author: WETTICK JR., J.,

text:
    600 Grant Street Associates Limited Partnership v. City of Pittsburgh

      February 5, 2001
    C.P. of Allegheny County,
    no. GD01-1211.

      David R. Cohen mdHollee Schwartz Temple, for plaintiffs.

      Ronald H. Pferdehirt, for defendant City of Pittsburgh.

      Ira Weiss, for defendant School District of Pittsburgh.

      Terrence McVerry and John A. Mulroy, for defendant County of Allegheny.
   WETTICK JR., J.,

Plaintiffs are property owners who pay real estate taxes to the County of Allegheny, the City of Pittsburgh, and the School District of Pittsburgh. For 2001, they will owe property taxes based on new assessments and an established predetermined ratio that has been increased from 25 percent to 100 percent. Plaintiffs request that I rule that the millage rates set by the county, the city, and the school district are excessive, that I prohibit these taxing bodies from setting millage rates for the year 2001 that will result in these taxing bodies collecting property tax revenue for the year 2001 in an amount in excess of (1) 105 percent of the total property revenue received in 2000 plus (2) additional revenue from newly constructed buildings or on increased valuations based on new improvements made to existing structures.

Plaintiffs rely on Act no. 146, adopted on December 21, 1998, 16 PS. §4980.2 (Supp. 2000), which reads as follows:

“Limits on counties of the second class. Notwithstanding any provisions of the Act of June 21,1939 (P.L. 626, no. 294), referred to as the Second-Class County Assessment Law, to the contrary, when a county of the second class makes its annual reassessment at values based upon an established predetermined ratio as required by law or when a county of the second class changes its established predetermined ratio, each political subdivision which hereafter levies its real estate taxes on that revised assessment or valuation shall for that year reduce its tax rate, if necessary, for the purpose of having the total amount of property tax revenue received exclusively as a result of the reassessment or change in ratio not to exceed 105 percent of the total amount of property tax revenue received in the preceding year, notwithstanding the increased valuations of properties under the annual reassessment system. For the purpose of determining the total amount of revenue received exclusively as a result of the reassessment or change in ratio for the year, the amount to be levied on newly constructed buildings or structures or on increased valuations based on new improvements made to existing structures shall not be considered.”

At the time Act 146 was enacted, Allegheny County was under a court order to complete a county-wide reassessment. The court order provided for the reassessment to be completed by the year 2000 for use in the tax year 2001.

At the time Act 146 was enacted, Allegheny County’s predetermined ratio was 25 percent. However, its common-level ratio was approximately 20 percent. It was anticipated that the Board of Property Assessment, Appeals and Review would increase the predetermined ratio to 100 percent for year 2001.

The two events described in the above paragraphs occurred. The county-wide reassessment was completed in the year 2000 for use in the tax year 2001. The 25 percent predetermined ratio was abolished; for the year 2001, properties are assessed at 100 percent of their fair market values.

Act 146 applies in any year in which a political subdivision levies its real estate taxes on a revised annual assessment of a county of the second class or when a county of the second class changes its established predetermined ratio. Both conditions occurred for the year 2001.

All parties agree that Act 146 was enacted to prevent taxing bodies from increasing taxes solely because property values were increased as the result of a reassessment and/or an increased established predetermined ratio.

Act 146 was sponsored by then State Senator Melissa Hart who was quoted in an article appearing in the November 19,1998 Pittsburgh Post-Gazette (Frank Reeves, “Property tax vote expected next week”) as follows:

“Those of us who live in Allegheny County can see our property taxes increase without local officials voting to do so, because property taxes rise automatically with high reassessments,” Hart said. “This bill will ensure that local property taxes won’t increase more than the inflation rate — unless officials vote to do so.”

By the year 2000, the county’s common-level ratio was less than 20 percent, so if property was valued in 2001 at 100 percent, for the typical taxing body in Allegheny County, assessed property values would increase between 2000 and 2001 by more than 500 percent. Thus, if this typical taxing body reduced its millage from 10 mills to three mills, the property owners might believe their taxes had been reduced. However, since there was more than a five-fold increase in property values attributable to the reassessment and the change in the predetermined ratio, taxes would actually have increased by 50 percent. (A small portion of this increase in property values within the taxing body within the past year would be attributable to new construction or inflation.) Consequently, under Act 146 if property values of existing property increase by 500 percent from 2000 to 2001, the legislature requires the municipality to reduce taxes to 2.1 mills and not to 3 mills:

Year Tax Total Assessment Value Revenue

2000 10 Mills $ 2,000,000 $20,000

2001 2.1 Mills $10,000,000 $21,000

2002 3 Mills $10,000,000 $30,000

Plaintiff property owners claim that the taxes of the city, county, and school district should be reduced because the tax rates that these taxing bodies have adopted will produce revenue in 2001 based on 2001 taxes in excess of 105 percent of the revenue that these taxing bodies collected in 2000 from their 2000 taxes. The taxing bodies contend that they are in compliance with Act 146 on the basis of the evidence which they submitted at a January 29,2001 hearing and their construction of Act 146.

I.

I initially consider the property owners’ claim that Allegheny County’s millage rate for the year 2001 (4.72 mills) violates Act 146. Allegheny County’s governing body did not vote to raise taxes.

In order to determine whether a taxing body’s millage in 2001 is likely to produce revenue in excess of that permitted by Act 146,1 must calculate the taxing body’s actual 2000 revenue and its likely revenue for 2001. The 2001 revenue cannot exceed 105 percent of the 2000 revenue (excluding new construction).

At the January 29, 2001 hearing, Allegheny County calculated its 2000 revenues from real estate taxes to include the money that the county actually received from its 2000 real estate taxes in 2000: $229,780,277.

The county then added revenues of $10,374,510 that are identified in Table One. While these are revenues related to real estate taxes and were received in 2000, for the most part they relate to the payment in 2000 of delinquent taxes (i.e., taxes owed prior to January 1, 2000).

Table One

Sub-Object 2000

Code Description Preliminary

0012 Real Estate Delinquent Collections $6,209,815

0013 Real Estate Liened Collections 1,647,558

0014 Interest Delinquent Real Estate Taxes 400,501

0015 Penalty Delinquent Real Estate Taxes 406,624

0016 Interest Liened Real Estate Taxes 556,773

0017 Penalty Liened Real Estate Taxes 112,536

0018 Act 602 — Current Year Delinquent 210,502

0037 In Lieu of Taxes — Tax Exempt Properties 830,201

Total Non-Current $10,374,510

However, for purposes of Act 146, the county included for tax year 2001 only the taxes that it expects to receive in 2001 from its year 2001 taxes. It did not include any money that it expects to receive in year 2001 from taxes imposed in years prior to year 2001.

The language of Act 146 refers to property tax revenue “received exclusively as a result of the reassessment or change in ratio.” The county contends that the inclusion of this clause permits it to (1) include money received in year 2000 from the late payments of taxes due in prior years and (2) to exclude these payments in year 2001. The property owners contend that the language of Act 146 does not support a reading of Act 146 in this fashion.

Possibly, there is more than one way to read the words of Act 146. However, this legislation should be read to accomplish its obvious legislative purpose of keeping a taxing body from collecting more revenue (except for a five percent inflation allowance and revenue from new construction) in the year following a reassessment or change in ratio than it received from its taxes in the prior year without publicly announcing and voting for a tax increase. When a taxing body is comparing revenues received in the prior year with anticipated revenues in the present year, under recognized accounting principles it must include the same revenue sources for both years. Act 146 is a guarantee to the taxpayers that they will not be paying a hidden tax increase (after excluding a five percent inflation adjustment and new construction). If this legislation is construed to permit the use of methods of accounting that do not permit an accurate comparison of revenue in the year of the reassessment with revenue in the prior year, Act 146 will be enabling rather than preventing hidden tax increases. This is not what the legislature intended.

At a meeting on January 31,2001 with counsel for the county and counsel for plaintiffs, I directed the county to prepare a comparison between year 2000 and year 2001 that did not consider, for either year, the receipt of money from delinquent taxes.

In 2000, the county would have received $242,665,376 if it had collected 100 percent of the taxes that it imposed in 2000. The county actually received $224,576,116 or 92.5 percent of the gross amount.

