Court Opinion

ID: 9672993
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:04:02.55218+00
Date Added: 2024-06-11T18:16:19.591721
License: Public Domain

Beilfuss, Wilkie and Heffernan, JJ.
(dissenting). We respectfully dissent from the opinion of the majority and conclude that the Bradford Terrace Addition (less the value of the physical therapy rooms) as presently operated is not exempt from property taxation.
In considering tax exemption problems we start with the proposition that all property must be uniformly taxed. An exemption of property lowers a municipal tax base and transfers its burden of taxation to others. For this reason, at least, tax exemption statutes are usually strictly construed against exemption.
In the recent case of Engineers & Scientists v. Milwaukee (1968), 38 Wis. 2d 550, 553, 157 N. W. 2d 572, we stated:
“One who seeks to have his property exempt from taxation is required to bring himself within the terms of the exemption statute. This court has frequently stated that taxation is the rule and that exemption from taxation is the exception. In Bethel Convalescent Home v. Richfield (1961), 15 Wis. 2d 1, 4, 111 N. W. 2d 913, we quoted *304with approval the rule stated in Madison Aerie No. 623 F. O. E. v. Madison (1957), 275 Wis. 472, 476, 82 N. W. 2d 207:
“ ‘ “Statutes exempting property from taxation are to be strictly construed and all doubts are resolved in favor of its taxability. To be entitled to tax exemption the taxpayer must bring himself within the exact terms of the exemption statute.” ’
“In the recent case of Columbia Hospital Asso. v. Milwaukee (1967), 35 Wis. 2d 660, 668, 669, 151 N. W. 2d 750, we pointed out that:
“ ‘. . . a strict construction is nonetheless a construction, and an exemption statute need not be given an unreasonable construction or the narrowest possible construction. A “strict but reasonable” construction seems to be the pithy and popular statement of the rule. [Citing cases.] The difference between a liberal and a strict construction is best illustrated in those cases where the meaning of the language expressing the objective intent of the legislature is doubtful; in such cases, any doubt under the strict construction rule must be resolved against the exemption. Thus an exemption should be expressed in such clear language as to leave no doubt.’ ”
We will refer to the 1963 Bradford Terrace Addition as “Bradford Terrace,” and all the other wings and facilities as the “Home.”
There is no contention by the city that the Home and its facilities are not exempt from general property taxation as being charitable or benevolent associations. The question is whether Bradford Terrace is exempt because of the manner in which the founders’ fee method of financing is utilized. As now operated, does Bradford Terrace perform a benevolent service ?
The charter of the appellant in 1956 provided:
“Article 2. The purpose shall be to provide a home for aged persons who are unable to care or provide for themselves and to engage in any lawful activity . . . .”
On November 8, 1960, it was amended to read:
“Article 2. The corporation is organized solely for charitable purposes and, specifically, to own and operate *305a residence and nursing home for aged persons and to do and perform any and all acts as may be necessary to the furtherance of such purposes . . . .”
The major hurdle in appellant’s path, as we see it, is the contention that residents of Bradford Terrace are, in effect, the recipients of their own benevolence for they, as paying residents, and no others, enjoy all the facilities of Bradford Terrace.
To overcome this hurdle the majority states that the concepts of benevolence and charity can be given a broad enough interpretation to include all the needs of aged persons, physical and mental, as well as financial. Further, the fact that the operation shows a profit or that its services are not offered at less than cost does not in itself destroy the charitable nature of the association. In support of its position it cites Duncan v. Steeper (1962), 17 Wis. 2d 226, 233, 234, 116 N. W. 2d 154. A quotation from the case is:
“It is apparent that respondents harbor the mistaken view that an institution cannot be a charitable hospital unless it extends direct charity to at least some of its patients in the form of free service, or charges less than the cost of its services. . . . ii
“In Associated Hospital Service v. Milwaukee (1961), 13 Wis. (2d) 447, 460, 109 N. W. (2d) 271, this court pointed out that some courts have adopted broad definitions of ‘charitable’ institutions which do not embody the idea of giving away something free. As an example we therein cited Rueda v. Union Pacific R. Co. (1946), 180 Or. 133, 169, 175 Pac. (2d) 778, 793, to the effect that the test of whether an enterprise, such as a hospital, is charitable is its purpose, and that, if its purpose is to heal the sick and relieve the suffering without hope or purpose of gain from its operation, it is charitable. We held in the Associated Hospital Case that the gain or profit which destroys the charitable character of a corporation is that which inures to the benefit of its members and is not affected by the fact that the corporation’s income may exceed its operating expenses.”
*306While we recognize the authority of the Duncan and Associated Hospital Service Cases, supra, they must be distinguished in view of the fact that we adhere to the strict construction rule in tax exemption statute cases.
The issue in Duncan was tort liability of a hospital because of the negligence of an employee and an asserted defense of charitable immunity.
In Associated Hospital Service the issue was tax exemption of the real and personal property of a hospital service corporation operating on the Blue Cross Plan by virtue of sec. 182.032 (2) (a), Stats. At page 463 of the Associated Hospital Service Case, the court stated:
“The city further contends that the employment of the words of sub. (8) of sec. 182.032, Stats. 1955 and 1957, ‘as provided in secs. 70.11, 71.01 (3), 72.04, and 72.75 to 72.81’ must be interpreted as meaning that the tests of exemption, in so far as real and personal-property taxes are concerned, are those set forth in sec. 70.11. The learned trial court rejected such interpretation and so do we.
“There would be no purpose for the legislature to declare that a nonprofit hospital-service corporation is a charitable and benevolent corporation and tax exempt in sub. (8) of sec. 182.032, Stats. 1955 and 1957, if it already qualifies for exemption under sec. 70.11. On the other hand, if such corporation did not qualify for exemption under sec. 70.11, it also would be a meaningless gesture to declare in such sub. (8) that it was a charitable and benevolent corporation and tax exempt, if the ultimate tests of exemption are those prescribed by sec. 70.11.”
The exemption statute relied upon, sec. 70.11 (4), provides: “Property owned and used exclusively by . . . benevolent associations . . . while such property is not used for profit . . . .” shall be exempt from property taxes.
Both parties, and the trial court in an exhaustive and helpful memorandum opinion, cite many Wisconsin and foreign jurisdiction cases that deal with the problem of tax exemption for the property of charitable or benevo*307lent associations. We will not attempt to cite or discuss most of these cases for the reason that “. . . neither a single test nor isolated answers to each of the questions posed . . . will automatically determine when a hospital [here a convalescent home] is a benevolent association. The facts of each case must be regarded as a whole and the substance of the scheme of operation as it exists must be examined.” 1
The statute clearly requires that the property must be used exclusively for benevolent purposes and not for. profit.
The articles of incorporation, as amended, state that the appellant “is organized solely for charitable purposes.”
The statute uses the word “benevolent” while the charter uses “charitable.” The word “benevolent” in sub. (4), sec. 70.11 is no doubt synonymous with “charitable.” 2
