County of Dauphin v. City of Harrisburg

24 A.3d 1083, 2011 Pa. Commw. LEXIS 271, 2011 WL 2301991
CourtCommonwealth Court of Pennsylvania
DecidedJune 10, 2011
Docket1668 C.D. 2010
StatusPublished
Cited by10 cases

This text of 24 A.3d 1083 (County of Dauphin v. City of Harrisburg) is published on Counsel Stack Legal Research, covering Commonwealth Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
County of Dauphin v. City of Harrisburg, 24 A.3d 1083, 2011 Pa. Commw. LEXIS 271, 2011 WL 2301991 (Pa. Ct. App. 2011).

Opinion

OPINION BY

President Judge LEADBETTER.

The County of Dauphin (County) and taxpayers of the City of Harrisburg (City), Joseph and Jacalyn Lahr, (collectively, County), appeal from an order of the Court of Common Pleas of Dauphin County that sustained preliminary objections of the City, the City’s Mayor, Treasurer and Controller, and the City Council members (collectively, the City or City defendants) to the County’s first amended complaint and dismissed the County’s action without prejudice. The County argues that the specific performance and mandamus relief sought against the City defendants are permitted under Sections 8104 and 8261 of the Local Government Unit Debt Act (Debt Act), 53 Pa.C.S. §§ 8104 and 8261, and the City’s guaranty to pay the principal and interest on the notes issued by the Harrisburg Authority (Authority). The City defendants argue that the relief sought by the County and the Lahrs are moot and barred by lis pendens and that the Lahrs lacked standing to seek mandamus relief. The trial court’s order is affirmed in part and reversed in part.

I.

The County commenced the instant action against the City defendants on November 9, 2009 seeking specific performance and mandamus relief. The County’s allegations and the documents attached to the parties’ pleadings reveal the following relevant facts.

In 1993, the Authority acquired from the City the Harrisburg Materials, Energy, Recycling and Recovery Facilities (facility) located at 1690 South Cameron Street in the City. After the Authority’s acquisition, the City continued to manage and operate the facility. In 2003, the Authority issued bonds to finance the retrofitting of the facility. The bonds were secured by a trust indenture, which named Commerce Bank, now TD Bank, as a trustee. The City, Authority and the trustee entered into an agreement, in which the City agreed to guarantee the Authority’s payment of the principal and interest on the bonds in a first guaranty position (2003 City guaranty). In a separate agreement with the Authority and the trustee, the County agreed to guarantee the Authority’s payment in a second guaranty position (2003 County guaranty). The Authority, *1087 the City and the County then entered into a reimbursement agreement.

Due to cost overruns and delays, the 2003 retrofit project was not completed as scheduled. In December 2006, the Authority terminated the City’s service as the facility’s operator and hired a new company to complete the retrofit project. To finance the completion of the project, the Authority issued the following notes: Guaranteed Resource Recovery Facility Limited Obligation Notes, Series C of 2007 with an initial stated value of $20,961,574.40, and Guaranteed Federally Taxable Resource Recovery Facility Limited Obligation Notes, Series D of 2007 with an initial stated value of $9,033,234.45 (2007 notes). The notes were secured by a trust indenture, which designated Commerce Bank, now TD Bank, as a trustee (2007 trust indenture). The notes were scheduled to mature on December 15, 2010, with the maturity values of $23,920,000 and $10,765,000, respectively.

In a guaranty agreement entered into with the Authority and the 2007 trustee, the City agreed to “unconditionally and irrevocably” guarantee the full and prompt payment on the 2007 notes in a first guaranty position “for the benefit of the registered owners” (2007 City guaranty). Section 3.01 of the 2007 City Guaranty; Reproduced Record (R.R.) at 115. In a separate guaranty agreement, the County assumed a second guaranty position (2007 County guaranty). The Authority, the City and the County entered into a reimbursement agreement setting forth their respective rights and responsibilities under the 2007 trust indenture and the 2007 City and County Guaranties.

On October 30, 2009, the trustee notified the City of the deficiency amount of $34,684,998.67 (the 2007 notes’ maturity values of $34,685,000 minus $1.33 in the debt service accounts). Upon receipt of the trustee’s notice, the City was required to include the deficiency amount in its 2010 fiscal year budget and transfer to the trustee (1) an amount sufficient to permit the trustee to pay the stated values of the notes at maturity by August 15, 2010 and (2) an amount of any deficiency for the succeeding fiscal year by December 15, 2010. Section 3.13(a) of the 2007 City Guaranty; R.R. at 119.

In November 2009, the County commenced the instant action. In a first amended complaint filed in March 2010, the Lahrs were added as plaintiffs, and the City officials’ names in the caption were also amended. In Count I, the County sought specific performance to compel the City to include the deficiency amount of $34,684,998.67 on the 2007 notes in the 2010 budget and appropriate and pay that amount. In Count II, the County and the Lahrs alternatively sought mandamus relief against all of the City defendants demanding the same relief sought in Count I. In Count III, the County and the Lahrs sought mandamus relief against the City’s Treasurer ordering him to pay the deficiency amount from the first tax monies or other available revenues. The County and the Lahrs also sought attorney’s fees and litigation costs against the City defendants. 1

The County alleged that the City’s obligations under the 2007 City Guaranty were specifically enforceable pursuant to Section 8104 of the Debt Act, which gov *1088 erns a municipality’s issuance of bonds, notes and guaranties. Section 8104 provides in relevant part:

(a) General rule. — The local government unit[ 2 ] shall, in the ordinance authorizing the issue of bonds or notes or a guaranty or in such bonds or notes, or in the trust indenture securing the same, or in the instrument of guaranty, covenant with the holders ... of the bonds or notes or guaranteed bonds or notes ... that the local government unit shall do the following.
(1) Include the amount of the debt service, or the amounts payable in respect of its guaranty ... for each fiscal year in which the sums are payable in its budget for that year.
(2) Appropriate those amounts from its general or specially pledged revenues ... for the payment of the debt service or guaranty[ 3 ]
(3) Duly and punctually pay or cause to be paid from its sinking fund[ 4 ] or any other of its revenues or funds the principal of and interest on every bond or note or, ... the amount payable in respect of the guaranty, at the dates and places and in the manner stated in the bonds and in the coupons thereto appertaining or in the guaranty, according to the true intent and meaning thereof.
(b) Obligation of government unit. — For budgeting, appropriation and payment in respect of its general obligation [ 5 ] bonds or notes, its guaranteed revenue bonds or notes or its guaranty of the bonds or notes of an authority or other local government unit, the local government unit shall pledge its full faith, credit and taxing power

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Bluebook (online)
24 A.3d 1083, 2011 Pa. Commw. LEXIS 271, 2011 WL 2301991, Counsel Stack Legal Research, https://law.counselstack.com/opinion/county-of-dauphin-v-city-of-harrisburg-pacommwct-2011.