I believe that the claimants, who are employees of The New Opera Company, are entitled to the benefits generally accorded employees by the Unemployment Insurance Law (Labor Law, art. 18, §§ 500-643). I cannot agree with the court's decision that the employer herein is beyond the coverage of that statute.
An employer is exempted from liability for contributions to the State unemployment insurance fund only if "organized and operated exclusively for * * * educational purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual" (Labor Law, § 560, subd. 4). The record before us establishes that The New Opera Company, competing with indisputably commercial theatrical enterprises, produced operettas and musical comedies for Broadway and on-the-road showing, to which the public were invited upon payment of the usual box-office prices. Profits were realized from two of the company's shows and those profits were divided between the company and individuals who backed the productions. It may well be that this sharing of net earnings, in and of itself, precludes the employer from claiming an exemption. *Page 54 Be that as it may, however, there was not, in my view, the slightest basis for holding that such a company operated"exclusively" for educational purposes, or even that it was operated — exclusively or otherwise — for such purposes.
It is important at the outset to note that this case differs in at least one vital respect from exemption cases arising under most other tax laws. In those situations, granting an exemption involves only reallocating a person's tax burden to countless others; here, however, exemption to appellant means exclusion of its employees from benefits and protection under the Unemployment Insurance Law. (See City Club of Milwaukee v. United States,46 F. Supp. 673, 674.) That being so, the Legislature could be expected to award exemptions with a jealous hand, and to insist, in doubtful cases, upon a strict interpretation of the provisions in favor of employees — and that, the statute itself demonstrates, is the fact. Thus, the Unemployment Insurance Law expressly provides that "as a guide to interpretation and application of this article, the public policy of this state is declared to be as follows: * * * the public good and the well-being of the wage earners of this state require the enactment of this measure for the compulsory setting aside of financial reserves for the benefit of persons unemployed through no fault of their own" (Labor Law, § 501). Beyond that, and to check still further all attempts to expand the coverage of the exemption provision, the Legislature added an explicit declaration, in the subdivision immediately following the exemption clause, that "No exemption from taxation granted under any other law of the state shall be so construed as to apply to the payment of contributions under this article" (Labor Law, §560, subd. 5).
With those general considerations noted, I turn to the facts, to consider, in the first place, whether The New Opera Company was, within the meaning of the Unemployment Insurance Law, organized and operated for "educational" purposes. I would not insist that, in order to qualify under that term, a corporation must dedicate itself to disseminating technical learning by formal means or that "educational" denotes only teacher-pupil systems and classroom methods of instruction. Unless, however, the statutory requirement is to be entirely stripped *Page 55 of meaning, the activities upon which exemption is predicated must partake of the aspects and methods of education, as these are commonly understood; and entertainment, no matter how artistically or even unprofitably presented, is not thereby rendered educational.
The New Opera Company was formed, the record discloses, under the Membership Corporations Law to "cultivate, promote, foster, sponsor and develop the understanding, taste and love of the musical arts". These commendable purposes, properly effectuated, might accomplish educational ends.
In the beginning, serious musical works, including some operas which theretofore had been only infrequently heard, were presented. However, as its officers testified, they were not sufficiently income producing and failed to satisfy the company's financial needs. A new policy was adopted. Under the sponsorship of the company, and in joint venture with profit-seeking investors active in the commercial theatre, operettas such as "The Merry Widow" and "Helen Goes to Troy" were produced. Well-known musical comedy stars filled pleading roles — concededly as box-office attractions — at prices scaled according to commercial theatre rates. Typical advertising and press agent promotion were employed, in direct competition with commercial theatres. There was at no time any general reduction of admission prices to make the performances more available to the public. Whether or no the company's other activities could be regarded as educational under the statute — and I am of the opinion they were not — these two presentations were concededly not educational. The company itself recognized that they would "not be educational for school children" because of the ideas contained in them.
