Kingsland Bay School, Inc. v. Town of Middlebury, 88-099

• Decision Date: 01 December 1989
• Docket Number: No. 88-099,88-099
• Citation: 153 Vt. 201,569 A.2d 496
• Parties: , 58 Ed. Law Rep. 694 KINGSLAND BAY SCHOOL, INC. v. TOWN OF MIDDLEBURY.
• Court: Vermont Supreme Court

Page 496

569 A.2d 496

153 Vt. 201, 58 Ed. Law Rep. 694

KINGSLAND BAY SCHOOL, INC. v. TOWN OF MIDDLEBURY.

No. 88-099.

Supreme Court of Vermont.

Dec. 1, 1989.

Richard F. Taylor, Middlebury, for plaintiff-appellee.

Chester S. Ketcham, Middlebury, for defendant-appellant.

Before ALLEN, C.J., PECK, GIBSON and DOOLEY, JJ., and SPRINGER, District Judge (Ret.), Specially Assigned.

GIBSON, Justice.

Defendant Town of Middlebury (Town) appeals an Addison Superior Court order declaring that plaintiff Kingsland Bay School, Inc. (Kingsland) is exempt from property tax pursuant to 32 V.S.A. § 3802(4) and 32 V.S.A. § 3832(7). We affirm.

I.

The facts are not in dispute. Kingsland is a nonprofit corporation which operates a group home on property it owns in Middlebury. Pursuant to one-year contracts with the State of Vermont, Department of Social and Rehabilitation Services (SRS), Kingsland provides residential services for up to five sixteen-to-eighteen-year-old adolescents experiencing social and emotional difficulties. Generally, only adolescents placed in state custody by the courts are referred to Kingsland; however, Kingsland is not equipped to handle criminal, psychotic, addicted, or retarded individuals. SRS and Kingsland jointly determine which individuals are appropriate for placement at Kingsland. The State may terminate the contract with Kingsland upon thirty-days' notice if, for three consecutive months, or for four of six consecutive months, occupancy is less than 85% of the maximum.

The stated purpose of Kingsland is to provide residential services in a therapeutic milieu for adolescents with major life-adjustment problems. Kingsland focuses on preparing residents for independent living by teaching such things as budgeting, nutritional, academic, and vocational skills. In addition, it helps residents obtain a G.E.D. or high school diploma, procure a driver's license, manage conflicts, and deal with authority so that the youths can eventually function as responsible citizens independent of state support. Kingsland offers neither in-house counseling nor in-house treatment for special physical or mental health problems. Instead, residents are required to attend outside counseling sessions for at least thirteen weeks while attending Kingsland, and outside providers treat residents for specific physical or mental illnesses.

Kingsland acquired the property in July of 1984 and refused to pay real estate taxes thereafter despite the fact that the previous owners, who had leased the property to Kingsland for use as a group home, never claimed a tax exemption. Real estate taxes assessed on the property from 1985 through 1987 totaled approximately $4,800. In April of 1986, Kingsland commenced a declaratory judgment action seeking tax-exempt status for the school. On January 21, 1988, the trial court declared the property to be exempt from taxation under 32 V.S.A. § 3802(4) and not subject to the provisions of 32 V.S.A. § 3832(7).

On appeal, the Town contends that the court erred in concluding that (1) the use of the property served a public function and was therefore exempt from real estate taxes under 32 V.S.A. § 3802(4); and (2) a town vote under 32 V.S.A. § 3832(7) was not required in order to accord the property tax-exempt status because Kingsland's primary purpose was to provide residential services rather than health-related services. We disagree with both contentions.

II.

The Town first argues that 32 V.S.A. § 3802(4) does not afford Kingsland tax-exempt status. 32 V.S.A. § 3802(4) provides, in part, that "[r]eal and personal estate granted, sequestered or used for public, pious or charitable uses" is exempt from taxation. Recently, in American Museum of Fly Fishing, Inc. v. Town of Manchester, 151 Vt. 103, 557 A.2d 900 (1989), this Court reviewed Vermont case law interpreting the "public use" component of § 3802(4). Based on that case law and the statutory language of § 3802(4), we clarified the "public use" test by rejecting the "essential governmental function" aspect of the test that had arisen in recent cases, and by specifying the elements of the test:

(1) the property must be dedicated unconditionally to public use;

(2) the primary use must directly benefit an indefinite class of persons who are part of the public, and must also confer a benefit on society as a result of the benefit conferred on the persons directly served; and

(3) the property must be owned and operated on a not-for-profit basis.

American Museum of Fly Fishing, Inc., 151 Vt. at 110, 557 A.2d at 904.

