text:
    VALUATIONS OF PROPERTY GIVEN IN PAYMENT FOR. CORPORATE STOCK.
    [Circuit Court of Erie County.]
    R. D. Kunz et al v. National Valve Co. et al.
    Decided, April 13, 1907.

      Corporations — Liability for Unpaid Balance of Stock Subscription — - Where Property at an Over-Valuation was Given in Exchange for Stock — Not Actual Value, Btit Good Faith Controls — Where Valuation was not Constructively Fraudulent — Gates v. Stone Co., 57 0. S., 60, Analyzed — Intent—As Among the Parties Making the Ex- ■ change — And as to Those Subsequently Sealing with the Corporation — Elements Entering Into a Fair Valuation — Effect of the Laws of Trade — Capitalization not the Basis of Credit — Substitution of Trustee — Burden of Proof — Equity—Laches.
    1. An action by the creditors of a corporation to ascertain the amount of unpaid balances of stock subscriptions, on which subscriptions payment had been made only with property at an alleged over-valuation, and to compel payment of such balances when ascertained, is appealable; and the right of appeal is not affected by' the substitution of a trustee in bankruptcy for such creditors.
    2. The holder of stock of a corporation, for which property- was accepted in payment at an over-valuation of such property, is not liable to creditors of the corporation for the difference as an unpaid balance, where the transaction was made in good faith and the over-valuation was not so gross as to be constructively fraudulent-
    3. The burde.n of proof rests on a plaintiff, asserting that property has been taken by a corporation in payment for stock at a fraudulent over-valuation, to establish that fact.
    IT. L. Peeke, representing tbe plaintiffs,
    cited and commented on the following authorities: Andres v. Morgan, 62 Ohio St., 60; Morawetz, Corporations, Sections 1, 227; Chicago & O. T. By. v. Miller, 91 Mich., 166; Des Moines Gas Co. v. West, 50 Iowa, 16; Booth v. Bunco, 33 N. Y., 139; Slate v. Standard Oil Co., 49 Ohio St., 137; Bennett v. Minott, 39 Pac. Rep., 997; First Nat. Bank v. Trebein Co., 59 Ohio St., 316; Ilalhorn v. Calef, 69 U. S., 10; Ochiltree v. Bailway, 88. U. S., 249; Norris v. Wrenschall, 34 Md., 492; Brown v. TIitchcock, 36 Ohio St., 667; Sutliff v. Atwood, 15 Ohio St-., 186; Johnson v. Underhill, 52 N. Y., 203; Hodgkinson v. Kelly, L. R., 6 Eq. Cas., 496; Gape’s Executor’s Case, 2 DeG. M. & G., 562; Mexican & S. A. Go., In re, 4 DeG. & J., 544; Kinsey v. Gable Go., 6 C. C.' — N. S., 345.
    Mr. Peeke contended that if a person accepts stock issued to him as a gratuity and the corporation becomes insolvent the law will create a promise to pay for it, and cited: Handley v. Stutz, 139 U. S., 417; Upton v. Tribilcock, 91U. S., 45; Sanger v. Upton, 91 U. S., 5Q;~ Chubb v. Upton, 95 U. S., 665; Pullman v. Upton, 96 U. S., 328; Morgan County v. Allen, 103 U. S., 498; Hawkins v. Glenn, 131 U. S., 319; Graham v. Raihuay, 102 U. S., 148; Richardson v. Green, 133 U. S., 30; Union Mut. Life Ins. v. Manufacturing Go., 97 111., 537; Fogg v. Blair, 139 U. S., 118; Clark v. Bever, 139 U. S., 96; Kinsey v. Gable Go., 6 C. C/ — N. 5., 345; Camden v. Stuart, 144 U. S., 104; Rickerson Roller-Mill Go. v. Foundry & Mach. Go., 75 Fed. Rep., 554.
    The authorities cited as to the true value were: 10 Cyc., 472, 473, 474; Ford v. Lamson, 17 C. C., 539; Kulp v. Fleming, 65 Ohio St., 321; Wick Nat. Bank v. Bank, 62 Ohio St., 446; Scofield v. Oil Go., 6 C. C. — N. S., 169.
    As to payment for shares on personal liability for stock standing in name of one as trustee: 5 Cyc., 378; 10 Cyc., 460, 461, 463, 464, 797, 799; Price, In re, 92 Fed. Rep., 987; Scovill v. Thayer, 105 U. S., 143; 10 Cyc., 697; Cook, Stockholders, Section 503c; Holcomb v. Gibson, 39 Bull., 380; National Tube-Works Co. v. Gilfillan, 124 N. Y., 302; Ailing v. Wenzel, 133 111., 264; Coleman v. Howe, 154 111., 458; Van Cleve v. Berkey, 143 Mo., 109; Boulton Carbon Go. v. Mills, 78 Iowa, 460; Hastings Malt. Co. v. Brewing Go., 65 Minn., 28; Wallace v. Manufacturing Co., 70 Minn., 321; Lloyd v. Preston, 146 U. S., 630; Home Life Ins. Co. v. Fisher, 188 U. S., 726; Parmelee v. Price, 208 111., 544; Commercial Bank v. War then, 119 Ga., 990.
    As to who may complain of the transaction: Rickerson Roller-Mill Co. v. Foundry c§ Mach. Co., 75 Fed Rep., 554; First Nat. Bank v. Mining Co., 42 Minn., 327; 2 Morawetz, Corporations, pars. 832, 833; Coil v. Amalgamating Go., 119 U. S., 343.
    Intentional overvaluation of the property is actual fraud: Lloyd v. Preston, 146 U. S., 630; affirming, Preston v. Raihvay,
      36 Fed. Rep., 54; Coit v. Amalgamating Go., 119 U. S., 343; Northwestern Mut. L. Ins. Go. v. Beal Estate Go., 46 Fed Rep., 22; Boynton v. Hatch, 47 N. Y., 225; Boynton v. Andreivs, 63 N. Y., 93; National Tube-Works Go. y. Gilfillan, 124 N. Y., 302; Crawford v. Bohrer, 59 Md., 599; Welherbee v. Baker, 35 N. J. Eq., 501; Coleman v. Howe, 154 111., 458; Peninsular Sav. Bank v. Stove Polish Go., 1.05 Mich., 535; Shiekle -v.Watts, 94 Mo., 410; Garrett v. Mining Go., 113 Mo., 330; Gilkie v. Town c6 Gas Go., 46 Neb., 333; Osgood v. King, 42 Iowa, 478; Wishard v. Hansen, 99 Iowa, 307; Salt Lake Hardware Go. v. Milling Go., 13 Utah, 423; Ely ton Land Go. y. Warehouse & Elevator Co., 92 Ala., 407; Boulton Carbon Go. v. Mills, 78 Iowa, 460; First Nat. Bank v. Mining Go., 42 Minn., 327.
    A. B. Thompson, representing R. B. Fisher,
    cited as to the nature of the remedy: Thompson, Corporations, Sections 3429, 3432, 3493; Cook, Corporations, Sections 204, 206; First Nat. Bank v. Peavey, 69 Fed. Rep., 455; 20 Enc. PI. & Pr., 703, 704, '710, 724; Wellington y. Construction c& Imp. Co., 52 Hun., 408; By an v. Jacques, 103 Cal., 280.
    As to liability of one holding stock as trustee: Holcomb v. Gibson, 39 Bull., 380; Biggio v. Sandheger, 8 N. P., 13; Beach, Corporations, Section 136, Subd. H. See also 2 Morawetz, Corporations (2d Ed.), Section 852; Thompson, Corporations, Sections 3193, 3194; Cook,' Corporations (4th Ed.), Sections 245, 246; Wadsworth v. Laurie, 164 111., 42; Grew v. Breed, 51 Mass., (10 Met.), 569; Pullman v. Upton, 96 U. S., 328, 330.
    As to liability of defendants for unpaid stock subscriptions: 10 Cye., 473, 474; Gates v. Stone Go., 57 Ohio St., 60; State Tr. Go. y. Turner, 111 Iowa, 664; Dean y. Baldwin, 99 111. App., 582; Clevenger y. Moore, 58 Atl. Rep., 88 (N. J.); Bumsey Mfg. Go. y. Kaime, 173 Mo.,- 551; Hastings Malt. Go. v. Brewing Go., 65 Minn., 28; Van Gleve y. Berkey, 143 Mo., 109; Coleman y. Howe, 154 111., 458, 471, 472; Boynton y. Andrews, 63 N. Y, 93; Ailing y. Wenzel, 133 111., 264, 265; National Tube-Works Go. v. Gilfillan, 46 Hun., 248; affirmed. National Tube-Works Go. v. Gilfillan, 124 N. Y., 302; Chotean v. Dean, 7 Mo. App., 210; Garden City Sand Go. v. Crematory Go., 205 111., 42; Donald y.
      Smelting & Refin. Go., 62 N. J. Eq., 732; Holcomb v. Gibson, 39 Bull., 380; Thompson, Corporations, Section 3194; Cook, Corporations, Sections 245, 246; Hospes v. Manufacturing é Gar Co., 48 Minn., 174; Wallace v. Heating Mfg. Go., 70 Minn., 321; Jackson v. Traer, 64 Iowa, 469; See v. Heppenheimer, 61 Atl. Rep., 844 (N. J.); Wetherbee v. Baker, 35 N. J. Eq., 501, 502.
    Wiedman, J.; Haynes, J., and Parker, J., concur.
    Appeal from Erie Common Pleas Court.
    This ease presents, first, the question of the appealability of an action instituted by a creditor of a corporation to compel the payment of claimed unpaid balances upon stock issued for overvalued property, and to subject the amount of such balances from stockholders to the payment of the debts of the corporation, in which case a trustee in bankruptcy has been substituted for the original creditor plaintiff, or has been permitted to come in and litigate the questions involved in the case.
    At an early stage of the action we indicated our impression-that the case here presented is appealable in Ohio, notwithstanding the decision of the Supreme Court in the case of Smith v. tJohnson, 57 Ohio St., 486. That was an action in which a receiver appointed to wind up the affairs of a corporation brought suit below to recover unpaid subscriptions to the capital stock of the corporation, and it was held that despite the fact that several stockholders were brought in who raised no question of misjoinder, it was in effect an action in which the remedy sought was a recovery of money, and that it was a case triable to a jury and not appealable.
    There was no question there, as there is in the case before us, as to the effect of the taking by a corporation of property in lieu of money as payment upon stock subscriptions, or of the issues arising upon a suit by a creditor to subject any interest still owned by the corporation in balances of the price of stock over and above the value of the property received by the corporation in assumed full payment of the subscription price.
    The question is one not free from difficulty, but our view of the whole matter is, that the present case demands an accounting after an ascertainment of the question of the liability of stockholders to respond to the ciaims of the plaintiff, assuming, of course, for the moment, that there be any liability on the part of such stockholders, and that as among all concerned equity requires an adjustment of such liabilities among the stockholders and an ascertainment of the amount of unpaid subscriptions, if any, requisite to meet the legitimate demand of creditors for the payment of debts.
    We think, then, that the case is appealable, and as we entertained that impression from the time of our first examination of the matter, we have very fully heard the case upon its merits, giving some days'time to its trial, and since its submission to us as much time as was possible for the consideration of the legal questions involved and very able arguments and briefs of counsel. As to the written briefs, I will say that at the cost of some night work they have all been carefully examined and we think that no important questions or propositions submitted by counsel on either side have been overlooked.
    'The National Valve Company, a defendant here, was organized under the laws of this state in October,. 1903, with an authorized capital stock of $75,000, $65,000 of which was issued, and all to one stockholder, J. G. Schurtz. It was a sort of successor to an earlier corporation known as the Vincent Valve Company, which had been unfortunate in business and whose affairs had come under the control of a trustee in bankruptcy. The Vincent Valve Company, the earlier corporation, was organized under the .laws of Michigan and in the year 1899 was brought to this city of Sandusky and entered upon business here. It acquired real estate here, by donation, I think, from the chamber of commerce, and established a plant and for several years conducted its business. In the year 1903 it had accumulated an indebtedness of some $130,000 — $100,000, or about that sum, being diie to the president of the company, the said Mr. J. G. Schurtz, and some $20,000 to the Third National Exchange bank of this city. A suit was instituted by the bank, and the company’s property placed in charge of a receiver appointed by the court of common pleas of this county. He was subsequently, in proceedings in bankruptcy in the federal court, appointed a receiver therein and the property for a time remained under his management as such.

