Maine Life Care Retirement Community, Inc. v. Town of Scarborough

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STATE OF MAINE SUPERIOR COURT
CUMBERLAND, ss CIVIL ACTION
DOCKET NO. CV-18-476

MAINE LIFE CARE RETIREMENT
COMMUNITY, INC.,

Plaintiff
V. ORDER

TOWN OF SCARBOROUGH, et al.,

Defendant REC'D CUM8 CLERKS OH
FEB 20 '20 AH8:47

In this action plaintiff Maine Life Care Retirement Community Inc., which operates a

continuing care retirement community known as Piper Shores in Scarborough, is seeking a

declaratory judgment that its property is exempt from taxation because it qualifies as a charitable

institution within the meaning of36 M.R.S. § 652(1).

Before the court are a motion for summary judgment by Maine Life Care Retirement

Community Inc. (hereafter "Maine Life Care" or "Piper Shores") and a cross-motion for summary

judgment by defendants Town of Scarborough and Town Assessor David Bouffard (collectively,

the Town).

Summary Judgment

Summary judgment should be granted ifthere is no genuine dispute as to any material fact

and the movant is entitled to judgment as a matter of law. In considering a motion for summary

judgment, the court is required to consider only the portions of the record referred to and the

material facts set forth in the parties' Rule 56(h) statements. E.g., Mahar v. Stone Wood Transport,

2003 ME 63 ,r 8, 823 A.2d 540. The facts must be considered in the light most favorable to the

Plaintiff-Sally Daggett, Esq.
Defendants-Eben Albert, Esq. and
N Joel Moser, Esq.
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non-moving party. Id. Thus, for purposes of summary judgment, any factual disputes must be

resolved against the movant. Nevertheless, when the facts offered by a party in opposition to

summary judgment would not, if offered at trial, be sufficient to withstand a motion for judgment

as a matter of law, summary judgment should be granted. Kenny v. Department of Human

Services, 1999 ME 15813, 740 A.2d 560.

In this case the majority of each party's factual assertions are undisputed. Thus the Town

has admitted 41 out of the 62 factual assertions in the August 19, 2019 statement of material facts

filed by Piper Shores ("Piper Shores SMF"), and all of the remaining assertions have been qualified

rather than denied. Similarly, Piper Shores has admitted 61 of the 73 factual assertions in the

Town's August 30, 2019 statement of material facts ("Town SMF') and has also qualified rather

than denied the remainder.

Only a few of the qualifications raise disputed issues. Even in those few instances where

there are potentially disputed factual issues, the court does not find those disputes are material. A

factual dispute is only material if it would potentially affect the outcome of the case. Holmes v.

Eastern Maine Medical Center, 2019ME84115, 208 A.3d 792.

Undisputed Facts

Maine Life Care Retirement Community Inc. is a nonprofit Maine corporation that

qualifies for tax exempt status under the Internal Revenue Code. The continuing care retirement

community that it operates, Piper Shores, occupies approximately 140 acres on Piper Road in

Scarborough. It provides its residents with 200 independent living units in 160 apartments and 40

cottages. It also includes 50 assisted living and memory care units and 40 skilled nursing care

units.

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The assisted living units are licensed as a nonprofit residential care facility by DHHS

pursuant to 22 M.R.S. § 7801. The skilled nursing care units are licensed as a nonprofit nursing

home by DHHS pursuant to 22 M.R.S. § 1817.

In addition, Piper Shores has obtained a certificate of authority from the Maine Bureau of

Insurance to operate as a "continuing care retirement community" pursuant to 24-A M.R.S. §

6202(3)(B), which subjects institutions offering continuing care agreements to various consumer

protection provisions enforced by the Bureau ofinsurance and set forth in chapter 73 of Title 24-

A.

Residents of Piper Shores pay a one-time entrance fee upon admission and thereafter pay

continuing monthly fees. Both the entrance fee and the monthly fees are set without regard to the

residents' ability to pay. Town SMF ,r 31 (admitted).

The entrance fee consists of a residential component, which depends on the type of unit to

be occupied, and a fixed $30,000 per person life care component. There are two options for

payment of the entrance fee, referred to as a 90% refundable option and an amortizing balance

option. Under the 90% option the entrance fee is refundable in varying amounts depending on how

much time the resident has occupied the unit. Town SMF ,r 46 (admitted). Under the amortizing

option a lower entrance fee is charged but the refundable option reduces to zero over the first 50

months of residency. Town SMF ,r 47 (admitted).

