Madison County, Tennessee v. Tennessee State Board Of Equalization

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
FEBRUARY 20, 2008 Session
MADISON COUNTY, TENNESSEE v. TENNESSEE STATE BOARD OF
EQUALIZATION, ET AL.
Direct Appeal from the Chancery Court for Madison County
No. 63630 James F. Butler, Chancellor
No. W2007-01121-COA-R3-CV - Filed May 27, 2008
Several taxpayers appealed Madison County’s valuation of the taxpayers’ limited partnership
property to the Tennessee State Board of Equalization. The administrative law judge scheduled a
pre-hearing conference, with notice being sent to the taxpayers and Madison County. Some
confusion arose, and no representative for Madison County attended the conference. The
administrative law judge entered a default judgment against Madison County, and Madison County
timely filed a petition to reconsider with the administrative law judge. The administrative law judge
took no action on the petition, and after twenty days, the petition was deemed denied by operation
of law. Madison County then failed to appeal the administrative law judge’s denial of the petition
to reconsider within thirty days to the Assessment Appeals Commission. The Assessment Appeals
Commission thereafter issued the Official Certificates of Assessment. Madison County filed a
motion to reconsider the Official Certificates with both the administrative law judge and the Board
of Equalization, seeking relief under Rule 60.02 of the Tennessee Rules of Civil Procedure. The
administrative law judge denied the motion, but the Board of Equalization granted relief and
remanded the matter to the administrative law judge. The taxpayer defendants then filed a petition
with the Board of Equalization, challenging the Board’s order setting aside the default judgment.
The taxpayers filed a petition for review in chancery court in Madison County. Thereafter, the Board
held a hearing, reversed its prior order, and reinstated the default judgment against Madison
County. Madison County filed a petition for review in chancery court in Madison County pursuant
to Tenn. Code Ann. § 4-5-322, seeking review of the Board’s reinstatement of the default judgment.
The chancery court granted the taxpayers’ motion for summary judgment. Madison County appeals,
and we affirm.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Chancery Court Affirmed
ALAN E. HIGHERS, P.J., W.S., delivered the opinion of the court, in which HOLLY M. KIRBY , J.,
joined, and W. FRANK CRAWFORD , J., did not participate.
C. Jerome Teel, Jr., Jackson, TN for Appellant
Lewis Cobb, Jackson, TN (Court of Appeals oral argument only), for Appellant
David C. Scruggs, Memphis, TN, for Appellee, Jackson Bond, et al
OPINION
I. FACTS & PROCEDURAL HISTORY
The case before us has an unusual procedural posture that must be examined in detail.
Several taxpayers (“taxpayer defendants”) appealed the property tax valuations assessed by Madison
County, Tennessee. The taxpayer defendants took issue with the 1999, 2000, 2001, and 2003
valuations of property owned by their limited partnerships.1 The local board of equalization upheld
the valuations, and the taxpayer defendants appealed to the Tennessee State Board of Equalization
(“the Board”). The parties agreed to hold the appeal in abeyance pending the outcome of the Spring
Hill litigation, which involved a similar question of valuation. The Middle Section of this Court
issued the opinion of Spring Hill, L.P. v. Tennessee State Bd. of Equalization, No.
M2001-02683-COA-R3-CV, 2003 WL 23099679 (Tenn. Ct. App. Dec. 31, 2003), and thereafter,
the Administrative Law Judge (“ALJ”) scheduled a pre-hearing conference2 for November 29, 2004.
At the pre-hearing conference held on November 29, the ALJ entered default judgment
against Madison County and in favor of the taxpayer defendants.3 The order, entered December 8,
1
The limited partnerships involved in this dispute are Jackson Bond, L.P.; Madison Partners, L.P.; and Jackson
Parkway Partners, L.P.
