95 N.E.3d 116
Ind. Ct. App.2018Background
- Hammond operated a municipal housing inspection program since 1961 and a rental-registration program (with per-unit fees) since 2001; fees reached $80 per unit before state legislation.
- Beginning in 2011 the Indiana General Assembly regulated local rental registration/inspection fees; 2014 legislation capped annual registration fees at $5 but exempted political subdivisions with a rental program created before July 1, 1984 (the "Fee Exemption").
- Hammond was initially treated as exempt for 2014 and sought to collect about $86,000 from HKP for unpaid 2014 registration fees; HKP disputed liability under the new statutory regime.
- In 2015 the Legislature amended chapter 36-1-20 to define "rental registration or inspection program" narrowly (excluding general housing programs and programs that include non-rental dwellings), which had the effect of removing Hammond from the Fee Exemption while leaving Bloomington and West Lafayette exempt.
- Hammond sued for declaratory judgment: Count I (Hammond qualified for the 2014 Fee Exemption — not appealed), Counts II–III (challenge to the 2015 definition/Fee Exemption as unconstitutional special legislation under Ind. Const. art. IV, §§ 22 and 23). Trial court upheld the statute; the Court of Appeals reversed on §§ 22 and 23 and held the Fee Exemption is not severable.
Issues
| Issue | Plaintiff's Argument (Hammond) | Defendant's Argument (HKP/State) | Held |
|---|---|---|---|
| Standing to bring constitutional challenge | Hammond suffers direct financial injury if capped at $5 and can defend its ordinance | HKP/State rely on Howard County to argue political subdivisions generally lack standing to raise Article IV claims | Hammond has standing: political subdivision has direct stake and imminent injury from lost fee revenue (Held for Hammond) |
| Whether Fee Exemption violates Art. IV § 22 (special laws relating to "fees or salaries") | Section 36-1-20-5 creates a special exemption allowing only certain municipalities to charge higher fees and thus unlawfully singles out fees | Fees clause is archaic and refers only to 19th-century officer-compensation fees; modern registration fees are not the kind of "fees" Section 22 protects | Court rejects narrow reading: the Fee Exemption concerns fees used to run local programs (special fund) and treats fees non-uniformly; § 22 violated (Held for Hammond) |
| Whether Fee Exemption violates Art. IV § 23 (laws must be general where possible) | Rental registration fees are amenable to a general law; the July 1, 1984 cut-off and the 2015 definitional change were tailored to exempt only Bloomington and West Lafayette, so the classification is not justified | Fee Exemption is permissible special legislation or a grandfathering device; Bloomington and West Lafayette have unique housing/tenant markets that justify exemption | Court finds the law is special and that the purported unique characteristics do not rationally justify exempting only those cities; § 23 violated (Held for Hammond) |
| Severability of the Fee Exemption from § 36-1-20-5 | Fee Exemption is inseparable; the Legislature would not have enacted the fee cap without the exemption | Large legislative majorities show the Legislature would have passed the bill even without the exemption | Court holds the exemption is not severable; because the Legislature would not have omitted it, the entire § 36-1-20-5 must be stricken (Held for Hammond) |
Key Cases Cited
- Bd. of Comm’rs of Howard Cty. v. Kokomo City Plan Comm’n, 330 N.E.2d 92 (Ind. 1975) (court explained limits on a political subdivision's ability to assert claims absent a direct injury)
- Ind. Dep’t of Natural Res. v. Newton Cnty., 802 N.E.2d 430 (Ind. 2004) (county has standing to defend validity of its ordinances when directly affected)
- Buncich v. State, 51 N.E.3d 136 (Ind. 2016) (upheld special legislation for Lake County where objectively distinctive local conditions justified differential treatment)
- State v. Lake Superior Court, 820 N.E.2d 1240 (Ind. 2005) (special laws addressing county-specific tax/assessment matters struck as violating Article IV limits)
- Alpha Psi Chapter of Pi Kappa Phi Fraternity v. Auditor of Monroe Cty., 849 N.E.2d 1131 (Ind. 2006) (struck special retroactive tax-exemption relief where uniqueness asserted did not justify special law)
- Hoovler v. State, 668 N.E.2d 1229 (Ind. 1996) (discussed historical understanding of "fees" in constitutional interpretation)