Opinion
CV136007335S
12-31-2015
Generations Willimantic, LLC et al. v. Town of Windham
UNPUBLISHED OPINION
MEMORANDUM OF DECISION ON MOTIONS FOR SUMMARY JUDGMENT
John D. Boland, S.J.
Plaintiffs sue the town of Windham in a four-count complaint alleging that on the Grand List of October 1, 2012, the town has taxed their real property in violation of statutory authority. Before the court at this time are defendant's motion for summary judgment (#138), and plaintiffs' objection thereto (#143), as well as plaintiffs' counter motion for summary judgment (contained within #143), and defendant's objection to it (#146). For the reasons set forth below, the court grants in part and denies in part the town's motion, and denies the plaintiffs' motion in its entirety.
The real property in question is located at 40 Mansfield Avenue in Willimantic, and is the site of a community health center open to the public. Generations Willimantic, LLC (" GW") is the record owner of the property, while Generations Family Health Center, Inc. (" GFHC") is the tenant in possession of the premises pursuant to a long-term, written lease. In the first count they assert that the property ought to be tax exempt under the provisions of Conn. Gen. Stat. § 12-81(7), and bring this appeal under the authority of § 12-119. Their second count incorporates the factual allegations of the first, and demands a declaratory judgment under § 52-59. Counts three and four set forth plaintiffs' additional claims under each of those statutes that § 12-81(58) provides an independent entitlement to such an exemption.
I. Standards for Determining a Motion for Summary Judgment
In ruling upon a motion for summary judgment, the court adheres to the process recently articulated in Marinos v. Poirot, 308 Conn. 706 (2013), at pages 711-12, 66 A.3d 860, as follows:
Practice Book § 17-49 provides that summary judgment " shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." A party moving for summary judgment is held to a " strict standard." To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact . . . As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent . . . When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § 17-45 (citations omitted).
In application of that process, the court requires of each moving party a showing excluding any real doubt as to any issue of material fact as to its right to a judgment on the allegations as they presently stand, and, if the moving party makes at least a prima facie showing that such is the case, then to require of each opposing party a showing revealing that there is evidence to establish that material facts are genuinely disputed and cannot be resolved summarily. The subject matter of the present its motion, since the determination of " whether a property is tax-exempt is a fact intensive inquiry"; Fanny J. Crosby Memorial, Inc. v. Bridgeport, 262 Conn. 213, 220, 811 A.2d 1277 (2002).
II. Tax Exemption Under § 12-81(7) (Counts One and Two)
The pertinent text of this statute provides that a parcel of real property is exempt from local real estate taxation if it is " of, or held in trust for, a corporation organized exclusively for scientific, educational, literary, historical or charitable purposes or for two or more such purposes and used exclusively for carrying out one or more of such purposes . . . The real property shall be eligible for the exemption regardless of whether it is used by another corporation organized exclusively for scientific, educational, literary, historical or charitable purposes or for two or more such purposes."
The statute's exemption applies both to the circumstance in which a corporate owner of the fee simple title is utilizing land in its own name for the charitable purposes enumerated, and, disjunctively, also to an arrangement whereby the land is used by a corporation serving those purposes but held in trust by another.
The town's motion attacks what it describes as plaintiffs' failures to satisfy the plain language of the statute. GW is not a corporation, but instead a limited liability company. The town posits that the owner of the parcel must be " a corporation" organized and operating as the statute defines; having established that GW, the property owner, does not exist in this form, it claims that this feature of its organization alone renders GW categorically ineligible for the exemption. Both in opposition to the town's motion, and affirmatively in support of their own counter motion, plaintiffs argue that the court should interpret the statute's language with an eye to comprehending the substance of the plaintiffs' relationship. They establish that GFHC is a duly-qualified § 501(c)(3) corporation, and that GW is a " supporting organization" exempt from federal taxation under § 509(a)(3) of the IRC. Plaintiffs make a plausible argument that GFHC would have been the owner of the parcel but for the vagaries of the lending arrangement which facilitated the construction of the improvements upon the site. Briefly, as they explain it, their lender permitted a pledge of the facility to secure its loan in lieu of a mortgage, but demanded that the title holder be a nominally for-profit entity in order to allow a transfer of ownership in the event of default; thus, in their eyes, GW is effectively no more than a straw man. Plaintiffs contend that the court ought to recognize GW as " the equivalent" of a qualified taxpayer, and not be bound by mere matters of form.
