Magic II, Inc. v. Dubno, 13213

• Citation: 206 Conn. 253,537 A.2d 998
• Decision Date: 16 February 1988
• Docket Number: No. 13213,13213
• Court: Supreme Court of Connecticut
• Parties: MAGIC II, INC. v. Orest T. DUBNO, Commissioner of Revenue Services.

Page 998

537 A.2d 998

206 Conn. 253

MAGIC II, INC. v. Orest T. DUBNO, Commissioner of Revenue Services.

No. 13213.

Supreme Court of Connecticut.

Argued Dec. 11, 1987.

Decided Feb. 16, 1988.

K. Wynne Bohonnon, with whom were R. William Bohonnon, and, on the brief, David Bohonnon, New Haven, for appellant (plaintiff).

Robert L. Klein, Asst. Atty. Gen., with whom were Bonnie D. Stewart, Certified Legal Intern, and, on the brief, Joseph I. Lieberman, Atty. Gen., for appellee (defendant).

Before ARTHUR H. HEALEY, SHEA, CALLAHAN, GLASS and HULL, JJ.

HULL, Associate Justice.

The plaintiff has appealed from an assessment by the commissioner of revenue services of a use tax, which totaled $14,831 including penalty and interest, with respect to a sailing yacht owned by it. The commissioner assessed the tax under General Statutes § 12-416 on the basis of the plaintiff's failure to file a return reporting its Connecticut use tax liability under General Statutes § 12-411 ¹ on its purchase of a yacht out-of-state for use in Connecticut. The plaintiff sought a reassessment and was granted a hearing pursuant to General Statutes § 12-418(2). The original assessment was confirmed after a hearing by the deputy commissioner. He found that the vessel was, in reality, a pleasure craft purchased for use by the corporation's two shareholders and that the corporation itself and its purported conducting of business was a mere subterfuge. The plaintiff appealed this decision to the Superior Court. The matter was referred to Hon. Charles S. House, state trial referee, who exercised the authority of the Superior Court in hearing the appeal. At the hearing on the appeal the entire administrative record was admitted into evidence. Herbert W. Owen, the president of the corporation, testified at that hearing before the deputy commissioner and also at the court hearing. In its memorandum of decision dated December 15, 1986, the court summarized the deputy commissioner's findings of fact as supplemented in essential detail by evidence before the court and found the deputy commissioner's finding assessing the use tax fully supported by the evidence. The facts as found by the court are not seriously disputed.

Owen organized the plaintiff as a Delaware corporation on September 21, 1976. Since its organization, Owen has served as the president, treasurer and sole director. He is also the owner of 90 percent of the corporation's stock. His wife, Alice Owen, in September, 1976, owned a house in and was a resident of Old Saybrook. Since the corporation's organization she has been vice president, secretary and the owner of the remaining 10 percent of the stock. On March 23, 1977, in Maine, the plaintiff purchased a yacht known as "Magic." Owen made a deposit on the boat on September 1, 1976, before the organization of the corporation. He was then a resident of and domiciled in Connecticut. The boat was delivered on March 23, 1977, for $223,433. Owen guaranteed a $150,000 bank loan used to finance the purchase.

Owen signed an affidavit that the corporation would remove the yacht from Maine immediately upon delivery. The corporation was therefore not liable for the Maine use tax. Owen registered the yacht with the United States Coast Guard as a pleasure vessel and executed a sworn statement that it would be used exclusively as a pleasure vessel. He testified that when it was purchased it was intended that the yacht would be used in Connecticut. On June 1, 1977, Owen sailed the yacht to Old Saybrook, where a well attended christening party was held. He then sailed it back to Maine a few days later to be checked over. The yacht has been back in Connecticut periodically since. It was stored at a Mystic shipyard during the winters of 1979-80 and 1980-81. In September, 1977, Owen filed an application with the Old Saybrook harbor master for a 1978 mooring for a forty foot yacht named Magic, and he has made annual applications for a yacht mooring since that time.

The court concluded as follows: "The use tax is an excise tax imposed on the storage, acceptance, consumption or other use in Connecticut of tangible personal property purchased from any retailer for storage, acceptance, consumption or other use in this state. General Statutes Sec. 12-411. It was enacted to complement the sales tax. Fusco-Amatruda Co. v. Tax Commissioner, 168 Conn. 597 [362 A.2d 847 (1975) ]. As noted in Stetson v. Sullivan, 152 Conn. 649, 653 [211 A.2d 685 (1965) ], 'three conditions must exist to create taxability. First, there must be a purchase of tangible personal property; second, the purchase must have been made for the purpose of storage, use or other consumption in this state; and, third, there must have been such storage, use or other consumption.' It is also pertinent to note that the burden of proving any claimed exceptions to a tax is on the taxpayers. Modugno v. Tax Commissioner, 174 Conn. 419, 421 [389 A.2d 745 (1978) ], as is the burden of proving that an assessment is erroneous. H.B. Sanson, Inc. v. Tax Commissioner, 187 Conn. 581, 586 [447 A.2d 12 (1982);] Fusco-Amatruda Co. v. Tax Commissioner, supra [168 Conn.], 599 .

