author: PARKER, J.

text:
    CONTRACTS.
    [Lucas (6th) Circuit Court,
    October 19, 1901.]
    Haynes, Parker and Hull, JJ.
    Thomas Van Tuyl v. Homer J. Young et al.
    1. Policy is to Give Effect to Provision for Damages.
    The policy of courts where the measure of damages is provided for in the contract, and where they are liquidated, and the sum to be paid is not in the nature of a penalty, but is as compensation agreed upon between the parties, is to uphold and enforce such provisions.
    2. Rule Applied as to Measure of Damages.
    Under a contract, giving the exclusive right to manufacture and sell a certain patented bicycle handle bar, and pay a royalty of ten cents each upon the first 10,000 and a lesser rate upon the excess thereof, in which the second party agreed to manufacture and sell not less than 10,000 before September 1, 1899, and 10,000 each succeeding year thereafter or during the life of the contract after such date, or cancel the contract, and further agrees to manufacture the first 1,000 before February 1, 1899, or cancel the contract, but in any event to pay the royalty thereon whether manufactured or not, if the same is not cancelled before February 1, 1898, the provision as to manufacturing and selling 10,000 handle bars is in full force and effect, and the measure of damages is the royalty upon the minimum production provided for in the contract, regardless of whether any bars were made and sold or not.
    3. Failure to Comply Does not Work Rescission.
    The failure to comply with the provision in the above contract relating to the manufacture of the 1,000 handle bars before February 1, 1899, gives the patentee, not the party in default, the option of rescinding the contract. The failure to perform on the part of the latter does not operate ipso facto to work cancellation and render the contract inoperative, but requires some positive act on his part, amounting to an absolute rescission, if not a tender of the amount, due in any event on the date mentioned.
    Heard on Error.
    C. E. Longwell, for plaintiff.
    B. F. Brough, Doyle & Lewis, and C. A. Seiders, for defendant in error.
   PARKER, J.

In the court below the parties stood as they do here, Van Tuyl being plaintiff and Young and another being defendants. The action was brought upon a written contract and bond. The contract is not very long, and I will read it:

“ This contract made and entered into this 16th day of September, 1898; by and between Thomas Van Tuyl, of Nicholas, Iowa, party of the first part, and H. J. Young, of Toledo, Ohio, party of the second part, witnesseth:
“ That whereas the said H. J. Young is about to conduct an enterprise for the manufacture and sale of a certain patented bicycle handle bar, which patent was issued to the said Thomas Van Tuyl under date of May 10, 1898, and under the title of the “ Van Tuyl Double Adjustable Bicycle Handle Bar,” whereby the said Thomas Van Tuyl (patentee) is to receive as such patentee a royalty on each and every Van Tuyl adjustable bicycle handle bar so manufactured and sold by H. J. Young, his successor or assigns, as hereinafter set out.
“ The said Thomas Van Tuyl hereby awards to said H. J. Young, his successor or assigns, the sole and exclusive right to manufacture and sell the aforesaid patented handle bar, protected by letters patent to said Thomas Van Tuyl from the U. S. Patent Office granted May 10, 1898, and numbered 608,671, and all patented improvements on the said handle bar which the said Van Tuyl may hereafter invent or acquire for and in consideration of a royalty for the manufacture and sale of said handle bar as herein set out.
“ The said H. J. Young, his successors, legal representatives or assigns, agrees in consideration for the sole and exclusive right and privilege to so manufacture and vend the said handle bar as above set out and described, to pay or cause to be paid the said Thomas Van Tuyl, his legal representatives or assigns, a royalty of ten cents on each and every handle bar for the first 10,000 so manufactured and sold; and a royalty of five cents thereafter on each and every handle bar in excess of 20,000 so manufactured and sold by the said H. J. Young, his successors and assigns. Said royalty to be due and payable on the first day of each and every month for all handle bars manufactured and sold the previous month.”

(It seems to us that the word “ twenty ” there is probably inserted through mistake; the word “ ten ” must have been intended. We could not otherwise reconcile the terms of the contract. However, it is not very material to the question we have submitted to us.)

“ The said H. J. Young, for himself, successors or assigns, further agrees hereby to manufacture and sell not less than 10,000 of aforesaid handle bars on or before the 1st day of September, 1899, and to manufacture and sell not less than 10,000 each succeeding year thereafter, or so long as said H. J. Young shall continue to so manufacture and sell said handle bars after the 1st day of September, 1899, or surrender and cancel this contract.

“ The said Young, his legal representatives or assigns, hereby further agree to manufacture the first 1,000 handle bars before the 1st day of February, 1899, or cancel this contract, and whether manufactured or not to be liable to said Van Tuyl, his legal representatives or assigns for the royalty of ten cents each upon said 1,000 handle bars.

“ Said H. J. Young for the faithful performance of the above and foregoing conditions to be by him kept and performed, hereby further agrees to execute and deliver to the said Thomas Van Tuyl his good and sufficient bond in the sum of $1,000, signed by at least one resident freehold security, and approved by said Thomas Van Tuyl, which bond shall be holden until the 1st day of September, 1899. That each year thereafter from the date last above mentioned the said H. J. Young shall execute and deliver a like bond in the sum of $500, so long as he or his successors shall manufacture and sell said handle bar.

“ It is further agreed by the said H. J. Young that should he desire to continue to so manufacture and sell said handle bars after the said 1st day of September, 1899, he shall give notice to the said patentee at least thirty days prior to the 1st day of September, 1899, and a like notice each year thereafter, so long as the said H. J. Young shall continue in said manufacture and sale of said handle bars.

“ It is further agreed by and between all parties hereto that the said Thomas Van Tuyl shall at all times have free and undisputed access to the books of said H. J. Young, his successor or assigns, for the sole and only purpose of ascertaining the number of said handle bars so manufactured and sold.

