Case Name: BEHNKE-WALKER BUSINESS COLLEGE v. MULTNOMAH COUNTY et al.
Court: Oregon Supreme Court
Jurisdiction: Oregon
Decision Date: 1944-02-29
Citations: 173 Or. 510
Docket Number: 
Parties: BEHNKE-WALKER BUSINESS COLLEGE v. MULTNOMAH COUNTY et al.
Judges: Before Bailey, Chief Justice, and Belt, Rossman, Kelly, Lusk, Brand and Hay, Associate Justices.
Reporter: Oregon Reports
Volume: 173
Pages: 510–554

Head Matter:
Submitted on briefs September 7, 1943;
argued on order of the Court January 25;
reversed February 29, 1944
BEHNKE-WALKER BUSINESS COLLEGE v. MULTNOMAH COUNTY et al.
(146 P. (2d) 614)
Before Bailey, Chief Justice, and Belt, Rossman, Kelly, Lusk, Brand and Hay, Associate Justices.
Frank 8. Sever, Deputy District Attorney, of Portland (James R. Bain, District Attorney, of Portland, on the brief), for appellants.
W. L. McFarling, of Portland (G. G. Smith, of Portland on the brief), for respondent.
I. H. Van Winkle, Attorney General, and James Q. Smith, Assistant Attorney General, for State Tax Commission, amicus curiae.

Opinion:
BAILEY, C. J.
The question before us for decision is whether or not the real and personal property owned and used by the plaintiff, Behnke-Walker Business College, a corporation, is subject to taxation. The real property involved consists of two lots in Portland, on which there is a three-story brick and concrete building, one hundred by one hundred feet in size, especially designed and used for carrying on therein the plaintiff's business, the conduct of "a school of the type commonly called a business college," in which are taught "bookkeeping, shorthand, English, arithmetic, business administration and kindred subjects". With the exception of one room, approximately twelve by twenty feet in size, the entire building is occupied by the plaintiff. The personal property consists of "the usual furniture and equipment for teaching the usual business subjects taught in the institution, including books of reference".
Tuition fees are charged by the plaintiff to its students, varying "in amount in accordance with the courses or number of courses or subjects taken by such students." It is admitted by the plaintiff in its supplemental brief and was also stated by its counsel in oral argument, that the plaintiff is a corporation organized for profit.
From a decree declaring the plaintiff's property exempt from taxation the defendants have appealed.
The plaintiff asserts that the property, real and personal, owned and used by it in the conduct of its business college is not subject to taxation, because of the provision of subdivision 3, § 110-201, O. C. L, A., which exempts from taxation the "personal property of all literary, benevolent, charitable and scientific institutions incorporated within this state, and such real estate belonging to such institutions as shall be actually occupied for the purposes for which they were incorporated".
It is the defendants' contention that the real and personal property involved in this litigation is not exempt from taxation under subdivision 3, § 110-201, supra, for the following reasons: (1) that the subdivision mentioned has no application to the property of a corporation such as the plaintiff, organized and operated for profit to its stockholders; and (2) that the Behnke-Walker Business College is not a literary, benevolent, charitable or scientific institution within the meaning of that subdivision.
Ever since its enactment by the territorial legislature in 1854, subdivision 3 of § 110-201, supra, has remained unamended, except that the word "territory" therein has been changed to "state": Deady's Code, page 894. In order to ascertain the intention of the territorial legislature in passing the law of which this is a part, it is well to consider the conditions existing at the time of its enactment.
During territorial days corporations were created by special legislative grants to designated persons and their associates. A grant so made conferred the right to be a corporation and to exercise specified corporate powers. Prior to the enactment of the exemption statute now under consideration, the territorial legislature had by special laws granted many corporate franchises. Those were of two general classes, one of which comprised corporations commonly known as capital stock companies, created for the purpose of carrying on designated businesses for the profit of stockholders. Among such corporations were the Umpqua River Navigation and Manufacturing Company, which had for its purpose the building of dams and locks on the Umpqua river to render it suitable for navigation (Special Laws 1853-1854, page 14); the Santiam. River Bridge Company, incorporated for the purpose of constructing and operating a bridge across the Santiam river (Special Laws 1853-1854, page 19); and the Oregon City Water Company, created to supply Oregon City with water (Special Laws 1853-1854, page 78). Those and similar corporations were authorized to issue and sell corporate stock.