2
The Uniform Administrative Procedures Act provides as follows concerning pre-hearing conferences:
In any action set for hearing, the administrative judge or hearing officer assigned
to hear the case[ ] . . . may direct the parties or the attorneys for the parties, or both,
to appear before the adm inistrative judge or hearing officer for a conference to
consider:
(A) The simplification of issues;
(B) The necessity or desirability of amendments to the pleadings;
(C) The possibility of obtaining admissions of fact and of documents that will avoid
unnecessary proof;
(D) The limitation of the number of expert witnesses; and
(E) Such other matters as may aid in the disposition of the action.
Tenn. Code Ann. § 4-5-306(a)(1) (2005).
3
The Uniform Administrative Procedures Act provides as follows:
If a party fails to attend or participate in a pre-hearing conference, hearing or other
stage of a contested case, the administrative judge or hearing officer [ ] . . . may
hold the party in default and either adjourn the proceedings or conduct them
without the participation of that party, having due regard for the interest of justice
and the orderly and prompt conduct of the proceedings.
(continued...)
-2-
2004, indicated that “[a] copy of the notice [of the hearing] was sent to the Madison County Assessor
on October 20, 2004. Pursuant to this notice, a prehearing conference was conducted. [ ] The
Madison County Assessor failed to attend or participate in the prehearing conference either
personally or by authorized representative.” Finding Madison County in default, the ALJ then
decided the appeal on the record, which included the defendant taxpayers’ sworn forms setting forth
the value of the property in question: “[b]ased on the record, the fair market value of the property
should be set as contended by the taxpayer.”
On December 20, 2004, Madison County filed a petition to reconsider the ALJ’s decision.4
Madison County gave the following account as to why a representative was not present at the pre-
hearing conference:
William S. Carman, Sr., attorney for Madison County did not
receive Notice of the pre-hearing conference by the Administrative
Judge.5
...
. . . [T]he Madison County Assessor contacted counsel and
briefed him on the matter. The inference was drawn by counsel . . .
that the hearing of this matter set for November 29, 2004 would be a
formality, the finding in SPRING HILL, L.P., et al. v. TENNESSEE
STATE BOARD OF EQUALIZATION, et al., being dispositive. A
further inference drawn, in error, was that the various counties’
interest, including Madison County’s interest, would be represented
by the Division of Property Assessments.
...
Thereafter, staff for counsel was instructed to place a call to
counsel for the Division of Property Assessments, the purpose being
to confirm that the Division of Property Assessments would represent
Madison County’s interest in the hearing on November 29, 2004. For
reasons impossible to determine, that call was never made and the
3
(...continued)
Tenn. Code Ann. § 4-5-309(a) (emphasis added).
4
“Any party, within fifteen (15) days after entry of an initial or final order, may file a petition for
reconsideration, stating the specific grounds upon which relief is requested. . . .” Tenn. Code Ann. § 4-5-317(a).
5
The petition goes on to clarify that “Counsel makes no assertion that he is entitled as a matter of law or
regulation, to courtesy of Notice, when Notice is given directly to his client, nor does he demand extraordinary
communications to assure there is no confusion as to a docketed matter.” (Vol 1 p45). Rather, Madison County argued
that customarily, especially in civil courts, “a courtesy call will be made to the secretary of counsel, by staff, to inquire
whether or not counsel has been detained in another matter. . . . Counsel does not seek to impose rules or courtesies
of the civil courts upon the Administrative Judge, but respectfully submits there is a rational basis for giving Notice to
counsel and for other courtesies.”
-3-
matter was not placed on counsel’s calender. Counsel did not appear
at the hearing.
Madison County argued that the “failure to appear on November 29, 2004, is due to excusable
neglect for failures of communication and not the fault [of] any person or party, but, under the
circumstances, nevertheless, excusable, for the reasons shown.”
