7th Circuit Court of Appeals
Civil – Cold Beer Sales
Indiana Petroleum Marketers and Convenience Store Association, et al. v. David Cook
Cold beer will continue to be sold only by licensed liquor stores in Indiana.
The 7th Circuit Court of Appeals has upheld state law that prohibits convenience stores, gas stations and other retailers from selling beer cold in Indiana. In a 13-page opinion written by Judge Diane Sykes, the court found the Indiana Petroleum Marketers and Convenience Store Association failed to carry its burden in showing why the state’s cold-beer statute violates the Equal Protection Clause.
“The Association’s policy arguments for allowing cold-beer sales by grocery and convenience stores are matters for the Indiana legislature, not the federal judiciary,” Sykes concluded.
The convenience stores and gas stations filed a lawsuit in the U.S. District Court for the Southern District of Indiana in May 2013. The plaintiffs argued Indiana’s statutes regarding cold beer sales violated the Commerce Clause, and the Equal Protection and Due Process clauses of the 14th Amendment and parallel provisions in the Indiana Constitution.
However, the association failed to convince the district court and argued their case before the 7th Circuit in January.
Civil – Defamation/Injunction
Kevin B. McCarthy, et al. and Langsenkamp Family Apostolate, et al. v. Patricia Ann Fuller, et al.
The 7th Circuit Court of Appeals found an injunction issued in a case involving religious artifacts and defamation claims was entirely too broad and threatened to silence the defendants completely. But the judges were split over whether the district court should be able to modify the injunction.
Kevin McCarthy and Albert Langsenkamp sued Patricia Ann Fuller and Paul Hartman after a falling out between McCarthy, Langsenkamp and Fuller in a business deal. Fuller, who used to be a religious sister, (an issue previously addressed by the 7th Circuit) owned property given to her by another nun regarding Our Lady of America. McCarthy and Langsenkamp helped to spread the word about the Virgin Mary’s appearance in Rome City, Indiana, in the 1950s, and in gratitude, Fuller gave them a statute and other artifacts of Our Lady.
After the falling out, Hartman, a retired postal inspector, came to Fuller’s aid by launching a campaign to smear McCarthy and Langsenkamp’s reputations, including through writing on a blog. The two sides ended up suing each other on numerous claims, including copyright infringement and defamation.
The jury ruled in favor of plaintiffs McCarthy and Langsenkamp, and at issue in the decision is the defamation ruling and injunction issued by Judge William T. Lawrence. Although the jury was not specific about what it found to be defamatory statements, Lawrence outlined what the defendants could not say, and included in the injunction “as well as any similar statements that contain the same sorts of allegations or inferences, in any manner or forum.”
The permanent injunction ordered Hartman to take down his blog.
The 7th Circuit reversed, finding since the jury wasn’t asked to identify which of the nine possible statements were false and defamatory, it has no findings to support the specificity requirement for a proper injunction; the enjoined statements do not even correspond to the statements the plaintiffs claimed were defamatory; and the injunction is vague and overbroad.
Judges Richard Posner and Ann Claire Williams sent the case back to Lawrence to decide whether to issue a new injunction, and if he does, to keep in mind the criticisms of the 7th Circuit.
Judge Diane Sykes voted to not even allow Lawrence to have an opportunity to correct the errors. He should simply issue an amended judgment without the flawed injunction.
Indiana Supreme Court
Civil Plenary – Administrator Termination/First Impression
Jeffrey Hewitt v. Westfield Washington School Corporation, et al.
An elementary school principal whose administrator’s contract was canceled after school officials learned of his affair with a teacher received constitutional due process in his termination proceedings, the Indiana Supreme Court affirmed.
Jeffrey Hewitt, while principal of Monon Trail Elementary School in Hamilton County, admitted to having a consensual affair with a teacher in his school, who would have been his subordinate. He agreed to resign as principal, but keep his teaching position, effective June 30, 2012. But the school board was concerned about his continued employment as principal and sought the termination to be effective immediately. Hewitt refused and the school board voted 4-0 to immediately terminate his administrator contract.
