Cathy Jo Robertson v. State of Indiana ( 2020 )

FILED
Mar 30 2020, 11:51 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
IN THE
Indiana Supreme Court
Supreme Court Case No. 19S-PL-432
Cathy Jo Robertson,
Appellant/Defendant,
–v–
State of Indiana,
Appellee/Plaintiff.
Argued: September 5, 2019 | Decided: March 30, 2020
Appeal from the Jennings Superior Court
No. 40D01-1705-PL-67
The Honorable Roger Duvall, Special Judge
On Petition to Transfer from the Indiana Court of Appeals
No. 18A-PL-1002
Opinion by Justice David
Chief Justice Rush and Justices Massa and Goff concur.
Justice Slaughter concurs in the judgment with separate opinion.
David, Justice.
In this case, the Office of the Indiana Attorney General brought two
claims against a county bookkeeper for misappropriation of public funds
and, under a third claim, sought additional relief under the Crime Victims
Relief Act. At issue is what the applicable statutes of limitations are for
these claims. We hold that as for the claims to recover public funds
pursuant to Indiana Code Section 5-11-5-1(a), the limitations period begins
to run only after the Office of the Indiana Attorney General receives a
final, verified report from the State Board of Accounts. We further hold
that claims pursuant to the Crime Victims Relief Act are governed by the
discovery rule. We therefore affirm the trial court’s denial of the motion
to dismiss Counts I and II, reverse the trial court’s denial of the motion to
dismiss Count III as to the Crime Victims Relief Act claim and remand for
further proceedings consistent with this opinion.
Facts and Procedural History
Cathy Jo Robertson was a bookkeeper for the Clerk of the Jennings
Circuit Court from January 1, 2009 to April 8, 2011. In 2014, the State
Board of Accounts (SBOA) conducted a special investigation of the Clerk’s
records for the time period Robertson served as bookkeeper. It concluded
that over $61,000 in cash collections was misappropriated in a “checks
substituted for cash” scheme during that time period. It further concluded
that these substitutions did not occur on days that Robertson was off from
work.
In December of 2014, SBOA discussed its report with Robertson and
asked her to return the money to Jennings County. On December 11, 2014,
it also sent a letter to county officials including its investigation report.
The letter indicated that a copy of the report was also being sent to the
local prosecuting attorney and the Office of the Indiana Attorney General
(OAG). It also indicated that the official response to the report had not
been examined or verified for accuracy.
The results of the investigation were discussed with Jennings County
officials in February 2015. On January 21, 2016, more than one year after
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the refunds were requested, the SBOA special investigation report (“Audit
Report”) was verified and, on January 22, 2016, the Audit Report was
formally published and made public.
On May 5, 2017, the OAG filed a complaint to recover public funds
against Robertson pursuant to Indiana Code section 5-11-5-1(a). In that
complaint, the OAG attached a copy of the SBOA’s published verified
report as an exhibit and alleged that Robertson misappropriated public
funds. It sought to recover those public funds (Counts I and II) and also
sought treble damages pursuant to the Crime Victim Relief Act (CVRA)
(Count III).
Thereafter, Robertson filed a motion to dismiss the OAG’s complaint
pursuant to Indiana Trial Rule 12(B)(6). In her motion to dismiss,
Robertson asserted that the OAG’s complaint was subject to a two-year
statute of limitations and that the OAG had not timely filed its complaint.
Following a hearing, the trial court determined that the plain language
of Indiana Code Section 5-11-5-1 provided that “the statute of limitations
during which the Office of the Indiana Attorney General could institute an
action for the recovery of monies commenced on January 22, 2016,” when
the SBOA placed its verified report with the OAG. (Appellant’s App. Vol.
II at 14.) Since the complaint was filed within two years of that date, the
trial court denied Robertson’s motion to dismiss.
The Court of Appeals granted Robertson’s motion for interlocutory
appeal and affirmed the trial court. Robertson v. State ex rel. Hill, 121
N.E.3d 588 (Ind. Ct. App. 2019), vacated. Robertson sought transfer which
we granted. Ind. Appellate Rule 58(A). For reasons discussed herein, we
affirm in part, reverse in part and remand for further proceedings.
