Blair Academy v. Blairstown Tp.

• Decision Date: 30 June 1967
• Docket Number: A--359,Nos. A--331,s. A--331
• Citation: 95 N.J.Super. 583,232 A.2d 178
• Parties: BLAIR ACADEMY, Appellant, v. TOWNSHIP OF BLAIRSTOWN, a municipal corporation of the State of New Jersey, Respondent. BLAIR ACADEMY, Petitioner-Respondent, v. TOWNSHIP OF BLAIRSTOWN, a municipal corporation of New Jersey, Respondent-Appellant, and Division of Tax Appeals of the Department of the Treasury of the State of New Jersey, Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 583

95 N.J.Super. 583

232 A.2d 178

BLAIR ACADEMY, Appellant, v. TOWNSHIP OF BLAIRSTOWN, a municipal corporation of the State

of New Jersey, Respondent.

BLAIR ACADEMY, Petitioner-Respondent, v. TOWNSHIP OF BLAIRSTOWN, a municipal corporation of New

Jersey, Respondent-Appellant,

and

Division of Tax Appeals of the Department of the Treasury of

the State of New Jersey, Respondent.

Nos. A--331, A--359.

Superior Court of New Jersey Appellate Division.

Argued June 19, 1967.

Decided June 30, 1967.

Theodore Sager Meth, Newark, for Blair Academy (Meth & Wood, Newark, attorneys).

Archie Roth, Blairstown, for Township of Blairstown.

Arthur J. Sills, Atty. Gen., for respondent, Division of Tax Appeals, filed a statement in lieu of brief (Elias Abelson, Deputy Atty. Gen., of counsel).

Before Judges GOLDMANN, KILKENNY and COLLESTER.

The opinion of the court was delivered by

KILKENNY, J.A.D.

Township of Blairstown appeals from a judgment of the State Division of Tax Appeals setting aside assessments for taxes for the year 1963 on the ground that the subject buildings and improvements of Blair Academy were tax exempt under N.J.S.A. 54:4--3.6. Blair Academy appeals from a judgment of the State Division of Tax Appeals dismissing its appeals from assessments for taxes for the year 1965 because the petitions of appeal, as originally filed, did not assert tax exemption as the basis of the appeal. The appeals were consolidated for argument.

Blair Academy's claim of tax exemption for the years in issue is based on N.J.S.A. 54:4--3.6 which provides in pertinent part:

'The following property shall be exempt from taxation under this chapter: All buildings actually used for colleges, schools, academies or seminaries; * * * the land whereon any of the buildings hereinbefore mentioned are erected, and which may be necessary for the fair enjoyment thereof * * * and does not exceed 5 acres in extent; * * * provided * * * the buildings, or the lands on which they stand, or the associations, corporations or institutions using and occupying them as aforesaid, are not conducted for profit, * * *.'

The State Division found that Blair Academy qualified for tax exemption under that statute as to the buildings under review.

There is substantial evidence in the record which supports this finding by the State Division. The school's existence dates back to 1848. From then until 1889 it was sustained in large measure by generous grants from John I. and Ann Blair. It was for many years operated by trustees responsible to the Presbytery of Newton and had close ties to the First Presbyterian Church. It is a boy's preparatory school whose students are for the most part boarders, coming as they do from widely scattered areas. Thus, at the time of the hearings before the State Division there were 306 boarding students and 19 day students more or less.

In 1928 the then State Board of Taxes and Assessments ruled that the school was not entitled to tax exemption because it had not been incorporated under the laws of New Jersey as authorized to carry out a purpose for which this exemption might be allowed, but was operating under three trust deeds under the control of and as a subsidiary to the Presbytery of Newton, New Jersey. This judgment was affirmed by the courts. Bd. Trustees, etc., Blair Academy v. State Bd. of Taxes and Assessments, 6 N.J.Misc. 498, 141 A. 789 (Sup.Ct.1928), affirmed o.b. 106 N.J.L. 556, 146 A. 912 (E. & A.1929).

To cure this deficiency Blair Academy incorporated in September 1928 as an educational corporation not for profit under the predecessor statute of our present Title 15. Legal title to the subject properties became vested in the Academy pursuant to several deeds of conveyance executed thereafter. The township recognized all of the school's buildings as tax exempt from 1928 until 1963. The Federal Government acknowledged its nonprofit status by exempting it from the payment of income tax and by granting it the usual franking privilege. Moreover, the record demonstrates that the school is a nonprofit organization within the interpretation laid down by us in City of Trenton v. State Division of Tax Appeals, 65 N.J.Super. 1, 166 A.2d 777 (1960), and in the case of Kimberly School v. Town of Montclair, 2 N.J. 28, 65 A.2d 500 (1949).

