author: PAUL H. ANDERSON, J.

text:
    HEALTHEAST, Relator, and University of Minnesota Physicians, intervenor, Relator, v. COUNTY OF RAMSEY, Respondent.
    No. A07-1086.
    Supreme Court of Minnesota.
    May 22, 2008.

      J. Patrick Plunkett, John G. Patterson, Martin D. Kappenman, Moore, Costello & Hart, Minneapolis, MN, for Relator Heal-thEast.
    Michael C. Flom, Gray, Plant, Mooty, Mooty & Bennett, Minneapolis, MN, for Intervenor/Relator University of Minnesota Physicians.
    Darwin J. Lookingbill, Ramsey County Attorney’s Office, St. Paul, MN, for Respondent County of Ramsey.
   OPINION

PAUL H. ANDERSON, J.

In this case, we review the final order of the Minnesota Tax Court denying Heal-thEast, a non-stock, non-profit corporation, an exemption from payment of real property taxes assessed in 2002, 2003, and 2004 on the Bethesda Clinic. HealthEast provides management services for a fee to various hospitals and clinics in the Heal-thEast healthcare system. At the time of the assessments, Bethesda Clinic was owned by HealthEast and leased to the University of Minnesota and University of Minnesota Physicians. HealthEast and University of Minnesota Physicians contend that the subject real property is exempt from taxation under Minn.Stat. § 273.19 (2006). Section 273.19, subdivision 1, provides that property owned by certain types of entities, including “benevolent societies] or institution[s]” and “corporation[s] whose property is not taxed in the same manner as other property,” and leased to another entity is treated for property tax purposes as the property of the lessee. The tax court determined that HealthEast was neither a “benevolent society or institution” nor a corporation “whose property is not taxed in the same manner as other property,” and on that basis ruled that the property was not exempt from taxation. In reaching its decision, the tax court rejected HealthEast’s argument that the court should not look to HealthEast itself as the property’s fee owner but rather consider the larger care system of which HealthEast is a part. HealthEast and University of Minnesota Physicians appealed. We reverse and remand.

Relator HealthEast, a Minnesota non-stock, non-profit corporation, was the fee owner of the subject real property for all three tax assessment years at issue. The subject property is located at 580 Rice Street in Saint Paul, Ramsey County, Minnesota, and is the site of Bethesda Clinic. In assessment year 2002, the University of Minnesota leased and operated Bethesda Clinic. In assessment years 2003 and 2004, intervenor-relator University of Minnesota Physicians (UM-Physicians) assumed the lease and the operations of Bethesda Clinic from the University of Minnesota. UMPhysicians is the designated faculty clinical practice organization of the University of Minnesota Medical School. Residents in the medical school’s Department of Family Practice and Community Health receive training through Bethesda Clinic. Although the residents who receive training through Bethesda Clinic also see patients at St. Joseph’s Hospital, one of the four public hospitals in the HealthEast system, it is our understanding from the record that Bethesda Clinic is operated by UMPhysi-cians, rather than by HealthEast.

UMPhysicians is a non-profit corporation under MinmStat. ch. 317A (2006). Its articles of incorporation state that it “shall be operated exclusively for charitable, scientific, and educational purposes” to: (1) support quality instruction to medical students, residents, and interns at the University of Minnesota Medical School, (2) perform and support medical research in conjunction with the medical school; and (3) provide complete, efficient, and coordinated quality medical care to patients served by the medical school faculty.

Ramsey County assessed real property taxes against the subject property for the years 2002, 2003, and 2004. HealthEast timely petitioned for review of each assessment and UMPhysicians, as lessee of the property, intervened. Before trial, the county filed a motion to compel Heal-thEast to respond to the county’s requests for discovery concerning HealthEast’s operation of clinics at other locations. Heal-thEast opposed discovery on the grounds that it was a “public hospital” under Minn. Stat. § 272.02, subd. 4 (2006), and therefore tax-exempt under section 273.19 as a “corporation whose property is not taxed in the same manner as other property.” The court granted the county’s motion to compel, ruling that “a corporation whose property is not taxed in the same manner as other property” referred to entities, like land-grant institutions, “whose property is exempt across the board.” The court therefore indicated that HealthEast would be required to demonstrate at trial that it was a “benevolent society or institution” under section 273.19, which the court equated with an “institution of purely public charity” under Minn.Stat. § 272.02, subd. 7 (2006).

The matter was submitted to the tax court on the basis of a detailed stipulation of facts, supporting exhibits, trial briefs, and oral argument. Based on this record, the tax court concluded that HealthEast had not established that it was an institution of purely public charity under North Star Research Institute v. County of Hennepin, 306 Minn. 1, 236 N.W.2d 754 (1975), and therefore Bethesda Clinic could not constitute tax-exempt property under section 273.19. Although unnecessary to its decision, the tax court further concluded that UMPhysicians also had not established that it was an institution of purely public charity under North Star. Heal-thEast and UMPhysicians appealed to our court.

We review tax court decisions to determine whether the court’s decisions are supported by the evidence and in conformity with the law. Bond v. Comm’r of Revenue, 691 N.W.2d 831, 835 (Minn.2005). In this case, HealthEast and UMPhysi-cians do not challenge the court’s factual findings, but they do challenge its conclusions of law. We review the court’s legal determinations de novo. ILHC of Eagan, LLC v. County of Dakota, 693 N.W.2d 412, 419 (Minn.2005). Under Minn.Stat. § 272.01, subd. 1 (2006), all property is presumed to be taxable, and we have held that the taxpayer bears the burden of proving entitlement to an exemption. E.g., Croixdale, Inc. v. County of Washington, 726 N.W.2d 483, 487 (Minn.2007). Exemptions from property tax liability are strictly construed. E.g., Am. Ass’n of Cereal Chemists v. County of Dakota, 454 N.W.2d 912, 914 (Minn.1990).

For property to be exempt from taxation, there generally must be “a concurrence of ownership of the property by an institution of the type prescribed by the constitution and a use of the property for the purpose for which such institution was organized.” Christian Business Men’s Comm. of Minneapolis, Inc. v. State, 228 Minn. 549, 554, 38 N.W.2d 803, 808 (1949) (emphasis in original). That is, as a general rule, to be exempt from taxation the property must be both owned by an exempt entity and used by that entity for an exempt purpose. See Ideal Life Church of Lake Elmo v. County of Washington, 304 N.W.2d 308, 313 (Minn.1981).

In this case, there is no concurrence of ownership and use: the property is owned by one entity (HealthEast) but used by another (UMPhysicians). Two Minnesota statutes address such a situation. Under Minn.Stat. § 272.01, subd. 2 (2006), property exempt from ad valorem taxes — as well as taxes in lieu of ad valorem taxes— that is “leased, loaned, or otherwise made available and used * * * in connection with” a for-profit business is subject to a use tax “in the same amount and to the same extent as though the lessee or user was the owner of such property.” Thus, when property of a tax-exempt entity is leased to a for-profit business, the property is subject to a use tax determined as though it were owned by the lessee.

The other statute, Minn.Stat. § 273.19, subd. 1, addresses the tax status of property that is owned by a tax-exempt entity and leased to another entity. It is under this statute that HealthEast and UMPhy-sicians assert that the subject real property is exempt. Minnesota Statutes § 273.19, subd. 1, provides that (with exceptions not applicable here): “[T]ax-exempt property held under a lease for a term of at least one year, and not taxable under section 272.01, subdivision 2, or under a contract for the purchase thereof, shall be considered, for all purposes of taxation, as the property of the person holding it.” As a result, when property that is tax-exempt under section 273.19 is leased to a tax-exempt entity and used for a tax-exempt purpose, it remains tax-exempt. That is, section 273.19 provides an exception to the requirement that, to be exempt from taxation, real property must be both owned by an exempt entity and used by that entity for an exempt purpose.

Section 273.19 sets out several requirements. First, the property in question must be “tax-exempt property” under section 273.19’s special definition. Second, the property must be “held under a lease for a term of at least one year, and not taxable under section 272.01, subdivision 2, or under a contract for the purchase thereof.” If these requirements are met, then section 273.19 provides that the property “shall be considered, for all purposes of taxation, as the property of the person holding it.” In this case, HealthEast and UMPhysicians contend that under section 273.19 the subject property is exempt from real property taxes because it is held by a tax-exempt entity (UMPhysicians) and used by that entity for an exempt purpose.

