author: GIFFEN, J, orally.

text:
    JUSTICE OF THE PEACE — CONSTITUTIONAL LAW.
    [Hamilton (1st) Circuit Court.]
    Swing, Giffen and Jelke, JJ.
    Rogers v. Prushansky.
    1. Jurisdiction or Justices Coextensive with Counties.
    Justices of the peace have jurisdiction under Secs. 583 and 6496, Rev. Stat. co" extensive with their respective counties to issue orders of attachment and to accompany said orders with summons.
    2. Court Declines to Pass Upon Constitutionality oe 93 O. U. 146.
    The court declined to pass upon the constitutionality of act 93 O. D. 146, amending Secs. 582, 583 and 584, Rev. Stat., giving justices of the peace jurisdiction in attachment co-extensive with the county, Cuyahoga and Franklin counties excepted, wherein jurisdiction is limited to the township, inasmuch as if the act should be held unconstitutional the law as it was prior to the amendment would be revived and justices of the peace would have the same jurisdiction in Hamilton county as they now have.
    3. Appeal Under Sec. 6494, Rev. Stat. — Pleading.
    The court of common pleas, upon appeal from the overruling of a motion to discharge an attachment before a justice of the peace under Sec. 6494, Rev. Stat., 93 O. h. 141, has no authority to entertain tile filing of a new motion or to consider anything but the motion filed before the justice ; and, having done so, to certify the case back to him. Under this rule, if the motion filed before the justice did not waive objection to the jurisdiction, a new motion filed in the common pleas court and embracing a ground other than objection to jurisdiction, will not have that effect.
    Heard ON Error.

      W. E. Beall, for plaintiff in error,
    cited:
    1. Jurisdiction of justices of the peace in attachment. Kelly v. Flanagan, 11 Circ. Dec. Ill (20 R. 891); Collins v. Bingham Bros., 12 Circ. Dec. 825 (22 R. 588 ); Court Index, September. 26, 1901.
    C. T. Dumont, for defendant in error,
    cited :
    1. Motion. Smith v. Hoover, 89 Ohio St. 249.
    2. Jurisdiction of justices of the peace in attachment. Watkins v. Schlecter, 9 Dec. 590 (7 N. P. 42).
   GIFFEN, J, orally.

This was a suit in attachment before a justice of the peace, and upon the overruling of the motion to discharge the attachment it was appealed to the court of common pleas under amended Section 6494, Rev. Stat., 93 O. D. 141, which permits an appeal to be made upon the overruling of a motion to discharge an attachment.

Upon the hearing of the case in the court of common pleas the motion was sustainéd and attachment discharged ; the question is raised in this case whether the court did not err in discharging the attachment on the ground that the court had no jurisdiction over the person of the defendant, he living in another township than the one for which the justice was elected.

The statute gave jurisdiction to the justice of the peace coextensive with the county prior to 1898; then Secs. 582, 583 and 584, Rev. Stat., were amended so that Franklin and Cuyahoga counties were excepted, leaving the jurisdiction coextensive with the counties in all counties other than those two. The claim, therefore, is made that these amended sections are unconstitutional, and that therefore the court had jurisdiction of the person of this defendant although he resided in a township other than that in which the justice was elected. It was suggested during the argument that this defendant had entered his appearance, and therefore waived the objection, because our Supreme Court has a number of times recently held that where a motion addresses itself to any other relief than that of inquiry as to the jurisdiction of the person of the defendant, it is an entrance of appearance for all purposes. But counsel have since cited us to Smith v. Hoover, 39 Ohio St. 249, in which the motion was almost identical with this one, and asks for a dismissal of the case upon the ground that the court had no jurisdiction of the person, and that the said justice of the peace has no jurisdiction of the property of said defendant.

Now, in this case, the original motion filed in the justice’s court did not have this second ground, but after it got into the common pleas court a mw motion was filed, which included the second ground that the court had no jurisdiction of the property; so that the motion filed in the common pleas court is almost identical with the one decided by the Supreme Court. Smith v. Hoover, supra.

But clearly the court in this case had no authority to entertain the filing of a new motion, or consider anything but the motion filed before the justice of the peace, because at least this court has heretofore held, in another case, that this amended Sec. 6494, Rev. Stat., was intended not to give jurisdiction by appeal to the court of common pleas of the entire case, but simply for the purpose of determining the motion for the discharge of the attachment, and having done so, to certify the case back to the justice of the peace.

At any rate, the motion, as made before the justice of the peace, was not an entering of appearance, relying upon this authority in Smith v. Hoover, supra.

The question then is whether the amendment of Secs. 582, 588 and 584, Rev. Stat. excepting Cuyahoga and Franklin counties renders the law unconstitutional. The question came up in Rucas county before the circuit court there, in Collins v. Bingham Bros., 12 Circ. Dec. 825 (22 R. 533), and they declined to pass upon the constitutionally for the reason that if it be declared unconstitutional there would be no law applying to attachments, and that if they did declare it unconstitutional that they ought also to declare unconstitutional the repealing act, and that being so, the original law which gave the justice of the peace jurisdiction coextensive with the county would be restored. And we are therefore inclined to adopt the course pursued by the circuit court in Lucas county, and decline to pass upon the question as to whether or not this is unconstitutional, because under this law, or under the law as it • stood before that, the justice of the peace in Hamilton county would have jurisdiction coextensive with the county.

The syllabus in this case is that—

“ Where an act repealing another act and providing a substitute therefor is found invalid, the repealing clause must also be found invalid, unless it shall appear that the legislature would have passed the repealing clause in any event. The legislature by the act of April 19, 1898, 93 O. L. 146, amending Sec. 584, Rev. Stat., relating to attachments before justices by limiting the jurisdiction of justices in certain counties named without otherwise changing the law, did not intend to destoy the law upon such subject, consequently, the repealing clause of the act in question would be invalid if the law were held unconstitutional.”

We think, therefore, that the justice pf the peace had jurisdiction of the person and subject matter, and that the court erred in discharging the attachment, and the judgment will be reversed,


source: Caselaw Access Project

author: SULLIVAN, J.

