text:
    FRAUD OF DIRECTORS IN A SALE TO THE CORPORATION.
    [Circuit Court of Perry County.]
    Shawnee Commercial & Savings Bank Co. v. Frank S. Miller and Clement B. Edgar.
    Decided, November Term, 1902.

      Corporations — De Facto and De Jure — Section 3797 Directory — Application of Section 3821s; — Promoters and Directors — Duty of, Includes Protection of the Corporation against their Own Rapacity — Liability of, for Fraud against the Corporation — Attachment—Form and Substance of Affidavit — Limited Application of Section 5109.
    1. Where articles of incorporation have been issued and duly certified by the secretary of state, and the incorporators hold, meetings, elect directors, etc., the corporation thus created has at least a de facto existence, with capacity to commence and maintain an action; whether it. is a corporation de jure, the state by a direct proceeding can only inquire.
    2. A company, incorporated under the laws of Ohio and authorized to receive deposits, borrow and lend money on interest, etc., is not subject to the penalties imposed by Section 38212 for transacting business without having complied with the provisions of Section 3797, which section is directory and its violation not criminal.
    3. Under the rule laid down in 29 O. S., 423, an affidavit for an order of attachment is not defective as to form in setting forth merely that the affiant “is a director and agent of the plaintiff”; nor is it defective in substance or insufficient in allegation of facts, where the language used is sufficient to charge actual fraud and the fraudulent incurrence of the obligation under the statute, and is sufficient to and does charge the defendants with committing and intending to commit actual fraud. The provisions of Section 5109 were intended to apply only to affidavits in verification of pleadings.
    4. Where the evidence shows that certain directors, defendants in a suit in attachment, made representations as to their interest in the corporation and the value of certain property which were untrue, and which they knew were untrue, the allegation of fraud in an affidavit for attachment will be regarded as established, notwithstanding other directors, with less knowledge of the value of the property being transferred to the corporation, voted with them for its purchase.
    5. Those who participate in the organization of an incorporated company and enter the board of directors occupy a fiduciary relation thereto, and where such promoters and directors urge the sale of property to the corporation at three times its real value, and vote for its purchase, with full knowledge as to its actual value, there is such a lack of good faith toward the corporation; its stockholders and creditors as to constitute fraud per $e, and the fact that other directors assisted in the deal and voted with them affords no defense in an action against them for the amount the company has lost hy such conduct.
    Yooei-iees, J.; Douglass, J., 'and Donai-iue, J., concur.
   On July 21, 1902, plaintiff brought its action in common pleas court of Perry county against defendants, and alleged in its petition in substance: That it is a corporation duly incorporated under the laws of Ohio, with power to receive deposits, borrow and lend money on interest, etc.; and that its principal place of business is at the village of Shawnee, in said county.

That the corporation was organized March 22, 1902, and the defendants were the promoters thereof, and induced and procured the formation of said company; that the defendants were at the time conducting a private hanking business in said village, under the assumed name of The Shawnee Commercial & Savings Bank, and, as such promoters, they procured and induced the incorporators of plaintiff to file the certificate of incorporation and procured and induced various persons to take or subscribe for stock to be issued by plaintiff corporation. This they did by representing to said parties that the incorporation could do a prosperous hanking business in said village, and hy further representing that they would each subscribe and pay for thirty shares of the capital ■stock of the company, and the capital stock of said company was hy the defendant fixed'at $25,000, divided into 250 shares of $100 each, and it was so stated in the articles of incorporation.

That afterwards, and on or about April 18, 1902, the certain stockholders who had subscribed for stock in said company, met to organize the same hy electing directors, and said defendants were present 'at said meeting and falsely and fraudulently represented to said stockholders that they had subscribed for and held thirty shares of said stock each, and said defendants voted said alleged shares of stock so falsely pretended to he owned and held hy them, and. were themselves elected as directors of said corporation at said election; whereas, at said time, as the defendants well knew, they had not subscribed for any shares of plaintiff’s stock, nor did either of said persons own or hold any share of said stock in said corporation; and all of defendants’ said representations and acts were false and fraudulent, and made with the intent and purpose of furthering and effecting a scheme to cheat and defraud the plaintiff out of its moneys.

That afterwards, on April 22, 1902, at a meeting of the directors of the corporation, said defendants being present and acting as directors, induced and procured said board of directors, acting for and on behalf of the plaintiff, to buy out defendants’ said private bank, by purchasing, receiving 'and accepting all its assets at the valuation fixed by them, and by assuming to pay the obligations of said bank in an amount equal to the said valuation of said assets.

That at the time said assets were purchased and accepted by plaintiff, they consisted in part of certain bank furniture and fixtures, which were then of the value of $1,000 and no more, as defendants then well knew, and a further item of said assets was an expense account of $721.32, which represented no value, but only money already paid out for prior expenses of defendants’ said bank.

That at said directors’ meeting, defendants falsely professed and pretended to be the owners of stock, and directors of said company, and argued and voted 'as directors for said purchase, and then and there falsely and fraudulently represented to the directors, that they owned sixty shares of stock in the corporation, being a majority of all the stock issued by the company, which said false and fraudulent representations the said directors then acting for and on behalf of plaintiff believed to be true, they then relying upon the said representations of said defendant, and then having no other knowledge as to the ownership of said sixty shares of stock, than was-then imparted to them by defendant; said defendants with the intent and purpose aforesaid, and to induce plaintiff and said board of directors acting for and on behalf of plaintiff in said transaction, to purchase the said assets and property of their said bank, falsely and fraudulently represented to said directors that said bank furniture and fixtures were of the value of $5,116.40, and that the said expense account of $721.37 was also 'a true and valuable asset of said bank, and should be purchased and paid for by said corporation at said prices and value so represented to them as aforesaid; and plaintiff and its said board of directors, acting for plaintiff, and retying upon and-believing said representations to be true, 'and having no knowledge to the contrary, were by said false and fraudulent representations, acts, arts and practices of defendants, induced to purchase, and pay to defendants out of -the corporate moneys and assets of plaintiff, the sum of $5,-837.74 for said bank furniture and fixtures and expense account aforesaid; while in truth and in fact defendants were not then the owners of any stock in said company, were not entitled to act as directors therein, were not entitled to note as such directors, and said furniture and fixtures and expense account were then of the value of $1,000 and no more, 'as defendants and each of them well,knew; and defendants and each of them well knew that all of said representations and acts were false 'and fraudulent, and were part of their scheme to defraud -the plaintiff. By means whereof defendants unlawfully and wrongfully and fraudulently did procure from plaintiff the sum of $5,837.74, to its damage in the sum -of $5,000.

At the time of filing said petition plaintiff filed its affidavit for attachment. The 'affidavit is -as follows:

“State oe Ohio, County oe Perry, ss:
“Edward GL Blair, being first duty sworn, says: He is a director -and agent of the plaintiff, The Shawnee Commercial & Savings Bank Company, a corporation duty incorporated under the laws of Ohio, and -further:
“1. That the nature of the claim of the said plaintiff against said defendants and for which the plaintiff brings its said action in said court against said defendants for damages for the false and fraudulent representations and fraudulent acts, arts and practices of the defendants, wherein and whereby the plaintiff was induced to purchase from the defendants- certain bank fixtures and furniture and other property of the defendants for the sum of $5,837.74, that being the value thereof as falsely and fraudulently on the twenty-second day of April, 1902, by the defendants represented to the plaintiff’s board of directors, who acted for it in the transaction; whereas in truth and in fact all said property was of -the value of $1,000 and no more, as the defendants then well knew, and as the plaintiff and said directors did. n-ot then know, they retying, on the defendants’ said representations, and said defendants at the time 'also falsely and fraudulently pretending to be stockholders in and directors of the plaintiff, when they were not in fact either, although they voted as such directors at their meeting for said purchase, and said directors did not then know that he was not such director or stockholder.”

On July 26, 1902, the defendant, Frank S. Miller, filed his motion to discharge the attachment, and on the same day filed his affidavit and separate 'answer to the plaintiffs petition.

The motion to discharge the attachment assigns three grounds, which are hereinafter set forth.

The separate answer of defendant, Miller, takes issue with the petition as to the plaintiff being a corporation, alleging that it is not authorized to act as a corporation, or to commence or rnaintain this suit, and that it has ever since April 22, 1902, illegally and criminally been doing the matters and things set forth in said answer.

The purpose and scope of the answer is to show by allegations of facts that the plaintiff is not a legally organized corporation under the laws of Ohio.

The answer denies that he, Miller, was at the time of the pretended organization and incorporation of plaintiff, engaged in the private banking business, or that he represented to said parties or any of them that he would subscribe for and pay for thirty shares of stock, or that he had anything to do with fixing the capital stock of said corporation at $25,000, or ’that he made any representations as to being a stockholder, or director therein; that all of said matters were of record in the books of said pretended corporation, and said parties had access thereto. The answer puts in issue the allegations of the petition wherein it charges him with fraud or false representations.

The cause was submitted to the judge of the court of common pleas of said county, at chambers, upon the motion to discharge the attachment and evidence.

Upon the issues thus made and joined, and the evidence, the judge discharged the attachment.

A bill of exceptions, containing the evidence offered by the plaintiff and defendants, was taken and is brought into this court by petition in error.

His honor, the judge, on hearing said motion, found that the first and second grounds stated in the motion were not well taken, and said motion as to said grounds was overruled; and sustained the third ground of the motion, and discharged the attachment for the reason set forth therein.

The defendant, Miller, excepted to the judge’s holding in overruling his motion as to the first and second grounds, and the plaintiff excepted to the ruling on the third ground.

Both plaintiff and defendant, Miller, prosecute error to this court, by petition and cross-petition in error.

