Board of Trustees of East Baton Rouge Mortg. Finance Authority v. All Taxpayers

• Decision Date: 30 June 1976
• Docket Number: No. 10785,10785
• Citation: 336 So.2d 306
• Parties: The BOARD OF TRUSTEES OF the EAST BATON ROUGE MORTGAGE FINANCE AUTHORITY, Acting as the Governing Body of Said Authority v. ALL TAXPAYERS et al., etc.
• Court: Court of Appeal of Louisiana — District of US

Page 306

336 So.2d 306

The BOARD OF TRUSTEES OF the EAST BATON ROUGE MORTGAGE FINANCE AUTHORITY, Acting as the Governing Body of Said Authority v. ALL TAXPAYERS et al., etc.

No. 10785.

Court of Appeal of Louisiana, First Circuit.

June 30, 1976.

Rehearing Denied Aug. 27, 1976.

Steve E. Hicks, Baton Rouge, for plaintiff-appellant-appellee.

John E. Seago, Baton Rouge, for defendant-appellee Allie P. Landry, III.

Jonathan C. Harris, Pro se, defendant intervenor, appellant-appellee, Baton Rouge.

Before LANDRY, COVINGTON and PONDER, JJ.

LANDRY, Judge.

The Board of Trustees of the East Baton Rouge Mortgage Finance Authority, Acting as the Governing Body of Said Authority, (Authority) appeals from judgment dismissing its action, brought pursuant to La.R.S. 13:5121--5130 (Act No. 385 of 1972), to establish the validity of $1,000,000.00 in bonds which Authority proposes to issue as an alleged governmental unit. Appeal was also taken by Jonathan C. Harris (Intervenor), as a named defendant, from the trial court's judgment decreeing Authority to be a legally created body fulfilling a valid public purpose as a public trust and decreeing further that Ordinance Number 4327 of the East Baton Rouge Parish Council (Council), adopted August 14, 1974, is valid and constitutional.

We affirm the trial court's dismissal of Authority's suit for reasons different than those found by the lower court and reverse that part of the trial court's judgment granting declaratory relief in favor of Authority.

This action was brought by motion for judgment filed by Authority on May 28, 1975 pursuant to the procedure for determining the validity of bonds issued by governmental units under the provisions of La.R.S. 13:5121--5130 (Bond Validation Law). Authority's motion for judgment alleges Authority to be the governing body of a public trust duly created in conformity with the provisions of La.R.S. 9:2341--2347 (Public Trust Act, as enacted by Act 135 of 1970), by execution of the Indenture of Trust, on August 14, 1974, by Royal American Corporation, as Grantor or Settlor, and seven named individuals as Trustees. On the same day the Council, as governing authority of East Baton Rouge Parish (Parish) adopted Ordinance Number 4327 accepting beneficial interest in the public trust entitled 'East Baton Rouge Mortgage Finance Authority' thereby constituting and establishing the Council and Parish as beneficiary of the trust, all in accordance with the provisions of Public Trust Act, particularly La.R.S. 9:2342. Several weeks thereafter, the Mayor-President, as chief executive officer of the Parish, signed the acceptance of beneficial interest in the Authority as created by the Indenture.

Authority's motion for judgment also alleges that Authority is the governing body of a governmental unit, as the term is defined in La.R.S. 13:5121, and as such brings this action against all tax-payers, property-owners and citizens of the Parish, including non-residents owning property or subject to taxation therein, and all other persons interested in or in any way affected by the issuance of Authority's Mortgage Finance Bonds, 1975 Series A (Bonds), in the aggregate principal sum of $1,000,000.00, to establish the validity of all proceedings taken in connection with the issuance and authorization of the bonds, and also to establish the principle that the interest income received by holders of the Bonds is exempt from state income taxation.

The motion for judgment further alleges that Authority was created for the public purpose of expanding the supply of funds available in the Parish for new mortgage loans, thereby promoting the welfare of Parish residents by providing funds for their acquisition of residential properties, thus stimulating home ownership and the economy of the Parish. Authority asserts its intent to make funds available to lenders for the financing of homes for credit-worthy persons and families of low and moderate income, to alleviate the shortage of adequate housing for such persons and families in the Parish. Next, Authority avers its purpose to seek effective participation in its program by lenders on terms which restrict the financial return and benefit of lenders to the extent necessary and reasonable to induce lender participation.

