                IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                                   June 30, 2003 Session

         FIRST PRESBYTERIAN CHURCH OF CHATTANOOGA v.
            TENNESSEE BOARD OF EQUALIZATION, ET AL.

                   Appeal from the Chancery Court for Hamilton County
                      No. 01-0208 Howell N. Peoples, Chancellor

                                  FILED AUGUST 15, 2003

                                No. E2003-00128-COA-R3-CV


Ms. Madeline D. Apple bequeathed her house to First Presbyterian Church of Chattanooga (“the
Church”) to be used for the temporary housing and convenience of the Church’s missionaries. The
Church filed a formal application with the Board of Equalization requesting the house be exempted
from property taxation because it was used purely and exclusively for carrying out the Church’s
missionary work. The request for exemption was denied, a decision later upheld by an
Administrative Law Judge and then by the Assessment Appeals Commission. The Church appealed
the final decision of the Assessment Appeals Commission to the Hamilton County Chancery Court
(“Trial Court”). After a hearing, the Trial Court concluded the house was not used purely and
exclusively for religious purposes and denied an exemption. The Church appeals, and we affirm.


                  Tenn. R. App. P. 3 Appeal as of Right; Judgment of the
                       Chancery Court Affirmed; Case Remanded.


D. MICHAEL SWINEY, J., delivered the opinion of the court, in which HERSCHEL P. FRANKS , J., and
CHARLES D. SUSANO, JR., J., joined.

J.W. Dietzen, Chattanooga, Tennessee, for the Appellant First Presbyterian Church of Chattanooga.

Paul G. Summers, Attorney General and Reporter, Michael E. Moore, Solicitor General, and Ann
Louise Vix, Senior Counsel, Nashville, Tennessee, for the Appellees Tennessee State Board of
Equalization and Tennessee Assessment Appeals Commission.

Mary Neill Southerland, Chattanooga, Tennessee, for the Appellee Bill Bennett, Hamilton County
Assessor of Property.
                                                   OPINION

                                                  Background

               Ms. Madeline D. Apple owned a house in Chattanooga. In her will, Ms. Apple
bequeathed this property to the Church to be used “for the temporary housing and convenience of
the missionaries of said Church.” After Ms. Apple passed away and an Executor’s Deed was
delivered to the Church, the Church requested the Assessor of Property for Hamilton County to
exempt this property from taxation. Specifically, the Church claimed this property was exempt
because it was used purely and exclusively for carrying out thereupon at least one of the purposes
for which the Church existed, i.e., its missionary work. A formal application to exempt the property
from taxation was filed with the Board of Equalization (“Board”) on April 30, 1999. On May 17,
1999, the Board’s Exemption Designee denied the exemption.

                The Church appealed the decision of the Exemption Designee to an Administrative
Law Judge (“ALJ”), who conducted a hearing and heard testimony from Reverend Lea Clower as
well as Roger Thomas, the Church’s Director of World Missions. The ALJ subsequently issued
Findings of Fact and Conclusions of Law. From a factual standpoint, it was undisputed that during
the over two-year period the Church was in possession of the house, it was used by overseas
missionaries who returned to the United States on home assignment, with the exception of a two-
month period when a former pastor for the Church was permitted to live in the house after he
returned to the Chattanooga area and while he attempted to obtain permanent housing. Occupants
of the house are not charged rent, but they are required to pay for utilities. It also was undisputed
that missionaries on home assignment are required to report to the Church’s World Missions
Committee, attend an annual World Missions Conference, as well as participate in Sunday School
and Bible study.

                 After discussing the above facts, the ALJ noted that a religious or other qualifying
institution is eligible for exemption only if the property is put to a use which is “‘directly incidental
to or an integral part of’ (or ‘reasonably necessary’ to the accomplishment of) an exempt purpose
of the institution. Methodist Hospitals of Memphis v. Assessment Appeals Commission, 669 S.W.2d
305 at 307 (Tenn. 1984).” The ALJ then stated as follows:

                          With the notable exception of parsonages, property of a
                  religious institution that is used principally as a residence has
                  generally not been approved for exemption – regardless of whether
                  the owner receives income from such property. 1 Thus, as counsel for
                  the Church has acknowledged, the Assessment Appeals Commission
                  … has historically declined to exempt church-owned residences for
                  missionaries on furlough. For example, in the Appeal of Riverview


