In re: Appeal of the Town of Colchester, No. S0933-10 CnC (Toor, J., Jan. 28, 2011)

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                                               VERMONT SUPERIOR COURT
                                                  CHITTENDEN UNIT
                                                   CIVIL DIVISION

                                                                    │
IN RE: APPEAL OF THE TOWN OF                                        │           Docket No. S0933-10 CnC
COLCHESTER                                                          │
                                                                    │

                        RULING ON MOTION FOR SUMMARY JUDGMENT

           Pursuant to 32 V.S.A. § 5408(d), the Town of Colchester (the Town) appeals the

decision of the State’s Valuation Appeal Board (VAB) dated July 12, 2010. The VAB

concluded that it could not find that certain property located in the Town is tax exempt,

and therefore denied the Town’s appeal of its equalized education property value (EEPV)

and the coefficient of dispersion (COD) for 2008. The State of Vermont (the State) has

moved for summary judgment on the grounds that the Town has not shown, and cannot

show, that the property at issue satisfies the requirements for tax exemption set forth in

32 V.S.A. §§ 3802(4) and 3832(2). Charles L. Merriman, Esq. represents the Town;

Assistant Attorney General Suzanne M. Monte represents the State.

           Section 5408(d) requires this court to “hear” the appeal from the VAB “de novo.”

32 V.S.A. § 5408(d). This “signifies that that court shall conduct a new evidentiary

hearing and make its own independent findings.” Town of Killington v. Dep’t of Taxes,

2003 VT 88, ¶ 5, 176 Vt. 70 (citing State v. Madison, 163 Vt. 360, 369 (1995)).

However, given that this case is in a summary judgment posture, the court has not taken

evidence or made findings of fact. Instead, the court applies the ordinary summary

judgment standard, seeking to determine whether the State has established that there is no

genuine issue of material fact and that the State is entitled to judgment as a matter of law.
                                          I. Factual Background

         The following facts are derived from the parties’ statements, and are undisputed

except where noted. The Religious Hospitallers of St. Joseph of Vermont, Inc. (RHS)1 is

a Vermont nonprofit corporation organized exclusively for religious purposes. PACE

Vermont, Inc. (PACE) is a Vermont nonprofit corporation organized for charitable and

education purposes and activities including: coordinating and providing health, social and

transportation       services     to    elders     of    designated       communities;         establishing      a

comprehensive service and financing model of long-term care; establishing and

maintaining adult day health centers and other facilities as appropriate; and developing

and conducting educational programs for communities and PACE staff.

         In 2006 and 2007, RHS owned a 5-acre property in Colchester (the Property)

occupied by a 3-story brick building that was previously used by RHS as a convent, but

which was converted a number of years ago into a residential care home for nuns as well

as offices. By a Lease Agreement dated March 24, 2006, RHS leased the Property to

PACE for the purpose of providing health and social services to the elderly in exchange

for an annual rental payment of at least $93,800. Specifically, under the terms of the

lease:

         The Premises shall be used exclusively for the provision and
         administration of health and social services related to the Program of All-
         Inclusive Care for the Elderly (“PACE”), serving persons who are frail,
         nursing home eligible, and seeking a non-residential adult day program,
         and directly related activities, and for no other, different or additional
         purpose unless the prior written consent of Landlord is obtained.




1
 The Hospitallers is “[a] military and religious order founded in the 12th century and so called because it
built a hospital at Jerusalem to care for pilgrims. . . . The Hospitallers still function in several countries as a
humanitarian society.” Black’s Law Dictionary 754–55 (8th ed. 2004).


                                                        2
Lease, § 3(a). Nothing in the record indicates that RHS gave written consent to use the

Property for a different or additional purpose, nor does it appear that PACE has deviated

from the lease provision.

       In 2007, Colchester Town Assessor Mark Paulsen set the Property’s value at

$1,624,800. The State asserts that Paulson also determined that the Property is taxable.

The Town disputes whether Paulson made that determination, and asserts that Paulson

was not qualified to determine the legal tax status of the Property. RHS and PACE

timely appealed to the Board of Listers, which did not change the assessment. On

October 25, 2007, RHS and PACE filed an appeal with the Board of Civil Authority

(BCA). Paulsen appeared for the Board of Listers, and argued that the property was not

exempt from taxation. On December 3, 2007, the BCA issued its decision, declining to

rule on the issue of taxability and upholding the assessor’s valuation. In particular, the

BCA wrote:

               After much discussion and deliberation the Committee felt that
       there are two issues to address. The first issue has to do with the exempt
       status of the property. The Committee determined that whether a property
       is tax exempt is a question of law, and concluded that the BCA does not
       have jurisdiction to rule on the exemption issue and should decline to rule
       on the issue of taxability. It is a matter for the court to determine.
               The second issue to address is the value of the property. Although
       the appellant stated in the written material that the property is over-
       assessed and should be reduced, there was not sufficient evidence
       presented to back the claim of $790,000, using the income approach.
               We conclude that the subject property’s fair market value is
       $1,624,800 based on the evidence presented.

State’s Ex. A, BCA Decision (Dec. 3, 2007). In a Notice of Appeal dated January 2,

2008, RHS and PACE appealed the BCA’s decision to the Chittenden Superior Court (the




                                            3
Pace appeal).2 RHS and PACE later amended their petition to include a request for

declaratory relief regarding exemption. RHS and PACE moved for summary judgment,

seeking a declaration that the Property is tax-exempt.

        The State asserts that the Town initially took a position adverse to the position

held by RHS and PACE. The Town denies that, asserting that it drafted a memorandum

of law in opposition to RHS and PACE’s motion for summary judgment and emailed the

draft to counsel for the State, but later called the State’s counsel and notified the State

that the Town would not file the draft motion but would instead take the legal position

that the property is exempt. The motion the Town actually filed with the court supported

RHS and PACE’s motion for summary judgment, and requested that the court grant the

motion.

