The opinion of the court was delivered by: DUSEN
The trial judge makes the following findings of fact and conclusions of law:
2. Pursuant to written agreements with the Philadelphia and Reading Coal & Iron Co. (hereinafter called 'Reading'), denominated P-22, P-22B, P-29, P-32 and P-35, dated, respectively, May 27, 1944, February 23, 1945, May 8, 1945, December 17, 1945, and July 19, 1946 (plaintiffs' Exhibit 1 and Stipulation Exhibits A, B, D, & E), the plaintiffs, in the tax years 1944 to 1947, inclusive, strip mined coal on land owned by Reading in the Good Springs area known as the Tower City Tract, located in Schuylkill County, Pa.
3. Plaintiffs also entered into another strip mining contract with Reading, P-30, dated July 16, 1945, in the Minersville area, about 10 or 12 miles from the Tower City area (Exhibit C; N.T. 86, 87).
4. Further, plaintiffs had periodic oral strip mining arrangements with the Stevens Company (hereinafter called 'Stevens') for about four or five different tracts during the years 1944 to 1947, inclusive).
5. During these same years, plaintiffs also strip mined for the Jones Coal Company, Jack Jones, and the Peters Creek Coal Company.
6. Defendant Francis R. Smith was Collector of Internal Revenue for the First District of Pennsylvania from May 1, 1945, to November 11, 1952 (Stip. par. 1). All the federal income taxes paid by plaintiffs for the tax years 1945 to 1947, inclusive, were paid to the abovestated defendant.
Plaintiffs paid most of their federal income taxes for 1944 to the predecessor in office of the defendant Collector, but in 1946 plaintiffs each paid defendant Collector $ 987.56 as an additional payment on their 1944 income taxes. Plaintiffs' total payments of income taxes for the year 1944 are in amounts as large as the amounts they seek to recover (Stip. par. 4).
7. The partnership of which plaintiffs are members duly filed its income tax returns for the years 1944, 1945, 1946, and 1947, but in each of said returns of its income it failed to take credit for depletion in connection with the mining contracts aforesaid, and stated the distribution to the individual partners accordingly, with the result that the distributive income of each partner was, by said return, shown to be higher for income tax purposes than it would have been had the statutory percentage depletion been deducted in such statement and return.
8. Plaintiffs, in the years 1948 to 1950, inclusive, each filed claims for refund for the taxable periods of 1944 to 1947, inclusive. On these claims, the defendant Collector of Internal Revenue allowed plaintiffs percentage depletion only as to the Jones Coal Company, Jack Jones and the Peters Creek Coal Company, making refunds of a portion of the amounts claimed for those years. To the extent that the claims for refund were not allowed, plaintiffs were denied percentage depletion with respect to the Reading and Stevens contracts mentioned in paragraphs 2, 3, and 4 above. Statutory notices of such disallowance were sent to each of plaintiffs by registered mail on May 10, 1951 (N.T. 104 and Stip. par. 3).
Plaintiff Russell Huss claimed refunds of $ 9,861.54 for 1944, $ 7,270.10 for 1945, $ 5,720.04 for 1946, and $ 5,089.91 for 1947.
Plaintiff Wesley Huss claimed refunds of $ 9,861.54 for 1944, $ 7,270.10 for 1945, $ 5,734.30 for 1946, and $ 5,146.92 for 1947.
The claims for refund of each plaintiff were allowed to the extent of $ 4,799.65, plus interest, for the year 1944; $ 1,847.57, plus interest, for the year 1945; and $ 646.54, plus interest, for the year 1947 (Stip. pars. 2 & 3).
10. Prior to signing the contract of May 27, 1944, (P-22) between plaintiffs and Reading, plaintiffs went onto the land, looked over the ground, and moved in equipment so as to test for the presence of sufficient coal to start the operation.
11. Before the five Tower City stripping contracts (see Finding No. 2) were let, Reading furnished plaintiffs with surface maps showing where the veins of coal were or where they were supposed to be. All of the tracts had been deepmined and the tract covered by P-22B had been partially strip mined, but plaintiffs were the first to strip mine on the other four areas involved in the Reading contracts.
12. After P-22 was negotiated, plaintiffs never investigated by test boring or prospecting for coal before signing the other contracts. Plaintiffs could see where the land had been previously mined and the thickness of the exposed veins of coal. When the contracts after P-22 were offered to plaintiffs, they were well acquainted with the tracts being offered and were able to discuss prices for delivery of the coal to the colliery. Except for changes in price due to increased labor costs, plaintiffs entered into all the contracts after P-22 without detailed negotiations of their terms.
13. Plaintiffs' job, in both the Reading and the Stevens contracts, consisted of removing the loose overburden from the top, drilling and shooting the rock overburden, removing this overburden by dragline, cleaning the coal, loading the coal on trucks, and delivering it to the Westwood colliery operated by Stevens. When the coal was delivered to the colliery, it was weighed in and, at the end of each day, plaintiffs got a sheet with the number of loads and the weight of the coal they had delivered.
14. Reading had the right to send inspectors on the property to direct plaintiffs as to the average amount of overburden to be removed in ratio to the coal, and they occasionally exercised that right. The inspector also checked the coal to see whether it was acceptable or not before it was loaded in trucks.
15 The coal from the Forestville area was delivered to the same colliery by railroad cars on the Reading Railroad. Plaintiffs' contract, P-30, called for loading the coal at a siding in Forestville, and, pursuant to a working agreement between Reading and Stevens, one of the latter two paid the freight from the loading point to the colliery.
16. In all of the Reading contracts, plaintiffs were paid a stated price per ton of coal delivered to the colliery (N.T. 33, 35, Article 37 of P-22).
17. As to both the Reading and Stevens contracts, plaintiffs themselves determined when and where to begin and to stop the mining in a particular area. They also determined whether or not it would be profitable to begin strip mining. If plaintiffs had determined that it would not have been economically possible, they were not entitled to be reimbursed for their prospecting costs.
18. Plaintiffs paid the men who did the work in this operation and also paid for all of the ...