Opinion
No. CV 03-0478106 S
March 14, 2006
MEMORANDUM OF DECISION
STATEMENT OF THE CASE
The appellants have appealed from the assessment of their property at 29 Parker Avenue in Madison in the amount of $1,863.10. This assessment was levied on the October 1, 2002 Grand List.
The property owners proceeded to pay the full amount of the taxes on the 2002 and 2003 Grand Lists.
In this tax appeal, the defendant town has interposed a special defense . . . that the appellants, even if they were over-assessed, are not entitled to a refund for the taxes they paid in full, without having protested those payments to the tax collector. The defendant argues that paying taxes in full waived their right to collect any refund of any overpayment, and, therefore, the appeal for those tax years must be dismissed. In addition, the defendant argues that they are not entitled to any interest on the overpaid portion because they voluntarily paid more than the applicable percentage of tax as set forth in § 12-117a.
That section requires the taxpayer to pay 90% of the tax assessed if he appeals from an assessment.
Therefore, before addressing the basis for the appeal, the special defense must be decided.
The two issues before the court are: (1) Whether the full payment of taxes assessed without protest of the revaluation of these taxes waives the taxpayers' right of appeal under General Statutes § 12-117a, and (2) whether paying 100 percent, rather than the required ninety percent of the tax assessment, as set forth in § 12-117a, disallows the taxpayers from receiving a refund and/or interest for any overpayment of the amount.
DISCUSSION
A taxpayer may appeal a property tax levied on his real property under Section 12-117a. That section provides in relevant part: "Any person . . . claiming to be aggrieved by the action of the . . . board of assessment appeals . . . in any town . . . may, within two months from the date of the mailing of notice of such action, make application, in the nature of an appeal therefrom . . . The pendency of such application shall not suspend an action by such town . . . to collect not more than seventy-five percent of the tax so assessed or not more than ninety percent of such tax with respect to any real property for which the assessed value is five hundred thousand dollars or more, and upon which such appeal is taken . . . If the assessment made by the board . . . of assessment appeals . . . is reduced by said court, the applicant shall be reimbursed by the town or city for any overpayment of taxes, together with interest and any costs awarded by the court, or, at the applicant's option, shall be granted a tax credit for such overpayment, interest and any costs awarded by the court."
I Is a protest necessary?
In Gifford v. Madison, Superior Court, judicial district of New Haven, Docket No. CV 92 0331827 (May 20, 2004, DeMayo, J.T.R.) ( 37 Conn. L. Rptr. 145), the requirement of a protest to challenge an assessment was raised by the town of Madison as a special defense. The court stated that, "[s]ection 12-117a deals with tax appeals and the issues involved in them. If a formal protest were required it would say so. It is hard to imagine the legislature set up a payment schedule and allowed interest but left all this to become a nullity without an appellant's protest. The conclusion is inescapable, that the taking of the appeal, with its notice to the town, was deemed to be a notice of protest . . . It is the conclusion of the [c]ourt that the appellants [taxpayers] are not required to file a protest or pay under protest once an appeal was taken." Id., 146. See also Rosenblum v. Madison, Superior Court, judicial district of New Haven, Docket No. CV 03 0479466 (December 15, 2005, Meadow, J.T.R.) ("the payment without an official protest is not necessary having instituted the appeal"). See also, CV 03-0478708 S, Maurer v. Madison, Hadden, J.T.R., Superior Court at New Haven, January 30, 2006 ( 40 Conn. L. Rptr. 654).
In the present case, the plaintiff was not required to make a formal protest because the appeal to the Superior Court put the defendant on notice that they were challenging the assessment. Based on the plain language of § 12-117a and the case law, the plaintiffs have not waived their right to an appeal.
II Are the appellants entitled to a refund and/or interest on a voluntary overpayment of taxes?
In the present case, the plaintiffs have paid, not ninety percent of the tax assessment, but 100 percent of it and claim that they are entitled to a refund and interest on any overpayment due. The portion of § 12-117a, which is applicable to an overpayment and whether interest is to be awarded by the court, provides: "The court shall have power to grant such relief as to justice and equity appertains, upon such terms and in such manner and form as appear equitable . . . and, upon all such applications, costs may be taxed at the discretion of the court. If the assessment made by the . . . board of assessment appeals . . . is reduced by said court, the applicant shall be reimbursed by the town . . . for any overpayment of taxes, together with interest and any costs awarded by the court, or, at the applicants' option, shall be granted a tax credit for such overpayment, interest and any costs awarded by the court. Upon motion, said court shall, in event of such overpayment, enter judgment in favor of such applicant and against such . . . town for the whole amount of such overpayment, together with interest and any costs awarded by the court."
