Ralston Purina Co. v. Board of Tax Review of Town of Franklin, SWISS-AMERICAN

• Decision Date: 05 May 1987
• Docket Number: Nos. 12782,12783,SWISS-AMERICAN,s. 12782
• Citation: 525 A.2d 91,203 Conn. 425
• Court: Connecticut Supreme Court
• Parties: RALSTON PURINA COMPANY et al. v. BOARD OF TAX REVIEW OF the TOWN OF FRANKLIN.SPAWN, INC. v. BOARD OF TAX REVIEW OF the TOWN OF FRANKLIN.

Page 91

525 A.2d 91

203 Conn. 425

RALSTON PURINA COMPANY et al. v. BOARD OF TAX REVIEW OF the TOWN OF FRANKLIN.

SWISS-AMERICAN SPAWN, INC. v. BOARD OF TAX REVIEW OF the TOWN OF FRANKLIN.

Nos. 12782, 12783.

Supreme Court of Connecticut.

Argued March 5, 1987.

Decided May 5, 1987.

Palmer A. McGee, Jr., with whom was J. Rene Frechette, Hartford, for appellant (defendant in both cases).

Milton L. Jacobson, with whom was Karen K. Lamb, Norwich, for appellees (plaintiffs in each case).

PETERS, C.J., and ARTHUR H. HEALEY, SHEA, HULL and LEONARD W. DORSEY, JJ.

PETERS, Chief Justice.

The dispositive issue in this combined appeal is whether a municipality is required under General Statutes § 12-62 ¹ to adjust property tax assessments during interim years between decennial revaluations of real property to account for fluctuations in property values resulting solely from changes in market conditions. The plaintiffs in the first case, Ralston Purina Company (Ralston Purina) and Franklin Mushroom Farms, Inc. (Franklin Mushroom), and the plaintiff in the second case, Swiss-American Spawn, Inc. (Swiss-American), appealed separately to the Superior Court pursuant to General Statutes § 12-118 from the refusal of the defendant, the board of tax review of the town of Franklin (board), to reduce the October 1, 1982 tax assessments on their real property and personal property located in that town. ² In challenging the defendant's refusal to adjust their tax assessments, the plaintiffs claimed that the fair market value of their property had declined substantially since the last decennial revaluation conducted by the town on October 1, 1979, as evidenced by the subsequent sale of the property in 1983 at a price significantly below its assessed value. Since 1979, however, the assessments of their property had not been changed to reflect that decline in its fair market value. The plaintiffs therefore requested that their assessments be reduced and that the town's grand list be amended accordingly. After a joint trial of the two appeals, the trial court, Hendel, J., sustained the appeals of the plaintiffs in both cases and ordered a reduction in the assessed value of their respective properties. The defendant then filed in this court separate appeals from those judgments. We find error in the ruling by the trial court that the defendant is required, as a matter of law, to adjust the plaintiffs' tax assessments in the interim period between decennial revaluations of real property.

The record reveals the following underlying facts. In 1977, Ralston Purina acquired approximately 202 acres of land in Franklin. From 1977 to 1979, it constructed and equipped on that site a special purpose building complex designed as a mushroom farm. During that same period, Ralston Purina and Swiss-American jointly constructed and equipped a spawn production facility, located approximately one quarter of a mile from the mushroom farm and designed to produce spawn, a protein product used to grow mushrooms. ³ Ralston Purina commenced operation of the mushroom farm in 1979.

As required by General Statutes § 12-62, the assessors of the town of Franklin conducted in 1979, a ten year revaluation of all real property located in the town, and revised the town's grand list as of October 1, 1979. That grand list indicated that the Ralston Purina property was valued, as of October 1, 1979, at an actual value of $11,836,698 and an assessed value of $8,285,689. ⁴ These valuations were based primarily on data submitted by Ralston Purina to the town's assessors.

Apart from some minor adjustments resulting from tax benefits authorized by statute, additions to the mushroom farm complex, and the depreciation of personal property, both the actual value and the assessed value of the Ralston Purina property remained the same on the October 1, 1980, 1981, 1982, 1983 and 1984 grand lists. Neither Ralston Purina nor Swiss-American, however, has ever challenged the valuation of their respective properties as of the October 1, 1979, 1980 and 1981 assessment dates. ⁵ Thus, the plaintiffs in these appeals challenge only their tax assessments on October 1, 1982, 1983 and 1984.

