SEARS, ROEBUCK AND COMPANY v. BOARD OF TAX REVIEW, 241 Conn. 749 (1997)

699 A.2d 81

(SC 15492)Supreme Court of Connecticut

Callahan, C.J., and Berdon, Norcott, McDonald and Peters, Js.

Syllabus
The plaintiff appealed to the trial court challenging the refusal of the defendant board of tax review of the town of West Hartford to reduce the assessment on certain of the plaintiff’s real property. The trial court rendered judgment sustaining the plaintiff’s appeal and reducing the assessment on the property. Subsequently, in response to a motion by the plaintiff, that court opened the judgment and awarded the plaintiff prejudgment interest on the taxes it had overpaid for the years in question. The trial court determined that the plaintiff had a mandatory right to prejudgment interest under the statute (§ 12-117a) governing appeals from boards of tax review and that the plaintiff was, under the statute (§ 37-3a) applicable to the award of prejudgment interest in civil actions, entitled to interest fixed at 10 percent. On the town’s appeal, held: 1. The town could not prevail on its claim that, because the trial court did not credit the testimony of the plaintiff’s expert, the plaintiff had failed to sustain its burden of proving that the assessment was excessive; the town, having submitted its own evidence, could not prevent the trial court from relying on that evidence for substantive purposes. 2. The trial court should not have determined that the plaintiff had a mandatory right to prejudgment interest at the rate of 10 percent; the right to interest under § 12-117a is not mandatory, but, rather, is a matter of judicial discretion, and § 37-3a does not fix the rate of prejudgment interest at 10 percent but instead establishes a maximum rate.

(Two justices concurring in part and dissenting in part)

Argued April 22, 1997

Officially released July 22, 1997

Procedural History
Appeal from a decision by the defendant denying the plaintiff’s appeal from the tax assessment on certain of its real property, brought to the Superior Court in the judicial district of Hartford-New Britain at Hartford and tried to the court, Blue, J.; judgment sustaining the appeal; thereafter, the court filed a supplemental memorandum of decision modifying the judgment and awarding interest to the plaintiff, and the defendant appealed.

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Affirmed in part; reversed in part, further proceedings.

Marjorie Wilder, corporation counsel, for the appellant (defendant).

I. Milton Widem, for the appellee (plaintiff).

Opinion
PETERS, J.

The principal issue in this tax appeal is the extent of a trial court’s discretion, under General Statutes §12-117a,[1] to award prejudgment interest to an aggrieved taxpayer upon finding that a municipality

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has overassessed the value of the taxpayer’s real property. The plaintiff, Sears, Roebuck and Company, appealed to the trial court from the refusal of the defendant, the board of tax review of the town of West Hartford (board),[2] to reduce the assessed value of the plaintiff’s property. The trial court determined that the property in question had been overassessed and, in a subsequent decision, awarded the plaintiff interest on its tax overpayment. The town of West Hartford (town) appealed from the judgment of the trial court to the Appellate Court, and we transferred the appeal to this court pursuant to Practice Book § 4023 and General Statutes § 51-199 (c). We affirm in part and reverse in part.

The relevant facts are undisputed. The plaintiff owns property in the town consisting of a thirteen acre parcel of land improved with two buildings, an automobile service center and a department store. As a result of the town’s decennial revaluation of real property; see General Statutes § 12-62 (a); the town assessor (assessor) determined that, as of the assessment year commencing October 1, 1989, the true and actual value of the plaintiff’s property was $13,045,000 and assessed the property at 70 percent of this value. See General Statutes § 12-62a (b) (municipality shall assess all property at “seventy per cent of present true and actual value”). Disputing the valuation, the plaintiff appealed to the board seeking a reduction in the property assessment. See General Statutes § 12-111 (providing for appeal to board). After the board declined to alter the assessment, the plaintiff appealed from the board’s decision to the trial court. See General Statutes § 12-117a. While this matter was on appeal in the trial court,

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the town continued to assess the plaintiff’s property at its 1989 valuation, and the plaintiff amended its appeal to include the assessment years 1990 through 1995.[3] See General Statutes § 12-177a [12-117a].

