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Filmore Parc Apartments II v. Foster

Court of Appeals of Louisiana, Fourth Circuit

November 7, 2018

FILMORE PARC APARTMENTS II
v.
NORMAN S. FOSTER, OFFICER AND DIRECTOR OF FINANCE, CITY OF NEW ORLEANS, ERROLL G. WILLIAMS, ASSESSOR, ORLEANS PARISH AND THE LOUISIANA TAX COMMISSION

          APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH NO. 2014-01725, DIVISION "1" Honorable Nakisha Ervin-Knott, JUDGE

          Cheryl M. Kornick, Robert S. Angelico COUNSEL FOR PLAINTIFF/APPELLEE

          Christian N. Weiler, John J. Weiler, Reese F. Williamson COUNSEL FOR DEFENDANT/APPELLANT

          (Court composed of Judge Edwin A. Lombard, Judge Daniel L. Dysart, Judge Paula A. Brown)

          Paula A. Brown Judge

         This appeal arises out of a suit to recover ad valorem taxes paid for the year of 2014. Filmore Parc Apartments II ("Filmore II") filed a petition to recover taxes paid under protest to the City of New Orleans against Norman S. Foster, Chief Financial Officer and Director of Finance for the City of New Orleans, Erroll G. Williams, as the Assessor of Orleans Parish ("Assessor Williams"), and the Louisiana Tax Commission. Assessor Williams filed a motion for summary judgment, and Filmore II, in turn, filed a cross-motion for summary judgment. On December 8, 2017, the district court rendered judgment granting in part and denying in part Filmore II's cross-motion for summary judgment, and granting in part and denying in part Assessor Williams' motion for summary judgment. From this judgment, Assessor Williams appeals.[1] Additionally, Filmore II filed an answer to the appeal seeking review of the district court's judgment granting in part Assessor Williams' motion and denying in part its cross-motion.[2] For the reasons set forth below, the district court's judgment is reversed in part, affirmed in part, and remanded.

         FACTS AND PROCEDURAL HISTORY

         This matter was previously before this Court in Filmore Parc Apartments II v. Foster ("Filmore I"), wherein this Court set forth the procedural history of this case as follows:[3]

Michael Vales formed Mirabeau Family Learning Center, Inc. ("MFLC"), a Louisiana non-profit corporation, as a vehicle to counteracting poverty. MFLC acquired the property ("Property") in question in 1995, "for the specific purpose of constructing housing units to provide affordable housing to low and very low income families." MFLC entered into a Land Use Restriction Agreement ("LURA") with the requirement that the Property be used "solely to provide housing to low- and very low-income families." Filmore Parc Apartments II ("Filmore"), a partnership in commendam, was formed by Mr. Vales with MFLC as the general partner. The Housing Outreach Fund VII Limited Partnership, a Fannie Mae entity, is the limited partner. MFLC's interest in the Property was then transferred to Filmore.
Filmore operated the Property as "affordable housing for low-and very low-income families." The Property operates 32 units as Section 8 Project Based Voucher units.[4] The remaining [24] units meet the requirements of § 42 of the Internal Revenue Code. Filmore contends that the Property is operated pursuant to the federal Hope VI program[5] and La. R.S. § 40:600.1-600.24. Filmore Parc was assessed ad valorem taxes for the Property for the 2014 tax year. Filmore paid $61, 755.92 on January 24, 2014, and contended that it was exempt pursuant to Louisiana Const. Art. VII, § 21(A).
Filmore then filed a Petition to Recover Taxes Paid Under Protest against Norman Foster, Chief Financial Officer and Director of Finance for the City of New Orleans; Erroll Williams, as the Assessor of Orleans Parish; and the Louisiana Tax Commission . . . . Mr. Williams also filed a Motion for Summary Judgment contending that the housing units in the Property were not exempt from ad valorem taxation. Filmore filed a Cross-Motion for Summary Judgment alleging exemption. Following a hearing, the trial court found that the Property was not exempt from ad valorem taxation for 2014. Accordingly, the trial court granted Mr. Williams' Motion for Summary Judgment and denied Filmore's Cross-Motion for Summary Judgment. Filmore's Petition for Suspensive Appeal followed.

