author: Johnson, J.

text:
    Myers, Treas., et al. v. The Benjamin Rose Institute.

      Taxation — Institutions of purely public charity — Personal property exempt, when — Income from endowment funds — Section S353, General Code — Section 2, Article XII, Constitution.

    Section 5353, General Code, when enacted and when this suit was brought, was within the authority granted to the general assembly by Section 2, Article XII of the Constitution, as then in force, and exempted from taxation the personal property of institutions of purely public charity, including endowment funds which belong exclusively to them and which, with the income arising therefrom, are devoted solely to their support.
    (No. 13883
    Decided June 4, 1915.)
    Error to the Court of Appeals of Cuyahoga county.
    This proceeding in error is brought by the treasurer and auditor of Cuyahoga county to reverse the judgment of the court of appeals of that county in so far as it relieved from taxation personal property held by The Citizens Savings & Trust Company, as trustee, for certain charitable uses set forth in the original petition.
    The Benjamin Rose Institute, a corporate body other than for profit, brought its suit in June, 1910, to enjoin the collection of taxes which had been levied on certain real estate held by said trustee for its benefit, and by an amendment to the petition filed in July, 1911, the plaintiff set forth that the auditor of the county had illegally and unlawfully placed on the tax duplicate, for the year 1910, personal property in the aggregate sum of $25,970, belonging to said trust fund and held by The Citizens Savings & Trust Company, as trustee, for the charitable uses set forth in the original petition, and that the treasurer “intends and threatens to collect said sum unlawfully demanded as aforesaid and threatens to illegally seize or distrain said property and to impose penalties” against said trustee. The original petition set forth that plaintiff was created and organized in pursuance of the provisions of the will of Benjamin Rose and for the purposes therein named.
    There was set out in the petition copies of the provisions of the will with reference to the creation of the trust, whose purpose was stated in the fourth item to be: “It is my purpose to provide relief and maintenance so far as I am able for respectable and deserving, needy, aged people, as far as practicable, and mostly of the Anglo-Saxon race, and to supply temporary relief and aid to needy, crippled children or youth.’4
    The plan for the creation and management of the trust is fully set forth in the will. The property in question was devised to The Citizens Savings & Trust Company, as trustee, which was charged with the duty of holding and managing the same and paying over the net income to the institution.
    It is alleged in the petition that no part of the property or income thereof has been diverted to private use or profit, but that the property and the funds arising therefrom have been used exclusively in maintaining and prosecuting the charities provided for in the will.

      By the amendment to the petition it is alleged that the sum referred to is held by the trust company, as such trustee, for the charitable uses set forth in the original petition. The auditor and treasurer of the county demurred to the petition and to the amendment thereto, on the ground that they did not state facts sufficient to constitute a cause of action against them. The court of common pleas sustained the demurrer. On appeal to the court of appeals that court sustained the demurrer to the original petition and overruled it as to the amendment. The treasurer and auditor filed this proceeding to reverse the judgment of the court of appeals, in so far as it overruled the demurrer as to the amended petition. Therefore, by this proceeding, No. 13883, there is presented only the question whether the personal property or endowment fund held by the trust company as trustee, is subject to taxation.

      Mr. Cyrus Locher and Mr: John A. Cline, prosecuting attorneys, and Mr. Frederick W. Green and Mr. Walter D. Meals, assistant prosecuting attorneys, for plaintiff in error.

      Mr. N. 0. Mather; Messrs. Squire, Sanders & Dempsey; Mr. W. L. Fleming; Mr. W. C. Boyle and Mr. Thomas M. Kirby, for defendants in error.

      Mr. William E. Cushing; Mr. John H. Clarke; Mr. Frederick A. Henry; Mr. Duane H. Tilden; Mr. Talfourd P. Linn; Mr. Lemuel D. Lilly; Mr. Frank Taggart; Mr. Edgar M. Johnson; Mr.

      Denis F. Cash; Mr. Jackson W. Sparrozv; Mr. Edzvards Ritchie and Mr. John L. Stettinius, of counsel for the outside institutions.
   Johnson, J.

As shown in the statement, this proceeding in error relates only to the validity of the taxes sought to be collected as against the endowment fund held by the trustee.

The question involves a consideration of the power granted by the constitution to the legislature, with reference to the taxation of the property of institutions of purely public charity, as well as of the legislation enacted pursuant to that grant.

This proceeding was brought before the amendment in September, 1912, to Section 2 of Article XII of the Constitution. Pertinent parts of the section, as then in force, are: “Laws shall be passed, taxing by uniform rule, all moneys, credits, investments in bonds, stocks, joint stock companies, or otherwise; and also all real and personal property according to its true value in money, * * * but burying grounds, public school houses, houses used exclusively for public worship, institutions of purely public charity, * * * may, by general laws, be exempt from taxation.” There is not here involved, and we are not called upon now to decide, the effect of the amendment adopted in September, 1912, to that section of the constitution. That amendment changed the phrase “institutions of purely public charity” and substituted for it the phrase “institutions used exclusively for charitable purposes.”

In the consideration of this important subject we are impressed that much assistance may be had by a review of the statutes passed pursuant to the original section of the constitution and of the decisions of this court construing them.

In the first place, it has been constantly recognized and held by this court that the phrase “institutions of purely public charity” is a broad one, and that the term may be applied by the. legislature to the organization which administers the charity or to the establishment where its operations are carried on.

In Gerke, etc., v. Purcell, 25 Ohio St., 242, it is said: “The property that may be exempted from taxation depends either upon its ownership, or the use to which it is applied, or upon both.” And at page 244: “The term ‘institution’ is sometimes used as descriptive of the establishment or place where the business or operations of a society or association is carried on; at other times it is used to designate the organized body. * * * As used in the constitutional provision, the term may be applied by legislation in either sense.”

In Humphries, Auditor, v. Little Sisters of the Poor, 29 Ohio St., 201, it is held in the syllabus: “A corporation created for the sole purpose of affording ‘an asylum for destitute men and women, and the incurable sick and blind, irrespective of their nationality or creed,’ is an institution of purely public charity, within the meaning of sec. 2, art. 12, of the constitution.”

In Cleveland Library Assn. v. Pelton, Treas., 36 Ohio St., 253, the court declared: “A library association, incorporated under the laws of this state, whose objects and purposes are, ‘The diffusion of useful knowledge, and the acquirement of the arts and sciences, by the establishment of a library of scientific and miscellaneous books for general circulation, and a reading-room, lectures and cabinets / open to all persons, without distinction, upon equal terms and the income and revenues of which are devoted exclusively to such objects and purposes, is ‘an institution of purely public charity/ within the meaning of the 6th clause of the act of March 21, 1864. S. & S., 761.”

In Davis, Auditor, v. Cincinnati Camp Meeting Assn., 57 Ohio St., 257, the court rested its decision, upholding the exemptions claimed in that case, on the finding that the “association is such an institution.”

In Little, Treas., v. U. B. Theological Seminary, 72 Ohio St., 417, the court declares it to be settled that an institution, such as the petition alleges the seminary to be, is an institution of purely public charity, within the meaning of this section of the constitution, and that the authority conferred upon the general assembly is to exempt such institution without limit or qualification.

