City of Trenton v. State Board of Tax Appeals

• Decision Date: 26 August 1941
• Citation: 127 N.J.L. 105,21 A.2d 644
• Docket Number: 248
• Court: New Jersey Supreme Court
• Parties: CITY OF TRENTON, PROSECUTOR, v. STATE BOARD OF TAX APPEALS AND RIDER COLLEGE, RESPONDENTS

21 A.2d 644

127 N.J.L. 105

CITY OF TRENTON

v. STATE BOARD OF TAX APPEALS et al.

No. 248.

Supreme Court of New Jersey.

Aug. 26, 1941.

Certiorari proceeding by the City of Trenton, prosecutor, against the State Board of Tax Appeals and Rider College, to review a judgment of the State Board of Tax Appeals sustaining claimed exemption of Rider College and reversing a judgment of the Mercer County Board of Taxation, which dismissed the appeal of Rider College from an assessment by assessors of the City of Trenton.

Judgment reversed, and local assessments affirmed.

Argued May term, 1941, before BODINE, PERSKIE, and PORTER, JJ.

Louis Josephson, of Trenton, for prosecutor.

William J. Egan, of Newark (Robert L. Hood, of Newark, of counsel), for respondent Rider College.

PERSKIE, Justice.

The question requiring decision on the facts of this case is whether the State Board of Tax Appeals erred, as claimed, in holding that the real and personal property of Rider College were exempt from taxation for the year of 1940.

The local assessors of the City of Trenton, New Jersey, assessed the real and personal property of Rider College, located at Trenton, for the year 1940 as follows: "Lands and Improvements, $184,375; Pers. $10,400; Total $194,775." Rider College appealed to the Mercer County Board of Taxation on the ground that it was established and operated as a fundamentally charitable and philanthropic institution and not for profit, and, therefore, its real and personal property in question were exempt from taxation. N.J.S.A. 54:4-3.6. That appeal was dismissed and the local assessment was sustained. On further appeal to the State Board of Tax Appeals that Board sustained the claimed exemption, reversed the judgment of the Mercer County Board of Taxation, and ordered the assessment cancelled. To review the propriety of the judgment of the State Board of Tax Appeals, a Justice of this Court, on the application of the City of Trenton, allowed a writ of certiorari.

The applicable legal principles present no difficulty. The right to the claimed statutory exemption depends entirely upon the facts and circumstances of each particular case. Dana College v. State Board of Tax Appeals, 184 A. 412, 14 N.J.Misc. 308, 310, affirmed, 117 N.J.L. 530, 189 A. 620. Since statutes granting exemption from taxation are in the nature of a "renunciation of sovereignity", and are at war with the sound basic principle that the "burden of taxation ought to fall equally upon all", they are most "strongly construed" against those claiming exemption. Thus the facts and circumstances in each case must clearly and convincingly establish the right to exemption within the statute granting exemption, otherwise the general rule is invoked which subjects "all property to a just share of the public burdens." Princeton Country Day School v. State Board of Tax Appeals, 113 N.J.L. 515, 517, 175 A. 136, 137; Carteret Academy v. State Board of Taxes and Assessment, 102 N.J.L. 525, 133 A. 886, affirmed, 104 N.J.L. 165, 138 A. 919. Otherwise stated, the proofs must be "free from fair doubt." Carteret Academy v. State Board of Taxes and Assessment, supra, 102 N.J. L. at page 529, 133 A. at page 887. The burden of proof is upon the claimant to establish the asserted right to exemption. Dwight School of Englewood v. State Board of Tax Appeals, 114 N.J.L. 594, 599, 177 A. 875, affirmed, 117 N.J.L. 113, 187 A. 36.

The application of the stated principles to the facts and circumstances of each case is, as here, not free from difficulty.

Solely in aid of our determination of respondent's claim to exemption, as of October 1, 1939, let us examine the proofs, from the day respondent was established and thereafter operated, to ascertain whether they properly sustain respondent's claim that it was established and operated as a fundamentally charitable or philanthropic institution not for profit.

Respondent, Rider College, is an institution located at Trenton, N. J. It specializes in the instruction of general business subjects. Its high standing is conceded. It was established in 1865 by Anderson J. Rider. It was incorporated as an institution of learning, under the name of "The Rider Business College", on June 15, 1897 (its "bulletin" gives this date as 1893) pursuant to the then existing act "for the incorporation of associations for the erection and maintenance of schools and institutions for educational purposes." P.L.1890, ch. CCXXXIX, p. 413. Although this act was repealed in 1899, P.L.1899, ch. 76, p. 189, subdivision 35, the school nonetheless has continued to function thereunder by virtue of a saving clause (§ 2) in the latter statute. The school later merged with Stewart College which had been established by Thomas J. Stewart in 1883. After several changes in its name, it was finally changed to Rider College by which name it is presently known.

