THEAITORNEYGENERAL
FVILL WILSON
AlTORNEYOENERAL
March 16, 1962
Honorable Charles J. Lleck Opinion No. NW-1277
Criminal District Attorney
of Bexar County Re: Exemption from ad valorem
County Courthouse taxes of Mornlngs.ldeManor,
San Antonio 5, Texas mc .
Dear Mr. Lleck:
In connectionwith your request for an opinion of this
office on the above captionedmatter, we have been advised of
the following facts. MornlngsldeManor, Inc., hereinafter
referred to as the Home, 1s incorporatedunder the Texas Non-
profit CorporationAct for charitableand benevolentpurposes.
We quote the following excerpt from the brief which has been
submitted by the attorneys for The Home In support of their :
claim that ,theHome shotildbe exempt from the ad valorem taxes
on the basis of being a purely public charity;
II flornlngsldeManor 1s a project of
the’&n’Antonlo District od the Methodist
Church. Said district has a board on homes
for older adults in Its organizationalstructure.
This board 1s Incorporatedas the San Antonio
District Board on Methodist Homes for Older
Adults and Is the parent corporation.
“MorningsideManor, Inc. has purchased 20.325
acres more fully described in the application
for exemption, and has virtually completed
constructionof improvementsthereon. Opening
ceremonies and occupancy began In September
1961. The improvementsconsist of one build-
ing designed to house 109 residents.
“The present requirementsfor admission con-
stitute the requirementsunder which all exls,t-
lng reoldents have been admitted. As quoted in
sald Exhibit A of the application for exemption,
seotlon five of the by-laws Is very olesr in
stating that,
“IThere 1s no admission fee, or fixed amount,
for admisrlon to the Home, but those who are
flnanolal,lgable to pay for the cost of their
‘
Honorable Charles J. Lieck, Page 2 Opinion No. WW-1277
,
care shall be expected to do so on a basis
determinedby the Board of Directors. In any
case admission will be a matter of negotiation
and mutual agreement and each case will be
consideredon Its own merit.’
“No one Is declined admlaslon because of
financial Inability to pay. The directors
have attempted to determine what It will
cost to operate the Home and have estimated
a cost of $214.50 for one person in a single
room, $182.38 each for two persons In a double .
room, and $194.75 each for two persons in a
suite. These figures are expected to under-
write the cost of futinishlngtheir living
quarters, all meals, ‘snda complete staff,
Including an administrator,a full time
director of social activities, and four full
time nurses plus one part-time nurse, all of
whom are either registered nurses or licensed
vocational nurses. Netevery elderly person
has need of such Facllltles,but for thoee
who do, the Methodist Church feels their need
to be equivalent to the need of orphans, unwed
mothers, and the slok and needy who require
hospital care. This Home is a sincere attempt
to meet such need. All residents are asked to
pay what they can, and because It Is non-profit,
many can afford to pay the full cost of their
care. It Is not expected that any person will
be In such dire financial circumstancesas to
require full charity due to the fact that most
people are eligible for old age assistance,
social security, etc. However, should a case
arise, the Home would not hesitate to provide
a member with 100% dtiarlty.
“The experience of other homes for older ..
adults across the nation has shown that quite
often emergency financial needs result In
connectionwith the last Illness and death
of its membere. Quite often these needs cannot
be met by the member and even though they are
not within the ecope of services furnished by :
the Home, the Home has little choice but to pay
for the necessary Items. Consequently,It’has
become a sound practioe in such homes to request
payment in advance of a sum, when posslble,iD
help lndemnify~theHome should it be caught In
such a situation. If no financial burden is
Honorable Charles J. Lleck, Page 3 Opinion No. WW-1277
Imposed on the Home, the resident or his
estate.has a credit and right to receive from-
the Home an amount equal to the Initial pay-
ment. MorningsideManor has 'sucha program
and that portion of the contract applicable
thereto is as follows:
'ltOnthis date the undersignedMember has
paid Dollars ($ 1
to the Manor to Drovlde analnst anv contlnaencv
which may arise ihat would result in a per&%~y
responsibilityof the Member and which Is not
otherwise disposed of. The Member agrees In
advance to be bound by and hereby ratifies the
decisions of the duly authorizedperson or
persons acting for the Manor when It Is decided
that a charge against said contingencyshould
be made. Upon terminationof residency, the
Manor agrees to pay to the undersignedMember
or his estate - - Dollars
0 ) less any amounts withdrawn therefrom,
If any. This payment shall be paid Into the
general fund of the Manor, and amounts payable
by the Manor under this provision shall be paid
out of the general fund. It Is expressly under-
stood that no fiduciary relation Is created
thereby.'
