Lutheran Hospital Ass'n of South Dakota v. Baker

• Decision Date: 26 March 1918
• Docket Number: 4280.
• Citation: 167 N.W. 148,40 S.D. 226
• Parties: LUTHERAN HOSPITAL ASS'N OF SOUTH DAKOTA. v. BAKER, County Treasurer.
• Court: South Dakota Supreme Court

167 N.W. 148

40 S.D. 226

LUTHERAN HOSPITAL ASS'N OF SOUTH DAKOTA. v. BAKER, County Treasurer.

No. 4280.

Supreme Court of South Dakota

March 26, 1918

Appeal from Circuit Court, Codington County; C. G. Sherwood, Judge.

Action by the Lutheran Hospital Association of South Dakota against L. Baker, as Treasurer of the County of Codington. From a judgment for defendant, and an order denying new trial plaintiff appeals. Reversed, and cause remanded.

Hanten Hanten & Gault, of Watertown, for appellant.

Sheafe & Haugan, of Watertown, for respondent.

McCOY J.

This action was brought under the provisions of chapter 289, Laws of 1915, to recover certain taxes assessed and levied against the property of plaintiff and paid under protest. Findings and judgment were in favor of defendant, and plaintiff appeals.

There is no conflict in the testimony. The sole and only question presented is whether or not the property of appellant, on which assessment and levy of taxes was made, was being used exclusively for charitable and benevolent purposes. Appellant is a corporation organized and existing under and by virtue of the provisions of article 19, c. 3, of the Civil Code, relating to benevolent corporations. The property of appellant on which said tax was levied consists of a hospital and equipment and the grounds upon which the same are located, situated in the city of Watertown, valued at about $32,500.

So far as is material to this controversy, the articles of incorporation of appellant are as follows: That the members thereof have agreed to associate themselves together for the purpose of becoming incorporated in perpetuity under the provisions of said article 19; that the general purpose of said incorporation shall be to receive, provide for, nurse and give medical attention to sick persons, and such persons and patients as may apply for admission to the hospital under the rules and by-laws of said association; that its plan of operation shall be to organize and establish a suitable hospital for the purposes aforesaid, and to provide for such management as may be necessary to carry out its general purpose as a church charity, or benevolent society; that the terms of admission to membership into said corporation shall be that such members shall belong to some Lutheran congregation, and the payment of such initiation fee as shall be prescribed by the by-laws; that all other property and money of said corporation shall be obtained by gift, grant, purchase, and testamentary will; that the individual property of the members of said corporation shall not be liable for the debts of said corporation; that the said corporation may hold such real and personal property as shall be requisite to the immediate accommodation of its business, or such as may from time to time be acquired by purchase, donations, gifts, or wills, or such as shall have been purchased at sales upon judgments, decrees, or mortgages obtained or made for debts due said corporation; that the affairs and business transactions of said corporation shall be under the management and control of a board of directors to be elected by the members of said association. From the evidence submitted it appears that the articles of incorporation and charter of appellant permits no capital stock to be issued; that there are no shares of stock and none have been issued, and that no dividends or profits in any form have been received by any of the members of the association; that the corporation is composed of members who have paid $10 or more towards the establishment of said hospital; that the funds with which said hospital was established were received from such membership fees, donations, and gifts; that no salaries are paid to any officers connected with said association; that the only persons who receive compensation are the superintendent, the nurses, and other persons employed directly in and about said hospital; that the hospital receives no part of the doctors' fees and has no control over the fees of doctors except that they are required to be reasonable; that the association requires that in the event a patient is unable to pay no charge of any kind is made, and that the attending physician donate his services; that those who are able to pay for services are expected and required to do so, but, where patients are unable to pay the regulation rate, they are only asked and required to pay what they reasonably can; that all persons or patients in need of hospital treatment are admitted without regard to race or creed, excepting those having contagious diseases, whether they have money or not; that the proportion of pay patients to charity patients has been approximately estimated as 95 per cent. pay to 5 per cent. charity; that the entire premises are used for hospital purposes and not otherwise; that the receipts from pay patients and current donations have at times exceeded the expenses of running the hospital, and at the time of the trial of this case there was some surplus of receipts over running expenses, but which surplus funds are and always have been used solely to keep up and improve the said hospital property, and in paying interest on bonded indebtedness owing by said association; that a nurses' training school is maintained at said hospital wherein apprentice nurses are taught all the elements of nursing, including lectures by trained nurses and doctors, and that said apprentice nurses receive a small salary, and if found qualified are graduated by the hospital as graduate nurses; that all patients who are Codington county charges, being paupers, are charged to said county at the regulation minimum rate; that all persons, including members of appellant corporation, who have paid and contributed to said corporation are entitled upon request to a rebate of one-third of any hospital bill they may incur until the amount so contributed has been wholly returned to the donors in rebates.

Section 6, art. 11, State Const., provides that the Legislature shall by general law exempt from taxation property used exclusively for charitable purposes. Section 2056 of the Political Code provides that all property belonging to any charitable society, or used exclusively for charitable purposes, shall be exempt from taxation. We are of the opinion that the appellant is a corporation or society organized and conducted exclusively for charitable purposes, and that its said property was and is being used exclusively for such purpose. The criterion in this class of cases seems to be that whatever is done or given gratuitously in the relief of public burdens or for the advancement of the public good is a public charity, and an institution founded as a purely public charity does not lose its character as such under the tax laws if it receives a revenue from the recipients of its bounty sufficient to keep it in operation; or, applying another test, if the object for which an institution is founded ...