City of Hammond v. Herman & Kittle Props., Inc.

• Decision Date: 20 February 2018
• Docket Number: Court of Appeals Case No. 49A04–1612–PL–2784
• Citation: 95 N.E.3d 116
• Parties: CITY OF HAMMOND, Appellant–Plaintiff, v. HERMAN & KITTLE PROPERTIES, INC., Appellee–Defendant. and State of Indiana, Intervenor.
• Court: Indiana Appellate Court

95 N.E.3d 116

CITY OF HAMMOND, Appellant–Plaintiff,

v.HERMAN & KITTLE PROPERTIES, INC., Appellee–Defendant.andState of Indiana, Intervenor.

Court of Appeals Case No. 49A04–1612–PL–2784

Court of Appeals of Indiana.

FILED February 20, 2018

Attorneys for Appellant : Bryan H. Babb, Bradley M. Dick, Bose McKinney & Evans LLP, Indianapolis, Indiana

Attorneys for Appellee : Steven C. Shockley, Russell C. Menyhart, Taft Stettinius & Hollister LLP, Indianapolis, Indiana

Attorneys for Intervenor : Curtis T. Hill, Jr., Attorney General of Indiana, Frances Barrow, Deputy Attorney General, Indianapolis, Indiana

Robb, Judge.

Case Summary and Issues

[1] In 1961, the City of Hammond created an inspection program for rental housing that permitted inspections of housing and required inspections of rooming houses. In 2001, Hammond created a program which required annual registration of all rental housing and assessed a per unit fee. Beginning in 2011, the Indiana General Assembly passed a series of bills related to rental registration and inspection programs, including a 2014 bill that restricted fees that could be imposed by a rental registration program ("Fee Restriction") unless the program was created prior to July 1, 1984 ("Fee Exemption"). In 2014, Hammond sought payment of nearly $86,000 from Herman & Kittle Properties, Inc. ("HKP") for overdue registration fees for two of its rental properties. Based on the 2014 legislation, HKP disputed it owed the entirety of those fees. Hammond then filed a complaint seeking a declaratory judgment that because its inspection program was created prior to July 1, 1984, its program was unaffected by the 2014 legislation and, accordingly, HKP owed the fees in question.

[2] While that declaratory judgment action was pending, the General Assembly in 2015 enacted further legislation that amended the definition of a "rental registration or inspection program" such that there was no question Hammond's registration program did not qualify for the Fee Exemption. Hammond then amended its complaint to add Counts II and III seeking a declaratory judgment that the 2015 legislation was special legislation in violation of Article 4 Sections 22 and 23 of the Indiana Constitution. The State of Indiana intervened in the action for the limited purpose of defending the constitutionality of the law.

[3] Both Hammond and HKP filed motions for summary judgment. The trial court granted summary judgment to Hammond on the first count, finding Hammond qualified for the Fee Exemption in 2014. The trial court also found that although the Fee Exemption is special legislation, it does not violate the Indiana Constitution. The trial court therefore granted summary judgment to HKP on Counts II and III of Hammond's complaint. Hammond now appeals, raising three issues for our review:

1) Whether Hammond is entitled to summary judgment declaring the Fee Exemption is in violation of Indiana Constitution Article 4, Section 22's prohibition on special legislation relating to salaries and fees;

2) Whether Hammond is entitled to summary judgment declaring the Fee Exemption is in violation of Indiana Constitution Article 4, Section 23's requirement that where possible, laws must be general; and

3) Whether, if the Fee Exemption is unconstitutional, it is severable from the remainder of section 36–1–20–5 or whether the entire section must be stricken.

HKP's brief, in which the State has joined, does not challenge the entry of summary judgment for Hammond on Count I. In addition to meeting Hammond's argument with respect to Counts II and III, HKP alleges preliminarily that Hammond does not have standing to challenge the constitutionality of the Fee Exemption.

[4] Concluding that Hammond has standing, that the Fee Exemption runs afoul of both Sections 22 and 23 of Article 4 of the Indiana Constitution, and that the Fee Exemption is not severable from the remainder of section 36–1–20–5, we reverse and remand to the trial court to enter summary judgment for Hammond on Counts II and III.

Facts and Procedural History

I. Hammond's Ordinances

[5] In August 1961, Hammond enacted Ordinance 3337, "an ordinance establishing minimum standards governing supplied facilities, maintenance and occupancy of dwellings within the City of Hammond; fixing certain responsibilities and duties of owners and occupants of dwellings; authorizing the inspection of dwellings, the condemnation of dwellings unfit for human habitation, and fixing the penalties for violations." Appendix to Brief of Appellant, Volume II at 99. In pertinent part, Ordinance 3337 provides:

The Health Officer and/or the Fire Inspector and/or the Building Commissioner are hereby authorized and directed to make inspections to determine the condition of dwelling units, rooming units, and premises located within the City of Hammond, in order that they may perform their duties of safeguarding the health and safety of the occupants of dwellings and of the general public. For the purpose of making such inspections, the Health Officer, and/or Fire Inspector and/or Building Commissioner are hereby authorized to enter, examine and survey at all reasonable times, all dwellings, dwelling units, rooming units, and premises.

