Montgomery v. State Bd. of Tax Com'rs

• Decision Date: 14 April 1999
• Docket Number: No. 45T10-9807-TA-00084,45T10-9807-TA-00084
• Citation: 708 N.E.2d 936
• Parties: 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, 1 Petitioners, v. STATE BOARD OF TAX COMMISSIONERS, Indiana Family & Social Services Administration, Morris Wooden, Auditor, State Of Indiana, Joyce Brinkman, Treasurer, State of Indiana, and State of Indiana, Respondents.
• Court: Indiana Tax Court

Page 936

708 N.E.2d 936

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, ¹ Petitioners, v. STATE BOARD OF TAX COMMISSIONERS, Indiana Family & Social Services Administration, Morris Wooden, Auditor, State Of Indiana, Joyce Brinkman, Treasurer, State of Indiana, and State of Indiana, Respondents.

No. 45T10-9807-TA-00084.

Tax Court of Indiana.

April 14, 1999.

Peter L. Benjamin, Gerald M. Bishop, Greco Pera & Bishop, Merrillville, Indiana, Attorneys for Petitioners.

Jeffrey A. Modisett, Attorney General of Indiana, Angela L. Mansfield, Deputy Attorney General, Beth H. Henkel, Deputy Attorney General, Indianapolis, Indiana, Attorneys for Respondents.

ORDER ON MOTION TO RECONSIDER

FISHER, J.

On July 20, 1998, the Lake County Council, Lake County, and the Lake County Board of Commissioners, as well as various members of the Lake County Council and the Lake County Board of Commissioners, filed an original tax appeal challenging the constitutionality of Indiana's Health Care for the Indigent (HCI) property tax levy. On October 9, 1998, the respondents filed a motion to dismiss. In that motion, the respondents contended that the Court lacked subject matter jurisdiction over this case and also that the governmental petitioners in this case lacked standing to challenge the constitutionality of the HCI property tax levy. On January 19, 1999, the Court ruled on the respondents' motion in a published order. See Lake County Council v. State Bd. of Tax Comm'rs, 706 N.E.2d 270 (Ind. Tax Ct.1999). In the order, the Court concluded that it had subject matter jurisdiction over this case and therefore denied the respondents' motion to dismiss. However, the Court granted the respondents' motion to dismiss the governmental petitioners because they had no standing to challenge the constitutionality of the HCI property tax levy. ²

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 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 case ³ 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. ⁴ 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.

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, 57 L.Ed.2d 351 (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. Langdeau, 371 U.S. 555, 558, 83 S.Ct. 520, 522, 9 L.Ed.2d 523 (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).

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 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.

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.

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...