United Methodist Retirement Communites Inc v. City of Chelsea

Order Michigan Supreme Court
Lansing, Michigan
May 10, 2019 Bridget M. McCormack,
Chief Justice
158198 David F. Viviano,
Chief Justice Pro Tem
Stephen J. Markman
Brian K. Zahra
UNITED METHODIST RETIREMENT Richard H. Bernstein
COMMUNITIES, INC., Elizabeth T. Clement
Petitioner-Appellant, Megan K. Cavanagh,
Justices
v SC: 158198
COA: 337998
MTT: 15-003171-R
CITY OF CHELSEA,
Respondent-Appellee.
_________________________________________/
On order of the Court, the application for leave to appeal the May 22, 2018
judgment of the Court of Appeals is considered, and it is DENIED, because we are not
persuaded that the question presented should be reviewed by this Court.
MARKMAN, J. (dissenting).
I respectfully dissent from this Court’s order denying leave to appeal. Instead, I
would grant leave to appeal to reconsider this Court’s holdings in Mich Baptist Homes &
Dev Co v Ann Arbor, 396 Mich. 660 (1976), and Retirement Homes of the United
Methodist Church v Sylvan Twp, 416 Mich. 340 (1982), in light of our more recent
holding in Baruch SLS, Inc v Tittabawassee Twp, 500 Mich. 345 (2017). More
specifically, I would grant to consider whether this Court’s holding in Baruch logically
compels an alternative analysis for determining whether a charitable institution is
precluded from receiving a property tax exemption under MCL 211.7o because its
property is not “occupied by [it] solely for the purposes for which [it] was
incorporated . . . .” MCL 211.7o(1).
Petitioner United Methodist Retirement Communities seeks a tax exemption under
MCL 211.7o for property it owns and operates as a residential retirement facility for
senior citizens. MCL 211.7o(1) provides:
Real or personal property owned and occupied by a nonprofit
charitable institution while occupied by that nonprofit charitable institution
solely for the purposes for which that nonprofit charitable institution was
incorporated is exempt from the collection of taxes under this act.
The Tax Tribunal denied petitioner an exemption on the grounds that its property was not
“occupied by [it] solely for the purposes for which [it] was incorporated,” MCL
211.7o(1), and the Court of Appeals affirmed, relying on this Court’s decisions in Mich
Baptist and Retirement Homes. In those cases, this Court denied tax exemptions under
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MCL 211.7o to retirement homes on the basis that their properties were not occupied
solely for the purposes for which they were incorporated. We reasoned that this
requirement was only satisfied if the homes “benefit[ed] the general public without
restriction,” Mich Baptist, 396 Mich. at 671; see also Retirement Homes, 416 Mich. at 349,
and that the homes in dispute did not do so because they did not help the elderly
population generally, but rather only a subset of relatively less infirm and relatively less
financially needy individuals, Mich Baptist, 396 Mich. at 671-672; Retirement Homes,
416 Mich. at 349-353.
Petitioner here argues that the Court of Appeals erred by relying on these two
cases because their reasoning was effectively rejected in Baruch, 500 Mich. 345 (2017).
In Baruch, we addressed one of the six factors that this Court had previously laid out in
Wexford Med Group v City of Cadillac, 474 Mich. 192 (2006), for determining whether
an institution is “charitable.” As relevant to the instant case, Wexford held that the third
of these factors is:
A “charitable institution” does not offer its charity on a
discriminatory basis by choosing who, among the group it purports to
serve, deserves the services. Rather, a “charitable institution” serves any
person who needs the particular type of charity being offered. [Id. at 215.]
Baruch, however, clarified that this factor only “ban[s] restrictions or conditions on
charity that bear no reasonable relationship to an organization’s legitimate charitable
goals” and further explained that “the ‘reasonable relationship’ test should be construed
quite broadly to prevent unnecessarily limiting the restrictions a charity may choose to
place on its services.” Baruch, 500 Mich. at 357-358.
Petitioner contends that Baruch overruled Mich Baptist and Retirement Homes,
which denied charitable tax exemptions on the basis of limitations that those institutions
placed on those who could receive their services absent consideration of whether there
was a reasonable relationship between those limitations and the organizations’ legitimate
charitable goals. The Court of Appeals rejected this argument, asserting that Baruch had
exclusively addressed whether an institution was “charitable,” whereas Mich Baptist and
Retirement Homes addressed whether a charitable institution “occupied the premises
solely for the purposes for which it was incorporated.” United Methodist Retirement
Communities, Inc v City of Chelsea, unpublished per curiam opinion of the Court of
Appeals, issued May 22, 2018 (Docket No. 337998), pp 5-6.