The ALJ did not act on the petition within twenty days, which had the effect of a denial.6
Madison County failed to appeal the orders to the Assessment Appeals Commission after the ALJ
denied the petition to reconsider.7
The Assessment Appeals Commission issued the Official Certificates of Assessment on
March 8, 2005. On March 22, 2005, Madison County filed a motion to reconsider the official
certificates with both the ALJ and with the Board, seeking relief under Rule 60.02 of the Tennessee
Rules of Civil Procedure, as embodied in section 1360-4-1-.01(3) of Uniform Rules of Procedure
for Hearing Contested Cases Before State Administrative Agencies.8 The ALJ denied the motion
to set aside the default judgment, and Madison County did not appeal this ruling. The Board, on the
other hand, granted Madison County’s motion to set aside the judgment and remanded the matter
to the ALJ. The taxpayer defendants then filed a petition with the Board, asking that the Board
reconsider its order setting aside the default judgment.9 The Executive Director of the Board sent
a letter to the ALJ which denied the taxpayer defendants’ motion to reconsider.
The taxpayer defendants filed a petition for review in chancery court in Madison County,
challenging the fact that the Board entered an order setting aside the original default judgment
without holding a hearing. Thereafter, the Board held a hearing on December 7, 2005, reversing its
prior order and reinstating the default judgment against Madison County. The Board’s order
reinstating the default judgment reads, in relevant part: “[T]he Order Setting Aside Default dated
May 4, 2005, should be vacated. [R]elief under to [sic] TRCP 60.02 is not available to Madison
County pursuant to the Tennessee Supreme Court’s holding in Food Lion, Inc. v. Washington Co.
6
“If no action has been taken on the petition within twenty (20) days, the petition shall be deemed to have
been denied.” Tenn. Code Ann. § 4-5-317(c).
7
“Appeals from initial decisions of administrative judges or hearing examiners for the state board of
equalization m ust be filed within thirty (30) days from the date the initial decision is sent.” Tenn. Code Ann. §
67-5-1501(c).
8
“ In any situation not specifically addressed by these rules, reference may be made to the Tennessee Rules
of Civil Procedure for guidance as to the proper procedure to follow, where appropriate and to whatever extent will best
serve the interests of justice and the speedy and inexpensive determination of the matter at hand.”
9
Among other issues, the taxpayer defendants alleged that the Board violated Rule 0600-1-.15 of the Rules
of the State Board of Equalization by failing to hold a hearing. The taxpayer defendants also argued that the Board acted
in contravention of the Open Meeting Act, Tenn. Code Ann. § 8-44-103(b).
-4-
Beer Board, et al., 700 S.W.2d 893, 895 (Tenn. 1985). [T]he final Official Certificates entered on
March 8, 2005, are reinstated.”
On January 10, 2006, Madison County filed a petition for review in chancery court pursuant
to Tenn. Code Ann. § 4-5-322, seeking review of the Board’s reinstatement of the default judgment.
(Vol 1 p1). The Board filed an answer and both sides filed motions for summary judgment. The
chancery court held a hearing on both motions for summary judgment on January 10, 2007. The
court took the matter under advisement, and on April 30, 2007, granted the taxpayer defendants’
motion for summary judgment.10 The chancery court summarized the matter before it as “whether
or not there are genuine issues of material fact which would mandate a hearing on [Madison
County’s] Petition for Review. If there are, then the hearing would proceed whereby the Board’s
action in reinstating the default judgment would be reviewed using the standard set for[th] in
Tennessee Code Annotated §4-5-322 (h)(1-5).” The court went on to point out that “[w]hile the
County would have the Court focus on the perceived unjust and inappropriate default judgment
rendered by the ALJ on November 29, 2004, that issue is not before this Court.” The chancery court
determined that the “main disputed ‘fact’ is whether or not the staff attorneys for the Division of
Property Assessments w[ere] representing the County at the November 29, 2004 [pre-conference]
hearing.” The court pointed out that the issue “has been reviewed by the ALJ two times and the
Board one time. All have denied relief after full consideration of this core issue.”
