Stockton Civic Theatre v. Board of Sup'rs of San Joaquin County

• Decision Date: 24 February 1967
• Citation: 66 Cal.2d 13,423 P.2d 810,56 Cal.Rptr. 658
• Court: California Supreme Court
• Parties: , 423 P.2d 810 STOCKTON CIVIC THEATRE, Plaintiff and Appellant, v. BOARD OF SUPERVISORS OF SAN JOAQUIN COUNTY et al., Defendants and Respondents. Sac. 7662. In Bank

Page 658

56 Cal.Rptr. 658

66 Cal.2d 13, 423 P.2d 810

STOCKTON CIVIC THEATRE, Plaintiff and Appellant, v. BOARD OF SUPERVISORS OF SAN JOAQUIN COUNTY et al., Defendants and Respondents.

Sac. 7662.

Supreme Court of California,

In Bank.

Feb. 24, 1967.

Rehearing Denied March 22, 1967.

Fred M. Bollinger, Stockton, for plaintiff and appellant.

Mitchell, Silberberg & Knupp and John L. Nourse, Los Angeles, amici curiae on behalf of plaintiff and appellant.

Richard W. Dickenson, County Counsel, and Walter J. McInnis, Deputy County Counsel, for defendants and respondents.

PETERS, Associate Justice.

This is an action to recover taxes paid under protest and for declaratory relief, plaintiff contending that it is a charity and entitled to the charitable exemption. The trial court determined that plaintiff is not organized and operated for charitable purposes, and that its property is not used exclusively for charitable purposes. Judgment was entered for defendants. Plaintiff appeals.

The case was tried without a jury on an agreed statement of facts.

The purposes of plaintiff nonprofit corporation, as set forth in its articles of incorporation, are to foster and stimulate interest in drama and music by the production of plays, musicals, light opera, and operettas; to gather, receive, study and disseminate information concerning plays, playwriting, acting, direction and production techniques; and to unite for mutual benefit persons interested in participating in those activities generally carried on by civic theatre groups.

The articles of incorporation also provide that the corporation is formed for purposes other than pecuniary gain, that no dividends or pecuniary profits shall be declared or inure to the members of the corporation, that no financial gain shall accrue to any member in the conduct of the business of the corporation, and that upon dissolution the assets remaining after payment of debts shall be distributed 'to any charitable or civic institution or organization in the sole discretion of the directors.'

In 1962 plaintiff acquired a theatre in the City of Stockton which it uses for the production of popular plays and musical comedies. The real estate is used only for the operation of the theatre, and is not employed to benefit any officer, trustee, director, shareholder, member, employee, contributor, or bondholder. All productions in their entirety are produced by persons of amateur standing.

Membership in plaintiff is unrestricted and is obtained by anyone who purchases a season ticket to plaintiff's plays, ordinarily $6 for four plays. In addition plaintiff obtains revenues from the sale of tickets for single performances and from gifts. Plaintiff's financial statements indicate that for its 1962--1963 season approximately one-half of its income was from gifts and for its 1963--1964 season approximately 13 percent of its income was from gifts.

In 1963 the county assessor assessed plaintiff's land and improvements for a total of $5,515, and plaintiff paid the resulting tax of $590.70 under protest and commenced this action.

The basic question involved is whether plaintiff is a corporation organized and operated for charitable purposes within the meaning of section 1c of article XIII, of the California Constitution and section 214 of the Revenue and Taxation Code. Secondly, there is involved the question as to whether plaintiff's property is irrevocably dedicated to charitable purposes and upon liquidation will inure to a charitable organization within the requirements of subdivision (6) of the code section.

Section 1c of Article XIII provides in part: 'In addition to such exemptions as are now provided in this Constitution, the Legislature may exempt from taxation all or any portion of property used exclusively for religious, hospital or charitable purposes and owned by community chests, funds, foundations or corporations organized and operated for religious, hospital or charitable purposes, not conducted for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.'

Unlike some other constitutional provisions dealing with tax exemption, this section is permissive and not self-executing. It merely authorizes the Legislature, without requiring it, to exempt the specified property. (Sutter Hospital of Sacramento v. City of Sacramento, 39 Cal.2d 33, 35--36, 244 P.2d 390.)

