text:
      Court of Common Pleas, Dauphin County,

      December 31st, 1862.
    The Commonwealth of Pennsylvania v. Drexel & Co.
    Under the act of 16th May, 1861, the tax upon discounts is not to be computed upon the face value of the paper discounted, but upon the actual profit'of the transaction. This law has not a retroactive efíéct, and imposes no tax upon transactions before its date. Under this law brokers and private bankers are obliged to so keep their accounts as to be able to make a statement of them to the treasury department on the first Monday in December, or they will have to pay the penalty imposed by law.
   By the Court.

This proceeding was instituted to collect the penaltyof one thousand dollars, imposed by the 3d section of the act of 16th May, 1861, relating to brokers and private bankers. The act requires every stock, bill, exchange, real estate broker and private banker on or before the first Monday in December, then next, and on or before the same day in each year thereafter, to make a written return under oath to the auditor-general of the amount of his receipts from commissions, discounts, abatements, allowances, and all other profits arising from his business during the year ending on the 30th day of November, preceding the date of such annual return, and to forthwith pay into the State treasury three per centum upon the aggregate amount contained in such return. Many questions have been raised on the construction of the statute, and much evidence received as to the practice of brokers and private bankers in keeping their accounts. But we conceive there are but few points of difficulty in the case as we construe the act of Assembly. The attorney-general contends that the word “discount” as used in this statute should be construed literally and according to its ordinary signification. And, therefore, if a bond, bill of exchange, promissory note, or bank note is purchased for one-half of its face, the tax must be paid at the rate of three per cent, on the other half, although the samé paper is sold on the same or next day in. the usual course of business at the advance of only one per cent, on the price of the purchase, and therefore the broker could readily state the required account, as their books show the discount made on such paperback to the 30th day of November, 1860, although they are not so kept as-to show the profit on net sales, or in fact any sales, or whether the money was collected, or lost. We do not so understand the act of Assembly, but putting a construction on the whole law, we are satisfied that the framers in this case understood “discounts” as synonymous with “commissions,” as the whole is qualified by the. expression “ all the profits arising from his business.” It rarely happens that the discount deducted shows the profits, as it is the business of the broker to sell as well as to buy. The tax is imposed on the discount “received;” corporation bonds or stocks are frequenty purchased at a discount of twenty-five, fifty., and sometimes seventy-five per cent, less than their face, and immediately resold at an advance of one-half, one, or two per cent., and to impose a tax of three per centum on each transaction of this kind which passed through the hands of the various brokers, would be .to exclude all such paper from the market. Besides although purchased at a heavy discount, it is not unfrequently resold by the broker at an actual loss, or in the case of mercantile paper, it is through the insolvency of the parties, never collected, and no discount is received. Is that to be subject to a tax of three per cent, on the discount? If so, the worse the paper, and the heavier the risk, the greater must be the tax. I am of the opinion that the framers of the law, by all of its expressions, and giving full force -to every word intended to impose the tax of three per cent, upon the “ net ” profits of the business, from whichever source derived, whether from “commissions,” “discounts,” “abatements,” or “allowances,” and it is very manifest that the framers of the statute used phrases unknown to the board of brokers, and of the meaning of which the legislature was profoundly ignorant. Taking the meaning of the law to be as declared, many of the points raised by the defendants’ counsel would properly arise,— but for another position to be stated, — as it is very clear from the method of keeping the defendants’ books, that it was impossible for them to present the required statement, but we construe the law differently from the counsel on either side. Both contend that it is retroactive in its effect, and requires the tax to be paid on all business transacted between the 30th day of November, 1860, and the 16th day of May, 1861. We do not so understand it. On the contrary, a decent respect for a co-ordinate power of the government obliges us so to construe the law as to prevent its working injustice, or applying its operation and burdens on transactions completely past, but to have it take effect from the time of its passage only, as is the case with all just and proper legislation. We fully concur in what is said by the defendants’ counsel, that taxes should be imposed on persons, property, privileges, or franchises in the nature of property, and not on matters of business transacted and closed before the enactment of the law, and that leads us to the conclusion that the legislature never intended it to have a retroactive effect. Nothing could be more unjust than to now impose a tax for the years 1859 or 1860 on lands which had gone into the hands of a new owner in 1861, unless it might be to burden a contract of buying and selling with a similar tax long after the business was closed.

Suppose the tax imposed by this law on the amount of discount, as contended by the attorney-general, and the defendants had, in January, 1861, bought a bond or the stock of .a corporation calling on its face for one thousand dollars for the sum of five hundred dollars, the tax on the discount would be fifteen dollars, and that they had sold it the next day at an advance of one per cent, to another broker, who again at once sold it at a like advance, would it be just to tax each transaction with fifteen dollars when the profit was but five? This is not an isolated or supposititious case, but the daily business of brokers. But if we impose the tax on the profit alone, the operation will be equally unjust, but not to the same extent. It may be fairly supposed that, in very many cases, had the transaction been subject to this tax, it would either never have transpired, or been conducted on very different terms. It should require clear and express words to justify us in giving any tax law a retroactive effect and applying it to transactions entirely past. The law under consideration is by no means clear. It provides for a statement on the succeeding first Monday of December, but does not say that it must embrace the time from the preceding thirtieth day of November, but that expression applies to future reports. That for the current year, as we understand the law, should contain an exhibit of the amount of the brokers’ “receipts from commissions, discounts,” etc., from the 16th of May, 1861, until the first Monday in December, 1861, and need not go further back, as the law only went into effect from the time of its passage. From that time forth, proper accounts should have been kept so as to exhibit the business, and the failure to do so and present the statement as required, subjects the delinquent to the penalty of one thousand dollars, which was properly imposed by the auditor-general, not for failing to exhibit an account of the transactions of the year, but for neglecting to present any account whatever. The defendants were as much bound to make a report of their dealings and pay the tax thereon from the 16 th day of May till the first Monday of December, as they .would have been had they commenced to act as brokers on that day. It is further contended that it is impossible to state an account of the year’s business, or even for that of six months, between the 30th of November, Saturday, and the 2d of December, Monday, and, therefore, the impossibility will excuse from the penalty. From the time this law passed, it was the duty of every broker so to keep his accounts as to enable him to state them at the treasury on the day prescribed, and at most, he would have been obliged to make up a statement of Saturday’s business alone on that day, which it will scarcely be pretended could not 'have been readily done. We cannot relieve him from the penalty for that reason. We deem it unnecessary to answer the various points presented by the defendants’ counsel; many of them may be correct in the abstract, but under our views of the law of this case and of the time the act of Assembly went into effect, they are unimportant. If we have erred in the construction of the act, the Supreme Court can correct the error, and then many of them will fairly arise.

Meredith, for plaintiff.

MeMurtrie and Bullitt, for defendant.

As no return or report was made by the defendants as required, they are subject to the penalty of one thousand dollars imposed by the law, for which your verdict must be rendered in this case, but without interest, as none is given for the non-payment of a penalty, even when presented in the form of a report by the auditor-general.

Affirmed by the Supreme Court (10 Wright, 31).


source: Caselaw Access Project

author: By the Court.

license: Public Domain

text:
      Court of Common Pleas, Dauphin County,

      January 26th, 1863.
    The Commonwealth of Pennsylvania v. The Catawissa, Williamsport, and Erie Railroad Company.
    The sheriff's return on a summons that he served it on a certain person, the superintendent of a certain corporation, is conclusive as to the existence of the company and the official position of the person served, and the party ■will not be allowed to contradict it.
    A general affidavit of defence will prevent the commonwealth from taking judgment for want of a sufficient affidavit, when the narr merely contained the common counts, and the balance due, as settled by the accounting department, was not declared on specially.
   By the Court.

The attorney-general, on behalf of the commonwealth, on July 7th, 1862, moved the court for judgment for want of a sufficient affidavit of defence.

