Gerry Scheub, and the Lake County Draingage Board v. Van Kalker Family Limited Partnership, Lake County Trust Company as Trustee of Trust No. 5240 and Singleton Stone, LLC.

FOR PUBLICATION Jun 25 2013, 6:07 am

ATTORNEY FOR APPELLANTS: ATTORNEYS FOR APPELLEES:

MARK A. BATES JAN M. CARROLL
Schererville, Indiana EDWARD M. SMID
Barnes & Thornburg, LLP
Indianapolis, Indiana

IN THE
COURT OF APPEALS OF INDIANA

GERRY SCHEUB, in his official capacity as a )
Member of the Lake County Drainage Board and )
the LAKE COUNTY DRAINAGE BOARD, )
)
Appellants-Defendants, )
)
vs. ) No. 37A03-1210-PL-453
)
VAN KALKER FAMILY LIMITED )
PARTNERSHIP, LAKE COUNTY TRUST )
COMPANY as TRUSTEE OF TRUST NO. 5240 )
And SINGLETON STONE, LLC, )
)
Appellees-Plaintiffs. )

APPEAL FROM THE JASPER CIRCUIT COURT
The Honorable Rex W. Kepner, Special Judge
Cause No. 37C01-1105-PL-389

June 25, 2013

OPINION - FOR PUBLICATION

RILEY, Judge
 STATEMENT OF THE CASE

Appellants-Defendants, Gerry Scheub, in his official capacity as a Member of the

Lake County Drainage Board (Scheub), and the Lake County Drainage Board (Drainage

Board) (collectively, the Appellants), appeal the trial court’s declaratory judgment in

favor of Appellees-Plaintiffs, Van Kalker Family Limited Partnership, Lake County Trust

Company as Trustee of Trust No. 5240, and Singleton Stone, LLC (collectively,

Singleton).

We affirm.

ISSUE

The Appellants raise one issue on appeal, which we restate as follows: Whether

the trial properly denied the Appellants’ motion to dismiss for lack of subject matter

jurisdiction.

FACTS AND PROCEDURAL HISTORY

In January 2010, Singleton filed an Application for zone change with the Lake

County Plan Commission (Plan Commission) to rezone 600 acres in an unincorporated

area of Lake County to construct and operate a stone quarry. Scheub, who was the

chairman of the Drainage Board as well as a member of the Plan Commission, was a

vocal opponent of Singleton’s petition. As a member of the Plan Commission, Scheub

organized the opposition to the petition and was successful in persuading the Plan

Commission to issue an unfavorable recommendation to Singleton’s project. Scheub also

organized the remonstrators opposed to the zoning change and spoke as their

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representative during the public hearing before the Lake County Council. However, the

Lake County Council approved Singleton’s request for a zoning change. Despite the

Lake County Council’s approval, Singleton still required a permit from the Drainage

Board, on which Scheub sat as chairman of the three-member board. While the rezoning

proceedings were pending, Singleton applied for the drainage permit.

Because of Scheub’s public advocacy against the petition for rezoning, Singleton

contacted the legal counsel for the Lake County Board of Commissioners and the

Drainage Board, requesting Scheub’s recusal on the drainage permit. Legal counsel

advised that Scheub declined. On February 9, 2011, Singleton filed a complaint, seeking

a declaratory judgment that Scheub’s participation in or attempts to influence the

Drainage Board’s consideration of Singleton’s permit application would deprive

Singleton of due process and should be enjoined. On March 14, 2011, Appellants

replied. Thereafter, on May 5, 2011, the action was venued to Jasper County on

Appellants’ motion.

On July 20, 2011, Singleton filed a motion to compel discovery. The trial court

issued an order granting the motion. On December 1, 2011, when Appellants failed to

comply with the trial court’s order compelling discovery, Singleton filed a motion for

sanctions requesting the entry of a default judgment against Appellants as well as an

award of attorney fees. On February 7, 2012, while Singleton’s motion was pending in

the Jasper Circuit Court, Appellants filed Scheub’s recusal from the Drainage Board with

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the Lake Circuit Court. 1 Two days later, on February 9, 2012, the Jasper Circuit Court

conducted a status conference during which the trial court decided to keep the issue of

Scheub’s recusal under advisement until the parties advised the trial court of a resolution

or until transfer to Jasper County could be obtained. On February 13, 2012, Appellants

filed a rescission of Scheub’s recusal in the Lake Circuit Court.

