Bradley v. City of New Castle

ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEE

George T. Patton, Jr. Kevin W. Dogan
Kevin S. Smith Indianapolis, Indiana
Bryan H. Babb
BOSE McKINNEY & EVANS, LLP David L. Copenhaver
R. Scott Hayes
E. Edward Dunsmore HAYES, COPENHAVER & CRIDER
Knightstown, Indiana New Castle, Indiana

ATTORNEYS FOR AMICI CURIAE R. Thomas Bodkin
CITIZENS OPPOSING ANNEXATION, Jason P. Lueking
ET AL. Douglas A. Welp
BAMBERGER, FOREMAN, OSWALD
John H. Brooke & HAHN, LLP
Casey D. Cloyd Evansville, Indiana
BROOKE & CLOYD, P.C.
ATTORNEYS FOR AMICUS CURIAE
INDIANA MUNICIPAL LAWYERS
ASSOCIATION

Nana Quay-Smith
Karl L. Mulvaney
BINGHAM SUMMERS WELSH & SPILMAN
Indianapolis, Indiana

IN THE

SUPREME COURT OF INDIANA

JAMES E. BRADLEY, KAY C. MILLER, )
and Certain Other Persons Owning )
Property in the Proposed Annexed )
Territory, ) No. 33S01-0104-CV-195
) in the Supreme Court
Appellants (Plaintiffs Below),)
)
v. ) No. 33A01-9807-CV-281
) in the Court of Appeals
CITY OF NEW CASTLE, INDIANA, )
)
Appellee (Defendant Below). )

APPEAL FROM THE HENRY CIRCUIT COURT
The Honorable John L. Kellam, Judge
The Honorable Barbara A. Harcourt, Special Judge
Cause No. 33C01-9302-CP-19

March 12, 2002

SHEPARD, Chief Justice.

In 1992, the City of New Castle annexed some 750 acres in Henry
County with an estimated population of 1,700 residents.

The trial court rejected all the Remonstrators’ challenges to the
annexation. The Court of Appeals reversed, faulting the City Council on a
variety of procedural points (although the Remonstrators make no claim that
their substantive rights were violated) and faulting the trial court for
allowing the City to supply additional evidence in support of the adequacy
of the Fiscal Plan. Annexation is essentially a legislative process, and
courts should not micromanage it.

We affirm the trial court.

Facts and Procedural History

On October 19, 1992, the Common Council of the City of New Castle
held a public information hearing on proposed Ordinance No. 2892, to annex
four contiguous areas: Elmwood Addition (Area 1); Blue River Valley
Addition (Area 2); McGrew Addition (Area 3); and Wildwood Estates (Area 4).

The Council followed a “three readings” approach. On November 2nd,
it adopted a written Fiscal Plan for implementing the annexation and voted
in favor of the Ordinance on first reading. On November 16th, the Council
amended the Ordinance to eliminate a twenty-four acre tract from Area 4,
thereby splitting that Area into 4 East and 4 West, and also amended the
Plan. It then passed the Amended Ordinance on second reading. On December
7th, the Council again amended the Plan and passed the Amended Ordinance on
final reading.

In February 1993, certain property owners residing in the annexed
areas filed a Petition for Declaratory Judgment and a Petition for
Remonstrance. These Remonstrators claimed that the Council failed to
observe some statutorily required procedures in passing the Ordinance.
They also challenged the sufficiency of the Fiscal Plan as adopted at the
time of the Ordinance’s passage.

In May 1994, Remonstrators filed a Third Amended Petition for
Declaratory Judgment and Remonstrance. Judge John Kellam treated the
City’s response as a motion for summary judgment and, in July 1995, granted
summary judgment in favor of the City on the petition for declaratory
judgment and on portions of the petition for remonstrance.[1]

The hearing on the remaining portions of the petition for
remonstrance began in November 1995. Remonstrators requested a continuance
after the City changed its theory of annexation on Area 2 to reflect an
intervening Court of Appeals decision. The trial court granted the
continuance and the hearing resumed in July 1996. During the hearing, the
court allowed the City to present evidence revising and supplementing the
Fiscal Plan that the Council adopted in 1992.

