author: STEINFELD, Judge.

text:
    J. B. BLANTON COMPANY, Inc., Appellant, v. J. E. LOWE, Chairman et al., Appellees.
    Court of Appeals of Kentucky.
    May 26, 1967.
    Thomas F. Marshall, Frankfort, for appellant.
    William E. Johnson, Johnson & Burton, Allen Prewitt, Jr., Frankfort, for appellees.
   STEINFELD, Judge.

This action is an appeal from the refusal of the Board of Zoning Adjustment and Appeals to require the issuance of a building permit to J. B. Blanton Company, Inc. authorizing it to construct a warehouse. From a judgment upholding such refusal the property owner appeals.

The land involved in this controversy is the greater part of Lot 29 of Meredith Manor, which subdivision is located on the Frankfort-Versailles Road (U. S. Highway No. 60) in Frankfort, Kentucky, a city of the second class. Lots 26, 27 and 28 of that subdivision have frontage on the south side of that highway, are each 50 feet in width throughout and vary in depth from 150 feet on the west to 213 feet on the east. Lot 29 which faces Phillips Street (now Lee Court) is south of and contiguous to Lots 26, 27 and 28. Lee Court begins at the south side of the road and extends generally southwardly and runs along the western line of Lots 28 and 29. The eastern and the western boundaries of Lot 29 are 167 feet, the northern boundary is 150 feet, and the plat filed with the complaint shows that the southern boundary is 158 feet more or less. No part of Lot 29 touches the Frankfort-Versailles Road. It is owned by J. B. Blanton Company, Inc., the appellant herein, it having acquired the land by a deed dated October 30, 1957, recorded in deed book 152, page 168 in the office of the Clerk of the County Court of Franklin County, Kentucky.

Immediately before June 21, 1954, Lot 29 was in an area having a zoning classification of “single family residence district R-l”. On that date there were general changes in the zoning classification of property in Frankfort, Kentucky, made by the following resolution:

“All areas zoned as of this date for Local Commercial District ‘C-l’ use on the Frankfort-Versailles road are to be zoned for Commercial District ‘C-2’ use. This is to apply on both sides of the road. Also, all areas zoned as of this date for Single Family Residence District ‘R-l’ use and facing the Frankfort-Versailles road on its south side only are to be rezoned for Commercial District ‘C-2’ use as far east as the west side of Atwood Street and for a depth of 300 feet from the Frankfort-Versailles Road.”

On August 27, 1965, an officer of J. B. Blanton Company, Inc. acting for it, applied for a building permit so that the company could construct a warehouse on Lot 29. After much controversy during which the permit was issued, later withdrawn and finally denied, the corporation appealed to the Board of Zoning Adjustment and Appeals and requested it to direct that the permit be issued. This request was denied for the reason that the board found the land to be zoned single family residence R-l.

Contending that the quoted resolution •changed the zoning classification of that part of Lot 29 which was within 300 feet ■of the Frankfort-Versailles Road from residence district R-l to commercial district C-2, the corporation appealed to the Franklin Circuit Court. It demanded that the decision of the board be reversed and that the permit be issued.

The circuit court heard a number of witnesses and considered many exhibits filed by the parties after which it made findings of fact among which was the following :

“That the June 21, 1954, minutes of the Capital Planning & Zoning Commission changed the zoning of only that R-l property located on and facing the Frankfort-Versailles Road on the south side of said road, and did not change the zoning classification of Lot No. 29 of Meredith Manor Addition Subdivision; * * * »

It adjudged that the order of the board finding that Lot 29 “ * * * is presently zoned R-l, is correct and supported by the evidence; * * * It ordered the action dismissed.

The first part of the resolution which refers to the transfer of areas from commercial district C-l to commercial district C-2 is not involved in this controversy. The meaning of the second part which transfers areas from residential district R-l to commercial district C-2 is determinative of this litigation. It is susceptible of two constructions; therefore, an ambiguity exists. Lane v. Railey, 280 Ky. 319, 133 S.W.2d 74. The meanings of the word “areas” and the word “facing” are critical to the decision. The word “area” is discussed in 6 C.J.S. page 332 where it is said:

“The word ‘area’ has a somewhat elastic meaning. Originally it meant a broad piece of level ground, but in modern use it can mean any plane surface, the inclosed space on which a building stands, the sunken space or court giving ingress and affording light to the basement of a building; a particular extent of surface; an inclosed yard or opening in a house; an open place adjoining a house; any particular extent of surface; region; tract. In geometry, the superficial contents of any figure, as the area of a square or triangle; the surface included within any given lines.”

Also see State ex rel. McNerney v. Armstrong, 97 Neb. 343, 149 N.W. 786, 788, Ann.Cas.1917A, 554; A. Dicillo & Sons v. Chester Zoning Bd. of Appeals, Ohio Com. Pl., 103 N.E.2d 44, 48; Van Bebber v. Village of Scottville, 13 Ill.App.2d 458, 142 N.E.2d 711, 714; Fleming v. Farmers Peanut Co., C.C.A.Ga., 128 F.2d 404, 406; Atwood v. Humble Oil & Refining Co., C.A. Tex., 338 F.2d 502, 506.

“Area” has been held to mean a unit comprising several tracts. Illinios Central R. Co. v. Village of South Pekin, 374 Ill. 431, 29 N.E.2d 590, 592, 593; People v. Ferris, 18 Ill.App.2d 346, 152 N.E.2d 183, 186. However, in Maisen v. Maxey, Tex.Civ.App., 233 S.W.2d 309, 312, area was held to usually mean tract, space, region or a broad part of land. It has been the subject of litigation and was adjudged to be synonymous with the word tract. United States v. Olesen, D.C.Cal., 196 F.Supp. 688, 690. In the zoning case of Incorporation of Village of Oconomowoc Lake, 264 Wis. 540, 59 N.W.2d 662, 663, the court said it meant a ground area.

The question to be decided is what the commission intended. Gateway Construction Co. v. Wallbaum, Ky., 356 S.W.2d 247. Did it mean a tract, a parcel, a plot or a collection of tracts, parcels and plots? The board and the court below adjudged that the former connotation was the intent.

The board was of the opinion that the commission intended to use the word “areas” as synonymous with tract rather than in the sense that many tracts or plots were to be included. That conclusion apparently was reached partly because of the word “facing” which is included in the resolution. Lot 29 was not facing the road. Liller v. Louisiana Board of Alcoholic Bev. Control, La.App., 59 So.2d 222; Howard Homes, Inc. v. Guttman, 190 Cal.App.2d 526, 12 Cal.Rptr. 244. There were acts of the commission since the adoption of the resolution which indicated that it had interpreted the resolution to mean that only tracts having frontage on the road were included. In 1963 it rezoned certain land off of the road but within 300 feet of it into a commercial district C-2 classification. Contemporaneous construction by an administrative body of a regulation which it had adopted is of great weight in adjudging the meaning of such regulation.

“The court in the interpretation of administrative rules and regulations also applies the doctrine applicable in the interpretation of statutes that great weight will be given to an administrative construction, especially when long continued and uniform, and the limitations of that doctrine are also applied in the construction of rules and regulations. An administrative construction of the agency’s own regulations is controlling in determining their meaning unless plainly erroneous or inconsistent with the regulations.” 2 Am.Jur.2d 136 Administrative Law, section 307.

The board decided that no part of Lot 29 was in a commercial district C-2. It interpreted the regulation of the commission upon sufficient evidence. Consideration of the language, its purpose and the conditions existing when it was enacted was proper. Brown v. Hoblitzell, Ky., 307 S.W.2d 739.

The lower court sustained the board; therefore, we should not and will not hold to the contrary. State of Alabama v. United States, 65 S.Ct. 1274, 325 U.S. 535, 89 L.Ed. 1779.

The judgment is affirmed.

WILLIAMS, C. J., and MILLIKEN, OSBORNE, PALMORE and MONTGOMERY, JJ., concur.


source: Caselaw Access Project

author: PALMORE, Judge.

license: Public Domain

text:
    James E. WHITE et al., etc., Appellants, v. CITY OF HICKMAN, Kentucky, etc., Appellee.
    Court of Appeals of Kentucky.
    May 19, 1967.
    John C. Bondurant, Hickman, for appellants.
    Brantly D. Amberg, Hickman, Jo M. Ferguson, Grafton, Ferguson, Fleischer & Harper, Louisville, for appellee.
   PALMORE, Judge.

The City of Hickman on December 30, 1966, enacted an ordinance authorizing the issuance of $3,600,000 in industrial revenue bonds to finance the acquisition and completion of a manufacturing plant. KRS 103.200 et seq. This is a declaratory judgment suit brought by the city against representative citizens and taxpayers to confirm the legality of the ordinance and of the bonds to be issued pursuant to it. The defendant parties appeal from a judgment declaring the project valid.

