Opinion by
Mb. Justice Mitchell,
■ The questions presented in these cases grow out of a state of facts so unusual as not to be in legislative contemplation when the taxing Act was passed, and too far outside of the ordinary course of business for much light to be afforded by precedent or experience. A corporation with enormous assets, and also enormous liabilities, found itself unable to meet the interest on a very large body of its obligations. As to these it was practically insolvent, unable to pay as payment fell due. These obligations were in classes, with priority among themselves which threatened the juniors with destruction. To escape this danger the corporate affairs and management were taken out of the hands of the usual officers, not merely by the process of a receivership but by the joint action of the stockholders and the creditors in exercise of their combined powers for their common interest. The result was a settlement, among other things, of the interest upon a large amount of the corporate debt, which the commonwealth claims, was a payment that entitles it to demand the tax imposed by the Act of 1885 from the company. The court below so held.
It will simplify the discussion, and tend to clear understanding of the subject to keep in mind that the tax is. laid not on the company, nor even on the bondholders as a body, but upon each resident bondholder as an individual. The company, or rather its treasurer, is merely the instrument of collection for the convenience of the state. The question therefore is not whether the company has in effect and through its agencies paid the interest, but whether it paid at such time and in such manner that its treasurer could perform the duty imposed upon him by the statute, of deducting the tax from each shareholder’s interest. It might even be conceded that the interest has in effect been paid by the company, and that the state has not received the tax to which it is entitled, but the question would still remain whether the omission to collect the tax was [330]*330such a default as to make the company directly liable for the amount. It was found as a fact by the learned court below that the treasurer made the assessment and report to the auditor 'general in 1887 and 1888 as required by law, and it is admitted that the company acted in entire good faith, and that there is no element of fraud, or trick, or device to escape the payment of the tax in the case.
It would be unprofitable to discuss in detail the numerous and very elaborate assignments of error, and with this preliminary view of the nature of the question, I address myself directly to the substantial points of controversy.
1. The payments of interest by Drexel & Co. during 1887 were not payments by the company. They were not made with the company’s money, nor by the company’s authority or at its instance. Drexel & Co. did not represent the company in any capacity, though what they did was with the expectation that it would result ultimately to the company’s advantage. That however was a mere incident which might or might not follow, the action of Drexel & Co. was as agents and on behalf of certain stock and bondholders who had, in their individual rights and capacity, agreed to adopt the proposed plan of re-organization for their own individual benefit. To join in the plan or not was determined by each bondholder for himself. Drexel & Co. represented only those who joined. They paid out their own money to the bondholders they represented, by way of an advance on account of interest, but under conditions, one of which was that, in case the plan of re-organization failed, their advances were to be repaid to them by the bond or certificate holders whose bonds were to be re-delivered to them and their claims against the company thus restored to the status quo. Up to this point the company had no part in the transaction.
Drexel & Co. were under no obligation to deduct the tax from their payments. Whether the company could delegate its authority under the statute is entirely immaterial. Drexel & Co. did not represent the company, and, what is even more to the point, no tax was assessed or assessable upon the payments made. They were not payments by the debtor to the creditor, which alone are taxable, but advances by certain of the creditors among themselves, with the assistance of stock[331]*331holders and Drexel & Co. individually, which were to be interest paid or mere advances to be returned, according to luture circumstances. If the plan of re-organization failed and Drexel & Co. were repaid by the bondholders their disbursements under the effort to carry it through, then there would be no payment of interest at all. Advances by an agent of the creditors, under such circumstances, whether called interest or not, are not within the terms of the Act imposing a tax upon payments of interest by corporations to the holders of their indebtedness.
Up to this point as already said it is entirely clear that the corporation was no party to the transactions in any way. In July, 1888, however the plan of re-organization had become so far successful that the company was enabled to pay off the bonds which had been deposited with Drexel & Co., including the reimbursement to the latter of their advances on account of interest. By so doing of course the company ratified and accepted what had been done by Drexel & Co. as having been done on behalf as well as for the benefit of the company, and the substantial foundation of the commonwealth’s claim is that this ratification made the payment of interest by Drexel & Co. so completely a payment by the company that the latter is bound to account for the tax. If the tax were imposed upon and payable by the company this claim would be indisputable, or again if the payment had been made in the first place by Drexel & Co. acting in any way under the authority, or on account of the company, the company would have been liable on the principles of Com. v. Phila. & Reading Co., 137 Pa. 481, where it was held that a corporation must be presumed to be solvent as to those obligations which are shown to have been actually paid, and that payment by the receivers of a guarantor railroad company who were also receivers of the debtor company, and a charge of the amount against the latter in the accounts, was in effect and for the purposes of the tax a payment by the latter. But the case here is entirely different. As already shown, Drexel & Co. did not act under the authority or on behalf of the company but entirely independently and for other parties. As between them and the company they were separate parties, dealing amicably but at arm’s length in the settlement of July, 1888, and the accept[332]*332anee by the company of Drexel & Co.’s action was the acceptance of a completed act, not as it might have been, not even necessarily as it ought to have been, but as it actually was at that time. The liabilities of the company began at and from that date, when its affairs as to this branch of them, came under its own control.
