Ran-Mar, Inc. v. Town of Berlin, 05-311.

• Decision Date: 17 November 2006
• Docket Number: No. 05-311.,05-311.
• Citation: 912 A.2d 984,2006 VT 117
• Court: Vermont Supreme Court
• Parties: RAN-MAR, INC., R & G Properties II, Inc. and R & G Properties III, Inc. v. TOWN OF BERLIN and Joadi Tracey, Treasurer and Collector of Current and Delinquent Taxes of the Town of Berlin.

912 A.2d 984

2006 VT 117

RAN-MAR, INC., R & G Properties II, Inc. and R & G Properties III, Inc. v. TOWN OF BERLIN and Joadi Tracey, Treasurer and Collector of Current and Delinquent Taxes of the Town of Berlin.

No. 05-311.

Supreme Court of Vermont.

November 17, 2006.

Kathleen B. O'Neill and Philip H. White of Wilson & White, P.C., Montpelier, for Plaintiffs-Appellants.

Marikate E. Kelley and Philip C. Woodward of Woodward & Kelley, P.L.L.C., South Burlington, for Defendants-Appellees.

Present: REIBER, C.J., and DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.

BURGESS, J.

¶ 1. This case arises out of a group of tax sales by the Town of Berlin to satisfy delinquent tax payments for properties owned by three related corporate entities: Ran-Mar, Inc.; R & G Properties II, Inc.; and R & G Properties III, Inc. (collectively, "taxpayers"). Taxpayers challenged the Town's actions, claiming that the Town exceeded its statutory taxing authority under 32 V.S.A. § 5254(a) by collecting "interest" and "penalties" through the tax sales and by retaining the excess proceeds from the tax sales during the redemption period. Taxpayers also claimed that the Town's retention of the proceeds was an unconstitutional taking. The superior court granted the Town's motion for summary judgment. We affirm.

¶ 2. Taxpayers owned a number of properties in the Town of Berlin. After the taxes on several of taxpayers' properties became delinquent, the Town gave notice of tax sales on seven of the properties. The notices stated that in order to prevent the tax sale taxpayers would have to pay the Town the principal on the delinquent taxes, any accrued interest, penalties, legal fees, and costs, before the date of the tax sale. Taxpayers did not pay the amount due to the Town, and the tax sales were conducted. Following the tax sales, taxpayers requested that the Town provide an accounting of the sales and turn over to taxpayers the amount collected in excess of the taxes, costs, and fees owed by taxpayers. The Town responded that it intended to hold the proceeds of the tax sales until the expiration of the one-year statutory redemption period. Taxpayers brought suit in Washington Superior Court to set aside the tax sales and challenge the Town's retention of the tax sale proceeds during the period of redemption.¹ Taxpayers moved for judgment on the pleadings. The Town moved for dismissal or, alternatively, for summary judgment. The court granted the Town's motion for summary judgment, upholding the tax sales and the Town's authority to hold the proceeds until the end of the redemption period. This appeal followed.

¶ 3. Taxpayers argue that the tax sales were invalid because the Town's notices demanded that taxpayers pay accrued interest and penalties to prevent the tax sales. Taxpayers contend that the Town is not authorized to collect interest or penalties through tax sales under 32 V.S.A. § 5254(a), which provides: "When the tax with costs and fees is not paid before the day of sale, the real property on which the taxes are due shall be sold to pay such taxes, costs and fees." Taxpayers claim that the language "taxes, costs and fees" does not include "interest" or "penalties" as demanded by the Town. Taxpayers also argue that the Town had no right, statutory or otherwise, to hold the excess proceeds of the tax sale during the period of redemption and that to do so was an unconstitutional taking of their property.

¶ 4. First, we address taxpayers' contention that the Town exceeded 32 V.S.A. § 5254(a) by collecting interest on the delinquent tax principal by way of tax sale. Taxpayers argue that the Town cannot collect interest on delinquent taxes because interest is not specifically listed in § 5254(a). The superior court held that interest is considered to be an element of the tax obligation itself, and therefore did not need to be specifically listed in the statute to be collectible through tax sale.

¶ 5. In construing a taxing statute, like all statutes, our primary goal is to implement the intent and purpose of the Legislature. In re Loyal Order of Moose, Inc., Lodge # 1090, 2005 VT 31, ¶ 8, 178 Vt. 510, 872 A.2d 345 (mem.). If a statute's meaning is plain on its face, we enforce it according to its terms. Id. "When the meaning of a statute is in doubt, we determine its intent from a consideration of the whole and every part of the statute, the subject matter, the effects and consequences, and the reason and spirit of the law." Boutin v. Conway, 153 Vt. 558, 562, 572 A.2d 905, 907 (1990) (internal quotations omitted). We construe all parts of the statutory scheme together, where possible, as a harmonious whole, In re Estate of Cote, 2004 VT 17, ¶ 10, 176 Vt. 293, 848 A.2d 264, and "[w]e will avoid a construction that would render the legislation ineffective or irrational." In re Southview Assocs., 153 Vt. 171, 175, 569 A.2d 501, 503 (1989). Any remaining ambiguities are resolved against the taxing power and in favor of the taxpayer. Loyal Order of Moose, 2005 VT 31, ¶ 8, 178 Vt. 510, 872 A.2d 345.

