River Oaks Garden Club v. City of Houston

NORVELL, Justice

(dissenting).

I am unable to agree with the narrow and restricted concept of the term “charity” which for the first time this Court has .•adopted with reference to the constitutional power of the Legislature to grant tax ex•emptions to charitable institutions. The ■constitutional grant upon which the legislative power rests has in some respects been narrowly construed, but a restrictive construction has not heretofore been applied in determining whether or not a particular activity is charitable. In my opinion, it is not only unnecessary but unfortunate to restrict the meaning of the term “charity” to those actions which tend to prevent individuals from becoming burdens to society and to the State, or to those activities which either the state or local government is under a duty or an obligation to finance in providing educational opportunities and benefits to its society. This is charity in its most restricted and narrow sense. The test of preventing persons from becoming burdens to society and the State is only properly used to determine whether an activity or trust with a limited class of beneficiaries can be properly classified as a charity. And to say that charities in the educational field must be restricted to those activities which the state or local government is under a duty or obligation to finance is to adopt a standard which is both overly restrictive and highly uncertain. Where and when may we expect agreement as to educational subjects which the state or local government is under an obligation to finance? However, while my difference with the Court may not be as deep as a well, it rather approaches such proportions, and hence there is nothing to be gained by discussing the variations of wording in which the rule adopted by the Court might be couched. The import of the Court’s holding is clear: the only charity which is eligible for legislative exemption is one whose activities will directly lessen a financal burden which would otherwise be borne by the taxpayer. This is not my concept of a charity.

The Texas courts have definitely adopted the classification of charitable purposes set forth in the American Law Institute’s Restatement of Law of Trusts. See, Powers v. First National Bank of Corsicana, Tex.Civ.App., 137 S.W.2d 839, affirmed 138 Tex. 604, 161 S.W.2d 273; Frost National Bank v. Boyd, Tex.Civ.App., 188 S.W.2d 199, affirmed, Boyd v. Frost National Bank, 145 Tex. 206, 196 S.W.2d 497, 168 A.L.R. 1326.

*858It was said by this Court in the case last cited that:

“The authorities leave no doubt that the words ‘charitable purposes’ have a fixed meaning in law and that a judicial determination may be made with satisfactory certainty in every case where the question of whether a given purpose is or is not charitable arises. Chapter 4 of the statutes of 43 Elizabeth, enacted in 1601, known as the Statute of Charitable Uses, although not adopted in Texas, ‘is regarded by many authorities as the principal test and evidence of what the law will consider charitable uses,’ and the enumeration of those uses as set out in the preamble to the act was accepted as authoritative in Powers v. First National Bank of Corsicana, 138 Tex. 604, 161 S.W.2d 273.
“Illuminative in this regard is the following quotation from Zollman’s American Law of Charities, § 187, p. 123: ‘It must never be forgotten that the words “charity” and “charitable” are technical terms. Since the statute of Elizabeth, they have had a technical meaning both in England and America, including even those states in which the statute has been repealed or has not been re-enacted or adopted. “They are lifted from their popular and lexicographical meaning. In them survives a ■ history from which they have derived a special significance. They condense volumes of controversy and decision into a phrase which must be now read by the growing light under which it has been developed.”
“And the following excellent definition of ‘charity’ and ‘a charitable use’ is evolved in 2 Perry, Trusts and Trustees, 7th ed., § 697, p. 1182: ‘It will be seen that the words “charity” and “a charitable use” have a somewhat technical meaning in the law. * ⅝ * The word “charity” in its widest sense, denotes all the good affections men ought to bear toward each other; in a more restricted sense, it means relief or alms to the poor; but in a court of chancery the signification of the word is derived from the statute of Elizabeth, [and a public charity need have no special reference to the poor.] Hence it has been said that those purposes are considered charitable which are enumerated in the statute, or which by analogy are deemed within its spirit or intendment. * *
“Current legal concepts of what are charitable purposes are well gathered into the following classification in II Restatement, Trusts, § 368, p. 1140:
“ ‘Charitable purposes include
(a) the relief of poverty;
(b) the advancement of education;
(c) the advancement of religion;
(d) the promotion of health;
(e) governmental or muncipal purposes ;
(f) other purposes the accomplishment of which is beneficial to the community.’ ”

