CEDARS OF LEBANON HOSPITAL v. LOS ANGELES COUNTY

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District Court of Appeal, Second District, Division 1, California.

CEDARS OF LEBANON HOSPITAL v. LOS ANGELES COUNTY et al., and five other cases.

Civ. 16531, 16532, 16534-16537.

Decided: May 31, 1949

Harold W. Kennedy, County Counsel, and Andrew O. Porter, Deputy County Counsel, Los Angeles, for appellant Los Angeles County. Ray L. Chesebro, City Attorney, and Hugh H. MacDonald and Louis A. Babior, Deputy City Attorneys, Los Angeles, for appellant City of Los Angeles. Musick, Burrell & Ingebretsen and Philip C. Jones and James E. Ludlam, Los Angeles, for respondents Lutheran Hospital Society and Monte Sano Foundation. Gibson, Dunn & Crutcher, and Bert A. Lewis, Los Angeles, for respondents Hospital of the Good Samaritan. Faries & McDowell and Wayne R. Hackett, Los Angeles, for respondent Hollywood Presbyterian Hospital. Leonard G. Ratner, Beverly Hills, for respondent Cedars of Lebanon Hospital. Joseph Scott and J. Howard Ziemann, Los Angeles, for respondent Queen of Angels Hospital.

These appeals involve the right of plaintiff hospitals to have certain portions of their property exempted from taxation under the recently enacted welfare exemption. Calif.Const. Art. XIII, Sec. 1c; Sec. 214, Revenue and Taxation Code. The portions in questions were used either to furnish a place of residence for personal attached to and employed by plaintiff hospitals, or for the purpose of conducting a nurses' training school in connection with a plaintiff hospital.

Also involved in some of the cases is the question of whether said welfare exemption extends to plaintiffs an exemption from the Los Angeles County Flood Control District levy.

A cross-appeal has also been taken by plaintiffs Walker et al. (Hollywood Presbyterian Hospital, numbered Civil 16536) from that portion of the judgment entered following the sustaining of defendants' demurrer to counts 2 and 4 of said last-named plaintiffs' complaint involving buildings under construction on the first Monday of March, 1946, to be used exclusively as a dormitory and residence for student nurses attending said plaintiffs' school of nursing. Plaintiff Lutheran Hospital has also filed a cross-appeal in case numbered Civil 16537, from that portion of the judgment entered pursuant to an order sustaining defendants' demurrer to said plaintiff's fourth and seventh causes of action involving property consisting in part of a tennis court used as a recreational facility for student nurses, interns and residents of said hospital, and a building, the lower floor of which is used to house a “Thrift Shop,” the entire proceeds of which are devoted to the charitable work of said plaintiff hospital, to-wit, a Free Children's Clinic.

The California welfare exemption was operative for the first time in the tax year 1946–1947 and each of the plaintiffs herein duly filed a claim for the welfare exemption. The taxing authority granted such exemption in each case as to 90% to 95% of the respective hospitals' property. However, as to the remaining 5% to 10% portions, the taxing authority, being of the opinion that the same was being used for purposes not exempt, denied exemption thereof. Accordingly, a tax was levied upon the last mentioned portions and the Los Angeles County Flood Control District levy was levied against all of the real property of plaintiff hospitals in every case.

The plaintiffs paid such taxes and Flood Control District levy under protest, and then commenced the instant actions to recover such portions of those payments as to which the respective plaintiffs contended they were entitled to exemptions.

The complaint in each case was divided into several causes of action, with each cause of action involving either a separate piece of property or a portion of a particular piece of property devoted to a separate specific use.

A general demurrer as to each cause of action was filed in each case, and all of the cases were consolidated for the purpose of hearing.

As heretofore indicated, the trial court sustained demurrers without leave to amend as to those causes of action based upon property used to furnish recreation to hospital personnel; property used as a shop for the sale of donated clothing to realize funds for charitable purposes in connection with the hospital, and buildings under construction to furnish housing for student nurses. The demurrer was also sustained without leave to amend as to the fourth, sixth and eighth causes of action of plaintiff Monte Sano Foundation (case numbered Civil 16535) involving portions of a building leased out as an X-ray laboratory or doctor's office, but said plaintiff has not filed a cross-appeal from such ruling.

However, the trial court sustained the contentions of the five plaintiffs herein who claimed exemption from Flood Control District levies, overruled the demurrer to the cause of action relating to the properties used for the housing of personnel employed by plaintiff hospital, and also overruled the demurrer to the causes of action relating to the properties owned and used by certain of the plaintiff hospitals to provide a nurses' training school operated in connection with the hospital. The property devoted to the latter two uses constituted the bulk of the taxed portions of plaintiffs' properties claimed to be exempt. From the judgments entered upon the foregoing orders, defendants prosecute these appeals, and the two plaintiffs hereinbefore mentioned prosecute cross-appeals.

Because no question is raised herein by defendants as to any of these plaintiffs qualifying as an institution for the welfare exemption, and the only reason urged for denying exemption being the uses to which the taxed portions of the properties were devoted, we deem it unnecessary to here set forth the allegations of the complaints filed herein, other than to epitomize the issues presented therein and upon this appeal as follows:

(1) Is hospital property used to provide housing for the hospital's interns, student nurses, nurses and certain other essential employees required to live on the premises because of the nature of their services and the manner in which hospitals must operate, “property used exclusively for hospital purposes” and therefore exempt under the welfare exemption?

(2) Is hospital property used for a training school for its student nurses “property used exclusively for hospital purposes” and therefore exempt under the welfare exemption?

(3) Is hospital property upon which buildings are under construction “property used exclusively for hospital purposes” and therefore exempt under the welfare exemption?

