Fredericka Home for the Aged v. San Diego County

CourtUnited States State Supreme Court (California)
Writing for the CourtSPENCE; GIBSON
Citation221 P.2d 68,35 Cal.2d 789
Decision Date18 August 1950

Page 68

221 P.2d 68
35 Cal.2d 789

L. A. 20634.
Supreme Court of California, in Bank.
Aug. 18, 1950.

Page 69

[35 Cal.2d 790] Fred N. Howser, Attorney General, E. G. Benard, Deputy Attorney General, James Don Keller, District Attorney, and Carroll H. Smith, Chief Trial Deputy District Attorney, San Diego, for appellant.

Gray, Cary, Ames & Driscoll and John M. Cranston, all of San Diego, for respondent.

SPENCE, Justice.

Plaintiff, a nonprofit corporation operating a home for elderly people on a 'life care contract' basis, brought this action to recover taxes paid under protest for the tax year 1946-1947. It claimed that it was a charitable organization devoting its property exclusively to charitable purposes and so entitled to the benefit of the recently adopted welfare exemption. Cal.Const. art. XIII, § 1c; Rev. & Tax. Code, § 214. With certain exceptions a parcel of vacant land, some acreage leased for commercial purposes, and a small item of solvent credits the trial court adjudciated the exemption claim in plaintiff's favor and entered judgment accordingly for a tax refund. From such judgment defendant county has appealed, contending that the record does not sustain the conclusion that plaintiff was functioning as a charitable institution within the meaning of the welfare tax exemption law. Upon the undisputed facts, we have conclued that defendant's contention cannot be sustained.

At the trial the only evidence introduced was that offered by plaintiff. It appears that plaintiff was incorporated in 1908 and received as a gift certain land in Chula Vista some 15 acres and the buildings then on it. Subsequent buildings were donated, and in 1916 a trust fund of $200,000 was [35 Cal.2d 791] created. It is conceded that plaintiff is a nonprofit corporation organized for the purpose of providing a home for aged people at its site in Chula Vista, and that the property in dispute, with the exception of the portion hereinafter mentioned, is used exclusively for such purpose and is irrevocably dedicated thereto; that all of its income whether from charges to inmates, investments, gifts or donations is used entirely in the maintenance and operation of the home; that the members of its board of directors serve without compensation, and that the compensation paid to its employees is 'fair and reasonable.' But regardless of these qualifying factors, defendant cites plaintiff's 'manner of operation' as determinative of its ineligibility for the tax benefit applicable to a 'charitable institution' within the meaning of the welfare exemption law.

Applicants for admission to the home must have attained the age of 69 years, be in good health, and meet the approval of the board of directors including consideration over a three months' probationary period. Prior to November 1, 1944,

Page 70

each applicant, in addition to paying a fixed fee for maintenance at the home, was required to execute a trust agreement whereby three-fifths of the applicant's estate would go to the home upon death of the applicant. A new policy was adopted after said date eliminating the trust agreement as an entry requirement, and at the same time the minimum fee for admission to the home was fixed at $5,500. By the terms of the life care contract made with the applicant, the home agreed to furnish room, board, and other services.

As documentary evidence in its behalf and representing the 'last figures available at the time (the exemption) claim was filed', Code Civ.Proc. § 1963, subds. 28-32, plaintiff introduced a financial report for the fiscal year ending June 30, 1945. According to that accounting reocrd, 21 new residents were admitted during the period covered, 16 of them under the policy of charging a minimum fee of $5,500 as established in November, 1944, the average fee being $6,264.04. The exact amount of the admission fee of each applicant was computed actuarily and also depended on the applicant's choice of accommodations. According to one of plaintiff's directors, the division as to the source of plaintiff's income was fixed at 35 per cent from interest on the endowment fund and donations and 65 per cent from admission fees. Certain other schedules introduced in evidence clearly showed that over 25 per cent of plaintiff's gross cash income, as well as its [35 Cal.2d 792] land and buildings, came from sources other than the residents of the home. The trial court found that the total amounts received by plaintiff from its inmates and from the endowment fund have always been insufficient to pay operating expenses of the home, and that the deficit has been met through voluntary gifts and contributions from persons not inmates of the...

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