Court: Massachusetts Appeals Court; December 20, 1985; Massachusetts; State Appellate Court
The case concerns unpaid real estate taxes for the fiscal year 1975 on a commercial property in Springfield previously occupied by a department store owned by Forbes. The city is counterclaiming against Forbes to recover these unpaid taxes. A demand for payment was issued, but no payment was made, leading to a recorded tax taking in 1977. In 1974, Forbes sold the property to J.M.B. for $4.8 million while retaining a lease requiring them to pay all real estate taxes. J.M.B. mortgaged the property to Chase Manhattan Bank to cover a pre-existing mortgage with Travelers Insurance Company.
Forbes filed a complaint in 1977 to prevent the city from taking the property due to nonpayment, but the city counterclaimed for the unpaid taxes. A preliminary injunction was denied, and summary judgment was granted to the city on Forbes's complaint, leaving the counterclaim active. Trial on the counterclaim began in June 1984. During the trial, it was revealed that Forbes had closed the store and defaulted on the new mortgage, leading to foreclosure by Chase, which acquired the property for $910,000 against a $2.8 million debt. Chase later obtained a deficiency judgment of $2.1 million against Forbes.
In December 1979, Commercial Investment Group, Inc. (C.I.G.) purchased the property from Chase for $1 million, assuming the existing tax liabilities. The mayor of Springfield assured a lender that the city would assist in finding a new developer if C.I.G. defaulted, but the court found this assurance was not an enforceable agreement. C.I.G. struggled to secure financing for renovations, prompting the city and the Springfield Redevelopment Authority (SRA) to seek a federal urban development grant. Ultimately, the SRA approved purchasing the property from C.I.G. for $1.85 million, which was later adjusted to $1.775 million.
On September 16, 1982, the city transferred a U.D.A.G. grant of $1,775,000 to SRA and executed a deed conveying the locus to SRA, which was subject to all real estate taxes, penalties, and interest that SRA agreed to pay. On March 8, 1983, SRA initiated a taking of the locus from C.I.G. for $1, with no evidence of C.I.G. filing for damages. Before trial on May 4, 1984, Forbes attempted to implead SRA, but this was denied. The trial judge ruled in favor of the city against Forbes for 1975 taxes totaling $401,164.76 and also ruled for J.M.B. against Forbes, which has since been settled. Forbes appealed.
The court affirmed that remedies for real estate tax collection are cumulative and not exclusive. The judge noted that Forbes failed to prove the city received any payment for the 1975 taxes, establishing Forbes' direct liability. Forbes claimed obstacles to collection based on Webber Lumber Co. v. Shaw but did not sell the locus to J.M.B. subject to the outstanding taxes. The sale price of $4,800,000 was deemed the 1974 fair market value, and Forbes did not pay the 1975 taxes, negating any subrogation rights to the city’s lien. The city has not foreclosed the tax title on the locus, which is now owned by SRA, not the city.
Forbes argued that allowing the city to recover the taxes would result in unjust enrichment, referencing a mortgage foreclosure and subsequent payments made by Forbes. However, the court clarified that SRA and the city are distinct entities, countering Forbes' claim that the taxes were effectively paid through prior transactions.
G. L. c. 121B, enacted by St. 1969, c. 751, allows cities to engage with redevelopment agencies within their jurisdiction, as seen in Lynn Redevelopment Authority v. Lynn. However, no statutory provision equates cities and redevelopment agencies as the same entity. Sections 19-20 of G. L. c. 121B require city appropriations for using tax funds in support of such agencies. In this case, while the city actively pursued a U.D.A.G. grant for the SRA, the SRA took title to the property and agreed to pay outstanding taxes, which led to the ruling that the city could still collect 1975 taxes from Forbes, who did not prove that SRA's acquisition barred this collection on unjust enrichment grounds.
Forbes claims the city is estopped from collecting the taxes based on former Mayor Dimauro's actions, but the burden to prove estoppel lies with Forbes. The trial judge found the mayor's actions did not constitute a reliable agreement, and any assurances regarding tax collection lacked authority and did not follow proper procedures.
Additionally, Forbes argued that SRA’s acquisition constituted an eminent domain taking, which would prevent tax recovery. However, the judge found no eminent domain taking occurred, as SRA already owned the property prior to the alleged taking in March 1983, supported by evidence showing that the deed to SRA was recorded earlier in October 1982.
The city’s tax collector's notice regarding unpaid 1975 taxes lacked authorization under G. L. c. 79, § 44A, since there was no eminent domain taking. The court affirmed the judgment for the city and its tax collector on their counterclaim for the unpaid 1975 taxes, allowing Forbes to assert claims against SRA for these amounts. The dismissal of Forbes's original claim was also affirmed. The 1975 taxes for the adjacent “Waters” lot are no longer part of the dispute as they have been paid. Taxes for the locus from 1976 to 1979 were settled by J.M.B. in May 1984, and J.M.B.’s claim against Forbes for reimbursement of this payment has been resolved. Forbes's appeal regarding this reimbursement was dismissed, but it retains the right to appeal related to the city. The purchase price to Forbes included $2,000,000 in cash and a $2,800,000 mortgage from J.M.B. The 1971 mortgage to Travelers is not included in the records. A refinancing in 1974 aimed to replace this mortgage, which would typically obligate Forbes to pay real estate taxes. In 1979, the city initiated proceedings to foreclose rights of redemption for its earlier tax taking. The mayor of Springfield agreed in 1980 to temporarily delay these proceedings, intending to collect back taxes without terminating the suit. SRA authorized taking the locus by eminent domain for $1,775,000 in 1982. The city’s tax collector demanded payment from SRA for 1976-1978 taxes but not for 1975. The proceeds from the purchase were allocated to discharge C.I.G.'s mortgage and urban renewal expenses. SRA's takings were validated only for thirty days, and no resolution was passed within that timeframe prior to the deed acknowledgment. The precedent case involving Webber Lumber Company highlighted the issue of double taxation if the tax were enforced after the property had been sold subject to it.
Webber, upon paying the tax, is entitled to subrogation to the tax collector's claim against the land due to the enforceable tax lien. A resolution from Forbes’s directors dated May 23, 1974, indicated that Forbes would assume responsibility for all taxes related to the sale and lease-back of the property. The overall 1974 transaction implied an obligation for Forbes to settle any outstanding tax liens, which it was likely already responsible for due to its prior mortgage with Travelers. The foreclosure in the Webber case had various causes, but the present situation reflects Forbes's default and subsequent foreclosure by Chase, which may stem from Forbes's financial struggles after 1974. The judge concluded that the city never obtained title to the property, and SRA is distinct from the city, rejecting Forbes’s claim that SRA acted as the city’s agent in the property acquisition. Furthermore, the Webber case is not applicable here since Forbes did not sell the property subject to the 1975 taxes, nor has it been demonstrated that Forbes received less than the 1974 fair market value from J.M.B.
