Lomas & Nettleton Co. v. City of Waterbury

• Decision Date: 01 December 1936
• Citation: 188 A. 433,122 Conn. 228
• Parties: LOMAS & NETTLETON CO. v. CITY OF WATERBURY.
• Court: Connecticut Supreme Court

188 A. 433

122 Conn. 228

LOMAS & NETTLETON CO. v. CITY OF WATERBURY.

Supreme Court of Errors of Connecticut.

December 1, 1936

Appeal from Superior Court, New Haven County; Newell Jennings Judge.

Action by the Lomas & Nettleton Company, trustee, against the City of Waterbury, to reduce the assessment on real estate of the plaintiff, brought to the superior court and tried to the court. Judgment for the defendant, and the plaintiff appeals.

No error.

Charles M. Lyman, of New Haven, for appellant.

Charles O'Connor and Timothy S. Sullivan, both of Waterbury, for appellee.

Argued before MALTBIE, C.J., and HINMAN, BANKS, AVERY, and BROWN JJ.

BANKS Judge.

The plaintiff is the owner of an apartment house on North Main street in Waterbury which was assessed upon the list of 1934 as follows: Land, $15,000; apartment building, $45,600; garage, $800; total, $61,400. The plaintiff, claiming this assessment to be excessive, brought this action under General Statutes, Cum.Sup. 1933, § 328b (now Cum.Sup.1935, § 375c), which provides that, " when it shall be claimed *** that a tax laid on property was computed on an assessment which under all the circumstances was manifestly excessive and could not have been arrived at except by disregarding the provisions of the Statutes for determining the valuation of such property, the owner thereof, prior to the payment of such tax, may, in addition to the other remedies provided by law, make application for relief to the superior court." The court found that the assessment was not manifestly excessive and determined the value of the buildings to be $62,500 and of the land $16,500, a total of $79,000. The appellant's brief states that the sole question raised by this appeal, aside from two rulings on evidence, is as to the correctness of the trial court's method of determining the value of business real estate for taxation purposes.

Section 1143 of the General Statutes provides that property of this character shall be set in the list at its " present true and actual valuation," and section 1149 provides that the present true and actual value of any estate shall be deemed to be " the fair market value thereof." There had been no sales of property of this character in Waterbury during the last five years and it was conceded that its market value was not ascertainable. Its " true and actual valuation" must therefore be determined by some other method of valuation. Underwood Typewriter Co. v. Hartford, 99 Conn. 329, 337, 122 A. 91.

Three methods were used by the experts in this case to determine the value of the property: (a) Reproduction cost less depreciation and obsolescence; (b) capitalization of gross income; (c) capitalization of a stabilized net income. The court held that all three were proper methods and should be used to check the results obtained. Each of these is an approved method of ascertaining the actual value of real estate for purposes of taxation. We so held as to the method of reproduction costs in Underwood Typewriter Co. v. Hartford, supra; as to the capitalization of gross income in Somers v. Meriden, 119 Conn. 5, 174 A. 184, 95 A.L.R. 434; and in Metropolitan Life Ins. Co. v. Bassford, 120 Conn. 384, 389, 180 A. 692, sustained a holding of the trial court that no one method was necessarily controlling, and that consideration should be given to them all in arriving at the value of the property. The contention of the plaintiff is that property of this character can have only a use value, and that the controlling and practically exclusive method of determining its actual value is by capitalizing its earning capacity-a method which it terms " capitalization of stabilized net income."

Plaintiff's building is a four-story apartment house of brick and marble construction. On the first floor are four stories, and the three upper floors consist of seventeen two-room apartments and sixteen one-room apartments. The actual gross rental received from the building for the years 1932 to 1935, inclusive, averaged $7,324.93. The actual expenditures in maintaining the building during the same period averaged $7,191.25. The plaintiff contends that where, as here, the actual figures of income and expense over a period of four years are available, they establish the use values of the property with almost mathematical accuracy, and that a valuation thus based upon facts should be controlling and render immaterial other methods which involve speculative factors based upon testimony of expert witnesses employed by the parties. The actual figures of income and expenditure disclose that this building produced substantially no net income during the years under consideration. If its value were to be measured solely by its actual earning capacity, it would be practically worthless. Such a result would tend to discredit a valuation thus ascertained. Appreciating this, plaintiff adopts so-called " stabilized figures" of income and expense which it claims represent the reasonable expectation of what these items should be under normal conditions, and using these figures arrives at a " stabilized net income" of the property, the capitalization of which, it claims, should conclusively establish its value. As pointed out in the memorandum of decision of the trial court, each one of these items of income and expense immediately becomes a matter of opinion as to which the experts differed widely, thus depriving the result of that mathematical accuracy claimed by the plaintiff to follow from the use of actual figures of income and expenditure. Thus the court has found from the testimony of certain experts that under normal conditions the reasonable expectation is that the items of expense, exclusive of taxes, depreciation, and obsolescence would total $3,200 per year, while the plaintiff's claim, based upon the testimony of its experts, is that this total should be $4,515.

It is true, as we said in Somers v. Meriden, supra, that earning of income producing capacity is a factor in valuation for taxation purposes, and that it is often a reasonable assumption that property is worth a sum capitalized on the basis of its...