This requires the examination of the whole record, and all the grounds assigned in defendants’ motion to discharge the attachment of plaintiff in error.

The grounds of the motion are:

First. Because said alleged plaintiff is not and was not at the ■time of the commencement of this action a corporation, and has not and had not at the commencement of this action, legal capacity to commence or prosecute the same.

Second. That the facts stated in said affidavit are not sufficient to 'authorize or justify the issuance of said attachment.

Third. That the facts stated in said affidavit as grounds for issuing said attachment are not true.

In support of defendant’s motion, Miller filed an affidavit in which he denies the truth of the facts and allegations contained in plaintiff’s affidavit.upon which the order of attachment was issued; and he also files his separate answer denying the material allegations of the petition as to plaintiff’s corporate capacity, its right to sue or maintain the action, and the charges of fraud therein made. The answer takes issue with the petition only, not with the affidavit; the issue so made by the answer is for the jury on the trial of the case on its merits, and is not important on the hearing of this motion.

The grounds for the attachment being thus denied by the defendant, they must be sustained by the plaintiff to the satisfaction of the court; upon the plaintiff, by the denial, is thrown the burden of proof. Harrison v. King, 9 Ohio St., 388.

Considering the motion and reasons for it in the order assigned:

1. As to the legal capacity of the plaintiff to commence and maintain this action.

The grounds for want of capacity to sue, etc., urged by the defendant, are that the plaintiff is not a legally organized corporation; that in the month of March, 1902, one Edgar and others sought to form a savings and loan association under Title 2, Chap. 16, Rev. Stat. of Ohio, with a capital stock of $25,000, divided into shares of $100 each, under the name of The Shawnee Commercial & Savings Bank Company, to be located in the said village of Shawnee, Perry county, Ohio, 'and do business therein; that they sent a certificate to the secretary of state, about March 22, 1902, certifying that they desired to incorporate under said act, to do business specified in said charter, and that they had fixed their capital stock 'at the sum of $25,000, divided into shares of $100 each; that said village 'had at the federal census of 1880 a population of over 3,000 people, and ever since has had a population of over 3,000'people; that thereafter they opened books for subscriptions to the capital stock of said corporation, and at .the time of -the commencement of this suit less than $25,000 of the capital stock had been subscribed, nor had one-half of each subseription thereto been fully paid up.

At and prior -to the commencement of this action, as shown by the record, articles of incorporation were issued and duly certified by the secretary of state for said corporation. After the certificate of articles of incorporation were issued by the secretary of state, the incorporators, with the defendants participating therein, held meetings, elected directors, including the defendant, Miller, as one of the directors.

Under such state of facts can the defendant attack by allegations or prove the non-incorporation of the company in this proceeding ?

If there is a law 'authorizing incorporation, and a company has attempted to organize under it, and has 'acted as a corporation, it is a de facto corporation, and its de jure existence can be questioned only by the state. Gaff v. Flesher, 33 Ohio St., 107, 113; Society Perun v. Cleveland, 43 Ohio St., 481, and authorities cited by Owens, J., in opinion.

A party dealing or contracting with a corporation can not defeat his obligation by showing that the corporation w'as never legally incorporated. 2 Cook Corporations, Section 637, bottom page 1233; Alexander v. Brown, 2 Disn., 395.

Where a corporation sues for the price of articles sold, the defendant can not set out that the plaintiff sold the articles before its capital stock was fully paid up, as required by statute. Chase’s Pat. El. Co. v. Tow-Boat Co., 28 N. E. Rep., 300 (152 Mass., 428).

Estoppel as to corporate existence seems to be that the corporation is obliged to prove only a de facto existence, and need not prove the details of incorporation. Leonardsville Bank v. Willard, 25 N. Y., 573, 574.

If is only necessary to prove that the plaintiff is a corporation de facto, to enable it to maintain an action against any one, other than the state, who has contracted with the corporation, or who has done it a wrong. Baltimore & P. Ry. Co. v. Church, 137 U. S. 568.

It is further contended by counsel for the motion that the stattutes of Ohio make it a penal offense for such a company, as the plaintiff purports to be, to transact any business unless it comply .with the provisions of Section 3797, Revised Statutes; and in support of this contention we are cited to Section 38212, Revised Statutes. This section is found in Title 2, Chap. 16, Revised Statutes, and is the closing section of that chapter, as now found in Bates’ Annotated Statutes. Looking to this statute, we are of opinion that it has no application to the companies n'amed in Section 3797, Revised Statutes, although Section 3797 is one of the sections found in this chapter. Section 38212, Rev. Stat., is Section 9 of an act passed April 25, 1898, found in 93 O. L., 401; and that is an act entitled “An act to regulate certificate, bond and investment companies, partnerships and associations, other than building and loan companies, and to regulate investment guaranty companies, partnerships and associations doing business on the service dividend plan, and to protect holders of their certificates, debentures 'and securities.” The words in Section 9 of said act, “such company, partnership or 'association,” applies solely to the class of partnerships 'and companies named in Sec. 1 of that act; and it is the violation of the provisions of that act alone that is made a misdemeanor, and punishable by fine or imprisonment. It has not, and can not, have reference or application to any of the other sections found in Chap. 16, Title 2, except the sections that are found in the act of which it is a part. This section is not an amendment or supplement to any of the original sections of this chapter. It is an independent act passed long after Section 3797, Revised Statutes, was a law. That the compiler of these statutes placed it in Chap. 16 is perhaps appropriate, but the fact that the compiler so placed it there does not, and can not, of itself make it control the other sections of that chapter. The act does not purport to be a part of that chapter, nor does it purport to modify, supplement or repeal any of the existing laws in that chapter at the time of its passage.

Therefore, we find that Section 3797, Revised Statutes, is directory and its violation would not be criminal, nor would it subject the company, or its agents, to penalties named in Section 38212, Revised Statutes. True, the state can interfere and prevent its doing busines and forfeit its charter for non-compliance with the provisions of Section 3797, Revised Statutes, but the fact nevertheless remains that this corporation, while not organized in conformity with the laws directing its formation, yet the business it is doing is not criminal, and therefore the usual rule as to de facto corporations, which we have before stated, would apply to this corporation, though it would not apply to a corporation doing a business made criminal by the laws of Ohio.

We do not discover any error in the record or ruling of the judge in overruling defendants’ motion as to first ground; and the court further hold that the plaintiff, under the facts stated, is a corporation de facto, and has capacity to bring and maintain this action.

2. Is the affidavit sufficient to authorize or justify the issuance of said 'attachment ?

(a) It is contended that the affidavit is defective in not stating or showing that Edward G. Blair was the agent of the plaintiff .and 'authorized to make it.

The affidavit shows that Edward G. Blair being sworn says: “That he is a director and agent of the plaintiff, The Shawnee Commercial & Savings Bank Company, a corporation duly incorporated under the laws of Ohio.”

Section 5522, Revised Statutes, provides that the affidavit for an attachment under Section 5521, Revised Statutes, may be made by the plaintiff, his 'agent or attorney.

In an affidavit for an order of attachment, under said section, or under the old section of the code, 192, made by the plaintiff’s attorney, it is not necessary to show why the affidavit was not made by the party himself, or that the facts stated in the affidavit were within the personal knowledge of the affiant. White v. Stanley, 29 Ohio St., 423.

The court, at page 427, say:

“The court of common pleas did not err in overruling the motion of defendants to discharge the attachment. Section 192 of the code (now Section 5522) authorizes the making of an order of attachment upon the 'affidavit of the plaintiff, his agent or attorney/ showing certain facts therein enumerated. The sufficiency of an 'affidavit for an order of attachment made by the plaintiff’s agent or attorney is determined by the same tests as one made by the party himself. There is no- such limitation upon the power of an -agent or attorney to make an 'affidavit for an attachment as is prescribed by Section 1136 of the code (now Section 5109). This section was intended to -apply -only to affidavits in verification of pleadings. This is rendered, clear from the context of the section as well as by its terms.”

Therefore, we hold the objection to the affidavit as to form, as having been made by the agent, Blair, is not well taken.

(6) Is it defective in substance or insufficient in allegation of facts?

Section 5521, Revised Statutes, provides the grounds upon which an attachment may issue. Subdivision 9 of the section provides when the defendant, “Iras fraudulently or criminally contracted the debt or incurred the obligation, for which suit is about to be or 'has been brought,” an attachment may issue.

The grounds for an attachment 'may be stated in the affidavit in the language of the statute, without specifying more particularly the facts to be alleged (Coston v. Paige, 9 Ohio St., 397, Emmitt v. Yeigh, 12 Ohio St., 335). Such statement is not invalidated by adding thereto a statement of such particular facts as upon a fair and reasonable construction would justify a belief in the truth of the general statement. Emmitt v. Yeigh, supra; Harrison v. King, 9 Ohio St., 388.

The charge in the affidavit in this case is a claim for damages for the false and fraudulent representations and fraudulent acts, arts and practices of the defendants in the sale of property to the ■plaintiff for the sum of $5,837.74, whereas in truth said property was of the value of $1,000, and no more, as defendants well knew, and plaintiff did not know to the contrary, but relied on defendants’ said representations; and further, in falsely and fraudulenfly pretending to be stockholders in and directors of plaintiff when they were not in fact either, and in voting as directors at not then knowing that said defendants were not snch directors their meeting for the purchase of said property, the said directors and stockholders.

The affidavit is sufficient to charge actual fraud and the fraudulent incurring of the obligation under the statute; and is sufficient to and does charge the defendants with committing and intending to commit actual fraud. It is not a charge of constructive fraud, and, therefore, it does not fall within the rule of decision in Union Roll. Mill Co. v. Packard, 1 C. C., 76.