On February 20, 2012, Appellants filed a motion to dismiss alleging that the action

was not justiciable for lack of subject matter jurisdiction. On March 14, 2012, the parties

appeared for a scheduled hearing on Appellants’ motion to dismiss. Instead of arguing

the motion, the parties entered into a settlement conference in the trial court’s chambers.

At that time, Appellants offered that Scheub would recuse himself from the Drainage

Board when considering the permit for Singleton’s quarry project as long as the

stipulation of judgment would be filed after the May 8, 2012 primary election in which

Scheub was seeking a re-nomination as Lake County Commissioner. Singleton accepted

those terms and the parties subsequently agreed that Scheub would be replaced on the

Drainage Board by Richard McDevitt (McDevitt). On May 14, 2012, a week after

Scheub was successful in the primary election, Scheub’s counsel announced that there

was “no deal” because Scheub had “changed his mind.” (Appellee’s App. p. 125).

On May 29, 2012, Singleton filed a motion to enforce the settlement agreement.

On September 25, 2012, the trial court conducted a hearing on Appellants’ motion to

dismiss and Singleton’s motion to enforce the agreement. Thereafter, on October 1,

1
That same day, February 7, 2012, the Lake Circuit Court accepted Scheub’s recusal and appointed his
replacement pursuant to Ind. Code § 36-9-27-6(b).

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2012, the trial court entered its Order, denying Appellants’ motion to dismiss and

agreeing that the parties had entered into an enforceable settlement which applied to

Scheub in his official capacity only. The trial court appointed McDevitt as Scheub’s

replacement on the Drainage Board as to all matters related to the Singleton quarry

project. The trial court did not enter any findings with respect to its denial of the motion

to dismiss.

The Appellants now appeal. Additional facts will be provided as necessary.

DISCUSSION AND DECISION

The Appellants contend that the trial court lacked subject matter jurisdiction to

decide Singleton’s cause of action and therefore the trial court erred when it denied their

motion to dismiss. The applicable standard of review for Trial Rule 12(B)(1) motions to

dismiss for lack of subject matter jurisdiction is a function of what occurred in the trial

court. GKN Co. v. Magness, 744 N.E.2d 397, 401 (Ind. 2001). That is, the standard of

review is dependent upon: (i) whether the trial court resolved disputed facts; and (ii) if

the trial court resolved disputed facts, whether it conducted an evidentiary hearing or

ruled on a paper record. Id. If the facts before the trial court are not in dispute, then the

question of subject matter jurisdiction is purely one of law. Id. Under those

circumstances no deference is afforded the trial court’s conclusion because appellate

courts independently, and without the slightest deference to the trial court determination,

evaluate those issues they deem to be questions of law. Id.

If, however, the parties dispute the facts presented to the trial court, then our

standard of review focuses on whether the trial court conducted an evidentiary hearing.

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Id. Under those circumstances, the court engages in its fact-finding function, often

evaluating the character and credibility of witnesses. Id. Accordingly, when a trial court

conducts an evidentiary hearing, we give deference to its factual findings and judgment,

and we will reverse only if the findings and judgment are clearly erroneous. Id.

However, where the facts are in dispute but the trial court rules on a paper record

without conducting an evidentiary hearing, then no deference is afforded the trial court’s

factual findings or judgment. Id. And where, as in this case, the facts are in dispute and

the trial court conducts a hearing where no evidence was presented with respect to that

motion (only arguments by counsel) and the trial court made no findings of fact, the

reviewing court is in as good a position as the trial court to determine whether the court

has subject matter jurisdiction. Id. We thus review de novo the trial court’s ruling in this

case.

In support of their claim that the trial court lacked subject matter jurisdiction,

Appellants contend that because Singleton failed to exhaust its administrative remedies

before the Drainage Board and instead filed a declaratory action before the trial court, the

trial court did not acquire jurisdiction to rule on Singleton’s cause. In response, Singleton

raises three allegations. First, Singleton focuses on the enforceability of the settlement

agreement—the final motion Singleton filed before the trial court. As such, Singleton

maintains that “the trial court unquestionably had subject-matter jurisdiction to enforce

the [s]ettlement [a]greement, regardless of any challenge to its jurisdiction to decide the

underlying claims” as this case is governed by contract law. (Appellee’s Br. p. 10).

Second, Singleton alleges that because Appellants admitted at least three times that the

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trial court had subject matter jurisdiction to decide the declaratory judgment complaint,

they should now be judicially estopped from asserting a position that is inconsistent with

their admissions. And third, Singleton claims that he was not required to exhaust the

administrative remedies before the Drainage Board because its complaint did not seek

judicial review of any order or determination of the Drainage Board. Because the trial

court’s order is silent as to its reason for denying Appellants’ motion to dismiss, we will

address each assertion in turn.

