decided: February 26, 1986.
LEROY THOMPSON, APPELLANT
WEST BRANCH AREA SCHOOL DISTRICT, APPELLEE
Appeal from the Order of the Court of Common Pleas of Clearfield County in the case of West Branch Area School District v. Ronald Thompson, No. 83-762-CD; West Branch Area School District v. Leroy Thompson, No. 83-763-CD, and Leroy Thompson v. West Branch Area School District, No. 83-16-EQU.
Allan E. MacLeod, for appellant.
Winifred H. Jones-Wenger, for appellee.
Judges Doyle and Palladino, and Senior Judge Kalish, sitting as a panel of three. Opinion by Judge Doyle.
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Leroy Thompson and Ronald Thompson (Appellants) appeal from a single order of the Court of Common
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Pleas of Clearfield County which disposed of three related actions between Appellants and West Branch Area School District (School District).
The School District filed separate actions in assumpsit against Leroy Thompson and Ronald Thompson, respectively, to recover unpaid earned income taxes for the tax years 1976 through 1982. In connection with these actions the School District served Appellants with requests for production of Federal income tax returns, pursuant to Pa. R.C.P. No. 4009. Appellants responded to these requests by filing motions for protective orders to prevent the production of these documents. Concurrent with these motions, Appellant Leroy Thompson filed a complaint in equity against the School District alleging that the School District had no authority to impose additional taxes upon its residents because it had accumulated an excessive surplus of funds between 1976 and 1982. The School District thereafter filed preliminary objections in the nature of a demurrer, alleging that the complaint in equity did not state a cause of action under existing law.
The court of common pleas consolidated argument, and heard Appellants' motions for protective orders together with the School District's preliminary objections to the complaint in equity. After a thorough consideration, the trial court issued an order which denied Appellants' motions for protective orders, and sustained the School District's preliminary objections in part, allowing Appellant Leroy Thompson's complaint in equity to stand insofar as it stated a claim under the Act of June 21, 1957, P.L. 390, as amended,*fn1 popularly referred to as the "Right to Know Law." The objections otherwise were sustained.
[ 95 Pa. Commw. Page 291]
Appellants have appealed to this Court, alleging that the trial court erred in sustaining the demurrer, and in denying the motions for protective orders. The School District filed a motion to quash the appeal regarding the issue of the denial of the protective orders on the grounds that this portion of the court's order was interlocutory.*fn2 The motion to quash was granted by Senior Judge Kalish of this Court on November 16, 1984.
Still before us for resolution, however, is Appellant Leroy Thompson's claim that the School District had no statutory authority to maintain a surplus of funds.*fn3 Appellant based his request for declaratory and injunctive relief on the following allegation:
During a period from and after fiscal year 1976, Respondent [School District] accumulated and currently retains a surplus in funds beyond that necessary for school operations in excess of $1,030,000.00, exceeding the entire collections of Respondent under the Local Tax Enabling Act of approximately $150,000.00 per year since 1976, all without authorization or authority under law.
In granting the School District's demurrer, the trial court concluded that the alleged accumulation of surplus did not result in a violation of any provision of The Local Tax Enabling Act (Act).*fn4 We agree.
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Section 2 of the Act, 53 P.S. § 6902, authorizes a school district to levy, assess, and collect a variety of taxes for general revenue purposes. Limitations as to the rate and amount of such taxes are provided by Section 8 of the Act, 53 P.S. § 6908, which limits the rates which may be imposed as to certain types of tax, and Section 17(a) of the Act, 53 P.S. § 6917(a), which limits the aggregate amount of all taxes which may be imposed. These sections have been held to provide the exclusive measure by which to determine whether the tax is "excessive or unreasonable" under Section 6 of the Act, 53 P.S. § 6906. William Penn Parking Garage, Inc. v. City of Pittsburgh, 464 Pa. 168, 346 A.2d 269 (1975); Prior v. Borough of Eddystone, 30 Pa. Commonwealth Ct. 536, 374 A.2d 981 (1977). See Donnelly v. Media Borough, 23 Pa. Commonwealth Ct. 115, 351 A.2d 299 (1976) (allegation of excessive surplus resulting from tax insufficient to support a claim that the tax was unreasonable). Since Appellant's complaint did not allege that the School District exceeded the limits set forth in Section 8 or 17(a), the trial court reasoned that Appellant had stated no recognizable legal claim that the tax imposed was excessive or unreasonable.
Appellant concedes that his allegation that the School District accumulated $1,030,000.00 in surplus funds does not make out a cause of action under Sections 8 or 17(a) of the Act, but contends nonetheless that this accumulation of surplus exceeds the authority given elsewhere in the Act, and is thus actionable. In support of this contention Appellant cites Sections 690 and 440.1 of the Public School Code of 1949 (School Code), 24 P.S. §§ 6-690, 4-440.1.*fn5 Section 440.1 states that the school directors shall invest funds "consistent
[ 95 Pa. Commw. Page 293]
with sound business practice," and sets forth the types of investments permitted. The section does not specify a limit to the amount of investment, nor, contrary to Appellant's assertion, does it limit the use of funds to "temporary investments."*fn6 Far from supporting Appellant's claim, this section lends authority to the proposition that a school district may accumulate and invest surplus funds. Section 690 of the School Code also cited by Appellant, authorizes a school district to create a separate capital reserve fund to finance approved school building projects. Appellant suggests that this section sets forth the only set of circumstances under which surplus funds may be retained by a school district, and that retention of such funds under any other circumstances is unauthorized. This section, of course, makes no such statement. It merely delineates the manner in which funds may be accumulated for one particular purpose. In the absence of explicit language, we cannot possibly conclude that this was intended to prohibit the accumulation of surplus funds for other purposes. Indeed, Section 441.1 sets forth procedures for the investment of funds generally apart from those which are authorized by the School Code.*fn7
In conclusion we have not been directed to, nor could we independently find, any provision which would prohibit the School District from accumulating a $1,030,000.00 surplus in funds. Further, the mere
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existence of such a surplus, as we have seen, cannot support a claim that taxes are excessive or unreasonable.*fn8 William Penn; Prior. Therefore, the trial court did not err in granting the demurrer, and accordingly we affirm.*fn9
Now, February 26, 1986 the order of the Court of Common Pleas of Clearfield County, Docket Nos. 83-762, 83-763 and 83-16, dated April 10, 1984, is hereby affirmed.
Motion granted. Order affirmed.