Gordon v. Board of Civil Authority for Town of Morristown

Gordon v. Board of Civil Authority for Town of Morristown (2005-245); 180 Vt. 299;
910 A.2d 836

2006 VT 94

[Filed 01-Sep-2006]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 2006 VT 94

                                No. 2005-245


  William Gordon                                 Supreme Court

                                                 On Appeal from
       v.                                        Lamoille Superior Court


  Board of Civil Authority for                   May Term, 2006
  Town of Morristown


  Howard E. Van Benthuysen, J.

  Ronald I. Merelman, Stowe, for Plaintiff-Appellee. 

  Shapleigh Smith, Jr. and Douglas D. Le Brun of Dinse, Knapp & McAndrew,
    P.C., Burlington, and Richard C. Sargent, Morrisville, for
    Defendant-Appellant.

  William H. Sorrell, Attorney General, and Charles L. Merriman, Special
    Assistant Attorney General, Montpelier, for Amicus Curiae State of Vermont.


  PRESENT:  Reiber, C.J., Dooley, Johnson, Skoglund and Burgess, JJ.

        
       ¶  1.  BURGESS, J.   This case arises out of the Town of
  Morristown's assessment of real estate property taxes against an airplane
  hangar owned by William Gordon.  The property on which the hangar sits is
  leased to Gordon by the State, which owns the land.  Gordon challenged the
  tax assessment in Lamoille Superior Court, which held that the hangar was
  personalty, therefore not taxable as real property, and granted summary
  judgment in favor of Gordon.  The Town appeals.  Because we conclude that
  the superior court erred in concluding that the hangar was not taxable real
  property assessed to Gordon under 32 V.S.A. § 3608, we reverse.

       ¶  2.  The hangar is a bare, non-insulated wood frame structure with
  an aluminum roof and electric power.  Gordon purchased the hangar from
  Elizabeth Darden on July 19, 2001.  Four days later, with the State's
  consent as lessor, Darden assigned to Gordon the lease for the underlying
  land.  The lease began in 1993 and is currently in its third five-year
  renewable term.  

       ¶  3.  The lease called for the construction of the hangar within the
  first year of the lease and provides that the lessee retains title to all
  improvements constructed or installed on the leased premises.  The lease
  also provides that upon termination, the State, as lessor, may require the
  lessee to remove or relocate the hangar, or to relinquish title of the
  hangar to the State.  Gordon agreed in the lease to pay all taxes assessed
  on the premises, and on any buildings, structures, betterments, or other
  improvements.  The lease contains restrictions on Gordon's use of the
  premises, ability to improve the premises, and ability to transfer the
  lease.  The State reserved the right to terminate the lease with thirty
  days notice. 

       ¶  4.  Gordon appealed the assessment of the hangar to the Morristown
  Board of Listers, which affirmed the assessment, and then to the Morristown
  Board of Civil Authority, which also affirmed.  Gordon then appealed to the
  Lamoille Superior Court, where the parties filed cross motions for summary
  judgment; Gordon's was granted.  We review a decision on a motion for
  summary judgment de novo, employing the same standard as the trial court. 
  Hardwick Recycling & Salvage, Inc. v. Acadia Ins. Co., 2004 VT 124, ¶ 14,
  177 Vt. 421, 869 A.2d 82.  To prevail on a motion for summary judgment, the
  moving party must show there is no genuine issue as to any material fact,
  and that it is entitled to judgment as a matter of law.  V.R.C.P. 56(c)(3).
          
       ¶  5.  In evaluating the tax status of the hangar, the superior court
  applied the test set out in Sherburne Corp. v. Town of Sherburne, 124 Vt.
  481, 484, 207 A.2d 125, 127 (1965), to determine whether the hangar was a
  fixture on the land and thus part of the real estate.  The court found,
  based on the lease terms, no intention by the lessor or lessee to make the
  hangar a permanent part of the realty, and so concluded the hangar was not
  real property under the Sherburne test. (FN1)  Base on that finding, the
  court held that the hangar could not be taxed as real estate and granted
  Gordon's motion for summary judgment. 