"The Methodist Church members have made con-
tributionsto help underwrite the cost of furnleh-
lng this facility and are going to continue to
contributeto Its support. Except for these ~
contributions,the Home could not afford to
operate. At the date of this writing, twenty-
two persons have moved Into the Home. Of these;
three such members (13.6$) are charity residents,
I.e. they pay only a fractionalpart of the
estimated cost for their care. As the Home con-
tinues to fill, It Is expected the percentageiof
charity cases will Increase."
There 18 no substantialdisagreementbetween the taxing
authorlt$esand the Home as to the facts. The brief submitted
by the Criminal District Attorney In support of his position
that MornlngsldeManor Is not exempt from state and county ad
valorem taxes contains a few facts In addition to those contained
In the above The purchase price of the land
Involved was ihe cost of the building, $912,501.56,
totaling costs to the date of completion
came from Individual oontributlonsand the Issuance of bonds.
Honorable Charles J. Lleck, Page 4 Opinion No. m-1277
Hereafter the Home will be syRported from such contributions
and the charges received from,those residing in the building.
The entire 20.325 acres will be cleared and landscaped
and the land, In addition to the building site and immediate
bampus, will be used by the residents for recreation and for
vegetable and flower gardens. Exemption has been requested
for the entire tract of land.
We have carefully examined the,briefs submitted In connection
with your request, We have concluded th&t, with certain llmlta-
tlons, the property In question Is exempt from taxation.
Article VIII, Section 2 of the Constitutionof the State
of Texas has empowered the Legislature to exemp; from taxation
certain enumerated properties, among which are Institutions
of purely public charity". In pursuance to thls'p%3cular eon-
stltutlonalgrant, the Legislatureenacted Section 7 of Article
7150, Vernon's Annotated Texas Statutes, which effectuatesexemp-
tion to the extent of the exemptlve powers conferred by Article
VIII, Section 2. Little Theatre of Dallas Inc. v. City of Dallas,
124 S.W.2d 863 Clv.App. 1939) Clty f Wichita Falls v. Cooper,
170 S.W.2d 777 Clv.App. 1943,;errorzef )' D lcklson v. Woodmen
of the World Life Insurance Co., 280 S.W:2;1315 (Clv.App. 1955,
error ref.).
Section 7 of Article 7150 reads as follows:
"Public charities. All buildings and
personal property belonging to lnstltutlona
of purely public charity, together with the
lands belonging to and occupied by such
Institutionsnot leased or otherwise used
with a view to profit, unless such rents
and profits and all moneys and credits are
appropriatedby such Institutionssolely
to sustain such Institutionsand for the
benefit of the sick and disabled members
and their families and the burial of the
same, or for the maintenance of persons when
unable to provide for themselves,whether
such persona are members of such lnstltutlona
or not. An lnetitutlonof purely public
charity under this article Is one which
dispenses Its aid to Its members and others
in sickness or distress, or at death, wlth-
out regard to poverty or riches of the
recipient, also when the funds, property
and assets of such Institutionsare placed
and bound by its Paw to relieve, aid and
Honorable Charles J. Lleok, Page 5 Opinion No. WW-1277
administer in any way to 'therelief of Its
members when In want, sloknese and dietrees,
and provide homes Sor its helpless and
dependentmember8 and to educate and maintain
the orphans of Its deceased members or other
pereons.”
