Summary
holding that interest was ownership for taxation purposes
Summary of this case from Quill v. R.A. Investment Corp.Opinion
Nos. 30405 to 30412
Decided December 26, 1945.
Taxation — Welfare Federation of Cleveland — Institution used exclusively for charitable purposes — Nonprofit corporation formed to assist charitable organizations and coordinate their activities — Income from bookkeeping, furnishing information, sale of books and rent — Decision of Board of Tax Appeals denying exemption neither unreasonable nor unlawful — Part of building rented with view to gain — Listing real estate for taxation — Section 5560, General Code — Parcel may not be split to tax a portion and exempt rest — Exemption governed by present exclusive use of property — Exemption forfeited by renting portion of separate parcel — Interest of fee owner in 99-year lease, renewable forever — Reverter, right to rent and right to enforce lease covenants — Owner of such lease has freehold estate and is a taxpayer — Although lessee to pay taxes and property in lessor's name on duplicate — Leasehold owner may complain respecting taxing or exempting leased property — Application for exemption from taxation — County treasurer's certificate that taxes, assessments, penalties and interest paid — Application may be amended by attaching such certificate, when — Board of Tax Appeals may consider application, when.
1. A nonprofit corporation formed for the purpose of assisting charitable and educational organizations of Cleveland and its vicinity and which co-ordinates all charitable activities of greater Cleveland does not lose its character as an institution for purposes only of public charity by accepting or charging reimbursement for bookkeeping services rendered to other charitable organizations, by charging or accepting partial reimbursement for welfare information furnished to the Federal Housing Administration, by the sale without profit of books designed primarily for use in schools of greater Cleveland as a supplementary text in the education of pupils and others in social services, or in renting a part of its building to commercial concerns with a view to profit. The Welfare Federation of Cleveland under the facts set forth in the statement of this case is an institution used exclusively for charitable purposes.
2. Where an institution used exclusively for charitable purposes owns a single building rented in part with a view to gain, the decision of the Board of Tax Appeals denying exemption from taxation of that part of such building used exclusively for charitable purposes is neither unreasonable nor unlawful. (Paragraph three of the syllabus of Cleveland Library Assn. v. Pelton, Treas., 36 Ohio St. 253; paragraph one of the syllabus of Cincinnati College v. Yeatman, Aud., 30 Ohio St. 276; and paragraph seven of the syllabus of City of Toledo v. Jenkins et al., Board of Tax Appeals, 143 Ohio St. 141, distinguished. Benjamin Rose Institute v. Myers, Treas., 92 Ohio St. 252; Jones, Treas., v. Conn et al., Trustees, 116 Ohio St. 1; Cullitan, Pros. Atty., v. Cunningham Sanitarium, 134 Ohio St. 99; Zindorf v. Otterbein Press, 138 Ohio St. 287; In re Estate of Taylor, 139 Ohio St. 417; East Cleveland Post, No. 1500, Veterans of Foreign Wars, v. Board of Tax Appeals, 139 Ohio St. 554; Incorporated Trustees of Gospel Worker Society v. Evatt, Tax Commr., 140 Ohio St. 185; Pfeiffer et al., Trustees of Akron Public Library, v. Jenkins et al., Board of Tax Appeals, 141 Ohio St. 66; Wehrle Foundation v. Evatt, Tax Commr., 141 Ohio St. 467; and Ursuline Academy of Cleveland v. Board of Tax Appeals, 141 Ohio St. 563, approved and followed.)
3. There is no authority for splitting the listing of a separate parcel of real property owned by a single charitable institution so as to tax a portion and exempt the rest of such property from taxation. Listing for tax purposes is to be made in accordance with Section 5560, General Code.
4. The test to be applied when the exemption of property from taxation is sought by an institution used exclusively for charitable purposes is the present exclusive use of such property for charitable purposes. The renting of any portion of a separate parcel of real estate forfeits the right to exemption even though the proceeds of such rental are devoted to charitable purposes.
5. The only interest left in a fee owner who grants a ninety-nine year lease, renewable forever, is a possibility of reverter, the right to receive the stipulated rental or consideration, and the right to enforce performance of other contractual covenants contained in the lease.
6. The owner of a ninety-nine year lease, renewable forever, of real property has a freehold estate in such property and is a taxpayer in respect of such parcel of real property where the lease requires lessee to pay the taxes, even though there is a provision in the lease that the premises shall remain upon the tax duplicate in the name of the lessor, his heirs and assigns.
7. Such leasehold owner has the right to complain to the Board of Tax Appeals respecting the taxation of or failure to exempt from taxation the real property described in such lease. (Section 1464, Section 5616 and Section 5681, General Code.)
8. Before the Board of Tax Appeals may consider an application for exemption of property from taxation under Section 5353, General Code, such application must have attached thereto a certificate or affidavit executed by the county treasurer certifying that the taxes, assessments, penalties and interest levied and assessed against the property sought to be exempted have been paid in full to the date upon which the application for exemption is filed. (Section 5570-1, General Code.) Prior to consideration thereof by the Board of Tax Appeals, such application may be amended by attaching a proper certificate of the county treasurer showing that such taxes, assessments, penalties and interest have been paid in full to the date upon which the application for exemption is made.
9. The Board of Tax Appeals has jurisdiction to consider an application for exemption from taxation of real property where the application discloses that the only taxes, penalties and interest unpaid are such as accrued after the property began its use for the exemption purpose and after the date of acquisition by the applicant. ( Ursuline Academy of Cleveland v. Board of Tax Appeals, 141 Ohio St. 563, approved and followed.)
APPEALS from the Board of Tax Appeals.
These eight cases, which were consolidated for hearing, involve appeals by The Welfare Federation of Cleveland from decisions of the Board of Tax Appeals denying exemption from taxation (for the years 1941, 1942, 1943 and 1944) of certain parts of a building known as the Community Service building, 1001 Huron road, Cleveland, and denying remission of the taxes and penalties accrued on the parts of the premises claimed to be exempt.
Hearing was had upon a stipulation of facts regarding the character of the occupants of floors three to ten, inclusive, and a stipulation of what witnesses, if called, would testify.
Prior to tax lien day 1941, appellant became the owner of a ninety-nine year lease, renewable forever, on the premises in question. This lease provides for payment by lessee to lessor of an annual rental of $4,000 and the payment by the lessee of all taxes, levies and assessments thereafter becoming due and payable. The granting clause of the lease contains the following provision: "Which premises shall at all times remain upon the tax duplicate in the name of the lessor, his heirs or assigns."
There is an eleven-story building on the premises in question, the entire eleventh floor being occupied by appellant. It was stipulated that all the occupants of the floors three to ten, inclusive, were exclusively charitable institutions each of which made exclusively charitable use of such premises, within the contemplation of Section 2, Article XII of the Constitution of Ohio, and Section 5353 of the General Code of Ohio. None of the occupants of floors three to ten, inclusive, paid any rent. Appellant paid all expenses connected with the operation of the building. It was not stipulated (but disputed) that appellant was such a charitable institution as would be entitled to exemption.
