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    PROPER TESTS AS TO REASONABLENESS OF A RATE TO BE CHARGED FOR NATURAL GAS.
    Court of Appeals for Licking County.
    The City of Newark, by Frank A. Bolton, Solicitor, v. The Newark Natural Gas & Fuel Company.
    Decided, May Term, 1914.

      Public Utilities — Control of Rate for Natural Gas — Elements to be Considered in Fixing Rate — What is Contemplated by the Statute Giving Municipal Councils Power to Regulate — Court Will Not Declare a Rate Confiscatory, Unless.

    1. The power given to municipalities hy the Ohio statute to regulate the price of natural gas contemplates an impartial and thorough investigation into all the facts for the- purpose of doing justice to both the corporation and the public by establishing reasonable rates on the one hand and on the other compensation which will be just to the company.
    2. The elements to be considered in fixing the rate for natural gas are the amount of net profit which may be earned under a fixed rate, and whether the rate as so fixed will yield a fair return on the investment, depreciation in the value of the plant and the risk attendant ■ on the enterprise considered.
    3. The fixing of the rate of twenty cents per thousand for natural gas for the city of Newark can not be regarded as confiscatory, notwithstanding some depletion in the supply from the wells, when it appears that the supply is still four times the consumption in that field, and the company for some time paid dividends' of ten per cent, under a rate of only eighteen cents, and for several years has paid dividends under a twenty cent rate, and other localities in the same filed are being’ furnished gas at the eighteen cent rate at the present time.
    4. Moreover, rate can not be declared confiscatory unless clearly shown to be so by actual experience, and particularly will a court refuse so to declare where a mandatory injunction to enforce the provisions of the ordinance fixing the rate complained of has been in force for three years and no showing is made by the company of the result of its operations during that time.

      Frank A. Bolton, Roderic, Jones, Kibler & Kibler and Ralph Norpel, City Solicitor, for plaintiff.

      S. M. Douglas. Eugene Machey and Fitzgibbon & Montgomery, contra.
    Shields, J.; Powell, J., concurs; Voorhbes, J., dissents.
   On March 6th, 1911, the city council of the city of Newark, Ohio, duly passed a city ordinance fixing the maximum price of natural gas to be charged by the Newark Natural Gas & Fuel Company, its successors or assigns, for the period of five years next ensuing, at 20c for each thousand cubic feet of gas used or consumed by all persons, firms or corporations using or consuming the same, with a discount of 10% allowed if payment was made on or before the tenth day of the succeeding month. Declining to'accept the provisions of the ordinance, the defendant company, which for years had been and then was supplying said city and its citizens with gas under an ordinance of said city passed February 21, 1898, immediately caused notice to be given to its consumers of gas by publication that on and after the April, 1911, reading of meters the price to be charged for gas would be 25c for each thousand cubic feet, subject to a discount of 10% if paid on or before the tenth of each succeeding month, and that unless said price was so paid the further supply of gas to said city and its citizens-would be discontinued. Soon after said publication was made a petition was filed by the city of Newark, by Frank A. Bolton, its solicitor, in the Court of Common Pleas of Licking County, Ohio, to enforce by mandatory injunction the provisions of said city ordinance passed March 6th, 1911.

Stating it more fully and at length, said petition recites:

That the said Frank A. Bolton is the duly elected, qualified and acting solicitor of the city of Newark, Ohio, a municipal corporation, and that said action is brought by direction of its city council. That the defendant, the Newark Natural Gas & Fuel Company, is a corporation and is furnishing natural gas for fuel and light to said city and its inhabitants by virtue of a franchise granted by the said city council by ordinance passed February 21, 1898, by the terms of which there was granted to the defendant company the right and privilege of laying pipes in and through the streets and alleys and public grounds of said city for the purpose of supplying and conveying natural gas or fuel gas to the inhabitants of said city for a period of 28 years. That for the period of 10 years from the passage of said ordinance, the defendant company was entitled to charge conumers of gas, who are inhabitants of said city, for gas furnished at the rate of 25e for one thousand cubic feet. That within ninety days- after the passing and taking effect.of said ordinance the acceptance thereof by said defendant was required to be filed with the said city council. That said ordinance was duly published as required by law. That within ninety days from the passing and taking effect of said ordinance, to-wit, March 21, 1898, the defendant company accepted the same in writing. That a copy of said ordinance and the acceptance thereof by the defendant company'is attached to said petition. That from the date of the passage of said ordinance franchise up to the 6th day of March, 1911, said city council passed no further ordinance regulating the price to be charged by the defendant company to said city and its inhabitants for fuel and light, or either. That ever since the passage and acceptance of said ordinance the defendant company has been continuously, and now is supplying gas to said city and its inhabitants by virtue of the rights'and privileges granted by said ordinance.

That on the said 6th day of March, 1911, said city council duly passed an ordinance regulating and fixing the maximum price the defendant company may charge consumers thereof, whether the city itself or its inhabitants, under said franchise for the period of five years at the rate of 20e per thousand cubic feet of natural gas for the fuel and light, meter measurement, with 10% discount on all bills paid before the 10th of each succeeding month. That said last named ordinance was on the 9th day of March, 1911, duly signed, approved by the mayor of said city, and was- published ás required by-law,- a copy of which ordinance is attached to said petition. That said last named ordinance is now in full force and that the price as therein fixed by said city council is the same price that the defendant company has been and is now charging said city and its inhabitants who have been and now are consumers of gas in said city, ‘and ever since the defendant began furnishing gas under the ordinance granting- said franchise. That the defendant company had due knowledge and notice of said ordinance passed March 6th, 1911.

That the defendant company is notifying and has notified said city and the inhabitants thereof that on and after the April, 1911, reading of meters the price charged for gas would be 25e for one thousand cubic feet, subject to á discount of 10% if paid on or before the tenth day of the following month, and it threatened that unless said price is paid by said city and its inhabitants on or before May 10th, 1911, the defendant company would stop the supply of gas and refuse to furnish gas for fuel and light to said city or any of the inhabitants who refused to pay said price so fixed by the defendant company. That the said defendant company insists upon its right to make the price for all gas furnished to said city and its inhabitants, on and after April 1, 1911, the sum of 25c per thousand cubic feet, subject to said discount of 10%, and no less, and unless restrained by the court, all consumers of gas furnished by the defendant company would be required to pay 25c per thousand cubic feet, subject to said discount on and after May 1st, 1911, contrary to the provisions of said ordinance of March 6th, 1911.

That for the purpose of avoiding a multiplicity of suits for the defendant company’s threatened refusal to comply with the provisions of said ordinance of March 6th, 1911, said solicitor brings this suit.

•‘The plaintiff further says that said city and its inhabitants are each and all of them without remedy at law and can get no relief from the processes of a court of equity, and they have no adequate remedy at law.

Wherefore, the plaintiff prays that on the final hearing of this cause the defendant company may be perpetually enjoined from charging, collecting, or in any manner attempting to collect from said city, of any of its inhabitants any other, greater or further sum for gas by it delivered for heat and light than the maximum sum or rate fixed by said ordinance passed March 6th, 1911, and that the defendant company be enjoined to specifically perform said ordinance and franchise, and that pending the final hearing of said ease a temporary injunction issue to a like effect, restraining the defendant company in like manner and for all other and further relief to which said city or any of its inhabitants may be entitled in equity.

Upon the foregoing petition being filed, a temporary injunction was allowed to issue as prayed for in said petition, except as to the specific performance of said ordinance, by Chas. W. Seward, Judge of the court of common pleas of said county.

In its amended answer to said petition the defendant company sets up four separate defenses, and for its first defense says-:

It denies that it threatens or has threatened that the defendant company would stop the supply of gas and refuses to furnish, gas to said city or any of its inhabitants who refuse to pay the price fixed by said defendant companythat while it admits that said ordinance of March 6th, 1911, was passed in dne form by said city council, fixing the price that the defendant may charge consumers, it avers that said ordinance is unreasonable, and that the rate fixed denies to the defendant any adequate profit for the fivé years next ensuing and operates as a fraud upon the property rights' of the defendant, and is therefore unreasonable and void, and it denies all the other averments in said petition not expressly admitted in said ground of defense set up in said amended answer.

For a second defense the defendant says that said ordinance of March 6th, 1911, is contrary to and -in violation of Section 1 of Article I of the Bill of Rights of the Constitution of the state of Ohio and is therefore null and void and of no effect for the reason that said ordinance is violative and a denial of the due protection and possession of the property of said defendant without its consent.

For a-third defense the defendant says that said ordinance of March 6th, 1911, is contrary to and in violation of Section 19 of Article I of the Bill of Rights of the Constitution of the state of Ohio, and is therefore null and void and of no effect, for the reason that it is the taking of private property without due process of law in that said ordinance attempts to compel the defendant to furnish gas at a price without just compensation or profit and without any equivalent or just compensation in money and against and without the consent of the defendant.

For a fourth defense the defendant says that said ordinance is contrary to and in violation of Section 1 of the' Fourteenth Amendment to the Constitution of the United States and is therefore null and void and of no effect, for that it is a denial to this defendant of the equal protection of the laws and without due process of law in this, that it tends and is designed to compel tire defendant company to furnish gas for a period and at a price without adequate return, compensation or profit and without the consent of the defendant.