As of 2019, entrance fees for independent living apartments under the 90% option ranged

from $230,400 for a studio to $809,700 for a two-bedroom with den. Of the 160 independent living

units, 6 are studios, 73 are one-bedroom apartments (with and without dens) and 81 are two

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bedrooms apattments (with and without dens). As of 2019, the entrance fees for cottages ranged

from $573,000 to $872,400. All of the cottages have two bedrooms. 1

As of 2019 the monthly fees for independent living apartments ranged from $2,149 per

month for a studio occupied by one person to $7,481 per month for a two person apartment with

den occupied by two people. The monthly fees for cottages ranged from $4,387 to $4,977 per

month for a single person and $5,390 to $5,980 per month for two persons. Town SMF 1139-42.

Under its Residency Agreement Piper Shores may raise the monthly fees charged to

residents once per year after consultation with the Residents' Association and after making the

information upon which any increase is based available to all residents. Residency Agreement §

5.3.2, cited in Town SMF 1 43.

In an atnendment to its Residency Agreement, Piper Shores states that "except as waived

by us after full disclosure, we require that all residents must be capable of independent living, with

or without reasonable accommodation or reasonable modification, upon assuming residency at

Piper Shores." Town SMF 134. 2 Thereafter Piper Shores generally guarantees that, if residents'

health care needs change after admission, the residents can move to an assisted living or skilled

nursing care unit as needed and pay the same monthly fee as they paid in their independent living

unit. Piper Shores SMF 1 7. 3

1 Town SMF 1137-38, 68-69 (admitted). The entrance fees under the amortized balance option ranged

from $160,200 for a studio to $536,800 for a two bedroom apartment with den and from $383,000 to
$577,400 for cottages. Id. 11 70-71. In all cases those entrance fees are for a single resident. For a second
resident an additional $30,000 life care fee is added to the entrance fee.

2 Piper Shores qualifies Town SMF 134, but the quoted statement appears as written in the Amendment

to the Residency Agreement cited by the Town in that paragraph.

3 The Town has qualified Piper Shores SMF 17, but the qualification does not relate to the fact recited

above. There may be an additional cost for residents with certain pre-existing conditions. See Exhibit A to
Albert Affidavit, referred to in the Town's SMF 134 and in the qualification of that paragraph by Piper
Shores.

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Although Piper Shores does not subsidize the entrance fee for any resident and sets its

entrance and monthly fees without regard to residents' ability to pay, it has established a

benevolence policy which provides that it does not intend terminate any residency by reason of a

resident's inability to pay monthly fees, as set forth in its Residency Agreement:

It is the intent and policy of Sponsor [Maine Life Care] to operate as
a not-for-profit corporation and not to terminate the residency of
Resident solely by reason of the financial inability of Resident to pay
the Total Monthly Fee. When Resident establishes facts to justify the
need for financial assistance as determined by Sponsor in its
reasonable judgment, Sponsor shall advance funds to help Resident
pay his or her Monthly Fee. Such advances, plus interest at the prime
rate or base rate of T.D. Banknorth N.A. or its successor, shall be
charged against the repayable portion of Resident's Entrance Fee. In
the case where such advances exceed the amount of Resident's
Entrance Fee Repayment ... , Sponsor will waive some or all of the
Resident's Monthly Fee; provided, however, that Resident has not
intentionally depleted assets needed to pay his or her Monthly Fee.
In accordance with the terms of any applicable guaranty agreement,
Sponsor will first look to Resident's Guarantor for payment of any
charges owed to Sponsor before advancing any funds to the Resident.

Piper Shores SMF ~ 38 (admitted). The b~nevolence policy therefore applies after unpaid amounts

are charged against the repayable portion of a resident's entrance fee and after recourse has been

sought from any guarantor.

In 2016 Piper Shores provided 2 residents with reductions or write-offs of monthly fees in

a total amount of $63,042.00. In that same year Piper Shores had total monthly fee revenue of

$13,154,003.00. Town SMF ~~ 57-58 (admitted).