The charter of the River Oaks Garden Club provides that:

“The purpose of the River Oaks Garden Club shall be the creation of a Society of Fine Arts, devoted wholly and without charge to the promotion of education and learning in the field of the fine art of gardening and related fine arts.
“Further, the River Oaks Garden Club shall maintain the historical building on the premises known as the Old Smith County School and is incorporated for the purpose of preserving the building which is not to be leased or otherwise used with a view to profit.”

In my opinion the River Oaks Garden Club, under and by virtue of its charter, is an organization for the advancement of education; and hence is a corporation created for charitable purposes under the definition contained in the Restatement.

*859Admittedly, the Powers and Boyd cases were concerned with charitable trusts. They involved the rule against perpetuities which is a public policy doctrine designed to insure that real property remain a comparatively free article of commerce. An exception to the rule is recognized in the case of charitable trusts upon the theory that the removing of property from the stream of commerce is offset or overbalanced by the public good derived from the charitable institution. In determining whether or not the concept of a “charity” as developed in the field of charitable trusts is valid in the area of tax exemption, it is well to bear in mind that a tax exemption is based upon a similar premise to that supporting an exception to the rule against perpetuities, namely, that the contribution to the public good made by the charitable institution overbalances the public loss which is caused by removing the property from the tax rolls.

Article 8, § 2 of the Texas Constitution, authorizes the Legislature to exempt from taxation “all buildings used exclusively and owned by persons or associations of persons for school purposes * ⅛ * and [all] institutions of purely public charity * *.” Morris v. Lone Star Chapter No. 6, R.A.M., 68 Tex. 698, 5 S.W. 519. The use of the word “public” in connection with the word “charity” really adds nothing to it. The term “public charity” is quite commonly used in legislative enactments exempting from taxation those institutions engaged in ■“purely public charity”; but accurately speaking, all charities by definition must be public. Powers v. First National Bank of Corsicana, Tex.Civ.App., 137 S.W.2d 839, 1. c. 842. The word “purely” as used in the Constitution refers to the qualify of the charity, i. e., “that it should be wholly altruistic in the end to be attained, and that no private or selfish interest should be fostered under the guise of charity.” City of Houston v. Scottish Rite Benevolent Association, 111 Tex. 191, 230 S.W. 978. Insofar as this case is concerned, the “charity” of the constitutional provision relating to tax exemption is essentially the same as the “charity” considered by the courts in relation to the law of trusts and has been regarded as analogous by this Court. Powers v. First National Bank of Corsicana, 138 Tex. 604, 161 S.W.2d 273. The difference in wording employed in the Constitution and that employed by the courts in discussing charitable trusts is of little or no significance.

I do not regard any of the Texas authorities cited by the Court of supporting its restricted view of charity. The statute of 43 Elizabeth anedates the Texas Constitution of 1876, and hence the framers thereof, being concerned with the preparation of a basic legal document, may be supposed to have used terms of recognized legal significance. It is reasonable to conclude that the term “charity” was used in its legal and technical sense rather than to designate something in the nature of a dole, restricted to such objectives as would prevent poor and indigent people from becoming burdens to society and to the State. It has been said on respectable authority that “man does not live by bread alone.”

The relief of poverty is one type of charity, and a commendable one at that. It is mentioned first in the classifications set forth in the Restatement. As heretofore pointed out, when this kind of charity is involved and there is a restriction upon the class of beneficiaries, the element of preventing the members of the restricted class from becoming burdens to society is an important consideration. In other classifications of charity it may have little or no significance.

