Macioci v. Commissioner of Revenue

• Citation: 386 Mass. 752,438 N.E.2d 786
• Parties: Beatrice MACIOCI et al. 1 v. COMMISSIONER OF REVENUE et al. 2 (and ten companion cases).
• Decision Date: 20 July 1982
• Court: United States State Supreme Judicial Court of Massachusetts

Page 786

438 N.E.2d 786

386 Mass. 752

Beatrice MACIOCI et al. ¹ v. COMMISSIONER OF REVENUE et al. ² (and ten

companion cases).

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued March 5, 1982.

Decided July 20, 1982.

Philip Burling (Peter A. Fine & David R. Pearson, Foley, Hoag & Eliot, Boston, with him), for plaintiffs.

James A. Aloisi, Jr., Asst. Atty. Gen., for Commissioner of Revenue.

John M. Lynch, Brookline, for Board of Assessors of Fitchburg & others.

Before HENNESSEY, C. J., and ABRAMS, NOLAN and O'CONNOR, JJ. NOLAN, Justice.

This case represents a test of certain procedures taken pursuant to the tax classification amendment, art. 112 of the Amendments to the Massachusetts Constitution, and its enabling legislation, St.1979, c. 797. At issue is the propriety of the Superior Court judge's findings and rulings regarding (1) certification by the Commissioner of Revenue (Commissioner) that the city of Fitchburg (city) was qualified to implement differential taxation of property by use classification for fiscal years 1981 and 1982; (2) implementation by the city of that program; and (3) failure of the city in 1981 to apply free cash available at the close of fiscal 1980 to reduce its property tax levy. We affirm the judgment of the Superior Court with the one exception noted in Part 5 infra.

1. Overview. A brief description of the property tax system, and especially classification, will prove useful in understanding our discussion of the issues in this case. ³ In recent years this court has upheld the constitutional mandate that the Legislature impose "proportional and reasonable assessments, rates and taxes." Part II, c. 1, § 1, art. 4, of the Massachusetts Constitution. See Sudbury v. Commissioner of Corps. & Taxation, 366 Mass. 558, 563, 321 N.E.2d 641 (1974); Coomey v. Assessors of Sandwich, 367 Mass. 836, 837, 329 N.E.2d 117 (1975). Shortly after this court's decision in Bettigole v. Assessors of Springfield, 343 Mass. 223, 178 N.E.2d 10 (1961), in which the Constitution of the Commonwealth was construed to require equality in tax rates on all classes of property, the Legislature began preparation of an amendment allowing for classification, or different tax rates for different classes of property. Ultimately, in 1978, the voters ratified a classification amendment. Art. 112 of the Articles of Amendment to the Massachusetts Constitution. Legislation was enacted by St.1978, c. 580, § 38, which inserted c. 59A (Classification Act). Statute 1979, c. 797 (Enabling Act), repealed and amended c. 580, § 38, with the exception of c. 59A. ⁴ See generally Opinion of the Justices, 378 Mass. 802, 393 N.E.2d 306 (1979).

The amended Classification Act permits municipalities to determine, within limits, the tax burden for four classes of property. ⁵ Before classification of real property is implemented, the Commissioner is required to certify that "the assessments on the real property ... are at full and fair cash valuation." G.L. c. 59, § 2A(c ). Once the Commissioner determines that a community is assessing property at full value, she "shall determine a minimum residential factor for each city and town." G.L. c. 58, § 1A. This factor, to be not less than 65%, nor more than 100%, must prevent the tax burden on any other class of property from being increased by more than 50%. The community may adopt a residential factor, not less than the minimum residential factor prescribed by the Commissioner. G.L. c. 40, § 56. At the same time, the board of assessors of the community must determine the percentages of the local tax levy to be borne by each class of real property. G.L. c. 40, § 56.

While the responsibility for assessments and valuation is ordinarily committed to local assessors, the Commissioner has substantial authority and powers with respect to these matters. G.L. c. 58, § 1A. Assessors must follow her lawful commands. See Sudbury v. Commissioner of Corps. & Taxation, 366 Mass. 558, 563-564, 321 N.E.2d 641 (1974); Commonwealth v. Andover, 378 Mass. 370, 377-378, 391 N.E.2d 1225 (1979). She is required to administer all laws which the Department of Revenue must enforce. G.L. c. 14, § 3. She may further the attainment of the goal of uniformity in "valuation, classification and assessment" throughout the Commonwealth, G.L. c. 58, §§ 1A, 4, by issuing guidelines to assist local assessors in the performance of their duties. G.L. c. 58, §§ 1, 3. To assist her in carrying out her responsibilities, the Commissioner has a staff which the Superior Court judge found to be "without the resources to accomplish its many functions in the manner and to the degree of accuracy which ... [is] desirable."

