Jackson County v. State Tax Commission

• Decision Date: 10 March 1975
• Docket Number: No. 58676,58676
• Parties: JACKSON COUNTY, Missouri, et al., Respondents, v. STATE TAX COMMISSION, Appellant, and Saint Luke's Hospital of Kansas City et al., Appellants-Intervenors.
• Court: Missouri Supreme Court

Page 378

521 S.W.2d 378

JACKSON COUNTY, Missouri, et al., Respondents, v. STATE TAX COMMISSION, Appellant, and Saint Luke's Hospital of Kansas City et al., Appellants-Intervenors.

No. 58676.

Supreme Court of Missouri, En Banc.

March 10, 1975.

Rehearing Denied April 14, 1975.

Stanley Christopher, County Counselor, Joe M. Williams, Deputy County Counselor, John Edward Cash, Associate County Counselor, Kansas City, for respondents.

Robert P. Lyons, Howard F. Sachs, Carl H. Helmstetter, Kansas City, for appellant and appellants-intervenors; Spencer, Fane, Britt & Browne, Blackwell, Sanders, Matheny, Weary & Lombardi, Mann, Sullivan &amp Gilwee, Lem T. Jones, Jr., Kansas City, of counsel.

Elliott P. Koenig, Thomas, Busse, Goodwin, Cullen, Clooney & Ottsen, St. Louis, for Hospital Assn. of Metropolitan St. Louis as amicus curiae.

Forrest P. Carson, Cullen Coil, Jefferson City, for Missouri Hospital Assn., amicus curiae.

Charles L. Bacon, Shook, Hardy & Bacon, Kansas City, Eugene T. Hackler and Robert C. Londerholm, Hackler, Londerholm, Speer, Vader & Austin, Olathe, Paul T. Miller, Kansas City, for amicus curiae.

Leland B. Curtis, Jefferson City, for James R. Spradling, amicus curiae.

MORGAN, Judge.

The State Tax Commission of Missouri ruled that the tangible personal property of St. Luke's Hospital and the real property of Baptist Memorial and Research Hospitals, all in Kansas City, were exempt from ad valorem taxes under the provisions of Article X, § 6, of the 1945 Missouri Constitution, V.A.M.S., and § 137.100(5), RSMo 1969, V.A.M.S. The trial court found to the contrary and entered judgment accordingly; from which, the Commission, and the hospitals as invervenors, lodged their appeal. With construction of the constitution and revenue laws called for, this court has original appellate jurisdiction by virtue of Article V, § 3, of the constitution of this state.

Although the record is rather voluminous, and sometimes technical, there is little dispute as to the underlying facts. In July of 1972 of Board of Equalization of Jackson County assessed for ad valorem tax purposes properties owned by the three hospitals. In order to eliminate any issue regarding the valuation of the same, such assessment was set at $100 for 1972. Accordingly, an assessment of $100 was placed upon the real property of Baptist Memorial used a hospital; $100 upon the business personal property of St. Luke's; and, $100 upon the real property of Research with the intent of testing in this litigation only the tax status of that portion of the same used as residence quarters for hospital employees, nursing students, para-medical students and their families. The Board's decision that the property was taxable was appealed to the Commission, with an apparent agreement not to challenge the action of the Board as discriminatory, arbitrary or capricious in that these three hospitals are the only ones assessed among thirteen now tax-exempt hospitals in the area of Kansas City. The three are operated by not-for-profit corporations and have never issued any stock nor paid a dividend to any person; and, there is no contention that any members of the corporations have ever received a pecuniary benefit from their respective hospitals. Prior to 1972, the assessor of the county had carried the properties on his rolls as tax exempt. The hospitals have never filed a Missouri state income tax return or paid any sales or use tax on purchases for use in the conduct of hospital functions. Prior to January 1, 1972, they did not pay the state unemployment compensation tax, but have since the applicable statutes were amended (effective on the date noted) to cover employees of charitable organizations. The hospitals are exempt from federal income tax under 26 U.S.C.A. § 501(c)(3) as corporation organized and operated exclusively for charitable purposes, with no part of the net earnings inuring to the benefit of any private shareholder or individual. Contributions to these hospitals are deductible therefore by the donor for federal income tax purposes under 26 U.S.C.A. § 170. Each hospital is governed by a board of directors (or trustees) who donate their time and effort to the establishment of policy, governing of the hospital and service on working committees. The day-to-day management is handled by an Administrator (Research) or an Executive Director (St. Luke's and Baptist) who is salaried and responsible to (though not a member of) the board of directors or trustees. The medical, surgical and dental staff is selected and appointed by the governing board of each hospital. Only members of a staff have the privilege of admitting patients with some limited exceptions available. However, each hospital maintains large emergency facilities which are open to the public 24 hours per day. Each has turned a profit for several years, i.e., income has exceeded expenses. Any excess has been and is devoted to (a) retirement of debt, (b) expansion and replacement of facilities or (c) improvement of patient care and medical education. Each hospital derives a portion of its revenues from voluntary donations which are placed in trust to further the purposes noted.