To fulfill the foregoing purposes, Authority alleges its right and power to issue Bonds pursuant to the Indenture agreement to provide financing for Authority's objective, which Bonds are obligations of Authority payable out of funds, assets or revenues of Authority and which Bonds cannot in any event constitute obligations of the State or Parish or be secured by pledge of the credit or taxing power of the State or Parish.

Authority avows its aim, pursuant to the Indenture, to issue bonds in the sum of $1,000,000.00, in denominations of $5,000.00 dated February 1, 1975, bearing interest at 7% Per annum, payable February 1 and August 1 of each year, the interest on which is allegedly exempt from state income taxation. It is also asserted that Authority has confected binding contracts with lenders in the aggregate of $900,000.00, which agreements are to be funded from the proceeds of the Bonds.

The foregoing allegations are followed by Authority's request that the trial court order publication of the motion in accordance with the provisions of La.R.S. 13:5124 and, after due hearing, render judgment declaring that the Bonds would be valid and legally binding obligations of Authority when issued, that all legal requirements and proceedings have been met to empower Authority to execute and deliver the Bonds and that the interest to be paid holders of the Bonds would be exempt from state income taxes.

On May 28, 1975 the trial court entered the requested order for publication and fixed the matter for hearing on June 11, 1975. Before the scheduled hearing date, Allie P. Landry, III (Defendant), asserting a substantial interest in the action predicated on his being a resident and taxpayer of the Parish, answered the action by way of a general denial. Defendant's answer raises numerous procedural and constitutional issues, none of which pertain to the issue upon which we decide this matter, namely that Authority has no right of action in that Authority does not come within the class of litigants entitled to proceed under the Bond Validation Law.

By a joint stipulation entered of record on July 11, 1975, Authority and Defendant stipulated that Authority is a duly created public trust within the terms of La.R.S. 9:2341--2347, and a governmental unit as defined in La.R.S. 13:5121(2). Additionally, the stipulation contains acknowledgments which in effect concede the veracity of all averments of Authority's motion. On July 23, 1975, the matter was taken under advisement by the trial court, after submission of memoranda of authorities by Authority and Defendant.

On September 19, 1975, while the matter was still under advisement, Intervenor attempted to intervene in the suit, alleging himself to be a member of defendant class specified in La.R.S. 13:5124. Intervenor raised numerous exceptions to Authority's action, including an exception of no right of action on the ground that Authority is not a 'governmental unit' as defined in the Bond Validation Law (La.R.S. 13:5121 et seq.). On this basis Intervenor contends that Authority is not within the class of litigants authorized to proceed under the Bond Validation Law. On September 19, 1975, the trial court denied Intervenor's petition of intervention on the ground that the intervention was untimely filed. However, on September 25, 1975, the trial court granted Intervenor's oral motion to be enrolled as a party defendant in this matter.

Judgment was rendered by the trial court on January 14, 1976, decreeing Authority a legally created body and declaring Parish Ordinance Number 4327, adopted August 14, 1974, constitutional and valid. However, the decree rejected with prejudice Authority's prayer for validation of the proposed bond issue. On January 23, 1976, the trial court amended its judgment to decree Authority a legally created body fulfilling a valid public purpose while performing an authorized and public function of its beneficiary, the Parish, and to declare Parish Ordinance Number 4327, adopted August 14, 1975, constitutional and valid.

From the foregoing judgments Intervenor appealed devolutively and Authority appealed suspensively. In this court Intervenor, as a member of the defendant class named in Authority's motion, filed the following peremptory exceptions: (1) No right of action on the ground that Authority is not a governmental unit within the definition of that term as contained in La.R.S. 13:5121; (2) No cause of action because of the failure of Authority's motion to assert consent and approval of the State Bond Commission for the issuance of the Bonds, despite Authority's allegation that Authority is a governmental unit; (3) No cause of action on the ground that Authority fails to allege facts which establish Authority as a political subdivision or a non-profit corporation created or governed by a duly constituted political authority, as required by the Bond Validation Law, but rather that Authority's pleadings and attachments reveal Authority to be a private enterprise; and (4) Lack of an indispensable party in that the State of Louisiana was not joined to contest the alleged non-taxability of bond interest for state income tax purposes. In this court, Authority moved to dismiss Intervenor's appeal on grounds that Intervenor had no standing to appeal because Intervenor failed to timely answer Authority's action as provided by La.R.S. 13:5126 and also because the petition of intervention was rejected by the court below. By judgment rendered March 12,...