Hebron Acad., Inc. v. Town of Hebron

• Decision Date: 05 February 2013
• Docket Number: Docket No. OXF–12–95.
• Citation: 2013 ME 15,60 A.3d 774
• Parties: HEBRON ACADEMY, INC. v. TOWN OF HEBRON.
• Court: Maine Supreme Court

60 A.3d 774

2013 ME 15

HEBRON ACADEMY, INC.

v.TOWN OF HEBRON.

Docket No. OXF–12–95.

Supreme Judicial Court of Maine.

Argued: Dec. 12, 2012.

Decided: Feb. 5, 2013.

Bryan M. Dench, (orally)Esq., and Michael S. Malloy, Esq., Skelton, Taintor & Abbott, Auburn, on the briefs, for appellant Town of Hebron.

John W. Conway, (orally)Esq., and Sonia J. Buck, Esq., Linnell, Choate & Webber, Auburn, on the briefs, for appellee Hebron Academy.

Sandra L. Parker, Esq., Maine Hospital Association, Augusta, on the briefs, for amicus curiae Maine Hospital Association.

Jonathan A. Block, Esq., and Kris J. Eimicke, Esq., Pierce Atwood LLP, Portland, on the briefs, for amicus curiae Maine Association of Independent Schools.

Janet T. Mills, Esq., and Daniel W. Walker, Esq., Preti, Flaherty, Beliveau & Pachios, LLP, Augusta, on the briefs, for amicus curiae Maine Independent Colleges Association.

Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and JABAR, JJ.

LEVY, J.

[¶ 1] The Town of Hebron appeals from a declaratory judgment of the Superior Court (Oxford County, Clifford, J.) determining that the tax exemption for literary and scientific institutions in 36 M.R.S. § 652(1)(B) (2012) exempts certain parcels of Hebron Academy's real estate from taxation by the Town. Hebron Academy cross-appeals, arguing that the court erred in concluding that res judicata barred the court from relieving it of its obligation to pay taxes on its exempt property for the 2009 tax year. We affirm the judgment.

I. BACKGROUND

[¶ 2] The court found the following facts, which are supported by the record. See Bayley v. Bayley, 602 A.2d 1152, 1154 (Me.1992).

[¶ 3] Hebron Academy is a private, nonprofit preparatory school that owns real estate in Hebron and offers a curriculum similar to that of a liberal arts college, with required courses in English, literature, science, and other subjects.

[¶ 4] In addition to its regular sources of revenue, Hebron Academy generates about $130,000 per year by renting some of its facilities on a short-term basis to outside individuals and organizations. The rental revenue accounts for approximately one percent of its operating budget, and the rentals do not interfere with Hebron Academy's use of the properties for its own purposes. Also, various Hebron Academy properties are subject to private rights and restrictions, including rights of way to access other property or maintain utilities, a restriction on building, and a reversionary clause that will be triggered if certain property ceases to be used for academic purposes. These uses are minimal in scope and do not affect the school's use of the properties for its own purposes.

[¶ 5] Pursuant to 36 M.R.S. § 841 (2012), on or around March 31, 2010, Hebron Academy requested a tax abatement from the Town for tax year 2009. The Town denied the request because Hebron Academy had not filed the abatement request before the statutory deadline. See36 M.R.S. § 841(1). Pursuant to 36 M.R.S. § 843(1) (2012), Hebron Academy appealed to the Oxford County Board of Assessment Review, which held a hearing and denied the abatement request on the same ground, without addressing the merits. Hebron Academy did not seek judicial review of the Board's decision by appealing to the Superior Court pursuant to 36 M.R.S. § 844–M(6) (2012) and M.R. Civ. P. 80B.

[¶ 6] In December 2010, Hebron Academy filed a complaint seeking a declaratory judgment that it is a literary and scientific institution within the meaning of 36 M.R.S. § 652(1)(B), that its properties are exempt from taxation, and that the Town must reimburse it for all real estate taxes it paid on its exempt properties for the prior three years, including 2009. Following a one-day hearing, the court entered a judgment declaring that Hebron Academy was entitled to the exemption for most of its property, but that res judicata precluded the court from relieving it of its obligation to pay the 2009 real estate taxes on its exempt property. The court subsequently amended the judgment to require the Town to reimburse Hebron Academy for all taxes paid on its exempt properties for the tax years 2008, 2010, and 2011, with interest. The Town appeals and Hebron Academy cross-appeals from the amended judgment.

