ATTORNEYS FOR PETITIONERS: ATTORNEYS FOR RESPONDENTS:
PETER L. BENJAMIN JEFFREY A. MODISETT
Merrillville, Indiana Attorney General of Indiana Indianapolis, Indiana
GERALD M. BISHOP
GRECO PERA & BISHOP ANGELA L. MANSFIELD
Merrillville, Indiana Deputy Attorney General
BETH H. HENKEL
Deputy Attorney General
TROY MONTGOMERY, ROBERT ) CROSSK, WILLIAM SMITH, ) BERNADETTE COSTA, JOHN AGUILERA, ) LANCE RYSKAMP, LARRY BLANCHARD, ) FRANCES DUPEY, RUDOLPH CLAY, ) GERALD SCHEUB, and ) LAKE COUNTY, a political subdivision of ) the STATE OF INDIANA, individually ) and on behalf of all other property owning ) taxpayers within the jurisdictional limits of ) Lake County, Indiana,See footnote 1 ) ) Petitioners, ) ) v. ) Cause No. 45T10-9807-TA-00084 ) STATE BOARD OF TAX COMMISSIONERS, ) INDIANA FAMILY & SOCIAL SERVICES ) ADMINISTRATION, MORRIS WOODEN, ) Auditor, STATE OF INDIANA, ) JOYCE BRINKMAN, Treasurer, )
constitutionality of the HCI property tax levy.See footnote
In its order, the Court relied on the Indiana Supreme Court's decision in State Board of Tax Commissioners v. Mixmill Manufacturing Co., 702 N.E.2d 701 (Ind. 1998). On February 5, 1999, the Indiana Supreme Court issued an unpublished order modifying its opinion in Mixmill. On February 10, 1999, the respondents filed a motion asking the Court to reconsider its order in this case in light of the Indiana Supreme Court's modified opinion in Mixmill. The Court agreed to reconsider its order and, accordingly, stayed all proceedings in this case pending the Court's reconsideration of its order. On March 18, 1999, the Court heard argument on the respondents' motion.
The respondents raise two issues in their motion. First, the respondents contend that the modifications to the Mixmill case compel the conclusion that the Court is without subject matter jurisdiction to hear this case. Second, the respondents contend that the Court prematurely evaluated the merits of the case when determining whether the administrative remedies available to the petitioners were inadequate.
The Court will first deal with the respondents' contention that the Court prematurely evaluated the merits of the case. As a starting point for its analysis of this issue, the Court notes that its subject matter jurisdiction over this case is predicated upon the inadequacy of the administrative remedies available to the petitioners
because the petitioners in this case did not exhaust their administrative remedies. See
Lake County Council, 706 N.E.2d at 275. Exhaustion of administrative remedies is
generally required before a court may exercise jurisdiction over a matter conferred to
an administrative agency. See Smith v. State Lottery Comm'n, 701 N.E.2d 926, 931
(Ind. Ct. App. 1998). One exception to this general rule is where the available
administrative remedies are inadequate. See id. As a result, the Court, in its analysis
of whether it had subject matter jurisdiction was required to examine the adequacy of
the administrative remedies in this case and determine the legal issues raised by this
examination. To the extent that these legal issues involved the law governing the HCI
property tax levy, a complaint that the Court was determining the merits of the case
cannot succeed. See Perry v. Stitzer Buick GMC, Inc., 637 N.E.2d 1282, 1286-87 (Ind.
1994); cf. Coopers & Lybrand v. Livesay, 437 U.S. 463, 469, 98 S. Ct. 2454, 2458
(1978) (When court examines whether class action should be certified that
determination may involve considerations that are enmeshed in the factual and legal
issues comprising the plaintiff's cause of action.) (quoting Mercantile Nat'l Bank v.
Landeau, 371 U.S. 555, 558, 83 S. Ct. 520, 522 (1963); Retired Chicago Police Ass'n v.
City of Chicago, 7 F.3d 584, 598-99 (7th Cir. 1993) (line separating class determination
and merits is not easily discernable).
Accordingly, the respondents' complaint that the Court should not have examined whether the HCI property tax was a state tax in its evaluation of the adequacy of the administrative remedies available to the petitioners misses the point.