(4) Is hospital property used to furnish required recreational facilities for its student nurses, interns and residents “property used exclusively for hospital purposes” and therefore exempt under the welfare exemption?

(5) Is hospital property used to house a “thrift shop” in conjunction with its charitable activities “property used exclusively for charitable or hospital purposes” and therefore exempt under the welfare exemption?

(6) Is the tax levied by the Los Angeles Flood Control District an exception to the general exemption granted under section 214 of the Revenue and Taxation Code?

Until the fiscal years 1946–1947, hospital and charitable organizations bore their pro-rata share of the property tax load. However, at the general election held November 7, 1944, an amendment to the California Constitution was approved by the voters and became section 1c of Article XIII. The constitutional section reads as follows:

“In addition to such exemptions as are now provided in this Constitution, the Legislature may exempt from taxation all or any portion of property used exclusively for religious, hospital or charitable purposes and owned by community chests, funds, foundations or corporations organized and operated for religious, hospital or charitable purposes, not conducted for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.”

In the year 1945, the Legislature, under the permission granted it by the foregoing constitutional amendment, enacted section 214 of the Revenue and Taxation Code. This section reads as follows:

“214. Welfare exemption: Requisites: Construction. Property used exclusively for religious, hospital, scientific, or charitable purposes owned and operated by community chests, funds, foundations or corporations organized and operated for religious, hospital, scientific, or charitable purposes is exempt from taxation if:

“(1) The owner is not organized or operated for profit;

“(2) No part of the net earnings of the owner inures to the benefit of any private shareholder or individual;

“(3) The property is not used or operated by the owner or by any other person for profit regardless of the purposes to which the profit is devoted;

“(4) The property is not used or operated by the owner or by any other person so as to benefit any officer, trustee, director, shareholder, member, employee, contributor, or bondholder of the owner or operator, or any other person, through the distribution of profits, payment of excessive charges or compensations or the more advantageous pursuit of their business or profession;

“(5) The property is not used by the owner or members thereof for fraternal or lodge purposes, or for social club purposes except where such use is clearly incidental to a primary religious, hospital, scientific, or charitable purpose;

“(6) The property is irrevocably dedicated to religious, charitable, scientific, or hospital purposes and upon the liquidation, dissolution or abandonment of the owner will not inure to the benefit of any private person except a fund, foundation or corporation organized and operated for religious, hospital, scientific, or charitable purposes.

“The exemption provided for herein shall be known as the ‘welfare exemption.’ This exemption shall be in addition to any other exemption now provided by law. This section shall not be construed to enlarge the college exemption or to extend an exemption to property held by or used as an educational institution of less than collegiate grade.”

It is first contended by defendants that the welfare exemption, California Const., Art. XIII, sec. 1c, and sec. 214, Revenue & Taxation Code, must be strictly construed and its provisions given a narrow and limited meaning.

We are persuaded that in construing statutes or constitutional provisions our efforts must be directed toward ascertaining their true intent. If the language used is such that its meaning is obvious and not ambiguous, then resort to extrinsic aid becomes unnecessary. The rule of strict or liberal construction becomes important where the language of the legislative enactment indicates a purpose and an intention to give the words therein used a strict or a broad meaning. It is also the law that when by a strict and narrow construction of a statute the result would inevitably lead to mischief or absurdity, while a broader interpretation would reflect sound sense and wise policy, the former should be rejected and the latter adopted. Robbiano v. Bovet, 218 Cal. 589, 595, 24 P.2d 466. The general terms in a statute will be limited in their scope to avoid an interpretation which leads to injustice, oppression or absurd consequences. People v. Ventura Refining Co., 204 Cal. 286, 290, 268 P. 347, 283 P. 60.

Starting out with the proposition that under the foregoing rules the cardinal principle in construing a constitutional or statutory provision is to ascertain its intent; that the interpretation adopted must be reasonable and that the construction must be such as to give a sensible and intelligible meaning to every part of it so as to avoid absurd and unjust consequences, we are confronted with the problem of ascertaining and determining what the Legislature intended by using the words “property used exclusively for religious, hospital, scientific, or charitable purposes” (emphasis added) Sec. 214, Revenue & Taxation Code.

However, before proceeding to a discussion of the legislative intent as evidenced by the foregoing words used in the statute, it seems appropriate to suggest that a reasonable construction of the welfare exemption is grounded upon sound legal principles. The existence in the community of a hospital which admits, cares for and gives medical aid to the sick and afflicted whether rich or poor, not without compensation in all cases, but where in all cases, any fees collected go to pay the expense of operation of the hospital and not to the profit of the founders or shareholders is a public charity in the fullest sense. Scripps, etc., Hospital v. Cal. Emp. Comm., 24 Cal.2d 669, 675, 151 P.2d 109, 155 A.L.R. 360. The existence of such hospitals furnishes to some extent a relief of the burden upon the state to care for and conserve the interests of its citizens. The policy of tax exemption of hospitals is not founded on maudlin sentiment but upon a sound economic principle that the benefits derived by the community at large from the services rendered by such institutions far outweigh the trivial inequality caused by an exemption of their property from taxes. Their ultimate contribution to the public good returns more than a fair equivalent for the exemption afforded them. It is therefore, at once apparent and manifest that such exemptions are not merely an act of grace on the part of the state, but stand squarely on the best interests of the state itself.

