Straus v. City of New Orleans

• Decision Date: 02 July 1928
• Docket Number: 28199
• Citation: 118 So. 125,166 La. 1035
• Court: Louisiana Supreme Court
• Parties: STRAUS v. CITY OF NEW ORLEANS

118 So. 125

166 La. 1035

STRAUS v. CITY OF NEW ORLEANS

No. 28199

Supreme Court of Louisiana

July 2, 1928

Appeal from Civil District Court, Parish of Orleans; Hugh C. Cage Judge.

Suit by Simon J. Straus, trustee, against the City of New Orleans for an injunction. Judgment for defendant, and plaintiff appeals.

Judgment annulled, and writ of injunction perpetuated.

Monroe & Lemann and Walter J. Suthon, Jr., all of New Orleans, for appellant.

Bertrand I. Cahn, City Atty., and Francis P. Burns, Asst. City Atty. both of New Orleans (Rene A. Viosca, of New Orleans, of counsel), for appellee.

OPINION

O'NIELL, C. J.

The Magnolia Textile Corporation owned and operated a cotton mill in New Orleans, and cotton mills in Mississippi. In November, 1921, the corporation mortgaged its cotton mills to Simon J. Straus, trustee, to secure a bond issue of $ 275,000. The description of the lands on which the mills were situated included "all buildings, improvements and appurtenances thereunto attached or belonging, * * * machinery, boilers, dynamos, mechanical equipment, including belting, shafting, conveyors, and fixtures, and all other machinery and equipment of every kind, nature and description, whether attached to said premises or placed therein, and apparatus of any, all and every kind and character whatsoever," etc. The language, therefore, left no doubt that the mortgagor intended to include and did include in the act of mortgage everything in the way of machinery and apparatus in the cotton mills, equipped as going concerns.

On the 1st day of January, 1924, the corporation had become insolvent, ceased operations, and abandoned its property, including the New Orleans mill, to the trustee for the bondholders. He foreclosed the mortgage on the property in Mississippi, and afterwards on the New Orleans property, and after applying the proceeds to the mortgage bonds there was a deficit of more than $ 100,000.

In November, 1925, a short time before instituting the foreclosure proceedings on the New Orleans property, the trustee for the bondholders, with the consent of the corporation, sold all of the machinery in the New Orleans cotton mill to a concern in Houston, Tex., for $ 53,000, which was applied on the mortgage debt. That sum is included in the calculation showing the loss of more than $ 100,000 by the bondholders.

Before any of the machinery was dismantled for shipment to Houston, and while the mill remained intact and ready to operate as a cotton mill, the state tax collector seized the machinery, claiming a tax lien on it, as personal property, for unpaid taxes for 1924, assessed against other property, which was in fact personal property, belonging to the Magnolia Textile Corporation at the time of the assessment. The seizure was levied about the 1st of August, 1925, and the dismantling of the machinery commenced on the 1st of November, that year. After the machinery was dismantled, boxed, crated and prepared for shipment, the city of New Orleans seized it, claiming a tax lien on it, as personal property, for unpaid taxes for 1924 assessed against the other property, being the personal property belonging to the Magnolia Textile Corporation at the time of the assessment.

Apart from the assessment of its real estate for the taxes of 1924, the Magnolia Textile Corporation was assessed for taxes on the following items as "personal property," viz.: Merchandise, $ 75,000; office furniture, $ 1,000; machinery, $ 46,800; miscellaneous, or other articles of value, $ 11,400.

The trustee for the bondholders paid the taxes for 1924 on the real estate, and paid the taxes on the "machinery," assessed at $ 46,800; the amount of taxes due the city on the machinery being $ 1,093.95. The payment was made for account of the bondholders, with subrogation to the tax lien. The taxes on the personal property of the corporation, described as merchandise, assessed at $ 75,000, office furniture, assessed at $ 1,000, and miscellaneous or other articles of value, assessed at $ 11,400, for the year 1924, were not paid; and those articles were disposed of by the corporation, or could not be found or levied upon by the tax collector.