Although Minn.Stat. § 272.02 (2006) lists specific kinds of property that are exempt from taxation in Minnesota, section 273.19 incorporates its own definition of “tax-exempt property.” The definition reads as follows: “property owned by the United States, the state, a school, or any religious, scientific, or benevolent society or institution, incorporated or unincorporated, or any corporation whose property is not taxed in the same manner as other property.” Minn.Stat. § 273.19, subd. 1. In interpreting this language, the tax court equated “benevolent society or institution” with “institution of purely public charity,” which is an entity that is exempt from property taxation under Minn.Stat. § 272.02, subd. 7. Applying the six factors set out in North Star, 306 Minn. at 6, 236 N.W.2d at 757, the court concluded that HealthEast is not an “institution of purely public charity,” and that, therefore, the property was not tax-exempt under section 273.19.

HealthEast does not challenge the tax court’s finding that it does not meet the first requirement of section 273.19 — that HealthEast itself qualifies as an entity whose property is tax-exempt property under section 273.19’s special definition. HealthEast does not challenge this finding because it does not contend that as a separate corporation it is a “benevolent society or institution” or “a corporation whose property is not taxed in the same manner as other property.” Rather, HealthEast appears to contend that, in determining whether Bethesda Clinic is tax-exempt property under section 273.19, the court should have considered whether the Heal-thEast care system, of which HealthEast is a part, is either a “benevolent society or institution” or a “corporation whose property is not taxed in the same manner as other property.”

In essence, HealthEast argues that the tax court should have ignored Heal-thEast’s status as a separate corporate entity and, instead, have attributed to it the characteristics of the larger Heal-thEast care system — particularly, the characteristics of the four public hospitals that are part of that system. Had the court done so, HealthEast contends, the court would have concluded that Bethesda Clinic was tax-exempt property under the definition in section 273.19, subd. 1, either because the HealthEast care system is a “benevolent society or institution” or because the HealthEast care system is a “corporation whose property is not taxed in the same manner as other property.” Therefore, we will first review the tax court’s decision to consider, for purposes of section 273.19, the nature of only Heal-thEast as the property’s fee owner and not the larger HealthEast care system.

For purposes of federal income taxation, the United States Supreme Court has held that generally “a corporation formed or operated for business purposes must share the tax burden despite substantial identity, in practical operation, with its owner.” Nat’l Carbide Corp. v. Comm’r, 336 U.S. 422, 429, 69 S.Ct. 726, 93 L.Ed. 779 (1949). As the Court has explained,

The doctrine of corporate entity fills a useful purpose in business life. Whether the purpose be to gain an advantage under the laws of the state of incorporation or to avoid or to comply with the demands of creditors or to serve the creator’s personal or undisclosed convenience, so long as that purpose is the equivalent of business activity or is followed by the carrying on of business by the corporation, the corporation remains a separate taxable entity.

Moline Props., Inc. v. Comm’r, 319 U.S. 436, 438-39, 63 S.Ct. 1132, 87 L.Ed. 1499 (1943) (footnote omitted).

We have adopted the Supreme Court’s Moline Properties rule for purposes of Minnesota corporate income taxes. Milwaukee Motor Transp. Co. v. Comm’r of Taxation, 292 Minn. 66, 193 N.W.2d 605 (1971). In Milwaukee Motor Transportation, we stated that we would not disregard the separate corporate status of a subsidiary corporation that is “incorporated or acquired for the purpose of advantageously carrying on some phase of the parent corporation’s activities or business.” Id. at 73, 193 N.W.2d at 609.

The situations in which we have disregarded an entity’s separate corporate status for tax purposes have been very limited. For example, in State v. St. Paul Union Depot Co., 42 Minn. 142, 43 N.W. 840 (1889), we considered whether the corporation that owned the St. Paul Union Depot was subject to a separate gross earnings tax in addition to the gross earnings tax to which its railroad shareholders were then subject. See Minn.Stat. §§ 1387, 1389 (1888) (imposing a percentage tax on railroads’ gross earnings, “in full [payment] of all taxation and assessment whatever”). In St. Paul Union Depot, we noted that all of the depot corporation’s stock was owned by the railroads that operated in St. Paul, meaning that the stock of the corporation that owned the depot “represents and is the exact equivalent of all the property of that corporation.” 42 Minn. at 143, 145, 43 N.W. at 841, 842. The shareholder railroads shared proportionally both the expenses of operating the depot and the interest on the bonds sold to construct the depot. Id. at 144, 43 N.W. at 841. The railroads then passed those costs through to passengers as part of passenger ticket prices. Id. at 144-45, 43 N.W. at 841

Based on these facts, we concluded that to impose a gross earnings tax on both the corporation that owned the depot and on its railroad shareholders would have resulted in double taxation of the same property. Id. at 145, 43 N.W. at 842. We also noted that the amount of the gross earnings tax payable by each of the shareholder railroads was no different, whether the railroads owned stock in the corporation that owned the depot or held the property directly as tenants in common:

If the railway companies had owned and used this depot as tenants in common, the percentage on their gross earnings payable to the state would have been the same as now, and yet that percentage would have paid the taxes on the depot the same as on any other property held and used by them for railway purposes. We cannot see what difference it can make whether they hold the depot property as tenants in common, or put it in the name of a trustee to hold and manage for their common use, or, as in this case, organize a corporation for the same purpose, as a more economical and convenient method of holding the property, managing the business and apportioning the expenses among themselves.

Id. at 146, 43 N.W. at 842 (emphasis added). In St. Paul Union Depot we expressly rejected as “too narrow and technical a view of the case” the state’s argument that because the depot corporation was “a separate and independent legal entity,” we “ha[d] no right to consider the functions which it performs, or the relations which it bears to the railway companies who own its stock and use its depot.” Id. at 146, 43 N.W. at 842. We therefore reversed the district court’s order imposing a separate gross earnings tax on the depot corporation. Id.

In contrast to St. Paul Union Depot, in Milwaukee Motor Transportation we declined to disregard, for corporate income tax purposes, the separate corporate status of a trucking company even though it was wholly owned by a railroad that was subject to the gross earnings tax. 292 Minn. at 77-78, 193 N.W.2d at 612. We noted that “[n]early all” of the trucking company’s revenues were earned from performing services for the railroad, and as a result the railroad paid a gross earnings tax on “[n]early all” of the trucking company’s revenues. Id. at 68-69, 193 N.W.2d at 607. But we concluded that the fact that the trucking company was authorized to, and did, “engag[e] in trucking services unrelated to railroad business” meant that the trucking company was “a distinct and separate corporate entity with an independent corporate vitality.” Id. at 77, 193 N.W.2d at 611. We therefore concluded that the trucking company and the railroad were not “the same taxable entity” and the separate corporate status of the trucking company could not be disregarded. Id. at 78, 193 N.W.2d at 612.

In Community Hospital Linen Services, Inc. v. Commissioner of Taxation, we considered the tax status of property owned by two nonprofit cooperative associations owned and operated, in turn, by a group of public hospitals to provide laundry, collection, and printing services for the hospitals. 309 Minn. 447, 448-49, 245 N.W.2d 190, 191 (1976). Each cooperative association was limited by its articles of incorporation to performing services for its members, and each cooperative’s articles of incorporation further limited membership in the cooperative to hospitals that were tax-exempt organizations. Id. at 449, 245 N.W.2d at 191-92. Under such an arrangement, we noted that no “private advantages accrue as a result of the formation of the separate associations,” as compared to the operation of separate tax-exempt facilities. Id. at 456, 245 N.W.2d at 195. Based "on this analysis, we affirmed the principle that “a subordinate corporation organized solely to serve parent corporations may be disregarded as a separate tax entity” and held that the subject property was tax-exempt. Id. at 455, 458, 245 N.W.2d at 195-96.

From these three cases, we can derive two general principles. First, we disregard an entity’s separate corporate status for tax purposes only in limited circumstances. As we stated in Milwaukee Motor Transportation, the general rule is that “[i]f a corporation elects to treat itself as an independent business for some purposes, it should not be permitted to disavow that identity merely to avoid the resultant tax consequences.” 292 Minn. at 73, 193 N.W.2d at 609.