“ It is further understood and agreed that this contract shall be binding and in effect from and after the 16th day of September, 1898, on which date, said H. J. Young shall sign this contract and furnish to said Van Tuyl a bond (which bond is hereby made a part hereof in conformation with the above and foregoing conditions in the sum of $1,000 for the faithful performance of the. same).

“ This contract to bain duplicate and when properly signed and bond furnished, each party to have a copy of the contract and the same to be in full force and effect thereafter.

“ Signed in duplicate this 16th day of September, 1898. (Signed by the parties, and witnessed, and acknowledged before a notary public.)”

And the bond reads:

“ Know all men by these presents, that we, H. J. Young, as principal, and E. D. Hubbell, as surety, of the county of Tucas and state of Ohio, are held and firmly bound unto Thomas Van Tuyl in the penal sum of $1,000, for the payment of which and truly to be made we bind ourselves, our heirs, executors, administrators and assigns firmly by these presents.
“ Sealed with our seal and dated this 16th day of September, 1898.
“ The condition of the above obligation is such, that whereas, the above bound H. J. Young, of Toledo, Ohio, on the 16th day of September, 1898, entered into a contract with Thomas Van Tuyl, of Nicholas, Iowa, for the sole and exclusive right to manufacture and sell a certain patent handle bar known as the Van Tuyl Double Adjustable Bicycle Handle Bar, and protected by letters patent number 603,671 of the patent office of the TJ. S., and paying the said Van Tuyl a royalty on each and every handle bar manufactured and sold under said patent a certain specified royalty.
“Now, therefore, if the said H. J. Young shall do and perform all the stipulations and conditions of said contract to be by him kept and performed, then this obligation shall be null and void; otherwise to be and remain in full force and effect in law.
“Witness our hands and seals this 16th day of September, 1898.” It is duly executed.

In the court of common pleas the plaintiff recovered a judgment for $100, with interest from February 1, 1899. The prayer of the petition was for judgment for $1,000 and interest.

The plaintiff contended that the measure of damages for the default alleged was fixed by the contract at ten cents each upon 10,000 handle bars that should have been manufactured during the year, and that the damages, therefore, to which he was entitled amounted to $1,000. He filed a motion for a new trial upon the ground that the verdict was against the law and the evidence, i. e., that the award of damages was too small.

It appears from the bill of exceptions that the defendant Young did not enter upon the manufacture of these handle bars at all. He never manufactured any of them. Sometime in the fall of 1898 he began to correspond with the plaintiff with a view of effecting a rescission of the contract, but the terms of his proposal were not accepted by the plaintiff.

It is set forth in the bill of exceptions that “ It is admitted by the plaintiff and the defendants that no handle bars were manufactured or sold by the defendants Homer J. Young or Fdward P. Hubbell in pursuance of the contract hereto attached, marked plaintiffs exhibits Nos. 1 and 2, and that no royalty was paid by the defendants to the plaintiff.”

There was no averment or evidence that the plaintiff had manufactured or sold any handle bars, or that anyone else for him had done so, during the year. The plaintiff did not introduce any evidence of any damages that he had suffered by reason of the failure of the defendants to manufacture and vend the handle bar, relying upon the terms of the contract as providing not only the measure of damages, but as liquidating the damages, stating the amount definitely, that is to say, the minimum amount, that he would be entitled to recover.

A jury was waived in the court below, and the case was submitted to the judge, and it is evident from the amount of his award of damages, that he did not sustain the contention of the plaintiff in error, but that he regarded the provision in the contract that “ The said Young, his legal representatives or assigns, hereby further agrees to manufacture the first 1,000 handle bars before February 1, 1899, or cancel this contract, and whether manufactured or not to be liable to said VanTuyl, his legal representatives or assigns, for the royalty of ten cents each upon said 1,000 handle bars,” as being the only provision which fixed the measure of damages in the event that the handle bars were not manufactured and sold, and as being the only provision for liquidated damages.

The question presented, it will be observed, turns entirely upon the construction to be placed upon this contract. We are unable to agree with the conclusions of the learned judge of the court below. We are of the opinion, looking at the whole contract, and reading it in the light of the purposes to be served by it, that the proper construction to be put upon it is, that if Young held onto the privileges thereby conferred upon him beyond February 1, 1899; that is to say, if he did not cancel and surrender the contract before that time, he would be bound to manufacture and sell and pay royalty upon 10,000 handle bars, or if he did not manufacture and sell them, nevertheless to pay a royalty for the year upon the 10,000 handle bars that he agreed to manufacture and sell during the year. If he manufactured and sold 10,000 handle bars, he would be required to pay the royalty of ten cents each thereon; if he manufactured and sold more than 10,000, he would be required to pay a royalty of ten cents each upon the 10,000, and a royalty of five cents each upon any in excess of 10,000, assuming that the word “ twenty ’’ to which I referred, was inserted by mistake, and that it should read “ten.” We believe this is the true construction of the provision on the subject of royalties, in the light of other provisions of the contract, especially in the light of the provisions respecting the bond required.

It is apparent that if a distinct measure of damages had not been provided in the event of a failure to perform, by the manufacture and sale of handle bars, it would be difficult, if not impossible, to arrive at a true and just measure of damages. It is also apparent that it would be important to the patentee, who conferred this exclusive right upon the manufacturer, that the handle bars should not only be manufactured and put upon the market, but that such number should be manufactured and put upon the market as would bring to him some reasonable return, in consideration of his having surrendered to the manufacturer the exclusive right to manufacture and vend for the period stated. It is apparent too, from the correspondence itself that it would not have been feasible for the patentee to accept a surrender of this contract after the first day of February of any year, and then undertake to enter into a new arrangement, either for the manufacture and vending of the article himself, or with another manufacturer to do so, because the season after that would be so far advanced that it would be impracticable to place the handle bars upon the market during the season. And it seems to us> looking over the whole .contract, that this contingency is provided for in the clause which I have just read. That seems to us to be a definite provision that the right of cancellation which is given to the manufacturer is limited, for the initial year, at least, to Februarj'- 1, 1899. And we think that it should be and is the policy of the courts, where the measure of damages is provided for in the contract, where the damages are liquidated, where the sum to be paid is not in the nature of a penalty but in the nature of a compensation agreed upon between the parties, to uphold and enforce provisions of that character.

