Taxation — Mortgages and participation certificates — Trust company — Taxation for state purposes — Taxation for county purposes — Assessment against trust company trustee — Act of June 17, 1913, P. L. 507 — Estoppel to assess tax — Creation of trust — Mortgage pool as active trust — Situs of trust.
1. Mortgages given by individual mortgagors or by first-class or nonprofit corporations not paying a capital stock tax, and which have not been assumed by, nor the interest thereon paid by, a corporation paying a capital stock tax or a tax on shares, legal title to which is of record in the name of a trust company, and unacknowledged assignments to individuals of which mortgages, termed participation certificates, by their terms provide for an undivided interest in the certificate holder in the proceeds of such mortgages, payable from such proceeds with interest, that the trust company shall hold separate and apart from its assets a pool of bonds secured by first mortgages, that the trust company shall collect the interest on such mortgages, retaining therefrom compensation for its services before payment to the certificate holder, and that the trust company guarantees the payment of the principal and interest of the certificates in the event of default on the part of the mortgagors sufficient to affect payment from the pool, are not taxable for state purposes under section 17 of the Act of June 17, 1913, P. L. 507, and its amendments; and this is so although the certificates reserve the right of the trust company to withdraw any mortgage or bond in the pool and replace it with another mortgage or bond. [86-90]
2. Such participation certificates, likewise, are not taxable for state purposes under section 17 of the Act of 1913 and its amendments. [86-95]
3. Such mortgages are taxable for county purposes under section 1 of the Act of 1913, and its amendments, and the tax is properly assessed against the trust company. [86-95]
4. The county commissioners are not estopped from assessing such tax against a trust company for a particular year because they demanded and received taxes on the certificates for that year from some of the holders thereof, and the trust company, knowing of this practice, did not retain the tax from the interest paid by it to the certificate holders, or because no effort was made prior to that year to assess the tax against the trust company. [98-9]
5. An agreement or contract in writing made by a person having the power of disposal over property, whereby such person agrees or directs that particular property or a certain fund shall be held or dealt with in a particular manner for the benefit of another, raises a trust in favor of such other person against the person making it. [95]
6. An active trust is created where mortgages are placed in a pool and participation certificates are issued. [96]
7. Property held in trust should be assessed to the trustee where he resides. [97]
8. No estoppel in pais can be asserted against the exercise by the State of its taxing power. [98]
9. Under section 1 of the Act of 1913, failure to assess or return the tax does not discharge the owner or holder of the property taxed from liability. [99]
Argued January 7, 1935.
PER CURIAM, March 25, 1935:
A thorough examination of the record in this case convinces us that all questions raised for our consideration have been fully considered and correctly disposed of in the opinion of President Judge REESE. Nothing further need be added to what the learned trial judge has so well said.
Judgment affirmed at appellant's costs.