An examination of the enactments of the general assembly, passed pursuant to the power granted by the section of the constitution above referred to as adopted in 1851, likewise discloses a settled policy of legislation.

The first act passed on the subject, after the adoption of the constitution of 1851, was that of April 13, 1852 (50 O. L., 135). The third section of that act exempts: “All buildings belonging to institutions of purely public charity, together with the land actually occupied by such institutions not leased or otherwise used with a view to profit; and all moneys and credits appropriated solely to sustaining and belonging exclusively to such institutions.” It is significant that the first legislature that met after the constitution of 1851, and which was fresh from the public discussions concerning it, treated the term “institutions” in the broad sense above referred to. This language was retained in all the subsequent legislation until the revision of 1880, when, without change, it became part of Section .2732, Revised Statutes.

On May 21, 1894, the section was amended so as to exempt the buildings belonging to and used exclusively for armory purposes by lawfully organized military organizations, but the provision as to institutions of purely public charity remained the same.

On May 9, 1908, clause six of Section 2732 was again amended by substituting, as the second word in the clause, the word “property” for the word “buildings.”

The decisions of this court have likewise been in harmony in construing the provisions of the statute as to “land actually occupied by such institutions not leased or otherwise used with a view to profit.”

In Library Assn. v. Pelton, supra, it was held that where such an association owned a lot of ground, with a block of buildings thereon, constructed as an entirety, and the buildings had a basement and three stories over the same, each divided into rooms adapted to its use, and for renting, some of which, on each floor, were used by it for its purposes; some were rented out, and the rents received applied exclusively to keeping the property in good repair, and to the purposes of the association, and some were vacant, such parts of the building and appurtenances as were rented, or otherwise used with a view to profit, were not exempt from taxation; and the fact that the buildings were so constructed that the parts leased, or otherwise used with a view to profit, could not be separated from the residue by definite lines, was no obstacle to a valuation of such parts for the purposes of taxation, having due reference to the taxable value of the entire property.

As to personalty, it seems to be conceded that after the act of 1852, and until this proceeding, no claim was made that the personalty of such organizations was subject to taxation.

In Little v. Seminary, 72 Ohio St., 417, supra, it is held in the syllabus that “The sixth subdivision of section 2732, Revised Statutes, is within the authority which is conferred upon the general assembly by section 2 of article 12 of the constitution. It exempts from taxation an endowment fund of a college which belongs exclusively to it, and which is devoted solely to deriving an income for its support.”

It is thus shown, by the history of the legislative treatment of the subject and by the adjudications of this court, that for a period of more than fifty years after the adoption of the constitution of 1851 it was the settled law of the state, first, that land and the buildings thereon actually occupied by institutions of purely public charity were exempt from taxation; second, that the real estate of such institutions, which was leased or otherwise used with a view to profit, was not exempt from taxation, and, third, that the moneys and credits of such institutions, including their endowment funds, which were devoted solely to deriving an income for their support, were exempt. This was the situation until the adoption of the General Code, which was in effect when this suit was brought.

The codifying commission, pursuing its usual course, divided Section 2732, Revised Statutes, which had consisted of ten subdivisions, into twelve separate sections, to-wit, Sections 5349 to 5360 of the General Code. The portions pertinent here are Sections 5353 and 5354, General Code, which read: “Sec. 5353. Lands, houses and other buildings belonging to a county, township, city or village, used exclusively for the accommodation or support of the poor, and property belonging to institutions of public charity only, shall be exempt from taxation.” “Sec. 5354. Buildings belonging to and used exclusively for armory purposes * * * and the land owned and used as sites for the armory buildings of such military organizations, not leased or otherwise used with a view to profit, and moneys and credits appropriated solely to sustain, and belonging exclusively to, such organizations, shall be exempt from taxation.” It will thus be seen that the only reference to institutions of purely public charity is included in Section 5353, viz., “and property belonging to institutions of public charity only, shall be exempt from taxation.” It would seem to be clear that this language is sufficiently broad to include every exemption which had theretofore been provided in favor of the institutions referred to, and that the word “property,” which replaced the word “buildings,” was used in the act of 1908 with the intention of broadening rather than restricting the operation of the statute, so far as personal property is concerned, and to include not only moneys and credits but all other personal property of such institution. This would of course be equally clear as to the provision in the General Code. Prior to the act of 1908, the only reference to personalty was as to “moneys and credits.” Therefore, it might well have been doubted whether chattels, such as live stock, etc., or stock in foreign corporations which belonged to the institution by bequest, or otherwise, were exempt. By changing the word “buildings” to the word “property” that doubt was removed. The word “buildings” and the phrase “moneys and credits” are retained in Section 5354, General Code, relating to armories, while the word “property” is retained in Section 5353, which is the only section that relates to institutions of public charity only.

Upon rules of construction which are well settled, where the general statutes of the state are revised and consolidated, there is a strong presumption that the same construction which the statute had before revision should be applied to the enactment in the revised form, although the language may have been changed. The State, ex rel., v. Com missioners, 36 Ohio St., 326; Heck v. State, 44 Ohio St., 536; The State, ex rel., v. Stockley, 45 Ohio St., 308; Conger et al. v. Barker's Admr., 11 Ohio St., 1; German American Ins. Co. v. McBee, 85 Ohio St., 173.

As stated in The State, ex rel., v. Commissioners, supra, the court is warranted in changing the construction given to a statute which has undergone revision, only when the intent of the legislature to make such change is clear, or the language used in the new act plainly requires such change of construction to be made.

The language of the act of April 2, 1906, providing for the codifying commission, “for thé revision and consolidation of the statute laws of the state,” indicates the intention of the legislature: “The said commissioners shall bring together all the statutes and parts of statutes relating to the same matter, * * * making alterations to harmonize the statutes with the constitution as construed by the courts, reconcile contradictions, supply omissions, and amend imperfections in the original acts, so as to reduce the general statutes into as concise and comprehensive a form as is consistent with clear expression of the will of the general assembly, rejecting all equivocal and ambiguous words, and circuitous, and tautological phraseology.”

In the light of these suggestions we are not able to say that it is clear that the legislature at the time of the codification intended to change the law .as it had theretofore for so long a time existed. If, in the codification, in the effort to put the law into “concise and comprehensive form,” the word “property” was used with the intention of including only such personalty as was previously exempt, it follows that it would comprehend within its meaning moneys and credits, for these were previously exempt. On the other hand, if the word “property” shall be held to mean all personalty of whatever character, it is equally clear of course that moneys and credits are included.