On January 13th, 1863, Mr. Alricks, as counsel for defendant, moved to set aside the service of the summons on the affidavit filed. We will consider the last motion first. The summons to commence this action issued on the — day of-, 1862, and was returned by the sheriff of Lycoming county, as follows: April 2d, 1862. Served personally on H. S. Goodwin, superintendent of the Catawissa, Williamsport, and Erie Railroad Company, by leaving with him a true and attested copy of the within summons, and informing him of the contents. So answers Fred. Shole, sheriff.” To this return there is an appearance by Mr. Alricks, de bonis inquirendo, for the special purpose of suggesting the dissolution of the Catawissa, Williamsport, and Erie Railroad, and H. S. Goodwin files an affidavit of defence on May 23d, 1862, in which he avers that he never was the agent of this company, but was superintendent of the Catawissa Railroad Company at the time the process was served on him. He further avers that' the company sued was dissolved and ceased to exist, and by virtue of an act of Assembly passed 21st March, 1862, the Catawissa Railroad Company was created, and permitted to hold the property and franchises of the other company, which had been previously sold under a decree of the Supreme Court, and' purchased by the persons composing the present company, which is in no wise responsible for the debts of the former corporation. There is a mistake in the date of the act as mentioned, which must be that of 21st March, 1860 (Pamphlet Laws, 234); but there is nothing that we can discover in the law dissolving the Catawissa, Williamsport, and Erie Railroad Company, and it remains responsible for its debts, the new company not being required to pay any except those of a special character named in the statute. The debt sued was, as appears by the narr, contracted in 185’9, and the return of the sheriff is conclusive-that H. S. Goodwin was superintendent of the Catawissa, Williams-port, and Erie Railroad Company at the time the process was served on him. In Kleckner v. Lehigh County (6 Wh. 66), it was held that, where the sheriff returned “ served on A. and B., who are said to be county commissioners,” the words “said to be” must be treated as surplusage, and A. and B. must be conclusively taken to be county commissioners, as the sheriff must, at his peril, ascertain that they are such before serving the writ, and, if in doubt, can demand an indemnity before making his return. That it is conclusive of the facts returned, see Mentz v. Hamman, 5 Wh. 150; Zion Church v. St. Peter’s Church, 5 W. & S. 215; Fleck v. Troxel, 7 W. & S. 65; Freeman v. Caldwell, 10 W. 9; 1 Penna. Prac. 688, 736. One of these facts is, that Goodwin was the superintendent of the company named in the writ, and that the sheriff must ascertain before serving it; and if he cannot satisfy himself after reasonable diligence, should return that no officer or agent of the company can be found on whom to serve it. The return made is quite as conclusive as a devastavit, which never can be questioned except in an action against the sheriff for a false return. This must be questioned in the same way; and that part of the return calling Goodwin the superintendent is just as conclusive that he was such at the time of the service, as it is that the officer served the writ. The motion to set aside the return must be overruled. If the claim as set forth in the narr was of the character supposed by the attorney-general in his argument, the affidavit would be entirely defective; but when we look to the declaration alone to ascertain the claim, it appears to be fully met. The affidavit, it is true, is very general; but the claim is equally so. It is nowhere set forth what the indebtedness to the State is for, or how created; and no settlement by the accounting department is averred in such a way as to make it conclusive, or even primd facie evidence of the amount. It is a mere general averment that the defendant is indebted to the commonwealth in the sum of $1836; and in another place it is stated that it is indebted “in the further sum of $1836 on an account then and there approved by the accounting officers of the commonwealth, and in consideration thereof promised to pay,” etc. •

I.have repeatedly decided that these printed narrs as filled up do not contain sufficient to estop the defendants from denying the conclusiveness or efficacy of the settlement'. It should, as we conceive, be shown, or at least averred, that the claim was one which the accounting officers were authorized to settle; that it was examined and adjusted by the auditor-general, entered on his books, and submitted to the State treasurer, and approved by him, together with the date of such settlement and ajrproval; that at least thirty days’ notice was given to the defendant, as required by law; and that the same remains in full force, and unappealed from. "Where a claim is thus set forth, it must be fully met by a proper affidavit of defence, showing such facts as would avail the parly, else the commonwealth will be entitled to judgment. This becomes more necessary since the law requiring a special affidavit, which should never be exacted, except where there is a special claim stated, or a copy filed, which the law, relative to State claims, does not contemplate. In like manner where the suit is brought for some demand never settled, its nature and character should be expressly set forth. The facts proved on a trial have often been found to amount to an estoppel, when there was nothing in the narr which could have that effect, as in the present case. For aught that appears, the claim of the State may have been, for a tax on the corporation’s dividends, settled .without notice, and none given afterwards; and as the company, it is averred, never made any dividends, it is fully met by the affidavit. The present form of declaration was adopted at a time when a general affidavit of defence was permitted; and if the one was loose and uncertain, the other could be equally so. But when the legislature requires exactness and precision in the affidavit, we should see that the claim is equally so, or at least sufficiently certain to give notice to the defendant, and not require any fact to be met which is not plainly averred. The motion for judgment for want of a sufficient affidavit of defence is refused.

Meredith, for plaintiff.

Alrielts, for defendant.


author: By the Count.

text:
      Court of Common Pleas, Dauphin County,

      February 2d, 1864.
    The Commonwealth of Pennsylvania v. Weiser & Son.
    Under the act of 16th of May, 1861, imposing a tax upon the discounts of private bankers and brokers, the sum is to be computed upon the actual profits of the business, deducting all losses incurred and interest paid on money to carry on business. Where these two equal or exceed the profits, no tax is to be paid.
   By the Count.

This case comes into court on appeal from the decision of the auditor-general and State treasurer. The defendants, private bankers in the borough of York, made report of their business for the preceding year, on the 30th day of November, 1861, under the act of May 16th, 1861, relating to brokers and private bankers. Following the directions of the auditor-general, they made the report for the entire year, whilst, according to our construction of the act, they were only bound to furnish an account commencing on the 16th of May of that year. We have now no means of correcting the error, as the subsequent statement presented for the half year was rejected by the auditor-general, and is now objected to on the trial. We have been obliged to reject it as not legal evidence.

They report the amount of receipts from discounts at $4960.14, and from all other profits $296.35, arising from their business as exchange brokers. Against this is set down their losses sustained, $1884.16, and interest paid, $3665.70, by which it appears that the whole business of the year yielded no net profits, but on it they sustained a loss. On this return the attorney-general contends that the tax should be assessed on the whole amount of the discounts, whether the bankers made a profit or sustained a loss thereon. We are of a different opinion, which was more fully expressed in Drexel & Co. v. The Commonwealth (1 Pearson, 337), afterwards affirmed in the Supreme Court (10 Wright, 31). Our views have undergone no change on that point, but are greatly strengthened by the reasoning of Mr, Justice Read, in delivering the opinion of the court in that case. We, there^ fore, instruct you that the sum of $1884.16, of losses sustained on the paper discounted, must be deducted from the amount received for discounts. The greater difficulty arises on the question of interest paid by the defendants in their business. It is to be regretted that the return is in almost every particular so meagre as to scarcely be intelligible, and to convey but little information on the different points now contested; but that is said to arise from the printed forms sent out by the auditor-general, predicated on what we believe to be a misconstruction of the law. If it were shown that the money used in discounting paper was the identical funds on which interest was paid as deposits, I am of the opinion that the net profits to the banker would be the amount of discount made, minus the interest. That would be the net balance of profit. But that is not proved, it is assumed. I am unwilling to give such a construction to this statute as would tax the banker differently who uses his own capital, from him who obtains his 'funds by borrowing from others to carry on his business as a banker. Yet such I conceive is the evident intention of Mr. Justice Read in the case referred to. He says: This act clearly intended to levy a tax of three per centum on the profits or income of the business, and was not meant to tax-capital. Profits must necessarily be the net profits of the business, and the commonwealth was to receive Qn them three per cent. It was in fact a tax upon the income of the business in which the defendants were engaged.” These expressions clearly show that in the mind of the judge, the tax was to be assessed on the whole net profits of the business, deducting losses and necessary expenses; and it may, perhaps, be very properly inferred that the legislature had in view the well-known custom of private bankers to pay interest on the money deposited with them, with which the larger portion of their discounts and purchases are made, and the payment of which interest greatly diminishes their profits. If this is at all to be treated in the light of an income tax, such deduction would be eminently just and proper. My doubt is whether the act will bear that construction. Although this subject of interest was probably not in the mind of the judge when he wrote that opinion, yet we will take his language as giving a just and equitable construction of the statute, and throwing the greater burdens on those who are best able to bear them, men who bank on their own capital. So construing the law, the defendants made no profit on their business in 1861, consequently they are not subject to taxation, and your verdict must be in their favor.

