Missouri Pacific Hospital Association v. Pulaski County

• Decision Date: 27 January 1947
• Docket Number: 4-8031
• Citation: 199 S.W.2d 329,211 Ark. 9
• Parties: Missouri Pacific Hospital Association v. Pulaski County
• Court: Arkansas Supreme Court

199 S.W.2d 329

211 Ark. 9

Missouri Pacific Hospital Association v. Pulaski County

No. 4-8031

Supreme Court of Arkansas

January 27, 1947

Appeal from Pulaski Circuit Court, Third Division; J. Mitchell Cockrill, Judge.

Affirmed.

Henry Donham, for appellant.

John M. Rose, for appellee.

Ed F McFaddin, Justice. Holt, J., dissenting.

OPINION

Ed F. McFaddin, Justice.

The question for decision is whether the property of the appellant, Missouri Pacific Hospital Association, is exempt from taxation. The appellees are Pulaski County, the City of Little Rock, the Little Rock Special School District, and John M. Rose, as a property owner in Pulaski county. The status of the appellant, and the use of its property will be discussed subsequently.

Appellees filed petition with the Arkansas Public Service Commission to have the property of the appellant placed on the assessment roll for ad valorem taxes. The Public Service Commission, after hearing evidence, made the order sought by the appellees, and rendered a written opinion that has proved helpful to this court. The Pulaski Circuit Court affirmed the order of the Public Service Commission; and the appellant has appealed, presenting the points herein listed.

I. Is the Appellant's Property "Used Exclusively for Public Charity," and Therefore Exempt? The answer to this question depends on the use of the appellant's property measured to the applicable constitutional provisions. Article XVI, § 5 of the Arkansas Constitution says, in part:

". . . the following property shall be exempt from taxation: . . . buildings and grounds and materials used exclusively for public charity."

Article XVI, § 6 of the Constitution says:

"All laws exempting property from taxation other than as provided in this Constitution shall be void."

Some of our cases construing the constitutional language "used exclusively for public charity" are: Brodie v. Fitzgerald, 57 Ark. 445, 22 S.W. 29; Hot Springs School District v. Sisters of Mercy, 84 Ark. 497, 106 S.W. 954; Grand Lodge F. & A. M. v. Taylor, 146 Ark. 316, 226 S.W. 129; School District of Ft. Smith v. Howe, 62 Ark. 481, 37 S.W. 717; and Robinson v. Indiana & Arkansas Lumber Co., 128 Ark. 550, 194 S.W. 870, 3 A. L. R. 1426. These cases afford the guide to a decision in the present case.

Acting under Art. XVI, § 5 of the Constitution, the Legislature, by Act No. 114 of 1883 (now found in § 13603, Pope's Digest) provided:

"All property described in this section, to the extent herein limited, shall be exempt from taxation . . .

"Seventh. All buildings belonging to institutions of purely public charity, together with the land actually occupied by such institutions, not leased or otherwise used with a view to profit, and all monies and credits appropriated solely to sustaining and belonging exclusively to such institutions."

This subdivision has been several times before this court; but, as pointed out in Brodie v. Fitzgerald, supra, the right of exemption must be found in the Constitution rather than in the statute, since Art. XVI, § 6 so provides.

Appellant claims that its property is exempt as coming within the last clause of Art. XVI, § 5, supra, that is:

"All buildings and grounds and materials used exclusively for public charity."

We proceed, therefore, to determine whether the use made of appellant's property is "exclusively for public charity"; and these facts appear to be admitted: (1) Appellant is a benefit association organized under the laws of Missouri, and composed of the employees of the Missouri Pacific Railroad Company and the Missouri Pacific Transportation Company. (2) Appellant owns the hospital in Little Rock; and the employees of the railroad and transportation companies support the hospital by contributions from their wages and salaries each month; and these employees have absolute and exclusive control over the hospital, which is open to retired employees of these companies, and also to members of the families of the employees. (3) The hospital is principally open only to these people; but, in addition, the hospital receives some people who become sick or are injured on the property of the railroad or transportation company. (4) The hospital does not "go out and take in the public generally that might come in and ask for admission." (5) As previously stated, the hospital is supported by assessments made on the wages and salaries of employees. (6) These assessments are fixed by the Board of Trustees of the hospital, based on a scale depending on the amount of wages of each employee. (7) The assessments are made to meet the requirements of the hospital; and, in the event that the hospital accumulates a surplus, the assessments are reduced or temporarily suspended.

