Elam v. Salisbury

• Decision Date: 11 April 1918
• Citation: 180 Ky. 142,202 S.W. 56
• Parties: ELAM v. SALISBURY, MAYOR, ET AL.
• Court: Kentucky Court of Appeals

202 S.W. 56

180 Ky. 142

ELAM v. SALISBURY, MAYOR, ET AL.

Court of Appeals of Kentucky.

April 11, 1918

Appeal from Circuit Court, Boyd County.

Application by O. M. Elam against William Salisbury, Mayor, and others for writ of mandamus to compel the assessment of omitted property. From an order dismissing the petition, petitioner appeals. Reversed and remanded.

J. F Stewart and John W. Woods, both of Ashland, for appellant.

Proctor K. Malin and John T. Diederich, both of Ashland, for appellees.

CLAY C.

On October 23, 1911, a fire occurred in the plant of the Ashland Leather Company, which consisted of about 34 buildings in the city of Ashland, equipped for tanning sole leather, belting etc. With the exception of the engine and boiler house, a one-story iron clad frame building, 50X60 feet, the bark shed, the leech house, a one-story frame building, 30X100 feet, the office, a one-story brick building 22X40 feet, the beam house, a one-story brick veneer building, 66X176 feet and the hide house, a two-story brick veneer building, all the buildings, machinery; equipment, material, and supplies used by the company for the purpose of operating its tannery were destroyed. Thereupon several cities throughout the United States offered the company a free site and exemption from taxation as an inducement to the location of their new plant in such cities. At the same time the commercial organizations of the city of Ashland offered to donate money for the purpose of purchasing additional real estate, and agreed that they would endeavor to procure the adoption of an ordinance by the board of council exempting the property of the company from taxation for a period of five years if the company would erect its new plant and continue its business in that city. This proposition was accepted, and on November 8, 1911, the board of council passed the necessary ordinance. Thereafter the company rebuilt its plant, and continued to carry on its business in the city of Ashland.

On January 9, 1915, Oliver M. Elam, a citizen and taxpayer of the city of Ashland, served a written notice on the mayor and each member of the board of council that the action of the board of council, exempting the property of the company from taxation, was void, and requesting them to assess the property for the years 1912, 1913, and 1914 as omitted property, but the board of council refused to assess the property.

On February 22, 1915, Elam instituted this proceeding for a mandamus, compelling the mayor and the members of the board of council to assess the property for the years 1912, 1913, and 1914. To this proceeding the Ashland Leather Company and the board of education of the city of Ashland were made party defendants. To the petition the Ashland Leather Company filed a demurrer, which does not seem to have been acted upon, Thereafter the Ashland Leather Company and the mayor and members of the board of council, filed separate answers, pleading, in substance, that the property of the company was exempt from taxation by virtue of the ordinance adopted November 8, 1911. On June 13, 1916, the Ashland Leather Company filed an amended answer, pleading that at a regular meeting of the board of council held on June 5, 1916, said board duly assessed all of the property of the company for the years 1912, 1913, and 1914, 1915, and 1916, and directed the city collector and city attorney to collect of the company the taxes so assessed for said years. Thereupon plaintiff filed a reply, pleading that by the resolution of June 5, 1916, the property of the company was assessed for the year 1912 at $10,000, and for the years 1913, 1914, 1915, and 1916, at $75,000; that the actual cash value of the company's property on April 1, 1912, was $624,500, on April 1, 1913, $924,500, on April, 1, 1914, $1,020,300, on April 1, 1915, $1,030,300, and on April 1, 1916, $1,075,300; and that the assessed value placed on said property for the years in question was many thousand dollars less than its fair cash value for those years, and that the assessments were made in a lump sum, without notice to the Ashland Leather Company, without obtaining any information as to the value of the property, and without a separate finding of the value of the different items constituting such property. He further pleaded that the resolution of the board was fraudulent, and was the result of fraud, covin, and collusion between it and the Ashland Leather Company; that the action of the board in assessing the property of the company for taxation at many thousand dollars below its cash value was illegal and void, in that it was arbitrary and capricious, and evinced a purpose to evade due and faithful performance of its duty, and was taken for the purpose of and with the fraudulent intent to anticipate the rulings of the court. It was further charged that the acts of the board were done viciously, maliciously, and willfully, for the purpose of cheating the city and board of education out of large sums due by the defendant as taxes for the years in question. Thereupon the court sustained a demurrer to the reply and dismissed the petition. Elam appeals.

1. The first question presented is, Was the exemption ordinance valid? Section 170 of the Constitution provides:

"The General Assembly may authorize any incorporated city or town to exempt manufacturing establishments from municipal taxation, for a period not exceeding five years, as an inducement to their location."

Pursuant to the above provision, the Legislature enacted subsection 32, section 3490, Kentucky Statutes, giving authority to the boards of council of fourth class cities by ordinance to "exempt manufacturing establishments and the machinery from taxation for a period not exceeding five years from the establishment in such city." Pursuant to this statute, the ordinance in question was adopted. In the case of Victor Cotton Oil Co. v. City of Louisville, 149 Ky. 149, 148 S.W. 10, the question arose whether the property of the Victor Cotton Oil Company was exempt from taxation under an ordinance of the city of Louisville passed pursuant to section 170 of the Constitution, and section 2980a, Kentucky Statutes. It appeared that the Globe Refining Company had ceased to do business, and its plant would have been dismantled had it not been for its purchase by the Victor Cotton Oil Company, a new corporation. In holding that the property of the Victor Cotton Oil Company was not exempt from taxation, the court said:

"The plain purpose of the ordinance, as well as the constitutional provision, is to induce the location of new manufacturing enterprises in the city. It was not contemplated by either the Constitution, the statute, or the ordinance that manufacturing establishments, already established in the city, shall be exempt from taxation for five years, when they change hands. The ordinance contemplates the exemption of new manufacturing enterprises; and the immunity from taxation is allowed to induce their location in the city. It does not include manufacturing establishments already in the city, although for any reason not in operation. Exemptions from taxation are strictly construed. They are never construed as including things not fairly within the meaning of the words read as they are written."

Here the Ashland Leather Company did not establish a new manufacturing enterprise in the city of Ashland. Though the principal portion of its plant had been destroyed by fire, several substantial buildings remained intact. While several new buildings were erected and the plant greatly enlarged, this was only a reconstruction of the business already located in Ashland and a continuation of the old business thereafter established. Since the exemption is granted as an inducement to the location of new manufacturing enterprises, we are not prepared to depart from the rule that exemptions from taxation should be strictly construed, and hold that the exemption may be granted to a manufacturing concern already located as an inducement to continue in the city and not move its plant elsewhere. We therefore conclude that the exemption ordinance is invalid on the ground that it is not authorized by the Constitution.

2. The next question is whether the board of council is charged with the duty of assessing the property in question. Section 3542, Kentucky Statutes provides:

"If for any reason, any property subject to taxation has not been listed, the council may assess same; (but it) may not be taxed or listed for more than five (5) years. * * *"

The point is made that because of the use of the word "may" the power conferred on the council is one which it may or may not exercise in its discretion. The general rule is that permissive words in respect to courts or officers are imperative in those cases in which the public or individuals have a right that the power so...