The judge did not err in overruling defendants’ motion in the second ground therein set forth.

3. That the facts stated in said affidavit as grounds for issuing the attachment are not true.

Here the most difficult questions, both as to law and fact, are presented.

Evidence was submitted to the judge on the issue. The motion was sustained and the attachment discharged on this ground. A bill of exceptions containing the evidence, both oral and written or documentary, was ta,ken and filed in this court.

The testimony established conclusively the following facts:

1. That the defendants, and especially Miller, were the promoters of the plaintiff company. They procured its incorporation, or at least the issuing of the certificate and articles of incorporation, secured the stock subscription, named the board of directors, selected the finance committee, had themselves chosen as members of the board of directors, acted as such directors, sold the furniture and fixtures to the plaintiff corporation, they both acting and voting as directors, and urged the purchase of the property by the board for the company.

2. At the time of the purchase and before the purchase was made, they both represented to the other directors that the furniture and fixtures so purchased were cheap at the price sold, namely, $5,116.42.

3. They both represented and claimed at the time of the purchase, that they were each the owner of thirty shares of the capital stock, and were paying sixty per cent, of the purchase price of the furniture and fixtures.

4. The furniture and fixtures- -were not worth, to exceed $1,700.

5. The value of the furniture and fixtures was unknown to the other members of the hoard of directors; they were men without experience as to values of property of that kind, and in this regard did not stand equal in experience or in opportunities for knowing the value of property of that kind or of the ownership of said stock with the defendants. The other members of the hoard relied upon the representations of defendants as to value of said property and as to their ownership of stock as represented and claimed by them, namely, that they owned sixty shares and were paying sixty per cent, of the purchase price of said furniture and fixtures.

6. Miller did not become a stockholder until June 23, 1902, long after said purchase was made, then of one share only. Edgar never was a stockholder.

The above facts are clearly shown and established by the evidence contained in the record.

Both in England and in the United States, promoters of corporations or other enterprises have been held to occupy a fiduciary relation towards one another, 'and towards the company or corporation whose organization they seek to promote. The principle of law necessary resulting from the doctrine is, that the promoters must act in good faith with one another, and with the corporation, and such special advantages or profits as they reserve to themselves must not be secret. In other words, they will not he permitted to assert, either expressly or by necessary implication, that they are forming a corporation upon terms which give them no special profit or advantage, while in fact they are intending to reap benefit of which their fellow-promoters or subsequent subscribers have no notice.

The principle is stated by Morawetz Corporation (2d Ed.), Section 545, in these words:

“The relation between the promoters of a corporation and its agents and shareholder is often of such a character as to render their dealings liable to be scrutinized by the court with great strictness. Promoters of a company usually represent themselves to be deeply -interested in its success, and are instrumental in inducing the subscription- of the shares by means of representations and promises in relation to the projected enterprise. As a rule the promoters possess absolute control over the policy and operation of the company when it is first formed, and in many instances the first board of directors of the company consist of nominees of the promoters and is wholly within their control. The subscriptions of the shareholders are made upon the trust that the promoters are men of rectitude and business sagacity, who will use their knowledge and exercise their control -over the enterprise for the benefit of the company. It is evident that a corporation dealing with its promoters under such circumstances -would not meet them on equal footing.
“Accordingly it has been held that if persons start a company, and induce others to-subscribe for shares for the purpose of selling property to the company when organized, they must faithfully disclose all facts relating to the property which would influence those who formed the company in deciding upon the judiciousness of the purchase. If the promoters are guilty of any misrepresentation of facts or suppression of the truth in relatiqn to the character and value of the property, or their personal interest in the proposed sale, the company will be entitled to set aside the transaction or recover compensation for any loss which it has suffered.”

In the ease of Yeiser v. Board & Paper Co., 107 Fed. Rep., 340 (46 C. C. A., 657), Severens, J., says:

“It is a well settled principle of equity that those who participate in bringing about the organization of an incorporated company, and in getting it in condition for transacting the business for which it is organized, assume the obligations of a trust toward the company and those who shall be invited to come into the enterprise as stockholders and share in its fortunes. The latter have the -right to rely on the good faith and fair dealing of those who have promoted the company, and to assume that they have not perverted the organization by secret means to the accomplishment of selfish purposes and the destruction of that equality of right which, in the absence of some known- modification, all the shareholders are entitled to- enjoy. Indeed, some of the decided cases hold a wider doctrine and declare that whether the promoter becomes a stockholder himself or not, he owes a like duty to those who become such, and can not, by covert manipulation of the company, while it is under his control, and without the faculty of acting for itself, take a personal profit from his dealings with it. The recognition of a fiduciary relation in such circumstances is merely for the application of a familiar principle of equity, which fastens a trust upon one-who has such power over another and his affairs as to give the former an opportunity to make personal gains in his dealings with them.
“In this country the courts have accepted the essential principle laid down in the English cases, and hold with scarcity any variation to the doctrine' that the promoter of a company stands in the relation of a trustee to it and those who become subscribers to its stock so long as he retains the power of control over it. There is some difference of opinion, as there is in the English cases, in Tegard to the 'time when -he becomes such promoter within/ the meaning and operation of the rule. Some courts are of opinion that he is ohargeable with the duties of a trust when he enters upon the execution of the scheme which is intended to result in the transfer of the property to a company to be organized and controlled by him. All, however, agree that he comes within the rule when he begins to organize a company, and that from that time he is bound to de'al openly and fairly, and in such a way as that those having independent charge of the company as well as those who are induced to become subscribers to its stock, may be fully advised of the relation he bears to the property which he proposes to sell, in like manner, as one who assumes to act as the agent of another in the purchase of property.
“We refer to a few of the well considered cases in this country which support what we regard as the doctrine settled upon sound reasons. Brewster v. Hatch, 25 N. E. Rep., 505 (122 N. Y., 349; 19 Am. St. Rep., 498); South Joplin Land Co. v. Case, 16 S. W. Rep., 390 (104 Mo., 572); Hebgen v. Koeffler, 72 N. W. Rep., 745 (97 Wis., 313); Densmore Oil Co. v. Densmore, 64 Pa. St., 43; Hayward v. Leeson, 57 N. E. Rep., 656 [Mass.]; Burlante v. Dennis, 35 Pac. Rep., 444 (101 Cal. 90); Yale Gas Stove Co v. Wilcox, 29 Atl. Rep., 303 (64 Conn., 101; 25 L. R. A., 90; 42 Am. St. Rep., 159).
“The company, as well ’as the stockholders, are entitled to the benefit of the independent judgment of the trustee in regard to the value of the property to be purchased, and the price to be paid, as well as its fitness for the intended use. It is said that the property was worth what the company paid for it, and is adapted to the company’s requirements. It happens so. But this in no manner affects the operation of the rule.”

See also the ease of Second Nat. Bante v. Fence Post Co., Vol. 2, Circuit Court New-Series, opinion by Sullivan, J., and authorities there cited.

In Teachout v. Van Hoessen, 76 Iowa, 113 (40 N. W. Rep., 96; 1 L. R. A., 664; 14 Am. St. Rep., 206), it was held:

“A statement by a person owning property which is to be fumed into the corporation at cost, as to its value, which is acted upon by the other parties, who put in money upon the basis of such value, is not a statement of opinion, but a fact, and if false, will entitle the others to recover back the over-payment made by them.”

Again:

"If a vendor has superior knowledge of the property sold, and knowingly gives a false opinion in regard to a material fact with an intention of defrauding the purchaser, an -action may be maintained against him for fraud." Collins v. Jackson, 19 N. W. Rep., 947 (54 Mich., 186).

If a statement of value is connected with a false representation of an extrinsic fact calculated to put the other person off his guard and induce him to give credit -to the representations of value, it may be fraudulent. Miller v. Barber, 66 N. Y., 558; Simar v. Canaday, 53 N. Y., 298 (13 Am. Rep., 523).

If the case does not fall within one of the well defined classes, the rule is, that the question whether it is opinion or fact is for the jury. Messer v. Smyth, 59 N. H., 41; Simar v. Canaday, 53 N. Y., 298 (13 Am. Rep., 523).

We recognize the general rule of law to be that a naked assertion by a vendor of the value of property offered for sale, even although untrue of itself, and known to be such by him, unless there is a want of knowledge by the vendee, and the sale is made in entire reliance upon the representations made, or unless some artifice is employed to prevent inquiry or the obtaining of knowledge by the vendee, will not render the vendor responsible to the vendee for damages sustained by him.

In this ease the record shows that the board of directors were thrown off their guard to make inquiry,. when the defendants falsely represented that they were stockholders owning sixty shares of the stock of the company, and would therefore pay sixty' per cent, of the purchase price, and for these reasons, as claimed by the defendants, the other directors could not “kick” at the price.

These representations as to their interest in the corporation were untrue, and the defendants knew they were untrue, and suppose the other members of the board had equal means of -knowing the falsity of their statement, yet they had a right to rely upon such representations coming from those who stood in fiduciary relation to the corporation and its stockholders, and they had a right to rely thereon without making further inquiry as to the truth thereof. Their opportunities and experience as to the value of such property were not equal to that of the' defendants, the promoters of the enterprise, and for which the property was being purchased, and it is immaterial that the -directors of the corporation knew of the fraud. 1 Thompson Corporations, Section 468; Redding v. Wright, 51 N. W. Rep., 1056 (49 Minn., 322).

But aside from these considerations, we are confronted in this record with the fact that Miller and Edgar, whether stockholders or not, and eligible to be elected directors, were elected directors-of this corporation and they proceeded to and did act as such directors.

