Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Com'n of Missouri

• Decision Date: 16 April 1984
• Docket Number: No. 65058,65058
• Citation: 669 S.W.2d 548
• Parties: EVANGELICAL RETIREMENT HOMES OF GREATER ST. LOUIS, INC., d/b/a Friendship Village of West County, Appellant, v. STATE TAX COMMISSION OF MISSOURI, et al., Respondents.
• Court: Missouri Supreme Court

Page 548

669 S.W.2d 548

EVANGELICAL RETIREMENT HOMES OF GREATER ST. LOUIS, INC., d/b/a Friendship Village of West County, Appellant, v. STATE TAX COMMISSION OF MISSOURI, et al., Respondents.

No. 65058.

Supreme Court of Missouri,

En Banc.

April 16, 1984.

Rehearing Denied May 15, 1984.

Carroll J. Donohue, Fred A. Eppenberger, Carol A. Rutter, St. Louis, for appellant.

Dennis C. Affolter, Thomas W. Wehrle, Clayton, for respondents.

John B. Williams, Michael F. Dandino, Ulysses Clayborn, Kansas City, and Thomas E. Tueth, St. Louis, amicus curiae.

GUNN, Judge.

The subject of this appeal is the charitable tax exemption status of a retirement home for a particular category of persons 62 years of age or older. The State Tax Commission denied tax exemption status of certain property of appellant, Evangelical Retirement Homes of Greater St. Louis, Inc. Appeal to the Circuit Court of St. Louis County affirmed the Tax Commission, and the matter is lodged in this Court which has exclusive jurisdiction by virtue of the involvement of the construction of state revenue laws. Mo. Const. art. V, § 3.

Evangelical Retirement Homes of Greater St. Louis, Inc. (Evangelical), is a not-for-profit Missouri corporation, organized under Chapter 355, RSMo 1978. It owns and operates a retirement home located in St. Louis County which was placed on county real and personal property tax rolls in 1978. Evangelical thereafter filed a complaint for review of assessment with the State Tax Commission (Commission) claiming exemption for the home as "property ... actually and regularly used exclusively ... for purposes purely charitable and not held for private or corporate profit ...." Section 137.100(5), RSMo 1978.

After a hearing and relying on Franciscan Tertiary Province of Mo., Inc. v. State Tax Commission, 566 S.W.2d 213 (Mo. banc 1978), the Commission issued its order affirming the assessment, concluding that the home's services to its residents did not directly or indirectly benefit society, and as a result, the home did not qualify for tax-exempt status.

On review, the circuit court affirmed the Commission. We, too, affirm the Commission, and follow and reaffirm the guideposts on this subject established in Franciscan.

Evangelical's attack on the judgment is four-fold: first, that the circuit court erroneously applied the wrong standard of review in failing to exercise its independent judgment in light of the evidence; second, that the Commission erroneously construed § 137.100(5), by taking into account the financial status of the home's elderly residents; third, that the evidence demonstrates Evangelical's compliance with the requirement for tax-exempt status under a proper construction of § 137.100(5); and, fourth, that the circuit court erroneously concluded that the appeal was not effective for the 1978 tax year.

The following facts are supported by competent and substantial evidence appearing in the record. The property owned by Evangelical contains residential and non-acute medical care facilities, with various service and recreational facilities. Admission is available only upon application to the governing board, and applicants must meet certain requirements. They must be 62 years of age or older, in reasonably good health and able to care for themselves at the time of admission. Applicants must have sufficient monthly income to cover a monthly fee of between $358 and $530 and any personal needs not provided by the home. The home provides one daily meal without extra charge; any others are paid for by the residents. Applicants are required to be covered both by Medicare (parts "A" and "B") and by supplemental health insurance acceptable to Evangelical. Prospective residents must also have sufficient assets to pay an initial endowment of between $20,000 and $40,000 (depending on the size of the residential unit), with an equivalent amount of additional assets remaining in reserve. In this regard, the residents can scarcely be categorized as sybarites; living "comfortably" would be a more apt expression.

Once admitted, residents are entitled to the use of their apartment and the common facilities of the home for life or until the residential agreement is terminated by either the resident or Evangelical. It is the policy of Evangelical, as stated in the agreement, not to terminate a residency "solely because of the financial inability of a resident to pay the monthly fee." However, this policy is expressly conditioned upon the resident's establishing facts sufficient to justify a waiver. Moreover, any waiver is subject to the sole discretion of Evangelical to determine that there would not be any impairment of its ability to operate the facility on a sound financial basis. Additionally, Evangelical retains the right under the agreement to terminate a resident for failure to pay any monthly fee when due unless other mutually satisfactory arrangements have been made. Residents may also be terminated as a result of physical disease for which the home is not licensed to provide medical care. The home does not maintain acute care facilities.

