Krumpelman v. Louisville & Jefferson County Metropolitan Sewer Dist.

• Decision Date: 20 June 1958
• Citation: 75 A.L.R.2d 1110,314 S.W.2d 557
• Parties: KRUMPELMAN et al., Appellants, v. LOUISVILLE & JEFFERSON COUNTY METROPOLITAN SEWER DISTRICT et al., Appellees. LOUISVILLE & JEFFERSON COUNTY METROPOLITAN SEWER DISTRICT et al., Appellants, v. KRUMPELMAN et al., Appellees.
• Court: United States State Supreme Court — District of Kentucky

Page 557

314 S.W.2d 557

75 A.L.R.2d 1110

KRUMPELMAN et al., Appellants, v. LOUISVILLE & JEFFERSON COUNTY METROPOLITAN SEWER DISTRICT et

al., Appellees.

LOUISVILLE & JEFFERSON COUNTY METROPOLITAN SEWER DISTRICT et

al., Appellants, v. KRUMPELMAN et al., Appellees.

Court of Appeals of Kentucky.

June 20, 1958.

Lee S. Jones, Louisville, for Florence R. Krumpelman, Robert M. and Evelyn M. Bailey.

William E. Berry, Acting Director of Law, James G. Becker, Blakey Helm, Louisville, for Louisville and Jefferson County, Metropolitan Sewer Dist. and City of Louisville.

Richard B. Crawford, Alfred C. Krieger, Louisville, for Morrison & Conklin Const. Co. Inc., amicus curiae.

Stites, Wood, Helm & Peabody, James W. Stites, Carl L. Wedekind, Jr., Louisville, for Kentucky Trust Co. STEWART, Judge.

This action was filed as an agreed case under KRS 418.020, and involves the proposed construction of sewers and drains in territory newly annexed to the City of Louisville. The particular area contemplated to be served is a triangular tract across Taylorsville Road from Bowman Field in the southeast section of the city.

Under an Act adopted by the 1946 Legislature (KRS Chapter 76) the Louisville and Jefferson County Metropolitan Sewer District (hereinafter referred to as 'Metropolitan') was created for the purpose of providing adequate sewer and drainage facilities in and around the City of Louisville. This Act recited that such a sewer district had no authority to levy property taxes but that it had the right to fix rates, rentals and charges, to be collected from the property owners served in the manner prescribed by the district. Nevertheless, this right to establish and collect sewer rates and other charges was subject to the approval, supervision and control of the legislative body of the city.

Service collections have furnished the sole source of income for Metropolitan in its operation and maintenance of the city's sewer and drainage systems and in its construction of additional sewers. However, the income of Metropolitan by itself was insufficient to provide funds for the installation of both trunk and lateral sewers in areas annexed to the city since July 1, 1946 (when KRS Chapter 76 became effective). These sections had been largely improved with residences depending on septic tanks for sewage disposal. The use of such methods in these closely-built-up sections presented a serious health menace, and, to bring relief as early as possible, Metropolitan adopted a policy of laying trunk sewers to reach all areas possible. This plan required separate financing of the lateral sewers which connected to these trunk sewers.

The 1952 Legislature amended the Act under which Metropolitan was created by providing in KRS 76.171 that where adequate sewers or drains have not been constructed in any territory annexed to a city of the first class since July 1, 1946, the city legislative body may by ordinance, on recommendation of the director of works, or of the board of a metropolitan sewer district if the city be in such a district, install branch or lateral lines within such territory to connect with the city's sewer or drainage systems.

KRS 76.172 of the Act was also amended in 1952 so as to authorize the sewer district to construct such branch or lateral sewers at the exclusive cost of the owners of land as set forth in KRS 93.370 with reference to the improvement of streets or alleys. The method of financing prescribed by KRS 93.370 was by the use of apportionment warrants issued against the benefited property.

In addition, the 1952 amendment placed the responsibility for approving plans, advertising for bids and issuing apportionment warrants on city officials, in accordance with KRS Chapter 9o. Since the projects for new sewers and contracts for sewers generally were in all other cases made exclusively by Metropolitan, this statutory method as to lateral sewers proved to be impracticable. Therefore in 1956 the Legislature clarified KRS 76.172 by placing the aforementioned administrative features, as well as the construction work and control relating to lateral sewers, in the hands of Metropolitan. However, the 1952 amendment which fixes the apportioning of the cost among owners of benefited property remained unchanged.