Meredith and Piter, for plaintiff.

Gray don and Bullitt, for defendant.

Affirmed by the Supreme Court (August 12th, 1864). Not' reported.


text:
      Court of Common Pleas, Dauphin County,

      March 26th, 1864.
    The Commonwealth of Pennsylvania v. The Erie Railway.
    An act of Assembly imposing a tax on the tonnage passing through a State to or from other States or foreign countries, upon any railway, canal, river, or any other mode of conveyance, is in violation of the Constitution of the United States, and is void.
    A statute imposing a tax required quarterly returns to be made and a tax to be paid before a particular day; there was less than three months between the time of passing the law and that fixed for the return to be made. Held, that that would not relieve from taxes during that period. The act of 25th August, 1864, does not repeal that of SOth April, 1864.
    An act of Assembly authorizing a railway to be built upon the payment of a certain sum to the State, and imposing a tax upon the same ratio as upon other property of a like kind within the commonwealth, is not such a contract between the State and the company as will prevent the legislature from imposing other taxes upon it.
    (Pennsylvania Railroad Company v. The Commonwealth, 3 Grant, 129, distinguished.)
   By the Court.

This case' came into court on an appeal from the decision of the auditor-general and State treasurer, who, on the second day of September, 1864, settled an account against the defendent charging it with a tax on the tonnage carried over its road between the first day of May and the first day of July, 1864, pursuant to the provisions of the act of April 30th, 1864. The aggregate of tonnage carried between those periods was 164,611 tons, of which 88,831 ¿ tons were of the second and 75,779 J-g-g-§ tons were of the third class, as mentioned in the statute. Of this, 2104 tons of the second and 13,957 tons of the third class were received and delivered in the State of Pennsylvania; all the residue was in transit through this State for the Western or Eastern States or for foreign countries. On this tonnage an aggregate charge of $5565.60 was made by the accounting department as due for taxes. Several exceptions have been taken to the validity of the tax as assessed against the Erie Railway Company, and numerous propositions presented against the constitutionality of the laws attempting to impose it; all of which will be duly considered by the court.

The defendant is an incorporated company, created by the laws of the State of New York, having its principal place of business within the city of New York; its line of railway almost entirely constructed through that State; its capital stock held mainly by the citizens thereof or foreigners, yet running for a short distance through the counties of Pike and Susquehanna, in the State of Pennsylvania, and thus doing business, to a certain extent, within this State. It is contended on the part of the defendant:

I. That it is not embraced by nor intended to be included within the provisions of the statute imposing the tax. The act is very general and broad in its terms, including not merely all companies created by the laws of this commonwealth, but all corporations or companies doing business therein, without any regard to the distance the tonnage is transported, where the stock is held, who created the company, or whether the transportation be by railroad, steamboat, canal-boat, or other means of transportation, on natural or artificial navigation, provided any part of the business be transacted within this State. The injustice of applying the law to this line of transportation has been strongly urged, as it is conceded that the road, nearly five hundred miles in length, passes in all but about twenty-five miles within the boundaries of Pennsylvania. With the justice or injustice of the enactment we have no concern, provided the road belonging to the company comes clearly within its intendment. For that the legislature is alone responsible. We must carry the law into effect. ■ This' company may have the consolation of knowing that it is no worse off than its neighbors. What is called the Lake Shore Road, extending for about thirty miles across the triangle at Lake Erie, and .being the connecting link on the great line of travel from East to West, is subject to á similar tax for every ton of freight transported from the great West to the cities of New York and Boston. The road from Philadelphia to Baltimore, about one hundred miles long and running perhaps fifteen miles through Pennsylvania, is subject to a like charge. Some of the coal roads, not over ten miles in length, and leading to the natural navigation of the Ohio or Susquehanna rivers, pay a like duty. All are assessed by the ton, with the same tax charged against the Pennsylvania Railroad, extending by a direct line over four hundred miles through this State, and, with its different branches, forming continuous lines reaching over a thousand miles in length; or the Northern Central or Reading Railroad, each with their connecting branches stretching their lines of communication for many hundred miles within our borders. Several other like instances might be mentioned. The inequality and injustice is so glaring as to almost lead one to believe that the law had been framed on the suggestion of the great roads to measurably escape the burden of taxation and throw it on the smaller ones. Had it been imposed ■ on the ton per mile, according to the distance travelled, this objection would have been entirely obviated. We have no doubt that the Erie Railroad comes within the words and intention of the act of Assembly, and however unequal and unj ust we may consider it, the law, if constitutional, must be enforced.

II. As quarterly returns are required to be made, commencing on the first day of July, 1864 and as only two months had intervened between the enactment of the law and that day, it is contended that no tax was lawfully due or need have been reported, consequently the settlement was illegal. We are of a different opinion. Although the statute speaks of quarterly returns, and directs the payment to be made of the tax on tonnage for the next three months preceding the first of July, yet that part of the act is merely directory, the time is not important, and the tax can lawfully be charged for the tonnage during a single month, if no more had intervened. It is evident that the bill was reported at an earlier day, but was not passed into a law until the 30th of April, leaving less than three months until the first day of July. It will not relieve the company from paying that two months’ tax.

III. It is contended that the statute is virtually repealed and superseded by the act of August 25th, 1864, on the same subject-matter; therefore no tax was due on the first of July. We cannot give our assent to that position. The act of August was apparently intended to correct some errors and omissions in the former law, by fixing return days for the other three-quarters of the year, as well as the one ending on the first day of July; also, to require like payment from companies not transporting but receiving tolls from the carriers; also, more plainly and explicitly to impose the tax on companies outside of the State, enjoying privileges or doing business within our borders. This, we conceive, was unnecessary, as the tax was clearly imposed before, but no part of the latter is intended as a repeal of the former law, both were designed to stand in full force, and there are no words of repeal, nor does it follow by any necessary implication.

IV. The defendant says that the law imposing this tax violates the contract between the State and the Erie Railroad Company, under which the road was made across the Pennsylvania line, as a certain sum was agreed to be paid for the privilege, and a tax was to be imposed equal to the cost of constructing that part of the road within this State on the same ratio, and no more than is imposed on other property of like kind in this commonwealth. If the act of March 26th, 1846, had contained an express provision that no other tax should be imposed except that mentioned, we would hold that it was a binding contract and could not be violated. For although our Supreme Court has at times declared that no legislative enactment can tie up the hands of future legislatures from imposing additional taxes on property or franchises, yet we consider the law clearly settled otherwise by the Supreme Court of the United States, in a series of decisions from Fletcher v. Peck (6 Cranch, 87) and the State of New Jersey v. Wilson (7 Cranch, 164), down to the last book of the reports of that court, and the decisions of that tribunal in cases under the Constitution of the United States are binding on every court in the nation. Such a law would impair the obligation of the contract. This statute contains no such provision, and the power of the legislature is not to be taken away by implication. The right to levy and collect taxes is a necessary incident of every government, essential to its very existence, and is never presumed to have been surrendered or abandoned except by clear words, and for what is deemed at the time an adequate consideration, to be judged of by the legislature making the contract, and relied upon and acted under by the opposite party.