Section 214 of the Revenue and Taxation Code provides: 'Property used exclusively for religious, hospital, scientific, or charitable purposes owned and operated by community chests, funds, foundations or corporations organized and operated for religious, hospital, or scientific, or charitable purposes is exempt from taxation if:

'* * *

'(6) The property is irrevocably dedicated to religious, charitable, scientific, or hospital purposes and upon the liquidation, dissolution or abandonment of the owner will not inure to the benefit of any private person except a fund, foundation or corporation organized and operated for religious, hospital, scientific, or charitable purposes;

'* * *on

'The exemption provided for herein shall be known as the 'welfare exemption. " ¹ Preliminarily, it bears emphasis that the crucial term 'charitable purposes' is used in both the constitutional provision authorizing exemption and the statutory provision granting the exemption. Thus the determination whether activities such as plaintiff's are included within that term will decide not only whether the Legislature has exempted property used for such activities but also whether the Legislature has power to exempt that class of property.

The proper construction of the word 'charitable' as used in section 1c of article VIII was before this court in Lundberg v. County of Alameda, 46 Cal.2d 644, 298 P.2d 1. The issue in that case was the validity of the 1951 amendment to section 214 of the Revenue and Taxation Code which added the language that property 'used exclusively for school purposes of less than collegiate grade' owned by religious or charitable funds or corporations 'shall be deemed to be within the exemption provided for in Section 1c of Article XIII of the Constitution of the State of California and this section.' The question thus was whether section 1c authorized the Legislature to adopt such an exemption or, as the majority in Lundberg put it, 'whether an educational purpose may be regarded as a charitable purpose within the meaning of section 1c of article XIII.' (46 Cal.2d at p. 649, 298 P.2d at p. 4.)

In concluding that the answer to the question was in the affirmative, the court pointed out that the argument that the word 'charitable' as used in section 1c of article XIII should be narrowly construed had been previously rejected (Y.M.C.A. v. County of L.A., 35 Cal.2d 760, 768, 221 P.2d 47; Fredericka Home v. County of San Diego, 35 Cal.2d 789, 221 P.2d 68), and that the word 'charitable' was to be broadly construed. The court pointed out that the wide and varied nature of the exemption ('religious, hospital, or charitable') indicates a purpose and intention to give the words used a broad rather than a strict meaning. (Lundberg v. County of Alameda, supra, 46 Cal.2d 644, 650--651, 298 P.2d 1; Scripps etc. Hospital v. California Emp.Com., 24 Cal.2d 669, 676, 151 P.2d 109, 155 A.L.R. 360.) It would appear that provisions, such as section 1c of article XIII, granting power to the Legislature which do not restrict individual rights should be broadly interpreted unless exceptional reasons appear for limiting the grant of power.

Defendants rely upon the rule that constitutional and statutory provisions Granting exemption from property taxation must be strictly but reasonably construed. (E.g., City and County of San Francisco v. San Mateo County, 17 Cal.2d 814, 817, 112 P.2d 595.) As already pointed out, however, section 1c of article XIII does not grant exemption but merely authorizes the Legislature to grant exemption, and we are satisfied that we should adhere to the established rule of construction for section 1c.

In Lundberg, supra, the court considered at some length the proper definition of the term 'charitable purposes' as used in section 1c of article XIII. It was there pointed out that the term 'charity' has been defined in a number of California cases as "a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their hearts under the influence of education or religion, by relieving their bodies from disease, suffering or constraint, by assisting them to establish themselves in life, or by erecting or maintaining public buildings or works, or otherwise lessening the burdens of government.' In re Estate of Halm, 196 Cal. 778, 781--782, 239 P. 307, 308; In re Estate of Coleman, 167 Cal. 212, 214, 138 P. 992; (Ann.Cas.1915C 682); In re Estate of Sutro, 155 Cal. 727, 736, 102 P. 920; In re Estate of Lennon, 152 Cal. 327, 329--330, 92 P. 870; (125 Am.St.Rep. 58, 14 Ann.Cas. 1024); In re Estate of Merchant, 143 Cal. 537, 543--544, 77 P. 475.' (46 Cal.2d at p. 649, 298 P.2d at p. 4.)

The court also pointed out that charity is not confined solely to the relief of the needy and destitute, but comprehends "as well activities which are humanitarian in nature and rendered for the general improvement and betterment of mankind, though the recipients of such benefits may be able to pay at least in part therefor * * *." (46 Cal.2d at p. 650, 298 P.2d at p. 5; see also Y.M.C.A. v. County of L.A., supra, 35 Cal.2d 760, 768, 221 P.2d 47.)

The court in Lundberg also relied upon the definition of charity set forth in Estate of Henderson, 17 Cal.2d 853, 857, 112 P.2d 605, where it was stated: 'A bequest is charitable if: (1) It is made for a charitable purpose; its aims and accomplishments are of religious, educational, political or general social interest to mankind. * * * (2) The ultimate recipients...