
    Commonwealth versus Texas and Pacific Railroad Company.
    1. A company incorporated by an Act of Congress is not a foreign corporation within the meaning of the Revenue Act of June 7th 1879, § 16 (Pamph. Laws 130), and although it does business in this Commonwealth is not, therefore, obliged to take out the license and to pay the tax provided for by said section.
    
      2. The proviso in the said section, that if a majority of the stock of a foreign corporation doing business in this Commonwealth be owned or controlled by a corporation of this Commonwealth, said foreign corporation shall not be obliged to take out said license and pay said tax, is to be construed as referring to a majority of the stock actually issued by such foreign corporation, and not to a majority of the total amount of stock which it is by the terms of its charter authorized to issue.
    May 19th and 20th 1881. Before Sharswood, C. J., Mercur, Gordon, Paxson, Trunkey, Sterrett and Green, JJ.
    Error to the Court of Common Pleas of Dauphin county: Of May Term 1881, No. 172.
    This was an appeal by the Texas and Pacific Bailway Company, a corporation incorporated by Act of Congress, from the settlement of the auditor-general and state treasurer of Pennsylvania, against the said company, for office license tax, under section 16 of the act of June 7th 1879, assessed upon the amount of the authorized capital stock of the company, which is ’$50,000,000. The annual tax-being at the rate of “ one-fourth of a mill on each dollar of capital stock, which said company is authorized to have ” — amounted by the settlement to $12,500, with interest from October 21st 1880.
    Section 16 of the said act of June 7th 1879, is as follows :—
    “Sect. 16. That from and after the first day of July, Anno Domini one thousand eight hundred and seventy-nine, no foreign corporation, except foreign insurance companies, which does not invest and use its capital in this Commonwealth, shall have an office or offices in this Commonwealth for the use of its officers, stockholders, agents or employes, unless it shall first have obtained from the auditor-general an annual license so to do, and for said license every such corporation shall pay into the state treasury, for the use of the Commonwealth, annually, one-fourth of a mill on each dollar of capital stock, which said company'is authorized to have, and the auditor-general shall not issue a license to any corporation until said license fee shall have been paid. The auditor-general and state treasurer are hereby authorized to settle, and have collected an account against any company violating the provisions of this section, for the amount of such license fee, together with a penalty of fifty per centum for failure to pay the same: Provided,'That no license shall be necessary for any corporation paying a tax under any previous section of this act, or whose capital stock or a majority thereof is owned or controlled by a corporation of this state which does pay a tax under any previous section of this act.”
    Of the authorized capital stock of $50,000,000, the company had issued $7,902,500 ; of this latter amount all except a few shares were held by the California and Texas Railway Construction Company, a corporation of this state, which at that time had a capital stock of $3,221,250, but whiph was valued in the tax returns of their company at only $100,000. The Texas and Pacific Railway Company rented and occupied au office in the city of Philadelphia, for the transaction of its corporate business, but employed none of its capital in this state.
    The Texas and Pacific Railway Company appealed from said settlement to the Court of Common Pleas, and filed the following specifications of objections thereto : — •
    1. The said settlement is erroneous and-illegal because the Texas and Pacific Railway Company has, by reason of its charter granted by the Congress of the United States, a legal existence in .Pennsylvania, and, not being a foreign corporation, is not subject to the provisions of the 16th section of the act of June 7th 1879, the said 16th section relating to foreign corporations only.
    2. The said settlement is erroneous and illegal, because, if the 16th section of the act of June 7th, 1879, requires a license to be obtained by the Texas and Pacific Railway Company from the auditor-general of Pennsylvania, then the said seciion is in conflict with the Act of Congress entitled “An act to incorporate the Texas and Pacific Railroad Company, and to aid in the construction of its road, and for other purposes,” approved March 3d, 1871; the Act of Congress supplementary thereto, approved May 2d, 1872, and the Constitution of the United States, either or all of them, and is therefore void.
    3. The said settlement is erroneous and illegal, because the company is charged therein with a license fee of one-fourth of one mill upon $50,000,000, whereas, the capital stock is only $8,653,500.
    4. The said settlement is erroneous and illegal because the act of Assembly, in accordance with the provisions of which it purports to have been made, is in conflict with the provisions of the Constitution of the State of Pennsylvania, and therefore void.
    5. The said settlement is erroneous and illegal, and the Texas and Pacific Railway Company is not bound to pay the sum wherewith it is therein charged, or any part thereof, because a majority of the capital stock of said company was, during the whole of the period covered by said settlement, owned or controlled by a corporation of the state of .Pennsylvania, paying a tax under the 4th section of the act of June 7, 1879.
    By agreement the case was tried without a jury before Pearson, P. J., whose finding of facts and decision was as follows:—
    
