APPEAL from the Circuit Court of Tazewell County; the Hon.
CHARLES M. WILSON, Judge, presiding.
MR. JUSTICE SCHAEFER DELIVERED THE OPINION OF THE COURT:
Rehearing denied December 3, 1970.
This case involves applications of the county collector of Tazewell County, for judgment and orders of sale for delinquent real-estate taxes assessed for each of the years 1962, 1963, 1964, 1965, and 1966 against the property of the defendant, the Hopedale Medical Foundation.
The Hopedale Medical Foundation, situated on 5.12 acres of land in the city of Hopedale, consisted of a hospital, a nursing home, and a medical arts building, all under one roof, and a nurses' residence and a home for the elderly known as Hopedale House, in separate buildings. It claimed that its property was exempt from taxation because it was owned and used by an Illinois not-for-profit corporation for charitable and eleemosynary purposes pursuant to section 19.7 of the Revenue Act. Ill. Rev. Stat. 1969, ch. 120, par. 500.7.
At the close of the defendant's evidence, the collector moved for judgment in his favor for each of the tax years in issue on the ground that the defendant had failed as a matter of law to meet its burden of proving that it is a charitable organization within the meaning of section 19.7 of the Revenue Act. The court granted the collector's motion for judgment as to Hopedale House, the nurses's residence, and the 20% of the land upon which these buildings were located, but sustained the defendant's objections as to $40,771 of the $54,644 tax due, or 74.5% of the total. At the close of all the evidence, the defendant moved for judgment sustaining its objections in the amount of $40,771 and for an order directing the collector to refund that amount. The defendant argued that, in its order at the close of the defendant's evidence, the court had found as a matter of law that the defendant had sustained its burden of proving its right to an exemption as to all the property except Hopedale House, the nurses' residence, and 20% of the land, and that the evidence introduced thereafter by the collector either corroborated the defendant's proof or failed to establish any new facts that would cause the court to change its judgment.
The court entered final orders in which it found "that no gain or profit, in a private sense, has inured to the benefit of any person connected with The Hopedale Medical Foundation, an Illinois not for profit corporation." Nevertheless, it modified its order entered at the close of the defendant's evidence and granted judgment in favor of the collector as to $31,438 of the $54,644 tax due, or 57.5% of the total. It sustained the defendant's objections, in part, as follows: in 1962, the hospital and 40% of the land, for a refund of $1,806; in 1963, the hospital and 40% of the land, for a refund of $2,838; in 1964, the hospital and 40% of the land, for a refund of $2,880; in 1965, the hospital, construction in progress, and 40% of the land, for a refund of $3,937; and in 1966, the hospital, the medical arts building, and 40% of the land, for a refund of $11,745. In all, the court sustained the defendant's objections only as to $23,206 of the $54,644 tax due, or 42.5% of the total.
The collector has appealed directly to this court pursuant to our Rule 302(a)(1)) (Ill. Rev. Stat. 1969, ch. 110A, par. 302(a)(1), and prays that the lower court's final order be reversed as to the partial refund of taxes to the defendant and for a finding and order that the defendant is not entitled to any refund of taxes for the tax years involved. The defendant cross-appealed and asks this court to enter an order sustaining the lower court's order entered at the close of the defendant's evidence. No questions are raised on the pleadings.
Section 3 of article IX of the State constitution states: "The property of the state, counties, and other municipal corporations, both real and personal, and such other property as may be used exclusively for agricultural and horticultural societies, for school, religious, cemetery and charitable purposes, may be exempted from taxation; but such exemption shall be only by general law." (Ill. Const., art. IX, sec. 3.) (Emphasis supplied.) Section 19.7 of the Revenue Code provides that "All property of institutions of public charity, all property of beneficent and charitable organizations, whether incorporated in this or any other state of the United States, and all property of old people's homes, when such property is actually and exclusively used for such charitable or beneficent purposes, and not leased or otherwise used with a view to profit * * *" shall be exempt from taxation. Ill. Rev. Stat. 1969, ch. 120, par. 500.7 (Emphasis supplied).