        The court granted the motion for summary judgment, stating: “Courts exist for

purpose of resolving ‘cases or controversies.’            We therefore accept Town’s assent.

Submit proposed judgment.” Entry, In re Pace Vermont, Inc. and Religious Hospitallers

of St. Joseph of Vermont, Inc., No. S0024-08 CnC (Aug. 25, 2008) (Katz, J.). RHS and

PACE submitted a proposed order to the court, and the court issued a final order

consistent with that proposed judgment. The “Final Order” reads as follows:

        IT IS ORDERED that Appellants’ Motion for Summary Judgment is
        GRANTED.

        IT IS FURTHER ORDERED THAT the property located at 786 College
        Parkway in Colchester (“Property”) is entitled to an exemption from
        property taxes under 32 V.S.A. § 3802(4) for properties dedicated to
        public, pious or charitable uses.


2
  The Pace appeal was captioned In re Pace Vermont, Inc. and Religious Hospitallers of St. Joseph of
Vermont, Inc. and docketed No. S0024-08 CnC. The appeals described above—from the Town Assessor to
the Board of Listers, and then to the BCA and ultimately to the Superior Court—were all pursuant to the
appeals provisions of 32 V.S.A. ch. 131.


                                                  4
          IT IS FURTHER ORDERED THAT the assessment for the Property for
          tax years 2007–2008 and 2008–2009 shall be $0.

          IT IS FURTHER ORDERED THAT, as long as the Property is owned by
          Fanny Allen Holdings, Inc. f/k/a Fanny Allen Hospital Dieu or related
          successors and assigns and operated by PACE Vermont, Inc., or related
          successors and assigns, with a mission to care for the elderly, and that both
          entities remain non-profit corporations, then the Property shall be entitled
          to an exemption from property taxes under 32 V.S.A. Chapter 125.

          IT IS SO ORDERED.

Id. Order (Oct. 22, 2008) (Katz, J.). The State of Vermont was not a party to the Pace

appeal.

                 II. Procedural History as it Relates to this § 5408(d) Appeal

          This case has a lengthy procedural history, which the court recites here by

drawing on the administrative record filed with this court pursuant to V.R.C.P. 74(d).3 At

about the same time that the Pace appeal was filed in early January 2008, the Town of

Colchester—pursuant to 32 V.S.A. § 5408—petitioned the Director of the Vermont

Department of Taxes’ Division of Property Valuation and Review (PVR) for a

redetermination of the Town’s 2007 equalized education property value (EEPV) and

coefficient of dispersion (COD). The Town indicated that it was disputing the Education

Grand List and thus the Equalized Education Grand List; noted an appeal pending in

Superior Court regarding a request for tax exempt status (the Pace appeal, presumably);

and stated that it sought to have the resolution of the exemption dispute be reflected in the

2007 Education Grand List and Equalized Grand List.

          By a letter dated January 11, 2008, PVR acknowledged the Town’s petition for

redetermination. The letter indicated that a meeting would be scheduled, and that PVR


3
  The following procedural history includes many of the “additional material facts not in dispute” that
appear in the Town’s opposition to the State’s motion for summary judgment.


                                                  5
would propose a “tentative redetermination” if obvious errors were pointed out or if PVR

believed corrections should be made. A representative from PVR did meet with Town

officials, after which PVR issued a “Notice of Tentative Redetermination” dated

March 7, 2008. The Notice of Tentative Redetermination stated that PVR “did not find

sufficient reason to make changes in the equalized education property value or coefficient

of dispersion.         As a result, our values certified to you effective January 1, 2008

remain . . . .” PVR scheduled a hearing for April 3, 2008 in the event the Town wished to

pursue its appeal further.

           In a letter dated March 13, 2008 and addressed to PVR Director William E.

Johnson, the Town asked that the April 3 hearing be waived and that the appeal be

determined based on the Town’s letter. The Town’s letter asserted that the Town’s

equalization appeal turned on a dispute over the taxability of the Property owned by

RHS, and that that dispute was currently before the Chittenden Superior Court.4 The

Town’s letter concluded by recognizing that its appeal was “predicated on an as-yet

undecided Superior Court action. We believe, though, that we need to lodge the appeal

for the purpose of preserving Colchester’s EEPV appeal rights until final adjudication of

the Superior Court case.”

           By a letter dated March 26, 2008 and addressed to Director Johnson, the Vermont

Department of Taxes indicated it did not object to the Town’s request to waive the

hearing. The letter, which was authored by Attorney Monte, stated the following:

           It is the Tax Department’s position that the Town has provided no basis
           for a redetermination. As acknowledged in the Town’s March 13, 2008
           letter, the Town included the property at issue—property owned by [RHS]
           and operated by [PACE]—on its 2007 grand list, which PVR then used for


4
    That referred to the Pace appeal described above.


                                                        6
       purposes of its 2007 Equalization Study. The taxability of the [Property]
       is currently under separate appeal in the Chittenden Superior Court.

               The Town has submitted no evidence in the current appeal
       indicating that the [Property] was incorrectly treated on its 2007 grand list
       or in the 2007 Equalization Study. Therefore, the Tax Department
       respectfully requests that the Town’s request for a redetermination be
       denied.

