In 1891 Kentucky adopted a new constitution, section 174 of which, providing for the taxation of all property in proportion to its value, is also set forth in the above-cited case.
The legislature of the state in 1892 passed an act in relation to the taxation of banks and other corporations which was in conflict with the Hewitt act, and provided for taxing the banks in a different manner from that act, and also subjected the banks to local taxation; the total being much more onerous than that enforced under the Hewitt act.
The complainant was incorporated under an act of the legislature of Kentucky approved February 10, 1865, and it had all the powers granted by that act and the several amendments thereof as alleged in its bill.
There were various other banks in the city of Louisville, which also alleged that they had accepted the terms of the Hewitt act, and by reason thereof had a valid contract with the state that they should be taxed only under the provisions of that act.
The complainant alleges in its bill that early in the year 1894 a demand was made on the part of the defendant the city of Louisville, based upon the act of 1892 and the ordinance adopted in pursuance thereof, for the payment of a license tax equal to 4 per cent. of its gross receipts into the sinking fund of the city. The banks denied their liability to pay any tax other than that provided in the Hewitt act, and hence arose the differences between the city and the banks.
No litigation had been commenced for the purpose of testing the questions at issue between the city and the banks, although negotiations looking to that end had been in progress between the city attorney of Louisville and the members of the sinking-fund board, on the one hand, and the counsel for the various banks and trust companies, on the other. There is set forth in the bill of the complainant the action of the sinking-fund board, as follows:
'Sinking Fund Office, Feb'y 13, 1894.
'A committee, consisting of Messrs. Thomas L. Barrett, John H. Leathers, and George W. Swearingen, appeared before the board on behalf of the banks who are members of the Louisville Clearing House, and stated that it was the purpose of said banks to resist the payment of the license fee demanded of them under the license ordinance approved January 29, 1894, on the ground that said banks were not legally liable to pay the same; but, in order to save the sinking fund from any embarrassment occasioned by their refusal to pay said license fee, the banks, with two or three exceptions, were willing to enter into an arrangement whereby they would pay a part of the amount demanded of them, and lend the sinking fund the balance thereof, to be repaid, with interest at four per centum per annum, if it was finally decided and adjudged that the banks were not liable to pay said license fees.
'After discussion, the president was, on motion of Mr. Tyler, seconded by Mr. Summers, authorized to enter into the following arrangement with the different banks, trust and title companies who will be subject to the payment of the license fees if the license ordinance is finally adjudged to be valid and enforceable:
'First. To accept from each of said banks and companies a payment equal to the difference between the amount they now pay to the state for state taxes and the amount they would be required to pay for state taxes under the provisions of what is known as the 'Hewitt Bill.' This sum shall be an actual payment, not to be repaid under any circumstances; but its payment shall not in any manner or to any extent prejudice the banks or companies paying it, or be taken as a waiver of any legal right which they have in the premises.
'Second. In addition to making the above payments, the said banks and companies, save those selected to test the question involved, shall each lend to the sinking fund a sum which, added to said payment, will equal four per centum of its gross earnings during the year 1893, and the sinking fund will execute for said loans its obligations, agreeing to repay the same, with interest at four per centum per annum, when and if it shall be finally adjudged by the court of last resort that said banks or companies are not liable to pay the license fee required by the ordinance aforesaid; but, if it is finally adjudged that they are liable to pay said license fee, then the said loan shall be taken and deemed as a payment of said license fee, and the obligation to repay the same shall be void.