In City of Cleveland v. Ruple, 130 Ohio St. 465, 200 N.E. 507, the Cleveland municipal stadium and the related city owned structures, including public halls and a parking garage, were held to have been constructed and leased for public purposes.Summary of this case from Hecht v. Pro-Football, Inc.
Decided February 26, 1936.
Municipal corporations — Local self-government and public utilities — Engaging in purely private, competitive business, not conferred — Power to tax limited to public purposes — Municipal exhibition hall cannot be operated as private garage, when — Exhibition hall may be used for public and incidental purposes — Parking and storage by municipal officers and employees, permissible — Municipal motor vehicles may be parked, stored or serviced.
1. The Constitution of Ohio gives to municipalities the right of local self-government, local police power, and the authority to acquire, construct, own, lease and operate any public utility; but neither the Constitution nor the statutes contain language which can be construed as an attempt to confer upon a municipality the privilege of engaging in purely private, competitive business.
2. The right of private property, guaranteed by the state and federal Constitutions, is subject to the governmental power of taxation; but the power to tax can be exercised only to raise money for a purpose public in nature.
3. A public underground exhibition hall, constructed with public funds for holding public exhibitions or to provide space for storage, garage or other public purposes and for all uses incidental thereto, may not lawfully be used by the municipality in carrying on a purely private garage business in competition with other private garage businesses in the vicinity, such use being an undue interference with the constitutional right of private property.
4. Such a public underground exhibition hall may be used by the municipality for all public purposes and all purposes incidental thereto, including the right to afford to patrons of adjacent municipal buildings, to wit, a public stadium and a public hall, parking and storing privileges, and a reasonable charge therefor may be made.
5. The municipality has the right to permit its officers and employees to use such underground exhibition hall for parking and storing their automobiles, while performing their duties as officers or employees, on such reasonable terms as the municipality may impose.
6. The municipality may lawfully use such underground exhibition hall for parking, storing and servicing its own automobiles, trucks, busses, and other vehicles, such use being public in kind.
ERROR to the Court of Appeals of Cuyahoga county.
Several years ago the city of Cleveland established a civic center, and among the buildings erected therein were a public hall which embraced a large auditorium with seating capacity for many thousands and a hall adapted to use as a theater, a public stadium with a large seating capacity, and a city hall. These three public buildings were part of the same group, and in conjunction therewith and in the same vicinity the county erected a new court house. After these buildings were erected the city of Cleveland made a lease with the county of Cuyahoga in accordance with an ordinance passed September 28, 1931, authorizing the city to enter into an agreement of lease with the Board of County Commissioners of Cuyahoga county for the site of an underground exhibition hall or annex to the public hall. The lease contained the following provisions authorized by municipal legislation: "Whereas, it is mutually desired to construct for public purposes certain underground structures in and underneath the present surface of the ground between the Cuyahoga County Court House and the Cleveland City Hall, together with appropriate entrances thereto. * * *
"Said premises shall be used only for the purpose of constructing, maintaining and operating below the surface of the ground one or more structures for public purposes, suitable for holding public exhibitions therein, or to provide space for storage, garage or other public purposes, and for all uses incidental thereto. * * *"
From June, 1933, when the underground exhibition hall was opened, until January, 1935, the city, excepting for about three months of exhibitions, has used this large garage in competition with private business and has permitted the parking and storing of thousands of cars and automobiles for the general public, residents in Cleveland and other parts of the state and country. In fact, during the year 1933 the underground exhibition hall was used for exhibition purposes only on one occasion at which time the structure was leased by International Exhibitions, Inc. During the year 1934 ten major events or exhibitions were held. When the structure is used for exhibition or entertainment purposes, all automobiles whether for parking or storage are as a rule removed from the underground hall. The use of it for parking and storage of automobiles occurs only when such use does not interfere in any way with the use of the structure for exhibitions or other public purposes.
For the erection and completion of the public hall and the underground exhibition hall connected therewith, bonds were issued and sold in the amount of $6,050,000.
On April 26, 1934, Ferdinand W. Ruple, a taxpayer of the city of Cleveland and acting receiver of the Auditorium Garage Building, which is located in the immediate neighborhood of the city structure in question and which is operated as a private garage in the hands of such receiver, brought an action to enjoin the city of Cleveland, its Mayor, Director of Parks and Public Property, Commissioner of Public Auditorium and Stadium, Director of Law, Acting Director of Law, and each of them, from carrying on the garage business in such underground exhibition hall.
The Court of Common Pleas found in favor of the city and the petition was dismissed. The court based its decision upon the ground that in practicing economy, especially under the present economic conditions, the city should be permitted to derive revenue from the garage business rather than to permit the building to remain idle.
On appeal the Court of Appeals found for plaintiff and granted a permanent injunction against all the defendants.
