Catholic Health Init. Color. v. City of Pueblo, 05CA2432.

• Decision Date: 06 September 2007
• Docket Number: No. 05CA2432.,05CA2432.
• Citation: 183 P.3d 612
• Parties: CATHOLIC HEALTH INITIATIVES COLORADO, d/b/a Villa Pueblo Towers, Plaintiff-Appellant, v. CITY OF PUEBLO, Colorado, Department of Finance, and Lara Barett as Director, Defendants-Appellees.
• Court: Colorado Court of Appeals

183 P.3d 612

CATHOLIC HEALTH INITIATIVES COLORADO, d/b/a Villa Pueblo Towers, Plaintiff-Appellant, v. CITY OF PUEBLO, Colorado, Department of Finance, and Lara Barett as Director, Defendants-Appellees.

No. 05CA2432.

Colorado Court of Appeals, Div. I.

September 6, 2007.

Certiorari Granted May 27, 2008.

Kutak Rock, LLP, Mark L. Sabey, Denver, Colorado, for Plaintiff-Appellant.

Law Offices of Thomas E. Jagger, Robert P. Jagger, John G. Scorgie, Pueblo, Colorado, for Defendants-Appellees.

Opinion by Judge MÁRQUEZ.

Catholic Health Initiatives Colorado appeals the trial court's judgment denying it a City of Pueblo sales and use tax exemption for its retirement community because it was not engaged in a religious activity. We reverse.

According to the stipulated facts, Catholic Health owns and operates Villa Pueblo. Villa Pueblo is a continuing care retirement community in Pueblo providing different levels of care for elderly residents, including general elder support, assisted living, and skilled nursing care.

Catholic Health applied to the city for a sales and use tax exemption as a charitable and religious organization, but the application was denied. When the city audited the operations of Villa Pueblo and issued a notice of assessment for sales and use tax, Catholic Health protested the assessment. The city issued a final determination in the amount of $22,587.68, but Catholic Health claimed to be entirely exempt from the sales and use tax.

On appeal, the Executive Director of the Colorado Department of Revenue found that the exemption for religious or charitable organizations did not apply and the city was entitled to its assessment.

Catholic Health appealed to the trial court pursuant to § 29-2-106.1(7), C.R.S.2006, but only on the claim that the operation of Villa Pueblo is a religious activity of a religious organization.

Catholic Health and the city waived the right to a trial and submitted the case to the trial court on stipulated facts. In part, those facts included the following as to Catholic Health's status as a tax exempt religious organization: Catholic Health is a religious organization affiliated with the Roman Catholic Church; Catholic Health operated its senior care facilities, including Villa Pueblo, at a net loss for the period July 1, 1997 through May 31, 2004; to Catholic Health, providing housing and care for the elderly is a religious activity motivated by religious belief; Catholic Health's facilities are managed and operated by Centura Health Corporation, a Colorado not-for-profit corporation; Catholic Health is a tax exempt not-for-profit religious organization under § 501(c)(3) of the Internal Revenue Code; Catholic Health and Villa Pueblo are listed in the Official Catholic Directory; the Internal Revenue Service determined that all institutions listed in the Official Catholic Directory were exempt from federal income tax under § 501(c)(3); Catholic Health's bylaws require it to operate in accordance with the Ethical and Religious Directives for Catholic Health Care Services approved by the Committee on Doctrine of the National Conference of Catholic Bishops; Catholic Health provides services and advocates for the elderly in accordance with its mission, and providing care and housing for the elderly is part of the religious mission of the Catholic Church; Catholic Health instructs new employees in orientation about the meaning of its religious mission, and all employees are required to support that religious mission and follow religious directives of the Catholic Church related to their jobs; and Catholic Health provides extensive leadership training for its managers regarding the religious mission and ministry.