Standard of Review
Indiana Trial Rule 12(B)(6) allows a motion to dismiss based on failure
to state a claim upon which relief can be granted. When ruling on such a
motion, the court must “view the pleadings in the light most favorable to
the nonmoving party, with every reasonable inference construed in the
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non-movant’s favor.” Thornton v. State, 43 N.E.3d 585, 587 (Ind. 2015)
(citation omitted). Because such a motion challenges only the legal
sufficiency of the complaint, it presents a legal question that is reviewed de
novo on appeal. Ward v. Carter, 90 N.E.3d 660, 662 (Ind. 2018).
Further, “matters of statutory interpretation present pure questions of
law; as such, these questions are reviewed de novo.” Rodriguez v. State, 129
N.E.3d 789, 793 (Ind. 2019).
Discussion and Decision
I. Pursuant to Indiana Code Section 5-11-15-1(a), the
claim accrues when the OAG gets the final,
verified report.
The first issue is when the statute of limitations began to run as to the
State’s misappropriation of public funds claims against Robertson (Counts
I and II). 1 Robertson argues that the limitations period began to run, at the
latest, on December 11, 2014 when the SBOA provided the OAG with a
copy of its preliminary report. The OAG argues that the limitations period
began only after it filed its final, verified report on January 22, 2016.
“Under Indiana’s discovery rule, a cause of action accrues, and the
limitations period begins to run, when a claimant knows or in the exercise
of ordinary diligence should have known of the injury.” Cooper Indus.,
LLC v. City of S. Bend, 899 N.E.2d 1274, 1280 (Ind. 2009) (citation omitted).
“[I]t is not necessary under this rule that the full extent of the damage be
1 As our Court of Appeals noted, it seems that for purposes of this appeal, the parties have
agreed that the OAG’s claims are subject to a two-year statute of limitations. See Ind. Code §
34-11-2-4 (providing a two-year limitation for actions for injury to personal property.)
However, previously, the OAG argued that its claims were subject to a five- or six- year
statute of limitations pursuant to Indiana Code section 34-11-2-6 which provides those
limitation periods for an action against a public officer. We think the five- or six- year
limitations period may apply here but decline to decide the matter as it has not been fully
briefed by the parties and neither party objects to using a two-year limitations period now.
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known or even ascertainable, but only that some ascertainable damage has
occurred.” Id. However, our discovery rule does not apply where our
Legislature intends that another rule should apply. See Carrow v. Streeter,
410 N.E.2d 1369, 1373 (Ind. Ct. App. 1980) (noting Indiana courts have
expressly rejected the so-called “discovery rule” when it is found to be
against “legislative intent”); Toth v. Lenk, 164 Ind. App. 618, 621, 330
N.E.2d 336, 338 (1975) (“[T]he legislature did not intend actual discovery
to be the event that triggers the commencement of the statutory period”).
The operative statute provides that with regard to a preliminary report,
“the state examiner may provide a copy of the report to the attorney
general. The attorney general may institute and prosecute civil
proceedings against the delinquent officer or employee. . .” Ind. Code § 5-
11-5-1(e). With regard to a final verified report, the statute provides that
once filed: “[t]he attorney general shall diligently institute and prosecute
civil proceedings.” Ind. Code § 5-11-5-1(a).
Here, the OAG filed its complaint pursuant to Indiana Code section 5-
11-5-1(a). Given the permissive language about the preliminary report
(“may”) and the mandatory language about the final, verified report
(“shall”), we agree with our trial court and Court of Appeals colleagues
that our Legislature did not intend that the discovery rule apply to claims
brought pursuant to Indiana Code section 5-11-5-1(a). That is, the plain
language of the statute does not require the OAG to take any action until
it receives a verified final report. Therefore, the statute controls instead of
the default discovery rule for when claims under this statute must be
brought. To hold otherwise would require us to rewrite the statute such
that the permissive “may” would become a “shall” with regard to the
OAG instituting legal action after receiving a preliminary report. We will
not do this. See Ind. Alcohol & Tobacco Comm’n v. Spirited Sales, LLC, 79
N.E.3d 371, 376 (Ind. 2017) (citation omitted) (“We may not add new
words to a statute which are not the expressed intent of the legislature.”).