2. Factual background--certification of Fitchburg. After St.1979, c. 797, was enacted, the Commissioner issued a set of guidelines. ⁶ Pursuant to these guidelines, the Commissioner conducted a certification review of Fitchburg. The review consisted of a statistical analysis of residential and land parcel values. ⁷ The Commissioner derived a median assessment/sales ratio ⁸ for some such parcels and a coefficient of dispersion (COD) about that median. ⁹

The Commissioner's study derived ratios and COD's for only two classes of property. For R1 (single family residential) ¹⁰ she found a median ratio of 80% and a COD of 11.2%. For land she found a median ratio of 55% and a COD of 63.7%. Determining that the data submitted for her land study was inadequate, the Commissioner discarded those results and relied on R1 statistics alone.

In order to raise assessment for R1 and other parcels to acceptable levels, the Commissioner developed a factor to be applied to R1 and other parcels. ¹¹ The factor was developed by taking the mean ratio for R1 parcels ¹² derived from the 1980 equalized value study (EQV study) ¹³ and finding a multiplier that would increase that mean ratio to 100%. ¹⁴ Using the mean method from the EQV study for R1 properties, the Commissioner calculated the assessment/sales ratio as 89.6% (as distinguished from the 80% median ratio derived from the nine-month study). The Commissioner chose a multiplier (factor) of 1.12 to raise the EQV mean for R1 properties to 100%. ¹⁵ Fitchburg chose a system of factors differing from that prescribed by the Commissioner. Having separately assessed values for land and buildings, the city applied a 1.10 factor for R1 land and a 1.13 factor for R1 structures in Fitchburg. The R2, R3, and R4 properties were factored at 1.06. ¹⁶ Commercial and industrial properties were factored at 1.00 and land was factored at 1.10. The Commissioner accepted Fitchburg's factoring program and certified that the city could implement tax classification.

At the conclusion of fiscal 1980, Fitchburg had free cash in the amount of $1,610,330. Had this money been applied to 1981 taxes, such taxes would have been reduced by $7.28/$1,000, from $73.20/$1,000 to $65.92/$1,000. ¹⁷ Of the free cash available, Fitchburg appropriated and expended $1,222,479 to defray ordinary expenses during fiscal 1981.

3. Procedural background. This case, here on cross appeals from a judgment in the Superior Court, is the result of a ten-taxpayer action seeking injunctive relief under G.L. c. 40, § 53, and declaratory relief under G.L. c. 231A, which was consolidated with ten separate taxpayer actions for the recovery of back taxes under G.L. c. 60, § 98. The plaintiffs (taxpayers) are taxpayers in the city of Fitchburg. The defendants are the Commissioner and various officials of Fitchburg (city defendants).

This case was preceded by Litton Business Systems, Inc. v. Commissioner of Revenue, --- Mass. ---, Mass.Adv.Sh. (1981) 1207, 420 N.E.2d 339. Litton presented essentially the same question as the instant case, but was dismissed for want of subject matter jurisdiction. Id. --- Mass. at --- - ---, Mass.Adv.Sh. (1981), at 1211-1212, 420 N.E.2d 339. During the pendency of the Litton appeal in this court, the ten actions under G.L. c. 60, § 98, were filed. Four days after Litton was remanded, the instant action for injunctive and declaratory relief was filed in the county court. The case was transferred to this court pursuant to G.L. c. 211, § 4A. Injunctive relief was denied and the case was then transferred to the Superior Court for further proceedings.

The consolidated actions were tried between September 15, and September 29, 1981. Shortly thereafter, a Superior Court judge entered an order for partial summary judgment. Mass.R.Civ.P. 54(b), 365 Mass. 820 (1974).

The judge denied the taxpayers' motion for injunctive relief by which they sought to restrain the issuance of classified real property tax bills in fiscal 1982. The judge noted that, although there was a reasonable likelihood that the plaintiffs would be able to prove various errors, inconsistencies and at least one flaw in the tax program as adopted by Fitchburg and approved by the Commissioner, they failed to show that they were threatened by "sufficient irreparable" harm to warrant interference with the city's collection of taxes. The judge ruled further that on "the present record ... the Plaintiffs are not entitled to any relief under either G.L. c. 40, Section 53 or G.L. c. 60, Section 98 as to the tax classification aspects of the case," and thus he denied relief on these claims. The order did grant relief to the taxpayers on the issue of the city's failure to apply its free cash to abate tax assessments, but the judge deferred to the Appellate Tax Board to ascertain the limits of its own jurisdiction on this issue. The judge retained jurisdiction in the event that the Appellate Tax Board decided that it had no jurisdiction over this matter.

In November, 1981, the judge issued his memorandum of decision in which he fleshed out the reasoning behind his order and, in addition, he made several declarations pursuant to G.L. c. 231A. Appeals and cross appeals were filed, and this court granted a motion brought jointly by the city and...