In the Matter of Appeal of Grand Forks Homes Inc. v. Grand Forks Bd. of County Commissioners

• Decision Date: 22 March 2011
• Docket Number: 20100202.,Nos. 20100197,s. 20100197
• Court: North Dakota Supreme Court
• Parties: In the Matter of Appeal of GRAND FORKS HOMES, INC., Continental Homes, Inc., Homestead Place, MDI Limited Partnership # 35, and Faith & Hope, LP, Appellantsv.GRAND FORKS BOARD OF COUNTY COMMISSIONERS, Appellee.In the Matter of Appeal of Terzetto Village, LLC, Appellantv.Grand Forks Board of County Commissioners, Appellee.

795 N.W.2d 381

2011 ND 50

In the Matter of Appeal of GRAND FORKS HOMES, INC., Continental Homes, Inc., Homestead Place, MDI Limited Partnership # 35, and Faith & Hope, LP, Appellants

v.GRAND FORKS BOARD OF COUNTY COMMISSIONERS, Appellee.In the Matter of Appeal of Terzetto Village, LLC, Appellant

v.Grand Forks Board of County Commissioners, Appellee.

Nos. 20100197

20100202.

Supreme Court of North Dakota.

March 22, 2011.

Russell John Melland, Grand Forks, N.D., for appellants.John Alan Warcup (argued), Special Assistant State's Attorney, Grand Forks, N.D., for appellee.CROTHERS, Justice.

[¶ 1] Grand Forks Homes, Inc., and several other property owners (collectively “property owners”) appeal from the district court judgments affirming the Grand Forks County Board of Commissioners' (“Board”) denial of their applications for abatement of real estate taxes and denying their motions for an extension of time and for a remand to the Board to consider additional evidence. We conclude the district court did not abuse its discretion in denying the property owners' motions. We further conclude the Board did not misapply state law on tax exemptions for public charities and property used exclusively for charitable or other public purposes and did not act arbitrarily, capriciously or unreasonably in denying the applications for abatement of real estate taxes. We affirm.

I

[¶ 2] Most of the property owners in these cases are nonprofit corporations owning and operating apartment complexes in Grand Forks and renting units to low-income families or to physically or mentally disabled persons. Grand Forks Homes, Inc., is a North Dakota nonprofit corporation that owns Oak Manor Apartments, Cherry Height Apartments and LaGrave Place Apartments, which are all operated and managed by the Grand Forks Housing Authority. Apartment occupants must meet low-income eligibility requirements. Continental Homes is owned by Continental Homes, Inc., a North Dakota nonprofit corporation. Continental Homes' occupant services include a resident service coordinator and a learning center. Tenants must meet low-income eligibility requirements. Homestead Place, a North Dakota nonprofit corporation owning and operating Homestead Place Apartments, is designed to house elderly families and persons with disabilities. Tenants must meet low-income eligibility requirements, and occupant services include a resident services coordinator and a learning center. Members of the board of directors of the Grand Forks Housing Authority comprise the board of directors of Homestead Place.

[¶ 3] Riverside Manor Apartments provides low-income housing and is owned by MIDI Limited Partnership # 35. Riverside Manor, LLC, is the general partner which owns one percent of the limited partnership, and National Tax Credit Fund 37 L.P. owns the remaining 99 percent. Riverside Manor, LLC, is a wholly owned subsidiary of Grand Forks Homes, Inc., and has an option to purchase Riverside Manor Apartments. Redwood, Oakwood, and Westwood are three separate apartment buildings owned by Faith & Hope, LP, a limited partnership in which the general partner, Grand Forks Homes, Inc., owns 99.9 percent and Faith and Hope, LLC, owns the remaining 0.1 percent. Faith and Hope, LLC, is also a wholly owned subsidiary of Grand Forks Homes, Inc. Occupancy in Redwood is limited to persons who are developmentally disabled. Occupancy in Oakwood is limited to persons who are chronically mentally ill. Occupancy in Westwood is limited to persons with physical disabilities. All tenants must also meet low-income eligibility requirements.

[¶ 4] Terzetto Village, LLC, a limited liability company owned by Westend Terzetto's, also a North Dakota nonprofit corporation, owns single-family residential lots in Grand Forks. Terzetto Village provides low- to moderate-income families the opportunity to own homes. At least 51 percent of its homes must be sold to low- to moderate-income families.

[¶ 5] These property owners filed applications for abatement of real estate taxes for 2006, 2007, and 2008 with the city of Grand Forks, claiming their properties were exempt from taxation under state law because they are used for charitable or other public purposes. Following several hearings on the applications, the Grand Forks City Council (“Council”) recommended the abatement requests be denied. The Board, based on the record before the Council, concurred with the Council's recommendations.

