Court Opinion

ID: 8209905
Source: CourtListenerOpinion
Date Created: 2022-09-28 16:08:08.284927+00
Date Added: 2024-06-11T16:41:45.781438
License: Public Domain

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Chester-Upland School District        :
                                      :
               v.                     :            No. 386 C.D. 2020
                                      :            No. 387 C.D. 2020
Chester City Board of Revision of     :            Argued: March 10, 2022
Taxes and Appeals, Prospect Crozer    :
LLC, City of Chester, Crozer-Keystone :
Health System, and Upland Borough :
                                      :
Appeal of: Prospect Crozer LLC        :

BEFORE:       HONORABLE PATRICIA A. McCULLOUGH, Judge
              HONORABLE STACY WALLACE, Judge
              HONORABLE MARY HANNAH LEAVITT, Senior Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY SENIOR JUDGE LEAVITT                                   FILED: September 28, 2022

              Prospect Crozer LLC (Taxpayer) appeals two orders of the Court of
Common Pleas of Delaware County (trial court) that terminated the real estate tax
exemption on two properties, a community hospital and a former convent
(Properties), located in the City of Chester (City).1 The trial court concluded that
Taxpayer, the current owner of the Properties, is not a purely public charity within
the meaning of Article VIII, Section 2(a)(v) of the Pennsylvania Constitution, PA.
CONST. art. VIII, §2(a)(v), and the Institutions of Purely Public Charity Act (Act
55).2 Accordingly, the Properties did not qualify for a tax exemption under the
Consolidated County Assessment Law.3 Taxpayer argues that the two orders are

1
  On October 22, 2020, the Court sua sponte consolidated the two appeals.
2
  Act of November 26, 1997, P.L. 508, No. 55, 10 P.S. §§371-385.
3
  53 Pa. C.S. §§8801-8868.
null and void because the judge issued them after he had forfeited his judicial office
by assuming a position with the Philadelphia Board of Revision of Taxes
(Philadelphia Tax Board). Taxpayer also challenges the orders on their merits,
asserting that the trial court lacked jurisdiction over the challenge of Chester-Upland
School District (School District) to the Properties’ exemption because the School
District did not first present that challenge to the Chester City Board of Revision of
Taxes and Appeals (City Tax Board). For the reasons that follow, we vacate the trial
court’s orders.
                                         Background
               The Properties were designated as tax exempt during the City’s 2015-
2017 triennial assessment period.4 The City Tax Board had assessed the community
hospital at $11,991,516 and assessed the convent at $475,580. On July 28, 2014, the
School District challenged the assessment of the Properties for the 2015-2017
triennial period. Using the appeal form provided by the City Tax Board, the School
District wrote that it appealed “for the following reasons to wit: property is
underassessed.” R.R. 1341a (emphasis added).
               At the time the School District appealed to the City Tax Board, the
community hospital was owned by Crozer-Chester Medical Center, and the convent
was owned by Crozer-Keystone Health System; both were non-profit organizations.
On November 19, 2014, the City Tax Board notified Crozer-Chester Medical Center
and Crozer-Keystone Health System by letter that “a hearing has been scheduled for

