Southern Railway Company v. Commonwealth
| Decision Date | 27 March 1931 |
| Citation | 238 Ky. 638 |
| Parties | Southern Railway Company et al. v. Commonwealth ex rel., etc. |
| Court | United States State Supreme Court — District of Kentucky |
1. Appeal and Error. — Nothing was precluded by Court of Appeals opinion on former appeal, except questions actually before court or which might have been raised on record.
2. Appeal and Error. — Federal Supreme Court's decision that Kentucky tax on nonresident railroad franchise violated due process did not bar commonwealth's action to recover same taxes on amended petition including matters previously omitted (Ky. Stats., secs. 4077-4091; Constitution U.S. Amend. 14).
After such decision by United States Supreme Court and resubmission of case by state Court of Appeals to circuit court for judgment, commonwealth amended its petition to include lines of certain subsidiary of foreign railroad sought to be taxed on franchise on basis of mileage apportionment so as to eliminate Supreme Court's objections that, though there was no claim in commonwealth's petition for taxes in respect to lines of such subsidiary, such subsidiary's lines were considered in computing the franchise tax and in apportioning it on unit mileage basis.
3. Taxation. — Judgment for railroad franchise tax held properly against railroad, not against Director General of Railroads alone (Act Cong. March 21, 1918, 40 Stat. 451; Ky. Stats., secs. 4077-4091).
4. Taxation. — State cannot compel United States to pay taxes on railroad during federal control, or penalty for nonpayment, but has lien on railroad's property (Ky. Stats., secs. 4077-4091, 4241).
Ky. Stats., sec. 4241, allows a penalty of 20 per cent. on the amount of taxes due, and costs of assessment, except where property has been duly listed by owner.
5. Taxation. — Federal statute held not to prevent assessment of tax against railroad while under federal control, or of penalty for nonpayment thereof (Ky. Stats., secs. 4077-4091, 4241; Act Cong. March 21, 1918, 40 Stat. 451).
Act Cong. March 21, 1918, 40 Stat. 451, prohibits any construction thereof that will amend, repeal, impair, or affect existing laws or powers of states in relation to taxation, except when such laws, powers, or regulations may affect transportation of troops, war materials, government supplies, or issue of stocks and bonds.
Appeal from Woodford Circuit Court.
EDWARD P. HUMPHREY, CHARLES W. MILNER and HUMPHREY, CRAWFORD & MIDDLETON for appellants.
FRANK DAUGHERTY, Attorney General, L.W. MORRIS, D.L. HAZELRIGG and J.P. HOBSON for appellee.
Affirming.
On March 8, 1920, the Commonwealth of Kentucky on relation of its then revenue agent filed two statements, or petitions, in the county court of Woodford county seeking to have assessed as omitted property a part of the franchise value of the Southern Railway Company which, it was alleged, had been omitted in the assessments made by the taxing authorities of the state of Kentucky. The first statement covered the years 1915, 1916, and 1917. The second statement covered the years 1918 and 1919. Apparently the reason for the separate statements was that the railroads of the nation had been placed in the hands of a Director General who was in charge of their operation for the two last mentioned years. By stipulation the two cases were heard together in the county court, and that court dismissed the petitions, or statements, which was a finding that the Commonwealth was not entitled to recover. This was done after the pleadings had been made up and proof had been heard. There was an appeal to the circuit court of Woodford county, and, upon hearing, that court dismissed the petitions, and an appeal was prosecuted to the Court of Appeals of Kentucky.
