In the Matter of the Petition by M. CLUB FOUNDATION, UNIVERSITY OF MARYLAND, INC., Post Office Box 273, College Park, Maryland 20740 Denial of Application for Second-Class Mail Privileges for "VOICE OF THE TURTLE" P.S. Docket No. 1/169 March 13, 1973 David J. Knight Administrative Law Judge John I. Heise, Jr., Esq., Heise, Kyle and Jorgensen, Silver Spring, Maryland, for the Petitioner Donald J. Engleman, Esq. Arthur S. Cahn, Esq., U.S. Postal Service, for the Respondent
This matter involves a proposed refusal by the Mail Classification Division of the U.S. Postal Service to enter a certain publication as second-class mail which moves at a very inexpensive rate. After hearing the evidence and reviewing the parties' proposed findings of fact, conclusions of law and briefs, I am not sure who the publisher is or its status as an applicant for the second-class license. Astoundingly enough, the case may be properly decided without resolving this uncertainty by ordering further hearing or pleadings.
On April 4, 1972, the M Club, University of Maryland (M Club), an unincorporated association, applied to the postmaster at College Park, Maryland, on POD Form 3502, for entry of a publication entitled the Voice of The Turtle as second-class mail. The application indicates that the publisher is itself a benevolent society or order rather than published under the auspices of such an organization. Attached to the application, however, were the articles of amendment of a Maryland corporation known as M. Club Foundation, University of Maryland, Inc., (Foundation or petitioner), which, as detailed below, is not the same organization as the M Club.
This application was forwarded to the Postal Service's Mail Classification Division at Washington, D. C., for action. By letter dated June 28, 1972, addressed to the corporate Foundation, the application was denied. The single reason for denial was that the applicant was not found to be published by or under the auspices of a benevolent or fraternal society of (sic) order organized under the lodge system and having a bona fide membership of not less than 1,000 persons... (emphasis mine since that clause is determinative of this case).
This letter also detailed the procedure for appealing the ruling and on September 7, 1972, a petition of appeal was filed by the Foundation. On September 21, 1972, the Postal Service (respondent) filed its answer.
A periodical publication may obtain the cheaper second-class mailing status under either 39 U.S. Code 4354(a) or 4355. Under the provisions of the former, it must meet five conditions: (1) regularly issued not less than four times a year; (2) from a known office of publication; (3) on printed sheets; (4) to disseminate public information or devoted to a field of learning or a special industry; and (5) have a legitimate list of subscribers. Under the latter section, 4355, only the first three conditions must be met if the publisher falls into one of 11 specified categories one of which applies to benevolent societies.
The instant application was filed under the latter section, specifically 4355(a)(6) which permits the entry of periodicals if they contain only the publisher's advertising and if they are
(6) published by or under the auspices of a benevolent or fraternal society or order organized under the lodge system and having a bona fide membership of not less than 1,000 persons;...
Petitioner contends that a benevolent society or order is entitled to second-class entry regardless of the nature of its organization and there is no statutory requirement that it conform to the lodge system. It concedes that it does not so conform but insists that it is a benevolent organization.
Hearing was held on December 19, 1972, and both parties were represented by counsel.
(1) Whether petitioner is a benevolent association for the purpose of 4355(a)(6) and if so
(2) Whether it must be organized under the lodge system having a bona fide membership of not less than 1,000 persons.
A single witness was presented, the petitioner's or M Club's executive director, through whom all of the evidence was adduced and the foundation laid for receipt of the exhibits.1/
Petitioner has been in existence since the early 1950's. Its purpose2/ is to provide scholarships for worthy students who are also athletes at the University of Maryland and that fund is administered by the University's Director of Scholarships and Grants.
According to its financial statement as of June 30, 1972, (Exhibit P-2) about half of its income of over $34,600 was derived from M Club's dues and half from dividends and interest, promotions, and miscellaneous sources. Of this income, almost $12,500 was devoted to the scholarship program; $8,728 was excess income over expenses (to be invested in future scholarships); and the remainder of $13,498 was paid out as various types of expenses, the largest single category being $9,200 in salaries.
In February 1966, a within house split occurred. The Internal Revenue Service refused to grant the Foundation an exemption as a charitable organization because of the mixture of charitable, social and recreational purposes within petitioner's corporation. So a separate, unincorporated association was formed to carry on the social and recreational purposes and the exemption was granted. That association is the M Club, University of Maryland. Its purposes are to cultivate social intercourse and good fellowship among the wearers of the "M"; encourage athletic competition; and maintain the highest ideal of intercollegiate athletics.
