REDDING LIFE CARE LLC v. TOWN OF REDDING

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Supreme Court of Connecticut.

REDDING LIFE CARE, LLC v. TOWN OF REDDING.

No. 18921.

Argued April 26, 2012. -- March 12, 2013

NORCOTT, PALMER, ZARELLA, EVELEIGH, HARPER, VERTEFEUILLE and LAVINE, Js.* William S. Fish, Jr., with whom were William H. Champlin II and, on the brief, Heidi Hamilton, for the appellant (plaintiff). Elliott B. Pollack, with whom was Tiffany K. Spinella, for the appellee (defendant).

The plaintiff, Redding Life Care, LLC, appeals from the judgment of the trial court denying its appeal from the decision of the board of assessment appeals of the defendant, the town of Redding (town), which upheld the assessor's valuation of the plaintiff's property. The plaintiff claims that the trial court improperly concluded that (1) it failed to establish aggrievement under General Statutes § 12–117a1 because the going concern income capitalization approach applied by the plaintiff's expert to value the property was not a permissible valuation method under Connecticut law, and (2) the town's assessment of the property was not manifestly excessive under General Statutes § 12–1192 despite its reliance on assumptions regarding income that it knew to be untrue and, if corrected, would have reduced the fair market value of the property by more than $30 million. The town responds that the trial court properly concluded that the plaintiff did not establish aggrievement and that the town may use hypothetical conditions in calculating the fair market value of a property. We agree with the town and, accordingly, affirm the judgment of the trial court.

The following relevant facts and procedural history are set forth in the trial court's memorandum of decision. The plaintiff is a for-profit limited liability company that purchased the subject property consisting of 133.62 acres in August, 1998, for the purpose of developing Meadow Ridge, an entry fee continuing care retirement community. Phases I and II of the development were completed in October, 2001, and August, 2007, respectively.

The development is situated on thirty to forty acres in the southerly portion of the property and contains three distinct components. These consist of (1) three separate, four-story, congregate retirement apartment and limited common area buildings containing 338 total entry fee apartments, (2) a one to two-story attached community building, and (3) a one to two-story attached health center, which includes twenty assisted living units and fifty skilled nursing beds. The community facility and the health center are located in one connected building. The three apartment buildings are connected to the community building and to the health center by enclosed walkways. The buildings are surrounded by interior driveways, open, paved parking areas, resident garages and landscaped areas, including three large courtyards. The remaining seventy acres in the northerly portion of the property contain a conservation easement accessible to the public and Meadow Ridge residents by walking trails.

All Meadow Ridge residents must execute a continuing care agreement that sets forth the financial obligations of the resident and the obligations of Meadow Ridge to provide the resident with lifetime care. Under the terms of that agreement, residents of the independent living units must be at least sixty-two years old, must be able to function independently at the time of admission, and must have sufficient financial resources to pay the entrance fee, monthly service fees and other expenses associated with independent living. Pursuant to the residence agreement, all residents also must pay an initial entrance fee and a monthly service fee, which entitle the resident to occupy an independent living unit for life, subject to certain conditions outlined in the agreement. Residents receive a flat 85 percent refund of their entry fee, which is payable on death, voluntary withdrawal or permanent transfer to the assisted living or health center.

Services are provided to residents at no additional cost, including one meal per day, building and grounds maintenance, custodial service, laundry and housekeeping services, transportation service, all utilities except telephone and cable television, special diet and tray service when approved by a physician, planned activities, parking, use of all common and activity areas, an emergency call system, and facility security. The residence agreement also entitles residents access to assisted living or nursing care at a discount below market rate and equal to the lower of a two bedroom monthly fee or the monthly fee of the previously occupied unit, plus surcharges for extra meals and services. This benefit is unlimited. Monthly service fees are subject to increase at the discretion of the owner upon thirty days notice.

In accordance with the town's statutory obligation; see General Statutes § 12–62(b)(1);3 the assessor conducted a town wide revaluation of all real estate for the grand list of October 1, 2007,4 and determined that the plaintiff's property had a fair market value of $117,621,0005 and an assessment value of $82,334,600. The plaintiff challenged the valuation and appealed to the board of assessment appeals (board) pursuant to General Statutes (Rev. to 2007) § 12–111(a),6 claiming that the property had a fair market value of $89,100,000 and an assessment value of $62,370,000. The board upheld the assessor's valuation, and the plaintiff appealed to the Superior Court pursuant to §§ 12–117a and 12–119. The plaintiff alleged that it was aggrieved by the actions of the board because the assessor's valuation of the property exceeded 70 percent of its true and actual value on the assessment date,7 and, consequently, the valuation was “grossly excessive, disproportionate and unlawful.” The plaintiff thus sought a reduction in the amount of the tax and the assessment on which it had been based.

At trial, the plaintiff's appraiser, Michael G. Boehm, explained the methodology he had used to determine the fair market value of the property. On February 23, 2011, the trial court denied the appeal pursuant to § 12–117a, explaining that it was unable to find that the plaintiff was aggrieved based on the evidence presented. The court also found no evidentiary support for the plaintiff's claim that the assessment was manifestly excessive under § 12–119. It thus rendered judgment for the town.