In the clause immediately preceding that which I have just read the matter of surrender and cancellation is mentioned, but in our judgment the cancellation there provided for has reference to other provisions of the contract for years subsequent to September 1, 1899; that is to say, if the defendant should not desire to manufacture during any succeeding year, and failed to renew the contract by giving the notice and bond provided for other years, that then he should surrender and cancel the contract. This does not say that the failure to give such notice and bond would necessarily operate as a cancellation of the contract. The contract by its terms is adequate for future years. It provides for other years succeeding September, 1899. And the patentee. Mr. VanTuyl, might have waived the notice provided for in the contract, and might even have waived the bond provided for in the contract, and if the defendant had gone ahead and manufactured, VanTuyl would have had a right, notwithstanding the failure to give notice and bond to consider and hold him as manufacturing under and in pursuance of this contract, and to require him to pay the royalty provided for by the contract. It would not be within the power of the defendant to effect a cancellation or abrogation of this contract simply by failing to perform certain conditions of the contract imposed upon him.

It was contended in argument that since Young had failed to manufacture any handle bars, he had forfeited his rights under the contract; that the contract had ipso facto become inoperative; that it had been annulled with respect to all its provisions excepting those as to the manufacture of 1,000 handle bars up to February 1, 1899. A right of cancellation was given to Mr. Young, but cancellation requires some positive act. A failure to perform the contract on the part of Young would not ipso facto operate to work cancellation. It might give to the patentee, Mr. Fan Tuyl, not in default, a right to rescind and annul the contract; but that option would be in Mr. Van Tuyl and not in the party % default. In this respect the principle of forfeiture is similar and applicable ; and upon that head I read from a case that was cited in argument — Woodland Oil Co. v. Crawford, 55 Ohio St. 161 [44 N. E. Rep. 1093; 34 L. R. A. 62], I read from the opinion by Judge Burket: “This case arose upon an oil lease which contained a provision that—

“ ‘A failure on the part of U to complete such well or wells as above specified, or instead thereof, to pay the rental as above provided, shall render this lease and agreement null and void, together with all rights and claims, and not binding on either party, and not to be revived without the consent of both parties hereto, in writing.’

The lessee having failed to perform, either by the driving of the well or by paying rental, when he was called upon to respond in damages, answered that by the terms of the lease, his failure to perform had brogated the agreement. Judge Burket very tersely and emphatically disapproves of that proposition:

I read from pages 176 and 177:

The principle contention in this case arises upon that part of the lease which provides that a test well should be drilled within one year, and in default, payment of- a yearly rental of $128 for further delay, and a further provision that a failure to drill the test well, or pay the rental, should render the lease null and void, and not binding on either party, and not to be revived without the consent, in writing, of both parties.
“ It was this provision that was relied upon in the demurrer to the amended petition, and in the third general defense in the answer of the oil company.
“ Reduced to its essence, this is a promise in writing upon sufficient consideration, to pay a yearly rental of $128 for the right to use, to a limited extent, certain premises, with a further provision in the same instrument, that a failure to pay should discharge the debt; that a default of payment should be the equivalent of payment; that failure should be performance; that non-payment should be payment.
“ Such contradictions in like instruments have caused the courts to look critically into such instruments to ascertain the real intention of the parties because such contracts cannot be enforced according to their letter. A promise to pay cannot be fulfilled by a failure to pay. A promise to drill a well cannot be satisfied by a failure to drill such well. The proper construction to be placed upon such an agreement is, that upon failure of the lessee to drill a well, or pay the rental, or both, as the case may be, the lessor may elect to put an end to the lease, and enforce payment of the promised rental, or sue for damages for failure to drill the well, or he may elect to have the lease continue in force to the end of the term, and enforce the drilling of wells, and the payment of rentals, as provided in the lease. Such provisions of forfeiture are for the benefit of the lessor, and not for the benefit of the lessee. The lessee cannot plead his own default or wrong, in discharge of his obligation to drill or pay rental.”

The contract under consideration here has no such express provision, and besides, it contains no condition upon which there shall be a forfeiture, but simply a provision for a cancellation, which, as I have said, requires a positive act — something more than a mere failure to perform; and we think the principles enunciated in the case from which I have just read, apply with full force to the case under consideration and to the argument advanced in support of the proposition that the failure to perform operated to cancel the agreement.

It is contended on behalf of the defendant in error that Young did exercise his right to cancel the agreement. It will be observed that it is very clearly and distinctly provided in the agreement that Young shall be liable for at least flOO, whether he manufactures any handle bars or not. About that counsel make no question. As I have said, we hold that the provision as to cancellation was limited to February 1, 1899. There was some correspondence upon the subject of putting an end to this agreement, and it is upon that correspondence that the defendant in error relies to show that the cancellation was effected. I need not read all of it. The first letter referring to the matter of putting an end to'the contract is dated November 29, 1898. It reads:

“ Mr. Thos. VAN Tuyl,
Nicholas, Iowa.
“ Dear Sir: I write you to-day in regard to your double adjustable handle bar which has been absorbing my attention more or less for the past month, and at this time, cannot see my way clear to do you justice upon your bar for the coming season. Our Mr. Hubbell and myself had about concluded a deal whereby one of the largest jobbing nouses in the bicycle sundry and fittings line would dispose of the output for us, but the deal, up to this time has not been consummated, and they report to us that they have got more than they can do this season upon their regular line. We are also in a similar condition ourselves with our own business here, and it is taking so much of our time and attention that is is impossible for us to do your handle bar justice. I therefore wish to state if you will kindly release me and Mr. Hubbell as my surety, in regard to contract entered into, I will surrender and deliver contract to you. I believe that this will certainly be to your advantage, because it will be necessary to do considerable preliminary work even for the coming year, and it will now enable you to prepare yourself in plenty of time for the retail trade for next season; and introducing a bar of this kind it will be almost impossible to force it into the manufacturer or jobber before you have done your preliminary work with the retailer. I therefore verily believe that you should take hold of it and pat it on the market this season.
“ I have regretted very much my inability to give it proper attention and was in hopes to tie up with some concern who would handle the output for this season and give it a name in the trade.
Enclosed please find release of contract, which I would ask you to kindly sign and return, and will forward to you tools and bars now in our possession. I believe you will consider this the best thing to be done in the premises and let the contract revert back to you. Therefore, if you will kindly send in your release we will act very promptly.”