      During 'the summer of 1903 efforts were made for the reorganization of the new company, citizens of this city deeming it of importance that the plant be retained here and the business of the company continued, and among the gentlemen forwarding this project were some citizens well known to the members of the court, men of character and business ability. Some of them were attorneys at this bar; one of them was a former member of this court.’ As the result of all their efforts a new company, the present defendant, was organized and incorporated under the laws of Ohio, and the assets of the Vincent Valve Company were transí erred at private sale by the trustee in bankruptcy to John G. Schurtz, the principal creditor of the former concern, as I have already stated, and its president. Immediately thereafter the stock of the National Valve Company to the amount of $65,000 was issued to Mr. Schurtz.
    Schurtz had made certain arrangements with the Third National Exchange bank, which I will not stop to recite, in the nature of a sort of application upon its claim, which was a preferred claim upon this property, of $20,000 worth of bonds of the National Valve Company to be issued. The National Valve Company, October 26, 1903, I think, not only issued its stock to the amount of $65,000 to John G. Schurtz, but also $20,000 worth of bonds. These bonds were turned over to the Third National Exchange bank to be applied upon its claims. Its original claims against the Vincent Valve Company had been changed into a claim for loans or advances made to Mr. Schurtz himself, to the amount of some $26,000 or $27,000, which had enabled him to carry out the program formulated by the promoters of the new organization. For the further protection of the bank, a large block of the stock so issued to Mr. Schurtz was transferred by him to Mr. F. P. Zollinger, an officer of the bank, as trustee. This block of stock was to an amount sufficient to give Mr. Zollinger the absolute control of the new company in any stockholders’ meeting. By a contract which had been entered into between him and Schurtz, he was .to receive 51-100ths of the total stock, and in fact received 380 shares from Mr. Schurtz out of the 650 shares issued by the company to Schurtz. A part of this so received by Zollinger, however, was for services rendered by him and deemed by Mr. Schurtz of sufficient value to justify the' transfer to him of a portion of the stock so received by Mr. Schurtz from the valve company.
    The new company issued its bonds to the amount of $40,000, inclusive of the $20,000 so delivered to the Third National Exchange bank, but of the remaining $20,000 so issued only $16,-000 were ever disposed of, and it was, as we find, in the contemplation of the parties that said $16,000 in bonds were to go. into assets of the new company to furnish additional machinery in part and to reinforce or establish a working fund for the furtherance of its business. I may have omitted some of the details from this general statement, but sufficient has been said to show the general nature of the transaction, an understanding of which is necessary to an intelligent consideration of the questions raised by the pleadings.
    The vital question in the ease is the one presented by the claim of the plaintiff creditors, and subsequently by the trustee in bankruptcy, that the property received from Schurtz by the National Valve Company was grossly overvalued; that it was not worth the face value of the stock issued to Schurtz, added to the amount of the bonds which he received. This presents a question of fact upon which we have received a large amount of evidence. Connected with this are some legal questions which have been very interesting to us and which perhaps, have not yet been determined by the courts of this state. That under the adjudication in Ohio stock is not necessarily to be deemed fully paid, although it may so state upon its face, and although it may be so declared by resolution of the directors of the company, is substantially undisputed here, and, indeed, it could hardly be disputed in view of some of the decisions of the Supreme and other courts of this state.
    The main controversy is, whether the property turned over to the corporation by Mr. Schurtz is to be taken as of its actual value at the time it was so transferred, or as of its understood and believed value by the parties then dealing with it, Schurtz on the one hand and the corporation 'on the other. The diversity of view entertained by the courts called upon to consider this question for many years and in many jurisdictions has led to the recognition in some jurisdictions of what is called the “true-value rule” and in others of the so-called “good-faith rule.” It is agreed by counsel in the case, who have made very careful research along the lines here involved, that there is this diversity of view among the courts of the different states. And it is also agreed that even in those jurisdictions where the so-called ‘ ‘ good-faith rule” prevails, there is recognized as sometimes appearing in transactions of this character such gross overvaluations of property delivered or transferred to a corporation in payment of stock subscription as to constitute, although actual fraud be lacking, a constructive fraud upon other stockholders not so favored and upon creditors of the corporation.
    It is contended by the plaintiffs that the rule which makes a transfer of property apply as payment for subscribed stock only to the actual value of the property, is the rule which obtains in Ohio, and much emphasis is placed upon the case of Gates v. Stone Co., 57 Ohio St., 60, in support, as it is claimed, of this proposition. It is urged, also, in behalf of the plaintiffs, that if this rule does not obtain in Ohio, still in the case at bar there was such a gross overvaluation of the property as consistently with the good intent and good faith of the officers of the corporation and Mr. Schurtz will present a case of constructive fraud as against creditors.
    On the other hand, it is claimed that the good-faith rule is the rule towards which the courts in the different jurisdictions are rapidly tending; that the overwhelming weight of authority will support transactions of this kind in which both parties act in absolute honesty, endeavoring to fix a real value upon the property transferred to the corporation in payment of stock subscriptions. The defendants insist that this rule has not been repudiated in the state of Ohio by the case of Gates v. Stone Co., supra, or any other decision of the court of last resort; but they urge that even if the rule contended for by counsel for the plaintiffs is correct, still the property transferred by Mr. Schurtz to the National Valve Company was, considering all conditions and circumstances, of an actual value equal to the par value of the stock received by him, plus the $20,000 of bonds.

