City of Lewiston v. Marcotte Congregate Housing, Inc.

• Decision Date: 05 March 1996
• Docket Number: No. 7568,Docket No. AND,7568
• Citation: 673 A.2d 209
• Parties: CITY OF LEWISTON v. MARCOTTE CONGREGATE HOUSING, INC. DecisionLaw95 372.
• Court: Maine Supreme Court

Page 209

673 A.2d 209

CITY OF LEWISTON v. MARCOTTE CONGREGATE HOUSING, INC.

Decision No. 7568.

Law Docket No. AND 95 372.

Supreme Judicial Court of Maine.

Argued Jan. 2, 1996.

Decided March 5, 1996.

Bryan M. Dench (orally), Ronald P. Lebel, Skelton, Taintor & Abbott, Auburn, for Plaintiff.

John Geismar, Susan E. Oram (orally), Isaacson & Raymond, Lewiston, for Defendant.

Before WATHEN, C.J., and ROBERTS, GLASSMAN, RUDMAN, DANA, and LIPEZ, JJ.

GLASSMAN, Justice.

Marcotte Congregate Housing, Inc. (MCH) appeals from the judgment entered in the Superior Court (Androscoggin County, Marden, J.) vacating the decision of the State Board of Property Tax Review determining that, pursuant to 36 M.R.S.A. § 652(1)(A) & (J) (1990 & Supp.1995), ¹ a portion of one of MCH's properties and the entirety of another of its properties are exempt from taxation. MCH contends that because the Board properly applied the statute by granting the exemptions, the trial court erred in vacating the Board's decision. We affirm the judgment.

The record reveals the following pertinent facts: MCH is a non-profit corporation organized under the law of Maine. It owns two parcels of real estate that are the subject of the instant appeal: (1) a five-story multiple use building that houses a congregate care facility, a kitchen and cafeteria, a chapel, and various office and storage spaces (the building), and (2) a tunnel that connects the building to St. Mary's Regional Medical Center.

In 1992, the City of Lewiston (City) issued tax bills imposing real estate taxes on the building and the tunnel. ² In response, MCH submitted to the City two applications for abatement of the assessed taxes, claiming the properties were exempt pursuant to 36 M.R.S.A. § 652(1)(A) and (J). Following the City's denial of the applications, MCH filed two petitions for assessment review with the Board.

After hearings on the petitions, ³ the Board determined that MCH qualifies, for purposes of 36 M.R.S.A. § 652(1), as an institution organized and conducted exclusively for benevolent and charitable purposes. ⁴ The Board found that the building contains 110 residential units that are leased pursuant to a United States Housing and Urban Development Housing Assistance Payments Contract administered by the Lewiston Housing Authority and an additional 18 residential units that are leased to low-income and disabled elderly tenants at market rental rates without federal subsidies. The Board further found that in addition to containing these congregate housing units, the building also contains (1) storage space that is leased at market rental rates to the Sisters of Charity Health System, Inc., Campus Cuisine, Inc., St. Mary's Regional Medical Center, and Marcotte Nursing Home; ⁵ (2) a kitchen and cafeteria space that is leased at market rental rates to Campus Cuisine; and (3) office space that is leased at market rental rates to Sisters of Charity, Campus Cuisine, and private physicians. ⁶ Based on these findings of fact, the Board concluded that the dominant use of the building is to provide federally subsidized housing for low-income and disabled elderly tenants. Accordingly, the Board determined that 82 percent of the building is tax exempt pursuant to 36 M.R.S.A. § 652(1)(A) and (J), and that the remaining 18 percent, representing the physicians' offices and the nonsubsidized congregate housing units, is taxable.

With respect to the tunnel, the Board found that it is used to transport meals and patients from the building to St. Mary's Regional Medical Center. It determined that this use is incidental to the use of the building and that therefore the entire tunnel property is tax exempt.

From the Board's decision concluding that a portion of the building and all of the tunnel are exempt from taxation, the City sought review by the Superior Court pursuant to 5 M.R.S.A. § 11002 and M.R.Civ.P. 80C. MCH filed a cross-petition for review in which it asserted the Board erred in finding 18 percent of the building to be taxable. After a hearing, the trial court concluded that MCH qualifies as a benevolent and charitable organization for tax exemption purposes but that the building and tunnel are used in such a manner as to not be exempt. From the judgment entered accordingly, MCH appeals.