On March 3, 1997, the City filed a motion under Ind. Trial Rule 53.2,
and on April 8 this Court appointed Judge Barbara A. Harcourt to replace
Judge Kellam. On June 17, 1998, Special Judge Harcourt issued a judgment
in the City’s favor, supported by findings of fact and conclusions of law.

Remonstrators appealed. The Court of Appeals held that the trial
court erred in granting partial summary judgment on the petition for
remonstrance and in allowing the City to make significant changes to its
Fiscal Plan during the remonstrance hearing. Bradley v. City of New
Castle, 730 N.E.2d 771, 787 (Ind. Ct. App. 2001). We granted transfer.
753 N.E.2d 10 (Ind. 2001).

Standard of Review for Annexation Challenges

A. The Nature of Annexation. For much of Indiana history, aggrieved
property owners had virtually no recourse to protest annexation.[2] Over a
century ago we said:
[N]o property is taken from the owner, by annexation, no private right
of the owner is affected; the act simply changes the property and its
owner, in their civil relation to certain public authority. This
power the State has the right to exercise, directly or indirectly,
within constitutional limits, at any time.

Stilz v. City of Indianapolis, 55 Ind. 515, 523 (1877).

In short, “annexation of territory to a city is not a taking of the
property, nor does it deprive any person of his property.” Taggart v.
Claypool, 145 Ind. 590, 596, 44 N.E. 18, 20 (1896). Property owners
therefore have no vested interest in the maintenance of municipal
boundaries at any particular location. Forks v. City of Warsaw, 257 Ind.
237, 273 N.E.2d 856 (1971), cert. denied, 409 U.S. 841 (1972).

B. The Trial Court’s Role. Annexation is an essentially legislative
function. Rogers v. Mun. City of Elkhart, 688 N.E.2d at 1239 (citing City
of Indianapolis v. Wynn, 239 Ind. 567, 157 N.E.2d 828 (1959)). It is
subject to judicial review only as provided by statute, and “[t]he larger
object of the annexation statute is, as it always has been, to permit
annexation of adjacent urban territory.” Id. at 1242.

Therefore, a remonstrator’s challenge to annexation is not a regular
lawsuit, but rather a special proceeding the General Assembly may control.
See Thorn v. Silver, 174 Ind. 504, 510, 89 N.E. 943, 946 (1909) (action by
remonstrators challenging a drain construction assessment). Indiana Code
§§ 36-4-3-11 through 13 establish requirements for remonstrances;[3] give
trial courts authority to hear and enter judgment on remonstrances;[4] and
direct courts to order annexation provided that the city meets specified
requirements on matters such as contiguity and has adopted a fiscal plan
showing that it will provide municipal services to the annexed area that
are equivalent to those enjoyed by residents in similar areas of the
municipality.[5]

The trial court’s role is to decide whether the municipality has
operated within its authority and satisfied the statutory conditions for
annexation. Rogers, 688 N.E.2d at 1239-40. At the remonstrance hearing,
the municipality bears the burden of showing compliance with the
requirements of the annexation statute. Id.

Although the municipality bears the burden of proof when properly
challenged, we afford legislative judgment considerable deference. It is
well-established that we avoid scrutinizing legislative processes, even
those that are constitutionally mandated. See State ex rel. Masariu v.
Marion Superior Court No. 1, 621 N.E.2d 1097, 1098 (Ind. 1993) (“[T]his
Court has held repeatedly that courts should not intermeddle with the
internal functions of either the Executive or Legislative branches of
Government.”); see also Roeschlein v. Thomas, 258 Ind. 16, 280 N.E.2d 581
(1972).

The General Assembly has delegated part of its power to re-establish
and change governmental unit boundaries to local legislatures. See Perry
Township v. Indianapolis Power & Light Co., 224 Ind. 59, 64 N.E.2d 296
(1946). We do not abandon our deferential approach simply because the
state legislature has delegated a legislative function to subordinate
agents, the municipalities. See City of Valparaiso v. Gardner, 97 Ind. 1,
3 (1884) (“[C]ourts will not interfere with mere matters of municipal
legislation . . . .” ).