¶ 6. The Legislature authorized municipalities to collect interest on overdue taxes through 32 V.S.A. § 5136. Viewing the statutory scheme as a whole, we conclude that the Legislature intended interest authorized under § 5136 to be included as an element of the obligation collectible by tax sale under § 5254(a), or by other statutory means of property tax collection. Section 5136 does not specify a method by which the interest shall be collected, and no express mention of tax interest is made in most of the sections governing property tax collection. See 32 V.S.A. §§ 5221-5227 (collection of taxes by action at law); id. §§ 5251-5263 (collection of taxes by sale of real estate); id. § 5140 (collection of taxes from the estate of the deceased). Without some method to collect the interest, § 5136 would be rendered ineffective. The only statutory method of collection that expressly uses the word "interest" is found in 32 V.S.A. § 5141, which authorizes collection of delinquent taxes from the earnings of municipal employees. It would be an irrational result and contrary, we believe, to the intent of the Legislature if towns could collect the interest to which they are entitled under § 5136 only if the tax was owed by municipal employees or voluntarily paid by the taxpayer. Cf. Boutin v. Conway, 153 Vt. at 562, 572 A.2d at 907 (holding that a late payment penalty was part of the tax due itself, and that refusal to issue a driver's license based on failure to pay the penalty was valid, in part because "a contrary interpretation would lead to the irrational result that the commissioner would be unable to collect the penalty"). Thus, we conclude that in order to give effect to the interest-collection provision of § 5136, the Legislature intended interest authorized under § 5136 to be included as an element of the obligation collectible by tax sale under § 5254(a), or by other statutory means of property tax collection.

¶ 7. Taxpayers cite Clace v. Fair for the proposition that "[i]nterest and penalties are only incidental" to a delinquent tax and are not inherent to collection of the tax itself. 129 Vt. 573, 574, 285 A.2d 705, 706 (1971). In Clace, this Court held that tax collectors were not authorized to bring suit for penalties and interest when the principal tax obligation, although delinquent, had already been paid to, and accepted by, the town. Id. at 574, 285 A.2d at 705-06. We find Clace inapplicable for several reasons. First, the assessment of interest in the present case was not brought by an individual collector as a subsequent action after satisfaction of the underlying taxes owed, as was the case in Clace. The collection authority of towns is not constrained in the same manner as that of an individual tax collector. See id. at 574, 285 A.2d at 705 (construing 32 V.S.A. §§ 5221, 5222). Second, a post-Clace statutory amendment raises doubt about Clace's continued validity and further supports our conclusion that the Legislature intended to allow collection of interest by tax sale or other collection means. Under current law, "[t]he acceptance of full or partial payment of overdue taxes ... shall not preclude the town from collecting any unpaid balance of taxes and any interest and collection fees accruing to the town, whether relating to the collected or uncollected portion of taxes." 32 V.S.A. § 5142(a)(originally enacted by 1985, No. 91). Thus, satisfaction of the tax obligation in this case by means of a tax sale and subsequent redemption does not preclude collection of interest and fees as in Clace.

¶ 8. We next address taxpayers' argument that the Town's demand of "penalties" is not authorized by § 5254(a). The superior court determined that the "penalties" listed in the notice from the Town was not actually a penalty, but the eight percent collector's fee authorized by 32 V.S.A. §§ 1674, 5258. "Fees" are explicitly collectible by tax sale under § 5254(a). The Town's use of the term "penalties" to refer to the collector's fee does not invalidate the tax sale, nor does it prevent the Town from collecting the fee.² The purpose of the notice is to inform the taxpayer that the property is to be sold, so that the taxpayer can prevent the sale by paying the delinquent taxes. Chester Motors, Inc. v. Koledo, 146 Vt. 357, 358, 503 A.2d 551, 552 (1985). The notice was clear enough to inform taxpayers of the sale, and of the amount properly due.

¶ 9. Finally, we address taxpayers' argument that the Town's retention of the excess proceeds from the tax sale was unauthorized by statute and amounted to an unconstitutional taking.³ While noting that Vermont's taxing statutes make no provision for the disposition of the surplus proceeds during redemption, the superior court concluded that taxpayers had no right to the proceeds during the redemption period and that no taking had occurred. We agree.

¶ 10. Taxpayers who wish to redeem their...