If they participated in the sale to the corporation of their property at about three times its real value, and urged such sale and voted for it, -this fact alone is a fraud upon the corporation, its stockholders and its creditors. These men, as directors, were charged with the exercise of the utmost good faith in their dealings with the corporation. They were placed in office for the purpose of protecting the rights of the corporation and its stockholders and creditors, and not for the purpose of enabling them to sell this corporation their property at three times its value, and thereby make gains to themselves at the expense of the persons to whom they stood in fiduciary relation.

The mere fact that they voted on the part of said corporation to consummate such a bargain and sale is a fraud per se, and that the other directors, either with or without knowledge of the fraud, voted with -them, aided and assisted them in making such a deal, is no excuse for them and affords them no defense to this action. If every other director of this corporation had equal knowledge of the value of this -property, and with such knowledge aided and abetted them in. perpetrating this fraud on the corporation, its stockholders 'and creditors, it would in no wise relieve them from responsibility for their fraud, because it was their duty to protect the property and funds of this -corporation, not only from the outside world, but also from themselves; and it is evident that whatever they may have done with reference to protecting it from the outside world, they made no effort to protect this corporation from -their own rapacity, but were in fact chiefly instrumental in bringing about the sale of this property to the corporation at a price largely in excess of its fair value.

If this contention were simply between the directors of this corporation, as individuals on the one side, and the defendants on the other, we would leave the -directors to suffer the consequences of their -own folly. Eor, to say the least, their conduct was not only grossly negligent, -but reprehensible in the highest degree. But they are not the only ones to suffer by this fraud of the defendants and 'this carelessness and negligence of the directors. The stockholders and creditors of this corporation have no voice in the matter. They had placed these men, together with Edgar and Miller, in charge of their property to protect them, and for no other purpose. That the defendants used their position for personal gain, as is shown by the record, and though the directors may have permitted them to do so, furnishes no excuse or defense for these defendants in this action.

George F. Martin, M. A. Daugherty, for plaintiff in error.

John Ferguson, H. D. Cochran and T. J. McDermott, for defendants in error.

Therefore, we find that these acts of the defendants, Miller and EdgaT, in urging and voting for this purchase of their property by this company, was in dereliction of their duty and an actual fraud upon the corporation, its stockholders and creditors, without reference to whether the conduct of their co-directors was negligent, reprehensible or even fraudulent.

Without further citation of authorities or discussion, we think the finding of the judge was clearly 'against the evidence, and contrary to law; and his .holding and judgment on the third ground of the motion is reversed with costs; his holding on first and second grounds is affirmed with costs. The cause is remanded to the common pleas with instructions to overrule the motion to discharge the attachment and for further proceedings therein.

To all of which holdings and judgment of this court defendant excepts.


source: Caselaw Access Project

license: Public Domain

text:
    BUILDING RESTRICTIONS COVERING A SUBDIVISION.
    [Circuit Court of Cuyahoga County.]
    Herman C. Shubert v. The Eastman Realty Company.
    Decided, November 4, 1903.

      Building Restrictions not Enforceable, When — Lot Owner Violating Restrictions Can not Enforce Them Against Another.

    1. Where the owner of land subdivides and sells it to lot purchasers, with restrictions in the deeds as to the purpose for and manner in which the land may be used, one lot purchaser can not enforce such restrictions against another lot purchaser, unless the restrictions-are,-uniform.for all the lots-similarly situated, and part of a general scheme for the improvement of the whole tract.
    2. Where there is a-general scheme for the improvement of the whole tract, one lot owner who has violated the restriction in his own deed by building too near the street line, can not compel his neighbor to build according to the restriction.
    Winch, J.; Hale, J., and Marvin, J., concur.
    Appeal by plaintiff.
   Plaintiff is the owner of sub-lot 66 in Henry Lower’s subdivision of part- of original Brooklyn township lots numbers 9 -and 10, as shown on the plat of said subdivision, recorded in Volume 19 of Maps, page 28 of Cuyahoga County Records. His lot is 56.5 feet front 'on Detroit street and 200 feet -deep along the westerly line of Eastman street. Defendant is the owner of suib-lots 23, 24 and 25 in said Lower’s subdivision, making a fronttage of 166 1-2 feet on Detroit street and having ’a depth of 200 feet long along the easterly side of Eastman street.

Plaintiff alleges that he brings his action in his own behalf and for the use of numerous -other property owners having lots fronting on Detroit' street to restrain the defendant from violating certain building restrictions contained in the deeds to their property by ■erecting a four-story apartment house within forty feet of the Detroit street line, it being claimed that defendant’s deeds provide that only one dwelling house he erected upon each of its lots and •that said dwelling houses he built back fifty feet from -the street line. It is claimed that Henry Lower, wbo subdivided the land and platted the allotment, and under whom both parties claim, in each and every deed conveying lots on Detroit street inserted similar covenants, restrictions and limitations as to the character of the improvements to be built upon said 1-ots by the purchasers, the distance from the street- line that improvements should be erected, etc.; that -all such lot purchasers, including plaintiff, but excepting defendant, had complied with such restrictions.

Plaintiff says that' defendant’s violation- of said conditions and restrictions will obstruct the view of other lot purchasers in the subdivision, including himself, and shut off their light and air, and depreciate the value of their property for private residence purposes.

Defendant’s ánswer denies -that it is violating any of said restrict tions, and further alleges that none of the limitations or restrictions inserted by Lower in his deeds to his Detroit street lots were inserted for -the benefit of adjoining property owners, nor pursuant to any general scheme of improvement, but for his own benefit, and that he is not complaining; that said restrictions as to the various lots, ten in number, on Detroit street, wexe not uniform and have not been complied with by plaintiff or any other lot owners, but that by common consent all lot owners on Detroit street have disregarded said restrictions.

By the pleadings this case is brought squarely under the rule of law laid down in 1 Jones on the Law of Real Property in Conveyancing, Section 771:

“Where the owner of a tract of land adopte a general scheme for its improvement, dividing it into lots and conveying them with uniform restrictions as-to’the-purposes for-which the'.land may be used, such restrictions create equitable easements in favor of the owners of the several lots which may be enforced in equity by one of such owners.”

Let us examine the restrictions inserted by Henry Lower in the deeds of the ten lots on Detroit street, in order that we may determine whether the owner of the original tract of land when he divided it into lots adopted a uniform scheme for its improvement and- conveyed the lots with uniform restrictions as to the purposes fox which the land might be used.

Two lots (69 and 70) were conveyed without any restrictions whatsoever.

Four lots (25, 66, 67 and 68) were conveyed with restrictions that the building line should be fifty feet back from the sidewalk.

Four lote (21, 22, 23 and 24) have a forty foot building line.

Five lots (21, 22, 23, 24 and 66) have a condition that but one dwelling house shall be erected thereon.

On six lots (21, 22, 23, 24, 25 and 68) liquor can not be sold.

Six lots (23, 24, 25, 66, 67 and 68) are to be used for residence purposes only.

It therefore appears that no uniform scheme of improvement was adopted either as to the building line or as to there being but one dwelling house upon each lot.

Foran, McTighe & Gage, for plaintiff.

Higley & Maurer, for defendant.

It follows that plaintiff is not entitled to the relief he prays for. This view of the case makes it unnecessary for this court to determine whether an apartment house is “one dwelling house.” It is admitted that defendant might build an apartment house on lot 25, but it is claimed that he could not build one on lot 23 or lot 24. Lot 25 is the lot nearest plaintiff’s lot, and an apartment house on that lot would do all the damage plaintiff claims would flow from any apartment house on any of defendant’s lots. This inconsistency illustrates the soundness and wholesomeness of the rule of law above quoted from Jones on-Real Property in Conveyancing.

There is another reason why plaintiff is not entitled to an injunction.

The proof shows that the building line of plaintiff’s lot is fifty feet from the street line. The main part of his house conforms ■to the restrictions in his deed, but' a bay window two stories high is* within forty-five feet of the street line. This bay window is in the shape of a tower, is a substantial part of his house, and encloses rooms therein. His porch is a heavy, substantial structure having a solid foundation and slate roof, heavy columns and of such style and construction that it must substantially interfere with the view of his neighbors. This porch is within forty feet of the street line.

It can not be contended that plaintiff can compel his neighbor to put his building back fifty feet from the street when he himself is within forty or forty-five feet of the street. And if he asks his neighbor to go back as far as he is from the street, should the porch not be considered, the line established would be not more than forty-five feet from the street and he would be asking us to enforce a building restriction established, not by the original owner of the land for the common benefit of all lot owners, but by one lot owner for his own benefit and to suit his own convenience.

The petition is dismissed at plaintiff’s costs.


author: Mooney, J.

text:
    INDEFINITE TERM OF LEASE FOR. OIL AND GAS LANDS.
    [Circuit Court of Wood County.]
    Charles E. Tucker v. John G. Watts et al.
    Decided, June 26, 1903.

      Lease — For Oil and Gas Lands — Delay in Drilling — No Term Fixed in Lease — Assignment of Lease not Recorded — Abandonment of Lease.

    1. Under the terms of Section 4112a, the assignment of a lease, granting the right to go upon lands for the discovery and production of oil and gas, need not he filed for record or recorded in order to render it valid as between the parties thereto and. their assigns.
    2. A contract of lease between a land owner and an oil producer gives the right of possession to the latter for the purpose of exploring for oil and gas, and is not void ab initio by reason of the fact that no term is stated or fixed by the contract; and oil or gas having been discovered, the contract endures for such time as is necessary to accomplish its purpose, the producer acting with reasonable diligence.
    3. Where a well is drilled and no gas or oil is found, the term of the lease can not be fixed by the caprice of the driller, but he is bound to continue his search within a reasonable time; and where, as in the case under consideration, further drilling is delayed for a period of six years, the interest of the lessee and his assigns will be declared to have been abandoned.
   Mooney, J.

