Appeal of Fox and Wife

• Decision Date: 10 May 1886
• Docket Number: 323
• Citation: 112 Pa. 337,4 A. 149
• Parties: Appeal of Fox and Wife
• Court: Pennsylvania Supreme Court

4 A. 149

112 Pa. 337

Appeal of Fox and Wife

No. 323

Supreme Court of Pennsylvania

May 10, 1886

Argued March 10, 1886

APPEAL from the Court of Common Pleas of Northampton County: In equity: Of January Term, 1886, No. 323.

This was an appeal by Edward J. Fox and Elizabeth F. R. Fox, his wife, from a decree of said court dismissing their bill in equity filed by them against Edward Lerch, Reuben Fehnel and Tilghman Wolfe, County Commissioners of Northampton County and Hiram Edelman, assessor of the sixth ward in the Borough of Easton, said county.

The bill recites that the complainants are residents of Easton and that Hiram Edelman is the assessor of the sixth ward, in which the plaintiffs reside. That he served a notice upon the plaintiffs requiring them to make a return of their personal property, viz., mortgages, notes, etc., for taxation, in accordance with the Act of June 30th, 1885. That upon the refusal of the plaintiffs to make such return, the assessor would estimate the amount of their property and return the same to the county commissioners, who would add fifty per centum thereto, and make the aggregate amount the basis of taxation of the personal property of the plaintiffs. That the Act of June 30th, 1885, is in conflict with sections 1 and 2 of Article IX. of the Constitution, and also with section 3 of Article III., they asked for an injunction to restrain the assessor from requiring the plaintiffs to make a return, and from estimating and returning to the commissioners the estimate, and restraining the commissioners from adding fifty per centum to any estimate made by the assessor.

The answer of the defendants admits the statements of fact contained in the bill, but denies that the Act of June 30th 1885, is unconstitutional.

The case was heard on bill and answer. The court, SCHUYLER, P.J., entered a decree dismissing the plaintiffs' bill, and filed the following opinion:

The serious question raised by the pleadings, and the only question much discussed on the argument, is as to the constitutionality of Act 30th June, 1885, P.L. 193, entitled "A further supplement to an Act to provide revenue by taxation, approved the 7th day of June, 1879." It cannot be denied that this is a question of the gravest importance, and yet, in the view we take of it, it does not call for, even if in the advanced state of the authorities it admits of, very elaborate discussion.

The first section of the Act in question reads as follows: "All mortgages, money owing by solvent debtors, whether by promissory note, or penal or single bill, bond or judgment; also all acts of agreement and accounts bearing interest, owned or possessed by any person or persons whatsoever -- except notes or bills for work or labor done, and all obligations given to banks for money loaned, and bank notes -- and all public loans and stocks whatsoever, except those issued by this Commonwealth or the United States, and all money loaned or invested in any other state, and all other moneyed capital in the hands of individual citizens of the state, shall be and are hereby taxable for state purposes, at the rate of three mills on the dollar of the value thereof annually. Provided, that the same shall, after the passage of this Act, be exempt from all taxation except for state purposes. Provided, that the provisions of this Act shall not apply to building and loan associations."

It is claimed by the plaintiff, that this section offends against sections 1 and 2 of Article IX. of the new constitution, which provide as follows:

"SECTION 1. 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, but the General Assembly may by general laws exempt from taxation public property used for public purposes, actual places of religious worship, places of burial not used or held for private or corporate profit and institutions of purely public charity.

"SEC. 2. All laws exempting property from taxation, other than the property above mentioned shall be void."

The argument is that the taxes imposed by the act under consideration are not uniform upon the same class of subjects, inasmuch as certain kinds of property "in the hands of individual citizens of the state" are taxed, whereas the same kinds of property held by corporations are not taxed, and because none of the property made taxable by the Act is taxable when held by a building and loan association, the effect of which, it is claimed, is to exempt property in the hands of corporations, which the constitution in the section quoted above says shall not be exempt. The force of this argument is apparent rather than real. There was no compulsion on the legislature to tax any portion of the subjects mentioned in the first section of the Act at all, and if they had not done so the whole would have been exempt. So much is conceded, but it is argued that when the legislature select any given subject for taxation, say mortgages, all mortgages held within the state, no matter by whom held, must be taxed.