The other class of corporations for which special franchises were granted consisted of what might be termed eleemosynary or non-profit organizations. Among them were institutions of learning, such as Oregon Academy at Lafayette (Laws 1851-1852, special laws, page 25); Willamette University (Laws 1852-1853, special laws, page 27); Rickreall Academy (Special Laws 1853-1854, page 10); Union Academy (Special Laws 1853-1854, page 25); Tualatin Academy and Pacific University (Special Laws 1853-1854, page 30); Santiam Academy (Special Laws 1853-1854, page 37); and Corvallis Seminary (Special Laws 1853-1854, page 52). During the session of the legislature in which the exemption statute was passed, charters were granted to the five institutions last named. Subsequently, but prior to the admission of the territory into statehood, many other like corporate franchises were granted.
There is a similarity of language in all the special charters to institutions of learning. In each instance certain designated individuals and their associates and successors are "declared to be a body corporate and politic in law, by the name and style of the 'trustees' " of the institution incorporated. The expressed purpose of granting such franchises was to establish a seminary, acádemy or other institution of learning in each case. In many of the charters there is the provision that "no part of the resources" of the institution "shall ever be used for any other than educational purposes herein contemplated". In other charters there are similar expressions, although not in precisely the same language. All such corporations are authorized to acquire by purchase, donation or gift, property, real, personal or mixed, necessary to carry into effect the objects for which they were incorporated. In none of the charters is there any provision for the issuance of capital stock or any intimation that the trustees or their associates shall receive any profit from the conduct of the corporation.
The creation of private corporations by special laws came to an end when this state adopted its constitution, which provides that, ' ' Corporations may be formed under general laws, but shall not be created by special laws, except for municipal purposes ' ': article XI, § 2, Deady's Code, page 119. In 1862 the legislature passed a general law providing for the organization of corporations for profit, empowered to issue and sell capital stock: Deady's Code, page 658. Two years later the legislature passed "An act to provide for the incorporation of churches and religious, benevolent, literary and charitable societies": Deady's Code, page 632. No provision was made in the latter act or its amendments for the issuance of capital stock or the distribution of profits to the incorporators or members. That act as thereafter amended was last codified as § 77-401 to 77-408, inclusive, O. C. L. A. It was repealed in 1941 and superseded by chapter 462, Oregon Laws 1941, entitled in part, "An act relating to the organization and operation of non-profit corporations".
In pointing out the characteristics of non-profit corporations as distinguished from those of corporations organized for gain, this court in Wemme v. First Church of Christ, Scientist, 110 Or. 179, 199, 219 P. 618, 223 P. 250, with reference to the same corporation, The E. Henry Wemme Endowment Fund, that was involved in Carson v. Schulderman, 79 Or. 184, 154, P. 903, observed:
"A corporation is purely a creature of statute. It can exercise no power unless the statute expressly or by necessary implication authorizes it. Without such statutory power a corporation can not have or issue capital stock. In this state corporations organized for profit are required by statute to have capital stock in order to enable them to carry out the objects and purposes for which they are organized, but corporations organized for charitable purposes are not authorized or permitted by statute to have or to issue capital stock. The E. Henry Wemme Endowment Fund is an eleemosynary corporation and the statute did not confer the power for it to have or to issue capital stock. The issuance by it of capital stock, although directed by the testator, was unauthorized by law and was wholly unnnecessary to aid in carrying out the purposes of the charity".
The following excerpt from 4 Thompson on Corporations, second edition, § 3402, was quoted by the court with approval in that opinion:
"From their very nature religious, educational, charitable and fraternal and social organizations are neither intended nor authorized to have capital stock. Generally, the necessity and authority for capital stock is limited to corporations that are intended for the financial benefit of the members, while it is not required or authorized for those not so intended."