The only substantive issue on which the trial court heard evidence in the de novo proceedings pursuant to § 12-117a was whether the 1989 assessment was excessive.[4] The principal witness for the plaintiff was William Kane, a professional appraiser who had conducted an appraisal of the plaintiff’s property. Kane testified that, based on the capitalization approach to property valuation,[5] the fair market value of the plaintiff’s property, in 1989, was $11,700,000.[6] The principal witness for the town was William French, also a professional appraiser. French testified that he had performed two valuation studies of the plaintiff’s property, one using the cost

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approach to property valuation[7] and the other using the capitalization approach advocated by the plaintiff. He testified that, in 1989, the property had a fair market value of $12,346,000 under the cost approach and $12,106,000 under the capitalization approach. No one associated with the 1989 reassessment testified at trial, and the town submitted no evidence that would support its original $13,045,000 valuation of the plaintiff’s property.

In an October 18, 1995 memorandum of decision (October, 1995 decision), the trial court determined that “the plaintiff [had] met its burden [of proving] that the assessor’s [$13,045,000] valuation was not the true and accurate value of the property.” The court found that the capitalization approach advocated by the plaintiff was the more appropriate method of valuation under the circumstances of this case. It also found, however, that Kane’s appraisal suffered from a “number of factual inaccuracies”[8]
that rendered Kane a less “careful, thorough and credible” witness than French and undermined the court’s confidence in his testimony. Accordingly, the court concluded that the fair market value of the property was $12,106,000, the valuation reached by French using the capitalization approach.

Thereafter, the plaintiff filed a motion with the trial court pursuant to § 12-117a, seeking, as a remedial matter, to recover prejudgment interest on the taxes overpaid between 1989 and 1995 as a result of the

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overassessment. A hearing was held in March, 1996, at which time both parties presented evidence regarding the plaintiff’s right to interest and the applicable interest rate.[9] In an April 9, 1996 memorandum of decision (April, 1996 decision), the trial court opened its judgment and granted the plaintiff the relief it had requested. The court concluded that, as an aggrieved taxpayer, the plaintiff had a mandatory right to prejudgment interest under § 12-117a and that, under General Statutes § 37-3a,[10] the rate of such interest was mandatorily fixed at 10 percent. After permitting the parties to submit proposed calculations consistent with this decision, the trial court awarded the plaintiff $27,795.77 in interest on its tax overpayment.

On appeal, the town challenges both the trial court’s October, 1995 decision substantively reducing the assessment and its April, 1996 decision awarding prejudgment interest to the plaintiff. With respect to the October, 1995 decision, the town claims that the assessment reduction was improper because the plaintiff failed to satisfy its burden of proving overvaluation. With respect to the April, 1996 decision, the town claims that, in awarding mandatory interest at 10 percent, the trial court failed to exercise proper discretion under § 12-117a. We disagree with the town’s first claim but agree with its second claim. We will address each claim in turn.

I
The parties do not dispute the principles that govern a trial court’s decision whether to reduce a property

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valuation. “Whether a property has been overvalued for tax assessment purposes is a question of fact for the trier. . . . Mere overvaluation is sufficient to justify redress under [§ 12-117a], and the court is not limited to a review of whether an assessment has been unreasonable or discriminatory or has resulted in substantial overvaluation.” (Citations omitted; internal quotation marks omitted.) Newbury Commons Ltd. Partnership v. Stamford, 226 Conn. 92, 103-104, 626 A.2d 1292 (1993). The trial court tries a §12-117a appeal de novo. Id., 104; see also Xerox Corp. v. Board of Tax Review, 240 Conn. 192, 204, 690 A.2d 389 (1997); New Haven Water Co. v. Board of Tax Review, 166 Conn. 232, 234, 348 A.2d 641
(1974). Although the ultimate question at this de novo proceeding “is the ascertainment of the true and actual value of the taxpayer’s property”; (internal quotation marks omitted) Newbury Commons Ltd. Partnership v. Stamford, supra, 104; the taxpayer bears the burden of establishing the impropriety of the assessor’s valuation. Xerox Corp. v. Board of Tax Review, supra, 204.

