Case 69 — .Action by City of Louisville against German Washington Mutual Fire Ins. Co. for City Taxes.

Feb. 10.

#### German Washington Mutual Fire Insurance Co. v. City of Louisville.

APPEAL FROM JEFFERSON CIRCUIT COURT, CHANCERY DIVISION.

Judgment for Plaintiff and Defendant Appeals.

Affirmed.

Taxation — Co-operative Insurance Companies — Double Taxation —Licenses—Municipal 'Corporations — Powers—Payment of License Tax — Creditor.

Held: 1. Where a co-operative insurance company was organized without stock, as authorized by Kentucky .Statutes, 1903, c. 32, subd. 5, and its personal property consisted of money contributed by its members for the payment of losses, the fact that the members paid taxes on the property insured did not exempt the company from taxation on- its personalty on the ground of double taxation.

2. Under Kentucky Statutes,- 1903, section 3011, authorizing the general council of cites of the first class to provide for licenses to he paid by insurance companies doing business within the city, the city of Louisville was .authorized to pass an ordinance imposing a license tax payable to the city sinking fund, on insurance companies doing business within the city, in addition to the ad valorem tax otherwise levied thereon.

3. Where a city ordinance levied a license tax on- insurance companies doing business within the city, and provided that such tax should he in addition to the ad valorem tax otherwise assessed against the companies, an insurance company paying such license tax w-as not entitled to credit therefor on the ad valorem tax levied against it.

4. The Legislature may properly ¡classify taxpayers in devising an equal system of taxation, and may properly authorize municipal corporations to provide different systems of taxation for different kinds of corporations.

*594GEO. L. EVERBACH and ISAAC T. WOODSON, .attoeneys bob APPELLANT.

PROPOSITIONS. OF LAW AND AUTHORITIES.

1. The situs of the mortgage ownership not being shown by either allegations of proof, there is no proper basis laid for any ad valorem taxation- of appellant’s mortgagesi, for city purposes. Board of Councilmen of Frankfort v. Frankfort Safety Vault and Trust Co., 25 Ky. Law Rep., 46; Board of Councilmen, &c. v. Fidelity Trust & Safety Vault Co., 23 Ky. Law Rep., 908; City of Louisville v. Sherley, 88 Ky., 71; City of Lexington v. Fishback’s Trustee, 22 Ky. Daw Rep., 1392, secs. 3174-3179, 4032-4035, Kentucky Statutes.

2. Taxation of the assets of a co-operative fire insurance association is double taxation when such an association is not organized for profit, has no capital stock, and is not a corporation provided for in the statutes authorizing taxation of mercantile corporations. Aetna Life Ins. Co. v. Coulter, Auditor, &c., filed June 5, 1903; Levi v. City of Louisville, 97 Ky., 401; ■German Washington Mutual Fire Association v. Commonwealth, 9 Bush, 394, secs. 4086, 4088,. Kentucky Statutes; -Franklin Ins. Co. v. Louisville, 20 Ky. Law Rep., 489.

■ 3. To tax a corporation, without, exempting the individual members from taxation of their property rights in the corporation, is to establish a -rule varying from the statutes governing corporations of the class which issues capital stock; and this-would amount to a systematic discrimination against tax-payers insured in the co-operative associations, which would render the taxation unconstitutional and void. Judson on Taxation, secs. 467-470; Taylor v. L. & N. R. R. Co., 31 C. C. A., 537; Chicago Union Traction Co. v. State Board of- Equalization, 114 Fed Rep., 557; Judson on Taxation, sec. 478; Mercantile National Bank v. N. Y., 28 Fed. Rep., 776; Boyer v. Boyer, 113 U. S., 689; Santa Clara v. 'Sou. Pac. R. R. Co., 18 Fed. Rep., 385-436; San Mateo case, 8 Sawyer, 302, 13 Fed Rep., 147 to 722; State v. Hannibal, &c. R. R. -Co., 75 Mo., 212; Knowlton v. Supervisor, 9 Wis., 410; Hale v. Kenosha, 29 Wis., 599; Cooley’s Con. Lim., p. 2, and cases cited; 2 Dillon on Mun. Oorp., paragraph 36; State v. Hannibal & St. Jos. R. R. Co., 75 Mo., 210-11; Missouri State Constitution, cited in Life Association v. Board of Assessors, 49 Mo., 512; Wisconsin State Constitution,, cited in Knowlton v. Supervisor, &e., 9 Wis., 410-424; Broadway Baptist Church v. McAtee; 8 Bush, 513; Barret v. Henderson, 4 Bush, 259; Jhdge of Campbell County Court v. Taylor, 8 Bush, 207; Fecheimer Bros. & Co. v. City of Louis*595ville, 84 Ky., 306; Daniel v. Trustees of Richmond, 78 Ky., 542; 'State v. Furbush, 72 Me., 493; -State v. North and Scott, 27 Mo., 464; Willing v. Michigan,- 116 U. S., 446; City of Lexington v. McQuillan’s Heirs, 9 Dana, 513-51-6; Aetna Life Ins. Co. v. 'Coulter, Auditor, &c., filed June 5, 1903; Levi v. City of Louisville, 97 Ky., 401; German Washington Mutual Fire Association v. Commonwealth, 9 Bush, 3'94, secs. 4085, 4088, Kentucky Statutes, Present Constitution, 171, 174, 181, Constitution U. S., Fourteenth Amendment.

