The opinion of the court was delivered by: LUONGO
The County of Lancaster and Penn Manor School District, which is located in Lancaster County, instituted this suit claiming violation of their civil rights by the defendants, Philadelphia Electric Company (PECO), a Pennsylvania public utility corporation, the Commonwealth of Pennsylvania, and the Pennsylvania Supreme Court, in denying to the County and the School District
the right to tax certain property owned by PECO. Plaintiffs seek damages approximating $1,300,000, representing taxes which should have been collected, plus interest, costs and counsel fees. The defendants have filed motions to dismiss the action pursuant to Rule 12(b), F.R.C.P.
In 1962 PECO began the acquisition of a large tract of land in Lancaster County to be used for construction and operation of a generating facility referred to as the Muddy Run Pumped Storage Hydro-Electric Project. By the terms of a federal license issued in 1964, portions of the land were required to be set aside for park and recreational purposes. Construction of the facilities, the total cost of which was estimated to be in excess of $74 million, began in 1964. In 1967 the first two of eight generating units were in operation and in 1968 the facility was completely operational. For the years 1965, 1966 and 1967, the land acquired by PECO for the Project was included in the annual assessment rolls without adjustment for the improvements which were in the course of construction. No appeals were filed from the annual assessments and PECO paid the local taxes due on those assessments for each of the three years.
During March 1967 and May 1968, the Board for the Assessment and Revision of Taxes for the County of Lancaster made additional assessments for the years 1965, 1966 and 1967 based on expenditures for the improvements to the land in the course of construction of the facilities.
PECO appealed to the Court of Common Pleas of Lancaster County. The Common Pleas Court declared the additional assessments invalid on the grounds that (1) the generating facilities were exempt from taxation even during construction; (2) retroactive assessments were permitted only for "omitted property," and improvements were not "omitted property" under the applicable state law; and (3) the dam and land and improvements devoted solely to recreational purposes were exempt from taxation during construction because PECO, by acceptance of the federal license, became a trustee for the public of this recreational facility, within the meaning of 72 P.S. § 5020-204(f). Philadelphia Electric Company Appeal, 63 Lancaster Law Review 521 (1972).
The decision was affirmed by the Commonwealth Court on the grounds that (1) the generating facilities were exempt from taxation even during construction, (2) retroactive assessments were permitted only for "omitted property," and improvements were not "omitted property" under the applicable state law, and (3) since no appeals were taken from the assessments for 1965, 1966 and 1967 within the statutory time period, the assessments were final and not thereafter subject to revision under applicable state law. Board for the Assessment and Revision of Taxes of Lancaster County, Township of Drumore, Township of Martic, Solanco School District and Penn Manor School District, Appellants v. Philadelphia Electric Company, Appellee, 10 Pa. Commonwealth Ct. 382, 308 A.2d 627 (1973). The Pennsylvania Supreme Court denied allocatur. (Allocatur Docket, Eastern District, No. 1109, February 22, 1974). The taxing authorities did not seek certiorari to the United States Supreme Court before the instant suit was filed by the County of Lancaster and Penn Manor School District.
Plaintiffs have based jurisdiction on 28 U.S.C. §§ 1331 and 1343(3), alleging that defendants have violated 42 U.S.C. § 1983 and the Fifth and Fourteenth Amendments to the United States Constitution. It is plaintiffs' contention that since other tax exempt organizations, such as charitable institutions, are not entitled to the exemption for the period while facilities are under construction, granting exemption to utilities during the period of construction violates the due process and equal protection clauses; that the Supreme Court of Pennsylvania, by denying allocatur, created the discriminatory classification and that it, and its "employer," the Commonwealth of Pennsylvania, are liable for the violation of plaintiffs' constitutional rights, and that PECO, by participating
in the unlawful discriminatory practice, is likewise liable.