Director Johnson rendered his decision in a letter dated April 8, 2008. He wrote:

               I have reviewed the letter you submitted on behalf of the Town of
       Colchester dated March 13, 2008, as well as the Department’s March 26,
       2008 response to your letter, submitted by Suzanne M. Monte, Esquire.
               At this time, the Town has presented no basis for recalculation of
       its equalized education property value (EEPV) and coefficient of
       dispersion (COD). As the Town has acknowledged, the taxability of the
       [Property] is currently pending in the Chittenden Superior Court. The
       Town has waived its right to a hearing in the equalization study appeal;
       accordingly, a finding by PVR that the property is exempt, and that the
       Town’s Grand List should be adjusted, has no evidentiary support in this
       forum. Further, such finding is premature and should await a decision of
       the Superior Court.
               The Town has stated that it wishes to preserve its appeal rights,
       pending decision by the Superior Court, and may do so in the manner
       prescribed by law. . . .

       In a letter dated April 9, 2008 and addressed to Director Johnson, the Town gave

notice that it appealed the decision to the Valuation Appeal Board (VAB) pursuant to 32

V.S.A. § 5408(c). The Town suggested that the VAB await the decision in the Pace

appeal before scheduling the redetermination appeal. By a letter dated April 30, 2008,

the VAB acknowledged receipt of the April 9 letter, and indicated it would not schedule

the appeal until the Superior Court decided the Pace appeal.

       As described above, Judge Katz issued a “Final Order” in the Pace appeal on

October 22, 2008. In a letter dated December 22, 2008, the Town advised the VAB of

the Final Order, attached a copy of that order, and requested that the VAB find that the

Town’s Grand List is reduced by the listed value of the Property and order PVR to



                                            7
recalculate the Town’s EEPV using the reduced grand list. The Town’s letter mentioned

that the Final Order was in response to an unopposed motion for summary judgment, but

the Town did not enclose a copy of Judge Katz’s August 25, 2008 Entry.

       In January 2009 the State moved for summary judgment before the VAB, arguing

that (1) the Pace appeal is not binding on the State; (2) the Property fails the test set forth

in American Museum of Fly Fishing, Inc. v. Town of Manchester, 151 Vt. 103 (1989),

because there is no concurrence of ownership and use; and (3) the Property runs afoul of

32 V.S.A. § 3832(2) as a property owned by a religious society because it is not used for

one of the statutorily-prescribed purposes.       The Town opposed the State’s motion,

arguing that (1) the VAB lacks jurisdiction to determine the taxability of the Property; (2)

the State is bound by the Final Order in the Pace appeal; and (3) the commissioner’s

equalization authority does not override that order.

       The VAB issued a “Decision and Notice of Hearing” addressing the State’s

summary judgment motion on July 22, 2009. The VAB wrote:

               The Valuation Appeal Board has considered all filings in regards
       to the Town of Colchester’s appeal of William E. Johnson’s, Director of
       Property Valuation and Review, redetermination of the municipality’s
       equalized education property value and coefficient of dispersion dated
       April 8, 2008.
               The State’s Motion for Summary Judgment dated January 20, 2009
       is hereby denied.
               The Valuation Appeal Board has scheduled a de novo hearing in
       accordance with 32 V.S.A. section 5408(c) on whether to include the
       [Property] in the Town of Colchester’s 2008 equalized education property
       value and coefficient of dispersion (Grand List 2007). The hearing is
       scheduled for August 28, 2009 a Friday at 10:00 a.m. in the Colchester
       Town Offices in Colchester, Vermont.




                                              8
The Board did hold a hearing,5 after which the Town filed a Post-Hearing Memorandum

of Law, proposed findings of fact, and a supplemental exhibit consisting of the March 7,

2008 “Notice of Tentative Redetermination,” the March 26, 2008 letter, and the

Director’s April 8, 2008 redetermination letter.         For its part, the State also filed a

memorandum of law and proposed findings of fact, both dated November 12, 2009.

        The VAB issued its “Findings and Notice of Decision” dated July 12, 2010. The

VAB recounted much of the procedural history described above. In the course of doing

so, the VAB noted that it had read Judge Katz’s August 25, 2008 Entry, the effect of

which it interpreted as being to inform the parties, and anyone else relying on the Entry,

that Judge Katz, like Director Johnson, had heard “no evidentiary support” for the

taxability of the Property, and was instead entering as an Order a stipulation of the

parties. After discussing the procedural history, the VAB wrote as follows:

                While the three VAB members may now know something more
        than Director Johnson and Judge Katz about the activities taking place
        inside the PACE building in Colchester, after the hearing the three
        members were left with more questions than answers. In fact, the only
        witness at the hearing that had been inside the building at all was a witness
        for the state. The Town in the de novo VAB hearing at the end of last
        summer fell far short of proving that PACE was entitled to tax exempt
        status. The VAB cannot accept this Entry based on a stipulation of two
        parties as to tax exemption because the issue itself has never been tried. In
        fact Judge Katz seems to warn the Board not to rely on the Town’s assent
        to the taxpayer’s claim of tax exemption. Such a practice would set
        dangerous precedent. The problem in this case is that of many Vermont
        towns: whether to spend the town’s limited resources in a lengthy and
        expensive lawsuit when so much of the tax dollars collected are sent to
        Montpelier for the State’s education fund. . . .
                In conclusion, the case before the VAB in regards to the Town of
        Colchester, the PACE property and the Vermont Department illustrates
        one of the major problems with Vermont’s education funding system.
        And that problem is that the time and expense of litigation involving tax

5
 The court understands that Mark Paulson offered testimony at the VAB hearing. As mentioned above,
Paulson was the Town assessor who set the Property’s value at $1,624,800 in 2007. At the time he
appeared before the VAB, he was apparently a PVR employee.


