author: Geiger, J. Hornbeck, J.,

text:
    Weinreich et al., Appellants, v. The Franklin Savings & Loan Assn., Appellee.

      (No. 1833
    Decided April 23, 1945.)

      Mr. John Froug, for appellants.

      Messrs. Estabrooh, Fimi & McKee, for appellee.
   Geiger, J.

This matter is before this court on appeal on questions of law from the judgment of the Court of Common Pleas of Montgomery county. The second supplemental petition of plaintiffs, Arthur L. Weinreich and Kate M. Dwyer, was filed on February 7, 1941, and a number of answers were filed thereafter.

As an answer to the second supplemental petition the association admits many of its allegations, but denies certain other allegations and alleges that the pláintiffs and all other creditors of the association who were issued certificates of claim against the defendant association are entitled to receive interest only at the rate provided in the certificates of deposit issued to the claimants by the defendant and not uniformly at 6 per cent, and defendant denies that it has preferred any creditors.

The court, on August 28, 1944, made a formal entry that the cause was submitted to the court upon the second supplemental petition and the defendant’s answer and plaintiffs’ reply, the stipulations in the record, and the evidence; and on consideration the court found the issues against the plaintiffs.

Notice of appeal was given and the case is in this court for our consideration.

Counsel for plaintiffs filed the following assignment of errors:

“First: The finding and judgment of the trial court is against the manifest weight of the evidence and the law, and the judgment is contrary to the law and evidence.

“Second: That upon the evidence and the law the finding and judgment of the trial court should have been in'favor of the plaintiffs and against the defendant.

“Third: * * * [Not important],

“Fourth: For error of the trial court in overruling the demurrer of the plaintiffs to the evidence of the defendant.

“Fifth: For error of the trial court in overruling motion of plaintiffs for judgment in favor of plaintiffs at the close of all the evidence.

“Sixth: For all other errors appearing on the face of the record.”

This case has been exceptionally well argued on behalf of the plaintiffs and defendant, and while we shall adhere closely to the matters as presented by counsel, yet due to the importance of the case and to original research we have made, we may extend our opinion slightly to cover views not presented by counsel for either party.

It will be impossible to detail tbe facts relating to this case due to their extensive ramification, bnt we may summarize, confining ourselves to those facts which are undisputed.

• The defendant was a building, and loan association invested with all the duties and authorities prescribed by the statutes of Ohio relating to building and loan associations. On the 29th of September, 1933, the Superintendent of Building and Loan Associations of Ohio, with the approval of the Director of Commerce, ordered the liquidation of the association under the provisions of Section 687-21, General Code. In pursuance of the statute the board of directors filed an application in the Common Pleas Court of Montgomery county requiring all persons having claims against the association to file proof of claims and to present their claims for allowance. All creditors and depositors filed their proof of claims and they were approved and allowed in the liquidation proceeding And both the creditors and depositors received certificates of 'claim and surrendered their evidence of deposit. Certificates of claims amounting to approximately $1,-700,000 were issued. During the course of administration the directors, with proper consent, paid to the holders of certificates, dividends totaling 35 per cent on the principal amount of the outstanding certificates up to and including the year 1936.

On the 8th day of September, 1936, upon application of the Superintendent of Building and Loan Associations, the defendant association was permitted to resume business on a restricted basis and to file a plan of reorganization.

On August 27, 1940, plaintiff Arthur L. Weinreieh filed his original petition, stating that he brought the action on his own behalf and on behalf of all creditors and claimants seeking the determination that the plaintiff and all holders of certificates of claim were entitled •to receive interest on their several certificates of claim during the time of liquidation at the legal rate- of six per cent. Plaintiff sought an accounting of the amount of interest due each claimant and for a restraining order against calculating interest at the contract rate and for judgment for the amount found due to each claimant. There was sufficient cash to pay all principal claims plus interest.

On the 28th day of September, 1940, after the unsuccessful efforts to effect the settlement with all holders of certificates, the board of directors passed a resolution ordering the payment of the final liquidating dividend of 65 per cent of the principal amount and ordered payment of interest on the outstanding certificates from the date of liquidation at the contract rate, that is, the rate of interest that was payable to depositors on the original evidence of deposit, varying from four per cent to six per cent. The board notified the superintendent of its action and the superintendent approved the same. On September 28, 1940, the association notified all holders of claims by letter that payment of 65 per cent final liquidating dividend plus interest at the contract rate would be-made and that interest would cease to accrue on the certificates of claim after October 1, 1940. Claimants, in response to the letter, called at the office of the association and, in order to obtain their dividend check, signed a receipt. Upon the back of the check there was an endorsement and a purported release and an agreement to accept the sum calculated at the contract rate of interest. This agreed settlement was not submitted to the court for its confirmation.

Counsel for plaintiffs in this case notified the defendant that the receipts and endorsements of the checks were not valid because of no consideration and requested that the form of receipt be changed, which was not done, and the plaintiff Weinreich did not cash all the claims he had against the association, but retained several as set out in the petition. The defendant admitted that there were 283 persons who were certificate holders and whose claims were ordered paid as of October 1, 1940. All certificates of claim were of like tenor. All bnt a very few'of .the certificate holders accepted the payment of their full certificate with interest computed at the contract rate and cashed the checks given in payment thereof, which bore as part of their endorsement an agreement to accept the amount in full discharge of their claim against the association.

We shall state the claims as to the law made by the respective parties. The plaintiffs claim that the two legal questions presented are: (1) What rate of interest is payable to holders of certificates of claim in a liquidated building and loan association? (2) Was the defendant association discharged and released from its liability to pay a legal rate of six per cent on certificates of claim by reason of any act done or committed by the creditors?

