Opinion
C.A. No. PC-2015-4751 C.A. No. PC-2016-4780 C.A. No. PC-2017-2375 C.A. No. PC-2017-4880 C.A. No. PC-2018-7366 C.A. No. PC-2019-7251 C.A. No. PC-2019-10189
02-01-2021
CHATEAU CLARE RIH, LLC v. ARTHUR BOUCHARD, in his capacity as Acting Tax Assessor of the City of Woonsocket CHATEAU CLARE RIH, LLC v. ELYSE PARE, in her capacity as Tax Assessor of the City of Woonsocket CHATEAU CLARE RIH, LLC v. CITY OF WOONSOCKET TAX BOARD OF ASSESSMENT REVIEW and ELYSE PARE, in her capacity as Tax Assessor of the City of Woonsocket
ATTORNEYS: For Plaintiff: William Landry, Esq. For Defendant: Michael R. McElroy, Esq.; Leah J. Donaldson, Esq.; Charles A. Ruggerio, Esq.
DECISION LICHT , J. In these consolidated cases, Plaintiff Chateau Clare RIH, LLC (Plaintiff or Chateau Clare) has moved for partial summary judgment with respect to its property tax complaints against the City of Woonsocket. The Defendants object to Plaintiff's motion and have filed a Cross Motion for Summary Judgment.
I
Facts and Travel
Chateau Clare owns a low-income elderly housing complex with eighty-eight units situated within the City of Woonsocket. Chateau Clare contends that it has been illegally taxed and seeks the Court's declaration that it qualifies for a maximum municipal tax of 8 percent of the property's previous year's gross scheduled rental income under G.L. 1956 §§ 44-5-12(a)(1) and 44-5-13.11 (8% Rule). The tax years at issue are 2015 through 2019, based on assessments effective December 31st preceding each of those years. The Defendants have raised procedural challenges to Plaintiff's petitions.
For the 2015 tax year, Plaintiff filed an equity/illegal taxation case (C.A. No. PC-2015-4751) under § 44-5-27 for taxes assessed as of December 31, 2014. For the 2016 tax year, Plaintiff filed an equity/illegal taxation case (C.A. No. PC-2016-4780) under § 44-5-27 for taxes assessed as of December 31, 2015. The Plaintiff also appealed the decision of the Woonsocket Tax Board of Assessment Review in connection with an administrative appeal for the 2016 tax year. For the 2017 tax year, Plaintiff only filed an equity/illegal taxation case (C.A. No. PC-2017-4880) under § 44-5-27 for taxes assessed as of December 31, 2016. For the 2018 tax year, Plaintiff filed an equity/illegal taxation case (C.A. No. PC-2018-7366) under § 44-5-27 for taxes assessed as of December 31, 2017. As with the 2016 tax year, Plaintiff appealed the decision of the Woonsocket Tax Board of Assessment Review in connection with an administrative appeal for the 2018 tax year. Lastly, for the 2019 tax year, Plaintiff filed an equity/illegal taxation case (C.A. No. PC-2019-10189) under § 44-5-27 for taxes assessed as of December 31, 2018. For the 2019 tax year, Plaintiff filed an appeal to the Woonsocket Tax Board of Assessment Review, which remains pending for that year.
II
Standard of Review
"Summary judgment is a drastic remedy, and a motion for summary judgment should be dealt with cautiously." Employers Mutual Casualty Co. v. Arbella Protection Insurance Co., 24 A.3d 544, 553 (R.I. 2011) (internal quotations omitted). "[S]ummary judgment is appropriate when, viewing the facts and all reasonable inferences therefrom in the light most favorable to the nonmoving party, the Court determines that there are no issues of material fact in dispute, and the moving party is entitled to judgment as a matter of law." Quest Diagnostics, LLC v. Pinnacle Consortium of Higher Education, 93 A.3d 949, 951 (R.I. 2014) (internal quotations omitted). The moving party bears the initial burden of establishing that no such issues exist. Heflin v. Koszela, 774 A.2d 25, 29 (R.I. 2001). If the moving party can sustain its burden, then the "litigant opposing a motion for summary judgment has the burden of proving by competent evidence the existence of a disputed issue of material fact and cannot rest upon mere allegations or denials in the pleadings, mere conclusions or mere legal opinions." American Express Bank, FSB v. Johnson, 945 A.2d 297, 299 (R.I. 2008) (citations omitted).