The total cost of the plant will approximate $12,000,000. Construction began in 1965 and was about 90% completed when the ordinance was enacted in December of 1966. Thus far it has been financed by the Carborundum Company, which will convey the facilities to the city and occupy them under a 20-year lease with four 5-year renewal options. The bonds are payable solely out of the rent, and are to be liquidated over the 20-year primary term of the lease. The company will have, in substance, the right to repurchase the property at any time after 1971 for $2,000 plus the amount required to pay off the balance (if any) of the bond indebtedness and incidental costs.

The first question presented on appeal is whether Manning v. Fiscal Court of Jefferson County, Ky., 405 S.W.2d 755 (1966), applies. We agree with the trial court that it does not.

The proposal in Manning was held invalid because there was not a satisfactory or sufficient showing that the construction of Fontaine’s plant had been induced by assurances of public financing. In this case it is clear that the proposed bond issue was a key factor from the beginning, and was deferred until a rather late stage of the construction work only by reason of the circumstance that Carborundum found it necessary or desirable to put up a major share of the total investment itself. On October 5, 1964, the legislative body of the city adopted a resolution purporting to authorize the Hickman Development Corporation, a nonprofit organization created for the purpose of securing industry, to act as its agent and “to negotiate to conclusion, consummation and finality such lease agreements as may be or may become necessary or expedient between the City * * * and any prospective, industrial development or manufacturer,” etc. While this resolution may be of questionable legal efficacy, it has value from an evidentiary standpoint. It is often necessary that negotiations of this type be kept confidential until the vital decisions are made, for which reason they cannot be memorialized from day to day in the form of official actions by public agencies. There was ample proof that Carborundum proceeded with construction of the plant on the basis of a reasonable and good faith assumption that the project could and would be financed in part by a revenue bond issue under the statutes here in question. It is our opinion that the inducement was enough to satisfy the objections held fatal in Manning.

Substantial evidence was adduced to show that the proposed undertaking will alleviate conditions of unemployment in the Hickman area and will encourage the increase of industry in this state. The trial court so found.' Hence the requisite conditions set forth in KRS 103.210 have been met.

The only other contention advanced by the appellants is that the proposed method of disbursing the proceeds of the bond issue amounts to an unlawful delegation of its legislative body’s discretionary power and responsibility. Fair consideration of this point requires a brief outline of the way in which the money is to be expended.

By an agreement made in August of 1965 Carborundum engaged National Factory Locating Service, an engineering firm headquartered at Memphis, Tennessee, to prepare plans, specifications and contract documents, assist in the awarding of contracts, and supervise construction of the project. In the bond ordinance of December 30, 1966, National is designated as the city’s engineer in the same capacity described in that contract, the city assumes payment of National’s fee, and the mayor is authorized to execute a contract with National “in form satisfactory to the City Attorney.” The ordinance directs ultimate payment of the engineer’s fee and the fee of Stein Bros. & Boyce, theretofore appointed as fiscal agent, solely from the proceeds of the bond issue.

When the bonds are sold, the mayor and city treasurer are authorized and directed forthwith to pay out of the proceeds the fiscal agent’s fee and, upon conveyance of the property by Carborundum to the city, the cost of the site. The balance must be deposited with Citizens Fidelity Bank and Trust Company, of Louisville, Kentucky, as trustee. That portion representing accrued interest becomes part of a sinking fund provided for retirement of the bonds on schedule. The balance is designated as a construction fund and is to be paid out by the trustee on a “progress-payment” basis as approved by this court in Gregory v. City of Lewisport, Ky., 369 S.W.2d 133 (1963). Such payments may be made only with the approval of the engineer and city treasurer, and they may be made in reimbursement of expenditures theretofore made by Carborundum under its construction contracts, subject to a guaranty by Carborundum that the facilities will be completed in accordance with the plans and specifications.

Thus it may be seen that the interests of both the city and the bond purchasers are secured by the integrity of the engineer, the trustee, and a responsible manufacturing company, and provision has been made to assure against the money’s being expended on a project that may not be completed. Indeed it would seem probable that the job will be done by the time any of it is paid out, in which event the entire construction fund may become payable at once to Carborundum by way of reimbursement.

As pointed out in Gregory v. City of Lewisport, Ky., 369 S.W.2d 133, 136-137 (1963), by submitting to the protective procedures reasonably required of a borrower the city does not surrender any governmental powers. “What are involved are simply details of a proprietary transaction.” Ibid. Although the city has an obligation of good faith to the bondholders, they are the parties most interested in and affected by the manner in which the money is handled, and we take it for granted that no one would contend the bondholders would prefer to have it handled by the city council than by a professional fiduciary institution operating under the protective banking statutes. We find no improper delegation of authority or responsibility of the city.

The proposed lease agreement recites that the parties interpret the law as exempting the leased property, including the leasehold estate, from ad valorem taxation, which factor has been a material inducement in Carborundum’s decision to enter into the contract. See KRS 103.285. However, simple candor prompts an admonition that thus far the question has not been and it is not now so decided.

The judgment is affirmed.

All concur.

      . Presumably, an attempt to sell the bonds at the beginning of construction would be less feasible than at a later stage when the proceeds are sufficient to assure completion of the job.

      . On the premise that any broader meaning would amount to an unlawful delegation, we construe this provision as authorizing no more than an assumption of Carborundum’s rights and obligations under the pre-existing contract, which was introduced as a part of the evidence in this proceeding.

      . Purchased by the Hickman Development Corporation in 1964 and transferred to Carborundum in 1965.

      . The sinking fund is otherwise derived from the lease revenues, which are payable directly to the trustee.

      .In its contract with the city Carborundum has agreed that it will pay all costs of the project in excess of the amount available from the bond proceeds.


author: WADDILL, Commissioner.

text:
    Vila Mae HOPPERTON et al., Appellants, v. CITY OF COVINGTON, Appellee.
    Court of Appeals of Kentucky.
    May 26, 1967.

      Andrew W. Clark, Hughes, Clark & Burke, Covington, for appellants.
    Charles H. Deters, Covington, for ap-pellee.
   WADDILL, Commissioner.

This is an appeal by resident freeholders of a 1620-acre tract of land sought to be annexed by the appellee, City of Covington. The case was heard without the intervention of a jury. Appellants allege the trial court erred in not holding in their favor when it was discovered that the description in the original ordinance proposing annexation was defective, in permitting the city to amend its pleadings, in finding that the requirements of KRS 81.280 were satisfied and in deciding that the failure to annex, as provided by KRS 81.140, would be detrimental to all parties concerned. They further assert an unconstitutional deprivation of property.

After the City of Covington adopted an ordinance proposing to annex an unincorporated area lying south of it the appellants, representing more than 51% of the resident freeholders of this area, filed a remonstrance proceeding (KRS 81.110 and 81.280). Early in the trial of this action it was discovered that a portion of the area to be annexed was the subject of a prior annexation ordinance by another city. The appellants moved to hold that the ordinance was void under KRS 81.100. The trial court overruled this motion, abated the action and gave the city permission to file an amended pleading eliminating the area that was the subject of the prior annexation proceeding. The city then adopted a new ordinance amending the first ordinance. The area described in the second ordinance was approved by the trial court for annexation and is the subject of this appeal.

Annexation of unincorporated territory by cities of the second class, such as Covington, is authorized by KRS 81.140 which incorporates the annexation procedure set forth in KRS 81.100 and 81.110. An accurately defined boundary is required by KRS 81.100. Cf. City of St. Matthews v. City of Beechwood, Ky., 373 S.W.2d 427. The appellants contend it was error to permit the city to amend.its pleadings to show the adoption of a second ordinance which correctly described the area to be annexed. When the trial court permitted the amendment to the pleadings it also allowed the parties to strike any testimony previously heard which concerned territory not to be annexed under the second ordinance. Appellants have failed to demonstrate wherein they have been prejudiced by the trial court’s rulings and in the circumstances disclosed we are unable to find an abuse of discretion. Buchanan v. City of Dayton, Ky., 363 S.W.2d 92.

This case is distinguishable from Garner v. City of Lexington, Ky., 306 S.W.2d 305, wherein an ordinance proposing to annex a small area was held void as being in violation of the circuit court’s jurisdiction of a larger area to be annexed under a preexisting ordinance. In the instant case we have an amendatory ordinance and an order of the trial court specifically authorizing amendment of the pleadings. Cf. Buchanan v. City of Dayton, supra.