The parties also stipulated to, among other things, the following facts about the operation of Villa Pueblo: Villa Pueblo is operated by Catholic Health Initiatives Colorado as part of the health care apostolate of the Catholic Church; Villa Pueblo is a continuing care retirement community with the average age of all residents being approximately eighty-seven years old; monthly fees for independent units range from $1130 to $2347, and assisted living and nursing care facility rates are higher; from mid-1997 through mid-2000, approximately fifty percent of the residents of Villa Pueblo paid market rates for their accommodations, while the remaining fifty percent were on life care contracts; Villa Pueblo is losing money on its life care contract program; Villa Pueblo admits residents who are unable to pay the normal and customary charges; Villa Pueblo holds itself out to the general public as a religious organization; Villa Pueblo pays for an on-site chaplain who is available twenty-four hours a day, seven days a week; the chaplain interviews and completes a spiritual assessment for all residents admitted into the assisted living and skilled nursing units to create an individual spiritual care plan; Villa Pueblo facilities include a chapel for use by residents and staff for worship and meditation; the chaplain conducts Sunday vesper services for residents and staff; mass is conducted every Sunday, and a midweek Episcopal service is also held; Villa Pueblo arranges special, additional on-site worship services such as a Blessing of the Hands service where nurses and other associates are invited to have their hands blessed with oil; and employees of Villa Pueblo are required to respect and uphold the religious mission of Villa Pueblo and adhere to Catholic Church directives.

Because the parties stipulated that Catholic Health is a religious organization and is certified by the IRS as a not-for-profit organization under § 501(c)(3) of the Internal Revenue Code, Catholic Health met the charitable organization definition under Pueblo's municipal code. Therefore, the only issue for the trial court was whether the operation of Villa Pueblo is a religious activity or function.

After reviewing the stipulated facts and briefs and hearing oral argument, the trial court concluded that operation of the retirement community was not a religious activity. The trial court found:

I accept . . . the stipulated facts as they have been set out. . . . I . . . appreciate that it is expensive to operate a facility such as Villa Pueblo and that the family members of the folks who live there are very appreciative of the obviously superior care they get at that facility, but my question is, is this a religious activity that would trigger constitutional safeguards? Instead I find that it is a community of like-minded citizens who have chosen to conclude their lives in a community of similarly situated souls. The activity of moving into Villa Pueblo, whether the assisted living portion, the independent living portion, the condominiums, [or] the apartments, is not a religious activity. [sic] It is a charitable deed on the part of the Catholic church as all religions are admonished to do by statements in the new testament.

In order for . . . me to find that the First Amendment Rights of the Catholic church would prevent the City of Pueblo from collecting [its] sales and use tax, I would have to find that religion must prevail [sic] the activities of the institution and I cannot. Certainly it is true that people there are urged to pray with, communicate with, and encourage religious activities; however, religion does not prevail [sic] the organization or institution so as to prevent people who disagree from living in the residence.

Thus, the court found that the First Amendment rights of the Catholic Church did not prevent collection of the sales and use tax. The court further ruled that "[t]he religious exemptions will apply to regularly . . . related religious functions, and other than that, for all secular functions, like refrigerators and stoves, Villa Pueblo must pay sales and use tax to the City of Pueblo when applicable."

I. Standard of Review

An appeal to the district court pursuant to § 29-2-106.1(7) is a trial de novo. Section 39-21-105, C.R.S.2006. A decision of the district court is reviewable by this court "as is otherwise provided by law." Section 39-21-105(7), C.R.S.2006.

We review the construction of a city ordinance de novo. When construing an ordinance, we give the ordinance its plain and ordinary meaning whenever possible. See Bumbal v. Smith, 165 P.3d 844 (Colo. App.2007).

Our primary task when interpreting an ordinance is to determine and give effect to the intent of the body enacting it. We are not bound by a trial court's interpretation of a city ordinance. Int'l Paper Co. v. Cohen, 126 P.3d 222, 226 (Colo.App.2005).

Here, review is based on stipulated facts. When a judgment is entered on stipulated facts and documentary evidence, we are obligated to make an independent judgment on the merits. Bolser v. Bd. of Comm'rs, 100 P.3d 51, 53 (Colo.App.2004).

II. Religious Activity

Catholic Health contends that its operation of Villa Pueblo is a religious activity and that the trial court did not apply the proper test. Catholic Health argues that because it is motivated by religious beliefs, its activities are religious and that religious activities include more than formal worship services. It also asserts that government officials cannot determine what constitutes a valid religious practice or belief. The city does not question Catholic Health's religious motives. Rather, it asserts that most of the operations of Villa Pueblo are substantially identical to the operations of many other retirement, assisted living, and nursing home facilities which are admittedly subject to the municipal sales and use tax. It acknowledges that Villa Pueblo is entitled to exemption on purchases and sales directly related to facets of its operation that are religious in nature but asserts that all such partial exemptions were granted.

Contrary to the trial court's ruling and the city's argument, we conclude that the entire operation of Villa Pueblo is a religious activity. To address...