Second, we will disregard the separate corporate status of the real property’s fee owner only if the owner “could have no purpose or existence apart from the operations of’ the entities with which it is sought to be aggregated. Id. at 77, 193 N.W.2d at 611. For example, in Community Hospital Linen we said we would disregard the separate corporate status of the cooperative associations who owned the property because the cooperatives were “organized solely for and devoted exclusively to serving the needs of the member hospitals.” 309 Minn. at 456, 245 N.W.2d at 195. On the other hand, a fee owner that performs services for entities other than those with which it is to be aggregated is, in the language of Milwaukee Motor Transportation, “a distinct and separate corporate entity with an independent corporate vitality,” whose separate corporate existence cannot be disregarded. 292 Minn. at 77, 193 N.W.2d at 611; see also Community Hospital Linen, 309 Minn. at 456, 245 N.W.2d at 195 (“Respondent’s articles of incorporation specifically forbid them from engaging in any activities unrelated to their purpose of serving the member hospitals.”).

In this case, the county argues that Community Hospital Linen establishes an exception to the general rule that is even narrower than we indicate above. The county asserts that in order for Community Hospital Linen to apply, and the separate corporate existence of the property’s fee owner to be disregarded for purposes of section 273.19, the subject property must be owned by a subsidiary of the tax-exempt entity. That is, the county argues that although in Community Hospital Linen we attributed to the laundry the charitable characteristics of the hospitals that owned it, Community Hospital Linen must be limited to situations involving property owned by a subsidiary of a tax-exempt entity. The county contends that there is no authority under Community Hospital Linen for imputing tax-exempt status to HealthEast by relying on the charitable nature of the public hospitals. In support of that argument, the county notes that, in contrast to the structure used in Community Hospital Linen, the tax court described HealthEast as a “holding company that owns * * * a number of * * * hospitals” and described those hospitals as “subsidiaries” of HealthEast.

We reject the county’s argument for two reasons. First, the tax court’s description of HealthEast as the parent corporation of the public hospitals and clinics is imprecise. The record confirms that Heal-thEast is a non-profit, non-stock corporation under Minn.Stat. ch. 317A. Under HealthEast’s articles of incorporation, control is vested in a board of directors. Under HealthEast’s bylaws, all the members of HealthEast’s board of directors must also be members of the boards of directors of each of the four public hospitals in the HealthEast care system. Therefore, control and management of the four public hospitals is vested in HealthEast by virtue of its board of directors, who also govern the four public hospitals. But, at the same time, control and management of Heal-thEast is vested in the four public hospitals, whose directors also govern Heal-thEast. The first premise underlying the county’s argument, namely, that Heal-thEast is the “parent” corporation and therefore controls the four public hospitals, and that the four hospitals do not exercise control over HealthEast, is not supported by the facts of this case.

Moreover, the corporate structure at issue in Community Hospital Linen was not the typical parent-subsidiary relationship. Community Hospital Linen was a nonprofit cooperative association organized under Minn.Stat. ch. 308, the members of which were four Minneapolis hospitals. 309 Minn. at 449, 245 N.W.2d at 191-92. At the time Community Hospital Linen was decided, Minn.Stat. § 308.11 (1976) provided that cooperative associations be governed by a board of directors, each member of which was required to be a member of the cooperative itself. Accordingly, as we noted, representatives designated by the members of the cooperative served as directors and officers of Community Hospital Linen. 309 Minn. at 449, 245 N.W.2d at 192. The second premise of the county’s argument, namely, that Community Hospital Linen involved parent hospitals owning a subsidiary, is not supported by the facts of that case. We therefore conclude that the corporate structure of Heal-thEast does not prevent the application of the general principles we announce here simply because those principles are derived, in part, from Community Hospital Linen.

As we noted above, the tax court concluded that HealthEast is not a “benevolent society or institution” or a “corporation whose property is not taxed in the same manner as other property.” But the court did not explicitly apply the principles we announce today in determining whether to examine HealthEast or the larger Heal-thEast care system. Under the specific circumstances of this case, the general principles we announce today must be applied in the first instance to determine the proper entity to evaluate as the property’s fee owner for purposes of section 273.19. That is, the tax court should have first considered explicitly whether the separate corporate status of the property’s fee owner, HealthEast, could be disregarded because HealthEast “could have no purpose or existence apart from the operations of’ the entities with which it sought to be aggregated. Milwaukee Motor Transp., 292 Minn. at 77, 193 N.W.2d at 611. Only then could the tax court consider whether the property is tax-exempt under section 273.19’s special definition, because it is owned by a “benevolent society or institution” or by a “corporation whose property is not taxed in the same manner as other property.”

It is not clear from the record whether “the substance of the arrangement” between the applicable entities is such that HealthEast has a “purpose or existence apart from” either the four public hospitals that control it or the rest of the HealthEast care system. Community Hospital Linen, 309 Minn. at 455, 245 N.W.2d at 195. There is some suggestion in the record that HealthEast may perform services for entities outside the HealthEast care system, which we held in Milwaukee Motor was sufficient to make that entity “a distinct and separate corporate entity with an independent corporate vitality.” 292 Minn. at 77, 193 N.W.2d at 611. At the same time, HealthEast’s articles of incorporation provide that it is to be “operated exclusively for the benefit of, to perform the functions of, or to carry out the purposes of’ the four public hospitals. Again, the tax court made no finding in this regard, one way or the other.

For all the foregoing reasons, we conclude this matter requires further proceedings. We therefore reverse the tax court and remand the matter. On remand, the tax court must determine whether Heal-thEast, either on the basis of the existing record or such further evidence as the tax court may in its discretion admit, has met its burden to prove that it does not have “a purpose or existence apart from” the Heal-thEast care system. If the tax court determines that HealthEast has met that burden, then in determining whether Bethesda Clinic qualifies as tax-exempt property under Minn.Stat. § 273.19, the tax court should consider the HealthEast care system as the property’s owner.

Reversed and remanded.

PAGE and GILDEA, JJ., took no part in the consideration or decision of this case.

      . Under Minn.Stat. § 272.01, subd. 2(c) (2006), this use tax is assessed against the lessee or user of the real property "in the same manner as taxes assessed to owners of real or personal property, except that such taxes shall not become a lien against the property.”

      . The definition of "tax-exempt property” under section 273.19 differs from that under Minn.Stat. § 272.02 (2006), which exempts from taxation "public burying grounds” (subd. 2), "public schoolhouses” (subd. 3), "public hospitals” (subd. 4), "academies, colleges, and universities, and all seminaries of learning” (subd. 5), "churches, church property, and houses of worship” (subd. 6), "[i]n-stitutions of purely public charity” (subd. 7), and "public property exclusively used for any public purpose” (subd. 8).

      . As noted above, the tax court earlier rejected HealthEast's argument that a public hospital is a "corporation whose property is not taxed in the same manner as other property.”

      . Those public hospitals are Bethesda Hospital, St. John’s Hospital, St. Joseph’s Hospital, and Woodwinds Hospital.

      . For example, HealthEast’s 2002 tax return states that “HealthEast employees perform employee assistance services for * * * unaffiliated organizations,” and that HealthEast charges for these services.


source: Caselaw Access Project

author: RUSSELL A. ANDERSON, Chief Justice. GILDEA, Justice

license: Public Domain

text:
    David TORGELSON, Renville County Attorney, Appellant, v. REAL PROPERTY KNOWN AS 17138 880TH AVE., RENVILLE COUNTY, Minnesota, Defendant, Kent Feigum, Owner, Respondent, and Thomas G. Kramer, Yellow Medicine County Attorney, Appellant, v. Property Located at 860 10th Avenue, Granite Falls, Minnesota 56241 (Lot 7, Block Eighteen, Lathrop’s First Addition to the City of Granite Falls, Yellow Medicine County, Minnesota), Defendant, Luverne W. Johnson, Owner, Respondent.
    Nos. A06-1507, A06-1757.
    Supreme Court of Minnesota.
    May 22, 2008.

      Lori Swanson, Attorney General, James B. Early, Assistant Attorney General, St. Paul, MN, David Jon Torgelson, Renville County Attorney, Olivia, MN, and Keith Helgeson, Yellow Medicine County Attorney, Granite Falls, MN, for Appellant.
    John E. Mack, Mack & Daby P.A., New London, MN, for Respondent.
   OPINION

RUSSELL A. ANDERSON, Chief Justice.