license: Public Domain

text:
    COPORATIONS — PROMOTERS—FRAUD.
    [Darke (2nd) Circuit Court,
    November 18, 1899.]
    Wilson, Sullivan and Summers, JJ.
    Second National Bank v. Greenville Screw-Point Steel Fence Post Co., et al.
    1. Organization or and Sale or Property to Corporation.
    A person as owner, part owner or agent, coupled with an interest in ihe proceeds, of a patent right or other property, may legally form a corporation or other association and sell the patent right or other property to it for a price agreed upon between them, regardless of the profits to be made thereby, provided no false representations are made.
    2. Promoter Deeined — Duty.
    A promoter is one who organizes a corporation and as such occupies a fiduciary relation thereto. He is bound to fully disclose his relations to the property which is the subject of the enterprise. Any suppression, concealment or misrepresentation of material facts connected therewith is fraud upon the corporation.
    3. Liability or Promoter ror Fraud.
    Where a promoter, having made a secret arrangement with the owner of a patent right for the sale of the same for $3,000,'conceals such fact, and induces other persons to join with him in forming a corporation for its purchase for $15,000, claiming that to be the lowest figure for which the patent right can be purchased, and investing them, by his conduct, with the belief that he is interested in the enterprise with no other expectation of profit to himself than such as shall accrue to all stockholders therein, while in fact he is making a large profit by the sale, he is liable as a trustee for the profits thus fraudulently obtained.
    4. Fraud Must be Proved — Suspicion not Surricient.
    Fraud must be proved by clear and conclusive evidence. Hence the fact, that a stockholder is active in inducing persons to take stock in a corporation to purchase and manufacture a patented article, as above stated, together with other acts from which a suspicion of his participation in the fraud practiced would seem to be justified, is not sufficient to hold him jointly liable with the promoter, in the absence of evidence showing his knowledge of the fraudulent purchase.
    5. Remedy or Persons Fraudulently Induced to Become Stockholders.
    Persons fraudulently induced to become stockholders in a corporation through the misrepresentation of the promoter thereof, may rescind the contract of subscription to stock and recover their subscriptions, offer t'o restore the stock and sue in equity for a rescission of the contract and recover the money paid by them, or join in an equitable action, for an accounting, to charge the promoter as a trustee of the profits fraudulently retained by him.
    Anderson & Bowman, Allread & Teegarden and Williams & Krick-enberger, for defendant in error.
    Elliot & Chenowith and John C. Clark, for plaintiff in error,
    sited:
    1. We submit that a party must appeal from the whole and not a part of the case in which he is interested; that he cannot appeal from an unfavorable part and leave the favorable to stand. McGowan v. McGowan Pump. Co. 8 Re. 218 (6 Bull. 338) ; Wright v. Telegraph Co., 2 Circ. Dec. 604 (4 R. 375,376), citing Branch v. Dick, 14 Ohio St. 551, 557.
    2. In the event the above point is not well taken, we submit that if the said appeal brought up any part of the case, it brought up all of it and all the parties, nolens volens. Ewers v. Rutledge, 4 Ohio St. 210, 214; Emerick v. Armstrong, 1 Ohio, 513 5Í6; Glass v. Great-house, 20 Ohio, 503, oil.
    3. Promoter’s liability. 2 Cook Corp., Sec. 651; Woodbury Heights Eand Co. v. Loudenslager, (N. J. Ch.) 85 Atl. Rep. 436; St. Louis, F. S. & W. R. Co. v.Tiernan, 15 Pac. Rep. 544 [37 Kas. 606]; Giasier v. Ross, L. R-, 42 Ch. Div. 436; Cook Corp., n. 2, p. 1276; Lyd-ney W. & I. O. Co. v. Bird, L. R., 33 Ch. Div. 85; 34 Week. Rep. 749; Clark Corp., Sec. 48, p. 117; Getty v. Develin, 54 N. Y. 403, redecided and strengthened in 70 N. Y. 504; Franey v. Warner, 71 N., W. Rep. 81 [96 Wis. 222, 235] ; Pittsburgh Mining Co. v. Spooner, 74 Wis. 307 [42 N. W. Rep. 259; 17 Am. St. Rep. 149]; Simons v. Mining Co., 61 Pa. St. 202; Yale Gas Stove Co. v. Wilcox, 29 Atl. Rep. 303 [ 64 Conn. 101; 25 L- R. A. 90; 42 Am. St. Rep. 159] Exterv. Sawyer, 47 S. W. Rep. 951 [146 Mo. 302], 2 Syl.; Cook Corp., Sec. 651; Burbank v. Dennis, 35 Pac. Rep. 444 [101 Cal. 90]; Rice’s Appeal, 79 Pa. St. 168 ; Brewster v. Hatch, 25 N. E. Rep. 505 [ 122 N. Y. 349 ; 19 Am. St. Rep. 498 ] ; Petrie v. Torrent, 49 N. W. Rep. 1076 [ 88 Mich. 43 ]; Pomeroy Eq. Juris., Secs. 910, 912; Hill v. Lane, L. R., H Eq. 215; Chandler v. Bacon, 30 Fed. Rep. 538; Emma Silver Mining Co. v. Grant, L. R., 11 Ch. Div. 918; Beck v. Kantoriwiez, 3 Kay & J. 230; Emory v. Parrott, 107 Mass. 95; In re Fitzroy v. Bessemer Steel Co., 50 L. P. N. S. 144; 32 Week. Rep. 475; Whaley Bridge Calico Printing Co. v. Greene, L. R-, Q. B. Div. 10y; 28 Week. Rep. 35, 351; Ex.-Mission &W. Co. v. Flash, 32 Pac. Rep. 600 [97 Cal. 610 ]; Greenville Gas Co. v. Reis, 54 Ohio St. 549, 558 [44 N. E. Rep. 271]; Merchants Bank v. Rudolph, 5 Neb. 527; Brown v. Finn, 34 Fed. Rep. 124; Wood v. Carpenter, 101 U. S. 135, 141, 151; Kennedy v. Greene, 3 Myle & K., 722; Parker v. Conner, 93 N. Y. 118 [45 Am. Rep. 178]; Baker v. Bliss, 39. N. Y. 70; Pringle v. Philips, 5 Sam. S. C., 157; Danforth v. Dart, 4 Duer, 101, Syl.; Parker v. Conner, 93 N. Y. 119, 124 [ 45 Am. Rep. 178]; Hooser v. Hunt, 26 N. W. Rep. 442 [65 Wis. 71]; Van Lue v. Greene, 21 N. J. Eq., 364; Busterud v. Farrington, 31 N. W. Rep. 860 [ 36 Minn. 320, 321 ]; Litchfield v. Hutchinson, 117 Mass. 195, 198; Hornblower v. Crandall, 78 Mo. 581, 582 ; Tantum v. Green, 21 N. J. Eq. 364 ; New Sombrero Phosphate Co. v. Erlanger, L. R. Ch. Div., 73; 25 Week. Rep. 426; Getty v. Devlin, 51 N. Y. 403, reaffirmed 70 N. Y. 504; Farwell v. Telegraph Co., 44 N. E. Rep.. 891 [161 Ill., 522, 523, 597 ].
    4. Notes, subject to defense of fraudulent procurement. Ramsey y. Manufacturing Co., 160 Mo. 313; Savage v. Bartlett, 28 Atl. Rep. 414 [78 Md. 5.61]; Fear v. Bartlett, 32 Atl. Rep. 322 [81 Md. 435; 33 L. R. A. 721 ; Vreeland v. Stone Co., 29 N. J. Eq. 188; Rockford, R. I. & St. E. Ry. v. Shiinick, 65 Ill. 323; Bradley v. Poole, 98 Mass. 169 [ 93 Am. Dec. 144 ].
    5. Recission of part of a fraudulent action. Potter v. Taggart, 11 N. W. Rep. 678 [54 Wis. 395]; Churchill v. Price, 44 Wis. 540.
    ; 6. Depositions. King v. Wicks, 20 Ohio, 87; Runyan v. Price; 15 Ohio St. 1 [86 Am. Dec. 495].
    Appeal.
   SULLIVAN, J.

The defendant, The Greenville Screw-Point Steel Fence Post Company, a corporation, was incorporated under the laws of Ohio, and organized and entered upon the business for which it was formed in June, 1895. For reasons not necessary to be stated here, the corporation in the following year, was, upon the petition of a part of the stockholders, dissolved, its affairs wound up and its debts paid in full.

The evidence set forth in the transcript of the testimony shows that W. K. Clyne, of Miami county, Ohio, on April 18, 1893, obtained letters patent for an improvement in fence posts, which consisted chiefly of a screw-point attached to the end of the post inserted in the ground.

That on November 5.1894, he entered into a written contract with the defendant, H. D. Tilman, in which it was agreed that Tilman was to sell territory and posts, with the improvement covered by said patent, for Clyne, and to return to Clyne one-half of the proceeds of such sales. That sometime in March, 1895, Tilman, (whether in conjunction with Clyne, or not, does not appear affirmatively from the evidence) conceived the notion of associating a number of parties together as partners, for the purpose of buying this patent, to sell territory and also manufacture the post for sale. Thereupon an instrument was drawn up, which recited that the subscribers thereto were to become “ copartners ” under the firm name of “ The Clyne Screw-Point Post Company,” for the purpose of carying on together the business of manufacturing and selling posts, and territory, with the understanding that the territory was to cost $15,000.”

The contract provided that each party was to pay the amount set opposite his name signed upon this instrument. That the number of shares should be fifteen, and of $1,000 each. This agreement was not to be binding upon any subscriber unless all tbe shares were'subscribed. Before the number of shares had been subscribed, those who hád signed were notified to appear at the court house in Greenville on Juné' 8, 1895, for the purpose of organizing or launching the partnership. By whom such notice was given does not satisfactorily appear, but it'is immaterial by whom, in view of what occurred between the parties at that meeting.

After the parties came together, they concluded to abandon the plan of a partnership and form a corporation; thereupon the necessary steps were taken to obtain a charter, and all who had theretofore subscribed to the instrument proposing a partnership subscribed respectively the same amount for the capital stock of the corporation. The several subscribers gave notes for their stock, instead of cash, payable in one and two years. These notes up to the sum of $11,250 were made payable to Clyne, $8,750 of the stock being reserved by Clyne.

In a settlement between Tilman and Clyne, this stock subsequently became the stock of Tilman. Upon what terms it became the property of Tilman there is a conffict in the evidence of Clyne and Tilman upon this point. However, it is wholly immaterial how it became Tilman’s under tbe present status of the case. Whatever was done at this meeting by Tilman appears to have been done with the approval at'least of Clyne.

The plaintiff, after averring its corporate capacity, sets forth in its petition that the defendant, the Greenville.Screw-Point Steel'Fence Post Company, on the 15th of May. 1895, was a corporation duly incorporated under the laws of Ohio and had an authorized capital stock of $25,000, divided into two hundred and fifty shares of one hundred dollars each, of which one hundred and fifty shares only had been subscribed, paid up and issued by said corporation, and there were subscribed, paid up and issued, prior to the incurring by said defendant company the indebtedness to plaintiff described in its petition, the name of each subscriber, and the number of shares subscribed for, by each, is set forth.

It then avers that on the 15th of May, 1896, the said Fence Post Company, being wholly insolvent, an action was commenced in Darke county common pleas against the same by certain of the stockholders to dissolve said corporation and to appoint a receiver to take charge of its assets and effects.