III
Analysis
A
The Uniform Declaratory Judgments Act
The Defendants contend that a declaratory judgment is inappropriate in a tax appeal case. The Supreme Court has held that the remedy contained in the taxing statutes is made exclusive if the taxpayer owned or possessed "any ratable estate at all." See Murray v. Rockaway Boulevard Wrecking & Lumber Co., 108 R.I. 607, 609, 277 A.2d 922, 924 (1971). The Plaintiff cannot circumvent the procedural requirements of G.L. 1956 § chapters 4 and 5 of title 44 by seeking a declaratory judgment. Even if it could, declaratory judgments are discretionary with the trial judge and this Court would decline to exercise that discretion in this case.
Defendants challenge the Court's jurisdiction to entertain timely direct actions alleging "illegal and/or void taxation." Plaintiff maintains that this Court has subject matter jurisdiction over timely actions filed by taxpayers involving illegal tax assessments, whether or not there is a specific reference to § 44-5-27.
The proper question for this Court is not whether there needs to be a specific reference to § 44-5-27 but rather whether the Plaintiff sufficiently alleges that the taxes at issue are illegal. The Defendants turn this Court's attention to Narragansett Electric Co. v. Minardi, 21 A.3d 274, 278 (R.I. 2011) where the Supreme Court highlighted that "[the plaintiff] elected to bypass the review procedures set forth in §§ 44-5-26 and 44-5-27 and proceed directly to the Superior Court by contending that it was challenging an illegal assessment." However, the Supreme Court noted that the plaintiff failed to establish that the taxes at issue were, in fact, illegal. The plaintiff merely contended that "because its gas assets were taxed incorrectly . . . that this amounts to an illegal tax." Id. "[N]owhere in its pleadings or arguments does plaintiff argue that its gas assets are exempt from taxes or that the assessments were 'so palpably exorbitant and excessive as to amount to constructive fraud [.]'" Id. (internal citations omitted). Because the plaintiff failed to establish that it had been assessed an illegal tax, it could not avail itself of the direct appeal to the Superior Court set forth in § 44-5-27. Id.
Plaintiff's 2015 Complaint, which is the only one Defendants challenge on the grounds that it did not specifically reference § 44-5-27, sets forth that "[p]ursuant to R.I. Gen. Laws § 44-5-13.11 and/or § 44-5-12(a)(1), The Affordable Rental Housing Complex is subject to a maximum municipal tax equal to eight percent (8%) of the property's previous year's gross scheduled rental income. . . . The Affordable Rental Housing Complex is currently illegally taxed at a rate in excess of their previous year's gross scheduled rental income." Compl. ¶¶ 5-6. Therefore, not only does Plaintiff's Complaint sufficiently allege an illegal tax, but Plaintiff's Motion for Partial Summary Judgment's arguments also specifically advance illegal tax claims. As a result, this Court has subject matter jurisdiction to hear the illegal tax claim contained in the 2015 Complaint.
B
2015 and 2019 Complaints' Named Defendant
Defendants argue that Plaintiff named the wrong defendant in the Superior Court Complaints for tax years 2015 and 2019. Section 44-5-26 requires that the complaint name "the assessors of taxes of the city or town in office at the time the petition is filed." Defendants argue that Plaintiff named Arthur Bouchard as the defendant even though the Affidavit shows that Mr. Bouchard was not the Tax Assessor at the time the 2015 and 2019 Complaints were filed. The Plaintiff contends that it named the "Acting" Tax Assessor, Arthur Bouchard, in the 2015 and 2019 Complaints because the office of the Tax Assessor was vacant at those times. The Defendants admit to this fact in their Answer in PC-2019-10189. Answer ¶ 2. This is a trivial issue not warranting dismissal. The statute does not specify what should be done in the event that there is no current Tax Assessor for those years, nor is there any case law dealing with this specific issue. Moreover, Rule 15 of the Superior Court Rules of Civil Procedure allows the amendment of pleadings to conform to the evidence at any time, even after judgment. Super. R. Civ. P. 15. Frequently, in these cases, the Tax Assessor changes and the new one is substituted, but there are also cases where the parties fail to amend the pleadings. If either party moves to substitute the current Tax Assessor, the Court will entertain the motion.