It is asserted by plaintiffs that there can be no question on the legal proposition that holders of the certificates of claims in the liquidating of an insolvent association are entitled to interest at the legal rate of six per cent, and counsel points with considerable assurance to the holding of this court in the case of Nathan Goldzwig v. Merion, Superintendent, in charge of liquidation of the American Loan and Savings Association, being case No. 1750 in this court, which decision was rendered on April 29, 1943. It is pointed out that in that case this court held unanimously that the contracts of deposit were abrogated and rescinded under the statute and therefore that the contract rate of interest could not be the guide for the rate of interest due on certificates, and that this court overruled the trial court in that case in its judgment that the contract rate was the rate of interest to be paid. Motion to certify the record in that case has been overruled in the Supreme Court. In that case this court held that under the provisions of the statute any contract existing between a certificate holder and the association as to the rate of interest to be paid was rescinded by the statute when the association was taken over by the Superintendent of Building and Loan Associations for the purpose of liquidation, and that upon such occurrence Section 8305, General Code, providing for the rate of interest at 6 per cent thereafter controlled, and this court held further that the subsequent turnback to the association of the property formerly taken into the control of the superintendent did not reinstate any contract rate of interest existing prior to the original insolvency of the association, and that such turnback was for the purpose of reorganizing the association, or on failure to do that, it was for the purpose of liquidation. This court held that if the association has assets which will permit a payment of interest to the depositing creditors, such payment must be made not by virtue of the contract that is null and void because of the insolvency of the association as provided in Section 687-3, General Code, but by virtue of a general statute, Section 8305, General Code, providing for the payment of interest on claims at the rate of six per cent.

In the case of Goldswig v. Security Savings Association, No. 93176, Montgomery county Common Pleas Court, Judge Mills followed the law laid down by this court in the above entitled case.

It is asserted by counsel for the plaintiffs that the decision of this court in the Goldsivig case lays down the principle controlling the case at bar, but that the trial court in the case at bar held that, at the time the final dividend of 65 per cent plus contract interest was ordered paid, the association was operating under the turnback provision of the statute and that the interest rate contracted for' should be that originally established between the parties before the insolvency. The trial court took the view that upon the turnback of the association to its directors the rate of interest established by the contract, although the same had been ab'rogated by the intervening insolvency of the association, should be reinstated and be the contract under which or in pursuance of which the interest.should be paid. This court, however, has held definitely that the turnback to the directors for final dissolution of the corporation or its rehabilitation did not reestablish the contract rate but that, if the contract rate because of insolvency became six per cent under the general statute, it would remain such rate pending the windup of the corporation.

Counsel for plaintiffs asserts that if the contracts were rescinded at the moment the association was ordered into liquidation on September 29, 1933, the same could not be reinstated on October 1, 1940. With this position of counsel for plaintiffs we are in accord.

In the case of Warner v. Mutual Building & Investment Co., 128 Ohio St., 37, 190 N. E., 143, it is held in the second paragraph of the syllabus:

■ “When a building and loan association becomes insolvent, it can not perform its contract with its members and shareholders, and its contract with them is thereby rescinded, and on this theory a court of equity has jurisdiction # * V’

While the case was-discussed and decided upon the proposition as to whether the action against the company was a legal or equitable proceeding, the court did determine as above stated without a very detailed discussion of that point.

The next point discussed by counsel for plaintiffs ‘ is the question as to whether the defendant association was discharged from its liability to pay six per cent interest' on the certificates of claim by reason of any act done or committed by the creditors. The trial court held that when a creditor executed a receipt and accepted a check requiring an endorsement in the nature of a receipt and release, such creditor thereby released- any claim he might have to interest at other than the contract rate as set out in the certificates issued to him and endorsed on the check given in payment thereof.

This court had before it the case of Weinreich v. Permanent Building & Savings Association, 26 Ohio Law Abs., 545, rendering a decision therein in 1937, and there held that the holder of a certificate at the time of liquidation' was entitled to interest on his claim from the date of posting under the provisions of Section 687-3, General Code. Hornbeck, J., concludes therein: “It follows that upon this claim he (the plaintilf) is entitled to interest by the specific terms of G. C. 687-3, from the date of posting.”

Counsel for plaintiffs contends that the receipt and endorsement of the checks do not bar the right of creditors to recover the balance of interest, there being no consideration for the receipt or the endorsement of the check, if it be considered in the nature of a release; and that there was no disputed or unliquidated claim involved. The certificate of claim was for a sum certain at the time the association was ordered into liquidation and the creditors filed their proofs of claim and the claims were allowed, and counsel urges in support of this position the case last cited, opinion by Hornbeck, J., and further asserts that the legal interest on the certificates was liquidated and undisputed and the defendant having- failed to show any consideration for the acceptance of a lesser amount, there could be no discharge or release from the legal obligation to pay the lawful rate of interest, to wit, six per cent; that it is axiomatic that the payment of a smaller sum will not discharge the larger sum due and owing unless the claim is unliquidated or disputed; and that there is an agreement to release the balance.

Counsel cites the case of Yin v. Amino Products Co., 141 Ohio St., 21, 46 N. E. (2d), 610, pointing to the conclusion of the court in the-first paragraph of the syllabus that “The acceptance of less than the amount presently or past due upon a liquidated and undisput-ed indebtedness in full payment thereof is not an accord and satisfaction.”

' The above cited case is very interesting upon the question presented and is more interesting in consideration of the dissenting opinion of Judge Hart. See comments by Hart, J., at page 40. We commend to a careful reading not only the opinion of the majority of the court in that case, but also that of Judge Hart, at pages 31 to 47, and authorities there cited.

This court had before it the case of Adams Recreation Palace, Inc., v. Griffith, 58 Ohio App., 216, 16 N. E. (2d), 489, 26 Ohio Law Abs., 1, in which it rendered a decision on December 6, 1937, opinion by Geiger, J. The case related to the question whether a landlord who had made a written lease to a tenant for a certain annual rental could collect the amount of that rental after he had agreed with the tenant to accept a lesser sum. The court there followed the decisions of the courts upon that question and held that ■ an agreement by a lessor to accept a lesser rental than that provided in the lease is not binding unless supported by a valid and sufficient new and independent consideration.

A pertinent proposition is announced in the case of Gholson v. Savin, 137 Ohio St., 551, 31 N. E. (2d), 858, 139 A. L. R., 75, wherein it is held in the sixth paragraph of the syllabus:

“While an executory agreement on the part of a creditor to accept in payment and full satisfaction of a liquidated claim a sum less than the amount of such claim, without any additional consideration to support such agreement, is ordinarily not enforcible at law, yet if such agreement has been executed and settlement made accordingly, or has been made with some benefit or advantage to the creditor, however slight, it will operate as a full discharge of the debt in accordance with the intention of the parties.”

