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and on the 6th of May, 1903, the common, Congress of 1891. [26 Stat. at L. 827, chap. council received a communication from the 517, U. S. Comp. Stat. 1901, p. 549.] The board, through its secretary, wherein the grounds of the dismissal of the bill are set board requested the common council to in- forth in the foregoing statement of facts. vite bids for the bonds of the city for the purpose of constructing the system of waterworks, which bids were to be opened on the 1st of August, 1903. Thereupon the common council, on the same day, complied with the request, and directed the publication of a notice for receiving bids for the bonds up to August 1, 1903.

On the 30th of July, 1903, the complainant filed this bill against the parties named. It is contended in the bill that, as trustee for the bondholders, the complainant can maintain this action, on the ground of an impairment of the obligation of the contract already mentioned, and that, as the water company has mortgaged to the complainant the benefits of its contract with the city, together with the other property of the water company, as security for the payment of its bonds, any such action as proposed by the city will destroy the value of the bonds of the water company, and will amount to the taking of complainant trustee's property without due process of law, and will deprive it of the equal protection of the laws. The water company is made a defendant for the purpose of binding it, as averred in the bill, by the judgment and decree that may be rendered in this cause, so that the right and equity of subrogation, or other rights and equities set up, may be enforced and decreed against the water company, and that the water company may be held and decreed, on its part, to specifically perform all the obligations of such contract. An injunction was asked for and granted, as stated, pendente lite. It was also asked that the defendant city might be enjoined from refusing to carry out the contract with the waterworks company, and from placing any obstacle in the way of the due performance thereof, according to its terms.

Messrs. Joseph Packard, Olin J. Wimberly, Louis F. Garrard, and John I. Hall for appellant.

Messrs. W. A. Wimbish, J. H. Martin, T. T. Miller, and Ellis, Wimbish, & Ellis for appellees.

Mr. Justice Peckham, after making the foregoing statement, delivered the opinion of the court:

The sole question arising herein is whether the Federal circuit court had the jurisdiction to determine the issue involved. That question alone has been certified to this court by the circuit court, under the provisions of the 5th section of the act of

Whether this case comes within the principle laid down by this court in Dawson v. Columbia Ave. Sav. Fund, S. D. Title & T. Co. 197 U. S. 178, 49 L. ed. 713, 25 Sup. Ct. Rep. 420, upon the question of diversity of citizenship, it is unnecessary to determine, because there is, in our opinion, a Federal question involved, which gave the circuit court jurisdiction to determine the case without reference to citizenship. It is averred in the bill that by reason of the passage of the ordinance of the common council of the city and the act of the legislature of Georgia, passed December 3, 1902, the obligation of the contract set forth in the bill was impaired. It is part of the duty of the Federal courts, under the impairment of the obligation of contract clause in the Constitution, to decide whether there be a valid contract and what its construction is, and whether, as construed, there is any subsequent legislation, by municipality or by the state legislature, which impairs its obligation. That the ordinance of the common council of a municipal corporation may constitute a law within the meaning of this constitutional clause is too well settled to admit of doubt. St. Paul Gaslight Co. v. St. Paul, 181 U. S. 142, 148, 45 L. ed. 788, 791,.21 Sup. Ct. Rep. 575; Davis & F. Mfg. Co. v. Los Angeles, 189 U. S. 207-216, 47 L. ed. 778-780, 23 Sup. Ct. Rep. 498. The contract in this case provided in terms for the exclusive privilege of supplying water to the city and its inhabitants for thirty years from the date of its completion. By the ordinance of the city of 1902 the city insisted that the water company had totally failed to fulfil its contract to supply water to the city and its inhabitants. Such ordinance then went on and proposed to the electors an ordinance, the material portions of which have been set forth in the foregoing statement.

The act of the legislature, passed the day before the day of the election, is also referred to in the statement and some of its material provisions are mentioned.

