In re: Appeal of the Town of Colchester, No. S0933- 10 CnC (Toor, J., Jan. 28, 2011) [The text of this Vermont trial court opinion is un official. It has been reformatted from the origina l. The accuracy of the text and the accompanying data included in the Vermont trial cou rt opinion database is not guaranteed.] V ERMONT S UPERIOR C OURT C HITTENDEN U NIT C IVIL D IVISION │ 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 Colch ester (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 prope rty located in the Town is tax exempt, and therefore denied the Town’s appeal of its equal ized 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 requ irements for tax exemption set forth in 32 V.S.A. §§ 3802(4) and 3832(2). Charles L. Merri man, Esq. represents the Town; Assistant Attorney General Suzanne M. Monte represe nts 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 cou rt shall conduct a new evidentiary hearing and make its own independent findings.” To wn of Killington v. Dep’t of Taxes , 2003 VT 88, ¶ 5, 176 Vt. 70 (citing State v. Madiso n , 163 Vt. 360, 369 (1995)). However, given that this case is in a summary judgm ent posture, the court has not taken evidence or made findings of fact. Instead, the co urt 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 i s entitled to judgment as a matter of law.2 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 exclusive ly for religious purposes. PACE Vermont, Inc. (PACE) is a Vermont nonprofit corpora tion organized for charitable and education purposes and activities including: coordi nating and providing health, social and transportation services to elders of designated com munities; establishing a comprehensive service and financing model of long-t erm care; establishing and maintaining adult day health centers and other faci lities as appropriate; and developing and conducting educational programs for communities and PACE staff. In 2006 and 2007, RHS owned a 5-acre property in C olchester (the Property) occupied by a 3-story brick building that was previ ously used by RHS as a convent, but which was converted a number of years ago into a re sidential care home for nuns as well as offices. By a Lease Agreement dated March 24, 2 006, 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 prov ision and administration of health and social services relate d to the Program of AllInclusive Care for the Elderly (“PACE”), serving pe rsons who are frail, nursing home eligible, and seeking a non-residentia l adult day program, and directly related activities, and for no other, different or additional purpose unless the prior written consent of Landlor d is obtained.

1 The Hospitallers is “[a] military and religious or der founded in the 12th century and so called becau se it built a hospital at Jerusalem to care for pilgrims. . . . The Hospitallers still function in several c ountries as a humanitarian society.” Black’s Law Dictionary 754– 55 (8th ed. 2004).3

Lease, § 3(a). Nothing in the record indicates tha t 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 de termined that the Property is taxable. The Town disputes whether Paulson made that determi nation, 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 a ssessor’s valuation. In particular, the

BCA wrote:

After much discussion and deliberation the Committe e felt that there are two issues to address. The first issue h as to do with the exempt status of the property. The Committee determined t hat whether a property is tax exempt is a question of law, and concluded t hat the BCA does not have jurisdiction to rule on the exemption issue an d 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 pr operty. Although the appellant stated in the written material that t he property is overassessed and should be reduced, there was not suffi cient evidence presented to back the claim of $790,000, using the income approach. We conclude that the subject property’s fair marke t value is $1,624,800 based on the evidence presented. State’s Ex. A, BCA Decision (Dec. 3, 2007). In a N otice of Appeal dated January 2, 2008, RHS and PACE appealed the BCA’s decision to t he Chittenden Superior Court (the4

Pace appeal). 2 RHS and PACE later amended their petition to incl ude a request for declaratory relief regarding exemption. RHS and PA CE moved for summary judgment, seeking a declaration that the Property is tax-exem pt. The State asserts that the Town initially took a p osition adverse to the position held by RHS and PACE. The Town denies that, assert ing that it drafted a memorandum of law in opposition to RHS and PACE’s motion for s ummary judgment and emailed the draft to counsel for the State, but later called th e State’s counsel and notified the State

