author: Fess, J.

text:
    The Butler Produce & Canning Co., Appellant, v. Edgerton State Bank, Appellee.

      (No. 319
    Decided April 14, 1952.)

      Messrs. Newcomer, Neiv'comer & Shaffer and Mr. Alphonso Wood, for appellant.

      Messrs. Gébhard & Rogue and Mr. Fred Wolf, for appellee.
   Fess, J.

This is an appeal on questions of law from a judgment entered on a verdict for the defendant.

Plaintiff corporation brings its action for recovery of the proceeds of three cheeks cashed by the defendant upon allegedly, forged endorsements of the names of the payees thereof by one Earl L. Brant, an associate and employee of the plaintiff. One of the checks was made payable to the plaintiff and two of them were payable to the Blackford County Canning Company, a nonincorporated business owned and operated by one Jacob H. Walz, who was also treasurer of the plaintiff. Prior to the commencement of the action, Jacob H. Walz sold and assigned all the assets of the Black-ford company to the plaintiff.. The petition sets forth three separate causes of action, upon'each of the three' checks.

The first defense in the- answer is a general denial.

The second defense alleges that the plaintiff and Jacob H. Walz gave to Earl L. Brant specific authority to endorse any and all checks of the Butler Produce & Canning Company and the Blackford County Canning Company; that Brant was employed to keep books, handle deposits, pay bills, draw checks, prepare tax returns and conduct other business of importance; that Walz and plaintiff, over many years, made available to Brant their unendorsed checks and permitted him to endorse and cash them; that they permitted Brant to borrow funds in his individual name from defendant and others to cover overdrafts of Walz and plaintiff in the Knisely bank in Indiana; that by their conduct, Walz and plaintiff clothed Brant with apparent, if not actual, authority to endorse and cash the three checks; and that Walz and plaintiff are estopped and precluded from asserting the claims set forth in the petition.

For its third defense, defendant alleges that if there was any liability, the obligation of Brant was primary and that of the defendant secondary, and that plaintiff and Walz had entered into an agreement with Brant under the terms of which the parties agreed on the total amount of all claims owing by Brant and had accepted in satisfaction, compromise and settlement thereof promissory notes secured by mortgages. Defendant alleges further that such agreement is an accord and satisfaction and discharges defendant from any liability.

For its fourth defense, defendant says that the aforesaid agreement provided that an effort be made to determine the exact amount of the abstractions from Walz and the plaintiff and that the sum repaid by Brant be adjusted as between Walz and the plaintiff; that Brant has repaid $18,667.93, leaving a balance due Walz and plaintiff of $16,332.07 ($12,000 at time of trial); that such balance is secured by mortgages; and that such repayment and security should, in equity, be applied to discharge plaintiff’s claims against the defendant. Defendant prays for dismissal of the petition “and for such other and further relief to which it in equity be entitled.”

The reply was a general denial and an averment that the total amount abstracted by Brant was to be thereafter determined, and was not determined at the time the agreement was executed since plaintiff had made no examination of the records for 1946, and that by reason of the fraudulent acts of Brant in failing to disclose the abstractions in 1946, set forth in the petition, the note and mortgage were given for the amount set forth therein.

Although Earl L. Brant was principally engaged in the insurance business, he was a part time employee and associate of the plaintiff and Jacob H. Walz. He had charge of the books of the two companies and the auditing of the accounts. Pursuant to authority from the owners, Brant deposited checks from customers in the Knisely National Bank at Butler, Indiana. The endorsement was made by a rubber stamp, made available for such purpose to Brant and a girl bookkeeper in the office, reciting:

“Pay The Knisely National Bank of Butler, Indiana or order

“Butler Produce & Canning Company Jacob H. Walz, Treasurer.”

With respect to the Blackford company, a similar stamp was provided with the name “Blackford County Canning Company” instead of “Butler Produce & Canning Company.”

In September 1946, Brant came into possession of a cheek dated September 24, 1946, in the sum of $1,574.34, payable to the Blackford company and, by another rubber stamp, stamped upon the back of the check “Blackford County Canning Co., By ....,” and signed the name “Jacob H. Walz, Treas.” thereon. Brant also came into possession of another check dated September 26, 1946, payable to the Blackford company, which he endorsed in like manner. Another check, dated September 30, 1946, in the sum of $1,-773.48, payable to the plaintiff, was endorsed by rubber stamp “Butler Produce & Canning Co., Inc., By ....,” and the signing of “Jacob H. Walz, Treas.” thereon. The three checks were taken by Brant to the defendant bank, which apparently cashed them without requiring Brant’s endorsement or making any inquiry as to his authority to endorse or negotiate the checks. The liability ledger sheet of the defendant bank discloses that on September 12, 1946, Brant owed the bank $6,500. Thereafter payments of $1,031.33 and $1,000 were made on the loan, reducing it, as of September 30th, to $4,468.67. Additional payments of $968.67 and $500 were made, reducing the loan as of October 1st to $3,000. No further entries appear until November 13th, when another payment of $1,000 was credited upon the account. Brant also maintained a cheeking account with the defendant bank, which reflects deposits of $100 on September 21st, and $870.45 on October 18, 1946. Midwest Brokerage Company, Jacob Walz and E. L. Brant, had a checking account which reflects deposits of $1,309.68 on September 30th, and $621.51 on October 1, 1946. It will be noted that the proceeds of the three checks can not be traced to either Brant’s personal account or his liability account. The checks, however, bear the endorsement of the defendant bank and it necessarily follows that Brant received the proceeds in cash or by way of partial credit upon his indebtedness.

Butler Produce & Canning Company made a loan of $284.80 from the defendant bank in 1941, which was paid in September of that year, but was not otherwise a customer of the bank. Jacob Walz had a somewhat inactive checking account which was opened November 17, 1945, and closed on March 31, 1946. Blackford County Canning Company, Earl L. Brant and Jacob Walz made a loan of $1,500 on July 10,1945, which was paid November 1, 1945.

There also appears in evidence a signature card at the Knisely National Bank at Butler, Indiana, upon the account of the Blackford County Canning Company upon which “Blackford County Canning Co. by ......” is typed (not stamped), and bearing the signatures “By — Dorothy Camp, Jacob H. Walz or E. L. Brant. ’ ’ It was also developed at the trial that checks dated November 15, 1945, payable to the Blackford Canning Company in the sums of $1,322.83 and $1,-322.84 were taken by the defendant endorsed by stamp “Blackford County Canning Co., By ....,” and signed “Jacob H. Walz, Treas,” and that on March 11, 1946, the defendant-bank cashed a check payable to ‘ ‘ Cash— E. L. Brant” in the sum of $756.13 and signed “Jacob EL Walz, by E. L. Brant.”

Although the three checks were negotiated by Brant in September 1946, the defalcation was not discovered until April 1950. Brant had fraudulently credited the payments received from the drawers of the checks upon the books of the two companies.

The evidence that Brant forged the endorsements upon the three checks is practically uncontradicted. Section 8128, Gleneral Code, provides:

“When a signature is forged or made without authority of the person whose signature it purports to be, it is wholly inoperative. No right to retain the instrument, give a discharge therefor, or to enforce its payment against any party thereto, can be acquired through or under such signature, unless'the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.”

Although the statute makes no specific reference to the liability of an intermediate endorsee who collects the proceeds upon forged commercial paper, there is ample authority for the proposition that such endorsee is liable to the holder whose name has been forged as upon an action for money had and received.

“One acting on an indorsement must ascertain its genuineness at his own risk; and, where indorsement is essential to recovery, there can be no recovery if it was forged. So forgery of thfe payee’s name is a defense in a holder’s action against the payee, maker, or drawer; and a payee whose name has been forged may in proper circumstances recover from the drawer, drawee, or indorsee.” (Italics supplied.) 10 Corpus Juris Secundum, 1087, citing Buckley v. Second National Bank of Jersey City (1871), 35 N. J. Law, 400, 10 Am. Rep., 249.

The payee whose endorsement has been forged may bring his action against an intermediate endorsee bank which has collected the proceeds of the check from the drawee bank. Shaffer v. McKee, 19 Ohio St., 526; Central Trust Co. v. Backsman, 50 Ohio App., 512, 198 N. E., 730.

Notwithstanding the language of the opinion in the Backsman case, the more cogent reasoning and authority support the theory that the action is ex contractu for money had and received rather than ex delicto for conversion. Henderson v. Lincoln Rochester Trust Co., 303 N. Y., 27, 100 N. E. (2d), 117. See 31 A. L. R., 1068; 67 A. L. R., 1535.

But is the plaintiff “precluded from setting up the forgery or want of authority” of Brant to endorse the check? As between a drawer-depositor and a draweedepository bank, the doctrine of “two innocent persons” is frequently applied to estop the drawer whose name has been forged from asserting the forgery. Weisberger Co. v. Barberton Savings Bank Co., 84 Ohio St., 21, 95 N. E., 379, 34 L. R. A. (N. S.), 1100; Jones v. Peoples Bank, 95 Ohio St., 253, 116 N. E., 34; Hillside Dairy Co. v. Cleveland Trust Co., 142 Ohio St., 507, 53 N. E. (2d), 499.

Recovery by a depositor against a bank upon checks deposited in his personal account by the general manager of the depositor has also been denied upon the ground of negligence. Portsmouth Clay Products v. National Bank of Portsmouth, 78 Ohio App., 271, 69 N. E. (2d), 653.

