commonwealth’s appeal.
Opinion,
Me. Justice Steeeett:
The Lackawanna Iron & Coal Co., appellee in this ease, is a domestic corporation, chartered by the act of April 5,1853, and supplements of May 2, 1855, and April 27, 1864.
Section 4, of the original act, authorizes the company to hold [354]*354“ lands not exceeding, at any one time, three thousand acres, with power to mortgage, sell, lease or otherwise dispose of the same or any part thereof; ” and provides that its capital “ may be employed in mining iron-oré, making and manufacturing iron, mining coal and limestone, and transporting and carrying the same, and for such other objects as are necessary in the prosecution of said business.”
Section 5 requires the company to report annually the amount of capital paid in, the number of acres of land held by it, the quantity of coal mined, and of iron manufactured and sold, etc.
Section 2, of the first supplement, authorizes the company to acquire, hold and enjoy certain timber and iron-ore lands, in Luzerne county, not exceeding five thousand acres; and also ore lands in the state of New York, not exceeding one thousand acres at any one time, and to mine, obtain and use the ores, timber and other products of said lands.
Section 2, of second supplement, authorizes the company to purchase, hold and dispose of such mineral lands in the state of New Jersey, and such limestone lands, not exceeding two hundred acres, in the counties of Monroe and Northampton, in this state, as the directors may deem advisable, with the right to mine, quarry, remove and dispose of said minerals and limestone.
During the tax years ending first Monday of November, 1887 and 1888, respectively, the company, exercising the corporate powers with which it is invested by the acts aforesaid, mined coal and iron-ore, quarried limestone, manufactured iron and steel, transported the same, etc. Its reports for same years show a full paid capital of $3,000,000, on which dividends were declared, as follows.: for 1887, fifteen per cent, amounting to $450,000, and for 1888, ten per cent, amounting to $300,000. In stating its tax account with the commonwealth for those years, the proper accounting officers charged the company for each year, respectively, one half mill for each one per cent of dividend, aggregating $37,500. From that settlement the company appealed, alleging that under § 20 of the act of 1885, it was wholly relieved from the payment of capital stock tax. That section provides, “ that the taxes laid upon manufacturing corporations by and under the revenue laws of this commonwealth be and the same are hereby abolished as to such corporations, [355]*355and 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.”
This case was tried by the court, without a jury, under the act of 1874. The findings of the learned judge are not as full and specific as they should have been, or as the evidence would have warranted; but, in connection with other facts, about which there is no dispute, we have sufficient data to enable' us to dispose of the main questions. Indeed, there was no conflict of testimony. In the main, the oral evidence was that of Charles F. Mattes, called by the company. Among other things, it was clearly shown that a considerable portion of the coal mined by the company during the two years in question, about 450,000 tons, alleged to be too small for its own use, was sold at the mines for not less than $721,000.
In addition to the facts above stated, relating to the incorporation of the company, amount of its capital stock, dividends declared for the years 1887 and 1888, etc., the learned judge found as follows: '
“2.....Its principal business is the manufacture of steel rails: incident thereto it mines a considerable quantity of coal and iron-ore.
“ 8. Its capital stock represented the following property, all of which was reasonably necessary for the prosecution of its business:
Manufacturing plant, including buildings, real estate, machinery, etc., the value of which was . . . $1,500,000
Coal property, the value of which was 500,000
Ore property, the value of which" was 400,000
-- $2,400,000.”
“It also represented the following property, which has not been shown to be reasonably necessary in the prosecution of its principal business:
United States bonds, the value of which was . . . . . $ 500,000
Other bonds and mortgages, . 200,000
City lots, the value of which was . 1,000,000
Store goods, the value of which was 80,000 — 1,780,000.”
“ Total valuation, . . $4,180,000.”
