New England Legal Foundation v. City of Boston

• Decision Date: 24 September 1996
• Parties: NEW ENGLAND LEGAL FOUNDATION v. CITY OF BOSTON & another. 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 152

670 N.E.2d 152

423 Mass. 602

NEW ENGLAND LEGAL FOUNDATION v. CITY OF BOSTON & another. ¹

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued April 2, 1996.

Decided Sept. 24, 1996.

Constantine Papademetriou, Boston, for defendants.

Stephen S. Ostrach (Todd S. Brilliant with him), Boston, for plaintiff.

Laura Steinberg & Lisa F. Sherman, Boston, for Conservation Law Foundation, Inc., amicus curiae, submitted a brief.

Before LIACOS, C.J., and WILKINS, LYNCH, O'CONNOR and GREANEY, JJ.

LIACOS, Chief Justice.

Since 1993, the city of Boston has assessed real property taxes on two office condominium units, adjacent to each other, owned by the New England Legal Foundation (NELF), a corporation organized under G.L. c. 180 (1994 ed.). NELF's Articles of Organization proclaim that:

"The specific and primary purposes for which this corporation is formed and for which it shall be exclusively administered and operated are: To receive, administer and expend funds for charitable and educational purposes in connection with the following:

"1. To provide legal representation for the citizens of the New England region, corporate or individual, and citizens of the United States on matters of public interest at all levels of the administrative and judicial process;

"2. To engage in nonpartisan analysis, study, research and consultation for the benefit of the general public on those questions affecting the public interest, both with respect to the public and private sectors; and for no other purposes, to the express exclusion of any participation in or intervention in (including the publishing or distributing of statements) any political campaign on behalf of any candidate for public office."

The judge found, as the parties agreed by stipulation of facts, that NELF engages in no activities that are outside this charter description.

Beginning in 1993, NELF asserted tax-exempt status as a charitable organization, pursuant to G.L. c. 59, § 5, Third 1994 ed.). ² The city disagreed, claiming that NELF primarily conducted political activities and was therefore not entitled to tax exemption. Litigation ensued, with NELF bringing an action to recover back taxes (see G.L. c. 60, § 98 [1994 ed.] ), and for declaratory relief. On cross motions for summary judgment and a motion for reconsideration, the Superior Court granted relief as to taxes paid in 1993 and 1994, while denying declaratory relief. The court denied NELF's motion for legal fees.

The parties cross appealed, and we granted an application for direct appellate review. Three issues are before the court: (1) whether certain procedural requirements prevent recovery in this case; (2) whether NELF is entitled to tax-exempt status; and (3) whether the court's denial of legal fees was proper. ³ We recount the appropriate facts as we take up each of these questions. ⁴

1. Procedural issues. The city has availed itself of the Legislature's authorization for cities and towns to collect real property taxes on a quarterly basis rather than an annual or a semi-annual basis. G.L. c. 59, § 57C, inserted by St.1989, c. 653, § 41. In each of the city's first two fiscal quarters, taxpayers receive preliminary bills in the amount of one-fourth of the previous year's tax. See id. (preliminary tax payments due in August and November). The city informs the taxpayer of the actual tax assessment for the year with the third quarter tax bill. See id. at fifth par. (actual tax bill mailed by December 31). Property owners pay the remaining tax liability for the year (total assessment less the two preliminary payments already made) in equal installments in the third and fourth fiscal quarters. See id. (February and May payments).

In the city's fiscal year 1993, it sent quarterly tax bills to NELF, in the manner just described. When NELF received its actual tax assessment in the third quarter, it timely paid the accompanying bill. The payment was accompanied by a letter contesting the tax assessment, and NELF filed suit in the Superior Court in April, 1993.

The city continued to send quarterly tax bills. In the fourth quarter (May), NELF again made timely payment and in late July filed another lawsuit seeking recovery of taxes paid in fiscal year 1993. The Superior Court consolidated the two actions. Tax billing continued parallel with the litigation. NELF paid real estate tax bills for fiscal year 1994, although the record does not reveal any further lawsuits that were filed.

Both the April and July actions sought recovery, pursuant to G.L. c. 60, § 98, of taxes paid during fiscal year 1993. The city contends that two sections of the General Laws operate together to prevent recovery on procedural grounds. First, G.L. c. 60, § 98, states:

"No action to recover back a tax shall be maintained, except as provided in sections sixty and eighty-five, unless commenced within three months after payment of the tax nor unless such a tax is paid either after an arrest of the person paying it, a levy on his goods, a notice of a sale of his land, a written protest signed by him, or a withholding of money due him under section ninety-three."

