Hebert v. Police Jury of West Baton Rouge Parish, 7194

CourtCourt of Appeal of Louisiana (US)
Writing for the CourtLANDRY
Citation200 So.2d 877
Docket NumberNo. 7194,7194
Decision Date13 June 1967

Page 877

200 So.2d 877
No. 7194.
Court of Appeal of Louisiana, First Circuit.
June 13, 1967.
Rehearing Denied June 15, 1967.
Writ Refused June 30, 1967.

Page 879

Joseph W. Cole, Jr., of Cole & Claiborne, Port Allen, for appellant.

Samuel C. Cashio, Maringouin, E. E. Huppenbauer, Jr., of Cox, Bagot & Huppenbauer, New Orleans, Fred G. Benton,

Page 880

Sr., of Benton & Moseley, Baton Rouge, for appellee.


LANDRY, Judge.

This matter, and the associated case of Arnone v. Police Jury of Iberville Parish, State of Louisiana, La.App., 200 So.2d 897, involve suits by plaintiff taxpayer from each said parish to obtain preliminary and final injunctions prohibiting the respective police juries from carrying out the provisions of lease agreements entered into by defendants with certain industrial corporations and issuing certain revenue bonds pursuant to the provisions of LSA-R.S. 39:991--1001, inclusive, and Louisiana Constitution Article 14, Section 14(b. 3), commonly known as the 'industrial inducement law'.

In each instance the validity of the lease and bonds was maintained by the trial court and the application for injunction denied. Both plaintiffs have appealed. We find the lower court has correctly resolved all issues presented for adjudication.

Although these related matters have not been consolidated, they were tried and argued as consolidated matters in both the trial court and on appeal. It is acknowledged by counsel in each case that for all practical purposes the issues are essentially legal as well as identical in both instances. Some slight factual variations are shown and will be noted hereinafter.

For purposes of brevity, the instant or Hebert case will sometimes hereinafter be referred to as the 'Hebert case' or the 'West Baton Rouge case' and the related suit referred to as the 'Arnone case' or 'Iberville case.'

In each instance the defendant Police Jury has signed a lease designed to induce a large industrial firm to locate a multimillion dollar plant within its jurisdiction. In the Hebert case the Police Jury has entered into a lease dated September 22, 1966, with Copolymer Rubber & Chemical Corporation (Copolymer) for a term expiring November 1, 1986, subject to the option of Lessee (Copolymer) to terminate prior thereto. In connection with this lease the Police Jury proposes to issue $20,000,000.00 in revenue bonds as provided for in the applicable constitutional and statutory authority. In the Iberville case the lease is with Hercules, Incorporated (Hercules); its expiration date is February 1, 1987, and in connection therewith the Police Jury of Iberville Parish proposes to issue a total of $60,000,000.00 in revenue bonds. Further distinctions in the respective lease provisions are that in the Iberville case it is mandatory that the lessee purchase the leased premises at the termination of the lease and that rentals to be paid by the lessee are stated in fixed dollar amounts. In the West Baton Rouge lease, however, Copolymer possesses the option to purchase and failing to buy, subsequent rental is in effect fixed in the sum of the ad valorem taxes assessable against the subject property based on its value and the millage rate thereafter in effect.

Both police juries have duly adopted resolutions finding in effect that the granting of the leases and issuance of the necessary bonds pertain to the public interest and declaring that its parish and citizens would derive substantial economic benefits and advantages as a result of inducing the respective industries to locate within their boundaries. The resolutions further authorize the President and Secretary of the Police Juries to execute the leases on behalf of the governing authorities. By duly adopted resolution of each said body politic, elections were held in which the question of issuing the necessary bonds was submitted to the qualified taxpayers of each parish. In both instances the elections carried favorably in both numbers and assessed valuations as required by law, Moreover, in each case, The Board of Commerce and Industry has approved the respective lease agreements and the stated

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plan of each governing authority to encourage the location of these industries within their territories pursuant to the pertinent constitutional and statutory authority.

The attack in each case is two-fold, that is, certain constitutional violations are urged and secondly, the lease itself is said to be null and void because certain of its terms contravene specific state laws.

