Hildebrand v. City of New Orleans

• Decision Date: 12 September 1989
• Docket Number: No. 88-CA-2761,88-CA-2761
• Citation: 549 So.2d 1218
• Parties: Salome HILDEBRAND v. CITY OF NEW ORLEANS and Paul Mitchell, Director of Finance, City of New Orleans and all consolidated cases. 549 So.2d 1218
• Court: Louisiana Supreme Court

Page 1218

549 So.2d 1218

Salome HILDEBRAND v.CITY OF NEW ORLEANS and Paul Mitchell, Director of FinanceCity of New Orleans and all consolidated cases.

No. 88-CA-2761.

549 So.2d 1218

Supreme Court of Louisiana.

Sept. 12, 1989.

Rehearing Denied Oct. 19, 1989.

Okla Jones, City Atty., Don J. Hernandez, Chief Deputy City Atty., and Blaine G. LeCesne, Deputy City Atty., for appellant.

Lemle, Kelleher, Kohlmeyer, Dennery, Hunley, Moss & Frilot, Moise W. Dennery, Christopher J. Dicharry, Patrick M. Gusman, Parker & Parker, Peter A. Nass, Monroe & Lemann, John D. Wogan, James D. Dalferes, Baldwin & Haspel, John A. Rouchell, Karl J. Zimmerman, Robert R. Rainold, Marie Breaux Stroud, Walker, Bordelon, Hamlin & Theriot, June Y. Bass, Donald E. Theriot, Ronald J. Pursell, Helene McGee Walker, New Orleans, Gerald S. Quinlan, Metairie, Simon, Peragine, Smith & Redfearn, James A. Tramonte, Charles C. Coffee, Lizbeth A. Turner, Thomas Barr, III, John McEnery Robertson, Montgomery, Barnett, Brown, Read, Hammond & Mintz, Stanley McDermott, Jr., Albert Mintz, Walter M. Barnett, Omer F. Kuebel, Alan H. Katz, New Orleans, Roy M. Bowes, Gretna, Satterlee, Mestayer and Freeman, Kent Satterlee, Jr., McCloskey, Langensgtein & Stoller, Edward J. McCloskey, Wegmann and Wegmann, Edward F. Wegmann, Taylor Caffery, Mark W. Malloy, Banks & Fritch, Stephen A. Fritch, George L. Wax, New Orleans, William J. Luscy, III, Henican, James & Cleveland, Philip E. James, Jr., Metairie, and Rene Nicaud, New Orleans, for appellees.

William J. Guste, Jr., Atty. Gen., Jesse J. Marks, Anne Benoit, and Lois Davis, Asst. Attys.Gen., for intervenor.

James C. Russell, Jr., amucius curiae for State of Louisiana, through Dept. of Revenue and Taxation.

William C. Gambel and Pam Peden Bond, Milling, Benson, Woodward, Hillyer, Pierson & Miller, New Orleans, amucius curiae for Executrixes for Succession of Joseph Marion Legendre.

LEMMON, Justice.

These consolidated cases are before the court on a direct appeal from a judgment of the district court declaring unconstitutional a series of ordinances by the City of New Orleans that levied a municipal inheritance tax.La. Const. art. V, Sec. 5(D).

Facts

OrdinanceNo. 11,262, which was adopted on July 10, 1986, imposed a tax on "all inheritances, legacies, donations and gifts made in contemplation of death" resulting from deaths that occurred on or after July 15, 1986.The tax was levied on the transfer of all immovables and tangible movables physically situated in Orleans Parish "whether owned or inherited by, or bequeathed, given or donated to a resident of [sic] nonresident, and whether inherited, bequeathed, given or donated under the laws of this state or of any other country".Also taxed was the transfer of all tangible and intangible movables owned by an Orleans Parish domiciliary, wherever the movables were situated.The ordinance further established rates and exemptions which varied with the relationships between the decedents and their heirs or legatees.Under this ordinance the tax became due and owing at the time an inheritance tax return was filed with the State Collector of Revenue.

OrdinanceNo. 11,262 was subsequently amended and reenacted by OrdinancesNos. 11,337 and 12,147, adopted on August 7, 1986, and December 10, 1987 respectively.The second and third ordinances were made retroactive to July 15, 1986, the effective date of the first ordinance.

The second ordinance altered the rates of taxation, exempted usufructs of surviving spouses, and provided for a conditional expiration date of December 31, 1986.The ordinance further stated that the "levy of the tax shall take effect at the moment of death".However, the ordinance also carried over the provision that the tax shall become due and owing at the time an inheritance tax return is filed.

The third ordinance was identical to the second except that it did not contain an expiration date.

The plaintiffs in these consolidated cases, who are the heirs and legatees of persons that died after July 15, 1986, challenged the taxing ordinances on a number of constitutional, statutory and procedural grounds.They paid the taxes under protest and filed actions for declaratory judgments seeking to determine the validity of the ordinances.The State of Louisiana intervened, contending that the City was not authorized to levy an inheritance tax.

