Fransen v. City of New Orleans

• Decision Date: 01 July 2008
• Docket Number: No. 2008-CA-0087.,No. 2008-CA-0076.,2008-CA-0076.,2008-CA-0087.
• Citation: 988 So.2d 225
• Parties: A. Remy FRANSEN, Jr. and Allain F. Hardin v. CITY OF NEW ORLEANS, et al.
• Court: Louisiana Supreme Court

988 So.2d 225

A. Remy FRANSEN, Jr. and Allain F. Hardin v. CITY OF NEW ORLEANS, et al.

No. 2008-CA-0076.

No. 2008-CA-0087.

Supreme Court of Louisiana.

July 1, 2008.

Rehearing Denied August 29, 2008.

Liskow & Lewis, James Alcee Brown, Brian Anthony Jackson, Shannon Skelton Holtzman, Jason R. Johanson, New Orleans, for appellant in No. 2008-CA-0076.

James D. Caldwell, Attorney General; Stone, Pigman, Walther, Wittmann, LLC, Phillip A. Wittmann, Agnieszka Anna McPeak, New Orleans; Scheuermann and Jones, Lawrence Blake Jones, New Orleans; Penya Marzula Moses-Fields, City Attorney, Robert Joseph Ellis, Jr., Evelyn Foley Pugh, Assistant City Attorneys; Barham, Warner & Bellamy, Richard G. Barham, Shreveport; Fransen & Hardin, Main Freret Hardin, A. Remy Fransen, Jr., New Orleans; Henry L. Klein, New Orleans, for appellee in No. 2008-CA-0076.

Stone, Pigman, Walther, Wittmann, LLC, Phillip A. Wittmann, Agnieszka Anna McPeak, New Orleans; Scheuermann and Jones, Lawrence Blake Jones, New Orleans; Penya Marzula Moses-Fields, City Attorney, Robert Joseph Ellis, Jr., Evelyn Foley Pugh, Assistant City Attorneys; Barham, Warner & Bellamy, Richard G. Barham, Shreveport, for appellants in No. 2008-CA-0087.

James D. Caldwell, Attorney General, Liskow & Lewis, James Alcee Brown, Brian Anthony Jackson, Shannon Skelton Holtzman, Jason R. Johanson, New Orleans, Fransen & Hardin, Allain Freret Hardin, A. Remy Fransen, Jr., New Orleans; Henry L. Klein, New Orleans, for appellee in 2008-CA-0087.

KNOLL, Justice.

In this case, we are called upon to decide whether an ordinance of the City of New Orleans for the collection of delinquent ad valorem taxes is a valid exercise of its plenary power under its home rule charter. The ordinance in question permits the City of New Orleans to place for collection with an attorney or collection agent delinquent ad valorem property taxes, to levy penalties, including a penalty to cover costs of collection by an attorney or collection agent, for delinquent ad valorem property taxes, and to sue to collect the delinquent tax. This case is before us pursuant to our appellate jurisdiction, La. Const. art. V, § 5(D), because the ordinance has been declared unconstitutional by the Fourth Circuit Court of Appeal. For the following reasons, we find the ordinance is an unconstitutional exercise of the City's plenary power under its home rule charter, because the Louisiana Constitution provides tax sales as the exclusive method for a governmental subdivision to collect delinquent ad valorem property taxes and does not allow for the imposition of a penalty for delinquent ad valorem property taxes.

FACTS AND PROCEDURAL HISTORY

On March 5, 1998, the New Orleans City Council adopted Ordinance No. 18637, codified in the New Orleans Code of Ordinances, Chapter 150, Article II, §§ 150-46.1 through 150-46.6.¹ Ordinance No. 18637 provides:

AN ORDINANCE to provide for interest and increased penalties on delinquent ad valorem taxes and for the payment of costs and attorneys' fees in connection with the collection of such taxes:

WHEREAS, the City of New Orleans incurs significant delinquencies in the collection of ad valorem tax revenues due to (i) lack of penalties to encourage prompt compliance by the taxpayers with the tax laws and (ii) lack of provision for collection fees, attorneys [sic] fees, costs and expenses; and attorneys' fees and costs to cover the costs of collection; and

WHEREAS, the City will be able to increase revenues from ad valorem taxes through the implementation of interest and penalties and in imposing collection fees, attorney fees, costs and expenses on the taxpayer;

SECTION 1. THE COUNCIL OF THE CITY OF NEW ORLEANS HEREBY AMENDS SECTION 150-46 OF THE CODE OF THE CITY OF THE CITY OF [sic] NEW ORLEANS AND ORDAINS, that Section 150-46 of the Code of the City of New Orleans is adopted and ordained to read as follows:

Sec. 150-46.1 Taxing Unit.

A taxing unit for purposes of this Section shall mean the City of New Orleans and all jurisdictions for which the Director of Finance for the City of New Orleans collects ad valorem taxes.

Sec. 150-46.2 Penalty and Interest.

