Lawrence Mall of New Haven, Inc. v. City of West Haven, No. X06-CV03-0183330 S (CT 9/22/2004), X06-CV03-0183330 S
| Decision Date | 22 September 2004 |
| Docket Number | No. X06-CV03-0183330 S,X06-CV03-0183330 S |
| Parties | Lawrence Mall of New Haven, Inc. et al. v. City of West Haven et al. |
| Court | Connecticut Supreme Court |
The plaintiffs who are real property taxpayers in the city of West Haven seek a temporary injunction enjoining the city from charging taxpayers who are delinquent in paying their real property taxes a 10% or 15% collection fee on the grounds that the fee is unreasonable and in violation of Connecticut statutes and the Connecticut and United States Constitutions. The defendant City of West Haven maintains that the collection fee is authorized by statute and does not run afoul of any constitutional provision.
The named plaintiffs, Lawrence Mall of New Haven, Inc., ("Lawrence Mall"), Joseph B. Celantano, Three Up Investments, LLC, and Joseph Suraci, own real property located in West Haven, Connecticut. The defendants are the City of West Haven and JER Revenue Services; LLC, ("JER"), a private collection agency hired by West Haven to collect certain of the city's delinquent real property taxes. The plaintiffs' fourth amended complaint contains twenty-four counts and seeks damages, declaratory and injunctive relief with respect to the practice of the City of West Haven in referring selected delinquent real property tax accounts to JER and charging taxpayers a 10% or 15% collection fee on the outstanding arrearage.
The court (Arnold, J.) subsequently granted the plaintiffs' motion for class certification and certified a plaintiff class of all persons, corporations, businesses and limited liability companies who owned property and were taxpayers of the city of West Haven at any time from July 10, 2002 and the present, as set forth on the appropriate grand lists for the subject time periods, who were charged collection servicing fees in connection with real property and sewer use taxes by JER and the City of West Haven.
The plaintiffs have now moved for a temporary injunction from this court to enjoin the City's enforcement of a percentage collection fee on outstanding real property taxes. An evidentiary hearing was held on the plaintiffs' claims. Before addressing those claims, it is appropriate to set forth the standards governing the issuance of a temporary injunction.
"The principal purpose of a temporary injunction is to preserve the status quo until the rights of the parties can be finally determined after a hearing on the merits." (Internal quotation marks omitted.) Clinton v. Middlesex Mutual Assurance Co., 37 Conn.App. 269, 270 (1995). A party seeking injunctive relief has the burden of establishing irreparable harm and the lack of an adequate remedy at law. Walton v. New Hartford, 223 Conn. 155, 165 (1992). In its consideration of a request for an injunction, the court may consider and balance the injury complained of with that which will result from interference by an injunction. Moore v. Ganim, 233 Conn. 557, 616 n.25 (1995). The court must properly weigh the equities between the parties and only grant that relief compatible with the equities of the case. Walton v. New Hartford, supra, 223 Conn. 167. The task of balancing the equities Griffin Hospital v. Commission on Hospitals, 196 Conn. 451, 457 (1985).
Based on the evidence presented at the hearing on the plaintiffs' motion for a temporary injunction, I find the following facts. Real property taxes in the city of West Haven from each annual grand list are payable by taxpayers in two installments: on the subsequent July 1 and January 1. For example, taxes from the 2001 grand list are payable on July 1, 2002 and January 1, 2003. Taxes on real property become delinquent thirty days after each of these due dates.
On July 10, 2002, the City of West Haven entered into a written contract with JER entitled "Direct Servicing Agreement" for JER to provide services to the city for the collection of delinquent real estate taxes. Pursuant to the agreement, JER attempts to collect, on behalf of the city, the outstanding balances, including principal, interest, penalties and fees, with respect to certain real estate tax liens referred to JER by the city. The collection services include telephone calls, collection letters, and skip tracing whereby JER seeks to locate delinquent property owners. Pursuant to the agreement, JER also manages foreclosure proceedings brought by the city to collect delinquent property taxes. JER is authorized under the agreement to enter into forbearance agreements with taxpayers pursuant to which a taxpayer agrees to pay a minimum of 50% of the outstanding arrearage, amortize the balance over a period not to exceed two years, and keep current on subsequent real estate taxes. Taxpayers are to make payments on delinquent accounts referred to JER directly to the Tax Collector of the City of West Haven. Pursuant to the agreement, JER is paid by the city a servicing fee of 15% of the amount actually collected on the delinquent tax accounts referred to JER by the city. The servicing fee is a contingency fee in that it is only paid by the city to JER to the extent JER is successful in collecting the arrearage.
On July 2, 2003, the city and JER agreed to a one-year extension of their direct servicing agreement. On July 9, 2004, the city and JER entered into a new direct servicing agreement. For purposes of these proceedings, the only significant change in the contract from the 2002 agreement was a change in the servicing fee paid by the city to JER. Under the new agreement, JER is paid a 10% fee for collections on delinquent tax accounts from the 2002 grand list1 provided the account is not subject to any prior unpaid tax liens and JER is paid a 15% servicing fee for all other delinquent tax accounts. As a result of this change, JER is paid 10% of collections on the outstanding arrearage for delinquent tax accounts which are delinquent only with respect to the 2002 grand list. JER continues to be paid 15% of collections for all other delinquent accounts.
JER's servicing fees are paid by the city on a quarterly basis based on the amount of collections it receives on the delinquent tax accounts referred to JER. The city seeks to recoup its payment of JER's servicing fees from delinquent taxpayers. The servicing fee is uniformly applied by the city to all delinquent real estate tax accounts referred to JER for collection2 and the appropriate percentage is deducted from every payment on such accounts. The collection fee is charged to the delinquent taxpayer in addition to the 18% interest authorized by statute.
When a delinquent account is assigned by the city to JER, JER sends a letter on city letterhead to the affected taxpayer informing him that the city has authorized JER to collect the delinquent real property taxes and that a collection fee of 10% or 15%, as appropriate, will be added to the arrearage. JER subsequently sends another letter on JER stationery introducing JER and requesting that the taxpayer contact JER to arrange payment of the delinquency. JER endeavors to obtain payment in full or a forbearance agreement with the taxpayer. If these efforts are unsuccessful, JER may seek authorization from the city to commence foreclosure proceedings.
Pursuant to its contract with JER, the City of West Haven, in October 2002, initially referred 2,556 delinquent real estate tax accounts, which represented a majority of its delinquent accounts, to JER for collection. The outstanding value of these delinquent tax accounts was $15,380,770. Since October 2002, the city has continued to refer selected delinquent real property tax accounts to JER. As of June 30, 2004, a total of 3,417 delinquent accounts with an outstanding total arrearage of $18,848,232 have been sent by the city to JER for collection. Additional facts will be set forth as necessary to resolve the parties' claims.
The plaintiffs contend that a collection fee of a fixed percentage such as that charged delinquent taxpayers by the City of New Haven is not authorized by General Statutes §12-166 and that such a fee is unreasonable because it is not based on the amount of work performed by the collection agency. They further argue that to the extent §12-166 authorizes a contingent collection fee it is unconstitutional on its face as it is void of standards and void for vagueness and unconstitutional as applied because delinquent taxpayers are not given adequate notice and an opportunity to contest imposition of the fee in violation of the due process provisions of the Connecticut and United States Constitutions. The defendants assert that the collection fee which is imposed on delinquent real estate tax accounts by the City of West Haven is a reasonable exercise of the statutory authority of a municipal tax collector and complies with constitutional due process requirements. I agree with the defendants.
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