Waiver of fees in individual circumstances has occurred, but such waivers have never aggregated more than one per cent of the home's gross monthly income. At the time of the hearing, Evangelical was discounting the fees of a single financially distressed resident to the sum of $800. This was out of total 1980 budget revenues of $3,175,550 and expenses of $3,057,289.

Evangelical's first argument, that the circuit court erred in applying the wrong standard of review, is not supported by the definitive role of the reviewing court under § 536.140, RSMo 1978. Under that section, the circuit court's affirmance of an administrative decision or order may not be reversed on subsequent appeal solely on the basis of an error of law committed by the circuit court which is unrelated to the merits of the appeal. The reviewing court reviews the findings and decision of the administrative agency and not the judgment of the circuit court. Fleming Foods of Mo., Inc. v. Runyan, 634 S.W.2d 183, 184 (Mo. banc 1982). A circuit court may apply the wrong standard of review, yet arrive at the correct results on the merits of the appeal. In that case, the attention of the appellate court sitting in review is properly focused on the validity of the agency's order, under the appropriate standard of review, rather than on the standard which the circuit court chose to employ.

Evangelical is correct in asserting that there are two distinct and mutually exclusive standards of review provided by § 536.140 and that its challenge to the Commission's order must, at least in part, be judged under the second of these two standards.

The general standard of review in administrative appeals is found in § 536.140.2. ¹ Under that subsection, review is ordinarily limited to a determination of whether the agency's action was supported by competent and substantial evidence upon the whole record or whether it was arbitrary, capricious, unreasonable, unlawful or in excess of its jurisdiction. Ross v. Robb, 662 S.W.2d 257, 259 (Mo. banc 1983); Barnes Hospital v. Missouri Commission on Human Rights, 661 S.W.2d 534, 535 (Mo. banc 1983).

However, subsection 536.140.3 provides an alternative standard of review in cases where act complained of "involves only the application by the agency of the law to the facts." Section 536.140.3, RSMo 1978. In such case, "the [reviewing] court may weigh the evidence for itself and determine the facts accordingly," although "[i]n making such determination the court shall give due weight to the opportunity of the agency to observe the witnesses, and to the expertness and experience of the particular agency." Id.; Missouri Church of Scientology v. State Tax Commission, 560 S.W.2d 837, 838 (Mo. banc 1977), appeal dismissed, 439 U.S. 803, 99 S.Ct. 57, 58 L.Ed.2d 95 (1978). This standard of review is applicable to cases in which the appellant challenges the construction of law or legal standard applied to it by an administrative agency. Scientology, supra. It allows the reviewing court to resolve factual issues where it has been successfully urged by appellant that the legal standard applied by the agency was incorrect. Bergman v. Board of Trustees of Firemen's Retirement System, 425 S.W.2d 143, 147 (Mo.1968); Guntli v. McLeod, 646 S.W.2d 899, 901 (Mo.App.1983); see also, Bank of Crestwood v. Gravois Bank, 616 S.W.2d 505, 518 (Mo. banc 1981) (Rendlen, J., dissenting).

Evangelical's challenge to the construction placed on § 137.100(5) by the Commission invokes this latter standard of review. However, Evangelical is unable to demonstrate either the merits of its construction of the statute or the inadequacy of the Commission's. Therefore, Evangelical's argument may be answered without the need for an independent determination of the facts under § 536.140.3.

On the merits of the case, the substance of Evangelical's argument is that in determining the charitable nature of the use to which the subject property was put the Commission improperly focused upon the financial status of the home's residents. Instead, Evangelical suggests that the provision of residential and other services to the elderly, at cost or less, is necessarily a charitable activity. This argument is not supported by the applicable precedents.

In Franciscan Tertiary Province, supra, this Court overruled a line of cases which applied a distinct standard for determining charitable tax-exempt status to homes for the elderly, separate from that applied to all other activities and services. ² In doing so, a construction of § 137.100(5) was rejected that would have required a home for the aged qualifying for tax exemption to show that its services were provided only to the indigent, the infirm or those who would otherwise be burdens on society or the government. Franciscan, 566 S.W.2d at 218. Instead, this Court reversed the Commission's...