The ordinance and the act should properly be considered together, and they evidently contemplate an immediate execution of the work in case the electors assented to the issuing of the bonds. If the provisions of the ordinance and act were carried out, the effect, of course, could be none other than disastrous to the water company, as the obligations of the contract (if any) would thereby be so far impaired as to render the contract of no value. The source of the ability of the water company to pay the

interest on its bonds, and the principal | were not new and substantial duties in thereof, as they became due, was, by this positive opposition to those contained in the ordinance and act, entirely cut off.

contract created and their performance provided for by the ordinances and act. The act of the legislature aided the city by granting it power to itself erect waterworks and to issue bonds in payment of the cost thereof, and the city was proceeding to avail itself of the power thus granted, when its progress was arrested by the filing of the bill in this case and the issuing of a temporary injunction. It would seem as if the case were really within the principle decided in Walla Walla v. Walla Walla Water Co. 172 U. S. 1, 43 L. ed. 341, 19 Sup. Ct. Rep. 77; Vicksburg Waterworks Co. v. Vicksburg, 185 U. S. 65, 46 L. ed. 808, 22 Sup. Ct. Rep. 585, 202 U. S. 453, 50 L. ed. 1102, 26 Sup. Ct. Rep. 660; Davis & F. Mfg. Co. v. Los Angeles, 189 U. S. 207, 47 L. ed. 778, 23 Sup. Ct. Rep. 498; Knoxville Water Co. v. Knoxville, 200 U. S. 22, 50 L. ed. 353, 26 Sup. Ct. Rep. 224. In the last-cited case the water company contended that the agreement mentioned in that case constituted a contract, for which it acquired for a given period the exclusive right

Was not this legislation, and legislation of a kind materially to impair the obligation of the contract then existing, and not only to impair, but to wholly destroy its value? We are not called upon now to say whether the exclusive right for thirty years, granted to the water company by the contract to supply the city with water, was legal and valid, because that is a part of the question whether the obligation of the contract has been impaired by the subsequent ordinances of the city and the laws of the state. It cannot be determined that there is an impairment of the obligation of a contract until it is determined what the contract is, and whether it is a valid contract. If it be valid, it still remains to be determined whether the subsequent proceedings of the city council and legislature impaired its obligation. The ordinance and act were not mere statements of an intention on the part of one of the parties to a contract not to be bound by its obligations. Such a denial on the part, even of a municipal corporation, contained in an ordinance to supply water to the city and its inhabitto that effect, is not legislation impairing ants, and it insisted that the obligation of the obligation of a contract. St. Paul this contract would be impaired if the city, Gaslight Co. v. St. Paul, 181 U. S. 142, acting under the acts of the legislature and 45 L. ed. 788, 21 Sup. Ct. Rep. 575. It was under the ordinance mentioned, established stated in that case that the ordinance in and maintained an independent and separate question "created no new right or imposed system of waterworks in competition with no new duty substantially antagonistic to those of the water company. It was held the obligations of the contract, but simply that such a question was one arising under expressed the purpose of the city not in the Constitution of the United States, and the future to pay the interest on the cost of that the Federal circuit court had jurisdicconstruction of the lamp posts which were tion thereof without regard to the citizenordered to be removed. . . When the ship of the parties. It must be remembered substantial scope of this provision of the that in the case before us the sole question ordinance is thus clearly understood, it is is whether the Federal circuit court had juseen that the contention here advanced of risdiction to determine the case, and we are impairment of the obligations of the con- not now concerned with the question as to tract arising from this provision of the or- how the matter should be determined, but dinance reduces itself at once to the prop-only whether the circuit court had jurisdicosition that wherever it is asserted, on tion to determine it. As stated in Vicksburg the one hand, that a municipality is bound Waterworks Co. v. Vicksburg, 185 U. S. 65, by a contract to perform a particular act, at page 82, 46 L. ed. 808, at page 815, 22 and the municipality denies that it is liable under the contract to do so, thereby an im- Sup. Ct. Rep. 585, at page 592, in speaking under the contract to do so, thereby an impairment of the obligations of the contract of the question of jurisdiction: "We do not arises, in violation of the Constitution of the such questions in the present case, for we are wish to be understood as now determining United States. But this amounts only to the contention that every case involving a only considering whether or not the circuit controversy concerning a municipal contract court had jurisdiction to consider them.” is one of Federal cognizance, determinable ultimately in this court. Thus, to reduce the proposition to its ultimate conception is to demonstrate its error."