The chancery court proceeded to analyze whether Madison County had offered any proof that
the Board arbitrarily or capriciously denied its motion for Rule 60 relief. The chancery court found
that “[t]he Board obviously considered these arguments at the full hearing on December 7, 2005 and
rendered a conclusion that because the County failed to present an adequate excuse for failing to
appeal the adverse rulings of the ALJ, that it was not entitled to Rule 60 relief.” The court concluded
that Madison County “has failed to present any admissible evidence that the Board, in making it’s
decision, [sic] violated any of the standards under which their actions are to be judged. While
reasonable minds might disagree as to the correctness of the ruling, the Court should not substitute
it’s judgment [sic] for that of the Board[.] . . .” It is from this ruling that Madison County now
timely appeals to this Court.
II. ISSUES PRESENTED
Madison County contends that the chancery court erred in granting the Board’s motion for
summary judgment because the Board arbitrarily and capriciously denied Madison County’s Rule
60.02 motion to set aside the default judgment. We affirm the decision of the chancery court.
10
The order incorporated Chancellor Butler’s findings of fact and conclusions of law, which were contained
in a letter to the parties dated April 13, 2007.
-5-
III. STANDARD OF REVIEW
When dealing with a decision made by an administrative agency following a contested case
proceeding, this Court applies the same standard of review as that applied by the chancery court.
Terminix Intern. Co., L.P. v. Tennessee Dept. of Labor, 77 S.W.3d 185, 191 (Tenn. Ct. App. 2001)
(citing Ware v. Greene, 984 S.W.2d 610, 614 (Tenn. Ct. App. 1998)). Thus, we are guided by the
standards set forth in Tenn. Code Ann.§ 4-5-322(h):
The court may affirm the decision of the agency or remand the case
for further proceedings. The court may reverse or modify the decision
if the rights of the petitioner have been prejudiced because the
administrative findings, inferences, conclusions or decisions are
(1) In violation of constitutional or statutory provisions;
(2) In excess of the statutory authority of the agency;
(3) Made upon unlawful procedure;
(4) Arbitrary or capricious or characterized by abuse of discretion or
clearly unwarranted exercise of discretion; or
(5)(A) Unsupported by evidence that is both substantial and material
in the light of the entire record.
“Factual issues are reviewed upon a standard of substantial and material evidence, and not upon a
broad, de novo review.” Southern Ry. Co. v. State Bd. of Equalization, 682 S.W.2d 196, 199 (Tenn.
1984) (citing CF Industries v. Tennessee Public Service Commission, 599 S.W.2d 536, 540 (Tenn.
1980)); see also Mosley v. Tennessee Dept. of Commerce and Ins., 167 S.W.3d 308, 316 (Tenn.
Ct. App. 2004) (“[T]his Court’s review of the facts is limited to a determination of whether or not
there is substantial and material evidence in the record to support the decision of the administrative
agency.”); Wayne County v. Tennessee Solid Waste Disposal Control Bd., 756 S.W.2d 274, 279
(Tenn. Ct. App. 1988) (citations omitted). We must uphold the agency’s factual determination if
there exists “such relevant evidence as a reasonable mind might accept to support a rational
conclusion and such as to furnish a reasonably sound basis for the action under consideration.” Id.
at 279–80 (quotation omitted). Substantial and material evidence means something more than a
scintilla or glimmer, but something less than a preponderance of the evidence. Mosley, 167 S.W.3d
at 316 (quoting Wayne County v. Tennessee Solid Waste Disposal Control Bd., 756 S.W.2d 274, 280
(Tenn. Ct. App. 1988)).
An agency decision is considered arbitrary and capricious if it is not supported by substantial
and material evidence, or if the decision rendered was “caused by a clear error in judgment.”
Jackson Mobilphone Co., Inc. v. Tennessee Public Service Comm’n, 876 S.W.2d 106, 110 (Tenn.
