ATTORNEYS FOR APPELLANTS
John R. Price
Bruce A. Stuard
Indianapolis, Indiana
ATTORNEYS FOR APPELLEES
Joseph R. Morris
Plymouth, Indiana
Gary J. Dankert
Indianapolis, Indiana
__________________________________________________________________
IN THE
SUPREME COURT OF INDIANA
__________________________________________________________________
MARSHALL COUNTY TAX )
AWARENESS COMMITTEE, )
DAVID A. and NORMA JEAN GOOD, )
DOROTHY STARR, DENNIS LARGE, )
ROBERT CLARK and MICHAEL )
BERNERO, )
) Indiana Supreme Court
Appellants (Plaintiffs Below), ) Cause No. 50S05-0212-CV-636
)
v. ) Indiana Court of Appeals
) Cause No. 50A05-0211-CV-567
JAN ALLEN QUIVEY, Marshall )
County Auditor and PLYMOUTH )
COMMUNITY SCHOOL )
CORPORATION, )
)
Appellees (Defendants Below). )
__________________________________________________________________
APPEAL FROM THE MARSHALL CIRCUIT COURT
The Honorable Duane G. Huffer, Special Judge
Cause No. 50C01-0207-PL-17
__________________________________________________________________
ON PETITION FOR TRANSFER
__________________________________________________________________
December 26, 2002
BOEHM, Justice.
This case involves a public lawsuit to enjoin a school corporation
from issuing bonds to pay for building improvements. The trial court
concluded that the plaintiffs in this case presented no “substantial
issues” and ordered them to post a $1,000,000 bond or have their case
dismissed. The plaintiffs appealed that decision to the Court of Appeals,
but before the Court of Appeals heard the merits of the case this Court
granted the school corporation’s petition to transfer pursuant to Appellate
Procedure Rule 56. We hold that the trial court abused its discretion when
it found the plaintiffs had not presented a “substantial issue.” We vacate
the trial court’s order requiring a bond and remand this cause for further
proceedings.
Factual and Procedural Background
The Plymouth Community School Corporation intends to pay for building
improvements by issuing bonds in an amount in excess of $25,000,000. The
Corporation published notice of its plan on February 8, 2002.
Pursuant to Indiana Code sections 6-1.1-20-3.1 and -3.2, a group of
citizens calling itself the “Tax Awareness Committee” initiated a “petition
and remonstrance process” to block the project. Signatures of real
property owners in the district, both for and against the school’s plan,
were collected and filed with the County Auditor. Under section 6-1.1-20-
3.2, certain requirements must be met in the collecting of signatures,
including: (1) the “carriers” (those collecting the signatures) and signers
of petitions must themselves be owners of real property within the school
district; (2) the carrier must be a signatory on at least one petition; and
(3) after the signatures have been collected, the carrier must swear or
affirm before a notary public that the carrier witnessed each signature.
After the signatures have been verified and filed, it is the Auditor’s
responsibility to certify the number of valid signatures. If the number of
valid signatures opposing a plan is greater than those in favor, then “the
bonds petitioned for may not be issued or the lease petitioned for may not
be entered into.” Ind. Code § 6-1.1-20-3.2(6) (1998).
Before either side began collecting signatures, the Auditor and
representatives of both the Tax Awareness Committee and the school met to
discuss ground rules for the process. The product of that meeting was a
“Memorandum of Understanding” signed by all three parties. That document
set forth the “Auditor’s understanding concerning the Petition and
Remonstrance process” and included a provision that persons signing for
entities that are property owners should include their titles, e.g., “Mary
Doe, President.”[1]
After the signatures were collected, the Auditor validated 2,665 of
the 3,114 signatures supporting the project, and 2,578 of the 3,151
opposing. Therefore, by the Auditor’s calculation, those favoring the plan
collected 87 more valid signatures than its opponents were able to
assemble.