In support of this argument, the town invokes the case of Common Fund v. Town of Fairfield, 228 Conn. 375, 636 A.2d 795 (1994), which dealt with a similar although not identical situation. The named plaintiff was a corporation which existed to assist other qualified corporations in the investment and management of their assets, and it demanded local tax exemption as to its own holdings. The entity was exempt from federal taxes under § 501(f) of the Internal Revenue Code. The Court adopted as a definition of the eligibility for property tax exemption the test set out in § 12-89a, which requires that " [a]ny organization claiming exemption from property tax in any municipality in which real or personal property belonging to such organization is situated, which exemption is claimed with respect to all or a portion of such property under the provisions of any of the subdivisions (7), (8), (10), (11), (12), (13), (14), (15), (16), (18), (27), (29), (49) or (58) of section 12-81, may be required . . . to submit evidence of certification from the Internal Revenue Service . . . that such organization has been approved for exemption from federal income tax as an exempt organization under Section 501(c) or 501(d) of the Internal Revenue Code." The Common Fund plaintiff's exemption under § 501(f) did not meet that statute's definition, and the tax exemption was denied.
GW, likewise, cannot supply proof sufficient to comply with that definition, and indeed, appears not to have even sought such approval from the IRS. Its argument urging an " equivalency" determination in this action runs afoul of Common Fund 's direction that it is the legislature which bears the responsibility for establishing a proper balance between two worthy but competing policy goals: the protection of local tax revenues and the advancement of the charitable goals of corporate adjuncts to charitable institutions. In discerning legislative intent, " [i]t is a settled rule of law that statutes which exempt from taxation are to be strictly construed against the party claiming an exemption . . . Exemptions, no matter how meritorious, are of grace, and must be strictly construed. They embrace only what is strictly within their terms . . . Exemption from taxation is the equivalent of an appropriation of public funds, because the burden of the tax is lifted from the back of the potential taxpayer who is exempted and shifted to the backs of others . . . It is also well settled that the burden of proving entitlement to a claimed tax exemption rests upon the party claiming the exemption"; United Church of Christ v. Town of West Hartford, 206 Conn. 711, 718-19, 539 A.2d 573 (1988) (citations omitted).
Where Common Fund is distinguishable from this case, however, is that it included no claim that the real property in question was used for approved purposes under the statute, while being " held in trust" by another entity for the qualified corporation making that use. The town's single-minded focus upon the identity and qualifications of GW overlooks the statute's emphasis upon the use of the subject property and its allowance for circumstances in which a qualified user might not be the fee simple owner of the real estate title. With regards to use, the Court in Isaiah 61:1, Inc. v. City of Bridgeport, 270 Conn. 69 at 80, 851 A.2d 277 (2004), citing Hartford Hospital v. Hartford, 160 Conn. 370, at 376, 279 A.2d 561 (1971), emphasized that in categorizing property belonging to or held in trust for a charity, the touchstone is not whether " the property is leased, rented or used for anything other than [charitable] purposes, " but instead the exclusivity of its use for those charitable purposes: " [t]he determining factor is the exclusive use of the property for [charitable] purposes." The town's contention that the apparent payment of rent from GFHC to GW disallows the exemption runs aground in light of this observation in Isaiah 61:1, at page 85: " the rental of property does not necessarily prevent the property from qualifying for tax exemption, as long as the property is used exclusively for carrying out the charitable purposes of the organization to which the property belongs." If GW were the only entity involved here, or if the statute did not include the " or held in trust for" prong, the town's motion would be on solid ground; but absent those counterfactual scenarios, a judgment granting the town's present motion would be improper as it has failed to adequately address the statute's alternative provision for tax exemption, one not eliminated by Common Fund.
Turning to the plaintiffs' counter motion, the court will first comment upon their citation of two superior court decisions involving this statute, namely Bradford Foundation v. Avon, Superior Court, judicial district of Hartford, Docket No. CV 99 0496299 (2001, Aronson, J.) (30 Conn. L. Rptr. 461), and C.C.C. Real Estate, Inc. v. Waterbury, Superior Court, judicial district of Waterbury, Docket No. CV04 4001666 (2007; Upson, J.) . As in the instant case, each involved a bifurcated owner/occupant or landlord/tenant relationship with respect to the property as to which a tax exemption was sought.