It la clear that under the above section an InstLtutloncan
gain exemption for Its "bulldlngr. , . together with the lands
belonging to and occupied by such ln8tltutlons"only If it IS
an "institutionof purely public charity."
In City of Houston v. Scottish Rite Benev. AeerniC ;;3.eTex.
191, 198, 230 S.W. 978 931 (1921) th t said th
Legislaturemight rea&ably concl:de Fh?% ln8tltutlonwas
one of 'purelypublic charity' where: First, It made no gain
or profit; second, It accompllehedends wholly benevolent; and,
third, It benefited persons, indefinite In numbers and In
personalties,by preventing them, through absolute gratuity,
from becoming burdens to society and to the state."
Admittedly, the Home meets the first requirement slnce'lt
makes no gain or profit. Does It accomplish ends wholly benevolent
and will It benefit persons Indefinite In numbers by preventing
them from becoming burdens to society and the State? 'Inthe
brief submitted In support of the proposition that the property
18 taxable, It Is argued that nineteen occupants are not faced
with the probability that they will become a public charge since
they are paying their room and board according to the schedule
before quoted, that three are partially dolnfiso, that none are
on a "full and exclusive charity basis. . and that "neither
the Constitutionor the courts have establikhed a percentage of
charitableuse as a basis for an exemption except 100 per cent."
We think that these arguments are refuted by the decision In
Santa Rosa Infirmary v. City of San Antonio, 259 S.W. 926 (Tex.
om. pp., .
In the Santa Rosa case, the City of San Antonio and the
San Antonio Independent School District Instituted suit against
the Sisters of Charity of the Incarnate Word, hereinafter
referred to as Sisters of Charity, and the Santa Rosa Infirmary,
hereinafter referred to as the Hospital, both Incorporatedfor
charitablepurposes, to recover taxes assessed against the real
estate and improvementsthereon owned by the Hospital. The
Hospital was a subsidiaryof the Sisters of Charity and was
controlledby It in the management and operation of Its property.
A Sister of Charity of the Incarnate Word became a member
of the Hospital when she was assigned to duty there by the
Congregationof Sisters of Charity. The Sisters had,no'lnterest
: ..,,4'
.
Honorable Charles J. Lleck, Page 6 Opinion No. W-1277
In the corporation,received no compensationfor their services
except that room8 in the Hospital were furnished them when they
became sick and that they received the expenses of their room,
board, clothing and funeral expenses.
All patients whose financial condition permitted them to
pay for the hospital services did so. The money so received was
used for the maintenance,upkeep and Improvementsof the Hospital
facilities,for the liquidationof Its debts, for the educatlan
and maintenance of young Sisters, future members of the Hospital,
for the support of sick and disabled members of the Hospital, and
the balance went to a building fund. The Hospital had no other
source of revenue than that which It derived from Its pay patients.
The Sisters of the Hospital engaged In other charities and
charitableworks. They conducted St. Luke’s Free Clinic, fed
and clothed the needy, aided unwed mothers -- all of these additional
charities being performed from the general funds of Hospital. There
was testimony to the effect that the large majority of patients
were pay patients, that the applicants for charity were comparatively
small In number, that the lnetltutlonwas entirely self-sustained
and In no way dependent on any outside charity or eollcltatlone
from other organizationscOMeCted with the church.
The court discusses the case of Morris v. Masons, 68 Tex.
703, 5 S.W. 519 (1887) which held that a building owned by a
Masonic body claiming to be a purely charitableorganizationwas
not entitled to exemption since the building was largely leased
to tenants from whom rentals were collected. The court therefore
did not decide whether the Masonic body was, In fact, a “purely
public charity.” The court dletlngulshedthe Morris case from
the case under considerationon the ground thamough the
constitutionalprovision authorizingexemption was still the
same, the statutory provision Implementingthe constitutional
provision had been~ampllfledto imlude rents and profits when
appropriatedby charitable lnetltutlonssolely to sustain such
Institutions. The court stated that If the language of the then
controllingstatute was to be given effect, charitable lnetltu-
tlons might use funds derived ‘as an Incident of the administration
of their charities.” (hphasls supplied) The court expressly
rejected the contention that the Hospital lost its status as
a purely public charity because the majority of the horns
In the hospital wftsused to take care of pay patients and stated
at page 932 that the mere fact that pay patients largely
predominatedover ihi dharlty patients, or that the lnatltutlon
did not go out Into the highways and by-ways seeking out those
to whom Its charitableoffices might be extended, could not,
under the great weight of authority, be said to so detract from
Its charities as to disqualify it as an lnetltutlonof purely
public charity.”