Judge Williams in the majority opinion and Judge Hart in his dissenting opinion, in the Yin case, supra, comment upon the Gholson case. Judge Williams says at page 27:

“If the sixth paragraph of the syllabus in the Ghol-' son case at first blush seems rather far-reaching when applied to a different factual situation, it should be remembered that a syllabus must always be read in the light of the facts presented.”

Judge Hart comments, at page 32, to the effect that. he apologizes for the length of his dissenting opinion on account of “confusion which I fear may result from the decision of the court in this case [Yin v. Amino Products Co.] in connection with the case of Gholson v. Savin, 137 Ohio St., 551, 31 N. E. (2d), 858, 139 A. L. R., 75, decided by this court only two years ago, * * =»

In support of that part of the sixth paragraph of the syllabus in the Gholson case, “yet if such agreement has been executed and settlement made accordingly, * * # it will operate as a full discharge of the debt in accordance with the intention of the parties,” we find substantial authorities.

In 1 Corpus Juris Secundum, 528, Section 34, it is stated that it is an elementary rule in order to effect an accord and satisfaction that the thing offered must be accepted by the creditor as satisfaction of his claim and the payment of a part of a debt will not discharge. the whole thereof without an acceptance of such partial payment as satisfaction. It is then stated:

“Such acceptance may be actual, by an express and affirmative agreement or consent to receive a partial payment in settlement of the whole debt or demand, or it may be constructive, or implied in law, by the acceptance of a partial payment tendered on the condition that it be accepted in full settlement.”

See further comment in the authorities cited.

In 17 Corpus Juris Secundum, 422, Section 71, it is said:

“If one makes' an executory contract which lacks consideration, he may avoid it when called on for performance, but if he executes the contract by performance he cannot undo his voluntary act. ’ ’

See Rye v. Phillips, 203 Minn., 567, 282 N. W., 459, 119 A. L. R., 1120, with annotations beginning at page 1123; also 34 A. L. R., 1035.

An interesting case decided by the United States Supreme Court is that of Southern Pacific Co. v. United States, 268 U. S., 263, 69 L. Ed., 947, 45 S. Ct., 500. In that case the Supreme Court of the United States held that where a railroad had a just claim against the government for the transportation of soldiers or material and rendered a bill against the government at “land grant” rates in lieu of full compensation to which the railroad was entitled, although the comptroller’s rule was erroneous, the railroad was bound by acquiescence and could not recover the difference between the Amount received and the larger amount which it was lawfully entitled to charge under the tariff.

In De Boest v. Gambell, Auditor, 35 Ore., 368, 58 P., 72, relating to salary dne to a public official under the' law, but for which salary the official accepted a lesser payment, the court holds that while paying officials may not reduce the salary below that established by statute or ordinance, yet if the official accepts the same, he may not recover the difference between the sum so accepted and the sum provided for by law.

The dissenting opinion of Judge Hart in the Yin case is so replete with sustaining citations that we can do nothing more than to say to those who may be interested that we refer to that opinion and cases cited on page 42 et seq. Among other propositions on .page 45 will be found:

“Where a tender of payment is made upon certain conditions, the creditor has no right to accept the tendered payment and disregard the conditions attached. If he exercises dominion over the thing offered or tendered, he will be bound by the conditions.”

The Gholson case and the Yin case both recognize the fact that there is a distinction between an executory contract and an executed contract.

There seems to be no question on the proposition that if a creditor agrees to accept a sum less than that conceded to be due to him, such acceptance is not an accord and satisfaction and the creditor may proceed to collect the full balance of his claim, yet, if in pursuance of the agreement, there has been an executed contract, the execution thereof meets the objection that there is no accord and satisfaction. Applying that to the case at bar, after the certificates had been issued and the letters sent to the certificate holders who agreed to accept payment, such certificate holders could have refused to carry out the agreement upon the ground that there, was no consideration. They would have had a right to so repudiate their contract. But after they accepted the money so offered to them there can be no rescission from it on the ground that there is no accord or satisfaction.

A very early case in Ohio is referred to at length in the Adams Recreation Palace, Inc., case heretofore cited, the case being Harper v. Graham, 20 Ohio, 106, opinion by Ranney, J. It is an illuminating case and while following the rule that there must be an accord and satisfaction, the court points out that modern decisions have sought to avoid the absurdities of the principle, and have taken advantage of every opportunity to escape the consequence of the early decisions.

Coprts have held that -while a money payment of a, less amount than that which is due is not an accord and satisfaction, yet if any other item than money is involved, it supports the claim of accord and satisfaction. If a debtor gives a certain amount of money and adds to it a horse, hawk or robe, as originally recited by Lord Coke, there is an accord; or in these days, a carton of cigarettes, in addition to the cash, would be held to be an accord and satisfaction even though the amount of money paid was far less than that which was due.

The statute requires the Superintendent of Building and Loan Associations to publish the fact that the association has been taken over. This action was instituted by the plaintiffs on August 27, 1940. We have already set out the facts recited in the second supplemental petition upon which the case was tried. The original petition clearly stated, so that all creditors could be informed of the claim of the plaintiffs, that it was asserted that, after the insolvency of the company, creditors or depositors were entitled to six per cent interest, and that the plaintiff brought his action on behalf of himself and all others similarly situated, yet in spite of this knowledge, which came home to the claimants, all of them with the exception of the plaintiff Weinreich and possibly Mrs. Kate M. Dwyer, accepted payments of the principal of their claim, and interest at the contract rate. It may pot, therefore, be said that they entered into this agreement which, was carried ont to completion by the acceptance of the amount tendered, in ignorance of the amount to which they may have been entitled had they not accepted interest at the contract rate.

The parties have filed briefs to which we have given attention and further we have given attention to the well considered opinions of the court below.

Restating the matter in the fewest words possible, we find that the controversy involved the question as to-whether the plaintiffs in this ease, acting on behalf of themselves and others whom they claim are in a like situation, may recover the difference between the contract rate of interest which was paid to and accepted' by the claimants upon the offer made by the board of directors, and the rate of six per cent interest which is the legal rate in force after the association became insolvent. If the claim of the plaintiffs is sustained, the sum of $70,000 will be taken from the shareholders and paid to the depositors who have already received the amount offered by the directors, thus changing their claim from an executory to an executed contract.' The plaintiffs have a very minor claim in amount and we can by no construction arrive at the conclusion that' these minority claimants who have refused to accept the offer made by the directors may, by virtue of their alleged representative capacities, create a fund to the detriment of the shareholders to be paid to creditors who have already accepted the offer of the board of directors.