This section was construed by the court in Sears, Roebuck Co. v. Board of Tax Review, 241 Conn. 749, 758-63, 699 A.2d 81 (1997). "We begin by recognizing that, as used in § 12-117a, the term `shall' does not carry a fixed connotation. Under the statute, `shall' applies to three forms of relief: reimbursement, interest and costs . . . There is no dispute that the trial court is required to order a municipality to reimburse an aggrieved taxpayer for overpayments resulting from over assessment. Thus, with respect to reimbursement, the term `shall' carries a mandatory connotation. There is also no dispute, however, that a trial court is not statutorily required to award costs to an aggrieved taxpayer. See General Statutes § 12-117a ('costs may be taxed at the discretion of the court'). Thus, with respect to costs, the term `shall' does not carry a mandatory connotation. The question presented in this case is whether the term `shall,' as it applies to interest, carries the mandatory connotation associated with reimbursement or the directory connotation associated with costs." (Citation omitted.) Sears, Roebuck Co. v. Board of Tax Review, supra, 760. In construing the legislature's use of the term "shall," the court looked to the purpose of the statute, which is to "afford an aggrieved taxpayer a forum for challenging, and, if appropriate, correcting a property assessment," and noted that "[t]he right to interest, like the right to costs, is ancillary to this primary purpose." Id., 761. The court concluded that a contextual reading of § 12-117a supported an interpretation that the "use of the term `shall' was intended to be directory." Id. Thus, "whether to provide this form of relief to the [taxpayer]" is "a matter of judicial discretion." Id., 762-63.
The difference between the version of § 12-117a, construed in Sears, Roebuck Co. v. Board of Tax Review, and its newer version presently before the court is the addition of the words "any costs awarded by the court" instead of merely stating "costs."
Pursuant to the "shall" language in § 12-117a, the plaintiff is entitled to a refund for the overpayment of his taxes. In the present case, the court must also decide whether interest is appropriate for any overpayment of the amount owed or only of the ten percent overpayment of the ninety percent mandated, and if so, what the appropriate rate of interest for any such award should be. See Sears, Roebuck Co. v. Board of Tax Review, supra, 241 Conn. 763. In Sears, Roebuck Co., the court agreed that the most appropriate statute on interest is General Statutes § 37-3a(a), because § 12-117a is silent as to any applicable rate. Section 37-3a(a) provides in relevant part: "[I]nterest at the rate of ten percent a year, and no more, may be recovered and allowed in civil actions . . . as damages for the detention of money after it becomes payable." The court noted that the "statute gives rise to two procedural requirements, pursuant to which a trial court must determine: (1) whether the party against whom interest is sought has wrongfully detained money due the other party; and (2) the date upon which the wrongful detention began in order to determine the time from which interest should be calculated." (Internal quotation marks omitted.) Id. Therein, the court also pointed out that "because the plaintiff voluntarily paid more in taxes than was required under § 12-117a [having paid 100 percent of its taxes rather than withholding up to ten percent of its tax obligation during the pendency of the appeal] it may be problematic either to hold that the town `wrongfully detained' the plaintiff's money or to attempt to ascertain exactly when this `wrongful detention began.'" Id., 764.
Any interest awarded under § 37-3a(a) "is intended to compensate the prevailing party for a delay in obtaining money that rightfully belongs to him" Neiditz v. Morton S. Fine Associates, Inc., 199 Conn. 683, 691, 508 A.2d 438 (1986). "A plaintiff's burden of demonstrating that the retention of money is wrongful requires more than demonstrating that the opposing party detained money when it should not have done so. The fact that an award of such interest is discretionary and subject to equitable considerations, rather than automatic, reflects the reality that not all improper detentions of money are wrongful." (Internal quotation marks omitted.) Smithfield Associates, LLC v. Tolland Bank, 86 Conn.App. 14, 26, 860 A.2d 738 (2004), cert. denied, 273 Conn. 901, 867 A.2d 839 (2005).
