Opinion
January 5, 1966.
March 22, 1966.
Practice — Equity — Jurisdiction — Taxation — Restraining collection of taxes — Modification of prior restraining decree — Public officers — Restraints on conduct — Municipalities — Philadelphia — Mercantile license tax — Act of August 5, 1932, P. L. 45.
1. In this case in which it appeared that in 1953 the court below entered a decree in equity perpetually enjoining the City of Philadelphia from enforcing its mercantile license tax against The Bell Telephone Company of Pennsylvania upon the ground that the Sterling Act of August 5, 1932, P. L. 45, prohibited the application of the tax to Bell; and in 1961 the City assessed a mercantile license tax against Bell's receipts from certain sources; and subsequently the court below on a petition to modify the 1953 decree ruled that its original decree was in error and modified that decree so as to restrain the enforcement of the City tax only for the years preceding and including 1953 and also decreed that the question as to whether Bell's incidental receipts were subject to the mercantile license tax was a proper one for consideration by the Philadelphia Tax Review Board, it was Held that the court below (1) did not err in modifying its original decree or (2) in its holding with respect to the Philadelphia Tax Review Board.
2. An erroneous interpretation of a taxing statute by a tax official does not support his being prohibited from ever again enforcing that taxing statute against the decree winner. [16]
Mr. Chief Justice BELL dissented and would deny any assessment of taxes prior to 1961.
Mr. Justice JONES dissented.
Mr. Justice ROBERTS dissented generally, and in addition, would deny any assessment of taxes prior to 1961.
Before BELL, C. J., MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.
Appeal, No. 326, Jan. T., 1965, from decree of Court of Common Pleas No. 2 of Philadelphia County, March T., 1953, No. 3922, in case of The Bell Telephone Company of Pennsylvania v. City of Philadelphia, George S. Forde, Revenue Commissioner, and Walter Pytko, Commissioner of Licenses and Inspections, of the City of Philadelphia. Decree affirmed; reargument refused May 4, 1966.
Equity.
Decree entered in 1953 declaring certain provisions of mercantile license tax ordinance to be invalid, and perpetually enjoining City of Philadelphia from enforcing its provisions against plaintiff, and subsequent order entered in 1965 modifying decree, order by CARROLL, P. J. Plaintiff appealed.
John B. Hannum, with him Thomas A. Everly, Jr., Peter F. Pugliese, John B. King, and Pepper, Hamilton Scheetz, for appellant.
Levy Anderson, First Deputy City Solicitor, Gerald Gornish, Assistant City Solicitor, and Edward G. Bauer, Jr., City Solicitor, for appellees.
Pursuant to the power granted by the Act of August 5, 1932, P. L. 45, § 1, as amended, 53 P. S. § 15971, known as the Sterling Act, the City of Philadelphia adopted an ordinance imposing a Mercantile License Tax upon persons engaged in certain business activities within the City. This Act also has the effect of prohibiting the imposition of any tax by the City on items subject to a State tax or license fee.
The Bell Telephone Company (Bell), appellant, and others in 1953 successfully sought a decree in equity prohibiting as to them the imposition of the Mercantile License Tax. That decree perpetually enjoined the City from enforcing or attempting to enforce the Mercantile License Tax against Bell.
In 1961, without seeking a modification of the 1953 injunction, the City assessed a Mercantile License Tax against Bell's receipts from directory advertising, miscellaneous sales, rentals, commissions, dividends, and interest, contending that the earlier injunction did not proscribe such assessments. Bell thereupon filed a petition for a citation, and the chancellor held that the City's assessment violated the 1953 decree.
The City then withdrew the assessment and filed a petition seeking a modification of the 1953 injunction. The trial court held that its original decree, which enjoined collection perpetually, was in error and it modified that decree so as to restrain the enforcement of the City tax only for the years preceding and including 1953. At the same time, that court held that the question as to whether Bell's incidental receipts were subject to the Mercantile License Tax was a proper one for consideration by the Philadelphia Tax Review Board. It is from this decree that Bell appeals.
The issues presented in this appeal are: (1) whether the court below erred in modifying its original decree, and (2) if it was not in error what is the proper forum for considering Bell's objections.
The original decree was entered on the basis of the Sterling Act. There was no determination of unconstitutionality of the ordinance but only a holding that the Sterling Act prohibited its application. We are, therefore, not faced with the question of whether enforcement of an unconstitutional taxing statute may be perpetually enjoined, but only with the question of whether an erroneous interpretation of a taxing statute by a tax official supports his being prohibited from ever again enforcing that taxing statute against the decree winner.
We have held that such action may not be proscribed. In Pinebrook Foundation, Inc. v. Shiffer, 416 Pa. 379, 206 A.2d 314 (1965), the reasoning of the rule was stated: "If, because it once erred, the agency were prohibited from acting again with respect to a certain matter without prior judicial approval there would be a grave decrease in the utility of the administrative process and a violation of the legislative intention to place certain matters, initially, at least, within the judgment of the administrative agency with its own peculiarly adapted timing, procedure, and expertise — not to mention the exceedingly increased burden on the judiciary."
As is clear from the distinct features of Pinebrook (which discusses separately the reasons for equity not issuing a perpetual injunction against a tax collection authority and the limitation on equity jurisdiction where there is an administrative procedure), the limitation on its original decree entered by the lower court in this case is correct regardless of whether it or the Tax Review Board is the proper forum for challenging the City's subsequent efforts to collect the tax.
Bell also objects to equity's referral of the matter to the Tax Review Board. First, it should be noted that neither at oral argument nor in its brief has Bell maintained that the incidental receipts are not subject to the Mercantile License Tax. Bell maintains that: (1) equity is the proper forum to determine want of power to tax, but no attack is made on the power of the City to enact a Mercantile License Tax; (2) the Tax Review Board has no jurisdiction to determine constitutional objections, but the constitutional objections Bell raises have either been decided against it ( National Biscuit Co. v. Philadelphia, 374 Pa. 604, 98 A.2d 182 (1953), Tax Review Board v. C. J. Devine Co., 184 Pa. Super. 297, 134 A.2d 238 (1957)) or are so devoid of merit as not even to be colorable.
Decree affirmed at appellant's cost.
Mr. Chief Justice BELL dissents and would deny any assessment of taxes prior to 1961.
Mr. Justice JONES dissents.
Mr. Justice ROBERTS dissents generally, and in addition, would deny any assessment of taxes prior to 1961.