International Foundation of Emp. Ben. Plans, Inc. v. City of Brookfield

• Decision Date: 26 February 1980
• Docket Number: No. 78-455,78-455
• Citation: 95 Wis.2d 444,290 N.W.2d 720
• Parties: INTERNATIONAL FOUNDATION OF EMPLOYEE BENEFIT PLANS, INC., f/k/a National Foundation of Health, Welfare & Pension Plans, Inc., Plaintiff-Appellant, v. CITY OF BROOKFIELD, Defendant-Respondent.
• Court: Wisconsin Court of Appeals

Page 720

290 N.W.2d 720

95 Wis.2d 444

INTERNATIONAL FOUNDATION OF EMPLOYEE BENEFIT PLANS, INC.,

f/k/a National Foundation of Health, Welfare &

Pension Plans, Inc., Plaintiff-Appellant, v. CITY OF BROOKFIELD, Defendant-Respondent.

No. 78-455.

Court of Appeals of Wisconsin.

Argued Dec. 19, 1979.

Opinion Released Feb. 26, 1980.

Opinion Filed Feb. 26, 1980.

Review Granted.

Timothy C. Frautschi, of Foley & Lardner, Milwaukee, for plaintiff-appellant.

Harold H. Fuhrman, Sp. Counsel, and Mark W. Ninneman, Wickert & Fuhrman, Milwaukee, argued and of counsel, for defendant-respondent; George A. Schmus, City Atty., Brookfield, on brief.

Before VOSS, P. J., and BROWN and BODE, JJ.

BROWN, Judge.

International Foundation of Employee Benefit Plans, Inc. is seeking to be declared an "educational association" entitling it to an exemption from property taxes pursuant to sec. 70.11(4), Stats. ¹ After a trial by jury, the trial court entered a judgment against International Foundation. We affirm the trial court's judgment and hold that International Foundation is not an educational association as contemplated by the statute.

This case reaches the appellate courts for the third time. The first case, National Foundation v. Brookfield, 65 Wis.2d 263, 222 N.W.2d 608 (1974), was an appeal by Brookfield from an order overruling a demurrer to International Foundation's complaint. The supreme court reversed and remanded with leave to replead. The significance of the first decision is the supreme court's emphasis upon the necessity that one claiming an exemption for educational purposes must be engaged in "traditional" education. The court said:

Although the complaint here does expressly or by reasonable inference allege the elements specified by sec. 70.11(4), Stats., necessary to establish a property tax exemption, it is also necessary, because of our ruling in Engineers & Scientists (v. City of Milwaukee,) (38 Wis.2d 550, 157 N.W.2d 572 (1968)) that the complaint go further and specifically set forth facts showing that plaintiff is engaged in the kind of traditional educational activities which would entitle it to receive tax exempt status. . . .

The fatal defect of the complaint as now stated, however, is that there are no supporting facts concerning the purposes and functions of the plaintiff. We think more is required, in view of Engineers & Scientists. Specific traditional educational activities must be engaged in in order to qualify for tax exemption as an educational association. (Footnote omitted.) National Foundation v. Brookfield, supra, at 266-67, 222 N.W.2d at 610.

A new complaint was drafted alleging engagement in traditional educational activities. Again, Brookfield appealed from an order overruling its demurrer to the complaint. In the second appeal, however, the supreme court affirmed. The court held that the complaint set forth sufficient facts to show that International Foundation was engaged in the kind of traditional educational activities which would entitle it to a tax exemption. Proof of those facts must be determined at a trial on the merits. International Foundation of Employee Benefit Plans, Inc. v. City of Brookfield, 74 Wis.2d 544, 549-50, 247 N.W.2d 129, 132 (1976).

Following the second appeal, the case was returned to the trial court where the issues were tried before a jury. The jury found that International Foundation was not an educational association, that its property was not owned and used exclusively for the purposes of the association, that its property was not necessary for the location and convenience of the buildings and that the property was not used for nonprofit purposes.

A preliminary question that must be resolved is what standard of review this court is to employ in reviewing the jury's determinations. As noted above, this case was tried to a jury. Both factual disputes and the ultimate question of whether International Foundation is an educational association were submitted to the jury. However, the ultimate question of whether International Foundation is or is not an educational association is dependent upon a construction of the term "educational association" under sec. 70.11(4), Stats. The issue is one of statutory construction and therefore is a question of law not fact. As a result, the issue must be determined by this court without giving any special weight to the conclusions of the jury. Engineers & Scientists v. City of Milwaukee, 38 Wis.2d 550, 554, 157 N.W.2d 572, 574 (1968).

