Judges: Latimer
Filed Date: 6/8/1945
Status: Precedential
Modified Date: 10/19/2024
Affirming. *Page 225
Appellants, defendants below, bring this appeal from a judgment of the Todd Circuit Court granting the prayer of plaintiff's petition under the provisions of the Declaratory Judgment Act. Civil Code of Practice, sec. 639a — 1 et seq.
The plaintiff below filed its petition wherein it stated that on or about July 1, 1943, it duly executed, swore to, and thereupon filed with the Tax Commissioner of Todd County its return of property for taxes as of July 1, 1943, in which return the plaintiff duly listed certain personal property belonging to the plaintiff of the fair market value of $60,000, consisting of certain raw materials to be manufactured into railroad ties, and certain railroad ties which were in the process of being manufactured, but which had not been completely manufactured, and at the same time, further declared that such property was subject only to state taxation and not to taxation by the defendant, Todd County, or by the defendant, Board of Education. In its petition it stated that the above-mentioned property is subject only to state taxation and that it is specifically exempt from taxation by the County and Board of Education by virtue of KRS
It further alleged that after it had filed its return of property with R. E. Morphew, Tax Commissioner, Mr. Morphew accepted the valuation of $60,000 and assessed the property at such value, but declined and refused to list the property in the classification above, and changed the classification and listed all of the property as manufactured products, and not as products in the course of manufacture, all of which it alleges was wrongfully and unlawfully done.
Both by allegation and proof, it appears that the plaintiff below purchases timber on the market and has it transported to its plant in Todd County where it is sawed into pieces of such dimensions as are commonly used by railroads for ties. These rough ties are then bored for spikes and bolts and adzed for fitting of tie plates, and trimmed as required. They are then stored under proper conditions for at least one year for seasoning, then creosoted, chemically treated and dried, after which time they are marketed for use as railroad ties. The defendants below sought to tax this property after it had been sawed, but before it had been manufactured, *Page 226 creosoted, and while plaintiff claimed it was in the process of manufacture.
The plaintiff below prayed that the rights of the parties be declared as follows:
"1. That the railroad ties manufactured by it in Todd County, Kentucky, constitute products in the course of manufacture and are raw material on hand for that purpose at all times prior to the completion of the process of creosoting.
"2. That all uncreosoted railroad ties belonging to the plaintiff at its plant in Todd County, Kentucky, are exempt from County taxation and from school taxation and from all local taxation by virtue of Section
"3. That the declaration of rights as set forth in the paragraphs numbered 1 and 2 above apply both to such property which the plaintiff may have had on hand as of July 1st, 1943 and to all similar property in future years so long as Section
The court below, after hearing defendants' demurrer, and considering the depositions taken, granted the petitioner's prayer.
Two questions are presented in this appeal. The first is a procedural question. The second is the factual question as to whether or not the appellee was actually engaged in manufacturing, and whether or not the untreated railroad ties at its plant were raw materials actually on hand for the purpose of manufacturing.
Appellants earnestly contend that the appellee, in failing to show by proper allegation that it had complied with KRS
Appellants contend that no right of appeal lies to the circuit court in the absence of a hearing before the Board of Supervisors, and that an appeal directly to the circuit court from the acts of the Tax Commissioner was premature and not in any manner within the contemplation of the Legislature in passing the above Acts.
Appellants maintain further that it was incumbent upon appellee to allege and prove that it had followed the provisions of the statute in seeking redress, and, not having done so, the petition is fatally defective.
Appellants insist that the rule announced in the case of Ball, Sheriff, v. P. V. K. Coal Co.,
Appellee contends that appellants waived objection by failure to file a special demurrer, and that such failure was a waiver of any jurisdictional objection. This appears to us to be a justifiable position and would be sufficient reason within itself for a disregard of the mere technical contention as made by appellants in that respect. Wedding v. First Nat. Bank, Inc., of Chicago,
The remaining question to be decided is whether the property was in process of manufacture and therefore exempt from local taxation. No doubt exists as to the power of the Legislature to exempt manufacturers, manufacturing enterprises as a matter of policy primarily not to aid in the benefit of private persons for private ends, but for the benefit of the public at large by increasing resources of the state and its taxable property through the establishment of new industries. However, it is necessary for the claimant of exemption affirmatively to show itself to be within the class to which statutory exemption applies. In determining the propriety and rightness of the listing of property as being in the process of manufacture, we must bear in mind the basic meaning of the term "manufacture" and its related terms. 51 Am. Jur., Taxation, Section 592, we find these words: "Beyond this, however, where there is a finished product materially different in substance, general condition, or quality, which change has been wrought by human or artificial labor, and fits natural substances so that they become articles of value and use, it is generally held that the evolution constitutes manufacturing, * * *." Ayer Lord Tie Co. et al. v. Commonwealth et al.,
It is admittedly true that railroads will not and do not buy raw and untreated ties. The record discloses that the manufacturing process, after receipt of the raw ties, requires a full year of seasoning, after which there *Page 229 must be a boring, adzing, trimming and branding of the ties, and then the treatment with creosote and other chemicals by an extremely high steam pressure, thus changing the very nature of the tie.
It is further evident that more than 99% of ties thus treated are sold to the railroads for their use.
It is further disclosed that the process of treatment is more expensive than that of sawing it into the raw tie. It appears that untreated ties are not marketable to railroads for such purposes, and that the manufacture of them is not completed until the creosoting has been completed; and that the process of creosoting is necessary and essential in the manufacture of railroad ties. It goes without argument that a number of years ago the creosoting process of ties was generally unknown, and that during that time the railroad tie was completely manufactured when it left the saw mill, but under the modern processing, such ties are not completed, or ready for the use intended, nor made into a salable product until after the final chemical treatment.
Reference is made to the Stearns case, Stearns Coal Lumber Co. v. Thomas,
In the instant case, less than 1% of the raw material is sold without having gone through the waiting, creosoting, boring, adzing, trimming and drying process.
We are of the opinion that the court rightly adjudicated that the appellee was engaged in manufacturing, *Page 230 and that the untreated ties in its plant were raw materials actually on hand for the purpose of manufacture.
Judgment affirmed.