This defence is unavailing.

V. It is argued that the act of 1864 is repugnant to the Constitution of tire United States, which secures to Congress the power to regulate commerce with foreign nations, and among the several States, and prohibits the States, without the consent of Congress, from laying any impost or duly on imports or exports or on tonnage. If the act of Assembly violates any of these provisions, it is thus far clearly void, as the Constitution of the United States and the laws passed pursuant thereto, are the supreme law of the land. In case of any repugnancy, the inferior must give way'to the superior power.

This subject, which is of the highest importance to every State in the Union, naturally divides itself into two parts: 1. The imposition of a tax on the tonnage delivered or received within this commonwealth, and 2. That belonging to other States or foreign countries, which is merely in transit through it.

It is settled by the highest judicial authority in the United States, that the regulation of that kind of commerce which is completely internal, carried on between man and man in a State, or between different parts of the same State and which does not extend to or affect other States, does not come within the powers of Congress. The completely internal commerce of a State may be regulated by the State itself (Gibbons v. Ogden, 9 Wheaton, 1). The power to regulate commerce with foreign nations has always been conceded to be exclusively vested in Congress, and the Constitution, in the same sentence, confers the power on that tribunal to regulate it among the several States, and with the Indian tribes. Chief Justice Marshall, in the case cited, declares that it does not mean merely traffic, buying and selling, but intercourse.

It is shown substantially, that it embraces the carrying of goods from one State to another, either by land or water, and by virtue of that authority Congress has passed laws regulating the coasting trade. It cannot be pretended that any State could levy a duty on imports or exports, or close its ports against the licensed vessels sailing from other States. We think that the right of every citizen to freely pass with his articles of trade from one port of the United States to another, through the great rivers of the country, or any other navigable highway of nature, cannot be denied; and it is equally clear that he can travel over, and carry his commodities upon artificial highways from State to State, Without molestation or hindrance on the part of State authorities, except so far as restraint may be found necessary for police regulations.

One great object in abolishing the Articles of Confederation and adopting the Federal Constitution, was to secure an impartial tribunal to regulate the general commerce of the country, not only with foreign nations, but between the several States. Those situated on the seaboard might, by the imposition of heavy duties, exclude the interior States from the enjoyment of any commerce whatever, could entirely cut them off from the foreign markets. Hence the extreme jealousy of permitting any duty on imports or exports to be imposed by the laws of States, either directly or indirectly. In the case of Brown v. The State of Maryland (12 Wheaton, 419), it is decided that a law of Maryland, requiring the importer of foreign merchandise to take out a license to enable him to sell, in the original package, was in violation of the Constitution of the United States, as substantially imposing a duty on imports, that it might as well be required on the delivery of the goods at the port of entry as in the hands of the importer, as the sole object of importation was sale. And there could be no difference, in effect, between a power to prohibit the sale of the article and a power to prevent its introduction into the country; and if a State can tax, it can prohibit; for its taxes may amount to a prohibition, and thus the great importing States be enabled to collect a tax from tbe non-importing. In the course of this very able and well-considered opinion, Chief Justice Marshall says: “ The action of the States cannot interfere with any regulation of commerce. If the States may tax all persons or property found on their territory, what shall restrain them from taxing goods in transit through the State, from one point to another, for the purpose of exportation? The laws of trade authorize this operation, ana general commerce requires it. Or what shall restrain a State from taxing any article passing through it, from one State to another, for the purpose of traffic? Or from taxing the transportation of articles passing from the State itself to another State for commercial purposes ? These cases are all within the sovereign power of taxation, but would obviously derange the measures of Congress to regulate commerce, and affect materially the purpose for which that power was given.”

If the words, thus uttered by this learned judge, be a sound exposition of the law, they certainly show that any tax or duty imposed on goods passing from one State through another is in violation of the Constitution of the United States. We find the same language used by Chief Justice Taney in the license cases (5 Howard, 575-6): “A tax upon them, while in this condition, for State purposes, whether by direct assessments, or indirectly by requiring a license to sell, would be hardly more justifiable in principle than a transit duty upon merchandise when passing through a State. A tax in any shape upon imports is a tax on the consumer by enhancing the price of the commodity. And if a State is permitted to levy it in any form, it will put it in the power of a maritime importing State to raise a revenue for the support of - its own government from citizens of other States, as certainly and effectually as if the tax was laid openly and without disguise as a duty on imports. Such a power in a State would defeat one of the principal objects of forming and adopting the Constitution. It cannot be done directly as a duty on imports, for that is expressly prohibited. And as it cannot be done directly, it could liardly be a sound construction of the Constitution which would enable the State to accomplish precisely the same thing under another name and in a different form.” The learned judge reiterates what was said by Chief Justice Marshall hi Brown v. The State of Maryland, and although a majority of the court differed from Chief Justice Taney on other points, these principles were not disputed.

These cases arose in relation to the foreign commerce of the • country, but we have already said that the same power precisely is reserved as to the commerce among the States. The question also arose as to the power of a State to tax the trade coming from-other States. This was done by the legislature of Missouri, which required a higher amount to be paid for a license to sell the commodities manufactured in other than was exacted from those who dealt exclusively in goods the product or manufacture of that State. The Supreme Court declared the law to be a violation of the Constitution of the United States, and the whole subject is most carefully examined, and an elaborate and well-reasoned opinion reported in 27 Missouri P. 464. The judge declares at p. 473: “It would be a bold proposition to say that the States of the Union have concurrent power with the United States in the regulation of commerce. One main object of the Union was to have a unity of commercial as well as of political interests, which can only result from a unity of government.” There is no question of greater moment as relates to the peace and harmony of the States. If each State is permitted to regulate for itself, it would beget discontent, and lead to retaliatory measures. One main objection to the old Articles of Confederation was the want of this power. A great difficulty arose from the seaboard States taxing the commodities of the interior States, and the court declares that nothing would be more strictly a regulation of commerce than these discriminating licenses, or come more completely Avithin the inhibition of the Federal Constitution; and it then declared, as in McCullough v. The State of Maryland (4 Wheaton, 430-31), “ it is a question of power, and if the poAver to tax exists, it may be so exercised as to destroy.”

It is said, however, that this is not a tax on the tonnage carried, to be paid by the transporter, but by the company, and, therefore, it does not affect the commerce betAveen the States, but the profits of the company only. The return is required to be made by every railroad, steamboat, and slack-water navigation or other transporting company doing business within this commonwealth, of the entire number of tons of freight traffic carried or moved by said company or corporation, and graduates the amount to be paid per ton upon all tonnage carried upon or OArer their respective lines of transportation, and fixes different rates of tax on the different kinds of commodities. It also provides that tonnage need not be paid on different connecting lines, but payment may be demanded from any company over whose line it passes. The laAV applies alike to all means of transportation, whether on the. navigable rivers passing through the State, the great lakes of the West, or any line of canal or railroad. If goods are started from Olean, in the State of New York, to be carried on the steamboats or other boats of a transportation company, to New Orleans, they may be taxed by the ton so soon ■ as the boat Avith its freight crosses the line of Pennsylvania, and thus our great rivers be no longer free to the commerce of all the citizens of every State through which it passes. A steamboat company incorporated in Buffalo or Chicago, by the laws of the respective States, is engaged in transporting freight from one port to the other, and is so unfortunate as to require coal or other fuel when near Erie, goes into that port, and is taxed by the ton for all the freight on board. The same consequences would follow, should the boat stop at that place to receive or land freight; a like tax could be imposed by Ohio and Michigan, and thus the free commerce of the lakes, hitherto enjoyed by all the citizens, be broken up. If the power to tax exists, it has no limit but the legislative discretion or the wants of the State treasury. If a tax of two, three, or five cents per ton can be imposed, one of two, three, or five dollars will be equally constitutional, and thus the trade of the interior be effectually cut off from the seaboard. If Pennsylvania can tax the grain or flour of Minnesota or Nebraska, it may be done also by Wisconsin, Iowa, Illinois, Indiana, Ohio, and New Jersey, before it reaches the city of New York, and thus its whole value to the producer be absorbed in taxes. It matters little by what name you call this tax, whether upon the tonnage passing through the State, or upon the means of its transportation, if in reality it operates on the commerce among the respective States, and tends to incumber or embarrass it, the act is unconstitutional. The law looks beyond mere words to things, to substantial effects. Such has been the repeated declaration of the court in construing the Constitution of the United States. This is sufficiently exemplified in several of the cases already cited, to which we may add Almy v. California (24 Howard, 169). The State of California had, by law, imposed a tax on each bill of lading for gold or silver transported from the State to any port or place out of the State, and it was held to be a tax on exports. Chief Justice Taney, in delivering the opinion, says that every one can see that if the tax was imposed on the article exported, it would be a duty, and the bill of lading, though differing in form, is substantially the same thing, as it is necessary evidence of the export of the commodity. So here the tax in form is required to be paid by the transporting company, but necessarily falls upon the goods transported, thereby increasing the cost of the article to the consumer, or diminishing its value to the producer (see also 12 Howard, 293).