And in connection with that appears a release, which we understand is a copy of the one which went forward with the letter (though it contains the date of December 6, 1898), which reads:

“ Mr. H. J. YotjNG,
“ Toledo, Ohio.
“ Dear Sir: In consideration of your surrendering contract between us dated September 16, 1898, to me, for the control of U. S. letters patent No. 603,671,1 hereby release you and your surety from all obligations thereunder.
“ Very truly yours.”

That was to have been signed and returned by Mr. Van Tuyl. The answer that Mr. Van Tuyl made does not appear in the record, but it is apparent from other letters by Mr. Young and Mr. Hubbell that he did not accept this proposition. There is more correspondence along that line — more letters — before February 1, 1899, in which this proposition to rescind is repeated. Then on June 2, which was after the time, according to our construction of the contract, within which Mr. Young might have cancelled this contract and surrendered it, he writes as follows:

“Mr. Thomas VaN Tuyl,
“Nicholas, Iowa.
“ Drar Sir: Please take notice that on November 29, 1898, I did by letter cancel and surrender all my right, title and interest that I had or might have acquired in and to a certain contract, dated the 16th day of September, 1898, between you (Thomas Van Tuyl, Nicholas, Iowa) and myself (H. J. Young, of Toledo, Ohio), in regard to a pantented adjustable handle bar ; and I hereby again notify you that I do relinquish all my right, title and interest in and to above contract, and I hereby surrender my original copy of said contract, and send the same by mail to you to-day.
“Very truly yours,
“H. J. Young.”

And accompanying that was his copy of the contract with the words “ Cancelled November 29,1898,” written upon it. When that was written upon it does not appear, but according to our construction of these letters and these acts, the statement that he had, upon November 28, 1898, cancelled the contract and surrendered his rights under it, was incorrect. He had simply proposed a rescission upon the terms that his obligation to pay $100 should be cancelled and released — a proposition that Mr. Van Tuyl was not required to accept, and that he steadfastly refused to accept. We do not think that it would have been necessary for Mr. Young to have paid $100 as a condition precedent to exercising his right to cancel; but he might have cancelled absolutely, if he had done so before February 1, 1899, and then Mr. Van Tuyl would have been compelled to enforce as best he could the obligation of Mr. Young and his bondsman to pay $100. But Mr. Young did not attempt to exercise that right. He was seeking to save the hundred dollars and to obtain a rescission of the contract by agreement with Mr. Van Tuyl. The situation was this: Up to the second of June Mr. Van Tuyl had declined to accept this proposition to rescind the contract and put an end to the rights conferred upon Mr. Young under this contract — the exclusive right to manufacture and vend was still in Mr. Young. Mr. Van Tuyl had no right, upon the mere submission of this proposition, or unless he accepted it and released Mr. Young from the obligations under the contract to manufacture and vend handle bars, or to confer the right upon another. The exclusive right to make and vend the handle bars was in Mr. Young and remained in him. Mr. Young said that he would relinquish it; that he would surrender the contract if the obligation to pay $100 were surrendered; and that proposal Mr. Van Tuyl declined. So that we are of the opinion that Mr. Young did not accomplish a cancellation ; indeed, did not attempt to exercise the right to cancel the contract within the time that by its terms he might have done so.

Holding these views, and believing that the measure of damages applied by the court below was not correct, and that the motion for a new trial should have been granted upon the ground that the award was too small, the judgment of the court of common pleas will be reversed, and the cause remanded.


source: Caselaw Access Project

author: HULL, J.

license: Public Domain

text:
    CONVEYANCES — WITNESSES—NOTARY.
    [Lucas (6th) Circuit Court,
    October 19, 1901.]
    Haynes, Parker and Hull, JJ.
    William H. A. Read, Assignee, etc. v. Toledo Loan Co. et al.
    1. Interest oe Witnesses or Notary does not Invalidate Conveyances
    Inasmuch as Sec. 4106, Rev. Stat., prescribing what shall constitute the proper attestation and acknowledgment of instruments for the conveyance of land, etc., does not require that either the witnesses or the official before whom the same is acknowledged shall he disinterested, it is not sufficient to invalidate a conveyance in Ohio that the witnesses or the notary public, before whom the acknowledgment is taken, is a stockholder in a corporation to which the conveyance is made.
    2. Acknowledgment is a Ministerial Act.
    The acknowledgment of a mortgage of real estate, under Sec. 4106, Rev. Stat., providing for the acknowledgment of such instruments, etc., before a notary public and certain other officials, is a ministerial and not a judicial act.
    3. Grantor Estopped erom Claiming Invalidity.
    The grantor in a mortgage of real estate may elect the witnesses and official before whom he desires to acknowledge it and he ordinarily has the possession and control of it until acknowledged. Accordingly, he is in such case estopped from complaining that the witnesses thereto are, interested in the conveyance and from claiming that the conveyance is on that account invalid,
    W. H. A. Read, for plaintiff in error.
    King & Tracy, for defendant, Roan Co.
   HULL, J.

This case involves the question as to whether an interested party may witness a mortgage, and also act as a notary public in taking the acknowledgment of the grantor.

