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12/08/97 RONALD H. ISRAELIT AND JOAN R. ISRAELIT

December 8, 1997

RONALD H. ISRAELIT AND JOAN R. ISRAELIT AND AARON RAPPEPORT, ON BEHALF OF THEMSELVES, ALL OTHERS SIMILARLY SITUATED, APPELLANTS
v.
MONTGOMERY COUNTY, MONTGOMERY COUNTY BOARD OF ASSESSMENT APPEALS, AND MONTGOMERY COUNTY BOARD OF COMMISSIONERS



Appealed From No. 96-09386. Common Pleas Court of the County of Montgomery. Judge SMYTH, President Judge.

Before: Honorable Doris A. Smith, Judge, Honorable Dan Pellegrini, Judge, Honorable Emil E. Narick, Senior Judge. Opinion BY Judge Smith.

The opinion of the court was delivered by: Smith

OPINION BY JUDGE SMITH

FILED: December 8, 1997

Ronald H. Israelit, Joan R. Israelit and Aaron Rappeport, on behalf of themselves and all others similarly situated (collectively, Taxpayers), appeal from the order of the Montgomery County Court of Common Pleas that sustained the preliminary objections of Montgomery County, the County's Board of Assessment Appeals and its Board of Commissioners (collectively, County) and dismissed the Taxpayers' complaint. Taxpayers contend that the trial court erred by dismissing their action and requiring them to pursue administrative remedies and by concluding that their request for tax refunds cannot be resolved in the context of a class action.

I

Taxpayers are all residents of Montgomery County who have been subject to the County's personal property tax (Tax) imposed pursuant to the Act of June 17, 1913, P.L. 507 as amended, 72 P.S. §§ 4821 - 4902, commonly known as the County Personal Property Tax Law (Law). Under Section 1 of the Law:

All personal property of the classes hereinafter enumerated, owned, held or possessed by any resident ... is hereby made taxable annually for county purposes ... at a rate not to exceed four mills of each dollar of the value thereof, and no failure to assess or return the same shall discharge such owner or holder thereof, from liability therefor, that is to say ... all shares of stock in any bank, corporation, association, company, or limited partnership, created or formed under the laws of this Commonwealth or of the United States, or of any other state or government, except shares of stock in any bank, bank and trust company, national banking association, savings institution, corporation, or limited partnership ... liable to or relieved from the capital stock or franchise tax for State purposes under the laws of this Commonwealth....

72 P.S. § 4821. Section 1.1, added by Section 1 of the Act of April 18, 1978, P.L. 56, 72 P.S. § 4821.1, provides that "the county commissioners of each county ... shall have the power to determine whether or not to impose and collect the taxes permitted under the provisions of this law."

Taxpayers filed a class action complaint in equity against the County after the United States Supreme Court announced its decision in Fulton Corp. v. Faulkner, 516 U.S. 325, 116 S. Ct. 848, 133 L. Ed. 2d 796 (1996). The Court held in Fulton Corp. that an allegedly similar North Carolina tax violated the Commerce Clause of the United States Constitution. Taxpayers' complaint seeks: (1) a declaration that the Law violates the Pennsylvania and United States Constitutions; (2) an injunction against the County's collection of the Tax; and (3) refunds of payments made to the County under the Tax.

The County filed preliminary objections in the nature of a demurrer to the complaint, arguing, inter alia, that Taxpayers could not pursue their claims in equity because an adequate statutory remedy existed. The trial court sustained the preliminary objections and dismissed Taxpayers' complaint in its entirety. Specifically, the court concluded that Taxpayers had failed to exhaust the statutorily prescribed procedure of filing for a refund with the Board of Assessment Appeals and that a class action may not be maintained for a tax refund request. This appeal followed. *fn1

II

The Court first turns to Taxpayers' contention that the trial court erroneously determined that it could not hear Taxpayers' constitutional challenge to the Law because Taxpayers failed to exhaust statutory remedies. A party seeking to invoke a court's equity jurisdiction must demonstrate that available remedies at law do not adequately allow the adjudication of the claims asserted. City of Harrisburg v. School District of the City of Harrisburg, 675 A.2d 758 (Pa. Commw.), appeal granted, 546 Pa. 699, 685 A.2d 548 (1996); Borough of Kennett Square v. Lal, 165 Pa. Commw. 573, 645 A.2d 474 (Pa. Commw.), appeal denied, 540 Pa. 613, 656 A.2d 119 (1994).

Under Section 1 of the Act of May 21, 1943, P.L. 349, as amended, 72 P.S. ยง 5566b, when a taxpayer has paid taxes to a political subdivision that is not entitled to the funds, the governmental authorities, upon proper filing by the taxpayer, are directed to make a refund. If the authorities refuse to refund the tax payments, the taxpayer may file an action in assumpsit against the political subdivision to compel a refund. Section 2 of the Act of May 21, ...


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