In this case, the town urges us to conclude that, as a matter of law, the plaintiff failed to meet its burden. The town contends that, because the trial court did not credit Kane’s testimony and because Kane was the plaintiff’s principal witness, the plaintiff “utterly failed” to present evidence establishing an overassessment. Although the town concedes that the testimony of its own expert, French, supported the valuation reached by the trial court, it contends that the court should not have considered French’s testimony once the court had rejected Kane’s testimony. We are unpersuaded.

Because a tax appeal is heard de novo, a trial court judge “is privileged to adopt whatever testimony he

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reasonably believes to be credible.” (Internal quotation marks omitted.)Newbury Commons Ltd. Partnership v. Stamford, supra, 226 Conn. 99; cf Eichman v. J J Building Co., 216 Conn. 443, 452, 582 A.2d 182
(1990) (in deficiency judgment hearing, trier of fact “is privileged to adopt whatever testimony he reasonably believes to be credible” [internal quotation marks omitted]). This principle applies not only to the trial court’s determination of the true and actual value of taxable property, but also to its determination of whether the plaintiff has satisfied the burden of establishing overvaluation. See Midway Green Corp. v. Board of Tax Review, 8 Conn. App. 440, 442, 512 A.2d 984 (1986) (“[t]he ultimate decision for the court is whether, considering all of the evidence . . . the plaintiff has proved by a fair preponderance of the evidence that any of the assessments on its property were illegal or excessive” [emphasis added]).

The fact that, in this case, the testimony that the trial court found credible was presented by the town’s own expert does not undermine the applicability of this principle. Because the burden of proving overvaluation rested on the plaintiff, the town was under no obligation to submit expert evidence in support of its valuation. Having submitted such evidence, however, the town cannot circumscribe its significance or prevent the trial court fro relying on it for substantive purposes. See CTB Ventures 55, Inc. v. Rubenstein, 39 Conn. App. 684, 692-94, 667 A.2d 1272
(1995), cert. denied, 235 Conn. 940, 669 A.2d 577 (1996) (in deficiency judgment hearing, trial court may rely on defendant’s expert in finding that plaintiff has satisfied burden of proof).

The propriety of the trial court’s reliance on the town’s expert witness finds support in the “waiver rule.” Under this rule, when a trial court denies a defendant’s motion for a directed verdict at the close of the plaintiff’s case, the defendant, by opting to introduce evidence

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in his or her own behalf, waives the right to appeal the trial court’s ruling. See Dindo v. Grand Union Co., 331 F.2d 138, 141 (2d Cir. 1964) State v. Rutan, 194 Conn. 438, 440, 479 A.2d 1209 (1984). The rationale for this rule is that, by introducing evidence, the defendant undertakes a “risk that the testimony of defense witnesses will fill an evidentiary gap in the [plaintiff’s] case.” State v Rutan, supra, 440. On appeal in such cases, the “question becomes whether . . . there is evidence in the entire record” to justify submitting the matter to a trier of fact. (Emphasis added.) Warner v. Kewanee Machinery Conveyor Co., 411 F.2d 1060, 1063 (6th Cir. 1969), cert. denied, 398 U.S. 906, 90 S.Ct. 1685, 26 L.Ed.2d 65 (1970); see also 9 J. Wigmore, Evidence (4th Ed. 1981) § 2496, pp. 402-403. Although we have questioned the continuing viability of the waiver rule in the criminal context; see State v. Rutan, supra, 441; we have never questioned its applicability in the civil context. Id. The town has articulated no persuasive reason why the rationale underlying the waiver rule should not operate in a tax appeal to allow a trial court to render judgment for a taxpayer on the basis of the testimony of the town’s own, admittedly sufficient, expert evidence.[11]

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Accordingly, we conclude, in light of the record at the trial as a whole, that the plaintiff satisfied its burden of establishing an overassessment. The town cannot succeed in its appeal from the trial court’s judgment rendered in conformance with the court’s October 18, 1995 memorandum of decision.

II
We next consider the town’s claim that the trial court improperly awarded prejudgment interest to the plaintiff. The trial court based the interest award on two underlying determinations: (1) that § 12-117a creates a mandatory right to prejudgment interest once a taxpayer establishes that his property has been overassessed; and (2) that § 37-3a fixes that rate of interest at 10 percent. The town takes issue with both of these determinations, claiming that neither the award of interest nor the rate at which such interest should be calculated is statutorily mandated. We agree with the town.

