Lincoln Street v. Town of Springfield

  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, Vermont 05609-0801 of any errors in
  order that corrections may be made before this opinion goes to press.


                                  No. 91-179


  Lincoln Street, Inc.                         Supreme Court

                                               On Appeal from
       v.                                      Windsor Superior Court

  Town of Springfield, Vermont,                April Term, 1992
  Bonnie Greer, Delinquent Tax
  Collector and John O'Brien,
  Finance Director



  Richard W. Norton, J.

  Agnes S. Hughes and George W. Lamb of Lamb & Hughes, P.C., Springfield, for
    plaintiff-appellant

  Stephen S. Ankuda of Parker & Ankuda, P.C., Springfield, for defendants-
    appellees



  PRESENT: Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.



       JOHNSON, J.    Plaintiff, Lincoln Street, Inc., appeals a decision
  granting summary judgment in favor of the Town of Springfield.  At issue is
  whether property owned by private individuals and leased to a nonprofit
  organization for public or charitable use is exempt from property tax
  pursuant to 32 V.S.A { 3802(4).  The trial court held that, because Lincoln
  Street leases the subject property from private owners, the property does
  not qualify for a public use tax exemption.  We affirm.
       The facts are not in dispute.  Lincoln Street is a private, nonprofit
  Vermont corporation that serves mentally retarded persons in Windham and
  Windsor Counties by operating a number of group residential homes.  Lincoln
  Street leases one such property from Stephen and Truddi Greene.  The terms
  of the lease agreement obligate Lincoln Street to pay annual personal and
  real property taxes assessed against the Greenes' property by the Town of
  Springfield.  Lincoln Street requested that Town exempt the property from
  such taxes, but the Town refused.  Instead, the Town placed a $577,000
  attachment on the property to insure the payment of back taxes.  Lincoln
  Street subsequently sought a declaratory judgment regarding the tax exempt
  status of the leased property.  The Town moved to dismiss or, in the
  alternative, for summary judgment.  The trial court held that Lincoln
  Street's request for a property tax exemption was foreclosed by the
  definition of "public use" developed by this Court in American Museum of
  Fly Fishing, Inc. v. Town of Manchester, 151 Vt. 103, 110, 557 A.2d 900, 904
  (1989), and granted summary judgment in favor of the Town.
       To prevail on a motion for summary judgment, the moving party must show
  that there are no genuine issues of material fact and that the moving party
  is entitled to judgment as a matter of law.  Kelly v. Town of Barnard, 155
  Vt. 296, 299, 583 A.2d 614, 616 (1990).
       At issue is the interpretation of the first clause of 32 V.S.A. {
  3802(4), (FN1) which provides a tax exemption for "[r]eal and personal estate
  granted, sequestered or used for public, pious, or charitable uses."  The
  first clause of subsection (4), unlike subsequent clauses, contains no
  express requirement of ownership.   Two years before Lincoln Street entered
  into its lease agreement, we considered at length the legislative and common
  law history of the statute and determined that, since at least 1886, three
  guiding principles were explicit or implicit in all decisions of this Court
  construing the legislative purpose of { 3802(4).  American Museum of Fly
  Fishing, 151 Vt. at 110, 557 A.2d  at 904.  Consequently, we clarified the
  interpretation of { 3802(4) by establishing a three-part test for
  determining whether a use is "public":
            (1) the property must be dedicated unconditionally to
            public use;

            (2) the primary use must directly benefit an indefinite
            class of persons who are part of the public, and must
            also confer a benefit on society as a result of the
            benefit conferred on the persons directly served; and

            (3) the property must be owned and operated on a not-
            for-profit basis.