[¶ 6] The property owners appealed the Board's decision to district court. The property owners also moved to extend time or stay the proceedings and to remand the case to the Board so the Board could consider the testimony offered during Council proceedings. The district court denied the motions and affirmed the Board's decision to deny the tax abatement requests. The cases were consolidated for appeal.

II

[¶ 7] The property owners argue the district court erred in denying their motions to remand the cases to the Board for consideration of the transcripts or recordings of the hearings held before the Council. The Council passed a motion that the transcripts be forwarded to the Board, but the transcripts or recordings were not available to the Board before it ruled on the abatement applications. The property owners contend the transcripts or recordings were material evidence necessary for the Board to review before reaching its decision.

[¶ 8] Under N.D.C.C. § 28–34–01(3), a “court may order that ... additional evidence be taken, heard, and considered by the local governing body” if the “additional evidence is material and ... there are reasonable grounds for the failure to adduce such evidence in the hearing or proceeding had before the local governing body.” A district court's decision whether to order the taking of additional evidence under N.D.C.C. § 28–34–01(3) is discretionary. Grand Forks Hous. Auth. v. Grand Forks Bd. of County Comm'rs, 2010 ND 245, ¶ 11, 793 N.W.2d 168. “ ‘A district court abuses its discretion when it acts arbitrarily, capriciously, or unreasonably’ or when it misinterprets or misapplies the law.” Id. (quoting In re Pederson Trust, 2008 ND 210, ¶ 12, 757 N.W.2d 740).

[¶ 9] Here, the district court found the transcripts or recordings of the hearings before the Council did not constitute material evidence necessary to review the decision to deny the abatement applications. The court noted the Board gave the property owners an opportunity to present evidence in support of the applications and received all evidence and testimony they offered. The court reasoned that if the property owners wanted the Board to consider the oral testimony presented in the Council proceedings, the property owners should have offered the testimony at the hearing before the Board.

[¶ 10] The district court's decision is not arbitrary, capricious or unreasonable, and the court did not misapply the law. We conclude the court did not abuse its discretion in denying the property owners' motions to remand the cases to the Board for consideration of additional evidence.

III

[¶ 11] The property owners argue the Board erred in denying their applications for abatement of real estate taxes.

[¶ 12] “[W]e apply a very limited and deferential standard of review when considering an appeal from a decision of a local governing body.” Grand Forks Hous. Auth., 2010 ND 245, ¶ 6, 793 N.W.2d 168.

“When considering an appeal from the decision of a local governing body under N.D.C.C. § 28–34–01, our scope of review is the same as the district court's and is very limited. This Court's function is to independently determine the propriety of the [Commission's] decision without giving special deference to the district court decision. The [Commission's] decision must be affirmed unless the local body acted arbitrarily, capriciously, or unreasonably, or there is not substantial evidence supporting the decision. ‘A decision is not arbitrary, capricious, or unreasonable if the exercise of discretion is the product of a rational mental process by which the facts and the law relied upon are considered together for the purpose of achieving a reasoned and reasonable interpretation.’ ”

Hagerott v. Morton County Bd. of Comm'rs, 2010 ND 32, ¶ 7, 778 N.W.2d 813 (quoting Gowan v. Ward County Comm'n, 2009 ND 72, ¶ 5, 764 N.W.2d 425) (internal quotations and citations omitted). “A local governing body's failure to correctly interpret and apply controlling law constitutes arbitrary, capricious, and unreasonable conduct.” Hector v. City of Fargo, 2010 ND 168, ¶ 5, 788 N.W.2d 354.

A

[¶ 13] The property owners argue the Board erred in refusing to exempt their properties from taxation because the Board erroneously interpreted North Dakota law on tax exemptions for public charities and for property used exclusively for charitable or other public purposes.

[¶ 14] “All property in North Dakota is subject to taxation unless expressly exempted by law.” Grand Forks Hous. Auth., 2010 ND 245, ¶ 8, 793 N.W.2d 168; see also N.D.C.C. § 57–02–03. The North Dakota Constitution exempts from taxation “property used exclusively for ... charitable or other public purposes.” N.D. Const. art. X, § 5. Section 57–02–08(8), N.D.C.C., also exempts from taxation “[a]ll buildings belonging to institutions of public charity ... under the control of religious or charitable institutions, used wholly or in part for public charity, together with the land actually occupied by such institutions not leased or otherwise used with a view to profit.” The “burden of establishing that property comes within the tax-exemption statute is upon the person or entity who claims the exemption” and “any doubt as to whether the property is used for charitable or benevolent purposes so as to exempt it from taxation must be resolved against the claimant.” Riverview Place, Inc. v. Cass County, 448 N.W.2d 635, 640 (N.D.1989). “Each case where a claim for tax exemption is made ... must be decided upon its own facts.”...