Opinion
No. CV 04-0092875 S
September 22, 2004
MEMORANDUM OF DECISION
This decision encompasses all the issues presented in the above files along with a fourth file Docket Numbers CV 04-0092876-S, entitled WORTHINGTON vs. AR INTERNATIONAL PROPERTIES, LLC (which was subsequently withdrawn). These matters came before the court on June 9, and July 21, 2004. All of these files concern the distribution of excess proceeds from a tax sale of two properties formerly owned by AR International Properties, LLC. On June 24, 2003 the Tax Collector for the Town of Litchfield pursuant to General Statute 12-157 conducted a tax sale for the properties located at 38 Bantam Lake Road and 45 Bantam Lake Road, located in the Borough of Bantam, Town of Litchfield, Connecticut. The property at 38 Bantam Lake Road was sold for taxes due. The property at 45 Bantam Lake Road was the subject of a bidding war, in which 131 bids were made. The successful bid was made by Fedco, Inc. in the amount of $160,595.00. The tax collector for the Town of Litchfield then paid the taxes, fees and costs due to the Town of Litchfield on this property through December 31, 2003, and the taxes due the Borough of Bantam through June 30, 2003. The Borough of Bantam is a separate municipality and tax district located within the Town of Litchfield. On or about January 9, 2004 the Litchfield Tax Collector pursuant to General Statute § 12-157(i)(1)(B) deposited the balance of the proceeds in the amount of $130,000.00 with the clerk of the Court for the Judicial District of Litchfield. The plaintiff pursuant to General Statute § 12-157(f) did not redeem the property within the allotted six-month period which expired on December 28, 2003. On or about December 29, 2003 a tax collector's deed was recorded on the Litchfield Land Records in Volume 281, at Page 919 transferring ownership to Fedco, Inc.
On April 7, 2004 AR International Properties LLC (hereinafter AR International), pursuant to General Statute § 12-157(i)(2), made an application for the excess tax sale proceeds deposited by the Tax Collector for the Town of Litchfield with the clerk of the court for the Judicial District of Litchfield. The Borough of Bantam (hereinafter the Borough) made a similar application on January 30, 2004. Fedco, Inc. (hereinafter Fedco) filed a similar application on February 24, 2004. The defendant John Worthington had filed a separate action for a portion of the proceeds which has been withdrawn.
The Borough of Bantam makes two claims for a portion of the excess proceeds. The first claim is that since AR International was the owner of the property on the sale date of June 28, 2003 it is responsible for the taxes due and payable as of the assessment date of October 1, 2002. The evidence produced at trial was that AR International was the owner of record on the assessment date of October 1, 2002, these taxes being due and payable July 1, 2003 and January 1, 2004. The Borough's claim is based on General Statute § 12-161, which states in part, "all taxes properly assessed shall become a debt due from the person, persons or corporation against whom they are assessed." The Borough's second claim is that it is due attorney fees and costs which are a result of its own Tax Foreclosure action commenced on March 11, 2003 which is pending in the Judicial District of Litchfield under docket number CV-03-0089732. The Borough acknowledges its taxes, interest and lien fees were paid by the Litchfield Tax Collector through June 30, 2003.
Fedco Inc. (hereinafter Fedco) has made three separate claims for the excess proceeds: First, all the proceeds should be paid to Fedco or held by the court due to the failure of the transferor, AR International Properties, LLC to comply with the General Statute § 22a-134 et seq., commonly known as the Transfer Act, and that until the pollution on the property is eradicated none of these funds should be disbursed; second, that Fedco should be reimbursed for real property and sewer taxes paid to the Town of Litchfield the Borough of Bantam, assessed on October 1, 2002 due and payable July 1, 2003 and January 1, 2004; third, that Fedco should be reimbursed for monies it expended to protect the property between the date of the sale and the filing of the deed on December 29, 2003 in the amount of $5,000.00.
AR Intemational claims it is the only entity that is entitled to the excess proceeds based on the plain reading of General Statute § 12-157(i)(1) and (2), and that neither Fedco nor the Borough have standing to make a claim for any of the funds.
The threshold issue in these cases is whether or not the defendants, the Borough of Bantam and Fedco, have standing to make any claims for the excess funds.
