Dupuy v. Johns

Decision Date25 March 1918
Docket Number185
Citation261 Pa. 40,104 A. 565
PartiesDupuy v. Johns et al., Appellants
CourtPennsylvania Supreme Court

Argued February 5, 1918

Appeal, No. 185, Oct. T., 1917, by defendants, from decree of C.P. Allegheny Co., July T., 1917, No. 101, awarding injunction in case of Herbert Dupuy v. David B. Johns, Simon A. Merkle and John C. Kaiser, constituting the Board for the Assessment and Revision of Taxes in the County of Allegheny E. D. Friebertshauser, Treasurer of said County of Allegheny and Frank J. Harris, A. C. Gumbert and Gilbert Myer, Commissioners of Allegheny County. Affirmed.

Bill in equity for an injunction. Before BROWN, J.

The opinion of the Supreme Court states the facts.

The court on hearing on bill and answer awarded an injunction. Defendants appealed.

Errors assigned were in dismissing exceptions to findings of fact and conclusions of law and decree of the court.

The assignments of error are overruled, and the decree is affirmed at the cost of appellants.

R. W. Martin, with him Lee C. Beatty and Rose & Eichenauer, for appellants. -- Under the Act of June 17, 1913, P.L. 507, plaintiff's shares of stock can be relieved from taxation for county purposes only on such a proportionate part of their value as the capital employed within the State of Pennsylvania bears to the total capital stock of the company: Commonwealth v. Standard Penna. and O.R.R. Co., 188 Pa. 169; Commonwealth v. Fall Brook Coal Co., 156 Pa. 488; Commonwealth v. Lackawanna I. & C. Co., 129 Pa. 346; Commonwealth v. Lehigh Coal & Navigation Co., 162 Pa. 603; Commonwealth v. United Gas Improvement Co., 162 Pa. 602; Commonwealth v. Fall Brook Coal Co., 156 Pa. 488.

The apportionment of the value of shares of stock in foreign corporations having a portion of their capital stock employed within the State in accordance with the interpretation of the provisions of the Act of June 17, 1913, P.L. 507, contended for by defendants, is equitable, makes for uniformity of taxation and is in harmony with the construction placed by the courts on other taxing acts: Commonwealth v. Wyoming Valley Canal Co., 50 Pa. 410; Philadelphia v. Barber, 160 Pa. 123; Mercantile Library Co. v. City of Philadelphia, Etc., 161 Pa. 155; American Sunday School Union v. Philadelphia, Etc., 161 Pa. 307; Pocono Pines Assembly, Etc., v. Monroe County, 29 Pa.Super. 36; Moore v. Taylor, 147 Pa. 481; Commonwealth v. Western Union Telegraph Co., 15 W.N.C. 331; Commonwealth v. D., L. & W.R.R. Co., 145 Pa. 96; Commonwealth v. Fall Brook Ry. Co., 188 Pa. 199; Pullman's Palace Car Co. v. Penna., 141 U.S. 18; Pullman's Palace Car Co. v. Commonwealth, 107 Pa. 156.

If Section 1 of the said Act of 1913 is construed so as to relieve wholly from taxation shares of stock in all foreign corporations having a portion of their capital stock employed within the State, irrespective of the amount of the capital stock so employed, then the act grants an unlawful exemption and lacks uniformity, in violation of Sections 1 and 2 of Article IX of the Constitution of the Commonwealth of Pennsylvania: Fox's Appeal, 112 Pa. 337; Commonwealth v. Westinghouse Air Brake Co., 151 Pa. 276; Commonwealth v. Westinghouse Air Brake Co., 251 Pa. 12.

George E. Shaw, of Reed, Smith, Shaw & Beal, for appellee. -- The Act of June 17, 1913, P.L. 507, specifically excepts shares of stock in any corporation liable to the capital stock tax or exempt therefrom, and provides that corporations liable to the capital stock tax for State purposes shall not be required to make a return or pay under this act any further tax upon any securities owned in their own right. A capital stock tax under our law and a tax upon shares in the hands of an owner reaches the same property and would be double taxation: Commonwealth v. United Gas Improvement Co., 162 Pa. 602; Commonwealth v. Lehigh Coal & Navigation Co., 162 Pa. 603.

Before BROWN, C.J., POTTER, MOSCHZISKER, FRAZER and WALLING, JJ.

OPINION

MR. JUSTICE MOSCHZISKER:

This is an appeal from a decree of the common pleas striking off an assessment and restraining the collection of a personal property tax.

