Appeals from the Orders of the Court of Common Pleas of Philadelphia County in cases of City of Philadelphia v. Thomas, Percival, Kenny, Hazzard, Harvey, Jr., and Deckert, Nos. 424, 425, 428, 429, 430, 433 January Term, 1973; and City of Philadelphia v. George V. Schock and Jerome L. Newman, Nos. 2040 and 2045 November Term, 1973; City of Philadelphia v. James Sproles, Nos. 2245 November Term, 1973; City of Philadelphia v. Frederic Jennings, No. 2054 November Term, 1973, and City of Philadelphia v. Gloria T. Jones, No. 2042 November Term, 1973; City of Philadelphia v. George J. Cilona, No. 2146 November Term, 1973; City of Philadelphia v. Charles Cross, No. 2062 November Term, 1973; City of Philadelphia v. Arthur E. Cornell, No. 2087 November Term, 1973; and City of Philadelphia v. Meyer Goldstein, No. 2127 November Term, 1973.
Kenneth E. Aaron, with him Astor & Weiss, for appellants.
Stewart M. Weintraub, Assistant City Solicitor, with him Albert J. Persichetti, Deputy City Solicitor, Stephen Arinson, Chief Deputy City Solicitor, and Sheldon L. Albert, City Solicitor, for appellee.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Kramer.
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These cases involve appeals from the granting of summary judgments, or, as in several of the cases, judgments on the pleadings against the appellants. The appellants are residents of, or are domiciled in, the State of New Jersey, but are employed by the Federal Government at federal establishments inside the boundaries of the City of Philadelphia. These appeals are but the latest chapter in the history of litigation which has been unceasing since 1939, when the City first passed its Wage and Net Profits Tax Ordinance.*fn1
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In each of these cases, the City filed a complaint in assumpsit in the Court of Common Pleas of Philadelphia County. The complaints are all similar. Each alleged that the named defendant had not paid the wage tax for the various years shown on the complaints. Each demanded payment of the delinquent taxes plus interest and penalties, pursuant to Section 19-508(1) of The Philadelphia Code, which provides in pertinent part:
(1) If any tax imposed under this Title is not paid when due, interest at the rate of 1/2% of the amount of the unpaid tax and a penalty at the rate of 1% of the amount of the unpaid tax shall be added for each month or fraction thereof during which the tax shall remain unpaid and shall be collected, together with the amount of the tax.
Each defendant filed an answer in which he or she denied certain allegations of the complaint, and, as to the remaining allegations, asserted the privilege against self-incrimination guaranteed by the Fifth Amendment to the United States Constitution. Each answer also contained new matter which alleged that the action was barred by the statute of limitations and that the City's wage tax law was unconstitutional under the Pennsylvania and the United States Constitutions.
After all pleading procedures had closed, the City moved for judgment on the pleadings in its actions against Defendants Thomas, Percival, Kenny, Hazzard, Harvey, and Deckert. Judge Paul A. Dandridge entered orders granting the City's motion. In the actions against Defendants Sproles, Newman, Jennings, Jones, Schock, Goldstein, Cornell, Cilona, and Cross, the City submitted supporting affidavits and moved for summary judgment. The motions in these
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cases were assigned to six separate judges, who heard and granted the motions. We will affirm the orders of the court below in all 15 of these appeals.
The primary issues raised by the appellants can be summarized as follows: (1) Do the appellants' assertions, in their answers, of the privilege against self-incrimination under the Fifth Amendment to the United States Constitution leave unresolved questions of fact which render judgment on the pleadings or summary judgment inappropriate? (2) Have the appellants adequately denied certain averments of fact in the City's complaint, so as to leave unresolved questions of fact which render judgment on the pleadings or summary judgment inappropriate? (3) Does the doctrine of estoppel for failure to exhaust administrative remedies preclude the appellants from raising, as new matter, the defenses of unconstitutionality of the wage tax ordinance and the running of the statute of limitations? and (4) If the appellants are not precluded from raising the aforementioned defenses, are there any unresolved questions of fact which must be answered before we may rule on the merits of these defenses?
As can be seen, the general thrust of these issues is a challenge to the appropriateness of judgments on the pleadings or summary judgments, as the case may be, for the disposition of these cases. As an appropriate starting point, we note our conclusion that each of the City's complaints contains adequate allegations to support a lawsuit in assumpsit, and, therefore, we are concerned with the legal sufficiency of the appellants' answers thereto. Since the pleadings in all of these cases are similar in all respects material to the application of the relevant legal principles, quoted portions of the pleadings will be drawn from the action against Guy W. Harvey for illustrative purposes.
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I. Do the Appellants' Assertions of the Fifth Amendment Privilege Against Self-Incrimination Leave Unresolved Questions of Fact?