C
Compliance with § 45-15-5
The Defendants turn the Court's attention to G.L. 1956 § 45-15-5's requirement that every person who has a monetary claim against a municipality must present the claim to the town or city council and may not file suit until forty days have passed after the presentation for the claim. The Defendants cite no case nor is the Court aware of any case involving the alleged overassessment of taxes that required compliance with § 45-15-5. The Defendants cite United Lending Corp. v. City of Providence, 827 A.2d 626 (R.I. 2003) to support the contention that compliance with the requirements of § 45-15-5 is mandatory when seeking to recover taxes. However, that case had nothing to do with overassessment or illegal taxation. Rather, the plaintiff in that case sought to recover taxes paid pursuant to an erroneous municipal lien certificate because the taxes were not in fact owed. Section 45-15-5 is not at all applicable in this case.
D
Requirements of Chapter 5 of Title 44
The Defendants begin by arguing that Plaintiff failed to comply with administrative procedures (§§ 44-5-15, 44-5-26, and 44-5-27) and cannot maintain these appeals. Specifically, Plaintiff's 2015 and 2018 notices of intention to bring an account were not timely filed. They further contend that the actual accounts for 2015 and 2016 were not timely filed. The Defendants also assert that Chateau Clare failed to properly notarize the accounts filed in 2015 and 2018—the notarial certificate on the 2015 account was not dated and the 2018 account was neither signed nor notarized. The Defendants argue that the 2015-2019 appeals to the Tax Assessor were missing, incomplete, and/or defective. They state that the appeals to the Tax Assessor did not provide the information required in the statutorily mandated form set forth in § 44-5-26(b). Furthermore, Defendants state that Plaintiff failed to file an appeal to the Tax Assessor for tax years 2015 and 2017 as well as an appeal with the Tax Board of Review for those years. Lastly, Defendants contend that Plaintiff prematurely filed its appeals with the Superior Court.
Upon review of the 2015 and 2018 notices of intention, the Court finds that they were timely filed by the Plaintiff. Pursuant to § 44-5-15, "[t[he notice of intention to bring in an account is deemed to have been filed with the assessors if the notice is sent to them by registered or certified mail, postage prepaid, postmarked before 12:00 A.M. midnight of the last day on which the notice may be filed." January 31st is the deadline under § 44-5-15. Plaintiff's 2015 notice of intention was sent to the Assessor by certified mail on January 30, 2015. Plaintiff's 2018 notice of intention was sent to the Assessor by certified mail on January 31, 2018.
While Plaintiff disputes the specific deficiencies alleged by Defendants, it contends that since the Defendants have assessed an illegal tax, the procedural requirements of chapter 5 of title 44 do not apply. Section 44-5-31 states, "[i]f the taxpayer has not filed an account, and if on the trial of the petition, either with or without a jury, it appears: . . . (2) That the tax assessed is illegal in whole or in part, the court shall give judgment . . . ." Section 44-5-26(c) states, if a "person has not filed an account, or filed an appeal first within the local tax board of review, that person shall not have the benefit of the remedy . . . unless . . . (2) the tax assessed is illegal in whole or in part . . . ." Section 44-5-27 states, "[a] taxpayer alleging an illegal or void tax assessment . . . is not required to file an appeal with the local assessor."
In CIC-Newport Associates v. Stein, 121 R.I. 844, 403 A 2d. 658 (1979), the Court listed examples of illegal assessment, including taxing exempt property, assessors acting without jurisdiction, an assessment knowingly or intentionally made in a discriminatory manner, or an assessment fraudulently rendered
This list is not exclusive. Another form of illegal taxation is the disproportionate taxation of real estate. See Merlino v. Tax Assessors for Town of North Providence, 114 R.I. 630, 337 A.2d 796 (1975). Indeed, our Supreme Court has voided tax assessments as "illegal" under provisions of the Condominium Act. See, e.g., Inn Group Associates v. Booth, 593 A.2d 49, 52 (R.I. 1991). Recently, this Court in an unreported decision found that "the Tax Assessor's attempt to treat two different condominium units in a condominium as a single parcel of real estate for real estate tax assessment constitute[d] an illegal tax in violation of §§ 34-36.1-1.05(a), (b) and the Court [found] that the plaintiffs [were] entitled to bring an action pursuant to 44-5-27." A Prospering Community, LP, et al. v. Elyse M. Pare, in her Capacity as Tax Assessor of the City of Woonsocket, PC- 2016-4246 (R.I. Super. Nov. 17, 2020).