In 2001, the county will receive $268,593,407 if it collects 100 percent of the taxes which it has imposed in 2001. Under Act 146, the county may deduct gross receipts of $4,460,246 for new construction. The county has also deducted $9,702,000 as refunds that will be paid in 2001 because of appeals.

These adjustments produce gross revenues of $254,431,161. The county assumes the same collection rate of 92.5 percent and therefore anticipates revenues (after excluding new construction) of $235,348,824. This is an increase (after excluding new construction) of 4.8 percent. The county’s tax rate complies with Act 146 if its deductions are permitted.

Plaintiffs’ counsel advised me that he is not challenging the county’s use of a collection rate of 92.5 percent, because this was its collection rate in 2000.

The county has a budget item of $9,702,000 for refunds to be made in 2001 because of assessment adjustments. Plaintiffs did not challenge this deduction because of the inclusion of this item as a budget item that can be used only for this purpose. The county will voluntarily agree to the issuance of a court order which will permit this budget item to be used only for refunds and for any balance to be placed in the 2002 budget in a budget item for refunds.

For these reasons, I find that the county millage complies with Act 146. My order of court governing plaintiffs’ Act 146 challenge to the Allegheny County millage is the first order attached to this opinion.

II.

I next consider the property owners’ claim that the City of Pittsburgh’s millage rate for year 2001 violates Act 146. At this time, the city’s tax rate is 31.37 mills for land and 5.44 for buildings.

At the January 29, 2001 hearing, the city also calculated (1) its 2000 revenue from real estate taxes to include both the money it actually received in 2000 from its 2000 taxes and money received in 2000 for the late payment of taxes due in prior years and (2) its 2001 revenue from real estate taxes to include only money it expects to receive in 2001 from its 2001 taxes. At a meeting on January 31,2001 with counsel for the city and for plaintiffs, I directed the city to prepare a comparison between year 2000 and year 2001 that did not consider, for either year, the receipt of money from taxes owed in prior years.

Presently, the city’s books and records show the city received $110,998,081 in the year 2000 for 2000 real estate taxes. This amount may be adjusted after a final audit. If it is not adjusted, under Act 146 the city may receive in 2001, revenues of 105 percent of $110,998,081 or $116,547,798 based on 2001 taxes (excluding revenues from new construction).

As part of its response to Act 146, the operating budget for the City of Pittsburgh includes the following provision:

“Due to the uncertainties surrounding current data received from Allegheny County, a ‘Taxpayers rebate and appeals trust fund’ will be established. This places in reserve any revenue exceeding the 105 percent cap. Revenues exceeding the cap will either be credited or refunded to taxpayers.”

The city contends that since the above provision was part of its response to Act 146,1 must construe this provision broadly in deciding whether the city has complied with Act 146.1 agree. In order for the city to be in compliance with Act 146,1 interpret this provision establishing a taxpayers rebate and appeals trust fund as follows: Any revenue from 2001 taxes (excluding new construction) in excess of 105 percent of $110,998,081 will be placed in this escrow fund. The above figure may be adjusted if the final audited 2000 revenues from 2000 taxes received in year 2000 differ from $110,998,081. Also, the above figure may be adjusted if there is an appellate court decision which construes Act 146 in a manner that differs from my interpretation of this legislation.

The city offered the following justification for creating this trust fund: The underlying purpose of Act 146 is to prevent spending in excess of 105 percent of last year’s revenues unless the taxing body votes to increase taxes (i.e., you cannot spend what you will not have). Because of the reassessment, there is considerable uncertainty concerning how many people will participate in the city’s tax abatement programs and the amount of refunds that will be paid in 2001. The city recognizes that some of its revenue projections and projected payments for tax refunds may be too pessimistic. However, it did not want to make projections that failed to produce the revenue that the city requires (and to which it is entitled under Act 146). Consequently, it created the trust fund as part of a “wait and see” approach.

Because the city responded to Act 146 by creating a trust fund that will prevent the city from spending more money than 105 percent of its 2000 revenue, I should not intervene unless I find with reasonable certainty that the city’s millage will produce revenue in 2001 in excess of 105 percent of year 2000 revenue. I do not find that the city’s millage violates Act 146.

My order of court, governing plaintiffs’ Act 146 challenge to the City of Pittsburgh millage is the second order attached to this opinion.

III.

I next consider the property owners’ claim that the school district’s millage rate for the year 2001 (13.92 mills) violates Act 146.

According to the school district, it initially reduced its tax rates to an amount that produced revenue of only 105 percent of the year 2000 property tax revenue (excluding new construction). Thereafter, it voted to increase real estate taxes by 20 percent. Plaintiff property owners contend that (1) Act 146 prohibits tax increases in excess of 105 percent; (2) the school district did not engage in a two-step process through which it initially reduced its tax rate and thereafter voted to increase taxes by 20 percent; and (3) even assuming that the steps that the school district took constitute a two-step process in which it initially reduced its tax rate, the reduced tax rate produces income significantly in excess of 105 percent of the school district’s property tax revenue for 2000.

In Part A, I address the first issue; I am ruling in favor of the school district.

In Part B, I address the second issue; I am ruling in favor of the school district.

In Part C, I address the third issue; I am ruling in favor of plaintiffs and ordering the school district to reduce its taxes from 13.92 mills to 13.22 mills.

A.

The issue that I now address is whether Act 146 was intended to prevent taxing bodies from increasing their taxes by more than five percent or whether its sole purpose was to prevent increases in tax revenue in excess of five percent attributable exclusively to the reassessment/ change in ratio.

The wording of Act 146 supports the school district’s position. It provides for a reduction of the tax rate “for the purpose of having the total amount of property tax revenue received exclusively as a result of the reassessment or change in ratio not to exceed 105 percent of the total amount of property tax revenue received in the preceding year.” The final sentence of Act 146 uses the same language. It provides that taxes levied on new construction and improvements should not be considered when determining “the total amount of revenue received exclusively as a result of the reassessment or change in ratio for the year.” 16 P.S. §4980.2. (emphasis added) These emphasized words have meaning only if the legislature intended to permit the total amount of tax revenue received in the year of the reassessment/change in ratio to be more than 105 percent as a result of a tax increase. Under the construction of Act 146 proposed by plaintiffs, the words “exclusively as a result of the reassessment or change in ratio” are meaningless. If I exclude the clause “exclusively as a result of the reassessment or change in ratio,” the legislation contains an absolute prohibition against any receipt of increased revenue in excess of five percent:

“Limits on counties of the second class. Notwithstanding any provisions of the Act of June 21,1939 (P.L. 626, no. 294), referred to as the Second-Class County Assessment Law, to the contrary, when a county of the second class makes its annual reassessment at values based upon an established predetermined ratio as required by law or when a county of the second class changes its established predetermined ratio, each political subdivision which hereafter levies its real estate taxes on that revised assessment or valuation shall for that year reduce its tax rate, if necessary, for the purpose of having the total amount of property tax revenue received extfasivefy-as a rcsulf-of the-rcasscssmcnt or change in-ratio not to exceed 105 percent of the total amount of property tax revenue received in the preceding year, notwithstanding the increased valuations of properties under the annual reassessment system. For the purpose of determining the total amount of revenue received, exclusivcly-as-a result of--die-reassessment-r>i^efaango-m-ratioTbr-the-yoar, the amount to be levied on newly constructed buildings or structures or on increased valuations based on new improvements made to existing structures shall not be considered.”

A statute shall be construed to give meaning to all of its provisions. 1 Pa.C.S. §1922(2). If Icross out the words “exclusively as a result of reassessment or change in ratio,” Act 146 imposes a revenue cap (i.e., it prohibits any tax that will produce revenue in excess of 105 percent of the prior year’s revenue). Since the legislature does not expect courts to cross out words in construing Act 146,1 must give meaning to these words. The school district’s reading of Act 146 gives meaning to these words; the property owners’ reading does not.

