Janesville Community Day Care Center, Inc. v. Spoden

• Decision Date: 19 September 1985
• Docket Number: No. 84-834,84-834
• Citation: 126 Wis.2d 231,376 N.W.2d 78
• Parties: , 28 Ed. Law Rep. 575 JANESVILLE COMMUNITY DAY CARE CENTER, INC., Plaintiff-Respondent, v. Frank SPODEN and the City of Janesville, Defendants-Appellants.
• Court: Wisconsin Court of Appeals

Page 78

376 N.W.2d 78

126 Wis.2d 231, 28 Ed. Law Rep. 575

JANESVILLE COMMUNITY DAY CARE CENTER, INC., Plaintiff-Respondent, v.Frank SPODEN and the City of Janesville, Defendants-Appellants.

No. 84-834.

Court of Appeals of Wisconsin.

Submitted on Briefs Aug. 1, 1985.

Opinion Released Sept. 19, 1985.

Opinion Filed Sept. 19, 1985.

Berta S. Hoesly, City Atty., and Waldemar Klimczyk, Asst. City Atty., Janesville, for defendants-appellants.

Dennis L. Hansch and Nowlan & Mouat, Janesville, for plaintiff-respondent.

Before GARTZKE, P.J., and DYKMAN and EICH, JJ.

DYKMAN, Judge.

The City of Janesville and its assessor appeal from a judgment declaring the property of Janesville Community Day Care Center, Inc., exempt from general property taxation under sec. 70.11(4), Stats.¹The issue is whether the center qualifies as an "educational ... association" under that statute.Because we conclude that it does, we affirm.

Respondent operated a licensed child day-care facility in rented space from 1969 until 1980.In 1980, respondent purchased and renovated a former Janesville public school building.The city assessed taxes on respondent's real and personal property in 1981 and 1982.Respondent did not pay the taxes, claiming it was an educational organization under sec. 70.11(4), Stats., and requested removal of the property from the tax rolls.Appellants refused and respondent brought this declaratory judgment action.At trial, respondent presented proof on its educational status.The trial court held that respondent's property was exempt and this appeal followed.

EXEMPTION

Tax exemptions are a matter of legislative grace, not of right.Midcontinent Broadcasting Co. v. Dept. of Revenue, 98 Wis.2d 379, 390, 297 N.W.2d 191, 197(1980)."Taxation is the rule and exemption is the exception."Alonzo Cudworth Post No. 23 v. Milwaukee, 42 Wis.2d 1, 13, 165 N.W.2d 397, 404(1969), quotingM.E. Church Baraca Club v. Madison, 167 Wis. 207, 211, 167 N.W. 258, 259(1918)."An exemption from taxation must be clear and express.All presumptions are against it, and it should not be extended by implication."(Citations omitted.)Soo Line R. Co. v. Department of Revenue, 89 Wis.2d 331, 359, 278 N.W.2d 487, 500(Ct.App.1979), aff'd, 97 Wis.2d 56, 292 N.W.2d 869(1980).

Section 70.11(4), Stats., exempts the property of "educational ... associations" from general property taxes.²Appellants argue that respondent is not an educational organization within the meaning of sec. 70.11(4).

Appellants' attack appears to focus on the substance of the trial court's findings numbered 10 through 12:

10.Plaintiff has a structured and regularly scheduled curriculum.

11.Plaintiff provides education within the traditional understanding of the term and the property is owned exclusively for the purpose of its educational functions.

12.Plaintiff has an educational purpose and function and although custodial services are provided, such services are incidental to the primary purpose of education.

Appellants maintain that respondent's primary purpose is the routine custodial care of children whose parents, because of jobs or other obligations, cannot provide daytime supervision.They argue that the educational part of respondent's program is too small a fraction of its activities to be a primary function.They also contend that respondent's educational activities are nontraditional in that they are not administered by licensed teachers and are not degree or certification oriented and, therefore, are not among the types of programs customarily exempted.Finally, appellants contend that the legislature has not expressly provided an exemption for day-care centers.³

The issue is not as broad as appellant contends.We do not consider whether all day-care centers are exempt educational associations, but only whether respondent is exempted.

To qualify its property as exempt under sec. 70.11(4), Stats., respondent must show that it is a nonprofit organization

substantially and primarily devoted to educational purposes.Five statutory tests must be passed: (1)Plaintiff must be an educational association; (2) the property must be owned and used exclusively for the purposes of such association; (3) the property involved must be less than 10 acres; (4) the property must be necessary for location and convenience of buildings; and (5) the property must not be used for profit.