Further, there are good reasons for the OAG to wait to institute legal
proceedings until receiving the final report. For instance, if the OAG is
forced to act on the preliminary report which is subject to change and
unverified, it puts the OAG in the position of relying on unverified and
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incomplete information, hindering ongoing investigation, and creating
premature, potentially unnecessary litigation.
Should there be a very egregious case of misappropriation of public
funds that requires immediate action, the OAG can file upon receipt of the
preliminary report pursuant to Indiana Code section 5-11-5-1(e). In that
case, the limitations period would begin to run when the OAG receives
the preliminary report. Otherwise, waiting for a final, verified report
allows for judicial efficiency and fairness to the accused as well—the OAG
won’t be forced to bring litigation against a party unless the investigation
is complete.
Finally, to the extent Robertson and amicus are concerned that waiting
for a final report before the limitations period begins to run will result in
indefinite tolling of the statute of limitations because the SBOA can
deliberately drag out the process, this concern is highly speculative. As
our Court of Appeals aptly noted, our Legislature chose not to impose a
time limit for conducting investigations and recognized that some
investigations will necessarily take longer than others depending on the
circumstances. It is not for the Court to set a deadline when one is not
prescribed by the applicable statute.
In light of the above, we hold the statute of limitations for the OAG’s
complaint to recover public funds pursuant to Indiana Code section 5-11-
5-1(a) does not begin until the OAG receives from SBOA the final, verified
report. In this case the OAG received the final, verified report on
January 22, 2016. It filed its complaint on May 5, 2017, less than two years
later. Accordingly, we affirm the trial court’s denial of Robertson’s
motion to dismiss Counts I and II.
II. The CVRA claim is untimely.
Robertson also argues that with regard to the CVRA claim (Count III)
against her, the discovery rule applies. Further, she argues that the Court
of Appeals opinion is in conflict with Mizen v. State ex rel. Zoeller, 72
N.E.3d 458 (Ind. Ct. App. 2017). In Mizen, our Court of Appeals
addressed a similar case arising from a SBOA audit and a statute of
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limitations defense. In that case, the county official accused of
misappropriating funds argued that the CVRA claim against him was not
timely filed. Id. at 464. While Mizen does not squarely address the issue
here, it applies the discovery rule to the CVRA claim there citing prior
case law that establishes: “[a]ctions under the [CVRA] are subject to the
discovery rule, under which a cause of action accrues, and the statute of
limitations begins to run, when the plaintiff knew or, in the exercise of
ordinary diligence, could have discovered that an injury had been
sustained as a result of the tortious act of another.” Id. at 466 (quoting
Prime Mortg. USA v. Nichols, 885 N.E.2d 628, 639-40 (Ind. Ct. App. 2008)).
It is long settled that “because the substance of a claim under [the CVRA]
is punitive rather than compensatory, such claims are subject to a two-
year statute of limitations.” Id. (quoting Prime Mortg. USA, 885 N.E.2d at
638.)
While our trial court and Court of Appeals colleagues applied the
statute of limitations pursuant to Indiana Code section 5-11-15-1 to all
three counts, a different statute—Indiana Code section 34-24-3-1—governs
with regard to the CVRA claim. This statute does not provide a limitations
period, and thus, the default discovery rule applies as there is no
legislative intent to the contrary and our case law, discussed above, is
clear that the two-year limitations period applies to these claims.
Accordingly, we find that while the OAG may proceed with its first two
Counts against Robertson, the CVRA claim is untimely. The OAG knew
or should have known of its injury by December 11, 2014, when the SBOA
provided the OAG with a copy of its preliminary report and the complaint
was not filed until May of 2017, more than two years later.
Conclusion
We affirm the trial court’s denial of Robertson’s motion to dismiss
Counts I and II, reverse the trial court’s denial of Robertson’s motion to
dismiss Count III and remand for further proceedings consistent with this
opinion.
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Rush, C.J., and Massa and Goff, JJ., concur.
Slaughter, J., concurs in the judgment with separate opinion.
ATTORNE YS FOR APPEL LANT
Ann C. Coriden
Coriden Glover LLC
Columbus, Indiana
ATTORNE YS FOR AM IC US C UR IA E,
LIBERTY MUTUAL INSURANCE
Kevin D. Koons
Jennifer L. Watt
Kroger, Gardis & Regas, LLP
Indianapolis, Indiana
ATTORNEYS FOR APPELLEE
Curtis T. Hill, Jr.