As regards constitutionality, it is contended in essence (1) that the applicable constitutional article, namely, Article 14, Section 14(b.3) was not properly adopted; (2) the bonds sought to be issued are not issued for public purposes as required by certain state constitutional provisions, and (3) if issued for the purposes contemplated (which plaintiffs maintain in effect are for the financing of private industry), they contravene certain provisions of both the state and federal constitutions.

In support of their constitutional arguments, plaintiffs maintain the statute and constitutional provision in question are not limited to the issuance of bonds for public purposes consequently, they may be said to permit the sale of bonds by public agencies for other than public purposes and are therefore null and void. It is further contended that in neither case has the police jury offered any evidence to substantiate the declared public purpose of the bonds other than in the form of the resolutions so declaring and the subsequent affirmation thereof by the Board of Commerce and Industry as hereinabove noted.

As regards the contentions the leases themselves are null and void because certain of their provisions violate express state law and jurisprudence, the argument in support thereof may be summarized as follows:

(a) Provisions in the leases obligating the parishes not to sell, assign or transfer the subject properties during the lease term, except under specific terms stated therein, violate the terms of LSA-R.S. 33:4711 and 4717, which place no limitation on the authority of a police jury to sell property belonging to the parish;

(b) Lease terms providing that if for any reason, after the bonds have been sold, Lessee fails to convey the industrial facility to Lessor prior to the date specified in the contract, on the transfer date, Lessor shall require the transfer of all moneys remaining in the project account to the bond fund and immediately sell all interest in the project to Lessee, are violative of Article Four, Section Twelve of the state constitution which prohibits the giving of anything of value belonging to the state or the loan or pledge thereof to or for any person or corporation, public or private;

(c) The obligation of the police jury to redeem the bonds prior to maturity at Lessee's option pursuant to certain conditions set forth, grants Lessee illegal and unauthorized control of public funds;

(d) A lease provision permitting release of and removal from the effect of the contract of a portion of the leased premises is in direct violation of the terms of LSA-R.S. 39:993 which expressly provides that upon execution of the Act of Mortgage and Pledge provided for therein, the property mortgaged shall remain mortgaged and pledged for the security of the bonds, in principal and interest, until they have been fully paid and discharged.

(e) Under certain conditions specified, principal and interest on bonds may be paid from bond proceeds. It is contended this rendered the lease null inasmuch as no such express authority is granted in either the statute or constitutional provision. Further, plaintiffs argue that this provision offends the terms of LSA-R.S. 39:996, which states the rental provisions of the lease shall be sufficient to discharge both principal of and interest on the bonds issued to finance the industrial development.

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(f) The lease is in effect not a lease because it lacks the essential element of fixed price required by LSA-C.C. Article 2669. In this connection it is maintained that the prices are variable at the option of Lessee; consequently there is no price and hence no lease.

(g) The leases in question being granted without advertisement for bids do not comply with LSA-R.S. 41:1211--1221, inclusive, which require that leases on lands belonging to political subdivisions of the state shall be preceded by advertisement for bids thereon and no such advertisements were had in the cases at bar;

(h) Provisions requiring the parish to purchase the completed facility from the industry involved and immediately lease same to each lessee are violative of the terms of LSA-R.S. 38:2211--2217, inclusive, which require advertisement for bids of all public works exceeding a certain amount. In this regard, it is conended that the construction is for all intents and purposes undertaken by the Police Jury which provides the means of financing; therefore the public contracts law is applicable.

(i) Assuming the bonds are issued for public purposes, lease provisions granting Lessees the right to purchase the industrial facilities for the amount of the outstanding bonds plus an additional nominal sum are contrary to LSA-R.S. 33:4711, which provides that public property may be sold only when it is no longer needed for public use.

In this connection, it is argued that in each lease it is provided Lessee may purchase the facilities for the sum of $1,001.00 if all bonds have been retired. Plaintiffs maintain this constitutes a violation of the constitutional provision prohibiting the donation of publicly owned property and also Articles 2464 and 2589 of LSA-R.C.C., which require serious consideration as the price of a sale or transfer. Additionally, plaintiffs aver such provision vitiates the leases for...

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