In Corfield v. Coryell (4 Wash. C. C. R. 378), Judge Washing ton sajrs: “ Commerce with foreign nations and among the several States, can mean nothing more than intercourse with those nations and among those States for the purposes of trade, be the object of the trade what it may; and this intercourse must include all the means by which it can be carried on, whether by the free navigation of the waters of the several States, or by a passage over land through the States, when such passage becomes necessary to the commercial intercourse between the States. It is this intercourse which Congress is invested with the power of regulating, and with which no State has a right to interfere.” In Sturges v. Crowninshield (4 Wheaton, 122) it is said: “When the nature of a power requires that it shall be exercised by Congress, it is completely excluded from State legislation; ” and in Gibbons v. Ogden (9 Wheaton, 1), already cited, it is said: “ The power over commerce with foreign nations and among the several States is vested in Congress as absolutely as it could be in a single government having in its constitution the same restrictions on the exercise of the power as is found in the Constitution of the United States. There is no restriction in the Constitution; the power is clearly conferred and must consequently be sole, entire, and conclusive beyond State control or regulation.” In the passenger cases (7 Howard, 283), where it appeared that the States of New York and Massachusetts had imposed a tax on each alien passenger arriving in the ports of those States, it was held that the law was unconstitutional. The case received great consideration, and in the course of Judge Catron’s opinion, at page 445, he gives the history of this provision of the Constitution, and says: “ That if the States can tax the persons or commodities passing from one State to another, we might as well be under the old Articles of Confederation, and the provision prohibiting the States from laying any duty on imports and exports, and the one which declares that vessels bound to or from one State shall not be obliged to enter, clear, or pay duties in another, were especially intended to prevent the evil. Around our extensive seaboard, on our great lakes, and through our great rivers, this protection is relied on against State assumption and State interference. Throughout the Union our vessels, of every description, go free and unrestrained, regardless of State authority. They enter at pleasure, depart at pleasure, and pay no. duties.” He then goes on to show the great distance which steamboats pass over on lakes and rivers, and declares that the tax cannot be imposed either on the persons or property passing. In another part of the opinion, at p. 448, he said: “ If this court could sanction the doctrine, the time is not distant when States holding the great inlets of commerce might raise all necessary revenues from foreign intercourse and from intercourse among the States, and thereby exempt their own inhabitants from taxation altogether.”

Mr. Justice Grier, in his opinion, at page 458, says: “The true character of the law cannot be changed by its collocation; a State cannot do that indirectly which she is forbidden by the Constitution to do directly. If she cannot levy a duty or tax graduated on the tonnage or admeasurement of the vessel, she cannot effect the same purpose by merely changing the ratio and graduating it by the number of masts, or of mariners, or the size and power of the engines, or the number of passengers she carries. We have to deal with things and we cannot change them by changing their names.” In another part, he shows that a condition cannot be annexed to the right of persons to pass through the State, and the right to tax is predicated on the right to exclude them, which does not exist, and shows clearly that the right to tax is the right to exclude. Again, he shows that there is no power to tax persons or property passing through the State. We have, therefore, come to the conclusion beyond all doubt, that there is no authority in our legislature to tax the commerce of other States passing through this State. The power existed to exclude the Erie Railroad or any other road from passing through the State, but having been granted for a consideration, it cannot be revoked, nor can a tax be imposed on the trade or commerce of other States passing over it. They must have the free right of transit untaxed and unmolested. It is said that this is merely a tax on the corporation, not on the goods; but it is well established that in construing the power under the Constitution we look to things and effects, not to expressions or collocation of words, and the tax must eventually fall, in these cases, on the producer and consumer and not on the transporter. But it may well be asked, what authority has the State of Pennsylvania to impose a tax on this corporation? It was not created by our laws, has not its place of business within our borders, and the capital of the corporation is not held by our citizens. Such an attempt would be very similar to that of the State of California to tax the steamship company, which was decided -by the Supreme Court of the United States, in Hays v. The Pacific Mail Steamship Company (17 Howard, 596), to be unconstitutional. The vessels were owned by a corporation created under the laws of New York, its capital held there, and the ships registered in that port. The attempt was- to tax them at San Francisco, where business detained them longer than at any other port; and Mr. Justice Nelson, in delivering the opinion of the court, says the State of California cannot .impose this tax. If it could, they might be taxed in every other State where they touch in the course of business, and the proper place of taxation is where the corporation exists and the vessels are owned and registered.

The present case is not an attempt to tax the works of the company in this State, nor the capital invested in their construction, but the business and trade passing over the road, which is, in effect, to exclude the commerce of other States from crossing our boundaries. This has been truly said to be a question of power, for if the State can tax it can exclude. The State of New Jersey attempted to tax the business of this same railroad company, and the question as to the legality of that tax Avas raised and most carefully considered in the Court of Errors and Appeals in the case of The Erie Railroad Company v. The State of New Jersey, reported in the LaAV Register of February, 1865, page 238, and a unanimous opinion pronounced against the constitutionality of the law. The reasoning of Chief Justice Beasley is cogent and powerful and. the investigation of the subject full and exhausting; it entirely covers the point raised in the present case. It is said, however, by the counsel for the commonwealth, that this principle is settled in Pennsylvania by the decision in The Pennsylvania Railroad Company v. The Commonwealth (3 Grant’s Cases, 129). We do not consider that decision raised the point now presented,. The case turned on a contract to pay a certain tax on the business of the road as part of the terms on which the corporation obtained the charter, and it was wholly unimportant whether it was to pay by the ton, the car-load, or the bushel; the amount to be paid in proportion to the business done was a commutation for a gross sum or price annually, for leave to construct the road through the State; this, in part, because it interfered and competed with the transportation on the public works. We decided that case mainly on the ground of contract, and no tax was imposed by the road on the commerce of the country; the railroad company itself paid the tax. The money was there paid on a contract between the parties; this arises from a tax law directed to them. Even if the point had been directly decided by the Supreme Court of Pennsylvania, which it certainly has not, we would not consider ourselves bound by the decision if it came in conflict with those made by the Supreme Court’ of the United States, as that is the tribunal which must ultimately settle every question arising under the Federal Constitution. We would yield implicit obedience to every decision of our own Supreme Court in questions arising under the laws and Constitution of the State, but when presented under those of the United States, they are entitled to thé same weight and no more than those made by the courts of New York, Massachusetts, or New Jersey, and not binding as authority and only entitled to deference and respect so far as they conform to the supreme law of the land, — the Constitution of the United States as construed by the Federal judiciary. The jury is therefore instructed: First. That the act of Assembly, so far as it imposes the tax on the tonnage passing through the State of Pennsylvania to or from other States, on the Erie Railway Company’s road, is in violation of the Constitution of the United States, has no binding effect, and is void. Second. For the determination of the present case we are not called on to decide whether the tax can or cannot be imposed on tonnage taken from Pennsylvania to the markets of other States or from other States into Pennsylvania, as the question does not arise. The tax is imposed by the department on the return made, which must be most strongly construed against the company making it. The return does not show whether the 13,957360^ tons was both received and delivered in this State, or received in Pennsylvania and delivered elsewhere, nor has it been proved on the trial. The same may be said of the 2104^-®-^- tons of the second class. We must, therefore, presume that it was entirely an intrarterritorial trade, and from what was said in the outset, being such, it is under the control of the State legislation and can be taxed. There was, therefore, due to the commonwealth at the time of settlement on the tonnage that we presume from the return to have been received and delivered within the State, the sum of $761, on which, under the act of Assembly, interest must be charged after three months from the day of settlement at the department. You will, therefore, render a verdict in favor of the plaintiff for $806.18. This substantially answers all of the points raised on the trial except the sixth, relative to the duty on tonnage. We do not consider the law of Pennsylvania as coming within that prohibition, which was clearly directed against the power of States to tax vessels coming within their harbors in proportion to the tonnage — a well-known and understood method of taxation under the Articles of Confederation. The statute is only subversive of the third number of the eighth section of the first article, which relates to “ the commerce within the States,” and would be equally objectionable if the tax was imposed upon each bushel, barrel, or car-load of produce or foot of lumber.