      A very careful analysis of the case of Gates v. Stone Go., supra, does not disclose a holding by the Supreme Court that where the grantor and the grantee of property are in error as to its actual value and the property is received by a corporation in payment for stock issued ostensibly as “full-paid stock,” it can be treated as only partially-paid stock if the property turns out to be not worth the estimate placed upon it by the parties so dealing with it. This Gates case does treat the question of good faith, but it is the question of good faith as applicable to the intentions of the parties with reference to others in the matter of fraud. The ease was referred in the court below to Judge Pennewell, of Cleveland, as a referee, and after the hearing of evidence he found that property had been turned out to the corporation at double its real value. No exceptions were filed to his report upon this point, no objections made to the finding that the property was received by the corporation at twice its actual value, so that the case presented itself to the Supreme Court as one in which that was a determined issue. There was no finding, so far as appears in the report, what the parties at the time of the transfer believed the property to be worth; and the Supreme Court simply hold in substance that when parties receive a credit for twice the value of the property turned out to a corporation in payment for a stock subscription, they are not relieved from liability to pay the residue of the' price by reason of the fact that they had confidence in the future prosperity of the company and that they had no intention to defraud either stockholders or future creditors. I think that that is the spirit and substance of the decision of the Supreme Court in the Gates case. But it does not anywhere appear in the ease that the grantor or grantee of the property — by the grantee I mean the corporation acting through its officers — believed that the property was worth the par value of the stock. No claim of that kind seems to have been made in the ease.
    We are not to confuse the two kinds of intent here — the one the intent to defraud persons who may dwell with the corporation or who may become stockholders in it, and the other the intent as among themselves to make an inflated but not necessarily fraudulent estimate of the value of the property. When the courts of some jurisdictions have mentioned the good-faith rule they have referred to the estimate of the value of the property in good faith by the persons making it. The Supreme Court in the Cates case, when it is talking about honesty, or good faith, is considering the intention of the incorporators and the stock subscriber as to those with whom they are subsequently to deal, and who may rely upon the capitalization as a basis of credit.
    Passing now from this case, which we think does not determine the question in dispute between the parties here, we have discovered no decision in Ohio upon which we are disposed to rely which settles the question, whether what is known as the true-value rule or the good-faith rule should apply to transactions of this bind and determine whether stock is full-paid or whether it is not.
    It would be a labor of very great difficulty and hardly warranted at the present time to attempt a review of the multitudinous adjudications along these lines in other states and in England; but I think that I may not unprofitably read from 1 Cook, Corporations, Section 46, wherein he discusses the principle involved in these disputes and states his view as to the current of authority. I read:
    “A dissenting stockholder may object to such an issue, inasmuch as it decreases the value of his stock. ’ ’
    That is, an issue of stock for property where the property is, in fact, overvalued.
    “lie may have the transacttion set aside, and the person receiving the stock compelled to return it.”
    That would be futile as a means of giving relief to anyone here, because the stock has become, I suppose, substantially worthless, the company having become bankrupt after 'conducting business for about a year from October 28, when the National Valve Company issued this stock to Schurtz. The’writer continues :
    “Corporate creditors, however, are the persons who generally complain. The company becomes bankrupt and they are not paid. They then find that the capital stock did not represent cash; it was paid for by property taken by the corporation at a valuation much greater than its real value. The company being insolvent and its property gone, the corporate creditors seek to hold the stockholders liable. They seek to hold the stockholders liable for the par value of the stock, less the real value of the property which was turned in to the corporation. During the past twenty years there has been a vast amount of litigation on this subject. The courts still disagree, in their conclusions, but a careful study of the cases will show that upon authority as well as principle the stockholders can not be held liable in such a case. In England and New York they can not be held liable at all, except on the basis of a rescission. And under all the well-considered decisions they can not be held liable unless the property was of so trifling a character that it practically has no value whatever. This class of cases has arisen under two aspects; first, at common law, and, second, under statutes.
    “At common law it is well settled that corporate creditors can not hold stockholders liable on -stock which has been issued for property, even though the property was turned over to the corporation at an agreed valuation which was largely in excess of the real value of the property. There have been cases which •refuse to follow this rule, but it is clearly established by the'great weight of authority.”
    I am not reading all this and treating it as the law of Ohio, but only as the expression of this writer and compiler and for its indication of the trend of authority in the different states of this country and in England, and also for his discussion of the reasons which may support the one rule or the other.
    I continue the quotation:
    “The reason of the rule is, that if the payment by property was fraudulent, then the contract is to be treated like other fraudulent contracts. It is to be adopted in tolo, or rescinded in toto and set aside. Both parties are to be restored as nearly as possible to their original positions. The property or its value is to be returned to the person receiving the stock, and he must return the stock or its real value. In New York and in England, as stated above, at common law the stockholder is- not liable at all to corporate creditors, even though the overvaluation was' gross and clearly known so to be. The remedy is rescission, and not the making of a new contract by the court. There are other cases, however, which hold that where the property so turned in had no substantial value, or where the overvaluation was ‘fraudulent,’ 'the court will hold the stockholders liable for the par value of the stock, less the value of the property. Still other cases hold, that where the stock has no value when it is issued for property, the creditors are not deprived of anything and hence can not complain. ‘If, when disposed of by the railroad company, it was without'value, no wrong was done to creditors.' Such is the language of the Supreme Court of the United States. ’ ’
    I stop for a moment in the reading of the text to refer to the decision in Coii v. Amalgamating Co., 119 U. S., 343, affirming Coit v.'Amalgamating Co., 14 Fed. Rep., 12, cited in a foot-note by Cook, where this question, he says, clearly arose, and—
    ■ “The court said that the creditors could not hold the stockholders liable unless there was an intentional and fraudulent overvaluation. The court said that, ‘Where full-paid stock is issued for property received, there must be actual fraud in the transaction to enable creditors of the corporation to call the stockholders to account; a gross and obvious overvaluation of .property would be strong evidence of fraud.' ”
    I,have already said, and it seems to be conceded by counsel for the defendant, an overvaluation may be so gross as to constitute not simply strong evidence of fraud but to constitute constructive fraud and become just as binding upon the parties, so far as fixing liability is concerned, as if it were actual fraud. I read further from the note:
    “The court held that although a machine and a license to use a patent were put into the company for $100,000 of stock, yet there was no fraud. The lower court said corporators ‘ought not to be made liable individually for the debts of the company at the instance of creditors, because, at a later day, the estimates fairly put upon the property at that time have become modified by subsequent events, and will not amount to the value which they set upon it.’-”
    In other words, the Supreme Court seems to be holding that the reliability of the estimate or the honesty of the persons dealing with the property can not be affected by conditions subsequently arising, matters not known to them at the time when they fixed the value. I read further from the text:
    At the common law “there is no contract, express or implied, to pay to the corporation or to corporate creditors the par value of stock which is issued for property. Not only is there no such contract, but there is no implied fraud even though the property was overvalued. If there is express fraud the law provides ample remedies, but such a fraud must be clearly proven and is not implied from the proof that the property was worth less than the par value of the stock. This principle of law, that there is no liability on stock issued for property the value of which is,'less than the par value of the stock, seems a self-evident principle of law. Moreover, this principle is based on business usage and is sound practice. There is no more harm in the issue of stock below par than there is in the issue of a note or bond below par. The extent to which the courts have gone in sustaining such issues of stock for property is shown by the fact that even constitutional and statutory prohibitions against watered stock have been practically construed away by the courts. Moreover, the laws of trade are more powerful than the laws of men, and in business circles it has become customary to capitalize property at a reasonably high figure. This is due to the fact that it is easier to sell stock at less than par than at par, and also to the fact that, by a large capitalization, dividends are kept low enough to avoid the cupidity of possible competitors and the interference of Legislatures. To such an extent is this practice carried of issuing stock for property at an overvaluation, that the investing public and persons who give credit to corporations rather expect it, and they no longer rely upon the nominal capitalization of the company. Experience has taught them that they must investigate the real financial condition of the company, and invest or give credit upon that alone.
    “Even the fact that a person to whom the stock is issued returns a part of it as a gift to the corporation or to trustees for the corporation to sell the same below par and put the proceeds in the corporate treasury for a working capital does not' necessarily prove fraud in the value put upon the property. The person receiving the stock may have been willing to sacrifice a part of his stock and property in order to make the rest more valuable. Shares which have been forfeited after being partly paid for may be reissued at a price equal to the unpaid subscription price or any sum in excess thereof.1 ’
    After some further discussion of the question, the writer continues, in the same section:

