Appendix — La Societe Francaise de Bienfaisance Mutuelle v. California Employment Commission

24

APPENDIX A.

Trt Journat of the American Medical Association, issue

of March 27, 1948, Vol. 121, No. 13, p. 1011:

‘** NONGOVERNMENTAL Hospira.s.

In the field of nongovernmental institutions there are

4,421 hospitals—a reduction in number from 4,494 non-

governmental hospitals existing a year ago. Their bed

capacity at present, however, is 368,046, a considerable

increase over 858,870 reported last vear. Their basinets

now number 59,620 as compared with 54,669 a year ago.

The total patients admitted were 8,535,935, showing quite

a large increase over their former figure, 7,933,586. The

average census changed during the year from 255,147 to

267,390,

The nongovernmental hospitals fall readily into two gen-

eral groups--the nonprofit: organizations, section Bo of

fable 1, composed of those that are church related, and

other nonprofit associations; and section C of table 1, com-

posed of hospitals that are owned by individuals or part-

nerships and those owned by corporations that are un-

restricted as to profit. In the nonprofit group are 2,926

With a capacity of 316,291 and 51,416 basinets to whieh were

admitted 7,463,648 patients and which had an average

census of 256,104. The nonprofit group, therefore, showed

a strong increase, and the growth was shared in some part

by the church related hospitals but to a much ereater ex-

tent by the other nonprofit associations.

Church hospitals show a net loss from 993 to 977 but a

considerable inerease in the number of beds and basinets.

Their patients admitted increased from 2,961,594 to

3,211,162 and their average census from 90,195 to 94,521.

The other nonprofit associations increased in number

from 1,917 to 1,949 and in capacity from 182,140 beds to

190,150 beds and in bassinets from 26,422 to 29,154. They

admitted 4,252,486 as compared with 3,931,141 last vear,

and their average census was 141,633 as compared with

132,472 last year.”’

25

APPENDIX B.

Section 2 of

California Unemployment Insurance Act (Statutes 1935),

p. 1227,

This act is enacted as a part of a National plan of un-

employment reserves and social security, and for the pur-

pose of assisting in the stabilization of unemployment

conditions. The imposition of the tax herein imposed upon

California industry alone, without a corresponding tax be

imposed upon all industry in the United States, would, by

the corresponding penalty upon California industry, defeat

the very purposes of this act set forth in section 1. There-

fore this act shall take effect only if and when there is

enacted legislation by the United States Government pro-

viding for a tax upon the payment of wages by employers

in this State, against which all or any part of the contribu-

tions required by this act may be exedited.

Whenever suc legislation enacted by the United States

Government is repealed, amended, affected or otherwise

changed in such manner that the contributions required by

this act or some portion thereof can not be thus credited,

then upon the date of such change, the provisions of this

act requiring contributions and providing for payment of

benefits shall cease to be operative and any assets in the

unemployment fund or unemployment administration fund

shall in the discretion of the State Treasurer be held in the

then existing depositaries or otherwise in the State treas-

ury. In the case of the unemployment administration

fund, such moneys may thereafter be dealt with by the

State Treasurer pursuant to the conditions of the erant

thereof to the State by the United States Government or

agency thereof.

26

APPENDIX C.

Authorities Holding Non-Profit Hospitals To Be per se

Charitable Institutions.

Buchanan v. Kennard, 234 Mo. 117, 139, 1386 S. W. 415, Ann.

Cas. 1912D 50.

In re Mendelsohn, 262 App. Div. 605, 31 N. Y. S. (2d) 433,

440, (social security tax).

Commissioner of Internal Revenue v. Battlecreek Inc., 126

Fed. (2d) 405, (income tax).

In re Rust’s Estate, 168 Wash. 344, 12 Pac. (2d) 396, 398

(1932), (Exemption from taxation).

New England Sanitarium v. Inhabitants of Stoneham, 205

Mass. 335, 91 N. E. 385, 387, (1910), (Exemption from

taxation).

Mulliner v. Evangelischer Diakonniessenverein, 144 Minn.

392, 175 N. W. 699.

Magnuson v. Swedish Hospital, 99 Wash. 399, 169 Pac. 828,

830, (1918).