       ¶  6.  On appeal, the Town argues that the fixture test applied in
  Sherburne is inapplicable to determining whether the hangar is real
  property because the issue is governed by 32 V.S.A. § 3608,  the statute
  governing real estate taxation of buildings on leased land or land not
  owned by the owner of the building.  The Town asserts that the hangar is a
  building under the language of § 3608, and that Gordon is responsible for
  the tax under 32 V.S.A. § 3651, the statute requiring taxable real estate
  to be set in the grand list to the last owner or possessor in each tax
  year.  Gordon argues that even if the hangar is considered real property,
  it is attached to the State's land and therefore not taxable to him. 
  Alternately, he argues that the tax is not properly assessed to him because
  the State holds all indicia of ownership in the hangar. 
   
       ¶  7.  We first address the Town's argument that the hangar was
  appropriately assessed under 32 V.S.A § 3608, which provides: "Buildings on
  leased land or on land not owned by the owner of the buildings shall be set
  in the list as real estate."  The superior court declined to apply § 3608
  because it concluded that, under the fixture test of Sherburne, the hangar
  was not considered part of the underlying real estate and therefore the
  Town had no authority to tax it.  We disagree with the trial court's
  conclusion that § 3608 is inapplicable, or that this matter is subject to
  further analysis according to the law of fixtures. The fixture test applied
  in Sherburne is used to determine if property falls generally under the
  definition of real property under common law. (FN2)  See Sherburne, 124 Vt.
  at 484, 207 A.2d  at 127 ("By applying these tests . . . we can decide what
  the character of the property at issue is under the law generally, without
  the pressures brought to that determination by possible tax consequences or
  the identity of the parties.").                          
   
       ¶  8.  By enacting § 3608, the Legislature specifically included
  buildings on leased land in the definition of taxable real estate, and
  recognized that a building can be taxed separately from the land upon which
  it sits.  It is irrelevant whether a building falls under the general
  common law definition of real estate.  The authority of towns to impose
  taxes, and on what property, comes from the Legislature.  Estey v. Starr,
  56 Vt. 690, 693-94 (1884) ("The usual powers exercised by towns to raise
  money by taxation are not inherent in the town, but exist because the
  legislature has conferred them."); Town of Bennington v. Park, 50 Vt. 178,
  202 (1877) ("Every power [towns] exercise in the local administration of
  their affairs, is expressly delegated to them by legislative enactment."). 
  Because the Legislature has chosen to define taxable real estate, this
  Court may not disregard that choice in favor of a common-law definition of
  real estate for tax purposes.  See Hitchcock Clinic, Inc. v. Mackie, 160
  Vt. 610, 611, 648 A.2d 817, 819 (1993) ("This Court may not extend common
  law principles to extinguish express statutory language.");  MAPCO Ammonia
  Pipeline, Inc. v. State Bd. of Equalization & Assessment, 471 N.W.2d 734,
  748 (Neb. 1991) ("[A] legislature can statutorily change the usually
  accepted common law definition of real estate and can designate subjects to
  be assessed and taxed as real estate.");  Portland Terminal Co. v. Hinds,
  39 A.2d 5, 9 (Me. 1944) ("[I]t is within legislative authority, for the
  purposes of taxation, to provide that real estate shall be assessed as
  personalty or that personalty shall be taxed as realty.").  

       ¶  9.  We also agree with the Town that the hangar is a building.  The
  term "building" is often used in a broad sense, referring to any structure
  enclosing a space or sheltering contents.  In re John A. Russell Corp.,
  2003 VT 93, § 37, 176 Vt. 520, 838 A.2d 906 (mem.).  The hangar, as a
  structure designed to enclose an area for sheltering airplanes, is a
  building.  Because the hangar is a building on leased land, § 3608 requires
  that it be set in the list as real estate.