We are asked in this appeal to decide whether Minnesota’s drug asset forfeiture statute, Minn.Stat. § 609.5311, subd. 2 (2006), is constitutional as applied to homestead property. Appellants, county attorneys for Renville and Yellow Medicine counties, obtained judgment of forfeiture of respondents’ homestead properties under the drug asset forfeiture statute. In a consolidated appeal, the court of appeals reversed. We affirm, holding that the Minnesota Constitution precludes the forfeitures of respondents’ homestead properties.

The facts in this case are undisputed and the issue purely legal. Respondents each pleaded guilty to drug felonies, Kent Feigum in Renville County and Luverne Johnson in Yellow Medicine County. Each county sought forfeiture of Feigum’s and Johnson’s respective homestead properties pursuant to Minn.Stat. § 609.5311, subd. 2(a). In both cases, the parties agreed that the property was homestead property within the meaning of Minn.Stat. § 510.01 (2006) and that the county could satisfy the elements of the forfeiture statute. The sole issue was whether the forfeiture statute is constitutional as applied to homestead property. Both the Renville County and the Yellow Medicine County district courts ordered forfeiture to the appropriate law enforcement agency.

Feigum and Johnson appealed, and their cases were consolidated. Torgelson v. 17138 880th Ave., 734 N.W.2d 279, 281 (Minn.App.2007). The court of appeals reversed both forfeitures, holding that the Minnesota Constitution protects homestead property from forfeiture. Id. at 284. Both Renville and Yellow Medicine counties petitioned for further review, which we granted. We review questions of law, including constitutional issues, de novo. State v. Bussmann, 741 N.W.2d 79, 82 (Minn.2007).

The Minnesota Bill of Rights provides: “A reasonable amount of property shall be exempt from seizure or sale for the payment of any debt or liability. The amount of such exemption shall be determined by law.” Minn. Const, art. I, § 12. Pursuant to this constitutional directive, the legislature enacted Minn.Stat. § 510.01, which provides an exemption for homestead property:

The house owned and occupied by a debtor as the debtor’s dwelling place, together with the land upon which it is situated to the amount of area and value hereinafter limited and defined, shall constitute the homestead of such debtor and the debtor’s family, and be exempt from seizure or sale under legal process on account of any debt not lawfully charged thereon in writing, except such as are incurred for work or materials furnished in the construction, repair, or improvement of such homestead, or for services performed by laborers or servants * * *.

Homestead exemptions are to be liberally construed. Denzer v. Prendergast, 267 Minn. 212, 217-18, 126 N.W.2d 440, 444 (1964).

The drug asset forfeiture statute provides as follows:

All property, real and personal, that has been used, or is intended for use, or has in any way facilitated, in whole or in part, the manufacturing, compounding, processing, delivering, importing, cultivating, exporting, transporting, or exchanging of contraband or a controlled substance that has not been lawfully manufactured, distributed, dispensed, and acquired is subject to forfeiture under this section * * *.

MinmStat. § 609.5311, subd. 2(a). We have recognized that civil in rem forfeiture is at least in part a penalty, and accordingly it should be disfavored and strictly construed. Jacobson v. $55,900 in U.S. Cur rency, 728 N.W.2d 510, 521 (Minn.2007); see also Austin v. United States, 509 U.S. 602, 621-22, 113 S.Ct. 2801, 125 L.Ed.2d 488 (1993) (holding that forfeitures of real property pursuant to federal law are fines that fall within the scope of the Excessive Fines Clause of the United States Constitution); Riley v. 1987 Station Wagon, 650 N.W.2d 441, 443 (Minn.2002) (“[T]o the extent that the forfeiture law at issue here is, in part, ‘punishment’ and, therefore, disfavored generally, we strictly construe its language and resolve any doubt in favor of the party challenging it.”).

We have never addressed whether Article I, Section 12, of the Minnesota Constitution prohibits drug asset forfeiture of homestead property. Yet we have long construed the constitutional language to refer to “ ‘debts or liabilities of every kind or description, without exception.’” Denzer, 267 Minn. at 220, 126 N.W.2d at 445 (quoting Tuttle v. Strout, 7 Minn. 465, 468 (Minn.,1862) (1905)). We have held that the exemption protects homesteads from claims sounding in tort as well as contract, observing that “we do not think the legislature intended to, or could, make property exempt from satisfaction of one class of obligations and not the other in view of the language of the constitution as construed by this court.” Id., 126 N.W.2d at 445; see also Cargill, Inc. v. Hedge, 375 N.W.2d 477 (Minn.1985) (approving reverse piercing of the corporate veil so that owners could have homestead exemption for family farm held in the name of their closely held corporation).

The constitutional phrase “debt or liability” is broad, and we see no basis for excluding civil forfeiture from its scope. “Liability” is defined as “1”. The quality or state of being legally obligated or accountable; legal responsibility to another or to society, enforceable by civil remedy or criminal punishment * * *. 2. A financial or pecuniary obligation; “DEBT.” Black’s Law Dictionary 932 (8th ed.2004). Although “debt” and “liability” can be synonymous, it is presumed that if the Constitution’s authors used two different words, they intended two different meanings. See Urban v. Am. Legion Dep’t of Minn., 723 N.W.2d 1, 5 (Minn.2006) (“We must presume that * * * no statutory language should be deemed superfluous or insignificant.”). No other state that has considered whether the homestead exemption protects homesteads from forfeiture has the term “liability” in its homestead exemption. The breadth of the term “liability” coupled with the rule that homestead exemptions are to be construed liberally suggests that the constitutional language is broad enough to encompass forfeitures. See 40 Am.Jur.2d Homestead § 88 (1999) (“Any compulsory disposition of the property, whether denominated a ‘sale’ or otherwise, is within the purview of the [homestead] law.”).

Arguably, homestead laws are intended to protect homestead property solely from creditors. Id. (“Homestead statutes may be invoked to protect premises from sale under execution, attachment, or any other process which seeks to appropriate the property to the payment of the claims of creditors.” (emphasis added)). Even if this is so, however, we have recognized that the framers of the Minnesota Constitution deliberately left Section 12 of Article I vague, leaving open the possibility for applications beyond what they specifically foresaw. See In re Haggerty, 448 N.W.2d 363, 364 (Minn.1989) (“It was originally proposed that the Minnesota Constitution contain a homestead exemption with a specific dollar limit, Minnesota Convention Debates 99 (1857) (debates of July 24, 1857), but it was determined the constitution should not contain perfect or specific laws.”).

We also find persuasive the reasoning of several other state supreme courts that have held that state forfeiture laws violate statutory or constitutional homestead exemptions. Although interpreting different language, these courts have applied principles and policies underlying the concepts of the homestead exemption and forfeiture that hold true in Minnesota. The supreme courts of Florida, Iowa, Kansas, and Oklahoma, as well as the Appellate Court of Illinois, have held that their state homestead exemptions prohibit forfeiture of homestead property. These states tend to rely on the twin maxims, recognized in Minnesota, that homestead laws are to be liberally construed and that forfeiture is a harsh and disfavored penalty that should be strictly construed. E.g., Butterworth v. Caggiano, 605 So.2d 56, 58 (Fla.1992); In re Bly, 456 N.W.2d 195, 199, 200 (Iowa 1990); State ex rel. Means v. Ten Acres of Land, 877 P.2d 597, 601 (Okla.1994). In the widely cited case Butterworth v. Caggiano, the Florida Supreme Court addressed whether a homestead was subject to forfeiture in light of the requirements of Florida’s constitution, which exempts homesteads “ ‘from forced sale under process of any court’ ” with exceptions for taxes and for purchase, improvement, or labor obligations. 605 So.2d at 58 (quoting Fla. Const, art X, § 4). Noting that the exemption must be liberally construed and forfeiture disfavored, the court took a broad view of the exemption and observed that it “uses broad, nonlegal terminology that was intended simply to guarantee that the homestead would be preserved against any involuntary divestiture by the courts, without regard to the technicalities of how that divestiture would be accomplished.” Butterworth, 605 So.2d at 59. The court concluded that

in light of the historical prejudice against forfeiture, the constitutional sanctity of the home, and the rules of construction requiring a liberal, nontechnical interpretation of the homestead exemption and a strict construction of the exceptions to that exemption, we hold that * * * the Florida Constitution prohibits civil or criminal forfeiture of homestead property.

