Commonwealth v. Pennsylvania Co.

Opinion, Me. Justice Williams : These appeals may be disposed of together. The Pennsylvania Company obtained its charter in 1870, completed its organization in 1872, and entered at once upon active business as a lessee of lines of transportation built and owned by existing corporations. It made returns of its situation and business to the auditor general yearly, £,s required by the tax laws of the commonwealth, and that officer assessed upon — 277 — it the taxes which he believed to be legally chargeable against it. These taxes have been regularly paid. In 1874 the company alleged that, by the terms of its charter, it was not liable to a tax upon its capital stock, and that none ought to be assessed against it. The auditor general regarded the question thus raised as one of law, and referred it, as it was eminently proper that he should do, to the Hon. George Lear, then attorney general, for decision. After examining the question, the attorney general came to the conclusion that the company was right* in its interpretation of the charter, and advised, by a written opinion furnished to the auditor general, that the company was not liable to a capital-stock tax. This opinion was adopted unhesitatingly, as furnishing the correct construction of the charter and the measure of the liability of the company; and, in conformity with it, the auditor general omitted from the taxes charged against the company that upon its capital stock. His successors adopted the same construction of the charter, and, in like manner, refrained from assessing the company with this particular tax, down to the year 1888. On May 1,1888, a clerk in the office of the auditor general, in his own name, and, so far as appears, of his own motion, undertook to overrule the decision of Attorney General Lear upon the legal question, and to brush aside the precedents established by a succession of able men who had filled the office of auditor general under administrations differing in political character. He accordingly stated an account, in the usual manner in which current accounts are stated, charging the company with a capital-stock tax, running back to the date of its organization in 1872, covering almost a score of years, and reaching the very respectable total of about one and a quarter millions of dollars. This remarkable document occupied about eight months in making the journey to the office of the state treasurer, which it reached in January, 1889. Some days after its arrival in his office, the state treasurer indorsed, what is perhaps intended as a formal approval upon it, adding, however, words to show that he was not satisfied “ as to the authority to revise the actions of former state officers on accounts so long closed.” Taken together, this dorsement can hardly be called an approval. It is very clear that the state treasurer did not regard the document as a statement of accruing taxes, but as a re-settlement of accounts stat — 278 — ed by former state officers, and long since closed. He says so distinctly. If he was right in this view of the document before him, neither his approval, nor the account on which it was indorsed, is of the slightest value. This leads us to inquire how public accounts are settled, how they are re-settled, and what the powers of the auditor general in the premises really are. The act of 1811 * †‡gives the auditor general the power to state and settle accounts between the state and its debtors, “ according to law and equity.” When he has so stated an account, it is next to be submitted to the state treasurer, for his examination and approval. If it is approved by him, it is returned, properly indorsed, to the auditor general, in whose hands it is then ready for collection. When presented to the taxpayer, or debtor, he may, if not satisfied with the account, appeal to the courts. If he does not appeal, he must pay the account as stated. Where the several taxes for a given tax year are thus assessed and paid, the year’s accounts between the state and that particular taxpayer are closed. They may be opened and the account re-stated at any time within twelve months after voluntary payment, on the request of the taxpayer, of the auditor general, or the state treasurer. If the auditor general discovers that hé has made a clerical error, or if an error appears upon his books, or by information, against the commonwealth, the act of 1846 † gives power to the auditor generaland state treasurer to correct such mistakes. If no request be made within a year after payment, and no clerical error or mistake is discovered, capable of correction under the act of 1846, the account must be regarded as closed. If such an account is to be opened and re-stated, it must be done under the provisions of the act of 1869.