Okey v. Walton

• Decision Date: 30 March 1973
• Citation: 36 Ohio App.2d 87,302 N.E.2d 895
• Parties: , 65 O.O.2d 75 OKEY et al., Appellants, v. WALTON et al., Appellees.
• Court: Ohio Court of Appeals

Page 87

36 Ohio App.2d 87

302 N.E.2d 895, 65 O.O.2d 75

OKEY et al., Appellants, v. WALTON et al., Appellees.

Court of Appeals of Ohio, Seventh District, Carroll County.

March 30, 1973.

Syllabus by the Court

1. In the judicial review of legislation there is a presumption of validity which cannot be overcome unless it appears that there is a clear conflict between the legislation in question and some particular provision or provisions of the Constitution.

2. The words 'at least twelve months' are severable from the remainder of R.C. 322.01(A) and does not affect the constitutionality of the remainder of R.C. 322.01(A) or 322.02.

3. R.C. 322.01 and 322.02 with the exception of the words 'at least twelve months' in R.C. 322.01(A), which were not at issue in this case, do not violate the equal protection provisions of the Fourteenth Amendment, Section 1 of the United States Constitution or Section 2, Article I of the Ohio Constitution.

4. While the legislature may not delegate its power to make a law, it may make a law to become operative on the happening of a certain contingency or a future specified event.

5. Section 1 of Article X of the Ohio Constitution authorizes the General Assembly by general law to delegate to boards of county commissioners limited legislative power relative to the government of counties.

6. R.C. 322.02 is a general law that authorizes every county in the state to levy a real estate transfer tax and does not violate Section 26, Article II of the Ohio Constitution.

7. R.C. 322.02 is an excise tax that comes under Section 10, Article XII of the Ohio Constitution.

8. R.C. 322.02 does not violate Section Id, Article II of the Ohio Constitution.

9. R.C. 322.01 and 322.02, with the exception of the words 'at least twelve months' in R.C. 322.01(A), which were not at issue in this case, are constitutionally valid.

Donald C. Steiner, Canton, for appellants.

Rudolph Battista, Pros. Atty., for appellees.

Michael R. Grove, Columbus, for the Atty. Gen. of Ohio.

LYNCH, Presiding Judge.

The sole issue in this case is the constitutionality of R.C. 322.02, whose pertinent parts at issue are as follows:

'For the purpose of paying the costs of enforcing and administering the tax and providing additional general revenue for the county, any county may levy and collect a tax to be known as the real property transfer tax on each deed conveying real property or any interest in real property located wholly or partially within the boundaries of such county at a rate not to exceed thirty cents per hundred dollars for each one hundred dollars or fraction thereof of the value of the real property or interest in real property located within the boundaries of the county granted, assigned, transferred, or otherwise conveyed by such deed. * * *'

The constitutionality of the italicized parts of R.C. 322.01, which is set out below, are being questioned in this case.

'As used in sections 322.01 to 322.05, inclusive, of the Revised Code:

'(A) 'Value' means, in the case of any deed not a gift in whole or part, the amount of the full consideration therefor, paid or to be paid for the real estate described in the deed, including the amount of any liens thereon, except the amount owed on a debt secured by a mortgage which has been of record at least twelve months prior to the date of the conveyance and which is assumed by the purchaser and, in the case of a gift in whole or part, the estimated price the real estate described in the deed would bring in the open market and under the then existing and prevailing market conditions in a sale between a willing seller and a willing buyer, both conversant with the property and with prevailing general price levels.

'(B) 'Deed' means any deed, instrument, or writing by which any real property or any interest in real property is granted, assigned, transferred, or otherwise conveyed except that it does not include any deed, instrument, or writing which grants, assigns, transfers, or otherwise conveys any real property or interests in real property exempt from the fee required by division (F)(3) of section 319.54 of the Revised Code.'

Pursuant to R.C. 322.02, the board of county commissioners of Carroll County adopted a resolution levying a real estate transfer tax of thirty cents per one hundred dollars value, effective July 1, 1968. Plaintiffs are property owners of Carroll County who desire to sell their real estate, and they are questioning the validity of this real estate transfer tax.

