Highland Park Owners, Inc. v. Tracy - Ohio Supreme Court Opinion - Ohio Supreme Court Decision

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OPINIONS OF THE SUPREME COURT OF OHIO

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Highland Park Owners, Inc., Appellee, v. Tracy, Tax Commr.,
Appellant.
[Cite as Highland Park Owners, Inc. v. Tracy (1994),
Ohio St.3d .]
Taxation -- Lakefront property purchased by non-profit
homeowners association and maintained as a lakeside park
open to the public exempt from taxation when R.C. 5709.12.
(No. 93-2570 -- Submitted September 29, 1994 -- Decided
December 27, 1994.)
Appeal as of right from the Board of Tax Appeals, No.
91-A-1405.
Highland Park Owners, Inc., appellee, a non-profit,
homeowners association, purchased lakefront property within its
subdivision, which is on Grand Lake St. Marys. Highland Park
maintains the property as a lakeside park. The park contains
benches, picnic tables, a swimming beach with a mercury vapor
lamp, a boat ramp, and a fishing pier. Highland Park mows the
grass, maintains the improvements, and pays for electricity for
the lamp. Highland Park opens the park to the public for
swimming, boating, fishing, and walking.
Highland Park applied to the Tax Commissioner, appellant,
to exempt the property from taxation for tax year 1990. The
commissioner denied the exemption, and Highland Park appealed
to the Board of Tax Appeals ("BTA"). The BTA determined that
Highland Park was not a charitable institution but that the
property qualified for exemption under R.C. 5709.12. The BTA
ruled that the property was exempt despite not being held by a
charitable institution because Highland Park used the property
exclusively for charitable purposes.
The cause is now before this court upon an appeal as of
right.

Michael Sacher, for appellee.
Lee Fisher, Attorney General, and Richard C. Farrin,
Assistant Attorney General, for appellant.

Per Curiam. R.C. 5709.12(B) states:
"* * * Real and tangible personal property belonging to
institutions that is used exclusively for charitable purposes
shall be exempt from taxation. * * *"
The commissioner argues that, to qualify for exemption,
the property must be owned by a charitable institution, and
that since Highland Park is not a charitable institution, the
property is not exempt. He also argues that the property is
not used exclusively for charitable purposes. We disagree on
both counts.
Section 2, Article XII of the Ohio Constitution permits
the General Assembly to exempt from taxation "institutions used
exclusively for charitable purposes[.]" In Gerke v. Purcell
(1874), 25 Ohio St. 229, paragraph six of the syllabus, our
brethren ruled on an earlier version of this constitutional
provision:
"The constitution, in directing the levying of taxes and
in authorizing exemptions from taxation, has reference to
property, and the uses to which it is applied; and where
property is appropriated to the support of a charity which is
purely public, the legislature may exempt it from taxation,
without reference to the manner in which the title is held, and
without regard to the form or character of the organization
adopted to administer the charity."
In Goldman v. Friars Club (1952), 158 Ohio St. 185, 195,
48 O.O. 147, 151 107 N.E. 2d 518, 522, Justice Hart, writing
for the majority, stated:
"It must be conceded that the criterion of the
exemptibility of these properties is their use for charitable
purposes. The application of this limitation on the exemption
of real property from taxes was before this court in the case
of Wilson, Aud., v. Licking Aerie No. 387, F.O.E., 104 Ohio
St., 137, 135 N.E., 545, wherein it was held that to be exempt
the property need not be owned by an institution of purely
public charity, so long as the property itself is exclusively
devoted to and used for charitable purposes."
In Episcopal Parish v. Kinney (1979), 58 Ohio St. 2d 199,
200-201, 12 O.O. 3d 197, 198, 389 N.E. 2d 847, 848, we adopted
the concurring opinion of Justice Stern in White Cross Hosp.
Assn. v. Bd. of Tax Appeals (1974), 38 Ohio St.2d 199, 203, 67
O.O. 2d 224, 226 , 311 N.E. 2d 862, 864-865 :
"'Initially, it is important to observe that, although
R.C. 5709.121 purports to define the words used exclusively for
"charitable" or "public" purposes, as those words are used in
R.C. 5709.12, the definition is not all encompassing. R.C.
5709.12 states "* * * Real and tangible personal property
belonging to institutions that is used exclusively for
charitable purposes shall be exempt from taxation." Thus, any
institution, irrespective of its charitable or non-charitable
character, may take advantage of a tax exemption if it is
making exclusive charitable use of its property. See Wehrle
Found. v. Evatt (1943), 141 Ohio St. 467 [26 O.O. 29], 49 N.E.
2d 52. The legislative definition of exclusive charitable use
found in R.C. 5709.121, however, applies only to property
"belonging to" i.e., owned by, a charitable or educational
institution, or the state or a political subdivision. The net

