Untitled Texas Attorney General Opinion

a-185 OFFICE OF TEE ATTORNEY GENERAL AUSTIN. TEXAS PRICE DANIEL ATTORNEYGENERAL July 11, 1947 Hr. Lee Bovlin op1n10n Ro. y99 cciunty Attorney Hale county Be: Exemption from ad valorem Pla lnvlev , Texas taxes of buildloss and land belonging t;; Bale County Cooperative Hospi- Dsar Sir: tal. You have requested an opinion .Srom this Department as to vhether or not the Bale County Cooperative Hoapl- tal is exempt from ad valorem taxes. This %ospltalwj as we shell hereafter generally term It, was chartered pursuant to the provisions of Sect Ion 28 of Article 1302, R. C. S., which reads as Sollovs: VA. Charitable corporations may be created’for the purpose, or purposes, of owning and operating non-profit cooperative hospitals, and for the purpose of provld- lag a suitable place in the inrmedlate lo- cality where members and families of mem- bers of such corporat~lons nag obtain medl- cal, dental, health, surgical, nursing, hospitalization, and related services and benefits. Acts 1945, 49th Leg., p. 102, ‘.ch. 70, @L1.’ Article III of the Charter of the “Bospltal’ states that -1s corporation does not contemplate pecu- niary gain or profit to the members hereof’ and sets out the corporate purposes ‘of the “Hospital” In the language ~ubstantlally that of the +c statute quoted above. Article VII of the Cfiarter reads as Sollovs: “Section 1. This Corporat Ion shall have no capital stock, and consequently no dividends, and any profit shall bs used to further the charitable purposes for vhich it Is created, and said Corporation owns no property of any kind. n Hr. Lse Novlln, Page 2, v-299 “Se,ct Ion 2. The persons signing these Articles of Incorporation shall bs deemed members of the Corporation Immediately upon the completion of the organization and new members nmy be admitted to membership In this Corporation under the terms and condi- tions of the By-laws. Membership 1n this Corpomtloti shall be evidenced by certlf l- cate of membership which Shall be provided for In the By-Iaws. Such certificate of membership shall not be assignable or trans- ferrable except as provided lo the By-laws. We quote the following from a letter from the man- ager of the “Hospital”. “Since the Inception of this organlza- tlon, our nrsjor effort has been expended in tha construction of 17-bed hospital with Clinic facilities including X-ray, Labora- tory, and doctors’~ offices. To date the hospital portion Is Incomplete, but the Clinic Is in operation. The major portion of the patients treated here pay for ser- vices rendered; hovever, charity cases will be taketi care of. The percentage of charity cases that we will be able to care for has not been determined. ‘As you my know, these cooperative hospital& were started ln answer to a very critical need for medical facilities in r’iral areas In Texas. They are not the complete answer, but they have gone a long way toward providing facilities and guar- anteed Incomes for properly qualified pro- fessional people lo our southwestern rural areas. These professional people are the first requirements for good medical care at a price our rum1 people can afford to pay. Bach of these hospitals expects to operate a prepsyment plan which will insure the cost of medical care In the locality of the organlzat Ion. This prepymsnt plan stab- llzes the incomes of doctors and prevents extremely high cost of c$tastrophlc lll- nesses of the patients. Article VIII, Section 2 of the Constitution of the State of Texas has empovered the legislature to exempt from taxation certain enumerated properties, among which H&. Lee Nowlin, Page 3, V-299 are ” . . . lnst ltut ions of purely public charity”. In ursmnce to this particular constitutional grant the fs glslature enacted Section 7 of Article 7150, R. C. S., which effect llates exemvtion to the extent of the exemD- tlve powers conferred by Article VIII, Section 2. Lltiie !Pheatre of Callas Inc. v. City of tillas, 124 9. Wr)- 863; City of Wichita P&Us v. CooDer, 170 S. W. (2) 777, error refused. Sect ion 7 of Article 7150 reads as follovs: “7. Public charities. - All buildings belonging to Institutions of purely public charity, together with the lands belonging to and