Opinion
No. 72-106
Decided March 27, 1973. Rehearing denied April 17, 1973. Certiorari granted August 20, 1973.
Injunction action against defendant as an alleged violator of the Proprietary School Act. From issuance of the injunction ordering defendant to cease operations unless it complied with the provisions of the subject act, the defendant appealed.
Reversed
1. STATUTES — Rule of Construction — Undefined Term — Common Law — Existing — Time of Enactment. By an elementary rule of statutory construction, an undefined term in the statute may be understood in light of the common law and scheme of jurisprudence existing at the time of its enactment.
2. SCHOOLS AND SCHOOL DISTRIS — Educational Institution — Eleemosynary — Corporation — Distinctive Features — Described. The distinctive features of an eleemosynary or charitable educational corporation are the absence of capital stock, the lack of any provision for distributing dividends or profits, the derivation of funds mainly from public and private charity, and the holding of these funds for educational objectives, and, where tuition is charged, an educational institution may still be an eleemosynary corporation if all revenues are used to further the objects of the corporation.
3. Eleemosynary Institution — Facts Established — Defendant — Excluded — — Proprietary School Act. Where by facts uncontradicted in the record it was established that defendant is a non-profit Colorado corporation whose stated purposes are the promotion of creative and scientific education and the maintenance and organization of an institution to conduct such educational endeavors, that the trustees of the corporation serve without salary, that the president's wife had been paid an average of approximately $4,300 a year for working full time for the school, that the president had not received any compensation from the school for six years, that the teaching salaries paid were substantially lower than at other comparable institutions, that in the history of the corporation there had been no distribution of dividends or profits and the by-laws provided for none, and that the funds for operation of the school are derived from the school's operation and public and private charity and are devoted exclusively to the school's educational purposes; held, these facts demonstrate that defendant is an eleemosynary school and therefore specifically excluded from the Proprietary School Act.
Appeal from the District Court of the City and County of Denver, Honorable James C. Flanigan, Judge.
Duke W. Dunbar, Attorney General, William Tucker, for plaintiffs-appellees and third-party defendant-appellees.
Henry and Henry, Hubert D. Henry, for defendant and third-party plaintiff-appellant.
Division II.
The Attorney General applied to the District Court under the provisions of 1967 Perm. Supp., C.R.S. 1963, 146-3-14, for an injunction against Colorado Polytechnic College as an alleged violator of the Proprietary School Act of 1966. 1967 Perm. Supp., C.R.S. 1963, 146-3-1, et seq. The court determined that defendant was a proprietary school under the purview of the proprietary school act and issued an injunction ordering defendant to cease operations unless they complied with the provisions of that act. We reverse.
At trial, defendant denied that it operated a school which was a proprietary school. It asserted that it was lawfully operating a school outside the purview of the statute. Defendant also filed a third-party complaint against Trinidad State Junior College, The Community Colleges of Denver, Metropolitan State College, and the University of Colorado, which was dismissed by the trial court.
Because we here determine that defendant is an eleemosynary corporation, and therefore not subject to the proprietary school act, we do not find it necessary to consider the dismissal of the third-party complaint or defendant's other assertions of error.
[1] The proprietary school act excludes from the definition of "proprietary school" an "eleemosynary school or institution." 1967 Perm. Supp., C.R.S. 1963, 146-3-3(3)(c). The term "eleemosynary" is not defined by the statute. As an elementary rule of statutory construction, an undefined term in the statute may be understood in light of the common law and scheme of jurisprudence existing at the time of its enactment. 3 J. Sutherland, Statutes and Statutory Construction § 5301 (3rd ed.).
"Where a word or phrase has a clear, definite, and settled meaning at common law, it is to have the same meaning in the construction of a statute in which it is found, unless it is plainly apparent that such was not the legislative intention."
H. Black, Construction and Interpretation of the Laws § 57. We have perceived no indication of legislative intent that the term "eleemosynary" should be defined in any other way than its settled meaning at common law.
[2] The leading case in this area is based in large part upon Blackstone's definition of eleemosynary corporations. "The eleemosynary sort are such as are constituted for the perpetual distributions of the free-alms, or bounty, of the founder of them, to such persons as he has directed. Of this kind are all hospitals for the maintenance of the poor, sick and impotent; and all colleges both in our universities and out of them . . . ." 1 Blackstone Commentaries 471.
This definition was applied in the case of Trustees of Dartmouth College v. Woodward, 17 U.S. 518, 4 L.Ed. 629, which was concerned with the matter of a charter granted by the British Crown to the Trustees of Dartmouth College. The entity in question was determined to be an eleemosynary corporation because it was a private charity founded and endowed by an individual who obtained a charter for the better administration of the charity. The classification of a corporation set up to administer an educational institute as eleemosynary is not unique. Board of Education v. Greenebaum Sons, 39 Ill. 609; American Asylum v. Phoenix Bank, 4 Conn. 172. In cases under Section of Article 20 of the California Constitution, which states "no perpetuity shall be allowed except for eleemosynary purposes," California courts have held that eleemosynary is synonymous with the word charitable as used in the law of trusts. In addition, trusts for strictly educational purposes have been defined as eleemosynary trusts. People ex rel. Ellert v. Cogswell, 113 Cal. 129, 45 P. 270; In re Bailey's Estate, 19 Cal. App. 2d 135, 65 P.2d 102. The cases have determined that even where tuition is charged an educational institution may still be an eleemosynary corporation where all revenues are used to further the objects of the corporation. Berry v. Odom, 222 F. Supp. 467; Z. Smith Reynolds Foundation Incorporation v. Trustees of Wake Forest College, 227 N.C. 500, 42 S.E.2d 910. The distinctive features of an eleemosynary or a charitable educational corporation are the absence of capital stock and the lack of any provision for distributing dividends or profits, the derivation of funds mainly from public and private charity, and the holding of these funds for educational objectives. Farm Home Savings Loan Association v. Armstrong, 337 Mo. 349, 85 S.W.2d 461.
[3] Defendant is a non-profit Colorado corporation whose stated purposes are the promotion of creative and scientific education and the maintenance and organization of an institution to conduct such educational endeavors. Mr. Melvin C. Coffman, President and Dean of Colorado Polytechnic College, testified that the seven trustees of the corporation serve without salary and that his wife had been paid a total compensation of $45,173.08 in the ten and a half years of the school's operation, an average of approximately $4,302 a year, for working full-time for the school. He further testified that he had not received any compensation from the school in six years. He testified that the teaching salaries paid were substantially lower than at other comparable institutions. In the history of the corporation there has been no distribution of dividends or profits and the by-laws provide for none. The funds for operation of the school are derived from the school's operation and public and private charity and are devoted exclusively to the school's educational purposes. The facts are uncontradicted in the record and demonstrate that defendant is an eleemosynary school and therefore specifically excluded from the Proprietary School Act.
We reverse and remand with directions to enter judgment vacating the injunction in accordance herewith.
CHIEF JUDGE SILVERSTEIN and JUDGE ENOCH concur.