Commonwealth v. Lehigh Coal & Navigation Co.
| Decision Date | 11 July 1894 |
| Docket Number | 18 |
| Citation | 29 A. 664,162 Pa. 603 |
| Parties | Commonwealth v. Lehigh Coal & Navigation Co., Appellant |
| Court | Pennsylvania Supreme Court |
Argued May 29, 1894
Appeal, No. 18, May T., 1894, by defendant, from judgment of C.P. Dauphin Co., Sept. T., 1891, No. 444, for plaintiff, on trial by court without jury. Reversed.
Appeal from tax settlement.
The court, in an opinion by SIMONTON, P.J., printed in 151 Pa 282, note, found that defendant company was not exempt from taxation on the portion of its capital stock invested in the shares of other corporations of the commonwealth which had paid a tax on their capital stock for the same tax year. Exceptions were overruled in an elaborate opinion to the same effect.
Error assigned was inter alia to the entry of judgment.
As the taxes due from the defendant under our construction of its liability have been paid, and the item still unpaid is one for which the defendant is not liable, we can dispose finally of this case at this time. The judgment in favor of the commonwealth is reversed, and judgment is now entered in favor of the defendant with costs of suit.
M. E Olmsted, for appellant. -- The commonwealth is not entitled to recover from defendant any tax on its capital stock, which represents its holdings in the stock of other corporations the tax upon which has already been paid into the state treasury: Com. v. Fall Brook Coal Co., 156 Pa. 488.
It is freely conceded that prior to 1868 the legislature did impose this species of double taxation; that is to say, it did tax the capital stock against the corporation, and it did also tax the shares of that capital stock in the hands of the holders. But in 1868 the legislature expressly repealed one of these taxes, and it has never been reimposed. The following cases arose prior to the act of 1868: Whitesell v. Northampton Co., 49 Pa. 526; Carbon Iron Co. v. Carbon Co., 39 Pa. 251; Phila. Saving Fund Society v. Yard, 9 Pa. 359; Lackawanna Iron & Coal Co. v. Luzerne Co., 42 Pa. 424; McKeen v. Northampton Co., 49 Pa. 519.
Undoubtedly there is a distinction which, for certain legal purposes, may be drawn between the capital stock of a corporation and the shares into which it is divided. But substantially there is no distinction. Whatever touches the value of one touches the value of the other. To tax both is to impose double taxation: Catawissa R.R. Co.'s Ap., 78 Pa. 59.
Granted that to tax the capital stock of a corporation and to tax also the real estate in which that capital stock is invested, would be double taxation. Prior to 1866 there was such double taxation clearly and distinctly imposed, not contested nor disputed by anybody. But by act of Feb. 23, 1866, P.L. 82, the tax on real estate was abolished, and since that date there has been no double taxation of that character, and consequently no question of that kind arises in this case. The revenue acts of June 1, 1889, P.L. 420, and June 8, 1891, P.L. 239, provide in their first sections that shares of stock of corporations which pay taxes into the state treasury shall not be taxed in the hands of the holders.
The tax in this case is levied upon the capital stock of defendant company upon a valuation thereof. A tax so imposed is a tax upon the property of the company: Com. v. Standard Oil Co., 101 Pa. 119. It is a tax upon U.S. bonds owned by the company: Com. v. Penna. Coal Co., 5 Pa. C.C.R. 90. It is a tax upon bonds, mortgages and shares of stock owned by the company: Fox's Ap., 112 Pa. 337; Fidelity Co. v. Loughlin, 139 Pa. 612. And therefore a tax upon the whole capital stock of defendant company is a tax upon the shares which it owns in the capital stock of other corporations which have already been taxed.
Every act of assembly has in terms taxed the whole capital stock of corporations, and yet the tax has always been apportioned so as to apply only to such parts as were properly taxable: Com. v. Standard Oil Co., 101 Pa. 119.
Reference is challenged to a single case since 1868, in which the commonwealth has recovered tax upon the capital stock of a corporation and also upon the shares, or any portion of the shares, into which that capital stock was divided. It has been attempted a number of times, but always unsuccessfully: Penna. Co. for Ins., ets., v. Com., 22 W.N. 340; s.c., 2 Mona. 694; Com. v. Penna. Co., 145 Pa. 266.
