ATTORNEYS FOR APPELLANTS
John R. Price
Bruce A. Stuard
ATTORNEYS FOR APPELLEES
Joseph R. Morris
Gary J. Dankert
SUPREME COURT OF INDIANA
MARSHALL COUNTY TAX )
AWARENESS COMMITTEE, )
DAVID A. and NORMA JEAN GOOD, )
DOROTHY STARR, DENNIS LARGE, )
ROBERT CLARK and MICHAEL )
) Indiana Supreme Court
Appellants (Plaintiffs Below), ) Cause No. 50S05-0212-CV-636
v. ) Indiana Court of Appeals
) Cause No. 50A05-0211-CV-567
JAN ALLEN QUIVEY, Marshall )
County Auditor and PLYMOUTH )
COMMUNITY SCHOOL )
Appellees (Defendants Below). )
APPEAL FROM THE MARSHALL CIRCUIT COURT
The Honorable Duane G. Huffer, Special Judge
Cause No. 50C01-0207-PL-17
ON PETITION FOR TRANSFER
December 26, 2002
This case involves a public lawsuit to enjoin a school corporation from issuing
bonds to pay for building improvements. The trial court concluded that the
plaintiffs in this case presented no substantial issues and ordered them to post
a $1,000,000 bond or have their case dismissed. The plaintiffs appealed that
decision to the Court of Appeals, but before the Court of Appeals heard
the merits of the case this Court granted the school corporations petition to
transfer pursuant to Appellate Procedure Rule 56. We hold that the trial
court abused its discretion when it found the plaintiffs had not presented a
substantial issue. We vacate the trial courts order requiring a bond and
remand this cause for further proceedings.
Factual and Procedural Background
The Plymouth Community School Corporation intends to pay for building improvements by issuing
bonds in an amount in excess of $25,000,000. The Corporation published notice
of its plan on February 8, 2002.
Pursuant to Indiana Code sections 6-1.1-20-3.1 and -3.2, a group of citizens calling
itself the Tax Awareness Committee initiated a petition and remonstrance process to block
the project. Signatures of real property owners in the district, both for
and against the schools plan, were collected and filed with the County Auditor.
Under section 6-1.1-20-3.2, certain requirements must be met in the collecting of
signatures, including: (1) the carriers (those collecting the signatures) and signers of petitions
must themselves be owners of real property within the school district; (2) the
carrier must be a signatory on at least one petition; and (3) after
the signatures have been collected, the carrier must swear or affirm before a
notary public that the carrier witnessed each signature.
After the signatures have been verified and filed, it is the Auditors responsibility
to certify the number of valid signatures. If the number of valid
signatures opposing a plan is greater than those in favor, then the bonds
petitioned for may not be issued or the lease petitioned for may not
be entered into. Ind. Code § 6-1.1-20-3.2(6) (1998).
Before either side began collecting signatures, the Auditor and representatives of both the
Tax Awareness Committee and the school met to discuss ground rules for the
process. The product of that meeting was a Memorandum of Understanding signed
by all three parties. That document set forth the Auditors understanding concerning
the Petition and Remonstrance process and included a provision that persons signing for
entities that are property owners should include their titles, e.g., Mary Doe, President.
After the signatures were collected, the Auditor validated 2,665 of the 3,114 signatures
supporting the project, and 2,578 of the 3,151 opposing. Therefore, by the
Auditors calculation, those favoring the plan collected 87 more valid signatures than its
opponents were able to assemble.
After the Auditor certified the results, the Tax Awareness Committee filed a public
lawsuitSee footnote seeking to enjoin the school from moving ahead with its plan.
The complaint alleged, inter alia, that the Auditor improperly invalidated signatures that would
have carried the day for the opponents.See footnote Pursuant to Indiana Code section
34-13-5-7, the school demanded an interlocutory hearing, in which the issue is whether
the plaintiffs claims present a substantial issue.See footnote If not, the trial court
may order that the cause be dismissed unless the plaintiff posts a bond.
The requirement to post a bond in public lawsuits is meant to
deter harassing litigation that can delay legitimate public improvement projects where the mere
passage of time can have significant consequences.
Pepinsky v. Monroe County Council,
461 N.E.2d 128, 131 (Ind. 1984). Thus, when a bond is set,
it is to be in an amount found by the judge to cover
all damage and costs that may accrue to the defendants by reason of
the pendency of the public lawsuit in the event the defendant prevails.
Ind. Code § 34-13-5-7(b). The trial court in this case conducted an
extensive interlocutory hearing, which included fourteen live witnesses and forty-nine exhibits.
The principal issue on appeal, and a focus of the hearing, is whether
the Auditor properly excluded signatures on remonstrances carried and verified by David Good.
