Estate of Scheutz

• Decision Date: 03 October 1934
• Docket Number: 42-1935
• Citation: 114 Pa.Super. 602,174 A. 832
• Parties: Estate of Henry Scheutz, Jr., Deceased
• Court: Pennsylvania Superior Court

174 A. 832

114 Pa.Super. 602

Estate of Henry Scheutz, Jr., Deceased

No. 42-1935

Superior Court of Pennsylvania

October 3, 1934

Argued May 4, 1934

Appeal by Edwin Scheutz, Carrie S. Helmig, Clementine S. DeHaven Henrietta S. McCann and Marguerite S. Graham from decree of O. C., Allegheny County, June T., 1933, No. 213, in the case of Estate of Henry Scheutz, Jr., deceased.

Exceptions to an adjudication. Before Trimble, P. J., Mitchell and Chalfant, JJ.

The facts are stated in the opinion of the Superior Court and in the case of Scheutz's Estate, 315 Pa. 105.

The court dismissed the exceptions. Exceptants appealed.

Error assigned, among others, was the dismissal of the exceptions.

Affirmed.

J. Boyd Duff, Jr., for appellant.

Thomas E. Whitten, Assistant County Solicitor, for appellee.

Before Trexler, P. J., Keller, Cunningham, Baldrige, Stadtfeld Parker and James, JJ.

OPINION

Keller, J.

The question raised by this appeal is whether the County of Allegheny is entitled to collect a four mill tax on interest bearing deposits in incorporated banks for the years 1928, 1929, 1930, 1931 and 1932. The court below held that it was.

Prior to the Act of June 17, 1913, P. L. 507, for many years, the tax imposed on money at interest was a State tax. It was collected in two ways: (1) With respect to the tax on moneys borrowed and owing by domestic corporations, and foreign corporations doing business in this Commonwealth, the corporation, through its treasurer, made an annual report to the auditor general setting forth the amount of its interest bearing loans held by residents of this Commonwealth, and the tax was levied on the amount so settled, and the corporation, as the agent of the Commonwealth, was required to deduct the tax from the interest paid to its loan creditors and remit the same to the state treasurer. (2) With respect to all other loans and interest bearing accounts, the tax was levied and collected for the state by the county in which the creditor resided, on the basis of a return made to the assessor by the person taxable, of taxable money at interest; or for want of such return, on the basis of an assessment made by the assessor from the sources of information at his command. By various amendments and supplements engrafted on the law, the State returned to the several counties a proportion of the taxes thus collected by them for the State's account. The tax was, however, a State tax. See Phila. Co. for Guaranteeing Mortgages v. Guaranty Realty Co., 78 Pa.Super. 258, for a fuller review of the legislation involved.

The Act of 1913 changed this. It provided, inter alia, that beginning with 1914 the tax levied and collected in the second class above-mentioned should be for county purposes; while that levied and collected in the first class -- that is, from returns made by corporations as agents of the Commonwealth -- remained a State tax for State purposes. The subjects taxable for county purposes are set forth in the first section of the Act; those taxable for State purposes are set forth in the 17th section. Included in the first section, inter alia, are "all . . . . accounts bearing interest; . . . . all other moneyed capital in the hands of individual citizens of the State." It also included "all loans issued by any corporation . . . . except such loans as are made taxable for State purposes by section seventeen." The 17th section provided, inter alia, "That all scrip, bonds, or certificates of indebtedness issued by any and every private corporation, incorporated or created under the laws of this Commonwealth, or the laws of any other State or of the United States, and doing business in this Commonwealth, . . . . are hereby made taxable in the year 1914 and annually thereafter for State purposes . . . . And . . . . none of the classes of property made taxable by this section for State purposes shall be taxed or taxable for county, school or local purposes." A superficial reading of the statute would apparently show a duplication of taxation in the two sections of certain items of corporate loans, but a more careful study of the whole act will clear this up. There were corporate loans held by individual residents of this Commonwealth which were not embraced within the provisions of Section 17, and all such, and only such, were taxable under Section 1 for county purposes.

Now deposits in banks, while they create the condition of debtor and creditor between the bank and the depositor, have not, in prior legislative enactments, been included under the term "corporate loans." Where "deposits" have been intended as a subject for legislation, they have been designated as such, rather than as loans or indebtedness of the bank. See Act of April 30, 1864, Sec. 3, repealed by Act of May 1, 1868, P. L. 108, Secs. 11 and 16. The legislation of the State makes a clear distinction between deposits, on the one hand, and bonds, notes, bills payable and other indebtedness on the other. Hence in construing the 17th Section of the Act of 1913 it was natural not to include interest bearing bank deposits in "scrip, bonds or certificates of indebtedness issued by" a private corporation; but rather to classify them under "accounts bearing interest" or "all other moneyed capital," made taxable under the first section for county purposes; and both the state and county taxing officials acted accordingly. Interest bearing deposits in incorporated banks, as well as in private banks, were assessed in Allegheny County for county tax purposes under Section 1 and were not required to be returned to the State by the incorporated bank as included within "scrip, bonds or certificates of indebtedness issued by" the corporation bank. This followed the classification in use before the Act of 1913; such deposits being taxable, if at all, by assessment and collection by the county, as agent for the State, rather than by return to the auditor general by the corporation bank.

Following the Act of 1913 an abuse grew up which required a remedy. A corporation, instead of buying a property and placing a mortgage upon it, would have title taken in the name of an individual, who mortgaged it and then conveyed it to the corporation, subject to the mortgage, which the corporation might assume, or merely pay the interest on the mortgage without a formal assumption. The Supreme Court held in Com. v. DuPont Land Co., 254 Pa. 446 98 A. 1047, and Com. v. Lancaster E. L. H. & P. Co., 268 Pa. 290, 110 A. 724, that interest paid by the corporation on such mortgages or indebtedness was not within the 17th section of the Act of 1913 nor taxable for State purposes as 'scrip, bonds or certificates of indebtedness issued by [the] corporation.' On the...