4. 'License fees exacted from appellant for the purpose of reducing ad valorem levies for' sinking fund purposes of the city of Louisville, assessed upon each one hundred dollars of premiums received by appellant -during the year previous- to that in which the license fee is collected, are taxes levied ad valorem, -or, at least, in lieu of ad valorem taxes. Judson on Taxation, p. 224, paragraphs 206, 467, 470; Levi v. City of Louisville, 97 Ky., 406.

5. An assessment of a license tax of two and 50-100 dollars upon each one hundred dollars of premiums, received by appellant during the year previous to such assessment, (when appellant is a co-operative fire association, not organized for profit, but merely for the mutual protection -of the persons insured, ■and not issuing capital stock, and having no estate except the premiums paid for insurance), is not -a mere measure of a tax, but i-s a tax upon the corpus iof appellant’s property; and is in. effect an ad valorem tax, a tax upon the value of appellant’s estate; and should be construed as a levy -of taxes in lieu of ad valorem taxes, if not, of itself, an ad valorem tax. Judson on Taxation, paragraph 206, secs. 159, 171, 174 of 'State Constitution.

6. By the terms of an ordinance pleaded by appellant, license fees paid in lieu of ad valorem taxes must be credited on any judgment rendered in behalf of appellee for ad valorem taxes herein. Page 31, Transcript; Fourth Compilation of the Ordinances -of the City of Louisville, p. 348, approved August 6, 1895; Levi v. City of Louisville, 97 Ky., 394.

• 7. The system of license taxation, under which said license fees was exacted, is oppressive, unjust, and unconstitutional; because it systematically and for years has discriminated against appellant, and others, by requiring license fees of them, while totally exempting many other persons, associations, corporations, and classes doing business in the city of Louisville; and it results that, thereby, the burden of reducing the ad valorem taxes for sinking fund purposes has been cast upon appellant and some -others; and this amounts to an oppressive discrimination, in violation of the State Constitution, and in violation *596of the Fourteenth Amendment to the Constitution of the United States. .License laws for municipalities must be governed by the same rules and. principles governing uniform and equal taxation for State purposes, and the constitutional provisions against unequal taxation apply to municipalities, not only as to ad valorem taxes, but as to license taxes. The municipality is a part of the 'State government, and can not be allowed to assess taxes unequally, so as to discriminate in favor of one class against another, systematically, for a term of years, either as to ad valorem taxes, or license fees. Levi v. City of Louisville, 97 Ky., 406; State v. Hannibal, &c., R. R. Co., 75 Mo., 212; Knowlton v. .Supervisor, 9 Wis., 410; Hale v. Kenosha, 29 Wis., 599; Life Association v. Board of Assessors, 49 Mo., 512; Broadway Baptist Church v. MeAtee, 8 Bush, 513; Barret v. Henderson, 4 Bush, 259; Judge of Campbell County Court v. Taylor, 8 Bush, 207; Fecheimer Bros. & Co. v. City of Louisville, 84 Ky., 306; Daniel v. Trustees of Richmond, 78 Ky., 542; City of Lexington v. McQuinlan’s Heirs, 9 Dana, 513; San Mateo Case, 8 Sawyer, 302, 13 Fed. Rep., 147, 722; County of Santa Clara v. Sou. Pac. R. R. Co., 18 Fed. R., ‘402; Boyer v. Boyer, 113 U. S., 689; Judson on Ttaxation, paragraph 478; Mercantile National Bank v. City of New York, 28 Fed. Rep., 776; Taylor v. L. & N. R. R. Co., 31 C. C. A., 537; Hersey v. Supervisor, 16 Wis., 185; Fourteenth Amendment to U. S. Constitution.