This case comes here from the court' of common pleas on appeal. The plaintiff named avers in his petition that he is the owner of a leasehold interest and is in possession of certain lands described, in Wood county’’, Ohio, for the purpose of producing oil, and that the defendant, John G. Watts, has entered into possession of the lands and drilled thereon and is producing oil and is converting the five-sixths part thereof to his own use. The praynr of the petition is that Watts be enjoined from such conversion, and that the Buckeye Pipe Line Company — with the limes of which the tanks upon the lease are connected — shall be enjoined from delivering to defendant the oil produced upon said premises.

The ’defendant, John G.. Watt's, files an answer which is, in substance, a general denial, and then avers that he is the owner of the leasehold interest upon said lands, and prays for affirmative relief. ■

This averment of the interest in Watts is denied in the reply.

From the evidence in the case, as well as from the pleadings— more specific than has been stated — it 'appears that on the 21st day of November, 1892, Stearns and Ferris, the then owners of the fee of the lands in question, executed and delivered to Monroe and Hamnon a contract, or a lease, covering 'all these lands. That after-wards this contract was filed for record and was recorded, the date of the filing being April 5th, 1893; and after this time Monroe released to Harmon all his interest in the lands, and Harmon after-wards conveyed to the plaintiff in this action the interest, if any, arising and existing under the lease, and it is under this contract that the plaintiff claims. It is evident that the claim or title t'o relief of the plaintiff in this action must be based upon the validity of the contract originally made and the subsistence of an interest or estate thereunder at the time of the bringing of this action, and, therefore, the terms and conditions of the contract originally entered into between Stearns and Ferris of the one part and Monroe and Harmon on the other, become, as we think, of controlling importance in the case. By this contract the land owner, for a consideration of one hundred dollars, grants unto the second party the privilege of drilling for and removing the oil and gas from the premises, together with the right to place thereon such fixtures as may become necessary for the production, transportation and storage of oil or gas, and the right t'o remove such fixtures at the pleasure of said second party. It is provided that if oil be found the land owner shall receive a royalty share thereof of one-sixth of all that may be produced from the premises. Should gas be found the compensation to the land owner shall be three hundred dollars yearly for each and every gas well used and while used. It is further provided that said Monroe and Harmon shall complete a well upon the premises within ninety days from the date of this agreement, or thereafter shall pay t'o the first party $25 per month until such well is completed.' A well was completed in August, 1893, and all the rental due, at $25 per month, from the expiration of the first ninety daj^s after the execution of the agreement, was paid. Nothing was found in this well so drilled, and shortly after all the drive-pipe and casing, derricks and all appliances usual and necessary for the drilling of wells were removed from the premises. Harmon and Monroe had other leasehold interests for oil purposes in the vicinity, and from time t'o time prosecuted drilling for oil at some distance and then in the near vicinity of these lands, hut from 1893 to 1899 they had never entered upon this land for the purpose of drilling or further prosecuting their search for oil, nor had the plaintiff prior to the bringing of this action, nor any one for either Harmon and Monroe, nor the plaintiff, except that at one time a stake to mark the location, of a well to be drilled in the future, was driven. There is some evidence — but the fact is in dispute — that’ both Harmon and the plaintiff at various times declared their intention not further to prosecute their search for oil upon the lands described in this petition. And there is evidence tending to show that while Judge Harmon was the sole owner of this lease he declared his unwillingness at the time of making the statement to further drill, unless the royalty was reduced, and it is a fact established in the case that Judge Harmon was of opinion and intended to drill only in the event that the price of oil by its advance would justify the drilling to secure the quantity of oil that it was believed could be found by drilling upon these lands — bis conviction at that time being that' oil could not be found in quantity sufficient to make drilling profitable at the then price for which oil could be sold.

The assignment of this agreement by Judge Harmon to the plaintiff in this case w.as mot filed for record, nor recorded. It is contended now by the defendants in this case that this lease is not in force, for the reasons: First, that the assignment has not been recorded, and therefore, the plaintiff in this case has no title to the leasehold, even though it is still a subsisting interest; second, that this lease was invalid ab initio, for the reason that no term is stated or fixed by its terms; and, third, that if the lease ever were valid, all interest of the plaintiff in the premises has been lost by reason of the abandonment, either by himself or Judge Harmon.

We are of the opinion that under the terms of Section 4112a, the assignment of a lease need not be — as between parties sustaining the interests in the lands that these parties do — need not be filed for record, or recorded, and that the failure to so file or to so record is an immaterial circumstance in this action. The lease in this ease was filed for record and recorded, and, therefore, if the lease were otherwise valid, an interest passed and terms were complied with to some extent, and if the peformance of these contract obligations upon the part of Harmon changed or affected or increased the inchoate interest theretofore existing, that interest was vested in him; he was possessed at all events with the interest, and that as to persons, except third persons acquiring am interest in that interest under Harmon, the title of the plaintiff in this case became valid and subsisting by the 'act of transfer without filing or recording the evidence of the assignment.

We are not of opinion that this agreement is invalid by reason of the fact that no term is fixed in -it. This was a contract that was entered into between the land owner and an oil producer, for the purpose of enabling the oil producer to follow his occupation upon these premises and produce oil and gas therefrom. A right to possession, at least for this purpose, passed to the oil producer. He had a right to explore for oil, and when he did discover it the contract then would endure for such time as was necessary to accomplish the purpose of the contract, the producer acting with reasonable diligence.

In this case, then, if oil had been found, Harmon, or his- assignee, would have had the right to retain possession of this land for such length of time as would be reasonably necessary to the production of the oil and gas lying in and forming part of the lands. Now it is a maxim of law that that' is certain which can .be rendered certain, and the existence of the means of rendering need not attend the formation of the contract; if subsequent events established or fixed the means that had been agreed upon in the contract, that would create the certainty that the law requires. We, therefore, think that by necessary implication the period that this contract was to endure was fixed by the terms of the contract, and that in consequence the contract is not subject to the objection in that respect that is taken to it.

The sole remaining question in the case is that of abandonment. It will be observed that by this, contract there is granted the privilege of producing oil — the privilege of going into possession of this land for.the purpose of exploring for oil is the primary right. This right, the eases are 'agreed, is not an estate in the land, and while some difficulty is experienced by the different court's in the adequate legal expression of just the right conveyed, the substance of it is recognized by all. Some of the cases call it a right to possession and some 'a license, the terms varying, but all agreeing that' to the producer is given the right to go upon the land and make search. No estate or interest in the land itself arises until the product' is found, and then the interest becomes vested, and being vested, -may be called an estate.

It was evidently the theory of the original party to this contract — the second party — that, having drilled one well, required by the terms of this contract, that thereby a perpetual interest was granted and that if at any time in the future oil should be found, it would become the property of the assignees or of the party who succeeded to the interest of Harmon in this lease. To that construction of the contract we can not agree. The contract was entered into for the benefit of both the producer and the land owner, and if oil were found, the land owner was entitled to his share. The time of the enjoyment of this beneficial interest in the contract is something that could not be fixed by the caprice of the driller — it was his right and duty to do the drilling, but it was equally the right of the land owner, within a reasonable time, to enjoy the fruits of this contract so far as he was entitled to them; and so we think that a fair construction of the rights that each of the parties had under this contract is: While upon failure to find oil when the first well was drilled, the interest of the owner of this contract — the producer — would not cease, or be in any manner forfeited, while he still had the right to continue his search, that he was bound to do so within a reasonable time. That is more especially the case where, as here, the duration of the lease is not fixed expressly by its terms. Now, to this contract Ferris was a party. She had no interest in, and no benefit was conferred upon her by the finding of oil, or its production upon adjoining lands in the immediate vicinity, or at distances remote; she had the right t'o have proceedings taken looking to the securing to her of the benefits under this contract, and within a reasonable time.

It is true that oil developments in the vicinity are matters of consequence in cases of this kind — because, having expended money in the completion of a well, the parties here wipe justified in waiting a reasonable time for other oil-producers, or themselves— upon adjoining lands to cast sidelights upon the oil probabilities in these various lands, but the simple fact of activity, by Harmon or by the plaintiff, upon adjoining lands, would not' authorize am undue and unreasonable extension of time for further drilling upon these lands. Now, from 1893 to 1899 no step had been taken looking to immediate drilling upon these lands — six years, with oil wells drilling in upon lands within a half a ’mile, or perhaps a less distance, and nothing to indicate that rights were claimed under this contract. As has been stated it is quite evident that Judge Harmon was of opinion that oil from these lands could mot be produced profitably and he was unwilling to experiment further upon these lands at the them price of oil; in fact, we take it from the record, as well as from the arguments, that the specific intention was to drill further wells when there was an advance in the price of oil. Now an intention t'o drill further wells when there is-an advance in price is tantamount to an intention not' to drill further wells until after such advance. Tire advance in the oil market was a matter that was entirely beyond the control of this lessee; it either might happen within a reasonable time, or it might never happen, and so the intention, so far as there was an intention, was to permit the matter of drilling to go to a time when in the judgment of the lessee the price would justify the expenditure. But, under the terms of this contract, Harmon was bound to drill within a reasonable time whether the price of oil would make it profitable or mot. '‘This intention, therefore, to drill only when the price of oil would make it profitable, was an intention not to comply with this contract but to comply with some other contract which he had substituted for it. His relinquishing of any intention to drill strictly in accordance with the terms of this contract, as well as the lapse of time — which we think was unreasonable — we believe resulted in an abandonment of the interest that' accrued to Harmon, and consequently to the plaintiff, under the terms of this lease.

