Commonwealth v. Am. Bell Teleph. Co
| Decision Date | 28 June 1889 |
| Docket Number | 33 |
| Citation | 129 Pa. 217,18 A. 122 |
| Parties | COMMONWEALTH v. AM. BELL TELEPH. CO |
| Court | Pennsylvania Supreme Court |
Argued June 3, 1889
APPEAL BY PLAINTIFF FROM THE COURT OF COMMON PLEAS OF DAUPHIN COUNTY.
No. 33 May Term 1888, Sup. Ct.; court below, No. 395 August Term 1885, C.P.
On February 19, 1885, the auditor general stated the following account against the American Bell Telephone Company for taxes for the year 1884, which was approved by the state treasurer April 2, 1885:
For tax on capital stock, per acts of March 20, 1877, and June 7 1879, for the year ending first Monday of November, 1884, as per report herewith filed.
$4,337.53
The corporation thus charged thereupon appealed from said settlement to the Court of Common Pleas of Dauphin county specifying objections thereto which in substance were as follows:
1. The appellant is a Massachusetts corporation, and during the year mentioned in the settlement was not doing business in Pennsylvania, nor had it any capital employed in Pennsylvania in the name of any other corporation, association or person or in any other manner; and it is therefore not liable for a tax upon capital stock under either the act of March 20 1877, or that of June 7, 1879.
2. The 23,982 telephones used in the settlement as the measure of the tax alleged to be due, are not and were not operated by this company, but were hired from it, at its place of business in Boston, Massachusetts, by Pennsylvania corporations which use and operate them and are liable for and pay all taxes arising from their presence, use and operation in Pennsylvania.
3. The property of this company represented by its capital stock consists largely of patent rights and stocks and bonds of other corporations, and the 23,982 telephones aforesaid do not constitute more than 41,009/23,906,200 parts of the company's property and assets and of the entire value of its capital stock; wherefore the company is in no event liable for a tax upon a larger proportion of its capital stock than 41,009/23,906,200 thereof.
4. The settlement appealed from attempts to tax a part of the capital stock of the appellant, represented by stocks and bonds of other corporations, and patent rights, which property, being owned by a corporation of Massachusetts, has its taxable situs there; and this attempt is in violation of a necessary implication of the constitution of the United States, that each state shall have jurisdiction only over property within its limits.
5. The taxation by the state of patent rights granted by the United States, or of capital stock representing or represented by such patent rights, or royalties received therefrom, or of dividends out of such royalties, or of capital stock measured by such dividends, is in violation of the act of congress, approved July 8, 1870.
6. The acts of March 20, 1877, and June 7, 1879, if they authorize or impose any tax upon the capital stock representing or represented by such patent rights, or such royalties or dividends, impair the obligation of the contract contained or implied in the patents granted by the United States, and are therefore void, because in violation of § 10, article I. of the constitution of the United States.
7. The account appealed from is wholly erroneous and illegal, the appellant not being indebted for any part of the sum wherewith it stands charged.
The cause was submitted to the decision of the court, without a jury, under the act of April 22, 1874, P.L. 109, and after hearing on February 1, 1888, the court, SIMONTON, P.J., filed the following decision:
This case was tried by the court, as provided by the act of April 22, 1874.
The settlement appealed from is for tax on capital stock for the tax year ending the first Monday of November, 1884.
FINDINGS OF FACT.
1. The American Bell Telephone Company, defendant, is a corporation created in 1880, by the laws of the state of Massachusetts. Its principal office and place of business is in the city of Boston. It is authorized by its charter to carry on the business of manufacturing, owning, selling, using, and licensing others to use, electric speaking telephones and other apparatus pertaining to the transmission of intelligence by electricity.
2. Defendant had no office, agent or place of business in Pennsylvania during the period embraced in this settlement. The business of telephoning was carried on in this state by Pennsylvania corporations, which were licensed by defendant to operate telephones, for which it holds letters patent granted by the United States; and it had also leased to said corporations the telephones used in said business, which it manufactured in the state of Massachusetts, and delivered to the licensees and lessees there, retaining the ownership of the telephones so leased.
3. The lessee corporations constructed and owned the necessary lines of wire, switches, switch-boards and other apparatus necessary to carry on said business, and they maintained their own offices, and employed the officers and agents needful to carry on said business, and furnished telephones and received the pay therefor from those who used them.
4. Defendant received from these Pennsylvania corporations, for the license under said letters patent and the lease of the telephones in most instances, a fixed rent and royalty upon and for each telephone furnished, which was charged and paid, whether the telephone was in actual use or not; in some cases the compensation, instead of a fixed sum, was a percentage on the gross receipts of the lessee. All the contracts for rent and royalties were made in Boston, and the payments therefor were made there.
5. The settlement appealed from charges defendant with a tax on that part of its capital stock which bears the same proportion to its whole capital stock that the number of telephones used in Pennsylvania, in the manner detailed above, during the period embraced in the settlement, bore to the whole number of its telephones anywhere in use.
The commonwealth claims that on these facts, defendant is liable to the tax on capital stock imposed by § 2 [4] of the act of June 7, 1879, P.L. 112, which enacts that "every company . . . doing business in this commonwealth, or having capital employed in this commonwealth, in the name of any other company or corporation association or associations, person or persons, in any other manner," shall be subject to a tax on its capital stock.
It is conceded on behalf of the defendant that if the facts bring it within the terms of the act, it is liable to the tax; but it is contended that they show that it is not "doing business" in this state, nor "having capital employed" in any of the ways which by the terms of the act create a liability to taxation.
There have heretofore been two cases before this court which have called for a consideration of the scope of the part of the act of 1879, above quoted. The first of these is Commonwealth v. Standard Oil Company, 101 Pa. 119. It is there said, 132: the act now in question, "enacts that no corporation chartered by this or any other state, and 'doing business' in this commonwealth, shall 'go into operation' without first making certain reports; thus making 'doing business' equivalent to 'going into operation;' and in § 16, 120, foreign corporations which do not 'invest and use' their capital in this state, are required to obtain and pay for a license, thus making 'invest and use its capital' another equivalent for 'doing business.'" The judgment based on this reasoning was, in that case, affirmed by the Supreme Court.
The second case was Commonwealth v. Conglomerate Mining Company, decided in 1884, and not reported. In that case this court held that a foreign mining company, which owned a lot of ground in the city of Philadelphia, not used for corporate purposes, for which it had paid $1,500, was not subject to the tax on capital stock imposed by the act of 1879, because it did not come within the scope of the language of § 2 [4], which we have quoted above, and under which the tax is claimed in this case. It was said in that case: This was the only point in the case, and it was affirmed by the Supreme Court.
We think the authority of these precedents requires us to hold that defendant is not liable to the tax claimed in this case. We cannot say that it was doing business in this state, or had capital employed in any manner here, during the period embraced in this settlement, merely because it had leased telephones, the legal title to which it retained, and charged royalties for the use of its patents, the rent and royalties being either a fixed sum, or a proportion of the gross receipts received by the lessees, and being payable and actually paid to defen...
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