  Id.
       Lincoln Street asks us to overrule American Museum of Fly Fishing and
  all other decisions that require a concurrence of ownership and operation as
  a qualification for a public or charitable use exemption.  Lincoln Street
  argues that the plain meaning of the first clause, when read independently,
  establishes direct and immediate use of property as the sole criterion for
  property tax exemption.  Secondly, Lincoln Street argues that case law
  before American Museum of Fly Fishing specifies use, not ownership, as the
  test.  Lastly, Lincoln Street argues that the trend in other jurisdictions
  is away from requiring both use and ownership.
       Lincoln Street relies on Town of Williston v. Pine Ridge School, Inc.,
  132 Vt. 439, 321 A.2d 24 (1974) to support its argument that the first
  clause of { 3802(4) should be read independently of the rest of the statute.
  There, we stated that the various clauses of { 3802(4) are disjunctive, id.
  at 444, 321 A.2d  at 28, meaning that it is unnecessary to prove that
  property is exempt for more than one reason.  It does not follow, however,
  that the meaning of each clause in the statute must be determined without
  considering those that precede or follow it.
       In construing a statute, the primary objective is to give effect to
  the intent of the Legislature.  Burlington Electric Dept. v. Vermont Dept.
  of Taxes, 154 Vt. 332, 335, 576 A.2d 450, 452 (1990).   We gather
  legislative intent by considering, not just isolated sentences or phrases,
  but "'the whole and every part of the statute, the subject matter, the
  effects and consequences, and the reason and spirit of the law'."  American
  Museum of Fly Fishing, 151 Vt. at 108, 557 A.2d  at 903 (quoting Holbrook
  Grocery Co. v. Commissioner of Taxes, 115 Vt. 275, 278-79, 57 A.2d 118, 120
  (1948)).  A tax exemption statute must be strictly construed against the
  party claiming an exemption, but also reasonably construed so as not to
  defeat its purpose. Id.
       Lincoln Street's argument fails because we must read the separate
  clauses of this statute together, as parts of a unified statutory system.
  Wolfe v. Yudichak, 153 Vt. 235, 240, 571 A.2d 592, 595 (1989).  Doing that,
  we find that the concurrence of nonprofit ownership and use is necessary to
  make the statute as a whole effective.  See  McAllister v. AVEMCO Ins. Co.,
  148 Vt. 110, 112, 528 A.2d 758, 759 (1987) (plain meaning of statute will be
  expanded by implication when necessary to make statute effective).
       This interpretation is also consistent with legislative intent.  The
  Legislature enacted { 3802(4) to further "the general welfare by promoting
  the direct employment of property for services which would otherwise have to
  be offered by the state or which should be encouraged by the state for
  humanitarian purposes."  Broughton v. Town of Charlotte, 134 Vt. 270, 275,
  356 A.2d 520, 523 (1976).  The purpose of { 3802(4) is to "benefit an
  indefinite class of persons who are part of the public."  In re Tax Appeal
  of Abbey Church, 145 Vt. 227, 230, 485 A.2d 1263, 1265 (1984).  At the same
  time, the public or charitable use must confer a benefit on the public
  generally.  Trustees of Vermont Wild Land Foundation v. Town of Pittsford,
  137 Vt. 439, 443, 407 A.2d 174, 177 (1979); English Language Center v. Town
  of Wallingford, 132 Vt. 327, 329-30, 318 A.2d 180, 182 (1974).
       The purpose of { 3802(4), then, is to benefit the community as a whole
  by benefiting that indefinite part of the public served by public, pious, or
  charitable organizations.  Where the benefit of an exemption under { 3802
  would flow to private individuals, however, rather than to an indefinite
  class of persons who are part of the public, the use is not public, the
  purpose of the statute is not met, and the town cannot be required under the
  statute to exempt the property from taxation.  See English Language Center,
  132 Vt. at 331, 318 A.2d  at 183 (whatever directly promotes individual
  interest is essentially a private activity).
       Here, the ultimate beneficiaries of an exemption would be the Greenes,
  in whose name the property is listed.  See Abbey Church, 145 Vt. at 230, 485 A.2d  at 1265 (owners who control lease terms are the immediate beneficiaries
  of any tax exemption).  Private landlords are not an indefinite class of
  persons under the meaning of { 3802(4) because they benefit from the rental
  and investment income of their property, regardless of its use.  Permitting
  an exemption here would allow private title owners to enjoy the appreciation
  in value of their property, if any occurs, without paying any taxes on that
  property.  Id. (citing Broughton, 134 Vt. at 275, 256 A.2d at 523). Regard-
  less of any benefit transferred to lessees in the form of reduced rent, the
  private lessors would enjoy lower ownership risks and costs.  For example,
  private owners who leased to exempt organizations would be insulated from
  forced tax sale of their property.  They would also enjoy substantially
  higher after-tax investment returns than would other private property owners
  who must pay taxes to support municipal services.  We cannot conclude that
  the Legislature intended such a result.  Id.
       Moreover, our prior case law does not support Lincoln Street's
  assertion that use, rather than ownership, has been the determinative factor
  in granting tax exemptions.  The most that can be said of prior cases is
  that ownership was not an issue because the tax exemption claimants were
  also the owners of the property for which the exemption was sought.  See,
  e.g., Kingsland Bay School, Inc. v. Town of Middlebury, 153 Vt. 201, 202,
  569 A.2d 496, 497 (1989); American Museum of Fly Fishing, 151 Vt. at 103,
  557 A.2d  at 900; Broughton, 134 Vt. at 271, 356 A.2d  at 521.
       Finally, because we construe the intent of our Legislature in this
  matter, we cannot be guided by any trend in other jurisdictions, as cited by
  Lincoln Street.  We see no compelling statutory or policy ground on which to
  depart from precedent.
       Affirmed.


                                     FOR THE COURT:



                                     __________________________________
                                     Associate Justice




FN1.        The following property shall be exempt from taxation . . .
  (4)  Real and personal estate granted, sequestered or used for public,
 pious or charitable uses; real property owned by churches or church
 societies or conferences and used as parsonages and personal property
 therein used by ministers engaged in full time work in the care of the
 churches of their fellowship within the state; real and personal estate set
 apart for library uses and used by the public and private circulating
 libraries, open to the public and not used for profit; lands leased by towns
 or town school districts for educational purposes; and lands owned or leased
 by colleges, academies or other public schools or leased by towns for the
 support of the gospel; and lands and buildings owned and used by towns for
 the support of the poor therein; but private buildings on such lands shall
 be set in the list to the owners thereof, and shall not be exempt.  The
 exemption of lands owned or leased by colleges, academies or other public
 schools, shall not apply to lands or buildings rented for general commercial
 purposes, nor to farming or timber lands owned or leased thereby; but this
 provision shall not affect the exemption of so-called school or college
 lands, sequestered to such use prior to January 28, 1911.  32 V.S.A.
 { 3802(4).