Untitled Texas Attorney General Opinion ( 1947 )

a-185
OFFICE OF
TEE ATTORNEY GENERAL
AUSTIN. TEXAS
PRICE DANIEL
ATTORNEYGENERAL
July 11, 1947
Hr. Lee Bovlin op1n10n Ro. y99
cciunty Attorney
Hale county Be: Exemption from ad valorem
Pla lnvlev , Texas taxes of buildloss and
land belonging t;; Bale
County Cooperative Hospi-
Dsar Sir: tal.
You have requested an opinion .Srom this Department
as to vhether or not the Bale County Cooperative Hoapl-
tal is exempt from ad valorem taxes. This %ospltalwj
as we shell hereafter generally term It, was chartered
pursuant to the provisions of Sect Ion 28 of Article
1302, R. C. S., which reads as Sollovs:
VA. Charitable corporations may be
created’for the purpose, or purposes, of
owning and operating non-profit cooperative
hospitals, and for the purpose of provld-
lag a suitable place in the inrmedlate lo-
cality where members and families of mem-
bers of such corporat~lons nag obtain medl-
cal, dental, health, surgical, nursing,
hospitalization, and related services and
benefits. Acts 1945, 49th Leg., p. 102,
‘.ch. 70, @L1.’
Article III of the Charter of the “Bospltal’
states that -1s corporation does not contemplate pecu-
niary gain or profit to the members hereof’ and sets out
the corporate purposes ‘of the “Hospital” In the language
~ubstantlally that of the +c statute quoted above.
Article VII of the Cfiarter reads as Sollovs:
“Section 1. This Corporat Ion shall
have no capital stock, and consequently no
dividends, and any profit shall bs used to
further the charitable purposes for vhich
it Is created, and said Corporation owns
no property of any kind.
n
Hr. Lse Novlln, Page 2, v-299
“Se,ct Ion 2. The persons signing these
Articles of Incorporation shall bs deemed
members of the Corporation Immediately upon
the completion of the organization and new
members nmy be admitted to membership In
this Corporation under the terms and condi-
tions of the By-laws. Membership 1n this
Corpomtloti shall be evidenced by certlf l-
cate of membership which Shall be provided
for In the By-Iaws. Such certificate of
membership shall not be assignable or trans-
ferrable except as provided lo the By-laws.
We quote the following from a letter from the man-
ager of the “Hospital”.
“Since the Inception of this organlza-
tlon, our nrsjor effort has been expended in
tha construction of 17-bed hospital with
Clinic facilities including X-ray, Labora-
tory, and doctors’~ offices. To date the
hospital portion Is Incomplete, but the
Clinic Is in operation. The major portion
of the patients treated here pay for ser-
vices rendered; hovever, charity cases will
be taketi care of. The percentage of charity
cases that we will be able to care for has
not been determined.
‘As you my know, these cooperative
hospital& were started ln answer to a very
critical need for medical facilities in
r’iral areas In Texas. They are not the
complete answer, but they have gone a long
way toward providing facilities and guar-
anteed Incomes for properly qualified pro-
fessional people lo our southwestern rural
areas. These professional people are the
first requirements for good medical care at
a price our rum1 people can afford to pay.
Bach of these hospitals expects to operate
a prepsyment plan which will insure the
cost of medical care In the locality of the
organlzat Ion. This prepymsnt plan stab-
llzes the incomes of doctors and prevents
extremely high cost of c$tastrophlc lll-
nesses of the patients.
Article VIII, Section 2 of the Constitution of the
State of Texas has empovered the legislature to exempt
from taxation certain enumerated properties, among which
H&. Lee Nowlin, Page 3, V-299
are ” . . . lnst ltut ions of purely public charity”. In
ursmnce to this particular constitutional grant the
fs glslature enacted Section 7 of Article 7150, R. C. S.,
which effect llates exemvtion to the extent of the exemD-
tlve powers conferred by Article VIII, Section 2. Lltiie
!Pheatre of Callas Inc. v. City of tillas, 124 9. Wr)-
863; City of Wichita P&Us v. CooDer, 170 S. W. (2) 777,
error refused.
