Court Opinion

ID: 4133974
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:44:21.805712+00
Date Added: 2024-06-11T14:34:19.118867
License: Public Domain

*

                                   RNEY          GENERAL
                              OFI'EXAS

Honorable Michael      J.   Simmang        Opinion     No.   M-694
County Attorney
Lee County                                 Re:   Ad Valorem Tax Exemption
Olddings,  Texas                                 Status of Lee Memorial
                                                 Hospital  of Qlddlngs,
Dear Mr. Simmang:                                Texas

       You have requested an opinion on the tax exemptlon
status   of Lee Memorial Hospital located in Olddings, Lee
County, Texas.

       Your opinion    request    reads,    in part,     as follows:

                    "Lee Memorial Hospital          was first    char-
            tered as a non-profit          corporation     on April
            10, 194-r* The original           article   stated that
            the hospital       was founded for the purpose of
            providing      a suitable    place in the Immediate
            locality     where members and families of mem-
            bers of the corporation           may obtain medical,
            dental,     health,   surglcal,~nurslng,         hospltalfza,
            tfon and related        services     and benefits.       The
            articles     further    stated that there would be
            no capital      stock and no dividends         and any
            profit    would be used to further          the charitable
            purposes     for which the corporation           was created.
            The by-laws provided          that members of the cor-
            poration     would be those who paid a membership
            fee of $100.00 and would be chosen from
            people    residing    in the territory        serviced     by
            the corporation.

                  "The charter  was amended on January 7,
            1957, to show that the services   of the hos-
            pital  would be extended to all residents  of
            the community regardless   of whether or not
            they were members in the corporation.

                                      -3346-
                                                                            .                   .

                                                                                         ‘..’            ,,
                                                                                     :              ,.

Honorable       Michael   J.   Simmang, page       2       (M- 694)             ” :                           ”

                        “On August 1, 1969, the Articles         were
                again amended to show the duration           of the
                corporation     to be perpetual     and changing the
                registered     name of the corporation       and
                adopting    the Texas Non-Profit       Corporation
                Act. . . . Again, on June 22, 1970, the
                Articles    were amended to show that upon
                dlssolutlon     of the corporation      any remain-
                ing assets    would be distributed       to a
                strictly    charitable   organization.       The by-  ,,
                laws were also amended to that effect.             :

                  “The ownership    of the hospital     is
            currently   vested In the members of the corn-
            munity who have taken out membership anr: ‘d?,,.
            the Board of Directors       Is elected  from this
            membership.     No physician     is a member of
            the Board of Directors,       nor does any physi-
            cian derive   any benefits     from the hospital
            other than being able to place his patients
            in the hospital.”

      Article      III of Lee Memorial        Hospital’s         Articles       of              In-
corporation       provides:

                       “This corporation        does not contemplate
                pecuniary    gain or prnfft       to the members
                thereof    and Is organized       as a charitable
                corporation     under the Provisions        of Article
                1302, sub-paragraph        2A, Revised Cfvil       Statutes
                of Texas, for the purpose of owning and op-
                eratfng    a non-profit      cooperative    hospital,
                and for the purpose of providing            a suitable
                place fn the immediate locality            where mem-
                bers and families        of members of this Corpora-
                tion and other residents          of the community may
                obtain medical,       dental,    health,   surgical,
                nursfng,    hospitalization,        and related    ser-
                vices and benefits.”

      By supplemental          letter,   you also      advfsed     us:

            “1 *     There are no restrictions           on admission
                     of patients and patfente           are admitted

                                          -3347-
Honorable    Michael   J.   Simmang, page      3     (M-694)

                  regardless  of their ability to pay.
                  If a person comes to the hospital
                  completely  unable to pay, they are
                  admitted as a c~harity case.

            “2.   No salaries   are paid by the hospital
                  to any doctors   practicing In the
                  hospital.

            “3.   No hospital   space is rented or        leased
                  to any doctors    or to any other       in-
                  dividuals   or corporations.

            “4.   The hospital  does not operate     a phar-
                  macy but does operate   a cafeteria
                  which is open only to the patients
                  and to the employees.    The public    does
                  not have access   to the cafeteria.”

