William Schenk & Sons v. Northampton, Bucks County, Municipal Authority

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
William Schenk & Sons; Silver, Green :
and William Schenk & Sons; Silver, :
Green, Winitsky and William Schenk :
& Sons; Glendale Enterprises, Inc.; :
Huntingdon Valley Enterprises, Inc.; :
William Schenk & Sons, equitable :
owner; Silver, Green and William :
Schenk & Sons, Inc., equitable owner;:
Huntingdon Valley Enterprises, :
equitable owner, :
Appellants :
:
v. : No. 1881 C.D. 2013
: Argued: June 20, 2014
Northampton, Bucks County, Municipal :
Authority :
BEFORE: HONORABLE DAN PELLEGRINI, President Judge
HONORABLE P. KEVIN BROBSON, Judge
HONORABLE ANNE E. COVEY, Judge
OPINION BY JUDGE BROBSON FILED: July 30, 2014
Nonresidential property owners (Property Owners)1 appeal from an
order of the Court of Common Pleas of Bucks County (trial court). The trial court
overruled Property Owners’ preliminary objections to the petitions for appointment
of a Jury of View (Petitions) filed by the Northampton, Bucks County Municipal
1
As indicated in the caption, Property Owners include: William Schenk & Sons; Silver,
Green and William Schenk & Sons; Silver, Green, Winitsky and William Schenk & Sons;
Glendale Enterprises, Inc.; and Huntingdon Valley Enterprises, Inc. The Property Owners own
property in Northampton Township (Township) in Bucks County.
Authority (Authority).2 The Authority filed the Petitions in order to recoup the
costs of extending a public sewer system into the area in which Property Owners’
properties are located. We affirm the trial court’s order, but on slightly different
grounds.
I. BACKGROUND
The Authority and Property Owners acknowledge that, on
April 30, 2008, the Pennsylvania Department of Environmental Protection issued
an order directing the Township to extend its public sewer facilities into certain
areas, including what is referred to as “Sewer District 3,” in which all of the
subject properties are located. On or about December 15, 2010, the Authority
completed construction of the sewer system extension into Sewer District 3.
On February 2, 2011, following the completion of the sewer extension
project, the Authority adopted Resolution 2011-1098 (Resolution 1098), relating to
the costs of the construction of the sewer system expansion into Sewer District 3.
In Resolution 1098, the Authority notes its powers under the Municipal Authorities
2
The Authority was created in 1965, and its purpose is to provide public water and sewer
services to Northampton Township (Township). (Property Owners’ Complaint in their related
declaratory judgment action docketed by the Court of Common Pleas of Bucks County under the
same docket number as the present Petitions, at ¶ 8.) The declaratory judgment action involved a
resolution the Authority adopted relating to tapping fees and its determination of what is referred
to as equivalent dwelling units or “EDUs.” As indicated in Count II of the declaratory judgment
action, Property Owners also challenged the Authority’s intention to charge each Property
Owner $10,000 for the cost of construction and installation of a “manhole sampling chamber,”
and $100 each for the cost of “manhole/sampling chamber vacuum testing fee[s].” (Id. at ¶ 27.)
In its opinion issued under Pa. R.A.P. 1925, the trial court explained that it had intended to sever
the declaratory judgment action from the Petitions, but that had not been accomplished. Thus,
the certified record contains all docketed materials from both matters.
2
Act (Act)3 to assess and recover the costs of sewer construction, and it specifically
notes that the Act “provide[s] that the benefit assessment shall be assessed in a
manner provided under the Act for the exercise of eminent domain.” Resolution
1098 indicates that “the Authority has determined that each of the Residential
Properties abutting the [construction] Project have been presently benefitted by the
Project.” (Emphasis added.) Resolution 1098 thereafter provides:
[I]n accordance with the benefit assessment
method provided for in the Act, the Authority Board has
determined that the fair and reasonable benefit
assessment for each of the Residential Properties
benefitted by the Project shall be in the amount of
[$1,878.44] after consideration of all relevant assessment
factors and adjustments for all governmental grants
acquired by the Authority, and
...
