Herrick v. Town of Marlboro

Herrick v. Town of Marlboro (2000-591); 173 Vt. 170; 789 A.2d 915

[Filed 09-Nov-2001]

[Motion for Reargument Denied 20-Dec-2001]


       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. 2000-591


Mark Herrick	                                 Supreme Court

                                                 On Appeal from
     v.	                                         Windham Superior Court


Town of Marlboro	                         October Term, 2001


John P. Wesley, J.

Michael Rose, St. Albans, for Plaintiff-Appellant.

Paul S. Gillies, Montpelier, for Defendant-Appellee.


PRESENT:  Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.


       SKOGLUND, J.   Plaintiff taxpayer Mark Herrick appeals from a Windham
  Superior Court  finding that his land, which is "sequestered" for "pious"
  uses, is not exempt from property taxation  under 32 V.S.A. § 3802(4). 
  Because Herrick failed to irrevocably dedicate the sequestered property 
  for the "pious" use, he fails to meet the three-prong test set forth and
  affirmed in our recent line of  cases.  We therefore affirm the trial
  court's denial of tax exempt status on the sequestered lands. To  the
  extent this decision conflicts with Johnson v. Jones, 86 Vt. 167, 83 A. 1085 (1912),  it is hereby  overruled.

       Herrick owns 171 acres, including a two-unit house and some
  outbuildings (parcel  #256.000), in the Town of Marlboro. He has allowed a
  nonprofit corporation called The Mountain  Ministry Inc., a
  nondenominational Christian service ministry, the exclusive use of this
  property.

 

       The Mountain Ministry assists poor people in transition, particularly
  single mothers, battered  women, and homeless persons.  Among other
  services, it provides food, clothing, furniture, moving  and transportation
  assistance and firewood cut from the land.  At times the land is used for
  retreat  camping, gardens, storage space for homeless people, and for
  raising turkeys and other farm animals  for consumption.  All of the
  Mountain Ministry's services are provided free of charge to anyone on a 
  non-discriminatory basis, based on need and available resources.  Under
  this arrangement between  Herrick and the Mountain Ministry, the Mountain
  Ministry uses all the property, rental income from  one unit of the
  two-unit house on the property, and all revenue from the sale of timber and
  maple  products from the property to support its operating expenses. 

       On August 1, 1998, Herrick removed the upstairs rental apartment from
  the rental market.   The apartment is now used as a safe house for the
  Mountain Ministry's patrons.  When rented for  profit, the unit was rented
  for $450 per month.  There is currently no charge for use of the apartment. 

       Herrick is on the Mountain Ministry's Board of Directors and works for
  the Mountain  Ministry full-time, without pay or any other form of
  compensation.  On March 25, 1999, Herrick  executed a document he entitled
  "Sequestration" in which he sequesters all of Parcel #256.000 to the 
  exclusive use of the Mountain Ministry.  See Johnson v. Jones, 86 Vt. at
  170, 83 A.  at 1086 (defining  "sequester" as setting aside or apart).  
  Herrick receives no financial consideration in return for the 
  sequestration of land for the Mountain Ministry, but retains title to the
  real estate and may revoke the  sequestration arrangement at any time.

       The Town assessed Herrick's parcel at $247,800.00 for the 1999 tax
  year.  Herrick argues that  the lands sequestered for the Mountain
  Ministry's use fall squarely within the tax exemption for lands  which are:
  "granted, sequestered or used for public, pious or charitable uses."  32
  V.S.A. § 3802(4).   Herrick relies on Johnson v. Jones, a case with facts
  similar to this one, where the Court 

 

  held that land owned by a clergyman, devoted exclusively to the use of
  church groups for religious  gatherings, with any and all revenue derived
  from the lands used for the sole purpose of defraying  expenses of
  gatherings, was property sequestered for pious uses and thus exempt from
  taxation.  The  issue of nonprofit ownership of the lands by the clergyman
  was mentioned in the case but was not  considered germane to resolution of
  the exemption issue which focused on the clergyman's pious use  of the
  land.  See id. at 170-71.  Herrick, in kind, emphasizes the pious use of
  his land and, arguing  that the legislature intentionally spoke in terms of
  use when crafting the statute, disputes any  statutory requirement that the
  property be held in nonprofit ownership.

