text:
    HEARING OF CAUSE OUTSIDE OF JURISDICTION BY CONSENT.
    [Circuit Court of Cuyahoga County.]
    John B. Stark v. William Treat et al.
    Decided, November 7, 1904.

      Justice of the Peace — Cause Heard, Outside of Township — Judgment Valid, When.

    A justice of the peace, having jurisdiction of the subject-matter, may by consent of all the parties hear the evidence and the arguments outside of the township in which he resides and for which he was elected.
    Marvin, J. (orally); Hale, J., and Winci-i, J., concur.
    Appeal by plaintiff.
   The .defendant, Treat, was a justice of the peace of Brooklyn township, in this county. The defendant Bell was a special constable acting for said justice of the peace. The defendant, F. -, brought a suit against the plaintiff, Stark, before the defendant, Treat, tlie justice of the peace. The papers, summons and the like, in this suit were issued by said justice in Brooklyn township where he lived, and in which township he was elected. By consent of all the parties to the case, the testimony was taken in the township and city of Cleveland, in the same county. The judgment was entered upon the docket of the justice of Brooklyn township. Whether the actual writing was done in Brooklyn township or not does not appear. It is immaterial. The only question is, may a justice of the peace, having jurisdiction of the subject-matter, by consent of all the parties hear the evidence and arguments outside of the township in which he lives and for which he was elected.

The statute on the subject is Section 582, Revised Statutes, which provides:

“The jurisdiction of justices of the peace in civil cases, unless otherwise directed by law, is limited to the township wherein they have been elected, and wherein they reside; but no justice of the peace shall hold court outside the limits of the township for which he was elected.”

The statute, as it now reads, was enacted on the 19th day of April, 1898. Prior to that, the section read exactly as it now reads, with the exception of the words “but no justice of the peace shall hold court outside the limits of the township for which he was elected.” That sentence was added as an amendment to the statute as it was before. Should it be held that the statute as it now reads should prohibit a justice of the peace from hearing the evidence in a case and the arguments of counsel in a township other than his own, where the parties consent? It seems to us that the addition of these word's to the section make it mean nothing other than it meant before. The justice had no jurisdiction before outside of his township and it is only by virtue of the statutes giving jurisdiction that courts have jurisdiction. It is a well-known fact that this court while sitting in this county has jurisdiction in Cuyahoga county only, and yet it is not an unusual thing for this court, by agreement of parties, .to hear the evidence and argument in appeal eases, and to hear the arguments in proceedings in error in this county of cases pending in other counties. It is not unusual that parties request that -the hearing be here; and we have in the same way heard in Summit county cases pending in Medina county.

There is a provision in the statutes that cases may be certified from one county to another, but not acting under that but simply by the consent of the parties that the case may be heard in another coiinty it has been done again and again. It is not an extraordinary thing. I have in mind now a case which lasted a considerable length of time, where a judgment of the court of common pleas of the second subdivision of this judicial district was heard by a judge of that subdivision in this county, which is, I think, the third subdivision.

When the parties have all consented that the hearing of a case shall be in a given place, there seems to be no good reason why such hearing should not be treated as a hearing within the limits of the territory in which the court has jurisdiction. There are a number of authorities that go to support the proposition that parties may consent to a hearing outside of the territorial jurisdiction of the court. A case directly in point is found in 42 Fed. Rep., beginning at page 98. The facts in the case were these: A judge of the District Court of the United States was assigned by one of the judges of the Supreme Court of the United States to sit in a circuit other than that in which he resided, io-wit, in the district of Colorado. That was lawful, and the judge could be assigned so to sit. lie went to Colorado and heard the case in that district. Motion for new trial was made. lie went home to Nebraska, outside of the district of Colorado, and, by consent of all the parties, heard the motion for a new trial at his own home. His jurisdiction was thereafter questioned, and this language was used by the court:

William Howell, for plaintiff.

J, W. Syhora, for defendants.

“My jurisdiction to pass upon this motion is called in question on the ground that I am now acting under the order of Judge Brewer, which sent me to Colorado to hold circuit court in aid of the district judge. It was the pending litigation between these parties mainly which induced Judge Brewer to send me to Colorado, partly owing to the fact that Judge Hiallstt wished to be relieved from sitting in the cause on account of his relation to some of the parties. The trial of the cause would have been incomplete without -a final disposition of the motion for a new trial. The right to try the principal cause carries with it the incident. Had I remained at that court until the coming in of the motion for new trial, four days after the verdict, as I might well have done, no question could possibly arise as to my jurisdiction to pass upon the motion. Equally true must it be that' I might have returned to Colorado after the motion was filed, and taken it up and decided it. Counsel for both parties having agreed to waive the necessity or burden of such trip to me, my right to pass upon this motion must be viewed as if I had gone to Colorado, or remained there in the first instance, to hear the motion.”

We think that reasoning is good; that, applied to this case, the justice of the peace hearing the evidence and the argument in this township, by the consent of the parties, it is to be treated as having been heard in the township of Brooklyn and the case is to be treated as though tried in the township of Brooklyn. The suit here is brought to enjoin the justice, the constable and the plaintiff in the original action, from taking any steps toward the enforcement of judgment obtained by plaintiff against the defendant Stark. We think the petition should be dismissed. That will be done.


source: Caselaw Access Project

license: Public Domain

text:
    DEPOSITS IN INSOLVENT BANKS.
    [Circuit Court of Guernsey County.]
    P. L. Baker v. R. V. Orme and David Okey, as Receivers of The Commercial Bank Company.
    Decided, April, 1905.

      Banks — Deposit in, when Insolvent — To' the Knowledge of Cashier and Manager — Gan he Charged Against Fund in the Hands of Receiver, When.

    Where a general deposit was made in a bank which at the time is hopelessly insolvent, which insolvency is known to the cashier who is the general manager of the bank, and is unknown to the depositor, the other, officers of the bank taking no control over the business whatever, and immediately after siich a deposit the bank fails and goes into the hands of receivers, the funds coming into the hands of the receivers being more than the amount of such deposit and increased by the amount of the deposit — Held; The depositor has a right by a suit in equity against the receivers to charge such deposit upon the fund in the hands of the receivers and have the same paid in preference to the general creditors.
    Brief of Mathews & Mathews, attorneys for plaintiff:
    The knowledge of Patterson, as the cashier of the Commercial Bank Co., and as the general manager of the business of this bank, that this bank was hopelessly insolvent for a long time prior to the receiving of plaintiff’s deposit, is imputed to and becomes the knowledge of the bank. Patterson’s knowledge of the bank’s insolvency was acquired through a long series of transactions as cashier of the bank, but it makes no difference how he acquired this knowledge, if he had it prior to the time plaintiff made his deposit and held out the bank to plaintiff and to the public as solvent. Craigie et al v. Hadley, 99 N. Y., 131; St. L. Ry. Co. et al v. Johnson, 138 U. S., 567-76; Martin v. Webb, 130 U. S. 267; Bank v. Walker, 130 U. S., 267; Holden, Trustee, v. N. Y. & Erie Bank, 72 N. Y., 286.
    The fact that Patterson, the cashier, and Barber, the vice-president, who had knowledge that this bank was hopelessly insolvent, concealed its condition froip the othpr officers and direetors of the bank does not bring the bank, as a principal, within the exception to the rule as to knowledge as stated in Pomeroy’s Equity, Vol. 2, p. 122, Section 675, so as to relieve the bank of being charged with such knowledge, even though the insolvent condition of the bank was caused chiefly by loans made by the bank to Patterson and Barber, and to various corporations with which they were connected.
    The Commercial Bank being insolvent at the time it received plaintiff's deposit, which was during the last hour that the bank was open for business, and its insolvency being known to two of its officers, each of whom was also a director, the receipt of plaintiff’s deposit was a fraud upon him; no title passed to the bank, and he can reclaim and recover the whole amount of his deposit. Craigie v. Hadley, supra; St. L. Ry. Co. v. Johnson, supra; Beal, Recr., v. City of Somerville, 50 Fed. Rep., 647; Wasson v. Hawkins, 59 Fed. Rep., 233; City of Philadelphia v. Eckels, 98 Fed Rep., 485; City of Philadelphia v. Aldrich, 98 Fed. Rep., 487; Richardson v. New Orleans Coffee Co., 102 Fed. Rep., 785; Richardson v. N. O. Debenture Red. Co., 102 Fed. Rep., 780.
    Plaintiff’s deposit consisted of two checks and cash. One of the checks came into the hands of the first receiver appointed, and was collected by him. The other check was forwarded to the Commercial Bank’s correspondent on the day it was deposited, and the amount thereof credited to- the account of the Commercial Bank, and afterwards the amount of this check was paid to the receivers.
    Plaintiff having traced the proceeds of these checks into the receivers’ hands, is entitled to recover the amount thereof. Beal, Recr., v. City of Somerville, 50 Fed. Rep., 647; St. L. & S. F. Ry. Co. v. Johnson, 133 U. S., 566; Craigie v. Hadley, Recr., 99 N. Y., 131; City of Philadelphia v. Eckels, 98 Fed. Rep., 485.
    The cash deposited by plaintiff was mingled with the bank’s money within less than an hour before the bank closed on the last day it was open for business, and the amount of plaintiff’s cash deposit was only a small per eentage of the cash in the bank when it closed, which amount was placed in the receivers’ hands. It is conceded by defendants that the money which came into their hands, as receivers, was increased by the amount of plaintiff’s deposit; but it is claimed that he is not entitled to recover his cash deposit, unless he can trace the identical money in their hands, and that, since this cash deposit was mingled with the bank’s funds before the receivers took charge and possession of the funds and property of the bank, its identity has been lost and plaintiff can not recover the amount thereof.
    “The fact that the money was not marked, and by mingling with other funds of the bank lost its identity, does not affect the right to recover in full, if it can be traced to the vaults of the bank, and it appears that a sum equivalent to it remained continuously therein until removed by the receiver.” Massey v. Fisher, 62 Fed. Rep., 957.
    “It is not'essential to the right of a depositor to recover from the receiver of an insolvent bank money deposited after it was known by its officers to be insolvent, that he should be able to trace the identical money, but it is sufficient if the money which came into the receivers’ hands was increased by the amount of the deposit.” Richardson v. New Orleans Debenture Redemption Co., 102 Fed. Rep., 780.
    “Where money and checks are unsuspectingly deposited in a bank, which is known by its managing officer to be hopelessly insolvent, a few minutes before closing hour on the last day on which it does business, and the checks are subsequently collected by the bank’s clerk, the ivhole of the deposit is charged with a trust, and an equal amount may be recovered from the receiver who retains the specific money among the general mass of the bank’s funds.” Wasson v. Hawkins, 59 Fed. Rep., 233.
    Brief of Fred L. Rosemond, R. T. Scott and C. S. Turnbaugh, for defendants.
    The deposit was not for collection, nor a special deposit, but was a general one, and the relation of debtor and creditor, and not a trust, arose. Covert v. Rhodes, 48 O. S., 66, 71; R. R. Co. v. Bank, 54 O. S., 60, 71; Morse, Banks, Sections 186, 573, 575.
    Even if it had been a deposit for collection the fund can not be followed because of the indistinguishable mingling of the funds. Reeves v. Bank, 7 O. S., 465, 3d Syl., 482, 484; 2 Morse, Banks, Section 629.