Many authorities are referred to in the briefs of able and diligent counsel on both sides, and much light has been thrown upon the general principles involved. An examination of them discloses that many states have pursued the same policy in reference to the taxation of the property of such institutions that Ohio has. In view, however, of the well-understood meaning of the term “institutions of purely public charity,” as consistently defined by this court for so long a time, and of the fixed legislative policy of the state touching the subject for the same period, which have created what may well be regarded as a rule similar to a rule of property concerning institutions of this character, we have preferred to draw our conclusion in this case from the situation peculiar to this state. We think it manifest that there is ample justification for the contention that those in charge of such institutions, as the plaintiff in this case, have been led to invest the funds provided for their maintenance with the understanding, and while relying on the fixed policy and law of the state, that they were not taxable. It would seem that this is a most appropriate case for the application of the rule stare decisis. Uniformity, certainty and stability in the law are salutary results always to be sought, and when the highest court of the . state has given a construction to a constitutional provision, which has been accepted and acted on by the legislature throughout a long period, it should not lightly be set aside. The change contended for here is so radical that the intention of the legislature to make it should be clearly manifested. This revolutionary result is avoided by following rules of interpretation which are familiar and which have been strengthened and sanctioned by long experience. It has been the policy of this state, as well as of the other states, to encourage institutions of this nature and to give full recognition to the public benefit that they confer. Their astonishing growth and the extension of their fields of endeavor have been a source of pride and satisfaction to our people. This is so because it is a condition that is peculiar to this country.

Mr. Bryce in his American Commonwealth, Vol. 2, 481-482, quotes from an address by President Eliot as follows: “The successful establishment and support of religious institutions — ? churches, seminaries, and religious charities — upon a purely voluntary system, is an unprecedented achievement of the American democracy. * * * The endowment of institutions of education, including libraries and museums, by private persons in the United States is a phenomenon without precedent or parallel, and is a legitimate effect of democratic institutions.”

As already observed, the constitutional provision under inquiry here was amended in September, 1912. For the phrase “institutions of purely public charity!’ there is substituted the- phrase “institutions used exclusively for charitable purposes.” Widely different views are entertained concerning this amendment.

On the one hand, that as now used the word “institutions” must be given a much more restricted meaning, and that the exemption must be confined to the physical property or establishment which is used for the purposes stated.

On the other hand, the view in effect is that the purpose of the change was not to restrict but to enlarge the permissive power of the legislature; that the framers of the. amendment and the people will be presumed to have used the word “institution” in view of the well-defined meaning that had been given to the term by the legislature and by the adjudications of this court, and that the intention was to grant to the legislature the permissive power to extend exemptions to the property of associations which were not institutions of “purely public” charity, but which nevertheless devoted themselves “exclusively to charitable purposes,” such as the great fraternal organizations which provide and maintain homes in Ohio for their aged and infirm members, their widows and orphan children. Much of the charitable work of these organizations would have to be done by the state tself but for them.

This view is also supported by a consideration of the debates of the constitutional convention concerning this change.

As stated in the beginning, however, the construction of that amendment is not involved in this case, and the question is not now decided.

Judgment affirmed.

Donahue, Wanamaker, Matthias and Jones, JJ-, concur.

Nichols, C. J., and Newman, J., dissent.


source: Caselaw Access Project

author: Nichols, C. J.

license: Public Domain

text:
    The Benjamin Rose Institute v. Myers, Treas., et al.

      Taxation — Institutions of purely public charity — Real property exempt — But rented property not exempt — Although income devoted to charity, when.

    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.
    (No. 13882
    Decided June 4, 1915.)
    Error to the Circuit Court of Cuyahoga county.
    In June, 1910, The Benjamin Rose Institute sought the remedy of injunction, in the common pleas court of Cuyahoga county, against the treasurer and auditor of that county to interdict the collection of taxes on certain real property in the city of Cleveland, it being contended that the property in question was exempt from taxation by favor of the last clause of Section 5353, General Code, reading, “Property belonging to institutions of public charity only, shall be exempt from taxation.”
    The Benjamin Rose Institute, with a board of trustees named in the last will and testament of Benjamin Rose, late of Cuyahoga county, was created by will, having for its purpose the carrying into effect certain provisions thereof relative to the distribution of the income arising from the property sought to be exempted from taxation, among certain beneficiaries designated in the fourth item of said will, in the language following:
    “It is my purpose to provide relief and maintenance so far as I am able for respectable and deserving, needy, aged people, as far as practicable, and mostly of the Anglo-Saxon race, and to supply temporary relief and aid to needy, crippled children or youth.”
    An elaborate scheme of instituting and managing the trust is set forth in great detail in the will. The property in question was devised to The Citizens Savings & Trust Company, as trustee, charged with the duty of holding and managing the same and paying over the net income to the institute aforesaid.
    That the property so sought to be exempted is pf great value is evidenced by the allegation of the petition that the semi-annual installment of taxes payable in June, 1910, amounted to the sum of fourteen thousand dollars. The petition seeking the relief sets forth in detail that no part of said property or the income thereof has been diverte4 to private use or profit, but that said property and the funds arising therefrom have been used exclusively in maintaining and prosecuting the charities provided for in said will.
    It is conceded, however, by The Benjamin Rose Institute that none of the real property sought to be exempted from taxation is either actually or directly occupied or used for .charitable purposes of any kind or character; in fact, by stipulation of the parties, it is agreed that all of said real estate, excepting a portion of small value situated in Nottingham, has been rented for residence and commercial purposes, and that the income and rental therefrom only have been used and are being used in maintaining and prosecuting the charities created by said will.
    The treasurer and auditor of Cuyahoga county demurred to the petition of The Benjamin Rose Institute, which demurrer was sustained by the common pleas court and on appeal the same action was had in the circuit court of Cuyahoga county.

      Mr. N. 0. Mather; Messrs. Squire, Sanders & Dempsey; Mr. W. C. Boyle and Mr. Thos. M. Kirby, for plaintiff in error.

      Mr. Cyrus Locher and Mr. John A. Kline, prosecuting attorneys, and Mr. F. W. Green, Mr. G. A. Howells and Mr. Walter D. Meals, assistant prosecuting attorneys, for defendants in error.
   Nichols, C. J.

The supreme court has been frequently called upon to interpret the statutes exempting properties from taxation, and quite an array of reported cases on this subject are available.

It is substantially conceded by counsel for the institute that, under any and all of these former interpretations, the real property of Benjamin Rose so trusteed would not be in the exempted class, but it is their contention that, by virtue of the amendment of May 9, 1908, to Section 2732, Revised Statutes, and' more especially of the ratification, on February 15, 1910, of the report of the codifying commission by the general assembly of Ohio, all of the property, both real and personal, so devised to the above-mentioned public charity is wholly exempt from taxation.

The adjudications of this court were all had prior to the amendment of May 9, 1908, the cases, chronologically arranged, being Cincinnati College v. The State, 19 Ohio, 110; Gerke, etc., v. Purcell, 25 Ohio St., 229; Humphries, Auditor, v. Little Sisters of the Poor, 29 Ohio St., 201; Cleveland Library Assn. v. Pelton, Treas., 36 Ohio St., 253; Watterson v. Halliday, Auditor, 77 Ohio St., 150. It is quite evident that but for the amendments to the statutes of May 9, 1908, and February 15, 1910, respectively, exempting property, this action would not have been instituted. An examination of the several tax-exemption statutes is not only necessary for a proper consideration of the case, but is alike interesting and illuminating.

