Burritt Mut. Sav. Bank of New Britain v. City of New Britain

Decision Date31 July 1959
Citation154 A.2d 608,146 Conn. 669
CourtConnecticut Supreme Court

Valentine J. Sacco, Hartford, with whom were Jerome I. Walsh, Hartford, and, on the brief, George J. Coyle, Corp. Counsel, New Britain, for appellant (defendant).

Harold J. Eisenberg, New Britain, for appellee (plaintiff).

Before DALY, C. J., and BALDWIN, KING, MURPHY and MELLITZ, JJ., concurring.

MELLITZ, Associate Justice.

In the city of New Britain the tax assessment date is September 1 in each year. On September 1, 1956, the board of assessors of the city assessed the land of the plaintiff at 267-271 Main Street at $109,720 and the building thereon at $141,300. The plaintiff appealed to the board of tax review, and from the refusal of the board to reduce the assessment it appealed to the Court of Common Pleas. In the course of the trial, the plaintiff withdrew its appeal so far as it related to the valuation of the building. The trial court reduced the assessment on the land to $78,000, and the defendant has taken this appeal.

The property is in the so-called 100 per cent retail business district of the city. On September 1, 1956, it was used for the conduct of the plaintiff's banking business, but its highest and best use, as found by the court and not disputed by the defendant, was for retail business purposes. Although assessments were required by law to be made at the true and actual value of the property (Rev.1949, § 1738), it was the practice of the assessors to fix assessments at 60 per cent of the value as determined by them. This practice, declared illegal in E. Ingraham Co. v. Town and City of Bristol, 144 Conn. 374, 380, 132 A.2d 563, was validated by the General Assembly at its 1957 session. Public Acts 1957, No. 673, § 1; see Rev.1958, § 12-64. In 1955, the assessors undertook the revaluation of real estate which is required during each period of ten years by what is now § 12-62 of the 1958 Revision. The valuations fixed by the assessors on the list of 1956 were the result of this revaluation. To aid the assessors in the revaluation, the city engaged the services of the J. M. Cleminshaw Company of Cleveland, Ohio, a nationally recognized appraisal company, and to assist in the task a citizens' advisory committee was formed, consisting of persons familiar with property values in the city. The president of the plaintiff was a member of the committee, as was the expert who testified for the plaintiff. As a result of the revaluation, the basic unit valuation of land in the 100 per cent business area was fixed at $4,200 per front foot for a depth of 100 feet. The plaintiff's property has a frontage of approximately 43.5 feet and an average depth of approximately 90 feet, with an easement over land of others for access to the rear of the building. The application of the basic unit valuation to the plaintiff's property, adjusted slightly downward by the use of a depth table to compensate for the 90-foot depth and for the location, which was a short distance northerly from the heart of the 100 per cent business district resulted in the assessors' setting the true and actual value of the land at $182,866 and the assessment, being 60 per cent of the valuation, at $109,719.60.

At the trial, the only witness testifying for the defendant was an employee of the Cleminshaw Company who had supervised and directed the revaluation. His experience came from employment with the company for a period of fourteen years in the field of reassessment for municipal taxation purposes and from study of the methods of real estate appraisal. The valuation made by him of the plaintiff's property in the course of the revaluation, together with his methods, findings and opinions in fixing that valuation, was accepted and adopted by the board of assessors. In determining the value of the plaintiff's property, he relied on (1) correlation and comparison of two land sales; (2) residual land value capitalization of all property in the central business district; and (3) the advice and recommendation of the citizens' advisory committee. The plaintiff's expert witness fixed the true and actual value of the land at $108,000. He testified that in arriving at this value he used a land residual method. In his opinion the two sales referred to by the defendant's expert were not sales of comparable property and there were no comparable sales available as aids in determining the value of the plaintiff's property.