      Baker can get relief only by actually or in effect obtaining a rescission, and the only basis suggested is fraud. Mere insolvency and not disclosing it are not enough; there is no presumption of fraud, and plaintiff must prove it. 2 Morse, Banks, Sections 629, 589; Quinn v. Earle cited 2 Morse, Banks, Section 629; 95 Fed., 728.
    There is no allegation of misrepresentation; the complaint is of silence only; and silence affords no ground for relief unless there were both knowledge and duty to disclose. Baker dealt with Scott, a mere employe, and knowledge on Scott’s part of insolvency is neither shown nor claimed. The knowledge which plaintiff must show is that of the board of directors. Balbach v. Frelinghuysen, 15 Fed., 675.
    Notice to one director is not enough. 1 Morse, Banks, Section 112; Story, Agency, Section 140c; R. R. Co. v. Everett, 19 C. C., 205.
    Knowledge of Patterson, cashier, and of Barber, .vice-president, does not bind the bank as to this transaction because (a) prior to this deposit both had absconded and their official connection with the bank had ended, and (6) because the insolvency was caused by their own frauds upon the bank, in violation of their duty, and concealed by them. Instead of giving information to the bank company they deceived it, and fled after ruining it. 1 Morse, Banks, Section 104a; Story, Agency, Section 210; 2 Pomeroy’s Eq. Jur., Section 674; Note 10 L. R. A., 706, “Exceptions to- Rule as to Imputed Notice."
    The -only decisions of the Supreme Court relate to the deposits for collection -only, -and the question made seems to be covered by no special case.
    Cook, J.; Burrows, J'., and Laubie, J., concur.
    Appeal from Common Pleas Court of Guernsey County.
   This action is for the purpose of charging the claim of plaintiff upon the funds in the hands of defendants, as receivers of the Commercial Bank Company, and to order the same paid out of the fund as a preferred claim.

The Commercial Bank Company is a corporation organized under the general corporation act of the state.

There is very little, if any, dispute about the facts in the case which are substantially as follows: On June 13, 1904, pi aintiff, who for a long time had been a customer of the bank, deposited money in the sum of $99 and two checks obtained from his customers, one for the sum of $169, drawn on the old Citizens Bank of Zanesville, and the other for the sum of $15 on the National Bank of Cambridge. The money and checks were credited as one item in the pass book of plaintiff and passed to his credit in the bank, he -at that time having a credit in the bank of $100, which made a balance in his account of $383. This deposit was made in the usual course of business of depositors, nothing be-, ing said about collecting the checks for plaintiff and no doubt it was a general deposit and the relation of debtor and creditor immediately took place.

The deposit was received by an employe of the bank w&o was authorized to receive the same. lie had been acting as assistant cashier for about a year, but was never elected as such by the board of directors.

In less than an -hour after the deposit was made the’.bank failed and closed its doors. The money was immediately'placed among the other money of the bank and became indistinguishably mingled with the same. The check on the old Citizens Bank of Zanesville was placed to the credit of the Commercial Bank Company by it, making a balance in favor of the same of $583.-55, which was paid over to the receivers by said old Citizens Bank and by them placed in the fund in their hands. The check for $15 was collected by the receivers from the National Bank of Cambridge and placed in the fund in their hands. There was on hand in money in the bank at the time of its failure, including the deposit of $99 made by plaintiff, the sum of $3,026.16 which went into the hands of the receivers.

The evidence further shows that at the time of said deposit and of the failure, the bank was hopelessly insolvent and had been for at least several months previously and that the cashier and vice-president had full knowledge of such insolvency, and that plaintiff had no knowledge of such insolvency whatever.

PI. C. Patterson was cashier of the bank at the time of its failure and had been- such cashier from, the time of its organization some three years previously. He was not only the cashier but had the general managment of the bank; conducting all its business; making all loans -and discounts and doing all its business. IP. O. .Barber-was the vice-president. ITe was the brother-in-law of Patterson, but gave the affairs of the bank practically no attention whatever, as was the case with the president, and all the directors except Patterson.

Patterson, the cashier,. and Barber, the vice-president, were largely engaged in outside enterprises, organizing and building street railways, electric plants, shoe manufactories and other concerns and were also largely interested in two other banks which were tributary to the Commercial Bank Company.

The failure of the bank was entirely through the overdrafts of Patterson and Barber, the money being used in bolstering up their outside enterprises. The money was drawn out upon their checks or obtained on debit slips all of which were charged up in their accounts and the books of the bank showed the condition of their accounts open to any one of the officers or directors desiring to examine the accounts. The overdrawing of their accounts had been going on almost from the organization of the bank. Neither Patterson nor Barber informed the president or any of the directors of the insolvency of the bank and they had no knowledge of such insolvency whatever.

Under these facts is the claim of plaintiff preferred and entitled to be paid out of the fund in the hands of the receivers in preference to the general creditors ?

Two reasons are strenuously urged by the attorneys for the receivers, why the same should not be so ordered;

First.. That the insolvency of the bank was due to the act of the cashier and vice-president in using the funds of the bank in bolstering up their outside enterprises which was a fraud upon the bank, and therefore their knowledge of the insolvency arising from such cause was knowledge obtained in a fraudulent act óf their own and such knowledge being withheld from the other officers and directors of the bank, then the bank is not chargeable with such knowledge.

Second. The money having been mingled with the other moneys of the bank before the bank failed and closed its doors and not being distinguishable, and one of the checks having gone to the credit of the bank and the other being collected by the receivers and also indistinguishably mingled with the funds of the bank, the same can not be recovered back in kind, and therefore the same can not be charged upon the fund in the hands of the receivers.

As to the first reason. There seems to exist an exception to the general rule that knowledge to the agent is knowledge to the principal, in this, that when an agent has in the course' of his employment been guilty of an actual fraud against his principal, contrived and carried out for his own benefit, and he intentionally conceals such fraud from his principal, then his' principal is not chargeable with such knowledge, even though the agent at the same time intended to defraud another party. The rule is most strongly stated in Pomeroy’s Equity, Section 675. It reads as follows:

“The second exception is much more important and of far wider application. It is now settled by a series of decisions, possessing the highest authority, that when an agent or attorney has, in the course of his employment, been guilty of an actual fraud, contrived and carried out for his own benefit, by which he intended to defraud and did defraud his own principal or client, as well as, perhaps, the other party, and the very perpetration of such fraud involved the necessity of his concealing the facts from his own client, then, under such circumstances, the principal is not charged with constructive notice of facts known by the attorney and thus fraudulently concealed. In other words, if in the course of the same transaction in which he is employed, the agent commits an independent fraud for his own benefit, and designedly against his principal, and it is essential in the very existence or possibility of such fraud that he should conceal the real facts -from his principal, then the ordinary presumption of a communication from the agent to his principal fails; on the contrary, a presumption arises that no communication was made, and consequently the principal is not affected with constructive notice. The courts have carefully confined the operation of this exception to the condition described where a presumption necessarily arises that the agent did not disclose the real facts to his principal, because he was committing such an independent fraud that concealment was essential to its perpetration; it has never been extended beyond these circumstances. It follows, therefore, that every fraud of an agent in the course of his employment and in the very same transaction, does not fall within this exception; and most emphatically it does not apply when the agent’s fraud consists merely in his concealment of material facts within his own knowledge from his principal.”

By reference to the notes to this section it will be seen that the rule is restricted to a very narrow compass, and it is doubted that the rule would apply to managing officers. (See eases cited in note.)

It will be observed that this rule only applies when an agent has, in the course of his employment, been guilty of actual fraud, contrived and carried out for his own benefit, by which he intended to defraud and did defraud his own principal, as well as, perhaps, the other party, and the very perpetration of such fraud involved the necessity of concealing the facts from his principal. Under such circumstances, the principal is not charged with constructive notice of facts known by the agent thus fraudulently concealed. Furthermore, it must be an independent fraud for his own benefit.

