City of Norwich, Dept. of Public Utilities v. Town of Lebanon

• Decision Date: 05 August 1986
• Citation: 200 Conn. 697,513 A.2d 77
• Court: Connecticut Supreme Court
• Parties: CITY OF NORWICH, DEPARTMENT OF PUBLIC UTILITIES v. TOWN OF LEBANON. CITY OF NORWICH v. TOWN OF LEBANON.

Page 77

513 A.2d 77

200 Conn. 697

CITY OF NORWICH, DEPARTMENT OF PUBLIC UTILITIES v. TOWN OF LEBANON.

CITY OF NORWICH v. TOWN OF LEBANON.

Supreme Court of Connecticut.

Argued May 7, 1986.

Decided Aug. 5, 1986.

Jackson T. King, Jr., New Haven, with whom was Mary E. Holzworth, Norwich, for appellant (defendant in each case).

George C. Hastings, with whom was Charles B. Spadoni, Hartford, for appellee (plaintiff in each case).

Before PETERS, C.J., and SHEA, CALLAHAN, NOVACK and HAMMER, JJ.

SHEA, Associate Justice.

This combined appeal involves a continuing dispute between the plaintiff city of Norwich and the defendant town of Lebanon over the taxability of water supply land owned by Norwich and located in Lebanon. The factual and procedural history underlying these cases is not in dispute.

Since 1971 the plaintiff city of Norwich has owned approximately thirty-eight acres of watershed land in Lebanon. In 1973 Norwich constructed on part of this land a water treatment facility and other related improvements. The plant was used to furnish water to residents of Norwich and Lebanon, as well as to certain firms and residents of the neighboring towns of Montville, Bozrah, Franklin and Preston. Until July, 1979, Norwich provided water to Lebanon users at a marginally higher rate than that charged to its own residents. After that date, however, Norwich equalized its rates.

In connection with the preparation of its 1973 assessment, the board of assessors for the town of Lebanon forwarded a blank form to Norwich on which Norwich was requested to list property which it owned in Lebanon. On October 31, 1973, Donald E. Williams, an employee of the Norwich Department of Public Utilities, estimated that the value of "buildings used for business, commercial, mercantile, and trading purposes, but not for manufacturing" was $2,000,000. Lebanon's board of assessors accepted the form and assessed the property at 70 percent of the estimated value placed on the property by Williams, after a 10 percent reduction for depreciation. General Statutes § 12-62a(b). The assessed valuation of $1,260,000 was then entered upon Lebanon's October 1, 1973 grand list.

In subsequent years, the defendant similarily assessed the subject property and imposed property taxes against Norwich accordingly. Norwich never appealed to the Lebanon board of tax review any of the assessments for the years 1973 through 1980. It did, however, in June, 1975, bring an action pursuant to General Statutes § 12-119 claiming that the 1973 and 1974 assessments were manifestly excessive and in violation of General Statutes §§ 12-81(4) and 12-76. A demurrer to the first count involving the 1973 assessment was sustained in December, 1975, on the ground that the action was not instituted within one year after the assessment date of October 1, 1973, as required by General Statutes § 12-119. The remainder of the action challenging the 1974 assessment was dismissed in 1980 for failure to prosecute; Practice Book § 251; and Norwich did not appeal or move to open the judgment. Practice Book § 377; General Statutes § 52-212.

In October, 1980, Lebanon's tax collector issued an alias warrant to collect $956,336.65 in taxes, interest and lien fees he claimed to be due from Norwich on the 1974 through 1979 grand lists. Norwich, in November, 1980, instituted an action against Lebanon seeking an injunction to prohibit Lebanon from collecting taxes on the subject property for the years 1974 through 1980. The trial court, Purtill, J., denied Norwich's request for injunctive relief because Norwich had neglected to pursue the two statutory avenues available to challenge the tax, and, therefore, had failed to demonstrate that it had no adequate remedy at law. Norwich appealed from the judgment to this court, which affirmed the trial court's decision with respect to the years 1974 through 1979, ¹ holding that Norwich's claim that its water supply property had been "wrongfully or excessively assessed could have been appealed in one of two ways: (1) to the board of tax review and from there, within two months, to the Superior Court pursuant to [General Statutes] §§ 12-111 and 12-118; or (2) by direct action to the court within one year from the date when the property was last evaluated for purposes of taxation pursuant to [General Statutes] § 12-119." Norwich v. Lebanon, 193 Conn. 342, 347-48, 477 A.2d 115 (1984). (Norwich I )

On February 18, 1976, Norwich paid Lebanon the 1973 tax bill, plus interest and certain costs. The payment was made under protest and Norwich specifically reserved its right to contest the validity of the tax assessment. Norwich filed with the Lebanon tax collector an application for repayment of the tax under General Statutes § 12-129. Lebanon refused to refund the tax.