After the Auditor certified the results, the Tax Awareness Committee
filed a “public lawsuit”[2] seeking to enjoin the school from moving ahead
with its plan. The complaint alleged, inter alia, that the Auditor
improperly invalidated signatures that would have carried the day for the
opponents.[3] Pursuant to Indiana Code section 34-13-5-7, the school
demanded an “interlocutory hearing,” in which the issue is whether the
plaintiffs’ claims present a “substantial issue.”[4] If not, the trial
court may order that the cause be dismissed unless the plaintiff posts a
bond. The requirement to post a bond in public lawsuits is meant to deter
“harassing litigation” that can delay legitimate public improvement
projects where the mere passage of time can have significant consequences.
Pepinsky v. Monroe County Council, 461 N.E.2d 128, 131 (Ind. 1984). Thus,
when a bond is set, it is to be in an amount “found by the judge to cover
all damage and costs that may accrue to the defendants by reason of the
pendency of the public lawsuit in the event the defendant prevails.” Ind.
Code § 34-13-5-7(b). The trial court in this case conducted an extensive
interlocutory hearing, which included fourteen live witnesses and forty-
nine exhibits.
The principal issue on appeal, and a focus of the hearing, is whether
the Auditor properly excluded signatures on remonstrances carried and
verified by David Good. Good, a member of the Tax Awareness Committee, was
a carrier of six remonstrance petitions and collected 129 signatures.[5]
In 1995, Good and his wife, Norma Jean, transferred their home in Plymouth,
Indiana to a revocable living trust. They are the settlors, trustees, and
beneficiaries of the trust. The tax rolls show the owners of the property
as “Good, David A. and Norma Jean Good, co-trustees of the David A. Good
and Norma Jean Good Rev Living Trust.” However, when Good signed the
verification form as a carrier of the petitions, he did not indicate that
he was signing as a trustee. Based on the provision in the Memorandum of
Understanding that trustees “should sign” petitions in their official
capacity, the Auditor invalidated Good’s signatures as a carrier of the
petitions. Having determined that Good’s signature as a carrier was
invalid, the Auditor also invalidated all 129 of the signatures Good
collected.
The trial court issued an order after the interlocutory hearing
finding, inter alia: (1) when Good signed as a carrier, he did not indicate
that he owned property only as trustee; (2) this omission was despite the
Memorandum of Understanding and despite his instruction from the chairman
of the Tax Awareness Committee that he should sign as “Trustee”; and (3)
the Auditor properly excluded the signatures Good collected because of his
failure to show ownership status by omitting his designation as trustee.
After addressing and dismissing the other issues raised by the plaintiffs,
the court ultimately concluded that the plaintiffs’ suit did not raise a
substantial question and ordered the plaintiffs to post a $1,000,000 bond
or have their case dismissed.
The plaintiffs appealed the trial court’s order to post bond.
Although Indiana Code section 34-13-5-7(d) directs that appeal of an order
to post or deny bond is to be taken to this Court, the plaintiffs filed
their appeal in the Court of Appeals. This is consistent with this Court’s
holding in Sekerez v. Bd. of Sanitary Comm’rs, 261 Ind. 398, 399-400, 304
N.E.2d 533, 533-34 (1973), that our Rules of Procedure, not the Indiana
Code, govern which cases this Court hears on direct appeal. Pursuant to
Appellate Procedure Rule 5(B), appeals from interlocutory orders are
appealable to the Court of Appeals.[6]
Citing the potential expense from protracted litigation, the school
filed a motion in the Court of Appeals requesting an appeal bond from the
plaintiffs “pursuant to the Indiana Rules of Appellate Procedure and the
Public Lawsuit Statute [Indiana Code section 34-13-5-7(d)(2)].” On the
same day, the school also filed a motion in this Court requesting that we
assume jurisdiction over the appeal pursuant to Appellate Procedure Rule
56. That rule provides for transfer to this Court, and the bypass of Court
of Appeals review, “upon a showing that the appeal involves a substantial
question of law of great public importance and that an emergency exists
requiring speedy determination.” The school argued that this case met
those criteria because the school is unable to sell bonds and proceed with
the project as long as litigation is pending. In addition, as the school
argued to the trial court, “[i]f bonds are not sold before the end of the
year the tax control board does not permit the School to impose a tax levy
for the year 2003.” On December 5, we granted the school’s motion for
transfer.