Sect ion 7 of Article 7150 reads as follovs:
“7. Public charities. - All buildings
belonging to Institutions of purely public
charity, together with the lands belonging
to and occupied by such institutions not
leased or otherwise used with a view to pro-
Sit, unless such rents and profits and all
moneys and credits are appropriated by such
lnstltitlons solely to sustain such lnstltu-
tlons and for the benefit of the sick and dis-
abled members and their families and the bur-
ial of the same; or for the maintenance of
persons vhen umble to provide for themselves,
whether such persons are members of such ln-
stlt utlons or not. An lnstlt ution OS ptiely
public. charity under this article Is one which
dispenses Its aid to its members and others
la sickness or distress, or at death, wlth-
out regard to poverty or riches of the reclp-
lent, also vhen the Punds, property and as-
-sets of such lns~tltutions are placed and
bound by its laws to relieve, aid and admln-
Ister In any way to the relief of Its mem-
bers when In Want, sickness and distress,
and provide homes for Its helpless and de-
pendent members and to educate and mrlntaln
the orw”ns of Its deceased members or other
persons.
It is clear that under the above section an lnstl-
tutlon can gain exemption for its “buildings , . . . to-
gether with the Lands belonging to gad occupied by such
last it ut ions ” on1 If It Is an “lnstltutlon of purely
public cbrlty 4. e are faced at the outset with Opln-
Ion O-6792 of this Department which holds that corpora-
tions drganleed under Section 2A of Article 1302 are
not Institutions of “purely public charity” and are not
within the exemption from paymsnt of franchise taxes
Mr. Lee Nowlln, Page 4, V-299
which Article 7094 accords corporations “organized .
. . for purely public charity”. We will not reconsld&
that question since lt is not before us. We do not con-
sider that the opinion precludes the anomalous view that
the “8ospltal” Is an ulnstltutlon of purely public char-
ity” within the meaning of that phrase as used in Ar-
ticle VIII Section ,2 of the Constitution and la Section
7 of Article 7150 for the reason that a different ex-
empt Ion Is now being sought by vlrt ue of a different
statute.
We are of the opinion that the question YOUore-
sent is settled by the decision In Clty,of Paiestine
v. Missouri Pacific Lines Hospital Ass’n., 99 9 W (2)
311, writ of error refused. ‘The court there heid &mt
the ``Mlssourl Pacific Lines Hospital Association was
an “lnstltutlon of purely public charity” and exempt
from taxa t *on.
The Missouri-PBclfic Lines Hospital Association 1s
the name borne by the corporation originally chartered
in 1915 as the Internat,lonal-Great Northern Railway Rm-
ployees I Hospital. The second article of the original
charter reads as follows:~,
“Second. The purpose for which this
corporation Is formed Is for the support of
a benevolent and charitable undertaking, la
this:. to provide medical and surgical treat-
ment and care for the employees of the Inter-
national and Great Northern Railway and all
persons engaged la the operation of the same
and Its properties, whether or not in the
hands of Receivers, or however owned or oper-
ated hereafter, who may bs Injured or disabled
by accident or sickness while in such employ-
ment, to such extent only, and under such
rules and regulations as nmy be prescribed
frcnn time to time by the Trustees and to fur-
nish such other and additional privileges
and benefits to said employees as may from
time to time be directed by the Hoard of
Trustees of this Association; provided that
such additional benefits and advantages shall
not bs inconsistent with nor interfere with
the nmln object of said Assoclatlon, as here-
before expressed, and to that end purchase,
erect and wmlntaln suitable bulldlngs:~for
hospitals or other purposes at suitable
Mr. Lee Nowlln, Page 5, v-299
po.lnt s along the line of aald railway a,nd
its branches. ”
The sixth article provided that “there shall be no
capital stock of this corporation, but the necessary
funds therefor shall be raised in tnch nvinner as may be
provided for by the by-laws, . . .
It was urged in International & G. N. Rs. Emp x
ees* IiosDltal Ass’n. v. Bell, 224 S W. 311, that’%
taln facts, I. e., membership In thi assoclatlca being,
a cotidltlon of employment with fees therefop withheld
from employees salaries, showed that the hospltal’was ,_,
not a benevolent and charitable assoclatlon but a mu-
tusl benefit, health, and accident insurance assoclac
tion. The’~court rejected this contention and held, that
the Bospltal Association vas “a mutual benefit assocla-
tlon”, and that “Its contracts with its several members
cannot. be I’egarded or :construed as contracts of lnsur-
ante .
