32 A.2d 236 | Pa. | 1943
Lead Opinion
This is an appeal from an order of the Court of Common Pleas of Allegheny County reducing a final *193 assessment on the real estate of the Mesta Machine Company, a private corporation located in the Borough of West Homestead, Allegheny County, Pennsylvania, made by the Board of Property Assessment, Appeals and Review for ad valorem taxes, pursuant to the Act of May 22, 1933,1 P. L. 853, Art. II, sec. 201, as amended by the Act of July 2, 1941, P. L. 219, sec. 1.2
At the triennial assessment for the years 1940, 1941 and 1942, the taxable value of the mill of the Mesta Company, consisting of lands, as well as buildings and machinery located therein, was valued and assessed for real estate tax purposes. In February, 1942, the Board increased the assessments, inter alia, by the sum of $618,000, to cover the value of certain additional machinery which had been installed on the premises as an integral part of the mill. This machinery was placed in the mill of the Mesta Company, which was the record owner of the land upon which its mill was located, not on a temporary basis, but instead to enable that company to carry out the very purpose for which it was organized, i. e. the manufacture of heavy equipment for profit. This revised assessment was sustained by the Board; and the Mesta Company, contending that it was not liable for the tax based on the additional assessment for the reason that the company did not own that machinery but merely leased it from the United States *194 government which held title thereto, appealed to the Court of Common Pleas. That tribunal permitted the Federal government to intervene in the proceeding, over the objection of the County. After hearing, the court below entered an order sustaining the appeal, setting aside the assessment as to that machinery and reducing the assessment of the mill of the Mesta Company by the sum of $618,000. From that order, the County of Allegheny has appealed to this Court.
This is a case of great importance because our decision will not only dispose of the present controversy, but will also affect many similar arrangements which have been or will be entered into by the United States government with various individuals and companies throughout this Commonwealth as a result of the present national emergency.
The principal contention of Allegheny County is that there is no competent evidence to support the action of the court below in reducing the assessment here under consideration. The County presented a prima facie case by the production of the record of assessment, made by proper officers and approved by the Board of Property Assessment, Appeals and Review: Chatfield v. Boardof Rev. of Taxes,
There can be no doubt that the machinery here under consideration formed a real and permanent part of the mill of the Mesta Company, and was, therefore, a proper subject of assessment as real estate, under the provisions of section 201 of the Act of May 22, 1933, P. L. 853, as amended. InPatterson v. Delaware County,
Furthermore, this private arrangement between the Mesta Company, the owner of the land and buildings and operator of the mill, and the Federal government, the owner of the machinery, which treats the equipment as personal property and permits the latter to remove it at the termination of the contract, can in no way change the legal effect of the Act of Assembly which specifically designates machinery, under these circumstances, as real estate for tax purposes. In this connection, it was said in Bemis v. Shipe,
Nor can the Mesta Company, by its private arrangement acknowledging that the Federal government has title to the machinery which is an integral part of the mill of the company, evade the right of the County to assess the company as the owner of the mill erected upon land title to which is in its name upon the public records. The mill of the company was taxable under the statute as real estate, and this necessarily included the machinery essential to the existence and operation of that manufactory. In Guthrie v. Pittsburg Dry Goods Co., supra, the Superior Court held that the owner of the land and building cannot deny his liability for a portion of the tax because the machinery which composed a permanent and essential part of the manufactory was owned by a tenant who had the right to remove it at the end of his lease. There it was said (p. 401): "Does the private arrangement between the tenant and the landlord which permitted the former to remove the machinery at the end of the term change the character of the property as affected by the taxing statutes? We think not . . . If the machinery is not to be included there is no manufactory to be taxed and the land and building would be liable not as a factory but as 'other real estate' as provided in the same section of the statute. The property is either a manufactory or it is not. If a manufactory it is clearly subject to taxation under the specification of that class of property."