In addition, if the legislature intended for taxing bodies within second-class counties to be precluded from receiving property tax revenue in excess of 105 percent of the total amount of property tax revenue received in the preceding year, it would have used the language it had previously used. In a 1975 amendment to the General County Assessment Code at 72 PS. §5020-402(b), the legislature enacted legislation that placed a limitation on the total amount of taxes that could be levied where there has been a county wide revision of assessment of real property values or a change in the established predetermined ratio. This amendment, which excludes counties of the first and second class, reads as follows:

“(b) Except as to counties of the first and second class, after any county makes a county wide revision of assessment of real property at values based upon an established predetermined ratio as required by law or after any county changes its established predetermined ratio, each politi cal subdivision, which hereafter for the first time levies its real estate taxes on that revised assessment or valuation, shall, for the first year, reduce its tax rate, if necessary, for the purpose of having the total amount of taxes levied for that year against the real properties contained in the duplicate for the preceding year, equal, in the case of any taxing district, not more than 10 per centum greater than the total amount it levied on such properties the preceding year, notwithstanding the increased valuations of such properties under the revised assessment. For the purpose of determining the total amount of taxes to be levied for said first year, the amount to be levied on newly constructed buildings or structures or on increased valuations based on new improvements made to existing houses need not be considered. The tax rate shall be fixed for that year at a figure which will accomplish this purpose. With the approval of the court of common pleas, upon good cause shown, any such political subdivision may increase the tax rate herein prescribed, notwithstanding the provisions of this subsection.” (emphasis added)

The fourth- to eighth-class county assessment law contains an almost identical provision at 72 P.S. §5453.602(b):

“(b) After any county has established and completed, for the entire county, the permanent system of records consisting of tax maps, property record cards and property owner’s index as required by section 306 of this Act, and has made its first county assessment of real property or subsequently makes a county wide revision of assessment of real property under that system and at values based upon an established predetermined ratio as required by this section or when a county changes its established predetermined ratio, each political subdivision, which hereafter for the first time levies its real estate taxes on that first or revised assessment or valuation, shall, for that first year, reduce its tax rate, if necessary, for the purpose of having the total amount of taxes levied for that year against the real properties contained in the duplicate for the preceding year, equal, in the case of a school district, not more than 110 per centum, and in the case of any other taxing district, not more than 105 per centum of the total amount it levied on such properties the preceding year, notwithstanding the increased valuations of such properties under the new assessment system. For the purpose of determining the total amount of taxes to be levied for said first year, the amount to be levied on newly constructed buildings or structures or on increased valuations based on new improvements made to existing houses need not be considered. The tax rate shall be fixed for that year at a figure which will accomplish this purpose. With the approval of the court of common pleas, upon good cause shown, any such political subdivision may increase the tax rate herein prescribed, notwithstanding the provisions of this subsection. No political subdivision shall levy real estate taxes on a countywide revised assessment until it has been completed for the entire county.”

Unlike the above legislation, Act 146 does not limit the total amount of taxes that may be levied against real estate. Act 146 only reaches revenues that are “received exclusively as a result of the reassessment or change in ratio.” Certain projected school district revenues in excess of 105 percent of its 2000 revenues will not be “received exclusively as a result of the reassessment or change in ratio.” These revenues will be received because the school district increased its taxes.

Plaintiffs rely on case law holding that statutes relating to taxation are to be strictly construed, and in cases of doubt, the construction should be against the taxing authority (see e.g., In re Estate of Leitham, 726 A.2d 1116, 1118 (Pa. Commw. 1999)), and on Rule of Statutory Construction 1928(b)(3), 1 Pa.C.S. § 1928(b)(3) which provides that all provisions of a statute imposing taxes shall be strictly construed. I am not certain that this Rule of Statutory Construction applies because Act 146 does not confer any power to impose taxes. Even assuming that it does apply, there is no ambiguity because, as I have discussed, this legislation covers only property tax revenue received “exclusively as a result of the reassessment or change in ratio.”

Plaintiffs contend that there is legislative history that supports their position. Attached as exhibit F to an affidavit of Ronald A. Magoc, submitted by plaintiffs, is a document dated November 20, 1998 titled, “House of Representatives/Republican Caucus/Bill Summary.”

Plaintiffs rely on the preliminary summary of the bill summary which includes the following description of the legislation:

“(2) limit political subdivisions from receiving tax revenues in excess of 105 percent of the preceding year’s property tax revenues after a reassessment or change in the predetermined ratio.”

I need not decide what weight, if any, should be given to this document because its discussion of this legislation uses the qualifying language “received exclusively as a result of reassessment or ratio change:”

“(2) Reassessment revenue caps (anti-windfall provision): An additional section is added that requires political subdivisions in counties of the second class in the year following a reassessment or change in the predetermined ratio to reduce tax rates so the total amount of property tax revenue received exclusively as a result of the reassessment or ratio change, excluding the amount to be levied on newly constructed buildings or structures or on increased values on new improvements, does not increase more than five percent over the last year’s totals. This language is similar to that included in the Code under the Home Rule Charter Article which, for the exception of a few sections, expires upon the swearing-in of the first elected Home Rule official.”

This summary also refers to the other legislation described at pages 33 to 35 of this opinion which uses language placing a limit on the amount of revenue that may be collected without approval of court upon good cause shown.

For these reasons, I rule that the school district did not violate Act 146 if its board initially voted to reduce millage to a millage rate that would not produce revenue in 2001 based on its 2001 taxes which exceeds 105 percent of the revenue it received in 2000 from its 2000 real estate taxes.

B.

I next address plaintiffs’ claim that the school board did not use a two-step process in which it initially voted to reduce taxes and thereafter voted to increase taxes.

I agree with plaintiffs that the board vote was not as clear as it could have been. The board conducted a single vote in which it set millage at 13.92 mills. See Board of Public Education of the School District of Pittsburgh minutes, December 20, 2000 at 112-13. However, the resolution included a statement of estimated revenues which contained the following:

“Real Estate Tax
Tax rate — in mills 59.7 plus increase of 11.94 equals 71.64
Converted 11.60 plus increase of 2.32 equals 13.92
Estimated collectible during current year (current and delinquent) $153,640,000”

The first converted number is a millage rate (11.60) that, according to the school district, is permitted under Act 146. The second (2.32 mills) is a 20 percent increase. This shows, according to the school district, that by adopting a millage rate of 13.92 mills, the board was voting to increase taxes by 20 percent.

The purpose of Act 146 is to prevent a taxing body from increasing taxes where the public does not know that this is taking place. The cryptic information upon which the board relies does not support a finding that the public knew what was taking place.

However, the 20 or so newspaper articles the school district submitted, describing the proposed budget of the school superintendent, clearly establish that the public understood that the superintendent initially was asking the board to raise taxes by 23.3 percent and that prior to the vote on his proposed budget, he had reduced the tax increase to 20 percent.

The earliest article, which appeared in the Pittsburgh Post-Gazette on November 14,2000 was titled, “Schools propose a 23.3 percent tax hike.” A November 22, 2000 article appearing in the Pittsburgh Tribune-Review titled, “Superintendent defends plan,” states that the superintendent met with the newspaper’s editorial board to discuss the district’s preliminary 2001 budget which would raise property taxes by 23 percent. An editorial appearing in the December 19, 2000 Pittsburgh Post-Gazette titled, “Remedial math,” refers to the superintendent’s revised budget that calls for a 20 percent property tax increase rather than 23 percent. An editorial in the December 20,2000 Pittsburgh Tribune-Review titled, “The caged bird,” states that the latest budget proposal, reducing the property tax increase from 23 percent to 20 percent, is “inconsequential.”

When the vote was taken on December 20,2000, both the public and the members of the school board clearly understood that the board members who voted for the adoption of the budget intended to be voting for a 20 percent tax increase. Since the public understood that the board was intending to raise taxes by 20 percent, a tax increase of 20 percent above 105 percent of the 2000 revenue (plus revenue from new construction and new improvements) does not violate Act 146.

C.

For the reasons I have discussed in III.A and III.B of this opinion, since the school district voted to increase taxes by 20 percent, the school district was permitted to set a millage that increases its 2001 revenue by 20 percent of the revenue that it could collect under Act 146 if it had not raised taxes. However, if the millage is likely to produce revenue (excluding new construction) of more than 120 percent of 105 percent of its 2000 revenue, the tax violates Act 146.

At the January 29, 2001 hearing, the school district offered school district exhibit 6 to support its position that its millage would produce revenue in 2001 of only 20 percent more than 105 percent of its 2000 revenue (excluding revenue of $6,104,410 which the school district attributed to new construction). According to exhibit 6, the school district’s actual revenue in year 2000 will be $117,750,000. After making adjustments for the 5 percent permitted by Act 146 and the 20 percent tax increase, the school district concluded that it was entitled under Act 146 to set taxes that will produce actual revenue of $ 151,140,000 (which includes new construction). The school district’s witnesses testified that the millage it set (13.92 mills) is likely to produce revenue of $151,140,000. In other words, the millage was set in order to comply with Act 146.