In arriving at a determination of the issues presented on this appeal we are first led to a consideration of what is a “hospital” and what constitutes a “use for a hospital purpose”? In their brief, respondents answer the first of those queries as follows:

“A hospital is primarily a service organization. It serves three groups: Its patients, its doctors, and the public. It furnishes a place where the patient, whether poor or rich, can be treated under ideal conditions. It makes available room, special diet, X-ray, laboratory, surgery, and a multitude of other services and equipment now available through the advances of medical science. Essential to the administration of these techniques is the corps of highly trained nurses and student nurses who are on duty 24 hours per day. In the large hospitals there are the interns and residents whose presence make it possible for the hospital to do a better job. In addition, the hospital must be kept spotlessly clean; it must have power and utilities available even though the standard source of these services is cut off. It must have special meals and diets prepared and served throughout the day and night. It must have administration to see that its services function properly and are coordinated, and that patients are received and cared for regardless of the hour or the patient's condition. Nothing can be left to chance because a slip may mean a life or many lives. These facilities also stand ready to serve the community in times of epidemic or disaster.”

As to what is meant by the phrase “hospital purpose” we are persuaded that it embraces those facilities or services that must be regarded as reasonable, necessary or appropriate to accomplish the functions of a hospital in furnishing a complete and efficient hospital service to its patients, its doctors, and its community.

The first question presented is whether the use of property by plaintiff hospitals for a nurses' training school and to provide housing for hospital interns, residents, student nurses and certain other alleged essential employees required to be readily available constitutes a use exclusively for hospital purposes and therefore renders the property exempt under the welfare exemption. We are impressed that in order to be “used exclusively” as contemplated by the statute, the use must be essential to the operation and conduct of the hospital.

If the major hospitals did not operate nursing schools, no student nurses would be available and resort would have to be made to registered nurses at much greater expense to patients. And obviously, if hospitals did not train nurses, eventually there would be no registered nurses available. Recognizing that the greater part of a nurse's training is in actual work with patients, our California law, Business & Professions Code, sec. 2786, requires that an accredited school of nursing must be “affiliated or conducted in connection with one or more hospitals.” In connection with this problem, we regard as pertinent the language used by our Supreme Court in the case of Lutheran Hospital Society v. County of Los Angeles, 25 Cal.2d 254, 257, 258, 153 P.2d 341, 344, as follows:

“* Furthermore, it is apparent that in the ordinary acceptation of the term, a hospital is not considered as an ‘educational institution of collegiate grade’ or as a ‘college or seminary of learning.’ In this field of legislation the Legislature may well have concluded that the training of women as nurses is mainly in connection with and for the benefit of the hospital (see article 2; Ch. 6, div. II of the Business and Professions Code *), and that the property used for such purposes is entitled only to the classification accorded general hospital property devoted to nonprofit or charitable uses. The record indicates that upon application to the Board of Equalization and a presentation of facts showing its use exclusively for charitable and nonprofit purposes, the plaintiff received a 50 per cent reduction in the assessed valuation of all of its property including Larson Hall. Total exemption of the property of such institutions was rejected by the electors of the state in November, 1930, when it was proposed to add section 1 5/8 to Article XIII of the Constitution to accomplish that purpose. However, at the November, 1944, election, proposed section 1c of Article XIII was added, making it permissive for the Legislature to exempt all or a portion of the properties of nonprofit hospital corporations.” (Emphasis added.)

In the case of Immanuel Presbyterian Church v. Payne, 90 Cal.App. 176, 265 P. 547, it was held that property adjoining the church and used by worshipers for an auto parking lot came within the constitutional provision which exempts from taxation so much of the real property, on which buildings used solely and exclusively for religious worship are situated, as may be required “for the convenient use and occupation of said buildings.” Const. art. 13, § 1 1/2. We entertain no doubt that a nurses' training school is an integral part of the hospital and necessary for the purposes of such an institution to improve the facilities of the same in caring for the sick and afflicted.

Little need be said in determining whether nurses' homes come within the welfare exemption and its application to specific facilities. It is the purpose to which the facility is put that is important. And it is a matter of common knowledge that in many if not most hospitals, nurses and student nurses sleep in the hospital building or in a building adjoining the hospital. Manifestly, an emergency condition may arise from time to time during the night requiring immediate attention and which makes it necessary to have more nursing personnel available than is actually on night time duty. This can be accomplished as alleged by plaintiffs, only by furnishing housing facilities upon the hospital grounds for nurses, student nurses and kindred aids. The nature and character of the property provided for such use would, under the pleadings in the instant cases, be identical with the nature and character of the hospital. Such property must therefore, be held as being used exclusively for hospital purposes. Aultman Hospital Ass'n v. Evatt, 140 Ohio St. 114, 42 N.E.2d 646, 647; Corporation of Sisters of Mercy v. Lane County, 123 Or. 144, 261 P. 694, 700; Appeal of Parmentier et al., 139 Pa.Super. 27, 11 A.2d 690, 693; Nuns of Third Order of St. Dominic v. Younkin, 118 Kan. 554, 235 P. 869; Calais Hospital v. City of Calais, 138 Me. 234, 24 A.2d 489; Dougherty v. City of Philadelphia, 139 Pa.Super. 37, 11 A.2d 695.

