Dana W. Morey Foundation, In re

• Decision Date: 04 March 1970
• Citation: 21 Ohio App.2d 230,256 N.E.2d 232
• Parties: , 50 O.O.2d 377 In re Application for Tax Exemption by DANA W. MOREY FOUNDATION.
• Court: Ohio Court of Appeals

Page 230

21 Ohio App.2d 230

256 N.E.2d 232, 50 O.O.2d 377

In re Application for Tax Exemption by DANA W. MOREY FOUNDATION.

Court of Appeals of Ohio, Third District, Union County.

March 4, 1970.

Syllabus by the Court

Where real property owned by a foundation, which is a nonprofit institution so constituted that its property and energies are used exclusively for charitable purposes, including providing for the care of the aged and infirm, is leased prior to tax-lien date to a public institution so constituted that the property under its control and its energies are used exclusively for charitable purposes, including providing for the care of the aged and infirm, and on tax-lien date the lessor is constructing on that real property an extended-care facility to be used by the lessee upon completion as 'a halfway point between acute care (provided in an adjoining hospital already in operation by the lessee) and the patient's home or a nursing home,' such property is 'real * * * property belonging to institutions that is used exclusively for charitable purposes (and) shall be exempt from taxation,' as prescribed by Section 5709.12, Revised Code.

David F. Allen, Maysville, for appellant, Dana W. Morey Foundation.

Richard E. Parrott, Pros. Atty., for appellee, Union County Treasurer.

GUERNSEY, Judge.

This is an appeal under the provisions of Section 5717.04, Revised Code, from an order of the Board of Tax Appeals denying an application filed on behalf of the Dana W. Morey Foundation, hereinafter referred to as the foundation, for exemption from taxation for the tax year 1969 of 9.41 acres of land owned by it in Union County. The facts are undisputed.

The foundation was created in 1953 as an inter vivos trust for charitable purposes. The settlor is now deceased, and the Chemical Bank New York Trust Company is the successor and exising trustee. The trust agreement provides that after the decease of the settlor 'the distribution of trust funds and the general policy of the Foundation shall be directed by an Advisory Committee,' which has been in existence, and is empowered 'to direct the Trustee to pay and distribute all or a part of the net income of the Foundation,' for the purposes of the trust, and 'by unanimous vote or action, may at any time appropriate for distribution for the uses and purposes herein mentioned any part or all of the principal of the trust fund.'

Pursuant to the purposes set forth in the trust instrument, on September 5, 1968, the trustee, also hereinafter referred to as the lessor, with the approval of the advisory committee, entered into a lease agreement with the Board of Trustees of the Union County Memorial Hospital and with the Board of County Commissioners of Union County, which boards operate a county hospital, pursuant to Section 339.01 et seq., Revised Code, on property adjoining the tract in question. The lease agreement provides for the construction by the lessor of a 40 bed extended care facility on the lessor's land, hereinafter referred to as the Center, 'to be used to administer, maintain and operate an extended care and related hospital care facility by the Lessee, as determined by the Lessee,' for the term of 20 years from the availability of the Center 'to the Lessee,' for occupancy and use.' In consideration thereof the lessee agreed to pay to the lessor (1) $1 per year; (2) an amount each year equalling the annual depreciation on the building (taken in the fastest manner consistent with acceptable and customary standards of hospital accounting), but not less than $30,000 or more than $60,000 per year; and (3) an amount each year equal to the payments due on any therein defined construction loan or mortgage given by the lessor for the purpose of financing the project, such payments, however, not to exceed $3,000 monthly or $36,000 annually.

The lease makes further provision for a 'controlling board' of twelve members. The funded depreciation paid to the lessee 'shall be used exclusively for health care purposes in Union County as determined and ordered by the 'controlling board," limited, however 'to the improvements and additions to the 'Center' and Memorial Hospital as it (the controlling board) deems appropriate for the development of the overall care facility,' including the retirement of indebtedness on the Center. The lessee also agreed to construct an enclosed corridor joining the hospital to the Center and 'to administer and maintain the leased facilities in a manner consistent with the operation of a public health facility, strictly complying with the law with regard to admission of the patients without regard to race, creed, color, or sex.'

