Opinión óe tiie court by
JUDGE BARKERRevebsins.
•'This xvas a'proceeding in the Franklin circuit court by'the auditor’s agent, under section -1241 of the Kentucky Statutes of 1903, to collect from the appellant an organization tax of dn’Vtenth of one per cent, of the face, value of its' authorized capital stock. • The case xvas; submitted on the pleadings to the circuit judge for an adjudication as to the merits o'f the claim, xvith the result that'a'judgment xvas rendered *199in favor of the Commonwealth against appellant for 'the sum of $3,000, and, in addition, the penalty allowed by law* to the auditor’s agent in such cases, amounting to $600.’'
There is, of course, no controversy as to the facts'; the question being one purely of law, which must be solved by á proper construction of' the statutes bearing on the subject: For convenience we deem it advisable to insert herein so much of the statutes of the State as appear necessary for the solution of the question before us:
Ky. St., 1903, section 763: “Any .number of persons, not less than seven, may associate to form a corporation for the purpose of constructing, operating, and maintaining a railroad. Such persons shall execute articles of incorporation,which shall specify the name of the proposed railroad, the number of years the corporation is to continue, the amount of its capital stock, and the number of shares into which the same shall be divided; the number of directors, which shall not be' less than five nor more than fifteen, and their names, the places from and to which, and the name of each county into- or through which, it is intended to be constructed, and its length as near as may be. Each subscriber to such articles shall set opposite his name his place of residence and the number of shares subscribed by him. Whenever two hundred and fifty dollars per mile has in good faith been subscribed, and twenty per cent, thereof paid in in cash, to the persons named in the articles as directors, and an affidavit made to that' effect by two of said named directors and attached thereto, a copy of said articles and affidavit shall be filed in’ the office of the Railroad Commission, and in the office of the secretary of State; and when a certificate of such fact is delivered by the said officers to the incorporators,'the' persons who have subscribed such articles shall be ¿ body' corporate b3r the name specified in the articles, and as such1 *200may sue ami be sued, contract and be contracted with, have a seal, and change the same at pleasure; may elect or appoint directors, who shall choose from their number such officers as may be necessary; may require from any officer or employe a bond for the faithful discharge of liis duties, and prescribe such by-laws for its government, and exercise such powers as are necessary to the conduct of its business not inconsistent with law.”
Heel ion 765: “No raidroad corporation, organized or created by or under the laws of any other State, shall have the right io condemn land for, or acquire the right of way for, or purchase or hold land for itsi depots, tracks, or other purposes, until it shall have first filed in the office of the secretary of State of this State, in the manner provided in the first article of this chapter, its acceptance of the Constitution of this State, and shall have become organized as a corporation under the laws of this State, which it may do by filing in the offices of the Secretary of State and the Railroad commission articles of incorporation in the manner and form provided in section 763 uf this article.”
Section Kdl : “No company, association or corporation created by, or organized under, the laws or authority of any State or county other than this State, shall possess, control, maintain or operate any railway, or part thereof, in this State until, by incorporation under the laws of this State, (he «ame shall have become a corporation, citizen and resident of this State. Any such company, association or corporation may, for the purpose of possessing, controlling, maintaining or operating a railway or part thereof in this State, become a corporation, citizen and resident of this State by being incorporated in the manner following, namely: By filing in the office of the secretary of State, and in the office of the Railroad Commission, a copy of the charter’ or *201articles of incorporation of such company, association or corporation, authenticated by its seal and by the attestation of its president and secretary, and thereupon, and by virtue thereof, such company, association or corporation shall at once become and be a corporation, citizen and resident of this State. The seci’etary of State shall issue to such corporation a certificate of such incorporation.”
Section 842: “Any company, association or corporation that, after the first day of August, one thousand eight hundred and ninety-three, possesses, controls, maintains or operates any railway, or part thereof, in-this State, without becoming incorporated as a corporation, citizen and resident of this State, as permitted by section 841, shall be guilty of a misdemeanor, punishable by a fine of not less than one i housand dollars for each day, or part thereof, that any railway, or part thereof, in this State, is possessed, controlled, maintained or operated by it. Any person that in anywise aids or assists, either as officer, agent, servant or employe in so possessing, controlling, maintaining or operating any railway, or part thereof, in this State, shall be guilty of a misdemeanor, punishable by a fine of not less than one hundred dollars for each day or part thereof that he so assists or aids.”