Inasmuch as we have arrived at our conclusion of excluding the depositors who agreed to and did aceept the contract rate, we must concede that as to the plaintiff Weinreieh who has not accepted the contract rate, bnt has asserted continnonsly his right to have his claims allowed at the rate of six per cent interest, he is entitled to the computation of his claims at the rate of six per cent for the period beginning with the insolvency of the corporation. The directors have tendered him the amount of his claims, computed at the contract rate and have paid the same into court and assert that, therefore, the plaintiff is not entitled to recover. With this claim of the hoard of directors we cannot agree. The claim of the plaintiff, Weinreieh, excluding any class representation, may be computed at the rate of six per cent and this amount should be paid. We will not go over the figures, but they are of a very minor amount.

Due to the long lapse of time this small increase in the rate of interest may amount to a considerable sum, estimated in this case to be $70,000 for all the claims. We shall not assume the burden of computing the exact amount, but leave that to the actuaries of the company and the plaintiff, Weinreieh. This applies equally to the claim of $6,236.42 of Kate M. Dwyer, if she refused to accept the interest payment. If she accepted, it does not apply.

A matter that assumes paramount importance in this case is the correct solution as to whether Weinreieh, who brings the action as creditor for himself and all other creditors of the corporation for their use and benefit, can represent creditors other than himself and possibly Mrs. Dwyer in a class suit under the provisions of Section 11257, General Code.

All other creditors save Weinreieh and possibly Mrs. Dwyer have settled with the corporation by the receipt of dividends based upon a contract rate of interest and have given to the corporation full discharge from all further claims on behalf of their certificates of indebtedness. Weinreieh never cashed such a certificate and always has maintained that he is entitled to six per cent interest in spite of the fact that his contract rate was less. If there were any other creditors than Weinreieh who were in the saíne class with him in having refused to accept the payment tendered by the association, then they would be in the same class with Weinreieh, but not numerous. In the case at bar the larger group of creditors, amounting to over 285, have constituted a class of their own by having accepted the checks tendered by the association. We have serious doubts as to whether Weinreieh, being practically the only one who has not áccepted the settlement, may constitute himself a plaintiff on behalf of all the others who have accepted the payment, by merely alleging a common interest. -No common interest seems to us to exist. The large group of creditors whom Weinreieh claims are so numerous that it would justify a class suit, are separate and distinct in their claim from Weinreieh, who seeks to - become their representative in a class suit.

In accordance with the decision in 1937 of this court in the Weinreieh case, supra, the plaintiff Weinreieh is clearly entitled to interest at six per cent, whereas all of the certificate holders who accepted the payments made by the defendant upon the condition imposed by it, constitute a different class.

We believe this question has been considered and decided in the case of Stevens v. Cincinnati Times Star Co., 72 Ohio St., 112, 73 N. E., 1058, where the court considers this matter on page 154, and embodies its conclusion in the last sentence of the second paragraph of the syllabus. The court pertinently states on page 154:

“The rule is uniform that, in order to maintain a suit by one for the benefit of himself and others, there must be community of interest as well as a -right of recovery by reason of tbe same essential facts. Armstrong v. Treas., 10 Ohio, 235; Ohio v. Ellis, same volume, 456; Trustees v. Thomas, 51 Ohio St., 285, 295; Duncan v. Willis, same volume, 433.”

Judgment of tbe court below is affirmed, except as to the amount claimed by tbe plaintiff Weinreicb wbo bas constantly maintained bis right to a six per cent rate, and possibly Mrs. Dwyer.

Judgment accordingly.

Nichols, J., concurs.

Hornbeck, J., concurs in tbe judgment.

Nichols, J., of tbe Seventh Appellate District, sitting by designation in tbe Second Appellate District.

Hornbeck, J.,

concurring. I concur in tbe judgment and am of opinion that tbe fourth defense of tbe answer bas been established as against all persons whom plaintiff Weinreicb claims to have represented except himself and those wbo would not accept the checks issued by tbe defendant association.

Because of the judgment, it is immaterial whether this is a class suit. If tbe plaintiff Weinreicb could maintain bis contention that all claimants whom he seeks to represent were entitled to 6% interest on their claims, and that tbe acceptance of tbe checks afforded no consideration for tbe releases in full satisfaction signed by them, then all of such claimants would be in like status as that of tbe plaintiff and tbe suit would properly proceed as a class suit.

I do not agree that tbe claimants ’ acceptance of the checks, being an executed contract, afforded a consideration for tbe receipts, for tbe reason that we are precluded from properly so bolding by Yin v. Amino Products Co., 141 Ohio St., 21, 46 N. E: (2d), 610. I recognize the strength of Judge Geiger’s opinion and the dissent of Judge Hart in the cited case and that many states take a different view than that which was reached by the majority in the cited case.

I believe that there was a consideration moving between the parties in the tender and acceptance of the checks and execution of the receipts therefor. At the time that the checks were tendered there was manifest uncertainty as to the rights of the claimants to collect six per cent interest instead of the rate specified in their certificates from the association. Nor had there been an adjudication on the subject. The checks were delivered under date of October 1, 1940, and the opinion of this court in the Goldswig case was not released until 1943 and, even then, the question there decided was not identical with the one presented here. This uncertainty on behalf of the claimants as to their right to collect a full six per cent instead of their contract rate, would support their'aeeeptance of a lesser sum and afford a consideration for the releases executed by them.


source: Caselaw Access Project

author: Carter, J.

license: Public Domain

text:
    Fowler, Appellant, v. Young et al., Board of Education of City of Youngstown, Appellees. (Two cases.)
    (Nos. 3004 and 3005
    Decided April 24, 1945.)

      Messrs. Williams S Stanley, for appellant.

      Mr. W. P. Barnum, for appellees.

      Mr. G. J. Hoyt, amicus curiae.

   Carter, J.

The parties will be designated as plaintiff and defendants.

This action had its origin in the Court of Common Pleas of Mahoning county, Ohio, under and by virtue of the provisions of Section 7690-6 (now Section 4842-12), General Code.