       The Town of Marlboro concedes that Johnson v. Jones would control
  here, were the case  good law.  However, the Town maintains that Johnson
  has since been implicitly overruled by our  more recent line of cases
  interpreting 32 V.S.A. § 3802(4) as a whole and mandating application of a 
  three-part test laid out in American Museum of Fly Fishing Inc. v. Town of
  Manchester, 151 Vt. 103,  110, 557 A.2d 900, 904 (1989).  The Town further
  urges the conclusion that Herrick's claims fail  under the 3-part test and
  our subsequent cases applying the test.  On cross-motions for summary 
  judgment, the trial court agreed with the Town.  It held that Herrick's
  failure to make irrevocable the  sequestration of the land for the Mountain
  Ministry's use fails the first prong of the American   Museum of Fly
  Fishing test requiring that property "be dedicated unconditionally to
  public use," id.  at 110, 557 A.2d  at 904, and that Herrick's sequestration
  lacked the requirement of concurrent  nonprofit ownership and use under the
  third prong of the test.  The court concluded, therefore, that  the
  property did not qualify for tax exemption.  This appeal followed. 

       At trial there were no contested facts and the parties submitted a
  joint stipulation of facts.  On  cross-motion for summary judgment,
  taxpayer Herrick had the burden of proving he was entitled to  judgment as
  a matter of law.  That same standard is applicable here.  Morrisville
  Lumber Co. v.

 

  Okcuoglu, 148 Vt. 180, 182, 531 A.2d 887, 888 (1987) ("Our standard on
  review of a motion for  summary judgment is the same standard as applied by
  the trial court").  Summary judgment is  appropriate when the record
  demonstrates that there is no genuine issue as to material fact, and the 
  moving party is entitled to judgment as a matter of law.  Burr & Burton
  Seminary v. Town of  Manchester, 12 Vt. L.W. 204, 204 (2001).

       The statute at issue states: 

    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 . . .; real and personal estate set
    apart for library uses and used  by the public and private
    circulating libraries . . .; lands leased by  towns or town school
    districts for educational purposes; and lands  owned or leased by
    colleges, academies or other public schools . . .;  and lands and
    buildings owned and used by towns for the support of  the poor
    therein . . . .

  32 V.S.A. § 3802(4).  This case concerns only the first exemption for
  "[r]eal and personal estate  granted, sequestered or used for public, pious
  or charitable uses." Id. 

       "Our paramount goal in statutory construction is to give effect to the
  Legislature's intent."  Burr & Burton Seminary, 12 Vt. L.W. at 204.  The
  definitive source of legislative intent is the  statute's language, if that
  language plainly sets forth the intent of the Legislature.  Hambley v. Town 
  of St. Johnsbury, 130 Vt. 204, 206-07, 290 A.2d 18, 20 (1972).  "[W]hen the
  plain meaning of the  statute contradicts the intent of the Legislature, we
  are not confined to a literal interpretation of the  statutory language." 
  Burr & Burton Seminary, 12 Vt. L.W. at 205.  Rather, we should gather 
  legislative intent from "a consideration of the whole and every part of the
  statute, the subject matter, 

 

  the effects and consequences, and the reason and spirit of the law." 
  Holbrook Grocery Co. v.  Commissioner of Taxes, 115 Vt. 275, 278-79, 57 A.2d 118, 120 (1948).