The first and second floors of the building, constituting approximately 10,000 square feet of rentable space each, were not included in the applications for exemption and remission of taxes.
The floor space in the basement consists of approximately 12,000 square feet. Approximately 1,000 square feet of this space (not covered by the applications for exemption or remission) is used by Burroughs Adding Machine Company, the tenant occupying the entire second floor of the premises, and approximately 330 square feet (not covered in such applications) is used by Lyon Healy, one of the tenants occupying the first floor. These two sections of the basement are separated from the rest of the basement by vertical walls. Approximately 1,910 square feet in the basement (covered by the applications) is used exclusively by the appellant and, with appellant's consent, by the charitable institutions occupying the floors three to ten, inclusive. The rest of the basement, consisting of approximately 8,760 square feet, is used for general building purposes.
The total taxes on the entire premises, including the parts used for commercial purposes and the parts used for charitable purposes, for the years prior to 1941 were paid in full after filing of the applications for exemption for the 1941 and 1942 taxes, but before consideration of the applications by the Board of Tax Appeals.
Appellant instituted an action in the Common Pleas Court of Cuyahoga county against the county treasurer and county auditor for the claimed purpose of enabling the county treasurer, who had refused to receive a part only of the taxes, to receive the part tendered by appellant. Pursuant to the order of the court in the above mentioned case the treasurer accepted one-third of the total taxes for the years 1941 and 1942, but was enjoined from collecting the balance of the taxes for such years pending the final determination of these proceedings.
It was stipulated that if the witnesses were called they would testify: The upper nine floors of the building were separated horizontally from the lower two floors of the building. These lower two floors consisted of approximately 10,000 square feet of rentable space each and were not included in the applications for exemption. It was further stipulated that the witnesses would testify: "22. The characteristics of The Welfare Federation of Cleveland during the years 1941, 1942 and 1943 with regard to its charitable nature are set forth in Section 3 above."
Section 3 of the "Stipulation As To Testimony of Witnesses" reads as follows:
"3. The Welfare Federation of Cleveland was originally incorporated as The Cleveland Federation for Charity and Philanthropy. It is a corporation not for profit organized and existing under and by virtue of the laws of the state of Ohio and is located at 1001 Huron road in the city of Cleveland, Ohio. The name of the corporation in 1916 was changed to The Welfare Federation of Cleveland. The purpose clause contained in its articles of incorporation, as amended in 1924, and as it existed at all times during the years 1941, 1942 and 1943 (exhibit L) is as follows:
" 'Third, said corporation is formed for the purpose of assisting the charitable and educational organizations of Cleveland and its vicinity by receiving and holding funds or real property, in trust or otherwise, and making such distribution of the same among such organizations as may be deemed best or by making such other use thereof or engaging in such other activities as may be deemed in the general interests of charity and education in said region.'
"Article I of the regulations of The Welfare Federation of Cleveland as they existed during the years involved in these proceedings (also a part of exhibit L) contained a statement of the purpose of the institution as quoted above.
"Article II of the regulations in effect during said period provided for two (2) kinds of membership in The Welfare Federation of Cleveland: (1) financially participating agencies which receive money from the Cleveland Community Fund through The Welfare Federation of Cleveland, of which there were seventy-nine (79) in each of the three years involved in these proceedings, and (2) approximately fifty-one (51) cooperating agencies, which are tax-supported public organizations or private agencies financed in other ways. Only institutions financed through The Cleveland Community Fund occupy space in the Community Service building covered by these applications.
"The Welfare Federation of Cleveland is almost wholly supported by the Cleveland Community Fund, which is the money raising agency. Approximately nine-tenths of the money raised by the Cleveland Community Fund, after deducting the expense of raising and collecting the money, is paid to The Welfare Federation of Cleveland, and the other one-tenth of the money so raised by the Cleveland Community Fund is paid to the Jewish Welfare Federation. The funds thus received by The Welfare Federation of Cleveland are budgeted in advance and distributed to the financially participating members of The Welfare Federation of Cleveland. In the financial statement of The Welfare Federation of Cleveland (exhibit M for each of the years 1941, 1942 and 1943, respectively), it is stated that all of the funds received by that institution are either paid to the various charitable institutions which are members of The Welfare Federation of Cleveland or are used to meet the actual expense of running the office of The Welfare Federation of Cleveland. No funds are used for any other purpose.
"The Welfare Federation of Cleveland has no capital stock and makes no provisions for dividends or profits to any institution or any individual. No dividends have ever been declared or paid by this institution to any institution or to any individual.
"The Welfare Federation of Cleveland has, for a number of years, held real estate in Cuyahoga county and Summit county, Ohio, which, during the time of said holding, has been, and is now, exempt from taxation. The Welfare Federation of Cleveland has been exempted from payment of income tax and social security taxes by the Federal Government and donors to The Welfare Federation of Cleveland may make deductions for gifts so made in the computation of their federal income tax.
"The Welfare Federation of Cleveland is a council to which its member institutions bring their common problems and their conflicting ideas and interests. Its membership during the years 1941, 1942 and 1943 consisted of one hundred thirty (130) nonsectarian, Catholic, Protestant and Jewish agencies. Each of these agencies appoints official delegates who make up the general membership of The Welfare Federation. These members in turn elect a Board of Trustees, forty (40) in number, seven (7) of whom are ex officio members. This Board of Trustees, as a policy determining body of The Welfare Federation, represents many different interests and varying points of view — public officials, social workers, business and professional men, community fund campaign leaders, and always the giving public. The Welfare Federation is made up of the general membership appointed by the member institutions, the Board of Trustees, the staff appointed by the board of trustees, (21) standing committees and other committees appointed as the need for them arises, and six (6) councils of social agencies with their subcommittees.
"The central services available to agencies through the Welfare Federation staff include the operation of the Community Service building in order to provide office space for many of its member agencies which have downtown headquarters. The cost to The Welfare Federation of operating the Community Service building as it did in 1941, 1942 and 1943 is less than it would cost to pay rent for space in various office buildings which otherwise it itself and its member institutions would have been required to rent. A number of charitable institutions being located together in one building also has the advantage of saving time since there is much interchange between the various agencies located in the one building.
"The Welfare Federation provides a central bookkeeping service for a considerable number of its member agencies, thus avoiding the necessity of each one having to employ persons on its own staff to do this work. The operation of this central bookkeeping service has resulted in a considerable saving over what it would normally cost the individual organizations.
"The Welfare Federation operates a central telephone switchboard in the Community Service building, contracts, and pays for, the auditing of the books of all its member agencies, makes arrangements for joint insurance coverage and provides professional services on workmen's compensation matters.
"The Welfare Federation maintains a property supervisor for the purpose of making available to its member agencies consultation and advice on building repair, heating and maintenance problems and any other matters relating to the operation of buildings. Annual savings amounting to several thousand dollars have been made in operating costs as a result of recommendations made by the property supervisor.