Therefore, a trial court hearing a remonstrance is not an examiner
conducting an audit of a challenged fiscal plan. Rather, it should focus
on whether that plan represents a credible commitment by the municipality
to provide the annexed area with comparable capital and non-capital
services.

B. The Appellate Court’s Role. When a trial court enters special
findings, as it did here, we review issues of fact for sufficiency of the
evidence and look to the record only for evidence favorable to the
judgment. Ind. Trial Rule 52; Rogers, 688 N.E.2d at 1240. We do not set
aside findings and judgments unless they are clearly erroneous. T.R. 52.
We review questions of law de novo. Rogers, 688 N.E.2d at 1240 (citation
omitted).

Scope of Review for Annexation Remonstrances

Remonstrators argue that the City exceeded its authority by violating
certain statutory directives concerning the passage of ordinances.
(Appellants’ Br. at 57.) Some of these directives appear in Indiana Code
Chapter 36-4-3, Municipal Annexation and Disannexation, although not in the
sections that deal specifically with remonstrance proceedings.[6]
(Appellants’ Br. at 57, 65.) Others appear elsewhere in the Code.
(Appellants’ Br. at 62, 67.) Remonstrators do not argue that any of
these violations impaired their substantial rights or caused them specific
harm.

For example, Remonstrators point to the requirement in Ind. Code § 36-
4-3-3 that says, “The legislative body of a municipality may, by an
ordinance defining the corporate boundaries of the municipality, annex
territory . . . .” Remonstrators argue that this statute requires a legal
description and, because the City did not prove that the annexation
ordinance (which referred to City boundaries generally) had a map attached
to define the City’s legal boundaries, the annexation fails. They do not
claim that they were misled or disadvantaged in any way by this
approach.[7]

As another example, Remonstrators point to Ind. Code § 36-4-6-13,
which says: “A two-thirds (2/3) vote of all the elected members, after
unanimous consent of the members present to consider the ordinance, is
required to pass an ordinance of the legislative body on the same day or at
the same meeting at which it is introduced.” (Appellants’ Br. at 62-63.)
They claim that the November 16, 1992, Council action deleting twenty-four
acres of land from Area 4 was more than just an amendment and thus
triggered the “unanimous consent” requirement.[8] (Appellants’ Br. at 64-
65.) They do not, however, assert any specific harm arising out of this
course of events.

Judge Kellam declined to address these individual challenges on the
merits and granted summary judgment to the City, concluding that all
sufficiently specific allegations fell outside the scope of judicial
review. The Court of Appeals disagreed and remanded for a new remonstrance
hearing. Bradley, 730 N.E.2d at 787.

We begin by noting that the separation of powers doctrine, which both
the trial court and Court of Appeals discussed at length, does not preclude
judicial review, if only because Indiana’s legislature has provided a
specific judicial role in annexation challenges. The question is whether
judicial review should extend beyond the confines of Sections 11 through
13.

The Court of Appeals “f[ou]nd nothing in the Annexation Act[9] that
shows that the General Assembly intended to limit the judicial review of a
municipalit[y’s] annexation power.” Bradley, 730 N.E.2d at 782. It
therefore concluded that Remonstrators could challenge the annexation based
on noncompliance with statutes that do not deal specifically with
remonstrances.

We disagree. According to Ind. Code § 36-4-3-13, “a court shall order
a proposed annexation to take place if the following requirements are met.”
(Emphasis added.) These requirements are contiguity (or specified
alternatives to contiguity) plus a fiscal plan that covers enumerated
subjects. This language seems plain enough: if the City satisfies Section
13’s listed requirements, the court shall order annexation.

We recognize, of course, that annexing municipalities may commit
procedural wrongs so severe that courts must act to protect remonstrators’
substantial rights. An example of such is King v. City of Bloomington, 239
Ind. 548, 159 N.E.2d 563 (1959). There, remonstrators claimed to have
incurred great expense to challenge an annexation ordinance. 239 Ind. at
556, 159 N.E.2d at 567. If they succeeded, a statute prohibited any
reannexation attempt for two years. 239 Ind. at 558, 159 N.E.2d at 568.
In an alleged attempt to frustrate the remonstrators’ efforts, the city
repealed the ordinance and then three months later started the entire
process over by annexing substantially the same territory under a new
ordinance. 239 Ind. at 557, 159 N.E.2d at 567-68.

