Verizon New Eng., Inc. v. City of Rochester

• Decision Date: 28 December 2007
• Docket Number: No. 2007–091.,2007–091.
• Citation: 940 A.2d 237,156 N.H. 624
• Court: New Hampshire Supreme Court
• Parties: VERIZON NEW ENGLAND, INC. v. CITY OF ROCHESTER.

156 N.H. 624

940 A.2d 237

VERIZON NEW ENGLAND, INC.

v.CITY OF ROCHESTER.

No. 2007–091.

Supreme Court of New Hampshire.

Argued: Nov. 8, 2007.

Opinion Issued: Dec. 28, 2007.

Rehearing Denied Feb. 12, 2008.

McLane, Graf, Raulerson & Middleton, P.A., of Manchester (Jack B. Middleton and Scott H. Harris, on the brief, and Mr. Harris orally), for the plaintiff.

Wensley, Jones & Azarian, PLLC, of Rochester (Danford J. Wensley, on the brief and orally), for the defendant.

DUGGAN, J.

The defendant, City of Rochester (city), appeals a decision of the Superior Court (Morrill, J.) ruling that the city's taxation of the plaintiff, Verizon New England, Inc. (Verizon), for its use and occupation of public property violated Verizon's equal protection rights. We affirm.

This case is before us for a third time. See Verizon New England v. City of Rochester, 151 N.H. 263, 855 A.2d 497 (2004) (Rochester II ); N.E. Tel. & Tel. Co. v. City of Rochester, 144 N.H. 118, 740 A.2d 135 (1999) ( Rochester I ). We recite only a brief history of the facts necessary to decide this appeal.

Verizon provides telecommunications services to the residents of the city. Rochester II, 151 N.H. at 265, 855 A.2d 497. In accordance with RSA 231:161 (1993), Verizon obtained licenses from the city for the placement of its poles, wires, cables and other equipment on city-maintained highways. Id.

In March 1996, the city manager and the commissioner of public works petitioned the city council to amend Verizon's pole licenses to include language from RSA 72:23, I(b) (Supp. 1993) (amended 1999, 2002, 2003), and to require Verizon to pay real estate taxes for its use of the public ways. Id. ; see RSA 72:23, I (Supp. 1993) (amended 1999, 2002, 2003); RSA 72:6 (1991). In August 1996, the mayor and the city council determined that the public good required the licenses to be amended and granted the petition. Rochester II, 151 N.H. at 265, 855 A.2d 497.

Verizon appealed this decision to the superior court. Id. The trial court held that: (1) Verizon's licenses were not leases or other agreements within the meaning of RSA 72:23, I; and (2) the mayor and city counsel erred in finding that the public good required the city to amend Verizon's licenses. Id. The city appealed. Id.

In Rochester I, we reversed the trial court's decision, holding that Verizon's pole licenses constituted agreements to occupy and use public property, and, therefore, the terms of RSA 72:23, I(b) were applicable. Id. We also held that the amendments were required by the public good. Id. Accordingly, we reversed the trial court's order insofar as it prohibited the city from amending Verizon's licenses and remanded for further proceedings.

On remand, after a bench trial, the trial court ruled that the city could lawfully amend Verizon's pole licenses to require Verizon to pay real estate taxes. Id. The trial court, however, also found that the city "failed to follow a recognized methodology in reaching its conclusions regarding the market value of Verizon's use of the land pursuant to its pole licenses." Id. (quotation omitted). Therefore, the trial court granted Verizon's abatement petitions "to the extent that the city's tax bills ... must be reassessed based on an appropriate methodology." Id. (quotation omitted). Both parties appealed. Id.

In Rochester II, Verizon argued that: (1) RSA 72:23, I, does not allow the city to tax Verizon's use of the public ways; (2) the city's proposed tax unconstitutionally singles out Verizon; and (3) the city's amendment of Verizon's pole licenses is not consistent with the public good. Id. at 265–66, 855 A.2d 497. The city cross-appealed and argued that the trial court erred in granting in part Verizon's petitions for abatement because Verizon failed, as a matter of law, to satisfy its burden of establishing that it is paying more than its proportional share of the common tax burden. Id. at 266, 855 A.2d 497.

We upheld the trial court's ruling that the city could lawfully amend Verizon's pole licenses to require Verizon to pay real estate taxes. Id. at 267–70, 855 A.2d 497. In its equal protection challenge, Verizon attacked the city's use of its broad taxing power under RSA 72:6 and the exemption in RSA 72:23, I, to selectively impose real estate tax assessments upon Verizon's use and occupation of public land, but not upon the gas, cable and electric companies that similarly use and occupy the public ways. Id. at 270, 855 A.2d 497. The trial court found no equal protection violation, ruling that Verizon had "failed to demonstrate that its total tax obligation is greater than its share of the common burden." Id. at 271, 855 A.2d 497 (quotation omitted).