I. Settlement Agreement

It is well established that subject matter jurisdiction is the power of a court to hear

and decide the general class of actions to which a particular case belongs. Parkview

Hosp. Inc. v. Geico General Ins. Co., 977 N.E.2d 369, 371 (Ind. Ct. App. 2012), trans.

denied. When a court lacks subject matter jurisdiction, its actions are void ab initio and

have no effect whatsoever. Id. In characterizing the instant dispute as nothing more than

the enforceability of a “garden variety contract,” Singleton now asserts that Indiana

courts have subject matter jurisdiction to enforce contracts, even though dispositive

motions are pending. (Appellee’s Br. p. 11). Disputing Singleton’s categorization,

Appellants assert that this is not a contract dispute but an attempt to have Scheub

removed as a member of the Drainage Board.

We agree with Appellants that the origin of this cause is not a contract dispute but

rather a request for declaratory judgment instigated by Singleton. In determining whether

a court has acquired subject matter jurisdiction, we do not evaluate every single filing

within a specific course of action. Regardless of subsequent motions in a case, a trial

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court cannot proceed unless the complaint was properly before it, otherwise any action

taken will be void. In other words, subject matter cannot be conferred by the content of a

subsequent motion when no subject matter existed in the first place. As such, Singleton’s

focus on the enforceability of the settlement agreement as a vehicle to convey subject

matter jurisdiction is misplaced. Rather, because it is clear that the settlement agreement

derived as a result of Singleton’s request for a declaratory judgment and was filed in the

same proceeding, we need to analyze whether Singleton’s initial request for a declaratory

judgment fell within the province of the trial court’s subject matter jurisdiction.

II. Admissions

Next, Singleton claims that “Appellants admitted the trial court had subject matter

jurisdiction at least three times.” (Appellee’s Br. p. 29). Because Appellants played fast

and loose with the trial court by first conceding that the court had jurisdiction and then

turned around and disavowed it, Singleton maintains that Appellants should be estopped

from raising the argument now.

An Indiana court obtains subject matter jurisdiction only through the Constitution

or a statute. Parkview Hosp. Inc., 977 N.E.2d at 372. Subject matter jurisdiction cannot

be waived or conferred by agreement and can be raised at any time by the parties or the

court, including on appeal. Weldon v. Universal Reagents, Inc., 714 N.E.2d 1104, 1107

(Ind. Ct. App. 1999). In Carpenter v. State, 360 N.E.2d 839, 842 (Ind. 1977), a case

where the parties agreed to a change of venue to a trial court which was lacking

jurisdiction in criminal matters, the supreme court held that the appellant could not be

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estopped from raising the lack of jurisdiction over the subject matter even if appellant or

his counsel were guilty of fraud or bad faith.

Thus, regardless of Appellants’ conduct and admissions, Appellants cannot be

estopped from raising a challenge to the trial court’s subject matter jurisdiction.

III. Exhaustion of Administrative Remedies

Appellants’ main argument focuses on the requirement that parties before an

administrative tribunal are required to exhaust their administrative remedies prior to

requesting judicial intervention by the trial court. Specifically, Appellants allege that

because Singleton’s application for a drainage permit is still pending before the Drainage

Board, the trial court had no jurisdiction to grant relief. In response, Singleton contends

that it was not required to exhaust administrative remedies because it did not seek judicial

review of any order of the Drainage Board; rather, its declaratory judgment action existed

independently from any decision the Drainage Board could make as it presented a pure

question of law. Moreover, Singleton maintains that prior exhaustion of administrative

remedies would be futile as the Drainage Board is refusing to grant Singleton the relief it

requested, i.e., Scheub’s recusal due to bias.

Where a party is required by the Administrative Orders and Procedures Act to

exhaust the administrative remedies before an agency prior to obtaining judicial review of

the agency action and fails to do so, courts have no subject matter jurisdiction until after

the entry of the final determination by the relevant administrative agency. Austin Lakes

Joint Venture v. Avon Util. Inc., 648 N.E.2d 641, 644 (Ind. 1995). Even when neither

statute nor agency rule specifically mandates exhaustion as a prerequisite to judicial

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review, the general rule is that a party is not entitled to judicial relief for an alleged or

threatened injury until the prescribed administrative remedy has been exhausted. Id.

