Willamette University v. State Tax Commission

• Decision Date: 30 December 1966
• Citation: 245 Or. 342,422 P.2d 260
• Parties: WILLAMETTE UNIVERSITY, an Oregon corporation, Respondent, v. STATE TAX COMMISSION, Appellant.
• Court: Oregon Supreme Court

Page 260

422 P.2d 260

245 Or. 342

WILLAMETTE UNIVERSITY, an Oregon corporation, Respondent, v. STATE TAX COMMISSION, Appellant.

Supreme Court of Oregon, In Banc.

Submitted on Briefs Sept. 7, 1966.

Decided Dec. 30, 1966.

Robert Y. Thornton, Atty. Gen., Donald C. Seymour and Carlisle B. Roberts, Asst. Attys. Gen., Salem, for appellant.

Roy Harland, Salem, for respondent.

Before McALLISTER, C.J., and PERRY, SLOAN, O'CONNELL, GOODWIN, DENECKE and HOLMAN, JJ.

PERRY, Justice.

This is an appeal by the State Tax Commission from a decision of the Oregon Tax Court granting to the plaintiff Willamette University its claim of exemption from ad valorem taxes on five parcels of land which the plaintiff owned on January 1, 1963, the date the property was assessed. Willamette University v. Tax Commission, 2 OTC adv sh 261.

The admitted facts disclose that plaintiff is an institution entitled to the exemption from taxation granted by ORS 307.130.

The admitted facts also disclose that at the time of assessment student housing units were under construction on parcels 1 through 4 and parcel 5 was being used for parking purposes without charge to those going to and from parcels 1 through 4.

The sole question presented by this appeal is whether this property of plaintiff, which when completed and occupied is admittedly exempt from taxation under ORS 307.130, qualified under the statute as exempt during the time the buildings are in the course of construction.

ORS 307.130, so far as applicable, is as follows:

'(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.'

It is the contention of the commission that actual physical occupancy or use, as contrasted with intended physical occupancy or use, must exist before the right of exemption may attach. The commission relies upon a general principle of law,--that statutes providing exemption from taxation are to be strictly construed. This general principle however has been said to be secondary to the rule that the intention of the legislature must be the primary objective sought. Corbett Inves't Co. v. State Tax Com., 181 Or. 244, 181 P.2d 130.

The combining of these rules so as not to 'thwart the purpose of the lawmakers' leads to the rule adopted by this court of strict but reasonable construction of tax exemption statutes. Multnomah School of Bible v. Multnomah County, 218 Or. 19, 343 P.2d 893.

'Exclusively used' is primary use made of the property, and its use for exemption purposes is measured by the reasonable applicability of the property to carry out the purposes of the exempt taxpayer. Multnomah School of Bible v. Multnomah County, supra.

It must be conceded that providing housing space for students at the University meets this test of applicability of the property for university purposes, but this does not reach the question raised by the defendant Tax Commission.

The purpose of the legislature in passing ORS 307.130 was primarily to aid the 'incorporated literary, benevolent, charitable and scientific institutions' by relieving them of a tax burden and thus aiding them to this extent in carrying on a purpose deemed of benefit to the public good.

The exact question which this appeal presents then is when is property owned by the charitable institutions said to be 'actually and exclusively occupied or used in * * * work carried on by such institutions?'

The Tax Commission relies upon the following cases: Cedars of Lebanon Hosp. v. County of L.A., 35 Cal.2d 729, 221 P.2d 31, 15 A.L.R.2d 1045 (1950); Institute of Holy Angels v. Fort Lee, 80 N.J.L. 545, 77 A. 1035 (1910); Longport v. Max & Sarah Bamberger Seashore Home, 91 N.J.L. 330, 102 A. 633 (1917). In these cases, the courts held that in applying the rule of strict construction it could not be said that buildings in the course of construction on the assessment date could be said to be actually occupied or used by the exempt charity.

It is to be noted, however, in Cedars of Lebanon Hospital v. County of L.A., supra, there is a strong dissent, and subsequently the legislature provided exemptions for buildings in the course of construction. Nat. Charity League, Inc. v. County of L.A., 164 Cal.App.2d 241, 330 P.2d 666 (1958). In Longport v. Max & Sarah Bamberger Seashore Home, supra, with two justices dissenting, the majority of the justices reluctantly held that because of the rule of Stare decisis a building held by a charitable corporation while in the course of construction was not then actually used and, therefore, not tax exempt.

However, it should be noted that the New Jersey court, in cases subsequent to those above cited, held in Seaside Home v. State Board Taxes, etc., 98 N.J.L. 110, 118 A. 704 (1922), that property that had been used, but was not in use on the assessment date, which would probably be used the following year, was exempt. Distinguishing Longport v. Max & Sarah Bamberger Seashore Home, supra, and Institute of Holy Angels v. Fort Lee, supra, on the sole ground that in those cases use was only intended; they had never been actually used.

In Trenton Ladies Sick Benefit Soc. v. City of Trenton, 19 N.J.Misc. 176, 17 A.2d 809 (1941), the court found that the building was completed and ready to be used on the assessment date. It was not in actual use, however, because no applications for residency had been made by indigents on the assessment date. The court held that the property qualified for exemption under the statute as being in actual occupation and use.

It is clear, therefore, that even in New Jersey actual physical occupancy is not necessary to meet the requirement of actual occupancy as set forth in their statute.

We prefer to follow the cases from jurisdictions which hold that a building in the course of construction is being occupied and used for the purposes of the exempt corporation as more reasonable and more in spirit with the purpose of the rule of strict but reasonable construction.

In New England Hospital for Women and Children v. City of Boston, 113 Mass. 518, 521, the court stated:

'The facts agreed show that the plaintiffs, at the date of the assessment of this tax, had recently purchased the land in question for the purpose of establishing and maintaining a hospital thereon, and were diligently proceeding with the preliminary measures necessary to the erection of the same. The land must therefore be deemed to have been then occupied by them for the charitable purposes for which they were incorporated, and as such exempted from taxation by the Gen.Sts. c. 11, § 5, cl. 3.'

The word 'actual' was not contained in the Massachusetts statute at that time, but it is clear that the court determined that the right to control the use of the property as distinct from actual physical occupancy constituted an occupancy contemplated by the Act.

The court of New York in considering 'actual use' held that buildings which had been purchased and were in the process of remodeling, but were not occupied by anyone, were actually being used by the corporation for its purposes on the assessment date.

'* * * If the subsequent use created a tax exempt status then a use which was confined to readying them for such purpose was likewise entitled. See Matter of Syracuse University, 214 App.Div. 375, 378, 212 N.Y.S. 253, 257.' Application of Thomas S. Clarkson Memorial College of Technology, 87 N.Y.S.2d 491, 492, 274 App.Div. 732. Affirmed on appeal without dissent, 300 N.Y. 595, 89 N.E.2d 882.

In City of Richmond v. Richmond Memorial Hospital, 202 Va. 86, 116 S.E.2d 79, the hospital building was under construction for the tax years 1956--57. The exemption statute provided an exemption only for '(r)eal estate belonging to, actually and exclusively occupied and used by' the exempt institution. 202 Va. 86, 87, 116 S.E.2d 79. As to the contention that the property was not actually and exclusively occupied and used during the period of construction and therefore not exempt, the court stated:

'* * * It is a matter of common knowledge that where property is being developed for...