Id. at 61; see also Tramel v. Stewart, 697 So.2d 821, 824 (Fla.1997); People v. 1403 E. Parham, 251 Ill.App.3d 198, 190 Ill.Dec. 573, 621 N.E.2d 1026, 1031 (1993) (finding that Illinois’ statutory homestead exemption from “attachment, judgment, levy or judgment sale for the payment of his or her debts or other purposes ” prohibited forfeiture); State ex rel. Braun v. 918 N. County Line Rd., 251 Kan. 685, 840 P.2d 453, 455 (1992) (finding that because forfeiture was not one of the enumerated exceptions to the homestead exemption, it was constitutionally prohibited, notwithstanding a statute providing that a person convicted of a drug violation was presumed to have consented to forfeiture); Means, 877 P.2d at 601.

Many decades ago, we aptly summarized the policy of the homestead exemption as follows:

The homestead law is to be liberally construed. It would not be wholesome to construe the statute as conserving lawful homes only. To do so would tend to increase the burdens of the community chest; destroy homes; divide families; and increase the population of our orphan asylums. We construe our homestead law as relating to all debtors. It does not prescribe personal qualifications touching the moral character of the debtor; and upon principle and reason we see no justification for excluding from its protection the vicious, the criminal, or the immoral. All must live, and right consideration should contemplate not only the living but the next generation. This statute rests upon the thought of family. Our established policy is not restricted to right-thinking or right-acting persons; but sounds in hope for the future both as to the debtor and his children.

Denzer, 267 Minn. at 217-18, 126 N.W.2d at 444 (quoting Ryan v. Colburn, 185 Minn. 347, 350, 241 N.W. 388, 389 (1932)). In light of these well-established principles, the language of our constitution, and the decisions of other jurisdictions, we hold that the Minnesota Constitution’s homestead exemption, as implemented by Minn. Stat. § 510.01 (2006), exempts homestead property from forfeiture.

Affirmed.

GILDEA, Justice

(concurring).

I join in the majority’s conclusion to affirm the court of appeals, but I write separately because I believe that we should resolve this case without reaching the constitutional question the majority decides. Respondents argue that Minnesota’s forfeiture statute, Minn.Stat. § 609.5311, subd. 2 (2006), is unconstitutional because it allows their homestead property to be subject to forfeiture. Under the constitution, “[a] reasonable amount of property shall be exempt from seizure or sale for the payment of any debt or liability.” Minn.Const. art I, § 12. The constitution leaves it to the Minnesota Legislature to determine “[t]he amount of such exemption.” Id. There are two statutes that relate to the exemption amount in this case: the homestead exemption statute, Minn.Stat. § 510.01 (2006), and the forfeiture statute, § 609.5311, subd. 2. We generally avoid reaching constitutional questions “if there is another basis on which a case can be decided.” State v. Bourke, 718 N.W.2d 922, 926 (Minn.2006) (internal quotation omitted). Following our general practice, I would resolve this case based on the language of the two statutes, rather than reaching the constitutional question.

In the homestead exemption statute, the legislature provides for property up to a certain value and size to be “exempt from seizure * * * under legal process on account of any debt not lawfully charged thereon * * Minn.Stat. § 510.01. In the forfeiture statute, there is no limit on the value of property subject to forfeiture. Minn.Stat. § 609.5311, subd. 2(a) (“All property, real and personal, that has been used [in connection with controlled substances crimes] is subject to forfeiture under this section * * *.”). The statutes thus conflict.

The legislature has directed that when two statutes conflict, the more specific provision controls over the general. Minn. Stat. § 645.26, subd. 1 (2006) (“When a general provision in a law is in conflict with a special provision in * * * another law, * * * the special provision shall prevail and shall be construed as an exception to the general provision * * *.”). The homestead exemption statute is more specific because it relates to a specific type of property, the homestead, whereas the forfeiture statute applies to all types of property. Compare Minn.Stat. § 510.01 with Minn.Stat. § 609.5311, subd. 2(a). Being the more specific statute, the homestead exemption statute therefore controls. Because the government seeks to forfeit property that falls within the statutory exemption of Minn.Stat. § 510.01, I would hold that the forfeiture should have been denied.

      . We note the homestead property exempted is limited in both area and value to "a reasonable amount," Minn. Const, art. I, § 12, defined by current statute as follows:
      The homestead may include any quantity of land not exceeding 160 acres, and not included in the laid out or platted portion of any city. If the homestead is within the laid out or platted portion of a city, its area must not exceed one-half of an acre. The value of the homestead exemption * * * may not exceed $200,000 or, if the homestead is used primarily for agricultural purposes, $500,000 * * *.
      Minn.Stat. § 510.02 (2006). Thus if the value of the property exceeded the amount of the statutory exemption, the statutory analysis would permit the government to obtain forfeiture of the property to the extent of the value of the property over the exemption amount, with the homeowner receiving the amount of the exemption. The reasonableness of the statutory exemption under the constitution is not before us in this case.

      . Drug asset forfeiture is a civil in rem action, independent of any criminal prosecution. Minn.Stat. § 609.531, subd. 6a(a) (2006). The seized assets’ value is distributed 70 percent to the appropriate law enforcement agency, 20 percent to the county attorney, and 10 percent to the state treasury. Minn.Stat. § 609.5315, subd. 5 (2006). The statutes provide a defense for homeowners who can prove that they were unaware of the unlawful use of their homes. Minn.Stat. § 609.5311, subd. 3(d) (2006).

      . We note that several state courts of appeals have reached .the opposite conclusion. Two rationales underpin these decisions. First, many of the exemptions expressly limit the exemption to protect against sale for the payment of “debts.” People v. Allen, 767 P.2d 798, 800 (Colo.Ct.App.1988); Lot 39, Section C, N. Hills Subd., Grayson County, Tex. v. State, 85 S.W.3d 429, 430, 432 (Tex.App.2002); Tellevik v. 6717 100th Street S.W., 83 Wash.App. 366, 921 P.2d 1088, 1094 (1996); see also Smith v. State, ex rel. Littrell, 176 B.R. 221, 223 (Bankr.N.D.Ala.1995). This is narrower language than Minnesota’s "debt or liability.” Second, some courts reason that the homestead exemption was intended to protect the financially troubled, not criminals. In re 1632 N. Santa Rita, 166 Ariz. 197, 801 P.2d 432, 437 (Ariz.Ct.App.1990).

      . In light of this precedent, we cannot agree with the concurrence that whether the constitutional exemption language encompasses forfeiture of homestead property presents a "closef] question.”

      . We recognize that federal drug forfeiture law has been held to preempt state homestead exemptions. See, e.g., United States v. Curtis, 965 F.2d 610, 616 (8th Cir.1992).

      . The Counties argue that the homestead exemption statute does not apply here because forfeiture does not involve seizure "on account of any debt.” Minn.Stat. § 510.01. But we have broadly construed provisions of the homestead exemption statute so as “to protect the person claiming” the exemption “as against those asserting the right to reach his assets in satisfaction of a claim.” Denzer v. Prendergast, 267 Minn. 212, 216, 126 N.W.2d 440, 443 (1964) (construing phrase "owned and occupied” in exemption statute in favor of one who owned a remainder interest in the property at issue); see also Ryan v. Colburn, 185 Minn. 347, 350, 241 N.W. 388, 389 (1932) ("The homestead law is to be liberally construed.”). Given the broad construction of the statute dictated by our precedent, it seems to me that seizing property because it has been used in connection with criminal activity can fairly be said to constitute seizure "on account of any debt.” Minn.Stat. § 510.01 (emphasis added). In my view, it is a much closer question whether forfeiture is "seizure * * * for the payment of any debt or liability” as required by the constitutional provision. Minn. Const. art. I, § 12 (emphasis added). But, as explained above, I do not believe we should reach that issue here.

      . There are exceptions in the forfeiture statute, but none is relevant to resolution of this case. See Minn.Stat. § 609.5311, subd. 3.

