Care Institute, Incorporated-Maplewood v. County of Ramsey, C5-97-1492

• Decision Date: 09 April 1998
• Docket Number: No. C5-97-1492,C5-97-1492
• Citation: 576 N.W.2d 734
• Parties: CARE INSTITUTE, INC.-MAPLEWOOD, an Indiana nonprofit corp., Relator, v. COUNTY OF RAMSEY, Respondent.
• Court: Minnesota Supreme Court

Page 734

576 N.W.2d 734

CARE INSTITUTE, INC.-MAPLEWOOD, an Indiana nonprofit corp., Relator, v. COUNTY OF RAMSEY, Respondent.

No. C5-97-1492.

Supreme Court of Minnesota.

April 9, 1998.

Syllabus by the Court

1. The doctrines of collateral estoppel and stare decisis do not bar respondent from claiming that relator is not exempt from Minnesota's property tax as an institution of purely public charity.

2. The record adequately supports the tax court's conclusion that the relator is not exempt from Minnesota's property tax as an institution of purely public charity under Minn. Const. art. X, § 1 and Minn.Stat. § 272.02, subd. 1(6) (1996).

Maun & Simon, PLC, Richard M. Gaalswyk, St. Paul, for relator.

Susan Gaertner, Ramsey County Atty., David F. Macmillan, Asst. County Atty., for respondent.

Heard, considered, and decided by the court en banc.

OPINION

PAGE, Justice.

Pursuant to Minnesota Statutes Chapter 278 (1996), relator Care Institute, Inc.-Maplewood ("Care"), a nonprofit corporation, filed petitions with the tax court challenging respondent Ramsey County's 1995 and 1996 tax assessments of Care's real property, consisting of a 100-unit assisted living facility located at 1200 Lakewood Drive, Maplewood, Minnesota. The petitions were filed in Ramsey County District Court and then transferred to the tax court pursuant to Minn.Stat. § 271.01, subd. 5 (1996). Specifically, Care's petition, while not contesting the County's valuation of the property, claimed that Care was entitled to a tax exemption as an institution of purely public charity pursuant to Minn. Const. art. X, § 1 ¹ and Minn.Stat. § 272.02, subd. 1(6) (1996). ² The tax court held that Care was not an institution of purely public charity and that Care's constitutional rights to equal protection of the laws and uniformity of taxation were not violated. This court granted Care's petition for certiorari.

As it did at the tax court, Care argues that collateral estoppel and stare decisis should operate to bar the County's claim that Care is not exempt from taxation as an institution of purely public charity. Alternatively, Care argues: (1) that the tax court erred in concluding that Care was not an institution of purely public charity; and (2) that Care's rights to equal protection of the laws and uniformity of taxation were violated because the County singled out Care's Maplewood property for a rigid application of the charitable institution factors identified in North Star Research Institute v. County of Hennepin, 306 Minn. 1, 236 N.W.2d 754 (1975). We affirm.

Care is affiliated with seven nonprofit corporations, ³ three in Minnesota and four in other states, engaged in the operation of similar assisted living facilities. Each of these nonprofit corporations is a separate legal entity. Each of the Minnesota nonprofit corporations is managed by a separate for-profit management company. One of the Minnesota nonprofit corporations, Care Institute, Inc.-Roseville, was the subject of a Chapter 278 proceeding decided on February 2, 1996, by a different tax court judge. Care Institute, Inc. v. County of Ramsey, File No. C9-95-563, 1996 WL 45908 (Minn. Tax Ct. Feb. 2, 1996). In that proceeding, the tax court determined that Care Institute Inc.-Roseville was an institution of purely public charity and was therefore entitled to a property tax exemption under Minn.Stat. § 272.02, subd. 1(6). That decision was not reviewed by this court.

Care's facility was constructed in 1994 at a cost of $6,309,985 on land purchased for $600,400. The facility was financed by tax exempt revenue bonds which have a face value of $11,830,000 issued by the City of Maplewood with repayment of the bonds to be funded by the facility's operations. The facility opened in January 1995 and Care's operating expenses for the facility that year, excluding debt service, were $930,022. In 1996, revenue was $2,142,199 and operating expenses were $1,548,808. However, once debt service is accounted for, Care's net assets decreased $1,307,253 in 1995, and $828,657 in 1996.

