Appellants Brief Opposing Appellees Motion — Wabaningo Boy Scout Camp v. Michigan Tax Commission

IN THE

SUPREME COURT OF THE UNITED STATES

OcTOBER TERM, 1963

No. 231

WABANINGO BOY SCOUT CAMP,

A Michigan Nonprofit Corporation,

Appellant,

vs.

MICHIGAN STATE TAX COMMISSION,

Appellee.

No. 232

EVANSTON Y.M.C.A. CAMP,

A Michigan Nonprofit Corporation,

Appellant,

vs.

MICHIGAN STATE TAX COMMISSION,

Appellee.

Appeals from the Supreme Court of Michigan

APPELLANTS’ BRIEF OPPOSING APPELLEE'S

MOTION TO DISMISS OR AFFIRM

Of Counsel: HARRY D. REBER

Fremont, Michigan

STEPHEN R. SMITH

RICHARD A. BEYER AMOS M. MATHEWS

JAMES G. STAPLES 28 Union Station Building

ALBAN WEBER _ Chicago 6, Illinois

Attorneys for Appellants

Lo Salle Street Press—Chicago 10

INDEX

SUBJECT MATTER

RI TORII 6c ies oso cenn ens cd ao hae cha hanees

Although appellee asserts a contrary conclusion,

appellee’s admissions reveal that appellants have

presénted a substantial Federal Question.

coe Oe SA hb id ks sxe 54a ahh eae ea ecey «o

Except by making two erroneous assertions, ap-

pellee does not attempt to contradict or question

any statement in appellants’ statement of the case.

ARGUMENT

1. Appellants are proper parfies in interest to present

nf PUP TETCTAT eee Teer eee ere

to

by

The inheritance tax cases cited by appellee (pp.

11-21) rest upon a special principle of state sover-

eignty not applicable here ....................

3. The judgments of the Supreme Court of Michigan

DEO DER WUD Faw esac ce asdacabeceas bs aaes

IUD <5 x saree cavnnuceseciescessackaaceser

AUTHORITIES CITED

Cases

Cincinnati, N. O. & T. P. Railway Co. v. Rankin, 241

a Se I ee ae ees

Dearborn Clinic and Diagnostic Hospital, In re, 342

Mich. Gi3, 71 N..W. Dd ZEB (ARGS) x. doc ec cscs nss

Edwards v. Leaver, 102 F. Supp. 698 (DCRI 1952) ....

International Harvester Co. v. Wisconsin Department

of Taxation, 322 U.S. 435 (1944) .................

11

11

3

10

ii

PAGE

Maxwell v. Bugbee, 250 U.S. 525 (1919) 2... .0.0.0... 9

Muilaney v. Anderson, 342 U.S. 415 (1952) .......... 10

Phillips Chemical Co. v. Dumas Independent School

District, 361 U. S. 376 (1960) ................ 9,10, 11

Pierce v. Society of Sisters, 268 U.S. 510 (1925) ...... 6

Raley v. Ohio, 360 U. S. 423 (1959) »............... 4

Toomer v. Witsell, 384 U.S. 385 (1948) .....0...02... 10, 11

Travis v. Yale & Towne Manufacturing Co., 252 U.S.

I OS a hat Be ae CAN Sc a chs 7

United States v. Burnison, 389 U.S. 87 (1950) ...... 9

CONSTITUTION AND STATUTES

Fourteenth Amendment ................0-05- 2, 4,5, 8, 10

Par. Fourth of $7.7 as amended, Michigan Stat. Ann.

DE cis ii cas ed kex tac vhesarekaeedesens 2, 6,8, 11

IN THE

SUPREME COURT OF THE UNITED STATES

OcTOBER TERY, 1963

No. 231

WABANINGO BOY SCOUT CAMP,

A Michigan Nonprofit Corporation,

Appellant,

vs.

MICHIGAN STATE TAX COMMISSION,

Appellee.

No. 232

EVANSTON Y.M.C.A. CAMP,

A Michigan Nonprofit Corporation,

Appellant,

vs.

MICHIGAN STATE TAX COMMISSION,

Appellee.

