Ran-Mar Inc. v. Town of Berlin, No. 499-9-04 WnCv (Katz, J., June 27,
2005)

[The text of this Vermont trial court opinion is unofficial. It has been
reformatted from the original. The accuracy of the text and the
accompanying data included in the Vermont trial court opinion database is
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STATE OF VERMONT                                                   SUPERIOR COURT
Washington County, ss.:                                       Docket No. 499-9-04Wncv


RAN-MAR, INC.

v.

TOWN OF BERLIN


                                           ENTRY


       Plaintiff-Taxpayers, related corporate entities, seek to set aside the
tax sales of several of their properties, arguing that the Town of Berlin
improperly determined the amounts collectible by 32 V.S.A. § 5254 tax
sales (by recovering interest on the delinquencies), and unlawfully retained
excess proceeds from the sales during the periods of redemption. They
seek damages too.1

       Section 5254 allows a town to collect delinquent taxes by tax sale of
the subject property. Taxpayers argue that § 5254 specifically bars the

1
 We recognize here Taxpayers’ concessions that their 42 U.S.C. § 1983 claim should be
dismissed, and Joadi Tracey, no longer the Town’s delinquent tax collector, should be dismissed
as a defendant.
collection of interest and penalties as part of the sale. Section 5254 states,
“When the tax with costs and fees is not paid before the day of sale, the real
property on which the taxes are due shall be sold to pay such taxes, costs
and fees.” Taxpayers reason that “penalties” and “interest” cannot be
collected by tax sale because they do not appear in § 5254, and tax statutes
must not be extended by implication. See Portland Pipe Line Corp. v.
Morrison, 118 Vt. 417, 420 (1955).

       We need not address this argument with regard to “penalties”
because the expense repeatedly referred to by Taxpayers, as well as the
Town until its most recent filing, is a “fee,” not a penalty. It is the eight
percent “collector’s fee” authorized in 32 V.S.A. §§ 1674, 5258. With no
allegation of any other “penalty,” we regard this issue as moot.

        The Town has collected 32 V.S.A. § 5136(a) interest on the taxes
due from the proceeds of the tax sales. Though no statute so requires,
Taxpayers argue that such interest must be collected by some method other
than a tax sale, if at all. While we will not extend a tax statute “by
implication,” our paramount goal in interpreting a tax statute, as any other,
is to ascertain the intent of the Legislature. And, “The intention of the
legislature is to be ascertained, not from the literal sense of the words used,
but from a consideration of the whole and every party of the statute, the
subject matter, the effects and consequences and the reason and spirit of the
law.” Portland Pipe Line Corp., 118 Vt. at 420.

        Taxpayers’ argument is wholly implausible. While interest owed on
overdue taxes is not specifically listed in § 5254, we suspect that it is
omitted only because it is considered to be an element of the tax obligation
that bears it. Nothing in the relevant statutes specifically states how and
interest obligation must be collected, or suggests that it should be collected
separately from the delinquent tax that bears it. Its collection by tax sale is
subject to the same procedural protections as other aspects of the tax sale.
We perceive no meaningful basis whatsoever for excluding the collection
of interest from § 5254, which, in the context of the statutory scheme, we
do not find ambiguous. We will not presume that the Legislature would




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authorize—by vote, no less, 32 V.S.A. § 5136—the imposition of interest
and then impliedly bar its collection by the usual enforcement routes.

        Each of the tax sales generated what is commonly known as “excess
proceeds,” the positive difference between the tax sale price and the amount
due the Town. The Town escrowed the excess for the duration of the
redemption periods, after which it promises to make an accounting and
disburse the funds. See generally 32 V.S.A. § 5260 (redemption). The
Town expressly claims no title of its own to the excess proceeds.
Taxpayers calculate that the excess proceeds from some of the sales would
be sufficient to enable them to redeem properties that were subject to other
sales if only they could get their hands on those proceeds prior to the end of
the latter redemption periods. They claim a statutory right to the immediate
disbursement of the excess proceeds at the time of the tax sale, and claim
that any delay in disbursement amounts to an unconstitutional taking of
their property.

        We begin by noting that there is no statutory basis for analyzing this
issue any differently because Taxpayers have several properties involved in
the tax sale process at the same time, rather than just one. Relevant statutes
make no distinction between the tax sale of one property and the concurrent
tax sales of multiple properties. The issue is whether the Town must
deliver excess proceeds from any particular tax sale to the former owner
prior to the end of that sale’s period of redemption.

        There is no express statutory right of a former owner to the
disbursement of excess proceeds prior to the end of the period of
redemption. Indeed, Vermont statutes make no provision whatsoever for
the disposition of excess proceeds. Taxpayers’ statutory argument is
premised on the belief that they must have the right to immediate
disbursement unless Vermont statutes specifically state otherwise. Because
Taxpayers view any delay in the return of excess proceeds to be an
unconstitutional taking, however, presumably they would argue that any
statute to the contrary is unconstitutional.