The defendant prays that the temporary restraining order granted herein may be dissolved; that the prayer of the petition be denied and that said ordinance of March 6th, 1911, be declared unreasonable, null and void, and for all proper relief.

After a demurrer was overruled to the second and third defenses of the defendant company’s amended answer, a reply was filed by the plaintiff, and replying to the first defense therein it denies that said ordinance of March 6th, 1911, is unreasonable, and it denies that the rate fixed by said ordinance denies to the defendant company any adequate profit for the five years next énsuing and operates as a fraud upon the property rights of the defendant and is therefore unreasonable and void.

And for a reply to the second, third and fourth defenses of said defendant’s amended answer the plaintiff denies each and all of the allegations therein contained.

The ease comes into this court by appeal from the judgment of the court of common pleas of said county and was tried upon the evidence introduced in support of the issues raised by the pleadings filed in the case.

While there are several defenses pleaded in the amended anr swer of the defendant company, when taken together, they substantially raise the same question and make the same defense, namely, that the ordinance of March 6th, 1911, is constitutionally invalid, both under the Constitution of the United States and under the Constitution of the state of Ohio, because said ordinance fixes a maximum rate to be charged by the defendant company for the supply of natural gas to the city of Newark and its citizens for the period of five years from the date of its passage and taking effect that is both unreasonable and confiscatory in its effect, and that said ordinance is therefore null and void.

The power given by statute to the council of a municipality to regulate the price of natural gas is to be found in Section 3982 of the General Code, which provides that:

“The council of a municipality in which electric lighting companies, natural or artificial gas companies, gas light and coke companies or companies for supplying Avater for'public or private consumption are established, or into which their wires, mains or pipes are constructed may regulate from time to time the price Avhich such companies may charge for electric light, or for gas for lighting or heating purposes, or for Avater for public or private consumption, furnished by such companies to the citizens, public grounds and buildings, streets, lanes, alleys, avenues, Avharves and landing places, or for fire protection. Such companies shall in no event charge more for electric light, natural or artificial gas, or water furnished to such corporation or individuals, than the price specified by ordinance of council, ’ ’ etc.

It will thus be seen that the term “regulate” is employed in the foregoing statute. Evidently the statute contemplates that the power thus given in fixing rates shall not be exercised short of an impartial and thorough investigation into all the facts with the ultimate object of doing justice both to the public service corporation and to the public. It does not contemplate an arbitrary fixing of rates irrespective of the rights of the corporation or the public, but reasonable rates and just compensation, and to do otherwise would be violative of the spirit of the statute and of public duty. What was actually done in the premises by the city council is not now before this court and the presumption is, in the absence of proof to the contrary, that it acted with due regard to the rights of both the corporation and the public. And that it was clothed with power to regulate the price of gas to be furnished by the defendant company is not open to question.

Said ordinance having been passed by the council, signed and approved by the mayor and having become operative after publication, what then? The defendant company not only refused to comply with its terms, but notified its consumers of gas that* on and after the April, 1911, reading of meters that the price to be charged for gas would be 25c for one thousand cubic feet, subject to a discount of 10 <f0 if paid on or before the 10th day of the succeeding month. It is fair to assume that this action was taken for the reasons set forth in the defendant company's amended answer.

As has already been pointed out, the city council has the power to regulate by ordinance the price of gas in municipalities, but this power does' not reside in the court, whose province and duty it is to judicially declare whether or not the rate fixed in said ordinance is reasonable or otherwise. With this duty discharged its power is exhausted. What constitutes reasonable rates for this purpose is a subject that has given the courts no little concern. The various conditions that may be present in one case may be absent in another. lienee there is no uniform rule laid down to be followed by courts, for no particular rates can be established for all cases.' Quoting from the opinion of Justice Pecbham in the case of Wilcox et al v. Consolidated Gas Co., 212 U. S., 19-48:

“There is no particular rate of compensation which should in all cases and in all parts of the country be regarded as sufficient for capital invested in business enterprises. Such compensation must depend greatly upon circumstances and locality; among other things, the amount of risk in the business is a most important factor, as well as the locality where the business is conducted and the rate expected and usually realized there upon investments of a somewhat similar nature with regard to the risk attending them. There may be other matters which in some cases might also be properly taken into account in determining the rate which an investor might properly expect or hope to receive and which he would be entitled to without legislative interference. The less risk the less right to any unusual returns upon the investment. One who invests his money in a business of a somewhat hazardous character is very properly held to have the right to a larger return without legislative interference than can be obtained from an investment in government bonds or other perfectly safe security.”

It will thus be seen that locality, risk and other considerations may enter into the reasonableness of the rates fixed. And in fixing such rates the rights of both the corporation and the public are to be equally considered. The ends of justice would not he met by disregarding the interests of either. On the one hand, the company is entitled to a fair return upon the reasonable valúe of that which it employs for the public convenience, and on the other hand what the public is entitled to demand is that no more be exacted from it than what such company furnishes is reasonably worth.

In Covington Lexington Turn Pike Uoad Company v. Sand-ford, 164 U. S., 578, 597, 598, Justice Harlan, speaking for the court, says:

“In short, each case must depend upon its special facts, and when a court, without assuming itself to prescribe rates is required to determine whether the rates prescribed by the Legislature for a corporation controlling a public highway are, as an entirety, so unjust as.to destroy the value of its property for all the purposes for which it was acquired, its duty is to take into consideration the interests, both of the public and of the owner of the property, together with all other circumstances that are to be considered, by determining whether the Legislature has, under the guise of regulating rates, exceeded its constitutional authority, and practically deprived the owner of property without due process of law.
“The utmost that any corporation, operating a public highway, can rightfully demand at the hands of the Legislature when exerting its general powers is that it receive what, under all the circumstances is such compensation for the use of its property as will be just, both to it and to the public.”

Again, in San Diego Land & Town Company v. National City, 174 U. S., 739:

“What the company is entitled to ask is a fair return upon the value of that which it employed for the public convenience. ’ ’

In Wilcox et al v. Consolidated Gas Company, supra, it is held! that;

' “The rates must be plainly unreasonable to the extent that their enforcement would be equivalent to the taking of property for public use without such compensation as under the circumstances is just both to the owner and to the public. There must be a fair return upon the reasonable value of the property at the time it is being used for the public.”

Numerous other authorities might be cited sustaining this same view, but from the authorities cited we think it is apparent that the law enjoins upon a legislative body, such as a city council, in fixing rates for any public service corporation that they be so fixed as to be just both to the corporation and to the public.

Is the rate fixed by the ordinance in question reasonable or otherwise? Was it fixed with reference to the rights of this corporation and of the public? Tf it was and it is reasonable, the relief asked for by the defendant company'should not be granted-, but if it was not and it is unreasonable and it denies to the defendant company equal protection of the laws in attempting to compel it to furnish gas for a period and at a price without adequate return, without its consent, then such relief under favor of the Fourteenth Amendment to the Constitution of the United States should not be denied.

We are therefore confronted with the inquiry, how is this court to determine whether or not the rate is reasonable dr otherwise ? What is the test to be applied ? This question has been before the federal courts at various times and the rule there adopted in determining the reasonableness of rates is:

First, to ascertain the value of the plant of the corporation.

Second, to determine, if possible, the total amount of the net profits which it can earn under the rate fixed.

Third, to determine whether the amount of said pr.ofits is sufficient to provide a fair return on the reasonable value of the plant.

A vast amount of testimony was introduced under these different heads, especially relating to the cost of the defendant company's plant, including promotion and organization cost, construction and engineering work, the risks incident to the production and distribution of gas, the necessity of maintaining a large reserved area of gas-developed territory to meet exigencies liable to arise in the various sources of supply, the market price of gas delivered at Newark, etc. Indeed the variety of subjects is so great and the testimony relating thereto so voluminous, a large part of which consists of expert testimony, it would seem that their intelligent solution would be aided by the services of a well-trained and experienced gas expert. But in its analysis the ease will be found to present legal questions', the solution of which may be helpful in enabling .the court to reach a better understanding of the facts in the case.

Let us take up and consider the first proposition, namely, the value of the plant of the defendant company and the elements that should be considered in arriving at such value and when the valuation should be determined.

In McQuillan on Municipal Corporations, 1750, the rule is stated as follows:

“The only practical test for determining the amount on which the public service company is entitled to a fair return is the present value of the property of the company at the time of the inquiry.”

In Dillon on Municipal Corporations, 1331, it is laid down that:

“When the inquiry is directed to the reasonableness of the compensation, founded upon a fair return to the corporation upon the value of the property used for the public, the value of such property is the basis of that inquiry.”

Under the rule laid down by the roregoing authorities, supported by numerous adjudicated eases, the rule appears to be well established that the value of the property at the time of the fixing of the rates is the basis of valuation to be employed in determining the reasonableness of such rates.

The testimony shows that the defendant company was incorporated in 1889 with a capital stock of $81,600 and that no additional capital has ever been put into it for any purpose, except such as has been taken out of the earnings of the company.

