Episcopal Academy v. Phila. , 150 Pa. 565 ( 1892 )

Opinion by

Mb. Justice Williams,

The academy, the appellee, is what may be fairly considered a denominational school. Its name, “The Academy of the Protestant Episcopal Church in Philadelphia,” is one of the indicia of its character. The qualifications necessary to eligibility for the office of trustee is another. These are, first, orders in the Episcopal church; or, second, eligibility to the office of vestryman. The head master of the academy must be a communicant in the Episcopal church. By the plan of organization and the action of 1846 the various Episcopal congregations in the city are authorized to select each one person to be nominated to the trustees as a free pupil, and upon the list of free pupils a preference was given to the sons of clergymen of the Episcopal church to the number of ten. Free scholars are admitted to the academy by the action of the trustees to whom all applications must be made on blanks prepared and furnished by them. Among the questions upon these blanks are the following: “ Q. Are the parents, or either, and which of them, communicants of the Protestant Episcopal church ? Q. How long have they or either of them been so, and with what church are they connected ? ” The admission of pupils is not limited to children of members of the Episcopal church either by the charter, the rules, or the practice of the school; but it is quite evident that such children are preferred. This appears by the testimony of the head master and the treasurer. Mr. Hunter, who has been connected with the school for many years, puts the order of preference as, first, “sons of clergymen of the Episcopal church;” next, “members of our own denomination.” When asked for the reason of such preference he answered: “We always like our own household.” Other persons are admitted as pupils both upon the pay list and the free list, when vacancies exist; but they are postponed or rejected if children of the denomination apply in sufficient numbers. The school is not open in the same way to the general public as to persons connected with the Episcopal church, but they are admitted as vacancies occur, and when admitted it is upon the same terms with all other pupils.

This school was founded, as appears by the first section of the Act of March 29, 1787, incorporating it, by “a number of persons of the Protestant Episcopal churches in the city of Philadelphia and others,” for the purpose of affording encouragement to the education of youth. It was endowed with the funds necessary for the purchase of a lot and the erection of a school building thereon by its founders and friends, and by the state of Pennsylvania, which gave to it ten thousand acres of the public land.

The title to the property of the corporation is in trustees who hold it in trust for the purposes for which the school was founded. There are no stockholders or other persons who have a pecuniary interest in the property or any right to participate in its earnings, or any control over them, except through the trustees and for the purposes of the trust.

It is maintained almost wholly by the fees for tuition charged to the pupils, who are divided into three classes; those who pay the full price fixed by the trustees for tuition, those who pay half price, and those who are admitted without charge.

The two important questions presented upon these facts are, first, Do the purposes and the organization of the school bring it within the definition of a “ purely public charity ? ” and, next, Is the institution “ founded, endowed and maintained by public or private charity ? ”

The definition of charity has been steadily broadening. It was once held to be “ whatever is given for the love of God, or for the love of your neighbor, free from any taint or stain' of any consideration that is personal or selfish.” But the purity and unselfishness of the motive came to be regarded by the courts as important only in the moral aspects of the act, and was not insisted on in determining whether a gift was to a charitable use. In Donohugh’s Ap., 86 Pa. 312, charity was defined as something “ done out of good will, benevolence, a desire to add to the happiness or improvement of our fellow beings.” The fact that selfish considerations induced the act done was thus left out of view, and the act alone considered. In the recent case of Boyd v. The Fire Insurance Patrol, 120 Pa. 624, another advance was made, and the court held that a corporation acting in aid and ease of the city of Philadelphia in the preservation of life and property at fires, without gain or profit to itself, was a public' charity, notwithstanding the fact that among its acknowledged objects was that of lessening the losses of fire insurance companies.

In view of these cases it may be safely said that whatever is gratuitously done or given in relief of the public burdens or for the advancement of the public good is a public charity. In every such case as the public is the beneficiary, the charity is a public charity. As no private or pecuniary return is reserved to the giver or any particular person, but all the benefit resulting from the gift or act goes to the public, it is a “ purely public charity,” the word “purely” being equivalent to the word “ wholly.” The education of youth and the support of schools are for the advancement of public good, and money given for such purposes was recognized in England as given for a charitable use, before the statute of 43 Elizabeth.

Our own courts have uniformly held the same doctrine. The school may therefore be regarded as a purely public charity if it can meet the requirements of the law as to the manner of its founding, endowment and support.

