Opinion
No. 13,396.
Decided December 21, 1934.
Action to enjoin assessment and levy of taxes upon property used for educational purposes and alleged to be exempt from taxation. Judgment for plaintiff.
Affirmed.
1. JUDGMENTS — Res Judicata. A former adjudication involving the same parties is decisive as to all matters determined or that might have been properly determined therein.
2. TAXES AND TAXATION — Educational Institutions — Exemption. The fact that an educational institution operating by virtue of a state charter under which its property is exempt from taxation may have changed its name, held not to operate as a forfeiture or abandonment of its rights under the charter.
3. Educational Institutions — Exemption. Under the statute granting a charter to defendant in error and making certain of its property exempt from taxation, the exemption held to include all property of the corporation the income of which is devoted exclusively to its purposes as an educational institution or which is necessary to carry out its design.
4. Schools — Exemptions — Constitutional Law. Under section 5 of article X of the state Constitution, all lots with the buildings thereon, if the buildings are used exclusively for educational purposes, are exempt from taxation.
Error to the District Court of the City and County of Denver, Hon. James C. Starkweather, Judge.
Mr. JAMES D. PARRIOTT, Mr. FRANK L. HAYS, for plaintiffs in error.
Messrs. HUGHES DORSEY, Messrs. PERSHING, NYE, BOSWORTH DICK, Mr. A. L. DOUD, for defendant in error.
THE Colorado Seminary brought suit in the district court of the City and County of Denver to enjoin the assessment and levy of taxes upon certain property for the years 1924 to 1932. The City and County of Denver and William F. McGlone, as manager of the department of revenue of the City and County of Denver were joined as defendants. An injunction was granted and errors and cross-errors are assigned. When not otherwise designated, the parties will hereafter be referred to as plaintiff and defendants as they were aligned in the trial court.
The plaintiff came into corporate existence through a special charter granted by the Legislative Assembly of the Territory of Colorado on March 5, 1864. This charter provides that twenty-eight persons "be and they are hereby constituted a body politic and corporate, for the purpose of founding, directing and maintaining an institution of learning, to be styled the Colorado Seminary, * * *." Section 5 of the act provides: "Such property as may be necessary for carrying out the design of the Seminary in the best manner, while used exclusively for such purpose, shall be free from all taxation." Ter. Laws, '64, p. 209.
Pursuant to the purpose for which it was conceived, the corporation founded an institution in Denver in the year 1864. Students were admitted and classes carried on from that period until 1868, when due to financial difficulties the plaintiff was unable to conduct a school for a time. During a part of this time the Colorado Seminary did not own any property. A mortgage on its school building was foreclosed in 1870 and the property bought in by Hon. Samuel H. Elbert, a member of the board of trustees of the plaintiff for many years. In 1874 he conveyed it to Governor John Evans, also a trustee, who held it until 1880, when he reconveyed it to the seminary. In September of 1880 students were again admitted. From that date until the present time a school has been carried on under the direction and control of the Colorado Seminary. In the summer of 1880 the University of Denver was incorporated. Since 1880 the school operated by the Colorado Seminary has been popularly known as the "University of Denver." However, the University of Denver has at all times been a corporation directly controlled by the Colorado Seminary. The original constitution of the Society of the University of Denver provided:
"Article III. The members of this Society shall be: The Secretary, for the time being, of the Colorado Annual Conference of the Methodist Episcopal Church, and the Secretaries (while in such office) of such Annual Conferences as shall hereafter be organized within the territory now occupied by the said Colorado Annual Conference; the Presiding Elders, for the time being, of the aforesaid Annual Conference or Conferences; the President for the time being of the Colorado Seminary; and the members of the Executive Committee, for the time being, of the Board of Trustees of said Colorado Seminary; together with such honorary members as they may from time to time elect."