The record showed that title to the land was in the Mesta Company, and the assessor was not obliged to go further. Under the circumstances, he was justified in treating the ground, building and machinery as an entity, a mill or manufactory, and assessing it as such to the Mesta Company, the registered owner of the land. In Pennsylvania Co. v. Bergson,
It is well established that property held by the United States for the purposes conferred on the government by the Constitution and laws of the United States is beyond the pale of taxation by a State or its political subdivisions (Irwin v. Wright,
In upholding the minimum price regulations of the Pennsylvania Milk Control Law of April 28, 1937, P. L. 417, as it affected a dealer selling milk to the government to be disposed of on lands belonging to this Commonwealth but in use by the Federal government as a military encampment, Mr. Chief Justice STONE, in speaking for the United States Supreme Court, in Penn Dairies, Inc. v. The Milk Control Commission, supra, said (p. 270): "The trend of our decisions is not to extend governmental immunity from state taxation and regulation beyond the national government itself and governmental functions performed by its officers and agents. We have recognized that the Constitution presupposes the continued existence of the states functioning in coordination with the national government, with authority in the states to lay taxes and to regulate their internal *201 affairs and policy . . ." It is a matter of great seriousness to the states and their municipal subdivisions that individuals and corporations pay their fair share in taxes for the benefits they and their personnel undoubtedly receive from the public services they enjoy, such as police and fire protection, the use of streets and schools, and other advantages of community life. These are adjuncts of civilization, necessary but expensive, and those who have them should and must pay for them.
Moreover, the fact that one of the two possible parties liable for a tax — the record owner or the actual owner — may for some reason be exempt from taxation will not defeat the right of the taxing power to enforce payment by the other. InCounty of Franklin v. McClean, supra, the County levied a tax against buildings erected upon lands leased by the Commonwealth to a tenant who owned the buildings and under his lease had the right to remove the same at the expiration of his term. The record owner being the sovereign, which is not subject to taxation by its subdivisions, the tax upon the structures was assessed in the name of the tenant, the real owner thereof, and this was held proper by the Superior Court. There it was said (p. 171): "We regard the fact that appellant's estate is held under the State as lessee, rather than under an individual, as immaterial. The tax is not laid against the State nor its interest in the land." In Kittanning Academy v. KittanningBoro.,
The County of Allegheny further contends that the court below also erred in permitting the Federal government to intervene in the appeal filed in the court below by the Mesta Company against whom the assessment was made. We need not pass upon this question, *202 for obviously under our disposition of the controversy the County in no way was harmed by such intervention.
We are satisfied that the evidence that the machinery was not owned by the Mesta Company was irrelevant and, therefore, improperly admitted. Since the record contains no competent evidence to warrant the action of the court below, the order must be reversed and the assessment of the Board reinstated.
The order is reversed, and the assessment of $3,901,504 made by the Board of Property Assessment, Appeals and Review of Allegheny County of the mill of the Mesta Machine Company for the year 1942 is restored and affirmed; costs to be paid by the Mesta Machine Company.
(a) All real estate to wit: Houses, lands, lots of ground and ground rents, mills and manufactories of all kinds, furnaces, forges, bloomeries, distilleries, sugar houses, malt houses, breweries, tan yards, fisheries, and ferries, wharves, and all other real estate not exempt by law from taxation." (Italics added.)
Dissenting Opinion
In dissenting from the court's decision I start with the observation that never since the foundation of our government, so far as careful research has disclosed, has there been a case, either in a state or a federal court, in which a tax imposed by a state or other local authority on property belonging to the United States was sustained, except where the consent of Congress to such taxation had been given, or where the United States had the legal title to the property but the equitable or beneficial interest was in private ownership. Nor has any difference ever been suggested in the application of this principle between personal property, real estate, and chattels affixed to the land and therefore regarded for some legal purposes as real property. On the contrary, every reported case has recognized the immunity from local taxation of all property actually owned by the United States. The leading decision to that effect, Van Brocklin v. State ofTennessee,
From a study of these authorities it will be observed that they hold that taxation of government property is *204
prohibited when the tax is assessed, not merely against the United States, but against private individuals or corporations as well, and irrespective of who may have the use or possession of it; in most of those cases the United States was not even a party. The majority opinion cites authorities which it asserts support the proposition that where the tax is not assessed against the government but against an independent contractor the immunity does not exist. This, it seems to me, is a misconception of the import of those decisions. What they hold is that a state has the right to impose a tax on an independent contractor on property owned, not by the United States, but bythe contractor; in other words, the right of a state to tax the property of a citizen is not impaired merely because of the existence of a contract between that citizen and the United States as the result of which the tax indirectly imposes an economic burden on the government. As examples of such cases — obviously not to be confused with one such as the present where the tax is imposed not upon the property of the contractor butupon that of the United States — may be cited: Thomson v.Pacific Railroad,