We held in Sisters of Third Order of St. Francis v. Board of Review, 231 Ill. 317, 321, that a not-for-profit corporation is used exclusively for charitable purposes and is therefore exempt from taxation "so long as all the money received by it is devoted to the general purposes of the charity, and no portion of the money received by it is permitted to inure to the benefit of any private individual engaged in managing the charity." (See also German Hospital v. Board of Review, 233 Ill. 246; People ex rel. Cannon v. Southern Illinois Hospital Corp., 404 Ill. 66; Methodist Old Peoples Home v. Korzen, 39 Ill.2d 149; People ex rel Nordlund v. Ass'n Winnebago Home for the Aged, 40 Ill.2d 91.) It is not disputed that the defendant has no capital stock or shareholders, that it pays no dividends, and that its services are available to all who apply without regard to their ability to pay. The narrow issue upon which this case must turn is whether there is inurement of benefit to a private individual engaged in managing the Foundation so as to preclude a tax exemption.
From 1952 through 1955, Dr. Lawrence Rossi, a physician, practiced medicine from a principal office in Pekin, Illinois, and maintained a part-time office in Hopedale, a small community 15 or 20 miles from Pekin with a population of 550. In late 1953, he decided to close his Hopedale office because of the growth of his practice in Pekin and the impracticality of commuting to Hopedale. However, in response to requests from a group of Hopedale residents, he agreed to give up his practice in Pekin and to move to Hopedale, "if the community would provide adequate health facilities."
In the fall of 1953, Dr. Rossi and his wife acquired approximately two acres of land in Hopedale in consideration for $1,500 worth of bonds of the hospital financing program on which Dr. Rossi was the obligor. Construction of an initial 20-bed hospital began in June, 1954, under the supervision of Dr. Rossi, and was completed in May, 1955. Dr. Rossi financed the construction of the hospital by selling to people in the community, as his own personal obligation, $105,000 worth of first mortgage 4% bonds payable in ten years. Dr. Rossi also became personally indebted to the extent of $50,000 to pay for supplies and equipment for the hospital. He testified: "Since no one wanted to participate in the actual financial responsibility for construction of a hospital, I volunteered to take the debt on my shoulders, and give the local people a first mortgage on the hospital property. This, in effect, made me owner of the hospital." The original hospital contained office space for Dr. Rossi from which he conducted his private practice and also functioned as the director and administrator of the hospital. At this time, he was the only resident physician in Hopedale.
In 1956, Dr. Rossi and his wife acquired the balance of the 5.1 acre tract of land for $11,500, and added the nurses' residence in a separate building on one corner of the tract because Dr. Rossi had experienced difficulty finding suitable housing for unmarried nurses in Hopedale. Construction of a 22-room, 40-bed nursing home, or extended care facility, was begun in 1957 and completed in 1958. This facility, which was intended primarily to care for the sick and disabled and to provide long-time convalescent care at a lower daily cost than the hospital, was connected with the hospital by a ramp-type hallway and was served by the hospital staff. One half of the money for the nursing home, or $90,000, was raised through the sale of nursing home or preferential certificates purchased for $750 and redeemable in 20 years at $1,000 or by the use of the facilities in that amount from the date of purchase. Dr. Rossi was the obligor on these certificates.
In 1960, construction began on Hopedale House, a 24-unit home designed for elderly people not in acute need of nursing care. The home, which was completed in 1961, was not physically connected to the hospital or the nursing home, but was tied to the nursing home by a communication system that enabled residents of the facility to obtain assistance by pushing a button. Moreover, members of the hospital and nursing home staff made daily rounds in Hopedale House. The home was financed by a 100% construction loan of $225,000 to Dr. and Mrs. Rossi from First Federal Savings and Loan Association of Peoria.
Upon completion of this construction, Dr. and Mrs. Rossi were the sole owners of all the property and buildings of the complex, and their total personal indebtedness amounted to about $500,000, primarily with First Federal Savings and Loan Association of Peoria. Dr. Rossi operated the complex as a sole proprietorship, and he also functioned as medical director and administrator. He continued his private practice of medicine out of his office in the ...