Champlain Hous. Trust, Inc. v. City of Burlington, No. S1392-10 CnC (Toor, J., Aug. 25, 2011)

[The text of this Vermont trial court opinion is un official. It has been reformatted from the origina l. The accuracy of the text and the accompanying data included in the Vermont trial cou rt opinion database is not guaranteed.] V ERMONT S UPERIOR C OURT C HITTENDEN U NIT C IVIL D IVISION │ CHAMPLAIN HOUSING TRUST, INC. │ Plaintiff │ │

v. │ Docket No. S1392-10 CnC │ CITY OF BURLINGTON and the VERMONT │ DEPARTMENT OF TAXES, DIVISION OF │ PROPERTY VALUATION AND REVIEW │ Defendants │ │

RULING ON MOTION TO DISMISS Plaintiff Champlain Housing Trust, Inc. (Champlain ) sues the City of Burlington (the City) seeking a declaratory judgment that six Burli ngton properties Champlain owns are taxexempt as “public, pious or charitable” pursuant to 32 V.S.A. § 3802(4). The City moved to join the Vermont Department of Taxes, Division of Proper ty Valuation (PVR) as an indispensible party pursuant to V.R.C.P. 19 and 21. The court gr anted the motion to join PVR, citing the analysis it undertook in its January 28, 2011 rulin g in In re Appeal of the Town of Colchester, No. S0933-10 CnC. PVR moves to dismiss as to PVR p ursuant to V.R.C.P. 12(b)(1) on the grounds of sovereign immunity, failure to exhaust a dministrative remedies, lack of subject matter jurisdiction, and inappropriate joinder. Champlain and the City both oppose PVR’s motion. 1 Jessica Oski, Esq. represents Champlain; Eugene M. Bergman, Esq. and Richard Haesler, Jr., Esq. represent the City; and John McAllister, Esq. represents PVR.

1 Champlain opposed the City’s motion to join PVR on the grounds that there is no risk of inconsistent judgments on questions of taxability because PVR lacks authority to determine the tax-exempt status of real propert y. Champlain now says it is prudent to keep PVR in the litigatio n—opposing PVR’s motion to dismiss—because PVR is a sserting that it does have authority to determine taxability questions.2

In its complaint, Champlain alleges that it owns s ix Burlington properties in which it provides affordable housing and social support serv ices. Champlain says that, in a letter dated March 10, 2010, it asked the City for a determinati on that each of the properties is exempt as used for “public, pious or charitable uses.” 32 V. S.A. § 3802(4). According to Champlain, the City refused to grant the exemption despite having found exempt other similarly owned and operated properties in Burlington. The court takes up each of PVR’s four arguments for

dismissal in turn. 1. Sovereign Immunity PVR argues that Champlain’s action as against PVR i s barred by sovereign immunity because claims against the State are barred unless explicitly waived. The City asserts that its claim is not a claim against the State, but is inst ead an action for declaration of rights between Champlain and the City. The City maintains that, b ecause the State asserts a right to independently determine taxable status, the State h as an interest in the outcome of this litigation and must be joined in order to bind it to the court ’s decision on taxability. 2 PVR replies that neither the Vermont Declaratory Judgments Act nor t he joinder provisions of the Rules of Civil Procedure trump the doctrine of sovereign immunity, and that sovereign immunity bars not only tort claims against the State, but all claims unles s such claims are expressly waived. “Under the doctrine of sovereign immunity, claims a gainst the State are barred ‘unless immunity is expressly waived by statute.’” Kane v. Lamothe, 2007 VT 91, ¶ 6, 182 Vt. 241 (quoting Sabia v. State, 164 Vt. 293, 298 (1995)). Whether a claim has been waived under Vermont’s Tort Claims Act has been the subject of n umerous reported Vermont cases; PVR has

cited some of those cases in its motion. E.g. , Amy’s Enterprises v. Sorrell, 174 Vt. 623 (2002); Noble v. Office of Child Support, 168 Vt. 349 (1998 ); Denis Bail Bonds, Inc. v. State, 159 Vt.

