CITY OF PHILADELPHIA, Trustee under the will of Stephen Girard, Deceased, acting by the Board of Directors of City Trusts, Appellant
CUMBERLAND COUNTY BOARD OF ASSESSMENT APPEALS, Appellee.
Argued May 9, 2012.
Appeal from the Order of Commonwealth Court dated
April 4, 2011 at No. 1725 CD 2010 which Reversed the order of the Court of
Common Pleas, Cumberland County, Civil Division, dated July 28, 2010 at No.
07-6943 Civil Term. Appeal allowed November 2, 2011 at 461 MAL 2011. Trial
Court Judge: Merle L. Ebert, Jr., Judge. Intermediate Court Judges: Dan
Pellegrini, Kevin P. Brobson, JJ, James R. Kelley, Senior Judge. 18 A.3d 421
(Pa. Cmwlth. 2011).
Sarah Chadwick Cocke, Esq., PFM Group, for Public Financial Management, Inc.
James G. Colins, Esq., Stephen A. Cozen, Esq., Sara Anderson Frey, Esq., Cozen O'Connor, Philadelphia, Gary Dean Fry, Esq., Archer & Greiner, P.C., Philadelphia, Christopher Anil Amar, Esq., Charles B. Gibbons, Esq., Pittsburgh, Jack Mentzer Stover, Esq., Harrisburg, Buchanan Ingersoll & Rooney, P.C., Joseph T. Kelley Jr., Esq., Kelley & Murphy, Howard A. Rosenthal, Esq., for City of Philadelphia, Trustee Under the Will of S. Girard, Deceased, Acting by the Brd of Drectors.
Stephen Douglas Tiley, Esq., Frey & Tiley, Carlisle, for Cumberland County Board of Assessment Appeals.
Robert L. Knupp, Esq., Knupp Law Offices, LLC, Anthony T. McBeth, Esq., Harrisburg, for County Commissioners Association of Pennsylvania.
BEFORE: CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, ORIE MELVIN, JJ.
CASTILLE, Chief Justice.
The issue in this appeal is whether certain property (the " property" ) in Cumberland County, which is owned by the City of Philadelphia as trustee of the Stephen Girard Trust and leased by the Board of Directors of City Trusts (colloquially and hereinafter " the Board of City Trusts" and, where the context is clear, " the Board" ) to the Pennsylvania Office of Attorney General (" OAG" ), is subject to local real estate taxation in Cumberland County. The trial court held, in a grant of summary judgment, that the property was both immune and exempt from local real estate taxation. The Commonwealth Court reversed in a published opinion. For the reasons set forth below, we reverse the Commonwealth Court and reinstate the order of the trial court, on grounds of tax immunity.
Stephen Girard's Will and the entwined nature and status of the Girard entities  have produced nearly two centuries of litigation in multiple contexts. Girard was a unique person and the Girard Trust is a unique legal entity. Born in Bordeaux, France, on May 20, 1750, Stephen Girard died on December 26, 1831 at eighty-one years of age; his life reflects the early history of the nation and of his chosen home, Philadelphia, Pennsylvania. 
Girard was born into a family that had established a lucrative business trading in the West Indies in the Caribbean Sea; he began working in his father's counting house at ten years old, went to sea for the first time at age fourteen in 1764, and received little if any formal education. Girard left France permanently in 1773 and ultimately settled in Philadelphia in 1777 after several years as a trading sea captain; he became a citizen of Pennsylvania in 1778. During the American Revolution and the years after, he maintained and augmented his growing commercial fortune, becoming a ship owner and builder in 1789. In the following decades, Girard traded within what is now the United States, to ports including Charleston, South Carolina, and New Orleans, Louisiana, and all over the globe: the West Indies, Europe, the Mediterranean, the Baltic and Russia, South America, the East Indies, India, and China. His trading wares included grain, wine, fruit, hemp, iron, coffee, tea, and silk. Anticipating the War of 1812 with England and its likely effect on international maritime commerce, Girard shrewdly reduced his trading activity, liquidated his overseas holdings, collected outstanding foreign debts owed to him, and invested in the First Bank of the United States. Girard became the foremost banker in Philadelphia and the nation when he acquired the bank itself in 1812 after the federal government declined to renew the bank's charter, which expired in 1811, twenty years after its 1791 inception at the behest of Alexander Hamilton, the first Secretary of the U.S. Treasury.