In the case at bar the conditions are entirely different. There was not merely a denial by the city of its obligation under the contract, but the question is whether there

Concluding that the court below had such jurisdiction, because it presents a controversy arising under the Constitution of the United States, the judgment of the Circuit Court is reversed, and the case remanded to that court to take proceedings therein according to law.

Reversed.

.

SECURITY TRUST & SAFETY VAULT, tised the same to be sold, and would sell COMPANY, of Lexington, Kentucky, the same, unless restrained by order of the Trustee of Clara D. Bell, Plff. in Err.,

V.

CITY OF LEXINGTON, Kentucky, and E.
T. Gross, Delinquent Tax Collector for
Said City, Defts. in Err.
Constitutional law-due process of
notice and hearing.

court. It was averred that the claim for back taxes was for alleged omissions of personal property owned by the plaintiff as trustee, which had not been assessed for city taxation for the years stated, and that law-the tax was based on alleged assessments imposed in December, 1898, for these years, made by the city assessor of Lexington. The plaintiff denied that the pretended assessments made in 1898 for those years were any assessments at all, and alleged that there had been no assessment for the back taxes of those years or for any of them. It was averred that certain entries which had been made in the assessor's books for the years mentioned, purporting to assess the property for these back taxes, were interpolated among the assessments for those years, but were not legally made; that such entries were not assessments, nor any

The failure of the Kentucky statutes to require notice to be given of a special assessment for back taxes on omitted property, made by the regular assessor under Ky. Stat. § 3179, after the time provided by law for the making of the general assessment, does not deprive the taxpayer of his property without due process of law, where the state court has afforded him full opportunity to be heard on the question of the validity and the amount of the tax, and, on such hearing, has reduced the tax. *

[No. 55.]

Argued October 23, 24, 1906. Decided De- step in the valid assessment of back taxes

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Statement by Mr. Justice Peckham:

The plaintiff in error, which was plaintiff below, filed its petition in the Fayette county circuit court, state of Kentucky, in equity, on February 3, 1899, for the purpose of obtaining an injunction restraining the defendants in error from the collection of certain back taxes accruing during the years 1894 to 1898, both inclusive, imposed in favor of the city of Lexington, and which the plaintiff asserted were illegally assessed. A temporary injunction was prayed for and granted, restraining the collection of the tax, and upon the trial the amount of the taxes was reduced, and, as so reduced, declared to be a lien on the property of the plaintiff in error as trustee, and judgment accordingly was entered, which judgment was, upon appeal to the court of appeals of the state, affirmed, and the plaintiff brings the case here by writ of error.

in those years, and were made by the city assessor without any notice to, or conference

with, the plaintiff of his intention to make tiff at no time, either before or since said the same, or any assessment, and the plainpretended assessment, had been given or allowed any opportunity or privilege to make any complaint or show cause against the assessment before any competent officer or tribunal whatever. It was also averred that all the property of plaintiff as trustee, during each of the years covered by the claim for back taxes, had been duly assessed, and, if it had been given the opportunity, plaintiff would have established the fact of such assessment, and that it had been fully and legally paid.

The plaintiff averred that collection of taxes based on assessments made as above stated would be in violation of the Constitution of the United States and of the state of Kentucky, forbidding that a citizen should be deprived of his property without due process of law.

The defendants in their answer averred that all of the property (with an exception not material) on which the defendants were claiming taxes as upon omitted property, had in fact been omitted by the plaintiff from its assessment lists during the years mentioned, and that the lists made out by In the amended petition it is averred that the plaintiff for those years had been imthe plaintiff, as trustee, owned certain real perfect and improper lists, and that there estate in the city of Lexington, and that the was omitted therefrom a large part of the tax collector of the city, asserting a claim personalty owned by the plaintiff as trusfor back taxes from 1894 to 1898, both in- tee. The defendants averred that all the clusive, in favor of the city, against the omitted property was properly assessable for trust estate in the plaintiff's hands, for the respective years, and that there was due $13,964.96, had, to satisfy the claim, levied thereon, in 1898, as the back taxes on the on the real property held by it as trustee said omitted property, the sum named, to and described in the petition, and had adver- wit, $13,964,96; and the defendants denied *Ed. Note.-For cases in point, see Cent. Dig. vol. 10, Constitutional Law, § 893.