The plaintiff appealed,8 and the town filed a motion for articulation seeking clarification from the trial court as to whether it was the assessor's duty to value the unencumbered fee simple interest and whether the non-interest bearing refundable portion of the plaintiff's entry fees “should be considered in valuing the ․ property, and, if so, how.” In response to the first question, the court stated that the issue on appeal to this court was whether the plaintiff had proven that it was aggrieved by the valuation and that the assessor's duty was not a factor in its decision. In response to the second question, the court stated that, “[s]ince the court found that the plaintiff was not aggrieved by the assessor's valuation, as the court did not find credible the plaintiff's use of the going concern approach to value its real estate, the discussion of noninterest bearing refundable entry fees is not relevant to the issue raised in the plaintiff's appeal.” The court added in a footnote that the appeal had been taken by the plaintiff and centered on “the court's rejection of the use of the going concern approach to valuing its real estate.”

After the briefs were filed and following oral argument, this court sought an articulation as to “whether [the trial court] rejected Boehm's testimony because [the court] found him not to be credible, or because [the court] rejected Boehm's use of the going concern approach as a method for [the valuation] of real property.” The trial court responded on October 31, 2012, as follows: “[T]he trial court] rejected Boehm's testimony because the trial court found his testimony not to be credible.”

I

The plaintiff first claims that the trial court improperly concluded that the going concern income capitalization approach applied by Boehm is not recognized or permitted under Connecticut law and thus may not be used to determine the fair market value of real estate and whether the plaintiff is aggrieved under § 12–117a. In response, the town argues that the trial court did not reject the going concern income capitalization approach as a matter of law but, rather, because the plaintiff had failed to provide adequate, credible evidence to meet its burden of demonstrating overvaluation. We agree with the town.

The following review of the trial court's memorandum of decision is relevant to our resolution of this claim. After setting out the facts, the trial court explained the method Boehm had used to value the plaintiff's property. The court noted that Boehm “undertook to value the subject real estate ․ by first estimating the going concern value” of Meadow Ridge. The court explained that “[t]he going concern value in this case consists of the real estate, the personal property and the intangibles” and that “[i]ntangible personal property, for tax purposes, has been defined as property which is not itself intrinsically valuable, but which derives its chief value from that which it represents.” (Internal quotation marks omitted.) The court also noted that “Boehm considered only the income approach to value the subject [property] as a going concern. [He] neither considered the market sales approach nor the cost approach, although the costs of land acquisition and construction were recently incurred․”9

Following this explanation, the trial court proceeded to analyze the plaintiff's appeal. Significantly, the trial court opened the analysis portion of its decision by noting that both “Boehm, as well as the [town's] appraiser ․ concluded that the valuation of the subject real estate could only be accomplished by determining the value of [the subject property] as a going concern.” The court then identified several general principles for valuing real property .10 The court referenced Whitney Center, Inc. v. Hamden, 4 Conn.App. 426, 427, 494 A.2d 624 (1985), acknowledging that continuing care facilities, such as the plaintiff's in the present case, are difficult to value for property tax assessment purposes because “the plaintiff's real estate must be distinguished from the value of its business․ This task is complicated ․ by the close relationship between the business and the land, as well as by the fact that the residents do not pay rent in the traditional sense.” (Internal quotation marks omitted.) The trial court also addressed the principles behind the going concern income capitalization approach and noted the difficulty of relying on this approach to determine the going concern value of the plaintiff's business. The trial court specifically noted that “a purchaser of a going concern, like a [continuing care retirement community], would most likely consider allocating, for tax purposes, a greater amount of value to depreciated buildings and personal property than nondepreciable assets such as intangibles.”

The trial court next turned to the actual calculations and formula used by the plaintiff's appraiser. “Boehm established the value of [furniture, fixtures and equipment] by relying on recognized cost manuals and the actual incurred costs of [such tangible property] at comparable multiple level retirement campuses․ This process is basically an estimate of the ․ replacement costs․ Boehm did not consider actual investment costs that [the plaintiff] paid for [such tangible property].” In that connection, the trial court reasoned that “[i ]t is difficult to accept Boehm's conclusion that the [furniture, fixtures and equipment] depreciated 50 percent during the first year of acquisition for that portion of Meadow Ridge․ General Statutes § 12–63 ․ provides specific percentages of depreciated value over a period of years that are inconsistent with Boehm's application of a 50 percent broad brush stroke.” (Emphasis added.)

The trial court further observed that “[t]he portion of the going concern value related to the business value of $16,350,000 comes from a method [that] Boehm claims to be widely accepted. This method compares Meadow Ridge's ongoing cash flows based on actual occupancy to an estimated value as if it were hypothetically empty as of October 1, 2007.”11 The court stated, however, that “[c ]ontrary to Boehm's ‘widely accepted’ method of determining business value, the definition of business enterprise/going concern value includes ․ real property; personal property [furniture, fixtures and equipment]; net working capital; cash and cash equivalents ․ [and] intangible property․ See [Appraisal Institute], The Appraisal of Real Estate (12th Ed.2001) p. 642.

“Considering the above definition of business enterprise/going concern value, clearly, the valuation portion of a going concern dealing with ‘business value’ is more complicated than what Boehm reported.” (Emphasis added.)