that the Town would not file the draft motion but w ould instead take the legal position that the property is exempt. The motion the Town a ctually filed with the court supported RHS and PACE’s motion for summary judgment, and req uested 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 Vermo nt, 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 t he court issued a final order consistent with that proposed judgment. The “Final Order” reads as follows: IT IS ORDERED that Appellants’ Motion for Summary J udgment is GRANTED. IT IS FURTHER ORDERED THAT the property located at 786 College Parkway in Colchester (“Property”) is entitled to a n exemption from property taxes under 32 V.S.A. § 3802(4) for proper ties 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 descri bed above—from the Town Assessor to the Board of Listers, and then to the BCA and ultim ately to the Superior Court—were all pursuant to th e appeals provisions of 32 V.S.A. ch. 131.5 IT IS FURTHER ORDERED THAT the assessment for the P roperty 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 Hospit al 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 P roperty 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 V ermont was not a party to the Pace appeal. II. Procedural History as it Relates to this § 540 8(d) Appeal This case has a lengthy procedural history, which the court recites here by drawing on the administrative record filed with thi s 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 o f 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 educat ion property value (EEPV) and coefficient of dispersion (COD). The Town indicate d that it was disputing the Education Grand List and thus the Equalized Education Grand L ist; noted an appeal pending in Superior Court regarding a request for tax exempt s tatus (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 acknowledg ed the Town’s petition for

redetermination. The letter indicated that a meeti ng 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 moti on for summary judgment.6

would propose a “tentative redetermination” if obvi ous errors were pointed out or if PVR believed corrections should be made. A representat ive from PVR did meet with Town officials, after which PVR issued a “Notice of Tent ative Redetermination” dated March 7, 2008. The Notice of Tentative Redetermina tion 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 t o 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 ta xability 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 app eal was “predicated on an as-yet undecided Superior Court action. We believe, thoug h, that we need to lodge the appeal for the purpose of preserving Colchester’s EEPV app eal 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 Attorne y Monte, stated the following: It is the Tax Department’s position that the Town h as provided no basis for a redetermination. As acknowledged in the Town ’s March 13, 2008 letter, the Town included the property at issue—pro perty owned by [RHS] and operated by [PACE]—on its 2007 grand list, whic h PVR then used for

4 That referred to the Pace appeal described above.7 purposes of its 2007 Equalization Study. The taxab ility of the [Property] is currently under separate appeal in the Chittende n Superior Court.

The Town has submitted no evidence in the current appeal indicating that the [Property] was incorrectly trea ted 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 Dep artment’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 c oefficient of dispersion (COD). As the Town has acknowledged, th e taxability of the [Property] is currently pending in the Chittenden S uperior Court. The Town has waived its right to a hearing in the equal ization study appeal; accordingly, a finding by PVR that the property is exempt, and that the Town’s Grand List should be adjusted, has no eviden tiary support in this forum. Further, such finding is premature and shou ld 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 Di rector Johnson, the Town gave notice that it appealed the decision to the Valuati on 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 Pac e appeal. As described above, Judge Katz issued a “Final Orde r” in the Pace appeal on October 22, 2008. In a letter dated December 22, 2 008, 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 to8

recalculate the Town’s EEPV using the reduced grand list. The Town’s letter mentioned that the Final Order was in response to an unoppose d motion for summary judgment, but the Town did not enclose a copy of Judge Katz’s Aug ust 25, 2008 Entry. In January 2009 the State moved for summary judgmen t before the VAB, arguing that (1) the Pace appeal is not binding on the State; (2) the Proper ty 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 us e; and (3) the Property runs afoul of 32 V.S.A. § 3832(2) as a property owned by a religi ous society because it is not used for one of the statutorily-prescribed purposes. The To wn opposed the State’s motion, arguing that (1) the VAB lacks jurisdiction to dete rmine 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” a ddressing the State’s summary judgment motion on July 22, 2009. The VAB wrote:

The Valuation Appeal Board has considered all filin gs in regards to the Town of Colchester’s appeal of William E. Jo hnson’s, Director of Property Valuation and Review, redetermination of t he municipality’s equalized education property value and coefficient of dispersion dated April 8, 2008. The State’s Motion for Summary Judgment dated Janua ry 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 whethe r to include the [Property] in the Town of Colchester’s 2008 equaliz ed education property value and coefficient of dispersion (Grand List 200 7). The hearing is scheduled for August 28, 2009 a Friday at 10:00 a.m . in the Colchester Town Offices in Colchester, Vermont.9