The history of the company consists of three periods, the Everett management, extending from 1889 to 1898, the Logan management, from 1898 to 1902, and the Union Gas Corporation, from 1902 to the present time.

The value of this property rests upon evidence furnished largely by the defendant company, supplemented by evidence covering the result of an examination made of its books by an expert accountant. As tending to show the value of the defendant company’s property, R. S. Lord, a witness for said company, testified that he was employed by it in March, 1912, to examine said property and then placed a value on it at $309,000. In estimating such value the original cost of much of the material employed in the construction of said company’s plant seems to have been based upon an examination of the books of the company and information furnished him. In making such estimate he testified that 50% deduction from the original cost of the line between Newark and Thurston, if the same is not in use, should be made, namely, $24,000; that no allowance for financing expenses, or organization cost, or interest charges, etc., during the construction of said plant was included, and that no allowance was made for general depreciation of the plant covering a period of some ten years. The book value of the plant December 31, 1911, was shown to be $302,889.02, exclusive of allowance made for depreciation and franchise value. In June, 1902, the book value was shown to be $183,187.96, which amount was made up of various items as shown on page 541 of the record. In this estimate was included also an item of $60,000 for “rights of way.” A. J. Drolet, general auditor of the Union National Gas Corporation of Pittsburgh, a witness for the defendant company, testified that although the books of said company showed that by an inventory then taken the franchise value was then entered on said books at $3,500, said sum was increased to $60,000 in six-months after that time. The record on pages 542, 543 and 544 shows that said witness testified upon this subject as follows:

“Q. Now, under the head of rights of way, what do you mean by that? A. That is an account that we have. It is a franchise account. It is supposed to cover intangible values. We merely put it down. That is all; we had so many thousand consumers, and an investment of so much, and knowing about how much it ought to be per consumer, we noticed that there was a certain amount missing from the investment. We could not ascertain just where it was. It is a matter that has been ascertained by the accounting department, we are not authorities on that.
“ Q. As a matter of fact, it is simply a value that is put upon the franchise. A. Yes, sir, covering all intangible value.
“Q. You had an inventory taken in 1902, in June? A. Yes, sir, I think so.
“Q. And that right of way was placed at $3,500? A. Yes, sir.
“Q. And was increased in December of the same year to $60,000? A. Yes, sir. Because we did not believe $3,500 covered it.
“Q. Well, it did not cost anything? A. It is a question. I don’t know. We knew that the plant -was worth more than $123,000.
“Q. Your schedule shows the actual earnings and actual expenses of your company? A. Yes, sir. This was merely an inventory. I haven’t that list of pipe and meters; that is all that I received in the Pittsburgh office — this list of material. In view of the fact that there was no absolute physical appraisement taken of the plant, nothing else was left for us but to extend the figures at what we thought was right.
“Q. And you voluntarily increased the investment of the company from $122,638.00, by adding $60,000.00? Á. Yes, sir.
“Q. In six months’ time? A. That is a feature which we had omitted in the opening.
“Q. That was .an inventory? A. Yes, sir, of the physical property.
“Q. In June, 1902? A. Of the physical property, yes, sir.
“Q. The physical property in June, 1902, was $122,000 ? A. That is what we thought it was. We put $60,000 as being intangible.
“Q. And the $60,000 which you added was the franchise value? A. Yes, sir. What we estimated was the franchise value.
“Q. And you have nothing on your books to show that you paid anything at all for the franchise? A. Nothing at all, no sir. ”

It would appear that if the foregoing illustrates-the modern methods of bookkeeping in capitalizing corporation values, investigation may be helpful in disarming criticism that frequently follows where trust and confidence are fortified by book” figures.

Evidence was also offered of the valuation placed upon this property by the state tax commission for the years 1911 and 1912 at $572,450 and $435,670, respectively, while the value placed upon practically the same property by the company itself in the sworn statement of W. J. Broder, its secretary, for the years 1908, 1909 and 1910 (as appears on page 398 of the record) was $41,996, $47,114 and $47,706, respectively. By the authorities this evidence is held to be immaterial for valuation purposes except as it tends to show the value placed upon the property by the company.

It is difficult to arrive at anything like a satisfactory conclusion as to the value of the company’s property in March, 1911, when it is considered nothing else was charged off for depreciation and that no definite showing appears of the actual operating expenses incurred or an itemized account of the betterments made from year to year. It is well settled that a deduction should be allowed for depreciation from age and use of the plant when determining the present value of tangible property for the purpose of testing the reasonableness of rates fixed by a municipal ordinance. Knoxville v. Knoxville Water Co., 212 U. S., 1.

As bearing upon a fair per cent, to be deducted for depreciation, Mr. Drolet testified that 5% was a reasonable per cent. And it is also well settled that a further deduction for franchise value should be made. Lincoln Gas Co. v. City of Lincoln, 182 Fed. Rep., 926, 928.

As already indicated no such reliable and definite information was presented to the, court to enable it to reach a conclusion wholly satisfactory to itself of the value of the defendant company’s property in March, 1911, but in the light of the evidence introduced upon the subject, as we analyze it, and applying the rules of law already stated, the value of said property at that time appears to be $89,460.78. This amount may not be mathematically correct, owing to the incomplete and unintelligible condition of the company’s books in respect to the disbursements» made and profits earned by it during the time mentioned as the same appeared in the evidence and in this connection the evidence of the expert witness, J. Hope Sutor, who examined said books is not overlooked, but it is a result reached and verified by an examination involving a careful analysis of such evidence.

The second proposition, as stated, is to ascertain, if possible, the total amount of the net profits the defendant company can earn under the rate fixed.

This is a matter of -no little importance to the defendant company, because whatever its earnings may have been prior to the passage and taking effect of the ordinance of March 6th, 1911, conditions may have intervened increasing or decreasing the facilities and cost for supplying gas by the said company.

The claim made that natural gas is distinguishable from other public utilities in that its quantity or quality is beyond human control, and that there is ever present an element’ of risk attending its productioii and distribution, is not questioned, nor is the correctness of the claim challenged that' the quantity of natural gas may be affected by decreased rock pressure as well as by other varying conditions, all of which no doubt would tend to increase the cost of production. These elements of uncertainty appear to be peculiar to the business,'including also the risk attending the development of gas territory, and other risks, too, necessarily connected with the production and transmission of gas; but these risks are such are are assumed by the investor, a fact, however, which should not and can not weigh in considering the question under discussion here. In this enumeration of risks, it will be observed that the evidence given upon the subject refers to no one particular plant, but "to the numerous plants of the Logan Company, whose property interests are admittedly large.

Among other things, it is urged by the defendant company that the wells in the Knox-Licking field (designated herein as the local field) have become so depleted of late, thereby increasing the cost of production, that neither the Logan Company, nor any other company, can furnish gas to the defendant company or the city of Newark and its citizens at the rate fixed by said ordinance with anything like a reasonable net profit on fihe value of its plant. If this claim is borne out by the facts, then the equitable relief asked by the defendant company should be granted.

But what are the facts in this respect as disclosed by the evidence? Undoubtedly the wells in the local field have become more or less depleted owing to the causes described, but the evidence shows that said wells at the beginning of this litigation yielded more than four times the quantity of gas consumed by the city of Newark and its citizens. True it is shown that only 60 per cent, of the gas delivered at the city of Newark was of the product of said wells, and the balance is from the West Virginia field. If this condition prevails, there must be some reason for it, but no reason appears to be given, nor does the record show the cost to said company of producing gas in the local field, although there was no little testimony introduced by the plaintiff bearing upon the cost of producing natural gas in territory adjacent to the local field as evidenced by the contracts for its sale and delivery to various cities in this state. Omitting figures, it is sufficient to say that such testimony appears to warrant* the statement that the cost of producing gas and its sale at the prices therein named about the time of the passage of said ordinance do not indicate that the rate fixed therein is confiscatory-in its effect. '

Considerable testimony was offered upon the trial showing the price of gas delivered to various cities in this state as tending to show the general market price thereof, delivered at the city of Newark. In the absence of any testimony tending to show the cost of producing- and transporting gas to the city of Newark for distribution, such testimony would be entitled to no little weight, but what is the effect of such testimony as against proof of the cost of producing gas in the immediate vicinity of the local field, supplemented by proof that gas was being furnished at that time by said company at the 18 cent net rate ? Situated as the city of Newark is, substantially contiguous to the local field, does not this fact when considered in connection with the admitted fact that the citizens of said city were- supplied with gas by the same company for years prior to and up to the time of the passage of said ordinance at a rate not in excess of the rate fixed by said ordinance, minimize if not nullify the legal effect of any showing of the market value of gas at said city at said time? Assuredly different conditions may exist in other cities where possibly the price of gas may be governed by the volume of the supply, and other considerations may .also enter into the price there charged for gas, but as we view it, the real question made here is not what the prevailing price of gas at that time was elsewhere, but what was it reasonably worth when furnished to the citizens of Newark, in view of all the conditions here shown, and is the rate fixed by said ordinance such as to yield a fair return on the reasonable value of the company’s property, above all legitimate and proper charges ?