That the conclusion that the HCI property tax is a state tax, see Lake County Council,
706 N.E.2d at 277, can be read as being on the merits because a legal issue has
been resolved or as having some bearing on the merits of this caseSee footnote
because the fact
that the HCI property tax is a state tax may have something to do with the
constitutionality of that tax (i.e., the merits of this case) has nothing to do with whether
the Court was required to deal with this issue in order to make the threshold
determination of whether it had subject matter jurisdiction.See footnote
Cf. Barnes v. American
Tobacco Co., 161 F.3d 127, 140 (3d Cir. 1998) (where court evaluates whether class
action should be certified, court must not consider who will ultimately prevail, but still
may have to go behind pleadings in making that evaluation), petition for cert. filed, 67
U.S.L.W. 1307 (U.S. Mar. 16, 1999) (No. 98-1489). Courts must often come to factual
and legal conclusions regarding their jurisdiction over a case. See Perry, 637 N.E.2d
at 1286-87. This case is no different. In order to determine whether the Court had
subject matter jurisdiction, one of the legal issues the Court was called upon to resolve
was whether the HCI property tax levy was a state tax or a local tax. The Court did so,
and it cannot be erroneous to do what the law requires.
The respondents also contend that in its analysis of the available administrative
remedies, the Court did not take into consideration the possibility that the State could
indemnify the Lake County General Fund for any refunds of HCI property tax illegally
collected. Therefore, according to the respondents, the Court erred in its determination
that the administrative remedies available to the petitioners were inadequate. The
respondents would be correct if the State were required to indemnify the Lake County
General Fund for HCI property tax refunds. This indemnification would obviate the
Court's conclusion that the Legislature did not intend to make refunds of state taxes
payable from county general funds, see Lake County Council, 706 N.E.2d at 278, and
would remove all doubts about the adequacy of the administrative remedies in this case
because the petitioners, if ultimately successful, could receive refunds pursuant to
chapter 6-1.1-26 of the Indiana Code. However, the Court's research has disclosed
absolutely no authority for any indemnification
by the State
of county general funds for
refunds of HCI property taxes. Therefore, the possibility of the indemnification
envisioned by the respondents is, at best, speculative.
Consequently, the respondents' contention that the failure of the Court to evaluate the possibility of indemnification of county general funds by the State led the Court to erroneously conclude that the administrative remedies available to the petitioners were inadequate is without merit. There is no authority for the proposition that a court evaluating the adequacy of an administrative remedy must speculate about what the future may bring. That is precisely what the respondents ask the Court to do. The Court must decline the invitation.
The Court now turns to an analysis of whether the Indiana Supreme Court's
modification of Mixmill changes the Court's conclusion that it has subject matter
jurisdiction over this case. As the Court noted in the order, after it has been determined
that the administrative remedies are inadequate, the question is not whether immediate
judicial review is proper, but where that judicial review may be had. See Lake County
Council, 706 N.E.2d at 278-79. In its order, the Court determined that the proper place
for judicial review was in the Tax Court. Despite the Indiana Supreme Court's
modification of Mixmill, the Court's view has not changed.
It is axiomatic that [t]he tax court is a court of limited jurisdiction. Ind. Code § 33-3-5-2(a) (1998). The Tax Court's jurisdiction is restricted to cases that arise under the tax laws of this state and that [are] initial appeals of final determination[s] made by either the Department of State Revenue or the State Board. Id. The Legislature has also provided that where a taxpayer fails to comply with any statutory requirement for the initiation of an original tax appeal, the tax court does not have jurisdiction to hear the appeal. Id. § 33-3-5-11(a); see also Mixmill Mfg. Co., 702 N.E.2d at 704 (In view of the explicit language of these provisions, we can only conclude that the legislature intended to require the taxpayer to follow all statutory procedures for review before going to the Tax Court.).
In this case, the first statutory jurisdictional prerequisite is met. This case arises under the tax laws of Indiana. See Lake County Council, 706 N.E.2d at 274. However, the second statutory prerequisite is not met: there is no State Board final determination. See id. at 275. The respondents contend that this precludes the Court from exercising jurisdiction in this case whether the administrative remedies available to the petitioners
are adequate or not. In evaluating the respondents' contention, the Court must apply
the statutory provisions governing the Tax Court's jurisdiction to the facts of this case.