Recurring now to the point noted at the outset that the tax is laid on the bondholder as an individual and the company is merely a collector, we come to the question whether upon the adoption of Drexel & Co.’s acts, and payment made to them in July, 1888, there was any duty of collection of the tax which the company omitted. As to the year 1887 clearly there was none. As already shown the company made no payment in that year, and it is at the time of payment, and then only, that the tax is to be assessed and deducted.
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Opinion by
Mb. Justice Mitchell,
■ The questions presented in these cases grow out of a state of facts so unusual as not to be in legislative contemplation when the taxing Act was passed, and too far outside of the ordinary course of business for much light to be afforded by precedent or experience. A corporation with enormous assets, and also enormous liabilities, found itself unable to meet the interest on a very large body of its obligations. As to these it was practically insolvent, unable to pay as payment fell due. These obligations were in classes, with priority among themselves which threatened the juniors with destruction. To escape this danger the corporate affairs and management were taken out of the hands of the usual officers, not merely by the process of a receivership but by the joint action of the stockholders and the creditors in exercise of their combined powers for their common interest. The result was a settlement, among other things, of the interest upon a large amount of the corporate debt, which the commonwealth claims, was a payment that entitles it to demand the tax imposed by the Act of 1885 from the company. The court below so held.
It will simplify the discussion, and tend to clear understanding of the subject to keep in mind that the tax is. laid not on the company, nor even on the bondholders as a body, but upon each resident bondholder as an individual. The company, or rather its treasurer, is merely the instrument of collection for the convenience of the state. The question therefore is not whether the company has in effect and through its agencies paid the interest, but whether it paid at such time and in such manner that its treasurer could perform the duty imposed upon him by the statute, of deducting the tax from each shareholder’s interest. It might even be conceded that the interest has in effect been paid by the company, and that the state has not received the tax to which it is entitled, but the question would still remain whether the omission to collect the tax was [330]*330such a default as to make the company directly liable for the amount. It was found as a fact by the learned court below that the treasurer made the assessment and report to the auditor 'general in 1887 and 1888 as required by law, and it is admitted that the company acted in entire good faith, and that there is no element of fraud, or trick, or device to escape the payment of the tax in the case.
It would be unprofitable to discuss in detail the numerous and very elaborate assignments of error, and with this preliminary view of the nature of the question, I address myself directly to the substantial points of controversy.
1. The payments of interest by Drexel & Co. during 1887 were not payments by the company. They were not made with the company’s money, nor by the company’s authority or at its instance. Drexel & Co. did not represent the company in any capacity, though what they did was with the expectation that it would result ultimately to the company’s advantage. That however was a mere incident which might or might not follow, the action of Drexel & Co. was as agents and on behalf of certain stock and bondholders who had, in their individual rights and capacity, agreed to adopt the proposed plan of re-organization for their own individual benefit. To join in the plan or not was determined by each bondholder for himself. Drexel & Co. represented only those who joined. They paid out their own money to the bondholders they represented, by way of an advance on account of interest, but under conditions, one of which was that, in case the plan of re-organization failed, their advances were to be repaid to them by the bond or certificate holders whose bonds were to be re-delivered to them and their claims against the company thus restored to the status quo. Up to this point the company had no part in the transaction.
Drexel & Co. were under no obligation to deduct the tax from their payments. Whether the company could delegate its authority under the statute is entirely immaterial. Drexel & Co. did not represent the company, and, what is even more to the point, no tax was assessed or assessable upon the payments made. They were not payments by the debtor to the creditor, which alone are taxable, but advances by certain of the creditors among themselves, with the assistance of stock[331]*331holders and Drexel & Co. individually, which were to be interest paid or mere advances to be returned, according to luture circumstances. If the plan of re-organization failed and Drexel & Co. were repaid by the bondholders their disbursements under the effort to carry it through, then there would be no payment of interest at all. Advances by an agent of the creditors, under such circumstances, whether called interest or not, are not within the terms of the Act imposing a tax upon payments of interest by corporations to the holders of their indebtedness.
