Shawmut Inn v. Inhabitants of Town of Kennebunkport

• Decision Date: 14 April 1981
• Citation: 428 A.2d 384
• Parties: SHAWMUT INN, v. INHABITANTS OF the TOWN OF KENNEBUNKPORT et al.
• Court: Maine Supreme Court

Page 384

428 A.2d 384

SHAWMUT INN, v. INHABITANTS OF the TOWN OF KENNEBUNKPORT et al.

Supreme Judicial Court of Maine.

Argued Nov. 13, 1979.

Decided April 14, 1981.

Drummond & Drummond, John B. Emory, Portland (orally), for plaintiff.

Wilson, Steinfeld & Murrel, Henry Steinfeld, Portland, Lane & Johns, Charles A. Lane, Portland (orally), for Town of Kennebunkport.

G. Arthur Brennan, Dist. Atty., Joseph A. Wannemacher, Asst. Dist. Atty., Sheila Fine, Law Student, Alfred (orally), for County Commissioners.

Before McKUSICK, C. J., and POMEROY, ^* WERNICK, GODFREY, NICHOLS and GLASSMAN, JJ.

NICHOLS, Justice.

Once again on this appeal our Court is confronted with an issue as to the assessment of real estate for local property taxation.

Pursuant to 36 M.R.S.A. § 844 and M.R.Civ.P. 80B the Plaintiff, Shawmut Inn, appeals from the refusal of the Superior Court (York County) to order any abatement of a portion of the tax assessed upon its oceanfront resort by the Town of Kennebunkport as of April 1, 1975. The Plaintiff asserts that when professional appraisers, who were retained by the Town, used a single appraisal method, "reproduction cost less depreciation," in arriving at its valuation, and the municipal assessors adopted the professionals' valuation, it resulted in a substantial overvaluation of the Plaintiff property in violation of the assessors' duty to determine "just value" of the property.

The subject premises is a seasonal resort facility. It consists of a large main building, a number of cottages and a 20-unit motel situated on approximately 25 acres of land fronting on the Atlantic Ocean.

In April, 1974, the Town of Kennebunkport contracted with the Massachusetts appraisal firm of Whipple-Magane-Darcy, Inc., to make "a complete appraisal and reevaluation for tax assessment purposes of all real and personal property in Kennebunkport." The appraisal firm contracted to furnish to the assessors "full information concerning the appraisals and valuation made by it, the methods used and the procedures followed." The contract further provided that:

The appraisal company shall make careful investigation of the market value of all classes of land. Owners, realtors, banks and other informed sources shall be asked to supply information relative to sales of property within the area covered by these specifications. The appraisal company shall furnish to the Assessors for their information and further reference the detailed data which were used to arrive at the units of land value and which serve to substantiate these values, ....

With reference to residential property the contract provided:

The appraisal company shall record the type and quality of construction by component parts such as foundation, basement, framing, floors, interior trim, exterior trim, roof, heating, plumbing, lighting extras, such as fireplaces, etc., and substandard physical features, number of rooms, age, number of stories, physical, functional and economic depreciation factors, rent, if rented, and sales data that may be obtainable. In addition, all such other pertinent factors as may contribute or detract from value shall be noted. Seasonal properties will be seasonally checked.

Further, with reference to commercial and special purpose buildings, the contract provided:

The appraisal company shall measure accurately these buildings and shall keep a similar record with respect to their component parts as in the case of residences. Depreciation shall be determined from conditions, functional utility and location. Earnings shall be considered as a check against depreciated cost where this process may be applicable. (emphasis supplied)

In the course of its performance of that contract the appraisal firm proposed valuations aggregating $1,679,600 on the Shawmut Inn's real estate. The assessors adopted those valuations, without change, for its 1975 assessment.

On April 3, 1975, the Shawmut Inn's present stockholders (then minority stockholders) purchased for $830,000 the remaining corporate stock which at that time was owned by the Estate of Frank J. Small. The principal asset of the corporation was the real estate, and an independent appraisal, made in conjunction with the purchase of stock, placed a total value of $677,605 on the Shawmut Inn's real estate.

With this appraisal in hand Shawmut Inn applied to the town assessors pursuant to 36 M.R.S.A. § 841 for an abatement of so much of its tax as reflected a valuation in excess of the sale price of the stock.

The town assessors granted a reduction of $152,800 on the valuation placed on the Shawmut Inn property.

