Nutmeg Housing Development Corp. v. Colchester , 324 Conn. 1 ( 2016 )

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NUTMEG HOUSING DEVELOPMENT
CORPORATION v. TOWN OF
COLCHESTER
(SC 19551)
Rogers, C. J., and Palmer, Zarella, Eveleigh, McDonald,
Espinosa and Robinson, Js.
Argued September 21—officially released December 27, 2016
James Stedronsky, for the appellant (plaintiff).
Lloyd L. Langhammer, for the appellee (defendant).
Robert A. White and Proloy K. Das filed a brief for
the Connecticut Housing Finance Authority as ami-
cus curiae.
Opinion
ZARELLA, J. In this appeal, we consider whether
the trial court correctly determined that the plaintiff,
Nutmeg Housing Development Corporation, failed to
establish aggrievement in that it failed to prove that the
defendant, the town of Colchester (town), had overval-
ued its property for tax purposes. After a bench trial,
the court found that the plaintiff had failed to establish
that it was aggrieved by the town’s valuation because
the court found that the plaintiff’s expert did not present
sufficient, credible evidence to establish that the town
had overvalued the property. The trial court rendered
judgment for the town, and the plaintiff appealed. We
conclude that the trial court’s determination of credibil-
ity is supported by the record, and, thus, we affirm the
judgment of the trial court.
The following facts and procedural history are rele-
vant to this appeal. The plaintiff is the owner of a unique
parcel of land in Colchester. The property contains a
thirty-two unit apartment complex, which was built in
2008. All of the units are age and income restricted.
The property is subject to a ninety-nine year restrictive
covenant requiring that the property be rented only to
low income, elderly individuals. Because of the
restricted use of the property, investors in the develop-
ment of the property are eligible to receive federal low
income housing tax credits (tax credits). The federal
government created this tax credit program as a means
of funding the development and rehabilitation of
affordable housing. Investors in these projects receive
dollar for dollar tax credits in addition to normal depre-
ciation deductions. These tax credit projects must com-
ply with strict requirements, or else they are subject to
recapture penalties.
For tax year 2011, the town assessed the plaintiff’s
property at approximately $2.29 million. The plaintiff
challenged this assessment before the Colchester Board
of Assessment Appeals (board), claiming that the prop-
erty was worth only $1.3 million. The board disagreed,
upholding the town’s original valuation, and the plaintiff
appealed from the board’s decision to the Superior
Court pursuant to General Statutes § 12-117a, again
claiming that its property was overvalued.
Before the trial court, the plaintiff argued that the
town had used an improper method for valuing the
property. The plaintiff claimed that the town was
required to use the method described in General Stat-
utes § 8-216a. That provision calls for the valuation of
certain low income property using an income capitaliza-
tion approach, that is, determining the property’s actual
rental income less reasonable expenses, and then
adjusting that figure by a suitable capitalization rate.
See General Statutes § 8-216a (a). The plaintiff further
claimed that § 8-216a does not allow the town to include
the value of the tax credits in its valuation. At the trial
on the plaintiff’s appeal, however, the plaintiff did not
provide any evidence to the trial court to show precisely
which method the town used to value the property and
presented no evidence to show that the town had used
the tax credits in valuing the property. Nevertheless,
the plaintiff claimed that the town’s valuation was
excessive.
In support of its claim, the plaintiff relied on an
appraisal report prepared by Christopher Italia, a certi-
fied appraiser. Italia did not, however, value the prop-
erty according to the income capitalization approach
described in § 8-216a. He instead reached his valuation
by blending an income capitalization approach with a
sales comparison approach. For the income capitaliza-
tion portion of his analysis, Italia first calculated the
net operating income of the property by examining the
actual income and expenses of the subject property.
Italia used the below market restricted rents of the
subject property but adjusted the other income and
expense figures on the basis of the average income
and expense figures derived from other, market rate
properties, in order to determine reasonable income
and expense figures. He then divided the net operating
income by the capitalization rate—a figure that he deter-
mined from examining other market rate properties.