A
In determining whether the award of interest under § 12-117a
is mandatory or discretionary, we are guided by settled principles of statutory construction. “Our fundamental objective is to ascertain and give effect to the apparent intent of the legislature. . . . In seeking to discern that intent, we look to the words of the statute itself, to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship

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to existing legislation and common law principles governing the same general subject matter.” (Citations omitted; internal quotation marks omitted.) State v. Metz, 230 Conn. 400, 409, 645 A.2d 965 (1994).

At the time the plaintiff filed its action in this case, §12-117a[12] provided, in relevant part, that “[t]he court shall have power to grant such relief as to justice and equity appertains, upon such terms and in such manner and form as appear equitable . . . and, upon all . . . applications, costs may be taxed at the discretion of the court. If the assessment made by the board of tax review is reduced by said court, the [taxpayer] shall be reimbursed by the town or city for any overpayment of taxes, together with interest and costs, or, at the [taxpayer’s] option, shall be granted a tax credit for such overpayment, interest and costs. Upon motion, said court shall, in event of such overpayment, enter judgment in favor of such [taxpayer] and against such city or town for the whole amount of such overpayment, together with interest and costs.”[13]

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In its April, 1996 decision, the trial court construed this language to provide a mandatory right to prejudgment interest. The court acknowledged that “[t]he award of prejudgment interest has traditionally been considered as a discretionary judicial function,” but inferred from use of the word “shall” a legislative intent that the interest provisions of § 12-117a fall outside this traditional function. We do not agree with the trial court.

We begin by recognizing that, as used in § 12-117a, the term “shall” does not carry a fixed connotation. Under the statute, “shall” applies to three forms of relief: reimbursement, interest and costs. See General Statutes § 12-117a (aggrieved taxpayer “shall be reimbursed . . . together with interest and costs”). There is no dispute that the trial court is required to order a municipality to reimburse an aggrieved taxpayer for overpayments resulting from overassessment. Thus, with respect to reimbursement, the term “shall” carries a mandatory connotation. There is also no dispute, however, that a trial court is not
statutorily required to award costs to an aggrieved taxpayer. See General Statutes § 12-117a (“costs may be taxed at the discretion of the court”). Thus, with respect to costs, the term “shall” does not carry a mandatory connotation. The question presented in this case is whether the term “shall,” as it applies to interest, carries the mandatory connotation associated with reimbursement or the directory connotation associated with costs.

In answering this question, we are guided by past cases construing the legislature’s use of the term “shall.” “In determining whether the use of the word `shall’ is mandatory or directory, the test is whether the prescribed mode of action is of the essence of the thing to be accomplished. . . . That test must be applied with reference to the purpose of the statute.” (Citations omitted; internal quotation marks omitted.) Eichman

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v. J J Building Co., supra, 216 Conn. 450; see also LeConche v Elligers, 215 Conn. 701, 710, 579 A.2d 1 (1990). Contrary to the trial court’s opinion, we do not agree that the allowance of interest is the “essence of the thing to be accomplished” by §12-117a. The primary purpose of that statute is to afford an aggrieved taxpayer a forum for challenging and, if appropriate, correcting a property assessment. See Pauker v. Roig, 232 Conn. 335, 340, 654 A.2d 1233 (1995) (§ 12-117a “allows a taxpayer to challenge the assessor’s valuation of his property”). The right to interest, like the right to costs, is ancillary to this primary purpose. Although the statutory predecessor to § 12-117a was first enacted in 1878; Public Acts 1878, c. 32, § 1; the legislature did not adopt the interest provisions until 1933. Public Acts 1933, c. 217, § 1. We decline to hold that the allowance of interest is the “essence of the thing to be accomplished” by § 12-117a when the statute did not explicitly provide for this form of relief until over fifty years after its enactment.