Failing to apply the 8% Rule to property that qualifies is not one of the examples listed above. The Defendants argue that if the 8% Rule applies in this case, which it disputes, it is a mere overassessment, but it is not illegal. The Supreme Court has never addressed this issue. However, Associate Justice Kristin Rodgers of the Superior Court addressed this issue in Springfield Armoury L.P. v. Picard, No. KC 2010-0038, 2013 WL 1943167, at *1 (R.I. Super. May 2, 2013). She found that the "Plaintiff [was] entitled to the tax benefits conferred by § 44-5-13.11, and the Tax Assessor's actions in denying Plaintiff's application for the eight percent (8%) tax rate were in violation of the statute and illegal." Id. at *8. While this Court is not bound by a decision of a colleague on the Superior Court, it can choose to follow it, which this Court elects to do. If a statute obligates a tax assessor to assess property and the assessor chooses to use a different method, he or she has violated that statute and thus imposed an illegal assessment. Since this Court has determined that failing to apply the 8% Rule to property that qualifies is an illegal assessment, Defendants' procedural arguments fail. Therefore, this Court finds that Plaintiff's administrative appeals under § 44-5-26 and direct actions under § 44-5-27 are properly before it.
E
Occupancy Permit
In order for the 8% Rule to apply, three requirements must be met: (1) the property has been issued an "occupancy permit" on or after January 1, 1995; (2) substantial rehabilitation has been done as defined by the U.S. Department of Housing and Urban Development (HUD); and (3) the property is encumbered by a covenant recorded in the Land Evidence Records in favor of a governmental unit or Rhode Island Housing and Mortgage Finance Corporation (RI Housing) restricting either or both the rent that may be charged to tenants of the property or the incomes of the occupants of the property. Section 44-5-13.11. It is undisputed that Plaintiff has satisfied the second and third requirements.
This Court must determine whether Plaintiff has satisfied the first requirement—that the property was issued an "occupancy permit" on or after January 1, 1995. More specifically, this Court must decide whether the only type of "occupancy permit" that can satisfy the occupancy permit requirement is a "Certificate of Occupancy" issued under the State Building Code. Simply put, the question becomes whether a "Permission to Occupy," issued by RI Housing or HUD under the federal affordable housing regulatory regimen, qualifies as an "occupancy permit."
The Plaintiff argues that RI Housing's issuance of the "Permission to Occupy" is an "occupancy permit" as that term is utilized in § 44-5-13.11. The Defendants disagree. The Defendants assert that RI Housing cannot legally authorize occupancy or issue occupancy permits—only the City has the authority to do so. Moreover, Defendants contend that Plaintiff's "Permission to Occupy" is a financing document used to ensure that the property has been approved for use by subsidized means as a condition of financing. When viewed in conjunction with the State Building Code, Defendants argue that "occupancy permit" more appropriately refers to a "Certificate of Occupancy" rather than the "Permission to Occupy."
Defendants' contention that a "Certificate of Occupancy" is the only occupancy permit that satisfies the requirement is flawed for several reasons. First, § 44-5-13.11 provides that "[a]ny residential property that has been issued an occupancy permit on or after January 1, 1995 . . .," along with satisfying the other two requirements, "is subject to a tax that equals eight percent (8%) of the property's previous years' gross scheduled rental income or a lesser percentage as determined by each municipality." Section 44-5-13.11 merely requires an occupancy permit without further describing what qualifies as an occupancy permit, nor is there any Rhode Island case law that aids in this Court's interpretation. This Court does not agree with Defendants' argument that only one type of occupancy permit—a "Certificate of Occupancy"—is applicable. If the General Assembly meant to limit the first requirement to a "Certificate of Occupancy," it would have either referenced the applicable section of the State Building Code or at the very least used the term "Certificate of Occupancy" as opposed to "occupancy permit." In addition, the General Assembly would have capitalized the words "Occupancy Permit" if it meant to denote the title of one specific permit as opposed to naming a category of permits, which may have varying titles.
Second, RI Housing grants a "Permission to Occupy," not a "Certificate of Occupancy." However, this Court notes that the noun "permission" derives from the verb "to permit," and the noun "occupancy" derives from the verb "to occupy." Consequently, a fair reading of § 44-5-13.11 leads this Court to the conclusion that the grant of a "Permission to Occupy" is the same as issuing an "occupancy permit."