Appellants contend the trial court erred in not finding the proposed annexation to be in violation of KRS 81.280. By the provisions of this statute certain specified requirements must be satisfied before an area may be annexed if an industrial plant is located therein. The northern tip of the area is occupied by a portion of the Sohio Petroleum Refinery Company. The trial court found that each of the requirements of this statute was satisfied. The only finding under this statute which is now attacked is that the area is “compact and contiguous.” The evidence discloses that it has an irregular shape roughly similar to that of an hour-glass. It also discloses that it is contiguous because the northern end of the area adjoins the present city limits of Covington. The eastern boundary of the area adjoins the boundaries of other cities. The southern and western boundaries coincide with a railroad track and certain highways. These monuments constitute reasonable and easily identified boundaries and the mere irregularity in its shape does not vitiate its compactness. Cf. City of Hickman v. Choate, Ky., 379 S.W.2d 238. The fact that part of the So-hio plant is already within the city limits and a part is in one of four other areas the city intends to annex under its comprehensive plan of annexation has no bearing on the compactness of the area now proposed for annexation.

Appellants urge that it was error for the trial court to find under KRS 81.-110 that the failure to annex will materially retard the prosperity of the city and of the landowners and inhabitants of the area. The evidence establishes that the lack of undeveloped land has seriously hindered the city in its efforts to attract new industry and to implement its urban renewal program. It further reveals that the 346 residents of the 1620-acre area to be annexed are dependent on septic tanks for sewage disposal although the soil is heavy clay-This and other deleterious conditions are not conducive to the proper utilization of this area’s potential. The city showed that as soon as possible it would provide the needed municipal services such as are enumerated in Hellman v. City of Covington, Ky., 393 S.W.2d 889 (which case involved a nearby tract of land). The findings of the trial court, as set forth in an enlightening opinion, are abundantly supported by the evidence. Although appellants argue that the cost of providing municipal services to this sparsely populated area will work a financial hardship on the city, the evidence shows it is economically feasible. Whether it is economically unwise is not a subject for judicial review.

Appellants finally contend that the proposed annexation will unconstitutionally deprive them of property without due process of law. As clearly set forth in Yount v. City of Frankfort, Ky., 255 S.W.2d 632, and Lenox Land Co. v. City of Oakdale, 137 Ky. 484, 125 S.W. 1089 and 127 S.W. 538, this question has no application to annexation of territory by a municipality.

The judgment is affirmed.

All concur.


author: CLAY, Commissioner.

text:
    Myrtle BEATTY, Appellant, v. Brenda ROOT, Appellee.
    Court of Appeals of Kentucky.
    May 19, 1967.

      Neville Smith, Manchester, Robert L. Milby, Hamm, Taylor & Milby, London, for appellant.
    Lester H. Burns, Jr., Henry E. Hughes, Manchester, for appellee.
   CLAY, Commissioner.

This is an appeal from a $5,000 judgment, for personal injuries, granted plaintiff appellee against defendant appellant. Defendant’s principal contention on appeal is that she was entitled to a directed verdict.

While traversing Tom Cat Trail, a two-lane gravel highway near the intersection of Highway 80 in Laurel County, defendant’s automobile, driven by her, ran off the road to the left and struck a utility pole. The defense was that the brakes failed and defendant steered the car off the road in an emergency to avoid traveling onto Highway 80. It is contended that the brake failure was the proximate cause of the accident and that defendant had no knowledge of this defective condition of her car.

The automobile had been purchased about two months before the accident. It was 10 years old. In a pretrial deposition defendant testified in substance that she had not had her brakes checked and that she had never used her emergency brake prior to this occasion. At the trial her son-in-law testified that shortly before the accident he had done some work on the rear end of the car, had actually done some work on the brake system, and that it was in good condition. He also testified that after the accident he found the “rear left kit Mowed”. There was no evidence that the emergency brake system had been tested, and it also had failed to function when defendant tried to use it.

Defendant’s contention that she was entitled to a directed verdict is based partially on the argument that the owner or operator of an automobile owes no greater duty to his passenger than a homeowner does to a social guest, and that the passenger must take the automobile as he finds it. We would like here to dispel this notion, although a comparable concept crept into the case of Veal v. Davis, Ky., 343 S.W.2d 593. There the statement was made that the operator of a car owes a lesser duty to a passenger than he does to other users of the highway. No reason is given for either theory (which cannot be practically applied) and we know of none.

An automobile may become a dangerous instrumentality if in a defective condition (Gaidry Motors v. Brannon, Ky., 268 S.W.2d 627), and everybody knows this. The potential dangers of defective equipment on the highway cannot be equated with those in the home. However, it is unnecessary to compare duties owed to other classes of persons. The statute, KRS 189.090, and any standard of reasonable care requires the maintenance of adequate brakes.

We have recently held, particularly with respect to an automobile several years old (and this one was 10 years old), “that from the mere fact of a brake failure an inference may be drawn that the owner had not exercised ordinary care with regard to maintenance”. Swope v. Fallen, Ky., 413 S.W.2d 82. The plaintiff is entitled to the benefit of this inference unless there is conclusive evidence the defendant had exercised ordinary care to see that the brakes were maintained in safe condition.

In this case the defendant had not personally shown any interest in the maintenance of a good braking system and she may have been justified, in view of her recent purchase, in assuming it was adequate. But this is not a matter of law. Nor can we say as a matter of law that the testimony of her son-in-law was so conclusive as to establish that someone in the family was exercising due care to assure the proper functioning of the mechanism. There is a question of credibility here. In our opinion the inference of negligence was sufficient to take the case to the jury.

This position fits perfectly with the principle that when a motorist runs off the road a presumption (or inference) of negligence arises. Vernon v. Gentry, Ky., 334 S.W.2d 266, 79 A.L.R.2d 1. In this case when defendant drove off the highway and struck a utility pole, she was prima facie negligent (because this sort of thing does not ordinarily happen without negligence). She undertook to blame the occurrence on the failure of both her foot brake and her emergency brake but there was also an inference of negligence arising from this mechanical malfunction. The evidence introduced by her may well have effectively rebutted both inferences but that is a question for the jury and not the court to determine.

In view of the fact that there was also a question whether defendant was negligent in the operation of her automobile after the emergency developed, we believe this is a case in which the jury, under all the circumstances, should properly decide the issue of whether the defendant had exercised reasonable care in safeguarding her passenger from injury. Therefore defendant was not entitled to a directed verdict.

Appellant’s final contention is that her motion for summary judgment should have been sustained. Assuming the motion is properly presented for review, it is clear that plaintiff’s pretrial testimony that defendant “had to pump her brakes” on the morning before the accident did not establish as a matter of law that plaintiff was contributorily negligent.

The judgment is affirmed.

All concur.

      . See Gumm v. Combs, Ky., 302 S.W.2d 616.


author: CULLEN, Commissioner. MONTGOMERY, Judge OSBORNE, Judge

text:
    DEPARTMENT OF REVENUE, Kentucky Board of Tax Appeals, Appellants, v. OLDHAM COUNTY, Appellee.
    Court of Appeals of Kentucky.
    May 19, 1967.

      William S. Riley, Asst. Atty. Gen., John P. Livingston, Larry A. Carver, Dept, of Revenue, Frankfort, for appellants.
    Bruce R. Hamilton, LaGrange, for ap-pellee.
   CULLEN, Commissioner.

The Kentucky Department of Revenue entered an order increasing by fifteen percent the 1966 assessment of farm property in Oldham County, to bring the assessment up to fair cash value. See KRS 133.150 and Russman v. Luckett, Ky., 391 S.W.2d 694. The county through its fiscal court appealed to the Board of Tax Appeals, which upheld the order. The county then appealed to the Oldham Circuit Court, which entered judgment holding the order invalid. The Department of Revenue and Board of Tax Appeals have appealed here from that judgment.

There is no issue between the parties as to whether all classes of property must be assessed at full fair cash value; all agree that it must he. The main controversy is as to whether the farm property in Old-ham County was in fact underassessed by the local authorities so as to warrant the increase ordered by the department. The circuit court held that the evidence taken before the Board of Tax Appeals did not sustain the board’s finding that the farm property was underassessed; on the contrary it showed that the local assessment was at full fair cash value. While expressed in terms of an evaluation of the evidence, in reality the holding was simply a rejection of the department’s principles of computation and an acceptance of the principle advocated by the fiscal court.

The assessment in question undertook to value the property as of January 1, 1966. The Department of Revenue made a study of all farm sales in the county during 1964 and 1965. Those which did not appear to be bona fide arm’s-length transactions were eliminated from consideration. The actual sale price of each of the remaining sales was determined and it was compared with the 1964 and 1965 assessments (which admittedly were way below full fair cash value). This comparison showed that the ratio of assessments to fair cash value, for each of the years 1964 and 1965, was 21.6 percent. This meant that the aggregate assessments for those years had to be multiplied by 4.6 in order to produce an amount representing full value assessment. Applying this method and making appropriate adjustments, the department made a computation of what should be the aggregate full value assessment for 1966. The actual assessment was such an amount below that as to require a fifteen percent increase to bring it up to full value.

(It is significant, we think, that in applying the same procedure to the several classes of property in Oldham County other than farm property, the department found that they were assessed at almost 100 percent of value.)