Upon reason and authority, the same principle should be applied as between the payee of a check whose signature has been forged and an intermediate endorsee bank which has taken such forged check. But as between a drawer whose name has been forged and the drawee bank, the circumstances creating an estoppel precluding the drawer from asserting the forgery are more likely to arise than in the case where an intermediate endorsee cashes a check upon the forged endorsement of the payee. For example, in the instant case the payee did nothing which would clothe Brant with any indicia of authority to endorse the checks or to receive the proceeds thereof other than to permit the checks to come into Brant’s possession. In order to charge the payee of the checks with responsibility under the “one of two innocent persons rule,” the acts of the payee must in some way contribute to cause the endorsee to pay to a person other than the actual payee of such check or a person not duly authorized by the actual payee to receive payment. Hockett Co. v. Simmonds, 84 Ohio App., 467, 87 N. E. (2d), 739. In Fourth & Central Trust Co. of Cincinnati v. Johnson, 24 Ohio App., 129, the court holds that in an action to recover a bank deposit paid by the bank under forged checks of the depositor’s bookkeeper, where the evidence did-not show duty and opportunity to speak by the depositor or reliance of the bank on his silence and injury resulting thereby, the depositor was not estopped from defending against the payment of the forged checks.

In Lavanier v. Cosmopolitan Bank & Trust Co., 36 Ohio App., 285, 173 N. E., 216, it is held that drawee bank’s payment on a check being a nullity if endorsement was forged, the drawer’s right to his deposit remained unaffected; hence, the drawer could not recover against the intermediate cashing bank, because the drawer’s money was still in the drawee bank. This decision is contrary to the greater weight of authority which, in the interest of avoiding a multiplicity of suits, permits the payee of a check whose endorsement has been forged to recover against the intermediate endorsee. 31 A. L. R., 1068; 67 A. L. R., 1535; Henderson v. Lincoln Rochester Trust Co., supra. Avoidance of a multiplicity of suits is recognized by implication in the reference to plaintiff’s argument in a footnote in Shaffer v. McKee, supra. In Provident Savings Bank & Trust Co. v. Western & Southern Life Ins. Co., 41 Ohio App., 261, 179 N. E., 815, the court reaffirmed the Johnson case, but also held that in an action against the drawee bank for the amount paid on checks forged by a depositor’s agent, negligence alone on the part of the depositor is no defense, but it must be such negligence as is the proximate cause of the bank’s action in paying the forged checks — acts constituting negligence upon which the bank relied to its damage. Provident Bank & Trust Co. v. Fifth-Third Union Tr. Co., 43 Ohio App., 533, 183 N. E., 885, and Planters Bank & Trust Co. of Richmond v. Fifth-Third Union Tr. Co., 56 Ohio App., 309, 10 N. E. (2d), 935, illustrate the technical ramifications and confusion which arise as between banks incident to the transfer of forged negotiable instruments upon the theory that the drawee bank alone is liable.

In Pyper v. Climer, 29 Ohio App., 486, the payee of a check delivered it unendorsed to his agent with instructions to deposit it as security for the rental of an airplane. The agent forged the payee’s name and it was cashed by the plaintiff as the intermediate en-dorsee. The court held that under-the facts and circumstances the payee was, by his conduct, precluded from setting up the defense of forgery, upon authority of Weisberger Co. v. Barberton Savings Bank, supra, thereby applying the “one of two innocent persons” rule. The Weisberger and Pyper cases ignore the fundamental principle that one who acts upon the endorsement of negotiable paper does so at his peril; that a forgery is void; and that no right can be acquired through a forgery unless the payee by his conduct “is precluded from setting up the forgery or want of authority.” Mere possession of an unendorsed check does not clothe the possessor with apparent authority to negotiate' it. On the contrary, the apparent authority is created by the forgery and the one cashing it is relying on the forgery itself and not upon any act or conduct of the payee. The same court which decided the Pyper case in 1928 in the recent case of Hockett Co. v. Simmons, supra, holds that under the “one of two innocent persons rule” the act of the drawer must in some way contribute to cause the payer to pay to a person other than the actual payee of a check, or a person not duly authorized by the actual payee to receive payment.

There is no evidence in this case from which it may be inferred that the defendant bank relied upon any conduct of the plaintiff or Walz which would lead it to believe that Brant had authority to negotiate the checks, except that indicating that he was allowed to have possession of the checks for deposit. It was the duty of the bank to ascertain the extent of Brant’s authority. Instead, it relied upon the forged endorsements of the payees’ names. Mere possession of the check with the forged endorsements was insufficient to clothe Brant with any indicia of authority attributable to the payees.

Upon this aspect of the case, we therefore conclude that the evidence tending to show that Walz and plaintiff permitted the unendorsed checks to come into Brant’s possession 'did not preclude plaintiff from setting up the forgery. However, upon the issue of forgery we are of the opinion that the trial judge should have submitted to the jury the issue of fact as to whether Walz and the plaintiff authorized Brant to negotiate the checks and if they found that Brant was so authorized, that its verdict shpuld be for the defendant; that, on the other hand, if it found that Brant was not so authorized to negotiate the checks, its verdict should be for the plaintiff.

With respect to the defense of accord and satisfaction, there is considerable doubt whether, under the circumstances, the liability of Brant was primary and that of the bank secondary. Ordinarily, upon discovery of the forgery, the drawee bank would pay the amounts of the checks to the payee and then in turn be reimbursed by the prior endorsers in the order of their several endorsements. And in the instant case the defendant bank would reimburse the bank to which it negotiated the checks, and in turn would have the right to proceed against the forger for the loss thus sustained. Upon discovery of the forgery, the bank would no doubt have the right to pursue the forger, even before it would be called upon to repay the amount to its endorsee.

But in the instant case the defendant, as the collecting bank, acquired no title to the checks on the forged endorsement because the endorsement, its only source of title, is a nullity. It, therefore, is wrongfully in possession of the check, and upon equitable principles holds it for the payee. While in possession of the forged check, the bank, by means of the forged endorsement, collected the cheek and thereby holds the proceeds of the collection for the payee. Such circumstances are said to create a privity between the bank and the payee, and if the payee elects to ratify the collection of the proceeds for his benefit by-the collecting bank, the payee may recover from it the amount collected. National Union Bank v. Miller Rubber Co., 148 Md., 449, 129 A., 688, 690; 9 Corpus Juris Secundum, 763.

The payee no doubt has a right of action against the forger to recover the amount of his defalcation. The bank also has a right of action against the forger on account of the criminal fraud practiced by him. But it is exceedingly difficult to perceive a situation of primary and secondary liability as between the bank and the forger. Of course, the plaintiff may have but one recovery and any payment which it might receive from the forger would reduce the amount of its recovery from the bank, and the bank in turn would be entitled to recover from the forger the amount of the judgment against it.

With these considerations, it would appear that if the forger repays the whole amount of the checks to the payee, the latter would have no further right of recovery against the endorsee bank. Likewise, if the payee makes a complete settlement with the forger and thereby releases him from any further obligation, an accord and satisfaction would result which would redound to the benefit of the bank.

The agreement upon which defendant relies as an accord and satisfaction was. made September 27, 1949, between Brant, the plaintiff, and Jacob H. Walz. In the preamble, it is recited that over a period of years Brant had been employed in keeping books and records, handling deposits, paying bills and drawing checks for the Butler and Blackford companies; that investigation had disclosed shortages in both concerns in amounts then undetermined; and that Brant admits embezzlement of funds from both companies and fixes the amount at $35,000, but is unable to state how much had been taken from each company, “and whereas the said Earl L. Brant has promised to pay said abstraction iii such, amount as may be determined and in compliance with this agreement” has paid $8,119.85 in payment of liabilities of Blackford company and $2,-548.08 of Butler company. The preamble - recites further that Butler and Blackford contend that the abstractions were in excess of $35,000. Thereupon the agreement itself recites that Brant admits abstractions in the sum of $35,000, and agrees to pay such sum to the two companies .“as soon as he can raise said amount, but in no event to exceed a period, of six months, unless the balance remaining unpaid” at the end of six months is secured to .the satisfaction of the two companies. It was also agreed that Brant had paid the $8,119.85 and $2,548.08 which should be credited upon the admitted sum of $35,000, leaving a balance due of $24,332.07 to be represented by a note for $4,-332.07 due December 31, 1949, and one for $20,000 due within one year, with interest at 5 per cent. Brant agreed further to secure the notes by a mortgage on his farm, subject to an existing first mortgage of $2,000, and a chattel mortgage on live stock and machinery. Butler and Blackford agreed that payments received should be allocated as nearly as possible between the two companies so as to restore the companies to the same relative position as before the defalcations. “Any eventual loss that may be sustained after recoveries have been made and applied shall be sustained pro rata by the two companies in proportion to the amount of loss of each of said companies.” Butler and Blackford also agreed that if $8,000 was paid upon the $20,000 note before maturity, they would extend the balance of $12,000 for an additional period of one year. It is obvious from the terms of the agreement that one of its primary objects was to attempt' to adjust the defalcations as between the two companies.

No specific provision that Brant was to be released from his obligations to the companies npon the payment of the $35,000 was made in the agreement.

On February 20,1950, a further agreement was made acknowledging that Brant was entitled to credits aggregating $8,000 on his $20,000 note and reciting that the credits had been arrived at as compromises and are to be considered in full payment of any and all debts due Brant from Butler and Blackford up to December 31, 1949 (with a minor exception).

Plaintiff’s evidence (which was erroneously excluded) tends to show that the loss on the three checks was not discovered until April of 1950.

At the time of trial, the $4,332.07 note had been paid, and the balance due upon the $20,000 note was $12,000, which had been reduced to judgment in an action to foreclose the mortgage. Plaintiff’s evidence that the value of the farm securing the mortgage was $9,000 was excluded npon objection. Evidence tendered by plaintiff in rebuttal to show the circumstances surrounding the execution of the agreement was erroneously excluded upon objection. Evidence that the three checks in controversy were not discovered until April 1950, and that it was later discovered that Brant had embezzled approximately $70,000, was also erroneously excluded upon objection of the defendant.

