Zindorf v. Otterbein Press

• Decision Date: 28 May 1941
• Docket Number: 28439.
• Citation: 138 Ohio St. 287,34 N.E.2d 748
• Parties: ZINDORF et al. v. OTTERBEIN PRESS etal.
• Court: Ohio Supreme Court

34 N.E.2d 748

138 Ohio St. 287

ZINDORF et al. v. OTTERBEIN PRESS etal.

No. 28439.

Supreme Court of Ohio

May 28, 1941

Syllabus by the Court.

1. The use of property exclusively for charitable purposes is the criterion of exemption thereof from taxation. The right of exemption, derived from Section 2 of Article XII of the state Constitution, is lost if the property be appropriated to other uses. Cullitan, Pros. Atty., v. Cunningham Sanitarium, 134 Ohio St. 99, 16 N.E.2d 205, approved and followed.

2. Where a substantial portion of the gross income of a corporation is received for work done in competition with commercial concerns in the same line, the property of such corporation may not be exempted from taxation under Section 5353, General Code, even though such corporation be one formed not for profit and owned by a religious institution for whose use, benefit and behoof the property of the corporation is held. American Issue Publishing Co. v Evatt, Tax Commr., 137 Ohio St. 264, 28 N.E.2d 613 distinguished.

3. Under Sections 1464-1 and 5570-1, General Code, it is the duty of the Board of Tax Appeals to see that no property is improperly or illegally exempted from taxation, and such board at any time may revise the list of property exempted from taxation.

This case is here on appeal from the decision of the Board of Tax Appeals entered on November 20, 1940, 6 Ohio Supp. 65, holding that the use of appellant's premises does not constitute such a use within the meaning of Section 5353, General Code, as to entitle appellant to the exemption of its premises from taxation, and sustaining the complaint of complainants.

Appellant, the Otterbein Press, incorporated under the laws of Ohio as a corporation not for profit, is the successor, as the official church publishing organ of the United Brethren Church, of 'The Printing Establishment of the United Brethren in Christ.'

The appellant corporation is the outgrowth of a reorganization, under Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207, of a predecessor corporation. Its purposes are as follows: 'To publish religious periodicals and such other works as may conduce to the general benefit of the Church of the United Brethren in Christ, any net profits therefrom to be divided among the annual conferences of the Church of the United Brethren in Christ in the United States, to be applied by such conferences to the support of their indigent aged and disabled ministers, ministers' widows and orphans.'

Appellant took over all of the old corporation's assets, including plant, machinery, equipment, cash, accounts receivable, work in progress, etc., including land with a tax valuation of $35,900 and buildings with a tax valuation of $227,690.

Under the Section 77B bankruptcy reorganization plan, appellant was to retain 30 per cent of its future earnings for its own purposes. Of the remaining 70 per cent, one-half was to be used for the purpose of cancelling outstanding bonds of the old corporation, and one-half for cancelling outstanding notes.

Shortly after the reorganization plan had become operative, the real estate comprising the printing plant which had come to the appellant through the reorganization was placed on the exempt list by order of the Tax Commission of Ohio, where it has since remained. Appellant holds title to this printing plant property 'for the use, benefit and behoof of the Church of the United Brethren in Christ.'

Appellant's activities consist of printing, publishing and binding religious literature and church publications. It does the printing required by the 28 conferences or territories into which the church is divided. It furnishes this work to the various agencies of the church at cost plus a profit. A small amount of religious printing is done for denominations other than the United Brethren in Christ, which printing is paid for in the same manner as that for the United Brethren. In addition to religious printing, appellant does commercial printing for persons and corporations outside of the church. Gross sales in 1938 attributable to religious publications were $334,441.36; to commercial work $223,149.72. In 1939, the figures were $340,896.28 and $239,329.67, respectively. There was an operating profit of $60,000 in 1938 and of $90,000 in 1939. The commercial printing represents from 10 per cent to 20 per cent of the labor of the employees and of the use of the presses and other machinery.

Frank Zindorf and other complaining taxpayers of Montgomery county, Ohio, appellees herein, where the real estate in question is located, made demand upon the auditor of Montgomery county to strike appellant's property from the exempt list and place it upon the tax list and duplicate. Upon the failure and refusal of the county auditor, these complainants, under Section 5616, General Code, complained to the Board of Tax Appeals, requesting that appellant's property be removed from the auditor's list of exempted properties and placed upon the list of taxable properties, on the ground that such property was not exempt from taxation by virtue of the provisions of Section 5353, General Code, under which it theretofore had been placed upon the auditor's list of exempted properties.

Iddings, Jeffrey & Weisman, of Dayton, for appellees Frank Zindorf and others.

Coolidge & Becker, of Dayton, and Dargusch, Caren, Greek & King, of Columbus, for appellant.

Thomas J. Herbert, Atty. Gen., and Perry L. Graham, of Columbus, for appellee, William S. Evatt, tax commissioner.

MATTHIAS Judge.

Whether the decision of the Board of Tax Appeals is reasonable and lawful depends upon a proper interpretation of Section 5353, General Code.

Under Section 2 of Article XII of the Constitution of Ohio, general laws may be passed exempting from taxation property used exclusively for charitable purposes. Under this section of the Constitution, the Legislature enacted Section 5353, General Code, providing as follows:

'Lands houses and other buildings, belonging to a county, township, city or village, used exclusively for the accommondation or support of the poor, or leased to the state or any political subdivision thereof for public purposes,...