Canton Continues to Seek Tax Money for Commercial Route 44 Property

With a recent state appellate court decision about a case that affects a delinquent tax bill for a prominent commercial parcel on Route 44, the question becomes — what next?

Last week, the court ruled that a lower court granted too much power to a “receiver of rents” looking to collect payments from the parent company of Mitchell Volkswagen, M&S Gateway Associates, LLC.

The dealership is operating at 51 Albany Turnpike, which since 1994 has been owned by Ohio-based Cadle Properties of Connecticut, Inc. The 1.7-acre site has a long history of contamination that long predates its current owner and occupant. The town contends Cadle essentially abandoned the site and has not collected rent in years. 

But with a tax bill in excess of $800,000 (including taxes, liens and interest), the town in April of 2011 appealed to Hartford Superior Court to appoint a “receiver of rents,” to collect "rent" from Mitchell, most of which would then go to the town. A couple months later the court granted the receivership and subsequently modified the arrangement.

But the lower court “exceeded its authority under (state statute) 12-163a by granting the receiver permission to evict the tenant, secure a new tenant and to use all legal process to collect back rents allegedly due,” according to the appellate decision.  

The decision leaves the receiver in place. While the appellate court agreed the state statute’s use of the word “forthcoming” is ambiguous, it ruled, “We conclude that the receiver may collect only those rents that are forthcoming on or after the date of the receiver’s appointment, not rents allegedly overdue.”

But initial reaction to the decision may show a lack of agreement on exactly what it all means for those "forthcoming" payments.

“I do not see this as a setback,” said Canton tax collector Lisa A. Theroux. “The Town can still require the tenant to pay rent from the time that the receiver was appointed by the courts and pursue further means if the tenant continues to refuse to do so.”

But Mitchell’s attorneys insist there is nothing to legally collect. The receiver can only intercept rent payments that exist through an agreement between a tenant and owner, according John L. Bonee III of BoneeWeintraub LLC

“The appellate court does not permit a receiver to take rent when no rent exists,” Bonee said. “There’s no outstanding lease. That’s what’s created this legal anomaly.”

In the fall of 1995, Mitchell’s parent company signed a three-year lease with Cadle. While the state statute allows a receiver to be appointed for “rents or payments for use and occupancy,” the firm contends that there is still nothing their client can legally pay under the decision. 

“Cadle didn’t have any holdover terms,” said attorney Jay Weintraub.

Ken Slater Jr., of Halloran & Sage, who is representing the town in the matter, clearly disagrees. Leases sometimes have such provisions but that is still considered "rent," he said. Past cases make it clear that use and occupancy is for cases when there is no longer any agreement between owner and tenant, Slater said. 

"If you have no rental agreement, by definition that is use and occupancy," Slater said. "That's exactly what it's (the state statute) intended to deal with." 

On Friday, Canton Chief Administrative Officer Robert Skinner expressed his frustration with the issue.

"I can’t be the only one that finds it odd that a multi-million dollar corporation can be on a property for more than 10 years and pay no rent and no property tax,” Skinner said.  

But Mitchell’s attorneys argue it has nothing to do with Volkswagen and that their client is not trying to get out of anything. The company employs people, pays all other taxes (including on other properties), and has kept a viable business in what would otherwise essentially be an abandoned “toxic waste” site, they said.

Legally the company can’t pay anything toward the tax bill, stating it would be constitute an inappropriate “gift” to the town, according to BoneeWeintraub. They even argue what was paid after a lower court’s decision should be returned. Weintraub said he understands the town's frustration but contend Mitchell is also a victim in the situation. 

First Selectman Richard Barlow, however, said he finds it odd that Mitchell did pay for a short time and only stopped and appealed when the receiver began seeking back rent. 

"The troubling thing to me is that they sit on that site for a number of years without any attempt to compensate the town," Barlow said. 

Canton selectmen will likely discuss the town’s options this coming Wednesday, Skinner said 

“The Board of Selectmen will be reviewing the town’s response and determine what other litigation may be necessary,” Skinner said.

Barlow said he also wants some advice on the appellate decision and whether the town or any other party should pursue it further. .

According to a past State Department of Energy and Environmental Protection memo, the J. Swift Chemical Company recycled spent solvents on the site from 1951 to 1972, contaminating the property in the process.

In the early 1980s a pubic water main was extended to serve surrounding properties. A variety of solvents remain, mostly blow the water table, according to a 2012 document sent from DEEP to the federal Environmental Protection Agency.

Between Cadle and previous site owner Gianfranco Galuzzo, the state has won more than $11 million in judgments; officials acknowledged the chance of collecting is slim.

The town has worked on various proposals for help in taking the site over but none have worked. Weintraub said Mitchell has also tried to come to agreements to take over the site. 

Generally a town might foreclose on such a property with outstanding taxes but the cost of cleaning up existing contamination is prohibitive, officials have said. 

At one point, the state discussed a $4 million clean-up bill but that included paying DEEP back some of the funds it has expended on the site. Barlow said he'd like to see if the town would be responsible for those payments or just cleanup should it look again at that avenue.  

Last December DEEP requested that the EPA re-evaluate the site and that process is ongoing, Barlow said. 

Read the entire appellate decision here and a previous Patch story here.