The county used a different method of computation in support of its contention that the farm property was not underas-sessed. It took all sales of farm property in 1964 and 1965 (without attempting to weed out any that were not voluntary arm’s-length transactions) plus those occurring during the first six months of 1966. The total sales prices for each year were divided by the total number of acres sold, to-produce a per-acre price. This method indicated an average per-acre price of $327 in 1964, $224 in 1965, and $260 in 1966.. The combined average for the three years, was $273. The amount of the local assessment of farm land for 1966, divided by the total number of acres of farm land in the county, produced an average per-acre-value of $294. This, says the county, shows that the local assessment was above fair cash value.

As hereinbefore mentioned, the circuit-court held in substance that the department’s method was not valid and did not. produce reliable evidence of underassessment. We do not agree. Many things attest to the validity and reliability of the department’s method. First, there was evidence that the method, over many years of use, had proved dependable and reasonably accurate; that the method is used by some 35 other states and by the United States Census Bureau; and that it has been used with satisfactory results in the-allocation of school funds under the Minimum Foundation Program. Second, there-was evidence that the sales used in the method were sufficient in number and in character so that when compared with assessments a fair and reliable indication was-produced of the prevailing ratio of assessments to full value for the entire class of such property in the county. Third, the method is logically valid. Fourth, and we think particularly significant, is the fact that in the instant case the department’s, method will produce substantially the same result as the one advocated by the county,, if sales not truly representative are eliminated from consideration. This latter point: requires some explanation. The county used all sales in its computations. The department undertook to eliminate sales that were not voluntary arm’s-length transactions. For the year 1964 the sales used by the department were substantially the same as those used by the county, and the per-acre price was substantially the same ($328 for department, $327 for county). However, in 1965, there was a material difference in the sales used. Those used by the county averaged $224 per acre. Those used by the department averaged $328 per acre — the same as in 1964. The average per-acre value under the increased assessment ordered by the department would be $323. Thus the department’s method produces substantially the same result here as the county’s if consideration is limited to properly selected sales.

The county argues that the department’s method is not proper or reliable because it utilizes 1964 and 1965 assessment figures whereas the law requires reassessment and revaluation as of January 1, 1966. This argument is wholly without merit. The assessment figures were used simply to determine a ratio as a test of the 1966 assessment. The county argues also that the assessment figures so used might not have been correct. We think there was sufficient proof of correctness in the testimony of employes of the department that they took the figures from the assessment records. The county further argues that the department has no statutory authority to use such a formula as it did use. This argument is •somewhat astonishing in the face of the •express directions in KRS 133.150 that the department compare the tax commissioner’s books with the records of sales of land and ■“determine the ratio of the assessed valuation of the property to the fair cash value.”

We are not convinced that the per-acre method advocated by the county is even acceptable, much less conclusive of valuation. It gives no consideration to differentials in improvements or in the amounts of acreage, or in the quality of the land sold. That there is something wrong with this method is quite clearly pointed •out by the fact that it produced a per-acre value of $327 in 1964, but only $224 for 1965. It is a matter of common knowledge that land values did not depreciate in Old-ham County or elsewhere by such a substantial amount between 1964 and 1965.

It is our conclusion that the evidence heard before the Board of Tax Appeals established the validity and reliability of the department’s method of computation of aggregate fair cash value sufficiently to give probative value to the computation and to support the finding of the board that the farm property was under-assessed to such an extent as to require a fifteen-percent increase.

Other questions are raised.

The circuit court held that KRS 133.150 does not authorize the Department of Revenue to equalize the assessment of classes of property by comparing the aggregate assessments of such classes of property with the individual assessments made by the county tax commissioner. It is sufficient to say that as we read the statute it plainly does so authorize. Related to this is the contention of the county that the statute authorizes only equalization among counties and not equalization of classes within a county. The statute expressly says that if any class of property in any county is not assessed at its fair cash value such assessment shall be increased or decreased to its fair cash value. Furthermore, this Court in Russman v. Luckett, Ky., 391 S.W.2d 694, made clear that the department has not only the power but the duty to see that all property is assessed at fair cash value.

This case was heard twice before the Board of Tax Appeals. At the conclusion of the first hearing the board remanded the case to the department with directions that the county submit a list of the specific properties that it claimed would be assessed at more than full value as a result of the increased assessment ordered by the department, and that the department make findings as to each of such properties. We construe this as a good faith move by the board directed toward achieving a fair result. However, the county seized upon it as an opportunity for a tactical maneuver, and proceeded to list 725 out of the 751 farms in the county. The county put the tax commissioner on the stand and he testified simply that he had assessed all of the farms at fair cash value. The department put on no evidence of its own, and at the conclusion of the hearing proceeded to find that there was no evidence presented before it that any particular piece of property would be overassessed. The circuit court held in effect that the blanket testimony of the tax commissioner showed that every one of the 725 listed farms would be overassessed, and since the department did not offer any evidence to the contrary the department was bound to make a finding that all of the listed parcels would be overassessed. We think it is obvious that the Board of Tax Appeals, in its order of remand, did not contemplate any such ploy as the county chose to engage in. The board obviously intended to give an opportunity for consideration of the effect of the increase on individual properties. The aggregate aspects of the assessment increase had been fully gone into before the board. However, the county elected to continue the battle of the aggregate assessments under the remand order. We think the department was not required to introduce any evidence to combat the blanket testimony of the tax commissioner, and that it properly found that no evidence had been presented on the issue of over-assessment of individual pieces of property.

At this point we should mention that no individual property owners are in this case and we do not have before us the issues that were involved in Fitzpatrick v. Patrick, Ky., 410 S.W.2d 143.

The Department of Revenue certified the increased assessment to the county clerk of Oldham County on July 29, 1966. KRS 133.180 provides that when the department has completed its action on the assessment of property in any county it shall, not later than June 20, certify the assessment to the county clerk. The circuit court held that the assessment increase for Oldham County was void because not certified by June 20.

In Johnson v. Fordson Coal Co., 213 Ky. 445, 281 S.W. 472, under a predecessor statute, the State Tax Commission certified an increased assessment on August 8, whereas the statute required that it be done not later than June 1. This Court held that the statute was directory only, as to the date, and that the assessment increase was not void. To the same effect is Ross v. First National Bank, 213 Ky. 453, 281 S.W. 517. The county argues, however, that the above cases were decided prior to the 1942 revision of the statutes in which, in KRS 446.010(23), there was inserted the principle of construction that, unless the context otherwise requires, “shall” is mandatory. We find no force in the argument because this principle of construction was recognized in our case law many years before 1942 — at least as early as 1920. See Horning v. Fiscal Court of Caldwell County, 187 Ky. 87, 218 S.W. 989.

Evidence at the hearing before the Board of Tax Appeals showed that because of the problems arising in 1966 in connection with the transition to full fair cash value assessments it was impossible for the Department of Revenue to complete its equalization duties and certify all of its assessment orders by June 20. The county suggests that the delay in certification prejudiced the county by delaying its tax collection program. However, the county has not shown that any of its problems in relation to its tax collection program are attributable to the delay in certification.

We conclude that the delay in certification did not prejudice the county and did not invalidate the assessment increase.

A final question grows out of the fact that the Department of Revenue failed to notify the mayors of LaGrange and Pewee Valley of the contemplated assessment increase. KRS 133.160 states that the department shall notify the mayor of any city which is affected and which has adopted the county assessment. There were two parcels of farm land within the limits of Pewee Valley, and six parcels within the limits of LaGrange, both of which cities had adopted the county assessment. However, the department was not aware of the existence of these parcels so it failed to give notice to the mayors. The Board of Tax Appeals held that the failure to give such notice would have the effect only of making the increased assessment unenforcible with respect to city taxes on the parcels in question. The circuit court, however, held that the entire assessment increase was void, as tc all farm land in Oldham County, because of the failure of notice.

In support of the judgment on this point the county again argues that “shall” is mandatory. We think that is irrelevant, because the real question is what shall be the consequence of the failure to give notice, whether or not the giving of notice is deemed mandatory. We cannot rate the failure here, affecting just the city taxes on only eight parcels of land out of a total of 751 parcels, as being of such proportions as to require that the whole procedure be held invalid. The county points out that the ruling of the Board of Tax Appeals results in a preference or discrimination in favor of the eight parcels. This fails to impress us, because if we were to accept the county’s argument and hold the entire assessment increase void, the result would be not only that the preference or discrimination in favor of the eight parcels as to city taxes would be continued, but an additional preference would be created in favor of those parcels as to school taxes, county taxes, and state taxes, and a preference would be created in favor of the 743 other parcels of farm land as to school, county and state taxes. It is our opinion that the consequences of the failure to notify the mayors should be considered to fall within the maxim, De minimis non curat lex.

