Fredericka Home for the Aged v. County of San Diego

Plaintiff, a nonprofit corporation operating a home for elderly people on a “life care contract” basis, brought this action to recover taxes paid under protest for the tax year 1946-1947. It claimed that it was a charitable organization devoting its property exclusively to charitable purposes and so entitled to the benefit of the recently adopted welfare exemption. (Cal. Const., art. XIII, § lc; Rev. & Tax. Code, § 214.) With certain exceptions—a parcel of vacant land, some acreage leased for commercial purposes, and a small item of solvent credits—the trial court adjudicated the exemption claim in plaintiff’s favor and entered judgment accordingly for a tax refund. From such judgment defendant county has appealed, contending that the record does not sustain the conclusion that plaintiff was functioning as a charitable institution within the meaning of the welfare tax exemption law. Upon the undisputed facts, we have concluded that defendant’s contention cannot be sustained.

At the trial the only evidence introduced was that offered by plaintiff. It appears that plaintiff was incorporated in 1908 and received as a gift certain land in Chula Vista—some 15 acres—and the buildings then on it. Subsequent buildings were donated, and in 1916 a trust fund of $200,000 was

Applicants for admission to the home must have attained the age of 69 years, be in good health, and meet the approval of the board of directors—including consideration over a three months’ probationary period. Prior to November 1, 1944, each applicant, in addition to paying a fixed fee for maintenance at the home, was required to execute a trust agreement whereby three-fifths of the applicant’s estate would go to the home upon death of the applicant. A new policy was adopted after said date eliminating the trust agreement as an entry requirement, and at the same time the minimum fee for admission to the home was fixed at $5,500. By the terms of the life care contract made with the applicant, the home agreed to furnish room, board, and other services.

As documentary evidence in its behalf and representing the “last figures available at the time [the exemption] claim was filed” (Code Civ. Proc., § 1963, subds. 28, 32), plaintiff introduced a financial report for the fiscal year ending June 30, 1945. According to that accounting record, 21 new residents were admitted during the period covered, 16 of them under the policy of charging a minimum fee of $5,500 as established in November, 1944, the average fee being $6,264.04. The exact amount of the admission fee of each applicant was computed actuarily and also depended on the applicant’s choice of accommodations. According to one of plaintiff’s directors, the division as to the source of plaintiff’s income was fixed at 35 per cent from interest on the endowment fund and donations and 65 per cent from admission fees. Certain other schedules introduced in evidence clearly showed that over 25 per cent of plaintiff’s gross cash income, as well as its

As discussed in the opinion filed by this court in certain consolidated hospital cases (Cedars of Lebanon Hospital v. County of Los Angeles, L. A. No. 20610, ante, p. 729 [ 221 P.2d 31 ]), the problem of determining whether or not plaintiff is entitled as a charitable organization to the welfare tax exemption must be resolved upon the basis of a “strict but reasonable construction” of the exempting language, and the claimant of such benefit has the burden of showing that it clearly comes within the terms thereof. It is not sufficient that the institution shall have originated through a charitable gift or bequest, but “it must actually dispense charity” if it is to satisfy the requirement that its property be “used exclusively for . . . charitable purposes.” (51 Am. Jur. §601, p. 584; emphasis added.) However, due regard must be had for the ordinary acceptation of the exempting language and its purport in effecting the object of the lawmakers. In the light of such guiding principles, the particular facts establishing plaintiff’s method of operation and function in the community must be considered.

The concept of charity is not confined to the relief of the needy and destitute, for ‘ ‘ aged people require care and attention apart from financial assistance, and the supply of this care and attention is as much a charitable and benevolent purpose as the relief of their financial wants.” (Estate of

Defendant’s challenge of plaintiff’s denomination as a charitable institution and the use of its property for charitable purposes stems primarily from the fact that plaintiff does not extend free services to the poor, but the welfare exemption law as above quoted makes no such requirement as a qualifying factor for the tax exemption, and if such condition were intended, appropriate language to that effect could readily have been adopted. Rather, the welfare exemption law as here involved appears to rest on a concept of charity in its ordinary sense. Consistent with such interpretation, the controlling consideration in determining whether an institution such as plaintiff should be classified as a charitable one is not whether a few or all of the recipients of its benefits may make reasonable contributions toward defraying the cost of such benefits, but whether such contributions as are made do not exceed what is required for the maintenance of the institution at a reasonable standard and are devoted to the purposes for which the institution was founded, which purposes, in the absence of the required contributions, would clearly be deemed to be charitable. If such is the situation, then the institution is no less a charity because of the receipt of such contributions, and within such concept plaintiff properly claims a tax-exempt status under the welfare exemption law.

The record contains abundant evidence that approximately 35 per cent of plaintiff’s income came from interest on the endowment fund and from donations, while only about 65 per cent came from fees of the inmates. Moreover, it appears

While it is true that each applicant for admission to the home is required to pay an entry fee in return for his care, it is also true that plaintiff contributes a substantial proportion of the annual cash expenditures, as well as the use of its properties for such care. Under these circumstances, the mere payment of such fees by the inmates does not militate against plaintiff’s status as a charitable organization. Nor does it matter that plaintiff requires the applicant to the home to submit to a three-month probationary period and meet the approval of the board of directors rather than permit the home to be open to the admission of any individual upon demand. Such stipulation only suggests an attempt to maintain the home in a manner which would engender harmony of association among the elderly inmates rather than endanger their peaceful, congenial living conditions through the introduction of discordant elements.

As was pertinently said in Estate of Henderson, supra, 17 Cal.2d 853 , at page 857: “Since the enactment of the Statute of Charitable Uses during the reign of Elizabeth, aid to the aged and infirm has been recognized as charitable.” Here the record shows that plaintiff is ministering to its elderly residents at a charge which, although appreciable, is within the reach of persons in modest circumstances and is no greater than that which is required to augment the substantial amount which plaintiff is able to contribute to the accomplishment of its purposes. There can be no doubt that arrangements for such life care contracts fill a social purpose as well as a need of the applicants for admission. Approaching those years when the physical and mental faculties normally decline over an indefinite period of time and being faced with the prospect of expending increased but indeterminable amounts for care

Such adjudication of plaintiff’s status in relation to the welfare tax exemption likewise comprehends that portion of its property used to house its personnel as that issue is here presented. Thus, there is considerable testimony in the record showing that those of the personnel living on plaintiff’s premises do so as a matter of institutional necessity. In this regard it must be remembered that a prerequisite for entrance to the home as a resident is the 69-year age qualification, indicating the need of adequate personnel to care for such elderly

It therefore follows that the trial court correctly determined that plaintiff is a charitable institution and entitled to exemption from taxation on all the property in dispute.

The judgment is affirmed.

Gibson, C. J., Shenk, J., Edmonds, J., Carter, J., Traynor, J., and Schauer, J., concurred.