In re Springfield Hosp. Folio No. 42–00–06625–01

179 A.3d 632

IN RE: APPEAL OF SPRINGFIELD HOSPITAL FOLIO NO. 42–00–06625–01

Appeal of: Prospect Crozer, LLC

No. 191 C.D. 2017

Commonwealth Court of Pennsylvania.

Argued December 7, 2017

Decided February 13, 2018

Andrew R. Sperl, Philadelphia, for appellant.

Pamela A. Lee, Springfield, for appellees.

BEFORE: HONORABLE ROBERT SIMPSON, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE DAN PELLEGRINI, Senior Judge

OPINION BY SENIOR JUDGE PELLEGRINI

Prospect Crozer, LLC (Prospect) appeals from an order of the Court of Common Pleas of Delaware County (trial court) granting a petition to enforce the trial court's previous order approving a payment in lieu of a tax agreement and ordering that the tax status of Springfield Hospital be changed to taxable non-exempt effective July 1, 2016. For the following reasons, we affirm.

I.

A.

Springfield Hospital is located on 11+ acres of land at 190 West Sproul Road, Delaware County (property), within the taxing districts of Springfield School District and Springfield Township (together, Taxing Authorities). "Springfield Hospital" was a non-profit corporation organized and operated as a purely public charity for hospital purposes; as such, the property itself has held tax-exempt status since approximately 1960.

In 1992, Springfield Hospital was in the process of expanding its health campus to include medical office buildings, a sports club and a parking garage, which prompted the Taxing Authorities to appeal the property's tax-exempt status. The Delaware County Board of Assessment Appeals (Board) issued a notice removing the property's tax-exempt status and fixing the assessment at $500,000. Springfield Hospital appealed to the trial court contending that the property remained wholly exempt because the entire tract of land was a necessary part of an institution of purely public charity.

The parties resolved the tax assessment appeal pursuant to a payment in lieu of taxes (PILOT) agreement,¹ which the trial court approved by order dated May 31, 1994 (1994 PILOT Order). Paragraph 4 of the trial court's 1994 PILOT Order provides, in pertinent part:

After the final Certificate of Occupancy is granted by Springfield Township to Springfield Hospital for the new medical health campus, Springfield Hospital, its successors and assigns, shall not be subject to real estate tax on the existing hospital building so long as the existing hospital building is used solely for hospital purposes by Springfield Hospital or is used solely for hospital purposes by an entity which is exempt from federal tax under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended .

(Reproduced Record (R.R.) at 14a.) (Emphasis added.) The 1994 PILOT Order also states that it is "binding on the successors and assigns of Springfield Hospital." (R.R. at 15a.)

Crozer–Keystone Health System (CKHS), an entity exempt from federal tax under Section 501(c)(3) of the Internal Revenue Code, subsequently acquired the property and continued to use it solely for hospital purposes. All parties agreed that the requirements of the 1994 PILOT Order continued to be satisfied and, therefore, the property remained tax-exempt while it was owned and operated by CKHS.

B.

On January 8, 2016, CKHS was sold to Prospect by way of an asset purchase agreement dated January 8, 2016, with the transfer effective July 1, 2016. Prospect is a for-profit entity but continues to operate Springfield Hospital and uses the hospital building solely for hospital purposes.

Given the sale of the property to a for-profit entity, the Taxing Authorities believed the property no longer qualified as tax exempt. Springfield School District issued to Prospect a 2016 school real estate tax bill for the property dated July 1, 2016, in the amount of $433,956.15, based upon the property's current real estate tax assessment of $13,810,935.00. On July 13, 2016, after this tax bill was sent, the Taxing Authorities sent a letter to the Delaware County Tax Assessment Office (Assessment Office) alerting it of the sale of the property to a for-profit entity and requesting that the Assessment Office update the county tax records to reflect the property's taxable status as of July 1, 2016, the date the transfer of the property became effective. Prospect disputed the Taxing Authorities' interpretation of the 1994 PILOT Order and the property's tax status, and the Assessment Office did not change the property's tax status.

On July 26, 2016, the Taxing Authorities filed a statutory annual appeal with the Board challenging the property's tax-exempt status for tax year 2017. On November 15, 2016, the Board granted the appeal and issued a decision stripping the property of its tax-exempt status as of January 1, 2017.