Subdivision 3 of § 110-201, O. C. L. A., on which the plaintiff relies, applies only to literary, benevolent, charitable and scientific institutions incorporated within this state; and the inference is strong that it was intended to affect only such of those institutions as were created by special acts of the territorial legislature or incorporated under general laws relating specifically to literary, benevolent, charitable and scientific corporations as distinguished from private organizations for profit. Section 4 of the act of 1854, of which section subdivision 3 was a part, as printed at page 894 of Deady's Code (which was published in 1866, after Oregon had become a state) and not thereafter amended until 1903, reads as follows:
' ' Sec. 4. The following property shall be exempt from taxation:
"1. All property, real and personal, of the United States, and of this state;
"2. All public or corporate property of the several counties, cities, villages, towns and school districts in this state, used or intended for corporate purposes;
"3. The personal property of all literary, benevolent, charitable and scientific institutions, incorporated within this state, and such real estate belonging to such institutions as shall be actually occupied for the purposes for which they were incorporated ;
"4. All houses of public worship, and the lots on which they are situated, and the pews or slips, and furniture therein, and all burial grounds, tombs and rights of burial; but any part of any budding, being a house of public worship, which shall be kept or used as a store or shop, or for any other purpose, except for public worship or for schools, shall be taxed upon the cash valuation thereof the same as personal property, to the owner or occupant, or to either; and the taxes shall be collected thereon in the same manner as taxes on personal property;
"5. All public libraries, and the real or personal property belonging to or connected with the same;
"6. The property of all Indians, who are not citizens, except land held by them by purchase;
"7. The personal property of all persons, who by reason of infirmity, age or poverty, may, in the opinion of the assessor, be unable to contribute toward the public charges."
Section 1 of article IX of the Oregon constitution as originally adopted was as follows:
"The legislative assembly shall provide by law for a uniform and equal rate of assessment and taxation, and shall prescribe such regulations as shall secure a just valuation for taxation of all property, both real and. personal, excepting such only for municipal, educational, literary, scientific, religious, or charitable purposes, as may be specially exempted by law."
That section remained unamended until 1917, at which time the provision relating to "specially exempted" property was eliminated.
We shall now consider whether the territorial legislature by the use of the words "literary and scientific" in subdivision 3, supra, intended to exempt from taxation all the personal property of literary and scientific corporations and their real property used for corporate purposes, regardless of whether such institutions ,be conducted for the profit of their stockholders or not. It is a familiar rule of construction that "the coupling of words together shows that they are to be understood in the same sense": Neal v. Clark, 95 U. S. 704, 24 L. Ed. 586; or, as expressed in Southern Pacific Company v. State Corporation Commission, 39 Ariz. 1, 3 P. (2d) 518, "Associated words explain and limit each other," See also, in this connection: O 'Malley v. Continental Life Insurance Co., 335 Mo. 1115, 75 S. W: (2d) 837; 25 R. C. L., Statutes, § 239, page 995; and 2 Sutherland on Statutory Construction, third edition, §4908. In subdivision 3, supra, the words "scientific and literary" are associated with "benevolent and charitable".
In Board of Assessors v. Garland School of Home Making, 296 Mass. 378, 6 N. E. (2d) 374, the phrase "literary, benevolent, charitable and scientific institutions", used in the tax-exemption statute of Massachusetts, was interpreted by the supreme court of that state thus:
"The only corporations falling within the class described by the words quoted are corporations which are 'charitable' in the broad sense in which that word is used in the law relating to public charities. The words descriptive of exempt institutions are to be construed together. The word 'benevolent' used in connection with the word 'charitable' is synonymous therewith. Molly Varnum Chapter, D. A. R., v. Lowell, 204 Mass. 487, 492, 90 N. E. 893, 26 L. R. A. (N. S.) 707. And these words are not restricted to relief of the poor or sick but, subject to the limitation above stated, bring institutions of a general charitable nature within the scope of the exemption": citing numerous authorities. "While the words 'literary' and 'scientific' show that the exemption given by the statute is not restricted to institutions having the narrow charitable purpose of relief of the poor or sick, they are to be interpreted, like the word 'benevolent' in the light of their use in connection with the word 'charitable' and do not extend the exemption to literary or scientific .institutions which are not in the nature of public charities. This interpretation is in accord with the underlying reason of the exemption, that it is given in return for the performance of functions which benefit the public": citing authorities.
The properties enumerated in § 4, supra, as exempt from taxation, in other parts of that section than subdivision 3, are those belonging to the United States, the state or some of its agencies, or those devoted to religious, charitable or public use, and in addition the personal property of those who are financially unable to "contribute toward the public charges." In none of such exemptions is there any intimation that any property used for the private gain of any individual or corporation shall be relieved of taxation. For the purpose of construction, the words "literary" and "scientific" used in subdivision 3 should not be lifted from the context in which they are found, but should be considered in relation to the whole of § 4, supra (act of 1854, Deady's Code, page 894). Upon viewing that section in its entirety, it is apparent that the legislature did not intend to exempt from taxation private property used for private profit, and that the only property, public or private, in fact exempted is such as "has been sequestered or devoted to public uses": Brunswick School v. Greenwich, 88 .Conn. 241, 90 A. 801.
