Equitable Life Assur. Soc. of U.S. v. Murphy

• Citation: 621 A.2d 1078,153 Pa.Cmwlth. 338
• Parties: EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES and Allied Dunbar Property, Inc., Appellants, v. M. Christine MURPHY, Revenue Commissioner and City of Philadelphia, Appellees.
• Decision Date: 05 February 1993
• Court: Pennsylvania Commonwealth Court

Page 1078

621 A.2d 1078

153 Pa.Cmwlth. 338

EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES and Allied Dunbar Property, Inc., Appellants, v. M. Christine MURPHY, Revenue Commissioner and City of Philadelphia, Appellees.

Commonwealth Court of Pennsylvania.

Argued June 18, 1992.

Decided Feb. 5, 1993.

Michael P. Weinstein, for appellants.

John D. Christmas, Asst. City Sol., for appellees.

Before CRAIG, President Judge, and DOYLE, (P.) and FRIEDMAN, JJ.

FRIEDMAN, Judge.

The Equitable Life Assurance Society of the United States and Allied Dunbar Property, Inc., (collectively, Appellants) appeal from an order of the Court of Common Pleas of Philadelphia County denying their motion for summary judgment, granting a cross-motion for summary judgment to the City of Philadelphia (City) and its Revenue Commissioner (collectively, Appellees), and entering judgment against Appellants for payment of delinquent realty transfer taxes. We affirm. ¹

The parties agree on all pertinent facts in this case and filed a stipulation of those facts with the trial court, (R.R. at 68a-73a), a condensed version of which follows.

The entities involved in this case present us with an intricately intertwined cast of characters which includes: Appellant, the Equitable Life Assurance Society of the United States (Equitable), a New York mutual life insurance company; Appellant, Allied Dunbar Property, Inc. (Allied), a Delaware corporation and wholly owned subsidiary of British corporation, Allied Dunbar Assurance, Plc.; Allied Dunbar Property (Eight Penn) Inc., a Delaware corporation, which until February 14, 1986, was a wholly owned subsidiary of Allied; Remm Incorporated (Remm), a wholly owned subsidiary of Equitable and a Pennsylvania corporation; and Penn Eight Associates (Associates), a Pennsylvania general partnership comprised of Equitable and Eight Penn, each of which held a 50% interest in Associates. Associates' only tangible asset was the real estate and building located at 8 Penn Center in Philadelphia. From May 21, 1984 until February 14, 1986, Eight Penn's only asset was its partnership interest in Associates.

On February 14, 1986, Equitable and its subsidiary, Remm, entered into an agreement of sale to purchase all of Eight Penn's one hundred (100) shares of outstanding stock from Allied for $20,737,500.00, ninety-nine (99) shares to Equitable and one (1) share to Remm. The closing for the sale took place simultaneously in New York City and London, with the Eight Penn shares delivered to the buyers in New York City. ²

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

In June 1985, the City of Philadelphia amended its Realty Transfer Tax Ordinance, Philadelphia Code §§ 19-1400--19- 1408, by adopting the Ordinance of June 5, 1985, Bill No. 567 (Bill No. 567). ³ The amended tax ordinance required persons selling or accepting securities or shares of any real estate corporation, which in effect transferred ownership of real estate situate within the City, to file certificates of transfer within thirty (30) days of the transaction and pay realty transfer taxes at the rate of two and five-tenths percent (2.5%) of the real estate's value. Philadelphia Code §§ 19-1403 and 19-1404(2). ⁴

The parties agree that at the time of the sale, Eight Penn was a "real estate corporation" as more than ninety percent of its assets consisted of real estate. Philadelphia Code § 19-1402(5). Therefore, pursuant to Philadelphia's amended Real Estate Transfer Tax, Equitable's acquisition of Eight Penn stock from Allied required Appellants to file a certificate of transfer and to pay the appropriate realty transfer taxes. Remm was exempted from this requirement because its transfer amounted to only 1% of the transaction. Philadelphia Code 419-1403. Appellants did not, and still have not filed a certificate of transfer or paid any taxes.

Instead, Appellants filed a Complaint in Equity with the trial court, seeking a declaratory judgment that certain former sections of the Philadelphia Realty Transfer Tax Ordinance, as amended by Bill No. 567, are invalid and unconstitutional either as written or as applied to Appellants' transaction. The parties stipulated that Appellants' action was the proper vehicle for resolving these issues and agreed that Appellants should bring these challenges before the trial court by means of a motion for summary judgment.