Brattleboro Retreat v. Town of Brattleboro, 106 Vt. 228,

173 A. 209, 212, (1934), (Exemption from taxation).

Hearns v. Waterbury Hospital, 66 Conn. 98, (1895), 33 Atl,

595.

Lutheran Hospital Ass’n. v. Baker, 40 S. D. 226, 167 N. W.

148 ( 1918), (Exemption from taxation).

State v. H. Longstreet Taylor Foundation, 198 Minn. 263,

269 N. W. 469 (1936), (Exemption from. taxation).

German Hospital v. Board of Review, 233 IIl. 246, 84 N. E.

215. (Exemption from taxation).

Barnes v. Providence Sanitarium, 229 S. W. 588, (Tex. Civ.

App.).

County of Henepin v. Brotherhood of Gethsemane, 27 Minn.

460, 38 A. R. 298, (Exemption from taxation).

Maretick v. South Chicago Community Hospital, 297 Ill.

App. 488, 17 N. E. (2d) 1012, 1013.

27

Union Pacifie Railway Co. v. Artist, 60 Fed. 365, (C. C. A.

8th, 1894), (Railroad hospital).

Texas Central R. Co. v. Zumwalt, 103 Texas 603, 132 S. W.

113, 30 L. R. A. (N. S.) 1206, (Railroad hospital).

Carr v. Northern Pacifie Beneficial Ass’n., 128 Wash. 484,

221 Pae. 981.

Richardson v. Carbon Hill Coal Co., 10 Wash. 656, 39 Pae. 95.

Wells v. Ferry Baker Lumber Co., 57 Wash. 658, 107 Pae.

869, 29 L. R. A. (N. S.) 426.

Barden v. Atlantic Coastline Ry. Co., 152 N. C. 318, 67 S. E.

971.

Thomas v. Postal Telegraph-Cable Co., 48 S. W. (2d) 422,

(Ct. Civ. App. Tex. 1930).

Galveston H. & S. A. Ry. Co. v. Hanway, 57 S. W. 695, (Ct.

Civ. App. Tex. 1900).

Southern ete. Sanitarium v. Wilson, 45 Ariz. 522, 46 Pac.

(2d) 118, 125, 77 Pace. (2d) 458.

Bedford v. Colorado Fuel & Iron Corp. 102 Colo. 538, 81

Pae. (2d) 752, 759.

Miller v. Mohr, 198 Wash. 619, 89 Pae. (2d) 807.

McDonald v. Mass. Gen’! Hospital, 120 Mass. 432, 21 Am.

Rep. 529.

Reynolds Memorial Hospital v. Marshall County Court,

78 West Va. 685, 90 S. E. 238 (1916).

Knell v. Baptist Hospital, 45 S. W. (2d) 395 (Tex. Civ. App.

1931).

City of Palestine v. Missouri-Pacifie Lines H. Ass’n., 99

S. W. (2d) 311, (Ct. Civ. App. Tex. 1936).

Miami Battlecreek v. Lummus, 140 Fla. 718, 192 So. 211

(1939).

Rush Hospital Benev. Ass’n. v. Board of Sup’rs., 187 Miss.

204, 192 So. 829 (1940).

28

Piedmont Memorial Hospital v. Guilford County, 218 N. C.

673, 12 S. EK. (2d) 265.

Virginia Mason Hospital v. Larson, 9 Wash. (2d) 284, 114

Pac. (2d) 976, (social security tax).

Beverly Hespital v. Early, 292 Mass. 201, 197 N. E. 641,

100 A. L. R. 1332.

City of Dallas v. Smith, 130 Tex. 225, 107 S. W. (2d) 872.

Illinois Central R. Co. v. Moodie, 23 Fed. (2d) 902 (C. C. A.

5th).

Seott on Trusts (1939), p. 1996.

Zollman on Charities, p. 188.

Trusts, Restatements, Sections 372, 376.

Bogert on Trusts (1935), Vol. 2 p. 1163.

APPENDIX D.

Authorities relative to clause, ‘‘No part of the net earnings

of which applies to the benefit of any private shareholder

or individual.’’

United States v. Proprietors of Social Law Library, 102

Fed. (2d) 481, 484, (C. C. A. Ist, 1939).

