I dissent from the majority opinion and I would affirm the judgment of the court below and hold that 75% of the $36,241,501.95 worth of trust property, made up of non-tax-exempt securities, was taxable in this Commonwealth.
The majority opinion correctly states that "the statute authorizes a tax on personal property, owned, held or possessed by any resident in his own right or as trustee," *Page 175 but it then says: "The legal title to the property assessed is not in any resident of Pennsylvania but in the four trustees, one of them, the corporate trustee, not engaged in, and having no right to engage in business in Pennsylvania." From this last statement it proceeds to the conclusion that Pennsylvania cannot tax any of these trustees.
It was frankly conceded by appellants' counsel at the argument that if all four of these trustees were residents of Pennsylvania the property in question would be taxable in this State, but it was contended that since one of the four trustees does not reside in this Commonwealth the trust property was absolutely exempt from Pennsylvania taxation. This postulate gives rise to the anomalous situation that where a testator bequeaths his property to (say) ten trustees, nine of whom are residents of Pennsylvania and one of whom is a resident of some other state, the property cannot be taxed in Pennsylvania in spite of the fact that the laws of this Commonwealth plainly states that all personal property of the classes enumerated, "owned, held or possessed by any resident in his own right or as trustee" shall be taxed. It follows from appellants' argument that if New Jersey had a personal property tax law similar to Pennsylvania's (and most all states have such a law), and if appellants' contention here should be followed by the highest court of New Jersey, the trust in question could not be taxed in either New Jersey or Pennsylvania and would be wholly exempt from taxation for, I repeat, the basic argument of appellants is that when trustees of an estate all reside in Pennsylvania they are taxable under our laws but if one of them is a nonresident of Pennsylvania, the trust estate cannot be reached either in whole or in part for purposes of taxation. If this contention is to be accepted as sound in law, a wide and easy avenue of escape from taxation is opened to property held in trust.
The majority opinion preliminarily quotes the established rule that "when the administration of a trust is *Page 176 vested in co-trustees, they all form but one collective trustee. They must therefore execute the duties of the office in their joint capacity." While fully recognizing that rule, I challenge the conclusion appellants draw from it and which conclusion the majority opinion appears to accept, to wit, that the "proportional assessment rule" cannot be applied when the trustees reside in different jurisdictions. I will hereafter point out that the "proportional assessment rule" is merely a matter of practical administration of our taxing laws, and that the "legal fiction" that co-trustees "are one," like the "legal fiction" that husband and wife as joint owners of property "are one," should not be permitted (as the United States Supreme Court said in a husband and wife joint ownership of property taxing case: Tyler et al., Admrs., v. U.S., 281 U.S. 497), to "restrict the power of taxation" which the Supreme Court characterized as "a fundamental and imperious necessity of all government."
