2008 VT 60


Mollica
v. Division of Property Valuation & Review (2006-410)
 
2008 VT 60
 
[Filed 02-May-2008]
 
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, Vermont05609-0801
of any errors in order that corrections may be made before this opinion goes to
press.

 
 

2008 VT 60

 

No. 2006-410

 

Peter M. Mollica
  and Sandra H. Mollica


Supreme Court


 


 


 


On Appeal from


     v.


Windsor Superior Court


 


 


 


 


Division of Property Valuation
  and Review


October Term, 2007


 


 


 


 


William
  D. Cohen, J.


 

Christopher D. Roy of Downs Rachlin
Martin PLLC, Burlington, for Plaintiffs-Appellees.
 
William H. Sorrell, Attorney General, and Stephen W. Gould
and Danforth Cardozo, III,
  Assistant Attorneys General, Montpelier, for
Defendant-Appellant.
 
 
PRESENT:  Reiber, C.J.,
Dooley, Johnson, Skoglund and Burgess, JJ.
 
 
¶ 1.            
SKOGLUND, J.   The Vermont Department of Taxes’
Division of Property Valuation and Review (PVR) appeals from a superior court
decision reversing PVR’s determination that part of a
parcel of land owned by Peter and Sandra Mollica was
no longer eligible to be enrolled in a program designed to give tax breaks to
landowners who maintain their property as farm and forest lands.  We
affirm.
¶ 2.            
Landowners operate a Christmas tree farm on a 72.6-acre parcel of land
that they purchased in two separate transactions in 1978 and 1981.  Since
1988, they have enrolled all but two acres of their property in a tax-abatement
program of some type.  In 1996, the Mollicas
enrolled their property, excluding a two-acre house site, in the Agricultural
and Managed Forest Land Use Value Program, V.S.A. §§ 3751-3763, commonly
referred to as the current-use program.  In 2000, in furtherance of their
expansion of the retail component of their Christmas tree operation, the Mollicas converted a building known as the “Grist Mill,” which
they had been using as a sales office, into a guest house, and began using a
refurbished mobile home, deemed the “Christmas Cottage,” as the new sales
office and warming hut for customers during the Christmas tree season. 
The Mollicas also used the Christmas Cottage
occasionally during the off-season as a rented guest house.
¶ 3.            
  The Mollicas’ use of the Christmas
Cottage is the focus of this appeal.  In 2003, PVR notified the Mollicas that two buildings on their enrolled property,
later identified as the Grist Mill and the Christmas Cottage, were being used
as dwellings and thus were not eligible for enrollment in the current-use
program.  Accordingly, PVR excluded from the program the buildings and two
acres of land for each building.  The Mollicas
appealed this determination to the PVR director.  While the appeal was
pending, PVR sent the Mollicas a notice of
discontinuance of their entire enrolled parcel from the program based on their
failure to provide updated maps, and assessed a land-use-change tax on the four
acres associated with the Grist Mill and Christmas Cottage.
¶ 4.            
Following an evidentiary hearing, the director determined that the Mollicas were using the Grist Mill and Christmas Cottage as
rental property, which was “development” under the applicable statutory
provision, thereby precluding enrollment of the buildings in the current-use
program.  The director determined, however, that only one acre of land
should be associated with each building, and instructed PVR to reinstate 68.6
acres of the Mollicas’ property into the
program.  The Mollicas appealed that decision to
the superior court, which held a de novo evidentiary hearing.
¶ 5.            
Following that hearing, the court reversed the director’s decision, concluding
that the Grist Mill was not situated on enrolled property and that the Mollicas were using the Christmas Cottage exclusively as a
farm building during the Christmas tree season.  The court determined that
the Mollicas’ occasional use of the Christmas Cottage
as a rental property during the off-season did not exclude the property from
the current-use program under the applicable statute.  On appeal, PVR
argues that the superior court erred by failing to give deference to the
director’s decision and by construing the relevant statutory provisions to
allow enrollment of the Christmas Cottage into the current-use program.
¶ 6.            
We first address PVR’s standard-of-review
argument.  PVR contends that the superior court was compelled to uphold the