4
  At the March 21, 2019, trial, however, the parties stipulated that the triennial period was from
2015 to 2018. Notes of Testimony (N.T.), 3/21/2019, at 112-13; Reproduced Record at 327a-28a
(R.R. __). In any event, the School District challenged the assessment of the Properties for the
triennial period starting in 2015.
                                                2
the [] School District’s assessment appeal.” R.R. 1063a-64a. Crozer-Chester
Medical Center and Crozer-Keystone Health System did not attend the hearing.
             The City Tax Board denied the School District’s appeal. On December
29, 2014, the City Tax Board notified Crozer-Chester Medical Center and Crozer-
Keystone Health System by letter that “[a]fter review of [the School District’s]
appeal of your school taxes[, the City Tax Board] has denied any change at this time
and the above captioned property will remain assessed [as is].” R.R. 1233a.
             On January 26, 2015, the School District appealed the City Tax Board’s
decision to the trial court, asserting that the City Tax Board erred in “placing the
[Properties] into exempt status[.]” R.R. 21a, 29a. The School District asserted that
the Properties did not qualify for a tax exemption under the Consolidated County
Assessment Law because the owners were not purely public charities and,
alternatively, did not use or occupy the Properties for charitable purposes.
             On July 1, 2016, Taxpayer, a for-profit corporation, acquired the
Properties as part of its purchase of Crozer-Chester Medical Center and Crozer-
Keystone Health System. On October 31, 2016, the trial court allowed Taxpayer to
intervene in the School District’s appeal. The trial court held hearings in March,
May, and June of 2019, where the parties presented evidence on the Properties’ real
estate tax exemption.
                                Trial Court Decision
             On January 21, 2020, the trial court entered two adjudications holding
that the Properties were not tax exempt. Therein, the trial court reasoned that “the
power to determine exemption is implicit in the function of determining the tax
assessment.” Trial Court Adjudication, 1/21/2020, at 4; R.R. 2400a. The trial court
stated that in a real estate tax appeal, first, there must be a determination on whether

                                           3
the property qualifies for taxation. If so, then the tax appeals board determines the
assessment amount for that property. The trial court held that the School District’s
assessment appeal “place[d] all issues,” including the Properties’ tax exempt status,
before the City Tax Board. Trial Court Adjudication, 1/21/2020, at 5, Conclusion
of Law No. 6; R.R. 2401a. Accordingly, “as part of its duties in assessing a
property’s fair market value,” the trial court may “first consider whether the property
is subject to real estate taxation.”            Trial Court Adjudication, 1/21/2020, at 6,
Conclusion of Law No. 11; R.R. 2402a.
               Having concluded that the School District preserved the tax exemption
issue, the trial court held that Taxpayer’s “operations or operations of the
Propert[ies]” did not satisfy the constitutional requirements established by our
Supreme Court in Hospital Utilization Project v. Commonwealth, 487 A.2d 1306
(Pa. 1985) (HUP), and the statutory requirements in Act 55.5                             Trial Court
Adjudication, 1/21/2020, at 8; Conclusion of Law No. 27; R.R. 2404a. Taxpayer

5
 Article VIII, Section 2(a)(v) of the Pennsylvania Constitution states in pertinent part, as follows:
        (a) The General Assembly may by law exempt from taxation:
                                                ****
                (v) Institutions of purely public charity, but in the case of any real
                property tax exemptions only that portion of real property of such
                institution which is actually and regularly used for the purposes of
                the institution.
PA. CONST. art. VIII, §2(a)(v). The Pennsylvania Constitution does not define “institution of
purely public charity.” In HUP, 487 A.2d at 1317, our Supreme Court defined a purely public
charity as an institution that “(a) [a]dvances a charitable purpose; (b) [d]onates or renders
gratuitously a substantial portion of its services; (c) [b]enefits a substantial and indefinite class of
persons who are legitimate subjects of charity; (d) [r]elieves the government of some of its burden;
and (e) [o]perates entirely free from private profit motive.”
        In 1997, the General Assembly enacted Act 55 to “weigh[ ] in on questions affecting
determinations of charitable exemption[.]” Alliance Home of Carlisle, PA v. Board of Assessment
Appeals, 919 A.2d 206, 216 (Pa. 2007). Act 55 tracks the five criteria set forth in the HUP test
and specifies the type of evidence needed to meet each individual criterion.
                                                   4
leased the Properties for the rental income. Section 8812(b)(2) of the Consolidated
County Assessment Law states that “all property, real and personal, actually and
regularly used and occupied for the purposes specified in this section shall be subject
to taxation unless the person or persons, associations or corporation so using and
occupying the property shall be seized of the legal or equitable title in the realty….”
53 Pa. C.S. §8812(b)(2). The trial court held that the Properties were not exempt
from real estate taxes.
               Taxpayer appealed to this Court.
                                             Appeal
               On appeal,6 Taxpayer raises three issues. First, Taxpayer has filed an
application to vacate the two orders because the presiding judge, the Honorable John
L. Braxton, held a position on the Philadelphia Tax Board at the same time he
adjudicated these cases.7 Second, Taxpayer argues that the trial court lacked
jurisdiction to consider the School District’s challenge to its tax exemption because
the School District did not raise the issue before the City Tax Board. Alternatively,
Taxpayer argues that the trial court erred in holding that the Properties did not
qualify for a tax exemption under the Consolidated County Assessment Law for the
relevant tax periods.
               Article V, Section 17(a) of the Pennsylvania Constitution prohibits a
judge from holding “an office or position of profit in the government of the United