Prior to issuance of the Board's decision, the Taxing Authorities also filed with the trial court a petition to enforce the 1994 PILOT Order. The Taxing Authorities asserted that pursuant to the plain language of the order, the property is no longer exempt from real estate taxes because it was transferred to a for-profit entity subject to federal income tax, and the 1994 PILOT Order requires an immediate change in the property's tax status as of the date of transfer, July 1, 2016. Prospect countered that under the first clause of the 1994 PILOT Order, the property remains tax exempt because the hospital building is still being and will continue to be used as Springfield Hospital for hospital purposes, and it does not matter that Prospect is a for-profit entity. In the alternative, Prospect argued that if the property is now taxable, the common law tax assessment day rule mandates that the change in taxable status cannot be instituted until the next fiscal year following that change, which would be January 1, 2017.

The trial court granted the petition to enforce and ordered that the property's status be changed on the tax rolls to taxable non-exempt effective July 1, 2016. The trial court also ordered the Assessment Office to update its roll to reflect the property's taxable non-exempt status.

In an opinion issued pursuant to Pa. R.A.P. 1925(a), the trial court noted that the clear and unequivocal intent of the parties, based upon the plain language of the 1994 PILOT Order, was for the property to remain tax exempt only so long as the entity that operated it as a hospital held tax-exempt status. That ceased when CKHS transferred its assets to Prospect, a for-profit entity, thus entitling the Taxing Authorities to the relief they sought through the petition to enforce. The trial court further noted that while the property may still be used for hospital purposes as "Springfield Hospital," that use is determined by Prospect, a for-profit entity and, therefore, neither condition in paragraph 4 of the 1994 PILOT Order remains in effect. The trial court reasoned that the tax assessment day rule is not applicable here because the change in tax status of the property is not the result of any reassessment but pursuant to the explicit terms of the 1994 PILOT Order. It held that Prospect was to pay taxes once the conditions in paragraph 4 were no longer met, meaning when the property changed hands on July 1, 2016.

Prospect moved for reconsideration given the intervening decision of the Board, asking the trial court to clarify its order to make clear that the property remains tax exempt until January 1, 2017, in conformity with the Board's decision. By order dated December 27, 2016, the trial court granted the motion for reconsideration and agreed to clarify its previous order in light of the Board's recent ruling. However, by order dated February 3, 2017, the trial court "denied" Prospect's motion for reconsideration, noting that its previous order is clear and speaks for itself without need for clarification. Prospect then filed a timely appeal to this Court challenging the trial court's November 30, 2016 order.

On November 10, 2017, Prospect filed what is titled as an application for leave to file supplemental brief. The application requests that we vacate the trial court order and remand, without reaching the merits, for reconsideration by a judge outside of the Court of Common Pleas of Delaware County. The application alleges that the entire Delaware County bench is recused from cases involving Prospect, and the Supreme Court appointed a visiting judge to a separate case in the trial court involving Prospect, because a sitting Delaware County judge also serves on the Board of Directors of the Crozer–Keystone Community Foundation (Foundation), a foundation directly related to Prospect. We issued an order treating the application as a motion to remand and directing that it be heard with the merits of the appeal.

II.

A.

We first address Prospect's argument that the trial court's order granting the petition to enforce should be vacated and the case remanded and assigned to a visiting judge due to potential bias because an unnamed judge on the Court of Common Pleas of Delaware County also serves on the Foundation's Board. Prospect argues that every member of the Delaware County bench should be recused because of this conflict of interest and the petition to enforce should be re-heard by a visiting judge. Prospect contends that while the circumstances for the recusal existed at the time the trial court issued the enforcement order, Prospect did not learn of the potential conflict until October 17, 2017.

In essence, Prospect's motion to remand is a petition for recusal. As our Supreme Court recently reiterated, "[t]he case law in this Commonwealth is clear and of long standing; it requires a party seeking recusal or disqualification to raise the objection at the earliest possible moment, or that party will suffer the consequence of being time barred." Lomas v. Kravitz , ––– Pa. ––––, 170 A.3d 380, 389 (2017) (quoting Goodheart v. Casey , 523 Pa. 188, 565 A.2d 757 (1989) ). The earliest possible moment means "when the party knows of the facts that form the basis for a motion to recuse." Lomas , 170...