Cleveland State University v. Perk, 70-235

• Decision Date: 31 March 1971
• Docket Number: No. 70-235,70-235
• Citation: 268 N.E.2d 577,26 Ohio St.2d 1,55 O.O.2d 1
• Parties: , 55 A.L.R.3d 422, 55 O.O.2d 1 CLEVELAND STATE UNIVERSITY et al., Appellants, v. PERK, Auditor, Appellee.
• Court: Ohio Supreme Court

Page 1

26 Ohio St.2d 1

268 N.E.2d 577, 55 A.L.R.3d 422, 55 O.O.2d 1

CLEVELAND STATE UNIVERSITY et al., Appellants, v. PERK, Auditor, Appellee.

No. 70-235.

Supreme Court of Ohio.

Decided March 31, 1971.

Syllabus by the Court

1. A lessee of buildings located on land which is owned by the lessee who, by the terms of the lease, has obligated itself for the full amount of any real estate taxes assessed against the buildings and the land has standing to file with the Board of Tax Appeals an application for exemption of such buildings from taxation, application for examption of the land having been previously granted.

2. Under the provisions of R.C. 5709.07, exempting from taxation 'public colleges and academies and all buildings connected therewith,' buildings located on the campus of a state university and used exclusively for classrooms and faculty offices are exempt from taxation, even though such buildings are not owned by the university, but are leased for a term of years, with provision for rental therefor, from a corporation for profit.

By the enactment of R.C. Chapter 3344, the General Assembly in 1964 created the Cleveland State University. In 1967, apparently lacking financial ability to build needed classrooms and faculty offices, its board of trustees, acting under authority of law to 'make and enter into all contracts and agreements necessary or incidental to the operation of such university' (R.C. 3344.04), entered into an agreement with Modulux, Inc., a corporation for profit, by which Cleveland State leased from Modulux seven temporary relocatable buildings for a term of three years with an option for a one-year or two-year renewal.

These buildings remain the property of modulux and at the end of the leasehold term will be removed. They were placed on the Cleveland State campus and during the period they remain on the Cleveland State campus, their only purpose and use is to provide classroom and faculty office space.

Under the terms of Item 16 of the lease, the actual payment of any real estate taxes was to be made by Modulux but with an agreement that Cleveland State, in effect, would reimburse Modulux for any such payments (either from a contingent fund established for such purpose or by increased rental payments).

In a prior application to the Board of Tax Appeals, the land of Cleveland State on which the leased buildings are located was held to be tax exempt under the provisions of R.C. 5709.08.

In the instant case, application was made by Cleveland State, joined in by Modulux, for tax exemption of the buildings under the provisions of R.C. 5709.07, 5709.08 and 5709.12. At the hearing, 'principal reliance' was stated to be upon R.C. 5709.07.

The board dismissed the application as to Cleveland State, on the basis that 'Cleveland State University, not being the owner of the property, has no standing to come before this board to ask for tax exemption for property which it does not own but which it leases.'

The board denied the application as to Modulux, stating:

'The buildings are being used by Modulux, Inc., a corporation for profit, to generate income and profit. The fact that the lessee uses the property for educational purpopses is immaterial. Modulux, Inc., is not an institution of learning and, as owner of the subject property, Modulux, Inc., is not using the property for educational purposes.'

The cause is now before this court on appeal by both Cleveland State and Modulux from the decision of the Board of Tax Appeals.

Paul W. Brown, Atty. Gen., Sidney D. L. Jackson, Jr., Baker, Hostetler & Patterson, Parker M. Orr and Gerald W. Boston, Cleveland, for appellant, Cleveland State University.

Krause & Stanton, Cleveland, for appellant Modulux, Inc.

John T. Corrigan, Pros. Atty., and Thomas P. Cyrus, Cleveland, for appellee.

LEACH, Justice.

The first question presented by this appeal is whether Cleveland State had 'standing' to make application to the Board of Tax Appeals seeking exemption from real property taxation for the buildings in question. If it did not, it would not have been a proper 'party' in the proceedings before the board, and it would not be a proper party-appellee in this court.

Reliance for the position that Cleveland State was not a proper party is had by appellee, as it apparently also was by the board, upon that portion of R.C. 5713.08, reading:

'Taxes and penalties, which have accrued after the property was first used for the exempt purpose, but in no case prior to the date of acquisition of the title to said property by applicant, may be remitted by the auditor, with the consent of the board.'

This language of R.C. 5713.08 does not purport to deal with the question of who may apply for exemption; rather it deals with the remission of taxes which have already accrued on properties entitled to exemption.

We find no statutory inhibition against the filing of such an application by Cleveland State. The language of R.C. 5715.27 providing that 'any person * * * authorized by section 5715.19 of the Revised Code to file complaints with the county board of revision may complain to the board of tax appeals * * * as to the liability of any property to taxation in that year, or its exemption therefrom,' when read with the language of R.C. 5715.19 authorizing the filing of 'a complaint as to the valuation or assessment of his own or another's real property,' makes it clear that a complainant is not required to be the fee title owner of real property in order to have standing to seek tax exemption of such property.

If the common law principles of 'real party in interest' be required to establish 'standing,' such requirement is met in this case. Here, Cleveland State has a leasehold interest in the buildings sought to be exempted, is the owner of the underlying fee in the land, and, by contract, has obligated itself financially for the full amount of any real property taxes imposed on the buildings.

We conclude, therefore, that a lessee of buildings located on land which is owned by the lessee who, by the terms of the lease, has obligated itself for the full amount of any real estate taxes assessed against the buildings and the land has standing to file with the Board of Tax Appeals an application for exemption of such buildings from taxation, application for exemption of the land having been already granted.

No claim is made by the appellants that the buildings are exempt from taxation under R.C. 5709.08 or 5709.12. Appellants now concede that the buildings do not constitute real property 'belonging to the state * * * used exclusively for a public purpose' (R.C. 5709.08), and that they do not constitute real property 'belonging to institutions that is used exclusively for charitable purposes' (R.C. 5709.12).

The specific issue presented is whether the buildings in question are exempted from taxation under R.C. 5709.07 which reads, in pertinent part:

'Public schoolhouses and houses used exclusively for public worship, the books and furniture therein, and the ground attached to such buildings necessary for the proper occupancy, use, and enjoyment thereof, and not leased or otherwise used with a view to profit, public colleges and academies and all buildings connected therewith, and all lands connected with public institutions of learning, not used with a view to profit, shall be exempt from taxation. * * *' (Emphasis added.)

Appellants assert that the buildings in question are exempt from taxation as 'buildings connected' with a public college. Looking solely at the language 'public colleges and academies and all buildings connected therewith,' we think it clear that the buildings in question, standing on the campus of Cleveland State and being used solely for classrooms and faculty offices, are buildings 'connected' with a public college. Thus it would...