Riverview Place, Inc. v. Cass County By and Through Cass County Bd. of Com'rs, No. 890157

• Court: United States State Supreme Court of North Dakota
• Writing for the Court: VANDE WALLE; ERICKSTAD
• Citation: 448 N.W.2d 635
• Parties: RIVERVIEW PLACE, INC., Appellee, v. CASS COUNTY, acting By and Through the CASS COUNTY BOARD OF COMMISSIONERS, Appellant. Civ.
• Docket Number: No. 890157
• Decision Date: 29 November 1989

Page 635

448 N.W.2d 635 RIVERVIEW PLACE, INC., Appellee,
v.
CASS COUNTY, acting By and Through the CASS COUNTY BOARD OF
COMMISSIONERS, Appellant. Civ. No. 890157. Supreme Court of North Dakota. Nov. 29, 1989.

Page 636

J. Gerald Nilles and Daniel J. Crothers (argued), of Nilles, Hansen & Davies, Fargo, for appellee.

Robert G. Hoy, State's Atty., Fargo, for appellant.

Robert W. Wirtz, Asst. Atty. Gen., Office of the State Tax Com'r, Bismarck, for State of N.D., amicus curiae.

Wayne O. Solberg, of Solberg, Stewart, Boulger & Miller, Fargo, for City of Fargo, amicus curiae.

Steven K. Aakre, of Serkland, Lundberg, Erickson, Marcil & McLean, Ltd., Fargo, for American Lutheran Homes, amicus curiae.

VANDE WALLE, Justice.

Cass County appealed from a judgment of the district court which found Riverview Place, Inc., to be an institution of public charity and which abated Riverview Place's real estate taxes for the year 1987. Cass County contends that the trial court erred in finding Riverview Place to be an institution of public charity within the meaning of NDCC Sec. 57-02-08(8). We agree with Cass County, and reverse the judgment of the district court.

Riverview Place is a modern, minimum-care, residential facility for the elderly located in Fargo, North Dakota. It is owned and operated by Riverview Place, Inc., a nonprofit corporation organized in 1986 pursuant to chapter 10-24, NDCC, and whose member-shareholders are the Presentation Sisters of the Blessed Virgin Mary and the Catholic Health Corporation. The purpose of the facility was stated in Riverview Place, Inc.'s articles of incorporation:

"The objects and purposes of this Corporation shall be the owning, organizing and managing of the affairs, property, business and activities of housing and services specially designed to meet the physical, social and psychological needs of the elderly and the promotion of the health, security, happiness and usefulness in longer living of retired persons. As such this Corporation shall be duly benevolent, beneficial, educational, charitable, religious and scientific. Its operation shall be conducted in such a manner as to support the mission of the Roman Catholic Church and shall be operated in compliance with the objectives and philosophy of the Members of this Corporation."

The undisputed facts in the record reveal that Riverview Place is located on property which was donated to Riverview Place, Inc., by the Presentation Sisters. The property was formerly used as a convent by the Presentation Sisters, and had an appraised value of two million dollars at the time of the donation. Upon making the donation of the property, the Presentation Sisters and the Catholic Health Corporation obtained ten million dollars in financing from the sale of Municipal Industrial Development Act bonds [see ch. 40-57, NDCC], and began to develop the property into a modern, apartment-style, living facility for the elderly. A feasibility study was conducted prior to the commencement of construction. The study indicated that the project would be "financially successful, even under the most conservative assumptions." The report estimated start-up losses for the first three years of operation, 1987 through 1989, and indicated that positive cash flows would begin in the fourth operating year. The report projected that Riverview Place would earn a net income of $231,022 in fiscal year 1990, and a net income of $362,807 in the fiscal year ending in 1991. In addition, a consultant's report from an accounting firm forecast similar net income figures after initial losses during the startup years. An agreement between the Presentation Sisters and the Catholic Health Corporation also granted the Catholic Health Corporation an option

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to purchase the buildings and land from the Presentation Sisters at specified prices within five years from the start up of operations. Since its inception in 1987, Riverview Place has actually operated with yearly losses which now total more than one million dollars. Moreover, the Catholic Health Corporation has not exercised its option to purchase the buildings and the land.

The facilities at Riverview Place consist of three interconnected, multilevel buildings. As of the assessment date, the three brick-veneered residence buildings provided a total of 95 units available for occupancy, ranging from small one-bedroom apartments to large two-bedroom apartments. All units have interior entrances, carpeting, kitchens with the ordinary appliances, private baths, and a full complement of utilities. Some units have exterior patios, and garages are available for residents.