Application of net earnings to improvements to Library

rendering it more serviceable to members, does not make

institution non-charitable.

Santee Club v. White, 87 Fed. (2d) 5, (C. C. A. 5th).

Profit on sale of small unusable portion of lands of game

club does not inure to its shareholders, use of club’s facili-

ties not being a ‘‘benefit’’.

Koon Kreek Klub v. Thomas, 108 Fed. (2d) 616, 618 (C. C.

A. 5th).

Rents from grazing privilege in club’s game preserve, and

eash consideration paid for oil lease thereon, same being

used to pay mortgage on club’s property, held not to

‘‘inure’’ to members’ benefit.

ae

29

Scofield v. Corpus Christi Golf & Country Club. 127 Fed.

(2d) 452, (C. C. A. Sth, 1942).

Factual situation similar to that in preceding case.

Commissioner of Internal Revenue v. Kensico Cemetery,

96 Fed. .(2d) 594, 596 (C. C. A. 2d, 1938).

‘Intangible values’’ resulting from application of reve-

nues of membership cemetery corporation to extension of

cemetery and to embellishment of erounds, does not inure

as a net profit to members.

District of Columbia v. Mt. Vernon Seminary, 100 Fed.

(2d) 116, 118 (Ct. App. Dist. Col.)

Property is not used for ‘‘private gain’’ and is exempt

from taxation, where all net earnings used for edueational

purposes and continued improvement of institution.

Crooks v. Kansas City Hay Dealers’ Ass’n., 37 Fed. (2d)

83, 87.

That, on final dissolution, accumulated profits would go

to the individual members, does not destroy exemption.

Roche’s Beach Inc. v. Commissioner, 96 Fed. (2d) 776,

C. C. A. 2d (1938).

Profit-making corporation required, under testamentary

trust, to turn over income to a charitable foundation, held

exempt from income tax as a corporation organized and

operating exclusively for charitable purposes.

King County Insurance Association, 37 B. T. A. 288, 292

(1938).

Receipt of income by non-profit organization, which

served to reduce members’ dues, does not inure to benefit

of private individual.

Oregon Casualty Association, 37 B. T. A. 340, 345 (1938).

Return to members of non-profit organization of over-

payment of assessments does not constitute an inuring to

their benefit.

la

caneteTT Oy

30

Waynesboro Manufacturers Ass’n., 1 B. T. A. 911, 914.

Earnings of non-profit association, where retained by it

for its own use, do not constitute an inuring to benefit of

any individual.

Accord.

American Society of Cinematographers, 42 B. T. A. No. 102.

There have been similar rulings by the Treasury Depart-

ment.

Cum. Bull. III-1, p. 230, 232, S. M. 2710.

Cum. Bull. 1919, p. 202, S. 958.

APPENDIX E.

The principles by which an institution’s

charitable character is determined.

(a) The nature of ‘charity’? in General. ‘*Charity”’

represents ‘‘both a personal and a social endeavor to amel-

iorate the conditions which exist in society’’, (ne. Brit.,

14th (1986) Ed., Vol. 5, p. 248). ‘*It has no necessary rela-

tion to relief or alms. It may mean a consideration shown

for the welfare of others either individually or generally’’

(Id.) <A charitable use refers to ‘‘almost anything that

tends to promote the well doing and well being of social

man.’’* In 3 Paul & Mertens on Federal Income Taxation,

p. 582, Sec. 32.19, ‘‘charity’’ is defined as ‘‘a gift, act or

service for the benefit of an indefinite number of persons.’’

(b) ‘*Charity’’ is not limited to almsgiving or gifts to

the poor, but its legal meaning is more comprehensive than

its popular significance.

Bogert on Trusts, Vol. 2, pp. 1163-4;

Gossett v. Swinney, 53 Fed. (2d) 772, 776;

Old Colony Trust Co. v. Welch, 25 Fed. Supp. 45, 58

(D. C. D. Mass. 1938) ;

Harrison v. Barker Annuity Fund, 98 Fed. (2d) 286

(C. C. A. 7th);

Darcey v. O’Brien, 65 Fed. (2d) 599 (Ct. App. Dist.

Col.) ;

.

* Ould v. Washington Hospital, 95 U. S. 303, 311.