Meredith, for plaintiff.

Campbell and Kunlcel, for defendant.

Note. — Writs of error were taken in this case and that of the subsequent one, The Commonwealth v. The Delaware, Lackawanna and Western Bailway; hut W. M. Meredith, then attorney-general, declined to argue them, considering that the decisions were right. The same principle afterwards arose in The Commonwealth v. The Philadelphia and Beading Bailroad, was decided in the same way -by the court of Dauphin county (1 Pearson, 379), and affirmed by the Supreme Court of the United States (15 Wall. 232), reversing the Supreme Court of Pennsylvania.


text:
      Court of Common Pleas, Dauphin County,

      December 26th, 1866.
    The Commonwealth of Pennsylvania v. The Delaware, Lackawanna and Western Railroad Company.
    An act of Assembly imposing a tax upon freight sent from this State into 'any other, or from any other into this, is contrary to the Constitution of the United States, and is void. The legislature has the power to lay a tax upon freight carried from place to place within the State.
   By the Court.

Some of the principles involved in this case came under our consideration in The Commonwealth v. The Erie Railway Company, decided by this court in the early part of the present year. The question there presented was: Can the State tax a transportation company on its tonnage, for goods carried through, its boundaries from and to other States beyond its lines? We held that the act of 13th of April, 1864, so far as it undertook to impose such a tax, was in violation of the Constitution of the United States, and therefore void. For the reasons for that decision, and the authorities which controlled the court in making it, we refer to the opinion on file (1 Pearson, 345). The present case involves two questions: 1st. Can the commonwealth tax the tonnage carried on the defendant’s railway, where the transportation is entirely within the State? 2d, Can it impose such tax on articles carried from Pennsylvania into other States, or from other States into this? That a State possesses the control over commerce carried on within her borders, is, as we conceive, a self-evident proposition. It does not come within the provisions of the Federal Constitution, which confers upon Congress the power to regulate commerce with foreign nations and among the several States. It is altogether intra-territorial; is not a power conferred, but reserved. It was not considered necessary to preserve the constituency against the taxing powers of their own legislature, but the power to tax a commodity has long since been held in numerous reported cases, to be the power to exclude it from the State. In Gibbons v. Ogden (9 Wheaton, 1), Marshall, C. J., says, in speaking of the authority conferred on Congress by the article cited: “ It is not intended to say that these words comprehend the commerce which is completely internal, which is carried on between man and man in a State, or between different parts of the same State, and which does not extend to or affect other States. Such a power would be inconvenient, and is certainly unnecessary.” And again: “The completely internal commerce of a State, then, may be considered as reserved for the State itself.” These principles have been recognized in numerous other cases, and never questioned in any. It follows as a consequence, that the tax imposed on the tonnage carried on this road solely within the State of Pennsylvania, is strictly constitutional. The tonnage of that character is of class No. 1, 30,581, of No. 2, 5585, and of No. 3, 5416 tons, and the tax amounts in the aggregate to the sum of $1049.97.

2d. The tonnage passing over the defendant’s road from this into other States, or from others into this, presents a different question. Congress possesses the same exclusive power to regulate commerce between the different States, that it does with foreign nations. The word “commerce,” as used in the Constitution of the United States, does not mean trade and traffic alone, it is “ intercourse” between nations and parts of nations (Gibbons v. Ogden, 9 Wheaton, 1; Brown v. The State of Maryland, 12 Wheaton, 419; The Passenger Cases, 7 Howard, 407, 444, 458, 4 Wash. C. C. Rep. 378). And this, whether that intercourse be carried on by sailing or steam-vessels, canal-boats, wagons, or railroad cars, whether upon the high seas, the bays, lakes, and rivers of the country, or canals, railroads, turnpike roads, or ordinary highways. It is well to consider another provision of the Federal Constitution in connection with that already cited. Article 1, section 9, declares, “No tax or duty shall be laid on articles exported from any State.” And again, “Nor shall vessels bound to or from one State, be obliged to enter, clear, or pay duties in another.” The act of Assembly imposing the tax now in controversy, is so broad as to cover every kind of transportation, whether on the rivers, lakes, railroads, or canals, provided the means of conveyance or the objects on which it is conveyed be owned by a company or corporation. A steamboat belonging to a transportation company is freighted with iron, coal, or lumber, in Pittsburg, destined for St. Louis, and must pay a duty or tax of two or five cents per ton on its whole cargo. If Pennsylvania can impose such a tax, it can be done also by West Virginia, Ohio, Kentucky, Tennessee, and Wisconsin, and thus the article be taxed out of the market, and the free commerce and intercourse between the States, which the Constitution was specially framed and adopted to protect, be frustrated and rendered of no avail. The same burden would be imposed on a cargo of Philadelphia manufactured goods shipped by steamer to Norfolk or Charleston, or of lumber or grain transported from Chicago to Erie. The method of transportation between the States has greatly changed since the adoption of the Federal Constitution, but the same principles apply. Then the commercial intercourse between the States was by sailing-vessels, keel-boats, canoes, wagons, and pack-horses, It is now mainly by railroads, canals, and steamers. Yet, whether it be by the one method or the other, Pennsylvania cannot say to Ohio, If you bring your grain, flour, or pork to our borders, the article shall pay a tax or duty before you are permitted to transport it to Philadelphia for a market. The effect of such laws is well illustrated by Judge Catron in his opinion in the Passenger Cases (7 Howard, 445), and in many other cases; see those already cited, to which may be added the very able opinions of the Supreme Court of the State of Missouri in 27 Mo. Rep. 464, and of the Court of Appeals of New Jersey reported in the Law Register of February, 1865, and also the opinion of Judge Taney in the License Cases (5 Howard, 575). There is a still later case which even more clearly illustrates the jealous care with which the Federal judiciary have guarded the intercourse between the respective States, and repudiated their power in any manner, directly or indirectly, to impose a tax or duty on commodities passing from one to another. We allude to Almy v. The State of California (24 Howard, 169). It was'there decided that “a stamp duty imposed by the legislature of California upon bills of lading for gold or' silver transported from that State to any port or place out of the State is a tax on exports, and the law of the State unconstitutional and void.” Showing thereby that the State legislatures could not get around the provision which inhibits their embarrassing the intercourse and trade between the States, or lay any tax or duty thereon. It follows as a sequence, that so much of the act of 1864 as imposes a tax on each ton of commodities passing from other States into Pennsylvania, or from this into other States, is in violation of the Constitution of the United States, and therefore void; and it matters not whether the tax or duty be imposed on the ton, the cord, the thousand, the bushel, gallon, or barrel, or the bill of lading which shows its shipment or affreightment, it is equally improper, and not an object from which any State can lawfully raise a revenue. Therefore we instruct you that so much of the account as charges a tax on the tonnage carried from other States into this, or from this into other States, is unlawful and must be left out of your verdict, which must be rendered in favor of the commonwealth for the tax due on intra-territorial carriage alone, amounting to $1049.97, with interest thereon from June 5th, 1866, to this day, November 26th, $29.90, making in the whole, $1079.87, as calculated by the parties.