Id., 16-0568, pp. 2-3, (La.App. 4 Cir. 2/15/17), 212 So.3d 621, 623-24 (footnotes omitted). In Filmore I, this Court explained that "La. Const. art. VII, § 21(A) exempts 'public property used for public purposes' from ad valorem taxation." Id., 16-0568, p. 4, 212 So.3d at 624 (quoting Slay v. Louisiana Energy & Power Auth., 473 So.2d 51, 53 (La. 1985). This Court found the first requirement-whether the property was public property-was not met as Filmore Parc Apartments II was privately owned. However, in reversing the district court's judgment and remanding the matter, this Court held that "the trial court committed a legal error when it failed to apply the proper test for determining whether the Property is public." Id., 16-0568, p. 9, 212 So.3d at 626-27. This Court explained that the trial court did not consider the restrictions Filmore placed upon "the Property in furtherance of the mission of providing affordable housing for 'low- and very low-income residents in New Orleans.'" Id., 16-0568, p. 8, 212 So.3d at 626.

         Following remand, the district court held a hearing on Assessor Williams' motion for summary judgment and Filmore II's cross-motion.[6]

         In support of the motion, Assessor Williams submitted an affidavit along with exhibits attached, and the affidavit of Magdalena Merrill ("Ms. Merrill"), Director of Asset Management with the Housing Authority of New Orleans. Assessor Williams attested that Filmore II was a for-profit entity. He stated the Housing Authority of New Orleans ("HANO"), through the Section 8 Project-Based Voucher program, entered into a Housing Assistance Payments Contract ("HAP contract") with Filmore II to provide housing payments to thirty-two of the apartment units. Assessor Williams explained that a HAP contract is a standard Housing and Urban Development ("HUD") agreement "whereby Section 8 tenant-based assistance under the housing choice voucher program is offered to private business owners."[7] He attested that the HAP agreement was the only agreement between HANO and Filmore II and that Filmore did not offer any "public housing" on behalf of HANO, HUD, or the City of New Orleans.

         Ms. Merrill agreed with Assessor Williams' attestation. She stated HANO entered into a HAP agreement with Filmore II wherein HANO committed to provide "project based 'Section 8' housing assistance payments for thirty-two (32) apartment units" which were owned and managed by Filmore II. Ms. Merrill explained the tenants in project based 'Section 8' units pay a portion of the approved rent not to exceed "30% of their adjusted income. . . ." Ms. Merrill stated that to the best of her knowledge Filmore II had no "public housing," and aside from the HAP agreement, there are no other contractual agreements between Filmore II and HANO related to operation of the property. Ms. Merrill attested there was no Regulatory and Operating Agreement between HANO and Filmore II.[8] Ms. Merrill explained that "[p]ublic housing is low income housing assisted by a PHA [Public Housing Assistance] under the provision of the U.S. Housing Act of 1937 (other than Section 8)."

         In support of Filmore II's cross-motion for summary judgment, Filmore II submitted the affidavit of Michael R. Vales ("Mr. Vales"), along with exhibits, and an affidavit of Nyssa A. Hackett ("Ms. Hackett"), Manager of the Project Based Vouchers for HANO. Mr. Vales stated he was the executive director of Mirabeau Family Learning Center of New Orleans ("MFLC")-a non-profit entity. He purchased the land and complex which is now Filmore Parc Apartments II, in November of 1995, from Resolution Trust Corporation ("RTC").[9] The Act of Sale provided that the sale was subject to two agreements: Land Use Restriction Agreement ("LURA") and the Recapture and Reinvestment of Profits Agreement. Mr. Vales stated that the LURA required MFLC or its successor in title to the property "to maintain the Property as multifamily residential housing for Low-Income Families and Very Low-Income Families as defined by the Housing Act of 1937, 42 U.S.C. § 1437a(b)(2) ..... "[10] The Recapture and Reinvestment of Profits Agreement, which was applicable in the event of a sale or transfer of the property, terminated on November 15, 1997. Mr. Vales stated that Filmore Parc Apartments II has fifty-six units. Thirty-two units in Filmore Parc Apartment II were, in 2014, under a HAP Contract with the PHA through its Project Based Voucher Program; the pertinent HAP contract was effective from August 1, 2012 to July 31, 2027. He stated because the tenants from the thirty-two units must be referred by HANO, some of the units remain vacant resulting in loss of rental income for the affected units. Mr. Vales attested that the remaining units in Filmore Parc Apartments II were not subject to the same restrictions as the thirty-two units and were fully occupied in 2014. Mr. Vales stated that Filmore II entered several agreements with the city, state, and federal government for loans and grants. The pertinent agreements included:

