Hughes & Co. v. City of Lexington

• Decision Date: 04 December 1925
• Parties: Hughes & Company v. City of Lexington.
• Court: United States State Supreme Court — District of Kentucky

211 Ky. 596

Hughes & Company v. City of Lexington.

Court of Appeals of Kentucky.

Decided December 4, 1925.

1. Municipal Corporations — Term "Engaged in Manufacturing," as Used in Statute Exempting Such from Taxation, Defined. — Term "engaged in manufacturing," as used in Ky. Stats., section 4019a-10, exempting machinery, products, and raw material engaged in manufacturing from city and other local taxation, is incapable of exact definition, and there is no hard and fast rule which can be applied, but each case must turn upon its own facts, having regard for sense in which term is used and purpose to be accomplished.

2. Municipal Corporations — One Engaged in Manufacture of Ice Cream Held Entitled to Exemption from Taxation. — Under Ky. Stats., section 4019a-10, one engaged in manufacturing ice cream, maintaining therefor large plant and employing many people and much machinery, held entitled to exemption from city taxes.

Appeal from Fayette Circuit Court.

R.H. THOMPSON and H.E. ROSS for appellant.

JAMES A. WILMORE, W.H. TOWNSEND and G.A. HUGUELET for appellee.

OPINION OF THE COURT BY CHIEF JUSTICE CLARKE.

Reversing.

Section 4019a-10, Kentucky Statutes, exempts from city and other local taxes certain kinds of property, including:

"(2) Machinery and products in course of manufacture of persons, firms or corporations actually engaged in manufacturing and their raw materials actually on hand at their plants for the purpose of manufacture."

Appellant is a corporation engaged upon a large scale in making and selling ice cream in the city of Lexington. It instituted this action against the city under the Declaratory Judgment Act to determine its claimed right to the exemptions granted by the above statute and, the single question for decision is whether it is "engaged in manufacturing" within the meaning of the statute.

That the definition of the term is a question of law and for the courts is plain, but the courts are practically agreed that it is incapable of exact definition and that there is no hard and fast rule which can be applied but that each case must turn upon its own facts, having regard for the sense in which the term is used and the purpose to be accomplished. City of Louisville v. Zinnmeister & Sons, 188 Ky. 570, 222 S.W. 958, 10 A.L.R. 1269; Standard Tailoring Company v. City of Louisville, 152 Ky. 504, 153 S.W. 764, 44 L.R.A. (N.S.) 303; City of Lexington v. Lexington Leader Company, 193 Ky. 107, 235 S.W. 31; City of Henderson v. Geo. Delker Co., 193 Ky. 248, 235 S.W. 732; 38 C.J. 972.

The sense in which the term is here used as well as the purpose intended to be accomplished by the act is quite plain. Obviously the term "engaged in manufacturing" was not employed in any technical sense but must be accorded its ordinary meaning as commonly understood. And, while incapable of exact definition, nevertheless it is true, as was stated in several of the above cases, that according to common understanding and generally speaking, manufacturing consists in the application of labor or skill by hand or machinery to material so that as a result thereof a new, different and useful article of commerce is produced.

It likewise is clear that the purpose the legislature intended to accomplish by the enactment was the encouragement of manufacturing as a state industry and for the public good; and that the exemption from local taxes was simply the means adopted for the accomplishment of that purpose. And it must not be overlooked that in so doing the legislature was but carrying into effect an amendment to the State Constitution, adopted a short time theretofore, and expressly authorizing it to divide property into classes and to determine what class or classes should be subject to local taxation.

However this court never has treated the act as a declaration of public policy to be liberally construed but uniformly has taken the opposite view.

In the older cases this and like acts have not only been treated as mere grants of special privilege but some of such acts have been construed so strictly that every doubt, however slight, seems to have been resolved against applicability.

In the more recent cases, although the rule of strict construction was held applicable, the term "engaged in manufacturing" has been much more liberally construed.

The extreme variance in the results obtained from an attempted application of the same rule is indicated by the fact that the manufacturing of clothing was held not within a like act in Standard Tailoring...