Girard's second career as a banker flourished. He served as a primary financier of the nation during the War of 1812 and on the board of the Second Bank of the United States, which was established after the war, in 1816.  Having renounced international trade, Girard invested in land, primarily in Philadelphia (including a working farm located on the site of the present-day historic district of Girard Estate in South Philadelphia), but also throughout Pennsylvania and in Kentucky and Louisiana. Some of the Pennsylvania lands Girard acquired, in Columbia County and Schuylkill County (which includes the borough of Girardville, established in 1832), contained abundant coal; after Girard's death, coal royalties produced hundreds of thousands of dollars each year, sustaining the Trust in the process.
Girard's endeavors were not limited to private enterprise; he was also a selfless public citizen of Philadelphia. The Pennsylvania Supreme Court described his public service over a century and a half ago in Soohan v. City of Philadelphia, 33 Pa. 9, 1859 WL 8661 (Pa.1859):
In the great yellow fever of 1793, which broke out in Water street, within a square of his residence, Mr. Girard distinguished himself by visiting and attending upon the sick, and by his invaluable services as an active manager of the hospital at Bush Hill.
Seventeen thousand persons left the city, and of the remainder, upwards of four thousand, or nearly a fifth, died. At a meeting of the citizens of Philadelphia, the Northern Liberties, and district of Southwark, assembled on Saturday, the 22nd day of March 1794, and presided over by Thomas McKean, a signer of the Declaration of Independence, and then chief justice, and afterwards governor of the state, their most cordial, grateful, and fraternal thanks were presented to their fellow-citizens named in the proceedings, " for their benevolent and patriotic exertions in relieving the miseries of suffering humanity on the late occasion." One of these citizens, thus gratefully remembered, was Stephen Girard, under whose " meritorious exertions and peculiar care," at the Bush Hill hospital, in conjunction with Peter Helm, " every possible comfort was provided for the sick, and decent burial for those whom their efforts could not preserve from the ravages of the prevailing distemper."
In 1797 and 1798, the fever again prevailed in Philadelphia with fearful violence, and again Mr. Girard exhibited the same enlarged philanthropy, and the same disregard of danger, by liberal contributions, and personal services to the sick and dying.
In 1802, Mr. Girard was elected a member of the city councils, and so continued for several years. Upon the expiration of the charter of the first Bank of the United States, he established his own private bank, in the building occupied by the late national institution, and his first cashier was Mr. George Simpson, the cashier of the late bank.
1859 WL 8661, at *9-10.
At the time of Girard's death in 1831, his estate was valued at nearly $7 million, making him (it is believed) the wealthiest man in the nation at that time. The estate included ships, land, stock in the public debts of Philadelphia, Pennsylvania and the United States, and shares in insurance
companies, Pennsylvania turnpikes and a bridge, the Franklin Institute, the Schuylkill Navigation Company, the Chesapeake and Delaware Canal, and the Danville & Pottsville Railroad.
Girard married, but outlived his wife and had no surviving children. In 1830, the year before he died, he met with his counsel and created what became his last Will and testament, subject to two later codicils; the Will was reprinted and published in 1874. See WILL AND CODICIL OF THE LATE STEPHEN GIRARD, ESQ. (James B. Chandler 1874) (" Girard Will" or " the Will" ) (cites infra are to specific provisions of the Will, followed by the corresponding page numbers in the published version). The Girard Will left specific sums to relatives, including Girard's brother and each of his brother's six children and four other nieces, as well as bequests to friends, life incomes to his maid and to his farm housekeeper and her family, and bequests to persons indentured to him. The vast majority of his considerable fortune, however, was left to support charitable and public causes in and about Philadelphia. Thus, Girard left sums to Pennsylvania Hospital, asylums for orphans and the deaf and mute, a society for relief of impoverished shipmasters and their families, and amounts to be invested so as to provide housing fuel for the poor of Philadelphia. Girard also left specific bequests to establish a public school in Philadelphia, and a neighborhood school just outside the then-boundaries of the City, in Passyunk Township. Girard Will, Clauses I-XVIII, at 3-14.
The residual portion and great majority of Girard's estate, estimated to be worth about $5 million at the time of his death, was also left to further public purposes in the city he called home. The Will stated plainly: " I have sincerely at heart the welfare of the City of Philadelphia." Girard Will, Clause XX, at 18. The directives Girard included in his Will corroborated this point. Thus, Girard left $500,000 to the " Mayor, Aldermen, and Citizens" of Philadelphia to remove and to prohibit all buildings made of wood or other combustible materials in the city and to create Delaware Avenue in place of the former
Water Street, where Girard had kept his riverfront offices, so as to improve the eastern half of the City. His specifications for these public improvements were set forth in minute detail. Girard explained that by all of these improvements, " it is my intention to place and maintain the section of the City, above referred to, in a condition which will correspond better with the general cleanliness and appearance of the whole City, and be more consistent with the safety, health, and comfort of the Citizens." Girard Will, Clause XXII, ¶¶ 1-3, at 35-40.
