Frisco Emp. Hospital Ass'n v. State Tax Commission of Mo., 50509

• Decision Date: 13 July 1964
• Docket Number: No. 1,No. 50509,50509,1
• Parties: FRISCO EMPLOYES' HOSPITAL ASSOCIATION, Appellant, v. STATE TAX COMMISSION OF MISSOURI et al., Respondents
• Court: Missouri Supreme Court

Page 772

381 S.W.2d 772

FRISCO EMPLOYES' HOSPITAL ASSOCIATION, Appellant, v. STATE TAX COMMISSION OF MISSOURI et al., Respondents.

No. 50509.

Supreme Court of Missouri, Division No. 1.

July 13, 1964.

Motion for Rehearing or to Transfer to Court En Banc Denied

Sept. 14, 1964.

George E. Bailey and George J. Pruneau, St. Louis, for appellant.

Thomas F. Eagleton, Atty. Gen., Joseph Nessenfeld, Asst. Atty. Gen., Jefferson City, Thomas J. Neenan, City Counselor, Thomas F. McGuire, Associate City Counselor, Conway B. Briscoe, Jr., DeWitte T. Lawson, Jr., Assistant City Counselors, St. Louis, for respondents.

WALTER H. BOHLING, Special Commissioner.

The Frisco Employes' Hospital Association, plaintiff corporation (referred to as appellant or Association), owns and operates a 129-bed hospital in the City of St. Louis. The City Assessor placed this property on the assessment roll for ad valorem taxes as of January 1, 1963. This action was upheld upon successive reviews by the Board of Equalization of said City, the State Tax Commission, and the Circuit Court of the City of St. Louis, resulting in an assessment at $137,840.00. The Association has appealed. The City of St. Louis was permitted to intervene in the Circuit Court. The issue for determination is whether the Association's hospital is 'actually and regularly used exclusively * * * for purposes purely charitable' within Section 137.100(5) ¹ and Art. X, Sec. 6, Mo.Const. V.A.M.S. (set forth more fully hereinafter), and consequently exempt from taxation. This case was submitted to the State Tax Commission upon an agreed statement of facts. We state the relevant facts.

The Association was organized in 1898 as a nonprofit corporation. See now Chapter 352. It purchased the site and erected the hospital. Its present name was adopted in 1911.

The management and control of the Association is vested in a Board of Trustees. At first the St. Louis & San Francisco Railroad Company, predecessor to the present St. Louis-San Francisco Railway Company (sometimes herein referred to as the Railroad), appointed the majority of the Board of Trustees. Ever since an amendment of the bylaws in 1940 the employe representatives have constituted a majority of the Board.

The Association provides medical and surgical services on an inpatient and outpatient basis to its members in the ninestate area in which the Railroad and its subsidiaries operate. This hospital is the only hospital owned by the Association. It is a duly licensed and accredited hospital.

A chief surgeon has the immediate supervision of the hospital. As permitted by the bylaws, he is also chief surgeon for the Railroad and receives one half of his salary from it. The hospital is well staffed.

In general, the facilities of the hospital are available only to members of the Association, which is limited to employes and retired employes of the Railroad, employes of the Association, and officers and employes of labor organizations representing the Railroad employes. Families of the Association's members are not members of the Association; but the wives and dependent children of a member and persons other than members injured on the line of the Railroad may, if facilities are available, receive treatment as pay patients. No pay patients have been admitted for many years on account of a shortage of facilities.

The Association's funds are derived mainly from monthly dues paid by the membership. The current monthly dues of regular members are $9.00 and for 'pensioners' $8.00. ('Pensioner,' as here used, does not mean an indigent person but refers to one who has had ten-years' membership in the Association, who has retired from the Railroad's active service, and who is also known as a 'limited member.') A breakdown of the membership into categories shows the following monthly payments: Operating crafts, 2,574 members, paid by employe through payroll deduction; nonoperating crafts, officers and specialists, 5,922 members, $7.58 paid by employer--$1.42 paid by employe through payroll deduction; hospital employes, 208 members, $6.80 paid by Association--$2.20 paid by employe through payroll deduction; furloughed employes, 50 members, and labor representatives, 17 members, $9.00 paid directly by member; pensioners, 1,834 members, $8.00 paid directly by pensioner. Under collective bargaining agreements, the Railroad pays the above $7.58. It has accorded 937 officers and specialists, not members of a union, the same benefit. It pays an additional 32cents a month for nonoperating craft employes for extended hospitalization in the event of a furlough and, under an agreement with the Association, $5,500 a month for treatment of employes injured while on duty. The Association agreed to pay the above $6.80 for certain of its employes under a bargaining agreement and now pays the $6.80 for all of its employes whether or not covered by a labor contract.