Prior to the adoption of the constitution of 1851, the nature and extent of exemption from tax was wholly a matter of legislative discretion, which was afterwards limited in set terms by the then new constitution. The original statute, under the new order of things, was adopted in 1852 (see 50 O. L., 135) and provided that “All buildings belonging to institutions of purely public charity, together with the land actually occupied by such institutions not leased or otherwise used with a view to profit,” shall be exempted, etc.

■By the revision of 1880, this language was carried into and became a part of Section 2732, Revised Statutes of Ohio.

In 1894 (see 91 O. L., 216) this particular paragraph was amended and made to read as follows: “All buildings belonging to institutions of purely public charity and all buildings belonging to and used exclusively for armory purposes by lawfully organized military organizations which are and shall continue to be fully armed and equipped at their own expense, by law made and subject to all calls of the governor for troops, in case of war, riot, insurrection or invasion, together with the land actually occupied by such institutions and that owned by and used as sites for such armory buildings of said military organizations, not leased or otherwise used with a view to profit, and all moneys and credits appropriated solely to sustain, and belonging exclusively to said institutions and military organization.”

In May, 1908 (99 O. L., 449), a further change was made, and the paragraph then read: “All property belonging to institutions of purely public charity, and all buildings belonging to and used exclusively for armory purposes by lawfully organized military organizations which are and shall continue to be fully armed and equipped at their own expense and by law made subject to all calls of the governor for troops in case of war, riot, insurrection or invasion together with the' land actually occupied by such institutions and that owned and used as sites for such armory buildings of said military organizations not leased or otherwise used with a view to profit, and all moneys and credits appropriated solely to sustain and belonging exclusively to said institutions and military organizations.”

In February, 1910, the report of the codifying commission was adopted by the legislature of Ohio, and thereafter the exemption of institutions of purely public charity was entirely disassociated from those of armory organizations, with which they had been classified since 1894, and associated instead with county, township and village infirmaries. Section 5353, General Code. And the exemption of armory organizations was provided for in separate Section 5354, General Code.

An examination of these several enactments will disclose the fact that from 1852 to 1908 the statutes read “All buildings belonging to institutions of purely public charity,” etc., whereas, in 1908, the word “buildings” was changed to the word “property.” It is around the change of the word “buildings” to “property” that counsel for the institute seek to build their case in the first instance.

It must be noted, however, that the language “together with the land actually occupied by such institutions” remains intact in all of the several statutes, commencing with the original act of 1852, down to and including the act of May 9, 1908. If we eliminate from Section 2732, Revised Statutes, as amended May 9, 1908, all reference to armory organizations, we will find it reading as follows: “All property belonging to institutions of purely public charity, * * * together with the land actually occupied by such institutions, * * * not leased or otherwise used with a view to profit,” which is precise in terms with the original act of 1852, excepting the change above referred to of “buildings” to “property.”

It is contended by The Benjamin Rose Institute that in the act of May 9, 1908, the words “together with the land actually occupied by such institutions” have no proper place or significance, for the reason that since the general assembly expressly exempted all property belonging to institutions of purely public charity, this latter phrase was not intended to be and cannot be construed to be a limitation upon the express provisions of the statute.

With this interpretation the court cannot agree. If these words are to be construed as a limitation upon the express provisions of the statute as originally enacted and as amended from time to time, we can find no possible warrant authorizing a different interpretation simply by reason of the substitution of the word “property” for “buildings.”

We feel it to be of significance that these express words of limitation were carried into the acts from 1852 to 1908, inclusive, and are a clear and distinct expression of the legislative will to the effect that only such property as might be actually occupied and used by the institution of purely public charity, subject to the still further limitation that even that property should not be leased or otherwise used with a view to profit, was to be released from its share of the public burden of taxation. The legislature, from the beginning to the time the codifying commission did a little legislating on its own account, has been consistent on the subject.

We now approach a consideration of the question from quite a more difficult angle and go to the main question, involving an interpretation of Section 5353, as passed in February, 1910, upon which counsel for the institute chiefly rely in their effort to exempt this property from taxation. Section 5353 is.as follows:

“Sec. 5353. Lands, houses and other buildings belonging to a county, township, city or village, used exclusively for the accommodation or support of the poor, and property belonging to institutions of public charity only, shall be exempt from taxation.”

We are concerned, of course, only in the interpretation of the latter clause of this section.

It will be observed that neither the phrase “together with the land actually occupied by such institutions,” nor the clause “not leased or otherwise used with a view to profit,” as employed in Section 2732, Revised Statutes, is to be found in Section 5353, General Code, it being stripped to the narrow confines of this language: “Property belonging to institutions of public charity only, shall be exempt from taxation.”

This language should be interpreted by certain rules, one of which is, “where all the general statutes of a state are revised and consolidated, there is a strong presumption that the same construction which the statute received before revision, should be applied to the enactment in its revised form, although the language may have been changed.” The State, ex rel., v. Commissioners, 36 Ohio St., 326; The State, ex rel., v. Stockley, 45 Ohio St., 308; and German-American Ins. Co. v. McBee, 85 Ohio St., 173.

The plaintiff in error maintains that the case must turn upon the interpretation to be given the words “belonging to,” and that the test is no longer one of the actual occupancy or use of the property, but simply one as to whether the institution administering the charity is the owner thereof.

If the constitution of our state was silent on the subject of exemption of property from taxation and if the general assembly had the power to handle the subject wholly at its discretion, as it did under the constitution of 1802, we might accede to the views of the counsel for the institute, especially since the charity created by Benjamin Rose is of such >a commendable and praiseworthy character. That a beneficent public service can and no doubt is being rendered by the institute cannot be questioned, and it is entitled to a fair and reasonable interpretation of the statute under which it asks exemption. This institute is not seeking relief from sordid or unworthy motives of any kind or character, and is, we believe, only desirous that its income be not diminished by the amount necessary to pay taxes thereon, in order that it may more effectually and on a larger scale carry on its kindly work.

It must be admitted by all interested parties that the charity created by Benjamin Rose does benefit the state in that it affords relief to the aged and needy and to the crippled young, and affords it in such a manner as to protect the beneficiary from the loss of self-respect. The testator did render a distinct public service in devoting his immense fortune to this purpose and did possibly render to the state a fair equivalent for the release of his estate from taxation. In view of the peculiar merit of this charity we are disposed to relax to some extent the rule of construction established in the case of Cincinnati College v. The State, supra, the second proposition of which case reads: “All laws exempting any of the property in the state from taxation, being in derogation of equal rights, should be construed strictly.”

But this court, as well as the general assembly, has certain limitations, i. e., those recited in the constitution, that gave both bodies their very existence. The provision on the subject is (see Section 2, Article XII), “ * * * institutions of purely public charity * * * may, by general laws, be exempted from taxation.” Impressed with the duty of interpreting this language reasonably and even liberally, and giving the fairest and most reasonable construction allowable, we cannot extend to it so broad a meaning as to grant the relief which the. institute asks.