"The Welfare Federation provides a consulting service on nutrition, including meal planning for institutions and summer camps, literature on selection of foods and other similar services. It maintains a research and statistical department which gathers and compiles statistics for the entire health and welfare field. This department is also the accredited Cleveland agent of the United States Children's Bureau in its collection of national statistics in the health and welfare field.
"The Welfare Federation operates the Social Service Clearing House which is a card catalog or central index of the records of persons or families known to any of the approximately one hundred fifty (150) different social agencies, public and private, in Cleveland. Reports from this file of nearly a million cards are available only to social agencies and indicate to them what, if any, agency or agencies are also interested in any one of their clients. These reports prevent duplication of service and make possible better planning through exchange of information and therefore better service to those in need.
"The Volunteer Department of The Welfare Federation is its central recruiting, training and placement bureau which has recruited, trained and placed a large number of the more than five thousand (5,000) volunteer workers in its member social agencies.
"In addition to the services to its member agencies enumerated above, The Welfare Federation has two (2) other important activities which relate directly to individuals in need of help:
"(1) The Community Christmas Committee of The Welfare Federation of Cleveland devotes itself to the work of distributing provisions and gifts to the needy at Christmas time. Local newspapers unite with social workers and volunteers of The Welfare Federation of Cleveland to clear all Christmas giving. Through funds raised by the newspapers the committee is able to bring Christmas to the largest possible number of those in need. The committee actually disburses the funds raised by two of the newspapers, The Cleveland News and The Cleveland Press, a statement of each of which is attached to exhibit M for the years 1941, 1942 and 1943, respectively. The third newspaper, The Cleveland Plain Dealer, distributes its own funds but only to families in need as certified by the committee, thus avoiding any possibility of duplication.
"(2) The Welfare Federation operates the Tremont Service Bureau which is an example of how agencies in a general neighborhood can unite their services. Several years ago, The Welfare Federation completed a study showing how this one area of the city of Cleveland, the so-called Tremont Area, had suffered by unemployment, crowded living conditions, lack of recreational facilities, and a serious lack of respect for law enforcement. Plans for closer coordination in this area led to the establishment of one bureau as an experiment to take the place of six (6) agencies which had formerly served this area. Results of this experimental project have been studied carefully. In the period since this one bureau was established, the delinquency rate in proportion to the population has fallen much more rapidly than in other similar sections of the city or in the city as a whole.
"The Welfare Federation does social planning on a community-wide basis. This social planning is achieved through bringing together the various agencies in councils and through standing or specially appointed central committees in which lay and professional workers meet. The councils are six (6) in number, each bringing together within its membership, agencies working in similar fields. All but one of these councils have a paid secretary and all are assisted by auxiliary committees. The chief function of the councils is to bring to The Welfare Federation membership and to the general public a knowledge of social problems of major concern.
"Each one of these six (6) councils, like The Welfare Federation of which these are a part, concerns itself both with financial and with social planning. The budget committee of each council studies the budget submitted by the 'financially participating' agencies, brings its recommendations to the council which in turn submits recommendations to the central budget and policy committee of The Welfare Federation.
"The standing or special committees of The Welfare Federation together with the various councils complete this picture of working and planning together. The names alone of most of these committees indicate their duties, such as: Capital Accounts Committee, Executive Committee, Committee on Fire Insurance, Investment Committee, Nutrition Committee, Social Service Clearing House Advisory Committee, Committee on Solicitation and Committee on Transient and Homeless.
"In enumerating the activities of The Welfare Federation three (3) of its committees call for special comment. Together they are responsible for much of the long range planning as well as for immediate and emergent action. They are the Planning Committee, the Research Committee and the Central Budget and Policy Committee.
"The Planning Committee concerns itself with the problems, for example, of what are the factors producing sickness, untimely death, vice, crime, mental breakdown and family breakdown. By searching and careful analysis it determines to what extent these are preventible, the most efficient means of preventing them and how the community can be aroused to combat them. By careful analysis, research and special studies made by The Welfare Federation Research Department acting with the Research Committee of experts as advisors the actual facts and real conditions are determined. Nationally known experts often have been brought in and special local committees have been set up to guide individual studies.
"Studies made by the Research Committee often involve comparison with other cities, as salary study in the case work field, or comparison of expenditures for health and welfare in relation to other cities. Frequently they deal with one particular field, as members of recreational agencies or care of chronically ill persons in greater Cleveland, a study recently made at the request of the mayor's committee on health and welfare. Neighborhoods have been studied as to population, race, color, economic status and health conditions — all to determine the need for agency services in the area. The Research Committee serves The Welfare Federation Board of Trustees, the planning committee and the different councils in making studies as occasion demands. After the facts have been determined reports are brought to the planning committee. On the basis of facts thus determined the planning committee makes decisions and lays out a course of action. It determines whether a new agency shall be established to meet a recognized need or an existing agency shall be adapted to such service. It determines whether an agency has outlived its usefulness and how the efficiency of certain agencies can be increased. It determines whether a merger of agencies is desirable, whether services should be carried into new areas, how a shifting of population within an area has affected the need for agency services, how changing world or national conditions should affect the services which the Cleveland social agencies are now giving.
"The job of carrying out the details of social planning, of putting into effect the decisions of the planning committee frequently falls to the central budget and policy committee. This committee holds the purse strings both for many existing agencies and often for proposed new services. It studies agency deficits and recommends suitable action. It recommends appropriations from the contingent fund to meet emergencies. After considering all factors such as changes in income, in commodity costs, etc., affecting certain fields, it makes preliminary allocation of funds to each field served, receives in turn from each council recommendations of budgets needed by individual agencies, determines the allotments to be made to each agency, and passes these recommendations on to the board of trustees for final decision. These recommendations for appropriations to individual agencies total about $3,000,000 each year which is the approximate amount turned over to The Welfare Federation by the Cleveland Community Fund during that period.
"The Welfare Federation of Cleveland coordinates all the charitable activities of greater Cleveland, makes them work together efficiently and economically, furnishes centrally located places to many charitable institutions rent free in one building for the efficient carrying on of their activities, and, in addition, performs certain charitable services directly to the citizens of greater Cleveland who are in need of those services."
The following statement in the journal entry of the Board of Tax Appeals may be helpful to an understanding of the facts connected with this matter:
"It is pertinent to note that in the case of The Huntington Association, Inc., et al., v. The Tax Commission of Ohio, 21 O. O., 526 [in which case the present appellant was a party and which case is referred to in the stipulation in the instant case], the Common Pleas Court of Cuyahoga county, Ohio, under date of September 20, 1941, acting on appeal from an order of the Tax Commission of Ohio, which denied an application for the exemption from taxation of the identical property and parts thereof here in question for a former tax year, reversed said order of the Tax Commission and directed the exemption from taxation of the upper nine floors and part of the basement of this particular building. The Court of Appeals of Cuyahoga county by a judgment made and entered under date of June 22, 1942, reversed this judgment and order of the Common Pleas Court and affirmed the order of the Tax Commission of Ohio therein complained of. A motion for an order directing the Court of Appeals to certify the record in said case was overruled by the Supreme Court under date of November 18, 1942, in case No. 29268 on the docket of said court."
