Doctors General Hospital v. County of Santa Clara

KAUFMAN, P. J. This is an action brought by appellant Doctors General Hospital of San Jose, a California nonprofit corporation, to recover property taxes for the year 1953-1954, which had been levied by the respondents, county of Santa Clara and city of San Jose, and paid under protest by the appellant. The trial court found that the appellant did not meet the requirements prescribed by the 1953 amendment to section 214, subdivision (3), of the Revenue and Taxation Code for the “welfare exemption” which section le of article XIII of the state Constitution authorized the Legislature to grant. The issue here presented is the constitutionality of the retroactive application of the 1953 amendment to section 214, subdivision (3), Revenue and Taxation Code.

It is conceded that appellant after the effective date of the amendment has been qualified for the exemption. Prior to the 1953 amendment, appellant’s hospital could not qualify under section 214, subdivision (3), of the Revenue and Taxation Code, because its operation produced an excess of income over expenses. Sutter Hospital v. City of Sacramento, 39 Cal.2d 33 [244 P.2d 390], held that under a strict but reasonable construction of section 214, subdivision (3), a hospital could not qualify for the property tax exemption if it made any profit, as the statute prohibited any excess of income over revenue, regardless of the purpose for which the profit is used.

The 1953 Amendment (Stats. 1953, ch. 730) is as follows: “provided, that in the case of hospitals, such organization shall not be deemed to be organized or operated for profit, if during the immediate preceding fiscal year the excess of [55]operating revenues, exclusive of gifts, endowments and grants in aid, over operating expenses shall not have exceeded a sum equivalent to 10% of such operating expenses.” As this enactment occurred on May 18, 1953, a date prior to the time that taxes were due and payable, November 1, 1953, (Rev. & Tax. Code, § 2605), but after the lien date, the 1st Monday in March, 1953, (Rev. & Tax. Code, §2192), the amendment was expressly made retroactive as to all taxes levied on or after January 1, 1953. The amendment also contained an urgency clause (Stats. 1953, Ch. 730, § 2) making it effective immediately because of the effect of the Sutter case.

The question then is whether the 1953 Amendment contravenes the prohibition against gifts of public money of section 31 of article IV of the state Constitution. The appellant’s first contention that the Constitution of the State of California does not prohibit retrospective legislation per se, need not be discussed.