We "vacate[d] the trial court's ruling and remand[ed] for application of the equal protection analysis set forth" in In re Sandra H., 150 N.H. 634, 846 A.2d 513 (2004). Id. We directed the trial court that, in applying the rational basis test, it could "properly consider whether differences between the utilities justif[ied] varying treatment by the legislature." Id. Because "[t]he record [wa]s insufficiently developed with respect to how the various utilities are taxed," we "remand[ed] for further proceedings consistent with th[e] opinion." Id. Additionally, we reversed the trial court's partial grant of Verizon's abatement petitions because the trial court applied an erroneous standard, and, consequently, "remand[ed] for further proceedings consistent with th[e] opinion." Id. at 272, 855 A.2d 497.

On remand, both parties moved for summary judgment. The city argued that RSA 72:23, I, does not, on its face, violate equal protection. Verizon contended that the city "singled Verizon out as the sole entity occupying the public ways from which it[ ] seeks a real estate tax," and, therefore, violated its equal protection rights. Verizon also requested that the court grant its abatement petitions because the city's proposed tax was disproportionate. The trial court ruled that RSA 72:23, I, is constitutional on its face, but found that "the record [wa]s ... insufficiently clear to warrant entry of summary judgment for either party on" Verizon's as-applied challenge. The court also found that issues of fact remained with respect to Verizon's abatement petitions. After a bench trial, the trial court determined that the city's taxation of only Verizon for its use and occupancy of public property under its pole licenses is unconstitutional because the city's reasons for taxing Verizon alone are not rationally related to any legitimate governmental interest. RSA 72:6, :23, I. Foreseeing an appeal, the trial court additionally granted Verizon's abatement petitions, finding that, " as of April 1, 1996, the market value of the public land used or occupied by Verizon for real estate tax purposes was $218,700," and the city's tax assessment of this land was disproportionate.

On appeal, the city argues that the trial court erred by: (1) failing to adhere to the scope of the remand in Rochester II by not confining its review of Verizon's equal protection challenge to whether RSA 72:23, I, is facially constitutional; (2) improperly ruling that as applied, RSA 72:23, I, violates Verizon's equal protection rights; (3) revisiting the disproportionality issue on remand; (4) failing to dismiss Verizon's abatement petitions; and (5) quashing the city's subpoena seeking testimony from Verizon's vice president for governmental relations as to Verizon's potential sale of its landlines.

We first address the equal protection issue. The city argues that the trial court failed to adhere to the scope of the remand in Rochester II when it addressed whether RSA 72:23, I, is unconstitutional as applied to Verizon. The city interprets Rochester II as remanding to the trial court solely for an analysis of whether RSA 72:23, I, on its face, violates the Equal Protection Clauses of the State and Federal Constitutions. Based upon this interpretation, the city argues that the trial court improperly heard additional evidence upon Verizon's as-applied equal protection challenge, and erred in finding an equal protection violation. Verizon counters that it has always challenged RSA 72:23, I, as applied, and the trial court properly considered additional evidence in assessing its equal protection argument.

In Rochester II, we stated that "Verizon argue[d] that RSA 72:23 creates an unconstitutional classification of taxpayers." Rochester II, 151 N.H. at 270, 855 A.2d 497. This language suggests that Verizon was challenging RSA 72:23 on its face. However, we noted that Verizon contended that "the city's proposed tax unconstitutionally singles out Verizon." Id. at 265–66, 855 A.2d 497 (emphasis added). It maintained that "the city has issued real estate tax assessments to Verizon, but not to the gas, cable and electric companies that use the public ways in a manner indistinguishable from Verizon's, thus violating its right to equal protection." Id. at 270, 855 A.2d 497. We thus understood that Verizon was also attacking RSA 72:23, I, as applied to Verizon. We did not rule upon either challenge in Rochester II . Rather, we vacated the trial court's ruling because we had recently clarified our equal protection analysis in In re Sandra H., and the trial court had not applied the rational basis test as articulated in that case in reviewing Verizon's claims. Id. at 270–71, 855 A.2d 497. We then remanded for further proceedings consistent with the opinion because the record, which included transcripts from the first bench trial, was insufficiently developed with respect to how the other utilities are taxed. Id. Contrary to the city's contention, we never suggested that upon remand the trial court was confined to addressing only whether RSA 72:23, I, is facially unconstitutional. Indeed, if Verizon had challenged RSA 72:23, I, on its face only, information concerning how the other utilities are taxed would have been irrelevant. Accordingly, the trial court properly interpreted...