Gray v. Methodist Episcopal Church, South, Widows and Orphans Home in State of Kentucky

• Decision Date: 18 March 1938
• Citation: 272 Ky. 646,114 S.W.2d 1141
• Parties: GRAY v. METHODIST EPISCOPAL CHURCH, SOUTH, WIDOWS AND ORPHANS HOME IN STATE OF KENTUCKY.
• Court: Kentucky Court of Appeals

114 S.W.2d 1141

272 Ky. 646

GRAY v. METHODIST EPISCOPAL CHURCH, SOUTH, WIDOWS AND ORPHANS HOME IN STATE OF KENTUCKY.

Court of Appeals of Kentucky

March 18, 1938

Appeal from Circuit Court, Woodford County.

Action under the Declaratory Judgment Act by the Methodist Episcopal Church, South, Widows and Orphans Home in the State of Kentucky, against John M. Gray, County Court Clerk of Woodford County for a determination whether plaintiff was required to pay a tax for the issuance of a license for a motor vehicle owned by the plaintiff, wherein defendant filed a demurrer. From a judgment, defendant appeals.

Affirmed in part and reversed in part.

Hubert Meredith, Atty. Gen., and Jesse K. Lewis, Asst. Atty. Gen for appellant.

Edward C. O'Rear and Allen Prewitt, both of Frankfort, for appellee.

MORRIS Commissioner.

Appellant is, and was at the time stated in the pleadings, county court clerk of Woodford county, and as such charged with the duty of issuing motor vehicle licenses in accordance with pertinent statutes.

Appellee the "Methodist Episcopal Church, South, Widows and Orphans Home in the State of Kentucky," is a corporation duly organized by an act of the General Assembly in 1871 ^[1] as a nonstock, nonprofit making or sharing corporation. It was empowered "To use all monies from any sources, coming to its hands to provide and maintain a home for the destitute widows and orphans of deceased members of the Methodist Episcopal Church, South, and others who may be placed under its charge."

In accordance with its charter, and in furtherance of its purpose, some years ago it acquired a tract of land and buildings thereon, situated a short distance east of Versailles, and there re-established the home, and at the time of the institution of this suit was caring for more than one hundred orphan children of school ages, who were in attendance in the common schools of Woodford county.

The above facts were set out in appellee's petition, and in addition it was alleged that, in order to furnish transportation for the children, it was necessary to have a motor vehicle, and it purchased one; that later it presented to appellant evidence of his title thereto, and requested registration thereof, but tendered no fee. Appellant refused to issue to it a certificate of registration. It is alleged in the petition that appellant refused because appellee did not manifest that there had been paid the 3 per cent. "use tax" as was required by section 4281i-2, Kentucky Statutes.

It was also alleged that appellee's sole purpose and functions constituted a purely public charity, as contemplated by section 170 of the Constitution, and therefore it was entitled, under the provisions of said section, to have its car duly registered, without the payment of any fee.

The suit was begun and practiced throughout under our Declaratory Judgment Code provisions. Civil Code of Practice, § 639a--1 et seq. The appellant demurred to the petition; the court overruled same. The appellant declined to plead further, and the cause was submitted for a declaration of rights and final judgment. The court adjudged that appellee was an institution of purely public charity; that, being such, it was entitled to have appellant register its car and issue proper certificate, without the payment of license fee, or use tax, and directed appellant to issue proper certificates as required by law. To this judgment defendant below excepted, and was granted an appeal.

While it was alleged in the petition that the clerk had refused registration because of the nontender of the use tax, in the brief for appellant it is pointed out that the statute specifically exempts a charitable institution from the payment of the latter tax, but argued that the petition was nevertheless demurrable, since appellee in seeking registration had refused to tender the fee required by section 2739g-2c, Kentucky Statutes.

The parties agree that appellee's business, and the conduct thereof in the manner stated, brings it within the class of "public charities" as contemplated by section 170 of the Constitution, and the definition of "purely public charities," as declared in opinions of this court. After observing its charter, and the undenied allegations of the petition, we are in accord with both parties.

Appellant in argument takes the position that since the exaction of a fee for registration of motor vehicles is not the exaction of money for revenue purposes, but solely for regulatory purposes, or as usually termed in describing such exactions, for police purposes or regulation, section 170 of of the Constitution does not nor has it been construed by this court to exempt, or to have the effect of exempting, charitable institutions from its payment. Appellee contends that the all-inclusive language of section 170 of the Constitution exempting institutions exercising the functions and privileges of a "purely public charity" necessarily includes, and has been construed to include, the license tax herein concerned. So much of the section of the Constitution, supra, as has bearing on the question, provides: "There shall be exempt from taxation public property used for public purposes; *** institutions of purely public charity, *** and all laws exempting or commuting property from taxation other than the property above mentioned shall be void."

Appellee correctly takes the position that the exemption set out in the section of the Constitution, supra, especially in so far as it exempts public charities from taxation, was intended to and has been so construed as to exempt such charities from the exaction of "taxes." Taking up first appellant's contention, we find that it has been held that the exemption to public charities is to the institution. This is made clear from a reading of Corbin Y. M. C. A. v. Commonwealth, 181 Ky. 384, 205 S.W. 388, 1 A.L.R. 264; and Trustees of Kentucky Female Orphan School v. Louisville, 100 Ky. 470, 471, 36 S.W. 921, 19 Ky.Law Rep. 1091, 40 L.R.A. 119. In both these cases it was definitely decided that the exemption intended by section 170 of the Constitution was to the "institution." In other words, the exemption was intended to extend further than an exemption of ad valorem on property, directly used by the institution in the operation of its charity. This is made clear by reference to the Orphan School Case, supra, and is no less clear when we read the Y. M. C. A. Case, supra.

Appellee contends that the Y. M. C. A. Case is controlling. In that case we held that, since the exemption intended was from taxation against the institution, it was not required to pay the license tax fee required by section 4224, Kentucky Statutes, for the purpose of operating a restaurant. We said in that case:

"It is insisted for the commonwealth, and this seems to have been the opinion of the trial court, that the exemption granted to institutions of purely public charity is an exemption from ad valorem or property taxes, and that such institutions are not entitled to exemption from the payment of occupational license fees such as are imposed by section 4224 of the Statutes. Whether or not this is true is the only question for decision in this case. That an occupational tax usually, and especially in this case, is not a property tax, is agreed by both parties to this controversy; and it is further agreed, as has been decided by this court in Hager v. Walker, 128 Ky. 1, 7, 107 S.W. 254, 32 Ky. Law Rep. 748, 15 L.R.A.,N.S., 195, 129 Am.St.Rep. 238, that section 4224 of the Statutes is a revenue measure, and not a police regulation; nor does the commonwealth contend that under ** section 170, which, as uniformly construed by this court, *** does not exempt from taxation all of the property of such institutions, the use or income from which is confined to their authorized activities, *** but insists that it is only the property of such institutions, when so employed, that is exempted."

Then follows the court's reasoning leading to the final conclusion, that it is the "institution" and not alone the "property" of such institutions, intended to be exempt from "taxation." In its conclusion it follows the construction given by this court in Trustees of Kentucky Female Orphans School v. Louisville, supra (a thoroughly well developed and considered case), referred to and upheld in Commonwealth v. Y. M. C. A., 116 Ky. 711, 76 S.W. 522, 25 Ky.Law Rep. 940, 105 Am.St.Rep. 234, both of which, however, related to the exemption of the institution from ad valorem taxes.

Concluding as we do, that the cases cited...