Opinion
No. 40012.
April 21, 1947.
1. UNEMPLOYMENT COMPENSATION: Sufficient Number of Employees. When housewives employed to assist at weekly luncheons are included, appellant had a sufficient number of employees to come within the Unemployment Compensation Act.
2. UNEMPLOYMENT COMPENSATION: Charities: Taxation: Charitable and Educational Purposes: Requirements for Tax Exemption. An association claiming an exemption from unemployment compensation contributions on the ground that it is engaged in charitable and educational work must be both organized and operated exclusively for such purposes.
3. UNEMPLOYMENT COMPENSATION: Charities: Unemployment Contributions: Chamber of Commerce Not Exempt. The Chamber of Commerce of North Kansas City is neither organized nor operated exclusively for charitable and educational purposes, but promoted trade and commerce under its charter powers, and is not exempt from unemployment compensation contributions.
Appeal from Cole Circuit Court. — Hon. Sam C. Blair, Judge.
AFFIRMED.
James A. Potter, Judson L. Patmer and Simrall Simrall for appellant.
(1) The services performed for or in connection with the activities of the Chamber of Commerce of North Kansas City do not constitute "employment" within the meaning of that term as defined in the Missouri Unemployment Compensation Law, because such services are excluded by reason of the provisions of Section 9423 (i) (6) (7), R.S. 1939. (2) In determining whether or not the appellant was organized exclusively for charitable and educational purposes, the articles of association of the corporation are the sole basis for such determination. Murphy v. Concordia Pub. House, 348 Mo. 753, 155 S.W.2d 122; Mohawk Mills Assn., Inc., v. Miller, 260 A.D. 433, 22 N.Y.S.2d 993; In re First Natl. Deposit Co., 351 Mo. 423, 173 S.W.2d 403; N.Y. Mun. Assn. v. United States, 99 F.2d 460; Helvering v. Coleman-Gilbert Associates, 296 U.S. 369, 56 S.Ct. 285, 287, 80 L.Ed. 279; Wyatt v. Stillman Institute, 303 Mo. 94, 260 S.W. 73. (3) To hold that the purposes set forth in the Articles of Agreement under educational purposes were not "educational purposes" within the meaning of the statute, would be putting a narrow, unnatural and unsound interpretation upon the words "educational purposes." Ancient, etc., S.R. of Freemasonry v. Board of County Commissioners, 122 Neb. 586, 241 N.W. 93, 81 A.L.R. 1166; Better Business Bureau v. Jones, 34 F. Supp. 573. (4) To hold that the balance of the purposes set forth in the Articles of Agreement were not "charitable purposes" within the meaning of the statute would be putting a narrow, unnatural and unsound interpretation upon the words "charitable purposes." 14 C.J.S., sec. 1a, p. 410; International Reform Federation v. District of Columbia Unemployment Comp. Board, 131 F.2d 337, 76 U.S. App. 282, certiorari denied, District of Columbia Unemployment Comp. Board v. International Reform Federation, 63 S.Ct. 324, 317 U.S. 693, 87 L.Ed. 555; Parsons v. Childs, 345 Mo. 689, 136 S.W.2d 327; Missouri Historical Society v. Academy of Science, 94 Mo. 459, 8 S.W. 346. (5) The act contemplates findings by the Commission of the constitutive facts essential to the holdings. Whether the findings of fact made by the Commission are sustained by sufficient competent evidence is a question of law. If the evidence, although some, be not legally sufficient or lack sufficient probative force to sustain the award, the findings and award are not binding on the court and it is the duty of the court to set aside the award. The scintilla of evidence rule does not obtain in this jurisdiction. S.S. Kresge v. Unemployment Comp. Comm., 349 Mo. 475, 162 S.W.2d 838. (6) While the courts are not bound by decisions of the Federal courts in interpreting the Federal Unemployment Compensation Act, such decisions will be given weight by this court. Meyer Co. v. Unemployment Comp. Comm., 348 Mo. 147, 152 S.W.2d 184; American Nat. Ins. Co. v. Keitel 353 Mo. 1107, 186 S.W.2d 447. (7) While the general rule is that tax-exempt statutes are to be construed strictly in favor of the government, the rule does not apply to the exemption statutes of the character here involved in view of the fact that bequests for public purposes operate in aid of good government and perform by private means what ultimately would fall upon the public. Union New Haven Trust Co. v. Eaton, 20 F.2d 419; Harrison v. Barker Annuity Fund, 90 F.2d 286; United States v. Proprietors of Social Law Library, 102 F.2d 481; Commissioner v. F.G. Bonfils Trust, 115 F.2d 788; Ledered v. Stockton, 260 U.S. 3, 43 S.Ct. 5, 67 L.Ed. 99; Old Colony Trust Co. v. Commissioner, 301 U.S. 379, 56 S.Ct. 813, 81 L.Ed. 1169.
