Okla. Cty. v. Queen City Lodge, I. O. O. F. , 195 Okla. 131 ( 1945 )

I concur in paragraphs 1, 2, 3, 4, 8, and 11 of the syllabus of the majority opinion. I think paragraphs 5, 7, 9, and 10 of the syllabus are inappropriate. I dissent to paragraph 12 of the syllabus and the result reached.

While the ultimate question for decision is whether the Perrine Building should be stricken from the tax rolls for 1941, there are several intermediate questions that should be decided before that question is reached:

Has the Lodge sustained the burden cast upon it of establishing that it was exempt from taxation for 1941?

Does the fact that all the first eleven floors were rented out and all the income was applied on the mortgage indebtedness, representing the purchase price, deprive the Lodge of its claim of exemption?

Are our decisions in State v. Bartlesville Lodge,168 Okla. 416, 33 P.2d 507, and University Scholarship Corp. v. Parduhn,180 Okla. 446, 70 P.2d 84, which answer this precise question in the negative, sound? If not, should they be adhered to under the doctrine of stare decisis?

Does the fact that the Lodge receives a regular monthly income of $90 from renting the 12th floor deprive it of the right to claim prorata exemption of that floor?

If any definite part of the 12th floor is exclusively used by the Lodge, is it entitled to a prorata exemption of that portion?

Is the Lodge entitled to claim prospective operation of the rule established by the majority opinion, which is contrary to the former rule?

There are many ramifications to the question as to just what section 6, art, 10, of the State Constitution means, as applied to particular property. The question as to whether any certain property is exempt from taxation is a mixed question of law and fact, and each case should be decided according to the peculiar facts showing the exact use to which the property is devoted. We seem to have gone far afield in several decisions involving tax exemptions, which is due to our failure to keep in mind settled rules of construction. We should re-examine those decisions when the precise questions decided are presented and when we will have before us the parties whose rights will be directly affected by our decisions and when we will also have the benefit of their arguments. We will then be faced with the question of the correctness of those decisions, and, if found to be incorrect, whether we should adhere to them under the rule of stare decisis.

Since we are not here concerned with the question of the exclusive use of income for educational purposes, we should refrain from deciding whether Board of Com'rs v. Phillips University, 144 Okla. 57, 289 P. 720, should be overruled.

And since we are not here dealing with the question of the taxability of a manufacturing or industrial establishment owned and operated by a benevolent institution and not rented out, we should not here overrule Sand Springs Home v. State,168 Okla. 323, 32 P.2d 928. No case is cited in the dissenting opinion in that case or in the majority opinion in this case clearly demonstrating the incorrectness of that decision.

And since we are not here concerned with the use of income partly for charitable purposes and partly for noncharitable purposes, we should leave Board of Com'rs v. Sand Springs,185 Okla. 305, 92 P.2d 376, to be dealt with when that question is presented.

The majority properly refrains from a discussion of the correctness of the decisions in In re Assessment of Beta Theta Pi Corp., 108 Okla. 78, 234 P. 354, Phi Kappa Psi v. State,175 Okla. 605, 53 P.2d 1130, and similar cases, holding college fraternity and sorority houses exempt from taxation, which seem to be contrary to the great weight of authority (51 Am. Jur. 600; 61 C.J. 493; 35 A.L.R. 1045) and are largely based upon the erroneous assumption that section 5914 of Wilson's Revised Statutes of Oklahoma of 1903 is still in effect. But those decisions are about as much in point as the three decisions that are overruled in the majority opinion.

The authorities seem to be uniform in holding that, while the rule of stare decisis is subordinate to legal reason and justice, former decisions will not be lightly departed from, and "only urgent necessity or conclusive reasons" are sufficient ground for doing so. 14 Am. Jur. 342; 7 R.C.L. 1008; 15 C.J. 959; 21 C.J.S. 324. Under this rule it would seem that courts should never overrule prior decisions on points not directly in issue, for to do so is to resort to obiter dicta, which is always to be avoided.

The Lodge contends that the building was exempt in 1941 under two statutory provisions and one constitutional provision: (1) Section 5914 of Wilson's Revised Statutes of Oklahoma of 1903, which was carried forward by the proviso to section 6, article 10, of our Constitution; (2) section 12329, O.S. 1931; and (3) that portion of section 6, art. 10, of the State Constitution exempting from taxation "all property used exclusively for religious and charitable purposes." We should dispose of these three contentions, and in doing so we should keep in mind well settled rules of construction to be applied to constitutional and statutory tax exemption provisions.