        1
          It is noteworthy that Tenn. Code Ann. section 67-5-212(a)(1) specifically precludes a church from obtaining
exem ption of mo re than one p arson age. (footnote in original)

                                                        -2-
               Independent Baptist Church (Rutherford County, decided December
               14, 1987), where the appellant sought exemption of a “prophet’s
               quarters” within an activities center, the Commission upheld the
               following rationale for denial:

                       …[T]he residents of this room have no duties that
                       require that they be furnished a residence. Furnishing
                       this residence cannot be said to be “reasonably
                       necessary” to accomplishment of the appellant’s
                       exempt purposes and in fact more closely resembles
                       compensation or a living allowance to the occupants
                       of the room.

               Id. at p. 3.

                       Similarly, the evidence of record in this proceeding indicates
               that the subject property was intended primarily for the benefit of the
               missionaries who actually use it. In fact, as previously mentioned,
               Ms. Apple devised the property to the Church expressly for the
               “convenience” of such persons. While recognizing the depth of the
               Church’s commitment to its missionary program, the administrative
               judge cannot legitimately infer that a missionary’s temporary
               occupancy of this house – rather than a commercially-available home
               or apartment in the vicinity – would significantly enhance his or her
               overall contribution to that program.

The ALJ then upheld the decision of the Exemption Designee and concluded the property was not
exempt from taxation under applicable law.

                 The Church appealed the ALJ’s decision to the Assessment Appeals Commission
(“Commission”), and another hearing was conducted. The Church stipulated to many of the ALJ’s
factual conclusions and also called Reverend Clower to testify to the very significant role missionary
work occupies in the duties of the Church, a fact which is undisputed for purposes of this appeal.
Roger Thomas (“Mr. Thomas”) also testified. As previously noted, Mr. Thomas is the Director of
World Missions at First Presbyterian Church in Chattanooga. Mr. Thomas testified the Church’s
world missionary work for fiscal year 2000 accounted for 37.5% of the Church’s annual budget and
was used to support 100 missionary families. According to Mr. Thomas, due to modern advances
such as air travel, missionaries now are able to return home for shorter periods of time. A missionary
returning to the United States is more likely to stay three to six months, whereas in the past they
would have stayed for one or two years. In some cases, a missionary returning to the United States
may be able to find suitable housing if they are staying for a sufficiently lengthy period of time.
However, for those missionaries returning for a shorter period of time, it simply is not practical to
rent a house and take the necessary steps to set up a household, only to have to dispose of everything


                                                 -3-
when they return overseas in a few months. Prior to the Church’s obtaining the house at issue, its
missionaries returning to the United States were responsible for finding their own place to stay. Mr.
Thomas admitted this did not “shut down” the missionary program of the Church.

                Mr. Thomas testified that when missionaries return to the United States, they are on
“home ministry assignment” and are expected to visit their supporting church and give reports. If
applicable, they undergo retraining or recertification in order to keep medical or teaching certificates
and the like current. They also undertake recruiting work for the mission and raise funds. When
returning to the United States, missionaries typically bring very few items with them, usually just
clothing or books. They do not bring household items.

               According to Mr. Thomas, the World Missions Committee established a policy that
the house is available on a first come, first served basis as follows: first, to missionaries who are
financially supported by and who are members of First Presbyterian Church; second, to missionaries
who are financially supported by but not members of the Church; third, to retired missionaries; and
fourth, to temporarily house members of the Church ministry staff who have such a need, such as
when a house is being remodeled. Mr. Thomas testified the Church has no intention of classifying
the house as a permanent residence for one of its missionaries.

              Several months after the hearing was completed, the Commission issued its Final
Decision and Order, at which time the Commission noted that the only issue to be decided was
whether the Church’s use of the property, i.e, temporary housing for missionaries on home
assignment, constituted an exempt use. The Commission concluded that it did not, stating:

                         [A substantial amount of] the church’s roughly two million
                dollar budget is devoted to its mission program. The missionaries are
                financially supported by the church and the church provides housing
                when they temporarily return to the United States. Missionaries in
                this status are not idle, however. They are considered to be on “home
                missionary assignment” and may visit local churches that have
                supported them, receive retraining, recruit other missionaries, or raise
                contributions for the missionary program. They have occupied the
                subject property for periods ranging from ten days to eleven months.

