Harmon v. North Pac. Union Conference Ass'n of Seventh Day Adventists, 1060

• Decision Date: 15 December 1969
• Docket Number: No. 1060,1060
• Citation: 462 P.2d 432
• Parties: Lee HARMON, Glenn McKee and Greater Anchorage Area Borough, Appellants, v. NORTH PACIFIC UNION CONFERENCE ASSOCIATION OF SEVENTH DAY ADVENTISTS,Appellee.
• Court: Alaska Supreme Court

Page 432

462 P.2d 432

Lee HARMON, Glenn McKee and Greater Anchorage Area Borough, Appellants, v. NORTH PACIFIC UNION CONFERENCE ASSOCIATION OF SEVENTH DAY ADVENTISTS,Appellee.

No. 1060.

Supreme Court of Alaska.

Dec. 15, 1969.

Warren W. Matthews, Jr., and Charles P. Flynn, of Burr, Pease & Kurtz, Anchorage, for appellants.

William J. Bailey, of Croft & Bailey, Anchorage, for appellee.

Allen McGrath, of McGrath & Wohlforth, Anchorage, for National Board of Missions of the United Methodist Church, Alaska Mission, as amicus curiae.

Before DIMOND, RABINOWITZ and CONNOR, JJ., and MOODY, Superior Court Judge.

CONNOR, Justice.

This case concerns the scope of an exemption of real property from taxation. Under constitutional and statutory provisions which render certain property used for religious purposes exempt from taxation, appellee claims exemption from taxes assessed by the Greater Anchorage Area Borough. ¹ The borough asserts that the property is not exempt from taxation.

Appellants assessed real property taxes for the calendar year 1965 on three parcels of residential property owned by the appellee. These will be referred to as follows:

Parcel 1

702 Barrow Street-residence of A. C. Reed. Mr. Reed is a minister of the Seventh Day Adventist Church. He is the assistant to J. C. Hanson, and is also the treasurer of appellee's statewide operations.

Parcel 2

134 East Seventh Avenue-residence of David Kuebler. Mr. Kuebler is not a minister of the church, and his position is that of principal of appellee's parochial school and teacher in the 9th and 10th grades.

Parcel 3

111 East Seventh Avenue-residence of J. C. Hanson. Mr. Hanson is the president of appellee's statewide operations, and is also a minister in appellee church.

Parcels 1 and 2 are located in close proximity to appellee's Alaska Mission. Parcel 3 is located next to the church building of appellee. All of the parcels are located within the same block in Anchorage, Alaska.

In addition to being used as residences, it is stated that the dwellings on these parcels of property are used for counseling, social gatherings of a church nature, and as residences by visiting members and staff of the church when they attend conferences at Anchorage.

It is the policy of appellee to provide housing for all of its employees in Alaska, whether or not it designates them as ministers. For example, one of the secretaries of appellee occupies an apartment contained in the residence of Mr. Hanson on Parcel 3.

Appellee's statewide operations are extensive. It operates ten schools in the State of Alaska, only one of these being within the Greater Anchorage Area Borough. It operates nine organized churches and five organized church companies. None of the organized companies is in the Greater Anchorage Area Borough, and only one of the organized churches is within the borough. Neither the physical church building located in the Greater Anchorage Area Borough nor the home of the pastor of the local congregation is taxed by the borough.

The assessments were appealed by the appellee to the board of equalization of the borough. This appeal was denied by the board on April 5, 1965; and on May 17, 1965, appellee brought an action for a declaratory judgment asserting that these properties were exempt from taxation.

Appellants moved to dismiss on the grounds that appellee had not appealed to the superior court under AS 29.10.426, providing for appeals from the determinations of boards of equalization, and that appellee should not be allowed to collaterally attack the decision of the board. This motion was denied, without opinion. Both parties then filed cross motions for summary judgment and stipulalted on this method of disposing of the case. Summary judgment was granted to appellee church, declaring the properties in question to be exempt from real property taxation.

The two main issues presented on appeal are: (1) whether the bringing of a declaratory judgment action instead of following the statutory method of appeal from a tax equalization board determination should bar appellee from litigating its claimed tax exemption, and (2) whether the properties in question are exempt from taxation.