6
  This Court’s review determines whether the trial court abused its discretion, committed an error
of law, or rendered a decision unsupported by substantial evidence. Walnut-Twelve Associates v.
Board of Revision of Taxes of City of Philadelphia, 570 A.2d 619, 622 (Pa. Cmwlth. 1990). “The
trial court, as fact finder, has discretion over evidentiary weight and credibility determinations.”
1198 Butler Street Associates v. Board of Assessment Appeals, County of Northampton, 946 A.2d
1131, 1138 n.7 (Pa. Cmwlth. 2008).
7
   Taxpayer filed an application to vacate on January 19, 2021, and the Court referred the
application to the merits panel.
                                                 5
States, the Commonwealth or any municipal corporation or political subdivision
thereof[.]” PA. CONST. art. V, §17(a). In its application to vacate, Taxpayer asserted
that Senior Judge Braxton held a “position of profit” with the Philadelphia Tax
Board at the same time he acted as a judge on the instant tax appeals, which rendered
his two orders null and void. The School District responded that Taxpayer’s
application to vacate was untimely filed and, further, that the Pennsylvania Supreme
Court approved Senior Judge Braxton’s completion of this judicial assignment after
his appointment to the Philadelphia Tax Board.
             Taxpayer supported the application to vacate with affidavits and public
record searches that it attached thereto. Following argument before the merits panel,
this Court concluded that a record was needed on Taxpayer’s assertion of
incompatible service and the School District’s response thereto. Accordingly, the
Court entered an order remanding this matter to the trial court with directions to
develop an evidentiary record on the following factual questions:
             (1) The date on which Senior Judge Braxton assumed his position
             on the Philadelphia Board of Revision of Taxes and began
             receiving compensation therefor;
             (2) Whether Senior Judge Braxton’s continued work on the
             above-captioned assessment appeals of Prospect Crozer, LLC
             while simultaneously serving on the Philadelphia Board of
             Revision of Taxes was approved in writing or in some other way
             by the Pennsylvania Supreme Court; and
             (3) The date on which Prospect Crozer, LLC learned that when
             Senior Judge Braxton issued the orders in the above-captioned
             appeals, he had already assumed his position with the
             Philadelphia Board of Revision of Taxes.