      . The forfeiture statute was first. enacted in 1988, Act of Apr. 26, 1988, ch. 665, § 11, 1988 Minn. Laws 941, 946, long after the homestead exemption, Act of Mar. 12, 1858, ch. 35, § 1, 1858 Minn. Laws 89, 89, which dates to the beginnings of our state. Section 645.26, subdivision 1 provides that if the general provision is enacted after the specific provision "and it shall be the manifest intention of the legislature that such general provision shall prevail,” the general provision controls. Minn.Stat. § 645.26, subd. 1. But the legislature gave no indication in the forfeiture statute that it intended the general forfeiture statute to prevail over the more specific homestead exemption. I therefore would apply the default rule that the more specific statute controls over the general.


author: PER CURIAM.

text:
    In re Petition for DISCIPLINARY ACTION AGAINST Scott E. SELMER, a Minnesota Attorney, Registration No. 156024.
    No. A06-2254.
    Supreme Court of Minnesota.
    May 22, 2008.

      See also 636 N.W.2d 308.

      Timothy Michael Burke, St. Paul, MN, for Petitioner OLPR.
    Allen H. Gibas, Minneapolis, MN, for Respondent Selmer.
    Laurie A. Savran, Minneapolis, MN, for Amicus Rosalie E. Wahl.
   OPINION

PER CURIAM.

In November 2001, we placed Scott E. Selmer on supervised probation for 5 years subject to a number of conditions, including making good faith efforts to reduce or satisfy liens and judgments and paying an outstanding Wisconsin disciplinary judgment. On November 28, 2006, the Director of the Office of Lawyers Professional Responsibility (“Director”) filed a petition seeking the revocation of Selmer’s probation and imposition of further discipline. The petition identified three violations: failure to comply with the terms of probation in violation of Minn. R. Prof. Conduct 3.4(c), 8.1(a) and (b), and 8.4(c) and (d), and Rule 25, Rules on Lawyers Professional Responsibility (RLPR); failure to timely file individual income tax returns in violation of Minn. R. Prof. Conduct 8.4(b) and (d); and a fifth-degree assault conviction in violation of Minn. R. Prof. Conduct 8.4(b). Selmer answered the petition, and a hearing was held before a referee, who recommended that Selmer be released from probation with a public reprimand. We conclude that the appropriate discipline is a public reprimand and 1 year of unsupervised probation. Selmer will be automatically released from probation when he has submitted proof of payment of the Wisconsin disciplinary judgment. If Selmer has not satisfied the Wisconsin disciplinary judgment by the end of 1 year, Selmer will be automatically suspended from the practice of law until he has satisfied that judgment.

Selmer was admitted to the practice of law in Minnesota in 1984. In 1995, he was disciplined twice. He received a private admonition for improperly charging a client for copies of the client’s file made for Selmer’s own benefit. Additionally, Sel-mer was publicly reprimanded and put on probation for 2 years for the following violations: failing to promptly provide an accounting of the distribution of an arbitration award, charging an unreasonable fee, abusing the discovery process, failing to maintain proper trust account books and records, falsely certifying that he maintained proper trust account records, and commingling personal and client funds. In re Selmer, 529 N.W.2d 684 (Minn.1995). After being privately admonished, publicly reprimanded, and placed on probation, Sel-mer was also subject to reciprocal disciplinary proceedings in Wisconsin, where he had been admitted to the bar in 1978, for the same conduct. In re Selmer, 195 Wis.2d 687, 538 N.W.2d 252 (1995). The Wisconsin Supreme Court publicly reprimanded Selmer and required him to submit his trust account records quarterly for a period of 2 years. Id. at 255. Selmer was also ordered to pay the costs stemming from the Wisconsin disciplinary proceeding. Id.

Approximately halfway through Selmer’s 2-year probationary period, the Director filed a petition for revocation of probation and for further disciplinary action. In re Selmer, 568 N.W.2d 702, 702-03 (Minn.1997). Pursuant to this petition, we suspended Selmer in 1997 for 1 year for engaging in “a pattern of frivolous and harassing litigation” and a pattern of “repeated misrepresentation, nondisclosure and lack of candor” throughout the disciplinary process, and we required Selmer to petition for reinstatement. Id. at 704. The Wisconsin Supreme Court suspended Selmer for 1 year based on Selmer’s misconduct in Minnesota. In re Selmer, 227 Wis.2d 85, 595 N.W.2d 373, 374-75 (1999). Selmer was ordered to pay the costs of the disciplinary proceedings in Wisconsin. Id. at 379-80.

On November 28, 2001, we reinstated Selmer to the practice of law and put him on probation for 5 years subject to a number of conditions. In re Selmer, 636 N.W.2d 308, 309 (Minn.2001). These conditions included full cooperation with probation, compliance with the rules of professional conduct, supervision by and regular contact with a licensed attorney, various reporting requirements, initiation of proper office procedures, payment of the outstanding Wisconsin disciplinary judgment, good faith efforts to reduce or satisfy the liens and judgments against him, and creation of a business plan. Id. at 308-09. The judgments and liens against Selmer included past-due tax liabilities and a judgment from a civil suit in Hennepin County District Court (“Schurstein judgment”). Since his probation began, Selmer has met some of the conditions of his probation: he has satisfied the Schurstein judgment and his federal tax liens.

Since 2001, the Director has supervised Selmer’s probation. The Director’s supervision consisted primarily of written correspondence with Selmer. The Director requested a wide variety of information generally pertaining to the terms of Sel-mer’s probation. Selmer frequently responded to the Director’s requests late, but usually provided the information requested. Over the course of the probationary period, the Director’s requests became more sweeping. For example, in one letter in the last year of Selmer’s probation, the Director instructed him to provide detailed information of his monthly household income and expenses, including thorough documentation of 30 different income- and expense-related items.

Selmer frequently responded in writing by questioning the Director’s authority to require such information. The relationship between Selmer and the Director during Selmer’s probationary period was often strained, at best. Although Selmer frequently told the Director in writing that he did not think the Director had the authority to request certain types of information, Selmer did not request any modifications to the conditions of his probation. Similarly, although the Director expressed frustration in his letters that Selmer did not always respond in a timely fashion, the Director did not seek revocation of Sel-mer’s probation until just days before it was set to expire.

The Director’s November 28, 2006, petition alleges three types of misconduct: (1) that Selmer failed to comply with the conditions of probation and made false statements to the Director; (2) that Selmer failed to timely file federal and state income tax returns; and (3) that Selmer committed fifth-degree assault when he punched a man who argued with Selmer’s son at a school basketball game. Selmer filed an answer to the Director’s petition denying that any violations warranted discipline, and we referred the matter to a referee for findings of fact and recommendations for disposition.

The referee found that Selmer furnished some, but not all of the information requested by the Director; Selmer failed to provide information showing compliance with the financial requirements of his probation; Selmer has no income; Selmer pleaded guilty to fifth-degree assault; and the Director did not prove that Selmer made false statements to the Director. The referee then concluded that Selmer violated the conditions of his probation. The referee concluded that Selmer’s misconduct was aggravated by his past history of discipline but was mitigated by his financial problems. The referee also stated that Selmer’s violations hurt no clients, but rather affected only Selmer and his family. The referee recommended that Selmer receive a public reprimand and be released from probation. The Director subsequently ordered a transcript of the hearing before the referee.

Because the Director has ordered a transcript of the referee hearing, the referee’s findings “are not binding on this court.” In re Peterson, 718 N.W.2d 849, 853 (Minn.2006); see also RLPR 14(e) (providing that if either respondent or the Director orders a transcript, the referee’s findings of fact and conclusions of law are not conclusive). However, we will uphold a referee’s factual findings if they have evidentiary support in the record and are not clearly erroneous. In re Pinotti, 585 N.W.2d 55, 62 (Minn.1998). A referee’s findings are clearly erroneous when we are “left with the definite and firm conviction that a mistake has been made.” Peterson, 718 N.W.2d at 853 (internal quotation marks omitted).

Although the parties submitted over 100 exhibits to the referee and the referee heard testimony from Selmer and other witnesses, the referee made very limited factual findings. The material findings made by the referee are that Selmer “furnished some, but not all, of the information requested by the Director”; that Selmer “failed to provide information showing compliance with the financial requirements of his probation”; and that Selmer “has had no ability to comply with the financial terms of his probation.” The referee concluded that Selmer violated the terms of his probation, thus violating the rules of professional responsibility, and that Sel-mer’s conviction for fifth-degree criminal assault violated Minn. R. Prof. Conduct 8.4(b). Finally, the referee recommended that Selmer be publicly reprimanded and released from probation based on the mitigating factor of Selmer’s financial problems and the fact that Selmer’s misconduct hurt no clients.