Any person, according to M Club's constitution, "in sympathy with the objects and purposes" of the club may become an associate member. For these, there is no requirement for athletic achievement. The October '72 edition of the Voice of The Turtle shows an impressive list of these members describing them as active and enthusiastic, contributing money, time and effort to help the M Club Scholarship Program (Exhibit P-2, page 6).
The M Club has over 1,000 members presently and the annual dues to belong are $5.00. Also assessed are supporting dues of $7.50; contributing dues of $10.00; sustaining dues of $25.00; and for an associate member of $50.00. It maintains an operating fund made up of the regular and supporting dues plus a portion of funds received from events and promotions which it sponsors plus some of the interest or income from investments. However, an excess of a year's operating fund over the previous year's is transferred to the petitioner's scholarship fund (late-filed exhibits).
The Voice of The Turtle relates news and matters of interest of both the Foundation but mostly of the M Club. The first edition was released in April 1972, (when it applied for the second-class entry) and it is to be issued on a quarterly basis. It reports on athletic events at the University and brings news of the participants, past and present. It announces the sporting events which the M Club sponsors, a portion of the income of which is to benefit the scholarship fund. It carries no advertising other than its own and is sent to each member of M Club. I find that the petitioner, M Club Foundation, University of Maryland, Inc., is the conduit through which the funds raised by the unincorporated association known as M Club, University of Maryland, pass on their way to the scholarship fund. It is the business of the corporation to pay over the money to the University for athletic scholarships but the unincorporated M Club is to generate the interest and promote athletic events to raise funds. Both organizations, the financial and social, then, are engaged in a common activity to reach a single goal.
Counsel for the Postal Service prefaced his cross-examination with the statement:
Q. Mr. Heagy, I have a series of questions on the structure of the M Club Foundation, University of Maryland, Inc., and in those questions I will refer to the foundation (sic) as the M Club.
A. All right.
But all the answers dealing with officers, dues and membership appear to refer to the unincorporated M Club (see its constitution filed with exhibits received after the hearing). The differences between the organizations were not made known--in all their confusion--until after the hearing.
For the purposes of this proceeding each organization is within the other to form a whole although I don't know which is the actual publisher. The application and its attachment indicate with vagueness that the Foundation has authority to publish; but the title page of the Voice of The Turtle says, "Official Publication of the 'M' Club . University of Maryland". But I infer from the testimony that the management of the Foundation and M Club see both organizations as a unit to reach one ultimate destination stopping along the way at various social stations.
The opening issue is whether the Foundation (if it is the publisher) is "benevolent" within the meaning of 4355(a)(6). The postal statute does not define the term but respondent argues that since the Foundation is organized to accomplish both charitable and educational purposes (see footnote 2, supra ), it is not exclusively benevolent or fraternal and therefore does not qualify under the statute or the implementing regulations (Postal Service Manual, 132.232). Petitioner contends that the granting of educational scholarships is benevolence citing cases from various jurisdictions indicating that aiding education is done by "benevolent" associations.
I conclude that the Foundation is engaged in benevolent activity within the meaning of 4355(a)(6). In Hight v. United States , 256 F.2d 795, the question presented was whether "benevolent" used with "charitable", "religious", or "educational" was enough to deprive a tax benefit to an estate since "benevolent" is not used as an exemption in the taxing statute, 303(a)(3) of the Revenue Act of 1926, 44 Stat. 836, whereas the other quoted terms are. The court ruled at page 802 that:
In granting tax deductions for bequests of the type listed in Section 303(a)(3), Congress could not have intended to encourage bequests for eleemosynary purposes only to have them defeated by narrow construction.
And eleemosynary purposes include the promotion of learning as pointed out by petitioner citing Dartmouth College v. Woodward , 4 (Wheat) U.S. 518.
The taxing statutes are based on securing different ends than the postal law and are more definitive. Under Section 501(c)(3) of the Internal Revenue Code, (26 U.S.C.) exemptions are granted for charitable and educational purposes among others. The postal law uses only benevolent or fraternal purposes. This does not mean that the latter is a narrower statute since benevolence has a broader meaning than charity. See 15 Am. Jur. 2d Charities 3 and 4.
Now the application was filed by the unincorporated M Club which might be the publisher and since M Club springs from the Foundation to assist in the benevolent purpose it, too, would qualify.
The final issue-which seems to be of first impression--presents the question of whether a benevolent or fraternal society or order must be organized under the lodge system with not less than 1,000 members before it may qualify for second-class entry.