The applications for exemptions and remissions in the instant cases were made on the ground that the property involved was property belonging to an institution used exclusively for charitable purposes.
The treasurer's certificate attached to the application form for 1941 exemption reads:
"See letter certificate of John J. Boyle, Treasurer of Cuyahoga Co., O., attached hereto and made a part hereof."
There are two letters from the county treasurer in the record. The one dated November 29, 1941, reads:
"Taxes for the year 1937 and prior show paid in full on the treasurer's duplicates on the above listed parcel.
"Taxes for the tax year 1938, 1939 and 1940 show paid in part and the balance $32,601.41 has not been paid.
"The amount listed as due and payable for the tax year 1938 was $14,275.24. Of this amount $4,758.42 was paid. The balance plus penalties or $10,468.50 was carried forward to the 1939 duplicate. The amount charged for 1939 was $15,102.44. Against this amount was paid $5,034.14. The balance plus penalties and prior delinquency or $21,543.62 was carried forward to the 1940 duplicate. The amount charged for 1940 was $15,078.81. Against this $5,026.26 was paid, leaving a balance plus penalties and prior delinquency of $32,601.41.
"The county treasurer has been served with a temporary restraining order in Common Pleas case No. 513691 enjoining the collection of the $32,601.41 representing delinquent taxes and penalties for 1938, 1939 and 1940, pending final adjudication of case No. 513691."
Under date of June 17, 1943, the record contains a letter from the county treasurer reading:
"Taxes, assessments, penalties and interest for the year 1940 and prior show paid in full on the treasurer's duplicates on the above listed parcel.
Taxes for the year 1941 show paid in part and the balance of $11,023.13 remains unpaid on the treasurer's tax duplicate.
"The amount listed as due and payable for the tax year 1941 was $15,031.55. Of this amount, $5,010.52 was paid. The balance, plus penalties, or $11,023.13, has been carried forward to the 1942 tax duplicate."
As of June 17, 1943, the record contains the following treasurer's certificate in the applications for exemption for 1941 and 1942:
"I hereby certify that taxes, assessments, penalties and interest on the above described premises have been paid in full to and including last half 1940 as of 12/31, 1942."
In the applications for exemption for 1941 and 1942 the auditor's certificates read:
"After investigation, I find that the property as described is not entitled to exemption from taxation."
In case No. 30409 (for 1943) the county treasurer's certificate is by letter under date of November 15, 1943, in which it is stated:
"Taxes, assessments, penalties and interest, for the year 1940 and prior, are paid in full on the treasurer's duplicate on the above listed parcel.
"Taxes for the year 1941 show paid in part and the balance of $11,023.13 remains unpaid on the treasurer's tax duplicate.
"Taxes for the year 1942 show paid in part and balance of $10,849.80 remains unpaid on treasurer's tax duplicate.
"Taxes and assessments, for the year 1943, are not determined and therefore no figures are available at this date.
"The county treasurer has been served with a temporary restraining order in Common Pleas Court, case No. 518492, enjoining the collection of the balance of the 1941 and 1942 taxes, representing two-thirds of the taxes charged for those years, pending final adjudication of that case."
The county auditor's finding and certificate for the last mentioned year reads as follows:
"Now before the B. T. A. the county auditor makes no recommendation."
In case No. 30411 (for 1944) the county treasurer by letter dated November 22, 1944, made the following certificate:
"Taxes, assessments, and interest, for the year 1940 and prior thereto, are paid in full on the treasurer's duplicate on the above listed property.
"Taxes for the year 1941 show paid in part and the balance of $11,023.13 remains unpaid on the treasurer's tax duplicate.
"Taxes for the year 1942 show paid in part and the balance of $10,849.80 remains unpaid on the treasurer's tax duplicate.
"Taxes for the year 1943 show paid in part and the balance of $8,822.59 remains unpaid on the treasurer's tax duplicate.
"Taxes and assessments, for the year 1944, are not determined and therefore no figures are available at this date.
"The county treasurer has been served with a temporary restraining order in Common Pleas Court, case No. 518492 enjoining the collection of the balance of 1941, 1942 and 1943 taxes, representing two-thirds of the taxes charged for those years pending final adjudication of that case."
The county auditor's certificate for the year 1944 reads:
"After investigation, I find that the property as described is not entitled to exemption from taxation, as it is not owned and used exclusively for charitable purposes."
The applications for exemption from taxation each bear the file mark of the Board of Tax Appeals showing the same to have been filed prior to December 31st of the year for which exemption was asked.
The Board of Tax Appeals found that the property in question is not entitled to exemption from taxation and denied appellant's applications for exemption from taxation and for remission of taxes and penalties.
The Welfare Federation of Cleveland appealed to this court under Section 5611-2, General Code.
Mr. Ira J. Warner, for appellant.
Mr. Hugh S. Jenkins, attorney general, Mr. Aubrey A. Wendt, Mr. Daronne R. Tate, Mr. Frank T. Cullitan, prosecuting attorney, and Messrs. Laylin Smith, for appellees.
Under Section 5611-2, General Code, the question for our consideration is: Are the decisions of the Board of Tax Appeals reasonable and lawful?
As phrased by the Attorney General, the question is raised: "Did the Board of Tax Appeals make an unlawful or unreasonable decision when it refused to exempt from taxation that portion of a leased building occupied by appellant and various charitable organizations, and leave subject to taxation the remaining portion thereof occupied by commercial tenants?"
The appellant has phrased the matter as involving three questions as follows:
"1. Does the property involved in these cases, consisting of the upper nine stories of an eleven-story office building, belonging to an exclusively charitable institution, and part of the basement of same, all of which is used exclusively for charitable purposes by the owner, said upper nine stories and basement being separated from the two lower stories by horizontal floors and the various parts of the basement being separated by vertical walls, come within that part of Article XII, Section 2 of the Constitution of Ohio, which provides as follows: 'General laws may be passed to exempt * * * institutions used exclusively for charitable purposes * * *,' and within that part of Section 5353 of the General Code of Ohio which provides as follows: ' * * * property belonging to institutions used exclusively for charitable purposes, shall be exempt from taxation.'
"2. Under the Constitution and statutes of the state of Ohio is the property described in question No. 1, above, as being used exclusively for charitable purposes by the owner, severable for purposes of taxation from the part of the building which is not used for charitable purposes so that the property so used exclusively for charitable purposes may be exempted from taxation when it is the sole property described in the application for exemption?
"3. Under the Constitution and laws of the state of Ohio where a large office building belonging to an exclusively charitable institution is divided as stated in question No. 1, above, and the parts specifically described in the application for exemption of property from taxation are used exclusively for charitable purposes and the remaining parts of the building are used for commercial purposes, may the parts of the building which are used for commercial purposes be appraised for purposes of taxation, having due reference to the taxable value of the entire property, so that the parts used for commercial purposes may be taxed and the parts used exclusively for charitable purposes may be exempted from taxation?"