However, the majority opinion, taking a broader base than the legal fiction as to "the unitary character of the trust," which fiction was appellants' chief reliance, but accepting this "unitary character" fiction as one of the two grounds on which to predicate its conclusion, also bases its conclusion on the theory that New Jersey is this trust's "domicile" and that therefore the entire property is exempt from taxation in Pennsylvania. The majority opinion says: "Accordingly, we must inquire whether, as contended by the appellants, the record shows that a trust was established in New Jersey to be administered there, with trust property maintained there, without control elsewhere and whether the trust is being administered there; in other words, whether New Jersey may be regarded as the 'trust domicile,' if that term may be used." The doctrine of "trust domicile" for purposes of determining whether property is taxable is apparently a novel one, for appellants themselves nowhere invoke it. They invoke the "business situs" doctrine which is quite a different thing, for a mere trust can be administered in *Page 177 any jurisdiction regardless of whether the trust itself carries on any business in that jurisdiction and regardless of whether the securities held in trust have any relation to any business in that jurisdiction. Where a trust is administered is absolutely immaterial when the sovereign state imposes a tax on personal property held within its jurisdiction by any trustee. The majority opinion then says: "The established fact is that the property is identified as trust property and is located and administered as the trust domicile. The will clearly shows that such administration of the trust in Camden, New Jersey, was intended by the testator." My answer to that is that Pennsylvania has not the slightest concern as to where the testator "intended" his trust to be administered. If a wealthy automobile manufacturer of Detroit, Michigan, would appoint a resident of Pennsylvania as trustee of a $50,000,000 estate, and "intend" or even direct that the trustee should have his trust office in Detroit, Michigan, and deposit his securities in a Michigan safe deposit box, the Pennsylvania trustee would nevertheless be taxed on that trust fund because our law says so. I do not understand appellants to controvert that. Their contention is (embodying for clarity their contention in the example used) that if the Michigan manufacturer appointed two or more Pennsylvania residents as trustees and one non-Pennsylvanian as trustee, this State could not impose any tax on the Pennsylvania trustees. If such is the law in this State then all that Pennsylvania trustees administering trust property in this Commonwealth need to do to exempt the trust property in their hands from taxation is to have one of them become a resident of another state. Or, as Judge LAMBERTON cogently puts it: "If this be true, then any testator by naming trustees residing in different states could be assured that the trust estate would entirely escape local and state taxation in so far as intangible assets were concerned. We believe this to be contrary to both logic and common sense. We prefer to *Page 178 follow the reasoning so clearly stated in the case ofMackay v. San Francisco, 128 Calif. 680. In that case there were two trustees, only one of whom resided in California. The court said: 'The property is not in California nor in Nevada, but, being intangible personal property, is said by defendants to follow the person of the owner. If it follows the person of the owner, it could not, as matter of law, be said to follow the person of the plaintiff who resides in California and to forsake and refuse to follow the person of the plaintiff who resides in Nevada. It follows one as much as the other, and the situs is that of the place of domicile of its owners.' The court then held that one-half and only one-half of the trust assets could be taxed by the State of California."
The decision in Safe Deposit Trust Company of Baltimore v.Virginia, 280 U.S. 83, referred to in the majority opinion, is an authority supporting Pennsylvania's contention in this case, for in that case the United States Supreme Court held that under a Maryland personal property tax law similar to ours, a trustee domiciled in Maryland who was holding the trust property for the benefit of Virginia residents was taxable under the law of Maryland. In the concurring opinion of Mr. Justice STONE in that case, he summed up the grounds for the decision when he said: "It is enough to support it [i. e., the decision] that, as stipulated in the record, the Virginia assessment was levied against a trustee domiciled in Maryland upon securities held by it in trust in its exclusive possession and control there, and so is forbidden as an attempt to tax property without the jurisdiction." In other words, as I read that case, the important point is the fact that the trustee wasa resident of the State of Maryland. The corporate trustee residing there had the property in its exclusive possession and control. Even if the trustee had placed the property in a safe deposit box in New York or Canada or elsewhere, it was still legally in its possession and *Page 179 control and since it, the possessor and controller, was a resident of Maryland, it was obliged to pay the tax that its sovereign State imposed on it. In the instant case, it is conceded by appellants, according to the statement of their counsel in open court, that if all the four trustees were domiciled in Pennsylvania, the entire trust property would be taxable in this State regardless of the fact that the securities which constitute the trust property are physically in New Jersey and regardless of the fact that the trustees hold their meetings in New Jersey. I think this admission by appellants' counsel indicates that appellants do not place any reliance on the theory that New Jersey is the "business situs" of this property, for if that state is the business situs of that property, the property is taxable there and not elsewhere, regardless of where the trustees who hold title to that property have their legal residence. "Choses in action may acquire a situs for taxation other than at the domicile of their owner if they have become integral parts of some local business": Farmers Loan Co. v. Minn., 280 U.S. 204; New Orleansv. Stempel, 175 U.S. 309; Small's Est., 151 Pa. 1, 25 A. 23, (see also other cases cited in the dissenting opinion filed on December 29, 1938, in re: Girard Trust Company, Trustee'sAppeal, 333 Pa. 129).
