Court Opinion

ID: 6389851
Source: CourtListenerOpinion
Date Created: 2022-06-25 00:17:40.808433+00
Date Added: 2024-06-11T15:50:40.473573
License: Public Domain

Nixon, J.,
Plaintiff brought this suit to recover for overpayment of taxes in excess of $4,000 allegedly paid erroneously and inadvertently for the years 1950, 1951 and 1952, under the Mercantile *484License Tax Ordinance of the City of Pittsburgh. These taxes were not paid under protest.
Commencing in 1948, plaintiff company paid a mercantile license tax based upon the entire volume of its business transacted in the city. In 1949, the legislature amended the general enabling Act of June 25, 1947, P. L. 1145, by Act of May 9, 1949, P. L. 898, which amendment imposed a limitatiori in favor of manufacturers upon the taxing power of municipalities. This amendment was before the Superior Court in the case of H. J. Heinz Company v. Pittsburgh, 170 Pa. Superior Ct. 435 (1952) and the court held that the city was prohibited from taxing, under the Acts of 1947 and 1949, any privilege, act or transaction related to the business of manufacturing. The over-payments here involved allegedly come within the ruling of that case. Defendants have filed preliminary objections to the effect that: (1) A taxpayer has no right to a refund unless he has paid the tax under protest as required by the Ordinance; and (2) the) action is in effect an appeal from the refusal of the I treasurer to make a refund and, therefore, the County i Court of Allegheny County and not the court of com-1 mon pleas has exclusive jurisdiction. It is upon these ! objections that the matter is now before the court en banc.
Plaintiff bases its action upon the theory that these taxes were paid erroneously and inadvertently, although paid voluntarily. Obviously, taxes paid under protest are not paid through error and inadvertence, as one who pays and protests knows exactly what he, is doing, and there is no mistake either of fact or of law. But the Mercantile License Tax Ordinance provides for refunds only where payment is under protest. In support of its claim, plaintiff relies principally upon the Act of May 21, 1943, P. L. 349, 72 PS §5566(6):
*485“Whenever any person or corporation of this Commonwealth has erroneously or inadvertently paid or caused to be paid into the treasury of any political subdivision, directly or indirectly, any tax or taxes on real or personal property, or any license fee or fees, under an assumption that such taxes or license fees were due and owing, when in fact such taxes or license fees, or a part thereof, were not due and owing to the political subdivision, then in such cases the authorities of the political subdivision, upon due proof of any such erroneous or inadvertent tax or license fee payments, are hereby directed to draw their warrant upon the treasurer of such political subdivision in favor of such person or corporation, to make refund out of the public funds of such tax or taxes or license fee or fees to which the political subdivision has no valid claim:..
The nature of the mercantile license tax is well settled. It is not a property tax, but an excise imposed on the privilege of doing business. Nor is it, strictly speaking, a license fee, as its purpose is plainly to raise revenue. The Act of 1943 does not specifically enumerate this species of tax, although the title reads: “An act requiring political subdivisions to refund taxes and license fees erroneously and inadvertently paid.” (Italics supplied.) It might also be noted at this point that in 1943 property taxes were the only substantial and identifiable taxes which a city could collect; the so-called “tax-anything” power was not conferred until the Act of 1947. Prior to the Act of 1943 and its predecessors on the same subject, it was true as a general principle of law that taxes paid voluntarily could not be recovered, even though it subsequently appeared that they were not properly assessable against the taxpayer. To what extent that principle has been changed or modified is the basic question before us. •
*486Of course, the object of all interpretation and construction of laws is to ascertain and effectuate the intention of the legislature. Proper matters for consideration are the occasion and necessity for the law, the mischief to be remedied, the object to be attained, the former law on the subject and the consequences of a particular interpretation. In Longacre Park Heating Co. v. Delaware County, 160 Pa. Superior Ct. 252, 255 (1947), real property taxes were involved, but the court considered the Act of 1943 and its application, and said:
“The law prior to the Act of 1943 sanctioned the unmoral practice under which municipalities, in general, kept and used for municipal purposes, funds however erroneously paid and unlawfully received by them. The former laws on the subject, the Act of May 8, 1929, P. L. 1656, and of June 2, 1937, P. L. 1211, did no more than to make the refund of taxes, erroneously paid, discretionary, first as to counties and then as to all municipal political subdivisions. Prior to the 1937 act the borough was powerless to grant refunds of taxes erroneously but voluntarily paid, without protest. . . . Obviously, there was mischief to be remedied, supplying the occasion and necessity for the 1943 act; the object to be attained was to impose upon municipalities standards of common honesty in relation to the collection of taxes, compelling them, for the first time, to refund taxes paid to them under mistake of law.” (Italics supplied.)