In paragraph 2 of each of the complaints, the City alleged the defendant's name, the name of his or her employer, his or her place of employment, and his or her social security number and account number with the Department of Collections. In paragraph 5 of each complaint, the City alleged the defendant's income for the years in question. Each appellant's answer responded to these averments by an assertion of the privilege against self-incrimination under the Fifth Amendment to the United States Constitution.
It is indisputable that the Fifth Amendment privilege against self-incrimination is applicable to the States via the Fourteenth Amendment, and that it applies to protect an individual not only from being compelled to testify against himself in a criminal prosecution, but also privileges him not to answer official questions in any proceeding, criminal or civil, where the answer might incriminate him in future criminal proceedings. Leftkowitz v. Turley, 414 U.S. 70, 77 (1973).
In Pennsylvania, pleadings are conclusive in the actions in which they are filed. Ham v. Gouge, 214 Pa. Superior Ct. 423, 257 A.2d 650 (1969). Moreover, in the absence of statutory prohibitions, a party's voluntary testimony or statements made in pleadings or other papers filed in a judicial proceeding, may be used against him in a subsequent criminal prosecution. 1 Henry, Pennsylvania Evidence, § 82 (4th ed. 1956); see also Commonwealth v. Ensign, 228 Pa. 400, 403-4, 77 A. 657, 658 (1910), aff'd, 227 U.S. 592 (1912); Commonwealth v. Cavanaugh, 159 Pa. Superior Ct. 113, 119, 46 A.2d 579, 582 (1946); Charles v. Arrington, 110 Pa. Superior Ct. 173, 177, 167 A. 428, 429
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(1933). It follows that a defendant in a civil case must be entitled to assert the privilege in his pleadings, when allegations in the complaint call for answers which may tend to incriminate him. See de Antonio v. Solomon, 41 F.R.D. 447 (D.C. Mass. 1966); Ensign, supra; Cavanaugh, supra. It must be emphasized, however, that the interdiction of the privilege operates only in situations presenting the possibility of criminal liability. Hale v. Henkle, 201 U.S. 43, 67 (1906); Riccobene Appeal, 439 Pa. 404, 268 A.2d 104 (1970).
It is clearly the law of Pennsylvania that the prosecution for violation of a municipal ordinance is procedurally a civil case, e.g., Waynesburg Borough v. van Scyoc, 419 Pa. 104, 213 A.2d 216 (1965); Commonwealth v. Ashenfelder, 413 Pa. 517, 198 A.2d 514 (1964); Philadelphia v. Home Agency, Inc., 4 Pa. Commonwealth Ct. 174, 285 A.2d 196 (1971). In Philadelphia v. Konopacki, 27 Pa. Commonwealth Ct. 391, 366 A.2d 608 (1976), this Court squarely held that an action for fines for violations of the wage tax provisions of the Philadelphia Code, § 19-500 et seq. (1973), is a civil action. This is not dispositive, however, for each appellant has cited the case of Philadelphia v. Cline, 158 Pa. Superior Ct. 179, 44 A.2d 610 (1945), cert. denied, 328 U.S. 848 (1946), which held that the defendants in an action in assumpsit for fines for failure to file returns under the Philadelphia Wage Tax Ordinance could assert the privilege and refuse to testify, and that no comment could be made upon their silence, nor could any adverse inference be drawn from it. Cline, supra, at 184-86, 44 A.2d at 613. We are of the opinion that Cline was correctly decided, but we conclude that the judgments granted below in the present cases do not violate the holding in that case.
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The holding in Cline rests upon the proposition that actions for penalties, even though prosecuted through modes of procedure applicable to the ordinary civil remedy, may be "criminal" in their nature for Fifth Amendment purposes, e.g., United States v. United States Coin and Currency, 410 U.S. 715 (1971); Lees v. United States, 150 U.S. 476 (1893); Boyd v. United States, 116 U.S. 616 (1886); Osborne v. First Nat'l. Bank, 154 Pa. 134, 26 A. 289 (1893); Boyle v. Smithman, 146 Pa. 255, 23 A. 397 (1892). As the cited cases point out, in such "quasi-criminal" cases, the Fifth Amendment privilege is fully applicable; the defendant may refuse to testify altogether and no adverse inference may be drawn from such refusal. We agree with the court in Cline, supra, that an action for fines and imprisonment, if said fine is not paid within ten days,*fn2 is such a "quasi-criminal" case.