The action below was brought originally in the probate court by the assignee, by filing a petition to sell real estate, making the Toledo Loan Company and others parties defendant. The Toledo Loan Company filed its answer and cross-petition setting up a mortgage given by Cary D. Lindsay, the assignor. The assignee replied, denying the validity of that mortgage, alleging that it had not been acknowledged or witnessed according to law. The mortgage was sustained in the probate court, and upon appeal a like judgment was entered in the common pleas court, and we have here a finding of facts by the court of common pleas. In paragraphs 4, 5, and 6 the finding of facts is this :

“4. That prior to and upon February 19, 1896, said assignor, Cary D. Lindsay, was a member of said The Toledo Loan Co., and on the said date subscribed for ten shares of the capital stock of said company; that thereupon, on the representation of said Cary D. Lindsay to said company, and upon agreement between said Cary D. Lindsay and said company that said loan should become and be secured by a first lien upon said lots numbers 116 and 117 in Shaw’s Monroe street addition to Toledo, Ohio, said The Toledo Loan Company on February 19, 1896, loaned and advanced to said Cary D. Lindsay the sum of $4,800 of and from the moneys theretofore raised by said company for said purpose of loaning to its members, said Cary D. Lindsay agreeing to repay said loan with interest in weekly installments, in accordance with the constitution and by-laws of said company; that in pursuance with said representation and agreement, and to secure the payment of said money so loaned, with interest, and simultaneously with the loaning thereof, said Cary D. Lindsay executed, acknowledged and delivered to said defendant, The Toledo Loan Company, his certain mortgagefor said sum of $4,800 upon said lots Nos. 116 and 117 in Shaw’s Monroe street addition aforesaid.
“5. That said mortgage was executed by said Cary D. Lindsay in the presence of Fva M. Fly and Grant Williams, and was acknowledged by said Cary D. Lindsay before Grant Williams, a notary public within and for Lucas county, Ohio; that at the time of the execution and acknowledgment of said mortgage, said Cary D. Lindsay was a stockholder in said The Toledo Loan Company, and Fva M. Fly and Grant Williams were each owners of two shares of the stock of said company, and said Fva M. Fly and Grant Williams were not otherwise related to said The Toledo Loan Company or in any wise employed by it; and said Cary D. Lindsay then knew that said witnesses and notary, respectively, were stockholders in said company.
“ 6. That Fva M. Fly and Grant Williams each testified upon the hearing of this case that they acted as witnesses and notary, respectively, of said mortgage, at the request of said Cary D. Lindsay, and Cary D. Lindsay testified that he did not request either of them to act as witnesses, and that he did not request Grant Williams to' act as a notary.”

This last does not amount to a finding of fact' as appears from its reading, but is a statement by the court of what the witnesses testified to. So that it appears that this mortgage given by Cary D. Ifindsay to the Roan Company was witnessed by two persons, both of whom were stockholders to the amount of two shares in the Roan Company; that one of these stockholders who acted as a witness also took Ifindsay’s acknowledgment as a notary public.

It is claimed by the plaintiff in error that these persons were incom petent to act as witnesses, and that Williams was incompetent, by reason of his interest, to act as a notary public in taking the acknowledgment.

The case was very fully argued, and a very large number of authorities collected by counsel on both sides and cited to the court,— authorities not only from this state but from nearly every state in the union, bearing upon this question. The briefs were very full, and have been very helpful to the court. However, in this opinion we shall not be able to review or cite any great number of these authorities.

The statute with reference to this question in this state is Sec. 4106, Rev. Stat., which provides as follows:

“ A. * * * mortgage * * * of any estate or interest in real property, shall be signed by the * * * mortgagor * * * and such signing shall be acknowledged by the * * * mortgagor * * * in the presence of two witnesses, who shall attest the signing and subscribe their names to the attestation, and such signing shall also be acknowledged by the * * * mortgagor * * * before a judge of a court of record in this state, or a clerk thereof, a county auditor, county surveyor, notary public, mayor or justice of the peace, who shall certify the acknowledgment on the same sheet on which the instrument is written or printed, and subscribe his name thereto.”

The question is, whether, under the provisions of this statute, a person may act as a witness to a conveyance who is interested to the extent of being a stockholder in the grantee, and whether such person may act as a notary public in taking the acknowledgment.

A number of cases from other states were cited by counsel for plaintiff in error, where it has been held that such persons cannot act either as witnesses or notaries public, upon the ground of their interest in the transaction, in the conveyance, or the property itself. In some of those states, and perhaps nearly all of them, it is held by the courts that the act of a notary public in taking an acknowledgment is a judicial act, and the courts hold that under the rule that a judge may not act in his own case or in a case in which he is in any wise interested, a notary public, as be acts judicially, cannot act in any matter in which he' has any interest. It is the settled law of this state, however, under the decisions of our Supreme Court, that the action of a notary public in taking an acknowledgment is not a judicial act, but a ministerial one, and manifestly, therefore, the reasoning of many of the decisions in other states is not applicable to the statute of this state.

It is to be observed from the reading of the statute itself that the witnesses are not required to be disinterested. The language of the statute is that it “ shall be signed by the grantor, mortgagor, or lessor,” and in the presence of two witnesses, who shall attest the signing, and subscribe their names to the attestation,” and then it further provides that such signing shall be acknowledged by the grantor, mortgagor, or lessor, before a notary public or some other officer named. The statute itself, then, does not provide that either the witnesses or the notary public shall be disinterested. There are statutes relating to notaries public which provide that they shall be disinterested in acting in certain matters, as in the taking of depositions, in which the statute provides that the notary public shall be some person who is not interested in the case.