There is another reason for holding that the legislature did not intend that property owned by literary or scientific corporations organized and operated for the profit of individual stockholders should be exempted from taxation. Legislation exempting such property when owned by corporations and not when owned by individuals would be discriminatory and unconstitutional.
In Ward's Seminary v. City of Nashville, 129 Tenn. 412, 167 S. W. 113, the court considered the question of whether the exemption from taxes of certain property belonging to educational institutions applied to property owned by individuals as well as to that owned by corporations. The court had decided in a previous case that the exemption was limited to corporate property, and in reference to the former ruling the opinion observed:
"This construction can not be adhered to. Such a construction exempts from taxation property be longing to corporations for profit, if used for educational purposes, but holds the property of individuals used for identical purposes liable for such taxes. If subsection 2 of section 2, Acts of 1907, be so construed, it would be clearly unconstitutional. The court has recently considered the question of discrimination between individuals and private corporations in the case of State v. Railroad, 124 Tenn. 16, 135 S. W. 773, Ann. Cas. 1912 D 805, where the authorities are reviewed at length. As pointed out in State v. Railroad, there must be some natural and reasonable basis for discrimination in legislation between individuals and corporations. Such classification must have some natural and reasonable basis. No reason whatever has been suggested for a discrimination between an individual and a corporation for profit, both engaged in educational work, and any attempt of the legislature to make such a distinction as between the two in the matter of exemption from taxation would be invalid."
When a statute is susceptible of two constructions, one of which would render it constitutional, and the other, unconstitutional, the court will adopt the former construction. In limiting the statute now under consideration to such scientific or literary corporations only as are not operated for private profit we are upholding its constitutionality. There is a sound basis for exempting from taxation the property of such institutions, as distinguished from the property of individuals : Waller v. Lome County, 155 Or. 160, 171, 63 P. (2d) 214.
The burden of taxation ought to fall equally upon all. Statutes exempting persons or property are construed strictly, and an exemption should be denied to exist, unless it be so clearly granted as to be free from reasonable doubt. Such statute will be construed most strongly against those claiming the exemption: Hibernian Benevolent Society v. Kelly, 28 Or. 173, 42 P. 3, 30 L. R. A. 167, 52 Am. St. Rep. 769.
The appellant cites a number of cases holding that property owned by schools and used in their conduct is tax-exempt, regardless of whether the schools are operated for private gain or not. Two of those, from which the plaintiff quotes extensively, are In re Mountain State College, Inc., Assessment, 117 W. Va. 819, 188 S. E. 480, and Board of Commissioners v. Tulsa Business College, 150 Okla. 197, 1 P. (2d) 351.
In the first case named the statute relating to exemption of property from taxation, as quoted in the opinion of the court, provided that:
"All property, real and personal, described in this section, and to the extent herein limited, shall be exempt from taxation, that is to say: Cemeteries; property belonging to colleges, seminaries, academies, and free schools, if used for educational, literary or scientific purposes, including books, apparatus, annuities, money and furniture ; property used for charitable purposes, and not held or leased out for profit; all real estate used exclusively by any college or university society as a literary hall, or as a dormitory or club room, if not leased or otherwise used with a view to profit; all property belonging to benevolent associations, not conducted for private profit".
The court ruled that the property of the commercial college there involved was exempt from taxation, and quoted as authority therefor one of its earlier decisions, as follows:
' ' There is no limitation upon the above exemption for educational purposes by reason of the fact that the property may be held or leased out for profit, as is true of the case of property used for charitable purposes."
The opinion then stated:
". . . The context, exempting several classes of property upon condition that they are not used for profit or private gain, further weakens the claim that a similar qualification was intended as to property belonging to colleges, seminaries, and academies and used for educational, literary, or scientific purposes."
In the Oklahoma case above mentioned, Board of Commissioners v. Tulsa Business College, 150 Okla. 197, 1 P. (2d) 351, the statute under consideration exempted among other things:
"Tenth. All property, both real and personal, of scientific, educational and benevolent institutions, colleges or societies, devoted solely to the appropriate objects of these institutions."
The court in that instance decided that the statute specifically exempted all property used exclusively for schools or colleges, and that it was immaterial, in view of the wording of the statute, whether or not the schools or colleges were operated for private gain.