The vice, as we think, in this position, is that it overlooks the power of classification vested in the legislature. "In the legitimate exercise of the power of taxation," says Judge SHARSWOOD in Durach's Appeal, 12 P.F.S. 494, "persons and things have been and may constitutionally be classified. . . . If the taxation is upon all of a class, either of persons or things, it matters not whether those included in it be one or many. . . . The legislature has often exempted certain classes of properties and even certain classes of persons from taxation altogether." It is true that Durach's Appeal was decided before the adoption of the new constitution, but in Kitty Roup's Case, 32 P.F.S. 216, it is stated that the judges of the Supreme Court, whilst they were unable to agree upon the other questions in the case, were all of one mind, "that the power to classify the subjects of taxation is not taken away by the new constitution." So in Kittaning v. Commonwealth, 29 P.F.S. 104, AGNEW, C.J., speaking of the very clause in the new constitution now invoked by the plaintiffs, says: "Clearly there is nothing in this prohibiting the power to classify. Will it be argued that persons or the owners of property cannot be classified? For example, can it be said that all single freemen cannot be required to pay a uniform tax?" See also Banger's Appeal, 16 W.N.C., 289, which is the last utterance of the Supreme Court on the subject.

It is thus seen that the power to classify both persons and things for the purposes of taxation is undoubted. But the power to classify, so carefully defended by the Supreme Court, would be of no avail unless accompanied by the power to discriminate between the classes thus created. The existence of this latter power is expressly recognized, and the absurdity that would result from a denial of it is clearly pointed out in Durach's Appeal, supra.

So in Township v. Berger, 2 Pears., 231, Judge PEARSON, whose utterances on all questions relating to taxation are entitled to the greatest respect, concedes that the legislature may impose "taxes on one class, from which others should be free." Moreover, the whole tenor of tax legislation, as well since as before the adoption of the new constitution, is in harmony with this idea. Our statute books teem with Acts of Assembly, the constitutionality of which has never been called in question, imposing taxes upon corporations from which not only natural persons, but other corporations, are exempt. True, the discriminations thus made are against corporations, but the principle is the same. The constitutional rights of corporations are just as sacred as those of individual citizens, and the legislature has no more power to take the property of the one for public uses, without compensation, than it has to take the property of the other.

By keeping in view the power vested in the legislature to discriminate between classes of persons, the present question will be found to be free from all difficulty. The Act under consideration declares that certain property "in the hands of individual citizens of the state" shall be taxable for state purposes. This is but another way of saying that "individual citizens" as distinguished from corporations holding the particular kinds of property named shall pay a tax upon it: Kittaning v. Commonwealth, supra. The distinction between the two forms of expression is unmeaning: Id. Much of the confusion of thought injected into the present case comes from treating the classification made by the legislature as a classification of property rather than as a classification of persons. All, therefore, that the legislature has done has been to divide the tax-paying element of the state into two classes, taxing the one and exempting the other. The classification is a very natural one, and one that has been constantly recognized in tax legislation. There is nothing, as has been seen, in such a classification that is unconstitutional. It is not easy to understand why the proviso specially exempting building and loan associations was inserted, but it is enough that such associations constitute a "class" by themselves, and being such the legislature had a right to exempt them from the burdens imposed by the Act.

But it is claimed that the Act we have been considering, which is entitled "A further supplement to an Act entitled an Act to provide revenue by taxation," is unconstitutional upon another ground, to wit, that it violates section 3 Article III, of the constitution, which provides that "no bill, except general appropriation bills, shall be passed containing more than one subject, which shall be clearly expressed in the...