Girard also left $300,000 to the Commonwealth of Pennsylvania to improve canal navigation and to enact laws that would permit Philadelphia to improve its port. Notably, each of these civic bequests was conditioned upon the passage of the laws necessary to enable completion of the public projects Girard envisioned. Girard Will, Clause XXIII, at 40-41. The remainder of Girard's fortune was left to the City in trust with instructions to establish, build, and maintain a residential school for " poor male white orphans" — Girard College— on a large lot Girard owned, with the cost of construction not to exceed $2 million. Girard Will, Clause XXI, at 20. However, the residuary portion of the estate was also to be used for other civic purposes, i.e., to provide a competent police force for the City and to improve the property and general appearance of the City. Girard noted that his intention in this regard was " in effect to diminish the burden of taxation, now most oppressive especially on those, who are the least able to bear it." Girard Will, Clause XXIV, at 41-42.
Girard's Will made clear that the civic endeavors to be funded from the residuary estate were subject to the " primary object" that the College be adequately provided for. He expressed this context for the residuary bequests as follows: " To all which objects, the prosperity of the City, and the health and comfort of its inhabitants, I devote the said fund as aforesaid, and direct the income thereof to be applied yearly and every year for ever— after providing for the College as hereinbefore directed, as my primary object." Girard also provided for public-works contingencies if his designated trustee, the City, were to " knowingly and willfully violate" any conditions of the Will: in that instance, the remainder of the residue would be distributed to the Commonwealth for purposes of internal navigation— excepting that income from his Pennsylvania real estate was to be forever applied to maintenance of the College. If the Commonwealth, in turn, failed to abide by the contingent restrictions placed upon it, the Will further provided, that portion of the remainder of the Estate was left to the United States for purposes of internal navigation. Girard Will, Clause 24, ¶ 3, at 42-43.
Respecting the purpose of the College, Girard made clear that he desired to provide " a better education as well as a more comfortable maintenance" than such orphans " usually receive from the application of the public funds." The Will is replete with meticulous detail concerning the College, which Girard envisioned as an institution able to step in where public assistance had not, or could not. Girard noted, for example, that preference was to be given first to Philadelphia-born orphans, then to those born elsewhere in Pennsylvania, then to those born in New York City, and finally to those born in New Orleans. 
The Will also addressed the design of the buildings, food and clothing for the students, exercise and recreation, the subjects to be taught, etc. Girard Will, Clauses XX; XXI, including ¶¶ 6 & 7, at 18-31.
In addition to designating the City as Trustee of the College, Girard's Will obliged the City and the Commonwealth, if they were to accept his generosity, to pass the laws necessary to effectuate his various bequests. Thus, respecting the bequests to improve the City's physical infrastructure, the Will stated that funds would be disbursed: " as soon as such laws shall have been enacted by the constituted authorities of the said Commonwealth as shall be necessary, and amply sufficient to carry into effect, or to enable the constituted authorities of the City of Philadelphia to carry into effect, the several improvements above specified[.]" Girard directed that the legislation was to be passed expediently, within one year, or the funds would be redirected. Girard Will, Clause XXIII, at 40-41. Both the City and the Commonwealth responded quickly; indeed, within three months of Girard's death, the General Assembly adopted special legislation in the form of the Act of March 24, 1832, P.L. 176, which authorized and directed the City of Philadelphia to carry the Will into effect. Less than two weeks later, by the Act of April 4, 1832, P.L. 275, the General Assembly authorized the select and common councils of the City to provide for the election or appointment of such officers as deemed essential to duly execute " the duties and trusts enjoined and created by" Girard's Will. In Commonwealth v. Brown, 392 F.2d 120 (3d Cir.1968), cert. denied, 391 U.S. 921, 88 S.Ct. 1811, 20 L.Ed.2d 657 (1968), the U.S. Court of Appeals for the Third Circuit described some of the ensuing developments:
Philadelphia accepted the bequests and by ordinance set up a plan to administer the College by a Trusts Board. In 1833 a building committee of the City Council was appointed, a president of the College was chosen under an ordinance created for that purpose and the cornerstone of the main building laid. Construction was concluded in 1847 and the College opened the first of the following year. Down to 1869 the City Council operated the College directly, first by way of the trustees until 1851 when the latter offices were abolished, and the Council again took over direct management. In 1869 the Commonwealth enacted a law which gave Philadelphia a local Board of Trusts to take over the control of Girard College.... Broadly summing up the Commonwealth and City's intimate association with Girard College the District Court, with full justification in the record, found as fact that:
Beginning in 1831 and continuing to date , the Commonwealth of Pennsylvania and the City of Philadelphia, by the enactment of statutes and ordinances, by the use and supervision of public officials, appointed by legislative and judicial bodies, by rendering services and providing tax exemptions, perpetual existence and exemption
from tort liability have given aid, assistance, direction and involvement to the construction, maintenance, operation and policies of Girard College.