[T]hat the owners of record of each of the
Residential Properties may execute and present to the
Authority on or before April 1, 2011, a document
entitled, “Western End Sanitary Sewer Project, Phase II
Residential Public Sewer Payment Plan Agreement
(“Agreement”) . . . and,
...
[T]hat any owner of record of the Residential
Properties within the Project that have failed or refused
to enter into the Agreement, the Authority’s solicitor is
authorized to file Petitions for Appointment of Board of
View to Assess Benefits and thereafter to collect the
entirety thereof from the subject property owners as
determined by the Act.
(Reproduced Record (R.R.) at 95a-96a; emphasis added.)
3
53 Pa. C.S. §§ 5601-5623.
3
On the same day, the Authority adopted Resolution 2011-1099
(Resolution 1099), which in most respects is identical to Resolution 1098 except
that it pertains to the nonresidential properties in the sewer expansion area. (R.R.
at 105a-09a.) Resolution 1099 includes an Exhibit A, which, unlike the $1,878.44
assessment determined in Resolution 1098 for residential properties, identifies
individual assessments on the nonresidential properties in varying amounts. All of
the nonresidential assessment amounts are in increments of $11,873.93, the highest
being $189,982.88 (which is 16 x $11,873.93).
By letters dated February 3, 2011, the Authority informed Property
Owners that it had “determined the benefit Assessment of your property” as a
result of the sewer system extension. (R.R. at 110a-120a.) The letter also
provides:
A Benefit Assessment Payment Plan Agreement is
being offered by the Authority to help property
owners …. This agreement allows each property owner
to finance the payment of the determined benefit
Assessment and administration costs over a five (5) year
period payable in monthly installments at a 3.8% interest
rate . . . .
Please note that you are not required to enter into
the Benefit Assessment Installment Agreement. You may
choose to make payment in full or choose to have the
Jury of View selected by the Bucks County Court of
Common Pleas determine the benefit Assessment to your
property and make payment in accordance with that
determination.
In the event that our office does not receive
payment or an executed Benefit Assessment Installment
Agreement by April 1, 2011, the Authority will assume
that you have selected the Jury of View determination
method . . . . Commencing in April 2011, the Authority
will file a required petition in the Bucks County Court of
Common Pleas seeking a hearing before a Jury of View
to determine the benefit Assessment to your property
4
based upon improvements incurred, i.e., public sanitary
sewer service.
(Id. (emphasis added).) The letters indicated that the Authority attached a copy of
the proposed agreement to the letter.
By way of example, one of the Public Sanitary Sewer Payment Plan
Agreements signed by a residential owner provides, in pertinent part:
[T]he ability of the Authority to determine assessment on
the Property through the right of the eminent domain
process is intended to be waived by the parties herein by
entering into this Agreement . . . .
(R.R. at 409a-410a (emphasis added).)
After Property Owners failed to sign and submit the offered
Agreements, the Authority filed the Petitions for the appointment of a jury of view,
requesting a “Board of View to assess benefit to the premises.” 4 (Supplemental
Reproduced Record (S.R.R.) at 39b-78b.) The Petitions allege that the
construction had provided Property Owners’ properties with a benefit, that the
Authority had “notified [Property Owner] of the proposed benefit assessment” (in
the amount indicated in the particular individual Property Owner’s Agreement),
and that, in accordance with the Act, the Authority was requesting the trial court to
appoint a “Board of Viewers to assess the benefit to the Premises in accordance
with municipal law.” (Id. at ¶ 9 of each Petition.)
Property Owners filed preliminary objections to the Petitions. Among
the objections to the Petitions, Property Owners faulted the amounts of the
4
Property Owners’ Petitions refer to the appointment of a Jury of View. Because the
applicable case law and statutory provisions generally refer to a board of view or board of
viewers, when referencing the appointed body to which the Authority refers we will hereafter
refer to a board of viewers.
5
assessments the Authority deemed to be appropriate for the construction, as
identified in the Authority’s letters and proposed Agreements. With regard to the
assessments the Authority proposed in its letters, Property Owners asserted that the
amounts improperly imported charges that were inappropriate to the calculation of
construction costs and the associated benefit to Property Owners. Further,
Property Owners, which as noted above are all nonresidential owners, objected to
the disparity between the assessments proposed by the Authority to residential
owners and the assessments proposed to the nonresidential owners. Thus, although
the Petitions sought only the appointment of a board of viewers to determine the
proper assessment, Property Owners claimed that the trial court should dismiss the
Petitions based upon arguments relating to the Authority’s method of determining
the proposed assessments and the Authority’s alleged misapplication of its rates,
rules, and regulations. Property Owners also claimed that the Petitions failed to
state a cause of action upon which relief may be granted.
