Court Opinion

ID: 5450702
Source: CourtListenerOpinion
Date Created: 2022-01-08 18:37:16.03015+00
Date Added: 2024-06-11T08:32:22.274849
License: Public Domain

CURTIS, J., Dissenting.
I dissent.
From the findings of the court it appears that the Eastern Star Homes was organized as a non-profit corporation under the provisions of section 593 of the Civil Code by the Grand *863Chapter of the State of California of the Order of Eastern Star. Its articles of incorporation state that the purpose of its organization is “to own, control, conduct and manage homes, hospitals and asylums for the care, maintenance and support of aged, indigent or infirm members of the Order of the Eastern Star”. The by-laws of the corporation restrict admission to the Home to members of the Order of the Eastern Star who have been in good standing for not less than ten years. The Home is maintained and supported by dues and assessments levied against members of said Order. No person not a member of said Order has ever been admitted as a resident of said Home. It thus appears that only those persons who have contributed toward the support of said Home for a long period of time are entitled to the privileges of said Home, and such contributions are practically the sole support of the Home. Is such an organization a charitable or benevolent society or corporation within the meaning and intent of section 41 of the Probate Code ?
In the case of Brown v. La Societe Francaise, etc., 138 Cal. 475 [71 Pac. 516], the question before the court was whether or not the defendant was a charitable institution. In passing upon that question, the court held that it was not such an organization and, for reason of so holding, stated at page 477:
“From the by-laws of the defendant, of date May 10, 1854, it appears that the society was originally organized as a voluntary association, but was afterwards incorporated by the filing of a certificate of election of trustees, June 7, 1854 (Hittell’s Gen. Laws, art. 1024); and on May 5, 1895, new by-laws were adopted. From these it appears that ‘the society is established on the basis of mutuality for the treatment of sick members, ’ or, as more specifically provided, for the purpose of securing to its members (without payment otherwise than of dues) medical and surgical treatment, including the services of its physicians, surgeons, apothecaries, dentists, nurses, etc., and also medicines. Nor do we find in it any provision for assistance to others, except to paying patients, or sick persons not members admitted to treatment for agreed compensation. It is therefore merely an association for mutual profit or benefit, similar in its essential nature to other societies formed for such purposes. (Gorman v. Russell, 14 Cal. 531; 18 Cal. 688; Donnelly v. Boston Catholic Cemetery, 146 Mass. 166; Coe v. Washington Mills, 149 Mass. *864547; Babb v. Reed, 5 Rawle, 151 [28 Am. Dec. 650]; Texas and Pac. Coal Co. v. Connaughton [Connaughten], 20 Tex. Civ. App. 642 [50 S. W. 173].)”
In the Estate of Dol, 182 Cal. 159 [187 Pac. 428], an appeal was taken from an order distributing the sum of $5,000 to a hospital located in Los Angeles, and the name of which and the purpose of its organization were practically the same as those of the defendant in the Brown ease. The court held that the two organizations were so similar that the later case was controlled by the decision in the earlier case, that the respondent in the ease then before the court was not a charitable or benevolent society or corporation as these terms were used in section 1313 of the Civil Code (now in part re-enacted in section 41 of the Probate Code), and that the bequest to it was not limited by the provisions of said section of the code. In the discussion of the question of the charitable character of the defendant therein, Mr. Justice Shaw at page 163 of the Estate of Dol expressed the view of the court as follows:
“ . . . The same principle is stated in Gorman v. Russell, 14 Cal. 531. Referring to an organization known as the 'Riggers and Stevedores Union Association of San Francisco,’ which was unincorporated, the court said that it was a ‘voluntary association formed for the benefit of the members of it,’ and further, that ‘a number of the members of a particular avocation meet for mutual benefit and protection and prescribe rules for the government of the society thus organized. They agree that each shall contribute a certain fixed sum to the common treasury, and that the sum shall be applied, in a certain event, as in sickness, etc., to the relief of the necessities or wants of the individual members or of their families. This is not a charity any more than an assurance society against fire, or upon life, is a charity. It is simply a fair and reciprocal contract among the members to pay certain amounts in certain contingencies, to each other, out of a common fund. ’ The fact that the society there involved was unincorporated makes no essential difference. The members of the corporation here involved are interested therein substantially in the same way as the members of a voluntary association or partnership formed for the same object are interested. No sound distinction exists on this ground. In each case the arrangement partakes of the nature of a contract whereby, for the dues and fees agreed upon and paid, the members receive *865the medical treatment to be given by the association at the expense of the common fund thus accumulated. Such a society, whether incorporated or not, is not doing charitable work, but is merely rendering the consideration agreed upon in the contract between it and its members. ’ ’
The Estate of Dol was again before this court. On the second occasion the question before the court was whether the Los Angeles County Pioneer Society was a charitable society, as that term was used in section 1313 of the Civil Code. That society was organized for the purpose of the collection and preservation of data touching the early history of the state. This court held: “We are of the opinion that the respondent is a charitable and benevolent corporation. If its only object were to cultivate social intercourse and friendship among its members, it would be for the benefit of the members alone and it would not come within that class. But it is apparent from the reading of the part of the articles (of incorporation) above quoted that this was but a minor part of its purposes.” (186 Cal. 64, 65 [198 Pac. 1039].)
