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HomeMy WebLinkAbout2007-6943 Civil CITY OF PHILADELPHIA, TRUSTEE : COURT OF COMMON PLEAS UNDER THE WILL OF STEPHEN GIRARD, : CUMBERLAND COUNTY DECEASED, ACTING BY THE BOARD OF : DIRECTORS OF CITY TRUSTS : : Petitioner : : V. : CIVIL ACTION – LAW : CUMBERLAND COUNTY BOARD OF : ASSESSMENT APPEALS : NO. 07-6943 : Respondent : IN RE: PETITIONER’S MOTION FOR SUMMARY JUDGMENT BEFORE HESS, J. AND EBERT, J. ORDER OF COURT th AND NOW, this 28 day of July, 2010, upon consideration of Petitioner’s Motion for Summary Judgment, the Respondent’s Answer thereto, the parties’ Briefs, Admissions, and after oral argument; IT IS HEREBY ORDERED AND DIRECTED that Petitioner’s Motion for Summary GRANTED Judgment is . By the Court, M. L. Ebert, Jr., J. Gary D. Fry, Esquire Counsel for Petitioner Stephen D. Tiley, Esquire Counsel for Respondent CITY OF PHILADELPHIA, TRUSTEE : COURT OF COMMON PLEAS UNDER THE WILL OF STEPHEN GIRARD, : CUMBERLAND COUNTY DECEASED, ACTING BY THE BOARD OF : DIRECTORS OF CITY TRUSTS : : Petitioner : : V. : CIVIL ACTION – LAW : CUMBERLAND COUNTY BOARD OF : ASSESSMENT APPEALS : NO. 07-6943 : Respondent : IN RE: PETITIONER’S MOTION FOR SUMMARY JUDGMENT BEFORE HESS, J. AND EBERT, J. OPINION AND ORDER OF COURT Ebert, J., July 28, 2010 - Petitioner brings this action to appeal the findings of the Cumberland County Board of Assessment Appeals which assessed property taxes against Petitioner’s property in Cumberland County. Petitioner filed a motion for summary judgment. For the reasons stated below, Petitioner’s Motion for Summary Judgment will be granted. STATEMENT OF FACTS and PROCEDURAL HISTORY 1 The essential facts of this case are not in dispute. Stephen Girard bequeathed his sizable estate (“Estate”) to the City of Philadelphia (“City”) in 1831, naming the City as Trustee of the 2 Estate. A portion of the Estate was to be used for the purpose of building and maintaining a 3 school for orphaned children, now known as Girard College. Pursuant to Girard’s will, the City established Girard College which currently provides room, board, and educational services to 1 Brief of Respondent in Opposition to Motion for Summary Judgment, filed May 7, 2010, page 1. 2 Petitioner’s Petition for Review of Decision of Cumberland County Board of Assessment Appeals, page 2, ¶ 1. 3 Petitioner’s Memorandum of Law in Support of Motion for Summary Judgment, filed April 30, 2010, page 3. 1 4 about 750 orphans. In 1869 the Pennsylvania General Assembly created the Board of Directors of City Trusts (“Board”) to administer the various trusts vested in the City, including the Girard 5 Estate. Among its many other responsibilities, the Board manages real estate situated 6 throughout the Commonwealth of Pennsylvania on behalf of the City. Since November 2001, the City as Trustee of the Girard Estate has owned property 7 located at 106 E. Lowther Street in the Borough of Lemoyne (“Property”). The Board administers and leases the Property to the Commonwealth of Pennsylvania, Office of the 8 Attorney General. The income from the Property is used exclusively for the operations of 9 Girard College. The taxing authorities of Cumberland County, the Borough of Lemoyne, and 10 the West Shore School District assessed property taxes against the Property. The Board (Petitioner) filed an Application for Tax Exemption with the Board of Assessment Appeals (Respondent) on August 28, 2002, requesting an exemption from the real estate taxes assessed against the Property on grounds that “[t]he Board is an instrumentality of the Commonwealth and, therefore, is immune from local taxation. Additionally, as an agency of the City of Philadelphia, the Board’s real property is exempt from taxation as its property is leased for a public purpose to the 11 Commonwealth.” On October 18, 2007, nearly five years after conducting a hearing on October 22, 2002, the 12 Cumberland County Board of Assessment Appeals denied Petitioner’s exemption request. 13 Petitioner then timely appealed the Respondent’s determination to this Court. Petitioner has 4 Id. at 3. 5 53 P.S. §§ 16365 – 16368. 6 Petitioner’s Memorandum at 3. 7 Petitioner’s Petition at 2, ¶ 8. See also Petitioner’s Memorandum at 3-4. 