Plaintiff alleges in her petition substantially as follows : That the defendants are the duly elected or appointed, qualified and acting members'of the Board of Education of the city of Youngstown, Mahoning county, Ohio; that by an order of the Common Pleas Court of Mahoning county she was granted a continuing contract to teach in the schools in the city of Youngstown, the effective date thereof being the second day of September 1941; that on or about the eighteenth day of September 1942, she received notice from the board of education that it was its intention to cause the termination of her contract of September 2, 1941; and that the written communication further stated:

“I am further instructed to advise you that the grounds for such consideration are gross inefficiency and other good and just causes as. hereinbefore more fully stated and which were the basis of the superintendent’s failure to reappoint you in June 1941. These grounds include inability to maintain discipline either in your own classroom or in study hall, inability to make simple routine reports on time and accurately, inability to carry out simple directions of the principal as a supervisor of instruction, inability to handle any extra-curricular activity satisfactorily, and inability to command the respect of pupils.”

Plaintiff further alleges that she requested she be given a hearing as contemplated by Section 7690-6, General Code; that on the 15th day of September 1943, a hearing was had before the board; that on the 30th day of September 1943, she was notified by the board that the contract between the parties was terminated; that a record and transcript of testimony before the board was taken and transcribed; and that the action of the board^in terminating plaintiff’s contract is contrary to law and against the weight of evidence in the following respects. Then follows eight respects in which it is. urged that the finding is contrary to law and against the. weight of the evidence, to which reference will be made further on in this opinion. The prayer is that plaintiff be given an opportunity for the presentation of additional testimony, for an order reversing the decision of the board of education, and for an order commanding and requiring the board to reinstate this plaintiff under the provisions of her contract of September 2, 1941. •

^ To this petition an answer was filed by the defendants, in which they admit, that they are the duly elected, qualified and acting members of the Board of Education of the city of Youngstown, Mahoning county, Ohio; that by an order of the Common Pleas Court of Mahoning county plaintiff was granted a continuing contract to teach in the schools of the city of Youngstown as of the second day of September 1941; that plaintiff received a notice that it was the intention of the- board to cause the termination of her contract; that a request was made that she be given a hearing as provided by law; that a hearing wás conducted by the board and plaintiff was personally present, represented by counsel during the hearing; that plaintiff was notified of the termination of the continuing contract ; and that a record of the testimony adduced before the board was taken and transcribed. Defendants then deny each and every allegation of fact in plaintiff’s petition contained not admitted to be true, and allege that the board had jurisdiction to hear and determine the matters presented; that the charges preferred were in conformity with law; that the evidence received was proper and admissible; that the motion of plaintiff made at the close of all the evidence in the hearing was properly overruled; and that the board acted within its discretion and with good faith made its determination upon the charges.

On hearing in the Court of Common Pleas the following entry appears:

“This day the above cause came on for hearing upon the petition of plaintiff and answer of defendants thereto. Additional evidence having been offered and received, and the court, being fully advised in the premises, finds that the sole function of this court of appeal under G-eneral Code 4842-12 from an order of the board of education terminating a teacher’s contract is to determine whether grounds for such termination were fairly and lawfully found by the board to have existed, and to have existed after the date the contract took effect; the board had before it the testimony of the teacher’s superior, under whose supervision and observation she had been for fourteen (14) years; to evaluate her services as to efficiency he must be given the legal status of an expert witness; he gave the teacher a rating amounting to gross inefficiency and declared it as his opinion that such inefficiency was permanent; if permanent it necessarily was existent during the contract period terminated; the board had a legal right to believe this testimony and to base its decision, as it obviously did, thereon; this court has no power under the appeal statute to inquire into and find as on an original hearing whether the grounds for termination existed; finding there was substantial legally competent evidence as a basis for the board’s action, nothing remains for the court but to affirm the same.

“Wherefore, it is ordered, adjudged and decreed that plaintiff be and is her'eby denied the relief as prayed for in her petition; and it is further ordered, adjudged and decreed that the finding and judgment of the Board of Education of the city of Youngstown be and is hereby affirmed. Plaintiff’s motion for new trial, as filed herein, be and is hereby overruled. ’ ’

Appeal is prosecuted to this court. There is no question that plaintiff was entitled to a continuing contract ■ under the provisions of former Section 7690-1, General Code. That question has been adjudicated by an action in mandamus, and plaintiff was awarded by the board a continuing contract as of September 2, 1941. However, the board subsequent thereto, to wit on September 18,1942, notified plaintiff that it contemplated terminating the contract. On September 15, Í943, a hearing was had by the board' and it found from the evidence adduced that the contract should be terminated on the grounds that plaintiff was and is unable to maintain discipline, to carry out school rou- . tines on time and accurately, unable to carry out directions of principal and supervisors, unable to handle extra-curricular responsibilities, and unable to maintain the respect of pupils; that the exhausted and listless spirit which indicated inadequate physical strength for teaching and her emotional instability seem clearly to be prevalent now; that the inefficiency is gross in nature, and that the grounds set forth for the termination of the contract are such as clearly to show gross inefficiency and other good and just causes as before set forth, all of which existed as of September 1, 1941, and have continued- since that date.

Appeal was prosecuted from this finding to the Common Pleas Court, under and by virtue of the provisions of. Section 7690-6. (now Section 4842-12), General Code, wherein by agreement of counsel additional evidence was presented. That finding was affirmed by the Common Pleas Court. There appear in the record two notices of appeal, one on questions of law filed on May 9, 1944, and one on questions of law and fact .filed on May 10, 1944; both appeals being from the same judgment entered on April 27, 1944. However, the brief filed by counsel for plaintiff appears to be prepared on the theory of an appeal on questions of law, and we will so treat the appeal.

It is. stated in plaintiff’s brief that the following are the questions involved for consideration and determination by this court, to wit: That the board of education is and was without jurisdiction to hear and determine the case for the reason that all the offenses charged occurred before the passage of the Teachers’ Tenure Act, effective as to certain teachers on September 1, 1941, and that the board is estopped from inquiring into plaintiff’s conduct prior to September 1, 1941; that plaintiff was never given opportunity to teach under the new contract which became effective on September 2, 1941; that there existed the same grounds for removal prior to September 1, 1941, under and by virtue of the provisions of Sections 7701 and 7708, General Code; and that there is a presumption of law that a teacher is competent after having taught five consecutive years.