For a court to have subject matter jurisdiction over a claim, the party asserting the claim must have standing. Ardmere Construction Co. v. Freedman, 191 Conn. 497, 467 A.2d 674 (1983). "Standing is the legal right to set judiciary machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some interest in the cause of action, or a legal or equitable right, title or interest . . . in the subject matter of the controversy." (Internal quotations marks omitted.) Id. Chila v. Stuart, 81 Conn.App. 458, 464, 840 A.2d 1176 (2004).
Who may apply for excess tax sale proceeds is found in Connecticut General Statute § 12-157(i)(1) and (2), which read as follows.
If the tax collector pays to the court any moneys pursuant to paragraph (B) of subdivision (1) of this subsection, the delinquent taxpayer, any mortgage, lienholder or other encumbrancer whose interest in such property is affected by the sale may within ninety days of the date the tax collector paid the moneys to the court, file an application with the court for return of the proceeds. Any person may make an application for the payment of the monies deposited in court as provided for in this subsection to the superior court for the judicial district in which the property that is the subject of the proceedings referred to is located, or if said court is not in session to any judge thereof, for a determination of the equity of the parties having an interest in such moneys.
AR International argues under subsection 12-157(i)(2), the only parties that can lay claims to these funds are those named in this subsection, namely, "the delinquent taxpayer, any mortgagee, lienholder or other encumbrancer, whose interest in the property is affected by the sale." The Borough and Fedco contend that the next line of subsection (2) which reads in part: "Any person may make an application for payment of moneys deposited in court as provided for in this subsection to the superior court for the judicial district in which the property that is referred to is located, . . . for a determination of the equities of the parties having an interest in such moneys" means just that — any person is any person, not just the parties named in the prior sentence of this subsection.
The court has been unable to find any appellate decision dealing directly with this issue, nor does there appear to be any legislative history directly on point. In Federal Deposit Ins. Corp. v. Caldrello, 79 Conn.App. 384, 830 A.2d 767 (2003), the Appellate Court found the applicant did not have to be a holder in due course to apply for the funds. Though the Appellate Court in Federal Deposit Ins. Corp. at page 396 does state, "the statute explicitly states in a clear and concise list those persons who are eligible to file such an application" it was not presented with the question of interpreting the sentence of § 12-157(i)(2) which immediately follows this list. The court is thus left to make its own determination of the meaning of the statute. In Bender v. Bender, 258 Conn. 733, 741, 785 A.2d 197 (2001), the Connecticut Supreme Court deviated from the plain meaning rule, by adopting a new sliding scale approach. Bender authorized courts to look "to the words of the statute itself, to the legislative history and the circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter." In State v. Courchesne, 262 Conn. 537, 816 A.2d 562 (2003), our Supreme Court announced a further departure from the plain meaning rule. In Courchesne the court stated that, "We now make explicit what is implicit in what we have already said: in performing the process of statutory interpretation, we do not follow the plain meaning rule in whatever formulation it may appear." Courchesne, 262 Conn. at 565. In response to Courchesne the Connecticut legislature adopted Public Act 03-154 effective October 1, 2003 which reads: "The meaning of a statute shall, in the first instance, be ascertained from the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd results, extratextual evidence of the meaning of the statute shall not be considered."
This court in interpreting General Statute § 12-157(i)(2) finds that it is not ambiguous. The court finds that the two sentences which are the subject of this controversy are separate and distinct. The court finds the first sentence which enumerates the parties who may make application and the second sentence which starts with "Any person" are not interrelated. The basis for the court's finding is that if the legislature intended only certain named parties to have the right to claim the excess funds there is no reason for the second sentence. In addition, the sentence which allows any person to make a claim for the money specifically allows the court to exercise its equitable powers in determining a party's interest. If the legislature intended to limit who could make an application they could have simply said the following parties only may make application for the excess funds.
