City of Pittsburgh v. Allegheny Valley Bank of Pittsburgh

• Decision Date: 20 March 1980
• Parties: CITY OF PITTSBURGH, a Municipal Corporation, and Joseph L. Cosetti, Treasurer, Appellants, v. ALLEGHENY VALLEY BANK OF PITTSBURGH, Commercial Bank and Trust Company, Iron and Glass Bank, Keystone Bank, North Side Deposit Bank, State Banking Associations, Mellon Bank, N. A., Pittsburgh National Bank, the Union National Bank of Pittsburgh and Equibank, N. A., National Banking Associations.
• Court: Pennsylvania Supreme Court

412 A.2d 1366

488 Pa. 544

CITY OF PITTSBURGH, a Municipal Corporation, and Joseph L.

Cosetti, Treasurer, Appellants, v. ALLEGHENY VALLEY BANK OF PITTSBURGH, Commercial Bank and Trust Company, Iron and Glass Bank, Keystone Bank, North Side Deposit Bank, State Banking Associations, Mellon Bank, N. A., Pittsburgh National Bank, the Union National Bank of Pittsburgh and Equibank, N. A., National Banking Associations.

Supreme Court of Pennsylvania.

March 20, 1980

Argued Sept. 20, 1979.

Mead J. Mulvihill, Jr., City Sol., Grace S. Harris Executive Asst. City Sol., Pittsburgh, for appellants.

Everett K. Dilworth, William H. Dickey, Jr., Tucker Arensberg, Very & Ferguson, Pittsburgh, for Pittsburgh Nat Bank.

William B. Mallin, Ray C. Stoner, Eckert, Seamans, Cherin & Mellott, Pittsburgh, for Allegheny Valley Bank of Pittsburgh, Commercial Bank & Trust Co., and Iron and Glass Bank.

Abraham Fishkin, Pittsburgh, for Keystone Bank.

James F. Malone, III, Brandt, Milnes, Rea & Malone, Pittsburgh, for North Side Deposit Bank.

Carl E. Glock, Jr., J. Sherman McLaughlin, Reed, Smith, Shaw & McClay, Pittsburgh, for Mellon Bank, N. A.

Robert H. Stevenson, Anderson, Moreland & Bush, Pittsburgh, for Equibank, N. A.

George L. Cass, Buchanan, Ingersoll, Rodewald, Kyle & Buerger, Pittsburgh, for Union Nat. Bank of Pittsburgh.

Before EAGEN, C. J., and O'BRIEN, ROBERTS, NIX, MANDERINO, LARSEN and FLAHERTY, JJ.

OPINION OF THE COURT

ROBERTS Justice.

Since 1969, the City of Pittsburgh has imposed a Business Privilege Tax on local business revenues. ^[1] On August 30, 1973 the City brought assumpsit actions in the Allegheny County Court of Common Pleas against five state banks and four national banks for failure to pay this tax. ^[2] The City alleged that the state banks were subject to the Business Privilege Tax for the years 1969 to 1973, resulting in unpaid tax liability of at least $300,000, and that the national banks were subject to the Business Privilege Tax for the years 1970 to 1973, resulting in unpaid tax liability of at least $4,000,000. ^[3] The banks admit not paying the tax, but claim that the tax is invalid as applied to them.

The actions were consolidated and tried without a jury. The trial court held that the Bank Shares Tax Act and the Local Tax Enabling Act exempted appellee banks from this tax. ^[4] The court decided, however, that certain "nontraditional" banking activities were subject to the Business Privilege Tax. ^[5] The Commonwealth Court reversed the trial court's holding as to the taxability of "nontraditional" banking activities, but in all other respects affirmed the court's decision. This Court granted allowance of appeal. We affirm.

I.

The question presented is whether appellant City of Pittsburgh may validly impose its Business Privilege Tax upon the business of appellee banks. The Local Tax Enabling Act, if read alone, may possibly sustain appellant's tax, for it grants municipalities "the power to levy, assess and collect taxes upon any and all subjects of taxation which the Commonwealth has power to tax but which it does not tax or license." However, the Legislature's enactment of comprehensive banking legislation compels our consideration of whether local taxation upon the business of banks has been preempted.

When laws, such as the banking legislation,

"are silent as to whether municipalities are or are not permitted . . . to impinge in any manner upon the field entered by the state . . . (,) the question whether municipal action is permissible must be determined by an analysis of the provisions of the . . . (relevant legislation) in order to ascertain the probable intention of the legislature in that regard."

Western Pennsylvania Restaurant Ass'n v. Pittsburgh, 366 Pa. 374, 380-81, 77 A.2d 616, 619-20 (1951) (Opinion by Justice, later Chief Justice, Horace Stern); see Harris-Walsh, Inc. v. Dickson City Borough, 420 Pa. 259, 216 A.2d 329 (1966); Department of Licenses v. Weber, 394 Pa. 466, 147 A.2d 326 (1959). Review of the Commonwealth's banking laws discloses the Legislature's intention to exclusively reserve regulation of the state banks to the Commonwealth. It is clear, moreover, that appellant's Business Privilege Tax impermissibly "impinges" upon this regulated area in contravention of the legislative preemption for the Commonwealth. It must be concluded therefore that appellee state banks are not taxable under appellant's ordinance. Because federal law prohibits discrimination in taxation between state and national banks, it would be impermissible to impose this tax upon national banks while excluding state banks from such taxation. Hence, we hold that appellant's tax is also invalid as applied to appellee national banks.

