City of Middlesboro v. Coal & Iron Bank

Opinion oe the court by JUDGE WHITE Reversing. The appellant, city of Middlesboro, is a city of the fourth class. . On February • 22,1893, appellant’s board of council passed an ordinance levying a tax for the fiscal year ending April 30, 1894, upon all the taxable property in the city as of its value November 1, 1892, as assessed by the assessor and equalized by the board of equalization, specifying the purposes, etc., for which it would be used. On August 16, 1893, the auditor certified1 to the clerk of Bell County Court that the Coal & Iron Bank had been assessed on its franchise for taxes under the act of November 11, 1892, the valuation being fixed at $202,100. This valuation and assessment were certified by the county clerk to the collector of taxes of appellant. The amount of taxes that would be due on this valuation under the ordinance of March 22, 1893, would be $2,829.40. This tax is the subject of this controversy. On December 1, 1893, the Secretary of State, under section- 616 of Kentucky Statutes, caused proceedings to be instituted against the — 683 — Coal & Iron Bank, and a receiver appointed to close up and settle its affairs in insolvency. It appeared in that action by the Commonwealth that the bank was hopelessly insolvent, and at the July term, 1894, of the circuit court a judgment was rendered directing a sale of the assets and all the property of the bank. At this sale G-. W. Saulsberry became the purchaser at $1,644, and after-wards transferred his bid to appellees, Bell County Investment Company, and Middlesboro Town & Land Company. The report of sale was confirmed, and the proceeds of sale were all consumed in paying the expense of that settlement suit. In December, 1897, the petition of appellant was filed against the defunct bank and the ap-pellees, Bell County Investment Company and Middles-boro Town & Land Company, seeking to have adjudged to appellant a lien on the property bought at the receiver’s sale to the amount of the tax of $2.829.40, and penalty alleged to be due appellant by the Coal & Iron Bank for taxes on its franchise, as certified by the auditor in August, 1893, for that year. The facts above were pleaded in the petition and! the several amendments, and the court sustained a demurrer to the. petition as amended, and dismissed the action, and appellant prosecutes this appeal. The position of appellees is that the ordinance of February, 1893, did not levy a tax on the franchise of the Coal & Iron Bank, nor, indeed, on any property, except as assessed by the city assessor as of November 1, 1892, and that came under the supervision of the board of equalizers for the city. Secondly. It is contended that, even if the ordinance of February, 1893, embraced the franchise tax ,on the bank, there is no lien on the real estate and choses in action bought by appellees for the amount — 684 — of such taxes. Thirdly. It is insisted that by delay or laches of appellant in the collection of the tax it has lost any right to collect same from the purchaser of the assets of the defunct bank. Lastly, it is contended that, the proceedings in insolvency being in the name of the Commonwealth, the judgment rendered therein and the sale thereunder operate as a bar of all claim of the State for taxes, or the claim of any subdivision of the State. In other words, the proceeding being by the State, all persons, corporations, or municipalities that derive a right or power from the sovereignty will be estopped to dispute the absolute title of the purchaser at the sale. The questions here presented are not entirely free from difficulty. The ordinance of February, 1893, levying the tax for the fiscal year beginning May 1, 1893, specifies that the tax is levied “on all taxable property in the city of Middlesboro, Bell county, Kentucky, as of its value November 1, 1892, as assessed by T. E. Cook, assessor for said city, and equalized by the board of equalization for the purposes hereinafter set out,” etc. Á. literal construction of that ordinance might mean that the tax was only levied on the property in the city (1) that had been assessed by T. E. Cook, (2) that had been equalized, — i. e, raised or lowered by the board of equalization. Such a construction would, it seems to us, be strained. Under this literal construction of the ordinance, if Cook, the assessor, had overlooked property, it could not be taxed; or if it was assessed by Cook and the board of equalization did not equalize its value, it could not be forced to pay its just proportion of the taxes due the city. This can not be the intent or meaning of the ordinance. Under its provisions, by a strict construction, the property of a railroad in the city would escape taxation; for the railroad — 685 — property, like franchises, is not assessable by the city assessor, nor can the city board of equalizers pass on its valuation. Yet, if appellees’ contention as to the meaning of the ordinance be correct, the railroads in the city would not be liable. We