By the terms of the decree the defendants were enjoined from doing directly or indirectly and at all times from the date thereof, the following things or acts: "(1) From parking or storing automobiles, trucks, busses and/or any other vehicles for or on behalf of any individual, partnership, firm or corporation, for consideration or hire in that portion of the Public Hall of the City of Cleveland known as the Underground Exhibition Hall or the Public Hall Annex or in any other portion of said Public Hall;
"(2) From maintaining, operating, financing or conducting in said Underground Exhibition Hall or Public Hall Annex, or in any other portion of said Public Hall, an automobile garage and from engaging therein in any activity commonly performed in such a garage, including washing, oiling, lubricating, repairing, parking, storing and/or otherwise servicing automobiles, trucks, busses and/or other vehicles.
"Nothing herein contained shall be construed to prevent the appellee, The City of Cleveland, from using said premises for the parking, storing, washing, oiling, lubricating, repairing and/or otherwise servicing its own automobiles, trucks, busses and/or other vehicles."
This court ordered a certification of the record.
Mr. Ezra Z. Shapiro and Mr. Alfred Clum, directors of law; Mr. Gordon C. Locke and Mr. Alfred Lawrence, for plaintiffs in error.
Messrs. Horwitz, Kiefer, Gates Harmel, for defendant in error.
The right of private property is guaranteed and protected by the fundamental law of the state and nation. The state and federal Constitutions provide that no person shall be deprived of his property without due process or due course of law. The Ohio Constitution further provides that private property shall ever be held inviolate but subservient to the public welfare, and classes among the inalienable rights of man those of acquiring, possessing and protecting property.
Private property is subject to three rights of government: (1) The right of eminent domain, (2) the right of police power, and (3) the right of taxation. The first relates to the taking of property for public use for which compensation must be made. As to the second it may be said that the exercise of the police power justifies municipal action only when it relates to the public weal or general welfare, and can never be the basis for municipal authority to engage in private, competitive business, that is, business which does not involve the element of public utility. As to the third right, that of taxation, we are directly concerned in this case, because only through taxation to redeem bonds or defray expenses can any municipal corporation be carried on and its functions fulfilled.
It is basic in constitutional law that taxes can only be levied and collected for a public purpose. Auditor of Lucas County v. State, ex rel. Boyles, 75 Ohio St. 114, 134, 78 N.E. 955, 7 L.R.A. (N.S.), 1196; Loan Association v. Topeka, 87 U.S. 655, 22 L.Ed., 455; 1 Cooley on Taxation (4 Ed.), 381, Section 174; 26 Ruling Case Law, 41, Section 26; 38 Ohio Jurisprudence, 758; 61 Corpus Juris, 88, Section 18.
The authorities differ to some extent as to what constitutional provisions give rise to the principle of a required public purpose in taxation, but the rational foundation of the doctrine is that any other legal theory would not be consonant with free government, that is, a government based upon the public will and not on force, and that the right to tax is conditioned upon its being for a public purpose, and is the very heart of the representative form of government guaranteed to each state by the federal Constitution. Some authorities hold that taxation for other than public purposes is taking property without due process of law, within the meaning of the Fourteenth Amendment to the federal Constitution. Green v. Frazier, Governor, 253 U.S. 233, 64 L.Ed., 878, 40 S.Ct., 499; Fallbrook Irrigation Dist. v. Bradley, 164 U.S. 112, 41 L.Ed., 369, 17 S.Ct., 56.
It has also been held that taxation for a private purpose is prohibited by the clause of the federal Constitution that guarantees to every state a republican form of government, as such a form of government forbids the raising of taxes for anything but a public purpose. Beach v. Bradstreet, Comptroller, 85 Conn. 344, 82 A. 1030, Ann. Cas. 1913B., 946.
The right of local self-government and local police power is conferred on municipalities by the state Constitution. Article XVIII, Sections 3 and 7, Constitution. Municipal corporations have the right to acquire, construct, own, lease and operate any public utility. Article XVIII, Section 4, et seq., Constitution. No attempt, however, has been made to confer power upon public corporations in this state to enter into private, competitive business.
In State, ex rel. City of Toledo, v. Lynch, Auditor, 88 Ohio St. 71, 102 N.E. 670, 48 L.R.A. (N.S.), 720, Ann. Cas. 1914D., 949, the court, in passing upon the right of a charter or home rule city, such as Cleveland, to engage in private business by operating a moving-picture theater, laid down the following principle: "Whether a municipality acquires authority 'to exercise all the powers of local self-government' by adopting a charter, or adopts a charter as an indispensable mode of exercising the authority, the powers to be exercised, being governmental, do not authorize taxation to establish and maintain moving-picture theaters."