[356]*356Having found that the capital stock was represented by the several items of property above specified and valued in the aggregate at $4,180,000, the learned judge rightly concluded that the company was not taxable, in any event, on so much of its capital as was invested in United States bonds: Bank v. Commonwealth, 9 Wall. 359. He also held it was not taxable on so much of its capital as was invested in its manufacturing plant, and also in coal and ore property which he considered reasonably necessary in the prosecution of its principal business as a manufacturing company, but he refused to further sustain the company’s contention, and held that, as to the last three items, consisting of bonds and mortgages, city lots and store goods, aggregating $1,280,000, it was taxable. He accordingly found that the proportion of the capital invested in those three items was $888,038, and entered judgment for the taxes on that amount, with interest and attorney general’s commissions. '
As stated by the learned judge himself, the ground upon which the company was thus held liable was, that the section above quoted “ was intended to operate simply on capital employed in manufacturing, the purpose being to free such capital from the burden believed to be hampering our own industries in the struggle for a market. It was hardly intended to relieve from taxation, capital, although belonging to manufacturing companies, which was not actually used in manufacturing, but invested, as in the case before us, in interest bearing securities, in unnecessary real estate, or in a business not reasonably required by the principal corporate purpose. Language which relieves from taxation is to be strictly construed: Academy v. Philadelphia Co., 22 Pa. 496; Miller v. Kirkpatrick, 29 Pa. 226; Crawford v. Burrell Tp., 53 Pa. 219. We, therefore, hold.....that the' defendant is a manufacturing corporation, within the provisions of the act of 1885, only as to so much of its capital stock as it has shown to be thus employed. The burden is upon it to make out its claim to the relief set up; if it fails, the capital stock tax of 1879 is properly collectible. It has failed with respect to the last three items of paragraph 3, and we must therefore decide a due proportion of its capital stock to be taxable.”
As we understand it, a proper application of the principle of construction, above stated, should also subject to taxation that [357]*357portion of the capital invested in the “ coal property” and “ ore property.” Strictly speaking, both of these pertain to mining rather than manufacturing corporations. Neither of them has any necessary connection with the latter.
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commonwealth’s appeal.
Opinion,
Me. Justice Steeeett:
The Lackawanna Iron & Coal Co., appellee in this ease, is a domestic corporation, chartered by the act of April 5,1853, and supplements of May 2, 1855, and April 27, 1864.
Section 4, of the original act, authorizes the company to hold [354]*354“ lands not exceeding, at any one time, three thousand acres, with power to mortgage, sell, lease or otherwise dispose of the same or any part thereof; ” and provides that its capital “ may be employed in mining iron-oré, making and manufacturing iron, mining coal and limestone, and transporting and carrying the same, and for such other objects as are necessary in the prosecution of said business.”
Section 5 requires the company to report annually the amount of capital paid in, the number of acres of land held by it, the quantity of coal mined, and of iron manufactured and sold, etc.
Section 2, of the first supplement, authorizes the company to acquire, hold and enjoy certain timber and iron-ore lands, in Luzerne county, not exceeding five thousand acres; and also ore lands in the state of New York, not exceeding one thousand acres at any one time, and to mine, obtain and use the ores, timber and other products of said lands.
Section 2, of second supplement, authorizes the company to purchase, hold and dispose of such mineral lands in the state of New Jersey, and such limestone lands, not exceeding two hundred acres, in the counties of Monroe and Northampton, in this state, as the directors may deem advisable, with the right to mine, quarry, remove and dispose of said minerals and limestone.
During the tax years ending first Monday of November, 1887 and 1888, respectively, the company, exercising the corporate powers with which it is invested by the acts aforesaid, mined coal and iron-ore, quarried limestone, manufactured iron and steel, transported the same, etc. Its reports for same years show a full paid capital of $3,000,000, on which dividends were declared, as follows.: for 1887, fifteen per cent, amounting to $450,000, and for 1888, ten per cent, amounting to $300,000. In stating its tax account with the commonwealth for those years, the proper accounting officers charged the company for each year, respectively, one half mill for each one per cent of dividend, aggregating $37,500. From that settlement the company appealed, alleging that under § 20 of the act of 1885, it was wholly relieved from the payment of capital stock tax. That section provides, “ that the taxes laid upon manufacturing corporations by and under the revenue laws of this commonwealth be and the same are hereby abolished as to such corporations, [355]*355and 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.”
