Oregon Methodist Homes, Inc. v. Horn

• Court: Supreme Court of Oregon
• Citation: 360 P.2d 293,226 Or. 298
• Parties: OREGON METHODIST HOMES, INC., Petitioner-Appellant, Willamette View Manor, Inc., Petitioner-Intervener-Appellant, v. S. W. HORN, Samuel B. Stewart, and Carl Chambers, Commissioners of the State Tax Commission of the State of Oregon, Respondents, M. M. Graham, County Assessor for Clackamas County, Intervener-Respondent. *
• Decision Date: 01 March 1961

Page 293

360 P.2d 293

226 Or. 298

OREGON METHODIST HOMES, INC., Petitioner-Appellant, Willamette View Manor, Inc., Petitioner-Intervener-Appellant, v. S. W. HORN, Samuel B. Stewart, and Carl Chambers,

Commissioners of the State Tax Commission of the

State of Oregon, Respondents,

M. M. Graham, County Assessor for Clackamas County,

Intervener-Respondent. ^*

Supreme Court of Oregon, In Banc.

Argued and Submitted Dec. 14, 1960.

Decided March 1, 1961.

Paul R. Biggs, Oregon City, and Cleveland C. Cory, Portland, for appellants. With Mr. Biggs on the briefs were John O. Sheldahl, Oregon City, and Hart, Rockwood, Davies, Biggs & Strayer, Portland.

Richard Rink, Asst. Atty. Gen., for respondents. With him on the brief were Robert Y. Thornton, Atty. Gen., and Winston L. Bradshaw, Dist. Atty., Oregon City.

Before McALLISTER, C. J., and ROSSMAN, WARNER, SLOAN, O'CONNELL, GOODWIN and HOWELL, JJ.

WARNER, Justice.

Petitioner Oregon Methodist Homes, Inc., commenced this proceeding in the Circuit Court for Clackamas County pursuant to ORS 306.545 to obtain a review of an order of the State Tax Commission, made May 1, 1958, confirming the action of the County Assessor for Clackamas County, in placing certain property of petitioner on the tax rolls of that county for the 1957-1958 tax year and denying petitioner's claim of exemption as a charitable institution. From the order of the circuit court denying the petition and affirming the order of the Commission, petitioner and intervener appeal.

The particular property of petitioner for which exemption is sought is a parcel upon which it erected a building for the residential accommodation of retired persons. It is known as the Willamette View Manor and hereinafter called the Manor.

Subsequent to the institution of the instant proceeding and on or about October 3, 1957, petitioner transferred all its right, title and interest in and to the real and personal property constituting the Manor to Willamette View Manor, Inc., the intervener, a corporation organized on or about January 31, 1957. We will hereinafter refer to the second corporation as the intervener.

Two questions are presented by the appeal: (1) was petitioner a benevolent and charitable institution as of January 1, 1957, and, if so; (2) was any part of the subject property occupied or used actually and exclusively in benevolent and charitable work as of that date so as to entitle it under the provisions of ORS 307.130 (as it was prior to amendment in 1959) to an exemption from ad valorem taxes. That section then read:

'(1) Upon compliance with ORS 307.170, the following property owned by incorporated literary, benevolent, charitable and scientific institutions shall be exempt from taxation:

'(a) Except as provided in ORS 740.080, ¹ only such real or personal property, or proportion thereof, as is actually and exclusively occupied or used in the literary, benevolent, charitable or scientific work carried on by such institutions.

'(b) Parking lots maintained solely for the use, without charge, of persons going to and from the property exempted under paragraph (a) of this subsection, but not if such lots are used for parking or other purposes not connected with the use and maintenance of such property.

'(2) The liability of any such institution for payment of principal or interest on any obligation of the institution, whether direct or assumed, shall not deprive it of the exemption otherwise allowable under subsection (1) of this section.'

Evaluations for the purposes of assessment are made as of January first for each tax year. See ORS 308.210 and 308.215 (as they were prior to amendment by Oregon Laws 1957, ch. 324, p. 434). We accent the date January 1, 1957, because the issues are narrowed to a claim of exemption for the tax year 1957-1958.

The first statute granting exemptions to benevolent, charitable and scientific institutions was enacted in 1854. Although the statutes relating to exemptions from ad valorem taxes were subsequently amended in many different particulars, the original wording of that part relating to exemptions granted to benevolent, charitable and scientific institutions remained intact for more than 90 years. It was amended for the first time in 1945 (Oregon Laws 1945, ch. 296, p. 440) and received no further legislative attention until 1955 (Oregon Laws 1955, ch. 576, § 1, p. 692).

