Opinion by
Thе proposition made by the learned attorney general that a distinction exists between the capital stock of a corporation or a joint stock association and the shares into which it is divided, that has been recognized by the courts, must be conceded. It
A corporation is an artificial person created by law for the purpose of becoming the business representative, agent or trustee of so many persons as may join to furnish the money with which the business to be done by the corporation may be cаrried on. The corporation comes into existence, like a natural person, naked. The money furnished by those whose representative it is to be, is its capital stock. The amount that each person contributes to this fund is his share in the venture, and is called his share or shares in the stock. The legal title to the whole sum so contributed is in the corporation, and so is the legal title to all the property real or personal in which it may be invested. The equitable title, that is, the right to the profits from the business done, and to a return of the capital when the corporation is dissolved, is in the stockholdеrs. There is one estate, one business, but the title has been divided, by the separation of the power of control, from the right to receive the profits. The nature of the undertaking, or the number of the persons uniting in it, makes this division desirable for convenience in the transaction of the business, and for the unity and еfficiency of its management. Nevertheless, as in the ordinary case of trustee and cestui que trust, the real owners are the beneficiaries.
Now, how shall this single estate be taxed. It may well be taxed in the name of the corporation, the legal owner, or the names of the shareholders, the еquitable owners, or, as in White-sell v. Northampton County,
It is not like the case put in the argument of one who buys a farm and gives а mortgage for the money with which to pay for it; for in that case there are two distinct subjects of taxation, each of which is made taxable by an express provision of the law. The farm is taxable as land, against whoever may be the owner, without regard to the incumbrances upon it. The sum secured by the mortgage is taxable as money at interest, regardless of the use the borrower may make of it. If the owner of land is compelled to incumber it, it may be his misfortune, but the man who lends money to him has no connection with him in title. There is in such case no double taxation. The land is taxed once to its owner. The money at interest is taxed once to its owner. They are distinctly different taxpayers and pay taxes upon distinctly different subjects of taxation.
The correctness of another proposition made by the appellee must be conceded, viz.: that the legislature has power to impose double taxation, provided it is done in such manner as to secure the uniformity which the constitution requires. It cannot be done arbitrarily in a given case, but it may be done if the whole class to which the subject belongs is subjected to the burden in substantially the same manner. But an intent to impose double taxation will not be рresumed: Fidelity Company v. Loughlin,
Lycoming County v. Gamble,
The same thing is true of Whitesell v. Northampton County,
The same thing is true of Spangler v. York County,
Having seen in what manner property standing in the name of a trustee оr a corporation may be assessed, let us inquire what method has been provided by the act of 1889 as amended in 1891 for the assessment of capital stock. Section 1 of the act of 1889 subjects certain classes of personal property to
Here by еxpress words the statute has selected the holder of the legal title as the person to be dealt with as the owner for all purposes of taxation. It has also elected to proceed against such holder of the legal title of shares for his or its interest or shares of stock so held. But the shares reached by this section are not all shares of stock held or owned by the taxpayer. They are described as the “ shares of stock . . . except shares of stock in any corporation or limited partnership liable to the capital stock tax imposed by the twenty-first section of this аct, or relieved from payment of capital stock tax by said section.” Two classes of shares of stock are thus excepted from the operation of the taxing clause of the first section.
We turn now to the twenty-first section to ascertain what the exempted classes include. One class includes manufacturing corporations and companies, and the capital stocks of this class are exempt from taxation by the express words of the section. The other class includes all other corporations created by the laws of this state, or doing business within it, that are taxablе under existing laws, and subjects them to a capital stock tax assessed against the corporation, andmeasured by the amount of dividends declared; or if these do not amount to six per cent, then by the appraised value of their capital stock. This tax is adjusted by the auditor general and pаid directly to the state treasurer.
The stocks falling under either of these classes are expressly excepted from the operation of the first section; and the shares are not taxable in the hands of the holders, because as to one class the taxes are levied and colleсted in another manner, and as to the other class they are not levied or collected in any manner, the corporations or companies being exempt.
The provisions of the acts of 1889 and 1891 furnish us therefore with the following scheme for the taxation of stocks : (1) The capital stock of all manufacturing companies and corporations is exempt from taxation, whether in the hands of the
This scheme includes every share of the stock in corporations created by, or doing business in, this state, wherever it may be owned, by imposing the tax on the corporation. It includes evеry share of stock in corporations which the state cannot reach that may be held by any taxpayer by requiring him to disclose his ownership, and then assessing the shares he holds directly to him.
It only remains to apply the provisions of the acts of 1889 and 1891 to the assessment appealed from in this casе. The Fall Brook Railway Company is a corporation belonging to the second of the classes above enumerated. The state tax upon its stock was adjusted by the auditor general at the sum of $11,088.33. This sum was paid into the state treasury. The stock is therefore clearly within the exception in the first section of the act of 1889, and is not taxable in the hands of the holders of its shares, whether such holders are natural or artificial persons.
The Fall Brook Coal Company is another corporation belonging to the same class. Its stock was appraised at nearly four times its par value. The аuditor general adjusted the tax, and this too has been paid into the state treasury. What is now asked by the commonwealth, and was actually done by the court below, is to assess the coal company as the holder of the stock of the railway company with the same sum already paid .by that corporation upon the same capital stock, to wit, $11,083.33. This cannot be done, as we have already seen, for two very satisfactory reasons : (1) It would be a clear case of double taxation without any expressed intention on the part of the legislature to impose double taxatiоn, and in the face of the legal presumption that no such intention exists. (2) It is in
The shares of stock in the Fall Brook Railway Company are not taxable in the hands of their holders because they have already paid the state tax through the corporation, and are excepted in express words from the liability to taxation in the hands of the holder by the first section of the act of 1889.
The learned attorney general very evidently felt the stress of this position, for he made no effort to defend the ruling of the court below under the provisions of the acts of 1889 and 1891, but rested the argument on the supposed effect of the recent cases of Commonwealth v. The Westinghouse Manufacturing Company,
Those cases, however, afford no support to the contention of the appellee. We have еxamined both cases with reference to this question and feel justified in saying that it was not raised by either of them. The defendant corporations in these cases claimed exemption for their entire capital stock as manufacturing companies. They also claimed exemption on particular portions of it for the following additional reasons: (a) Because one portion of it was invested in patent rights which were not subject to taxation by the state ; (5) because another part of it was invested in manufacturing plants in other states; and (c) because still another part of it was invested in the stocks “ of sundry corporations, some of them received in exchange for its manufactured products.”
What these corporations were, where they were located, whether they had paid taxes to the state or not, did not appear.
The learned judge of the court belоw held as to this item of the claim for exemption that “ this would raise a question requiring consideration if the fact was sufficiently proved, but no details are furnished and we cannot say with any certainty how much of its capital stock was so invested.”
This court concurred in the conclusion of the court below and did not enter upon a consideration of the question, because the facts necessary to an intelligent disposition of it were not before us. On the other hand the recent cases of Commonwealth v. The Pennsylvania Co., referred to at page 411 of
The judgment in this case cannot be sustained upon any decision of this court, upon the provisions of the statute under which the tax is assessed, nor upon principle, and it is now reversed.