John L. Porter and Charles F. Moseley for respondents; Michael J. Carroll of counsel.
(1) Exemptions from taxation must be construed against the applicant for exemption. Kansas City Exposition Driving Park v. Kansas City, 174 Mo. 425, 74 S.W. 977; Wyman v. St. Louis, 17 Mo. 335; Better Business Bureau of Washington, D.C., Inc. v. United States, 148 F.2d 14; State ex rel. Y.M.C.A. v. Gehner, 320 Mo. 1172, 11 S.W.2d 30; St. Louis Y.M.C.A. v. Gehner, 329 Mo. 1007, 47 S.W.2d 766; Hudgins v. Mooresville Consolidated School Dist., 312 Mo. 1, 278 S.W. 769; State ex rel. Laundry, Inc., v. Public Service Comm., 327 Mo. 93, 34 S.W.2d 37; Section 9423 (i) (6) (F), R.S. 1939, as amended; 2 Cooley on Taxation, (4th Ed.), p. 1403; 59 C.J. 1106, sec. 657; Endlich on Interpretation of Statutes, p. 142, sec. 108. (2) The fact that other governmental agencies may have administratively exempted the appellant from certain taxes is not controlling in considering the status of the appellant under the Compensation Law. Northeast Osteopathic Hospital v. E.J. Keitel, Cause No. 39.951, Division No. 1, Supreme Court, 355 Mo. 740; Park Floral Co. v. Industrial Comm., 104 Colo. 350, 91 P.2d 492; American Medical Assn. v. Board of Review of Department of Labor, 392 Ill. 614, 65 N.E.2d 350; Hassett v. Association Hospital Service Corp. of Massachusetts, 125 F.2d 611, (3) Appellant is not organized exclusively for charitable or educational purposes. Murphy v. Concordia Publishing House, 348 Mo. 753, 155 S.W.2d 122; Better Business Bureau of Washington, D.C., Ins. v. United States, 66 S.Ct. 112; Round Table Club v. Fontenot, 143 F.2d 196; Colony Town Club v. Michigan Unemployment Comp. Comm., 301 Mich. 107, 3 N.W.2d 28; National Exchange Club, Inc., v. Frazier Reams, 147 F.2d 291; State ex rel. Women's Club v. Brand, 197 Wis. 32, 221 N.W. 375; Semple v. Schwarz, 130 Mo. App. 65, 109 S.W. 633; Collins v. Truman, 223 Mo. App. 186, 14 S.W.2d 526; Sec. 9423(i)(6)(F), R.S. 1939. (4) Appellant is not operated exclusively for charitable or educational purposes. Murphy v. Concordia Publishing House, 348 Mo. 753, 155 S.W.2d 122; Northeast Osteopathic Hospital v. E.J. Keitel, 355 Mo. 740, 197 S.W.2d 970; Better Business Bureau of Washington, D.C., Inc. v. United States, 66 S.Ct. 112; Boston Chamber of Commerce v. Assessors of Boston, 315 Mass. 712, 54 N.E.2d 199, 152 A.L.R. 174; Jackson v. Phillips, 14 Allen. 539.
The question presented on this appeal is whether under the Unemployment Compensation Law the Chamber of Commerce of North Kansas City, Missouri, is required to make contributions with reference to wages paid individuals. The Commission decided that the Chamber of Commerce was liable. On appeal to the Circuit Court of Cole County the decision of the Commission was affirmed. From that judgment an appeal was taken to this court.
Appellant, Chamber of Commerce, contends that it is exempt from making contributions by virtue of sec. 9423, Mo. R.S. Ann., R.S. Mo., 1939, as amended by Laws of Missouri, 1943, pages 920 and 921, subsections 6 and (F), which read as follows:
"(6) Shall not include:"
"(F) Service performed in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual;"
Appellant also contends that it is organized and operated exclusively for charitable and educational purposes and that no part of its earnings inures to the benefit of any private shareholders or individuals. We may dispose of the latter clause, and not mention it further, by stating that no [772] earnings ever accrued and therefore none were ever distributed. Appellant's only income was derived from dues of its members and voluntary contributions.