And' that such proceedings were thereafter had in said company that said corporation on the 15th of September, 1896, was dissolved, a receiver appointed who -converted all the assets of said company into money, paid costs of the proceedings and applied the balance in payment' upon the indebtedness of said company, and after'applying-said balancé there still remained due and unpaid an indebtedness against said com-any of $1,650, of which sum there was due and owing plaintiff abalance of $941.44, for money loaned to said company, and for which said company had executed its notes to plaintiff.

The plaintiff then set forth, so far as known, the names of all other creditors of said company.

Plaintiff averred that by reason of the premises the defendant stockholders named became liable to plaintiff and the other creditors of said company to an amount, equal in amount to the stock owned by each.

Wherefore it prays that the creditors of said company and the amount due each might be ascertained by such method as the court should direct; determine the amount in which each of the stockholders is liable to plaintiff and other creditors of the company, and that the court order the payment of such amount by each stockholder for the purpose of paying said claims, and all other relief as in equity the circumstances of the case may require.

Now the cross-petition filed by the receiver in this case, and upon the averments of which arise the issues to be determined, after setting forth that the corporation had been dissolved, its affairs wound up and all its debts paid, charges that the defendants, Tilman, Armstrong, Hal-derman,.Van Tue and Fidson, combined and confederated together for the purpose of cheating and defrauding all other parties who had become, or might become, stockholders in said corporation. That the fraud which they together had perpetrated upon their co-stockholders and members of said company consisted in having falsely represented to their associates that the improvement they were purchasing was a valuable invention, and that it could not be purchased from Clyne for less than $15,000, and that they had procured said Clyne to sell the same to the company for that sum, and falsely represented that Clyne had agreed if they could raise $10,000 and that he would remain interested with them to the extent of $5,000 and that thereafter, he, Clyne, would dispose of this amount to such persons as the other stockholders might select. That each of the confederates named subscribed $1,000 to the capital stock of the corporation. That these subscriptions by such confederates were a mere pretense upon their part; that they neither paid cash nor gave their notes as the others had done. There are other charges of fraud and fraudulent representations not necessary to mention here, as the bill does not disclose that any proof was offered to sustain them. Believing such representations, and upon the strength of them, the other parties in good faith, become stockholders in the corporation, and complied with all the obligations upon their part respecting the same.

The court below found from the evidence, that neither of the five parties charged with the fraud had paid their subscription and entered up a judgment against them respectively, for the amount of the same, with interest on the one-half thereof from June 8, 1896, and the remaining one-half from June 8’, 1897, and found from the evidence that the delendants, Tilman and Halderman, had secured to themselves a secret profit, in the sum of $6,050 by representing to the company that the patent could not be bought for less than $15,000, when in fact, out of the amount raised from the notes given, they paid Clyne $3,000 and no more. That whilst these confederates were representing to the other parties, who became stockholders, that said patent could not be purchased for less than $15,000, they had in fact an agreement with Clyne to purchase it for $3,000 ; that upon such representations they secured to themselves a profit of $6,050 that belonged to the corporation, and therefore a judgment for that amount was entered up against Tilman and Halderman, in favor of the receiver, together with interest on the one-half thereof from June 8,1896, and on the remaining one-half from June 8, 1897. From this judgment the defendant, Halderman, took an appeal to this court.

The case was heard upon the pleadings, transcript ot the testimony taken in the court below, and some additional testimony taken at the trial here.

The first question to be determined from the evidence is the relation that the defendants, Tilman and Halderman, sustained to the com. pany or to their associates, each of them being a member of the corporation. If Tilman had been the owner of the patent, then he would have been entitled to any profit there might have been upon the sale of it to the company, although a member of the company. If he purchased the patent in his own name and then sold it to the corporation, although it was organized by him, he would not be a trustee of the corporation.

See Milwaukee Cold Storage Co. v. Dexter, 74 N. W. Rep. 976 [99 Wis. 214], fifth syllabus:

“Any man or number of men who are the owners of any kind of property, real or personal, may form a partnership or association with others, and sell that property to the association at any price which may be agreed upon between them, no matter what it may have originally cost, provided there be no fraudulent representations made by their [the] vendors to their associates. They are not bound to disclose the profit they may realize by the transaction.”

Densmore Oil Co. v. Densmore, 64 Pa. St. 49.

See Milwaukee Cold Storage Co. v. Dexter, 74 N. W. Rep. 976 [99 Wis. 214, 229].

If Tilman was simply the agent of Clyne to sell the Patent and Tilman’s compensation was simply a share of the proceeds of such sale, then Tilman could not be held for any profits he may have made, but would be liable only for any damages accruing to the corporation from any false representations made by him, not authorized by Clyne.

However, it is not necessary in the present status of the case to determine whether Tilman acted simply as the agent of Clyne or whether Clyne and he were acting together in the organization of the corporation and the sale of the patent to it, as the evidence, we think, clearly shows, that Tilman’s representation to those he was seeking to induce to become stockholders was that the patent was held by Clyne at $515,000, and that he could not purchase it for the company from Clyne at a less figure, holding out to such parties all the time that the corporation, of which he was a stockholder and which he was active in promoting, must pay that figure to Clyne before they could get the patent, concealing all the while from his associates the arrangement he had made with Clyne, as stated in his own testimony. His entire conduct was such as to invest his associates with an honest belief that the entire sum was to go to Clyne, and that the reward, or rather remuneration he expected for his efforts in accomplishing the organization of the company and getting it to operating, was that which would come to him on his stock, just like any other stockholder. We think his own conduct contradicts the claim he now makes, that he stated to all the parties, except two, that he was simply endeavoring to sell the patent as Clyne’s agent.

We think the evidence shows that he was inspired solely to become a member of the company and thereby induce his associates to believe that he was interested in the enterprise-, with no other expectation of profit to himself except such as would accrue in common to all, for no other purpose except to enable him to make a profit upon a sale of the patent to the company.

We have very high authority defining who and what are promoters. In Yale Gas Stove Co. v. Wilcox, 29 Atl. Rep. 303, 307 [64 Conn. 101; 25 L. R. A. 90; 42 Am. St. Rep. 159], reading from the opinion of the court, in which the court says “ who and what are promoters, so called, of corporations, and what their relations [are] to the corporations which they help to form, has been more frequently judicially considered and determined by the English courts than by those of this country. A ‘ promoter ’ has been defined to be a person who organizes a corporation. It is said to be, not a legal, but a business term-, usually summing up in a single word a number of business operations familiar to the commercial world, by which a company is generally brought into existence. * * * That such persons occupy a fiduciary relation toward the company or corporation whose organization they seek to promote, is well settled by the decisions of both countries.”

The original instrument, drawn with a view to the formation of a partnership, was inspired by him, and he was active throughout and therefore a promoter. In his relation to the company, it was his duty to act for the best interests of it like any other stockholder, and therefore he could not withhold any secret profit made by him.

Tilman’s first object was the formation of some kind of a company with a view to the sale of the patent. The kind of company that could best do this, and thus accomplish the end he had in view, may not have been in the beginning very clear to his mind, but he ultimately succeeded in forming one and reached the result he was after, i. e.¡ sale of the patent. He became a member himself, and certainly concealed from every one that the effort he was making was for an expected profit from such sale. He was then a promoter, and sustained a fiduciary relation to the company, and as the court say in the case last above cited, page 122 of the opinion, “ he must make full disclosure to the company of his relations to the property, that is the subject of his deal. Suppression, concealment, or misrepresentation of material facts is fraud; upon proof of which rescission of contract or repayment of secret profits will be compelled.”

Though he may have been acting as agent of Clyne, yet the relation he sustained to the company was that of promoter and as such it was his duty to have disclosed the true arrangement he had with Clyne. Yale Gas Stove Co. v. Wilcox, 29 Atl. Rep. 803 [64 Conn. 101; 25 L. R. A. 90; 42 Am. St. Rep. 159]; Exter v. Sawyer, 47 S. W. Rep. 951 [146 Mo. 302], 2d Syllabus; Franey v. Warner, 71 N. W. Rep. 81 [96 Wis. 222],

Upon the discovery of the wrong perpetrated by Tilman upon his associates, three remedies were open to them to redress such wrong: (1) They could, by restoring Tilman to his original situation, have rescinded the contract and recovered their money; (2) or they might have offered to restore, and by keeping such offer good, sued in equity for a rescission of the contract and a recovery of their money ; (3) or, as in this case, without restoring or offering to restore, all stockholders who were in a similar situation could join in a suit in equity to charge the guilty parties as trustees of the profits fraudulently retained by each, and an accounting.

This being an action to require an accounting for the secret profits, made by Tilman between the amount actually paid Clyne, and that which was obtained from the company, what part, if any, does the evidence show was received by Halderman? The bill does not show by any direct or positive evidence that he received any part of it, neither is it shown by any of the circumstances. At best the evidence merely creates a suspicion that Halderman participated in such profit.

