Department of Taxes v. Murphy

Department of Taxes v. Murphy (2004-350); 178 Vt. 269; 883 A.2d 779

2005 VT 84

[Filed 29-Jul-2005]


       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.


                                 2005 VT 84

                                No. 2004-350


  Department of Taxes	                         Supreme Court

                                                 On Appeal from
       v.	                                 Lamoille Superior Court


  Thomas C. Murphy and Carol A. Presley 	 April Term, 2005 


  Edward J. Cashman, J.

  William H. Sorrell, Attorney General, and Stephen W. Gould, Special
    Assistant Attorney General, Montpelier, for Plaintiff-Appellee.

  Jeff W. Lively, Moscow, for Defendants-Appellants.


  PRESENT:  Reiber, C.J., Dooley, Johnson and Skoglund, JJ., and 
            Allen, C.J. (Ret.), Specially Assigned 


       ¶  1.  REIBER, C.J.   Taxpayers appeal a superior court decision
  granting State of Vermont Department of Taxes' summary judgment motion and
  thereby requiring taxpayers to pay the unpaid land gains tax pursuant to 32
  V.S.A. §10006.  On appeal, taxpayers argue that the six-year statute of
  limitations in 32 V.S.A. § 5892 bars the Department from collecting the
  land gains tax, and challenge the merits of the underlying tax assessment. 
  We affirm.
   
       ¶  2.  We will briefly summarize the facts because this is the third
  time this case has been appealed to this Court, and the events leading up
  to this appeal are fully recounted in Murphy v. Stowe Club Highlands, 171
  Vt. 144, 761 A.2d 688 (2000) [hereinafter Murphy I], and Murphy v.
  Department of Taxes, 173 Vt. 571, 795 A.2d 1131 (2001) [hereinafter Murphy
  II]. Taxpayers purchased an undeveloped lot in Stowe Club Highlands in
  1994.  Taxpayers contracted with developers to have the site substantially
  excavated and  prepared by 1995.  In 1996, however, the developers had not
  completed the work and taxpayers filed suit against the developers. 
  Following a jury trial, the jury awarded taxpayers punitive and
  compensatory damages.  Developers appealed to this Court, and we affirmed
  the judgment as to the compensatory damages, but reversed the jury's award
  of punitive damages.  Murphy I, 171 Vt. at 167, 761 A.2d  at 704.

       ¶  3.  In 1995, taxpayers filed a land gains tax return claiming the
  principal residence exemption pursuant to 32 V.S.A. § 10002(b), under the
  assumption that they would occupy the property no later than two years
  after the closing date.  Taxpayers failed to occupy the land within two
  years because the developers failed to complete the necessary work.  The
  Department billed taxpayers for the land gains tax on December 2, 1996. 
  Taxpayers requested a waiver from the Commissioner of Taxes, and the
  Commissioner responded that the claim was in appeal status pending the
  outcome of their complaint against the developers.  After the jury award in
  favor of taxpayers, the Department held a hearing for taxpayers' appeal of
  the land gain tax determination and affirmed the tax assessment.  Taxpayers
  appealed to the superior court, and the court affirmed.  Taxpayers then
  appealed to this Court, and on December 26, 2001, we held that taxpayers
  had to pay the land gains tax.  Murphy II, 173 Vt. at 574-75, 795 A.2d  at
  1135.  On January 29, 2002, we denied taxpayers' motion for reargument.
   
       ¶  4.  Thereafter, the Department sought to collect the land gains
  tax.  As a defense, taxpayers raised whether suit was filed within six
  years after the date the tax liability was "collectible" pursuant to 32
  V.S.A. § 5892 and § 5886.  On February 5, 2003, the Department commenced an
  action against taxpayers under § 5892 to recover the unpaid land gains tax. 
  The parties filed cross-motions for summary judgment.  The trial court
  granted the Department's motion concluding that it timely sought to recover
  the unpaid land gains tax under 32 V.S.A. § 5892, and that taxpayers' other
  challenges were barred by res judicata.  Taxpayers appealed.

       ¶  5.  In reviewing a summary judgment ruling, we apply the same
  standard as the trial court.  The moving party must prove that no genuine
  issues of material fact exist, and that it is entitled to judgment as a
  matter of law.  White v. Quechee Lakes Landowners' Ass'n, 170 Vt. 25, 28,
  742 A.2d 734, 736 (1999).  When interpreting a statute, our overriding goal
  is to effectuate the Legislature's intent.  In reaching this goal, we first
  look at the statute's plain language.  If the statute's plain language
  "resolves the conflict without doing violence to the legislative scheme we
  are bound to follow it."  State v. Baron, 2004 VT 20, ¶ 6, 176 Vt. 314, 848 A.2d 275 (quotations omitted).
   
