Sand Springs Home v. State

OSBORN. J. This is an appeal from the county court of Creek county, and involves the right of the state to levy ad valorem taxes upon the property of the Sand Springs Home. The cause originated when the tax ferret of Creek county served a notice on the officers of the Home to appear before the county treasurer and show cause why said property should not be extended on the county tax rolls. The Home filed a return to said notice, alleging that it was exclusively a charitable institution, had no stockholders, declared no dividends, and that no person profited by its operation. The parties will be referred to as they appeared in the trial court, which is inverse to their order here. The county treasurer held that the property involved was taxable, defendants appealed to the county court, and after a hearing the court sustained the ruling of the treasurer, and ordered the property placed on the tax rolls, from which ruling the defendant has appealed. The property involved is described as: “One (8) unit gasoline' plant including lines, buildings, resident houses, pipe lines, loading rack, R. R. spur, tank cars, wood and steel tanks and any and all other material used in connection therewith, also all tools and equipment. The above prop erty located on Tommy Atkins lease, sec. 4-18-7. Fair cash value of property mentioned for each year, total valuation $60,-00o per year.” It appears that the Sand Springs Home was founded by Charles Page in 1908, and was incorporated in 1912. Beginning in a small way, its operations were extended, and additional equipment provided until, at the present time, an average of from 90 to 100 orphan children are being eared for. The articles of incorporation of the Home provide for the carrying on of a number of activities, all of which are calculated to provide funds for the operation of the Home. During the lifetime of Page, he made provision for the financing of the institution. and at his death he willed the bulk of his estate, consisting of property valued at approximately $3,000,000, to the institution. Since the death of Page, the defendant institution, through its properly constituted officers, has continued the management of these properties. These consist of the gasoline manufacturing plant in controversy herein, a railroad, a cotton factory, an iron foundry, some producing oil wells, and other property. The record shows that a separate set of books is kept for each of the particular industries, hut that the Home pays the operating expense and all of the profits go to the Home. The profits, in turn, are used exclusively for the upkeep and maintenance of the Home, and, in addition thereto, about 60 or 70 small cottages. which are maintained for the benefit of widows with small children who are dependent upon charity for support. *324 It was shown at the hearing before the county court that the average annual operating expense of the Home was from $200,000 to $250,000. On a per capita basis the court found that the institution spent about $2,200 per annum for each child maintained in the institution and therefore defendant was not a charitable institution such as contemplated by section 6, article 10, of the Constitution. The court further found that the property in question was an auxiliary business to the defendant institution and according to the provisions of chapter 3, S. L. 1923-24 [O. S. 1931, secs. 9952-9953], the same was subject to ad valorem taxes. There is little dispute as to ¿he facts, the principal contentions being- as to the law. The plaintiff contends defendant is engaged both in the administration of charities and the conduct of commerical activities ; that the operation of the gasoline plant is purely a commercial activity in competition with other business of like land in Greek county, and the property is taxable as an ordinary business enterprise. Defendant contends that, under the rule heretofore adopted by this court, the use of the property by a charitable institution determines its taxability; and it being shown that the revenues and profits from the operation of the plant are used exclusively for the maintenance of the Home, which means the care, education, and upkeep of needy widows and orphans, that the property is nontaxable under section 6. article 10, of the Constitution. The question presented herein is not an open one in this jurisdiction, but is definitely settled in the case of Board of Commissioners of Garfield County v. Phillips University, 144 Okla. 57, 289 P. 720, wherein the rule is stated as follows: “The purpose for which property and the income therefrom is used is the test to be applied in determining whether such property is exempt from taxation, and that use is a question of fact to be determined from the evidence.” See, also, Board of Commissioners of Tulsa County v. Sisters of the Sorrowful Mother, 141 Okla. 32. 283 P. 984; Beta Theta Pi Corporation v. Board of County Commissioners of Cleveland County, 108 Okla. 78, 234 P. 354; Trinidad v. Sagrada Orden de Predicadores, 263 U. S. 578. The evidence offered by defendant, that all of the proceeds of the business in question are used exclusively for the pse, maintenance, and upkeep of the Home, is not disputed, and the conclusion of the trial court that the Home is not a charitable institution on account of a large per capita cost of operation is contrary to 1^tie undisputed facts. The trial court found that chapter 3, Session Laws 1923-24, is controlling herein, and the property of defendant was taxable by virtue of the provisions thereof. Section 2 of said act provides as follows: “Any such charitable, educational or benevolent corporation may borrow money and incur debts either for its principal purposes, or for the furtherance of any or all its business enterprises or both, at a rate of interest and bonus, not exceeding six per cent. (6%) per annum on such indebtedness. In case money is borrowed to aid any corporation, a majority of whose stock is lawfully owned by such charitable, educational, or benevolent corporation, it may loan or advance the same to such controlled corporations on such terms as may seem advisable to its trustees. Any such charitable, educational or benevolent corporation so borrowing money to aid any other corporation as aforesaid, may evidence its indebtedness by notes or bonds and secure their payment by mortgaging and pledging all or any part of its property, real, personal and mixed, except the real estate, buildings and personal property consisting of household goods, farm implements, and domestic animals used for the ordinary conduct and operation of the institution of such corporations, which last named property shall never be liable, or in any manner taken for indebtedness, charge or lien of any nature whatsoever contracted by such corporation, to aid another corporation as aforesaid, provided that if any charitable, educational or benevolent corporation shall maintain or carry on any auxiliary business under the terms of section 1 of' this act, either directly or through any other corporation or corporations, such fact shall be held to be an agreement on its part and on the part of such other corporation or corporations that all property owned by, devoted to,, or used in such auxiliary business hereunder, shall be subject to taxation for all purposes in the same manner as taxable property generally and that such property shall not be exempt from taxation by reason of the fact that the revenues or profits or a portion thereof. are used or intended to be used as additional funds for carrying out the charitable, educational or benevolent purposes of such corporation' or for reinvestment by or in behalf of such charitable, educational or benevolent corporation; and it is hereby declared that no such property shall be exempt from taxation; and provided, further, that the real estate, buildings, and personal property, consisting of household goods, farming implements, and domestic animals, *325 necessary for the ordinary conduct and operation of such charitable, educational or benevolent corporations, shall be exempt from taxation.” It is noted that the bill, by express provision, attempts to subject to taxation all property owned by, devoted to, or used in any auxiliary business operated by a charitable, educational, or benevolent corporation. The defendant contends that said act is unconstitutional and void as violative of the provisions of section 6, article 10, of the Constitution, which, in part, provides: “All property used for free public libra.ries, free museums, public cemeteries, property used exclusively for schools, colleges, and all property used exclusively for religious and charitable purposes * * * shall be exempt from taxation.” The above provision of the Constitution is definite and certain in providing that property used • exclusively for charitable purposes shall be exempt from taxation. In so far as said chapter 3, Session Laws 1923-24 [O. S. 1931, secs. 9952-9953], attempts to subject the property so used to ad valorem taxation, the same is in conflict with said constitutional provision, and is therefore invalid and ineffective. The judgment of the trial court is reversed and remanded, with directions to dismiss the proceeding. SWINDALL, ANDREWS, MeNEILL, and BUSBY, JJ„ concur. CULLTSON, Y. C. J.. absent.