Appelmans v. City of Philadelphia

• Citation: 826 F.2d 214
• Decision Date: 12 August 1987
• Docket Number: No. 86-1583,86-1583
• Parties: Claire APPELMANS and Tara Broderick, Appellants, v. The CITY OF PHILADELPHIA, the Philadelphia City Council, Mayor Wilson Goode, Director of Finance, Richard C. Gilmore, the Philadelphia Gas Commission, and Gas Commissioners, Joseph Vignola, John Street, Ann Land, Lawrence Reaves and Charlotte Nichols.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 214

826 F.2d 214

Claire APPELMANS and Tara Broderick, Appellants, v. The CITY OF PHILADELPHIA, the Philadelphia City Council,

Mayor Wilson Goode, Director of Finance, Richard C. Gilmore,

the Philadelphia Gas Commission, and Gas Commissioners,

Joseph Vignola, John Street, Ann Land, Lawrence Reaves and

Charlotte Nichols.

No. 86-1583.

United States Court of Appeals, Third Circuit.

Argued March 18, 1987.

Decided Aug. 12, 1987.

Timothy B. Broderick (argued), Philadelphia, Pa., for appellants.

Handsel B. Minyard, City Sol., Gerald T. Clark (argued), Deputy City Sol., City of Philadelphia Law Dept., Philadelphia, Pa., for appellees.

Before HIGGINBOTHAM, MANSMANN, and ROSENN, Circuit Judges.

OPINION OF THE COURT

MANSMANN, Circuit Judge.

This class action under 42 U.S.C. Sec. 1983 against the City of Philadelphia was instituted by residents of Philadelphia who are consumers of gas purchased from the Philadelphia Gas Works ("PGW"). The plaintiffs alleged that the transfer of $6.5 million from the PGW's sinking fund reserve to the General Fund of the City of Philadelphia constituted a special assessment against them and was violative of their rights under the equal protection clause of the 14th Amendment, a taking of property without just compensation in violation of the 5th Amendment and was violative of Pennsylvania's law of municipal utilities. The district court entered summary judgment for the defendant City of Philadelphia, finding that the plaintiffs had failed to state a cause of action under Sec. 1983 in that the transfer of funds does not constitute a special assessment. After de novo review, we find no evidentiary materials of record to support the assertion that the appellants have a protectible property interest in the funds at issue here. Therefore, we will affirm the grant of summary judgment for the defendants.

I.

The Philadelphia Gas Works is a facility for the manufacture and distribution of gas owned by the City of Philadelphia and managed by the Philadelphia Facilities Management Corporation. The Gas Works is regulated by the Philadelphia Gas Commission, a five member body including the City Controller, two members appointed by the City Council, and two members appointed by the Mayor.

The First Class City Revenue Bond Act of 1972 authorizes cities to incur increased debt for the purpose of financing or refunding the cost of their ordinary revenue producing enterprises or "projects" without pledging the general credit or the taxing power of the city itself. 53 Pa.S. Sec. 15901 et. seq. This may be accomplished by issuing bonds secured only by project revenues. 53 Pa.S. Sec. 15902. Project revenues which may be used to secure the bonds are defined generally as receipts from charges to the general public, payments under bulk contracts, and government subsidies. 53 Pa.S. Sec. 15902. Project revenues may also include estimated interest and profits from investment of the foregoing. Id.

The statute requires the establishment and maintenace of a sinking fund for payment of principal and interest on the bonds. 53 Pa.S. Sec. 15909. Interest and profit from investment of the sinking fund may be added to the fund as required to service the debt, and any excess "shall be repaid to the city for its general purposes or applied as may be provided in the bond ordinance." Id.