The first appeal (Docket No. 12685) arises from this refusal of the Lebanon tax collector to refund the 1973 taxes paid by Norwich. On November 1, 1982, Norwich instituted an action seeking in the first count damages, equitable relief and a writ of mandamus ordering the tax collector of the town of Lebanon to return the amount paid for the 1973 assessment and, in a second count, an injunction prohibiting the collection of taxes based on the October, 1981 assessment as well as those for later years. After a trial to the court, Tamborra, J., judgment was entered in favor of Norwich on both counts. The court concluded that the fair market value of the land in question should have been determined not as ordinary business property, but as if it were "improved farmland" under General Statutes § 12-76, and it ordered the defendant to refund the difference between the taxes paid and those that properly should have been assessed under the appropriate valuation standard. The court also concluded that because the property was used for a "public purpose" and because the residents of Lebanon were entitled to utilize the water supply at the same rate as residents of Norwich since July, 1979, General Statutes §§ 12-81(4) and 12-76 provide tax exempt status. The court, therefore, entered an injunction prohibiting Lebanon from collecting any taxes on the disputed property based on the grand list of October 1, 1982, and also upon any future assessments so long as the statutory exemption requirements remain satisfied.

The second action (Docket No. 12762), which Norwich instituted on September 4, 1981, is a similar action, although not in the form of a mandamus, seeking a refund of the taxes for the years 1974 through 1979. Norwich paid these taxes under protest on August 31, 1984, following our decision in Norwich I, but also sought a refund of the amount paid, pursuant to § 12-129, a demand which the Lebanon tax collector refused. After a trial to the court, Walsh, J., judgment was rendered in favor of Norwich. The court concurred with all of the findings of facts and legal conclusions of the court, Tamborra, J., in the action involving the 1973 refund and ordered Lebanon to refund the difference between the taxes paid by the plaintiff for the tax years 1974 through 1979 and the amount which should have been paid under the "improved farmland" valuation standard.

The defendant Lebanon appeals from each judgment, claiming that the trial court erred (1) in failing to conclude, in accordance with its special defense in each action, that General Statutes § 12-118 and 12-119 are the exclusive judicial remedies for contesting the illegal assessment of property; and (2) in concluding that as of the October 1, 1982 assessment, the water supply property was exempt from taxation under General Statutes §§ 12-81(4) and 12-76. We agree with the trial court in respect to the tax exempt status of the plaintiff's property for the 1982 tax assessment. Because Norwich has failed to pursue the statutory remedies available to it, however, we find error in the judgments ordering Lebanon to refund a substantial portion of the 1973 through 1979 taxes paid by Norwich.

I

The trial court, Tamborra, J., concluded that all of the Norwich property assessed by Lebanon, the land, water treatment plant and related improvements, was owned by "a municipal corporation of this state and used for a public purpose." The property was thus exempt from taxation by virtue of General Statutes § 12-81(4), ² except that the water supply land was assessable pursuant to § 12-76 ³ as "improved farm land" until Norwich in 1979 ceased to charge its Lebanon water customers at a higher rate than Norwich residents paid.

The first ground upon which Lebanon disputes this conclusion is that, because Norwich uses its water supply property in Lebanon to furnish water not only to Norwich customers but also to those in the towns of Bozrah, Montville, Preston and Franklin, the property is not being "used for a public purpose" and does not qualify for the exemption created by § 12-81(4). Lebanon relies upon our decision in Sachem's Head Property Owners' Assn. v. Guilford, 112 Conn. 515, 519-20, 152 A. 877 (1931), where we held that water mains extending beyond the boundaries of a municipal corporation solely for the purpose of supplying inhabitants of another area outside its territorial limits were not tax exempt, because they were wholly devoted to the needs of another community and the corporation charter authorized the corporation to furnish water only to its residents. We also held, however, that mains extending beyond the boundaries of the municipality to the source of the water distributed to municipal residents, as well as, through the nonexempt mains, to the other community, were being used for a public purpose and thus tax exempt. Id., 519. None of the water supply property in Lebanon is used exclusively for the purpose of servicing customers outside Norwich, all of the water treated at the Lebanon plant being distributed alike to residents of Norwich and the surrounding towns. These circumstances are quite similar to those that induced us in...