On July 1, 1969, at the time of the hearing before the attorney-examiner for the Board of Tax Appeals, it was testified that construction of the Center had commenced in 1968 and it had a completion date of November 15, 1969; that the term 'extended care' did not contemplate that the Center would become a nursing home; 'that it is intended that it be an extension of acute care, a halfway point between acute care and a patient's home or a nursing home'; and that it is contemplated that charity patients will be included in the patients to be admitted to the Center.

Upon submission the Board of Tax Appeals denied the application to exempt the real property involved, under the provisions of Section 5709.12, Revised Code, relying on the authority of Lincoln Memorial Hospital v. Warren, 13 Ohio St.2d 109, 235 N.E.2d 129, and citing Zangerle v. State ex rel. Gallagher, 120 Ohio St. 139, 147, 165 N.E. 709, for the reason that 'to exempt real property from taxation on the ground that it is used exclusively for charitable purposes the ownership of the property and its use must coincide.' The appellant foundation assigns as error that the decision the the Board of Tax Appeals is unreasonable and unlawful.

As the decision of the board was certified only to the foundation and the Union County Auditor (who had recommended that the exemption be granted), counsel for these parties alone appeared in the appeal and sought, by consent, for this court to order the exemption. However, Section 5713.08, Revised Code, specifically provides that 'No additions shall be made to such exempt lists nor additional items of property exempted under such sections without the consent of the board of tax appeals * * *,' and the 'auditor shall follow the orders of the board given under this section.' Under such provisions the auditor, or his counsel, has no power of consent, a consent decree or order is not authorized, and the order of the Board of Tax Appeals stands until reversed as provided by law.

The statutory provision involved is that contained in the last sentence of Section 5909.12, Revised Code, prescribing that 'Real * * * property belonging to institutions that is used exclusively for charitable purposes shall be exempt from taxation.

In Jones, Treas., v. Conn (1927), 116 Ohio St. 1, 155 N.E. 791, it was held that under the provision of the Ohio Constitution permitting exemption of 'institutions 'used exclusively for charitable purposes" 'personal property belonging to an institution of public charity is exempt from taxation only when used exclusively for charitable purposes, and, if such personal property is invested for financial purposes during the period before the charity was being dispensed by the institution, it is not exempt from taxation during such period.' The court also stated, page 14, 155 N.E., page 795, 'We see absolutely no distinction, from the standpoint of principle, between real estate and personal property for the purpose of this decision.'

The Jones rule remained unmodified for many years. Compare Wehrle Foundation v. Evatt, Tax Com'r. (1943), 141 Ohio St. 467, 49 N.E.2d 52. However, in Good Samaritan Hospital Assn. of Sandusky v. Glander, Tax Com'r. (1951), 155 Ohio St. 507, 99 N.E.2d 473 involving a nurses' home for a hospital already being operated by the landowner, the Supreme Court held:

'Per Curiam. As the record discloses that since on and before tax-lien day 1950 the property in question, acquired by appellant for use for a charitable purpose, was undergoing repairs and remodeling to condition it for the charitable use for which it was acquired, and there being nothing in the record to show that during such time i had been used for a noncharitable purpose, the Board of Tax Appeals was in error in denying the exemption. * * *'

Thereafter, with relation to the exemption of church property under the provisions of Section 5709.07, Revised Code the whole subject of intended use, as compared to present actual use, was extensively discussed by Judge Matthias in his opinion in Holy Trinity Protestant Episcopal Church of Kenwood v. Bowers (1961), 172 Ohio St. 103, 173 N.E.2d 682, and the Supreme Court held:

'A religious institution which purchases vacant land for the purpose of erecting a house of worship thereon is entitled to have such land exempted from taxation, where such institution is actively working toward use of such land for the public benefit; and the intent to make such a use of the land may be evidenced by a showing that plans had been prepared and funds were available, or were to be available, to effectuate actual construction of such house of worship within a reasonable time from the filing of the application for exemption.'

That case was then cited as controlling authority in the case of Cleveland Memorial Medical Foundation v. Perk (1967), 10 Ohio St.2d 72, 225 N.E.2d 233, where the court authorized exemption of a parcel of land purchased by the taxpayer for the relocation of a general hospital which it had been operating and construction plans and funding for such purpose were in progress.

Meanwhile, in Philada Home Fund v. Board of Tax Appeals (1966), 5 Ohio St.2d 135, 214 N.E.2d 431, in an opinion dealing primarily with the character of the use, concurred in by three other members...