Sabrina Graham v. Town of Brownsburg , 124 N.E.3d 1241 ( 2019 )

FILED
May 21 2019, 9:15 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
APPELLANTS PRO SE ATTORNEYS FOR APPELLEE
Kurt Disser Robert L. Hartley
Sabrina Graham Maggie L. Smith
Brownsburg, Indiana Carly J. Tebelman
FROST BROWN TODD LLC
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Sabrina Graham, et al., May 21, 2019
Appellants-Plaintiffs, Court of Appeals Case No.
19A-PL-153
v. Appeal from the Hendricks Circuit
Court
Town of Brownsburg, The Honorable Daniel F. Zielinski,
Appellee-Defendant. Judge
Trial Court Cause No.
32C01-1807-PL-109
Bailey, Judge.
Court of Appeals of Indiana | Opinion 19A-PL-153 | May 21, 2019 Page 1 of 15
Case Summary
[1] Sabrina Graham and Kurt Disser (collectively, “Graham/Disser”) are domestic
partners who own property in Brown Township, which is outside of the Town
of Brownsburg (“the Town”) corporate limits. However, they are customers of
the Town’s municipal water utility (“the Water Utility”). They filed, pro se, a
lawsuit against the Town in which they sought declaratory and injunctive relief
regarding the legality of a water rate ordinance the Town enacted in 2018.
Graham/Disser now appeal the trial court’s order granting summary judgment
to the Town. They raise multiple issues on appeal, but we decide only the
dispositive issue of whether the trial court erred in granting summary judgment
to the Town on the grounds that Graham/Disser failed to exhaust their
administrative remedies.
[2] We affirm.
Facts and Procedural History
Adoption of Challenged Ordinance
[3] The Town operates the Water Utility, which supplies water to customers in the
Town and in some areas outside of the Town limits. The Water Utility also
supplies unmetered water to public fire hydrants used by firefighters for fire
suppression. Thus, the Water Utility incurs certain costs in providing water
service for public fire protection both within and without of Town limits. The
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Indiana Code allows municipal water utilities to recover such costs. Ind. Code
§ 8-1.5-3-1 to -15.
[4] Prior to 2002, the Water Utility was subject to the jurisdiction of the Indiana
Utility Regulatory Commission (“IURC”) and was required to seek IURC
approval to establish or change any rates and charges to recover costs of
providing water service for public fire protection. However, in 2002 the Water
Utility withdrew from the jurisdiction of the IURC, as allowed by law. See I.C.
§ 8-1.5-3-9.1 (2002). Thereafter, the Water Utility’s rates and charges were
established by the Town Council passing rate ordinances. See I.C. § 8-1.5-3-8.1
(allowing a municipal legislative body to adopt and change utility rates and
charges by adopting rate ordinances).
[5] Until 2010, the Water Utility allocated its costs for water service for public fire
protection to the Town itself and levied an annual hydrant fee on the Town. In
2010, the Town decided the Water Utility should instead recover such costs
through customer rates, as permitted by law. See I.C. § 8-1-2-103(d) (2010)
(providing that a municipality may fund public fire protection services through
charges “in the basic rates of all customers of the utility within the
municipality,” rather than charges directly to the municipality). Therefore, the
Town adopted Ordinance 2010-09 (“2010 Ordinance”) under which Section
54.22 enacted a new charge for water service for fire protection, named “Public
Fire Protection Charge” (“the Fee”), on all water customers. App. Vol. IV at
191-92. The ordinance also included a schedule under which the amount billed
to a customer was related to the size of the customer’s water meter. Id.
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Although the ordinance did not exempt customers outside the Town limits, the
Water Utility charged the new rate only to customers within the Town limits.
[6] In 2018, the Town decided to start charging the Fee to certain water customers
outside of the Town limits. Therefore, the Town proposed Ordinance 2018-14
(“2018 Ordinance”)—an amendment to Section 54.22—which reads as follows:
(A) Fire protection service fees. Pursuant to Indiana Code section
8-1-2-103(d), each user shall pay the fire protection service fees,
which consist of (i) private and/or (ii) public. This fee applies to
all Town residents on town water and any non-resident on Town
water who is within 1,000 ft of a town hydrant.
