Nash Family Inv. Properties v. Town of Hudson

• Decision Date: 09 June 1995
• Docket Number: No. 93-772,93-772
• Citation: 660 A.2d 1102,139 N.H. 595
• Parties: NASH FAMILY INVESTMENT PROPERTIES and another v. TOWN OF HUDSON and another.
• Court: New Hampshire Supreme Court

Page 1102

660 A.2d 1102

139 N.H. 595

NASH FAMILY INVESTMENT PROPERTIES and another v. TOWN OF HUDSON and another.

No. 93-772.

Supreme Court of New Hampshire.

June 9, 1995.

Carol A. Rolf, Amherst, by brief and orally, for plaintiffs.

Soule, Leslie, Zelin, Sayward & Loughman, Salem (Barbara F. Loughman, orally, and Michael S. Elwell, on the brief), for defendants.

JOHNSON, Justice.

This case concerns special assessments levied against the plaintiffs for the construction of a sewer near their lots in the Town of Hudson. The plaintiffs are Nash Family Investment Properties, Nash Family Investment Trust, Nash-Tamposi Family Investment, Tamposi Family Investment Properties, Nash & Clegg, Nash-Stellos Family Investment Properties, D.P.C.S. Investment Property, Samuel A. Tamposi & Gerald Q. Nash, Samuel A. Tamposi 1987 Trust, Gerald Q. Nash 1987 Trust, Leon P. Brassard, d/b/a Heat, Inc., Acorn Leasing Co., Inc., Q. Peter Nash, and Samuel Tamposi, Jr. The defendants are the Town of Hudson (town) and the Hudson Town Council (town council). The plaintiffs petitioned the Superior Court (Lynn, J.) to abate the assessments. The court denied abatement on all but three lots and partially granted the defendants' motion for attorney's fees. We affirm in part, vacate in part, and remand.

In March 1984, voters at the Hudson town meeting voted to raise and appropriate $1,670,000 for construction of a sewer in the Sagamore Industrial Park, where the plaintiffs' lots are located. The warrant article passed by the town authorized the Hudson selectmen to raise the money by issuing bonds under RSA chapter 33, the Municipal Finance Act, and directed them "to enter into contracts or agreements for the actual costs with industry or industrial parks which shall provide for the payment to the Town by each such industry or industrial park for the cost of extending sewer lines to, or providing sewage facilities for, the industry or industrial park...." In December 1985, the town voted "to terminate any previously-approved method of capital cost recovery pertaining to sewer construction projects, and in lieu thereof to authorize the governmental authority referred to in RSA 149-I:7 to implement a fair and equitable method of capital recovery for all sewer projects in the Town of Hudson...." Effective January 1986, the town adopted a charter and town council form of government.

The town council hired Park Construction to build the sewer in the Sagamore Industrial Park. Although Park was the low bidder on the project, its stated contract price was $2,007,388, well above the $1,670,000 appropriated in 1984. As a consequence, the size of the project was reduced temporarily to keep the price within the 1984 limit. Park agreed to the new terms and completed the scaled-down project, designated Phase One, in June 1988. That month, the council voted to assess lot owners in the industrial park for the cost of the sewer. In the fall of 1988, the council authorized construction of Phase Two, the remainder of the original project, and appropriated $400,000 to fund it. The council eventually added this cost and project overruns to the lot owners' assessments. The plaintiffs petitioned the superior court for abatement, and this appeal followed.

The plaintiffs' first argument on appeal concerns interest earned on the Phase One bond money from 1985, when the town issued the bonds, to 1987, when the town spent the money to pay for the project. This interest, approximately $185,000, was transferred from the Sagamore sewer account to the town's general fund. The town did not use it to offset the assessments later levied against the Sagamore Industrial Park property owners to pay for the cost of the project. We conclude that the defendants may have acted illegally.

The issue presented is one of first impression for this court. Our caselaw offers little guidance, and no statute directly addresses the problem. RSA 33:3-a, I (1988), for example, provides that "[t]he proceeds of any sale of bonds or notes shall be used only for the purposes for which the loan was incurred"; "proceeds" of a sale ordinarily means "what is produced or derived from [a sale] by way of total revenue," Webster's Third New International Dictionary 1807 (unabridged ed. 1961), not interest earned on that money.