Insofar as the exemption of property used to provide housing for interns, superintendents and other employees is concerned, it will suffice to say that fundamentally the cases involving the exemption of various types of institutions from taxation and which have dealt with the inclusion therein of housing facilities supplied to members of the staff, nurses, superintendents and other types of personnel, proceed on the basis that the administration of the affairs of the institution requires that certain personnel and employees be located on the property to the end that the operation of the institution may be efficiently conducted and supervised and that emergency cases may be cared for as they arise. It is commonly and generally known that admittance may be gained to a hospital at any hour of the day or night. To supply such service, help obviously must be on hand to provide for the handling of such emergencies. Illustrative of what we have just said we quote the following allegations, admitted by the demurrer, and contained in the complaint filed by plaintiff Lutheran Hospital Society of Southern California in case numbered Civil 16537:

“That plaintiff receives patients at all hours of the day or night and in connection therewith must have available employees to receive these patients, enter them in the hospital record, make up their rooms, attend to their personal effects, clean up after emergency operations, do the clean-up and maintenance work around the hospital at such times that it will not interfere with the essential services of the hospital. To do part of this work The California Hospital employs 48 housekeeping employees including porters and orderlies of whom 26 are housed by it, and the Santa Monica Hospital employs 30 housekeeping employees including porters and orderlies of whom 2 are housed by it. In addition plaintiff employs a large body of employees doing what it classifies (as) administration work which group includes clerks, bookkeepers, stenographers, telephone operators, engineers and the like. Of these the California Hospital employs 263 and houses 26, and the Santa Monica Hospital employs 104 and houses 5.

“That plaintiff operates its dietary department upon a split-shift (four hours' service during the day and four hours' during the night). That if plaintiff operated its said personnel on straight eight-hour shifts the unions to which such personnel belong would require plaintiff to hire more personnel than are required under the split-shift plan. That plaintiff thereby effects a substantial saving by employing the said personnel on a split-shift basis. That it is difficult to obtain competent personnel to work on a split-shift basis unless they are actually housed in the immediate vicinity since a split-shift requires them to be at the hospital for two different periods during each 24 hours. That the morning shift in the dietary department starts at between 4:00 o'clock and 6:00 o'clock at a time when public transportation is not readily available. That plaintiff houses 57 of its 67 dietary employees employed at the California Hospital and 2 of its 54 employees employed at the Santa Monica Hospital.

“That the plaintiff does not employ a night-shift engineer at the Santa Monica Hospital, but furnishes its two daytime engineers with housing on its premises so that they will be readily available in case of emergency to service the pressure boiler maintained by plaintiff to furnish steam to its sterilizers as well as general heating service.”

We entertain no doubt that the term “property used exclusively for * hospital * purposes,” as used in section 214 of the Revenue & Taxation Code, means not only the buildings and grounds actually used for housing the patients, but adjacent buildings and grounds which are reasonably necessary or appropriate to the purposes and objects of the hospital and which are used directly for the promotion and accomplishment of the same. Judged by this standard, it must be held that the property used to provide housing for interns, superintendents and other employees as aforesaid is exempt under the welfare exemption. Corporation of Sisters of Mercy v. Lane County, supra; County of Hennepin v. Brotherhood of Gethsemane, 27 Minn. 460, 8 N.W. 595, 38 Am.Rep. 298; Aultman Hospital Assoc. v. Evatt, supra; Calais Hospital v. Calais, supra; Appeal of Parmentier, et al., supra.

We are next confronted with the question of whether buildings under construction on the first Monday in March, when such buildings had not been but were intended for use exclusively for hospital purposes, and were thereafter actually so used, are within the welfare exemption.

This issue relates to the second and fourth causes of action of plaintiffs Hugh K. Walker, et al. (Hollywood Presbyterian Hospital) in case bearing number Civil 16536.

The judgment of the trial court herein sustained defendant's demurrrers to these two causes of action, thereby holding that none of the real and personal property of plaintiffs described in their second and fourth causes of action was exempt from taxation under the provisions of section 214 and 254.5 of the Revenue and Taxation Code. While holding that completed buildings used exclusively for housing facilities for student nurses were tax exempt, the trial court concluded that the welfare tax exemption does not apply to property on which buildings were under construction on the tax day, even though such buildings were designed and intended exclusively for a hospital or for any other hospital purposes.

With reference to this issue, plaintiffs (Hollywood Presbyterian Hospital) alleged in Paragraph II of both the second and fourth causes of action, after describing the property involved in each cause of action:

“That on the first Monday of March, 1946, there was being constructed on this property for plaintiffs a building designed to be used exclusively as a dormitory and residence for student nurses attending plaintiffs' School of Nursing hereinabove referred to. That construction of said building began on or about September 1, 1945, and said building was placed in use as such dormitory and residence on or about July 1, 1946, and has been so used ever since said date. That construction of said building was approximately eighty-five per cent (85) completed on the first Monday of March, 1946.”

Insofar as allegations of fact and not conclusions of the pleader are concerned, the same are, of course, admitted by the demurrer of defendants.

In urging the correctness of the action of the trial court defendants lean heavily upon the case of Southern California Telephone Company v. Los Angeles County, 212 Cal. 121, 125, 126, 298 P. 9, 11, which involved the taxation of a building under construction belonging to a telephone company which if “used exclusively in the operation of their business” was subject to assessment by the State Board of Equalization and exempt from county taxation. In the case just cited, the court said, 212 Cal. at page 125, 298 P. at page 11:

“In San Bernardino v. State Board of Equalization, 172 Cal. 76, 79, 155 P. 458, 460, the court said: ‘The measure of the taxing power of the local authorities, applied in all of the cases, is not the quality or the nature of the property so much as its use.’ It may readily be conceded that none of these decisions deals with facts similar to those involved herein, but they indicate an interpretation of the words ‘operative’ and ‘used exclusively in the operation of their business' to mean an actual use of the property. It may also be observed that other states, in dealing with tax exemptions, have interpreted the words ‘used exclusively’ to require an actual use. *” (Citing cases.)

We do not regard this case as determinative of the question now before us. The case in question involved taxation of a corporation organized and operated for profit and not the question of tax exemption of a non-profit hospital whose property is “irrevocably dedicated to * hospital purposes and upon the liquidation, dissolution or abandonment of the owner will not inure to the benefit of any private person except a fund, foundation or corporation organized and operated for * hospital *, or charitable purposes.” By their very incorporation for purely nonprofit hospital purposes, they have made a contract with the state, effectually constituting those in charge of the enterprise as trustees of a special trust and in their last analysis and their legal effect, the charter of such institutions became declarations of trust.

