Stahl v. Kansas Educational Ass'n

1. Taxation —Exemption. Any person or corporation claiming, immunity from the common burdens of taxation, which should rest equally upon all, must bring himself or itself clearly within the exemption; and hence a provision creating an exemption from taxes must be construed strictly. 2. Religious Pubeoses —Dwelling House, not Exempt from Taxation. The charter granted by the legislative assembly of the territory of of Kansas to the Kansas Educational Association of the Methodist Episcopal Church provided, “that all the property or funds, real, personal, or mixed, that may be received, held or appropriated by or for said association, for the exclusive purpose of religion or education, including a cemetery not exceeding 40 acres, shall be forever exempt from taxation.” Held, That a dwelling house owned by the association, which was devised to it for the exclusive purpose of education, is not exempt from taxation, under the provisions of the charter of the association, if not used exclusively for religious or educational purposes, although the house is rented to a tenant, who pays rent therefor, and such rent is appropriated by the association exclusively for the purpose of education.

Error from Lyon District Court, This was an action brought by The Ka/nsas Educational Association of the Methodist Episcopal Church against D. A. Stahl,, as county treasurer, and others, to restrain the collection of certain taxes on certain premises in Lyon county, on the ground that the lands were exempt from taxation, under the charter of the Kansas Educational Association, § 6 of which reads as follows: “That all the property or funds, real, personal, or mixed, that may be received, held or appropriated by or for said association, for the exclusive purposes of religion or education, including a cemetery not exceeding 40 acres, shall be forever exempt from taxation.” The charter was granted February 3, 1858, by a special act of the legislative assembly of the territory of Kansas. The title of the act is as follows: “An act incorporating the Kansas Educational Association of the Methodist Episcopal Church.” Section 2 reads: “That the objects of the association are and shall be, the promotion of education in Kansas, under the patronage of the Kansas and Nebraska conference of the Methodist Episcopal church, or such conferences as may be hereafter formed out of the said conference, within the bounds of the territory of Kansas, and for the mutual benefit of the members of this association.” Section 7 reads: “That in case said corporation shall hereafter, at-any time, receive by gift, grant, or devise, any number of acres of land exceeding one township of land, they shall be and are hereby required to sell and dispose of the same, within 25 years from the date of such gift, grant, or devise, and said corporation are hereby expressly limited to the holding, at any one time; of more than one township of land, except when received by gift, grant, or devise, as aforesaid, in which case they shall dispose of the same within the time aforesaid.” The defendants filed a general demurrer to the petition, which, on the 4th of February, 1891, was overruled. No application being made by the defendants to answer, the court rendered judgment in favor of the plaintiff against the defendants, forever enjoining them from levying or collecting any general taxes upon or against the real estate described in plaintiff’s petition, so long as the same belonged to the plaintiff. The defendants excepted, and bring the case here. It is a settled rule that no presumption in favor of exemption of property from taxation can be indulged. It must be made upon a sufficient consideration, and be clearly shown to exist. Every reasonable doubt shall be resolved against it. Where it exists, it is to be rigidly scrutinized, and never be permitted to extend, either in scope or duration, beyond what the terms of the concession clearly require. It is in derogation of public right and narrows the trust created for the good of all. See Tucker v. Ferguson, 22 Wall. 575. The defendant in error claims that the exemption constituted by the act creating its charter is perpetual, and that the act itself is in effect a contract. This concession of the legislature was spontaneous, and no service or duty or other remunerative condition was imposed upon the corporation. It belongs to the class of laws denominated privilegia favorabilia. It exists bene placitum, and may be revoked at the .pleasure of the sovereign. The Rector v. The County of Philadelphia, 24 How. 302, 303. All questions of doubt are to be resolved in favor of the state in such cases. Railroad Co. v. Canal Comm’rs, 21 Pa. St. 22; Manufacturing Co. v. East Saginaw, 19 Mich. 259; Railroad Co. v. Richmond, 26 Gratt. 