He sued in February 2012, and the trial court ruled in favor of the school corporation. The Court of Appeals reversed, holding the same procedures used for terminating a teacher’s contract should have been used in terminating his administrator’s contract.
“[W]hile there are no statutory procedures for cancellation of a principal or other administrator contract, there is a statutory section that addresses the power of the superintendent to terminate principals and teachers. The language in that section further demonstrates that the procedure for terminating a teacher and the procedure for terminating a principal are distinct,” Justice Steven David wrote.
The plain language of Hewitt’s contract, the teacher termination statute, and prior case law all support the decision that an opportunity for a hearing with a just cause determination, and all laws governing the employment and dismissal of teachers only apply to Hewitt’s underlying teacher’s contract.
“Because the School only sought to cancel Hewitt’s administrator’s contract and not his underlying teacher’s contract, the School did not need to comply with these provisions,” David wrote.
The justices also held Hewitt’s due process rights were not violated as he was given sufficient notice and an opportunity to be heard before the school board voted to terminate the contract.
Indiana Court of Appeals
Mortgage Foreclosure – Interests in Mortgage
Michael Fish v. 2444 Acquisitions, LLC
An Indiana trial court incorrectly ruled a company was entitled to relief under Indiana Trial Rule 60(B)(6) after deciding a mortgage foreclosure action was void based on who owned interests in the mortgage.
Michael Fish had mortgages on properties owned by 2444 Acquisitions LLC. He sought to foreclose on the properties and through an agreed entry between the parties, Fish was granted more than $260,000 plus interest and foreclosed the mortgage.
Prior to the foreclosure action, Fish testified in a bankruptcy hearing involving Acquisitions that he had transferred the mortgage to Indianapolis Restaurant Ventures LLC, in which he owned 40 percent and a trust owned 60 percent.
Acquisitions filed a motion for relief from judgment of the foreclosure and agreed entry, claiming the judgment was void because Fish did not accurately represent his interest in the mortgage and failed to name IRV as a party who holds an interest. Fish, in an objection, said he remained the party in interest and that Acquisitions’ motion is based on misrepresentation under Ind. Trial Rule 60(B)(3) and therefore untimely since it was not filed within a year of the judgment.
The trial court found that IRV was a real party and should have been named a party to this matter. It found the judgment and agreed entry to be void.
The Indiana Court of Appeals reversed.
“We conclude that the agreed judgment is not void under Indiana Trial Rule 60(B)(6). This is not a case where the trial court lacked subject matter or personal jurisdiction. Consequently, the trial court erred when it determined that Acquisitions was entitled to relief under Indiana Trial Rule 60(B)(6),” Judge Michael Barnes wrote.
Acquisitions’ other claims that the judgment was properly voided also fail because they were not timely filed under Trial Rule 60(B), the court held.
Civil Plenary – Unpaid Wages
Chuck W. Adams, Charles E. Howard, et al. v. ArvinMeritor, Inc., et al.
The Indiana Court of Appeals was divided over whether an inmate who worked for a private company that contracted with the Department of Correction to employ offenders was allowed under Indiana statute to make a claim for unpaid wages.
Chuck Adams worked in ArvinMeritor Inc.’s brake shop, where he eventually earned $1.10 an hour. Comparable work done by non-inmates at a Plainfield, Indiana, facility paid at least $11.71 per hour, Adams alleged.
After he was injured on the job and allegedly improperly treated, he filed a lawsuit for unpaid wages against Meritor and state defendants, which was joined by other inmate brake shop employees. Adams’ lawsuit also stated a personal injury claim against other medical and state defendants. The trial court granted the defendants’ Trial Rule 12(B)(6) motions to dismiss the wage claim, after finding Adams had no private right of action to sue for such wages. The court also granted the defendants’ motion on the personal injury claim on the basis that Adams did not exhaust his administrative remedies.