As to jurisdiction, there are a number of stipulations found in the record not necessary to enumerate. Jurisdiction was challenged and objection was made to the introduction of evidence. We are at a loss to understand this non-jurisdictional claim. The person and subject matter were within the jurisdiction of the board. The board might be in error in admitting certain evidence. However, such would not deprive the board of jurisdiction. If therg was no competent evidence or evidence of probative value introduced, plaintiff would be entitled as a matter of law to a judgment of dismissal of the charges filed against her. Clearly, Section 4842-12, General Code, confers upon the board jurisdiction to hear and determine grounds for terminating a continuing contract. Unquestionably the board had original jurisdiction to hear and determine the particular charges filed in the case at bar. Whether the - so-called offenses (which I prefer to call disqualifications) in the case at bar existed prior to September 1, 1941, and regardless of whether the teacher’s disqualifications were challenged prior thereto under the provisions of Sections 7701 and 7708, General Code, in the latter’s instance the school authorities might have been long suffering in their attitude toward the plaintiff and have felt that, in the interest of the school, removal should be effected now due to accumulation of grievances. Jurisdiction may be defined as power given by law to hear and decide controversies. We think the board had undoubted jurisdiction to hear and determine the charges.

As to the disqualifications charged having occurred before the passage of the Teachers’ Tenure Act, a number of cases are cited by counsel for plaintiff wherein it is claimed that such evidence cannot be considered. We will not enter into a discussion of all the cited cases, but will make reference to the latest pronouncement of our Supreme Court bearing on thi« question. It appears that counsel on either side cite this case as authority in support of their respective claims. I refer to the case of State, ex rel. Weekley, v. Young et al., Board of Education of City School District of City of Youngstown, 141 Ohio St., 260, 47 N. E. (2d), 776, which was decided on March 24, 1943. That case deals with portions of the Teachers’ Tenure Act. It was an action in which the relatrix, Bertha Weekley, was seeking a writ of prohibition to prevent this same board of education from proceeding with the hearing to terminate the continuing contract which existed between the board and relatrix. Judge Williams writing the opinion, in which the entire court concurred, stated:

“A board of education, under and by virtue of Section 7690-6, General Code, has full authority to terminate a contract of that character in every instance in which a statutory ground therefor is shown to exist subsequent to the effective date of the contract.”

In the Weekley case the board failed and refused to enter into a continuing contract with the teacher pursuant to Section 7690-1 et seq., General Code. A writ in mandamus was allowed by the Common Pleas Court, and accordingly on June 1,1942, a contract was entered into as of September 2, 1941. However, relatrix was not assigned by the board to teach in the public schools of the district. The contention of the relatrix was that the charges contained in the written notice served upon her related to a period previous to the date the continuing contract became operative. The court in its opinion stated:

“The contention of relatrix that the charges contained, in the written notice served upon her and quot- ' ed above relate to a period previous to the date the continuing contract became operative is not well founded. The notice recites merely that gross inefficiency and other good and just causes, including inability to maintain discipline and lack of ability to plan work, together with a highly emotional state, all of which are alleged .grounds for the termination of the contract, were also the reasons for the failure of the superintendent to reappoint her in June 1941. Clearly the written notice specifies disqualifications covering a period during the existence of the contract.”

The disqualifications urged in the case at bar are of a similar character as those specified in the Weeldey case, and, on the basis of the reasoning found in the Weeldey case> evidence substantiating the charges was competent. The written notice in the case at bar specified disqualifications covering a period during the existence of the contract, particularly in the light of the testimony of the principal of the school under which plaintiff taught for many years, wherein he testifies that the disqualifications were of a permanent character and that these disqualifications not only existed prior to the entering into of the continuing contract, but in his judgment still are existent. Gross inefficiency if existent after the date the contract took effect would warrant such termination even though the employed teacher never taught under that particular contract. Such is the holding of the court in the Weeldey case. One can readily conceive of a situation where a contract could not be terminated upon ground occurring prior to the effective date of the contract. However, these charged disqualifications are of such a character that according to the evidence they exist now and did exist subsequent to the entering into of the continuing contract. We think the Supreme Court in the Weekley case disposes of the question raised that the teacher never taught under the continuing contract. Such would not prevent termination.

We also think the Supreme Court in the Weehleip case made disposition of the question of estoppel as urged under the provisions of Section 7701, General Code, wherein the court stated:

“In our judgment the respondents are not estopped because grounds of dismissal existed during the period of the prior contract. When the continuing contract was entered into, the provision in Section 7690-6, General Code, as to grounds for termination or suspension of a contract, was read into and became a part ■ of the contract as made. Palmer v. Tingle, 55 Ohio St., 423, 45 N. E., 313. To hold otherwise would nullify the statute and defeat one of its purposes. So the very agreement of relatrix of itself’would prevent the operation of estoppel.”

The court also held:

“The judgment in mandamus, likewise, could not on the theory of former adjudication or res judicata bar the right of the respondents to terminate relatrix’s present contract on statutory grounds.”

In the Weehley case the court also held:

“The -respondents have jurisdiction to proceed to determine the charges, and the statute affords to the teacher, if aggrieved, a remedy that is full, adequate and complete.”

As to the evidence supporting the charges, it would serve no useful purpose to quote the evidence as disclosed by the record. There were before the board and the Common Pleas Court the statement df Dr. Harvey, the cross-examination of plaintiff, and the testimony of Howard W. Phillips, principal under whom plaintiff taught for many years. The rating sheets are in evidence and indicate the evaluation of plaintiff’s rating as a teacher according to Mr. Phillips. These evalúations as disclosed are certainly far below satisfactory ratings required. In the light of that testimony the board could very properly terminate the contract under the charges filed, and the Court of Common Pleas was not in error in holding that there was substantial legal compétent evidence for the board’s action in terminating the contract.

It is urged also that a presumption arises that a teacher, having taught five years, is presumed competent. Assuming such to-be true, such is not a conclusive but a rebuttable presumption. We think that any presumption arising as urged has been met and overcome by evidence as disclosed by the record. At least such was a question for the board.

Now it is urged that the testimony of the witness Phillips was incompetent for the reason that such testimony was an answer to the identical question the board was called upon to answer. In this we cannot concur. Teaching is an art as well as a profession and requires a large amount of preparation in order to qualify one in that profession. The ordinary layman is not versed in that art, neither is he in a position to measure the necessary qualifications required for the teacher of today. In our judgment this information can be properly imparted by one who is versed and alert in the profession and aware of the qualifications required.