App. Vol. III at 125.
[7] The 2018 Ordinance was introduced and first read during the regular public
meeting of the Town Council on May 10, 2018. The Town scheduled a public
hearing for June 28, 2018, to allow users of the water works, owners of property
served or to be serviced by the water works, and other interested persons to be
heard concerning the proposed rates and charges. The Town published a
formal Notice of the public hearing and mailed it to users of the water works
whose property is located outside the Town limits. The Notice informed
ratepayers that, following adoption of the ordinance, they may challenge the
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ordinance under Indiana Code Sections 8-1.5-3-8.2 or 8-1.5-3-8.3.1 The Town
Council adopted the 2018 Ordinance on July 26, 2018.
Relevant Municipally Owned Utility Law
[8] Indiana Code Sections 8-1.5-3-1 to -15 govern the operation of municipally
owned utilities, including water services, and Indiana Code Sections 8-1.5-3-8
to 8.3 govern utility rates and charges. Municipalities owning utilities must
furnish reasonably adequate services, and they may charge “reasonable and just
rates and charges” for those services. I.C. § 8-1.5-3-8. Before adopting an
ordinance related to rates and charges, the municipality must hold a public
hearing and give notice of the same. I.C. § 8-1.5-3-8.1. Objections to any such
rates and charges are governed by Indiana Code Section 8-1.5-3-8.2, which
provides, in relevant part:
(b) Owners of property connected or to be connected to and
served by the works authorized under this chapter may file a
written petition objecting to the rates and charges of the utility so
long as:
(1) the petition contains the names and addresses of the
petitioners;
1
The procedures in Indiana Code Section 8-1.5-3-8.3(d) apply only to rates on property located outside the
corporate boundaries that exceed by a certain percentage the rates charged on property within the corporate
boundaries. It provides that IURC review and adjustment of such rates may be sought by either the
municipality itself or the lesser of (1) ten percent of all or (2) twenty-five utility customers who own property
located outside of the corporate boundaries. Given that the plaintiffs are only two utility customers with one
property outside the Town limits, this section is not applicable to this case.
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(2) the petitioners attended the public hearing provided
under section 8.1 of this chapter;
(3) the written petition is filed with the municipal
legislative body within five (5) days after the ordinance
establishing the rates and charges is adopted under section
8.1 of this chapter;
(4) the written petition states specifically the ground or
grounds of objection; and
(5) a petition has not been filed with the commission under
section 8.3 of this chapter or under IC 36-9-23-26.1[2]
appealing the same rates and charges of the utility.
(c) Unless the objecting petition is abandoned, the municipal
clerk shall file in the office of the clerk of the circuit or superior
court of the county a copy of the rate ordinance or ordinances
together with the petition. The court shall then set the matter for
hearing at the earliest date possible, which must be within twenty
(20) days after the filing of the petition with the court. The court
shall send notice of the hearing by certified mail to the
municipality and to the first signer of the petition at the address
shown on the petition. All interested parties shall appear in the
court without further notice, and the municipality may not
conduct any further proceedings concerning the rates and charges
until the matters presented by the petition have been heard and
determined by the court.
***
2
That statute relates to rates and charges of sewage works.
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(e) Upon the date fixed in the notice, the court shall, without a
jury, hear the evidence produced. The court may confirm the
decision of the municipal legislative body or sustain the objecting
petition. The order of the court is final and conclusive upon all
parties to the proceeding and parties who might have appeared at
the hearing, subject only to the right of direct appeal. …
(f) If the court sustains the petition, or if the petition is sustained
on appeal, the municipal legislative body shall set the rates and
charges in accordance with the decision of the court.
Procedural History
[9] Graham/Disser are water customers who live outside of the Town’s boundaries
and within 1,000 feet of a fire hydrant. They attended the June 28, 2018, public
hearing on the 2018 Ordinance and voiced their concerns. However, they did
not file an administrative appeal of the 2018 Ordinance. Instead, on July 30,
2018, Graham/Disser filed, pro se, a “Verified Petition for Declaratory Relief
and Motion for Preliminary Injunction” in the Hendricks Circuit Court. The
Petition sought a declaration that the 2018 Ordinance is “void and invalid”
because it: (1) violates Indiana Code Section 8-1-2-103(d); (2) charges for a
service for which Graham/Disser were already paying; (3) violates their
“rights” by charging the Fee to water customers outside of Town limits but
within 1,000 feet of a fire hydrant but not charging similarly-situated non-water
customers; and (4) was implemented for the purpose of harassing those who
remonstrated against an on-going annexation action. App. Vol. II at 17-21.