For two reasons, I do not accept the school district’s Act 146 calculations.

First, the school district based its revenue projections for 2001 on a hypothetical tax base that turned out to be 5.22 percent lower than its actual tax base. Consequently, if the school district’s remaining calculations are correct, the school district will actually collect 5.22 percent more revenue than the revenue that it said it would collect.

When the school district adopted its budget on December 20, 2000, the tentative tax base (excluding new construction) provided by the county was $12,841,167,711. The school district assumed that the value of the tax base that would be certified by the county (“actual tax base”) would be substantially less. In preparing its budget and setting and raising taxes, the school district used a tax base (excluding new construction) of only $12,179,792,656.

The tax base that was certified by the county on January 11, 2001 (excluding $601,414,706 for new construction) was $12,815,287,920 (or only $25,879,791 less than the tentative certification on which the school district based its budget). In other words, the school district’s reduction of $661,375,055 from the estimated tax base exceeded the actual reduction by $635,495,264.

While in December 2000 it may have been appropriate for the school district to assume a lesser tax base, once it received a certified tax base that was only $25,879,791 less than the December estimate, under Act 146, the school district was required to recalculate its millage based on the actual tax base. Because the actual tax base was 5.22 percent higher than the tax base on which the budget was based, actual revenues would exceed budgeted revenues by 5.22 percent unless taxes were reduced by 5.22 percent. Thus, a balanced budget would become a budget with a surplus of 5.22 percent unless, in 2001, the school district spent more than it had budgeted. The school district’s director of finance testified that it was appropriate for the school district not to reduce taxes after being advised that the value of the property which it could tax was 5.22 percent higher than the value of the property on which its budget was based. He said that if the reduction did not show up in the form of a reduced tax base, it would show up in 2001 through increased tax refunds made in 2001 as a result of tax appeals. This explanation makes no sense. The school district’s anticipated revenue for 2001 already included a deduction from gross revenue of $4,535,167 for “additional appeals allowance.” See school district exhibit 6. Also, fundamental accounting principles do not permit a taxing body to hide an anticipated expenditure by omitting this anticipated expenditure from the budget and using an incorrect tax base to generate revenue for this anticipated expenditure.

The following example shows what occurred:

Assume that the law does not permit an income tax that will generate revenue in excess of $1 million. The law provides for the taxing body to use income in the prior year in setting the tax. The taxing body sets taxes at 10 percent because it uses a total earned income of $10 million. The total income for the prior year is, in fact, $11 million. While a budget based on income of $10 million will produce income of $1 million as permitted by law, a budget based on the actual total income will produce income of $1.1 million (or $100,000 more than the law permits).

Obviously, the tax base that I will use in deciding whether or not the school district’s taxes violate Act 146 is the actual tax base of $13,416,702,626 (less new construction).

There is a second major difficulty with the school district’s calculations. The school district’s figure for actual revenue for the year 2000 included revenue it receives in tax year 2000 (the school district uses the end of February for its tax year) from year 2000 taxes and an additional $2,500,000 received in 2000 for the late payment of taxes imposed in prior years. Its 2001 figures did not include any late payments.

At a meeting with counsel for the school district and counsel for plaintiffs, I directed the school district to prepare a comparison between year 2000 and 2001 that did not consider, for either year, the receipt of money from taxes owed in prior years. I also directed that the comparison be based on the certified tax base of $13,416,702,626 (less new construction of $601,414,706).

In order to comply with Act 146, the revenue that the school district is likely to receive in 2001 from its 2001 taxes (excluding new construction) may not exceed $145,215,000. The following calculations support this statement:

School district’s 2000 revenue from its 2000 taxes:

$115,250,000

Under Act 146, the school district may increase this revenue by five percent without raising taxes:

$121,012,500

The school district can collect 20 percent additional revenue because it voted to raise its taxes by 20 percent:

$145,215,000

I now calculate the revenue that the school district is likely to receive in 2001 from its 2001 taxes at 13.92 mills.

The school district’s tax base is $13,416,702,626. The school district will receive $186,760,500 if it collects 100 percent of the taxes which it has imposed:

$186,760,500

Under Act 146, the school district may deduct anticipated revenue from new construction which is the following amount according to school district exhibit 6:

$ 6.104.410

$180,656,090

The school district anticipates refunds of $5,200,000. I will permit this deduction while requiring that it be included as a budget item that cannot be used for other purposes. See my discussion of the county’s deduction for refunds at page 27 of this opinion:

$175,456,090

The school district is using a collection rate of 87.5 percent. This is slightly lower than its collection rate for 2000. However, the school district’s collection rates have been dropping. Consequently, I will permit the use of this collection rate while creating an escrow fund for increased revenue similar to the trust fund which the city created. If I use this 87.5 percent collection rate, the school district’s anticipated revenue (excluding new constraction) atamillagerate of 13.92mills is $153,524,079. This anticipated revenue exceeds the revenue permitted under Act 146 ($145,215,000) by $8,309,079. Consequently, the current millage exceeds the maximum millage permitted by Act 146 and must be reduced to 13.22 mills.

Because the millage deduction that I am requiring is based primarily on the school district’s use of the wrong tax base, this millage reduction would not appear to result in the school district’s receiving less money from real estate than the amount which it budgeted. The school district’s 2001 budget listed revenue of $153,640,000 under the category of real estate tax. This category was described as including “estimated collectible during current year (current and delinquent).” The millage reduction to 13.22 mills in order for the school district to comply with Act 146 would appear to permit the school district to collect real estate revenues of $153,640,000 for 2001, as budgeted.

Under the school district’s budget adjustments (87.5 percent collection rate and $5.2 million for refunds), the school district’s revenues for 2001 taxes collected in 2001 will be approximately $145,300,000. According to the school district, additional revenue for new construction will be more than $6,000,000. I assume that the payments of delinquent taxes in 2001 will be similar to the $2.5 million payments in 2000:

$145,300,000

6,000,000

2,500,000

$153,800,000

For plaintiffs’ Act 146 challenges to the school district’s taxes, I enter the third order of court attached to this opinion.

ORDER OF COURT — ALLEGHENY COUNTY

On February 5, 2001, it is ordered, adjudged, and decreed that:

(1) Any unspent money in the year 2001 budget item for refunds of $9,702,000 shall not be used for any other purpose in year 2001, any positive balance in this budget item at the end of tax year 2001 shall be available for year 2002 only for this purpose of refunds, and any budget item in year 2002 for refunds shall reflect this balance; and

(2) The county’s 2001 tax millage rate does not violate Act 146 or similar provisions in the Home Rule Charter of Allegheny County and its Administrative Code.

ORDER OF COURT — CITY OF PITTSBURGH

On February 5, 2001, it is ordered, adjudged, and decreed that:

(1) The City of Pittsburgh will not modify the provision in its budget documents which provides for a taxpayers rebate and appeals tmst fund;

(2) Any revenues (excluding new construction) that the city receives in 2001 from its 2001 real estate taxes which exceed 105 percent of $110,998,081 shall be placed in the trust fund. The 2000 revenue receipts of $110,998,081 may be revised as described in the opinion which accompanies this order of court;

(3) Any revenue in the trust fund at the end of 2001 will, at the discretion of the taxing body, (1) be credited to taxpayers, (2) be refunded to taxpayers, or (3) be treated as 2002 revenues from 2002 real estate taxes, with the millage used in 2001 to be reduced accordingly in year 2002 (without prejudice to the city to thereafter raise millage, at an announced and voted on tax increase);

(4) Revenues received in 2001 in the amount of $3,271,696 (see city exhibit A) may be attributed to new construction; and

(5) The City of Pittsburgh’s 2001 millage (if not increased) does not violate Act 146.