The all but universal judicial deliverances along the line have had the effect of confining the exemption to such property as is directly used and employed by the institution in the actual carrying on of the business of the charity. Perhaps the most thoughtful and best reasoned of the cases outside of our immediate jurisdiction are to be found in Pennsylvania and Georgia, in both of which states the constitutional limitations on the subject of exemption from taxation are alike with ours, word for word. Reference is made to the cases of American Sunday School Union v. City of Philadelphia, 161 Pa. St., 307, and Trustees of the Academy of Richmond County v. Bohler, 80 Ga., 159.

In the former of these two cases it is observed by Mr. Justice Dean:

“By no judicial rule of construction can these words be made to mean that a commercial enterprise is exempt because the whole profit of it goes into the treasury of, and it is carried on by, a purely public charity. In so far as the institution is charitable, and its revenues are derived from the contributions of the charitable, it is protected by the constitution. But if such institution sees fit to engage in trade for the purpose of increasing its revenue, or making any part of its business ‘self-supporting/ the trade part of its business can be taxed, and ought to be.”
“Nor does the fact that the profits gathered on the counter of the book-store are devoted to the primary object of the charity, which is purely public, in any degree affect the character of the trading or commercial enterprise. Every dollar the society expends is some charitable contributor’s gains or profits from some business not charitable; if such contributor devoted the whole of his profits from the sale of drygoods, groceries or books to promote this particular charity, that fact would not make the source of such profit a purely public charity. And if, as the master has found, the society was compelled to put a part of its operations on a basis that was self-supporting, by starting a book-store to sell books only of a high moral character, and standard publications, that is trade. That the entire profits of this branch of the business are devoted to the purposes of the charity, no more changes its business nature than if, instead of a book-store, the society had established and carried on a shoe-store. It might have operated a farm or rolling-mill with the same end in view, to put the society, as the master aptly says, on a basis that was self-supporting; but the end would not have exempted the business from taxation.’á

In the Georgia case it is said:

“That the word ‘institution’ both in legal and colloquial use, admits of application to physical things, cannot be questioned. One of its meanings, as defined in Webster’s Unabridged Dictionary, is ‘an establishment, especially of a public character, affecting a community.’ And one of the meanings of ‘establishment,’ as defined by the same authority, is ‘the place in which one is permanently fixed for residence or business; residence with grounds, furniture, equipage, etc., with which one is fitted out; also, any office or place of business, with its fixtures.’ The term “institution” is sometimes used as descriptive of an establishment, or place, where the business or operations of a society or association is carried on; at other times it is used to designate the organized body.’ Gerke v. Purcell, 25 Ohio St., 244. See also Abbott’s Law Diet., and City of Indianapolis v. Sturdevant, 24 Ind., 391. * * * A charitable institution, in the ideal sense, may embody and manifest itself physically and impersonally in a place of business for permanent occupation, with all needful buildings, furniture, outfit, and supplies, for the continuous exertion of its activities. * * *•
“In the casé of a poor-house, the realty might embrace, besides the land covered with the necessary buildings, grounds for recreation, exercise, for pasture of the animals, and even a farm for the inmates to cultivate. The establishment, as a whole, might embrace all these, with articles of personalty to any needful extent for supplying the inmates with all the comforts of life, and keeping them in a healthy, virtuous, cheerful and contented state of existence. We doubt not the entire establishment, however extensive or composite, would be exempt from taxation if used directly and solely for public charity, and not as a source of profit or income. * * * The scheme of exemption as to other than public property seems to be this: to exempt all that is used immediately and directly as a part of the establishment in the conduct of the regular business there carried on, but not such as may be devoted to other uses, such as farming, merchandizing, manufacturing, etc., and from which profit or income is derived. It is the use of the property which renders it exempt or non-exempt, not the use of the income derived from it. Cincinnati College v. The State, 19 Ohio, 110; Library v. Pelton, 36 Ohio St., 258; New Orleans v. St. Patrick’s Hall, 28 La. An., 212; Detroit v. Mayor, 3 Mich., 172; State v. Elizabeth, 4 Dutcher, 103.
“Property used to produce income to be expended in charity is too remote from the ultimate charitable object to be exempt. If property is allowed to be used as taxed property, it also is to be taxed. If it competes, in the common business and occupations of life, with the property of other owners it must bear the tax which theirs bears. Thus, if even a synagogue or a church were rented out during the week for a store-room or a shop, though divine service might be performed in it on Saturday or Sunday, and though the rents were all appropriated to religious or charitable uses, its exemption would be lost. * * * When the tax officer goes forth to search for taxable property, all which he finds employed in the ordinary uses of common life, unless it belongs to the public, he is to regard as taxable. When exemption is claimed, he is not to look for persons, natural or artificial, nor for ideal beings, but for real, visible things, for places of religious worship, places of burial, institutions of purely public charity, colleges, academies and seminaries of learning, public libraries, and the real and personal estate used by or connected therewith, books, apparatus, paintings and statuary kept in public halls, etc., and unless they are in present tangible existence, he cannot exempt something else which he is informed will be used to produce them hereafter. In other words, he is not to spare a form of property not enumerated because, for the time being, it represents a part or the whole of one or more of the forms which are enumerated. The exemption is not a release in personam but a release in rem, and the res to zvhich the release applies must be found and identified by the officer or no exemption can be recognized.”

We gather from these two cases, as well as from the several Ohio cases, these two general and controlling rules of interpretation:

1. It is the use of the property which renders it exempt or nonexempt, not the use of the income derived from it.

2. The exemption is not a release in personam but a release in rem, and the res to which the release applies must be found and identified by the officer or no exemption can be recognized.

We are bound to apply these settled rules of construction to the case now before us, with the further, admonishment that the act of 1910 must be construed together with the constitutional limitation surrounding it. If we gave to the last word of the general assembly on this subject the enlarged scope that is asked, we would so interpret it as to bring it in direct and obvious conflict with the organic law.

To enlarge upon a provision of the constitution beyond the express limitation it permits in the way of privilege and immunities is just as repugnant to the instrument as it would be for the general assembly to attempt to enact into law some measure especially prohibited by the constitution.

The property belonging to this institution is being commercially used. It is competing with other landlords in the city of Cleveland, in securing tenants for its business houses and residences. The trustees of this property would be derelict in duty if they did not secure from the occupants of these several buildings the highest possible return. They must keep these buildings in repair, by the express terms of the trust, and to do this they must draw on the rental income therefor.

No pretense is made that The Citizens Savings & Trust Company, the holding trustee, is managing this property on any other than strictly moneymaking principles consistent with honesty and fair dealing. The case under consideration presents even stronger and more conclusive reasons why this property should not escape taxation than did the facts and circumstances which developed in the case of Cincinnati College v. The State, 19 Ohio, 110, and that case cannot be disregarded as an authority simply because the court at that time was interpreting a statute without constitutional limitations rather than a statute that had its authority' directly from the constitution. In that case, Caldwell, J., says at page 114: “This property is most of it leased and used with a view to profit. * * * But when any society, no matter of what kind, whether scientific, literary, or religious, enters the common business of life, and uses property for the purpose of accumulating money, the government should, and we think the statute does, treat it in the same way persons are dealt with, who are using property in a similar manner, and engaged in the same business. * * * _ ,

“The legislature could not, without a flagrant violation of the principles of equality, on which our institutions are founded, make a distinction such as is contended for, between the store of the Cincinnati College and that of an individual. * * *

“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.1”

In the case at bar the trustee is frankly and yet properly using the property under its control for the purpose of accumulating money.