(See note to Commonwealth v. Erie Bailway, 1 Pearson, 356.)

Meredith, for plaintiff.

Kunkel, for defendant.


text:
      Court of Common Pleas, Dauphin County,

      January 9th, 1865.
    The Commonwealth of Pennsylvania v. The Delaware Division Canal Company.
    A taxpayer, having applied to the auditor-general, to know whether he owed any taxes to the State, and having been informed by that officer that he did not, is not liable to any penalty for not paying those taxes.
    The fact that taxes were paid, and receipts given for subsequent years, will not relieve the taxpayers from money due for preceding years ; nor will a letter to them from the auditor-general that no taxes were due by them to the State. The act of 1st May, 1861, does not debar the commonwealth from claiming taxes due prior to its passage.
    The State cannot claim interest upon a balance of taxes struck from three months after its settlements, when only part of the amount was legally due by the taxpayer.
   By the Court.

There are three points of law raised on the

facts proved in the present case, which are undisputed:

1. Is the defendant subject to the penalty of ten per cent, for failing to report to the auditor-general the amount of its dividends, or an appraisement of the value of its capital stock during the year ? Such a report was necessary under the thirty-third section of the act of 1844, and is now particularly enjoined by the first and second sections of the act of April, 1858 (Pamphlet Laws, pp. 419-20), which directs all corporations taxable under the laws of this commonwealth, in the month of November of each year, to make such report. The second section of that act provides, that if any such corporationn shall neglect or refuse to make such return, or appraisements, on or before the 31st day of December, annually, there shall he added ten per centum to the tax of such corporation for each year. Was there such a neglect, or refusal, here as would subject this corporation to the penalty? The evidence shows that the officers of this canal company, during the month of November, 1858, was in anxious correspondence with the auditor-general on the subject of its taxes, inquiring the rate thereof, howto be computed, from what time, etc.; and on the 7th day of December, 1858, that the officer wrote, stating that the corporation was not taxable under the act of 1844, and that there was no tax due from it at that time. The officers of this company had no reason to believe that it owed any tax to the State, after receiving such a notice from the fiscal officer of the government, until the passage of the act of the 1st day of May, 1861, clearly imposing the tax, and from that time forward it has been regularly paid. It is true that every one is bound to know the law, but the act of 1858 imposes the penalty for a neglect or refusal” to make the required report. Could the conduct of this corporation be considered either? It had applied to the proper office and officer for information, and was informed that it owed nothing — did not come within the tax laws. To call this such a neglect, or refusal, as would subject it to a penalty, would confound all our notions of right and -wrong, and be at war with the whole system of jurisprudence in Pennsylvania. It never was the intention of the legislature to impose a penalty in any such case. It is the spirit of the decision in The Easton Bank v. The Commonwealth (10 Barr, 442), that penalties will not be imposed where there are serious doubts as to the proper construction of an act of Assembly, and no intentional violation of its provisions. Many other cases might be cited to the same effect. It can scarcely be said that no doubts existed here, for it is declared by the legislature, in the preamble to the act of May 1st, 1861, that no doubts have arisen as to the liability of this and other similar companies to pay taxes, and provision is then made for their payment thereafter. You will, therefore, render a verdict in favor of the commonwealth, for the amount of the tax, as settled at the accountant department, for the years 1858,1859, and 1860, minus a penalty charged, and will compute interest on the sum thus found, after three months from the date of that settlement, and we will reserve the other questions raised and argued in this case, to wit: 1. Was this corporation subject to any tax prior to the act of 1861 ? Is it absolved from all former taxation by the words of that act, or is the State barred by the several settlements annually made; and 2d. Does the settlement bear interest, the amount having been reduced by throwing off the penalties ?

OPINION OF THE COURT ON THE RESERVED QUESTIONS.

The governor of this commonwealth issued his letters-patent, incorporating a company called “ The Delaware Division of the Pennsylvania Canal,” on the 18th day of July, 1858 — under what authority we need scarcely pause to inquire, as the counsel on both sides treat it as an incorporated company. It is so considered and spoken of in the act of May 1st, 1861, but I must confess myself unable to discover any law giving such a power to the governor. It is certainly not embraced in the act of 6th of April, 1791, or its supplements, and is not authorized by the fifth section of the act of April 21st, 1858, for the sale of the public works. Possibly it may be conferred by some act which has escaped my observation. The company, after accepting and acting under such a charter of incorporation, may be estopped from denying its existence and validity; and if not utterly valid, but only voidable, it cannot be inquired into in this case — may possibly come into question when the company asserts some right under it. We have not seen or read the charter, and have it not before us. The Delaware Division of the Pennsylvania Canal was transferred to the Sunbury and Erie Railroad Company, by virtue of the act of April 21st, 1861, clear of all incumbrance except the unpaid purchase-money, and would be subject to a tax in the hands of that company from thenceforward. It probably was transferred to the present company soon after its incorporation, which should have reported to the auditor-general during the following November. At that time there was something over six months’ taxes due on the dividend and capital stock in the hands of the two companies, and the established usage of the department in such cases is to charge for half a year’s tax. No valid or legal reason has been presented to excuse this corporation from paying a tax on its capital stock and dividends, under the act of 1844 and prior laws, or on its capital stock under the act of April 12th, 1859. Those laws embrace all incorporated companies owning stock within the commonwealth, unless where the same are expressly excepted by the statutes. Do the settlements which have been made, and receipts given, discharge this company from all taxes prior to that of 1861? We find that on the 5th day of December, 1861, a regular account is stated, by the department, of the taxes due for that year, and the same was paid. This appears, on its face, to have been done under the act of May 1st, 1861. Payment has also been made of the tax due each year since. It must be conceded that, in ordinary cases between individuals, a settlement or payment of subsequent years’ indebtedness will be presumed to discharge prior claims. But that presumption may readily be repelled by showing that the earlier one was not included. Conceding, for the present, that an erroneous settlement made of a certain year’s tax by the auditor-general and State treasurer, and payment thereof, cannot afterwards be overhauled for mistake, yet that would certainly not debar the State from presenting a claim for a tax never settled by those officers, or paid by the debtor. We think it unimportant that the tax was due for a prior year; the settlement is no bar. It plainly appears, on its face, that these years’ taxes were not included. It is a legal maxim that the government is not to be injured either by the mistake or negligence of its officers; therefore the auditor-general, deciding that this corporation was not subject to taxation, and informing its officers that there was nothing due from it therefor, will not discharge the duty, but it must be paid when the mistake is discovered. In the case of the Easton Bank already cited, the auditor-general informed the bank officers that it was chargeable with only a certain amoi;nt of taxes, which was paid; yet that was held to be no bar to a new settlement and additional charge of taxes for the same year. In our opinion there is nothing in these settlements and payments which will absolve this corporation from paying the taxes now claimed.

