Pollice v. National Tax Funding, L.P.

• Decision Date: 29 July 1999
• Docket Number: No. CIV.A. 98-813.,CIV.A. 98-813.
• Citation: 59 F.Supp.2d 474
• Parties: Tito POLLICE and Violet Pollice, et al., Plaintiffs, v. NATIONAL TAX FUNDING, L.P. et al., Defendants. Gladys Houck, et al., Plaintiffs, v. Capital Asset Research Corp. Ltd., et al., Defendants.
• Court: U.S. District Court — Western District of Pennsylvania

59 F.Supp.2d 474

Tito POLLICE and Violet Pollice, et al., Plaintiffs, v. NATIONAL TAX FUNDING, L.P. et al., Defendants.

Gladys Houck, et al., Plaintiffs, v. Capital Asset Research Corp. Ltd., et al., Defendants.

No. CIV.A. 98-813.

United States District Court, W.D. Pennsylvania.

July 29, 1999.

COPYRIGHT MATERIAL OMITTED

Rudy A. Fabian, Donald Driscoll, for Plaintiffs.

Terrence C. Budd, for Nat.Tax Fund; Cap.Asset.

Ira Weiss, Pittsburgh, PA, for School Dist. of Pittsburgh.

Ronald H. Pferdehirt, Pittsburgh, PA, for City of Pittsburgh.

Christopher C. French, Pittsburgh, PA, for Cap.Asset; National Tax Funding; Capital Assets Holding.

OPINION

ZIEGLER, Chief Judge.

Pending before the court are the cross-motions for summary judgment (doc. nos.77, 85) of defendants, National Tax Funding, L.P. ("National Tax"), Capital Asset Research Corp. Ltd. ("CARC"), and Capital Assets Holdings GP, Inc. ("Capital Assets"), and plaintiffs, Gladys Houck, Marie Demitras, Bragette Parker, Mary Walsh, Mary Tabb, et al. ("Houck plaintiffs"), pursuant to Rule 56(c) of the Federal Rules of Civil Procedure. National Tax seeks summary judgment in both the Houck action and the action concerning representative plaintiffs Tito and Violet Pollice ("Pollice plaintiffs").

I. Facts

National Tax is the purchaser of certain liens and claims arising out of delinquent real estate taxes, water rate charges, and sewer charges previously owned by the City of Pittsburgh (the "City")¹ and the School District of Pittsburgh (the "School District"). National Tax purchased the liens and claims through a purchase agreement dated September 30, 1996. The agreement provides that the City and School District each:

does hereby sell, assign, transfer and convey ... its interest in the tax and municipal claims listed on the attached Schedule A, including interest, penalty and costs thereon, as permitted by law, together with all benefits and advantages that may be obtained thereby.

Defs.' Mot. for Summ. J., Ex. 11.

National Tax entered into a similar purchasing agreement with the Pittsburgh Water and Sewer Authority (the "PWSA") in April, 1997. Both the agreement with the City and School District and the agreement with the PWSA provide for the purchase of future liens by National Tax.

Under the purchase agreements with National Tax, the City, School District, and PWSA retained the right to service the liens. This right was subsequently granted to CARC by each of the respective organizations.

Pollice plaintiffs commenced this civil action alleging, inter alia, violation of the Truth In Lending Act (the "TILA"), 15 U.S.C. § 1601 et seq. The Pollice plaintiffs TILA claim rests on the allegation that defendants offered to extend credit to plaintiffs for the payment of delinquent real estate taxes and unpaid water and sewer charges. The Pollice plaintiffs also assert claims under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., and Pennsylvania common law.

Representative plaintiffs Gladys Houck, Marie Demitras, Bragette Parker, Mary Walsh and Mary Tabb brought a civil action alleging violations of the Fair Debt Collection Practices Act (the "FDCPA"), 15 U.S.C. § 1692 et seq. (1998), the Unfair Trade Practices and Consumer Protection Law (the "UTP/CPL"), 73 P.S. §§ 201-1 through 201-9.2 (West 1993), and the Loan Interest and Protection Law (the "LIPL"), 41 P.S. § 101 et seq. (West 1992).² The Houck action is related to the Pollice action and the two have been treated together.

II. Standard of Law

Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In considering a motion for summary judgment, we must examine the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in favor of that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

III. Discussion

(A) Loan Interest Protection Law (Houck Plaintiffs)

The Pennsylvania Loan Interest Protection Law prohibits the charging and collection of interest and other charges for the loan or use of money which exceeds that "provided [for] by this act or otherwise by law." 41 P.S. § 501 (West 1992). The LIPL authorizes a maximum lawful interest rate of six percent for the loan or use of money, absent statutory authority to charge a higher rate. Id. at § 201. It has been alleged that the Municipal Claims Act serves as statutory authority allowing for a charge of a 10% rate.³ Houck plaintiffs argue that, regardless whether the applicable rate is six or 10%, defendants have violated the LIPL by charging and collecting an interest rate of between 18% and 19.5% per annum.