W. U. Hensel, attorney general, James A. Stranahan, deputy attorney general, with him, for appellee. -- The legislature has the right to impose double taxation: Act of April 29, 1844, P.L. 497; Iron Co. v. Carbon Co., 39 Pa. 251; Iron Co. v. Luzerne Co., 42 Pa. 424.
The act of Jan. 3, 1868, P.L. 1318, did not expressly nor by implication relieve corporations holding shares of stock from tax thereon. On the other hand, it explicitly continued this tax by its proviso, "that this act shall not be construed to relieve said corporation from any tax now imposed by law on the real estate belonging to said corporations from the state, county or local tax to which they are now or may hereafter be subject."
Neither in the case of the Commonwealth v. Fall Brook Coal Co., 156 Pa. 488, nor in the elaborate argument in the present case, has it been pointed out that the proviso in the act of Jan. 3, 1868, has ever been repealed expressly or by necessary implication.
We submit that Penna. Co. for Ins. etc. v. Com., 22 W.N. 340, is not authority in point. It may be granted that since the act of 1868 shares in the hands of (individual) shareholders are not taxable; and that double taxation is not to be presumed. That case decides nothing more. The same is true as to Fidelity Company v. Loughlin, 139 Pa. 612. The conditions here are shares in the hands of corporate holders, who were made liable by the act of 1844, and whose liability was expressly continued by the unrepealed provision of the act of 1868.
If the language of an act of assembly is such as to leave its meaning in doubt the court would be inclined to give it such construction as would best accord with the general system of finances: Com. v. Bacon, 8 S. & R. 136.
A reversal of contemporaneous construction would exempt a great proportion of the capital stock of railroads and traction companies.
M. E. Olmsted, for appellant, in reply. -- The intention of the act of 1891 was to put the whole stock upon the same taxable basis, doing away with the dividend basis and requiring an appraisement of the whole stock. It has frequently been claimed by the commonwealth that because the law makes no proviso for the apportionment of capital stock, therefore the whole stock is taxable. But, whenever occasion required, this court has held otherwise. This question is fully discussed in Com. v. Standard Oil Co., 101 Pa. 119. (See cases there cited, pp. 131, 132, 146 and 147.) In Com. v. Dredging Co., 122 Pa. 386, a similar conclusion was reached. In Com. v. Penna. Coal Co., 5 Pa. C.C.R. 90 (not found in the state reports) this court held that capital stock invested in and representing United States bonds was not taxable. It has always been conceded that the capital stock of a corporation invested in Pennsylvania state bonds is not taxable, the legislature having expressed its intention that the bonds should not be taxed. The law has never made any provision for taxation for less than a whole year, but fractions of time have always been recognized in assessing the tax on capital stock. In Com. v. Phila. & Reading R.R., 150 Pa. 312, the tax on loans was apportioned to a part of the tax year. The legislature having declared against this double taxation it cannot be enforced. The decision in the Fall Brook case is conclusive.
The decisions of this court in the Westinghouse cases have no bearing whatever upon the point at issue. There was no question of double taxation decided or even discussed in either of those cases. Each of the defendants in the Westinghouse cases did own shares of stock in other corporations, but no evidence was offered in the court below to show that any tax upon or in respect of said shares had been paid, either by the corporation which issued them or the one which owned them, and as matter of fact no tax had been paid by or charged against either corporation.
Before STERRETT, C.J., GREEN, WILLIAMS, McCOLLUM, MITCHELL, DEAN and FELL, JJ.
This case raises but one question. It is whether shares of stock on which a state tax has been paid by the corporation issuing them are liable to be again taxed in the hands of the holder. This question was decided in Commonwealth v. Fall Brook Coal Company, 156 Pa. 488, which was before this court just one year ago.
It is fair to the learned judge of the court below, however, to say that the judgment now appealed from was entered before the decision in that case was announced. But the question now before us is no longer an open one. It was discussed at some length in Commonwealth v. Fall Brook Coal Company, supra, and the opinion filed in that case is referred to as expressing the views of the court upon the general subject.
We shall add to what was then said but two observations, and we shall do this as briefly as possible. The first of these is that the question presented in this case was anticipated and answered by the act of 1868 in the most explicit manner. That act declares that the shares of stock held by any stockholder in any corporation that, in its corporate capacity, pays the tax on capital stock imposed by the state, shall not be liable to taxation in the hands of such stockholder for either state or local purposes. It is not easy to see how any possible doubt could exist as to the meaning of this clear and positive provision. But the lawmakers evidently did not mean to be misunderstood or misinterpreted,...
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