Piper Shores advertises various "world class" amenities on its website, stating that many

of its independent living apartments have "full ocean views," that it offers several "fine dining"

options, and that it has, among other things, a full fitness center and pool, seaside walldng trails,

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a convenience store, a bank, a woodworking shop, and gardening facilities. See Town SMF ,r,r 52-

56.

In 1997, in conjunction with the submission and approval of a contract zoning amendment

allowing the construction of the Piper Shores project, Maine Life Care on behalf of Piper Shores

entered into an agreement with the Town with respect to the payment of property taxes. That

agreement provided in pertinent part:

Maine Life Care agrees for itself, its assigns and successors in
interest in the Property, that the proposed 160 independent living
units or apartments and the 40 cottages and related common areas
(hereinafter the "Taxable Property") will be fully taxable under
current Maine property tax laws, and not exempt from, taxation
under 36 M.R.S.A. § 652. If, as a result of a change in the law or
otherwise, the Taxable Property is subsequently determined to be
exempt in whole or in part from taxation under Maine property tax
laws or entitled to be taxed at a rate less than the property tax
imposed on other property owners in the Town, Maine Life Care, its
successors and assigns shall pay to the Town annually, at the same
time property taxes are due, an amount equivalent to 100% of the
property taxes that would be imposed on the Taxable Property if the
same were fully taxable, less any amounts of property taxes actually
paid. Such payments shall be subject to the same interest charges
and penalties for late payment or non-payment as are applicable
under Maine law for non-payment of property taxes and Maine Life
Care shall have the same rights to dispute valuations and seek
abatements as if such payments were assessed as property taxes.

Piper Shores SMF ,r 43.

This has given rise to a factual dispute between the parties. The Town contends this

agreement constitutes an admission that a major portion of Piper Shores is not exempt from

property tax. 4 Piper Shores points out that the agreement only speaks to the 160 independent living

units and 40 cottages and related common areas - not the entire project - and argues that it

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It has also offered evidence in the form of minutes from a Town Council meeting in November 1997
reporting that a representative of Maine Life Care stated that Maine Life Care would pay taxes on all of
the property and not contest at that time the exempt status of any portion of the project. Town SMF ,r 73.

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constitutes an agreement to pay property tax on those 160 units, 40 cottages, and related common

areas regardless of whether those areas or the Piper Shores property as a whole would otherwise

qualify as exempt. At least for purposes of summary judgment, the court accepts the position

espoused by Piper Shores.

Since 1997 the Town has assessed - and Piper Shores has paid - property taxes on all of

the Piper Shores property. According to the affidavit of James Adamowicz, CEO of Maine Life

Care, the addition of 30 assisted living and memory care units in 2017 resulted in an increase in

the property tax assessed against Piper Shores. At that point the new management team at Piper

Shores reviewed its assessments and discovered that it had been paying taxes on the entirety of its

property, not just on the 160 assisted living units, the 40 cottages, and the related common areas.

Piper Shores SMF ,, 50-52.

Thereafter Piper Shores applied for exemption for the portions of its property other than

the 160 independent living units, the 40 cottages, and the related common areas expressly covered

by the 1997 agreement. The Assessor did not formally act to grant or deny those exemption

applications, and Piper Shores then commenced this action.

Tax Exemption for Charitable Property

The governing statute is 36 M.R.S. § 652(l)(A), which provides in pertinent part:

The real estate and personal property owned and occupied or used
solely for their own purposes by benevolent and charitable
institutions incorporated in this State are exempt from taxation. Such
an institution may not be deprived of the right of exemption by
reason of the source from which the funds are derived or by reason
of limitation in the classes of persons for whose benefit the funds
are applied.

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A further condition for charitable tax exemption is that any corporation claiming such an

exemption "must be organized and.conducted exclusively for benevolent and charitable purposes."

36 M.R.S. § 652(1)(C)(l) (emphasis added).

Certain organizations are expressly designated in the statute as benevolent and charitable

institutions. Thus section 652(1 )(A) expressly states that the term " 'benevolent and charitable

institutions' includes, but is not limited to" nonprofit nursing homes licensed by DHHS, nonprofit

residential care facilities licensed by DHHS, nonprofit community mental health service facilities

licensed by DHHS, and nonprofit child care centers. What this means is that if Piper Shores

consisted solely of its skilled nursing care units and its assisted living units, which have been

separately licensed by DHHS as a nursing home and a residential care facility respectively, it

would be tax exempt.