The plaintiffs argue that the trial court abused its discretion in
requiring them to post a bond. In the course of this argument, the
plaintiffs present six issues, which we consolidate into four: (1) whether
the trial court erred when it concluded as a matter of law that David Good
had to identify his capacity as a trustee in signing as a carrier; (2)
whether all signatures on a petition are disqualified if the signature of
the carrier is invalid; (3) whether Indiana Code section 6-1.1-20-3.2
violates the Equal Protection Clause of the Fourteenth Amendment to the
United States Constitution; and (4) whether the Auditor’s method of
determining which signatures were valid violated the Equal Protection and
Due Process Clauses of the Fourteenth Amendment, the First Amendment, and
Article I, Section 23 of the Indiana Constitution. Because the plaintiffs
satisfy their burden of demonstrating a substantial issue concerning the
signatures Good collected, we address only that issue.
I. Validity of David Good’s Signature as a Carrier
When a petition and remonstrance process is undertaken, the State
Board of Accounts is responsible for delivering to the County Auditor both
petition and remonstrance forms, and instructions for the collection of
signatures. Ind. Code § 6-1.1-20-3.2(3). By law, those instructions must
include the requirements that:
(A) the carrier and signers must be owners of real property;
(B) the carrier must be a signatory on at least one (1) petition;
and
(C) after the signatures have been collected, the carrier must swear
or affirm before a notary public that the carrier witnessed each
signature.
Id. The instruction sheets furnished to the Auditor by the Board of
Accounts included additional requirements governing who may sign, and in
what form those signatures should be made, but had no specific instruction
dealing with signatures by individuals signing on behalf of trusts or other
legal entities.
There seems to be no question that Good is the beneficial owner of
real property located in the school corporation, and as trustee is also a
record owner. David Good is co-trustee of the “David A. Good and Norma
Jean Good Revocable Living Trust,” and as such has legal title to the
trust’s real property, which is located within the relevant school
district. The Auditor’s records indicated as much. However, Good did not
indicate he was the owner of property as trustee, prompting the Auditor to
disqualify his signature and the signatures he collected.
We think it was clear enough who Good was and that, as trustee of a
revocable trust created by himself and his wife, he was an owner of
property within the district. The school argues that the disqualification
was proper under Paragraph 11 of the “Memorandum of Understanding” that was
agreed to by the Auditor, the school, and the Tax Awareness Committee prior
to the gathering of signatures. The plaintiffs point out that Paragraph 11
uses the phrase “should sign” rather than “shall sign” or “must sign.” We
agree that to the extent the Memorandum purports to impose an inflexible
requirement that the capacity of a trustee be shown on the face of the
signature, it conflicts with Indiana Code section 6-1.1-20-3.2. That
section states that the verification of petitions and remonstrances must be
done “in the manner prescribed by the state board of accounts.” Ind. Code
§ 6-1.1-20-3.2(4). This statute does not permit County Auditors to add
their own requirements for the verification procedure. Although the
Memorandum of Understanding may have indicated that trustees “should” sign
in their official capacity, there is no such explicit requirement in
section 6-1.1-20-3.2, and there was no such requirement on the instruction
forms provided by the State Board of Accounts. The only rule in the
instructions having to do with the content of the signatures stated:
7. All names should be written and printed neatly, and as they appear
on the tax records in the Auditor’s office as nearly as possible.