More helpful is RSA 149-I:7 (1990), the source of the town's authority to assess the plaintiffs for the cost of the sewer. Although RSA chapter 149-I generally applies only to cities, see RSA 149-I:1 (1990), the town adopted its provisions in accordance with RSA 149-I:24 (1990) and is therefore governed by them. RSA 149-I:7 reads:

The [town] may assess upon the persons whose drains enter such main drains, common sewers or treatment facilities, or whose lands receive special benefit therefrom in any way, their just share of the expense of constructing and maintaining the same or paying off any capital debt or interest incurred in constructing and/or maintaining the same.

(Emphasis added.) We hold that it is unjust for a municipality to use interest earned on sewer bond money for any purpose other than to ease the financial burden of the property owners charged with paying for the sewer. RSA 149-I:7 allows the town to assess the plaintiffs for the total cost of the project, including the interest incurred on the bond debt. It would therefore be inequitable to deprive the plaintiffs of the interest earned on any unspent bond money. To do so would unfairly provide municipalities with an unearned windfall at the expense of the assessed lot owners. Cf. United States v. Michigan, 518 F.Supp. 966, 969 (E.D.Mich.1981).

The defendants argue that RSA 33:3-a, I, prohibits a municipality from using interest earned on bond money to offset assessments. They quote: "Any premium received shall not be used to increase the amount to be spent for the purpose for which the loan was originally incurred." RSA 33:3-a, I. We disagree with the defendants' interpretation of this statute. Even if "premium" could be construed to include interest, but see Webster's, supra at 1789, we do not understand how applying the interest to offset the plaintiffs' assessments would have increased the amount to be spent on the sewer project. The town intended to recoup the total cost of the project from the owners of the sewer district lots. Using the interest to ease the owners' burden does nothing to change this amount. The defendants cite no evidence that the sewer would have been built more expensively had the interest remained in the sewer account during construction.

The defendants contend alternatively that the plaintiffs were not harmed by the town's decision to place the interest in the general fund because the town used an even greater amount of its general funds to pay for sewer costs that could have been charged to the plaintiffs. These costs arose because of the way the defendants calculated the assessments on the lots in the sewer district. The town divided the total cost of the sewer project by the total number of acres in the sewer district, thus achieving a cost per acre. Each lot in the district was then assessed by multiplying this figure by the number of acres in the lot. The town now deems "uncollectible" several lots included in the sewer district. The defendants argue that although the town had the right to recover the "uncollectible" assessments from the remaining lots in the district, the town instead paid the uncollectible assessments out of its general fund.

The share of the total project cost attributable to the "uncollectible" lots under the town's original calculation is greater than the interest earned on the bond money. Consequently, the defendants argue that the plaintiffs were not harmed by the town's transfer of the interest into the general fund because the town has paid a greater amount out of its general fund for the "uncollectible" assessments. The defendants argue that if the town had used the interest to reduce the plaintiffs' assessments at the outset, the town could have then increased the plaintiffs' assessments to pay for the "uncollectible" lots thus destroying any advantage gained from the interest.

The defendants' position has merit. As presented, it does not conflict with our stated principle that interest earned on unspent bond money must be used to ease the lot owners' assessment burden. The defendants, for example, do not argue that the town could place the interest in the general fund and increase the plaintiffs' assessments to recoup the "uncollectible" assessments. Moreover, the defendants' argument complies with the rule that assessments must not substantially exceed the benefits received. See Chasan v. Village District of Eastman, 128 N.H. 807, 818, 523 A.2d 16, 23 (1986). As discussed below, the plaintiffs failed to prove that their assessments violated this rule; these assessments would not change if we accepted the defendants' view.

The plaintiffs, however, challenge two assumptions underlying the defendants' position: that the lots are truly "uncollectible" and that the town has the right to charge the plaintiffs for any portion of the project cost attributable to such lots. Six lots are at issue: a lot owned by the federal government, two residential lots, and the three lots whose assessments were abated by the trial court. The parties do not dispute that the federal lot and the latter three are exempt from assessment, and we agree that these lots can be deemed truly uncollectible. With regard to the two residential lots, the plaintiffs appear to consider the lot owners liable for a share of the sewer costs and thus currently delinquent for nonpayment of assessments. The defendants claim that the assessments on these lots were actually abated. The record does not provide a clear answer to this question, and the trial court never addressed it. We think it important to have the trial court resolve this factual dispute, and we therefore...