Callaway Community Hosp. Ass'n v. Craighead, WD
| Decision Date | 16 August 1988 |
| Docket Number | No. WD,WD |
| Citation | 759 S.W.2d 253 |
| Parties | CALLAWAY COMMUNITY HOSPITAL ASSOCIATION, Appellant, v. Ronald CRAIGHEAD and Melvin Tate, Respondents. 40079. |
| Court | Missouri Court of Appeals |
Thomas M. Dunlap, Whitlow, Riley, Mariea & Dunlap, Fulton, for appellant.
Craig A. Van Matre, Columbia, for respondents.
Michael Madsen, Carson, Coil, Riley, McMillin, Levine & Veit, Jefferson City, for Missouri Hosp. Ass'n, Amicus Curiae.
Before TURNAGE, P.J., and SHANGLER and MANFORD, JJ.
Callaway Community Hospital brought suit against the Callaway County assessor and collector for a refund of 1985-1986 ad valorem taxes which were paid under protest. The court entered judgment in favor of the assessor and collector.
The Hospital contends it is entitled to the charitable exemption from the payment of ad valorem taxes as set forth in Art. 10, § 6 of the Missouri Constitution and § 137.100, RSMo 1978. Reversed and remanded.
There was little dispute in the facts. Callaway Community Hospital Association is a not-for-profit corporation incorporated in the State of Delaware and authorized to do business in Missouri. It is owned by another Delaware not-for-profit corporation, CHAMA, INC. The hospital has been deemed tax exempt by the IRS and the State of Missouri.
The hospital was constructed at a cost of approximately 12 million dollars. Of this amount CHAMA advanced 1.7 million with the balance being financed by revenue bonds. The hospital opened in September of 1984 with a license for 58 beds which was later amended to 53 beds. The hospital is the only one in Callaway County and includes an emergency room which provides emergency medical service twenty-four hours per day.
The hospital is governed by a board of directors which is appointed by CHAMA. In accordance with the certificate of Incorporation, which provides that no part of the net income of the hospital shall inure to the benefit of any director, officer, or private individual, the directors are not compensated for their services by the hospital. In addition to the Board of Directors, there exists an advisory board of trustees which consists of the hospital administrator, two physicians and four lay persons, residents of Callaway County, whose function is to approve the appointment of physicians to the medical staff.
The admission of patients to the hospital is at the sole discretion of physicians on the medical staff. About 1100 patients were admitted to the hospital in 1985 and about 968 in 1986. In addition, 4400 persons were treated in the emergency room in 1985, and in 1986, 4700 persons were treated there.
To date, the hospital has operated at a loss. In 1985 this amounted to $241,821 and in 1986 the figure rose to $696,096.
In its accounting procedures the hospital carries an account labeled "provision for doubtful accounts." This account consists primarily of services rendered to those patients who cannot pay, with a small remainder representing service rendered to patients who can pay but do not. In essence, approximately 4.9% of the hospitals operating expense was allocated to services rendered to indigent patients. 1
Although the hospital has collection policies which require it to attempt to collect payment from all patients, hospital administrators testified that no person had ever been denied treatment or refused admission to the hospital due to inability to pay. The only obstetrician gynecologist on the medical staff testified that the hospital had never refused to admit any person on the basis of indigency which he wished to admit. He further testified that if faced with a non-emergency situation and a patient who could not pay, he would refer that patient to the University of Missouri Hospital approximately 30 miles away. The doctor stressed, however, that this was a personal decision and in no way reflected hospital policy on the issue. There was no evidence that anyone had ever been refused service in the emergency room. 2
There is a freestanding medical offices building owned by the hospital located on the same 20 acre tract as the hospital. Some office suites have been sold to physicians. The medical offices building was not a part of the 1985 assessment but was included in the 1986 tax bill to the hospital. The hospital agrees that the office building is not exempt from taxation.
In its findings of fact and conclusions of law the court found the hospital to be a not-for-profit corporation, but that it does not provide all persons, rich or poor, with care. The court further found that the non-emergency patient who is indigent and not eligible for government assistance was sent to the University of Missouri Hospital. The court found that patients experiencing financial difficulties were neither counseled nor encouraged to qualify for any charitable care; rather, the hospital personnel used all available means to encourage patients to pay. The court concluded that as the hospital does not provide care to all persons, rich or poor, it is not entitled to a tax exemption.
In Franciscan Tertiary Province of Missouri, Inc. v. State Tax Commission, 566 S.W.2d 213 (Mo. banc 1978), the court reviewed a number of cases which had considered the constitutional and statutory exemption provisions and found the cases to be inconsistent. The court formulated a test by which several factors are considered in determining if an exemption is proper. Initially it must be determined that the property is owned and operated on a not-for-profit basis. Id. at 224. The court stipulated that the property must be dedicated to a charitable activity such that no profit accrues to either an individual or a corporation. However, the court pointed out that so long as any profit received is incidental to the charitable objective, there is no reason that the not-for-profit activity cannot operate in the black.
The second requirement set forth by the court "is that the dominant use of the property must be for the benefit of an indefinite number of people" and among other purposes be to relieve their bodies from disease or suffering. Id. at 224. The court stated that examples of humanitarian activities which fall within the second requirement include "... the operation of hospitals which are open and available to rich and poor." Id. at 224.
In Franciscan Tertiary, the court cited with approval Jackson County v. State Tax Commission, 521 S.W.2d 378 (Mo. banc 1975). In Jackson County, the court considered whether or not three hospitals in Kansas City qualified for tax exemption. The court there cited Buchanan v. Kennard, 234 Mo. 177, 136 S.W. 415 (Mo. banc 1911) and Community Memorial Hospital v....
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