Denbow v. Borough of Leetsdale

• Decision Date: 08 June 1999
• Citation: 556 Pa. 567,729 A.2d 1113
• Parties: Ronald DENBOW, Vernon S. Krayniewski and Andrew Pszenny, Police Wage and Policy Committee, Appellants, v. BOROUGH OF LEETSDALE, Appellee.
• Court: Pennsylvania Supreme Court

729 A.2d 1113

556 Pa. 567

Ronald DENBOW, Vernon S. Krayniewski and Andrew Pszenny, Police Wage and Policy Committee, Appellants, v. BOROUGH OF LEETSDALE, Appellee.

Supreme Court of Pennsylvania.

Argued September 14, 1998.

Decided June 8, 1999.

Ronald P. Koerner, Pittsburgh, for Ronald Denbow.

Richard F. Start, Pittsburgh, for Borough of Leetsdale.

Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO, NEWMAN and SAYLOR, JJ.

OPINION

SAYLOR, Justice.

This appeal presents a single issue of first impression: Does Article III, Section 26 of the state Constitution, which provides in pertinent part that "[n]o bill shall be passed giving any extra compensation to any public officer, servant, [or] employe... after services shall have been rendered or contract made," operate to prohibit a municipality from granting raises to municipal employees who are already covered by an employment contract?

On December 30, 1991, Appellee, the Borough of Leetsdale (the "Borough"), through the Borough Council (the "Council"), entered into a collective bargaining agreement with the Wage and Policy Committee of the Borough's police officers. The agreement covered the terms and conditions of employment, including wages, for the years 1992 through 1994. It did not include a "wage re-opener" provision.

On November 2, 1993, two members of the Council were defeated in municipal elections. The next day, the Council voted to approve an addendum to the collective bargaining agreement giving three police officers substantial pay increases in 1994. The Council later approved a pay increase for a fourth officer who had inadvertently been omitted from the addendum. The vote to approve the pay increases was 5-2, with the two defeated members voting with the majority.

In January of 1994, the newly reorganized Council repudiated the addenda to the collective bargaining agreement. When the Borough refused to pay the salary increases, three police officers and the Wage and Policy Committee (collectively, "Appellants") filed a breach of contract action against the Borough. In its answer and new matter, the Borough asserted that the addenda on which Appellants based their action were "illegal and against public policy as they were improper attempts by a `lame duck' counsel [sic] to enter into `midnight contracts' which would bind their successors in office." At the trial court's request, the parties also briefed and argued the issue of whether the pay increases were invalid under Article III, Section 26.¹

Following a non-jury trial, the court entered a verdict in favor of the Borough. In an accompanying opinion, the court opined that if the matter at issue were solely a question of private sector contract law, Appellants would "most certainly" be entitled to recover. Since the matter at issue involved an agreement entered into by a political subdivision of the Commonwealth, however, the court held that Section 26 of Article III prohibited the pay raises granted by the Council. The Commonwealth Court affirmed. Denbow v. Borough of Leetsdale, 699 A.2d 838 (Pa. Cmwlth.1997).

Appellants do not dispute that the pay increases granted to the Borough's police officers constitute extra compensation given to public employees after a contract with those employees had already been made. Rather, they argue that Article III's proscription of such extra compensation applies only to actions of the General Assembly, not to actions of local municipalities. We granted allowance of appeal limited to this issue.² As with any issue of law, our scope of review is plenary. Phillips v. A-Best Products Co., 542 Pa. 124, 130, 665 A.2d 1167, 1170 (1995).

Appellants rest their claim of non-applicability on two grounds. First, they assert that it is clear from the plain language of Article III that its provisions apply only to the General Assembly of Pennsylvania. Second, they maintain that the decisions of this Court in McKinley v. School Dist. of Luzerne Township, 383 Pa. 289, 118 A.2d 137 (1955), and Retirement Bd. of Allegheny County v. McGovern, 316 Pa. 161, 174 A. 400 (1934), taken together, lead inevitably to the same conclusion.