Our conclusion that the use of the term “shall” was intended to be directory is supported by a contextual reading of § 12-117a. Immediately precedent to the language concerning interest, §12-117a provides that “[t]he court shall have power to grant such relief as to justice and equity appertains, upon such terms and in such manner and form as appear equitable. . . .” (Emphasis added.) The trial court did not address this language in its memorandum of decision. We deem it inappropriate, however, to interpret the interest provision in § 12-117a without also considering the discretionary language to which that provision is adjoined. “[E]ach part or section [of a statute] should be construed in connection with every other part or section so as to produce a harmonious whole. Thus, it is not proper to confine interpretation to the one [part] to be construed.” (Internal quotation marks omitted.) State

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v. Spears, 234 Conn. 78, 91, 662 A.2d 80, cert. denied, 516 U.S. 1009, 116 S.Ct. 565, 133 L.Ed.2d 490 (1995).

Interpreting the interest provision of § 12-117a as discretionary also harmonizes the right to interest under §12-117a with the right to interest under General Statutes §12-119. Section 12-119 provides, in relevant part, that a taxpayer may obtain judicial relief where its property assessment was “manifestly excessive and could not have been arrived at except by disregarding the provisions of the statutes for determining the valuation of such property. . . .” As a substantive matter, therefore, the taxpayer bears a heavier burden under § 12-119 than under § 12-117a and must establish something more egregious than mere overvaluation in order to prevail under § 12-119. See Second Stone Ridge Cooperative Corp. v. Bridgeport, 220 Conn. 335, 340, 597 A.2d 326
(1991) (under § 12-119, taxpayer must prove either absolute nontaxability of property or manifest and flagrant disregard of statutes). Despite this demanding substantive requirement, we have construed § 12-119 to afford only a discretionary, rather than mandatory, right to interest. See Loomis Institute v Windsor, 234 Conn. 169, 181-82, 661 A.2d 1001 (1995). It would be inconsistent for the legislature to have provided a more limited, discretionary, right to interest for a taxpayer who establishes a greater injury under § 12-119 than for a taxpayer who demonstrates a lesser injury under § 12-117a. In concluding that § 12-117a does not entitle a taxpayer to interest as a matter of right, we interpret the statutory language to avoid such inconsistency. See Powers v. Ulichny, 185 Conn. 145, 149, 440 A.2d 885 (1981).

Accordingly, we conclude that the trial court improperly determined that the plaintiff was afforded a nondiscretionary statutory right to interest under § 12-117a. The trial court, on remand, will have to decide, as a

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matter of judicial discretion, whether to provide this form of relief to the plaintiff.[14]

B
If, on remand, the trial court determines that a discretionary award of interest is appropriate in light of the facts of record, the trial court will have to decide what the appropriate rate of interest for any such award should be. Recognizing that § 12-117a does not supply an applicable rate, the trial court in this case relied on § 37-3a and concluded that, under that statute, the legislature has fixed the rate of prejudgment interest at 10 percent. The town disagrees and contends that § 37-3a sets only a maximum interest rate and that a trial court may exercise its equitable powers under § 12-117a to award interest at any level up to this maximum. We agree with the town.

As a preliminary matter, we recognize that the trial court relied on § 37-3a without addressing the procedural requirements of that statute. Section 37-3a provides, in relevant part, that prejudgment interest “may be recovered and allowed in civil actions . . . as damages for the detention of money after it becomes payable.” (Emphasis added.) We have construed this statute to give rise to two procedural requirements, pursuant to which a trial court must determine: “(1) whether the party against whom interest is sought has wrongfully detained money due the other party; and (2) the date upon which the wrongful detention began in order to determine the time from which interest should be calculated.” Blakeslee Arpaia Chapman, Inc. v. EI Constructors, Inc., 239 Conn. 708, 735, 687 A.2d 506

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(1997); see also Metcalfe v. Talarski, 213 Conn. 145, 160, 567 A.2d 1148
(1989). As the town points out, because the plaintiff voluntarily paid more in taxes than was required under § 12-117a; see footnote 3 of this opinion; it may be problematic either to hold that the town “wrongfully detained” the plaintiff’s money or to attempt to ascertain exactly when this “wrongful detention began.”

That this action does not fit squarely within the parameters of § 37-3a, however, neither renders interest unavailable under §12-117a nor renders § 37-3a irrelevant to the present dispute. The plaintiff’s right to interest derives from the text of §12-117a and, to the extent that the interest provisions of that statute are self-activating, a trial court may award prejudgment interest without finding that the procedural requirements of another interest statute, including § 37-3a, have been satisfied.[15] A trial court, however, should not ignore the text of § 37-3a when awarding interest under § 12-117a. To the extent that § 37-3a reflects a legislative determination that the rate of prejudgment interest must fall within certain limits, a trial court awarding prejudgment interest under § 12-117a should look to § 37-3a for guidance in setting an appropriate rate. We turn, therefore, to determining what guidance properly can be derived from § 37-3a.

