New England Tel. & Tel. Co. v. City of Franklin

• Decision Date: 21 November 1996
• Docket Number: No. 95-318,95-318
• Citation: 141 N.H. 449,685 A.2d 913
• Parties: NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY and another v. CITY OF FRANKLIN and another.
• Court: New Hampshire Supreme Court

Page 913

685 A.2d 913

141 N.H. 449

NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY and another v. CITY OF FRANKLIN and another.

No. 95-318.

Supreme Court of New Hampshire.

Nov. 21, 1996.

McLane, Graf, Raulerson & Middleton, P.A., Manchester (Jack B. Middleton and James J. Tenn, Jr. on the plaintiffs' joint brief, and Mr. Middleton orally), for plaintiff New England Telephone and Telegraph Company.

Ransmeier & Spellman, P.C., Concord (Dom S. D'Ambruoso and R. Stevenson Upton on the plaintiffs' joint brief), for plaintiffs Merrimack County Telephone Company and Contoocook Valley Telephone Company.

Upton, Sanders & Smith, Concord (Richard F. Upton and Robert Upton, II on the brief, and Mr. Richard Upton orally), for the defendants.

HORTON, Justice.

Following consolidation of various tax abatement proceedings, the Superior Court (Nadeau, C.J.) granted summary judgment to plaintiffs New England Telephone and Telegraph Company (NET), Merrimack County Telephone Company (MCT), and Contoocook Valley Telephone Company (CVT), holding that their communications equipment was personal, not real, property and therefore not subject to taxation by the municipal defendants. See RSA 72:6, :12 (1991). The defendants appeal. We affirm.

The plaintiffs are public utilities providing telecommunications services in New Hampshire. NET commenced separate actions for abatement of real estate taxes against the City of Franklin and fifteen other municipalities. NET disputed the defendants' treatment of its communications equipment as real estate, thereby challenging their authority to tax its equipment. The communications equipment at issue involves two basic categories: (1) distribution plant, which includes telephone poles, wires, and underground conduits, and (2) central office equipment, consisting of frames, switches, and other power equipment. The superior court consolidated NET's various actions, as well as a similar action brought by MCT and CVT against the Town of Hopkinton. The plaintiffs jointly moved for summary judgment, arguing that their communications equipment was personal property not subject to municipal taxation.

In support of the summary judgment motion, the plaintiffs submitted affidavits setting forth the following facts. All of the plaintiffs' poles, wires, and underground conduits located in the municipalities are placed either on public rights of way or on private property owned by third parties. Approximately ninety percent of the poles are located on public rights of way pursuant to licenses issued by the State or the municipalities. See RSA 231:159 et seq. (1993 & Supp.1995). The remaining ten percent of the poles are placed on private property either by consent of the property owner or pursuant to an easement. The poles, wires, and underground conduits are installed in a manner that permits and facilitates their removal and relocation. Consequently, removal of that equipment is neither complicated nor time-consuming, and does not harm the underlying land or change its usefulness. The plaintiffs remove and relocate their poles, wires, and underground conduits at the request of the State or the applicable private landowner or municipality. In obtaining the licenses, consents, or easements for their poles, wires and underground conduits, the plaintiffs insist on maintaining ownership of that equipment and refuse any requests to make the equipment a permanent part of the realty. The plaintiffs' central office equipment, most of which is located in buildings owned by the plaintiffs, is both portable and designed to permit removal and relocation. The plaintiffs' practice and policy is to move pieces of central office equipment among buildings in response to changes in technology or system use. Although certain frames are bolted to the buildings, their removal is achieved without affecting the usefulness of the buildings or the frames themselves. When the plaintiffs ultimately vacate a building used as a central office, they remove all of their equipment and merely transfer the building "as a shell." The vacated building, though devoid of central office equipment, retains utility for other commercial or professional uses.

In opposition to the motion for summary judgment, the defendants did not dispute the specific facts set forth by the plaintiffs. Moreover, the defendants' affidavits acknowledged the general removability and transportability of the communications equipment. The defendants, however, produced the following additional facts regarding the equipment at issue. Installation of telephone poles typically involves placing them six feet into the ground. Telephone poles often have a life expectancy or replacement cycle exceeding forty years, and must be sufficiently sturdy to withstand harsh weather and vehicle collisions. Based on these additional facts and on the asserted importance to the plaintiffs of providing reliable and uninterrupted service, the defendants contended that the telephone poles and related equipment were "permanent."