Although no statute forbade this practice, this Court held:
[I]f it is shown that a defendant prepares at considerable time and
expense to defend and the action is then dismissed for the avowed
purpose of repeatedly filing like actions to harass and wear down the
defendant without giving him an opportunity to adjudicate and settle
the issues on the merits, equity has a remedy. . . . The principle is
invoked to prevent vexatious litigation, multiplicities of suits, or
circuit of actions. Equity will not suffer a wrong without a remedy.

239 Ind. at 563-64, 159 N.E.2d at 570-71 (citations omitted).

Similarly, due process and due course of law may require judicial
relief where plausible claims of fraud or discrimination are established.
See, e.g., State ex rel. City of Marion v. Grant Circuit Court, 239 Ind.
315, 157 N.E.2d 188 (1959)(allowing judicial review of city’s sewage
disposal rate scheme). However, “[w]e start from the premise that there
can be no protected property interest in adherence to established procedure
. . . . and the mere failure to follow applicable rules or procedures does
not, without more, amount to a due process violation.” Shook Heavy &
Envtl. Const. Group v. City of Kokomo, 632 N.E.2d 355, 361 (Ind.
1994)(quoting Rice v. Scott County Sch. Dist., 526 N.E.2d 1193, 1196-97
(Ind. Ct. App. 1988))(citations omitted)(denying judicial review to
unsuccessful bidder for public contract).

As we noted above, Remonstrators’ complaints here are relatively
technical in nature, and do not assert any impairment of substantive
rights. The trial court therefore correctly concluded that the alleged
procedural violations fell outside the scope of judicial review of
annexations.

A Balanced Approach to Fiscal Plan Review

Section 13 requires “that a city’s annexation plan show that the city
will promptly provide the annexed territory with municipal services
equivalent to those it already provides in similar areas of the existing
city.” Chidester II, 631 N.E.2d at 910. Specifically, at the time the
City passed its annexation ordinance, it was also required to adopt a
written fiscal plan showing:
1) The cost estimates of planned services to be furnished to the
territory to be annexed.
2) The method or methods of financing the planned services.
3) The plan for the organization and extension of services.
4) That planned services of a noncapital nature, including police
protection, fire protection, street and road maintenance, and
other noncapital services normally provided within the corporate
boundaries, will be provided to the annexed territory within one
(1) year after the effective date of annexation, and that they
will be provided in a manner equivalent in standard and scope to
those noncapital services provided to areas within the corporate
boundaries that have similar topography, patterns of land use,
and population density.
5) That services of a capital improvement nature, including street
construction, street lighting, sewer facilities, water
facilities, and stormwater drainage facilities, will be provided
to the annexed territory within three (3) years after the
effective date of the annexation, in the same manner as those
services are provided to areas within the corporate boundaries
that have similar topography, patterns of land use, and
population density, and in a manner consistent with federal,
state, and local laws, procedures, and planning criteria.
6) The plan for hiring the employees of other governmental entities
whose jobs will be eliminated by the proposed annexation,
although the municipality is not required to hire any employees.

Ind. Code Ann. § 36-4-3-13(d)(West Supp. 1992).

It is undisputed that the City did adopt a written fiscal plan that
covered all of these topics to some extent. Remonstrators argue that the
trial court erred by allowing the City to amend and supplement that Plan at
the hearing, to meet its burden of proving the Plan sufficient.
(Appellants’ Br. at 67-68.) The issue, then, is whether a fiscal plan is
frozen as of the date of its adoption for purposes of evaluating its legal
sufficiency.

We answered this question in City of Hobart v. Chidester, 596 N.E.2d
1374 (Ind. 1992)(“Chidester I”), after remand, 631 N.E.2d 908. There,
remonstrators argued that the City of Hobart’s fiscal plan failed to set
out all the information required under the statute. Id. at 1375. The City
introduced evidence at trial addressing this deficiency. Id. We said:
Remonstrators are correct in that the plan must be more than a mere
recital of the statutory language. We do not think, however, that
comparisons between the city’s topography, patterns of land use, and
population density and those of the annexed territory need be set out
in the plan itself. Such comparisons would do little to advance the
ability of landowners to enforce their rights to services under the
plan. . . . The statutes do call upon the trial court to determine
whether the city’s written resolution and plan are according to
statute, but they also tell the court to “enter judgment on the
question of the annexation according to the evidence which either
party may introduce.” Ind. Code § 36-4-3-12(a)(2)(West Supp. 1991). .
. . There would be no need for an evidentiary hearing . . . if all
proof of a city’s ability to provide like services had to be set out
in the written plan.

