The year 2008 was a banner year for the firm of Engel & Schultz, as it successfully brought to resolution the firm’s two oldest cases, both of which had been heard twice by appellate courts in Massachusetts.
Peterson v. The Commissioner of Revenue
In the case of Peterson v. The Commissioner of Revenue, the law firm challenged the constitutionality of a law which increased the tax on capital gains in the middle of a tax year. In Peterson I, the Firm successfully obtained a Supreme Judicial Court ruling declaring that it was unconstitutional to make effective a change in the tax laws in the middle of a calendar year, thus, taxing some taxpayers, while not taxing other taxpayers, for the same types of transactions.
In response to Peterson I, the legislature passed a law purporting to treat all taxpayers the same, stating that all taxpayers owed capital gains taxes in 2002, but then exempting from that taxation those taxpayers who had already filed their tax returns and paid no capital gains tax for the year 2002. Engel & Schultz then challenged the constitutionality of this new legislation. The Commonwealth sought to justify this new legislation by arguing that it was reasonable to exempt persons from taxation who sold their assets prior to May 1, 2002, under the doctrine of “reliance”. The Court, at our urging, in Peterson II rejected this argument, and declared the new law, like the first law, to be unconstitutional. The Court, however, left it to the legislature whether all persons paying capital gains taxes in 2002 would have to pay the higher tax rate imposed in the middle of the year or the lower rate which was in place for the first part of the year.
Engel & Schultz, in turn, urged legislative leaders to adopt the lower rate for all taxpayers. The compromise eventually adopted by the legislature, providing for a four year payout of the tax abatement, was first suggested by our office in correspondence with the legislative leadership, and then again in private meetings and phone calls with the legislative leadership. In fact, legislative leadership, concerned that our firm might challenge the constitutionality of the final “four year compromise” in court, worked with our office in drafting the final legislation, and did not finalize the legislation until they had received an assurance from our office that we would recommend to our clients to accept the compromise and not challenge it in court.
In sum, after three years, two wins in the Massachusetts Supreme Judicial Court, and a successful effort to work with the legislative leadership, the Massachusetts General Court changed the effective date of the increase in taxes on capital gains from May 1, 2002 to January 1, 2003. As the result of Engel & Schultz’s efforts spearheaded by attorney Stephen Schultz, approximately 150,000 taxpayers received refunds of approximately $250 million.
Berish v. Bornstein
In this case, the firm represented the condominium association for the Cotuit Bay Condominiums, which sued the developer of the condominium project, for faulty construction. Engel & Schultz took over the case after it had been unsuccessfully litigated without a resolution for 14 years. Engel & Schultz successfully appealed to the Massachusetts Supreme Judicial Court and overturned the dismissal of plaintiffs’ contract and breach of implied warranty claims. As the result of Engel & Schultz’s efforts, the Supreme Judicial Court declared that an implied warranty of habitability attaches to all new residential construction in the Commonwealth.
On remand, an eighteen day trial was held in the Massachusetts Superior Court. The trial judge found that the windows lacked proper flashing, the firewalls and firestops were installed defectively, the chimneys were inadequately secured, and the developer had negligently failed to place building wrap on the outside of the building and vent the bathrooms to the outside. Both sides appealed. On appeal, the Appeals Court upheld those claims on which the lower court had awarded the condominium association damages, and overturned the lower court’s original finding that the faulty chimney attachments were not a safety threat to condominium unit inhabitants, remanding the case for an additional award of damages based on the chimney related claim. In the end, the firm successfully obtained a judgment for over $2.4 million for the condominium association.