Lesage v. Town of Colchester. Mary Jane Marchelewicz

• Decision Date: 26 August 2013
• Docket Number: 12–300,Nos. 12–196,12–392.,s. 12–196
• Citation: 81 A.3d 1142,2013 VT 48,194 Vt. 377
• Court: Vermont Supreme Court
• Parties: Stephanie LESAGE, Mary E. McNeil and Richard Mostrom, Colin McNeil, Daniel and Claudia McNeil v. TOWN OF COLCHESTER. Mary Jane Marchelewicz v. Town of Colchester. In re Colchester Leased Lands.

194 Vt. 377

81 A.3d 1142

2013 VT 48

Stephanie LESAGE, Mary E. McNeil and Richard Mostrom, Colin McNeil, Daniel and Claudia McNeil

v.TOWN OF COLCHESTER.

Mary Jane Marchelewicz

v.Town of Colchester.

In re Colchester Leased Lands.

Nos. 12–196, 12–300, 12–392.

Supreme Court of Vermont.

July 5, 2013.

Motion for Reargument In Docket No. 2012–392 Denied As Untimely Filed Aug. 26, 2013.

Ian M. DeGalan and Brian P. Monaghan of Monaghan Safar Dwight PLLC, Burlington, for Appellant Town of Colchester. (2012–196).

Peter and Stephanie Lesage, Pro Se, Colchester, Appellees.

Joseph E. McNeil, Colin K. McNeil and Kevin J. Coyle of McNeil, Leddy & Sheahan, Burlington, for Appellees McNeil/Mostrom, Colin McNeil, Daniel and Claudia McNeil.

James W. Barlow, Vermont League of Cities and Towns, Montpelier, for Amicus Curiae Vermont League of Cities and Towns.

Mark L. Sperry and Michele B. Patton of Langrock Sperry & Wool, LLP, Burlington, for Amicus Curiae Coates Island, LLC.

Brian P. Monaghan and Nicholas T. Stanton of Monaghan Safar Dwight PLLC, Burlington, for Appellant Town of Colchester. (2012–300 & 2012–392).

Liam L. Murphy and Damien J. Leonard of Murphy Sullivan Kronk, Burlington, for Appellees Colchester Leased Lands.

William H. Sorrell, Attorney General, and Mary L. Bachman, Assistant Attorney General, Montpelier, for Amicus Curiae Department of Taxes.

Present: REIBER, C.J., SKOGLUND and BURGESS, JJ., and BENT and GERETY, Supr. JJ., Specially Assigned.

SKOGLUND, J.

¶ 1. The common legal issue in these consolidated cases is whether Vermont law allows the Town of Colchester to consider location-related “intangible” factors in assessing seasonal lakefront camps situated on leased land. We conclude that the Town is not precluded from considering such factors in assessing the subject properties. Accordingly, we reverse the decisions of the superior court and state appraiser reaching the opposite conclusion, and we remand the cases for further consideration consistent with our opinion set forth below.

¶ 2. There are two decisions for our review, one by the superior court and one by a state appraiser from the Vermont Division of Property Valuation and Review. As noted, both decisions addressed the Town's authority to factor in intangible factors related to location in assessing lakefront camps situated on leased land. In each of the cases before us, taxpayers own camp buildings on land owned by others who are not parties to these proceedings.

¶ 3. The seed for the instant dispute was planted in 2008 when the Division informed the Town that both its common level of appraisal, which measures assessment equity across towns, and its coefficient of dispersion, which measures assessment equity within a town, were outside acceptable state parameters, thereby requiring a town-wide reappraisal. The Town completed its reappraisal in 2011. Among the town properties subject to reappraisal were hundreds of seasonal lakefront camps, many of which were located on leased lands.

¶ 4. Upon discovering during the reappraisal process that the camps on leased land were listed on the average at about half their median sale price, the Town determined to reappraise the properties based on the actual sales of comparable properties. The Town's appraisal software broke down the appraised value of the camps into two categories, which the Town labeled “building” value and “land/amenity” value. The Town derived the “building” value by estimating the replacement cost of a new building and then deducting depreciation. The Town calculated the “land/amenity” value by using market data to establish a fixed base value and then adjusting that value depending on a variety of factors related to location, such as proximity to shoreline, views, and quality of beachfront.

¶ 5. Following challenges before the town listers and the Town of Colchester Board of Civil Authority, forty-four camp owners appealed their reappraisal assessments to the superior court. See 32 V.S.A. § 4461(a) (providing that taxpayer aggrieved by decision of town board of civil authority may appeal to either superior court or state appraiser). In an April 2012 summary judgment ruling on those consolidated cases, the court concluded that Vermont law does not give municipalities authority to assess owners of “buildings” on leased land for location-related value attributable to the leasehold rather than the building itself. After denying the Town's motion for reconsideration, the court entered its final judgment in September 2012 ordering the Town to remove the “land/amenity” value from the appraised value for each of the forty-four camps.

