American Museum of Fly Fishing, Inc. v. Town of Manchester

• Decision Date: 03 February 1989
• Docket Number: No. 86-377,86-377
• Parties: AMERICAN MUSEUM OF FLY FISHING, INC. v. TOWN OF MANCHESTER and Village of Manchester.
• Court: Vermont Supreme Court

Page 900

557 A.2d 900

151 Vt. 103

AMERICAN MUSEUM OF FLY FISHING, INC. v. TOWN OF MANCHESTER and Village of Manchester.

No. 86-377.

Supreme Court of Vermont.

Feb. 3, 1989.

Charles R. Eichel, Manchester Center, and Joy C. Frank, Dorset, of counsel, for plaintiff-appellant.

Joseph J. O'Dea, P.C., Manchester, for defendant-appellee Town of Manchester.

W. Michael Nawrath, Manchester Center, for defendant-appellee Village of Manchester.

Before ALLEN, C.J., and PECK, GIBSON and MAHADY, JJ.

GIBSON, Justice.

Plaintiff appeals a declaratory judgment of the Bennington Superior Court determining that plaintiff is not exempt from property taxation under 32 V.S.A. § 3802(4), but that the Town could vote to exempt plaintiff from property taxes pursuant to 32 V.S.A. § 3840. We reverse.

I.

Neither party questions the trial court's findings, which reveal the following relevant facts. Plaintiff is a nonprofit, Vermont corporation, exempt from federal and state income taxation. It was organized for the purpose of "[e]ngaging in, assisting and contributing to the support of exclusively charitable, scientific and educational activities" relating to the sport of fly fishing. In October of 1983, plaintiff purchased a building in the Village of Manchester to be used solely as a museum in support of plaintiff's above-stated corporate purpose. The museum opened in late May of 1984. Since then, it has been open daily to the general public free of charge.

The Town and Village of Manchester assessed property taxes on the museum for the year 1984. Plaintiff appealed to the Town of Manchester Board of Civil Authority, asserting its alleged tax-exempt status. The Board denied this request. Plaintiff subsequently brought suit in the superior court, seeking a declaratory judgment that the museum was exempt from all property taxes under 32 V.S.A. § 3802(4). ¹ The trial court held that plaintiff was not exempt under § 3802(4) since plaintiff had not assumed an essential governmental function. The court also found that 32 V.S.A. § 3832(7), denying automatic tax exemptions for property "used primarily for ... recreational purposes," did not apply to the museum. The court went on to conclude that the provisions of 32 V.S.A. § 3840 ² did apply since "plaintiff is associated for charitable purposes and the real estate that it owns is used solely for its charitable, nonprofit purposes...."

Plaintiff appeals, raising three issues. We find plaintiff's first argument, that the trial court erred in applying the test of assumption of an essential governmental function to the museum, dispositive of this appeal. We, therefore, do not reach plaintiff's remaining claims. In light of this Court's previous mixed interpretations of § 3802(4), we shall review briefly the historical development of the "essential governmental function" test and set forth what we consider to be the proper "public use" test for application on remand.

II.

An important early case interpreting 32 V.S.A. § 3802(4), then designated as V.S.1947, § 649, was Fort Orange Council, Inc. v. French, 119 Vt. 378, 125 A.2d 835 (1956). In that case, this Court held that a camp operated by the Boy Scouts of America, a New York corporation, was not entitled to an exemption because the corporation served only a limited group, the members of the Boy Scout organization. The Court stated that in order to claim an exemption under the statute, the property in question must not serve a "closed circle" of members, but must be open to the public at large. Id. at 384, 125 A.2d at 839.

In New York Institute for the Education of the Blind v. Town of Wolcott, 128 Vt. 280, 262 A.2d 451 (1970), this Court affirmed the grant of a tax exemption to a summer remedial school/camp for blind children. The Court held that § 3802(4), not § 3840, applied, and that in order to qualify for exemption under § 3802(4), "the property of the Institute must be used for public use and its use confer a benefit upon an indefinite class of persons who are a part of the public." Id. at 285, 262 A.2d at 454. The Court found that the Institute met this test because the property was used to benefit an indefinite class of persons: blind children. The Court distinguished Fort Orange Council by noting that the class of persons in that case was " 'a closed circle to those outside the organization,' " id. at 286, 262 A.2d at 455 (quoting Fort Orange Council, 119 Vt. at 384, 125 A.2d at 839), and asserting that the class was determined by "choice or selection and implie[d] some kind of voluntary action or judgment." Id.