8 Petitioner’s Memorandum at 4. 9 Id. at 4. 10 Id. at 4. 11 Petitioner’s Application for the Exemption of Real Estate, Petitioner’s Petition for Review, Exhibit E. 12 Petitioner’s Memorandum at 4; See also Petitioner’s Petition for Review, Exhibit F. 13 Petitioner’s Memorandum at 4. 2 14 paid $301,200.26 in taxes while maintaining its claims of exemption and immunity. The Parties have filed extensive briefs in the case. Oral argument was held on May 12, 2010. DISCUSSION I.SUMMARY JUDGMENT STANDARD The standard for summary judgment is well settled in Pennsylvania. According to Rule 1035.2 of the Pennsylvania Rules of Civil Procedure, after the relevant pleadings are closed, any party may move for summary judgment in one of two instances: (1) whenever there is no genuine issue of any material fact as to a necessary element of the cause of action or defense which could be established by additional discovery or expert opinion, or (2) if, after the completion of discovery relevant to the motion, including the production of expert reports, an adversary party who will bear the burden of proof at trial has failed to produce evidence of facts essential to the cause of action or defense which in a jury trial would require the issues to be submitted to a jury. A Pennsylvania court shall grant summary judgment only where the pleadings, depositions, answers, and admissions on file, together with any affidavits, show that no genuine issues of material fact exist. Fortney v. Callenberger, 801 A.2d 594, 597 (Pa. Super. 2002). When considering a motion for summary judgment, the Court must view the evidentiary record in the light most favorable to the non-moving party and must resolve all doubts as to the existence of a genuine issue of material fact against the moving party. Jones v. SEPTA, 772 A.2d 435, 438 (Pa. 2001). “A material fact is one that directly affects the outcome of the case.” Fortney, 801 A.2d at 597. Finally, the Court may grant summary judgment only where the right to such a judgment is clear and free from doubt. Toy v. Metropolitan Life Ins. Co., 928 A.2d 186, 194-95 (Pa. 2007). The Cumberland County Board of Assessment Appeals concurred “in the submission of the case to resolution under the rules applicable to motions for summary 14 Id. at 5. 3 15 judgment...” Both parties agree that public property used for a public purpose is exempt from real estate taxation and that property of the Commonwealth and its agencies is immune from 16 taxation. The primary dispute between the parties is (1) whether the Property is public property used for a public purpose and/or (2) whether the Board is a Commonwealth Agency for the purpose of tax immunity. First, Petitioner claims that since the Property is leased to the Commonwealth of Pennsylvania, Office of the Attorney General, it is therefore exempt from real 17 estate taxes under the “public use” exemption of the General County Assessment Law. Petitioner also points out that taxing authorities in five other counties have acknowledged that the Board’s property similarly leased to the Commonwealth in those counties is exempt from 18 taxation. Second, Petitioner claims that the Board is an agency of the Commonwealth of 19 Pennsylvania and is thus immune from property taxation. Petitioner cites case law stating that property owned by the Commonwealth is presumed immune from taxation. Furthermore, Petitioner notes that courts have held that the General County Assessment Law, which grants 20 local taxing authorities the power to tax, is inapplicable to property owned by the Commonwealth. Finally, Petitioner points out that the Supreme Court of the United States concluded that “the Board which operates Girard College is an agency of the State of Pennsylvania” in Commonwealth of Pa. v. Board of Directors of City Trusts, 353 US 230, 231 (1957). 15 Respondent’s Brief at 9. 16 Respondent’s Brief at 6-7; Petitioners’ Memorandum at 6, 9. 17 Id. at 4. 18 Id. at 8. 19 Id. at 9. 20 General County Assessment Law, Act of May 22, 1933, P.L. 853 §201; codified at 72 P.S. §5020-201. 