I might say, as tending to support this conclusion, that' very recently, in a case unreported, the Circuit Court of the'Third Circuit held that where nothing had been done in the way of drilling after the failure of the first well, for four years, upon a leasé where the lessees had expressly agreed that they would drill another well when a Mr. Geazy, a consumptive, had returned from Ashe-ville, North Carolina, from whence, being an inválid, he never did return, that after waiting four years for his return and drilling no well, it resulted in an abandonment. It is but fair to state, however, that the activity in oil drilling around that leasehold intefest was somewhat greater than in this case.

The case of Baumgardner v. Browning, 12 Circuit Court Reports, 73, relied upon here by the plaintiff, we think, so far from being authority to sustain his contention 'here, is rather against the plaintiff’s position. In that case 'a lease for oil purposes upon a cash payment of five hundred dollars was executed and the term fixed at twenty years, and that was 'a definite term. It was held finally in that case that a failure to drill for a certain length of time did not result in an abandonment or forfeiture of the leasehold interest, but it was not' held in that case that the lessee was entitled to the full period of twenty years, but it was, in substance and effect, held that a reasonable time for the' doing "of further drilling upon the premises had not expired. It is evident from a reading of the entire ease that the court intended to decide the ease upon it's own particular circumstances; and the court had, I believe, theretofore held in other oases, and where the term of lease was less clearly fixed, and where the territory had been more thoroughly developed for oil purposes, that an abandonment would result. And so it is indicated by the concluding paragraph of that' opinion that the case is exceptional and is decided upon its own peculiar circumstances. There is it stated:

“Now, without in any way infringing upon any rule we have already laid down, but deciding this case as it' stands, we are of the opinion that the equities are with the plaintiffs, Baumgardners, and that they still have a fair and just right to hold the exclusive possession of these premises for the time being, and at this time, for the purpose of determining whether there is any oil in the land or not.”

And at another part of the opinion, it is said:

“We think the better rule is to say that under this lease the parties have a right to abide, at least for some time, to see what the developments were in the vicinity around and about there.”

Gilbert Harmon and Fries & Painter, for plaintiff.

Balchvin & Harrington and J. O. Troup, for defendants.

If it had appeared that' for several years — four, or five, or six— that upon adjoining lands oil had been produced, we are of the opinion that the lessee would not have been excused from drilling and would not be permitted to retain his interest in the absence of drilling simply because, while oil was found, it was deemed, by reason of .the state of the oil market, that it would not be profitable to do the drilling. If it is not profitable, there is an easy escape for the oil driller; he may either confer the benefits of the royalty upon the land owner by drilling, or he may surrender his interest in the land; but he has no right, when oil is found in considerable quantities to decline to produce the oil for the benefit of the land owner because in the condition of the oil market it would not be profitable for the producer to do the drilling. He may do that, but if he does it he must' surrender his interest in the premises.

• And so, upon the last case, we find that the lease here was abandoned, and that at the commencement of this action the plaintiff was without title to the interest of the oil lessee, and that' in consequence of that finding the decree must be for the defendant in the case. We find that the lease had been abandoned at the time of the commencement of the action.


text:
    DUTIES OF STREET AND STEAM RAILWAY COMPANIES WHERE THEY CROSS AT GRADE.
    [Circuit Court of Hamilton County.]
    Clara Kopp v. The Baltimore & Ohio Southwestern Railroad Co.
    Decided, December 16, 1903.

      Crossings — Of Steam and Street Railways — Proper Precautions — By Both Companies — Where the Tracks are at Grade — Section 3443-6.
    The provision in Section 3443-6, that before a street car shall cross over a railroad track at grade, some employe of the company shall go ahead and ascertain whether the-way is clear, does not relieve the steam railroad of the duty of so operating its gates as to indicate whether or not the way is clear to those in charge of the street car.
    Gieeen, J.; Swing, J., and Jelke, J., concur.
   Counsel for defendant in error assumes that Section 3443-6, Revised Statutes, providing that before -a street' car shall cross over a railroad' track at grade, some employe of the company shall go ahead and ascertain if the way is clear, relieves the steam railroad company of the duty of so operating its gates as to indicate to the person' operating the street car whether the track is clear. There is nothing in the statute that warrants such conclusion, and, having been enacted for -the protection of the passengers, there can arise no implication that the Legislature intended to expose them to danger-by releasing the-.railroad- company from the duty of exercising ordinary care. On the contrary it was evidently intended to furnish an additional safeguard to the passengers who have no control over the management of the street ear.

At the very time that it became the duty of the railroad company to lower its gates to indicate -the approach of a train, it was also the duty of the street railway company by its employe to go ahead and see if the way was clear. The failure of each of the companies to perform such dhity, concurred -one with the other in causing the accident. There was no appreciable difference in the time when the failure to perform -the duty by the respective companies occurred. The two ran together, and were the direct cause of the collision.

In the case of The Street Railway Co. v. Murray et al, both the street railway company and the steam railroad company were held liable upon a state of facts similar to that in the ease before us, except in that case- the railroad company was operating its train of ears in a negligent manner.

It may be said of that case that notwithstanding the gates were up, and notwithstanding the employe of the street railway company failed to go ahead to see if the way was clear, still the collision would probably not have -occurred had the employes of the railroad company operating the train given some signal of the approaching train, and that the failure to do s-o was the direct cause -of the accident, and therefore the street railway company was not liable. But -the court evidently considered the three causes, although distinct and independent, as concurring to cause the collision.

Theodore Horstman, for plaintiff in error.

A. W. Goldsmith, contra.

We think, therefore, that the common pleas court erred in arresting the ease irom the jury, and the judgment will be reversed.


text:
    THE STATUTE OF FRAUDS AS APPLIED TO A VERBAL AGREEMENT TO SELL LAND.
    [Circuit Court of Cuyahoga County.]
    Catherine Gallagher v. Samuel E. Dettelbach.
    Decided, October 26, 1903.

      Statute of Frauds — Verbal Contract to Sell Land — Vendee Who Refuses to Accept Deed — Can Not Thereafter Maintain Suit to Recover Earnest Money — By Alleging Want of Consideration.

    The fact that a verbal agreement to sell land is void under the statute of frauds does not make i tillegal; and where the vendor has the deed ready, and is able to and repeatedly offers to convey, but is prevented from so doing by the refusal of the vendee to accept a deed, and six months later the vendor conveys the land to another, a suit can not thereafter be maintained by the vendee to recover the earnest money on the ground that it was paid without consideration.
    Marvin, J.; Hale, J., and Winch., J., concur. ■
    Error to the court of common pleas.
   This is a proceeding in error to reverse a judgment of the court of common pleas of this county. The plaintiff here was plaintiff ¡below.

The facts are these: On.the 23d day of October, 1897, the plaintiff agreed with the defendant to purchase from him a certain lot of land in this city, a part of which was not at the time owned by the defendant, but he agreed that he would purchase this additional property, to-wit, three feet front on Euclid avenue, adjoining the lot which he then did own, and that the plaintiff should have the property from the defendant for $2,475. This agreement was not reduced to writing, but was wholly a verbal agreement. The plaintiff paid to the defendant at the time the agreement was made the sum of $300. The defendant, immediately after the agreement was made, purchased the additional three feet of ground and notified -the plaintiff that he had so purchased and that he was ready and willing to convey the property to her upon her paying the additional amount to be paid. The defendant continued to be-the owner of the land until the 6th day of April, 1898, when he conveyed it to another party, for the same consideration. The deed by which he conveyed to another party, and which is in evidence, expresses the consideration for which he did convey it as $3,000. The only evidence in the case is the deed made 'by the defendant to the third party and the answer which the defendant made, the first answer in this case. That answer was withdrawn and another substituted, but the plaintiff introduced that answer .and rested upon if. It follows that unless the facts contained in this answer entitle the plaintiff to recover, she is not entitled to recover. Suit is brought by the plaintiff to recover the $300 which .she paid at the date of the agreement. This answer yddch, as j^g already been said, was introduced in evidence by plaintiff, after setting out that the defendant purchased the additional three feet ■of land, so that he became thé owner of all he agreed to sell, says:

“Immediately thereafter defendant did purchase said three feet additional, and so notified plaintiff of said purchase and of his readiness to convey said forty-five feet of land [that being all he had agreed to convey, and -included the three feet] to plaintiff according to the terms of said agreement, but plaintiff notwithstanding said notice utterly disregarded the same; within a few days thereafter defendant again notified said plaintiff personally that he had procured said property and was ready to make conveyance and complete the transaction, when plaintiff a-gain refused and neglected to receive or accept said conveyance, or to perform her part of said agreement, and in like manner again on the 29th of November and on the 14th day of December, 1897, defendant notified plaintiff of his readiness to convey sa-id premises and urged .plaintiff to accept said conveyance and comply with her agreement, but plaintiff still refused to give the -matter any attention whatsoever.
“Then on the 20th day of December defendant again notified ■said plaintiff in writing of his readiness and willingness to perform his agreement and make conveyance of said property, and that unless she complied with her agreement by the 27th day of Deeember, 1897, defendant would claim said three hundred dollars ($300) as forfeited by reason of plaintiff’s failure to perform, but plaintiff continued as before to utterly ignore such notice as well as the performance of her agreement.
“Defendant says he continued to own and hold said premises in fee simple, free from any encumbrance whatsoever, and with a good and sufficient warranty deed, duly executed and ready for delivery to plaintiff, until the 6th day of April, 1898, when he sold the same to said Sterling Parks at and for the sum of twenty-four hundred and seventy-five dollars ($2,475) and no more.”

Under this state of facts the plaintiff claims to he entitled to recover the $300.

