Commonwealth v. Mahoning Roll. Mill Co. , 129 Pa. 360 ( 1889 )

Opinion,

Mu. Justice Stekrett :

The tax account of defendant company with the commonwealth, per act of June 7, 1879, for the fiscal year ending first Monday of November, 1887, ivas stated by the auditor general, December 1, of that year, as follows, to wit:

“ Dividend, 15 per cent on $50,000 capital stock. Tax, 71 mills (one half mill for each one per cent of dividend), $375.

“ Interest at 12 per cent from sixty days after date of settlement!”

The company appealed from that settlement, and contended that, as a manufacturing corporation, its capital stock was wholly exempted from taxation by the following section of the supplement, June 30, 1885, viz.:

“ Sect. 20. That the taxes laid upon manufacturing corporations, by and under the revenue laws of this commonwealth, be and they are hereby abolished as to such corporations, and the laws under which such taxes are laid and collected be and the same are hereby repealed, so far, and so far only, as they apply to and affect manufacturing corporations : Provided, that the provisions of this act shall not apply to corporations engaged in the manufacture of malt, spirituous and vinous liquors, or in the manufacture of gas,” etc.

It appears from the record that the company was chartered under the general corporation act of 1874, with an authorized capital of $50,000, three fourths of which was paid in; that on June I,’l887, it declared a dividend of 15 per centum on its paid-up capital. The settlement appealed from was based on that dividend.

The learned judge also found that the business of the company, with an unimportant exception, is converting pig-iron, old rails, and scrap into a form of wrought-iron known as skelp, adapted to the manufacture of pipes: that about one thirteenth, or parts “ of its capital is invested in dwellings which are reasonably necessary for the use of its employees.”

The findings of fact are not as full and specific as the undisputed evidence would have warranted. While the tenant-houses, in which about $2,900 of the company’s capital is invested, are in a certain sense “ reasonably necessary for the use of its employees,” the evidence clearly shows they are not a necessary part of its manufacturing plant, and have no necessary connection with the business for which the company was incorporated. They are a convenience and advantage both to the company and its employees, and doubtless a profitable investment for the former; but, in principle, the employment of its capital in building houses, for the purpose of leasing the same to its employees, does not differ materially from any other investment- that might be made outside of its- business as a manufacturing corporation. The only question is, whether capital thus employed or invested is within the exemption of the section above quoted. We are of opinion that it is not. In some respects the question is similar to one that was presented in Commonwealth v. Lackawanna I. & C. Co., No. 48 of May Term 1889, in which an opinion has just been filed. In that case, we held that the section in questiqn was intended to operate solely on capital actually employed in manufacturing and not on capital employed in any other business, or pursuit. [See ante, 846.]

. In West Chester Gas Co. v. Chester Co., 30 Pa. 232, the question was whether houses erected by the company for its workmen were a part of the plant, and as such, exempt from taxation. Mr. Justice Poet.ee, speaking for this court, said: “ The gas works are clearly exempted, but' the houses do not appear necessary to the performance of the company’s proper work. On the other hand, they are said to have been erected for the accommodation of their workmen. This is a convenience, not a necessity. For anything that appears, these workmen might be able to discharge their duties as satisfactorily if they lived somewhere else.”

It may be difficult in some cases to determine just where necessity ends and mere convenience begins. In the case before us, however, it appears to be quite clear that the investment of part of the company’s capital in dwelling-houses for the use of its employees, was a measure of mutual convenience and advantage, and not of necessity. We think the learned judge erred in holding that the portion of capital thus invested is exempt from state tax. To that extent the specifications of error are sustained.

It follows that the judgment complained of must be reversed, and judgment entered in favor of the commonwealth for amount of tax on $2,900 of the company’s capital, with interest, commissions, and costs as follows:

Tax, 7^ mills on $2,900, for year 1887, . $21 75

Interest from March 1,1888, at 12 per ct. . 3 40

Attorney-general’s commissions ... 1 09

Total $26 24

Judgment reversed, and judgment is now entered against defendant in favor of the commonwealth for $26.24, and costs.