El Castillo Ret. Residences v. Martinez, 35,148

Background

El Castillo Retirement Residences is a private, nonprofit continuing-care retirement community in Santa Fe funded entirely by entry and monthly fees; it screens residents for financial and health qualifications and does not admit Medicare-/Medicaid-/charity-dependent applicants.
In 2009 El Castillo sought a property-tax exemption under Article VIII, § 3 of the New Mexico Constitution (charitable-purpose exemption) and under the 2008 statutory exemption for continuing-care communities, § 7-36-7(B)(1)(d).
The County Assessor denied the statutory exemption as El Castillo’s gratuitous donations of services were minimal; the Santa Fe Valuation Protests Board upheld the denial on statutory grounds.
The district court (exercising original rather than appellate review) concluded the statute governed the constitutional standard and granted exemption; the Court of Appeals reversed on constitutional grounds but declined to decide the statutory question for lack of jurisdiction.
The New Mexico Supreme Court granted certiorari to resolve (1) whether the statute can be applied consistent with the Constitution and (2) the appropriate exercise of appellate jurisdiction.
The Supreme Court held El Castillo is not exempt under Article VIII, § 3 or under § 7-36-7(B)(1)(d) because its property use does not primarily and substantially confer a substantial public benefit furthering a charitable purpose; it also found jurisdictional errors below.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Standing to raise constitutionality of § 7-36-7(B)(1)(d)	Assessor lacks standing (relying on Overton)	Assessor has concrete interest and duty in valuation; standing is proper	Assessor has standing to raise statutory/constitutional issues as appellee
Proper exercise of district court and appellate jurisdiction	District court could decide constitutional and statutory claims in original jurisdiction	Court must respect district court’s appellate role over agency findings; appeals court should review intertwined statutory/constitutional issues	District court erred by substituting findings (should have reviewed Board under substantial-evidence standard); Court of Appeals erred by refusing to decide statutory question tied to constitutional limits
Whether § 7-36-7(B)(1)(d) can grant exemption independent of Article VIII, § 3	Statute’s plain terms suffice; satisfying statute satisfies constitutional claim	Statute must be read in harmony with Article VIII, § 3; statute cannot expand constitutional exemptions for real property	Statute must be interpreted consistent with Article VIII, § 3; it cannot confer exemptions beyond constitutional limits
Whether El Castillo’s property use qualifies as charitable under Article VIII, § 3	Meeting statutory criteria (continuing-care facility, 501(c)(3), some gratuitous services) suffices	El Castillo’s self-sustaining, fee-based, selectively admitted community does not primarily and substantially benefit the public	El Castillo does not qualify: its use is not direct, immediate, primary, and substantial public benefit; no exemption under Constitution or statute as applied

Key Cases Cited

CAVU Co. v. Martinez, 332 P.3d 287 (N.M. 2014) (framework for testing whether property use directly, immediately, primarily, and substantially furthers exempt purpose)
Pinghua Zhao v. Montoya, 329 P.3d 676 (N.M. 2014) (standard of review for constitutional issues reviewed de novo)
Bounds v. State ex rel. D’Antonio, 306 P.3d 457 (N.M. 2013) (presumption of legislative constitutionality but courts interpret statutes to avoid unconstitutional results)
State ex rel. Clark v. Johnson, 904 P.2d 11 (N.M. 1995) (constitutional limits on legislative taxation power; courts measure statutes against Constitution)
NRA Special Contribution Fund v. Bd. of Cty. Comm’rs, 591 P.2d 672 (N.M. Ct. App. 1978) (describing substantial-public-benefit quid pro quo required for tax-exempt status)