ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
G. MICHAEL SCHOPMEYER and JEFFREY A. MODISETT
MARTHA J. POSEY ATTORNEY GENERAL OF INDIANA
KAHN, DEES, DONOVAN & KAHN
Evansville, IN ANGELA L. MANSFIELD
DEPUTY ATTORNEY GENERAL
NORTH PARK CINEMAS, INC., ) ) Petitioner, ) ) v. ) Case No. 82T10-9609-TA-00106 ) STATE BOARD OF TAX COMMISSIONERS, ) ) Respondent. ) ______________________________________________________________________________December 5, 1997 FOR PUBLICATION
ON APPEAL FROM THE STATE BOARD OF TAX COMMISSIONERS ___________________________________________________________________________
area. She presented no documentary evidence and did not disclose whether other theaters had
been given obsolescence depreciation adjustments.
Mr. Steve Folz (Folz), a deputy assessor for Knight Township, testified at the hearing that he "worked [at the theater] for four years." (Pet'r Ex. 2). Folz also testified that "they're aware of that they're not going to get much business on the weekdays. . . . They know that when they go into business." Id.
The hearing officer contacted North Park's owner, toured and inspected the theater, and later mailed him a copy of her proposed recommendation. The hearing officer gave North Park ten additional days to make a statement or provide evidence in support of its position. It did not. The hearing officer forwarded her recommendations to the State Board. On July 26, 1996, four years later, the State Board issued its final determination stating that the obsolescence depreciation adjustment was unjustified and therefore removed. On September 6, 1996, North Park filed this original tax appeal. A trial was held before this Court on June 20, 1997. Additional facts will be supplied as necessary.
Before addressing the arguments made by North Park, the Court will resolve a preliminary
evidentiary question. At trial, North Park offered into evidence the property record cards of other
theaters in the Evansville area. The State Board objected to the admission of this evidence
because it was not offered at the State Board hearing. See State Bd. of Tax Comm'rs v. Gatling
Gun Club, Inc., 420 N.E.2d 1324 (Ind. Ct. App. 1981) (holding that only exhibits offered before
the State Board may be offered before the reviewing court). This Court accepted the evidence
subject to a post-trial ruling on its admissibility.
Tax Court proceedings are governed by the law in effect prior to the creation of the Court with respect to evidence that it may consider in its final review of State Board determinations. See Ind. Code Ann. § 33-3-5-14 (West 1996). The law in effect prior to this Court's creation was clear. A reviewing court must "go no further than to examine the propriety of the agency's facts as the agency found them." Gatling Gun, 420 N.E.2d at 1328. In addition, other than the hearing officer, "only those witnesses who testified at the board's hearing may testify at the judicial review hearing, and they may testify only to those facts to which they testified at the board's hearing." Id. "Similarly, only those exhibits introduced at the board's hearing may be introduced on judicial review." Id. (emphasis added). Armed with Gatling Gun, the State Board objected to the proposed admission of the property record cards at trial because they were not introduced before the State Board.
North Park attempts to defeat the State Board's objection by arguing that the property record cards are probative of a violation of Article X, Section 1 of the Indiana Constitution and are therefore admissible even though not introduced before the State Board. (Pet'r Post-Trial Br. at 6); (Tr. at 29). North Park argues that the State Board's denial of its obsolescence
depreciation adjustment does not result in a uniform and equal rate of assessment because other
theaters in Vanderburgh County receive as much as a 65% adjustment. Further, North Park
argues that the State Board does not posses either the authority or the ability to decide
constitutional issues and, therefore, presentation of the property record cards before the State
Board would be pointless.
One of the underlying rationales of Gatling Gun is that this Court "would intrud[e] upon the discretionary authority of the [State Board]" if it considered evidence not presented to the State Board. American Juice Co. v. State Bd. of Tax Comm'rs, 527 N.E.2d 1169, 1170 (Ind. Tax Ct. 1988) (quoting Gatling Gun, 420 N.E.2d at 1328). However, in instances where the character of the question presented is beyond the competency, expertise, or authority of the particular agency, this rationale has little force. Cf. Bielski v. Zorn, 627 N.E.2d 880, 887 (Ind. Tax Ct. 1994) (no need to present claim at administrative level when question is beyond agency's competence, expertise, or authority).