Section 37-3a provides, in relevant part, that “interest at a rate of ten per cent, and no more, may be recovered and allowed in civil actions. . . .” (Emphasis added.) Although the trial court recognized that the phrase “and no more” suggests a rate ceiling, it concluded, primarily on the basis of legislative history, that this figure actually

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represents an absolute amount and is, therefore, not subject to downward variation. The court reasoned that if the legislature had actually intended to set a rate ceiling, § 37-3a would provide for “interest at a rate of no more than ten per cent a year” and that, in the absence of this or similar syntax, the legislature probably included the phrase “and no more” only “out of abundant caution.” We disagree with this analysis.

“It is a basic tenet of statutory construction that the legislature did not intend to enact meaningless provisions. . . . [I]n construing statutes, we presume that there is a purpose behind every sentence, clause, or phrase used in an act and that no part of a statute is superfluous.” (Citations omitted; internal quotation marks omitted.) Castagno v. Wholean, 239 Conn. 336, 346, 684 A.2d 1181 (1996). The trial court’s interpretation of § 37-3a fails to accord proper weight to these principles. It is true that the language now codified at § 37-3a has undergone numerous revisions and that, at an earlier point, this language arguably was phrased in more emphatic terms. See Public Acts 1873, c. 87, § 2 (“no greater rate of interest than seven per cent. per annum shall be recovered or allowed”). Over the course of these revisions, however, the legislature has seen fit neither to delete “and no more” nor to include language barring the judiciary from awarding interest below the stated rate. Under these circumstances, we decline to negate, judicially, the significance of the phrase “and no more” by holding that § 37-3a
fixes the rate of prejudgment interest at 10 percent.[16] We conclude instead

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that, consistent with its plain language, § 37-3a establishes a maximum rate above which a trial court should not venture in the absence of specific legislative direction. See White Oak Corp. v. Dept. of Transportation, 217 Conn. 281, 297, 585 A.2d 1199 (1991) (§ 37-3a “permits recovery of interest . . . at a maximum rate of 10 percent” [emphasis added]).

A trial court acting pursuant to § 12-117a has broad discretion to award interest up to this maximum rate. See General Statutes § 12-117a (trial court may grant relief “upon such terms and in such manner and form as appear equitable”). In exercising this equitable authority, a trial court may consider all relevant information and should allow the parties, if appropriate, to submit evidence relative to the rate of interest available during the period of overassessment. Although the trial court in this case heard evidence from both parties tending to show that interest was available at a rate less than 10 percent; see footnote 9; it improperly disregarded this evidence upon concluding that the rate of interest under § 37-3a was not subject to variation.

The judgment is affirmed with respect to the reduction of the plaintiff’s tax assessment. The judgment is reversed with respect to the award of prejudgment interest to the plaintiff, and the case is remanded for a determination of the amount of prejudgment interest, if any, to which the plaintiff is entitled.

In this opinion CALLAHAN, C.J., and NORCOTT, J., concurred.

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McDONALD, J., concurring and dissenting.

With whom BERDON, J., joins.

I concur in parts I and II B of the majority opinion. I dissent as to part II A.

In part II A, the majority defines “shall” with respect to prejudgment interest payable to the taxpayer under General Statutes § 12-117a as meaning “may.” “In other words, according to the majority, `shall’ means shall when the court wants it to mean shall, but `shall’ does not mean shall when the court is of another mind.” Doe v. Statewide Grievance Committee, 240 Conn. 671, 688, 694 A.2d 1218 (1997) (Berdon, J., dissenting). Only in Wonderland does shall mean may. See id., 688 n. 5.

In its holding, the majority renders the words of commandment entirely permissive. This distortion of plain language would confound philologists, should disturb the trial bench, and makes light of the authority of the General Assembly.

Accordingly, I respectfully dissent, with the hope that the majority does not read dissent as agreement.