Whether the agreement constituted an accord and satisfaction was in dispute. Since it did not recite in specific terms that the $35,000 was in full payment of Brant’s obligations to Butler and Blackford and did not in specific terms release Brant upon his payment of such sum, the burden was upon the defendant to show dehors the written agreement that the parties thereto intended it to be a full and complete settlement. Morton v. Siebler Clothing Co., 21 Ohio App., 393, 153 N. E., 227; Warner Elevator Mfg. Co. v. Higbee, 53 Ohio App., 546, 5 N. E. (2d), 947. This it failed to do. In Leach v. Church, Admr., 15 Ohio St., 169, citing Merrick v. Boury & Sons, 4 Ohio St., 60, the Supreme Court held that' a note of a surviving member of a firm, given by him to the creditor of the firm on an adjustment of such creditor’s claim against the firm, will not be regarded as given and received in satisfaction of the firm debt unless the testimony affirmatively and clearly shows such to have been the agreement of the parties. In Steward v. Evatt, Tax Commr., 143 Ohio St., 547, 56 N. E. (2d), 159, the Supreme Court held that payment of an obligation ordinarily must be made in money, although other things, such as negotiable paper, may be accepted by a creditor, but such acceptance does not constitute payment or satisfaction of the debt in the absence of an express or implied agreement that it shall be so considered. In that case, as in the instant case, there was nothing to indicate that the note was either delivered or accepted with an intention that it be regarded as payment or satisfaction.

It is therefore concluded that plaintiff’s motion to withdraw from the consideration of the jury the third ■and fourth defenses of the answer should have been granted and that the failure to do so was prejudicial to the plaintiff. The parties apparently acquiesced in having the equitable issues raised by the fourth defense tried to the jury, and any error in failing to have such issues tried to the court falls because of the failure to prove the so-called accord and satisfaction.

Considerable evidence was introduced tending to show Brant’s participation in the business affairs of the two companies. This evidence was admissible for the limited purpose of supporting the allegation in the second defense that Walz and the plaintiff clothed Brant with authority to cash checks. That portion of the defense alleging that' they clothed Brant with “apparent authority” should have been withdrawn from the jury, since there was no evidence that the defendant bank had knowledge of any apparent authority on the part of Brant to negotiate the checks. From this evidence of Brant’s participation in the affairs of the companies, reasonable minds might differ as to whether Brant had authority to cash the checks at the defendant bank. If he had such authority, there would be no forgery. The inference tó be drawn from such evidence is very slight, but possibly more than a scintilla, which would require the submission of the issues of forgery to the jury under appropriate instructions.

By reason of a misconception on the part of the court as well as counsel of the issues raised under the pleadings, many errors prejudicial to the plaintiff occurred during the trial in the admission and exclusion of evidence and in the charge of the court. All errors referred to in appellant’s brief are sustained except as indicated in the following paragraph.

Plaintiff requested the court to submit six forms of verdict — two for each cause of action. The refusal of this request was within the sound discretion of the court. Befusal of plaintiff’s requests to charge was not erroneous. Evidence relating to transactions with the Knisely bank so far as it tended to show the authority conferred upon Brant was also admissible for that limited purpose, but not for the purpose of showing “apparent” authority.

The judgment is reversed and cause remanded for a new trial.

Judgment reversed.

Conn and Savobd, JJ., concur.


source: Caselaw Access Project

author: Conn, J.

license: Public Domain

text:
    The State of Ohio, Appellee, v. Nowak, Jr., Appellant.
    (No. 4588
    Decided January 21, 1952.)

      Mr. Joel 8. Rhinefort, prosecuting attorney, for appellee.

      Mr. Hyman S. Topper and Mr. A. M. Steinberg, for appellant.
   Conn, J.

On September 3, 1946, the defendant was indicted by tbe Grand Jury of Lucas county, wherein he was charged with “promoting numbers game, second offense.” Before the case was reached for trial, the defendant withdrew his plea of not guilty and pleaded guilty to the charge as laid in the indictment. Thereupon the trial court adjudged that the defendant pay a fine of $1,000 and costs of prosecution. The court suspended the imposition of sentence to the Ohio penitentiary and probated defendant to the sheriff of Lucas county for a period of five years.

Two days after defendant was placed on probation a writ of execution for costs was issued and delivered to the sheriff and later returned, no money having been found to satisfy the costs. On December 16th following, a capias was issued for the arrest of defendant, but two days later same was vacated and held for naught. It does not appear from the record that the fine imposed on defendant or costs were paid, but counsel for defendant stated in their brief that these conditions of the probation were complied with.

On April 25, 1951, a capias for the arrest of-defendant was issued and delivered to the sheriff, but on May 8th the order for capias was withdrawn. The next day, the court made an order referring the case to the Lucas County Adult Department for investigation, report and recommendation.

On July 12, 1951, a hearing was held, the defendant and his counsel being present, at which time the court received the report of the investigation made by the chief probation officer. This report was informal and rested mainly on hearsay. The several matters brought to the court’s attention tended to show that defendant may have engaged directly or indirectly in unlawful acts of a similar character to those charged in the indictment and to which he had pleaded guilty.

The trial court refused to permit counsel for defendant to cross-examine the probation officer. The defendant did not testify and offered no evidence whatever to meet the somewhat incriminating statements of this officer.

At the conclusion of the hearing, the court vacated the order of probation entered December 7, 1946, and sentenced defendant to the Ohio penitentiary until released according to law.

The defendant appealed to this court from the order revoking his probation, and assigns as error that he had not violated the terms of his probation or any of the statutory provisions contained in Section 13452-5, General Code; that the order of probation was not vacated upon a judicial inquiry in open court; and that the court had abused its discretion.

In the prosecution of crime, the statutory provisions regulating the probation of a defendant who has pleaded or been found guilty (juvenile delinquents and certain crimes expressly excepted) are contained in Sections 13452-1 to 13452-11, inclusive, General Code.

The statutes appear to give the court broad discretion in entering an order of probation, in extending the period (not to exceed five years), and in vacating an order previously made. It is provided in Section 13452-1, General Code, that when “it appears to the satisfaction of the judge or magistrate that the character of the defendant and the circumstances of the case are such that he is not likely again to engage in an offensive course of conduct, and the public good does not demand or require that he be immediately sentenced * * the imposition of sentence may be suspended and the defendant placed on probation.

The Legislature amended the probation statutes, effective October 11, 1945, by adding a supplemental section, 13452-la, General Code, wherein it is provided that in a felony case when there is a plea of guilty or conviction, no person “shall be placed on probation until a written report of investigation by a probation officer shall have been presented to and considered by the court. ’ ’ The character of the investigation and report is also specified. It does not affirmatively appear that the provisions of this new section were followed in the instant case, but of this the defendant could not complain.

It may be noted further that the statute (Section 13452-4, General Code) provides that when defendant is released on probation he

“shall continue under the control and supervision of the county department of probation or the state department of public welfare, as the case may be, to the extent required by law, the terms and conditions of the order of probation, and the rules and regulations governing said department of probation.”

When the defendant in a felony case is released on probation, the procedural' provisions of the statutes and the rules and regulations of the probation department, together with the conditions in the order of probation, constitute the terms upon which defendant’s probation rests and upon default by him the order of probation may be vacated, following a judicial inquiry. Section 13452-7, General Code, specifically provides that “when the defendant is brought before the judge or magistrate, such judge or magistrate shall immediately inquire into the conduct of the defendant, and may terminate the probation. * *

The issue presented on this record and which this .court has jurisdiction to consider is the claim of defendant that he was not accorded a judicial inquiry as contemplated by law and that the trial court abused its discretion, in vacating the order - of probation and in imposing a prison sentence on the defendant.

It is vigorously contended by defendant that the vacation of the order of probation was not grounded on a “judicial inquiry” and, further, that the defendant had not been guilty of violating the terms of his probation or that he had not been guilty, during his probation period, of any act or acts inhibited by Section 13452-5, General Code, where “the probation period shall cease to run until such time as he is brought before the court for its further action under this act.”

In other words, the defendant contends that as there was no evidence offered of any violation of the statute (Section 13452-5, General Code), and no such claim made, and no evidence offered of any violation of the conditions of probation, and nothing before the court but the “unilateral report” of the probation 'officer and arguments of counsel, the hearing was not a “judicial inquiry.”

However, by virtue of the statutory provisions above referred to, it was competent and material for the court to receive the report of the officer of the law having charge of the county probation department and from whom the court had a right to receive a statement of fact relative to the conduct of defendant while on probation, and the duty to give consideration to the charges of misconduct brought to its attention.

The general rule of procedure in cases like the one before us is stated in 24 Corpus Juris Secundum, 75, Section 1572-3, as follows:

“Except as statute may provide otherwise, no formal charge or hearing is necessary before the court may revoke a suspension or probation and impose sentence.”

See, also, 15 American Jurisprudence, 151, Section 500; 132 A. L. R., 1248; State v. Merricks (Ohio App.), 57 Ohio Law Abs., 257, 88 N. E. (2d), 293.

However, in the absence of specific statutes outlining a detailed procedure, the authorities cited and others we have examined hold that the defendant is not entitled to a formal trial where the court is given discretion. The authorities also appear to hold that the minimum requirements of a judicial inquiry include a public hearing in open court with timely notice to the defendant; that-the defendant is entitled to be present, represented by counsel, and to be advised of the nature of the accusation against him; that defendant be given an opportunity to be heard and submit evidence in his own behalf; and, generally, that defendant be accorded reasonable opportunity to bring to the court’s attention, as far as he is able, such facts and circumstances as tend to contradict or explain the alleged violations.

In the instant case, the defendant did not take the' witness stand in his own behalf or offer any evidence in contradiction or explanation of the charges made in the report of the probation officer. Not having availed himself of this legal right, the defendant can not now urge that he has been prejudiced by hearsay in the report of the probation officer. We reach the same conclusion with respect to the refusal of the court to permit the probation officer to be cross-examined, as such refusal was not an abuse of discretion, in view of the circumstances shown in the record of this case.