Court Order, 3/17/2022.
             On April 20, 2022, the trial court conducted a hearing. The record
consists of a stipulation of the parties; Taxpayer’s public record searches and
                                          6
affidavits; and the testimony of Senior Judge Braxton. A summary of the parties’
stipulation, the affidavits, and Senior Judge Braxton’s testimony is set forth in In Re:
Appeal of Prospect Crozer LLC from the Decision of the Board of Assessment
Appeals of Delaware County, PA, __ A.3d __ (Pa. Cmwlth., Nos. 1596-1599, 1600-
1629 C.D. 2019, filed September 28, 2022) (Appeal of Prospect Crozer). Thereafter,
on May 4, 2022, the trial court issued an order finding, inter alia, that Senior Judge
Braxton began to receive compensation for his position with the Philadelphia Tax
Board on June 16, 2019, and ended his judicial service on January 24, 2020. The
trial court credited Senior Judge Braxton’s testimony that he notified the
Administrative Office of Pennsylvania Courts of his appointment to the Philadelphia
Tax Board and received approval to complete his outstanding judicial assignments.
Taxpayer sought reconsideration, but it was denied.
             After receipt of the trial court’s May 4, 2022, order, the parties filed
supplemental briefs with this Court to address the trial court’s order.
                                 Analysis
I. Senior Judge Braxton’s Incompatible Service on the Philadelphia Tax Board
             Taxpayer’s claims under Article V, Section 17(a) of the Pennsylvania
Constitution, PA. CONST. art. V, §17(a), are identical to those it raised in Appeal of
Prospect Crozer, __ A.3d at __, slip op. at 17-29. There, we held that Senior Judge
Braxton forfeited his judicial office no later than June 16, 2019, when he began to
receive compensation in his position of profit on the Philadelphia Tax Board.
Because Senior Judge Braxton’s orders were issued after he forfeited his judicial
office, they were null and void. For all the reasons set forth in Appeal of Prospect
Crozer, __ A.3d at __, slip op. at 17-29, which is incorporated by reference herein,
we grant Taxpayer’s application to vacate the trial court’s orders.

                                           7
                         II. Tax Exemption Adjudications
             Taxpayer argues that the School District was precluded from
challenging the Properties’ exemption in its appeal to the trial court because it did
not raise it with the City Tax Board, which decides a property’s assessment value as
well as its taxable status. The School District limited its appeal to the Properties’
assessment value. On appeal to the trial court, the School District raised the
Properties’ exemption for the first time. The trial court lacked jurisdiction because
the School District did not raise or preserve the issue of the Properties’ tax exemption
in its appeal to the City Tax Board.
             Taxpayer contends that allowing the School District to assert an
exemption challenge for the first time in an appeal to the trial court is fundamentally
unfair. Taxpayer’s non-profit predecessors had no notice that the Properties’ tax
exemption was at issue in the City Tax Board proceeding. They had no reason to
respond to the School District’s challenge to the Properties’ assessment amount
because they would not be paying taxes, regardless of whether the assessments were
increased. In the alternative, Taxpayer argues that if the School District was allowed
to challenge the Properties’ exemption, then the assessment amount was included in
that appeal. The trial court erred by not allowing Taxpayer to proffer evidence that
the community hospital’s assessment was excessive.
             The School District responds that Taxpayer has raised “at most, a
technical defect[.]” School District Brief at 33. The City Tax Board does not have
a separate form for appealing a property’s tax exemption. The School District’s
counsel, Donald J. Weiss, filed an affidavit attesting that he argued orally to the City

                                           8
Tax Board that the Properties should not be tax exempt.8 R.R. 1344a. The City Tax
Board, after the hearing, made no changes to the Properties’ exemption, which
adversely affected the School District. The School District argues that the term
“assessment” includes both “value and taxable status,” as reasoned by the trial court.
School District Brief at 33. A property’s assessment would be zero if it was 100%
tax exempt. Id., n.11.
              The School District further contends that any technical defect in its
appeal to the City Tax Board was a harmless error. In In re Penn-Delco School
District, 903 A.2d 600 (Pa. Cmwlth. 2006), the taxpayers alleged that they never
received notice of the administrative hearing for the school district’s tax appeal and,
therefore, did not attend. This Court rejected the taxpayers’ claim that the trial court
lacked jurisdiction; rather, we held that the appropriate remedy for defective notice
is not a dismissal but a remand for a new hearing before the board. In Penn-Delco
School District, the lack of notice did not prejudice the taxpayers because the tax
appeals board denied the school district’s appeal. Thereafter, the taxpayers fully
participated in the trial de novo.
              The School District contends that as in Penn-Delco School District, the
City Tax Board denied the School District’s appeal, leaving the Properties’
assessment unchanged. In other words, Taxpayer prevailed before the City Tax
Board. Thus, Taxpayer was in no way harmed by a defect in the School Board’s
written appeal to the City Tax Board.

