Jones, Treas., v. Conn

• Decision Date: 23 February 1927
• Docket Number: 20057
• Parties: Jones, Treas., v. Conn Et Al., Trustees.
• Court: Ohio Supreme Court

155 N.E. 791

116 Ohio St. 1

Jones, Treas., v. Conn Et Al., Trustees.

No. 20057

Supreme Court of Ohio

February 23, 1927

Taxation - Personal property of institution of public charity exempt when - Personally invested for financial purposes before charity dispensed, not exempt - Section 2, Article XII Constitution.

Under Section 2 of Article XII of the Constitution of Ohio, in its present form, the 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. (Rose Institute v. Myers, Treas., 92 Ohio St. 252 110 N. E., 924, L.R.A.: 1916D, 1170, and State, ex rel. Ross v. Hess, Aud., 113 Ohio St. 52, 145 N. E., 347, approved and followed.)

This case arises upon error proceedings to a judgment of the Court of Appeals of Van Wert county, entered in an action for injunction, which involved the assessment for or exemption from taxation for the years 1922 and 1923 of the property real and personal bequeathed and devised by the will of George H. Marsh, deceased, to certain trustees for the purposes of a public charity to be created and to be known as the Marsh Foundation. The defendants in error are the trustees of the foundation. The proceeding in error is prosecuted by the county treasurer and county auditor, defendants below, to reverse the judgment of the Court of Appeals of Van Wert county, which held the personal property exempt from taxation.

The plaintiffs below, as trustees under the will of George H. Marsh, filed suit in the court of common pleas of Van Wert county, alleging that George H. Marsh died upon August 13, 1920, leaving a will in which the plaintiffs were named executors and trustees of his estate. The action sought to enjoin the collection of taxes for the years 1929 and 1923 on both the real and personal property, upon the ground that this property was exempt from taxation under Section 5353, General Code, which provides that "property belonging to Institutions of public charity only" shall be exempt from taxation. The answer of the defendants alleged the following:

"Defendants deny that the property described in the petition was, during the years 1922 and 1923, or since, used exclusively for charitable purposes; denies that said the Marsh Foundation was, during said time, an institution of purely public charity, used exclusively for charitable purposes; and denies that the property described in the petition, or any part thereof, has been used by the plaintiffs during the time hereinbefore stated, for the accomplishment of the purposes and objects of the trust referred to in the petition; and denies that any of said property referred to in the petition was, during the times aforesaid, and is, exempt from taxation under the laws of Ohio."

The court of common pleas decided that the property involved, both real and personal, was taxable for the years 1922 and 1923, but was exempt from taxation thereafter. Upon appeal being taken to the Court of Appeals, that court found that no application had been made to the tax commission under Section 5616, General Code, and dismissed the petition upon the ground that the plaintiffs had not exhausted their legal remedies. A motion to certify the case to this court was allowed, and, upon hearing, this court reversed the judgment of the Court of Appeals and remanded the case, as is stated in the mandate, "for further proceedings upon the question as to what, if any, of the property constituted an institution of public charity at the times set forth in the petition." Conn et al., Trustees, v. Jones, Treas., 115 Ohio St. 186, 152 N. E., 897. Thereupon the case was heard in the Court of Appeals upon the pleadings and evidence, and that court found the personal property exempt upon authority of Myers v. Benjamin Rose Institute, 92 Ohio St. 238, 110 N. E., 929, and the "real estate not exempt" upon authority of Benjamin Rose Institute v. Myers, 92 Ohio St. 252, 110 N. E., 924, L.R.A., 1916D, 1170. The material part of the journal entry of the Court of Appeals reads as follows:

"* * * The court finds the issues joined for the plaintiffs, and that the plaintiffs are entitled to the relief prayed for; except that, in respect of the taxes levied for the years 1922 and 1923 upon the real property in the petition described, the court finds for the defendants that said real property was not so used during said years as to entitle it to exemption from taxation for the years 1922 and 1923."