A "Certificate of Occupancy" under the Building Code is required wherever the work involves the erection of a new building, occupancy of a previously unoccupied building, a change of use, or the size or fire rating or load capacity of an existing building. See G.L. 1956 §§ 23-27.3-120.1, 23-27.3-120.2, and 23-27.3-105.2. In this case, Chateau Clare's eighty-eight units were already occupied, and the tenants were never displaced. The rehabilitation did not involve the type of work that requires a "Certificate of Occupancy" from the local Building Official under the State Building Code. Therefore, how can Plaintiff be expected to have secured a "Certificate of Occupancy" when none was required. RI Housing has the authority to "administer and manage Section 8 tenant based certificate programs and Section 8 rental voucher programs in those municipalities that do not have a local housing authority and in those municipalities whose local housing authority elects to contract with Rhode Island housing mortgage and finance corporation." Section 42-55-5(35). Chateau Clare underwent substantial rehabilitation financed by the federal housing Tax Credit (HTC) Program administered by RI Housing. After a series of cost certifications and inspections of Chateau Clare, RI Housing issued the "Permission to Occupy," certifying the costs of the work and that the work was completed for the tax credits to be approved and issued. Nothing more was required of Chateau Clare, as the conditions requiring a "Certificate of Occupancy" were not present.
Third and finally, the Rhode Island Supreme Court has stated that "[i]n matters of statutory interpretation our ultimate goal is to give effect to the purpose of the act as intended by the Legislature." Webster v. Perrotta, 774 A.2d 68, 75 (R.I. 2001). The legislative purpose of the 8% Rule was discussed in Springfield Armoury L.P. v. Picard. In that case, Justice Rodgers highlighted that:
"Reviewing § 44-5-13.11, entitled 'Qualifying low-income housing — Assessment and taxation.' in its entirety, it is evident that the purpose of the statute is to encourage private entities to rehabilitate property that will ultimately provide low-income housing options. . . . This goal mirrors the goal of Congress as reflected in 12 U.S.C. § 1715l , entitled 'Housing for moderate income and displaced families,' which provides for the HUD mortgage insurance program . . . . See 12 U.S.C. § 1715l(a) (noting that '[t]his section is designed to assist private industry in providing housing for low and moderate income families and displaced families'). Despite the varied language of these two statutes' titles that indicate applicability to low-income housing, see § 44-5-13.11, and moderate income families, see 12 U.S.C. § 1715l , both statutes are intended to promote the availability of low-income housing." Armoury, 2013 WL 1943167, at *5.
This Court concurs with the conclusion that the intent behind § 44-5-13.11 is to encourage private entities to rehabilitate property that will ultimately provide low-income housing options.
Substantial rehabilitation occurs in currently-occupied buildings that does not necessarily require a "Certificate of Occupancy" issued by a municipal building official. To require Plaintiff to obtain a "Certificate of Occupancy," when it is not required under the State Building Code, defeats the section's underlying purpose, which is accomplishing rehabilitation in order to provide affordable housing. The intent of the statute is to ensure that the rehabilitation work is done. RI Housing does that by inspecting and certifying the work, which it does when it issues a "Permission to Occupy" pursuant to HUD regulations. The statute refers both to HUD regulations and to RI Housing. A fair reading of the statute, therefore, leads this Court to the conclusion that the "Permission to Occupy" issued by RI Housing, in accordance with HUD regulations, is consistent with the underlying legislative purpose and intent of § 44-5-13.11. Thus, Plaintiff has met all three requirements of § 44-5-13.11 to qualify for the 8% Rule.
IV
Conclusion
Based on the foregoing, this Court finds that failing to apply the 8% Rule to qualifying property is an illegal assessment; thus, Plaintiff's administrative appeals under § 44-5-26 and direct actions alleging "illegal" taxation under § 44-5-27 are properly before this Court. Additionally, Plaintiff satisfied the "occupancy permit" requirement under § 44-5-13.11 by obtaining a "Permission to Occupy" from RI Housing. Therefore, this Court grants Plaintiff's Motion for Partial Summary Judgment and denies Defendants' Cross Motion for Summary Judgment. Counsel shall prepare the appropriate order and judgment.
ATTORNEYS:
For Plaintiff:
William Landry, Esq.
For Defendant:
Michael R. McElroy, Esq.; Leah J. Donaldson, Esq.;
Charles A. Ruggerio, Esq.