                                                9
        exemption status, or property tax valuation, is borne entirely by the
        Towns, yet such determinations directly affect the State’s equalized
        education grand list. One player is missing from the table at the settlement
        of a disagreement between a town and taxpayer, that being the State.
        Vermont’s equalization process brings the missing player back to the
        table, sometimes with consequences unforeseen by the town.
                Despite the policy problems as outlined above, based on the
        evidence and arguments presented at the hearing in Colchester, and the
        filings by both parties before and since the hearing, the VAB cannot find
        that the PACE [Property] is tax exempt and, therefore, must deny the
        Town of Colchester’s appeal of its equalized education property value
        (EEPV) and coefficient of dispersion (COD) effective January 1, 2008.

The Town appeals that decision to this court pursuant to 32 V.S.A. § 5408(d).

                     III. The Town’s Motion for Leave to File a Surreply

        The State has now moved for summary judgment in this case on the grounds that

the Town has not shown, and cannot show, that the Property satisfies the requirements for

tax exemption set forth in 32 V.S.A. §§ 3802(4) and 3832(2). The Town has filed an

opposition to that motion,6 and the State has filed a reply. In its reply, the State cites

what appears to be a transcript of Mark Paulsen’s testimony at the August 28, 2009 VAB

hearing. The transcript was filed in this court on November 4, 2010 along with the

State’s reply, but was not included in the administrative record filed on August 2, 2010.

        The Town filed a motion for leave to file a surreply, noting that the State’s reply

includes a partial transcript of Paulson’s testimony, and seeking an opportunity to

respond to that “new material and claim.” Mot. for Leave to File a Surreply at 2 (filed

Nov. 17, 2010).       Also on November 17, the Town filed a surreply, asserting that

Paulson’s testimony actually supports the Town’s estoppel claim. Surreply at 2 (filed




6
 On October 11, 2010, the Town moved for an enlargement of time to oppose the State’s motion. The
Town then filed its opposition on October 18, 2010. The State has not opposed the Town’s motion for an
enlargement. The court therefore grants the Town’s motion for enlargement of time.


                                                 10
Nov. 17, 2010). The court therefore begins with the Town’s motion for leave to file a

surreply.

        Rule 74(d) requires in part:

        Any party desiring a transcript of any portion of the proceedings to be
        included in the record on appeal shall notify all other parties thereof, shall
        procure such portion at that party’s own expense, and shall cause it to be
        filed with the clerk of the superior court within 30 days after the filing of
        the notice of appeal.

V.R.C.P. 74(d). Here, the State seeks in its reply to rely on a transcript from the VAB

proceedings.    The Town asserts that “the State’s submittal of Paulson’s supposed

testimony at this late date is troubling,” and describes a dispute over the responsibility for

recording the hearing. Surreply at 2 n.3 (filed Nov. 17, 2010). More important for

present purposes, however, is that there is no evidence that the State notified the Town

that the transcript should be included in the record of this appeal, and that the transcript

upon which the State relies was not filed within 30 days of August 2, 2010—the date the

Town filed this appeal. The Paulson transcript is therefore not a part of the record on

appeal, and the court will not consider it. The Town therefore need not respond to that

transcript.

        To the extent the Town’s surreply—and footnote 2 in particular—helps to clarify

the Town’s legal arguments, the court will consider it. To that extent, in the interests of

fully understanding the parties’ positions, and rendering a decision that might bring this

long saga of litigation to a close, the court grants the Town’s motion for leave to file a

surreply, and will at the same time consider the State’s response to the surreply.




                                             11
                         IV. The State’s Motion for Summary Judgment

         The issue presented in the State’s motion is whether the Property satisfies the

requirements for tax exemption set forth in 32 V.S.A. §§ 3802(4) and 3832(2).                             In

opposition, the Town does not take up that issue directly, but instead offers a variety of

reasons why summary judgment should be denied. The court takes each argument in

turn.

A. The Town’s Claim That PVR Either Did Not Act or Unlawfully Exercised its Powers

         The Town begins its opposition by arguing that the State’s motion for summary

judgment attempts to “recast” the dispute as whether the Property is taxable, and thus

avoids the Town’s actual claim. That claim is, as best the court can tell, that PVR

“unlawfully exercis[ed] judicial power when calculating the Town’s common level of

appraisal (CLA).”7 Opp’n at 1 (filed Oct. 18, 2010). The court finds this argument

confusing because the Town also asserts that PVR did not actually make any

determination as to whether the Property is taxable. Moreover, the action in this case

began when the Town petitioned the Director of PVR for a redetermination of the Town’s

2007 EEPV and COD. The Town indicated in its letter to Director Johnson that its

equalization appeal turned on a dispute over the taxability of the Property. In short, the

Town’s claim at the start of the § 5408 appeals process was not that PVR lacked authority

to determine taxability, but that it affirmatively sought a ruling from PVR on that very

issue. In any case, the court will address the Town’s claims.8


7
 The Town says that this appeal is really about the Town’s CLA because the CLA determines the Town’s
education tax rates, and is determined via PVR’s equalization study. Opp’n at 1 n.2 (filed Oct. 18, 2010).
8
  The Town also argues that there are disputed issues of fact in this case: (1) whether the Town took a legal
position which bound the Town to litigate the taxability of RHS’s property on behalf of the State; (2)
whether PVR “found” or “determined” RHS’s property to be taxable; and (3) whether the State acted or
failed to act in such a manner as to equitably estop the State from asserting that RHS’s property is taxable.