Appellant was organized by a pro forma decree under the provisions of Art. 10, chapter 33, Mo. R.S. Ann., R.S. Mo., 1939, which permits organization and incorporation for benevolent, religious, scientific, fraternal-beneficial or educational purposes. See sec. 5436, R.S. Mo., 1939, Mo. R.S. Ann. Appellant's charter reads in part as follows:
"Fourth: This association is formed for educational and benevolent purposes in North Kansas City, Missouri, and its trade territory without financial profit to its members.
"The field of education shall include gathering and dissemination of information in relation to the business, industrial, professional, home and institutional life and interests of the community it is intended to serve, providing a meeting place for the discussion of matters of interest, furnishing speakers, and furnishing music and other wholesome forms of entertainment.
"The benevolences shall include the promotion of better streets and highways, better police and fire protection, better business and trade practices, better health and labor conditions, reduction of unemployment, aid in works of charity, promotion of harmony, good will and fellowship throughout the community, encouragement of beautification of homes and public places, and to improve the civic and business life of the community generally."
The by-laws contain the following:
"The purpose of this Association shall be to promote the welfare of the trade manufacturing interests and industries of North Kansas City and Vicinity, and to contribute to the development and extension of such interests in all lawful ways: to acquire and disseminate valuable commercial and economic information, and encourage greater interest and a better understanding of the importance of manufacturing and trade industries as factors in our growth and prosperity; and to promote just and equitable principles of trade and foster the highest commercial integrity; to increase acquaintanceship among its members and facilitate the speedy adjustment by arbitration of business disputes; to interchange views and secure concerted action upon matters of public interest; to discuss and correct abuses, using the means that may be best calculated to protect the interests and rights of its members as business men and citizens."
The only regular employees of appellant are a secretary and a janitress. That number would not be sufficient to place appellant under the act. Subdivisions (h) and (i) of sec. 9423, Laws 1943, page 923, provide that eight or more employees constitute an employment unit. However, the members of the Chamber of Commerce evidently possessed good appetites. The record shows that they held weekly or biweekly luncheon meetings. Housewives were employed to prepare these luncheons. Some of these employees worked about two and one-half hours on the luncheon day, while one cook worked about four hours on Mondays and eight hours on Tuesdays the time of the luncheon. It was at these meetings that the principal education feature was carried out. The record discloses that speakers were invited and that the subjects discussed varied widely. We will notice these later. It was conceded, in fact it was stipulated that appellant had a sufficient number of employees so as to come within the act. We may, therefore, dismiss this question from our consideration.
The rule generally applied when considering the question of exemptions of the nature now under consideration, that is, on the grounds that the employer is engaged in benevolent, charitable or educational work, is that such an association or organization must be both organized and operated exclusively for such purposes. If either fails, then the exemption does not apply. Northeast Osteopathic Hospital v. Keitels et al., 355 Mo. 740, 197 S.W.2d 970; Murphy v. Concordia Pub. House, 348 Mo. 753, 155 S.W.2d 122; [773] American Medical Ass'n. v. Board of Review of Dept. of Labor et al., 392 Ill. 614, 65 N.E.2d 350; Better Business Bureau of Washington, D.C., Inc. v. United States, 66 Sup. Ct. 112. Appellant, however, contends that it came within that rule because it was organized and was operating exclusively for benevolent and educational purposes. The real dispute in this case, is therefore, whether the functions performed by appellant, as authorized by its charter, should be classified as benevolent and educational within the meaning of the Unemployment Compensation Law.
It was conceded and the evidence in this case shows that many of appellant's activities were purely charitable and educational as those terms are generally understood in their restricted sense. That is, they aided the needy in a material way and promoted educational features consisting of lectures on general non-commercial topies. For example, Red Cross collections and the so called United Charity collections were from year to year conducted and supervised by appellant organization. As to the educational features we find that during the course of years some of the topies for discussion were: "Adam's Rib." "Chemical Warfare," "Whither Bound In Higher Education." "Robinson Crusoe's Money," "Marriage And Divorce In Russia," "Cliff Dwellers-Bryce's Canyon," "Treatment of Husband And Wife," and "How To Keep Out Of Jail," Strange as it may seem, among all the varied lectures delivered during the years from September, 1936, to May, 1944, we fail to find one devoted to the subject. "How To Keep From Paying Taxes." Some of the following topics indicate that the subjects discussed were commercial: "What Helps Business Helps You," "How Is Business," "Greater Profits Through Retailer and Manufacturer Cooperation" and "The Master Salesman."