Shelburne Museum, Inc. v. Town of Shelburne, 129 Vt. 341, 278 A.2d 719 (1971), which followed shortly thereafter, involved the question of whether two homes on the premises of the museum qualified for an exemption under § 3802(4). The Court established that in order to attain tax-exempt status under § 3802(4), "the property must confer a benefit upon that segment of the public which the institution was designed to serve." Shelburne Museum, 129 Vt. at 344, 278 A.2d at 721. The Court held that one of the properties, the director's home, was exempt, because it was used for various business and entertainment functions of the museum and thus furthered the "purposes and aims of the museum." Id. The other home, occupied as a dwelling by a landscape artist, was not exempt, however, because the benefit derived from its use was only "collateral to the historical and educational purposes" of the museum. Id. at 345, 278 A.2d at 721.

The theoretical foundation of the essential-governmental-function test arose in English Language Center, Inc. v. Town of Wallingford, 132 Vt. 327, 318 A.2d 180 (1974), wherein the Court denied a public use exemption to a nonprofit school that taught English to students whose native tongue was other than the English language. The Court held that "[e]xemptions are granted for the performance of service essentially public in nature on the theory that such service benefits the public generally and, in so doing, assumes a share of the public burden." Id. at 329-30, 318 A.2d at 182. The Court also stated that "[w]hatever directly promotes individual interest, although it may also tend incidentally to the public benefit, is essentially a private, and not a public, activity." Id. at 331, 318 A.2d at 183. The English Language Center did not fall within the purview of a public use because it served only a select segment of the public and not the public generally. As the Court correctly noted, public uses are essentially public in nature and benefit the public generally. It does not, however, follow that public uses must necessarily be those that assume a public burden. This is a fine point that was not necessary to the outcome of the case.

The Court applied a similar rationale in Vermont Wild Land Foundation v. Town of Pittsford, 137 Vt. 439, 407 A.2d 174 (1979). In that case, the Court denied an exemption for property that consisted of primeval forest, but the access to which was strictly limited to those involved in scientific research. The Court found that "[a]lthough the Foundation's endeavors are admirable, the benefit to the public is too tangential to require the support of the community...." Id. at 444, 407 A.2d at 177.

The current "essential governmental function" test was first enunciated in Brattleboro Child Development Inc. v. Town of Brattleboro, 138 Vt. 402, 416 A.2d 152 (1980), in which a day care center argued that it qualified for tax-exempt status on the ground that, by caring for the children of working parents, it rendered a benefit to the public generally. The Court upheld the trial court's determination that the services provided by the plaintiff were "essentially private" in nature, concluding that " 'the benefit to the public [was] too tangential to require the support of the community.' " Id. at 408, 416 A.2d at 156 (quoting Vermont Wild Land Found., 137 Vt. at 444, 407 A.2d at 177). In arriving at its ultimate holding, the Court balanced the historical basis of the exemption for the "support of schools and churches believed necessary for the encouragement of settlement in colonial ... Vermont," against "the increasing cost of town and city governments and the services which they provide." Id. at 405, 416 A.2d at 154 (citing Broughton v. Town of Charlotte, 134 Vt. 270, 272-73, 356 A.2d 520, 522 (1976), and Experiment in Int'l Living v. Town of Brattleboro, 127 Vt. 41, 50, 238 A.2d 782, 788 (1968)). See generally Note, Exemption of Educational, Philanthropic and Religious Institutions from State Real Property Taxes, 64 Harv.L.Rev. 288 (1950). In the course of its opinion, the Court stated that in order to claim tax-exempt status under 32 V.S.A. § 3802(4), a plaintiff must "assume a burden of the municipality to provide a service which the legislature has determined to be an essential governmental function." Brattleboro Child Dev., 138 Vt. at 406, 416 A.2d at 155. ³ As will be discussed in the next section of this opinion we believe such a criterion unjustifiably narrows the basis for which tax-exempt status as a public use under § 3802(4) may be claimed.

Finally, the "essential governmental function" test was most recently applied in Ski-Lan Gymnastics & Performing Arts Educational Foundation, Inc. v. City of Rutland, 143 Vt. 294, 465 A.2d 1363 (1983), wherein the Court denied an exemption to a school that taught children gymnastics and the performing arts. The Court held that plaintiff was not entitled to an exemption because it had "assumed no burden of the municipality which the legislature has determined to be an essential governmental function." Id. at 297, 465 A.2d at 1365. As further justification for its decision, the Court declared that the plaintiff's request for an exemption would be denied because "plaintiff's services provide[d] an essentially private benefit to a limited class of persons...." Id.

Considering the previous history of the law in this area of...