### THEAITORNEYGENERAL

FVILL WILSON AlTORNEYOENERAL

Honorable Charles CriminalDistrict J. Lleck

Attorney of Bexar County County Courthouse San Antonio 

### 5, Texas Opinion No. NW-1277

Re: Exemption from ad valorem taxes of Mornlngs.lde Manor, mc
. March 16, 

### 1962

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 incorporated under the Texas Nonprofit Corporation Act for charitableand benevolentpurposes. We quote the followingexcerpt from the brief which has been submittedby the attorneys for The Home In support of their : claim that ,the

Home shotild

be 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 o d the Methodist Church. Said districthas a board on homes for older adults in Its organizational structure. This board 1s Incorporated as the San Antonio DistrictBoard on Methodist Homes for Older Adults and Is the parent corporation. “Morningside

Manor, Inc. has purchased 20.325
acres more fully described in the application for exemption,and has virtually completed construction

of improvementsthereon. Opening ceremoniesand occupancybegan In September 

### 1961. The improvements consist of one building designed to house 109 residents.
“The present requirementsfor admission constitute the requirements under which all exls,tlng reoldentshave been admitted. As quoted in sald Exhibit A of the applicationfor 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,lg

able to pay for the cost of theirHonorableCharles 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 admissionwill be a matter of negotiation and mutual agreementand each case will be consideredon Its own merit.’

“No one Is declined admlaslonbecause of financial Inability to pay. The directors have attempted to determinewhat 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 underwrite the cost of futinishlng their living quarters,all meals, ‘snd a complete staff, Includingan administrator, a full time director of social activities,and four full time nurses plus one part-timenurse, all of whom are either registerednurses or licensed vocationalnurses. Net every elderly person has need of such Facllltles, but for thoee who do, the Methodist Church feels their need to be equivalentto 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 residentsare 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 circumstances as 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 experienceof other homes for older adults across the nation has shown that quite often emergency financialneeds 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 furnishedby 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~the Home should it be caught In such a situation. If no financialburden is ‘

,

.

..Honorable Charles J. Lleck, Page 3 Opinion No. WW-1277

Imposed on the Home, the resident or his estate.hasa credit and right to receive fromthe Home an amount equal to the Initialpayment. MorningsideManor has 'such a program and that portion of the contractapplicable thereto is as follows:

'ltOn this date the undersigned Member has paid Dollars ($ 1 to the Manor to Drovlde analnst anv contlnaencv which may arise ihat would result in a per&%~y responsibility

of the Member and which Is not otherwisedisposed of. The Member agrees In advance to be bound by and hereby ratifies the decisionsof 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 undersigned Member
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 amountspayable by the Manor under this provision shall be paid out of the general fund. It Is expresslyunderstood that no fiduciaryrelation Is created thereby.'

"The MethodistChurch members have made contributionsto help underwrite the cost of furnlehlng 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, twentytwo 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 continues to fill, It Is expected the percentagei of charity cases will Increase."
There 18 no substantial disagreement

between the taxing authorlt$esand the Home as to the facts. The brief submitted by the CriminalDistrictAttorney In support of his position that MornlngsldeManor Is not exempt from state and county ad valorem taxes containsa few facts In addition to those contained In the above The purchaseprice of the land Involvedwas ihe cost of the building, $912,501.56, totaling costs to the date of completion
came from Individualoontributlons and the Issuanceof bonds.HonorableCharles J. Lleck, Page 4 OpinionNo. m-1277

Hereafter the Home will be syRportedfrom such contributions and the charges received from,thoseresiding 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 recreationand for vegetableand flower gardens. Exemptionhas been requested for the entire tract of land.

We have carefullyexamined the, briefs submittedIn connection with your request, We have concludedth&t, with certain llmltatlons, the property In question Is exempt from taxation.

ArticleVIII, Section 2 of the Constitution of the State of Texas has empowered the Legislatureto exemp; from taxation certain enumeratedproperties,among which are Institutions of purely public charity". In pursuance to thls'p%3cular eonstltutlonal

grant, the Legislatureenacted Section 7 of Article 7150, Vernon'sAnnotatedTexas Statutes,which effectuatesexemption to the extent of the exemptlvepowers conferredby 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 )' Dlcklsonv. Woodmen of the World Life InsuranceCo., 280 S.W:2;1 315 (Clv.App.1955,
error ref.).
Section 7 of Article 7150 reads as follows:
"Public charities. All buildings and personalproperty belonging to lnstltutlona of purely public charity, togetherwith the lands belonging to and occupiedby such Institutions

not leased or otherwiseused with a view to profit, unless such rents and profits and all moneys and credits are appropriated

by such Institutionssolely to sustain such Institutions and for the benefit of the sick and disabledmembers and their familiesand the burial of the same, or for the maintenanceof 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 sicknessor distress,or at death, wlthout regard to poverty or riches of the recipient,also when the funds, property and assets of such Institutions are placed and bound by its Paw to relieve, aid andHonorableCharles J. Lleok, Page 5 Opinion No. WW-1277

administer in any way to 'the relief of Its members when In want, slokneseand dietrees, and provide homes Sor its helpless and dependentmember8 and to educate and maintain the orphans of Its deceasedmembers or other pereons.

”

It la clear that under the above section an InstLtutloncan gain exemption for Its "bulldlngr. , . togetherwith the lands belonging to and occupiedby such ln8tltutlons" only If it IS an "institution

of purely public charity."