Appeals from the Supreme Court of Michigan

APPELLANTS’ BRIEF OPPOSING APPELLEE'S

MOTION TO DISMISS OR AFFIRM

QUESTION PRESENTED

Although appellee asserts a contrary conclusion, appel-

lee’s admissions reveal that appellants have presented a

substantial Federal question.

2

“Appellee asserts (p. 4) that “appellants’ jurisdictional

statement does not properly state any federal questien.’’

But soon thereafter appellee’s own admissions (pp. 4, 6)

reveal that this conclusion is erroneous. For appellee states

ip. 4):

**We believe the only possible federal question to be:

‘**Can the State of Michigan distinguish, for ad

valorem property tax exemption purposes, between

camp facilities available to the use of its residents,

as compared to camp facilities available to the use

of nonresidents ?””

Then appellee states (p. 6):

“If the appellants ** * had established that their

camp facilities were used by Michigan residents in sub-

stantial part (50 per cent at least), presumably they

would have been granted the ad valorem property tax

exemption here in question.”’

Thus appellee concedes that appellants are, by para-

graph Fourth, as construed by the Michigan Court, denied

the tax exemption granted other Boy Scout and Y.M.C.A.

organizations soiely because appellants’ Boy Scouts and

Y.M.C.A. youth are nonresidents. This is the same ‘*ques-

tion presented*’ set forth in our jurisdictional statement

(p. 4), and it presents a question of equal protection of the

laws under the authorities there cited (pp. 7-10).

STATEMENT OF THE CASE

Except by making two erroneous assertions, appellee does

not attempt to contradict or question any statement in ap-

pellants’ statement of the case.

Although appellee asserts (p. 5) that it ‘‘cannot accept

appellants’ statement of the case,** appellee actually does

3

not attempt to contradict or question any statement therein

except by the making of two erroneous assertions.

First, appellee states (p.5):‘*There is not a scintilla of

evidence presented to substantiate the allegation that these

corporations in fact operated and conducted themselves as

nonprofit corporations.’* Appellee’s statement is not cor-

rect. In the proceedings before appellee, the Tax Commis-

sion, appellants filed sworn statements that they have al-

ways operated, and used their camp properties, within the

limitations of their articles as nonstock, nonprofit, member-

ship corporations. *(Wabaningo App. 4a, 6a, 14a, 19a;

YMCA App. 4a, Ga, Iza, Ia, 18a). These sworn state-

ments have never been denied. They are part of the reeord

on which appellee Tax Commission acted and which was

before the Supreme Court of Michigan. (Wabaningo App.

la-2a, 27a-28a; YMCA App. la-2a, 33a-34a). These sworn

statements are the type of evidence which is receivable be-

fore the\ Tax Commission in proceedings to determine

whether property is exempt from taxation under the exemp-

tion statutes. Ze re Dearborn Clinic and Diagnostic Hos-

pital, 342 Mich. 678, 71 N. W. 2d 212 (1955).

Actually, appellants made no direct ‘‘allegation”’ in their

statement of the case that they ‘tin fact conducted them-

selves as nonprofit corporations.’ The presumption exists

until the contrary is proved that a corporation of limited

powers acts within those powers and does not act u/tra vires.

Cincinnali, N. O. & T. P. Railway Co. v. Rankin, 241 U.S.

319, 327 (1916).

Appellee’s only other disagreement with our statement

of the case is the assertion (p. 5): **Neither is there merit

* The parenthetic references (Wabaningo App.) and (YMCA App.) refer

to the printed appendices of the record certified here from the Supreme

Court of Michigan.

+

to the statement that these corparations would have been

exempted from real property taxation, if it were not for

the amendment setting forth the membership requirement. ”’

That is not correct. For many years before the amendment

of paragraph Fourth in 1960 appellants had been exempted

by the statute from real property taxation to the same

extent that all other Boy Scout and Y. M. C. A. organiza-

tions were exempted, Y. M. C. A. property being wholly

exempt and Boy Scout property up to 160 aeres. (Juris. St.

4a). The 1960 amendment changed that (id.), and appellee

admits (p. 6), by the quotation we have set out above, that

except for the amendment_(or if 50 per cent of appellants’

members were Michigay residents) appellants would still

be enjoying such exemptions.