The cardinal rule of statutory interpretation is to ascertain and give effect to the intent of the legislature, and all other rules of statutory interpretation are subservient to that cardinal rule. See Chavis v. Patton, 683 N.E.2d 253, 259 (Ind. Ct. App. 1997); see also Collier v. Collier, 702 N.E.2d 351, 354 (Ind. 1998) (goal of court is to implement intent of Legislature). In general, the best evidence of this intent is found in the language chosen by the Legislature. See Wilson v. Pleasant, 660 N.E.2d 327, 337 (Ind. 1996); Associated Insurance Cos. v. Department of State Revenue, 655 N.E.2d 1271, 1273 (Ind. Tax Ct. 1995), review denied; see also Hyatt Corp. v. Department of State Revenue, 695 N.E.2d 1051, 1053 (Ind Tax Ct. 1998) (Legislature presumed to mean what it says), review denied; Chisom v. Roemer, 501 U.S. 380, 417, 111 S. Ct. 2354, 2376 (1991) (Scalia, J., dissenting) (following plain language of statute gives Legislature assurance that statutes will be given a predictable meaning thus giving Legislature a sure means by which it may work the people's will). However, statutory provisions must be read as a whole to ascertain legislative intent. See State Natural Resources Comm'n v. AMAX Coal Co., 638 N.E.2d 418, 429 (Ind. 1994). In addition, where the Indiana Supreme Court has determined the Legislature's intent in enacting a statutory provision, that determination is binding upon lower courts. See Mechanics Laundry & Supply, Inc. v. Department of State Revenue, 650 N.E.2d 1223, 1228 (Ind. Tax Ct. 1995).
The Indiana Supreme Court has spoken about the Legislature's intent in creating
the Tax Court. In the words of the Indiana Supreme Court, the policy underlying the
creation of the Tax Court was to consolidate tax-related litigation in one court of
expertise. Sproles, 672 N.E.2d at 1357. Pursuant to this policy, [t]he Legislature
transferred jurisdiction over tax cases from the circuit courts to the Tax Court . . . . Id.
at 1358. In light of this legislative policy, the Indiana Supreme Court concluded that
the Legislature intended that all challenges to the tax laws . . . be tried in the Tax
Court. Id. at 1357 (emphasis added). As the Indiana Supreme Court noted, this policy
choice makes a great deal of sense:
If circuit courts could invalidate listed taxes,See footnote 5 a patchwork of conflicting rulings on a tax's legality could significantly affect the revenue-collection process and the budgeting that depends on those revenues. The Legislature understandably wanted to avoid this result when it created a specialized judicial tribunal for tax disputes.See footnote 6
Id. at 1362.
In light of these strong statements by the Indiana Supreme Court concerning the Legislature's intent and policy in creating the Tax Court, it would seem that the Court may simply declare that the Legislature intended that this tax case be tried in the Tax Court and that, therefore, the Court has subject matter jurisdiction. See Sullivan v. Day, 681 N.E.2d 713, 717 (Ind. 1997) (court must determine, give effect to, and implement
intent of Legislature). However, there is one problem that must be resolved, namely,
the statutory requirement of a State Board final determination. There is none in this
The Court must therefore determine what effect the lack of a State Board final
determination has on this case.
The first possibility is that the requirement of a final determination in subsection 33-3-5-2(a) means that a taxpayer must proceed through the administrative process before resorting to the Tax Court in all cases, whether the administrative remedy is adequate or not. This would spell doom for the petitioners' appeal in this Court and would also foreclose immediate judicial review in a court of general jurisdiction. See Sproles, 672 N.E.2d at 1358 ([O]nce taxpayers are forced into the administrative paths, the only court for review . . . is the Tax Court.). However, the Court cannot read subsection 33-3-5-2(a) in such a manner. In Sproles, the Indiana Supreme Court predicated the Legislature's ability to channel tax appeals to the administrative process on the condition that the administrative remedies are in fact adequate. Id. at 1361. In this case, as the Court has found, the administrative remedies are inadequate.See footnote 8 Therefore, the petitioners cannot be forced into the administrative
process before they seek judicial review.See footnote
The second possibility is that where there is no adequate administrative remedy available to a petitioner in a tax case, only courts of general jurisdiction may adjudicate the [petitioner's] claim. Sproles, 672 N.E.2d at 1361 n.19; see also State v. Hoovler, 668 N.E.2d 1229 (Ind. 1996) (listed tax declared unconstitutional in circuit court). This possibility, however, creates some interesting results. In Sproles, the Indiana Supreme Court held the statutory scheme did not allow a taxpayer to avoid the Tax Court by bypassing the administrative process and filing suit in a court of general jurisdiction. It would therefore seem odd to find that the Legislature intended to require taxpayers to file suit in a court of general jurisdiction where the available administrative remedies are inadequate. See Sproles, 672 N.E.2d at 1358 (noting that Legislature transferred jurisdiction over tax cases from circuit courts to Tax Court).