So, then, the statute itself containing no express provision upon this subject, the question is, whether the policy of the law, or the law of this state as established by the courts, requires the witnesses to a conveyance or the notary public taking the acknowledgment to be disinterested persons. The purpose and object of witnesses to a mortgage or other conveyance, of course, is plain ; that there may be on record in a matter as important as the conveyance of real estate the names of two persons, who certify that they saw the grantor sign the instrument, or beard him acknowledge the same. The purpose of the acknowledgment is to rea quire a still further and more solemn attestation of his signature to the instrument, that he acknowledge it before an officer, who shall certify formally that he acknowledged the signature before him; all these provisions being for the purpose of the protection of titles, and of affording testimony and witnesses to the conveyance of real estate, which, in the times out of which this law grew, was regarded as a matter of great solemnity and importance.

In practice the grantor himself usually selects his own witnesses and the notary public before whom he desires to acknowledge his deed or mortgage. Until the mortgage has been signed, attested, and acknowledged, or the deed, if it be such á conveyance, it rests in the hands of the grantor. It is still in his possession and under his control. By whom it shall be witnessed and before whom it shall be acknowledged is a matter, ordinarily, for him to determine.

In this case it does not appear from the statement of facts that the grantor requested these persons to act as witnesses or notary public; it simply appears that he knew there were stockholders in the corporation. But in a case where the grantor had in fact requested a person or persons to act as witnesses or as a notary public, knowing that such persons were interested parties, were interested in the conveyance, the grantor himself selecting his witnesses from choice, it would seem that under such circumstances he ought to be estopped from complaining that the witnesses were interested, and therefore that his conveyance was invalid.

The question here is one of great importance, for if it be true that it invalidates a conveyance if a witness or the notary public is interested in the conveyance, to the extent of being a stockholder, it might affect, and doubtless would, the titles of a great many pieces of property, and in many cases it would be impossible to determine from an examination of the records in the recorder’s office whether a conveyance was valid or invalid; for it would not, in many .cases, as in this case, appear upon the face of the instrument that either of the witnesses or the notary public was interested. In this case the grantee is the Toledo Toan Company. There is nothing in the record to show that either one of these witnesses has any interest in the Toledo Toan Company, or would be interested in a conveyance to the corporation. These persons sustain no relation to the company except that of stockholders. From that alone the plaintiff in error claims that the mortgage is void. His claim was well and succinctly stated in the brief of counsel,' as follows:

“ 1. That inasmuch as Uva M. Ely and Grant Williams were both stockholders of the defendant company, the mortgage given to it by Cary D. Tindsay was never witnessed.
“ 2. That inasmuch as Grant Williams, the notary before whom said mortgage purports to have been acknowledged by Cary D. Tindsay, was a stockholder in said company, that said mortgage was never duly acknowledged.
“ 3. That never having been acknowledged and never having been witnessed as to its signature, said mortgage was not entitled to record in Tucas county, and its recordation is a nullity,
“4. That the plaintiff bolds the legal title to said real estate free from all incumbrances or liens growing out of said mortgage.”

This question has been discussed in some of the text books on the law of real estate, and some phases of it, at least, by our own Supreme Court, and whatever the law may be in other states, we must follow the decisions of our Supreme Court. An early case, in which the question of the qualification of a witness to a conveyance arose, is that of Johnson v. Turner, 7 Ohio (pt. 2), 216, where it is held that “A deed conveying lands is not to be impeached, by showing that one of the subscribing witnesses is incompetent to testify.” We find this in the statement of facts in the case:

“ In this case an agreed statement of facts is submitted on which the questions to be decided arise. Walter Turner was indebted to the Bank of Zanesville in the amount stated in the trust deed under which the plaintiffs claimed, and on the application of C. B. Goddard, Esq., the attorney for the bank, executed the deed which was prepared and signed by said Goddard, as one of the subscribing witnesses, he being a stockholder in the corporation.”

So that the facts in this case are similar to the facts in the case before us; the witness, who was the attorney, was also a stockholder in the bank. The Supreme Court held that that did not affect the validity of the deed. They say on page 218:

“But is not this deed in conformity with the statute? This is admitted, in all respects, excepting that General Goddard was interested in the corporation for whose benefit it was made, when he subscribed it as a witness, and it was executed by Turner. If interested, however small that interest may be, the general rule of law excludes the witness from giving testimony. It distrusts him and declares him disqualified. But if it be necessary to sustain this deed, to call this subscribing witness, would the rule which excludes an interested witness apply ? The party whose right it is to object on the ground of interest may waive that objection and the witness is then' competent. He may call him himself, and he is competent; because if he testify for himself, who has the right to object? His evidence is against his own interest, and the more worthy of credence; and if called by the other side, whose claim it is his interest to support, and the objection of interest is waived, the law admits him to testify.”

The objection to Goddard the witness in this case seems to have been on the ground that he was an interested party and would not be competent to testify if necessary to call him in a court as a witness. That objection under the law as it is now would not be good. But the Supreme Court say on the same page, in discussing the case:

“ In England the grantee must prepare the conveyance and present it to the grantor for execution. We know of no such rule here. The grantor prepares his own deed. He calls his witnesses; they are selected by himself. He must then acknowledge its execution, and not until thus acknowledged does he part with its possession by a delivery to the grantee. Every act, therefore, is the act of the grantor while the deed remains in his possession, and the first act of the grantee is the accept-anee when finally delivered to him. The grantor, then, should not, it appears to us, be permitted to object to a witness selected by himself) and in whose integrity he had reposed confidence, to bear witness to his own acts. But aside from this course of reasoning is this deed invalid ? The statute, Vol. 81, 846, Sec. 1, requires the deed to be executed ‘ in the presence of two witnesses, who shall attest such signing and sealing and subscribe their names to such attestation.’ Unless the express provisions of this statute, or its plain inference, lead to the conclusion that the witnesses to a deed must be credible and competent to prove its exe cution at the time of their attestation, and that such was the intention of the legislature, reluctantly, indeed, would this court adopt such an opinion. If such be the law, it is time to look around us and ascertain by whom our deeds bear witness. Who ever instituted an inquiry when a witness was called to attest a deed, whether he was competent or incompetent to testify in a court of justice ; or whether persons might not subsequently be found who would impeach him for the want of character for truth,” etc.