The Petition also sought a preliminary injunction enjoining enforcement of the
2018 Ordinance. The Town filed its Answer on August 20, 2018, and raised
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the affirmative defenses that: (1) the complaint fails to state a claim upon which
relief may be granted; and (2) the action is barred by the plaintiffs’ “failure to
exhaust their remedies under Ind. Code § 8-1.5-3-8.2 and -8.3.” App. Vol. III at
13.
[10] The parties subsequently engaged in discovery and related negotiations, and the
Town voluntarily delayed implementation of the 2018 Ordinance. On
September 14, Graham/Disser filed their third discovery request which
included five requests for admissions. The Town served its response to the
requests for admissions on October 16, which was seven days past the due date
for the admissions.
[11] On October 4, 2018, Graham/Disser filed an amended complaint under which
they added claims that: (1) the 2018 Ordinance violates Article 1, Section 23 of
the Indiana Constitution; (2) the “fee is not a fee but rather an additional tax; a
tax that is being unfairly assessed onto only certain persons. This fee is a
constitutional violation,” id. at 38-39 (emphasis omitted); (3) the “fee/tax …
creates unequal assessment,” App. Vol. III at 39; (4) to the extent Indiana Code
Section 8-1-2-103(d) allows the Fee to be unequally “assessed” to water
customers outside of Town limits who are within and without of 1,000 feet of a
fire hydrant, it violates “the constitution,” id. at 40; and (5) the original water
service fee enacted under the 2010 Ordinance “was not properly adopted,” id. at
41.
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[12] Because the Town did not file an answer to the amended complaint by the
October 31 due date, Graham/Disser moved for default judgment. In doing so,
they noted that the admissions they had requested of the Town in their third
discovery request were deemed admitted under Trial Rule 36 because the Town
did not timely answer the request. On November 14, the Town filed its answer
to the amended complaint in which it raised the same affirmative defenses. The
trial court denied Graham/Disser’s motion for default judgment.
[13] On November 27, the Town filed a Motion for Summary Judgment on all of
Graham/Disser’s claims and also on the Town’s exhaustion of administrative
remedies affirmative defense. Graham/Disser filed their response, including
their affidavits, on December 27. On January 9, 2019, the Town filed its reply
regarding summary judgment, and it moved to strike portions of
Graham/Disser’s affidavits and to withdraw its admissions pursuant to Trial
Rule 36(B). The trial court granted the Town’s motion to strike and its motion
to withdraw its admissions. Graham/Disser then filed a motion to reconsider
the order allowing the Town to withdraw its admissions and moved to strike
certain portions of the Town’s summary judgment reply. On January 13, 2019,
the trial court denied Graham/Disser’s motions to reconsider and to strike, and
issued an order granting the Town’s motion for summary judgment “on all
Plaintiff’s claims.” Appealed Order at 1. Graham/Disser now appeal the order
permitting the Town to withdraw its admissions, the order striking portions of
their affidavits, and the order granting the Town summary judgment.
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Discussion and Decision
Standard of Review
[14] The Town moved for summary judgment on the grounds that there are no
disputed questions of material fact and it is entitled to judgment as a matter of
law on all issues, including Graham/Disser’s failure to exhaust their
administrative remedies. Our standard of review for summary judgment is well
settled. When reviewing a grant or denial of summary judgment, we apply the
same standard as the trial court. Holmes v. Celadon Trucking Serv. of Ind., Inc.,
936 N.E.2d 1254, 1256 (Ind. Ct. App. 2010).
The party moving for summary judgment has the burden of
making a prima facie showing that there is no genuine issue of
material fact and that the moving party is entitled to judgment as
a matter of law. Once these two requirements are met by the
moving party, the burden then shifts to the non-moving party to
show the existence of a genuine issue by setting forth specifically
designated facts.