The majority noted Meritor is a private enterprise subject to the Wage Payment Statute. At the time Adams filed his complaint, the only limitation in I.C. 11-10-7 on an offender’s wages was that he or she was not eligible for unemployment compensation benefits. I.C. 11-10-7-4 provides “at least an implied right to sue for failure to pay the prevailing wage” because the Legislature later amended the chapter to specifically exempt criminal offenders in a facility operated by the DOC, Judge Margret Robb wrote for the majority.
“There may be other impediments to Adams’s recovery of the wages to which he claims he is entitled which will be discerned at a later stage in the development of the record. But Adams’s complaint, filed prior to May 9, 2013, has on its face stated a claim upon which relief could be granted,” she wrote.
Judge Melissa May dissented on this point, believing Blanck v. Ind. Dep’t of Corr., 829 N.E.2d 505, 509 (Ind. 2005), and Kimrey v. Donahue, 861 N.E.2d 379, 382 (Ind. Ct. App. 2007), trans. denied, do not permit reversal based on only an implied right of action.
“The majority implies a cause of action on the premise that such was the legislature’s intent. But our Supreme Court has cautioned that legislative intent is best determined by what the statutory language itself includes and not include,” May wrote.
The judges all agreed that summary judgment was proper for the defendants on Adams’ personal injury claim because he did not exhaust administrative remedies. He argued the DOC’s grievance procedure could not provide him the specific relief he wanted – monetary damages. But that does not render the administrative remedy “unavailable,” Robb wrote.
The judges also affirmed the decision of the lower court to conduct a hearing in his absence.
Criminal – Sentence/Methamphetamine
Ronald L. Eckelbarger v. State of Indiana
The Indiana Court of Appeals upheld a man’s convictions for making and delivering methamphetamine, but the judges did not agree that the 32-year sentence imposed by the trial court was appropriate.
Ronald L. Eckelbarger was convicted of three counts of Class B felony dealing in methamphetamine – two by delivery and one by manufacturing – and one count of Class D felony possession of chemical reagents or precursors with intent to manufacture a controlled substance.
His girlfriend, Rebecca Markley, agreed to act as a confidential informant for the state in order to avoid repercussions of a probation violation. She performed two controlled drug buys for methamphetamine from Eckelbarger a week apart. She provided him the pseudoephedrine pills and he provided her meth. A day after the second controlled buy, officers obtained and executed a search warrant, where officers found many items and ingredients needed to make meth.
Eckelbarger contended that his three Class B felony convictions violate the prohibition against double jeopardy and his sentence should be revised because his convictions arise out of an episode of criminal conduct.
The trial court sentenced Eckelbarger to 16 years with four years suspended on each of Counts I, II, and III. As to Count IV, the trial court sentenced Eckelbarger to three years. The trial court ordered the sentences on Counts I and II to be served concurrent with one another and consecutive to the sentence on Count III. The sentence on Count IV was ordered to run concurrently with the sentence on Count III.
The judges concluded that Eckelbarger’s acts of delivering methamphetamine and manufacturing methamphetamine were not part of the same continuous offense, so his convictions do not constitute double jeopardy.
And because the crimes were distinct in nature and not part of a continuous transaction, his crimes were not part of a single episode of criminal conduct, Judge Robert Altice wrote. Because of this, the trial court was not constrained to impose a sentence capped at the 30-year advisory sentence for a Class A felony.
Altice and Judge Elaine Brown voted to keep his 32-year sentence in place, but Judge Patricia Riley believed it should be revised based on Williams v. State, 891 N.E.2d 621 (Ind. Ct. App. 2008). Williams was a similar case to Eckelbarger’s in which the court reasoned that the state may not “pile on” sentences by postponing prosecution in order to gather more evidence. She would elect to order an aggregate term of 16 years, with 12 executed and 4 suspended to probation.