Since this decision was rendered (1920) and before
the decision in the City OS Palestine case, supra, the
orlgloal charter of the Internatlooal and G-t Rorthern
Railway Employees 1 Hospital Association was amended.
The dotiporate clams was changed to Mlssourl Pacific Lines
Hospital Assoclationtand article “Second” was amended’by
Inserting the word noSflcersW before “and employees” and
the word ‘halntalnance” before “opsratlon”, and varlolie
minor changes In vordlng were mpde. In addition the I&-
ternatlom1 Great Horthern Rallrcad” was deplned for the
purpose of showing what officers and employees vere en-
t Itled to the privileges of the association, and the fol-
loving proviso vas added:
‘Provided, hovever, that the properties
now owned by this Association . . . having
been accumulated by means of contributions
nade by present and former employees of the
InternatIons Great Northern Railway Company
and its predecessor compXnles, the employees
of that company and its successors, IS any,
fihall be entltleg7 to a preferential right
of use of such propert lea . . . . ; and If
” and when the employees of other lines nay bs
admitted to the privileges and benefits of
this Association, they shall be so admitted
upon condition that by enjoying such Prlvl-
leges and benefits and paying therefor they
bir. Lee Howlin, Page 6, V-299
shall not acquire or. claim any property
rights, legal or equitable, In or to the
physical properties or assets of this As-
sociation which shall not be completely
terminated and obliterated by a vlthdrawal
of such privileges and benefits by the
Board of Trustees of this Association.’
Thus there had been no change in the corporate pur-
pose or the corporate method of operation from the time
of the Bell case, supra, which would ake the Aseocia-
tlon any less “an assobiation for mutual benefit” or
any more an “lnstltutlon of purely public charity”. In
the City of Rilestine case, supra, the court simply re-
cites the facts of incorporation and operation vlthout
designating the corporation as ‘an association for mu-
tm1 benefit “. The court there,fore does not spsclflc-
ally deal with the possible effect of the benefit in-
uring to the members of the association as being des-
tructive of the “charitable” nature of the association;
however, It disposes of the netter by implication la
the f ollovlng paragraphs :
“(4) In Santa Rosa Infirmary v. City
of San Antonio, supra, the court said: ‘While
it Is stated in City of Houston v. Scottish
Rite, etc., Ass’n, supra, that, ln order to
maintain Its status as a purely charitable
lnstltutlon, an organlzatloa clalmlng to be
such, and asserting an exemption from taxa-
tion, mhst mske no private gala or corporate
profit, nothing more was Intended than that
no private individual should reap a profit,
or vhere a corporation was the owner that
no distributable earnlnGs In the shape of
dividends must accrue. 1
“(5) In the case of Benevolent & P. 0.
of E. Lodge v. Clt of Houston (Tex. Clv.
App.) 44 9. W. (26 7 488, 493, In construing
the expression ‘purely public charity,’ the
court said: ‘The word ‘purely” Is intended
to modify the vord “charity” and not the
word *public, It so as to require the lnstltu-
tlon $0 have a wholly altruistic quality and
exclu~de ‘from It every private or selfish ia-
terest or profit or corporate gain l * * In
law, the word ‘purely” Is used In the sense
Mr. Lee Novlln, Page 7, v-299
of and equivalent to “only, a “vholly, ”
“exclusively,” “co``$ely,.’ uentlrely,”
and ‘unquslifledly.
These paragraphs and a qubtatlon from’ Clt of
Houston v. Scottish Rite Benevolent Aas’n., TihX.
191, 230 S W 978 981, to the effect that “Charity
need not bi &lver&l to b@ public” likewise dlSpose,d
of the contention that the limitation of. the pr,lrmry
purpose of the charity to a class, i.e.; lallrcad em-~
ployees and their families, preve,tited the instltut,lon ., :
. from being one of “purely public charlty.~” ’ .,
It must be emphasized, however, that la polnt. of.
fact the Mlssourl Pacific Lines Hospital did do sOms
charitable work. It Is true that “the rendition. of
services to non-members has always been lncld~ntal to
the nmln purposes of said dssoclatlon . . ~.. .“; but
the Hospital had at till times during the period for
which taxes were sought given first aid td the members
of the City of Palestine police and fire depart=nt
and cared for the charity patients of the county.