The Board did hold a hearing, 5 after which the Town filed a Post-Hearing Memorand um of Law, proposed findings of fact, and a supplement al exhibit consisting of the March 7, 2008 “Notice of Tentative Redetermination,” the Mar ch 26, 2008 letter, and the Director’s April 8, 2008 redetermination letter. F or its part, the State also filed a memorandum of law and proposed findings of fact, bo th dated November 12, 2009. The VAB issued its “Findings and Notice of Decisio n” dated July 12, 2010. The VAB recounted much of the procedural history descri bed above. In the course of doing so, the VAB noted that it had read Judge Katz’s Aug ust 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 enterin g 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 acti vities taking place inside the PACE building in Colchester, after the h earing the three members were left with more questions than answers. In fact, the only witness at the hearing that had been inside the bui lding 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 enti tled to tax exempt status. The VAB cannot accept this Entry based on a stipulation of two parties as to tax exemption because the issue itsel f 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 p ractice would set dangerous precedent. The problem in this case is t hat of many Vermont towns: whether to spend the town’s limited resource s in a lengthy and expensive lawsuit when so much of the tax dollars c ollected 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 Depar tment illustrates one of the major problems with Vermont’s education funding system. And that problem is that the time and expense of li tigation involving tax

5 The court understands that Mark Paulson offered te stimony 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 em ployee.10 exemption status, or property tax valuation, is bor ne entirely by the Towns, yet such determinations directly affect the State’s equalized education grand list. One player is missing from t he table at the settlement of a disagreement between a town and taxpayer, that being the State. Vermont’s equalization process brings the missing p layer back to the table, sometimes with consequences unforeseen by th e town. Despite the policy problems as outlined above, bas ed on the evidence and arguments presented at the hearing in Colchester, and the filings by both parties before and since the hearin g, the VAB cannot find that the PACE [Property] is tax exempt and, therefo re, must deny the Town of Colchester’s appeal of its equalized educat ion property value (EEPV) and coefficient of dispersion (COD) effectiv e January 1, 2008. The Town appeals that decision to this court pursua nt to 32 V.S.A. § 5408(d).

III. The Town’s Motion for Leave to File a Surrepl y The State has now moved for summary judgment in th is case on the grounds that the Town has not shown, and cannot show, that the P roperty 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, th e State cites what appears to be a transcript of Mark Paulsen’s t estimony 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 administ rative record filed on August 2, 2010. The Town filed a motion for leave to file a surrep ly, noting that the State’s reply includes a partial transcript of Paulson’s testimon y, 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 file d a surreply, asserting that Paulson’s testimony actually supports the Town’s es toppel claim. Surreply at 2 (filed

6 On October 11, 2010, the Town moved for an enlarge ment 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 a n enlargement. The court therefore grants the Town’s motion for enlargement of time.11

Nov. 17, 2010). The court therefore begins with th e Town’s motion for leave to file a surreply. Rule 74(d) requires in part: Any party desiring a transcript of any portion of t he proceedings to be included in the record on appeal shall notify all o ther parties thereof, shall procure such portion at that party’s own expense, a nd shall cause it to be filed with the clerk of the superior court within 3 0 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 su bmittal of Paulson’s supposed testimony at this late date is troubling,” and desc ribes a dispute over the responsibility for recording the hearing. Surreply at 2 n.3 (filed No v. 17, 2010). More important for present purposes, however, is that there is no evid ence that the State notified the Town that the transcript should be included in the recor d 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 To wn 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 ren dering a decision that might bring this long saga of litigation to a close, the court grant s the Town’s motion for leave to file a surreply, and will at the same time consider the St ate’s response to the surreply.12 IV. The State’s Motion for Summary Judgment The issue presented in the State’s motion is wheth er 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 di rectly, 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 whethe r 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 calcula ting the Town’s common level of appraisal (CLA).” 7 Opp’n at 1 (filed Oct. 18, 2010). The court find s this argument confusing because the Town also asserts that PVR di d 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 lette r to Director Johnson that its equalization appeal turned on a dispute over the ta xability of the Property. In short, the Town’s claim at the start of the § 5408 appeals pro cess 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 Tow n’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 eq ualization study. Opp’n at 1 n.2 (filed Oct. 18, 2 010).