By order dated September 27, 2013, the trial court overruled the
preliminary objections. Property Owners filed a notice of appeal and, in
compliance with the trial court’s direction, submitted a statement of errors
complained of on appeal. It is clear that the essential claims Property Owners
asserted in their preliminary objections pertain to the Authority’s conduct in
reaching settlements with some property owners in the subject sewer district. As
indicated by the quotations above from the letters, the Authority stated that it was
acting in accordance with its rights under the Act to proceed under the law of
eminent domain to collect construction costs. Property Owners argued that in
order to comply with the Act, the Authority was required to follow the eminent
6
domain process, namely to have a board of viewers determine the amount of
benefit to be assessed upon all properties in the sewer district.
The trial court rejected Property Owners’ arguments. First, the trial
court rejected Property Owners’ claim that the letters and Agreements constituted
something other than a settlement offer. Next, the trial court concluded that the
Authority either had inherent power to enter contracts or that the Authority had the
power under the Eminent Domain Code (Code)5 to settle monetary disputes with
property owners. Finally, the trial court rejected a claim by Property Owners that
the Authority’s disparate offers as between residential and nonresidential property
owners violated Property Owners’ rights under the Equal Protection Clause to the
United States Constitution.
Property Owners appealed to this Court,6 raising the following issues:
(1) whether the trial court erred in concluding that the Authority complied with the
requirements for assessment of benefits; and (2) whether the trial court erred in
concluding that the Authority did not improperly treat nonresidential owners
disparately from residential owners. We note, however, that the focus of Property
Owners’ argument rests on their claim that a board of viewers is not capable of
performing a proper assessment because of the Agreements between the Authority
and some residential property owners.
5
26 Pa. C.S. §§ 101-1106.
6
The standard of review of a trial court’s order overruling preliminary objections to a
petition to appoint a board of viewers under the Code is limited to considering whether
competent evidence in the record supports necessary factual findings and whether the trial court
erred as a matter of law. Ristvey v. Dep’t of Transp., 52 A.3d 425, 429 (Pa. Cmwlth. 2012).
7
II. DISCUSSION
Because this matter presents a challenge to the Petitions for
appointment of a board of viewers under the Code, we begin by noting that
preliminary objections in the context of proceedings under the Code are distinct
from preliminary objections in the context of a proceeding under the Pennsylvania
Rules of Civil Procedure. In re Redevelopment Auth. of City of Philadelphia,
891 A.2d 820, 824 (Pa. Cmwlth.), aff’d in part and rev’d in part on other grounds,
938 A.2d 341 (Pa. 2006). In the context of a case where preliminary objections are
raised in response to the appointment of a board of viewers, the courts have held
that the scope of preliminary objections is the same as preliminary objections to a
declaration of taking. 26 Pa. C.S. § 504(d) (“An objection to the appointment of
viewers may be raised by preliminary objections filed within 30 days after receipt
of notice of the appointment of viewers.”). Section 306 of the Code addresses such
preliminary objections and provides that a trial court may make an evidentiary
record in order to resolve factual issues. 26 Pa. C.S. § 306(f)(2). In proceedings
under the Code, preliminary objections are intended as a procedure to resolve all
legal and factual challenges to a declaration of taking before proceeding to the
damages issue—i.e., hearing by an appointed board of viewers.
Sections 5607(d)(21) and (22) of the Act provide two specific
methods by which a municipal authority may recover the costs of sewer
construction, providing authorities with the following powers:
(21) To charge the cost of construction of any
sewer . . . constructed by the authority against the
properties benefited, improved or accommodated thereby
to the extent of such benefits. These benefits shall be
assessed in the manner provided under this chapter for
the exercise of the right of eminent domain.