However, continuing care retirement communities are not expressly designated as exempt.

Moreover, the Law Court has ruled that a property cannot, under 36 M.R.S. § 652(1 ), be partially

exempt. If the entire property is not being used "solely" for charitable purposes, it is not exempt.

City ofLewiston v. Marcotte Congregate Housing Inc., 673 A.2d 209, 212 (Me. 1996). Therefore,

to prevail in this action, Piper Shores must demonstrate that, as a whole, it is a charitable institution

whose activities are conducted exclusively for charitable purposes.

As the court understands it, Piper Shores is not trying to avoid or escape its 1997 agreement

to pay property tax on the independent living apartments and cottages and related common areas.

Instead, Piper Shores is arguing that it would otherwise qualify as tax exempt and is therefore

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legally entitled to an exemption on the portions of its property that are not subject to the 1997

Agreement. 5

As a general rule, all real property is subject to taxation. Francis Small Heritage Trust Inc.

v. Town ofLimington, 2014ME102112, 98 A.3d 1012. The Law Court has repeatedly ruled that

because taxation is the rule and exemption the exception, exemptions from taxation must be strictly

construed and the burden is on an organization seeking exemption to prove that it comes

"unmistakably within the spirit and intent of the act creating the exemption." E.g., Francis Small

Heritage Trust Inc. v. Town of Limington, 2014ME102113; Credit Counseling Centers Inc. v.

South Portland, 2003ME2126, 814 A.2d 458; Episcopal Camp Foundation v. Town of Hope,

666 A.2d 108, 110 (Me. 1995). 6

The above language comes originally from the decision in City of Bangor v. Rising Virtue

Lodge, 73 Me. 428,433 (1882), in which the Law Court further stated:

The just and honest rule in assessments for governmental purposes
is equality in taxation .... If one bears less than his share of the
public burden, some other must bear more .... The more numerous
the exemptions, the more unequal and burdensome the taxation.

5 Left for another day, if Piper Shores were to prevail in this action, would be the question of dete1mining

exactly what portion of its property would be subject to tax under the 1997 Agreement. In particular,
whether "related common areas" would be construed narrowly or whether that term would include the
seaside walking trails, the woodworking shop, and other Piper Shores amenities. In this connection, the
Town points out that the indoor pool (open to all residents of Piper Shores) and covered parking area (for
which residents of Piper Shores pay extra) are both located in the same building that houses the assisted
living and skilled nursing care units. As a result, portions of that building are used by the residents of the
independent living apartments and cottages and could potentially be the subject of dispute as to their
status as common areas.

6 Despite the "umnistakably" language, it appears that Piper Shores need only prove its entitlement to an
exemption by a preponderance of the evidence. See Town of Poland v. Poland Spring Health Inst., 649
A.2d 1098, 1100 (Me. 1994) ("We find no authority ... to support [the] contention that a preponderance of
the evidence is not the proper standard of proof to be applied by the trial court in its determination of
whether in fact the Institute' s property is exempt from tax pursuant to section 652"). The court therefore
construes tlte "unmistakably" language as emphasizing that exemptions from taxation, including the
charitable exemption in § 652(1 )(A), must be strictly construed.

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73 Me. at 432.

In construing the exemption in section 652(1 )(A) for property owned by benevolent and

charitable institutions and used solely for their own purposes, the term "benevolent" is

synonymous with "charitable." Christian Fellowship and Renewal Center v. Town ofLimington,

2006 ME 44 1 13, 896 A.2d 287; Maine AFL-CJO Housing Development Corp. v. Town of

Madawaska, 523 A.2d 581,584 (Me. 1987). In determining whether an institution is "charitable,"

the Law Court has looked to the definition of charity in Johnson v. South Blue Hill Cemetery

Association, 221 A.2d 280, 287 (Me. 1966):

A charity in the legal sense may be more fully defined as a gift, to
be applied consistently with existing laws, for the benefit of an
indefinite number of persons, either by bringing their minds or
hearts under the influence of education or religion, by relieving their
bodies from disease, suffering, or constraint, by assisting them to
establish themselves in life, or by erecting or maintaining public
buildings or works or otherwise lessening the burdens of
government.