4 Considering the evidence on record in the light most favorable to the Respondent and based on the analysis which follows below, this Court finds that no genuine issue of material fact exists. Accordingly, Petitioner’s Motion for Summary Judgment is granted. II. Public Use Exemption Respondent maintains that the Property is not tax exempt, arguing that the Property is owned by the Girard Estate and used as an investment property. Respondent contends that “the Girard Trust 21 Property is not public property. It is the property of a private charitable trust.” However, Respondent’s argument is inconsistent with settled principles of trust law. Essential to the creation of a trust is the division of the equitable and legal interests in the trust property. In re Horton’s Estate, 37 Pa. D. & C. 2d 621, 625 (Pa. Orph. 1963). The Pennsylvania Supreme Court has noted that a “trust exists where the legal title is in one person and the equitable interest in another.” Love v. Clayton, 134 A. 422, 426 (Pa. 1926). The Restatement (Third) of Trusts defines a trust as “a fiduciary relationship with respect to property, arising from a manifestation of intention to create that relationship and subjecting the person 22 who holds title to the property to duties to deal with it for the benefit” of the beneficiary. The Restatement further notes that essential to the fiduciary nature of the trust relationship is a separation of 23 title interests between the trustee and the beneficiary. In the instant case, an examination of the deed to the property in question filed at Deed Book 249, Page 908, in the Cumberland County Recorder of Deeds records, clearly shows that the City of Philadelphia holds legal title to the Property. It administers that property through the Board of Directors of City Trust, a Commonwealth agency, which has chosen to commit the use of the property to a public purpose. While the Girard Estate is the beneficiary of the rental income generated by the Property, it is the City’s clear legal title to the Property that distinguishes it as public property for the purpose of tax exemption. Thus, while the Girard Trust’s “equitable interest” 21 Respondent’s Brief at page 10. 22 Restatement (Third) of Trusts §2 (2003). 23 Restatement (Third) of Trusts §2, comment F (2003). 5 in the property may be characterized as “property of a private charitable trust,” it is the City’s legal title to the Property that is the foundation for its tax exemption. The property is being used for a public purpose and is therefore exempt from taxation. The Pennsylvania Constitution permits the General Assembly to exempt from taxation “[t]hat portion of public property which is actually and regularly used for public purposes.” Pa. C. ONST art. VIII, § 2(a)(iii). Accordingly, the General Assembly enacted the General County Assessment Law exempting from taxation all “public property used for public purposes with the ground thereto annexed and necessary for the occupancy and enjoyment of the same.” 72 P.S. 24 §5020-204(a)(7). Likewise, case law has long supported the rule that “public property used for public purposes is exempt from taxation.” Southwest Delaware County Municipal Authority v. Aston Tp., 198 A.2d 867, 871 (Pa. 1964). In the instant case, the Property is owned by the City of Philadelphia. The City, as Trustee of the Girard Estate, acts to administer the property by the Board. The Property is leased to the Commonwealth of Pennsylvania, Office of the Attorney General, for use as office space. The government’s use of the Property for the benefit of the public implicates the rationale for tax exemption of public property. Therefore, as a matter of law, the Property is tax exempt because it is public property used for public purposes. Respondent argues that the public use exemption does not apply since income from the Property is used to maintain Girard College so that the “Property is used solely for investment 25 purposes.” However, in a lease situation “the controlling test for tax exemption is not whether the property or part of it has been leased out, but whether the use of the property so leased is for a public purpose.” Wesleyville Borough v. Erie County Bd. Of Assessment Appeals, 676 A.2d 24 See also The Fourth to Eighth Class County Assessment Law, 72 P.S. 5453.202(a)(7) for identical provisions of law. 25 Respondent’s Brief at 17, 22. 