Daviess-Martin Cty. Joint Parks & Recreation Dep’t v. Estate of Abel by Abel, 77
N.E.3d 1280, 1285 (Ind. Ct. App. 2017) (citations omitted). All designated
evidence and reasonable inferences must be construed in favor of the non-
moving party, and doubts must be resolved against the moving party. Bleeke v.
Lemmon, 6 N.E.3d 907, 917 (Ind. 2014). However, “when the facts are
undisputed and the question is only one of law, our review is de novo.” Id.
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[15] Here, there are no disputed questions of material fact related to the dispositive
issue of exhaustion of administrative remedies. Therefore, our review is de
novo.
Exhaustion of Administrative Remedies
[16] It is well-established that “a claimant with an available administrative remedy
must pursue that remedy before being allowed access to the courts.” Turner v.
City of Evansville, 740 N.E.2d 860, 861 (Ind. 2001).3 This is true even when
neither a statute nor agency4 rule specifically mandates exhaustion as a
prerequisite to judicial review. Austin Lakes Joint Venture v. Avon Utils., Inc., 648
N.E.2d 641, 644 (Ind. 1995). Thus, where an administrative remedy is readily
available, “filing a declaratory judgment action is not a suitable alternative” to
exhaustion. Carter v. Nugent Sand Co., 925 N.E.2d 356, 360 (Ind. 2010).
[17] The exhaustion doctrine is supported by strong policy reasons and
considerations of judicial economy.
3
The Town cites cases indicating that failure to exhaust administrative remedies “creates a jurisdictional
defect.” Town Br. at 24 (quoting Common Council of City of Hammond v. Matonovich, 691 N.E.2d 1326, 1328
(Ind. Ct. App. 1998). However, “our supreme court has indicated that failure to exhaust administrative
remedies constitutes procedural error,” not jurisdictional error. Grdinich v. Plan Comm’n for Town of Hebron,
120 N.E.3d 269, 274-75 (Ind. Ct. App. 2019) (citing First Am. Title Ins. Co. v. Robertson, 19 N.E.3d 757, 760
(Ind. 2014), amended on reh’g on other grounds, 27 N.E.3d 768 (Ind. 2015)).
4
We note that the doctrine of exhaustion of administrative remedies does not apply only to “agencies” as
defined under Administrative Orders and Procedures Act (AOPA), Title 4, Article 21.5 of the Indiana Code;
it also applies in non-agency situations where there are available statutory remedies. Id.; see also, e.g.,
Indianapolis-Marion Cty. Pub. Library v. Shook, LLC, 835 N.E.2d 533, 538 (Ind. Ct. App. 2005) (noting “the
exhaustion doctrine essentially applies to cases that involve statutory or administrative remedies”).
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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.
Johnson v. Celebration Fireworks, Inc., 829 N.E.2d 979, 982 (Ind. 2005) (alteration
in original) (quoting Austin Lakes, 648 N.E.2d at 644).
[18] Here, in challenging the 2018 Ordinance, Graham/Disser had an
administrative remedy available to them under Indiana Code Section 8-1.5-3-
8.2. As owners of property connected to and served by the Water Utility and
who attended the public hearing on the new water rates, they should have
challenged those rates by filing a written petition with the Town Council within
five days after the ordinance was adopted. Id.5 Pursuant to state law, the
petitioner in the petition is to set forth the specific grounds for objection, thus
affording the Town the opportunity to compile a factual record, review its
actions in light of the stated objections, and correct any of its errors. Id.
Because it is undisputed that Graham/Disser failed to file such a petition, this
matter was not properly before the trial court. E.g., Turner, 740 N.E.2d at 861-
62.
5
There is no allegation or evidence that a petition had been filed with the IURC under Indiana Code Section
8-1.5-3-8.3, which would have precluded a remedy under section 8.2. I.C. § 8-1.5-3-8.2(b)(5).
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[19] There are exceptions to the general requirement to exhaust administrative
remedies. For example, exhaustion is not required where it would be futile,
e.g., Scheub v. Van Kalker Family Ltd. P’ship, 991 N.E.2d 952, 958 (Ind. Ct. App.
2013), where the agency action is ultra vires, e.g., Ind. Dep’t of Envtl. Mgmt. v.