If the record disclosed that defendant, had been denied the right to testify, or had been denied the right to offer competent evidence tending to meet or explain the charges made against him, the proceedings would have been lacking in an elementary ingredient of a judicial inquiry.

Among the cases relied on by the defendant is State v. Skypeck (1945), 77 Ohio App., 225, 65 N. E. (2d), 75. In that case, the defendant had pleaded guilty to a charge of grand larceny. The trial court suspended the imposition of sentence and placed defendant on probation with the chief of probation of Cuyahoga county for five years. About seven months later, a capias for the arrest of defendant was issued, based on information given a judge of the Common Pleas Court by a member of the police department. At the hearing, defendant appeared with counsel and was examined briefly by the judge before whom he appeared, as to his conduct since he had been probated. The answers given were unsatisfactory to the court and the order of probation was vacated. On appeal, the order of vacation was reversed, one judge dissenting. In the well reasoned opinion of the court by Skeel, J., in which the statutes and authorities are reviewed, it was pointed out that the probation department did not participate in the hearing or present any evidence of failure to comply with the terms of probation. We quote from the court’s opinion, page 234, as follows:

“The determination of whether the defendant, by his conduct, violated the requirements of his probation is under Section 13452-7, General Code, to be determined by a 'judicial inquiry.’ The defendant must be afforded a reasonable opportunity to be heard. This does not require the formality of a trial but it does require the presentation of the facts in open court so that the court, in the exercise of sound discretion, may deal justly with the defendant.

“It is the opinion of the majority of this court that the colloquy between the court and defendant, which makes up the complete record of the case, did not constitute a judicial inquiry into the conduct of the defendant as required by Section 13452-7, General Code, and that the action of the court in ordering the original sentence into execution was a clear abuse of discretion. ’ ’

The Skypeck case is distinguishable from the instant case. It appears that the court did not have before it any report of the probation officer as required by the statute or any complaint made in open court informing ■ defendant of the charge laid against him and in what manner defendant had failed to meet the conditions of his probation. In the case before us, the report of the probation officer tended to show that defendant had been associating rather closely with those who were known as promoters of the numbers game and that there was in and about the premises defendant frequently visited, physical evidence that a numbers game was being conducted.

It is our opinion that the trial court complied with all the requirements of law with respect to the judicial inquiry provided by statute and that in vacating the order of probation and imposing sentence there was no abuse of discretion, and, therefore, this court is without jurisdiction. The appeal is dismissed and the cause remanded for execution of sentence.

Appeal dismissed.

Fess and Savokd, JJ., concur.


author: Hornbeck, J. Miller, P. J. Wiseman, J.

text:
    In re Guardianship of Luft.
    (No. 4423
    Decided June 9, 1950.)

      Mr. Carl J. Purpus and Mr. James M. Mengst, for ward, Nina Luft.

      Mr. Robert R. Shaw and Mr. J. Weller Igo, for guardian, Bobert B. Sbaw.
   Hornbeck, J.

This is an appeal on questions of law from a judgment of tbe Probate Court of Franklin County denying an application of the ward for the termination of the guardianship.

The errors are assigned under four headings which may be encompassed within two: First, in permitting the guardian to appear and contest the ward’s application for termination, of the guardianship, and, second, that the order of the Probate Court is contrary to law,'is not sustained by sufficient evidence and is against the manifest weight of the evidence.

The first assignment is not well made. It was discretionary with the trial judge to permit the guardian, in the interest of the ward’s estate, to appear and contest his removal, introduce testimony and cross-examine witnesses.

To properly appreciate the other questions presented, it will be necessary to examine the proceedings. The order from which the appeal is taken was made pursuant to an application of the ward in which she recites that “Robert R. Shaw was appointed guardian of her person and estate on the ground of physical and mental incompetency, that while she physically ill and requires medical and nursing service, with' all of which she is well provided, she is not mentally incompetent and was and is capable of looking after and taking care of her property; and that letters' of appointment of said guardian were improperly issued.” The prayer is for termination of the guardianship.

The trial judge, in his written opinion passing upon the application, very properly noted that the statement that the guardian had been appointed for the person and estate of the ward on the ground of physical and mental incompetency was not supported by the facts. The guardian was named for the estate only of the ward and because she was physically incompetent.

The journal entry further recites “that the said Nina Luft signed a written consent consenting to the appointment.” Such written consent admittedly was made in open court and is found among the files in the transcript.

Two facts stand out in this record, and one is almost as certain as the other, viz., that at the time the guardian was appointed the ward was not mentally incompetent and would have been entitled to a court order to that effect, and, that she is badly physically incapacitated because suffering from Parkinson’s disease.

Although the application for the termination of the guardianship was grounded upon the claim of irregularity in the appointment only, the trial judge in one of the final entries not only determines that the letters of appointment of the guardian were not improperly issued but also that the necessity for the continuance of the guardianship still exists. In the presentation of the appeal and the briefs counsel have taken wide latitude and given consideration to both matters determined by the court. Therefore, in reviewing the judgment, we assume that by common consent both grounds for termination of the guardianship provided in Section 10507-61, General Code, were tried and adjudicated.

Section 10507-61, General Code, provides, in part, that upon proper notice “and satisfactory proof that the necessity for the guardianship no longer exists, or that the letters of appointment were improperly issued, the Probate Court shall order that the guardianship of an incompetent, terminate, and shall make an appropriate entry upon the journal.”

The guardianship likewise could be terminated if it appeared that there was no necessity for the appointment of the guardian when made.

One unusual aspect of this case is that the person who preferred the original charges against Mrs. Luft offers no testimony of his own, or of any other person, on the application to terminate the guardianship.

Under the statute, Section 10507-2, General Code, which provides that, when found necessary, the Probate Court shall appoint a guardian of the person, or of the estate, or of both, of an “incompetent (except that if the incompetency be due to physical disability or infirmity the consent of the incompetent must first be obtained) * # *; provided the person for whom the guardian is to be appointed be a resident of the county, or has a legal settlement or residence therein,” a prerequisite to the appointment of the guardian is that such appointment be necessary. That part of the section in parenthesis was enacted following the decision of our Supreme Court in Schafer v. Haller, Gdn., 108 Ohio St., 322, 140 N. E., 517, 30 A. L. R., 1378, declaring unconstitutional the provision of former Section 10989, General Code, making physical disability or infirmity a ground for the appointment of a guardian. The practical effect of this added language in Section 10507-2, General Code, is to place in the hands of the ward, when necessity for the appointment of a guardian appears, the power to select the guardian. This is true because at any time prior to the appointment the applicant can withdraw the consent. So that here it becomes vital to a correct decision of this appeal to decide two determinative factors, first, the necessity for appointment of a guardian originally and the continuance of the necessity on the application for termination of the guardianship, and, second, the reality of the consent of Mrs. Luft.

Upon both of these matters, if we had the right to determine them originally upon the evidence before us, we would hold that all of them should be resolved in favor of Mrs. Luft. But we recognize that we are hearing this appeal on law only and have no such power to weigh and determine the evidence as upon de novo hearing. However, upon the development of the testimony on' the application for the termination of the guardianship, we are of opinion that the refusal to grant the application was against the manifest weight of the evidence. The development upon which we-rely was not before the Probate Court at the time of the original appointment, and no criticism can properly be directed against the action taken at that time. It does not appear, nor can we find, that the probate judge fully appreciated the influences which must have actuated Mrs. Luft in signing the consent to the appointment of the guardian. She did not come into court on her own motion. She was foiced to come in upon two charges, first, that she was a mentally incompetent person, and, second, that she was physically incompetent to conduct her own business affairs. It must be assumed that upon the informal hearing the court could properly consider, prior to the consent of Mrs. Luft, but one aspect of the application for the appointment of a guardian, viz., mental incompetency. Mrs. Luft had reason to believe, though it may not have been the fact, that the person who filed the affidavits seeking the appointment of the guardian was unfriendly to her and her interests. She also might well have been apprehensive that as a result of these unfriendly acts the court might appoint a guardian for her upon the ground that she was an insane person. Finally, from her subsequent conduct it is reasonable to conclude that she did not appreciate the full implication of her consent to the appointment.

In the state of mind of Mrs. Luft, to which we have heretofore referred, her own counsel advised her that she should consent to the appointment and further told Miss Thornton, presumably in the presence of Mrs. Luft, “that with the appointment of her personal counsel as guardian * * # then after the operation, I thought after the operation for quite a while, for a period of, say, six months that perhaps, * * * the heat was ofi and * * * perhaps then she might be appointed as guardian.” One inference which could have been drawn from this statement was thht after the appointment Mrs. Luft might have something to say respecting the continuance of the guardianship or the same guardian.

Almost continuously from the date of the appointment, Mrs. Luft has refused to co-operate with the guardian who ostensibly was named upon her request and as desired by her. Such failure at all times to co-operate is utterly inconsistent with the thought of consent such as is contemplated by Section 10507-2, General Code. It is altogether probable that the probate judge did not have full knowledge of these factors which manifestly operated on the mind of Mrs. Luft to produce her consent. Nor do we impute any want of good faith to. Mrs. Luft’s counsel. He no doubt acted in the exercise of his best judgment in the sitúa-, tion as it appeared to him when he advised Mrs. Luft.

It is manifest that the guardianship of the estate only of Mrs. Luft is not working to her advantage and is not 'accomplishing that which is intended by the statute in such appointments.

We are doubtful if the necessity for the appointment would have appeared originally if full development of the facts had been made. Certainly, the necessity of the continuance of the guardianship does not appear upon the record.