Messrs. George C. Webb, George S. Shanklin, J. R. Morton, and E. P. Farrell for defendants in error.

Mr. Justice Peckham, after making the foregoing statement, delivered the opinion of the court:

There are in the state of Kentucky two distinct methods by which an assessment for so-called back taxes can be made. One

tax assessor, elected as provided for by an ordinance of the city of Lexington. This ordinance the court of appeals of the state of Kentucky has held, contrary to the contention of the plaintiff in this case, did not displace the regular assessor, or affect his right to make an assessment for back taxes. The other method provides for an assessment by the regular assessor, under § 3179 of the laws relating to the city of Lexington, which section, among other things therein contained, provides that: "Whenever the assessor shall ascertain that there has, in any former year or years, been any property omitted which should have been taxed, he shall assess the same against the person who should have been assessed with it, if living; if not, against his representative."

that the valuation of the property, as fixed | Joseph D. Hunt, and John R. Allen for in the assessment, was any larger in propor- plaintiff in error. tion than the value of the assessment generally placed on similar property in the city of Lexington. After the assessment was made, it was averred that the delinquent tax collector demanded payment of the same, which was refused and thereupon he levied upon the property on the 31st of December, 1898. The answer then set up the making of the assessment on the property omitted, and showed that it was made substantially as averred in the amended petition, by insert-method is an assessment by a special backing in each of the books for the various years an additional assessment on account of omitted property, and that, after each of the entries of assessment in the various books had been made by the assessor, he signed his name after the words, "Assessed by me;" and it is averred that the assessment was also recorded by the assessor in the back-tax assessment book kept by the city of Lexington, and was by him reported to the auditor of the city of Lexington on the day that the assessment was made, December 31, 1898. The defendants also averred that, more than thirty days prior to the time the assessment was made, the city, through its duly authorized officers and agents, had notified the plaintiff that it had omitted from its assessments for the years 1894 to 1898, both inclusive, a large portion of the estate held by it as trustee, and, at the time of giving such notice, the officers of the city had furnished and delivered, as a part of such notice, an itemized statement of the securities and other personal property belonging to the estate, and held by the plaintiff, on the respective dates for taxation for the respective years, and that payment of the taxes upon this omitted property was repeatedly demanded of the plaintiff by the city during a period of more than thirty days prior to the assessment, and the plaintiff refused to pay any additional taxes or to list the omitted property, and that ample time and opportunity were afforded plaintiff to show that the property had not been omitted from the yearly assessments, and the plaintiff failed to do so.

In this case the assessment for back taxes was made by the regular assessor, but not until December 31, 1898, under the abovequoted provision in § 3179. It was, however, a special assessment, made after the regular assessment in the assessor's books of 1898, and after such books had been transmitted within the time prescribed by law (§ 3180), December 1, 1898, to the auditor, subject to the inspection of the public. In regard to the regular assessment, the statutes of Kentucky provide (§ 3181) for a board of equalization, which sits on the first Monday of January, and continues in session not longer than four weeks. The auditor must deliver to the board the assessment books filed with him by the assessor, and it is to hear all complaints against the assessments made by the assessor, and may determine the same, but it cannot increase the assessment without notice to the party whose property is to be increased. The section is part of the general statutes as to assessments for the annual taxes, and it refers evidently to the assessments made by the assessor up to the 1st of December preceding, and which appear in the book which the law directs to be sent to the auditor and by him transmitted to the board of equalization. It does not refer to an extraordinary assessment made by the Messrs. John T. Shelby, George R. Hunt, assessor for back taxes subsequently to the

A reply and rejoinder were filed, and, upon the pleadings, the parties went to trial.