8 The Town also argues that there are disputed issue s of fact in this case: (1) whether the Town took a legal position which bound the Town to litigate the taxab ility 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 esto p the State from asserting that RHS’s property is t axable.13

The Town argues that summary judgment must be deni ed 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 t he tax status of property. Opp’n at 3 (filed Oct. 18, 2010). In support of its second po int, the Town cites Subud of Woodstock,

Inc. v. Town of Barnard , 169 Vt. 582 (1999) (mem.). The State maintains t hat the Town is incorrect, and that PVR did in fact determine th at 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 homeste ad property that is required to be listed at fair market value.” 32 V.S.A. § 5401(6). Final ly, 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 t hrough 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 “equ alization” study, the purpose of which is to estimate the full fair marke t value of all property that is taxable for education purposes and to deter mine the level of assessment equity (coefficient of dispersion). See Introduction to Vermont’s Equalization Study, Vermont Dep’t of Taxe s, Division of Property Valuation and Review (Dec.2004), available at http://www.state.vt.us/tax/pvr.shtml. As the Depart ment 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 i n opposition to RHS and PACE’s motion for summary judgment in the Pace appeal and emailed the draft to counsel for the St ate, but later called the State’s counsel and notified the State that the Tow n would not file the draft motion but would instead take the legal position that the property is exempt. Th e motion the Town actually filed with the court sup ported RHS and PACE’s motion for summary judgment, and req uested that the court grant the motion. In any case, the court concludes that this circumstance do es not raise any factual disputes material to the l egal issues raised in this case. The court concludes th at the other issues are questions of law, not fact.14 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 an nually. Thus, to treat all municipalities equally, the Department must bri ng 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 municipali ty 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 whic h is not exempt” and: For those parcels which are exempt, what the full l isted value of the property would be absent the exemption and the stat utory authority for granting such exemption and, for properties exempt pursuant to a vote, the year in which the exemption became effective and th e year in which the exemption ends. 32 V.S.A. § 4152(a)(5), (6). The grand list is use d to raise municipal taxes. See 32 V.S.A. § 4602. Municipalities also determine an “e ducation 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 “educa tion property tax grand list” includes values for “nonresidential” properties, id . § 5404(a), and because “nonresidential property” does not include “[p]roperty which is exe mpt 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 determin ation about whether a nonresidential property is exempt. If the municipality has taken a vote to exempt the property, then that15

determination is simplified. If not, then the list ers must attempt to determine whether there is statutory authority for the exemption. After determining the grand list and the “educatio n property tax grand list,” municipalities are required to transmit to the Stat e 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 munici pal 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” i s 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 determi ned by the municipality, the value of the “equalized education property tax gran d list” determined by the State is not supposed to include the value of nonresidential pro perties that are exempt by law. As indicated above, the purpose of the equalization pr ocess 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 calcula ting 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 regard ing property “required to be listed at fair market value”).16

With this background in mind, the court concludes as follows. In carrying out its mandate to determine the equalized education proper ty tax grand list, PVR must make a determination as to the property’s tax-exempt statu s. 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 c onclusion 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 Compan y and the Town of Hartford had entered into a stipulation as to the correct assess ed 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 C ounty 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 t o indicate on their grand lists what the full liste d value of the property would be absent the exemption the muni cipality believes applies. 32 V.S.A. § 4152(a)(6). The availability of that figure would facilitate th e State’s calculations in the event the State deter mined the exemption did not apply. The fact that the municip alities 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 th e 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 determi ne the aggregate fair market value of all property which is taxable by each town and i ncorporated school district of the state. For purposes of this part, “taxable property” inclu des any property which has been exempted, whether in whole or in part, from taxatio n by action of the town in which that property is located. “Town” or “town school distric t” includes cities or city school districts, as the case may be. (1) The aggregate fair market value of taxable prop erty 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 unde r this section shall be based upon such sample appraisals, market studies, or oth er investigative, statistical or projective techniques as, in the judgment of the co mmissioner, and in view of the resources available for that purpose, shall be appr opriate to support that determination.17