Good, a member of the Tax Awareness Committee, was a carrier of
six remonstrance petitions and collected 129 signatures.
See footnote In 1995, Good and his
wife, Norma Jean, transferred their home in Plymouth, Indiana to a revocable living
trust. They are the settlors, trustees, and beneficiaries of the trust.
The tax rolls show the owners of the property as Good, David A.
and Norma Jean Good, co-trustees of the David A. Good and Norma Jean
Good Rev Living Trust. However, when Good signed the verification form as
a carrier of the petitions, he did not indicate that he was signing
as a trustee. Based on the provision in the Memorandum of Understanding
that trustees should sign petitions in their official capacity, the Auditor invalidated Goods
signatures as a carrier of the petitions. Having determined that Goods signature
as a carrier was invalid, the Auditor also invalidated all 129 of the
signatures Good collected.
The trial court issued an order after the interlocutory hearing finding, inter alia:
(1) when Good signed as a carrier, he did not indicate that he
owned property only as trustee; (2) this omission was despite the Memorandum of
Understanding and despite his instruction from the chairman of the Tax Awareness Committee
that he should sign as Trustee; and (3) the Auditor properly excluded the
signatures Good collected because of his failure to show ownership status by omitting
his designation as trustee. After addressing and dismissing the other issues raised
by the plaintiffs, the court ultimately concluded that the plaintiffs suit did not
raise a substantial question and ordered the plaintiffs to post a $1,000,000 bond
or have their case dismissed.
The plaintiffs appealed the trial courts order to post bond. Although Indiana
Code section 34-13-5-7(d) directs that appeal of an order to post or deny
bond is to be taken to this Court, the plaintiffs filed their appeal
in the Court of Appeals. This is consistent with this Courts holding
Sekerez v. Bd. of Sanitary Commrs, 261 Ind. 398, 399-400, 304 N.E.2d
533, 533-34 (1973), that our Rules of Procedure, not the Indiana Code, govern
which cases this Court hears on direct appeal. Pursuant to Appellate Procedure
Rule 5(B), appeals from interlocutory orders are appealable to the Court of Appeals.
Citing the potential expense from protracted litigation, the school filed a motion in
the Court of Appeals requesting an appeal bond from the plaintiffs pursuant to
the Indiana Rules of Appellate Procedure and the Public Lawsuit Statute [Indiana Code
section 34-13-5-7(d)(2)]. On the same day, the school also filed a motion
in this Court requesting that we assume jurisdiction over the appeal pursuant to
Appellate Procedure Rule 56. That rule provides for transfer to this Court,
and the bypass of Court of Appeals review, upon a showing that the
appeal involves a substantial question of law of great public importance and that
an emergency exists requiring speedy determination. The school argued that this case
met those criteria because the school is unable to sell bonds and proceed
with the project as long as litigation is pending. In addition, as
the school argued to the trial court, [i]f bonds are not sold before
the end of the year the tax control board does not permit the
School to impose a tax levy for the year 2003. On December
5, we granted the schools motion for transfer.
The plaintiffs argue that the trial court abused its discretion in requiring them
to post a bond. In the course of this argument, the plaintiffs
present six issues, which we consolidate into four: (1) whether the trial court
erred when it concluded as a matter of law that David Good had
to identify his capacity as a trustee in signing as a carrier; (2)
whether all signatures on a petition are disqualified if the signature of the
carrier is invalid; (3) whether Indiana Code section 6-1.1-20-3.2 violates the Equal Protection
Clause of the Fourteenth Amendment to the United States Constitution; and (4) whether
the Auditors method of determining which signatures were valid violated the Equal Protection
and Due Process Clauses of the Fourteenth Amendment, the First Amendment, and Article
I, Section 23 of the Indiana Constitution. Because the plaintiffs satisfy their
burden of demonstrating a substantial issue concerning the signatures Good collected, we address
only that issue.
I. Validity of David Goods Signature as a Carrier
When a petition and remonstrance process is undertaken, the State Board of Accounts
is responsible for delivering to the County Auditor both petition and remonstrance forms,
and instructions for the collection of signatures. Ind. Code § 6-1.1-20-3.2(3).
By law, those instructions must include the requirements that:
(A) the carrier and signers must be owners of real property;
(B) the carrier must be a signatory on at least one (1) petition;
(C) after the signatures have been collected, the carrier must swear or affirm
before a notary public that the carrier witnessed each signature.
Id. The instruction sheets furnished to the Auditor by the Board of
Accounts included additional requirements governing who may sign, and in what form those
signatures should be made, but had no specific instruction dealing with signatures by
individuals signing on behalf of trusts or other legal entities.
