Young Men's Christian Ass'n of City of Reading v. City of Reading

• Decision Date: 16 January 1961
• Citation: 402 Pa. 592,167 A.2d 469
• Parties: YOUNG MEN'S CHRISTIAN ASSOCIATION OF the CITY OF READING, Pennsylvania, v. CITY OF READING, Daniel F. McDevitt, Mayor, John C. Kubacki, Harold E. Guldin, Bruce R. Coleman, William A. Ruoff, Councilmen, and John L. Hoch, Treasurer of the City of Reading, Appellants.
• Court: Pennsylvania Supreme Court

167 A.2d 469

402 Pa. 592

YOUNG MEN'S CHRISTIAN ASSOCIATION OF the CITY OF READING, Pennsylvania, v. CITY OF READING, Daniel F. McDevitt, Mayor, John C. Kubacki, Harold E. Guldin, Bruce R. Coleman, William A. Ruoff, Councilmen, and John L. Hoch, Treasurer of the City of Reading, Appellants.

Supreme Court of Pennsylvania.

January 16, 1961.

Robert F. Shapiro, Asst. City Sol., C. Wilson Austin, City Sol., Reading, for appellants.

David H. Roland, Geo. B. Balmer, Snyder, Balmer & Kershner Reading, for appellee.

Before CHARLES ALVIN JONES, C. J., and BELL, MUSMANNO, BENJAMIN R JONES, COHEN and EAGEN, JJ.

COHEN Justice.

The Young Men's Christian Association of the City of Reading Pennsylvania, filed a complaint in equity seeking to enjoin officials of the City of Reading from collecting real estate taxes on those portions of its building used for dormitories and a coffee shop by it and for office space by other rent-paying charitable organizations. The remainder of its building is exempt from taxation and the Y.M.C.A.'s position is that it should be totally exempt. After hearing and argument, the lower court entered an order granting the injunction and the city has appealed.

The chancellor's findings of fact and the record reveal that approximately twenty percent of the assessed value of the Y.M.C.A.'s property is assessed for tax purposes; that of a total of 119,000 square feet, 43,552 square feet comprise the dormitory area, 1,160 square feet are occupied by the coffee shop and 3,900 square feet are rented to other organizations; that of a total income for the fiscal year December 1, 1957, to November 30, 1958, of $184,014.16, dormitory operations provided $76,594.23, the coffee shop brought in $18,197 and the rental of office space provided $4,832; and that of total expenses for the same fiscal year of $183,994.17, building and dormitory expenses were $100,104.92 (no segregation of the amount attributable only to the dormitories were made). Expenses of maintaining the coffee shop were not given, but the testimony indicates that this enterprise generally operated close to the breakeven point.

Further, room rentals run $8 to $10.75 a week for a single room (single night rate is $2.25 plus a .25 cent membership fee); the age of residents as of November 15, 1958, varied greatly, 46.6 percent being under forty years of age and 53.4 percent being over that age; most hotels charge higher rates although one charged about the same as the Y.M.C.A.; while coffee shop rates are generally competitive with nearby lunchrooms. Finally, it seems clear that the income from all of these activities is used for the Y.M.C.A.'s general charitable purposes.

On these facts the Y.M.C.A., relying upon Young Men's Christian Association of Pittsburgh Tax Case, 1955, 383 Pa. 176, 117 A.2d 743, claims complete exemption from tax; while the City of Reading, relying upon Young Men's Christian Association of Germantown v. City of Philadelphia, 1936, 323 Pa. 401, 187 A. 204, asserts that a proportionate part of the Y.M.C.A.'s activities are taxable.

Initially, we are confronted with the question of whether equity has jurisdiction of these proceedings, there existing a statutory appeal procedure. Act of June 23, 1931, P.L. 932, as amended, §§ 2517, 2518, 2521, 53 P.S. §§ 37517, 37518, 37521. The crux of this problem is stated as well as can be in Wynnefield United Presbyterian Church v. City of Philadelphia, 1944, 348 Pa. 252, 35 A.2d 276:

'A distinction has been taken between the cases in which overassessment or inadequate exemption has been alleged and the cases in which the property owner denies the power to levy any tax. In the former, it has been held that the remedy is by appeal from the assessment, as the statute provides, and not in equity; in the latter, equity affords the remedy * * *.'

Application of this principle to assessment cases has led to the unusual procedure whereby the merits of the controversy are examined before jurisdiction is determined; that is, the court has first reviewed the merits to discover if the taxpayer is totally exempt or only partially so. If it decides that the latter result is proper, it then determines that equity has no jurisdiction and dismisses the complaint. A good example of this procedure is seen in Dougherty v. City of Philadelphia, 1934, 314 Pa. 298, 171 A. 583.

It takes little study to realize that this procedure is at odds with the general rule laid down in jacobs v. Fetzer, 1955, 381 Pa. 262, 112 A.2d 356 (a zoning case), wherein the Act of March 21, 1906, P.L. 558, § 13, 46 P.S. § 156, is cited. The efficacy of the rule that a statutory remedy must be pursued, if one exists, in preference to any other procedure is hardly questionable; its application to a tax assessment proceeding whereby those most familiar with the intricacies of tax assessments are able to review the controversy thoroughly is unquestionable.

However, in Jacobs v. Fetzer, supra, the court recognized the first-stated rule by quoting from the Dougherty case, supra, to the effect that equity has jurisdiction where a total want of power to tax appears. Hence, it does not seem inappropriate to review the history of this dichotomy to discover if equity jurisdiction should properly attach in a case like the present one where no allegations that the statute is unconstitutional on its face or is being applied unconstitutionally are made; ^[1] for absent such allegations the legal problems raised by exempting a charitable enterprise from taxation seem no different if a claim of part exemption or total exemption is asserted. The only question in each situation is one of statutory interpretation and application.

We have already referred to the modern expressions of the problem in the Wynnefield case, supra (a 1944 decision), and the Dougherty case, supra (a 1934 decision). Other recent cases are Narehood v. Pearson, 1953, 374 Pa. 299, 96 A.2d 895; Bradford Township Taxpayers Protective Association v. McKean County Board of Assessment and Revision of Taxes, 1952, 370 Pa. 468, 88 A.2d 782; Commonwealth v. Dauphin County, 1946, 354 Pa. 556, 47 A.2d 807; Laureldale Cemetery Association v. Matthews, 1946, 354 Pa. 239, 47 A.2d 277; and Kittanning Borough v. Armstrong County, 1943, 347 Pa. 108, 31 A.2d 710.

If we look to the late nineteenth century, we find several cases questioning the validity of certain taxes. Banger's Appeal, 1885, 109 Pa. 79, involved the constitutionality of the City of Williamsport's occupation tax. In deciding that the tax did infringe the Constitution, this Court pointed out that equity would not interfere where the tax was lawfully assessed or where the complaints dealt with irregularities in valuation or assessment, but that relief could be obtained in equity where there existed no power to tax or where the mode of assessment infringed upon the Constitution. To much the same effect is St. Clair School Board's Appeal, 1873, 74...