Where an administrative remedy is available, filing a declaratory judgment action is not a

suitable alternative. Carter v. Nugent Sand Co., 925 N.E.2d 356, 360 (Ind. 2010).

The exhaustion doctrine is supported by strong policy reasons and considerations

of judicial economy. Johnson v. Celebration Fireworks, 829 N.E.2d 979, 982 (Ind.

2005). Specifically,

[t]he exhaustion doctrine is intended to defer judicial review until
controversies have been channeled through the complete administrative
process. The exhaustion requirement serves to avoid collateral, dilatory
action . . . and to ensure the efficient, uninterrupted progression of
administrative proceedings and the effective application of judicial review.
It provides an agency with an opportunity “to correct its own errors, to
afford the parties and the courts the benefit of [the agency’s] experience
and expertise, and to compile a [factual] record which is adequate for
judicial review.

Id.

However, the rule requiring exhaustion of administrative remedies is not without

exceptions.

A party is excepted from the exhaustion requirement when the remedy is
inadequate or would be futile, or when some equitable consideration
precludes application of the rule. To prevail upon a claim of futility, one
must show that the administrative agency was powerless to effect a remedy
or that it would have been impossible or fruitless and of no value under the
circumstances. Furthermore, the requirement of exhaustion of
administrative remedies will be relaxed when there is grave doubt as to the
availability of the administrative remedy.

Johnson v. Patriotic Fireworks, 871 N.E.2d 989, 994 (Ind. 2007) (citing Higgason v,

Lemmon, 818 N.E.2d 500, 503-04 (Ind. Ct. App. 2004)).

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 In support of their argument that Singleton was required to exhaust administrative

remedies even when faced with a Board member’s perceived bias, Appellants point to

New Trend Beauty School, Inc. v. Indiana State Board of Beauty Culturist Examiners,

518 N.E.2d 1101 (Ind. 1988). In New Trend, the Beauty School sought to escape the

exhaustion requirement by seeking a declaratory action that “[a]n administrative

proceeding before the Board is futile because the Board’s bias and prejudice against New

Trend has preordained a negative result” and will result in a violation of its due process

rights. Id. at 1104. While the administrative proceeding was ongoing, the Beauty school

attempted to depose each member of the Board to determine their biases against the

Beauty School. Id. at 1102. After the Board prohibited the discovery sought, the Beauty

School filed its complaint before the trial court. Id. at 1103. The Beauty School

requested the trial court to dismiss New Trend’s complaint for failure to exhaust

administrative remedies. Id.

The supreme court noted that

[e]ven though we must take New Trend’s allegations of bias on the part of
individuals as true, we may not assume that the Board will act on those
biases and prejudices. To the contrary, we must presume the Board will act
properly with or without recusal of the allegedly biased members. In the
absence of demonstration of actual bias, the courts should not interfere with
the administrative process. To do otherwise would severely curtail the
principle that judicial review is unavailable if an administrative action is
only anticipated.

Id. at 1105 (internal references omitted). Thus, in light of a perceived bias by an

administrative agency, the best action is before the Board itself, in the form of

appropriate objections and/or motions for disqualifications. Id.

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 Such procedure will give the Board the opportunity to correct or prevent an
error as a result of bias, without judicial interference. It will also provide
New Trend the opportunity to preserve error in anticipation of judicial
review, upon the issue of whether the Board acted arbitrarily or
capriciously. Upon judicial review, outside evidence may be allowable to
show bias despite the prohibition of de novo hearings. Thus, if bias is
indeed present in the Board’s proceedings, New Trend has an adequate
administrative remedy to protect its due process rights and is not entitled to
the equitable relief requested here.

Id. at 1105-06.

A similar result was reached in Ripley County Bd. of Zoning Appeals v. Rumpke of

Indiana, Inc., 663 N.E.2d 198 (Ind. Ct. App. 1996), trans. denied. In Rumpke, after the

administrative proceeding was finalized, Rumpke sought judicial review, alleging among

other things, bias by one of the board members. Id. at 203. The trial court made specific

findings indicating that a board member was biased because of his past dealings with

Rumpke’s landfill. Id. at 209. Specifically, it found that the board member owned

property near the landfill and had on numerous occasions complained about its

operations. Id. Additionally, the trial court found that the board member had led an

effort to enforce a 300 foot setback requirement against Rumpke. Id. Finally, the trial

court noted several comments the board member allegedly made against Rumpke,

including that if he could run Rumpke out of Ripley County he would. Id. On appeal,

we affirmed the trial court’s finding of bias and noted that “[w]hen a biased member

participates in a decision, the decision will be vacated.” Id. at 210. However, we

declined to remand for another administrative hearing without the biased board member

because Rumpke had not requested that the board member remove himself from the

decision-making process and thus had waived the error. Id. See also Adkins v. City of

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Tell City, 625 N.E.2d 1298, 1303 (Ind. Ct. App. 1993) (Even if bias exists, we must

presume the Board will act properly with or without recusal of the allegedly biased

members).

