Neptune Fire Engine & Hose Co. v. Board of Educ. of Mason County

• Decision Date: 05 October 1915
• Citation: 166 Ky. 1,178 S.W. 1138
• Parties: NEPTUNE FIRE ENGINE & HOSE CO. v. BOARD OF EDUCATION OF MASON COUNTY ET AL.
• Court: Kentucky Court of Appeals

178 S.W. 1138

166 Ky. 1

NEPTUNE FIRE ENGINE & HOSE CO. v. BOARD OF EDUCATION OF MASON COUNTY ET AL.

Court of Appeals of Kentucky.

October 5, 1915

Appeal from Circuit Court, Mason County.

Action by the Neptune Fire Engine & Hose Company against the Board of Education of Mason County and others. From an adverse judgment, plaintiff appeals. Reversed, with instructions.

A. D Cole, of Maysville, for appellant.

W. H Rees and Worthington, Cochran & Browning, all of Maysville for appellees.

MILLER C.J.

The question for decision in this case is whether the land of the Neptune Fire Engine & Hose Company, No. 2, of Maysville, Ky upon the dissolution of that corporation, should: (1) Revert to the grantor of the land; or (2) go to the board of education of Mason county; or (3) be distributed among the living members of the corporation.

The appellant was incorporated by an act of the General Assembly approved March 24, 1851, which reads as follows:

"An act to incorporate the Neptune Fire Engine and Hose Company, of Maysville."

"Section 1. Be it enacted by the General Assembly of the commonwealth of Kentucky, that Richard C. Davis, Wm. W. Pike, Thomas N. Ross, David N. Biggers, John Hunt, Jr., Robert C. White, and Wm. D. Hixon, and their associates, are hereby created a body politic and corporate, by the name and style of the Neptune Fire Engine & Hose Company No. 2, of Maysville, Kentucky, and, as such, shall have perpetual succession, and may be capable, in law, of contracting and be contracted with, suing and being sued, pleading and being impleaded, in any action or suit, in any court whatever; and may have and use a common seal, and change the same at pleasure.

Sec. 2. They shall have the right to purchase, take, and hold one or more engines, hose carriage and hose, and all the necessary apparatus and tools for the use and repair of the same; to sell and convey, and purchase other engines, etc. They may purchase and hold, in the city of Maysville, as much ground as will be required for a convenient engine house, and a place to transact their business, the value of the same not to exceed ten thousand dollars, which amount of property they shall be entitled to hold.

Sec. 3. The management of the said property and company shall be under the direction of a president, vice president, three engineers, and three directors, chosen at such time and place as the by-laws of the company may direct; and they may have a secretary and treasurer, and keep a record of their proceedings.

Sec. 4. The members of this company, not to exceed three hundred, active and honorary, shall be exempted from militia duty, except in time of war, and from service on all juries and venires. the secretary of said company, on or before the first of February in each year, shall furnish the sheriff and circuit court clerk with a list of members, active and honorary, of said company: Provided, that those members of the company who are honorary members, and not engaged in the active duties of the company, shall not be released from serving on juries, but shall only be exempted from military duty."

Acts 1850-51, vol. 2, p. 660.

An amendatory act approved April 24, 1884 (Acts 1883-84, c. 1112), amended section 4 of the charter by adding the word "life" after the word "active" wherever it occurs in that section, by striking out the word "provided" and all that follows it in said section, and by adding an additional section empowering two-thirds of the active members of the company to borrow not exceeding $5,000 for the purpose of repairing the company's property or rebuilding its hall, with power to issue bonds therefor secured by a mortgage upon the real property of the company.

Pursuant to the authority granted the corporation bought a lot fronting 40 feet on the north side of Third street, in Maysville, on March 18, 1862, from John B. and James P. Poyntz, trustees, for the sum of $575, taking the title to the corporation. This purchase price was contributed, in part, by members of the corporation, and the remainder of the purchase money was derived from the rents of said property.