On the issue of standing the court finds as follows. AR International, as the delinquent taxpayer, has an absolute right under § 12-157(i)(2) to claim the excess proceeds. General Statute § 12-157(i)(2) states that one of the parties who may make a claim for excess proceeds are "other encumbrancers" whose interest in the property is affected by the tax sale. The court finds that since the Borough is a recognized taxing authority whose interest in the property was affected by the tax sale, it qualifies as an "other encumbrancer" under § 12-157(i)(2). The court finds that since the Borough is an other encumbrancer whose interest in the property was affected by the sale, as evidenced by its right to tax the property, it is entitled to reasonable attorney fees and court costs incurred in its attempt to collect the taxes due the Borough as allowed by General Statute § 12-140. The court having examined the Bill of Costs and Attorney Fees submitted by the Borough awards the Borough attorney fees in the amount of $2,500.00 and costs of $1,215.52 out of the excess proceeds.
The next question for the court is, what taxes are due, if any, to the Borough from the excess proceeds? In this case the Borough is claiming the taxes assessed on October 1, 2002, due and payable July 1, 2003 and January 1, 2004 are collectable from the excess proceeds. The tax sale took place on June 28, 2003. The deed to the property was not recorded until December 29, 2003 upon the expiration of the six-month redemption period on December 28, 2003. The Borough's position is that since AR International was the owner of record on the assessment date and the sale date it is responsible for the taxes due and payable July 1, 2003 and January 1, 2004 out of its share of the proceeds. AR International's position is that the notice of sale which stated the property is being sold "subject only to taxes laid by such municipality which were not yet due and payable" put the bidders on notice that they would be responsible for all the taxes due subsequent to the sale date. The court finds in the interest of equity that the Borough's taxes should be paid through December 31, 2003. The court further finds that, though when the sale took place on June 28, 2003 Fedco obtained equitable title, subject to a right of redemption, actual title to the property did not pass until December 29, 2003 when AR International's right of redemption expired and the deed was recorded. This is presumably why the Litchfield Tax Collector paid the Town's taxes through December 31, 2003. The court finds that since AR International was the record owner up until the expiration of the redemption period, the Borough's taxes, interest and fees for the period July 1, 2003 through December 31, 2003 should be paid out of the excess funds. The court therefore orders the clerk of the court to pay the Borough of Bantam upon submission of a notarized bill, the taxes, interest and lien fees due and owing on this property for the period between July 1, 2003 through December 31, 2003.
As to the claims made by Fedco, the court finds first that the Transfer Act is not applicable to a municipal tax sale. The foreclosure of a municipal tax lien is expressly exempted from the definition of a "transfer of establishment" under the Act. Conn. Gen. Stat. § 22a-134(1)(B). A municipal tax sale, being a nonjudicial municipal foreclosure, is, therefore, exempted. Fedco's position is that the section of the Transfer Act that exempts foreclosures of municipal tax liens does not apply because it did not become effective until July 1, 2003, three days after the sale date. To the contrary, foreclosures had always been exempted from the Transfer Act. The amendment regarding municipal foreclosures merely clarified that all foreclosures were exempt. As a clarification, this language should therefore be applied retroactively. Further, while the tax sale auction was held on June 28, 2003, the right of redemption did not expire until December 28, 2003, at which point the tax collector's deed was finally recorded. Accordingly, the foreclosure was not completed until several months after this language in the Transfer Act was effective.
That a tax sale is a nonjudicial foreclosure cannot be genuinely contested. Just as in a judicial foreclosure, a tax sale results in the transfer of title to the property, the extinguishment of the property owner's right of redemption, payment against the debt encumbering the property, and the extinguishment of other encumbrances. Further, the Transfer Act, at Conn. Gen. Stat. § 22a-134(1)(B), adopts the definition of "foreclosure" contained in subsection b of Conn. Gen. Stat. § 22a-452f, in which that term is defined as meaning "acquiring and to acquire, a property, business or establishment through (a) purchase at sale under a judgment or decree, a power of sale, a non-judicial foreclosure sale, a deed in lieu of foreclosure, or similar conveyance from a trustee, or repossession . . ." Conn. Gen. Stat. § 22a-452f(b)(4). Thus, a non-judicial municipal tax sale is a non-judicial foreclosure.
