Defenders' Townhouse, Inc. v. Kansas City, 53830

• Decision Date: 12 May 1969
• Docket Number: No. 53830,No. 2,53830,2
• Citation: 441 S.W.2d 365
• Parties: DEFENDERS' TOWNHOUSE, INC., a Not-for-Profit Corporation, Respondent, v. KANSAS CITY, Missouri, a Municipal Corporation, Goldie Horner, Ilus W. Davis, Rollin Agard, J. D. Robins, Sal A. Capra, Jeffrey Hilleison and Frank Brennan, Appellants
• Court: Missouri Supreme Court

Page 365

441 S.W.2d 365

DEFENDERS' TOWNHOUSE, INC., a Not-for-Profit Corporation, Respondent, v. KANSAS CITY, Missouri, a Municipal Corporation, Goldie

Horner, Ilus W. Davis, Rollin Agard, J. D. Robins,

Sal A. Capra, Jeffrey Hilleison and

Frank Brennan, Appellants.

No. 53830.

Supreme Court of Missouri, Division No. 2.

May 12, 1969.

Motion to Transfer to Court En Banc or for a Rehearing

Denied June 9, 1969.

James E. Grier, Kent E. Whittaker, Kansas City, for respondent; Brewer, Myers, Beckett & Grier, Kansas City, of counsel.

Herbert C. Hoffman, City Counselor, L. B. Saunders, Associate City Counselor, for appellants.

BARRETT, Commissioner.

Defenders' Townhouse, Inc., a Kansas not-for-profit corporation, owns and operates a housing facility at 922 Linwood for persons over 62 years of age. For the years 1965, 1966 and 1967 Kansas City, a constitutional charter city through its taxing authorities, City Assessor, City Board of Equalization and City Board of Delinquent Tax Adjustment, assessed and levied ad valorem taxes on Defenders' property of $5595.67, $5079.14 and $4563.68, a total of $15,238.49. Claiming that its property was used 'exclusively * * * for purposes purely charitable' and was therefore exempt from taxation, Const.Mo. Art. X, Section 6, V.A.M.S.; RSMo 1959, § 137.100; V.A.M.S., and failing to secure relief from the city, Defenders' Townhouse instituted this action against Kansas City and its officials. Six counts of Defenders' petition seek a declaratory judgment and an injunction against the assessment and collection of the taxes. In three counts 3, 6 and 9, it was stated that because the county exonerated it from state and county taxes for those years, the city's levy and assessment violated Article X, Section 11(a) of the constitution providing that counties and 'other political subdivisions' may levy taxes 'but the assessed valuation therefor in such other political subdivisions shall not exceed the assessed valuation of the same property for state and county purposes.' The city made full answers to all claims and allegations asserting chiefly that Defenders' Townhouse was not operated and used for charitable purposes but was operated for profit and therefore was subject to taxation. In addition, in three counts the city counterclaimed for its taxes. The trial court found for Defenders on all six counts relating to declaratory relief and injunction, it found against Defenders, however, on the three counts under Section 11(a), Article X of the constitution thereby finding and decreeing that if the property was not exempt from taxation the city had lawfully and properly assessed the property and levied the tax. The court of necessity found against the city on its counterclaims for the taxes. The city only has appealed and thus presents the decisive issue of whether respondent's property is exclusively used for purely charitable purposes and is therefore exempt from taxation.

As stated, Defenders' Townhouse is a Kansas corporation of 10,000 shares with a capital of $10,000.00 and formed for the sole purpose of managing, owning and operating the facility involved here. Defenders' Townhouse was caused to be incorporated by Defenders of the Christian Faith, the sole shareholder and contributor of all the capital of Townhouse. The articles of incorporation bylaws and other material relating to Christian Faith are not set out but Dr. Armstrong who is currently president of both organizations testified that it was formed in 1925 by a group of ministers to 'work among all churches' and 'to defend the historic faith of Christianity and the Bible beliefs.' It is not affiliated with any recognized church denomination, Dr. Armstrong said, 'we are an interdenominational church ministry.' He had only recently been affiliated with Townhouse but he said that his predecessors 'undertook working among the aged' and in connection with Townhouse said, 'We do not urge anything or we do not force anything upon these people, but we make available to them our spiritual assistance. We make available to them regular meetings in our chapel.' He said that he and other ministers were available 'to counsel with them--to assist them in any way possible. We feel this is a very rewarding ministry, and it is very important.' The officers of the two corporations are overlapping and the salaries and expenses of the president and secretary-treasurer of Townhouse in excess of $25,000.00 were paid by contributions received by Christian Faith. It was stipulated that all payments on Townhouse indebtedness had been made by contributions received by Christian Faith and that 'Christian Faith as a condition to obtaining the loan (an FHA loan to Townhouse of $1,116,000.00) has agreed to subsidize by charitable contributions any and all deficiencies arising from the operations of the Defenders' Townhouse.' It should be noted that any contracts or arrangements as to the precise financial relationships between Townhouse and Christian Faith are not mentioned or set out.