II. Appeal Bond
There seems to be no question that Good is the beneficial owner of
real property located in the school corporation, and as trustee is also a
record owner. David Good is co-trustee of the David A. Good and
Norma Jean Good Revocable Living Trust, and as such has legal title to
the trusts real property, which is located within the relevant school district.
The Auditors records indicated as much. However, Good did not indicate he
was the owner of property as trustee, prompting the Auditor to disqualify his
signature and the signatures he collected.
We think it was clear enough who Good was and that, as trustee
of a revocable trust created by himself and his wife, he was an
owner of property within the district. The school argues that the disqualification
was proper under Paragraph 11 of the Memorandum of Understanding that was agreed
to by the Auditor, the school, and the Tax Awareness Committee prior to
the gathering of signatures. The plaintiffs point out that Paragraph 11 uses
the phrase should sign rather than shall sign or must sign. We
agree that to the extent the Memorandum purports to impose an inflexible requirement
that the capacity of a trustee be shown on the face of the
signature, it conflicts with Indiana Code section 6-1.1-20-3.2. That section states that
the verification of petitions and remonstrances must be done in the manner prescribed
by the state board of accounts. Ind. Code § 6-1.1-20-3.2(4). This
statute does not permit County Auditors to add their own requirements for the
verification procedure. Although the Memorandum of Understanding may have indicated that trustees
should sign in their official capacity, there is no such explicit requirement in
section 6-1.1-20-3.2, and there was no such requirement on the instruction forms provided
by the State Board of Accounts. The only rule in the instructions
having to do with the content of the signatures stated:
7. All names should be written and printed neatly, and as they appear
on the tax records in the Auditors office as nearly as possible.
By stating that the names should be written as nearly as possible as
they appear on the actual tax records, this instruction requires only substantial, not
exact, conformity with those records. Arguably the name is only David Good,
even if his title is trustee. In any event, we think the
Board of Accounts intended to allow imperfect identification so long as the signer
can be readily identified in the Auditors records as an owner of real
property in the district. The Auditor testified that he had no difficulty
identifying the signer David Good as the David Good listed in his records
as an owner of real property as co-trustee of the David A. Good
and Norma Jean Good Revocable Living Trust. Nor did he have any
doubt as to who the carrier was. The signatures on the remonstrance
forms Good carried should not have been excluded.
To be sure, procedures are often necessary to the conduct of an orderly
election or petition. But in a democracy we strongly favor permitting citizens
to exercise their franchise. We sympathize with the school, which has undoubtedly
expended significant effort and engaged in exhaustive analysis of its needs before undertaking
this bond issue. Nevertheless, Indiana law permits a majority of signatures to
defeat a proposal and the plaintiffs here present a substantial issue that they
have done that. Signatures that do not violate any statutory or Board
of Accounts directive should be counted if it is clear who the property
owner is and that the person signing for that property is authorized to
do so. Goods signature on behalf of his trust met those criteria.
The Memorandums provision that persons signing on behalf of entities should indicate
their titles is not sufficient to override this general principle.
As mentioned in Part I, the school filed a motion with the Court
of Appeals requesting an order that the plaintiffs file an appeal bond in
the amount of $1,000,000. Thirty minutes before this Court filed its order
granting transfer, the Court of Appeals ordered the appellants to post an appeal
bond of $1,000,000 by the close of business on Friday, December 13.
Our order stated, The appellees Verified Motion For Appeal Bond remains under advisement,
creating an apparent conflict with the Court of Appeals order.
The school contends that if the plaintiffs fail to post the appeal bond
as required by the Court of Appeals order, this Court should dismiss the
appeal. The plaintiffs respond that this Courts granting transfer necessarily vacated the
Court of Appeals order, and that they were not required to post the
appeal bond. We disagree with both.
By rule, this Courts granting transfer has the effect of vacating the Court
of Appeals opinions. Ind. App. R. 58(A). However, the Rules of
Appellate Procedure do not provide that the orders of the Court of Appeals
are also vacated. When this Court assumes jurisdiction, it takes the case
as it finds it, including any outstanding orders. Although those orders usually
relate to timing of filings, etc., the bond order is in the same
category. The plaintiffs did not post an appeal bond by the close
of business on December 13. Therefore, the plaintiffs failed to comply with
the Court of Appeals order requiring an appeal bond, and this Court could
have dismissed the plaintiffs appeal as a result.
The plaintiffs proceeded at their own risk in electing not to post a
bond or seek to set aside the order of the Court of Appeals.