In 1975, the City of Philadelphia, pursuant to 53 Pa.S. Sec. 15901, enacted the General Gas Works Revenue Bond Ordinance, which authorized the issuance of gas works revenue bonds of the city, to be secured by a pledge of revenues of the Gas Works. City Council Bill 1872. The city ordinance established a sinking fund from pledged revenues of the Gas Works. Id., Section 6.01. The ordinance also established a sinking fund reserve from proceeds of the bond sales. Id., Section 6.04. Deficiencies in the sinking fund were to be restored from the sinking fund reserve. Id. Deficiencies in the sinking fund reserve were to be restored by deposits from the pledged revenues of the Gas Works. Id., Sections 6.04 and 7.02. Any excess income generated by either fund was to be "repaid" to the city. ¹ Id., Section 6.03.

On November 12, 1985 the Gas Commission approved the transfer of $6.5 million from the Gas Works' sinking fund reserve to the General Fund of the City of Philadelphia. As a result of this order, two separate lawsuits were filed: a state court appeal by a group representing all gas rate payers ² and this suit filed by Appelmans and Broderick, the appellants, in the United States District Court for the Eastern District of Pennsylvania. The relief sought by the appellants included an order enjoining the transfer of funds or restraining the use of the funds as part of the City's General Fund.

The defendants moved to dismiss plaintiffs' complaint, and the plaintiffs moved for summary judgment. The district court then treated the defendants' motion to dismiss as one for summary judgment in accordance with Fed.R.Civ.P. 12(c) and granted the defendants' motion.

The district court considered the proffered evidentiary materials and found that the plaintiff consumers had no cause of action based on the facts alleged and offered to be proved. The court found nothing of record to support the assertion that the transferred funds were "revenues" of a municipal corporation. Therefore no cause of action could be supported on the asserted legal theory that revenues of a municipal corporation are for the benefit of its consumers and may not be taken for the general municipal fund. The court also found that the plaintiffs had introduced nothing to support the allegation that the transfer of funds created a deficiency in Gas Works revenues necessitating an increase in gas prices operating as an indirect asssessment against the property of the gas consumers. Finally, the court found the transfer to be plainly authorized under state law. The district court denied the plaintiffs' motion for summary judgment and granted summary judgment for the defendant. This appeal followed.

Our review of a motion for summary judgment is plenary. An appellate court is required to apply the same test the district court should have utilized initially. Inferences to be drawn from the underlying facts contained in the evidence submitted to the district court must be viewed in the light most favorable to the non-moving party. See Goodman v. Mead Johnson & Co., 534 F.2d 566 (3d Cir.1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977). This standard does not change when the issue is presented in the context of cross-motions for summary judgment.

"[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be 'no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).

We agree with the district court that the plaintiffs have failed to state a cause of action under 42 U.S.C. Sec. 1983. The plaintiffs have failed to allege or provide evidentiary support for their legal entitlement to the funds at issue giving them standing to object to the transfer.

II.

We interpret appellants' argument to be that Pennsylvania law requires that the earnings of a municipal utility be retained and applied to fund the internal operations of the utility. If the funds had been retained, rates either would have been reduced or at least would not have been raised. Therefore the direct taking of the funds for the city's general fund amounted to an indirect tax on gas consumers in the form of higher rates. The result is that the property of the gas consumers is being taken in the form of higher rates and that gas consumers are forced to assume an unequal burden of taxation amounting to a taking without just compensation and violation of equal protection of the laws.

We need not consider whether there may have been a taking or an unreasonable classification unless the plaintiffs can show a property right or vested interest in the funds at issue which is adversely affected by the defendant's action. See generally, O'Shea v. Littleton, 414 U.S. 488, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974); Common Cause v. Department of Energy, 702 F.2d 245 (D.C.Cir.1983). In order to sustain a claimed denial of a federal constitutional right through the use of the funds at issue, the plaintiffs must establish more than a hope or unilateral expectation that the funds would be used for rate reduction. Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). They must establish a legal interest in or entitlement to those funds and a real or immediate injury or threat of injury which is likely to be redressed in a tangible way by available judicial relief. Id. Property interests are created by "existing rules or understandings that stem from an independent source such as state...