
    COLLEGIATE ENDOWMENT FUNDS EXEMPT FROM TAXATION.
    [Circuit Court of Greene County.]
    The United Presbyterian Theological Seminary of Xenia, Ohio, v. Asa Little, Treasurer of Greene County, Ohio.
    Decided, March Term, 1904.
    
      Endowment Funds — For the Support of a Theological Seminary — Constitute a “Credit” under Section 2732 — And are Exempt from Taxation — Such an Institution a “Purely Public Charity” under the Ohio Constitution.
    
    1. An institution for the education of young men for the gospel ministry, and open to all, is a “purely public charity,” within the meaning of Section 2, Article XII of the Constitution of Ohio.
    2. The endowment fund of such institution, which is loaned, and Lhe interest used solely for the salaries of the professors and expenses necessarily incident to such educational work, is a “credit” within the meaning of Section 2732, Revised Statutes, and is exempt from taxation.
    Dustin, J.; Sullivan, J., and Wilson, J., concur.
    Appeal. Demurrer to petition.
   The plaintiff is an incorporated institution for the education and training of young men for the ministry of the gospel, open to persons of any sect or creed, but under the control and management of the Synods of the United Presbyterian Church of North America. It has an endowment fund of $77,590, which the auditor of said county placed upon the tax duplicate, and upon which the defendant, the treasurer, is threatening to collect the sum of $2,444 taxes.

Plaintiff brought this action in the common pleas court to restrain the collection of said tax, alleging itself to be an institution of purely public charity, supported by the income of said fund, loaned for said purpose, and that no part thereof has been, or is used for private profit; and that the placing of said sum upon said duplicate by the auditor was unlawful, and that the threatened collection of said illegal tax by said treasurer would be a great and irreparable injury to said plaintiff.

To this petition the defendant filed a general demurrer, which was sustained by the court below, and the petition dismissed with costs.

Plaintiff; appealed, and the ease is before us on the merits of the general demu rer.

Two questions arise:

1st. Is the plaintiff, under its allegations of fact, as to its objects and purposes, really an “institution of purely public charity,” within the meaning of Section 2, Article XII of the Constitution of Ohio?

This is conceded by counsel; but that concession not being conclusive of the law, we are cited to authorities which seem to settle the matter beyond controversy.

Gerke v. Purcell, 25 O. S., 229, holds that, “A charity, in a legal sense, includes not only gifts for the benefit of the poor but endowments for the advancement of learning,” and that—

“Schools established by private donations, and which are carried on for the benefit of the public, and not with a view to profit, are institutions of purely public charity within the meaning of the provisions of the Constitution which authorize such institutions to be exempt from taxation. ’ ’

To the same effect are the holdings in Myers v. Aikens, 8 C. C., 228; Sowers v. Cyrenius, 39 O. S., 29; Mannix v. Purcell, 46 O. S., 102; Davis v. Cincinnati Camp Meeting Ass’n, 57 O. S., 257, and McIntyre’s Poor School Case, 9 Ohio, 28.

2d. Is this fund, the principal of which is not touched, but is loaned, and the interest only used for the purposes of the institution, exempt from taxation?

Upon this question issue is taken.

Defendant claims that while the fund itself, if reduced to money and kept in the treasury for use as needed, would not be taxable; the moment it is placed at interest and becomes a source of profit, it is analogous to the leasing of real estate for business purposes, and, following the doctrine of Cincinnati College v. The State, 19 Ohio, 110, it becomes taxable.

In that ease it appeared that the Cincinnati College borrowed money to improve its real estate, and,' in order to obtain a revenue therefrom to repay the borrowed money, leased the lower floor of the building to business men for stores; the purpose ultimately being, after payment of the debt, to use the revenue from the stores for the educational work of the college.

Under that state of facts the court held:

“The property of literary and scientific societies is only exempt from taxation when used exclusively for literary and scientific purposes. If used for other purposes it is liable to taxation, although the proceeds are in future to be applied for the promotion of literature and science.”

Inasmuch as the rental of real estate only was involved, the case was necessarily decided upon a construction of the third subdivision of the act then in force on the subject (44 O. L., 86), which included in the property that should be exempt from taxation, “All buildings belonging to scientific, literary, or benevolent societies, used exclusively for scientific, literary, or benevolent societies, together with the land actually occupied by such institutions, not leased or otherwise used with a view to profit,” etc.

Under that state of the law, and the admitted facts, the decision seems to have been highly just. But the learned judge who rendered the opinion, not satisfied with the undoubtedly correct conclusion to which the court had arrived as to subdivision three of the act in question, ventured to go beyond the single question then before that tribunal, and gave his individual views of what would be the construction of sub-division four of the act, which exempted “All moneys and credits belonging exclusively to universities, colleges, academies, or public schools, of whatsoever name, or to religious, scientific, literary or benevolent societies, and appropriated solely to sustaining such institutions of societies, ’ ’ etc., and said:

“Whilst the money is in the fund of the institution, to be used solely to meet its expenditures, it is making nothing; it is withdrawn from the common business of life to be used solely to effect the object of such institution. But should the trustees of the society use such money in business, either investing it in property, or loaning it at interest, the property thus purchased, or the money thus loaned, would be liable to taxation as much as any other property or money at interest, no matter in whose hands it might be. As we have before intimated, the law applies to the property as it finds it in use, and not to what may be done with its accumulations in future.”

But this construction of sub-division four is a mere dictum, and wholly obiter, as is expressly conceded by the judge, since he had previously stated that the third sub-division was “the only one that * * * could be supposed to have any bearing on this ease.”

We, therefore, are not bound by it as an expression of the law by the Supreme Court, and are free to give our own views upon the question, which are, that the word “credits,” in the sixth sub-division of the statute now in force on the subject, and known as Section 2732, Revised Statutes, and providing for the exemption of “All moneys and credits to sustain, and belonging exclusively to said institutions,” is broad enough to cover an endowment fund loaned to outside parties for the interest it may produce.

Such a fund when loaned can not better be defined than to call it a “credit,” and such we believe was the purpose of the Legislature in so using it.

Any other interpretation would seem to put a premium on unthrift, and would be in direct conflict with the teachings of the parable of the servant who hid his talent in the earth, instead of putting it to the exchangers, and was rebuked for his slothfulness and wickedness (Matthew xxv, 26).

We also think it would be contrary to the policy of the state to hold otherwise.

The ordinance of 1787 announces as the policy of the North- - west Territory, that “Religion, morality and knowledge being necessary to good government and the happiness of mankind, schools and the means of education shall forever be encouraged. ’ ’

The Constitution of 1802 reasserts this policy, and emphasizes it by introducing the word “essentially” before “necessary,” making it read, in Article VIII, Section 3, “Religion, morality and knowledge being essentially necessary to good government, ’ ’ etc.

And the Constitution of 1851, Bill of Rights, Section 7, in similar, but somewhat less felicitous- language, makes the- same announcement.

G. H. Kyle and G. C. Shearer, for plaintiff.

Charles Howard, for defendant.

The consequence has been that a large number of educational institutions have been founded and liberally endowed, upon the faith of this wise state policy, and up to the present ease no attempt has been made, so far as the court is aware, to place the burdens of taxation upon them, except as to real estate diverted from educational use.

Such a course would, in our opinion, be suicidal, and has never been contemplated by the Legislature. It would ruin one of the main sources of our power and influence as a state, and relegate the commonwealth to a less enlightened age.

Entertaining these views, therefore, as to the true construction, of the statutes, and the policy of the state, the demurrer to the petition will be overruled.  