Defendants counter that two main factors prevent the LIPL from applying to them. First, they argue that the interest limitations of the LIPL and the Municipal Claims Act have been superseded by the Home Rule Charter and Optional Plans Law, 53 Pa.C.S.A. § 2901 et seq. (West 1997), and the amount of interest and penalties that they have been charging is authorized by the Home Rule Charter Law. Second, defendants contend that, even absent specific Home Rule Charter authority to charge the rates assessed, they are not violating the LIPL, as the withholding of payments owed to National Tax by plaintiffs does not constitute a "use of money" for the purposes of the LIPL.

1. Does the Home Rule Charter authorize the charge of higher rates of interest and penalty?

Section 604 of the Loan Interest Protection Law provides:

If any maximum lawful rate of interest provided for in this act is inconsistent with the provision of any other act establishing, permitting or removing a maximum rate, or prohibiting the use of usury as a defense, then the provision of such other act shall prevail.

41 P.S. § 604 (West 1992).

Defendants contend that the rate restrictions of the LIPL are therefore subject to an increased interest rate to the extent permitted under the Home Rule Charter Law. While the Houck plaintiffs do not argue that section 604 prohibits this type of rate increase, they respond that the Home Rule Charter Law does not establish the power to legislate concerning the collection of municipal tax claims or liens to the extent that such legislation is contrary to or enlarges powers granted by the Municipal Claims Act or other state statute.

The parties have stressed the relevance of two primary sections of the Home Rule Charter Law. Section 2962(a) reads, in relevant part:

With respect to the following subjects, the home rule charter shall not give any power or authority to the municipality contrary to, or in limitation or enlargement of, powers granted by statutes which are applicable to a class or classes of municipalities:

(1) The filing and collection of municipal tax claims or liens and the sale of real or personal property in satisfaction of them.

53 Pa.C.S.A. § 2962(a) (West 1997).

While the Houck plaintiffs contend that section 2962(a) is most relevant to the instant proceeding, defendants argue that section 2962(a) is largely immaterial and that section 2962(i) is controlling. Section 2962(i) provides:

No provision of this subpart or any other statute shall limit a municipality which adopts a home rule charter from establishing its own rates of taxation upon all authorized subjects of taxation except those specified in subsection (a)(7).

53 Pa.C.S.A. § 2962(i) (West 1997).

We hold that the plain language of the statute requires application of section 2962(a) to the instant action. As Houck plaintiffs note, "the power to set tax rates on property is distinct from the power to determine matters relating to the collection of unpaid taxes." Br. in Supp. of the Houck Pls.' Mot. for Summ. J. and in Opp'n to Defs.' Mot. for Summ. J., at 9. The General Assembly expressly provided in section 2962(a) that state law governs the subject of tax claim collection. Here, defendants are controlling the rate of interest and penalty, and not the rate of taxation. We hold that rates of interest and penalty fall within the ambit of tax claim collection for the purposes of the Home Rule Charter Law.

Defendants, citing McSwain v. City of Farrell, 154 Pa.Cmwlth. 523, 624 A.2d 256, 258 (1993), argue that section 2962(a)(1) is properly interpreted as applying only to municipal tax claims or tax liens. Granting defendants the benefit of McSwain, however, provides no comfort. First, while section 2962(a)(1) may not apply to water and sewer liens, it is, in our judgment, unquestionable that the section applies to the tax liens at issue. Second, assuming that section 2962(a)(1) does not explicitly apply to water and sewer liens, there is no other provision in the Home Rule Charter Law which permits a municipality, which has adopted a home rule charter, to increase the maximum rate of interest and penalties on such claims.

Indeed, even if we were to conclude that section 2962(a) is inapplicable, section 2962(i) does not contain language "establishing, permitting or removing a maximum rate, or prohibiting the use of usury as a defense," as is required under § 604 of the LIPL. Section 2962(i) fails to create an exemption for defendants from the 10% limitation of the Municipal Claims Act.

Section 2962(i) addresses a municipality's ability to set the rate of taxation. While defendants have explained in great detail the ties that exist between interest and taxation, we believe that the language of the Home Rule Charter Law precludes considering interest and penalties within a home rule municipality's authority to set "rates of taxation upon ... authorized subjects of taxation." "Rate of taxation" is defined in section 2902 of the statute as "[t]he amount of tax levied by a municipality on a permissible subject of taxation."⁴ 53 Pa.C.S.A. § 2902 (West 1997). We see no reason to expand this...