In City of Houston v. ScottishRite Benev. AeerniC ;;3.eTex. 191, 198, 230 S.W. 978 931 (1921) th Legislature

might rea&ably concl:de t said th Fh?% ln8tltutlon was one of 'purelypublic charity'where: First, It made no gain
or profit; second, It accompllehedends wholly benevolent;and, third, It benefitedpersons, indefiniteIn numbers and In personalties,

by preventing them, through absolutegratuity, from becomingburdens to society and to the state." Admittedly,the Home meets the first requirement slnce'lt makes no gain or profit. Does It accomplishends wholly benevolent and will It benefit persons IndefiniteIn numbers by preventing them from becomingburdens to society and the State? 'Inthe brief submittedIn support of the propositionthat the property 18 taxable, It Is argued that nineteen occupantsare not faced with the probabilitythat they will become a public charge since they are paying their room and board according to the schedule before quoted, that three are partially dolnfi so, that none are on a "full and exclusive charitybasis.

. and that "neither the Constitutionor the courts have establikheda percentageof charitableuse as a basis for an exemption except 100 per cent." We think that these argumentsare refuted by the decision In Santa Rosa Infirmaryv. 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 IndependentSchool District Institutedsuit against the Sisters of Charity of the IncarnateWord, hereinafter referred to as Sisters of Charity, and the Santa Rosa Infirmary, hereinafterreferred 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 operationof Its property.

A Sister of Charity of the IncarnateWord became a member of the Hospitalwhen she was assigned to duty there by the Congregationof Sisters of Charity. The Sisters had,no'lnterest : ..,, 4'

.HonorableCharles J. Lleck, Page 6 OpinionNo. W-1277

In the corporation, received no compensationfor their services except that room8 in the Hospitalwere furnished them when they became sick and that they received the expenses of their room, board, clothingand funeral expenses.
All patients whose financial conditionpermitted them to pay for the hospital services did so. The money so received was used for the maintenance,upkeep and Improvements of the Hospital facilities,for the liquidationof Its debts, for the educatlan and maintenanceof young Sisters, futuremembers of the Hospital, for the support of sick and disabledmembers of the Hospital,and the balance went to a building fund. The Hospitalhad no other
source of revenue than that which It derived from Its pay patients. The Sisters of the Hospital engaged In other charitiesand charitableworks. They conductedSt. Luke’s Free Clinic, fed and clothed the needy, aided unwed mothers -- all of these additional charitiesbeing performed from the general funds of Hospital. There
was testimonyto the effect that the largemajority of patients
were pay patients, that the applicantsfor charitywere comparatively small In number, that the lnetltutlon was entirely self-sustained and In no way dependenton 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 charitableorganization was not entitled to exemption since the buildingwas 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 consideration on the ground thamough the constitutional

provision authorizingexemptionwas still the same, the statutoryprovision Implementingthe constitutional provisionhad been~ampllfledto imlude rents and profits when appropriated

by charitable lnetltutlonssolely to sustain such Institutions. The court stated that If the languageof the then controllingstatutewas to be given effect, charitablelnetltutlons might use funds derived ‘as an Incident of the administration of their charities. ” (hphasls supplied) The court expressly rejected the contentionthat the Hospital lost its status as a purely public charity because the majority of the horns In the hospitalwfts used to take care of pay patients and stated at page 932 that the mere fact that pay patients largely predominatedover ihi dharltypatients, or that the lnatltutlon did not go out Into the highways and by-ways seeking out those to whom Its charitableofficesmight be extended, could not, under the great weight of authority,be said to so detract from Its charitiesas to disqualifyit as an lnetltutlonof purely public charity.”.

, HonorableCharles J. Lleck, Page 7

At page 935, the court said: Opinion No. WW-1277

“The theory upon whloh institutions of thie characterare exempted from taxation is that they serve the governmentby rellevlng 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 assumptionby such institutions of this burden which compensate8the government for the exemptiongranted them from the general obligationresting upon all citizens to pay taxes. It is thereforeessentially to the general public Interest that the facllltleeof 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 populationand Its necessarilyincreasing demands for charitabledispensations.”

Both the State and Federal Qovernmentsare devoting attention to the ever Increasing problem of the aged who constitutean ever lncreaslngpercentageof our population. We think It is selfevident that an aged person need not be wholly without financial
means in order to become a public charge. The Home serves the Qovernmentby relieving it to some extent from what would otherwise 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 decisionsof our courts clearly establish the rule that in order to gain the exemption granted by Section 7 the “Institution

of purely public charity”muet not only own the property for which exemption is sought,but must, in addition, make an actual, direct and exclusiveuse of said property for charitablepurposes. City of Longvlew~ v. Markham-McRee-

Memorial Hoa ltal c-tk 137 Tex. 178, 152 S W 26 1112 (1941) .

Santa R of Longview, 191 S.W.id’695 (Clv.App. Markham Hospital & , error ref )* OS8 Infirmary,supra; Benevolentand Protectlv&,Order Gf’ 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.s

etaxibfe It Is argued that the requisiteof “exclusive use” Is not met in Chls case since some of the rooms will be rented. We do not think that this fact la determinative of the “exclualveuee” requirementbut rather that that requirementis met by the fact that the propertywill be used exclusivelyfor the oharltable:

ptipose ,of-

caring ‘f0tr

.theaged. We are unable to distinguishthe occupancyof the Home by those aged persons who pay for their expenrer and the occupancyof hospitalsby 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) ownershipof the property, (2) bona fide charitable purpose as evidenced by actual charitable work, and (3) exclusive use of the property by the charltabie.lnstltutlon 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

:
OPINIONCOMMITTEE: W. V. Qeppert, Chairman

J. C. Davis Marvin Thomas Bob Flowers Elmer McVey
FEWED FOR THEATTORNEY GENERAL
: Houghton Brovmlee,Jr.