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Appellate court upholds receivership over deteriorating city-owned properties

April 16, 2019

A long-running legal battle over a deteriorating east side Indianapolis housing complex has once again led to legal defeat for the city, with the Indiana Court of Appeals on Tuesday upholding the appointment of a receiver over the city-owned properties.

At issue in Towne & Terrace Corporation, et al. v. City of Indianapolis, 18A-OV-2310, is the Towne & Terrace residential complex located near East 42nd Street and Post Road. Some of the units in the complex have been acquired while others became the property of the city. The homes owned by the city are vacant and boarded up.  

As crime across Indianapolis surged in recent years — especially in the vicinity where Towne & Terrace is located — the city filed a complaint against the residential complex and four members of its board, alleging excessive police runs to the complex for crimes including homicide, rape and child abuse, among several others. The city sought damages, while T&T countersued for maintenance fees.

The Marion Superior Court granted summary judgment to T&T on the city’s complaint and partial summary judgment on the counterclaim, and the Indiana Court of Appeals affirmed in July 2018.

Meanwhile, as the summary judgment motions were pending, the city moved in September 2017 to appoint a receiver over T&T because one of the board members, Walter Timmons, had died. According to the city, Timmons and his wife Jacqueline had been the only directors serving on the board, so appointing a receiver would protect the city and “the rights of all property owners and … assure the people living at T&T that basic services will be performed.”

In response, T&T said two new board members had been elected after Walters’ death. The complex also filed its own petition for a receiver, alleging Indianapolis “had not paid ‘maintenance fees, assessments, late charges, interest and attorney fees.’”

The Marion Superior Court granted both receivership motions without holding a hearing, finding that “(t)he entire complex of building in Town (sic) [&] Terrace is in a state of disrepair” and noting that the complex’s remaining residents “live in fear.”

Both parties cross-appealed, and T&T argued the trial court erred in granting the city’s receiver petition. The Indiana Court of Appeals agreed, with Judge Edward Najam writing Tuesday that the city failed to comply with the requirements of the Unsafe Building Law, Indiana Code section 36-7-9-4(c)(2018).

Specifically, Najam noted the city did not issue an order requiring T&T to take action under Section 5 of the Unsafe Building Law, nor did it initiate a civil action under Section 17. Additionally, a hearing was never held.  

“In any event, the trial court did not find that the common areas of Towne & Terrace are ‘unsafe premises’ as defined by Indiana Code Section 36-7-9-4(c),” Najam wrote, noting T&T owns only the common areas. “There is simply no factual basis for the appointment of a receiver over T&T pursuant to the UBL, and we reverse the trial court’s appointment of a receiver on that ground.”

Likewise, the COA also reversed the grant of the city’s receivership motion under Indiana Code section 32-30-5-1(7), finding “no evidence in the record to show that the condition of the common areas warrants the appointment of a receiver.”

But the appellate court upheld the grant of T&T’s motion for a receiver over the city’s properties. The court determined the city failed to make a cogent argument that the trial court lacked authority to appoint a receiver over a political subdivision, and that the city waived its argument that the appointment of a receiver would violate separation of powers.

“Waiver notwithstanding, our Supreme Court has held that Article 3, Section 1 (of the Indiana Constitution) ‘relates solely to the state government and officers charged with duties under one of the separate departments of the state, and not to municipal governments and officers,’” Najam wrote. “… Accordingly, the City cannot prevail on this claim.”

Finally, the appellate court rejected the city’s insufficient evidence argument.

The complex is in the same general area as the derelict Oak Tree Apartments, for which the City-County Council this month appropriated $1.3 million to demolish.

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