Burr and Burton Seminary v. Town of Manchester

Burr and Burton Seminary v. Town of Manchester (2000-294); 172 Vt. 433;
782 A.2d 1149

[Filed 24-Aug-2001]


       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,
  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.


                                No. 2000-294


Burr and Burton Seminary	                 Supreme Court

                                                 On Appeal from
     v.	                                         Bennington Superior Court


Town of Manchester 	                         June Term, 2001 
Village of Manchester


Richard W. Norton, J.

Orland Campbell, Jr., and Matthew C. Samuelson, Manchester Village, for 
  Plaintiff-Appellant.

Steven F. Stitzel of Stitzel, Page & Fletcher, P.C., Burlington, for 
  Defendant-Appellee.


PRESENT:  Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.


       JOHNSON, J.   Appellant taxpayer Burr and Burton Seminary appeals from
  a decision of  the Bennington Superior Court granting the Town of
  Manchester summary judgment on taxpayer's  claim that two buildings it owns
  are exempt from property taxes under 32 V.S.A. § 3802(4).  The  court held
  that the buildings are not exempt because the buildings are not directly
  connected with the  running of Burr and Burton Seminary.  We affirm in
  part, and reverse in part.

       Burr and Burton Seminary is a non-profit corporation that operates a
  private high school in  Manchester, Vermont known as the Burr and Burton
  Academy.  Burr and Burton has traditionally  supplied housing to the
  headmaster, as part of the compensation package, on a building on campus 
  known as the Head House.  In 1996, Burr and Burton acquired a small lot in
  Manchester two miles 

 

  from the school's main campus and constructed a house on the land to be
  used as the Head  House.  The on campus house was converted to office
  space.  The school's headmaster is required to  live in the Head House and
  pay certain related expenses.  During the 1998-1999 school year, the  Head
  House was used for school purposes approximately eleven times for various
  events including  meetings, dinners and parties for faculty, students,
  trustees and staff.  In April 1997, the new Head  House was added to the
  Grand List of the Town and appraised at approximately $290,000.

       Burr and Burton also owns a building on Williams Street in Manchester
  that the school used  as dormitory space for students.  At the end of the
  school year in 1994, Burr and Burton listed the  Williams Street property
  for sale with a realtor.  Pending a sale, Burr and Burton rented the
  property  to various tenants.  The building was sold in 1999.  In April
  1998, the Williams Street property was  added to the Grand List of the Town
  and appraised at approximately $177,000.

       Burr and Burton grieved the appraisals to the Board of Listers and
  then to superior court on  the grounds that the properties are tax exempt. 
  The school argues that the properties fall within the  exemption for "lands
  owned or leased by colleges, academies or other public schools" in §
  3802(4)  because both properties are owned by the school.  The Town
  contends that this statute requires that  the properties be used by the
  school for an educational purpose and that neither of the properties is 
  used accordingly.  On cross motions for summary judgment, the court agreed
  with the Town and  held that neither the Head House nor the Williams Street
  property is directly connected to the  running of the school.  Thus, the
  properties do not qualify for the exemption.  This appeal followed.

       In reviewing a motion for summary judgment we apply the same standard
  as the trial court.   Summary judgment is appropriate when the record
  demonstrates that there is no genuine issue as to  material fact, and the
  moving party is entitled to judgment as a matter of law.  Guiel v. Allstate
  Ins.  Co., 170 Vt. 464, 467, 756 A.2d 777, 780 (2000).

 

       The statute at issue, 32 V.S.A. § 3802 states in relevant part:

         The following property shall be exempt from taxation:

                                 . . .


         (4) Real and personal estate granted, sequestered, or used
    for  public, pious or charitable uses; real property owned by
    churches or  church societies or conferences and used as
    parsonages and personal  property therein . . . ; real and
    personal estate set apart for library uses  and used by the public
    and private circulating libraries . . . ; lands  leased by towns
    or town school districts for educational purposes; and  lands
    owned or leased by colleges, academies or other public schools  .
    . . ; and lands and buildings owned and used by towns for the 
    support of the poor therein . . . .  The exemption of lands owned
    or  leased by colleges, academies or other public schools, shall
    not apply  to lands or buildings rented for general commercial
    purposes . . . ;

  (Emphasis added).  This case concerns the exemption only for "lands owned
  or leased by colleges,  academies or other public schools" (lands owned
  exemption).  Any statutory exemption from  property tax is to be strictly
  construed against the taxpayer.  Stowe Preparatory School, Inc. v. Town  of
  Stowe, 124 Vt. 392, 396, 205 A.2d 544, 546 (1964).

       At issue in this case is the status of the properties for the purpose
  of property tax assessments.  The parties are in agreement that Burr and
  Burton owns the properties and put the properties to some  use.  The
  dispute focuses on whether there is, in fact, a use requirement in the
  statute and whether to  qualify for the exemption the use of the property
  must serve an educational purpose.  If § 3802(4)  requires only ownership,
  then both properties qualify for the exemption.  If, however, the lands 
  owned exemption also requires that the qualified owner use the land for an
  educational purpose, then  we must analyze whether the Head House and
  Williams Street property comply with this  requirement.