director’s decision because the decision was supported by the facts and not
contrary to the law.  In PVR’s view, the
superior court improperly substituted its judgment in place of the director’s
reasonable interpretation and implementation of a statute within the agency’s
legislatively assigned area of expertise.  According to PVR, this amounts
to reversible error, even though the applicable statute provides for de novo
review in the superior court.
¶ 7.            
At the outset, in considering the proper standard of review, we
recognize that the superior court did not indicate either way whether it was
required to give any deference to the director’s decision.  To the extent
that this omission may be considered erroneous, it is inconsequential because,
notwithstanding the de novo evidentiary hearing in the superior court, we
directly review the director’s legal determination anew here.  See Tarrant
v. Dep’t of Taxes, 169 Vt. 189, 195, 733 Vt. 733, 738 (1999) (“Where there
is an intermediate level of appeal from an administrative body, we review the
case under the same standard as applied in the intermediate appeal.”).
¶ 8.            
In relevant part, 32 V.S.A. § 3758(a) provides that appeals from the director’s
decisions concerning the current-use program proceed “in the same manner and
under the same procedure” as tax appeals from a board of civil authority. 
Such appeals to the state appraiser or the superior court proceed “de
novo.”  Id. § 4467.  Although de novo review under § 4467
presumes the validity of the taxing authority’s decision only “until the
taxpayer produces some evidence to the contrary,” Town of Victory v. State,
2004 VT 110, ¶ 18, 177 Vt. 383, 865 A.2d 373, this does not mean that the court
ultimately owes no deference to the decision of the administrative
agency.  For example, in considering the superior court’s de novo review
of the Department of Forests, Parks and Recreation’s determination that a
taxpayer was not in compliance with a forest-management plan, we noted that “we
treat decisions within the Department’s area of expertise with substantial
deference.”  Jones v. Dep’t of Forests, Parks & Recreation,
2004 VT 49, ¶ 7, 177 Vt. 81, 857 A.2d 271; see also Town of Killington v. Dep’t
of Taxes, 2003 VT 88, ¶ 5, 176 Vt. 70, 838 A.2d 91 (noting that although
the applicable statute provided for de novo review of an administrative
decision establishing the methodology for implementing a statute taxing
property to support public school education, the statute plainly gave the
administrative agency discretion in choosing a methodology, which is presumed
to be valid absent “a clear and convincing showing to the contrary” (quotation
omitted)).
¶ 9.            
Generally, we defer to administrative agencies interpreting statutes
within their legislatively delegated expertise.  Town of Killington v.
State, 172 Vt. 182, 192, 776 A.2d 395, 403 (2001) (noting this Court’s rule
that “the interpretation of a statute by the administrative body responsible
for its execution will be sustained on appeal absent compelling indication of
error” (quotation omitted)).  In this case, the applicable statute
provides that “the director shall determine whether previously classified
property is still eligible for use value appraisal.”  32 V.S.A. §
3756(f).  Moreover, when a statutory tax exemption is ambiguous, we
generally strictly construe the exemption against the taxpayer.  The
Ice Ctr. of Washington W., Inc. v. Town of Waterbury, 2008 VT 37, ¶ 4, ___
A.2d ___.
¶ 10.        
On the other hand, as PVR concedes, the legislatively established
current-use program is a remedial statute designed for the express purpose of
alleviating the tax burden on landowners who promise to maintain their land in
agricultural or forest use.  See Wilk
v. Wilk, 173 Vt. 343, 346, 795 A.2d 1191, 1193
(2002) (noting “principle that remedial statutes ought to be liberally
construed”); cf. LSP Ass’n v. Town of Gilford,
702 A.2d 795, 798 (N.H. 1997) (describing New Hampshire tax-abatement statutes
as “remedial in nature”).  Indeed, the statute explicitly provides that
landowners who meet the statutory criteria “shall be eligible for use value
appraisal.”  32 V.S.A. § 3755(a).  “[O]ur
rule that tax statutes should be strictly construed against the party claiming
exemption must be tempered by the paramount concern that statutes be construed