Occupancy fees at Riverview Place range from between $850 to $1,205 per month. Stated differently, the units rent at an approximate rate of between $1.23 to $1.58 per square foot. A similar apartment in Fargo rents at approximately fifty cents per square foot. The occupancy fee at Riverview Place, however, contains the cost of amenities not typically found in an average apartment complex. As stated in the Occupancy Agreement, these amenities include: a dining room with one meal per day provided to each resident, a shuttle bus, a coffee shop, a chapel, a 24-hour emergency call system, a library, an arts and crafts room, and a greenhouse. For the payment of an additional fee, residents can also acquire such other amenities as housekeeping services, the use of a beauty salon and barber shop, and party catering.

Riverview Place has a number of admission policies. When making an application for residency at Riverview Place, an individual is required a complete a form detailing his or her current financial condition and assets. The Occupancy Agreement signed by the resident calls for the monthly payment of the designated occupancy fee, and allows Riverview Place to terminate the agreement and evict the resident if the resident is in default for a period of sixty days or more. However, the Occupancy Agreement does contain a provision allowing the management of Riverview Place to subsidize a resident to ensure that the resident does not have to leave the facility "solely due to the inability to pay." The granting of a subsidy is within the "sole discretion" of Riverview Place, and before making application for a subsidy, a resident must agree to first seek "any available family, state or federal financial assistance." A false statement made on the financial information form can disqualify an individual from obtaining a subsidy. Furthermore, residents agree not to make any gifts or dispositions which would impair their ability to satify any financial obligation to Riverview Place. Since the beginning of its operation, no resident has made an application for a subsidy from Riverview Place, and no resident has been evicted due to the inability to meet Riverview Place's financial obligations.

Riverview Place policies also require a resident to be over 55 years of age. The youngest resident at Riverview Place is 63, and the oldest resident is 99 years. The median age of the residents is 82. In addition, the policies contain health requirements for continued residency. Under the Occupancy Agreement, a resident must be able to "function independently" while at Riverview Place. If a person can no longer function independently, Riverview Place assists the individual in relocating to a nursing home or other health care facility, and allows the resident to terminate his or her occupancy agreement under a "short notice" provision. Riverview Place is not a medical facility, and it offers no medical care or treatment for its residents.

This case was commenced on February 26, 1987, when Riverview Place, Inc., filed a Certificate For Real Estate Tax Exemption Claim seeking to exempt its property and buildings from 1987 general real estate taxes. See NDCC Sec. 57-02-14.1. Riverview Place claimed that it was an institution of public charity and, therefore, exempt from property taxation under

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Sec. 57-02-08(8), NDCC. ¹ The application was disapproved by the Cass County Director of Tax Equalization on the grounds that Riverview Place and its property did not qualify for the exemption under Sec. 57-02-08(8). In rejecting the application, the Director acted on the advice of counsel who reviewed Riverview Place's certificate and exhibits, reviewed the case law surrounding Sec. 57-02-08(8), and recommended rejection of the application. When the property was subsequently assessed for 1987 general real estate taxes, Riverview Place, Inc., timely filed an Application for Abatement and Settlement of Taxes. See NDCC ch. 57-23.

The tax abatement application was initially heard before the Board of County Commissioners of Cass County on January 19, 1988. A further hearing on the matter was held on January 26, 1988. Riverview Place had submitted a number of exhibits with its application to the Board of County Commissioners. The Board of County Commissioners, also acting on the advice of counsel, rendered a decision denying the application for abatement of the property taxes on January 26, 1988. Riverview Place subsequently filed a timely notice of appeal to the district court pursuant to NDCC Sec. 11-11-39.

A hearing before the district court was held on November 9, 1988. At the hearing, the district court received evidence from the parties by way of stipulation, exhibits and testimony. The district court subsequently entered its findings of fact, conclusions of law, and order for judgment reversing the Board of County Commissioner's denial of Riverview Place's application for abatement, and ordered Cass County to exempt Riverview Place's property from taxation for 1987. A judgment was entered, and Cass County timely filed a notice of appeal to this Court.

The issue presented by Cass County on appeal is whether the district court erred when it overturned the Board of County Commissioner's denial of Riverview Place's application for abatement, and found...