The facts in this ease fall far short of sustaining the exception to the general rule. Patterson and Barber, the cashier and vice-president, were the owners of more than one-half of the capital stock of the bank; they had large outside enterprises; the funds of the bank were being used by them in the prosecution of these enterprises; it went along for nearly three years from year to year; the money was drawn out by them by checking upon their accounts the same as any other customer or by debit slips placed in the cash tills.

What independent act or fraud was done by them, or either of them, that they should necessarily conceal from their principal? The books showed their entire course of dealing which were open to the directors and all officers of the bank which would entirely rebut any purpose of concealment. We, therefore, see no fact in this case to make it an exception to the general rule, that knowledge to the agent is knowledge to the principal and especially so where the evidence conclusively shows that Patterson was not only cashier in the ordinary sense, but that he had the entire control of the business of the bank.

The second claim of the receivers presents a question of more than ordinary importance.

As we have said, immediately upon making the deposit by plaintiff, the relation of debtor and creditor attached and the question presented is: Where a depositor makes a deposit in a bank under such circumstances, after the bank has become hopelessly insolvent, and of which hopeless insolvency the cashier, who is general manager of the bank, has full knowledge, and of which insolvency the depositor has no knowledge, and which deposit is indistinguishably mingled with the other funds of the bank, can such depositor insist that his claim shall be a charge' upon the fund in the hands of the receivers and have the same paid to such depositor in preference to the general creditors, when the fund which the receivers received, including such deposit, is more than the amount of the deposit made by such depositor?

This question, in so far as we are informed, has never been determined by our Supreme Court.

The cases of Reeves, Stephens & Co. v. The State Bank of Ohio, 8 O. S., 465, and Jones et al v. Kilbrett, 49 O. S., 401, are not applicable for the reason that the deposits made in those cases were for collection, while in this, as we have stated, the deposit was an ordinary one and the relation of debtor and creditor immediately arose.

Counsel on both sides have argued the question very elaborately and with much research, citing a large number of authorities.

We shall not attempt to enter into a discussion of the question or review these authorities at length; sufficient to say that in our judgment the plaintiff’s claim both for the money and checks should be paid by the receivers as a preferred claim and we base our judgment largely upon the ease of Quinn v. Earle, 95 Federal Reporter, page 728, a ease almost precisely like the one under consideration. The syllabus of that case is as follows:

“1. Banks — Insolvency—Recovery of Deposit From Receiver. — To authorize the recovery of a general deposit from the receiver of an insolvent bank on the ground that the bank was .insolvent, and known to be so by its officers when the deposit-was received, and that the fraud authorized a rescission of the contract by the depositor, the thing deposited, or its proceeds, must be capable of identification in the hands of the receiver, or it must appear that the funds coming into his hands were increased by that amount.

“2. Samé Proof, of Fraud in Receiving Deposit — Knowledge of Insolvency by O'fficers. — To constitute-fraud on the part of-a bank in receiving a deposit when insolvent, which will authorize a rescission by the -depositor, and a recovery of the deposit from a receiver subsequently appointed for the bank, the officers of the bank must -hav-e known or believed that it was insolvent at the time the deposit was received; and such knowledge can not be presumed, but must be proved. The mere fact that the bank was known by the officers to be in an embarrassed condition is not sufficient to establish fraud.”

In the opinion Mr. Justice G-ray, on page 730 and 731, says:

“The principle of equity invoked by the complainant’s bill is that where a bank, whose officers know it to be hopelessly insolvent, receives moneys- or checks on deposit on the very eve of its failure, it commits such a fraud on the depositor, who is ignorant of its condition, that he is entitled to reclaim the moneys or proceeds of checks. This proposition, thus stated, must be assented to. It is a development of the doctrine that a contract founded on fraud is void, and may be rescinded at the option of the defrauded party, -and can not be enforced against him, that no title to property so obtained passes, and that restoration of the property obtained by means of the fraud, if properly identified, can be compelled by appropriate proceedings in law or in equity. Considering the usage of business of the banks, when a general deposit is accepted by a bank, there is an implied contract between the depositor and depository, which creates the relation of" creditor and debtor between them. A fraud on the part of the bank which induces the deposit vitiates this, contract, at the option of the -other party, as fraud would vitiate any other contract, and no rights can arise -out of it to the bank. What the remedy will be, will depend in this ease, as in others, upon the situation of the parties and the subject-matter of the contract. Upon a rescission of the contract, and due notice thereof, the cheek or draft deposited, or the proceeds thereof, if sufficiently identified, may be reclaimed, if in the possession of the depository. With regard to personal property other than money, the question of identification is generally easy of determination. Not so of money, and perhaps some personal property other than money. If these be confused in the mass of exactly similar things, specific identification becomes impossible. But the more modern doctrine has come to be'that, where the fraudulent depositary so mingles goods which he 'has obtained by fraud with the mass of like goods of his own, the whole may be seized, or considered 'as held in trust, until equitable separation of the property of the defrauded party is made. So, advancing one step further, where money thus obtained has gone to swell the aggregate in the possession of the' fraudulent party, it may, under proceedings, be segregated in amount from such aggregate sum, and made the subject of a trust, in order to accomplish the ends of justice. If my bushel of corn be obtained from me by fraud, and be poured into the mass of similar grain in the biiij Of the party committing fraud, justice is satisfied, and’ no one can be wronged, by my having restored to me a bushel of the same grain .out of the 'bin, though the identical grains obtained from me are not restored. If, on the other hand, the funds in possession of the defrauding bank be not increased by the property or the money so obtained, so that the aggregate amount of assets for distribution among the general creditors is not made larger by reason of the plaintiff’s contribution thereto, then this extension of the doctrine of identification will not apply, and the complainant can not have remedy as for a preferred claim. All the cases referred to by the counsel for complainant are consistent with this -distinction, and the case of Bank v. Blackmore, 21 C. C. A., 514; 75 Fed., 771, distinctly elaborates the doctrine just stated; Judge Taft, who delivered the opinion of the court, saying:

“ ‘No authority has been cited to show that a claim founded on fraud is entitled to a priority over other claims. It is only where,, by the rescission of the contract out of which the claim arises, on the ground of fraud, the specific thing parted with, or its proceeds, can be sufficiently identified to be returned, that fraud seems to give a priority of distribution. It may not be necessary to show earmarks upon the proceeds of the thing parted with, to justify such a remedy; but it must at least appear that the funds in the hands of the receiver were increased or benefited by the proceeds, and tbe recovery is limited to the extent of this increase or 'benefit. In every ease relied on by counsel for appellant, recovery, if desired, was based on the fact that the property in the hands of the assignee or receiver of the person or bank against whom the claim of fraud, right to rescind, and priority of distribution was made, included in its mass either the very thing parted with, or its proceeds. Railway Co. v. Johnston, 133 U. S., 573; 10 Sup. Ct., 390; Armstrong v. Bank, 148 U. S., 50; 13 Sup. Ct., 533; Craigie v. Hadley, 99 N. Y., 131; 1 N. E., 537.’ ”

Mathews & Mathews, for plaintiff.

Bosemond, Scott & Turnbaugh, for defendant.

Decree in favor of plaintiff as prayed for in his petition.


text:
    INJURY FROM DEFECT IN A VEHICLE.
    [Circuit Court of Lorain. County.]
    George P. Walton v. Calvin Ensign.
    Decided, May 8, 1905.

      Negligence — Agency of Driver — Of a Team Negligently Allowed to Cause an Injury — Evidence—Where an Exhibit Sliows an Old and Bad Defect — Liability for Defective Vehicle in Another’s Hands.

    1. Where ownership is admitted by the defendant of the team and wagon, from the negligent management of which the plaintiff claims ,lo have suffered injury, it is error to take the case from the jury on the ground that no evidence has been introduced to establish the agency of the man in charge of the team.
    2. The introduction of a section of the wagon pole, the breaking of which led ,to the accident, constitutes evidence of negligence, when an examination' of the part exhibited shows that it has been for a long time in a bad condition.
    Marvin, J.; Winci-i, J., and Henry, J., concur.
    Tbe case of George P. Walton v. Calvin Ensign is a proceeding in error brought here, seeking to reverse the judgment of the court of common pleas. The parties here are as they were below. The plaintiff in error having been plaintiff below, and so of the defendant.
   Suit was brought by Walton v. Ensign, setting up that on the 24th of September, 1903, Ensign was the owner of a span of horses, harnessed to a wagon, and that by reason of the careless and negligent manner in which said team of horses were guided and driven by an agent and employe of Ensign,who had them under his charge, they ran away and ran against a horse owned by the pl-aintiff and killed it.

It is also charged in the petition that the tongue or pole of the wag'on, owned by Ensign, to which these horses were harnessed, and the neck-yoke and neck-yoke ring were insufficient for the purpose for which they were used; that they were out of repair, and that that fact was known to Ensign, and that by reason of these negligent acts on the part of Ensign’s agent in permitting the team to run away and run against the horse of the plaintiff, and also by reason of the negligence of Ensign in permitting his wagon to be used in this imperfect state of the pole and neck-yoke, Ensign is liable in -damages for the value of the property of the plaintiff, injured.

Ensign answered, admitting that he owned the team, that' they ran away and killed the horse of the plaintiff. He denies all acts of negligence, and he avers that the plaintiff was himself negligent in permitting his horse to be where it was at the time of the injury.