                       [The exemption was originally denied] on the basis of our
                prior decisions … which involved temporary housing for
                missionaries. The rationale of these decisions is that the housing
                primarily meets the needs of the missionaries or is a convenience to
                them, taking the place of a housing allowance, rather than being
                reasonably necessary to the evangelical effort of which the
                missionaries are a part. [The Church argues] that the Commission
                should decline to abide by these precedents and should instead grant



                                                  -4-
               exemption in deference to the liberal construction generally given in
               Tennessee in the case of religious, charitable, and related exemptions.

                       The rule of liberal construction does not permit us to ignore
               the statutory exemption requirements and the circumstances of
               property use. Housing for an employee may indirectly serve the
               employer’s interests by accommodating the living needs of the
               employee and enabling the employee to productively serve the
               employer, but the housing clearly and primarily benefits the employee
               and is a form of compensation.…

                        [D]ecisions of our courts (not merely our own precedents)
               require the housing to be exempt must be not only directly incidental
               to exempt purposes of the owner but reasonably necessary to
               fulfillment of the exempt purpose.… The functions of … the
               missionaries on home assignment as described in testimony in this
               case do not reasonably require they be housed on property of the
               church in the sense contemplated by these precedents. They do not
               fulfill a need for after hours security, supervision or access to other
               property of the church, nor are the lodgings used for any purpose of
               the church other than meeting the living needs of the missionaries.

                The Church appealed the Commission’s Final Decision and Order to the Trial Court
and another hearing was conducted. Both Reverend Clower and Mr. Thomas testified consistently
with their previous testimony. There was, however, additional testimony that since the last hearing,
the Church permitted the house to be used by a missionary from Colorado whose son was being
treated nearby in Atlanta for a medical condition. After reviewing the facts and applicable precedent,
the Trial Court issued a memorandum opinion concluding the Church’s allowing the house to be
used: (1) by a former minister who was arranging for permanent housing after relocating to the
Chattanooga area; and (2) by a missionary from Colorado whose son was receiving nearby medical
treatment, while certainly commendable, did not qualify as use which was “purely and exclusively”
for religious purposes. Accordingly, the Trial Court held the property was not exempt.

              The Church appeals, claiming the Trial Court erred when it concluded the property
was not exempt because it was not used purely and exclusively for carrying out thereupon one of the
purposes for which the Church was created, i.e., its missionary work.

                                             Discussion

                All parties to this appeal agree that and have proceeded as if the standard of review
set forth in Tenn. R. App. P. 13(d) applies. We will, therefore, apply this standard and the factual
findings of the Trial Court will be accorded a presumption of correctness and will not be overturned
unless the evidence preponderates against them. See Tenn. R. App. P. 13(d); Bogan v. Bogan, 60


                                                 -5-
S.W.3d 721, 727 (Tenn. 2001). With respect to legal issues, our review is conducted “under a pure
de novo standard of review, according no deference to the conclusions of law made by the lower
courts.” Southern Constructors, Inc. v. Loudon County Bd. Of Educ., 58 S.W.3d 706, 710 (Tenn.
2001).2

                The relevant statutory provision which allows certain real and personal property of
qualifying institutions to be exempt from taxation provides as follows:

                          There shall be exempt from property taxation the real and
                  personal property, or any part thereof, owned by any religious,
                  charitable, scientific or nonprofit educational institution which is
                  occupied and used by such institution or its officers purely and
                  exclusively for carrying out thereupon one (1) or more of the
                  purposes for which the institution was created or exists, … and
                  provided further, that no church shall be granted an exemption on
                  more than one (1) parsonage, which shall include not more than three
                  (3) acres of land except as hereinafter provided; and provided further,
                  that no property shall be totally exempted, nor shall any portion
                  thereof be pro rata exempted, unless such property or portion thereof
                  is actually used purely and exclusively for religious, charitable,
                  scientific or educational purposes.

Tenn. Code Ann. § 67-5-212(a)(1)(A).

