South Iowa Methodist Homes, Inc. v. Board of Review

Garfield, C. J.

— I must respectfully dissent.

The narrow point to be decided is the meaning of the word “used” in section 427.1(9). The exemption is to “all grounds and buildings used by” the listed organizations. It is evident the plaintiff must base its claim here upon the contention that it is a “charitable” society or institution, and it is not contended otherwise.

The majority suggests there is considerable merit in the argument the statute is so plain and free from doubt or ambiguity that there is no room for construction. I cannot agree. What is a “use” for the designated purposes has been discussed in other jurisdictions and nowhere has the term been found so clear that interpretation was not needed. The question is whether the property is being “used” for charitable purposes when a structure is under construction upon it which is intended for a charitable purpose, but before it is actually completed and. in operation. To state the question is to demonstrate the statute is not so clear that doubt and ambiguity are not present.

One well settled principle should determine this appeal. Iowa is one of most jurisdictions which holds to the rule of strict construction of tax exemption statutes. In Readlyn Hospital v. Hoth, 223 Iowa 341, 344 , 272 N.W. 90, 91, 92 , is this clear statement : “Statutes passed for the purpose of exempting property from taxation must be strictly construed, and if there is any doubt upon the question it must be resolved against the exemption and in favor of taxation. The exemption is not to be made *1310 by judicial construction, but anyone claiming exemption from taxation under a statute must sbow clearly that the property is exempt within the terms of the constitution and the statute.” Numerous precedents are then cited.

We have followed and applied this rule in many later cases. Trinity Lutheran Church v. Browner, 255 Iowa 197, 200, 201 , 121 N.W.2d 131, 133 ; Fischer Artificial Ice etc. Co. v. Iowa State Tax Comm., 248 Iowa 497, 499 , 81 N.W.2d 437, 439; Jones v. Iowa State Tax Comm., 247 Iowa 530, 534 , 74 N.W.2d 563, 565 , and citations in these opinions. (“Taxation is the rule and exemption therefrom the exception; and the claimant of such an exemption must show his right thereto by evidence which leaves the question free from doubt.”) Many other Iowa cases might be cited which adhere to this rule.

The Trinity Lutheran Church opinion, supra, involving a claim for tax exemption under this same statute, section 427.1 (9), makes this pronouncement: “The current trend throughout the country as shown by recent decisions is to curb and restrict exemptions such as we have here. Adherence to what is now the majority rule would deny exemption to the property involved on the ground that a residence is a place in which to live and as such is not used solely for religious purposes.”

The exemption was allowed in the Trinity case largely on the basis of stare decisis — a 3-to-2 decision in 1877. The opinion indicates quite clearly that if the question there were one of first impression (as the one here is) the decision would go the other way. Even then, four of the nine justices dissented from the opinion.

Trustees of Iowa College v. Baillie, 236 Iowa 235, 238 , 17 N.W.2d 143, 146 , cites authorities for this proposition: “A claim for exemption cannot be sustained unless it is clearly shown to be within the letter and spirit of the law.” Jones v. Iowa State Tax Comm., supra, 247 Iowa 530, 535 , 74 N.W.2d 563, 565 , reiterates this and adds, from Black’s Law Dictionary, Third Ed., “The letter of a statute, as distinguished from its spirit, means the strict and exact force of the language employed, as distinguished from the general purpose and policy of the law.”

The general rule applicable here is thus stated in 34 A. L. *1311 R., annotations, page 672: “Land on which buildings to be used for charitable purposes are in the course of erection, or are in good faith contemplated, is generally held not exempt from taxation.” It is true there is minority of authority, to the contrary.

The real distinction between these opposing lines of cases is pointed out in the well considered case of Cedars of Lebanon Hospital v. Los Angeles County, 35 Cal.2d 729, 743 , 221 P.2d 31, 39, 40 , 15 A. L. R.2d 1045, 1056, where the identical question here involved was considered and decided. It was there held: “It is argued that some effect should be given to these factors: that the exemption here is sought for property on which considerable progress had already been made with the building, that the work was being diligently prosecuted, and upon its completion it was in fact used pursuant to its design for an exempt purpose — as distinguished from a claim made with respect to vacant land on which it is the intention to start construction at some future date. But these considerations attesting to the * * * institution’s good faith in carrying out its building program are wholly immaterial under the welfare exemption law, where the language plainly makes use of the property the basis of the exemption, and manifestly an incompleted building cannot meet that condition. Such matters of bona fide intention as well as acts on the part of the qualifying institution have been recognized in decisions by courts which are committed to the doctrine of liberal construction of tax exemption statutes [citing Colorado and New Mexico eases]. But the reasoning of such decisions is without force under the rule of strict construction followed in this state and in most of the other states. * * * here the problem concerns new buildings on property which had not yet acquired a definite character, and would not until completed and used for the designated hospital purposes. Dougherty v. City of Philadelphia, 112 Pa. Super. 570 , 172 A. 177 , 180.”

I disagree with the majority’s attempt to distinguish this California case by the assertion that legislative intent in the passage of an existing law is established by an amendment to it enacted after a court decision construing the existing act. The interpretation of an existing statute is a judicial, not legislative, function. The legislative intent that is controlling in the con *1312 struction of a statute bas reference to the legislature which enacted it, not a subsequent one. The legislature may say what the law shall be, not what it is or has been. Des Moines Independent Community School Dist. v. Armstrong, 250 Iowa 634, 645 , 95 N.W.2d 515, 521, 522 ; City of Sioux City v. Young, 250 Iowa 1005, 1009, 1010 , 97 N.W.2d 907, 910, 911 , and citations in these opinions.