Before taking up the main question, we will dispose of the jurisdictional ones.
There is no contention by the appellee that the case of Huntington Assn., Inc., v. Tax Commission of Ohio, in which appellant was a party, decided on June 22, 1942, by the Court of Appeals for Cuyahoga county, is res judicata of the issues here involved. In that case appellant was merely a sublessee for a ten-year term from the Huntington Association, Inc., which was then the owner of the ninety-nine year lease on the premises here involved.
In the case of Ursuline Academy of Cleveland v. Board of Tax Appeals, 141 Ohio St. 559, 49 N.E.2d 680, we held:
"The Board of Tax Appeals may not consider an application for exemption of property under Section 5349 or Section 5353, General Code, unless the application for exemption has attached to it a certificate or affidavit executed by the county treasurer certifying that taxes, assessments, penalties and interest levied and assessed against the property sought to be exempted have been paid in full to the date upon which the application for exemption is filed, or are such as may be remitted under the proviso in Section 5570-1, General Code."
In the applications for exemption for the years 1941, 1942 and 1943, the county treasurer's certificates show unpaid taxes.
However, there appears in the record a certificate of the county treasurer under date of June 17, 1943 (which was prior to consideration of the applications by the Board of Tax Appeals), showing that taxes, assessments, penalties and interest on the premises had been paid in full to and including the last half of 1940, as of December 31, 1942.
The record further shows that one-third of the total taxes for the years 1941 and 1942 were paid and that the collection of the unpaid taxes and penalties for the years 1941 and 1942 was temporarily enjoined by the Common Pleas Court of Cuyahoga county, in case No. 518492, entitled Welfare Federation of Cleveland v. Boyle, Treas., pending final determination of these proceedings. (Compare Bell v. State, ex rel. Methodist Book Concern, 129 Ohio St. 463, 195 N.E. 867; State, ex rel. Methodist Book Concern, v. Guckenberger, Aud., 133 Ohio St. 27, 10 N.E.2d 1001; State., ex rel. Methodist Book Concern, v. Guckenberger, Aud., 133 Ohio St. 373, 14 N.E.2d 9.)
It is doubtful whether an injunction restraining the county treasurer from collecting the taxes due may excuse compliance with the terms of Section 5570-1, General Code, which provides in part: "The Board of Tax Appeals shall not consider an application for exemption of property under any of the sections enumerated herein [including Section 5353] unless the application has attached thereto a certificate or affidavit executed by the county treasurer certifying that taxes, assessments, penalties and interest levied and assessed against the property sought to be exempted have been paid in full to the date upon which the application for exemption is filed.
"Provided, however, that taxes, penalties and interest which have accrued after the property began its use for the exempt purpose but in no case prior to the date of acquisition of the title to said property by applicant, may be remitted by the county auditor, with the consent of the Board of Tax Appeals."
As the first (1941) application for exemption bears the file mark of the Board of Tax Appeals, of December 29, 1941, there is raised the question of compliance with the foregoing provision of Section 5570-1, General Code. We are of the opinion that under the proviso of Section 5570-1, supra, the Board of Tax Appeals had jurisdiction to consider the application for the reason that the evidence before the board at the time of consideration disclosed that the only unpaid taxes and interest due on the property sought to be exempted were such as might be remitted by the county auditor with the consent of the Board of Tax Appeals, if the board consented to the exemption.
In the case of Ursuline Academy of Cleveland v. Board of Tax Appeals, 141 Ohio St. 563, 49 N.E.2d 674, we held:
"Under the proviso in Section 5570-1, General Code, the Board of Tax Appeals has jurisdiction to consider an application for exemption from taxation where the application or evidence before the board discloses that the only unpaid taxes, penalties and interest due on the property sought to be exempted are such as may be remitted by the county auditor with the consent of the Board of Tax Appeals if the board consents to the exemption."
Therefore, the Board of Tax Appeals did not err in proceeding with the consideration of the applications for exemption in view of the treasurer's certificate dated June 17, 1943.
It is contended on behalf of appellee that the property described in the applications for exemption is not owned by appellant, and that, therefore, appellant has no right, under either Section 5609 or Section 5616, General Code, to apply for exemption. While the stipulation shows that the underlying fee simple title is now in Central United National Bank, trustee, yet that stipulation also discloses that The Welfare Federation of Cleveland became the sole owner of the underlying ninety-nine year lease, renewable forever, prior to tax lien day 1941.
The only interest of the owner of the fee simple underlying a ninety-nine year lease, renewable forever, is a possibility of reverter, the right to receive the stipulated rental or consideration and the right to enforce performance of other contractual covenants contained in the lease.
While the ninety-nine year lease under which appellant holds the premises requires such premises to remain in the name of the grantor on the tax duplicate (now by assignment Central United National Bank, Trustee), we are of the opinion that the appellant has a freehold estate in the property. In other words, appellant's interest in the premises in question constitutes property "belonging" to appellant. It was held in the case of Humphries, Aud., v. Little Sisters of the Poor, 29 Ohio St. 201, that "real estate leased to such an institution for a term of years at a stipulated rent is not exempt from taxation, although, by the terms of the lease, the institution may have agreed with the lessor to pay the taxes." Yet at page 207, Judge White said: "We do not say that the legal title must be vested in the institution. If the legal title were held in trust for the sole use and benefit of the institution, the property, in such case, would be regarded as belonging to the institution. Gerke v. Purcell [ 25 Ohio St. 229] ."
In the case of Davis v. City of Cincinnati, 36 Ohio St. 24, it was held that a lessee for a term of ten years having no other interest in the real estate was not an owner even though the lease provided for the payment by the lessee of all assessments upon the property. We think there is no analogy for the purposes of our question here between a term merely for ten years and one for ninety-nine years, renewable forever.
In the case of Ralston Steel Car Co. v. Ralston, 112 Ohio St. 306, 147 N.E. 513, 39 A. L. R., 334, it was held:
"Where the owner of real estate leases the same to another and to his heirs and assigns for a term of 99 years, renewable forever, the estate created by such instrument becomes a freehold estate in real property and becomes subject to the laws of descent as an estate in fee."
Section 10503-11, General Code, provides: "Permanent leasehold estates, renewable forever, shall be subject to the same law of descent as estates in fee are subject to by the provisions of this chapter."
Section 11655, General Code, provides: "Lands and tenements, including vested legal interests therein, permanent leasehold estates renewable forever, * * * shall be subject to the payment of debts, and liable to be taken on execution and sold as hereinafter provided."
It was held in Cincinnati College v. Yeatman, Aud., 30 Ohio St. 276, that an estate for years in real property, renewable forever, is real and not personal property within the meaning of the tax laws of Ohio. See, also, Village of St. Bernard v. Kemper, 60 Ohio St. 244, 54 N.E. 267, 45 L.R.A., 662; Loring v. Melendy, 11 Ohio, 355; Northern Bank of Ky. v. Roosa, 13 Ohio, 334. (Since the amendment of Section 2658, General Code, effective October 15, 1931, taxes on real estate are no longer the personal obligation of the owner.)
