Leonard Bldg. Corp. v. City of New Britain

• Court: Connecticut Supreme Court
• Writing for the Court: Before DALY; MELLITZ; In this opinion the other judges concurred except DALY
• Citation: Leonard Bldg. Corp. v. City of New Britain, 154 A.2d 614, 146 Conn. 681 (Conn. 1959)
• Decision Date: 31 July 1959
• Parties: LEONARD BUILDING CORPORATION v. CITY OF NEW BRITAIN. Supreme Court of Errors of Connecticut

Page 614

154 A.2d 614

146 Conn. 681

LEONARD BUILDING CORPORATION v. CITY OF NEW BRITAIN.

Supreme Court of Errors of Connecticut.

July 31, 1959.

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).

John J. Kenny, Hartford, with whom were Samuel H. Aron, Hartford, and, on the brief, Israel Nair, New Britain, for appellee (plaintiff).

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

MELLITZ, Associate Justice.

The plaintiff owned property at 300 Main Street in New Britain. Following a revaluation of real estate in the city pursuant to what is now § 12-62 of the 1958 Revision, the board of assessors valued the plaintiff's property at $960,441 and assessed it at 60 per cent of its value, or $576,260. The practice of assessing property at a percentage of its value was held illegal in E. Ingraham Co. v. Town and City of Bristol, 144 Conn. 374, 380, 132 A.2d 563, but was validated by the General Assembly at its 1957 session. Public Acts 1957, No. 673, § 1. The board of tax review refused to reduce the assessment, and the plaintiff appealed to the Court of Common Pleas, where the value of the property was found to be $685,000 and the assessment was reduced to $411,000.

This appeal purports to be taken from the judgment of the trial court reducing the valuation and assessment on both the land and the building of the plaintiff, but the assignment of errors does not effectively attack the court's findings concerning the valuation of the land and the reduction of the assessment thereon. Our discussion is, therefore, confined to the assignments of error relating to the valuation of the building.

The plaintiff's property is in a 90 per cent retail business location and is being devoted to its highest and best use. The building, erected in 1927 and extensively remodeled in 1938, is five stories in height in the front and two in the rear and has a basement. The basement, the first floor and the second floor are occupied, for the most part, by a retail department store; the three upper floors are rented to various tenants as offices. The assessors valued the building on the list of 1956 at $513,789 as the true and actual value, and assessed it at 60 per cent of this value, or $308,270. Two expert witnesses testified for the plaintiff and one for the defendant. All relied chiefly on the capitalization of stabilized net income approach to determine value. It was necessary to resort to some method or test other than market sales to determine value because there had been no sales of comparable real estate for many years. The finding recites in detail the figures relating to the gross income and the deductions to be made therefrom to arrive at the net income to be capitalized and thus to determine the value of the building by the capitalization of net income method. These figures are not disputed. The court concluded that the fair market value of the plaintiff's building on September 1, 1956, was $370,000, and that the proper assessment, at 60 per cent of the true and actual value, was $222,000.

The vital factors in the process of ascertaining value by the use of the capitalization of net income method are the capitalization rate and the method of recapture of the investment. Much caution must be exercised in their choice, because widely divergent results may ensue depending upon the selection made. Burritt Mutual Savings Bank of New Britain v. City of New Britain, Conn., 154 A.2d 608. One expert who testified for the plaintiff used a capitalization rate of 6 per cent and a 2 per cent rate of recapture. The other expert for the plaintiff used a capitalization rate of 8 per cent, and a rate of 1.326 per cent for recapture. The defendant's expert and the assessors used a 5.5 per cent capitalization rate and, employing the Hoskold sinking fund method, a rate of recapture of 0.118 per cent. In arriving at its valuation of $370,000, the court employed a capitalization rate of 6.8 per cent and, by the straight line method, a 2.5 per cent rate of recapture.

To adopt a 6.8 per cent capitalization rate, the court had to find that the assessors were not justified in using a 5.5 per cent rate. There is no such finding. The burden was on the plaintiff to prove the lack of justification. Burritt Mutual Savings Bank of New Britain v. City of New Britain, supra. There is likewise no support for the use by the court of the straight line method of recapture....