As heretofore stated, the primary principle in construing a constitutional or statutory provision is to ascertain its intent, and the interpretation must be reasonable to the end that conclusions reached thereon will result in a sensible and intelligent meaning, devoid of absurdity and injustice in the ensuing consequences.

It was undoubtedly this concept of the rule of interpretation that led the court in the case of Southern California Telephone Company v. County of Los Angeles, supra, relied upon by defendants, to say, 212 Cal. at page 126, 298 P. at page 11:

“* Of course, it cannot be doubted that it is the duty of a utility to plan and prepare for emergency and future needs of its business; and we are disposed to give a broad interpretation to the constitutional provision. No one would seriously doubt that extra equipment for replacement purposes or for emergency use is property ‘used’ by the utility, even though on the taxable date it was not in use, and even though at that date it had never been actually placed in use. And the same is true, we think, of necessary additions or betterments when the same are completed. The reason for this is clear enough. It is necessary that this property be on hand when needed, and it is available for use at any time. It is in the same classification as property normally in use, but temporarily out of use, which has been held to come within the meaning of an ‘actual use’ provision. Seaside Home v. State Board of Taxes, 98 N.J.L. 110, 118 A. 704. It was never intended that local assessors should minutely scrutinize the entire system of the utility to select and tax locally isolated parts thereof which on the tax date or during the taxable year had performed no actual service. We accept the proposition that property which is necessary for the efficient operation of the business, and is available for use, is operative property whether actually placed in use or not.” (Emphasis added.)

We are not here confronted with a situation wherein the plaintiffs in question owned vacant property with the expressed intention of starting the construction of a hospital or hospital facilities thereon at some future date. Under the pleadings in the instant action, defendants by their demurrers have admitted that on March 1, 1946, the tax assessment day, there was under construction on this property, and approximately eighty-five per cent (85%) complete, a building designed to be used exclusively as a dormitory and residence for student nurses, and that the building was completed and placed in use as such dormitory and residence about July 1, 1946, an has been so used ever since.

We are persuaded that the weight of authority requires that under a reasonable interpretation of section 214 of the Revenue and Taxation Code, the property immediately here under consideration be considered as “used exclusively” for hospital “purposes.”

We are cited to no California cases directly in point and our own research therefor has been unavailing. However, cases from other jurisdictions present impelling reasons for the conclusion just stated by us.

For example, in El Jebel Shrine Ass'n v. McGlone, 93 Colo. 334, 26 P.2d 108, the Colorado Constitution exempted from taxation “lots, with the buildings thereon, if said buildings are used solely and exclusively for religious worship, for schools, or for strictly charitable purposes.” Const. art. 10, § 5. Plaintiff Shrine Association had started construction on its land of a building designed to be used for charitable purposes, but had proceeded no further than to erect the foundation. Work on the building had been stopped, apparently because of the business depression, but plaintiff's complaint alleged that the property in question was acquired for charitable purposes, and that it was the intent and purpose to complete the buildings on the lots to be used for charitable purposes. In its opinion, the court emphasized that plaintiff's intent and purpose were to complete the buildings for a benevolent, charitable use as soon as conditions improved. The Supreme Court of Colorado held that the property was exempt from taxes, and reversed the judgment of the trial court which had sustained defendants' demurrer.

While the rule of liberal construction is applied by the courts of Colorado, nevertheless the reasoning is convincing under the rule of interpretation adopted in California.

Additional cases supporting our view include McGlone v. First Baptist Church of Denver, 97 Colo. 427, 50 P.2d 547, 548; Forsesee v. Board of Directors of Bergman Special School District No. 8, 213 Ark. 569, 211 S.W.2d 432, 433; Osteopathic Hospital of Maine v. Portland, 139 Me. 24, 26 A.2d 641, 644; New England Hospital v. Boston, 113 Mass. 518, 521; Trustees of Property of Protestant Episcopal Church v. State Tax Commission, 39 N.M. 419, 48 P.2d 786, 787; Trinity Church v. Boston, 118 Mass. 164, 166.

We are convinced that the weight of authority supports the rule thus epitomized in the case of In re Appeal of Children's Hospital of Philadelphia, 82 Pa.Super. 196, 198, 199:

“It is well settled in this State that the right to exemption of property from taxation is based upon use * But our Supreme Court has never held that an addition to a building which was in use as a place of religious worship, a hospital or other purely public charity is subject to taxation prior to the time when it is actually used for religious or charitable purposes. Would anyone contend that if a hospital burned to the ground, that the ground on which a new structure was being built and the incompleted building itself, would be subject to taxation? We see no difference in principle between such a case and the one before us. It cannot be said that the ground and the partly erected building thereon is not a part of the hospital merely because the operations of the hospital are excluded from it while the building is in course of erection * While it is the use of a hospital plant which determines its character as a public charity, it would be sticking in the bark to hold that an addition which is being constructed to a building which is in actual use as a purely public charity is not a part of the institution. It is not to be considered independently of the main structure. It will increase its efficiency and facilities. To entitle it to consideration as a purely public charity, it is essential that it be devoted to the purposes for which the charity operates: Phila. v. Jewish Hospital Association, supra [148 Pa. 454, 23 A. 1135]. We think that there is sufficient devotion to hospital purposes under the circumstances to give it character as part of the hospital.” (Emphasis added.)

The next question presented is whether property used to furnish limited recreational facilities to student nurses, interns and residents is entitled to exemption. This issue relates to the fourth cause of action of plaintiff Lutheran Hospital Society of Southern California (California Hospital) in case bearing Civil No. 16537. Defendants demurrer to this cause of action was sustained by the trial court.