ORDER OF COURT — PITTSBURGH SCHOOL DISTRICT

On February 5, 2001, it is ordered, adjudged, and decreed that:

(1) The 2001 tax millage of the Pittsburgh School District is reduced from 13.92 mills to 13.22 mills;

(2) The adjustment to gross revenue submitted by the school district for refunds of $5,200,000 shall be a budget item that will not be used for any other purpose in year 2001. Any positive balance in this budget item at the end of tax year 2001 shall be available for year 2002 only for this purpose of refunds and any budget item in year 2002 for refunds shall reflect this balance;

(3) Any revenues (excluding revenues attributable to new construction) that the school district receives in 2001 from its 2001 real estate taxes which exceed $145,215,000 shall be placed in a separate fund. Revenue in this separate fund may be used in year 2001 to pay refunds which exceed $5,200,000 (see paragraph (2)). The revenue may not be used for any other purpose in 2001. Any revenue in this fund at the end of 2001 will be treated as 2002 revenue from 2002 real estate taxes with the millage used in 2001 to be reduced accordingly in year 2002 (without prejudice to the school district to thereafter raise millage in 2002 at an announced and voted on tax increase); and

(4) Revenues received in 2001 in the amount of $6,104,410 may be attributed to new construction.

ORDER

On February 5, 2001, it is ordered, adjudged, and decreed that this court will continue to exercise jurisdiction over this lawsuit and the implementation of its orders of court.

      . In the legal papers which they have filed, plaintiffs refer to Act 146 as the “taxpayer protection statute.” This is plaintiffs’ characterization of the legislation; the legislature did not identify this legislation in this fashion.

      . It is my understanding that the countywide reassessment that was completed for use in year 2001 is based on the design and use of a computer program which will permit the county’s assessment board — • primarily on the basis of sales information for sales throughout Allegheny County in prior years — to reassess at any time the entire county and that it is the assessment board’s intent to revise assessments countywide each year (for example, the assessed values for the 2002 tax year will be based on 2001 fair market values). If the county reassesses each property each year in this fashion, possibly Act 146 must be complied with on an annual basis. I do not address this issue in this litigation.

      . Ordinarily, tax increases that are based on growth and inflation are not considered “windfall” taxes. For example, the Commonwealth of Pennsylvania’s revenue from its income tax increases each year even though the tax rate remains the same because of increased earnings (pay raises) and additional employment compared to the prior year.

      . While I refer to Act 146 in this opinion and order of court, I am not deciding whether Act 146 applies to the county because the Home Rule Charter of Allegheny County and its Administrative Code contain very similar language.

      . The county assumes that the amount it will pay out in 2001 will increase because there will be many more successful appeals as a result of the county wide reassessment.

      .I recognize that the city may adjust its millage for year 2001.1 am advised that any adjustment will not produce additional anticipated revenue.

      . A refund or a credit may not be feasible because of the administrative costs that would be incurred. I construe the last sentence to permit the city to use an Act 146 solution under which it must adjust its 2001 millage downward for 2002 to reflect the money in the trust fund. Because of my ruling covering the school district, the city could then increase millage for 2002 if, and only if, its taxing body voted to raise taxes.

      . The school district and I recognize that the school district was actually voting to increase taxes by 25 percent (excluding new construction) when it was announcing that the school board members would be voting for a 20 percent tax increase. The school district did not violate Act 146 by announcing a 20 percent tax increase when it was actually voting to increase taxes by 25 percent because Act 146 permits a 5 percent increase. (The expectations of the voters as to what they should be told is an election issue — -not a judicial issue.)

      . A January 11,2001 letter from the director of the Office of Property Assessment of Allegheny County to the school district certified that the value for the year 2001 of real property as it appears in the assessment rolls and taxable by your political subdivision is $13,416,702,626.

      . A millage of 13.22 will produce revenue of $177,368,808 if all taxes are collected (.01322 x tax base of $13,416,702,626). I deduct $6,104,410 for revenues from new construction and $5,200,000 for refunds, leaving a balance of $166,064,398. Using a collection rate of 87.5 percent, the school district will collect 87.5 percent of $166,064,398 or $145,306,348 which slightly exceeds the total amount of $145,215,000 that Act 146 permits.


source: Caselaw Access Project

author: NEALON, J.,

license: Public Domain

text:
    Lomeo v. Davis

      July 24, 2001
    C.P. of Lackawanna County,
    no. 99-CV-2639.

      Patrick E. Dougherty, for plaintiffs.

      Laura J. Endler and Anthony J. Piazza Jr., for defendants Davis, Uroskie and Ob/Gyn Consultants Ltd.

      Richard K. Hodges, for defendant Community Medical Center.
   NEALON, J.,

The defendants in this malpractice litigation have filed motions for summary judgment seeking to dismiss this case on the grounds that it was not timely filed within the two-year statute of limitations. The reproduced record indicates that plaintiffs filed suit within two years of the date that a physician first informed them that the female plaintiff had suffered an injury, Sheehan’s Syndrome, which resulted from severe blood loss and hemorrhagic shock following her Caesarean section procedure that had been performed or managed by the defendants 32 months earlier. Since reasonable minds could differ as to when the injury and its operative cause should have been discovered by a reasonably diligent patient, the timeliness of the plaintiffs’ claims should be decided by a jury and the motions for summary judgment will therefore be denied.

FACTUAL BACKGROUND

Plaintiff Natalie Lomeo, and her husband, Samuel Lomeo, have commenced this medical negligence action against Lomeo’s treating physicians, defendant Harold Davis M.D., and defendant Theodore Uroskie M.D., t/a defendant, Ob/Gyn Consultants, who admitted Lomeo to defendant Community Medical Center on July 26, 1995, to deliver her third child via Caesarean section. Examining the record in a light most favorable to Lomeo, the materials which have been submitted for review reflect that Dr. Davis began the Caesarean section procedure at approximately 9 a.m., during the course of which he noted uterine atony which is known to cause increased blood loss. The physician’s delivery note documented 800 ml. of blood loss during the surgery whereas the anesthesia record estimated the blood loss at 1,000 ml. Although Lomeo was transported to the recovery room at 11:15 a.m., Dr. Davis returned at 12:25 p.m. and manually evacuated “a large amount of lochia and clots” from Lomeo’s uterus.

Immediately following the completion of the surgical procedure, the postpartum nursing staff noted that Lomeo continued to experience significant vaginal bleeding. In addition, she began to display hallmark signs of hypovolemic or hemorrhagic shock which were communicated by the nurses to Dr. Davis and Dr. Uroskie. Notwithstanding that fact, the attending physicians and hospital personnel neglected to transfuse any blood until 7:40 p.m. at which time Lomeo received her first of six units of blood.

Following her discharge from the CMC on August 1, 1995, Lomeo received postoperative treatment from Dr. Davis and Ob/Gyn in August 1995, January 1996, July 1996, January 1997, July 1997 and January 1998. During those visits, she reported complaints of fatigue, weakness, dizziness, hair loss, amenorrhea (absence of menstrual periods), dyspareunia (pain with intercourse), and vasomotor symptomatology. Dr. Davis’ working diagnoses at that time included possible chronic fatigue and “some type of hypothalamic dysfunction.” (See Harold Davis M.D. deposition dated 2/3/00, pp. 56-60.) Based upon Dr. Davis’ recommendation, Lomeo was eventually examined by an endocrinologist, K. Anega M.D., on March 23,1998, who diagnosed her as suffering from Sheehan’s Syndrome.

Lomeo instituted this malpractice action on May 27, 1999, and the parties have completed discovery and exchanged expert reports. Lomeo contends that she lost more than 50 percent of her total blood volume during the Caesarean section procedure and immediate postpartum period. Lomeo’s expert witnesses opine that Dr. Davis, Dr. Uroskie and CMC personnel grossly underestimated her blood loss and failed to timely recognize and treat her postpartum hemorrhagic shock and hypotension thereby causing her to develop Sheehan’s Syndrome, a condition which the defendants neglected to diagnose prior to March 23, 1998. Lomeo has reportedly lost her thyroid, hormone, adrenal and ovarian functions as a result of her Sheehan’s Syndrome which has placed her at an increased risk of developing osteoporosis and potentially life-threatening infections and has further diminished her life expectancy.

On February 26, 2001, CMC filed a motion for summary judgment, and on March 12, 2001, Dr. Davis, Dr. Uroskie and Ob/Gyn presented a comparable motion. The movants argue that Lomeo’s malpractice claims are barred by the two-year statute of limitations since this matter was filed more than two years after the date of the allegedly negligent conduct in July 1995. (See defendant CMC’s motion for summary judgment, ¶¶10-13; defendant Davis/Uroskie/Ob/Gyn’s motion for summary judgment, ¶¶9-13.) Lomeo submits that by operation of the “discovery rule,” the limitations period was tolled until March 23,1998, when she was first diagnosed with Sheehan’s Syndrome from her severe postpartum blood loss and hemorrhagic shock. Following the completion of oral argument on July 19, 2001, this matter was submitted for a decision.