¶ 6. Meanwhile, other camp owners appealed to a state appraiser after challenging the Town's assessment first before the town listers and the Board of Civil Authority. Despite finding that the Town had “presented reliable evidence that camps on leased land are selling in the free and open market for a greater amount than the FMV estimate of the camp/buildings themselves,” and further that the Town was assessing taxpayers “for the location of a camp/building, not the Leasehold Interest,” the state appraiser concluded, similarly to the superior court in the other consolidated cases, that Vermont law does not authorize the Town to assess camps on leased land for value attributable to location-related factors associated with the land rather than structures on the land.

¶ 7. The Town appeals to this Court. The essence of the Town's argument on appeal is that the decisions of the superior court and state appraiser thwart the letter and purpose of Vermont law to assess all real property uniformly according to its fair market value. The Vermont Department of Taxes and the Vermont League of Cities and Towns have filed briefs as amici curiae in support of the Town's appeal. In addition to echoing the Town's position that fair market value is the touchstone of property tax assessment in Vermont, they warn of far-reaching and potentially unintended consequences should this Court uphold the decisions below.

¶ 8. For their part, taxpayers also warn of negative consequences if the decisions are overturned. They take the position that the Vermont statute allowing towns to assess “buildings” on leased land does not authorize towns to assess those buildings based in part on location-related factors attributable to the land.

¶ 9. The decisions below resolved a pure legal question, which we generally review on a “nondeferential and plenary” basis. Barnett v. Town of Wolcott, 2009 VT 32, ¶ 5, 185 Vt. 627, 970 A.2d 1281 (mem.). Although we will uphold “interpretations of statutory provisions by the agency responsible for their administration” absent “compelling indication of error,” we must thoroughly review decisions by state appraisers “to ensure that they are supported by findings rationally drawn from the evidence and based on a correct interpretation of the law.” Barrett v. Town of Warren, 2005 VT 107, ¶ 5, 179 Vt. 134, 892 A.2d 152.

¶ 10. At the heart of the instant controversy is a simple statute, 32 V.S.A. § 3608, that has been part of Vermont law since the end of the nineteenth century. Section 3608 states as follows: “Buildings on leased land or on land not owned by the owner of the buildings shall be set in the list as real estate.” Taxpayers insist that this statute means that buildings on leased land must be assessed based only on the value of the structures themselves and not on factors, such as location, typically associated with the land. The superior court and the state appraiser relied on § 3608 to arrive at the same conclusion. We conclude that the court, the state appraiser, and taxpayers read too much into the statute and in particular the word “buildings” contained within the statute.

¶ 11. “The goal of property-tax appraisal is to ensure that no property owner pays more than his or her fair share of the tax burden; this is accomplished by listing all properties at fair market value.” Barnett, 2009 VT 32, ¶ 4, 185 Vt. 627, 970 A.2d 1281. Fair market value is “the price which the property will bring in the marketwhen offered for sale and purchased by another.” 32 V.S.A. § 3481(1); see Sondergeld v. Town of Hubbardton, 150 Vt. 565, 567, 556 A.2d 64, 66 (1988) (stating that “touchstone” of property tax valuation is fair market value as mandated by § 3481).¹ THE “MOST PERSUASIVE METHOD” OF ESTABLISHING THE FAIR MARKET VALUE OF residential property is “through bona fide sale transactions.” Sondergeld, 150 Vt. at 567, 556 A.2d at 66.

¶ 12. The Town contends that because its assessments of the subject properties are ultimately based on recent bona fide sale transactions involving comparable properties, the superior court and the state appraiser erred by rejecting those assessments. As noted, the court and state appraiser reduced the Town's assessments of the subject properties by the values representing the intangible location factors attributed to the properties by the Town. While acknowledging that its appraisal software program indicated subcategories of “building” value and “land/amenity” value, the Town argues those program labels do not alter the fact that the subject properties were appraised at fair market value, as required by Vermont law.

¶ 13. Taxpayers acknowledge that if they owned both the buildings and the land upon which the buildings sit, factoring in location as a component of the buildings' fair market value would be entirely appropriate. Indeed, in Wennar v. Town of Georgia, 161 Vt. 632, 633, 641 A.2d 101, 101–02 (1994) (mem.), we rejected the taxpayer's argument that the Town erred by basing the fair market value of his lakefront house on the original construction cost plus a time-location factor rather than on the house's replacement value. More specifically, we rejected “taxpayer's assertion that a house must be valued the same wherever it is located.” Id. at 633, 641 A.2d at 101. In so ruling, we cautioned that valuation methodologies were...