When the College opened in 1848 it housed approximately 200 orphan students who were about eight years old, under the aegis of the City Council. Notably, prior to that time, the City had made use of Girard's residuary bequest to support the other public endeavors which Girard had subsidized in his Will " to diminish the burden of taxation, now most oppressive especially on those, who are the least able to bear it." Thus, as the Soohan Court noted: " Until 1847, annual appropriations were made out of the residuary estate, for the support of the police, the improvement of the city property, and the general appearance of the city, and in effect to diminish the burden of taxation, but they ceased of course with the completion of the college— the erection of which had entirely exhausted the special fund of two millions." 1859 WL 8661, at *14.
Additional special legislation was adopted to satisfy other stipulations in Girard's Will respecting the College and obligations placed upon the City as his trustee. For example, the Will required that the City or its appointees be authorized to ensure that an orphan's relatives could not interfere with or withdraw a child from the College once the child was admitted, while another paragraph in the same Clause provided that when orphan students arrived at ages 14-18, they were to be " bound out" by the City to various " suitable occupations." Girard Will, Clause XXI, ¶¶ 5 & 9, at 30, 32. The General Assembly responded in 1847, passing a " Special Act"  by which guardians of prospective Girard College orphans were authorized to bind such children by indenture, as the Will indicated, to the City as trustee, effectively making the City the guardian of every Girard College orphan, prohibiting interference by the child's relatives, and authorizing the City to bind the students out until they reached their majority. See Soohan, 1859 WL 8661, at *1-2, *14; see also In re Estate of Girard, 386 Pa. 548, 127 A.2d 287, 321-22 (1956) (Musmanno, J., dissenting) (describing state and local implementing legislation; noting that " between September 15, 1832 and December 18, 1869, the Council enacted 48 different ordinances devoted exclusively to the Girard College" ).
In March 1869, the General Assembly responded to an apparent crisis in the management of the Trust and College. The Pennsylvania Senate heard testimony and discussed the state of affairs. Under the leadership of the City and Council, as described in the legislative record, " the college, like Noah's ark, has been ‘ drifting along’ and ‘ tiding along,’ without pilot or helmsman, upon the great deep, for a long time past." Pa. Senate Legislative Record, March 31, 1869, at 849-59. The solution was an Act of June 30, 1869, which ousted the existing directors, removed the Girard Trust assets from the control of the city council, a political body subject to political influences, and created the Board of City Trusts; the legislation is currently at 53 P.S. §§ 16365-16370. The statutes directed that Board of City Trusts members were to be citizens of Philadelphia
appointed by a " board of appointment" comprised of " the judges of the supreme court, together with the judges of the district court [since abolished] and the court of common pleas of the city and county of Philadelphia." 53 P.S. § 16366. Board members were to serve indefinitely, " during good behavior," but could be removed by two-thirds agreement of the judicial board of appointment. 53 P.S. § 16366.
As a result of administration of the Trust being left to the City, changes in the City itself as reflected in the 1854 Act of Consolidation, and then changes in the administration of the Trust, as effected by the 1869 Act, extensive litigation involving the Girard entities ensued during the nineteenth century. In 1956, this Court summarized the nineteenth century litigation in In re Estate of Girard, supra, as follows:
The Supreme Court held in Vidal v. Girard's Executors, 2 How. 127, 43 U.S. 127, 11 L.Ed. 205 [ (1844) ], in an elaborate opinion by Mr. Justice Story, that the city was legally capable of taking the bequest of the estate for the erection and support of the college upon the trusts designated in the will, and that these were valid charitable trusts and capable of being carried into legal effect.