Upon review of the record, we conclude that the referee’s very limited factual findings have evidentiary support in the record. The exhibits introduced at trial indisputably establish that on multiple occasions Selmer did not respond to the Director on time, that Selmer has not paid the Wisconsin disciplinary judgment, that he filed his individual income taxes late for 2 years, and that he was convicted of fifth-degree assault while on probation.

Furthermore, we conclude that, based on the referee’s findings, Selmer’s conduct violated the Minnesota Rules of Professional Conduct. Selmer’s failure to respond to the Director’s requests on time violated his probation, in violation of Rule 8.1(b). His failure to pay the Wisconsin disciplinary judgment violates Rule 3.4(c). Selmer’s untimely filing of tax returns violates 8.4(d), and his conviction for fifth-degree assault violates Rule 8.4(b).

Because we agree that Selmer violated the terms of his probation and consequently the Minnesota Rules of Professional Conduct, we turn to the appropriate discipline to be imposed. The referee recommended that Selmer be publicly reprimanded and released from probation. “Although a referee’s recommendation for discipline carries great weight,” we have the ultimate responsibility for determining what discipline, if any, is appropriate. In re Edinger, 700 N.W.2d 462, 467 (Minn.2005). In making this determination, we consider the nature of the misconduct, the cumulative weight of the disciplinary violations, the harm to the public, and the harm to the legal profession, in addition to any aggravating or mitigating factors. Id. at 468. Prior cases involving similar misconduct provide guidance on the appropriate discipline to be imposed, but we “examine each case individually and impose sanctions based on unique circumstances of each case.” Id.

Here, based on the factors discussed below, we conclude that the referee’s recommendation that Selmer receive a public reprimand is appropriate in light of the violations committed, but that the referee’s recommendation that Selmer be released from probation altogether is inappropriate in light of the fact that Selmer has not fulfilled all of the probationary conditions we imposed in 2001.

A. Nature of the Misconduct

Selmer failed to comply with the terms of his probation by not responding to all of the Director’s requests on time and not satisfying the judgment against him stemming from the 1999 reciprocal Wisconsin disciplinary proceedings. Additionally, Selmer did not timely file his individual income tax returns for 2 tax years and committed the offense of fifth-degree assault during his probationary period.

1. Failure to Comply with Probation

The failure to cooperate with an investigation or with the disciplinary process is itself a separate act of professional misconduct. In re Milloy, 571 N.W.2d 39, 45 (Minn.1997); see also In re Thedens, 557 N.W.2d 344, 348-50 (Minn.1997) (suspending an attorney for 6 months for neglect of a client matter, multiple tax code violations, and noncooperation with the Director, which consisted of his failure to attend a panel hearing and habitually late responses to the Director’s requests); In re Klemek, 446 N.W.2d 391, 391-92 (Minn.1989) (suspending an attorney indefinitely for at least 6 months for failing to initiate timely contact with her probation supervisor, failing to provide information on her client files, failing to reply to the Director’s letters, failing to attend two scheduled meetings with the Director, and neglecting client matters); In re Cartwright, 282 N.W.2d 548, 550, 552 (Minn.1979) (suspending an attorney for 6 months based in part on his noncompliance, which included repeatedly failing to respond to the Director’s requests, ignoring “the bulk of the correspondence” from the Director, and failing to fulfill promises to cooperate with the Director). Attorneys who cooperate at least to some extent will not be sanctioned as harshly as those who do not cooperate at all. See Milloy, 571 N.W.2d at 45.

Although we stress the importance of fully and openly cooperating with the disciplinary process, we conclude that Selmer’s conduct did not rise to the level of noncooperation that has warranted suspensions in the past. Unlike the attorney suspended in Cartwright who repeatedly failed to respond to the Director’s requests at all, Selmer regularly communicated with the Director’s office, responding with either the requested information or questions about the Director’s requests. We note that Selmer’s responses were often late, in direct violation of our 2001 order, which required he respond by the due dates specified by the Director. Selmer, 636 N.W.2d at 308. But, much like the attorney in Thedens, Selmer did eventually provide nearly all of the information requested of him, and circumstances that mitigate his failure to do so more promptly exist, as discussed below. Furthermore, unlike the attorney we suspended in Kle-mek, Selmer maintained contact with his supervising attorney, initiated meetings with the Director, and did not miss any meetings with the Director or any hearings related to this matter. Because Sel-mer’s noncompliance was not as significant as that of Cartwright, Thedens, or Kle-mek, we conclude that Selmer’s lack of cooperation with the Director does not alone warrant suspension.

Additionally, the conditions of Selmer’s probation required that he “make good faith efforts to reduce and/or satisfy all outstanding tax liens and civil judgments” and that he “provide the Director’s Office with a repayment plan for satisfying his past-due tax liabilities and the Schurstein civil judgment.” Selmer, 636 N.W.2d at 309. Within 5 years of his reinstatement, Selmer did provide the Director proof of satisfaction of the Schurstein civil judgment, but he did not provide the Director with a plan for satisfying his past-due tax liabilities. However, in March 2006, the IRS accepted Selmer’s offer in compromise to satisfy his federal tax liabilities, and Selmer has represented that on November 17, 2007, he satisfied his obligation under the IRS offer in compromise. Although Selmer did not meet this requirement within 5 years of our order, he has since met this condition of his reinstatement. Furthermore, although at the time of Selmer’s 1997 discipline case there were a number of civil judgments against him, they are not at issue here.

Finally, Selmer’s failure to satisfy his Wisconsin disciplinary judgment plainly violates the terms of his probation. Our order reinstating Selmer directed, as a condition of his reinstatement, that he “shall pay in full the outstanding Wisconsin disciplinary judgment before the conclusion of his probation.” Selmer, 636 N.W.2d at 309 (emphasis added). We ordered that he provide proof of satisfaction of that judgment “at least six months prior to the end of his probationary period.” Id. Selmer does not dispute that he still has not satisfied this judgment, and that violates our previous order.

We generally defer to the results of disciplinary proceedings in other states so long as “the procedure followed was in accord with due process and the discipline imposed was not in palpable error.” In re Morin, 469 N.W.2d 714, 716-17 (Minn.1991); see also RLPR 12(d). The rationale is to ensure that a sanctioned attorney cannot “avoid the consequences of misconduct by moving his or her practice to another state.” Morin, 469 N.W.2d at 717. Here, in keeping with this principle, the Wisconsin Supreme Court sanctioned Selmer for his misconduct in Minnesota. Just as we would not condone another state reinstating a Minnesota attorney to practice in its jurisdiction while in direct violation of our disciplinary order, we do not knowingly permit attorneys in Minnesota to practice while in violation of a disciplinary order of another state’s supreme court. This is Selmer’s most serious violation.

2. Untimely Filing of Tax Returns

Failing to file tax returns is a violation of an attorney’s oath and violates the rules of professional responsibility. Thedens, 557 N.W.2d at 348. We impose harsh discipline when tax violations result in criminal charges, id., or when an attorney fails to file and pay employer taxes, e.g., In re Moulton, 721 N.W.2d 900, 905 (Minn.2006). See also In re Doom, 463 N.W.2d 499, 500 (Minn.1990). Additionally, the failure to file tax returns altogether is a more serious violation than a mere failure to timely file. See Thedens, 557 N.W.2d at 348 (noting that “[w]hen the violations have involved a mere failure to timely file, however, we have been far more lenient”). In cases of failure to timely file, we frequently impose a public reprimand and unsupervised probation, even when taxes are owed. See, e.g., In re See, 669 N.W.2d 602 (Minn.2003); In re Rowe, 583 N.W.2d 923 (Minn.1998); In re Vaught, 583 N.W.2d 924 (Minn.1998); In re Carney, 505 N.W.2d 588 (Minn.1993).

Here, Selmer does not dispute that he filed his 2001 state and federal individual tax returns late, having filed them in the spring of 2003. Selmer does not dispute that he filed his federal tax returns for 2002 late, as well, having filed them in May 2003. The record indicates that in 2001 Selmer did not have any taxable income. In 2002, Selmer did have taxable income, but sufficient estimated taxes were withheld from his paychecks or were paid quarterly so that no taxes were owed upon filing his returns. Thus, although Sel-mer’s conduct violates Rule 8.4(d), we conclude that this violation is significantly less serious than those in which an attorney is faces criminal charges, fails to file altogether, or owes back taxes. Therefore, we conclude that based on this violation alone, the discipline imposed should not be as serious as those cases in which an attorney fails to pay taxes that are, in fact, owed.

