Analysis of the Garwood Appeal: Subterfuge and Seized Dogs

By Julian Prager

There has been a lot of notice on websites, e-lists and newspapers of the successful appeal in Garwood and Garwood v Indiana Department of State Revenue in the Indiana Tax Court. This decision is certainly good news for the Garwoods. However, it is only a small, but meaningful, victory in the overall fight against overreaching and excessive governmental tactics used against breeders.

In Garwood, the state Tax Department used an extraordinary procedure permitted under Indiana law to seize the Garwood’s assets in a tax liability case, resulting from failure to pay income and sales taxes. The Garwoods appealed asking for a summary judgment against the state.

The court found these facts to be undisputed:

1. That Kristin and Virginia Garwood owned a dairy farm for almost 30 years.
2. As a result of rising grain prices and falling milk prices, Virginia began buying and selling puppies and breeding them.
3. An animal control officer visited in response to a complaint about the Garwood’s treatment and sales of their dogs. He was refused admission and left information about the animal control law and left. He received two additional complaints in the next three months and contacted the Indiana Attorney General (OAG) to report that the Garwoods may be operating a “puppy mill.”  At that time, the term puppy mill was not defined in Indiana law and certain breeding or dog selling activities were not criminalized.
4. The next month the department issued a number of documents related to the jeopardy tax assessment process.
5. The OAG and the Department descended on the farm and demanded immediate payment of almost $285,000 (unpaid income and sales taxes, penalties, interest and costs) or the state would immediately levy their property for payment.
6. When they could not pay, the Indiana State Police and volunteers from HSUS and Missouri Humane Societies seized 240 dogs, including their house pets and farm dogs. This was followed by a press conference.
7. The Department sold the dogs to HSUS for $300, despite having valued the dogs at $300 each for tax purposes and having spent $550 to purchase two dogs from the Garwoods previously.

Indiana law permits the state to use the jeopardy tax assessment to recover unpaid taxes without notice or a court hearing under specific circumstances. This process is authorized when the taxpayer is likely to quickly leave the state, remove property from the state, conceal their property from state officials or impair the collection of taxes.

The court found that the state had not demonstrated the existence of any of the precedent conditions for a jeopardy tax assessment. They also found that the jeopardy tax assessment was not used to protect the state’s tax interest. They based this, in part, on the sales price received for the dogs from the HSUS and the media circus (the court’s words) following the seizure. The OAG staff was interviewed about shutting down a “puppy mill.”   Based on these factors, the Court held that “the Department wielded the power of jeopardy assessments as a sword to eliminate a socially undesirable activity and close down a suspected ‘puppy mill’, not to fill the state’s coffers with the tax liabilities the Garwoods purportedly owed.”

The Court granted summary judgment to the Garwoods and remanded the matter back to the department to give full effect to the order. So, where does this leave us?

The state has been reprimanded for its improper use of the jeopardy assessments and gets to go through the assessment process again, at a more leisurely pace. The Garwoods get to appeal any decision the state makes again before the state seizes other assets and their final liability is established. It is not quite so clear what effect this decision has with respect to the property seized and disposed of by the state, especially given the Garwood’s reported guilty plea to the charge of failure to pay taxes. That may have to be resolved in a civil case where, based on the state’s own estimates, the cumulative value of the dogs seized was $72,000 and the Garwoods can ask for punitive damages for the state’s excessive zeal.

The effect on the larger issue of excessive, overreaching or unconstitutional seizure of property is even less clear.

• Since this case was not decided on Constitutional grounds, issues whether taking dogs to impose limit laws, or mandatory s/n is taking property for a public purpose, therefore requiring just compensation is an open question.
• Since the state developed a method that can be used against them to value the dogs, the more difficult issue of how you establish the value of a dog used for breeding and the loss of future income in a seizure may go unanswered.
• Since the law involved had clear standards for the use of jeopardy tax assessments, this leaves issues with clear specificity, like of defining abuse or lack of adequate care, unresolved. Laws can still be passed defining anything as abuse or lack of adequate care, without any need for a basis in fact.

The fight will be a long one and is not over by far. As much as we have to worry about the effect of animal rights activists on individuals and the legislature, I am dismayed by the failure of people involved in the sport of dogs, agriculture, commercial breeding, and other animal related industries to unite, or even join in, efforts to fight these attacks on us.

I am concerned that, perhaps, Pogo was right: “We have met the enemy and he is us.”