ATTORNEYS FOR APPELLANT
Karen M. Freeman-Wilson
Attorney General of Indiana
Jon Laramore
Deputy Attorney General
Indianapolis, Indiana
ATTORNEY FOR APPELLEE
Kurt St. Angelo
Indianapolis, Indiana
__________________________________________________________________
IN THE
SUPREME COURT OF INDIANA
__________________________________________________________________
STATE OF INDIANA ex rel. )
INDIANA DEPARTMENT OF )
REVENUE, )
) Indiana Supreme Court
Appellant (Plaintiff Below), ) Cause No. 73S01-0104-CV-207
)
v. ) Indiana Court of Appeals
) Cause No. 73A01-0002-CV-49
TIMOTHY L. DEATON and )
MARIE E. DEATON, )
)
Appellees (Defendants Below). )
__________________________________________________________________
APPEAL FROM THE SHELBY SUPERIOR COURT
The Honorable Russell J. Sanders, Judge
Cause No. 73D02-9901-SC-195
__________________________________________________________________
ON PETITION FOR TRANSFER
__________________________________________________________________
September 26, 2001
BOEHM, Justice.
We hold that the Indiana Department of Revenue may collect a tax
judgment lien through proceedings supplemental in a court in any county
where the taxpayer owns property without first filing suit and obtaining a
judgment foreclosing the lien.
Factual and Procedural Background
When the Department reasonably believes an income tax return does not
reflect the proper amount of tax due, the Department may issue an
assessment. Ind. Code § 6-8.1-5-1(a) (1998). If the taxpayer disagrees
with that assessment, the taxpayer may protest it at the administrative
level. Id. § 6-8.1-5-1(c). If the Department denies the protest and
issues a letter of finding, that letter becomes a final determination, and
the taxpayer must pursue further review by requesting a rehearing or by
pursuing an appeal to the Tax Court. Id. § 6-8.1-5-1(e-h). The statute
provides that failure to pursue an appeal through the Tax Court
conclusively establishes the amount of taxes owed. Id. §§ 6-8.1-5-1(i-j) &
33-3-5-11(a).
The Department assessed a deficiency against the Deatons as to their
state income tax return, apparently for 1993. The Deatons protested
unsuccessfully and received a letter of finding from the Department. They
neither sought rehearing nor pursued an appeal to the Tax Court. Acting
pursuant to Indiana Code section 6-8.1-8-2(a), the Department issued a
demand notice to the Deatons for the total amount due. When the Deatons
still did not pay, the Department issued a tax warrant for $1901 pursuant
to section 6-8.1-8-2(b). The Department next filed that warrant with the
Shelby Clerk. The statute provides that at this point the warrant became a
judgment lien against the Deatons, attaching to all of their real and
personal property in Shelby County. Id. § 6-8.1-8-2(e).
The Department next instituted proceedings supplemental in the small
claims division of the Shelby Superior Court. The Deatons moved to
dismiss, contending that the court lacked personal jurisdiction over them
because the Department had not filed a complaint and obtained a judgment
against them in that court. The crux of the Deatons’ position is their
contention that the “judgment lien” described in the tax statute is not a
judgment. The trial court and the Court of Appeals agreed, holding that
the Department is required to file an independent lawsuit in a court of
general jurisdiction and obtain a judgment foreclosing its lien before it
can pursue proceedings supplemental in that court. State ex rel. Indiana
Dep’t. of Revenue v. Deaton, 738 N.E.2d 695, 698-700 (Ind. Ct. App. 2000).
This Court granted transfer.
I. Proceedings Supplemental to Collect a Tax Judgment Lien
The Deatons argued, and the majority of the Court of Appeals held,
that the Department must “domesticate” its final determination by filing
suit and obtaining a judgment foreclosing its lien in an Indiana court of
general jurisdiction before it may begin proceedings supplemental. Deaton,
738 N.E.2d at 700. As support for this proposition, the Deatons and the
Court of Appeals cite Borgman v. Aikens, 681 N.E.2d 213, 220 (Ind. Ct. App.
1997), trans. denied, in which the Court of Appeals held that an Indiana
court of general jurisdiction could enforce a federal judgment or a
judgment from another Indiana county through proceedings supplemental only
if the judgment was first domesticated.
In Borgman, the Court of Appeals relied on Stocker v. Cataldi, 521
N.E.2d 716, 718 (Ind. Ct. App. 1988), which held that a trial court
properly dismissed a complaint for proceedings supplemental for lack of
jurisdiction where that court had not rendered the original judgment.
Stocker, in turn, was based on the language of Indiana Trial Rule 69(E),
which states in pertinent part, “[P]roceedings supplemental to execution
may be enforced . . . in the court where the judgment is rendered.” In the
case of tax lien enforcement, however, the statutory framework overlays the
general Trial Rule governing proceedings supplemental. When a tax warrant
that embodies an unappealed final determination of the Department is
recorded in the judgment record of a county court, the statute provides
that the warrant becomes a “judgment lien” of that court, and the court
acquires jurisdiction for the limited purpose of enforcing the judgment
lien. We think the General Assembly intended by this language to provide
that the “judgment lien” for the tax obligation has the status of a
judgment of the court of general jurisdiction.
