Dove Lewis Memorial Emergency Veterinary Clinic, Inc. v. Department of Revenue

• Court: Supreme Court of Oregon
• Writing for the Court: Before PETERSON, C.J., LENT, LINDE, CAMPBELL, CARSON and JONES, JJ., and GILLETTE; GILLETTE
• Citation: 723 P.2d 320,301 Or. 423
• Parties: DOVE LEWIS MEMORIAL EMERGENCY VETERINARY CLINIC, INC., Appellant, v. DEPARTMENT OF REVENUE, State of Oregon, Respondent. TC 2086; SC S31597.
• Decision Date: 05 August 1986

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723 P.2d 320 301 Or. 423 DOVE LEWIS MEMORIAL EMERGENCY VETERINARY CLINIC, INC., Appellant,
v.
DEPARTMENT OF REVENUE, State of Oregon, Respondent. TC 2086; SC S31597. Supreme Court of Oregon. Argued and Submitted Jan. 29, 1986.
Decided Aug. 5, 1986.

Kirkham E. Hay, Portland, argued the cause and filed the brief for appellant.

Dave L. Canary, Asst. Atty. Gen., Salem, argued the cause for respondent. With him on the brief was Dave Frohnmayer, Atty. Gen., Salem.

[301 Or. 424] Before PETERSON, C.J., LENT, LINDE, CAMPBELL, CARSON and JONES, JJ., and GILLETTE, J. Pro Tem.

[301 Or. 425] GILLETTE, Justice Pro Tem.

Taxpayer, Dove Lewis Memorial Emergency Veterinary Clinic, Inc., appeals from a judgment of the Oregon Tax Court denying its claim to a real property tax exemption for the tax year 1981-82. 10 OTR 33 (1985). The Tax Court ruled that taxpayer was not entitled to the exemption because it did not qualify as a charitable corporation. Pursuant to ORS 305.445, we review anew upon the record to determine whether taxpayer is a charitable corporation and thereby eligible for the tax exemption. We agree that it is not eligible and therefore affirm.

The relevant facts are as follows: In 1965, a group of Portland area veterinarians who were members of the Portland Veterinary Medical Association (PVMA) attempted to provide an emergency service for the treatment of small animals. The service was available after the veterinarians' normal hours of operation; participating veterinarians volunteered their services and agreed to share on-call responsibilities. The system proved to be inefficient due, in large part, to the refusal of some members to respond to calls.

During the ensuing years, one of taxpayer's eventual founders, Dr. Werner, discussed the prospect of forming an emergency clinic with other local veterinarians but could not generate enough interest or financial backing. However, in 1973, a local dog breeder named Lewis contacted Werner and offered to donate a sum of money to start up the clinic as a memorial to his late wife.

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Taxpayer was formed under ORS chapter 61 as a nonprofit organization. The Internal Revenue Service granted it nonprofit status on February 26, 1974, exempting it from federal income tax under Section 501(c)(3) of the Internal Revenue Code.

Taxpayer operated its clinic out of a rented building in downtown Portland for approximately seven years, realizing a profit in each year. In 1980, it purchased the subject property and facility with funds derived in part from the net revenues received in the preceding seven years of operation. A small but undetermined amount was made up of donations. Most of the funds, however, came from a loan obtained from a bank.

[301 Or. 426] Taxpayer currently employs a full-time staff consisting of five veterinarians, eight technicians, one secretary and one business administrator. All are paid salaries comparable to persons similarly employed at other veterinary facilities. Taxpayer is open for business from 6 p.m. to 8 a.m. Monday through Thursday, from 6 p.m. Friday through the weekend, and 24 hours on holidays.

In March, 1981, taxpayer submitted an application pursuant to ORS 307.162 ¹ to Multnomah County for exemption from property tax. On July 7, 1981, Multnomah County informed taxpayer that its application for exemption from property tax was denied. On appeal to the Department of Revenue, the Department affirmed the Multnomah County Assessor's opinion and denied taxpayer's request for exemption. Taxpayer then filed this case. The Tax Court affirmed the opinion of the Department on February 26, 1985. The present appeal followed.

Taxpayer seeks exemption from payment of ad valorem taxes on its real and personal property pursuant to ORS 307.130, which provides, in pertinent part:

"Upon compliance with ORS 307.162, the following property owned or being purchased by incorporated literary, benevolent, charitable and scientific institutions shall be exempt from taxation:

(1) * * * only such real or personal property, or proportion thereof, as is actually and exclusively occupied or used in the literary, benevolent, charitable or scientific work carried on by such institutions.

(2) Parking lots used for parking or any other use as long as that parking or other use is permitted without charge."

Taxation is the rule and exemption from taxation is the exception. Corporation of Sisters of Mercy v. Lane County, 123 Or. 144, 152, 261 P. 694 (1927). The burden of establishing [301 Or. 427] entitlement to an exemption is on the taxpayer claiming the exemption. Methodist Homes, Inc. v. Tax Com., 226 Or. 298, 307, 360 P.2d 293 (1961).

Taxpayer's primary contention is that it is a hospital and that the cases considering the eligibility of hospitals to a charitable exemption are controlling. Of course, the mere fact that an organization is either a hospital or a charity does not establish any inherent right to exemption. Unander v. U.S. Nat'l Bank, 224 Or. 144, 151, 355 P.2d 729 (1960); Corporation of Sisters of Mercy v. Lane County, supra, 123 Or. at 153, 261 P. 694; see Ackerman v. Phys. and Surgeons Hosp., 207 Or. 646, 660, 288 P.2d 1064, 298 P.2d 1026 (1956). Any organization claiming the benefit of the tax exemption statute as a "charitable" institution must have charity as its primary, if not sole, object, and must be performing in a manner that furthers that object.

The articles and bylaws of a corporation are prima facie evidence of the character of the corporation. Foundation of Human Understanding v. Dept. of Rev., 301 Or. 254, 722 P.2d 1 (1986) (articles); Benton

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County v. Allen, 170 Or. 481, 485, 133 P.2d 991 (1943) (articles); Hamilton v. Corvallis Hosp. Ass'n., 146 Or. 168, 171-72, 30 P.2d 9 (1934) (articles and bylaws).

Taxpayer's bylaws state:

"The primary objective of the Clinic shall be to provide emergency veterinary service for small animals directed primarily to those hours when the private clinics would not be operating and on weekends, and in addition thereto, to provide further educational facilities for the dissemination of literature, library and other facilities and any other lawful purpose as set out in the Articles of Incorporation."

Taxpayer is organized to provide "emergency small animal veterinary service." One of the principal founders of taxpayer testified that it was formed "probably out of frustration more than anything else," referring to the failed attempt to provide an all-volunteer after-hours emergency...