In the final portion of its analysis, the trial court reasoned that “a purchaser of the subject property ․ would consider purchasing similar land and constructing similar buildings prior to commencing the operation of a [continuing care retirement community]. This appears to be the process Boehm used in developing the value of the subject's intangibles via the going concern value method. However, this concept fails to recognize that [the plaintiff] ․ obtained zoning approval and building permits to construct the [Meadow Ridge] complex, commenced landscaping and parking details, formed a management team and engaged a skilled workforce. All of these components would have enhanced the value of the real estate beyond being just brick and mortar. These intangibles ․ are so intertwined with the real estate so as to enhance its value.” (Emphasis added.)

In concluding, the trial court stated that “the valuation of the intangible business value, as determined by Boehm, was not credible because no other evidence—besides Boehm's own representations—was offered in order for the court to conclude that it was reasonably probable to quantify such an intangible as business value․

“[Additionally] [t]he court cannot accept Boehm's simplistic formula to determine business value ․ For these reasons, the court has given little weight to Boehm's process in computing the value of Meadow Ridge's intangible business.” (Citation omitted; emphasis added.)

We begin with the applicable legal principles on aggrievement. “Section 12–117a ․ provide[s] a method by which an owner of property may directly call in question the valuation placed by assessors upon his property․ In a § 12–117a appeal, the trial court performs a two step function. The burden, in the first instance, is upon the plaintiff to show that he has, in fact, been aggrieved by the action of the board in that his property has been overassessed․ In this regard, [m]ere overvaluation is sufficient to justify redress under [§ 12–117a], and the court is not limited to a review of whether an assessment has been unreasonable or discriminatory or has resulted in substantial overvaluation․ Whether a property has been overvalued for tax assessment purposes is a question of fact for the trier․ The trier arrives at his own conclusions as to the value of land by weighing the opinion of the appraisers, the claims of the parties in light of all the circumstances in evidence bearing on value, and his own general knowledge of the elements going to establish value including his own view of the property.” (Citations omitted; internal quotation marks omitted.) Konover v. West Hartford, 242 Conn. 727, 734–35, 699 A.2d 158 (1997). Thus, the trial court first must determine whether the plaintiff has offered sufficient, credible evidence that the subject property has been overvalued. If the trial court concludes that the plaintiff has not met its burden, the trial proceeds no further, and the town's assessment stands. See, e.g., Ireland v. Wethersfield, 242 Conn. 550,557–58,698A.2d 888 (1997) (“[i]f the trial court finds that the taxpayer has failed to meet his burden because, for example, the court finds unpersuasive the method of valuation espoused by the taxpayer's appraiser, the trial court may render judgment for the town on that basis alone”); see also id., at 559, 698 A.2d 888 (“[a] taxpayer ․ who fails to carry [the] burden [of establishing overvaluation] has no right to complain if the trial court accords controlling weight to the assessor's valuation of his property”).

In a tax appeal taken from the trial court to the Appellate Court or to this court, “the question of overvaluation usually is a factual one subject to the clearly erroneous standard of review․” (Citation omitted.) Breezy Knoll Assn., Inc. v. Morris, 286 Conn. 766, 776, 946 A.2d 215 (2008). “Under this deferential standard, [w]e do not examine the record to determine whether the trier of fact could have reached a conclusion other than the one reached. Rather, we focus on the conclusion of the trial court, as well as the method by which it arrived at that conclusion, to determine whether it is legally correct and factually supported․A finding of fact is clearly erroneous when there is no evidence in the record to support it ․ or when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” (Citation omitted; internal quotation marks omitted.) United Technologies Corp. v. East Windsor, 262 Conn. 11, 23, 807 A.2d 955 (2002). Additionally, “[i]t is well established that [i]n a case tried before a court, the trial judge is the sole arbiter of the credibility of the witnesses and the weight to be given specific testimony․ The credibility and the weight of expert testimony is judged by the same standard, and the trial court is privileged to adopt whatever testimony [it] reasonably believes to be credible․ On appeal, we do not retry the facts or pass on the credibility of witnesses.” (Citations omitted; internal quotation marks omitted.) Torres v. Waterbury, 249 Conn. 110, 123, 733 A.2d 817 (1999). Simply put, “a trial court is afforded wide discretion in making factual findings and may properly render judgment for a town based solely upon its finding that the method of valuation espoused by a taxpayer's appraiser is unpersuasive.” Id.

Conversely, we review de novo a trial court's decision of law. “[W]hen a tax appeal ․ raises a claim that challenges the propriety of a particular appraisal method in light of a generally applicable rule of law, our review of the trial court's determination whether to apply the rule is plenary.” Breezy Knoll Assn., Inc. v. Morris, supra, 286 Conn. at 776, 946 A.2d 215. To be sure, if the trial court rejects a method of appraisal because it determined that the appraiser's calculations were incorrect or based on a flawed formula in that case, or because it determined that an appraisal method was inappropriate for the particular piece of property, that decision is reviewed under the abuse of discretion standard. See id., at 775–76, 946 A.2d 215. Only when the trial court rejects a method of appraisal as a matter of law will we exercise plenary review.12 See id.