3. Fifth-Degree Assault

Rule 8.4 states that “[i]t is professional misconduct for a lawyer to * * * commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer in other respects.” Minn. R. Prof. Conduct 8.4. Relying on In re Stafford, 373 N.W.2d 275 (Minn.1985), the Director argues that a misdemeanor assault conviction alone warrants public discipline. In Stafford, an attorney was publicly reprimanded for committing a fifth-degree assault directly related to the lawyer’s practice of law; the lawyer struck opposing counsel during the course of representation of a client. Id. at 275. Here, unlike Stafford, there is no connection between Selmer’s fifth-degree assault conviction for punching another man at a basketball game and his practice of law. Although lawyers are answerable to the entire criminal law and we do not condone law-breaking, Selmer’s conduct in committing fifth-degree assault unrelated to the practice of law, standing alone, does not warrant public discipline.

B.Cumulative Weight of the Disciplinary Violations

We consider the cumulative weight of all the violations committed to determine the appropriate discipline. Edinger, 700 N.W.2d at 468. Here, Selmer’s violations are failing to respond promptly and thoroughly to all requests from the Director while on probation; failing to timely file individual income tax returns for 2 tax years in which no taxes were owed; committing misdemeanor assault; and failing to pay in full the outstanding Wisconsin disciplinary judgment. Furthermore, although Selmer has now satisfied his past-due tax liabilities, he did not provide a repayment plan during probation as dictated by our order. Although each of Selmer’s individual violations considered alone is not substantial, when considered together, the violations warrant public discipline. See, e.g., In re Nelson, 733 N.W.2d 458, 464 (Minn.2007) (recognizing that the cumulative weight of violations “ ‘may compel severe discipline even when a single act standing alone would not have warranted such discipline’ ” (quoting In re Oberhauser, 679 N.W.2d 153, 160 (Minn.2004))).

C. Harm to the Public and the Legal Profession

We consider both the harm to the public and the harm to the legal profession in determining an appropriate disciplinary sanction. Edinger, 700 N.W.2d at 468. This includes facts such as “the number of clients harmed [and] the extent of the clients’ injuries.” In re Randall, 562 N.W.2d 679, 683 (Minn.1997). Here, the referee found that Selmer’s violations have hurt no clients and have hurt only Selmer and his family. The Director did not challenge these findings or allege that Selmer harmed clients, the public, or the legal profession. These factors weigh against disciplining Selmer, as the purpose of attorney discipline is “to protect the courts, the public, and the legal profession.” Nelson, 733 N.W.2d at 465.

D. Aggravating and Mitigating Circumstances

As the final step in determining the appropriate discipline, we consider aggravating and mitigating circumstances. Edinger, 700 N.W.2d at 468. Here, the referee listed Selmer’s disciplinary history as an aggravating factor and Selmer’s severe financial problems as a mitigating factor in determining the appropriate discipline. The Director argues that the referee did not adequately take into account the fact that Selmer was on probation when the current violations occurred. The Director also suggests that Selmer’s financial situation should either not be considered a mitigating factor or not mitigate anything other than the failure to meet the financial requirements of probation.

Disciplinary history and violating the disciplinary rules while on probation are both aggravating factors in attorney discipline cases. Moulton, 721 N.W.2d at 905 (noting that a “violation of our disciplinary rules while on probation is a factor that warrants more significant punishment”); Milloy, 571 N.W.2d at 45 (noting that “[p]rior disciplinary action taken against an attorney is an aggravating factor”). Here, the bulk of Selmer’s violations pertain to the conditions of probation themselves, and the other misconduct at issue — his failure to timely file tax returns when no taxes were owed and his conviction for fifth-degree assault — is less serious. These violations are aggravated, however, by Selmer’s disciplinary history, which includes a private admonition, 2 years of probation, suspension for at least 1 year, and his current 5-year supervised probation. Although it is proper for the referee to consider these factors as aggravating factors, the record does not support the Director’s characterization of Selmer’s misconduct as escalating drastically while on probation. His earlier discipline cases involved such misconduct as commingling funds, failing to maintain proper trust account records, misrepresentation to the Director, and engaging in frivolous litigation. Selmer’s current violations are far less serious than his prior misconduct.

Furthermore, Selmer’s misconduct is mitigated by the financial strain he has experienced while on probation, as found by the referee. The record amply supports the referee’s conclusion. Testimony by Selmer and his witnesses as well as exhibits offered by both the Director and Selmer establish that during his 5 years of probation, Selmer has not had enough money to provide for his family. His family has gone without needed medical and dental care, he is in arrears on his rent payments, and he has needed assistance to make utility payments. Furthermore, Sel-mer’s financial situation had a direct impact on his ability to meet the requirements of his probation; testimony at the referee hearing showed that Selmer’s inability to afford copying costs at times prevented him from timely complying with the Director’s requests.

While we have held that financial hardship does not mitigate certain types of misconduct, such as conversion of client funds, e.g., In re Parks, 396 N.W.2d 560, 563 (Minn.1986), and does not alone preclude disbarment in cases of serious misconduct, e.g., In re Olsen, 487 N.W.2d 871, 875 (Minn.1992), we have not held that financial hardship is never a mitigating factor for misconduct. In a similar vein, we have held that personal turmoil, stress, and the emotional distress of divorce and child custody proceedings can all mitigate professional misconduct. See, e.g., In re Wentzel, 711 N.W.2d 516, 522 (Minn.2006); In re Rooney, 709 N.W.2d 263, 272 (Minn.2006); In re Heffernan, 351 N.W.2d 13, 15 (Minn.1984). We concluded that Selmer’s most serious violation of the terms of his probation was the failure to pay the Wisconsin disciplinary judgment, and Selmer’s financial problems are a proper mitigating factor for that misconduct. Although we are mindful of the difficulty that condition of his reinstatement has presented to continue to practice law in the State of Minnesota, Selmer must comply with our previous orders.

Scott E. Selmer is hereby publicly reprimanded for failing to comply with the terms of his probation, failing to timely file individual income tax returns on which no taxes were due, and committing fifth-degree assault unrelated to the practice of law. We place Selmer on unsupervised probation. If Selmer does not file with this court, and serve upon the Director, by 1 year from the date of this opinion proof that he has satisfied the Wisconsin disciplinary judgment, he shall be automatically suspended from the practice of law without further proceedings until such time as he provides the required proof to the court. While on unsupervised probation, Selmer shall comply with the Minnesota Rules of Professional Conduct and shall cooperate with the Director’s investigation of any allegations of unprofessional conduct that may come to the Director’s attention.

It is so ordered.

DIETZEN, J., not having been a member of this court at the time of the argument and submission, took no part in the consideration or decision of this case.

      . In 2005, the Wisconsin Supreme Court reinstated Selmer to practice law in Wisconsin. In re Selmer, 282 Wis.2d 194, 698 N.W.2d 695, 697 (2005). Selmer was ordered to pay the costs of the disciplinary proceedings associated with his reinstatement. Id.

      . In October 2002, Selmer moved this court for permission to file Chapter 7 bankruptcy. We found "no basis on which to grant the motion.” In our order, we stated that if Selmer wished to be relieved of any obligations under his probation, such a request would be "addressed only on a motion to modify the conditions of probation and based on an adequate record.” Selmer did not file any motions to amend the conditions of probation, nor did he file bankruptcy.

      . Rule 8.1 states that "a lawyer * * * in connection with a disciplinary matter, shall not * * * (b) * * ® knowingly fail to respond to a lawful demand for information from an admissions or disciplinary authority.” Minn. R. Prof. Conduct 8.1.

      . Rule 3.4 states that "[a] lawyer shall not * * * (c) knowingly disobey an obligation under the rules of a tribunal except for an open refusal based on an assertion that no valid obligation exists.” Minn. R. Prof. Conduct 3.4.

      . Rule 8.4 states that "[I]t is professional misconduct for a lawyer to * * * (d) engage in conduct that is prejudicial to the administration of justice.” Minn. R. Prof. Conduct 8.4.

      . Rule 8.4 states that "[I]t is professional misconduct for a lawyer to * * * (b) commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer in other respects.” Minn. R. Prof. Conduct 8.4.