Appeal from the District Court of the United States for the Western District of Pennsylvania; Frederic P. Schoonmaker, Judge.
Before BIDDLE, JONES, and BUFFINGTON, Circuit Judges.
This appeal calls in question the action of the district court in declining to take jurisdiction of the plaintiffs' suit which sought to enjoin the School District of Pittsburgh and its representatives from levying and collecting certain taxes for specified years.
The plaintiffs, as the bill avers, are citizens and residents of the State of New York and, as trustees, hold the legal title to real estate located in the School District of Pittsburgh. The statute creating the school district constitutes it a body corporate*fn1 whose legal statute has been defined*fn2 as that of a quasi municipal corporation or a political subdivision of the state for the purpose of administering the state's public school system within the district. The individual defendants, being the members of the Board of Public Education of the school district and its treasurer, are citizens and residents of Pennsylvania. Federal jurisdiction is invoked on the grounds of diversity of citizenship of the parties and the alleged violation and infringement by the defendants of rights guaranteed the plaintiffs by the due process clause of the Fourteenth Amendment to the Federal Constitution.
The bill of complaint assails the school district's tax levies for the years 1937, 1938 and 1939 on the ground of the alleged unconstitutionality of the statutes under which the taxes for those years were imposed by the Board of Public Education of the school district. As the bill specifically avers, the taxes for 1937 and 1938 were imposed by the school board "under the purported authority" of § 524 of the Act of May 18, 1911, P.L. 309, commonly known as the School Code, as amended by the Act of March 12, 1929, P.L. 20, § 1*fn3, "upon each dollar of the assessed value of the real estate of plaintiffs and other owners of real estate in the School District of Pittsburgh" and the taxes for 1939 were imposed "under the purported authority" of § 524 of the School Code as amended by the Act of December 1, 1938, Sp. Sess., P.L. 103,*fn4 "on each dollar of the total assessments of all property assessed and certified for taxation in said District, including the real property owned by the plaintiffs, as aforesaid;" etc.
The court below concluded that the plaintiffs' action was a suit to enjoin and restrain the levy and collection of taxes imposed by or pursuant to the laws of Pennsylvania and that a plain, speedy and efficient remedy may be had in equity in the courts of that state. Accordingly, the court dismissed the bill for want of jurisdiction because of the prohibition contained in § 24(1) of the Judicial Code as amended by the Act of August 21, 1937.*fn5 From the judgment of dismissal, the plaintiffs took the present appeal.
As the result of an attack made in the state courts in the fall of 1937 by taxpayers of the School District of Philadelphia,*fn6 the Supreme Court of the state declared the amendment of 1929 to § 524 of the School Code unconstitutional (Wilson et ux. v. Philadelphia School District, 328 Pa. 225, 195 A. 90, 113 A.L.R. 1401) but withheld injunctive relief from the complainants because of their laches and retained "the record and jurisdiction of the case for such further action as, on proper application, may be shown to be necessary". Thereupon, a suit on similar grounds was instituted by a taxpayer against the School District of Pittsburgh (Brooks v. School District of Pittsburgh, not reported) which terminated in a like ruling and decree by the State Supreme Court.
Following these decisions, the state legislature, in special session, enacted the statute of September 16, 1938, P.L. 36,*fn7 purporting to validate and confirm all taxes theretofore levied and assessed by the board of public education in any school district of the first class.*fn8 The legislature also enacted the further amendment of § 524 of the School Code (being the Act of December 1, 1938, supra), endeavoring to avoid the defect for which the amendment of 1929 had been held unconstitutional. It was subsequent to the passage of these two acts that the appellants filed their suit in the court below.
The appellants argue that, since the Supreme Court of the state held the amendment of 1929 unconstitutional, there never was a law of the state by or pursuant to which the taxes for 1937 and 1938 could have been imposed and that since the state court upon declaring the act of 1929 unconstitutional withheld injunctive relief from the complainants in the Wilson and Brooks cases, supra, because of their laches, the remedy in equity open to the present appellants in the state courts would be inefficient. Neither of these contentions can be sustained.
Accepting the unconstitutionality of the Act of 1929, as determined by the Supreme Court of the state, it was none the less the statute under which the school district acted when it levied its taxes for the years 1937 and 1938. While the levy for the latter year was made by express leave of the Pennsylvania Supreme Court, the act of 1929 was the statutory authority which the Board of Education exercised in making the levy, and the bill of complaint so avers. The determination of unconstitutionality did not make of the act a blank page in retrospect, as the appellants urge. Under it, actions has been taken by the school district, as the bill discloses, which were operative facts that must be recognized, at least, so far as the question whether the board acted by or pursuant to a law of the state is concerned. In Chicot County Drainage District v. Baxter State Bank et al., 308 U.S. 371, 60 S. Ct. 317, 318, 84 L. Ed. , the Supreme Court recently pointed out that earlier broad statements as to the completely nullifying effect of a determination of unconstitutionality must be taken with qualifications. Speaking for the court in that case, Mr. Chief Justice Hughes said: "The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. Norton v. Shelby County, 118 U.S. 425, 442, 6 S. Ct. 1121, 1125, 30 L. Ed. 178; Chicago, Indianapolis & Louisville R. Co. v. Hackett, 228 U.S. 559, 566, 33 S. Ct. 581, 584, 57 L. Ed. 966. It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to such a determination, is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, - with respect to particular relations, individual and corporate, and particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination."
From the standpoint of federal jurisdiction as restricted by the amendment to the judicial Code, the determination of the unconstitutionality of the state statute of 1929 serves the appellants no better than would their own unsupported allegation to like effect.
Furthermore, the Act of September 16, 1938, P.L. 36, purports to validate and confirm all prior tax levies by school districts of the first class. Undeniably, among the then prior levies were those of the School District of Pittsburgh for the year 1937 and 1938.Whether this statute legally effected its intended purpose, it is unnecessary for us to decide. It is nevertheless a law of Pennsylvania and, as such, material to the question of the school district's action. There is ample authority in Pennsylvania supporting the proposition that the legislature can by a retroactive law cure an illegality or even want of authority in the levy of a tax where the legislature had the power antecedently to authorize the tax.*fn9 The existence of a like power in Congress has been confirmed by the Supreme Court.*fn10
The appellants argue that the validating act may not be presently considered and that at most it is a matter for affirmative defense. We think not. Of course, upon trial, the act would be material and, if found valid, would bar the relief which the plaintiffs seek. But, the present importance of the act is its status as a law of the state. It is pleaded by the bill and, even if that were not the case, it constitutes a part of the state's statute law bearing appellants attack. It has direct relation to appellants attack. It has direct relation to the school board's earlier levies under the act of 1929 and, together, the two statutes constitute laws of Pennsylvania by or pursuant to which the taxes for 1937 and 1938 were imposed. The appellants seek to avoid the status of the ...