I would grant leave to reconsider Mich Baptist and Retirement Homes in light of
Baruch for three related reasons.
First, Wexford factor three, which this Court interpreted in Baruch, was arguably
derived from the same two cases (Mich Baptist and Retirement Homes) that also supply
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the standard for determining whether a property is “occupied by that nonprofit charitable
institution solely for the purposes for which [it] was incorporated . . . .” MCL 211.7o(1).
In Wexford, before laying out the factors relevant to determining whether an institution is
“charitable,” this Court analyzed Mich Baptist and Retirement Homes. Wexford, 474
Mich. at 209-212. Indeed, Wexford factor three substantially reflects the analysis that we
employed in Mich Baptist and Retirement Homes. If Wexford factor three was indeed
derived from the same cases that defined the standard for whether a property is “occupied
by that nonprofit charitable institution solely for the purposes for which [it] was
incorporated,” MCL 211.7o(1), then our interpretation of the former in Baruch may well
be relevant to the interpretation of the latter.
Second, the reasoning that this Court employed in Mich Baptist and Retirement
Homes is strikingly similar to the reasoning that this Court rejected in Baruch. Mich
Baptist and Retirement Homes held that in order to be entitled to a tax exemption, a
retirement home must serve the elderly population generally “without restriction.” Mich
Baptist, 396 Mich. at 671; Retirement Homes, 416 Mich. at 349. Baruch noted the
impracticality of such a requirement, remarking that “if an institution cannot serve
everyone who could benefit from the service (as most cannot), surely it will have to select
its beneficiaries in some manner,” Baruch, 500 Mich. at 355, and thus rejected the
conclusion that a charitable institution must “allocate[] its services using an arbitrary
metric, such as a lottery or first-come, first-serve,” id. at 356. This reasoning would
seemingly apply equally in the instant context, thereby calling into question our
reasoning in Mich Baptist and Retirement Homes.
Third, in light of the similarities between the analytical approaches set forth in
Mich Baptist and Retirement Homes and that rejected in Baruch, the latter would be
undermined considerably if the former remained good law, as a charity that would
otherwise be exempt under Baruch would, far more often than not, still be denied an
exemption as a result of the analyses of Mich Baptist and Retirement Homes. Baruch
held that institutions are not precluded from receiving a charitable exemption merely
because they are governed by standards for determining which persons-- among the
general population they purport to serve-- will qualify for their services. See id. at 357-
358. However, Mich Baptist and Retirement Homes suggest that no such standards are
permitted and that an institution is entitled to an exemption only if it assists “without
restriction” the population it purports to serve. Mich Baptist, 396 Mich. at 671;
Retirement Homes, 416 Mich. at 349. And an institution must satisfy both standards in
order to be entitled to a charitable tax exemption. Yet Mich Baptist and Retirement
Homes seemingly preclude nearly any restrictive standard as to who can receive an
institution’s services while Baruch allows such restrictions so long as they are
“reasonable.” If a charity that satisfies Baruch is nonetheless to be precluded from an
exemption by Mich Baptist and Retirement Homes, then Baruch, despite being the most
recent of this Court’s relevant decisions, would seem to have little practical effect in
giving meaning to MCL 211.7o. This uncertain relationship between these decisions
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suggests strongly the wisdom of giving further appellate consideration to the present
dispute.
Petitioner, in my judgment, raises a substantial question as to whether, in light of
Baruch’s rejection of an analysis substantially similar (if not identical) to this Court’s
analyses in Mich Baptist and Retirement Homes, these prior decisions can be maintained.
The former stands for the proposition that “reasonable” standards can be applied in
determining which members of the community a charitable institution purports to serve
will actually be provided services, while the latter seemingly stands for the proposition
that the process of applying such standards is, by itself, disqualifying as a “charitable
institution.” “[I]t is [this Court’s] obligation to overrule or modify case law if it becomes
obsolete, and until this Court takes such action, the Court of Appeals and all lower courts
are bound by”-- and, in my judgment, will be confused by-- “that authority.” Associated
Builders & Contractors v City of Lansing, 499 Mich. 177, 192-193 (2016) (quotation
marks and citation omitted). I would grant leave to appeal to consider whether Mich
Baptist and Retirement Homes should be reconsidered in light of Baruch or whether these
cases somehow can be reconciled.
I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
May 10, 2019
p0507
Clerk