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filed: October 12, 1989.


Appeal from Common Pleas Court, Centre County; Honorable David E. Grine, Judge.


John R. Miller, Jr., Esq., Terry J. Williams, Esq., MILLER, KISTLER, CAMPBELL, MILLER AND WILLIAMS, INC., Bellefonte, Pennsylvania AND Thomas B. Schmidt, III, Esq., Donna L. Fisher, Esq., PEPPER, HAMILTON & SCHEETZ, Harrisburg, Pennsylvania, for Appellants.

Delbert J. McQuaide, Esq., McQUAIDE, BLASKO, SCHWARTZ, FLEMING & FAULKNER, INC., State College, Pennsylvania, for Appellee.

Before: Honorable James Crumlish, Jr., President Judge, Honorable David W. Craig, Judge, Honorable Joseph T. Doyle, Judge, Honorable James Gardner Colins, Judge, Honorable Madaline Palladino, Judge, Honorable Bernard L. McGINLEY, Judge, Honorable Doris A. Smith, Judge. Judge James Gardner Colins dissents. Judge Bernard L. McGinley concurs in the result only. Judge Doris A. Smith dissents.

Author: Doyle

[ 129 Pa. Commw. Page 188]



This is an appeal by the County of Centre, Board of Assessment Appeals, and Jeffrey M. Bower, Martin L. Horn, and John P. Saylor, who are members of the Board of Commissioners and of the Board of Assessment Appeals (collectively Appellants) from an order of the Court of Common Pleas of Centre... County which granted a motion for summary judgment filed by the Pennsylvania State University (Penn State). The motion was granted on the

[ 129 Pa. Commw. Page 189]

    basis that the 1939 Centre County Court of Common Pleas opinion in Pennsylvania State College v. County of Centre, (No. 2 Equity November Term 1937, filed August 24, 1939), operated to bar the present action under the legal principles of res judicata and collateral estoppel. Specifically, the trial court held that Pennsylvania State College, which was never appealed, had held that for real estate tax purposes Penn State was an agency of the Commonwealth and, hence, could not be taxed by Appellants herein absent specific statutory authority for them to do so.

The present lawsuit began when, by notice dated June 28, 1984, the County assessed and attempted to tax, for real estate purposes for the 1985 tax year, Penn State property on which the Midstate Bank & Trust Company (Bank) has an office. The space in question is leased by Penn State to the Bank. Several other banks also maintain automatic teller machines on Penn State property and Appellants are also attempting to tax those portions of Penn State's property. Upon receipt of the June 28 notice Penn State advised Appellants that they lacked the legal power or authority to assess or tax Penn State's property. Penn State, as a precautionary measure, filed an appeal with the Centre County Board of Assessment Appeals (Board). Communication between the parties followed and the Board determined to delete an assessment it had levied against the Penn State book store and that issue is not before us. The Board, however, maintained its position with respect to the Bank office and the automatic teller machines. Consequently, Penn State filed the present action in equity contending, inter alia, that it will suffer irreparable harm if it is forced to adjudicate its position before the Board prior to a court deciding the legal question of whether Appellants have the power and authority to assess and tax its realty. As relief Penn State sought from the trial court an order preliminarily enjoining Appellants from conducting a hearing before the Board; an order preliminarily enjoining the assessments made by Appellants and enjoining them from taking any further action to assess or tax Penn State until a

[ 129 Pa. Commw. Page 190]

    final determination on the merits; and, subsequent to a hearing, an order permanently enjoining Appellants from assessing or taxing Penn State's property and a declaration that Appellants and their successors are without power to tax or assess Penn State's property. Preliminary objections to the complaint were filed and overruled. Penn State then filed a motion for summary judgment which the trial court granted and the instant appeal ensued.

On appeal here Appellants contend that Pennsylvania State College does not operate to bar their present attempt to assess and tax Penn State. We begin our analysis with an examination of that opinion.


Pennsylvania State College had its genesis in an attempt by Centre County and several local municipalities to assess and tax certain portions of Penn State property for the years 1935, 1936 and 1937. There, as here, Penn State sought injunctive relief. The specific property in issue consisted of nine tracts of farmland which were, during the years in question, used by Penn State as an agricultural laboratory for student instruction and agricultural experimentation and research with the ultimate goal being the advancement of agricultural science. The results of experiments conducted on the farms were disseminated to the public and filed with the Federal and State Departments of Agriculture.

