Chile Copper Co. v. Edwards

• Decision Date: 14 November 1923
• Parties: CHILE COPPER CO. v. EDWARDS, Collector of Internal Revenue.
• Court: U.S. District Court — Southern District of New York

294 F. 581

CHILE COPPER CO. v. EDWARDS, Collector of Internal Revenue.

United States District Court, S.D. New York.

November 14, 1923

Thomas J. Crawford, Asst. U.S. Atty., of New York City, and F. D Siefkin, Sp. Atty., Bureau of Internal Revenue, for the motion.

Arthur A. Ballantine and George E. Cleary, both of New York City opposed.

LEARNED HAND, District Judge.

It is quite true that this plaintiff has been doing all that it was organized to do, and that this feature constantly runs through the cases, as if it were in some sense a test of whether it was 'doing business' at all. Yet I cannot think that this would be a sound rule, or that it makes any difference whether the chartered powers are fully employed or not, because, as Mr. Justice Holmes said in U.S. v Emery-Bird-Thayer Realty Co., 237 U.S. 28, 35 Sup.Ct 499, 59 L.Ed. 825, the question is what it does, and not what it can do. There would be no justification in treating two corporations differently, who did exactly the same things, merely because one had an extensive charter and the other did not.

Had this been a lease, I think there could be no doubt. The different incidents of the plaintiff's activity have all been passed on. Thus receiving and distributing dividends is not enough to bring the lessor within the statute. Zonne v. Minneapolis Syndicate, 220 U.S. 187, 31 Sup.Ct. 361, 55 L.Ed. 428; McCoach v. Minehill Ry., 228 U.S. 295, 33 Sup.Ct. 419, 57 L.Ed. 842; U.S. v. Nipissing Mines Co. (C.C.A. 2) 206 F. 431, 124 C.C.A. 313; West End Ry. v. Malley (C.C.A. 1) 246 F. 625, 158 C.C.A. 581. Nor is the result different if the lessor, in addition, issues bonds direct to the lessee for his use in paying for improvements upon the leased lands. Anderson v. Morris & Essex R.R. (C.C.A. 2) 216 F. 83, 132 C.C.A. 327; N.Y. Central v. Gill (C.C.A. 1) 219 F. 184, 134 C.C.A. 558; Traction Cos. v. Collectors (C.C.A. 6) 223 F. 984, 139 C.C.A. 360; Public Service Co. v. Herold (C.C.A. 3) 229 F. 902, 144 C.C.A. 184. In one of the cases comprised within Public Service Co. v. Herold, supra, it was held that when the lessor, instead of delivering bonds to the lessee, to be sold, sold the bonds himself and paid the money to the lessee, the result was the same. The following cases present variants upon the general situation, in each of which the lessor was held not to be 'doing business'; Condemning lands for the lessee, N.Y. Central v. Gill, supra; selling parts of the leased property, Traction Cos. v. Collectors, supra; selling the whole property, Miller v. Snake River Valley R.R., 223 F. 946, 139 C.C.A. 426; providing for the issue of new bonds to refund others canceled, Public Service Co. v. Herold, supra; maintaining a sinking fund and extending an indebtedness, McCoach v. Continental, etc., Co., 233 F. 976, 147 C.C.A. 650; acquiring new property for the lessee and improving it to answer to the lease, Jasper, etc., Co. v. Walker (C.C.A. 5) 238 F. 533, 151 C.C.A. 469 (certainly an extreme case); investing the lessor's surplus funds in investments more profitable than bank deposits, McCoach v. Minehill Ry. Co., 228 U.S. 295, 33 Sup.Ct. 419, 57 L.Ed. 842.

These cases bear out my statement made above that, had the plaintiff leased its property to the Exploration Company and thereafter done what it did, it would not have been liable to the tax. It seems to me to make no difference that it was organized to do the same things. The term 'business' means some profitable activity undertaken on its own account. There was such a business, but it was the mining and sale of copper, to which both corporations were necessary, owing to the state of the Chilean law. Of course, it is true that each was doing a part of that business, because financing was a necessary incident to its prosecution. But the excise does not exact a double tax for leave to do a single...