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, 117 U.S. 151, far from being subsequently questioned or departed from, has been cited with approval and followed in a number of cases continuing in unbroken sequence to the present *Page 203 day; for example: Wisconsin Central R. R. Co. v. Price County,133 U.S. 496 (where it was said: p. 504: "It is familiar law that a State has no power to tax the property of the United States within its limits"); Clallam County v. United States,263 U.S. 341 (which extended such immunity to property of a corporation all the stock of which was owned or controlled by the United States, the corporation being an instrumentality organized for the purpose of carrying on the first world war);Lee v. Osceola Little River Road Improvement District,268 U.S. 643 (where it was said, p. 645: "It was settled many years ago that the property of the United States is exempt by the Constitution from taxation under the authority of a State so long as title remains in the United States. . . . This is conceded"); Fox Film Corporation v. Doyal, 286 U.S. 123 (where it was said, p. 128: "The property of the United States is not subject to state taxation"). It is true that where land belonging to the government is sold to a purchaser and the latter has complied with all the requirements of the contract, so that nothing remains to be done but the issuance of a patent or the execution of a deed, the property is subject to state taxation, because in that event equitable ownership has passed to the vendee and the government has a mere naked title; however, if any antecedent condition remains unperformed the property, as such, is exempt from local taxation: Railway Co. v. Prescott, 83 U.S. 603; Railway Co. v. McShane, 89 U.S. 444;Northern Pacific R. R. Co. v. Traill County, 115 U.S. 600;Wisconsin R. R. Co. v. Price County, 133 U.S. 496; UnitedStates v. Rickert, 188 U.S. 432; Irwin v. Wright, 258 U.S. 219;Jaybird Mining Co. v. Weir, 271 U.S. 609; United States v. Cityof Milwaukee, 100 Fed. 828; Lincoln County v. Pacific SpruceCorporation, 26 F.2d 435; Mint Realty Co. v. Philadelphia,218 Pa. 104, 66 A. 1130; see also City of New Brunswick v.United States, 276 U.S. 547.
From a study of these authorities it will be observed that they hold that taxation of government property is *Page 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, 76 U.S. 579; Railroad Company v. Peniston,85 U.S. 5; Baltimore Shipbuilding Dry Dock Co. v. Baltimore,195 U.S. 375; Susquehanna Power Co. v. State Tax Commission ofMaryland, 283 U.S. 291; Taber v. Indian Territory IlluminatingOil Co., 300 U.S. 1; James v. Dravo Contracting Co.,302 U.S. 134 (where it was said, p. 149: "The tax is not laid upon the government, its property or officers," nor "upon an instrumentality of the government"); Alabama v. King Boozer,314 U.S. 1 (where there was a tax on the purchase of building materials by a contractor but where impliedly it was held that if the government had been the purchaser the tax would have been invalid); Curry v. United States, 314 U.S. 14 (where a use-tax was imposed on material of contractors employed by them in the performance of their government contract).
In the present case it must be borne in mind that before, at, and ever since the time of the imposition of *Page 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,218 Pa. 104, 112, 66 A. 1130, 1132.
In People ex rel. Donner-Union Coke Corporation v. Burke,204 App. Div. 557, 198 N.Y. S. 601, it was held that a plant (buildings and equipment) owned by the federal government, which was erected during the first world war on land owned by a private corporation and sold to that corporation under a contract reserving title until payment of all installments due, was not subject to taxation by the City of Buffalo. That decision was affirmed by the New York Court of Appeals, without an opinion, in 236 N.Y. 650, 142 N.E. 320. The legislature of New York then passed an act authorizing the assessment and taxation of the interest of the private corporation in the property, such assessment to be at the full value of the property, but it was held that this was nothing more than an attempt, under the guise of taxing the corporation's interest, to tax the property itself, *Page 206 and accordingly, while the assessment of the land belonging to the corporation was sustained, the assessment of the plant built thereon and owned by the United States was vacated and set aside: People ex rel. Donner-Hanna Coke Corporation v.Burke, 217 N.Y. S. 803, affirmed, without an opinion, in222 App. Div. 790, 226 N.Y. S. 882, and by the Court of Appeals in248 N.Y. 507, 162 N.E. 503.
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." *Page 207
In our own state, in County of Franklin v. McClean, 93 Pa. Super. 165, a private citizen constructed improvements on land leased from the Commonwealth, and it was held that the buildings thus erected were taxable by the county as real estate but the land itself, belonging to the Commonwealth, was not taxable. By the same token the reverse is true; that is to say, if the land were privately owned and the title to the improvements were in the Commonwealth the improvements would be exempt from taxation although the land would be taxable to its owner.
