Ladies Literary Club v. City of Grand Rapids

• Decision Date: 24 November 1980
• Docket Number: No. 63898,63898
• Citation: 298 N.W.2d 422,409 Mich. 748
• Parties: LADIES LITERARY CLUB, Plaintiff-Appellee, v. CITY OF GRAND RAPIDS, Defendant-Appellant.
• Court: Michigan Supreme Court

Page 422

298 N.W.2d 422

409 Mich. 748

LADIES LITERARY CLUB, Plaintiff-Appellee, v. CITY OF GRAND RAPIDS, Defendant-Appellant.

No. 63898.

Supreme Court of Michigan.

Nov. 24, 1980.

Warner, Norcross & Judd by John H. Logie, Grand Rapids, for plaintiff-appellee.

Philip A. Balkema, City Atty., and Daniel A. Ophoff and Michael D. McGuire, Asst. City Attys., Grand Rapids, for defendant-appellant.

MOODY, Justice.

Ladies Literary Club filed a tax assessment appeal with the Michigan Tax Tribunal seeking a real property tax exemption classification under M.C.L. 211.7; M.S.A. 7.7. Tribunal Referee John M. LaRose denied plaintiff's request finding plaintiff to be "essentially a social club". On rehearing, the full tribunal denied plaintiff's tax exemption claim, holding that the club did not exclusively engage in the statutory tax-exempted activities.

The Court of Appeals reversed. It held that plaintiff's activities were sufficiently within the penumbra of the statute's exemption coverage in accordance with the general legislative intent. The Court concluded that "the Ladies Literary Club merits exemption under the statute". 92 Mich.App. 567, 570, 285 N.W.2d 212 (1979).

Defendant City of Grand Rapids appealed to this Court, claiming:

"(T)he Court of Appeals clearly invaded the province of the Legislature. The Court, essentially, substituted its judgment as to what property should be exempt from property taxes for the Legislature's judgment as expressed in MCL 211.7(d); MSA 7.7(d)."

The case turns on statutory construction in conjunction with the specific facts of this case. The basic issue is whether the plaintiff is a non-profit theater, library, benevolent, charitable, educational, or scientific institution within the meaning of M.C.L. 211.7(d); M.S.A. 7.7(d). The statute declares in pertinent part:

"The following property is exempt from taxation under this act:

"(d) Real estate or personal property as shall be owned and occupied by nonprofit theater, library, benevolent, charitable, educational, or scientific institutions and memorial homes of world war veterans incorporated under the laws of this state with the buildings and other property thereon while occupied by them solely for the purposes for which the institutions were incorporated."

A claimant seeking the real property exemption must establish four elements, clearly set forth in Engineering Society of Detroit v. Detroit, 308 Mich. 539, 550, 14 N.W.2d 79 (1944):

"(1) The real estate must be owned and occupied by the exemption claimant;

"(2) The exemption claimant must be a library, benevolent, charitable, educational or scientific institution;

"(3) The claimant must have been incorporated under the laws of this State;

"(4) The exemption exists only when the buildings and other property thereon are occupied by the claimant solely for the purpose for which it was incorporated."

In order to determine whether plaintiff qualifies under the statutory exemption, we must briefly review the facts. Plaintiff was a major contributor in the founding of the Grand Rapids Public Library, and continues to promote reading and the enhancement of knowledge by providing a small library for public use. The library is housed in plaintiff's 93-year-old clubhouse along with a 480-seat auditorium and a nursery which cares for children during scheduled activities. The clubhouse, which has been designated a national and state historic site, is the subject of the disputed property tax.

Ladies Literary Club engages in a wide spectrum of activities ranging from classes in writing and theater to lectures on antiques, UFO's, and house plants. The club has sponsored bus trips to Interlochen, Kalamazoo, Detroit, and Chicago for music festivals, Shakespearean plays, museum exhibits, and flower shows. The classes, lectures, and trips are financed by membership dues and income from coffee concerts, plays, and style shows held throughout the year. All of the programs are open to the public although an admission fee is charged to nonmembers.

Public-service and charitable activities are also sponsored by the club. As examples, the club fostered a benefit New York Street Theater performance for migrant workers and assisted a membership drive for a local public television station.

The plaintiff points out that for the past several years membership has been unrestricted and that the club enjoys tax-exempt status under § 501(c)(3) of the Internal Revenue Code. ¹ The club claims that it also qualifies for a property exemption under the state act because its activities fall within one or more of the statutory categories and urges that it need not fit neatly into only one classification. See Attorney General v. Common Council of Detroit, 113 Mich. 388, 390, 71 N.W. 632 (1897).

