a-185 

OFFICE OF 

TEE ATTORNEY GENERAL 

AUSTIN. TEXAS 

PRICE DANIEL 

ATTORNEY GENERAL 

July 11, 1947 

Hr. Lee Bovlin 

cciunty Attorney 

Hale county 

Pla lnvlev , Texas 

op1n10n Ro. y99 

Be: Exemption from ad valorem 

taxes of buildloss and 

Dsar Sir: 

land belonging t;; Bale 

County Cooperative Hospital. 

You have 

as to vhether 

tal is exempt 

requested an opinion .Srom this Department 

or not the Bale County Cooperative Hoaplfrom 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 provldlag a suitable place in the inrmedlate locality where members and families of members of such corporat~lons nag obtain medlcal, dental, health, surgical, nursing, 

hospitalization, and related services and 

benefits. Acts 1945, 49th Leg., p. 102, 

‘.ch. 70, @L 1.’ 

Article III of the Charter of the “Bospltal’ 

states that -1s corporation does not contemplate pecuniary gain or profit to the members hereof’ and sets out 

the corporate purposes ‘of the “Hospital” In the language 

~ubstantlally that of the statute quoted above. +c 

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 conditions of the By-laws. Membership 1n this 

Corpomtloti shall be evidenced by certlf lcate of membership which Shall be provided 

for In the By-Iaws. Such certificate of 

membership shall not be assignable or transferrable except as provided lo the By-laws. 

We quote the following from a letter from the manager of the “Hospital”. 

“Since the Inception of this organlzatlon, our nrsjor effort has been expended in 

tha construction of 17-bed hospital with 

Clinic facilities including X-ray, Laboratory, 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 services 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 guaranteed Incomes for properly qualified professional 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 stabllzes the incomes of doctors and prevents 

extremely high cost of c$tastrophlc lllnesses 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 

fs 

ursmnce to this particular constitutional grant the 

glslature enacted Section 7 of Article 7150, R. C. S., 

which effect llates exemvtion to the extent of the exemDtlve 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 proSit, unless such rents and profits and all 

moneys and credits are appropriated by such 

lnstltitlons solely to sustain such lnstltutlons and for the benefit of the sick and disabled members and their families and the burial of the same; or for the maintenance of 

persons vhen umble to provide for themselves, 

whether such persons are members of such lnstlt 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, wlthout regard to poverty or riches of the reclplent, also vhen the Punds, property and as- 

-sets of such lns~tltutions are placed and 

bound by its laws to relieve, aid and admlnIster In any way to the relief of Its members when In Want, sickness and distress, 

and provide homes for Its helpless and dependent 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 lnstltutlon can gain exemption for its “buildings , . . . together 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 OplnIon O-6792 of this Department which holds that corporations 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 consider that the opinion precludes the anomalous view that 

the “8ospltal” Is an ulnstltutlon of purely public charity” within the meaning of that phrase as used in Article VIII Section ,2 of the Constitution and la Section 

7 of Article 7150 for the reason that a different exempt Ion Is now being sought by vlrt ue of a different 

statute. 

We are of the opinion that the question YOU oresent 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 Rmployees 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 treatment and care for the employees of the International 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 operated hereafter, who may bs Injured or disabled 

by accident or sickness while in such employment, to such extent only, and under such 

rules and regulations as nmy be prescribed 

frcnn time to time by the Trustees and to furnish 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 herebefore 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 mutusl benefit, health, and accident insurance assoclac 

tion. The’~court rejected this contention and held, that 

the Bospltal Association vas “a mutual benefit assoclatlon”, and that “Its contracts with its several members 

cannot. be I’egarded or :construed as contracts of lnsurante . 

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 ent Itled to the privileges of the association, and the folloving 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 Prlvlleges 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 Association 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 purpose or the corporate method of operation from the time 

of the Bell case, supra, which would ake the Aseociatlon 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 recites the facts of incorporation and operation vlthout 

designating the corporation as ‘an association for mutm1 benefit “. The court there,fore does not spsclflcally deal with the possible effect of the benefit inuring to the members of the association as being destructive 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 taxation, 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 lnstltutlon $0 have a wholly altruistic quality and 

exclu~de ‘from It every private or selfish iaterest 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_ vaue of 

i&s; dli treatmsnts so rendered to the policemen and 

firemen and county charity pstlents would average approxlxmtely $350 a year. The aggregate amounts received . . . for the hospitalization . . . of the Soregoing classes of patients not members of the assoclatlon’were vholly lnadequste to mplnta,ln ‘the hospital 

and other services rendered, and such services could 

not have been rendered except through the monthly assessments paid by Said Embers as aforesaid . . . . ” 

The court no where considers the value of these 

charitable services in relation to the value of services 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 exemption was still accorded the assoclatlon. 

The fact that the members of ihe &le,.County COOPerative Hospital have voluntarily assoclat+d themselves 

together for the purposes of establishing and mslntaialng a hospital In no way militates against an exemption 
F2:=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 property that the charitable orgbnl&atlon may gain exemption from taxation. It has been held that exemption 

was lost where a hosDlta1 rented offices ln the hosDltal building to physicians for use in their generalpractice. ,’ City of Lonnvlew v. Eknrkbam -McRee Memorial 

&spit&l, 152 S. W. (2d) 1112. Moreover vhere a laboratory 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. 

Markham Hospital 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 buildlags 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 exempt 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 ” 

. 

MC:mrj 

BY 

Assistsat 

iTTORNRY GHNRRU 

’ 

_.