8
 Weiss also testified in person before the trial court on May 30, 2019. On cross-examination,
Weiss conceded that there was no “documentary support” for the School District’s tax exemption
challenge before the City Tax Board. N.T., 5/30/2019, at 96; R.R. 792a.
                                              9
                The City is governed by the Third Class City Code.9 Section 12522(a)
states, in pertinent part, as follows:
                (a) Power to appoint assessors.--With regard to the valuing and
                assessing of property for taxation within a city, the following
                shall apply:
                       (1) If, on May 19, 2014, a city is utilizing the
                       county assessment office for the valuation and
                       assessment of property, the city shall continue to
                       utilize the county assessment office for this
                       purpose.
                       (2) If paragraph (1) does not apply, council may
                       appoint and employ persons to value and assess
                       property for taxation within a city, following the
                       procedures and methodologies set forth in the
                       assessment law applicable in the county in which
                       the city is located, provided that the act of April 16,
                       1992 (P.L. 155, No. 28), known as the Assessors
                       Certification Act, shall apply to persons hired
                       pursuant to this paragraph.

11 Pa. C.S. §12522(a)(1)-(2) (emphasis added). Because the City does not use the
“county assessment office,” its City Tax Board must follow the “procedures and
methodologies” set forth in the Consolidated County Assessment Law, which
applies to Delaware County, a Second Class A county. 53 Pa. C.S. §8801.
                Section 8844(c) of the Consolidated County Assessment Law states, in
relevant part, as follows:
                (1) Any person aggrieved by any assessment, whether or not the
                value thereof shall have been changed since the preceding annual
                assessment, or any taxing district having an interest in the
                assessment, may appeal to the board for relief. Any person or
                taxing district desiring to make an appeal shall, on or before
                September 1 or the date designated by the county commissioners

9
    11 Pa. C.S. §§10101-14702.
                                              10
             if the option under paragraph (3) is exercised, file with the board
             an appeal in writing, identifying the following:
                   (i) Appellant.
                   (ii) Property location.
                   (iii) Owner.
                   (iv) Assessment or assessments by which the person
                   is aggrieved.
                   (v) Address to which notice of the time and place
                   for a hearing shall be mailed.
             (2) The same procedures and deadlines shall apply to a request
             for real estate tax exemption under section 8812 (relating to
             exemptions from taxation).

53 Pa. C.S. §8844(c)(1)-(2) (emphasis added).
             Section 8802 of the Consolidated County Assessment Law defines
“assessment” as “assessed value.” 53 Pa. C.S. §8802. “Assessed value” is defined
as “[t]he assessment placed on real property by a county assessment office upon
which all real estate taxes shall be calculated.” 53 Pa. C.S. §8802. While Section
8802 does not define the term “exemption,” the Consolidated County Assessment
Law treats a property exemption and a property assessment as two distinct concepts.
“Any person or taxing district” desiring to challenge a property’s exemption status
must file the appeal in writing. 53 Pa. C.S. §8844(c)(l).
             In its written appeal to the City Tax Board, the School District stated
that the Properties were “underassessed;” it did not challenge the Properties’ tax
exemption. R.R. 1341a. In filling out the form, the School District chose to limit
its appeal to one of assessment value. The record does not contain the City Tax
Board’s decision on the School District’s appeal; however, the notice sent by the
City Tax Board to Crozer-Chester Medical Center and Crozer-Keystone Health
System on December 29, 2014, suggested that the City Tax Board considered only