In Pennsylvania State College, the court reviewed the history of Penn State and specifically found:

(1). The plaintiffs [sic], the Pennsylvania State College, was created as a corporate body by the Pennsylvania Legislature by the Act of February 22, 1855, P.L. 46, as 'an institution for the education of youth in the various branches of science, learning and practical agriculture as they are connected with each other, by the name, style and title of "the Farmers' High School of Pennsylvania."' In 1862 the name of the College was changed to 'The

[ 129 Pa. Commw. Page 191]

Agricultural College of Pennsylvania' and in 1874 to 'The Pennsylvania State College', under which name the plaintiff has ever since operated.

(2). The body corporate consists of the Board of Trustees, of which the Governor of the Commonwealth, the Superintendent of Public Instruction, the Secretary of Agriculture and the President of the College are ex officio members, and of the remaining members six are appointed by the Governor and confirmed by the State Senate. Other members of the Board of Trustees are elected by the Alumni and others by delegates from the County Agricultural and Engineering Societies.

(3). The plaintiff was founded by the Commonwealth of Pennsylvania and is endowed and maintained by the public, that is, by appropriations from the Pennsylvania Legislature and the Congress of the United States.

(4). The plaintiff depends for its operation upon the appropriations made to it by the State and Federal Governments. It has no other source of revenue, except such incidental revenue as comes to it from operation of its educational plant. Various nominal charges, such as laboratory charges, are made to students using different facilities, but no tuition is charged to students residing in Pennsylvania, the Act of May 20, 1857, P.L. 617, providing that the admissions to the school from the several counties shall be in proportion to their number of taxables, respectively, if such number shall apply. Occasionally private donations are made to the Board of Trustees for various specific projects.

(5). The entire revenue derived by Pennsylvania State College is applied to the support of and to increase the efficiency and facilities thereof, and to the repair and the necessary increase of grounds and buildings thereof.

(6). The powers and duties conferred upon the plaintiff by the Pennsylvania Legislature are those usually involved in the management and operation of an education institution, particular stress being laid upon the high regard of the Legislature for the agricultural interest of

[ 129 Pa. Commw. Page 192]

    the State, and among powers and duties expressly conferred are the operation of 'experimental farms', the conducting of 'agricultural experiment stations', the conducting of 'agricultural extension work' for the purpose of bringing directly to the farmers of Pennsylvania the results of the agricultural experiments, and the distribution of reports to the State and Federal Governments and to the public concerning the results of the agricultural research of the College.

(7). The Congress of the United States, by the Land Grant Act of 1862, offered a grant of a portion of the public lands to each of the states not then in rebellion, the proceeds of which were to be sold by the state and invested as a perpetual fund, the income of which was to be 'inviolably appropriated by each state . . . . to the endowment, support and maintenance of at least one college where the leading object shall be, without excluding other scientific and classical studies, and including military tactics, to teach such branches of learning as are related to agricultural and the mechanical arts, in such manner as the legislatures of the states may respectively prescribe, in order to promote the liberal and practical education of the industrial classes in the several pursuits and professions of life.' The congressional statute required the acceptance of the state and imposed certain conditions upon the grant, among which was that the state should within five years from the acceptance of the statute provide at least one college meeting the requirements thereof.

(8). This congressional grant was accepted by the State of Pennsylvania by Act of April 1, 1863, P.L. 213, which act recited that the state had already established the plaintiff as a college meeting the requirements of the congressional grant and designating the plaintiff as the beneficiary of the grant.

(9). The Congress of the United States has from time to time subsequent to the original grant, by various statutes, made appropriations to the several states for the

[ 129 Pa. Commw. Page 193]

    purpose of the more complete endowment and support of such state colleges, of establishing and maintaining agricultural experiment stations at the various state colleges, and of supporting cooperative agricultural work between the various state colleges and the United States Department of Agriculture. Each of these Federal statutes has been duly accepted on behalf of the Commonwealth of Pennsylvania by the Legislature, the plaintiff being specifically designated as the proper institution to receive the congressional appropriations.

Pennsylvania State College, slip op. at 2-6. (Material deleted in original.) Based upon this history the court found that:

(17). The said farm lands are necessary for the proper discharge of the public functions imposed upon the plaintiff by the statutes and constitute an integral part of its educational plant.

(18). The said farm lands are not operated for the purpose of making a profit, but strictly for the purpose of performing the public functions delegated to the plaintiff by the State Legislature.

(19). As a necessary consequence of the operation of these experimental farms agricultural commodities are produced and the plaintiff receives some revenues from the sale thereof, which revenues represent the salvage from the experimental research work and are used to defray a part of the necessary expenses of the institution in performing its public functions.

(20). The revenues derived from the sale of the produce of said experimental farms are a mere incident to, and a by-product of, the legitimate use of the property directly for the necessary purposes ...

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