Brickman v. City of Manchester

• Decision Date: 28 December 1979
• Docket Number: No. 79-100,79-100
• Citation: 409 A.2d 1328,119 N.H. 919
• Parties: Herbert L. BRICKMAN v. CITY OF MANCHESTER.
• Court: New Hampshire Supreme Court

Page 1328

409 A.2d 1328

119 N.H. 919

Herbert L. BRICKMAN v.CITY OF MANCHESTER.

No. 79-100.

Supreme Court of New Hampshire.

Dec. 28, 1979.

Devine, Millimet, Stahl & Branch, P.A., Manchester (William S. Gannon, Manchester, orally), for plaintiff.

Elmer T. Bourque, Manchester (Thomas R. Clark, Manchester, orally), for defendant.

DOUGLAS, Justice.

This case involves a determination whether the master properly selected and applied the capitalization of income method in his evaluation of the plaintiff's property in a tax abatement appeal.

The plaintiff owns the South Willow Shopping Plaza in Manchester.The city tax assessor appraised the property for real estate tax purposes at $1,607,520 for the year beginning April 1, 1976, and assessed a tax of $87,786.31.The plaintiff applied for an abatement and it was denied.Pursuant to RSA 76:17 (Supp.1978)the plaintiff petitioned the superior court for relief.After a trial, the Master (Earl J. Dearborn, Esq.) granted a $19,510,99 abatement.Souter, J., entered a decree approving the master's recommendations and reserved and transferred the city's exceptions.

The city's first argument is that the master erred in relying exclusively on the capitalization method in determining the value of the plaintiff's property for real estate tax purposes.This argument is without merit.In abatement petitions, the trial court is empowered to make a determination of the subject property's market value, Poorvu v. City of Nashua, 118 N.H. 632, 392 A.2d 138(1978), and all evidence before the court relating to valuation should be considered.SeeDemoulas v. Town of Salem, 116 N.H. 775, 367 A.2d 588(1976).However, the court is not foreclosed from choosing a particular method to the exclusion of others.In the present case the master indicates in his report that he considered alternative methods of valuation presented by the parties before settling on capitalization of income.On the evidence presented, we cannot say that the latter method of valuation was not the best available.SeeGarland & LaChance Constr. Co. v. City of Keene,, 117 N.H. 920, 379 A.2d 1259(1977).

The city next argues that the master made two errors in his use of the capitalization method.The first alleged error concerns the determination of gross income.In projecting that figure the master did not assume full capacity; rather he allowed certain deductions for rental unit vacancies.The city relies on Demoulas v. Town of Salem, 116 N.H. 775, 367 A.2d 588(1976), for the proposition that a deduction for vacancies and uncollected accounts is improper.This reliance is misplaced.In Demoulas we said that we did "not mean to suggest that consideration of actual income is improper in all cases."Id. at 782, 367 A.2d at 593.Under certain circumstances a master's consideration of vacancies in projecting net income is neither improper nor unreasonable.In the present case there was evidence that the plaintiff's shopping center was designed to serve a neighborhood rather than a larger community or region, that construction of the New Hampshire Mall, a regional center, began shortly after the plaintiff's center was completed, that there were vacancies in plaintiff's center, and that the center was in some ways obsolete.On such evidence the master could and did find that "the Plaintiff's mall (had) a limited economic life and as of the tax year of 1976 such was beginning to appear."We hold that his use of vacancies was proper under the circumstances.

The city also contends that because no uncollectable accounts existed as of the date of valuation, the master erred in allowing a deduction for such amounts.It is unclear from the master's report whether he projected future uncollectable accounts, or future vacancies in excess of those existing at the time of valuation.In either case he was not in error."Prospective as well as present and past earnings are an important element in investment values, and any immediate prospect of an increase or decrease in earnings should be taken into consideration."Somers v. City of Meriden, 119 Conn. 5, 12, 174 A. 184, 187(1934);SeeUniroyal, Inc. v. Middlebury Bd. of Tax Review, 174 Conn. 380, 389 A.2d 734(1978); Annot., Income or Rental Value as a Factor in Evaluation of Real Property for Purposes of Taxation, 96 A.L.R.2d 666(1964).In the present case the evidence supported any implied finding that vacancies would increase or that uncollectable accounts would materialize in the future.

The city's second major argument concerning the capitalization rate is that the master erred in its formulation.We agree.

We have recognized that the capitalization method is "an established and well-accepted method for determining the value of income-producing property."Berthiaume v. City of Nashua, 118 N.H. 646, 647, 392 A.2d 143, 144(1978).The word "value" as used in the context of this case, means the "price which the property will bring in a fair market after reasonable efforts have been made to find a purchaser who will give the highest price for it."Trustees of the Phillips-Exeter Academy v. Exeter, 92 N.H. 473, 481, 33 A.2d 665, 671[119 N.H. 922](1943).The capitalization of income method arrives at the fair market value of income-producing property by dividing the net income of the property by a capitalization rate.Demoulas v. Town of Salem, supra, 116...