Both appellant and appellee have discussed Section 5330, General Code, which provides for the valuing and assessing in the names of lessees lands belonging to the state, municipal corporations, religious, scientific or benevolent societies or institutions, or to trustees for free education only, or held in trust by the state. Appellant claims that Section 5330, General Code, is not applicable here. Appellee says: " * * * it is unnecessary for the court to pass upon this phase of the matter for the reason that the finding of the board that the property was not used exclusively for charitable purposes must be sustained." We find it unnecessary to consider Section 5330, General Code, for the reason that we find nothing in that section prejudicial to the claims of appellant. In respect of the property in question appellant is the taxpayer, holder and owner and the property in question belongs to appellant.
We are of the opinion that appellant has the right, under Section 5616, General Code, to sign a complaint respecting the liability of the property in question to taxation or to its exemption therefrom. We are of the opinion that under the provisions of Section 5681, General Code, "each person holding lands shall pay the tax assessed thereon each year. * * *" (Italics ours.) Appellant is a taxpayer within the meaning of Section 5609, General Code.
Having disposed of the jurisdictional questions we come to the principal questions in the case, to wit:
(1) Whether the appellant is an institution used exclusively for charitable purposes, and
(2) Whether the property in question is being used exclusively for charitable purposes.
To justify the exemption of the property both questions must be answered in the affirmative.
The applicable part of Section 2 of Article XII of the Constitution provides as follows:
" * * * General laws may be passed to exempt institutions used exclusively for charitable purposes. * * *"
Section 5353, General Codes, provides in part:
" * * * Property belonging to institutions used exclusively for charitable purposes, shall be exempt from taxation."
(1) That the tenants occupying floors three to ten, inclusive, of the building are such charitable institutions has been stipulated by the parties. Such stipulation, however, does not cover appellant. During oral argument counsel for appellee argued that the charges for bookkeeping service for other welfare organizations, charges for information furnished the Federal Housing Administration and the sale (at a loss) of books entitled "Social Work in Greater Cleveland" prevent appellant being held to be a charitable institution.
The stipulation shows that no profit was made or expected from either the bookkeeping service or the furnishing of information to the Federal Housing Administration. The charges made for such service were solely for reimbursement. We are of the opinion that neither the reimbursement for the foregoing services nor the collection of rentals on the part of the property here in question affected appellant's status. The same may be said of the sale of the books.
Without reviewing the stipulated evidence of appellant's purpose clause, regulations and activities, but merely referring to the same as set forth in the statement of facts, supra, we are of the opinion that appellant is a charitable institution within the purview of Section 2 of Article XII of the Constitution and Section 5353 of the General Code.
(2) There remains, therefore, only the question of whether appellant's property sought here to be exempted is used exclusively for charitable purposes. Appellant's principal reliance is upon the case of Cleveland Library Assn. v. Pelton, Treas., 36 Ohio St. 253, decided in 1880 on the authority of Cincinnati College v. Yeatman, Aud., supra, in which latter case it was held in the first paragraph of the syllabus:
"There may be several and distinct tenements in the same building, under the same roof, as well where one is over the other, as where one is beside the other."
Before discussing the Cleveland Library Assn. case, we call attention to the fact that we do not have in the instant case any question of "several and distinct tenements in the same building, under the same roof." What we do have here is a building and the land on which it is situated held by appellant as a single unit. Section 5560, General Code, requires each separate parcel of real property to be listed agreeably to ownership. There is no authority for splitting the listing of a separate parcel of real property, for taxation or exemption therefrom, where the ownership is not divided.
There is an analogy, if not identity, between the instant case and the Cleveland Library Assn. case wherein it was held in the third paragraph of the syllabus as follows:
"The fact that the building is so constructed, that the parts leased or otherwise used with a view to profit cannot be separated from the residue by definite lines, is no obstacle to a valuation of such parts for purposes of taxation, having due reference to the taxable value of the entire property."
The effect of that holding was to enable an institution of purely public charity at that time to seek exemption of part of its block of buildings not being used with a view to profit. It is to be noted that the action below by the Cleveland Library Association was brought by the plaintiff to enjoin the auditor and treasurer of Cuyahoga county from collecting taxes and assessing penalties thereon for the year 1877. This court directed the denial of the exemption of all of the property, and in the course of the opinion by Judge Johnson (page 260) it was said:
"While we do not intend to suggest a doubt of the right of this corporation to accept this munificent donation of Mr. Case, the property being an entirety and suitable for its purposes, yet we think it clear, that as to so much of this building and grounds, not necessary for its use, which is rented out, should not be exempted from its equal share of taxation."
Appellant also relies on the definition of "exclusively" as used in the case of City of Toledo v. Jenkins et al., Board of Tax Appeals, 143 Ohio St. 141, 54 N.E.2d 656, in which it was held in paragraph seven of the syllabus:
"Some of the real property in a municipally owned and operated public airport unit may be taxable and the remainder exempt from taxation. The term 'exclusively,' as used in Section 2, Article XII of the Constitution, and read into Section 5351, General Code, by interpretation, applies to the use of particular parts of the property and not to the unit as a whole."
In the Toledo case the court was considering a public utility owned by the city of Toledo and in paragraph six of the syllabus it was held:
"The fact that revenue is incidentally derived from public property does not in and of itself alter the public character of the use."
That case involved the property of an airport consisting of eight parcels of land totaling about 506 acres. The court found that a part of this property rented to others was not presently needed for the airport. There is nothing in the Toledo case which questions either the statement of Chief Justice Weygandt in Pfeiffer et al., Trustees, v. Jenkins et al., Bd. of Tax Appeals, 141 Ohio St. 66, 46 N.E.2d 767, in which he said at page 69, "obviously, 'used exclusively' does not mean 'used in part,' " or the language of Judge Allen in Jones, Treas., v. Conn et al., Trustees, 116 Ohio St. 1, 155 N.E. 791, where the judge said at page 10, in respect of Section 2, Article XII of the Constitution: "Furthermore, when the amendment employed the word 'exclusively,' it placed as narrow construction upon the meaning of the clause as was possible; for, as pointed out in Zollman on Charities, p. 473, 'Property or buildings might actually be used for charitable purposes and yet not be used exclusively.' "
In the case of President and Trustees of Miami University v. Evatt, Tax Commr., 144 Ohio St. 434, 59 N.E.2d 366, the grantors had deeded to the university a tract of land which became a part of the campus, but reserved to two grantors, as long as they or the survivor of them should live, the right to occupy and live in the residence, rent free with heat furnished by grantee, with an obligation upon the grantors to maintain the residence in good condition and to maintain fire and windstorm insurance. The Board of Tax Appeals held the tract exempt excepting one acre of land and the residence building occupied by the two grantors. This court affirmed the decision of the Board of Tax Appeals, holding that there was no ground for exemption of the residence.