It might be well to call attention again to the purpose for which the appellant, the Eastern Star Homes, was organized, which is to maintain a home exclusively for its own members. No person other than a member of the Order in good standing could enjoy the privileges of the Home, which was maintained and supported by dues and assessments paid by these members.
No legal distinction may be made respecting their charitable character between an institution founded and maintained by a society or corporation for the purpose of providing a home for its needy members and a hospital founded and maintained for the purpose of caring for its sick or injured members, where each institution is supported and maintained by dues and assessments levied upon and paid by its members. In each case those enjoying the privileges of the home or hospital have paid for all the privileges and benefits received by them. In neither case does any member of either of such institutions, enjoying the privileges and benefits of the society of which he is a member, receive anything for which he has not paid a stipulated consideration. In the case of a member of the Order of the Eastern Star, before she can be entitled to the benefit of the Home maintained by that Order, she must have been a member of the Order for *866ten years and be in good standing at the time of making her application for admission. That means that for that period of time she has contributed toward the support of the Home all dues and assessments levied by the Order. To say that the Home is a charitable society or corporation when its benefits and privileges are limited solely to the members of the Order who have contributed definite and fixed amounts for its maintenance and support, is contrary to all reasonable or legal definitions of the word "charity”. The decisions above cited are contrary to any such construction and clearly support the contention of appellant that the Eastern Star Homes is not a charitable or benevolent society or corporation within the provisions of section 41 of the Probate Code. "Such a society,” quoting from the ease of Gorman v. Russell, supra, and approved and applied by this court in the Estate of Dol, supra, "whether incorporated or not, is not doing charitable work, but is merely rendering the consideration agreed upon in the contract between it and its members. ’ ’
The respondents have cited in their brief some thirty cases decided either by this court or by the District Courts of Appeal, which they argue support their contention that the appellant is a charitable or benevolent society or corporation. A mere reading of these eases discloses that not one of them involves a society or corporation whose benefits and privileges are limited only to the paying members of such organization. It is useless to discuss these cases in any detail for the reason that they are so wide of the mark that their inapplicability is apparent from simply mentioning the name and purpose of the particular organization to which the gift was made. In one case, Estate of Friedman, 171 Cal. 431 [153 Pac. 918], the bequest was made to the Hebrew Home for Aged Disabled of San Francisco. It is not clear that this Home was ever limited even to the Jewish people, but it does plainly appear that the privileges of this Home were not limited to the members of that group who contributed to the maintenance of the Home, like those members of the hospital in the Dol ease were doing. A number of these eases involved gifts to educational institutions, which clearly have no application to the question before us in the present proceeding. In other cases the question before the court concerned bequests to churches and other religious organizations. *867As churches and religious organizations are invariably held to be charitable societies, the court in these last named cases held, in accordance with this well-established rule, that such bequests were charitable within the terms of section 1313 of the Civil Code. The Estate of Burns, 26 Cal. App. (2d) 741 [80 Pac. (2d) 77], is also cited, but for what purpose we are unable to determine. While the will under contest in that case provided for a bequest to the Hollenbeck Home, a charitable institution, the sole question before the court in that ease was whether the evidence of the contestants established a prima facie case of undue influence on the part of certain beneficiaries named in the will. This court held that it was insufficient and affirmed the judgment of nonsuit. It is unnecessary to consider any of the other cited cases, as those not discussed above have no more bearing upon this present proceeding than those we have considered.
The rule approved by the decisions of this state cited and relied upon above is the general accepted doctrine in other jurisdictions. In Zollmann on Charities at section 206, it is stated: “Mutual benefit societies exist in great numbers and, as their name indicates, are of much benefit to their members. . . . Since their benevolence begins and ends at home, they will not receive recognition as charities ...” The author in section 208 of the same work in discussing the status of lodges, stated: “On reason lodges are not charities within the meaning of the statute of Elizabeth. . . . They are bodies which derive their funds not from gifts, testamentary or otherwise, but from dues, fees and assessments, and which have other objects than charity, and are rather mutual benefit associations than charitable institutions. ... A lodge of Odd Fellows is, therefore, a mutual benefit society rather than a charity.”