The California case cited above not only holds flatly and for cogent reasons that realty on which a building intended to be used for charitable purposes is under construction is not exempt from taxation, but points out the proper distinction in such matters between strict construction jurisdictions on one hand and liberal construction states on the other. In the latter category are Colorado and New Mexico. See McGlone v. First Baptist Church of Denver, 97 Colo. 427 , 50 P.2d 547, 548 , where the same distinction is pointed out.

The effect of the majority opinion is to depart from our long established rule of strict construction and follow the minority rule of liberal interpretation. The majority thinks that if the words of the statute, “for their appropriate objects” are strictly construed, the words “used by * * * charitable * * * institutions” must be interpreted liberally. No authority is cited for construing part of a statute, the part not in issue, strictly but the part that is in question liberally. The majority substitutes the will for the deed, the intent for the act.

“The road to Hell is paved with good intentions”, says an old English maxim. “He meant well” has served as an epitaph for many a futile endeavor, many a lost cause. Another proverb applicable here is that “there is many a slip between the cup and the lip.” All of these go to the point that a bona fide design to do good, to effectuate a charitable purpose, is not enough. It is only when they are put into effect that the best intentions will perform any real purpose.

Mullen v. Commissioners of Erie County, 85 Pa. 288, 292 , 27 Am. Rep. 650 , 652, aptly states: “It is thus clear, from both the constitution and the law, it is the use, not the building which defines the exemption. But the use which is made of a place is a present fact, not something ideal or in contemplation merely. *1313 If religious or public worship lias not been held in the place, indeed, statedly held in it, the place itself has not a character. At some day, distant or near, it may be intended to be used for stated public worship, but the fact that it is not now used strips it of its only title to exemption. * * * A building intended for a church may never be finished, or its use may be changed. On what principle, under the new constitution, should the property be exempted from taxation before it can be used, when it is the use only which gives it a title to exemption.”

The majority thinks the result of an affirmance here would conflict with National Bank of Burlington v. Huneke, 250 Iowa 1030 , 98 N.W.2d 7 . The cited case was decided under a different part of the statute, section 427.1(10), dealing with moneys and credits and placing stress upon ownership of trust funds. The determining part of the opinion is this: “* * * although the hospital had not been constructed, the funds were firmly committed and could not be diverted from the sole purpose of acquiring, constructing and operating the Klein Memorial Hospital, and during the interim the tax exemption was not lost.” Loc. cit. 250 Iowa 1037, 1038 , 98 N.W.2d 12 .

The distinction between the case just cited and this is obvious. The moneys in the trust fund in the Burlington bank were by the terms of the will set aside for the construction of the hospital. As we said, they “could not be diverted from that purpose.” In this case there is no more than an intention to construct a building which, if and when completed, would be used for what was thought would be a charitable purpose. Conceding the good intention, the structure may never be finished, or when finished, used for the now intended purpose. The majority seems to regard as a certainty the completion and use of the building for its intended purpose.

Iowa Wesleyan College v. Knight, 207 Iowa 1238 , 224 N.W. 502 , is also cited. It decides only that when an educational institution holds the equitable title to property it is entitled to the statutory exemption. It does not touch the question before us. The purpose in citing these Iowa cases is not clear; they serve at best only as make-weights and add nothing more than a small portion of confusion.

*1314 Indeed it is not clear wliat the majority holds other than to proclaim the exempt status of the grounds and building in question. It is clear it does not hold the grounds and building were used by plaintiff as a hospital or home for the elderly on the assessment date so as to qualify for tax exemption under a strict construction of section 427.1(9).

Zollmann, American Law of Charities, is cited by the majority. The citation may serve as a philosophical defense of the exemption laws but it has nothing to do with the legal question here involved. One statement from page 465, paragraph 693, of the cited work is, “The benefits derived by the community at large from charitable institutions far outweigh the trivial inequality caused by an exemption of their property.” This requires some considerable qualification. The nature and extent of the charity are most important. Many hospitals and old people’s homes are now being constructed as to which the charity involved is not always readily discernible, at least to those who need their care. The charges are often high — so high as to prohibit the use of the facilities to those who need them most. Whether the benefits of an exemption to this sort of institution “far outweigh” the inequality of tax exemption is debatable.

The tax burden, federal, state and local, grows heavier and heavier. The amount of property of the national and state governments, and of various institutions exempted under our statutes, likewise increases by leaps and bounds. So as taxes increase, the amount of property available to pay them diminishes. Thus “charity” is often illusory. Indeed it may well be that the time has come when we can no longer refer, as did Zollmann, to the “trivial inequality” caused by tax exemptions.

Village of Hibbing v. Commissioner of Taxation, 217 Minn. 528 , 14 N.W.2d 923 , 156 A. L. R. 1294, does not support the majority’s holding. The only question before the court was whether the hospital was a public one although the legal title and possession were still in the private vendor on the assessment date. “The question here is * * * whether an equitable owner is entitled to exemption where the vendor and vendee both devote the property to a use which constitutes a basis for exemption from taxation” (page 534 of 217 Minn., page 926 of 14 N.W.2d, page *1315 1300 of 156 A. L. R.). The exemption was granted by the state constitution, not alone by a statute subject to strict construction. See State v. P. K. M. Electric Co-Operative, Inc., 242 Minn. 404 , 65 N.W.2d 871, 877 . See also the comments on the Hibbing case in annotation, 156 A. L. R. 1301, 1304.

Briefs have been filed by certain institutions calling themselves “arnica curiae.” As always, they are not in fact friends of the court but of one of the contesting parties. Their briefs follow the general trend of plaintiff’s argument and likewise do not cite any substantial authority which upholds the plaintiff’s claim to exemption.

This dissent includes much of the material in one prepared by Justioe THOMPSON, who retired from this court July 1, to another reversing opinion — not, however, by the writer of this majority opinion.

I would affirm.

MooRE, J., joins in this dissent.