The New London Hosp. Ass'n v. Town of Newport

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2024 N.H. 33

THE NEW LONDON HOSPITAL ASSOCIATION, INC v. TOWN OF NEWPORT

No. 2022-0592

Supreme Court of New Hampshire, Sullivan

June 26, 2024

Argued: October 3, 2023

Devine, Millimet &Branch, Professional Association, of Manchester (Matthew R. Johnson on the brief and orally), for the plaintiff.

Drummond Woodsum, of Manchester (Keriann Roman and Matthew Serge on the brief and orally), for the defendant.

Preti Flaherty Beliveau &Pachios, PLLP, of Concord (Nathan R Fennessy on the brief and orally), for New Hampshire Hospital Association, as amicus curiae.

New Hampshire Municipal Association, of Concord (Stephen C. Buckley on the joint brief), and Upton &Hatfield, LLP, of Portsmouth (Russell F. Hilliard on the joint brief), for New Hampshire Municipal Association and Town of Bedford, as amici curiae.

HANTZ MARCONI, J.

[¶1] The plaintiff, The New London Hospital Association, Inc. (NLH), appeals a decision of the Superior Court (Tucker, J.) dismissing its appeals from denials by the defendant, Town of Newport (Town), of NLH's applications for charitable property tax exemptions for tax years 2015, 2017, and 2018. The Town cross-appeals challenging the trial court's rulings that NLH satisfied the second and third factors for charitable exemption that we articulated in ElderTrust of Florida, Inc. v. Town of Epsom, 154 N.H. 693 (2007). We affirm the trial court's rulings that NLH satisfied the second and third ElderTrust factors. We reverse its ruling that NLH failed to prove that it satisfied the fourth ElderTrust factor, and remand.

I. Factual Background

[¶2] The following facts are taken from the trial court's narrative order issued after a six-day bench trial or from the contents of documents in the record. NLH is a nonprofit corporation exempt from federal income taxation pursuant to section 501(c)(3) of the federal tax code. See 26 U.S.C. § 501(c)(3) (2018). It is also a regulated charitable trust registered with the New Hampshire Department of Justice Charitable Trusts Unit. NLH's purpose, as stated in its articles of agreement, is as follows:

The Corporation is established exclusively for the charitable, scientific and educational purposes herein set forth, subject to the provisions of New Hampshire RSA § 292 and the provisions of Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). The principal purposes of the Corporation shall be to operate an acute care hospital and related nursing home facility, to provide other facilities, services and products for the care of persons afflicted with illness or disabilities, without regard to age, race, sex, color, creed or national origin; either directly, through subsidiary or affiliated corporations or entities, or by contract or joint venture with other individuals or entities; and in furtherance thereof to acquire, hold, manage, invest, mortgage and dispose of property and funds of whatever character and generally to possess and exercise all powers permitted by the voluntary corporations under the laws of the State of New Hampshire.

All activities and functions of the Corporation shall be conducted in a manner which is consistent with the requirements of Section 501(c)(3) of the Code. Solely in furtherance of those purposes that qualify the Corporation as exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor provision, the Corporation is authorized to act in furtherance of the best interests of Mary Hitchcock Memorial Hospital, a New Hampshire non-profit corporation which is a taxexempt organization under Section 501(c)(3) of the Code, and Dartmouth-Hitchcock Clinic, a New Hampshire non-profit corporation which is a tax-exempt organization under Section 501(c)(3) of the Code, and to do everything necessary, suitable, or proper for the accomplishment, attainment, or furtherance of, to do every other act or thing incidental to, appurtenant to, growing out of, or connected with, the purposes, objects, or powers set forth in these Articles, whether alone or in association with others; provided that nothing herein set forth shall be construed as authorizing the Corporation to possess any purpose, object, or power, or to do any act or thing forbidden of any organization exempt from federal income tax pursuant to Section 501(c)(3) of the Code, or any successor provision, which would threaten the Corporation's tax-exempt status.

[¶3] NLH owns the property in Newport at issue here, on which it operates the Newport Health Center (NHC). NHC is classified under federal law as a Rural Health Clinic as part of a federal initiative addressing the shortage of physicians in rural areas. NHC is the only outpatient treatment center in Newport.

