State Bd. of Tax Com'rs v. Gatling Gun Club, Inc.

• Decision Date: 28 May 1981
• Docket Number: No. 1-979A242,1-979A242
• Citation: 420 N.E.2d 1324
• Parties: STATE BOARD OF TAX COMMISSIONERS: Carleton Phillippi, Durwood Strang, Taylor Morris, Jr., As Members, Defendants-Appellants, v. GATLING GUN CLUB, INC., an Indiana Not For Profit Corporation, Plaintiff- Appellee.
• Court: Indiana Appellate Court

Page 1324

420 N.E.2d 1324

STATE BOARD OF TAX COMMISSIONERS: Carleton Phillippi Durwood Strang, Taylor Morris, Jr., As Members Defendants-Appellants, v. GATLING GUN CLUB, INC., an Indiana Not For Profit Corporation, Plaintiff- Appellee.

No. 1-979A242.

Court of Appeals of Indiana, First District.

May 28, 1981.

Rehearing Denied July 7, 1981.

Linley E. Pearson, Atty. Gen., Marily S. Meighen, Deputy Atty. Gen., Indianapolis, for defendants-appellants.

William L. Soards, Thomas J. Carroll, Gerald W. Ohrn, Indianapolis, for plaintiff-appellee.

RATLIFF, Judge.

STATEMENT OF THE CASE

The defendant-appellant State Board of Tax Commissioners appeals the judgment of the Hendricks Circuit Court in favor of the plaintiff-appellee Gatling Gun Club, Inc., on the latter's action for judicial review of the State Board of Tax Commissioners' denial of property tax exemption. ¹

We reverse and remand.

STATEMENT OF THE FACTS

The Gatling Gun Club, Inc. (hereinafter called "the club") is a not-for-profit corporation holding title to real and personal property in Marion County. On May 11, 1976, the club filed with the Auditor of Marion County an application for a 100% property tax exemption on land, improvements, and personal property in 1976, based on charitable and educational grounds. The Marion County Board of Review disallowed the club's claim for exemption, and the club filed a petition for review by the State Board of Tax Commissioners (hereinafter called "the board"). On December 6, 1976, the board's hearing officer conducted a hearing on the claim for exemption. The hearing officer received evidence and submitted a report and recommendation to the board, advising that the exemption not be allowed. On March 4, 1977, the board announced its decision denying the exemption.

The club petitioned the Marion Superior Court for review of the board's decision. The cause was transferred by change of venue to the Hendricks Circuit Court. Indiana Code 6-1.1-15-6 provides that the transcript of proceedings which is to be filed in the circuit or superior court "shall not include the evidence compiled by the board with respect to the proceedings." Consequently, the circuit court, over the objections of counsel for the board, permitted the club to introduce testimony and exhibits which had not been introduced in the hearing before the board's hearing officer. The circuit court entered judgment on October 20, 1978, remanding the cause to the board for a hearing pursuant to the Administrative Adjudication Act, Ind.Code 4-22-1-1 et seq. ²

Both the club and the board filed motions to correct errors, and the circuit court on December 26, 1978, granted the club's motion and ruled that the club was entitled to an exemption of "75% of the land and lots, 90% of improvements, and 100% of personal property for the tax year 1976 and subsequent years to the present time." The board filed another motion to correct errors, which was denied on June 14, 1979.

STATEMENT OF THE ISSUES

The board presents the following issues for our review:

1. Whether the circuit court erred in admitting evidence which was not presented before or during the hearing held by the board.

2. Whether the board acted outside the scope of its delegated powers and abused its discretion in denying an exemption for the club's real and personal properties for the year 1976.

3. Whether the circuit court exceeded its authority in determining that the club was entitled to an exemption from taxation for the years 1976, 1977, and 1978.

Issue One

The board complains that the circuit court, over the objection of the board's counsel, permitted five persons to testify who did not testify at the hearing before the board's hearing officer and allowed two exhibits to be introduced into evidence which were not presented at the prior hearing. The board emphasizes that a court sitting in judicial review of an administrative determination may not substitute its judgment for that of the administrative body. Furthermore, the board argues that judicial review of administrative agency action is limited to a review of evidence considered by or presented to the agency, because the issue is whether, based on the evidence presented to it, the agency acted arbitrarily, capriciously, or illegally or abused its discretion.

The club contends that, without the testimony and exhibits it introduced, the only evidence for the circuit court to review was the hearing officer's one-page recommendation to the board. The club argues that the evidence of its charitable nature which it presented to the circuit court assisted the court in determining whether the board's action was arbitrary, capricious, or unreasonable.