As we read the record, the earnings of the defendant company during the year 1911 were such as to pay over 10% net profit, and that in 1910 they yielded a much larger net profit. True the record covering these two years, standing alone, and in the absence of other evidence, might not be a safe criterion upon which to base a judgment of- the net earnings of the company before that time, but the evidence shows that the total net earnings of this plant were very profitable from the time it was first organized, yielding to the management from 1902 to December 31, 1911, an average annual net profit of over 8%, during all of which said time said company charged the citizens of the city of Newark for gas the 18 cent net rate. We do not feel called upon to pursue this inquiry further, feeling that the foregoing facts furnish their own comment, and while it is impossible to say with any degree of certainty what the net earnings of the company may be during the future five years’ period, under said ordinance, it is reasonably safe to say that in view of the net earnings of the company during the period from 1902 to and including at least a portion of 1911, they will be such as to avoid the charge of being confiscatory is their effect.

We now reach the third and final proposition. Will the amount of net profit be such as to yield a fair return on .the value of this plant? It would seem that the conclusion reached as to the second proposition herein ought to be a sufficient answer to this inquiry, but we will notice some claims of counsel based upon said company’s amended answer! Counsel for said company quote the following from the opinion of the court in the case of New Memphis Gas Light Company v. City of Memphis, 72 Fed. Rep., 952-955:

“The state is under an obligation to act justly, and without arbitrary discrimination between corporations of the state, just as it is between citizens of the state enjoying the equal rights* The state can not, under the guise of a regulation, bring about a destruction and a confiscation of the company’s property; and the state’s power to absolutely abolish the corporation fnust be distinguished from its powers to destroy its business and confiscate its property so long as it chooses to permit its existence and to authorize its business by a valid charter. And the question of the reasonableness of the rate to charge is an elementary question for judicial investigation, requiring due process of law for .its determination. And to deprive a company of the power of charging reasonable rates for the manufacture and sale of gas is to deprive it of the business of its property, and, in effect, of the property itself, without due process of law.”

The foregoing embraces a concrete statement of the law. It tersely points out the constitutional guaranty afforded by the Fourteenth Amendment to the Constitution of the United States and incidently touches the vital question raised in this case wherein it is claimed that the defendant company is denied the equal protection of the laws and without due process of law, in that said ordinance seeks to compel it to furnish gas for a period and at a price without adequate return without its consent.

It is to be remembered that the defendant company operated under another ordinance of the city of Newark in furnishing it and its inhabitants with gas and was so engaged at the time of the passage of the March 6th, 1911, ordinance. Its relation to the public, therefore, then became fixed so far as being subject to public control.

In Cotting v. Kansas City Stock Yards Co., 183 U. S., 79-84, Justice Brewer, delivering the opinion therein, quotes from Munn v. Illinois, 94 U. S., 113, as follows:

“Property does become clothed with a public interest when used in a manner to make it a public convenience and affect the community at large. When, therefore, one devotes his property to a use in which the public has an interest, he in effect, grants to the public an interest in that business and must submit to be controlled by the public for the common good to the extent of the interest thus created. ITe may withdraw his grant by discontinuing the use, but so long as he maintains the use he must submit to the control.”

As already indicated, this power of control lodged in the city council, under the statute, should be exercised not arbitrarily but with an unbiased judgment and discretion, and such a rate fixed as will afford to the company a just compensation on the reasonable value of the plant at the time it was being used for the public — a rate that is just both to the company and to the public. “The idea of reasonableness is justice, and that which is unjust can not be reasonable,” says Justice Brewer, and it might here be remarked that courts have not been slow to safeguard property rights when the protection afforded by the Fourteenth Amendment to the Constitution of the United States has been denied, nor on the other hand has the strong arm of the law been withheld from the public to protect it from imposition and wrong. With this record before us showing the net éarn-' ings of the company for the period named to be unusually large on what has been found to be the reasonable value of its plant, can the reasonableness of the rate fixed by said ordinance be successfully challenged as being obnoxious to or in contravention of the provisions of the said Fourteenth Amendment? The action of the city council being admittedly within the limits of legislative authority and its action being founded upon modes of procedure adopted for the government of municipal legislative bodies, such modes are to be regarded as due process of law. Having enacted this legislation, the will of the city council, speaking through this ordinance, becomes the law — the law unto this corporation and all persons affected by it — unless it should be made to appear that the constitutional provision safeguarding property rights has been disregarded. Here it is not claimed that there is any lack of imiformity in the operation of the said ordinance, or that there is any unjust corporate classification or discrimination made, but that it is here sought to take private property for public use without just compensátion, in violation of the Fourteenth Amendment which forbids any state “to deny to any person within its jurisdiction the equal protection of the laws.” That corporations are persons within the meaning of this constitutional provision is well settled, and in view of the repeated adjudications of the highest court in the land upholding this constitutional provision it has become generally recognized that “no duty rests more imperatively upon the courts than the enforcement of this constitutional provision intended to secure that equality of rights which is the foundation of free government.” Observing this injunction upon courts, what is the duty of this court in view of the record before us ? Can it be said that the rate fixed' by said ordinance is confiscatory in its effect, or that it will be during the future five years period, in view of its net earnings shown for the period named when the price charged by the defendant company was at the 18 cent net rate ? Acting upon the well settled principle that rates will not be declared confiscatory unless clearly shown to be so, a majority of the court are of the opinion that the rate fixed by said ordinance is not unreasonable or confiscatory in its effect, and we therefore hold that neither of the several defenses of the defendant company, which has the burden ol proof, is sustained by the evidence.

But there is another feature of this ease which should not be overlooked, in our judgment, and that is that said ordinance has not had the test of actual experience. There was no showing made by the defendant company of the practical effect of the rate fixed by said ordinance from the date of its passage to the date of the trial in this court, a period covering three years and more. In the absence of a showing made by the defendant company, in a case permitting it, that such rate will not yield a fair return on the reasonable value of its property employed, should not courts hesitate to interfere with rate legislation before being advised of the practical result of such rate?

In Dillon on Municipal Corporations, 1327, it is laid down that:

“The judiciary ought not to annul or set aside rates established by legislative action unless they are proven or shown to be such as to make their enforcement equivalent to the taking of property for public use without such compensation as under all of the circumstances is just, both to the owner and to the public, that is, judicial interference should not occur unless the case presents clearly such a violation of the rights of property under the form of regulation as to satisfy the court that the rates prescribed will have the effect to deprive the company of reasonable compensation for its services.”

In Knoxville v. Knoxville Water Co., supra, Justice Moody says:

“The judiciary which is invoked here ought, as has been said, to be exercised only in the clearest eases. If a company of this kind chooses to decline to observe an ordinance of this nature, and prefers rather to go into court with the claim that the ordinance is unconstitutional, it must be prepared to show to the satisfaction of the court that the ordinance would necessarily be so confiscatory in its effect as to violate the Constitution of the United States.”

Again, in San Diego Land & Town Co. v. National City, supra, Justice Harlan, speaking for the court, says:

“But it should also be remembered that the judiciary ought not to interfere with the collection of rates established under legislative sanction unless they are so plainly and palpably unreasonable as to make their enforcement equivalent to the taking of private property for public use without such compensation as under all the circumstances is just, both to the owner and to the public; that is, judicial interference should never occur, unless the case presents, clearly and beyond all doubt, such-a flagrant attack upon the rights of property under the guise of regulations, as to compel the court to say that the rates prescribed will necessarily have the effect to deny just compensation for private property taken for public use.”

Again, in Wilcox et al v. Consolidated Gas Company, supra, Justice Peckham says:

“But where the rate complained of shows in any event a very narrow line of division between possible confiscation and proper regulation as based upon the value of the property found by the court below, and the defendant depends upon opinions as to value, which differ considerably among the witnesses, and also upon the results in future of operating under the rate objected to, so that the material fact of value is left in much doubt, a court of equity ought not to interfere by injunction before a fair trial has been made, if continuing business under that rate and thus eliminating, as far as is possible, the doubt arising from opinions as opposed to facts.”

From the foregoing it appears that the reasonable and safe rule for courts to follow is to decline to interfere by injunction with rate-making legislation before a fair test is made and shown of the practical effect of the rate fixed, to the end that courts may intelligently act upon evidence based upon the result of actual trial of such rate rather than speculation. As in the case of Knoxville v. Knoxville Water Company, supra, so in this case, if it shall hereafter be made to appear under the actual operation of said ordinance that the returns allowed by it operate as a confiscation of property, the courts are open to afford a remedy.

The same decree may be entered herein as was entered in the court of common pleas. Exceptions.

Motion for new trial, if made, will be overruled. Exceptions.

Thirty days from this dato will be allowed for a finding of facts and the statutory period allowed for filing a bill of exceptions.


source: Caselaw Access Project

license: Public Domain

text:
    RIGHT TO USE OF A WAY NOT ACQUIRED BY PRESCRIPTION.
    Court of Appeals for Butler County.
    August Gustafson and Franciska Gustafson v. Jacob Ursales and Veronica Ursales.
    Decided, May, 1914.