This case was tried by the court, without a jury, under the act of 1874. The findings of the learned judge are not as full and specific as they should have been, or as the evidence would have warranted; but, in connection with other facts, about which there is no dispute, we have sufficient data to enable' us to dispose of the main questions. Indeed, there was no conflict of testimony. In the main, the oral evidence was that of Charles F. Mattes, called by the company. Among other things, it was clearly shown that a considerable portion of the coal mined by the company during the two years in question, about 450,000 tons, alleged to be too small for its own use, was sold at the mines for not less than $721,000.
In addition to the facts above stated, relating to the incorporation of the company, amount of its capital stock, dividends declared for the years 1887 and 1888, etc., the learned judge found as follows: '
“2.....Its principal business is the manufacture of steel rails: incident thereto it mines a considerable quantity of coal and iron-ore.
“ 8. Its capital stock represented the following property, all of which was reasonably necessary for the prosecution of its business:
Manufacturing plant, including buildings, real estate, machinery, etc., the value of which was . . . $1,500,000
Coal property, the value of which was 500,000
Ore property, the value of which" was 400,000
-- $2,400,000.”
“It also represented the following property, which has not been shown to be reasonably necessary in the prosecution of its principal business:
United States bonds, the value of which was . . . . . $ 500,000
Other bonds and mortgages, . 200,000
City lots, the value of which was . 1,000,000
Store goods, the value of which was 80,000 — 1,780,000.”
“ Total valuation, . . $4,180,000.”
[356]*356Having found that the capital stock was represented by the several items of property above specified and valued in the aggregate at $4,180,000, the learned judge rightly concluded that the company was not taxable, in any event, on so much of its capital as was invested in United States bonds: Bank v. Commonwealth, 9 Wall. 359. He also held it was not taxable on so much of its capital as was invested in its manufacturing plant, and also in coal and ore property which he considered reasonably necessary in the prosecution of its principal business as a manufacturing company, but he refused to further sustain the company’s contention, and held that, as to the last three items, consisting of bonds and mortgages, city lots and store goods, aggregating $1,280,000, it was taxable. He accordingly found that the proportion of the capital invested in those three items was $888,038, and entered judgment for the taxes on that amount, with interest and attorney general’s commissions. '
As stated by the learned judge himself, the ground upon which the company was thus held liable was, that the section above quoted “ was intended to operate simply on capital employed in manufacturing, the purpose being to free such capital from the burden believed to be hampering our own industries in the struggle for a market. It was hardly intended to relieve from taxation, capital, although belonging to manufacturing companies, which was not actually used in manufacturing, but invested, as in the case before us, in interest bearing securities, in unnecessary real estate, or in a business not reasonably required by the principal corporate purpose. Language which relieves from taxation is to be strictly construed: Academy v. Philadelphia Co., 22 Pa. 496; Miller v. Kirkpatrick, 29 Pa. 226; Crawford v. Burrell Tp., 53 Pa. 219. We, therefore, hold.....that the' defendant is a manufacturing corporation, within the provisions of the act of 1885, only as to so much of its capital stock as it has shown to be thus employed. The burden is upon it to make out its claim to the relief set up; if it fails, the capital stock tax of 1879 is properly collectible. It has failed with respect to the last three items of paragraph 3, and we must therefore decide a due proportion of its capital stock to be taxable.”
As we understand it, a proper application of the principle of construction, above stated, should also subject to taxation that [357]*357portion of the capital invested in the “ coal property” and “ ore property.” Strictly speaking, both of these pertain to mining rather than manufacturing corporations. Neither of them has any necessary connection with the latter. True, they are sources from which corporations engaged in manufacturing iron necessarily draw their chief supply of raw materials, but those materials always may be and frequently are obtained from parties or corporations independently engaged in mining and supplying same to manufacturers of iron and others. It is, doubtless, a great convenience and advantage for an iron manufacturing company to own and operate its own coal and iron-ore mines, but the fact that such corporation is also specially authorized to do so, is no reason why so much of its capital as is invested in such mining operations should enjoy the benefit of exemption from state tax, designed to relieve manufacturing, as contradistinguished from mining corporations, from a burden they were supposed to be illy able to bear.