     Article    VIII, Section     2 of the Texas      Constitution        gave
the Legislature     the following    authority:

                    “All occupation     taxes shall be equal
              and uniform upon the same class          of subjects
             within   the limits    of the authority      levying
              the tax; but the legislature          may, by general
              laws, exempt from taxation         D e a lnstltu-
             tfons   of purely public      charity;    and all
             ‘laws exempting property       from taxation      other
              than the property     above mentioned      shall be
              null and void.”    (Emphasis Added)

        Pursuant to this authority,  the Legislature            enacted
Article    7150 (7) Vernon’s  Civil Statutes,     which        as last
amended In 1969, exempts the following        property:

                   “7 0 Public Charltfes.        All buildings
             and personal    property   belonging     to lnstitu-
             tlons of purely publfc       charity,    together
             with the lands belonging       to and oacupied
             by such fnstftutions,      includfng     hospital
             parking facflitfes,      not leased or otherwise
             used with a view to profit,         unless   such

                                      -3348-
Honorable    Michael   J.   Slmmang, page       4    (M-694)

             rents and profits        and all moneys and
             credits     are appropriated       by such lnstltu-
             tlons    solely    to sustain     such Institutions
             and for the benefit         of the sick and dis-
             abled members and their           famllles     and the
             burial    of the same, or for the maintenance
             of persons when unable to provide               for them-
             selves,     whether such persons are members
             of such lnstitutlons          or not.      An institu-
             tion of purely public          charity     under this
             article     is one which dispenses          its aid to
             its members and others          in sickness       or
             distress,      or at death, without         regard to
             poverty     or riches     of the recipient,        also
             when funds,      property    and assets       of such in-
             stitutions      are placed and bound by its law
             to relieve,      aid and admlnister         in any way
             to the relief        of its members when In want,
             sickness      and distress,      . . .'

     Section 7 was found to apply to a hospital  situation                 in
the case of Santa Rosa Infirmary  v. City of San Antonio,                 259
S.W. 926 (Tex. Comm. APP.,       J
        In the case of San Antonio Conservation          Society,     Inc.
v. City of San Antonlo,          455 SW 2d '143 (Tex. Sup., 1970)
th e                      ourt ruled on the ixemption       status of'a
corporatfon      chartered    for the purpose of preserving        his;,
torlcal    bulldlngs     and sites.    In determining    whether this
Section    7 of Article     7150 provides    the exclusive     definition
and meaning of the term "lnstltutlon           of purely public       charity,"
 the Court held,
                    "Section    7 concerns     and defines    charity
             in the sense of almsgfvlng          and the three
             cases cited      above (i.e.    City of Houston v.
             Scottish     Rite Benev. Assin.,      111 Tex. 131
             230 S.W. 978 (1921)         Santa Rosa Infirmary       v:
             City of San Antonio,         supra, and Hlllt
             Village,     Inc. v. Kerrville      Ind. SchooyPDls-
                i t   42b SW 2d 943 (T           8     lgb6)J   state
             i%%whlch         an fnstltutT:n     ml% meet to
             qualify    for that kind of charity.          Those

                                       -3349-
Honorable   Michael       J.       Slmmang, page   5   (M-694)

            cases arose by reason of claims that the
            institutions   In question  provided  relief
            to the needy, the sick,    and the distressed;
            and in doing so relieved    the government
            of burdens it would otherwise     be charged
            with solving."   (at p. 745)

     Thus, inasmuch as Lee Memorial Hospital      is an lnstitu-
tion dispensing    aid to persons   in sickness or distress,   its
exemption   status   should be governed by the line of cases
above cited    and Article  7150 (7).

     To qualify  as an almsgfving   charity,             the   Institution
must meet the tests  set forth   in City
Rite Benev. Ass'n.,  supra, to wit:

                    'In our opinion,     the Legislature       might
            reasonably    conclude    that an institution        was
            one of 'purely     public    charlty'    where: First,
            it made no gain or profit;          second,    It ac-
            complished    ends wholly benevolent;          ana,
              hirci, it benefited      ersons,     Indefinite    in
            numbers and in personaltles,           by preventing
            them, through absolute        gratuity,     from be-
            coming burdens to society         and to the StaFe.

                           Charity need not be universal
                  0
                      0   0    *

            to be public.       It is public  when It affects
            all the people of a community or state,
            by assuming,     to a meterial   extent,    that
            which otherwise      might become the obligation
            or duty of the community or the state.
            The care of those unable to provide          for
            themselves    certainly    may devolve    on those
            of the same community or state.          D o .I' (Rm-
            phasls Added).lat       pa 981).

      The rule with regard to tax exemptfon is well stated in
McCallum v, Associated     Retail   Credit Men of Austin,   41 S.W.2d
45 (Tex. Comm. APP.,       311 I' 0 e . where a tax is levied    by a
general  law and one claims an exemptfon therefrom        by reason
of some exemption   statute,    he must bring himself   clearly

                                             -3350-
Honorable   Michael    J.   Slmmang, page 6       (M-694)’

within    the exemption.    . . .” See also,   B. & P.O.E. v. Cit
of Houston,    44 S.W.2d 486 (Tex. Civ. App., 1931, error         ret’.
Therefore    we must determine    from the material    submitted
whether Lee Memorial Hospital        meets the statutory   and case
law requirements     heretofore   enumerated.