From this judgment the present error proceedings were prosecuted, motion to certify the record having been allowed by this court.

Mr. C. C. Crabbe, attorney general, Mr. John I. Miller, prosecuting attorney, Mr. Wilbur E. Benoy, and Mr. W. Dale Dunifon, for plaintiffs in error.

Messrs. Conn, Hoke & Wright, and Messrs. Wilson & Rector, for defendants in error.

ALLEN J.

It is conceded that under the will the trustees were directed to proceed, as soon as practicable, "to erect the necessary buildings for a home and also for a school," which institution was to be open to certain children from the northern counties of the state of Ohio, up to the age of 21 years. It is conceded that the property was turned over by the executors to the trustees in February, 1922, and that the trustees between that date and January 1, 1924, selected a superin- tendent for the home and school, and proceeded with the erection of certain buildings. It was the plan of the trustees that the home and school should be conducted upon the so-called "cottage plan," and by January 1, 1924, one cottage was available for the accommodation of children as a home. In August, 1923, the auditor of Van Wert county, acting under Section 5399, General Code, placed on his duplicate, as omitted property, real estate, moneys, credits, investments, and other personal property described in the petition as having been omitted for taxation purposes by the defendants in error for the years 1922 and 1923. The personal property so placed on the duplicate was as follows: Moneys, $100,000; credits, $516,580; investments $1,724,600; other personal property, $7,390. The real estate alleged to have been omitted was valued at $240,060, the taxes and penalties against which for two years aggregated $9,255.43. The total valuation of the real and personal property so added was $2,588,630, and the taxes and penalties thereon assessed $103,765.87.

The property, which comprised the estate of George H. Marsh, deceased, under the will of the testator was set aside for the foundation and support of a school and home for orphan or other children from Van Wert county or other counties of northwestern Ohio.

There is no contention as to the fact that the will provides for a purely public charity. There is no contention as to the fact that the trustees proceeded with the utmost and with most commendable diligence to organize the trust for the public charity, to conserve its property, to safeguard and increase its income, and to prosecute the work preliminary to the dispensation of the charity. The conflict arises over the question whether the personal property belonging to the trust estate is taxable for the years 1922 and 1923, after the trustees took over the estate and during the period before any charity was being dispensed.

The constitutional and statutory provisions involved are the following: "Laws shall be passed, taxing by a uniform rule, all moneys, credits, investments in bonds, stocks, joint stock companies, or otherwise, and also all real and personal property according to its true value in money, * * * but burying grounds, public schoolhouses, houses used exclusively for public worship, institutions used exclusively for charitable purposes * * * may, by general laws, be exempted from taxation * * *." Article XII, Section 2, Constitution of Ohio.

Section 5353, General Code, as amended in 1913 (103 Ohio Laws, 548): "Lands, houses and other buildings belonging to a county, township, city or village, used exclusively for the accommodation or support of the poor, or leased to the state or any political subdivision thereof for public purposes, and property belonging to institutions of public charity only, shall be exempt from taxation."

Section 5353-1, General Code: "Property, real, personal, and mixed, the net income of which is used solely for the support of institutions used exclusively for children's homes for poor children, the real estate on which said institutions are located, and the buildings connected therewith, shall be exempt from taxation."

The real estate is not in question here, as counsel for the defendants in error concede that under the ruling in Benjamin Rose Institute v. Myers, Treas., 92 Ohio St. 252, 110 N. E., 924, L.R.A., 1916D, 1170, the real estate cannot be exempt. It is the undisputed testimony that until after the second Monday in April, 1923, the day provided by Section 5372-1, General Code, for the listing of personal property in the possession or control of a trustee, there was no attempt to use any part of the real estate for the purposes of the institution, and until on and after that date all of the real estate comprised in the trust, except the vacant lots, was leased with a view to profit.

The question therefore relates to the personal property only, with regard to which the record is as follows:

I. C Morgan, one of the executors and trustees, testified that the income from all of the property controlled by the trustees went into an earnings account, and was spent in the construction of the buildings, the erection of which was...