The defendants have based their motions to dismiss on numerous grounds. It will not be necessary to discuss all the grounds since dismissal is clearly dictated by principles of res judicata. In reaching this conclusion I am, of course, mindful that "on a motion to dismiss the complaint must be viewed in the light most favorable to the plaintiff and that the complaint should not be dismissed unless it appears to a certainty that the plaintiff would not be entitled to relief under any state of facts which could be proved in support of his claim." Frederick Hart & Co. v. Recordgraph Corp., 169 F.2d 580, 581 (3d Cir. 1948); cited in Melo-Sonics Corp. v. Cropp, 342 F.2d 856 (3d Cir. 1965).
Although res judicata is an affirmative defense (see Rule 8(c)), it may be raised and disposed of on a motion to dismiss, Connelly Foundation v. School District of Haverford Township, 461 F.2d 495 (3d Cir. 1972); Williams v. Murdoch, 330 F.2d 745 (3d Cir. 1964); Hartmann v. Time, Inc., 166 F.2d 127 (3d Cir.), cert. denied, 334 U.S. 838, 92 L. Ed. 1763, 68 S. Ct. 1495 (1948); see Auritt v. Wheatcroft, 370 F. Supp. 948, 951 (E.D. Pa. 1974), quoting from Larter & Sons, Inc. v. Dinkler Hotels Co., 199 F.2d 854, 855 (5th Cir. 1952):
"'With respect to a specific affirmative defense such as res judicata, the rule seems to be that if the facts are admitted or are not controverted or are conclusively established so that nothing further can be developed by a trial of the issue, the matter may be disposed of upon a motion to dismiss whether the decision of the District Court be considered as having been arrived at under the provisions of Rule 12(b) or Rule 56(c).'"
Counsel for plaintiffs conceded at oral argument that there is no dispute concerning the accuracy of the record of the state proceedings as proffered in PECO's affidavit, consequently the matter is ripe for disposition.
In non-diversity cases, federal courts apply their own rule of res judicata. Heiser v. Woodruff, 327 U.S. 726, 90 L. Ed. 970, 66 S. Ct. 853 (1946); Blonder-Tongue v. University Foundation, 402 U.S. 313, 324, footnote 12, 28 L. Ed. 2d 788, 91 S. Ct. 1434 (1971). Judgment on the merits in a suit bars a second suit between the same parties or their privies on the same cause of action, and the judgment is final "not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose." Cromwell v. County of Sac, 94 U.S. (4 Otto) 351, 352, 24 L. Ed. 195 (1876) (emphasis added); Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 92 L. Ed. 898, 68 S. Ct. 715 (1948).
Plaintiffs contend that the violation of their constitutional rights did not ripen until the Supreme Court denied allocatur, thereby placing its stamp of approval on the court created discriminatory classification. This argument overlooks, however, that the possibility of such a ruling was present throughout the entire course of the state litigation, consequently the "unequal protection" claim was always available. In Coogan v. Cincinnati Bar Association, 431 F.2d 1209 (6th Cir. 1970); Mertes v. Mertes, 350 F. Supp. 472 (D. Del. 1972) (three-judge court), aff'd 411 U.S. 961, 36 L. Ed. 2d 681, 93 S. Ct. 2141 (1973); and Flynn v. State Board of Chiropractic Examiners, 418 F.2d 668 (9th Cir. 1969), res judicata was held to bar subsequent litigation even though constitutional issues sought to be raised in the federal actions had never been litigated in the state courts.
Roy v. Jones, 484 F.2d 96 (3d Cir. 1973), emphasized that the failure to seek review in the United States Supreme Court from the judgment of the highest court of the state was fatal to the federal claim, and quoted from Coogan v. Cincinnati Bar Association (dealing with suspension of a Justice of the Peace):
"'Coogan had an adequate remedy for review of his suspension by petitioning the Supreme Court of the United States for a writ of certiorari. He chose not to resort to that remedy.
'The Civil Rights Act was not designed to be used as a substitute for the right of appeal, or to collaterally attack a final judgment of the highest court of a state ...