II. DISCUSSION

(A) Standard of Review

Pennsylvania Rule of Civil Procedure 1035.2 furnishes two bases for the entry of summary judgment. First, under Pa.R.C.P 1035.2(1), summary judgment may be entered prior to the completion of discovery where there is no genuine issue of material fact which could be established by additional discovery or an expert report. Manzetti v. Mercy Hospital, 776 A.2d 938, 950-51 (Pa. 2001); Ghaner v. Bindi, 779 A.2d 585, 588 (Pa. Super. 2001). Alternatively, summary judgment may be entered pursuant to Pa.R.C.P 1035.2(2) following the completion of discovery if a party who bears the burden of proof at trial has failed to produce evidence of facts essential to the cause of action which would warrant the submission of the issue to a jury. Rieger v. Altoona Area School Dist., 768 A.2d 912, 914 (Pa. Commw. 2001); Jones v. Bresset, 47 D.&C.4th 60, 69 (Lacka. Cty. 2000). In both instances, “a proper grant of summary judgment depends upon an evidentiary record that either (1) shows the material facts are undisputed or (2) contains insufficient evidence of facts to make out a prima facie cause of action or defense.” Basile v. H&R Block Inc., 777 A.2d 95 (Pa. Super. 2001); Brenzel v. Lehrer-McGovern, 102 Lacka. Jur. 350, 352 (2001).

When considering a motion for summary judgment, the record must be viewed in the light most favorable to the non-moving party with all doubts as to the existence of a factual issue being resolved against the movant. Pappas v. Asbel, 564 Pa. 407, 418, 768 A.2d 1089, 1095 (2001). Although the moving party bears the burden of proving the nonexistence of any genuine issue of fact, K.H. v. J.R., 2001 WL 614891, *2, ¶9 (Pa. Super. June 5, 2001), the non-moving party must adduce sufficient evidence regarding an essential issue on which [s]he bears the burden of proof in order to successfully withstand a summary judgment motion. Keystone Aerial Surveys Inc. v. Pennsylvania Property & Casualty Ins. Guaranty Ass’n, 777 A.2d 84, 89 (Pa. Super. 2001); Reaser v. Larkin, 102 Lacka. Jur. 219, 222 (2000). However, in considering a motion for summary judgment, “it is not the court’s function to decide facts, but to determine whether there are issues of fact to be tried.” Bellefonte Area School Dist. v. Deak, 779 A.2d 1240, 1242 (Pa. Commw. 2001). Furthermore, summary judgment is appropriate only when there is no genuine issue as to any material fact and it is clear and free from doubt that the movant is entitled to judgment as a matter of law. Pappas, supra; Yskamp v. PennDOT, 102 Lacka. Jur. 196, 200 (2000).

(B) Discovery Rule

In Pennsylvania, a cause of action for medical malpractice is governed by the two-year statute of limitations set forth in 42 Pa.C.S. §5524(2). Hayward v. Medical Center of Beaver County, 530 Pa. 320, 324, 608 A.2d 1040, 1042 (1992); Haggart v. Cho, 703 A.2d 522, 525 (Pa. Super. 1997), appeal denied, 553 Pa. 698, 718 A.2d 785 (1998). The defendant physicians and hospital assert that Lomeo’s malpractice claim is time-barred since it was not filed within two years of the date on which she suffered her injury in July 1995. Lomeo counters that the two-year limitations period did not begin to run until March 23,1998, when her injury, Sheehan’s Syndrome, was first discovered such that this matter was timely commenced on May 27,1999, approximately 14 months after that diagnosis was first made.

If the plaintiff’s injury and its operative cause are not immediately discernible, the time within which an action must be commenced may be extended by the “discovery rule” which is an equitable exception to the statutory limitations period. See Crouse v. Cyclops Industry, 560 Pa. 394, 404, 745 A.2d 606, 611 (2000); Kramer v. Dunn, 749 A.2d 984, 988 (Pa. Super. 2000). “The discovery rule is a judicially created device which tolls the running of the applicable statute of limitations until the point where the complaining party knows or reasonably should know that [s]he has been injured and that his [/her] injury has been caused by another party’s conduct.” Crouse, supra (citing Pearce v. Salvation Army, 449 Pa. Super. 654, 657-59, 674 A.2d 1123, 1125 (1996)). Stated differently, “[t]he statute begins to run when the injured party ‘possesses] sufficient critical facts to put him[/her] on notice that a wrong has been committed and that [s]he need investigate to determine whether [s]he is entitled to redress.’ ”Haggart, 703 A.2d at 526 (quoting A. McD. v. Rosen, 423 Pa. Super. 304, 307-308, 621 A.2d 128, 130 (1993)). The party claiming the benefit of the discovery rule bears the burden of establishing that [s]he falls within that exception. Cochran v. GAF Corp., 542 Pa. 210, 216, 666 A.2d 245, 249 (1995); Pocono Int’l Raceway v. Pocono Produce, 503 Pa. 80, 85, 468 A.2d 468, 471 (1983).

For the discovery rule to extend the statute of limitations period, the plaintiff must have been reasonably diligent in attempting to discover the harm and its operative cause. In defining that “reasonable diligence” standard, the Supreme Court of Pennsylvania has observed:

“Reasonable diligence is precisely that — a reasonable effort to discover the cause of an injury under the facts and circumstances present in the case. This court has long held that there are few facts which diligence cannot discover, but there must be some reason to awaken inquiry and direct diligence in the channel in which it would be successful. This is what is meant by reasonable diligence. ... Although reasonable diligence is an objective rather than a subjective standard, ‘[i]t is sufficiently flexible ... to take into account the difference[s] between persons and their capacity to meet certain situations and the circumstances confronting them at the time in question.’ ... A plaintiff’s actions must be evaluated, therefore, to determine whether [s]he exhibited ‘those qualities of attention, knowledge, intelligence and judgment which society requires of its members for the protection of their own interests and the interests of others.’ ... In other words, a party is not under an absolute duty to discover the cause of his [/her] injury. Instead, [s]he must exercise only the level of diligence that a reasonable man would employ under the facts and circumstances presented in a particular case.” Crouse, supra at 404-405, 745 A.2d at 611-12. (citations omitted)

What constitutes a reasonable time for the plaintiff to discover an injury and its cause is usually an issue for the jury. Cochran, supra at 215, 666 A.2d at 248; Hayward, supra at 325, 608 A.2d at 1043. Indeed, the Crouse court cautioned that “[pjursuant to application of the discovery rule, the point at which the complaining party should reasonably be aware that [s]he has suffered an injury is a factual issue ‘best determined by the collective judgment, wisdom and experience of jurors.’ ” Crouse, supra at 404, 745 A.2d 611 (quoting White v. Owens-Corning Fiberglas Corp., 447 Pa. Super. 5, 22, 668 A.2d 136, 144 (1995), appeal denied, 546 Pa. 648, 683 A.2d 885 (1996)). It is only “where the facts are so clear that reasonable minds cannot differ [that] the commencement period may be determined as a matter of law.” Cochran, supra; Hayward, supra.

The application of the discovery rule is best illustrated by the Supreme Court holding in Hayward. In that case, the defendant physicians performed exploratory surgery to examine a mass that was present on the plaintiff’s lung, and based upon their erroneous diagnosis that the mass was cancerous, proceeded to remove that portion of the lung affected by the suspected tumor. Postoperative pathological studies revealed that the mass was merely a blood clot and although the defendant surgeon advised the patient of that mistake on November 21, 1980, he further indicated that the surgery was nonetheless necessary to remove the mass. During the ensuing 2 1/2 years, the plaintiff experienced progressive shortness of breath which ultimately forced him to terminate his employment. On May 19,1983, a subsequent treating physician informed the plaintiff “that the November 1980 surgery... was unnecessary and was a substantial factor in [his] disability.” Hayward, supra at 322-23,608 A.2d at 1041-42. The plaintiff filed suit within two years of receiving that information, but the trial court granted summary judgment in favor of the health care providers by concluding as a matter of law that the plaintiff “knew shortly after the operation that his lung had been removed, that such removal had been the result of misdiagnosis, and that the operation had caused his medical problems.” Id. at 324, 608 A.2d at 1042.