(a) A delinquent tax incurs a penalty of three percent of the amount of the tax on the day such tax becomes delinquent.

(b) A delinquent tax accrues interest at a rate of one percent for each month or portion of a month the tax remains unpaid in accordance to LSA-R.S. 47:2101.

Sec. 150-46.3 Additional Penalty for Collection Costs.

(a) All delinquent taxes for prior years, and taxes that remain delinquent on April 1 of the year in which they became delinquent, incur an additional penalty to defray costs of collection if the taxing unit has referred the collection of the delinquent taxes, penalty and interest to an attorney or collection agent. The amount of the additional penalty shall be thirty percent of the amount of taxes, penalty and interest due.

Sec. 150-46.4 Suit to Collect Delinquent Tax.

(a) At any time after its tax on property becomes delinquent, a taxing unit or its authorized agent may file suit to foreclose the lien securing payment of the tax. The suit must be in a court of competent jurisdiction for the parish in which the tax was or is imposed.

(b) A suit to collect a delinquent tax takes precedence over all other suits pending in courts.

(c) In a suit brought under Subsection (a), a taxing unit or its authorized agent may foreclose any other lien on the property in favor of the taxing unit.

Sec. 150-46.5 Recovery of Costs and Expenses.

(a) In addition to other costs authorized by law, a taxing unit or its authorized agent is entitled to recover from the subject property and, in the case of delinquent personal property taxes, against the tax debtor the following costs and expenses in its effort to collect a delinquent tax:

(1) all usual court costs, including the cost of serving process;

(2) costs of filing for record of notice of lis pendens against property;

(3) expenses of tax sale;

(4) reasonable expenses that are incurred by the taxing unit or its authorized agent in determining the name, identity and location of necessary parties and in procuring necessary legal descriptions of the property on which a delinquent tax is due; and

(5) in cases where Sec. 150-46.3(a) is not applicable, reasonable attorney's fees of thirty percent of the total amount of taxes, penalties, and interest due the unit.

(6) reasonable curator fees and expenses.

(b) Each item specified by Subsection (a) of this section is a charge against the property and shall be collectible in the same manner as the taxes, interest, penalties and costs due by the tax debtor and is subject to collection by foreclosure in a suit or as otherwise provided by law and shall be collected out of the proceeds of the sale of the property.

(c) The Director of Finance or his/her authorized agent, with the approval of the Mayor or the Chief Administrative Officer, is authorized to employ private counsel to assist in the collection of any taxes, penalties, interest or costs and expenses, including attorney's fees, [sic] due or to represent him in any proceeding under this section.

Sec. 150-46.6 Liability of Taxing Unit for Costs

(a) Except as provided by Subsection (b) of this section, a taxing unit or its authorized agent is not liable in a suit to collect taxes for court costs, including any fees for service of process, arbitration, or mediation, and shall not be required to post security for the costs.

(b) A taxing unit or its authorized agent shall pay the cost of publishing citations, notices of sale, or other notices from the unit's general fund as soon as practicable after receipt of the publisher's claim for payment. The taxing unit is entitled to reimbursement from other taxing units that are parties to the suit for their proportionate share of the publication costs on satisfaction on any portion of the tax indebtedness before further distribution of the proceeds. A taxing unit may not pay a word or line rate for publication of citation or other required notice that exceeds the rate the newspaper publishing the notice charges private entities for similar classes of advertising.

Pursuant to a contract with the city of New Orleans ("City"), the law firm of Heard, Linebarger, Graham, Goggan, Blair, Pena & Sampson, L.L.P. (hereinafter "the law firm")² and United Governmental Services of Louisiana, Inc. ("UGSL") provided tax collection services under the Ordinance. Plaintiffs, A. Remy Fransen, Jr. and Allain F. Hardin, own immovable property in New Orleans. Fransen received a letter of May 19, 2000, from the law firm informing him that the 2000 taxes on his immovable property were delinquent. Enclosed with the letter was a detailed tax statement. Fransen responded in writing to the law firm, enclosing his check of $5,301.54 for the 2000 real estate tax owed and asking what authority permitted assessment of interest and penalty totaling $2,072.91. Fransen also sent correspondence to the City's Department of Finance with the same inquiry. The Department of Finance responded in a letter dated June 21, 2000, stating that the $5,301.54 payment was credited as follows: $3,811.32 to tax, $152.45 to accrued interest, $114.34 to delinquency penalty and $1,223.43 to collection penalty. On January 15, 2001, Fransen again wrote to the Department of Finance, enclosing a check for $2,227.89 representing payment for the interest, penalty and collection penalty for the 2000 taxes. He indicated that he was contesting this payment.

Hardin received his 2001 tax bill in December 2000; payments made after January 31, 2001 were considered delinquent. In April 2001, Hardin discovered the check he had written for payment of the taxes had inadvertently not been mailed, and he then mailed the check. When he received his cancelled check, he noticed that it had a notation as "partial payment." He contacted the City's Department of Finance and was told...