The plaintiff is a resident of Pittsburgh; in his return for the year 1916 he failed to include certain shares of the preferred stock of the Crucible Steel Company of America, then owned by him. The concern in question is a New Jersey corporation, engaged in making steel and products thereof, the value of its total capital stock being approximately $75,000,000; of this amount, $14,000,000 is employed in Pennsylvania, and all except $29,000 exclusively in manufacturing. The company is licensed to do business in this State, and in 1916 it paid a capital stock tax on the before-mentioned $29,000, amounting to $169.17.

Plaintiff, claiming that, under section 1 of the Act of June 17, 1913, P.L. 507, his shares were exempt, refused to designate them for taxation; nevertheless, the board made an assessment against him in the sum of $1,153,800, being the value of 12,820 shares at $90 each, with a penalty of fifty per cent. added, as provided by law, for failure to make the return, totaling, in all, $1,730,700. At the time this assessment was levied, the stock had a market value of $110 per share; but, since fourteen-seventy-fifths market value of $110 per share; but, since fourteen- of the capital of the company in question was employed in Pennsylvania, on which it was either liable to the payment of a state tax or exempt as a manufacturing corporation, the board assessed plaintiff's holdings on only sixty-one-seventy-fifths of their value, which explains the rate of $90 per share. Thereupon a bill in equity was filed, praying that the entire assessment be declared illegal and void and the collection of a tax based thereon restrained; after hearing, the court below granted the desired relief, and defendants have appealed.

Section 1 of the Act of 1913 (P.L. 507, 508), supra, makes taxable for county purposes, at the rate of four mills on each dollar of the value thereof, inter alia, shares of stock in both domestic and foreign corporations, "except shares . . . in any . . . corporation . . . that may be liable to a tax on its shares or its capital stock for state purposes under the laws of this Commonwealth, or relieved from the payment of tax on its shares or capital stock for state purposes by the laws of the Commonwealth."

The contention of appellants is that the exception just quoted was inserted in the statute for the sole purpose of preventing double taxation, and must be read accordingly; that, when the act is so construed, appellee's shares are exempt thereunder from tax on "only such a proportionate part of their value as the capital stock of the corporation employed within the state and on which a capital stock tax is paid or which is relieved from taxation by reason of its being employed exclusively in manufacturing, bears to the total capital stock of the company. In other words, since only fourteen-seventy-fifths of the capital stock of the company is employed in this state, then only fourteen-seventy-fifths of the value of the shares of such company is exempt under the exception in section 1 of said act."

The position taken by appellee is that, under the express terms of the exception contained in the Act of 1913, supra, his shares of stock are absolutely exempt from taxation; and, in appellants' printed argument, the latter admit that this construction may be warranted by the strict letter of the law, as written in the statute, but they contend (a) that, to construe the provision in question literally, would be "narrow and technical," and leaves out of view what they allege to be its sole purpose, i.e., to avoid double taxation; (b) that, if read according to its letter, the provision would be void because violative of sections 1 and 2, article IX, of the Constitution of Pennsylvania, requiring uniformity of taxation upon the same class of subjects; and (c) that, if the provision be literally interpreted, then it relieves from taxation only shares of stock in corporations which are liable to the payment of a Pennsylvania state tax on their whole capital stock or whose entire capital stock is duly exempt from such a levy by the laws of the Commonwealth, citing Sturges v. Carter, 114 U.S. 511.

We shall discuss appellants' several contentions under designations corresponding with those just used; but, before taking up their direct consideration, it seems best to state some relevant propositions, generally accepted as established, which should prove helpful in reaching a correct solution of the problems now presented for determination.

The Pennsylvania tax levied directly against corporations on capital stock is, in effect, a tax on the property represented by the capital in question (Commonwealth v. Standard Oil Co., 101 Pa. 119, 145; Commonwealth v. N.Y., Pa. & O.R.R. Co., 188 Pa. 169, 189; Commonwealth v. Curtis Publishing Co., 237 Pa. 333, 335); and, in making the assessment of such tax, assets outside of the State cannot be considered (Commonwealth v. Westinghouse Air Brake Co., 251 Pa. 12, 14), for no property so situated can be taxed, either directly or indirectly, by the Commonwealth or any of its political subdivisions.

It is the public policy of the Commonwealth (Com. v Westinghouse Co., 251 Pa. 12, 14), declared by statute (Acts of June 7, 1879, P.L. 112, 113, sec. 6, 2d proviso; June 1, 1889, P.L. 420, 431, sec. 21; June 8, 1891, P.L. 229, 238, sec. 5; June 8, 1893, P.L. 353, 355; June 7, 1911, P.L. 673, 675; July 22, 1913, P.L. 903, 905), to exempt from taxation corporate bodies, domestic and foreign, doing business in Pennsylvania, to the extent their capital is invested in manufacturing within this State; also, in order to make the...

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