There are many things that were done by Halderman that would seem to justify such suspicion. First, the active part he took in securing others to go into the enterprise, and his knowledge that some were securing advantage over others. ^Second, his association with Tilman. And, lastly, his conduct and contradictory statements made with reference to the notes he gave after trouble arose. However Tilman swears that Halderman never received a dollar of the profit, and not only that* but he swears that Halderman never knew but what it was'true that $15,000 was to be paid to Clyne. Halderman swears to the same. True it might be claimed that they were not entitled to credit, and that these sworn statements in this respect should not be received. But they are corroborated by the fact that' none of the notes given were made payable to Halderman ; not a particle of evidence that any were endorsed over to him, or that he ever presented any of them ior payment. On the other hand, the evidence shows that all that were sold were negotiated by Tilman and Clyne, and the proceeds of such sales were divided between Tilman and Clyne, Tilman receiving the smaller amount when the division was made.

Yet it is urged that with all this, Tilman could have divided the • money he received with Halderman. Fraud must be shown by clear and conclusive evidence, and if the court should so find, it would have to do so from suspicion alone, and not from the evidence. It is, however, claimed that though Halderman may not have received any such profit, yet he, being a confederate with Tilman, and aiding Tilman in the perpetration of the wrong, that therefore he is equally liable with Tilman. This would be true if the evidence showed that Halderman knew that the representations made by Tilman to secure such profit were false and fraudulent. There is no evidence showing that he did know. He never saw Clyne; never knew him ; never had any correspondence with him. He and Tilman both swear that Halderman never knew anything of the arrangement between Tilman and Clyne. Halder-man evidently believed that the improvement was a good thing, and there is no evidence but what the improvement is fully worth every cent paid for it. There is no such clear and conclusive evidence as the law requires to justify the conclusion that he did know. If he did not, then he could not be held liable for any part of the profit received by Tilman.

What Halderman should have done when the wrong of Tilrnan was discovered, was to have paid the amount of his subscription to the treasurer of the company, instead of to Tilrnan ; we think the evidence shows he paid it afterward.

Judgment therefore for the amount of his subscription will be entered up against him in favor of the receiver, with six per cent, interest on the one-half from June 8, 1896, and on the remaining one-half from June 8, 1897, and to be paid within ten days from the date of this decree, or execution will issue therefor; and judgment against Tilrnan for $6,050 with interest at six per cent, on the one-half thereof from June 8,1896, and on the remaining one-half from June 8, 1897, less the amount of notes returned by him with interest thereon, as provided in said notes. Several of said notes are endorsed by Clyne and we presume they are good. In any event Tilrnan should not be charged with anything not received by him. Judgment against Tilrnan to be paid in ten days from date of decree, or execution to issue therefor.

The costs of sppeal and those of this court will be taxed up to Halderman and Tilrnan in the proportion as the judgment against them bear to each other. This case will be remanded to the court of common pleas to carry these judgments into execution. In view of the fact that there will be other services to be performed by counsel for the receiver in that court that can not now be estimated, the amount of fees for such counsel may be fixed by that court.

Entry may be drawn setting forth the above finding and judgments.


author: PARKER, J.

text:
    SCHOOLS.
    [Lucas (6th) Circuit Court,
    October 19, 1901.]
    Haynes, Parker and Hull, JJ.
    State ex rel. Rohr v. Adam Schauss et al.
    1. Manual Training, not Public Schools.
    A manual training and polytechnic school, founded upon private donation, accepted under Secs. 4095 to 4104, Rev. Stat., relating to trust funds for such purposes, is not a public school in the sense that common schools, established and supported by the general common school system, are public schools.
    2. Rule as to Acceptance oe Trust Funds.
    Under Sec. 4096, Rev. Stat., relating to trust funds for endowment, maintenance or aid of universities, colleges or institutions of learning, the directors are at liberty to reject a proposed donation if in their opinion the terms are unlawful or for any reason unacceptable, but if donations are accepted, they must be accepted upon terms prescribed.

      3. Authority to Regulate Such Schools.
    Tlie authority to regulate educational institutions founded upon endowments, prescribe the course of study and fix terms and conditions upon which students may enter, is placed in the directors and is found in Sec. 4099, Rev. Stat. The directors are authorized to delegate part of their authority to a faculty, hut not to any independent board of education.
    4. Authority oe Directors to Make Rules.
    It is within the discretion of the board of directors to make such rules and regulations as they may deem advisable so long as they do not interfere with some positive right (for example, that of free tuition) existing in favor of the public. And courts are not authorized to interfere with this discretion because it may seem that the policy adopted by the directors is unwise.
    6. Rule Valid Though Excluding Certain Pupils.
    A rule adopted by the directors of such school “ that all regular students entering the ninth grade of the public schools, who shall elect manual training, must pursue the correlative course as prescribed by this board under the instruction of the teachers of the polytechnic school,” is not unreasonable or unjust, or a denial of the clear right of pupils, though it discriminates against or has the effect of excluding members of the high school who belong to the ninth grade for the first half of the freshman year, the course of study being such as to make it impracticable for such students.
    Appeal.
    W. H. A. Read, for relator.
    C. K. Friedman, for defendants.
   PARKER, J.

This is a proceeding in mandamus brought into this court by appeal. The relator avers in his petition that the Toledo university is supported by general taxation levied by the board of education upon all the real- and personal property in the city of Toledo, and that the persons named as defendants occupy the positions of directors and superintendent of the Toledo university, as indicated by their titles in the caption ; that the relator is a resident of the city and a taxpayer of the city of Toledo, and father and natural guardian of one William F. Rohr, who is a minor and citizen of said city of Toledo; that William F. Rohr is a member of the freshman class of the Toledo high school in the city of Toledo, and as such is pursuing the studies regularly taught in said school; that the Toledo university conducts a manual training school in a building situated upon a certain tract of land described, which, as appears from the averments as well as the evidence, is a part of the lot on which the high school building is situated. The building occupied by the university is really an extension of the high school building. The petition also sets forth that the university occupies this property in question, in pursuance of a certain contract which is in part a lease, that was entered into between the directors of the university and the board of education of the city district, on April 4,1885. . The petition sets forth the various terms of that agreement which I -need, not notice, other than the provisions touching the right oí the relator, and relied upon by him, to-wit: ■

“It is also, agreed between the parties hereto that said party of the second part shall erect upon the premises herein described a suitable building for manual instruction, to be approved by said party of the first part, and shall equip the same with suitable tools and machinery for such instruction, and shall furnish and maintain competent instructors for such manual training■ and further, that no charge for instruction in such manual training school shall be made for the children, wards or apprentices, of any citizen of said city ; and such manual training shall be adapted to and at all times accessible to the pupils of the Toledo high school.
“It is expressly understood and agreed that the purpose of this grant is to secure to the pupils of the Toledo high school a wider and more extended range of instruction than that now furnished, and that the instruction furnished by the said Toledo university shall at all times be such as to be either auxiliary or supplemental to the studies pursued in the Toledo high school.”

The relator avers in his petition that by a rule and practice of the directors and superintendent of the university, his said son, who became a member of the freshman class of the Toledo high school, is excluded from taking such course in the university as relator believes he has a right to take, and from pursuing such studies there as relator avers he has a right and privilege to pursue ; that relator’s son is prohibited from pursuing his regular course in the Toledo high school, and at the same time pursuing the course that he desires to pursue in the Toledo university. And he says that this rule is a discrimination and prohibition against members of said freshman class; that the rule does not apply to and is not in force as to any other pupils of the university. He says that it “ is unreasonable and against public policy, and a violation of the legal rights of each member of said class, especially of said William F. Rohr and of the relator as the parent and natural guardian of said William F. Rohr, and not within the discretion of said defendants.*»

“ That the said defendants, by and through said Virgil G. Curtis, superintendent of said Toledo university, refuses to receive said William F. Rohr in the said school or allow him to enter the same, or to receive any instruction therein, unless he shall abandon and forego receiving any instruction in the Toledo high school, and will sever his connection therefrom, notwithstanding that members of other classes of said Toledo high school are admitted and allowed to receive instruction therein.”

The rule to which these objections are made was adopted by the directors of the university on September 5, 1901, and is set forth in haec verba in the answer, as follows:

“ Resolved, that all regular students entering the ninth grade of the public schools, who shall elect manual training, must pursue the correlative course as prescribed by this board, under the instruction of the teachers of the polytechnic school.”

It will be seen that the resolution does not, by its terms, exclude those belonging to the freshmen class in the high school. And the testimony shows that this rule as adhered to, is not extended; that is to say, that there is no other rule in force that might operate to exclude such pupils of the high school. This rule does not say that such students shall be prohibited from entering the manual training school and taking the correlative course. It says that if regular students of the ninth grade of the public schools shall elect and shall take manual training, they shall take the correlative course.

