United States v. Proprietors of Social Law Library

• Decision Date: 02 March 1939
• Docket Number: No. 3412.,3412.
• Citation: 102 F.2d 481
• Parties: UNITED STATES v. PROPRIETORS OF SOCIAL LAW LIBRARY.
• Court: U.S. Court of Appeals — First Circuit

102 F.2d 481 (1939)

UNITED STATES v. PROPRIETORS OF SOCIAL LAW LIBRARY.

No. 3412.

Circuit Court of Appeals, First Circuit.

March 2, 1939.

Jerome P. Carr, Sp. Asst. to Atty. Gen. (James W. Morris, Asst. Atty. Gen., and Sewall Key, Sp. Asst. to Atty. Gen., on the brief), for the United States.

Arthur D. Hill, of Boston, Mass. (Faneuil Adams, Irving M. Pinansky, and Hill, Barlow, Goodale & Wiswall, all of Boston, Mass., on the brief), for appellee.

Before BINGHAM and WILSON, Circuit Judges, and BREWSTER, District Judge.

WILSON, Circuit Judge.

This is an appeal from a judgment of the District Court of Massachusetts holding that under Section 101 (6) of the Revenue Act of 1934, 26 U.S.C.A. § 103 (6), the Proprietors of the Social Law Library, an old and well-known institution in Boston, was exempt from any capital stock tax that might be imposed under Sec. 701 of the Revenue Act of 1934, 48 Stat. 680, 769, 26 U.S.C.A. § 1358.

Sec. 701 (a) of the Act of 1934 provides that:

"(a) For each year ending June 30, beginning with the year ending June 30, 1934, there is hereby imposed upon every domestic corporation with respect to carrying on or doing business for any part of such year an excise tax of $1 for each $1,000 of the adjusted declared value of its capital stock.

* * * * * *

"(c) The taxes imposed by this section shall not apply —

"(1) to any corporation enumerated in section 101 section 103."

Sec. 101 (6) of the Act of 1934 under which the Library claims exemption for the tax imposed under Sec. 701 (a) provides as follows:

"Sec. 101. § 103. Exemptions from tax on corporations.

"The following organizations shall be exempt from taxation under this title chapter —

* * * * * *

"(6) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation."

The Social Law Library was incorporated by the Commonwealth of Massachusetts in 1814 by a Special Act of Legislature for the obvious purpose of "creating, enlarging, managing and improving said Library". The facilities of the Library are open to all who become either "Proprietors" or "Subscribers", and free of charge to certain state and federal officials. It has been operating continuously since 1814, and for a long time has been housed in the Suffolk County Court House, free of expense or rent, and from its inception has been supported in part by public funds, viz.: a payment from the County of Suffolk amounting to $1,000 a year. The Library consists of some 93,000 volumes on various legal subjects, including those of a light and non-technical nature.

The District Judge found as facts that the Social Law Library conforms to all the tests set up in the exempting section 101 (6) of the 1934 Act. Its charter provides that all funds received by it from the Commonwealth of Massachusetts, or from dues of the members, or from any other source, shall be used for the purpose of creating, enlarging, managing and improving the Library. It provides access to sources of information and for opportunities for research in problems of law by any citizen becoming a Proprietor or Subscriber, and which any attorney of Boston becoming a Proprietor or Subscriber may use as supplemental to and in conjunction with his own library. That all cases arising in their practice may be subjected to the widest possible examination and study, it is of inestimable benefit to the public. While individually lawyers may receive direct benefits in their business from the acquisition of knowledge contained in the books of the Library, nevertheless the public also receives both a direct and an indirect benefit from the better administration of the law by reason of the knowledge thus obtained. Though the ones who take advantage of its opportunities may be limited to those contributing to its upkeep, or who are granted the free privileges, that is true of any of our colleges and of many other institutions whose membership is of necessity restricted.

It matters not, we think, as to its status as an educational institution that in the main only lawyers seek to become Proprietors and Subscribers and thus qualify as having access to the Library, in addition to those given free use thereof under its charter. Its benefits are open to all citizens of Boston who are willing to aid in its upkeep by allying themselves with it as a Proprietor or Subscriber.

To permit the public to use the Social Law Library indiscriminately would greatly lessen its benefits to those qualified to obtain the greatest benefits from its use, since it must be a place devoted to study. Quiet is essential to serving its purpose. Hence the reason for excluding law students and restricting the users within reasonable limits.

The District Court found that in the true sense it is an educational institution. The District Court having made these findings and rendered judgment after hearing, and considering the evidence and the agreed statement of facts, such findings and judgment must be taken as presumptively correct. Wabash Ry. Co. v. Bridal, 8 Cir., 94 F.2d 117, 121; Colby et al. v. Riggs National Bank, 67 App. D.C. 259, 92 F.2d 183, 197, 114 A.L.R. 1065; Lawson v. United States Mining Co., 207 U.S. 1, 12, 28 S.Ct. 15, 52 L.Ed. 65.

Therefore, it being presumptively established that the Social Law Library is an educational institution within the meaning of Sec. 101 (6), it is exempt from a capital stock tax, under Sec. 701 (a) of the Revenue Act of 1934.

Such a statute should be liberally construed. The reason for the rule of narrow scrutiny of a statute does not apply in such cases. Union & New Haven Trust Co. v. Eaton, D.C., 20 F.2d 419.

As Judge A. N. Hand said in Slocum et al. v. Bowers, D.C., 15 F.2d 400, 403:

"The policy of exempting these corporations is firmly established and has been continuously expanding ever since the system of income taxation was adopted. The statute should be read, if possible, in such a way as to carry out this policy and not to make the result turn on accidental circumstances or legal technicalities."

The term "charitable" is a generic term and includes literary, religious, scientific and educational institutions. As the court said in Missouri Historical Society v. Academy of Science, 94 Mo. 459, 8 S.W. 346, cited in Simmons et al. v. Fidelity National Bank & Trust Co. of Kansas City, 8 Cir., 64 F.2d 602:

"Any gift not inconsistent with existing laws, which is promotive of science, or tends to the education, enlightenment, benefit, or amelioration of the condition of mankind, or the diffusion of useful knowledge, or is for public convenience, is a charity * * *." 94 Mo. 459, 8 S.W. 348.

Also see to the same effect St. Louis Union Trust Company et al. v. Burnet, 8 Cir., 59 F.2d 922, 927.

Surely a law library of the size and type of the Social Law Library of Boston, serving as it does a large body of lawyers and state and federal officials, measures up to the conditions required of an exempt institution under Sec. 101 (6) supra. Its contents are not strictly confined to law books as authorities on questions of law, but it contains over 8,000 biographical, encyclopedic, and historical works and books dealing with the entertaining aspects of the law. That its users are confined to those interested in legal, governmental or historical subjects and to those contributing to its support does not take away its right to exemption under Sec. 101 (6). This is expressly provided by Regulation 94 of the Treasury Department under Art. 101 (6)-1, and has been generally recognized. In Ettlinger v. Trustees of Randolph-Macon College, 4 Cir., 31 F.2d 869, 871, the court very clearly declared this doctrine:

"And it is equally clear both that...