There is no question that the property of the Home, considered apart from Bradford Terrace, as it is used and administered does fulfill the statutory requirements of an exclusive benevolent use without profit to its owners or directors. The care of the aged with their varying degrees of physical infirmities and senility, without insistence upon compensation equal to or greater than the cost of the services rendered, is universally recognized as charitable because of its humane consideration of others and its tendency to relieve the public of a burden. The Home as operated did not turn people out nor deny them admittance if they were unable to pay. The fact that there is an entrance fee and an assignment of all of one’s property in return for life care does not destroy its charitable character. The financial contributions made by a substantial number of the residents have not equaled the cost of the service rendered. The officers and direc*308tors do not receive compensation for their services, not even reimbursement for their expenses. No profit inures to their benefit. The Home has consistently operated at a loss. The property and facilities of the Home have been exempt from property taxation and rightfully so under the statute.
Bradford Terrace, considered separately, is operated and managed in quite a different manner. True, the officers and directors are the same and they receive no compensation or reimbursement of expenses, and Bradford Terrace does provide the same type of service to elderly persons albeit the facilities and services are much more lavish.
Bradford Terrace operates at a profit. While a profit is an element that tends to negate a charitable purpose, it does not necessarily do so. If profits are not sizeable and, in turn, are utilized for additional charitable purposes, they do not destroy the tax exemption of the property.3 The profits arise because of the rather substantial founders’ fee. They do go to the retirement of debt and interest for the construction of the building. Profits used to pay for the acquisition of property to be devoted to a charitable purpose do not stand on exactly the same footing4 as property used for charity; however, we do not condemn the founders’ fee method as used in this instance for that reason.
It is the charitable aspects of the founders’ fee agreement and the manner in which Bradford Terrace is operated that leads the minority of the court to pause.
Under the terms of the agreement, and in practice, applicants are not accepted unless and until they have paid the founders’ fee of $8,000, $10,000 or $15,000, as the case may be, in full and have given reasonable as*309surance of their ability to pay the monthly service charge. The size of the apartment and facilities included are not determined primarily by the needs of the resident but by the amount of the founders’ fee he pays. Likewise, the monthly service charge and additional fees are not regulated entirely by his needs and not by his ability to pay but rather upon the services rendered. If he needs medical or special nursing care it is his financial responsibility. If he leaves before the end of three years only a proportionate part of the founders’ fee will be repaid. If he does not pay his monthly service charge he can be evicted and liable to costs, including $1,000 liquidated damages. The residents of Bradford Terrace are certainly not elderly people, objects of charity, in the sense that the public or others come to their financial aid. As stated by the trial court, “It is difficult to believe that the residents who signed the businesslike contracts had any idea they were becoming parties to a charitable enterprise.” The type of charitable or benevolent aid extended to the residents of Bradford Terrace and the financial obligations they assume are not substantially different than the services rendered or obligations assumed in a private commercially operated convalescent home which, of course, is not tax exempt.
We cannot refrain from comparing the resident of Bradford Terrace, affluent enough to pay the founders’ fee in full before admission and with a portfolio attractive enough to assure his monthly payments, with the elderly owner of a modest home with assets or income hardly sufficient to sustain himself. The Bradford Terrace resident pays no taxes for his living facilities (nor does Bradford Terrace), while the owner of the modest home must.
The parties have cited cases from several foreign jurisdictions where tax exempt status of the property of convalescent homes being paid for on a founders’ fee ba*310sis has been at issue.5 In some instances the court found the property to be tax exempt, in others they did not. Aside from the point that the constitutions and exemption statutes of the various states differ, a salient observation is that in every case (except Bozeman Deaconess Foundation v. Ford, supra), where an exemption was approved, some of the residents were not required to pay the founders’ fee in total or in part or were given other financial benefits based upon their needs. This is not so in this case of the residents of Bradford Terrace — they either pay the founders’ fee and the service charges regardless of their financial abilities or they are not accepted or need not be retained.
Testimony of the officers indicates that they probably would not insist that a resident leave if he was unable to pay. The trouble with this argument is that the contract does not so provide and they have not been confronted by a resident who has not paid. Additional testimony was to the effect that after the note has been paid the expectation was that Bradford Terrace would be operated on the same basis as the Home. While there is no binding obligation that future operations be in accordance with this expectation, the significant point is that tax exemption statutes are to be applied as to the present use of the property and not as to how it might or will be used in the future.
In 2 Cooley, Taxation (4th ed.), pp. 1441, 1442, sec. 687, the rule is stated as follows:
*311“An intention to use property at some uncertain time in the future, for purposes which will render it exempt from taxation under the laws of the state, does not preclude its taxation before actually used for the purpose warranting an exemption. If the use determines the right to exemption, it is the present use and not the intended use in the future which governs.”
We are of the opinion that the founders’ fee method and service charge practices as presently used in Bradford Terrace do not constitute a charitable use of the property as contemplated by the legislature in sec. 70.11 (4), Stats.
The majority of the court agrees with the appellant that its whole operation is in reality only one; owned and controlled by the same corporation, with one board of directors and officers and with the same charitable objectives. But, it is only one of several wings of a large institution. Without again reciting the facts, we conclude that Bradford Terrace is being paid for in a different manner. Separate sets of books are kept; the nature of services rendered is more elaborate; the contracts of admission are different; and the duties, rights and obligations of Bradford Terrace and its residents are different. Bradford Terrace, although a wing of the Home, is readily identifiable as to its physical aspects, mode of operation, and property evaluation.
Bradford Terrace and the Home can and should be considered separately for tax exemption purposes. Sec. 70.11 (8), Stats., provides in part:
“Taxed In Part. Where property for which exemption is sought pursuant to this section is used in part for exempt purposes and in part for pecuniary profit, then the same shall be assessed for taxation at such percentage of the full market value of said real and personal property as shall fairly measure and represent the extent of such use for pecuniary profit. . . .”
We are of the opinion that Bradford Terrace can be readily distinguished from the Home, both as to its *312physical characteristics and its method of operation and administration and can be segregated for tax purposes.
We would affirm the judgment of the trial court.

