Tempe Life Care Village, Inc. v. City of Tempe

• Decision Date: 10 September 1985
• Docket Number: No. 1,CA-CIV,1
• Citation: Tempe Life Care Village, Inc. v. City of Tempe, 148 Ariz. 264, 714 P.2d 434 (Ariz. App. 1985)
• Parties: TEMPE LIFE CARE VILLAGE, INC., an Arizona non-profit corporation, Plaintiff-Appellee, v. CITY OF TEMPE, a municipal corporation, Defendant-Appellant. 7419.
• Court: Arizona Court of Appeals

Page 434

714 P.2d 434

148 Ariz. 264

TEMPE LIFE CARE VILLAGE, INC., an Arizona non-profit corporation, Plaintiff-Appellee, v.CITY OF TEMPE, a municipal corporation, Defendant-Appellant.

No. 1 CA-CIV 7419.

Court of Appeals of Arizona Division 1, Department C.

Sept. 10, 1985.

Reconsideration Supplemental Opinion

Denied Nov. 7,1985.

Review Denied Feb. 19, 1986.

David P. Merkel, Tempe City Atty. by Vincent A. Iannone and Dennis M. O'Neill, Asst. City Attys., Tempe, for defendant-appellant.

OPINION

EUBANK, Judge.

Tempe Life Care Village, Inc., [hereinafter "Village"] is an Arizona nonprofit corporation which operates Friendship Village of Tempe, a lifetime residential and health-care facility for senior citizens, located in the city of Tempe, Arizona.Since November 25, 1978, Village has maintained the status of a federally tax-exempt organization under § 501(c)(3) of the Internal Revenue Code of 1954, as amended.At issue in this case is the applicability of Tempe's transaction privilege tax ordinance to various activities conducted by Village.

In 1982, after an audit had been conducted by Tempe officials, Village was assessed by Tempe pursuant to its transaction privilege tax ordinance for activities which Tempe believed constituted rental, food service and transportation for hire.Although the Tempe City Council abated any taxes which might have been assessed for operations prior to the audit date, it was determined that Village would henceforth be subject to the tax.Village paid the assessment under protest and continued to pay subsequent assessments under protest.After its requests to Tempe for relief had been denied, it filed this suit in Maricopa County Superior Court contending that it was not subject to the Tempe transaction privilege tax.The parties filed cross-motions for summary judgment.For purposes of obtaining a ruling on the cross-motions for summary judgment, the parties stipulated to the following facts concerning the operations of Friendship Village:

The concept of Plaintiff's organization is to cover the costs of growing old as a group function.Such cost coverage consists of providing medical services, food service, housing, recreation, housekeeping and other personal needs to the community as a whole.Residents participate in one daily meal together.They reside in cottages and apartments.They do not have exclusive possession against the Village and their rights are not assignable.Transportation is provided to all who wish to use it.Recreational activities are conducted daily.The grounds and buildings are cared for by crews of workers.A clinic is in the Village for out-patient care as well as for hospitalization.Instead of each individual resident picking up the cost of living, the Village as a whole pays for the utilities, refuse collection, food, local phone services, domestic and laundry services, and all other costs.To pay for these pooled services, residents combine their money in two ways.They pay a one-time endowment which enables them to live at the Village for life.The amount of this endowment is computed actuarially based on insurance theory.The unused portion of the endowment from a person who does not live at the Village very long offsets the extended needs of a person who spends many years in residence.The insurance concept goes even further.To protect all the residents from financial failure of their collective effort, the Commissioner of Insurance for the State of Arizona has a lien against the premises of the Plaintiff.

Secondly, each resident pays a monthly fee to cover current costs of resident care, dietary service, maintenance, housekeeping and administration.This fee fluctuates and is set by the Board of Directors of the Plaintiff.

The Board of Directors is selected in accordance with By-Law provisions of the Plaintiff's organization.Management of the Village is contracted out to a corporation specializing in rendering life care services.

The trial court denied Tempe's motion for summary judgment and granted the motion for summary judgment of Village.The trial court found Village entitled to judgment because the activities Tempe sought to tax were not subject to the City of Tempe's transaction privilege tax both because they did not constitute "business" within the meaning of the Tempe City Code, and because they did not constitute the taxable activities of rental of real property, transportation for hire or food service within the meaning of the Tempe City Code.The trial court awarded Village all monies it had paid to Tempe to date pertaining to the tax assessments together with interest from the date that the payments had been made.Tempe filed an objection to the form of judgment, arguing that the interest award should not be allowed.Tempe appeals from the judgment and from the subsequent denial of its objection to the form of judgment.