From a reading of the amendments made in 1945 and 1955 it will be observed that the legislature has in later years inclined more to a restriction of the exemption privilege than to its relaxation.

On January 1, 1957, the property in question was owned by petitioner Oregon Methodist Homes, Inc. As noticed above, the intervener was not in existence on that date and did not acquire its title until a time subsequent to October 3, 1957. It therefore, follows that our interest in the tax status of the owner is necessarily narrowed to what it was as of January 1, 1957. Nor can we be interested in the happening of anything subsequent to that date which perchance gave any charitable character to the Manor over and above what petitioner was entitled to claim at that time.

Petitioner relies upon the proposition that it is a benevolent and charitable institution as evidenced by the fact that it supplies care, attention and security required by aged persons and contends that notwithstanding such persons are able to pay for such services, it is, nevertheless, as much a charitable and benevolent pursuit as would be the relief of their financial needs.

Petitioner was organized as a nonprofit organization in September, 1951, under the provisions of ORS 61.010 to 61.160, inclusive.

Article IV of the corporate articles of petitioner, as amended in 1954, reads:

'The objects, business or pursuit of said corporation shall be for the purpose of constructing and maintaining a home for the aged who may be members of the Methodist Church or of any other church or any other individual of good moral character who would be at home in a christian environment; to own, construct, operate and maintain a hospital for the aged; for use as a nursing home; and as a hospital for general and specialized purposes for the general public; to purchase and hold title to real property and personal property; to prescribe regulations and rules for those living in the home; to solicit funds, receive subscriptions, gifts, grants and bequests, to establish, endow, and hold the investments and assets of the corporation and to do each and everything necessary in order to own and maintain a home and place of residence for the aged, and hospital.' (Emphasis supplied.)

The italicized words in the foregoing article were added by the amendment of 1954 in order to give petitioner authority to acquire, build and operate a general hospital on adjacent land acquired from the previously operated Matson Memorial Hospital. At the time of the hearings in the matter the building of such a hospital was contemplated. It was, however, to be separate and apart from the operation of the Manor. One of the prime reasons for the transfer of the Manor property in October, 1957, from petitioner to the intervening corporation was to avoid any conflict in management and possible impairment of the Manor's separate financial structure.

The record is replete with evidence that the Reverend Edward Terry and, later, others who pioneered the organization subsequently incorporated in 1951 as Oregon Methodist Homes, Inc., and the officials who thereafter succeeded them, were from the beginning imbued with an idea that at some future time the Manor might attain a financial status that would enable it to extend its services to the indigent elderly on a charitable basis; that is, by charging only to the extent of such person's ability to pay or without any charge whatsoever. But as of January 1, 1957, it is clear that their charitable aspirations were only a praiseworthy, but nebulous, hope.

In the beginning and for sometime afterward those responsible for the overall plan expected to achieve that goal from gifts and donations. But this concept of voluntary contributions failed to gain any response. After a long series of solicitations, carried on initially by volunteers and later by professional money-raisers for like causes, they found it necessary to completely abandon their earlier ambition to raise funds in that manner and to shift to the plan of financing known as 'Founder's' contracts.

Pursuant thereto contracts were entered into between petitioner and various persons known as 'founders,' whereby each founder prepaid to the corporation a certain sum known as a founder's fee. These originally varied from $4,800 to $20,000, depending upon the amount of space in the Manor which a given founder would be privileged to occupy in return for the amount paid as a founder's fee. The minimum founder's fee was later increased from $4,800 to $7,000. In return for this 'founder's fee,' the party acquired a contractual lifetime right to occupy a specified apartment in the Manor and to receive 'life care' at a cost of not to exceed $100 per month.

There were no restrictions as to race, creed or color, but all applications were subject to petitioner's rule: 'If, for any cause, physical or otherwise, the applicant is found objectionable, such applicant will not be received.' An inquiry was also made as to the financial status of the applicant, for as Mr. Mummery, the administrator of the Manor, stated, the petitioner had to be reasonably sure that the founders were not only able to pay their 'founder's fee,' but also the monthly 'life care cost.' Or, as Mr. Seth Leavens, one of petitioner's trustees testified, this was done 'because up to the present time particularly [the date of the hearing] we didn't have money enough to carry on if that person didn't have enough means to come in and to stay there. We didn't have any endowment built up so we had to know that the party was financially...