%egardless of race, creed or Slnanclal condition or
any other ground of distinction, tio~such
-- case @ssr-
gencn7 ha& ever been turned sy from salss its1
~’(Bmphssls a8ded)- The reasome __f_
va ue of
i&s; dli treatmsnts so rendered to the policemen and
firemen and county charity pstlents would average ap-
proxlxmtely $350 a year. The aggregate amounts re-
ceived . . . for the hospitalization . . . of the Sore-
going classes of patients not members of the assocla-
tlon’were vholly lnadequste to mplnta,ln ‘the hospital
and other services rendered, and such services could
not have been rendered except through the monthly as-
sessments paid by Said Embers as aforesaid . . . . ”
The court no where considers the value of these
charitable services in relation to the value of ser-
vices rendered to members of the as&clatlon. It
seems safe to say that then percents& of charitable
cases was smpll In colaparlson with-the number of ppy
patients or members of the assocleQ9.n; yet the exemp-
tion was still accorded the assoclatlon.
The fact that the members of ihe &le,.County COOP-
erative Hospital have voluntarily assoclat+d themselves
together for the purposes of establishing and mslntaia-
lng a hospital In no way militates against an exemption
F-
2:=3
Hr. Iae Nowlln, Page 8, P-299
OS the %oepltal” property. OS course, until such :tLme
as charitable cases are being treated there can be no
exemption as it Is vell settled that a msre prospective
use for charitable purposes Is not sufficient. 2 A.L.R.
545. Likewise It is only by exclusive use of the prop-
erty that the charitable orgbnl&atlon may gain exemp-
tion from taxation. It has been held that exemption
was lost where a hosDlta1 rented offices ln the hosDl-
tal building to physicians for use in their general-
practice. ,’City of Lonnvlew v. Eknrkbam- McRee Memorial
&spit&l, 152 S. W. (2d) 1112. Moreover vhere a labor-
atory technician used a part of the hospital laboratory l
in doing a small buslnese of his ovn the exemption was‘
lost notwlthstandlnu the fact that he mid no rent and
that the hospital dyd not share la his-prlkte profits.
MarkhamHospital v. City of Lonuvlew, et al,’ I91 S. W.
12dl 695.. error refused. These two cases involve use
by a thtid uerson for private ~purposes and in no way
c&Ullct with .the holding ‘In &ti Rbsa Inflmnsry v:
,Clty -of San Antonio, Comm. App., 259 5. W. 926 to the
effect that the fact that the major portion of’ths rooms
In a hospital are used by pay patients does not result :’
In the loss of the exempt Ion accorded lnstltut Ions of
purely public charity provided the other requisites of
exemption are met.
Assuming, then, that the Bale County Cooperative
Hospltal~‘can meet the threefold requlremsnts of owner- ”
u of the property, bonaflde charitable ‘purpose as.
evidenced ba actual charitable m, and exclusive use
of the proper-the charitable instltut Ion Itself;-
it Is the opinion of this Department that ,the build-
lags bf the Hale County Cooperative Hospital and the
grounds on which said buildings are located are exempt ”
from ad valorem taxes.
SUMMARY
The buildings belonging to the Hale
County Cooperative Hospital and the grounds
on which said buildings are located are ex-
empt f~rom ad valorem taxes IS said buildings .
and grounds are owned and exclusively used by
the Hale County Cooperative Hospital for a
bona fide charitable purpose as evidenced by
actual charitable work. Art. VIII, sec. 2 of
lb. lee Novlin, Page 9, V-299
the Texas Constitntlorr; Sec. 7, AI%, 7150,
R. C. 5.; City 0s Palestine v. Hissouri
Psclflc LlneS Homltal A ss ' n., s. w.
126) 311.
Yours very truly,
ATTORNHY
GHRHRAL ~OF TEAS ”
.
BY
MC:mrj Assistsat
iTTORNRYGHNRRU
’
_.