As is pointed out in the majority opinion, it was well settled in 1907, when our Constitution was adopted, that constitutional and statutory provisions exempting property from taxation should be strictly construed against the one claiming exemption. 12 Am. Eng. Enc. of Law (2d Ed.) (1899) 302; Cooley on Taxation (3d Ed.) (1903) 357. This is still the rule in practically all jurisdictions. 61 C.J. 329, § 396; 21 R.C.L. 315; 51 Am. Jur. 526-533. It is also the rule in Oklahoma. Oklahoma City v. Shields, 22 Okla. 265, 100 P. 559; Protest of Hyde, 188 Okla. 413, 110 P.2d 292.

And, while there is some authority to the contrary, the great weight of authority is that the rule of strict construction applies to property used for educational, charitable, and religious purposes. See 51 Am. Jur. 583; 34 A.L.R. 634, at page 635, and 62 A.L.R. 328, at page 329, annotations, citing cases from 16 states in favor of the rule of strict construction as to such properties and cases from two states refusing to apply it in certain instances. We have not, however, followed this rule in the decisions relied upon by the Lodge, nor have we expressly repudiated it.

Following the rule of strict construction against tax exemptions, the rule generally obtaining in the other states in 1907 was that, under statutes and constitutional provisions exempting from taxation property exclusively used for educational, charitable or religious purposes, neither property not used for any purpose, nor property used for other purposes in connection with those enumerated, nor property rented out though the income is used for one of the enumerated purposes, nor property intended to be used in the future for the enumerated purposes but not presently so used, was exempt from taxation. 12 Am. Eng. Enc. of Law (2d Ed.) (1899) 318, 322, 323; Cooley on Taxation (3d Ed.) (1903) 350, 353; Washburn College v. Commissioners (1871) 8 Kan. 233, opinion by Justice Brewer. And these rules are still followed by the courts of a great majority of the other states. 26 R.C.L. 326; 51 Am. Jur. 542, 588; 61 C.J. 400, 459, 461; 50 L.R.A. (N.S.) at page 1211, 2 A.L.R. 545; 34 A.L.R. 634, at page 659; 34 A.L.R. 1067, at page 1072; 62 A.L.R. 328, at page 335.

1. Does section 5914 of Wilson's Statutes of 1903 entitle the Lodge to exemption of the Perrine Building, as contended by the Lodge? I think not.

Some of our recent decisions are based upon the assumption that said section 5914 is still in force. See In re Assessment of Beta Theta Pi Corporation, 108 Okla. 78, 234 P. 354 (discussed in note, 54 A.L.R. 1381), State v. Alumnae,176 Okla. 186, 55 P.2d 134, and University Scholarship Corporation v. Parduhn, 180 Okla. 446, 70 P.2d 84. This assumption is clearly erroneous. Section 5914 was superseded by section 2 of the 1909 Tax Code, S.L. 1909, p. 572, section 12319, O.S. 1931, which covered the same subject as that covered by section 5914 and contained additional provisions, and was, therefore, repealed by implication. Hine v. Gokey, 23 Okla. 870,102 P. 77; In re Application of Jackson, 179 Okla. 577, 66 P.2d 1101. Furthermore, in 1911 the Revised Laws of 1910 were adopted as a revised Code, and it was provided that "all general or public laws of the State of Oklahoma not contained in said revision are hereby repealed." S.L. 1910-11, chapter 39, page 70. Section 5914 of Wilson's Statutes of 1903 was not included in the 1910 Revised Laws and is no longer in effect. It only confuses the issue to continue to refer to section 5914.

2. Was the Perrine Building exempt from taxation in 1941, under section 12329, O.S. 1931 (repealed in May, 1941, S.L. 1941, page 333), which purported to exempt from taxation real estate belonging to fraternal orders, rented out and the "net proceeds" from which were "devoted exclusively to benevolent or charitable purposes," as argued by the Lodge? I think not.

It is clear that section 6, art. 10, of the Constitution of Oklahoma is self-executing (61 C.J. 385; 51 Am. Jur. 506), and the Legislature can neither restrict nor enlarge the exemptions therein provided. The constitutionality of section 12329, O.S. 1931, was doubtful. But, assuming that it was constitutional, the "net proceeds" (the amount left after paying the upkeep and operating expenses, Bouvier's Law Dictionary, Rawles Third Revision, page 2332) were here used to pay part of the purchase price. They were not "devoted exclusively to benevolent or charitable purposes" within the purview of section 12329. The decisions in State v. Bartlesville Lodge and University Scholarship v. Parduhn, above, were clearly in error in assuming that the net proceeds in those cases were devoted exclusively to benevolent or charitable purposes so as to make section 12329 applicable, even if constitutional.