Id. at 1378 (emphasis added).

Here, Judge Harcourt found that “[t]he Fiscal Plan contained a number
of errors. Some of which were quite obvious i.e. that the tax increase
from 8.2465% to 14.3604% was a 6% increase [as opposed to a $6 increase].”
(R. at 900.) Most significantly, the required capital improvement expense
for water services should have been $78,500 rather than the $11,000 shown
in the Plan. (R. at 906.) After taking into account the evidence at the
hearing, however, Judge Harcourt found as fact that:
The current building, policing, fire and medical, water, sewage,
street lighting, street and road maintenance, street construction,
parks, animal control, transit and administrative services currently
provided to the citizens of New Castle in comparable areas will be
provided to the citizens of the annexed areas in a manner that is
equivalent . . . in standard and scope. This includes both capital
and non-capital services. All of the non-capital services will be
supplied to the annexed territory within one year of the date of
annexation and all capital expenditures will be within three years of
the date of annexation.

(R. at 911.) She went on to say:
19. The Court agrees that the municipality, bearing the burden of
proof, may present matters outside the Fiscal Plan during the trial of
the case. The municipality is not required to include every detail in
the plan which may be presented at trial.

20. However, at some point new evidence presented at trial would
constitute a complete reworking of the plan. Such reworking of the
plan would create undue hardship upon remonstrators.

. . . .

34. The Court . . . identified three purposes for written fiscal
plans in Ho[]bart v. Chidester:[10]

“First, the publication of the written plan permits landowners
to make an intelligent decision as to whether or not to accept
annexation or remonstrate.

Second, requiring a written plan makes the opportunity for
remonstrance and judicial review more realistic. As a practical
ma[tt]er, more than vague promises are needed for a Court to
test a city’s ability to provide like services to the annexed
territory.

Third, a fiscal plan needs to be in writing to protect the
rights of the landowners to institute proceedings to force the
annexing city to provide the services pro[mis]ed under the
plan.” Hobart at 1377-78.

35. In the present case, the Fiscal Plan certainly allowed the
remonstrators to determine whether or not to remonstrate. They chose
to remonstrate.

36. The written plan also allowed for a complete judicial review.

37. The Fiscal Plan quite clearly stated what services were to be
provided to the areas being annexed.

38. The Fiscal Plan contained some errors. Some of the errors
[were] obvious, such as the percentage of increase of taxes and could
easily be identified by the lay public as well as the Court. Other
errors involved an increase of funds needed, such as sewage costs.
These increases were clearly identified.

39. The Plan’s errors were corrected by amendment or at trial. At
trial, the Plan still served as the basis for review.

40. The third purpose served by a plan is protection for landowners in
the future. The Plan in this case, along with the extensive testimony
and exhibits produced at trial certainly provides the landowners in
the Annex Areas 1, 2, 3, 4 East and 4 West with a concrete statement
of the city’s promise to provide certain services to them.

. . . .

43. The Court concludes that the city has met its burden with regard
to provision of services to annexed areas, both capital and non-
capital in a manner which is equivalent as that provided to the
comparable areas. The city has carried its burden as to the cost of
services to annexed areas and method of financing the services.

. . . .

48. Therefore, the Court concludes that the Fiscal Plan as
supplemented at trial is not so seriously defective as to thwart the
purposes announced under Hobart v. Chidester.

49. The central issue remains as to whether or not the evidence
offered at trial in 1995 and 1996 essentially rewrote the Fiscal Plan
to the point that substantial unfairness resulted to the
remonstrators.

. . . .

52. This case presents serious, strong competing public policies. On
one hand, is the need for municipalities to grow in a regulated,
planned fashion. On the other hand, individual landowners need to be
fully informed of proposed annexation actions. These interests must
always be carefully balanced.

