Valley Forge Towers Apartments N, LP v. Upper Merion Area Sch. Dist.

• Decision Date: 05 July 2017
• Docket Number: No. 49 MAP 2016,49 MAP 2016
• Citation: 163 A.3d 962
• Parties: VALLEY FORGE TOWERS APARTMENTS N, LP; Morgan Properties Abrams Run Owner LP; KBF Associates, LP; Gulph Mills Village Apartments LP ; and The Lafayette at Valley Forge LP v. UPPER MERION AREA SCHOOL DISTRICT and Keystone Realty Advisors, LLC Appeal of: Morgan Properties Abrams Run Owner LP; KBF Associates, LP
• Court: Pennsylvania Supreme Court

163 A.3d 962

VALLEY FORGE TOWERS APARTMENTS N, LP; Morgan Properties Abrams Run Owner LP; KBF Associates, LP; Gulph Mills Village Apartments LP ; and The Lafayette at Valley Forge LP

v. UPPER MERION AREA SCHOOL DISTRICT and Keystone Realty Advisors, LLCAppeal of: Morgan Properties Abrams Run Owner LP; KBF Associates, LP

No. 49 MAP 2016

Supreme Court of Pennsylvania.

ARGUED: March 8, 2017

DECIDED: July 5, 2017

Mark Alan Aronchick, Esq., Jonathan Lee Cochran, Esq., Matthew Aaron Hamermesh, Esq., John S. Summers, Esq., Cheryl L. Young, Esq., Hangley Aronchick Segal Pudlin & Schiller, for Morgan Properties Abrams Run Owner LP, Appellant and KBF Associates, LP, Appellant.

Wendy G. Rothstein, Esq., Fox Rothschild, LLP, for Upper Merion Area School District, Appellee and Keystone Realty Advisors, LLC, Appellee.

Douglas Che Allen, Esq., Dusty Elias Kirk, Esq., James Christopher Martin, Esq., Jeffrey Glenn Wilhelm, Esq., Colin Emmet Wrabley, Esq., Reed Smith LLP, for PA Retailers' Association, Amicus Curiae.

Joseph C. Bright, Esq., Robert Michael Careless, Esq., Cheryl Ann Upham, Esq., Cozen O'Connor, for Brandywine Realty Trust, Amicus Curiae, PA Chamber of Business & Industry, PA Food Merchants Assoc., PA Manufacturers Assoc., et al, Amicus Curiae.

M. Janet Burkardt, Esq., Ira Weiss, Esq., Weiss, Burkardt, Kramer LLC, for School District of Pittsburgh, Amicus Curiae.

Mark Steven Cappuccio, Esq., Erin Nancy Kernan, Esq., Eastburn and Gray, P.C., for King of Prussia Associates, Amicus Curiae.

Margarete Pawlowski Choksi, Esq., Edward A. Diasio, Esq., Lawrence Donald Dodds, Esq., Kenneth Roos, Esq., Wisler, Pearlstine, Talone, Craig, Garrity & Potash, L.L.P., for Abington SD, Lower Merion SD, Great Valley SD, School District of Upper Dublin, Amicus Curiae.

James C. Dalton, Esq., for West Chester Area School District, Amicus Curiae.

Matthew Paul Domines, Esq., for Pennsylvania Economy League, Central PA Division, Wilkes–Barre, Amicus Curiae.

John Edward Freund III, Esq., Jonathan M. Huerta, Esq., King, Spry, Herman, Freund & Faul, L.L.C., for Allentown SD, Bethlehem ASD, Easton ASD, Pocono Mountain SD, Amicus Curiae.

Andrew J. Giorgione, Esq., Buchanan Ingersoll & Rooney PC, for PA Apartment Association, Amicus Curiae.

Stuart Lee Knade, Esq., Pennsylvania School Boards Association, Inc., for Pennsylvania School Boards Association, Amicus Curiae.

Peter Houghton LeVan Jr., Esq., LeVan Law Group LLC, for Professors Fernandez-Villaverve, Ohanian, Bils, Yelowitz, Miron, Boudreaux, Malinak, Amicus Curiae.

Raymond Paul Wendolowski, Esq., for Crestwood Area School District, Hazleton SD, Mid Valley SD, Riverside SD, et al, Amicus Curiae.

SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

OPINION

CHIEF JUSTICE SAYLOR

This appeal raises the question of whether the Uniformity Clause of the Pennsylvania Constitution permits a taxing authority to selectively appeal only the assessments of commercial properties, such as apartment complexes, while choosing not to appeal the assessments of other types of property—most notably, single-family residential homes—many of which are under-assessed by a greater percentage.

I. Background

The appeal derives from a complaint that was dismissed on a demurrer. Accordingly, the facts as recited below are drawn from it and developed favorably to Appellants, and we assume the truth of all well-pleaded allegations. See Small v. Horn , 554 Pa. 600, 608, 722 A.2d 664, 668 (1998).

