A lawsuit against the city of Hammond brought by a group of corporate property landlords has been reinstated after the Court of Appeals of Indiana found the Lake Superior Court erred when it ruled their tort claims were filed in an untimely manner.
Drawing on the Indiana Supreme Court’s opinion in City of Hammond v. Herman & Kittle Props., Inc., 119 N.E.3d 70, 74-75 (Ind. 2019), the Court of Appeals wrote that to protect the public health, safety and general welfare of the city, the city of Hammond created two programs: an inspection program and a rental-registration program. Both programs charge fees for rental units.
The inspection program, created in 1961, authorized city officials to inspect all dwelling units, both owner-occupied and rented, and it specifically required a $5 annual inspection fee for hotels and rooming houses.
In 2001, Hammond created its rental-registration program. That program required owners of rental housing to register their units with the city and to pay a per-unit $5 annual registration fee. The city then increased the fee twice over the next 10 years, first to $10 in 2004 and then to $80 in 2010.
The eight-fold increase was the city’s response to the 2010 state constitutional amendment placing caps on property taxes, including a 2% cap on rental properties. That amendment led to substantial savings for landlords but also significantly strained many municipal budgets — especially for municipalities like Hammond, whose tax bases were shrinking.
Legislative activity eventually culminated in the 2015 version of Indiana Code § 36-1-20-5. Two provisions of that statute operate in concert to restrict all municipalities from charging more than a $5 rental-registration fee, except for the cities of Bloomington and West Lafayette.
In response to the 2015 amendments, Hammond argued the fee exemption was unconstitutional special legislation. The city further argued that the fee exemption and the fee restriction were not severable and, thus, striking down the fee exemption also required striking down the fee restriction.
In 2019, the Indiana Supreme Court agreed that the 2015 amendment to the fee exemption was unconstitutional special legislation. However, the court held that the fee exemption was severable from the remainder of the law, which meant the $5 fee restriction now operated statewide.
The group of landlords filed their proposed class action complaint in December 2016, which they amended following the Supreme Court’s opinion in Herman & Kittle. The landlords attached their Indiana Tort Claims Act-required notices to Hammond, which included each landlord’s completion of its required 2015 rental registration form.
The city moved to dismiss the landlords’ complaint under Indiana Trial Rule 12(B)(6). In its motion, the city asserted the landlords’ demand for refunds of the alleged 2015 overpayments must “fail because [the Landlords] did not provide timely notice [to the City] under the ITCA.”
In particular, the city argued the landlords knew that they owed the fees on Jan. 1 and, thus, that the Aug. 5, 2015, filing of the notices, 216 days later, was untimely under the ITCA’s 180-day filing requirement. After a hearing, the trial court granted the city’s motion and dismissed the landlords’ complaint.
On appeal, the COA sided with the landlords and reversed.
The appellate court wrote that Hammond erroneously relied on a footnote in Irwin Mortg. Corp. v. Marion Cnty. Treasurer, 816 N.E.2d 439, 446 (Ind. Ct. App. 2004).
“First, our ITCA-related holdings in Irwin Mortgage were with respect to whether the ITCA applied to a claim for a refund from a local government assessment and with respect to whether the facts of that case demonstrated substantial compliance with the ITCA’s notice requirements. The footnote relied on by the City was not relevant to those holdings and is dicta,” Judge Paul Mathias wrote for the unanimous appellate panel.
“Second, and critically, contrary to the City’s reading, the Irwin Mortgage footnote says nothing about ascertainment of future damages. That is, we did not say that the statutory penalty had not yet been sustained by the agent,” Mathias continued. “Indeed, the plain text of the statutory language provided for the penalty to be ‘added to the unpaid portion’ of the taxes that were already due and owing when the penalty was incurred. … Thus, the late penalty at issue in Irwin Mortgage was an alleged injury that had already been sustained by the time the agent learned that ‘it would be responsible’ for the penalty on May 16.”
Mathias wrote that not only is the city’s argument unsupported by caselaw, it’s also unsupported by the purposes of the ITCA, pointing to Schoettmer v. Wright, 992 N.E.2d 702, 706 (Ind. 2013).
“The City’s reading, however, would turn the 180-day requirement into an opportunity for gamesmanship in that it ‘would permit government bodies to immunize themselves from tort claims’ by simply saying on some arbitrary date that an assessment will be due at some future time, thereby starting the ITCA’s 180-day clock and turning that requirement into a trap for the unwary,” the court opined. “… The Landlords did not sustain any damage until March 9, 2015, when they paid the City’s registration fees. They filed their notices with the City within 180 days of those payments.
“Therefore, the trial court erred when it dismissed their complaint as untimely under the ITCA. We reverse the trial court’s judgment and remand for further proceedings,” Mathias concluded in 6232 Harrison Ave. LLC, 4734 Johnson Ave. LLC, 1523 175th St LLC, 4411 Baltimore Ave LLC, 4840 Oak Ave LLC, 6629 McCook Ave LLC, and 6845 Colorado Ave LLC v. City of Hammond, Indiana, 21A-PL-499.