Appellee observes (p. 5) that the question of equal pro-

tection under the 14th Amendment was first presented in

appellants’ applications for leave to appeal from the decei-

sion of appellee Tax Commission to the Supreme Court of

Michigan. The Court granted the application and con-

sidered and ruled on the question. (Juris. St. 10a, 12a).

That adequately brings the Constitutional issue here. Raley

v. Ohio, 360 U.S. 423, 486 (1959). Moreover, that issue first

emerged from the Tax Commission's decision.

5

ARGUMENT

1.

~ :,

Appellants are proper parties in interest to present the

Constitutional issue.

Under its Part 1, page 8, appellee argues (pp. 8-11) that

appellants’ lack standing to sue. Appellee’s first point in

support of that contention is (p.&) that since appellants are

Michigan Corporations ‘‘a question of discrimination be-

tween residents and nonresidents is not involved in this

proceeding,’* and therefore appellants cannot invoke the

Constitutional issue on their own behalf.

This point has no merit. Since appellants are denied tax

exemption solely because the Boy Scouts and Y.M.C.A.

youth who use their camps are nonresidents, appellants are

the victims of discriminatory taxation, and they have stand-

ing to invoke on their own behalf the equal protection clause

of Ahe 14th Amendment, under the principles of the cases

cited on page 9 of our Jurisdictional Statement.

Appellee then contends (p. 9) that appellants are not ‘tin

a position to espouse the cause of nonresident Boy Scouts or

Y.M.C.A. youth** who use their eamps. Appellants do not

rest their standing on that basis. Our position is that due

to our close relationship with the nonresident vouth we have

standing to attack paragraph Fourth on our own behalf

because of the discrimination it works upon us by reason

of that relationship. Our position is squareiy supported by

the cases cited in our Jurisdictional Statement (pp. 9-10),

and it was originally set forth immediately preceding those

citations (foot p. 8, top p. 9).

Appellee’s three numbered points (p. 9) only emphasize

the solid foundation for appellants’ standing to sue. The

6

first two points can be considered, together. They are that

there is no ‘‘direct relationship’? between appellants and

the Ilinois youth who use the camps, and that the require-

ment that appellants pay taxes *‘bears no direct or legal

relationship’’ to such youth.

On their face these contentions lack any merit. Appel-

lants’ liahility for taxes is created solely by the fact that

Illinois youth attend the camps. This demonstrates that-

there is both a direct and a legal:¥elationship between ap-

pellants and these youth, and between these youth and ap-

pellants’ liability for taxes, that gives appellants standing

to sue. See, for example, Pierce v. Society of Sisters, 268

U.S. 510, 530, 534-536 (1925), cited and brietly explained in

our Jurisdictional Statement (p. 9).

Appellants, for many years exempt from taxation to the

same extent as all other Boy Scout and Y. M. C. .A. organiza-

tions, were denied that exemption by the 1960 amendment

(Juris. St. 3) solely because their membership, as the word

was construed by the Michigan Court, are nonresident Boy

Scouts and Y. M. C. A. youth (Juris. St. 5-6). Thus there

is a clear financial impact upon appellants solely because

their members are nonresidents.

joing now to the record, it there appears that there is a

direct and legal corporate relationship between appellants °

and their Illinois youth who use their camps. .\ppetlants’

respective articles of association show that appellants ate

expressly designed and authorized to provide and operate

eamp facilities for, and to train and discipline, the Boy

Scouts and Y.M.C.A. youth who use them. Thus Wa-

baningo’s articles, adopted and filed in 1924, provide in part

*)*)

(Wabaningo App. 23a) that the corporate purpose is:

‘*To promote through organization, the ability of boys

to do things for themselves, and others, to train them

7

to scout craft, and to feach them patriotism, courage

self reliance, Aud Kindred virtues, using the strictly

educational program and methods which are now in

common use by Boy Scouts; * °° to provide benevolent

and charitable means whereby boys may obtain phys-

ical, social, moral, and religious eultere, and the de-

velopment of good character and citizenship through

life in the out of doors * ”

The Y.M.CLA. Camp articles, adopted and filed in 1928,

employ similar phraseology. (YMCA App. 20a).