We understand that during 1962 970 limited members (pensioners) received 14,981 patient-days' service at the hospital; that the costs allocated to this service was $337,072.50 and that the Association's income from the limited members was $165,140.70. Expressed otherwise, the limited members received 40.28% of the patient-days' service while contributing 13.68% to the Association's gross income for 1962.

Article II of the Articles of Association, so far as material, states: 'The purposes for which this Association is formed are the support of a benevolent and charitable undertaking in this: To provide medical and surgical treatment and care for the employes of the St. Louis and San Francisco Railroad Company, and of its associated Companies, who may be injured or disabled by accident or sickness while in such employ, and in the line of duty to such extent only and under such rules and regulations as may be prescribed from time to time by the Trustees hereinafter provided for; and to furnish such employes with additional privileges and benefits, not inconsistent or interfering with the main object of the Association, * * *.'

Article II of the Association's bylaws is to like effect, but much briefer in wording.

Under Article I of the Association's Rules and Regulations employes of the Railroad and its affiliated companies here involved 'shall from the date of their employment be considered members of the Association * * *.'

Article IV of the Articles of Association provides that '* * * the funds necessary for carrying out its purpose shall be raised in such manner as may be provided by the By-Laws.'

The Rules and Regulations provide for the assessment of specified monthly dues against the membership.

The constitutional and statutory provisions material here read: '* * * all property, real and personal, not held for private or corporate profit and used exclusively * * * for purposes purely charitable * * * may be exempted from taxation by general law. All laws exempting from taxation property other than the property enumerated in this article, shall be void.' Mo.Const.1945, Art. X, Sec. 6.

And, our General Assembly has provided: 'The following subjects are exempt from taxation for state, county or local purposes: * * * (5) All property, real and personal actually and regularly used exclusively * * * for purposes purely charitable and not held for private or corporate profit * * *.' Sec. 137.100(5).

The case is presented on the theory appellant is a nonprofit corporation under Chapter 352. Appellant contends its hospital, not exempted by name, is exempt under our italicized words supra. A charitable use tax exemption depends upon the purposes of the organization and the use made of the property involved. Each claim rests upon the particular facts of that case. St. Louis Gospel Center v. Prose, Mo., 280 S.W.2d 827, 831 ; St. Louis Council, Boy Scouts v. Burgess, 362 Mo. 146, 240 S.W.2d 684, 687; Taxation, 51 Am.Jur. Secs. 634, 635; 84 C.J.S. Taxation Sec. 297, d; Annotations, 22 A.L.R. 907; 108 A.L.R. 284, as to hspitals, 287, 289, 298, 303; 144 A.L.R. 1483.

The following has been considered a comprehensive and carefully drawn definition of a legal charity: "A gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds or hearts under the influence of education or religion, by relieving their bodies from disease, suffering, or constraint, by assisting them to establish themselves in life, or by erecting or maintaining public buildings or works or otherwise lessening the burdens of government." (From Mr. Justice Gray in Jackson v. Phillips, 1867, 14 Allen (96 Mass.) 539, 556; 14 C.J.S. Charities Sec. 1, n. 3.) Salvation Army v. Hoehn, 354 Mo. 107, 188 S.W.2d 826, 830; Northeast Osteopathic Hospital v. Keitel, 355 Mo. 740, 197 S.W.2d 970, 975.

The last sentence of Sec. 6, Art. X, Mo.Const., admonishes our General Assemblies and courts not to extend exemptions from taxation beyond the authorization found in said Article X. Provisions exempting property from taxation should be strictly, yet reasonably, construed. Midwest Bible & Missionary Inst. v. Sestric, 364 Mo. 167, 260 S.W.2d 25, 29; St. Louis Gospel Center v. Prose, supra, 280 S.W.2d l. c. 830.

Appellant, in its brief, makes several points which respondents do not question and do not brief. We mention that some of the issues thus raised are subject to limitations not stated in appellant's brief. We do not, however, extend this opinion to discuss these matters as we consider them not determinative of this appeal.

Appellant says the fact that 40% of the hospital days of 1962 were used by limited members (pensioners) representing approximately 17% of the total Association membership, that said members pay $12.00 a year less than other members of the Association, and that this service costs $170,000 more than was received from limited members, shows the Association is relieving society of the problem of 'medical care of the aged.' The term ...