The Upper Merion Area School District (the "School District"), is a taxing district in Montgomery County (the "County"), where the most recent countywide assessment of real property occurred in 1996. Since then, the market value of many of the parcels in the County, including properties within the School District, have changed, leading to significant discrepancies and a wide range of assessment ratios.¹ The School District contains commercial, industrial, and single-family residential properties. Many of the residential properties have an assessment ratio below that of many of the commercial properties. In addition, 80 percent of the single-family homes in the district have assessment ratios below the County's common-level ratio ("CLR").²

The School District decided to appeal the assessments of some of the properties within its boundaries. To this end, it retained Keystone Realty Advisors ("Keystone"), a private firm, to advise it as to which properties should be targeted for appeal. On Keystone's recommendation, the School District concentrated solely on commercial properties, including apartment complexes. They did so because these properties' values were generally higher than those of single-family homes, and hence, raising their assessments would result in a greater tax-revenue increase than doing the same with under-assessed single-family homes, including those which were under-assessed by a greater percentage. Another alleged factor motivating the decision was that most such homes are owned by School District residents who vote in local elections, and it would be politically unpopular to appeal their assessments.³

Appellants own apartment complexes in the School District. Per the above strategy, and believing Appellants' properties were under-assessed, the School District filed administrative appeals, see 53 Pa.C.S. § 8855 (giving taxing districts the same right as taxpayers, under the Consolidated County Assessment Law, to pursue administrative appeals), which were denied by the County's Board of Assessment Appeals (the "Board"). The district appealed the denials to the common pleas court. See id. § 8854(a) (providing the parties to an administrative appeal with the right to seek judicial review of a decision by the Board).

While those individual cases were pending, Appellants filed the present complaint, seeking declaratory and injunctive relief against the School District on the theory that it had violated the state charter's Uniformity Clause, see PA. CONST. art. VIII, § 1 ("All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws."), by systematically appealing only the assessments of commercial properties.⁴ In their complaint, Appellants acknowledged that the School District's appeals of their assessments were proceeding in the county court. However, they averred they lacked an adequate remedy at law because the uniformity violation which they asserted could not be cured via the statutory appeals process—and hence, they were not required to exhaust statutory remedies. In particular, they reasoned, their claims were directed to an overall strategy on the part of the School District to discriminate against commercial properties as a group by targeting them for administrative appeals while ignoring lower assessment ratios among single-family homes. See Complaint at 20–21, ¶¶ 103–105. Appellants therefore sought a declaration that the School District's actions comprised an unconstitutional application of Section 8855, as well as an injunction preventing the district from continuing to engage in the alleged pattern of selective and discriminatory application of that statute.⁵

The School District filed preliminary objections, including demurrers to the individual claims, as well as one objection alleging a failure to exhaust statutory remedies and another alleging a lack of jurisdiction due to such failure. As to the demurrers, the district proffered that it had a statutory right to appeal property assessments, and that selective appeals do not violate the Uniformity Clause as a matter of law. See Defendants' Preliminary Objections at 6, ¶¶ 29, 30. With regard to the exhaustion and jurisdictional preliminary objections, the district forwarded that the constitutional claim Appellants raised in their equity complaint could be raised and adjudicated in their individual administrative appeals. See id. at 4–5, ¶¶ 20, 25.

The common pleas court sustained the preliminary objections and dismissed the complaint. The court indicated Appellants' claims failed as a matter of law because the School District was not the entity that set assessments, and Section 8855 gave it a clear statutory right to appeal tax assessments set by the County. See Valley Forge Towers Apts. N, L.P. v. Upper Merion Area Sch. Dist. , No. 2014-09870, slip op. at 3, 2015 WL 7889836 (C.P. Montgomery Jan. 2, 2015). In rejecting Appellants' argument relating to discriminatory treatment, the Court indicated that "[t]he filing of selective appeals does not result in a uniformity violation, and it is not deliberate discrimination." Id. at 6 (citing Weissenberger v. Chester Cnty. Bd. of Assessment Appeals , 62 A.3d 501, 508–09 (Pa. Cmwlth. 2013) (en banc )). In this regard, the court ultimately concluded, more generally, that "the Uniformity Clause does not require equalization across all sub-classifications of real property." Id. at 7 (citing In re Springfield Sch. Dist. , 101 A.3d 835, 849 (Pa. Cmwlth. 2014) ).⁶

The Commonwealth Court affirmed in a published decision. See Valley Forge Towers Apts. N, LP v. Upper Merion Area Sch. Dist. , 124 A.3d 363 (Pa. Cmwlth. 2015). It first considered Appellants' assertion that Springfield had misquoted Downingtown Area School District v. Chester County Board of Assessment Appeals , 590 Pa. 459, 913 A.2d 194 (2006), and had, therefore, mischaracterized the relationship between the federal Equal Protection Clause and the Uniformity Clause. Consistent with the common pleas court, the Commonwealth Court rejected this contention. It reasoned that its pre- Springfield decision in Weissenberger v. Chester County Board of Assessment Appeals , 62 A.3d 501 (Pa. Cmwlth. 2013), had addressed the same argument and clarified that equalization is not required across all property sub-classifications. See Valley Forge , 124 A.3d at 367 (quoting Weissenberger , 62 A.3d at 506–09 ). Turning to the present case, the court recognized that...