Appellee’s third point (p. 9) is that there is no showing

that the youth whe use the camps are adversely affected by

the denial of the tax exemption. ‘Whatever may be the

materiality of this point, appellee’s statement is not cor-

rect. The articles of each appellant provide :

‘A charge, based upon the actual cost of operation and

maintenanee, may be levied upon such persons as may

attend the camp and be able to pay. therefor.” (Waz-

baningo App. 24a-2oa; YMCA App. 21a.)

Any charge, suchas taxes, increases the costs that must

be paid by the campers. Appellants, the taxpayers, have a

corporate duty and legal standing to contest the validity of

these taxes. Jnternational Harvester Co. v. Wisconsin De-

partmen¥ of Taxation, 322 U.S. 485, 440 (1944); Travis v.

Yale & Towne Manufacturing Co,, 252 U.S. 60, 75 (1920),

both cited in our Jurisdictional Statement (p. 9).

Appellee’s footnote observation (p. $), that ‘technically

neither appellant is a Y.M.C.A. or Boy Seout organiza-

tion,’’ is shown to’ he without foundation by the undisputed

facts set forth in our Jurisdictional Statement (pp. 4, 5.%0)-;

in brief, Wabaningo Boy Seout Camp is a corporation

wholly owneed and cantrolled by Evanston Council of the

Boy Scouts of America, and Evanston Y.M.CLA. Camp_is a

Fs

lee

8

corporation wholly owned and controlled by Evanston

Y.M.C.A. Wabaningo was incorporated in 1924 and its de-

clared purpose in its articles, brief excerpts from which are

set out above, mark it as nothing else but a ‘*Boy Scout

organization.”* (Wabaningo App. 22a-27a). Evanston Y.M.

C.A. Camp was incorporated in 1925 and its articles sim-

ilarly show it to be a** Young Men’‘s Christian Association.

(YMCA App. 20a-24a).

Appellee says (p. 10) that ‘tit is not [appellants*| mem-

bers who are adversely affected by the denial of the tax

exemption in question but rather the members of the Illinois

Boy Scout and Y. M. C. A. organizations.’* The Michigan

Court held tat **membership’* in paragraph fourth means

the youth attending the camps. (Juris. St. 5-6). These

youth are Boy Scouts or Y. M. C. A. youth of the Illinois

organizations; the youth members of the related Michigan

and Illinois organizations are identical.

Appellee states (p. 10) that appellants ‘tare instruments

of Llinois corporate entities.”" This is true, but appellatts

have a vey close and active relationship with their Boy

*Scout and Y. M. C. A. youth members; they are ‘live and

active instruments. They turnish training, inspiration, and

discipline for their members and they finance the camps by

charges upon their members, as shown by the above ex-

tracts and other provisions of their articles. (Wabaningo

App. 22a-27a; YMCA App. 20a-24a).

Thus it is idle for appellee to say (p. 11) in’ closing its

argument on standing to sue, that the relationship between

appellants and their members who use the camps ‘tis too

remote and too inconsequential and unsubstantial for ap-

pellants to be in a position to raise the equal protection

argument here posed."* when (1) in faet that relationship

is very close and intimate, and (2) as a matter of law that

9

relationship brings into play the statutory discrimination

against appellants and deprives them of the exemption,

2.

The inheritance tax cases cited by appellee (pp. 11-21)

rest upon a special principle of state sovereignty not ap-

plicable here.

Appellee’s argument captioned “*. Appellants do not pre-

sent a substantial federal question’? (pp. 11-21) is based

upon inberitance tax cases, which are not applicable here.

The principle of these cases is that since arstate has the

power to determine who shall take property by devise or

descent, it May discriminate against nonresidents and

others in respect both of the right to inherit and the level

of inheritance taxes. See Marweell vo Baghee, 250 U.S. 525,

040-542 (1919) cited by appellee (p. 15).

The principle of the inheritance tax cases Is sw juris,

It has never been extended to any other form of taxation.

No discrimination in other forms of taxation based on non-

residence has ever been sustained, so far as we can discover,

‘and appellee cites no authority therefor,

The absolute inapplicability of the inheritance tax prin-

ciple to ad valorem property taxes is demonstrated by com-

paring Uuited States v. Burnison, 339 Us. 87 (1950), with

Phillips. Chemical Co. vo. Dumas Independent School Dis-

trict, 861 U.S. 376 (1960), both cited by appellee (pp. 14, 78).