Even as to the more serious operas, available only to small numbers of the public on payment of commercial theatre admission fees, it seems clear that they were in the field of entertainment rather than in that of education. (See Boston SymphonyOrchestra, Inc., v. Board of Assessors of City of Boston,294 Mass. 248, 256.) In the Boston Symphony Orchestra case (supra), the Massachusetts Supreme Judicial Court rejected the claim of the Boston Symphony to exemption from city property taxes, though there the statutory exemption was *Page 56 couched in broader language than the provisions here involved. Pointing out that the "way in which the appellant [the corporation] carried out its purpose" — by sale of season subscriptions "to insure a more stable revenue" — and the charging of "a substantial admission fee" made "it doubtful whether the benefits are extended to the poor as well as to the rich", the court went on to say that "it is at least doubtful whether the method of instruction through the rendering of concerts, and especially of the `Pop' concerts, is such that the property is used primarily for educational purposes, rather than for the purposes of entertainment of listeners, even though it be entertainment of the highest and most beneficial type" (294 Mass., at pp. 255, 256).
I believe it even more clear here than in the Boston SymphonyOrchestra case (supra) that whatever educational benefits may be present are realized only as a by-product of entertainment. Thus, it appeared at the hearing that there was no organized schooling, instruction or training for performers other than the usual coaching incidental to preparation of any dramatic or musical performance. There were no "students" in the company; most of the performers selected for parts were music school graduates, and many of them were professionals. I perceive no great distinction between the type of program presented and the activities conducted by The New Opera Company, and the programs and the activities of innumerable ballet, theatre and motion-picture groups. In my judgment, the company was not organized or operated for "educational" purposes.
Even if I could persuade myself that the production of operettas and musical comedies in competition with the commercial theatre is "educational" under the Unemployment Insurance Law, I find no possible escape from the conclusion that the producer, The New Opera Company, is not operated "exclusively" for such educational purposes.
The statute demands — as a prerequisite to exemption — not simply that the company's activities be for educational purposes, but that they be "exclusively" so By the provision in question, the Legislature undoubtedly sought to guard against abuses which might arise if a charitable or educational corporation were tempted and permitted to undertake commercial. nonexempt ventures in the hope of increasing its funds for *Page 57 promotion of its exempt purposes. (See People ex rel. YoungMen's Assn. v. Sayles, 32 App. Div. 197, affd. on opinion below 157 N.Y. 677; Board of Foreign Missions v. Board ofAssessors, 244 N.Y. 42, 46.)
It cannot be said that such fears are unfounded. The record before us, for instance, demonstrates that The New Opera Company did not operate "exclusively" for educational ends. First, it was conceded that two of its productions — "The Merry Widow" and "Helen Goes to Troy" — did not effectuate the avowed educational objectives. Second, the company itself recognized that these productions were not entitled to exemption as educational by actually paying statutory contributions to the Unemployment Insurance Fund on their proceeds, without claiming exemption. Here was clear acknowledgment that the company engaged in nonexempt activities and earned profits from nonexempt productions. The mere circumstance that it made insurance fund contributions on such proceeds cannot be utilized and does not serve to insulate the rest of its operations and preserve the company's exempt status. If anything is clear, it is that the statute requires that, if the corporation is to escape liability for unemployment insurance contributions, all of its activities must be of the exempt class.
A contrary contention — in a case where exemption was sought from liability for real property taxes — was rejected in theSayles case (supra). There, the Appellate Division, in an opinion adopted by this court, declared, "we are asked to hold that, because the rentals of the commercial portions of this building are applied to the expenses of the benevolent objects promoted in the other portion, therefore, in effect, the whole building is exclusively used for benevolent purposes, and for none other. In our view the statute does not permit us this pleasure" (32 App. Div., at p. 200). No more does the Unemployment Insurance Law permit us here to say that a company which carries on concededly noneducational and nonexempt operations in competition with the commercial theatre is, nevertheless, "exclusively" operated for educational purposes.
In reaching this conclusion, I have put aside the circumstance that the determination made by the Unemployment Insurance Appeal Board, based upon questions of fact and having reasonable and substantial support in the record, is not subject to *Page 58 court review. (See Matter of Miller v. Kling, 291 N.Y. 65; cf. Matter of Mounting Finishing Co. v. McGoldrick,294 N.Y. 104, 108.)
The order of the Appellate Division should be affirmed.
LOUGHRAN, Ch. J., LEWIS and CONWAY, JJ., concur with THACHER, J.; FULD, J., dissents in opinion in which DESMOND and DYE, JJ., concur.
Order reversed, etc.