               In Blackwood Brothers Evangelistic Association v. State Board of Equalization, 614
S.W.2d 364 (Tenn. Ct. App. 1980), the plaintiff sought a property tax exemption for the home of
Reverend Blackwood, the church’s executive or chief minister. Reverend Blackwood was also a
member of the Blackwood Brother’s Quartet, a for-profit singing group which derived income from
concerts. Most of the time Reverend Blackwood traveled across the country as an evangelist and
performing with the quartet. He preached at the Church forty to forty-five times a year. Regular
church services were conducted by Reverend Retzloff, the church’s local full time pastor. The Board
of Equalization defined a “parsonage” as “the home of a full time regular minister of a local church,”
and concluded Reverend Blackwood’s home did not meet this definition Id. at 365-66. The trial
court affirmed this conclusion, holding the Board’s definition of parsonage was not arbitrary or
capricious and there was substantial and material evidence to support the Board’s denial of an
exemption. Id. at 366. On appeal, this Court first concluded the Board’s definition of parsonage was



         2
             The standard of review governing judicial review of agency decisions contained within the Uniform
Administrative Procedures Act would be more favorable to the State on this ap peal. See Tenn. Cod e Ann. §§ 4-5-322(h)
and 4-5-323. However, during oral argument the State took the position that this standard of review did no t apply. In
light of the State’s concession and because our ultimate resolution of this appeal would be the same regardless of which
standard was utilized , we will not create an issue where one otherwise does not exist and express no opinion on which
standard o f review otherw ise would be app ropriate.

                                                          -6-
not arbitrary or capricious. The Blackwood Court then concluded that the use of the house was not
purely and exclusively for religious purposes, stating:

                  [A]s we see it, the issue is not which minister lives in the home, but
                  whether the property is used purely and exclusively for religious
                  purposes. Parsonages, per se, are not given exemption under the
                  statute; only those pieces of property that are used purely and
                  exclusively for religious, charitable, scientific or educational purposes
                  are exempt. Even though a church may have more than one
                  parsonage used purely and exclusively for religious purposes, only
                  one would be exempt. It does not follow that one parsonage is
                  always exempt under all circumstances. It depends on the use of the
                  property, and we are of opinion that the use of the property under the
                  facts of this case is not purely and exclusively for religious purposes.
                  The Reverend Blackwood and his family live in the property and he
                  goes forth from there to make a living and preach, sing, and
                  evangelize in the name of his religion. However, that does not make
                  the property's use exclusively for religious purposes. The religious
                  purpose may be incidentally served by the housing of a minister, but
                  that incidental use and benefit does not bring the property within the
                  statutory exemption. Nashville v. Board of Equalization, 210 Tenn.
                  587, 360 S.W.2d 458 (1961).

Blackwood, 614 S.W.2d at 366 (emphasis in original).

               In the present case, the parties have furnished this Court with a copy of the unreported
opinion in Dozier v. State Board of Equalization, a Court of Appeals decision filed on October 26,
1979.3 In Dozier, one of the issues before the Court was whether the residence of Reverend Dozier,
the Bishop for the Roman Catholic Diocese of Memphis, was exempt from taxation because it was
used purely and exclusively for religious purposes. Bishop Dozier’s house did not adjoin any
church. The house contained, inter alia, a living room, dining room, kitchen, den, library, office,
and a chapel where private Masses were held.4 Bishop Dozier held meetings at his residence in
connection with religious, social, and educational activities. Dozier, slip op. at 2. In concluding
Bishop Dozier’s property was not used purely and exclusively for religious purposes, the Dozier
Court explained:




        3
            Unfortunately, the Dozier opinion is not available on either LEXIS or WESTLAW .

        4
          The Bishop’s primary church, the Cathedral of the Immaculate Conception, already had one exempt
parsonage. With regard to the chapel located within the Bishop’s house, the Court upheld the denial of a pro-rata
exemption because Masses held at the chapel were not open to the public.

