          IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Arthur Alan Wolk, Philip Browndies, :
and Catherine Marchand               :
                                     :
            v.                       : No. 1465 C.D. 2016
                                     : ARGUED: December 15, 2016
The School District of Lower Merion, :
                   Appellant         :


BEFORE:     HONORABLE MARY HANNAH LEAVITT, President Judge
            HONORABLE JULIA K. HEARTHWAY, Judge
            HONORABLE JAMES GARDNER COLINS, Senior Judge


OPINION NOT REPORTED


MEMORANDUM OPINION BY
JUDGE HEARTHWAY                          FILED: April 20, 2017

            The School District of Lower Merion (School District) appeals from
the August 29, 2016, order of the Common Pleas Court of Montgomery County
(trial court), which granted the request of Arthur Alan Wolk, Philip Browndies,
and Catherine Marchand (collectively, Appellees) for injunctive relief. The trial
court enjoined the School District from enforcing or collecting a tax increase for
fiscal year 2016-17 of over 2.4% more than was in effect for the prior year.


            On March 11, 2016, Appellees filed an amended class action
complaint on behalf of present and past residents of Lower Merion, seeking
$55,000,000 in damages plus interest and costs for alleged misrepresentations to
the Pennsylvania Department of Education (Department) and expenditures for a
continuing education program for teachers (Counts I-III). Appellees also asked the
trial court to suspend the Lower Merion School Board’s (Board) authority to act
for the School District, to appoint a trustee and court monitor to supervise the
School District’s decision-making and to manage its finances (Counts IV-V, XI);
to impose a constructive trust over the School District’s surpluses (Count VI); to
award damages and terminate certain employees in connection with a matter
settled in 2010 (Counts VII-VIII); to appoint a Board of Viewers (Count IX); to
mandate that bond refinance disclosures be revised and that monies be reallocated
from one account to another (Count X); and to declare the system of taxation to be
unconstitutional because it taxes property owners only and does not vary the
amount of tax by the number of children a taxpayer has in the schools (Count XII).


               The School District filed preliminary objections to the amended
complaint alleging that: (1) Appellees’ claims are nonjusticable political questions;
(2) Appellees lack standing; (3) the claims are barred by what is commonly called
the Political Subdivision Tort Claims Act;1 (4) Appellees failed to join
indispensable parties; (5) the amended complaint fails to state a claim; (6) it would
be contrary to law and the Constitution to award the relief Appellees seek; and (7)
Appellees failed to exhaust all administrative remedies.


               While the preliminary objections were pending before another judge,
Appellees filed the petition at issue here, asking that the School District be
enjoined from enacting any tax increase for the 2016-17 fiscal year. On June 14,
2016, a hearing was held on the injunction petition. At the hearing, the School
District reported that it had passed a 4.4% tax increase the previous evening, and

      1
          42 Pa. C.S. §§8541-8542.


                                         2
thus, the matter was moot. Appellees then requested “to address the merits of the
case because [the] tax increase is absolutely illegal.” (N.T. at 6.) The trial court
permitted Appellees to amend the form of relief requested and argue the merits of
the case. Seeking an order enjoining the School District from taking any further
actions to implement the tax increase, Appellees presented two witnesses. The
substance of their testimony is summarized below.


               Section 333 of the Taxpayer Relief Act (Act 1),2 53 P.S. § 6926.333,
authorizes the School District to increase its taxes up to a certain index without
taxpayer approval, which is 2.4% in this case. However, the School District can
increase its taxes by up to 4.4% without taxpayer approval if it applies for certain
exemptions with the Department. After projecting a $9.3 million dollar deficit for
the 2016-17 budget, the School District applied for, and was granted, exemptions
related to pension contributions and special education costs by the Department.
The School District tax increase of 4.4% was thus facially within the Act 1
requirements.


               The School District projected a deficit for every fiscal year from the
2009-10 fiscal year through the 2015-16 fiscal year; however, it actually realized a
surplus of approximately $42.5 million during those fiscal years. The School
District did not credit taxpayers after it realized a surplus, nor did it adjust its
budgeting practices to account for the surplus. Over that time-period, the School
District underestimated annual revenue by approximately one percent and
overestimated expenditures by approximately five-and-a-half percent. Each fiscal

      2
          Act of June 27, 2006, P.L. 1873, as amended.


                                               3
year, the School District projected a budget deficit and proposed a tax increase.
The School District has raised taxes by approximately 53.3% since 2006.