       Our paramount goal in statutory construction is to give effect to the
  Legislature's intent.  See  Burlington Elec. Dep't v. Vermont Dep't of
  Taxes, 154 Vt. 332, 335, 576 A.2d 450, 452 (1990).  The 

 

  school correctly notes that the plain language of this exemption makes no
  mention of use.   The statute says that an exemption shall be granted to
  "lands owned or leased by colleges, academies  or other public schools." 
  32 V.S.A. § 3802(4).  We recognize, however, that in some circumstances 
  the literal meaning of the words employed cannot prevail.  See In re Hatch,
  130 Vt. 248, 251, 290 A.2d 180, 182 (1972).  Therefore, when the plain
  meaning of the statute contradicts the intent of the  Legislature, we are
  not confined to a literal interpretation of the statutory language.  In re
  C.S., 158  Vt. 339, 343, 609 A.2d 641, 643 (1992).  In construing tax
  exemptions, we must ascertain the  legislative intent from a consideration
  of the entire exemption statute and with regard to both the  subject matter
  of legislation and its ramifications.  Governor Clinton Council, Inc. v.
  Koslowski, 137  Vt. 240, 247, 403 A.2d 689, 694 (1979).

       The school's proposed construction conflicts with the basic purpose of
  the exemption statute.  The institutions that may claim an exemption under
  the clauses of § 3802(4) include churches and  other religious
  organizations, libraries, all manner of charities, and at issue here,
  colleges, academies  and other public schools.  32 V.S.A. § 3802(4).  It is
  fair to conclude, therefore, that the purpose of  the statute is to free
  from taxation land that is being used to serve some public purpose.  We
  have  stated that our policy is to avoid construing a statute in a manner
  that would render the statute  ineffective, or lead to irrational
  consequences.  Addison County Cmty. Action v. City of Vergennes,  152 Vt.
  161, 165-66, 565 A.2d 233, 235 (1989).  We would violate this principle of
  construction  were we to extend this exemption to any land in which title
  is merely held by a public school.  If  there is no educational use to the
  land, there is no benefit to the state, and, consequently, no reason  why
  the Legislature would forgo the benefit of taxation for this land.  We
  cannot assume that the  Legislature intended to "allow [] an exemption
  whenever property benefits a qualifying organization  in a purely
  incidental manner."  Koslowski, 137 Vt. at 247, 403 A.2d at __ .

 

       Over one hundred years ago we recognized that the Legislature's
  purpose in enacting the  statute was to exempt property used for
  educational purposes.  In Willard v. Pike, 59 Vt. 202, 9 A. 907 (1886), 
  the exemption was challenged for several buildings owned by St. Johnsbury
  Academy  that were currently used for a boarding house, a club house for
  students, and a future residence for  the principal on the grounds that the
  buildings were not being used as required by the exemption.   The Court
  initially admitted that "[o]ur statute stands on the ground of ownership
  alone.  There is no  mention of use."  Id. at 217, 9 A.  at 915.  Despite
  this statement, the Court concluded:

         Although . . . ownership is all that is expressly required,
    it is  probable that the legislature did not intend to exempt
    property simply  because owned by an academy.  In construing
    statutes of exemption  from taxation, regard must be had to the
    settled rule that they are to  be construed most strongly against
    those who claim their benefit.   The ownership must undoubtedly
    be, not for speculative purposes,  but for the appropriate use and
    benefit of the institution as an  academy or college in carrying
    out the purposes of its incorporation.

  59 Vt. at 218, 9 A. at __ (emphasis added).  The Court allowed the
  exemption because what matters  for the purposes of the statute is not only
  whether the property is owned by an educational entity, but  also whether
  the property is used for an educational purpose.

       The Court incorporated this recognized purpose into later holdings. 
  In Broughton v. Town of  Charlotte, 134 Vt. 270 , 356 A.2d 520 (1976), the
  issue was whether an owner who leases her land to  an educational
  non-profit is entitled to the "land owned" exemption.  We held that she was
  not,  because ownership is as important a component of the exemption as
  use.  The Court stated the  "prevailing Vermont rule concerning the
  exemption of land [under the "lands owned" clause]" was  the one stated in
  Willard and then quoted the above passage.  Id. at 274, 356 A.2d  at 522-23. 
  The  Court continued, "[o]bviously, then, the rule to be followed in
  Vermont in respect to real property . .  . is that there can be no freedom
  from taxation unless the property is both owned by a qualified 

 

  body and used by such a body in pursuit of one of its exempt purposes." 
  Id. at 274, 356 A.2d   at 523 (emphasis added).