                                                    12
        The Town argues that summary judgment must be denied either because PVR did

not actually make a determination as to whether the Property is tax-exempt, or because

PVR does not have judicial authority to determine the tax status of property. Opp’n at 3

(filed Oct. 18, 2010). In support of its second point, the Town cites Subud of Woodstock,

Inc. v. Town of Barnard, 169 Vt. 582 (1999) (mem.). The State maintains that the Town

is incorrect, and that PVR did in fact determine that the Property is not tax exempt. The

State further asserts that PVR cannot determine the EEPV and COD without determining

the taxability of property, because PVR is required by statute to determine the “aggregate

fair market value of all nonresidential and homestead property that is required to be listed

at fair market value.” 32 V.S.A. § 5401(6). Finally, the State contends that Subud is

inapplicable because that case involved a valuation appeal under 32 V.S.A. § 4461

instead of a petition for redetermination under 32 V.S.A. § 5408.

        Vermont’s Equal Educational Opportunity Act (Act 60) operates to “equalize[]

education expenditures per student across Vermont through a state-wide fund comprised

of a general state support grant and local property tax revenue.”                      In re Town of

Killington, 2003 VT 87A, ¶ 2, 176 Vt. 60.

        Each year, the Department of Taxes conducts an “equalization” study, the
        purpose of which is to estimate the full fair market value of all property
        that is taxable for education purposes and to determine the level of
        assessment equity (coefficient of dispersion). See Introduction to
        Vermont’s Equalization Study, Vermont Dep’t of Taxes, Division of
        Property Valuation        and     Review     (Dec.2004),   available     at
        http://www.state.vt.us/tax/pvr.shtml. As the Department explains, the state

Opp’n at 2 (filed Oct. 18, 2010). The first issue is one of characterization rather than fact. There is no
dispute that the Town drafted a memorandum of law in opposition to RHS and PACE’s motion for
summary judgment in the Pace appeal and emailed the draft to counsel for the State, but later called the
State’s counsel and notified the State that the Town would not file the draft motion but would instead take
the legal position that the property is exempt. The motion the Town actually filed with the court supported
RHS and PACE’s motion for summary judgment, and requested that the court grant the motion. In any
case, the court concludes that this circumstance does not raise any factual disputes material to the legal
issues raised in this case. The court concludes that the other issues are questions of law, not fact.


                                                    13
       assesses a tax to fund education costs based on the grand lists compiled by
       the listers in over 250 municipalities in the state. While the listers are
       required to list all taxable property each year at its fair market value, it is
       not feasible to do so given the ever-changing real estate market and
       because town-wide reappraisals are not conducted annually. Thus, to treat
       all municipalities equally, the Department must bring grand lists to fair
       market value.

Dewey v. Town of Waitsfield, 2008 VT 41, ¶ 6 n.1, 184 Vt. 92.

       As mentioned above, the listers in each municipality compile a grand list. The

minimum contents of the list are spelled out in 32 V.S.A. § 4152. The grand list is to

include “[t]he listed valuation of each parcel which is not exempt” and:

       For those parcels which are exempt, what the full listed value of the
       property would be absent the exemption and the statutory authority for
       granting such exemption and, for properties exempt pursuant to a vote, the
       year in which the exemption became effective and the year in which the
       exemption ends.

32 V.S.A. § 4152(a)(5), (6). The grand list is used to raise municipal taxes. See 32

V.S.A. § 4602. Municipalities also determine an “education property tax grand list.” 32

V.S.A. § 5404(a); see also id. § 5401(5). Like the grand list, the value of the “education

property tax grand list” is not supposed to include the value of nonresidential properties

that are exempt by law. This is because the “education property tax grand list” includes

values for “nonresidential” properties, id. § 5404(a), and because “nonresidential

property” does not include “[p]roperty which is exempt from the municipal property tax

by law and not by vote of the municipality.” Id. § 5401(10)(A).

       Thus, for the purposes of both the grand list and the “education property tax grand

list,” municipalities must make an initial determination about whether a nonresidential

property is exempt. If the municipality has taken a vote to exempt the property, then that




                                             14
determination is simplified. If not, then the listers must attempt to determine whether

there is statutory authority for the exemption.

        After determining the grand list and the “education property tax grand list,”

municipalities are required to transmit to the State the data contained in those lists. See

32 V.S.A. § 5404(b) (municipalities “shall transmit to the director in an electronic format

as prescribed by the director: education and municipal grand list data, including

exemption information . . .”). Based on those data, the State determines the “equalized

education property tax grand list for the state” by summing all of the “municipal

equalized education property tax grand lists.” 32 V.S.A. § 5405(b) (emphasis added). To

be clear: the “education property tax grand list” is determined by the municipality, and is

distinct from the “equalized education property tax grand list,” which is determined by

the State. Compare 32 V.S.A. § 5401(5) with § 5401(6).

        Like the education property tax grand list determined by the municipality, the

value of the “equalized education property tax grand list” determined by the State is not

supposed to include the value of nonresidential properties that are exempt by law. As

indicated above, the purpose of the equalization process is to “estimate the full fair

market value of all property that is taxable for education purposes . . . .” Dewey v. Town

of Waitsfield, 2008 VT 41, ¶ 6 n.1, 184 Vt. 92 (emphasis added); see also 32 V.S.A.

§ 5401(6) (value of property that goes into calculating the “equalized education property

tax grand list” is the value of “all nonresidential and homestead property that is required

to be listed . . . .”); 32 V.S.A. § 5405(c) (same phrase regarding property “required to be

listed at fair market value”).