Twin Eagle LLC, 798 N.E.2d 839, 844 (Ind. 2003), where exhaustion would
cause irreparable injury, S. Bend Fed’n of Teachers v. Nat’l Educ. Ass’n—S. Bend,
180 Ind. App. 299, 311, 389 N.E.2d 23, 31 (Ind. Ct. App. 1979), or where other
equitable considerations preclude exhaustion, Barnette v. U.S. Architects, LLP, 15
N.E.3d 1, 10 (Ind. Ct. App. 2014).
[20] Graham/Disser contend that pursuing the administrative remedies available to
them would have been futile because they challenged the constitutionality of
Indiana Code Section 8-1-2-103(d), as applied, and the Town does not have the
power to declare a statute unconstitutional. However, “[e]stablished
administrative procedures may not be bypassed simply because a party raises a
constitutional issue; otherwise they could be circumvented by the mere
allegation of a constitutional deprivation.” Barnette, 15 N.E.3d at 10. Rather,
[e]ven if the ground of the complaint is the unconstitutionality of
the statute, which may be beyond the agency’s power to resolve,
exhaustion of administrative remedies may still be required
because administrative action may resolve the case on other
grounds without confronting broader legal issues.
Outboard Boating Club of Evansville, Inc. v. Ind. State Dep’t of Health, 952 N.E.2d
340, 344 (Ind. Ct. App. 2011) (quoting Twin Eagle, 798 N.E.2d at 844), trans.
denied; see also State v. Sproles, 672 N.E.2d 1353, 1360-61 (Ind. 1996) (noting
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arguments that would allow taxpayers to bypass administrative procedures in
constitutional challenges must be addressed to the legislature as “[r]equiring
exhaustion of administrative remedies even in constitutional cases is well
within legislative discretion”). Thus, the exhaustion requirement “should not
be dispensed with lightly on grounds of ‘futility.’” Johnson, 829 N.E.2d at 984
(quotations and citation omitted). 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.” Id.
[21] In this case, the Town had the power to supply a remedy. It could decide on
administrative review that, for example, the ordinance must be changed or
repealed because it erroneously charges customers twice for the same service, as
Graham/Disser allege; such a decision would resolve the case and make the
constitutionality of Indiana Code Section 8-1-2-103(d), as applied, moot. Or
the Town could decide that the ordinance should be repealed because it was
enacted solely for the purpose of harassing annexation remonstrators like
Graham/Disser, as they also claim. Graham/Disser may believe it is unlikely
that the Town will grant them such relief on agency review, but “the mere fact
that an administrative agency might refuse to provide the relief requested does
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not amount to futility.” Johnson, 829 N.E.2d at 984. Administrative review
would not have been futile in this case.6
[22] Nor do we discern any other exception to the exhaustion requirement. The
Town’s action was not ultra vires; it had legal authority to adopt and/or amend
a rate ordinance. I.C. § 8-1.5-3-8 and -8.1. Graham/Disser do not allege that
exhaustion would have caused them irreparable injury; in fact, the Town
voluntarily delayed implementation of the 2018 Ordinance. And
Graham/Disser point to no other equitable consideration that would preclude
exhaustion, such as equitable estoppel. See, e.g., Barnette, 15 N.E.3d at 10.
Conclusion
[23] Because Graham/Disser were required to exhaust their administrative remedies
before seeking access to the courts and failed to do so,7 the trial court did not err
in granting summary judgment to the Town.
[24] Affirmed.
Riley, J., and Pyle, J., concur.
6
Graham/Disser also state in one sentence of their reply brief that this case was properly before the trial
court because “at least one of the issues falls within the ‘primary jurisdiction’ of the courts rather than with
the government agencies.” Reply Br. at 9. However, to the extent they raised the issue of “primary
jurisdiction,” that issue is waived because (1) Graham/Disser failed to provide cogent argument and citation
to relevant authority as required by Appellate Rule 46(A)(8), and (2) an issue may not be raised for the first
time in a reply brief, e.g., Monroe Guar. Ins. Co. v. Magwerks Corp., 829 N.E.2d 968, 977 (Ind. 2005).
7
Given our holding, Graham/Disser’s claims regarding the withdrawal of admissions and partially stricken
affidavits are moot.
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