On the other hand, in advancing its argument that it was not required to exhaust

the administrative remedies the Drainage Board could offer, Singleton relies on Ind.

Dep’t of Envtl. Mgmt v. Twin Eagle LLC, 798 N.E.2d 839, 844 (Ind. 2003). Twin Eagle

was a declaratory judgment action brought by a real estate developer against the Indiana

Department of Environmental Management (IDEM), challenging some interim

regulations governing wetlands’ development that the agency had promulgated following

a decision by the United States Supreme Court stating that the development and use of

certain wetlands could not be constitutionally regulated by Congress. Id. at 841-42. The

developer in Twin Eagle apparently feared that the agency would apply the interim

regulations to its project and sought various declarations of law as to the agency’s

authority to regulate in this area and, if it had authority, the validity of interim

regulations. Id. at 844. The supreme court found that exhaustion of administrative

remedies was unnecessary “[t]o the extent the issue turns on statutory construction, [and]

whether an agency possesses jurisdiction over a matter [as that] is a question of law for

the courts.” Id. It was in this context that the court concluded that the exhaustion of

administrative remedies “may not be appropriate if an agency’s action is challenged as

being ultra vires and void,” or otherwise beyond the scope of the agency’s authority. Id.

This case differs from Twin Eagle in material respect. Unlike Twin Eagle, where

the court was presented with a clear legal question, the issue whether Singleton can have

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a fair proceeding due to Scheub’s alleged bias, is a mixed question of law and fact, and,

quite likely, a pure question of fact.

Turning to Singleton’s claim that Scheub was biased, we note that the record is

replete with instances where Scheub interfered with Singleton’s rezoning procedure.

As a member of the Plan Commission that reviewed Singleton’s petition for re-zoning,

Scheub was a vocal opponent of Singleton’s request. The record reflects that Scheub and

the County engineer collaborated to “make the project so expensive [Singleton goes]

away.” (Appellee’s App. p. 6). Ultimately, the Plan Commission gave an unfavorable

recommendation of the project to the Lake County Council. During the public hearing

before the Lake County Council, Scheub spoke as the remonstrators’ representative and

actively advocated against the rezoning petition. Despite Scheub’s interference, the Lake

County Council approved the rezoning.

Although the rezoning request had been granted, Singleton still required a permit

from the Drainage Board, on which Scheub sat as chairman. Because of Scheub’s earlier

interactions and vocal opposition to the quarry project, Singleton contacted the legal

counsel for the Lake County Board of Commissioners and the Drainage Board,

requesting Scheub’s recusal on the drainage permit. Legal counsel advised that Scheub

declined. Thereafter, on February 9, 2011, Singleton filed a Complaint seeking a

declaratory judgment that Scheub’s participation in or attempts to influence the Drainage

Board’s consideration of Singleton’s permit application would deprive Singleton of due

process and should be enjoined.

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 Here, as in Rumpke, it is clear that Scheub’s actions in the quarry project

amounted to an actual bias against Singleton. In order to give the Drainage Board an

opportunity to prevent an error as a result of bias, Singleton requested Scheub’s

disqualification. See New Trend, 518 N.E.2d at 1105. Upon the Drainage Board’s

refusal to disqualify Scheub, any further action by the Drainage Board became futile and

of no value under the circumstances because any decision in which a biased Board

Member participates will be vacated. See Patriotic Fireworks, 871 N.E.2d at 994; Couch

v. Hamilton County Bd of Zoning Appeals, 609 N.E.2d 39, 42 (Ind. Ct. App. 1993).

Therefore, as the exhaustion of administrative remedies was excused, the trial court

acquired subject matter jurisdiction over the cause and properly denied Appellants’

motion to dismiss.2

CONCLUSION

Based on the foregoing, we conclude that the trial court properly denied

Appellants’ motion to dismiss for lack of subject matter jurisdiction.

Affirmed.

BRADFORD, J. and BROWN, J. concur

2
Appellants only challenge the trial court’s denial of their motion to dismiss; they do not challenge the
trial court’s enforcement of the settlement agreement, disqualifying Scheub and replacing him with
McDevitt.

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