The discussion on the last point we think brings out the fact that the primary objective of 100 percent assessment is to achieve equality of the tax burden, not to increase the burden. If an increase in taxes results from an assessment increase it is because the locally elected representatives of the people have not adjusted the rate. To illustrate: A county’s budget is based upon an estimate of aggregate tax revenue, determined by application of a rate to the aggregate assessment; if the assessment of one class of property is increased, the aggregate assessment correspondingly is increased; thus the amount of income contemplated by the budget can be raised with a lower tax rate; the ultimate effect of the assessment increase is, then, that the aggregate tax burden is not increased; the burden simply is spread equally among the various classes of property. If there is a public demand that one class of property carry a lower burden than other classes, the remedy is through classification legislation under Section 171 of the Kentucky Constitution — not through unequal assessments.

The judgment is reversed with directions to enter judgment upholding the order of the Board of Tax Appeals.

WILLIAMS, C. J., and HILL, MILLI-KEN, STEINFELD and PALMORE, JJ., concur.

MONTGOMERY and OSBORNE, JJ., dissent.

MONTGOMERY, Judge

(dissenting).

I respectfully disagree with the majority opinion because it approves the same method of blanket increase of the assessment of property that was demonstrated in Fitzpatrick v. Patrick, Ky., 410 S.W.2d 143, to be an erroneous method. I disagree with the majority opinion when it undertakes to differentiate the Fitzpatrick case on the ground that the same issues are not involved.

In the Fitzpatrick case various owners of farm property and rural nonfarm property in Montgomery County brought an action by which they challenged “a blanket fifteen-percent increase by the Department of Revenue in the assessment” of their property on the ground that the property had been “assessed at a value in excess of fair cash value.” In order to show the similarity of issues, the following is quoted from the same opinion:

“The crux of the appellants’ complaint is that their properties were assessed at full cash value prior to the equalization increase by the Department of Revenue (they say the properties all were purchased within a few months of the 1966 assessment date and were assessed at the purchase price); that the increase results in unconstitutional assessments, above fair cash value; * *

The main issue here is whether the Department method of assessment used to justify a blanket increase, which is the same as was used in the Montgomery County case, should be sustained, as opposed to the method used by the county tax commissioner based on 1966 values. The county tax commissioner stated it was his opinion, based on sixteen years’ experience, that 725 of the 751 farms had been assessed at fair cash value and that these farms would be overassessed if the blanket raise, such as was condemned in Fitzpatrick v. Patrick, should be upheld. The effect of the majority opinion is to reduce the office of county tax commissioner to that of a recording clerk whose judgment is worthless, despite the fact that he has personal knowledge of the properties involved and the statisticians of the Department of Revenue do not. If the Department had had its way the property of the landowners in the Montgomery County case also would have been overassessed, which is forbidden by the Kentucky Constitution. Rogers v. Pike County Board of Supervisors, 288 Ky. 742, 157 S.W.2d 346.

For this reason I respectfully dissent

OSBORNE, Judge

(dissenting).

I agree with Judge Montgomery in his dissent and I further dissent upon other grounds. First and foremost, I do not agree with this court’s opinion in Russman v. Luckert, Ky., 391 S.W.2d 694. I believe it usurped the legislative powers of Kentucky and injected this court into administrative affairs without justification. Prior to the Russman case the law of this state relative to the assessment of property for taxation was stable and settled. Now it is unsettled causing consternation and strife on every hand. The case presently before us is an outgrowth of the Russman case. Just as the liar, once committed to a false tale, must continue his course in order not to be found out, a court once committed to an unsound policy is compelled to continue or have its error disclosed. We have determined apparently to continue at all costs without regard to the most rudimentary rules of statutory construction.

The Department of Revenue insists that its decision is correct because it is based upon statistics consisting of farm sales in Oldham county in the years 1964 and 65, after excluding certain sales which did not suit its purpose. I am reminded of the statement made by Mark Twain, “There are liars, damn liars and statistics.” Here the Department is using statistics made by itself. If the Department wished to base its conclusion upon previous sales it should be required to use all sales and not be permitted to arbitrarily select those which suit its purpose.

KRS 133.180 provides:

“When the Department of Revenue has completed its action on the assessment of property in any county, it shall, not later than June 20, certify to the county clerk the assessment and the amount of taxes due.”

KRS 446.010 provides:

“As used in the statute laws of this state, unless the context requires otherwise : (23) ‘shall’ is mandatory; * *

The Department of Revenue certified the increased assessment of Oldham county on July 24, 1966. Clearly, this was not in time. The majority opinion in holding the foregoing statutes to be directory and not mandatory is wrong. I believe most reasonable and informed people agree that a state legislative body has the power to require that an act be done or committed by a certain day. If it has this power, then what language must it use ? Since this court is saying that “shall” is not a mandatory word, even though the statutes say otherwise, in my humble opinion the court should be considerate with the legislature and tell them what would be a mandatory word. It is conceivable that at some future date the legislature may want to require an act to be done or performed in a prescribed manner at a specific time without delay or excuse. If this should happen, what language should it use ? Have we in effect, by this decision, rendered the legislature powerless to enact mandatory legislation ?_

KRS 446.010(23) plainly and clearly states that “shall” as used in these statutes is mandatory. As late as 1960 in Clinton County Farm Bureau v. Clinton County Fiscal Court, Ky., 339 S.W.2d 930, we held that “shall” was a mandatory word. In fact, the word “shall” has been interpreted by this court in some fourteen different cases as mandatory.

Angel v. Byars, (1913), 153 Ky. 208, 213, 154 S.W. 1109; Clinton County Farm Bureau v. Clinton County Fiscal Court, supra; Woods v. Commonwealth, Ky., 305 S.W.2d 935; Stanfield v. Willoughby, (1956), Ky., 286 S.W.2d 908, 53 A.L.R.2d 925; Clark v. Riehl, (1950), 313 Ky. 142, 230 S.W.2d 626; Stevens v. Coleman, (1949), 311 Ky. 313, 224 S.W.2d 149; Ward v. Hurst, (1945), 300 Ky. 464, 189 S.W.2d 594; Hart v. Central City, (1942), 289 Ky. 431, 159 S.W.2d 18; Skaggs v. Fyffe (1936), 266 Ky. 337, 98 S.W.2d 884; Horning v. Fiscal Court of Caldwell County (1920), 187 Ky. 87, 218 S.W 989; Middleton’s Heirs v. Middleton’s Devisees (1897), Ky., 43 S.W. 677; Maysville & Lexington R.R. Company v. Herrick, 76 Ky. 122, 13 Bush 122; Anderson v. Brady, D.C., 1 F.R.D. 589, and the Supreme Court case Anderson v. Yungkau, 329 U.S. 482, 67 S.Ct. 428, 91 L.Ed. 436.

80 C.J.S. p. 137 defines “shall” as follows:

“In its ordinary signification, ‘shall’ is a word of command, and is the language of command, and is the ordinary, usual, and natural word used in connection with a mandate. In this sense ‘shall’ is inconsistent with, and excludes, the idea of discretion, and operates to impose a duty which may be enforced, particularly if public policy is in favor of this meaning, or when addressed to public officials, or where a public interest is involved, or where the public or persons have rights which ought to be exercised or enforced, unless an intent to the contrary appears; but the context ought to be very strongly persuasive before it is softened into a mere permission.”

It is bad enough that we usurp the legislative powers to provide for the assessment and taxation of property. It is worse when we attempt to justify it by completely misconstruing and ignoring the plain mandate of the statutory law. It would be interesting to observe the results should this court some day construe the ten commandments with all the “thy shall” and “thy shall nots” contained therein.

For the foregoing reasons, I respectfully dissent.


author: POPE, Justice. GRIFFIN, Justice

text:
    BROWN EXPRESS, INC., et al., Petitioners, v. RAILROAD COMMISSION of Texas et al., Respondents.
    No. A-11381.
    Supreme Court of Texas.
    April 12, 1967.
    Rehearing Denied June 21, 1967.
    McKay & Avery, C. N. Avery, Jr., Austin, Mills, Shirley & McMicken, Galveston, James, Robinson, Felts & Starnes, Phillip Robinson, Austin, for petitioners.
    Crawford C. Martin, Atty. Gen., Sam Kelley, Asst. Atty. Gen., Austin, Kelley, Looney, McLean & Littleton, Jackson Littleton and Rogers Kelley, Edinburg, Dean Moorhead, Austin, for respondents.
   POPE, Justice.

The Railroad Commission entered an order approving a transfer of six certificates owned by Southern Plaza Express, Inc. Brown Express and a number of other interested motor carriers filed a complaint with the Railroad Commission in which they asserted that the certificates should be revoked. The Commission refused to hear the complaining carriers’ complaint and their evidence that the transfer was not for the public convenience and necessity. The questions presented are whether the Commission acted arbitrarily (1) in approving the transfer and (2) in overruling the complaint without hearing the proffered evidence. The trial court on appeal set aside the Commission orders. The court of civil appeals reversed the judgment of the trial court and sustained the Commission orders. 399 S.W.2d 863. We reverse the judgment of the court of civil appeals and affirm that of the district court.