We have already pointed out the distinction between the Cincinnati College case, supra, and the instant case. It would be difficult to point out a distinction in principle between the instant case and the case of Cleveland Library Assn. v. Pelton, Treas., supra. However, there have been changes in both the constitutional and statutory provisions respecting the exemption of property belonging to a charitable institution, and the case of Cleveland Library Assn. v. Pelton, Treas., supra, may be distinguished on that ground alone. However, if, as appellant contends, the doctrine of that case is still applicable, we would have to reverse the same to be consistent with the holdings of this court since the last amendment of Section 2, Article XII of the Constitution.
In Benjamin Rose Institute v. Myers, Treas., 92 Ohio St. 252, 110 N.E. 924, L.R.A. 1916D, 1170, it was held:
"The real estate belonging to an institution of purely public charity is exempt from taxation only when used exclusively for charitable purposes, and if such real estate is rented for commercial and residence purposes it is not exempt, although the income arising from such use is devoted wholly to the purpose of the charity."
In the case of Cullitan, Pros. Atty., v. Cunningham Sanitarium, 134 Ohio St. 99, 16 N.E.2d 205, this court held:
"1. There is no presumption favorable to the exemption of property from taxation. An exemption from taxation must be clearly and expressly stated in the statute and must be such only as is authorized by the Constitution.
"2. Under the provisions of Section 5353, General Code, enacted pursuant to authority conferred by Section 2, Article XII of the state Constitution, institutions used exclusively for charitable purposes are exempted from taxation. Such use being the criterion of such exemption, the right is lost if the property be appropriated to other uses."
In the case of Zindorf v. Otterbein Press, 138 Ohio St. 287, 34 N.E.2d 748, we held:
"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."
In the case of In re Estate of Taylor, 139 Ohio St. 417, 40 N.E.2d 936, we held:
"A right to exemption from taxation must appear with reasonable certainty in the language of the Constitution or valid statute and must not depend upon a doubtful construction of such langage."
As we held in the cases of Incorporated Trustees of Gospel Worker Society v. Evatt, Tax Commr., 140 Ohio St. 185, 42 N.E.2d 900, and Wehrle Foundation v. Evatt, Tax Commr., 141 Ohio St. 467, 49 N.E.2d 52, the test to be applied is the present use of the property and unless the present use of the property is exclusively for charitable purposes the property may not be exempted from taxation although owned by a charitable institution.
At page 473 of the Wehrle case we said:
"We have no doubt that The Wehrle Foundation is a charitable institution devoted to a worthy cause, but under the plain language of the statute its property was not, at the time the exemption herein was asked for, being used exclusively for charitable purposes."
In the case of Crown Hill Cemetery Assn. v. Evatt, Tax Commr., 143 Ohio St. 399, 55 N.E.2d 660, we held: "Taxation of property is the rule and exemption the exception."
In the case of Bank of Commerce v. Tennessee, 161 U.S. 134, 146, 40 L.Ed., 645, 649, 16 S.Ct., 456, Mr. Justice Peckham said:
"Taxes being the sole means by which sovereignties can maintain their existence, any claim on the part of any one to be exempt from the full payment of his share of taxes on any portion of his property must on that account be clearly defined and founded upon plain language. There must be no doubt or ambiguity in the language used upon which the claim to the exemption is found. It has been said that a well founded doubt is fatal to the claim; no implication will be indulged in for the purpose of construing the language used as giving the claim for exemption, where such claim is not founded upon the plain and clearly expressed intention of the taxing power."
In 2 Cooley on Taxation (4 Ed.), 1443, Section 688, it is said:
"Of course if the part not used for exempt purposes is wholly separate and apart from the other property used for exempt purposes, then there is no question but that the nonexempt part should be taxed and the exempt part not taxed. Often, however, it is difficult to separate the exempt part from the nonexempt part, as where part of a building is used for exempt purposes and a part for nonexempt purposes. In such a case, if the statute be strictly construed, it would seem that if part is used for a nonexempt purpose then the building, considered as an entirety, is not 'exclusively' used for exempt purposes; and this has either been assumed without discussion or directly held in some cases refusing any exemption at all."
Following the foregoing language, Cooley says: On the other hand, the better rule seems to be that if the exempt and nonexempt parts are separable, for purposes of valuation, the former should be held not taxable and the latter taxable."
Outside Ohio the authorities are divided in respect of whether strict or liberal construction is to be given to constitutional and statutory provisions for exemption from taxation. In Ohio it is so thoroughly settled that strict construction is to be applied that tax cases from other states which follow liberal construction are of no value in deciding Ohio exemptions. Illustrative of the holdings of other states which follow the rule of strict construction is the case of Gymnastic Assn. of South Side of Milwaukee v. City of Milwaukee, 129 Wis. 429, 109 N.W. 109, wherein it was said (page 438): "The property in question is a single non-severable building together with the ground on which it stands. Only when the 'property' is exclusively used for educational purposes can it be exempt at all. It seems obvious that a single indivisible piece of property cannot, in any proper sense, be exclusively so used when parts of it are permanently occupied for other purposes."
There is but one parcel of property here involved. We do not have here the situation of a building, the different floors of which are separately owned. There is no authority for splitting the listing of property for taxation in the manner sought by appellant, to wit, part of a single parcel of property under single ownership to be exempt and part nonexempt. If there were different owners of the different floors we would have a different question such as was presented in the case of Cincinnati College v. Yeatman, Aud., supra. (See reference to Section 5560, General Code, supra.)
In the case of Ursuline Academy of Cleveland v. Board of Tax Appeals, supra, we held:
"2. Under Section 5349 or Section 5353, General Code, property belonging to a public college, academy or institution of learning not publicly owned may be exempted from taxation only if used exclusively for a charitable purpose at the time the exemption is sought."
In the case of East Cleveland Post No. 1500, Veterans of Foreign Wars, v. Board of Tax Appeals, 139 Ohio St. 554, 41 N.E.2d 242, this court in a per curiam opinion affirmed the decision of the Board of Tax Appeals which held: " * * * Under the policy of this state with reference to exemption from taxation as expressed in constitutional and statutory provisions a charitable institution owning a building, which, together with land on which it is situated, is a single unit is entitled to have it exempted only if it is exclusively used for charitable purposes. And if such institution elects to use part of said building for commercial purposes and thus enter into competition with others who are paying taxes, it must bear its share of the burden of taxation."
While it is true in that case that the entire property was sought to be exempted, this court did not modify the decision of the Board of Tax Appeals as it had the power to do under Section 5611-2, General Code.