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       Taxpayers cite numerous cases on the general subject of takings law,
but none are on point. Generally, taxpayers have “a recognizable interest in
the excess proceeds from [a tax sale] only if the state constitution or tax
statutes create such an interest.” Ritter v. Ross, 558 N.W.2d 909, 912 (Wis.
App. 1996). Without a constitutional or statutory right, they have no such
interest. Id.

        Taxpayers’ argument in this case is extrapolated from Bogie v. Town
of Barnet, 129 Vt. 46 (1970). In Bogie, the Vermont Supreme Court
concluded that 32 V.S.A. § 5259 (which allows the Town to purchase a
property at a tax sale if there are no other bids equal at least to the amount
due the Town) requires the return of a surplus to the former owner after a
resale by the town to a third party. In that case, the Town acquired the
property for the amount due, but just after the end of the redemption period
sold it to a third party for an amount significantly in excess of the purchase
price, generating a “surplus.” The Court ruled, as a matter of statutory
interpretation, that in such cases the “measure of recovery [for the Town] is
determined by the extent of the tax obligation, and there is no excess to
dispose of.” Id. at 54 (on reargument). The Ritter Court distinguished
Bogie, and its reliance on U.S. v. Lawton, 110 U.S. 146 (1884), see Bogie,
129 Vt. at 49, from a more general claim of right to excess proceeds as
follows:

       The Ritters argue . . . that United States v. Lawton, 110 U.S.
       146 (1884), and Bogie v. Town of Barnet, 129 Vt. 46 (1970),
       require the taxing entity to return the surplus from the
       foreclosure sale to the taxpayer under the Takings Clause.
       We disagree. Lawton and Bogie are distinguishable because
       in both cases the Court determined that the statutory
       framework of the applicable tax legislation required any
       excess proceeds to be returned to the taxpayer. Indeed, in
       Nelson v. New York, 352 U.S. 103, 109-10 (1956), the Court
       distinguished Lawton—a case it decided seventy years
       earlier—on that very basis.




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Ritter, 558 N.W.2d at 912 n.6. Thus, Taxpayers’ takings argument really
adds nothing to their statutory argument.

        Looking more closely, then, to relevant Vermont statutes, we note
that 32 V.S.A. § 5254 was amended in 1995. Prior to amendment, § 5254
required a town to sell only so much of the property as was necessary to
recoup the amounts due the town from the delinquency. Technically, there
could be no “excess proceeds” under such a regime because a tax sale
should never generate more than necessary to cover the taxpayer’s
obligation. In cases where gross disparities did arise, towns were faulted
for selling more land than necessary, and the sales were set aside. See, e.g.,
Price v. Leland, 149 Vt. 518, 522 (1988); Peterson v. Moulton, 120 Vt.
439, 442 (1958). This affirmative requirement of the town’s in § 5254 was
eliminated by the amendment. Section 5254 now requires a landowner to
request that only a portion of the property be sold, and to prove that it may
be so subdivided lawfully prior to the tax sale. There is no allegation of
such a request in this case. In that event, as here, the town sells the whole
property. 32 V.S.A. § 5254(a). Consequently, we view Taxpayers’
reliance on pre-amendment § 5254 cases as misplaced.

        We decline to extend the constitutional considerations of Bogie to
the circumstances of this case. The Bogie Court made clear that its
circumstances were “special”:

       We construe the authority given to the municipality to bid at a
       tax sale as an ultimate recourse given to protect the town
       against any conspired attempts to avoid the sale by
       discouraging all bidding. 32 V.S.A. § 5259 indicates that the
       position of the municipality as a bidder is a special case, by
       denying to it authority to bid at all unless no bid equal to the
       tax and costs is made at the sale. A policy which encouraged
       municipal governments to promote situations where it was
       authorized to acquire the property of its own taxpayers at
       unconscionable discounts, to the enrichment of the town
       treasury or enlargement of its land holdings, is fraught with




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       danger and we find not contemplated by the legislative
       enactment.

Bogie, 129 Vt. at 49. A tax sale under § 5254, particularly where, as here,
the town does not seek title to excess proceeds, does not present the same
concerns.

        We resolve the issue, then, with an emphasis on equitable
considerations. See Poulin v. Towns of Danville & Cabot, 128 Vt. 161,
165 (1969) (“equity has jurisdiction in tax matters”). In this regard, we
cannot see why equity should favor Taxpayers in this case. Taxpayers are
responsible for their delinquencies, and responsible for not exerting their
subdivision rights under 32 V.S.A. § 5254(b). Considering the number of
lienholders on the properties sold at the tax sale—which have the right of
redemption along with Taxpayers—it is evident that Taxpayers may not
have any ultimate right to excess proceeds anyway. Placing those proceeds
in Taxpayers’ hands prior to the end of the redemption periods, rather than
in escrow, would accomplish little other than unnecessarily introducing a
risk of loss of those proceeds. Taxpayers’ implied argument that it is unfair
for the Town to refuse their request for a refund during the period of
redemption is not well received. “Those who seek equity must be prepared
to give equity.” Shell Oil Co. v. Jolley, 130 Vt. 482, 491 (1972).

       Defendants’ motion for judgment is granted.

    Dated at Montpelier, Vermont, __________________________, 20___.




                                            __________________________
                                                                 Judge




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