8. Defensive pleadings which specifically set out the above grievances constitute a good defense against both the ad valorem taxes sued on and the license fees paid; and the demurrers of appellee, to the answers of appellant, should reach back to the petition and be sustained to the petition, or should be overruled. Wile v. .Sweeney, 2 Duvall, 161; Young v. Duhme, 4 Metcalf, 239; -Martin v. McDonald, 14 B. M., 544, 1 Met, 237, 79 Ky., 487.

9. In the interpretation of all statutes, -a cardinal rule is that their provisions are never extended by implication beyond the fair meaning of the term used; and in every case of doubt they are construed more strongly against the government and in favor of the taxpayer; because burdens are not to be imposed unless the intention of the Legislature to impose them is distinctly shown. Aetna Ins. Co. v. Coulter, Auditor, filed June 5, 1903.

10. The framers of the Constitution, in pnohibiting the Legislature from imposing taxes on, or for, municipalities, did not intend to leave the entire mode of assessment to the discretion of the general council, or to give to such bodies the exercise of *597any power of taxation expressly denied to the representatives of the people. “The object of such a provision as placed the city government beyond legislative control, as to imposing taxation was to prohibit the latter bodies from determining the amount to be imposed and the -objects to which it should be applied.” Levi v. City of Louisville, 97 Ky., 406; Howell, &c.. *v.*Bristol, &c., 8 Bush, 493.

11. It is a fundamental maxim in taxation that the same-property shall not be subject to a double tax, payable by the-same party, either directly >or indirectly; and, when it is once-decided that any kind -or class is liable under one provision of the statutes, it has been held to follow, -as a legal conclusion,, that the Legislature could not have intended the same property should be subject to another tax, though there may be general .words in the law which seem to imply that it may be taxed a. second time. Cooley on Taxation, 165, 166, and authorities-cited; Present Constitution of Kentucky, secs. 171, 174.

12. Although double taxation and discrimination may have, been permissible under the former' Constitution of the State, •all such inequalities are forbidden by the present Constitution; and any systematic injustice -of this class renders taxation void, whether it be of one class or another. “Taxes shall be levied and collected for public purposes only. -They shall be uniform upon all property subject to taxation within the territorial limits of the authority levying the tax.” (.Section 171, present. ■Constitution of Kentucky.) Uniformity in the m-anner of assessment and approximate equality in the amount of exactions are essential to the constitutionality of local taxation, and. this was the law under the former Constitution. Howell, *&v.*v. Bristol, &c., 8 Bush, 493.

.13. Tax bills made out in the wrong name raise no presumption of regularity. This presumption exists only when the. tax bill is made out correctly against the taxpayer. Secs. 2985-2996, Kentucky Statutes.

14. Tax bills made under assessments in the wrong name bear-no interest. Interest is only to be added “beginning with the first of May after the correction, or retrospective assessment, is certified to the receiver.” 'See. 2991, Kentucky Statutes.

HENRY L. STONE, city attorney, tor atpeluee.

POINTS AND AUTHORITIES.

1. Appellee’s judgment is sustained -by the city assessor’s-testimony and authentication of the tax bills sued on. See. 2996, Kentucky Statutes; City of Louisville v. Johnson-, 95 Ky., *598254; Reed v. (City of Louisville, 61 S. W., 11; S'herley v. Same, 63 S. W., 530; Fonda v. Same, 49 iS. W., 785; Shuck, v. City of Lebanon, 53 S. W., -655.

2. The city assessor has power to retrospectively assess personal property. Secs. 2980, 2985, 2988, 2995, Kentucky Statutes; Stone, Auditor v. City of Louisville, 22 R., 423; Levi v. City of Louisville, 97 Ky., 394; Fourth 'Compilation of the Ordinances of the City of Louisville, pp. 347-348, 407-410; Cooley on Taxation, pp. 281-2-3-4, 289-91, 155; Anderson v. City of Mayfield, 93 Ky., 230.

3. Double taxation does not result from the taxation of appellant’s property. Louisville German 'Mutual Fire Insurance Association v. Commonwealth, and German Washington Mutual Fire Association v. Same, 9 Bush, 394.

4. The license taxes paid by appellant under the ordinance of April 1, 1896, can not be treated as either full or partial payments of the ad valorem tax bills against appellant. Sec. 3011, Kentucky .Statutes; Levi v. City of Louisville, 97 Ky., 394; Fidelity & Casualty Co. v. City of Louisville, 20 R., 1785, 106 Ky., 207; Southern Building & Loan Association v. Norman, 98 Ky., 294.