The property immediately in question consists of a tennis court owned by the plaintiff in question, located on the hospital grounds, used as an outdoor recreational facility for its student nurses, interns and residents. In its complaint plaintiff California Hospital alleged that “To qualify for the training of interns or residents under the rules of the American Medical Association Council on Medical Education and Hospitals a hospital must provide for the health, care, housing, recreation and food for its residents and interns.” (Emphasis added.)

There is no denial of the fact that the nature and type of the recreational facility here under consideration is of a reasonable character both as to the relationship of its cost and the size and location of the hospital. In the case of Corporation of Sisters of Mercy v. Lane County, 123 Or. 144, 261 P. 694, 697, 700, wherein land “actually occupied for the purpose” of a hospital was held tax exempt, there was included a tennis court used “to afford recreation for the pupil nurses and employees of the hospital, and sometimes the patients.”

In State v. Academy of Our Lady of Lourdes, 221 Minn. 227, 21 N.W.2d 617, 618, defendant hospital claimed exemption from taxation under the Constitution of the State of Minnesota, Art. 9, sec. 1, which provided:

“* public hospitals, * institutions of purely public charity, * shall be exempt from taxation *.” The court held that defendant was clearly a public hospital and that its property, including “a nurses home, swimming pool, auditorium, recreation hall” was tax free. (Emphasis added.)

Defendants call attention to the fact that in the first of the two last cited cases “it appears that the tennis court was sometimes used by patients,” and that in the last cited case, “the statement of facts shows that the hospital contained a swimming pool and recreation hall but it is not shown that these were not maintained primarily for the use of patients and they were not considered separately from the rest of the hospital.” Defendants then proceed with the statement:

“It is submitted that had the tennis court here involved been maintained for the use of patients it might be entitled to exemption but that there is no authority for exempting it when it is maintained exclusively for the use of employees and that the arguments against exempting housing for employees apply also to the tennis court.”

We fail to perceive the force of this argument. To us it appears manifest that it is equally as important to conserve the health of nurses, student nurses, interns and residents of the hospital as it is to restore the health of its patients, because upon the existence of the former depends to a large extent the accomplishment of the latter. We conclude that the recreational facility here in question is reasonably necessary or appropriate to the purposes and objects of a hospital and must therefore be classified as used exclusively for hospital purposes and entitled to the benefits of the welfare exemption statute. Revenue & Taxation Code, sec. 214. Defendants' demurrer to the fourth cause of action of plaintiff California Hospital should have been overruled.

We are now confronted with the question of whether hospital property used to house a “thrift shop” in conjunction with the charitable activities of such hospital is entitled to exemption.

This issue relates to the seventh cause of action of plaintiff Lutheran Hospital Society of Southern California (California Hospital) in case bearing Civil No. 16537. Defendant's demurrer to this cause of action was sustained by the trial court.

The “thrift shop” is located in a portion of plaintiff hospital building. In its complaint plaintiff California Hospital alleged in detail the use and purpose of this part of its building as follows:

“This building is owned by the plaintiff, but the lower floor which is in issue in this cause of action is used as a Thrift Shop where donated clothing and furnishings are sold by the Women's Auxiliary of the California Babies' and Children's Hospital, an authorized agency of the Los Angeles Community Chest. The entire proceeds of the shop are devoted to the maintenance of the Free Children's Clinic maintained jointly by the plaintiff and the agency. The above use of the property is deemed by the board of directors of the plaintiff to be a charitable use.”

Defendants contend that according to the aforesaid complaint, the sole purpose of the thrift shop is to raise money and that its exemption is specifically forbidden by subparagraph 3, sec. 214 of the Revenue & Taxation Code, which provides that property is exempt from taxation only if “the property is not used or operated by the owner or by any other person for profit regardless of the purposes to which the profit is devoted.”

Under the rule that claims for exemption from taxation must be strictly, but reasonably construed, we are convinced that the property upon which the thrift shop was conducted was exclusively used for hospital and purely charitable purposes. This is not a commercial enterprise and does not compete with taxpaying business. The property is used for the purpose of receiving and converting gifts of clothing and furnishings into cash to assist in financing a free clinic for children—strictly a hospital purpose. Who would contend that if a gift of bonds was received by a hospital, converted into cash and used to erect a hospital building, that such property would not be exempt? Yet, such a situation is analogous to the one with which we are confronted, wherein gifts are made, converted into cash, and utilized for a strictly hospital purpose. The thrift shop is not operated for “profit” as is generally the primary purpose of business. The primary purpose of the thrift shop, on the contrary is to aid sick and afflicted children by maintaining for their benefit a free clinic. The case of Cypress Lawn Cemetery Association v. San Francisco, 211 Cal. 387, 295 P. 813, cited by defendants is not persuasive. In that case the court had under consideration a construction of sec. 1b of Article XIII of the State Constitution, adopted November 2, 1926, reading as follows:

“All property used or held exclusively for the burial or other permanent deposit of the human dead or for the care, maintenance or upkeep of such property or such dead, except as used or held for profit, shall be free from taxation and local assessment” (emphasis added).