Any inquiry as to whether or not the institutions, in fact, are operated in such a manner as to qualify for tax-exempt status is necessary only if the objectives sought to be accomplished fall within the charitable concepts of the constitutional and statutory provisions heretofore cited. Community Memorial Hospital v. City of Moberly, 422 S.W.2d 290, 295(7) (Mo.1967). The following excerpts from the Articles of the three governing corporations dispose of this initial question by reflecting that they do, to-wit:

Research: Basically, to care for the sick and to carry on research and teaching and to foster the health of the community, and in such connection to establish, operate and maintain hospitals, clinics, laboratories, plants and all manner of other facilities for the study and care of the human body or any part thereof, and the causes, effects, diagnosis, treatment and prevention of diseases, disorders, maladjustments and abnormalities of the human body * * *

Baptist: . . . to provide treatment to the sick and injured who come to its doors.

St. Luke's: . . . to own, operate and conduct a charity and pay hospital * * *

Article X, § 6, of the 1945 Constitution of Missouri (as amended in 1972) provides, in part, that: '. . . 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.'

Section 137.100 (as amended in 1959), implementing the constitutional provision, provides, in part, that: '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 . . .'

No novel question of law is involved nor suggested by the parties. As with other tax exemption cases, disposition of the case must turn on the particular facts presented in the record. Midwest Bible and Missionary Inst. v. Sestric, 364 Mo. 167, 260 S.W.2d 25 (1953).

Nevertheless, for simplicity of reference and as a guide for consideration of the factual issues, we do emphasize two cases pertaining to hospitals. Other representative cases, consistent therewith, need only be identified. ¹

In Buchanan v. Kennard, 234 Mo. 117, 136 S.W. 415 (Mo. banc 1911), this court reviewed the historical premise upon which any concept of 'charitable purpose' is predicated. Although construction of a trust was involved, the legal principles therein considered are relevant and applicable, l.c. 420--421, to-wit: 'But a person who is sick, injured, or afflicted, or in a helpless condition, is none the less a proper object to be included in the purpose of a public charity, although he may not be poor. * * * From the foregoing cases it must be taken as settled that public charities for the relief of persons who are made objects of the charity for reasons other than their poverty will be upheld. The language of the case last cited, as to the purpose of the trust, does not differ materially from that of the bequest under consideration, and, construing it, the court said: 'The rich should not be turned away because of their wealth, nor the poor because of their poverty.' And why is not that, as was the purpose of the testator in this case, the true spirit of public charity? It was said of old, 'The poor always ye have with you'; and because of that truth, and the need, want, and distress which closely wait upon poverty, the poor have always been, and ever will be, the chief concern of those who have means and are moved by the noble purpose of devoting it to the well-being of their fellow men. But sickness, pain, and suffering are the heritage of all. We are continually attended by peril and may at any time, and when least expected, be stricken by misfortune and affliction. No man can be so rich or so circumstanced as to be exempt from this condition. And if so overtaken, is charity to withhold its ministrations because the stricken sufferer may not be poor? Is the Samaritan to refuse to bind up the wounds of the unconscious man on the wayside because he may have means to pay a physician? Charity, whether public or private, sees the nedd, or want, or affliction, or suffering, and its first concern is to bring relief. The question of whether the recipient is able to pay is the merest incident and of minor importance. In the case under consideration, the ability of the sick or injured to pay may be regarded as almost an intrusion into the high charitable purpose of the benefactor, who would relieve 'sick and injured persons, without distinction of creed.' Such a gift and for such a purpose, aside from the aid of the liberal rule of construction applied by the courts in...