II.

The Banking Code ^[6] and the Department of Banking Code ^[7] manifest the Legislature's intention to exclusively occupy the state banking field. These Codes impose statutory requirements and standards upon virtually all aspects of banking. There are provisions, for example, governing the powers of commercial and saving banks, 7 P.S. §§ 301-317 and 501-512, bank deposits, §§ 601-610, a bank's capital structure, §§ 1101-1105, shares and shareholders, §§ 1201-1222, incorporation, §§ 1001-1011, and duties as a fiduciary, §§ 401-407.

The Legislature established the Department of Banking to supervise the activities of state banking institutions. See Delaware County Nat'l Bank v. Campbell, 378 Pa. 311, 314, 106 A.2d 416, 418 (1954); Commercial Bank Corp. v. Freeman, 353 Pa. 563, 567, 46 A.2d 233, 235 (1946). The Legislature assigned various mandatory duties to the Department, ^[8] and vested in it "auditory, investigatory and inquisitorial power . . ." to carry out these functions. Stahl v. First Pa., 411 Pa. 121, 131, 191 A.2d 386, 392 (1963).

The Legislature also granted broad supervisory power to the Department of Banking. The Department is charged with the responsibility of protecting the safety and soundness of all banking institutions:

"(The Department) shall exercise such general supervision over institutions as will afford the greatest possible safety to depositors, other creditors, and shareholders thereof, insure the safe and sound conduct of the business of such institutions, conserve their assets, maintain the public confidence in such institutions and protect the public interest."

71 P.S. § 733-202. In addition, the Department is legislatively directed to foster a "progressive" banking industry in this Commonwealth by promoting "competition" and the growth of diversity in the banking industry, encouraging banks to adapt to the changing community and economy, providing bank management more leeway in the development of bank operations and policy, and shaping its own regulations to "meet changes in banking and economic conditions without repeated, detailed legislative amendment." 7 P.S. § 103(a) (v)-(ix) and Comment; ^[9] see also Pennsylvania Bankers v. Secretary of Banking, 481 Pa. 332, 392 A.2d 1319 (1978).

The Great Depression is a stark reminder that the economic fate of our Commonwealth is tied to the soundness and progress of its banking institutions. Banks possess a "delicate nature," so that even sound banks may be in jeopardy of collapse when one or more in the general area fail. Dauphin Deposit Trust Co. v. Myers, 401 Pa. 230, 236, 164 A.2d 86, 89-90 (1960); cf. Conestoga Nat'l Bank v. Patterson, 442 Pa. 289, 300, 275 A.2d 6, 11 (1971). It is the legislative judgment that unified state-wide regulation of banks is the best method for protecting the soundness and integrity of banking institutions.

"Local authorities not only are ill-equipped to comprehend the needs of the public beyond their jurisdiction, but, and equally important, these authorities, if they had the power to regulate, necessarily would exercise that power with an eye toward the local situation and not with the best interests of the public at large as the point of reference."

Duquesne Light Co. v. Upper St. Clair Twnshp., 377 Pa. 323, 336, 105 A.2d 287, 293 (1954); see Duquesne Light Co. v. Monroeville Borough, 449 Pa. 573, 298 A.2d 252 (1972). Thus there is no position in the legislative schema for municipal "impingement" in the uniform state-wide regulation of banking institutions. ^[10]

III.

It is well established in this Commonwealth that a municipal regulation may not intrude into areas preempted by the state. ^[11] This concept is equally applicable to local taxation. See e.g., Allegheny Airlines v. Philadelphia, 453 Pa. 181, 309 A.2d 157 (1973) (state or local airport head tax preempted by congressional legislation); United Tavern Owners v. Philadelphia School District, 441 Pa. 274, 272 A.2d 868 (1971) (opinion announcing the judgment of the court) (municipal retail liquor tax preempted by state); Tempe v. Prudential Insurance Co., 109 Ariz. 429, 510 P.2d 745 (1973) (municipality preempted by state from taxing insurance company rental income); East Ohio Gas Co. v. Akron, 7 Ohio St.2d 73, 218 N.E.2d 608 (1966) (municipality preempted by state from taxing utility income); Parker v. Silverton, 109 Or. 298, 220 P. 139 (1923) (municipality preempted by state from taxing transit company); see also McCulloch v. Maryland, 4 U.S. (4 Wheat. 316) 415 (Curt.Ed.), 4 L.Ed. 579 (1819) (state preempted by Congress from taxing national bank); Weston v. Charleston, 8 U.S. (2 Pet. 449) 171 (Curt.Ed.), 7 L.Ed. 481 (1829) (municipality preempted from taxing federal bonds); see generally Antieau, 2A Local Government Law § 21.10 (1979 ed.); McQuillin, Municipal Corporations § 44.190a (1973 ed.).

As appellant's complaint indicates, the tax liabilities which appellant imposed upon appellee state banks are not nominal. To the contrary, appellant seeks tax payments calculated as a...