In addition to the foregoing, Fedco's application is denied because its claims are purely speculative. Fedco, Inc. produced no evidence to support its claim that it may, at some point in the future, owe some undetermined amount as a fee to submit particular filings to the Department of Environmental Protection. Fedco's representative Mr. Federovich testified that the DEP had made no demand of any kind of any Form III filing. Mr. Federovich further testified that the DEP had not made any demand to Fedco for any kind of payment. The court finds Fedco has failed to present any evidence in support of its claims that, at some undetermined point in the future, it may owe the DEP some undetermined sum of money.
Still further, the evidence at trial established that another entity that had owned the property prior to AR International, that being Allied Signal, Inc. and its successor, Honeywell, has acknowledged responsibility for site remediation, is the Certifying Party on a Form III on file with the DEP, and is continuing to work with the DEP to remediate the site. This evidence supports AR International's position that Fedco's claims are nothing other than speculation and that even if the DEP were to seek remediation, compliance or fines, AR International is not the party DEP would hold responsible. Finally, there is no statutory provision for the relief that Fedco seeks, that being that this Court hold the funds from the tax sale proceeds until the full environmental cleanup has occurred. The statutes governing tax sales make no provision for the tax sale proceeds to be held in the court's accounts pending an environmental cleanup. It is common knowledge that environmental cleanups often take years if not decades. The court finds there is no statutory basis for the court to exercise jurisdiction over these tax sale proceeds for an undetermined length of time.
Fedco's next claim is that it should be reimbursed taxes and sewer charges paid to the Town of Litchfield and the Borough of Bantam on the Grand List of October 1, 2002, due and payable July 1, 2003 and January 1, 2004. As previously found the Litchfield tax collector paid the taxes and sewer charges due the Town through December 31, 2003 and the Borough through June 30, 2003 out of the proceeds. Though this claim is for reimbursement the evidence produced at trial was that Fedco had not paid any of the taxes subsequent to June 30, 2003. Fedco's position is that pursuant to General Statute § 12-161 the property taxes due are the responsibility of the owner of record on the date of assessment and absent an agreement otherwise remain that party's responsibility. General Statute § 12-70 does allow the purchaser to assume responsibility for the taxes from the date he acquires his interest in the property but does not require the purchaser to do so. The court is aware that the normal custom in a real estate closing is to pro-rate the taxes as of the date of the closing. That, however, is done as part of the bargain, but it is not required by Gen. Stat. § 12-161. AR International contends that since the notice of the tax sale put the potential bidders on notice that property was being sold "subject only to taxes laid by such municipality which were not yet due and payable," Fedco was put on notice that it was buying the property subject to taxes not yet due and payable. The court finds that Fedco had notice of its responsibility for the assessed but yet not due taxes and by bidding on the property agreed to be responsible for these taxes. In any event Fedco's claims for reimbursement for taxes due the Town of Litchfield and the Borough of Bantam are denied because evidence showed no taxes were paid after July 1, 2003. The court does find that the Borough's taxes should have been paid through December 31, 2003 and Fedco is responsible for all taxes due the Borough and the Town of Litchfield from January 1, 2004 forward.
Fedco's last claim is for monies expended by it between the time of the sale on June 28, 2003 and the recording of the tax collector's deed on December 29, 2003. Mr. Federovich, the president of Fedco, testified that it spent approximately $5,000.00 to secure the property. This consisted of boarding up windows and doors to keep out trespassers. Fedco did not however produce any evidence as to actual costs. In addition Mr. Federovich testified he was aware of the condition of the property when he bid on the property, and that he had bought and sold over 100 properties. The court finds that Fedco is a sophisticated purchaser of real estate and should have anticipated these costs when it bid on the property. The court can find no authority in law or equity which would allow it to compensate Fedco for these costs and the request is denied.
The court therefore orders the clerk of the court to disburse the excess tax sale proceeds as follows.
1. To the Borough of Bantam legal fees in the amount of $2,500.00 and court costs in the amount of $1,215.52.
2. To the Borough of Bantam, taxes, interest and lien fees for the tax period of July 1, 2003 to December 31, 2003 to be paid upon submission of a notarized billing statement. This bill is to be filed within 30 days of the filing of this decision.
3. The balance of the funds are to be distributed to AR INTERNATIONAL PROPERTIES, LLC.
4. All other claims for relief are denied.
BRUNETTI, J.