Are the procedures provided under Pennsylvania’s Refund Act the mandatory and exclusive means of pursuing refunds of excessive fees charged by political subdivisions?
County of Northumberland v. Twp. of Coal, 2022 WL 10766760 (Pa. Cmwlth.) (unreported), allocatur granted May 2, 2023, appeal docket 35 MAP 2023
In this case, the Pennsylvania Supreme Court will consider whether the procedures provided under Pennsylvania’s Refund Act are the mandatory and exclusive means of pursuing refunds of allegedly “excessive fees” charged by political subdivisions.
Section 1 of the Refund Act states in relevant part:
(a) Whenever any person or corporation of this Commonwealth has paid or caused to be paid, or hereafter pays or causes to be paid, into the treasury of any political subdivision, directly or indirectly, voluntarily or under protest, any taxes of any sort, license fees, penalties, fines or any other moneys to which the political subdivision is not legally entitled; then, in such cases, the proper authorities of the political subdivision, upon the filing with them of a written and verified claim for the refund of the payment, are hereby directed to make, out of budget appropriations of public funds, refund of such taxes, license fees, penalties, fines or other moneys to which the political subdivision is not legally entitled. Refunds of said moneys shall not be made, unless a written claim therefor is filed, with the political subdivision involved, within three years of payment thereof.
….
(c)(1) Any taxpayer who has paid any tax money to which the political subdivision is not legally entitled shall receive interest on such sum of money….
72 P.S. § 5566b. Section 2 of the Refund Act further provides that:
In the event of refusal or failure on the part of authorities of the political subdivision involved to make any such refund of taxes, license fees, penalties, fines or other moneys to which the political subdivision is not legally entitled, or refusal or failure to pay interest as required by [S]ection 1 [of the Refund Act], then the aggrieved person or corporation shall have the right to bring suit for and recover any such taxes, interest, license fees, penalties, fines or other moneys to which the political subdivision is not legally entitled, subject to the limitation herein provided, by instituting an action in assumpsit in the court of common pleas of the county wherein such political subdivision is located.
72 P.S. § 5566c.
Commonwealth Court summarized the factual background as follows:
On August 9, 2017, the County submitted building applications to the Township to convert an existing juvenile detention facility into a County prison after the County’s prison was destroyed by a fire (Project). On August 11, 2017, the Township sent the County an invoice (Invoice) demanding $161,724.00 for “State Inspections [and] Plan Review[.]” Reproduced Record (R.R.) at 29a. The Invoice also sought an additional $220,801.00 for a “Coal Township Permit” (Coal Township Permit) pursuant to Township Ordinance 408 (Ordinance). Id.
On August 18, 2017, the County paid the Township $161,724.00. By September 6, 2017 correspondence, the Township acknowledged receipt of the County’s payment, but demanded the outstanding $220,801.00 balance by close of business on September 13, 2017, or the Township would issue a stop work notice on September 14, 2017. See R.R. at 32a. By September 12, 2017 letter (September 12, 2017 Letter), County Chief Clerk Maryrose McCarthy (McCarthy) paid the Township $220,801.00 under protest and also demanded proof that the Township had incurred the costs purportedly represented by the previously submitted $161,724.00 fee. See R.R. at 35a-36a.
The September 12, 2017 Letter provided, in pertinent part:
First, in regard to the payment previously made by the County [ ] to the Township [ ] in the amount of $161,724[.00], I am hereby requesting proof that the Township actually incurred, or will be charged, the costs as set forth in the August 11, 2017 Invoice to the County for “State Inspections [and] Plan Review.”
Secondly, regardless of whether the charges related to the $161,724[.00] are legitimate, I am also hereby requesting proof that the $220,801.00 fee, nebulously referred to in the Township’s [I]nvoice as the Coal Township Permit fee, in any way relates to the costs to the Township in performing services related to the permitting of the prison.