8
(22) To charge the cost of construction of a sewer
. . . constructed by the authority against the properties
benefited, improved or accommodated by the
construction according to the foot front rule. Charges
shall be based upon the foot frontage of the properties
benefited and shall be a lien against such properties.
Charges may be assessed and collected and liens may be
enforced in the manner provided by law for the
assessment and collection of charges and the enforcement
of liens of the municipality in which such authority is
located. No charge shall be assessed unless prior to the
construction of a sewer . . . the authority submitted the
plan of construction and estimated cost to the
municipality in which the project is to be undertaken and
the municipality approved it. The properties benefited,
improved or accommodated by the construction may not
be charged in the aggregate amount in excess of the
approved estimated cost.
(Emphasis added.) These provisions are commonly referred to as the benefits
method of assessment and the foot front or foot frontage method of assessment,
respectively.
Property Owners argue that these two methods are the only means by
which a municipal authority may act to collect construction costs for the benefit
conferred upon properties for sewer improvements and that the Authority exceeded
its powers by entering into agreements with property owners rather than submitting
to a board of viewers the task of determining the benefit to be assessed all
properties improved by the construction project. As we explain below, we agree
with Property Owners’ argument that municipal authorities may seek to recover
their construction costs only through one of these methods (or a combination of
both), but we conclude that, despite the Authority’s error, a board of viewers may
still assess the benefit bestowed by the construction on their properties.
9
Our Supreme Court’s decision in Whitemarsh Township Authority v.
Elwart, 196 A.2d 843, 846 (Pa. 1964), discusses the two methods and also helps to
clarify the reasons why municipal authorities must elect one of these methods or a
combination of the two methods. In Whitemarsh, a municipal authority sought to
recover costs associated with a sewer construction project. Initially, the municipal
authority adopted a resolution indicating that it would use the foot front method for
all properties benefited by the construction. Later, the municipal authority adopted
a second resolution indicating that if the foot front method could not be used in a
legal manner—i.e., a fair and equitable manner, to assess any properties, the
benefit would be determined by a board of viewers. The municipal authority filed
a municipal claim against one property owner, seeking to recover costs allegedly
based upon the benefits method. The property owner in that case challenged the
action by asserting that the municipal authority should have applied the foot front
method.
The Supreme Court rejected the suggestion that the Second Class
Township Code7 provisions for benefits assessments applied. Rather, the Supreme
Court referred to the Act and the two methods:
It can be seen that the Legislature vested in every
authority the right to charge certain costs of construction
by the “benefits method” and the “foot front method,” the
two long known and familiar methods of imposing such
charges. In the event the Authority chooses the “benefits
method,” the charges to be made by the Authority are
determined by a jury of view, this being the procedure
provided in all municipal codes for eminent domain
proceedings. If the Authority chooses the “foot front
method,” the charges to be made by the Authority are
7
Act of May 1, 1933, P.L. 103, as amended, 53 P.S. §§ 65101-68701.
10
determined by “the plan of construction and estimated
cost” that are approved by the municipality. Thus it can
be seen that in either event the basis for the charges, and
therefore the control, are not within the purview of the
Authority. It can also be seen from [Sections 5607d)(21)
and (22)] . . . that either or both methods may be used by
the Authority and that they both may be used
simultaneously on the same project. No restricting words
appear, such as are present in The Second Class
Township Code; the disjunctive “or,” which would
restrict the simultaneous use of both methods, is not
present.
Whitemarsh, 196 A.2d at 846 (emphasis added). The Supreme Court recognized
that in some cases, the use of a single method would not result in “an adequate
measurement of the fair proportions of the cost of constructing the sewer.” Id. at
848. Moreover, as indicated by the highlighted language, the Supreme Court
recognized that the power of municipal authorities to determine an assessment is
limited—i.e., “not within the purview of the Authority.” Id. The Supreme Court
observed the overarching goal of benefits assessment as follows:
This is a matter of balancing the equities between one
property owner and the remainder of the property owners
also serviced by the sewer system. If the [owners] in this
case do not pay their fair share of the cost of constructing
this sewer, the remaining property owners must
necessarily pay more than their fair share; if not in the
form of assessment, then ultimately in the form of sewer
service charges which will and must pay for the system.