                                             15
           With this background in mind, the court concludes as follows. In carrying out its

mandate to determine the equalized education property tax grand list, PVR must make a

determination as to the property’s tax-exempt status. While the municipality might have

already made such a determination for the purposes of the lists it is required to generate,

it is within PVR’s authority to reach a different conclusion for the purposes of the

“equalized education property tax grand list.”9

            Town of Hartford v. Commissioner of Taxes, 135 Vt. 560 (1977), supports this

result. In that case, the New England Power Company and the Town of Hartford had

entered into a stipulation as to the correct assessed value of the company’s property in

Hartford for the years 1970–1975. 135 Vt. at 561. That stipulation was entered and

embodied in 1971 in a final decree of the Windsor County Court of Chancery. Under the

provisions of 16 V.S.A. § 3458a,10 the tax commissioner redetermined the value of the


9
  The court notes that municipalities are required to indicate on their grand lists what the full listed value of
the property would be absent the exemption the municipality believes applies. 32 V.S.A. § 4152(a)(6).
The availability of that figure would facilitate the State’s calculations in the event the State determined the
exemption did not apply. The fact that the municipalities must provide such data supports the court’s
conclusions, as there would be no reason to require the data if the State were required to defer to the local
decision regarding exemptions.
10
     Section 3458a has since been repealed, but at the time read in relevant part as follows:

               Biennially, the commissioner of taxes shall determine the aggregate fair market value
           of all property which is taxable by each town and incorporated school district of the state.
           For purposes of this part, “taxable property” includes any property which has been
           exempted, whether in whole or in part, from taxation by action of the town in which that
           property is located. “Town” or “town school district” includes cities or city school
           districts, as the case may be.

               (1) The aggregate fair market value of taxable property as determined, or, if such be
           the case, as redetermined, by the commissioner for any town or district and for any year
           under this section shall be known as the equalized fair market value of that town or
           district for that year.

               (2) Any determination made by the commissioner under this section shall be based
           upon such sample appraisals, market studies, or other investigative, statistical or
           projective techniques as, in the judgment of the commissioner, and in view of the
           resources available for that purpose, shall be appropriate to support that determination.



                                                        16
property for 1974 at a figure different than the figure for that year in the Court of

Chancery’s final decree. The Town of Hartford appealed to the Windsor Superior Court,

arguing that the values in the final decree are not properly subject to reappraisal. The

Superior Court rejected the town’s contention, and affirmed the Commissioner’s

appraisal. The Town of Hartford then appealed to the Supreme Court, again arguing that

the values in the final decree are not properly subject to reappraisal. See id.

        The Supreme Court likewise rejected the Town of Hartford’s argument and

affirmed, reasoning as follows:

                The purpose of this appraisal was to implement an equalization of
        State funds as between municipalities. Various communities may vary in
        ways of appraisal that could put them at an advantage or disadvantage
        with respect to the distribution of State aid to education funds. It was the
        intended purpose of the reappraisal provisions to authorize the
        commissioner to bring the measuring of taxable resources of communities
        to a more nearly common measure. This, obviously, was to make the
        distribution of State funds for education as fair as possible.
                The essence of this statutory procedure is to free the commissioner
        from the appraisal binding on the municipality for its own tax purposes.
        There is no doubt that the court decree operating between the taxpayer and
        the town bound the town to a value of the property for town tax purposes,
        even though it was a stipulated appraisal rather than being determined
        independently by the trier.
                But the town is similarly bound by its own grand list, yet the
        statutory authority given the commissioner overrides it. Taking this
        statutory authority together with the acknowledged fact that neither the
        commissioner nor the Department of Taxes was a party to the litigation
        cited, it is the holding of this Court that the commissioner had full
        authorization to reappraise the property in question. To hold otherwise
        would frustrate the statutory objective.

Id. at 562. Although Hartford was decided long before Act 60 became law, the purpose

of § 3458a—to use an equalization process to make the distribution of State funds for

education as fair as possible—is the same. And while Hartford involved a question of



Hartford, 135 Vt. at 561–62.


                                             17
valuation rather than taxability, its lesson is equally applicable here: the State is not

bound by the municipality’s determinations.

       Subud of Woodstock, Inc. v. Town of Barnard, 169 Vt. 582 (1999) (mem.), does

not require a contrary result. That case does establish that when PVR reviews the BCA’s

determination of a property’s fair market value under 32 V.S.A. § 4461, it lacks

jurisdiction to determine the property’s tax-exempt status. 169 Vt. at 583. However,

those appeals address municipal taxation. PVR has a different role to play in petitions for

redetermination of tax-exempt status for State property tax purposes, a distinction not

addressed in Subud. The Court’s short entry order in that case did not address PVR’s

statutory mandate to determine the “equalized education property tax grand list.”

       Finally, the court rejects the Town’s claim that PVR did not make a decision

about whether the Property is tax exempt.        PVR expressly said that the Town had

presented no evidence of tax exemption and that there was therefore “no evidentiary

support” for a “finding by PVR that the property is exempt.” Letter from Director

Johnson dated April 8, 2008. Although it could have been argued that PVR’s decision

was not final because of its reference to the then-pending court case, the Town itself

treated the decision as final by appealing it to the VAB. Thus, the Town waived any

objection on that basis.

            B. Whether PVR is Bound by the Final Order in the Pace Appeal

       The State argues that the Pace appeal does not bind the State because the State

was not a party to that action. State’s Mot. for Summ. J. at 10 (filed Sept. 7, 2010). The

Town contends that the State had actual notice that the Town would not contest RHS and

PACE’s claim of exemption, and was thus required to join the earlier action under




                                            18
V.R.C.P. 18 if it asserted a claim of relief other than that asserted by the Town, RHS, and

PACE. Opp’n at 5 (filed Oct. 18, 2010). The Town also asserts that PVR was obligated

to join the Pace appeal under 32 V.S.A. § 3613. Id. at 6. The State replies that V.R.C.P.

18 is permissive and applies to joinder of claims and remedies by a party—which the

State was not in the Pace appeal. Reply at 6 (filed Nov. 4, 2010). The State further

contends that 32 V.S.A. § 3613 is inapplicable. Id.