It is urged that the plaintiff -is entitled to recover because the agreement could not be enforced, and, therefore, the payment was made without consideration. There was this consideration, however, that the defendant had agreed to convey, and if he carried out that agreement it would be a sufficient consideration. No effort was made by plaintiff to have defendant carry out that agreement. She had no notice from him that he would claim the protection of Section 4199, but she refused on her part to accept any deed, to carry out the agreement. It is true that at the time this suit was brought he had put it beyond his power to carry out the agreement, but many times before that she on her part had refused to carry out her agreement.

The case of Campbell et al v. Gittings, 19 Ohio Reports, 347, is in point here. It is true that in that case there was no failure to comply with the statute of frauds, in the agreement, but the party seeking to recover the money back -in that case insisted that without tender on plaintiff’s part to complete the contract, he was entitled to recover because the other party had not tendered the conveyance. The court held that was not a good defense.

In Browne on the Statute of Frauds, Section 122, we find this:

“The right in the vendee of land by verbal contract, to recover what money or other consideration he has paid, is clearly confined to those eases where the vendor has refused or become unable to carry out the contract, the plaintiff himself having faithfully performed or offered to perform on his part. This rule is sometimes said to rest upon the ground that the vendor, when sued in such an action, merely defends upon the verbal contract, and that this is not prohibited by the statute. As a general proposition, however, we shall hereafter see that a verbal contract within the statute can not be enforced in any way, directly or indirectly, whether by action or in defense. And it does not seem necessary to impeach that proposition in order to sustain the rule in question. In such cases.of suit by the vendee to recover the consideration paid, it has been suggested that the contract is substantially executed on the part of the vendor, he' being able and' willing to perform every thing which in conscience he was bound to perform, and the vendee never having put him in default by a demand for title. But another and better view, taken in a well-considered decision of the Supreme Court of New York, is that the right of the vendee in any case to recover what he has paid stands u-pon the ground that the vendor has received and holds it without consideration, so that a promise to pay it will be implied; but that if the vendor is able and willing to perform on his part, no such want or failure of consideration can be shown, and such promise is not implied.”

The case spoken of as “the well-considered decision of the Supreme Court of New York” is the case of Abbott v. Draper, 4 Denio, 51. The last clause of the syllabus reads:

“But independently of these objections, the suit could not be sustained without proof of a breach of the contract by the defendant; for although it was void by the statute of frauds it was not illegal; and the plaintiff could not recall what he had advanced so long as the defendant -was willing to perform the agreement on his part.”

An examination of the case shows a course of reasoning that commended itself to us in support of that proposition. To the same effect is Section 533 of Beach on Contracts, and cases there cited. Durham Land & Improvement Co. v. Guthrie, 116 N. C., 381; 21 S. E. Rep., 952; Green v. N. C., etc., R. R., 77 N. C., 95; Foust v. Shoffner, Phil. Eq., 242.

In the last named ease, a very considerable payment had been made by the vendee in cordwood for a tract of land which, by verbal agreement, he was to purchase from the vendor, and the vendor expressed a willingness to perform, and the vendee, failing to perform after twelve months, the vendor sold the property to another, put it out of his power to convey.- The court held that the pa3,ment could not be recovered back.

In this case, the pa3'ment was made on -the 23d day of October, 1897, and from that time forward until the 6th day of April, 1898, the defendant was ready, able and willing to perform, and had the deed ready. It is true he did not tender the deed to plaintiff, hut the plaintiff refused to accept any deed from him.

James vs F. Walsh, for plaintiff in error.

Carpenter, Young & Stocker, for defendant in error.

The judgment of the court of common pleas is affirmed,


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    AS TO WIDOW’S EXEMPTION FROM LEVY AND SALE.
    [Circuit Court of Hamilton County.]
    Penny Brown v. Wm. H. Parham.
    Decided, December 16, 1903.

      Exemption — Of Widow — Without Custody of Minor Children — Punctuation of Section 5441.
    A widow, not the owner of a homestead, and not having in good faith the care and maintenance of any minor child or children of a deceased relation, is not entitled to hold property exempt from levy and sale. Wentzel v. Mays, 16 C. C., 110, explained.

      F. H. Williams, for plaintiff in error.

      A. J. Cunningham and W. H. Parham, contra.
    Gieeen, J.; Swing, J., and Jelke, J., concur.
   The plaintiff in error being 'a widow, not the owner >of a ¡homestead, and not 'having in good faith the care, maintenance and custody of any minor child or children of a deceased relative, is not entitled to hold property exempt from levy and sale, unless under Section 5441, Revised Statutes; but in this section, as now punctuated, the words “having in good faith the care, maintenance and custody of any minor child or children of a deceased relative” qualify the word “widow” as well 'as the words “unmarried female,” and a widow not 'having the care of such child can not hold property exempt under this section. When the case of Wentzel v. Hayes et al, 16 C. C., 110, was decided, Section 5441, Revised Statutes, as 'amended in 81 O. L., 148, contained no comma after the words “unmarried female” as it now does, and as found in Whittaker’s Code it' contained a comma after the word “widow.” This punctuation evidently influenced the court in that decision, *as there is no soumid reason why a widow should be entitled to an exemption that an unmarried female is not entitled to.

The judgment will be affirmed.


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    VALID AND INVALID CONTRACTS BETWEEN ATTORNEY AND CLIENT.
    [Circuit Court of Lucas County.]
    Peter Emslie v. The Ford Plate Glass Co.
    Decided, October 3, 1903

      Attorney and Client — Contract between for Professional Services— When Valid — When Champertous and Void.

    A simple contract between attorney and client, whereby the attorney is to receive a share of the recovery as compensation for his services, is binding and legal; but where the attorney undertakes to pay a part of the expenses and in that way acquires a pecuniary interest in a suit, or an agreement is entered into with the client that no settlement or compromise shall be made without the attorney’s consent, the contract is champertous and void.
    Hull, J.; Haynes, J., and Parker, J., concur.
   A demurrer to the plaintiff’s petition was sustained in) the court of common pleas on the ground that if did not state a cause of action. Judgment was rendered upon the demurrer against the plaintiff and Ms petition dismissed. Error is prosecuted to this judgment.

Plaintiff, who is an attorney, claims in his petition that his client, William P. Eggleston, had a suit pending against the defendant, The Edward Eord Plate Glass Company, which he had brought for him as attorney — an action for a personal injury— and he sets up in his petition that as a consideration.' for his services as attorney, “the said William P. Eggleston agreed to pay to the said Peter Emslie one-half of all the money obtained by suit or settlement. That no settlement was to be made with said defendant company without the consent and approval of the said William P. Eggleston and his- attorney, Peter Emslie.” And he further alleges that he notified said company of his contract between himself and his client; that The Eord Plate Glass Company offered to settle the case at one time and the offer was refused. That his client is insolvent and not the owner of any property. That the defendant, with full knowledge of the contract between him and his client, settled the case .with his client, without Emslie’s knowledge or consent, and procured Iris client to consent to a dismissal of the case; that the glass company came into court' and dismissed the case against Mr. Emslie’s objection and over his protest; and he alleges that this settlement was brought about by the glass company through their agents by false and malicious representations which they made to his client, that he would be arrested for perjury — that his attorney had “lied to him,” and that said agents had told Eggleston that his fraternal organizations would “turn him down” and deprive him of opportunities to get employment if he did not settle the case; and plaintiff alleges that there was a conspiracy against himself to deprive him of his profits under his contract, and that defendant succeeded, as he says, in “alienating” his client from him and depriving him of the profit that he might have reaped under this contract; and he asks judgment against The Ford Plate Glass Company, by reason of this alleged violation of his rights, in the sum of five hundred dollars.

This petition was found t'o be demurrable in the court below, and, as is insisted im this court, for the reason that the contract set up by Mr. Emslie is contrary to public policy, illegal and void, and that', therefore, no cause of action can he based upon it, as a cause of action can not rest upon an illegal and void contract.

We are of the opinion that the court of common pleas was correct; that the contract plead in this petition is contrary to public policy, and void. Champertous contracts have always been held from time immemorial, both in this country and in England, to be void, and champerty and maintenance, under the common law, in former times were held to be misdemeanors punishable by fine and imprisonment, and in some eases as contempt of court. Where a lawyer or attorney agrees, for a portion of the amount involved, to carry on a law suit, and that he will pay the expenses of the suit, or a part of t'he expenses of the suit — all such contracts are held void as contrary to public policy encouraging litigation and having a tendency to the harrassing of the parties. A contract that a lawyer is to pay the costs, or a part of the costs in a case in which he has no personal -interest except his fees, is void; and a contract by the terms of which a plaintiff is not permitted to settle without the consent of his attorney is also void. It takes from the client the power to settle his ease, a right which he has under the law and can not legally bargain away; it takes from the defendant also the right to settle and compromise, a right to buy his peace 'and get out of court if he can make an adjustment with the plaintiff, whioh is always encouraged by the courts as tending to peace and the end of litigation.

This contract provides that Eggleston shall not settle without the consent of Emslie, and for th'at reason is null and void, and, being so, it did. not' affect Eggleston’s right to settle with the plate glass company in any respect, nor the right of the glass company to settle with Eggleston on terms offered, or on any basis satisfactory to him. The petition alleges that Eggleston was at the time in a bad mental condition, by reason of facts that are set forth, that he was harrassed and not in a condition to malee a contract. This was a matter with which Emslie had nothing to do. If Eggleston is satisfied with the contract' he has made, his attorney can not complain, and Eggleston does not complain of the settlement which he has made. Such contracts as this have been held void in this state from the first volume of the Supreme Court reports in which a decision is found. The question seems to have come early in the judicial history of the state, when that court did not have so much to do as they have now, and they discussed it at great length, apparently with the intention of settling the question for 'all time to come. This decision is found in 1 Ohio Reports, 132, Key v. Vattier, and it runs to page 153. The opinion is by Judge Burnet, and is a full discussion of the whole matter, citing all the authorities extant at the time. This was an action brought by 'an attorney t'o recover one half of some land over which there had been litigation which the attorney had conducted for his client. The contract between them was that the attorney was to have’ one-half of the land, and the agreement was that the client was not to settle without the attorney’s consent. The Supreme Court say, on page 147:

“Such practices are oppressive on the parties immediately concerned. They have an injurious effect on the community at large; they are against the policy of the law and ought to be suppressed.”