Southern Plaza is the owner of intrastate common carrier certificates numbered 3739, 2054, 4014, 3589, 3605, and 2119. Southern-Plaza was formerly known as Ryder Truck Lines of Missouri but, during the course of these proceedings, changed its corporate name. On June 29, 1964, Ryder Truck Lines of Missouri (Southern Plaza) contracted to sell and transfer the six certificates to Ryder Truck Lines of Texas for $1,000. The next day the corporations filed an application with the Railroad Commission for its approval of the sale and transfer. Brown Express and other competing carriers filed a protest to Ryder’s application for the approval of the sale and transfer. They also filed a complaint with the Commission in which they asserted that the six certificates should be revoked for Ryder’s failure to comply with the terms of the certificates. The Commission assigned docket number A-1531 to the transfer application and dockets numbered 3839, 2054, 4014, 3589, 3605, and 2119 to the complaints. Hearing in the sale and transfer proceeding began on September 16, 1964. The protesting carriers tendered but were not permitted to introduce evidence that no public convenience and necessity for the transfer existed. Their theory was that the transfer of the certificates to Ryder Truck Lines of Texas, Inc. who would fully operate the certificates constituted the authorization of new services. The complaining carriers also offered proof of non-operation of the certificates for such a period of time that they were subject to revocation. To this offer, the hearing examiner ruled:

“THE EXAMINER: ‘It has nothing to do with the sale of the certificates. I am not going to listen to the issue of dormancy. In the first place, the Railroad Commission has no such proceeding. If we did have such a proceeding, it would be a show cause proceeding and would be instituted by the Commission. As long as these certificates are shown to be in good standing, we are not going into the subject of dormancy, nor convenience and necessity. * * * This is purely a hearing on sale and transfer, and I am not going to get into the issue of dormancy.’
«* * *
“ 'There is no proceeding, as counsel well knows, before the Railroad Commission for abandonment. There is no proceeding before me at this time with reference to failure to operate, which is a statutory definition, and, consequently, I can’t see where this testimony would be pertinent to the issue, and it will not be received.’
* * *
“ ‘They are not dormant, as far as the Railroad Commission is concerned. I am not going to hear any further testimony in accordance with what counsel has outlined. I don’t think it is relevant to this hearing.’ ”

The complaining carriers insisted that they be granted a hearing on their complaint. On October 5, 1964, they filed a motion requesting that the complaint be set for hearing. They also filed a motion that the Commission defer action on the transfer application until the issue of the good standing of the certificates was heard and decided. They again tendered evidence in the transfer hearing that would bear upon their complaint. The Commission overruled all of these motions, and the complaining carriers were never accorded an opportunity to be heard on the complaint issue in either the transfer or complaint proceedings.

On November 12, the Commission approved the sale and transfer of the certificates. The order provided, among other things, that “all motions, complaints or ancillary matters previously filed in connection with this application are * * * expressly overruled * * On December 3, 1964, the Commission overruled the complainants’ motion to set the complaint for hearing stating its reasons in the following order:

“The Commission has, subsequent to the filing of this complaint, heard the application for the sale and transfer of these certificates in another Docket and is of the opinion that this motion filed on July 7, 1964, should be in all things overruled.”

The complainants then appealed from both orders of the Commission which were heard together by the trial court.

The Commission properly excluded the evidence about public convenience and necessity. That issue was determined upon the original authorization of the certificates. Section 5 of art. 911b, Vernon’s Ann.Civ.St., states the nature of the proof an applicant must make to obtain the Commission’s authorization of a transfer order. The applicant must show (1) the transfer is in good faith, (2) the successor to the certificate is able and capable of continuing the operation of the equipment “in such a manner as to render the services demanded by the public necessity and convenience * * and (3)1 the proposed sale is for the public interest.

This court in Tarry Moving & Storage Co. v. Railroad Commission, 367 S.W.2d 322 (Tex.1963) rejected the contention that public convenience and necessity was an issue in a hearing to divide a certificate as. to territory, although an additional carrier would be created, since there would be no change in the character of the service to be rendered. The court relied upon L. A. Norris Truck Line v. Railroad Commission, 245 S.W.2d 746 (Tex.Civ.App. 1952, writ ref.) which held that public convenience and necessity need not be considered in an application to divide a certificate as to commodities. Only when the orders will create or establish a new service about which there has never been a finding of public convenience and necessity must the issue be determined. Railroad Commission of Texas v. Jackson, 157 Tex. 32, 299 S.W.2d 266 (1957). Upon the basis of these authorities, the Commission correctly denied the protestants’ offer of proof that there was no public convenience and necessity for transfer of existing certificates.

The Commission acted arbitrarily, however, in overruling the complaint filed by the protesting carriers without granting them a hearing. See, Stotts v. Railroad Commission, 236 S.W.2d 210 (Tex.Civ.App. 1951, writ ref.); Wattenburger v. Railroad Commission of Texas, 231 S.W.2d 924 (Tex.Civ.App. 1950, writ ref. n. r. e.). Since the protesting carriers operate over the routes and serve the points encompassed in the six certificates which are the subject of the transfer hearing, they are interested parties. Railroad Commission of Texas v. Red Arrow Freight Lines, Inc., 96 S.W.2d 735 (Tex.Civ.App. 1936, writ ref.). Being interested parties, they could complain about the transfer of a certificate which had no standIng. Sections 12(b) and 14(a) , art. 911b recognize their right to make complaints. See, Railroad Commission v. Winkle, 57 S.W.2d 287 (Tex.Civ.App.1933), affirmed in Texas & Pacific Motor Transfer Co. v. Railroad Commission, 124 Tex. 126, 73 S.W.2d 509 (1934). The Commission’s Rule 59 further recognizes an interested carrier’s right to complain.

The Commission made its final decision that the certificates are not subject to revocation without holding a hearing and receiving evidence. Complaints against certificate holders in the past have been determined by hearings after notice. Texas & Pacific Motor Transfer Co. v. Railroad Commission, supra; Wattenburger v. Railroad Commission of Texas, supra. A denial of the right to be heard is not excused by section 12(b) which permissively states that the Commission “may” revoke certificates if a holder discontinues operations or violates the terms of the certificate or the Commission’s rules. Texas & Pacific Motor Transfer Co. v. Railroad Commission, supra. The power of the Commission to exercise its discretion after a hearing cannot be construed as the power to overrule a complaint without a hearing. The complaining carriers endeavored to get a hearing both in the transfer hearing and the complaint proceedings. The Commission first excluded the complainants’ evidence in the transfer hearing and then overruled their motion for a complaint hearing on the grounds that the order in the transfer hearing rendered the issue immaterial. Evidence that the certificates are subject to revocation is material to the issue of the good standing of the certificates but has not yet been considered. The Commission’s refusal to hear the complaining carriers’ proof was arbitrary. Railroad Commission v. Alamo Express, Inc., 158 Tex. 58, 308 S.W.2d 843 (1958).

The Commission says that its departmental practice is to hear transfer applications without regard to a complaint which attacks the standing of the certificate in question. Departmental practice is important when an administrative agency is confronted with an ambiguous statute, but it affords no basis for practices which are contrary to the plain meaning of statutes. Eddins-Walcher Butane Co. v. Calvert, 156 Tex. 587, 298 S.W.2d 93 (1957); Humble Oil & Refining Co. v. State, 158 S.W.2d 336 (Tex.Civ.App.1942, writ ref.). Sections 12(b) and 14(a) of art. 911b, as well as Commission rule 59, supra, plainly contemplate a hearing before a complaint is adjudicated.

We find no evidence in the record which supports the Commission’s argument that it had a departmental practice of disregarding a pending complaint in acting upon a transfer application. Mr. Soule, the Director of Transportation for the Commission, testified that upon the filing of each transfer, the Commission makes a routine check to determine whether the applicant has maintained insurance and properly registered its equipment. If the applicant has met those requirements, the certificate is treated as one in good standing. Whether the certificates have been properly operated is not investigated. The only matter considered, according to Mr. Soule, is whether the purchaser of the certificate is capable of operating it. This evidence does not reach the question presented by this case. Mr. Soule’s testimony concerns the usual situation in which no complaint is filed by interested parties. Neither Mr. Soule nor anyone else testified about any Commission practice for handling a bona fide complaint asserted against the good standing of a certificate which is the subject of a pending application.