occupied by such institutions not leased or otherwise used with a view to pro- Sit, unless such rents and profits and all moneys and credits are appropriated by such lnstltitlons solely to sustain such lnstltu- tlons and for the benefit of the sick and dis- abled members and their families and the bur- ial of the same; or for the maintenance of persons vhen umble to provide for themselves, whether such persons are members of such ln- stlt utlons or not. An lnstlt ution OS ptiely public. charity under this article Is one which dispenses Its aid to its members and others la sickness or distress, or at death, wlth- out regard to poverty or riches of the reclp- lent, also vhen the Punds, property and as- -sets of such lns~tltutions are placed and bound by its laws to relieve, aid and admln- Ister In any way to the relief of Its mem- bers when In Want, sickness and distress, and provide homes for Its helpless and de- pendent members and to educate and mrlntaln the orw”ns of Its deceased members or other persons. It is clear that under the above section an lnstl- tutlon can gain exemption for its “buildings , . . . to- gether with the Lands belonging to gad occupied by such last it ut ions ” on1 If It Is an “lnstltutlon of purely public cbrlty 4. e are faced at the outset with Opln- Ion O-6792 of this Department which holds that corpora- tions drganleed under Section 2A of Article 1302 are not Institutions of “purely public charity” and are not within the exemption from paymsnt of franchise taxes Mr. Lee Nowlln, Page 4, V-299 which Article 7094 accords corporations “organized . . . for purely public charity”. We will not reconsld& that question since lt is not before us. We do not con- sider that the opinion precludes the anomalous view that the “8ospltal” Is an ulnstltutlon of purely public char- ity” within the meaning of that phrase as used in Ar- ticle VIII Section ,2 of the Constitution and la Section 7 of Article 7150 for the reason that a different ex- empt Ion Is now being sought by vlrt ue of a different statute. We are of the opinion that the question YOUore- sent is settled by the decision In Clty,of Paiestine v. Missouri Pacific Lines Hospital Ass’n., 99 9 W (2) 311, writ of error refused. ‘The court there heid &mt the ~~Mlssourl Pacific Lines Hospital Association was an “lnstltutlon of purely public charity” and exempt from taxa t *on. The Missouri-PBclfic Lines Hospital Association 1s the name borne by the corporation originally chartered in 1915 as the Internat,lonal-Great Northern Railway Rm- ployees I Hospital. The second article of the original charter reads as follows:~, “Second. The purpose for which this corporation Is formed Is for the support of a benevolent and charitable undertaking, la this:. to provide medical and surgical treat- ment and care for the employees of the Inter- national and Great Northern Railway and all persons engaged la the operation of the same and Its properties, whether or not in the hands of Receivers, or however owned or oper- ated hereafter, who may bs Injured or disabled by accident or sickness while in such employ- ment, to such extent only, and under such rules and regulations as nmy be prescribed frcnn time to time by the Trustees and to fur- nish such other and additional privileges and benefits to said employees as may from time to time be directed by the Hoard of Trustees of this Association; provided that such additional benefits and advantages shall not bs inconsistent with nor interfere with the nmln object of said Assoclatlon, as here- before expressed, and to that end purchase, erect and wmlntaln suitable bulldlngs:~for hospitals or other purposes at suitable Mr. Lee Nowlln, Page 5, v-299 po.lnt s along the line of aald railway a,nd its branches. ” The sixth article provided that “there shall be no capital stock of this corporation, but the necessary funds therefor shall be raised in tnch nvinner as may be provided for by the by-laws, . . . It was urged in International & G. N. Rs. Emp x ees* IiosDltal Ass’n. v. Bell, 224 S W. 311, that’% taln facts, I. e., membership In thi assoclatlca being, a cotidltlon of employment with fees therefop withheld from employees salaries, showed that the hospltal’was ,_, not a benevolent and charitable assoclatlon but a mu- tusl benefit, health, and accident insurance assoclac tion. The’~court rejected this contention and held, that the Bospltal Association vas “a mutual benefit assocla- tlon”, and that “Its contracts with its several members cannot. be I’egarded or :construed as contracts of lnsur- ante . Since this decision was rendered (1920) and before the decision in the City OS Palestine case, supra, the orlgloal charter of the Internatlooal and G-t Rorthern Railway Employees 1 Hospital Association was amended. The dotiporate clams was changed to Mlssourl Pacific Lines Hospital Assoclationtand article “Second” was amended’by Inserting the word noSflcersW before “and employees” and the word ‘halntalnance” before “opsratlon”, and varlolie minor changes In vordlng were mpde. In addition the I&- ternatlom1 Great Horthern Rallrcad” was deplned for the purpose of showing what officers and employees vere en- t Itled to the privileges of the association, and the fol- loving proviso vas added: ‘Provided, hovever, that the properties now owned by this Association . . . having been accumulated by means of contributions nade by present and former employees of the InternatIons Great Northern Railway Company and its predecessor compXnles, the employees of that company and its successors, IS any, fihall be entltleg7 to a preferential right of use of such propert lea . . . . ; and If ” and when the employees of other lines nay bs admitted to the privileges and benefits of this Association, they shall be so admitted upon condition that by enjoying such Prlvl- leges and benefits and paying therefor they bir. Lee Howlin, Page 6, V-299 shall not acquire or. claim any property rights, legal or equitable, In or to the physical properties or assets of this As- sociation which shall not be completely terminated and obliterated by a vlthdrawal of such privileges and benefits by the Board of Trustees of this Association.’ Thus there had been no change in the corporate pur- pose or the corporate method of operation from the time of the Bell case, supra, which would ake the Aseocia- tlon any less “an assobiation for mutual benefit” or any more an “lnstltutlon of purely public charity”. In the City of Rilestine case, supra, the court simply re- cites the facts of incorporation and operation vlthout designating the corporation as ‘an association for mu- tm1 benefit “. The court there,fore does not spsclflc- ally deal with the possible effect of the benefit in- uring to the members of the association as being des- tructive of the “charitable” nature of the association; however, It disposes of the netter by implication la the f ollovlng paragraphs : “(4) In Santa Rosa Infirmary v. City of San Antonio, supra, the court said: ‘While it Is stated in City of Houston v. Scottish Rite, etc., Ass’n, supra, that, ln order to maintain Its status as a purely charitable lnstltutlon, an organlzatloa clalmlng to be such, and asserting an exemption from taxa- tion, mhst mske no private gala or corporate profit, nothing more was Intended than that no private individual should reap a profit, or vhere a corporation was the owner that no distributable earnlnGs In the shape of dividends must accrue. 1 “(5) In the case of Benevolent & P. 0. of E. Lodge v. Clt of Houston (Tex. Clv. App.) 44 9. W. (26 7 488, 493, In construing the expression ‘purely public charity,’ the court said: ‘The word ‘purely” Is intended to modify the vord “charity” and not the word *public, It so as to require the lnstltu- tlon $0 have a wholly altruistic quality and exclu~de ‘from It every private or selfish ia- terest or profit or corporate gain l * * In law, the word ‘purely” Is used In the sense Mr. Lee Novlln, Page 7, v-299 of and equivalent to “only, a “vholly, ” “exclusively,” “co~~$ely,.’ uentlrely,” and ‘unquslifledly. These paragraphs and a qubtatlon from’ Clt of Houston v. Scottish Rite Benevolent Aas’n., TihX. 191, 230 S W 978 981, to the effect that “Charity need not bi &lver&l to b@ public” likewise dlSpose,d of the contention that the limitation of. the pr,lrmry purpose of the charity to a class, i.e.; lallrcad em-~ ployees and their families, preve,tited the instltut,lon ., : . from being one of “purely public charlty.