We nevertheless do not dismiss the appeal. We believe that the
Court of Appeals order was contrary to the Appellate Rules. An appeal
bond is of a different character from the statutory bond that was at
issue in the interlocutory hearing. It is true that Indiana Code section
34-13-5-7(d) purports to permit an appellate court to set a bond in an
appeal from an interlocutory hearing. It appears that the bond to which
the statute refers is a bond of the sort that may be required
by the trial court, and not an appeal bond. In any event,
as we held in Sekerez, the appeal procedures outlined in section 7(d) are
trumped by our Appellate Rules. Thus the issue as to the propriety
of a bond as a condition to appeal is whether it is permitted
by Appellate Rule 18, which governs appeal bonds. That rule is specific
that an appeal is permitted without bond except to secure payment of a
money judgment. This is consistent with the granting in the Indiana Constitution
of an absolute right to appeal. Ind. Const. Art. VII, § 6.
No money judgment was awarded below. Further, the appellate bond contemplated
by section 34-13-5-7(d) seems to turn on a finding that the plaintiffs have
presented no substantial question. If we agree with the trial court on
that point, we should affirm the trial courts order requiring the posting of
a statutory bond. If we disagree, we should reverse that order.
In neither case is it appropriate to order an independent appeal bondi.e., a
bond as a condition to appeal of the trial courts finding as to
the presence vel non of a substantial question. Accordingly, we do not
dismiss this interlocutory appeal for failure to post the bond.
Because counting the signatures Good collected would put the results of this petition
and remonstrance process in doubt, we hold that plaintiffs have demonstrated a substantial
issue that eliminates the need for them to post a bond. The
plaintiffs have thus met their burden of demonstrating one substantial issue and are
entitled to go to trial on the complaint. We do not address
the remaining claims presented. We vacate the trial courts order requiring a
bond, and remand this cause for further proceedings.
SHEPARD, C.J., and DICKSON, SULLIVAN, and RUCKER, JJ., concur.
The Memorandum included the following paragraphs:
11. Corporations, limited liability companies, and trusts may sign. The authorized agent
of a corporation, limited liability company, trust, or other entity which owners [sic]
real estate within the boundaries of the school corporation may sign the Petition
or Remonstrance on behalf of the entity. Below the printed name of
the entity and after the words, By an authorized agent of the entit[y]
should sign and indicate his/ or her office or role as for example,
Mary Doe, Pres. Or John Doe, Partner.
21. This Memorandum is an attempt to clarify Indiana Code 6-1.1-20-3.2. This
Memorandum is not intended to revise, amend or modify the statute and is
not an exhaustive recitation of all its provisions. Any conflict between this
Memorandum and the statute shall be resolved in favor of the statute.
Public lawsuits are defined in part as any action in which the
validity, location, wisdom, feasibility, extent, or character of construction, financing, or leasing of
a public improvement by a municipal corporation is questioned directly or indirectly, including
but not limited to suits for declaratory judgments or injunctions to declare invalid
or to enjoin the construction, financing, or leasing. Ind. Code § 34-6-2-124.
Footnote: The complaint also alleged that certain carriers in favor of the schools
plan committed several statutory violations in the collection of signatures, that the schools
plan was a misuse of public funds, and that Marshall County citizens could
not withstand additional taxation.
Footnote: The statute provides that plaintiffs in a public lawsuit must establish facts
that would entitle the plaintiff to a temporary injunction. Ind. Code §
34-13-5-7(b). The phrase temporary injunction has been in the statute since 1967,
and predates the current Trial Rules which refer to temporary restraining order and
preliminary injunction. Ind. Trial Rule 65. This Court has held that
under this statute the plaintiffs must demonstrate that there is a substantial issue
to be tried.
Hughes v. City of Gary, 741 N.E.2d 1168, 1171
(Ind. 2001) (citing Boaz v. Bartholomew Consol. Sch. Corp., 654 N.E.2d 320, 322-23
(Ind. Tax Ct. 1995) and Johnson v. Tipton Community Sch. Corp., 253 Ind.
460, 464-65, 255 N.E.2d 92, 94 (1970)).
The plaintiffs second amended complaint alleges Good collected 129 signatures, while plaintiffs
counsel argued at the interlocutory hearing that Good collected 137 signatures. In
their brief to this Court, plaintiffs again allege that 129 signatures are at
stake. We accept that number. The critical point is whether more
than 87 were improperly invalidated.
Footnote: Appellate Procedure Rule 5(B) states: The Court of Appeals shall have jurisdiction
over appeals of interlocutory orders under Rule 14. The plaintiffs appeal was
proper under Rule 14(C), which governs statutory interlocutory appeals. Because the statutes
grant of a right to appeal is consistent with the Appellate Rules, the
right to take an interlocutory appeal conferred by section 34-13-5-7(d) is not affected
by the holding in
Sekerez that the court to which the appeal is
to be taken is the Court of Appeals.