A leading case upon this subject is Bangor v. Rising Virtue etc. Masonic Lodge, 73 Me. 428 [40 Am. Rep. 369], in which the question before the court was whether a Masonic lodge was a charitable institution. After an extended review of the authorities upon the subject and an analysis of the constitution, by-laws, and rules and regulations of Masonic lodges, the court held that such a lodge was not a charitable institution. On page 436 of the opinion the court states its conclusion as follows: “ ... Its funds are derived . . . from fees and the assessments of its members. The funds so obtained are to be distributed among the poor and needy mem*868bers, from whom they were collected, and among their wives and children. It is an association for the mutual benefit of its members, and not a charitable institution within the meaning of the statute.” The statute just referred to provided that all real and personal property of all benevolent and charitable institutions incorporated in that state should be exempt from taxation. The court held that as the lodge was not a charitable or benevolent institution, it was not exempt from taxation under said statute.
Among the cases cited and relied upon in Bangor v. Masonic Lodge, supra, was the case of Babb v. Reed, 5 Rawle (Pa.), 151, 157 [28 Am. Dec. 650], wherein the charitable character of an Odd Fellows lodge was at issue. In commenting on that case the Supreme Court of Elaine in the above decision (p. 436) observed: “In Babb v. Reed, 5 Rawle [151] 157 [28 Am. Dec. 650], it was held that a lodge of Odd Fellows, being an association of mutual benevolence among its members, was not a charitable institution. . . . ‘The association,’ observes Sargent, J., in delivering the opinion of the court, ‘from whose property is the money in court, was formed and conducted without incorporation. Its objects are stated to be the employment of its funds in purposes of mutual benevolence among its members and their families; but these cannot be deemed charitable uses under the common law of Pennsylvania, or the statute 43 Eliz. . . . ’ ”
Respondents contend that a later case of the Supreme Court of Pennsylvania, Philadelphia v. Masonic Home, 160 Pa. 572 [28 Atl. 954, 40 Am. St. Rep. 736, 23 L. R. A. 545], lays down a different rule and is in conflict with the earlier case of Babb v. Reed, supra, but such is not the case. The Constitution of the State of Pennsylvania provided that property of an “institution of purely public charity” was exempt from taxation. The court in Philadelphia v. Masonic Home, supra, simply held that the Masonic home, maintained by the Grand Lodge of Masons of the State of Pennsylvania, was not such an institution, as the benefits of the Home were limited to members of the Etasonie fraternity and were not open to the public.
In the case of In re Rathbone’s Estate, 170 Misc. 1030 [11 N. Y. Supp. (2d) 506, at p. 529], is to be found a clear statement as to the distinction between a beneficial and a charitable society. It is there said: “The distinction be*869tween a beneficial and a charitable society is clear. In the beneficial society the world outside the association’s doors is essentially a stranger. The beneficial society is regardful only of its members. It constitutes a group of insiders. Its membership is formed of candidates able to satisfy onerous conditions—financial, moral, civil, etc. The members have been drawn together by a mutual desire to be as they are. Once assembled they exclude all other persons from their society activities. The charitable institution is exactly the opposite in all the stated particulars allowing of comparison. To a charity the world outside is a world, the inhabitants of which should all be united as brothers. . . . The managing members of a charitable organization expect to get nothing for their labors. Charity seeks primarily the good of others. . . . Charity is the proof of the profound paradox that to get one must give but the giving must not be for the purpose of getting. Every charitable use is open to the whole world so' far as is practicable. ’ ’
As the appellant, the Eastern Star Homes, was founded and is maintained for the express and sole purpose of providing a home for the members of the Order of the Eastern Star of this state, and as the funds necessary for its operation and maintenance were contributed by the members of said Order in regular dues and assessments, under the above authorities it cannot be held to be a charitable or benevolent corporation or society, but is, on the other hand, a mutual benefit association, rendering to its members benefits for an agreed consideration under a contract between itself and its members.
The respondents further contend that even though the appellant is not a charitable or benevolent society or corporation, that the bequest to it is for a charitable purpose and therefore comes within the limitation placed on gifts of that character by the provisions of section 41 of the Probate Code. In support of this contention they cite the case of Estate of Willey, 128 Cal. 1 [60 Pac. 471]. In that case it was contended that certain gifts to several Masonic bodies were invalid because these bodies were charitable societies. The court held that even if these Masonic bodies were not charitable societies, the gifts to them were for charitable purposes and sustained them. This decision, therefore, properly may be construed as holding that a gift or bequest may be charitable and therefore subject to the limitation placed on such *870gifts by section 41 of the Probate Code, although the person or society to whom the gift or bequest is made may not be a charitable society.
