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Indiana Supreme Court: Court Hands Down 2 On Wednesday, June 17
Posted in Litigation

On Wednesday, the Indiana Supreme Court handed down two opinions.  Henri v. Curto addressed appellate issue preservation under Trial Rules 50 and 59.  Indiana Department of Revenue v. Kitchin Hospitality addressed whether, before 2007, hotels were entitled to tax exemptions for their utility purchases.

Henri v. Curto

By Ashley Paynter

In Henri v. Curto, the Indiana Supreme Court held that under Trial Rule 59, an issue or ground for appeal is “‘appropriately preserved during trial’ if it is properly asserted in a motion for judgment on the evidence filed either before the case is submitted to the jury, after submission and before judgment is entered on the verdict, or in a motion to correct error.”  The court explained that the Rule’s use of the phrase “during trial” is intended “to require that a claim of insufficient evidence must be preserved by proper presentation to the trial court.” 

The issue in Henri arose out of the disharmonious interplay of Trial Rules 50 and 59.  Specifically, Trial Rule 50(A)(4) states that a party may move for judgment on the evidence in a motion to correct errors; Trial Rule 50(A)(5) states that a party may raise the issue of insufficiency of the evidence on appeal for the first time in criminal appeals but not civil appeals.  Conversely, Trial Rule 59, the Rule that governs motions to correct error, is only mandatory when a party seeks to address newly discovered material evidence, or a claim that a jury verdict is excessive or inadequate.  The rule states that all other issues “appropriately preserved during trial” may be initially addressed in the appellate brief. 

Addressing the interplay, the Indiana Supreme Court concluded that a strict, literal interpretation of the phrase “during trial” would preclude a party from presenting an appellate challenge of insufficient evidence, despite the party raising the issue in a motion for judgment on the evidence through a motion to correct error (as authorized by Rule 50(A)(4)), or even if the party filed a motion for judgment on the evidence post-verdict but before the entry of judgment (as authorized by Rule 50(A)(3)).  Instead of adopting a strict construction, the Court chose to harmonize Trial Rules 50 and 59 and came to the conclusion that a challenge to sufficiency of the evidence “may not be raised on appeal in a civil case if not previously preserved in the trial court by either a motion for judgment on the evidence filed before judgment or in a motion to correct error.”

Ashley Paynter is a student at the Indiana University School of Law – Indianapolis, and a summer associate with Bingham McHale.

Indiana Department of Revenue v. Kitchin Hospitality, LLC

By Viki Lewinski

In Indiana Department of Revenue v. Kitchin Hospitality, LLC, a divided Indiana Supreme Court held that hotels are not entitled to a tax exemption for their utility purchases. Kitchin Hospitality, LLC operated fourteen hotels in Indiana during 2004 and 2005.  It initially paid gross retail tax on its utility purchases for those hotels, but later filed claims with the Indiana Department of State Revenue seeking a refund, claiming that utility purchases fell within a 1992 tax exemption for tangible personal property "that guests use up, remove, or otherwise consume while staying at a hotel."  The 1992 tax exemption did not define “tangible personal property.”  In 2007, the General Assembly amended the exemption "to specify that it did not apply to transactions involving electricity, water, gas, or steam," but this amendment came years after the period at issue in this case. 

In a 3-2 decision, the Indiana Supreme Court, analyzing the language of the exemption differently than the Tax Court, concluded that “the using up or consumption of the tangible personal property in question must meet two tests in order for the property to be exempt from tax:  first, the property must be used up or otherwise consumed ‘during occupation of the rooms.’  Second, the property must be used up or otherwise consumed ‘by a guest.’”  In this case, the Court concluded that neither test was met because, in addition to the hotel rooms lacking individual utility meters to monitor guests’ utilities use, the utilities were used up or consumed regardless of whether the guest rooms were occupied or vacant.  Therefore, the utilities were used or were consumed by the hotel and not by a guest. 

Justices Dickson and Rucker dissented, believing that the Indiana Supreme Court should defer to the Indiana Tax Court’s contrary decision, on the basis that the Tax Court was created “to consolidate tax-related litigation in one court of expertise.”

Viki Lewinski is a student at the Indiana University School of Law – Indianapolis, and a summer associate with Bingham McHale.

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