                                         11
the Properties’ assessment value. Because the School District did not preserve the
issue of the Properties’ tax exemption before the City Tax Board, it was barred from
raising the issue for the first time before the trial court.
              In his affidavit, the School District’s attorney attested that he orally
addressed the Properties’ exemption to the City Tax Board. The trial court did not
make any findings in this regard. Instead, it concluded that “the power to determine
exemption is implicit in the function of determining the tax assessment[;]” as such,
the trial court may, “as part of its duties in assessing a property’s fair market value,
first consider whether the property is subject to real estate taxation.” Trial Court
Adjudication, 1/21/2020, at 4, 6, Conclusion of Law No. 11; R.R. 2400a, 2402a.
The trial court’s proposition is at odds with the Consolidated County Assessment
Law. Section 8854(a) sets forth the scope of the trial court’s inquiry in an assessment
appeal and states, in pertinent part, as follows:
              (a) Court of common pleas.—
                                         ****
                     (2) In any appeal of an assessment the court shall
                     make the following determinations:
                            (i) The market value as of the date the
                            appeal was filed before the board. In
                            the event subsequent years have been
                            made a part of the appeal, the court
                            shall determine the market value for
                            each year.
                            (ii) The common level ratio which was
                            applicable in the original appeal to the
                            board. In the event subsequent years
                            have been made a part of the appeal,
                            the court shall determine the
                            applicable common level ratio for each
                            year published by the State Tax
                            Equalization Board on or before July 1
                                            12
                            of the year prior to the tax year being
                            appealed.
                     (3) The court, after determining the market value of
                     the property pursuant to paragraph (2)(i), shall
                     then apply the established predetermined ratio to
                     that value unless the corresponding common level
                     ratio determined pursuant to paragraph (2)(ii) varies
                     by more than 15% from the established
                     predetermined ratio, in which case the court shall
                     apply the applicable common level ratio to the
                     corresponding market value of the property.

53 Pa. C.S. §8854(a)(2)-(3) (emphasis added). Nowhere does Section 8854(a) direct
a trial court to consider a property’s tax exemption in each and every assessment
appeal. Rather, its job is to determine the market value, then common level ratio
and then apply that ratio to the market value.
              The School District’s reliance on In re Penn-Delco School District, 903
A.2d 600, is misplaced. This is not a technical defect in the hearing notice but,
rather, an issue of waiver. See Germantown Cab Co. v. Philadelphia Parking
Authority, 134 A.3d 1115, 1120 (Pa. Cmwlth. 2016) (when a party fails to raise an
issue in an agency proceeding, the issue is waived and cannot be considered for the
first time in a judicial appeal).
              The trial court lacked jurisdiction to consider the School District’s
challenge to the Properties’ tax exemption because the School District did not raise
this issue to the City Tax Board. In its appeal to the trial court, the School District
did not challenge the City Tax Board’s decision on the Properties’ assessment, and,
thus, that issue was not before the trial court. This leaves no issue to be decided and,
thus, a remand is not necessary.

                                          13
                                     Conclusion
             Senior Judge Braxton vacated his position as senior judge by operation
of law on June 16, 2019, when he began to receive compensation for his
incompatible service on the Philadelphia Tax Board, which was a “position of profit
in the government of the United States, the Commonwealth or any municipal
corporation or political subdivision thereof.” PA. CONST. art. V, §17(a). The two
orders issued on the School District’s tax appeals are null and void. We grant
Taxpayer’s application to vacate the trial court’s orders. However, a remand is not
necessary because the trial court lacked jurisdiction to consider the School District’s
challenge to Taxpayer’s exemption.

                            ____________________________________________
                            MARY HANNAH LEAVITT, President Judge Emerita

Judge Fizzano Cannon did not participate in the decision in this case.

                                          14
         IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Chester-Upland School District        :
                                      :
               v.                     :     No. 386 C.D. 2020
                                      :     No. 387 C.D. 2020
Chester City Board of Revision of     :
Taxes and Appeals, Prospect Crozer    :
LLC, City of Chester, Crozer-Keystone :
Health System, and Upland Borough :
                                      :
Appeal of: Prospect Crozer LLC        :

                                   ORDER

            AND NOW, this 28th day of September, 2022, Prospect Crozer LLC’s
Application to Vacate Orders on Appeal Because of Structural Error is GRANTED.
The orders of the Court of Common Pleas of Delaware County, filed January 21,
2020, are VACATED for structural error and for lack of subject matter jurisdiction.

                           ____________________________________________
                           MARY HANNAH LEAVITT, President Judge Emerita