CARE INSTITUTE v. County of Ramsey, C7-99-1868.

• Decision Date: 08 June 2000
• Docket Number: No. C7-99-1868.,C7-99-1868.
• Citation: 612 N.W.2d 443
• Parties: CARE INSTITUTE, INC.-ROSEVILLE, Respondent, v. COUNTY OF RAMSEY, Relator.
• Court: Minnesota Supreme Court

612 N.W.2d 443

CARE INSTITUTE, INC.-ROSEVILLE, Respondent, v. COUNTY OF RAMSEY, Relator.

No. C7-99-1868.

Supreme Court of Minnesota.

June 8, 2000.

Rehearing Denied July 17, 2000.

Considered and decided by the court en banc without oral argument.

OPINION

RUSSELL A. ANDERSON, Justice.

Respondent, Care Institute, Inc.-Roseville (CIIR), an Indiana nonprofit corporation exempt from federal and state income tax, owns and operates Rosewood Estates of Roseville (RER), an assisted living facility for the elderly. At issue in this case is whether CIIR qualifies as a purely public charity exempt from property taxes for tax years 1996, 1997, and 1998. On CIIR's motion for summary judgment, the Minnesota Tax Court held that because it ruled in 1996 that CIIR qualified as an exempt purely public charity for tax year 1994, the doctrines of res judicata and collateral estoppel prevented the county from relitigating CIIR's entitlement to exempt status.¹See Care Inst., Inc.-Roseville v. County of Ramsey, No. C9-96-10374, 1999 WL 714088, at *5 (Minn. Tax Ct. Sept. 3, 1999). The county petitioned for a writ of certiorari and we now reverse the tax court's grant of summary judgment to CIIR and remand for further proceedings consistent with this opinion.

The facts are taken in the light most favorable to the nonmoving party, the county. See DLH, Inc. v. Russ, 566 N.W.2d 60, 72 (Minn.1997). RER is an assisted living facility for the elderly, and part of CIIR's mission is to meet the housing, health and financial security needs of the elderly. In the period 1996 to 1999 base rents ranged from $1,470 to $3,885 per month, considerably higher than rents at comparable facilities that have been granted exempt status. While CIIR set aside two units for reduced or no rent for people unable to pay anything beyond health care charges, and reduced rent for other residents, RER's occupancy rate fluctuated between 83 percent and 100 percent over the period 1996-1999.

Services in the rental agreement include: the apartment, breakfast and evening meals, up to 60 minutes per week of housekeeping, laundry facilities, all utilities except long distance telephone service, basic cable television, facility security system², emergency response, social work case management, psychiatric consultation, house physician consultation, weekly nurses mini-clinic, dietary consultation, use of common space for family gatherings, and maintenance. Other services are provided at an additional fee. CIIR receives contributions in the form of volunteer work, reduced administrative and management fees and donations. According to the county, donations amounted to less than two-tenths of one percent (.2%) of total revenue and less than fifteen one-hundredths of one percent (.15%) of assessed market value. RER consistently operates at a significant deficit.

The facility's operation is administered by Care Institute Group, Inc. (Care Group), an Indiana nonprofit corporation that provides administrative services to RER and seven affiliated Care Institute operations around the country. The director of CIIR is on the board of directors for Care Group. The director does not receive director's fees from CIIR, but is compensated through Care Group. Several of the donations claimed by CIIR were in the form of reduced service fees from Care Group and the forgiveness of a loan from CIIR's management company.

I.

On appeal from a grant of summary judgment, this court must determine whether any genuine issues of material fact exist and whether the lower court erred in its application of the law. See Offerdahl v. University of Minn. Hosps. & Clinics, 426 N.W.2d 425, 427 (Minn.1988). In addition, we review tax court decisions to determine if the decision is supported by the evidence and in conformity with the law, and to determine if errors of law were committed. See Minn.Stat. § 271.10, subd. 1 (1998); Community Mem'l Home at Osakis, Minn., Inc. v. County of Douglas, 573 N.W.2d 83, 86 (Minn.1997) (Osakis). The application of the doctrine of res judicata is a question of law that we review de novo. See, e.g., BAACT Corp. v. Executive Aero, Inc., 312 Minn. 143, 145-46, 251 N.W.2d 107, 109 (1977); First & Am. Nat'l Bank v. Higgins, 208 Minn. 295, 319, 293 N.W. 585, 597 (1940). The determination of whether collateral estoppel is available presents a mixed question of law and fact also subject to de novo review. See Falgren v. State, Bd. of Teaching, 545 N.W.2d 901, 905 (Minn.1996).