I think the contention of this Commonwealth that "the intangibles comprising the Dorrance Trusts do not have a business situs in New Jersey" is supported in the Commonwealth's paper book by an argument that is unanswerable. In that paper book, the Attorney General of Pennsylvania aptly says: "An examination of the cases on business situs reveals that the conventional situation where this doctrine is applicable is where a creditor places choses in action in the hands of an agent in another State for collection or renewal with a view to reloaning the money and keeping it invested as a continuous and permanent business in such other state. The test seems basically whether such a business is carried on regularly and in competition with local money lenders. *Page 180 Where such credits are not an integral part of a continuing business, as where they are held in the foreign state merely for collection or merely for safekeeping, the cases hold that they do not acquire a business situs. These principles are pointed out generally in First Bank Stock Corp. v. Minnesota,301 U.S. 234, as follows: 'The doctrine that intangibles may be taxed at their business situs, as distinguished from the legal domicile of their owner has usually been applied to obligations to pay money, acquired in the course of a localized business [citing cases].' . . . An extensive annotation is contained in 76 A.L.R. 806, in which the cases pertaining to business situs are reviewed at length. See also article entitled, Multiple Taxation by the State — What is left of it? Volume 48 Harvard Law Review 407." I repeat that the contention of the Commonwealth that the intangibles comprising the Dorrance Trusts do not have a business situs in New Jersey finds support in the admission of appellants that if all four of the Dorrance trustees were residents of Pennsylvania, the trust property would be taxable here. If this property had a business situs in New Jersey, it would be taxable there even though all four trustees resided here.
The majority opinion, as I interpret it, then comes down to this: Since the statutes of Pennsylvania do not expressly provide for proportional assessment of trust property held by trustees respectively domiciled in different jurisdictions, that trust property can be taxed only in the jurisdiction where the trustees meet to administer the trust. I can find no warrant whatever under our Pennsylvania law for such a judicial holding. Our taxing laws say nothing about theadministration of a trust. Our taxing laws are not concerned as to where trustees meet to administer the trust committed to their keeping. They might meet in Florida or on a vessel at sea or elsewhere. The law provides (72 PS sec. 4821): "All personal property of the classes hereinafter enumerated, owned, held or possessed by any person, persons *Page 181 . . . or company, resident, located or liable to taxation within this Commonwealth . . . or by any bank or corporation, . . . whether such personal property be owned, held or possessed by such person or persons . . . company . . . or bank or corporation, in his, her, their or its own right or as active trustee, agent, attorney-in-fact, or in any other capacity, for the use, benefit or advantage of any other person, persons . . . is hereby made taxable . . . for county purposes." A similar Act (72 PS sec. 3244) makes the same kind of property taxable "for state purposes."