Thus, the starting point in any tax appeal taken from the Superior Court, including the present appeal, is a determination as to whether the trial court reached its decision through (1) the exercise of its discretion in crediting evidence and expert witness testimony, or (2) as a matter of law. We conclude, contrary to the plaintiff's claim, that the trial court rejected the plaintiff's evidence, including Boehm's testimony, because it found it not to be credible, and, therefore, the trial court did not conclude that the going concern income capitalization approach was not recognized or permitted under Connecticut law.

This conclusion is supported by the trial court's response dated October 31, 2012, to this court's request for an articulation of the reasons for its decision, in which the trial court stated that it had rejected Boehm's testimony because it found him not to be credible, and not because his use of the going concern approach as a method for the valuation of real property was improper as a matter of law. Accordingly, the plaintiff's claim can be resolved on this basis alone. See, e.g., Priest v. Edmonds, 295 Conn. 132, 140, 989 A.2d 588 (2010) (articulation serves to clarify “the factual and legal basis upon which the trial court rendered its decision” [internal quotation marks omitted] ). The trial court's memorandum of decision, however, also supports this conclusion. Portions of the decision, as previously described, and specifically the italicized portions, when read together, illustrate that the trial court rejected the formula and calculations on which Boehm relied to arrive at the valuation of the intangible business. In other words, the trial court's disagreement with the plaintiff's valuation turned on the flaws in Boehm's calculations and formula, not on the method itself. For example, the trial court concluded that Boehm's valuation omitted or distorted several essential aspects of Meadow Ridge's value as a going concern. The trial court specifically questioned the percentage by which Boehm depreciated Meadow Ridge's furniture, fixtures and equipment, the simplistic formula Boehm used to calculate business value, and Boehm's failure to recognize Meadow Ridge's state of operation when it first opened. The trial court also rejected Boehm's unsupported valuation of intangibles.13 Any one of these flaws would have constituted sufficient grounds for the trial court to have rejected Boehm's appraisal method as unpersuasive. Simply put, the trial court rejected Boehm's appraisal as not credible because it was premised on formulas and calculations that failed to value Meadow Ridge accurately. Thus, the trial court did not summarily dismiss the method as a matter of law.

Furthermore, because the value of real estate under the going concern approach necessarily depends on an accurate valuation of the going concern, the plaintiff could not rely on Boehm's valuation as proof of overassessment. Accordingly, once the trial court rejected the plaintiff's evidence as not credible, it properly concluded that the plaintiff had failed to satisfy its burden under § 12–117a. See, e.g., Ireland v. Wethersfield, supra, 242 Conn. at 557–58, 698 A.2d 888 (“[i]f the trial court finds that the taxpayer has failed to meet his burden because, for example, the court finds unpersuasive the method of valuation espoused by the taxpayer's appraiser, the trial court may render judgment for the town on that basis alone”). We therefore conclude that the trial court's determination that the plaintiff failed to establish aggrievement under § 12–117a was not clearly erroneous.

II

The plaintiff next claims that the trial court improperly concluded that it failed to establish a manifestly excessive valuation of the property under § 12–119, even though the undisputed evidence was that the town's assessment of the property included a material assumption related to income that was known to be untrue and that, if corrected, would have reduced the fair market value of the property by more than $30 million.14 The town responds that the trial court properly decided this issue because hypothetical conditions may be used in real estate appraisals. We agree with the town.15

In a tax appeal taken pursuant to § 12–119, the plaintiff must prove that the assessment was “(a) manifestly excessive and (b) ․ could not have been arrived at except by disregarding the provisions of the statutes for determining the valuation of the property․ E. Ingraham Co. v. Bristol, 146 Conn. 403, 409, 151 A.2d 700, cert. denied, 361 U.S. 929, 80 S.Ct. 367, 4 L.Ed.2d 352 (1959)․ [The plaintiff] must [set forth] allegations beyond the mere claim that the assessor overvalued the property. [The] plaintiff ․ must satisfy the trier that [a] far more exacting test has been met: either there was misfeasance or nonfeasance by the taxing authorities, or the assessment was arbitrary or so excessive or discriminatory as in itself to show a disregard of duty on their part. Mead v. Greenwich, 131 Conn. 273, 275, 38 A.2d 795 (1944).16 Only if the plaintiff is able to meet this exacting test by establishing that the action of the assessors would result in illegality can the plaintiff prevail in an action under § 12–119. The focus of § 12–119 is whether the assessment is illegal. Cohn v. Hartford, 130 Conn. 699, 703, 37 A.2d 237 (1944); see E. Ingraham Co. v. Bristol, supra, at 408, 151 A.2d 700 (municipality disregarded the statutes when it taxed real property at 50 percent of its value, personal property at 90 percent and motor vehicles at 100 percent at a time when municipalities were prohibited from assessing property as a percentage of its value); Stratford Arms Co. v. Stratford, 7 Conn.App. 496, 500, 508 A.2d 842 (1986) (property could not be taxed as condominiums when still legally an apartment building at date of assessment). The statute applies only to an assessment that establishes a disregard of duty by the assessors. L.G. DeFelice & Son, Inc. v. Wethersfield, 167 Conn. 509, 513, 356 A.2d 144 (1975).