5. Appellant is not entitled to a set-off or counter-claim for the amount of license taxes paid against the ad valorem taxes sued on. Secs. 2980, 3058, Kentucky Statutes; Fourth Compilation of City Ordinances, pp. 348-49, 360-/363; Livingston v. City of Paducah, 80 Ky., 656; Fidelity & Casualty 'Company v. City of Louisville, 20 R., 1785, 106 Ky., 207, sec. 181 of Constitution; Wilson v. City of Lexington, 50 S-. W., 834, 49 S. W., 806, 20 R., 1593, lb., 1980; City of Somerset v. Somerset Banking Co., 22 R., 1129, 60 S. W., 5; Himmelman v. Spanagel, 39 Chi., 393; Cooley on Taxation, 3d ed., 9; Cooley on Constitutional Limitations, 6th ed., 587; MdCulloch v. Maryland, 4 Wheat., 316, 418; Kirtland v. Hotchkiss, 100 U. S., 491; Young-blood v. Sexton, 32 Mich., 406¿

6. The appellant has not been, doubly taxed. City of Covington v. Woods, 98 Ky., 344, sec. 181 of Constitution; McDonald v. City of Louisville, 24 R., 271; Fidelity & Casualty Co. v. Coulter, Auditor, 25 R., 200; Fidelity *&*Casualty Co. v.'City of Louisville, TO6 Ky., 207; Fidelity *&*Casualty Co. v. Coulter, 25 R., 200; • Elliott v. City of Louisville, 19 R., 414, 101 Ky., 262; Bowser v. Thompsion, 103 Ky., 331; Commonwealth v. Pearl Laundry Co., 105 Ky., 259; German National Insurance Co. v. City of Louisville, 21 R., 1179, see. 2998, Kentucky Statutes; Fonda v. City of Louisville, 20 R., 1652; Reed v. Same, 22 R., 1636; Louisville Bridge Co. v. 'Same, 23 R„ 1655.

*599Opinion of the court by

JUDGE BARKER

Affirming.

The appellant is an assessment or co-operative fire insurance company, organized under subdivision 5, c. 32, Ky. St., having its chief office and1 principal place of business in Louisville, Ky. The corporation having refused' to list its personal property for taxation as by law required, the city of Louisville arbitrarily assessed it with the sum of $50,000 for the years 1899, 1900, 1901, and 1902. Appellant having refused to pay the tax so assessed, this action was instituted for the purpose of enforcing payment.

No claim is made by appellant that it did not own the personalty with which it was assessed. It claims, however, that, being a co-operative insurance company, without stock, inasmuch as its various members pay taxes upon the property insured; therefore to tax the personalty of the corporation would be double taxation. It is difficult to understand the reasoning upon which this claim is predicated. Section' 171 of the Constitution provides that “taxes shall be uniform upon all property subject to taxation within the territorial limits of the authority levying the tax.” Section 172: “All property not exempt from taxation by this 'Constitution shall be assessed for taxation at its fair cash value, estimated at the price it would bring at a fair voluntary sale. . . .” And section 174: “All property, whether owned by natural persons, or by corporations, shall be taxed in proportion to its value, unless exempt by this Constitution, and all corporation property shall pay the same rate of taxation paid by individual property. Nothing in this Constitution shall be construed to prevent the General Assembly from providing for taxation based on income licenses or franchises.” Section 181 provides that the Legislature “may, by general laws, delegate the power to county, town, *600city and other municipal corporations, to impose and collect license fees on stock used for breeding purposes, on franchises, trades, occupations and professions.” It will thus be seen tliat the Constitution provides a general system for the taxation of all real and personal property by an *ad valorem*tax, and also delegates power to the Legislature to authorize the various municipalities to collect franchise and occupation taxes. Because the members pay an *ad valorem*tax upon the property insured, it does not follow that the imposition of an *ad valorem*tax on the personalty of the corporation is double taxation. If the personalty of the corporation was in the hands of the individual members, it would still be taxable in addition to their other property. The money sought to be taxed in this case is contributed by the various members for the purpose of indemnifying any member for the loss of his property by fire. • 'Tkisi money, as well as the insured property, is subject to taxation. The money in the hands of the corporation being taxed once, I and the property in the hands ” of the individual members ¡"being taxed once, this is not double taxation. It is simply ¡¡ the enforcement of the constitutional rule that all property, whether real or personal, shall pay a uniform rate of •ad *valorem*taxation.