 Prairie du Chien Sanitarium. Co. v. Prairie du Chien (1943), 242 Wis. 262, 265, 7 N. W. 2d 832.

 Will of Roberts (1927), 193 Wis. 415, 214 N. W. 347.

 See Order of the Sisters of St. Joseph v. Plover (1941), 239 Wis. 278, 1 N. W. 2d 173.

 See Gymnastic Association v. Milwaukee (1906), 129 Wis. 429, 109 N. W. 109.

 Fredericka Home v. County of San Diego (1950), 85 Cal. 2d 789, 221 Pac. 2d 68; Fifield Manor v. County of Los Angeles (1961), 188 Cal. App. 2d 1, 10 Cal. Rptr. 242; Topeka Presbyterian Manor v. Board of County Commissioners (1965), 195 Kan. 90, 402 Pac. 2d 802; Methodist Homes, Inc. v. Tax Commission (1961), 226 Or. 298, 360 Pac. 2d 293; Friendsview Manor v. State Tax Commission (1966), 247 Or. 94, 420 Pac. 2d 77; Haines v. St. Petersburg Methodist Home, Inc. (Fla. 1965), 173 So. 2d 176; Presbyterian Homes v. City of Bradenton (Fla. 1966), 190 So. 2d 771; Bozeman Deaconess Foundation v. Ford (Mont. 1968), 439 Pac. 2d 915.