In Indiana, the Tax Court has exclusive jurisdiction over “any case
that arises under the tax laws of this state and that is an initial appeal
of a final determination” of the Department. Ind. Code § 33-3-5-2(a)
(1998). A case “arises under” the tax laws of Indiana if an Indiana tax
statute creates the right of action, or if the case principally involves
collection of a tax or defenses to that collection. State v. Sproles, 672
N.E.2d 1353, 1357 (Ind. 1996). The Deatons’ case principally, indeed
solely, involves the collection of taxes or defenses to that collection,
and so arises under the tax laws of Indiana. Resort to a court of general
jurisdiction to challenge a tax is precluded by this grant of exclusive
jurisdiction. Id.
The domestication of judgments from other courts described in Borgman
permits the domesticating court to entertain attacks on the validity of the
judgment itself, either for want of personal jurisdiction or subject matter
jurisdiction. Am. Mgmt., Inc., v. Riverside Nat’l Bank, 725 N.E.2d 930,
933 (Ind. Ct. App. 2000). If this were permitted as to tax liability, it
would be inconsistent with the grant of exclusive jurisdiction to the Tax
Court to hear these issues. If, on the other hand, litigation in the court
of general jurisdiction is foreclosed even in a domestication proceeding,
then that proceeding becomes a purely perfunctory waste of time and
resources. This exclusive grant of jurisdiction to the Tax Court thus
strongly suggests that no independent domestication proceeding is
contemplated under the tax statutes.
Section 6-8.1-8-8 also supports the view that a “judgment lien” as
that term is used in that section is intended to be a final judgment. That
section provides that after a tax warrant becomes a judgment lien, the
Department may seize bank accounts, garnish earnings, and levy upon and
sell property, all without subsequent judicial proceedings. The Deatons
contend, and the Court of Appeals held, that section 6-8.1-8-8 operates
only to limit the actions the Department may take without subsequent
judicial proceedings to these three specifically enumerated ones. Deaton,
738 N.E.2d at 699. We do not agree. Section 6-8.1-8-7 states that “the
remedies for tax collection provided to the department under this chapter
are cumulative and the selection or use of one (1) of the remedies does not
preclude the subsequent or corresponding use of one (1) or more of the
other remedies.” Therefore, absent express limiting language, section 6-
8.1-8-8 cannot be construed to be an exhaustive list of remedies available
to the Department without initiating subsequent judicial proceedings.
Rather, it authorizes summary collection proceedings without further
judicial action. This demonstrates the understanding of the General
Assembly that once a tax warrant becomes a judgment lien, the day for
disputing the tax is over, and the matter has progressed to the collection
stage. And, of course, proceedings supplemental are one means of
collecting. As the Court of Appeals pointed out, a “judgment lien” may
fairly be regarded as distinct from a judgment. In this context, however,
we believe the General Assembly equated the two.
For these reasons we hold that, unless and until it is appealed to the
Tax Court, a final determination of the Department is the equivalent of a
judgment, and when the tax warrant that embodies that final determination
is recorded as a judgment lien in the judgment record of a county court,
the warrant becomes a judgment of that court, which thereby acquires
jurisdiction for the limited purpose of enforcing the judgment. The
judgment may be enforced as any other judgment of the court, including by
means of proceedings supplemental. Accordingly, the Deatons’ motion to
dismiss should have been denied, and the Shelby Superior Court should have
allowed the Department to commence proceedings supplemental.
II. Adequacy of Notice under the Income Tax Statute
A final concern raised by both the Deatons and the Court of Appeals is
whether the notice procedures used by the Department meet constitutional
due process standards. Throughout its tax collection administrative
proceedings, the Department is authorized to send all notices to the
taxpayer by first class mail. Ind. Code §§ 6-8.1-3-11 & 6-8.1-5-1 (1998).
As the Court of Appeals noted, if these notices are not received by the
taxpayer, the taxpayer’s “first notice of an alleged deficiency might well
be a personally served subpoena in proceedings supplemental in a court of
general jurisdiction commanding appearance on pain of contempt.” Deaton,
738 N.E.2d at 699.
The Deatons do not have standing to raise this issue. This Court has
held that “the standing requirement mandates that courts act in real cases,
and eschew action when called upon to engage only in abstract speculation.”
Pence v. State, 652 N.E.2d 486, 488 (Ind. 1995). As a general
proposition, “for a private individual to invoke the exercise of judicial
power, such person must ordinarily show that some direct injury has or will
immediately be sustained.” Id. The Deatons have not alleged that they did
not receive full and complete notice of all administrative and judicial
proceedings against them.
There are a number of administrative and judicial remedies
potentially available to a taxpayer who contends that he, she, or it has
been the subject of a proceeding supplemental without becoming aware of a
dispute with the Department. If all fail, and the issue of adequate notice
arises, we can address it at that time. We note, however, that this Court
affirmed the constitutionality of notice by first class mail in the context
of the abandoned vehicle statute in Holmes v. Randolph, 610 N.E.2d 839
(Ind. 1993). We also observe that under the statutory scheme our General
Assembly has conceived, before proceedings supplemental can begin against a
taxpayer for an alleged deficiency, the Department must send at least three
separate mailings to the address the taxpayer provided on the tax return in
question. The first of these mailings, the assessment notice, typically
would be sent within one year of the Department’s receipt of the return.
During that year, mail for which the taxpayer had left a forwarding address
should be forwarded in the normal course.
Conclusion
The judgment of the Shelby Superior Court is reversed, and this
action is remanded for proceedings consistent with this opinion.
SHEPARD, C.J., and DICKSON, SULLIVAN, and RUCKER, JJ., concur.