Notably, however, none of the properties that Italia
considered in this approach was age and income
restricted.1 Italia determined that the property was
worth $1.06 million under this approach. For the sales
approach, Italia examined the sales prices of other com-
parable apartment complexes. He then adjusted those
prices based on perceived differences between these
properties and the subject property in an attempt to
calculate the price for which the subject property would
sell. Once again, however, none of the comparable prop-
erties that Italia selected was age or income restricted
like the subject property. In addition, the properties
Italia relied on were also much older than the subject
property. At the time of the valuation, the subject prop-
erty was only three years old, yet one of the properties
that Italia used as a comparable was eighty-six years
old. Italia determined that the value under this approach
was $1.15 million. After developing both methods, Italia
then took the average of the two valuations and con-
cluded that the fair market value of the property was
$1.1 million.2
The town then presented its own expert, Robert Sil-
verstein, a certified appraiser, who was not the town’s
original appraiser of the property but had been retained
as an expert for trial. Silverstein testified that the fair
market value of the property was $2.5 million. Unlike
Italia, Silverstein valued the property using solely an
income capitalization approach, similar to the approach
prescribed in § 8-216a. Also, unlike Italia, Silverstein’s
income capitalization analysis took into consideration
the restricted nature of the subject property. In order
to determine reasonable income and expense figures,
Silverstein used market rates but adjusted them to
reflect the subject property’s restrictions. Silverstein,
however, included the value of the tax credits associ-
ated with the property when evaluating the property’s
income and expenses.
After the trial concluded, the parties submitted post-
trial briefs. In the plaintiff’s posttrial brief, it disregarded
its expert’s valuation of $1.1 million and claimed,
instead, to perform its own valuation of the property
using § 8-216a and determined that the value of the
property was actually $526,940—less than one half of
the value assigned by its own expert. To reach this
value, the plaintiff did not rely on its own expert’s
income and expense figures but used different figures
from a 2011 statement of operation. The plaintiff
adduced no expert testimony as to why this valuation
was more appropriate than that used by its expert or
whether the income and expense figures that the plain-
tiff relied on were reasonable.
The trial court rejected the plaintiff’s claims and ren-
dered judgment for the town. In its memorandum of
decision, the court did not credit the plaintiff’s $526,940
valuation because it was based solely on the plaintiff’s
own reading of § 8-216a and was not supported by any
expert testimony. The court also cast doubt on the
plaintiff’s claim that § 8-216a applied and on its argu-
ment that the town could not consider tax credits when
valuing the property. Nevertheless, the trial court ulti-
mately did not base its decision on either of these
grounds. Instead, the trial court determined that the
plaintiff had not established that it was aggrieved by
the town’s valuation because it found that the plaintiff’s
expert was not credible. The court found that Italia’s
opinion of fair market value was not credible because it
was ‘‘based [on] unrestricted sales and rental properties
unrelated to age and income restrictions . . . .’’
(Emphasis in original.) The trial court explained that
‘‘[i]t is a basic principle of law governing tax appeals
that it is the burden of the taxpayer to show that he or
she has been aggrieved by the action of the assessor
overassessing the property. Ireland v. Wethersfield, 242
Conn. 550, 556, 698 A.2d 888 (1997). It is also recognized
by our case law that, [when] the trial court finds that
the taxpayer’s appraiser is unpersuasive, judgment may
be [rendered] in favor of the municipality on this basis
alone. Id., 557–58. . . . [I]t is clear that Silverstein’s
opinion of value, based on the subject being an age
and income restricted property (in contrast to Italia’s
opinion of value based on unrestricted property), is the
more credible.’’ (Emphasis added.) Because the trial
court concluded that the plaintiff was not aggrieved,
the court upheld the town’s original assessment. After
the court issued its memorandum of decision, the plain-
tiff moved for an articulation, requesting that the court
articulate the statutory formula it had used to determine
the property’s value. More specifically, the plaintiff
asked the trial court whether § 8-216a applied and, if
not, which standard of valuation the court applied and
what the property’s value was under that standard. The
court issued an articulation, explaining that it did not
apply any standard to value the property because it
determined that the plaintiff did not establish that it
was aggrieved by the town’s valuation, and, therefore,
the court was not required to determine the property’s
value. The court reiterated that it found that the plaintiff
had failed to establish aggrievement because ‘‘Italia’s
opinion of fair market value of the subject property
[was] based [on] unrestricted sales and rental proper-
ties unrelated to age and income restrictions . . . .’’
(Emphasis in original.) This appeal followed.
The plaintiff appealed to the Appellate Court, and we
transferred the appeal to this court pursuant to General
Statutes § 51-199 (c) and Practice Book § 65-1. In this
appeal, the plaintiff claims that the trial court improp-
erly applied the incorrect legal standard of valuation
to the subject property. The plaintiff claims that the
court should have applied § 8-216a to value that prop-
erty and that § 8-216a does not allow for the inclusion
of tax credits in the valuation of the property. In
response, the town argues that the trial court did not
reach the issue of valuation because it determined that
the plaintiff failed to prove that it was aggrieved by
the actions of the board in that the plaintiff’s expert
testimony was not credible, and, therefore, the plaintiff
failed, as a threshold matter, to show that the town had
overassessed its property. We agree with the town.
