For the prosecutor, Thomas G. Haight and John A. Hartpence.
For the respondent city of Englewood, F. Hamilton Reeve.
Before Justices Heher and Perskie.
The opinion of the court was delivered by
HEHER, J. The decisive question here is whether the real and personal property of the prosecutor, Dwight School of Englewood, New Jersey, devoted to scholastic purposes, is exempt from taxation in virtue of the provisions of section 203 (4) of chapter 372 of the laws of 1931. Pamph. L. 1931, p. 905. The Bergen county board of taxation denied the claim for exemption, and sustained the assessment, for the purpose of taxation, made by the taxing district of the city of Englewood. The state board of tax appeals affirmed the judgment. The claimant thereupon sued out this certiorari.
The insistence of prosecutor is that the corporation is not conducted for profit; that the property included in the tax ratables is devoted exclusively to educational purposes, and that "it is an eleemosynary institution, pure and simple." But, without disputing these premises in their entirety, we cannot give assent to the view that the property in question is, in whole or in part, the subject of exemption from taxation within the intendment of the statute invoked.
The test is whether the purposes and objects of the school claiming the exemption are "fundamentally charitable or [114 NJL Page 596] philanthropic." Carteret Academy v. State Board of Taxes and Assessments, 102 N.J.L. 525; affirmed, 104 Id. 165. The claim for exemption here does not meet this standard or test of validity. In respect of this fundamental requirement, there is no substantial difference in point of fact between that case and this. The claimant here derives its corporate vitality from the statute providing for the incorporation of associations not for pecuniary profit. It was incorporated on June 24th, 1925. The design of its founders was to convey to the corporate body an existing privately-owned institution -- a very profitable enterprise -- maintained in the city of Englewood for the preparatory and general education of girls, under the name and style of "The Dwight School for Girls." The founders of the school were Miss Euphemia S. Creighton and Miss Ellen W. Farrar, who, shortly after the corporation came into being, conveyed to it title, in fee-simple absolute, to the lands devoted to school purposes, and with Miss Frances Leggett, who had acquired Miss Farrar's interest in the school, transferred to the corporation the title to the furniture, equipment and personal property contained therein. The declared design of the grantors was to secure a continuance of the school "along and according to the ideals" established by the grantors; and to effectuate that purpose it was "deemed advisable that a corporation without capital stock and without hope of pecuniary profit should be organized with a substantial board of trustees whose interest in Englewood and in the maintenance of a desirable private school for girls would assure the continuation of the enterprise." The institution has since been conducted as a comparatively exclusive private school for girls. The annual tuition fee ranges between $200 and $500; the maximum annual rate for boarding pupils is $1,500. On the date of the assessment at issue, the enrollment was two hundred and thirty pupils. The teaching staff consisted of thirty-two -- an average of one teacher for seven students. There were twelve additional employes. At the time in question less than half of the pupils were residents of the city of Englewood; many of the remainder were not residents of this state. There was a considerable annual
outlay of money devoted to advertising the advantages of the school, in order to attract pupils from distant parts. The corporation pays annuities of $800 each to two former teachers who render no service in return. This obligation is imperative; the conveyance of the property was conditioned upon its performance. The salaries paid to the teaching staff compare favorably with the salaries paid in schools conducted for profit. Two of the trustees are teachers, and receive salaries as such; in addition, one is furnished board and lodging at the school.
The annual income has been in excess of operating expenses; but, it is insisted, that the surplus is more apparent than real, in that "depreciation on buildings and the amount necessary to annually amortize one of the mortgages," are properly included in the operating expenses. And it is said that "boarding pupils are taken and sought in order to make it possible to educate the children of Englewood and vicinity for a smaller tuition fee than would otherwise be possible." We are not persuaded of the validity of this claim. Considering the annual mortgage amortization payment of $4,500 as an operating expense, the school still yields a substantial surplus income. For the five-year period ending September 30th, 1932, the excess of income over expenses (including in the latter ordinary expenses, taxes, maintenance and repairs in the sum of $53,483.76, the mortgage amortization payments, and annuities) was $100,905.44. The excess income for the year ending September 30th, 1932, after the making of like deductions, was $13,930.64; in no year during that period did the expenses equal the income. The surplus account increased from $109,572 in 1928, to $200,569 on September 30th, 1932. Prosecutor maintains that the surplus is requisite "to provide necessary depreciation reserves," and that "no more is charged [for tuition] than is necessary to pay the operating expenses, depreciation and amortization charges." This is not the fact. Concededly, the school was a very profitable institution for many years before its transfer to the corporation; and, although its income has not been materially lessened since, the tuition fees have not been
reduced. And it is also worthy of note that to the school's board of trustees is committed the exclusive authority to ...