31

Powers v. Massachusetts Homeopathic Hospital, 101

Fed. 896 (Cir. Ct. Mass.) ;

14 Corp. Jur. Seeun. 411.

(c) The test of a charity is to be found in the purpose

for which the institution is founded and exists. The mo-

tive of, or benefit to, a donor or settlor are immaterial.

Bogert on Trusts, Vol. 2, pp. 1126-7 ;

Fire Insurance Patrol +. Boyd, 120 Pa. St. 624, 6

A. 8. R. 745, 750, 1 L. R. A. 417;

Fordyce & McKee v. Women’s Christian Nat. Library

Ass‘n., 79 Ark. 550, 96S. W. 155;

Harrison v. Barker Annuity Fund, 98 Fed. (2d) 286;

Union Pacific Railway Co. v. Artist, 60 Fed. 365

(C. C. A. 8th, 1894) ;

Parsons v. Childs, 345 Mo. 689, 136 S. W. (2d) 327, 332;

Cert. den. 310 U. S. 640;

Old Colony Trust Co. 7. O. M. Fisher Home, Ine., 301

Mass. 1,16 N. 16. (2d) 10. (1938) ;

Westport Bank & Trust Co. +. Fable, 126 Conn. 665,

13 Atl. (2d) 862, 866 (1940).

(Whatever the motives of those who are now, or in the

past have been, appellant’s members, there now exists,

largely from donations and bequests, an institution which,

without profit, and at a charge to them of less than half its

actual outlay, affords complete protection to the health of

nearly ten thousand persons, and also stands ready to treat,

on like terms, all other persons complying with its simple

and non-exclusive requirements for admission.)

(d) That a non-profit institution makes a charge against

members, or that its inmates pay a consideration on their

admission, or that a non-profit school or hospital makes

some charge to help to defray the cost of its operation,

does not affect its charitable character.

Bogert on Trusts, pp. 114-115;

Estate of Lowe, 326 Pa. 375, 192 Atl. 405, 111 A. L. R.

518 (1937);

32

People v. Morton, 373 Ill. 72; 25 N. E. (2d) 504 (1940);

Little v. City of Newburyport, 210 Mass. 414, 96 N. i.

1082 ;

In re McDowell, 217 N. Y. 454, 112 N. EB. 177;

In re Y. M. C. A. Retirement Fund Ine., 18 B. T. A,

139;

Mpiscopal Academy v. Phila., 150 Pa. 565, 573;

Summers v. Chicago Title & Trust Co., 335

167 N. EB. 777.

Andrews v. Young Men's Christian Association, 226

Towa 374, 284 N. W. 186 (Iowa 1939).

I}. 564,

(e) Restriction of benefits to its own members does not

affect a non-profit institution’s charitable character.

(It would be misleading to argue that petitioner ‘re-

stricts’’ its benefits to ‘tits own’’ members. Since mem-

bership is unlimited, it evidently seeks to diffuse them as

widely as possible.)

Bogert on Trusts, Vol. 2, pp. 1124-25;

Hibernian Benevolent Society rv. Kelly, 28 Ore. 173, 42

Pac. 3, 30 L. R. A. 167, 52 A. S. R. 769;

Morrow v. Smith, 145 La. 514, 124 N. W. 319;

United States +. Proprietors of Social Law Library,

102 Fed. (2d) 481, 484 (C. C. A. Ist, 1939) ;

Pease vr. Pattinson, L. R. 32 Ch. Div. 154, 55 L. J. Ch.

N.S. 617, 54 L. T. N. S. 209;

Spiller 7. Maude, 11 L. T. (N.S.) 329;

In re Buck (1896), 2 Ch. 727;

Carter v. Whitcomb, 74 N. H. 482, 487, 69 Atl. 779;

Widows’ and Orphans’ Home of O. EF. 7. Common-

wealth, 126 Ky. 386, 108 S. W. 354;

Most Worshipful G. L. of A. F. & A. M. x. Board of

Review, 281 Ill. 480, 117 N. FE. 1016, 1017;

City of Indianapolis +. The Grand Master, &e., 25 Ind.

518, 522;

state of Lubin, 186 Cal. 326;

Estate of Henderson, 17 Cal. (2d) 858 (1941).

(6321)