Up to this point as already said it is entirely clear that the corporation was no party to the transactions in any way. In July, 1888, however the plan of re-organization had become so far successful that the company was enabled to pay off the bonds which had been deposited with Drexel & Co., including the reimbursement to the latter of their advances on account of interest. By so doing of course the company ratified and accepted what had been done by Drexel & Co. as having been done on behalf as well as for the benefit of the company, and the substantial foundation of the commonwealth’s claim is that this ratification made the payment of interest by Drexel & Co. so completely a payment by the company that the latter is bound to account for the tax. If the tax were imposed upon and payable by the company this claim would be indisputable, or again if the payment had been made in the first place by Drexel & Co. acting in any way under the authority, or on account of the company, the company would have been liable on the principles of Com. v. Phila. & Reading Co., 137 Pa. 481, where it was held that a corporation must be presumed to be solvent as to those obligations which are shown to have been actually paid, and that payment by the receivers of a guarantor railroad company who were also receivers of the debtor company, and a charge of the amount against the latter in the accounts, was in effect and for the purposes of the tax a payment by the latter. But the case here is entirely different. As already shown, Drexel & Co. did not act under the authority or on behalf of the company but entirely independently and for other parties. As between them and the company they were separate parties, dealing amicably but at arm’s length in the settlement of July, 1888, and the accept[332]*332anee by the company of Drexel & Co.’s action was the acceptance of a completed act, not as it might have been, not even necessarily as it ought to have been, but as it actually was at that time. The liabilities of the company began at and from that date, when its affairs as to this branch of them, came under its own control.
Recurring now to the point noted at the outset that the tax is laid on the bondholder as an individual and the company is merely a collector, we come to the question whether upon the adoption of Drexel & Co.’s acts, and payment made to them in July, 1888, there was any duty of collection of the tax which the company omitted. As to the year 1887 clearly there was none. As already shown the company made no payment in that year, and it is at the time of payment, and then only, that the tax is to be assessed and deducted. Moreover, when payment was made in July, 1888, it was to those who at that time held the bonds, or the certificates which represented them. The certificates were negotiable, and the evidence is that they passed from hand to hand and were largely dealt in upon the stock market. Proof as to what bonds were in July, 1888, held by residents of Pennsylvania was not proof as to 1887, even though it be shown that the aggregate amount was fairly constant. The tax is not on resident holders in the aggregate but on each separately. Even if the adoption by the company in July, 1888, of Drexel & Co.’s advances in 1887 could be considered a payment by the company in 1887 the holders in 1887 were then beyond reach and there was no authority in law to deduct the tax for 1887 from the holders in 1888.
In regard to the interest falling due in July, 1888, the case is different. By the close of 1887 the board of reconstruction trustees, to whom the decision had been left, became satisfied that the plan of re-organization would be successful and by July the company had raised $28,615,950, which it delivered to Drexel & Co. and which was used by the latter in reimbursing themselves for their advances and in paying off the principal and the arrears of interest on the deposited bonds. In this matter Drexel & Co. clearly acted for the corporation. The latter not only ratified and adopted what Drexel & Co. had previously done, and as already said became responsible for whatever was done after that time, but furnished the money with which the payment was made. In so doing the companjr [333]*333not only converted Drexel & Co.’s previous conditional advance of four per cent into an actual payment of interest, but made a new payment out of its own funds of the other two per cent necessary to make up the rate stipulated in their bonds. This was clearly a payment by the company on which the tax was due. The failure to deduct and pay it over to the state treasurer is not sufficiently excused. The finding of facts is a little indefinite on this point, which was not important in the view taken by the court below. It is found that when the report was made to the auditor general in 1887 the treasurer had no means of ascertaining the residence of the holders of the loans, “ and it was only-after they had been paid off in July, 1888, that the details. . . . were obtained by the treasurer from the bankers.” But the company having furnished the money and then, acting through Drexel & Co. had authority to ascertain, and there is no sufficient proof that they could not in fact have done so. In Comptroller Jones’s affidavit it is said, “in the case of the payment of the general mortgage of July, 1874, to Drexel & Co. the company was able to obtain partial information, the transaction being conducted by one and the same party,” but there is a notable absence of definiteness as to what information was obtained and whether any efforts were made to obtain the rest. We conclude therefore that as to this payment in July, 1888, the company is liable for the tax. As it was however a payment for half a year only, the claim of the appellant that the tax should be apportioned is one that in equity should be allowed.