* * *

“While an insufficiency of data or the selection of an inappropriate method of appraisal could serve as the basis for not crediting the appraisal report that resulted, it could not, absent evidence of misfeasance or malfea sance, serve as the basis for an application for relief from a wrongful assessment under § 12–119.” (Citations omitted; emphasis added; internal quotation marks omitted.) Second Stone Ridge Cooperative Corp. v. Bridgeport, 220 Conn. 335, 341–43, 597 A.2d 326 (1991). In short, when reviewing a claim raised under § 12–119, a court must determine whether the plaintiff has proven that the assessment was the result of illegal conduct.

In the present appeal, the plaintiff's sole claim of misconduct is that the town's assessor relied on a “hypothetical condition,” that is, a fact known to not actually exist, in arriving at the total value of Meadow Ridge as a going concern. Specifically, the plaintiff claims that the assessor included in the valuation the hypothetical “assumption of $4,800,000 of annual [interest] income at Meadow Ridge, based upon an entrance fee escrow account that did not exist․”17 The plaintiff argues that the inclusion of this hypothetical condition in valuing Meadow Ridge “imposed a manifestly excessive valuation on the property in disregard of Connecticut law” because, as the assessor conceded, the value of Meadow Ridge, and therefore the plaintiff's property, would be substantially less if the interest income were removed from the valuation.

Under the standard set forth in Second Stone Ridge Cooperative Corp., the success of the plaintiff's claim turns on whether the assessor's use of a hypothetical condition was a misfeasance or malfeasance of the assessor's duty. As the following makes clear, the plaintiff's claim under § 12–119 has no merit.

A hypothetical condition is defined as “a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.” (Emphasis added.) Appraisal Standards Board, Appraisal Foundation, 2012–13 Uniform Standards of Professional Appraisal Practice (2012) p. U–3, available at http://www.uspap.org (last visited February 21, 2013).18 Thus, contrary to the plaintiff's argument, the use of a hypothetical condition is not a violation of the Uniform Standards of Professional Appraisal Practice. Indeed, standards rule 1–2 of the Uniform Standards of Professional Appraisal Practice specifically contemplates the use of a hypothetical condition, and provides that “[i]n developing areal property appraisal, an appraiser must ․ (g) identify any hypothetical conditions necessary in the assignment ․” (Emphasis added.) Id., at pp. U–16, U–18. The corresponding comment to this rule provides that “[a] hypothetical condition may be used in an assignment only if ․ use of the hypothetical condition is clearly required for legal purposes, for purposes of reasonable analysis, or for purposes of comparison; [and] use of the hypothetical condition results in a credible analysis ․“19 Id., comment, at p. U–18, 597 A.2d 326. Similarly, the Appraisal Institute has observed that “[h]ypothetical conditions are contrary to what exists, but the conditions are asserted by the appraiser for the purposes of analysis. For example, in the case of a manufacturing plant that is known to be subject to environmental contamination, it is possible for the appraisal to be based on the hypothetical condition that it is not contaminated.” (Emphasis in original.) Appraisal Institute, supra, at p. 56. Consequently, to the extent that the plaintiff claims that the use of a hypothetical condition is a violation of the Uniform Standards of Professional Appraisal Practice, and therefore a violation of an assessor's statutory duties, that claim has no merit.

Moreover, turning to the facts of this case, we note that James Tellatin, the appraiser hired by the town to determine the value of Meadow Ridge, explained in deposition testimony that “the hypothetical condition [of interest income] has to be made, in my opinion, based on Connecticut law on the definition of the interest that is appraised for property tax purposes.” Specifically, in order to value the subject property, he had to account for the value received from the entry fees paid by new residents. Tellatin explained that, “when the entry fees are paid by the residents, in a way, they're lending money to [Meadow Ridge]․ [Y]ou can view the residents as providing the financing and taking out the construction loan on this transaction․”20 In other words, Tellatin endeavored to “value [Meadow Ridge] on an unencumbered fee simple basis․ [T]he ownership [of Meadow Ridge] has given life estates to residents, and residents have made these resident loans [as] these entry fees that, on average, exceed over [one-half] million dollars. And to say to the property ownership and to the taxpayers of the ․ community that ․ those interest free loans ․ do not get factored into the valuation for fee simple purposes ․ goes against the spirit of the law of Connecticut with regard to the assessed valuation of property.” Accordingly, when counsel asked, “that's why you've termed [the entry fee escrow account] a hypothetical condition, because you assume that, even if the cash isn't there [to produce the interest income], in order to transfer the fee simple interest, cash [or cash equivalency] in that amount must be transferred to the buyer,” Tellatin answered in the affirmative.21 (Emphasis added.)

As noted previously, the plaintiff has the burden of demonstrating that the town not only overvalued the property but also that the assessment constituted misfeasance or malfeasance by the assessor. In this case, the plaintiff's strongest argument is that the use of a hypothetical condition “has never been authorized under Connecticut law” and thus constitutes a misfeasance or malfeasance. The plaintiff's argument, however, is unpersuasive. The fact that this court has not specifically addressed the use of hypothetical conditions does not render their use illegal. To the contrary, the Uniform Standards of Professional Appraisal Practice, which the plaintiff explicitly references, contemplates the use of hypothetical conditions. In the present case, Tellatin explained why his use of a hypothetical condition concerning interest income was both necessary and appropriate in valuing the plaintiff's property. The plaintiff has not demonstrated why this method was illegal and thus cannot prevail under § 12–119.

