Lundberg v. Alameda County

• Decision Date: 06 June 1956
• Court: California Supreme Court
• Parties: Alfred J. LUNDBERG, Plaintiff and Respondent, v. COUNTY OF ALAMEDA et al., Defendants and Appellants, The Roman Catholic Welfare Corporation of San Francisco (a Corporation), Intervenor and Appellant. S. F. 19026.

Page 1

298 P.2d 1

46 Cal.2d 644

Alfred J. LUNDBERG, Plaintiff and Respondent, v. COUNTY OF ALAMEDA et al., Defendants and Appellants, The Roman Catholic Welfare Corporation of San Francisco (a Corporation), Intervenor and Appellant.

S. F. 19026.

Supreme Court of California, In Bank.

June 6, 1956.

Rehearing Denied July 5, 1956.

J. F. Coakley, Dist. Atty., R. Robert Hunter, Chief Asst. Dist. Atty., Richard J. Moore and Maury Engel, Deputy Dist. Attys., John W. Collier, City Atty., Robert E. Nisbet, Deputy City Atty., Oakland, Edmund G. Brown, Atty. Gen., and Clarence A. Linn, Chief Asst. Atty. Gen., for defendants and appellants.

Andrew F. Burke, San Francisco, for intervenor and appellant.

Hill, Farrer & Burrill, Anson B. Jackson, Jr., Musick, Peeler & Garrett and James E. Ludlam, Los Angeles, as amici on behalf of defendants and appellants and intervenor and appellant.

Henry C. Clausen, San Francisco, for respondent.

GIBSON, Chief Justice.

Plaintiff, a citizen resident of defendant county and a taxpayer therein, brought this suit to challenge the legality of a tax exemption. Such actions are authorized by section 526a of the Code of Civil Procedure, ¹ cf. Delaney v. Lowery, 25 Cal.2d 561, 154 P.2d 674 and, being in aid of the collection of taxes, are distinguishable from cases in which a party seeking to avoid taxation was denied mandamus on the ground that an action for refund of illegally collected taxes constituted an adequate remedy at law. (See Security-First Nat. Bank v. Board of Supervisors, 35 Cal.2d 323, 217 P.2d 948; Vista Irr. Dist. v. Board of Supervisors, 32 Cal.2d 477, 196 P.2d 926; Sherman v. Quinn, 31 Cal.2d 661, 192 P.2d 17.)

The suit involves the constitutionality of that portion of section 214 of the Revenue and Taxation Code ² which grants a tax exemption to property 'used exclusively for school purposes of less than collegiate grade and owned and operated by religious, hospital or charitable funds, foundations or corporations,' provided that the property is used for nonprofit purposes and owned by nonprofit organizations. The exemption in question was added to section 214 in 1951 and was approved by the people on referendum at the general election of 1952. This appeal was taken from a judgment declaring the exemption invalid.

In California all property must be taxed unless an exemption is authorized by the state Constitution or granted by the laws of the United States. Section 1c of article XIII of the Constitution declares, 'In addition to such exemptions as are now provided in this Constitution, the Legislature may exempt from taxation all or any portion of property used exclusively for religious, hospital or charitable purposes and owned by community chests, funds, foundations or corporations organized and operated for religious, hospital or charitable purposes, not conducted for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.' ³

The validity of the statutory exemption depends, first, upon whether an educational purpose may be regarded as a charitable purpose within the meaning of section 1c of article XIII. The term charity has been defined in a number of California cases as "a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their 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." In re Estate of Halm, 196 Cal. 778, 781-782, 239 P. 307, 308; In re Estate of Coleman, 167 Cal. 212, 214, 138 P. 992; In re Estate of Sutro, 155 Cal. 727, 736, 102 P. 920; In re Estate of Lennon, 152 Cal. 327, 329-330, 92 P. 870; In re Estate of Merchant, 143 Cal. 537, 543-544, 77 P. 475. This definition was quoted with approval in Scripps, etc., Hospital v. California Employment Comm., 24 Cal.2d 669, 675, 151 P.2d 109, 155 A.L.R. 360, where a nonprofit hospital was held exempt from unemployment insurance taxes as a charitable organization.