      “ The defendant company was incorporated by the Congress of the United States, by an act approved May 2d 1872, to construct a railway from Marshall, in the state of Texas,'to San Diego bay, in the state of California, and authorized to have a capita] stock in a sum not exceeding fifty millions of dollars, as should be fixed by the directors. The company was regularly formed, and by its bjr-laws fixed that sum as the amount of its capital. This company rented an office in the city of Philadelphia, No. 275 South Fourth street, prior to the year 1879, and still lias it in occupancy for the use of its officers, stockholders, agents, or einployés, in which that part of its business done in Pennsylvania is transacted. It also, in the year 1874, made an arrangement with the California and Texas Pailway Construction Company” (a corporation created by the state of Pennsylvania, and having its capital and transacting its business therein), to raise capital and carry on the construction of its road, and the same was done under the arrangements and on the terms of the contracts executed between the companies.
    “ The said construction company paid a tax on its capital stock into the treasury of the state of Pennsylvania.
    “ On the 21st day of October 1880, the auditor-general and ' state treasure]1 settled a license tax against 1 The Texas and Pacific Pail way Company,’ of $12,500, on account of its having an office in this Commonwealth for the use of its officers,-&c., and for the transaction of its business, without having obtained a license from the auditor-general so to do, or having invested and used its capital stock in this Commonwealth, from which settlement the said company has in due form of law taken an appeal.
    “ This case presents two prominent points. First. Is the defendant a foreign corporation ? To constitute it such it must be set up or created by a foreign government. This corporation is created by the United States. Is that a foreign government to the state of Pennsylvania? Is it not a sovereignty outside of Pennsylvania, but within it, spreading all over it, a superior government embracing it. The citizens of the United States ■constituting citizens of Pennsylvania, and the citizens of Pennsylvania being citizens of the United States. The laws of the United States governing and controlling Pennsylvania. The same courts, having jurisdiction over each, dispensing justice alike for each. The neighboring states have no such authority within this state, nor over them. If the Legislature intended to exclude the United States from having power to create corporations within Pennsylvania, it certainly did not use very apt words to express the intention in speaking oí foreign corporations. It is as much a domestic corporation as if created by a law of this state. It emanates from a power within this state. No permission would have to be asked by the government of the United States to take possession of any part of our soil required for-a public purpose, within the state, as for a fort, a post-office, or a custom-house. Each year is proving more aud more that the jurisdiction of the courts created by the laws of both governments are concurrent — they run together. There are not many decisions of the courts of superior jurisdiction showing that the-United States is not a foreign sovereignty to the state of Pennsylvania, but the same sovereignty, but there are a few to be found. In Olaflin v. Houseman, Assignee, 3 Ótto, 136, Justice Bradley says: ‘The United States is not a foreign sovereignty as regards the several states, but is a concurrent, and, within its jurisdiction, paramount sovereignty. Every citizen of a state is a subject of two distinct sovereignties, having concurrent jurisdiction in'the state.” In Ordway v. Central National Bank of Baltimore, Mr. Justice Alvey announces a similar doctrine. He says, at page 566 of Thompson’s National Bank Cases: ‘The laws of the United States are laws in the several states, and just as much binding on the citizens and courts thereof as the state laws are. The United States is not & foreign sovereignty as regards the several states, but it is a concurrent ana, within its jurisdiction,, a paramount sovereignty. Every citizen of a state is a subject of two distinct sovereignties having concurrent jurisdiction in the state — concurrent as to place or person, though distinct as to subject-matter.’ Again, he says: ‘ The two jurisdictions are not foreign to each other, nor to be treated by each other as such, but as courts of the same country.’
    “ There is no doubt of the power of the state to impose a tax on the corporation created and placed in its midst by the United States, unless for national purposes, but it must clearly describe it as it is, and exclude, or tax it in express words, not as a foreign corporation. The United States could also force it on the state, but must do it by apt words, and for good and proper reasons, showing or averring the necessity.
    “Second. The evidence shows that a connection was formed between the Texas and Pacific Railway Company, and the ‘ Cal ifornia and Texas Railway Construction Company,’ to carry on the work. This, as found, was a corporation created by, and existing in Pennsylvania, and subject to taxation under her laws. This company had a nominal capital of ten millions of dollars, one subscribed of $8,22 L,250, and actually paid in of $7,902,500, all of which, so far as we can collect, was expended in building the Texas and Pacific Railway. Y et its capital stock was owned and controlled by a corporation of this state, and pays a tax into its treasury under this act. By the end of the year 1880, its stock was reduced to $100,000, on which it paid tax that .year, yet probably during the year 1879 it held a much larger capital. Its stock was actually taxed and paid to the amount of $299.35, as per receipt. The question is, does that exonerate the defendant company ? It is very probable that the Construction Company would have been taxed to a much larger amount under our laws. Its tax from 1874 down to 1879 would have been much higher, but that is not an important point. This was not a settlement for taxes on the capital stock of the ‘Construction Company,’ but for a license tax against the Texas and Pacific Company. If that company was not subject to such a tax this amount as settled cannot be sustained. The evidence clearly shows that it was connected with a Pennsylvania corporation, which was subject to taxation ; therefore, by the very terms of the act, the Texas and Pacific Company could not be called on to pay a license tax; such appears to be the words of the act, apparently introduced for the express purpose of exonerating the this company. So far as we can see this charge of tax is illegal. .....
    “ For reasons already given we are of the opinion that this license tax can not be sustained. We, therefore, give judgment in favor of the defendant,, and that the Commonwealth has no cause of action!”
    To this decision the Commonwealth filed the following exceptions :—
    1. The court erred in deciding as follows : “ There is no
    donbt of the power of the state to impose a tax on the corporation created and placed in its midst, by the United States, unless for national purposes, and it must clearly describe it as it is, and exclude or tax it in express words, not as a foreign corporation.”
    2. The court erred in deciding as follows : “ The evidence clearly showed that it (‘ The Texas and Pacific Railway Company ’) was connected with a Pennsylvania corporation, which was subject to taxation ; therefore, by the very terms of the act, the Texas and Pacific Company could not be called upon to pay a license tax ; such appears to be the words of the act, apparently introduced for the express purpose of exonerating this company.”
    3. The court erred in entering judgment in favor of the company, and against the Commonwealth.
    The court overruled the exceptions and entered judgment against the Commonwealth, whereupon the Commonwealth took this writ of error, assigning for error the dismissal of the exceptions and the entering of judgment for the Commonwealth.
    