Section 422-5: “Every corporation which may be incorporated by or under the laws of this State, having a capital stock divided into shares, shall pay into the State treasury one-tenth of one per centum upon the amount of capital stock which such corporation is authorized to have, and a like tax upon any' subsequent increase thereof. Such tax shall be due and payable on the incorporation of the company and on the increase of the capital thereof, and no such corporation shall have or exercise any corporate powers until *202pie ;tgx shall, have, been paid; and upon payment, they shall file, ,a statement thereof with the secretary of State.” - • ■ •
Appellant is a foreign corporation, organized under the laws ■ of Ohio, operating, as lessee, a railroad through • the State;, of Kentucky, known as the “Cincinnati- Southern,” upper a .-contract, made, in 1881; the road so operated having-been constructed under an act of the General Assembly oftpe. .Commonwealth of Kentucky, .entitled “An act to authorise, the trustees of the Cincinnati Southern Railway to’acquire tp,e right of. way, and extend, a .line of railway through certain qo,unties in this . Commonwealth,” approved. February 13,-1872, and. -contained in Acts 1871-72, vol. 1, p. 23, c. 2.72. Ry.this act certain named trustees were authorized to extend, construct, and maintain a line of railroad within the-Commonwealth of Kentucky, with single or double tracks, with all the usual appendages, including a line of .telegraph, and to exercise such powers vested in them under and by virtue of an act of the General Assembly of the State of Ohio-, subject to the provisions and restrictions this act provides. These trustees were, given the power to acquire rights of why by gift, grant, or purchase, or proceedings by ad quod damnum, to be exercised in the mode pointed out in the act and also to lease its railroad, for the purpose of being operated, to other persons or companies-. The trustees and their lessees were prohibited by the terms of the grant from instituting any action in the federal courts against a citizen of this State, or of removing any action instituted against" them to the federal courts. No question is made as to the reg- ’ ularity of the organization of either the lessor or lessee company or as to the latter being in lawful possession of the franchises leased by it from the former, the sole question be-, ingpas to whether the latter is subject to pay the organization tax under section 4225, because it complied' with the provisions *203of 841 and 842 of the statutes. After the enactment of these-last sections, the appellant filed in the offices of the secre-' tary of State and the Railroad Commission a copy of its' charter, or articles of incorporation, as prescribed in section 841, and thereupon the secretary of State issued to it the1 certificate of incorporation authorized by that section. The-organization tax required by section 4225 was not exacted-by the secretary of State, it being both his opinion and that-of appellant that it was not liable therefor. The auditor’s'agent, however, was of a different opinion. He regarded the act of appellant in filing a copy of its articles of incor-' poration with the secretary of State and Railroad -Com-’ mission as an act of incorporation under the laws of Kentucky within the purview of section 4225, and instituted this proceeding to recover the organization tax. If he is cor-rect in his construction, then the judgment of the circuit court should be affirmed; if not, it should be reversed, there being no question of the correctness of the judgment if appellant is" liable at all. ■
An inspection of section 4225 will show that by its very: terms it applies only to such corporations as have -been in-' corporated- by or under the laws of this’ State, having a' capital stock divided.into shares, while section 841 applies' only to companies, associations, or corporations created' by or organized under the laws or authority of any Staté or ; country other than this State, and without regard to whether they are, or not, stock corporations. Section 763' provides-' exactly how many number of persons, not less than seven,: may associate to form a corporation for the purpose of constructing, operating, and maintaining a railroad. A compari-! son of the terms of 'section 763 with those of 841 will show the vast difference between what is required'by the former" to create railroad corporations by the laws of: this State,'’ *204and what is required by the latter to naturalize railroad corporations created by a foreign jurisdiction. Section 841 does not deal with the creation of corporations. Section 7G3 shows how a railroad corporation may be created, and vitality breathed into it, by the power of the laws of our own Commonwealth. Each person desiring to be a constituent member of the proposed new corporation shall execute the articles of incorporation, and these shall specify the name of the proposed railroad, the number of years the corporation is to continue, the amount of its capital stock and the number of shares in which the same shall be divided, the number of directors which it shall have, their names, and the places from and to which, and the name of each county into or through which, the proposed railroad is to be constructed, and its length, as near as may be, given. Each subscriber is required to set opposite his name in the articles of incorporation his place of residence and the number of shares subscribed by him, and these articles of incorporation are required to be filed in the offices of the secretary of State and Railroad Commission, and when a certificate of such fact is delivered by these officers to the incorporators, the persons who have subscribed such articles shall he a body corporate by the name specified in the articles, and as such may sue and be sued, contract and be contracted with, have a seal, which they may change at pleasure, may elect or appoint directors, and prescribe by-laws for the government of the new corporation, and may exercise such powers as are necessary to the conduct of its business not inconsistent with law.. Section 841 was not enacted for the purpose of creating corporations, but assumes them to have been already created. The language, is: “Any such company, association or corporation may, for the purpose of possessing, controlling'', maintaining or operating a railway or part there*205of in this State, become a corporation, citizen and resident of this State by being incorporated in the manner following, namely: . . This section has nothing, to do. with shares of stock of corporations, and has. nothing to say on that subject. It is equally applicable to those which are joint stock corporations, and those which are not. Section 4225 only applies to joint stock corporations, and section 763 . only provides for the creation of joint stock corporations. If section' 4225 applies, to foreign corporations operating1 their roads through Kentucky, which have complied with the terms of section 841, then it is immaterial whether the given corporation has paid .an organization tax to its native State or not, for there is no- exception in the terms of the section last named in favor of a foreign corporation which has not so paid; and it would follow that if some great transcontinental railroad, with a capital stock perhaps of $100,000,000, should run through only one county of our State, it would be required, by tlie penalties denounced in section 842, to comply wjth the terms.of section S41, and then, by the construction sought to be maintained by appellee, it would instantly owe the State an organization tax of one-tenth of one per cent, of the capital, or $100,000; and, if the various States, through which it passed on the road from the Atlantic to the Pacific had laws similar to oursi, such a construction would lead to consequences prohibitory of the building of the road.