Indiana Code 6-1.1-15-7 provides, in part, that an "appeal" ³ of the final determination of the board to the circuit or superior court "shall be tried by the court without a jury. The trial shall be governed by the Indiana rules of trial procedure." At first blush this section could give one the impression that a circuit or superior court's review of a final determination of the board is to be a trial de novo.

The case of Uhlir v. Ritz, (1970) 255 Ind. 342, 264 N.E.2d 312, involved a judicial review of the State Insurance Commissioner's order revoking a bail bondsman's license. Indiana Code 35-4-5-24 ⁴ provides that one whose bail bondsman's license has been revoked "shall have the right of appeal from such final order of the commissioner thereon to the circuit court of the county from which the bail bondsman or runner applied for his license, and such appeal shall be heard de novo." With regard to this appeal de novo, Justice Hunter (then Chief Justice), writing for the Supreme Court noted that, although some administrative functions may be properly delegated by the legislature, the courts have a review power which they must exercise "(t)o assure that the administrative process does not exceed the bounds of justice ...." 255 Ind. at 344, 264 N.E.2d 312. He warned, however, that "because we must be ever aware that we operate within a tri-partite system of government, courts must carefully police the scope of their review so that they do not intrude into the area of valid administrative discretion." Id. Justice Hunter stated further:

"While it does not apply in bail license cases (Department of Insurance v. Hendrickson (1964), 245 Ind. 117, 196 N.E.2d 574()) the Administrative Adjudication and Court Review Act, Ind.Ann.Stat. § 63-3001 et seq. (1961 Repl., 1970 Supp.), passed in part to provide a method of court review of certain other, administrative actions, shows the legislature's awareness of our proper field of activity. Under this act the line demarking an unconstitutional intrusion into the legislative sphere has been properly drawn just beyond a ruling that an administrative act was capricious, arbitrary, an abuse of discretion, in excess of statutory authority or unsupported by substantial evidence. We may make such a ruling if the facts of a case warrant it but we may not interfere with acts by an administrative body which are within the allowable scope of responsible discretion. Department of Financial Inst. v. State Bank of Lizton (1969), 253 Ind. 172, 252 N.E.2d 248; City of Evansville v. Nelson (1964), 245 Ind. 430, 199 N.E.2d 703.

"In making such a determination under that statute we must look at the facts as they were found by the agency. Thus,

'The court's only right or scope of review is limited to a consideration of whether or not there is any substantial evidence to support the finding and order of the administrative body.' Department of Financial Inst. v. State Bank of Lizton, supra, 252 N.E.2d at 250.

and if there is we may not disturb it.

"In the case at hand a special statute on court review, § 9-3713, supra, was enacted. It states that a review 'de novo' of a license revocation may be secured. It is the term 'de novo' which must concern us. While in the usual sense of that phrase one might envisage a complete retrial of the issues involved, our constitutional relationship with the other branches of government precludes such a review. Our legislature is aware of our duty and its scope and we will not attach to its language the innuendo that it wishes our courts to exceed the bounds of proper re-examination. Even if such was clearly mandated, we could proceed only so far in such reviews as the dictates of constitutional law permit.

"Thus, a court reviewing under a de novo statutory direction may, to a limited extent, weigh the evidence supporting a finding of fact by an administrative agency. Public Service Commission v. City of Indianapolis (1956), 235 Ind. 70, 131 N.E.2d 308. But, it may negate that finding only if, based upon the evidence as a whole, the finding of fact was

(1) arbitrary,

(2) capricious.

(3) an abuse of discretion,

(4) unsupported by substantial evidence

or

(5) in excess of statutory authority.

Having, in a de novo review, found the facts to be properly determined by the administrative body, the reviewing court then proceeds to, by applying the same standard, determine if the order, in light of those facts, was proper. City of Evansville v. Nelson, supra.

"The review de novo, then has two stages, (1) a determination of the propriety of the fact-finding and (2) a determination of the propriety of the administrative order made in light of the properly found facts, and the same standard is used in both steps." (Original emphasis.)

Id. at 344-46, 264 N.E.2d 312. Accord State Board of Tax Commissioners v. Stone City Plaza, Inc., (1974) 161 Ind.App. 627, 317 N.E.2d 182; Indiana State Board of Tax Commissioners v. Pappas, (1973) 158 Ind.App. 327, 302 N.E.2d 858.

Thus, even where the Administrative Adjudication Act is inapplicable and another statute expressly provides for an appeal de novo, the reviewing court must go no further than to examine the propriety of the agency's facts as the agency found them and the propriety of the agency's order in...