Thus, we must look to the facts ab initio to determine whether the primary use to which International Foundation's building is put comes within the compass of what the legislature has denominated as an educational association. Engineers & Scientists v. City of Milwaukee, supra. The record reveals that the facts are substantially undisputed. The facts are as follows.

Employee benefit plans have long been a staple of negotiated fringe benefits resulting from management-employee bargaining. The Taft-Hartley Act of 1947 gave a great incentive to both management and workers by providing that such pensions would be tax deductible. Taft-Hartley provided, however, that in order for the plan to be tax deductible, the fund must be managed by trustees half of whom are appointed by management and half by labor. Since the inception of the act, 6,000 Taft-Hartley plans have come into existence.

Some of the trustees who manage these plans are not specially trained to handle the funds. Labor representation on these trustee panels often come from the rank-and-file membership of the union. They are either elected or appointed by their unions to serve as trustees in addition to their regular fulltime jobs. They are not compensated for their work. Representation by management on the panel often includes persons not specifically learned in the field of employee benefit plans.

To answer the growing need for informed trustees, International Foundation was organized in 1964 and was designed to inform trustees on subject matters concerning welfare and pension plans. Although the International Foundation has members from different kinds of employee benefit plans, the great majority of trustees are involved in an employee benefit plan envisioned by the Taft-Hartley Act.

The Articles of Incorporation set forth the purposes of International Foundation:

(1) Through education to improve and develop the capabilities of individual Union Trustees, Management Trustees and Administrators of jointly-trusteed health, welfare and pension benefit plans;

(2) To provide educational conferences from time to time for the trustees, administrators, and advisors of such plans; . . .

(3) To promote the training and education of trustees and administrators in the management of health, welfare and pension plans;

(4) To improve public understanding and acceptance of the functions of these plans;

The International Foundation is governed by a board of directors, nine of whom at any given time are labor trustees, nine management trustees and nine administrators (hired employees who carry out the day-to-day management operation of the particular fund). The board's executive committee consists of a president-chairman, a president-elect and a secretary-treasurer. The International Foundation has a regular paid staff to implement foundation business.

International Foundation has 19,000 individual members. The dues are generally not paid by the individual members but are paid by the 3,500 pension fund groups in the organization. Sixty-five to seventy percent of the individual members are trustees. The remainder includes accountants, lawyers, actuaries, investment counselors, banks, insurance companies and others interested in employee benefit plans.

To implement the education of new trustees, International Foundation sponsors a "New Trustees Institute" four times a year. This institute deals with such subjects as the importance of the labor contract in the trust agreement, the fundamentals of investment, familiarization of the various kinds of investments, the collection of delinquencies, and how trustees can best inform plan members, in understandable language, about their benefit programs.

The "New Trustees Institute" is, however, only a small part of International Foundation's operations. The bulk of instruction is related to the continuing education of the trustees. This continuing education is provided in the form of 35 to 40 seminars per year which are attended by a total of 10,000 to 11,000 people each year. Attendance at these seminars ranges from 75 to 400 persons per event. Additionally, there is an "annual conference" attended by 5,000 to 6,000 people each year. The annual conference lasts five days, and there generally are different sessions going on simultaneously during the day. No attendance records are kept during either the seminars or the annual conference, but the International Foundation will issue a Certificate of Attendance if an individual member submits attendance cards. There is no testing procedure at the end of the seminars or at the annual conference.

An additional benefit of the seminars is the opportunity for trustees to meet and exchange information and ideas with other trustees and to be updated on new investment opportunities, changes in applicable law and other more general areas relating to the continuing education of trustees.

International Foundation owns one building resting on eleven acres of land. International Foundation claims seven and one-half acres as exempt. The building houses the fifty-five member staff of International Foundation, a library with 480,000 items containing ninety percent of all material in the field of employee benefits, and a research department. The building also contains a printing office for the purpose of preparing textbooks, periodicals for use in the seminars and a monthly news magazine. These printed resources are sent out free to members and deal with...