The Pennsylvania Supreme Court heard arguments March 12 over whether the General Assembly has the power to overturn a court ruling through retroactive legislation.
In Friends of Pennsylvania Leadership Charter School v. Chester County Board of Assessment Appeals, a three-judge panel of the Commonwealth Court unanimously affirmed the ruling of a Chester County trial judge, finding unconstitutional Section 1722-A(e)(3) of the Public School Code of 1949, in which the legislature amended the law to exempt nonprofit corporations and associated nonprofit foundations that lease property to charter and cyber charter schools from real estate taxes and provided for retroactive application to allow eligible entities to recoup real estate taxes they previously paid.
Therefore, the court found, plaintiff Friends of Pennsylvania Leadership Charter School, a domestic nonprofit corporation that leases property to the Pennsylvania Leadership Charter School to operate as a cyber charter school, was not entitled to a refund of real estate taxes collected by the county for 2008, 2009 and 2010.
In August 2007, according to court documents, Friends appealed the tax assessment of its property, claiming it was exempt from real estate taxes as an institution of purely public charity.
The Chester County Board of Assessment Appeals denied the appeal and the Commonwealth Court affirmed the denial, according to court documents. But after the legislature amended the School Code with Section 1772-A(e)(3) in 2011, Friends argued it was entitled to retroactive relief.
The Commonwealth Court, led by Judge Renee Cohn Jubelirer, relied on its own unreported 2011 opinion in In re Appeal of Collegium Charter School, in which it found that the retroactive application of Section 1722-A(e)(3) violated Article I, Section 11 of the Pennsylvania Constitution, which states that everyone is entitled to “‘remedy by due course of law’” for an injury.
Jubelirer, joined by Judge Patricia A. McCullough and Senior Judge James Gardner Colins, said that because Friends had received a final judgment that it was not exempt from real estate taxes after it initially challenged the assessment, it was not entitled to retroactive relief under Section 1722-A(e)(3).
“The cause of action related to Friends’ obligation to pay real estate taxes on the property had ‘accrued,’ the county and [the West Chester Area School District] had a vested right in the judgment awarding them the tax monies, and the retroactive application of the amendment of Section 1722-A that would have reversed Friends’ obligation to pay those real estate taxes would impermissibly eliminate that vested right in violation of Article I, Section 11 of the Pennsylvania Constitution,” Jubelirer said, citing the Pennsylvania Supreme Court’s 1908 ruling in Lewis v. Pennsylvania Railroad, which held that a law cannot alter a “’cause of action’” that has already “‘accrued.’”
At arguments in Philadelphia, Chief Justice Ronald D. Castille said the General Assembly can change a law going forward, but he was skeptical as to its power to overturn a court’s ruling.
“That’s not the way it works, is it?” Castille asked Friends’ attorney, Andrew G. Lehr of West Chester, Pa.
But Lehr argued that the legislature should be permitted to “correct” its own mistakes.
Castille, however, asked whether Lehr was suggesting that parties and courts that rely on a law as it currently exists are at the mercy of the “whim or will” of the legislature to subsequently change the law.
“Where does that power come from?” Castille said.
Lehr said the legislature has the authority to decide what property should be exempt from real estate taxes, but Castille asked whether that meant the legislature could suddenly decide that all taxes paid by any charter school since charter schools first came into existence in Pennsylvania must be refunded.
Justice Max Baer told Lehr that Castille’s hypothetical was “completely consistent with what you’re arguing.”
But Lehr maintained that the legislature had the power to retroactively decide that property is exempt from taxes.
And while Lehr said he did not believe the legislature was attempting to overturn a court ruling, but was rather asserting its power to make certain property exempt, counsel for defendant West Chester Area School District, Anthony T. Verwey of Unruh, Turner, Burke & Frees in West Chester, Pa., said the justices had correctly framed the issue as one of separation of powers.
Verwey said the question was whether the legislature had the authority to “reach in and undo” a court ruling.
Justice J. Michael Eakin also questioned Lehr as to why, under Section 1722-A(e)(3), only parties that have appealed a tax assessment should be entitled to retroactive relief.
“Making it retroactive for some and not others smells,” Eakin said.
But Lehr argued that the legislature made “a reasonable distinction” by choosing to only allow retroactive relief for taxpayers who contested their assessments because those who did not appeal presumably never sought an exemption.