It is the use of property for purposes other than making money that justifies its exemption from ■ taxation, and all constitutions and laws on this subject are fairly replete with this spirit and no other.

The end sought is the public good, and not injustice. The small home-owner, struggling sometimes amidst adverse surroundings, deserves consideration at our hands. His burden of taxation is made heavier whenever property of any kind is withdrawn from the field of taxation.

The competitors of the trustee, engaged in the same line of business in the city of Cleveland, are pursuing the necessary and commendable pursuit of procuring a livelihood. They are self-supporting agents in the community, entitled to consideration and fair dealing. They, together with the small home-owner, pay their share of the public burden for fire protection, police protection, the maintenance of courts of justice and the many other instrumentalities that society employs to make the ownership of private property possible.

If the institute were to sell all of the real estate devised to it for the use of The Benjamin Rose Institute, and should assemble the proceeds in one, two, three, or any number of buildings wherein the objects of the charity were to be carried out, the buildings thus being segregated and removed from their present commercial use, then they would present the ideal property subject to exemption from taxation.

The trustee is not engaged in any respect in charitable work, nor will it ever be so far as the property of Benjamin Rose is concerned. Nothing more than the income can ever be used by the institute to further the purposes set forth in the instrument creating it. Therefore the income, after it is actually paid over to the institute, is the only property belonging to the body that can be held to be exempt from taxation. In this case the income is the res to which the exemption applies.

We interpret the language employed in Section 5353, General Code, to have the effect of exempting from taxation the property belonging to this institution only so far as it is used and employed by the institution for purposes of charity. Any other construction would require the court to hold that the legislature exceeded its power and directly violated the constitution. Making use of the choice of two possible constructions, we prefer the interpretation that will permit the act to survive, relying in this connection upon the well-established rule of interpretation that, as between two possible interpretations of a provision which is on its face doubtful, that one which will result in sustaining the law as against a constitutional objection will be followed, to the exclusion of another the effect of which would be to render the law unconstitutional.

In the case of Humphries v. Little Sisters of the Poor, supra, the court in the second proposition of the syllabus defines “institution” in the following language: “The word ‘institutions/ in the sixth clause of sec. 3 of the tax law, is used to designate the corporation or other organized body instituted to administer the charity, and the real estate described as belonging to such institutions has.reference to property owned by them; and to entitle such institutions to hold the property exempt from taxation, they must not only own it, but it must be so used as to fulfill the requirements of the statute.”

We ascertain, therefore, that the question now before the court is a much broader one than one simply as to whether the institution administering the charity is the owner thereof, as claimed by the trustee and institute, for in the Humphries case, supra, the court distinctly holds that the institution must not only own the real estate but it must be so used as to fulfill the requirements of the statute.

In conclusion, brief reference to the amendment adopted in September, 1912, to Section 2 of Article XII of the Constitution, may with propriety be made here.

The language “institutions of purely public charity” has been eliminated, and substituted therefor are the words “institutions used exclusively for charitable purposes.”

While the rights of the parties to this action, as to all taxes assessed prior to April, 1913, are to be determined by proper interpretation of the language of the constitution as it existed at the time the taxes attached as a lien on the real estate of the institution, yet the court might regard this latest expression of the public will as one justifying a strict interpretation of all laws and statutes exempting property from taxation.

It could not be contended for one moment that the property in question by any possible constitutional legislation could be exempt under the language of amended Section 2 of Article XII. Nor can it be maintained, under the provisions of Section 2, Article XII, in force from 1909 to 1913, that the property of Benjamin Rose should escape taxation, unless the decisions of our own state are to be overruled and those of most of our sister states disregarded.

More might be said, but perhaps more than is necessary has already been said. When one reflects over the many able and exhaustive opinions on this and immediately correlated subjects, already to be found in our reports, it might be said that this particular exposition is a work of superogation, or rather an attempt to gild gold already refined, but the very great importance and ever-living interest in the subject fairly justifies the labor devoted to it and the space it will occupy in the archives of the court.

The judgment of circuit court is accordingly affirmed;

Judgment affirmed.

Ñewman, Jones and Matthias, JJ., concur.

Wanamaker, J., dissents.


text:
    Koblitz et al., Partners, v. The American Credit Indemnity Co.

      Bonds — Credit indemnity — -Sufficiency of notice by insured — Of insolvency of debtor — Knowledge of agent of insurer — Notice to company — Waiver of formal notice.

    A bond issued by a credit indemnity company, as indemnity against loss from bad debts accruing from sales of merchandise, provided for notice of each insolvency of debtors to be given to the company within a time fixed, and also provided that knowledge on the part of or notice to any agent or representative other than certain designated officers should not estop the company from enforcing any of the provisions of the bond or be held to be a waiver thereof. The insured gave notice of the insolvency of a debtor, within the time fixed, on a blank furnished by the company, but which did not fully comply with the requirements of the bond. The company, within the period named, began an investigation; one of the designated officers corresponded with the insured concerning the matter and had full knowledge of all facts of which the insured was required to furnish notice. Held: That knowledge and notice of the designated officer was notice to the company, and its action waived the more formal notice provided for.
    (No. 14617
    Decided June 4, 1915.)

      Error to the Court of Appeals of Cuyahoga county.
    Plaintiffs in error commenced their action in the common pleas court of Cuyahoga county against The American Credit Indemnity Company, based upon a credit indemnity bond issued by the company to them, wherein insurance was provided against bad debts contracted by them.
    The bond bore date of August 27, 1907, and by its terms provided such indemnity for debts accruing from sale of merchandise between the dates of March 1, 1907, and February 28, 1908. The liability was limited to $20,000; the premium paid was $1,000, or an annual rate of five per cent. The bond contained the stipulation that the company would guarantee the plaintiffs in error against actual ’ loss sustained by the indemnified party through the insolvency of debtors as thereafter defined in the policy, occurring during the term of the bond. The definition set' forth in the bond covered eleven different phases of insolvency, the first three being:
    1. When the debtor’s assets are held in any judicial proceeding to be insufficient to pay his debts in full.
    2. When a petition in bankruptcy or insolvency is filed by or against him under the laws of the United States, or any state or territory thereof, or of Canada.
    3. When he (the debtor) makes a compromise of his indebtedness with a majority of his creditors in number and in amount.