The testimony shows, however, that the enforcement of this rule has the effect of excluding such members of the high school as belong to the ninth grade for the first half of the freshman year,- since by ths curriculum adopted by the directors of the university, the correlative course of study that is to be taken in connection with the manual training, and the hours prescribed for study and recitations are such as make it impracticable for one to pursue that course and those studies at the same time that he pursues the regular course in the high school. It is in that sense, therefore, that certain members of the freshman class of the high school are excluded from entering the university and taking manual training at the same time.

Now, what the relator desires is, that his son shall be permitted to enter the university during the first half of his freshman year in the high school and take a certain course there, and not take the full correlative course prescribed in connection with the manual training: That he shall be permitted to take what is denominated “free hand and mechanical drawing;” and he says -that his son is fitted for that by education and by the development of his mind, and that his business occupation outside of school makes it desirable that he should have this instruction. He claims, therefore, the right to have his son pursue his studies in the freshman class of the high school, and to pursue such studies as he may elect in the university, i. <?., such as will not interfere with the pursuit of his course in the high school. And the question for decision is, whether the court, at the instance of the relator, may interfere with this rule and regulation of the board of directors and superintendent of the university, and require of them that they shall receive this young man upon the terms he desires to have applied to his case.

This is contended for on behalf of the relator on two grounds First, upon the ground that this right is secured to pupils of the high school by this agreement between the board of education of the city and the directors of the university, which was entered into on April 4, 1885. And he claims the right as one of the beneficiaries, so to speak, one of the cestuis que trustent under that agreement, to enforce it for his own benefit.

It is not clear to us that the effect of the provision in that agreement that the instruction furnished by the university shall at all times be such as tobe either auxiliary or supplementary to the studies pursued in the Toledo high school,” and shall be free and open to such students, is to give to every member of the high school, under any and all circumstances, a right to elect such course as he shall choose to pursue in the university. We are not clear, in other words, that such a rule as has been adopted here would be obnoxious to the terms of this agreement. But assuming that it is so, assuming that the agreement was originally euforcible at the instance and for the benefit of the relator, the question arises whether that agreement as to these stipulations is still in full force. It is clear that the right of the relator is dependent upon the agreement, and that if the agreement is not in force, his contention upon that ground must fail. It is- equally clear that the authorities that made the agreement may unmake it.

It appears by the evidence that the nucleus, perhaps the substantial foundation, of the fund for this university arose from donations of certain persons formerly citizens of this city, Jesup W. Scott and his heirs, and Mr. Raymond, who gave substantial sums for the establishment of this university. What the terms and conditions were upon which these donations were made, we are not advised. Counsel on either side claim nothing on that score. We simply have it that such donations were made. Nothing appears to have been done in pursuance of these donations until a certain act was passed in 1870, for the establishment of the University of Cincinnati, the act as amended being now included in Sees. 4095 to 4104, Rev. Stat., and the passage of an act in 1878, which has since been amended (Sec. 4105, Rev. Stat.), making this act as to the Cincinnati university applicable to the city of Toledo; nor until the common council, in pursuance of that act of the legislature, had adopted an ordinance which is found in Secs. 678 to 688, revised ordinances of the city of Toledo; nor until after this agreement before referred to had been entered into between the board of education of the city of Toledo and the directors of the university, and the erection and equipping of the building in pursuance thereof.

The date when this school went into operation is not stated, but it was some time subsequent to April 4, 1885, and soon thereafter. As to the character of this school and as to the authority of the board of directors, we must look to the acts of the legislature before referred to; and as to the agreement between these respective boards, representing the high school and the university, we are to look not only to the lease of April 4, 1885, but to certain subsequent transactions between those boards carried on in pursuance of subsequent arrangements or regulations. And going to the question last stated, we find this state of facts: that at a meeting of the board of education on July 16, 1900, Mr. Dowd, a member of the board, stated that he was in receipt of a communication from Mr. Adam Schauss, president of the manual training board, inviting the board of education to meet with the manual board for the purpose of consultation; that Gen. Hamilton moved that the manual training board be notified that the board of education will meet with them on the next Monday night, and that the clerk should notify them to that effect; and that his motion was carried. That at a subsequent session of the board of education, held on July 28, 1900, for the purpose of meeting with the manual training board in consultation, and for the transaction of other business, Mr. Ashley, on behalf of the university board, appeared before the school board and made certain representations with respect to what the university board had done and what they would like to do — what he conceived to be leasable. The import of it was that the university board desired to extend the course of study.

XJp to that time, it appears, that the only course of instruction in the university was that pursued in what was called the “ manual training school, ” which consisted chiefly, if not entirely, of what the name would imply, experimental or manual training in certain arts and occupations ; and it was proposed to add what they denominated a polytechnic school, for the carrying on of the study of arts and sciences, on what may have been perhaps more theoretical lines. This was laid before the board of education, and a committee was appointed to act in conjunction with the committee of'the university board, and that committee made a repor* on August 6, recommending this extension of the studies and instruction in the university, i. <?., the establishment of this other branch of the university which they had termed the polytechnic school, and to that report was appended a special report of a proposed curriculum. That curriculum is not carried into the journals, but it has been presented to us here. All this was agreed to and adopted by a very decisive vote of the board of education, there being three votes in favor of the motion, and but one against it.

It appears that the course of study that is now being pursued n the university is based upon that curriculum; that in pursuance of this arrangement and agreement with the board of education, the university board on September 5, 1901, adopted the resolution to which I have referred, and to the enforcement of which relator objects. And thereafter, some members of the board of education, not being satisfied with the result of the operations under this resolution, moved that the university board be requested to set it aside, but that resolution was put to a vote and lost. It fairly appears to us that so far as the board of education of the city of Toledo is concerned, it is acceding and consenting to the enforcement of this rule as it is enforced with the effect stated.

That being true, it appears to us that the relator is not in a position to rely upon the terms of the lease of 1885 that has been referred to, for the reason that this resolution, as it is interpreted and put in practice, with the knowledge, acquiescence and consent of the board of education, amounts to a modification of the terms of the lease, in so far as it may have secured to all students in the high school a right to enter the university; that if that lease provided that each and every student might enter whatever class he pleased in the university, and might take there such studies as he pleased, that part of the lease has been abrogated by the subsequent transactions of the boards.

That, therefore, leads us to a consideration of the other question : i. e., whether this is a public school, supported by public revenues, of a character that the relator may ask and require what he seeks; whether he, as the representative of one of the persons entitled to participate in the advantages of the university may require that its directors shall so modify its rules as to the admission and instruction of students as to accommodate him in the way he desires. We do not understand that this is a public school in the sense that our common schools, established and supported under the general.common school system of the state, are public schools. It is a public school in the sense only that the tuition is to be free. The character of the university is, we think, indicated very clearly by the statute providing for its maintenance. Section 4095, Rev. Stat., reads:

“ The board of directors of the university of the city of Cincinnati in the name and behalf of the city, may accept and take any property or funds heretofore or hereafter given to the city for the purposes of founding, maintaining or aiding a university, college or other institution for the promotion of free education, and upon such terms, conditions and trusts, not inconsistent with law, as the said board of directors may deem expedient and proper for that end.”

That is to say, they may accept of the donation if the terms’ prescribed by the donors are not contrary to law or are not deemed inexpedient by the board. So that it becomes a school, subject to some extent, to the terms and conditions of the trust or donationand in that respect, of course, it is quite different from the common schools. In Sec. 4096, Rev. Stat., we find this, with respect to how the trust funds are to be employed :

“For the' further endowment, maintenance and aid of any university, college or institution for the promotion of free education, heretofore or hereafter so founded in said city, the board of directors of the university thereof may, in the name and in behalf of the city, accept and take as trustee, and in trust for the purpose aforesaid, any estate, prop-ertyor funds, which may have been or may be lawfully transferred to the city for such use, by any person or body corporate having the same, or any annuity or endowment in the nature of income which may be covenanted or pledged to the city toward such use by any person or body corporate'; and any person or body corporate having and holding any estate, property or funds, in trust or applicable for the promotion of education, or the advancement of any of the arts or sciences, may convey, assign, transfer and deliver over the same to said city as trustee in his or its place, or covenant or pledge its income, or any part thereof, to the same; and such estate, property, funds or income shall be held and applied by such city in trust-for the further endowment or maintenance of such university, college or institution, in accordance, nevertheless, with the terms and true intent of an3^ trust or condition upon which the same was originally given or held. ”

Since we have not present for our consideration any of the terms or conditions upon which this trust fund was donated, I do not read this for the purpose of the consideration of any question that might arise upon the terms of the donation. I read it for the purpose of showing the character of the school; that it is a school that is subject to the terms and conditions imposed by the donors who gave the- property or money in trust for the school. The directors are at liberty to reject a proposed donation if in their opinion the terms are unlawful, or for any reason unacceptable to them. If they accept it, they must accept it upon the terms prescribed.

