Breezy Knoll Ass'n. v. Town of Morris

• Decision Date: 13 May 2008
• Docket Number: No. 17815.,17815.
• Citation: 286 Conn. 766,946 A.2d 215
• Court: Connecticut Supreme Court
• Parties: BREEZY KNOLL ASSOCIATION, INC. v. TOWN OF MORRIS.

946 A.2d 215

286 Conn. 766

BREEZY KNOLL ASSOCIATION, INC. v. TOWN OF MORRIS.

No. 17815.

Supreme Court of Connecticut.

Argued November 28, 2007.

Decided May 13, 2008.

James Stedronsky, Litchfield, for the appellant (plaintiff).

J. Michael Sconyers, Litchfield, with whom was Ruth C. Nadeau, for the appellee (defendant).

ROGERS, C.J., and KATZ, PALMER, VERTEFEUILLE and SCHALLER, Js.

ROGERS, C.J.

This case concerns the valuation, for property tax purposes, of common areas owned by a neighborhood homeowners' association when those common areas are subject to extensive encumbrances that solely benefit the association's neighborhood resident members. The plaintiff, Breezy Knoll Association, Inc. (association), appeals from the judgment of the trial court dismissing its municipal tax appeal, brought pursuant to General Statutes § 12-117a, for lack of aggrievement.¹ The association claims that the court improperly concluded that it failed to prove that the defendant, the town of Morris (town), had overvalued its properties for tax purposes because various easements and restrictions burdening those properties rendered them unsaleable and reduced their fair market value to a nominal amount. According to the association, pursuant to this court's decision in Einbinder v. Board of Tax Review, 217 Conn. 240, 584 A.2d 1188 (1991),² when taxable real property is so heavily burdened by easements and restrictions that there is no reasonable likelihood that it could be sold on the market, its value inures chiefly to the dominant estate owners who benefit from the easements and restrictions and should be reflected in the assessments of those owners' properties, rather than in the assessment of the encumbered, servient property. We agree and, accordingly, reverse the judgment of the trial court.

The following facts, either found by the court or not disputed, and procedural history are relevant to the appeal. The association is a Connecticut membership corporation formed in 1960 for the purpose of maintaining, preserving and protecting commonly used property within Breezy Knoll, a private lakefront community in the town of Morris. Membership in the association is limited to the owners of the nineteen individual residential properties comprising Breezy Knoll.

The association holds title to three commonly used properties within Breezy Knoll that are the subject of this appeal. Those properties are a 0.84 acre parcel that is used as a parking lot, a 0.56 acre parcel on which there is a tennis court, and a strip, 10 feet in width and 504 feet in length, located along the shoreline of Bantam Lake and adjacent to four of the residential lots within Breezy Knoll. The deeds transferring ownership of the three properties to the association subject those properties to a number of easements and restrictions.³ The deeded easements and restrictions also have been incorporated into the association's bylaws.

The applicable provisions ensure that the residents of Breezy Knoll, as members of the association, will have continuous access to the common areas, and require the association to own and maintain them for the members' use and enjoyment.⁴ The costs of operation and maintenance are chargeable to association members by way of an annual fee. Pursuant to the deeds, the easements and restrictions "shall be operative and binding on all future owners of any interest in ... Breezy Knoll ... for a period not exceeding twenty one years after the death of the survivor of all the now living persons who shall together constitute the original members of the [association]."⁵ The association's bylaws, however, contain no such time limitation. The easements and restrictions may not be altered, amended, revoked or terminated, nor may the lands affected be released from them, unless two-thirds of the owners of Breezy Knoll properties provide written consent. Similarly, the association's bylaws may not be amended without the approval of 80 percent of its members.