. . . .

55. The function of the Court in the annexation process is quite
limited. “Annexation is primarily a legislative decision.
Nevertheless, the judiciary is charged with ensuring that the minimum
requirements for annexation, as prescribed by the General Assembly
have been satisfied.” Town of Sellersburg v. Proposed Annexation of
Certain Property, 677 N.E.2d 608, 612. (Ind. App. 1997); Chidester v.
City of Hobart, 631 N.E.2d 908, 910 (Ind. 1994).

56. It appears to the Court that this case presents a close
question.

. . . .

58. The city made a number of errors in its Fiscal Plan and the Plan
preparation could be termed “sloppy.”

59. Plaintiffs’ expert witness testified that errors may be expected
for Fiscal Plans.

. . . .

61. . . . [A]t the end of the trial in this case, the remonstrators
had complete information as to the city’s plans for provision of
services to the annexed areas.

62. The Court concludes that the errors are not fatal to the Fiscal
Plan or to the annexation process as a whole. The City’s
supplementation of the Plan at trial did not unduly prejudice
Plaintiffs. The city has borne its burden of proving it met the
minimum requirements set forth by the Indiana General Assembly.

(R. at 915-22.)

We quote these findings and conclusions at length because Judge
Harcourt followed the appropriate path. Her analysis correctly focused on
the purposes for requiring fiscal plans and measured the City’s Plan
against those purposes. She allowed the City reasonable leeway in updating
the Plan within the bounds of fairness to the Remonstrators.

At the end of the day, Judge Harcourt concluded that although the Plan
was imperfect it was legally sufficient to protect the annexed landowners’
future rights. This conclusion is supported by sufficient facts, and it is
a correct application of the law.

Conclusion

We affirm the judgment of the trial court.

Dickson, Sullivan, Boehm, and Rucker, JJ., concur.
-----------------------
[1] The Remonstrators sought an interlocutory appeal on the remonstrance
claims, but the parties later filed jointly for its dismissal. (R. at 555-
60.) Remonstrators did not appeal the declaratory judgment ruling. See
Bradley v. City of New Castle, 730 N.E.2d 771, 774 (Ind. Ct. App. 2000),
transfer granted, opinion vacated, 753 N.E.2d 10 (Ind. 2001).
[2] Indiana’s statutory annexation scheme dates back to 1824, when the
first annexation statute allowed virtually automatic annexation of improved
land whenever an adjacent out-lot was platted into new building lots and
recorded. See Rogers v. Mun. City of Elkhart, 688 N.E.2d 1238, 1241 n.5
(Ind. 1997) (citing “An act for the incorporation of Towns,” 1824 Ind. Rev.
Stat., ch. CXI § 14, at 417 (Jan. 30, 1824)). “The acts of building and
recording building lots were viewed as constructive consent to annexation.”
Id. (citing Forsyth v. City of Hammond, 142 Ind. 505, 40 N.E. 267 (1895)).

[3] Ind. Code Ann. § 36-4-3-11 (West Supp. 1992)(“Section 11”).
[4] Ind. Code Ann. § 36-4-3-12 (West 1992)(“Section 12”).
[5] Ind. Code Ann. § 36-4-3-13 (West 1992)(“Section 13”); Chidester v. City
of Hobart, 631 N.E.2d 908, 910 (Ind. 1994)(“Chidester II”).
[6] Only Sections 11 through 13 are specific to remonstrances.
[7] Remonstrators concede that Ind. Code § 36-4-3-4 provided an alternative
basis for annexation and does not require this description. (Appellants’
Br. at 61.) They argue, however, that because the City voluntarily said it
was acting pursuant to Section 3, it must strictly comply with Section 3’s
requirements. (Appellants’ Br. at 61-62.) We need not address this
argument for reasons explained below.
[8] The City disagrees and also points out that the ordinance did not
actually pass into law until the third reading and signing on December 7th.
(Appellee’s Br. at 29-30, 32-33.)
[9] Municipal Annexation and Disannexation Act, Ind. Code § 36-4-3-1 et
seq.
[10] This refers to Chidester I.