Foursquare Tabernacle Church of God in Christ v. State Bd. of Tax Com'rs

• Decision Date: 20 February 1990
• Docket Number: No. 49T05-8904-TA-00009,49T05-8904-TA-00009
• Citation: 550 N.E.2d 850
• Court: Indiana Tax Court
• Parties: FOURSQUARE TABERNACLE CHURCH OF GOD IN CHRIST, Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.

Page 850

550 N.E.2d 850

FOURSQUARE TABERNACLE CHURCH OF GOD IN CHRIST, Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.

No. 49T05-8904-TA-00009.

Tax Court of Indiana.

Feb. 20, 1990.

Karl W. Kindig, B. Keith Shake, Henderson Daily Withrow & Devoe, Indianapolis, for petitioner.

Linley E. Pearson, Atty. Gen. by James R. Green, Deputy Atty. Gen., Indianapolis, for respondent.

FISHER, Judge.

Foursquare Tabernacle Church of God in Christ (the Church) brings its original tax appeal from a final determination of the State Board of Tax Commissioners. The Church has moved for summary judgment.

FACTS

For each of the years, 1982 through and including 1987, the Church filed applications for exemptions with respect to parcels of real estate and certain improvements thereon, owned by the Church in Marion County. The Church purchased this property, parcel by parcel, over a period of years. The Church has maintained that it will continue to purchase additional parcels of property until it can, one day, build a world class tabernacle on the property.

To this date, the parcels of property have not been used for any purpose by the Church and the property has not produced any income. Individuals living in houses on the property were allowed to remain until they could find alternative housing. The Church has since boarded up the houses and has left them standing unused.

The Church claimed exemptions for the property pursuant to IC 6-1.1-10-16(d). The Board denied the exemptions because the Church failed to prove that the property was purchased for the purposes of IC 6-1.1-10-16(d).

The Church has had a congregation of approximately thirty-five active members since 1982. The Church has brought in approximately $10,000 per year in income, which has been just enough to meet its expenses. The Church has not designated any savings fund for the intended construction of the world class tabernacle, which is expected to cost up to $5,000,000. The minister of the Church believes that the Church will one day be able to afford such a major project.

In order to build the proposed facility, the Church must acquire additional properties not yet owned by the Church. These properties are necessary to accommodate the proposed project, yet they may never be available. There is no proper zoning in effect and no steps have been taken to obtain proper zoning. The only steps taken by the Church to plan the construction of the proposed project occurred in 1984, when the Church contacted Myler Church Building Systems, which merely sent some standard information to the Church. The Church has not made any further contact with this company or any other company regarding construction of the tabernacle. Additional facts will be provided as necessary.

ISSUES

This case presents three issues:

I. Whether claim preclusion (res judicata) applies to the case at bar.

II. Whether issue preclusion (collateral estoppel) applies to the case at bar.

III. Whether the Church qualifies for an exemption under IC 6-1.1-10-16(d).

DISCUSSION AND DECISION

The first and second issues, aforementioned, arise from a judgment by default which was rendered against the Board and in favor of the Church by the Marion Superior Court on September 27, 1984. This prior case (Cause No. S283-1630) involved the same parcels of real estate for 1982, the same issues, and the same facts as the case at bar. No appeal was taken. The Church contends that the Board is barred and precluded by principles of res judicata and collateral estoppel from denying the exemptions.

I.

The Church asserts that the elements of claim preclusion are present in the case at bar. There are four elements of claim preclusion (res judicata):

(1) the former judgment must have been rendered by a court of competent jurisdiction; (2) the matter now in issue was, or might have been, determined in the former suit; (3) the particular controversy adjudicated in the former action must have been between the parties to the present suit; and (4) judgment in the former suit must have been rendered on the merits. State Exchange Bank of Culver v. Teague (1986), Ind.App., 495 N.E.2d 262, 266.

A default judgment is a judgment on the merits for purposes of res judicata. Patterson v. State (1859), 12 Ind. 86. Therefore, the Church concludes that the parcels described in Cause No. S283-1630, are exempt.

The Board contends that res judicata does not apply to the case at bar because the prior judgment of the Marion Superior Court merely remanded the case to the Board for reassessment. The superior court crossed out the language that was originally typed on the judgment which granted exemptions to the Church and inserted language which remanded the case to the Board. Since IC 6-1.1-15-8 provides that the court's authority is limited to remanding the case to the Board for a new assessment, the Board concludes that the court's judgment has no binding effect.