The proof in fact shows that the Commission conditions its approval of a transfer application upon proof of the good standing of the certificates at the time of the transfer. The Commission has prescribed forms for use by applicants in transfer proceedings. They are the only evidence in this record of the departmental practice, and they embody the Commission’s departmental construction of the law. See Huey & Philp Hardware Co. v. Shepperd, 151 Tex. 462, 251 S.W.2d 515 (1952). Southern Plaza’s application for transfer was made on the Commission’s prescribed form which contained these words:

“The operation is to be continued by the seller or lessor until the final approval of the sale and transfer, or lease, by the Commission, and the final approval of the sale, transfer, assignment or lease by the Commission is subject to the certificate or certificates being in good standing, and not subject to cancellation for failure to comply with the requirements of the law, rules and regulations of the Commission with respect to proper insurance, plate and tax fees and cab cards, or cancellation for other reasons authorized by law.” (Emphasis added)

There is sound reason for such a requirement of proof of good standing in transfer hearings. It is stated in T. S. C. Motor Freight Lines v. Vanway Express Co., 148 S.W.2d 899, 903 (Tex.Civ.App. 1941, writ dism. judgm. cor.): “It follows, therefore, that the approval by the Commission in May 1939, of the sale and transfer of certificates no longer in force, could vest no rights thereunder in the purchaser.” Section 5 of art. 911b requires a transferee to pay the State for the credit of the Highway Fund ten per cent of the amount paid as a consideration for the sale of a certificate. It would be unconscionable for the State to collect the ten per cent of the sale price and later determine that the transfer which it had approved was of invalid certificates.

We do not hold that the Commission should have revoked the certificates. Texas & Pacific Motor Transfer Co. v. Railroad Commission, supra. We hold that the order overruling the complaints without a hearing was arbitrary. Railroad Commission v. Red Arrow Freight Lines, Inc., supra. We accordingly reverse the judgment of the court of civil appeals and affirm that of the trial court which set aside the orders of the Railroad Commission.

GRIFFIN, SMITH, NORVELL and HAMILTON, JJ., dissenting.

GRIFFIN, Justice

(dissenting).

On June 30, 1964, Ryder Truck Lines of Mo. requested Railroad Commission approval of its sale of six certificates of convenience and necessity to its wholly owned subsidiary, Ryder Truck Lines of Texas, Inc. Being a corporate inter family transaction, the consideration for the sale or transfer was $1,000.00. Thereafter on July 7, 1964, Brown Express, Inc. and other competitors of Ryder Truck Lines of Mo. filed a complaint with the Railroad Commission under the provisions of Article 911b, § 12(b) and 14(a), asserting, in effect, that the six certificates sought to be transferred were dormant.

While the application for the approval of the sale was pending, the parent corporation, Ryder System, Inc. sold all the corporate stock of Ryder Truck Lines of Mo., Inc. to Lee A. Hyde, Sr. This transaction was subject to the sale of the six certificates in controversy to Ryder Truck Lines of Texas, Inc. (which remained a Ryder System subsidiary). Hyde changed the corporate name of Ryder Truck Lines of Mo., Inc. to Southern Plaza Express, Inc. The purpose of these transactions was to vest title to the six certificates in a Ryder System subsidiary and thus except them from the sale to Hyde. It may perhaps also be inferred that this was done so that the subsidiary corporation could be sold to another carrier by Ryder System, Inc. It is suggested that this might result in a tax saving and there is evidence that Ryder System, Inc. had been offered $800,000.00 for the certificates. However, there is nothing illegal about the sale of corporate capital stock and the matter involved in this litigation is the transfer of six certificates of convenience and necessity from one Ryder corporation to another, or as stated in the respondents’ brief, the transfer of assets from one Ryder pocket to another.

The Commission refused to consider petitioners’ claim of dormancy because under its established practice, that question was not considered an issue upon a hearing held to determine whether or not a sale of certificates should be approved. The sale of such certificates to Ryder Truck Lines of Texas, Inc. was ultimately approved on November 12, 1964.

This Court has now held that actually there are two orders or matters involved here, namely, the question of the dormancy of the certificates and the question of approving the sale from Ryder of Mo. to Ryder of Texas. The Court has held that the order approving the sale must fall because the Commission did not first determine the issue of dormancy before approving the sale. The effect of this holding is to make dormancy a possible issue in every application for the approval of a sale of a certificate of convenience and necessity. I cannot agree to such holding. The approval of a sale and the cancellation of a permit for dormancy are two different things and to insert the issue of dormancy into the sale approval process is to encourage delay and obstruction.

The Motor Carrier Act, Article 911b, Vernon’s Ann.Tex.Stats., was originally adopted in 1929 and from that date to the present time, the Commission has never construed the Act as requiring that a hearing as to dormancy should be held prior to or along with a hearing to determine whether a sale of a certificate should be approved by the Commission. This Court’s decision overturns an administrative ruling of some thirty-five years’ standing upon the stated theory that a competitor’s economic position might be weakened by such sale. We may now expect most sales of certificates to be contested upon a claim of dormancy because delay if nothing else may be gained thereby.

This is not a case in which a “new service” is brought about by a combination of existing certificates, and despite repeated holdings, by this Court that where no “new service” is involved, the issue of convenience and necessity is not at issue, the majority opinion now allows competing carriers, in effect, to litigate such issue under the guise of a dormancy proceeding.

It seems undisputed that the six certificates here involved, which the competing carriers assert are dormant and hence inoperative, have a substantial market value. The Motor Carrier Act provides that certificates of convenience and necessity may be bought and sold. Heretofore, the approval of a sale was determined by well-recognized rules followed by the industry and the Railroad Commission. The effect of the Court’s holding will obviously be to introduce a new and uncertain factor which will affect the proposed sale of many certificates hereafter. The effect upon the market of such certificates will be unfortunate for with every purchase the purchaser will acquire not only a chance to obtain a certificate but a lawsuit as well.

I agree with the Court of Civil Appeals that this case is, or should be, controlled by Tarry Moving & Storage Company v. Railroad Commission, 367 S.W.2d 322 (Tex.Sup.1963), wherein it was pointed out that the Commission’s authority over a proposed sale of certificates of convenience and necessity was “a veto whereby it ‘may disapprove’ a proposed sale, if it finds and determines that (1) the sale is not in good faith, (2) the purchaser is not capable of continuing the operation, or (3) the sale is not best for the public interest”.

The Court of Civil Appeals correctly pointed out the difference in the statutes providing for issuance of an original certificate to a motor carrier to operate, and the sale and transfer of existing operating certificates as follows:

“A prerequisite to original issuance is that the Railroad Commission act affirmatively. That it make an affirmative finding to the effect that public convenience and necessity require the operation.
“No such prerequisite attends subsequent sales since the statute provides that, once issued, a certificate ‘may be sold, assigned * * * transferred,’ without the need for affirmative action or affirmative findings of any character. The Commission’s only power over such sales is a veto whereby it ‘may disapprove’ a proposed sale if it finds and determines that (1) the sale is not in good faith, (2) the purchaser is not capable of continuing the operation, or (3) the sale is not best for the public interest.
******
“However, where, as in the case at bar, the Commission has issued an order approving a subsequent sale of a certificate, the problem of judicial review is entirely different. A Commission order approving such a sale is in effect an order of ‘no disapproval,’ since the statute itself grants the power to make the sale. Therefore, an order of approval is not necessary to confer the power of sale; and any such order can only mean that the Commission is refraining from exercising its veto power. Such an order does mean that the Commission has not found that (1) the sale is not in good faith; (2) the purchaser is not capable of continuing the operation, or (3) that the sale is not in the public interest.” (399 S.W.2d 869-70. All emphasis that of the Court of Civil Appeals.)

This construction of the statutes follows the Tarry case; the majority opinion herein fails to recognize and to give effect to the wording of the statute.

With reference to the question of public interest, this Court said in Tarry:

“It may reasonably be said that since the Commission has found in this case that (1) the purchaser is financially able and capable of maintaining the service authorized; (2) the equipment proposed to be used by him meets all requirements; (3) he agrees to conduct operations in the same manner as theretofore authorized;
(4) the application is made in good faith; and the further fact that the Commission found initially that ‘convenience and necessity’ required this service, the public interest has been sufficiently considered”.

The Court then held, primarly on the basis of long standing departmental construction, that the issue of public convenience and necessity was not involved in the case.

This Court has now imported into sale approval cases — by the back door, so to speak —the rejected issue of public convenience and necessity under the guise or appellation of “dormancy”. This is accomplished by bringing into play a purely permissive and unconnected provision of the Motor Carrier Act, namely, Article 911b, § 12(b). The argument is made that Ryder has allowed its certificates to become dormant with the result that its competitors have expanded their facilities so there is no further need (public convenience and necessity) for Ryder to continue operations. And it is argued that to permit Ryder to resume operations under a supposedly dormant certificate would amount to the establishment of a “new service” under the holding of Railroad Commission of Texas v. Jackson, 157 Tex. 32, 299 S.W.2d 266 (1957).