At the close- of the evidence offered on behalf of the plaintiff, which included as an exhibit a part of the wagon tongue or pole, some four and one-half feet long, the front part of that pole— at the close- -of that evidence, a motion was made to direct the jury to return -a verdict for the defendant. The record reads:

“Whereupon -counsel for defendant requested the court to arrest the testimony from the jury, an-d render a judgment for the defendant, on the ground that there was no evidence- presented by the plaintiff as to the agency alleged in plaintiff’s petition; that there was no evidence presented by plaintiff, showing knowledge on the part of the defendant of the defect in the tongue, as -alleged in plaintiff’s petition; that there- was no evidence showing that there was any defect in the tongue as alleged in plaintiff’s petition, and that there was no evidence that the defendant had in any way been negligent. ’

This motion was sustained by the court, and the jury were directed to return a verdict for the defendant.

As has already been said, it is admitted by the answer that the team and the wagon which collided with the horse of the plaintiff and killed it, was the property of the defendant Ensign.

There was no evidence, no witness testified to any agency of the man in charge of that team. And the court clearly understanding the law to require of the plaintiff that he establish the agency of the man in charge of Ensign’s team by evidence before he could recover, and having failed to do so was not entitled to recover. We understand the law to be otherwise.

It is laid down in Shearman & Redfield on Negligence, Section 158:

“When the plaintiff has suffered injury from the negligent management of a vehicle, such as a boat, ear or carriage, it is sufficient prima, facie evidence -that the negligence was imputable to the defendant, to show that he was the owner of the thing, without proving affirmatively that the person in charge was the defendant’s servant. It lies with the defendant to-show that the person in charge was not his servant, leaving him to show, if he can, that the property was not under his control at the time, and that the accident was occasioned by the fault of a stranger, an independent contractor, or other person, for whose negligence the owner would not be answerable. This view is supported by decisions, in which it was held sufficient evidence of the defendant’s negligence to show that the plaintiff was injured by something falling out of the window of the defendant’s house, or from a hoisting apparatus belonging to the defendant. ’ ’

Supporting the same proposition is the case of Norris v. Kohler, 41 N. Y., page 42. The syllabus reads:

“ In an- action for causing death in the streets of a city, charged to have been by the negligence of the defendant’s servants, evidence that the fatal injury was occasioned by a runaway span of horses and wagon, owned by the defendants — Held: Sufficient to authorize a jury to find persons in charge of such hox-ses and wagon to be his servants, although engaged at the time in a business which appeared to be that of another person, whose name, as carrying on such business, was painted upon the wagon. ’ ’

And on page 45 of the opinion, the court say this:

“Whether the driver of the wagon was the servant of the defendant, the evidence consisted, first, of the fact of ownership. The property being proved to belong to the defendant, it is urged that a presumption arises that it was in use for his benefit, and on his own account. This argument, I think, is a sound one. The ownership of personal property draws to it the possession. While no proof was given in the present case, separating the ownership from the possession and the presumption of law is, that the wagon and horses of the defendant were in use in his service, and on his account.”

Entertaining the view that the law is as declared in Shearman & Redfield on Negligence, which has been read, and as announced in the case from the opinion of which I have just read, we think it clear that it was error on the part of the court to take this case from the jury on the ground that no evidence had been introduced to establish the agency of the man in charge of this team.

And another ground on which the court took the case from the jury was, that there was no evidence showing knowledge on the part of the defendant of the defects in the tongue as alleged. As has already been stated, a part of that tongue, the part which is claimed was defective, was in evidence, and it is a part of the bill of exceptions; we think that an examination of that tongue would show that one might well think that it had been in a defective condition for a long time, and if that be so the jury might well have found, if they had been permitted to pass upon the question, that the owner of that team knew of the condition of that wagon pole. The neck-yoke itself was not introduced in evidence, the ring of the neck-yoke was not introduced; but the flange on the pole is defective, it is in a bad condition, and apparently has been so for a long time, and surely there should have been submitted to the jury the question, whether in the condition that wagon pole was, from its appearance, whether that did not make it probable that the owner, if a man of ordinary carefulness, would have known of its condition. The pole itself was evidence enough to go to the jury for them to pass upon the question of whether the owner had knowledge of its condition.

F. M. Stevens, for plaintiff in error.

L. B. Fauver, for defendant in error.

Reading further from the second section of Shearman & Red-field, from which I have already read—

“Acquiescence in the constant use of a vehicle may make the owner responsible for the negligence of those using it in connection with his business. And where -an injury is caused by defects in a vehicle or its loading, which the owner was bound to remedy, it is immaterial whether the persons in charge were his servants or not.”

It should be said that the evidence shows that while this team was running, the pole of that wagon extended out to the front of the horses five feet or more. The condition of the pole was such, is such now, as that one looking at it knows that it is now defective ; the fact that it is in the condition it is and has the appearance it has is well calculated to establish the proposition it had been in that defective condition for a long time, and we think it was clearly error for the court to direct the jury to return a verdict for the defendant. The judgment is reversed and the case remanded to the court of common pleas.


text:
    THE ISSUING OF STOCK AT LESS THAN PAR.
    [Circuit Court of Hamilton County.]
    E. A. Kinsey et al v. Mt. Auburn Cable Co. et al.
    Decided, March, 1905.

      Corporations — Sale of Stock at Less than Par — Permissible, When— Not Available to Promoters of New Enterprises — Nor to Give Special Terms to Those in Control.

    1. The legal propriety of a corporation issuing any of its stock at less than par, depends entirely upon the good faith of those participating in the transaction.
    2. While ordinarily a corporation is expected to 'receive the par value of the stoick issued by it, yet, where a corporation has become .embarrassed, for the purpose of saving its corporate life and prosecuting the ends for which it was organized, it may issue its stock for the best price it can secure therefor, as in the cases of Peter v. The Union Manufacturing Company et al, 56 O'. S., 181, and Nandley v. Stuts, 139 U. S., 417.
    3. The doctrine laid down in the above cases is not to be extended, to the organization, of a corporation or to the financing and flotation of new enterprises, and especially not to those of speculative character and problematic success.
    4. Neither will said doctrine be applied to permit those having the management and control in the organization and promotion of such enterprises to obtain any of the corporate securities on terms more favorable than those accorded to the other shareholders or offered to the public.
    Jelke, P. J.; Swing, J., concurs; Giefen, J., dissents from the finding and judgment.
   The Mt. Auburn Cable Company was incorporated under the laws of the state of Ohio, with a capital stock of one hundred thousand dollars. The purpose of this incorporation was to build a street railroad from Fourth street in Cincinnati through a portion of Mt. Auburn to Avondale. The construction of the road was begun in 1887, and completed for operation in June, 1888. On March 5, 1887, the capital stock of the company was increased to $300,000; of this $300,000, $174,000 was subscribed and paid for, so that in September, 1887, there was unissued in the treasury of the company $126,000 of this capital stock. At that time there was on hand a considerable quantity of mtuchinery and material for the construction and equipment of the road; but the road became embarrassed for want of sufficient funds for its completion. There were outstanding at that time promissory notes and acceptances to Messrs. Henry Martin, David Sinton, Rudolph Wurlitzer, Marcus Warth, and other stockholders and directors of the company, to the amount of about $77,000. In addition there were Henry Martin’s acceptances of $19,000. There were other obligations — on contracts for material and equipment — bringing the total obligations on or about October 18, 1887, to the siun of $152,731.44.

It appears that the holders of some of these claims were pressing for payment, and that in addition to the necessary liquidation of these outstanding claims some further money was needed to complete the road ready for operation.

It appears that after the transaction herein involved was consummated that there was actually raised the sum of $27,868.56 in addition to the funds used for the liquidation of the liabilities aforesaid.

It appears in evidence that the representatives of the Mt. Auburn Cable Railway Company had made strenuous efforts to sell the bonds and treasury stock of the company,’ but whatever their efforts may have been, or at whatever terms they had offered these securities to the general public, they had been unsuccessful.

It appears that the bonds of the company had, at times, in one or two sales, sold as low as eighty cents on the dollar; but for the most part they had brought par at all times, and were finally assumed by the Cincinnati Street Railway Company, and have at all times since then brought a substantial premium.

In September, 1887, The Cincinnati Traction & Construction Company was incorporated with a capital of $5,000, of which only ten per cent, was subscribed, and it does not appear how much, if any, of the sum subscribed was ever actually paid.

About this time the following arrangement was devised and entered into:

“Cincinnati, 0., October 13, 1887.