However, not all penalties pursued by civil actions are "quasi-criminal." A penalty may be primarily remedial, as opposed to criminal, in character, and, if this is the case, such guarantees of the Fifth Amendment as the prohibition of double jeopardy and the privilege against self-incrimination do not apply. One Lot Emerald Cut Stones and One Ring v. United States, 409 U.S. 232, 237 (1972); Rex Trailer Co. v. United States, 350 U.S. 148, 152 (1956); United States ex rel. Marcus v. Hess, 317 U.S. 537, 548-52 (1943); Helvering v. Mitchell, 303 U.S. 391, 398-405, 404 n. 12 (1938). The penalty sought in the present cases under Section 19-508(1) is an addition to the appellants' taxes of one per centum per month for each month the tax remains unpaid. Such a sanction is primarily remedial in character. It is provided as a safeguard for the protection of the revenue and to reimburse
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the City government for the heavy expense of investigations, litigation, and other measures designed to accomplish assessment and collection of taxes necessitated by the taxpayer's failure or refusal to pay that tax. See Helvering v. Mitchell, supra at 401. The penalty provided in Section 19-508(1) falls, in our opinion, entirely within the reasoning of the Court in Mitchell. It should be noted that the Court in that case, while in the process of concluding that a 50 percentum addition to taxes owed for fraudulent evasion was a purely civil sanction, noted that an addition to the tax of one percentum per month in the case of nonpayment was obviously intended by a Congress as a civil incident of the assessment and collection of the income tax. Helvering v. Mitchell, supra, at 405. We believe it likewise clear that the "penalty" in Section 19-508(1) of this Ordinance was intended by its promulgators as a civil incident of the assessment and collection of the wage tax, and we so hold.
Since we have held the present cases to be completely civil in nature, they alone provide no grounds to support the assertion of the privilege by the appellants. However, as pointed out in the briefs, the appellants may well be subjected to future proceedings by the City for fines and imprisonment in default of payment of said fines under Section 19-508(3) for failure to file returns covering the tax liability at issue here. Because of their reasonable apprehension of such "quasi-criminal" proceedings, the appellants were entitled to assert the privilege in these civil cases. Leftkowitz v. Turley, 414 U.S. 70, 77 (1973). This does not mean, however, that the effect of the privilege is the same as if it had been invoked in a criminal or quasi-criminal case. Although we have discovered no Pennsylvania cases so holding, there is much authority for the proposition that, while a defendant
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in a civil case may invoke the privilege and it may not be used against him in any way in a subsequent criminal prosecution, the court in the civil case may draw any adverse inference which is reasonable from the assertion of the privilege. Kent v. United States, 157 F.2d 1 (5th Cir.) cert. denied, 329 U.S. 785 (1946); Paynes v. Lee, 362 F. Supp. 797 (M.D. La. 1973), aff'd, 487 F.2d 1307 (5th Cir. 1974); Stillman Pond, Inc. v. Watson, 115 Cal. App. 2d 440, 252 P.2d 717 (Ct. App. 1953); Simpson v. Simpson, 233 Ga. 17, 209 S.E. 2d 611 (1974); Allen v. Lindeman, 259 Iowa 1384, 148 N.W. 2d 610 (1967); Ralph Hegman Co. v. Transamerica Insurance Co., 293 Minn. 323, 198 N.W. 2d 555 (1972); Morgan v. U.S. Fidelity and Guaranty Co., 222 S.2d 820 (Miss.), cert. denied, 396 U.S. 842 (1969); Harwell v. Harwell, 355 S.W. 2d 137 (Mo. App. 1962); Mahne v. Mahne, 66 N.J. 53, 328 A.2d 225 (1974); In Re Tesch, 322 N.Y.S. 2d 538, 66 Misc. 2d 900 (1971); Ikeda v. Curtis, 43 Wash. 2d 449, 261 P.2d 684 (1953); Molloy v. Molloy, 46 Wisc. 2d 682, 176 N.W. 2d 292 (1970); 8 Wigmore, Evidence, § 2272(1)(e) (McNaughton rev. 1961); 98 C.J.S. Witnesses, § 455. We conclude that the rule enunciated in the cited authorities is sound, and we adopt it. In the present cases, a reasonable inference to be drawn from the appellants' assertion of the privilege is that a truthful response to the relevant allegations of the City's complaint would fail to deny these allegations. See, e.g., Simpson v. Simpson, supra, at 21, 209 S.E. 2d at 614; Molloy v. Molloy, supra, at 687, 176 N.W. 2d at 296. Therefore, we may deem the allegations in paragraphs 2 and 5 of the complaint to be admitted by failure to deny specifically or by necessary implication,*fn3 and, therefore, the assertion of the privilege
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leaves no unresolved questions of fact which would render judgment on the pleadings or summary judgment inappropriate.
II. Are the Appellants' Denials of the Allegations in Paragraphs 4 and 6 of the Complaint Sufficient To Leave Unresolved Questions of Fact?
With the exception of the amount of taxes due, paragraph 4 in the City's complaint against each appellant was identical to ...