I would refer you to the following Pennsylvania Commonwealth Court cases on the subject: Raum v. Board of Sup[ervisors] of Tredyffrin [Township], 370 A.2d 777 ([Pa. Cmwlth.] 1976); Bucks Cove Rod & Gun Club, Inc. v. Texas [Township] Zoning [Hearing Board (Pa. Cmwlth. No. 2666 C.D. 2010, filed Sept. 14, 2011)]; Martin Media v. Hempfield [Township] Zoning Hearing [Board], 671 A.2d 1211 ([Pa. Cmwlth.] 1996); Skepton v. Borough of Wilson, [755 A.2d 1267] ([Pa.] 2000) …. These cases all clearly state that a municipality may not use its power to charge fees for issuing licenses or permits for the purpose of raising revenue and, further, that the fees charged must be directly related to the costs incurred by the municipality in issuing the permit. Any amounts collected in excess of the Township’s costs will be considered an unauthorized tax and the County will be permitted to recoup these amounts, plus interest. I would point out that your [Township] Board [of Commissioners’] member’s comments in the local newspaper would seem to belie any argument that the fees the Township has charged are in any way related to the Township’s actual costs.
If I have not received the documentation requested herein, on or before the close of business on September 20, 2017, please be advised that the County will commence action against the Township for reimbursement of all fees over and above the Township’s actual costs. In the event that the Township wishes to revise its permit fee, based upon the aforementioned, please feel free to send your revised fee to my attention.
R.R. at 35a-36a.
On January 15, 2018, the County filed an action in the trial court seeking declaratory judgment that the Township’s building fees were unreasonable and/or unenforceable and that the building permit fees charged were unconstitutional and/or legally invalid (Complaint). Further, the County sought relief in assumpsit, requesting a refund of building fees, permit fees, inspection fees or other fees in excess of the Township’s actual expense of administering the building permit process, plus interest.
On February 16, 2018, the Township filed preliminary objections to the County’s Complaint. Therein, the Township alleged, inter alia, that the Complaint should be dismissed because the County did not submit to the Township “a written and verified claim” before filing its action in assumpsit, as required by Section 1(a) of the Refund Act. 72 P.S. § 5566b(a). The County filed its response to the preliminary objections. On April 25, 2018, the trial court overruled the Township’s preliminary objections, concluding, in pertinent part, that given the County’s September 12, 2017 Letter, the Township had failed to demonstrate that the County did not satisfy Section 1(a) of the Refund Act’s “written and verified claim” requirement. 72 P.S. § 5566b(a); see R.R. at 73a-74a.
On May 30, 2018, the Township filed its Answer, New Matter and a Contingent Counterclaim. On June 27, 2018, the County filed its Answer to the Township’s New Matter and Contingent Counterclaim. On August 30, 2018, the Township filed a Summary Judgment Motion, alleging that the County had failed to file a “written and verified claim for a refund of alleged overpayment for permits.” R.R. at 107a. On September 25, 2018, the County filed its response thereto. On December 17, 2018, the trial court denied the Township’s Summary Judgment Motion. See R.R. at 238a-239a.
Slip op. at 1-4. The County filed a motion for summary judgment on the basis that no material facts remained with respect to the County’s refund. The trial court granted the County’s motion and directed the Township to refund the County $267,320.98 plus interest and costs. The trial court reasoned that:
Building permit fees fall within the category of license fees and must be assessed commensurate with the expense of administering the permit. [See] 72 P.S. [§] 5566b; Skepton …, and Talley v. Commonwealth …, … 553 A.2d 518 ([Pa. Cmwlth.] 1989).
Presented at oral argument and attached to the [County’s] brief is evidence that Building Inspections Underwriters (B.I.U.), the entity the Township engaged to perform all inspections and reviews, actually discounted its charge to the Township, resulting in a total payment by the Township in the amount of $113,204.02. This appears to be unrefuted evidence.