We find nothing in this law prescribing that the courses of studies shall be so mapped out and arranged and pursued as to permit of all students of the high school, whatsoever may be their class, pursuing their studies in the high school and at the same time taking an elective course in the university; and we know of no rule or principle upon which a court is at liberty to impose that condition or to enforce that kind of a regulation. The agreement between these two boards might so provide; it is possible that before it was modified it did so provide. It may be that that would have been a fair interpretation of that order. The directors may have so abrogated their authority, or delegated or surrendered it, as to enter into an arrangement of that kind. Whether lawfully may be a very serious question, but it is not presented, because the arrangement under which the university is now carried on seems to be acceptable to the directing parties. The authority in the premises to regulate the school, prescribe the course of studies, and to fix the terms and conditions upon which students may enter, is placed in the directors, and the terms of the authority are found in Sec. 4099, Rev. Stat., which says :

“The board of directors may provide all the necessary buildings, books,'apparatus and means and appliances, and pass all such by-laws/ rules and regulations, concerning the president, professors, tutors, instruc, tors, agents and servants, and the admission, government and tuition o-students, as they deem wise and proper; but they may, by suitable bylaws delegate and commit the admission, government, management and control of the students, course of studies, discipline and other internal affairs of such university, college, or institution, to the faculty which the directors may appoint from among the professors.”

They are authorized to delegate part of their authority to the faculty, but not to any independent board of education. As I have said, if the interpretation be put upon this contract that is insisted upon by counsel for the relator, then it would seem that the directors of the university had placed substantially the whole matter of the running of the university in the hands or under the control of the board of education ; for it would leave it then within the .power of the board of education, if it saw fit, to prescribe that students of the high school should be admitted to take such studies as they pleased, at such hours as they pleased, in the university, and if that were the agreement, it would not be within the power of the directors of the university to successfully resist any such regulation as might be prescribed by the board of education. We do not think that that would be consistent with the provisions or the spirit of this law. The only right expressly given by the statute that the relator has here is the right of free tuition, and that right must be pursued subject to such reasonable and proper regulations as may be prescribed by the directors of the university.

Now it appears that students of the high school in other classes than freshman B, (which corresponds with grade 9 — 2 of the university), are permitted by the university to elect courses there, and also, at the same time pursue their studies in the high school; but we do not see .that because they have adopted this liberal raleas to all classes excepting grade 9 — 2, they are thereby required to adopt the same rule as to grade 9 —2. They certainly have a wide discretion in the premises which cannot be interfered with by a pupil of the school. The only inconvenience to a patron of the school or scholar in the high school is, that he must wait four months before he can enter the university upon these terms; that is to say, before he may elect certain studies and pursue those and none other.

The purpose of this regulation, as claimed by the relator and con- , fessed by the respondents, is to fill up the university and increase the attendance of those who will take the full four years’ course prescribed, and this they believe will be of benefit to the university, Whether the policy is wise or unwise is not a question for this court to consider. We would have no right to interfere with this regulation upon the ground, if it were true, that the policy being pursued is an unwise ■policy. It is within the discretion of the board. They have a right to do that so long as they do not interfere with some positive right of the relator; and where he seeks the enforcement of a right by mandamus, the right must clearly appear; and that the right is denied must likewise clearly appear.-

We are not prepared to say that this discrimination against this particular class in the high school (for it is a discrimination, confessedly,) is unreasonable and unjust, and so far a denial of the clear right of pupils in that class of the high-school that a court of equity has a right to interfere by mandamus to compel the university directors to so conduct this school as to wipe out this discrimination; and being of that opinion, the prayer of the relator for a wi a must be denied.


author: JELKE, J.

text:
    CONSTITUTIONAL LAW*
    [Butler Circuit Court,
    1902.]
    Swing, Giffen and Jelke, JJ.
    State ex rel. Gard v. E. H. Harmon, District Examiner.
    1 Act 94 O. L. 33, as to Licensing Engineers, Invalid.
    The act of March 1,1900, 94 O. L. 33, See. 4364r-891, Rev.-.Stat., et seq., providing- ' ■ for the licensing of stationary engineers, in that it exempts from examination for licenses those who have been continuously employed as engineers for the-three years next preceding its passage, to-wit, from March 1,1897, to March 1, 1900, arbitrarily exempts from its operation, by the time limit im- - posed, a large,- fixed, particular number or set of engineers, and excludes all others not within the time limit designated therein, thereby contravening ¡ ' Sec. 2, Art. 1 of the bill of rights and-Sec. 36, Art. 2.of.the constitution of the .. state,- ■ i

      2. Unconstitutionality op Sec. 7 Invalidates the Whole Act.
    Section 7 of the above act, by excepting a certain class of engineers, constituting as they do a large proportion thereof, affects the scope of the whole law, and therefore the whole act is unconstitutional.
    J. M. Sheets (Attorney General), and S. W. Bennet (special counsel) for the demurrer.
    Warren Gard, W. M. Ampt and James E. Neal, against the demurrer.
   JELKE, J.

The only objection to the law herein involved, viz: “An act for the better protection of life and property against injury or damage resulting from the operation of steam engines and boilers by incompetent engineers and others, and to repeal an act therein named,” 94 O. L. 33, Sec. 4364-891 to 4364-89w, Rev. Stat., which gives us serious consideration is ' that urged to the provision of Sec. 7, which reads as follows:

“ Section 7. Any engineer who has been employed continuously as a steam engineer in the state of Ohio for a period of three years next prior to the passage of this act, and who files with his application a certificate of such fact, under oath, accompanied by a certificate from his employer or employers,- verifying the same, or who holds a license issued to him under any ordinance of a municipal corporation of this state, shall be entitled to a license without further examination.”

It is contended that this section arbitrarily exempts from the requirements of the act a large, fixed, particular number of engineers who would naturally belong to the class sought to be regulated by the general provisions of the law and hence is in contravention of Sec. 2, Art. 1 of the bill of rights, and Sec. 26, Art. 2 of the constitution.

The particular engineers who can substitute three years’ continuous employment in lieu of an examination are fixed once and for always by the passage of the act. They are those who have been continuously employed as engineers between March 1,1897, and March 1,1900, and none other. Here is a particular class marked off by an arbitrarily fixed time limit from the general class, and Into this particular class no one thereafter can ever enter. A little reflection will make apparent that this particular class is large.

There is no objection within the legislative wisdom to making three years’ continuous employment the equivalent of an examination, but the privilege of tendering this equivalent must not be given to a particular set of engineers.

The Supreme Court said, per Spear, C. J., in State v. Gardner, 58 Ohio St. 599, 610 [51 N. E. Rep. 136; 41 L. R. A. 689; 65 Am. St. Rep. 785]:

“ Our bill of rights prohibits the granting of privileges to one which are denied to others of the same class, and the imposition of restrictions or burdens upon certain citizens from which others of the same class are exempt, and Sec. 26 of Art. 2 of the constitution requires that all laws of a general nature shall have a uniform operation throughout the state. A statute, therefore, which imposes special restrictions or burdens, or grants special privileges to persons engaged in the same business under the same circumstances, cannot be sustained because it is in contravention of the equal right which all are entitled to in the enforcement of laws, and in the enjoyment of liberty, and in the enjoyment of an equal right in the acquisition and possession of property, and so is not of uniform operation.

“The constitutional objection to this statute is that it operates unequally in that it imposes the burden of an examination and license fee upon certain persons, and exempts others of the same class, pursuing the same business in the same way.”

Also see State v. Gravett, 65 Ohio St. 289.

At first we considered declaring Sec. 7 invalid and letting the remainder of the law stand, but the exception of Sec. 7 is so large that it affects the scope of the whole law.

The general assembly may not have legislated on the subject at all had it realized that it could not make the exceptions provided for in Sec. 7.

We do not think the fourteenth amendment of the federal constitution applies to this subject matter.

The other objections to this law are not, in our opinion, well taken. We are of opinion that this law is invalid.

Demurrer to petition overruled.


author: CALDWELL, J.

text:
    RAILROADS — COMBINATIONS—TICKET BROKERS — CONTRACTS-IN JUNCTION.
    [Cuyahoga (8th) Circuit Court,
    February 10, 1902.]
    Caldwell, Hale and Marvin, JJ.
    John M. Kinner et al. v. Lake Shore & Michigan Southern Railroad Co.
    1. Rule as to Application op Maxim in Equity.
    The maxim as to coming into court with clean hands is confined by courts of iquity to misconduct in regard to the matter in litigation, so that it affects the equitable relations subsisting between the two parties and arising out of the transaction, and cannot be extended to any misconduct, however gross It is, not connected with the matter in litigation and with which the opposite party has no concern.