Mrs. Luft owns considerable real estate, the gross income from which is $150 per month. At the time of the appointment of the guardian there was no suggestion of improvident expenditure, that her income or estate was being squandered, or that there was any danger of her losing title to her holdings. She was having continuous and proper attention and had the mental ability to name an agent or an attorney in fact, if desired. Upon the application for termination of the guardianship it clearly appears that by reason of the appointment of the guardian her income has been depleted, there is every probability that her estate will be materially decreased, and, most unfortunately, the guardian is impotent to accomplish anything of substantial value to his ward because of her unwillingness to co-operate. In this situation, if necessity for the appointment appeared originally, it had disappeared when the application of the ward was before the conrt.

The guardian now serving is an attorney of ability and integrity and there is no reason to believe' that any person, other than Miss Thornton, could do better or render more satisfactory service under the appointment than he. But as guardian of the estate he has no control of the person of his ward. Because of her physical condition Mrs. L'uft requires constant attention day and night. To employ and pay for trained attendants or nurses and a housekeeper to meet her necessities would rapidly dissipate her estate. Miss Thornton, the ward’s sister, almost alone, has performed all of these services for a period of years without remuneration. The guardian cannot discharge her. He might reduce the allowance to his ward. This for obvious reasons- is impractical. Without some control over the person of the ward the guardian is practically helpless and if he should accomplish the removal of Miss Thornton, such removal would not only increase the cost of the maintenance and care of the ward, but might very seriously impair her physical well being. Miss Thornton’s belligerant attitude in this case has been inordinate, unwise, has manifestly operated to her own disadvantage, and probably, also, to the disadvantage of her sister. But Miss Thornton is capable and has stood by her sister with the utmost loyalty and consideration. It is most unfortunate that this ward, with her limited estate, should be subjected to the unusual expense as well as the mental distress which has occurred and will continue as a result of this guardianship.

It is also unfortunate that Mrs. Luft was not required to testify more at length- as to the circumstances, conditions and state of her mind at the time she signed the consent. Upon remand, the court can explore this aspect of the case and should do so fully. We appreciate the difficulty under which Mrs. Luft testifies, but several of the witnesses stated that they had no difficulty in understanding her, and, if necessary, the court should call somebody to its assistance to get all the facts which have a bearing on the consent of Mrs. Luft to the appointment of the guardian.

In our opinion, the failure of the court to sustain the motion of Mrs. Luft to terminate the guardianship was contrary to and against the manifest weight of the evidence.

Therefore, the judgment is reversed and the cause remanded for further proceedings according to law.

Judgment reversed and cause remanded.

Miller, P. J., and Wiseman, J., concur, in the judgment.

Miller, P. J.

I concur in the-judgment of reversal but am of the opinion that this court should render a final judgment terminating the guardianship. I am in full accord with my associates in finding that the court properly appointed the guardian in the first instance, but when it appeared that Mrs. Luffs consent was not genuine, and was given under an apparent misapprehension of her legal rights, the guardianship should have been terminated. It should be noted that Mrs. Luft did not voluntarily seek the assistance of the court, but was brought in under a complaint properly filed therein, charging both mental and physical disability. She certainly recognized these as most serious charges, and when she was advised that the court probably would appoint a guardian for meutal disability, although there was no evidence to support such a charge, she merely chose the lesser of two evils and gave her consent. Under these circumstances the consent was not of her own free will and accord and, therefore, does not meet the requirements of Section 10507-2, General Code. The appointment of a guardian for physical disability without the ward’s consent is an unwarranted abridgment of his right to acquire, possess and protect property and, therefore, in violation of Section 1, Article I of the Constitution of Ohio. Schafer v. Haller, Gdn,, 108 Ohio St., 322, 140 N. E., 517, 30 A. L. R., 1378.

Further, I am of the opinion that the record clearly shows not only that there is no necessity for a guardian, but that it woiild be to the best interest of the ward that the guardianship be terminated. Her income from the estate is so limited that it cannot satisfy all her needs, compelling her to accept the services of others without compensation. She, therefore, needs the entire income, even more, and the added expenditures incident to the guardianship should not be imposed upon her. Since she has full mental capacity it must be inferred that she is able to employ others physically qualified to look after her affairs.

Wiseman, J.

I concur in the judgment of reversal on the weight of the evidence on the theory that Mrs. Luft was persuaded to give her written consent to the appointment óf a guardian of her estate on the ground of incompetency due to physical disability by statements of her counsel involving a promise which would require the judgment and action of the Probate Court and which, according to the record, was not brought to the attention of that court at the time of the appointment. Such promise is not likely to become a reality. Hence, it cannot be said that she acted with a full knowledge of the legal implications of her act; it was not her free act as contemplated by Section 10507-2, General Code.


author: Wiseman, J.

text:
    Klein et al., Appellees, v. Garrison, Appellant.
    (No. 2148
    Decided December 10, 1951.)

      Mr. Merritt 8. Schlafran, for appellees.

      Mr. Otterbein Creager, for appellant.
   Wiseman, J.

This is an appeal on questions of law from a judgment of the Municipal Court of Dayton in an action for damages for trespass on real property by the removal of topsoil. The cause was tried to the court without the intervention of a jury. The court rendered a general finding in favor of the plaintiffs and assessed damages in the amount of $100, on which finding judgment was rendered.

The defendant-appellant claims that the court erred in finding the defendant guilty of trespass; that the court erred in computing damages without reference to the evidence; and that the court applied the wrong-rule as to the measure of damages.

The defendant subdivided farm land into building-lots. The plaintiffs purchased a lot in the early part of 1947 and, in January 1948, purchased another lot adjacent to the lot first purchased. At the time the second purchase was- made the plaintiffs went upon the property and learned that the defendant had used a scoop or bulldozer in grading the subdivision and, in doing so, had removed the topsoil from a portion of the lot first purchased. The evidence supports the contention of plaintiffs that approximately 300 cubic yards of soil was removed; that the lot was higher in the rear than at the front; and that the rear of the lot is where the deepest cut was made, which changed the grade of the lot. The testimony clearly shows that the removal of the topsoil was accomplished without the knowledge or consent of the plaintiffs.

We are of the opinion that the evidence supports the finding of the trial court that a trespass was committed. The defendant cannot avoid the consequences of a trespass on the theory that the lot in question and the subdivision required grading, and that the lot of the plaintiffs after the soil had been removed was in a smoother condition than it was before the removal. There was no evidence presented from which the court could conclude that the defendant was permitted to enter upon the lot after it was purchased by the plaintiffs for the purpose of grading or removal of any part of the soil.

The principal question for determination involves the measure of damages. The evidence is in conflict on the amount of soil removed and its fertility. The plaintiffs introduced evidence to the effect that the lot was of less value after the soil had been removed, and the defendant introduced evidence to the effect that for building purposes the lot was of greater value after the soil had been removed. There was no testimony presented showing the true market value of the lot before and after the soil had been removed or the difference in value before and after. The only testimony presented of a tangible character related to the cost of replacement of the topsoil. There was a variation in the cost of topsoil ranging from $1.40 to $2 a cubic yard, delivered on tbe lot. By a mathematical calculation based on the evidence that 300 cubic yards had been removed, the cost of replacement would have ranged from $420 to $600, the latter being the amount claimed by the plaintiffs as their damage. The court rendered judgment in the amount of $100.

The defendant contends, first, that the court failed to apply the correct rule in awarding damages, and, second, that the court computed damages without reference to the evidence. These two contentions revolve around the application of the true measure of damages in an action of trespass for the rertíoyalof soil. The law in this respect is not well settled in Ohio. For a discussion of this subject reference is made to 13 Ohio Jurisprudence, 124 et seq. It will be found that there are different rules applied by the courts for trespass to real property, depending upon the nature of the injury and whether the injury is considered to be temporary or permanent. In the case at bar the plaintiffs contend that evidence as to the cost of restoration of the property or the cost of replacing the topsoil is sufficient under the issues to support the award of damages. The defendant contends that under the issues and facts presented in this case the true measure of damages is the difference in the market value of the plaintiff’s real estate before and after the trespass was committed.

In 13 Ohio Jurisprudence, 125, Section 53, it is stated-:

“The proper measure of damages for a wrongful injury to real estate which is of a permanent or irreparable nature is the difference in the market value of the property as a whole, including the improvements thereon, immediately before and immediately after the injury. ’ ’ (Emphasis ours.)

On page 126, in Section 54, ibid., it is stated:

“On the question of the measure of damages for temporary injuries to real property there is a division of authority; one rule permits the recovery of the reasonable cost of repair and restoration, while another rule holds that the diminution of the rental value, together with any special damages that may accrue, is the proper measure of recovery.” (Emphasis ours.)

The editor then discusses the various rules which have been applied in different types of cases by the courts of Ohio, also, a modification of the general rule which permits the recovery of the cost of restoration. This modification of the general rule is to the effect that the cost of restoration is a measure of damages unless “the reasonable cost of restoring the premises to their original condition exceeds the difference in value of the property before and after the injury, in which case the difference in the market value is the true measure of the plaintiff’s damages, although, if the testimony shows an injury to real property to be of a permanent or irreparable nature, the measure of damages is the difference in the value of the property before and after the injury.” ibid. (Emphasis ours.)

Numerous, cases are cited in support of the different rules which have been applied, a few of which will be discussed later. In 25 Corpus Juris Secundum, 603, Section 84, the rule is stated as follows:

“The measure of damages .for a permanent injury to real property is usually the fair value of the property immediately before and immediately after the injury. The recovery for a temporary injury to real property is measured by the loss sustained by the owner, and may include the cost of restoration if less than the difference in value, and the diminution in the value of the use and enjoyment or rental value of the property during the time the injury exists.” (Emphasis ours.)

On page 616 of the same work, in Section 85 e, the measure of damages applicable to the removal of soil is stated as follows:

“The measure of damages for unlawful removal of soil, or injury thereto impairing its productive capacity, is generally held to be the diminution in the value of the land.”

