Mountain View Cmty. Sch. Inc. v. City of Rutland.

• Decision Date: 23 June 2011
• Docket Number: No. 10–086.,10–086.
• Citation: 2011 VT 65,27 A.3d 312
• Parties: MOUNTAIN VIEW COMMUNITY SCHOOL, INC.v.CITY OF RUTLAND.
• Court: Vermont Supreme Court

27 A.3d 312

2011 VT 65

MOUNTAIN VIEW COMMUNITY SCHOOL, INC.

v.CITY OF RUTLAND.

No. 10–086.

Supreme Court of Vermont.

June 23, 2011.

Theodore F. Robare of Theodore F. Robare, P.C., Rutland, for Plaintiff–Appellant.Andrew Costello, Office of the City Attorney, Rutland, for Defendant–Appellee.Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.BURGESS, J.

¶ 1. Mountain View Community School, Inc. appeals from a trial court order rejecting its request for a property tax exemption for “lands owned or leased by colleges, academies or other public schools” under 32 V.S.A. § 3802(4). Mountain View contends the court misinterpreted the law in denying the requested exemption. We agree and reverse.

¶ 2. The undisputed facts may be summarized as follows. Mountain View is a Vermont nonprofit corporation organized for educational purposes, as well as a § 501(c)(3) nonprofit corporation under the Internal Revenue Code. It is licensed as an independent school by the Vermont Department of Education, under 16 V.S.A. § 166, to provide elementary education. For a number of years, Mountain View operated a private nonsectarian school for students from preschool through eighth grade at two separate locations in the City of Rutland. Mountain View's only use of the properties was as a school.

¶ 3. While maintaining that it was statutorily exempt from the payment of property taxes, Mountain View nevertheless paid them—albeit under protest—from its inception in 1994 through 2007. When the school's assessed value increased dramatically in 2006 and 2007, however, it sought an exemption as a “college, academy, or other public school” under 32 V.S.A. § 3802(4). ¹ The City declined to grant the exemption, and Mountain View, in response, filed suit for declaratory relief and an injunction to prevent a threatened tax sale.

¶ 4. The motion for preliminary injunction was heard in October 2008. Mountain View presented the testimony of one witness, a member of the school's board of trustees, who described the school's history, mission, and admissions process. She explained that the school provided individualized instruction which “cater[ed] to children who need a different learning environment.” While it sought children who would be a good “fit” for the school, she denied that it would refuse admittance to any member of the public. She acknowledged that the school charged tuition, but also observed that it offered scholarships to needy students, and noted that in past years a number of towns in Rutland County had tuitioned public-school students to Mountain View. Following the hearing, the court issued a brief order, finding that Mountain View had presented “a colorable case” for a tax exemption and would suffer irreparable harm if the tax sale went forward. Accordingly, the court granted the motion for preliminary injunction and stayed the sale pending completion of the action.

¶ 5. A one-day bench trial before a different judge was held in October 2009. Mountain View presented no testimony and only limited additional evidence, including the school's 2007–2008 “Handbook,” and referred the court to the evidence adduced at the earlier hearing in support of the motion for preliminary injunction. Mountain View argued that it qualified as a “public school” under the provision in 32 V.S.A. § 3802(4) exempting “lands owned or leased by colleges, academies or other public schools.” The City opposed the claim, asserting that Mountain View failed to meet the test for determining whether property is dedicated to a “public use” under the separate provision of § 3802(4) exempting real estate “sequestered or used for public, pious or charitable uses.”

¶ 6. That test, as this Court recently explained in Vermont Studio Center, Inc. v. Town of Johnson, requires the taxpayer to show that the property is dedicated to a public use, that it directly benefits “an indefinite class of persons who are part of the public,” and that it “confer[s] a benefit on society as a result of the benefit conferred on the persons directly served.” 2010 VT 59, ¶ 3, 188 Vt. 223, 5 A.3d 904 (quotations omitted). Elaborating on the “indefinite class” criterion, we have held that it is “the character and quality of an organization's ‘choice,’ ‘selection,’ or ‘judgment’ criteria used to determine its beneficiaries that informs the question of whether or not the organization's use of its property benefits an indefinite class that is part of the public and, thus, confers a benefit on society.” Sigler Foundation v. Town of Norwich, 174 Vt. 129, 134, 807 A.2d 442, 447 (2002).