In this case the tax court concluded that under the doctrines of res judicata and collateral estoppel the county is barred from relitigating CIIR's status as a purely public charity. Thus, we address whether the tax court committed an error of law in ruling the county was barred from litigating the exemption issue.

II.

To evaluate the application of res judicata and collateral estoppel, we necessarily review the prior adjudication. In 1996, the tax court found that for tax year 1994 CIIR was a purely public charity under Minn.Stat. § 272.02 (1998). See Care Inst., Inc. v. County of Ramsey, No. C9-95-563, 1996 WL 45908, at *3 (Minn. Tax Ct. Feb. 2, 1996). That section sets out property tax exemptions for various public, academic and religious facilities, and includes "institutions of purely public charity." Minn.Stat. § 272.02, subds. 1-8 (1998 & Supp.1999). The term is not defined in statute, but we have described the purpose and practices of a charity:

The legal meaning of the word "charity" has a broader significance than in common speech and has been expanded in numerous decisions. Charity is broadly defined as a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons "by bringing their hearts under the influence of education or religion, by relieving their bodies from disease, suffering, or constraint, by assisting them to establish themselves for life, or by erecting or maintaining public buildings or works, or otherwise lessening the burdens of government."

But it is not safe to say as a universal rule that any gift which tends to promote man's well-being is a charity.

Junior Achievement of Greater Minneapolis, Inc. v. State, 271 Minn. 385, 390, 135 N.W.2d 881, 885 (1965) (quoting 15 Am.Jur.2d Charities § 3).

To determine whether an organization qualifies for the public charity exemption, we analyze the following six factors:

(1) whether the stated purpose of the undertaking is to be helpful to others without immediate expectation of material reward;

(2) whether the entity involved is supported by donations and gifts in whole or in part;

(3) whether the recipients of the "charity" are required to pay for the assistance received in whole or in part;

(4) whether the income received from gifts and donations and charges to users produces a profit to the charitable institution;

(5) whether the beneficiaries of the "charity" are restricted or unrestricted and, if restricted, whether the class of persons to whom the charity is made available is one having a reasonable relationship to the charitable objectives; and

(6) whether dividends, in form or substance, or assets upon dissolution are available to private interests.

North Star Research Inst. v. County of Hennepin, 306 Minn. 1, 6, 236 N.W.2d 754, 757 (1975). The fifth factor includes consideration of whether the operation diminishes the burden on government. See Osakis, 573 N.W.2d at 86-87; Junior Achievement, 271 Minn. at 392,135 N.W.2d at 886. These factors are only guidelines and an organization may still qualify for an exemption even if all six are not satisfied. See Care Inst., Inc.-Maplewood v. County of Ramsey, 576 N.W.2d 734, 738 (Minn.1998) (Maplewood). However, all property is presumed taxable; therefore, the entity seeking exemption bears the burden to prove entitlement. See Camping & Educ. Found. v. State, 282 Minn. 245, 250, 164 N.W.2d 369, 372 (1969). "[T]axation is the rule and exemption is an exception in derogation of equal rights," and therefore exemption provisions are to be strictly construed. Id.

In 1996, the tax court found that CIIR qualified as a purely public charity. See Care Inst., Inc., 1996 WL 45908, at *3. The court found that CIIR was supported in part by donations and gifts, including contributions from affiliated entities. See id. at *4. The court also found that rents were set at a level somewhat below total cost of the benefits provided, meaning that the residents were not required to pay in full for the assistance they received. See id. at *5. Further, the court found that because CIIR did not charge an initiation fee, and reduced rents for those unable to pay the full amount, it did not restrict the class of its beneficiaries. See id. at *6.

Based on these findings, the tax court concluded in its 1996 decision that CIIR qualified as a purely public charity. The county did not appeal that decision. However, when all exempt properties next came up for reevaluation on the county's three-year schedule, the county proceeded to assess property taxes against CIIR for tax years 1996, 1997 and 1998.³ CIIR petitioned the tax court for review and the court concluded that res judicata and collateral estoppel barred the relitigation of CIIR's status.

III.

Under the doctrine of res judicata, parties to an action may be prohibited from raising any matter in a second suit that was or could have been litigated in the first suit. See Youngstown Mines Corp. v. Prout, 266 Minn. 450, 466, 124 N.W.2d 328, 340 (1963). The doctrine applies when the parties to the two actions are the same, the second suit is for the same cause of action, and the original judgment was on the merits. See id. Identity of subject matter does not establish that two claims are the same cause of action. See Maryland Cas. Co. v. Baune, 184 Minn. 550, 552, 239 N.W. 598, 599 (1931). In addition, if the right to assert the second claim did not arise at the same time as the right to assert the first...