Case 81 — Action by Commonwealth against Jennie Gray’s Trustee, to Recover Taxes on Property not Listed.

May 27.

#### Commonwealth v. Gray’s Trustee.

APPEAL EROM MARION .CIRCUIT COURT.

Judgment eor Deeendant and Plaintiee Appeals.

Aeeibmed.

Taxation — ¡Exemptions—Educational Trust Funds.

Held: 1. iCotrust. section 170, providing that there shall be exempt from, taxation “institutions” of education not uu-leid! or 'employed for gain by any person 'or corporation, and the -income of which is devoted solely to the cause- of edm-cationi, is not limited to the build-ingsi and grounds' otf educational associations, but includes trust funds, bequeathed to be .inv,elsted, and the income usted solely for1 thie education of poor ohiildren to- be selected by the trustee.

WM. W. SPALDING, attorney eor appellant.

,Jan-e Gray died in 1860, -a resident of Boyle county, Kentucky, where her Will was probated. The residuary clause of thiis will was as follows: “The residue -of my estate, should there be any, I wish placed either in -the bank or ,in the hands of somlej safe individual at interest, and the interest applied annually to the schooling of four children whose piarenits are not able to school them.”

*666John A.- Burton, the executor of the wfill, brought isiuit in. the Boyle circuit court for a 'construction, of this clause of the! will, and the court ait the August term, 1862, rendered a judgment upholding this residuary devise anid directed the executor to annually select four children ‘on whose education he should annually expend the income of the residuary estate .passing into his hands. This judgment has bden obeyed up to the present time; the estate in the meantime’ coming into the hands of the appellee.

.Said estate in the hands of appellee during the years Í890 to 1900, amounted to aibout $6,000. The trustee listed, as the record .shows, $1,000 for (taxation for all of these yeans. During this period there was no claim of constitution or statutory exemption from taxation interposed by trustee. On ■a proceeding by the agent for the Commonwealth to subject the $5,000, omitted from assessment to taxation for each lof these years, the Marion circuit court, on appeal from thei county count, held that it was exempt, from which judgment this appeal is prosecuted.

Our contention is: *That the property herein involved, in not exem/pt from taxation under section 110 op the Constitution, either as am, institution of purely public*charity', *or as an institution of education noil used or employed for gown, by any person or corporation, and ■ the income of which is devoted solely ‡0 the cause of education.*

AUT’HORITISS.

Gray *et al.*v. Gray’s Actor., 70 S. W., 46; German Bank v. ICity of Louisville, 56 S. W., 306; New Orleans v. Louis Rotura, 11 L. R. A., 141, Subsec. 5 of sec. 9, chap. 92, General Statutes, sec. 4026, Kentucky .Statutes'; Sec. 170 of the Constitution; City of Newport v. Masonic Temple Asm., 56 S. W., 405; Widow’s *&*Orphan’s Home of Odd Pel. of JECy. v. OBoslwortih, 65 S. W., 591; Bosworth, Sheriff v. Ky. Chat. Assy., 65 S. W., 602; Gray v. Gray, .supra; 'Com. v. Lexington Cemetery ¡(Co., 70 S. W., 280; City of Louisville v. Nazareth Lit. & Beil. Assn., 36 S. W., 994.

W. J. LI'SLEk ATTORNEY (FOR APPELLEE.

We are not contending that this fund is exempt as an “institution of public charity,” but do aontend that it is exempt as .an “institution of education, not used or employed for gain by any person or corporation, and - the income 'Of which iis solely devoted to the cause of education^” as provided in section 170 of the present Constitution.

*667An. 'institution that gives education to- children, especially to poor children whose parents are not able- to- educate thefcn, renders a service to >the State and to hutmiamilty, and for th-is reaiso-n the State says that such a fiund shall n-oit hear' the burden -of taxation.

AUTHORITIES CITED.

Kentucky Constitution, sec. 170; City Lo-uisville v. Com., 1 Duv., 295; City of Henderson v. McGullMugh, 89 Ky., 452; Broadway Ch. v. Com., 23 R„ 1695; Oity of Louisville v. Nazareth, 19 R., 1100; Zable v. Bap. Orphans’ Home, 9>2 Ky., 9-2; Kentucky IStatuteS, section 4053; Muir v. Corn., 14 R., 478.

Opinion op the court by

JUDGE O’REAR

Affirming.

Jennie (Jane) Gray, of the county of Boyle, devised the residuum of her estate, after certain specific bequests, in trust; the interest to be applied annually to the schooling of four poor children to be selected by the trustee. The fund was not a large one — probably five or six thousand dollars in the aggregate. Since her death, in 1858, it has been applied as directed. The trustee invested all but a thousand dollars of it in national bank stock. This proceeding was instituted by the auditor’s agent to require the listing of this fund for taxation for all the years since 1885, and for the penalties provided by statute for failure to list property by the person chargeable with that duty. The county court required the property to be listed. The circuit court reversed that judgment, and the matter is here on appeal for review.

Section 170 of the Constitution provides that “there shall be exempt from taxation . . . institutions of education not used or employed for gain by any person or corporation and_the income of which is devoted solely to the cause of education.” If this fund is exempted from taxation, it is because it is included in the provision above quoted. But appellant contends that it is not sa embraced. *668That it has been set apart and perpetually dedicated to the sole cause of education, without gain to any person, is not questioned. This court had occasion to consider and construe the meaning of the word “institution,” as used in the above section, in the case of Trustees of Kentucky Female Orphan School v. City of Louisville, 100 Ky., 470, 19 R., 1091, 36 S. W., 921, 40 L. R. A., 119. It was argued in that case for the city, claiming the right to tax certain property in which the endowment fund of the orphan school had been invested, that the word “institution” refers alone to the buildings and grounds used by the schools as a place employed for the purpose of accommodating the pupils and teachers. The court, however, rejected this narrow construction, and found that word embraced not alone the buildings and grounds so used, but that it included the endowment and other funds of the school or corporation which were dedicated solely to the cause of education. What the convention which framed the Constitution evidently had in mind was to exempt from taxation all property that was dedicated solely to the cause of education, and not used or employed for gain by any person or corporation, whether that property was buildings or money, or owned by natural or artificial persons. Buildings alone, and the grounds upon which they stand, are not adequate to provide education. In addition, money must be used to employ teachers, provide text-books, etc. -Indeed, the buildings, so far as ownership by the educator is concerned, could be dispensed with, but not the other means. Nor can we believe that it was the purpose of the convention to require those dedicating their property to this unselfish mode of education to use it in connection with real estate likewise owned and used, before the exemption should apply. It is not a complete definition to define “institution” as simply *669a building or a plant or a body corporate. It may be all of these, but, more broadly speaking, it is that which is set np, provided, ordained, established, or set apart for a particular end, especially of a public character or affecting the community. So, when money or other property is set apart, the exclusive use and income of which is to be applied to the cause of education or pedagogy, the property impressed with that character becomes an institution, without regard to the particular form of its investment. When the dedicator, in his munificence, sets apart property or a fund to this end, the people, in a kindred spirit, have declared by their organic law that such property, when so used without gain or profit to the giver or owner, shall be exempt from taxation.

It follows that the judgment of the circuit court should be affirmed.