Yowell v. Lebanon Water Works Co.

71 S.W.2d 658, 254 Ky. 345, 1934 Ky. LEXIS 81

• Court: Court of Appeals of Kentucky (pre-1976)
• Decided: May 18, 1934
• Status: Published

Opinion

Opinion of the Court by

Hobson, Commissioner

Affirming.

W. B. Yowell owned a house in Lebanon. He brought this action against the Lebanon Waterworks Company to recover for the loss of his house by fire, alleging negligence in the water company in furnishing water to put out the fire. After the petition was filed, an agreed statement of facts was filed as a part of the petition. On these agreed facts the circuit court sustained the demurrer to the petition and dismissed it. The plaintiff appeals.

The agreed facts are these: The Lebanon Waterworks Company was incorporated under the special act of the General Assembly approved March 6, 1884 (see Acts 1883-84, c. 317, vol. 1, p. 579). The act was amended by the act approved March 2, 1886 (see Acts 1885-86, c. 117, vol. 1, p. 454), providing that the city of Lebanon might subscribe for stock in the company and issue bonds to pay for the stock, subject to an election to be held by the people voting the bonds. These acts were again amended April 30, 1890 (see Acts 1889-90, c. 1156, vol. 2, p. 1670), providing how the directors should be appointed and their duties. The city of Lebanon is a city of the fourth class, and subscribed for 600 shares of the capital stock of the Lebanon Waterworks Company; issued the bonds of the city to pay for the stock land the proceeds of the bonds were used in the construction of the plant of the Lebanon waterworks. The city owned all of the stock of the waterworks company [and that company, as originally organized, has never (been dissolved. The city council, acting for the city, elects the directors of the waterworks company. The directors elect a president and other officers and em ployees, wbo manage and conduct tbe business of tbe waterworks company. Tbe income received from tbe operation of tbe waterworks company’s plant is used for tbe operation and maintenance of tbe plant and any surplus income is paid and turned over to tbe city of Lebanon for municipal purposes. Tbe accounts of tbe waterworks company, including its bank acounts, are kept separated from the accounts of tbe city of Lebanon; tbe board of directors rendering each year to tbe council of tbe city a report showing the receipts and disbursements, as required by law.

It has been held in a long line of cases that where a waterworks company has contracted with a city to furnisb a supply of water for the protection of property in tbe city against fire, a citizen of tbe city under section 18 of tbe Code of Civil Practice may maintain an action against tbe water company to recover for tbe loss of bis property by fire, resulting from its failure to perform its contract. See Harlan Wafer Co. v. Carter, 220 Ky. 493, 295 S. W. 426; Kentucky Utilities Co. v. Farmers’, etc., Stock Yards Co., 246 Ky. 40, 54 S. W. (2d) 364, and cases cited. On tbe other band it has been held that if tbe city is tbe owner of and operates a waterworks system, the city is not liable for any loss of property by reason of tbe failure to furnish water to put out a fire. Phillips v. Kentucky Utilities Co., 206 Ky. 151, 266 S. W. 1064; Phillips v. City of Elizabethtown, 218 Ky. 428, 291 S. W. 358; Small v. City of Frankfort, 203 Ky. 188, 261 S. W. 1111, 33 A. L. R. 692, and cases cited. In Commonwealth v. Lebanon Water Works, 130 Ky. 61, 112 S. W. 1128, 20 L. R. A. (N. S.) 224, a revenue agent sought to tax tbe sinking fund created to liquidate the bonded debt incurred by the city in tbe purchase of tbe waterworks system in question, but it was held that this money was simply tbe money of tbe city, held for a public purpose and not liable for taxation. Tbe same principle must apply here. While tbe waterworks system is operated in the name of tbe waterworks company, it is only a part of the city government. The mere form in which the city operates tbe system does not in any wise affect tbe rights of tbe parties. Under tbe well-settled rule if tbe city operates this system in tbe name of tbe city, tbe action could not be maintained against it. To allow tbe plaintiffs to maintain the action and recover against tbe waterworks company would be simply to allow them to maintain an action against a branch of the city government. All the surplus from the operation of the plant is paid into' the city treasury for municipal purposes, and, if a' judgment in favor of the plaintiffs was paid, there would be this much less to pay into the municipal treasury. To allow the action to be maintained against the waterworks company would be therefore simply to allow a recovery against the city. The court will' look at the substance not the form. Com. v. Southern R. Co., 193 Ky. 474, 237 S. W. 11.

Judgment affirmed.