       In American Museum of Fly Fishing, 151 Vt. at 110, 557 A.2d  at 904 the
  Court examined the  "public use" component of § 3802(4) ("Real and personal
  estate granted, sequestered or used for  public, pious or charitable uses")
  and  laid out a three-part test distilling criteria "explicitly stated" or 
  "implicit in the prior decisions of this Court" for determining tax exempt
  "public uses."  In keeping  with the legislative intent, the Court held
  that in order to qualify for tax exemption, a "public use"  must meet the
  following criteria: (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. at 110, 557 A.2d  at 904.  Taxpayer Herrick argues that the
  American Museum of Fly Fishing, three-part "public  use" test does not
  apply to his lands which have been "sequestered," not "granted" nor "used,"
  to  serve a "pious," as opposed to "public" use under the statute. Given
  our repeated admonition that 32  V.S.A. § 3802(4) be read as a whole in
  order effectuate legislative intent, we are compelled to extend  the
  "public use" test to lands sequestered for pious and charitable uses under
  the statute.  Subsequent  applications of the American Museum of Fly
  Fishing test to cases interpreting 32 V.S.A. § 3802(4)  have further
  refined the requirements under the test.

       In Lincoln Street, Inc. v. Town of Springfield, 159 Vt. 181, 615 A.2d 1028 (1992), Lincoln  Street, a private nonprofit charitable organization
  which operates group homes for mentally  handicapped persons, leased one
  such property from private owners.  Under the lease agreement the 
  organization was obligated to pay the annual personal and real property
  taxes assessed against the  leased property.  Lincoln Street sought a
  declaratory judgment for a property tax exemption arguing 

 

  that 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).  Id. at 182, 615 A.2d  at  1029.  Lincoln
  Street asked the court to overrule American Museum of Fly Fishing and all
  other  decisions that require concurrence of ownership and use as a
  prerequisite to a public or charitable use  exemption. Lincoln Street
  argued that the plain meaning of the tax exemption clause, when read 
  independently, establishes direct and immediate use of property as a
  necessary criterion for property  tax exemption. Id. at 184, 615 A.2d  at
  1030.  

       The Court, acknowledged that the tax exemption in 32 V.S.A. § 3802(4)
  contains no express  requirements for ownership.  However, recognizing that
  our "primary objective is to give effect to  the intent of the
  Legislature," the Court was constrained to "gather legislative intent by
  considering,  not just isolated sentences or phrases," but the separate
  clauses of the statute "together, as parts of a  unified statutory system." 
  Id. at 184-85, 615 A.2d  at 1030.  Doing that, the Court found that the 
  concurrence of nonprofit ownership and use is necessary to make the statute
  as a whole effective.   Having therefore considered at length the
  legislative and common law history of the statute and  having 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), the Court reaffirmed the  three-part test. Id. at 183-84, 615 A.2d  at 1031. 

       The crux of our decision in Lincoln Street rests upon the fact that
  the purpose of § 3802(4) 

    is to benefit the community as a whole by benefitting 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.

  Id. at 185, 615 A.2d  at 1031.  

 

       Even though, under the lease agreement in Lincoln Street, the direct
  benefit of the tax  exemption, if allowed, would flow to the nonprofit
  organization, we found the "ultimate beneficiaries  of an exemption" would
  be the lessor private property owners.  Id. at 186, 615 A.2d  at 1031.  The 
  private owner lessors would, for example, "benefit from the rental and
  investment income of their  property, regardless of its use," and "would
  enjoy lower ownership risks and costs."  Id.  We also  found that to permit
  "an exemption here would allow private title owners to enjoy the
  appreciation in  value of their property, if any occurs, without paying
  taxes on that property."  Id. 

       This court is aware that by sequestering lands, Herrick has not
  entered into a lease agreement  with the Mountain Ministry.  But Herrick's
  sequestration scheme unfortunately contains a fatal flaw  which prevents
  him from overcoming the American Museum of Fly Fishing test: there is no 
  concurrence of nonprofit ownership and use.  Granted, Herrick derives no
  immediate income from  activities or services performed on the property. 
  But so long as Herrick retains title to the land and  various benefits of
  ownership, such as property value appreciation and increasing investment 
  income, flow to Herrick and not the Mountain Ministry, lands owned by
  Herrick himself will not  qualify for the tax exemption.    