       ¶  10.  The superior court alternatively stated, and Gordon argues,
  that even if the hangar was real property it would be attached to the
  underlying land owned by the State, and therefore exempt from taxation
  pursuant to 32 V.S.A. § 3802(1) (exempting from taxation real and personal
  property owned by the State).  Again, this reasoning depends on the trial
  court's application of the inapplicable law of fixtures.  Section 3608
  contemplates two separate listings when a building is located on land not
  owned by the owner of the building: one for the building, and one for the
  land.  There is nothing in the statutory scheme to support the theory that
  the tax exempt status of the landowner must be transferred to the building
  owner.  See Trustees of Vt. Wild Land Found. v. Town of Pittsford, 137 Vt.
  439, 444, 407 A.2d 174, 177 (1979) ("[E]xemption statutes are to be
  construed most strongly against those claiming the benefits."); see also
  Portland Terminal Co., 39 A.2d  at 9  (holding that private buildings on
  leased, tax-exempt land were still taxable to the building owner,
  regardless of the tax status of the underlying land).
   
       ¶  11.   Gordon also argues that even if the hangar is taxable real
  estate, it is not taxable to him because § 3608 does not address who is to
  be assessed for the building on leased land.  To whom a property tax is
  assessed is governed by 32 V.S.A. § 3651, which states that: "Taxable real
  estate shall be set in the list to the last owner or possessor thereof on
  April 1 in each year in the town, village, school and fire district where
  it is situated." (FN3)  Because there are two separate grand list entries,
  ownership of the land itself is irrelevant in determining ownership of the
  hangar.  Gordon stated as an undisputed fact in support of his motion for
  summary judgment that he is owner and title holder of the hangar.  By the
  plain language of § 3651, Gordon, as owner, is responsible for the real
  estate taxes on the hangar, and the State is not responsible because it is
  not the owner of the hangar.  Cf. Magoon v. Bd. of Civil Auth. of Johnson,
  140 Vt. 612, 614-15, 442 A.2d 1276, 1277 (1982) (holding that plaintiffs
  were not liable for real estate taxes on property currently in their
  possession because the State owned and held fee simple title in the land);
  Sherburne Corp. v. Town of Sherburne, 145 Vt. 581, 585, 496 A.2d 175, 178
  (1985) (holding that plaintiff corporation was not liable for taxes on land
  leased from the State because the State maintained ownership).  
                          
       ¶  12.  Despite his concession below that he is the owner, Gordon
  argues on appeal that he is not the "actual owner" of the hangar because
  the State holds all indicia of ownership.  While the possibility does exist
  that at termination of the lease the State could take title to the hangar,
  that does not alter the undisputed fact that at the present time, and until
  the State executes its option to claim title, Gordon is the title holder
  for the hangar.  See  Sherburne Corp. v. Town of Sherburne, 145 Vt. at 585,
  496 A.2d  at 177-78 (holding that legal title alone was sufficient to
  establish ownership for purposes of tax exemption statute). Therefore,
  based on the undisputed facts, the Town of Morristown is entitled to
  judgment as a matter of law.  For the foregoing reasons, we reverse the
  trial court's grant of summary judgment for Gordon and its denial of the
  Town's cross-motion, and we remand with directions that summary judgment be
  entered for the Town.

       Reversed and remanded.

       
                                       FOR THE COURT:



                                       _______________________________________
                                       Associate Justice



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                                  Footnotes


FN1.  The Sherburne test considers:  "(1) the annexation, actual or
  constructive, of the article to the real estate; (2) its adaptation to the
  use of the realty to which it is annexed; and (3) whether or not the
  annexation has been made with the intention to make it a permanent
  accession to the freehold."  Sherburne, 124 Vt. at 484, 207 A.2d  at 127.

FN2.  The applicability of 32 V.S.A. § 3608 was not addressed in Sherburne,
  and there is no indication that § 3608 was raised or implicated.  Sherburne
  held only that the trial court erred in finding that the ski lift equipment
  was taxable as personalty.  124 Vt. at 486, 207 A.2d  at 128.

FN3.  Section 3651 is located in the sub-chapter titled, "Where and to Whom
  Real Estate Taxed" whereas § 3608 is located in the sub-chapter titled,
  "Subjects and Manner of Taxation."  The statutory scheme should be
  construed together as a harmonious whole.  In re Estate of Cote, 2004 VT
  17, §10, 176 Vt. 293, 848 A.2d 264 (2004).  The titles of the sub-chapters
  support the interpretation of the statutory scheme.  Section 3608 explains
  what subjects can be taxed, and § 3651 explains who is responsible for the
  tax on those subjects.