HILGER v. HARDING COLLEGE
5-2014
Supreme Court of Arkansas
February 15, 1960
331 S.W.2d 851
The established presumption is important in all phases of the instant case. It is based, of course, on the reluctance of the courts to interfere with the enactments of a coordinate branch of the government: the legislatures. As Chief Justice McCulloch stated in a leading Arkansas case on constitutional principles, Ex Parte Byles, 93 Ark. 612, 126 S. W. 94 (1910):
“The courts are not the guardians of the rights of the people of the state, except as those rights are secured by some constitutional provision which comes within the judicial cognizance. The protection against unwise or oppressive legislation, within constitutional bounds, is by an appeal to the justice and patriotism of the representatives of the people. If this fails, the people in their sovereign capacity can correct the evil; but courts cannot assume their rights. The judiciary can only arrest the execution of a statute when it conflicts with the Constitution. It cannot run a race of opinions upon points of right, reason and expediency with the law-making power.”
For the reasons stated above, I respectfully dissent.
Rose, Meek, House, Barron & Nash, for appellee.
PAUL WARD, Associate Justice. On this appeal we are called upon to decide whether certain personal property and certain real property belonging to Harding College are exempt from taxation under
The equipment used in connection with the printing shop and the laundry and all of the real estate last above described were assessed for taxes for the year 1957. The County Clerk had extended the taxes on the tax record for said year against the said equipment and the real estate acreage; the Collector is demanding that said taxes be paid; and, unless the taxes are paid the equipment and land will be sold.
This litigation was instituted by the College against the Tax Collector, the Assessor and the County Clerk of White County asking the Chancery Court to cancel the 1957 assessments; to restrain the Assessor from assess-
The decision in this case rests within the interpretation given to
A copy of the Articles and Agreement of Incorporation of the College were introduced in evidence and are a part of the record on this appeal. The first paragraph states in effect that the incorporators were acting on and in pursuance of the laws of the State of Arkansas for “incorporation of an educational institution“. It is clear, we think, that the “laws of the State” mentioned above refer to
It is important, therefore, to a decision in this case to examine the record to find out the nature, extent and usage of the personal property used in connection with the printing press and the laundry located on the campus of the College, and to find out the extent and usage of the off-campus real estate holdings of the College with a view to determining whether the property is being used “exclusively for schоol purposes“. It is necessary also to consider these properties and usages in relation to the aims and purposes of the College.
The evidence contained in the record consists of the deposition of Dr. George S. Benson, President of the College, and certain exhibits attached thereto. From these sources we find the evidence to be substantially as hereafter set out.
Printing Press. The College operates a printing press for two purposes: It provides jobs for certain students and it provides an immediate and accurate service for college printing. About 10% of the total volume of work comes from outside of the College. The print shop shows a profit of 2% over the past nine years and it is not operated for profit. The print shop has never done any advertising. No one connected with the print shop is listed with the College faculty, and no scholastic credits are given for such work.
The Dairy is operated for two fundamental purposes: One is to provide employment for the students and the other is to provide milk and meat products to the students at the lowest possible cost. Beginning with the present semester the College has commenced a course in animal husbandry tо be followed by a course in poultry and a course in dairying. From time to time portions of the dairy cattle are sold when advisable to increase herd efficiency and the money goes into the operational fund. Over the past nine years the dairy has operated at an average 3% loss. Making a profit is not the chief concern of the College. The dairy began selling products to the general public in 1957 when the Searcy dairy ceased to operate and now the College dairy is the only Grade A dairy operating in that County. All of the dairy‘s work is done by students except for one full-time operator. No one connected with the dairy is listed with the Cоllege faculty, but may be in the near future. No part of the dairy is located on the College campus.
Lands. The lands heretofore described, consisting of more than 400 acres, are not part of the campus and are used for cattle grazing. Some of the lands are several miles in distance from the College campus.
In addition to the above Dr. Benson testified, generally, to substantially the following: It is our purpose
In the Howe case, supra, the School District owned certain vacant lots not used for school grounds which were kept for rent and for sale, the proceeds being used exclusively for school purposes. In the cited case it was conceded that the vacant lots were “public property” which is not true in the case under consideration. Therefore, the Court was considering that portion of
This court was dealing with that portion of
Because of the similarity of the language used in
When we apply the rules and principles set forth in the cases cited above to the facts and circumstances of
We note that a sizeable percentage of the business done by both of these College enterprises is in competition with like businesses in the town of Searcy. Not only does this circumstance show that said enterprises are not operated exclusively for the College but it is contrary to the avowed purpose of the College to teach the benefits of “America‘s private enterprise economy“.