The 1956 amendment further cleared up KRS 76.172 by incorporating the applicable wording of KRS 93.370 therein, which the 1952 amendment referred to only partially. This section now reads:

'When such sewers or drains are located in a public street or alley, the construction thereof shall be at the exclusive cost of owners of lots in each one-fourth of a square to be equally apportioned by the metropolitan sewer district according to the number of square feet owned by said property owners. Each subdivision of the territory bounded on all sides by principal streets shall be deemed a square.'

The 1956 amendment also states in subsection (6) of KRS 76.172 that a lien is created against the respective lots or land for the cost of such sewer facilities with interest thereon at the rate of six per cent per annum. Subsection (8) thereof requires Metropolitan to enter a record of all apportionment warrants in a register. Subsection (9) thereof provides that a lien shall exist from the date of the apportionment warrant, but that such lien shall not be valid against a purchaser for a valuable consideration without notice unless the apportionment warrant is entered and registered within ten days of its issuance.

Pursuant to the Act as amended, the Board of Aldermen of the City of Louisville, on Metropolitan's recommendation, enacted Ordinance No. 132, Series 1957, calling for the installation of sanitary sewers and property service connections in the area involved in the instant case. These five points are presented for adjudication:

(1) Is the lien given by the 1956 Act (or KRS 76.171 and 76.172) to the holder of an apportionment warrant for the construction of lateral sewers and service connections superior to any lien (except the statutory lien of other taxes) existing against the property benefited?

(2) Is the 1956 Act constitutional as to territories annexed to the City of Louisville since July 1, 1946?

(3) Is Ordinance No. 132 valid in respect to delegating the right to Metropolitan to make contracts for the construction of lateral sewers and property service connections at the cost of the property owners and issuing apportionment warrants therefor?

(4) Is Ordinance No. 132 valid in providing that such cost of construction of lateral sewers and of property service connections be assessed against the property owner without any provision therein for payment in annual installments?

(5) Is property that cannot be served directly, although it lies within the quarter block where sewer laterals are to be laid, subject to assessment to any extent in apportionment of the cost of such sewer construction?

The lower court answered each of the first four questions in the affirmative and the last or fifth in the negative. The parties hereto have prosecuted a joint appeal from the judgment entered in order to obtain a ruling of this Court on each of these questions. The Kentucky Trust Company, Florence R. Krumpelman and Robert M. and Evelyn M. Bailey, parties litigant below, address themselves only to certain of the questions, and we shall mention the points they raise in this respect in the course of this opinion.

I

Appellant, The Kentucky Trust Company (herein called 'Mortgagee'), is the holder of mortgages against two parcels of improved land situated in the area to be sewered. One of these, which was executed and recorded May 2, 1952, is held against property owned by appellant, Florence R. Krumpelman; and the other, which was executed and recorded June 12, 1957, is held against property owned by one William V. and Ethel May Corbett and is herein referred to as the 'Corbett mortgage'. The Corbetts are not parties to this appeal.

Mortgagee appeals from that portion of the judgment which ruled that Metropolitan's apportionment warrants, when issued, will take precedence (1) over its 1952 Krumpelman mortgage which was recorded before the 1952 and 1956 amendments were passed, and (2) over its 1957 Corbett mortgage which was recorded before any notice of any apportionment warrants was given. It urges these grounds for reversal:

(1) The assessments for the cost of sewer construction are not to be considered taxes; (2) the Act, as construed by the lower court, impairs the obligations of contracts entered into before any apportionment warrants were issued; (3) there is no statutory authority for granting superiority to the apportionment warrants over recorded liens; and (4) there is no authority for granting priority to sewer apportionment warrants over previously recorded liens.

We agree with Mortgagee that it is very generally held that special assessments or special taxes to pay for local improvements are not taxes in the ordinary or strict sense of the term. See Gosnell v. City of Louisville, 104 Ky. 201, 46 S.W. 722; and Kilgus v. Trustees of the Church Home for Females, 94 Ky. 439, 22 S.W. 750. In practice, and as usually understood, there is a clear distinction between taxes and special assessments. The latter are local burdens laid on property made for a public purpose, but fixed in amount once and for all time with reference to the special benefit which such property derives from the cost of the project, while taxes are generally held to be a rate or duty levied each year for purposes of general revenue, regardless of the direct benefit accruing to the person or property taxed. See Dressman v. Farmers' & Traders' Nat. Bank of Covington, 100 Ky. 571, 38 S.W.1052, 36 L.R.A. 121; and 63 C.J.S. Municipal Corporations § 1290b, page 1026.

However, broadly speaking, special assessments for benefits are part of the system of taxation, often being referred to as a method or species of taxation. The levy of...