We first consider two jurisdictional issues raised by Village.Without making any argument, Village seems to suggest that this court lacks jurisdiction over the appeal due to the holding in Sarwark v. Thorneycroft, 123 Ariz. 1, 596 P.2d 1173, approved123 Ariz. 23, 597 P.2d 9(1979) and due to the express mention in the Tempe City Code that suit may be filed by a tax protester in superior court, with no mention that any further review may be sought through the courts.

We agree with Tempe that nothing in the Sarwark case or the Tempe City Code precludes our review of the ruling made by the superior court in this instance.In Sarwark we were concerned with judicial review of decisions made by state administrative agencies.We held that the Administrative Review Act, A.R.S. § 12-901 et seq., which provides for review of agency rulings by the superior court, and review of the superior court ruling by the appellate courts, is not applicable when independent statutory review of the rulings of a particular agency is provided.In that case a specific judicial review statute for certain rulings of the Department of Transportation limited review to the superior court, and therefore we found that this court had no jurisdiction to review the superior court's decision.

In this case, we are concerned with a charter city's enforcement of its ordinances, not with a ruling made by a state administrative agency.We have not been cited to any statute enacted by the legislature limiting judicial review of decisions concerning city ordinances.While we do not find from reading the city ordinance that Tempe has attempted to limit review of its enforcement of its tax ordinance to the superior court, we also note that a city has no authority to limit the jurisdiction of the state's courts which obtain their jurisdiction from the stateconstitution and statutes.Schoenberger v. Board of Adjustment, 124 Ariz. 528, 606 P.2d 18(1980).Since no specific limitation on our jurisdiction to hear this case exists, we have jurisdiction pursuant to A.R.S. § 12-120.21(A)(1) which grants appellate jurisdiction "... in all actions and proceedings originating in or permitted by law to be appealed from the superior court...."

Secondly, Village contends that this court has no jurisdiction to consider the appeal from the denial of the objection to the form of judgment because Tempe filed its notice of appeal prior to the time that a formal order denying the objection to the form of the judgment had been entered.This issue has been decided adversely to Village's contention.The Arizona Supreme Court has held in Barassi v. Matison, 130 Ariz. 418, 636 P.2d 1200(1981) that under the Arizona Rules of Civil Appellate Procedure which were enacted in 1977 a premature appeal is not jurisdictionally defective.The court held that "a premature appeal from a minute entry order in which no appellee was prejudiced and in which a subsequent final judgment was entered over which jurisdiction may be exercised need not be dismissed."Id. at 422, 636 P.2d at 1204.Since Village has shown no prejudice, we do not find that the filing of a premature appeal provides grounds for dismissal.

Having found no jurisdictional defect to hearing this appeal, we proceed to the substantive issues.Tempe argues that the trial court erred in finding that Village was not engaged in "business" as defined in the Tempe City Code and that it was not engaged in specific taxable business activities pursuant to the code.

Tempe's transaction privilege tax is a tax "measured by the amounts or volume of business transacted by persons on account of their business activities" and is derived from "gross proceeds of the sale or gross income" from the business.Tempe City Code§ 33-16.Obviously, an entity in order to be taxed must be conducting "business" within the definition of the Code."Business" is defined in § 33-11(3) to include "all activities or acts, personal or corporate, engaged in or caused to be engaged in with the object of apparent gain, benefit or advantage, either direct or indirect."Within the definition of "business," the Code clarifies that isolated casual activities not connected with nor related to other taxable business activities are not included as "business," with the exception that the rental or lease of property even if isolated is almost always considered taxable business activity.Proceeds from rental or lease of property are taxable if the owner advertises the property for rent, receives $1,000 or more from the rental, rents for thirty days or more, or rents with an option to buy.§ 33-11(3)(a, b, c and d).

Not only must the entity be engaged in "business," but it must be engaged in the specific business activities which the Code enumerates in § 33-16(1) to (14).In determining that Village was engaged in taxable business activity, Tempe charged that village was transporting persons for hire pursuant to subsection (1), serving food in the manner of a restaurant, dining room or lunch room pursuant to subsection (10), and leasing real property...