Rogers on Expert Testimony (3 Ed.) in the introductory remarks of that work states at page viii:

.“The testimony of the expert is- admitted upon the theory that in the particular case, the issue is such that the jurors are not competent to draw their own conclusions from the facts without his aid. The purpose of his testimony is, then, to enlighten the jurors as to the significance of the facts involved in the inquiry and thus to aid them in reaching correct conclusions. The line of demarcation between matters that fall within the knowledge of mankind generally and matters that are the subject of special and peculiar knowledge cannot, from the nature of things, be accurately described. The one of necessity shades into the other, and though the extremes are readily determinable, appellate courts are fairly unanimous in vesting the judge with a measure of discretion whether he will or will not admit opinion evidence in cases which fall within the doubtful zone.”

We think there was no abuse of discretion in permitting the witness Phillips to testify.

Further, we might suggest that there is other evidence in the record in addition to the testimony of Mr. Phillips which would amply justify the board’s finding and affirmance by the court. I speak of the rating record, to wit the required standards and the lack of qualifications to measure up to that standard.

There is, therefore, sufficient competent evidence outside the testimony of Phillips which would justify this action by the board.

For this reason, however, we think the principal, Phillips, with the years of experience possessed by him can be classed properly as an expert in the teaching profession, and is in a similar position as a doctor in the medical profession. His testimony was not incompetent and certainly was an aid to the board and to the court in arriving at their respective conclusions.

While this case was pen-ding in this court, C. J. Hoyt, an attorney of the Mahoning county bar, who appears to be interested on behalf of some clients involving similar questions, sought permission to appear as amims curiae. The court permitted such appearance, and thereupon he filed a rather elaborate brief dealing particularly with the conclusions reached by the Common Pleas Court as to the functions that court on appeal was called upon, to perform. The Court of Common Pleas permitted additional evidence to be introduced, and held that his sole function on appeal under Section 4842-12,-General Code, was to determine whether grounds for such termination were fairly and lawfully found by the board to have existed and to have existed after the date the contract took effect. The Common Pleas Court held also that the testimony of the principal, Phillips, must be given the status of an expert witness and found that the rating which he had given plaintiff amounted to gross inefficiency. The court further held that the testimony was to the effect that the inefficiency was permanent and by reason thereof it necessarily was existent during the contract period terminated; that the court on appeal had no power under the appeal statute to inquire into and find as on an original hearing whether the grounds for termination existed; and that, since there was substantial legally competent evidence as a basis for the board’s action, nothing remained for the court but to affirm same.

It is from the conclusion of the trial judge that he had no power to consider the matter ele novo and that his sole function was to determine whether the action of the board was fair and lawful that counsel amicus curiae claims the holding was not proper and was erroneous. Such counsel questions also the holding of the court that the principal’s testimony was competent. He claims that the appeal provided for teachers under the Teachers’ Tenure Act contemplates an appeal de novo; that additional testimony may be offered and the court is bound to receive it; and that the court thereupon makes an original determination as to whether the contract should he terminated regardless of, and independent of, the hoard’s finding. In other words, the claim is made that the court is substituted in the place of the board on the appeal and hears same as though there had been no prior hearing or determination.

As to the competency of the testimony introduced, we have álready made disposition of that question. heretofore in this opinion.

As to the right to hear additional testimony on appeal, the statute provides that the Common Pleas Court shall examine the transcript and record of the hearing before the board of education and shall hold such additional hearings as it may deem advisable and may consider other evidence, in addition to such transcript and record. Unquestionably the court is authorized to hear additional evidence on appeal. Such was done in this case. We are frank to say that just what sort of hearing is contemplated on an appeal under this section has given us some trouble, and considerable time has been spent in trying to reach a conclusion reasonably satisfactory. We have many administrative boards in the state of Ohio exercising legislative and executive functions and possibly gwasi-judicial functions, and the Legislature creating these various boards has fixed the procedure to be followed in original hearings before the administrative boards and on appeal. There is considerable variance in the procedure to be followed on original hearings before the boards and on appeals from the findings of the various administrative boards. Therefore the holdings of the courts with respect to'the procedure to be followed in certain instances under the various statutes are not always helpful in determining the modus opercmdi to be followed in any particular instance.

We might observe that there is grave doubt as to whether the questions raised by counsel amicus cu- riae in this case, if such raise a constitutional question, can be raised at all due to the fact that the plaintiff has herself invoked this statute on her appeal from the finding of the board. It appears to us that it is rather novel that one may invoke a statute, seek its protecting power, and after a decision unfavorable attáck the very statute invoked. Neither was the constitutionality of the statute attacked before the board nor was it challenged in the Common Pleas Court, and it is raised for the first time in this court. However we are not treating the question raised as a constitutional one but one of construction and application. There are some cases holding that the constitutionality of a statute may be attacked even upon appeal from a finding by an administrative board. It appears to us that the question raised must be determined through and by a construction of the statute in question which permits the appeal.

What sort of an appeal did the Legislature contemplate in the enactment of Section 4842-12, formerly Section 7690-6, General Code? That section provides in part:

i i * * * Any teacher affected by an order of termination of contract shall have the right of appeal to the Court of Common Pleas * * *. Such appeal shall be an original action in said Common Pleas Court and shall be commenced by the filing of a petition against such board of education, in which petition the facts shall be alleged upon which the teacher relies for a reversal or modification of such order of termination of contract. Upon service or waiver of summons in said appeal, such board of education shall forthwith transmit to the clerk of said Common Pleas Court for filing a transcript of the original papers theretofore filed with said board and a certified transcript of all evidence adduced at the hearing or hearings before such board, whereupon the cause shall be at issue without further pleading and shall be advanced and heard without delay. The Common Pleas Court shall examine the transcript and record of the hearing before the board of education and shall hold such additional hearings as it may deem advisable, at which it may consider other evidence in addition to such transcript and record.” (Italics ours.)

The section further provides:

“Upon final hearing, the Common Pleas Court shall grant or deny the relief prayed for in the petition as may be proper under the provisions of law in accordance with the evidence adduced in the hearing. Such an action shall be deemed to be a special proceeding within the purview of Section 12223-2 of the General Code and either the teacher or the board of education may appeal therefrom.”

