North Dakota Soc. for Crippled Children and Adults v. Murphy

• Decision Date: 12 January 1959
• Docket Number: No. 7794,7794
• Citation: 94 N.W.2d 343
• Parties: NORTH DAKOTA SOCIETY FOR CRIPPLED CHILDREN AND ADULTS, a North Dakota corporation, Plaintiff and Appellant, v. Louise MURPHY, as County Treasurer of Stutsman County, North Dakota, Defendant and Respondent.
• Court: North Dakota Supreme Court

Page 343

94 N.W.2d 343

NORTH DAKOTA SOCIETY FOR CRIPPLED CHILDREN AND ADULTS, a North Dakota corporation, Plaintiff and Appellant, v. Louise MURPHY, as County Treasurer of Stutsman County, North

Dakota, Defendant and Respondent.

No. 7794.

Supreme Court of North Dakota.

Jan. 12, 1959.

Syllabus by the Court

1. The burden is on the claimant of a tax exemption to establish the exempt status of the property.

2. Laws under which a tax exemption is claimed will receive a strict construction against the claimant.

3. In order to warrant the exemption from taxation of property under the provisions of Section 57-0208, paragraph 8, NDRC 1943 as being 'used wholly or in part for public charity' its use must result in a benefit that has at least some direct and primary connection with the public charitable activities of the institution. A monetary saving or a mere convenience is not such a benefit.

Hjellum, Weiss, Nerison & Ottmar, Jamestown, for appellant.

M. C. Fredricks, State's Atty. of Stutsman County, Jamestown, for defendant and respondent.

Hendry K. Mackenzie, Jamestown, amicus curiae.

MORRIS, Judge.

In this action the plaintiff seeks to recover from the defendant the sum of $483.08 representing taxes on real property levied by Stutsman County for the years 1954 and 1955 which the plaintiff paid under protest on November 27, 1956. Subsequent to the payment the plaintiff applied to the Board of County Commissioners of Stutsman County for a refund of the amount so paid. The application for refund was rejected. The real property is known as Lot 8 of Hi-Acres Second Addition to the City of Jamestown, Stutsman County, North Dakota. This lot was during the period in controversy and still is owned by the plaintiff. During all of that time there was and is a house thereon occupied exclusively as a residence by an employee of the plaintiff known as its 'executive director' who pays no rent and receives a cash salary of $7,000 per year.

The plaintiff is a nonprofit corporation organized for charitable purposes. Its income of about $80,000 per year is devoted to work in the field of physically handicapped children and adults. The general program and the limits within which the organization functions are determined by the executive committee of the board of directors which employes an executive director whose principal duties are administration, fund raising and the drafting of the overall program under which the society operates. It maintains a state headquarters with five permanent employees under the administration of the executive director. This headquarters has no physical connection with the residence in question and is located in a different part of the city.

The plaintiff contends that the residence in question is exempt from taxation because the plaintiff is an institution of public charity and the property is 'used wholly or in part for public charity' and thus comes within the exemption provided by Section 57-0208, paragraph 8, NDRC 1943, which reads:

'All buildings and contents thereof belonging to institutions of public charity, including public hospitals under the control of religious or charitable institutions, used wholly or in part for public charity, together with the land actually occupied by such institutions not leased or otherwise used with a view to profit, and all moneys and credits appropriated solely to sustaining and belonging exclusively to such institutions;'.

The defendant does not question plaintiff's assertion that it is an institution of public charity but contends that the use to which the property is put determines its taxability and that the use of the property as a residence for the executive director does not bring it within the exemption. No constitutional questions are presented. The issues involve only the construction and application of the statute.

The trial court decided that the plaintiff was a charitable institution but that the use to which the property was put did not justify its exemption from taxation under the statute and rendered judgment for the dismissal of plaintiff's action. The plaintiff has appealed from that judgment. The case is here for trial de novo.

The plaintiff was incorporated in 1947 and up to the present time has employed two successive executive directors both of whom have lived in residences furnished by the plaintiff. It is difficult to secure a competent director because few persons have experience in that field. It was difficult to find suitable housing in Jamestown and the plaintiff undertook to supply a residence as an inducement to competent persons to accept the position of director. At first the plaintiff rented a house for its director at $80 per month. When the rent was raised to $100 per month a committee was appointed to select and recommend the purchase of a residence, with the result that the property in controversy was purchased in 1954.

The plaintiff contends that the decision to purchase did not stem wholly from the raise in rent but that the executive committee considered that the ownership of a residence was a necessity in order to insure proper housing to applicants for the position of executive director and that therefore the ownership of a residence contributes directly to the advancement of the charitable purposes of the organization in making it more easy to secure a competent director and to that extent at least the residence is 'used wholly or in part for public charity'. While the argument is resourceful it cannot prevail. We have here but a single use. The property is used as a residence and for no other purpose. The use of the residence by the director is as much a remuneration for his services as is the cash salary that he receives and whether the residence in which he lives is owned by the society or rented by it would seem to have little bearing on whether he should accept or retain the position as director. The fact asserted by the plaintiff that ownership rather than the rental of a house would render the inducement which it could offer more stable since an owned residence would always be available regardless of housing shortages has at the most a very remote bearing on the charitable activities of the plaintiff.

As we approach the construction of our statute and its application to the facts of this case we bear in mind the rules that the burden is on the claimant of a tax exemption to establish the exempt status of his property and that the laws under which such an exemption is claimed will receive a strict construction against the claimant. Engstad v. Grand Forks County, 10 N.D. 54, 84 N.W. 577; In re McKee's Estate, 71 N.D. 545, 3 N.W.2d 797; Incorporated Trustees of Gospel Worker Society v. Evatt, 140 Ohio St. 185, 42 N.E.2d 900; City of Longview of Markham-McRee Memorial Hospital, 137 Tex. 178, 152 S.W.2d 1112; Trinity Methodist Episcopal Church v. City of San Antonio, Tex.Civ.App., 201 S.W. 669; Cypress Lawn Cemetery Ass'n v. City and County of San Francisco, 211 Cal. 387, 295 P. 813; Walker v. State, 154 Cal.App.2d 838, 316 P.2d 998; People ex rel. Kelly v. Avery Coonley School, 12 Ill.2d 113, 145 N.E.2d 80; American Bridge Co. v. Smith, 352 Mo. 616, 179 S.W.2d 12, 157 A.L.R. 798 and Annotations.

In Boston Symphony Orchestra, Inc. v. Board of Assessors, 294 Mass. 248, 1 N.E.2d 6, 10, it was held that doubt as to whether property is used for charitable or benevolent purposes so as to exempt it from taxation must be resolved against the claimant and:

'Any doubt must operate against the one claiming tax exemption, because the burden of proof is upon the one claiming an exemption from taxation to show clearly and unequivocally that he comes within the terms of the exemption.'

The plaintiff cites ...