Illinois Cent. R. Co. v. Commonwealth

• Citation: 128 Ky. 268,108 S.W. 245
• Parties: ILLINOIS CENT. R. CO. v. COMMONWEALTH.
• Decision Date: 27 February 1908
• Court: Kentucky Court of Appeals

108 S.W. 245

128 Ky. 268

ILLINOIS CENT. R. CO. v. COMMONWEALTH.

Court of Appeals of Kentucky.

February 27, 1908

Appeal from Circuit Court, Franklin County.

"To be officially reported."

Action by the commonwealth of Kentucky against the Chesapeake, Ohio & Southwestern Railroad and the Illinois Central Railroad Company. From a judgment for plaintiff, defendant Illinois Central Railroad Company appeals. Affirmed.

Trabue Doolan & Cox, Hazelrigg, Chenault & Hazelrigg, and J. M Dickinson, for appellant.

T. L Edelen, C.J. Whittemore, and R. B. Franklin, for appellees.

HOBSON J.

This action was filed in the Franklin circuit court on December 5 1902, by the commonwealth of Kentucky to recover of the Chesapeake, Ohio & Southwestern Railroad and the Illinois Central Railroad the franchise tax of the Chesapeake, Ohio & Southwestern Railroad Company for the years 1896 and 1897 upon an assessment made on January 20, 1898, of which notice was given on that date and final notice was given on February 21, 1898. The circuit court dismissed the petition as to the taxes for the year 1896, but gave judgment against the Illinois Central Railroad Company for the tax for the year 1897. From this judgment, the Illinois Central Railroad Company appeals.

The report upon which the tax for the year 1896 was assessed was made on September 15, 1895, by John Echols as the general manager of the Chesapeake, Ohio & Southwestern Railroad Co. The report upon which the tax for the year 1897 was assessed was made by the Illinois Central Railroad Company, which had, in some way not explained in the record, come into possession of the railroad. The circuit court dismissed the petition of the commonwealth as to the taxes for the year 1896, for the reason that it did not appear that the Illinois Central Railroad Company was then in possession of the railroad, and the report for that year was made by the general manager of the Chesapeake, Ohio & Southwestern Railroad Company. It gave judgment against the Illinois Central Railroad Company for the taxes for the year 1897, because that company made the report upon which the assessment was based, and was then in possession of the railroad. In doing this the circuit court followed the opinion of this court in Southern Railway v. Coulter, 113 Ky. 657, 68 S.W. 873, where the Illinois Central was held liable on this same assessment in a well-considered opinion by this court. The court said: "It is claimed on behalf of the appellant, Illinois Central Railroad, that, as it did not get possession of the entire lines until some time in 1897, no franchise tax should be assessed against it prior thereto. The record, however, discloses the fact that it made reports to Auditor Stone, and upon these reports he fixed the value of its franchise, commencing with the year 1896, up to the same time the other assessments were made. We are therefore of the opinion that as they recognized themselves as owners of the line at that time, and made their reports and paid taxes to the state, it is now too late to raise that question. We are not inclined to hold that appellants necessarily bound themselves to pay the county franchise tax simply because they paid the state a franchise tax. Neither have they any right to complain of the delay in enforcing the local taxes. They have simply had the use of the money without interest during these many years."

The defendant introduced on the trial Samuel H. Stone, who was the auditor of the state in the year 1898, and, as such, a member of the board who made the assessment upon which the suit is based. He testified on the trial, which took place in October 6, 1905, in substance that, although the board made the assessment and sent out notice of it and at the end of 30 days sent out the final notice of assessment, they were unwilling to force a conclusion because they were not sure of their ground; and in the winter of 1899 they had a consultation with the railroads of the state, and in this consultation in the year 1899 they agreed that the assessment then made against the Illinois Central Railroad should be in full not only for that year but for the previous years. It also appears from the proof that the assessment which was made in 1899 was made in this way: The board took the total capitalization of the Chicago, St. Louis & New Orleans Railroad, and deducted from it the tangible property assessed against it, and the balance was the sum on which the Illinois Central Railroad paid a franchise tax for the year 1899. But waiving this, the testimony of the assessor who makes an assessment cannot be received after his term is out to show that he did not consider his assessment a valid act or final. The board made the assessment in the way that all other assessments were made. It gave notice of the assessment to the railroad company as required by statute, and at the end of 30 days it gave notice, as provided by the statute, that the assessment had become final. When this had been done, the matter passed beyond the control of the board. A final assessment had been had as provided by law, and, if any injustice was done the taxpayer, it was due entirely to his failure to appear before the board and ask a reduction of the assessment. No reliance could be placed in such proceedings if the validity of the record was made to depend upon the secret intentions of the assessing officer. The validity of their actions depends upon what they do, and not upon their undisclosed purposes. When the assessment had become final and the railroad company owed the state the amount of taxes thus fixed, the assessing officers were without authority afterward to make any agreement with the railroad to the effect that, if the railroad would pay the taxes for 1899, they would forego collecting the taxes for the previous years. This precise question was also presented in the case of Southern Railway in Kentucky v. Coulter, 113 Ky. 676, 68 S.W. 877. In disposing of it, we there said: "Even if it be conceded that the old board agreed or stipulated with the appellants that they should not pay any franchise tax to the local authorities, still such agreement is null and void. It was held in City of Louisville v. Louisville R. Co., 111 Ky. 1, 63 S.W. 14, 98 Am. St. Rep. 387, by this court that the city council of Louisville could not release a street railway company from taxes due the city. Much less could the board of valuation and assessment release appellants from local taxation of the value of their franchise."

Much is said in the argument as to the hardship of the case; but we fail to see that appellant has any substantial grounds for complaint. It has escaped the payment of all franchise taxes for the year 1896, and has only been required to pay for one year, instead of two; and, as far as the amount of the assessment goes for the year 1897, it is much less than it has been for the years succeeding 1899. The personal judgment against the Illinois Central Railroad Company was proper because it was in possession of the property, and made the report upon which the assessment was made. The question most seriously insisted on is that the action was barred by limitation. The suit was brought within five years after the assessment was made, but it was not brought within five years after the assessment might have been made by the board. The board should have made the assessment in the winter of the year 1897, and the action was not brought within five years from that time. Previous to the passage of the act of 1890 (Laws 1889-90, p. 149, c. 1763), it was well settled that an action to recover taxes did not accrue until the taxes were assessed. L. & N. R. R. Co. v. Commonwealth, 1 Bush, 250; Covington v. Wilson, 5 Ky. Law Rep. 778; Louisville v Johnson, 95 Ky. 254, 24 S.W. 875. It is insisted, however, that this action is governed by the act of 1890, and that that act changes the rule. The case of the Louisville Water Co. v. Commonwealth, 89...