
    Gorman, Pros. Atty., on behalf of The State of Ohio, v. Friedlander, County Treas., et al.
    (Decided September 26, 1932.)
    
      Mr. Robert N. Gorman, prosecuting attorney, and Mr. Jack B. Josselson, for plaintiff.
    
      Mr. Clifford Gordes, for defendants Treasurer and Auditor of Hamilton county.
    
      Mr. Gilbert Bettman, attorney general, Mr. Lewis F. Laylin, Mr. Raymond J. Kunkel and Mr. Wm. J. Ford, for defendant State Auditor.
    
      Mr. Washington T. Porter and Mr. Morison R. Waite, for intervening petitioners, the Board of Trustees of Public Library.
   Ross, P. J.

This is a proceeding on appeal from the court of common pleas of Hamilton county, Ohio.

The matter is presented to this court upon a demurrer to the petition, as amended by interlineation. As so amended the petition recites that the prosecuting attorney of Hamilton county brings this suit in the name of the state and for the benefit of Hamilton county and its taxpayers.

The petition further alleges that the so-called “Intangible Tax Law” was passed by the Legislature of Ohio and became effective in June, 1931 (114 Ohio Laws, 714), and by its provisions replaced certain provisions of the General Code and amended others. These sections are set out in detail in the petition as follows: “Said law repealed certain former sections of the taxation laws and enacted or amended in whole or in part the present sections of the Ohio General Code as follows:

“Amending Sections 5323, 5324, 5325, 5326, 5327, 5328, 5360, 5382, 5385, 5388 and 5389 of the General Code, enacting supplemental Sections 5325-1, 5328-1 and 5328-2 and Section 5638 of the General Code, amending Sections 2583, 2585, 2586, 2588, 2589, 2590, 2591, 2592, 2596, 2624, 2641, 2643, 2645, 2649, 2650, 2651, 2653, 2654, 2657, 2683, 2684, 2685, 2687, 2688, 2689, 2746, 5366, 5367, 5368, 5370, 5371, 5372, 5372-1, 5372-2, 5372-3, 5372-4, 5373, 5376, 5378, 5379, 5390, 5391, 5392, 5393, 5398, 5406, 5407, 5408, 5409, 5410, 5411, 5412, 5413, 5414, 5419, 5422, 5428, 5429, 5430, 5445, 5446, 5448, 5450, 5455, 5456, 5457, 5459, 5460, 5498, 5499, 5562, 5563, 5579, 5591, 5596, 5597, 5599, 5601, 5604, 5605, 5606, 5609, 5610, 5612, 5613, 5614, 5615, 5624-4, 5624-5, 5624-7, 5624-14, 5672, 5673, 10509-80, 10509-81, 10509-82, 10509-176, 12924-4, 12924-7, 12924-8, 12924-9, and 12924-10 of the General Code, enacting supplemental Sections 2585-1, 2587-1, 2602-1, 2649-1, 5372-5, 5398-1, 5411-1, 5411-2, 5412-1, 5414-1, 5414-2, 5414-3, 5414-4, 5414-5, 5414-6, 5414-7, 5414-8, 5414-9, 5414-10, 5414-11, 5414-12, 5414-13, 5414-14, 5626-2, 5671-1, 5671-2, 5673-1, 5673-2, 5673-3, 5673-4 and 12924-11 and Sections 2584, 2602, 2656, 5375, 5377, 5394 and 5395 of the General Code and repealing Sections 192, 2588-1, 2595, 5321, 5366-1, 5369, 5371-1, 5371-2, 5371-3, 5371-4, 5371-5, 5374-1. 5375-1, 5375-4. 5384, 5387, 5387-1, 5397, 5399, 5400, 5401, 5402, 5403, 5403-1, 5404, 5404-1, 5405, 5651, 5674, 5702, 9675 and 12919 of the. General Code.”

It is further alleged that the taxes in question were levied under the provisions of such amendments and new legislation; that the auditor of Hamilton county, pursuant to such law, prior to the first of February, 1932, computed the amount of undivided classified property taxes due in 1932 to all municipalities, school districts, public library trustees, and park boards; and transmitted a certificate thereof to the auditor of state. The total sum of such taxes amounted to $3,356,273.72; that thereafter property tax returns were filed by the taxpayers of Hamilton county and the taxes due thereon were paid to the treasurer of Hamilton county.

It is alleged that if all the undivided classified property taxes estimated and expected to be collected in Ohio were collected, Hamilton county would be entitled to receive one-half the amount contained in such certificate, or $1,678,136.86, at the time of the May settlement, and the other half at the time of the November settlement; that the treasurer has collected for the first half of the year $1,813,677.69, and that there will be additional sums collected, such amount not including extensions, or taxes due from inter-county corporations and certain others who are not required to make payment until September 20, 1932; that more than $1,813,677.69 has been collected in Hamilton county and under the provisions of the new law such county could only retain $1,678,136.86 of such taxes if a similar percentage of collection had been made in all the other counties of the state combined, the excess being required to be held subject to future legislation, but that because less has been collected in the other 87 counties than was estimated and anticipated under the provisions of such “Intangible Tax Law” only the sum of $1,013,121.37, or 60 per cent, of the estimate of its county auditor, could be used and retained for tbe political subdivisions of this county, and the balance of $763,726.46 would be paid into the state treasury, and thence disbursed to political subdivisions of the state for support and expenses and to pay the bonded indebtedness of those subdivisions, including cities, villages, school districts, townships, and libraries, none of which are in Hamilton county.

