A. T. & S. F. Hospital Ass'n v. State Commission of Revenue and Taxation

• Court: Kansas Supreme Court
• Writing for the Court: SMITH
• Citation: A. T. & S. F. Hospital Ass'n v. State Commission of Revenue and Taxation, 246 P.2d 299, 173 Kan. 312 (Kan. 1952)
• Decision Date: 03 July 1952
• Docket Number: No. 38689,38689
• Parties: A. T. & S. F. HOSPITAL ASS'N v. STATE COMMISSION OF REVENUE AND TAXATION et al.

Page 299

246 P.2d 299

173 Kan. 312

A. T. & S. F. HOSPITAL ASS'N v. STATE COMMISSION OF REVENUE AND TAXATION et al.

No. 38689.

Supreme Court of Kansas.

July 3, 1952.

Rehearing Denied Oct. 17, 1952.

Syllabus by the Court

Under the facts stated in the opinion, the property of the Atchison, Topeka & Santa Fe Hospital Association, in Topeka, is held to be used exclusively for benevolent and charitable purposes and hence exempt from taxation, pursuant to Article XI, Section I of the constitution of the state.

Marlin S. Casey and William M. Mills, Jr., both of Topeka, argued the cause and were on the briefs for plaintiff.

Wilbur G. Leonard, of Council Grove, and C. V. Rankin, of Lawrence, argued the cause and were on the briefs for defendants.

SMITH, Justice.

This is an original action in mandamus wherein the plaintiff seeks to have its real and personal property removed from the tax rolls. We issued an alternative writ. The facts were agreed on. The cause was submitted on the merits.

The petition alleged the incorporation of plaintiff as a corporation without capital stock and not for profit; the ownership of certain described real estate and certain personal property being used exclusively for charitable and benevolent hospital purposes; that about May 19, 1951, plaintiff made application to the defendants, claiming exemption from taxation under Article XI, Section I, of the constitution of the state and praying for a refund of its 1950 taxes; that on December 17, 1951, defendants, the tax commission, made an order denying relief; that such action was arbitrary, unreasonable and in violation of Article XI, Section I, of the constitution of the state, which provides:

'All property used exclusively for state, county, municipal, literary, educational, scientific, religious, benevolent and charitable purposes * * * shall be exempted from taxation.'

The petition alleged there was the plain duty upon defendants to order such property stricken from the tax rolls; that the statement of facts, testimony and exhibits offered by plaintiff at the hearing contained all the facts pertinent to the question to be decided and were not in controversy; that plaintiff as a matter of right was entitled to the exemption, had no adequate remedy at law and unless the writ was allowed would suffer irreparable damages.

The prayer was that a writ issue commanding defendants to issue an order declaring the property to be exempt and to refund the 1950 taxes. Certain documents were attached as exhibits.

The defendants filed a motion to quash the writ on the ground that it and the motion did not contain facts sufficient to constitute a cause of action against defendants or any ground for the issuance of a writ. Defendants placed this motion on five grounds: first, that the plaintiff had a plain and adequate remedy at law; second, that the writ and the motion therefor conclusively disclosed that the alleged grievance of the plaintiff was given full, complete, adequate and impartial consideration by the defendants; and that the plaintiff had no clear, specific and definite right to the performance of the acts commanded by said writ; third, that plaintiff's motion for writ showed on its face that the order of the defendant, the state commission of revenue and taxation, was based upon, was consistent with and was substantiated by the evidence submitted to the commission by the plaintiff; fourth, that the acts sought by the writ to be commanded and controlled were discretionary duties imposed upon the defendants by sections 79-1701, 79-1702 and 79-1702a, G.S.1949, and plaintiff was not entitled, as a matter of law, to a de novo consideration of its case, substituting this court for the defendant commission; and fifth, that the plaintiff had failed to prove that the property in question was used exclusively, immediately and directly for a purpose which is exempt from taxation under either the constitution or the statutes of the state.