(1) The Recapture and Reinvestment of Profits Agreement which expired on November 15, 1997;
(2) Tax Credit Regulatory Agreement of the Louisiana Housing Finance Agency for federal Low Income Housing Tax Credits, regulated by Section 42 of the Internal Revenue Code of 1986, as amended;[11]
(3) The HOME Investment Partnerships Program in which the City of New Orleans issued to MFLC $1, 000, 000.00 and MFLC lent the funds to Filmore II.
(4)The Road Home Small Rental Property Program loaned Filmore II $162, 150.00 (a non-interest bearing loan); and
(5) The Home Affordable Rental Housing Program Regulatory Agreement, regulated by Volume 24, Part 92 of the Code of Federal Regulations, wherein the City of New Orleans issued a loan/grant to Filmore II in the amount of $1, 575, 000.00.

         Mr. Vales attested that "[n]o cash had been left to make repayments of the HOME loan, or the Road Home loan. Additionally, Mr. Vales stated that "[b]ecause of the restrictions on the rents . . . [Filmore II] will never have profits or other cash to distribute to the partners through the term of the numerous regulatory and other agreements encumbering the Property [Filmore Parc Apartments II]." Mr. Vales declared that Filmore Parc Apartments II was dedicated to the public purpose of providing "workforce housing for the City of New Orleans" on a long term basis through its "agreements, encumbrances, and restrictions."

         In Ms. Hackett's affidavit, dated January 4, 2016, she referred to the units as "the 32 Section 8 PBV [Project Based Voucher] units." Ms. Hackett stated that HANO confirmed that "units in . . . Filmore II do constitute part of the affordable public housing inventory available in the City of New Orleans based on the Project Based Voucher contracts with HANO and HANO's understanding of circumstances that exist with regard to the development and financing of these apartments and the rent and use restrictions that exist along with these agreements." However, Ms. Hackett revised her affidavit on January 21, 2016 and acknowledged her prior affidavit was not "based on her personal knowledge but based upon a letter that the Executive Director of HANO, Gregg Fortner, composed on or about December 15, 2014 and submitted to Michael Vales."

         The district court rendered judgment on December 8, 2017, denying Assessor Williams' motion in part and granting Filmore II's cross-motion in part as to "amounts paid under protest attributable to the thirty-two PHA Units." As to the remaining units, the district court granted in part Assessor Williams' motion and denied in part Filmore II's cross-motion finding that the remaining units were not exempt from ad valorem taxes. At the request of Assessor Williams, the district court, pursuant to La. C.C.P. art. 966(C)(4), provided written reasons for the judgment which stated in pertinent part:[12]

