Zlotoff Found. v. Town of S. Hero

• Decision Date: 20 March 2020
• Docket Number: No. 2019-213,2019-213
• Court: Vermont Supreme Court
• Parties: Zlotoff Foundation, Inc. v. Town of South Hero

2020 VT 25

Zlotoff Foundation, Inc. v. Town of South Hero

No. 2019-213

Supreme Court of Vermont

October Term, 2019

March 20, 2020

NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal revision before publication in the Vermont Reports. Readers are requested to notify the Reporter of Decisions by email at: JUD.Reporter@vermont.gov or by mail at: Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may be made before this opinion goes to press.

On Appeal from Superior Court, Grand Isle Unit, Civil Division

Robert A. Mello, J.

Brian P. Monaghan and James F. Conway, III of Monaghan Safar Ducham PLLC, Burlington, for Plaintiff-Appellant/Cross-Appellee.

Wm. Andrew MacIlwaine and Kendall Hoechst of Dinse P.C., Burlington, for Defendant-Appellee/Cross-Appellant.

PRESENT: Reiber, C.J., Eaton, J., and Tomasi, Supr. J., Burgess J. (Ret.)¹ and Morris, Supr. J. (Ret.), Specially Assigned

¶ 1. REIBER, C.J. This appeal from summary judgment concerns the taxable status of a 9.9-acre parcel of land containing an 11,500-square-foot garage that is owned and used by Zlotoff Foundation, Inc., a nonprofit charitable organization, for the purpose of storing and maintaining a collection of classic automobiles that it displays at its nearby museum. The trial court ruled that the garage and the land were tax-exempt because they were used for a public purpose. However, it denied the Foundation's request for a refund of property taxes paid to theTown of South Hero from 2016 to 2018 because the Foundation did not obtain a certificate of authority allowing it to transact business in Vermont until 2019. The Foundation and the Town both appealed. We affirm.

¶ 2. The following facts were undisputed for purposes of summary judgment. Zlotoff Foundation, Inc., is a Michigan nonprofit corporation organized for charitable, educational, and conservation purposes. It operates a museum in South Hero, Vermont, that displays colonial tools and a classic automobile collection. The museum currently displays approximately 3000 tools from the American colonial era and forty classic cars. It is a member of the New England Museum Association and the Early American Industries Association. The museum does not charge admission. It is open to the public every Saturday from Memorial Day to Columbus Day, and all three of the federal holiday weekends during that period. It is also open to the public for special events and in response to requests from interested parties to visit on days when it is normally closed. The museum provides programming for local school groups and has been visited by more than 1000 people.

¶ 3. The museum operates in a leased barn that is located on property owned by AIR Development, LLC.² The Foundation renovated the barn in 2008 to house the museum collection. For several years, the Foundation used the upper level of the barn to display the tool collection. In 2017, the Foundation began displaying the "Z Motorsports Collection" of vehicles at the museum.

¶ 4. The Foundation owns a 9.9-acre parcel on Landon Road that abuts AIR Development's property. In 2016, the Foundation constructed a 11,500-square-foot garage on the Landon Road parcel. The Foundation uses the garage to store and repair its collection of classic automobiles, approximately seven of which are shown at the museum on a rotating basis. Prior to building the garage, the Foundation used part of the museum barn to repair and maintain its classicvehicles. The garage is operated on a not-for-profit basis. It is not open to the public, and it is not a museum. The Foundation does not use the garage or the land surrounding it for any purpose other than to support the museum.

¶ 5. In 2007, AIR Development, LLC, applied for site plan approval to improve the barn where the museum is located for use as "private storage for owner and antique tool collection housing." The South Hero Planning Commission issued a decision in October 2007 approving the project and proposed use. Neither the application nor the Planning Commission's decision referenced the possibility that the barn would be used as a public museum, and the permit was not for public use.