The 1905 Act now carried forward as Article 7150, § 7, Vernon’s Ann.Tex.Stats., does not purport to define an institution of purely public charity in the constitutional sense.

In Morris v. Lone Star Chapter No. 6, R.A.M., 68 Tex. 698, 5 S.W. 519, this Court made no attempt to state an all-inclusive definition of “charity” or “charitable purposes.” The Court expressly pretermitted a decision of whether the property-owning *860corporation was a charitable institution. The property involved was a Masonic Temple, and a portion of the building: had been leased for profit. This was the turning point of the case. The Court concluded that the building was not used exclusively for purely charitable purposes. The use contemplated by the Constitution was held to be “the actual and direct use for the purposes of the association, and not a use by others for revenue, although that revenue may be exclusively appropriated for the objects of the charity.”

In City of Houston v. Scottish Rite Benevolent Association, 111 Tex. 191, 230 S.W. 978, the only charitable use or purpose involved was the relief of poverty. The charter of the benevolent association as set forth in the agreed statement of facts provided that:

“The purpose for which said corporation is formed is to provide for the relief of needy Masons, their wives, widows, mothers and children. * * ”

In this category of charities, the objective of preventing individuals from becoming burdens to society is an important consideration. However, the building owned by the association was used by the San Jacinto Lodge of Perfection No. 6 and the Rose Croix Chapter No. 5, which were Scottish Rite Lodges. The holding of this Court was that as the agreed statement of facts showed that the two Lodges mentioned were engaged in the work of the Masonic order which was “not an order 'that does nothing but dispense charity.’ But it does dispense charity,” such Lodges were not engaged in purely charitable activities

In Dickison v. Woodmen of the World Life Ins. Soc., Tex.Civ.App., 280 S.W.2d 315, wr. ref., it was held that the Woodmen of the World Life Insurance Society, which owned the property claimed to be tax exempt, was not an institution of purely public charity. The Court said:

“The question is then narrowed to the inquiry of whether or not an association or society which is authorized to issue benefit certificates in the nature of life insurance on a contractual basis and apply its assets acquired from assessments or any other source to the payment of such certificates, can reasonably be classified as an institution for the accomplishment of 'ends wholly benevolent’. City of Houston v. Scottish Rite Benev. Ass’n, 111 Tex. 191, 230 S.W. 978, 981.
“Under the Texas decisions, despite the attempted legislative classification, it must be held that such ends are not wholly benevolent and such an organization as here involved is not an institution of ‘purely public charity’ within the constitutonal definition.” [280 S.W.2d 315, 319]

The other authorities cited by the Court are of similar import. They represent a restrictive or conservative view of charity only in that they hold that the organization claiming the exemption must have purely charitable objectives unmixed with non-charitable objectives or purposes. The case last mentioned is illustrative. An organization which sells life insurance and also maintains a hospital is not an institution of purely public charity.

Similarly, the use to which the property is put must be wholly charitable and unmixed with non-charitable uses. Morris v. Lone Star Chapter No. 6, R.A.M., 68 Tex. 698, 5 S.W. 519; City of Houston v. Scottish Rite Benevolent Association, 111 Tex. 191, 230 S.W. 978.

I have no quarrel with those cases, but they do not stand for the proposition that no organization or no use may be classed as charitable unless the activities of the organization or the uses made of its property be such as will tend to directly lessen a financial burden which would otherwise be borne by the taxpayer. Had the framers of the Constitution intended to limit the tax exemption authorization to the relief of poverty, they could have easily said so instead of employing the broader term of “charity.”