[¶4] For a number of years, NLH leased "sub-optimal" space for NHC at the property. NLH purchased the property in 2012 and constructed a new facility with more space to accommodate additional physicians and serve additional patients.

[¶5] In tax year 2015, NLH applied for a charitable tax exemption for the NHC property. The Town denied the exemption and NLH appealed to the superior court. See RSA 72:34-a (2012 &Supp. 2023). Subsequent applications for tax years 2017 and 2018 were also denied, and those denials were appealed to the superior court. The three appeals were thereafter consolidated.

[¶6] NLH moved for summary judgment, which the trial court denied. The court ruled that "[v]iewing the evidence in the light most favorable to the Town, [NLH] established three of the four factors necessary for the exemption (the so-called [ElderTrust] factors), but not the fourth." The Town moved for reconsideration, which the court granted in part and denied in part. Specifically, the court denied the motion as to the first ElderTrust factor, but granted it as to the second and third, ruling that, with respect to those factors, there were issues of material fact to be resolved at trial.

[¶7] Following a bench trial, the court dismissed the appeals. It ruled that NLH proved the second ElderTrust factor and that "NLH proved the third criterion with respect to the property it occupied directly at [NHC] . . . [but not] with respect to the space it leased for storage." With respect to the fourth factor, the court ruled that NLH failed to prove it met that criterion. This appeal and cross-appeal followed.

II. Standard of Review

[¶8] When reviewing a trial court's decision after a trial on the merits, "we uphold the trial court's factual findings and rulings unless they lack evidentiary support or are legally erroneous." Jesurum v. WBTSCC Ltd. P'ship, 169 N.H. 469, 476 (2016). "We do not decide whether we would have ruled differently than the trial court, but rather, whether a reasonable person could have reached the same decision as the trial court based upon the same evidence." Id. "Thus, we defer to the trial court's judgment on such issues as resolving conflicts in the testimony, measuring the credibility of witnesses, and determining the weight to be given evidence." Id. "Nevertheless, we review the trial court's application of the law to the facts de novo." Id.

III. Analysis

[¶9] Determination of NLH's right to an exemption from taxation is statutory. Town of Peterborough v. MacDowell Colony, 157 N.H. 1, 5 (2008). "The existence and extent of exemptions depends on legislative edict." Id. (quotation omitted). Therefore, "we will overturn the trial court's decision if we find that the court misapprehended or misapplied the law." Id. (quotation and brackets omitted). "We note that the legislative purpose to encourage charitable institutions is not to be thwarted by a strained, over-technical and unnecessary construction" of the applicable statutes. Id. (quotation and brackets omitted).

[¶10] NLH claims exemption under RSA 72:23, V, which applies to:

The buildings, lands and personal property of charitable organizations and societies organized, incorporated, or legally doing business in this state, owned, used and occupied by them directly for the purposes for which they are established, provided that none of the income or profits thereof is used for any other purpose than the purpose for which they are established.

RSA 72:23, V (2012). The term "'charitable,' as used to describe a corporation, society or other organization" covered by RSA 72:23, V, is defined to mean:

a corporation, society or organization established and administered for the purpose of performing, and obligated, by its charter or otherwise, to perform some service of public good or welfare advancing the spiritual, physical, intellectual, social or economic well-being of the general public or a substantial and indefinite segment of the general public that includes residents of the state of New Hampshire, with no pecuniary profit or benefit to its officers or members, or any restrictions which confine its benefits or services to such officers or members, or those of any related organization.

RSA 72:23-l (2012). RSA 72:23-l further provides, "The fact that an organization's activities are not conducted for profit shall not in itself be sufficient to render the organization 'charitable' for purposes of this chapter, nor shall the organization's treatment under the United States Internal Revenue Code of 1986, as amended." Id. Moreover, RSA 72:23-1 is expressly "not intended to abrogate the meaning of 'charitable' under the common law of New Hampshire." Id. NLH bears the burden of establishing entitlement to an exemption under RSA 72:23, V. See RSA 72:23-m (2012).

[¶11] In ElderTrust, we distilled the requirements of RSA 72:23, V and RSA 72:23-l into a single four-factor test, holding:

[T]he plain language of RSA 72:23, V and RSA 72:23-l requires the institution to satisfy each of the following four

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