The case of Pfeiffer et al., Trustees, v. Jenkins et al., Board of Tax Appeals, supra, bears some analogy to the instant case though hardly on all fours with it. In that case, trustees of the Akron Public Library sought exemption for a building acquired in the year 1940. The application for exemption for the year 1941 set forth that the third floor of the building was occupied by commercial tenants; and that one-half of the second floor and the basement were occupied by a library-sponsored. W. P. A. project for the indexing and filming of newspaper files. The W. P. A. project employing a hundred people was sponsored by the library. The files to be indexed belonged partly to the Akron Beacon Journal, partly to the Akron Public Library and partly to the Ohio State Archaeological and Historical Society. The photostats and index were to be the property of the Akron Public Library when completed. The library received no remuneration for this project. As the remodeling of the building progressed, the W. P. A. project was moved from the basement and second floor to the third floor where it was being operated at the time of the hearing. The use of the third floor by commercial tenants diminished until January 31, 1942, when all had moved out. The children's department of the library moved into the building on January 1, 1942, and other departments of the library had moved in before February 14, 1942. The Board of Tax Appeals held the property taxable for the year 1941 and denied exemption for the reason that during that year the property was not used exclusively for a public purpose.
In affirming the decision of the Board of Tax Appeals this court held:
"2. Under the provisions of Section 5351, General Code, and Section 2 of Article XII off the Constitution of Ohio, relating to the exemption from taxation of public property used for a public purpose, such use must be exclusive."
Appellant concedes "that any property of a charitable institution which is not used exclusively for charitable purposes is taxable," but contends that the portion of the building not used for commercial purposes is used exclusively for charitable purposes.
It its brief appellant says: "We submit that * * * the building involved in these cases should be divided horizontally for the purpose of valuation, for tax purposes, of the parts thereof which were used for commercial purposes, having due reference to the taxable value of the entire premises, and that the parts of the building that were used exclusively for charitable purposes should be exempted from taxation." In these contentions appellant invites us to depart from our rule of strict construction in exemption cases, or legislate, which is not a function of this court.
This court is not unmindful of the public service which is being rendered by The Welfare Federation of Cleveland, but as we see it, the policy of this state as set forth in Section 2, Article XII of the Constitution of Ohio and Section 5353 of the General Code expressly forbids the exemption of property where the use is not exclusively for charitable purposes. We are of the opinion that there is no authority in Ohio for making a separation of a single building under single ownership, whereby a part of the building used for commercial purposes may be held to be separate and distinct from the rest of the building used for charitable purposes. The only remedy for the situation which we can point out is to be found in the following language used by Chief Justice Rosenberry in Cardinal Publishing Co. v. City of Madison, 208 Wis. 517, 520, 243 N.W. 325: "If the plaintiff wishes to claim the benefit of the exemption it should keep itself within the field prescribed by the legislature [and in our case, the Constitution as well]. Whether it goes out of that field or not is a matter of choice. It may stay in and receive the exemption. It may depart from it and pay its taxes. It has chosen to depart, therefore its property is subject to taxation."
Being of the opinion that the decisions of the Board of Tax Appeals in the instant cases are reasonable and lawful, such decisions should be and they hereby are affirmed.
Decisions affirmed.
MATTHIAS, J., concurs.
WEYGANDT, C.J., and BELL, J., concur in paragraphs one to eight, inclusive, of the syllabus and in the judgment, but dissent from paragraph nine of the syllabus.
WILLIAMS and HART, JJ., concur in paragraphs one, five, six, seven, eight and nine of the syllabus, but dissent from paragraphs two, three and four of the syllabus and from the judgment.
There is no question that for purposes of taxation a building may be divided perpendiculary as well as horizontally, where there are separate and distinct tenements in the same building. Cincinnati College v. Yeatman, Aud., 30 Ohio St. 276. In our judgment this principle applies to a building part of which is exempt from taxation and the remaining part not exempt although the fee is owned by one person.
The case of Cleveland Library Assn. v. Pelton, Treas., 36 Ohio St. 253, which has never been modified or overruled, controls the rights of the parties in this case. That case concerned a building in Cleveland then known as the Case Block. The building consisted of a basement and four stories as shown by the plat. Some of the rooms on each floor except the first were used by the library association for its purposes, some rooms were rented out and some were vacant. The rents received were applied exclusively to keeping the building in repair and to the purposes of the association.
In the course of the opinion, it is stated that, under the act of 1864, which governed the rights of the parties, the buildings of the association must be used exclusively for the object of purely public charity in order to be exempt from taxation. The test was therefore substantially the same as that to be applied in the instant case. The opinion concludes with this language:
"While we do not intend to suggest a doubt of the right of this corporation to accept this munificent donation of Mr. Case, the property being an entirety and suitable for its purposes, yet we think it clear, that as to so much of this building and grounds, not necessary for its use, which is rented out, should not be exempted from its equal share of taxation.
"It may be said, that the entire building may become necessary for the objects of the association. When this shall become the case, and the entire building or any additional parts are so used, the parts thus withdrawn from renting, cease to be leased or otherwise used with a view to profit, and fall within the exemption.
"The fact that the building is so constructed that the parts leased or otherwise used with a view to profit cannot be separated from the residue by definite lines, is no obstacle to a valuation of such parts for purposes of taxation, having due reference to the taxable value of the entire property."
The final order recites that "on consideration whereof the court finds and adjudges that so much of said building [the Case Block] and property as is rented, leased or otherwise used with a view to profit, is subject to taxation, although the income derived therefrom is applied to keeping the building in repair, and to the purposes of said association, and that as to the residue of said building, and property not so used, the same is exempt from taxation." Order book No. 7, page 297.
In the instant case the admittedly nonexempt part (the first and second floors and walled-off part of basement) and the other part are separable for the purposes of taxation, and only such nonexempt part should be placed on the tax duplicate. The taxable character of the parts is not changed because the elevator and heating system serve the rented portion as well as the rest of the building nor because the lessee is furnished janitor service by the lessor nor because of any like situation. Such services as the use of the elevator and the furnishing of heat are factors to be considered in fixing the tax valuation of the rented portion. It is not, however, essential that the exempt and nonexempt parts can be separated by distinct lines. Cleveland Library Assn. v. Pelton, Treas., supra; Board of Home Missions v. City of Philadelphia, 266 Pa. 405,
109 A. 664. See, also, In re Young Men's Christian Assn. Assessment, 106 Neb. 105, 182 N.W. 593; In re Masonic Temple Craft, 129 Neb. 293, 261 N.W. 569; 2 Cooley on Taxation (4 Ed.), 1442, Section 688.
The case of Pfeiffer et al., Trustees, v. Jenkins et al., Board of Tax Appeals, 141 Ohio St. 66, 46 N.E.2d 767, is to be distinguished because during the year in question the building was not used for library purposes at all.
The implications of the pronouncements in the majority opinion are far-reaching. By virtue thereof a charitable institution owning a building several stories high might find that it needed the entire building for its charitable purposes except the first story but was unable to rent the unneeded part for as much as the taxes resulting from loss of exemption would be on the whole building. Therefore money would be saved by allowing the first floor to remain idle. Such a result would be anomalous if not grotesque.
There is no question that the appellant's building, with the exception of the rented space (the first and second floors and walled-in portion of the basement) was used exclusively for charitable purposes. So in our judgment the building, excepting such rented space, was exempt from taxation.
The decisions should be reversed and cases remanded with directions to cause the exempt portion of the building to be taken from the tax duplicate.
HART, J., concurs in the foregoing dissenting opinion.