With the provision in the statute that the facts shall be alleged upon which the teacher relies for reversal or modification of thev order of termination of contract it appears to this court that it was the intention of the Legislature, which is an important matter to consider, that the Court of Common Pleas shall examine the transcript and record of the hearing before the board, may consider also additional evidence taken in that court, and thereupon consider all of the testimony in reaching its conclusions as to whether the finding of the board should be reversed or whether there should be some modification of the order. The statute, therefore, provides for a judicial review of the board’s action. Judicial review does not necessarily mean trial de novo. Surely if the Legislature had intended that this was to be a trial de novo there would be no necessity for making provision for reversal or modification. A trial de novo connotes an examination of testimony and an independent finding made as fully as though the action was originally instituted in that court, in which event it would be immaterial what errors were committed in the hearing before the board. Also it would be immaterial what the findings of the board were.

What are the functions of the trial court under the provisions of that section? On what grounds may the Common Pleas Court reverse or modify the finding of the board? The statute is silent on that question. Ordinarily the court on appeal from findings of fact by an administrative board will not weigh the evidence, but will look to the record to determine whether there is evidence of probative value or sufficient competent evidence to substantiate the board’s finding; if so, the appellate court will not disturb that finding.

We think the court in this case had the power and authority after consideration of all the evidence to reverse the board’s action on the ground that its finding was against the. manifest weight of the evidence, for admission of incompetent evidence if prejudicial to plaintiff, or for any other good and proper reasons which were prejudicial to plaintiff; and the court may, where the evidence warrants such action, modify the board’s finding, or the court may affirm, which was done in the case at bar on appeal.

The statute provides further that upon final hearing the Common Pleas Court shall grant or deny the relief prayed for. A glance at the prayer of the petition of plaintiff discloses the relief - sought was that of reversal of the action of the board. Plaintiff was not entitled to a trial de novo. She has had a judicial review of her case.

The remaining question left for consideration is: Did the Common Pleas Court on appeal apply this statute too narrowly? As above indicated the court held that his only function was to determine whether grounds for such termination were fairly and lawfully found by the board to have existed. The entry of the court is to the effect that after consideration of all the evidence there should- be no reversal or modification of the board’s order of termination and then that order is affirmed. The court refused to reverse the order. In other words, the court held the evidence disclosed that the board’s action was justifiable, not contrary to law or against the manifest weight of the evidence, but supported by legally sufficient evidence; denied the. prayer for reversal and further found he had no right to hold trial as on appeal de novo, that is to substitute the court in the place of the board. We concur in that conclusion of the trial court.

Judgment of the Common Pleas Court affirming the finding of the board of education is affirmed.

We might refer counsel to a very able discussion of the subject “Public Administrative Law” with a large array of supporting citations in 42 American Jurisprudence, 281 et seq.

Judgment affirmed.

Nichols, P. J., concurs in the judgment and syllabus.

Phillips, J., concurs in paragraphs two, three, four and five of the syllabus, but dissents from paragraph one of the syllabus and from the judgment.


author: By the Court.

text:
    Jacobs, Exr., Appellee, v. Jacobs, Appellant, et al.
    (No. 972
    Decided September 29, 1944.)

      Mr. William P. Moloney, Messrs. Moloney-S Kelly and Mr. Paul D. Smith, for appellee.

      Mr. John H. Clark and Mr. J. D. Williamson, for appellant.
   By the Court.

This is an appeal on questions of law and fact from a judgment of the Court of Common Pleas of Marion county in an action therein wherein the appellee, Edward Jacobs as executor of the last will and testament of George Jacobs, deceased, was plaintiff, and the appellant, Dora Jacobs, was one of the defendants,.

This action was instituted by the plaintiff for authority to sell certain real estate of his decedent to pay debts. ’ . ■

The cause is submitted to this court on motion of plaintiff to dismiss the appeal of defendant Dora Jacobs on questions of law and fact.

The pleading filed by defendant Dora Jacobs to the plaintiff’s first amended petition, although designated as an answer, is both an answer and cross-petition, and the' cross-demand stated therein constitutes an equitable cause of action for foreclosure of a mortgage securing the payment of a note of decedent, on which a separate action might have been maintained.

The prayer of the answer which, as above mentioned, constitutes a cross-petition is for a finding of the amount due on the note, and that the mortgage lien securing the payment of the same is a first and best lien on the real estate sought to be sold. The prayer asks that the defendant have equitable relief, and that the real estate be sold to pay the debts of decedent, including the mortgage indebtedness of defendant. Judgment for the amount found due on the note is not asked in the prayer.

The pleading filed by the plaintiff to the answer and cross-petition of defendant Dora Jacobs, although designated a reply, constitutes an answer to the cross-petition.

The cross-petition in the instant case differs from the petitions in the cases of Gowdy v. Roberts, 31 Ohio App., 33, 166 N. E., 141, and Cleveland Liberty Bank v. Wanda Bldg. Co., 33 Ohio App., 548, 170 N. E., 38, in that it pleads a single cause of action which is essentially equitable in its nature (27 Ohio Jurisprudence, 594, Section 384), and does not plead a cause of action at law and one in equity, as the petitions do in the cases mentioned.

The nature of the cross-demand, constituting an equitable cause of action, pleaded in the cross-petition is not changed in any way by the allegations of the answer thereto which, as above mentioned, is designated a reply.

“* * * while an equitable defense merely will not affect the mode of trial or right of appeal, yet an equitable cross-demand set forth by a defendant in a cross-petition upon which he asks affirmative. relief, will draw to itself the mode of trial appropriate to such cause of action, and give the same right of appeal as it would do if set forth in a petition by the plaintiff in an action.” Gill v. Pelkey, 54 Ohio St., 348, 361, 43 N. E., 991. See, also, Lust v. Farmers’ Bank & Savings Co., 114 Ohio St., 312, 151 N. E., 189.

As the cross-demand set forth by defendant Dora Jacobs in her cross-petition is purely equitable in its nature and as she asked affirmative relief upon such cross-demand, such cross-demand instituted a chancery case triable as such, and the defendant Dora Jacobs is entitled to appeal on questions of law and fact from the judgment rendered on her cross-demand.

The motion to dismiss the appeal on questions of law and fact is therefore overruled.

Motion overruled.

G-ueensey, P. J., Jackson and Middleton, JJ., concur.