2. As to the bonds deposited with Brown Brothers & Co. on which no payment of interest in money was made,- but which were funded as to principal and accrued interest by the issue of new bonds in 1888. The learned judge below held that no tax was due for the year 1887 as no interest had been paid in that year, but that as to 1888 the acceptance of a new bond in release and substitution for the old one was a payment of interest. There is no doubt of the principle of law that the acceptance of a new obligation is payment of the old, if the parties so intend and agree. But it does not seem to us to cover this ease. It cannot be said that such was the understanding and intention of the parties. The interest was unpaid for several jmars past, the bondholders were unable to get it when it was due, and were in danger of losing it altogether. Under this pressure they agreed to stop its running at May 31, 1887, give [334]*334up all claim to it between that date and July, 1888, and to accept for their present bonds, others, including in their amount as principal, the unpaid interest on the old ones up to May 31, 1887. No reasoning can make this a payment in fact, or other than a mere new promise to pay. The agreement of the parties might make it a payment in law, but the circumstances seem to negative any such actual intention. It was the deferring of payment, and the acceptance of a new promise, as the lesser evil of those which the situation presented. There is nothing to show that the holders regarded it, or intended it to be regarded as payment.
Again and a fortiori, it was not such a payment as was meant by the Act of 1885. The first section imposes the tax on “ money owing by solvent debtors ” and the fourth section which prescribes the duty of the corporation treasurer to collect, requires him upon payment of interest “ to deduct three mills on every dollar of the interest paid,” etc. Even if a corporation which has to substitute a new promise for the money which its bond calls for, can be deemed solvent as to such interest, in the sense meant by the statute, it is clear that the payment contemplated was payment in money. The tax is payable in money and is to be “ deducted ”—a portion withheld, kept back, subtracted from — the interest paid to the bondholder. Deducting the necessary proportion of the new bonds and tendering them to the state treasurer would not be compliance with the act, the state demands money not bonds; there was no authority in the corporation to require from each bondholder an amount of cash equal to three one-thousandths of his bonds, that was not part of the contract; nor does the statute compel the corporation, when paying its interest in new promises, to pay the three mills on each dollar in money, that would not be deducting the tax from the interest, but making a totally different payment. It would be a strain upon the language used to call the settlement in regard to these bonds a payment within the terms of the Act.
In so holding it is not at all meant to imply that a solvent corporation may pay its interest in stock or scrip, or other equivalent of money and thereby escape the tax. No such question is raised by the facts of this case.
3. The interest on the consolidated mortgage of June 1,1871, would seem to stand upon the same principles as that on the [335]*335general mortgage of 1874. True it was not merely advanced but paid by the reconstruction trustees in 1887, but this was not a payment by the company. The money was not furnished directly or indirectly by the company, but by the stock and junior loanholders. They were under no obligation to contribute for this purpose and each determined for himself whether to do so or not. The reconstruction trustees represented only those who Contributed. That they took an assignment of coupons as a means of reimbursement does not vary the case. If the plan failed they might and probably would lose the money they had advanced, if it succeeded they would get it or some of it back. In either case it was a voluntary advance of money by parties not personally liable therefor, to protect their own interest. It is this feature which distinguishes the case from Com. v. P. & R. Co., 187 Pa. 481, where the payment was made in hehalf of the corporation by another which was liable on the same obligation as guarantor. For the same general reasons already stated in regard to the advances by Drexel & Co. this was not a payment of interest by the company in 1887. When however in 1888 the company furnished the money and took up the coupons for 1887 and 1888 it was a payment in 1888 and the company became liable for the tax for that year.
In accordance with the foregoing views the appellant company must be held not liable for tax in 1887 on the interest on the general mortgage of 1874 and the Perkiomen Railroad mortgage scrip deposited with Drexel & Co. and liable only for apportioned tax on the same for half the year 1888; not liable for tax in 1887 on the interest on the consolidated mortgage of 1871; and not liable either in 1887 or 1888 for tax on the interest of the junior bonds deposited with Brown Brothers & Co. and funded in new bonds. These items therefore must be stricken out .of the judgments and the interest items be readjusted.
The judgments are therefore modified and reduced as follows:
In No. 44-1887.
Tax on loans, interest on which was paid by the company, $3,745,930, . . $11,237.79
Interest on tax,...... 2,067.80
Attorney general’s commissions, .... 561.88
Total,
$13,867.47
[336]*336In No. 45-1888.
Tax as above on $11,017,330 . . . $33,051.99
Tax apportioned on $12,275,000 . . .18,412.50
Tax apportioned on $300,560 . . . 450.84
Interest on tax, ...... 9,552.36'
Attorney general’s commissions, . . . 2,595.76
Total, $64,063.45