83. See, also, Krutz v. Town Co., 20 Kas. 397; Scanlon v. Crashaw, 5 Mo. App. 337. Plaintiffs in error claim that said petition does not state facts sufficient to constitute a cause of action against the plaintiffs in error: First, Because said premises are claimed for Baker University, and it does not appear that Baker University was located at the town of Palmyra, Kas., or within one mile thereof, as required by said charter. Second, That the language of said §6 of said charter, under which the exemption is claimed, does not cover the property in controversy, which the petition shows to be rented to a tenant, and so is not held or appropriated exclusively for the purposes of religion or education. St. Mary’s College v. Growl, 10 Kas. 442; Cincinnati College v. The State, 19 Ohio, 110. Third, Because said § 6 of said charter is inconsistent with and repugnant to § 1, article 11, of the state constitution, which requires that “ The legislature shall provide for a uniform and equal rate of assessment and taxation,” and was therefore repealed by the adoption of the constitution. The accumulation of large amounts of untaxed property by educational, charitable, religious and other institutions is contrary to the fundamental rule requiring an' equal rate of assessment and taxation. The State, ex rel., v. Stormont, 24 Kas. 686; Washburn College v. Comm’rs of Shawnee Co., 8 id. 344. Under the provision of the state constitutional, article 11, use is made the test, and not ownership or holding. This is a broad distinction, apparent on the face of this section, and made the basis and reason of the opinion in the Washburn College case. 8 Kas. 348. Under the provision in the constitution, the property, in order to be exempt from taxation, must be used exclusively for educational purposes. Under the provision of § 6, such property must be received or held or appropriated for the exclusive purpose of education. The constitution superadds to holding and purpose, use; § 6 simply requires holding for the specified purpose. It has been sought to make something out of the use of the term “ exclusive,” as used in § 6. This word, however, qualifies “ purpose” and not either of the words “received,” “ held” or “ appropriated,” much less the imaginary word “ used.” Property may be held by this association (within the limits of § 7) without being subject to taxation, so long as it is held with the exclusive or sole purpose of devoting it to the first object of the creation of the association, to wit, the “promotion of education.” Is it not quite clear that this association could receive and hold funds for the exclusive purpose of maintaining the institution named, and devote the income therefrom to that purpose, without being liable for the payment of taxes thereon? Is it not equally clear that real estate may be held in the same manner? The object of the legislature is apparent. See University v. People, 99 U. S. 323, 324. 1. That the charter of defendant in error is a contract between it and the state is so universally held that I presume it will not be disputed here. See N. P. Ply. Co. v. Carland, 5 Mont. 146; same case, 3 Pac. Rep. 150; Loan & Trust Co. v. Stone, 20 Fed. Rep. 270; Tomlinson v. Jessup, 82 U. S. 454. 2. When there is no constitutional prohibition, the authority of the legislature to make a contract exempting property from taxation is now beyond question. At the time defendant in error received its charter, there was no restriction on the territorial legislature acting on that subject — nothing in the constitution of the United States, and nothing in the organic act creating the territory. By § 24 of the organic act it is provided: “That the legislative power of the territory shall extend to all rightful subjects of legislation consistent with the constitur tion of the United States and the provisions of this act.” That this provision conferred on the legislature the authority to exempt the property of defendant in error from taxation, is fully sustained by the following citations, which might be extended almost indefinitely: Gilman v. Sheboygan, 67 U. S. 510; W. C. Ptd. Co. v. Taylor Co., 52 Wis. 42; same case, 8 N. W. Rep. 833; Ferris v. Vannier, 5 Dak. 185; same case, 42 N. W. Rep. 31; N. P. Ply. Co. v. Barnes, 2 N. D. 310; same case, 51 N. W. Rep. 386; N. P. Ply. Co. v. Garland, 5 Mont. 146; same case, 3 Pac. Rep. 155; E. T. V. & G. Pld. Co. v. Piokerd, 24 Fed. Rep. 614; Tomlinson v. Jessup, 82 U. S. 454. 3. The territorial legislature having the authority to grant the charter in question, with the provision therein exempting the property of defendant in error from taxation, the exemption, being once granted, is beyond recall, either by the people in framing and adopting their constitution, or by their representatives in the legislature. See Bridge Co. v. Bridge Co., 70 U. S. 51; Grand Lodge v. City of New Orleans, 44 La. An. 659; same case, 11 S. Rep. 148; St. Anna’s Asylum v. City of New Orleans, 105 U. S. 362; Home of the Friendless v. Pouse, 75 id. 430.