      “There is a limit beyond which the courts will not go in sustaining the issue of stock for property taken at an overvaluation. If the property which is turned in is practically worthless, or is unsubstantial and shadowy in its nature, the courts will hold that there has been no payment at all, and that the Stockholders are liable on the stock.
    “Moreover it is to be borne in mind that the parties receiving watered stock may be liable as promoters to return'profits which they have made. This is particularly the ease where the promoters merely owned an option which they have sold to the corporation at .an exorbitant price.
    “The remedy of the corporate creditor is in equity. An action at law 'for conspiracy is difficult to maintain. The liability on stock issued for property at an overvaluation commences only upon insolvency of the corporation. Hence the statute of limitations’ runs from that date, or from the date when judgment is obtained against the corporation. Laches may be a bar to the collection of what is claimed to be due on watered, stock. ’ ’
    I have read nearly the whole of this section, which is a very long one, because there is so much treatment in it of the principles upon which these rules are based on one side or the other— the principles, perhaps, I should rather say, which call for the adoption of some rule applicable to cases of transfer of property in exchange for stock and the resulting liabilities thereunder.
    I have been much impressed in the reading of this section with the view expressed that creditors do not to-day rely upon the amount of the capitalization of the company in giving credit to a corporation to the extent that they did at some former period of our history, and the rule upon which even the decision in Gates v. Stone Go., supra, is based, is only, that to permit property to be put in at a gross overvaluation would be a fraud upon creditors who might rely upon the capitalization of the company. It seems to have escaped some of the courts, that where a company has remained in business for many years and its circumstances have greatly changed, where it has had either a profitable or an unprofitable business, the amount of its capitalization ceases to be, if it. ever was, a safe criterion as to the strength of the company. That matter does not seem to be referred to in these cases, but the discussion is all upon the apparent theory, that the amount of the capitalization of the company is a sort of an asset for the protection of creditors, as if-the money which had been paid in. for stock had remained unexpended' — undisturbed, during all the vicissitudes of its business.
    I am strongly of the opinion that the amount of capitalization of a company affords little basis for an estimate of the financial strength of the company. We have many companies whose profitable business has made them strong financially where their capitalization is very small, and we have others whose capitalization reaches into the millions and no one pretends to rely upon that fact as a basis of credit or an estimate of the actual financial strength of the company.
    The recent promotion of numerous speculative companies of enormous capitalization, where the property was, as known to everyone, vastly less in value, is illustrative of the fact that no especial reliance is placed upon authorized capitalization or upon the amount of stock issued at its nominal or par value. I am suggesting all this not in any effort to repudiate the doctrine which has been established by the court of last resort of the state of Ohio, but only as explanatory of my own view that we ought not to go very much further in holding stockholders to a technical liability based upon a legal fiction. It is the judgment of this court that the/'good-faith rule” should prevail in Ohio. It has not heretofore been established by any Ohio adjudication; but we believe it to be the rule more consonant with justice and more consistent with the established principles adopted in all other eases of claimed fraud. The good faith of the parties in such cases is made the test of the validity of the transaction, except where the circumstances raise so strong a legal inference as to constitute constructive fraud.
    As a question of fact, however, and lest we may be wrong in the opinion which I have expressed, we have considered the evidence bearing upon the question of the real value of the property taken by the National Yalve Company from Mr. Sehurtz. At the outset of this inquiry we feel very clear in our judgment that values as fixed by sacrifice sales are not to be taken as the just rule to determine the value which parties dealing with property, where the one is free to sell and the other is free to buy, should adopt. We think, as expressed in the case of Coil v. Amalgamating Co., supra, that incorporators are not to be held individually liable for the debts of the company at the instance of creditors because the estimates fairly put on the property at the time it was transferred to the company have been modified by subsequent events; and we think it equally true that the estimates which they place upon the property are not to be governed by prior forced sales of the property in a court of bankruptcy or upon execution from any court. It has been universally held that values are not so to be fixed, but that we are to determine the value of property by its worth in the market where the grantor is free to sell, and where the purchaser is free to buy.
    A number of witnesses have given their judgment as to the value of this plant and all that appertained to it as transferred by Sehurtz to the National Yalve Company. I will not attempt to analyze their testimony in detail and I will touch upon it only to consider certain general principles that apply to it.
    In one of the foot-notes to Section 46 of Cook, Corporations, from which I have read, at the bottom of page 126 of the first volume, I find this language:
    “Inasmuch as the franchise, earning power or good will is generally turned in at a high valuation, it is well to state that the law sustains a fair valuation of the franchise,” and he cites some authority in support of this. I have not gone off to any investigation of the question as to how far the note is borne out by the decisions, because I take it for granted; and I base my conclusion upon the result of prior examinations of adjudications not dissimilar in this respect, that there is attaching to property in Ohio as in other states, a something, intangible and yet not worthless, that may have grown up along with the use of the property in the course of years. It may be something that enhances the value of a shop or some other building where a business has been carried on for a long time until customers have learned to find their way to it. It may be something attaching to the quality of stock that is turned out by a particular manufacturing establishment. It may be something that pertains to the honest and fair dealing of a merchant with his customers. In all of these instances we call it sometimes good will, sometimes we say nothing about it, but we judge the value of the property itself in the light of that circumstance taken in connection with other circumstances.
    In the case at bar there may or may not have grown up a very valuable good will connected with this plant. So far as the real estate is concerned, I doubt whether it was made particularly more valuable by reason of the fact that the Vincent Valve Company had ever conducted its business there; but the men who have spoken as witnesses upon this question, at least those who have spoken in hehalf of the defendants, have taken into account in their judgment of the value of the property the fact that it had been a going concern and that it was a part of their plan of operation to keep it such after the brief period in which it was in financial difficulty. Prom the month of June until the month of October it was in control of the courts. From the month of July until some time in the month of November very little, if any, business was done, and we are pointed to correspondence of the company with would-be purchasers of its product where the company was forced to turn down offers or inquiries as to its goods. The very fact that it had inquiries, the very fact that there were possible purchasers in the market who were interested in the plant and who were writing to the company and receiving responses are indicative of the fact that it had some sort of a trade which might be valuable to preserve. We have no doubt that this was one of the matters taken into account by the promoters of the new company and we think legitimately so. We have considered the various items of property involved in this transfer. We have noted the character of the witnesses testifying. We think that they are honest men upon both sides, that they gave their honest judgment as to the value of the property turned over.
    It is urged by counsel for the defendants, and we have heard no adverse contention on the other side, that the burden of proof rests upon the plaintiffs to establish the claim that the property was taken at an overvaluation. To sum up the whole matter, it is our view, adopting this contention of the defendants, of the correctness of which we have no doubt,, that the onus resting upon the plaintiffs has not been sustained by a preponderance of the evidence. On the contrary, we think that the evidence preponderates in support of the claim made in behalf of the defendants that the stock under all the circumstances was worth what the corporation paid for it. I am saying this in full view of the circumstance, thereafter occurring, that the business proved unprofitable, that the company failed, and that its affairs again went into bankruptcy or insolvency, but also in view of the unquestioned law that the persons engaged in the transaction were not held to prophetic vision.
    Upon the question of good faith we are not to forget that no motive is apparent for any overvaluation of this property or overcapitalization of the company. They were not going out into the open market to hawk their stock about and sell it. There is no claim on the part of the creditors that anyone in fact relied upon the conduct of these men to his prejudice. There is no syllable of evidence that any credit was given upon the basis of this claimed overcapitalization — I do not know that it would be essential; but, at any rate, in judging of the whole matter it seems to us that it is fair to take into account the absence of evidence that these defendants sought to obtain credit upon any claim of theirs that the assets of the company amounted to $85,-000 or any other particular sum. The man who turned out the property to the company received all the issue of stock, every share of it. No stock was sold by the company to anyone else, and in the whole transaction from its beginning to its unfortunate end, we find no evidence of anything which vrould fix a stigma on the character of the men ’who engaged in it, or which would render any one of them personally liable to respond to the claims asserted by the creditors.
    Our judgment is, that the petition be dismissed.

      E. L. Peeke, for plaintiffs.

      A. B. Thompson, for R. B. Fisher.

      B. E, Williams and B. K. Bamsey, for defendants.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    CAPACITY TO MAKE A WILL.
    [Circuit Court of Licking County.]
    Welsh Hills Baptist Church v. Harriet M. Wilson et al.

    Decided, March Term, 1905.

      Wills — Charge of Court as to Capacity to Malee — Tests and Evidence of Testamentary Capacity.

    The fact that one paragraph of a charge given to the jury might be misleading, if standing alone, does not constitute reversible error, when the doubtful paragraph taken in connection with that part of the charge which immediately follows affords a clear and correct statement of the law. Nor is it error to charge that “it is necessary a person shall have sufficient m.ental capacity for the transaction of the ordinary affairs of life,” when this was followed in a later paragraph by the express statement that “he need not have sufficient capacity to make a contract, but must understand substantially what he is doing and the nature of the act in which he or she is engaged.”
    A. A. Stasel and G-. C. Daugherty, for plaintiff,
    cited as to the tests of testamentary capacity: Pepple v. Pepple, 13 C. C., 43; Keitemamn v. Metzger, 3 C. C. — N. S., 224; Page, Wills, Section 68; Thompson, Trial Ev., Section 1121; West v. Knoppenberger, 4 C. C. — N. S., 305; Underhill, Wills, Section 87..
    ITuntor & Hunter' and Kibler, Kibler & Montgomery, for defendants,
    contended that a sufficient understanding to transact ordinary business is strong evidence of testamentary capacity, though the want of such understanding does not necessarily show incapacity. Brockmeier v. Buck, 12 Bull., 213.
    They also cited with reference to special requests for instructions to the jury: Hall v. Reed, 17 Ohio, 498; Cleveland & E. Elec. Ry. v. Tlatvkins, 64 Ohio St., 391; United States Board c§ Paper Co. v. Browne, 1 O. C. — N. S., 345; Tracy v. Card, 2 Ohio St., 431; Lewis v. State, 4 Ohio; 389; Stewart v. Sowthao'd, 17 Ohio, 402; Reed v. McCrew, 5 Ohio, 375; Creed v. Bank, 11 Ohio, 489; Stewm-t v. State, 1 Ohio St., 66; Gill v. Sells, 17 Ohio St., 195; Oliver v. Sterling, 20 Ohio St., 391; Goal Go. v. Esiievenard, 53 Ohio St., 43 ■ Kettemann v. Metzger, 3 C. C. — N. S., 224.
    As to testamentary-capacity: Page, Wills, Section 97, p. 115; Blough v. Parry, 144 Inch, 463 (40 N. E. Rep., 70); Moore v. Caldwell, 27 O. C. C., 449; Black’s Dictionary, 767, 1107, 1108; McGinnis v. Eempsey, 27 Mich., 363.
    And with respect to reversible error: McAllister v. Ilarlzell, 60 Ohio St., 69; Clark v. Clark, 16 C. O., 103; Schweinfurth v. Raihuay, 60 Ohio St., 215; Brock v. State, 4 C. C., 160; Page, Wills, Section 400.

       Affirmed by the Supreme Court without report, 75 O. S., -.

   Per Curiam.

Harriet M. Wilson et al commenced their action in the Court of Common Pleas of Licking County against Andrew J. Cada et al, seeking to set aside the last will and testament of Hannah E. Thomas, deceased, and on issue joined, the cause went to a jury for determination.

After a verdict, the plaintiff in error prosecuted error to this court seeking to reverse the judgment of the court of common pleas; and the sole question presented here is on the charge of the court.

On the trial of the case, counsel for defendants requested the court, in writing, before the argument to the jury, to give to the jury the special instruction found on page 12 of the bill of exceptions, which the court refused to give; this is one of the errors complained of by the plaintiff in error. If this instruction, so asked by counsel, was correct and proper, it was the duty of the .court to have given it without modification and without change; but, as we view the request, it is not a correct instruction, as it omits several very important and vital elements defining mental capacity. Counsel request the court to say that, “The testatrix must have capacity to remember the person or parties to whom she wishes to give this property, and remember and know her immediate relatives.”

Taking this request as a whole, counsel in taking- it from the well-known authorities on instructions to juries, eliminated several very essential and, as we think, vital elements, and modified and restricted the definition of mental capacity in the respects as indicated, so that it was improper to be given in the form as requested. We think the court was not in error in refusing this request.

The charge as given to the jury is also excepted to, and our attention is directed to a parargaph on page 5 of the bill of exceptions, which reads as follows:

“In order to be able to make a valid will, it is necessary that a person shall have sufficient mental capacity for the transaction of the ordinary affairs of life, and if he possesses this, though he may be feeble in mind and body from sickness, old age or other cause, he has a legal right to dispose of his property as to him may seem fitting and proper.”

If this portion of the charge stood alone without any modification, it perhaps might be misleading; but taken in connection with what immediately follows, and particularly with what follows in the second paragraph below, we do not think the jury could have been misled. Nor is the question made in this case, as claimed by counsel for plaintiff in error, that the- court instructed the jury that testamentary capacity must equal that of capacity to make a contract, for the court distinctly says, and immediately following upon this paragraph that is objected to:

“The law does not undertake to test a person’s intelligence or to find the exact quality of mind and memory which a testator must possess; but it does require him to be capable of knowing the extent and value of his property, the names or relationship of those persons who are the -natural objects of his bounty; their deserts in reference to their conduct and treatment of him or her; their conditions and necessities, and be capable of retaining all of these facts in his or her memory long enough to have the will prepared and executed. He or she need not have sufficient capacity to make a contract, but he or she must understand substantially what he or she is doing, the nature of the act in which he or she is engaged, the extent of his or her property, the relations of others who may or ought to be the object of his or her bounty,” etc.

We think the court fairly presented to the jury the true thorities in this country and England, as shown by the latest rule of testamentary capacity, as approved by the highest auworks on the subject of wills. It is our opinion that no error intervened in this case, and that the judgment of the court of common pleas should be affirmed.