It is further alleged that such diversion for the entire year would amount to the sum of $1,500,000, and that the auditor of state, unless restrained, will draw his warrant upon the treasurer of Hamilton county for such excess, and that the legislation requiring the diversion of such surplus is unconstitutional and void.

By stipulation, a schedule, which is set forth later, was considered as incorporated in the petition, and it was also stipulated that the allegations of the petition should include a statement that the tax rate of 1930 in the several counties of the state varied with the counties.

To the petition, as amended and amplified by the stipulation, the defendants demurred.

The question as so presented involves only the recent legislation as it provides for the distribution of the tax upon intangibles.

The right of the Legislature to levy and collect the tax is not challenged. The attack is directed solely to the right of the Legislature to provide for a distribution of such tax to the several counties of the state for local purposes, upon an unjust, inequitable, and unequal basis, which has no uniformity in its operation.

We now reproduce in full the schedule admitted to be a part of the pleading:

In considering this schedule, it is to be noted that the distributable share of each county, set out in the first column, represents the money lost to the municipal corporations, school districts, park districts, and sanitary districts of the state, by reason of the removal from the general tax duplicate of all motor vehicles, household goods and furnishings, pianos and musical instruments, moneys, credits, investments in stocks, bonds, joint-stock companies and otherwise, and shares of bank stock or capital employed in banking. Such shares also include the money lost to libraries and township parks by reason of the constitutional limitation of the tax rate to fifteen mills, and this amount under the law is based upon the tax collection of 1930; and it has been stipulated that the petition alleges that such amounts were produced by varying tax rates in the various counties of the state.

Referring again to the schedule, it is obvious that if the tax rate had been somewhat higher, say in Allen county in 1930, the amount of the distributable share of Allen county, as previously defined, would have been consequently larger in proportion, and possibly sufficiently large to eliminate the amount which Allen county is required to pay upon the warrant of the state auditor, which is ascertained by subtracting the proportionate share (column 5) of this county in the entire state intangible tax collection from the net amount collected by the county (column 4). This same reasoning applies to the other fourteen counties showing surpluses in the net amounts collected in 1932 over their proportionate shares. It must be continuously borne in mind that these proportionate shares are predicated upon the 1930 tax returns, which were governed by the varying rates in the several counties.

It is just as obvious that had the tax rate of 1930 of the counties showing a deficit been smaller they would not have shown as large an aggregate collection as appears in the first column, and their proportionate share would have been consequently smaller and equalized by the net amount collected in 1932.

The result of all this is that it appears that the entire process of distribution of the 1932 collection is effected by and predicated upon the varying tax rates prevailing in the several counties in 1930. So that the distribution varies like the rate in the county, and the legislation applying to and providing for such distribution of the entire tax collected, while constituting legislation of a general nature, wholly fails to have a uniform operation throughout the state, and thus violates the provision of the Ohio Constitution, Article II, Section 26:

“All laws, of a general nature, shall have a uniform operation throughout the State * * V’

That the power to tax is inherent in the state, and that the Legislature has full authority to levy and collect taxes and distribute same, are axiomatic propositions. Unless limitation be found in the Constitution, this power, remains unabridged. It may be even exercised arbitrarily, but under the provision of the Constitution noted such legislation must have a uniform operation, and, if arbitrary, such arbitrariness must have uniformity in operation.

Courts must take into consideration the result of legislation, and, even though it is manifest that such legislation is highly commendable in other respects, if the result of such legislation is to produce a situation showing a lack of uniformity in the operation of such legislative acts there is no course open but to declare such legislation, in so far as it offends against the constitutional limitation, invalid and void.

The able and ample briefs of counsel note many other arguments pro and con upon other phases of the issues involved. Our conclusion, as above set forth, renders any statement upon these unnecessary.

While this case is presented to the court upon demurrer to the petition as amended, it is our understanding that all parties are agreed that only a question of law is involved, and that the court shall render its final judgment upon the premises presented.

The specific prayer of the petition is only that the auditor and treasurer of Hamilton county he enjoined from honoring any warrant drawn upon them by the auditor of state under the legislation hereinbefore noted.

It is the conviction of this court that principles of equity, the public welfare, and even consideration for the rights of humanity demand that the relief granted should extend no further than to enjoin any action affecting the surplus over the proportionate share of the county in the general fund. To hold otherwise would be to impound the entire tax collected and thus paralyze all of the necessary activities of the political subdivisions affected. Courts cannot close their eyes to calamity and disaster following a given course, and must-exercise every prerogative to prevent such a result.

It is the conclusion of this court, therefore, in view of the fact that some distribution of the entire fund shall be made, that pending further legislative action nothing said herein shall affect the right of the political subdivision involved to use that portion of the general fund designated as its proportionate share for local purposes, and that the surplus shall be retained pending- action of the Legislature, which shall conform to the limitation imposed by the Constitution of the state of Ohio.

This is in conformity to the legislation in question; the only limitation therein being found in Section 7 of the act, where it is provided that “no distribution of such fund shall be made by any county treasurer until the foregoing requirements of this section have been fully complied with.” This provision, we find, under the principles previously announced, to be unconstitutional and void.

While the lower court held Sections 6, 7, and 8 invalid and unconstitutional in toto, we do not go to this extent, as these sections contain the authority for the county officials to make distribution to the local subdivisions, and to such an extent these sections are Valid and constitutional, and such officers may proceed thereunder.

It follows that so much of Section 8 of the act as requires the auditor of state to draw his warrant against the so-called surpluses, and the county officers to honor same, is specifically held unconstitutional and void.

Decree accordingly.

Hamilton and Cushing, JJ., concur.  