The $36,000,000 worth of trust property known as the "Dorrance Trust" is held by four trustees, three of whom reside in Pennsylvania. If all four trustees resided in this State, the entire $36,000,000 trust property would be assessed and taxed here. That fact is conceded by appellants.* Since one of the four trustees resides outside of this State, the assessment of the majority of the trustees (three out of four) residing here became merely a matter of practical administration of the law. In my judgment, those officials charged with administering this law did a common-sense thing when they said, in practical effect: "If all four trustees of this property resided here, we would, of course, tax the entire $36,000,000 of trust property here, but since one trustee resides in New Jersey and therefore is not as 'trustee' subject to our taxing laws and since three of the trustees do reside here, we will tax only 3/4ths of this trust property in this Commonwealth." That is exactly what was done by the *Page 182 taxing authorities of California in a similar case. SeeMackay v. San Francisco (supra). In The Mayor and City Councilof Baltimore v. Stirling Ridgely, Trustees, 29 Md. 48, the Court of Appeals of Maryland filed the following opinion: "This Court in the case of Latrobe v. The Mayor and City Council ofBaltimore, 19 Md. Rep. 13, having settled the doctrine, that the residence of the trustee, and not that of the cestui quetrust, decides the situs for taxation upon property of the description mentioned in the record, the only question presented by this appeal arises from the fact, that in this case there are two trustees, one of whom resides in Baltimore city, and the other in Baltimore county. The tax laws of the State do not expressly provide for such a case, and our decision must be made to rest upon what we regard to be equity and right. The property is certainly not liable to a double tax. If the whole of it were taxable in Baltimore city, under the authority of Latrobe v. The Mayor, etc., of Baltimore, it would, under the same authority, be also taxable in Baltimore county. This cannot be. We think it should be taxed, one-half as of the place of residence of each trustee, — that is, one-half should be taxed to the trustee residing in Baltimore city, and the other half to the trustee residing in Baltimore county. We are sustained in this view by the case of The Stateex rel. Harkness et al. v. Matthews, 10 Ohio Rep. 437, and the case of Hardy et al. v. The Inhabitants of Yarmouth, 6 Allen 285. The judgment below will accordingly be reversed." InAppeal Tax Court of Baltimore City v. Gill, etc., Trustees etal., 50 Md. 377, the Court of Appeals of Maryland held (quoting the fourth syllabus): "Where it was conceded that two of the appellees, in the first named case, resided in this State, and the other resided in New York, two-thirds only of the bonds and stocks held by them as trustees should be subjected to taxation in this State."
I find nothing in our decision in Arbuckle's Est., 324 Pa. 501, which is at variance with the position I take in *Page 183 this case. That case reiterated the principle expressed inCallery's Appeal, 272 Pa. 255, 272, 116 A. 222, as follows: "No tax can be collected in the absence of a provision clearly imposing it upon the class to which the taxpayer or his property belongs." As applicable to the instant case, my contention is that the law clearly imposes a tax upon trust property held by a trustee residing in Pennsylvania and to my mind it is unthinkable that the legislature in framing this tax law intended that when trust property was held by trustees, all of whom were residents of Pennsylvania, such property should pay a personal property tax here but when one of the trustees resided elsewhere than Pennsylvania, though all the others resided here, such property should pay no taxes. As there is no possible reason for such a distinction, I cannot believe that the legislature intended to make it nor can I concur in any opinion which in practical effect holds that our tax laws must be administered on the basis of such a distinction.
The case of Tyler v. U.S., 281 U.S. 497, and already herein referred to, affords a good illustration of how the highest court in the land brushed aside an argument based on a legal fiction which was invoked to prevent the practical and common-sense administration of our federal taxing laws. There Mr. Justice SUTHERLAND, speaking for the United States Supreme Court, said: "These cases present the question whether [real and personal] property owned by husband and wife as tenants by the entirety may be included, without contravening the Constitution, in the gross estate of the decedent spouse for the purpose of computing the tax 'upon the transfer of the net estate' imposed by the Revenue Acts of 1916, c. 463, 39 Stat. 756, 777-8, and of 1921, c. 136, 42 Stat. 227, 277-8." In those cases the applicable taxing act imposed a transfer tax on the property of a decedent "to the extent of the interest therein held jointly or as tenants in [by] the entirety by the decedent and any other person, or deposited in banks or other institutions in their joint *Page 184 names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have belonged to the decedent." A surviving wife challenged the tax on property which she and her husband had held as tenants by the entireties. Her contention was that since she and her husband were in respect to the property they owned jointly, a unit, nothing was "transferred" to her by the death of her husband in respect to that property. As Justice SUTHERLAND expressed it: "The contention . . . proceeds upon the ground that no right in such property is transferred by death, but the survivor retains only what he already had. . . . The question here, then, is, not whether there has been, in the strict sense of that word, a 'transfer' of the property by the death of the decedent, or a receipt of it by right of succession, but whether the death has brought into being or ripened for the survivor, property rights of such character as to make appropriate the imposition of a tax upon that result (which Congress may call a transfer tax, a death duty or anything else it sees fit), to be measured, in whole or in part, by the value of such rights. According to the amiable fiction of the common law, adhered to in Pennsylvania and Maryland, husband and wife are but one person, and the point made is, that by the death of one party to this unit no interest in property held by them as tenants by the entirety passes to the other. This view, when applied to a taxing act, seems quite unsubstantial. The power of taxation is a fundamental and imperious necessity of all government, not to be restricted by mere legal fictions. Whether that power has been properly exercised in the present instance must be determined by the actual results brought about by the death, rather than by a consideration of the artificial rules which delimit the title, rights and powers of tenants by the entirety at common law. See Nicol v. Ames, 173 U.S. 509, 516;Saltonstall v. Saltonstall, supra, [276 U.S. 260], p. 271. Taxation, as it many times has *Page 185 been said, is eminently practical, and a practical mind, considering results, would have some difficulty in accepting the conclusion that the death of one of the tenants in each of these cases did not have the effect of passing to the survivor substantial rights, in respect of the property, theretofore never enjoyed by such survivor."