*861The promotion of the fine arts of gardening and related fine arts and the maintenance of historical buildings may not tend to prevent persons from becoming charges upon society; such activities may not be those which the state or local government is under a duty or obligation to finance (although there may be some argument about historical sites); yet under the legal definition of “charity,” they should be classed as charitable activities and hence within the meaning of the constitutional provision which authorizes the Legislature to grant tax exemptions. And here I would not enter the metaphysical field in order to attempt a distinction between that which may be classed as educational and that which is merely aesthetic. Whenever such distinctions are attempted, the tendency is to substitute a subjective standard for one which should be objective, and regard that which we consider worthwhile as being educational and that in which we have little or no interest as being merely aesthetic. In this area the Legislature has some discretion. It need not exempt all activities which may be classed as “charitable” in the constitutional sense. In my opinion, the Legislature is constitutionally authorized to exempt the property of organizations such as the River Oaks Garden Club from taxation. They may not be schools, but they are organizations for the advancement of education.

As the constitutional provision is not self-enacting and constitutes a mere authorization, it follows, as above indicated, that the exemption claimed must be not only within the permissible terms of the Constitution, but also within the actual provisions of the exempting statute. Santa Rosa Infirmary v. City of San Antonio, Tex.Comm.App., 259 S.W. 926. Article 7150, Vernon’s Ann. Tex.Stats., contains some twenty-one sections purporting to exempt from taxation certain described properties under the authorization contained in Article 8, § 2, of the Texas Constitution. All of these are different in wording, and confusion may result from attempts to apply statements of courts made in construing one article to the problems of construction encountered in determining the meaning of another article. For the purposes of the present case, however, it is apparent that the property of River Oaks Garden Club comes clearly within the exemption set out in Article 7150, § 14, which reads as follows:

“14. Art Galleries, etc. — All property belonging to Art Leagues and Societies of Fine Arts, whether incorporated or not, which are devoted wholly and without charge to the promotion of education and learning, including Art Galleries and exhibits therein contained, the land upon which the same are situated, which is devoted exclusively to such purposes, and also all land, money, pictures and other works of art and all other personal property which may be necessary and in actual use for the purpose of carrying out said educational feature.”

So far, I am in agreement with the Court of Civil Appeals. In its opinion that court cited the case of Power v. First National Bank of Corsicana, Tex.Civ.App., 137 S.W. 2d 839, aff’d 138 Tex. 604, 161 S.W.2d 273, as adopting a definition of charity which is applicable to the granting of tax exemptions. Seemingly also, that court was of the opinion that had the use of the property been exclusive with the petitioner, and had the property been used in accordance with the terms of its charter, the statutory tax exemption of Article 7150, § 14, would have been applicable. The reversal of the trial court’s judgment by the appellate court resulted from the conclusion, arrived at reluctantly, that “the use of the property in question by other organizations, even though such organizations have similar purposes and use patterns” destroyed the tax exemption.

This holding by the Court of Civil Appeals is much narrower than the holding of this Court. Under the opinion of this Court the property owned by petitioner could never meet the requirements for tax exemption although it be used exclusively *862by the petitioner and in strict conformity with its charter. Under the holding of the Court of Civil Appeals, it is the use of the property by other organizations that renders the property ineligible for tax exemption.

If the premise be accepted that “charitable purposes” as defined in the Powers and Boyd cases are applicable to the tax exemption authorization provision of the Constitution (as I think it should be), the mere fact that a charitable use is sometimes made of the property by some organization other than the owner, should not affect the tax exemption classification of the property so long as no charge is made for such use. In the present case the Court of Civil Appeals accurately describes the use of the property made by others as being of a similar pattern to the uses made of the property by the petitioner. This Court’s opinion names some of the users of the property, i. e., Houston’s Symphony Society Women’s Council, the Amaryllis Society, The African Violet Society and the Gulf Coast Botanical Research Society. All have purposes which are cultural in nature and similar to the purposes designated in petitioner’s charter. On principle, it is illogical to say that the petitioner could promote education along botanical lines and its property would be tax exempt; but that if the property were used temporarily and rent free by the Gulf Coast Botanical Research Society for a similar purpose, the property would lose its tax exemption.

