Julia L. Butterfield Memorial Hospital Ass'n v. Town of Philipstown

Munder, J. The property in question is improved with a Medical Arts Building which was built by the petitioner and is contiguous to the hospital which petitioner also owns and operates. The petitioner is a private, nonprofit association established to operate the hospital which was the testamentary gift of Julia L. Butterfield. Her will was admitted to [290] probate in Putnam County in March, 1915. The property in question is located in the Village of Cold Spring. It is clear from the record that the petitioner’s motivation in erecting the Medical Arts Building was to attract and hold doctors to service the small community. That purpose has been achieved. The hospital now has a number of medical specialists on its staff sufficient to provide full service to its patients, including the critical area of emergency care and treatment. As part of its inducement to the doctors, petitioner offered (1) a guaranteed income until the doctors’ practices were built up, e.g., several received guarantees of $30,000 per year against which they deducted fees received, (2) rent-free occupancy of office suites in the building for a period of time and (3) payment for other services, such as cleaning, heat, electricity and air conditioning of the suites. In addition to the doctors’ suites, the building also contains facilities more directly related to the hospital, e.g., 14 hospital beds, an educational facility for coronary and intensive care seminars and a mental health clinic. The building, insofar as its tax-exempt status is concerned, is a hybrid. Portions of it are used for hospital or hospital-related purposes. However, it also contains suites used as offices by doctors in which they conduct their private practices of medicine, from which they derive pecuniary benefit and for which they pay some rent to the hospital. In our view, as to that portion, the doctors are not performing their services in furtherance of hospital functions and, to that extent the petitioner is not entitled to an exemption from taxation. As noted recently by the Fourth Department, in a somewhat similar case, Matter of Genesee Hosp. v Wagner (47 AD2d 37), the trend of the statutory exemption law has been to restrict rather than expand exemptions. In Genesee Hosp., the Fourth Department, inter alia, rejected the "all or nothing” point of view and held that the portion of a doctor’s office building consisting of office space leased to doctors with staff privileges at the hospital, and used exclusively for their private practice of medicine, was not exempt space and was taxable. Similar results were reached in Little Falls Hosp. v Board of Assessors of City of Little Falls (75 Misc 2d 731) and Matter of Community-General Hosp. of Greater Syracuse v Town of Onondaga (80 Misc 2d 96). We reach that same conclusion in the instant case. Accordingly, the judgment should be reversed, without costs, [291] and the proceeding remanded to Special Term for the taking of further proof and the making of proper findings as to the extent of the area of the Medical Arts Building subject to taxation, and to fix the assessments therefor for the years in question.