The cases had been consolidated and heard together in the lower court, and they were likewise considered and disposed of by one opinion in the Court of Appeals. See Com., by, etc., v. Southern Railway Co., 193 Ky. 474, 237 S.W. 11. It was insisted in that case by the Southern Railway Company that it could not be held responsible for any taxes that might be due, or that were not paid, by the Southern Railway Company in Kentucky, a separate corporation, or for any taxes that might be due or assessable against the Cumberland Railway Company, the Cumberland Railroad Company, or the Mobile & Ohio Railroad Company. It was the theory of the Commonwealth that these three railroad companies operating lines of railway in Kentucky were railroads controlled by the Southern Railway Company, and therefore should have been considered as a part of its system, under the provisions of sections 4077-4091, Ky. Stats. It was the contention of the Commonwealth that the Southern Railway Company should have reported to the Kentucky taxing authorities as required by these sections, and that, after ascertaining the value of the entire system, including the four roads mentioned having their situs in Kentucky, there should have been an apportionment to Kentucky on a mileage basis, and that that apportionment should be the proportion of the entire value of the Southern Railway Company subject to franchise tax represented by the ratio that the mileage in Kentucky bore to the mileage of the entire system. The chief controversy was whether the Southern Railway Company should be required to pay taxes to the state of Kentucky because of these controlled roads within the state. It was held by this court that under the provisions of the sections of the Kentucky Statutes above cited, the Southern Railway Company controlled the Southern Railway Company in Kentucky, and that the mileage held in that name should be treated as a part of the mileage of the Southern Railway Company, and that the assessment should have been made on that basis. As the assessment had not been so made, this court directed such an assessment to be made, and that the Southern Railway Company should receive credit by the amount of franchise tax which had been previously paid on the assessment made against the Southern Railway Company in Kentucky. This court found, however, that the Mobile & Ohio Railway Company, the Cumberland Railway Company, and the Cumberland Railroad Company should not be treated as a part of the system of the Southern Railway Company, as there was no physical connection or unity of use between the properties of the Southern Railway Company and either of the other companies. The case was remanded to the circuit court, with directions that it proceed to ascertain the amount of intangible property which should be assessed for each of the years according to the prevailing rule of law upon the subject. The prevailing rule of law was to be found in the Statutes above cited, the opinions of this court, and the opinions of the Supreme Court of the United States.
On that appeal nothing was decided by this court other than the liability of the Southern Railway Company to assessment according to the laws provided for the assessment of railroads. It had not made a report to the taxing authorities of Kentucky as required by Statutes, and it defended its failure to do so on the ground that it could not be held responsible, in any way, for taxes assessed against the Southern Railway Company in Kentucky, and that it could not be required to make a report to Kentucky because it controlled that road. It made the same contention as to the other three railroads. The court sustained its contention as to the other three railroads, but found against it as to the Southern Railway Company in Kentucky. When the court remanded the cases for further proceedings consistent with the opinion, there was nothing left to be done except for the Southern Railway Company to make a report as required by the Statutes including as a part of its mileage that of the Southern Railway Company in Kentucky. No question had arisen about the lines of the Cincinnati, New Orleans & Texas Pacific Railway Company, because the Commonwealth did not know that it was a railroad controlled by the Southern Railway Company. No report had been made up to that time by the Southern Railway Company showing that it controlled lines of railroad in the state of Kentucky. That it controlled the Cincinnati, New Orleans & Texas Pacific Railway Company was a fact not developed up to the time that the matter was remanded to the circuit court of Woodford county. The Southern Railway Company in Kentucky had made a separate report to the taxing authorities and had been assessed thereon. The Cincinnati, New Orleans & Texas Pacific Railway Company had likewise made a report, and had been assessed. These railroads had not been assessed as a part of the Southern Railway System. Therefore the Southern Railway Company had failed to comply with the law in making its reports, or rather in its failure to make a report. The commonwealth was not contending that the Southern Railway Company should pay taxes on a basis different from other railroad companies in the state, but was making the contention that it should be assessed for taxation on the same basis as other railroads.
When the case was again taken up in the circuit court, the Southern Railway Company filed an amended answer on May 20, 1922. This amended answer first dealt with the years 1915, 1916, and 1917. It was alleged that the Southern Railway Company in Kentucky had no physical connection with the lines of the Southern Railway Company, and that the nearest point to the Southern Railway Company in Kentucky where the Southern Railway Company owned, operated, leased, or controlled a line of railway was Harriman Junction, Tenn., on the line of the Cincinnati, New Orleans & Texas Pacific Railway Company, 141.8 miles south of Danville, Kentucky, and that the only other point of the last-mentioned railway company where the Southern Railway Company owned, operated, leased, or controlled any line of railroad was at Chattanooga, Tenn., 221.5 miles south of Danville, Kentucky. It was alleged that the ...
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