In the present case, the court must determine whether the plaintiff's overpayment of more than the statutory requirement in § 12-117a of ninety percent constitutes a voluntary payment or money wrongfully detained by the town. As early as 1906 in Morris v. New Haven, 78 Conn. 673, 63 A. 123 (1906), the Connecticut Supreme court addressed the issue of whether an overpayment to the town of a tax assessment to avoid penalties was voluntary. "A payment is voluntary if made by a party informed of all the facts connected with the subject-matter of the payment, and under the influence of no distress or coercion, even though accompanied with a protest . . . It is the compulsion or coercion under which the party is supposed to act which gives him a right to relief . . . Where the parties stand on an equal footing then there is the free exercise of will, and compromise or payment is voluntary and binding." (Citations omitted; internal quotation marks omitted.) Id., 675-76.
In Morris, "the collector had no warrant authorizing him to proceed with the collection of any taxes against the plaintiff upon the list of 1902. The pendency of her appeal had suspended all action in that regard . . . No coercive measures against either her or her estate were threatened or possible, and this she was bound to know. The most that was done was to invite her to pay by the sending of a bill. That invitation she chose to accept. That choice was made in the exercise of her free and unconstrained will, and was therefore voluntary in the fullest sense of that term. It was no less so in that she may have been influenced to make it in the expectation of thereby saving the payment of accruing interest and thus reaping a financial benefit." (Citation omitted.) Morris v. New Haven, supra, 92 Conn. 176.
In Verran Co. v. Stamford, 108 Conn. 47, 142 A. 578 (1928), the court again addressed the voluntariness of an overpayment of taxes. "We have then a situation where a taxpayer, having a tax appeal pending in the Superior Court the result of which is uncertain, but being desirous of avoiding the interest penalty upon the amount which will ultimately be found to be owing, attempts to forecast the decision of the court, upon what basis of computation does not appear, and pays the amount thus arrived at only to find later that the decision of the court is more favorable to him than he had anticipated it would be. We fail to see the theory upon which it can be claimed that such a payment was made under a mistake of either fact or law. Neither in brief nor argument has the plaintiff pointed out any mistake made by it other than the fact that it erroneously guessed what its tax liability would be, nor has it advanced any reason or authority in support of its claim that a payment made under such circumstances was made under a mistake entitling it to relief in this action." Id., 51. The Verran court held that the payment was voluntary and not the result of fraud, duress, accident or mistake, and, therefore, the plaintiff was not entitled to a refund on the overpayment. Id., 52. Accord Bridgeport Screw Co. v. Bridgeport, 125 Conn. 593, 595, 7 A.2d 649 (1939) (plaintiff paid his taxes voluntarily without any coercion or protest, and, therefore, could not recover back any overpayment). Pitt v. Stamford, 117 Conn. 388, 392, 167 A. 919 (1933), established that "if the plaintiff, with knowledge of the facts, paid the taxes voluntarily, he could not recover them back even though they were in [an] amount in excess of what he should have been required to pay . . . Obvious reasons of public policy require limitation of recovery back because of mistake in assessment of taxes voluntarily paid, particularly where the error relates to facts which are within the actual or imputed knowledge of the individual property owner." (Citations omitted.) Pitt v. Stamford, supra, 392; see also Wadsworth Atheneum v. Hartford, Superior Court, judicial district of Hartford, Docket No. CV 94 0538328 (October 25, 1995, Aronson, J.) ( 16 Conn. L. Rptr. 25, 29) (a plaintiff is not entitled to a refund of taxes paid where "nothing suggests that the payment was coerced, involuntary, or otherwise made under protest.").
See also Services Development Corp. v. Willington, Superior Court, judicial district of Tolland, Docket No. CV 98 0066947 (October 14, 2003, Klaczak, J.T.R.) (plaintiff paid the taxes voluntarily with full knowledge, and, therefore, not entitled to recover any overpayment).