This was amended in 1898 so as to read, "the members of the Board of Trustees, for the time being, of Colorado Seminary." The president of Colorado Seminary is ex officio chancellor of the university. The principal activities of the University of Denver as a corporation under that name have been to hold an annual election and confer degrees. It has never owned any property or conducted a school, these functions having been retained and exercised by Colorado Seminary. The underlying object of the University of Denver seems to be to permit use of a name which, while preserving the original purpose of Colorado Seminary, will better express the modern idea of such an institution of higher learning.
The property involved consists of certain lots located on the corner of Sixteenth and Champa streets in Denver, and an office building thereon known as the University Building. The lots were originally owned by Corwin R. Welsh and Mary Thomas Welsh, who leased them to plaintiff's remote grantor for a period of ninety-nine years with the privilege of two renewals for like periods, or a period of two hundred ninety-seven years, with provision for payment of ground rent of $36,000 per year. The lease required the lessees to construct a building of certain specifications on the land, which when built should belong to the lessee. Upon default in the terms of said lease, title to the building, and the improvements thereon, shall revert to the owners of the underlying fee. After a building had been constructed, the lease was transferred by mesne conveyances down to the plaintiff. In 1923, Mr. James H. Causey offered the property in question to the plaintiff as a gift, with an understanding on the part of the seminary to pay to Mr. Causey and his wife during their lives an annuity of $9,000. At the time there were large mortgages on the property, and there was some hesitation on behalf of the seminary in accepting the gift from doubt whether it could be so managed as to yield a net income and also consideration whether it would be exempt from taxation. An arrangement was made which permitted the seminary to use the building for five years and at the end of the five years decide whether or not to accept the gift. On June 1st, 1923, conveyance was made to the seminary pursuant to this plan. During the five year trial period Mrs. Causey died and Mr. Causey relinquished all claim to the $9,000 annuity. The indebtedness on the property was materially reduced during this period, and in 1928, the seminary elected to keep the property. It thus acquired and holds ownership of the building and also all rights under the lease on the ground.
From 1924 to 1931, inclusive, the then manager of the department of revenue of the City and County of Denver placed an assessed valuation on the lots and also an assessed valuation upon the buildings and improvements located on the lots. Thereupon he placed the lots on the assessment roll, but withheld the buildings and improvements from the assessment roll. No taxes were claimed during this time on the buildings and improvements, but the assessed valuations were made a permanent record in the office of the manager of the department of revenue, and designated as an assessed valuation of property exempt from taxation. In each of these years the plaintiff paid the tax on the lots, but claimed complete exemption for the lots as well as the buildings and improvements.
In 1932, defendant McGlone concluded that it was his duty to attempt to collect taxes for the years 1924 to 1931, inclusive, upon the buildings and improvements, and for 1932 on the whole. He thereupon took the assessed valuation for each year and applied thereto the levies for such years. July 30, 1932, defendant McGlone notified plaintiff that the buildings and improvements had been placed on the assessment roll, and gave plaintiff an opportunity to object in respect of the assessment by written objections to be filed before August 10, 1932. Plaintiff filed its objections directed against assessment not only of the buildings, but of the lots as well, and also claimed that since no notice and hearing had been given, to collect taxes of previous years amounted to an attempt to deprive plaintiff of property without due process of law. Then defendant McGlone rescinded his former action to the extent as he said that as a matter of courtesy he would permit a hearing as to valuation. The plaintiff did not avail itself of this opportunity, and the property was again placed on the assessment rolls. Plaintiff filed a petition with the board of equalization of the City and County of Denver for relief, which was denied. Thereafter plaintiff filed its petition with the Colorado tax commission, which likewise denied relief. This suit was then commenced.
Plaintiff contends that not only the building owned by it and its leasehold interest, but also the lessors' interest in the lots are exempt, while defendants claim that all are subject to taxation. The trial court held that the building and leasehold interests of the plaintiff for the years in question are exempt, but not the fee title or reversionary interest, since this is held by third parties who are not entitled to exemption. Plaintiff's claim is based primarily upon the legislative act of 1864 and the exemption clause in that act hereinabove quoted. Plaintiff claims further that such property is also exempt under section 5, article 10 of the state Constitution. Defendants assert that plaintiff has forfeited whatever freedom from taxation the latter enjoyed under its charter, that the Constitution supersedes the charter, and that in any event the property of the kind described is not exempt.
