State Tax Commission of Md. v. Whitehall Foundation, Inc.

• Decision Date: 16 October 1957
• Docket Number: No. 3,3
• Citation: 135 A.2d 298,214 Md. 316
• Parties: STATE TAX COMMISSION OF MARYLAND v. WHITEHALL FOUNDATION, Inc.
• Court: Maryland Court of Appeals

Page 316

214 Md. 316

135 A.2d 298

STATE TAX COMMISSION OF MARYLAND v. WHITEHALL FOUNDATION, Inc.

No. 3.

Court of Appeals of Maryland.

Oct. 16, 1957.

Theodore C. Waters, Asst. Atty. Gen., C. Ferdinand Sybert, Atty. Gen., on the brief, for appellant.

Howard Wood, Centreville, for appellee.

Before BRUNE, C. J., and COLLINS, HENDERSON, HAMMOND and PRESCOTT, JJ.

HAMMOND, Judge.

The State Tax Commission in 1955 assessed Whitehall Foundation, Inc., (which in Coursey v. Hanover Bank, 206 Md. 180, 110 A.2d 680, was held to be exempt from Maryland inheritance taxes as an organization operated exclusively for charitable, scientific and educational purposes) upon its tangible personal property on a fourteen hundred acre farm in Queen Anne's County known as Blakeford Farms, on which it conducted long range scientific experiments and research in the inbreeding of livestock. The Circuit Court for Queen Anne's County abated the assessment on the ground that the Foundation, its activities at Blakeford Farms, and the personal property used in those activities were exempt by statute. The Commission appeals.

Code 1951, Art. 81, Sec. 8, grants various exemptions from assessment and taxation and directs that all such exemptions are to be strictly construed. If no part of the net income inures to the benefit of any private shareholder or individual, exemption is granted by sub-sections 7 and 8 to the equipment and furniture of charitable and of educational institutions respectively. The Commission argues that the strict construction required by the statute does not permit (a) an exemption as charitable or educational of the personal property of a non-profit organization which conducts scientific experiments in the inbreeding of livestock, or (b) the reading of the word 'equipment' as including livestock.

The story of Whitehall Foundation, Inc., is set forth in Coursey v. Hanover Bank, to which we have referred. Suffice it to say that it was established in 1937 by the late George Moffett, a wealthy man who contributed substantial sums to it during his lifetime. Corporate purposes, as set forth in the charter, are to give aid to those in need, to lend money for educational purposes, and to give financial aid to charitable, benevolent or educational organizations or agencies, either directly or through any charitable medium selected by the governing body, the trustees. It is conceded that the Foundation is a nonprofit corporation, that no part of its income inures to the benefit of any shareholder or individual and that no part of its property is commercially rented. It is exempt from Federal and Maryland income taxes and is qualified to receive non-taxable gifts. Since its incorporation, the Foundation has given away for charitable purposes well over one million dollars for scholarships, research, and for the general corporate purposes of many charitable institutions and organizations.

Mr. Moffett bought Blakeford Farms in 1935. He was interested in agriculture and was fully familiar with the progress that had resulted from experiments with hybrid corn. He believed that by following the same general principles in the inbreeding of dairy cattle for many generations with careful and scientific selection for types, the finest characteristics of the breed could be brought to a permanently higher plane and the undesirable features eliminated. He embarked on the experiment and conducted it at Blakeford Farms until his death in 1951, operating through a wholly owned corporation. Knowing that the experiment must continue for many years without regard to economic results, if it was to be meaningful, Mr. Moffett left the farm and the capital stock of the corporation, as well as the rest and residue of his large estate, to Whitehall Foundation, Inc. Pursuant to the directions of his will, the Foundation took over the experiments immediately upon his death and has continued them since, first operating the farm through the corporation and later directly.

The experiments at Blakeford Farms were primarily with Guernsey cattle. However, several new breeds of hogs have been developed there. In cooperation with the University of Maryland and the Bureau of Animal Industry of the United States Department of Agriculture, there was developed a new prize-winning hog known as 'Maryland No. 1'. The Department of Agriculture issued a bulletin on this development which said: 'The history of the development of this breed is unique in that all the resources in land, equipment, breeding animals and the necessary funds were placed at the disposal of the cooperative agencies by a private organization.'

The record in this appeal and that in the Coursey appeal reveal that the experiments during Mr. Moffett's lifetime were conducted with the cooperation and assistance of the University of Maryland, University of Wisconsin, Ohio State University, Iowa State College and the American Guernsey Cattle Club. Dr. Gordon M. Cairns, Dean of Agriculture at the University of Maryland, and former head of its Dairy Department as well as the former head of the Department of Animal Industry at the University of Maine, said that he had many times consulted with and assisted the farm manager at Blakeford in the inbreeding program and that consultations had been held with experts from other State universities and the American Guernsey Cattle Club. He pointed out that the inbreeding experiments were conducted entirely from a scientific point of view and for the purpose of benefiting the dairy industry. He called the Guernsey cattle project 'unique in this country' and said that the full results of the experiments would materially add to the knowledge on the subject. He added that 'the benefits will be reflected over a long period of time.' He went on to say that 'The University of Maryland is very much interested in the continuation of the project. Since in my opinion, a sound foundation has been established, it would be most unfortunate if further work is not done. Because of this, the University of Maryland will cooperate to the extent of its ability in supplying any technical assitance and advice that may be requested in carrying this program to a successful conclusion.'

After Mr. Moffett's death a committee of experts was named to supervise and make reports on the Guernsey breeding experiments. Its chairman was Dr. Cairns, and the other members were the Professor and Associate Chairman of Dairy Science at the Ohio Agricultural Experimental Station, and the Professor of Dairy Husbandry at Michigan State College. Their report was that a wealth of useful information had been made available from the experiments and that its 'analysis would contribute materially to the knowledge and help to guide the thinking of all dairy cattle breeders.' It was shown that a number of articles on the work that had been and was being done at Blakeford Farms had been published in trade and technical publications.

The State Tax Commission's argument that tax exemption must be strictly construed is sound. This Court has said often that to doubt is to deny an exemption. Thus the statute's direction in Code 1951, Art. 81, Sec. 8, is declaratory of the law. Nevertheless, strict construction does not require that an unreasonable or unusual meaning must be given to the words used in exemption statutes. We find nothing to show that the words 'charitable' and 'educational' were intended by the Legislature to have and convey other than their usual meaning in law.

Considering only the activities of Whitehall Foundation Inc., at Balkeford Farms, and reading the words of the statute as having their usual legal meaning, we think that those activities are charitable and educational. Rabinowitz v. Wollman, 174 Md. 6, 197 A. 566, shows the breadth,...