In a sense, whenever a tax exemption is granted, the State and its political subdivisions indirectly contribute a portion of the funds necessary to support the organization owning the property. The organization need not, however, be one that is eligible for tax support in order that its property be entitled to tax exemption. Churches and religious organizations are examples of institutions which may not be supported by taxation, yet their properties may be tax exempt. Once it be determined that certain activities are worthy of indirect State support through tax exemptions, it is difficult to justify the line of demarcation recognized by the Court of Civil Appeals. That court, quite obviously, made the “exclusive use by owner” distinction because of its belief that prior decisions of this Court so required.

In the quotation from City of Houston v. Scottish Rite Benevolent Association, 111 Tex. 191, 230 S.W. 978, set forth in the opinion of the Court of Civil Appeals, an exclusive use by the owner of the property is mentioned. However, the question of whether a use of property permitted by a benevolent association as owner thereof is a use by the association or a use by someone temporarily in charge thereof may become an elusive and at times a somewhat insubstantial inquiry. For example, should a speaker paid by the Gulf Coast Botanical Research Society deliver a lecture upon a botanical subject in the building owned by the River Oaks Garden Club and special invitations be sent to members of both organizations and a general invitation issued to the public, would it be correct to say that the use of the building for such purpose was not a use by the River Oaks Garden Club? The factual situation suggested may be varied in detail, but each variation will serve to demonstrate the irrelevance of the inquiry insofar as the policy of the law supporting tax exemption is concerned. If the owner be a charitable organization and the use of the property be charitable, then the exemption should be upheld.

To my mind, the Scottish Rite case supports rather than militates against this thesis. The property was owned by the benevolent association. It was used, however, by two Masonic Lodges mentioned in the opinion — San Jacinto Lodge of Perfection No. 6 and Houston Chapter of Rose Croix No. 5. This Court considered the nature of the use of the premises by these two Lodges as being highly important, although they were not the owners of the property. If it would have been sufficient to the decision of the case to simply point out that the benevolent association as owner was not using the building to the exclusion of all *863other organizations, why was it necessary to discuss whether or not the Masonic lodges were charitable organizations? The Court did not turn its decision upon the circumstance that the use of the property was not exclusive with the owner, but upon the proposition that the use made of the building by the non-owning lodges was not a purely charitable use. In its opinion this Court said:

“By the very manner and terms of this property’s acquisition, it was required to be used, as it was in fact used, by the two Masonic orders, ‘to enable them to pursue their work as Masonic lodges,’ such work being, as agreed, only partly charitable.
“To the extent that the property was used by Masonic organizations, whose activities included other fields than charity, it was not, and could not be, used exclusively by an institution of purely public charity. Not being used exclusively by an institution of purely public charity, the claim to exemption under the constitutional provision fails, and our answer to the certified question is that the property was subject to taxation.” 230 S.W. 978, 981.

I find no basis in either the constitutional provision nor in the applicable statutory wording to support the “exclusive use by owner” theory. We should be wary of the uncritical adoption of statements made in court opinions where the issue of “exclusive use by owner” was really not involved. I submit that the Scottish Rite case, when considered in the light of the contentions raised and the matters actually determined by the Court, supports my position here. The non-owning users of the building were not purely charitable organizations; hence there was no valid tax exemption. In the present case, it appears that the non-owners who make temporary uses of the building are using the same for educational and charitable purposes. The tax exemption should therefore be upheld. I agree with petitioner’s statement that:

“The requirement is that the Garden Club use the premises exclusively for the promotion of education and learning, without charge. The fact that other organizations of the same purpose and use-pattern are allowed to assist in-fulfilling that purpose, under the control of the Garden Club, meets the letter and the theory of Section 14 and Article 8, Sec. 2 of the Constitution, as construed by our Courts.”

I would reverse the judgment of the Court of Civil Appeals and affirm that of the trial court. Accordingly, I respectfully dissent from the order of the court affirming the judgment of the Court of Civil Appeals.

GRIFFIN, SMITH and GREENHILL, JJ., join in this dissent.