I

When, as here, the Superior Court acts in the capacity of an appellate tribunal, "we review directly the decision of the Board for abuse of its discretion, error of law or findings unsupported by substantial evidence in the record." IBM Credit Corp. v. City of Bath, 665 A.2d 663, 664 (Me.1995) (citing Town of Vienna v. Kokernak, 612 A.2d 870, 872 (Me.1992)). It is well settled that "a strict construction of the exemption statute is appropriate ... because of the basic principle, upon which we have repeatedly relied, that 'taxation is the rule and tax exemption is the exception.' " Connecticut Bank & Trust Co., N.A. v. City of Westbrook, 477 A.2d 269, 271 (Me.1984) (quoting Silverman v. Town of Alton, 451 A.2d 103, 105 (Me.1982)). Accordingly, for MCH to prevail on its appeal, it must bring its claim "unmistakably within the spirit and intent of the act creating the exemption." Episcopal Camp Found. Inc., v. Town of Hope, 666 A.2d 108, 110 (Me.1995) (quoting Holbrook Island Sanctuary v. Town of Brooksville, 161 Me. 476, 483, 214 A.2d 660, 664 (1965) (citations omitted)).

II

To qualify for an exemption pursuant to sections 652(1)(A) and (J), MCH must establish that it is "organized and conducted exclusively for benevolent and charitable purposes." 36 M.R.S.A. § 652(1)(C)(1) (Supp.1995). The Board determined that MCH satisfies this requirement, and the City contends such determination constitutes error.

As stated in its articles of incorporation, MCH "is organized exclusively for charitable, religious, educational and scientific purposes." Such purposes include, inter alia, (1) "function[ing] as an integral part of ... a Roman Catholic religious congregation ... engaged in providing for the health, social and spiritual needs of people through apostolic and charitable services"; (2) owning and operating hospitals, nursing homes, congregate housing and other such facilities "for the care, treatment and healing of human ailments and prevention of disease"; and (3) "coordinat[ing] activities of affiliate and subsidiary organizations ... as those organizations pursue their charitable, religious, educational, scientific and other purposes...." MCH is controlled by the Sisters of Charity, its sole corporate member, which in turn is controlled by the Covenant Health Systems, Inc., a Massachusetts nonprofit corporation. No part of MCH's net earnings inure to the benefit of any private individual, and, except for reasonable compensation for services rendered, none of its income is distributed to its members, directors, or officers.

In determining whether an organization is organized and conducted exclusively for benevolent and charitable purposes, we recently described a charity to be

for the benefit of an indefinite number of persons, either by bringing their minds or hearts under the influence of education or religion, by relieving their bodies from disease, suffering, or constraint, by assisting them to establish themselves in life, or by erecting or maintaining public buildings or works or otherwise lessening the burdens of government.

Episcopal Camp Found., 666 A.2d at 110 (quoting Johnson v. South Blue Hill Cemetery Ass'n, 221 A.2d 280, 287 (Me.1966)). We conclude that MCH falls within the above description. We also conclude that, contrary to the City's contention, neither MCH's religious purposes nor its corporate affiliation with religious organizations removes it from the purview of the tax exemption statute. See Episcopal Camp Found., 666 A.2d at 108 (Episcopal Camp Foundation qualified for exemption despite stated purpose "to maintain camps ... which will carry on moral, cultural, religious and recreational training and education...."); Green Acre Baha'i Inst. v. Town of Eliot, 150 Me. 350, 352, 110 A.2d 581 (1954) (organization qualified for exemption despite stated purpose to, inter alia, "conduct educational facilities ... for the exposition of spiritual truths, principles and religious precepts based upon the extent and available sacred literature of all revealed faiths, with particular reference to the Baha'i teachings on progressive revelation, religion, unity, and the oneness of mankind...."); Town of Poland v. Poland Spring Health Inst., Inc., 649 A.2d 1098 (Me.1994) (organization qualified for tax exemption despite operating properties...