       Most recently, in Twin Valley Community Services, Inc. v. Town of
  Randolph, 170 Vt. 648,  756 A.2d 1233 (2000) (mem.), we again upheld the
  applicability of the American Museum of Fly  Fishing three-part test and
  the requirements of concurrent nonprofit ownership and use and 
  unconditional dedication to public use.  Unlike Lincoln Street, however, we
  found that a lessor-lessee relationship did not thwart proper application
  of the tax exemption for uses performed by the  lessee where the entities
  shared a singular and legally recognized nonprofit mission. 

       The property at issue in Twin Valley was owned by a nonprofit
  corporation which was  organized solely to further the purposes of its
  lessee, another nonprofit corporation. The Town 

 

  argued that the taxpayer lessor had not unconditionally dedicated his land
  to a public use because the  lease contained conditions such as the
  lessor's right to terminate the lease and enter should the lessee  default. 
  The Town further argued that the fact that taxpayer owns the property,
  while another  nonprofit entity uses the property for the public benefit,
  bars taxpayer from entitlement to the tax  exemption for lack of concurrent
  ownership and use as construed in Lincoln Street.  The Court  rejected both
  arguments and held that because "[b]oth the taxpayer-owner and the
  lessee-operator are  nonprofit corporations with a single mission," certain
  lease restrictions did not thwart unconditional  dedication of the land to
  the nonprofit use and did not infringe upon the concurrence of ownership 
  and use. Twin Valley, 170 Vt. at 650, 756 A.2d  at 1235.  Indeed, the
  nonprofit taxpayer in Twin  Valley was organized specifically to further
  the purposes of the nonprofit corporation lessee, which  was its only
  member.  Id.

       What distinguishes the facts in Twin Valley from the facts herein, is
  the presence of  incontrovertible dedication of the property to a pious or
  charitable mission.  Unlike the lessor in  Twin Valley, Herrick is not
  himself a nonprofit corporation limited in the manner he may dispose of 
  corporate assets, such as the sequestered property. Cf. 11B V.S.A. § 14.05
  (limiting nonprofit  corporation in disposition of assets upon
  dissolution).  Indeed, there is nothing in Herrick's  sequestration which
  prevents him from revoking the sequestration at will, for any, or no reason
  at all. 

       As noted by the trial court, Herrick's selfless intentions in this
  case are beyond question.   While we recognize his personal devotion to the
  Mountain Ministry, there is no unequivocal showing  that his lands are
  irrevocably and legally bound to the Mountain Ministry's mission.  In fact,
  by  retaining title in himself and maintaining the revocability of the
  sequestered lands, he has organized  the sequestration in such a way that
  the Mountain Ministry's access to the land operates 

 

  at his will, revocable whenever he should change his mind and find the
  arrangement no longer  satisfactory.  As further noted by the trial court,
  the interpretation of § 3802(4) which Herrick  advocates would doubtless
  invite tax-avoidance schemes of much less obvious merit than Herrick's 
  "sequestration." 

       The doctrine of stare decisis does not preclude us from recognizing
  developments in our law  and overruling Johnson v. Jones or those portions
  of Johnson inconsistent with our more recent  decisions.  As the Supreme
  Court has noted, "[s]tare decisis is not an inexorable command."  Payne  v.
  Tennessee, 501 U.S. 808, 828 (1991).  Furthermore, it is well established
  that any statutory  exemption from property tax is to be strictly construed
  against the taxpayer.  Burr & Burton  Seminary, 12 Vt. L.W. at 204.  We
  will not, however, mandate such strict adherence to these  prerequisites so
  as to defeat the purposes of the statute.  See In re Northeast Wash. County
  Cmty.  Health Ctr., 148 Vt. 113, 115, 530 A.2d 558, 559 (1987) (citation
  omitted).  Mindful of the potential  for abuse of the tax exemption
  provision and with due regard for the revenue deprived the Town by 
  operation of any tax exemption, we hold that in failing to implement some
  type of legally protected  relationship between Herrick and the Mountain
  Ministry, Herrick has not dedicated his land  unconditionally to a public
  use and is therefore ineligible for tax exemption under 32 V.S.A. § 
  3802(4).

       The decision of the superior court is affirmed. 


        	                       FOR THE COURT:



                                       _______________________________________
                                       Associate Justice