A company incorporated for the exclusive purpose of manufacturing steel rails, for example, is not authorized by its charter to own and operate coal mines, iron-ore mines, or limestone quarries; and would, of course, be obliged to procure its supplies of raw materials from outside sources. Such mining and quarrying operations are not legally incident to the business of manufacturing; that is to say, they do not necessarily depend upon it, although, as a matter of fact, the supply of raw materials is, in one sense, incident to the process of manufacturing. If the business of mining and supplying such raw materials is not necessarily incident to a strictly manufacturing franchise, it cannot become so because that franchise is exercised concurrently with the separate franchises of mining and quarrying. As we have seen, the corporation appellee is of a fourfold character. It is a coal mining company, a quarrying company, an iron-ore mining company, and a manufacturing company, specifically invested with the distinct rights and privileges pertaining to each, and exercising all of them. In the exercise of its manufacturing franchise, it finds it convenient and profitable to become, in the main, the consumer of products resulting from the exercise of the other three. In other words, the mining and quarrying departments, so to speak, find a convenient customer in the manufacturing department. But, how can it be [358]*358inferred from this, that the capital employed in the mining and quarrying departments of the business is relieved from state tax, because capital employed in manufacturing happens to be exempt ? Such a conclusion would be as unjust as it is illogical. It relieves from taxation capital which the legislature never intended to exempt, merely because it happens to belong to a corporation which owns and controls other capital which, for a special reason, the legislature has seen fit to exempt.
The case in hand is a striking illustration of the injustice of any construction that would relieve the company from the payment of state tax on so much of its capital as is employed in its mining and quarrying operations; and we know of no rule of law that even favors, much less demands any such construction. The spirit of the exemption clause under consideration does not require it; nor is it demanded by the necessities of the company. A corporation that makes a net annual pr'ofit of from ten to fifteen per cent on its entire capital, is not an object of state charity, and should not, under a strained construction of the exemption clause, be permitted to evade payment of its share of the public burden. Corporations engaged in mining coal, etc., but not authorized to engage in manufacturing, are subject to the payment of state tax. Under a fair, if not a very liberal construction of the act of 1885, § 20, we think all that the company can reasonably claim is exemption from tax on so much of its capital stock as has been found to, be employed in strictly manufacturing operations, as contra-distinguished from the mining operations in which by its charter it was also authorized to engage at the same time. That accords to it all the advantages, in the way of relief from taxation, that it would have had in case it had been an exclusively manufacturing corporation.
The contention of the commonwealth that the exemption clause of the act of 1885 does not apply to any corporation except those engaged exclusively in manufacturing, has been very forcibly presented by the attorney general, but upon a full consideration of the subject, we are of opinion that the spirit if not the letter of the act entitles the company appellee to exemption from state tax on so much of its capital as was employed in exclusively manufacturing operations, in the sense above expressed.
[359]*359It therefore follows that in ascertaining the proportion of the company’s capital that is taxable, we should add the two items, “coal property” and “ore property,” in paragraph 3 of the learned judge’s findings of fact, to the last three items in same paragraph which aggregate . . . $1,280,000
“ Coal property,” valued at 500,000
“ Ore property,” “..... 400,000
$2,180,000
Then taking $4,180,000, the valuation of property represent- • ing capital stock, and we have this fraction, viz.: of $3,000,000, capital, as the correct proportion thereof that is taxable, $1,665,114.65.
Tax, 7^ mills on that sum for 1887 . . $11,738.36
Tax, 5 mills on that sum for 1888 _ . . 7,825.57
Attorney-general’s commissions ., . . 978.19
Int. at 12 per cent from March 9th ». . 684.73
■ Amount for which judgment should be entered $21,226.85
June 28, 1889. Judgment reversed and judgment is now entered in favor of Commonwealth and against the Lackawanna Iron & Coal Company, appellee, for, twenty-one thousand two hundred and twenty-six dollars and eighty-five cents, and costs.
LACKAWANNA I. & C.’ CO.’S APPEAL.
Me. Justice Steeeett :
This and Commonwealth’s Appeal, No. 48, of this term, in which an opinion has just been filed, are cross appeals from the same judgment. The facts, on which appellant’s contention in this ease is based, are fully set forth in that opinion. For reasons there stated, neither of the specifications of error, on which the company appellant relies, is sustained.
Appeal dismissed, with costs to be paid by appellant.