Civil Plenary – Child Support Modification
State of Indiana v. Anthony Gaw
Madison Circuit Court 5 did not have jurisdiction to rule on a man’s motion for relief from a child support decision entered by Madison Circuit Court 2, the Indiana Court of Appeals concluded.
Anthony Gaw was sentenced to 30 years in prison for arson in 1988. After serving his executed portion, he was released to probation, but that was revoked in August 1998. He remained incarcerated until 2009.
In 1998, his wife filed for divorce in Circuit Court 2. Gaw filed a motion to reduce his child support obligation during his incarceration in 2001, which was denied by the court. In 2014, Gaw filed a motion to set aside judgment under Indiana Trial Rule 60(B)(8) in Circuit Court 5 regarding his 2001 petition. The state was allowed to intervene, as it had already intervened in the ongoing collection process since Gaw owed more than $15,000. Circuit Court 5 granted Gaw’s request and abated the arrearage calculation for the period he was incarcerated.
The appellate judges found that the state has standing to appeal because the order is adverse to it as a properly recognized intervenor. Gaw maintained the state lacked standing because it suffered no harm through the reduction of his arrearage.
Case law has established that actions brought under Rule 60(B)(8) must be filed in the court which issued the judgment or order, Senior Judge Randall Shepard wrote. A court that issues a dissolution decree retains exclusive and continuing responsibility for any future modifications and matters, including child support.
Shepard also noted that because Circuit Court 5 lacked authority to hear Gaw’s request, the appellate court decided not to resolve the appropriateness of its decision.
Civil Collection – Contract Liability
Yellow Book Sales and Distribution Company, Inc. v. JB McCoy Masonry Inc. and Robin J. Brooks
A Hamilton County court erred in holding that the person who signed a contract as “owner” of a company, which later did not pay for advertising in the Yellow Book phonebook, was not personally liable for the amount owed under the contract.
Robin J. Brooks signed the contract with Yellow Book Sales as “owner” of JB McCoy Masonry Inc., the customer identified in the contract. The contract said in several places that the signer personally and individually assumes the full performance of the agreement, including payments of amounts due.
JB McCoy ended up not paying for the advertising, resulting in Yellow Book suing the company and Brooks for the $28,974 owed, plus interest. She testified at trial that while she is the owner of the company, she believed the word “owner” in the contract conveyed that she was acting as a representative. She also testified she did not read the reverse side of the contract.
The trial court concluded Brooks was not liable as a guarantor because the contract contained no language creating a conditional promise to pay, and that she was not liable because the contract was ambiguous concerning whether she signed only on behalf of the company or also agreed to be personally liable.
“Examining the language in the Contract, we conclude that the Contract is not ambiguous in its intent to make Brooks, as the signer, ‘personally and individually’ as well as ‘jointly and severally’ responsible to pay Yellow Book the amounts due under the Contract,” Judge James Kirsch wrote in reversing the lower court.
“Here, the Contract set forth, in three separate places, that the signer, Brooks, was assuming personal liability under the Contract. Brooks’s failure to read the Terms of the Contract on the reverse side does not make the Contract ambiguous.”
The judges remanded for the trial court to make a determination of damages, including interest, and attorney fees.
Domestic Relation – Modification of Child Support/Visitation
Wayne Patton v. Jessica Patton
A trial court should have reduced a father’s child support obligation to his three children because his daughter’s emancipation constitutes a substantial and continuing change, the Indiana Court of Appeals held. The trial court denied the father’s motion because the amount of child support offered differed by less than 20 percent of the amount dictated by the Indiana Child Support Guidelines.
Wayne Patton sought modification of his parenting time with his son W.P. as well as the reduction in $160 in weekly child support for W.P., Ja. P. and Ju. P. In July 2011, Jessica Patton filed for divorce; in 2012, Wayne Patton was convicted of child seduction for fondling Ja. P.’s breasts when she was 16.
