Court Opinion

ID: 6275850
Source: CourtListenerOpinion
Date Created: 2022-02-18 16:00:07.713587+00
Date Added: 2024-06-11T09:00:03.334545
License: Public Domain

Opinion by
Rice, P. J.,
The general question involved in this case is whether this institution of learning is “a purely public charity,” within the meaning of the constitution, which was “founded and endowed,” and during the period of taxation covered by the suit, was “maintained, by public or private charity,” within the meaning of the statute. The principal decisions of the Supreme Court pertinent to the branch of the subject to which the arguments of counsel have been particularly directed, have been reviewed by this court in Harrisburg v. Harrisburg Academy, 26 Pa. Superior Ct. 252, and Pocono Pines Assembly, etc. v. Monroe County, 29 Pa. Superior Ct. 36, and in the able opinions filed by Judge Enblich in the present case. We will not go over the entire ground again; in view of his discussion of the subject We may safely start with the case of Episcopal Academy v. Philadelphia, 150 Pa. 565. Indeed, we need not go outside of that case, for none, either before or since, has gone farther in the direction of holding the exemption to apply to an institution of learning which is supported by the fees received from students. That case decides that an institution that is in its nature and purpose a purely public charity does not lose its character as such under the tax laws, if it receives a revenue from the recipients of its bounty sufficient to keep it in operation. We quote from the opinion: “In the case before us the donors parted absolutely with what they gave. It was devoted to a charitable use and the title placed in the trustees. The trustees have invested it in a plant adapted to the purposes of the trust. By the use of this plant they are enabled to conduct ■a school that gives educational advantages to some free, and at a low cost to all, and thus make the charity pay the expenses of its own administration.” Grant that all this may be said of the institution in question — although it is worthy of notice that the number of free scholars compared with the number of those who pay is very small — the parallel between the two cases ceases when it is shown that the sums paid by students have been sufficient, not only to pay the annual expenses of maintaining the institution, but to yield a surplus which for the past five years has averaged about $9,000 per annum. *118How, then, can it be said in this case as it was in that, that it is a charity, conducted with a view to furnish education “at its actuhl cost” to a great number of youths who otherwise might be required to pay more for it or forego it altogether? Observe further that this is not a case where there has been an occasidnal'annual surplus, but more often an annual deficit, as in Philadelphia v. Pennsylvania Hospital, 154 Pa. 9, but a case where, for a long -period of years, there has been uniformly a considerable-surplus. If it were a private school, it would be appropriate' to speak of it as a profitable educational enterprise. It is contended, however, that the mere fact that there has'been ’and is likely to continue to be such annual surplus over the cost of the education furnished does not distinguish the- case from the Episcopal Academy case. True, the report of that 'case shows that all receipts from students and income from 'property given to or purchased- by the corporation, after paying éxpenses, were applied to increasing the number of fréé scholars, but it does not appear that there was a surplus over cost of maintenance derived from student charges alone. Again,'the suiplus so derived in the present case was not so applied as'to increase the number of free scholars, or to reduce tuition fées in the future; on the contrary, to quote from Judge Endlich’s-opinion, “Instead of going down with the increase of revenues, the charges at the Mercersburg College have gone up, and there has been no proportionate increase in the number of students received gratuitously.” But it is said that this distinction is not substantial, because the surplus thus derived from the sums paid by students goes into the betterment of the School, the extension and improvement of its grounds, build-Trigs' arid equipment,- and the augumentation of its facilities Md efficiency as an educational institution. This, say counsel, is as truly and' effectually “in furtherance of the education of youth/’ as is the reduction of tuition fees and the increase of the number of free scholars, and therefore the case is within the'doctrine of -that part of the opinion in the Episcopal Academy case'in which Justice Williams says, that “so long as the trustees of the school manage it as-a charity, giving the benefit of what might otherwise be profit to the reduction of *119tuition fees or the increase of the number of free scholars, in furtherance of the education of youth, the corpus of the trust, the schoolhouse, is entitled to exemption.” This remark, even considered apart from the context, is not tantamount- to de-^ ciding that if what otherwise would be profit be, applied in furtherance of the education of youth, no matter in what form, the corpus of the trust, the schoolhouse, is exempt from taxation;- nor is it equivalent to saying that, although the tuition fees' and other student charges are so regulated as to maintain the school and to create a surplus, the land and buildings are exempt, provided the surplus is applied to the acquirement of other lands and buildings for the aecommodatiqn of an increased number of students, with the probable result, [f