The trial court denied Appellants' motion for summary judgment, holding that the Philadelphia Realty Transfer Tax Ordinance, as amended by Bill No. 567, was a valid extension of the law, and that Appellants failed to demonstrate that its application to them violated either the Pennsylvania or United States Constitutions. Consequently, the trial court granted summary judgment in Appellees' favor and ordered Appellants to pay the delinquent tax due in the amount of $408,375.00 plus interest from March 16, 1986; i.e., thirty days after the realty transfer occurred.

On appeal, ⁵ Appellants maintain that: (1) under the Sterling Act, ⁶ the City of Philadelphia is not authorized to impose its realty transfer tax on the transaction in question; (2) provisions of Bill No. 567 are constitutionally infirm, violating the uniformity clause of the Pennsylvania Constitution and/or the equal protection, due process or commerce clauses of the United States Constitution; and (3) under the Regulatory Preemption Doctrine, Equitable, as a state regulated insurance carrier, is exempt from the Philadelphia Realty Transfer Tax. We will address each of Appellants' arguments in turn.

I. THE STERLING ACT

Appellants contend that Philadelphia can tax transfers of real property, or interests in corporations or partnerships owning real property, only insofar as that power is granted by the General Assembly under the Sterling Act, the City's principal tax enabling act. Section 1 of the Sterling Act, 53 P.S. § 15971, provides Philadelphia with:

the authority by ordinance, for general revenue purposes, to levy, assess and collect, or provide for the levying, assessment and collection of, such taxes on persons, transactions, occupations, privileges, subjects and personal property, within the limits of such city of the first class, as it shall determine, except that such council shall not have authority to levy, assess and collect, or provide for the levying, assessment and collection of, any tax on a privilege, transaction, subject or occupation, or on personal property, which is now or may hereafter become subject to a State tax or license fee.

Pursuant to its authority under the Sterling Act, the City of Philadelphia enacted the Ordinance of September 7, 1937, establishing its first tax on the transfer of Philadelphia real estate. In 1951, the Commonwealth of Pennsylvania adopted the Act of December 27, 1951, P.L. 1742, as amended, 72 P.S. §§ 3283-3292 (P.L.1742), which imposed its own realty transfer tax on the making or presentation for recording of any "deed, instrument or writing whereby any lands, tenements, or hereditaments within this Commonwealth or any interest therein shall be quitclaimed, granted, bargained, sold or otherwise conveyed to the grantee, purchaser, or any other person." 72 P.S. § 3284.

With language reflecting the Commonwealth's intent to preempt the field, the Sterling Act precluded Philadelphia from imposing tax on any matter subject to State tax. Therefore, P.L. 1742 ordinarily would have terminated Philadelphia's right to tax realty transfers entirely. However, P.L. 1742 contained a savings clause which provided:

Notwithstanding anything contained in any law to the contrary, the validity of any law or any ordinance or part of law or of any ordinance, or any resolution or part of any resolution, and any amendments or supplements thereto, now or hereafter enacted or adopted by the Commonwealth or any political subdivision thereof, providing of or relating to the imposition, levy or collection of any tax, shall not be affected or impaired by anything contained in this act.

Section 11 of P.L. 1742, 72 P.S. § 3292.

In 1952, under authority from the saving clause of P.L. 1742, the City replaced the 1937 ordinance with its present realty transfer tax system. Like its Commonwealth counterpart, Philadelphia's 1952 ordinance imposed a realty transfer tax on any "deed, instrument or writing whereby any lands, tenements or hereditaments within this City, or any interest therein, shall be granted, bargained, sold or otherwise conveyed to the grantee, purchaser, or any other person." Ordinance of December 9, 1952, as amended, Philadelphia Code §§ 19-1400--19-1408.

Appellants first argue that because the Sterling Act only authorizes Philadelphia to assess and collect taxes on transactions or privileges within City limits, the City has no statutory authority to tax Allied's transfer of Eight Penn stock to Equitable, which took place outside Philadelphia's boundaries. City Stores Co. v. Philadelphia, 376 Pa. 482, 103 A.2d 664 (1954). Moreover, even though the property affected by this transfer was situated in the City, Appellants contend that the tax could not be imposed on the privilege of transferring City real estate where that privilege was exercised outside the City. Philadelphia Appeal, 383 Pa. 428, 119 A.2d 205 (1956).

In both City Stores and Philadelphia Appeal, our supreme court held that Philadelphia could not tax transfers of City real estate when the settlement of the real estate sale was held outside the City. Nevertheless, these cases do not strengthen Appellants' position because both cases were decided prior to the effective date of a 1954 amendment to Philadelphia's real estate transfer tax. In City Stores, decided under the 1937 ordinance, the court stated that the ordinance imposed the tax not on the real estate itself nor on the paper on which the agreement for sale was written, but on a "transaction" pertaining to real estate. Because the only "transaction"...