The petitioner concedes that it is not so organized. At several points on cross-examination its witness denied the existence of a lodge type formation:
Q. As part of their membership?
A. No, it is not like a lodge system, it is restricted to winners of letters that is all. (Tr. 29)
Q. We could conclude then that M Club is not organized under the lodge system?
A. That is a fact.
Q. The answer is yes?
A. That is right.
Q. It is not(sic) organized under a lodge system?
A. Not organized under a lodge system.
Mr. Engleman: I have nothing further, Your Honor. (Tr. 30)
Petitioner argues that the statute 3/ means that a benevolent or fraternal society and an order organized under the lodge system may acquire a second-class license; and that there is nothing in the legislative history which amplifies or restricts the definition or formation of a benevolent association.
The respondent disputes this interpretation. Whatever the association be -- benevolent, fraternal, a society or an order -- it must be organized under the lodge system to qualify for second-class entry. Respondent cites exhaustively the legislative history going back to 1894 to prove the truth of its interpretation.
It appears that both approaches--albeit conflicting--may take their direction from the wording alone of the statute. Other statutes dealing with these organizations are not so loosely constructed or grammatically vague. The Internal Revenue Code of 1954, in its section on gift deductions, 26 U.S.C. 2522(a)(3):
Fraternal beneficiary societies, orders, or associations--
(A) operating under the lodge system or... It is interesting to note that a predecessor to the latter section was interpreted in a 1924 case on what comprises the operations of a lodge system but not whether the named types of associations had to be organized as a lodge. Western Funeral Benefit Ass'n. v. Hellmich , 2 F.2d 367 at 369.
Thus, by looking at the statute alone or comparing it to other likely worded laws, I must conclude that 4355(a)(6) is ambiguous. What is to be included within its bounds is not clear on its face. For this reason, delving into the legislative history is required. Bondholders Protective Committee v. I.C.C. , 432 F.2d 268 at 271.
Furthermore, determining the congressional intent is necessary to clarify a vague statute if a literal interpretation rapes the law's purpose. U.S. v. Public Utilities Commission of California , 345 U.S. 295 at 315.
The legislative history is clear and determines the congressional purpose which controls the interpretation of this section of the postal law. It is set forth in detail by the respondent in its brief--which should be attached as an appendix hereto--but only the high points of that pleading are necessary for this decision.
In 1893, a bill was introduced to the 53d Congress, H.R. 4003, to admit into the second-class certain publications issued by or under the auspices of a regularly incorporated benevolent or fraternal society or order...
It was submitted to W. S. Bissell, the Postmaster General, "for such information and suggestions as the subject may warrant." He objected. The bill was unwise. It would increase postal expenditure at a time when the Department's expenditures exceed its income.
Present second-class entry laws were then too liberal. The amount of second-class matter entered under the proposed bill would be enormous. There are thousands of the described societies including probably all mutual insurance companies. All, if they chose, could avail themselves of the benefactions of the bill; and that they would. He then concluded his long reply of October 31, 1893, by saying, "Altogether the bill is so objectionable that I trust your committee will not hesitate to report it adversely". 26 Cong. Rec. 3489.
When the bill was introduced to the second session of the 53d Congress, it was revised. Then H.R. 4897 met the Postmaster General's warning and read then as it does today that publications issued by or under the auspices of a benevolent or fraternal society or order organized under the lodge system and having a bona fide membership of not less than one thousand persons... That bill was enacted on July 16, 1894. 28 Stat. 104.
The clause "organized under the lodge system and having a bona fide membership of not less than 1,000 persons" must be attached to any benevolent, fraternal society or order otherwise the Postmaster General's words of warning would be in vain. Such a system restricts entry into the second-class under this section of the statute because of its requirements. Generally it's based on a lodge, or local chapter, system with a graduated series of central or governing bodies all with a representative form of government. Its business is transacted by ritualistic form and ceremony. Some or all of these features are usually required by statute as constituent elements of a benevolent or fraternal order, cf., 36 Am. Jur. 2d, Fraternal Orders, etc., 1, and Western Funeral Benefit Ass'n. v. Hellmich , supra , at page 369.
Based on the foregoing, I cannot accept the interpretation of this section pleaded by the petitioner. To do so would open the floodgates and the applications for second-class entry would pour in. That inundation is not to happen. I conclude that any benevolent, fraternal society or order applying for second-class entry under 4355(a)(6) must be organized under the lodge system among the other requirements of the statute.
Proposed findings and conclusions of the parties to the extent embodied in this decision are adopted; otherwise they are rejected as irrelevant or immaterial.
I find that neither the M Club Foundation, University of Maryland, Inc., nor M Club, University of Maryland are organized under the lodge system and I conclude that neither is entitled to have the Voice of The Turtle entered as second-class matter. The denial of the application by the Mail Classification Division is affirmed.
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1/ This includes the Articles of Incorporation and numerous other papers filed by agreement after the hearing was adjourned. Generally these concern the Foundation's application for exemption under the tax statutes and regulations.