“We, the undersigned, agree to purchase from the Cincinnati Traction & Construction Company, one hundred and eighty first mortgage bonds of The- Mount Auburn Cable Railway Company, and twelve hundred and fifty shares of stock of said company — par value'of $100. Each of the undersigned to pay the sums of money set opposite our respective names for the purpose of making said (purchase. Said money to be paid to the treasurer of the Cincinnati Traction & Construction Company, payments to be made as follows: The notes of the Mount Auburn Cable Railway Company, held by any of us to be taken at their face value without interest, on account of said subscription and thirty-three and one-third per cent, of the balance cash on completion of this paper,” thirty-three and one-third per cent, in thirty days thereafter .and thirty-three and one-third per cent, in sixty days thereafter. We to take respectively and in our proper proportions for the amounts hereto subscribed by us, the 180 first mortgage bonds and 1,250 shares of stock aforesaid. A condition of this purchase that the December, 1887, coupons are not to be presented for payment prior to January 1, 1888. This agreement not to be binding unless $180,000 is subscribed:

“David Sinton .......... $ 23.000 00

“Henry Martin ......... 66,000 00

“Elijah Coombe ........ 8,OO'O 00

1 ‘ Rudolph Wurlitzer ..... 11.500 00

“James M. Potter ...... 4.500 00

“Marcus Warth ......... 12.500 00

“Wm. F. Irwin ......... 1.500 00

“I-I. H. Coombe ......... 1,000 00

“Alb. Erkenbreeher ..... 11.500 00

“A. E. Burkhardt ....... 5.000 00

‘ ‘ George Gerke .......... 2.000 00

“William Means ........ 2,000 00

“John R. DeCamp ...... 2,000 00

“Edward N. Roth ....... 2,000 0'0

“J. A. S. Gray.......... 8,000 00

“F. M. Joyce ........... 1,000 00

“Samuel W. Ramp, Agent, 2,000 00

“G. K. Duckworth ...... 2,000 00

“John B. Deiters ........ 1,000 00

“Broderick & Bascom Rope Co., Jos. W. Wayne,. .. 5.000 00

“Louis Van Antwerp, per J. H. M.,.............. 5,000 00

Total ..................................$180,000 00

“Completed October 17, 1887.

“John H. Martin.”

Thereupon the following contract was entered into:

“October 18, 1887.

“1. Mount Auburn 'Cable Railway Company.

“2. Cincinnati Traction & Construction Company.

‘ ‘ 1,250 shares stock of $100 each.

“180 first mortgage bonds, December, 1897, coupons attached.

“Party of the first part to correspond with contractors, etc., to receive all materials and issue its acceptance therefor.

“Seoond party to meet all acceptances as they mature, and hold first party free and harmless from any and all damages or expense by reason thereof.

“Party of second part agrees to assume the full obligations; to complete the unexecuted and partially executed contracts herein mentioned, and perform the labor specified:

“1. To complete the eight miles single track cable railway between southern treminus of Fourth and Sycamore, and the northern terminus Rockdale and Main avenues, using material of Mount Auburn Cable Railway Company on hand and unused, free of expense to said second party doing said work, in a good and workmanlike manner similar to the construction already begun by the- first party -and to its entire satisfaction restoring the streets to as good a condition as before being opened.

“2. To complete the contract between first party and Lane & Bodley.

“3. To assume the existing contract between first party and Brill Car Company for six grips and six coaches.

“4. To assume balance due on contract with L. Sehreiber Sons for street vault at power house. •

“5. To assume the cash payment when due on the contract between first -party and Broderick & Bascom Company.

“6. To complete the power house in accordance with the plans and specifications- at an expense not to exceed $2,500.

“7. To assume and pay all outstanding acceptances as of date fifteenth of September, 1887, reimbursing Henry Martin for all of same taken by him since that — total amount of same being $19,000.

”8. To furnish six grips and attachments complete as per plans and specifications of first party.

“9. To pay all expenses of draughting, pattern making, office rent, etc., riot to exceed $1,000.

“10. To complete all boulder pavement repairs required, not to exceed $200.

“11. To assume and pay the promissory notes of the Mount Auburn Cable Railway Company, amounting to $77,000, which were executed to certain stockholders of said company, returned the collateral security attached to them to the first party.

“ (Signed) Ti-ie Mount Auburn Cable Railway Co.

“Henry Martin, Pres.

“Wm. T. Irwin, Sec’y.

“October 18, 1887.

“ (Signed) The Cincinnati T. & C Co.,

“Sam. W. Ramp, Treas.”

After this arrangement was 'consummated, the road was finished and put in operation. It does not appear that the Cincinnati Traction & Construction Company ever actually did anything. There was no chang.e in the persons directing and managing the completion and construction of the road, and that, the same people and the same policy prevailed. The fact of the matter was and we do find, that the Cincinnati Traction & Construction Company was a mere fiction, and served no substantial purpose in effecting the things that were herein done. In fact, its presence and the part which it played, become almost a badge of fraud and created the gravest doubt and suspicion as to the good faith of those lending themselves to this arrangement. Page 89 of Journal No. 2, shows an entry made by Arch Irwin, the bookkeeper of the company, and a son of William F. Irwin, a director of the company and its secretary, which entry was dated October 1, 1889, made as follows:

“Construction Ac.

“To Cincinnati Traction & Construction Co., Dr.

“To amount of stock issued to purchasers of first mortgage bonds, as a bonus for purchasing them at par, $126,000.”

There is some dispute as to the authorization of this entry, but it seems to have been made in the usual course of business, and so far as the testimony shows, it seems to be in accord with the understanding of all parties interested and as a necessary and only way of balancing the funds of the company. The verity of this entry was never challenged until the construction of this transaction became important in determining the issue herein involved.

After the road was in operation, there were a second and third issue of mortgage bonds, so that finally there were outstanding $180,000 first mortgage bonds, $22,000 second mortgage bonds and $137,000 third mortgage bonds. Nearly all of these bonds were issued to and held by the same persons who had acquired $180,000 first mortgage bonds and the $126,000 stock under the agreement aforesaid. In fact, nearly all the money at any time put up or invested in this enterprise, was put up and invested by those who had originally gone into the enterprise and had had faith-in it, and who after they had made a considerable investment had of necessity to put in more to sustain the enterprise and secure their earlier investment.

The burden of carrying this enterprise seems at all times to have been about where it belonged.

In 1893 a receiver was appointed by the Court of Common Pleas of Hamilton County, Ohio, in an action to foreclose the third mortgage bonds of the cable company.

In 1895 the receiver sold the road and its property under order of the court for $350,000 to David Sinton, trustee for bondholders; in 1896 said David Sinton sold it to the Cincinnati Street Railway Company for $400,000, the first mortgage bond issue $200,000 and the second mortgage bonds outstanding, $20,000, being assumed as part thereof. In addition to the mortgage bonds, the referee found that there were unsecured debts amounting to $126,904.04, of which the following amounts were claimed by persons who subscribed and were parties to the agreement of October 18, 1887, aforesaid. Finally, on the report of the referee, the common pleas court made an assessment of .4975 per cent, on the stockholders, as follows:

Elijah Coombe, 10 shares ......................$ 497 50

H. H. Coombe, 10 shares ....................... 497 50

Chas. Cowie, 10 shares ......................... 497 50

Jno. B. Dieters, 17 shares ...................... 845 75

Jas. A. S. Gray, 25 shares...................... 1,243 75

Cath. N. ITauck, Extrix., 50 shares .............. 2,487 _50

Alfred ITill, 110 shares ........................ 5,472 50

Jacob Menderson, 25 shares ..................... 1,243 75

Henry Martin, 793 shares-....................... 39,452 50

Neva W. Martin, Trust., 1 share................. 49 75

Jas. M. Potter, 38 shares........................ 1,890 50

Lou. M. Porter, Extrx., 5 shares.................. 248 75

Chas. E. Page, 10 shares .......................' 497 50

David Sinton, 277 shares....................... 13,781 00

Hy. P. Smith, 50 shares........................ 2,487 50

Lewis Seasongood, 180 shares-.................... 8,955 00

Theo. Sengstak, 170 shares ..................... 8,457 50

Eleanor Tatum, 10 shares ...................... 497 50

Fred "Vogeler, 50 shares ......................... 2,487 50

Marcus Warth, 232 shares ...................... 11,542 00

Rudolph Wurlitzer, 25-5 shares .................. 12,686 25

Jno. W. Wayne, 34 shares...................... 1,691 50

Total shares, 2,362. Total ................$117,510 50

And entered up several judgments against such stockholders accordingly. To this entry Lewis Seasongood prosecuted his separate appeal to this court, his contention being that as against the claim of David Sinton, Joseph Wayne and others, aggregating $84,903.71, should be set off, their liability in that amount to contribute to the funds of the corporation on account of the $12-6,000 of its capital stock for which they paid nothing, -and which they received as- a' bonus for taking its first mortgage bonds.

Two questions are thus here presented:

First, one -of fact, whether the subscription of this $126,000 of capital stock and the consideration therefor are so interwoven with the sale and issue of the $180,000 -of bonds that it can not be ascertained what separable price, if any, was paid for the stock, and so that it can not be said that nothing was paid for the stock; and

Second, a mixed question of law and fact, whether this $126,000 of capital stock was subscribed, and issued under circumstances justifying in law its being given by the corporation as a bonus or being sold by the corporation at a price far below its face or par value.

On the first issue of fact we find that said stock was given by the corporation as a “tonus” in the sale of the bonds, and whether they were issued for absolutely nothing or for a consideration, the consideration, if any, was so small and insignificant to make as the same legal inquiry pertinent and the same principles of law applicable.

On the second question as to the circumstances under which a corporation may lawfully issue its capital stock as fully paid up at a price much below par, we are guided by a consideration of the following cases:

Fogg v. Blair, 139 U. S. Reports, page 118:

It is the settled doctrine of this court, as well as of the Supreme Court of Missouri, that unpaid subscriptions to the stock of a corporation constitute a trust fund for the benefit of creditors, which, may not be given away or disposed of by it, without consideration or fraudulently, to the prejudice of creditors.

While it is competent for a railroad corporation in Missouri, exercising good faith, to use its bonds and stock in payment for the construction of its road, it could not be rightfully, at least, •as against creditors or stockholders, issue its stock to contractors as full paid, without getting some fair or reasonable equivalent for it. What is such equivalent depends primarily upon the actual value of the stock at the time it was contracted to be issued, and upon the compensation which, under all the circumstances, the contractors were equitably entitled to receive for the particular work undertaken or done by them. The corporation could not, by its directors, sell or dispose of its assets to the prejudice of creditors and stockholders, under such circumstances, on such terms, and at such prices, as indicated, upon the face of the transaction, that they were being squandered recklessly or fraudulently in disregard of the trust committed to them.

