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BOB E. RANKIN v. MT. LEBANON SCHOOL DISTRICT (12/02/82)

decided: December 2, 1982.

BOB E. RANKIN, MARILYN NICHOLS AND ALL OTHERS SIMILARLY SITUATED, APPELLANTS
v.
MT. LEBANON SCHOOL DISTRICT, MT. LEBANON BOARD OF DIRECTORS AND MELLON BANK, N.A., APPELLEES



Appeal from the Order of the Court of Common Pleas of Allegheny County in case of Bob E. Rankin, Marilyn Nichols, and all others similarly situated v. Mt. Lebanon School District, Mt. Lebanon Board of Directors and Mellon Bank, N.A., No. GD 81-17556, In Equity.

COUNSEL

Joseph M. Loughren, Wayman, Irvin & McAuley, for appellants.

Donald C. Bush, with him James C. Kletter and Thomas P. Peterson, Anderson, Moreland & Bush, for appellees, Mt. Lebanon School District and Mt. Lebanon Board of School Directors.

Walter T. McGough, with him Arthur J. Schwab, Anthony J. Basinski and Debra M. Coulson, Reed, Smith, Shaw & McClay, for appellee, Mellon Bank, N.A.

Judges Rogers, Blatt and Craig, sitting as a panel of three. Opinion by Judge Craig.

Author: Craig

[ 70 Pa. Commw. Page 211]

Bob E. Rankin and Marilyn Nichols (taxpayers) appeal the order of the Court of Common Pleas of Allegheny County which sustained the preliminary objections of the Mt. Lebanon School District, the school directors and Mellon Bank, N.A., and dismissed the taxpayers' class action suit in equity.

The preliminary objections set forth demurrers and also sought dismissal on the ground of failure to exhaust a statutory remedy, namely, a statutory appeal

[ 70 Pa. Commw. Page 212]

    from official audit under the Public School Code.*fn1 Judge Silvestri, of the common pleas court, issued a comprehensive opinion sustaining both attacks. We need to address only the matter of failure to state a cause of action because that matter, despite a scarcity of precedent, is one which clearly resolves itself upon examining the pleadings in the light of the School Code.

In their complaints,*fn2 the taxpayers averred that, at all times relevant here, the bank was the school district's treasurer and the district's designated depository; that the bank was authorized to receive money for deposit in two accounts, the "special account" and the "current account;" that the local tax collector deposited the district's real estate tax revenues directly in the special account and state and federal funding agencies remitted funds directly to the current account; that the bank, holding district funds as a fiduciary, commingled the district's funds with other funds in the bank's possession without pledging appropriate collateral held by the bank's trust department; that the bank made a profit from the use of funds deposited in the district's accounts; that the bank promised to serve as the district's treasurer at no cost to the district, but has debited the district's accounts for service charges; that the district entered into "repurchase agreements"*fn3 with the bank under which the bank paid the district a lower interest rate than the bank makes available to other similarly situated customers; that the district earned less interest

[ 70 Pa. Commw. Page 213]

    from repurchase agreements with the bank than it could have earned by putting its funds in investments authorized under the School Code;*fn4 and that the bank knew or should have known that the district could realize higher interest rates than those offered ...


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