In the Avon case, the equity owner of the real estate was a Pennsylvania Foundation holding title but leasing its premises to what appears to be a Connecticut nonprofit corporation providing child counseling services. The court there determined that the financial interrelationship of those parties precluded tax exemption under the statute. That relationship, however, as described in the court's opinion, was substantially distinct from that between GW and GFHC. The Avon tenant was paying market rents, whereas in the instant case plaintiffs assert that the rental amount " does not even cover all of the costs and expenses associated with the building." This certainly is not a market rent arrangement. Also, the Avon opinion gives no indication that the (presumably-qualified) tenant, who does not appear even to have been a party to the action, had any actual or residual beneficial interest in the property in question. The decision recites a host of additional financial entanglements between these parties and others, which further create distinctions between that case and this. The court therefore agrees with plaintiffs' contention that these disparities diminish the case's value as a precedent guiding the outcome here.
In the Waterbury case, the court ruled upon a motion for summary judgment similar in posture to that now pending before this court, and held generally in favor of the property owners. Its two plaintiffs were C.C.C. Real Estate, Inc., the property owner (which, like GW here, was a federally tax-exempt entity, although under § 501(c)(2) rather than § 509), and Connecticut Counseling Centers, Inc., which operated an outpatient substance abuse treatment center in property it leased from C.C.C. Both plaintiffs were subsidiaries of a parent entity, C.C.C. Holding Company, Inc. (whose tax status is not reported in the decision), and are sibling entities to yet a third corporation, Connecticut Counseling Centers Fund, Inc., organized to hold and invest for the benefit of Counseling Centers any excess revenue generated by the lease arrangement. Plaintiffs do not elaborate upon these structural idiosyncrasies, and they do not appear to be material; the court understands plaintiffs' argument to be that the decision's conclusion that because the underlying purpose of the two C.C.C. plaintiffs was to " operate jointly . . . a nonprofit counseling center, " and because in fact they were operating such a facility and thus deserved the tax exemption which they sought, should dictate a similar result here.
The court rejected the applicants' claim for an exemption from taxes in one year after finding that they had failed to supply the tax assessor with required notice of their claim to exempt status. That particular ministerial failure is not a factor in the case at bar.
In earlier denying a motion to strike in this case, this court pointed out that the Waterbury decision was a precedent useful to plaintiffs in laying out a sufficient basis for their claims. Now, they invoke the decision as authority for why their motion for summary judgment ought to be granted, and the town's denied. The problem they face on the instant motion is the sufficiency (or lack thereof) of the evidence proving that their reality is identical in substance to that of the C.C.C. plaintiffs. The Waterbury decision stands upon a number of findings pertaining to the bona fide non-profit status of its plaintiffs. The decision does not indicate whether its conclusions rest upon the documents submitted in support of the motion, or whether the municipality had acquiesced and left unchallenged those crucial factual premises. Here, plaintiffs rely heavily upon the representations within their briefs (obviously, not evidence at all), and the summary conclusions within two affidavits attached to those briefs.
The town has responded to this presentation with general skepticism as to the plaintiffs' factual propositions. In examining plaintiffs' submissions, this court has some questions as to those propositions. For instance, plaintiffs claim in their brief that while GFHC is a qualified tenant, it is also the beneficiary of a trust arrangement with GW which satisfies the statute. The town counters that plaintiffs neither 1) identify the form of trust (i.e., express, implied, constructive, etc.) claimed, or 2) lay out the evidence in support of that claim. About all they say, in the May 15, 2015 affidavit of the GFHC Chief Executive Officer, Arvind Shaw, is that there is some " understanding" which is tantamount to a trust.
This vague premise enhances the mysterious discrepancy between plaintiffs' affiant's statement that the title to the parcel in question will revert to GFHC in seven years, and the fact that the notice of lease between the two plaintiffs indicates a term of thirty years. Perhaps there is a reason for a discrepancy of such magnitude, but on a motion for summary judgment the court cannot speculate on what that reason might be.
Next, the relationship between GW and GFHC, and its lender, alluded to above, includes mention of certain tax credits which were facilitated by adoption of that ownership structure. The town cites Nutmeg Housing Development Corp. v. Town of Colchester, Superior Court, judicial district of New Britain, Docket No. CV12 6016973, (March 13, 2015; Aronson, J.T.R.), as holding that such tax credits affect the valuation of real property and thus their presence has a relevance to this case. All this court will say at the moment is that Nutmeg Housing involved an entirely different legal issue, namely the valuation of property for tax purposes, and not its potential exemption from taxation altogether. However, the town's citation to this decision--which may turn out to have no bearing upon the proper outcome of this case--is made more intriguing in light of an additional apparently related detail in plaintiffs' papers, and one which the court suspects may be inaccurately or ambiguously reported. The Shaw affidavit recites that all members of GW are § 501(c)(3) corporations. Plaintiffs' documents establish that in addition to GFHC, an entity identified as " Capital Link" is also a member. No further mention of Capital Link appears anywhere else in the case, including no proof that Capital Link is (or is not) such an entity. Again, this may be a red herring, but is one that for the moment casts a shadow upon the plaintiffs' motion.