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, 63 Sup. Ct. Rep. 617, 620) but property can be, and the machinery here is, such an instrumentality; United States v. Rickert, 188 U.S. 432; PortAngeles Western R. R. Co. v. Clallam County, 20 F.2d 202;Dewey County v. United States, 26 F.2d 434 (certiorari denied, 278 U.S. 649). Indeed, it seems to me inconceivable that a state or other local authority should have the power to impede the national effort to win the war by imposing taxes upon the instruments owned and needed by the government for that purpose. If the United States had guns stored in various cities of the Union, could such cities, or the states in which they were located, impose a property tax upon those implements of warfare? I realize that there has been a trend in the decisions of the Supreme Court of the United States toward holding that non-discriminatory taxation by a state, that is to say, taxation which does not single out the United States as a taxpayer, is not invalid; that trend is discussed in *Page 208 Penn Dairies v. Milk Control Commission of Pennsylvania,63 Sup. Ct. Rep. 617, 621. But, while a tax discriminating against the United States would certainly be invalid, I do not understand that a tax is valid just because it does not so discriminate; its validity is still subject to the limitation which, resulting from the nature of our federal system, requires that property belonging to the United States, and especially if used by it for the performance of one of its vital constitutional functions, should be exempt from local taxation. If, for example, a property tax were imposed by a state on all courthouse buildings within the state, could the tax be levied on a federal courthouse there located just because it applied to all courthouses, state and federal alike? If a property tax were imposed by a state on guns carried by persons within the state, could the tax be levied, because it was non-discriminatory, on guns carried by soldiers of the United States army within that state? The doctrine of "non-discriminatory" taxation has been applied to taxes on the property of contractors dealing with the government, but it has never been held to justify a tax imposed upon the government's own property or upon the instrumentalities through which it exercises the powers granted it by the Constitution. Nor is there any merit in the argument that the machinery, together with all the other property in the mill, is presumably given local police and fire protection. Such protection is also afforded to federal postoffices, courthouses, arsenals and other government establishments, but that does not make them liable to local taxation; it is for Congress alone to declare that, because of this consideration, the state or other local authority should be permitted to tax government property.
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 *Page 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,307 Pa. 44, 51, 159 A. 32, 34) is not to be weighed against the right of an exempt owner. As far as private persons are concerned, Pennsylvania may, if it sees fit, — either as a matter of practical expediency or of economic policy, — tax land, building and equipment as a whole, regardless of the fact that parts of the property may be owned by other persons, and even by citizens of other states: Coe v. Errol, 116 U.S. 517. In the present case, however, we are dealing, not with expediency or policy, but with the constitutional power of Pennsylvania where the owner of part of the property taxed happens to be the United States. It is contended that, although machinery belonging to the government is not taxable so long as it retains its status as personal property, it becomes locally taxable as real property when bolts are driven through it to the floor of the Mesta Company's mill. It is true, of course, that for certain purposes machinery affixed to a building is regarded by the law as though it were real estate, and, if privately owned, might properly be so regarded for purposes of taxation. Even if, however, it be deemed to be real property, it is real property belonging to the United States and therefore is not taxable. If the United States owned ahorizontal islet of land in the middle of the plant, certainly no one would contend that that islet would be taxable; it may not be too fanciful to view this machinery as a piece ofvertical real property belonging to the United States, and no more taxable, therefore, than it would be under the hypothesis suggested, for what difference should it make whether the property owned by the government be distinguished from *Page 210 that owned by the Mesta Company by horizontal or by vertical boundary lines? Such a distinction would subordinate actualities to a type of legalism unbefitting the purpose and art of constitutional interpretation. The important point is that, whatever the technical nomenclature ascribed to it, the machinery is owned by, and is an essential instrumentality of, the United States, and it cannot be deprived of the resulting immunity given it under our constitutional system merely because, in order to facilitate its operation, it is necessary temporarily to fasten it to the floor of a mill. Such fastening still leaves it a distinct, individuated part of the property; it does not change its ownership, and it is ownership which is the criterion of taxability under the statute by which this tax is imposed. In short, — to state the basic proposition in simple language, — the United States owns a distinct, clearlydefined, tangible part of this mill and that part is exemptfrom local taxation.
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, 218 Pa. 104, 110,66 A. 1130, 1132, "The power to tax implies the power to divest the title by a tax sale when there is default in the payment of the taxes levied," and in Northern Pacific R. R. Co. v. TraillCounty, 115 U.S. 600, 610, "A valid sale . . . for taxes, being the highest exercise of sovereign power of the State, must carry the title to the property sold, and if it does not do this, it is because the *Page 211 assessment is void. It follows that, if the assessment of these taxes is valid . . . the sale confers a title paramount to all others, and thereby destroys the lien of the United States for the costs of surveying these lands. If, on the other hand, the sale would not confer such a title, it is because there exists no authority to make it." As already stated, there is no pretense that the tax here in question was on the interest, equitable or otherwise, of the Mesta Company in the machinery, not only because the company had no such interest apart from its right to use the machinery under its government contract, but because the tax admittedly was on the full value of the machinery and was imposed upon the Mesta Company, not as user or possessor, but as owner of the mill. The situation, therefore, is quite different from that which existed in the case of City of New Brunswick v. United States, 276 U.S. 547, where the vendees of property, the title to which was in the United States, not only had a substantial interest therein, but had completed the payments to the government which entitled them to receive a deed to the property and had thereby relegated the United States to the legal position of a quasi-mortgagee.
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., 326 Pa. 262, 264,192 A. 121, 122. Thus there is peculiarly applicable here the statement made by the court in Colorado Bank v. *Page 212 Bedford, 310 U.S. 41, 52, that "The person liable for the tax, primarily, cannot always be said to be the real taxpayer. The taxpayer is the person ultimately liable for the tax itself." It is therefore clear that, just as in the Van Brocklin case and many others of those hereinbefore cited, the fact that the assessment of the tax is against the Mesta Company, and not the United States directly, is of no significance as far as the validity of the tax is concerned. The United States is the real party in interest, not because of any indirect shifting to it of the economic burden of the tax, but because it is bound, even irrespective of its contract, to reimburse the Mesta Company, and it is therefore the real taxpayer involved. Of course, the Mesta Company also has the right, apart from that of the government, to resist the tax imposed upon it; it is not obliged to submit to an invalid levy and then seek reimbursement from the government.
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. *Page 213