The superior court found no genuine issue of material fact and held that the communications equipment was not real estate and, therefore, not taxable as a matter of law. See RSA 72:6, :12. On appeal, the defendants challenge the superior court's rulings: (1) that the items of communications equipment were not fixtures; (2) that the communications equipment was not so intimately intertwined with the underlying land as to become taxable as real estate; and (3) that the statutory authority for the plaintiffs' licenses on public rights of way did not grant rights amounting to easements.

In reviewing the superior court's grant of summary judgment, "we consider the affidavits and other evidence, as well as all inferences properly drawn from them, in the light most favorable" to the defendants. Boissonnault v. Bristol Federated Church, 138 N.H. 476, 477, 642 A.2d 328, 328 (1994). If our review of that evidence discloses no genuine issue of material fact, and if the plaintiffs are entitled to judgment as a matter of law, we will affirm the grant of summary judgment. Id. at 477, 642 A.2d at 328; see RSA 491:8-a, III (1983). An issue of fact is "material" for purposes of summary judgment if it "affects the outcome of the litigation" under the applicable substantive law. Horse Pond Fish & Game Club v. Cormier, 133 N.H. 648, 653, 581 A.2d 478, 481 (1990) (quotation omitted).

"As a general rule taxes cannot be assessed and collected in this State except by authority of the legislature." King Ridge, Inc. v. Sutton, 115 N.H. 294, 296, 340 A.2d 106, 108 (1975). RSA 72:6 provides that "[a]ll real estate, whether improved or unimproved, shall be taxed except as otherwise provided." See King Ridge, 115 N.H. at 297, 340 A.2d at 108. Accordingly, if the items of communications equipment "are real estate within the meaning of that term as used in RSA 72:6, they are taxable unless exempted by some other provision." Id.; see RSA 72:12.

I. Communications Equipment as Fixtures

The defendants primarily argue that the superior court erred by refusing to characterize the communications equipment as fixtures and, therefore, by failing to treat the equipment as realty. "A chattel loses its character as personalty and becomes a fixture and part of the realty when there exists an actual or constructive annexation to the realty with the intention of making it a permanent accession to the freehold, and an appropriation or adaptation to the use or purpose of that part of the realty with which it is connected." The Saver's Bank v. Anderson, 125 N.H. 193, 195, 480 A.2d 82, 84 (1984) (quotation omitted). A mixed question of law and fact, Graton & Knight Co. v. Company, 69 N.H. 177, 178, 38 A. 790, 790 (1897), whether an item of property is properly classified as either personalty or a fixture turns on several factors, including: the item's nature and use; the intent of the party making the annexation; the degree and extent to which the item is specially adapted to the realty; the degree and extent of the item's annexation to the realty; and the relationship between the realty's owner and the person claiming the item. See, e.g., The Saver's Bank, 125 N.H. at 195, 480 A.2d at 84; Automatic Sprinkler Corp. v. Marston, 94 N.H. 375, 376, 54 A.2d 154, 155 (1947); Graton & Knight Co., 69 N.H. at 178, 38 A. at 790; Dana v. Burke, 62 N.H. 627, 629 (1883); Wadleigh v. Janvrin, 41 N.H. 503, 518 (1860). The central factors are "the nature of the article and its use, as connected with the use" of the underlying land,Langdon v. Buchanan, 62 N.H. 657, 660 (1883); see Despatch Line of Packets v. Bellamy Man. Co., 12 N.H. 205, 233 (1841), because these factors provide the basis for ascertaining the intent of the party who affixes or annexes the item in question. Wadleigh, 41 N.H. at 518.

In this case, the items of communications equipment did not constitute fixtures. Each of the relevant factors supports the superior court's holding that the property remained personalty. The poles, wires, and central office equipment, though placed in the ground or bolted to the buildings, were readily removable and transportable without affecting the utility of the underlying land, the buildings, or the equipment itself. Because removal of the equipment would not render the land or buildings "incomplete and unfit for use," and because the equipment could be "equally useful and adapted for general use elsewhere," the communications equipment did not constitute fixtures. Dana, 62 N.H. at 629 (quotation omitted); see Public Serv. Co. of N.H. v. Town of Seabrook, 126 N.H. 740, 746, 496 A.2d 352, 356 (1985). In addition, the very nature of telephone poles and wires, as well as their use by the plaintiffs in connection with integrated telecommunications systems, belies the proposition that the equipment became a permanent and essential part of the underlying realty so as to pass by conveyance with it. Cf. Dana, 62 N.H. at 629 (...