Crossroads Church of Prior Lake Mn v. County of Dakota, A10–859.

• Decision Date: 15 April 2011
• Docket Number: No. A10–859.,A10–859.
• Citation: 800 N.W.2d 608
• Parties: CROSSROADS CHURCH OF PRIOR LAKE MN, Relator,v.COUNTY OF DAKOTA, Respondent.
• Court: Minnesota Supreme Court

800 N.W.2d 608

CROSSROADS CHURCH OF PRIOR LAKE MN, Relator,

v.COUNTY OF DAKOTA, Respondent.

No. A10–859.

Supreme Court of Minnesota.

March 2, 2011.Rehearing Denied April 15, 2011.

Syllabus by the Court

A tax-exempt purchaser of real property that did not complete the purchase of the subject property before July 1 in the year of sale did not acquire equitable title to the subject property under Minn.Stat. § 272.02, subd. 38(b) (2010), and therefore is not entitled to a tax exemption for the year of sale.

Valerie LeMaster, John M. Dornik, MacKenzie & Dornik, P.A., Minneapolis, MN, for relator.James C. Backstrom, Dakota County Attorney, Suzanne W. Schrader, Assistant County Attorney, Hastings, MN, for respondent.

OPINION

ANDERSON, PAUL H., Justice.

This appeal arises out of respondent Dakota County's denial of tax exemption for a building purchased by Crossroads Church of Prior Lake. The County concluded that Crossroads did not “acquire” the building before July 1, 2008. Based on this conclusion, the County denied Crossroads' application for a property tax exemption for the year 2008 under Minn.Stat. § 272.02, subd. 38 (2010). Subdivision 38 provides for a property tax exemption in the year of purchase only when the real property is “acquired” by an exempt entity before July 1 of that year. Crossroads brought a property tax appeal petition to the Minnesota Tax Court. That court granted summary judgment in favor of the County, and Crossroads appealed to our court. We affirm.

In early 2008, relator Crossroads Church of Prior Lake was located at a facility in Prior Lake. Because of an increase in Crossroads' membership, the Prior Lake facility was no longer large enough to accommodate the congregation. Crossroads began to search for a building at a new location. It found a suitable building in Burnsville and in early 2008, Crossroads' pastor Craig Johnson entered into negotiations with the building's owners, Heise & Heise, LLC, to purchase the Burnsville property as a replacement church facility. In late January or early February 2008, Crossroads and Heise & Heise apparently reached an oral understanding that Crossroads would purchase the Burnsville property as part of a three-way property exchange that would include two other real estate transactions. The second transaction was to be a purchase of Crossroads' old facility in Prior Lake by Heise & Heise's real estate broker, EFH Realty Advisors. The third transaction was to be a purchase by Heise & Heise of a building owned by Gene Happe, the owner of EFH.

After reaching the oral understanding to purchase the Burnsville property, Crossroads began making preparations to convert the property, which had previously been used for commercial purposes, to a church. Pastor Johnson and the Crossroads board met with architects from two firms to discuss conversion plans. Between February and April 2008, these firms drew up plans for the future church. Some of the plans were made available to Crossroads by March 2, 2008, when it hosted an open house for its congregation at the Burnsville property.

On March 6, 2008, a purchase agreement was drafted to reflect the terms of the oral understanding. The draft purchase agreement provided that Crossroads' offer to purchase the Burnsville property had to be accepted by March 15, 2008, and provided for an earnest money payment of $10,000 by Crossroads. It also stated the closing had to occur by June 1, 2008.

The draft purchase agreement provided that the seller would deliver possession of the property on the date of closing. It also stated:

This Purchase Agreement constitutes the complete agreement between the parties and supersedes any prior oral or written agreements between the parties regarding the property. There are no verbal agreements that change this Purchase Agreement and no waiver of any of its terms will be effective unless in writing executed by the parties.

The draft purchase agreement also contained the following five conditions:

1. Buyer's simultaneous entering into an agreement for sales of property referred to as the “Crossroads Church building” located at 6880 Boudin St., in Prior Lake, Minnesota per the purchase agreement attached hereto as Exhibit B.

2. City of Burnsville's approval of Seller's property for use as a church and the related uses of the Seller.

3. Buyer securing financing necessary to complete the purchase of seller's property.

4. Buyer of purchaser's property securing approval of the City of Prior Lake for it's [sic] intended uses by buyer of the church property including rezoning of the property for Commercial uses.