We do want to point out however that the College now proposes to inaugurate a course in animal husbandry and dairying and perhaps other courses in which instructors will be employed and credits given. If and when that is done a different situation will be presented relative to the exemption from taxation of such equipment and lands as are necessary to implemеnt such course or courses and as are used directly and exclusively therefor.
We have also concluded that the Print Shop was subject to taxation in 1957, but for somewhat different reasons. It is not denied that the shop is maintained for two purposes—to provide jobs for certain students
In view of what we have heretofore said it follows that the decree of the trial court must be, and it is hereby, reversed.
Reversed.
GEORGE ROSE SMITH, J., not participating.
JOHNSON and ROBINSON, JJ., dissent.
JIM JOHNSON, Associate Justice, dissenting. After a careful study of the case at bar, I find it impossible to agree with the majority view. Harding College is a private school. This Court held unequivocally in Phillips County v. Sister Estelle, 42 Ark. 536, that private and public schools are on a parity insofar as tax exemption is concerned.
My research reveals that not only are the public colleges of this State granted the tax exemptions here asked for by Harding, but in addition more than $600 per stu-
In my view, the majority opinion is saying, in effect, that the above enumerated examples, in addition to the printing press, dairy and laundry apparatus, claimed by Harding as tax exempt, do not fall within
My research reveals that there are no Arkansas cases directly touching the question now before the Court, but there are cases involving the “public purpose” and the “public charity” exemptions which are pertinent. With respect to properties devoted to “public purposes” and “public charity,” the language of
“Public property used exclusively for public purposes, and
“Buildings and grounds used exclusively for public charity.”
The case of Hot Springs School District v. Sisters of Mercy, 84 Ark. 497, 106 S. W. 954, is in point. The hospital was maintained by the Sisters of Mercy as a charitable institution. It contained rooms used exclusively by charitable patients, but it also had some rooms which were occupied by paying patients. A drug store was maintained in the hospital, and those who were able to pay were charged for their prescriptions. The hospital also maintained a school for nurses, employed a teacher, and employed girls who gave nursing services to patients while taking nurse‘s training. All moneys received went to the hospital and no funds were diverted to any other institution. From the opinion:
“The judgment appealed from exempts only the ground uрon which the hospital building is situate and the building thereon; and the sole question in the case is, whether or not they are used exclusively for public charity.
“. . . It is not denied that the whole object of the institution of appellee is one of public charity but appellant claims that it is not exclusively so used because pay patients are received, and because those able to pay are charged for prescriptions.
” . . . The fact of receiving money from some of the patients does not, we think, at all impair the character of the charity, so long as the money thus received is devoted altogether to the charitable object which thе institution is intended to further.
“In the case of County of Henepin v. Brotherhood of Gethsemane, 27 Minn. 460, the court said: ‘A hospital with the necessary grounds, free to all who are not pecuniarily able, and supported partly by private contributions and partly by fees from patients, but producing no profit, is a purely public charity.’
“In the case of Penn. Hospital of Delaware Co., 169 Pa. St. 305, the court said: ‘Property which is used directly for the purpose and in the operation of the charity is exempt, though it may also be used in a manner to yield some return and thereby reduce the expenses.’
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“We think the property meets the constitution requirement of being ‘buildings and grounds and materials used exclusively for public charity.‘”
In Brodie v. Fitzgerald, 57 Ark. 445, 22 S. W. 29, it appeared that the Sisters of Charity and Mercy who operated a public charity аlso owned real property which was rented for income purposes. Taxes were levied against this rental property. It was contended that as the rental ultimately was used for charitable purposes, the property was exempt. This contention was rejected, this Court saying:
“Under our constitution the rule stated by 1 Desty on Taxation, p. 119, applies. It is as follows: ‘The fact that the rents and revenues of a property owned by a charitable corporation are devoted to the purposes for which the corporation was organized, will not exempt such property from taxation. It is only when the property itself is actually and directly used for charitable purposes that the law exempts it from taxation.‘”
This case is without application here for the simple reason that Harding College does not rent any of its properties for rental income. It actually and directly uses all of the property it owns for educational purposes. The operation of the press, the laundry and the dairy are carried on primarily for educational purposes and the receipt of revenue from a few outside customers is just as incidental as was the receipt by the Sisters of Mercy of payments from those patients who could afford to pay for the use of the hospital‘s facilities.
In pointing out why the rental property was held to be taxable in Brodie v. Fitzgerald, supra, this Court in Robinson v. Indiana & Ark. Lumber & Manufacturing Co., 128 Ark. 550, 194 S. W. 870 remarked:
“The reason is that under our constitution it is only when the property itself is actually and directly used for public charity that the law exempts it from taxation.”