We find that the weight of authority, as evidenced by cases decided, is that if a substantial portion of the activities of an organization is devoted to improving business or to business advantage then the exemption in the Unemployment Compensation Act does not apply. Neither does the exemption apply if the charter authorizes such activity. For example, in the Northeast Osteopathic Hospital case, supra, the court said:
"The purposes of fostering and encouraging and providing facilities for the practice of osteopathy, we believe, are quite clearly professional, and not charitable, in nature; and it should not be held the purposes of fostering and encouraging and providing facilities for the practice of a profession are charitable within the meaning of Clause (F), Section 9423 (i) (6), supra, and such purposes, if they are seen to be substantial purposes of Hospital's organization, should prevent Hospital's exclusion from the purview of the Unemployment Compensation Law."
In the State of Illinois the American Medical Association contended that it was exempted because engaged for scientific purposes. The Supreme Court of Illinois, however, held that the association was not exempt from payments of unemployment contributions because it devoted a substantial portion of its efforts toward protecting and furthering economic benefits to its individual members. See Colony Town Club v. Michigan Unemployment Compensation Commission, 301 Mich. 107, 3 N.W.2d 28; American Medical Ass'n. v. Board of Review of Dept. of Labor, supra. So also in New York, in the case of Mohawk Mills Ass'n., Inc. v. Miller, 22 N.Y.S.2d 993, where all the earnings of the association were devoted to charity, exemption was denied because the charter did not require this to be done. More direct to the point now under consideration is the case of Boston Chamber of Commerce v. Assessors of Boston, 54 N.E.2d 199, 152 A.L.R. 174. In that case exemption from taxation was denied because the organization's charter provided as follows:
"`The objects of the new corporation shall be to promote the commerce, industry and public interests of Boston, and of New England; to promote and regulate a commercial exchange in the city of Boston; to acquire, preserve and disseminate business information; to adjust controversies and [774] misunderstandings; to establish and maintain uniformity in commercial usages; and to promote just and equitable principles of trade.'"
Activities of the Chamber of Commerce were held within the charter's provisions. In the State of Tennessee the Supreme Court held, in Memphis Chamber of Commerce v. City of Memphis, 144 Tenn. 291, 232 S.W. 73, that the organization was not exempt from taxation because the charter provided, among other things: "`in the improvement of labor conditions, foreign trade and merchant marine, traffic and transportation, good roads and highways, municipal civic conditions and public health in the city.'"
The court said:
"`It is true it is not a corporation for profit, but, as before stated, its primary object is to promote the business and commercial interests of the City of Memphis. This is expressly stated in its charter. We are of the opinion, therefore, that it cannot claim the benefit of the exemption extended to religious, charitable, scientific, or educational institutions. The mere fact that it administers to charity, or may give instructions of an educational nature along certain lines, does not render it an educational or charitable institution in the sense of our Constitution and statute exempting the property of such institutions from taxation.'"
The Supreme Court of the United States held likewise in the case of Better Business Bureau of Washington, D.C., Inc. v. United States, 66 Sup. Ct. 112.
Appellant cited one federal case in point holding that a Chamber of Commerce should be excluded from taxation such as contributions to Unemployment. The case is, Better Business Bureau of Oklahoma City v. Jones, 34 F. Supp. 573, (same case) 123 F.2d 767. But that case was expressly referred to by the Supreme Court in the case of Better Business Bureau of Washington, D.C., Inc., supra, and the ruling exempting such organizations was disapproved. The federal authorities are bound by the ruling of the Supreme Court.
Viewing appellant's activities, as disclosed by the record, we find that many of them were devoted to purely charitable purposes, however, appellant had the power under its charter and it did in fact promote the trade and commerce of North Kansas City. The evidence disclosed that it was interested in bringing new industries to the community. The evidence showed that a special organization, not directly connected with appellant, furnished what finances were necessary to bring in new industries, but appellant's officers aided in this work by gathering information and attending meetings both at home and elsewhere. Bringing in new industries, promoting just and equitable principles of trade and actively fostering other purposes enumerated in appellant's charter, may all be considered very beneficial to a community and the citizens in general and certainly they are all laudable purposes. However, under the great weight of authority a Chamber of Commerce is not exempt by virtue of our statute from making contributions under the Unemployment Compensation Act. Cases cited, supra. A Chamber of Commerce, as generally understood, is:
"A board or association to promote the commercial interests of a locality, a country, or the like; a society of the principal merchants and traders of a city who meet to promote the general trade and commerce of the place."
It follows that the judgment of the circuit court affirming the decision of the Unemployment Compensation must be and is affirmed. Bohling and Barrett, CC., concur.
The foregoing opinion by WESTHUES, C., is adopted as the opinion of the court. All the judges concur.