Burnison sustained a California statute which made de-

vises to the United States invalid even theugh California

permitted devises to the state and its subdivisionsy The

Court held that this discriminatory treatmerft: was Wie

the state's power. citing Waswell v. Bagher. supra.

£

10

But in Phillips Chemical Co. v. Dumas Independent

School District, supra, 361 U.S. 376, the Court held invalid

a Texas statute that exempted from ad valorem taxation

state property leased to a private concern, while denying

exemption to Federal property leased to a private concern,

as an unconstitutional discrimination against the United

States. Thus the Court held in effect that the inheritance

tax principle did not apply to ad valorem property taxes.

The only tax cases cited by appellee rest on the inherit-

ance tax princip.c. Appellee’s non-tax cases deal with gen-

eral principles of classification and are not relevant.

Appellee argues (p. 21) that the statute ‘tinvolves .no

mere unconstitutional classification than the requirement

that a nonresident pay a higher fishing or hunting fee in

the State of Michigan than does a resident.’ That argu-

ment has no validity in respect to operations on the scale

of summer camps. In Toomer v. Witsedl, 354 U.S. 380, 395-

$03 (1958), and Mullaney ve Anderson, 342 US. 415 (1952),

commercial fishing licenses higher for nonresidents than

for resideuts were held unconstitutionally disceierfinatory.

Following the Toomer decision Edivards v. Leaver, 102

F. Supp. 698 (D.C. Ro 1.1952), held invalid under the equal

protection clause of the 14th Amendment a Rhode Island

statute because it had characteristics similar to the one here

in issue. It forbade taking fish from the waters of the state

by foreign corporations, and by domestic corporations 00

per cent or more of whose stock Was owned by nonresidents,

and it required that 51 per cent of the crew of a licensed

boat must be residents of the state.

11

3.

The judgments of the Supreme Court of Michigan are not

conclusive.

Appellee argues under its point 3 (p. 21) that ‘*The

judgments of the Supreme Court of Michigan are conclu-

sive.’’ Appellee says that the Michigan Court found that

the purpose of the exemption was ‘‘for the health end wel-

fare of the youth of the State’’- [of Michigan]. But this

purpose cannot justify a discrimination against appellants

solely because the youth using their cgmps are nonresidents.

Toomer ¥. Witsell, supra, 384 U.S. 285, 397-899: Phillips

Chemical Co. v. Dumas Independent School District, supra,

361 U.S. 376, 385-385. Appellee further says: ‘*The Court

found that the statute wes not «esigned to discriminate

against nonresident Y. M. C. A. or Boy Scout members.”’

We submit’ that no such finding can be spelled out, but even

if it could it would not be binding on this Court. See cases.

cited in our Jurisdictional Statement, page &. These cases

dispose of all of the other contentions in appellee’s point

3. There is no merit in them.

CONCLUSION

It should be noted that appellee does not question our

argument in our Jurisdictional Statement (pp. 11-12) that

the 1961 amendment doe: not in any respect relieve para-

graph Fourth from unconstitutionality.

We have fully dealt with the arguments that are repeated

and summarized in appellee’s cenclusion and there is no

need to repeat our arguments here.

We are constrained to suggest, however, that appellee’s

summary presents startling vistas. Assume a discrimina-

12

tory statute directed at corporations having Negro stock-

holders. Under appellee’s theory (pp. 22-23) the corpora-

tion could not object since it is not a Negro, and the stock-

holders could not object since the statute discriminates only

against the corporation. ;

The question here presented is so substantial as to require

plenary consideration ty the Court. Appellee’s motion

should be denied.

Respectfully submitted,

Harry D. Reser

Fremont, Michigan

Amos M. MatHews Z

280 Union Station Building A,

Chicago 6, Illinois

Attorneys for Appellants

Of Counsel:

STEPHEN R. SmitH

39 South La Salle Street

Chicago 3, Illinois

Ricuarp A. Beyer

220 Prudential Plaza

Chicago 1, Illinois

James G. STAPLES

8 South Michigan Boulevard

Chicago 3, Illinois

ALBAN WEBER g

619 Clark Street

Evanston, Illinois