Yoes v. City of Fort Smith, 207 Ark. 694, 182 S. W. 2d 683, involved a “public purpose” exemption. The City of Fort Smith issued revenue bonds and constructed a waterworks system. A reservoir was constructed in Crawford County some twenty-five miles from Fort Smith. The tax officials of Crawford County levied taxes against this property. They contended that all of appellee‘s property in Crawford County was not being used “exclusively for public purposes,” and in their brief said:
“‘In order to secure its water supply, appellee сonstructed its dam and plant in the northern part of Crawford County, more than twenty-five miles from the city. This, we concede, it had a right to do, but only for one purpose, and that was supplying its citizens water within the corporate limits. When it went beyond this, it was no longer using the property exclusively for the public purpose for which the waterworks was designed. True, this and other courts have held that in connection with this purpose, mere surplus water may be disposed of, but it has never been held that the municipality can spread out into the general utility field and then escape liability . . . ’ (i.e., liability of taxation on the property). Appellants thus concede, in this section of their argument, that appellee‘s property would be exempt from the taxation here sought to be imposed except for the contracts to furnish water to (a) Alma, (b) Van Buren, and (c) Camp Chaffee.”
This Court answered:
“A city may sell surplus water without losing its right to tax exemption as public property used exclusively for public use. In 3 A. L. R. 1445, there is an annotation on whether public property is taxable where income is received incidental to public use; and the rule is stated: ‘As a general rule, it may be said that where the primary and principal use to which the property is put is public,
the mere fact that income is incidentally derived from its use does not affect its character аs property devoted to public use.’ The annotation is supplemented in 129 A. L. R. 485, and also in 101 A. L. R. 790, where the case of Hope v. Dodson, 166 Ark. 236, 266 S. W. 68 is cited to sustain the above quoted rule.”
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“Appellants say in their brief: ‘After the construction of the dam, under a WPA grant, a large swimming pool and large bath house were constructed upon a tract of land which appellee had acquired wholly below the dam; admission fees were charged to swim in the pool, and other charges were made in connection with the use of the bath house, towels, etc.; cold drinks, sandwiches, and such articles, were sold at the bath house and about the swimming pool; a coin-operated music machine was operated. It is apparent that all of these things were separate and apart from, and had no relation to, the supplying of water. In addition to these things, a number of cottages have been erected upon the land below the dam, and title thereto is in Fort Smith . . . ’
“All the area below the dam was placed under the control of the Parks Board of the City of Fort Smith and has all the time been handled as a public park. The facilities are open to the public at large, and are patronized by the people of Crawford County, as well as by people from elsewhere. A small admission charge is made for the use of the swimming pool, in order to defray towel expense, etc.; cold drinks and sandwiches are sold by a concession; but from all of the admission charges and concession money, the City of Ft. Smith has never made any profit; in fact, it still lacks several hundred dollars of receiving back its original outlay for towels. If any profit should ever be received, it will go back into maintenance, etc.”
The Court quoted this from Hannon v. Waterbury, 106 Conn. 13, 136 A. 876:
“The charge of a small fee covering a part of the cost of the maintenance of the pool in paying a super-
visor, instructors, janitors, and the like, while the municipality furnished the buildings, the swimming pool, the apparatus and equipment in connection therewith, the coal, electricity, water chemicals, and other necessaries for thе maintenance of the pool from the rule of governmental immunity. The city was not deriving a profit from this small fee, the charge was a mere incident to the public service rendered in the performance of a governmental duty.”
And then added:
“Without lengthening this opinion by the citation of other authorities, we conclude that the use of the property below the dam, as a swimming pool, bath house, and public park, did not destroy the status as tax-exempt property under Article 16, Section 5, of our Constitution.”
If an incidental charging for swimming, towels, cold drinks, sandwiches, coin machines, and the rental of cottages does not impair the “exclusive use” for public purposes, it follows that school property is used “exclusively for school purposes,” even though a small amount of surplus products and services may incidentally be sold to outsiders who are not solicited.
The above case certainly should be controlling in the case at bar. I can think of no excuse to give a different meaning to the same words used in the same section of the Constitution simply because in one instance the property of one of the finest private schools in this Nation is involved. If the majority is compelled to deviate from the rule set out in Hot Springs School District v. Sisters of Mercy, and Yoes v. City of Fort Smith, supra, it seems to me the least this Court could do would be to take the equitable approach to this situation by allowing a pro-rata tax exemption for that amount of the property here involved which is admitted to be used in the strictest sense exclusively for the school.
For the reasons stated above, I respectfully dissent.