The Ladies Literary Club is correct in stating that an organization need not fit neatly into only one of the statutory categories. An institution may be involved in two or more tax-exempt areas. For example, a religious order which runs a home and school for orphans may not be solely an educational institution or solely a charity. But the underlying requirement is that an organization must engage in one or more of the statutory activities. Real or personal property is exempt only if it is owned and occupied by the various types of institutions "solely for the purposes for which the institutions were incorporated". M.C.L. 211.7(d); M.S.A. 7.7(d).

This Court has long held that since "(e)xemption from taxation effects the unequal removal of the burden generally placed on all landowners to share in the support of local government (and) (s)ince exemption is the antithesis of tax equality, exemption statutes are to be strictly construed in favor of the taxing unit". Michigan Baptist Homes & Development Co. v. Ann Arbor, 396 Mich. 660, 669-670, 242 N.W.2d 749 (1976). See Evanston YMCA Camp v. State Tax Comm., 369 Mich. 1, 118 N.W.2d 818 (1962); Webb Academy v. Grand Rapids, 209 Mich. 523, 177 N.W. 290 (1920); St. Joseph's Church v. Detroit, 189 Mich. 408, 155 N.W. 588 (1915). ²

Justice Cooley best summarized the rule of law in his treatise on taxation:

"An intention on the part of the legislature to grant an exemption from the taxing power of the state will never be implied from language which will admit of any other reasonable construction. Such an intention must be expressed in clear and unmistakable terms, or must appear by necessary implication from the language used, for it is a well-settled principle that, when a special privilege or exemption is claimed under a statute, charter or act of incorporation, it is to be construed strictly against the property owner and in favor of the public. This principle applies with peculiar force to a claim of exemption from taxation. Exemptions are never presumed, the burden is on a claimant to establish clearly his right to exemption, and an alleged grant of exemption will be strictly construed and cannot be made out by inference or implication but must be beyond reasonable doubt." 2 Cooley on Taxation (4th ed.), § 672, pp. 1403-1404. See Detroit v. Detroit Commercial College, 322 Mich. 142, 148-149; 33 N.W.2d 737 (1948).

We must not succumb to the temptation to read into the statute our beliefs as to what type of organizations and activities merit tax exemption. If the club engages in non-tax-exempt activities, it does not satisfy the statute's requirement.

The crux of this case centers upon an assessment of the second and fourth tests stated in Engineering Society : May the Ladies Literary Club be characterized as a non-profit theater, library, benevolent, charitable, educational or scientific institution whose premises are used solely for such purposes?

It appears some club activities relate to the use of its theater. Plaintiff also provides a library for public use. The club clearly carries out laudable benevolent and charitable activities. Thus, it is possible to conclude that a part of the club's activities fall within the institutional exemption categories.

Nevertheless, much of the organization's energy also is expended in promoting trips to see museum exhibits, music festivals, and plays; sponsoring lectures on antiques, music, and poetry; and conducting classes in painting, photography, and yoga. The club urges that these activities are predominantly educational in nature, thus compelling the determination that virtually all of the plaintiff's activities fall within one or another of the exemption categories.

We cannot conclude that these educational or cultural programs may be considered as being sponsored by an "educational institution". Something more than serving the public interest is required to bring one claiming an exemption as an educational institution within the goals and policies affording a tax exemption.

In Detroit v. Detroit Commercial College, supra, our Court determined that an institution seeking an educational exemption must fit into the general scheme of education provided by the state and supported by public taxation. This proposition was refined in David Walcott Kendall Memorial School v. Grand Rapids, 11 Mich.App. 231, 160 N.W.2d 778 (1968), which declared that an educational exemption may be available to an institution otherwise within the exemption definition, if the institution makes a substantial contribution to the relief of the burden of government. ³

It cannot be maintained that were it not for the Ladies Literary Club's programs, which enhance educational and cultural interests, the burden on the state would be proportionately increased. The club's programs do not sufficiently relieve the government's educational burden to warrant the claimed educational institution exemption. See American Society of Agricultural Engineers v. St. Joseph Twp., 53 Mich.App. 45, 218 N.W.2d 685 (1974); American Concrete Institute v. State Tax Comm., 12 Mich.App. 595, 163 N.W.2d 508 (1968).

The tribunal referee was correct in finding...