On appeal, the plaintiff argued “that, given the nature of the medical field and its complexity, he could not be expected to know, until informed otherwise by [his subsequent treating physician], that the ill effects he suffered were a result of wrongdoing and not merely the unexpected, inevitable or unforeseeable consequences of the medical treatment....” Id. at 326,608 A.2d at 1043. In reversing the lower court’s entry of summary judgment, the Hayward court reasoned:

“A jury could very well find that [plaintiff] reasonably should have investigated the need for the surgery at the time that he was informed of the misdiagnosis, and thereby, have discovered the alleged malpractice. A jury, however, could just as well find that [plaintiff] acted reasonably in not investigating further and in being satisfied by [defendant’s] assurances that the surgery was indeed necessary. Because reasonable minds could differ as to when [plaintiff’s] injury was reasonably ascertainable, a jury question is presented, and therefore, summary judgment is not appropriate.” Id. at 326-27, 608 A.2d at 1043.

The depositions and materials which have been submitted by the parties demonstrate that there are triable issues of fact as to whether Lomeo exercised reasonable diligence in discovering her injury and its operative cause. Although Lomeo experienced weakness, hair loss and amenorrhea following her Caesarean section, her treating physicians led her to believe that she was suffering from possible “chronic fatigue” or “some type of hypothalamic dysfunction” rather than Sheehan’s Syndrome. Lomeo was never advised by her health care providers that she had experienced excessive blood loss and hemorrhagic shock while unconscious during the surgical procedure and there is no indication in the record that she was informed that her postoperative symptomatology was anything other than the natural sequelae of her surgery. Hence, a jury could conclude that a reasonably diligent person would not have discovered Lomeo’s injury and its operative cause until March 23,1998, when the endocrinologist, Dr. Anega, first diagnosed her as suffering from Sheehan’s Syndrome. In that event, this action would be deemed as timely filed on May 27,1999, less than two years after the initial diagnosis of Sheehan’s Syndrome.

If the discovery rule were to be applied as rigidly as the defendant health care providers have advocated, Lomeo would be required to discover, as a matter of law, that which her physicians had failed to diagnose, namely, that hemorrhagic shock related to the Caesarean section procedure caused her to develop Sheehan’s Syndrome. Such an incongruous construction of the discovery rule would create a double standard in this case by obligating a patient to self-diagnose an injury (i.e., Sheehan’s Syndrome caused by hemorrhagic shock), which condition the defendants maintain they were not negligent for failing to recognize earlier. The defendants’ proffered interpretation of this rule could also produce disturbing consequences for health care providers. If, as the defendants have argued, patients are required to institute suit before a physician even diagnoses an injury, let alone its operative cause, plaintiffs will be compelled to file premature or perhaps even frivolous malpractice suits so as to preserve the statute of limitations, thereby forcing physicians, hospitals, insurers and courts to endure non-meritorious claims. See Thomas, An Insurer’s Right to Settle Versus its Duty to Defend Non-Meritorious Malpractice Claims, 16 J. Leg. Med. 545 (Dec. 1995). Thus, applying an equitable principle in such an inequitable manner would be detrimental to the physician and patient alike. Accordingly, since the court should not withhold a discovery rule determination from the jury “unless the undisputed facts lead unerringly to the conclusion that the time it took to discover an injury was unreasonable as a matter of law,” Haggart, 703 A.2d at 528, the motions of Dr. Davis, Dr. Uroskie, Ob/Gyn and CMC for summary judgment will be denied.

ORDER

And now, July 24, 2001, upon consideration of the motions for summary judgment of defendants, Harold Davis M.D., Theodore Uroskie M.D., Ob/Gyn Consultants, and Community Medical Center, the memoranda of law submitted by the parties, and the oral argument of counsel on July 19, 2001, and based upon the reasoning set forth in the foregoing memorandum, it is hereby ordered and decreed that the defendants’ motions for summary judgment are denied.

      . Sheehan’s Syndrome is an ischemic necrosis of the pituitary that is often caused by postpartum hemorrhage and hypotension. It was first described by H.L. Sheehan in 1937 and its classic features include amenorrhea, hair loss and adrenal insufficiency. See Sheehan, H.L., Postpartum Necrosis of the Anterior Pituitary, J. Path. Baceriol 1937; 45:189-214; Vance, M.L., Hypopituitarism, N. Engl. J. Med. 1994; 330:1651-1662.

      . By notice dated March 30, 2001, the court administrator originally assigned the motions for summary judgment to Judge Carmen D. Minora and scheduled oral argument for June 14,2001. After Judge Minora recused himself on that date, the court administrator forwarded a new notice to counsel on June 14, 2001, informing them that oral argument would be conducted before the undersigned on July 19,2001.

      . In support of their motion for summary judgment, the defendants have cited Murphy v. Saavedra, 451 Pa. Super. 638, 679 A.2d 264 (1996) (memorandum opinion), aff’d by an equally divided court, 560 Pa. 423, 746 A.2d 92 (2000) (per curiam), in which an evenly divided panel of the Supreme Court affirmed the lower court’s entry of summary judgment based upon the expiration of the statute of limitations under the discovery rule. However, a split decision by an evenly divided court has no precedential authority under principles of stare decisis. See In re Griffin, 456 Pa. Super. 440, 458, 690 A.2d 1192, 1201 (1997), appeal denied, 549 Pa. 701, 700 A.2d 441 (1997); Chesler v. Government Employees Insurance Company, 302 Pa. Super. 356, 359-60, 448 A.2d 1080, 1082 (1982). For that reason, we look to the holdings in Crouse, Cochran and Hayward for guidance.

      . Lomeo alternatively argues that inasmuch as she continued treating with Dr. Davis from July 1995 through January 1998, the statute of limitations was tolled until January 1998 when she ceased her postoperative care with Dr. Davis. Lomeo’s argument is without merit as our Superior Court has previously held: “Pennsylvania has not adopted a per se ‘continuous treatment rule’ tolling the statute of limitations in a malpractice case until the end of treatment by the defendant. . . . Rather, the courts of this Commonwealth simply apply the discovery rule to determine the date when a patient could reasonably be expected to know of his[/her] injury.” Haggart, 703 A.2d at 526-27. (citation omitted)


author: HERRON, J.,

text:
    Fineman & Bach P.C. v. Wilfran Agricultural Industries Inc.

      July 30, 2001

      Drew S. Dorfman, for plaintiff.

      Alfred A. Gollatz, for defendants.
   HERRON, J.,

Defendants Wilfran Agricultural Industries Inc., and William and Anne Franks have filed preliminary objections to the first amended complaint of plaintiff Fineman & Bach PC. For the reasons set forth in this opinion, the court is issuing a contemporaneous order sustaining the objections in part and overruling the objections in part.

BACKGROUND

Wilfran is a Pennsylvania corporation that F&B asserts is controlled by the Franks. F&B also contends that Wilfran has served as the Franks’ alter ego, artifice and/ or facade. At some point in the early 1990s, F&B began providing legal advice to Wilfran as a corporation and to the Franks as individuals. According to the complaint, F&B’s agreement to provide services to Wilfran was based in part on the Franks’ promise to pay for Wilfran’s legal services out of their personal funds. Although the Franks fulfilled this obligation for a time, they have ceased doing so. As a result, F&B claims that Wilfran and the Franks owe $134,859.13 for Wilfran’s legal fees. In addition, it is alleged that the Franks owe $2,948 on their own legal fees.

On the basis of these allegations, F&B has filed claims against all three defendants for breach of contract, unjust enrichment, quantum meruit and promissory estoppel. F&B has also asserted separate claims against the Franks individually for breach of contract, unjust enrichment, quantum meruit and promissory estoppel arising out of their alleged failure to pay their own legal bills. In response, the defendants have filed the objections, which assert that no count is legally sufficient as to Mrs. Franks and that the claims based on Wilfran’s legal fees cannot be sustained against Mr. Franks.

DISCUSSION

Each of the objections discussed in the body of this opinion is without merit.

I. The Allegations in Paragraphs Seven, Nine and Ten of the Complaint Are Sufficiently Specific

The defendants contend that the complaint paragraphs alleging that the Franks controlled Wilfran and that Wilfran is their alter ego, facade and artifice are insufficiently specific and must be stricken. To determine if a pleading meets Pennsylvania’s specificity requirements, a court must ascertain whether the allegations are “sufficiently specific so as to enable [a] defendant to prepare [its] defense.” Smith v. Wagner, 403 Pa. Super. 316, 319, 588 A.2d 1308, 1310 (1991). See also, Maleski by Taylor v. DP Realty Trust, 653 A.2d 54, 65-66 (Pa. Commw. 1994) (in determining whether specificity requirements have been met, the complaint as a whole must be examined).