A seasonable appeal by Shawmut Inn to the County Commissioners of York County pursuant to 36 M.R.S.A. § 844 and a hearing before the County Commissioners produced no further change in the valuation placed on the subject premises.

On December 23, 1976, Shawmut Inn appealed the County Commissioners' decision to the Superior Court. Months later that Court remanded the matter to the County Commissioners to establish a sufficient record for appellate review.

During two days of testimony in the hearing which ensued, the County Commissioners heard testimony as to appraisal methods commonly used to determine the value of commercial property, and as to methods used in reaching the values placed on the Shawmut Inn by the local assessors and by the taxpayer. Significantly, no evidence was offered as to the specific methodology employed by the professional appraisal firm which had developed the valuation initially placed by the assessors on the real estate in question.

The Town offered the testimony of a professional appraiser, Albert Scrontras, who could say that he had thoroughly examined the property and had checked the "Assessors' Cards" which the appraisal firm had prepared on each segment of the property. It was Scrontras' testimony that he found no evidence of the use by that firm of any approach other than "replacement cost less depreciation" in revaluing property in Kennebunkport. It was Scontras' opinion that the assessed value placed on the Shawmut Inn holdings represented the just value of the property.

The Shawmut Inn called as its principal witness before the County Commissioners Albert J. Childs, whose 1974 appraisal had established the sale price of the Inn on April 3, 1975. He testified that use by the appraisal firm of the "reproduction cost less depreciation" method had resulted in a substantial overvaluation of the property in 1975. It was Childs's opinion that "market data" and "capitalization of income" approaches would result in a more reasonable estimate of just value of the Shawmut Inn property.

When the record thus made before the County Commissioners came up for review by the Superior Court that Court, relying upon Frank v. Assessors of Skowhegan, Me., 329 A.2d 167 (1974), concluded that there was no showing that the appraisal techniques relied upon by the Kennebunkport assessors amounted to an intentional violation of the essential principle of practical uniformity, and further concluded that the valuation arrived at by the local assessors was not unreasonable.

The case comes here on appeal by the taxpayer.

I. Dismissal as to the Administrative Tribunals

Before reaching the merits of this appeal, we observe at the outset that this case must be dismissed as to the Defendants, Assessors of the Town of Kennebunkport and the Commissioners of the County of York. The taxpayer and the municipality are the proper adversaries in tax abatement proceedings in the courts. Assessors, Town of Bristol v. Eldridge, Me., 392 A.2d 37, 39-40 (1978). M.R.Civ.P. 80B requires notice to any administrative agency whose decision is being reviewed in the courts but, absent some statutory provision to the contrary, this requirement of notice does not make the agency a party to the proceeding in Superior Court.

We now reach the merits of Shawmut Inn's appeal. The Inn contends both that (a) the method of valuing its property was unlawful and that (b) by the use of that method, the property was overvalued. Faced with a similar double-barreled attack on the validity of a tax assessment, we recently concluded that proving one of these points would entitle the taxpayer to an abatement. See Farrelly v. Inhabitants of the Town of Deer Isle, Me., 407 A.2d 302, 306 (1979).

We must determine whether the conclusions reached by the Superior Court were erroneous as a matter of law. Specifically, on this appeal we must determine:

(a) Whether the court below erred in ruling as a matter of law that the appraisal approach used by the professional appraisers did not violate the constitutional mandate of equality; and

(b) Whether the court below erred in ruling that the value reached by the assessors was not so unreasonable in light of the circumstances that the property was substantially overvalued and injustice resulted.

II. Appraisal Method

This case presents a question almost identical to one we addressed in Frank v. Assessors of Skowhegan, Me., 329 A.2d 167 (1974). There, as here, the "reproduction cost less depreciation" method of appraisal was employed uniformly in revaluing all real property (in Skowhegan), including residential, commercial and industrial land and buildings. There the taxpayer argued that the assessors violated their obligation to assess justly and equally when they assessed his income-producing property by the "cost" method to the exclusion of the "capitalization of income" approach. He argued that the lower court's refusal to give any weight to his evidence of the income approach was error of law. Id. at 174.

Shawmut Inn's complaint is much the same in the present case. Its argument is that if the expert appraisers had valued its property by more than one appraisal method and then correlated the results, they would have found the value calculated by the "cost" approach to be excessive. The taxpayer further argues that the sale of corporate stock in the Inn only...