Recently in Rosenblum v. Madison, supra, Superior Court, Docket No. CV 03 0479466, which involved nearly identical issues and in which the same special defense was raised by the town of Madison, the court first stated: "In this case, the payment without an official protest is not necessary having instituted the appeal [pursuant to § 12-117a]" and second, it declined to award interest for any refunds granted by the court. The court commented that "[w]hen both the plaintiff and the defendant are at risk for interest payments whether for underpayment or overpayment, the benefit and burden of the statute is shared equally. Otherwise, an advantage would go to the plaintiff to the disadvantage of the entire local tax paying community. That would be neither fair or equitable. Accordingly . . . any refunds made . . . [will] be without interest." In another recent case before this court, the taxpayer was awarded interest for his overpayment because the court concluded that as a result of numerous trial delays during the twelve-year appeal process, a fair and equitable resolution would be an award of four years interest to the taxpayer. Gifford v. Madison, supra, 37 Conn. L. Rptr. 146.
A taxpayer is required by § 12-117a to pay ninety percent of the tax assessed when the amount in dispute is over $500,000. In the present case, the appellants paid their taxes in full or at 100 percent to avoid the eighteen percent penalty; General Statutes § 12-146; if they were found to have been assessed correctly by the defendant. Since this payment was for an amount greater than what was required by § 12-117a, the ten percent was a voluntary payment and the plaintiff is entitled to a refund owed but should not be entitled to recover interest on the ten percent overpayment of his taxes.
The town's special defense also contains language to the effect that interest should be denied because "the plaintiff risked nothing" and costs are kept low by a contingency fee arrangement. It goes on to say "they are virtually guaranteed a reduction by offering a competing appraisal." The court finds this statement relevant to nothing in this case and counsel well knows that in other tax appeals from Madison heard by this court the "competing appraisal" was not a guarantee of reduction.
III The Assessment CT Page 5011
The court turns finally to the underlying issue in this appeal — the fair market value of the subject property on October 2, 2002.While one anticipates that the parties will disagree over that figure, it is rare for the parties to differ on the basics. For example, the living area and its dimensions. Here, the appellants claimed the third floor should not be included in computing the living area. They also disagreed as to how many square feet comprised the area.
After visiting the premises, the court concludes that the third floor space is properly included as living area. The dispute over the square feet of living area persists, and the court is prepared to accept the opinion of the town assessor as to how that figure should be arrived at. In the court's view, that is not the most significant element contributing to value.
Patricia Hedwell, the Madison Assessor, indicated the third floor space was not even included in the 2002 assessment.
The court finds the appraisals offered by the parties to be of little assistance in its efforts. Their utility is seriously undermined by virtue of the fact that a different method is employed by each appraiser in adjusting his comparables.
The comparables utilized by each appraiser raise further questions. Philip Ball, the appellants' appraiser, used four comparables, while Albert Franke used three comparables in his appraisal for Madison. Only one property, that at 160 Middle Beach Road, was used by both. In the court's view, each of the two of Mr. Frankes' comparables belongs in "a league of its own." (Sales #2 and #3).
Mr. Ball's adjustments to comparables are expressed in percentages in not easily read columns. Mr. Franke produces astonishing results for his second and third sales when compared with the subject property.
The most compelling date in either appraisal is found in Mr. Ball's use of 146 Middle Beach Road. As his first comparable, it is shown as selling for $1,277,500 on September 2, 2002, a scant month before the assessment date. Having been inside the subject property and from its knowledge of this beach area and many other of these properties, the court cannot imagine a sale of the subject property for two million dollars — Mr. Frankes' appraised figure. And, one must question his use of the Buffalo Bay and Webster Point Road properties as comparables when those comparables entail repeated adjustments in the area of four to six hundred thousand dollars. The actual re-assessment figure is also high when compared to 146 Middle Beach Road.
Both appraisers stated that Middle Beach Road was a superior neighborhood to Parker Avenue. The court observed the entrance to Parker Avenue with the hotel on one corner and a shabby employee residence on the other. The proximity to this commercial activity cannot be considered an advantage. And, while the view of the water from 29 Parker Avenue is delightful, so too is the Middle Beach Road vista.
It is therefore the conclusion of the court that this property was over-assessed and that its fair market value on October 1, 2002 was $1,200,000.00.
Having determined that no interest should be awarded on the 10% overpayment on the re-assessment, the court finds that the rate of interest to which the appellants are entitled as a result of the court's valuation should be 6% per annum.
The appellants are awarded their taxable costs. The fee for the appraiser's testimony was requested in the amount of $1,000.00, and that sum is awarded.