State ex rel. Taft v. Campanella, 77-454

• Decision Date: 22 June 1977
• Docket Number: No. 77-454,77-454
• Parties: , 4 O.O.3d 423 The STATE ex rel. TAFT et al., Appellees, v. CAMPANELLA, Auditor, Appellant.
• Court: Ohio Supreme Court

Page 242

50 Ohio St.2d 242

364 N.E.2d 21, 4 O.O.3d 423

The STATE ex rel. TAFT et al., Appellees, v. CAMPANELLA, Auditor, Appellant.

No. 77-454.

Supreme Court of Ohio.

June 22, 1977.

Squire, Sanders & Dempsey, George I. Meisel and Robert H. Olson, Jr., Cleveland, for appellee board.

Ford, Whitney, Crump & Schulz, Isaac Schulz and John J. Whitney, Cleveland, for appellee hospital.

John T. Corrigan, Pros. Atty., Thomas P. Gill and Karen A. Hassenzahl, for appellant.

PER CURIAM.

Appellant asserts as his sole proposition of law that "the use of $10.6 million of county hospital-improvement 1st mortgage revenue bonds under Revised Code Chapter 140 to retire the outstanding debt of a hospital which is secured by a mortgage on the existing facilities exceeds the scope of a proper 'public purpose' under the Constitution of Ohio."

In State ex rel. Gordon v. Rhodes (1951), 156 Ohio St. 81, 100 N.E.2d 225, this court considered whether the use of revenue bonds to acquire and construct municipal off-street parking facilities constituted a public purpose. We emphasized that courts generally do not attempt a rigid definition of a public as distinguished from a private use, but rather prefer to leave each case to be determined by its own particular circumstances. The modern trend is to expand and liberally construe the term "public use" in considering state and municipal activities sought to be brought within its meaning. The test of "public use" is the right of the public to receive and enjoy its benefits.

The General Assembly, in R. C. 140.02, has declared the public and governmental interest in public financing of nonprofit hospital facilities by determining that:

"The authorizations granted in Chapter 140. of the Revised Code * * * are granted for the public purpose of better providing for the health and welfare of the people of the state by enhancing the availability, efficiency, and economy of hospital facilities and the services rendered thereby, * * * and facilitating the financing of hospital facilities to be available to or for the service of the general public without discrimination by reason of race, creed, color or national origin * * * ."

The parties stipulated in the Court of Appeals that the board, in adopting the resolutions, "had before it the following information:

" * * *es

"(C) Financing the project, including the county's purchase of the existing facilities, through tax-exempt bonds will save an estimated $8,000,000 over the proposed term of the bonds compared with the hospital's retaining ownership and financing the project through conventional, taxable mortgage borrowing. This reduction in debt service cost of the hospital will benefit the users of the project and the existing facilities, including residents of the county. * * *

"(D) Use of approximately $10.6 million of the proceeds of the bonds to retire the hospital debt and the release of the existing first mortgage on the property of the hospital securing such indebtedness will materially facilitate the financing of the project and enhance the economy of the hospital and the services rendered by it. * * * "

In his assertion that the resolutions exceed a constitutional public purpose, appellant is either challenging the constitutionality of R. C. 140.02 or the validity of the board's determination that the resolutions do indeed serve a public purpose described in that statute.

There is a strong presumption that statutes are constitutional, and in case of doubt the statute is to be upheld. See Cincinnati W. & Z. R. R. v. Commrs. of Clinton Co. (1852), 1 Ohio St. 77, 82.

In State ex rel. Dickman v. Defenbacher (1955), 164 Ohio St. 142, 128 N.E.2d 59, an appropriation by the General Assembly to nonprofit veterans organizations for rehabilitation of war veterans and promotion of patriotism was challenged on several grounds, including lack of public purpose. In upholding the appropriation, this court held, in paragraph one of the syllabus, that:

"An enactment of the General Assembly is presumed to be constitutional and before a court may declare it unconstitutional it must appear beyond a reasonable doubt that the legislation and the constitutional provisions are clearly incompatible."

Appellant shoulders a similar burden if he questions the board's determination that the use of the $10.6 million to retire debt would achieve or produce the public benefits set forth in R. C. 140.02.

The determination of whether a use of bonds constitutes a public purpose is primarily the function of the bond issuing authority, and will be overruled by the courts only if manifestly arbitrary or unreasonable. See State ex rel. Gordon v. Rhodes, supra (156 Ohio St. 81, 100 N.E.2d 225).

In State ex rel. Speeth v. Carney (1955), 163 Ohio St. 159, 126 N.E.2d 449, a mandamus action to compel the county auditor to execute a note for the construction of a county...