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Milward v. Paschen





APPEAL from the Superior Court of Cook County; the Hon. JOHN F. BOLTON, Judge, presiding.


Plaintiffs, trustees under an indenture dated February 19, 1945, creating a trust known as National Foundation of Funeral Service, hereinafter referred to as the Foundation, claiming to be a charitable and beneficent organization whose property is used exclusively for school and charitable or beneficent purposes, brought suit in the superior court of Cook County to enjoin the county treasurer, the county clerk, the State's Attorney and the county of Cook from exposing or offering the Foundation's property for sale for delinquent taxes for the years 1955, 1956, and 1957 and from prosecuting any action to collect the amounts claimed due for said general real-estate taxes levied, assessed or entered against said real property. After hearing evidence the court entered a decree dismissing the plaintiffs' complaint. The revenue being involved, plaintiffs bring their complaint directly to this court.

On July 12, 1957, the plaintiff trustees filed their complaint alleging the establishment of the Foundation by a certain indenture of trust which declared the purposes of the Foundation to be, in general, to (a) acquire and maintain a library relating to the profession and business of morticians, (b) maintain a model operating room and display room providing inspection of new techniques, merchandise, and equipment, (c) establish and maintain a school of management for the profession, (d) make the library, display room, and school available to the profession, to writers, public officials, responsible persons, and members of the general public, and (e) advance the education of the profession to higher professional and business standards. The complaint alleged the Foundation received numerous gifts and in 1948 commenced operation of its School of Management, and in 1951 completed a building upon the property in question containing class rooms, auditorium, library, students' lounge, projection room, selection room for merchandising research, offices, and several unfinished rooms; that since 1952 the school, library, and other educational facilities of the foundation have been continuously and exclusively conducted and operated in the building upon the premises in question; that the school is designed (1) to provide management training for funeral services and allied fields through the school and extension courses, (2) to collect and preserve funeral service literature, (3) to provide merchandising research, and (4) to provide public education through surveys, research, fact finding, and the dissemination of information; that the faculty is recruited from universities, professions, and businesses; that the school is available to all; that students pay tuition when able, but scholarships and other expenses are provided in cases of need, and that the school is operated at a loss made up by gifts to the Foundation. The foundation has tax-exempt status for Federal income tax purposes.

The property involved is located in Evanston, Illinois. Plaintiffs assert that the real estate has been used exclusively for school purposes, is entitled to exemption from taxation, and that the Foundation is an institution of public charity and of a beneficent and charitable organization actually used for such purposes and is entitled to exemption from taxation. They claim that taxes were levied against the property for 1955, marked "exempt," and no tax bill was ever received by plaintiffs until late 1956; that the property was assessed for 1956, that tax bills were issued and received by plaintiffs, and that plaintiffs exhausted their administrative remedies before the Board of Appeals. Plaintiffs further allege that said taxes are illegal and void, that they believe defendants expect to take action against plaintiffs or the real estate to collect said taxes, and prayed the court to find that the property is actually and exclusively used for school purposes, that the real estate is the property of a beneficent or charitable organization and was used for such purposes during the years 1955 and 1956, that the real estate is exempt from general real-estate taxes for the years 1955 and 1956 and for future years so long as it is exclusively used for school, charitable, or beneficent purposes, that the taxes levied and assessed against the real estate for 1955 and 1956, and all penalties, interest and costs be declared null and void, and that defendants be perpetually restrained and enjoined from exposing the real estate for sale or from instituting proceedings for collection of these taxes.

Defendants, in answering, denied that the real estate in question is and has been exclusively used by plaintiffs for school, charitable or beneficent purposes; denied that the general real-estate taxes levied against these premises for 1955 and 1956 and any interest, penalties, and costs accrued thereon are illegal and void; denied that plaintiffs are entitled to any relief, and prayed that the complaint be dismissed.

On October 9, 1957, plaintiffs filed an amendment to their complaint alleging the assessment of the premises for general real-estate taxes for 1957, that taxes will be extended for the year 1957 and defendants will attempt to collect them unless enjoined, and prayed that the Foundation's real estate be declared exempt from taxes for 1957 and for the same benefits with respect to 1957 prayed for the years 1955 and 1956. Defendant's answer was allowed to stand as defendants' answer to the amendment to the complaint.

Upon hearing before the court, W.M. Krieger, a trustee and director of the Foundation, and Charles Nichols, the educational director of the Foundation, testified. Kreiger testified in regard to the creation of the Foundation by trust indenture, the Foundation's ownership of the property, and the erection of the improvements. He stated that the building had been used as a school since its erection, offering funeral business management, open to the public, and that the sole business of the Foundation is the management and operation of its School of Management, the extension courses and seminars, and its general education program. He identified the school catalog which was received in evidence, said that the income was from contributions, gifts, bequests, donations, and tuition, and was used 100 per cent in the operation of the school and its education program.

Nichols testified as to the instruction offered in the school. Upon the close of the plaintiffs' evidence, defendants renewed their motion to dismiss the complaint. The motion was allowed and the court entered a decree dismissing the complaint and the amendment thereto for want of equity.

Plaintiffs now bring their appeal here, insisting (1) that the Foundation's property is entitled to exemption from real estate taxes as property of a school used exclusively for school purposes, and (2) is entitled to exemption as the property of a charitable organization.

Section 3 of article IX of the constitution provides that the General Assembly may, by laws general in their application, exempt from taxation such "property as may be used exclusively * * * for school * * * and charitable purposes," Accordingly, the legislature has exempted " * * * all property of schools, including the real estate on which the schools are located and any other real estate used by such schools exclusively for school purposes, * * *." (Ill. Rev. Stat. 1955, chap. 120, par. 500(1),) and "All property of institutions of public charity, all property of beneficent and charitable organizations, * * * when such property is actually and exclusively used for such charitable or beneficent purposes, * * *." (Ill. Rev. Stat. 1955, chap. 120, par. 500(7).) Plaintiffs claim exemption from general real-estate taxes for the Foundation property, under these provisions of the statutes. These statutory provisions are to be strictly construed, every presumption being against the intention to exempt from taxation. The burden of proving the right to exemption rests upon the plaintiffs who seek it. Rotary International v. Paschen, 14 Ill.2d 480.

Plaintiffs contend that the Foundation's School of Management offers systematic instruction in useful branches by methods common to institutions of learning, and its course of study provides educational training which would otherwise be furnished by publicly supported schools, thus lessening the tax burden upon the public, and making the foundation a school in the common acceptance of the word.

In summarizing the requirements necessary to be met to qualify a private institution for tax exemption as a school, we said in Coyne Electrical School v. Paschen, 12 Ill.2d 387, that there must be "first, a course of study which fits into the general scheme of education founded by the State and supported by public taxation; second, a course of study which substantially lessens what would otherwise be a governmental function and obligation." In arriving at this pronouncement we thoroughly reviewed the leading cases in this State upon the subject, as well as foreign jurisdictions.

Plaintiffs complain that to strictly apply the requirement that the course of study offered must be such as offered by publicly supported institutions in order to be classed as a school for exemption purposes would lay the groundwork for State control and preemption in the field of education, and by competitive advantage to tax supported schools, destroy private institutions of learning. The plaintiffs fail to realize, however, that the basis for tax exemption in Illinois is the relief that such tax exempt institutions provide to the taxpayers' burden. By assuming some of the burden which otherwise must be borne by the taxpayer, an institution may qualify for tax exempt status. (People ex rel. Brenza v. Turnverein Lincoln, 8 Ill.2d 198.) Thus only may tax ...

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