North Park's argument is based on the theory that the State Board's action's violate the uniform and equal clause of the Indiana Constitution. The State Board is statutorily required to ensure uniformity and equality in assessments. See Ind. Code Ann. §§ 6-1.1-2-2, 35-1 (West 1989); see also Bielski, 627 N.E.2d at 885; State Bd. of Tax Comm'rs v. McDaniel, 199 Ind. 708, 716, 160 N.E. 347 (1928) ("It will not be doubted that the State Board of Tax Commissioners is a creature of the people through legislative enactment as an administrative agent to aid in the gaining for the whole people a uniform and equal rate of assessment and taxation."). The character of this constitutional question is therefore not beyond the State Board's competency, expertise, or authority to decide. A challenge based on a lack of uniformity and
equality of assessment, as well as any supporting evidence, should have been presented to the
State Board. It was not. Consequently, this Court will not allow the property record cards into
North Park also argues that the exhibits are "not being entered for the purpose of new evidence as proscribed under Gatling Gun. These exhibits are being entered to establish that the State Board was arbitrary and capricious in [its] overturning of the Vanderburgh County Board." (Tr. at 9). This argument misses the mark. The review of agency decisions to ensure they are not arbitrary and capricious involves a review of only those facts presented before the agency. Gatling Gun, 420 N.E.2d at 1328-29. "If evidence not presented to the board were admissible on judicial review, the court sitting in review would have to weigh the evidence and draw its own conclusions thereon. The court would then be intruding upon the discretionary authority of the board." Id. North Park's attempt to introduce the property record cards before this Court is exactly the type of conduct that Gatling Gun is designed to prohibit. The State Board's objection to the introduction of the property record cards is SUSTAINED.
by proving that the State Board's actions were unsupported by substantial evidence and arbitrary
and capricious. Finally, North Park argues that the removal of the obsolescence depreciation
adjustment results in a violation of the Indiana Constitution's uniformity and equality requirement.
See Ind. Const. art. X, § 1(a).
evidence and makes a recommendation to the State Board based on an application of rules and
statutes to that evidence.See footnote
This function does not change regardless of how the case comes before
the State Board. A rule establishing an evidentiary burden of proof before the hearing officer
would have little practical effect. Even if a particular party bears the burden of proof, the hearing
officer could, in effect, satisfy the burden on behalf of that party through a thorough investigation.
However, a hearing officer does not have an affirmative duty to make a case on behalf of a party. A party who stands to be adversely affected by a petition for review has an obvious responsibility to appear before the State Board and present evidence and argument in support of its position. This should be done, if for no other reason, to preserve the ability to present evidence to this Court on appeal. See Gatling Gun, 420 N.E.2d 1324. This Court will not fabricate a rule placing the burden on Musgrave simply to save North Park from its failure to present evidence before the State Board.
Even if there were a rule allocating the burden of proof to Musgrave, this Court would still review a final determination of the State Board to determine whether it is unsupported by substantial evidence, is arbitrary or capricious, constitutes an abuse of discretion, or exceeds statutory authority. Bender, 676 N.E.2d at 1113-14. The standard of review has been satisfied in this case. North Park received sufficient notice of the State Board hearing. See Ind. Code Ann. § 6-1.1-15-4(a) (West Supp. 1997). Musgrave appeared and presented an argument. Folz's testimony supported her argument. Joest, the deputy county assessor, presented some argument on North Park's behalf. The hearing officer investigated the property and discussed her findings
with North Park's owner. In addition, the hearing officer allowed North Park an opportunity to
supply further evidence in support of its position. North Park had ample opportunity to present
evidence to the hearing officer. There is sufficient evidence and process here to satisfy this
Court's standard of review. Holding that Musgrave or North Park bore the burden of proof
would not change this result.