2 Champlain has apparently not taken a position on t he question of sovereign immunity.3

481 (1993). The issue here is different: whether t his suit for declaratory judgment on a question of interpreting the tax exemption statute involves a claim against the State. The court agrees with the City that this suit does not involve a claim against the State. This litigation seeks a declaration as to the appli cation of 32 V.S.A. § 3802(4); it does not seek to impose liability on the State. Other courts have r eached similar conclusions. See Owen v. W. Ala. Butane Co., 178 So.2d 636, 638–39 (Ala. 1965) (holding that suit for declaratory relief against a state official to construe a taxing statu te was not a suit against the state); McInerney v. Ervin, 46 So.2d 458, 459–460 (Fla. 1950) (suit that named Florida attorney general, railroad commission, and public utilities commission as defe ndants seeking declaratory judgment as to validity and construction of statute was not a suit against the state); Century Distilling Co. v. Defenbach, 99 P.2d 56, 59 (Idaho 1940) (suit for de claratory judgment brought by company against tax commissioner seeking declaration as to company’s obligation to pay certain taxes was not a suit against the state); Hudson v. Vill. of Homer, 87 N.W.2d 72, 78 (Mich. 1957) (holding that, where drainage district board sought declaratory relief and State Conservation Commission was made a party, the commission’s motio n to dismiss was properly denied since proceeding did not constitute a “suit against the s tate,” especially where the purpose of the declaratory judgment was to guide and “conclude[]” all the parties with an interest in the subject matter); Cobb v. Harrington, 190 S.W.2d 709, 712 (T ex. 1945) (holding that action brought by owner-lessors of trucks and trailers against state comptroller to obtain a judgment declaring that plaintiffs are not “motor carriers” as defined by t ax statute was not a suit against the State); Douglass v. Koontz, 71 S.E.2d 319, 325 (W.Va. 1952) (holding that suit against State Tax Commissioner for declaratory judgment as to whether plaintiff was subject to a certain tax was4

not a “suit against the state,” because it did not seek to control the Commissioner’s discretion or to affect proprietary rights of the state or any of its governmental arms).

2. Exhaustion PVR argues that the City has failed to exhaust the administrative remedies available to it pursuant to 32 V.S.A. § 5408. The City asserts tha t it could not have petitioned for a redetermination under § 5408 because at the time PV R’s Director certified the City’s equalized education property value (EEPV) and coefficient of dispersion (COD), the City agreed with that determination, and the City was not required to app eal that determination on the chance that a court might decide to exempt a property from the li st at a later time. For its part, Champlain argues that this case is not an appeal by the defen dant (the City) seeking a redetermination, but is instead a declaratory judgment action brought by Ch amplain. PVR maintains that the City should have appealed the Director’s determination, arguing that In re Appeal of the Town of Colchester, No. S0933-10 CnC, provides a clear exam ple of how the appeal process would have

worked. “Where a statute creates administrative remedies, ‘ a party must pursue, or “exhaust,” all such remedies before turning to the courts for reli ef.’” Town of Bridgewater v. Dep’t of Taxes, 173 Vt. 509, 510 (2001) (mem.) (quoting Rennie v. S tate, 171 Vt. 584, 585 (2000)). Here, as Champlain correctly points out, the City has not co me to court seeking relief, but is instead the named defendant in Champlain’s declaratory judgment suit. Champlain is plainly entitled to seek such a declaratory judgment. Subud of Woodsto ck, Inc. v. Town of Barnard, 169 Vt. 582, 583 (1999) (mem.). Neither is the court convinced that the Colchester case requires municipalities to file appeals from every EEPV/COD determination. One of the consolidated Colchester cases was a § 5408 appeal, but that appe al was filed at about the same time as5

litigation was proceeding between the taxpayer and the municipality on the question of taxability. If the Commissioner had been joined in the taxpayer’s litigation in the first place, then the result would have been binding on the Comm issioner and the perceived need to bring a § 5408 appeal would have been obviated. 3. Subject Matter Jurisdiction and Joinder PVR argues that the Declaratory Judgments Act does not provide any basis for subject matter jurisdiction against PVR with respect to Cha mplain’s complaint. The City maintains that the court has jurisdiction over tax exemption decis ions and that if the State asserts a right to determine taxability, then the court must have juri sdiction over the State on that issue. PVR is correct insofar as it contends that the Declaratory Judgments Act did not extend the jurisdiction of the courts over subject matter or parties. Town of Andover v. State, 170 Vt. 552, 553 (1999) (mem.). However, the court plainly has subject mat ter jurisdiction to decide questions of taxability. Subud of Woodstock, Inc. v. Town of Ba rnard, 169 Vt. 582, 583 (1999) (mem.). Furthermore, as the court concludes today in its ru ling on PACE’s motion for summary judgment in the consolidated Colchester cases, as long as th e State taxing authority is empowered to disagree with a taxpayer or municipality on taxabil ity questions, then it is necessary to include that taxing authority in the court’s adjudication o f disputes on those issues. For the same reason, the court rejects PVR’s argument that joining it in Champlain’s declaratory judgment action is inappropriate because PVR is not an indispensable o r necessary party.

Conclusion For the above reasons, the court rejects each of P VR’s four arguments for dismissal as to it. There remains a question as to whether PVR sho uld be the state entity bound by whatever declaratory judgment this court ultimately issues o r whether it might be more proper or advisable6

to join the Commissioner of Taxes instead. See Ex parte Ala. Dep’t of Fin., 991 So.2d 1254, 1257 (Ala. 2008) (holding that “exceptions” to sove reign immunity—including exception for actions brought under declaratory judgment act seek ing construction or application of a statute— apply only to actions brought against state officia ls, and not to actions against the State or against State agencies). The parties have not directly rai sed that question, however, and the court will leave it for a later time. At present, the court c oncludes that PVR should not be dismissed.

Order

PVR’s motion to dismiss is denied. Dated at Burlington this 24th day of August 2011.

______________________________ Helen M. Toor Superior Court Judge