See Francis Small Heritage Trust Inc. v. Town of Limington, 2014 ME 102 1 14; Christian

Fellowship and Renewal Center v. Town of Limington, 2006 ME 44 1 13; Episcopal Camp

Foundation v. Town of Hope, 666 A.2d at 110.7

In considering whether an organization is charitable and is using its property solely for

charitable purposes, the Law Court has directed its attention both to the stated purpose of the

organization and the facts related to the activities conducted by the organization. Christian

Fellowship and Renewal Center v. Town ofLimington, 2006 ME 441 16.

The Court has also stated that in cases where the charitable exemption is claimed,

7 In the more recent cases the Law Court has omitted the first part of the Johnson quotation describing a
charity as a "gift," instead beginning the quote with ''for the benefit of"

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There must be a careful examination to determine whether in fact
the institution is organized and conducting its operation for purely
benevolent and charitable purposes in good faith, whether there is
any profit motive revealed or concealed, whether there is any
pretense to avoid taxation, and whether any production of revenue
is purely incidental to a dominant purpose which is benevolent and
charitable.

Francis Small Heritage Trust Inc. v. Town of Limington, 2014 ME 1021 13, quoting Christian

Fellowship and Renewal Center v. Town of Limington, 2006ME441 17, and Green Acre Baha'i

Institute v. Town ofEliot, 150 Me. 350,353, 110 A2d 581 (1954).

This case turns on whether Piper Shores is organized and conducting its operation

exclusively for purely benevolent and charitable purposes. 36 M.R.S. § 652(1)(C)(l). In that

connection, the fact that Piper Shores is a nonprofit corporation that qualifies for tax exemption

under the Internal Revenue Code is not dispositive. Other nonprofit and tax exempt organizations

have sought and been denied tax exemption because their activities were not conducted exclusively

for charitable purposes. E.g., Credit Counseling Centers Inc. v. South Portland, 2003ME2112,

17; City ofLewiston v. Marcotte Congregate Housing Inc., 673 A.2d at 210.

As the Town points out, courts in other jurisdictions have denied charitable exemptions to

nonprofit continuing care retirement communities similar to Piper Shores. See Western

Massachusetts Lifecare Corp. v. Board of Assessors, 747 N.E.2d 97, 104-05 (Mass. 2001); El

Castillo Retirement Residences v. Martinez, 401 P.3d 751, 760-61 (N.M. 2017); Michigan Baptist

Homes & Development Co. v. City of Ann Arbor, 242 N.W.2d 749, 753-54 (Mich. 1976); In re

Appeal ofDunwoody Village, 52 A.3d 408,416 (Pa. Comm'w Ct. 2012); Franciscan Communities,

Inc. v. Hamer, 975 N.E.2d 733, 737, 752 (Ill. App. Ct. 2012).

Those decisions involve the specific legal requirements for charitable exemption in the

respective jurisdictions in question, which differ to some extent from the eligibility for tax

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exemption in Maine. However, all of those decisions primarily base the denial of exemption on

the existence of entrance fees and on continuing monthly fees which, like those of Pier Shores,

limit admittance to elderly persons who are affluent enough to pay. Indeed, many of the entrance

and monthly fees at issue in those cases were lower than the entrance and monthly fees charged at

Piper Shores, even adjusted for inflation. See, e.g., Western Massachusetts Lifecare Corp. v. Board

of Assessors, 747 N.E.2d at 101 (entrance fees ranging from $100,200 to $290,200 and monthly

fees ranging from $1,325 to $2,050 in 2000).

In response to the argument that Piper Shores does not qualify for a charitable exemption

because it derives its income from and provides its benefits to an affluent population of elderly

persons who at the time of admission are capable of independent living, Piper Shores points to the

following language in section 652(1)(A):

Such an institution may not be deprived of the right of exemption by
reason of the source from which its funds are derived or by reason
of the limitation in the classes of persons for whose benefit the funds
are applied.

This begs the question, however, because the above language applies only to "such an institution"

- in other words, an institution that otherwise qualifies as a benevolent and charitable institution.

For several reasons, the court concludes that based on the undisputed facts contained in the

summary judgment record Piper Shores does not qualify as a benevolent and charitable institution.

