"And now, August 8, 1938, upon consideration of the foregoing case, it is ordered, adjudged and decreed as follows:
"1. Defendants are hereby perpetually restrained and enjoined from levying upon and collecting from the Plaintiffs and other taxpayers of the School District of the Borough of Lansford for the fiscal year 1938-39 a tax in excess of 28 1/2 mills upon the assessed valuation of the taxable property in said Borough.
"2. The Defendant School District and Stanley Q. Morgan, Giles D. Helps, Lawrence Campbell, Louis Riebe, Bert Williams, Harry William Hartranft and Harry Weyhenmeyer, defendant Directors, are hereby perpetually restrained and enjoined for the year 1938-39:
"(a) From paying to the Secretary of the School District, as compensation for services as such, more than the sum of $300.
"(b) From paying to the Treasurer of the School District, as compensation for services as such, more than the sum of $250.
"(c) From paying to the Tax Collector of the School District, as compensation for services as such, more than the sum of $2,400.
"(d) From paying to the Superintendent, as compensation for services as such, more than the sum of $4,250.
"(e) From paying to the Principal, as compensation for services as such, more than the sum of $2,400.
"(f) From paying any amount for the employment of a Principal's Clerk.
"(g) From paying to the Superintendent's Clerk, as compensation for services as such, more than the sum of $900.
"(h) From paying for salaries of teachers more than the sum of $66,250.
"(i) From employing more than fifteen (15) elementary grade teachers. *Page 19
"(j) From paying for 'Operation of Plant' more than the sum of $14,000.
"(k) From paying for 'Medical Inspection' more than the sum of $600.
"(l) From paying to the State Retirement Board more than the sum of $2,334.
"(m) From paying for Textbooks more than the sum of $2,200.
"3. The costs of these proceedings shall be paid by Stanley Q. Morgan, Giles D. Helps and Lawrence Campbell, three of the members of the Board of Directors of the School District of the Borough of Lansford.
Defendants appealed.
Error assigned was decree. This appeal brings up a suit by taxpayers against the directors of a school district of the third class. The directors appeal from a decree, quoted in full in the Reporter's statement of the case, restraining them from levying a school tax in excess of a certain limit and from otherwise acting unlawfully. Only the decree is assigned for error; not a single finding of fact on which the decree was based, was excepted to; the findings made will not be disturbed here (Lenhart v. Wright, 286 Pa. 351, 355, 133 A. 495), the one question for review, then, is whether the findings support the decree.
The learned chancellor was of opinion that it clearly appeared that the directors abused the power or discretion vested in them; in his adjudication he dealt separately with the subjects of complaint and, by his decree, eliminated so much of the challenged action of the board as was plainly beyond its power. *Page 20
The evidence supporting the taxpayers' complaints came from school directors and from the superintendent of the district; it clearly sustains the findings and justifies defendants' counsel in not excepting to them. It is unnecessary now to recite each complaint that was sustained; but, to show the nature of the directors' failure to do what was required of them, reference may be made to several instances, generally illustrative. The average annual cost per pupil in this school district had reached the high figure of $95.40, whereas the average in third class school districts throughout the state was but $68.37. This, in itself, would invite scrutiny of the proposed budget. At the same time, the district was confronted with a reduction in tax assessments yielding approximately $37,000 less income from taxes than the year before. There was a general demand by taxpayers that school taxes should be reduced. Nevertheless, the school board increased the tax rate to 31 1/2 mills and imposed a per capita tax of $5.00. The president of the school board, with the experience of eight years as a school director to enlighten him, testified that he wrote an article which was published over his signature in a local newspaper at or about the time the budget was under consideration; it was entitled "Dr. Morgan presents School District case in tax issue." It began "As president of the Board of Education . . . I feel as though I should make a statement as to the policies of the Board to substantiate our position with relation to the millage increase." He suggested that the taxpayers should endeavor to obtain a reduction of their assessments by appeal to the county commissioners or to the ward assessors. He stated that he had informed a protesting taxpayer "that we are living in a highly-unionized territory that it is unfair to the board to ask that the Lansford directors take the initial steps. They are, however, willing to meet with the other boards in this Valley to discuss the question." His article continued: "It was particularly gratifying to note that *Page 21 the Taxpayers' Association acted favorably on my suggestion to take the entire matter to the courts for decision. We agree on one count, namely: That the home owner in Lansford is entitled to some redress in the assessment valuation. The vital question — and the one on which the Association and the Board differ — is how to intelligently attack or proceed to acquire that reduction."
Referring to his approval of the appeal to the courts for relief, he was asked at the trial of the case, when his article was put in evidence: "Q. Well, the part there that the Court is interested in they would rather have the Court be the goat than the School Directors, . . . A. Well, Your Honor, we are out on a limb. You know that as well as us . . . I feel they would take it from the Court better than they would take it from us." His statement and evidence indicate an appreciation of a public duty that should have been, but was not, performed; did the board vote to increase the tax in the hope that the taxpayers would "take the entire matter to the courts for decision" and procure a decree against them on the theory that "they would take it from the Court better than they would take it from us"?