The court recognizes that the allegations in the complaint are less developed than might be desired. An examination of the complaint as a whole, however, reveals sufficient detail to allow the defendants to present a defense, if barely: when read in conjunction with the allegations that the Franks paid for services rendered on behalf of Wilfran out of their personal funds, F&B’s assertions as to the Franks’ control over Wilfran and their use of the corporation as an alter ego, an artifice and a facade are sufficiently specific. Complaint atff7-10. As a result, the objections asserting insufficient specificity are overruled.

II. Each of F&B’s Counts Is Legally Sufficient

When a court is presented with preliminary objections based on legal insufficiency,

“[I]t is essential that the face of the complaint indicate that its claims may not be sustained and that the law will not permit recovery. If there is any doubt, it should be resolved by the overruling of the demurrer. .. . Put simply, the question presented by demurrer is whether, on the facts averred, the law says with certainty that no recovery is possible.” Bailey v. Storlazzi, 729 A.2d 1206, 1211 (Pa. Super. 1999). (citations omitted)

For the purposes of reviewing the legal sufficiency of a complaint, “all well-pleaded material, factual averments and all inferences fairly deducible therefrom” are presumed to be true. Tucker v. Philadelphia Daily News, 151 A.2d 938, 942 (Pa. Super. 2000).

A. Unjust Enrichment and Quantum Meruit

The elements of a claim for unjust enrichment are “benefits conferred on defendant by plaintiff, appreciation of such benefits by defendant, and acceptance and retention of such benefits under such circumstances that it would be inequitable for defendant to retain the benefit without payment of value.” Wiernik v. PHH U.S. Mortgage Corp., 736 A.2d 616, 622 (Pa. Super. 1999), app. denied, 561 Pa. 700,751 A.2d 193 (2000). Similarly, an action based on the quasi-contract doctrine of quantum meruit requires that “one person has been unjustly enriched at the expense of another,” and thus cannot be sustained without satisfying the elements of unjust enrichment. Mitchell v. Moore, 729 A.2d 1200, 1202 n.2 (Pa. Super. 1999). The defendants contend that there is no allegation of benefits conferred on the Franks individually and that the claims for unjust enrichment and quantum meruit must therefore be stricken.

The complaint alleges that a “substantial portion” of F&B’s legal work charged to Wilfran was done for the benefit of the Franks as individuals. Complaint at ¶19. This is sufficient to support the allegations that the Franks received a benefit from F&B’s services on behalf of Wilfran. Complaint at ¶¶26, 29. While the defendants may discount these allegations as lacking any factual basis, the court must accept these allegations as true in evaluating the objections, and the objections to these counts must be overruled.

B. Promissory Estoppel

Pennsylvania recognizes a cause of action based on a theory of promissory estoppel:

“This court has previously stated that a cause of action under a theory of promissory estoppel will lie when a party relies to his or her detriment on the intentional or negligent representations of another party, so that in order to prevent the relying party from being harmed, the inducing party is estopped from showing that the facts are not as the relying party understood them to be____In Pennsylvania, the elements of promissory estoppel are:
“(1) Misleading words, conduct or silence by the party against whom the estoppel is asserted,
“(2) unambiguous proof of reasonable reliance on the misrepresentation by the party seeking to assert the estoppel; and
“(3) no duty of inquiry on the party seeking to assert estoppel.” Thomas v. E.B. Jermyn Lodge No. 2, 693 A.2d 974, 977 (Pa. Super. 1997). (citations omitted)

The defendants argue that any reliance on their words could not have been reasonable.

The court cannot agree with the defendants at this stage. The complaint alleges that, at some point during the parties’ relationship, the Franks did, in fact, pay for Wilfran’s legal services out of their personal funds. Complaint at ¶15. This could support the conclusion that F&B’s reliance on the Franks’ representations was reasonable.

The statute and cases cited by the defendants are unconvincing. Pittsburgh Baseball Inc. v. Stadium Authority of the City of Pittsburgh, 157 Pa. Commw. 478, 630 A.2d 505 (1993), involved an oral representation by the mayor of Pittsburgh that the city would pay the plaintiff $4.2 million in exchange for the plaintiff’s purchasing the Pittsburgh Pirates and keeping the team in the city. The Commonwealth Court concluded that the plaintiff’s reliance was not reasonable because it should have investigated the extent of the mayor’s power and determined that he did not have the authority to promise the funds in question. Here, there is no indication that the Franks lacked the authority to guarantee payment for F&B’s services.

The defendants’ argument based on Pennsylvania’s statute of frauds, which requires that agreements to answer for the debt of another be in writing, must also fail. See 33 Pa.C.S. §3 (prohibiting actions based upon a promise “to answer for the debt or default of another” if such promise is not in writing). Even if the court assumes that the statute of frauds is applicable, Pennsylvania corporate law allows a court to “pierce the corporate veil” when certain conditions are present. See e.g., Kiehl v. Action Mfg. Co., 517 Pa. 183, 190, 535 A.2d 571, 574 (1987) (a Pennsylvania court may pierce the corporation veil “when used to defeat public convenience, justify wrong, protect fraud or defend crime”); S.T. Hudson Eng’rs Inc. v. Camden Hotel Dev. Assocs., 747 A.2d931 (Pa. Super. 2000) (allowing creditor to pierce the corporate veil under the alter ego theory); Rinck v. Rinck, 363 Pa. Super. 593, 597, 526 A.2d 1221, 1223 (1987) (permitting piercing of corporate veil “whenever it is necessary to avoid injustice”). The complaint alleges such conditions. See complaint at ¶¶6-7, 9-10 (alleging that the Franks controlled Wilfran, that Wilfran was the Franks’ alter ego and that Wilfran was an artifice or facade of the Franks). As a result, F&B’s promissory estoppel claim must be allowed to stand.

C. Claims against Anne Franks

The defendants also assert that the complaint fails to state a claim against Anne Franks as an individual because none of the F&B legal bills are addressed to her. Even if this is so, the allegations that she made certain representations to F&B, paid F&B out of her personal funds and received a benefit from the services provided to Wilfran are sufficient to sustain causes of action against her. Complaint at ¶¶15-16, 26, 29. Given these allegations, F&B may proceed on its claims against Anne Franks.

CONCLUSION

Aside from the objections asserting failure to attach a writing, each of the objections is denied.

ORDER

And now, July 30, 2001, upon consideration of the prehminary objections of defendants Wilfran Agricultural Industries Inc., and William and Anne Franks to the complaint of plaintiff Fineman & Bach RC. and plaintiff’s response thereto, and in accordance with the memorandum opinion being filed contemporaneously with this order, it is hereby ordered and decreed as follows:

(1) The objections asserting failure to attach a copy of a writing on which a claim is based or to describe the writing’s terms and to explain its absence are sustained;

(2) The remaining objections are overruled; and

(3) The plaintiff is directed to file a second amended complaint within 20 days of the date of entry of this order.

      . The objections also assert that Count I — Breach of contract is legally insufficient as to Wilfran because it does not comply with the requirement that, if a claim is based on a writing, a plaintiff must attach a copy of the writing to the complaint or summarize the writing and explain its absence. Pa.R.C.P. 1019(i). In its response to these objections, F&B has agreed to amend its pleading to comply with this rule. Plaintiff’s response at 3. Thus, the court has granted F&B leave to amend the complaint and has not discussed these objections in the body of the opinion.

      . 33 Pa.C.S. §§1-8.

      . It appears that the Pennsylvania statute of frauds does not necessarily preclude an action based on estoppel. See Thatcher’s Drugs of West Goshen Inc. v. Consolidated Supermarkets Inc, 391 Pa. Super. 524, 533, 571 A.2d 490, 495 (1990), rev’d on other grounds, 535 Pa. 469, 636 A.2d 156 (1994) (citing Big Mountain Improvement Company’s Appeal, 54 Pa. 361 (1867), for the proposition that a defendant is “foreclosed from asserting the Statute of Frauds to the plaintiff’s estoppel argument”).