are of opinion that a fair construction of the ordinance means that all property in the city liable for taxation ad valorem for the fiscal year ending April 30, 1894, should pay taxes at the rate there fixed. It is insisted that, even giving the ordinance this broad meaning, appellant had no right to tax the franchise of the bank for that year, for the reason that all property assessed was valued as of November 1, 1892, and on that date there was no law authorizing the taxation of franchises of banks, the first law on the subject having passed November 11, 1892. The law providing for the taxation ol franchises was effective November 11, 1892, by reason of an emergency clause in its enactment, and we are of opinion that the tax on franchises was due for the year 1893, and especially is this true as to appellant, whose fiscal year extended to April 30, 1894. It is insisted that, as the valuation of the franchise was not made at the date of the. ordinance, the tax could not be levied without a valuation. We think this immaterial. The same objection would lie to all property omitted and to the railroad, also not then assessed. We are clearly of opinion that the Coal & Iron Bank owed the franchise tax to appellant for the year ending April 30, 1894. As it was, then, property, and taxable, it could not have been exempted if the council had expressly so provided. Section 171 of the Constitution provides: “They [taxes] shall be uniform upon all property subject to taxation within the territorial limits of the authority levying the same; and all taxes shall be levied and collected by gen — 686 — eral laws.” By .section 64 of the act chartering the city of Middlesboro, it is provided: “All taxes levied under this charter shall be due and payable on the 1st day of May each year, and the city of Middlesboro shall have a lien for taxes upon any and all property subject to taxation, which lien shall be superior to all encumbrances prior or subsequent.” This provision of the charter is re-enacted in the charter for fourth-class cities, the date when due and payable being changed to July 1st. By section 4021, Kentucky Statutes, it is provided: “The Commonwealth and each county, incorporated city, town and taxing district, shall have a lien on the property assessed for the taxes due them respectively, which shall not be defeated by gift, devise, sale, alienation, or any means whatever, unless the gift, devise, sale or alienation shall have been made for .more than five years before the institution of proceedings to enforce the lien, and nothing shall be exempt from levy and sale for taxes and costs incident to the sale.” By section 4151, Kentucky Statutes, it is provided, in effect, that the sheriff or tax collector shall levy for taxes first on personalty, and, if there be none, he may levy on real estate for the taxes due. By these provisions of the special charter of appellant, the general charter of cities of the 'fourth class, and of the general law under the title, revenue, and taxation, we are of opinion that there exists a lien on any and all property for any and all taxes due by its owner, and that the assets of the bank are liable to be subjected to the payment of the franchise tax due appellant, unless by reason of laches, delay, or estoppel that right has been lost or waived. If there be such reason, it will properly appear in an answer. . There is nothing in the petition to which a demurrer was sustained, showing such laches or waiver. We are also of opinion that there — 687 — i& nothing in section 616, Kentucky Statutes, under which the bank was placed in the hands of a receiver, that can be construed as precluding any person, municipality, or taxing district from asserting any claim against any corporation that may be forced into liquidation by the Secretary of State. The proceeding there provided is for the benefit of the public, it is true, but, in our opinion, after the action is begun, and the receiver is appointed, the same rules apply as to any other action of the same nature brought by a creditor or a director of the corporation. Only those who have notice of the proceedings are bound by the judgment and decree of sale. The holders of liens should be brought into court, and their rights adjudicated; but this duty does not, of necessity, devolve on the Commonwealth, and surely, if the Commonwealth fails to bring in all the municipal corporations, and have their rights adjudicated, it can not be said that the municipal corporations lose their liens,, if such they had, against the property of the insolvent corporation. In other actions of insolvency the purchaser at decretal sales must protect himself against tax liens. We see no reason why a different rule should obtain in proceedings under section 616. For the reason that, in our opinion, the petition states a cause of action, we conclude that judgment sustaining a demurrer thereto and dismissing the action is erroneous. Judgment reversed, and cause remanded for proceedings consistent herewith.