Father wanted to no longer have to have supervised visits with his son. He was evaluated by a clinical and forensic psychologist, who found indications of defensiveness and poor judgment and decision-making. The psychologist also expressed doubts regarding father’s psychological functioning.
The trial court denied father’s motion, finding that supervised visits should continue based on the psychologist’s opinion and the nature of graphic comic books given to W.P. by his father. The judge allowed father’s mother to act as supervisor of parenting time or Wayne Patton could continue to visit with his son at the Children’s First Center at his expense.
The judge also denied father’s request for the child support reduction because the amount of child support calculated in the child support obligation worksheet, $136.42, did not differ by more than 20 percent of the support presently calculated.
“[W]e have little trouble concluding that Ja.P.’s emancipation warrants a modification of Father’s support obligation. Father’s current obligation is based on support for three children, whereas he is now obligated to support only two. The Child Support Obligation Worksheet prepared for this case, based on Father’s support of Ju.P. and W.P, and attached to the trial court’s order recommends a support obligation of $136.42 per week. Mother does not argue that the recommended obligation is based on incorrect calculations or faulty assumptions, and we see no other reason to depart from it. Consequently, we remand with instructions to modify Father’s child support obligation to $136.42 per week,” Judge Cale Bradford wrote.
Ordinance Violation – Speeding Ticket/Void Ordinance
Jason J. Maraman v. City of Carmel, Indiana
Indiana’s Home Rule law renders a Carmel city ordinance regarding traffic regulations void because it merely is a duplicate of already existing state law, the Indiana Court of Appeals ruled.
Jason Maraman was pulled over and cited for driving 30 MPH when the speed limit was 20 MPH because it was a construction zone. Maraman asked for a trial, and then moved to dismiss the speeding ticket because Carmel City Ordinance 8-2 simply incorporates by reference the portion of Indiana Code defining motor vehicle infractions.
The trial court found he did speed under the city code and entered judgment against him.
“Carmel’s wholesale adoption of chapters of Indiana Code resulted in its ordinance being nothing more than a ‘duplicate’ of already existing State law,” Judge Melissa May wrote.
“While Carmel may incorporate material by reference, it may not incorporate in a way that duplicates the statutes that create statewide traffic infractions. If a city wishes to establish local speed limits, it may do so in accordance with Ind. Code §§ 9-21-5-3(1), 9-21-5-6, and 9-21-1-3(a)(11) which gives the city the authority to adopt ordinances altering speed limits within the city; however, it is nevertheless prohibited from simply duplicating state imposed speed limits as Carmel City Code § 8-2 attempts to do.”
Miscellaneous – Sex Offender Registration/Ex Post Facto Law
Rex S. Lovett v. State of Indiana
The Indiana Court of Appeals upheld the requirement that man convicted of a sex crime in Washington must also register as a sex offender in Indiana, finding the requirement is not an ex post facto punishment under the Indiana Constitution. But one judge disagreed, and would reverse his registration requirement.
Rex Lovett was convicted of rape of a child and child molestation in Washington state in 1991. When he was released from prison in 2003, he was required to register as a sex offender in that state indefinitely. He moved to Indiana that year, where in 2007, he was required to register as a serious violent predator and comply with more rigorous restrictions after the General Assembly passed amendments to the Sex Offender Registration Act.
Lovett claimed the registration requirement is unconstitutional as applied to him because it violates the ex post facto clause of the state constitution. The trial court denied his petition.
“Lovett was subject to registration requirements in the State of Washington from the date of his conviction; it is not adding to his punishment to require continued registration in Indiana. And he should not be allowed to evade these requirements simply by relocating to Indiana, when the sole basis for that evasion would be a conviction date for a crime committed outside Indiana,” Judge L. Mark Bailey wrote for the majority.
Judge John Baker dissented, pointing to the line of cases, starting with Wallace v. State, 905 N.E.2d 371 (Ind. 2009), in which the courts have plainly held the date of primary importance is the date of the original conviction.