Whitemarsh, 196 A.2d at 848. Thus, the Supreme Court made clear that the
recovery of sewer construction costs must be done in an equitable manner. Strict
compliance with Section 5607(d)(21) or (22) of the Act (or a combination of both)
furthers the apparent legislative goal of assessing benefits in a fair and equitable
manner. The Agreements the Authority executed with some property owners
represent a method at odds with the Supreme Court’s admonishment in
11
Whitemarsh that the “basis of the charges” not be controlled by a municipal
authority. The Agreements in this case could potentially thwart the legislative
objectives of the Act if, as suggested by the Supreme Court in Whitemarsh, the
Agreements were to affect the equitable assessment of other properties by a board
of viewers.8
We believe, however, that a board of viewers could assess Property
Owners’ properties in a manner that is equitable even given the allegedly favorable
deals reflected in the Agreements between the Authority and some property
owners. We have confidence in such an outcome, and note that, although a total
assessment of benefited properties cannot exceed the total cost of construction, see
Stockdale Borough v. Astle, 189 A.2d 152, 154 (Pa. 1963), there is nothing in the
Act that prohibits an under-recovery of costs where the equities suggest that an
assessment might otherwise cause some property owners to bear a greater
proportional burden than they would have had a municipal authority complied with
the construction provisions of the Act.
8
Our conclusion regarding the Authority’s error in proceeding to enter into the
Agreements with some property owners and by failing to comply strictly with
Section 5607(d)(21) of the Act finds additional support in this Court’s recent decision in
Township of Summit v. Property Located at Vacant Land in Summit Township, ___ A.3d ___
(Pa. Cmwlth., No. 399 C.D. 2013, filed May 23, 2014). In Township of Summit, we concluded
that Summit Township’s attempt to collect money associated with a sewer improvement project
by filing a lien under the Municipal Claim Act, Act of May 16, 1923, P.L. 207, as
amended, 53 P.S. §§ 7101-7505, was improper, because the township failed to comply with the
statutory provisions of the Second Class Township Code for the assessment of costs for sewer
improvements. “Absent compliance with statutory requirements for assessment, the Municipal
Claim Act’s requirement that the municipal claim must be ‘lawfully imposed or assessed’ on the
property therefore is not satisfied and the claim cannot become a lien on the property by
operation of law.” Township of Summit, slip op. at 10-11.
12
In Whitemarsh, our Supreme Court, by holding that a municipal
authority is not bound to a single assessment method (of the two available) in
seeking to recoup its sewer construction costs, implicitly confirmed that a
municipal authority need not include all properties in a petition for the appointment
of a board of viewers. In seeking to arrive at equitable and fair benefit
assessments, however, a board of viewers will necessarily have to consider the
larger picture, including the nature of the Agreements between the Authority and
the settling property owners.
Although it may be that the Authority may not seek or may lack the
power to recover any further direct costs of construction from those parties with
whom it has entered into the Agreements, the Agreements do not affect a board of
viewer’s duty and powers under Section 5607(d)(21) of the Act. A board of
viewers may consider all evidence relevant to its determination of the benefit
conferred upon the remaining properties, including the Agreements between the
Authority and some property owners.
This Court has no power to direct the board of viewers as to how it
should perform its task, but we observe below some possibilities regarding how a
board of viewers’ evaluation and decision could ultimately reflect the amounts paid
by settling property owners. For example, in keeping in mind the Supreme Court’s
admonishment in Whitemarsh regarding the equities in a benefits assessment
determination and the Supreme Court’s comment that all property owners should
contribute their fair share to a construction project, a board of viewers could
consider, among other things, the ratio between the amount the settling property
owners paid to the Authority to the portion of the costs of construction attributable
13
to that segment of property owners.9 In turn, with regard to Property Owners, the
board of viewers might consider what similar ratio exists as to that segment of
owners relative to the costs attributable to that segment. Such an approach might
avoid the consequence of inequitable assessments that the Supreme Court
recognized in Whitemarsh. Thereafter, in accordance with the process afforded in
the Code, if Property Owners believe that the board of viewers’ decision still
results in inequity, Property Owners have the right to seek de novo review before a
court of common pleas.10
Property Owners also contend that the Authority lacked the power to
enter into the Agreements with the residential property owners. The trial court
9
We recognize that the number of residential property owners who elected to enter into
an agreement with the Authority is considerably smaller than the total number of residential
property owners. Refinement of this suggested approach, if a board of viewers deems the
approach useful, will depend on the evidence presented to a board of viewers.