      Easements — Use of a Way Not Adverse Where Privilege Was Acquired by Arbitration — Failure to Close a Gate and Failure to Keep a Fence in Repair Distinguished — Meaning of the Word “Let" in the Phrase “Without Let or Hindrance.”

    1. The submission by the user to arbitration of his right to use a strip of land as a road leading to a public highway, is inconsistent with the claim that its use has been of a character which has ripened into a title by prescription; and where the condition imposed for its use by the arbitration has not been observed, injunction lies against its further use.
    2. The phrase “without let or hindrance” is a tautological expression in which the word “let” does not mean “permission,” but has the same, meaning as “hindrance,” and the adoption of this phrase in defining the nature of the “use” which has been enjoyed in no way assists in establishing a right by prescription.

      Shank & Koehler, for plaintiffs.

      W. S. Bowers and C. J. Smith, contra.
    Jones, E. H., J.; Swing, J., and Jones, O. B., J., concur.
   This case was heard on appeal from the court of common pleas. The plaintiffs herein ashed for an injunction enjoining the defendants Jacob Ursales and Veronica Ursales from using a part of plaintiff’s farm as a roadway leading from the lands of defendants to a public highway. The claim of the defendants to the use of the roadway rests upon a long and continued use thereof by themselves and their predecessors in title, which use it is claimed by them has been open, continuous and adverse for a much longer period than twenty-one years, and has ripened into a right by prescription. This is met by the plaintiffs with the allegation that said use has been permissive only; and further, that such permission was conditioned upon the keeping up of a certain fence along said right-of-way and upon the lands of plaintiffs by the users of said roadway.

■The question thus presented is a simple one, but the evidence is somewhat vague and unsatisfactory as to the real terms and conditions under which such roadway has been used for about half a century. It clearly appears, however, from the evidence, that some forty years ago a dispute arose with reference to said roadway, between Mr.' Roll, the immediate predecessor in title of the defendants, and Mr. Johnson, then the owner of the servient tract. The matter was submitted to arbitration and it was decided that Roll should have the use of the roadway upon the condition that he maintain in good order the fence above referred to. This decision was ratified by the parties, but was not in writing. No other agreement or action with reference to said easement appears from the evidence, and Mr. Roll continued to use the roadway upon those terms until about seven or eight years ago when he sold the farm to the defendants and they moved thereon.

The act of Mr. Roll in submitting the matter to arbitration is inconsistent with a claim on his part to the use of the roadway such.as would ripen into a title by prescription.

It appears from the testimony of Mr. Hussey that about ten years ago permission was asked and secured from the then owner of the tract of land over which the roadway passed, for Mr. Hussey to pass over and along said roadway in going to and from the lands of Mr. Roil which he had rented. There are some other facts and circumstances related by witnesses, but aside from those referred to there is nothing which throws much light upon the question involved here.

After giving the case careful consideration, we have reached the conclusion that the evidence does not support the claim of a right of user by prescription. It appears that the use of the strip of ground as a roadway was looked upon and considered by the parties interested, as a permissive one. The evidence clearly shows that it was always conditioned upon the maintenance of a fence, and that this fence, at the time this action was brought in the court of common pleas, was. out of repair and not such a fence as met the requirements of the agreement. The permission to use the roadway had been forfeited by the defendants' in deliberately failing to maintain the fence after they had been informed that such was the condition upon which the roadway could be used.

In the case of Holtsberry v. Bounds, 9 C.C.(N.S.), 510, which involves a like question, the court found that the right to use the roadway was conditional upon keeping the gates closed, and that although the gates had been left open at times, the failure to close them did not work a forfeiture of the easement. We think, however, that there is a marked distinction between the failure to close a gate or gates, and the failure to keep a fence in repair. The former can be attributed, from our experience, to an occasional inadvertence, while the latter must be accounted for by deliberate and continued neglect and indifference.

The ease of Pavey v. Vance, 56 O. S., 162, is relied upon by defendants. The propositions of law stated in the syllabus, when carefully considered in the light of the evidence in this case, strongly support the contention of plaintiffs. v The first paragraph of the syllabus says:

“When one uses a way over the land of another without permission as a way incident to his own land and continues to do so with the knowledge of the owner, such use is, of itself adverse, and evidence of a claim of right. And where the owner of the servient estate claims that the use was permissive, he has the burden of showing it.”

We see that the use must be “without permission.” The facts in the ease,cited, as stated in the opinion,.show the absence of any evidence whatever that any express permission had been given for the use of the roadway, and in that respect it differs materially from the case at bar. It appears from the opinion in the case of Pavey v. Vance that the learned judge in writing his conclusion founded it upon a misconception of the meaning of the word “let” as used in the phrase “without let or hindrance.” There was a finding of facts by the circuit court in which it was found that the use of the roadway had been “without let or hindrance” for a period of over twenty-one years. It is apparent from the language used at the close of the opinion, on page 174, that the word “let” was construed as synonymous with the word “permission,” and that the circuit court having found that the use was without permission such finding was binding upon the reviewing court. A little investigation would nave disclosed that the word “let” has no such meaning when used in the phrase “without let or hindrance.” As there used, it means ‘ ‘ obstruction, ” “ obstacle. ” It is so defined in every dictionary which we have been privileged to consult. The Century Dictionary says that the phrase “without let or hindrance” is tautological. In other words, that the words “let” and “hindrance” mean the same thing.

Counsel for defendants have used this phrase with some frequency in the pleadings and brief in this case in describing the nature of the user here involved. When correctly interpreted the use of these words in defining the nature of the user can not help to establish a right by prescription, and on the theory that the phrase may have been inadvertently used, we have pointed out the njanifest mistake in the definition of the word “let” adopted by the Supreme Court in the above case.

We are of the opinion that the plaintiffs have succeeded in sustaining the burden of showing that the use of this roadway was by permission only.

A perpetual injunction will be allowed; neither party will he. awarded any money judgment; and the parties will be required to pay their own costs.


text:
    VERBAL WARRANTY UNDER A WRITTEN CONTRACT.
    Circuit Court of Cuyahoga County.
    John A. Weber v. The Nernst Lamp Company.
    Decided, June 17, 1912.

      Written Contract — Prior Verbal Special Warranty — Evidence of, Not Competent.

    In an action on a written contract for the installation of certain lamps containing the following provision, “This contract annuls any and all agreements, quotations and understandings both written and verbal, if any, which have heretofore existed between the parties hereto, and shall * * * become a contract covering-all agreements and understandings, either verbal or written existing between the purchaser and the company,” evidence tending to show a verbal spécial warranty of the lamps made by the agent of the vendor before the signing of said contract, will not be received.

      T. J. Ross, for plaintiff in error.

      H. A. Couse, contra.
    Metcalfe, J. (sitting in place of Winch, J.) ; Marvin, J., and Niman, J., concur.
   The defendant in error, the Nernst Lamp Company, was the 'plaintiff in this action in the court below.

The action was brought before a justice of the peace upon a contract to recover for the price of six lamps sold by the defendant in error to the plaintiff in error. The action was tried before a justice of the peace -and appealed to the court of common pleas, where judgment was rendered in -favor of the defendant in error, and error is prosecuted here to reverse that judgment.

It appears from the pleadings and the evidence in this case that on the 8th day of August, 1907, the parties entered into a written agreement by which the Nernst Lamp Company agreed to sell to John A'. Weber six lamps. The petition is based upon the agreement, but a recovery is sought for the entire amount of the contract, no payments having been made thereon.

-The defendant, by way of answer, sets np, first, certain repreentations claimed to have been made to him by a representative of the company at the time the contract was entered into, and upon the trial of the case in the court of common pleas, the defendant asked leave to file an amended answer. The court refused to grant him leave to file such amended answer, and thereupon the defendant offered to prove certain facts.

Whether there was error in the ease in our judgment depends entirely upon the question whether the facts which the defendant below offered to prove upon the trial were of such a kind and' character that they were admissible in evidence as a defense in the case. The contract contains several clauses; it does not contain any express warranty. The only part of it which it is necessary for us to consider at this time is the fourth clause, which reads as follows:

“This contract annuls any and all agreements, quotations and understandings, both written and verbal, if any, which have heretofore existed between the parties hereto, and shall be binding upon the company-only when approved by the president or the vice-president of the company and when accepted by the purchaser; and so approved, shall become a contract covering all agreements and understandings, either verbal or written, existing between the purchaser and the company.”

The amended answer which the defendant below asked leave to file upon the trial, sets forth that the plaintiff, by fraud, procured and induced the defendant to execute and deliver the eon-‘ tract set forth in the petition, by representing to him, in substance, that the lamps in question had a capacity to burn from 600 to 800 hours; that the lighting capacity of six of those lamps was equal to or greater than the total number of lamps which the defendant had installed in his place of business, and that the cost of maintaining the same would be very much less than the cqst of maintaining the lamps which the defendant was then using. This, in substance, covers the representations which the answer sets out and claims to have been made by the company to the defendant below.