By stating that the “names” should be written “as nearly as possible” as
they appear on the actual tax records, this instruction requires only
substantial, not exact, conformity with those records. Arguably the “name”
is only “David Good,” even if his title is “trustee.” In any event, we
think the Board of Accounts intended to allow imperfect identification so
long as the signer can be readily identified in the Auditor’s records as an
owner of real property in the district. The Auditor testified that he had
no difficulty identifying the signer “David Good” as the David Good listed
in his records as an owner of real property as co-trustee of the “David A.
Good and Norma Jean Good Revocable Living Trust.” Nor did he have any
doubt as to who the carrier was. The signatures on the remonstrance forms
Good carried should not have been excluded.
To be sure, procedures are often necessary to the conduct of an
orderly election or petition. But in a democracy we strongly favor
permitting citizens to exercise their franchise. We sympathize with the
school, which has undoubtedly expended significant effort and engaged in
exhaustive analysis of its needs before undertaking this bond issue.
Nevertheless, Indiana law permits a majority of signatures to defeat a
proposal and the plaintiffs here present a substantial issue that they have
done that. Signatures that do not violate any statutory or Board of
Accounts directive should be counted if it is clear who the property owner
is and that the person signing for that property is authorized to do so.
Good’s signature on behalf of his trust met those criteria. The
Memorandum’s provision that persons signing on behalf of entities “should”
indicate their titles is not sufficient to override this general principle.
II. Appeal Bond
As mentioned in Part I, the school filed a motion with the Court of
Appeals requesting an order that the plaintiffs file an appeal bond in the
amount of $1,000,000. Thirty minutes before this Court filed its order
granting transfer, the Court of Appeals ordered the appellants to post an
appeal bond of $1,000,000 by the close of business on Friday, December 13.
Our order stated, “The appellee’s Verified Motion For Appeal Bond remains
under advisement,” creating an apparent conflict with the Court of Appeals’
order.
The school contends that if the plaintiffs fail to post the appeal
bond as required by the Court of Appeals’ order, this Court should dismiss
the appeal. The plaintiffs respond that this Court’s granting transfer
necessarily vacated the Court of Appeals’ order, and that they were not
required to post the appeal bond. We disagree with both.
By rule, this Court’s granting transfer has the effect of vacating
the Court of Appeals’ opinions. Ind. App. R. 58(A). However, the Rules of
Appellate Procedure do not provide that the orders of the Court of Appeals
are also vacated. When this Court assumes jurisdiction, it takes the case
as it finds it, including any outstanding orders. Although those orders
usually relate to timing of filings, etc., the bond order is in the same
category. The plaintiffs did not post an appeal bond by the close of
business on December 13. Therefore, the plaintiffs failed to comply with
the Court of Appeals’ order requiring an appeal bond, and this Court could
have dismissed the plaintiffs’ appeal as a result.
The plaintiffs proceeded at their own risk in electing not to post a
bond or seek to set aside the order of the Court of Appeals. We
nevertheless do not dismiss the appeal. We believe that the Court of
Appeals’ order was contrary to the Appellate Rules. An appeal bond is of a
different character from the statutory bond that was at issue in the
interlocutory hearing. It is true that Indiana Code section 34-13-5-7(d)
purports to permit an appellate court to set “a bond” in an appeal from an
interlocutory hearing. It appears that the bond to which the statute
refers is a bond of the sort that may be required by the trial court, and
not an appeal bond. In any event, as we held in Sekerez, the appeal
procedures outlined in section 7(d) are trumped by our Appellate Rules.
Thus the issue as to the propriety of a bond as a condition to appeal is
whether it is permitted by Appellate Rule 18, which governs appeal bonds.
That rule is specific that an appeal is permitted without bond except to
secure payment of a money judgment. This is consistent with the granting
in the Indiana Constitution of an “absolute right” to appeal. Ind. Const.
Art. VII, § 6. No money judgment was awarded below. Further, the
appellate bond contemplated by section 34-13-5-7(d) seems to turn on a
finding that the plaintiffs have presented no substantial question. If we
agree with the trial court on that point, we should affirm the trial
court’s order requiring the posting of a statutory bond. If we disagree,
we should reverse that order. In neither case is it appropriate to order
an independent appeal bond—i.e., a bond as a condition to appeal of the
trial court’s finding as to the presence vel non of a substantial question.