         Vermont’s Declaratory Judgments Act includes the following provision: “When

declaratory relief is sought, all persons shall be made parties who have or claim any

interest which would be affected by the declaration, and no declaration shall prejudice the

rights of persons not parties to the proceeding.” 12 V.S.A. § 4721. Here, it is undisputed

that the State was not a party to the Pace appeal. Pursuant to § 4721, then, the Final

Order in that case cannot prejudice the State’s rights.11 The court agrees with the State

that V.R.C.P. 18 did not require the State to join the Pace appeal. The court also agrees

with the State that § 3613 does not apply—that provision can only be interpreted to

involve the State’s right to appeal from assessments against state easements for flood

control projects. Any other interpretation would lead to the illogical conclusion that the

State had appeal rights from all listers’ decisions regardless of whether the State had any

interest affected by those decisions.

                              C. Whether Equitable Estoppel Applies

         The Town argues that the State is equitably estopped from asserting that a value

for the Property should be included in the calculation of the Town’s common level of

appraisal. Opp’n at 6 (filed Oct. 18, 2010). “The doctrine of equitable estoppel seeks to


11
  That problem does not arise in this case because the taxpayer is not affected by this court’s ruling, which
relates only to the Town’s obligations to the State.


                                                    19
promote fair dealing and good faith by preventing ‘one party from asserting rights which

may have existed against another party who in good faith has changed his or her position

in reliance upon earlier representations.’” Beecher v. Stratton Corp., 170 Vt. 137, 139

(1999) (quoting Fisher v. Poole, 142 Vt. 162, 168 (1982)). The elements of equitable

estoppel are well established in Vermont:

        The party invoking the doctrine has the burden of establishing four
        essential components: (1) the party to be estopped must know the facts; (2)
        the party being estopped must intend that his or her conduct shall be acted
        upon or the acts must be such that the party asserting the estoppel has a
        right to believe it is so intended; (3) the party asserting estoppel must be
        ignorant of the true facts; and (4) the party asserting estoppel must rely on
        the conduct of the party to be estopped to his or her detriment.

Jones v. Dep’t of Forests, Parks and Recreation, 2004 VT 49, ¶ 15, 177 Vt. 81. In

addition:

        [E]stoppels “against the government are rare and are to be invoked only in
        extraordinary circumstances,” . . . where the “injustice that would ensue
        from a failure to find an estoppel sufficiently outweighs any effect upon
        public interest or policy that would result from estopping the government
        in a particular case.”

Id. (citations omitted).

        The Town contends that the State engaged in conduct, or made representations,

that led the Town to believe that PVR would abide by the result in the Pace appeal. See

Opp’n at 7 (filed Oct. 18, 2010). Specifically, the Town asserts that (1) PVR agreed to

postpone the hearing before the VAB pending a decision in the Pace appeal; (2) PVR did

not inform the Town of PVR’s intention to treat the Final Order as a “non-decision” until

after the time for appealing that order had passed; and (3) PVR is actively involved in

instructing towns on grand list matters. Id. Even if all true, none of those facts indicates

a representation by the State to the Town that the State was agreeing to be bound in a




                                             20
declaratory judgment action to which the State was not a party. The court therefore

concludes that the Town has not met its burden of establishing the second element of its

estoppel claim.

                         D. The Claim of Inadequate Discovery

        The Town’s final argument against summary judgment is that the procedure is

premature. Rule 56 does not require that summary judgment motions await completion

of discovery, but it does require “an adequate time for discovery.” Bushey v. Allstate

Ins. Co., 164 Vt. 399, 405 (1995). The three factual issues on which the Town asserts it

has had inadequate discovery are: (1) whether RHS leases the Property to PACE for a

profit; (2) whether RHS and PACE share a “single mission” or close relationship; and (3)

the circumstances of the hearing before the VAB for the purposes of establishing the

Town’s equitable estoppel claim. See Opp’n at 9–10 (filed Oct. 18, 2010).

        The first two issues go to the three-part test articulated in American Museum of

Fly Fishing, Inc. v. Town of Manchester, 151 Vt. 103 (1989). For the reasons discussed

below, the court need not apply that test in this case, and thus no additional discovery on

those issues is necessary. The third issue goes to the Town’s equitable estoppel claim.

The court has already addressed that claim; no further discovery is necessary to resolve

that issue.

                                      E. Taxability

        The issue of the taxability of the Property in this case has simultaneously

meandered its way through a variety of levels of review on two different tracks. The first

track—the Pace appeal—was unusual in the sense that at the time the issue came before

this court, the Town sided with the taxpayer and argued that the Property was exempt,




                                            21
and there was no party arguing that the Property was taxable. Thus the Pace appeal did

not actually resolve any controversy. The second track—the § 5408(d) appeal in this

case—pits the Town against the State.        This process is far from ideal or efficient.

However, the taxability issue has now been fully briefed, involves no material disputed

facts, and is ripe for summary judgment.

       The issue presented in the State’s motion is whether the Property satisfies the

requirements for tax exemption set forth in 32 V.S.A. §§ 3802(4) and 3832(2). Those

sections can both be found in chapter 125 (“Exemptions”) of Title 32. The former

section provides in pertinent part:      “The following property shall be exempt from

taxation: . . . (4) Real and personal estate granted, sequestered or used for public, pious or

charitable uses . . . .” 32 V.S.A. § 3802(4). The latter section provides in pertinent part:

       The exemption from taxation of real and personal estate granted,
       sequestered or used for public, pious or charitable uses shall not be
       construed as exempting: . . .

       (2) Real estate owned or kept by a religious society other than a church
       edifice, a parsonage, the outbuildings of the church edifice or parsonage, a
       building used as a convent, school, orphanage, home or hospital, land
       adjacent to any of the buildings named in this subsection, kept and used as
       a parking lot not used to produce income, lawn, playground or garden and
       the so-called glebe lands.