II. LEGAL ANALYSIS

A. Hebron Academy's exemption status pursuant to 36 M.R.S. § 652(1)(B)

[¶ 7] As a general rule, “[a]ll real estate within the State ... is subject to taxation.” 36 M.R.S. § 502 (2012). However, there is a tax exemption for “[t]he real estate ... owned and occupied or used solely for their own purposes by literary and scientific institutions.” Id. § 652(1)(B). “Exemption is a special favor conferred. The party claiming it must bring his case unmistakably within the spirit and intent of the act creating the exemption.” Humboldt Field Research Inst. v. Town of Steuben, 2011 ME 130, ¶ 7, 36 A.3d 873 (quotation marks omitted). Thus, the party seeking an exemption pursuant to section 652(1)(B) has the burden to prove that (1) it meets the “literary and scientific institutions” requirement, (2) it owns the property, and (3) the property is “occupied or used solely for [its] own purposes.” See36 M.R.S. § 652(1)(B); Humboldt Field Research, 2011 ME 130, ¶ 7, 36 A.3d 873;Alpha Rho Zeta of Lambda Chi Alpha, Inc. v. Inhabitants of Waterville, 477 A.2d 1131, 1136 (Me.1984).

[¶ 8] Here, the Town concedes that Hebron Academy owns the properties in question, but contends that (1) Hebron Academy is not a literary or scientific institution within the meaning of the tax exemption, and (2) Hebron Academy's property is not “occupied or used solely for [its] own purposes.” We consider each contention in turn.

1. Hebron Academy's qualification as a literary and scientific institution

[¶ 9] The meaning of “literary and scientific institutions” is an issue of statutory interpretation, which we review de novo. See Hurricane Island Outward Bound v. Town of Vinalhaven, 372 A.2d 1043, 1046 (Me.1977). We begin by looking to the plain language of the statute. Fuhrmann v. Staples the Office Superstore East, Inc., 2012 ME 135, ¶ 23, 58 A.3d 1083. If that language is susceptible to more than one meaning, we will look to legislative history to discern the Legislature's intended meaning. See id. We interpret the pertinent language mindful that “[a] tax exemption statute is narrowly and strictly construed with all doubt and uncertainty as to its meaning being weighed against exemption.” Humboldt Field Research, 2011 ME 130, ¶ 5, 36 A.3d 873.

[¶ 10] Here, the statute does not define “literary and scientific institutions,” and reasonable minds can differ as to whether that term is broad enough to encompass a preparatory school like Hebron Academy. As such, the term is ambiguous, which leads us to (a) consider our previous interpretation of the term “literary and scientific institutions,” and (b) examine relevant portions of the legislative history that illuminate the Legislature's intended meaning of the term.

a. Prior case law interpreting the term “literary and scientific institutions”

[¶ 11] We have previously concluded that to meet the “literary and scientific institutions” requirement, an institution need only be literary or scientific. Hurricane Island, 372 A.2d at 1046. We have also concluded that a liberal arts college and a university are literary or scientific institutions within the meaning of the tax exemption. See Alpha Rho Zeta, 477 A.2d at 1134 (“[T]here can be no doubt but that Colby College is a literary and scientific institution.”); Inhabitants of Orono v. Kappa Sigma Society, 108 Me. 320, 324, 80 A. 831 (1911) (“The University of Maine is a literary or scientific institution.”). However, our decisions in Alpha Rho Zeta and Kappa Sigma do not offer clear guidance as to Hebron Academy's qualification as a literary or scientific institution because neither decision articulates the standard by which we concluded that the academic institutions at issue in those cases qualified as literary or scientific institutions.

[¶ 12] Furthermore, our remaining case law is instructive only as to the types of educational institutions that do not qualify as literary or scientific institutions. For example, in Hurricane Island, we held that an organization that operated a “self-discovery” program did not qualify as a literary or scientific institution merely because it had educational aims and taught scientific courses. 372 A.2d at 1047.See also id. at 1047 n. 4 (recognizing that other jurisdictions define “scientific institution” to include institutions that engage in scientific research, but declining to adopt that standard); Holbrook Island Sanctuary v. Inhabitants of Brooksville, 161 Me. 476, 488, 214 A.2d 660 (1965) (concluding that a small library of books and an area for nature study were insufficient to qualify a game preserve as a scientific institution).

[¶ 13] Because our case law does not provide a definitive standard for determining what qualifies as a literary or scientific institution, we turn to the legislative history of the tax exemption for evidence of the Legislature's intended definition of the term. See Fuhrmann, 2012 ME 135, ¶ 23, 58 A.3d 1083.

b. Legislative history of Maine's tax exemption

[¶ 14] Maine's tax exemption for literary and scientific institutions traces back to the 1819 Massachusetts law creating an independent District of Maine, which preserved a tax exemption for land previously granted by the Commonwealth to “any religious, literary, or eleemosynary corporation, or society.” ¹ 1819 Mass. Laws 252 (emphasis added). Maine incorporated that tax exemption into article X, section 5 of the Maine Constitution, as adopted in 1819. See Delogu v. City of Portland, 2004 ME 18, ¶ 17 n. 4, 843 A.2d 33. Over time, the scope of the exemption has waxed and waned. See P.L. 1845, ch. 159, § 5(2); P.L. 1849, ch. 118, § 1; P.L. 1869, ch. 28, § 1. But particularly relevant to our analysis here is the Legislature's addition...