Article 911b, § 12(b) is a purely permissive statute and was intended by the Legislature to vest in the Railroad Commission a discretionary power to be exercised by it in the interest of a proper control of the motor carriers of this state. This section reads as follows:

“The Commission at any time after hearing, had, upon notice to the holder of any certificate or permit and after opportunity given such holder to be heard, may by its order revoke, suspend or amend any certificate or permit issued under the provisions of this Act, where in such hearing the Commission shall find that such certificate or permit holder has discontinued operation or has violated, refused or neglected to observe the Commission’s lawful orders, rules, rates or regulations or has violated the terms of said certificate or permit; provided, that the holder of such certificate or permit shall have the right of appeal as provided in this Act.” (Emphasis mine)

Under this section, when the Commission finds that a certificate holder has discontinued operation, etc., it may revoke, suspend or amend a certificate. The provisions of the section do not require the Commission to revoke a certificate even if the holder thereof has discontinued operation. I take it, then, that if the Commission had held a hearing and found that the holder of the certificate had discontinued operations, it would not necessarily be required to cancel the certificate. As pointed out by the Court of Civil Appeals, the Attorney General has so ruled. It would follow that under Article 911b, § 12(b), as written, no court would be authorized to compel the cancellation of a certificate by the Commission. It seems that under any well considered form of motor carrier regulation, the administrative authority after holding a hearing should have the discretionary power to determine whether a certificate should be cancelled outright or whether the holder thereof should be given a reasonable opportunity to bring his service up to the standard contemplated by the certificate, or take some similar action. The statute provides for administrative and not judicial regulation. A scheme of statutory regulation without an administrative authority proved unsatisfactory and ineffective many years ago. 40 Tex.L.Review 230. When the Legislature says “may” and the permissive term makes sense, there is little excuse for the judiciary to substitute a mandatory construction. However, the Court’s opinion, in effect, accomplishes this by holding that when a complaint of dormancy is filed, the Commission must hold a hearing and must hold such hearing prior to deciding whether or not to exercise its veto power over a proposed sale of a certificate. The premise upon which this construction is based is prejudice to Ryder’s competitors, —that the non-use or restricted use of the Ryder certificates has caused Ryder’s competitors to increase the scope of their operations so that there is no longer any need (public convenience and necessity) for Ryder to operate in the area which has now been occupied by its competitors. Thus, convenience and necessity come in the back door, and it is argued that Railroad Commission v. Jackson, 157 Tex. 32, 299 S.W.2d 266 (1957), supports this theory. In Jackson, there was no question raised as to the supposed dormancy of the certificates involved. The Railroad Commission under its authority to regulate motor carriers found that a combination of certificates would bring into existence a “new service” and that as to such new service, there had never been a showing of public convenience and necessity. This Court supported the Commission’s view. However, in the instant case, the Court’s action is contrary to the long established practice of the Commission. The Ryder certificates are supported by a finding of public convenience and necessity and consequently, in my opinion, this case should be ruled by Tarry Moving & Storage Company v. Railroad Commission, 367 S.W.2d 322 (Tex.Sup.1963).

The authority to cancel certificates for non-use or upon other statutory grounds is to be exercised in behalf of the public welfare at the discretion of the Commission. It should not be converted into a delaying device for the benefit of any particular group of competitors. It would indeed be an idle thing to require the Commission to hold a hearing which it had refused to hold when for some reason of administrative policy, it had decided not to cancel a certificate upon the grounds set forth in the complaint. This, for the reason that the decision to cancel or not to cancel is within the discretionary powers of the Commission under the statute.

This new idea of making it mandatory for the Commission to hold a dormancy hearing prior to or along with the hearing relating to the requested approval of the sale of a certificate is not only unsupported by statute but as above indicated is contrary to a departmental construction of long standing duration. As pointed out by the Court of Civil Appeals, Mr. Horace Soule, an examiner for the Railroad Commission for a period of almost twenty-five years testified that the Commission had never adopted or followed any theory of dormancy in connection with a hearing involving the approval or non-approval of the sale of a certificate. This was competent evidence of departmental construction. Tarry Moving & Storage Company v. Railroad Commission, 367 S.W.2d 322 (Tex.Sup.1963).

It further seems to me that in Tarry, this Court noted the distinction between the practice of the Interstate Commerce Commission under the Acts of Congress and the Texas Railroad Commission under Article 911b with respect to dormancy or material change in operating conditions as to competition and traffic in the territory served by competing truck lines. The practice of the Texas Commission differs quite naturally from that of the Interstate Commerce Commission and should remain different until changed by the Legislature. Administrative practices should present as few possibilities for harassment and delay as possible and still serve the public good. I would not add the gloss or interlineation to Article 911b, § 12(b) as the Court has done in its opinion and disturb a departmental practice of thirty-five years. If the Motor Carrier Act is not operating properly as it is written, it is the prerogative and duty of the Legislature to change it and not the courts.

What disturbs me most about the Court’s opinion is the opportunity for delaying tactics which it will afford. I realize that this certificate sale is hardly comparable to the merger between the New York Central and the Pennsylvania Railroad, but nevertheless, any proposal that goes before the Interstate Commerce Commission moves with the speed and alacrity of a moribund glacier. Heretofore in Texas, the transfer of certificates has been accomplished with a minimum of delay in all but exceptional cases. The type of evidence that would be adduced upon a dormancy hearing as envisioned by petitioners would be the same as that applicable to a convenience and necessity hearing with public witnesses, etc. We are all acquainted with these voluminous records. I would not incumber a sale where no new service is involved with all the possibility of delay that would be entailed by what really amounts to a public convenience and necessity hearing.

Finally, I would also mention that Mr. Soule raised the question of why the petitioners never sought action from the Commission because of dormancy until the proposal to transfer the certificates from one Ryder pocket to another came along. This inaction transpired although petitioners had operated for years and were expanding their facilities (so they say), knowing all the time that the Ryder certificates were outstanding. Can it be that one carrier may ignore an outstanding certificate and expend his operations and thus secure some sort of a vested right that calls for judicial protection?

The majority opinion cites as authority for its holding the case of T.C.S. Motor Freight Lines v. Vanway Express Co., 148 S.W.2d 899 (Tex.Civ.App.1941, writ dism’d, jdgmt. cor.). That case has no relevance here. There the Commission on April 9, 1935 after hearing ordered two certificates of convenience and necessity cancelled for failure of the operators to remit C.O.D. collections to shippers. This order was held in abeyance until the completion of certain litigation which was terminated by a judgment rendered on September 24, 1935. This judgment necessarily sustained as valid the cancellation order of April 9, 1935 and thereafter, on October 4, 1938, the Commission again determined that the certificates were no longer in force. (148 S.W.2d 902.) Therefore, when the application for transfer of such certificates was filed on May 26, 1939 and approved by the Commission on May 29, 1939, there were no certificates in existence to transfer. The previous orders entered after hearing which cancelled the certificates had long since become final. We have no such facts in the case at bar.

In my opinion, the authorities cited by the Court of Civil Appeals fully support its decision and I would affirm the judgment of that court. Accordingly, I respectfully dissent from this Court’s order reversing the judgment of the Court of Civil Appeals.

SMITH, NORVELL and HAMILTON, JJ., join in this dissent.

      . “The Commission at any time after hearing, had, upon notice to the holder of any certificate or permit and after opportunity given such holder to be heard, may by its order revoke, suspend or amend any certificate or permit issued under the provisions of this Act, where in such hearing the Commission shall find that such certificate or permit holder has discontinued operation or has violated, refused or neglected to observe the Commission’s lawful orders, rules, rates or regulations or has violated the terms of said certificate or permit; provided, that the holder of such certificate or permit shall have the right of appeal as provided in this Act.”

      . “The Commission shall have the power and authority under this Act to hear and determine all applications of motor carriers; to determine complaints presented to it by such carrier, by any public of-cial, or by any citizen having an interest in the subject matter of the complaint, or it may institute and investigate any matter pertaining to motor carriers upon its own motion. The Commission, or any member thereof, or authorized representative or Examiner of the Commission, shall have power to compel the attendance of witnesses, swear witnesses, take their testimony under oath, make record thereof, and if such record is made under the direction of a Commissioner, or authorized representative or Examiner of the Commission, a majority of the Commission may, upon the record, render judgment as if the case had been heard before a majority of the members of the Commission. * *

      .“The Commission, either on its own motion or upon receipt of sufficient written complaints, may at any time after legal notice to all interested parties cite anyone operating under its jurisdiction to appear before it in a public hearing and re quire it to show cause why his or its operating authority should not be can-celled, or otherwise restricted and limited * *

      . The words “dormant” and “dormancy” are used by the petitioner as designating a condition described in Article 911b, § 12(b), Vernon’s Ann.Tex.Stats. as existing when a certificate bolder “has discontinued operation, or has violated, refused or neglected to observe the Commission’s lawful orders, rules, rates or regulations or has violated the terms of said certificate or permit”. Petitioner’s primary complaint here relates to an alleged discontinuance of operations. In this dissent, I shall follow the nomenclature used by petitioners.