Due to increased competition from out-of-state mushroom growers, Ralston Purina faced mounting losses in its mushroom business in 1981 and 1982, and decided in 1982 to sell the Franklin mushroom farm. Shortly after announcing publicly its intention to sell the mushroom business, Ralston Purina received and accepted an offer of $2 million from a group of local investors. Those investors subsequently organized Franklin Mushroom Farms, Inc., a plaintiff in this appeal. The sale was completed on February 9, 1983, when Ralston Purina conveyed to Franklin Mushroom the real estate for $1,265,000 and the farm machinery for $435,000. ⁶ Upon conveyance of the real estate, Franklin Mushroom assumed and agreed to pay the taxes assessed on the property.

The plaintiffs filed with the defendant two separate petitions for correction of the assessed value of their respective properties as of October 1, 1982. Furthermore, Ralston Purina and Franklin Mushroom appeared before the defendant and claimed that, for assessment purposes, the fair market value of the mushroom farm should have been reduced to the purchase price paid by Franklin Mushroom for the property in February, 1983. The board denied both petitions, and the plaintiffs appealed to the Superior Court pursuant to General Statutes § 12-118.

In response to the appeal of the plaintiffs Ralston Purina and Franklin Mushroom, the defendant moved for summary judgment, alleging that there was no genuine issue of material fact, and that, as a matter of law, the plaintiffs were bound by the assessments of their property as of the 1979 decennial revaluation. The plaintiffs responded that the assessments on their real and personal property were excessive and did not reflect the "true market value" of that property on October 1, 1982, and October 1, 1983. The trial court, Vasington, J., denied that motion, relying upon General Statutes § 12-63, which provides in part that "[t]he present true and actual value of all other property shall be deemed by all assessors and boards of tax review to be the fair market value...." The court concluded, therefore, that there was a genuine issue of material fact as to the "present and true actual value of the plaintiff's property" on the assessment dates in question and that the issue could only be resolved at trial.

Shortly thereafter, the trial court, Hendel, J., tried the two appeals together. In its memorandum of decision the court did not discuss whether the plaintiffs in either case were actually entitled to an interim adjustment of their property assessments, adopting the implicit conclusion of the trial court, Vasington, J., that the defendant was in fact obligated to make the requested adjustments. ⁷ The court focused instead on selecting and applying the appropriate methods for valuation of the plaintiffs' property. In the appeal by Ralston Purina and Franklin Mushroom, the court found that the mushroom farm operation had been unsuccessful since its inception, principally because of "the influx of fresh mushrooms into the northeastern United States Market area from numerous small mushroom growers located in Pennsylvania." The court further determined that Ralston Purina's decision to sell the farm was a "normal business decision to divest an unprofitable operation made in the ordinary course of business," and that it had not acted "under compulsion" in accepting the $2 million offer by the organizers of Franklin Mushroom, even though it had earlier attempted to sell the mushroom facility for $4 million. Applying the sales comparison valuation method, the court concluded that the actual value of the Ralston Purina property was $3 million and its assessed value was $2,100,000 as of October 1, 1982, 1983 and 1984. ⁸ In the second appeal, the court determined that it was appropriate to value the spawn production facility at "its cost less physical, functional and economic depreciation and obsolescence," and concluded that the actual value of the property was $255,000 and its assessed value was $178,500, as of October 1, 1982, 1983 and 1984. ⁹ The court therefore rendered judgment for the plaintiffs in both cases and ordered the defendant to adjust their tax assessments accordingly.

On appeal from these judgments, the defendant contends that: (1) as a matter of law, it is not obligated to reduce the tax assessments of the mushroom farm or the spawn production facility in the interim years between decennial revaluations simply because that property declined in value as a result of changes in market conditions in the mushroom industry; (2) it likewise is not required to reduce the tax assessment of the mushroom farm merely because that property was sold in 1983 at a price below its assessed value as of the 1979 decennial revaluation; (3) the trial court improperly relied on Ralston Purina's sale of the mushroom farm in determining the value of that property; and (4) the trial court erred in refusing to admit into evidence Ralston Purina's answers to the defendant's interrogatories. We will address jointly the defendant's first two claims of error. Because we resolve those claims in favor of the defendant, we need not address its third and fourth claims.

In its first two claims of error, the defendant essentially argues that as a matter of law, under General Statutes § 12-62, it is not obligated to adjust the plaintiffs' property tax assessments during interim years between decennial revaluations of real property to account for fluctuations in property values resulting solely from changes in market conditions in the mushroom industry. According to the defendant, it may be required to conduct such interim revaluations of real property in certain limited circumstances, but this case does not present such...