.
,
Honorable Charles J. Lleck, Page 7 Opinion No. WW-1277
At page 935, the court said:
“The theory upon whloh institutionsof
thie character are exempted from taxation
is that they serve the government by rellev-
lng it to some extent of what would otherwise
be a public duty or governmentalfunction to
care for the indigent sick and afflicted, and
It Is the assumption by such institutionsof
this burden which compensate8the government
for the exemption granted them from the
general obligation resting upon all citizens
to pay taxes. It is therefore essentially
to the general public Interest that the
facllltlee of these institutionsto carry
on this burden be extended by additions, new
structures,and building funds, looking to
that end and keeping pace with a growing
population and Its necessarily increasing
demands for charitable dispensations.”
Both the State and Federal Qovernmentsare devoting attention
to the ever Increasingproblem of the aged who constitutean ever
lncreaslngpercentage of our population. We think It is self-
evident that an aged person need not be wholly without financial
means in order to become a public charge. The Home serves the
Qovernment by relieving it to some extent from what would other-
wise be a public duty or governmentalfunction to care for the
aged, and may be deemed, therefore,an Institutionof “purely
public charity” a8 those words are used in our Constitution.
Numerous decisions of our courts clearly establish the rule
that in order to gain the exemption granted by Section 7 the
“Institutionof purely public charity” muet not only own the
property for which exemption is sought, but must, in addition,
make an actual, direct and exclusive use of said property for
charitablepurposes. City of Longvlew~v. Markham-McRee- Memorial
Hoa ltal 137 Tex. 178, 152 S W 26 1112 (1941). Markham Hospital
c-tk of Longview, 191 S.W.id’695 (Clv.App.& , error ref )*
Santa ROS8 Infirmary, supra; Benevolent and Protectlv&,OrderGf’
Elks v. City of Houston, 44 S.W 2d 4Utl(Cl~.APP. 1945
ref.) I th bif submitted ii support of the propo&l%rthat
the Homenl.setaxibfe It Is argued that the requisite of “exclusive
use” Is not met in Chls case since some of the rooms will be
rented. We do not think that this fact la determinativeof the
“exclualveuee” requirementbut rather that that requirement is
met by the fact that the property will be used exclusively for
the oharltable:ptipose ,of- .the aged. We are unable to
caring ‘f0tr
distinguishthe occupancy of the Home by those aged persons who
pay for their expenrer and the occupancy of hospitals by pay
.
Honorable Charles J. Lleck, Page 8 Opinion No. WW-1277
patients. Of course, any change in the existing factual
altuatlon which prevents the Home from meeting the threefold
requirementsof (1) ownership of the property, (2) bona fide
charitable purpose as evidenced by actual charitable work,
and (3) exclusive use of the property by the charltabie.lnstltu-
tlon itself would result In a loss of the exemption accorded
by Section 7. The determination of these controlling facts
must always be made by the proper loos1 authorities In deciding
whether exemption will be accorded.
SUMMARY
Under submitted facts, Morningside
Manor, Inc., a charitable corporation
operating a Home for older adults In San
Antonio, la an Institution of pureiy public
charity and Is exempt from ad valorem taxes.
Yours very truly,
WILL WILSON
Attorney General of Texas
Assistant
MMP:cm
APPROVED
:
OPINION COMMITTEE:
W. V. Qeppert,
Chairman
J. C. Davis
Marvin Thomas
Bob Flowers
Elmer McVey
FEWED FOR THE ATTORNEY GENERAL
: Houghton Brovmlee, Jr.