The statute under consideration in Ward Seminary v. City of Nashville, supra, exempted from taxation "All property belonging to any religious, charitable, scientific, or educational institutions when used exclusively for the purpose for which said institution was created, or is unimproved and yields no income." In construing that section the court referred to and quoted article 11, § 12, of the Tennessee constitution of 1870, reading as follows:
"Knowledge, learning and virtue, being essential to the preservation of republican institutions, and the diffusion of the opportunities and advantages of education throughout the different portions of the state being highly conducive to the promotion of this end, it shall be the duty of the General Assembly in all future periods of this government, to cherish literature and science."
With that in mind, the court stated:
"We think, therefore, in view of this constitutional admonition and the necessity of schools, that it was the intention of the legislature to exempt property used in educational work, whether such property was owned and such work conducted by individuals or corporations."
That the exemption applied to property belonging to educational institutions whether or not used for private gain was therein decided.
In Board of Supervisors v. Gulf Coast Military Academy, 126 Miss. 729, 89 So. 617, the statute to be construed originally provided that all property belonging to incorporated institutions for the education of youth, used exclusively for that purpose and not for profit, should be exempt from taxation: § 3744, Annotated Code of Mississippi 1892. The phrase "and not for profit" was later eliminated. The court ruled that such amendment by the legislature showed the intention of that body to exempt all property used "exclusively for educational purposes, even though the institution is operated for profit".
The. two following cases may be considered together, State ex rel. v. Johnston, 214 Mo. 653, 113 S. W. 1083, 21 L. R. A. (N. S.) 171, and Pitcher v. Miss Wolcott's School Association, 63 Colo. 294, 165 P. 608, L. R. A. 1917E, 1095. In the former, the constitution of Missouri provided that, "Lots in incorporated cities or towns, or within one mile of the limits of any such city or town, to the extent of one acre, and lots one mile or more distant from such cities or towns, to the extent of five acres, with the buildings thereon, may be exempted from taxation when the same are used exclusively for religious worship, for schools, or for purposes purely charitable." In the other case the Colorado constitution was thus worded: "Lots, with the buildings thereon, if said buildings were used solely and exclusively for religious worship, for schools, or for strictly charitable purposes, also cemeteries not used or held for private or corporate profit, shall be exempt from taxation, unless otherwise provided by general law."
Both in Missouri and in Colorado the laws exempting property from taxation followed the language of the respective state's constitution. In the cases from both states it was held that the term "schools" was broad enough to include educational institutions operated for profit.
Nebraska has constitutional and statutory provisions similar in many respects to those of the two states last mentioned, and its supreme court has similarly construed them: Rohrbough v. Douglas County, 76 Neb. 679, 707 N. W. 1000.
The statute of Minnesota exempts from taxation the property of "All academies, colleges, and universities, and all seminaries of learning": State v. Northwestern College, 193 Minn. 123, 258 N. W. 1.
We have hereinbefore referred to most of the authorities cited by the plaintiff in support of its contention that its real and personal property is exempt from taxation. Those which we have not specifically mentioned we have read and considered. Not any of the plaintiff's cases are. in point in regard to the question here before us, for the reason that the constitutions and statutes of the jurisdictions from which they are cited differ materially from the Oregon constitution and statutes on the subject. The cases on which the plaintiff relies stress the fact that by the constitution or the statutes or both, the property of "schools" or other educational institutions is expressly exempted from taxation.
The real and personal property which in this suit the plaintiff is seeking to have exempted from taxation is owned and used by the plaintiff for its own profit. It is not owned and used for literary, benevolent, charitable or scientific purposes within the contemplation of subdivision 3 of § 110-201, O. C. L. A.
In Brunswick School v. Greenwich, supra, the court said:
". . . The plaintiff's purpose is not the charitable one of dévoting its property to the public use, but to devote it to its own use. The investment of capital in the corporation is not an endowment of the capital invested, or of the building in which it is invested, to the public use. Nor does the fact that no dividends have yet been paid, as found by the court, affect the situation."
We have not discussed or considered whether the plaintiff's business college would fall within the definition of a "scientific" or "literary" institution, if owned and used as a business college by a non-profit corporation, inasmuch as it is our conclusion that the plaintiff's property is used for private gain and is therefore taxable.
The decree appealed from is reversed and the suit dismissed. Neither party will recover costs in this court.
[See specially concurring opinion on following page.]