The trial court found that the two land sales to which the defendant's expert referred were of little use in fixing the value of the plaintiff's property and that there had been no sales of comparable real estate for many years prior to September 1, 1956. It found further that since the criteria of comparable sales were unavailable, the present true and actual value of the property was required to be determined largely by the method employed by both experts--capitalization of stabilized not income. Under this method, the value is determined by capitalizing the future net income from a building--devoted to the highest and best use of the land upon which it is situated--at a capitalization rate which provides for both a return on the investment and a recapture or amortization of the investment over the period of the economic life of the building. The value of the land is determined by the land residual method, which involves capitalization of the income regarded as attributable to the land. This is the amount of the income remaining from the gross rental after proper allowances have been made for vacancies, amortization of the investment in the building, payment of all expenses in connection with its operation, including taxes on the building, and earnings to be derived from ownership of the building. The prevailing rate of return on the investment plus an anticipated tax rate is then used to capitalize the remaining income. This method was used by the plaintiff's expert as well as by the defendant's expert.

The ultimate question presented was the ascertainment of the true and actual value of the plaintiff's property. The parties stipulated in open court that the valuation of, and assessment on, the building was correct, so that there remained for determination only the value of the land. The best test for the determination of value is ordinarily that of market sales. Campbell v. City of New Haven, 101 Conn. 173, 185, 125 A. 650. Here the court found that there had been no sales of comparable real estate for many years, and this finding was not challenged. In the absence of such sales, other means are required to be employed. Underwood Typewriter Co. v. City of Hartford, 99 Conn. 329, 337, 122 A. 91. Various methods have been recognized to be proper, no one method being controlling. National Folding Box Co. v. City of New Haven, 146 Conn. 578, 585, 153 A.2d 420; Sibley v. Town of Middlefield, 143 Conn. 100, 107, 120 A.2d 77. The experts who testified for each of the parties agreed that the best method to be employed here was the land residual method. In that method, as in the case of other theoretical methods of establishing value, a number of factors and elements are involved and require consideration, so that mathematical accuracy is not necessarily achieved by their use. Lomas & Nettleton Co. v. City of Waterbury, 122 Conn. 228, 232, 188 A. 433. In situations where such mathematical calculations must be relied upon for the determination of value, much caution is required, because those calculations, although made in the best of faith, can lead to widely divergent results. They must, therefore, be closely scrutinized. In re Erie Railroad System, 19 N.J. 110, 135, 115 A.2d 89. The methods do not establish value in themselves, but are merely aids in the ascertainment thereof.

The assessment of property for taxation is an administrative proceeding. The board of assessors and the board of tax review are administrative boards, and in performing their duties in valuing property and in correcting and equalizing assessments, they act largely upon the knowledge of their members as to valuation and the taxable property of taxpayers. Bugbee v. Town of Putnam, 90 Conn. 154, 158, 96 A. 955; Ives v. Town of Goshen, 65 Conn. 456, 459, 32 A. 932. In considering the results arrived at by them, we must bear in mind that the process of estimating the value of property for taxation is, at best, one of approximation and judgment, and that there is a margin for a difference of opinion. Bridgeport Brass Co. v. Drew, 102 Conn. 206, 212, 128 A. 413; Ford v. H. W. Dubiskie & Co., 105 Conn. 572, 580, 136 A. 560. Valuations for taxation purposes are first fixed by the assessors and an appeal lies to the board of tax review. The law contemplates that a wide discretion is to be accorded to assessors, and unless their action is discriminatory or so unreasonable that property is substantially overvalued and thus injustice and illegality result, their opinion and judgment should control in the determination of value for taxation purposes. Sears, Roebuck & Co. v. Inhabitants of City of Presque Isle, 150 Me. 181, 189, 107 A.2d 475; German-American Lumber Co. v. Barbee, 59 Fla. 493, 498, 52 So. 292; Washington County National Bank v. Washington County, 176 Va. 216, 222, 10 S.E.2d 515; Haubrich v. Johnson, 242 Iowa 1236, 1246, 50 N.W.2d 19.

It has been noted repeatedly that the valuation of property for assessment purposes has been a vexing and much litigated problem. Sibley v. Town of Middlefield, 143 Conn. 100, 105, 120 A.2d 77. A taxpayer who thinks he is aggrieved has an appeal to the courts, where the matter is tried de novo. On such an appeal, the contesting taxpayer must establish that the assessment is unjust and will result in his being required, in effect, to pay an illegal tax. Sibley v. Town of Middlefield, supra; Ives v. Town of Goshen...

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