Put another way, the plaintiff's argument amounts to nothing more than a claim of overvaluation. In that connection, this court has held that “[t]he process of estimating the value of property for taxation is, at best, one of approximation and judgment, and there is a margin for a difference of opinion․ There may be more ways than one for estimating the value of such ․ [property] for taxation.” (Citation omitted; internal quotation marks omitted .) Second Stone Ridge Cooperative Corp. v. Bridgeport, supra, 220 Conn. at 342, 597 A.2d 326. “Many factors may enter into the determination of the value of a piece of property. Its value is, in the final analysis, a matter of opinion.” Lomas & Nettleton Co. v. Waterbury, 122 Conn. 228, 233, 188 A. 433 (1936). Related to this concept, in the context of valuing property under the income capitalization approach, we have rejected the notion that only actual rent should be considered in determining the property's income producing potential. Instead, we have explained that, “[a]s a general principle, earning or income producing capacity, as distinguished from actual earnings, is to be regarded as a factor in valuation for taxation purposes․” Somers v. Meriden, 119 Conn. 5, 8–9, 174 A. 184 (1934). Thus, although a hypothetical condition is contrary to the known economic condition of the property, this factor alone is insufficient to render its use a misfeasance or malfeasance.

In sum, although the plaintiff may disagree that the hypothetical condition was necessary to reach the valuation, it has failed to demonstrate that the town assessor's reliance on the condition was illegal, and, accordingly, the plaintiff cannot prevail on its claim under § 12–119. See, e.g., Second Stone Ridge Cooperative Corp. v. Bridgeport, supra, 220 Conn. at 343, 597 A.2d 326 (“because the selection of an inappropriate method of appraisal or a paucity of the underlying data in connection with an appraisal, without more, is not manifestly illegal under our statutes ․ the circumstances presented ․ do not rise to the level of the extraordinary situation that would warrant tax relief under the provisions of § 12–119”).

Justice Eveleigh, in his concurring and dissenting opinion, maintains that “the town's assessment ․ was based on admittedly false and untrue assumptions contrary to known facts about the economic characteristics” of Meadow Ridge and that “the knowing use of false assumptions in an appraisal for an assessment would certainly qualify [as unacceptable] under § 12–119” because the assessment “could not have been arrived at except by disregarding the provisions of the statutes for determining the valuation of [real] property․” (Internal quotation marks omitted.) We disagree. In referring to the hypothetical condition as a “false assumption,” Justice Eveleigh appears to view the assessor's use of the condition as an arbitrary falsification of the value of the plaintiff's property. As previously discussed, however, this was not the case. The use of a hypothetical condition is an accepted means of determining the true value of real estate. It is not a number pulled out of thin air or evidence that the assessor disregarded his duty. Consequently, as the Uniform Standards of Professional Appraisal Practice and this case demonstrate, the use of a hypothetical condition, without more, is insufficient evidence to support a claim under § 12–119.

We also disagree with Justice Eveleigh's assertion that, because General Statutes §§ 12–63(a) and 12–64(a) require taxation to be based on the “true and actual” valuation of real estate, the use of a hypothetical condition was in violation of those statutes. General Statutes § 12–63(a) provides in relevant part that the “true and actual value” of real property “shall be deemed by all assessors ․ to be the fair market value thereof ” ․ General Statutes § 12–64(a) provides in relevant part that the unexempted real property shall be taxed at the “true and actual valuation, not exceeding one hundred per cent of such valuation, to be determined by the assessors ․” As this court explained more than fifty years ago, “[t]he expressions actual valuation, actual value, market value, market price and ․ fair value are synonymous. Usually, these expressions mean the figure fixed by sales in ordinary business transactions, and they are established when other property of the same kind in the same or a comparable location has been bought and sold in so many instances that a value may reasonably be inferred․ In other words, the best test is ordinarily that of market sales․ [When ] evidence of such sales is not available, other means must be employed to ascertain the present true and actual valuation․ Thus, the method of reproduction cost has been used․ The method of capitalizing gross income was adopted in Somers v. Meriden, [supra, 119 Conn. at 8], and that of capitalizing stabilized net income was approved in Lomas & Nettleton Co. v. Waterbury, [supra, 122 Conn. at 230]. No one method is controlling; consideration should be given to them all, if they have been utilized, in arriving at the value of the property.” (Citations omitted; emphasis added; internal quotation marks omitted.) Sibley v. Mid dlefield, 143 Conn. 100, 106–107, 120 A.2d 77 (1956); see also Lerner Shops of Connecticut, Inc. v. Waterbury, 151 Conn. 79, 85 n. 3, 193 A.2d 472 (1963) (explaining that “the term fair value is the preferable one to use, since it emphasizes the result to be achieved rather than the means by which that result is to be attained ” [emphasis added] ). In short, the true and actual value of a property is simply the “fair value” of the property as determined by the assessor. As long as the assessor appraises the property in accordance with our laws, including the Uniform Standards of Professional Appraisal Practice, the assessed value represents the true and actual value of the real property for taxation purposes. We are therefore unpersuaded by the Justice Eveleigh's assertion that the town's use of the hypothetical condition, which is an accepted practice under the Uniform Standards of Professional Appraisal Practice, was in violation of §§ 12–63(a) and 12–64(a).

