Bethesda General Hospital v. State Tax Commission

• Decision Date: 13 December 1965
• Docket Number: No. 2,No. 50970,50970,2
• Parties: BETHESDA GENERAL HOSPITAL, Respondent, v. The STATE TAX COMMISSION, Appellant
• Court: Missouri Supreme Court

Page 631

396 S.W.2d 631

BETHESDA GENERAL HOSPITAL, Respondent, v. The STATE TAX COMMISSION, Appellant.

No. 50970.

Supreme Court of Missouri, Division No. 2.

Dec. 13, 1965.

Victor A. Wallace, Barksdale, Abbott & Wallace, St. Louis, for respondent.

Thomas F. McGuire, City Counselor, City of St. Louis, James J. Wilson, Asst. City Counselor, St. Louis, Norman H. Andersen, Atty. Gen., W. Arnold Brannock, State Tax Commission, Jefferson City, for appellant.

George A. Rozier, Forrest P. Carson, Jefferson City, Elliott P. Koenig, Rassieur, Long & Yawitz, St. Louis, for amicus curiae, Hospital Assn. of Metropolitan St. Louis.

PRITCHARD, Commissioner.

The issue is whether seven residential properties owned by respondent, Bethesda General Hospital (a charitable corporation), and occupied rent free (at the time of placing thereof on the tax rolls, January 1, 1963) by certain hospital personnel, are subject to state, county and local real estate taxes under Article X, Sec. 6, Const.Mo.1945, V.A.M.S., and Sec. 137.100, RSMo 1959, V.A.M.S. The Constitution and said statute, a revenue law, being for construction, we have appellate jurisdiction. Art. V, Sec. 3, Const.Mo.1945, V.A.M.S.; St. Louis Gospel Center v. Prose, Mo., 280 S.W.2d 827, 828.

There are eight properties owned by respondent. Six are located on Rutger Street in St. Louis, Missouri, at the following street addresses: 3633, 3635, 3657, 3665, 3677 and 3681. These six properties were used and occupied as of January 1, 1963, respectively, by the following personnel of respondent: Supervisor of maintenance, salary $400 per month, his wife and two children in the two-story residence; assistant supervisor of maintenance and his family, salary $300 per month, in the two-story residence; assistant supervisor of maintenance and his family, salary $300 per month, in the one-story residence; chief laboratory technician (salary $425 per month) and a registered nurse (who was on leave from the hospital); house physician and family, salary $1,000 per month, in the four-room residence; and house physician and family, salary $1,000 per month, in the four-room residence. A seventh property is located at 3652 Hickory Street, approximately one block north from respondent's hospital, and was occupied by a house physician and family, salary $1,000 per month, and later in 1963 was occupied by a maintenance man and his family. The eighth single-family property, located at 3647 Rutger Street, was not occupied on January 1, 1963, but was being renovated and its tax-exempt status is not now in issue. In April or May, 1963, it was occupied by one of respondent's assistant supervisors of maintenance and his family, whose salary is $300 per month.

Respondent rented the subject properties to and including the month of December, 1962, for about $50 per month. No rentals were charged occupants after January 1, 1963. The reasonable monthly rental of the properties was between $50 and $70 per month, not including utilities.

After appeals to it, the State Tax Commission of Missouri ruled that none of the properties was exempt from taxation. Upon further appeal, the trial court reversed the ruling of the State Tax Commission, and held that the use of all of the residential properties, except that located at 3647 Rutger Street (it being unoccupied on January 1, 1963), was sufficiently connected with the accomplishment of respondent's charitable purpose so as to be exempt from such taxation.

Heat, light, water, a telephone extension and general maintenance were furnished by respondent to each resident. All of the occupants are full-time employees of respondent, and are on call 24 house per day. All are essential to the operation of the hospital, and would be housed in the hospital building itself (which is located across Rutger Street from those residences located thereon) it there were physically room in that building for them. The residences are not used for any hospital function such as for the care or treatment of patients, or medical, surgical, dental functions. There are around 400 employees of respondent. There is no question, and it is not otherwise contended, that respondent's hospital purpose is charitable, and that it operates not for profit. Its pro forma decree of incorporation so states. It is a member of the United Fund; it does a tremendous amount of charity work for patients who cannot pay for care and treatment; and it has continually experienced a net loss in operating income by reason of its charitable work even after application of endowment income.

In its Point I, appellant contends that the trial court erred in finding as a matter of law that respondent's properties were actually and regularly used exclusively for purposes purely charitable within the meaning of said Sec. 137.100(5) and Art. X, Sec. 6, Const.Mo.1945, because the subject real properties were used regularly and exclusively for residential purposes only.

Said Art. X, Sec. 6, Const.Mo.1945, provides in part that 'all property, real and personal, not held for private or corporate profit and used exclusively for religious worship, for schools and colleges, for purposes purely charitable, * * * may be exempted from taxation by general law. * * *.' Implementing this constitutional provisions is said Sec. 137.100(5), which provides as exempt from taxation for state, county or local purposes: '(5) All property, real and personal actually and regularly used excusively for religious worship, for schools and colleges, or for purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefrom is used wholly for religious, educational or charitable purposes. As amended Laws 1959, H.B. No. 108, Sec. 1.'

The issue here in concerned with the words of the Constitution and statute, supra, that real property shall be exempt from taxation where it is not held for private or corporate profit, and the same is used exclusively for purposes purely charitable. The rules applicable to cases such as this are that exemption statutes are strictly but reasonably (so as not to curtail the intended scope of the exemption) construed; that the charitable use exemption depends upon the use made of the property and not solely upon the stated purposes of an organization; that each tax exemption case is 'peculiarly one which must be decided upon its own facts'; that taxation is the rule; exemption is the exception; and that claims for exemption are not favored in the law. Midwest Bible and Missionary Institute v. Sestric, 364 Mo. 167, 260 S.W.2d 25. In the case of Bader Realty & Investment Co. v. St. Louis Housing Authority, 358 Mo. 747, 217 S.W.2d 489, 492, the court said, 'The courts formerly held a somewhat limited view and rather narrowly interpreted the words 'charity' and 'charitable purposes'. But the present day concept of 'purposes purely charitable' is broader than mere relief of the destitute or the giving of alms. As now viewed it comprehends activities not self-supporting 'which are intended to improve the physical, mental and moral condition of the recipients and make it less likely that they will become burdens on society and more likely that they will become useful citizens.'' In the Bader case it was held that property owned by the St. Louis Housing Authority, upon which after slum clearance low rent housing was erected, was tax exempt, it being a charitable purpose.

Other authority states that the reason for state tax exemption provisions is that they are given in return for the performance of functions which benefit the public; 84 C.J.S. Taxation Sec. 281, p. 533; that the exemption in favor of the charitable institutions is based upon the ground that a benefit is conferred upon the public by them, with consequent relief, to some extent, of the burden imposed upon the state to care for and advance the interests of its citizens. 34 A.L.R. 635. See also 51 Am.Jur. Taxation Sec. 600, p. 583.

Aside, however, from the basic rules of construction and reasons for tax...