Valley R. Co. v. Delaware, Lackawanna & Western Railroad Co.
| Decision Date | 22 March 1943 |
| Docket Number | 106 |
| Citation | 346 Pa. 579,31 A.2d 276 |
| Parties | Valley Railroad Co. v. Delaware, Lackawanna & Western Railroad Co., Appellant |
| Court | Pennsylvania Supreme Court |
January 26, 1943, Argued
Appeal No. 106, Jan. T., 1943, from order of C.P. Lackawanna Co Nov. T., 1942, No. 639, in case of The Valley Railroad Company v. The Delaware, Lackawanna and Western Railroad Company. Order reversed and petition dismissed.
Petition for declaratory judgment.
Order entered in favor of plaintiff, opinion by LEACH, P.J Defendant appealed.
The order appealed from is reversed and the petition is dismissed at petitioner's costs.
Reese H. Harris, of O'Malley, Hill, Harris & Harris, with him Gomer W. Morgan, for appellant.
Morris Wolf, with him J. Julius Levy, Wolf, Block, Schorr & Solis-Cohen, and Sullivan, Donovan & Heenehan, for appellee.
Before MAXEY, C.J.; DREW, LINN, PATTERSON, PARKER and STEARNE, JJ.
Defendant here called Lackawanna, appeals from an order in favor of plaintiff, here called Valley, in a declaratory judgment proceeding.
We take the following facts from the petition. Valley is a corporation created under the laws of New York for the purpose of constructing and operating a railroad in that state. Lackawanna is a Pennsylvania corporation owning and operating a railroad in Pennsylvania and also operating in New York over Valley's road. Valley leased its road and property to Lackawanna by a long term lease made in 1869. Article 4 of the lease provided that Lackawanna ". . . shall pay, as a rental and for the use, possession and occupancy of the said the Valley Railroad, the interest upon whatever bonds may as aforesaid be required to be issued for its construction; and the said [Lackawanna] shall also pay to the holders of the capital stock of the said [Valley], which may be issued as aforesaid to pay for the construction of said railroad, eight [1] per centum per annum, to be paid semiannually, on the first days of January and July in each and every year, free and clear of all taxes, impositions and assessments whatsoever." This rental was payable at Lackawanna's office in New York City.
The 6th and 7th articles provided that Lackawanna ". . . shall, during the continuance of this indenture, pay all taxes and assessments, which may be imposed, levied or assessed on the property of the said the Valley Railroad Company, or on the business done on or with the said railroad, or on the income or profits of said business, or on the said the Valley Railroad Company as a corporation, or any of its rights, privileges or franchises, by the United States, or any state, county, township, municipal or other authority having legal authority to levy taxes, imposts or duties.
The contract was a New York contract. Lackawanna has made payment to Valley's shareholders at the rate of 8 per cent and, since the modification, at the rate of 5 per cent. Lackawanna, through its nominees, appears to have managed the corporate affairs of Valley. In 1942, Valley shareholders learned that "Valley might have become liable to the United States of America for corporation income and excess profits taxes, which Lackawanna failed to pay, and also that Lackawanna might have caused entries to be made on the books of account of Valley indicating a large indebtedness of Valley to Lackawanna on open account." On inquiry, they found that "Lackawanna had caused to be made in the journal of Valley under date of December 31, 1941," an entry "To accrue Federal Income Tax for the years 1933 to 1941, inclusive, . . ." in amounts totaling $56,897.51. Petitioner averred that during specified prior years Lackawanna had paid such taxes. Valley's position is that on the facts stated, Lackawanna ". . . is obligated and required to assume and pay all taxes, including federal taxes heretofore and hereafter assessed against Valley during the continuance of the lease . . ."; that Lackawanna denied liability to pay them; that Valley has no funds and, since the lease provides that rental payments be made by Lackawanna direct to Valley's shareholders, it never can be in funds. The petition prayed for a declaratory judgment construing the rights of the parties and that Lackawanna ". . . be ordered to pay to the United States of America forthwith all taxes, including federal income taxes now due and owing to the United States of America by petitioner;" and ". . . to pay when due all future taxes" imposed upon petitioner.
To that petition, Lackawanna filed an answer raising questions of law, [2] asserting that Valley had not set forth a case within the declaratory judgment act and that it appeared ". . . the controversy [was] . . . ripe for relief by way of the usual proceedings in equity . . ." Before the court passed on that issue, Lackawanna also filed a petition under the Act of March 5, 1925, P.L. 23, 12 PS section 672, and obtained a rule to show cause why the petition ". . . should not be dismissed for want of jurisdiction." The case came on for hearing and the court ordered that ". . . the answer raising questions of law is decided in favor of the plaintiff and the defendant is allowed fifteen (15) days to answer to the merits."
First, as to the petition under the Act of March 5, 1925, P.L. 23, 12 PS section 672, challenging jurisdiction; Lackawanna was served and appeared and was therefore subject to the jurisdiction of the court. The common pleas has jurisdiction of petitions for declaratory judgments because the act confers it. The rule to show cause should therefore have been discharged: Lackawanna Co. v. James, 296 Pa. 225, 145 A. 817; Main Cleaners & Dyers, Inc. v. Columbia Super Cleaners, Inc., 332 Pa. 71, 2 A.2d 750. But, to discharge that rule, is not to hold that petitioner is entitled to the desired declaration.
While Lackawanna's answer denied the application of the declaratory judgment...
To continue reading
Request your trial