Justice Eveleigh further argues that, even if a hypothetical condition is sometimes appropriate, as in cases in which proposed construction, home improvements or repairs may be necessary to bring the value of existing or planned structures in line with the fair market value of other structures in the area that are valued according to their highest and best use, there was no reasonable basis for the use of the hypothetical condition in this case to determine the “present true actual value” of the property. (Internal quotation marks omitted.) Footnote 6 of the concurring and dissenting opinion. Justice Eveleigh contends that Tellatin's analysis was not credible because Tellatin testified that he knew the interest bearing account attributed to Meadow Ridge did not exist and he was not aware of any continuing care retirement community in the country that maintained an interest bearing account. Justice Eveleigh also argues that the trial court found that the plaintiff's use of the property already was its highest and best use and that the money paid by the residents was rated at market value. Id. We disagree that the town's use of a hypothetical condition, although condoned by the Uniform Standards of Professional Appraisal Practice and therefore Connecticut law, resulted in an appraisal that was untrue and contrary to law. As previously discussed, this court, in Lomas & Nettleton Co. v. Water bury, supra, 122 Conn. at 228, 188 A. 433, emphatically rejected the taxpayer's claim that “a valuation ․ based upon the facts should be controlling and render immaterial other methods which involve speculative factors based upon testimony of expert witnesses employed by the parties”; id., at 231, 188 A. 433; and held that the trial court properly had valued the taxpayer's property “largely [on the basis of] the opinion of the real-estate experts․” Id., at 233, 188 A. 433. Simply put, because valuation is a matter of opinion; see id.; many factors, both real and hypothetical, properly may be included in the calculation of the “true and actual value” of real property for assessment purposes. See, e.g., National Folding Box Co. v. New Haven, 146 Conn. 578, 587–88, 153 A.2d 420 (1959) (when “the prospect of a sale ․ of the plaintiff's manufacturing plant as a whole ․ was extremely remote and ․ there were no comparable sales to use as a measuring stick ․ [t]he [valuation] method chosen, which was in effect the determination of what the market value of the property would be if it were occupied by several tenants ․ [was] a justifiable one” [citations omitted; emphasis added] ). We also reiterate that, although “an insufficiency of data or the selection of an inappropriate method of appraisal could serve as the basis for not crediting the appraisal report that resulted, it could not, absent evidence of misfeasance or malfeasance, serve as the basis for an application for relief from a wrongful assessment under § 12–119.” (Emphasis added.) Second Stone Ridge Cooperative Corp. v. Bridgeport, supra, 220 Conn. at 343, 597 A.2d 326. In sum, although Justice Eveleigh offers reasons why the use of a hypothetical condition in the present case was not, in his view, appropriate, including that there was no existing or legally required account on which to base the hypothetical, none of his reasoning supports a finding of misfeasance or malfeasance under § 12–119.

For the foregoing reasons, we conclude that the trial court rejected the plaintiff's valuation of its property for lack of credibility because it was based on calculations and a formula that did not reflect a reasonable value of the real estate. The plaintiff thus failed to meet its burden of proving aggrievement under § 12–117a, and the trial court properly rejected that claim for lack of evidentiary support. We further conclude that the trial court did not abuse its discretion in rejecting the plaintiff's evidence and that it properly determined that the plaintiff failed to meet its burden of proving overvaluation under § 12–119.

The judgment is affirmed.

In this opinion NORCOTT, PALMER and LAVINE, Js., concurred.

I agree with part I of the majority opinion, but respectfully disagree with part II. Specifically, I respectfully disagree that the assessment made by the defendant, the town of Redding (town), was not manifestly excessive despite its inclusion of $4,800,000 in annual interest that the plaintiff, Redding Life Care, LLC, did not earn.1 I would, therefore, reverse the judgment of the trial court. Accordingly, I dissent.

The plaintiff claims that the trial court improperly failed to conclude that the town disregarded state statutes by assessing the parcel using material assumptions known to be untrue, which, if corrected, would have reduced the valuation of the property by over $30,000,000. I agree with the plaintiff.2

On appeal to the trial court, the plaintiff claimed that the town's assessment was manifestly excessive and could not have been arrived at except by disregarding the provisions of the statutes for determining the valuation of the real property in violation of General Statutes § 12–119.3 Specifically, in the appraisal on which the town based its assessment, James Tellatin assumed that the plaintiff earned almost $5,000,000 in investment income from entrance fees paid by Meadow Ridge residents that were held in escrow. Prior to taking this tax appeal, the plaintiff alerted the town's assessor that this assumption was false. The plaintiff stated: “First, the [Tellatin appraisal] assumes that [the plaintiff] earns almost $5,000,000 in investment income from entrance fees that are held in escrow or otherwise. This assumption is incorrect. Connecticut law does not require that entrance fees be escrowed after the resident has occupied the facility and in fact, [the plaintiff] does not maintain entrance fees in trust or otherwise. There is therefore no ‘investment income’ to be earned from the entrance fees. This error causes the report to significantly overstate net operating income and hence the valuation. If the almost $5,000,000 in phantom ‘investment income’ is corrected in the report, then without any other changes, the valuation will be reduced to approximately $81,000,000.” The town did not, however, change the assessment after receiving this information and, consequently, continued to assess the plaintiff at the value established on the October 1, 2007 grand list.