Clark v. Beyer, 139 U. S. Reports, page 97:

That whether a stockholder in law or in fact, owed to the corporation any sum on the stock held by him, was left by the statute to be determined in each case, upon its own circumstances, and in accordance with -the principles of general law touching the rights and liabilities of creditors and stockholders.

While the capital stock of a corporation, especially its unpaid subscriptions, is a trust fund sub modo for the benefit of its general creditors, a corporation — no statute forbidding — may in good faith sell or dispose of its stock to creditors in discharge of their debts.

The principle reaffirmed that when the interest of the public or of a stranger is to be affected by any transaction between the stockholders owning a corporation, and the corporation itself, such transaction is subject to rigid scrutiny, and if found to be infected with anything unfair towards such third person, calculated to injure him, or designed intentionally and inequitably to screen the stockholder from loss at the expense of the general creditor, it will be disregarded or annulled so far as it inequitably affects him. Therefore, when the interest of creditors requires, those holding shares in a corporation, purporting to be, but which are shown not to have been, paid for tO' the1 extent of their face value, should be held liable to pay for such shares unless it appears that they acquired the stock under circumstances that did not give creditors and other stockholders just ground for complaint.

Handley v. Stutz, 139 U. S. Reports, page 417:

When a stockholder in a corporation who assents to an increase in the capital stock of the corporation and its gratuitous distribution among the shareholders, receives such stock as full paid stock, an obligation arises to pay for it in full, when called upon to do so by creditors whose debts are subsequent, to the authorization of the increase; but this equity does not exist in favor of a creditor whose debt was contracted prior to such authorization.

An active corporation, finding its original capital impaired by loss or misfortune, may, for the purpose of recuperating itself, and of producing new conditions for the successful prosecution of its business, issue new stock and put it upon the market, and sell it for the best price that can be obtained; and in such case no such trust in favor of a creditor arises against the purchaser who, in good faith, buys for less than par.

Stuart v. Greenbrier White Sulphur Springs Company, 144 U. S. Reports, page 104:

The trust arising in favor of creditors by subscriptions to the stock of a corporation can not be defeated by a simulated payment of such subscription, nor by any device short of an actual payment in good faith; and it was not intended, by anything said in Clark v. Bever, 139 U. S., 96; Fogg v. Blair, 139 U. S., 118, or Handley v. Stutz, 139 U. S., 417, to overrule this principle, or qualify it in any way, but only to draw a line beyond which the court was unwilling to go in affixing a liability upon those who had purchased stock of the corporation, or had taken it in good faith in satisfaction of their demands.

Applying this rule to the testimony and mass of figures in this case, the court affirms the judgments of the court below against stockholders in these cases, whose subscriptions for their stock in the corporation, defendant in error in No. 643, were shown to be in part unpaid.

Rickerson Roller-Mill Co. et al v. Farrell Foundry & Machine Co., 75th Federal Reporter, page 554:

1. Corporalioxis — Issxie of Stock — Sale Below Par. — When a corporation, not for the purpose' of restoring its capital, impaired by losses in business, but for the purpose of providing new capital to carry on or extend its business, issues and sells stock at less than its par value, the purchasers of such stock take the same subject to the contingency that, in the event of the insolvency of the corporation, they would be liable to creditors who had become such in ignorance of the terms of their purchase, for the difference between the price actually paid for the stock and its par value (Handley v. Stutz, 11 Sup. Ct., 530; 139 U. S., 417, distinguished).

2. Same — Bights of Creditors. — In the absence of statutory or charter provisions, however, a corporation may agree with a subscriber to its stock to receive less than the par value therefor; and a creditor of the corporation who becomes such with knowledge of such an agreement between the corporation and the subscriber, can not require the subscriber, upon the insolvency of the corporation, to pay 'his stock in full.

Peter v. The Union Manufacturing Company et al, 56 Ohio State Reports, page 181:

The directors and managing officers of a corporation for profit should he held to stx-ict good faith in all dealixigs hetxveen themselves and the cox'poraiion. Where, however, the corporation is deeply in debt and pressed for money to continue its business; where a large' proportion of its capital stock remains unsubscribed, a great part of which was created by an unauthorized increase of the same, for which such directors and managing officers were chiefly responsible, though acting in good faith and in the belief that their action was regular; where such directors and managing officers believe the only practicable means of obtaining money to relieve the necessities of the corporation is by disposing of this stock; where accordingly they make diligent but unsuccessful efforts to dispose of the stock at par; where they offer it at a large discount to all its stockholders and generally to others without takers, such directors and managing officers and some others without intending to secure personal advantage, but with a view to aid the corporation, take parts of the stock at the discount price, either paying cash therefor, or cancelling debts due to them from the corporation, and they do not afterwards derive any profit on account of such stock, bad faith should not be imputed to them, either in respect to such increase of capital stock or their acquisition of it.

All of these eases have been digested and considered by Clark and Marshall on Corporations, who sum them up with the following comment:

“Secs. 1246-1247. Fraud is the Ooüy True Basis of this Doctrine. — Some of the courts, including the Supreme Court of the United States, in its earlier opinion, have based this doctrine upon the ground that the subscribed capital stock of a corporation is in equity a trust fund for the payment of its debts, and that no agreement between a corporation and its stockholders can affect the right of creditors to so treat it. It is now practically settled, however, that this is not the basis of the doctrine, for neither the unpaid subscriptions of a corporation nor its other assets are in any proper sense a trust fund for creditors. The true and only ground of the doctrine is fraud. Any arrangement between the stockholders of a corporation and the corporation, by which the former are to pay nothing at all, or less than par, either in money or property, for shares of stock which are issued and represented to the public as being full-paid, is clearly a fraud upon persons who deal with the corporation on the faith of such representation, and it requires the application of no new principle to enable a court of equity to prevent creditors from being defrauded by compelling the stockholders to make their representation good. Creditors not defrauded can not complain. ’ ’

Clark and Marshall’s “Private Corporations” (“Watered Stock”), page 1242:

“400. Issite to Directors or Other Officers. — The rule that the directors and managing officers of a corporation are to tel held to strict good faith in all dealings betiueen themselves and the corporation applies as well when they issue stock to themselves as in other cases. If they act in bad faith and obtain a profit or advantage not enjoyed by other stockholders, they may be called to account, or the transaction may be set aside.

‘ ‘ They may purchase stock, however, if they act in good faith, and they will incur no liability to the corporation or the other stockholders, in the absence of a statute, even when they purchase stock at less than par, where it appears that they acted in good faith and in the interest of the company, particularly where they have obtained no profit or advantage for themselves from the transaction. In a late Ohio case, in which stockholders of a corporation who had paid par for their stock sought to hold the directors and managing officers and others liable upon stock taken by them at less than par for the difference between what they paid and the par value, it appeared that the corporation at the time, and before the stock was taken, was deeply in debt, and pressed for money to continue its business; that a large part of its capital stock remained unsubscribed, a great part of which was created by an unauthorized increase of the same, for which the directors and managing officers were chiefly responsible, though acting in good faith, and in the belief that their action was regular; that the directors and managing officers believing that the only practical means of obtaining money to relieve the necessities of the corporation was by disposing of this stock, and after having made diligent but unsuccessful efforts to dispose of it at par, offered it at a large discount to all of -its stockholders, and generally to others, without intending to secure' any personal advantage, but with a view to aid the corporation, took parts of the stock at the discount price, either pay cash therefor, or cancelling debts due to them from the corporation, but did not then or afterwards derive any profit on account of the stock. Under these circumstances it was held that bad faith was not imputable to them with respect either to such increase of the stock or their acquisition of it; that, on the corporation becoming insolvent, the difference between the discount price and the par value of the stock thus purchased should not be regarded as assets of the corporation, as between those who bought at a discount and those who did not; and that the holders of previously issued stock, for which they had paid par, should not be allowed to assert the invalidity of the issue of the discounted stock without consenting that its purchasers be placed in statu quo.”

Clark and Marshall, “Private Corporations” (“Watered Stock”), page 1250:

“(5) Issue of Stock for Gash at a Discount. — The doctrine that the issue of watered or fictitiously paid up stock is a fraud upon persons who become creditors of the corporation in reliance upon its capital stock clearly applies when the original stock of a corporation is issued for cash as paid-up, under an agreement that payment in full shall not be required. Even in the absence of express statutory or constitutional provisions, as well as where there are such provisions, a court of equity, or other court having jurisdiction of winding-up proceedings, will disregard the agreement and enforce full payment for the stock so far as may be necessary to satisfy the claims of the creditors of the corporation who have dealt with it in reliance on the stock being full-paid; and by statute in some jurisdictions a creditor may proceed at law.

“When-stock is issued to subscribers for less than its par value in cash, the right of creditors to compel full payment can not be defeated by showing that there was no actual fraudulent intent in the transaction.

“(c) Issue of Stock as a Gratuity . — In a New York case, where a corporation had issued paid-up stock as a gratuity, it was held that a judgment creditor of the corporation, on its becoming insolvent, could not maintain a suit in equity to compel the stockholder to pay for the stock contrary to his agreement with the corporation. ‘The liability of a shareholder to pay for his stock,’ said the court, ‘does not arise out of his relation, but depends upon his contract, express or implied, or upon some statute, and in the absence of either of these grounds of liability, we do not perceive how a person to whom shares have been issued as a gratuity has, by accepting them, committed any wrong upon creditors, or made himself liable to pay the nominal face of the shares as upon a subscription or contract.’ It does not appear, from the report of this case, whether the creditor was such after it was issued, and in reliance on its being in fact full-paid. If the former, then the decision is clearly a sound one, but if the latter, it is contrary to the prevailing rule.