Id. at 101 (Section 2.1); see also Hammond City Code § 96.135(B) (2002) (authorizing and directing the Code Enforcement Commissioner to make inspections to determine the condition of dwelling units, rooming units, and premises in the city and requiring the owner or occupant of every dwelling, dwelling unit or rooming unit to give an authorized city inspector access to the premises). A "dwelling" is "any building which is wholly or partly used or intended to be used for living or sleeping by human occupants ...." App. to Br. of Appellant, Vol. II at 99 (Section 1.5). A "dwelling unit" is "any room or group of rooms located within a dwelling and forming a single habitable unit with facilities which are used or intended to be used for living, sleeping, cooking and eating." Id. at 100 (Section 1.6). A "rooming unit" is "any room or group of rooms forming a single habitable unit used or intended to be used for living and sleeping, but not for cooking or eating purposes." Id. at 101 (Section 1.21).

[6] In addition, Ordinance 3337 has a section devoted to hotels and rooming houses. Id. at 108. A "rooming house" is "any dwelling, or that part of any dwelling containing three or more rooming units, in which space is let by the owners or operator to persons who are not husband or wife, son or daughter, mother or father, or sister or brother of the owner or operator." Id. at 101 (Section 1.22). Every hotel and rooming house is required to be inspected twice each year and every person maintaining or operating a hotel or rooming house is obligated to pay the City Controller an annual inspection fee of $5 per hotel or rooming house. Id. at 108 (Sections 9.2(A) and 9.2(B) ).¹ Thus, Hammond's inspection program applies to both owner-occupied dwellings and rentals.

[7] In January 2001, Hammond enacted Ordinance 8327, the purpose of which "is to protect the health, safety and general welfare of the citizens of the City of Hammond by requiring the registration of all rental housing units which are or shall be in existence in the City of Hammond." Id. at 118. The ordinance required "[a]ny owner of real property in the City of Hammond, which real property is used as rental housing, ... to register all such properties on an annual basis." Id. at 119. "Rental housing" is defined as "any room, dwelling unit, rooming unit or portion thereof let or intended to be let to a family or person for compensation." Id. The ordinance also imposed a five dollar annual registration fee for each dwelling or rooming unit. Id. at 119–20. In 2004, Ordinance 8327 was amended to increase the annual registration fee for each dwelling or rooming unit to $10. Id. at 124. In 2010, Ordinance 9060 increased the annual fee to $80 "in order for the City of Hammond to bear the increased costs of inspections and enforcement actions on income property ...." Id. at 129. A 2011 ordinance made other changes to the rental registration program that are not relevant to this litigation, but specifically continued the $80 annual fee. Id. at 137; see also Hammond City Code § 96.152(C) (2011). Failure to register annually subjects the owner to a fine per unit per day.

II. Relevant Statutes and Legislative History²

A. 2011—HEA 1543

Regulation of Residential Leases Begins by Requiring Fees be Maintained in a Special Fund and Allowing Landlords to Pass Fee on to Tenants

[8] House Bill 1543 was introduced in 2011 to add a chapter to Title 36 concerning the regulation of residential leases. As introduced, the bill proposed, among other things, that a regulation by a political subdivision regarding landlord/tenant relations could not require owners of rental units to be registered with the political subdivision. App. to Br. of Appellant, Vol. II at 145 (HB 1543 Introduced Version Sec. 5).³ HB 1543 would therefore have barred all political subdivisions from registering rental units and therefore barred all registration fees. Ultimately, however, the General Assembly enacted Indiana Code chapter 36–1–20 as follows:

Sec. 1. The definitions in IC 32–31–3 apply throughout this chapter.

Sec. 2. (a) Except as provided in subsection (b), the owner of a rental unit assessed any inspection, registration, or other fee by a political subdivision pertaining to the rental unit may:

(1) notify the tenants of the rental unit of the assessment of the fee; and

(2) require the tenants of the rental unit to reimburse the owner for the payment of the fee.

* * *

Sec. 3. Any inspection, registration, or other fee assessed under section 2 of this chapter and collected by a political subdivision must be maintained in a special fund dedicated solely to reimbursing the costs reasonably related to services actually performed by the political subdivision that justified the imposition and amount of

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