‘reasonably so as not to defeat their purpose.’ “  Chamberlin v. Vt.
Dep’t of Taxes, 160 Vt. 578, 580, 632 A.2d 1103, 1104 (1993) (quoting In
re R.S. Audley, Inc., 151 Vt. 513, 516, 562 A.2d
1046, 1049 (1989)); see also Herrick v. Town of Marlboro, 173 Vt. 170,
177,  789 A.2d 915, 920 (2001) (same).
¶ 11.        
In short, this case does not call for the substantial deference due in Jones,
where the administrative agency was acting within a narrow area of technical
expertise, or Killington, where the Legislature had given the
administrative agency wide discretion to establish a methodology for
implementing the statute in question.  While we owe deference to the PVR
director in this case, that deference is tempered by our paramount concern of
construing the statute consistently with its explicitly stated purposes.
¶ 12.        
With this standard in mind, we review the merits of PVR’s
appeal.  PVR contends that the director reasonably interpreted the
relevant statutory provisions in determining that the Mollicas’
off-season use of the Christmas Cottage amounted to “development” that
precluded them from enrolling that property in the current-use program. 
PVR further contends that the superior court unreasonably construed the
relevant statutory provisions in determining that the Christmas Cottage was a
“farm building” entitled to enrollment in the program.  After examining
the language of the applicable statute and considering its explicitly stated
purposes, we agree with the superior court that the director erred in
determining that the statute precluded the Mollicas
from continuing the Christmas Cottage in the current-use program.
¶ 13.        
The statute explicitly states that it is intended, among other things,
“to encourage and assist the maintenance of Vermont’s productive agricultural
and forest land” and “to prevent the accelerated conversion of these lands to
more intensive use by the pressure of property taxation at values incompatible
with the productive capacity of the land.”  32 V.S.A. § 3751.  Toward
that end, any agricultural or forest lands meeting the statutory criteria
“shall be eligible for use value appraisal.”  Id. § 3755(a). 
The parties do not dispute that the Mollicas’
Christmas tree operation maintains agricultural land eligible for enrollment in
the current-use program.  The issue is whether the Mollicas’
use of the Christmas Cottage as a rental property took that structure and an
acre of surrounding land out of the program.
¶ 14.        
The director determined that the Mollicas’ use
of the Christmas Cottage amounted to “development,” as defined in § 3752(5),
thereby making the building subject to a land-use-change tax and discontinuance
in the current-use program.  That definition states, in relevant part,
that development does not include the construction or relocation of a building
for farming or forestry purposes, but does “include the subsequent commencement
of a use of that building . . . for other than farming, logging or
forestry purposes.”  According to the director, the Mollicas
“subsequently commenced” use of the Christmas Cottage as a rental property, and
thus the property was subject to a land-use-change tax as a “development” under
§ 3752(5) and no longer eligible for enrollment in the current-use program.
¶ 15.        
Before analyzing the director’s interpretation of the statute, we
examine the material facts in this case, which are largely undisputed. 
During the five-to-six-week selling season, the Christmas Cottage serves
exclusively as a sales office, reception area, and warming hut for the Mollicas’ Christmas tree business, which operates on land
enrolled in the current-use program.  At the cottage, customers pay for
trees and other items, warm themselves, use the bathroom, and wait for rides to
take them to the trees.  These uses are essential to the Mollicas’ business, particularly since they expanded the
retail sales aspect of the business in 2000.
¶ 16.        
During the off-season, the Mollicas allow
certain uses of the Christmas Cottage.  At times, agricultural workers
stay there.  The Mollicas also allow guests to
stay at the cottage, some for free.  Occasionally, they rent out the
cottage to paying guests.  The record is not entirely clear, but it
appears that the cottage was rented out to sixteen people in 2004.  On the
other hand, in the same year, 6,000 people visited the farm to purchase their
Christmas trees.  The director indicated that the Mollicas