Plaintiff cemetery was a cemetery association and in possession of certain trust moneys, a portion of which it had invested in a hotel then operated by it, the profits from which hotel operated by the cemetery association were used exclusively for the care, maintenance and upkeep of the cemetery in question and the care of the dead interred therein. The court held that the purpose of the constitutional amendment was to protect and preserve the place where the dead are buried against interference of possible sales for unpaid taxes, thereby keeping such property free from molestation of desecration. That the constitutional amendment was never intended to relieve from taxation, property operated by the cemetery association for profit, but only property used for burial of the dead. In the case now engaging our attention no analogous situation is presented. The thrift shop is not maintained for profit. It operates only to convert the gifts of personal property into cash to be used in maintaining a free clinic for children—purely a hospital purpose, which the welfare exemption statute and the constitutional amendment under which it was enacted, clearly intended to exempt from taxation. Upon full consideration of the record herein and the able briefs and argument of counsel for each side, we are convinced that the property utilized for the operation of the thrift shop falls within a reasonable definition of “Property used exclusively for * hospital * purposes” and is therefore tax exempt. Missouri Goodwill Industries v. Gruner, Mo.Sup., 210 S.W.2d 38. Defendant's demurrer to the seventh cause of action of plaintiff California Hospital should therefore, have been overruled.

Finally, we come to a consideration of the question whether the exemption from taxation granted the plaintiff under section 214 of the Revenue & Taxation Code includes the levy imposed by the Los Angeles County Flood Control District. In this regard the trial court sustained the contention of the five plaintiffs herein who claimed exemption from the flood control levy. The Los Angeles County Flood Control District was created by an act of the Legislature of the State of California entitled, “Los Angeles County Flood Control Act,” approved June 12, 1915, Stats.1915, p. 1502, Gen.Laws, Act 4463. Section 10 of the act empowers the Board of Supervisors of the district to levy a “tax” each year upon the taxable real property in the district sufficient to pay interest and installments of principal on the bonds and to pay other expenses of the district. Under the same section, such taxes are to be levied and collected at the time and in the same manner as the general taxes levied for county purposes.

When the constitutionality of the flood control statute was assailed, Los Angeles County Flood Control Dist. v. Hamilton, 177 Cal. 119, 169 P. 1028, its validity was sustained, the court holding that though the act used the expression “tax,” it in fact conferred authority merely to levy an assessment against the real property of the district on the basis of benefits and that the legislature itself had determined the question of these benefits when it authorized the assessment or tax against the real property on the basis of the assessed valuation thereof for general taxation purposes. Holding that the flood control district levy is a special assessment and not a tax is a long line of additional cases, including Los Angeles Ry. Corp. v. Los Angeles County Flood Control District, 78 Cal.App. 173, 180, 181, 248 P. 532; Los Angeles v. Los Angeles C.F.C. Dist., 11 Cal.2d 395, 80 P.2d 479; Los Angeles County F.C. Dist. v. Wright, 213 Cal. 335, 338, 2 P.2d 168; Inglewood v. County of Los Angeles, 207 Cal. 697, 702, 280 P. 360.

Defendants earnestly contend that the universal rule is that an exemption from special assessments must be expressed and will not be implied, and that an exemption from taxes does not include exemption from special assessments. However, in the case of Hollywood Cemetery Assoc. v. Powell, 210 Cal. 121, at page 133, 291 P. 397, 403, 71 A.L.R. 310, relied upon by defendants, the Supreme Court says: “And while we recognize the general rule that a mere exemption from ‘taxation’ does not exempt from local assessments, each case must largely depend upon the language of the statute giving the exemption.”

In the Hamilton case, supra, which is the cornerstone for the theory that the flood control levy is a special assessment, the issue urged here by defendants, that if exempted from payment thereof plaintiffs would be relieved from paying an assessment upon lands which will receive benefits from the flood control district, was suggested to the court, but decision thereon was specifically refused by the Supreme Court, which, 177 Cal. at page 130, 169 P. at page 1032 said: “The proper time to decide this question of interpretation will arrive when the question arises in a case involving the right to assess particular property. There is no occasion to decide it now.”

The present litigation presents an occasion for such a decision. Whether or not the Legislature in 1945 intended to include the flood control levy within the exemptions granted to hospitals and comparable charitable non-profit institutions must now be determined.

To us it seems pertinent in determining that intention to contrast the county flood control levy with what is typically characterized as a special assessment. In that regard, plaintiffs observe: “Most special assessments for various types of property improvements follow a similar pattern. The court will, undoubtedly, take judicial notice of the fact that most of such improvements in California for many years have been made in accordance with the provisions of the Improvement Act of 1911, presently comprising Division 7, Section 5000 et seq., of the California Streets and Highways Code. This is a typical special assessment statute and will be used for purposes of comparison.

“Section 5101 of this Code lists the types of improvements covered by that Act including grading, paving, sidewalks, sewer work, drainage, lighting, fire protection, tree planting, retaining walls, gas supply, and many other similar types of improvement. Under this Act the proceedings are commenced with a Resolution of Intention to make the proposed improvement. (Section 5130 et seq.) Notice thereof must be published and a public hearing held. (Sections 5133 and 5190.) Property owners are given an opportunity to protest. (Section 5220.) A resolution is then adopted authorizing the work and a contract is let. (Section 5240 et seq.)

“The Act solicitously avoids the use of the word ‘tax’ in its provisions covering the payment for the improvement. Section 5315 provides that ‘the expenses of the improvement shall be assessed upon the lots and lands fronting thereon *.’ If no bonds are issued such assessments are paid by the property owner to the contractor (Section 5390), or the Superintendent of Streets of the municipal unit involved (Section 5392). If bonds are issued, under Section 6400 et seq., the treasurer of the municipal unit involved executes the bonds and delivers them to the contractor. The bonds are in varying amounts, depending upon each particular unit of property involved and the total obligation of that unit with respect to the assessment (Section 6423), and that particular obligation alone constitutes a lien upon that particular property; thus the obligation of each property owner is a several one with respect to the assessment against his particular property and once he pays that his land is clear regardless of defaults by any other property owner. The installments on the bonds are, of course, paid to the treasurer of the municipal unit pursuant to a special card notice provided by law which is entirely different from the County Tax Bill.