In the opinion at page 96 it is stated: "How little would remain of the assurance which the Bill of Rights gives to minorities as well as to majorities that: 'All men * * * have certain inalienable rights, among which are those of * * * acquiring, possessing and protecting property,' and that private property may be taken only for uses which are public, if the proceeds of industry and thrift may be seized for the establishment and operation of moving-picture shows and all other imaginable purposes not more frivolous nor more remote from the functions of government."
In the case of Opinion of the Justices, 182 Mass. 605, 66 N.E. 25, 60 L.R.A., 592, the rule is stated to our approval in this language: "There may be some now who believe it would be well if business was conducted by the people collectively, living as a community, and represented by the government in the management of ordinary industrial affairs. But nobody contends that such a system is possible under our Constitution. It is plain, however, that taxation of the people to establish a city or town in the proprietorship of an ordinary mercantile or manufacturing business would be a long step towards it. If men of property, owning coal and wood yards should be compelled to pay taxes for the establishment of a rival coal yard by a city or town, to furnish fuel at cost, they would thus be forced to make contributions of money for their own impoverishment; for if the coal yard of the city or town was conducted economically, they would be driven out of business."
The right of private property must be protected against careless adjudication which, step by step, may wear it away. If a public municipal building may be used by the municipality to carry on private business of one kind, there is no reason why the municipal authorities may not embark in other fields of private enterprise. The only legitimate way such an end may be accomplished is by a change in constitutional limitations.
If taxes may be levied and raised for a private purpose, the whole people may be taxed for the benefit of a few or of a class. Board of Education v. State, ex rel. Lindsay, 51 Ohio St. 531, 38 N.E. 614, 46 Am. St. Rep., 588, 25 L.R.A., 770. Necessity of a public end or aim in taxation is the very basis and foundation of our free institutions.
It follows naturally that, in order for a municipality to employ taxes to carry on a competitive business, such business must involve a public function or be concerned with some element of public utility.
In the instant case the municipal legislation for acquiring the land and erecting the underground structure expressly provides that the purpose is to be a public one, and that the space is to be used for storage, garage or other public purpose, and for all uses incidental thereto." Manifestly had the express purpose been to maintain and operate a private competitive garage the proposal would have been extralegal from the beginning. To engage in private, competitive business is to go beyond the purpose for which the underground exhibition hall was constructed, as expressed in the legislation therefor.
It is true that in many instances it has been held that public buildings may be temporarily let for a consideration, but in our judgment the present case does not present a situation of that character. Here we are concerned not with a temporary leasing of a public building, but with one which is used at times for purely public functions and at other times, and by far the larger part of the time, for engaging in a private garage business in direct competition with privately owned and operated garages in the vicinity, including that which plaintiff below operated as receiver.
Thus the owner and operator of a private garage is taxed to carry on the garage business of a municipality in direct competition with himself. In this aspect of the case it matters not whether the municipal garage is or is not operated for profit. The impression that a business carried on by government, municipal or otherwise, is always profitable, has found lodgment in some minds. This fallacious attitude of mind fails to take note of the fact that the vicissitudes of business enterprises are always present, regardless of the private or public character of the management. In the operation of the garage business, taxation must be employed to pay the expense of maintaining and repairing the building, to pay damages resulting from the operation, to meet contingencies of loss and expense of whatever kind, whether by fire, tornado, or explosion, or by any failure of business acumen in conducting the business or from competition which might curtail it. In the instant case, for a period of several months, the garage was operated at a loss of seven hundred to one thousand dollars per month, while there was at no time a profit from operating it.
The application of these principles to the instant case leads inevitably to the holding that the building may be operated as a garage so far as in doing so there is involved a public function. The decree of the Court of Appeals is therefore too broad and must be modified. To be specific, whenever the public buildings of entertainment located in the civic center, to wit, the underground exhibition hall itself, the public hall, or the stadium are used properly and lawfully for public gatherings, patrons in attendance thereat may use the underground exhibition hall for parking or storing automobiles, for hire or otherwise. The city may permit its officers and employees to park or store their automobiles in the underground exhibition ball while they are engaged in the performance of duties as such officers and employees, but subject to The terms prescribed by the city. The city of Cleveland may use the premises for the parking, storing, washing, oiling, lubricating, repairing and otherwise servicing its own automobiles, trucks, busses, and other vehicles. Should any purely public purpose for which the building may be used arise in the future, such a use is not prohibited.
On the other hand the defendants in the court below are enjoined from operating the garage as a purely private business in competition with privately owned garages.
The judgment of the Court of Appeals will be modified accordingly, as of the date of the entry of judgment therein, and as modified will be affirmed.
Judgment modified and affirmed as modified.
WEYGANDT, C.J., STEPHENSON, JONES and MATTHIAS, JJ., concur.
ZIMMERMAN, J., concurs in the judgment.