In the present case it must be borne in mind that before, at, and ever since the time of the imposition of *205
the tax, not only the legal title but the entire beneficial ownership of the machinery was solely in the United States; it was merely loaned or leased to the Mesta Company for the nominal consideration of a dollar. Moreover, it is not pretended that the tax was based on an appraised valuation of any interest of the Mesta Company in the machinery arising from its right to use it; the assessment was on its full value, appraised as a separate item of property at $618,000, and was a direct tax on the property itself. As a matter of fact, the contract between the Mesta Company and the government provided that the company could not use this machinery for any purpose other than the manufacture of guns for the United States under that contract, so that the company had no interest of its own in the machinery in connection with any private manufacturing business it might transact. The law of Pennsylvania does not permit an assessment against divided equitable interests in real estate but assesses the entire taxable res as such, and if a tax sale results from default in the payment of the tax, the title to the res is sold: Mint Realty Co. v. Philadelphia,
In People ex rel. Donner-Union Coke Corporation v. Burke,
In Andrews, Ordway Green v. The Auditor, 69 Va. (28 Grat.) 115, it was held that buildings which were the property of the United States, erected on land belonging to a private owner and used for dressing stone to be employed in the erection of public buildings at Washington, were not subject to taxation by the State of Virginia either as personal property or as parcel of the land on which the buildings were erected. The court said in language which is here peculiarly apposite (p. 128): "Undoubtedly where the buildings erected on the land arethemselves the subject of taxation, the state will take no notice of private contracts which sever the ownership of the land from that of the buildings; and will hold the owner of the land responsible for the taxes on both. But suppose the buildings are exempt from taxation, — how then? Suppose a church or parsonage, or other building used for charitable purposes, is erected on land with the permission of the owner, he retaining the title to the soil on which it stands; can the owner of the land be taxed for the value of such buildings? Certainly not. If authority is wanting for so self-evident a proposition, I refer to the cases cited by the learned counsel for the defendants in error. . . . But it is said that churches and like buildings are exempt from taxation by express statute. So they are. And the buildings erected by the United States, owned by that government, and used for the lawful purpose of carrying into execution its granted powers, are also exempt from taxation — not by express statute it is true, but by laws as potent and obligatory as if they were written on the statute books of every state in the Union." *207
In our own state, in County of Franklin v. McClean,
Not only because this machinery is owned by the United States is it exempt from taxation but also because it is an instrumentality of the United States used in the prosecution of the war and therefore in the exercise of the most vital power conferred by the Constitution upon the federal government. The Mesta Company is an independent contractor and not itself an instrumentality of the government (Penn Dairies v. Milk ControlCommission of Pennsylvania,
The basic theme of the majority opinion is that, although this machinery belongs to the United States, it lost its immunity from state taxation when the government allowed it to be placed in the plant of the Mesta Company; in that connection great stress is laid upon *209
the decisions in Pennsylvania which hold that the tax here imposed is one on the mill or manufactory as a whole, and that tax assessors are not required to investigate whether any part of the equipment belongs to someone other than the apparent owner. It need scarcely be said that the inconvenience which might be occasioned to tax assessors arising from any such duty of investigation (Pennsylvania Company, Trustee, v. Bergson,
It is said in the majority opinion that "if the Mesta Company defaults in the payment of the tax, the paramount rights of the government in the machinery could not be divested or in any way affected." It seems to me that this very statement constitutes a back-handed acknowledgment of the weakness of the majority viewpoint. The Act of June 4, 1901, P. L. 364, provides that all taxes are first liens on the property taxed and that such liens shall be first paid out of the proceeds of any judicial sale of the property. In the admission, therefore, that this machinery cannot be sold by the taxing authority there is inherent the admission that it cannot be taxed, for, as was said in Mint Realty Company v. Philadelphia,
I take it that little, if anything, need be said in justification of the action of the court below in permitting the United States to intervene, for how else could it assert its rights? It is interested not only because it expressly contracted to reimburse the Mesta Company for the taxes which the latter might be required to pay, but because, even in the absence of such a contract, the Mesta Company could recover from it the amount of the tax on the machinery. "As between the real owner and the registered [that is, the nominal or apparent] owner, the latter is secondarily liable and may therefore recover from the real owner sums by him paid on account of the tax": Fidelity-Philadelphia Trust Company,Trustee, v. Land Title Bank Trust Co.,
Because, then, the tax which is sought here to be imposed is on property legally and beneficially in the sole ownership of the United States, and because also that property is an instrumentality vital to the execution of the war powers of the government, I do not think it an exaggeration to say, as was said by the court below: "That the taxing by a state or any of its subdivisions of property owned by the United States of America and used by it in carrying out a constitutional function constitutes a violation of the Constitution of the United States and of the principle of dual sovereignty upon which that Constitution is based, is no longer open to debate. The assessment and levy of such a tax is clearly invalid."
I would affirm the order of the Court of Common Pleas of Allegheny County.
Mr. Justice ALLEN M. STEARNE concurs in this opinion. *213