Despite its many buildings, Blair Academy had claimed up until 1965 only a total of five acres as tax exempt, paying taxes on the remainder. It voluntarily contributed $3000 annually to the township treasury as a gesture of goodwill. As hereinafter noted, it furnished from its own supply free water for municipal purposes, the township merely supplying the hydrants. An harmonious and cooperative relationship existed until 1963 when the township levied tax assessments against eight houses used as residences by members of the faculty, the residence occupied by the school's full-time business manager, a maintenance shop and a so-called maintenance garage. This led to a withdrawal of the school's voluntary contribution to the township treasury and the 1963 tax appeals.

The State Division properly held that the faculty houses were tax exempt. Pingry Corp. v. Hillside Tp., 46 N.J. 457, 217 A.2d 868 (1966), reversing 86 N.J.Super. 437, 207 A.2d 194 (App.Div.1965), removes all doubt as to the propriety of that determination. The Supreme Court held that the seven Pingry faculty houses were 'actually used' for school purposes and hence were tax exempt, even though the faculty members occupying them paid a nonprofit rental therefor and the use was solely for residential purposes. A fortiori, that same rule would be applicable to the eight faculty houses herein where occupancy is without any rental and the residences were used in part for consultations with students and similar school purposes.

As to the residence occupied by the business manager and treasurer, we agree with the State Division that this building was also tax exempt. This school official was required to live on the school grounds and to be available on a 24-hour a day basis. He was responsible not only for the school's financial affairs but also for maintenance of the properties and buildings, as well as attending to all of the Academy's business needs. He also acted as clerk at meetings of the board of trustees. A school official acting in these many capacities may be housed on the school's premises for the convenience of the institution. Residential quarters of a tax exempt institution used for such a purpose are also tax exempt. Princeton Tp. v. Tenacre Foundation, 69 N.J.Super. 559, 174 A.2d 601 (App.Div.1961).

The maintenance shop is a one-story building, wherein the school keeps its lathes and tools used in the maintenance of its buildings. It contains a paint shop, carpentry shop and plumbing supply shop--all used only for the school's maintenance work. The maintenance garage across the street houses the school's trucks, mowing equipment, snow plows and similar items used solely for maintenance of the school grounds. These auxiliary buildings are part of the school plant, are essential to the maintenance thereof, and were justifiably declared by the State Division to be tax exempt.

Blairstown contends that the Academy engages in several commercial proprietary functions or business ventures which preclude its claiming the status of a nonprofit corporation. Reference is made to four activities engaged in by Blair Academy, to wit, (a) its operation of a water department, (b) its opening to the public of the school golf course, when the students are not using it, (c) a summer tennis clinic, when school is not in session, and (d) the use of a catering system, the Slater System, in furnishing meals to the students, faculty members and their wives.

The water facility came into being when John I. Blair, the founder, desired to obtain water for the proposed school. The water had to be obtained from Paulins Kill which was 1.6 miles from the school. This necessitated bringing the water through the town. Citizens of the community petitioned for the right to connect to the water mains and were given permission to do so. This subjected the school's water department to regulation as a public utility, albeit no profit was sought and it never sought an increase in rates for 40 years. When an increase was sought in 1957 to minimize its losses in the operation, the Public Utilities Commission granted the request and suggested that the school should come back again for further relief.

Blair Academy charges itself for its water supply the difference between the total cost of the maintenance of the water system and what it receives in water rents. By this method of bookkeeping Blair pays much more than one-half of the cost, although it uses less than one-half of the water. As noted above, water is furnished to Blairstown's hydrants free. The State Division properly observed that this small sideline operation thus carried on 'hardly makes Blair a profit making institution.'

The school's golf course is used by the school teams and student body. When they are not using it, the citizens of Blairstown may play for a fee. But there is no profit motive or profit making. Similarly, the tennis clinic in the summertime when the school is not in session is a De minimis operation which does not materially affect Blair's nonprofit status.

The use of a catering system to feed the students and faculty of this boarding school cannot be regarded as a commercial activity or business venture of the school. Blair pays for this catering service an annual charge of $376 per person. It has been found expedient by the management of the school to have such a private caterer, in lieu of providing its own personnel to furnish this necessary service. The practice has been carried on for at least ten years. Nor do we find material as affecting Blair's nonprofit status that the catering system uses Blair's kitchen equipment and facilities in its performance,...