effect of this is that R.C. 5709.121 has no application to
noncharitable institutions seeking tax exemption under R.C.
5709.12. Hence the first inquiry must be directed to the
nature of the institution applying for an exemption. * * *'"
(Emphasis sic.)
Thus, to grant exemption under R.C. 5709.12, the arbiter
must determine that (1) the property belongs to an institution,
and (2) the property is being used exclusively for charitable
purposes. We have held that a private profit-making venture
does not use property exclusively for charitable purposes.
Cullitan v. Cunningham Sanitarium (1938), 134 Ohio St. 99, 11
O.O. 539, 16 N.E. 2d 205; Cleveland Osteopathic Hosp. v.
Zangerle (1950), 153 Ohio St. 222, 41 O.O. 243, 91 N.E. 2d 261;
Lincoln Memorial Hosp., Inc. v. Warren (1968), 13 Ohio St.2d
109, 42 O.O. 2d 327, 235 N.E. 2d 129. Nevertheless, "'any
institution, irrespective of its charitable or non-charitable
character, may take advantage of a tax exemption if it is
making exclusive charitable use of its property.'" Episcopal
Parish v. Kinney, supra, at 201, 12 O.O. 3d at 198, 389 N.E. 2d
at 848. As the BTA concluded, the applicant for exemption
under R.C. 5709.12 need not be a charitable institution, but
simply an institution.
Black's Law Dictionary (6th Ed. 1990) 800, defines
"institution" as:
"An establishment, especially one of eleemosynary or
public character or one affecting a community. An established
or organized society or corporation. It may be profit in its
character, designed for profit to those composing the
organization, or public and charitable in its purposes, or
educational (e.g. college or university). In re Peabody's
Estate [1937], 21 Cal. App. 2d 690 [693], 70 P. 2d 249, 250. A
foundation, as a literary or charitable institution. Prescott
Courier v. Bd. of Sup'rs. of Yavapai Cty. [1937], 49 Ariz. 423
[430], 67 P. 2d 483, 486."
First, Highland Park is an institution. It is a
non-profit corporation organized, according to its charter, to
advance the pleasure, recreation, common interests, and other
non-profitable purposes of the community of property owners of
Highland Park. Thus, the subject property is owned by an
institution.
Second, the park is used exclusively for charitable
purposes, contrary to the commissioner's argument. According
to College Preparatory School for Girls v. Evatt (1945), 144
Ohio St. 408, 29 O.O. 574, 59 N.E. 2d 142, paragraph two of the
syllabus:
"Land belonging to [a qualifying] institution, which is
used solely as an athletic field and playground for students of
the institution and other children of the vicinity is property
'used exclusively for charitable purposes' and exempt from
taxation under Sec. 5353, General Code [now R.C. 5709.12]."
Highland Park opens the property for the benefit of its
residents and any member of the public choosing to swim, boat,
fish, or walk on the property, and this use is exclusively for
charitable purposes.
Since the property owned by Highland Park is used
exclusively for charitable purposes under the above decisions,
we affirm the BTA's decision because it is reasonable and