Case Name: Commonwealth v. City of Louisville
Court: Kentucky Court of Appeals
Jurisdiction: Kentucky
Decision Date: 1909-05-18
Citations: 133 Ky. 845
Docket Number: 
Parties: Commonwealth v. City of Louisville
Judges: O’Rear, Nunn and Carroll, JJ., dissenting.
Reporter: Kentucky Reports
Volume: 133
Pages: 845–852

Head Matter:
CASE 95. — ACTION BY THE COMMONWEALTH OF KENTUCKY AGAINST THE CITY OF LOUISVILLE, IN- ' VOLVING THE LIABILITY OF THE CITY WHARE PROPERTY TO TAXATION FOR STATE AND COUNTY PURPOSES
May 18, 1909.
Commonwealth v. City of Louisville
Appeal from Jefferson Circuit Court (Chancery Branch, Second Division).
Samuel B. Kirby, Judge.
Judgment for defendant, plaintiff appeals.
Affirmed.
Taxation — Property Used for “Public Purposes” — Exemptions.— Where the rents received by a city for its wharf purposes leased to various persons for operation of such business establishments as receive materials and ship manufactured products by boat are turned into the sinking fund for payment of interest and principal of the bonded indebtedness, after policing, (fighting, and repairing the property, the property is used for public purposes within Const. Sec. 170, exempting such property from taxation.
JUNIUS C. KLIEN, JAS. BREATHETT, Attorney General, T. B. BLAKEY, Assistant' Attorney General, for Commonwealth.
CLAYTON B. BLAKEY and ELMER C. UNDERW.OOD for appellee.
No briefs. Record out of office.

Opinion:
Opinion of the Court by
Judge Barker.
Affirming.
This action involves the question whether the wharf property of the city of Louisville, Ky., is subject to taxation for state and county purposes. The wharf property is a strip of land, of varying width, in the city of Louisville, bordering on the Ohio river. It is owned in its entirety by the municipality, and a part of it is paved and used for wharf purposes. A large part of it, however, has not been paved, and is not used as a public highway or for the landing of boats 'and shipping of goods and passengers by river transportation. This latter part of the property is leased out to various, persons, who do business on the banks of the river. On it are sawmills, coalyards, and such other business establishments as receive the raw material and ship the manufactured product by river. On that part of the property which is paved and at which boats land, a toll is charged for each boat landing at the wharf. All of the proceeds or income derived from the property is used for the purpose (1) of policing, lighting, and keeping in repair -the wharf property; and, (2) after this is done, the net .proceeds are paid into the sinking fund of the city of Louisville for the purpose of paying the interest and finally extinguishing the principal of the bonded .'indebtedness of the municipality.
By section 170 of the present Constitution there is exempted from taxation, among other things, ' 'public property used for public purposes." That this property is public property is not questioned; in fact, it has been so held repeatedly by this court. In the case of the City of Louisville v. Bank of the United States, 3 B. Mon. 138, Judge Robertson, speaking for 'the court, said: "As already suggested, we are satisfied that in the original location and plan of Louis-ville the strip between Water street and the river was 'intended to- be always kept open for public con- venience; and there is no doubt that the occlusion or even appropriation of it as private property would . operate injuriously to the general.public, and perhaps . ruinously to the local interests of the city itself. It ought never to have been sold. We cannot believe that the Legislature of Virginia ever intended that it should be sold as absolute private property. Having been once dedicated to public use, the trustees, without legislative authority, would never have had the power to sell the absolute title to any portion of it— and, had it not been sold prior to the adoption of our Constitution, the property owners of Louisville would have been protected in their enjoyment of its. easements even against legislative power, without making adequate compensation to them in money. It would be almost as reasonable to sell and appropriate, as private property, the river itself, as the ground lining its margin, the occlusion of which would obstruct communication between the city and the river. The object of locating the town on the river was to enjoy the benefit of its facilities as a highway. To insure that enjoyment against the conflict of private right, which had been too long recognized to be successfully resisted, was doubtless the chief, and perhaps the sole, motive for the purchase of the claim, of Rowan and others by the trustees. Those purchases having been made-by the organs of the local public, and for its use and benefit, they operated ipso facto as a redevolution of the entire slip to the city, and a rededication of it to the public use, or rather, perhaps,' as a removal of the incumbrance which jeoparded the perfect enjoyment of it as public property." To the same effect are Roberts v. City of Louisville, 92 Ky. 95, 17 S. W. 216, 13 R. 406, 13 L. R. 844, and Batman v. City of Covington, 90 Ky. 390, 14 S. W. 361, 12 R. 384.
The only question remaining is whether or not the property is used for public purposes. It is insisted by appellant that at least a part of the property is not used for public purposes. It is not disputed, however, that all the income derived from it is paid over to the city for the extinguishment of the bonded municipal debt. Every dollar received from the net proceeds of the wharf property saves the citizens from being taxed to raise that dollar. Therefore the proceeds of the wharf property take the place of taxation. The bonded indebtedness of the city of Louisville was created for the establishment of waterworks, the purchase and maintenance of public parks, the .building of a general sewage system, the making of streets, and for such other municipal purposes. Money raised by taxation for these purposes and placed in bank would not be taxable, even though the bank paid interest on the deposit. It is difficult to perceive any distinction between money invested in property which produces an income and money loaned out at interest to produce an income. If money raised by taxation and loaned out to produce an income is property used for public purposes, certainly that same money invested in property which produces an income is used for public purposes; that is, of course, assuming that the income is expended for the benefit of all the citizens of the municipality. Under the third Constitution of Kentucky, no property was exempt from taxation except by statute. In the ease of City of Louisville v. Commonwealth, 1 Duv. 295, 85 Am. Dec. 624 this court held that municipal property was divided into two classes: (1) That which was used in carrying on the municipal government proper; and (2) that which belonged to the city in its private or commercial capacity. The first, which consisted of jails, courthouses, and such like, was held to be prop erty used for governmental purposes, and this was exempt from taxation without the aid of any statutory enactment for that purpose; whereas all other property owned by the city, unless especially exempted by statute, was taxable.