3. Is the Perrine Building being used exclusively for charitable purposes so as to exempt it from taxation under section 6, art. 10, of the State Constitution, as argued by the Lodge? I think not.

Until the purchase price is fully paid all or part of the income will be used to pay the mortgage indebtedness, which represents the purchase price. The most that can be said in behalf of the Lodge is that when the purchase price is fully paid the income will be used for charitable purposes. Under the rules above stated, it would seem that the present use of the income to pay the purchase price with an intention to use the income exclusively for charitable purposes in the distant future, if and when the purchase price is fully paid, should not entitle the Lodge to the exemption. The courts of Missouri, Kansas, and New York have passed upon this precise question, and they all hold that, in harmony with the rules above stated and under substantially the same exemption provision, the property is not exempt from taxation. See Fitterer v. Crawford, 157 Mo. 51, 57 S.W. 532, 50 L.R.A. 191; Summunduwot Lodge v. Spaeth, 81 Kan. 894, 106 P. 1077; People v. Purdy, 167 N.Y.S. 285, affirmed in121 N.E. 885.

In State v. Bartlesville Lodge and University Scholarship Corp. v. Parduhn, above, without apparently considering the rules of construction above stated, the decisions last cited, or the meaning of section 6, art. 10, of the State Constitution, this court held that use of income to pay the purchase price would exempt the property from taxation. These decisions are squarely in point here and the Lodge properly relies upon them. They disregard the well settled rules of construction, above stated. And, under established exceptions to the rule of stare decisis, hereinafter mentioned, they should be overruled.

4. The Lodge has not sustained the burden of showing that the 12th floor is not subject to taxation so that the value of the 12th floor should be deducted from the value of the entire property in fixing the assessed valuation, as was its duty. 51 Am. Jur. 530. The parties do not argue this point. The record discloses that the Lodge receives a regular income of $90 per month from renting the 12th floor. It does not disclose whether any certain portion of the 12th floor is exclusively used by the Lodge, or, if so, the value of such portion. Under these circumstances, and assuming that, despite the rule of strict construction of section 6, art. 10, of our Constitution, a portion used exclusively for one of the designated purposes should be held to be exempt from taxation and credit therefor given on the value when assessing the property even without statutory authority (51 Am. Jur. 589, 605; 22 A.L.R. at 924; 34 A.L.R. at 660, 661, citing cases decided prior to the adoption of our Constitution), the Lodge has not shown that it is entitled to exemption on the value of the 12th floor. People v. Sayless, 53 N.Y.S. 65, 67; Portland Hibernian Ben. Sov. v. Kelly, 28 Or. 173, 42 P. 3. Furthermore, there is grave doubt as to whether any part of the 12th floor is being used "exclusively for charitable purposes" within the purview of our constitutional provision. See 22 A.L.R. 907, 83 A.L.R. 773, annotations.

5. The Lodge urges that we should adhere to the rules stated in our prior decisions under the doctrine of stare decisis and relieve the Perrine Building from taxation. It makes a strong argument on this point. The rule of stare decisis is sound and makes for certainty and stability in the law, and decisions should be departed from only for cogent reasons (Inman v. Sherrill, 29 Okla. 100, 116 P. 426; 14 Am. Jur. 288), but the rule should not be used to perpetuate palpable error, especially where, as here, the prior decisions ignored settled rules of construction and are violative of the letter and spirit of the Constitution, and where more harm will be done by following such erroneous decisions than by overruling them. 7 R.C.L. 1008; 14 Am. Jur. 287, 291, 341-345; 15 C.J. 956-959; 21 C.J.S. 322-326; Weaver v. First Nat. Bank, 76 Kan. 540, 94 P. 273, 16 L.R.A. (N.S.) 110, 123 Am. St. Rep. 155. And the question of whether the rule shall or shall not be followed in any particular case rests in the sound discretion and judgment of the court. Equality in the tax burden is and should generally be the rule. To relieve this revenue-producing property of the $25,624.28 taxes imposed on it for 1941 and a similar sum for each of the future years for an indefinite period of time would be to impose that burden upon the other taxable property in Oklahoma county, including office buildings in competition with the Perrine Building, and would be violative of the equality and uniformity theory of taxation enjoined upon us by the State Constitution. In fact, the effect of exempting it from taxation would be that the property taxpayers would be indirectly paying part of the purchase price by relieving the property from taxes, permitting the Lodge to apply the sums so saved on the purchase price, and placing that burden upon the other taxable property in Oklahoma county. It is largely because of the desirability of equality and uniformity that the courts almost universally adhere to the rule of strict construction of tax exemptions allowed by statutes and Constitutions and resolve all reasonable presumptions against the surrender of the taxing power. 51 Am. Jur. 529.