In Girard v. City of Philadelphia, 7 Wall. 1, 74 U.S. 1, 19 L.Ed. 53 [ (1868) ], the decision in the Vidal case was affirmed, and it was held that the Consolidation Act had not changed the identity of the city so as to affect in any way its administration of the trust. The Court stated ...: " Now, if this were true, [that the city had become unable to administer the trust] the only consequence would be, not that the charities or trust should fail, but that the chancellor should substitute another trustee." In City of Philadelphia v. Heirs of Stephen Girard, 45 Pa. 9 [ (Pa.1863) ], our own Court likewise held that the trusts created
in the will were valid, and pointed out that the distinction must carefully be observed between the purposes and provisions of the trust itself and any problems or difficulties arising from the mode of its administration, the former not being affected by the latter; attention was called to the important fact that Girard stated that it was his " primary object" to construct and maintain the college. In City of Philadelphia v. Fox, 64 Pa. 169 [ (Pa. 1870) ], it was once again held that Philadelphia could act as a trustee to carry out the trusts under Girard's will, and that the Act of June 30, 1869, P.L. 1276, 53 P.S. §§ 6481-6486, providing for the administration by a Board of Directors of City Trusts of the trusts confided to the city, the Board being " dissociated from the general government of the city," was a valid enactment. And finally, in Girard's Appeal, 4 Penny[p]. 347 [ (Pa.1880) ], dealing with another attack on the will by Girard's heirs, it was held that they were concluded by the decree of the United States Supreme Court in the Vidal case, and that the establishment of the Board of Directors of City Trusts was legal and proper....
Id. at 290.
The 1870 decision in Philadelphia v. Fox, 64 Pa. at 169, is of particular interest to the inquiry before us. The challenge in Fox, by the City through its Solicitor (Mayor Daniel M. Fox and City Council were the ostensible defendants), was to the power of the General Assembly to replace the City as Trustee with the Board of City Trusts, a new municipal entity of the Legislature's creation that was " dissociated from the general government of the city." 1870 WL 8678, at *13. The Fox Court held the legislation to be constitutional, emphasizing that whatever power the City exercised over the Girard assets as trustee was revocable and subject to alteration, modification, and even dissolution by the sovereign Commonwealth, which was empowered to create municipal corporations like the City, as well as boards of municipal sewerage, streets, and police, in much the same manner as it had created the Board of City Trusts. And, if the Legislature could vest power in a municipal corporation, the Legislature could also remove or reshape that power; as such, any argument that the Commonwealth did not retain sovereign power over the City of Philadelphia and, by extension, the Board and the Girard entities, would fail. Id.; see also Appeal of Girard, 4 Penny p. 347, 1884 WL 13312, *10 (Pa.1880) (" The directors of city trusts are a department of the municipality which the Legislature had a constitutional
right to establish. A man who constitutes such a municipality his trustees [sic], does so subject to all the changes which the sovereign power may make in its character and organization." ).
Notably, in deciding the issue concerning the authority to shift the trusteeship from the City to the Board of City Trusts, the Fox Court also addressed the foundational question of the propriety of a municipal entity undertaking to manage the estate of a private person at all:
Such a municipal corporation may be a trustee, under the grant or will of an individual or private corporation, but only as it seems for public purposes, germane to its objects. I am aware that it has been said by high authority in England that it may take and hold in trust for purposes altogether private. But the administration of such trusts, and the consequent liabilities incurred, are altogether inconsistent with the public duties imposed upon the municipality.... It certainly is not compellable to execute such trusts, nor does it seem competent to accept and administer them. The trusts held by the city of Philadelphia, which are enumerated in the bill before us, are germane to its objects. They are charities, and all charities are in some sense public. If a trust is for any particular persons, it is not a charity. Indefiniteness is of its essence. The objects to be benefited are strangers to the donor or testator. The widening and improvement of streets and avenues, planting them with ornamental and shade trees, the education of orphans, the building of school-houses, the assistance and encouragement of young mechanics, rewarding ingenuity in the useful arts, the establishment and support of hospitals, the distribution of soup, bread or fuel to the necessitous, are objects within the general scope and purposes of the municipality. The king himself may be a trustee, though he cannot be reached by the process of any court without his consent ... and so may the state, though as I take it under the Constitution, only for objects germane to the purposes of government.
1870 WL 8678, at *12 (citations omitted).
After 1870, with the validity of the Trust reaffirmed, and more stable governance through the Board of City Trusts and ample revenue from Girard's coal lands and other properties, Girard College flourished. At the turn of the twentieth century, the school had over 1500 students, with hundreds more on a waiting list.
In the mid-twentieth century, however, further litigation arose. In 1954, a lawsuit challenged the racial segregation of the College arising from the Will's stipulation that the pupils be " poor male white orphans," after two otherwise qualified applicants were denied admission by the Board of City Trusts solely on account of their race. The rejected applicants sued, alleging that the race restriction violated the Fourteenth ...