These particular facts with respect to Christian Faith are interpolated and detailed for the purpose of making and emphasizing an important distinction. Christian Faith is not a party to this litigation. Despite their close relationship the action was instituted and prosecuted by Defenders' Townhouse and the question is not whether Christian Faith is entitled to an exemption by reason of property 'used exclusively for religious worship.' Const.Mo. Art. X, Sec. 6. And in this connection counsel for Defenders' Townhouse make no claim to an exemption by reason of religion. Thus the appeal is not concerned with the exemption of a religious body or the force and effect of property devoted to a combined religious and secular use. Annotation 168 A.L.R. 1222, 1235; Evangelical Lutheran Synod v. Hoehn, 355 Mo. 257, 196 S.W.2d 134. Again, it should be emphasized, the problem as briefed and argued by the parties is whether Defenders' Townhouse is exempt from taxation for the reason that it is used within the meaning of the constitution and the statute 'for purposes purely charitable.'

Also preliminarily to detailing the circumstances in which the problem is to be resolved the Missouri cases dealing with the general subject of charitable immunity from taxation should be noted. In this connection there have been no cases in Missouri involving the tax immunity of residences or facilities for the aged. While Evangelical Lutheran Synod v. Hoehn, noted above, involved religious and charitable problems it had become a leading case in certain respects and furnishes some more or less permanent guidelines in a field of changing concepts of both religion and charity. It was there held that the Lutheran Synod's vast publishing business, Concordia Publishing House, was not exempt from taxation as either a religious or chariable enterprise. It was conceded that the primary objective of both organizations, the church and the publishing business, was primarily religious, nevertheless, it was laid down as a principle that 'religious or charitable institutions cannot enter the field of business and operate for profit.' (196 S.W.2d l.c. 143.) The earlier YMCA cases and the Salvation Army case were reconciled but certain basic concepts were not modified. In Salvation Army v. Hoehn, 354 Mo. 107, 188 S.W.2d 826, the Salvation Army, an Illinois not-for-profit corporation, acquired at a foreclosure sale for $108,000.00 the 13-story Robert E. Lee Hotel in St. Louis and converted it into Evangeline Residence for single employed women. The details of the operation of the residence, rentals, services, meals are all set out and it was established that there was no intention or effort to make a profit and for the years involved, 1941--1943, the enterprise operated at a loss 'made up from the general funds of the Salvation Army.' It must be noted tht the Salvation Army itself owned and operated the residence and was the only party to the suit. The earlier YMCA cases (State ex rel. Koeln v. St. Louis YMCA, 259 Mo. 233, 168 S.W. 589; State ex rel. St. Louis YMCA v. Gehner, 320 Mo. 1172, 11 S.W.2d 30; St. Louis YMCA v. Gehner, 329 Mo. 1007, 47 S.W.2d 776, 81 A.L.R. 1449) were again reconciled or distinguished but of those particular cases the court said, 'Exemption from taxation was properly denied because a part of the building was concededly used for purposes purely commercial.' At another point it was observed 'that the YMCA, in effect, was 'conducting hotels or boarding houses' for pay, and rendering other services for which it made charges, the barber shop, tailor shop, soda fountain, swimming pool, etc. In other words, the holding was to the effect that the services, even though wholly without profit, were not exclusively and purely charitable.' The second and third YMCA cases were criticized as 'too strict, that is, not reasonable' and confined the concept of charity 'solely to the relief of the destitute, and excludes all humanitarian activities, though rendered at cost or less, 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 make it more likely that they will become useful citizens.' When the fourth YMCA case, forty years after the first one, Young Mem's Christian Ass'n v. Sestric, 362 Mo. same property and facilities came to the court the earlier cases were again reconciled in part but upon the basis of the intervening decisions in Young Women's Christian Ass'n v. Baumann, 344 Mo. 898, 130 S.W.2d 499, (the fourth YMCA case) and Missouri Goodwill Industries v. Gruner, 357 Mo. 647, 210 S.W.2d 38, exemption was granted because in those cases it was said, 'the uses made of the properties were intimately connected with the accomplishment of the purely charitable purposes of the organizations and because the uses themselves did not have for their purposes the making of profit. A distinction...