       ¶  6.  Here, the statute's plain language resolves the statute of
  limitations issue.  If the liable party fails to pay the land gains tax
  under 32 V.S.A. § 10006, the Department may bring an action to recover the
  tax pursuant to Chapter 151 of Title 32.  32 V.S.A. § 10007(e).  Chapter
  151 requires the Department to bring an action to collect taxes "within six
  years after the date the tax liability was collectible under section 5886
  of this title."  32 V.S.A. § 5892.  In turn, § 5886(a) states that an
  "assessment shall be collectible by the commissioner 60 days after the date
  of the notification or assessment."  If a taxpayer files a petition, the
  collection, however, is stayed for thirty days if a taxpayer files a
  petition after notification of the determination by the Commissioner.  Id.
  § 5886(a)(1).  If within thirty days of notification of  the Commissioner's
  determination, the taxpayer files a notice of appeal, the "collection shall
  be stayed pending judgment of the court upon the appeal."  Id. § 5886(a)(2).

       ¶  7.  Based on the statute, taxpayers argue that the assessment date,
  plus the sixty-day period, determines when a tax is collectible.  Under
  this reasoning, the tax became collectible sixty days after the Department
  billed taxpayers for the tax on December 2, 1996.  They argue that this
  would render the Department's filing on February 5, 2003 untimely because
  it would have had to file the action by February 2, 2003.  That argument,
  however, directly conflicts with the statute's plain language.  The statute
  expressly stays the running of the statute of limitations if the taxpayer
  files a notice of appeal.  The statute also expressly states that the
  limitations period begins to run upon the judgment on appeal.  Thus, the
  date of the final judgment on appeal determines when the tax is
  collectible.  

       ¶  8.  Taxpayers appealed to the superior court and then this Court. 
  By invoking their appeal rights, the assessment was not collectible until
  the final judgment of this Court, which occurred on December 26, 2001. 
  Consequently, the statute of limitations began to run on that date. 
  Accordingly, the Department had until 2008 to commence this action. 
  Because the Department commenced this action in 2003, well within the
  six-year time period, the trial court correctly found that the statute of
  limitations did not bar the Department's claim against taxpayers.
   
       ¶  9.  Morever, the trial court properly found that res judicata
  barred taxpayers from litigating the merits of the land gains tax
  assessment.  "Res judicata bars litigation of a claim or defense if there
  exists a final judgment in former litigation in which the parties, subject
  matter, and causes of action are identical or substantially identical." 
  Kellner v. Kellner, 2004 VT 1, ¶ 8, 176 Vt. 571, 844 A.2d 743 (mem.)
  (quotations omitted).  Moreover, res judicata bars parties from litigating
  claims that were raised in previous adjudicative proceedings and those that
  the parties could have raised.  Merrilees v. Treasurer, 159 Vt. 623, 624,
  618 A.2d 1314, 1316 (1992) (mem.).  

       ¶  10.  Here, taxpayers argue that neither the trial court nor this
  Court has ever ruled on the underlying merits of the tax assessment.  They
  further contend that the land gains tax was not part of the award in Murphy
  I because the complaint against the developers did not contain a claim for
  the land gains tax.  They contend that no court has considered whether the
  land gains tax is valid.

       ¶  11.  To the contrary, we previously determined that taxpayers are
  liable for the land gains tax.  In Murphy II, we held that taxpayers were
  liable for payment of the land gains tax.  We stated that:

    taxpayers were on full notice of the liability that would result
    if they did not meet the conditions of the exemption, as all of
    the figures with the exception of the total were accurate. 
    Moreover, developer's error does not relieve taxpayers of
    liability-the return clearly states, "if buyer fails to comply
    with all necessary requirements for an exemption, buyer will be
    liable for tax."

  Murphy II,  173 Vt. at 575, 795 A.2d  at 1135.  In addition, in Murphy II we
  rejected taxpayers' argument that the land gains tax was not part of the
  damages awarded during the jury trial, and noted that taxpayers' argument
  was misleading.  In rejecting their claim, we explained that:

    Taxpayers asserted in the initial argument before the superior
    court that they had relied on the Department's representation to
    their detriment because they had not amended the complaint in
    their suit against developer to include a claim for the land gains
    tax.  This assertion was somewhat misleading, however, as
    taxpayers argued to the trial court that taxes should be part of
    damages for breach of contract, and evidence of the taxes was
    presented to the jury.  Furthermore, in briefs submitted on appeal
    in Murphy I, taxpayers argued to this Court that the jury awarded
    compensatory damages were not excessive because the land gains tax
    was included in the award . . . Taxpayers cannot in good faith
    argue to this Court in one case that the land gains tax was part
    of their judgment, and in another, that it was not.

  Id. at 573, 795 A.2d  at 1134.  Because the parties, subject matter, and
  causes of action are substantially identical to the conflict we resolved in
  Murphy II, taxpayers are barred from relitigating the merits of the land
  gains tax assessment.

       Affirmed.  


                                       FOR THE COURT:



                                       _______________________________________
                                       Chief Justice