Mason Dist. Hospital v. Tuttle

• Decision Date: 12 May 1978
• Docket Number: No. 14684,14684
• Citation: 61 Ill.App.3d 1034,378 N.E.2d 753,19 Ill.Dec. 138
• Parties: , 19 Ill.Dec. 138 MASON DISTRICT HOSPITAL, Plaintiff-Appellee, v. Kathryn J. TUTTLE, County Treasurer and Ex-officio Collector for the County of Mason, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 753

378 N.E.2d 753

61 Ill.App.3d 1034, 19 Ill.Dec. 138

MASON DISTRICT HOSPITAL, Plaintiff-Appellee, v. Kathryn J. TUTTLE, County Treasurer and Ex-officio Collector for the County of Mason, Defendant-Appellant.

No. 14684.

Appellate Court of Illinois, Fourth District.

May 12, 1978.

Knuppel, Grosboll, Becker & Tice, Havana, for defendant-appellant; Eldon H. Becker, Havana, of counsel.

Mitchell & Perbix, Havana, for plaintiff-appellee; James L. Perbix, Havana, of counsel.

MILLS, Justice:

The question confronting us here: Is that portion of a medical center owned by a hospital and rented to physicians for their medical practice tax exempt?

In short no.

The Mason District Hospital in Havana (Mason County), Illinois, is a hospital that was created under the Hospital District Law (Ill.Rev.Stat.1975, ch. 23, pars. 1251-1275) and has enjoyed an exempt status from real estate taxes since its inception. The hospital has lately constructed a one-story "medical center" with basement, on hospital land, in close proximity to the hospital itself and has entered into a license agreement with certain doctors permitting them to use the Havana Medical Center offices and facilities to perform medical services and practice medicine.

According to Jon Dosher, Mason District Hospital Administrator, Havana had been experiencing a period of decline in the number of community doctors. To combat this trend, and to attract and retain competent doctors to the area in order to insure the continued functioning of Mason District Hospital, the Trustees of the hospital built the center. It was thought that the center would enable the hospital to remain a working entity. Data presented revealed that, in all areas shown, increases in hospital services rendered have occurred since the center's construction.

The center is located in a separate building adjacent to the hospital and it is composed of a ground floor and a basement of equal square footage. The basement is used as storage area for hospital records; the ground floor is used by community physicians in carrying on their private practices and medical services are rendered for which fees are charged. A license arrangement allows these physicians to use the center's facilities at a cost calculation on the basis of the square foot area occupied.

The administrator of the hospital indicated that as a condition of membership to the active medical staff of the hospital, all physicians are required to provide coverage of the emergency room of the hospital and that this is not a condition of the license agreement concerning the use of the center's facilities.

There is no question but that one-half (the basement) of the medical center is used by the hospital for storage facilities and was not assessed by the County Assessor for real estate tax purposes. There are presently four doctors using the Havana Medical Center and their costs for using the building under the license agreement is $4.44 a square foot per year. By way of illustration, the license agreement shows that 2 physicians are paying.$558.74 a month for the privilege of using the property in question. The cost of the medical center complex was $180,000 and was paid for from a depreciation reserve account that the hospital maintains. According to Mr. Dosher, the hospital administrator, the money was borrowed from that fund for the construction of the medical center and is currently being paid back to that fund out of the revenues received from the aforesaid license agreements. The doctors operate their medical practice on an individual basis and the hospital does not receive any revenue from the doctors' private medical practice carried on at the Havana Medical Center. The doctors operate their practices on a profit basis and do not provide care for anyone regardless of whether or not they can pay.

The Mason District Hospital filed an objection to $4,392.52 in 1975 real estate taxes assessed on such portion of this property, and paid under protest; a hearing was held before the board of review in Mason County on an objection, and the Board of Review unanimously rejected the Mason District Hospital's request for an exemption on the grounds that the medical center was for the benefit of the doctors and was not really a part of the hospital and, therefore, was not exempt. The case was then taken into the Circuit Court of Mason County and it was stipulated by the attorneys handling the case that it would be submitted to the trial court on the same evidence considered by the Board of Review. The trial judge thereafter sustained the objections of the Mason District Hospital, holding that the medical center complex owned by the Mason District Hospital was exempt from any real estate tax assessed by Mason County.

The County appeals.

We reverse.

The sole issue before us is whether the trial court erred in ruling that the real estate owned by the Mason District Hospital and upon which was located a doctors' medical clinic was exempt from real estate taxation by the county.

The correctness of the trial court's ruling must hub upon a determination of the primary use of the Medical Center. The Illinois Constitution provides that:

"The General Assembly by law may exempt from taxation only the property of the State, units of local government and school districts and property used exclusively for agricultural and horticultural societies, and for school, religious, cemetery and charitable purposes." Ill.Const.1970, art. IX, § 6.

And the Revenue Act exempts from taxation:

"All property of institutions of public charity, all property of beneficent and charitable organizations, whether incorporated in this or any other state of the United States, and all property of old people's homes, When such property is actually and exclusively used for such charitable or beneficent purposes, and not leased or otherwise used with a view to profit; * * *." (Emphasis ours.) Ill.Rev.Stat.1975, ch. 120, par. 500.7.

Illinois courts have strictly construed statutes granting tax exemptions. The burden of proving the right to exemption is upon the party seeking it and in determining whether property is included within the scope of an exemption, all facts are to be construed and all debatable questions resolved in favor of taxation. People ex rel. Cannon v. Southern Illinois Hospital Corp. (1949), 404 Ill. 66, 68, 88 N.E.2d 20, 21; Methodist Old Peoples Home v. Korzen (1968), 39 Ill.2d 149, 155, 233 N.E.2d 537, 540.

Our supreme court has stated that in order for property to be exempt from taxation, it must (1) be owned by a charitable organization and (2) be "exclusively used" for charitable purposes. (Rogers Park Post No. 108, American Legion v. Brenza (1956), 8 Ill.2d 286, 291, 134 N.E.2d 292, 295.) But more particularly, that court has noted that the phrase "exclusively used" refers to the Primary purpose for which the property is used and not a secondary or incidental purpose. (Korzen, 39 Ill.2d 149, 157, 233 N.E.2d 537, 542.) As the parties before us do not dispute the characterization of the Mason District Hospital as a charitable organization, the singular issue for resolution on appeal is simply: What is the primary purpose for which the Havana Medical Center is used?

Numerous cases are referred to by the hospital and the county in their briefs in support of their contentions by both analogy and distinction. One such case is People ex rel. Carson v. Muldoon (1922), 306 Ill. 234, 137 N.E. 863. There the defendant, a Catholic bishop of Rockford, asserted that land purchased for and used as a monastery for an order of cloister nuns was exempt from taxation. The supreme court, analogizing the facts of the case to those of People ex rel. Thompson v. First Congregational Church of Oak Park (1907), 232 Ill. 158, 83 N.E. 536, and First Congregational Church of DeKalb v. Board of Review of DeKalb County (1912), 254 Ill. 220, 98 N.E. 275, in...