This same work points out that some courts have held in such cases that the real measure of damages is the value of the soil removed or the cost of Restoring the land to its former condition.

In 15 American Jurisprudence, 529, Section 120, the rule with regard to the removal of earth, sand and gravel is stated as follows:

“It has frequently been held that where earth, sand or gravel is wrongfully removed from land, the owner may recover the difference between the value of the land immediately before the removal and its value immediately thereafter. According to some of the courts, however, the measure of damages is the value of the material removed, together with the expense of repairing any injury caused by its removal. ’ ’

In 97 A. L. R., 830, there is an annotation on the subject of the measure of damages for wrongful removal of earth, sand or gravel from land, where the rule is stated thus:

• “ * * * If the injury is permanent in character, compensation may be made for the depreciation in value; that is, the plaintiff may recover the difference between the value of the property immediately before the trespass and its value in its damaged condition.

i i * * *

“It has frequently been held that where earth, sand, or gravel is wrongfully removed from land, the owner may recover the difference between the value of the land immediately before the removal and its value immediately thereafter.” (Emphasis ours.)

An investigation of the law on this question discloses that there is a lack of uniformity in the rulings of the courts in the several jurisdictions. The courts must determine in the first instance whether the injury is temporary or permanent. If the injury is permanent, the great weight of authority supports the rule that the measure of damages is the difference in the value of the property before and after the injury. In the instant case the first question for the court to consider is whether the removal of the topsoil from plaintiffs’ lot was a permanent or temporary injury. It may be helpful to cite the rulings of several of the courts in other jurisdictions which applied the general rule just stated. In Gallagher v. R. E. Cunniff, Inc. (1943), 314 Mass., 7, 49 N. E. (2d), 448, a trespass for excavating gravel from plaintiff’s lot was held to be a permanent injury. In Nieman & Co. v. Holton & Hunkel Greenhouse Co. (1946), 248 Wis., 324, 21 N. W. (2d), 637, an action for damages for the removal of topsoil, there was evidence as to the value of the topsoil and also as to the value of the real estate and the court applied as the correct measure of damages the difference in value of the property before and after the taking. In Chione v. State (1946), 26 Wash. (2d), 635, 175 P. (2d), 955, where damages were claimed from the state for excavating soil on plaintiff’s property, the court applied the general rule and in its opinion referred to 97 A. L. R., 830; 15 American Jurisprudence, 529; 25 Corpus Juris Secundum, 603, 616, Sections 84, 85e; and 3 Sedgwick on Damages (9 Ed.), Section 923.

On the question whether the injury is permanent or temporary, it will be helpful to observe the rulings of courts in other jurisdictions.

In Morton Salt Co. v. Lybrand (Texas, 1927), 292 S. W., 264, where the defendant was charged with negligently permitting salt water to flow over plaintiff’s land, the court held the injury to be permanent and, on page 264, said:

“Our courts have uniformly held, in cases where it is shown that, by overflow, fire, or other agency, the roots or sod of native or other perennial grasses, fruit or other trees, grape or berry vines, or the productivity of the soil are impaired or destroyed, that the injury is permanent in nature, for which the owner is entitled to recover, as damages, the difference in the market value of the land before and after the injury.”

See, also, Texas Pacific Coal & Oil Co. v. Taylor (Texas, 1932), 47 S. W. (2d), 1110, where damage was caused by permitting salt water to escape from defendant’s land and flow over plaintiff’s land into a well, and it was held that the injury was permanent. The court, on page 1111, said that “an injury to land may be permanent, as that word is understood in law, without being perpetual.”

In Lone Star Gas Co. v. Hutton (Texas, 1933), 58 S. W. (2d), 19, where plaintiff’s land was injured by the laying of a pipe line diverting the natural flow of water and damages to crops on plaintiff’s land ensued, it was held the injury was permanent.

In Howell v. City of Dothan (1937), 234 Ala., 158, 174 So., 624, where damages were claimed by reason of the overflow, diversion and discharge of sewage, the fifteenth paragraph of the syllabus is:

“As respects measure of damages, an injury to land which inconveniences the owner in its right and accustomed use, and requires time and expense to restore land to its former condition, is a ‘permanent injury.’”

In City of Stillwater v. Cundiff (1939), 184 Okl., 375, 87 P. (2d), 947, where damages were claimed because of the drilling of wells on adjacent property causing the plaintiff’s water supply to fail, it was held the injury was permanent. In the course of the opinion, at page 377, the court said that “damage to realty is permanent when the cause of the damage cannot be abated.”

In Applegate v. Platte Valley Public Power & Irrigation District (1939), 136 Neb., 280, 285 N. W., 585, damage was claimed by reason of water seepage caused by the erection of a dam. The court, holding the injury to be permanent, defined a temporary injury as one which could be abated or discontinued at any time, either by the act of the wrongdoer or by the injured party. A permanent injury was defined as one of such character and existing under such circumstances that it would be presumed to continue indefinitely.

In all these cases the courts applied the general rule that the measure of damages is the difference in the fair market value of the property before and after the injury. For rulings to the contrary, see State Road Dept. v. Bender (Fla., 1941), 2 So. (2d), 298, where the state took building sand from plaintiff’s property, and plaintiff was entitled to recover the replacement value of the material, and Citizens National Bank v. Keel & Sons Co. (1942), 378 Ill., 428, 38 N. E. (2d), 734, where topsoil was removed from plaintiff’s land, and plaintiff was entitled to recover the value of such soil in its severed condition.

The court now considers the Ohio case law from which we extract a principle of law applicable to the issues and evidence in this case. We cite only six cases in chronological order.

In City of Toledo v. Grasser (1895), 12 C. C., 520, 6 C. D., 782, where injury to plaintiff’s property resulted from percolating water causing plaintiff’s land to sink and the foundation walls of the building to crack, requiring rebuilding, and where the evidence presented related only to the cost of restoratioíi, a judgment for the plaintiff was reversed. The court held that evidence on the cost of restoration was inadmissible and did not convey to the jury any information upon the question which it was to try, “which finally was, how much less valuable was the plaintiff’s property in consequence of the injuries to his building from the water that had flowed into it through this defective sewer?”

In City of Cincinnati v. Wright (1903), 2 N. P. (N. S.), 53, 14 O. D., 600 (affirmed in 74 Ohio St., 479), where plaintiff’s real property was injured by the overflowing of water caused by the clogging up of a gutter, the court held that the injury was temporary in character and that evidence presented on the difference in value of the property before and after the injury was prejudicially erroneous and reversed the judgment.

In Grief v. Kiewell (1911), 18 C. C. (N. S.), 450, 33 C. D., 153, where plaintiff’s real property was damaged by the willful removal of fixtures damaging the house and where evidence as to the cost of restoration was admitted, a judgment for the plaintiff was reversed on the ground that the injury was of a permanent character and that the true measure of damages was the difference in value of the real property before and after the injury. On page 452 the court said:

‘ ‘ The rule laid down repeatedly in this state is that where damage has been done to real property, the measure of damages is the difference in the value of the property before and immediately after the injury occurred. 12 C. C., 426; 12 C. C., 520; 12 C. CL, 650.”

We come now to consider one of the leading cases in Ohio on this question, Ohio Collieries Co. v. Cocke (1923), 107 Ohio St., 238, 140 N. E., 356, where plaintiff brought her action for damages against the collieries company for the improper removal of pillars, ribs, stumps and supports of coal from under her lands, it being claimed that the earth had cracked in deep fissures, and that buildings and trees on her land had been damaged. The judgment in favor of the plaintiff was affirmed. The court, in a rather lengthy opinion, discussed the measure of damages and, in the fifth paragraph of the syllabus, said:

“ * * * the owner of the surface is entitled to recover, if the injury is of a permanent or irreparable nature, the difference in the market v'alue of the property as a whole, including improvements thereon, before and after the injury. If restoration can be made, the measure of damages .is the reasonable cost of restoration, plus the reasonable value of the loss of the use of the property between the time of the injury and the restoration, unless such cost of restoration exceeds the difference in the market value of the property as a whole before and after the injury, in which case the difference in the market value before and after the injury becomes the measure.” (Emphasis purs.)

In that case there was evidence to substantiate the verdict for the plaintiff upon either theory of damages, that is, whether the injury was regarded as permanent or temporary. , In the instant case evidence was adduced only on the theory that the injury was temporary and that the plaintiffs were entitled to recover the cost of restoration. There was no evidence presented on the difference in value of the property before and after the injury. Consequently, under the rule stated in the case just cited, the court in the case at bar had no evidence before it from which it could determine whether the cost of restoration exceeded the difference in value of the property before and after the injury.

In Cleveland Electric Illuminating Co. v. Merryweather (1928), 6 Ohio Law Abs., 528, the plaintiff brought an action for damages for injury to a tree, and the court held the measure of damages to be the difference in value of the real estate before and after the injury, and that the admission of testimony of an expert as to the cost of replacing the tree constituted reversible error.

In Northwestern Ohio Natural Gas Co. v. First Congregational Church of Toledo (1933), 126 Ohio St., 140, 184 N. E., 512, where damage was caused to two church structures by a gas explosion, the smaller of the two buildings being practically destroyed by fire and some damage caused to the larger structure, and where evidence was admitted relative to the cost of restoration and no evidence admitted as to the difference in value of the property before and after the injury, the court held that with respect to the small building which had been practically destroyed by fire the measure of damages was the difference in value of the property before and after the injury, but that with respect to the damage to the larger building which could be easily restored and repaired, the measure of damage was the cost of restoration. On page 150 the court stated that in applying the rule that the measure of damages is the difference between the value of the property before and after the injury, “it is proper to take into consideration the cost of reconstruction, since that is clearly an element in determining the value of the building destroyed, depreciation and obsolescence on the property, original building cost, marketability of the building damaged, and the use to which it was being put by the person damaged.”