“Notwithstanding the state of the law at the time Lovett moved to Indiana, he is a resident of this State and ‘is entitled to the protections afforded to him by the Indiana Constitution. Therefore, even though he would be required to register as a sex offender under [Washington’s] laws, Indiana’s law controls,’” Baker wrote, citing Hough v. State, 978 N.E.2d 505 (Ind. Ct. App. 2012), trans denied. “Lovett was convicted of a sex offense before Indiana enacted SORA. Therefore, I believe that requiring him to register as a sex offender would violate Indiana’s constitutional prohibition against ex post facto laws; I would affirm the trial court’s judgment.”
Mortgage Foreclosure – Fair Market Value
R.P. Leasing, LLC, Robert C. Waite, and Ilene A. Waite v. Chemical Bank
Because there are genuine issues of material fact as to the fair market value of a property at the time of sale and the true amount of indebtedness on a promissory note, a trial court erred in granting summary judgment in favor a bank on its foreclosure action, the Indiana Court of Appeals ruled.
R.P. Leasing appealed summary judgment in favor of Chemical Bank on its foreclosure action involving Michigan and Indiana properties owned by R.P. Leasing. The company borrowed $700,000 from Chemical Bank to buy the properties. In 2009, the Michigan property was appraised at $1.2 million; in 2013, an appraisal valued the property at $500,000. By 2013, R.P. Leasing had defaulted on the loan, causing the Michigan property to go to a sheriff’s sale. The bank bought the property back through a credit bid for $500,000. It then sought to foreclose on the Indiana property, alleging that the amount the bank was owed was more than $716,000. The bank did not mention the sale of the Michigan property.
The trial court ruled in favor of the bank, ordering foreclosure of the Indiana property. The court denied R.P. Leasing’s motion to correct error.
“The fair market value of the Michigan property at the time of sale is a material issue in this case because, under Michigan law, it is a defense to a deficiency claim (such as the one the Bank brought in the instant case) that the property sold and applied against the Note was sold for less than fair market value,” Judge Edward Najam wrote.” Thus, if R.P. Leasing could show that the fair market value of the Michigan property was more than the $500,000 credit bid, then, as a matter of Michigan law, the set-off applied to the Note would be the fair market value rather than the lesser amount of $500,000.”
The bank submitted evidence designating the fair market value to be $500,000; R.P. Leasing submitted the 2009 appraisal showing the property valued as high as $1.2 million. There is also conflicting designated evidence on the material issue of the true amount of indebtedness owing on the note. As such, summary judgment is precluded, the COA held.
Also, the judges affirmed the denial of R.P. Leasing’s motion for attorney fees because it failed to raise that issue until its motion to correct error.
Civil Tort – Dram Shop Act
F. John Rogers, as Personal Representative of Paul Michalik, Deceased, and R. David Boyer, Trustee of the Bankruptcy Estate of Jerry Lee Chambers v. Angela Martin and Brian Paul Brothers
Civil Tort – Life Insurance Policies/Fraud
Seema Kapoor; Shiv Kapoor; Performance Support Consulting, LLC; Matt Judson; and Regional Construction Services, Inc. v. Steve Dybwad; Cronin Insurance Services, Inc.; Mark Light; et al.
Plaintiffs who purchased cash-value life insurance policies for their employees and deducted those contributions on income taxes that were later disallowed were wrongly denied their day in court against the insurers.
The Indiana Court of Appeals reinstated numerous actual fraud, constructive fraud and negligence claims, reversing a Marion Superior Court order dismissing the complaint. Several plaintiffs each paid hundreds of thousands of dollars annually for policies, according to the record.
In a 54-page opinion, Judge Cale Bradford wrote the trial court erred in finding there were no claims upon which relief could be granted.