All parties stipulated that there were no issues of fact to be resolved.The cases were tried on cross motions for summary judgment.

The district court rendered judgment declaring the ordinances unconstitutional.In reasons for judgment the court ruled that the ordinances violated La. Const. art. III, Sec. 12(A)(2), which prohibits the Legislature from passing a local or special law "changing the law of descent or succession", and La. Const. art. VI, Sec. 9(A), which prohibits local governmental subdivisions from enacting "an ordinance governing private or civil relationships".Although other of plaintiffs' arguments were discussed, the court stated that the other issues were moot.

The City filed this appeal, and plaintiffs answered the appeal.¹

Because we reverse the major portion of the judgment of the district court, we first discuss the source of the City's taxing power and then discuss separately each of plaintiffs' attacks on the ordinances.

The City's Taxing Power

La. Const. art. VI, Sec. 30 provides:

A political subdivision may exercise the power of taxation, subject to limitations elsewhere provided by this constitution, under authority granted by the legislature for parish, municipal, and other local purposes, strictly public in their nature.This Section shall not affect similar grants to political subdivisions under self-operative sections of this constitution.(emphasis added).

The City of New Orleans is governed by a Home Rule Charter originally enacted by Acts 1912, No. 159, and constitutionally recognized by La. Const. art. XIV, Sec. 22(1921).²Act 159 of 1912 was amended and reenacted by Acts 1936, No. 338, which provided in Section 1(f):

The City of New Orleans shall have the right to levy, impose and collect any and all kinds and classes of taxes or license fees that may be imposed that are necessary for the proper operation and maintenance of the municipality, provided same is not expressly prohibited by the Constitution of the State of Louisiana....(emphasis added).

Thus, just prior to the adoption of the 1974Constitution, the City was authorized by the Legislature and its Home Rule Charter to levy any tax not prohibited by the Constitution.SeeAcorn v. City of New Orleans, 377 So.2d 1206(La.1979).When the 1974Constitution was adopted, the City's previous Home Rule Charter provisions were continued in effect by La. Const. art. VI, Sec. 4, which specifically provided that every existing home rule charter entity retained the powers, functions, and duties in effect at the time of adoption which were not inconsistent with the Constitution.³

The City thus argues that it retained, after the adoption of the 1974Constitution, the power to levy any and all kinds and classes of taxes not prohibited by or inconsistent with the Constitution.On the other hand, plaintiffs argue that the City lacked the power to levy an inheritance tax at the time of adoption of the 1974Constitution and therefore had no power in that respect to be retained by Section 4 of Article VI.

The basis of plaintiffs' argument is that the 1921Constitution specified a maximum rate of inheritance tax on the three classes of beneficiaries and that the state inheritance tax at the time of the adoption of the 1974Constitution was being levied at the maximum rate for the first class and near the maximum for the other two.Plaintiffs thus contend that since the City could not have levied an inheritance tax just prior to the adoption of the 1974Constitution, the City continued to lack the power to do so after the adoption, and La. Const. art. VI, Sec. 4's provision for retaining the home rule powers is not applicable.

We disagree.At the time of adoption of the 1974Constitution, the City had the full power to levy any tax not prohibited by or inconsistent with the Constitution.Acorn v. City of New Orleans, 377 So.2d 1206(La.1979).This power included the power to levy an inheritance tax, if not otherwise prohibited by or inconsistent with the Constitution.The limitation on the total amount of inheritance tax did not divest the City of its power to levy such a tax, but rather imposed a temporary bar to the use of that power as long as the state tax was at the maximum allowed rate.The basic power to levy an inheritance tax continued when the 1974Constitution became effective.⁴

We therefore conclude that the City retained the power to levy an inheritance tax when the 1974Constitution was adopted, as long as the tax was not otherwise prohibited by or inconsistent with the Constitution.⁵

Violations of Louisiana Constitution

Plaintiffs contend that a municipality is constitutionally prohibited from levying an inheritance tax.

When the framers of the 1974Constitution intended to prohibit a local governmental subdivision from levying a specific type of tax, they did so in unambiguous terms.Article VII, pertaining to Revenue and Finance contains an express prohibition in the clearest terms against a municipality's levying of severance taxes, income taxes, and taxes on motor fuel.La. Const. art. VII, Sec. 4(C);seeCity of New Orleans v. Scramuzza, 507 So.2d 215(La.1987).There is no such express prohibition against a municipal inheritance tax.Nevertheless, an ordinance levying a specific type of tax may still be inconsistent with and violative of another provision of the Constitution.

Plaintiffs contend that the ordinances violate La. Const. art. III, Sec. 12(A)(2)'s prohibition against the Legislature's passing local or special legislation changing the law of descent or succession.⁶Pl...