The Act of 1874 exempts from taxation such schools as are supported at the public expense, and such others as are founded, endowed and maintained by public or private charity. This school was founded by private persons, who contributed for that purpose. It was endowed by the state of Pennsylvania with ten thousand acres of the public land, in addition to the sums given by its founders. It was evidently founded and endowed by public and private charity. Its funds were invested in the purchase of a lot and the erection and furnishing of a fine school building, except certain small sums specifically given in aid of the free education of pupils. When the building was ready for occupancy, the trustees employed teachers and opened the school, adjusting the rates of tuition with a view to make the school self-sustaining. The large majority of the pupils pay what is called full rate. A small number pay half rate, and a still smaller number, ranging from ten to twenty, pay nothing. The tuitions, with the income from the gifts for the free school, pay the expenses. In this manner education is afforded to some persons without cost, to some at half cost, and to many more at a less cost than in schools of a like grade. How is this school maintained ? It is not by annual gifts, as was the case of Lafayette College, 128 Pa. 132, but by the use of its endowment for the purposes for which it was given. It is free from any element of private gain; and, because of the ownership of its building and lot, assessed at 170,000, and its school equipments, it is able to put the price of tuition below that usually charged in such schools and yet pay the necessary salaries. The property given to the school is so used that, by its use for the purposes contemplated by the givers, the charity is made to support itself. It is not a business organization, conducted for profit, but a charity, conducted with a view to furnish education at its actual cost to a great number of youth who otherwise might be required to pay more for it or forego it altogether. Such was the situation in Phila. v. Women’s Christian Association, 125 Pa. 572. In that case it was said that the character of the association as a charity was • not destro3red if to some extent it received a revenue from the recipients of its bounty. We are now disposed to go further, and say that an institution that is in its nature and purposes a purely public charity does not lose its character as such under the tax laws if it receives a revenue from the recipients of its bounty sufficient to keep it in operation. It must not go beyond self-support. When a charity embarks in business for profit it is liable to taxation like any other business establishment ; but so long as the trustees of the school manage it as a charity, giving the benefit of what might otherwise be profit to the reduction of tuition fees or the increase of the number of free scholars in furtherance of the “education of youth,” the corpus of the trust, the schoolhouse, is entitled to exemption.

It represents the gift of private persons and of the state. It is, as we said in Northampton County v. Lafayette College, the educational plant, and, so long as it is used to provide education at the mere cost of teaching alone, and is open to the public, it does not lose its character as a charity.

A hospital erected and equipped by public or private charity might be conducted with such skill and economy as to become self-sustaining, but it would not thereby lose its character as a purely public charity. A private hospital, built and conducted as a business enterprise, stands upon widely different ground. There is no trust involved, no charitable use impressed upon such an establishment; nothing has been done or given by the proprietor in relief of the public, but he holds the title to his own property and conducts the business for his own profit. If it proves unprofitable he may close it up or devote his plant to such other purposes as he will.

In the case before us the donors parted absolutely with what they gave. It was devoted to a charitable use and the title placed in trustees. The trustees have invested it in a plant adapted to the purposes of the trust. By the use of this plant they are enabled to conduct a school that gives educational advantages to some free, and at a low cost to all, and thus make the charity pay the expenses of its own administration.

The school is maintained by the use of its plant, the gift of both public and private charity, for the legitimate purposes of the trust and in exact accordance with the will of the donors. It is therefore maintained by charity within the meaning of the Act of 1874. The fact that the school is under the control of a denomination or religious sect, and that a preference is given to children of parents connected with the denomination, does not destroy its character as a public charity, since no one is excluded by reason of denominational connection or preference, but such persons are admitted as fast as vacancies occur: Price v. Maxwell, 28 Pa. 23; Donohugh’s Appeal, 86 Pa. 306.

The decree of the court below is affirmed as modified by this opinion. And now, March 28, 1892, it is ordered, adjudged and decreed that the Academy of the Protestant Episcopal Church in the city of Philadelphia, is an institution of learning maintained by public and private charity, and that its real estate at the southwest corner of Juniper and Locust streets, described in the bill filed in this case, and used exclusively for school purposes, is exempt from taxation under the provisions of the act of the general assembly approved on the 24th of May, 1874, so long as no income is derived from it by the contributors or by the corporation other than that necessary to make the charity self-sustaining. It is further ordered that the appellants be enjoined from collecting taxes now assessed upon said real estate. The costs to be paid by the appellant, the city of Philadelphia.