Inventory Blanks Must Be Mailed to the Bankruptcy Trustee

Dalton Hydro LLC v. Town of Dalton
Dalton Hydro LLC v. Town of Dalton
No. 2005-195
Thursday, December 29, 2005

As part of the municipal tax process, taxpayer inventory blanks must be mailed to the “last known address of all persons or corporations known or believed to own taxable property in their towns” on or before March 25 of each year. RSA 74:5. Municipalities generally look to their official records to determine where to mail these inventory blanks. However, as this case illustrates, municipalities should be careful to consider all of the information they have about the ownership of property to be sure that they have met the requirements of RSA 74:5.

Dalton Hydro owns property on the New Hampshire/Vermont border consisting of a paper mill, a dam, and a hydroelectric power plant. A portion of the property is located in the town of Dalton. The property was previously owned by American Paper Mills of Vermont, which became the subject of an involuntary bankruptcy proceeding in July 2002. In September 2002, a trustee was appointed for the bankruptcy estate. On February 12, 2003, the town filed a proof of claim with the bankruptcy estate seeking back taxes on the Dalton property.

Also in February 2003, the bankruptcy court approved a petition for a Utah-based company, the Steve Rogan Company (SRC), to purchase the property. SRC assumed responsibility for operating the plant on February 14, 2003, although the sale had not yet occurred. On February 20, 2003, SRC representatives met with the Dalton clerk and tax collector to discuss the impending purchase and related tax issues.

On March 11, 2003, the town mailed taxpayer inventory blanks to all of the town’s property owners. The inventory blank for the American Paper property was mailed to American Paper, who was still the corporate owner of record as of that date. Neither the bankruptcy trustee nor SRC received a form, and no completed inventory blank was ever filed with the town for this property. On March 20, 2003, SRC assigned its right to purchase the property to Dalton Hydro, who purchased it the next day. The same day, the bankruptcy trustee paid past due property taxes on the property and notified the town of the sale.

This case arose when Dalton Hydro received a tax bill in November 2003 and filed a timely application for an abatement with the town’s board of selectmen, who denied the application. Dalton Hydro petitioned the superior court for an abatement and refund. The town moved for summary judgment, arguing that Dalton Hydro had forfeited its right to contest the tax because no one had filed the required taxpayer inventory blank with the town. The superior court agreed and dismissed the abatement action, finding that the town had met its statutory obligations under RSA 74:5.

Dalton Hydro appealed the dismissal to the New Hampshire Supreme Court, which reversed the superior court’s decision. The Court noted that as of the commencement of a bankruptcy case, a bankruptcy estate is created that is comprised of all legal and equitable property interests of the debtor as of that date. Therefore, when the American Paper bankruptcy case began on July 3, 2002, all property owned by American Paper, including the Dalton property, became part of the bankruptcy estate held by the bankruptcy trustee. Since the town had filed a claim with the bankruptcy estate for back taxes on February 12, 2003, it was clearly aware of the bankruptcy estate before it mailed the inventory blanks on March 11, 2003 and should have mailed an inventory blank to the trustee as the representative of the bankruptcy estate. As a result, Dalton Hydro had not forfeited its right to contest the tax and the case was remanded to the superior court for a determination on the merits.