The by-laws apparently first adopted by respondent and offered in evidence give no indication as to the date of their adoption. These by-laws provide, among other things, for two endowment funds. Art. IV, Sections 1 and 2. The second (§ 2) provides for an endowment to consist of "gifts, contributions, bequests and devises" to respondent, and is not here involved. The first (§ 1) provides for an endowment fund to consist of "all surplus monies taken in by the college as tuition fees over and above the operating expenses of the college." It further provides that: "* * * The income from this endowment fund may be used in providing scholarships for worthy students or for supplementing the income from tuition fees in the event that the tuition fees are inadequate to provide for the current expenses of the college. No part of the principal of this endowment fund may be used for any purpose, except for necessary enlargement of the college facilities, the payment of the obligations of the college, or for such other purposes as the board of governors may unanimously determine to be necessary and essential to its welfare. * * *." (Italics supplied.)

The by-laws further provide (Art. IV, § 2) that: "In the event of the final dissolution of Rider College, its net assets shall in nowise be deemed the property of its Board of Governors, or Trustees or any other person or persons, but shall be considered a trust fund for educational purposes to be distributed as such by the then existing Board of Governors, by a majority vote thereof to such other educational institutions then organized and existing under the laws of the State of New Jersey as the said Board shall determine." And Article VI (Amendments) provides: "Section 1. Amendments to the by-laws may be made at the annual meeting called for the purpose by a two-thirds vote of the Board of Governors."

This was the legal set-up under which respondent operated prior to 1935. Under this, set-up it was frankly admitted that it is a fair interpretation of the act of 1890, supra, to say that respondent could have operated thereunder for profit had it desired so to operate. That the charter and by-laws could be changed is not subject to debate. They were in fact, as we shall show, later changed.

Apart from this set-up, how, in fact, did respondent operate? Town of Montclair v. State Board of Equalization of Taxes, 86 N.J.L. 497, 92 A. 270, affirmed, 88 N.J. L. 374, 96 A. 44; Dana College v. State Board of Tax Appeals supra, 184 A. 412, 14 N.J.Misc. at page 310. Notwithstanding respondent's claim that it did not operate for a profit, the proofs negative the claim. Mr. Franklin B. Moore and Mr. John E. Gill served Rider College as president and dean respectively for over 33 years. There is nothing to indicate that they were not well paid; the contrary is true. From time to time as business schools were established in Trenton they would, with their moneys, purchase same and merge them with Rider College. They "owned and operated" Rider College. They were able during their ownership and operation thereof, to build up an endowment fund, from tuitions and other charges made (such as registration fees, sale of text books, maintenance, etc.) over and above operating expenses (which included liberal salaries), variously estimated between $200,000 to $300,000; the "bulletin" above referred to states this amount to be $400,000. All taxes due prosecutor were paid. There is nothing to indicate that respondent ever operated at a loss. Such a resultant financial status could not have been, nor was it made possible, on tuition fees, etc, based on actual costs of instruction. Clearly, such operation is neither charitable, philanthropic nor without profit.

Franklin B. Moore and John E. Gill died in 1934. Their respective estates continued to operate Rider College. Franklin F. Moore and John G. Gill succeeded their respective fathers in their respective positions as President and Dean of Rider College.

In April of 1935, the estates of Mr. Moore and Mr. Gill, deceased, sold and transferred their property to Rider College for the sum of $164,000 subject to two mortgages aggregating $66,000, which Rider College assumed, leaving a net consideration of $98,000. The estates also transferred to Rider College the endowment fund and gave it a release for all of their interests in the estates.

Then changes were begun. We turn to these changes.

In 1937 respondent amended its charter to read, in part, as follows: "The objects for which this association is formed: * * *(d). To conduct the affairs of the college in the accomplishment of the foregoing purpose so that no part of the net earnings of the corporation shall inure to the benefit of any private shareholder or individual." In addition, in 1938, respondent's by-laws (Art. 1, § 1, Control Vested in Board of Governors) were amended so that its Secretary and Treasurer were no longer members of the Board of Governors.

There are in fact 15 trustees; "six are a self-perpetuating group"; "seven" are elected by the alumni organization, and the...