      2. Unlawful Combination of Railroads — Question not Involved.
    Whether the combination of railroads constituting “The Central Passenger Association,” as to regulating and fixing the price of tickets for transportation of passengers thereon is unlawful, cannot be determined in an action to enjoin ticket brokers from dealing in certain limited non-transferable excursion tickets, issued by one of such associated railroads, and containing a contract -wherein the purchaser agrees to prevent the fraudulent and unlawful use of the same by others.
    3. Question not so Directly Involved as to Defeat Relief.
    If the combination is unlawful and contrary to the anti-trust law of the United States, the act of such association is not so directly connected with the contract under consideration that a court of equity will refuse to grant equitable relief to the railroad company issuing the tickets.
    4. Rule as to Injunction Against Violation of Contract.
    Unless the contract is itself unlawful and against public policy, a court of equity will grant relief by way of injunction to restrain one who'is not a party to the contract but who is seeking to induce others to violate it, and to accomplish that end, must do a wrong that is offensive to a court of equity and which amounts to crime.
    5. Rule Applied.
    Under the foregoing rules, a court of equity may restrain ticket brokers from inducing people to buy non-transferable reduced rate tickets, issued by a railway company in combination with other companies, under a passenger association, the use of which by persons other than original purchasers could only be effected by fraudulent representations.
    Heard on Error.
    Foran, McTighe & Baker, for plaintiffs in error.
    Brewer, Cook & McGowan, for defendant in error,
    cited:
    1. That the railway company, defendant in error, on the facts stated in its petition was entitled to the relief sought, can hardly be seriously disputed; injunctions of this character have been frequently granted. Nashville, C. & St. R. By. Co. v. McConnell, 82 Fed. Rep. 65.
    2. While the force of the maxim that “ He who comes into equity must come with clean hands ” is well established within certain limits, a qualifying principle, as well settled as the maxim itself, must be recognized, that the iniquity which will bar a complainant must be directly connected with the matter in litigation. 11 Enc. of Raw (2 ed.), p. 164; on the same point, Pomeroy Equity Juris., Sec. 899 ; Bateman v. Far-gason, 4 Fed. Rep. 432; Strait v. National Harrow Co., 51 Fed. Rep. 819 ; Bonsack Machine Co. v. Smith, 70 Fed. Rep. 383 ; Beach Eq. Jur., Sec. 16; Chas. E. Wisewall Estate, 74 Fed. Rep. 802; Dennehy v. Mc-Nulta, 86 Fed. Rep. 825, 827; EaFayette Bridge Co. v. Streator, 105 Fed. Rep. 729, 731; Chicago v. Stockyards Co., 45 N. E. Rep. 430 [35 R. R. A. 281; 164 Ill. 224]; Equitable Gas R. Co. v. Coal Tar Mfg. .Co., 3 Atl. Rep. 108 [65 Md. 73, 84]; 67 Pa. St. 166; Mossier v. Jacobs, 66 Ill. App. 571; National Distilling Co. v. Importing Co., 56 N. W. Rep. 864 [39 Am. St. Rep.-902 ; 86 Wis. 352, 355]; Sylvester , v. Jerome, 34 Pac. Rep. 760 [19 Colo. 128]; Wright v. Wright. 26 Atl. Rep. 166 [51 N. J. Eq. 475]; Eiverpool & E. & G. Ins. Co, v. Cline, 88 Fed. Rep. 160; Leonard v. Rutland (Vil.), 28 Atl. Rep. 885 [66 Vt. 178, 182]; Foster v. Winchester, 9 So. Rep. 83 [92 Ala. 497, 501]; 11 Tenn. 124, 126; Nester v. Brewing Co., 29 Atl. Rep. 102 [161 Pa. St. 473, 483 ; 24 E. R. A. 247; 41 Am. St. Rep. 894]; 50 Ga. 421, 422.
   CALDWELL, J.

A petition was filed in this case in the court of common pleas by the defendant in error to restrain John M. Kin tier and others who are known as ticket brokers in the city of Cleveland from dealing in certain tickets issued by it to persons who were attending the encampment of the Grand Army of the Republic in the city of Cleveland in the month of September, 1901.

The tickets issued by the railway company were for round trips to Cleveland and to a return from the place of starting, and they were made non-transferable and were good only in the hands of the person to whom they were issued and no other person could use the same except by fraudulently and unlawfully representing himself to be the one named in the ticket, and the party to whom the ticket was issued had entered into a contract evidenced by the ticket wherein he agreed to do all he could to further the intent and purpose of the railway company in issuing the same, and, to this end, that he would not transfer it nor use it 'for any purpose other than . that for which it was issued. Many persons attending the encampment by means of such tickets, after coming to Cleveland undertook to dispose of the same to the plaintiffs in error, and the plaintiffs in error were about to sell and were selling the same to persons to be used upon the railroad of the defendant in error. And> from thus unlawfully dealing in these tickets, this action was instituted and an injunction obtained from the court restraining the plaintiffs in error from dealing in the tickets as above set forth.

These tickets constituted limited contracts, not transferable, and good only in the hands of the original purchaser. They were also limited as to the time of their use. They could not be used earlier than September 8,1901, nor later than September 12, of the same year, unless certain arrangements were made in Cleveland through the agent of the railway company, who had power upon the performance of certain conditions stipulated in the tickets to extend the time within which the tickets could be used for a return passage, and, in accepting the ticket, 4he person agreed to be governed by all the conditions as stated in the contract; and the tickets had marked upon them, “Account of the Grand Army of the Republic, National Encampment.”

First, a motion was made by the defendant, below, to vacate the restraining order granted upon the petition, which motion was overruled, and thereupon the plaintiffs in error answered in that court, and the matters set forth in the answer, so far as necessary to speak of them here, are:

First. The plaintiff was engaged in a fraudulent conspiracy, and that the action brought in the petition was in the furtherance thereof.

Second. That the railway company has no standing in a court of equity by reason of the illegal acts which this suit is brought to protect and execute.

The acts of conspiracy on the part of the railway company are set out in great detail in the answer. Briefly stated, they are: That the railway company in this case, in conjunction with about twenty other railroad companies, entered into a combination and conspiracy for the purpose of suppressing competition among themselves in the business of transporting passengers to and from the encampment. That this was accomplished through what is known as the “ Central Passenger Association,” and that this association-had its office in Chicago; that said association was composed of certain railroads of which the Take Shore & Michigan Southern is one; and that this association had meetings by agents and representatives of all the companies parties thereto, including an agent and representative of the defendant in error and that, at such meetings, rates had been fixed and forms of tickets had been agreed upon to be issued by all the companies to such combination, for the purpose of transporting passengers to and from the city of Cleveland during the said encampment of the Grand Army of the Republic.

Various acts are set out in the answer, done by these companies in furtherance of this unlawful combination, and it is then pleaded that the association of these railroad companies is contrary to the laws of the United States and the state of Ohio; and that all the acts and things done by it in furtherance of the general illegal and unlawful design of the combination, are illegal and ought not to be protected or furthered by the aid of a court of equity.

When the case came on for trial in the court below, the plaintiffs in error put on a witness who was asked many questions in regard to the way in which the Central Passenger Association is made up and in regard to its purposes and rules and regulations and various other matters pertaining to it and tending to connect the Take Shore & Michigan Southern Railway Company with the Central Passenger Association. Each of these questions was objected to, and the objections were sustained, and counsel for the plaintiffs in error stated in the record what answers would be made to the questions if permitted to be answered, and the statements are responsive to the^questions asked.

The sole questionjjmade in this action is, whether or not thé defendant in error as a member of a combination of railroad companies which had for its object the suppression of competition in violation of the federal statute in such case made, and whether the defendant in error can appeal to a court] of equity! to protect tickets issued by it of the kind, character and > form’agreed ¡¡by said combination to be issued and, after issued, in danger of being fraudulently misused; or, in other words, had the defendant in error such a standing in a court of equity? . Were its own hands so clean that a court of equity would intervene to protect it and the contracts or tickets]issued by it ?

It appears from the record in this cáse, that whatever was done by the combination known as the Passenger Association,” that the tickets issued and under' consideration in this case were issued by each railroad separately, and that the contract of the passenger was with the road over which he took passage and with no other road, nor was his contract with the passenger association.

The plaintiffs in error insisted that they were not urging that the defendant in error cannot be heard in a court of equity because it is a member of this illegal conspiracy, but for the reason that the tickets which it seeks to protect by the aid of a court of equity are themselves the subject-matter of an illegal agreement, each individual ticket being the product and result of, and in furtherance of, the agreement made between the defendant in error and the other roads.