¶ 7. The trial court issued a written ruling in January 2010, denying the exemption. The court agreed with the City's analysis and concluded that Mountain View had failed to show that it directly benefited “an indefinite class of persons who are part of the public.” The court found that the only evidence Mountain View offered in this regard was the information in its handbook concerning the school's admissions process. The handbook described a “mutual process” in which an applicant's parents, teachers and the school “work together ... to make the final decision with regard to the acceptance of children into the program.” The court characterized the handbook description as “vague” and noted that Mountain View had provided no additional testimony “to clarify the process.” Nor had it presented evidence concerning the number of students the school had accepted or rejected over the years. In short, the court found that Mountain View had adduced no evidence as to “the character and quality of the ‘choice,’ ‘selection,’ or ‘judgment’ criteria” used to determine its “beneficiaries,” i.e., students, and thus concluded that it had failed to carry its burden of demonstrating that it was entitled to the claimed exemption. This appeal followed.

¶ 8. The meaning and scope of the tax exemptions set forth in 32 V.S.A. § 3802(4) plainly control the disposition of this appeal, and as such our review is plenary and de novo. See Kwon v. Eaton, 2010 VT 73, ¶ 13, 188 Vt. 623, 8 A.3d 1043 (mem.) (stating that questions involving statutory construction involve matters of law which we review de novo). Although cited by neither the parties nor the trial court below, our decision in Willard v. Pike nearly 125 years ago remains the seminal and controlling authority governing the exemption for property “owned or leased by colleges, academies or other public schools.” 59 Vt. 202, 9 A. 907 (1887). The question in Willard was whether several buildings owned by the St. Johnsbury Academy and used by students and faculty for lodging and dining purposes were exempt from taxation. The Academy, then as now a private corporation organized and operated for educational purposes with private tuition-paying students, relied on the identical exemption at issue here for “lands owned or leased by colleges, academies, or other public schools.”

¶ 9. In opposing the claimed exemption, the Town of St. Johnsbury asserted that the phrase “or other public schools” was designed to modify the preceding “academies” and “colleges” so as to restrict the exemption to those academies and colleges that were “public” in the sense of being open to all students at public expense. Because the Academy was “purely a private one” that could accept or reject any pupil and where “the scholars pay tuition” the Town maintained that it failed to qualify as a “public school” under the statute. Id. at 204, 9 A. at 908.² The Court flatly rejected this interpretation of the statute. As it explained:

Colleges and academies are, in popular understanding, public institutions, although not public in the sense as applied in our common schools, which are supported by public taxation and are free to the public without charge to the pupils.

The word “public” in this statute, we hold, is not to be construed in the latter sense, but in the sense in which academies are regarded as public institutions.

Id. at 216, 9 A. at 915. In other words, the Court continued, the word “public” in the phrase “public schools” is “not restrictive of what precedes, but is explained thereby; that is, public in the sense in which colleges and academies are public.” Id. (emphasis added). “Public” in this sense, the Court observed, meant an institution “incorporated wholly for the purposes of general education” and operated “without any ... purpose of profit” where “tuition is charged only for its maintenance.” Id. Again it meant, in the Court's view, an institution operated “without personal advantage or profit to the corporators, except as they share with the whole public in the general advantage by promotion of education and good morals.” Id. at 217, 9 A. at 915. The Court thus concluded that the Academy qualified as a public school within the meaning of the statutory exemption.

¶ 10. In an equally important addendum, the Willard Court went on to hold that, although the statute speaks in terms of lands “owned” by a college, academy or other public school, the Legislature did not intend to exempt property “simply because owned” by such an institution. Id. at 218, 9 A. at 916. Rather, the exemption extended only to property owned by the school and dedicated to the “use and benefit of the institution as an academy or a college in carrying out the purposes of its incorporation.” Id. Applying this construction, the Court had little difficulty holding that the buildings in question were employed “for actual use and convenience of the academy in carrying on” the educational functions of the school and were therefore entitled to a tax exemption. Id. at 219, 9 A. at 916.

¶ 11. We have consistently reaffirmed and applied Willard over the decades. Scott v. St. Johnsbury Academy, for example, involved several additional buildings on the campus of the same Academy which, once again, were held to be exempt from taxation by virtue of being owned by a public school and used for the “benefit of the...