First, although not dispositive, one of the issues to be considered in determining whether an

institution is charitable is whether it provides a service or benefit that would "otherwise [lessen]

the burdens of government." Christian Fellowship and Renewal Center v. Town of Limington,

2006 ME 44 ,r 24, quoting Johnson v. South Blue Hill Cemetery Association, 221 A.2d at 287. The

existence of a continuing care retirement community offering "world-class amenities" for persons

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able to afford entrance fees ranging from $160,200 8 to $872,400 and monthly fees ranging from

$2,149 to $7,481 cannot be found to "lessen the burdens of government in any appreciable way."

Western Massachusetts Lifecare Corp. v. Board ofAssessors, 747 N.E.2d at 105.

Second, in considering whether a charitable organization is being operated "for the benefit

of an indefinite number of persons," Johnson v. South Blue Hill Cemetery Association, 221 A.2d

at 287, courts have looked to whether the potential class of persons served is drawn from all walks

of life. Section 652(1 )(A) permits limitations in the classes of persons benefited by a charitable

organization, but a limitation to persons with substantial assets undercuts the basic concept of

charity.

Third, the fundamental attribute of a charitable organization is that it provides a benefit or

service to a significant number of its beneficiaries for free, below cost, or below market rates. 9

Thus, although the Law Court has confirmed the charitable status of various organizations that

charge fees, it has done so in cases where the benefits were being provided to persons of low

income or where the fees were nominal, below market rate, or were excused for persons who were

not able to pay. See, e.g., Christian Fellowship and Renewal Center v. Town of Limington, 2006

ME 44111 (nominal fees excused for persons who could not afford to pay them); City ofLewiston

v. Salvation Army, 1998ME9814, 710 A.2d 914 (clothing store serving low income community

selling donated clothes below market prices); Episcopal Camp Foundation Inc. v. Town ofHope,

666 A.2d at 110 ( stating that the "inquiry in this case is whether ... providing children with the

opportunity to attend summer camp below cost is a charitable and benevolent purpose") (emphasis

8 This is the lowest possible entrance fee, applicable to the amortizable balance option for a single person

seeking admission to one of the 6 studios.
9 This is consistent with the original description of "charity" in Johnson v. South Blue Hill Cemetery
Association, 221 A.2d at 287, as involving a "gift."

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added); Maine AFL-CJO Housing Development Corp. v. Town of Madawaska, 523 A.2d at 583,

585 (housing provided to low income elderly or handicapped individuals who pay a fraction of the

housing cost).

Piper Shores does not set its entrance fees or monthly fees based on residents' ability to

pay. It does not subsidize entrance fees in any instance nor does it reduce its monthly fees except

in rare and isolated instances. Under its benevolence policy, Piper Shores will not terminate the

residency of a person who, once admitted, becomes unable to pay the monthly fees, and it will

advance funds to help residents pay those fees. However, it does so only after the unpaid amounts

are charged against the repayable portion of the resident's entrance fee and after recourse has been

sought from any guarantor. In 2016 the benevolence offered by Piper Shores amounted to slightly

less than Y, of one percent of its monthly fee income. This is insufficient to transform Piper Shores

into a charitable organization.

Finally, the court cannot find that the non-charitable operations of Piper Shores (the 200

independent living units in 160 apartments and 40 cottages) are only incidental to the 50 assisted

living and 40 skilled nursing units that would, if considered alone, qualify for tax exemption.

From the summary judgment record, it appears that Piper Shores is a beneficial and

valuable institution which provides comfortable independent living accommodations with first

class amenities for retirees who have the necessary financial resources and which thereafter

provides continuing care to those individuals as their health needs change. If it were to be granted

a tax exemption, however, a greater tax burden would fall on other residents of Scarborough,

including elderly retirees who are unable to afford Piper Shores. The court does not find that Piper

Shores falls within the definition of a charitable institution entitled to tax exemption pursuant to

36 M.R.S. § 652(1)(A).

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The entry shall be:

Plaintiffs motion for summary judgment is denied. Defendant's motion for summary
judgment is granted, and the complaint is dismissed. The clerk shall incorporate this order in the
docket by reference pursuant to Rule 79(a).

Dated: February~, 2020
'-=£~
Thomas D. Warren
Justice, Superior Court

Entered on the Docket:_Q~-~!/zo.

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