The Court appreciates North Park's concern that it has been forced to defend an assessment, with which it agreed, because of the actions of a third party. However, there are protections for taxpayers when a member of the BOR appeals to the State Board. First, any final determination by the State Board that is not supported by substantial evidence or is arbitrary and capricious will be overturned if appealed to this Court. Further, the statutory right of a BOR member to appeal comes with responsibility. Cf. Williams Indus. v. State Bd. of Tax Comm'rs, 648 N.E.2d 713 (Ind. Tax Ct. 1995) (holding that taxpayer's right to challenge property's valuation is attached to certain responsibilities). The language of section 6-1.1-15-3(b) allows a BOR member the right to petition for review of an assessment he has made, on which he has passed, or an assessment made over his protest. The section is designed to be used in good faith. A BOR member petitioning the State Board must make a good faith showing that there is a proper reason for making the petition. This Court is confident that the State Board would summarily affirm the BOR were an appeal brought by one member for no purpose but to harass the taxpayer. If the State Board did not do so, this Court would. Musgrave gave a proper reason for petitioning for review. She did not believe the regulations allowed North Park an obsolescence depreciation reduction. The hearing officer properly investigated her claims and determined that she was correct. This Court will not alter the State Board's final determination
based on an argument that Musgrave was required to prove that North Park was not entitled to
the obsolescence depreciation reduction.
Assessor at the time. Mr. Angermeier told North Park that it would be "represented" by the
Deputy County Assessor, Joest.See footnote
Joest appeared "on behalf of North Park." (Pet'r Br. at 5).
Joest presented evidence to the hearing officer that an obsolescence depreciation reduction was
given due to the fact that the theater was "seasonal." In short, at certain times of the day, week,
and year, business was not as good as it was at other times. Joest also stated that other
businesses in the area received obsolescence depreciation reductions due to the seasonal nature of
their businesses. After this testimony, the hearing officer, accompanied by the owner, visited the
theater and toured the facility. The hearing officer mailed North Park's owner her proposed
findings denying North Park an obsolescence depreciation reduction. The hearing officer gave
North Park ten days to provide additional evidence regarding obsolescence. North Park did
After the hearing officer's proposed findings were presented to the State Board, four years passed without a final determination. North Park made no effort to appeal to this Court. See Ind. Code Ann. § 6-1.1-15-4(e) (West Supp. 1997). After the State Board issued its final determination, North Park appealed to this Court and offered into evidence the property record cards of other theaters in the area. As noted above, this evidence is not admissible before this Court based on Gatling Gun. There is simply no evidence presented by North Park to show that the final determination of the State Board was incorrect. In light of the hearing officer's investigation, and the lack of substantive evidence presented by North Park before the State
Board, this Court cannot find that North Park has demonstrated that the final determination of the
State Board is arbitrary, capricious, or unsupported by substantial evidence.
Bd. of Tax Comm'rs, 639 N.E.2d 1068, 1075 (Ind. Tax Ct. 1994); see also Harrington v. State
Bd. of Tax Comm'rs, 525 N.E.2d 360, 362 (Ind. Tax Ct. 1988) (State Board must consider
evidentiary value of assessment of like property even though State Board did not review
assessment of that property).
The State Board is required to compare similar properties when
such evidence is proffered by a taxpayer seeking review of his assessment.
Bielski, 627 N.E.2d at
885 (emphasis added). The State Board cannot discharge its duty to assess similar properties
consistently without considering evidence proffered by the taxpayer that similar properties were
None of this should be read to relieve the taxpayer of its duty to bring forth evidence to the State Board showing that similar properties have been treated inconsistently. As this Court stated in Western Select, "the taxpayer. . . must present some evidence of probative value to support its claim that its property has been assessed inconsistently with similar properties." Western Select, 639 N.E.2d at 1075 (emphasis added). Given this Court's standard of review and Gatling Gun, a taxpayer who does not present evidence of similar properties assessed differently cannot complain to this Court that the State Board failed to consider similar properties. It is not the duty of the State Board to make the taxpayer's case. North Park did not present evidence of similar properties. (Instead, Joest merely asserted an unsupported claim that other theaters were assessed differently.) This Court will not hold that the State Board failed in its duty to ensure uniform and equal assessments.
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