National Foundation v. Brookfield, 65 Wis.2d 263, 264-65, 222 N.W.2d 608, 609(1974).The only issue is whether respondent is an educational organization which owns and uses the property in question exclusively for those purposes.

International Foundation v. City of Brookfield, 95 Wis.2d 444, 290 N.W.2d 720(Ct.App.1980), aff'd, 100 Wis.2d 66, 301 N.W.2d 175(1981), created a two-step test for resolving this issue: (1) The organization and its property must be substantially and primarily devoted to educational purposes, International Foundation, 95 Wis.2d at 453, 290 N.W.2d at 724, citingNational Foundation, 65 Wis.2d at 264-65, 222 N.W.2d at 609; and (2) the organization's educational activities must be "traditional," in the sense that their benefits are in the general public interest and are available to an indefinite class.International Foundation, 95 Wis.2d at 458-59, 290 N.W.2d at 727.

STANDARD OF REVIEW

To determine whether the International Foundation criteria are satisfied "requires a careful analysis of the facts concerning how the ... property is actually being used."International Foundation at 453, 290 N.W.2d at 724, citingNational Foundation, 65 Wis.2d at 265, 222 N.W.2d at 610.The International Foundation standards of "substantially and primarily,""educational,""general public interest," and "indefinite class" pose mixed questions of fact and law.What the trial court has labeled its findings 10 through 12, are actually mixed determinations of fact and law.We owe no deference to a legal conclusion the trial court has denominated a fact.Anderson v. Kojo, 110 Wis.2d 22, 27, 327 N.W.2d 195, 197(Ct.App.1982).We therefore owe no deference to the conclusions contained in findings 10 through 12.

When we are confronted with mixed questions of law and fact, two questions must be answered.Department of Revenue v. Exxon Corp., 90 Wis.2d 700, 713, 281 N.W.2d 94, 101(1979), aff'd, 447 U.S. 207, 100 S.Ct. 2109, 65 L.Ed.2d 66(1980).The first is what are the facts; the second is whether the established facts fulfill the legal standard.We apply the "clearly erroneous" test to the facts found by the trial court, Noll v. Dimiceli's, Inc., 115 Wis.2d 641, 643, 340 N.W.2d 575, 577(Ct.App.1983), and independently review the trial court's conclusions of law based on the facts which meet that test.Ball v. District No. 4, Area Board, 117 Wis.2d 529, 537, 345 N.W.2d 389, 394(1984).

PRIMARY USE AND PURPOSE

Respondent's amended articles of incorporation were introduced as evidence.The 1969amendment declared respondent's purposes to be "exclusively ... educational."However its declared object cannot be controlling.What it actually does must also be scrutinized.Frank Lloyd Wright Foundation v. Wyoming, 267 Wis. 599, 605, 66 N.W.2d 642, 646(1954);Catholic Woman's Club v. Green Bay, 180 Wis. 102, 105, 192 N.W. 479, 480(1923).

Appellants challenge the trial court's finding that respondent provides structured educational activities and contend that its actual function is to provide working parents and guardians with a facility for daytime housing and care of their preschool children.They allege that most of each day is devoted to noneducational purposes, such as physical care, supervision and feeding of the children.

The record, however, contains uncontradicted evidence that respondent makes daily use of a structured instructional curriculum and specific programs.These programs include language and cognitive development, music, nature study, basic math and social and physical development.⁴Respondent offered unchallenged expert testimony of an educator from the Janesville school system that preschool children are capable of significant learning in these areas.The facts show that the programs are administered by respondent's staff of teachers, each of whom has had postsecondary education in early childhood training and has fulfilled state mandated in-service and continuing education requirements.Respondent's building contains a number of classrooms and "learning center" stations for the children's independent activities.

Appellants do not challenge these facts.They allege, however, that these educational activities are insignificant in proportion to the time and effort devoted to the mere custodial care of the children.They argue that exemption should not be granted because the educational use of respondent's property is incidental to its nonexempt activities.International Foundation, 95 Wis.2d at 453, 290 N.W.2d at 724.Appellants offered the testimony of members of the city assessor's staff to the effect that the only activities they observed during their brief inspections of the center were napping, eating, diaper-changing and playing.

Respondent counters that these services, though necessary, are incidental to its primary educational purpose.The state requires day-care facilities to administer certain minimum levels of such care.⁵Respondent also provided expert testimony to the effect that children of this age group learn fundamental skills almost continuously, regardless of the activity engaged in.

Respondent has introduced substantial proof regarding the nature of its programs and activities.We find little countervailing evidence.We conclude that there was ample credible evidence to support the factual portion of the trial court's determinations: that respondent"has an educational purpose and function; that, although custodial services are provided, such services are incidental to the primary purpose of education"; and that responden...