As for Appellants' first argument, it is beyond dispute that Article III of the Pennsylvania Constitution is addressed to the General Assembly. Article III is preceded by Article II, which is entitled "The Legislature," and which declares in Section 1 that "[t]he legislative power of this Commonwealth shall be vested in a General Assembly, which shall consist of a Senate and a House of Representatives." Article III, entitled "Legislation," specifies the procedures by which the General Assembly shall enact legislation. For example, Section 1 provides that "[n]o law shall be passed except by bill, and no bill shall be so altered or amended, on its passage through either House, as to change its original purpose." Article III is thus "an authorization and limitation of the legislation of the [C]ommonwealth." Commonwealth v. Griest, 196 Pa. 396, 408, 46 A. 505, 507 (1900) (emphasis added). In Section 26 of Article III, "[t]he Constitution provides that the General Assembly may NOT: ... [g]ive extra compensation after service rendered or contract made, except pensions and retirement." WOODSIDE, PENNSYLVANIA CONSTITUTIONAL LAW 301-02 (1985) (emphasis added). Article IX, moreover, is entitled and addresses "Local Government."

With this argument, however, Appellants demonstrate no more than that Section 26 of Article III governs actions of the General Assembly. Still to be answered is the question of whether Section 26 has been or should be interpreted as applying also to actions of local municipalities. Appellants contend that this Court, by its decisions in McGovern and McKinley, has implicitly rejected such an interpretation.

The issue in McGovern was whether the Retirement Act of May 2, 1929, P.L. 1278, violated, inter alia, Section 11 (now 26) and Section 13 (now Section 27) of Article III. Section 11 was in pertinent part identical to its successor; and Section 13 provided, as Section 27 does now, that "[n]o law shall extend the term of any public officer, or increase or diminish his salary or emoluments, after his election or appointment." Appellants, a majority of the Commissioners of Allegheny County, argued that receipt of full retirement pay by employees who retired shortly before the Act went into effect, and who had necessarily made few payments into the retirement system, constituted an unconstitutional increase in compensation. In the course of its analysis, this Court noted, without further explanation, that Section 11 "should be read in connection with section 13 ... of the same article." Id. at 168, 174 A. at 404. The Court found no constitutional violation, concluding that the benefits in question were a form of delayed compensation for services rendered. Id. at 168-69, 174 A. at 404.

In McKinley, this Court entertained an appeal from a decree entered in an equity action brought by a taxpayers' association, which decree had reduced the rate of commission received by the school district's tax collector from the rate that had been fixed by the board of school directors. On appeal, the tax collector argued, inter alia, that the trial court's decree violated Section 13 (now 27) of Article III. This Court rejected his argument on the ground that Section 13 "applies only to a law, which means an act of the legislature, and not to action by any municipal or local authority."³ Id. at 292-93, 118 A.2d at 139 (emphasis in original).

Appellants argue that since this Court held in McGovern that Sections 11 (now 26) and 13 (now 27) should be read in connection with each other, the limitation on the applicability of Section 13 that was recognized by the Court in McKinley must characterize Section 11 as well. Thus, according to Appellants, the latter section, now Section 26, does not restrain the actions of a municipality.

The Borough argues, however, that, in the words of the Commonwealth Court, "review of the relevant case law discloses that Article 3, Section 26 most assuredly applies to ... actions taken by municipalities." Denbow, 699 A.2d at 841. Of particular importance to the Borough's arguments are this Court's decisions in Harbold v. City of Reading, 355 Pa. 253, 49 A.2d 817 (1946), and Francis v. Neville Township, 372 Pa. 77, 92 A.2d 892 (1952).⁴

The dispute in Harbold centered on the issuance in 1933 of "improvement bonds" to finance street improvements in the City of Reading. Pursuant to a city ordinance, the bonds were expressly made payable out of the assessments levied upon the properties benefited by the improvements, with the City having no liability except for the collection of the assessments. Nevertheless, when several of the assessments proved uncollectible, Samuel W. Harbold, a bondholder, sued the City in assumpsit, basing his claim in part on the Act of May 26, 1943, P.L. 660. This "validating statute" provided that whenever, prior to January 1, 1942, a municipal corporation had issued bonds for the payment of the cost of a public improvement on the assumption that such bonds were not debts of the municipality, "such bonds and obligations are hereby ratified, confirmed and made valid and binding obligations and debts of the municipality." The trial court awarded judgment to the plaintiff.

On appeal, the City argued that the legislature's Act of May 26, 1943, violated, inter alia, section 11 (now 26) of Article III. Before stating its conclusion, this Court took pains to clarify the precise nature of the situation at issue. It was not a situation, the Court observed, in which the City was under a moral, albeit not a legally enforceable, obligation to the bondholders; to the contrary, the effect of the Act was to grant to the bondholders "a pure gratuity, a windfall...." Id. at 257, 49 A.2d at 819. Nor, the Court went on, was it required to decide whether the City could have entered into a contract...