6 298, 302 (Pa. Commw. 1996); See also Dauphin County Gen. Auth. v. Dauphin County Bd. of Assessments, 768 A.2d 895, 898 (Pa. Commw. 2000). In Wesleyville, the property owner (the Borough of Wesleyville) sought real estate tax exemption on property leased to Erie County for use as a courthouse. The Court invoked the General County Assessment Law’s public use exemption and determined that the Borough’s property as leased to the County for use as a courthouse was public property used for a public purpose. Wesleyville, 676 A.2d at 302. The Court further concluded that “the leasing of property and the receipt of rent will not defeat an exemption from local real estate taxes where public property is used for public purposes.” Id. at 303. In the instant case, while it is true that the Board collects rent from the Office of Attorney General, such rent does not defeat tax exemption since the primary use of the Property is office space for the Attorney General which is clearly public in nature. III. Commonwealth Agency Tax Immunity Petitioner also maintains that the Board is an agency of the Commonwealth and is therefore immune from taxation. The law in Pennsylvania is well settled that “[a]s a general matter, property owned by the Commonwealth and its agencies is immune from taxation by a local subdivision.” Southeastern Pa. Transportation Auth. v. Board of Revision of Taxes, 833 A.2d 710, 713 (Pa. 2003); See also Bucks County Cmty. College v. Bucks County Board of Assessment Appeals, 608 A.2d 622, 623 (Pa. Commw. 1992); Granville Tp. v. Board of Assessment Appeals of Mifflin County, 900 A.2d 1012, 1014 (Pa. Commw. 2006) (noting that Commonwealth property is entitled to immunity because “the delegation of taxing authority to a local subdivision does not include the authority to tax property owned by the Commonwealth, or its agencies or instrumentalities”). Local taxing authorities may not tax the property of the Commonwealth or its agencies absent statutory authority. SEPTA, 833 A.2d at 713; See also 7 Appeal of Bd. of School Directors of Owen J. Roberts School Dist., 457 A.2d 1264, 1265 (Pa. 1983). Neither the General County Assessment Law nor the Fourth to Eighth Class County Assessment Law grant local taxing authorities the power to tax property of the Commonwealth 26 or its agencies. Appeal of Harrisburg School Dist., 417 A.2d 848, 851 (Pa. Commw. 1980); See also Owen J. Roberts, 457 A.2d at 1265 (noting that the General County Assessment Law “does not expressly impose local real estate taxes on property owned by the Commonwealth”). Furthermore, the local taxing authority bears the burden of demonstrating the taxability of the property. Lehigh-Northampton Airport Auth. v. Lehigh County Bd. Of Assessment Appeals, 889 A.2d 1168, 1176 (Pa. 2005). During the long and colorful history of the Girard Estate, courts have struggled to identify the precise nature of the Board. In the instant case, to determine whether the Board is an agency of the Commonwealth for tax purposes, we look first to its enabling legislation. Bucks County Cmty. College, 608 A.2d at 623. The General Assembly created the Board by Act of June 30, 1869, P.L. 1276 in order to administer certain assets belonging to the City of Philadelphia, including the Girard Estate. 53 PS §§ 16366, et seq. According to the Act, “[a]ll and singular the duties, rights and powers of the city of Philadelphia, concerning all property and estate whatsoever, dedicated to charitable uses or trusts, the charge or administration of which is now or shall hereafter become vested in or confined to the city of Philadelphia, shall be discharged by the said city through the instrumentality of a board.” Id. The statute does not expressly call the Board a Commonwealth agency. However, the General Assembly’s delegation of the “duties, rights and powers of the city” to the Board suggests that the legislature intended for the Board to hold some governmental function. Other cases involving the Girard Estate are instructive on this matter. One Court noted that the statute vested in the Board “the fiduciary duties and powers of the City of Philadelphia, concerning all 26 See 72 P.S. §5020-204(a)(7) and 72 P.S. 5453.202(a)(7). 