In support of that answer, the defendant, upon the trial in the court of common pleas, made a. general offer to prove certain things. Some question is raised as to whether this offer was sufficient. We are inclined to think that it is, provided the matter offered to be proven is pertinent to the issue and should have been admitted in evidence.

The offer, in substance, is that before the contract was entered into for the purchase of the lamps, a, representative of the Nernst Lamp Company stated to the defendant, Weber, that the lamps in question would burn for the period of 600 to 800 hours; that after examining the lights in the place of business of the defendant he stated that six of the Nernst lamps had a capacity of doing the work of all the small lights in the defendant’s place of business, and that the current consumed by the Nernst lamps and the cost of maintaining the same was much less than the cost of maintaining the small lights then in said bar room, which he then examined, and that he would receive a greater amount of light therefrom and better service.

He then offers to prove that the lamps did not come up to the representations made by the representative of the company in lighting capacity, and that the company was notified to that effect and substituted other lamps for the'first ones delivered, and that the second installment of lamps did not meet the requirements of the defendant in his place of business better than the first; and other matters of this sort.

The representations claimed to have been made were entirely the representations of a representative of the company, and we think that any statements made by a representative would be entirely covered by Clause 4 of the contract, and they could not be offered in evidence unless the statements were of such a character as to show fraud on the part of the coxnpany.

The statement made and offered to be proved would tend only to constitute a warranty; they are not sufficient to constitute fraud, and there being no warranty clause in this contract, no express warranty, we think that the defendant can not be permitted, in view of the provisions of Clause 4, which I have read, to prove an express warranty. Bagley v. General Fire Ex. Co., 150 Fed. 284.

Indeed, it seems to us that none of the matters offered to be proved by counsel for the, defendant below, plaintiff here, are competent in this case, and that the entire contract of the parties having been in writing, the law will not permit proof of matters which are clearly matters of contract and outside of the written instrument itself. For that reason we think the judgment in this case should be affirmed.


text:
    PREMATURE ENTERING OF JUDGMENT.
    Circuit Court of Cuyahoga County.
    Frank Bradley et al v. W. H. K. Herron, and W. H. K. Herron v. Frank Bradley et al.
    Decided, June 17, 1912.

      Appeals — Discovery—Judgment Entered Before Overruling Motion for New Trial — Bill of Exceptions.

      1. An action on a contract for a money judgment though it require a discovery of information solely in the possession of the defendant, is triable to a jury and not appealable.
    2. Final judgment should not be rendered in an action until the motion for a new trial is overruled, where one is properly filed, and where judgment is entered before the overruling of the motion for a new trial, the forty days for the preparation and filing of a bill of ex - ceptions does not begin until the overruling of the motion for a new trial.

      T. H. Hogsett, M. H. Nason and William- Howell, for Frank Bradley et al.

      Matthews $ Orgill, contra.
    Niman, J.; Marvin, J., and Metcalfe, J. (sitting in place of Winch, J.), concur.
   Frank Bradley and L. G. Bradley were plaintiffs and W. IT K. Herron was defendant, in the court of common pleas.

The defendant, has appealed from the judgment of the court below, and has also prosecuted error to reverse said judgment.

The plaintiffs have filed a motion to dismiss the appeal for the reason that the'eause is not appealable.

The petition discloses a cause of action based upon a contract whereby the plaintiffs sold to the defendant twenty-five shares of the capital stock of the Herron-Bradley Coal Company, and were to be paid therefor an amount not to exceed $1,250, depending upon the net profits of the corporation during the first and second years following the sale of the stock. If the corporation made no profits during this period of time, the defendant was to pay nothing for the stock.

The petition, after the title of the cause, bears the words, “petition for specific performance and equitable relief,” and contains averments to the effect that the defendant has refused to take an inventory of the property of the corporation as required by the contract under which the stock was sold; that he has refused to permit an audit of the books of the corporation; that he has so carelessly kept the books that it is impossible to discover the condition of the business without the services of an expert in auditing; and that he has refused to submit to the plaintiff any statement of the business as to profits.

The relief sought against the defendant, as expressed by the prayer of the petition, is:

“That he be required to submit the books of the Herron-Bradley Coal Company, and the books of its successor, the Economy Coal & Supply Company, to such proper attorney or attorneys' as these plaintiffs, may designate, for examination, and for the purpose of verifying the statement of said defendant as to profits. That he be required to furnish to these plaintiffs said statement as to profits for the year ending May 23, 1908, and May 23, 1909.
“That he be required to make a complete inventory of said corporations, and that he be ordered and required to permit Ihese plaintiffs to be present at the making thereof. That,he be required to exhibit to these plaintiffs the checks, vouchers and cash account of said corporations showing the amount of money drawn by him as salary for the two years mentioned in said agreement, and that he be required to exhibit to these plaintiffs, the vouchers, papers and books showing the cash and other items advanced by him as loans to care for the obligations of said corporations and that plaintiffs have judgment for $1,250 and interest from May 22, 1909, or for such less sum as shall be found to be the net profits of said business for said years, and for such other and further relief as may be just and proper.”

In spite of the fact that the petition is called one for specific performance and equitable relief, and in spite of the prayer of the petition, conforming to the averment mentioned, it is apparent that the main relief sought by the plaintiffs is the recovery of a money judgment for breach of contract. The case is identical in principle with Chapman v. Lee, 45 O. S., 356. The syllabus of that ease is as follows:

“1. Upon the trial of an action against several defendants, where the plaintiffs in their petition charge upon the defendants a conspiracy to cheat and defraud the plaintiffs, thereby procuring and appropriating to their own use a single sum of money which rightfully belongs to the plaintiffs, and which they are entitled to recover, and for which they seek a joint judgment against the defendants, and the answer admits the receipt of a stated sum of money, and is otherwise, in effect, a general denial, cither party is entitled to demand a jury, notwithstanding the plaintiffs pray for a full discovery, and for an account of the full amount due to them, and to have an equitable lien declared and enforced.
“2. In such case the remedy of accounting in equity is not necessary to full and adequate relief to the plaintiffs.
“3. Adequate means of obtaining discovery from parties to actions at law being afforded by our statute, suits for discovery, as prosecuted in equity, before the adoption of the code, are practically obsolete in this state.”

It follows that the appeal in this case must be dismissed.

Coming to the consideration of the error proceedings, we are called upon to decide whether or not the bill of exceptions was filed within the required time. The ease was decided by the trial court on April 3d, 1912, and a motion for a new trial was filed on the same day. On April 4th the court rendered final- judgment for the plaintiff- without passing on the motion for a new trial. On April 6th the motion for a new trial was overruled. The bill of exceptions was filed on May 14th. If the time within which the bill of exceptions should have been filed is to date from April 4th, it was filed one day too late, but if the day when the motion for a new trial was actually overruled is the date from which the forty days begins to run, the bill was filed within the required time.

Final judgment should not have been rendered until the motion for a new trial was overruled, and we think that the defendant had forty days from the overruling of his motion within which to file the bill of exceptions.

The case below was tried to the court, who gave judgment to the plaintiffs for $750. The only error complained of is that this judgment is not sustained by sufficient evidence.

The plaintiffs’ right to recover of the defendant depended upon the question of whether there were any profits made by the corporation during the two years following the making of the agreement sued upon. To the extent of any such profits up to $1,250, the plaintiffs were entitled to judgment.

On behalf of the plaintiffs there was evidence tending to show that the corporation had made a net profit during the two years covered by the inquiry somewhat in excess of the judgment given the plaintiffs. On behalf of. the defendant, there was evidence tending to show that the business had been conducted at a considerable loss, and that the defendant had contributed out of his own personal means sufficient money to keep the concern going. It is apparent that great difficulty must have been experienced by the trial court in arriving at any exact determination of the profits of the corporation. The books and records of the company were in confusion, and the defendant’s ownership of all the stock seems to have lead to something of an intermingling of his personal finances with company affairs.

The trial court, with the witnesses before him, on the evidence presented, rendered judgment for the plaintiffs in the amount indicated, and we are-unable to say that the judgment is against the weight of the eveidence.

While the burden rested upon the plaintiffs to establish by the required degree of proof that profits were made during the period named in the contract, and the amount of such profits, still the judgment should not be disturbed merely because the amount of the judgment does not correspond to the exact dollar to the profits shown, if there was evidence which would sustain a finding that the profits were at least as large as the judgment rendered. finch a judgment is not necessarily illogical, and even if it be so, it is because of the defendant’s carelessness in not so keeping the books and records of the corporation under his control, as to be able when called upon to render a clear and unimpeachable accounting of its profits.

Judgment affirmed.


text:
    DISTRIBUTION UNDER A VENDOR’S LIEN.
    Circuit Court of Cuyahoga County.
    John Cechvala v. David Madak et al; and David Madak v. John Cechvala.
    Decided, June 17, 1912.

      Vendor’s Lien — Exemptions.
    There is no exemption as against a vendor’s lien, and when the premises upon which the lien is established have been sold and the money is in the hands of the clerk of the court, the lien will be transferred to the fund, to be paid before any exemptions can be allowed the judgment debtor.