‡ This statute creates a board of revision, composed of the attorney general, auditor general and the state treasurer, and clothes them with a sort of judicial power over accounts that have been closed more than one year after voluntary payment. They must sit as a board to hear, after notice to all parties interested, and to determine the validity of the reasons assigned for the opening of the account. If they decline to open the account, the proceeding ends. — 279 — If they open it, they must proceed to revise and adjust the account “ according to law and equity,” and certify the balance due. Here we have a system easy to understand and to apply. Current accounts are stated yearly by the auditor general, against those liable to state taxes. These accounts, when approved by the state treasurer, are binding on the taxpayer unless he appeals to the courts. Still they are open to correction, on request, within one year after payment. If they have been made to show too small a sum due to the state, by a mistake of the officer who stated them, this mistake may be corrected under the act of 1846. If more than a year has elapsed after payment, and the account cannot be corrected for clerical error, a revision becomes necessary, and an application must be duly made to the board, which has exclusive jurisdiction in such cases, and which must keep some record of its business and its decisions. Our remaining question is over the effect of the paper before us. Is it a statement of accruing taxes which the auditor general may make, or is it a re-statement of closed accounts ? The learned judge of the court below held it to be a restatement as to the years 1872 and 1873, and therefore of no force and effect as to those years ; but, as to the years following 1873, he held it to be an original settlement of accruing taxes, which any clerk in the auditor general’s office was competent to make. He was clearly right as to the years 1872 and 1873, and wrong as to the years succeeding. The only apparent reason for the distinction taken in the court below is, that in 1872 and 1873, a small amount of capital-stock tax was assessed upon the company, on a construction of its charter now thought to be erroneous; while in the following years, upon another construction also alleged to be erroneous, the auditor general assessed no capital-stock tax whatever against it. The present contention is, that both these constructions must be abandoned and a new and radically different one adopted. Having thus reversed the legal conclusions of four or five of his predecessors, reached under the advice of an attorney general, the auditor general proposes to revise their work, and do for them, what, upon full consideration, they refused to do. If this is not a revision of their work, we should be glad to know what would be. They met this question year after year, “is this company liable to a capital-stock tax?” — 280 — They decided it. They assessed the taxes due from the company, upon the basis which that decision afforded. Whether the decision was that the company was liable upon a mileage basis, or that it was not liable upon any basis, it was equally a a decision of the question • by the proper officer, and under it the taxes due for the year were computed, the company was called upon to pay them, and they were actually paid in full. But it is said, these taxes were omitted by mistake. When one fails by some forgetfulness, or inadvertence, to do what he intended to do, or knew should be done, such failure may be said to happen by mistake. But, if one does just what he intended to do, in the way he intended, after careful deliberation and competent legal advice, his action is in no sense due to mistake. His conclusion may be wrong, but it has been considerately reached. His action may do some one an injustice, but, if so, it is not the result of accident, but of a conviction that the action is the proper one to take. Before such action can be reversed, or set aside, it is necessary to revise the conclusions on which it rested. An error in computation, or in transcribing,'may be corrected, and such correction merely gives effect to the purpose of him by whom the error was made. He failed to do what he intended, when he made the error, and its correction is in aid of his own execution of his intent. But Auditor General Temple did not intend to assess a capital-stock tax against the defendant company. He investigated the question, and decided that the company was not liable, and proceeded to state the taxes due from it just as he believed they should be stated. His decision cannot be reversed by his successor, in the manner now attempted. His successor is not bound by it. He may adopt a different rule, for his own guidance in the current business of his office, but he cannot go back and do over again the finished work of his predecessors. If he could do what is proposed here, he could go back to the foundation of the commonwealth. If he could thus overhaul accounts, his successor could do the same thing, and so on indefinitely. The time would never come when a corporation, or other taxpayer, could feel safe, or be beyond the reach of an officer or clerk disposed to make him trouble, or to speculate on his fears or his dread of litigation. The further suggestion is made, that this is a case in whieh — 281 — the real question is, whether the commonwealth shall suffer for the laches of her agents. The case of Haehnlen v. Commonwealth, 13 Pa. 617, is cited in support of the proposition that she is not so bound; and, for this reason, we are asked to sustain the assessment of taxes before us. But we do not see that such a question is involved in this case. Auditor General Temple was not neglectful of his duty in 1874. He did not forget the subject of the defendant company’s liability for taxes, or fail to investigate the extent of that liability. When