8 charitable trusts held by the city” resulting in the Board serving a clearly municipal function. Danchison v. Ryon, 88 Pa. D. & C. 129, 132 (1954). While the Board’s enabling legislation is less than clear about its agency status, the Supreme Court of the United States unequivocally stated that “the Board which operates Girard College is an agency of the Commonwealth.” Commonwealth of Pennsylvania v. The Board of Directors of City Trusts of the City of Philadelphia, 353 US 230, 231 (1957) (holding that as a Commonwealth agency the Board could not discriminate against African American applicants to Girard College). Likewise, other courts have recognized that the Board is a Commonwealth agency for various purposes. The Commonwealth Court of Pennsylvania affirmed that the Board was entitled to sovereign immunity in a negligence action since the Board was a Commonwealth agency created by state statute. Moore v. Board of Directors of City Trusts, 809 A.2d 420 (Pa. rd Commw. 2001). Similarly, the 3 Circuit Court of Appeals characterized the Girard will as “a will in which the testator has deliberately and specially involved the State in the designated use rd of his testamentary property.” Commonwealth of Pennsylvania v. Brown, 392 F.2d 120, 123 (3 Cir. 1968). The Court went on to describe the nature of the State involvement in the College as “complete” when the City was named the Trustee of the institution and became “responsible for the supervision, direction and control of the College.” Id. at 789. In fact, the Court noted, the involvement was “of the most notorious nature” such that “there is not insubstantial evidence of subsisting connections between Girard College and agencies of the Commonwealth.” Id. at 789- 90. To support its assertion of complete State involvement, the Court pointed out that the Board must provide regular reports to the Legislature and that the College is subject to general supervision by the State Department of Public Instruction, the State Department of Welfare, and other State agencies. Id. at 790. The Court concluded that Mr. Girard “must have contemplated 9 … the many benefits which might flow from this special relationship” including “the substantial benefits of tax exemptions and other special concessions from public agencies.” Id. at 790. Based on the forgoing, it is the belief of this Court that the Board is a Commonwealth Agency for the purpose of tax immunity and thus no genuine issue of material fact exists. Therefore, whether by immunity or exemption, the Property is not subject to taxation. Additionally, the fact that other counties have found the Board and its property located in those counties to be immune or exempt from taxation, while not binding on this Court, is nonetheless compelling. Petitioner notes that the issue before this Court (“whether property owned by the Girard Estate and leased to a Commonwealth agency [is] exempt from real estate taxes”) was resolved in proceedings in Chester, York, Lehigh, Butler and Clinton Counties by 27 holdings in favor of the Board stating that their property was exempt from taxation. The evidence provided in Petitioner’s Motion for Summary Judgment demonstrates that decisions in the other counties support this Court’s conclusion that as a matter of law the property legally titled to the City of Philadelphia acting by the Board of City Trusts is either immune or exempt from taxation. CONCLUSION Because the Property is used for a public purpose and because the Board is an agency of the Commonwealth, there is no genuine issue of material fact and judgment must be awarded for the Petitioner. Accordingly, the following Order will be entered, 27 Petitioner’s Memorandum at 8. 10 ORDER OF COURT th AND NOW, this 28 day of July, 2010, upon consideration of Petitioner’s Motion for Summary Judgment, the Respondent’s Answer thereto, the parties’ Briefs, Admissions and after oral argument, IT IS HEREBY ORDERED AND DIRECTED that Petitioner’s Motion for Summary GRANTED Judgment is . By the Court, M. L. Ebert, Jr., J. Gary D. Fry, Esquire Archer & Greiner, P.C. nd 1650 Market Street, 32 Floor Philadelphia, PA 19103 Counsel for Petitioner Stephen D. Tiley, Esquire Frey & Tiley 5 South Hanover Street Carlisle, PA 17013 Counsel for Respondent 11