Is the State debarred, by the act of May 1st, 1861, from claiming any tax from this corporation prior to its passage? The preamble to the statute declares that it is passed to remove doubts which have arisen relative to the liability of those corporations to which the State canals were sold to pay taxes; and the body of the act provides that they shall, “hereafter,” be subject to the payment of a tax on their capital stock, and- the second section renders them liable to the penalties imposed by the act of April 21st, 1858, for a failure to make report and furnish an appraisement. As we conceive, no reasonable doubt could ever have existed as to all of these corporations being subject to the payment of taxes, and bound to make reports as others are required to do. There was no necessity whatever for the law, and there is nothing in its words which releases them from the responsibility fixed upon them by the former statutes. Laws cannot be repealed by implication, nor should a declaratory act be so construed as to relieve a party from a clear fixed liability. This act of Assembly could not be pleaded by the corporation as a release from the payment of taxes imposed by former laws. A mistake in the auditor-generals office, probably made by some clerk, first led to the supposition that no tax was imposed on the stock of any of these corporations, transferees of the public works, and the misapprehension which must, in law, be attributed to the officer, caused them to escape until the legislature acted on the subject. It would have been better to have so worded the enactment as to have made them liable for the past, as well as the future, and required the arrears to be paid as well as the subsequent tax, but possibly the legislature did not take time to examine the matter, and took it for granted that there were serious doubts, and that they could not be compelled to pay, if not previously liable, which would have been correct. As we view it, they were all liable from the date of their charter of incorporation, and this law did not relieve them. The charge of arrears of taxes for the years 1858-9-60 is therefore right, as settled by the department. Must interest be paid on these arrears after three months from the date of settlement ? The act of 1811 provides that “ all balances due the commonwealth, on accounts settled agreeably to this act, shall bear interest from three months after date of settlement until paid.” Had no erroneous items been taken into this account, and the “balance” struck by the accounting officers been sustained, there could have been no question on this subject. A portion of the charge has been rejected by our decision, and the defendant has, in part, sustained its appeal. The batanee as struck was not due. The company could not lawfully know what amount to pay or tender, and therefore cannot be required to pay interest. The amount actually due is for the first time fixed on the trial, and interest can, therefore, only be allowed on the judgment. As already stated, in regard to the penalties, we do not consider that there was such default on the part of the corporation in failing to pay its taxes, after the decision of the auditor-general, and the action of the legislature, as will subject it to the payment of interest. There must consequently be deducted from the verdict the sum of $470.96, allowed as arrears of interest, and the verdict corrected according to the point reserved, and the amount for which it should have been rendered is now fixed at nine thousand eight hundred and forty-six dollars, for which the clerk is directed to enter judgment, as of the 29th day of November, 1864.

Meredith, for plaintiff.

Knox, for defendant.

Affirmed by the Supreme Court, May 25th, 1868. Not reported.


text:
      Court of Common Pleas, Dauphin County,

      December 20th, 1866.
    The Commonwealth of Pennsylvania v. The Lehigh Crane Iron Company.
    Bringing suit is sufficient notice to a party of the settlement of a claim for taxes against him by the commonwealth. He must appeal within sixty days after the commencement of the action. A corporation is bound to pay a tax on stock dividends the same as on those made in cash.
   By the Court.

This suit was brought to recover a balance found due to the commonwealth by the defendant on account of a tax due upon its dividends, as settled by the auditor-general and State treasurer on the 20th of July, 1865. No appeal was taken from that settlement, and suit was brought for the recovery of the money on the 31st of January, 1866; and on the same day a narr and copy of the claim filed.

Two questions arise on the evidence in this case:

First. Had the defendant notice of the settlement according to law, so as to require it to take an appeal within sixty days ?

Second. If it had appealed, could it have avoided paying the tax imposed?

The clerk in the auditor-general’s office testifies that on the 21st of July, 1865, the day after the settlement, he made out a copy of the account as settled, and directed the same to the president of the company at Philadelphia, and placed it in their letter box in the office for transmission by mail, to be taken to the post-office by their messenger. If sent, it would be a compliance with the ninth section of the act of 1811, relative to public accounts, whether received or not. In the present case we have no proof that it ever reached the post-office, as the messenger is not called. The president, secretary, and treasurer of the company all testify that it never was received. Notice was sent from the attorney-general’s office that the claim was in the hands of that officer for collection, and the amount claimed was stated, but no copy of the account. This it is admitted was received, but is not, in our opinion, the notice contemplated by the act of Assembly. Is bringing suit such notice? As we have always understood the law we should answer in the negative, if we dared depend upon our own judgment; but we are precluded from so doing by the decisions of the Supreme Court, which are binding on us, and must be taken to be the law of the land. It has been three several times decided by that tribunal that bringing suit is sufficient notice under the statute, and if an appeal be not taken within sixty days after action commenced the settlement is conclusive. In Hays v. The Commonwealth (3 Casey, 272), Chief Justice Lewis says: “If the auditor-general neglects to give notice of the settlement, and brings an action to recover the amount without such notice, the notice may he treated as given when the writ is served; and if an appeal be filed within sixty days thereafter, the action must be stayed until the appeal is tried before the proper tribunal.” This principle is reiterated in Hultz v. The Commonwealth (3 Grant’s Cases, 61), and is more fully and carefully examined by Chief Justice Woodward, in Philadelphia v. The Commonwealth, not yet reported, who relies on the two former decisions. In none of these cases did the point necessarily arise. Certainly not in the last-named case. Suit was brought to recover a balance of State taxes due the commonwealth by the city; the settlement was offered in evidence, but was objected to because no notice had been given prior to settling the account. We held it to be unnecessary. It was next said that proof was not made that a copy was remitted to the city officers. We instructed the jury that the law presumed that the auditor-general had performed his duty until it was shown that no copy was received, which would then throw on the department the duty of proving that it was mailed; and when this was established the settlement would be conclusive, especially as no error was pointed out, or any payment pretended for which the city had not received credit. Thus it is shown that the point ruled by the Supreme Court did not arise in the case, as we have always considered the notice spoken of in the eleventh section of the act of 1811, is the one pointed out by the ninth section, to wit: sending a copy of the account by mail from the auditor-general’s office. The appeal, if taken after suit brought, could not be set up on the trial of that cause. When the case comes into court on appeal it is not to be tried on original principles, but merely on the points made before the department and stated in the appeal. As a general rule, the party plaintiff cannot be placed in a better situation, or acquire a new and undisputed right of action by anything occurring after suit brought; and if the defendant is not barred of his defence then, can he be by anything occurring afterwards ? These are, however, mere idle speculations of our own. We instruct you, under the decisions of the Supreme Court referred to, that the settlement is conclusive, and your verdict must be in favor of the commonwealth for fifty-five thousand dollars, with interest from the 20th day of October, 1865.

2. This company has lost nothing by omitting to appeal. It was originally incorporated with a comparatively small capital, was prosperous in business, and might have made large dividends among its stockholders, but the managers, after paying six per cent, to the stockholders, invested the surplus in new improvements and the purchase of additional works, and so continued from year to year until the amount of property held by the corporation became very large. This property was of course subject to State taxes, but not being divided, escaped the tax on dividends. After pursuing the course indicated, and increasing the capital stock at different times until it amounted to---dollars, the corporation made a dividend, in the form of stock, amounting to a sum the tax on which, computed as a dividend in money, was forty-five thousand dollars, and now contends that this is not such a dividend as is subject to taxation. We are unable, on principle, to see any difference between a stoch and cash dividend; and we have direct authority in the decision of our Supreme Court, declaring that there is none. In The Commonwealth v. The Cleveland, &c. Company, the Supreme Court says: “ In assessing the tax, no difference can be made between the dividends actually paid to the stockholders and stock dividends, which are profits added to the stock of each corporator.” To have decided otherwise would be to allow all corporations, whose stockholders could afford to let their capital accumulate, to escape the burden of taxation; and yet the stock, when thus divided, could be sold in the community, and transferred from hand to hand as money.

Brewster, for plaintiff.

Kunhel and Simonton, for defendant.

Affirmed by the Supreme Court (5 P. F. Smith, 448).