“As we have seen, it is on the ground of fraud, and not on the ground of contract, that persons to whom stock has been issued as full-paid, when it is not so in fact, are held liable to creditors, and the reason for the doctrine, therefore applies as well where the stock is issued as a gratuity as where it is issued for cash at a discount. In the former case, the holder does not agree to pay anything; in the latter he does not agree to pay anything further than what he has paid. It has repeatedly been held, -therefore, that if a corporation issues its stock.as full-paid -without receiving any consideration, and particularly when it does so in violation of an express charter, statutory or constitutional provision, and the stock is falsely held out to the public as being full-paid, the transaction, even ■when binding upon the corporation and consenting stockholders, operates as a fraud upon persons who subsequently deal with the corporation and become creditors on the faith of its capital stock being full-paid, and a court of equity, or, in some jurisdictions by statute, a court of law, will compel full payment for the stock, if necessary for the satisfaction of their claims.”

It appears from an examination of these authorities that the whole question turns upon a question of the good faith of those participating in the transaction, and in this connection it is to be noted that those who put through this transaction and got whatever of benefit supposedly there might have been in it, were those that we-re the directors, dominant stockholders and the leaders in control of the affairs of the corporation, and they are those who are held to the strictest accountability and whose conduct is subject to the closest scrutiny as against the rights 'of everybody whose interests were directly or indirectly in their custody. It is said -that if objection on this account could be made it could -only be made by subsequent creditors and not ■by stockholders — the situation of Mr. Seasongood. But this defense on the part of Mr. Seasongood is not sought to be interposed as against the creditors other than those making up the $84,903.71 of claims, who are interested in not urging this claim against themselves on their unpaid subscriptions. It is not reasonable to suppose that they would urge this claim to their own detriment and hence the right to urge the same must pass to and be asserted by those who would be interested and benefited if the claim prevails.

In examining the good faith of the transaction of October, 1887, one is impressed by the small amount of cash the company received in addition to its' indebtedness already outstanding; and for -all of which these parties were directly or indirectly under the burden, that is, by holding the notes or acceptances of the company, or.were liable on the statutory stock liability for its general indebtedness; in comparison with the vast amount of securities of the company issued, tc-wit, $180,000 first mortgage bonds and $126,000 of its capital stock.

These parties parted with so little new money.

They safeguarded themselves for all the money actually invested by taking bonds secured by mortgage on all the property bought by their money so furnished to the corporation and then sought to speculate on the future earning capacity of the enterprise on terms more favorable than the other shareholders had received and more favorable than they would have been willing to accord to the public.

Again, while it appears that efforts had been made to sell the stock and bonds of this company at home and abroad in the general market, and that these efforts had been thwarted probably by the malicious intervention of rivals, yet there was nothing in this that ought not to have been anticipated by those who originally subscribed for the stock, and • who were certainly familiar with all the conditions surrounding this enterprise. The record does not show that the arrangement which was finally entered into was ever offered in the general market or to the public, and it is extremely doubtful whether those who finally entered into this arrangement would have consented-that outsiders should have subscribed and taken this stock and these bonds on any such terms.

It is urged by counsel for Mr. Seasongood, that the case of Peters v. Union Manufacturing Company and Stutz v. Handley are not applicable because the Mount Auburn Cable Railway Company was not a going or active corporation at the time of this transaction.

An examination of the cases and a comparison of the cases of Fogg v. Blair and Rickerson Roller Mill Co. v. Farrell, supra, show that this is an elément entitled to great weight in consideration, but is not altogether determinative, but it is.indeed an element to be considered in ascertaining whether such a crisis was present which could not or ought not to have been foreseen and anticipated as a natural burden upon those already having invested in the enterprise, as to justify .this transaction as a means to save its life.

We understand that the corporation is justified in issuing its stock at any price it can obtain for the purpose of securing funds to preserve its corporate life and to prosecute the business and ends of an active corporation, but we do not understand that this expedient is to be resorted to to assist in the -birth of financial cripples.

Not to hold resort to such extreme expedients within strictest limit and closest scrutiny -would -open floodgates to a deluge of stock-watering in the creation and flotation of ill-conceived enterprises.

It would pave the way for the old -desire for a chance at the profits, at the same time securing the investment from the hazard of loss.

We do not mean to say that the gentlemen who participated in this transaction were conscious of committing fraud in a sense involving moral turpitude, but that they were astute in taking-care of themselves without a sufficient regard to the rights and future liabilities of others to a degree not tolerated by a court of equity.

It is claimed that there should be restitution by Henry Martin of $16,000, which seems to have been showered upon him almost against his protest. It may be that Henry Martin had performed services, but if he had voluntarily made the corporation a present of this service, and wanted no compensation therefor and made- no claim, the money so paid to him was substantially a present -and at no -time was this company or its directors (of whom Henry Martin was one) in a position to be generous at the expense of its creditors, or shareholders innocently suffering through them. Further, there are claims on the assessments against John J. Broderick, James D. Baseom, Isidor Blumenthal, James W. Frost, R. W. Healy, Fred Koettler -and William Means, aggregating in all one hundred and sixty-nine shares, which have never been properly or duly prosecuted. The conclusion we have reached on the unpaid stock subscriptions is sufficient to relieve appellant from assessment; we are, therefore, of opinion that such appellant is entitled to a decree discharging him from liability.

C. B. Matthews and Edward Strong, for the appellants.

Edward Colston, for the appellees.


text:
    RIGHTS OF WIDOW IN MORTGAGED REAL ESTATE OF HUSBAND.
    [Circuit Court of Allen County.]
    R. F. Hickey, Administrator, v. Mary F. Conine et al.

    Decided, April 22, 1904.

      Widow — Dower Interest of Computed, How — Where there are Mortgage Incumbrances — And Proceeds of Sale exceed the Mortgages— Widoiv not Subrogated, When — To Mortgage Lien Discharged in Part loith Her Separate Means.

    1. Where real estate is sold by the personal representative of a decedent, to pay the debts of decedent, which real estate is incumbered by a purchase money mortgage given by the decedent in his lifetime, and by a purchase money mortgage assumed by the decedent as a part of the purchase price 'Of the land, and such land is sold for a sum more than the amount of both of said mortgages, the widow is entitled to have her' dower interest in said land computed from and based on the entire proceeds of the sale, payable out of the residue of the proceeds, after satisfying sai'd mortgages.
    2. Where a widow furnished her husband- money which was used by him in part payment of a purchase money note, executed by the husband secured, by mortgage on real estate owned by him, which note and mortgage were not signed by the widow, in a proceeding brought by the personal representatives of the husband to sell said land the widow can not be subrogated to the lien and security of the mortgage indebtedness in so far as the money so advanced by her may have been used in paying said mortgage, in the absence of evidence that the widow gave or loaned the money to her husband, intending or expecting it to be paid on the mortgage debt.
    Norris, J.; Day, J., and Mooney, J., -concur.
    Heard on error.

       Affirmed by the Supreme Court without report, February 3, 1905 (71 O. S,. 548).
      For decision below, see 3 N. P.—N. S., 209.

   R. F. Hickey, as administrator of the estate of Taylor Conine, deceased, filed his petition in the Probate Court of Allen County, praying for an order to sell certain real estate of which his decedent died seized for the payment of the debts of said estate. Mary F. Conine is the widow of Taylor Conine, and is made a defendant to this petition.

From the judgment of the probate court appeal was taken to the common pleas and the case submitted to the court on the petition, second amended answer and cross-petition of the defendant, Mary F. Conine, and the reply of plaintiff, administrator, and the evidence.

The real estate sought to be sold had been the property of one Abraham Early and by him sold to Ellis Michael. To secure a part of the purchase price of the land Michael and wife executed back to Early their mortgage deed upon the premises. Subject to this mortgage Michael sold and conveyed the land to Taylor Conine. To discharge the indebtedness secured by this mortgage, proceedings were had by the plaintiff, administrator in the probate court and the land was sold. Mary F. Conine claims, as the’ widow of Taylor Conine, dower in this real estate and in her answer consents to the sale of the real estate free of her dower interest, and demands 'to be endowed as of the whole value of the real estate, asking that the value of her dower interest be computed and measured by the whole’ proceeds of the sale, and that she be paid said sum out of the balance of the proceeds after payment of the mortgage debt.

As .a second cause of action, she claims that she furnished to her husband $2,200 of her own money, which was by agreement between her said husband -and herself to be and was paid and applied on and took up $2,200 of said mortgage indebtedness, which arose by virtue of a mortgage which her husband executed to Ellis Michael to secure a part of the purchase price of the real estate described in the petition. She says it was agreed between Taylor Conine, her husband, and herself that she should hold the note upon which said $2,200 was applied, and should hold the security which said mortgage gave it until said $2,200 so advanced to her husband by her and the interest thereon was paid, and she claims that she is entitled to that extent to said mortgage lien and subrogated to it. She says she was not a party to any of said mortgages and in no wise obligated on said mortgage indebtedness, and she seeks to be subrogated to «the lien of said mortgage executed by her husband to Michael to the extent of said $2,200 and interest.

The reply of plaintiff controverts the claims of the defendant, Mrs. Conine, and these issues were submitted to the common pleas court on the evidence.