                 The School District, in approving the 2016-17 budget, authorized the
Board to transfer funds from its general, unreserved fund to the capital reserve
fund.       A school district has the authority to make that transfer as long as it
complies with the Public School Code of 1949 (School Code).3 This transfer
allows a school district to move funds that would be reflected in the general,
unreserved fund to the capital reserve fund, which is not governed by statutory
restrictions. Absent that transfer, the School District would have an unrestricted,
general fund balance greater than the 8% limit imposed by section 688 of the
School Code, 24 P.S. §6-688.4


                 The evidence further provided that each fiscal year since 2009-10, the
School District certified to the Department that the estimated ending, unreserved,
undesignated fund balance would be equal to or less than 8% of the total estimated
expenses. The School District, whose only restriction is on the ending, unreserved,
undesignated fund balance, has never exceeded the 8% amount. However, at the
end of each fiscal year, the School District transfers monies from its general,
unreserved fund into other funds to remain in compliance, get more funding, and
raise taxes to a higher rate for the following fiscal year.



        3
            Act of March 10, 1949, P.L. 30, as amended, 24 P.S. §§ 1-101 – 27-2702.

        4
       Section 688 of the School Code, as amended, 24 P.S. §6-688, added by the Act of
December 23, 2003, P.L. 304.


                                                 4
             On August 29, 2016, the trial court issued an injunction ordering the
School District to revoke that portion of the tax increase that had been authorized
by the Department pursuant to section 333 of Act 1, 53 P.S. § 6926.333, to
compensate for the increased costs of pension and special education obligations.
The trial court further enjoined the School District from collecting a tax increase
for fiscal year 2016-17, of over 2.4% more than what was in effect for the prior
fiscal year. The trial court reasoned that:

             The School District’s accounting practices may not incur
             a specific sanction of the statutes regulating them, but
             they are skirting the purposes of the law to prevent
             school districts from both accumulating a surplus over a
             certain percentage of the annual budget and raising taxes
             over a certain level without going to a referendum of the
             voters. The [School] District’s legerdemain in yearly
             projecting multimillion-dollar deficits in documents
             required by law to be published to the voters and/or filed
             with the Commonwealth and not disclosing that contrary
             to projections the [School] District every year
             experienced multimillion-dollar surpluses, which it then
             transferred into other accounts, while every year seeking
             and obtaining the Commonwealth’s permission to raise
             taxes beyond what would ordinarily be permitted without
             a referendum of the voters based on questionable cost
             estimates, was less than the transparent budgeting and
             taxing process the Public School Code and the Taxpayer
             Relief Act sought painstakingly to institute.          The
             [School] District’s tax increases in these circumstances
             violated the spirit, and in some cases the letter, of these
             laws.

                    The remedy provided by the law for a school
             district’s repeatedly and intentionally violating the
             intendment of the Public School Code in budgeting and
             taxing practices is an injunction against the practices by
             the courts. . . .
                                       ***


                                              5
                      Taxpayers and the public should be entitled to
               expect that governmental units taxing them will not year
               after year pursuant to a systematic pattern present them
               with projected deficits to justify raising taxes, raise taxes
               as a consequence, then record actual massive surpluses in
               the general fund at the end of each fiscal year, only to
               transfer the surpluses into other, designated accounts so
               that the source of the funds cannot be readily determined
               by those not directly involved in the governmental unit’s
               financial affairs. An injunction against this repeated
               practice of the . . . School District is the only appropriate
               remedy to bring the illegal practice to a halt.

(Trial Ct. Op., at 14-15.)

               Along with enjoining the School District from “enforcing or
collecting a tax increase for fiscal year 2016-17 of over 2.4% more than was in
effect for the prior fiscal year,” the trial court also ordered the School District to
“adopt a resolution revoking the tax increase of 4.4[]% for fiscal year 2016-17, and
enact[] a tax that represents an increase of no more than 2.4% greater than the tax
in effect for fiscal year 2015-16.”5 (Id., at 15-16.) The School District appealed to
this Court.6


               Before this Court, the School District contends that the trial court
issued a preliminary injunction, which is immediately appealable as an



       5
        The trial court did not address “the question of any rebates, refunds, or credits for taxes
already paid,” nor did it address Appellees’ request to establish a constructive trust for the
taxpayers who already paid. (Trial Ct. Op., at 16.)

       6
        Our review of a permanent injunction is limited to determining whether the trial court
committed an error of law. J.C. Ehrlich Company, Inc. v. Martin, 979 A.2d 862, 864 (Pa. Super.
2009).


                                                6
interlocutory appeal under Pa. R.A.P. 311(a)(4), and thus, Appellees’ motion to
quash for failure to file post-trial motions should be denied. We disagree.


             In determining whether an injunction is preliminary or permanent, an
appellate court must look to the nature of the relief granted. Soja v. Factoryville
Sportsmen’s Club, 522 A.2d 1129, 1132 (Pa. Super. 1986).               A preliminary
injunction is issued to preserve the status quo and prevent imminent and
irreparable harm that could occur before the case is heard on its merits. Id. at 1131
(Pa. Super. 1986). A preliminary injunction is an extraordinary remedy that may
only be granted if a clear right to relief is established. Id. In preserving the status
quo, the court must restore the last peaceable, non-contested status that preceded
the controversy. Id. A preliminary injunction shall issue “only after written notice
and [a] hearing.” Pa. R.C.P. No. 1531(a). “The question to be determined at this
hearing is whether there is an urgent necessity for interim relief before the case can
be heard on the merits.” Soja, 522 A.2d at 1131.