At the hearing before the commission there was a statement of facts that plaintiff owned and operated a hospital on the real estate in question; that it was erected in 1894 at a cost of $145,000 and in 1896 the railway company donated $30,000 toward the construction. The history of the development of the board of trustees, which controls the plaintiff, was given, but we find it necessary to make note only that at the present time the board of trustees consists of seven members who serve without salary, three of these are the persons who occupy the positions of General Manager Eastern Lines, General Manager Western Lines and the Chief Mechanical Officer of the company, while the other four members are employees who must be general chairmen or vice general chairmen of one or the other of the organizations representing the employees; that with this arrangement the effective control of the hospital passed from the hands of the officials of the railway company to the hands of representatives of the employees; that no profit accrues to anyone by reason of the operation of the hospital; that it is one of thirty-two non-profit hospitals in the state; the statement set out the amount contributed to the association, the railway company, yearly from 1942, when $45,977.27 was contributed to 1950, when $129,862.07 was contributed; that this was used in the operation, maintenance and improvement of the hospitals; that no part of the property is used other than for hospital purposes; that the hospital has a capacity of 175 beds, employs 151 persons, and with the exception of the chief surgeon, who receives a small stipend from the railway company, all employees are paid by the association; the railway has 4,025 employees in Shawnee county and 15,939 in the state (all these employees are contributing members and are entitled to the services of the hospital); that during 1950 the hospital admitted 3,178 bed patients and treated 24,295 out patients and performed 600 surgical operations; the primary purpose was to offer medical services to employees of the railway company; during the two years before the commencement of this action 36 patients, not employees, were hospitalized and 10 were given medical treatment as out patients; the patients are authorized hospitalization for varying periods of time based upon the length of time they have been members of the association (however, the hospital has always permitted patients to remain without cost to themselves far beyond their allotted time); during 1949 and 1950 such contributions amounted to $9,424.46; the hospital is a member of the American Hospital Association, the Kansas Hospital Association and is approved by the American College of Surgeons; the hospital participates in teaching students to become medical technologists and pays salaries to these students during the twelvemonth internship period; the association was granted exemption from state income taxes, in accordance with G.S.1949, 79-3204; is exempted from payment of federal income taxes; is exempted from payment of state sales taxes and is permitted to withdraw alcohol from a bonded federal warehouse tax free. At the hearing before the commission two witnesses testified. The commission made findings of fact, however, which are not disputed by either party.

The order after formal matters about which there is no dispute was as follows:

'6. All employees of the railway company, and of the hospital association are compelled to become members of the hospital association, and are required to pay monthly dues computed on a bracket system, and based upon the employees' respective earnings.

'7. Since 1942, the railway company has made an annual contribution to the hospital association of seven percent of the amount of the employees' dues. The railway company also furnishes the hospital association transportation, auditing, accounting, and other services at no cost to the hospital association. The Treasurer and Auditor of the railway company serve in like capacities for the Association.

'8. The dues of the members and the annual contributions by the railway company are sufficient to maintain and operate the hospital.

'9. All income is used to operate the hospital and to provide new facilities.

'10. The hospital facilities are available to the paid membership of the Association only.

'11. The hospital is not open to the public, including the members' dependents, except in cases of extreme emergency. During the past two years, thirty-six nonmember patients were given hospitalization, and ten were given out-patient treatment.

'12. The length of time an employee may use the hospital facilities at any one time is determined by his length of service with railway company. Charges for overstaying the accrued hospitalization period legally can be made; however, in many cases, this rule is not enforced, and usually no attempt is made to collect from the employee.

'13. The benefits of the Association are available to those retired railway company employees who have paid their current hospital assessments. These retired employees pay assessments for hospitalization based upon the current minimum rate of $2.25 per month.

'14. Employees of the Association have, by popular vote elected to become subject to the provisions of the Railway Retirement Act.

'The Commission further finds that a hospital operated as a private institution in a manner equivalent to a compulsory group hospitalization plan, available only to members who are also employees of the railway company, and who are required to become dues-paying members in the Association, and which hospital is maintained solely for the benefit of the railway company, and its employees, is not a benevolent and charitable institution; that the property of such hospital is not exempt from taxation as property used exclusively for benevolent and charitable purposes; and that the application should, therefore, be denied.'

Defendants argue first that the writ should be denied because ...