We begin with the applicable legal principles on
aggrievement in a tax appeal under § 12-117a. In an
appeal under § 12-117a, the trial court performs a two
step function. ‘‘The burden, in the first instance, is [on]
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 assess-
ment has been unreasonable or discriminatory or has
resulted in substantial overvaluation. . . . Whether a
property has been overvalued for tax assessment pur-
poses 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. . . . 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 con-
cludes that the plaintiff has not met [this] burden, the
trial proceeds no further, and the town’s assessment
stands.’’ (Internal quotation marks omitted.) Redding
Life Care, LLC v. Redding, 308 Conn. 87, 99–100, 61
A.3d 461 (2013). ‘‘If 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 court may
render judgment for the town on that basis alone.’’
Ireland v. Wethersfield, supra, 242 Conn. 557–58. With
respect to appeals by taxpayers, ‘‘we have regularly
affirmed such judgments without a showing that the
town adduced affirmative evidence sufficient to demon-
strate that the assessor’s determination of market value
was not unjust.’’ Id., 558.
‘‘In a tax appeal taken from the trial court to the
Appellate Court or to this court, the question of over-
valuation usually is a factual one subject to the clearly
erroneous standard of review . . . .’’ (Internal quota-
tion marks omitted.) Redding Life Care, LLC v. Red-
ding, supra, 308 Conn. 100. ‘‘Under this deferential stan-
dard, [w]e do not examine the record to determine
whether the trier of fact could have reached a conclu-
sion 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 stan-
dard, 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). To reiterate, ‘‘a
trial court is afforded wide discretion in making factual
findings and may properly render judgment for a town
based solely [on] 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 deci-
sion 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, [286 Conn. 766, 776, 946 A.2d 215 (2008)].
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., 775–76. Only when the trial court
rejects a method of appraisal as a matter of law will we
exercise plenary review. See id.’’ (Emphasis in original;
footnote omitted; internal quotation marks omitted.)
Redding Life Care, LLC v. Redding, supra, 308 Conn.
101–102.
Thus, in the present case, we must first determine
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 that the trial court rejected the testimony of
the plaintiff’s expert witness because the court found,
as a threshold matter, that the plaintiff’s expert was
not credible and, therefore, that the plaintiff was not
aggrieved. Consequently, the trial court did not base its
decision on whether § 8-216a governed the property’s
valuation or whether associated tax credits could be
included in the property’s value.
This conclusion is supported by both the trial court’s
memorandum of decision and its articulation. The mem-
orandum of decision illustrates that the court’s dis-
agreement with the plaintiff’s valuation was based on
flaws in Italia’s underlying data and not on the plaintiff’s
reliance on any particular statutory formula. For exam-
ple, the court rejected Italia’s income capitalization
approach because Italia relied on unrestricted market
properties to determine reasonable income and
expense figures for the subject property, which is age
and income restricted. The trial court reaffirmed this
reasoning in its articulation, in which the trial court
clarified that it had rejected Italia’s valuations because
it found that the data he relied on were not credible,
irrespective of which statutory standard applied.
Accordingly, the plaintiff’s claim could 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 [on] which the trial
court rendered its decision’’ [internal quotation marks
omitted]). Simply put, the court rejected Italia’s
appraisal as not credible because it was premised on
data derived from properties that were not representa-
tive of the subject property.3 As a result, we review the
trial court’s credibility determination under the deferen-
tial clear error standard.
The record supports the trial court’s finding. The trial
court rejected Italia’s valuation because he had relied
on income and expense figures derived from rentals
that were not age or income restricted, like the subject
property, and had failed to make any adjustment for
this difference. The town’s expert, on the other hand,
testified that such adjustments were necessary to
appropriately value the property given its restrictions.
Because the trial court rejected the plaintiff’s expert
testimony, the plaintiff could not rely on that testimony
to establish overvaluation. See Redding Life Care, LLC
v. Redding, supra, 308 Conn. 104. The trial court also
could have rejected the plaintiff’s claim that the prop-
erty was overvalued under § 8-216a because the plain-
tiff’s expert did not value the property under the
standard prescribed by that statute. Instead, the plain-
tiff, in its posttrial brief, performed its own calculation,
under § 8-216a, but did not provide any testimony to
support this calculation. Therefore, the trial court cor-
rectly concluded that the plaintiff had failed to satisfy
its initial burden of establishing aggrievement under
§ 12-117a. See, e.g., Ireland v. Wethersfield, supra, 242
Conn. 557–58. Thus, there is no need to determine
whether the town used the correct statutory formula
to value the subject property. See id., 558 (‘‘[in] appeals
[pursuant to § 12-117a] by the taxpayer, we have regu-
larly affirmed such judgments without a showing that
the town adduced affirmative evidence sufficient to
demonstrate that the assessor’s determination of mar-
ket value was not unjust’’). Accordingly, we do not
determine whether § 8-216a is the proper standard valu-
ation for the subject property and leave for another
day the issue of whether tax credits may properly be
included in a valuation under that standard.