Accordingly, we do not dismiss this interlocutory appeal for failure to
post the bond.
Conclusion
Because counting the signatures Good collected would put the results
of this petition and remonstrance process in doubt, we hold that plaintiffs
have demonstrated a substantial issue that eliminates the need for them to
post a bond. The plaintiffs have thus met their burden of demonstrating
one substantial issue and are entitled to go to trial on the complaint. We
do not address the remaining claims presented. We vacate the trial court’s
order requiring a bond, and remand this cause for further proceedings.
SHEPARD, C.J., and DICKSON, SULLIVAN, and RUCKER, JJ., concur.
-----------------------
[1] The Memorandum included the following paragraphs:
11. Corporations, limited liability companies, and trusts may sign.
The authorized agent of a corporation, limited liability company,
trust, or other entity which owners [sic] real estate within the
boundaries of the school corporation may sign the Petition or
Remonstrance on behalf of the entity. Below the printed name of the
entity and after the words, “By” an authorized agent of the entit[y]
should sign and indicate his/ or her office or role as for example,
“Mary Doe, Pres.” Or “John Doe, Partner”.
21. This Memorandum is an attempt to clarify Indiana Code 6-1.1-20-
3.2. This Memorandum is not intended to revise, amend or modify the
statute and is not an exhaustive recitation of all its provisions.
Any conflict between this Memorandum and the statute shall be resolved
in favor of the statute.
[2] “Public lawsuits” are defined in part as “any action in which the
validity, location, wisdom, feasibility, extent, or character of
construction, financing, or leasing of a public improvement by a municipal
corporation is questioned directly or indirectly, including but not limited
to suits for declaratory judgments or injunctions to declare invalid or to
enjoin the construction, financing, or leasing.” Ind. Code § 34-6-2-124.
[3] The complaint also alleged that certain carriers in favor of the
school’s plan committed several statutory violations in the collection of
signatures, that the school’s plan was a misuse of public funds, and that
Marshall County citizens could not withstand additional taxation.
[4] The statute provides that plaintiffs in a public lawsuit must
“establish facts that would entitle the plaintiff to a temporary
injunction.” Ind. Code § 34-13-5-7(b). The phrase “temporary injunction”
has been in the statute since 1967, and predates the current Trial Rules
which refer to “temporary restraining order” and “preliminary injunction.”
Ind. Trial Rule 65. This Court has held that under this statute the
plaintiffs must demonstrate that there is “a substantial issue to be
tried.” Hughes v. City of Gary, 741 N.E.2d 1168, 1171 (Ind. 2001) (citing
Boaz v. Bartholomew Consol. Sch. Corp., 654 N.E.2d 320, 322-23 (Ind. Tax
Ct. 1995) and Johnson v. Tipton Community Sch. Corp., 253 Ind. 460, 464-65,
255 N.E.2d 92, 94 (1970)).
[5] The plaintiffs’ second amended complaint alleges Good collected 129
signatures, while plaintiffs’ counsel argued at the interlocutory hearing
that Good collected 137 signatures. In their brief to this Court,
plaintiffs again allege that 129 signatures are at stake. We accept that
number. The critical point is whether more than 87 were improperly
invalidated.
[6] Appellate Procedure Rule 5(B) states: “The Court of Appeals shall have
jurisdiction over appeals of interlocutory orders under Rule 14.” The
plaintiffs’ appeal was proper under Rule 14(C), which governs statutory
interlocutory appeals. Because the statute’s grant of a right to appeal is
consistent with the Appellate Rules, the right to take an interlocutory
appeal conferred by section 34-13-5-7(d) is not affected by the holding in
Sekerez that the court to which the appeal is to be taken is the Court of
Appeals.