The facility is an assisted living facility developed around the concept of affording complete nursing home services to residents in a less institutional setting than a traditional nursing home. The facility has 100 individual apartment units, complete with kitchens and full bathrooms. Each unit is carpeted and handicap accessible, as are the facility's common areas. An emergency help system is available on-site, providing home health care workers who give residents assistance as needed. The apartment units are rented on a monthly basis and the rental fee is calculated at market rates and intended to cover the cost of all services and amenities provided by the facility, including: use of the apartment and common area lounges, utilities, local telephone service, basic cable television, weekly housekeeping, the emergency help system, two meals per day, use of washing machines and dryers, off-street parking, heating and air conditioning, social programs, transportation to shopping and social events, social service case management, three care conferences per year, a weekly clinic by a home health care agency, as well as dietary, prescription, and psychiatric consultations. The average age of the facility's residents is 83-years-old and 80% have some form of Alzheimer's disease or dementia. To protect residents from wandering away from the facility, security doors have been installed.

The facility employs three licensed social workers, two therapeutic recreational therapists, and a bookkeeper. Care provides an apartment at the facility for the "Courage Center" where, for a fee, physical, occupational, and speech therapists work with residents. Health care is provided to the residents, for a fee, by a third-party for-profit licensed home health care agency and by individuals employed by the residents themselves.

Several individuals, religious entities, and schools have donated time to the facility, helping with bingo, conducting religious services, providing one-on-one assistance such as letter writing, and engaging in other activities with residents. A total of $110 in cash was donated to Care's facility during 1995 and 1996. A flag, bench, cellular telephone, and hospital bed, along with a two-night hotel stay for use as a fundraising prize, were also donated during that time period. Care Institute, Inc.-Highland included references to Care's facility in its advertising campaign at no cost to Care. While $330,000 was spent on the advertising campaign, the tax court found that only $2,034.66 of that amount was spent on Care's facility. Recreational therapy interns spent more than 900 hours at the facility during 1995 and 1996. Rosewood Estate Management, Inc.-Maplewood, the for-profit company that developed and manages Care's facility, holds a $400,000 non-interest bearing subordinated note from Care. A Minnesota Foundation fund called the Care Institute, Inc.-Maplewood Fund received contributions in the amount of $3,085. All but $35 of that amount was contributed by Care. Care receives a 10% commission from Breaktime Beverage, a vending machine company which has the vending machines contract at the facility. Nurses are provided for clinics and resident care conferences at no extra charge to the residents. However, the cost of these "unbilled" services is built into the fee structure of the home health care agency that provides health care services to the residents.

Care first argues that collateral estoppel bars the County from claiming that Care is not exempt from Minnesota's property tax as an institution of purely public charity under section 272.02, subd. 1(6). Essentially, Care's argument is that its Maplewood facility is so similar in terms of programs, structure, and purpose to Care Institute, Inc.-Roseville's facility, which the tax court found exempt under section 272.02, subd. 1(2), that the County cannot now claim that Care is not exempt from Minnesota's property tax as an institution of purely public charity.

Care's collateral estoppel argument has no merit. The doctrine of collateral estoppel applies when each of the following elements are satisfied:

(1) [T]he issue was identical to one in a prior adjudication; (2) there was a final judgment on the merits; (3) the estopped party was a party or in privity with a party to the prior adjudication; and (4) the estopped party was given a full and fair opportunity to be heard on the adjudicated issue.

Tarutis v. Commissioner of Revenue, 393 N.W.2d 667, 669 (Minn.1986) (citations omitted). In Tarutis, we quoted the United States Supreme Court as follows:

[C]ollateral estoppel in income tax cases "must be confined to situations where the matter raised in the second suit is identical in all respects with that decided in the first proceeding and where the controlling facts and applicable legal principles remain unchanged."

Id. at 669 (quoting Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 599-600, 68 S.Ct. 715, 720, 92 L.Ed. 898 (1948)). While Tarutis was an income tax case, we see no reason to treat property tax cases differently.

The tax court did not apply collateral estoppel here because it found that "[t]he facts of this case, including critical facts such as the identity of the petitioner, the location of the subject property and valuation year are different from the facts of the Care Roseville case." We agree. Clearly, the first and third elements of collateral estoppel have not been met. Care and Care Institute, Inc.-Roseville are separate entities operating separate and distinct facilities in different locations. Further, the controlling facts and the tax year were different in the Care Institute, Inc.-Roseville case. Thus, the issue of whether Care is an institution of purely public charity is not identical to the issue before the tax court in Care Institute, Inc.-Roseville, and, therefore, the doctrine of collateral estoppel does not...