City of Knoxville v. Ft. Sanders Hospital

• Decision Date: 15 January 1924
• Parties: CITY OF KNOXVILLE v. FT. SANDERS HOSPITAL.
• Court: Tennessee Supreme Court

257 S.W. 408

148 Tenn. 699

CITY OF KNOXVILLE v. FT. SANDERS HOSPITAL.

Supreme Court of Tennessee.

January 15, 1924

Appeal from Chancery Court, Knox County; Chas. Hays Brown Chancellor.

Bill by the City of Knoxville against the Fort Sanders Hospital. Decree of dismissal, and complainant appeals. Reversed and rendered.

GREEN C.J.

The bill in this case was filed by the city of Knoxville to recover taxes for the year 1920 assessed against defendant Ft. Sanders Hospital, together with interest and penalties. The defendant answered and denied that its property was subject to taxation, and also denied that the act under which the assessment was made was a valid law. The chancellor dismissed the bill, and the city has appealed to this court.

The defendant is a corporation organized under the laws of Tennessee for the purpose of operating a hospital and in connection therewith conducting a transfer and omnibus business. It is a corporation for profit, but insists that its property assessed is exempt from taxation.

The defendant corporation was bought out by several doctors in Knoxville, they owning practically all its stock. It has a large hospital building in a desirable section of the city of Knoxville, in which there are 65 beds. In connection with its hospital it has a research laboratory and a modern X-ray outfit, and conducts a school for training nurses. About 20 student nurses are in the hospital and are there given instructions by the hospital staff. These young women are also employed at the hospital and given their board and a small amount of money for their services. Any doctor in Knoxville may bring a patient to the hospital for treatment and any patient may come there for treatment. No operations however, are performed at the hospital except such as are performed by members of the hospital staff.

There are an average of seven or eight charity patients at the hospital. The remainder of the patients there are charged very substantial prices for their accommodation.

Dr. L. L. Shedden, formerly president of the corporation, testifying with regard to the organization thereof, said it was organized because of the scarcity of hospital facilities in Knoxville; they being insufficient to take care of the sick and injured. He said:

"We simply did not have facilities to do our work nor places to take care of the sick and injured, nor sufficient nurses to meet the demands, and we built and equipped one to assist in relieving the situation."

He said it was not a money-making proposition. He was asked if it was not a fact that competent and skilled physicians and surgeons could practice their profession with more satisfaction through the use of a well-equipped hospital, and replied: "Yes, sir; that is the reason hospitals are built." He was then asked further about the reasons for building and equipping the hospital, "And your purpose in doing that was to be more useful and more successful as practitioners of medicine?" and answered: "Yes, sir; and to get better facilities for taking care of the sick and the injured, and to give better treatment and attention in every way that can be done, and to be able to properly train young girls to become graduate nurses, and thereby supply a part of that great demand."

Following the permission of section 28 of article 2 of the Constitution, the Legislature has for many years undertaken to grant certain exemptions from taxation. Among other things, in the last general assessment act there is exempted "all property belonging to any religious, charitable, scientific, or educational institutions when used exclusively for the purpose for which said institution was created, or is unimproved and yields no income." Chapter 602, Acts of 1907.

The question of the exemption of various institutions under this statute has been considered in several recent cases. Cumberland Lodge v. Nashville, 127 Tenn. 248, 154 S.W. 1141; Ward Seminary v. Mayor and City Council, 129 Tenn. 412, 167 S.W. 113; Chamber of Commerce v. City of Memphis, 144 Tenn. 291, 232 S.W. 73; Nashville Labor Temple v. City of Nashville, 146 Tenn. 429, 243 S.W. 78, 23 A. L. R. 807.

It is not worth while to review these cases; they are familiar to the profession. The difficulty always is in the application of the rules announced therein.

While the case before us is not free from doubt, we are of opinion that it falls within Chamber of Commerce v. City of Memphis, supra. Though the defendant does some charitable work, some educational work, and some scientific work, we do not think it can be regarded as a charitable institution, an educational institution, nor a scientific institution within the sense of the Constitution, nor is its property devoted exclusively to any of these purposes. The great bulk of its business is the operation of a hospital where patients pay for the services rendered them. That portion of the property devoted to charitable, scientific, and educational purposes is not separable from the remainder.

We held, in the case of Ward Seminary v. Mayor and City Council, that an educational institution did not lose its right to exemption because it was conducted for profit. Ward Seminary, however, was strictly an educational institution, or at least so much of its property as was held to be exempt was used exclusively for that purpose. The law exempts educational institutions by name. Hospitals are not exempt unless educational, charitable, or scientific.

It is obvious from the testimony of Dr. Shedden that this hospital was erected and is maintained as an aid or convenience for the physicians and surgeons who use it in the...