      Lyman D. Gilbert, deputy attorney-general, and Henry W. Palmer, attorney-general, for the Commonwealth, plaintiff in error.
    This case presents two questions: First. Does the fact that the corporation is chartered by the Congress of the United States deprive the state of Pennsylvania of the right to impose this license fee upon it for the transaction of its corporate business within the limits of this state ? Second. Does the control by a Pennsylvania corporation of less than $8,000,000 of the capital stock of the corporation, -whose authorized capital is $50,000,000, exempt it from the payment of this license fee?
    1. Did the legislature, by the words foreign corporations,” intend to tax a corporation having a congressional charter? If it had the intention, did it have the power to do so ? The whole object of section 16 of the Act of 1879 is revenue. Prior to that act, corporations chartered by any other sovereignty than Pennsylvania, having no property within this state, could not be taxed for state purposes, even though their most valuable business was done within the limits and protection of this state. The section in question was passed to' meet such.cases, and the legislative distinction between domestic and foreign corporations must be construed in this light. It is clear, therefore, that the Legislature intended, by the words “ foreign corporations,” to tax all corporations not created by our sovereignty. We are aware that in Eby v. Northern Pacific Railroad Company, 7 W. N. C. 145 ; and Same v. Same, 6 W. N. C. 385, the Common Pleas, No. 4, of Philadelphia county, in learned opinions, held that a corporation chartered by Congress has a legal existence in every state. But the matter in dispute was only the liability of a corporation to process, and its standing in court. The question of origin as affecting taxation, did not arise, but the distinction we contend for was recognized by the court, who said: “ the corporation may be foreign in the sense that its charter does not proceed from the constituted authorities of this state; but it is not foreign in any other sense.” In Mintzer v. Montgomery County, 4 P. F. Smith, 139, this court held that the words “ any other state or government ” in the Tax Act of April 29th 1814, include the United States.
    No one questions that th& power to tax all property, business and persons within the limits of the respective states, is original in the states and has never been surrendered. Nor that a state may exclude from its limits a corporation created by a foreign sovereignty. We admit that no state has the right to tax the means employed by the federal government for the execution of its powers, but there is a clear distinction between the means employed by the government and the property of agents employed by the government. Taxation of the agency is the taxation of the means; taxation of the property of the agent is not necessarily taxation of the means. Exemption in such case is dependent upon the effect of the tax, that is, whether the tax deprives or hinders the agent of its power to serve the government as it was intended to serve it. A tax upon the franchise or operations of such agent would obstruct the exercise of the federal powers. A tax upon its property has no such necessary effect. The corporation here was created to construct a railroad from Texas to the Pacific Ocean. Its property is taxable in the states through which it passes, and no principle of law can prevent our state from taxing it, where it conducts its corporate business in a place not necessary for the performance of any public duty, but selected merely for convenience. The principle of exemption contended for by the other side would remove from the reach of state taxation all the property of every corporation or agent of the government engaged in any branch of its service, such as transportation of mails or property, shipbuilding and manufacturing, telegraph lines, &c., &c. Had congress designed to exempt such corporations from state taxation, they would have expressly said so, as they did in the National Hank Act.
    Our position is supported by authority: Thomson v. Union Pacific R. R. Co., 9 Wallace 591; Railroad Co. v. Peniston, 18 Wallace 33. If the question were a doubtful one, this court has said that it' would be proper to resolve the doubt in favor of the state, lest she be deprived of a redress in a higher court: Insurance Company v. Commonwealth, 6 Nor. 173, per Agnew, C. J.
    2. Under the act in question the condition for the exemption of a foreign corporation from the license tax is either that the corporation pays a tax under a previous section of the act, or that a majority of its capital stock is owned or controlled by a corporation of this state which does pay a tax under the act. The ownership or control which exempts from license tax must be such an ownership or control as subjects a majority of the stock to taxation. Upon what amount of capital stock is this tax to be computed ? the authorized capital stock, or the amount actually paid up or issued ? The act itself answers: “ On each dollar of capital stock which said company is aidhorized to have.” This language is so plain that there is no room for argument to show that the control by a Pennsylvania corporation of less than $8,000,000 of the $50,000,000 authorized capital stock of tlie Texas and Pacific Railway Company does not exempt the Texas and Pacific Company from the payment of this license tax.
    