5. Simultaneous closing of the purchase of this property and the closing of the purchase of the “Crossroads Church Building.”

It appears that the terms of this draft purchase agreement may have been orally accepted by representatives of Crossroads and Heise & Heise by March 15, 2008; but the purchase agreement was not executed until August 2008. The Crossroads congregation voted to approve the purchase of the Burnsville property at a Special Business Meeting on March 30, 2008. Ten days later, on April 10, a Crossroads representative wrote a check for $10,000, which Pastor Johnson delivered to EFH, in its capacity as Heise & Heise's broker. Delivery of the check in this manner was consistent with the draft purchase agreement. The check was not deposited or cashed until August 2008 at the earliest.

By April 14, 2008, Heise & Heise had terminated its operations at the Burnsville property and moved to a new location. Pastor Johnson received a key to the building on April 21, and, between April and August 2008, he and other church staff and volunteers were at the Burnsville property almost daily. During this time, they took several steps to make the new building suitable for use as a church. Pastor Johnson and other Crossroads staff sought and received cost estimates for a communications system, carpets, lighting, and seating. They also made some minor physical alterations to the building, including replacing a door, erecting new signs, and painting parts of the building. Crossroads also sought financing to complete the purchase and obtained a mortgage commitment.

Crossroads also began the process of obtaining the necessary zoning changes to allow the Burnsville property to be used as a church. Crossroads and Heise & Heise petitioned the City of Burnsville for approval of a zoning change, and made the necessary payments connected with this petition. When the Burnsville City Council first discussed the petition on June 17, 2008, the Council noted in its minutes that city staff recommended that the petition be denied. The Council then postponed a vote on the petition. On July 8, 2008, the Council reconvened and voted to approve Crossroads' and Heise & Heise's petition to allow the Burnsville property to be used as a church.

While Crossroads was making the foregoing preparations to finalize the purchase and move into the building, details of the sales of the other properties being transferred as part of the three-way exchange were being completed, as required by the terms of the draft purchase agreement. On August 25, 2008, Crossroads' $10,000 check was deposited into escrow by EFH. Three days later on August 28, representatives of Crossroads, EFH, and Heise & Heise executed the purchase agreement for the Burnsville property. The closing took place eleven days later on September 8. The final purchase price of the Burnsville property was $4,500,000.

In December 2008, Mark Ericson, the accountant and financial secretary for Crossroads, completed, signed, and submitted to the County an application for property tax exemption for the Burnsville property. The application listed “September 2008” as the date that the Burnsville property was “acquired” by Crossroads. After this litigation began, Ericson filed an affidavit, in which he stated that, although Crossroads acquired legal title to the Burnsville property in September 2008, that month did not reflect when Crossroads paid earnest money or acquired possession. Ericson did not, however, assert that Crossroads “acquired” the property in a month different from that which he had originally stated—September 2008.

In March 2009, Crossroads received a $51,918 property tax bill from the County for real estate taxes assessed to the Burnsville property for the full year of 2008, and payable in the first half of 2009. Crossroads brought a property tax appeal petition to challenge this assessment, asserting that the Burnsville property was exempt from taxation. On May 7, 2009, Crossroads also brought a motion, under Minn.Stat. § 278.03, subd. 1 (2010), for permission to prosecute its property tax appeal without paying the first one-half of the 2008 taxes due and payable in 2009.¹ The tax court denied the motion. Crossroads Church of Prior Lake MN v. County of Dakota, No. 19HA–CV–09–2780, 2009 WL 1506968, at *1 (Minn.T.C. May 14, 2009). On September 30, 2009, Crossroads brought a second motion for permission to prosecute its appeal petition without payment of the second one-half of 2008 taxes due and payable in 2009. The tax court also denied this motion from the bench.

On October 12 and 13, 2009, respectively, Crossroads and the County filed motions for summary judgment on the issue of whether Crossroads had “acquired” the Burnsville property before July 1, 2008, and was therefore entitled to tax exemption for the year 2008 under Minn.Stat. § 272.02, subd. 38(b).² On November 10, the tax court held a hearing on the parties' motions for summary judgment. After the hearing, the court requested briefing by the parties on the legislative history and intent with respect to the meaning of the word “acquired” as used in Minn.Stat. § 272.02, subd. 38(b).

On April 13, 2010, after receiving the parties' legislative history briefing, the tax court granted the County's motion for summary judgment and denied Crossroads' motion for summary...