had collected nearly $40,000 in rental income during a four-year period, but it
is unclear how much of that income was generated by the principal guest
house—the Grist Mill—and how much by the occasional rental of the Christmas
Cottage.  In contrast, the income generated by the Christmas tree
operation was approximately $341,000 in 2004.
¶ 17.        
In light of these facts, we conclude that the director erred in
determining that the statute compelled discontinuance of the Christmas Cottage
from the current-use program.  The cottage is not a “development,” as
defined in § 3752(5), because it is used exclusively for farming uses during
the entire, albeit short, selling season.  Nor can the occasional
off-season use of the cottage as a rental property be considered the “subsequent
commencement” of a non-farming use so as to bring the property within the
definition of “development” in § 3752(5).  The term “subsequent
commencement” does not imply an annual off-season use that has no impact on the
exclusive seasonal use for farming.  Rather, it implies an abandonment of
a farming use for a non-farming use so as to trigger imposing a land-use-change
tax.  The record plainly demonstrates here that the Mollicas
did not abandon the farming use of the building.
¶ 18.        
Nor does the definition of the term “farm buildings” in § 3752(14)
compel discontinuance of the Christmas Cottage in the current-use
program.  In relevant part, § 3752(14) defines farm buildings as all
buildings “actively used” by farmers as part of a farm operation.  That is
certainly the case here.  The definition also provides, however, that farm
buildings “shall not include any dwelling other than a dwelling in use during
the preceding tax year exclusively to house one or more farm employees.”  Id.
§ 3752(14).  We conclude that this part of the definition of “farm
buildings” does not exclude the Christmas Cottage from the current-use
program.  As noted, during the entire agricultural season, the Christmas
Cottage is used actively and exclusively for farm operations, and is not set up
as a dwelling.  While the cottage is rented out and used as a dwelling
occasionally during the off-season, it is not a year-round dwelling and is
never a dwelling during the agricultural season.  The reason that the cottage
is not a farm building used exclusively as a dwelling for farm workers is that
it is not a dwelling at all when used as a farm building during the
agricultural season.  Therefore, notwithstanding its occasional off-season
use as a rental property, the cottage is not a dwelling within the meaning of
the definition of “farm buildings” in § 3752(14).
¶ 19.        
As the superior court stated, the Mollicas use
the Christmas Cottage as part of their farming operation to the fullest extent
possible during their seasonal farming operation.  The Legislature was
undoubtedly aware of the seasonal nature of farming operations, and yet nothing
in the statute compels discontinuance in the current-use program of structures
used exclusively for farming during the farming season but occasionally for
non-farming purposes during the off-season.
¶ 20.        
Construing the statutory definitions to compel discontinuance of the
Christmas Cottage from the current-use program under the facts of this case
would be inconsistent with the remedial statute’s explicitly stated purposes to
protect farming and forestry uses by providing tax incentives for farmers to
maintain those uses.  Nothing in the record suggests that the Mollicas’ occasional off-season use of the Christmas
Cottage has any negative impact on preservation of their agricultural lands or
on use of the cottage during the entire agricultural season exclusively for
farming purposes.  Accordingly, the director’s interpretation of the
statute to impose a land-use-change tax on the Mollicas
is erroneous.  We may not substitute our policy judgments for those of the
administrative agency assigned by the Legislature to implement a particular
statute, but we will not approve an agency’s statutory interpretation that runs
counter to the Legislature’s explicitly stated purposes for that statute. 
See Town of Killington, 172 Vt. at 189, 767 A.2d at 401 (stating that
statutory language will not be construed so as to undermine the legislative
purpose underlying the statute).
Affirmed.
 

 


 


FOR THE COURT:


 


 


 


 


 


 


 


 


 


 


 


Associate
  Justice

 