                                                       -7-
                In Reeves v. Reeves, 73 Tenn. 644, 648 (1880), it was argued that the
                residence of the minister was for religious or public worship. The
                Supreme Court stated:

                         A parsonage is but a house in which a minister of the
                         gospel resides, and has no more relation to public
                         worship than the clothes he wears or the horse he
                         rides. Both of these are incidentally convenient and
                         necessary for the comfort of the minister, but have no
                         necessary or natural connection with public worship.
                         … The fact is, a residence for the minister is not for
                         public worship any more than his barn or stable is. It
                         is for the use of his family, for the shelter and comfort
                         of himself and them, exactly as a lawyer’s residence
                         is, or a physician’s is. Public worship might be had in
                         either of these as well as the minister’s house, but it
                         could not be said the land on which they stood was
                         held for public worship by reason of such use.

                Supra at 648, 649.

                        The primary use of … [Bishop Dozier’s house] is not for
                religious purposes, nor can we say that its use is directly incidental to
                or reasonably necessary for the accomplishment of religious purposes.
                We agree with the Chancellor that “the property is not used purely
                and exclusively to further the purpose of the religious institution….

Dozier, slip op. at 7.

                In the present case, we do not believe using the house for overseas missionaries
temporarily returning to the United States constitutes an exempt use under the statute. This is not
a use which is directly incidental to or reasonably necessary for the Church to accomplish its
missionary work. If providing temporary housing to missionaries rose to this level, then certainly
the Church would have secured such housing for its missionaries long before obtaining the house
at issue only a few short years ago. Likewise, there is no proof that the Church’s ability to provide
missionary work overseas has been enhanced because of how it uses this house in Chattanooga.
Having access to temporary housing while on home assignment is not reasonably necessary to a
missionary being able to accomplish the Church’s religious purpose. This house is provided to
missionaries for temporary housing as a convenience to the missionaries, this being the purpose
stated in Ms. Apple’s will. While the religious purpose of the Church may be incidentally served
by the temporary housing of missionaries, this incidental use and benefit does not bring the property
within the statutory exemption. See Blackwood, 614 S.W.2d at 366. In other words, we agree with
the ALJ that a missionary’s temporary use of this house, as opposed to commercially available


                                                   -8-
housing in the area, would not enhance that missionary’s overall contribution to the Church’s
program.

                Even if we were to conclude that providing this house to missionaries on home
assignment was purely and exclusively for religious purposes, the Church still would have another
significant hurdle to overcome. More specifically, the statutory requirement that the use of the
property be purely and exclusively for religious purposes has been interpreted “to refer to the direct,
physical use of the property.” Christian Home for the Aged, Inc. v. Tennessee Assessment Appeals
Comm’n, 790 S.W.2d 288, 291 (Tenn. Ct. App. 1990)(quoting Book Agents of Methodist Episcopal
Church South v. State Board of Equalization, 513 S.W.2d 514, 523 (Tenn. 1974)). In the present
case, the Church admits that it permitted the house to be used temporarily: (1) by an assistant
minister who had relocated to the Chattanooga area and was searching for permanent housing; and
(2) by a missionary from Colorado whose son was receiving medical treatment in Atlanta. We agree
with the Trial Court that while allowing the house to be used for these purposes was commendable,
it eviscerates any argument that the house actually is used purely and exclusively for religious
purposes. It also is worth noting that the World Missions Commission has approved temporary use
of the house by Church ministry staff when needed, such as when their regular house is being
remodeled, and assuming the house is not otherwise needed by a missionary at that same time. This
permissible use of the house further detracts from the Church’s position.

                 The Church argues, and we agree, that the exemption in favor of religious, charitable,
scientific or nonprofit educational institutions found in Tenn. Code Ann. § 67-5-212(a)(1)(A) is to
be liberally construed. However, we cannot ignore the clear language of the statute in order to give
it a strained liberal construction. There is absolutely no doubt that the Church’s missionary work
is extremely important to the Church and considerable funds are spent toward carrying out this
program. Nevertheless, we conclude that the evidence does not preponderate against the factual
findings of the Trial Court and its holding that the property at issue is not exempt because the
Church’s use of the house is not purely and exclusively for religious purposes.

                                             Conclusion

               The judgment of the Trial Court is affirmed and this case is remanded to the Trial
Court for such further proceedings as are required, if any, consistent with this Opinion, and for
collection of the costs below. The costs on appeal are assessed against the Appellant, First
Presbyterian Church of Chattanooga, and its surety.




                                                       _________________________________
                                                       D. MICHAEL SWINEY, JUDGE


                                                 -9-