“The contrast between the typical special assessment, as above summarized, and the Los Angeles County Flood Control District Act is striking. The latter is entirely different from the former in all respects relating to the creation of the lien, the coverage of the lien, and the method of the collection and payment of the levy. Insofar as they both purport to exact from the property owner the cost of an improvement to his property which increases its value, we respectfully refer this court to the Hamilton decision. It will be apparent from the discussion there, that in many instances the benefits accruing from Los Angeles County Flood Control expenditures do not enhance directly the particular land involved; the enhancement is merely indirect in a manner somewhat similar to the indirect benefits accruing to all property owners from the exercise of typical police and general governmental functions, which by tradition have always been financed by a general tax levy. Moreover, the Flood Control levy, unlike special assessments generally, is collected in the same manner and constitutes a lien in the same manner as the general tax levy. Each year the levy depends upon the District's costs for the ensuing year, and the removal of any lands from that taxation merely affects the levy for the ensuing year. By contrast, under the 1911 Improvement Act and comparable special assessments, the contractor or the bondholder would suffer an unfair loss if specific land subject to a special lien for a specific obligation were exempted from further payment of the obligation. Furthermore, in the typical special assessment situation, there is a direct benefit to all of the lands assessed which enhances the value of that particular land. Consequently, it is only in the most rare of situations where property is held exempt from a pure special improvement levy.” (Emphasis added.)

It is noteworthy that when the Welfare Exemption Act here in question was adopted by the Legislature in 1945, the Los Angeles County Flood Control levy had appeared as one of the levies on the general property tax bills for all prior years since the adoption of the Flood Control Act in 1915 and was in common parlance regarded as a “tax” imposed on all real property whether directly benefited or not. It is true that in the Hamilton case, supra, the flood control levy was viewed as a special assessment and in the case of the Los Angeles Ry. Corp. v. Los Angeles C.F.C. Dist., 78 Cal.App. 173, 248 P. 532, was held to be a special assessment not covered by a general exemption from taxes But in that case the taxpayer involved was a corporation operated for profit and the case involved an exemption which existed prior to the imposition of the county flood control levy. We are impelled to the conclusion that the nature of the exemptions sought to be extended to the non-profit charitable institutions by the welfare act indicates a legislative purpose and intention to give the words of the statute a broad rather than a strict meaning, to the end that the intended purposes thereof might be accomplished. It cannot be doubted that it was the intention of the legislature through the welfare exemption statute to exempt hospitals from all taxes in exchange for the benefits conferred upon the public by such institutions.

In its practical effect, the flood control levy is not an exaction for specific benefits accruing directly to the property taxed. It is such a direct benefit which undoubtedly is the principal reason for and gave rise to the general rule that a general tax exemption does not cover special assessments. Such a reason does not exist in the instant case. It is not unreasonable therefore, to impute to the legislature the intention under the language used, to exempt the property of public charities from such a levy.

The power of the board of the Los Angeles County Flood Control District to determine a levy, to be made upon all of the taxable property sufficient to cover the estimated expenses, including installments on bonds and interest, permits an annual adjustment of the levy so that there is no undue hardship if the exemption is applied to the real property of the charities here under consideration. It is not unreasonable to assume that it was this quality or character of the flood control statute which impelled our Supreme Court to hold in the case of Inglewood v. County of Los Angeles, supra, that public property was exempt from this levy even though it had been held in private ownership at the time of the particular improvement there involved. As was said in the case just cited, 207 Cal. at page 703, 280 P. at page 363:

“Nevertheless, the power to levy a special assessment is the exercise of the same power as that exerted in the levy of an ordinary tax for governmental purposes. Both have their source in the fundamental power inherent in all governments. Fallbrook Irr. Dist. v. Bradley, 164 U.S. 112, 17 S.Ct. 56, 41 L.Ed. 369; County of Santa Clara v. Southern Pac. R. Co., C.C., 18 F. 385, at page 411. In this latter case the court said: ‘Taxation for local improvements, or for city, county, or town purposes, involves the exercise of the same power which is exerted in taxation for state or general purposes. It is the sovereign power of the state in both cases which authorizes the tax, whether that power be exerted directly by an act of the legislature, or by a municipal body as an instrumentality of the state. “That these assessments,” says Cooley, speaking of such as are special, “are an exercise of the taxing power, has over and over again been affirmed, until the controversy may be regarded as closed.” ’

“While publicly owned and used property is not exempt from special assessments under the Constitution or statutory law of this state, there is an implied exemption of such property from burdens of that nature.”

In the case of Los Angeles County Flood Control District v. Hamilton, supra, 177 Cal. at page 131, 169 P. at page 1032, the flood control district conceded that the flood control levy might not apply to public property and property “devoted to a public use.” Giving to the words of the welfare exemption act a reasonable rather than a strict meaning, because of the wide and varied nature of the exemptions provided therein, we are persuaded that since the property here involved is devoted to a public charitable use it is entitled to exemption from the flood control levy along with the other general property taxes.

For the foregoing reasons, the judgments, and each of them are affirmed except as to counts two and four of plaintiffs' Walker, et al. (Hollywood Presbyterian Hospital) complaint, and counts four and seven of plaintiff Lutheran Hospital Society of Southern California. As to the last named four counts, the judgments are and each is reversed with directions to the court below to overrule defendants demurrer as to said counts and to permit defendants a reasonable time within which to answer said last named four causes of action, should they be so advised.

WHITE, Presiding Justice.

DORAN, J., concurs. DOOLING, J., assigned, deeming himself disqualified, did not participate. DRAPEAU, J., did not participate.