The above admitted facts, as to the use and financing of the appellant's property, show that the property is not used "exclusively for public charity" within the rule announced in Hot Springs School District v. Sisters of Mercy, supra. In the reported case this court (speaking through Mr. Justice Hart) held the following to be some of the essentials existing in that case, and to be necessary to allow exemption of the property as "used exclusively for public charity":

A. The institution was open to any worthy sick person regardless of ability to pay.

B. No funds were diverted from the institution. Whatever profit was realized from those who paid went to the benefit of those who could not pay, to extend and enlarge the charity of the hospital.

Neither of these two essentials is present in the case at bar. The appellant's hospital is not open to "any worthy sick person"; it is open only to Missouri Pacific employees, their families, and persons who may become sick or be injured on Missouri Pacific property. Furthermore, if the hospital accumulates a surplus, then such is returned to the members by reducing or temporarily suspending assessments. In short, the proof here shows that the appellant's hospital is not used "exclusively for public charity"; and the use is the determining factor. As stated by Chief Justice McCulloch in Grand Lodge v. Taylor, supra: "This language of the exemption clause refers, not to the character of the corporation or association owning the property sought to be exempted, but, regardless of the character of the owner, to the direct and exclusive use of the property for public charity."

In 51 Am. Juris., 606, et seq., there is an exhaustive discussion of hospitals as exempt from taxation. In 61 C. J. 500, et seq., this matter is also discussed. Of course, the decision in any state depends, to a large extent, on the wording of the constitutional provision in such state. Our Constitution limits the exemption to property "used exclusively for public charity"; and is much more restrictive than provisions in the constitutions of some other states. The wording of the restriction determines the distinction in some of the cases, as is pointed out in Annotations and cases cited in 51 Am. Juris., 606, et seq., from which we quote a part of the text:

"Hospitals as such enjoy no inherent exemption from taxation, and their property is taxable except so far as exempted by constitutional provisions or legislative enactments. . . . Hospitals claiming exemption have the burden of showing that they clearly come within the terms of the exemption enactments. . . . Where the benefits of a hospital are restricted to a special class, the rules of law generally pertaining to such situations in the case of charitable institutions govern. So, a hospital to which the general public has no legal right of entry, and from which it may be excluded at the discretion of the managers, is not entitled to exemption from taxation as a purely public charity. A hospital maintained by a corporation created for the purpose of maintaining it for the benefit of employees of a railroad company, and used for treatment solely of members of an association composed entirely of such employees, is not for strictly charitable purposes within the meaning of a constitutional tax exemption."

To sustain the last-quoted sentence, there is cited the case of Chaffee County v. D. & R. G. R. Co. Employees' Relief Assn., 70 Colo. 592, 203 P. 850, 22 A. L. R. 902. In that case the Supreme Court of Colorado held that the hospital, very much like the one in the case at bar, was not exempt from taxation, since its property was not "used solely and exclusively for strictly charitable purposes." The constitutional provision in Colorado concerning exemption is very similar to ours, and the hospital association in the Colorado case is very similar to the hospital association in the case at bar.

A most enlightening case, construing our own constitutional provision as applied to a hospital operated for benefit of railway employees, is the case of S. L. S.W. Ry. Co. v. Yates, 23 F.2d 283. In that case the U. S. Circuit Court of Appeals of the 8th Circuit decided that a hospital in Texarkana, Arkansas, was not exempt from taxation. The court said:

"Funds to support the institution are to be obtained by assessments based on a wage-earning scale, collected monthly from the employees. There are other provisions which emphasize those above quoted or outlined but sufficient has been said to show the general plan of the trust to be that the use of the property is confined to the employees (and their dependents) of appellant and its affiliated lines. The public in general, nor any part thereof, nor any indefinite class have any right to any use in this property and it is in no wise supported by any charitable gifts or donations, but only by the direct beneficiaries thereof and by contributions, in the form of loans, from the railways whose employees are protected. In short, it...