Id. § 3832(2).

       In American Museum of Fly Fishing, Inc. v. Town of Manchester, 151 Vt. 103

(1989), the Supreme Court articulated a three-part test for determining whether a property

is entitled to a tax-exempt status as a public use.        That test also applies to lands

sequestered for pious and charitable uses. Herrick v. Town of Marlboro, 173 Vt. 170,

174 (2001). It is not enough, however, to meet the Fly Fishing test; in order to qualify for

exemption, a property must also fall outside the exceptions carved out by § 3832. See



                                             22
Our Lady of Ephesus House of Prayer, Inc. v. Town of Jamaica, 2005 VT 16, ¶ 12, 178

Vt. 35 (sections 3802(4) and 3832 must be read together). The court therefore begins

with § 3832.

         Here, there appears to be no dispute that the Property is real estate and that for the

time periods relevant to this appeal, it was owned by RHS. Nor does the Town appear to

argue that RHS is not a “religious society.” See Town’s Ex. 7 at 5, attached to Town’s

Surreply (“PVR correctly notes that the RHS/PACE property is religious property.”).

Indeed, it is undisputed that RHS is a Vermont nonprofit corporation organized

exclusively for religious purposes. The term “religious society” is “quite broad,” id. ¶ 19,

and the court has no trouble concluding that RHS is a “religious society.” Because it is

owned by a religious society, the Property can only be exempt if it fits within one of the

uses permitted by § 3832(2). Of the various permitted uses, the only one the Town

argues applies is that the Property is a “home or hospital.”

                                           1. Is it a Hospital?

         A hospital is “an institution providing medical and surgical treatment and nursing

care for ill or injured people.” Oxford American Dictionary 378 (1999) (emphasis

added); see also 18 V.S.A. § 1902(1) (defining “hospital” for purposes of Vermont’s

hospital licensing statute as “a place devoted primarily to the maintenance and operation

of diagnostic and therapeutic facilities for in-patient medical or surgical care of

individuals suffering from illness, disease, injury or deformity, or for obstetrics.”

(emphasis added)).12



12
  The court is aware that the Supreme Court has declined to incorporate the definition used in Title 18 into
the earlier enacted tax statutes of Title 32. Med. Ctr. Hosp. of Vt., Inc. v. City of Burlington, 152 Vt. 611,
623–24 (1989). That was in the context of declining to distinguish between a hospital’s inpatient and


                                                     23
         The VAB indicated that its members “may now know something more than

Director Johnson and Judge Katz about the activities taking place inside the PACE

building,” but did not articulate specific findings on that point. Still, it is undisputed that

PACE leases the Property for the purpose of providing health and social services to the

elderly. While it appears that establishing and maintaining a hospital might be consistent

with the purposes for which PACE was organized, the facility at the Property in this case

does not fit the definition of a “hospital.” The facility in this case provides health and

social services to persons who are frail, nursing home eligible, and seeking a non-

residential adult day program. That is different than providing treatment or nursing care

for the ill or injured.13

         It is true that a hospital’s inpatient and outpatient facilities are indistinguishable

for taxation purposes. Med. Ctr. Hosp. of Vt., Inc. v. City of Burlington, 152 Vt. 611,

623 (1989). According to the Town, that means “[a] facility that provides only outpatient

medical services is therefore a hospital for purposes of the exemption statutes.” The

Town’s position, however, begs the question, since outpatients are by definition hospital

patients. Oxford American Dictionary 557 (1999) (defining “outpatient” as “a hospital

patient whose treatment does not require overnight hospitalization”).                          The Town’s

argument is predicated on the assumption that the PACE facility provides outpatient

medical services; that argument assumes the conclusion the Town wants to reach. For

these reasons, the court concludes that the Property is not a hospital.


outpatient facilities for tax purposes. The court cites the definition in Title 18 to reinforce the general idea
that a hospital is a facility for the care of ill or injured people.
13
  The court also notes that the Town has not come forward with any evidence that PACE or RHS have
obtained a license pursuant to 18 V.S.A. § 1903 to maintain the Property as a hospital, and that neither RHS
nor PACE’s articles of organization, mission statements, or IRS documents describe their purpose or
activities as operating a hospital.


                                                      24
                                       2. Is it a Home?

       As with the term “hospital,” the court’s primary objective in construing the word

“home” is to implement legislative intent. Shlansky v. City of Burlington, 2010 VT 90,

¶ 8. To do that, the court looks first to the plain meaning of the language used in light of

the statute’s legislative purpose. Id. In discussing the word “home” as it appears in

§ 3832(2), the Supreme Court has noted that “home” is “general and vague” and “can

describe virtually any facility in which persons stay overnight for any reason.” Cent. Vt.

Hosp., Inc. v. Town of Berlin, 164 Vt. 456, 460 (1995). Here, it is undisputed that the

PACE facility is a non-residential adult day program. It therefore does not meet even the

most general definition of a “home.”

       Because the Property is owned by a religious society, and because it is neither a

“home” nor a “hospital,” the court concludes that even if it were otherwise entitled to an

exemption for public, pious or charitable uses under 32 V.S.A. § 3802(4), section 3832(2)

operates to prevent the court from construing § 3802(4) as exempting the Property.

                                            Order

       The Town’s Motion for Enlargement of Time is granted. The Town’s Motion for

Leave to File a Surreply is granted.       The State’s motion for summary judgment is

granted. The decision of the VAB is affirmed.

Dated at Burlington this 28th day of January 2011.



                                               ______________________________
                                               Helen M. Toor
                                               Superior Court Judge




                                             25