Chapter 322 of the Revised Code became effective December 12, 1967. Apparently it was enacted because of the proximate expiration of Internal Revenue Code 4361, which provided as follows:

'There is hereby imposed, on each deed, instrument, or writing by which any lands, tenements, or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers, or any other person or persons, by his or their direction, when the consideration or value of the interest or property conveyed (exclusive of the value of any lien or encumbrance remaining thereon at the time of sale) exceeds $100, a tax at the rate of 55 cents for each $500 or fractional part thereof. The tax imposed by this section shall not apply on or after January 1, 1968.'

Internal Revenue Code 4361 was originally enacted in 1917 and re-enacted in 1927. It was again re-enacted in 1932 in was continually re-enacted until 1941 when it was made a permanent tax. Phillips Petroleum Co. v. Jones, 10 Cir., 176 F.2d 737.

The trial court held that the words 'at least twelve months' in R.C. 322.01(A) are unconstitutional and void under the Fourteenth Amendment, Section 1 of the United States Constitution; that the remainder of R.C. 322.01 to 322.99 is severable and independent from these unconstitutional words; and that with the exception of the words 'at least twelve months' contained in R.C. 322.01(A), R.C. 322.01 to 322.99 are valid and constitutional.

Plaintiffs, appellants herein, are appealing the above decision of the trial court. Plaintiffs' only assignment of error is that the judgment of the trial court is contrary to law except to the extent that the trial court held the words 'at least twelve months' contained in R.C. 322.01(A) invalid. However, plaintiffs filed an extensive brief in which the constitutionality of R.C. 322.02 was questioned under six subject headings.

In the judicial review of legislation there is a presumption of validity which cannot be overcome unless it appears that there is a clear conflict between the legislation in question and some particular provision or provisions of the Constitution. City of Xenia v. Schmidt, 101 Ohio St. 437, 130 N.E. 24.

Plaintiffs' first subject heading is that R.C. 322.02 violates the equal protection provisions of the Fourteenth Amendment, Section 1 of the United States Constitution and Article 1, Section 2 of the Ohio Constitution and is unconstitutional.

Plaintiffs question three separate provisions of R.C. 322.01 under this subject heading. We will discuss each one separately.

The trial court upheld plaintiffs' position as to the words 'at least twelve months' on the basis of Louisville Gas & Electric Company v. Coleman, 277 U.S. 32, 48 S.Ct. 423, 72 L.Ed. 770, which held that a Kentucky statute violated the equal protection clause of the 14th Amendment and was void where it provided that in the recording of mortgages, which is essential to the protection of mortgages against bona fide purchasers and creditors, mortgages not maturing within five years were subject to a tax of 20cents for each $100 of value secured, while mortgages maturing within five years were exempted from the tax.

Defendants argue that the twelve month period specified in R.C. 322.01 is necessary to prevent fraud on the part of those sellers who might be tempted to mortgage their real estate a short time before the sale in order to escape the tax.

However, defendants did not file a cross-appeal pursuant to Rule 4 of the Ohio Rules of Appellate Procedure as to the trial court's decision on the unconstitutionality of the words 'at least twelve months' in R.C. 322.01(A); therefore, this part of the trial court's decision is not before this court on this appeal.

Plaintiffs also question the words 'and which is assumed by the purchaser.' This wording is different than Internal Revenue Code 4361, but it has been the experience of the members of this court that the application of Internal Revenue Code 4361 was the same as under the language of R.C. 322.01(A), as to outstanding mortgages.

Plaintiffs give the illustration of two separate parcels of real estate, both of which are sold for $100,000 each with a mortgage balance of $95,000. In one case, the purchaser assumes the mortgage and the tax would be on $5,000 or $15.00 while in the other case the purchaser obtains new financing and the existing mortgage is satisfied. In the latter case the tax would be on the entire $100,000 which would amount to $300.00.

There is no question that there is a considerable discrepancy in the amount of the tax due between these two situations, but that, in itself, does not make the tax unconstitutional if the discrimination is founded upon a reasonable distinction. Continental Can Co. v. Donahue, Tax Commr., 5 Ohio St.2d 224, 215 N.E.2d 400.

When the buyer assumes the mortgage, the actual money transferred between the buyer and seller is the difference between the mortgage balance and the sale price. However, when the mortgage of the seller is paid off as a part of the sale agreement, the buyer must in effect, pay the entire sale price even though the buyer may obtain a mortgage on the same property for the same amount of the mortgage balance owed by the seller. The difference is the amount of money that is transferred between the buyer and seller as a result of the sale of the real estate. We hold that this is a reasonable distinction...