Court Opinion

ID: 8833493
Source: CourtListenerOpinion
Date Created: 2022-11-26 16:11:07.60024+00
Date Added: 2024-06-11T17:04:59.559127
License: Public Domain

LEARNED HAND, District Judge.
It is quite true that this plaintiff has been doing all that it was organized to do, and that this feature constantly runs through the cases, as if it were in some sense a test of whether it was “doing business” at all. Yet I cannot think that this would be a sound rule, or that it makes any difference whether the chartered powers are fully employed or not, because, as Mr. Justice Holmes said in U. S. v. Emery-Bird-Thayer Realty Co., 237 U. S. 28, 35 Sup. Ct. 499, 59 L. Ed. 825, the question is what it does, and not what it can do. There would be no justification in treating two *583corporations differently, who did exactly the same things, merely because one had an extensive charter and the other did not.
Had this been a lease, I think there could be no doubt. The different incidents of the plaintiff’s activity have all been passed on. Thus receiving and distributing dividends is not enough to bring the lessor within the statute. Zonne v. Minneapolis Syndicate, 220 U. S. 187. 31 Sup. Ct. 361, 55 L. Ed. 428; McCoach v. Minehill Ry., 228 U. S. 295, 33 Sup. Ct. 419, 57 L. Ed. 842; U. S. v. Nipissing Mines Co. (C. C. A. 2) 206 Fed. 431, 124 C. C. A. 313; West End Ry. v. Malley (C. C. A. 1) 246 Fed. 625, 158 C. C. A. 581. Nor is the result different if the lessor, in addition, issues bonds direct to the lessee for his use in paying for improvements upon the leased lands. Anderson v. Morris & Essex R. R. (C. C. A. 2) 216 Fed. 83, 132 C. C. A. 327; N. Y. Central v. Gill (C. C. A. 1) 219 Fed. 184, 134 C. C. A. 558; Traction Cos. v. Collectors (C. C. A. 6) 223 Fed. 984, 139 C. C. A. 360; Public Service Co. v. Herold (C. C. A. 3) 229 Fed. 902, 144 C. C. A. 184. In one of the cases comprised within Public Service Co. v. Herold, supra, it was held that when the lessor, instead of delivering bonds to the lessee, to be sold, sold the bonds himself and paid the money to the lessee, the result was the same. The following cases present variants upon the general situation, in each of which the lessor was held not to he “doing business”; Condemning lands for the lessee, N. Y. Central v. Gill, supra; selling parts of the leased property, Traction Cos. v. Collectors, supra; selling the whole property, Miller v. Snake River Valley R. R., 223 Fed. 946, 139 C. C. A. 426; providing for the issue of new bonds to refund others canceled, Public Service Co. v. Herold, supra; maintaining a sinking fund and extending an indebtedness, McCoach v. Continental, etc., Co., 233 Fed. 976, 147 C. C. A. 650; acquiring new property for the lessee and improving it to answer to the lease, Jasper, etc., Co. v. Walker (C. C. A. 5) 238 Fed. 533, 151 C. C. A. 469 (certainly an extreme case); investing the lessor’s surplus funds in investments more profitable than bank deposits, McCoach v. Minehill Ry. Co., 228 U. S. 295, 33 Sup. Ct. 419, 57 L. Ed. 842.
fi líese cases bear out my statement made above that, had the plaintiff leased its property to the Exploration Company and thereafter done what it did, it would not have been liable to the tax. It seems to me to make no difference that it was organized to do the same things. The term “business” means some profitable activity undertaken on its own account. There was such a business, but it was the mining and sale of copper, to which both corporations were necessary, owing to the state of the Chilean law. Of course, it is true that each was doing a part of that business, because financing was a necessary incident to its prosecution. But the excise does not exact a double tax for leave to do a single business, and the plaintiff was in substance no more than the personification, of a part of the enterprise. Except for the separation of the corporate activities, no one would suggest that the Exploration Company was doing two businesses. As things are, the nearest approach to a separate business is the plaintiff’s investment of its funds in call loans. That, however, falls quite within the rule in McCoach v. Minehill Ry. Co. supra.
*584The defendant argues that Van Baumbach v. Sargent Land Co., 242 U. S. 503, 37 Sup. Ct. 201, 61 L. Ed. 460, changed the earlier rule and made obsolete the decisions in the lower courts which have depended upon it. I cannot so understand that decision. The lessor by no means confined itself to activities incidental to the exploitation of the lease, and it was to those added doings that it owed its liability to the tax. It is true that among these was the employment of a supervising engineer (a company), and that this is one of the activities relied upon. While this was a natural incident to the protection of the lessor’s interests, yet it was no necessary part of the exploitation of the lease. However that may be, the lessor did much more than that. It explored the soil on its own account, sold land, made stumpage contracts, and leased lots in a village and to squatters. In short, it appears to have managed the surface for its profit. All this was altogether independent of the business of the lessee.
Chemung Iron Co. v. Lynch (C. C. A. 8) 269 Fed. 368, was a similar case, though the lessor merely hired a supervising engineer and explored the soil. In Boston Terniinal Co. v. Gill (C. C. A. 1) 246 Fed. 664, 158 C. C. A. 620, the plaintiff conducted a number of profitable ventures,in its railway station, quite separate from its formal maintenance of that station for the benefit of the five roads which built it. I see no ground in these cases to suppose that the earlier decisions are no longer controlling, arid for the reasons already given I think that the motion to dismiss must be denied.
That being so, it is my understanding that the plaintiff is to take judgment for the amount demanded, with interest; and u is so ordered.