We address the second and third elements of the "public use" test first, as they require less discussion in the instant case. The fact that Kingsland is a nonprofit organization is undisputed. Furthermore, the primary use of the property directly benefits an indefinite class of persons as well as the public in general. This Court has described a definite class as "a group determined by choice or selection [implying] some kind of voluntary action or judgment." New York Inst. for the Educ. of the Blind v. Town of Wolcott, 128 Vt. 280, 286, 262 A.2d 451, 455 (1970). Accordingly, Peace Corps trainees and Boy Scouts are members of a definite class, Experiment in Int'l Living, Inc. v. Town of Brattleboro, 127 Vt. 41, 48, 238 A.2d 782, 786-87 (1968); Fort Orange Council, Inc. v. French, 119 Vt. 378, 384, 125 A.2d 835, 839 (1956), while blind children are not, New York Inst. for the Educ. of the Blind, 128 Vt. at 286-87, 262 A.2d at 455. In the instant case, the troubled adolescents do not become residents of Kingsland as a result of any voluntary action or judgment on their part. Nor are they selected solely by Kingsland; they become residents based on the joint determination of Kingsland and the contracting agency that Kingsland is capable of providing the appropriate services for them. Cf. Experiment in Int'l Living, 127 Vt. at 47-48, 238 A.2d at 786 (students selected solely by contracting agency). As in New York Institute, the purpose of Kingsland is to help adolescents without "any other limitation except for the capacity of its facilities." 128 Vt. at 286, 262 A.2d at 455. Consequently, those eligible for resident status at Kingsland constitute an indefinite class of persons.

Relying heavily on language in Brattleboro Child Dev., Inc. v. Town of Brattleboro, 138 Vt. 402, 416 A.2d 152 (1980), that was explicitly overruled by American Fly Fishing, the Town denies that a general societal benefit results from a benefit directly conferred on an indefinite class. See American Museum of Fly Fishing, Inc., 151 Vt. at 107, 110-11, 557 A.2d at 903, 905; Brattleboro Child Dev., 138 Vt. at 405-06, 416 A.2d at 154. The Town argues that Kingsland must assume a municipal burden of providing a service which the Legislature has determined to be an essential governmental function in order to secure tax-exempt status. As we noted in American Fly Fishing, "such a criterion unjustifiably narrows the basis for which tax-exempt status as a public use under § 3802(4) may be claimed." American Museum of Fly Fishing, Inc., 151 Vt. at 107, 557 A.2d at 903. In order to confer a benefit on the public, one need not perform an essential municipal service required by the State. For instance, this Court refused to grant tax-exempt status to a center which taught English to foreign students, and distinguished New York Institute as follows:

The declared purpose of the Institute was the education of members of the public who, because of blindness, needed specialized training in order to lead a more normal and useful life.... The Institute provided services that might otherwise have been required of the State of Vermont, and its services were financed in part with State funds. There was no question that the Institute's activities were essentially public in character.

English Language Center, Inc. v. Town of Wallingford, 132 Vt. 327, 330-31, 318 A.2d 180, 183 (1974). Like the Institute in the aforementioned case, Kingsland aided the State by providing training to individuals that needed specialized instruction, and thereby plainly conferred a benefit on the public.

The first criterion of the "public use" test is that property must be dedicated unconditionally to a public use. This criterion assures that the use directly benefits the public without requiring the onerous burden of showing that the use in question assumes an essential municipal function. "[T]he governing consideration is the direct and immediate, rather than the remote or incidental, benefit derived from the use of the property." Vermont Wild Land Found. v. Town of Pittsford, 137 Vt. 439, 444, 407 A.2d 174, 177 (1979). Accordingly, in Vermont Wild Land, we denied tax-exempt status for a tract of undeveloped wilderness where the foundation in control of the land restricted access to a limited number of approved researchers. Id. at 441-42, 407 A.2d at 176. As a result of the strict conditions imposed on use of the land, the benefit to the public was secondary and remote compared to the benefit conferred on a small group of researchers. Id. at 444, 407 A.2d at 177.

In the instant case, the record demonstrates that the Kingsland property is unconditionally dedicated to a public use. The instruction and education given to the Kingsland residents directly benefits the public by providing humanitarian services supported by the State, see Broughton v. Town of Charlotte, 134 Vt. 270, 275, 356 A.2d 520, 523 (1976), and by assisting residents to become capable members of society. Moreover, the fact that Kingsland's state contract may be terminated on thirty-days' notice does not make Kingsland's use of the land conditional. The record indicates that the property has served as a group home since at least 1983 when the Middlebury Board of Zoning Adjustment granted Kingsland a use permit with the understanding that its property was to be used as a group home. In any event, the tax-exempt status of the...