Ackerman v. Physicians & Surgeons Hospital , 207 Or. 646 ( 1956 )

ROSSMAN, J.,

specially concurring.

The defendant, Physicians and Surgeons Hospital, was incorporated under ORS 61.010 through 61.160 and the antecedents of those sections of our laws. Those enactments make provision for the incorporation of non-profit corporations. The type of corporation which the lawmakers had in mind when they adopted that legislation is indicated in part by ORS 61.130 which speaks of “telephone, power, water companies and cooperative associations.” The enumeration is not complete, but it suggests the general nature of the nonprofit corporations which may be organized under those sections. Other parts of the non-profit statute show indisputably that corporations organized under it are not eleemosynary in character. For example, ORS 61.080(2) says:

“Corporations formed under ORS 61.010 to 61.130, by a vote of three-fourths of the members present at any such general or special meeting called for the purpose, may authorize the dissolution of the corporation and provide for the settling of its business and disposing of its property. * * * The assets of the corporation shall be divided in accordance with the interest of each member in the proportion of his contribution to the assets of the corporation.”

Thus, a non-profit corporation may dissolve at any time and deliver its assets to “each member in the proportion of his contribution to the assets of the corporation.” If the assets increased in value prior to dissolution, those who receive their return are enriched thereby. Upon the other hand, a charitable corporation continues on forever (OES 61.440) and can never return its properties to those from whom it received them or benefit them in any other manner. As recently as 1945 the legislature, in recognition of the fact that charities are created for objects of permanent benefit to the public, as acknowledged more than three hundred years ago in the Statute of Elizabeth, provided in Oregon Laws 1945, chapter 433, that a charitable organization ‘ ‘ shall thereafter be deemed a body corporate, with continued perpetual succession.” This state has legislation for the creation of pure charities, as well as other legislation for the creation of non-profit and profit corporations. I think it is apparent that since the defendant was not created under a charity statute, it cannot be deemed a charity. I shall now call attention to supporting decisions.

In re Beekman, 232 NY 365, 134 NE 183, the court gave extensive consideration to a claim advanced by a wealthy corporation that it was a charity and exempt from the state’s tax laws. In rejecting the contention, the court ruled: “The articles of incorporation alone must determine whether a corporation comes within the exemption.” It held that the articles of incorporation established that the corporation was not a charity. Mohawk Mills Assn. v. Miller, 260 App Div 433, 22 NYS2d 993, declares:

“The learned counsel for appellant in his oral argument and in his brief has stressed the point that the use to which appellant’s income is applied is the ultimate test of the exemption. In support of that contention he has cited decisions of the Federal courts and the Board of Tax Appeals. In the case before us these authorities have no persuasive force because they conflict with the decisions of our own courts. It has been held again and again that the right of a corporation to exemption must be determined from the articles of incorporation alone and that if any of its powers are not charitable, the corporation is not entitled to be classified as a charity.”

In Nicholas v. Evangelical Deaconess Home & Hospital, 281 Mo 182, 219 SW 643, the court ruled: “We hold that defendant under its articles of association is a charitable organization.” Some parol evidence was received which bore upon the nature of the organization. Referring to it, the decision said: “The parol evidence introduced by the defendant was not necessary to show defendant’s charitable character, but it did not disprove it.”

The following is taken from In re First National Safe Deposit Co., 351 Mo 423, 173 SW2d 403:

“Northwestern Municipal Ass’n v. United States, 8 Cir., 99 F.2d 460, 461, is in point on the question of determining the purpose of an organization, as affecting its liability for income taxes. It was there said: ‘ The purpose of an organization must be determined from the purpose declared in the instrument creating it.’ And in Helvering v. Colman-Tilbert Associates, 296 U.S. 369, 56 S.Ct. 285, 287, 80 L. Ed. 278, the Supreme Court of the United States used this language: ‘ The parties are not at liberty to say that their purpose was other or narrower than that which they formally set forth in the instrument under which their activities were conducted.’ And this court has said: ‘A corporation as to its character is to be judged by the objects of its creation as expressed in its charter.’ Wyatt v. Stillman Institute, 303 Mo. 94, 260 S.W. 73, 76. See, also, Hall v. Woods, 325 Ill. 114, 156 N.E. 258, and cases cited. There appears to be an exception to this rule in determining whether a corporation is or is not a public utility. State ex rel. Buchanan Co. P.T. Co. v. Baker, 320 Mo. 1146, 9 S.W.2d 589.”

Czech Catholic Union v. Satla Realty Corp., 160 Ohio St 545, 117 NE2d 610, held to similar effect as the above. The holding is succinctly stated in a headnote as follows:

“Actual character of corporation is determined by objects of its formation and nature of its business as stated in its articles of incorporation, and not by any limited but permissible activity in which, under its charter, it may choose to engage in temporarily.”

The holdings of which notice has been taken are employed in actions wherein a hospital claims immunity from tort liability as is shown by Morton v. Savannah Hospital, 148 Ga 438, 96 SE 887.

From Maretick v. South Chicago Community Hospital, 297 Ill App 488, 17 NE2d 1012, the following is taken:

“As was said in Turnverein ‘Lincoln’ v. Board of Appeals, 358 Ill. 135, at page 142, 192 N.E. 780, at page 783: ‘The appellant is a corporation, and, as a general rule, the character of a corporation and the object for which it was organized must be ascertained from its charter or certificate of incorporation. People v. Rockford Masonic Ass’n, 348 Ill. 567, 181 N.E. 458, 83 A.L.R. 768; People v. Rockford Lodge B. & P. O. E., 348 Ill. 528, 181 N.E. 432; People v. Wyanet Electric Light Co., 306 Ill. 377, 137 N.E. 834; Distilling Co. v. People, 161 Ill. 101, 43 N.E. 779.’”

Other decisions to like effect are available.

It is true that many decisions, of which Hamilton v. Corvallis General Hospital Assn., 146 Or 168, 30 P2d 9, is a good example, hold that the articles of incorporation of a purported charity are not conclusive and that evidence may he received which reveals the corporation’s practices and treatment of those who deal with it. However, that manner of resolving the issue must be unsatisfactory. The formulation of instructions for the jury must be difficult, and even more difficult must be the application of the instructions by the jury. In a case tried today the jury might find that the institution, whether it be a hospital or a college, is non-charitable and, a year later, in another case, a different jury might find that the same organization is a charity. If the assessor and the income tax division gave effect to the judgments entered in that manner the institution would shuttle back and forth upon the tax rolls.

In view of the fact that the statute under which the defendant was organized does not permit the organization of charities, I think we ought to hold that for that reason the defendant is not a charity. It is, therefore^ unnecessary to take note of the parol evidence. The defendant is bound by its own charter and cannot ask the court to construe it as a charity when, in fact, its nature is otherwise. The plaintiff was entitled to a ruling as a matter of law that the defendant was not a charity.

I concur in the holding of the majority, but the above are my reasons.