In a deposition with Robert M. Slaby, Jr. [(Slaby)], [ ] Township Manager, it is acknowledged that the Township performed no independent inspections, so the [trial] court is confronted with an assessed fee of $269,320.98 that cannot be justified by corresponding [T]ownship expenditures or expenses. The Township’s explanation is reduced to an argument that this amount was assessed to cover general administrative costs. In support of this assertion, they have provided no documentation; the [trial] court will concede, however, that they have the usual expenses attendant to running the office and will adjust the refund by $2[,]000.00, which the [trial] court considers generous.
Slip op. at 4-5. The Township appealed, arguing that the County failed to satisfy the Refund Act’s mandatory requirement that it submit a “written and verified claim” before bringing suit, and that the trial court erred in finding that the September 12, 2017 Letter satisfied those requirements is erroneous. 72 P.S. § 5566b(a). Relying on Stranahan v. County of Mercer, 697 A.2d 1049 (Pa. Cmwlth. 1997), the Township argued that Commonwealth Court must “narrowly construe [the Refund Act’s] statutory procedures and require the [County] to file for a refund before bringing an action in assumpsit”; therefore, because the September 12, 2017 Letter did not explicitly request a refund, and was not verified, the trial court should have dismissed the action. Slip op. at 5-6.
Commonwealth Court held that the September 12, 2017 Letter satisfied the “written and verified claim” requirement because it put the Township on notice that the County was disputing the fees, reasoning that:
The statutorily-mandated “written and verified claim” requirement’s purpose, 72 P.S. § 5566b(a), is “to notify a municipality that a claim may be pending against it[.]” Malvern, 570 A.2d at 636. The Pennsylvania Superior Court has held that “the determination that an action should be barred for failure to comply with the notice statute must be coupled with a consideration of what if any prejudice resulted to the defendant.” Landis v. Phila., 369 A.2d 746, 749 (Pa. Super. 1976); see also Dubin v. Se. Pa. Transp. Auth., 281 A.2d 711, 712 (Pa. Super. 1971) (with respect to notice filed one week beyond a statutory six-month notice requirement, the Superior Court, quoting the lower court, explained that the statute “is not a statute of limitations. It must be reasonably applied to effectuate its purpose and not to needlessly strike down just claims…. There is no question that the plaintiff has substantially complied with the provisions ….”).
Here, within one month of the County’s initial August 18, 2017 payment, the Township “was well aware” that the County disputed both fees. Trial Ct. Apr. 25, 2018 Op. at 5; R.R. at 74a. As noted by the trial court, the County’s September 12, 2017 Letter was unmistakably clear that the County believed the fees were unlawful, demanded justification therefor, and threatened legal action to recover fees in excess of the Township’s actual costs. In the September 17, 2017 Letter, the County expressly claimed it was entitled to “recoup” the excess fees charged and threatened legal action seeking “reimbursement.” R.R. at 36a. Thus, the September 12, 2017 Letter unambiguously notified the Township “that a claim may be pending against it[.]”8 Malvern, 570 A.2d at 636. Approximately four months after the deadline set for the Township’s response, the County filed the instant assumpsit action.
Slip op. at 9-10. As to the unverified nature of the letter, Commonwealth Court concluded that “the County’s failure to affirm the truth of its statement contained in the September 12, 2017 Letter did not prejudice the Township or impair the Refund Act’s purpose.” Slip op. at 11. Thus, Commonwealth Court concluded that the trial court did not err in finding that the County complied with Section 1 of the Refund Act.
The Pennsylvania Supreme Court granted allocatur limited to the following issues:
(1) Is compliance with the Refund Act’s unambiguous, statutorily-dictated procedures both mandatory and the exclusive means of pursuing refunds of allegedly “excessive fees” charged by political subdivisions, or can refunds be obtained by a claimant’s employing alternative “procedures” not legislatively authorized by the General Assembly?
(2) Did the Commonwealth Court’s unreported decision below implicitly “overrule” case law holding the Refund Act’s statutory procedures are mandatory and should be “narrowly construed,” see Stranahan v. County of Mercer, 697 A.2d 1049, 1053 (Pa. Cmwlth. 1997),and create alternative procedures which were previously unavailable under the Refund Act?
For more information, contact Kevin McKeon or Dennis Whitaker.