~” ’ ., It must be emphasized, however, that la polnt. of. fact the Mlssourl Pacific Lines Hospital did do sOms charitable work. It Is true that “the rendition. of services to non-members has always been lncld~ntal to the nmln purposes of said dssoclatlon . . ~.. .“; but the Hospital had at till times during the period for which taxes were sought given first aid td the members of the City of Palestine police and fire depart=nt and cared for the charity patients of the county. %egardless of race, creed or Slnanclal condition or any other ground of distinction, tio~such -- case @ssr- gencn7 ha& ever been turned sy from salss its1 ~’(Bmphssls a8ded)- The reasome __f_ va ue of i&s; dli treatmsnts so rendered to the policemen and firemen and county charity pstlents would average ap- proxlxmtely $350 a year. The aggregate amounts re- ceived . . . for the hospitalization . . . of the Sore- going classes of patients not members of the assocla- tlon’were vholly lnadequste to mplnta,ln ‘the hospital and other services rendered, and such services could not have been rendered except through the monthly as- sessments paid by Said Embers as aforesaid . . . . ” The court no where considers the value of these charitable services in relation to the value of ser- vices rendered to members of the as&clatlon. It seems safe to say that then percents& of charitable cases was smpll In colaparlson with-the number of ppy patients or members of the assocleQ9.n; yet the exemp- tion was still accorded the assoclatlon. The fact that the members of ihe &le,.County COOP- erative Hospital have voluntarily assoclat+d themselves together for the purposes of establishing and mslntaia- lng a hospital In no way militates against an exemption F- 2:=3 Hr. Iae Nowlln, Page 8, P-299 OS the %oepltal” property. OS course, until such :tLme as charitable cases are being treated there can be no exemption as it Is vell settled that a msre prospective use for charitable purposes Is not sufficient. 2 A.L.R. 545. Likewise It is only by exclusive use of the prop- erty that the charitable orgbnl&atlon may gain exemp- tion from taxation. It has been held that exemption was lost where a hosDlta1 rented offices ln the hosDl- tal building to physicians for use in their general- practice. ,’City of Lonnvlew v. Eknrkbam- McRee Memorial &spit&l, 152 S. W. (2d) 1112. Moreover vhere a labor- atory technician used a part of the hospital laboratory l in doing a small buslnese of his ovn the exemption was‘ lost notwlthstandlnu the fact that he mid no rent and that the hospital dyd not share la his-prlkte profits. MarkhamHospital v. City of Lonuvlew, et al,’ I91 S. W. 12dl 695.. error refused. These two cases involve use by a thtid uerson for private ~purposes and in no way c&Ullct with .the holding ‘In &ti Rbsa Inflmnsry v: ,Clty -of San Antonio, Comm. App., 259 5. W. 926 to the effect that the fact that the major portion of’ths rooms In a hospital are used by pay patients does not result :’ In the loss of the exempt Ion accorded lnstltut Ions of purely public charity provided the other requisites of exemption are met. Assuming, then, that the Bale County Cooperative Hospltal~‘can meet the threefold requlremsnts of owner- ” u of the property, bonaflde charitable ‘purpose as. evidenced ba actual charitable m, and exclusive use of the proper-the charitable instltut Ion Itself;- it Is the opinion of this Department that ,the build- lags bf the Hale County Cooperative Hospital and the grounds on which said buildings are located are exempt ” from ad valorem taxes. SUMMARY The buildings belonging to the Hale County Cooperative Hospital and the grounds on which said buildings are located are ex- empt f~rom ad valorem taxes IS said buildings . and grounds are owned and exclusively used by the Hale County Cooperative Hospital for a bona fide charitable purpose as evidenced by actual charitable work. Art. VIII, sec. 2 of lb. lee Novlin, Page 9, V-299 the Texas Constitntlorr; Sec. 7, AI%, 7150, R. C. 5.; City 0s Palestine v. Hissouri Psclflc LlneS Homltal A ss ' n., s. w. 126) 311. Yours very truly, ATTORNHY GHRHRAL ~OF TEAS ” . BY MC:mrj Assistsat iTTORNRYGHNRRU ’ _.