"The hearing officer found that each of the three conditions precedent to a finding that the plaintiff was liable for the use tax assessment existed and the evidence fully supports his findings and conclusions: (a) the yacht was purchased in Maine by the plaintiff corporation; (b) Owen, a Connecticut resident, the president of the corporation, owner of 90% of the corporation's stock and its sole director, intended that it be brought to Connecticut and it was; (c) ... the plaintiff purchased the yacht with the intention of using it in Connecticut as it was so used. The evidence fully supports this finding as does the statutory presumption contained in General Statutes Sec. 12-411: 'It shall be presumed that tangible personal property shipped or brought to this state by the purchaser was purchased from a retailer for storage, use or other consumption in this state.' While Owen was extremely evasive in responding to inquiries as to the full extent of the corporation's use of the yacht in Connecticut, the evidence fully supports a finding that there was such use. The statute does not require a major or principal use in the state. Even a very brief and limited use is sufficient to justify the imposition of the tax. Stetson v. Sullivan, [supra, 152 Conn. at 654, 211 A.2d 685]; United Aircraft Corporation v. Connelly, 145 Conn. 176, 182 [140 A.2d 486 (1958) ]."

The plaintiff briefed two issues on appeal: (1) whether the trial court erred in adopting the findings of the commissioner of revenue services in assessing the plaintiff a use tax; and (2) whether a state may assess a use tax against a corporation with no taxable situs within the state and whose sole connection with the state is the passage through the state of a federally documented vessel owned by the corporation.

We conclude that, despite the ornate wrappings of the plaintiff's appeal, it is a patent and necessarily futile attempt to have this court retry the facts, which we cannot do. The plaintiff recites certain facts in its brief concerning Owen's residence in Key Largo, Florida, his use of the yacht one winter in Florida and his use of the Old Saybrook mooring for a twelve foot powerboat. These facts were not found by the trial court.

"Ordinarily we do not ' "resort to matters extraneous to the formal record, to facts which have not been found and which are not admitted in the pleadings or exhibits which are not part of the record." ' Grunschlag v. Ethel Walker School, Inc., 189 Conn. 316, 320, 455 A.2d 1332 (1983). References in the 'statement of facts' in a brief or references to testimony in the transcript, even if uncontradicted, do not constitute facts in the case. Where the factual basis of the court's decision is unclear, 'proper utilization of the motion for articulation serves to dispel any such ambiguity by clarifying the factual and legal basis upon which the trial court rendered its decision, thereby sharpening the issues on appeal. "It remains the appellant's responsibility to secure an adequate appellate record...." ' Barnes v. Barnes, 190 Conn. 491, 494, 460 A.2d 1302 (1983)." Pointina Beach Assn., Inc. v. Stella, 1 Conn.App. 341, 343, 471 A.2d 970 (1984). The plaintiff made no motion for articulation of the memorandum of decision in the trial court or in this court under Practice Book §§ 4051 or 4061.

We note that even if these "facts" had been found by the trial court, or were in the deputy commissioner's finding upon which the trial court largely based its conclusions, they would not have changed the result reached by the trial court. The state also recites various "facts," not found by either the trial court or the deputy commissioner, tending to show that Owen's claimed use of the yacht as a charter boat was a sham. To the extent that these "facts" are not properly found or contained in exhibits we do not consider them.

We need not dwell on the court's finding that the three necessary elements for imposition of a use tax were satisfied. Stetson v. Sullivan, supra, 152 Conn. at 653, 211 A.2d 685. The plaintiff purchased the yacht from a retailer with the intent of using it in this state. Owen's testimony at the hearings before the trial court and the deputy commissioner clearly show that he intended to use the yacht in Connecticut when he purchased it. He so testified in the hearing before the deputy commissioner. This intent, by the plaintiff's sole director and president, is that of the corporation. Goodspeed v. East Haddam Bank, 22 Conn. 530, 540 (1853). Concerning the third element, the yacht was used and stored in Connecticut. General Statutes § 12-407 defines the words "storage" or "use" as follows:

"(4) 'Storage' includes any keeping or retention in this state for any purpose except sale in the regular course of business or subsequent...