If the averments of the complaint are true, then precisely the same “mischief” exists here; the municipality is attempting to keep funds paid under a mistaken interpretation of the taxing law, money which it was not entitled to collect in the first place. In this regard we see no sound reason for distinction between, and different treatment of, taxes, mercantile license taxes or license fees. It is rather anamolous if cities *487can say, “Your taxes were overpaid through error, and we were not legally entitled to collect those amounts. Common honesty, and the legislature, compel us to make refunds on the property taxes, but we recognize no such compulsion as to license taxes, and we will therefore keep the money”. In our opinion, the court in the Longacre case, supra, has stated what was clearly the legislative intent and object in the Act of 1943, and it should be given effect.
A further consideration is that powers of municipal bodies are derived from the Commonwealth. They have only such rights, powers and’ authority as are granted by the legislature. As the court stated in the H. J. Heinz case, supra, at page 438:
“Under §1 of Art. XV of the Constitution of this State the Legislature may delegate to cities the power to levy, assess and collect taxes, for general revenue purposes, subject however ‘to such restrictions, limitations and regulations, as may be imposed by the Legislature.’ But as to the raising of revenue by taxation, as in other phases of the exercise of local self-government, cities have only such powers and authority as have been delegated to them by the Legislature, within the restrictions, limitations, and regulations imposed.”
Since the mercantile license tax arises from a delegation of the Commonwealth’s inherent taxing power, subject to the State’s right to tax, it is both relevant and important to inquire into the practice and obligation of the Commonwealth itself in cases where taxes are paid through error and inadvertence. Under the Act of April 9, 1929, P. L. 343, and subsequent amendments, 72 PS §501-503, the Board of Finance and Revenue has the power and the duty to hear petitions for refund of taxes, license fees, etc., “to which the Commonwealth is not rightfully or equitably entitled. . . .” The statutes provide a special limitation of five *488years “When any tax or other money has been paid to the Commonwealth . . . under an interpretation of such provision (of an Act of Assembly) subsequently held by such court to be erroneous”: Section 503(a)(4).
If the taxes here in question had been imposed by the Commonwealth instead of by one of its political subdivisions, plaintiff would have a clear remedy. Upon due proof of its claim before the Board of Finance and Revenue, a refund would be in order. If the city’s contention is correct, then in that respect its power is greater than that of the Commonwealth, for the State, the fountainhead of the taxing power, is obliged to make refunds under the circumstances here alleged. It is inconceivable that the legislature intended to delegate the authority to tax to political subdivisions, while leaving them free of the concomitant obligation which binds the Commonwealth itself. If defendant city is not rightfully or equitably entitled to the funds here involved, plaintiff should have its remedy at law.
- The second question raised by defendant city is that jurisdiction of the matter is in the county court, and not in the court of common pleas. The Act of December 22, 1951, P. L. 1718, 17 PS §626(l) provides that county court shall have jurisdiction:
“. . . in all cases of appeal from decisions of collectors of mercantile taxes authorized by any act of Assembly and imposed by any political subdivision within the territorial limits of the jurisdiction of the court.”
In our opinion this is actually, as well as in form, an action of assumpsit, with the amount in controversy in excess of $2,500, and we have jurisdiction. It is not an appeal under the procedure set forth in the Mercantile License- Tax Ordinance, which makes no provision- for refund in cases of this kind. This is a suit *489against the city and its treasurer for money allegedly paid through inadvertence and mistake, and based upon the provisions of the Act of 1943. Although it might be desirable, as the city has pointed out, to centralize all mercantile tax cases in one court, this is not an appeal from a decision of the collector, and as the court of common pleas hears many cases involving tax statutes, we see no frustration of legislative purpose in upholding our jurisdiction here.
Accordingly, the preliminary objections raised by defendants will be dismissed. Soffel, J., concurs in this opinion. Ellenbogen, J., dissents in a separate opinion.

Order

And now, June 1, 1955, it is ordered that the preliminary objections ex parte defendants, City of Pittsburgh and David A.. Smith, treasurer, be and the same are hereby dismissed. Defendants are allowed 20 days from the date hereof to file an answer on the merits.
Eo die, exception noted to defendants, and bill sealed.