       Similarly, the amount and type of use of a property were critical in
  Troy Conference  Academy v. Town of Poultney, 115 Vt. 480, 66 A.2d 2
  (1949).  At issue there was whether a  building used mainly as a dormitory
  for teachers qualifies for the lands owned exemption.  The  Court conducted
  an analysis of the property's use, examining the several uses of the
  building  compared with the purpose of the school and the need for those
  specific uses to further the purposes  of the school.  The Court held that
  the building was used for educational purposes, as opposed to  general
  commercial purposes, and would have allowed the exemption, but for the
  operation of a  1941 exception for colleges. (FN1)  Id. at 489, 66 A.2d  at
  8.  In Troy Conference, there was no  specific mention of the
  ownership-based language of the statute and the Court clearly based its 
  decision on the property's educational use.

       Thus, a property's educational use, although not a part of the
  language of § 3802(4), is a  well-embedded part of the exemption's
  requirement.  The statement in Willard in 1886 outlines the  only sensible
  interpretation of the statute given the exemption's purpose.  The
  Legislature, had it  disagreed with our construction, has had over one
  hundred years to amend the statute accordingly.   Indeed, subsequent to
  Willard, the Legislature amended the statute in a manner that strengthens
  this  construction.  The amendment states that the lands owned exemption
  "shall not be construed as  exempting lands or building rented for general
  commercial purposes."  1910, No. 33, § 1.  By  explicitly excluding land
  used for a commercial purpose, the Legislature emphasized that land  owned

 

  by a qualifying organization cannot be put to any purpose it desires and
  still qualify for the  exemption.  If land used for a commercial purpose is
  not exempt, the Legislature could not have  intended that other
  non-educational uses of the property, including no use at all, would
  qualify the  land for the exemption.  It is consistent with the purpose of
  the statute, therefore, to hold that the  school must use its property for
  an educational purpose, in addition to own it, in order to claim the 
  exemption.

       Applying this rationale to the specific properties in this case, we
  find the Williams Street  property is no longer used for an educational
  purpose.  Indeed, the Williams Street property plainly  violates the
  requirement that the property not be rented for general commercial
  purposes.  See 32  V.S.A. § 3802(4).  Since 1994, Burr and Burton has been
  renting the Williams Street property to  paying tenants, in order to derive
  a cash flow from the building.  This use is the definition of rental  for a
  general commercial purpose.  That the Town did not add the Williams Street
  property to the  Grand List until 1998 is irrelevant.  Once Burr and Burton
  ceased using the property for an exempt  purpose, it was no longer entitled
  to the tax exemption.  Therefore, the Williams Street property is  not tax
  exempt.

       The Head House, however, does qualify for the exemption.  Exempting
  the property as a  residence for the headmaster and a venue for school
  functions is consistent with other similar cases.   The Head House is
  analogous to the faculty dormitory in Troy Conference.  That the house is
  part of  the headmaster's compensation package does not bar the property
  from qualifying for the exemption.  As we stated in Troy Conference, "[h]ow
  the rent for rooms is received, whether their salaries  include quarters,
  or the cost is deducted, or the teacher is required to pay such costs
  direct, makes no  difference."  115 Vt. at 489, 66 A.2d  at 8.  The
  essential requirement, however, is that the Head  House has "other uses
  directly connected with the operation of the plaintiff institution."  Id. 

 

  at 486, 66 A.2d  at 6.  Those other uses include the eleven various school
  related events  hosted at the Head House.  The Town tries to distinguish
  Troy Conference from this Head House  based on factors such as the distance
  from campus and the number of times a year the facility is used  for
  events.  We find these distinctions unpersuasive.  A Head House located two
  miles from campus  in a small community that hosts school related functions
  approximately once a month does serve the  educational needs of the
  institution.  Finally, that a residence for a headmaster or faculty is used
  for  an educational purpose is well supported by cases from other
  jurisdictions.  See id. at 486-88, 66 A.2d  at 6-8 (citing cases).  Thus,
  the Head House is exempt from property tax according to 32  V.S.A. §
  3802(4).

       Burr and Burton also argue that the properties are exempt from
  taxation under the "public,  pious or charitable uses" clause of § 3802(4). 
  Whether property qualifies for this exemption is  properly determined by
  the test announced in American Museum of Fly Fishing, Inc. v. Town of 
  Manchester, 151 Vt. 103, 110, 557 A.2d 900, 904 (1989).  Because Burr and
  Burton did not present  a claim based on this exemption to the trial court,
  we are not required to consider it.  Morais v. Yee,  162 Vt. 366, 372, 648 A.2d 405, 410 (1994).

       Affirmed in part, reversed in part. 




                                       FOR THE COURT:



                                       _______________________________________
                                       Associate Justice



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                                  Footnotes


FN1.  In 1941, the Legislature passed 1941, No. 12, § 1 (codified at 32
  V.S.A. §  3831(a)), which states that any property acquired after April 1,
  1941 by a college,  university, or fraternity is not subject to the "lands
  owned" exemption.