¶ 6. In February 2015, the Foundation applied for a zoning permit to construct the garage building on its Landon Road parcel. The Foundation's application for site-plan review stated the proposed use of the structure was "Private Garage (Structure, Independent)." The Foundation's representative testified at a hearing before the Planning Commission that the proposed independent structure would be used to store and display the landowner's private car collection. In April 2015, the Planning Commission granted site-plan approval for the garage. In May 2015, the Foundation submitted its Act 250 land-use application for the garage project. The application described the project as "[c]onstruction of a private garage for motor vehicle storage" and stated that the garage was "not intended for public access, and its purpose is to store automobiles and motorcycles." The Town issued a certificate of occupancy for the garage in January 2016 that identified the structure's type of use as "Garage—private car collection."

¶ 7. In February 2016, the Foundation requested a property-tax exemption from the Town for the Landon Road parcel, arguing that it qualified as real estate used for public, pious, or charitable purposes under 32 V.S.A. § 3802(4) because the garage supported the museum. In April 2016, the Town's board of listers and the Foundation informally discussed the exemption request. Based on the information provided by the Foundation, the listers issued a decision denying therequest. The listers reasoned that neither the barn nor the garage had the required permits to be open to the public for museum use and therefore the Landon Road parcel was not dedicated unconditionally to public use. The Foundation did not appeal the listers' decision.

¶ 8. In April 2016, the town zoning administrator sent a letter to AIR Development stating that the barn was being operated as a public museum in violation of its permitted use as "private storage for owner and antique tool collection housing." In June 2016, the zoning administrator sent a second letter advising AIR Development that the use of the barn as a museum was a zoning violation and that it would need to apply for a new site-plan approval and conditional-use change or a notice of violation would be issued. AIR Development subsequently applied to change the barn's permitted use to "Tool Museum." The town zoning board of adjustment and the planning commission approved the application in late 2016. The Town has not specifically approved the use of the ground floor of the barn for a car museum. The planning commission's decisions state that the ground floor "is empty and is used by the museum."

¶ 9. In June 2017, the Foundation again requested a tax exemption for the garage property. The board of listers denied the request. The Foundation appealed to the Board of Civil Authority (BCA), which denied the appeal. The BCA agreed with the listers that the property was not dedicated unconditionally to public use because the Foundation had not obtained a permit to operate a museum on the property. It also found that there was insufficient information to determine whether the property benefited an indefinite class of the public or was owned and operated as a nonprofit. It therefore upheld the listers' appraised value of $1,101,700 for tax year 2017.

¶ 10. The Foundation appealed the BCA's decision to the civil division of the superior court. In the spring of 2018, the parties each moved for summary judgment. The Foundation argued that the Landon Road parcel qualified for the public-use exemption because it was used solely to support the public use of the museum. It sought a refund of property taxes it paid to theTown in 2016, 2017, and 2018. The Town argued that the Foundation failed to meet its burden of demonstrating that the parcel was dedicated unconditionally to public use because its zoning permits did not indicate it was being used to support the museum and it was not being used for core administrative functions of the museum. Further, it argued the Foundation had not demonstrated how the rest of the 9.9-acre parcel was being used.

¶ 11. In September 2018, the court issued a written decision denying the Town's motion for summary judgment and granting partial summary judgment to the Foundation. The court noted that the dispute between the parties arose in part from the Town's "understandable displeasure with the Foundation's decision to open a museum in a renovated barn without first securing proper permissions from the Town." However, it concluded that the Foundation's failure to secure complete and timely permission from the Town to conduct its museum-related activities did not control whether the Foundation had demonstrated public use as contemplated by 32 V.S.A. § 3802(4). The court determined that there was no dispute that the Foundation operated a museum that was dedicated unconditionally to public use. It concluded that the undisputed material facts demonstrated that the garage was directly connected to the Foundation's operation of the museum and was used in a way that was essential to the operation of the museum and in furtherance of its charitable purpose. It therefore concluded that the garage qualified for tax exemption under § 3802(4). However, it declined to determine whether the rest of the 9.9-acre parcel was exempt because the Foundation had not established how much of the parcel was dedicated to public use.

¶ 12. In December 2018, the Foundation filed a supplemental motion for summary judgment, arguing that the entire 9.9-acre Landon Road parcel was exempt from taxation because it supported the garage, was not used for any other purpose, and could not be used for any other purpose due to the size of...