When the present Constitution was enacted, the convention, having in mind what had been decided as to the exemption of property of cities, and determining not to leave it to the Legislature to exempt property from taxation, enacted section 170, .by which all public property used for public purposes is exempt from taxation of any sort. One of the first questions which arose after the adoption of the present Constitution was the meaning of the language used in the section, "public property used for public purposes." It was at first held that this language was synonymous with public property used for governmental purposes. In the case of Commonwealth v. City of Louisville (Ky.) 47 S. W. 865, 20 R. 893, this- construction was given to the language under discussion in regard to the very property involved in the case before us; and it was there held upon the authority of the case of City of Covington v. Commonwealth (Ky.) 39 S. W. 836, 19 R. 105, that the wharf property wias owned by the city in its private and commercial, and not in its governmental, capacity, and therefore was subject to taxation for state purposes. But in' the case of City of Frankfort v. Commonwealth (Ky.) 94 S. W. 648, 29 R. 699, we had occasion to review the whole subject of constitutional exemption from taxation of municipal property, and a rule of construction was promulgated in regard thereto to^ which we have adhered ever since. In that case it appeared that the city of Frankfort owned $40,000 of interest-bearing bonds, the in terest of which was used for the purpose of lighting the public- streets, and it was sought by the state to tax these 'bonds for state purposes. In the opinion all of the former cases on the subject were reviewed, and it was held that the bonds were exempt, that the lighting of the public streets wias a public use, and that the municipality had a right to invest the proceeds of taxation in bonds and use the income arising therefrom for municipal purposes without paying taxes to the commonwealth. In this case all of the former decisions of the court, which were inconsistent with the opinion, were overruled in the following language: "It follows that the case of City of Covington v. Commonwealth, 107 Ky. 680, 39 S. W. 836, 19 R. 105, and the subsequent cases which have followed the.rule therein announced, are overruled." Following and approving the last opinion, we held in the cases of Commonwealth v. City of Covington (Ky.) 107 S. W. 231, 14 L. R. A. (N. S.) 1214, City of Covington v. District of Highlands (Ky.) 110 S. W. 338, and Thomas Ryan, etc., v. City of Louisville, etc. (opinion delivered May 6, 1909), 118 S. W. 992, that, where municipalities owned their waterworks in iheir entirety, the property was exempt from taxation, although they sold water to the citizens; it being held that this was.public property used for public purposes. In the case of the City of Owensboro v. Commonwealth, 105 Ky. 344, 49 S. W. 320, 44 L. R. A. 202, we held that a park owned by the city of Owensboro was exempt as being public property used for public purposes. In the case of Commonwealth v. Newport & Covington Bridge Co. (Ky.) 105 S. W. 378, it was held that a bridge connecting Covington and Newport, of which the municipalities owned all the stock, 'was public property us.ed for public purposes, although a toll was charged every traveler using the bridge; the net proceeds of the bridge tolls being paid over to the respective cities and used for public purposes. In the case of Commonwealth v. City of Paducah, 126 Ky. 77, 102 S. W. 882, 31 R. 528, there was involved the question as to whether or not the electric light plant, poles and wires-, a house and lot on Kentuekv avenue between Third and Fourth streets, and certain personal property belonging to thé city of Paducah, were or not liable to taxation for state and county purposes for the years involved in the litigation; and it was held that this property was public property used for public purposes, and therefore exempt under section "170 of the Constitution. In the opinion it was -said: ' 'It is not disputed that the property in question belongs to the city of Paducah, or that it is used for public purposes; but the state contends that it is owned and used by the city in its local municipal capacity as contradistinguished from its governmental capacity. The question presented was involved in Board of Council of City of Frankfort v. Commonwealth (Ky.) 94 S. W. 648, 29 R. 699, and is controlled by that opinion. It is not necessary to reproduce the reasoning of the opinion. In it are reviewed all of the cases from this court bearing on the subject in hand, and the conclusion reached upholds the judgment of the circuit court." We do not think it possible to distinguish the principle involved in the ease at bar and that in the eases above cited; and especially is this true of the toll bridge property involved in the case of Commonwealth v. Newport & Covington Bridge Co., supra. The toll bridge was held exempt because it was a part of the public highway. A wharf is a public highway used for precisely the same purposes that the bridge is used, for the public to travel over — iu the one case to cross a river, and in the other to go down to the river.
We conclude, in consonance with the opinions in the cases herein cited, that the. wharf property of the city of Louisville is public property used for public purposes, and therefore exempt from taxation under section' 170 of the Constitution. It follows that the judgment of the chancellor, exempting the property, must be affirmed; and it is so ordered. •
O'Rear, Nunn and Carroll, JJ., dissenting.