84 Misc. 534 | N.Y. Sup. Ct. | 1914
This is a motion to confirm the report of the Hon. Irving G. Vann, former judge of the Court of Appeals of this state, who was appointed referee in the above-entitled certiorari proceedings instituted to review an assessment levied on the property of the relator, the Telluride Association, located in the city of Ithaca. The principal question presented for determination in this proceeding is of general interest and far-reaching importance. The assessors of Ithaca in the assessment-roll before the court assessed the property of the Telluride Association, which a few years ago erected a fine building on the campus of Cornell University with the consent of the university authorities, and the association claims that it is organized exclusively for educational and philanthropic purposes and that the property in question is used solely for such purposes, which contention was sharply litigated before Judge Vann, who was appointed referee to report to the court his findings of fact, conclusions of law and opinion upon the question presented. Judge Vann, in addition to formulating findings of fact and conclusions of law, also wrote a highly instructive and illuminating opinion on the question before him, all of which are now submitted to the court for its final action. I have
Opinion.
These cases present the question whether certain property of a voluntary association, composed of more than seven members and organized under the name of the Telluride Association, is exempt from taxation under the provisions of the Tax Law relating to exemption. That statute provides that “ all real property within this state, and all personal property situated or owned within this state, is taxable unless exempt from taxation by law.” Tax Law, § 3. The next section provides that certain property shall be exempt from taxation and by its seventh subdivision that “ the real property of a corporation or association organized exclusively for the moral or mental improvement of men or women or for * * * charitable, benevolent, * * * educational, scientific, literary, library, etc., purposes * 56 * or for two or more such purposes, and used exclusively for carrying out thereupon one or more of such purposes, and the personal property of any such corporation, shall be exempt from taxation. But no such corporation or association shall be entitled to any such exemption if any officer, member or employee thereof shall receive, or may be lawfully entitled to receive, any pecuniary profit from the operations thereof ex
The constitution of the Telluride Association was
Telluride House was erected' and paid for by the association between June, 1909, and September, 1911, and it is the taxation of that building, not as real estate, but as personal property in one case and a leasehold interest in the other, that gave rise to the present controversy. It is a substantial brick structure which cost about $95,000 and the furniture and equipment about $20,000 more. It has a dining room and kitchen on the first floor, living rooms on the second, sleeping rooms and studies on the third and fourth. It has no laboratory or recitation rooms. The students live there, study there, eat and sleep there and sometimes have social gatherings there with
Bach student when admitted is given a scholarship which entitles him to maintenance, tuition, etc., but not to clothing or pocket money, although a small sum is allowed for general expenses. The students sometimes go out to work temporarily to supply themselves with such conveniences as are not furnished by the association and then return to their studies. The cost to the association every year for each scholarship is the sum of $1,000. Fifty per cent, of the students could not get a university education if the opportunity was not afforded by the association. There was at one time a working arrangement between the association and a corporation known as the Telluride Power Company of Colorado, under which certain applicants for membership were employed by that company upon the recommendation of the association for a limited number of hours daily, with compensation for work and opportunity for study. During the first year they worked more and studied less. The second, they worked eight hours a day and the third six hours, and in both of those years had the rest of their time for study under an instructor employed by the company. The wages were precisely
The education of the young men is not confined to the curriculum of the college they attend and all the colleges accept the standards of the association for entrance to their courses without further examination on their part. The usual courses are mechanical, civil and electric engineering, agriculture, science, art and architecture. Music, law and medicine are included, but there are few who take these courses. A scholarship in Telluride House involves residence in the building, so that the students can come in contact with noted educators and with men of distinction in literature, science and art, who are systematically entertained there and occasionally lecture there. To illustrate, a director of the Smithsonian Institution visits the house frequently, talks to the students collectively, meets them in their rooms, takes great interest and devotes much time to them. Other instances of like character were proved on the trial. This contact with broad and mature minds is regarded by the management as an important part of the education furnished. The association requires that all work taken at the university shall be kept up to a high standard, higher than- the university itself requires. If a student fails to meet this requirement he may forfeit his scholarship, even if in no danger of being dropped by the university and there have been cases
In 1910 an assessment was spread upon the assessment roll of the city of Ithaca for state and county taxes in the following form: under the printed head of “ Name,” was written “ Nairn, L. L., and Telluride Company; ” under the printed head of “ Personal,” was written “ $30,000; ” under the head of “ Total,” was written ‘ ‘ $30,000; ’ ’ and under the head of “ Taxes,” was written “ $75.”
In 1912 an assessment was spread upon the assessment roll of the city of Ithaca in the following form: under the printed head of “ Personal Property. Name of person or corporation in tax district tax
The land upon which Telluride House stands is part of the campus of Cornell University in the city of Ithaca and for years has been and still is exempt from taxation under the statute. There is no written agreement between the university and the association, and no complete verbal agreement, specifying the terms and conditions of occupancy. The university consented that the building should be erected on the spot where it stands and knew that it was so erected under the reasonable expectation on the part of the association that it should have a lease at a nominal rent for a reasonably long term of years. During the interviews upon the subject of a lease held between the representatives of the two institutions, both before
Under these circumstances equity will prohibit the university from disappointing the reasonable expectation of the association, based on its own action, by expelling the latter from its ground and using the building for its own purposes. Since equity treats as done that which ought to be done, the nature of the tenure or occupancy of the association is that of a tenant at a nominal rent for a reasonably long term to be agreed upon by the parties or fixed by the courts. This, I think, is the status of the property so far as the question of taxation is concerned, independent of the question of exemption. No disturbing question has yet arisen between the university and the association. Their relations are most cordial and harmonious and there is no reason to apprehend that they will ever be disturbed.