I cite the above case to show that both Congress and the Supreme Court did not permit the "legal fiction" of the unity of husband and wife in respect to property held jointly by them to stand in the way of a tax on the "transfer" of an interest in that property from the deceased spouse to the surviving spouse though, according to the legal fiction invoked, no such "transfer" ever took place. Applying the reasoning of that case to this case, the three Pennsylvania trustees do have a taxable relationship to the trust property, and the "legal fiction" that the trustees are in law a unit should not be permitted to stand in the way of taxing these trustees who are residents of Pennsylvania and who therefore fall within the statutory designation of the subjects of taxation. Since it would be manifestly unfair to tax these three of the four trusteesto the full extent of the value of the property (one of the four being a nonresident of Pennsylvania), the court below adopted a just and reasonable formula for the practicable administration of our personal property tax law.
I agree fully with what Judge LAMBERTON of the court below says in his opinion, to wit: "The testimony shows that the Trustees meet in New Jersey merely for reasons of convenience. At such meetings they transact only the usual business of a trust estate. They do not conduct any business or do anything of a local character which would have the effect of giving the trust assets a business situs in New Jersey. Guiding the interests of the Campbell Soup Company is likewise ineffective. The stock of the Campbell Soup Company has an identity and a situs independent of the assets or business of that Company. *Page 186 If the trustees, by virtue of their control of Campbell Soup Company through stock ownership, give to that stock a business situs in New Jersey, then any individual, controlling a corporation through stock ownership would give to his stock a situs at the place where the business and assets of the corporation are located. In short, stock, amounting to control of a corporation, and used for that purpose would always have its situs where the corporation is located. That is not the law. A continued course of dealing in securities in New Jersey would give to the particular assets dealt in a business situs in New Jersey if they thereby became an integral part of a local business in that state. But 81% of the allegedly taxable assets consists of Common Stock of the Campbell Soup Company, which the trustees acquired from the estate of Decedent and still retain. Obviously this stock has not acquired a business situs anywhere. The remaining assets consist of United States Treasury Notes, corporate bonds and corporate stocks, in the main readily purchasable and salable on the stock exchange. Such assets have no features local to the State of New Jersey and consequently no amount of mere buying and selling could make them an integral part of local business in that State. But, as a matter of fact, the transactions therein were few and isolated and so plainly fall short of the requirements of the decisions."
I would affirm the decree of the court below.
* In addition to what counsel for appellants said at the oral argument, the following statement is made on page 19 of his paper book: "We think it is clear that the statute here involved, on its very terms, must be construed to reach thewhole of such jointly owned trust property as is ownedexclusively by Pennsylvania trustees [italics supplied], or is held or in the possession of a Pennsylvania trustee, and to reach none of the trust property which is jointly owned by trustees of diverse residence, when held outside Pennsylvania. This construction is supported by numerous decisions in other states."