      H. F. Payer, for plaintiff in error.

      Hart, Canfield & Croke, contra.
    Niman, J.; Marvin, J., and Metcalfe, J. (sitting in place of Winch J.), concur.
   The first of these actions is here on appeal; the other is a proceeding in error.

By the proceeding in error, the plaintiff in error seeks to reverse the judgment of the court o£ common pleas overruling his motion for the allowance of $500 exemptions in lieu of a homestead out of a certain fund in the hands of the clerk of courts, which the defendant in error seeks to have applied on a judgment’ rendered in his behalf in the action below against the plaintiff in error.

Inasmuch as the right of a judgment debtor to have exemptions allowed him in lieu of a homestead depends upon the existence of certain facts, those facts must be established by evidence of the proper kind, and when it is sought to review the action of a court in passing upon a motion for an allowance of such exemptions, the evidence on which the trial court acted must be brought before the reviewing court. There is no bill of exceptions here, and we unable to pass upon the question raised in the error proceeding, and the petition in error will be dismissed.

In the appeal case, the following state of facts appears:

Prior to October 25, 1910, the plaintiff, John Cechvala and Burt Madak were the owners of a piece of real estate in the city of Cleveland and a saloon business conducted on said real estate. Each party owned an undivided one-half interest in the real estate and saloon business. On the day mentioned the defendant, David Madak, purchased the interest of the plaintiff in the real estate and saloon business for $700, according to the claim of the plaintiff, which was disputed by said defendant, who claimed to have bought the plaintiff’s interest in the property for $20. The plaintiff was not paid at the time of the sale, and was given no note or security of any kind. A few months after this transaction took place, David Madak and Burt Madak sold the premises to the Hanover Realty Company for $3,000. The company, after paying various incumbrances out of the purchase price, had left in its possession a balance of. $613.43 due the Madaks. Burt Madak assigned his interest in the money, which was a one-half interest, to David Madak.

The plaintiff, after the sale had been made to the Hanover Realty Company, began suit against David Madak to recover the sum of $700. The Hanover Realty Company was made a defendant in the action. The petition contained averments to the effect that said company had in its hand the balance of the purchase price due Burt and David Madak, and a part of the prayer asked that the company be ordered and directed to pay over to the plaintiff the net proceeds of the sale.

The plaintiff also obtained an attachment and the Hanover Realty Company w^as made garnishee. The company then filed an interpleader and was ordered to pay the clerk the money in its hands belonging to the defendant, David Madak.

David Madak then filed an answer and cross-petition in which he denied the claim of the plaintiff, and prayed that the money in the hands of the clerk be paid to him.

The jury returned a verdict for the plaintiff against the defendant, David Madak, for $721 on which judgment was duly entered.

The defendant then filed a motion for the allowance of $500 in lieu of a homestead out of the fund paid to the clerk by the Hanover Realty Company. It is this motion that is now before us. We are met with the contention on behalf of the plaintiff that this is not such a judgment or final order as may be appealed from.

The plaintiff claims the fund in the hands of the clerk as against the defendant’s demand for exemptions.on the theory that he had a vendor’s lien on the premises sold to said defendant, and that the fund arising from the sale of real estate should be'charged with this lien. There being conflicting claims to the fund in question, and one of those claims involving the application of equitable principles, we are of the opinion that the motion should be treated as one in effect asking for an order of distribution, and that either party concerned might appeal from the decision of the court on such motion.

This leaves for decision, then, on the facts before us in the form of an agreed statement of fact, and the evidence offered, the one question whether under a vendor’s lien the plaintiff is entitled to an order for the payment to him to apply on his judgment, the entire fund, or any part thereof, except that in excess of $500 which he is admittedly entitled to recover in. the hands of the clerk, representing the balance of the price of the premises sold by the Madaks to the Hanover Realty Company.

The defendant, David Madak, is entitled to $500 exemptions in lieu of a homestead out of this fund, provided he is not prevented from receiving it on account of the lien claimed by the plaintiff.

In Neil v. Kinney, 11 O. S., 58, it was held:

“A vendor’s lien upon land sold for the purchase money, is an equitable right arising from a constructive trust, and is independent of the possession of the land to which the lien attaches as an incumbrance.”

The plaintiff had a vendor’s lien upon the real estate sold to David Madak for the, unpaid purchase price. The real estate has been sold and the balance of the money received from the sale, after paying incumbrances and other claims, is in the custody of the court and under- its control. The lien, which the plaintiff had against David Madak’s interest in the real estate may therefore be transferred tp the fund. Since the plaintiff, however, sold to David Madak only an undivided one-half interest in the real estate, his lien will attach to only one-half of the fund. The other half was acquired by David Madak from his brother Burt Madak, by assignment. As to this interest in the money in the hands of the clerk, the plaintiff can have no lien, and to the extent of such one-half interest the defendant is entitled to have his claim for exemptions allowed. The other half will be ordered paid to the plaintiff.


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    DETERMINATION AS TO LIABILITY ON A JOINT NOTE.
    Circuit Court of Lucas County.
    Monroe P. Holmes v. Frank Cairl.
    Decided, February 10, 1912,

      Promissory Notes — Error in Giving Judgment Against One Maker Without a Finding as to the Liability of the Other.

    Where the liability on a promissory note is joint only, it is error to adjudicate as to the liability of one maker, without passing judgment as to the liability of the other joint obligor.

      F. J. Flagg, for plaintiff in error.

      George G. Bryce, contra.
    Richards, J.; Wildman, J., and Kinkade, J., concur.
    Error to the Court of Common Pleas of Lucas County.
   In the court of common pleas Frank Cairl brought an action against Monroe P. Holmes and Dale Gr. Holmes to recover upon a joint note executed by them to him, dated July 5, 1909. The defendants answered separately, setting up a claimed breach of warranty and false representations in the sale of a horse, and claimed the invalidity of the note and asking a judgment against Cairl for damages.

Cairl filed a pleading denominated a reply and answer to the amended answer and cross-petition of Monroe P. Holmes. In that reply he sets forth the allegations contained in a petition filed against him by Monroe P. Holmes, averring facts tending to show the invalidity of this same note and asking to have its transfer enjoined and the note declared a nullity, and praying for damages in that action for $255 and for an injunction. He sets up further in the reply that the prior action was tried to a jury in the Common Pleas Court of Lucas County and resulted in a verdict and judgment in favor of said Frank Cairl. To this defense contained in the reply,'Monroe P. Holmes filed a demurrer. The court of common pleas overruled the demurrer and the defendant, Monroe P. Holmes, not desiring to plead further, the court rendered judgment against him for the amount claimed upon the note, leaving the action to proceed further in the common pleas court against the remaining defendant, Dale G. Holmes. To this judgment Monroe P. Holmes prosecutes error in this court, insisting that the judgment in the prior case as set forth in .the reply is not a bar to this action. He cites and relies upon two cases, Cramer v. Moore, 36 O. S., 347, and Porter v. Wagner, 36 O. S., 471. A careful examination of those eases indicates that in each case the decree which was held not to be a bar was one in equity, dismissing the petition which, for manifest reasons, ought not to be a bar to a subsequent action brought at law.

In the case now under consideration, it appears that the claims set up were litigated and adjudicated by a trial before a jury in the original case set forth in the reply, and we think the court of common pleas did not err in holding that the prior action was a bar, and in overruling the demurrer to the reply. The common pleas court, however, went further and entered a final judgment against the defendant, Monroe P. Holmes, for an amount claimed to be due upon this joint promissory note, without passing upon the liability of the other maker of said note. In so doing, we think the common pleas court erred to the prejudice of Monroe P. Holmes. The liability upon the note being a joint one only, and not joint and several, the court bad no power or authority to adjudicate as to the liability of one signer without at the same time determining as to the liability of the other. We call attention to the following cases which seem to be conclusive upon this matter: Carr v. Beckett, 1 C. C., 72; Aucker v. Adams, 23 O. S., 543; Hempy v. Ransom, 33 O. S., 312, 317; McCoy v. Jones, 61 O. S., 119; Schuch v. Groh, 10 C. D., 815; 4 Abb., 248.

For the single error in entering final judgment against Monroe P. Holmes before the final determination of the case, tihe judgment will be reversed and the case remanded for further proceedings.


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    SUSPENSION FROM A CATHOLIC ORDER FOR MARRIAGE TO A DIVORCED PERSON.
    Circuit Court of Cuyahoga County.
    Katherine Pinta Koukolicek v. The Ladies Catholic Benevolent Association.
    Decided, June 17, 1912.

      Fraternal Beneficial Association — Remedy Within Order Must Be Exhausted — Lawful Rules of Such Association — Practical Roman Oatholic — Marriage to Divorced Person.

    1. Where an individual becom.es a member of a fraternal beneficial association, he is bound to exhaust the remedies provided by its constitution and by-laws, not opposed to the laws of the state, which provide for the redress of grievances between members and the organization, and until he has done so he can not appeal to the courts for relief on account of such grievances
    2: The requirement that none but practical Roman Catholic women may become members of a fraternal beneficial association or of any of its branches is one'which the organization has a right to embody in its constitution and by-laws.
    3. Marriage to a divorced person whose divorced husband or wife, as the case may be, is still living, is a violation of one of the rules or canons of the Roman Catholic Church, and a person who has committed this offense against the church, can nor, under its laws, remain a practical Catholic.