It will be observed, however, that the court considered the fact there was no real market value for a church structure and that this fact called for the application of the principle of law just stated. We do not believe the court intended to modify the general rule that where the injury is of a permanent character the measure of damages is the difference in value of the property before and after the injury, and that evidence of the cost of restoration is inadmissible. The cost of restoration is admissible where the injury is temporary rather than permanent. See, also, City of Norwood v. Sheen, Exr. (1933), 126 Ohio St., 482, 186 N. E., 102, 87 A. L. R., 1375, on the rule respecting the admissibility of evidence and the measure of damage applicable to temporary injury as distinguished from a permanent injury.

We finally cite the well considered opinion of Judge Skeel in Koch v. O’Brien & Nye Cartage Co. (1942), 37 Ohio Law Abs., 270, 46 N. E. (2d), 438, where the basement and walls of plaintiff’s house were damaged by the defendant’s driver backing defendant’s truck into the plaintiff’s driveway and striking the foundation walls of the structure. In that case the court held:

“The measure of damages for damage to property susceptible of being repaired is the reasonable cost of the repairs made necessary, unless it should appear that the amount thus determined is greater than the difference between the value of the property just before the damage was done and immediately after the damage was done, in which event the difference in such values would be the amount of damages recoverable. ’ ’

The court reviewed numerous cases decided by the courts of Ohio, particularly Ohio Collieries Co. v. Cocke, supra, and on page 273, in commenting on that case, said:

“The rule as stated in the Collieries case is certainly supported by the great weight of authority.”

The court also cited and quoted from 3 Sedgwick on Damages (1918), a part of which quotation is:

“ ‘Strictly speaking, therefore, the cost of repairs is not the measure of damages, but only evidence of the amount of damages.’ ”

The court also cited the rule stated in McCormack on Damages, 483, and 15 American Jurisprudence, 523, Section 113. The court made no distinction between the rule applicable to a permanent injury and that applicable to a temporary injury to real property.

Even though the court should conclude that the removal of the topsoil by the defendant was a temporary injury there is no evidence in the case to warrant us applying the rule laid down in the case of Ohio Collieries Co. v. Coche, supra, for the reason that there is no basis for determining whether the cost of replacement would exceed the difference in value of the real estate before and after the injury. On the other hand, if the court determines that the injury was of a permanent nature there is no basis for the award of damages for the reason that there is no evidence presented on the difference in value- of the property before and after the injury. On either theory a reversal must be ordered. We are not required to decide whether the removal of topsoil is a temporary or permanent injury, but we proceed to do so as we believe it will be helpful to the trial court on retrial. The case law which we have examined indicates that where the injury abates by discontinuance of the wrong, or where the owner by his act can abate the wrong, the injury is held to be temporary. A line of distinction seems to be drawn between injury to crops, structures or improvements on the land and injury to the land itself. Where the injury still remains after the discontinuance of the wrong and will exist indefinitely and require the expenditure of time, effort and money to restore the land to a semblance of its original condition, the injury is held to be permanent. In law an injury may be considered to be permanent although not perpetual. The fact that topsoil is an article of commerce and that plaintiffs may replace the topsoil and grade the lot to its original state does not detract from the permanency of the injury as it now exists. The lot will remain in its present state indefinitely bereft of topsoil and with, the high ground partially removed unless the owner expends time, effort and money to restore it. By all the tests which may be applied the removal of topsoil and earth from plaintiffs- lot constituted a permanent injury and the measure of damages in respect thereto applies.

As we find error in the record prejudicial to the rights of the defendant, the judgment is reversed and the cause is remanded for further proceedings according to law.

Judgment reversed.

Horn beck, P. J., and Miller, J., concur.


text:
    Youngstown Sheet & Tube Co. et al., Appellees, v. City of Youngstown et al., Appellants. Youngstown Sheet & Tube Co. et al., Appellees, v. City of Campbell et al., Appellants.

      (Nos. 3491 and 3498
    Decided November 19, 1951.)

      Messrs. Dargusch, Caren, Greek & King, Messrs. Manchester, Bennett, Powers & TJllman and Messrs. Harrington, Huxley & Smith, for appellees.

      Mr. H. H. Hunt, director of law, and Mr. 1. Freeman, for appellant city of Youngstown.

      Mr. Paul VanSuch and Mr. W. P. Barnum, for appellant city of Campbell..
   Fess, J.

These appeals are on questions of law and fact from judgments in separate cases permanently enjoining the defendants from levying and collecting income taxes under the provisions of certain ordinances of the municipalities on the ground that such ordinances are repugnant to Section 2, Article I and Section 4, Article XIII of the Constitution of Ohio, and to the Fourteenth Amendment to the Constitution of the United States.

I. The Youngstown Income Tax Ordinance.

As amended on January 10, 1951 (effective January 23, 1951), the Youngstown income tax ordinance levys a tax of .3 per cent per annum on compensation and net profits of residents and a like tax upon compensation received and net profits earned by nonresidents, other than corporations, for services performed or business conducted within the city of Youngstown. A tax of one per cent per annum is levied upon the net profits of corporations having an office or place of business in Youngstown. The tax is limited to such part of the net profits as is earned by such corporations as a result of business conducted in the city, determined according to a certain formula set forth in the ordinance.

The power of cities to levy an income tax has been definitely established. Angell v. City of Toledo, 153 Ohio St., 179, 91 N. E. (2d), 250. At the outset, appellees attempt to divide taxes into three classes, (1) poll, (2) property, and (3) excise. Appellees contend that the income tax is a property tax within the purport of the term as employed in the Constitution of Ohio. The city contends that it is in the nature of an excise tax and is to- be distinguished from other forms of taxation. "Whether an income tax is a property or an excise tax has not been definitely determined in Ohio. In the opinion in Angell v. City of Toledo, supra, it is said:

“While an income tax may be regarded as in the nature of an excise tax, the Constitution of Ohio differentiates an excise tax from an income tax. *■ * * In th'e interpretation of the Ohio Constitution an income tax is not to be treated as an excise tax.”

Analogically, the Ohio Constitution differentiates an income tax from a property tax as well as from an excise tax and in interpreting the Constitution, an income tax should not be treated as a property tax.

Income taxes are not of recent origin. Shaffer v. Carter, Aud., 252 U. S., 37, 51, 64 L. Ed., 445, 40 S. Ct., 221; argument of George F. Edmunds in Pollock v. Farmers Loan & Trust Co., 157 U. S., 429, 488, 489, 39 L. Ed., 759, 15 S. Ct., 673. Prior to the adoption of the federal Constitution, nearly all the states imposed a poll tax and taxes on land, livestock, and various kinds of personal property; and seven of the thirteen states assessed their citizens upon their profits from professions, trades and employments. Pollock v. Farmers Loan & Trust Co., supra. Prior to the Pollock case, federal taxes on successions, business transactions and incomes were sustained as excise taxes and as such constituted indirect taxes not subject to apportionment but subject to the principle of uniformity. Pacific Ins. Co. v. Soule, Collector, 74 U. S. (7 Wall.), 433, 19 L. Ed., 95; Veazie Bank v. Fenno, 75 U. S. (8 Wall.), 533, 544, 546, 19 L. Ed., 482; National Bank v. United States, 101 U. S., 1, 25 L. Ed., 979; Scholey v. Rew, 90 U. S. (23 Wall.), 331, 23 L. Ed., 99; Michigan Central Rd. Co. v. Slack, Collector, 100 U. S., 595, 25 L. Ed., 647; Springer v. United States, 102 U. S., 586, 26 L. Ed., 253. The Pollock case did not overrule the prior decisions but distinguished them in holding that the tax on rents was a tax on the real estate itself and, therefore, a direct tax.

But the mere question of definitions has no legitimate bearing upon a question of constitutionality. The decision whether a municipal tax contravenes rights secured by the Constitution must depend not upon any mere question of form, construction, or definition, but upon the practical effect of the,tax imposed. A state may tax the incomes of its own citizens and residents because of the privileges they enjoy under its constitution and laws and the protection they receive from the state. A state, from whose laws property, business and industry derive the protection and security without which production and gainful occupation would be impossible, may also exact a share of those gains in the form of income taxes for the support of the government, from nonresidents. Just as a state may impose income taxes upon its own citizens whose persons are subject to its control, it may, as a necessary consequence, levy a duty of like character and not more onerous in its effect upon incomes accruing to nonresidents from their property and business within the state. Shaffer v. Carter, supra. It is therefore concluded that under the Ohio Constitution the income tax in question is neither a property tax nor an excise tax but is a' special tax — an income tax — and that the tax in question does not violate Section 4 of Article XIII of the Constitution.

However, the requirement of equal protection prescribed by Section 2, Article I of the Ohio Constitution, and the Fourteenth Amendment to the United States Constitution prevents discrimination as between persons subject to taxation. All taxpayers similarly situated are entitled to equality of treatment under any Ohio tax law. To be valid, taxation and other statutes must operate equally upon all persons of the same class; no discrimination or favoritism among them is permitted. Winslow-Spacarb, Inc., v. Evatt, Tax Commr., 144 Ohio St., 471, 476, 59 N. E. (2d), 924.

Private corporations are regarded as persons within the meaning of the constitutional provisions relating to persons. Wheeling Bridge & Terminal Ry. Co. v. Gilmore, 8 C. C., 658, 4 C. D., 366,1 O. D., 390; State v. Gardner, 58 Ohio St., 599, 609, 51 N. E., 136, 65 Am. St. Rep., 785, 41 L. R. A., 689; Wheeling Steel Corp. v. Glander, Tax Commr., 337 U. S., 562, 574, 93 L. Ed., 1544, 69 S. Ct., 1291.