A. A. Siasel and G. G. Daugherty, for plaintiff.

Hunter & Hunter and Kibler, Kibler ds Montgomery, for defendants.

Judgment for costs, and cause rehianded to the court of common pleas for execution.


text:
    PROCEDURE ON THE OVERRULING BY A JUSTICE OF THE PEACE OF MOTION TO DISCHARGE ATTACHMENT.
    [Circuit Court of Hamilton County.]
    Eugene Lyon v. Elizabeth Phares.
    Decided, April —, 1907.

      Attachment — Proceedings in, Before a Justice of the Peace — ■Motion to Discharge Overruled — Appeal to the Common Pleas — Procedure Thereafter — Error—Section 6494.
    Section 6494, as amended, does not give jurisdiction of the entire case in an appeal from an order by a magistrate overruling a motion to discharge an attachment, but the decision by the common pleas is to be sent to the justice to be entered by him in his docket as the final judgment of the matter in the justice’s court, and this judgment of the justice is the only final judgment in the action and the only one from which error may be prosecuted.
    Swing, J.; Gieeen, <L, and Smith, J., concur.
    Lyon brought an action in attachment befoie a justice of the peace in Hamilton county against Phares. A motion was made before the justice to discharge the attachment, which motion the justice overruled. Thereupon the defendant took an appeal to the court of common pleas. In that court the judge gave judgment discharging the attachment. Error is prosecuted to this court to reverse the judgment of the court of common pleas.

      We are of the opinion that error does not lie to this court from the judgment of the judge of the court of common pleas.
    It is not the final judgment of the court of common pleas in an action pending therein. The statute, Section 6494, Revised Statutes, permits an appeal to the court or a judge, and it is intended that the question should be decided m three days by either, and when decided, the decision is to be sent to the justice and by him is to be entered as the final judgment in that matter-in the justice’s court; and said property, moneys and credits are to be disposed of as directed in said judgment — that is, by the judgment of the justice. The judgment of the justice is the only final judgment in the action and the onl'r one to which error may be prosecuted.
    This court in a former case, which was not reported, so held. That case is referred to in 3 C. C. — N. S., 366.
    The cause should be stricken from the docket.

      H. L. Cooper and Samuel W. Bell, for the plaintiff in- error.

      W. K. Maxwell, contra.


text:
    AGREEMENT TO SHORE UP AND BRACE BUILDING.
    [Circuit Court of Hamilton County.]
    Julia A. Snyder v. August Schardt.
    Decided, June 29, 1907.

      Error — In Overruling Demurrer Immaterial, When — Contract—~With Adjacent Lot Owner — To Shore up and Brace Building — Second Promise to do the Same Worh without Consideration.

    It is immaterial on review whether or not the court below erred in overruling the demurrer to the second cause of action, where a special finding by the jury, supported by the evidence, sustains the verdict returned for the plaintiff on the first cause of action.
    G-ieeen, J.; Swing, P. J., and Smith J., concur.
    The special finding of the jury, which is sustained by the evidence, supports the general verdict in favor of the plaintiff upon the first cause of action, and hence it is immaterial whether the court erred in overruling the demurrer to the second cause of action.
    If, however', the plaintiff before the request was made by the defendant, had already agreed with the adjoining lot owner to do and preform the same work for a valuable consideration, the promise of the defendant to pay therefor, whether expressed or implied, would be without consideration.
    It would be no determent to plaintiff to do that which he was before bound to do, nor would it be any benefit to the defendant to receive that which was already assumed. Railway Co. v. Morley, 45 Mo. App., 304; Putman v. Woodbury, 68 Mo., 58.
    The contract of plaintiff with the adjacent lot owner required him to shore and brace the building of the defendant, and construct a new wall under the old wall to the depth of the footings of the new building, but it did not require him to tear down and rebuild the old wall condemned by the building inspector, although the plaintiff included all expenses incurred in building the wall up from a depth of nine feet below the curb, amounting in all to $450. The jury seems to have carefully distinguished between that required by his contract with the adjacent lot owner and that required by his contract with defendant, allowing him only $200, without interest, and we think the judgment should be affirmed.

      E. B. Gregg, for plaintiff in error.

      Closs & Luebbert, contra.


author: Albaugh, J.

text:
    (Fifth Circuit — Coshocton Co., O., Circuit Court
    May Term, 1885.)
    Before Judges Albaugh, Fodlett and Jenneb.
    Richard M. Voorhes, Assignee of John G. Stewart, v. John Hesket.
    S., a depositor, drew his check in favor of H. upon a bank in which he had funds deposited sufficient to pay the same; afterward, and before the presentation or acceptance of the check, S. made an assignment for the benefit of his creditors. Said cheek was presented and payment refused, and his assignee drew the entire fund deposited, and holds the same as assets. In a proceeding by the holder against the assignee to compel the payment of the check in full from such fund in the hands of the assignee,

      Meld, that the drawing and delivery of the check by S. to H. operated as an equitable assignment, pro tanto, of the fund on deposit with the bank, and that he was entitled to the-payment of the check in full.
    Error to tbe Court of Common Pleas.
    The defendant in error, John Hesket, filed his petition in the court of common pleas, setting forth that on the 30th day of January, A. D. 1885, John G. Stewart was engaged in a general banking business in the village of Coshocton, Ohio, and then had on deposit in the Importers’ & Traders’ National Bank, in New York City, the sum of $13,677.25, under an agreement between him and said Importers’ & Traders’ National Bank, that it would deliver said money to such persons, at such times, and in such sums, as the said Stewart might order. That on the said 30th day of January, the said Stewart, for a valuable consideration, to-wit: the sum of $800, to him paid by said Hesket, drew his check on said bank for the sum of $800, and delivered the same to said Hesket, of which the following is a copy:
    Coshocton, Ohio, January 30, 1885.
    Pay to the order of John Hesket Eight Hundred Dollars.
    John G-. Stewart.

      To Importers' <& Traders' National Ba/nk, New York. No. 16,688.
    On the third day of February, 1885, said check was duly presented to the Importers’ & Traders’ National Bank for payment, and payment refused because of the assignment hereinafter mentioned, and said check was protested. That at the time said check was presented for payment, said bank had $13,677.25 belonging to said Stewart, with which to pay said check, deposited by him under the agreement aforesaid, which sum of money was more than sufficient to pay all checks then outstanding, drawn by said Stewart on said bank. On the 31st day of January, 1885, said Stewart made an assignment to the said plaintiff, Richard M. Voorhes, for the benefit oí his creditors, under the insolvent laws of Ohio. On the 10th day of February, 1885, said assignee drew from the Importers’ & Traders’ National Bank said sum of $13,677.25, and now has the same in his possession. On the 27th day of February said Hesket presented said check to said assignee, and demanded the money thereon; that said assignee refused to pay the same, and now claims to hold the entire sum of $13,677.25 so withdrawn from said bank as a part of the general assets of the said assignor, and threatens to distribute the same among the creditors of said assignor.
    The said Hesket, therefore, prays that said assignee may be decreed to hold in trust, for the use of said Hesket, of the money so drawn from said bank by him, the sum of $800, and that he be enjoined from distributing the same to the general creditors of the assignor; and that he be ordered to. pay to the said Hesket, out of said moneys, the said sum of $800, the full amount of said check, and for other proper relief.
    To this petition a general demurrer was filed, the ground of which is that the petition does not contain facts sufficient to constitute a cause of action. The court overruled the demurrer, and the plaintiff in error excepted, and now files his petition in this court to reverse the judgment of the court of common pleas.
   Albaugh, J.

The question presented by the record in this case for consideration is one of unusual interest and importance, and has been argued by counsel on both sides with great care and ability. The plaintiff in error by his demurrer admits the truth of all the facts alleged in the petition. The question then is: Did the execution and delivery of this check by Stewart operate as an equitable assignment to Hesket, pro tanto, of the funds which he had on deposit with the Importers’ and Traders’ National Bank, in New York? — if it did, he would have the right to maintain his action and reach this fund in the hands of Stewart’s assignee.

It will be conceded that by an ordinary deed of assignment the assignor conveys and assigns all his property, real and personal, to his assignee for the benefit of his creditors; that is, he conveys all interest that he has in such property; the assignee, therefore, does not take anything more than that owned by the assignor at the time of the assignment; then, if Hesket acquired a right to this fund to the amount named in the check, such right would not be affected by the assignment, and he would be entitled to the payment of his check in full, from this fund in the hands of Stewart’s assignee. It is contended on the part of the plaintiff, that by the giving of this check no interest in this fund then on deposit in the Importers’ & Traders’ National Bank could be acquired by Hesket, until the same was presented to the bank for payment or acceptance ; and that, as the assignment was made before presentation and acceptance, the assignee took the fund free from any lien thereon. We will not undertake to harmonize the conflict of authority upon this question, but will briefly notice the leading cases cited by counsel in support of their respective claims, and determine the rights of the parties as nearly as we can by the weight of authority. That case of Harris v. Clark, 3rd Com. (N. Y.), 98, is cited by the plaintiff, and relied upon, among others, as supporting the position assumed by him. In that case it was held that an unaccepted draft for a specific sum upon a third person, who has in his possession funds of the drawer, does not operate as an assignment or appropriation to the payee of the sum named in the draft, but it was further said in that case, that the instrument in question was not a check on a bank, but an inland bill of exchange; that one of the characteristics which distinguishes a check from a bill of exchange, is that a check is always drawn on a bank or banker, and it is said to operate as a transfer from the time of its presentation or notice to the bank; while a draft is usually drawn at a longer time, and frequently taken upon the general credit of the drawer, and with less certainty of acceptance and payment by the drawee; that there are plausible, if not solid reasons for this distinction, arising out of the course of business, and the mutual understanding among banks and their customers. The customer deposits his money in a bank, with the understanding that he may draw checks in such sums as may suit his convenience ; the bank receives it upon that condition, and undertakes to keep the amount and pay the money accordingly. Checks are treated as cash, and by the course of business they are paid by the banker on whom they are drawn, with the same punctuality and certainty as if the deposit were specifically the money of the customer. Checks are, therefore, practically equivalent to a transfer of so much of the fund deposited. And the judge concludes by saying: But whether a bank check operates in favor of the holder as an assignment of the fund, so as to give him a remedy against the drawee, who refuses to accept or pay, is, perhaps, yet unsettled, and it is not necessary to determine it with a view to the case under consideration.”