An educational purpose has been held to be charitable in character where the status of a trust or bequest was in controversy and the gift was for the benefit of the public and not for private gain. Collier v. Lindley, 203 Cal. 641, 648-650, 266 P. 526; In re Estate of Halm, 196 Cal. 778, 781-782, 239 P. 307; In re Estate of Yule, 57 Cal.App.2d 652, 654, 135 P.2d 386; In re Estate of Bailey, 19 Cal.App.2d 135, 139, 65 P.2d 102; In re Estate of Bartlett, 122 Cal.App. 375, 377, 10 P.2d 126; see Rest., Trusts, § 370; 14 C.J.S., Charities, § 15, p. 444. And in other jursidictions it has been held that nonprofit educational institutions maintained for the benefit of the public qualify as charitable organizations for the purpose of tax exemption. School of Domestic Arts and Science, v. Carr, 322 Ill. 562, 153 N.E. 669; Appeal Tax Court v. St. Peter's Academy, 50 Md. 321; Board of Assessors v. Garland School of Home Making, 296 Mass. 378, 6 N.E.2d 374; State v. Johnston, 65 N.J.L. 169, 46 A. 776; Gerke v. Purcell, 25 Ohio St. 229;: In re Hill School, 370 Pa. 21, 87 A.2d 259; see In re Cooper's Estate, 229 Iowa 921, 295 N.W. 448; Morgan v. Presbyterian Church of the United States of America, Ky., 101 S.W. 338; In re Grace, 27 Minn. 503, 8 N.W. 761.

The argument made by plaintiff that the word charitable should be narrowly construed in favor of taxability has been rejected by this court in two recent cases involving section 1c of article XIII. Y. M. C. A. v. County of Los Angeles, 35 Cal.2d 760, 221 P.2d 47; Fredericka Home For The Aged v. County of San Diego, 35 Cal.2d 789, 221 P.2d 68. In the Y. M. C. A. case, where it appeared that the Association operated at an over-all loss in conducting its various activities, we held that dormitory facilities provided by it at relatively low rentals were exempt as property used exclusively for religious and charitable purposes, pointing out that the dormitories were designed mainly to give young men access to a place for study, recreation and residence under wholesome influences and that, therefore, they were incidental to and reasonably necessary for the accomplishment of the organization's purposes of promoting good character and Christian ideals. We refused to follow a contrary holding in another jurisdiction, noting that one of the factors leading to that decision was a 'concept of charity as confined solely to the relief of the needy and destitute * * * rather than comprehending as well activities which are humanitarian in nature and rendered for the general improvement and betterment of mankind, though the recipients of such benefits may be able to pay at least in part therefor * * *.' 35 Cal.2d at page 768, 221 P.2d at page 52.

The broad meaning of the term charitable set forth in the Y. M. C. A. case was applied in the Fredericka Home case where it was held that a home for the aged, operated on a nonprofit basis, was entitled to tax exemption as a charity although entrance fees were charged. Both of these decisions relied upon In re Estate of Henderson, 17 Cal.2d 853, 857, 112 P.2d 605, 607, where it was stated, 'A bequest is charitable if: (1) It is made for a charitable purpose; its aims and accomplishments are of religious, educational, political or general social interest to mankind. * * * (2) The ultimate recipients constitute either the community as a whole or an unascertainable and indefinite portion thereof. * * * The charitable nature of an institution is determined on the same basis.'

The fact that the term charitable is only one of three descriptive words used in section 1c does not require that it be narrowly construed against the exemption. To the contrary, in Scripps, etc., Hospital v. California Employment Comm., 24 Cal.2d 66, 151 P.2d 109, 112, 155 A.L.R. 360, where an unemployment insurance tax statute exempted organizations formed for purposes such as 'religious, charitable, scientific, literary or educational', it was held that a nonprofit hospital was exempt as a charity although the word hospital was not used in the statute. The court stated, 'The wide and varied nature of the exemptions thus provided rather clearly indicates a purpose and intention to give the words here in question a broad rather than a strict meaning * * *.' 24 Cal.2d at page 676, 151 P.2d at page 113.

It thus appears that the word charitable has been given a broad construction in tax exemption cases as well as others, and it would seem clear that nonprofit schools owned by nonprofit organizations and operated for the benefit of the public come within the term charitable as defined by out decisions. Moreover, both the Legislature and the people have construed the term charitable in section 1c of article XIII as authorizing exemption of such schools.

Section 1c is an enabling provision which empowers the Legislature to grant exemptions within certain general categories. In acting under this section the Legislature must necessarily construe the terms of the provision in order to determine the extent of the authority conferred upon it. The Legislature has consistently treated the term charitable in section 1c as broad enough to include nonprofit schools, first, by specifically excluding them from exemption and, second, by specifically granting them an exemption. The first construction was made in 1945 when the Legislature originally enacted section 214 of the Revenue and Taxation Code, which provided for the exemption of property used exclusively for charitable purposes. The Legislature must have then believed that the word charitable as used in section 1c authorized the exemption of nonprofit schools, and that the unqualified use of that term in section 214 would result in exempting such schools, because it added at the end of section 214 a proviso that the...