      M. E. Olmsted, for the defendant in error.
    The Texas and Pacific Railway Company was incorporated by congress under its general constitutional power to establish post roads, to regulate commerce among the several states, and to make all laws necessaiy for carrying such powers into execution. The laws of congress within its scope are supreme in all the states. The railroad of the company is declared to be a military and post road, in the use of which the government shall at all times have the preference. The company is, by its charter, authorized to sue and be sued in all courts within the United States, and it is vested with all the powers, privileges and immunities necessary to promote or carry into effect the purposes of its charter. A large portion of the capital has been furnished by citizens of Pennsylvania, and a great portion of the rails and other materials has been purchased in this state. Several of its-officers reside here, and a by-law provides that the company shall have au office in Philadelphia. The company in Pennsylvania is within the limits of the sovereignty which created it, and the state cannot forbid, hinder or tax its right to conduct business and have an office here : Stetson v. City of Bangor, 56 Maine 288; Casey v. Galli. U. S. Sup. Ct. 1876, Thompson’s Nat. Bank Cases 142; Pittsburgh v. First Nat. Bank, 5 P. F. Smith 45. It is not a “foreign corporation” within the intendment of the Act of 1879: Eby v. Northern Pacific R. R. Co., 6 W. N. C. 385 ; Same v. Same, 7 Ibid. 145. But if it were, that act would be to this extent unconstitutional. The state cannot prohibit this corporation from doing business within its limits, and it cannot tax what it cannot prohibit: McCulloch v. State of Maryland, 4 Wheaton 439 ; Osborn v. U. S. Bank, 9 Wheaton 738 ; Claflin v. Houseman, 3 Otto 137. The case of Thomson v. Union Pacific Railway Company, 9 Wallace 579, relied on by the other side, which decided that the state of Kansas had power to tax the property of that company, is inapplicable, as the Union Pacific Railroad Company, though afterwards merged with other companies chartered by congress, was originally chartered by the legislature of Kansas, and its railroad in that state was constructed under the * authority of the state. In this case, the company owes none of its franchises to state authority, and the tax is not laid upon the property, but is a license fee on its franchise. The power of state taxation is limited to persons, property, and business. All taxation must relate to one of these subjects: 15 Wallace' 300. The license tax here imposed is upon none of these unless it be upon the capital stock, which is not within the jurisdiction of the state.
    Even if this company be a foreign corporation, within the terms of the Act of 1879, it comes within the proviso of that act which exempts from taxation foreign corporations “ whose capital stock, or a majority thereof, is owned or controlled by a corporation of this state which does pay tax under any previous section of this act.” Prior to 1873 the ownership and control of a majority of the actually issued capital stock of the Texas and Pacific Railway Company became vested in the California and Texas Railway Construction Company, a corporation organized under a charter granted by this state, which pays tax under the act. It is to be noted that the proviso does not require that a majority of the authorized capital stock shall bé so owned or controlled, nor is it easy to see how there could be an ownership in that which is merely authorized but has no existence; but there is control over the authority to issue stock in this case, as it could be issued only by the vote of the shares already issued and owned by the Construction Company.
    June 13th 1881.
   Mr. Justice Sterbett