       From your Information,    Lee Memorial Hospital  devotes   any
gain or profit     made by it for the sole purpose of sustaining
its operation,     admits any person requesting  admission   to it
without   regard to their ability    to pay and allows none of
its property     to be used for the purpose of benefiting    any
prlvate   Individual.

      The case of Santa Rosa Infirmary    v, City of San Antonio,,
supra, dealt with the right of the Santa Rosa Hospital         to be
exempt from the ad valorem tax as a “purely      public  charity”
within Subdivision   6, Article   7507, Vernon’s  Civil  Statutes,
which is now Article    7150 (7).   The Court therein   defined
what Is meant by gain or profit,     as these words appear In test
number one, by stating,
                  I,
                    . .  . nothing more was intended      than
            that no private     Individual    should reap a
            profit,   or where a corporation       was the owner
            that no distributable       earnings   in the shape
            of dividends    must accrue.”     (at p” 935)

      Since Lee Memorial Hospital   is usi,ng its profits,   if any,
to perpetuate  Its operation,  and allows    no person to benefit,
from the use of its property,    it would qualify    under the first
test.

    . The Santa _ Rosa
                   _     Case further. held that the fact      that pay
patients    preaominate   over cnarlty patients    does not    disqualify
an Institution     from being a “purely    public  charity.”      (See
ppO 934 and 935).       The Court concluded    by stating,

                   “The theory upon which Institutions
            of this character    are exempted from taxa-
            tion is that they serve the government by
            relieving   it to some extent of what would
            otherwise   be a public  duty or governmental
            function   to care for the Indigent    sick and

                                    -3351-
    .       .

Honorable       Michael   J,   Simmang, page     7      (M-694)

                afflicted,   and it Is the assumption      by such
                lnstltutlons   of this burden which compensates
                the government for the exemption granted'
                them from the general    obligation    resting  upon
                all citizens   to pay taxes.    v . .'

       Since the operation   of Lee Memorial Hospital   Is similar
to the conduct of the Santa Rosa Infirmary,     Lee Memorlalls
operations   should likewise   be considered benevolent   in nature.

       If such an institution       restricts   admission    to its facili-
ties,    there ir; no assurance     that society     is or will be relieved
of a burden It owes to its populace           and, thus, the Institution
would not meet the third test to qualify             it as a "purely
public    charity"   (See Hilltop    Village,   Inc. v. Kerrville     Ind.
School District,      supra).    However, Lee Memorial HosDltal         has
placed no restriction       on its admission      requirements    and ac-
cepts applicants      without   regard to their financial       circum-
stances,     thereby meeting the third requirement         to be a "purely
public    charity.

        The remaining problem Is whether the lncldental            use of the
hospital    properties    for the operation      of a cafeteria    defeats
the exemption to which Lee Memorial Hospital              Is otherwise    en-
titled.     This precise     question   was answered In Hflltop       Village,
Inc. v. Kerrville       Ind. School District,       supra, when the Court
held,
                    II . . Nor will      the incidental    uses
                      e
             of the properties       for the operation      of
             guest facilities,       a canteen,   ,a beauty shop
             and vfnding machines defeat         the exemption
              . . *

        Thus, this incidental   use,of         its   properties   by Lee Memorial
would    not defeat  Its exemption.

        Under the well established      rules enumerated by case law,
it Is our opinion       that Lee Memorial Hospital     makes no gain or
profit,    accomplishes     ends wholly benevolent,    and benefits   per-
sons, indefinite      In number and in personalities,      by preventing
them, through absolute        gratuity,  from becoming burdens to
society    and to the state,      and is thus entitled   to exemption

                                        -3352-
                                                                   .    .

Honorable    Michael      J.   Simmang, page 8       (M-694)

under   Article   VIII,     Section    2, Texas Constitution     and Article
7150 (7), Vernon's         Civil   Statutes,   as a "purely    public chari-
ty."

                                  SUMMARY

                    Under the facts submitted end law
             cited,   Lee Memorial Hospital    is a "purely.    ':
             public   charity" and IS 'exempt from the       .,
             ad valorem tax.                '.

                                    Youwvery      truly,

                                                General of Texas
Prepared    by Harriet  D. Burke
Assistant    Attorney  General

APPROVED:
OPINION COMMITTEE

Kerns Tayl~or, Chairman
W. E. Allen,  Co-Chairman
                                                                               .’

Gordon Cass
Arthur Sandlin
William J. Craig
John B. Reese

MEADEF. GRIFFIN
Staff Legal Assistant

ALFRED WALKER
Executive Assistant

NOLA WHITE
First Assistant

                                       -3353-