As already stated, the bequest to the Eastern Star Homes was made “to be used by the trustees in such manner as may be most beneficial for the Home and its inmates”. It is presumed that the trustees will properly apply the fund so bequeathed to them in accordance with the terms imposed by the testatrix. (Estate of Willey, supra, p. 12.) If so, the proceeds from the gift will be applied in accordance with the purposes of the society, as set forth in its articles of incorporation, which we have seen are “to maintain the Home for the members of the Order”. As the purposes of the Order of the Eastern Star are not charitable and the bequest from the testatrix was to carry out these purposes, it cannot be said that the bequest took on any of the characteristics of a charitable nature. Had the bequest been made to the Home for the care and maintenance of the children of the members of the Order, rather than for the benefit of the members, then there might be some legal grounds for holding it to be a gift in trust for charitable purposes, and the case would be brought within the rule announced in the Estate of Willey, supra, where the bequest was made to certain Masonic bodies “for the use of the widows’ and orphans’ fund of said” lodges. But it was not so made and, as made, the only persons to be benefited by the gift were the members of the Order who might at some time in their lives become residents in the Home.
The accepted definition in this state of a charitable trust is “ ... a donation in trust for promoting the welfare of mankind at large, or of a community, or of some class forming a part of it, indefinite as to numbers and individuals.” (People v. Cogswell, 113 Cal. 129 [45 Pac. 270, 35 L. R. A. 269]; Zollmann on Trusts, p. 140; 5 Cal. Jur. 6.)
The bequest here involved does not come within the terms of this definition. It was not a donation for promoting the welfare of mankind at large, or of any community or class indefinite in number. On the other hand, its purpose was to promote the welfare of a class of individuals definite in number; that is, the membership of the Order of the Eastern Star of the state. As no member of the Order is entitled to become a resident of the Home without she is in good standing in the Order and has been such for ten years prior to her *871admission, the number of individuals whose welfare the bequest was designed to promote was definitely fixed, and their identity could be ascertained by an inspection of the records of the Order. The bequest, therefore, was not a gift to the Home for charitable uses, as the members of the Order for whose welfare the gift was made were an ascertainable and definite class of beneficiaries. (Zollmann on Trusts, p. 141; Loch v. Mayer, 50 Misc. 442 [100 N. Y. Supp. 837, 839].)
I have stated in a preceding part of this opinion that practically the sole support of the Eastern Star Homes came from the annual dues and assessments levied against the members of the Order of the Eastern Star in this state. The facts respecting the maintenance and operation of the Home are that the annual cost of such maintenance and operation of the Home is $30,000. Approximately $24,000 of this amount is from annual dues and assessments levied by the Order on its members, and the balance of said annual cost of maintenance, except the sum of $500, is from income on investments made by the corporation from the surplus of previous dues and assessments. Said sum of $500 per annum, the court found, is income “from an endowment fund of the corporation”. Respondents state that endowment suggests charity. Admitting that the possession of a substantial endowment fund is frequently taken into consideration in determining the charitable character of an institution possessing such a fund, we have been cited to no instance where the income from an endowment fund so insignificant in comparison to the total upkeep of the institution, as is the endowment income in the present case, has ever been seriously considered in determining whether such an institution is a charitable society. Here the annual income from the endowment fund is less than 2 per cent of the annual cost of maintaining the Home, and it cannot have the effect of determining the charitable character of the Home when the purposes of the Home and the actual operation thereof indicate its non-charitable character.
Respondents call our attention to the by-laws of the corporation, the Eastern Star Homes, where in four instances reference is made to the corporation as a “charity,” and contend that it is bound by such an interpretation of itself. There is no merit in this contention. No authority is cited in support of this assertion of respondents, and we doubt whether any can be found. On the other hand, the contrary rule is followed in this state. (Stewart v. California Medical *872etc. Assn., 178 Cal. 418, 421, 422 [176 Pac. 46]; Stonaker v. Big Sisters Hospital, 116 Cal. App. 375, 378 [2 Pac. (2d) 520].) It would be an easy matter in those states where charitable societies are exempt from certain taxes, for a corporation organized for purely commercial purposes, to escape taxation by stating in its articles of incorporation or in its by-laws that its purposes were benevolent and that it was a charitable society, if respondents’ construction of the law should be accepted.
I have referred to the heirs of said deceased who have appeared herein by filing a brief in opposition to this appeal as the respondents.
For the foregoing reasons in my opinion the judgment should be reversed.
Carter, J., concurred.