      Under the head of “Notification of Insolvency,” this language is employed: “Notification of each insolvency under this bond must be given by the indemnified to this company upon blanks supplied by this company for that purpose, and must be received by this company at its office in St. Louis, Mo., during the term of this bond, and within twenty (20) days after the indemnified has first received information of the insolvency of the debtor.”
    Very soon after the bond was issued it was brought to the notice of the indemnity company by the plaintiffs in error that two of their principal debtors were in serious financial difficulty, and in a letter, dated October 9, 1907, the company was informed by the plaintiffs in error that The Muskingum Valley Woolen Manufacturing Co., of Dresden, Ohio, had made an offer of 25 per cent, cash and balance in five annual installments, and also that The Kapner Brothers & Duga Hosiery Co. had proposed a composition of 25 per cent, straight.
    Afterwards both of the above-named debtors formally went into bankruptcy, The Muskingum Valley Woolen Manufacturing Co. on November 5,1907, and The Kapner Brothers & Duga Hosiery Co. on October 7, 1907.
    The notice in each instance, as sent to The American Indemnity Credit Company, was on blanks furnished by the company, and was substantially in the following form:

      “Date notice mailed to the Company 9-26, 1907.
    “Name of Debtor, Kapner Bros. & Duga Hosiery Co.
    “Location, Dresden, Ohio.
    “Date of Insolvency, Sept. 25, 1907.
    “Nature of Insolvency, Creditors’ Meeting.
    “Amount Debtor owes you, $9322 64-100.”
    The notice in the second instance was in the same form, and was dated October 9, 1907.
    To the notice and letter of October 9 the indemnity company replied by communication of October 16, signed by W. M.‘ Magill, chief adjuster, stating that the notice had been referred to one W. S. Sheill, and that he would call and see them.
    In a letter, of date November 25, 1907, to the plaintiffs in error from the indemnity company, the following language is to be found: “In view of your answer to question 7 (seven) of your application dated August 26th, 1907, for the bond issued by us to you * * * we wish to ascertain
    whether at the date you made said application you had any information detrimental to the credit or responsibility of The Kapner Bros. & Duga Hosiery Co. or of The Muskingum Valley Woolen Mfg. Co.
    “We are informed by our chief adjuster, Mr. William M. Magill, that, when he saw you last week, he requested from you permission to examine your books and papers, but that this permission was refused by you. * * *
    . “If you will permit us to make the examination of your books and papers hereby requested, we will at once make all necessary arrangements therefor.

      “This communication will be delivered to you through our attorney, Mr. A. V. Cannon, of your city, who is authorized to receive your reply.”
    It is important to note that the letter of November 25 is dated exactly twenty days after the second bankruptcy — too late to supply defect in notice.
    The plaintiffs in error maintain that the notices of September 26 and October 9, respectively, are a substantial compliance with the requirements of the bond as to notice of insolvency, and if not, then that the company, by its subsequent conduct, waived further notice, and is’ estopped from asserting otherwise.
    The defendant in error defends, in the first instance, by setting up fraud and misrepresentation in the obtaining of the bond, in that the plaintiffs in error had full knowledge of the insolvency of both of the debtors at the date application was made for the indemnity. Another defense is based wholly on the alleged failure of J. Koblitz & Co. to give the notice required by the terms of the policy, and it is with this feature of the defense that the court is now concerned.
    At the conclusion of the presentation of plaintiffs in error’s case to the jury the court directed a verdict in favor of the defendant in error on the grounds:
    1. That proper notice of insolvency had not been given.
    2. That the giving of such notice had not been waived.

      3. That it had not been shown that the indemnity company had the equivalent of notice, viz., actual knowledge.
    The court of appeals affirmed the common pleas.

      Mr. Milton S. Koblitz; Mr. Frank C. Scott and Messrs. Hole & Hole, for plaintiffs in error.

      Messrs. Stearns, Chamberlain & Royon, for defendant in error.
   Nichols, C. J.

It is conceded in this case that the written notice of the insolvency of the two debtors in question, sent by J. Koblitz & Co. to the indemnity company, neither technically nor substantially complied with the stipulations of the policy. It is not claimed that there was any express waiver of such notice. It is therefore incumbent on the insured, by competent evidence, to show knowledge by the officers of the company of the insolvency of the two debtors under consideration.

It is maintained by the indemnity company that its knowledge must have been received by one of the three officers named in the bond, namely, the president, vice president or secretary, and that information communicated to any other officer or agent of the company would be insufficient, unless further proof be tendered to the effect that the information so given was in turn communicated by its representative to the particular officer in question, thereby making it the knowledge of the company.

No proof or tender of proof was had to the effect that any written notice of insolvency other than that hereinbefore specified was given to either of the three officers named, but it is contended that, acting on the notice so given, incomplete as it is claimed to be, the company took immediate steps to protect itself from liability and did all the things that any insurer similarly situated would have done had it been furnished with all possible knowledge of the insolvency.

The bond in question provided that either of these three officers might change or modify any of the provisions of the bond and waive any right of the company thereunder if made in writing over the signature of either of such officers. It further provided that knowledge on the part of or notice to any of such officers would operate to estop the company from enforcing any of the provisions of the bond and be held to be a waiver thereof.

The instant case must prevail if at all on the theory that the company, through its vice president, possessed the knowledge of the insolvency, and reliance is placed on the letter of November 25, written by Mr. Treat, such vice president, to Koblitz & Company. The acquirement of such knowledge of the situation that the company did possess is referable to the formal notices sent by the insured to the company of dates, respectively, September 26 and October 9.

The formal notices that the two debtors named were in serious financial difficulty were quite sufficient to put any person of ordinary business foresight on inquiry, and that these notices actually so operated is quite clear.

The object of notice was for the one and only-purpose of permitting the insuring company to act promptly to defend its threatened liability and to take such steps possible to limit the extent of its liability. If from any source other than the insured it had full knowledge of the situation and so informed the plaintiffs in error when it attempted to follow up the defective notice with further information of the insolvency, it cannot be heard to say that since the information was not supplied by the insured in all its fullness, it must be denied indemnity, since the partial default in no degree contributed to the injury of the insuring company.

Shortly after the receipt of the notices so sent the defendant in error, formal statement was sent by it to the effect that the matter had been placed in the hands of the chief adjuster of the company, and this officer, writing as of date October 16, says that the affair had been referred to one W. S. Sheill, who would call and see them. This gentleman arrived in Cleveland soon thereafter and demanded an opportunity for a thorough and complete examination of Koblitz & Company’s books and papers for the admitted purpose of ascertaining what knowledge if any was possessed by the partnership of the failing condition of these two debtors when the bond was applied for.

It is well to notice that the representative so sent was an adjuster, not a solicitor or an inspector. The presence of an adjuster in the event of loss by fire is very good evidence that the insurance company has information of a loss for which it may be liable. So in the event of an investigation by the adjuster of a life insurance company, the very presence of such official carries with it a strong intimation of knowledge on the part of that company, and in the instant case it furnishes a strong presumption that the company had acquired knowledge of all the facts as to the insolvency which it now claims should have been more fully communicated by the insured.

The insured tendered evidence, which was rejected by the court, tending to show that the arrival of the adjuster was during the period of twenty days within which the more formal notice of insolvency should, by the terms of the bond, have been sent by the insured, and that while there the question of notice was discussed, and the adjuster then stated that his company had full information of both bankruptcy proceedings and that further notice was not required.