10
Sections 516 and 517 of the Code, 26 Pa. C.S. §§ 516-17 provide for appeals, in
pertinent part, as follows:
§ 516. Right of appeal
(a) Extent of right.—
(1) Any person aggrieved by the decision of
the viewers may appeal to the court.
§ 517. Appeals
(a) Contents.—The appeal shall set forth:
....
(5) A demand for a jury trial, if desired.
(b) Jury trial.—
....
(2) If no party makes a demand for a jury
trial . . . the court shall try the case without a jury.
14
viewed the letters the Authority sent to Property Owners as an offer of settlement
to recoup the construction costs, thus enabling the Authority to avoid proceeding
under Section 5607(d)(21) of the Act and the Code. The trial court concluded that
Section 5607(13) of the Act11 provided the Authority with the power to enter into
contracts, including those the Authority executed with some property owners as a
means to recover constructions costs, notwithstanding the specific provisions of the
Act pertaining to the recovery of such costs—i.e., Sections 5607(21) and (22) of
the Act. The trial court alternatively concluded that Section 501 of the Code,
26 Pa. C.S. § 501, also authorized the Authority to settle with property owners
before proceeding to the appointment of a board of viewers.
As we discussed above, we believe that a board of viewers has the
power to make benefit assessments in this case despite the Agreements. Thus, we
need not address the question of whether the Authority exceeded its powers. We
note, however, in passing, that while Section 5607(d)(13) does provide municipal
authorities with the power to enter into contracts, the more specific provisions of
the Act, Sections 5607(d)(21) and (22) compel strict compliance in order to serve
the goal of equity in benefits assessments. We also note that although
Section 501 of the Code does vest condemnors and condemnees with the right to
enter settlement agreements as to the amount of damages associated with a taking,
we are not convinced that all provisions of the Code apply in benefit assessment
proceedings. First, that provision applies only to pending proceedings, and, in this
11
Section 5607(d)(13) of the Act provides authorities with the power “[t]o make
contracts of every name and nature and to execute all instruments necessary or convenient for the
carrying on of its business.”
15
case, there were no pending proceedings under the Code at the time the Authority
entered into the Agreements.
Based upon the foregoing reasoning, we affirm the trial court’s order
overruling Property Owners’ preliminary objections.12
P. KEVIN BROBSON, Judge
12
We also note briefly Property Owners’ argument regarding the applicability of the
eminent domain provisions of the Second Class Township Code. The only reference to the law
of eminent domain in the applicable Chapter of the Act is found in Section 5615 of the Act.
Although that provision primarily relates to the acquisition of land, subsection (b) provides that
the “right of eminent domain shall be exercised by the authority in the manner provided by law
for the exercise of such right by municipalities of the same class as the municipality which
organized the authority.” Section 5615(b) of the Act, 53 Pa. C.S. § 6515(b). See Bern Twp.
Auth. v. Hartman, 451 A.2d 567 (Pa. Cmwlth. 1982). Although Property Owners may be correct
in arguing that the Second Class Township Code may have some applicability by virtue of the
language in Section 5615 of the Act, we do not need to address this issue based upon our
conclusion above regarding the board of viewers’ ability to perform an assessment.
16
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
William Schenk & Sons; Silver, Green :
and William Schenk & Sons; Silver, :
Green, Winitsky and William Schenk :
& Sons; Glendale Enterprises, Inc.; :
Huntingdon Valley Enterprises, Inc.; :
William Schenk & Sons, equitable :
owner; Silver, Green and William :
Schenk & Sons, Inc., equitable owner;:
Huntingdon Valley Enterprises, :
equitable owner, :
Appellants :
:
v. : No. 1881 C.D. 2013
:
Northampton, Bucks County, Municipal :
Authority :
ORDER
AND NOW, this 30th day of July, 2014, the order of the Court of
Common Pleas of Bucks County is AFFIRMED.
P. KEVIN BROBSON, Judge