The case of Chapman v. White, 6 N. Y., 412, was also a draft, and the preceding case was cited and followed. In the case of Attorney-General v. Continental Life Ins. Co., 71 N. Y., 330, the question was made as to a check, and the facts in this case bear a strong analogy to the case now under consideration, except that the check was not drawn upon a bank. In this case it was held that a check, drawn in the ordinary form, not describing any particular fund or using any words of transfer of the whole or any part of any amount standing to the credit of the drawer, does not operate as an assignment, equitable or otherwise, of funds of the drawer in the hands of the drawee; but upon the examination of this case we find that the judge delivering the opinion cites and quotes fully from the case of Harris v. Clark as sustaining this doctrine, when, as we have shown, the question was not passed upon or decided in that case. In the case of Etna Nat’l Bank v. Fourth Nat’l Bank, 46 N. Y., 83, it was also decided that a draft on a bank is no assignment of the deposit therein to the drawer’s credit, and gives no lien thereon in favor of the holder! In Dickenson v. Coates, decided by the supreme court of Missouri, reported in Cen. Law Journal, Vol. 18, No. 4, it was held that a check drawn in the usual form on a bank against a portion of the deposit therein, does not before its presentation and acceptance operate as an equitable assignment, pro tanto, of the deposit of the drawee, either in law or in equity, and this upon the sole ground that the relation between depositor and banker is that of creditor and debtor, and that a creditor cannot, either in law or equity, assign a part of such debt due him without the debtor’s consent. The cases of Bank of Republic v. Millard, 10 Wall., 152, and First Nat’l Bank v. Whitman, 4th Otto., 343, were both actions brought by the holder against the bank (the drawee), to recover upon refusal to pay a check when presented by the holder. The real question in both of these cases was, however, whether a bona fide holder of the check could maintain such action when funds of the drawer sufficient in amount to pay the check was on deposit. It was held that such action could not be maintained, upon the ground that there was no privity of contract between the holder of the check and the bank. The case of Carr v. Nat’l Security Bank, 107 Mass., was decided upon the same ground, without reference to other cases cited by the plaintiff; we find that in all these cases, with perhaps a single exception, the courts have placed their decision upon the ground of the want of privity of contract, where the action was brought by the holder against the drawee, or that the relation of debtor and creditor was created as between the depositor and depositary, and that the creditor could not change the terms of his contract and require his debtor to pay in the sums and to such persons as he should designate. We are not embarrassed with either of these questions in this case ; this is not a controversy between the holder of the check and the drawee, or bank. But it is a controversy between the assignee of the drawer of the check and the holder, and as we have said, the assignee takes the property of his assignor subject to all the equities existing against it in favor of third parties, and sustains the same relation to the tranaction as Stewart would have sustained if no assignment had been made.

It is averred in the petition that Stewart deposited with the Importers’ & Traders’ National Bank said sum of money under an agreement that said bank would deliver the same to such persons, at such times, and in such sums, as he might order. By the terms of this agreement, the bank was bound to pay out such sums of money, and to such persons, as Stewart would indicate from time to time, as long as the money was there on deposit; if the relation of debtor and creditor, as between him and the bank, was created by the deposit of this fund, the bank was only discharging the obligation imposed upon it by the terms of this agreement to pay the checks that Stewart would draw from time to time upon it, and the promise on the part of the bank would ’ inure to the benefit of the holder of any such checks. The rule is well established in this state in cases of contract, that if one person makes a promise to another for the benefit of a third, the latter may maintain an action upon it, though the consideration did not move from him.

It is hardly necessary to observe that the money, when the check was drawn, belonged of right to Stewart, the depositor, and had he demanded it to himself, the bank had no right to withhold it from him; it was his property. Instead of drawing in his own favor, he drew in favor of Hesket, that is to say, he assigned to him such portion of the deposit as was named in the check. It is not easily perceived upon what principle the justice of Hesket’s claim can be disputed. Where one, in consideration of money to come into his hands, promises to disburse that money as he shall be ordered by him from whom he receives it, he thereby creates a contract negotiable in its very nature, which puts him in privity with whomsoever he may be ordered to make payment to, so that the promise is in effect to that person, and he is bound by such promise to pay him. Jones v. Gibson, 12 Rich. (S. C.), 518.

The well-known custom that prevails as between bankers and depositors, creates an implied promise on the part of the bank to pay out deposits upon presentation of checks of the depositor, in such sums and to such persons as he should indicate by check, and a banker’s check, drawn on another bank in which the drawer has funds on deposit at the tijne with which to pay it, operates as an equitable assignment, pro tanto, of the fund drawn upon, and binds the drawee from the time of presentment to the extent of the funds of tlje drawer then on deposit. Such check in effect sets apart so much of the fund as is named therein to the absolute use of the holder. Mun. et al. v. Burch, 25 Ill., 35; National Bank v. National Bank, 68 Ill., 398; Union National Bank v. Oceana Co. Bank, 80 Ill., 212; Lester & Co. v. Given, 8 Bush. (Ky.), 357; Jones v. Gibson, 12 Rich. (S. C.), 518; Robert’s Assignee v. Austin, 26 Ia., 315.

When an order is given by a debtor to his creditor, directed to a third person having in his hands funds of the debtor in specie or in the way of a debt due, desiring him to pay the creditor out of that fund, it is an equitable assignment of so much of the fund or credit, not only against the party giving the check, but his assignee in bankruptcy or insolvency. Ex parte Alderman, 1 Madd., 39.

A check is an absolute appropriation of so much money in the hands of the banker to the holder of the check, and there it ought to remain until called for. 3 Kent. Com., 104; Byles on Bills, 114.

The distinction between a bill of exchange and a check, although in many respects similar, is that the former is not always or necessarily drawn upon actual funds in the hands of the drawee, but frequently drawn in anticipation of funds, or upon a previously arranged credit. Whereas the latter is drawn upon an existing fund and is an absolute transfer or appropriation to the use and control of the holder of so much money in the hands of the drawee. Morrison v. Bailey et al., 5 O. S., 18; Stewart v. Smith, 17 O. S., 82.

In the case of Davis, Gould, & Co. v. Ellen Adae, 4 Law Bull., 295, it is said that as between the drawer of the check and the holder, the deposit becomes, pro tanto, the property of the holder eo instanti; that it is not a contract like a bill or note, but is universally regarded as money, and its delivery might be said to be a symbolical transfer of so much of the deposit, just as the delivery of a ware-house receipt is for the goods for which it calls. Byles on Bills, 13; 1 Disney, 246.

Richard M. Voorhes, in person, and E. T. Spangler, for plaintiff.

J. Q. Pomerene, and Nicholas & James, for defendant.

Payment by checks has almost entirely superseded, in commercial ci«ties, other modes of payment. They are taken and given in mutual confidence, with the distinct understanding that they not only represent cash, but practically are cash; therefore they pass by delivery through various hands, performing the purpose of as many payments as there are persons who receive them, or transactions in which they are used, and when by the usages of trade they are thus regarded, the liabilities of all the parties should be clearly defined, as well as strictly enforced. In this case the payee had the right to suppose that the drawer had that amount in the hands of the drawee, which he in fact did have, and on the strength of this he accepted the check in good faith in the due course of business, and for a valuable consideration, and as between these parties it was the intention that it should operate as an assignment of the fund in the drawee’s hands. The drawer set apart from this fund, for the use of the payee** the amount of the check at the time he delivered it to him, and as between him and the payee it became absolutely his, and the assignment of Stewart, before presentation and acceptance of the check, could not divest him of his right to so much of the fund as the check called for, and to hold otherwise would not only be inequitable, but would be contrary to what we think to be the weight of authority.

The judgment of the court of common pleas is therefore affirmed.

Follett and Jenner, J.J., concurred.


author: Smith, J.

text:
    (First Circuit — Hamilton Co., O., Circuit Court
    Febr. Term, 1885.
    Before Judges Cox, Smith and Swing.
    Jas. Hughes v. Pat’k Lehan.

      Practice — The court, where plaintiff makes a prima facie case, and the defendant offers evidence in answer thereto, has no authority to direct the jury to find a verdict for the defendant.
    Error to the Superior Court of Cincinnati.
   Smith, J.

Hughes brought an action in the superior court against Lehan, to recover the possession of certain real estate, and damages for its unlawful detention. The answer of Lehan denied all the material allegations of the petition, and set up two special defenses. 1st: That he was the owner of the premises by virtue of a purchase of the same at a tax sale, and of a deed made in pursuance thereof by the auditor of Hamilton county to the grantor of defendant, and, 2nd: That after said purchase and deed he had prosecuted in the said superior court an action against Hughes to recover the possession of said premises, and had obtained a judgment of the court in his favor, which was still in force. The plaintiff, by his reply, denied the new matter of the answer.

At the trial of the case it was admitted, that at the time of his death, in 1859, one Thomas Hughes owned the premises in controversy, in fee-simple, and that, by his last will and testament, which was duly admitted to probate, in this county, he devised the same to the plaintiff. And proof having further been offered as to damages, the plaintiff rested.

The defendant then offered in evidence what purported to be a tax deed from the auditor of Hamilton county to the defendant (or his grantor), for some real estate in said county, but the description thereof was wholly different from that of the premises described in the petition.

The plaintiff objected to its introduction in evidence. No proof was offered as to the execution of the paper, or tending to show that the land described therein was the same described in the petition. ' The court overruled the objection, and admitted the paper in evidence, to which plaintiff excepted.