It is further contended by appellant that, inasmuch as it was required by an ordinance of the city of Louisville I to pay a license for carrying on the business of a fire in- / surance company for the years wherein the *ad valorem*tax is sought to be collected, that fact makes the collection of the *ad valorem*tax double taxation. After the passage of the act for the government of cities of the first class in 1898, the municipality sought to tax certain business by . means of a license, which was to be in lieu of the *ad valorem*tax prescribed by the Constitution.

*601In the case of Levi v. City of Louisville, 97 Ky., 394, 16 R., 872, 30 S. W., 973, 28 L. R. A., 480, it was held that this could not be done, that the *ad valorem*tax must be enforced uniformly, and that the license or occupation tax must be in addition to the *ad valorem*tax. The court,, in thus overturning the system by which the municipality sought to substitute a system of licenses in lieu of the *ad valorem*tax, after directing that the *ad valorem*tax should be retrospectively imposed, said that inasmuch as the license fees, as indicated by their amount, approximated the value of the *ad valorem*tax,, the former might be deducted from or credited on the latter for the given years. But this was done only because the licenses had been imposed as a substitute for the *ad valorem*system, and the language of the court has no application where the license is an occupation tax, and is imposed in addition to the *ad valorem*system. Section 3011, Ky. St., provides: “The general council (of cities of the first class) may, by ordinance, provide for the following licenses to be paid into the sinking fund with added penalties for doing business', for following the calling, occupation, profession, or the using or holding or exhibiting of the articles herein named, without the required license.” Then follows the general list, including specifically the name of every business which the Legislature could call to mind, among which were the following: “Every life, fire, or accident, casualty, and indemnity insurance company. . . . doing business in this city, shall on or before the first day of February of each year pay to the sinking fund not less than two nor more than three dollars on every one hundred dollars of premiums received on business done in the city during the previous year.” In pursuance of this authority, the general council on April 1, 1896, enacted an ordinance entitled “An ordinance pro*602viding for certain licenses for the sinking fund of the City of Louisville,” which is as follows: “Be it ordered by the general council of the City of Louisville: Section 1. That hereafter the following licenses shall be paid into the sinking fund of the city of Louisville, for the purpose of the sinking fund, for doing the business, following the calling, occupation and profession, or using, or holding, or exhibiting the articles hereinafter named in the city of Louisville, in addition to the *ad valorem*tax heretofore levied, or hereafter to be levied on any species of property in the city of Louisville. . . .” Among the occupations required to be taxed by the provisions of this ordinance were the following: “Every life, fire, accident, casualty and) indemnity insurance company doing business in this city shall, on or before the first day of February of each year, pay to the sinking fund the sum of two dollars and fifty cents on every one hundred dollars of premiums on business done in the city during the previous year. . . .” It will be observed that this ordinance specifically provides that the license shall be in addition to the *ad valorem*tax required by the •Constitution and the charter to be paid on all property within the city limits. That the general council had the right thus to require the payment of the occupation tax in question, in addition to the *ad valorem*tax, was' clearly settled in the cases of Levi v. City of Louisville, *supra,*Commonwealth v. Pearl Laundry Company, etc., 105 Ky., 259, 20 R., 1172, 49 S. W., 26, and Fidelity Casualty Company v. City of Louisville (106 Ky., 207, 20 R., 1785) 50 S. W., 35. The opinions in these three cases are conclusive of the right of the municipality ti> levy the occupation tax provided for by the ordinance, in addition to the *ad valorem*tax required by the Constitution and the charter. They are so exhaustive of the subject, and so plain In their *603meaning, that it is unnecessary to further attempt to elucidate the proposition. It follows that appellant is not entitled to a credit of the amount of the license tax paid under the ordinance on the *ad valorem*bills sued on.

The judgment of the chancellor is affirmed.

Response by

Judge Hobson

to petition for rehearing.

We have read with interest the petition for rehearing, and have reconsidered the questions raised, but are unable to see that any reason exlists' for modifying the opinion which we .rendered herein. The clerical error in appellant’s corporate name did not vitiate the tax bills. The sense is perfectly apparent. The city taxes in the same way as appellant, all iike corporations. The fact that as to other corporations unlike appellant a different system is devised does not affect it, as no injustice is thereby done it.. The Legislature may properly classify taxpayers in devising an equal system of taxation.. No right of appellant under the federal or State Constitution appears to have been violated. This question was considered on the original hearing, but omitted from the opinion.

The petition is. overruled.