Section 2 of Article I does not declare that every person shall receive the same amount of protection and benefit but does declare that “Government is instituted for their [the people’s] equal protection and benefit.” Equal protection means the protection of equal laws. State, ex rel. Werber, v. Felton, 77 Ohio St., 554, 571, 84 N. E., 85. It is, however, manifestly impossible to obtain an absolute universality of operation, and due regard must be had as to different capabilities, conditions and relations between men and physical forces. There is a wide latitude of selection of classification, and it is only when the power of selection has been abused that the courts may interfere. Legislation involving classification will not be held invalid unless the classification attempted is obviously unreasonable to the point of discriminating against members of the same class, so as to deny the equal protection of the laws. City of Xenia v. Schmidt, 101 Ohio St., 437, 130 N. E., 24. A classification must rest upon some difference which bears a reasonable and just relation to the act in respect to which the classification is proposed and may not be made arbitrarily and without any such reasonable or just basis. Class legislation is prohibited; but legislation which is limited in its application and within the sphere of its operation affects alike all persons similarly situated is not invalid. State v. Felton, supra, 574.

One of the most sensible tests is whether any substantial favor is gained by one class, or any greater burden is fastened on the other by reason of the classification. State, ex rel. Turner, Atty. Genl., v. United States Fidelity & Guaranty Co. of Baltimore, 96 Ohio St., 250, 255, 117 N. E., 232. A classification which undertakes to arbitrarily separate some persons from others upon which the act would operate and thus form a class, not upon any reasonable basis of different characteristics, capriciously, but as a matter of will and not of reason, is invalid. Williams v. Donough, 65 Ohio St., 499, 504, 63 N. E., 84. Cf. Chambers v. Owens-Ames-Kimball Co., 146 Ohio St., 559, 67 N. E. (2d), 439, 165 A. L. R., 1373.- Specifically, a classification for taxation, to be valid, must be a classification of the subject of taxation — property—and not a classification of taxpayers. State, ex rel. Struble, v. Davis et al., Tax Commission, 132 Ohio St., 555, 564, 9 N. E. (2d), 684; State, ex rel. Hostetter, v. Hunt et al., Exrs., 132 Ohio St., 568, 577, 9 N. E. (2d), 676; Winslow-Spacarb, Inc., v. Evatt, supra.

The classification in the instant case is between individuals and corporations. Individuals are to pay one rate and corporations a higher rate. There is apparent no reasonable basis for distinguishing the different rates as between natural persons and corporations. It follows that the ordinance violates Section 2 of Article I of the Ohio Constitution.

■ The tax is also repugnant to' the equal protection clause of the Fourteenth Amendment. No doubt there are subjects as to which corporations admittedly may be accorded different treatment, but there are other subjects as to which such a course is not permissible, the distinguishing principle being that classification must rest on differences pertinent to the subject in respect to which the classification is made. Power Mfg. Co. v. Saunders, 274 U. S., 490, 494, 71 L. Ed., 1165, 47 S. Ct., 678. The equal protection clause does not forbid classification. The power of the state to classify for purposes of taxation is of wide range and flexibility, provided always that the classification must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly situated shall be treated alike. F. S. Royster Guano Co. v. Virginia, 253 U. S., 412, 415, 64 L. Ed., 989, 990, 40 S. Ct., 560; Air-way Electric Appliance Corp. v. Day, Treas., 266 U. S., 71, 85, 69 L. Ed., 169, 177, 45 S. Ct., 12; Schlesinger et al, Exrs., v. Wisconsin, 270 U. S., 230, 240, 70 L. Ed., 557, 564, 43 A. L. R., 1224, 46 S. Ct., 260. That is' to say, mere difference is not enough; the attempted classification “must always rest upon some difference which bears a reasonable and just relation to the act in respect to which the classification is proposed, and can never be made arbitrarily and without any such basis.” Gulf,

Colorado & Santa Fe By. Co. v. Ellis, 165 U. S., 150, 155, 41 L. Ed., 666, 668, 17 S. Ct., 255; Louisville Gas dé Electric Co. v. Coleman, Aud., 277 U. S., 32, 37, 72 L. Ed., 770, 48 S. Ct., 423.

In 1920 Pennsylvania enacted a law providing for a tax on gross receipts derived by corporations from their operation of taxicabs in intrastate transportation of passengers, but did not tax the like receipts of individuals engaged in the same kind of business. In Quaker City Cab Co. v. Pennsylvania, 277 U. S., 389, 72 L. Ed., 927, 48 S. Ct., 553, the Supreme Court held that the act violated the equal protection clause of the Fourteenth Amendment. The court said:

‘ ‘ * * * Here the tax is one that can be laid upon receipts belonging to a natural person quite as • conveniently as upon those of a corporation. It is not peculiarly applicable to corporations as are taxes on their capital stock or franchises. It is not taken in lieu of any other tax or used as a measure of one intended to fall elsewhere. It is laid upon and is to be considered and tested as a tax on gross receipts; it is specifically that and nothing else.

“In effect section 23 divides those operating taxicabs into two classes. The gross receipts of incorporated operators are taxed while those of natural persons and partnerships carrying on the same business are not. The character of the owner is the sole fact on which the distinction and discrimination are made to depend. The tax is imposed merely because the owner is a corporation. The discrimination is not justified by any difference in the source of the receipts or in the situation or character of the property employed. It follows that the section fails to meet the requirement that a classification to be consistent with-the equal protection clause must be based on a real and substantial difference having reasonable relation to the subject of the legislation. Power Co. v. Saunders, supra [274 U. S., 490]. No decision of this court gives support to such a classification. In no view can it be held to have more than an arbirtrary basis. As construed and applied by the state court in this case, the section violates the equal protection clause of the-Fourteenth Amendment. See The Railroad Tax Cases, 13 Fed., 722; County of Santa Clara v. Southern Pacific R. R. Co., 18 Fed., 385; Northern Pacific R. R. Co. v. Walker, 47 Fed., 681. The tax can not be sustained. ’ ’

It should be pointed out, however, that Justices Holmes, Brandéis and Stone dissented, principally on the ground that the discrimination between corporations and individuals with regard to a gross receipts tax can not be pronounced arbitrary. The dissenting opinions refer to the decision in Flint v. Stone Tracy Co., 220 U. S., 107, 55 L. Ed., 389, Ann. Cas. 1912B, 1312, 31 S. Ct., 342, which sustained the Corporation Tax Act of 1909 imposing a tax of one per cent on the net income of corporations, with no corresponding -tax on the income of individuals. The corporation tax was attacked under the Fifth Amendment, but Justice Stone could see no reason for not applying it to the Fourteenth Amendment as well. However, during the intervening twenty-four years, the Supreme Court has not seen fit to overrule the Quaker City Cab case.

It is therefore concluded that as to appellees, the Youngstown income tax ordinance violates Section 2 of Article I of the Constitution of Ohio and that appel-lees are denied the equal protection of the lews of Ohio under the Fourteenth Amendment to the Constitution of the United States.

Our finding and judgment is the same as that of the Common Pleas Court, and the cause is remanded to that court for execution for costs and further proceedings, if any are necessary.

II. The Campbell Income Tax Ordinance.

The Campbell ordinance levies an income tax of .7 per cent per annum upon net profits of corporations earned as a result of business activities conducted in tbe city of Campbell. On its face, tbe discrimination is not as apparent as in the Youngstown ordinance levying the tax on individuals at one rate and upon corporations at a higher rate. It is stipulated, however, that no other ordinance of the city taxes individuals or partnerships and exempts corporations, and no other ordinance taxes individuals or partnerships or their property at a rate different from that at which corporations or their property is taxed.

In Flint v. Stone Tracy Co., supra, the constitutionality of the corporation income tax law arose under the Fifth Amendment,- and the court said, as obiter, that even if the Fourteenth Amendment applied, there was a sufficiently substantial difference between business as carried on in the manner specified in the act and as carried on by partnerships and individuals to justify the classification. The court held that the tax therein imposed was not a franchise tax but a tax upon the doing of business with the advantages which inhere in the peculiarities of corporate or joint-stock organizations of the character described in the act; that the requirement to pay such excise taxes involved the exercise of the privilege; and that if business is not done in the manner described, no tax is payable.

But as indicated above, the validity of the classification as between corporations and individuals under the Fourteenth Amendment was definitely decided by the Supreme Court in 1927 in Quaker City Cab Co. v. Pennsylvania, supra, and, although rendered by a divided court, the decision has not been overruled. As recently as 1948, the Supreme Court in Wheeling Steel Corp. v. Glander, Tax Commr., supra, held that the Ohio tax levying an ad valorem tax on accounts receivable of foreign corporations derived from sales of goods manufactured in Ohio, not used in the conduct of their business in Ohio, but used in their general business, denied such foreign corporations the equal protection of. the laws. Accounts receivable of- identical nature owned by residents and domestic corporations were exempt from the tax, The inequality to which foreign corporations were subjected was not based on Ohio’s relation to the decisive transaction, but solely on the difference in residence of the owner of the accounts receivable. It is of interest to note that in that case the decision of the Ohio Supreme Court sustaining the tax in question (National Distillers Products Corp. v. Glander, Tax Commr., 150 Ohio St., 229, 80 N. E. [2d], 863) was reversed.

It is therefore concluded that the appellees herein have been denied the equal protection of the laws of Ohio guaranteed by the Fourteenth Amendment, and that the Campbell ordinance likewise violates Section 2, Article I of the Ohio Constitution and the Fourteenth Amendment of the Constitution of the United States.

Our finding and judgment is the same as that of the Common Pleas Court, and the cause is remanded to that court for execution for costs and further proceedings, if any are necessary.

Judgments for appellees.

Conn and Savord, JJ., concur.

Fess, Conn and Savord, JJ., of the Sixth Appellate District, sitting by designation in the Seventh Appellate District.