The defendant, also, according to the statement of the bill of exceptions, offered in evidence “ a copy of the record of the superior court in a certain case (naming it), a copy of which is attached to the bill, marked,” etc. The plaintiff also objected to the reception of this evidence, but the court admitted it, and exception was taken. The papers alluded to as made part of the bill of exceptions, seem to be the original, or a copy of the petition filed in the superior court, by Lehan against Hughes — a summons issued thereon, and what appears to be an entry of the court of common pleas of this county, showing a judgment by default against Hughes for the recovery of the property described in the petition. There was no certificate attached to it, by the clerk or other person, showing that it was a transcript of the record of a case, in either court, or that the papers were the original files, nor was there any proof offered tending to show that such was the case. The defendant having offered other testimony, not necessary to be mentioned, rested, and the evidence being closed, he then moved the court to direct the jury to return a verdict for the defendant, which the court did, and a judgment was entered on the verdict rendered in pursuance of such instruction, to which action of the court the plaintiff excepted and prosecutes this petition in error to reverse the judgment, and assigns for error the above named rulings of the court.

Held: 1. That what purported to be the original deed of the auditor, did not prove itself, and was not admissible in evidence without proof as to its execution. And not appearing to convey any part of the premises in controversy, it should not have been received without evidence tending to show that it had some connection with the land in question. Nor was the alleged record, offered in evidence, admissible, there being no proof tending to show that it was a copy of a record, or that the papers themselves were the original files of the case, or that what purported to be a journal entry of the court, was such.

2. Prior to the passage of the act of April 12, 1858 (2 S. & C., 1158), the supreme court, in Byrd v. Blessing, 11 O. S., 364, held: That under the provisions of the code, as it then stood, it was error in the court, after evidence had been given to the jury by the plaintiff, tending to maintain the issue on his part, to enter a judgment of non suit and discharge the jury from a finding in the case.

J. W. Fitzgerald & Son, for plaintiff in error.

W. A. Goodman, for defendant in error.

But under the law, of 1858, and under sec. 5301, which is a substantial re-enactment of sec. 4 of that act, the court held, in Stockstill v. D. & M. R. R. Co., 24 O. S., 83, and in Dick v. Railroad Co., 38 O. S., 389, that “ the court is authorized, in a proper case, to arrest the testimony from the jury, and render judgment for the defendant. * ' * * But if the evidence tends to prove all the facts which it is incumbent on the plaintiff to establish, in order to maintain his action, he has a right to have the weight and sufficiency of the evidence passed upon by the jury.”

Sec. 5301 allows a bill of exceptions to be taken, “to the opinion of the court on a motion to direct a non suit, or to arrest the testimony from the jury.” But in our opinion this section does not authorize a court in a case, when the plaintiff by his evidence shows a prima facie right to recover, but in which the defendant afterwards introduces evidence, which in the judgment of the trial'court, meets and disproves the •case made by the plaintiff, or shows some other substantive defense, to direct the jury to find for the defendant. This is not a ruling “ on a motion for a non suit, or to arrest the testimony” (of the plaintiff doubtless), “from the jury,” and is not therefore authorized, expressly or by implication, by this section.

We think the law on this point is the same now that it was in 1850, when the case of Newman v. The City of Cincinnati was decided (18 Ohio, 323). In that case, in which, as far as this question is concerned, the facts were almost indentical with those of the case at bar, the court held: “ That it is error to charge the jury, in general terms, that the plaintiff has no cause of action, and that they must find for the defendant; especially where evidence has been exhibited by both parties; and for such error the judgment must be reversed, although the reviewing court may be satisfied upon the facts exhibited, that the defendant, in fact, was entitled to a verdict.”

For these reasons, we are of the opinion the judgment should be reversed, and the cause remanded for a new trial'.


text:
    (First Circuit — Hamilton Co., O., Circuit Court
    Febr. Term, 1885.)
    Before Judges Cox, Smith and Swing.
    Ann E. Purcell v. The Village of Riverside.
    An ordinance by a village council, authorizing the condemnation of land, for the purpose of having the county commissioners build an avenue thereon, under a special law granting authority to them to do so, is valid, though not read on three different days, the rule requiring this to be done having been properly suspended. Such ordinance is not in contravention of sec. 6, art. 8, or of sec. 1, art. 13 of the constitution.
   Smith, J.

The ruling made at the trial of this case, as to the admission of evidence, left but two questions to be now disposed of, viz: 1st, whether the ordinance under which the action in question is sought to be had, was legally passed, and 2nd, if so, whether it is invalid, as being in contravention of the provisions of the constitution, as contained in section 6, article 8, or in section 1, article 13.

It is objected by the counsel for the plaintiff that the ordinance, which authorized the solicitor of the village to apply to the court for the condemnation of the right-of-way for the avenue in question, was not legally passed, for the reason that it was not read on three different days, or that the rule, which requires this, was not dispensed with, as provided for in sec. 1694, R. S.

The record offered in evidence shows that the ordinance was introduced and read the first time, and by vote referred to the clerk of the village, for his certificate as to whether there was sufficient money in the treasury to pay the .condemnation money — and such certificate having been furnished, showing that there was, that it was accepted and approved by the council; and by an unanimous vote of the five members of council present (one member being absent), and taken by yeas and rays, the rule was suspended, and the ordinance then read the second and third time, and passed by the same vote.

This, v^r. think, was clearly a substantial compliance with the terms if the statute. It was the rule which required the ordinance to be read-on three different days which the counoil suspended, and when that was done, it was properly before the council for final action, and was legally passed.

It is further urged, however, by the counsel for the plaintiff, that the scheme, of which the ordinance and the action therein provided for, are but the first steps, is one in contravention of the sections' of the constitution before mentioned. —That it is, in effect, an attempt on the part of the defendant to enter into,jand carry out, with the funds of the village, an arrangement or plan, by which the village of Riverside and the county of Hamilton, are jointly to lay out, establish and construct an avenue within said village — the village to condemn and pay for the right-of-way so far as it had to be done, and the county to build the road thereon, under the law of April 7, 1880, and that this is contrary to sec. 6, art. 8, of the constitution, which provides that, “The General Assembly shall never authorize any county, city, town or township, by vote of its citizens or otherwise, to become a stockholder in any joint stock company, corporation or association whatever, or to raise money for, or loan its credit to, or in aid of any such company, corporation or association.”

Counsel for defendant, while they deny that this claim is well founded, insist that the question is not properly before the court — that it is not made by the pleadings, and that the proper parties to a determination of it are ,not before the court.

It may be that the question is not very distinctly made by the pleadings, yet we are of the opinion that if it should appear from the evidence to be so, and that if carried out would be in violation of this or any constitutional provision, the court might well require it to stop.

We think that an inspection of the ordinance shows that it does contemplate the construction of this ayenue, substantially as claimed by plaintiff. It recites the -statute of April 17, 1880, authorizing and directing the ccyjnmissioners of Hamilton county to levy a tax to be expended in opening, grading and constructing this avenue, no part of the amount to be expended in procuring the right-of-way,> in payment of damages in the construction of the same. •> h nd the ordinance states in terms, that the object of the statute was to aid the village in its construction — it plainly appears then, that the condemnation proceedings set on foot by the ordinance, are to procure the right-of-way for this avenue, which is to be constructed by the county.

But conceding this to be true, does it follow that if carried out it would be in conflict with this section ?

The supreme court in several cases has given a construction to this section. In Walker v. City of Cincinnati, 21 O. S., 54, Judge Scott, in deciding the case says: “The mischief which this section interdicts, is a business-partnership between a municipality or subdivision of the state, and individuals or private corporations or associations — -it forbids the union of public and private capital or credit in any enterprise whatever^ — in no project originated by individuals, whether associated or otherwise with a view to gain, are the municipal bodies named, permitted to participate in such manner as to incur pecuniary expense or liability,”

And in Wyscarver v. Atkinson, 37 O. S., 80, it is held, “ this section inhibits the combination in any form of the public funds, or credit of any county, city, town or township, with the capital of any other person or persons, corporated or incorporated, for the purpose of promoting any private enterprise whatever.”

And in Taylor v. Com’rs of Ross Co., 23 O. S., 22, the court held: “ That what the general assembly is prohibited by this section from doing directly, it has no power to do indirectly —and that when public credit or money is furnished by any of the subdivisions of the state named, to be used in part construction of a work, which, under the statute authorizing the construction, must be completed, if completed at all, by other parties out of their own means, who are to own, or have the beneficial control and management of the work when completed, the public money or credit thus used can only be regarded as furnished for and in aid of such parties.”

In the light of these adjudications, does this case come within the provisions of this section ? We think it does not.

The object sought to be accomplished, both by the statute and the ordinance in question, is not a private one — it is eminently of a public nature, to-wit, the construction of a public highway, open and free to all; and which can not be held or operated for private gain.

Judge D. Thew Wright and Paxton & Warrington, attorneys for plaintiff.

Wm. Disney and Lawrence Maxwell, for defendant.

It is true that when completed it will, by force of another general statute, be under the control of the village — but so far as the county or the public is concerned, this is a matter of no moment. In such case it is simply under the control of a different public corporation — a part of the machinery of the state for the construction, repair and maintenance of the public highways. It seems to be clear, from the decisions referred to, that the contribution of funds by such a municipality is forbidden only when the purpose is a private one, — and we see no reason why a county and village, or township, might not unite in making a public improvement free to the citizens of each, if the object is one within the scope of their powers. Ever since the adoption of the constitution of 1851, we have had a statute which gave to county commissioners, in laying out county roads, the right to require the petitioners for it to pay for the right-of-way and damages — and if this can be done when the commissioners retain the control of the road, we are unable to see that the fact that it is constructed by another public corporation, and for the public interest, would change the principle.

If the donation by the village, or by the county, was for a private enterprise, and to be used for gain, of course it would be different, and it would thus be brought directly within the terms of this section.

Neither do we think it contrary to the provisions of sec. 1, article 18. Even if the county was a corporation in the meaning of this section, we aré unable to see any grant of corporate authority to it by this statute.

The judgment will be that the injunction heretofore granted be vacated, and the petition, dismissed with costs.

Swing, J., concurred; Judge Cox did not sit in this case.


text:
    (First Circuit — Hamilton Co., O., Circuit Court
    Febr. Term, 1885.)
    Before Judges Cox, Smith and Swing.
    Chas. C. Murdock, Trustee, etc., v. McNeely et al.
    Pratice — Waiver of right to object to professional statement of counsel— Parties to a suit not incompetent to testify- as witnesses, even when the adverse party is a trustee of a deceased person — Objection to a competent witness before he testifies at all, premature — The whole evidence must be embodied in the bill of exceptions — “ Statement ” of the contents of a deposition destroyed by court-house fire sufficient — Insufficiency of reference in a bill of exceptions to the decision of a court and an agreed statement of facts, neither of which is attached thereto or otherwise referred to.
    Error to the Superior Court of Cincinnati.
   Smith, J.

