S.E. 592

DANVILLE TRACTION & POWER CO.

v.CITY OF DANVILLE.

Supreme Court of Appeals of Virginia.

June 10, 1937.

Appeal from Corporation Court of Danville; Henry C. Leigh, Judge.

Action by the City of Danville against the Danville Traction & Power Company. From a judgment for plaintiff, defendant appeals.

Affirmed.

Argued before CAMPBELL, C. J., and HOLT, HUDGINS, GREGORY, BROWNING, EGGLESTON, and SPRATLEY, JJ.

Harris, Harvey & Brown and Crews & Clement, all of Danville, for plaintiff in error.

A. M. Aiken, of Danville, for defendant in error.

SPRATLEY, Justice.

The city of Danville in April, 1936, instituted an action by notice of motion against the Danville Traction & Power Company, to recover the sum of $10,337.60 with certain interest thereon. This amount was claimed to be due by virtue of a contract, in the form of a franchise ordinance, allegedly providing for compensation for use of the city's streets. Neither party desiring a jury, the case was submitted to the judge of the corporation court of Danville, who, after hearing the evidence and argument of counsel, found for the plaintiff.

The Danville Traction & Power Company, hereinafter called the defendant, is the successor corporation to the Danville Street Car Company. It has taken over and possesses all of the rights, privileges, and franchises of the former corporation, granted under the ordinance in question here, subject to all of the obligations and duties enforced thereunder.

The ordinance was enacted in 1899, and was to continue for fifty years from and after the 1st day of January, 1900. So much of it as is pertinent to our inquiry reads as follows:

"Sec. 627. (1) The Danville Street Car Company, a corporation duly chartered, organized and existing under the laws of the State of Virginia, its successors and assigns, in addition to the rights, privileges and franchises heretofore granted to the said company by the said city, shall have under and subject to the conditions and restrictions herein contained and declared, the further rights, privileges and franchises, and the same are hereby granted to said company, its successors and assigns, to locate, lay, construct, operate and maintain its street railway within the limits of the City of Danville, for the carrying of passengers by, over and along the following streets and routes, namely: "(Here follows a list of streets and routes.)

"(2) The said Danville Street Car Company, its successors and assigns in addition to the aforesaid rights, privileges and franchises, shall have, under and subject to the conditions and restrictions herein contained and declared, the further rights, privileges and franchises and the same are hereby granted to said company, its successors and assigns, to locate, lay, construct, operate and maintain its street railway within the limits of the said City of Danville for the carrying of passengers by single or double track in, over and along Union Street, Jefferson Street, etc., * * * or any part of said street, and to accomplish these ends and for the purpose of operating the railway over the streets, avenues and bridge aforesaid, to lay and put in all necessary sidings and turnouts, and to erect its poles for trolley and feed wires along the sidewalks of the said streets and avenue and all other appliances and appurtenances necessary and proper, and to string its wires upon said poles and over and across said iron free bridge."

"(19) That the City of Danville, respecting and continuing its assent to the exemptions from municipal taxation heretofore granted to the said Danville Street Car Company, hereby expressly reserves the right to levy a property tax on all the property to be constructed and owned hereunder within the city limits by said company, its successors and assigns, at the same rate other property within the said city is taxed * * * and that in consideration of the rights, privileges and franchises herein granted the said company, its successors and assigns, shall annually after January 1, 1901, pay to said city, as license taxes are paid, an amount equal to one-half of one percentum of the first forty thousand dollars of the gross receipts of said company, its successors and assigns, from all the railways operated by said company, its successors and assigns, and one percentum on the said gross receipts in excess of said forty thousand dollars." (Italics supplied.)

The property tax of the traction company due to the city of Danville and its franchise tax due to the state of Virginia have been paid, and are not in question here. The stated percentage specified in the latter part of section 19 of the ordinance has been paid each year through the year 1927. No legal action was taken by the city to collect for subsequent years until the institution of this action in 1936. It appears that certain assessing and collecting officials of the city of Danville termed the percentage payment as a license or franchise tax, and so billed the traction company and so receipted it for whatever payments were made. The company raised no questions as to the nature of the obligation under which it made such payments.

The traction company now contends that the payment provided to be made under the ordinance is a franchise or license tax, and, therefore, not collectible under the Constitution and statutes of the state. The city takes the position that it is a contract or agreement by ordinance, providing for compensation for the use of its streets and avenues.

It is agreed by both parties that if the ordinance provides for a franchise or license tax, the city cannot recover; but if it provides for compensation for use of the streets, the city is entitled to recover.

Section 177 of the Constitution and section 216 of the Tax Code 1936 (Code 1936, Appendix p. 2469, unchanged since 1927, so far as we are here concerned), both provide that the annual state franchise tax upon gross earnings, required of railway corporations and the ad valorem taxes on their property, shall be in lieu of all taxes or license charges whatsoever. The Constitution and the statute, however, both contain a proviso that nothing contained therein shall annul or...