In Fitterer et al. v. Crawford, above, the Missouri court quoted from Bangor v. Masonic Lodge, 73 Me. 428, 40 Am. Rep. 369, this pertinent language:

"The just and honest rule in assessments for governmental purposes is equality of taxation. Whatever sacrifices it requires from the people should be made to bear as nearly as possible with the same pressure upon all. In this way only will there be the least sacrifice by all. If one bears less than his share of the public burdens, some other must bear more. If one block of stores remains untaxed, the remaining stores and other taxable property must be unduly and disproportionately taxed. The more numerous the exemptions, the more unequal and burdensome the taxation."

I agree that the just rule is that when decisions construing the Constitution or statutes are overruled, the overruling decision should ordinarily be given prospective effect as regards property or contract rights acquired on the strength of the overruled decisions (7 R.C.L. 1010; 14 Am. Jur. 345, § 130; 21 C.J.S. 327; 85 A.L.R. 262, annotation), and I believe this rule might well be applied to properties that have in good faith been left off the tax rolls on the strength of our prior decisions, in order to prevent great hardship and the confiscation of property. The rule is one of expediency and should be applied with caution. It is an exception to the general rule that overruling decisions operate retrospectively. This question is not argued by the parties. I do not believe, however, that there are such equities in this case as to justify the application of the exception. This valuable property had always been on the tax rolls prior to 1941. The lodge paid no cash consideration in the purchase of the property. The mortgagees retained control of all but the 12th floor and the income therefrom. Most of the mortgages now on the property were on it when it was clearly taxable and on the tax rolls. The mortgagees are now the chief beneficiaries of the tax exemption and will continue to be until the mortgages are paid. The Lodge and mortgagees have known since December, 1941, that the county was contending that it was taxable, and should have laid aside enough of the income to pay the taxes if such contention should be sustained. The income from the property in 1941 was not sufficient to pay the interest and the accruals on the principal of the mortgages. The property was in distress when the Lodge purchased it, and it is probable that, if the building must carry the tax burden in the future, the Lodge will be compelled to turn it back, in which event the mortgagees and former owners would be the beneficiaries of our generosity in remitting the taxes for 1941 and the subsequent years, amounting to approximately $125,000, and they clearly do not come within the exemption provision of our Constitution. The county has prosecuted this appeal to collect the taxes, not merely to get a rule of law established. It is unfair to the other owners of taxable property in Oklahoma county, and contrary to the public interest, to permit the property to escape taxation for those years under the circumstances just stated. It is my view that, when there is a conflict between public and private rights, the doubt should be resolved in favor of the public.

The fact that the rules stated in the majority opinion are to be made to operate prospectively as to similar property, held under different circumstances, and which the taxing officers have made no attempt to place on the tax rolls, is no justification for exempting this property from taxation for the five-year period.

The rule of stare decisis and the rule of prospective operation of the overruling decision are closely akin to the doctrine of estoppel. 15 C.J. 959; 21 C.J.S. 326. The question of exemption of the Perrine Building from taxation was only incidentally involved in the contract of purchase. To now overrule the decisions on which the parties to the contract relied is not to invalidate the purchase contract but to make it less valuable to the Lodge, for it must be conceded that a property that is burdened with an annual tax bill of $25,000 is worth much less than one not so burdened. The majority opinion applies the doctrine of prospective operation for the period up to January 1, 1946, but refuses to apply it thereafter. I would refuse to apply it at all for the reasons above stated.

I conclude that the decisions in State v. Bartlesville Lodge and University Scholarship Corporation v. Parduhn, above, should be overruled. The Perrine Building should not be given exemption, in whole or in part, from taxation for 1941 and the subsequent years. It was not "used exclusively for . . . charitable purposes" within the purview of section 6, art. 10, of the State Constitution and the second subdivision of section 12319, O.S. 1931. It was not "devoted solely" to the objects of the Lodge as a benevolent institution, or used exclusively for charitable purposes, within the purview of the 10th subdivision of section 12319, O.S. 1931. The "net proceeds" were not devoted exclusively to benevolent or charitable purposes within the purview of section 12329, O.S. 1931.