The city argues that NELF's April action fails to comply with § 98 because, at the time that suit was filed, NELF had paid only the first three quarterly tax bills and thus had not yet paid the entire tax due for the fiscal year. Thus the April action was not filed within "three months after payment of the tax" (emphasis added). Id.

Second, the city argues that NELF's July action does not lie because NELF commenced it more than ninety days after payment of the tax, in contravention of § 98. The city supports this position by citation to G.L. c. 59, § 57C, second par., which states:

"To the extent that any rights or remedies under law accrue from the date that the tax bill is issued, only the tax bill issued upon the establishment of the tax rate for the current fiscal year shall govern such rights and remedies."

This section arguably makes the third quarter tax bill (that follows the actual assessment) the only one from which filing periods may be calculated, and therefore the ninety-day period must run from the payment of that bill.

We recognize that the city is not asserting that NELF had no method by which to bring an action to recover back taxes paid; but the city reads the statute to require the taxpayer to make full payment of the entire tax at the time of the third quarter bill. Thus, it is said, both the full payment requirement of G.L. c. 60, § 98, and the third quarter time-calculation regime of G.L. c. 59, § 57C, second par., would be satisfied.

The problem arises from the relatively recent advent of a quarterly payment system for local taxes. Under the older annual and semi-annual billing regimes, the final (or only) payment of the year came due at the same time that the final tax assessment was sent to a property owner. The taxpayer who wished to file an action to recover back taxes would be able to pay the tax in the normal course and file a complaint within ninety days. Quarterly tax billing, however, provides the taxpayer with the final assessment in conjunction with the third quarter payment. In the normal course, the fourth and last payment would not be due for another three months. Thus, the question becomes whether, once the actual tax liability becomes known at the time of the third quarter billing, the taxpayer desiring to file an action to recover taxes must pay all the remaining tax at one time and file for an abatement within ninety days from that payment.

To interpret and harmonize the two relevant statutes, we look to "the intent of the Legislature ascertained from all its words construed by the ordinary and approved usage of the language, considered in connection with the cause of its enactment, the mischief or imperfection to be remedied and the main object to be accomplished, to the end that the purpose of its framers may be effectuated." Telesetsky v. Wight, 395 Mass. 868, 872-873, 482 N.E.2d 818 (1985). We examine background principles of both G.L. c. 60, § 98, and G.L. c. 59, § 57C, second par.

For most challenges to a tax bill, the taxpayer must resort to the administrative scheme, first seeking an abatement from the local board of assessors and then proceeding to the Appellate Tax Board. See, e.g., Sears, Roebuck & Co. v. Somerville, 363 Mass. 756, 757-758, 298 N.E.2d 693 (1973). See generally G.L. c. 59, §§ 59-74 (1994 ed.). Only after exhausting those remedies may recourse to the courts be had. ⁵ For a limited class of challenges, an action to recover back taxes will lie. The substantive argument that NELF makes, of complete tax exemption based on charitable organization status (see infra, part 2), could be brought pursuant to c. 60, § 98. See, e.g., Massachusetts Soc'y for the Prevention of Cruelty to Animals v. Boston, 142 Mass. 24, 25-26, 6 N.E. 840 (1886).

The ability to bring such a challenge, of course, might be disruptive of local government finances, because it is not a mere reduction that is sought (as in excessive assessment and valuation cases), but rather a complete voiding of the tax bill. Cf. Leto v. Assessors of Wilmington, 348 Mass. 144, 147, 202 N.E.2d 922 (1964). As a condition precedent to filing, the taxpayer must pay the tax bill, and then bring suit within ninety days. G.L. c. 60, § 98. The narrow window of time allows localities to obtain stability in their revenue flow because once a tax is paid, the locality will know soon thereafter whether the tax will be challenged.

As part of the Legislature's giving cities and towns the authority to collect local taxes on a quarterly basis, G.L. c. 59, § 57C, second par., attempts to harmonize the procedural schemes for tax administration with the new billing cycle. That new quarterly billing option provides localities in the Commonwealth with a steadier income stream than annual or semi-annual billing. Therefore, the touchstone of both §...