“We conclude that the trial court erred in dismissing the following actual fraud claims: (1) the Kapoor Plaintiffs against Dybwad and (2) the Judson Plaintiffs against Light. We conclude that the trial court erred in dismissing the following constructive fraud claims: (1) the Kapoor Plaintiffs against Dybwad, (2) the Judson Plaintiffs against Light, (3) all Plaintiffs against (Cronin Insurance Services Inc.), (4) all Plaintiffs against Fox & Fox, and (5) all Plaintiffs against (Western Reserve Life Assurance Co. of Ohio),” Bradford wrote.
“The trial court erred in dismissing the following negligence claims: (1) all Plaintiffs against Fox & Fox and (2) the Judson Plaintiffs against (Greenwalt Sponsel & Co.). The Judson Plaintiffs, however, may not base a claim of negligence on Greenwalt’s part for any conduct occurring before September 13, 2010. We affirm the judgment of the trial court in all other respects.”
Miscellaneous – Expungement
Jerrell Antonio Key v. State of Indiana
A trial court erred in denying a man’s expungement petition on a Class B felony conviction of aiding robbery because the statute requires a hearing when a prosecutor objects, the Indiana Court of Appeals ruled.
Allen Superior Judge John F. Surbeck denied Key’s petition to expunge the aiding robbery conviction after a prosecutor objected. The prosecutor cited the victim’s objection, the seriousness of the offense, Key’s apparent lack of remorse and other factors.
Judge L. Mark Bailey looked to the plain language of Indiana Code to interpret a case in which the state argued the expungement could be denied under trial rules for the sake of judicial economy.
“Subsection 35-38-9-9(c) provides that if the prosecuting attorney objects, the trial court shall set the matter for a hearing. Because the prosecutor objected, the trial court erred when it did not set a hearing on Key’s petition,” Bailey wrote in reversing the motion to correct error and remanding for further proceedings.
While Key’s Class D felony conviction of resisting law enforcement would be automatically expunged if he met the statutory requirements, Bailey wrote legislators gave courts discretion in expunging more serious crimes, and the trial court does have that discretion concerning Key’s aiding robbery conviction. But he wrote lawmakers also required a hearing when a prosecutor objects so that petitioners are not deprived due process.
“The State argues that requiring a hearing every time the State objects ‘would be a waste of judicial economy, overload busy prosecutors, and incentivize the State not to reply to avoid unnecessary hearings,” Bailey wrote. “We disagree. The statute requires the prosecuting attorney to reply to expungement petitions … so it does not create a disincentive to reply.”
Indiana Tax Court
Tax – Sales/Use Tax/Blended Gasoline
Crystal Flash Petroleum, LLC v. Indiana Department of State Revenue
A convenience store’s process for mixing two grades of gasoline left too many questions unanswered for the Indiana Tax Court to determine if the equipment used in the blending process was tax exempt.
Crystal Flash Petroleum LLC, which operated 25 convenience stores in Indiana during the years at issue, was assessed a sales/use tax on certain ice production, food preparation and mid-grade gasoline equipment. The company paid the assessment but then filed a refund claim with the Indiana Department of Revenue.
When the department denied the refund, Crystal Flash appealed to the Tax Court, claiming the equipment was exempt from the tax under Indiana Code 6-25.5-3.
The Tax Court affirmed summary judgment in favor of the department in regards to the ice production and food production equipment. However, Judge Martha Wentworth denied the department’s motion for summary judgment in regards to the gasoline equipment.
Crystal Flash blended the mid-grade gasoline from hi- and low-grade gasolines then sold the fuel to customers. The department argued mixing pre-existing grades of gasoline is not production because the end fuel is not substantially different. But the Tax Court agreed with the company that there is a genuine issue of material facts as to whether Crystal Flash used its mid-grade gasoline equipment in an integrated production process.
The Tax Court noted from the taxpayers’ point of view, the mid-grade gasoline was different from the hi- and low-grade gasolines individually. Yet while the differing compositions of the gasoline suggests that Crystal Flash used its mid-grade gasoline equipment within an integrated production process, the undisputed material facts did not help the court in determining whether the change in composition was a substantial change for purposes of the department’s equipment exemption.•