We are not questioning the right of the State to prescribe any terms it pleases as a condition precedent to the exercise of business by foreign corporations within its boundary. The question is, not what the State may do, , but-what it has done; and while the argument of hardship,is not always decisive as to the. proper construction of a statute, and should never be allowed to overturn its plain letter, yet it is. often *206worthy to bé weighed as a constituent in the. problem; and we think, where two constructions of a statute are admissible by its terms (to place the matter as favorable to the appellee as-possible), the one leading to consequences of unusual hardship and disaster, and the other resulting only in fairness and equity, the latter should be adopted. We are strengthened in the conclusion we have reached by a consideration of sections 555 and 550 of the Kentucky Statutes of '1903. Section 555 provides that any >two or more corporations organized under the laws of Kentucky, or the laws of this and any other State, may consolidate into a single corporation. ■ Section 550, in regulating the organisation tax of the new corporation so created^ contains this proviso:1' "“That'no consolidated company formed under this •chapter, or the laws of this State, shall be required to pay any organization tax, except that, if in the consolidation the capital stock-of the consolidated company be increased, or be hereafter- increased to an amount exceeding the aggregate capital stock of the constitutent companies at the time'of the Consolidation, then in that event the consolidated company shall not have or exercise any corporate powers until it shall have paid into the State treasury one-tenth of one per centum upon the amount of said increase, and upon such' payment shall' have filed a statement thereof with the secretary of State. If, however, any corporation hereafter formed in another State where no organization tax was required to be paid by it shall be consolidated with one formed in fhis"State, then the organization tax required by the laws of -tills State shall be paid upon so much of1 the capital stock of the eónsdlidated corporation as shall be equal to the capital stock1 -of the foreign constitutent corporation; or if '"sHicli - foreign corporation hereafter formed may have been required! by the laws of its State to pay an organi*207tion lax less than that required to be paid in this State, Then.’;¡upon «-such consolidation with -a- corporation ;of .this State an organization tax shall be paid $pdhT'To':-the ''difference between that required of such foreign corporation in the State of its creation and that which 'wóüld have been required had it been formed in this State.”
Tliis provision in section 55G was enacted in 1Ó02, and is a legislative construction against the blind and indiseriminati'ng policy, sought to be maintained by appellee, of requiring • every foreign corporation- which ¡does business in the State to pay an organization tax, without' regard' to the fact that it has already paid one at home;.. Undei; ¡section 558, although that which had been a foreign.' corporation, by' being consolidated and recreated, haé' been' iTally' dnd in •truth organized under the laws of this State, y.et so tender was die Legislature on'the subject of double Taxation that it in express terms-declined to require so ' jpüéh of the constituent element -of the new corporation as-, may-¡hare .paid an organization tax to its native Slate wh'eh if:was originally created to’pay agaiii to tliis State.. If fh¿\ (-(msTru.e’tiou,. contended .for by appellee had been the policy; of- the State, the proviso in section 55G would not have been enacted. Section 76’3 relates to the c-reation of corporations, and these latter only are required by section 4225 to pay an organization tax. . ; . -
For the reasons indicated, the- judgment is -reversed, with directions to -dismiss the proceedings against a'ppéllaní.
Petition for rehearing by appellee'overruled.