property for 1974 at a figure different than the fi gure for that year in the Court of Chancery’s final decree. The Town of Hartford appe aled 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 t he Supreme Court, again arguing that the values in the final decree are not properly sub ject to reappraisal. See id

. The Supreme Court likewise rejected the Town of Ha rtford’s argument and affirmed, reasoning as follows:

The purpose of this appraisal was to implement an e qualization of State funds as between municipalities. Various comm unities may vary in ways of appraisal that could put them at an advanta ge or disadvantage with respect to the distribution of State aid to ed ucation funds. It was the intended purpose of the reappraisal provisions to a uthorize the commissioner to bring the measuring of taxable reso urces of communities to a more nearly common measure. This, obviously, w as to make the distribution of State funds for education as fair a s 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 b etween 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 th an being determined independently by the trier. But the town is similarly bound by its own grand li st, yet the statutory authority given the commissioner override s it. Taking this statutory authority together with the acknowledged fact that neither the commissioner nor the Department of Taxes was a part y to the litigation cited, it is the holding of this Court that the com missioner had full authorization to reappraise the property in questio n. To hold otherwise would frustrate the statutory objective.

Id . at 562. Although Hartford was decided long before Act 60 became law, the pur pose of § 3458a—to use an equalization process to make t he distribution of State funds for education as fair as possible—is the same. And whi le Hartford involved a question of

Hartford , 135 Vt. at 561–62.18

valuation rather than taxability, its lesson is equ ally 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 esta blish that when PVR reviews the BCA’s determination of a property’s fair market value und er 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 prop erty tax purposes, a distinction not

addressed in Subud . The Court’s short entry order in that case did n ot address PVR’s statutory mandate to determine the “equalized educa tion property tax grand list.” Finally, the court rejects the Town’s claim that P VR did not make a decision about whether the Property is tax exempt. PVR expr essly said that the Town had presented no evidence of tax exemption and that the re 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 th e 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 S umm. 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 under19

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 a nd remedies by a party—which the

State was not in the Pace appeal. Reply at 6 (filed Nov. 4, 2010). The Sta te further contends that 32 V.S.A. § 3613 is inapplicable. Id

. Vermont’s Declaratory Judgments Act includes the f ollowing 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 rig hts. 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 prov ision can only be interpreted to involve the State’s right to appeal from assessment s against state easements for flood control projects. Any other interpretation would l ead 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 estopp ed from asserting that a value for the Property should be included in the calculat ion 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 t he taxpayer is not affected by this court’s ruling, which relates only to the Town’s obligations to the State

.20

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.’” Beeche r v. Stratton Corp. , 170 Vt. 137, 139 (1999) (quoting Fisher v. Poole , 142 Vt. 162, 168 (1982)). The elements of equita ble estoppel are well established in Vermont: The party invoking the doctrine has the burden of e stablishing four essential components: (1) the party to be estopped must know the facts; (2) the party being estopped must intend that his or he r conduct shall be acted upon or the acts must be such that the party assert ing the estoppel has a right to believe it is so intended; (3) the party a sserting estoppel must be ignorant of the true facts; and (4) the party asser ting estoppel must rely on the conduct of the party to be estopped to his or h er 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 ar e to be invoked only in extraordinary circumstances,” . . . where the “inju stice that would ensue from a failure to find an estoppel sufficiently out weighs any effect upon public interest or policy that would result from es topping the government in a particular case.”

