Fidelity-Philadelphia Trust Company's Appeal

Opinion by Me. Justice Linn, These appeals require the construction of part of the amendment of 1939 1 to the personal property tax Act of 1913. 2 The Fidelity-Philadelphia Trust Company, with its principal office in Philadelphia, is co-trustee with another, domiciled in Montgomery County, of trusts administered in Philadelphia where the assets are kept. It made a return in Philadelphia on which the tax collecting authorities made a demand for the 4 mill tax on the total value returned. It also made a return in Montgomery County where the taxing authorities demanded a tax in the proportion that the number of trustees in Montgomery County bore to the whole number, in accord with the amendment of 1939. Each county intervened in the proceeding in the other *37 county and in Philadelphia the common pleas sustained the tax collecting authorities and held that the entire tax was collectible there. The learned court reached this conclusion by holding that the amendment, in the respect under consideration, was in conflict with the uniformity requirement of Article IX, section 1, of the constitution. In Montgomery County the common pleas held the legislation constitutional and that the proportionate amount of the tax was collectible. The power of the state to direct the proportionate distribution between counties in the circumstances shown is therefore the first question 3 to be considered. The second question is presented by the Fidelity-Philadelphia Trust Company and is whether the trustees are liable to penalties for defaults in both counties in which they have filed returns and have remained ready to pay the tax as soon as advised to whom payment could lawfully be made. They contend that they are not in default within the statutory meaning of that term, and that the counties should not be permitted to invoke the penalty provision if the taxes are paid immediately upon return of these records to the courts below. By the Act of 1913 4 the state imposed a tax on certain personal property “annually, for county purposes, and, in cities coextensive with counties for city and county purposes, at the rate of four mills on each dollar of the value thereof, and no failure to assess or return the same shall discharge such owner or holder thereof from liability therefor.” Section 2 dealt with the mechanics of collection and required the board of revision of taxes or the county commissioners to furnish and distribute blanks for the returns by the proper party of the “personal property made taxable by the first sec *38 tion of this act. ...” Section 16 provided that the tax should be collected as other taxes for county purposes are collected. In Ghiscom’s Estate, 333 Pa. 186, 3 A. (2d) 693, it was necessary to determine in which county a return should be made and tax paid by two trustees, one located in Philadelphia and the other in Montgomery County, the trust property being kept and administered in Philadelphia. It was held that the statute required the returns to be made and the tax to be paid in Philadelphia. Thereafter the Act of 1913 was amended by the Act of June 19, 1939, P. L. 413, providing that in the case of co-trustees “residents of the Commonwealth, but not all of which are domiciled in the same county, return of such personal property shall be made in each county of this Commonwealth where any of the same are domiciled, and there shall be paid in each such county that portion of the tax imposed upon such personal property so held, owned, or possessed, as the number of such trustees, agents, or attorneys-in-fact domiciled therein bears to the total number thereof, notwithstanding the residence of any beneficiary or the place where such personal property is kept.” It is the legislative power to make this provision that Philadelphia County denies. We may repeat that the tax is imposed by the state on specified property and for county purposes. The statute does not authorize the counties to levy taxes on property to be designated by them and at rates to be fixed by them. They do not act as an independent taxing district. The history 5 of the personal property tax shows that originally the state received all of the tax and that the counties were mere collection agencies for the state. Later, part of the tax was returned by the state to the counties in which it had been collected. Finally, they were allowed to retain it all. *39 In the Philadelphia case, the power of the state to direct the distribution of this tax, as provided in the amendment, was said to violate Article IX, section 1, of the constitution, providing “All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws ...” The learned court below said the validity of the amendment “depends on whether or not the Legislature may authorize the imposition of a tax on the personal property of a trust estate located, managed, and administered in one county by a corporate trustee there located, by another county because of the incident that an individual co-trustee of the state is a resident of the latter county.” The court also said, “The Legislature has undertaken, by means of the statute under consideration, to grant to a county where the trust property involved is not located or administered, the right to assess taxes thereon in a certain proportion because of the incident that one of the trustees charged with the administration of the trust happens to live there.” These quotations indicate the error in the position taken below. The legislature has not authorized the imposition of a tax by one county on property in another; on the contrary, the legislature itself has imposed the tax at the rate of 4 mills on property designated in the statute. It has provided that the tax so levied shall be collected by county authorities who originally were the state’s collection agencies. The taxing statute is effective throughout the commonwealth. It cannot be said that the tax is not uniform upon the same class of subjects within the territorial limits of the authority levying the tax. The collection is provided for by general law. The cases cited by the learned court below dealing with taxation by one taxing authority of property located in the territory of another taxing authority are therefore not in point. *40 The real question is whether the legislature may declare, with respect to property taxed by the state for the benefit of all the counties in the state, that co-trustees residing in different counties shall return this intangible property and pay the tax to the counties in which each is domiciled and in proportion to their number. Or, in other words, whether the state may say that the domicile of the holders of the legal title shall determine where this tax on intangibles shall be paid and in what proportions. We have been referred to no. constitutional provision prohibiting it: For the purpose of distributing the proceeds of such a tax among the counties for whose benefit the state imposed the tax, their classification according to the respective residences of co-trustees is not unreasonable. The court may not require the legislature, in making such classification, to disregard the legal protection afforded by a county to a resident co-trustee who is part holder of the legal title of the subject of taxation: see People v. Feitner, 168 N. Y. 360, 61 N. E. 280; Baltimore v. Safe Deposit & Tr. Co., 97 Md. 659, 55 A. 316. The point that the subject of the Act is not clearly expressed in its title does not merit discussion: McGuire v. City of Philadelphia, 245 Pa. 307, 91 A. 628; Miller v. Northampton Co., 307 Pa. 550, 162 A. 209. The trustees have been ready and willing to pay the tax when due and, according to the record, have really been stakeholders during the period in which the matter has been in litigation by the two counties. Timely steps were taken to have the dispute settled judicially. If the tax had been paid pendente lite, an unauthorized payment could perhaps not have been recovered back: compare Arrott v. Allegheny Co., 328 Pa. 293, 194 A. 910. The Act of May 22, 1933, P. L. 853, sec. 518, amended July 12, 1935, P. L. 674, and July 15, 1935, P. L. 1007, 72 PS section 5020-518, cannot be said to afford adequate opportunity for trustees to recover over-payments because it might become necessary to file final *41 accounts of the trusts before obtaining complete refunds by means of tbe setoff, or credit against future taxes, allowed by tbe Act. In tbe circumstances, we think that if the taxes are promptly paid throughout the state after the records in these appeals are returned, it would be inequitable to exact the penalties and interest in addition to the tax and for that reason they should not be recovered: compare Phipps et al., Trustees, v. Kirk, 333 Pa. 478, 5 A. (2d) 143. The judgment of the Court of Common Pleas No. 1 of Philadelphia County is reversed and the record is remitted to the court below for the purpose of making an order in conformity with this opinion. The judgment of the Court of Common Pleas of Montgomery County is affirmed. The costs of the appeals shall be divided equally between Philadelphia County and Montgomery County. Footnotes [1] P. L. 413. [2] P. L. 507, 72 PS section 4821, et seq. [3] The same question, we are informed, is pending in different parts of the state in cases in which trust property is kept and administered in one county by two or more trustees, of whom only one is domiciled in the county in which the trust is administered, [4] P. L. 507, 72 PS section 4821, et seq. [5] Eastman: Law of Taxation, in Pennsylvania (1909), Vol. 2, p. 765, 790; and Cumulative Supplement (1922), p. 1414,