LLC v. City of Hartford et al. (2013)

MEMORANDUM OF DECISION RE MOTIONS TO DISMISS (# 102 AND # 106)

The complaint here alleges that the plaintiff, Ah Min Holding, LLC, is the successor to the rights of the previous owner of its property which had entered into a tax abatement agreement with the defendant, city of Hartford, for a forty-year abatement of taxes provided that the property was maintained as housing for low and moderate income persons or families.   The plaintiff alleges that the city failed to provide a tax abatement for certain years resulting in the filing of tax liens against the property, some or all of which were subsequently sold and transferred to the defendant, American Tax Funding LLC. In the First Count of the complaint the plaintiff claims a breach of the agreement.   In the Second Count, the plaintiff claims unjust enrichment because the city imposed and collected tax payments, interest and penalties in excess of the amounts that were properly due under the abatement agreement.   In the Third Count, the plaintiff claims that it did not know of the abatement agreement and paid taxes, penalties and interest by mistake and is therefore due a refund.

Each of the defendants have moved to dismiss the action claiming that plaintiff's sole remedies in challenging a property tax assessment are those provided by General Statutes §§ 12–117a and 12–119 and that the time has long passed in which to do so.  “It is well settled that, if the owner of the properties at the times of the assessments in question had wanted to challenge the assessments, it would have been required to follow the appropriate statutory procedures, either by (1) timely appealing from the assessments to the city's board of assessment appeals pursuant to General Statutes §§ 12–111 and 12–112 ․ and from there by timely appealing to the trial court pursuant to General Statutes § 12–117a ․ or (2) timely bringing a direct action pursuant to General Statutes § 12–119 ․ Public policy requires, therefore, that taxes that have not been challenged timely cannot be the subject of perpetual litigation, at any time, to suit the convenience of the taxpayer ․ A taxpayer who has not sought redress in an appropriate manner is foreclosed from continuing litigation outside [those] statutes.”  (Internal quotation marks;  citations and footnotes omitted.)  Danbury v. Dana Investment Corporation, 249 Conn. 1, 12–15 (1999).

The plaintiff claims, however, that it does not seek judicial review of the city's assessment of its property but seeks contractual recovery pursuant to the tax abatement agreement referred to in the complaint, and, therefore, has no obligation to proceed pursuant to General Statutes §§ 12– 117a and 12–119.

“It is well established that in ruling upon whether a complaint survives a motion to dismiss, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader.”  (Internal quotation marks and citation omitted.)  Lawrence Brunoli, Inc. v. Town of Branford, 247 Conn. 407, 410–11 (1999).

It is clear that a municipality can be sued for breach of contract.   See, West Haven Sound Development Corp. v. West Haven, 201 Conn. 305 (1986).   Similarly, a municipality may be sued for unjust enrichment.   See, Vertex, Inc. v. Waterbury, 278 Conn. 557 (2006).   However the issue here is whether the plaintiff's claims are really a challenge to the tax assessments and not contractual claims.

The defendants cite City of Bridgeport v. White Eagle's Society of Brotherly Help, Inc., 140 Conn.App. 663 (2013).   There the city sought to foreclose municipal tax liens on certain real property of the defendant.   The defendant filed a counterclaim alleging that the city had failed to comply with a 2002 stipulated judgment concerning its payment of back taxes.   On appeal the issue was whether the defendant's counterclaim was barred because the defendant should have sought relief in a tax appeal.   The Court stated:  “In the present case, the central allegation of the counterclaim was that the defendant had not received the 40 percent tax exemption that it believed it remained entitled to pursuant to the terms of the 2002 stipulated judgment and that the plaintiff was failing to abide by the terms of that judgment.   A tax appeal pursuant to § 12–111 is the proper vehicle for an aggrieved taxpayer to challenge ‘the doings of the assessors ․’ General Statutes § 12–111(a).   One of the duties of a city's board of assessors is to monitor the tax assessor's handling of applicable tax exemptions ․ Accordingly, if the defendant believed that the assessor erred in determining that the same use of the property was no longer maintained as stated in the stipulation and the assessment therefore did not properly reflect an applicable tax exemption, the defendant was aggrieved by the doings of an assessor and could have sought to correct the alleged error by filing a § 12–111 tax appeal.   Additionally, whenever a city levies a tax on property that is subject to a tax exemption, that is an illegal exaction that is amenable to redress in an action brought pursuant to § 12–119 ․ Thus, the defendant also could have sought to enforce its right to an exemption under the stipulated judgment in a § 12–119 action.   In sum, we agree with the court's order overruling the defendant's objection to the motion for summary judgment, in which the court found that the issues the defendant sought to adjudicate by counterclaim could have been addressed earlier by following appropriate statutory procedures, either by (1) timely appealing from the assessments to the city's board of assessment appeals pursuant to General Statutes §§ 12–111 and 12–112, and from there by timely appealing to the trial court pursuant to General Statutes § 12–117a, or (2) timely bringing a direct action pursuant to General Statutes § 12–119.  (Internal quotation marks and citations omitted.)  Id., 670–71.

The plaintiff argues that the decision in White Eagle is inapplicable because the contract here involves tax abatement and the tax assessor has no authority over tax abatements.   The court agrees.   In White Eagle the question involved the handling of a tax exemption.   By statute, General Statutes § 12–89, the board of assessors is to determine what property is exempt from tax.   Tax abatements, such as the one here for property maintained as housing for low or moderate income persons or families, are within the purview of the municipality.  General Statutes § 8–215 provides that:  “Any municipality may by ordinance provide for the abatement in part or in whole of real property taxes on any housing solely for low or moderate-income persons or families and may by ordinance classify the property on which such housing is situated as property used for housing solely for low or moderate-income persons or families.   Such tax abatement shall be used for one or more of the following purposes:  (1) To reduce rents below the levels which would be achieved in the absence of such abatement and to improve the quality and design of such housing;  (2) to effect occupancy of such housing by persons and families of varying income levels within limits determined by the Commissioner of Economic and Community Development by regulation, or (3) to provide necessary related facilities or services in such housing.   Such abatement shall be made pursuant to a contract between the municipality and the owner of any such housing, which contract shall provide the terms of such abatement, that moneys equal to the amount of such abatement shall be used for any one or more of the purposes herein stated, and that such abatement shall terminate at any time when such housing is not solely for low or moderate-income persons or families.”   Pursuant to the city's code, the city's committee on abatement of taxes and assessments is authorized to enter into contracts, subject to the approval of the city council, on behalf of the city, for the abatement of real property taxes for housing used solely for low or moderate income persons or families.   The abatement is subject to annual review by the committee.   The board of assessors has no role in this process.   Consequently, the provisions of General Statutes §§ 12–117a and 12–119 are inapplicable.  Section 12–117a provides for appeals from boards of tax review or assessment appeals.   Section 12–119 allows an action in Superior Court when a tax has been laid on property not taxable in the town or was computed on an excessive assessment.   The claim here is not that the property was improperly assessed or that it is not taxable by the city, but that certain taxes based on a valid assessment are subject to the city's agreement not to collect them as long as the property is used as housing for low and moderate income persons or families.

In conclusion, construing the allegations of the complaint most favorable to the pleader and for the reasons stated above, the motions to dismiss are denied.

Jane S. Scholl, J.

Scholl, Jane S., J.