Ct. App. 1993) (citations omitted). “An arbitrary decision is one that is not based on any course of
reasoning or exercise of judgment, or one that disregards the facts or circumstances of the case
without some basis that would lead a reasonable person to reach the same conclusion.” Id. at 111
(internal citations omitted).
-6-
IV. DISCUSSION
First, Madison County argues that the Board acted arbitrarily and capriciously by upholding
the default judgment against it because the ALJ “used procedure not in accord with the law[.]”11
Later in its brief, Madison County argues that “in granting the default judgment, the ALJ failed to
hear proof on the valuation of properties and failed to apply the Spring Hill decision which was the
law of the State of Tennessee.” If Madison County disputed the valuation employed by the ALJ,
then it could have proceeded via the proper avenues of appeal. Likewise, if Madison County
believed that the Division of Property Assessments appeared on its behalf at the hearing, it had the
opportunity to appeal the ALJ’s decision. It is undisputed that the Madison County Property
Assessor failed to appear at the pre-hearing conference. Madison County contends, however, that
the Division of Property Assessments agreed to appear on its behalf, and an attorney from the
Division of Property Assessments was present at the hearing. Whether the Division of Property
Assessments was in fact acting on behalf of Madison County is a question of fact, and there is
substantial and material evidence in the record to support the Board’s conclusion that the Division
of Property Assessments was not representing Madison County. But in any event, this is not the
issue at hand. We find Madison County’s argument somewhat circular, leading back to the fact that
they failed to appeal the ALJ’s denial of their petition to reconsider. Thus, the issue before the Board
was whether Madison County’s “ignorance of the law” in failing to appeal was excusable error or
fell under some other provision under Rule 60.02 which would entitle them to relief.
As to this issue, Madison County argues that Rule 60 should be given liberal construction.12
Again, Madison County ignores the fact that they failed to appeal, and that failure, admittedly, was
due to its attorney’s unfamiliarity with the law. The case law is clear that “mistake” as contemplated
in Rule 60.02 does not include a mistake in law. See generally Kilby v. Sivley, 745 S.W.2d 284, 287
(Tenn. Ct. App. 1987) (“The mere fact that a lawyer is ignorant of the rules or mistakenly reads the
rules is not within itself reason to invoke Rule 60.02(1), Tenn. R. Civ. P. To grant relief in every
case where a lawyer is mistaken about the rules or is negligent in reading the rules would emasculate
the rules pertaining to filing of notice of appeal.”). As our Supreme Court explained in Food Lion,
Inc. v. Washington County Beer Board, 700 S.W.2d 893, 896 (Tenn. 1985), “[i]f this Court were
to hold that ignorance of the law is a proper ground for relief under Rule 60.02, Tennessee Rules of
Civil Procedure, it is hard to conceive how any judgment could be safe from assault on that ground.”
11
Madison County states in its brief that the Board’s decision was unsupported by substantial and material
evidence, and thus, is arbitrary and capricious. Madison County fails to support the contention or mention the issue
again. Thus, we will not address it. See Bean v. Bean, 40 S.W.3d 52, 56 (Tenn. Ct. App. 2000).
12
As to the cases cited by Madison County in support of its argument, we agree with the Board that the cases
are distinguishable in that they all dealt with lack of notice. In this case, there is no dispute that Madison County
received notice of the pre-hearing conference.
-7-
Finally, Madison County argues that the defendant taxpayers received an inequitable tax
break, and that “[u]nequal treatment under the law by the government is an injustice.” Regardless
of whether this argument has any merit, the fact of the matter is that we are not going to substitute
our judgment for that of the Board’s, as we find substantial and material evidence to support its
decision to deny Rule 60.02 relief. In sum, we find that the Board did not act arbitrarily and
capriciously, and thus we affirm the decision of the chancery court.
V. CONCLUSION
For the aforementioned reasons, we affirm the decision of the chancery court. Costs of this
appeal are taxed to Appellant, Madison County, for which execution may issue if necessary.
___________________________________
ALAN E. HIGHERS, P.J., W.S.
-8-