North Park Cinemas, Inc. v. State Bd. of Tax Com'rs

• Decision Date: 05 December 1997
• Docket Number: No. 82T10-9609-TA-00106,82T10-9609-TA-00106
• Citation: 689 N.E.2d 765
• Parties: NORTH PARK CINEMAS, INC., Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.
• Court: Indiana Tax Court

Page 765

689 N.E.2d 765

NORTH PARK CINEMAS, INC., Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.

No. 82T10-9609-TA-00106.

Tax Court of Indiana.

Dec. 5, 1997.

G. Michael Schopmeyer and Martha J. Posey, Kahn, Dees, Donovan & Kahn, Evansville, for Petitioner.

Jeffrey A. Modisett, Attorney General, Angela L. Mansfield, Deputy Attorney General, Indianapolis, for Respondent.

FISHER, Judge.

North Park Cinemas, Inc. (North Park) appeals a final determination of the State Board of Tax Commissioners (State Board) removing North Park's obsolescence depreciation adjustment. See IND. ADMIN. CODE tit. 50, r. 2.1-5-1 (1992) (repealed 1995) (codified in present form at IND. ADMIN. CODE tit. 50, r. 2.2-10-7 (1996)). This Court AFFIRMS the final determination of the State Board.

FACTS AND PROCEDURAL HISTORY

This case originates with the 1989 general reassessment of North Park's property. The property consists of a movie theater complex located in Vanderburgh County, Indiana known as Showplace East Cinemas. After the 1989 reassessment, North Park filed a Form 130 Petition for Review with the Vanderburgh County Board of Review (BOR) seeking an obsolescence depreciation adjustment due to its property's seasonal and singular use as a movie theater. The BOR granted a 25% obsolescence depreciation adjustment for the property on April 26, 1991. Four days later, Cheryl Musgrave (Musgrave), then a member of the BOR, filed a Form 131 Petition for Review of Assessment with the State Board asking for a review of the BOR's determination. See IND.CODE ANN. § 6-1.1-15-3(b) (West 1989) (amended 1993 & 1997) (allowing a member of a county board to seek review of any assessment he has made, on which he has passed, or which was made over his protest). Musgrave claimed that North Park's building was a "newer" building that was being used for its A State Board hearing was scheduled for July 15, 1992. Notice of this hearing was sent on July 3, 1992 to the owner of North Park. At the hearing, Musgrave simply argued that there was "no evidence given for ... the obsolescence" before the BOR. (Pet'r Ex. 2). North Park's owner did not appear at this hearing. He testified at trial that the Vanderburgh County Assessor told him he did not need to attend because his interests would be represented by a deputy county assessor. The Deputy Assessor of Vanderburgh County ("Joest") did appear and presented evidence that obsolescence depreciation adjustments had been given to other businesses in the area. She presented no documentary evidence and did not disclose whether other theaters had been given obsolescence depreciation adjustments.

intended purpose as a movie theater. Therefore, North Park was not entitled to any adjustment.

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.

ANALYSIS AND OPINION

Standard of Review

This Court gives the decisions of the State Board great deference when the State Board acts within the scope of its authority. Bender v. State Bd. of Tax Comm'rs, 676 N.E.2d 1113, 1114 (Ind. Tax Ct.1997). Final determinations by the State Board are therefore only reversed by this Court when the decision is unsupported by substantial evidence, is arbitrary or capricious, constitutes an abuse of discretion, or exceeds statutory authority. Id. at 1113-14.

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 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).

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.

North Park's argument is based on the theory that the State Board's actions 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 evidence.

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.

Discussion

North Park presents four arguments. First, North Park argues that because Musgrave initiated the petition for review to the State Board, she bore the burden of proof before the State Board to show that the BOR's granting of the obsolescence reduction was erroneous. North Park claims Musgrave did not meet this burden. Second, North Park argues that the State Board bears the burden of proof at this Court to show that its removal of the obsolescence depreciation adjustment was correct--a burden the State Board has not met. Third, North Park argues that if it carried the burden of proof before the State Board or this Court, North Park...