             A permanent or final injunction is issued when a party establishes a
clear right to relief. Board of Revision of Taxes v. City of Philadelphia, 4 A.3d
104, 133 (Pa. 2010). “[T]he party need not establish either irreparable harm or
immediate relief,” as is necessary when seeking a preliminary injunction, and “a
court may issue a final injunction if such relief is necessary to prevent a legal
wrong for which there is no adequate redress at law.” Buffalo Township v. Jones,
813 A.2d 659, 663 (Pa. 2002). When a final injunction is granted, the court must
issue a decree nisi with a statement of the issues, findings of fact and conclusions
of law. Soja, 522 A.2d at 1132.


                                          7
              Here, Appellees sought an “injunction” directing the School District
to rescind a 4.4% tax increase that was passed in violation of the School Code and
Act 1, and to refund any taxes that were paid under it.7 The trial court held a
hearing to “address the merits of the case because the tax increase [that occurred
the night before the hearing,] was [allegedly] illegal.”8 (N.T. at 6.) At the hearing,
testimony and evidence were presented and both parties had the opportunity to
present and cross-examine witnesses. At the hearing’s conclusion, the trial court
asked the parties to submit proposed findings of fact, conclusions of law, and
responses to opposing submissions.           The parties complied.         The trial court
thereafter, filed an opinion and order with extensive findings of fact and
conclusions of law. The trial court did not “maintain the status quo,” as it would in
a preliminary injunction, but enjoined the School District from enforcing or
collecting a tax increase for fiscal year 2016-17 that was more than 2.4% over the
tax from the previous fiscal year.        The trial court further ordered the School
District to adopt a resolution revoking the 4.44% tax increase for 2016-17, and
enact a tax of no more than 2.4% greater than the previous fiscal years’ tax. Thus,
after looking at the “nature of the relief granted,” we must conclude that a
permanent injunction was issued by the trial court.


       7
         Appellees requested an “injunction,” they did not specify whether the injunction was
“preliminary” or “permanent.”

       8
          The trial court permitted Appellees to amend their requested relief at the hearing
because the School District passed the tax increase the night before the scheduled hearing. A
trial court may enter an order for a permanent injunction where appropriate based upon the
testimony, evidence, and arguments presented at a hearing for a preliminary injunction. See
Watts v. Manheim Township School District, 84 A.3d 378, 381 (Pa. Cmwlth. 2013).


                                             8
               Pursuant to City of Philadelphia v. New Life Evangelistic Church c/o
Bishop Jackson, 114 A.3d 472, 478-79 (Pa. Cmwlth. 2013), post-trial motions
must be filed within ten days following the trial court’s ordering a permanent
injunction or the issues raised on appeal are waived. In New Life Evangelistic
Church, the church was given the opportunity to submit evidence and cross-
examine witnesses in response to the city’s case. This Court concluded that a trial
was held for the purposes of Pa. R.C.P. No. 227.1, and post-trial motions needed to
be filed.


               Accordingly, because the trial court issued a permanent injunction and
the School District failed to file post-trial motions, we must dismiss the School
District’s appeal because all of its issues are waived.9                    See Pa. R.C.P. No.
227.1(c)(2) and (b)(2).10

                                               __________________________________
                                               JULIA K. HEARTHWAY, Judge




       9
         Because we dismiss the School District’s appeal for failure to preserve issues on appeal,
Appellees’ motion to strike the briefs of the School District, the Pennsylvania School Boards
Association, and, collectively, the Pennsylvania State Education Association, Pennsylvania
Association of School Administrators, and the Pennsylvania Association of School Business
Officials, is dismissed as moot.

       10
          “Post-trial motions shall be filed within ten days after . . . the filing of the decision in
the case of a trial without jury.” Pa. R.C.P. No. 227.1(c)(2). Further, grounds for post-trial relief
must be stated in the motion or they are deemed waived. Pa. R.C.P. No. 227.1(b)(2).



                                                  9
         IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Arthur Alan Wolk, Philip Browndies, :
and Catherine Marchand               :
                                     :
            v.                       : No. 1465 C.D. 2016
                                     :
The School District of Lower Merion, :
                   Appellant         :


                                  ORDER


            AND NOW, this 20th day of April, 2017, the School District of Lower
Merion’s appeal of the order of the Montgomery County Court of Common Pleas
in the above-captioned matter is dismissed. Further, Arthur Alan Wolk, Philip
Browndies, and Catherine Marchand’s Motion to Strike the Briefs of Appellant
and Amici Curiae is dismissed as moot.




                                    __________________________________
                                    JULIA K. HEARTHWAY, Judge
