
    Case 22. — ACTION BY CITY OF LOUISVILLE AGAINST THE CONTINENTAL TOBACCO CO. TO RECOVER TAXES FOR CERTAIN YEARS. —
    June 8.-
    Continental Tobacco Co. v. City of Louisville
    Appeal from Jefferson Circuit Court, (Chancery Branch, 1st Division.)
    Shackelford Miller, Judge.
    Judgment for Plaintiff. Defendant appeals.
    Affirmed.
    Taxation — New Factories — Exemption from City Taxes — Inducement to Location — Where a new corporation was organized in New Jersey for the purpose of acquiring large tobacco factories in the country, and in pursuance thereof purchased two large factories in the city of Louisville that were at the time going concerns, with no purpose to discontinue business, although the new corporation added new capital and some new machinery to the business and brought new brains, energy and industry to bear in the operation of the plants, it was not a new corporation in contemplation of section 2980a, Kentucky Statutes, authorizing the general council of a city, by ordinance, to exempt from municipal taxation, for a period of five years, manufacturing establishments as an inducement to' their location within the. city limits, and said new corporation is not exempt from city taxes under such ordinance.
    AUGUSTUS E. WILLSON, Attorney for appellant, J. PARKER and GIBSON, MARSHALL & GIBSON of Counsel.
    (Counsel for appellant in this case refer to brief for appellant in casé of “Mengel Box Co. v. City of Louisville, reported in 117 Ivy., 735, for Points and Citations of Authorities.”)
    A. E. RICHARDS, Attorney for appellee.
    (No brief for ai>pellee in record.)
   Opinion by

Judge Paynter.

Affirming.

The appellant is a New Jersey corporation, and was organized for the purpose of acquiring large tobacco factories in the country- John Finzer & Bro. and the American Tobacco Company, corporations, owned large establishments in the city of Louisville, manufacturing plug and smoking tobacco. These establishments consisted in large buildings, machinery, money, and property used to carry on the business. The consideration for the sales to the Continental Tobacco Company was cash and common and preferred stock, which was issued to them in the Continental Company. This company was a new corporation, distinct from the corporations whose property is purchased, although some of the persons who held stock and were officers of the selling companies became officers and stockholders in the new concern. This is an action to recover taxes for the years 1900,1901,1902,1903, and 1904, aggregating more than $100,000.

Appellant claims that it is exempt from the payment of these taxes to the city of Louisville by reason of the ordinance which was passed by the general council of the city of Louisville on July 29,1898, which provides that, .in order to induce the location of more manufacturing establishments within the city limits, any person, firm, or corporation, which shall, after the passage of the act of the Legislature authorizing the ordinance, permanently locate and conduct manufacturing establishments within the city limits, shall be exempt from taxation-for the period of five years after such location and commencement of the business of manufacturing therein. This act was passed pursuant to an act of the General Assembly approved March 16, 1898, which authorized the general council, by ordinance, to exempt from municipal taxation for the period of five years manufacturing establishments as an' inducement to their location within the city limits. Section 2980a, Ky. St. 1903. The General Assembly was authorized to enact this statute by reason of section 170 of the Constitution, which provides that it may authorize any incorporated city or town to exempt manufacturing’ establishments from municipal taxation for the period not exceeding five years as an inducement to their location. The purchase of the property by the appellant and the commencement of business in the city of Louisville toot place after the enactment of the ordinance in question. Ic is insisted for appellant, that as it was a separate and distinct corporation from those which operated the manufacturing plants when it became the owner, and, as new capital was used in the business, and some new machinery added to the plants, and new brains, energy, and industry brought to bear in the opera tim of the plants, it brought to Louisville new manufacturing establishments in contemplation of the ordinance, the act of the general assembly and the Constitution of this State.

It is insisted that the facts in this case are exactly the same as they were in Mengel Box Co. v. City of Louisville, 117 Ky. 735, 79 S. W. 255, 25 Ky. Law Rep. 1861, and the exemption is claimed under the rule announced in that case. If this claim be correct, then the same rule ought to be applied in this case as in the Mengel Case, supra, and the claimed exemption should be sustained. The John Finzer & Bro. Company and the American Tobacco Company establishments were going concerns, and, so far as this record shows, were prosperous, and no purpose existed to discontinue the business. They were active, going manufacturing establishments, employing a large number of persons and had a vast amount of money engaged in the enterprises. There is nothing in this record showing that the parties contemplated a suspension of their business or in any wise to fail to continue as active and apparently prosperous concerns. In this case we shall determine from the fact ^ found in the Mengel Case whether the rule there applied shall be applied to the facts of this case, because the principal announced was predicated upon the facts as they appeared to the court to exist in that case. In the Mengel Case the court found that the box business was unprofitable, that the corporation carrying on the business intended to abandon the enterprise altogether as soon as certain contracts were fulfilled. The court adjudged that Louisville had lost the factory as a business enterprise as wholly and completely as if it had never existed there. The court found •'‘that the old plant was dead. * * * That it had ceased to be a going concern. ’ ’ In view of this condition the court concluded that the new company had established a new plant, and that the claim of exemption could and should be sustained. How different are the facts in this case. As we have said, the Finzer Company and the American Tobacco Company were going concerns at the time they were purchased, and at the time the Continental Company began to operate them in Louisville. No purpose seems to have ever existed to abandon these manufacturing establishments, therefore Louisville did not get new enterprises, new manufacturing establishments, but simply another corporation which continued to operate the old ones.

There is no controversey as to the facts with reference to the John Finzer Company and the American Tobacco Company manufacturing establishments as we here state them. The court could not afford to say that they were not going concerns, that they were dead at the time they were purchased by the Continental Company, in order to say that they were new manufacturing establishments, and exempt from taxation under the Constitution and ordinance. The court might have erred in its conclusion as to facts in the Mengal Box Case, yet it enunciated a correct principle that must control in other cases, and when applied to the facts in this case, it is clear that appellant is not entitled to the exemption from taxation which it claims. Had the court concluded in the Men-gel Case that it was a live concern, that the owner of the establishment had no purpose to discontinue its business, and simply a new corporation had acquired the property and continued to run the business, it would not have held that it was exempt from taxation.

The evidence in this case shows that probably the capacities of the establishments have been increased, and that more men have been employed since the appellant acquired the property than were previously employed. This only amounts to an enlargement of ihe old plant, a mere addition to the capital of the going concern, and under the principles of the Mengel Case that would not entitle it to exemption from taxation for five years. If the appellant is not required to pay taxes under the facts of this case, it is possible for manufacturing establishments which are not new enterprises, to escape taxation for an indefinite period. The object and purpose of the exemption of manufacturing establishments from the payment of taxes for a certain period was to induce the location of new establishments in the various cities of the commonwealth, to induce persons of capital and enterprise and business capacity to invest their money so as to build up the cities of the State. The constitutional convention intended to maintain a uniform system of taxation, but feeling that an enlargement of the business interests of the cities was so desirable, it relaxed that uniform rule to the extent of allowing new enterprises to be exempt from taxation, believing that the location of new manufacturing and other business establishments in the cities would ultimately contribute such sums to the payment of the expenses of government as would more than compensate the other tax payers who bore the burden pending the establishment and maintenance of manufacturing enterprises for a period of five years, In other words, the c onstitntional convention thought it was wise to hold out this inducement to persons for the purpose of encouraging the location and securing manufacturing enterprises in the cities of this commonwealth.

Judgment affirmed.

Petition for rehearing by appellant overruled."  