The third possibility is that the Legislature enacted subsection 33-3-5-2(a) with its final determination requirement in order to codify the exhaustion rule applicable to
tax casesSee footnote 10 prior to the creation of the Tax Court. This would make the failure to exhaust administrative remedies a jurisdictional defect where exhaustion of administrative remedies was required, but would not make the failure to exhaust administrative remedies a jurisdictional defect where exhaustion of administrative remedies was not required.See footnote 11 In that way, all tax cases, even those where the administrative remedies could be bypassed (i.e., the rare circumstance where administrative remedies are inadequate in tax cases), would come to the Tax Court, thus giving effect to the Legislature's intent to consolidate tax-related litigation in one court of expertise. Sproles, 672 N.E.2d at 1357 (emphasis added). In addition, this reading of subsection 33-3-5-2(a) gives the broadest possible effect to the exclusivity provision of subsection 33-3-5-2(b). Once again, this would be entirely consistent with the Legislature's intent as determined in Sproles. See Associated Insurance Cos., 655 N.E.2d at 1274 (construing statutory language broadly in order to effect legislative intent); see also Stanek v. State, 603 N.E.2d 152, 153-54 (Ind. 1992) (construing statutory provision in light of legislative intent rather than explicit language); Department of State Revenue v. Estate of Hardy, 703 N.E.2d 705, 710 (Ind. Tax Ct. 1998) (eschewing strict literal meaning of statutory language where literal meaning of the language was at odds with legislative intent).
See Sproles, 672 N.E.2d at 1357. Rather, it involves the determination of what is a
reasonable time for county officials to act on a petition for review. This case, on the
other hand, involves the constitutionality of the HCI property tax levy, a type of case
specifically held to arise under the tax laws of this state. See id. Furthermore, Mixmill
did not involve a situation where the available administrative remedy was found to be
The last of these enumerated differences is the most important. Because the administrative remedy was not inadequate in Mixmill, there could be no circumvent[ion] of the administrative process. Mixmill Mfg. Co., 702 N.E.2d at 704. When viewed in this light, it is apparent that the Mixmill court was enforcing the exhaustion rule. Id. (taxpayer must get ruling from administrative agency before seeking judicial review in almost every case). In this case, however, the exhaustion of administrative remedies is not required because the available administrative remedies are inadequate. Therefore, it is difficult to see how the complaint that there is no final determination (i.e., no exhaustion) has any force in this case. Accordingly, the Court concludes that the Mixmill decision as modified does not preclude the Court from exercising jurisdiction over this case.
Another problem with adopting this interpretation of subsection 33-3-5-2(a) is that it is in conflict with a statement contained in Sproles. In Sproles, the Indiana Supreme Court stated that [w]here remedies are found to be inadequate, courts of general jurisdiction may adjudicate the claim because the Indiana Constitution creates a right to judicial review of administrative actions. Sproles, 672 N.E.2d at 1361 n.19.
If this were the only guidance in Sproles on this issue, then the Court would have no
choice but to dismiss this case. However, as outlined above, Sproles contains a great
deal of guidance with respect to the legislature's intent with respect to the creation and
jurisdiction of the Tax Court. The Sproles court's statement concerning cases where
remedies are inadequate is difficult to reconcile with the broad language concerning
the legislative intent and policy in creating the Tax Court. Because the legislature's
intent is the most important factor in statutory interpretation, see Melrose v. Capitol City
Motor Lodge, Inc., 705 N.E.2d 985, 989 (Ind. 1999), the Court will follow the Sproles
court's guidance in this area, rather than its statement about cases where remedies are
Accordingly, the Court holds that the lack of a State Board final determination is not fatal to the Court's subject matter jurisdiction over this case. This case is a tax case, and it was properly filed in the Tax Court. Therefore, the respondents' motion to dismiss must, once again, be DENIED.
County's amended complaint within sixty days of this ORDER.
IT IS SO ORDERED.
Thomas G. Fisher
Judge, Indiana Tax Court
Peter L. Benjamin
1000 East 80th Place, Suite 514 South
Gerald M. Bishop
2115 West Lincoln Hwy.
Jeffrey A. Modisett
Attorney General of Indiana
By: Angela L. Mansfield
Beth H. Henkel
Deputy Attorneys General
Indiana Government Center South, Fifth Floor
402 West Washington Street
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