Attorney General of Indiana
Frances Barrow
Deputy Attorney General
Indianapolis, Indiana
Indiana Supreme Court | Case No. 19S-PL-432| March 30, 2020 Page 8 of 8
Slaughter, J., concurring in the judgment.
I agree with much of the Court’s opinion. As to Part I, I agree that the
State’s claims for misappropriated public funds are timely and may
proceed. As to Part II, I agree that the State’s claim for treble damages
under the Crime Victims Relief Act is time-barred and cannot proceed. I
write separately to address two related issues. The first concerns the
procedural posture of this case—specifically, the Court’s tacit approval of
using Trial Rule 12(B)(6) to decide the merits of an affirmative defense,
contrary to our recent case law. The second concerns how to apply this
case law here.
A
I begin with the procedural posture. This case arises from Robertson’s
12(B)(6) motion seeking dismissal based on her affirmative defense that
the State’s claims are untimely under the applicable two-year statute of
limitations. We held unanimously in Bellwether Properties, LLC v. Duke
Energy Indiana, Inc., 87 N.E.3d 462 (Ind. 2017), that dismissal under Trial
Rule 12(B)(6) is “rarely appropriate when the asserted ground for
dismissal is an affirmative defense.” Id. at 464. The reason, we explained,
is that a 12(B)(6) motion merely tests the legal sufficiency of the complaint.
Id. at 466. “A complaint states a claim on which relief can be granted when
it recounts sufficient facts that, if proved, would entitle the plaintiff to
obtain relief from the defendant.” Id. As we held, “[a] complaint that
survives that limited scrutiny states a claim for relief, even if there may
lurk on the horizon an unassailable defense.” Id. at 464.
The Court does not mention Bellwether or the legal principle we
announced there. This omission risks leaving the reader with the
misconception that a 12(B)(6) motion is the proper procedural vehicle for
defeating an untimely claim. Most of the time, it is not. A notable
exception applies where the plaintiff’s complaint shows on its face that the
claim is untimely—i.e., the complaint alleges facts establishing that the
claim was brought outside the limitations period. As we recounted in
Bellwether, “[o]nly where a plaintiff has pleaded itself out of court by
alleging, and thus admitting, the essential elements of a defense does its
complaint fail to state a claim on which relief can be granted.” Id.
Here, the complaint and attached documents identify three dates
relevant to the statute-of-limitations analysis:
• the date the attorney general received the state examiner’s
preliminary report;
• the date the attorney received the final, verified report; and
• the date the attorney general filed suit.
These three dates provide all the information necessary for determining if
the State brought its misappropriation and treble-damages claims outside
the limitations period. Thus, Bellwether’s narrow exception applies here,
allowing us to decide the merits of Robertson’s affirmative defense.
B
Having determined that Robertson’s 12(B)(6) dismissal motion is a
proper vehicle for resolving her statute-of-limitations defense, I address
whether the State’s misappropriation and treble-damages claims are
timely.
If a state-board-of-accounts examination uncovers misappropriation of
public funds, then Section 5-11-5-1 empowers the attorney general to sue
to recover those funds. Under the statute, the attorney general has two
separate causes of action for recouping misappropriated money—one
under Subsection 5-11-5-1(a) and one under Subsection 5-11-5-1(e). Under
Subsection 1(a), the cause of action accrues when the attorney general
receives a final verified report from the state examiner. Here, the attorney
general sued Robertson under Subsection 1(a) after receiving the state
examiner’s final report. According to the complaint, the attorney general
received the state examiner’s final report in January 2016. He then filed
suit in May 2017, well within the two-year statute of limitations. Thus, the
face of the State’s complaint shows that its Subsection 1(a) claims are
timely, as the Court rightly holds.
Next, I apply Bellwether’s exception to the State’s treble-damages claim.
The basis of the State’s claim is that it sustained injury when Robertson
perpetrated her checks-for-cash scheme. Not only does the complaint
allege when and how this scheme occurred, but also it alleges that the
State learned of the underlying facts in December 2014 when the attorney
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general received the preliminary report. Because the State did not sue
until May 2017, outside the two-year limitations period, its claim is
untimely.
For these reasons, I concur in the Court’s judgment but do not join its
opinion.
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