We therefore conclude that the trial court’s determi-
nation that the plaintiff failed to establish aggrievement
under § 12-117a is not clearly erroneous and that the
trial court properly rejected the plaintiff’s appeal.4
The judgment is affirmed.
In this opinion the other justices concurred.
1
Italia’s reliance on unrestricted properties could have affected the accu-
racy of his valuation in at least two different ways. First, Italia did not
consider how the property’s restrictions impacted the occupancy rate of
the property; he instead based the vacancy loss figures on what would be
reasonable for a market property. Unlike a market property, which competes
with many other properties for tenants, the subject property is in high
demand because there is no nearby competition for age and income
restricted housing. The subject property, therefore, can maintain a higher
occupancy rate than a market property. Second, the property generates
more income through laundry services, late fees, and other sources than a
market property. Italia based his additional income figures on the average for
unrestricted market properties, but the subject property actually generated
more than twice the amount that Italia used in his calculations.
2
We note that Italia was unavailable to testify at trial, so the plaintiff
presented testimony from one of Italia’s coworkers, Josephine Aberle. Aberle
testified that she did not prepare a report of her own but instead adopted
Italia’s report as her own. Aberle claimed to rely on the same underlying
data as Italia, and she reached the same conclusions as Italia. Even though
her testimony mirrored Italia’s report, she claimed to have performed an
independent valuation, although she acknowledged that she had not actually
visited the property before reaching her conclusions. Because Aberle’s testi-
mony mirrored Italia’s, the trial court focused its analysis of the plaintiff’s
evidence solely on Italia’s report. Because the trial court did not give any
independent weight to Aberle’s testimony, we too address only Italia’s report
in this opinion.
3
Although the plaintiff focuses its appeal on § 8-216a, not even its own
expert, Italia, solely relied on the income capitalization approach. Italia also
relied on the sales comparison approach—his final valuation was a near
equal blend of the two valuation methods. The record supports the trial
court’s disagreement with Italia’s valuation derived from the sales approach.
The court found that this approach was improper because Italia used compa-
rable properties that were not age and income restricted. The comparable
properties were also much older than the subject property, specifically,
between thirty-four and eighty-three years older.
4
The plaintiff raises two additional claims in its appeal. First, it claims
that including the federal tax credits in the valuation of the property violates
article six of the United States constitution. The plaintiff did not raise this
claim before the trial court, and, accordingly, we decline to address it.
‘‘[O]nly in most exceptional circumstances can and will this court consider
a claim, constitutional or otherwise, that has not been raised and decided
in the trial court.’’ (Internal quotation marks omitted.) Lopiano v. Lopiano,
247 Conn. 356, 373, 752 A.2d 1000 (1998); see also Practice Book § 60-5.
The plaintiff has not demonstrated such exceptional circumstances.
Second, the plaintiff argues in the alternative that, because it does not
own the apartment complex located on the subject property, and because
the land is subject to restrictions, its property interest has no value. After
the trial concluded, the plaintiff, in its posttrial brief, for the first time
claimed that another party, Amston Village, LP (Amston), was responsible
for paying the property taxes. Amston leases the subject property from the
plaintiff. The plaintiff claimed that, by the terms of the lease, the buildings
on the property actually belonged to Amston, and, therefore, the plaintiff
is responsible for paying taxes only on the land, which, due to the restrictive
covenants, is valueless.
We decline to address this claim because nowhere in the plaintiff’s com-
plaint is there an allegation that the plaintiff is not the owner of the property
at issue. Because the plaintiff failed to properly raise this issue in the trial
court, we decline to address it. See, e.g., Connecticut Education Assn., Inc.
v. Milliman USA, Inc., 105 Conn. App. 446, 460, 938 A.2d 1249 (2008) (‘‘The
purpose of a complaint . . . is to limit the issues at trial, and . . . pleadings
are calculated to prevent surprise. . . . It is fundamental to our law that
the right of a [party] to recover is limited to the allegations in his [pleadings]
. . . . Facts found but not averred cannot be made the basis for a recovery.’’
[Emphasis omitted; internal quotation marks omitted.]).