Although the purpose of the corporation is not expressly stated in the charter, it is apparent that appellant was a volunteer fire company, organized for the purpose of extinguishing fires within the corporate limits of Maysville. The corporation erected a building upon its lot and equipped it with suitable fire apparatus; and, for many years it received compensation for its services from the city of Maysville. The company continued its activities along this line until the city of Maysville established a regular fire department of paid firemen. The corporation continued in existence, however, until February 6, 1912, when the 24 persisting members, by appropriate proceedings, dissolved the corporation and brought this action for a sale of the lot and its building, for the purpose of distributing the proceeds of sale between the persisting members.

In order that there might be no question concerning the title to the property, the plaintiffs made the board of education of Mason county, the board of education of the city of Maysville, the commonwealth of Kentucky, and John Walsh, escheator, defendants to the action. By consent of all the parties the property was sold under a judgment of the court which reserved the rights of all the parties to the proceeds of sale for future determination. The property sold for $7,000, and that fund, which now stands in lieu of the property, is the subject of this litigation. It was claimed by the board of education of the city of Maysville, and by the board of education of Mason county, under section 323 of the Kentucky Statutes, which reads as follows:

"If any society holding lands shall dissolve, the title to such land and appurtenances shall vest in the trustees of the county seminary in which the land may lie, for the use of such seminary; and if there be no such seminary, then in the county court, for the benefit of common schools in the county. The provisions of this chapter shall not apply to the society called 'Shakers,' who shall have the same right to acquire and hold real estate as they have had prior to the passage of this law."

But, as there was no county seminary in Mason county, the board of education of Mason county asked that the fund be turned over to the county court of Mason county to be held in trust for the common schools of the county.

The chancellor adjudged that the $7,000 derived from the sale of the real estate as above stated, less $146.35 necessary to pay a street claim, should pass to and be held by the county court of Mason county for the benefit of the common schools of that county, by virtue of section 323 of the Kentucky Statutes, above quoted. From that judgment the corporation and its members prosecute this appeal. The chancellor rested his judgment upon the idea that the Neptune Fire Engine & Hose Company was not a private corporation, but was organized and created for a public or charitable use, and upon its dissolution the disposition of its property was controlled by section 323 of the statutes supra, which is a part of chapter 17 of the Kentucky Statutes, dealing with "Charitable Uses and Religious Societies." The statute is only an extension of the equitable doctrine that a charity corporation is but a trustee for the public, and to give its assets to its members would be a perversion of the trust. Appellants concede that, if this volunteer fire company was a public charity, the devolution of its assets is controlled by section 323, supra; but they insist that the Neptune Company was a private corporation, and that the disposition of its assets is governed by the law applicable to private corporations.

What, then, was the character of the Neptune Fire Engine & Hose Company? Looking to the charter of the company to ascertain its purpose and character, it will be seen that it was given the power usually granted to ordinary private corporations, to buy and sell real and personal property, to contract, to sue and be sued, and to have and use a common seal and change it at pleasure. No public or other duty was imposed upon it; it had no capital stock; and its property was not acquired by gift, but by purchase. The management of the property of the corporation was placed under the direction of its officers selected by the members of the corporation. The second section of the amendatory act of 1884 emphasized the business character of the corporation, as follows:

"Two-thirds of the active members of the said company may borrow money, not to exceed $5,000.00 for the purpose of repairing their property or rebuilding their hall, and may issue bonds bearing six per cent. or less, or borrow the money on notes, in either case giving mortgage upon the real property of the company." Acts 1883-84, vol. 2, p. 568.

It will readily be seen that the judgment of the chancellor disposing of the corporate property as directed by the statute can be upheld only upon the idea that the appellant company was a public trust, or charity, and not a private corporation. So the question at last is: What is a "public charitable institution," and does the Neptune Fire Engine & Hose Company come within the meaning of that term?

Until the decision in Vidal v. Girard's Ex'rs, 2 How. 194, 11 L.Ed. 205, by the United States Supreme Court in 1844, it was generally held that public trusts or charities owed their origin to the Statute of 43 Elizabeth (A. D. 1601), and consequently that no charity could be sustained unless it was embraced within the 21 specific classes enumerated in that statute. That view had been expressed by the United States Supreme Court, speaking through Chief Justice Marshall, in Philadelphia...