Judgment was given for the defendants, refusing the injunction, and providing for the sale of the real estate to satisfy the amount due for back taxes, as stated in the judgment. The total amount of back taxes due on the omitted property was, by such judgment, reduced from $13,964.96, the amount claimed by the defendants, to the sum of $8,626.63.

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time provided for by law for the making | proof in such a proceeding as this was upon of the general assessment. The assessor the plaintiff to establish that there was no notice of the assessment given it; but it also held that the defendant had, in fact, proved that there was notice given to the plaintiff in error before the assessment was made. This applies to a notice in fact, but the court of appeals did not hold that there was any notice made necessary by the statute in regard to such a special assessment as above described. An assessment made on December 31, 1898, in the manner set forth, although imposed before the meeting of the board of equalization in January following, was not imposed at a time which made the general statutes as to assessments applicable, and therefore the taxpayer had no statutory notice or opportunity furnished him to appear and be heard before the board. He may have examined the assessor's books for the various years 1894-1898, when filed in the auditor's office on the 1st of December, by the assessor, and prior to December 31, when this assessment was made, and found that there was no assessment made against him for any back taxes. There was no statutory obligation imposed on him to again examine the books, lest perchance they may have had an interlined assessment made in them, for the making of which the law provided no notice. It follows that the subsequent assessments placed in such books, and not appearing on any book when sent to the auditor by the assessor, would not be made under any statutory provision for notice, and would not afford the tax

must return the general assessment which he makes in his book under § 3179 to the auditor on or before December 1 in each year. Section 3180. This book remains in the auditor's office subject to the inspection of the public until transmitted, in the January following, to the board of equalization under § 3181. In the case before us the assessment for the back tax was made December 31, 1898, by entering a separate assessment for each year in the assessor's book for that year, and therefore these various assessments were not contained in the books of the assessor as they were sent to the auditor on December 1 of each year, respectively. The assessor's books for the years prior to 1898 were obtained in some way, and the entries of the assessments were therein made, because, as stated, there were no other books provided. We find no provision of the statute as to assessments for back taxes, which requires notice of such assessment if made at any time other than in the regular course for the general assessment as provided for in the general statute. If the assessment happens to be made in the assessor's book prior to December 1 in any year, it, of course, goes with the book to the auditor, and remains there for inspection by the public until taken before the board of equalization. Such an assessment would carry with it the provision of the law of the state applicable to the city on the subject of assessments, including the general notice under the law provid-payer an opportunity to be heard before the ing for such assessment. But that, of course cannot apply where the assessment is not made on or before December 1 in the regular assessment book. That book the taxpayer must omit to examine at his peril, when filed with the auditor, or when before the board of equalization. As sent to the auditor December 1, 1898, the book did not contain the assessment in question. And as to the books of the former years, they had passed out of the legal custody of the assessor, and he could not take any such books, and, without notice, impose a conclusive assessment for back taxes for the particular year the book had been made use of as an assessment book. Such assessment could not be enforced unless the taxpayer could thereafter at some time, and as a matter of right, be heard upon the question of the validity and the amount of such tax. The general statutory notice as to the regular assessment proceedings cannot be regarded as notice of this special assessment, made years after the completion of the old assessments.

In regard to the question of notice, the court of appeals held that the burden of

board of equalization in regard to the illegality of such tax.

If the statute did not provide for a notice in any form, it is not material that, as a matter of grace or favor, notice may have been given of the proposed assessment. It is not what notice, uncalled for by the statute, the taxpayer may have received in a particular case, that is material, but the question is whether any notice is provided for by the statute. Stuart v. Palmer, 74 N. Y. 183, 30 Am. Rep. 289. Before this special assessment could be actually enforced or during the process of enforcement the taxpayer must have an opportunity to be heard as to its validity and extent. In Weyerhaueser v. Minnesota, 176 U. S. 550, 44 L ed. 583, 20 Sup. Ct. Rep. 485, it was held that the taxpayer was entitled to an opportunity to be heard before the tax could be enforced (see page 556, L. ed. page 586, Sup. Ct. Rep. page 488), that the filing of the tax list therein spoken of was, in effect, as held by the court, the institution of an action against each tract of land described in it, and the taxpayer thereafter had opportunity to make any defense he might have.

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