The Treat letter of November 25, which was not admitted in evidence by the trial judge, shows to the point of conclusiveness that the indemnity company was possessed of full and complete knowledge that both the Muskingum company and the Kapner company had been forced into involuntary bankruptcy, and the presence of the adjuster in Cleveland was to obtain information calculated to assist them in defense of any claim of Koblitz & Company. This letter shows conclusively that the insuring company was already dealing with Koblitz & Company at arm’s length; its attitude was distinctly hostile. Access to the books and papers was evidently desired by the company, not, as suggested by its counsel, for the purpose of determining whether or not the policy, which had about four months yet to run, should be cancelled, but manifestly for the purpose of showing that Koblitz & Company, at the time of the issuance of the bond, contrary to their express avowal in the application, had full knowledge of the failing circumstances of their debtors. In fact, the vice president in his letter frankly says that he desires access to those books to ascertain whether, at the time bond was applied for, Koblitz & Company had any information detrimental to the credit or responsibility of either the Kapner or Muskingum companies. If an investigation so sought would develop the fact that the insured possessed such information, it would operate to wholly defeat recovery on the bond, and it later appears that in the answer of the insuring company the possession of such knowledge is the basis of the second defense.

It is quite significant that the Treat letter was dated November 25, the very day of the expiration of the twenty-day period within which the notice of bankruptcy should, by the terms of the bond, have been given. The letter could not have been received by Koblitz & Company until the 26th, then too late to supply the defect of notice, and thereby giving color to the suggestion that the letter was opportunely timed.

It is urged by counsel for the indemnity company that since the letter could not have reached the insured until the 26th, it could not be said that reliance was placed on this letter as a waiver of the necessity of strict compliance with the terms of the contract as to notice.

If this be granted, it cannot at the same time be urged successfully that the letter might not be utilized to prove full knowledge of the situation. There is really no escape from the conclusion that the letter of the vice president- contains statements from which necessarily arises an implication of full and adequate knowledge of the peril the indemnity company was facing.

The proof of waiver or the existence of knowledge on the part of the company, by the express stipulation of the bond, alike relieve Koblitz & Company from the necessity of even substantially complying with the terms of the bond as to notice.

Again, as to the examination of the books and papers, it is not to be overlooked that this inspection was sought shortly after the notices of bankruptcy, such as they were, had been received, and had reference to Koblitz & Company’s dealings with the Kapner and Muskingum companies.

The defendant in error, in explanation of this letter, suggests the thought, as hereinbefore indicated, that the inquiry was desired because it considered the transaction and circumstances that so shortly developed as being “shady,” and that it had adopted that means for the purpose of finding out whether it should continue on the bond. In the light of the fact that the company already was deeply involved, it is impossible to believe that this was the sole or even the main reason for the examination.

The indemnity company further suggests that it in this instance had taken an “unusual risk” and had exposed itself to the chance that the insured might seek to recover upon claims which were known to be bad when the insurance was written.

With this characterization we can quite heartily agree, and it can be further said that since it exacted the unusual annual premium of $1,000 for insurance of $20,000, the company must be charged with the full knowledge that it was exposing itself to an unusual risk.

The premium was as unusual as the risk. To secure a bond guaranteeing relief against bad debts already contracted would be quite tempting to a business house involved with questionable debtors. The defendant company, in proposing such indemnity, really invited the very situation it now complains of in its second defense.

All insurance is a species of legal chance-taking and its field has been tremendously enlarged in modern days, but it might well be questioned if ex post facto insurance of the kind under investigation is not closely approximating the point of being opposed to an enlightened public policy.

Since we find from the letter of the 25th of November that the company had full and adequate knowledge of the bankruptcy of the debtors in question, and that by its own contract it thereby estopped itself from asserting want of notice as a defense, the judgments of both the lower courts are reversed and the cause is remanded to the court of common pleas for a new trial.

The rejected evidence relating to communications between the insured and representatives of the company other than the president, vice president and secretary, as well as with these officers, should be admitted for the purpose of showing the knowledge of the company and as corroborative, of the strong implication of knowledge contained in the vice president’s letter.

These facts, together with defensive matter which the indemnity company may possess, if any, on the issue of knowledge, should be submitted to the jury for determination under proper instructions of the trial judge.

The testimony offered by the plaintiffs, both admitted and rejected, would be quite sufficient to justify the conclusion that the company possessed this knowledge in all its fullness, but since it is a plain issue of fact, the jury and not the court should settle the dispute.

Judgments reversed.

Johnson, Donahue, Wanamaker, Jones and Matthias, JJ., concur.


author: By the Court.

text:
    Thompson v. The State, ex rel. Clemens.

      Office and officer — Boards of education? — Transfer of territory— Vacancy not created, when — Section 4748, General Code— Member of detached township — Entitled to complete term— Section 4735, General Code (104 O. L., 133).

    (No. 14789
    Decided June 4, 1915.)
    Error to the Court of Appeals of Fayette county.

      Messrs. Post & Reid, for plaintiff in error.

      Mr. John Logan and Mr, Tom S. Maddox, for defendant in error,
   By the Court.

On November 4, 1913, the relator, Fred H. Clemens, was elected a member of the board of education of Jasper township, Fayette county, Ohio, for a term of four years, and qualified as such member. On August 15, 1914, the county board of education of Fayette county transferred certain subdistricts of Jasper township to Concord township. The relator resides within the territory so transferred. On November 6, 1914, the Jasper township board of education declared that, in consequence of such transfer, a vacancy existed in their township, declared vacant the office of relator and appointed James H. Thompson to fill the vacancy. Clemens then brought his action in quo warranto to oust Thompson. His petition set forth the foregoing facts. Thompson demurred thereto. The court of appeals overruled the demurrer and entered a judgment of ouster.

Section 4748,' General Code, provides that “A vacancy in any board of education may be caused by * * * removal from the district,” etc. The section then makes provision for the filling of such vacancy by a majority vote of the remaining members of the board.

Counsel for plaintiff in error contend that inasmuch as Clemens was a resident of the territory transferred from Jasper township to Concord township, this constituted a removal from the district within the purview of- the foregoing section. In view of the statute hereinafter quoted, this contention becomes unimportant.

On February 5, 1914, the general assembly of Ohio adopted a partial code for -the classification and supervision of rural and village schools (104 O. L., 133) and, among other provisions, it adopted the following:

“Sec. 4735. The present existing township and special school districts shall constitute rural school districts until changed by the county board of education, and all officers and members of boards of education of such existing districts shall continue to hold and exercise their respective offices and powers until their terms expire and until their successors are elected and qualified.”

It was undoubtedly the purpose of the general assembly by the adoption of this section, in order to continue the existing school machinery, to provide that all members of the boards of education then in office should continue until the expiration of their terms and until the election and qualification of their successors. It means exactly what it says, and Clemens, being a member of the board of education of Jasper township at the time when the law took effect, was entitled to hold the same until the expiration of his term.

The demurrer was properly overruled and the judgment of the court of appeals is affirmed.

Judgment affirmed:

Nichols, C. J., Johnson, Donahue, Wanamaker, Newman, Jones and. Matthias, JJ.,, concur.