delivered the opinion of the court,

The 16th section of the Revenue Act of June 7th 1879 provides that no foreign corporation, except foreign insurance companies, &c., shall have an office in this commonwealth for the use of its officers, stockholders, agents, or employes, without first having obtained from the auditor-general a license to do so; for which license every such corporation shall pay “ annually one-fourth of a mill on each dollar of the capital stock which said company is authorized to have.” Provided, That no license shall be necessary for any corporation paying a tax under any previous section of this act, or whose capital stock, or a majority thereof, is owned or controlled by a corporation of this state which doés pay a tax under any previous section of this act.”

It is admitted that the defendant company was incorporated by Act of Congress for the purpose of constructing and operating a railroad from a point in the state of Texas to San Diego, California, with an authorized capital, not exceeding $50,000,000, less than one-sixth of which was issued, and that the company has not invested or used its capital in this Commonwealth, except in the purchase of rails and other railroad materials and supplies; but, during the year ending July 1st 1880, it kept and maintained for the use of its officers, stockholders, agents and employés, in the transaction of their business, an office in the city of Philadelphia, without having obtained a license from, the auditor-general. The company having thus failed to procure a license, the auditor-general and state treasurer, in pursuance of the provisions of the act, settled an account against it for $12,500, with interest from October 21st 1880. From this settlement an appeal was taken by the company, and the Court of Common Pleas, in a clear and able opinion, held that it was not liable, for the reasons that it is not a foreign corporation, within the meaning of the act, and that nearly all its capital stock actually issued was held and controlled by the California and' Texas Construction Company, a corporation of this state, which was liable to pay, and did pay, a tax under a previous section of the act, and hence the defendant was within the protection of the proviso above quoted. These are controlling points in the case, and if either of them be correct the judgment must be affirmed.

The general government, in its relation to that of the several states, cannot be considered a foreign government in the ordinary acceptation of that term. Within the sphere of its 'delegated powers its authority extends over all the states of which it is composed, and to that extent it maybe said to be identified with the government of each. Hence, a corporation created by the government of the United States cannot with propriety be called a foreign corporation. It is contended, however, that in a more comprehensive sense all corporations not created directly by state authority may be classed as foreign, in contradistinction to those of exclusively state origin ; and that such was intended to be the meaning of the word “ foreign,” as used in the act. This might be so, if there was anything in the act itself indicative of an intent to use the word in that sense; but there is not. On the contrary, in the 5th section, which imposes a tax on limited partnerships, &o., they are described as “ partnerships organized under or pursuant to the laws of this state, or of any other state or territory, or of the United States, or under the laws of any foreign state, kingdom or government ; ” thus clearly showing that when the legislature intended to tax associations created by the general government they used apt words of description for that purpose. The same distinction is observed in other portions of the act, especially in the 6th section. The construction adopted by the learned president of the Common Picas is so fully sustained, on principle as well as authority, that it is unnecessary to add anything to what is so well said in his opinion.

But, assuming that the 16th section of the act should be so construed as to embrace corporations created by Act of Congress, the judgment is still clearly right, on the other ground, viz.: that the defendant is within the protection of the proviso. The fact was conclusively established that nearly all of its actual capital stock was held and controlled by the California and Texas Construction Company, a Pennsylvania corporation, which paid a tax under a prior provision of the act; thus bringing the defendant directly within the terms of the proviso. In answer to this position, it is suggested that the phrase, “ capital stock, or a majority thereof,” refers to the authorized or nominal, and not to the actual capital of the company. Such a construction of the proviso is unreasonable and wholly unwarranted by anything contained in the act. "When authorized or nominal capital, in contradistinction to actual capital, is intended to form the basis of taxation, it is so designated as to leave no room for doubt as to what was meant. In a case like the present, in which less than one-sixth of the capital stock, which the company is authorized to have, has actually been issued, the proviso would be inoperative, if it means authorized capital. In the very nature of things capital stock authorized, but not issued, could not be owned or controlled by another corporation. We have no doubt the words of the proviso refer to capital stock actually issued,- and not to capital merely authorized.

In any view that can reasonably be taken of the case, the judgment is correct.

Judgment affirmed.  