Northern Tier Solid Waste Authority v. Commonwealth, Department of Revenue

DISSENTING OPINION BY

Judge PELLEGRINI.

I respectfully dissent to that portion of the majority’s opinion overruling the preliminary objections filed by the Commonwealth of Pennsylvania, Department of Revenue (Department) et al1 to Count V in the petition for review .filed by Northern Tier Solid Waste Authority, d/b/a Bradford County Landfill, McKean County Solid Waste Authority, and Clinton County Solid Waste Authority, d/b/a Wayne Township Landfill (the Authorities) because the Authorities’ claim under Count V does fail to state a claim upon which relief may be granted.

The Authorities filed a petition for review in this Court’s original jurisdiction challenging the solid waste disposal fee of $4.00/ton as authorized in Section 2 of Act 2002-90, 27 Pa.C.S. §§ 4202-4113, 6201-6306 (Act 90). They alleged that they accept waste for disposal at their facilities, and that the disposal fee is a tax, but that some of the existing contracts they have are with state agencies who have taken the position that the tax cannot be passed through to them. The Authorities alleged in Count V that the tax impedes the existing contracts in violation of Article I, Section 10 of the United States Constitution and Article I, Section 17 of the Pennsylvania Constitution, which both provide that no law impairing the obligation of contracts shall be passed. The Department filed preliminary objections in the nature of a demurrer arguing that Count V failed to state a claim upon which relief could be granted because any prior contractual obligations remained intact despite the subsequent imposition of a tax.

The majority overrules the Department’s preliminary objection to Count V finding that the Authorities state a claim for unconstitutional impairment of certain contracts based on their averment that they are unable to pass through the tax to all of their customers with whom they have contracts. The majority acknowledged that this Court’s holding in Heller v. De-*799puy, 2 Pa.Cmwlth. 196, 277 A.2d 849 (1971), which addressed a similar situation, is to the contrary, but relies upon our statement that a claim for unconstitutional impairment of contracts might exist where the weight of a new tax cannot be passed on to others but remains on the shoulders of the municipal authority. I disagree that the Authorities state a claim because not only was that statement in Heller dicta, the United States Supreme Court has held that there is no impairment of existing contracts when a subsequent tax law is enacted imposing a tax.

In Barwise v. Sheppard, 299 U.S. 33, 57 S.Ct. 70, 81 L.Ed. 23 (1936), the United States Supreme Court rejected the argument the Authorities now set forth in their petition. In that case, the tax at issue was a tax on the production of oil and was challenged by Barwise against the state of Texas. Under the prior law, only the lessee of oil-producing land was required to pay taxes on the production of oil; however, the new law required the taxes to be shared by all interested parties, including the lessor of oil-producing property, in this case, Barwise. Barwise alleged that the tax impaired the obligations of his contracts with the lessees, in which he agreed to deliver their equal portion in the pipe line of the oil produced free of cost because he no longer could do so. The Supreme Court found that although the lease may have been subordinated to the power of the State to tax the production of oil and to apportion the tax between the lessors and the lessee, the taxing act did not purport to affect any term of the lease. “Plainly no stipulation in the lease can be of any avail as against the power of the State to impose the tax, prescribe who shall be under a duty to the State to pay it, and fix the time and mode of payment.” Id. at 40, 57 S.Ct. 70. The Supreme Court went on to explain:

It is true that the law in force when the lease was made and for some years thereafter laid a production tax on the lessee alone, and it is equally true that under the act of 1933 a part of the tax is imposed on the lessors and the part imposed on the lessee is less than what would fall on him under the earlier law. But the State’s power in the matter was in no way circumscribed by the earlier law. That law was subject to change at any time through a further exertion of the taxing power; and the lease presented no obstacle to such a change.

Id. at 41, 57 S.Ct. 70. It then held that Barwise’s reliance on the contract clause of the Constitution was unfounded.

Similarly here, because the Commonwealth had the power to tax the Authorities, based on Barwise, that power does not interfere with the Authorities contract obligations with the state agencies and does not violate the contract provisions of the United States and Pennsylvania Constitutions. For this reason, I would sustain the Department’s preliminary objection to Count V because the count fails to state a claim upon which relief may be granted.

Judge LEADBETTER joins.

. Also named as petitioners were Larry P. Williams, Secretary of the Department; the Department of Environmental Protection (DEP), and David Hess, Secretary of the DEP.