In conclusion, as to counts one and two, the court denies the town's motion for its failure to address one of the statute's provisions, which could be sufficient to sustain plaintiffs' appeal. Conversely, the court denies the plaintiffs' motion for failure to clarify and prove the absence of genuine material fact as to the several matters thus listed. Consistent with those rulings, and as to counts one and two, the court sustains in part the plaintiffs' objection to the town's motion, and sustains the town's objection to the plaintiffs' motion.
III. Tax Exemption under § 12-81(58)
This statute provides an alternative path to tax exemption for properties " leased to a charitable, religious or nonprofit organization, exempt from taxation for federal income tax purposes, provided such property is used exclusively for the purposes of such charitable, religious or nonprofit organization and not otherwise exempt under this section." This could include, for instance, a property such as that involved in the Avon case described above, but the statute includes as a crucial condition preliminary to the granting of such an exemption that the exemption be authorized by ordinance enacted within the municipality involved. Plaintiffs' third and fourth counts claim that the town has " in practice and effect authorized" such an ordinance.
Plaintiffs cannot claim that Windham has formally enacted such an ordinance. In support of its motion seeking judgment on these counts, Windham's present motion establishes conclusively that it has not done so. By way of response, plaintiffs, now characterizing what the town has done as the adoption of an " ordinance by implication, " seek to have this issue designated as one of disputed fact which they therefore maintain is not amenable to summary judgment.
Assuming, arguendo, that a community may adopt an ordinance " by implication" or " in practice and effect, " instead of by the formal mechanisms set out for the enactment of positive law, plaintiffs' submission is inadequate to defeat summary judgment. In opposing a motion for summary judgment in which the moving party has made a showing of the absence of genuine issue as to a material fact, " the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue"; Marinos, supra, at 712. Other than the bald assertion in their memorandum that such facts exist, plaintiffs make no effort to illustrate what such facts are or what evidence supports their existence. It is a fair inference that plaintiffs have adduced no evidence of such disputed facts throughout the two years this case has been pending, and thus, at this juncture, it is too late to maintain that such facts exist and require a trial.
The assumption that plaintiffs' legal proposition is sound, it should be noted, is made solely for the sake of this memorandum, and does not indicate this court's response to the sufficiency of such a proposition as a matter of law.
In the prior decision on the motion to strike, the court denied the town's motion because it attempted to prove--there, inappropriately, but here, appropriately and adequately--that it had enacted such an ordinance.
As to counts three and four, the town's motion is granted, and the plaintiffs' motion denied. The town's objection is sustained in part, and the plaintiffs' objection accordingly overruled.
IV. Conclusion
Before concluding, the court must respond to the town's challenge to GFHC's very presence in this suit. Within its argument in favor of summary judgment, the town asserts that GFHC is not the landowner of 40 Mansfield Avenue and thus lacks standing to make any claims in this case. Standing, of course, is a concept usually raised via a motion to dismiss, but questioning a party's standing may require a court to respond to this challenge to its subject matter jurisdiction regardless of the nature of the pleading in which the challenge has appeared. " [A]lthough the defendants did not file their claim in a properly labeled motion . . . we look to the substance of the claim rather than the form in which it was raised"; People's United Bank v. Bok, 143 Conn.App. 263, 271, 70 A.3d 1074 (2013). Conn. Gen. Stat. § 12-119, which creates the right of appeal that undergirds the first count, specifies that an appeal of a manifestly excessive tax upon real property may be brought by " the owner thereof or any lessee thereof whose lease has been recorded as provided in section 47-19 and who is bound under the terms of his lease to pay real property taxes." Plaintiffs have supplied a copy of the duly-recorded notice of lease, and the Shaw affidavits affirms that GHFC must pay any property taxes due. GFHC has standing to be a plaintiff here, and the court decides the standing issue (to which the parties have but briefly alluded) in its favor; see, Moutinho v. Planning and Zoning Commission, 278 Conn. 660, 899 A.2d 26 (2006); Primerica v. Planning & Zoning Commission, 211 Conn. 85, 558 A.2d 646 (1989), and DiBonaventura v. Zoning Board of Appeals, 24 Conn.App. 369, 588 A.2d 244.