not-purpose, of increasing such surplus or profit in future years. But the above quoted remark is not to be considered apart from the context, in which, after referring to earlier cases, the court said: "We are now disposed to go further, and say th^t an institution that is in its nature and purposes a purely public charity does not lose its character as such under the tax laws if it receives a revenue from the recipients of its bounty sufficient'to'keep it in'operation.” But the court immediately added, evidently having in view revenue from the last mentioned- source: "It must not go beyond self-support.” If the tuition fees and other student charges are so regulated as to produce a profit, is that not going beyond self-support? It is impossible for us to show by any satisfactory reasoning that it is not. Again, looking to the decree for the point actually decided, we find that the matter decreed was that the defendant's real estate, used exclusively for school purposes, " is exempt from -taxation under the provisions of the Act of May 14, 1874, P. L. 158, so long as no income is derived from it by the contributors or by the corporation other than that necessary to make the charity self-sustaining.” This seems to imply that if in the future the income derived from student charges alone should exceed the amount necessary to maintain the institution, the lands and buildings would not- be exempt. That this is'the interpretation which the Supreme Court has placed upon .the -decision is shown by the following quotation from the *120opinion of Mr. Justice Dean in American Sunday School Union v. Philadelphia, 161 Pa. 307, at page 316: “In the case of the Episcopal Academy v. Philadelphia, 150 Pa. 565, this court went to the outside limit of liberality in construction of the constitution. The school was founded and endowed by public and private charity; the rates of tuition were adjusted with a view to make the school self-sustaining; a majority of the pupils paid full rates, a small number half rates, and a still smaller number nothing. It was held to be a purely public charity, because its revenues only made it self-supporting, but it was distinctly intimated that if the revenues had gone beyond the line of self-support it would not have been exempt.” The same doctrine was emphatically reasserted in White v. Smith, 189 Pa. 232, and applied by this court in Harrisburg v. Harrisburg Academy, 26 Pa. Superior Ct. 252. We have endeavored to show that thp contention of appellant’s counsel, thus far considered, is opposed to the doctrine of the adjudicated cases. Even if the question had not been authoritatively decided, the court below has made it clear, that if a surplus over cost of maintenance is derived from payments made by students, the institution can not be said to be maintained by public or private charity, even though the surplus be used to enlarge the institution by the purchase of additional lands and the erection of additional buildings — particularly if it be not shown that without such enlargement the institution could not be maintained.
The court found as a fact that the rental value “ of the entire property” is such that if it be added to the expense of maintaining The college, the total would more than wipe out the clearings of any year, but concluded as matter of law that in determining whether there was a surplus over the cost of maintenance the rental value should not be included in the latter. It appears that the entire property of the corporation includes land and buildings not now in use as part of the college, from which an income is derived by renting part of it, and by cultivation of another part as a truck patch. See fourth and fifth findings of fact. Surely it cannot be contended that in determining the question now under consideration the rental value, i. e., *121the value of the use of that property for any purpose to which it is adapted, is to be added to other expenditures. But, assuming for the purpose of this case, that the court in finding as above as to the rental value of the “entire property” did not intend to include the property of which we have just spoken, we still think he was right in his legal conclusion. To conclude otherwise we would be driven to holding that the point of self-support from income derived from students is not passed until such income alone is larger than is needed, not only to pay all the expenses of conducting the charity, but also to put into the treasury of the corporation a sum equivalent to what could be derived by renting the lands and buildings for any purpose to which they are adaptable. This would be little different in principle from saying that a charity is not self-sustaining, until the income derived from those who enjoy, its benefits is sufficient to pay the expenses of conducting it, and to give to the corporation a fair return upon the capital invested in its foundation and endowment. Either proposition' would be a distinct and unwarranted advance beyond the doctrine of any of the cases above cited, and neither is sustained by the decision, interpreted in the light of the facts of the case,in Philadelphia v. Pennsylvania Hospital, 154 Pa. 9. We will not prolong this discussion. The learned judge betow has treated this subject adequately and, to our minds, convincingly. So far as this question is concerned we rest our judgment upon his opinions without attempt on our part to further elucidate the subject.
In view of the foregoing conclusions, it is not necessary to decide or discuss the question of jurisdiction raised by appellees’ counsel.
The decree is affirmed at the costs of thé appellant.