      J. W. Syhora, for plaintiff.

      Hart, Canfield & Croke, contra.
    Niman, J.; Marvin, J., and Winch, J., concur.
   The action is here on appeal. The defendant, the Ladies Catholic Benevolent Association, is a mutual insurance and benefit association, incorporated under the laws of the state of Pennsylvania and transacting business in the state of Ohio. It insures the lives and health'of its members and maintains social relations between its members.

The defendant, the St. Cecilia Branch No. 349 of the Ladies Catholic Benevolent Association, is one of the subsidiary organizations of the defendant association first named.

Section 4 of Title I of the supreme constitution of the .association provides for the qualifications of members in the following language:

‘ ‘ None but practical Roman Catholic women may become members of the Ladies’ Catholic Benevolent Association, or of any of its branches.”

The plaintiff became a member of the St. Cecelia Branch of the association, and thereby of the association itself, on December 3, 1903. She thereby became entitled to all of the rights and benefits belonging to members of the organization, and acquired insurance upon her life for the sum of $1,000 payable to certain beneficiaries.

At the time the plaintiff joined the St. Cecelia Branch of the association, she possessed the qualifications necessary to render her eligible to membership in the association. .She remained a member in good standing until November 7, 1907, when she was suspended. Her suspension was followed by such action on the part of the organization, that on or about June 4, 1908, she was expelled.

The ground of her suspension and expulsion from the association was, that on or about September 3, 1907, she had married a divorced man whose divorced wife was still living, and had thereby violated one of the rules of the Catholic Church, and had ('.eased to be a practical Catholic.

By this action the plaintiff seeks to enjoin the defendants from refusing her the rights and benefits of a member of the association, and from cancelling or making void her insurance in the organization, and in case such relief can not be granted .her, she asks for an accounting of the money paid by her as premiums or assessments and a recovery of the same. Her right to the relief sought is disputed by the defendants on the ground that she had not exhausted her remedies within the association, and until she had done so, she has no standing in the civil court to obtain redress for the alleged wrongs done her by the organization of which she was a member.

In Meyers et ai v. Jenkins, Admr., 63 O. S., 101, it was held as follows:

“The members of a lodge of the Independent Order of Odd Fellows are not liable to another member of the same lodge for sick benefits, unless there is some law of the order expressly making them so liable. The obligation to pay sick benefits, as the laws of the order in this state stood in the year 1890, rested-alone upon the lodge, and not upon the members thereof.
“When a member of such order claims to be entitled to sick benefits, he must seek his remedy .in the first instance, in the lodge and the tribunal of the order and the determination of the matter by such lodge and tribunal in substantial accordance with the laws of the order, will be final and conclusive of the right to receive such benefits.
“If the lodge refuses or neglects, upon proper demand, to have the right to such benefits determined in substantial accordance with the laws of the order, or refuses to pay such benefits after -the same have been awarded to such member, then such member may sue in the civil courts for the recovery of such benefits.”

We consider it settled, then, that where an individual becomes a member of an organization such as this, he is bound to exhaust the remedies provided by the constitution and by-laws, not opposed to the laws of the state, which provide for the redress of grievances between .members and the organization, and until he has done so he can not appeal to the courts of the state for relief on account of such, grievances.

Section 61, of Title I, of the constitution and by-laws of the Ladies’ Catholic Benevolent Association provides for the filing of charges against any member of a branch who violates the obligations of the association, and for the trial of such member. The sixth paragraph of the section reads as follows:

"If after a fair and impartial trial the charges are proven, the accused may be fined, reprimanded, suspended, or expelled as a majority of the board of supreme trustees may determine.”

By virtue of other sections of the constitution and by-laws of the association, a member of a branch feeling dissatisfied at the decision rendered upon any charge or complaint, may appeal from the board of supreme trustees to the supreme council of the association.

The evidence fails to show that the plaintiff prosecuted any appeal. She was notified of the proceedings against her and every opportunity was given her at every stage to protect her rights. She did not take advantage o.f the rights given her by the constitution and by-laws of the organization to defend herself, and having failed to exhaust her remedies within the association she has failed in an essential part of her case. Notice to the plaintiff that she had been expelled by the supreme council does not, in our opinion, avoid the necessity of proof that she had prosecuted the appeal provided for by the constitution and bylaws. The fact that she had been expelled by the supreme council would not necessarily imply that an appeal would be taken in vain. i '

The requirement that none but practical Roman Catholic women may become members of the association, or of any of its branches, is one which the organization had a right to embody in its constitution and by-laws. The association also had the right to require of its members, once admitted, that they continue to be practical Catholics, and to provide for the expulsion of those who cease to be such.

Marriage to a divorced person whose divorced husband or wife, as the case may be, is still living, is a violation of one of the rules or canons of the Catholic Church, and a person vdio has committed this offense against the church can not, under its laws, remain a practical Catholic.

When the plaintiff married a man who had been divorced from his wife, whose divorced wife was still living, she ceased to be a practical Catholic, and under the constitution and by-laws of the association, was subject to removal as a member thereof. No law of the state and no principle of public policy is violated by the insistence of the organization on the observance of this rule of the church, as a condition of the retention of membership therein.

It follows that the relief prayed for by the plaintiff must be denied and her petition dismissed.


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    RESTRICTION AS TO VALUE OF IMPROVEMENTS WHICH MAY BE MADE.
    Circuit Court of Cuyahoga County.
    Mary Dean Snyder and F. E. Snyder v. The Lakewood Land & Improvement Company.
    Decided, June 10, 1912.

      Building Restrictions.

    A restriction in the deed of certain premises that “no house shall be erected upon said premises at a less cost than $3,500,” is violated by moving a barn upon the lot and converting the same into a house, the building after all alterations and repairs being of less value than $3,500.
    Niman, J.; Marvin, J., and Shields, J. (sitting in place of Winch, J.), concur.
   This proceeding in error had its inception in an action brought in the court of common pleas by the defendant in error, the Lakewood Land & Improvement Company, against the plaintiffs in error, Mary Dean Snyder and F. E. Snyder, to enjoin said defendants from violating a building restriction. The judgment in the court below was for the plaintiff. The defendants filed a motion for a new trial, which was overruled and they .are here seeking a reversal of the judgment of the court below.

Briefly stated, the facts are as follows: the Lakewood Land & Improvement Company is the owner of an allotment of real estate in the city of Lakewood, known as the Belle avenue allotment which contains 134 lots, some of which front on Madison avenue , some upon Belle avenue, and some upon Detroit avenue. All the lots in the allotment, except those fronting on Detroit avenue, are subject to uniform restrictions. On or about the 14th day of August, 1911, the plaintiff in error, Mary Dean Snyder, purchased on a land contract one of the lots in said allotment fronting on Madison avenue. In the contract the same restrictions were imposed upon the lot purchased as attach to the other lots in the allotment except those on Detroit avenue. That part of the restrictions necessary to be noticed here is as follows:

“No house shall be erected upon said premises at ,a less cost than $3,500 and shall be set back from the street line a distance of not less than 45 feet. ’ ’

At the time of the purchase of this lot by the said Mary Dean Snyder, there stood partly upon the lot purchased by her and partly upon another lot, a barn, which by the terms of the purchase went with the lot. After the contract was executed, the plaintiff in error moved the barn on to the lot purchased by them, and, having made' various alterations and repairs, moved into the same and occupied it as a place of residence. The building after alterations and repairs is admittedly of a less value than $3,500'.

The question here to be decided is: ’Whether or not the restriction that “no house shall be erected upon said premises at a less cost than $3,500” has been violated by the .fitting up of this barn as a place of residence and the living therein by the plaintiffs in error. ' ,

It is contended upon behalf of the plaintiffs in error that there has been no erection upon said premises of a house costing less than $3,500, and that the occupancy of this barn, which is claimed to be temporary only, does not violate the restriction.

The effect, however, of the converting of this barn into a dwelling-house upon the other lots sold by the defendant in error and upon the lots retained by it, is the same as though a new building of the same character and value had been erected and, in our opinion, there has been a plain violation of the restriction imposed upon this lot. The purpose of this restriction was to obtain uniformity in the character of buildings erected in the allotment and preserve the appearance and enhance the value of all the lots in the allotment as a desirable and attractive place for the establishment of homes. This purpose would be defeated, in part at least, if the plaintiffs in error were permitted to continue in the use of this barn as a place in which to live. They had a right to move the barn entirely on to the lot under the contract, but when they proceeded to convert it into a house, they violated the restriction, as much as though they had erected an entirely new house of equivalent value.

The court below, therefore, committed no error in granting a perpetual injunction as prayed for in the petition, but in our opinion the judgment of the court below should be modified to such an extent as to give the plaintiffs in error a reasonable time to make preparation for another place of residence, and the judgment of the court below will be so modified as to give the plaintiffs in error until thé 15th day of September, 1912, to permanently vacate said structure and abandon the same as a dwelling-house. The judgment, as so modified, will then be affirmed.