The trustee brought this suit against the city, and a similar suit against the state tax collector, and obtained writs of injunction against the enforcement of a tax lien upon the machinery, for delinquent taxes assessed against the other and personal property of the tax debtor. The plaintiff claims that the machinery in the cotton mill was immovable by destination, and was therefore affected by the bond mortgage, and not subject to a tax lien to secure the payment of taxes assessed against other property, or personal property, of the tax debtor. The injunction bond in each case being ample security for the taxes claimed, the trustee was allowed to ship the machinery to Houston pursuant to the sale which had been made when the machinery formed part of the cotton mill.

The defendant in each suit contended that the machinery in the cotton mill was personal property, not subject to the mortgage on the real estate, but subject to a tax lien to secure the taxes assessed against any and all of the personal property of the tax debtor, and the city pleaded also that, if the machinery was not personal or movable property while in place as a part of the cotton mill, it became personal or movable property when it was dismantled, and before the city levied its seizure. The city pleaded, as an estoppel, that the trustee, by paying the taxes for 1924, on the machinery, assessed as personal property, recognized that the machinery was properly classed as personal property; and the city pleaded, also by way of estoppel, that the corporation, through W. H. Purvis, its office manager, had made a return of the corporation's property for assessment for the taxes of 1925 and listed the machinery under the head of "Personal Property," and thereby recognized that the machinery was properly classed as personal property, and that he afterwards asked for and obtained a reduction of the assessment on the machinery, as personal property, for the taxes of 1925, and thereby again recognized that the machinery was properly listed as personal property.

The civil district court gave judgmentin favor of the defendant in each case, dissolving the writ of injunction and condemning the plaintiff to pay the taxes for 1924 assessed against the personal property of the corporation, with interest, attorney's fees and costs. The amount of the judgment in favor of the city is $ 2,042.98, plus the interest and attorney's fee. This appeal is from that judgment. The amount of the judgment rendered in the other suit, for the state taxes, was less than $ 2,000. The appeal in that case, therefore, was taken to the Court of Appeal, where it is now pending.

The district judge has given his opinion in writing, in which he construes article 468 of the Civil Code to mean that the machinery forming part of a manufacturing establishment in a city is not like the "things which the owner of a tract of land has placed upon it for its service and improvement," and is not "immovable by destination," unless it is "permanently attached to the tenement or to the building," or unless the owner of the manufacturing establishment has complied with section 1 of Act 30 of 1904, p. 37, as amended by Act 187 of the same session, p. 419, by filing in the office of the register of conveyances and in the office of the recorder of mortgages a declaration that the real estate and machinery are to be considered and dealt with as a whole and that the machinery is to be considered as part and parcel of the real estate. No such declaration was filed by the Magnolia Textile Corporation, as owner of the cotton mill described in the act of mortgage.

The tax lien claimed by the city, on this machinery, is not for the taxes that were levied or assessed upon the machinery, but for the taxes that were levied and assessed upon the other property, conceded to be the personal property of the tax debtor. The taxes levied and assessed upon the machinery, as well as the taxes levied and assessed upon the land and the building in which the machinery was, were paid, as we have said, before the machinery was seized by the tax collector, and before it was sold to the concern in Houston.

The tax-collecting authorities may seize and enforce a lien upon any personal or movable property of the tax debtor for the collection of taxes levied and assessed upon any other personal or movable property belonging to him. Const. art. 10, § 11, par. 2 (which was article 233, par. 2, of the Constitution of 1898); Cleveland Steel Co. v. Joe Kaufman Co., 155 La. 529, 99 So. 428. But the immovable property of a tax debtor is not subject to seizure for taxes levied against his personal or movable property. Mullan v. His Creditors, 39 La.Ann. 397, 2 So. 45; Saloy v. Woods, 40 La.Ann. 585, 4 So. 209.

The question, therefore, is whether the machinery in the cotton mill was immovable by destination, and therefore a part of the real estate. For the purpose of assessment for taxes, section 91 of Act 170 of 1898, which was then and is yet the current revenue law, at page 386, provides:

"Sec. 91. Be it further enacted, etc., that the following rules for the taxation of persons and property are hereby established, to-wit:

"1. The term 'real estate' shall be held to mean and include not only land, city, town and village lots, but all things thereunto pertaining, and all structures and other things so annexed and attached thereto, as to pass to the vendee by the conveyance of the land or lot.

"2. The phrase 'personal property,' or 'movable property,' shall be held to mean and include all things other than real...