Whether either of the assessments as laid is sufficient in substance and form to satisfy the law, I do not decide, but, finding the facts as they exist, leave the conclusion of law in that respect to be found by the courts of review, in case they do not agree with me on the question of exemption.
The question is raised whether the purposes for which Telluride Association was organized are educational or charitable to the exclusion of all others. The defendants read from the constitution under the head of ‘ ‘ Administration of Property ” the following section: “ It shall be the endeavor of the association not only to preserve the value of its property but to increase the same. To this end, and for the purpose of providing its members employment and experience, it shall be the aim of the association to establish, invest in and conduct commercial enterprises.” Founded on the last three words of the provision quoted the argument is made that carrying on a commercial enterprise cannot fall within the language of the statute and hence that the object of the organization is not exclusively educational or charitable.
It is true that the association owns a little less than one half the stock of the Beaver Biver Power Company, and its friends own enough more to give control of the management through the combined voting [lower. This, however, is simply a result of the power to invest in corporate stocks, which cannot be questioned or held.to carry the purpose of the organization outside of the statute. Is a university deprived of its right to exemption because it invests part of its educational funds in the stock of railroad, electrical or manufacturing corporations and to this extent conducts commercial enterprises ? Educational work cannot be carried on without money and, unless an educational institution uses up its principal or lets it lie idle, it must invest in something and may, as most of them do, invest in corporate stocks. This does not deprive them of their right to exemption.
According to the uncontradicted testimony of a prominent member of the convention which adopted
The constitution which constitutes the articles of association was adopted at a convention held in Utah, but each annual convention fixes the place of meeting for the next, and the conventions are held in different states. The association has no headquarters, principal place of business or office. Its principal business is transacted at the annual convention. The associates reside in many different states, its president and more
The association is so peculiar in purpose and practice as to be difficult of classification and for this reason probably there is no decision by the courts that is strictly analogous. The chief reliance of the respondents is People ex rel. Delta Kappa Epsilon Society of Hamilton College v. Lawler, 74 App. Div. 553, affd., without opinion, two of the judges not acting, 179 N. Y. 535. In that case a building and the land upon which it stood were owned by a college Greek letter fraternity, organized, according to its constitution, for literary purposes and the promotion of. the fine arts. The building was used primarily as a boarding house for the active members of the chapter, where they enjoyed the privileges of home life and met for social recreation and fellowship, but it was used incidentally for literary, education and scientific purposes. In holding that it was not exempt from taxation the court said: ‘ ‘ The important and controlling question for our determination relates to the use to which the relator’s property was put. * * * It is apparent that the partial or occasional use of the relator’s chapter house for literary, educational or scientific purposes is not sufficient to sustain its claim to exemption, unless it can be said that such purposes are primary and inherent while all others are secondary and incidental; for although we ought not, perhaps, to give to the word ‘ exclusively ’ an interpretation so literal as to prevent an occasional use of the relator’s property for some purpose other than one or more of
It is to be observed that in the case cited the educational element was not prominent and the charitable feature was wanting. The young men paid the expenses of carrying on the building and for their own maintenance, such as board, lodging, etc., while they occupied it. They paid their own tuition and their own way in every respect. They paid for every-benefit received and for every privilege enjoyed. A use is not charitable when it is paid for wholly by oneself. On the other hand, in the case of the Telluride Association the young men paid for nothing connected with their education, which was free in every respect. They paid nothing for tuition,- board, lodging, -maintenance or anything connected with their education.
In the case of People ex rel. Young Men’s Association v. Sayles, 32 App. Div. 197, it was held that a corporation organized exclusively for the purpose of promoting benevolent and charitable purposes, which owned Harmanus Bleecker Hall in the city of Albany, was not exempt from taxation as to the part of said hall that was leased for theatrical performances and public entertainments, because it was not used, in the language of the statute, “ exclusively for carrying out thereupon one or more of such purposes, but leased or otherwise used for other purposes.” It was held, however, that it was exempt as to the portion not so used. The same was held in the next case in the same volume, where a benevolent corporation owned a large public hall and leased it for hire to others for exhibitions, etc. People ex rel. Catholic Union v. Sayles, 32 App. Div. 203. The distinction between those cases and that under consideration is obvious without comment.
On the other hand the plaintiff and relator relies on People ex rel. Trustees v. Mezger, 98 App. Div. 237, affd., without opinion, 181 N. Y. 511. In that case the trustees of an incorporated academy with many buildings, including a stable, an armory with drill rooms, a library and a building occupied by the principal as a residence, leased them all to the principal for $3,000 a year in excess of the cost of maintenance, but the excess was used by the trustees in improving the buildings and grounds.
The novelty of the facts makes the case under consideration interesting but so difficult as to invite divergent views and the decision must rest on original impressions- and reasoning rather than authority. My conclusion is that the facts stated, about which there is. no dispute, and the reasons already given, show that Telluride Association was organized exclusively, and that Telluride House is used exclusively, for charitable and educational purposes. The statute is complied with when all of purpose, or use that is not educational is charitable.
There should be judgment for the plaintiff in the action and for the relator in the special proceeding.
Judgment accordingly.