Following a comprehensive townwide revaluation conducted in 2004; see General Statutes (Rev. to 2003) § 12-62, as amended by Public Acts 2004, No. 04-2, § 33; the town's assessor, Barbara Bigos, assigned new values to the association's properties for the October 1, 2004 grand list. Bigos first determined that the highest and best uses of the parking lot and tennis court properties were as lots for single-family dwellings. She then assigned those properties values of $107,957.14 and $105,328.57, respectively, on the basis of comparable sales. As to the lakefront strip, Bigos valued it at $378,000 by multiplying its total length by a per foot figure that she had derived from sales of other properties around the lake.⁶

Pursuant to General Statutes § 12-111(a),⁷ the association contested Bigos' valuations by appealing to the town's board of assessment appeals (board). It argued that, given the easements and restrictions encumbering the commonly used properties, they were unmarketable and, therefore, their value had been diminished greatly to a nominal amount. Following the board's denial of its appeals, the association appealed to the Superior Court pursuant to § 12-117a. See footnote 1 of this opinion. It subsequently amended its complaint to challenge the valuations in the October 1, 2005 grand list, in addition to the valuations in the 2004 grand list.⁸

As to both years, the association alleged that Bigos' valuations did not represent the true and actual values of its properties, but rather, were grossly excessive, disproportionate and illegal.

At trial, Bigos, as well as three other appraisers, testified in regard to the valuation of the association's properties. As to each property, Bigos testified that she had not attributed any of its value to the association members in connection with the assessment of the members' properties. Rather, she assessed them as separate, independent units, and attributed their value to the association only as the owner of the fee. In Bigos' view, she had the alternative of doing it either way.⁹ When questioned by the association's counsel, Bigos stated that, because she believed it was inapplicable, she did not consider the rule articulated in Pepe v. Board of Tax Review, 41 Conn.Supp. 457, 464-69, 585 A.2d 712 (1990), which provides that when property is so heavily burdened by easements that it becomes unmarketable, its value should be assessed in conjunction with the properties benefiting from those easements.

Bigos testified that she "wrestled" with what consideration she should give the deeded easements and restrictions when valuing the properties, because she considered them to be a "positive benefit," not a "negative factor," and she thought that they actually "enhanced the properties ...." Because she was valuing the properties separately, however, and not attributing their value to the individual members' properties, she chose to account for the easements and restrictions by assigning the tennis court and parking lot lower building site ratings than she otherwise would have.¹⁰ In regard to the lakefront strip, Bigos explained that she valued it at $750 per linear foot, the same as she had valued every waterfront property around the entire lake. Because the strip's physical characteristics precluded any construction, she disregarded its ten foot width and, therefore, did not assign it additional value for its acreage.¹¹ To account for the easements and restrictions, Bigos did not adjust the value of the strip itself, but assigned a lower neighborhood rating to the residential lots adjacent to it.¹²

The association presented the testimony of appraiser Barry Cunningham in support of its position that, given the easements and restrictions, the properties had only nominal value. Cunningham described the first step in the appraisal process as determining the properties' highest and best use, given what is physically possible, legally permissible, financially feasible and maximally productive. The second step is determining whether, in light of that use, a market existed for the properties and, if so, examining comparable sales within that market to estimate value. In Cunningham's opinion, the highest and best use for all of the association's properties was the current use as community amenities because the deeded easements and restrictions precluded selling the properties and it was "highly improbable" that those restrictions would be lifted so as to make development possible.¹³ Cunningham agreed that the easements and restrictions operated to benefit the lot owners within Breezy Knoll, and he opined that the value of community property typically was reflected in increased values of the individual properties that benefited from it. On the basis of his determination that the highest and best use of the association's properties was as community property, Cunningham concluded that the properties were not marketable and, therefore, should be assigned either no value, or only a nominal value,¹⁴ for tax purposes.¹⁵

The trial court concluded that the association had not shown that its property had been overvalued. The court found Cunningham's testimony to be "credible and interesting" and "value[d]," but nevertheless, found that of Bigos to be "far more comprehensive, reliable and persuasive."¹⁶ In regard to the tennis court and parking lot, the court noted that Bigos had assigned those parcels a lower site rating in light of the easements and restrictions, notwithstanding the fact that the lot owners, as members of the association, could vote to remove the easements and restrictions and sell the properties unencumbered. As to the lakefront strip, the court noted that Bigos had assessed the property at the same rate as all other lakefront property and had not increased the assessment to account for its acreage. After citing Bigos' testimony as to the general trend of greatly increasing property values in northwest Connecticut, in particular for lakefront...