Defendant Giles D. Helps, the secretary, testified that he and the superintendent prepared a budget for submission to his fellow-directors. The superintendent is Dr. Balsbaugh who had held that office since May, 1926. He testified to information he gave to Mr. Helps showing "him that by the estimated enrollment next year we could do with less teachers on our staff in the elementary grades. Q. How many teachers less? A. Four. Q. Did he follow your suggestion? A. I don't know."
Dr. Balsbaugh informed Mr. Helps that he would be willing to accept $4,250 a year salary instead of the larger sum that he had been receiving. He said "That grew out of a discussion we had, because Mr. Helps was as much concerned as I was about the financial condition *Page 22 of the School Board. When we realized — I will put it this way — when I realized that the School District was losing approximately $37,000 in taxes, I felt that it was only fair to the property holders that we should assume about one-half of that loss and ask the property holders to assume the other half. We discussed that question from time to time again. On the way home from a meeting with Mr. Helps we were sitting in his car, we discussed it. He said, 'How will we assimilate that loss?' I said, 'I see no other way than we will have to reduce salaries, and you might as well begin with mine, a thousand dollars less than you are paying me now.' That was a suggestion, it was not an offer." The witness was also asked whether the number of teachers could be reduced in particular grades "without affecting the efficiency of the schools" and answered that it could, specifying particulars. Despite the superintendent's advice to the secretary that he would be content to accept the proposed reduction in salary to $4,250, the secretary did not even communicate it to his fellow-directors and participated in a vote for a higher sum; and notwithstanding the advice of the superintendent the board retained unnecessary teachers.
The evidence clearly shows that it was proposed to have clerical work, in a number of instances specified, done at rates much in excess of what should have been paid. The board had fixed the salary of their fellow-director, Mr. Helps, as secretary, at $600 per year. In reducing it the learned chancellor found as follows: "The work performed by the Secretary is negligible. About three-fourths of the Secretary's work prescribed by law is performed by the Superintendent of the School District and the clerk in his office." Reference has just been made to the evidence showing how this officer, in formulating the budget for submission to the board, failed to take advantage of the superintendent's offer to accept a reduction in salary and of his advice to drop several teachers not needed. So, too, the board had fixed *Page 23 the salary of their fellow-director, Mr. Campbell, as treasurer, at $500 per year. In reducing it, the learned chancellor said: "The duties prescribed by law for the Treasurer are not performed by him. He keeps no books and his accounts are made up by the depositories [three banks designated by the board] who make monthly reports to the Board of Directors . . . of the accounts of the same. The only duties performed by the Treasurer are to make deposits of the state appropriations received by the School District, sign the payroll checks and the checks in payment of bills. All taxes collected are deposited daily by the Tax Collector; all checks are made up by the clerk in the Superintendent's office and merely signed by the Treasurer." Those findings are cited as illustrative and indicate the general character of the action of the board which the learned court below considered indefensible.
The power of the court, in the abstract, is not challenged. Appellants say that the court may not substitute its judgment for that of the board; we all agree with that. But when it clearly appears, as it does in this case, that the directors were not exercising judgment but were engaged in arbitrarily and, with knowledge, deliberately voting away the taxpayers' money in the respects indicated and corrected by the decree, the court must restrain them. The restraint of an unlawful expenditure is not a substitution of judgment, but a required declaration that the directors have failed to perform their public duty. A variety of illustrations of such action by the courts will be found in many decisions, among them: Wilson v.Philadelphia School District, 328 Pa. 225, 239, 195 A. 90;Ritzman v. Coal Township School Directors, 317 Pa. 271,176 A. 447; Coal Township School Directors, 290 Pa. 200, 138 A. 748;Summit Hill School Directors' Removal, 289 Pa. 82, 137 A. 143;Hibbs v. Arensberg, 276 Pa. 24, 119 A. 727; Mason v. HanoverTownship School District, 242 Pa. 359, 89 A. 552; Lamb v.Redding, 234 Pa. 481, *Page 24 83 A. 362; Appeal of Delano Land Co., 103 Pa. 347; Conners'Appeal, 103 Pa. 356; St. Clair School Board's Appeal, 74 Pa. 252. The school director's office is important; the director must familiarize himself with the elements of the questions to be solved in order that he may perform his duties intelligently; where the statute vests him with discretion, he must act in good faith and with that diligence, care and skill which ordinarily prudent men would exercise under similar circumstances in their personal business affairs.* See alsoSchuck v. School District of Baldwin Twp., 296 Pa. 408, 414,146 A. 24. We should, perhaps, add that all the directors were not equally at fault; one voted against the proposed budget and one was absent.
The decree is affirmed, except that the costs shall be paid by all the appellants except Mr. Riebe who voted against the condemned budget.
* This phraseology is taken from section 408 of the Business Corporation Law of 1933, P. L. 364, 390, 15 PS section 2852-408.