The court is disturbed by the Board's contentions. The Board maintains that once the court issues a judgment in a case and remands the case to the Board, the Board can reassess the property in direct contravention of the court's order. Moreover, the Board suggests that once the Board reassesses the property in question, the court's previous judgment has no binding effect over the new assessment. If the court were to accept such unfounded reasoning, the court's role of judicial review would be a nullity.

The purpose of judicial review of the Board's final determinations is to examine the Board's findings and determine if they are unsupported by substantial evidence, contrary to law, or arbitrary and capricious. Meridian Hills Country Club v. State Bd. of Tax Comm'rs (1987), Ind. Tax, 512 N.E.2d 911. In such case, the court has the authority to vacate and set aside the Board's final determination. However, the court cannot carry out the administrative function of assessing property. Therefore, the court must remand the case to the Board for reassessment. Such reassessment is to be done in compliance with the court's order. IC 6-1.1-15-8.

A judgment by default rendered against the Board must be given binding effect. Otherwise, there would be no reason for the Board to enter an appearance in a case. All the Board would have to do is fail to answer the taxpayer's appeal and then disregard the resulting default judgment. The taxpayer would be continuously denied his day in court and the Board would effectively avoid all means of judicial review.

Therefore, the court finds against the Board for the tax year 1982, and the Board is bound by the Marion Superior Court default judgment issued on September 27, 1984.

II.

The Church contends that the Board is collaterally estopped from litigating the tax years 1983 through and including 1987, because the issues for each of these years are the same as the issues for the 1982 year determined by the default judgment.

The Board asserts that it is authorized by law to annually review all property for which property owners claim an exemption. IC 6-1.1-11-7 to -8. Therefore, even if the default judgment of the Marion Superior Court is given res judicata effect for the 1982 tax year, the Board is not precluded from determining the tax-exempt status of the property for subsequent years.

The issues and parties involved in the case at bar are the same issues and parties involved in the case decided by the default judgment. The change in the years did not change the issues. Therefore, the question becomes whether the Board is precluded by the default judgment from asserting the same issues in this tax appeal for subsequent years when there has been no change in the facts.

This court decided in Porter's South Shore Cleaners, Inc. v. State (1987), Ind. Tax, 512 N.E.2d 895, that "fairness dictates that if the judgment is by default then the issue is not precluded in a subsequent suit." Id. at 898. The Church asserts that the court's ruling in Porter's South Shore is contrary to the holdings of the Indiana Supreme Court and Court of Appeals. The Church cites to Grantham Realty Corporation v. Bowers (1939), 215 Ind. 672, 22 N.E.2d 832, and Kirby v. Second Bible Missionary Church (1980), Ind.App., 413 N.E.2d 330.

In Grantham, the trial court heard evidence and entered a default judgment on behalf of the plaintiff in a quiet title action. Certain defendants, who were included in the action to quiet title as unknown heirs of a defendant and who were constructively notified by published notice, questioned whether they were precluded from subsequently challenging the trial court's judgment. The Indiana Supreme Court held that the defendants had been duly served with notice as required by law and were thus bound by any matters necessarily found by the judgment. 22 N.E.2d at 836.

In Kirby, the court extensively discussed the treatment of issue preclusion under Indiana law. The court explained that judgments are preclusive as to matters which are "actually litigated." The court held that the validity of the quitclaim deed was necessarily determined in the original action to quiet title:

Our statutory action to quiet title is a combination and an extension of the equity proceedings known as bills of peace and suits to quiet title. It is a very broad and comprehensive action.... The purpose of a decree quieting title is to put an end to all questions concerning it, no matter what shape they may assume. Id. at 333 (quoting Faught v. Faught (1884), 98 Ind. 470).

Both Grantham and Kirby involved quiet title actions in which the defendants attempted to raise additional questions concerning the rightful owners of the subject properties. Since the default judgment in each case determined that the respective plaintiffs were the rightful owners against all others claiming an interest, it necessarily follows that the defendants were divested of any and all interest in the properties. As the issue of rightful ownership was "actually litigated," the...