he found that it was thought to depend on the proper construction of the charter, he went to the attorney general for advice. When the official opinion of that officer was received, he followed it. The question before him was one of law, not one of fact. If a wrong was done the commonwealth by the decision arrived at, it was due to an error in law made by the attorney general, not to a mistake in computation made by the auditor general or his clerks. To such a case. the rule in Haehnlen v. Commonwealth, is not applicable. Now, let us assume, for the moment, that Attorney General Lear was mistaken' in his view of the effect of defendant’s charter. Let us further assume, what we have no reason to doubt, that the auditor general under whom this settlement of taxes was made, had reached a different conclusion from his predecessors, and believed it to be his duty to assess the company with a capital-stock tax. What should he do in that case? Clearly, he should, in the assessment of accruing taxes, act upon his own convictions, and add a capital-stock tax. The company could then appeal regularly, and have the proper construction of their charter declared by the courts. With such a course no fair-minded person could find fault.. It would bring the question to a decision in a proper manner, without unnecessary hardship, and without putting the commonwealth in an ungracious and inequitable position towards a large taxpayer. What was done in this case, wears a very different aspect, and raises other serious questions besides that of the construction of defendant’s charter. In a recent case, in which the city of Philadelphia was plaintiff, and the Ridge Avenue Pass. Ry. defendant, 142 Pa. 484, an effort was made to re-state the account of the taxes due from the railway company to the city for a series of years. Taxes had been assessed and paid during — 282 — all these years on one basis. It was alleged that, stated upon a different basis, a larger sum would have been due yearly, and the effort was to go back and re-state the taxes for each year. We said, in an opinion delivered by our late Brother Clark, that this could not be done. The city had stated her demands and enforced the payment of them year by year. The year’s business of the company had been settled and its net earnings divided upon that basis, regularly, among its stockholders, or invested in improvements. To disturb the situation, after the lapse of years, we said was inequitable; and, as the city was not above the obligation to be just to its taxpayers, it was not allowed to recover the additional sums demanded. The auditor general is authorized, and it is his plain duty, to settle and state accounts between the commonwealth and its debtors and taxpayers, “ according to law and equity.” The commonwealth does not need, and, whether it needs or not, it does not ask that which is against good conscience. It is true, that a corporation may not die, but corporators do. In sixteen years the membership may change largely, perhaps wholly. The money that should have gone to pay the taxes claimed for 1872, or any subsequent year, if they should have been assessed on the basis now claimed, has been long since paid in dividends, or invested in improvements. Those who received the dividends may be no longer members of the company. The estates of some who have died, may be already settled, and divided among heirs at law. The stock, enhanced in value by investments of undivided profits may be held by those who have paid a full price for it. If these sums are now to be collected, the burden may fall on those who have not profited by the failure of the state to demand them when they were properly demandable; while those who did profit by it are now beyond reach. A private suitor would be estopped by these facts. Equity would not permit him to recover under such circumstances. Why should the commonwealth of Pennsylvania seek to do that which no court would permit a citizen to do ? The settlement of such questions is, fortunately, not left to the judgment of a single officer. They must go to the board of revision. If this extraordinary demand ever reaches that body, its members will consider all the circumstances, and — 283 — determine whether “ law and equity ” require them to unsettle the work of a score of years, regardless of the consequences to private interests, for the sake of determining a question of law that may be settled at any time, in an orderly manner, by the act of the auditor general in stating accruing taxes. We purposely express no opinion upon the construction of defendant’s charter. We will consider that question when it comes to us. W hat we now hold is, that after the lapse of a year, from the time of payment of the taxes of a current year, without any request for the re-statement of the account of the taxpayer, the account is closed, except as to clerical mistakes, and can only be re-opened by an order of the board of revision. The judgment of the court below is now reversed, and judgment is now entered in this case, in favor of the defendant. The appeal of the commonwealth from the same judgment, is disposed of by the foregoing opinion. In that case The judgment is affirmed. Footnotes [*] Act of March 30, 1811, 5 Sm. L. 228. [†] § 8, act of April 21, 1846, P. L. 415. [‡] Act of April 8, 1869, P. L. 19.