The action below was brought by the McNeelys against Murdock, as trustee under the will of Stephen Clark, deceased, to set aside a deed made by them to Clark, in his lifetime, on the ground that it had been improperly and fraudulently obtained from them. In the superior court the decree was in favor of the plaintiff as to a part of the land described in the deed, and his petition in error was filed to obtain the reversal of that judgment. Among other rulings made by the circuit court were the following:

1. The bill of exceptions showed, that at the trial of the case the plaintiffs offered in evidence the desposition of Judge O’Connor, of Cincinnati. The defendant objected to its introduction, on the ground that he was a resident of Hamilton county, but as stated in the bill, “ it appearing to the court, from the professional statement of council for plaintiff, that the witness was sick and unable to appear in court and testify, the objection was overruled, and the defendant excepted.”

Under the statute, when objection was made to the deposition on the ground stated, it was incumbent on the plaintiff, by proper proof, to show either that the witness did not reside in the county, or was absent therefrom, or from infirmity or other reason stated in section 5263, revised statutes, he was unable to attend court. By section 5261, the testimony of witnesses may be taken by affidavit, — by deposition and ¡by oral examination. We are aware that in most of our courts it is usual, in matters addressed to the discretion of the court, to have the professional statement, of counsel, and act upon it as if given under the sanction of an oath, and this with the general concurrence of the members of the bar. But if this mode of proof, in a case of the character under consideration, was objected to, we think the facts requisite to be shown were not legally to be proved in that way. But the objection of the defendant should have been made to the manner in which it was sought to be shown, that the court might be advised as to the real nature of the objection. But this was not done in this case — the only objection being to the decision itself, which was clearly right if the fact found was properly established; and we think that the defendant, not then objecting to the statement of counsel, waived his right now to object to it. See Elliott and Wife v. Plattor, 43 O. S., — , 13 Weekly Law Bulletin 625; decided April 21, 1885.

2. Several of the plaintiffs offered themselves as witnesses on the trial of the case, and the defendant objected to each of them testifying, and the mode of objection in each case is the same. In the case of one it is stated thus: “The plaintiff then offered as a witness Samuel McNeely, one of the plaintiffs ; whereupon the defendant objected, which objection the court overruled and defendant excepted.” The witness thereupon testified, but no further objection was made to any evidence given by him.

Parties to a suit are not incompetent to testify as witnesses, even when the adverse party, as in this case, is the trustee of a deceased person. The statute, sec. 5245, provides, that they shall not testify except in certain cases, and as to certain matters. An objection, therefore, interposed toa competent witness, before he testifies at all, is premature, and is properly overruled by the court. The party desiring to object must wait and see what it is proposed the witness shall say, and if it is not allowable for him to testify as to such matters, the objection can then properly be made. But in a case like the one at bar, as we understand it, the section referred to, in effect, provides, that parties to the action stand on the same footing as other witnesses. It states expressly that the provisions of the section shall not apply to actions or proceedings involving the validity of a .deed or will, and such we think is this case. This construction was put upon this statute by the district court of Oreen county, some years ago, and exception having been taken to the ruling, the supreme court either refused leave to file a petition in error, or affirmed the judgment without reporting the case fully.

3. The principal question argued in the case was, whether the judgment of the superior court was against the weight of the evidence — but the claim is made by the counsel for the defendant in error that the court cannot consider that assignment, for the reason that it does not appear from the bill of exceptions that the reviewing court has before it all of the evi-.. dence which was before the trial court.

The rule on this point is clearly settled in Ohio, viz.: that it must be expressly certified in the bill of exceptions itself, or appear therefrom by necessary implication, that it contains all of the evidence given upon the trial; and that this is indispensably necessary, to enable the reviewing court to determine whether the court below did or did not err in overruling a motion for a new trial, for the alleged reason that the verdict or finding is against the weight of the evidence. 12 O. S., 103.

Or, as stated in another case, the whole evidence must be embodied in¿the bill of exceptions, or in some manner so made part of it, that there can be no doubt that the reviewing court has precisely the same evidence before it which was before the trial court. 19 O., 426. The substance of the evidence is not sufficient. 30 O. S., 106. And it has been held in 33 O. S., 77, that although the bill of exceptions states that it contains all the evidence offered on the trial, yet if on examination it shows that material evidence or documents referred to are omitted, the reviewing court cannot reverse the judgment on the ground that the verdict is against the evidence.

In the bill of exceptions in this case, in several places, it is stated, that the deposition of a witness was offered and read in evidence, and “ the said deposition having been destroyed in the court-house fire after the case was heard, but before it was decided, a statement of the contents is hereto attached marked,” etc. This we think may be held sufficient. Webster gives the meaning of the word statement as follows: “A formal embodiment, in language, of facts or opinions: a narrative or recital.” The bill states that the original deposition being destroyed, that a narrative, or recital of what it contained, is attached — this is nearly equivalent to saying that a copy is given.

The bill further states that the plaintiff offered in evidence the records of sundry cases in the superior and common pleas courts — there is no statement of the purpose for which they were offered, or of the contents of such records, or what they proved or even tended to prove. Then follows this statement: “All the above records were destroyed in the court-house fire— a statement of said cases is hereto attached, marked B, being the only thing obtainable.” This exhibit B is what looks like the ordinary entries of a case upon'the appearance docket. Again, the bill states, that “ the plaintiff offered in evidence the decision of the supreme court of Ohio, in the case of Gibson v. McNeely, in Vol. 11, O. S. Reports, page 118, and it was agreed that Samuel Still was the source of title, and that the agreed statement of facts set out in said decision showed the nature of the title of the McNeelys and Mrs. Gibson prior to the partition afterwards made between them.” (The state of the title of these parties was one of the issues made in the case.) But the decision referred to, and the agreed statements of facts mentioned, are not in any way made a part of the bill, or attached thereto, or otherwise referred to.

What a reviewing court could or ought to do in a case where it was manifest that the evidence submitted in the trial court, or some material part thereof, had without the fault of the plaintiff in error been destroyed, so that it was not possible to get it into the bill of exceptions, it is not necessary that we should decide in this case. We are of the opinion that while it might be a great misfortune and prejudice to the person desiring to have the judgment reviewed, yet that the rule is one which is obligatory upon the court, and in a proceeding of this kind could not be waived or corrected by the court. That it is an accident, which cannot be cured, and is like a case where a party before a trial, by some mischance, is deprived of evidence absolutely essential to a proper adjudication of his case.

Perry & Jenney and A. P. Diserens, for plaintiff in error.

Jndge Worthington and Mr. Marsh, for defendant in error.

But in this case there was evidence offered, to-wit, the decision and agreed statement of facts before mentioned, which was still in existence, or which could readily have been made part of the bill of exceptions; but this was not done, the reference to them having no such effect.

Again, the bill of exceptions does not state in terms as it should, that it contains all the evidence heard on the trial. There is such a statement at one point in the bill, when the court made a ruling as to the rights of parties, but gave leave to them to offer further evidence as to the state of the account between them. This was done, as appears from the bill; but after this there was no statement that this was all of the evidence offered. For these reasons we are of the opinion that we are not at liberty to look to this bill of exceptions to determine whether the court below ought to have granted a new trial, on the ground that the finding was against the weight of the evidence, and the judgment of the superior court will be affirmed.


author: Cox, J.

text:
    (First Circuit — Hamilton Co., O., Circuit Court
    Febr. Term, 1885.)
    Before Judges Cox, Smith and Swing.
    Henry Voss et al. v. H. T. Loomis, Trustee, et al.

      Probate Court — Jurisdiction—Action on Bond of Trustee or Assignee.

    Error to the Superior Court of Cincinnati.
   Cox, J.

1. The probate court has jurisdiction to compel an assignee or trustee to account for money and property in his hands for distribution, and for failure to do so, an action on his bond may be brought when there is an order of that court fixing his liability and ordering the money to be paid, or on failure of the assignee to file and settle his account, or deliyer to his successor all property and effects belonging to the trustee.

2. Under Sec. 6341, R. S., providing that the successor of a trustee or assignee failing to deliver over to the successor trust property, may proceed against such trustee or assignee by action in the “ common pleas or otherwise,” the successor may bring his action in the superior court.

Jordan, Jordan & Williams, for plaintiffs in error.

Storer <& Harrison, for defendants in error.

3. In an action on such bond, a joint suit against all the obligors is the only remedy, and it is error for the court to render a several judgment against one or more, leaving the action to proceed against the others. (23 O. S. 243; 27 O. S., 674). Reversed.


author: Swing, J.

text:
    (First Circuit — Hamilton Co., O., Circuit Court
    Febr. Term, 1885.)
    Befobe Judges Cox, Smith and Swing.
    Jennie Johns v. The City of Cincinnati.

      City not liable for Negligence of Board of Improvements acting as Agents of the State.

    Error to the Superior Court of Cincinnati.

      A. Q. Collins, for plaintiff in error.

      City Solicitors, for defendant in error.
   Swing, J.

In an action for damages to plaintiff’s premises by overflow of water, caused by the alleged negligence of the city failing to keep Columbia avenue in said city in repair, the answer set out that said avenue was being constructed under certain acts of the legislature; that said city had no control over said avenue, but the same had been wholly under the control of the state and its authorized agents, the board of city improvements. The jury found for the city. Held, there was no error in the action of the court in permitting the several acts passed by the legislature in relation to the avenue to go to the jury; that the several acts were not unconstitutional. While the city should not respond in damages for the act of the state and her agents, if said improvement had been completed, and the city had accepted and used it as a street, no formal turning over by the state, or acceptance by the city, would be necessary to render the city liable if the city took possession. These matters being questions for the jury, and the jury having found for the city, the verdict will not be disturbed. Affirmed.