They say at the bottom of page 219:

“ The counsel for the plaintiffs have furnished us with the case of, Smith v. Chamberlin, 2 N. H. 440. The opinion is given by the chief justice, Richardson, and appears to us fully to sustain us in our opinion of the law of this case, as to the validity of the trust deed. The opinion is founded on a statute of New Hampshire, of February 10,1791 (1 N. H. Raws, 191), which contains this provision : ‘ That all deeds or other conveyances of any lands, tenements, or hereditaments, lying in this state, signed and sealed by the party granting the same, having good and lawful authority thereunto, and signed by two or more witnesses, and acknowledged by such grantor or grantors before a justice of the peace, and recorded at length in the registry of deeds in the county where such lands,’ etc., ‘lie, shall be valid to pass the same'without any other act or ceremony in law whatever.’ On this section of the statute the chief justice says, ‘ In the clause now under consideration, there is nothing which indicates an intention in the legislature to require that witnesses to a deed should be competent to prove its execution at the time they subscribe it as witnesses. We have been much at a loss to conjecture why two witnesses were in this instance required by the statute. Surely they were not intended to be placed round a grantor for the same reasons they are placed round a testator. The most plausible conjecture is, that it was intended to render the proof of the instrument more certain. If this were the object, there is good reason to suppose that the word witness, was, in this instance, used in the simple sense of spectators of the transaction. A witness competent at the time might in one hour become incompetent; and a witness incompetent at the time might in one hour become competent. All that could be done with this view, by the legislature, was to require that deeds should be executed in the presence of two or more persons who should put their names to the deeds as witnesses. It would have been idle to make the validity of the deed depend upon the incompetency of the witnesses, at a time when they could not be wanted to prove the execution of the deed.’ ”

It seems to us that this decision of the Supreme Court settles the question for us, that a witness to a conveyance may be an interested person, and that although he may be interested to the extent of being a stockholder, this does not invalidate the deed. In 2 Jones Raw of Real Prop., Sec. 1126, the author arrives at the conclusion that that is the general law of the land. And his conclusions as to the notary are, that if there is nothing on the face of the deed to notify purchasers that the notary is an interested person, it will not affect the validity of the deed; and he says:

“ An interest under a deed not apparent on its face does not disqualify an officer to take and certify an ordinary acknowledgment. Thus, if he is one of the beneficiaries in a deed of trust, he may take the grantor’s acknowledgment, when his interest under the deed does not appear on the face of it. The fact that he acted as the agent of the mortgagor in obtaining the money does not disqualify him to take the mortgagor’s acknowledgment.
“The chief use of an acknowledgment, as already noticed, is to perfect the deed for record. The grantor can select such authorized officer before whom to acknowledge his deed as he chooses. He may refuse to make his acknowledgment before an interested officer. Having voluntarily acknowledged the deed, the grantor is presumed to have voluntarily consented to its record. If his deed is found on record, apparently executed according to the forms of law, and without any circumstances of suspicion against it, the plainest principle of equity would hold him estopped from setting up an undisclosed interest of the officer before whom he made his acknowledgment, to defeat his conveyance, as against an innocent purchaser relying upon the record as the evidence of his title.”

These remarks will apply to a witness as well as a notary, and perhaps with more torce.

In National Bank v. Conway, 17 Fed. Cas. 1202, it was held by the United States circuit court that the fact that the notary was interested would not invalidate a deed. Chief Justice Waite, deciding this case, among other things, said :

“ It has been frequently decided that an acknowledgment before a grantee named in a deed was of no effect. * * * It has also been held that a party interested in a deed cannot take and certify the, acknowledgment of a married woman requiring a privy examination.' * * * The taking of such an acknowledgment is, in some respect, a judicial act, and not ministerial only, but in the case of an ordinary acknowledgment it is purely a ministerial act. * * * Upon this principle it was decided in Dussuame v. Burnett, 5 la. 95, that an acknowledgment before one not a grantee named in the deed, but interested in the conveyance, was good. The same distinction was recognized in Stevens v. Hampton, before cited.”

And the chief justice said further along in the opinion:

“ The recording acts are intended for the security of titles and the prevention of frauds. They are to be construed liberally to that end* As the record, when made, is constructive notice to all having the legal right to rely upon it for protection, public policy requires that it shall import as near absolute verity as is consistent with a due regard to the rights of the parties interested. A deed acknowledged before one named as grantee, carries upon its face notice of that fact, or, what is equivalent, notice of circumstances sufficient to put a reasonable man upon inquiry. But when the name of the officer taking the acknowledgment does not appear as grantee, or as otherwise interested, no such notice or presumption accompanies the deed or its record. A certificate of acknowledgment is required to perfect a deed for record. The grantor can select such authorized officer for that purpose as he chooses. He has full power to protect himself against frauds by interested parties as certifying officers, for he may refuse to make his acknowledgment before them.”

Under the law of this state, as laid down by the Supreme Court, it is not clear that it would be held that the taking of an acknowledgment of a married woman was a judicial act. We are of the opinion that it would not be. The comparatively recent case of Amick v. Woodworth, 58 Ohio St. 86 [50 N. E. Rep. 437], decides that a grantee in an instrument cannot take the acknowledgment, and it is urged by counsel for plaintiff in error that this case modifies the decision. Johnson v. Turner,1 supra. The first paragraph of the syllabus is this :

‘ ‘ A grantee in an instrument for the conveyance or incumbrance of real property is disqualified, on grounds of public policy, to be an attesting witness to its execution, or to act in an official character in taking and certifying the acknowledgment of the grantor.”