Nor do the plaintiffs in error contend that these tickets are void as contracts between the railroad companies and purchasers. They are sold for a valuable consideration, and are agreements on the part of the railroad company to perform services in return for the money received and that the purchaser may insist upon the performance of that service, and the railroad company cannot set up its own wrong to avoid the contract; and they insist that the contention could not be raised with regard to the ticket as a contract between the vendor and the purchaser

They admit that their act was unlawful in that they were attempting to induce the ticket holder to break the contract which he had with the railroad company, and to accomplish the end sought it became necessary that they should induce the person to whom they would sell the ticket, to commit a fraud upon the railroad company by representing himself to be the person named in the ticket.

The plaintiffs in error do not seek to attack in a legal sense the Central Passenger Association in this proceeding ; but say that, in order to accomplish that end, an action would have to be commenced and prosecuted as in United States v. Joint Traffic Assn., 171 U. S. 505 [19 Sup. Ct. Rep. 948], and in United States v. Freight Assn., 166 U. S. 290 [17 Sup. Ct. Rep. 540], and that they are here not seeking the relief that was obtained in those cases on behalf of the United States but they have narrowed their contention to the claim that if the defendant in error is engaged in an enterprise obnoxious to the federal statute, and the tickets here issued are sought to be protected as in furtherance of that enterprise, it cannot ask the protection of a court of equity and, on this ground alone, it is claimed that the injunction allowed is contrary to law, and that is the question before the court.

It is not necessary to cite authority to the point that a court of equity will not protect the subject matter of an illegal contract and will not enforce an illegal contract.

The question, then, as we understand it, is this: A number of railroads furnish each a member of an association, which association, it is claimed, is organized for the purpose of keeping up passenger rates and stifling competition, and, hence, is against public policy and contrary to the anti-trust law passed by the congress of the United States in 1890; and that that association took some action in regard to the amount that should be charged for tickets from various states along the line of the railroad to'persons attending the encampment. It is not shown, however, that the association went into such detail, nor that it did anything more than to determine that the persons attending the encampment should have passage thereto and return for one fare; and that, after such association, each railroad for itself made terms and sold the tickets for the round trip for one fare; and, after the persons, who bought the tickets, arrived in Cleveland, the plaintiffs in error undertook to buy the tickets for the return trip contrary to the terms of the contract and in fraud of the defendant in error and illegally and unlawfully; and, thereupon, the defendant in error obtained an injunction against their so dealing with these tickets.

Under these facts, will a court of equity refuse the defendant in error relief against such unlawful dealing ?

The defendant in error relies lalmost wholly upon the case of Delaware, L. & W. R. R. Co. v. Frank, 110 Fed. Rep. 689, in the United States circuit court for the western district of New York.

That case is the one wherein the railroads made special terms to persons attending the Pan-American at Buffalo. It appears that the combination there made was, that the railroads agreed to pool their roads and their earnings upon such tickets and, at a time, divide the proceeds upon some basis determined by the association. In that regard, the case differs from the one under consideration.

The defendant in error cites us to a case decided in San Francisco about the same time that Judge Hazel decided the case at Buffalo, and the cases seem to be at variance with each other. In the San Francisco case an injunction was issued restraining scalpers from dealing in Hpworth League excursion ticket's, and in seeking dissolution of the order, the scalpers’ attorney urged that the railroad company did not come into the court of equity with clean hands, and that its combination with the other competing railroads by which the Epworth League scheme was brought about, was in violation of the provisions of the Sherman act by which it was made unlawful for competing railroads to fix rates; and it was urged that on this account, the tickets ■ being themselves unlawful, the railroad could not restrain any one from dealing in them. We have not seen this case reported in any law report, but have been referred to a notice of the same, and in the notice it seems that Judge Murasky decided the case, saying that the rule requiring persons to enter a court of equity with clean hands, applies equally to plaintiffs and defendants; and that the defendant, by his own affidavit, showed that he himself was engaged in an unlawful business which involved deceit, false persdnation and forgery, and that he who asks the court to relieve his shoulders of the burden of an injunction upon any other ground than lack of jurisdiction, is expected to deny the equities of the bill and not to disclose an utter absence of right on his part.

Nashville, C. & St. L. Ry. Co. v. McConnell, 82 Fed. Rep. 65, is a case much like the one before us, where the injunction was allowed.

In Baltimore & O. S. W. R. R. Co. v. Broome, in the superior court of Hamilton county, an injunction was granted July 9,1901, the occasion being the Christian Endeavor convention.

The maxim of coming into court with clean hands is confined by courts of equity to misconduct in regard to or connected with the matter in litigation, so that it affects the equitable relations subsisting between the two parties and arising out of the transaction. It does not extend to any misconduct, however gross it is, unconnected with the matter in litigation and with which the opposite party has no concern.

A court of equity will not shut its doors to the wicked and to those who are guilty of violation of law, simply because of the moral state of the person, but will confine the maxim to where the wrong-doing has directly afiected the particular matter under consideration by the court. There is no contention in this case as to this matter between the parties hereto. The real question is: Does the illegal contract, set up in the answer, so affect and taint the contract between the railroad company and its passenger that a court will refuse to restrain the plaintiffs in error from doing what they acknowledge to be an unlawful thing.

In Strait v. Harrow Co., 51 Fed. Rep. 819, where a suit was brought to enjoin the infringement of a patent, the court say, on page 819: “ Such a combination may be an odious and wicked one, but the proposition that the plaintiffs, while infringing the rights vested in the defendant under letters-patent of the United States, is entitled to stop the defendant from bringing or prosecuting any suit therefor because the defendant is an obnoxious corporation, and is seeking to perpetuate the monopoly which is conferred upon it, by its title to the letters-patent, is a novel one, and entirely unwarranted.”

Further on, quoting now again, the court say: If the defendant had brought suit against the plaintiffs for some breach of contract or violation of its alleged rights, founded upon the combination agreement, then it might become pertinent to inquire into the character of the combination, and ascertain whether the court would enforce any rights growing out of it. But in a suit brought for the infringement of a patent by the owner, any such inquiry, at the behest of the infringer, would be as impertinent as one in respect to the moral character or antecedents of the plaintiff in an ordinary suit for trespass upon his property.”

In Bonsack Mach. Co. v. Smith, 70 Fed. Rep. 383, the plaintiff sued for an injunction against the infringement of a patent, and the defendant set up the conduct of the plaintiffs in attempting to obtain a monopoly, and the court held that it was no defense.

The Charles E. Wisewall, 74 Fed. Rep. 802, In this case, the defendants undertook to avoid payment of tonnage charges, on the ground that the complainant was a member of an association illegal under the Sherman anti-trust act. The language of the court is directly to the point under consideration and is to the effect that the answer was not well taken.

The purchaser of the ticket, having received compensation in part, and the railroad company being ready to fulfill the entire contract, and having dealt with the railroad company in regard to the ticket, he can not take the benefit of his bargain without paying the consideration. He cannot receive the benefits of his contract without fully complying with the same himself.

Dennehy v. McNulta, 86 Fed. Rep. 825, 827. The court say that “the mere fact that the corporation as one of the contracting parties, may constitute an unjust monopoly, * * * cannot serve ipso facto to create default or liability on its contracts generally; nor can such fact be invoked collaterally, in any manner to affect in any manner its independent contract obligations or rights.”

LaFayette Bridge Co. v. Streator (City), 105 Fed. Rep. 729.

These cases are to the effect that the illegal combination of the railroads cannot be drawn into a suit in a collateral way; and that the relation between the railroad company and the ticket broker is so far foreign to the action of the passenger association, that it will not avail the plaintiffs in error in this case.

There are many cases cited in the brief of defendant in error which establish the point that courts will refuse to apply this maxim that a person must come into court with clean hands, for the benefit of persons seeking to evade a law. Chicago v. Stock Yards Co., 45 N. E. Rep. 534; Meister v. Alber, 36 Atl. Rep. 360 [85 Md. 73-84] ; Lewis & Nelson’s Appeal, 67 Pa. St. 153, 166 ; Mossler v. Jacobs, 66 Ill. App. 571; United Protestant E. G. Congregation v. Stegner, 21 Ohio St. 488; Norton v. Blinn, 39 Ohio St. 145 ; National Distilling Co. v. Importing Co., 56 N. W. Rep. 864 [86 Wis. 352, 355]; Sylvester v. Jerome, 34 Pac. Rep. 760 [19 Col. 128.]

These cases and many others that we have examined, establish these propositions:

First — The unlawful combination between the railroad companies cannot be tried and determined in this action.

Second — If that combination is unlawful and contrary to the antitrust law of the United States, still the act of that association is not so directly connected with the contract under consideration, that a court of equity will refuse to grant the defendant in error equitable relief.

Third — Unless the contract under consideration is itself unlawful and against public policy, a court of equity will grant relief by way of injunction to restrain one who is not a party to the contract but who is seeking to induce others to violate the same and, to accomplish that end must do a wrong that is offensive to a court of equity and which amounts to a crime.

These conclusions being reached, it is clear that the plaintiffs in error are not entitled to have the judgment below reversed, and the judgment is affirmed.