The common pleas by its consideration adjudges that Mrs. Conine was endowed in the whole value of the real estate described in the petition; that she was entitled to the value of her said dower, thus computed in money out of the- balance of the proceeds, of the sale after discharging the mortgage indebtedness. •

On her second cause of action the court found that she was not entitled to be. subrogated and refused the relief asked in said second cause of action.

The plaintiff, administrator, filed his motion for new trial as to the finding and judgment concerning the claim of the widow for dower.

The widow, Mary F. Conine, filed her motion for new trial eoneerning the finding a.nd judgment against her on the second cause of action in her second amended answer and cross-petition.

Each of these motions for new trial the common pleas court overruled.

The plaintiff, administrator, prosecutes error to the finding and judgment of the common pleas concerning the dower of the widow, defendant, Mary F. Conine, assigning in his petition:

1. That the common pleas erred in overruling his motion for a new trial.

2. That the finding, order, judgment and decree is against the law of the case.

3. That the court erred in ordering and decreeing that the said Mary F. Conine be paid money in lieu of her dower interest in said lands based on the entire proceeds of the sale of said real estate, notwithstanding the purchase money mortgage given by said Taylor Conine for part of said real estate, and as a part of the consideration thereof was still subsisting.

4. That the .common pleas erred in making the same order and. judgment as against the mortgage assumed by said Taylor Conine in purchase of the real estate, and as a part of the consideration for the purchase price of said land.

5. Error in the admission of evidence and in the rejection of evidence.

6. The finding and judgment is against the weight of the evidence.

7. And that the judgment should have been for plaintiff and not for the defendant in error.

The defendant, Mary F. Conine, filed her answer and cross-petition in error and asks that the finding and judgment of the common pleas on her action be reversed because of error:

1. In overruling the defendant’s motion for a new trial.

2. Said finding and judgment is against the weight of the evidence.

3. That the finding and judgment is against defendant in error and in favor of plaintiff in error.

4. Error in rejecting evidence offered by defendant.

5. That said finding, judgment and decree is against, the defendant on her second cause of action, and refuses the relief sought in the said second cause of action.

6. And that said finding and judgment is against the evidence in the case.

The question made by the plaintiff is as to whether the dower interest of the widow, when the lands of the deceased husband are covered by a purchase money mortgage, is- only in the residue of the value of the lands after deducting the amount of the purchase money debt secured by the mortgage, or whether she is dowable, and her dower interest is to be completed in the entire value of the land, payable out of the residue of proceeds of the sale of the land, if sufficient remain after deducting from the whole proceeds the mortgage debt.

No more can be said or better said on this proposition than has been said by Judge Cunningham in the. opinion of the court .of common pleas, but in supplement to it, however, we may say that the seller shall not lose the purchase price of his property. There results from the sale and purchase a trust in favor of the vendor in the subject of the transaction, not that the vendee reconveys the title or held the title for the benefit of a vendor) in a general sense, or that the vendor he reinvested with the title, bnt the vend'ee is deemed to hold the property sold in readiness to respond to the payment of the purchase price of it, that it may be converted into cash from which the purchase money due the vendor shall be paid. In this sense and in no other a trust arises in favor of the vendor, but the vendor does not hold the title, nor a shadow of the title, nor a right to the title», The vendee hold's both the legal and equitable title and this to a degree that by conveyance of the legal title by the vendee to a purchaser in good faith, and without notice of the lien of the vendor, the vendor’s lien for the purchase price must yield and may thus be defeated. Without this act of the vendee the vendor’s lien is paramount against the world.

When the security is the same property concerning which the debt arises, the vendor’s lien is not displaced by a purchase money mortgage, but is strengthened by it (Boss v. Ewing, 17 Ohio, 500, 522, 523). The secret lien or trust, as it may be termed', being thus made a matter of public record, places defeat of it, from a conveyance of the legal title by the vendee to a bona fide purchase without notice, beyond possibility. So that the strength of such a lien evidenced by such a mortgage is fortified beyond successful attack, and none of the favored rights of the law, such as exemptions and homestead and dower and the like, can attach to the property and supplant the lien, but all are postponed to the claim of the vendor for the consideration which moved him to part with his property and the title to it. He has parted with his title and in lieu of it he holds an unassailable claim for the money which would result from a sale of the land1 on enforcement of his lien equal to the unpaid purchase price due him in consideration of his title.

All this is for the vendor and for the benefit of the vendor and for those who succeed to his rights as vendor and purchase money mortgagees, until the vendee by his act and by his failure and forfeiture make it otherwise-; the vendor’s interest either as vendor or mortgagee is what is termed in law -and equity a lien and that only.

As to the vendor and the rights of the vendor, and the heirs of the vendee or the creditors of the vendee and their rights against the vendee, there is no privity and nothing in common. They are strangers to him and to his rights, and he is a stranger to them and to their rights. They can not ride in his wake, nor take advantage, or turn to their profit or benefit the condition or any phase of it in which natural equity and intrinsic justice' places the vendor fortified by his mortgage, the vendor stands apart and aloof, and qlone and secure. The heirs and the creditors and the wife of the vendee can only look to the vendee and the rights of the vendee and the title of the vendee, as the source of their interest in the property purchased.

A mortgage in Ohio is regarded as a mere security for a debt, and an incident to it. An action for foreclosure of the mortgage and sale of the mortgaged property is held to be an action on a specialty as described in Section 4980 of the Revised Statutes (51 O. S., 240-8-9).

As against the mortgagee and all the world the legal title to the mortgaged premises, until condition broken, remains in the mortgagor. It is only after the condition of the mortgage is broken that the legal title as between the mortgagor and mortgagee vests in the mortgagee. Nothing vests the legal title in the mortgagee but the breach of the condition of the mortgage. For this position we find1 abundant authority in this state, notably 2 O. S., 223; 40 O. S., 543-559; 42 O. S., 94; 51 O. S., 248, and other cases.

In the case at bar the conditions of the mortgages were not broken, and as against the mortgagee and all else the legal title remained in the mortgagor, and this whether the debt secured by it was for purchase money or otherwise. No action was pending or could be commenced to foreclose this mortgage or to recover possession in ejectment under it, and no proceeding could be taken or had to enforce the vendor’s lien for the purchase money, the debt to which the mortgage was incident.

If this be true then the legal title as well as the right to redeem the legal title from the pledge and peril of the mortgage had not passed from the mortgagor, and the mortgage had not assumed other conditions than that of a mere security for a debt, and had not been given the character of a conveyance which divested the mortgagor of his legal title and carried the legal title to the mortgagee. It was still a mere security — it was simply a lien, and the right of the vendor by reason of his vendor’s lien and his mortgage was that of a lienholder, and not the holder of the legal title to the property.

This being a fact the seizen of the mortgagor was not merely a fictitious and instantaneous and incidental seizen divested at once and permanently by the same act and transaction which conveyed the legal title to him, but he was seized of an estate of inheritance in the land, which was not yet divested by broken condition, or at all at the time of his death.

The dower right of the wife is deemed to be a moral right as well as an equitable and legal right. The law is as jealous of the inchoate right of the wife as it is of the vested dower right of the widow. The wife may, in the lifetime of the husband, maintain an action to protect her inchoate right equally as well as she may after her husband’s death maintain an action to secure her vested right. This right of the wife and widow is superior to the rights of an heir. The heir takes by inheritance. The dower estate is an estate by purchase (40 O. S., 398). It is paramount to the right of a mere creditor of the husband because her interest is held by her independent of the interest of the husband and are not obligated for her husband’s liabilities.

Under the laws of 'this state, amongst other provisions in behalf of dower, it is declared that if dower be not barred or relinquished a widow shall be endowed of an estate for life in one-third of the real property of which the deceased consort was seized as an estate of inheritance at any time during marriage (Section 4188).

This mortgagor held a descendable estate in the land in question. It was an estate that, notwithstanding the vendor’s lien and the vendor’s purchase money mortgage, could not be terminated by the mere will of the vendor, nor terminated at all by the vendor, unless by due process of law, following the voluntary act of the vendee, which terminated his inheritable interest in the land.

No condition of this character is present — nothing to make absolute the mortgage; no step taken to foreclose the equity of redemption, or to reduce the land to possession, and no right arose in favor of the vendor which he might thus assert. It would seem that nothing could more completely define an interest of the husband which would bear the dower right of a wife or widow than these facts described.

Handy & Underferth, Watts & Moore and Bailey <& Bailey, for administrator.

Gable & Pamenter, for Mary F. Conine.

So therefore we find ho error in the judgment of the common pleas; that the widow is dowable in the whole proceeds of the real estate subject to the rights of the vendor, but superior to the rights of the heirs and general creditors of the husband, and that the value of her dower is payable out of the residue of said proceeds after discharging the vendor’s claim. We deem this in trend' with the holdings of our Supreme Court upon question of dower and right of dower. And I will still continue to believe until from the perfect wisdom and sinless calm of that august tribunal a voice speaks to the contrary.

We are of opinion that the facts appearing in this record do not warrant the remedy sought by the defendant in the second cause of action made in her amended answer and cross-petition. There is no evidence that she gave or loaned the money to her husband intending or expecting it to be paid on the mortgage, or on any particular indebtedness of the husband, and we see no room for subrogating her to the rights of the mortgagor.

Finding no error in the record as claimed by the petition in error or in the cross-petition in error, the judgment is affirmed. The costs incident to the petition in error are adjudged against the plaintiff in error. The costs incident to the cross-petition in error are adjudged against the defendant in error. Execution is awarded and the case is remanded to the court of common pleas for execution.