Id . (citations omitted). The Town contends that the State engaged in conduc t, or made representations,

that led the Town to believe that PVR would abide b y the result in the Pace appeal. See Opp’n at 7 (filed Oct. 18, 2010). Specifically, th e Town asserts that (1) PVR agreed to postpone the hearing before the VAB pending a decis ion 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 a21

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

concludes that the Town has not met its burden of e stablishing 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 j udgment 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 issue s on which the Town asserts it has had inadequate discovery are: (1) whether RHS l eases the Property to PACE for a profit; (2) whether RHS and PACE share a “single mi ssion” 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 art iculated 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 c ase, 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 furt her 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 re view on two different tracks. The first

track—the Pace appeal—was unusual in the sense that at the time t he issue came before this court, the Town sided with the taxpayer and ar gued that the Property was exempt,22

and there was no party arguing that the Property wa s taxable. Thus the Pace appeal did not actually resolve any controversy. The second t rack—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 br iefed, involves no material disputed facts, and is ripe for summary judgment. The issue presented in the State’s motion is whethe r 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 (“Exempti ons”) of Title 32. The former section provides in pertinent part: “The following property shall be exempt from taxation: . . . (4) Real and personal estate grante d, 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 es tate 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 societ y other than a church edifice, a parsonage, the outbuildings of the churc h edifice or parsonage, a building used as a convent, school, orphanage, home or hospital, land adjacent to any of the buildings named in this subs ection, kept and used as a parking lot not used to produce income, lawn, pla yground 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 ex ceptions carved out by § 3832. See23

Our Lady of Ephesus House of Prayer, Inc. v. Town o f Jamaica , 2005 VT 16, ¶ 12, 178 Vt. 35 (sections 3802(4) and 3832 must be read toge ther). The court therefore begins with § 3832. Here, there appears to be no dispute that the Prop erty 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 pr operty is religious property.”). Indeed, it is undisputed that RHS is a Vermont nonp rofit corporation organized exclusively for religious purposes. The term “reli gious 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 permit ted uses, the only one the Town argues applies is that the Property is a “home or h ospital.” 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 purpo ses of Vermont’s hospital licensing statute as “a place devoted prim arily to the maintenance and operation of diagnostic and therapeutic facilities for in-pat ient 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 decl ined 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 declinin g to distinguish between a hospital’s inpatient and24 The VAB indicated that its members “may now know so mething more than Director Johnson and Judge Katz about the activitie s 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 providi ng health and social services to the elderly. While it appears that establishing and ma intaining 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 f acility in this case provides health and social services to persons who are frail, nursing h ome eligible, and seeking a nonresidential adult day program. That is different t han providing treatment or nursing care for the ill or injured. 13 It is true that a hospital’s inpatient and outpatie nt 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 purpos es of the exemption statutes.” The Town’s position, however, begs the question, since outpatients are by definition hospital patients. Oxford American Dictionary 557 (1999) (d efining “outpatient” as “a hospital patient whose treatment does not require overnight hospitalization”). The Town’s argument is predicated on the assumption that the P ACE facility provides outpatient medical services; that argument assumes the conclus ion the Town wants to reach. For these reasons, the court concludes that the Propert y is not a hospital.

outpatient facilities for tax purposes. The court cites the definition in Title 18 to reinforce the g eneral idea that a hospital is a facility for the care of ill o r injured people.

13 The court also notes that the Town has not come fo rward 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 neith er RHS nor PACE’s articles of organization, mission statem ents, or IRS documents describe their purpose or activities as operating a hospital.25 2. Is it a Home? As with the term “hospital,” the court’s primary ob jective in construing the word “home” is to implement legislative intent. Shlansk y v. City of Burlington , 2010 VT 90, ¶ 8. To do that, the court looks first to the plai n 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 st ay 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 societ y, and because it is neither a “home” nor a “hospital,” the court concludes that e ven if it were otherwise entitled to an exemption for public, pious or charitable uses unde r 32 V.S.A. § 3802(4), section 3832(2) operates to prevent the court from construing § 380 2(4) as exempting the Property.

Order The Town’s Motion for Enlargement of Time is grant ed. The Town’s Motion for Leave to File a Surreply is granted. The State’s m otion 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