Commonwealth v. Phila. etc. C. & I. Co. , 26 W.N.C. 455 ( 1890 )

NO 16.

Opinion,

Mr. Justice Clark:

This case, in the court below, was an appeal from a settlement by the auditor general, etc., for taxes on the loans of the Philadelphia & Reading Coal & Iron Company, for the year 1886, under the provisions of the' act of June 30,1885. The right of trial by jury having been waived, the case was tried by the court under the act of April 22, 1874. Some of the questions originally presented under the appeal have since been settled in the very recent cases of Commonwealth v. Canal Co., 123 Pa 594, and Commonwealth v. Railroad Co., 129 Pa. 429.

It appears that, during the whole of the year 1886, the Philadelphia & Reading Coal & Iron Company was in the hands of receivers appointed by the Circuit Court of the United States, who, during that year, paid the interest on $2,921,837.48 of the company’s bonded indebtedness, held by resident owners, or resident trustees, in full, without deducting or paying to the state the tax of three mills provided bj*- the act of 1885 ; and, as the interest was paid by the receivers, and not by the treasurer of the company, the appellant’s contention is that the company is not liable for the tax ; this is the only remaining question for our consideration in this case.

The receivers’ treasurer was also the treasurer of the company. Upon payment of the interest, it was his duty, as treasurer of the company, to assess the tax, and the like duty of the receivers to pay it. The solvency of the company, for the purposes of taxation on its bonded indebtedness, will be assumed on payment of the interest. Acting in the dual capacity of treasurer for both the company and its receivers, his duty was plain and clear, and, failing in the discharge of that duty, the company is liable for his default. The receivers were not the proper persons to assess the taxes, and, of course, they were not responsible personally for any failure in this respect; it was the treasurer’s duty to assess the tax, and the responsibility rested upon the company, whose treasurer he was. The receivers had a right to carry the company’s purse for the purpose of paying the company’s debts, as the company would have been obliged to pay, had the receivers not been appointed. If the tax had been assessed, it would have been the receivers’ duty to pay, but, as the treasurer made default in the assessment, the account is properly settled against the company.

The court was clearly right in charging the company with the tax upon the fund, upon which the interest was actually paid by the receivers.

The judgment is affirmed.

no. 17.

Opinion,

Mr. Justice Clark:

This case came into the Court of Common Pleas of Dauphin county on an appeal by the Philadelphia & Reading Coal & Iron Company from a settlement made by the auditor general, etc., for taxes on the bonded indebtedness of the company for the year 1886, under the act of June 30,1885. By agreement of counsel, the ease was tried by the court without a jury.

The learned judge finds that the Philadelphia & Reading Coal & Iron Company is a Pennsylvania corporation, and that the Philadelphia & Reading Railroad Company is the sole stockholder therein, and is also the guarantor for the punctual payment of the interest, as well as of the principal, of the bonded indebtedness of the coal and iron company at maturity; that upon $8,600,000 of this indebtedness the interest for the year 1886, at a rate less than stipulated in the coupons, was, by the receivers of the Philadelphia & Reading Railroad Company, paid to the holders of the bonds, who transferred the coupons to the said receivers ; that the coupons so paid and assigned were thereupon canceled by the railroad company and returned to the coal and iron company, and the amount paid therefor by the former charged in an account current to the latter, as so much money paid, laid out, and expended for the coal and iron company’s use.

For purposes of taxation, we think that was equivalent to an actual payment of the interest. The money was paid for and in behalf of the coal and iron companjq to the party properly entitled, by the guarantor of the debt, who thereupon canceled and surrendered the obligation, and entered the amount in their general account. The commonwealth was not bound to await the general settlement of accounts between these companies ; if this were so, by a continuation in this course of business from year to year, the adjustment of taxes on loans might be prolonged indefinitely, and the commonwealth after a series of years would only ascertain the coal and iron company’s liability1- for state taxes upon a general settlement of the mutual accounts and demands existing between the respective companies. The interest, as such, with all its incidents of lien, remedy, etc., was converted into an ordinary debt adjustable in a general settlement of accounts, and we think this was equivalent, as respects the commonwealth’s right to the tax, to an actual payment. Nor could the coal and iron company, or its treasurer, have been ignorant of this method of adjusting the interest, for the bonds, after having been paid, transferred, and canceled, were surrendered.

Of this indebtedness, $6,809,500 was held by residents of Pennsylvania, and it was the duty of the treasurer of the coal and iron company to assess the tax as required by the provisions of the act of 1885. If the coal and iron company, by its mode of dealing with the railroad company, put it out of the power of the treasurer to deduct the tax from the interest, it was, nevertheless, his duty to make the assessment, and thus to fix the responsibility of the company for payment thereof. This, however, he failed to do, and for this failure the company is responsible. In the absence of any agreement to the contrary, on payment of the tax the coal and iron company would have been entitled to a credit pro tanto in the account, but would in any event be liable to the state, whether any agreement existed as alleged Qr not. We do not question the good faith of this particular transaction. But, if this mode of dealing were permitted to prevail against the tax laws of the state, it worrld be in the power of these corporations, and of all others similarly situated, by a mere device to delay and defeat the proper collection of the taxes which they of right ought to pay.

We are of the opinion that the court erred in holding this defence to be a valid one as to that part of the indebtedness mentioned, and in refusing to charge the defendant company with the tax thereon; and upon this ground

The judgment is reversed, and judgment is now entered for the plaintiff, and against the defendant, for the sum of forty-four thousand two hundred and twenty-seven dollars, and costs.