Based on the facts and evidence presented, and examining the first requirement for tax exemption, there is no dispute that Filmore Parc's property is privately owned.
* * *
In the case at bar, the units in dispute are located on privately-owned property. The Fimore [sic] Parc property, in dispute, consists of 56 units. The Court believes 32 of the 56 housing units meet the criteria of being classified as public housing units because these units are set aside for very low-income and extremely low-income tenants, and any monies derived from these units are strictly set aside for the maintenance and operation of those units, pursuant to federal regulation. During oral argument, counsel for Filmore Parc explained that for 32 units, the residents were required to be HANO public housing tenants. If HANO does not have a place for their very low-income and extremely low-income residents in the "Big Six" (the six major HANO-owned public housing developments in New Orleans), the tenants are placed in these 32 units. In essence, these units serve as additional inventory for HANO. And, legally, Filmore Parc cannot use these 32 units for any other purposes other than to house these designated residents. Although Filmore Parc's 32 units are privately-owned, these units have been specifically dedicated for public use.
Based on the caselaw, evidence, and arguments presented before the Court, the Court granted, in part, and denied, in part, Defendant Errol Williams' Motion for Summary Judgment. The Court determined that the 32 units used by HANO, and that serve as public housing to very low-income and extremely low-income tenants, qualify for the ad valorem tax exemption under La. Cont. [sic] art. VII, § 21(A). Filmore Parc is entitled to a refund of the amount paid under protest and attributable to the 32 units determined by this Court to be public housing, which is THIRTY-FIVE THOUSAND TWO HUNDRED EIGHTY-SEVEN DOLLARS AND TWENTY-TWO CENTS ($35, 287.22), plus interest as allowed by law. The remaining 24 units, which do not house very low-income and extremely low-income tenants and do not serve as additional inventory that HANO can use, do not qualify for the ad valorem tax exemption under La. Cont. [sic] art. VII, § 21(A).

         From this judgment, this appeal follows.

         DISCUSSION

         Assessor Williams asserts the district court erred in granting in part Filmore II's cross-motion for summary judgment and denying in part his motion for summary judgment by finding Filmore II was entitled to partial exemption from ad valorem taxation under La. Const. art. VII, §21(A). Alternatively, Assessor Williams contends that the district court erred in finding the land on which Filmore Parc Apartments II is built qualifies for a partial exemption from ad valorem taxation under La. Const. art. VII, 21(A).[13]

         "A motion for summary judgment is a procedural device used when there is no genuine issue of material fact for all or part of the relief prayed for by the litigant." Tate v. Touro Infirmary, 17-0714, p. 1 (La.App. 4 Cir. 2/21/18), ___So.3d___, ___, writ denied, 18-0558 (La. 6/15/18), 245 So.3d 1027 (citing La. C.C.P. art. 966(A)(1)).[14] Generally, the burden of proof rests with the mover. La. C.C.P. art. 966(D)(1). An appellate court's standard of review for a grant of a summary judgment is de novo, and it employs the same criteria district courts consider when determining if a summary judgment is proper. Madere v. Collins, 17-0723, p. 6 (La.App. 4 Cir. 3/28/18), 241 So.3d 1143, 1147 (citing Kennedy v. Sheriff of E. Baton Rouge, 05-1418, p. 25 (La. 7/10/06), 935 So.2d 669, 686). In Chanthasalo v. Deshotel, 17-0521, p. 5 (La.App. 4 Cir. 12/27/17), 234 So.3d 1103, 1107 (quoting Ducote v. Boleware, 15-0764, p. 6 (La.App. 4 Cir. 2/17/16), 216 So.3d 934, 939, writ denied, 16-0636 (La. 5/20/16), 191 So.3d 1071), this Court explained:

This [de novo] standard of review requires the appellate court to look at the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, to determine if they show that no genuine issue as to a material fact exists, and that the mover is entitled to judgment as a matter of law. A fact is material when its existence or nonexistence may be essential to the plaintiff's cause of action under the applicable theory of recovery; a fact is material if it potentially insures or precludes recovery, affects a litigant's ultimate success, or determines the outcome of the legal dispute. A genuine issue is one as to which reasonable persons could disagree; if reasonable persons could reach only one conclusion, no need for trial on that issue exists and summary judgment is appropriate. To affirm a summary judgment, we must find reasonable minds would inevitably conclude that the mover is entitled to judgment as a matter of the applicable law on the facts before the court.
La. Const. art. VII, § 21, provides in pertinent part:[15]
[T]he following property and no other shall be exempt from ad valorem taxation:
(A) Public lands and other public property used for public purposes.

         This Court, in Gulf Coast Hous. P'ship, Inc. v. Bureau of Treasury of City of New Orleans, 13-0556, p. 12 (La.App. 4 Cir. 11/27/13), 129 So.3d 817, 824 (citation omitted), explained that when interpreting a constitutional provision that "the starting point is the language of the constitutional [sic] itself." Moreover, "exemptions from taxation are strictly construed against the taxpayer claiming the benefit thereof and must be clearly, ...


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