And, on page 148, they say:

“That such contracts have been frequent proves nothing of use to the plaintiff. We can not resort to the maxim communis error facit jus; it has no application to a case like this. But we apprehend that suoh contracts have been less frequent than the gentlemen imagine. By this contract counsel stipulate, as a compensation for their services, that they shall receive a moiety of 'all they may recover. They are to indemnify the plaintiff against costs, and he is bound not to settle or compromise without their consent. If such. contracts have been common, we have yet to le'am the f-aot. It is to be hoped, however, the counsel have been misinformed; but if not, it is certainly time the law should give a check to such a practice.”

The syllabus of the ease covers a few lines only, and says:

“Contract with am attorney that-he shall prosecute suits for the recovery of property, and that no compromise shall be made except he join in it, to receive part of the property recovered as compensation, illegal and void.”

In 49 O. S., p. 1 (Pennsylvania Co. v. Lombardo), this question is discussed, and the court there, through Judge Minshall, on page 5, say:

“It seems well settled by the previous decisions of this court, that a contract between an attorney and client by which the former is to prosecute the action at his own expense, and receive for his compensation a part of the recovery, is against public policy and can not be enforced; and it seems that this would be the case in a contract by which the attorney is simply to receive a part, coupled with a stipulation that no compromise or settlement is to be made without his consent.” Citing Key v. Vattier, 1 O’hio, 132, and other oases.

The last consideration by the Supreme Court of this question is found in 66 O. S., 316 (Brown v. Ginn, Trustee). They sa.y in the syllabus:

“A contract by which several -accounts against tire same debtor are assigned by the holders to another, termed a trustee, for the purpose of having the same prosecuted for collection by suit or otherwdse, and the proceeds, after payment of costs- and fees of the trustee for prosecuting the action,, to- be paid .to the assignors in proportion as the claim of each may bear to the whole sum recovered, does not constitute such assignees the real party in interest within the purview of Section 4993, Revised Statutes, so as to enable him to maintain an action in his own name upon such accounts. Nor is he a trustee of an express trust within the meaning of Section 4995, Revised Statutes.

Peter Emslie, for plaintiff.

Baldwin & Harrington, for defendant.

“A contract assigning several accounts for the purpose of collection which .'gives to the. assignee (an attorney) a contingent. fee depending on success, to he deducted from the proceeds of a suit to collect the 'accounts, which suit is to be prosecuted by him in his own name 'and at his own risk and cost, and which also deprives the assignors o>f any right to control or compromise the suit, is against public policy as champertous, and is invalid.”

It seems to be clearly established by the authorities of this state and everywhere, that such a contract as this is illegal and void. It has been held that a simple contract for a share of the recovery, as compensation for the attornéy’s services, is a binding and legal contract. In many cases that is the only way in which a man without money or means can have his action conducted and tried, and in all cases such contracts are sustained' by the courts; but where the attorney undertakes to pay a part of the expenses, and thus acquires- a pecuniary interest in that way in a suit, or agrees with his client that no settlement or compromise shall be made without the consent of the-attorney, such an agreement, ■ by all the authorities, is held to be champertous, contrary -t'o public policy and void. Such a contract is the one set up in the petition, and the judgment of the common pleas, holding that the breach of it did not constitute 'a cause of action, was correct, and the judgment will therefore be affirmed.


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    FAILURE TO ENTER THE OVERRULING OF A MOTION FOR NEW TRIAL.
    [Circuit Court of Lucas County.]
    The State of Ohio, ex rel Samuel H. Mohler, v. Reynolds R. Kinkade.
    Decided, October 31, 1903.

      Mandamus — Does not Lie to Compel the Making of an Entry, When— Nunc Pro Tunc Entries and their Office.

    1. While it is possible that a judge of the common pleas might, after the term, upon a proper presentation of the facts, 'set aside a former motion for a new trial and re-hear the case, it would be beyond his power to order an entry made as of the September Term of the overruling of a motion for a new trial on June 29th preceding.
    2. The omission to make at the time an entry of the overruling of a motion for a new trial can not be cured by a nunc pro tunc entry made tbe following term, when all the parties were present at the time of the overruling of the motion and had full knowledge of what was done.
    Haynes, J.; Hull, J., and Parker, J., concur.
   This is a petition in mandamus filed by the relator, the object and prayer of which is to compel a judge of the court of common pleas to enter the overruling of a motion for a new trial in a certaim ease as of the September Term, 1903, of that court.

The fact's of the case are these: Mohler had sued The G-rasser & Brand Brewing Company; the case came on for trial and a verdict was directed by the judge of the court in favor of the defendant, this occurring in May, 1903; and thereupon the plaintiff filed a motio-n for a' new trial. The motion came on to he heard on the 29th of June of that year, was argued by counsel and overruled by the court. The matter seems to have rested there until somebody waked up later in the season, along in September, and got an impression that they ought to file a bill of exceptions so that they could file a petition in error, and they found then that no entry had been placed upon the journal of the overruling of the motion for a new trial. Thereupon, on the 4th of September, 1903, there was a journal entry tendered by Mahler’s counsel to the clerk of the court of common pleas, which purported to he the overruling of the motion for a new trial on the last day of the previous term, that term having adjourned ou the 28th day of July, 1903. The clerk refused to make the entry. Thereupon a motion was filed by the plaintiff for an order nunc pro tunc for the entering of the overruling of tire motion for a new ■trial as of the 29th day of June, the date that it was overruled. For some reason this was overruled by the court. The petition for mandamus avers that there never has been any judgment entered in the case, 'and there the matter stands, so far as the journal in the court of common pleas is concerned. Incidentally, I should say that the court had, on the 8th 'day of September, 1903, made an entry on his docket, but he afterwards erased it for the reason that it had been made by the judge himself after the term, and so improperly made at that' time. Defendant’s counsel filed a bill of exceptions on the 4th of September, 1903, with the clerk, and that matter was brought up before the judge and he refused to sign the bill of exceptions.

Now, as a way out' of the difficulty, 'a petition in mandamus is filed to have the entry overruling motion for new trial made as of the September Term, which commenced on the 15th of September, to let the bill of exceptions be signed and filed. It appears from the record that counsel for both parties were present when the motion for a new trial was overruled and-the court made its decision, and the court was there and the clerk of the court, by his deputy. It will be -observed that no step was taken by any party from that time afterwards until more than sixty days had elapsed from the time of the overruling of t'he motion, when activity was commenced. The reason assigned by the clerk for not receiving the journal entry that was furnished by the defendant’s counsel was, that there was no memorandum on the docket of the court of common pleas. That book is known as t'he “Motion Docket” by us, but it is not known to the statute; a “Trial Docket” is provided for by -the statute and that is the one that is kept by the court. It has been determined more than once by the Supreme Court of this state that a memorandum made by the judge upon that docket is merely a memorandum for his owm information. The motion was overruled on the 29th,' in open court', and 'that was the act of the court. It was the duty -of the clerk under the statute to record the acts of the court in the journal of t'he court. No time is stated when it should be done, but it is ordered to be done and it is to be done according to the truth of the case. This entry should have been made, and should have been made on the 29th day of June; that was the truth of the case. The defendants had a right, immediately upon the overruling of the motion, if they wished to take the case to a higher court, to take steps and file a bill of exceptions. They had forty days in which to do that; and if they desired the journal entry to be made so that the record could go up with the journals all complete, they could have called the attention of the court to it and had the entry made. "We know of no reason, and may I say that we see no right for the court of common pleas to make an entry in September overruling the motion for a new trial. It is possible that after the term he might, upon a proper statement of fact's, set aside the former motion and re-bear the case; but to simply set aside and re-enter it, I think would be beyond the proper exercise of his power. The party in whose favor the motion was overruled has his rights in the matter, and he had a right to have the entry made as of the ¿date at which the overruling was made, and his right is fixed as that of time. The Statute, Section 5301, passed October 22d, 1902, provides that the party excepting must reduce his exceptions to writing and file the same within forty days after the overruling of the motion for a new trial. He had his forty days within which to do that and it was his duty to take steps to do that within that time if he desired to take the case further.

With this statement of the facts and of the law of the ease, as we understand it, we think this application for a mandamus should be overruled.. The party has had his day in which to file his bill of exceptions and that time has passed. He has not been misled by any person or by any party. He was present in open court and heard the ruling of the court', and he was bound to act upon that ruling if he desired to take exceptions to the overruling and the 'action of the court, or have a hearing upon that in another court. It is argued that a nunc pro tunc order should not' be allowed as of the 29th day of June as it would work a hardship and an injury to the other party. It is true that that rule is kid down in regard to nunc pro tunc orders, but at the same time the power to enter such order's is well and definitely fixed and is exercised often many years after the time that the action was taken by the court. There was a hard-fought case from this county where there had been a motion overruled' and failure to enter a judgment, and an application was made more than seven years after, and the entry was made and was sustained by the courts. The rule, so far as this case is concerned, has ho application whatever, because the parties were present and had full knowledge of what' was done by the court and were bound to act upon the knowledge that they possessed at that time and defend their rights.

Joseph B. W. Cooper -and Franlc G. Crane, for relator.

Doyle & Lewis, for defendant.

For these reasons the application for a writ of mandamus will bo denied and refused at the costs of the relator.