255 Pa. 269 | Pa. | 1916
Lead Opinion
Opinion by
This action, brought on a lease between the appellee and appellant, executed December 7,1896, is for the recovery of income tax paid by the lessor to the United States government. The following is the clause iu the lease under which the court below entered judgment against the lessee: “The Railway Company shall and will also punctually and faithfully pay all taxes, charges, and assessments which, during the continuance of the term hereby demised, shall be assessed or imposed under
Dissenting Opinion
Dissenting Opinion by
Plaintiff in 1896 leased its entire road and equipment to defendant for the term of nine hundred and ninety-nine years, the lease containing an agreement on the part of defendant to pay all taxes, charges and assessments imposed on the premises, or business, or the receipts therefrom, or on its bonds, stocks, or dividends, or on the franchises, for which plaintiff might become liable. In 1914 plaintiff paid to the United States government under the Income Tax Daw of October 3, 1913, 38 U. S. Stat, 114, the sum of $1,647.77, levied on its net income arising from all sources, $1,600.00 of which represented one per cent of the net income derived from rental paid under the lease to defendant. Of the latter sum $266.67 is the amount of the Federal excise tax assessed for the months of January and February, 1913, and the balance of $1,333.33 represents the assessment on income for the remainder of the year 1913. Plaintiff notified defendant of the assessment of the tax and requested payment thereof as part of the rental under the lease, which defendant refused, whereupon plaintiff paid the tax and brought this action for recovery of the amount so paid. Defendant’s affidavit of defense admitted the facts set forth in the statement of claim, but denied liability for the assessment under the terms of the lease. Plaintiff took a rule for judgment for want of a sufficient-affidavit of defense and the court below entered judgment for plaintiff for the above amount with interest, from which this appeal is taken, the sole error assigned being the action of the court in entering such judgment.
The construction of a lease of another road to this
In the present case, as in the one above referred to, the Federal Income Tax law was not in existence at the time the lease was made, and whether or not such a tax was within the contemplation of the parties must depend upon their intention gathered from the general terms of the lease. It is first provided that, in consideration of the lease of plaintiff’s property and franchises, which are fully described, the defendant “shall-and will well and truly pay, or cause to be paid......as rent for the said demised premises, the following sums of money.” The first requirement is that defendant pay such sum as will be “equal to all interest moneys hereafter to mature” on outstanding bonds of plaintiff company or on renewals or extensions thereof, “free from any tax thereon,” with a further provision that if defendant pay any part of the principal of the bonds the annual rental shall be reduced accordingly. The lessee also agrees to pay “such sum as will be equal to fiVe per cent.” on the preferred stock outstanding or which may in the future be issued for improvements, in which case the rental shall be increased by a sum sufficient to pay five per cent, thereon “free from taxes.” While the above provisions
It is strenuously argued by defendant that in the clause which requires defendant to pay all taxes or assessments “on the demised premises, or any part thereof, or on the business there carried on or on the receipts, gross or net, derived therefrom,” the word “therefrom” refers to the business and not the premises, and as no business is being carried on by plaintiff, but on the contrary is transacted entirely by defendant, there can be no basis for construing this clause to require defendant to pay a tax on rents received from the premises. On the other hand plaintiff argues “therefrom” refers to the premises, which forms the consideration for the rent, and income tax levied thereon is a tax or assessment which defendant agreed to pay. While defendant’s view is more in accord with the strict grammatical construction of the clause, standing alone, yet reading it in connection with the remainder of the paragraph in which .it occurs, inclines me to the opposite view. The general effect of the paragraph is to require defendant to pay all taxes, charges and assessments which may be based on the subjects then enumerated.
The business of operating the leased property is carried on solely by defendant. Plaintiff was, therefore,
Under the ruling in McCoach v. Minehill & Schuylkill Haven R. R. Co., 228 U. S. 295, plaintiff was not engaged in business within the meaning of the Federal Corporation Tax Act and was therefore not liable for the excise tax for the months of January and February, 1918. However, as the payment of this tax was made before the decision in that case, upon demand by the lawful authorities, and with notice to defendant, whom, under the lease, I would hold liable for the payment thereof, plaintiff was justified in paying to avoid the risk of incurring the penalties of the act in the event of an adverse ruling by the court. As between plaintiff and defendant the amount thus paid was not, in my opinion, paid voluntarily and an action of assumpsit lies to recover the