Opinion ID: 2070823
Heading Depth: 2
Heading Rank: 2

Heading: Exemption Clause as a Privilege

Text: As we noted, supra, section 59J of Chapter 911 provided that a person or health care entity, which included the nursing home then operated by Loveman, could not develop, operate, or participate in a health care project unless the state agency issued a CON for the project. 1978 Md. Laws, Chap. 911, § 59J(A)(1). The bill also provided, however, that the CON requirement provision did not apply to a health care project which was completed and in operation on or before June 1, 1978. Id. at 59J(A)(2)(II). Therefore, Loveman's health care project, the nursing home services he provided at the facility on 333 Harlem Lane, was not automatically granted a CON. The project was, to the extent of its operations as of June 1, 1978, exempted from the requirement to then obtain a CON. Our task in this case, therefore, is to interpret this exemption and what the General Assembly intended by allowing health care projects in existence at the time of the statute's enactment to be exempt from obtaining an otherwise mandatory CON. This is an issue of statutory construction and a question of law. Nowhere in section 59J of Chapter 911 did the legislature use the word exempt. Instead, the provision stated that this subsection does not apply to health care projects already operating by June 1, 1978. The effect of this subsection, however, was to exempt those facilities from the requirement to obtain a CON. BLACK'S LAW DICTIONARY 571 (6th ed.1990), as relative to the case at bar, defines exemption as: Freedom from a general duty or service; immunity from a general burden. THE RANDOM HOUSE DICTIONARY OF THE ENGLISH LANGUAGE 499 (Unabridged ed.1983) defines exemption as the act of exempting, the state of being exempted; immunity. It defines exempt as to free from an obligation or liability to which others are subject. These definitions, although not particularly enlightening, do indicate that exemptions typically relieve someone or something of an otherwise mandatory obligation. This definition appears logical and consistent with the statute in that those health care projects in existence prior to June 1, 1978, were relieved of the burden of then obtaining a CON in order to qualify for a license to continue services already provided by the project at that time, whereas new projects were required to obtain a CON from the outset. Maryland cases addressing exemptions are very limited. Some relate to creditor/debtor actions and statutory exemptions of certain property from execution or other similarly related areas of law. In any of those circumstances, however, the exemptions can be waived. For example, in Lawrence v. Commercial Banking Corp., 165 Md. 559, 169 A. 69 (1933), this Court stated relative to a creditor/debtor action: The statute was not, we think, intended to have the effect of preventing the ... employee from waiving the advantages accruing to him thereunder. Id. at 562, 169 A. at 70. Green v. State, 59 Md. 123 (1882), involved a statutory exemption from the requirement that a person sit on jury duty. That statute provided that all persons over seventy years of age ... shall be exempt from attendance as jurors. Id. at 125. Green had been indicted by a grand jury and convicted by a petit jury of forgery and sought to challenge his conviction because each jury had persons over seventy years of age serving. We disagreed with Green, holding that the exemption was a privilege capable of waiver. We said: [A]nd in exempting persons over 70, the law makes a concession of immunity to them in view of their age, and relieves them from duties so long borne and discharged.... They are exempted only that is they are competent but not compellable. The Act of 1858, ch. 139, first exempted persons over 70. It says they are hereby exempted and relieved from serving as jurors in all cases. The codifiers have omitted all after the word exempted. The omitted words show most clearly that it was a personal privilege which was accorded, relief from the duty, if they chose to avail themselves of it. Webster says, exemption is immunity, a privilege, and illustrates by applying it to military and jury service: as exemption from military or jury service. Id. at 128 (some emphasis added). There is little other case law in Maryland or elsewhere construing exemptions in other situations. Some jurisdictions that have addressed exemptions have referred to exemptions as personal privileges that can be waived. See, e.g., State v. Stunkle, 41 Kan. 456, 459, 21 P. 675, 676 (1889) (Exemption is the personal privilege of the party exempted.... [T]he exempt person may ... waive the privilege conferred by law.); Pugh v. St. Louis Police Relief Ass'n, 237 Mo.App. 922, 938, 179 S.W.2d 927, 936 (1944)(Exemption is a personal privilege.). Accord Rusk v. Rusk, 859 S.W.2d 751 (Mo.Ct.App.1993). See also State v. Exxon Corp., 676 So.2d 783, 786 (La.Ct.App.1996) (An exemption implies a release from some burden, duty or obligation.(citation omitted)). We conclude, accordingly, that an exemption in this context generally is personal to the person or entity exempted. In this case, the entity that held the exemption was the health care project and the party operating that health care project: Shangri-La and Loveman, respectively. Like most personal privileges, the exemption can be waived. To the extent the exemption is related to real property, and we do not hold that it is, the exemption would remain a privilege, an incorporeal hereditament that also can be waived and abandoned, as we shall later explain. There is little or no reference to these exemption provisions in the legislative history of either the original Maryland or Federal Acts. Additionally, our courts have yet to construe this exemption clause. Other states, however, have addressed tangentially the issue and have held that such an exemption provision must be narrowly construed. For instance, the Supreme Court of Georgia construed a similar exemption from the CON requirement under its State Health Planning Act. In Phoebe Putney Memorial Hospital v. Roach, 267 Ga. 619, 480 S.E.2d 595 (1997), that court was called upon to examine whether a mobile cardiac catheterization unit which was ... exempt from obtaining a certificate of need when it began operating in Vidalia, Georgia, must obtain a certificate of need in order to operate in Albany, Georgia. Id. at 619, 480 S.E.2d at 596. Answering in the affirmative, the court noted first that although the statute exempted from CON requirements projects in existence prior to the enactment of the State Health Planning Act, the statute provided no exemption for such projects to relocate without first obtaining a CON. The court then went on: The exemption provisions of this statute must be followed closely; deviations are not permitted. See Chattahoochee Valley Home Health Care, Inc. v. Healthmaster, Inc., 191 Ga.App. 42, 44, 381 S.E.2d 56 (1989)[, cert. denied, 493 U.S. 1079, 110 S.Ct. 1132, 107 L.Ed.2d 1037 (1990) ]. Thus, in the absence of an express provision authorizing an exemption for the relocation of [the health care project at issue, that project] must obtain a CON if it is relocated. Id. at 620-21, 480 S.E.2d at 597. See also Seashore Ambulatory Surgery Center, Inc. v. Dep't of Health, 288 N.J.Super. 87, 101, 671 A.2d 1088, 1095 (1996) (holding that the clear language of the act providing that a CON was needed for new health care project limited the exemption clause from applying to other situations not specified in the clause). When Loveman's license was revoked permanently, he ceased operating the nursing home and removed its personalty. Later, he and the corporation attempted to salvage their investment by leasing the existing building at 333 Harlem Lane to other nursing home health care projects. Eventually, Inglenook became licensed and operated its own, new project. It obtained an emergency CON and then a permanent CON to operate its nursing home. We found no indication from the record, nor do the parties point us to such an instance, of appellee objecting to the grant of the new CON to Inglenook. Thus, Inglenook and the subsequent operators at that location conducted their business under the aegis of Inglenook's newly acquired CON, not the prior exemption provided to Loveman and Shangri-La under Chapter 911. Subsequent health care projects and the chain of operations can be traced back to the Inglenook CON. Loveman and Shangri-La's medicaid convictions, the loss of Loveman's license to operate, and his acquiescence as to the issuance of a CON to another operator for the lessee's own health care project, constituted a waiver and abandonment of his exemption privilege.