Tellatin admitted in his deposition that two key assumptions in his report were “hypothetical conditions” under the Uniform Standards of Professional Appraisal Practice. He specifically admitted that he assumed that “interest income” of approximately $4,800,000 annually was received by the plaintiff on entrance fees in escrow. Tellatin also agreed that after a correction to remove the hypothetical income of $4,800,000, the total going concern value of the plaintiff would have been reduced to $76,500,000, plus or minus 10 percent, and that the real property valuation would have been less than $76,500,000. Thus, the plaintiff contends that this false assumption created a “manifestly excessive” assessment. I agree.

I begin by setting forth the standard of review applicable to the plaintiff's claim. The question of overvaluation is a factual one subject to the clearly erroneous standard of review. See United Technologies Corp. v. East Wind sor, 262 Conn. 11, 23, 807 A.2d 955 (2002). “A finding of fact is clearly erroneous when there is no evidence in the record to support it ․ or when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” (Internal quotation marks omitted.) Id.

In the present case, it is undisputed that the town arrived at its assessment based on Tellatin's appraisal and that Tellatin's appraisal was based on a false assumption of $4,800,000 of annual income from an entrance fee escrow that did not exist. General Statutes § 12–63(a)4 requires in relevant part that “[t]he present true and actual value of ․ property shall be deemed by all assessors and boards of assessment appeals to be the fair market value thereof․” (Emphasis added.) Further, General Statutes § 12–64(a)5 provides in relevant part as follows: “All the following-mentioned property, not exempted, shall be set in the list of the town where it is situated and, except as otherwise provided by law, shall be liable to taxation at a uniform percentage of its present true and actual valuation, not exceeding one hundred per cent of such valuation, to be determined by the assessors․” (Emphasis added.) The admissions by Tellatin in his deposition established that the fair market value of the real estate should have been reduced to $76,500,000, plus or minus 10 percent, if the false assumptions were corrected and the appraisal appropriately reduced. Therefore, the town's assessment of $82,334,600 was based on admittedly false and untrue assumptions contrary to known facts about the economic characteristics of the subject property.6 I conclude, therefore, that the plaintiff has satisfied the standard established in § 12–119 by demonstrating an assessment that “was manifestly excessive and could not have been arrived at except by disregarding the provisions of the statutes for determining the valuation of such property․” See also Mead v. Greenwich, 131 Conn. 273, 275, 38 A.2d 795 (1944). “Cases in this category must contain allegations beyond the mere claim that the assessor overvalued the property. [The] plaintiff ․ must satisfy the trier that [a] far more exacting test has been met: either there was misfeasance or nonfeasance by the taxing authorities, or the assessment was arbitrary or so excessive or discriminatory as in itself to show a disregard of duty on their part.” (Internal quotation marks omitted.) Second Stone Ridge Cooperative Corp. v. Bridgeport, 220 Conn. 335, 341, 597 A.2d 326 (1991).

Under the circumstances of this case, the knowing use of false assumptions in an appraisal for an assessment would certainly qualify on all counts under § 12–119. In the present case, the town attributed millions of dollars to the value of Meadow Ridge based on a hypothetical known to be untrue. The inclusion of this hypothetical that was known to be untrue blatantly disregards the requirements of §§ 12–63(a) and 12–64(a) to ascertain the true and actual value of the property and resulted in a taxation of more than 100 percent of the true and actual valuation in violation of § 12–64(a). As this court has stated: “Municipalities have no powers of taxation other than those specifically given by statute, and strict compliance with the statutory provisions is a condition precedent to the imposition of a valid tax.” Empire Estates, Inc. v. Stamford, 147 Conn. 262, 264, 159 A.2d 812 (1960). Therefore, it is clear to me that the town's assessment is not based on the true and actual value of the parcel as defined in the Connecticut statutes and case law and constituted a “manifest and flagrant disregard of statutory provisions.”7 (Internal quotation marks omitted.) Breezy Knoll Assn., Inc. v. Morris, 286 Conn. 766, 778 n. 20, 946 A.2d 215 (2008).

Both the defendant and the majority cite Ireland v. Wethersfield, 242 Conn. 550, 557–58, 698 A.2d 888 (1997), for the proposition that “[i]f the trial court finds that the taxpayer has failed to meet his burden because, for example, the court finds unpersuasive the method of valuation espoused by the taxpayer's appraiser, the trial court may render judgment for the town on that basis alone.” I reject this assertion because Ireland involved an appeal pursuant to General Statutes (Rev. to 1989) § 12–118 now General Statutes § 12–117a. Id., at 551–52 n. 1, 698 A.2d 888. It did not concern the issue raised herein pursuant to § 12–119 regarding whether the assessment was “manifestly excessive․” Contrary to the decision of the trial court, the failure to consider the improper assumption of the existence of interest bearing accounts was relevant to a determination of “manifest excessive[ness]” under § 12–119. Accordingly, I would reverse the judgment of the trial court as to the plaintiff's claim under § 12–119 and remand the matter for a new trial. Therefore, I respectfully dissent.

ZARELLA, J.

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