Two prior attempts to tax property of the seminary have been carried to this court for determination. County Commissioners v. Colorado Seminary, 12 Colo. 497, 21 Pac. 490, and Colorado Seminary v. Board of County Commissioners of Arapahoe County, 30 Colo. 507, 71 Pac. 410. The identical charter of 1864 now before us was before us for consideration in each of the above cases. There was also an identity of parties, in that the present plaintiff is the Colorado Seminary and the present defendants are the official successors of the officers of the old Arapahoe county, in which Denver was included prior to a division of the counties. Except as herein noted, the subject matter involved in the first two cases and the present cause are the same. With these concurrent conditions, our former adjudications are decisive as to all matters determined or that might have been properly determined therein.
The case in the twelfth Colorado reports holds that the provisions of the charter having been accepted and acted upon by the seminary, became a binding contract existing between the corporation and the state which cannot be impaired by subsequent legislation, constitutional or statutory. In the case in the thirtieth Colorado report, the record shows that the seminary again pleaded exemption from taxation of its property by virtue of the charter and Constitution and the same rule in this respect was followed as in our former decision. In the latter case, Mr. Justice Campbell appropriately denominated the seminary as "the pioneer school of higher learning in the state." Since then it has consistently and continuously exercised its charter and constitutional rights and has steadily grown in commanding influence in accordance with its original purpose. It has become a potent and inseparable factor in the social and educational life of the city and state. This confirms the wisdom of our former decisions and calls for their reaffirmance if necessary. The circumstance that the seminary is popularly known as the University of Denver is only an incident, unimportant as affecting the rights of the Colorado Seminary under the conditions fully explained in our statement of facts. No forfeiture or abandonment of these rights, vital to the existence of plaintiff, was either intended or accomplished in the above manner or at all.
In the above case reported in the twelfth Colorado, we held that only the property of the seminary in actual use for school buildings, campus and the like was exempt from taxation, but in the later case in the thirtieth Colorado reports, a different rule was applied. There we reviewed the former case at length, and also gave consideration to our reported decision in Bishop v. Treasurer Arapahoe County, 29 Colo. 143, 68 Pac. 272. In the thirtieth Colorado case, we held that the exemption includes all property of the corporation the income of which is exclusively devoted to the purposes of the seminary and which is necessary to carry out its design. It is beyond question that the income derived from the property involved is for this purpose. The reduction of the mortgage debt and consequent increase of plaintiff's equity enhances its value and merely postpones its full enjoyment of the revenues to be derived from the building to be used in good season for its charter purposes.
Numerous authorities from other jurisdictions are cited in the briefs, but our own previous decisions under plaintiff's charter and the Constitution of this state are ample for all purposes. Section 5, article 10 of the Constitution reads: "Lots, with the buildings thereon, if said buildings are used solely and exclusively for religious worship, for schools, or for strictly charitable purposes, also cemeteries not used or held for private or corporate profit, shall be exempt from taxation, unless otherwise provided by general law." See the following cases in which we have held that exemption from taxation exists under the above section: Pitcher v. Miss Wolcott School, 63 Colo. 294, 165 Pac. 608; Horton v. Colo. Springs Masonic Building Society, 64 Colo. 529, 173 Pac. 61; Board of County Commissioners v. San Luis Valley Masonic Ass'n, 80 Colo. 183, 250 Pac. 147; Denver Turnverein v. McGlone, 91 Colo. 473, 15 P.2d 709; El Jebel Shrine Ass'n v. McGlone, 93 Colo. 334, 26 P.2d 108; Kemp v. Pillar of Fire, 94 Colo. 41, 27 P.2d 1036.
We have considered all points raised in the briefs, but find no error in the record. The judgment must be accordingly affirmed.
Judgment affirmed.
MR. JUSTICE HILLIARD dissents.