THE PROCEDURAL ISSUE

Appellants argue that the exclusive method of review of the equalization board's derermination is that found in AS 29.10.426, which provides:

'A person aggrieved by an order of the board of equalization may appeal to the superior court for review de novo after he has exhausted his administrative remedy under §§ 369-540 of this chapter.'

Both parties concede that this type of appeal was not sought, that the action before us was an original action when filed, and that the right of appeal from a board of equalization determination differs in certain cases from the right to commence an independent action.

In Keiner v. City of Anchorage, 378 P.2d 406 (Allaska 1963), this court laid down the rule that on appeal from administrative agencies or district (then magistrate) courts there may not be a trial de novo unless the superior court requires it. This rule was based upon an interpretation of legislative enactments subsequent to Alaska statehood and a procedural rule promulgated by this court. The court stated:

'(I)f the agency record is not sufficient to determine the issue on appeal, or if the record discloses that justice requires evidence to be taken de novo, the superior court has the discretion to do what is necessary by granting a new trial or hearing, either in whole or in part.' Keiner v. City of Anchorage, supra, at 410.

Appellants argue that the review of the board of equalization's determination should have been on the record, including a transcript of the board hearing and any other documents which might have been available. Appellants argue that only if the record It is true that the substantial evidence rule is of great importance. One of the purposes of administrative agencies is to serve as fact-finding boards in fields in which they possess expertise greater than, or at least equal to, that of the judiciary. The litigation of various questions before administrative tribunals, which are vested with power to act within a given field, also results in judicial economy, as many administrative determinations are final and are not appealed by either party. Running through the entire field of administrative law is the policy of not overturning the factual findings of administrative agencies unless there is a lack of substantial evidence in the record as a whole to sustain the agencies' determinations. Universal Camera Corp. v. NLRB, 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951).

were inadequate, or if the superior court in its discretion granted a de novo hearing, should the review have been de novo and not limited only to the record. It is argued that unless the rule laid down in Keiner is enforced, it means a reversion to the system by which all review of administrative action would be de novo. Additionally, appellants argue that the substantial evidence rule will be overturned if an independent action such as the one before us is permitted.

Appellee argues that whatever may be the general rule, in the case before us the standard of review was the same because there were no genuine factual issues in dispute. It urges that the only point at issue is whether, under agreed facts, the residential properties in question are taxable as a matter of law. Appellee argues that even if it had followed the prescribed procedure, only this question would have been presented for consideration by the superior court. It also points out that if this action were to be dismissed on procedural grounds it would only result in the same questions being brought before the court at some later date, with essentially the same facts, the same legal issues, and with additional expense to all parties.

In Matanuska-Susitna Borough v. King's Lake Camp, 439 P.2d 441 (Alaska 1968), the borough contended that the appellee had incorrectly instituted an action for both declaratory and injunctive relief instead of paying its taxes under protest and suing for recovery, and that appellee had not obtained a ruling from the board of equalization, thereby failing to exhaust its administrative remedy. This court in that case stated its opinion that the procedural questions presented should await a more appropriate occasion for their resolution. We feel similalrly in the case before us. Appellee's only procedural irregularity was in terming its action before the superior court an original action for declaratory relief instead of an appeal from an adverse ruling of the board of equalization. Unlike like the King's Lake Camp case, appellee here did in fact apply for relief from the board of equalization before seeking relief in the courts.

It is noteworthy that the superior court indicated its willingness to make a determination on the merits when it denied appellants' motion to dismiss for failure to state a claim. This can be regarded as an exercise of the court's discretion to hear the matter de novo on appeal from the board of equalization. We have already noted that the facts in this case were not seriously in dispute.

Considering all of these circumstances, we have concluded that any procedural irregularities committed by appellee should not bar it from a determination on the merits.

THE SUBSTANTIVE ISSUE

The pertinent parts of the statute which we must construe, AS 29.10.336, read as follows:

'(a) Property * * * used exclusively for nonprofit religious * * * purposes * * * (is) exempt from (property) taxation.

(b) The term 'property used exclusively for religious purposes' includes the following types of property owned by a religious organization:

(1) the residence of the pastor, priest, rabbi, minister, or religious order, which residence is owned by a recognized religious organization;

(2) a structure, and the land it stands on, which is used for public worship, solely...