The court discusses the question fully in the opinion, and on the' ground of public policy holds that a grantee in an instrument-is disqualified, from taking an acknowledgment. The court argues, page 100, and it. is clearly true, that to permit the grantee in an instrument to “attest as a witness the execution of an instrument made to himself, or take its acknowledgment as an officer, where its attestation and acknowledgment are necessary to give it validity, would be against public policy and would practically defeat the real purpose of the law, which is to prevent the perpetration of frauds on the grantors, and afford reasonable assurance to those who deal with or on the .faith of such instruments that they are genuine and represent bona fide transactions.” They say on page 101 of the opinion: “It is probably unnecessary to notice that this question was not involved in Johnson v. Turner,7 Ohio (pt. 2),216, and that case is unaffected.” So it seems to us that the Supreme Court intend here, and do expressly state, that the doctrine in Johnson v. Turner, supra, is not to be disturbed, and is not affected by this decision, which was rendered in 1898.

. A case decided by the district court of Mahoning county in 1881 is decidedly in point here. It is a very brief decision in Horton v. Columbian Building & Loan Co., 8 Dec. (Re.) 169, heard before Judges Sherman, Myer and Woodbury, and is as follows :

“ The plaintiff in error executed and delivered a mortgage to the defendant in error to secure a loan made by the society to him, one of its stockholders.
“ The mortgage was acknowledged before Owen O’Donnell, who at the time of taking the same was a stockholder in, and secretary and treasurer of the defendant in error, The Columbian Building and Loan Society, a corporation. In the suit in foreclosure brought by the society upon the mortgage, the defense was made that the mortgage was not properly executed for the reason that the notary public, O’Donnell, being a stockholder and officer of the society, the mortgagee occupied such a position as disqualified him from acting in his official capacity as notary.
“ Held, that the official connection of O’Donnell with the society did not disqualify him from acting in his notarial capacity in taking the acknowledgment to the mortgage to the corporation of which- he was an officer and stockholder.”

In that case the facts were stronger than in the one at bar. The notary was not only a stockholder but an officer of the corporation. This decision, though brief, is to the point, and it is significant that it has stood in this state now for twenty years without criticism, so far as we know, by the' Supreme Court or any other court of the state. The court which decided the case was composed of able judges, and then decision is entitled to great respect, and we give it such respect.

In this state the act of the notary is not judicial but ministerial and it seems to us, both upon reason and authority, that it is not sufficient to invalidate a conveyance in Ohio that the witnesses or the notary are stockholders in a corporation to which the conveyance is made. To hold that this was sufficient would unsettle titles, and as the Supreme Court say in Johnson v. Turner, supra, we might well examine our conveyances, and look about us to see who were the witnesses that had attested them. We think there is every reason to hold against that claim for the purpose of security of titles. And the decisions of the courts of this state, as we understand them, are against the contention of the plaintiff in error.

For these reasons the judgment of the court of common pleas will be affirmed.


author: MARVIN, J.

text:
    INSURANCE.
    [Lorain (8th) Circuit Court,
    October 10, 1901.]
    Caldwell, Hale and Marvin, JJ.
    Manchester Fire Insurance Co. v. Henry A. Plato et al.
    ■ 1. Contract or Insurance Without Naming Company.
    Where the agent of several fire insurance companies agrees to insure certain property at a given rate, without naming the company in which he will place the risk, and thereupon such agent writes the policy in one of his companies, the fact that the policy is not delivered to the assured, is not sufficient to relieve the company from liability thereon. Nor is the company relieved by the fact that no company was named between the agent and the assured.
    2. Custom Among Agents as to Payment oe Premiums.
    Where a course of dealings has been pursued for several years between the agents of different insurance companies, whereby one calls upon the other to issue policies to his customers, which he does, and settlements are from time to time made between the two agents, when payment is made by the one to the other for policies so issued, the company issuing such policy will not be relieved from liability, because of the fact that payment of the premium has not been made to its agent, when the time for settlement between the two agents has not arrived, and when no demand for the payment of such premium has been made.
    Heard on Error.
    E. G. Johnson and F. M. Stevens, for plaintiff in error.
    H. G. Redington and Webber and Metcalf, for defendant in error.
   MARVIN, J.

In the case of the Manchester Fire Association against Henry A. Plato and John E. Plato, the defendants in error were the owners of a store building in North Amherst in this county. On October 13, 1900, one H. N. Steele, who was acting ior the Platos, as their agent in the premises, had a conversation by telephone with Mr. R. W. Pomeroy about the insurance of their property. Pomeroy was the agent of a number of fire insurance companies, including the plaintiff in error. Steele asked him to insure the property. Steele and Pomeroy are at issue as to just what was said in this conversation.

Steele’s testimony in regard to it is this: “I asked Mr. Pomeroy over the phone if he would place $500 insurance on the H. A. and J. E. Plato store building, lot No. 48, rate two per cent., and to begin that day, and he. said he would.”

Pomeroy’s testimony on the subject is this : “He called me up and wanted to know if I could place $500 on Plato Brothers’ store building, he called it. I told him I did not know whether I could or not, but I would try.” ■

Then this question was asked: “Did you tell him that you would place or carry $500 on that ?,”

Answer. “ Not positively, no, I did not.”

As the result of that conversation Mr. Pomeroy thereafter wrote out a policy for the Platos for $500 in the German Insurance Company of Freeport, Ill., of which he was the agent. In reference to this policy Pomeroy was asked this question upon the trial: “ And what did you do with that policy?” Answer. “It was cancelled, it was returned to the company.” Question. “ Was it ever sent to Platos or Steele?” Answer. “ No, sir, never went out of the office.” After this was done Pomeroy testified as follows: Question. ■“ Well, after that was cancelled and returned, what did you do then? ” Answer. “ I wrote a ■ policy in the Manchester.” This latter policy was dated on October 16, 1900, and is made a part of the bill of exceptions.

There is no question as to the authority of Pomeroy to write and issue this policy and thereby bind the company by its terms.

The building named in the policy was totally destroyed by fire on December 26, 1900, and the owners made proper proofs of loss, so if the policy was in force at the time of the fire they were entitled to recover from the companv the amount of the indemnity named therein, to-wit: $500.

The company denied liability and suit was brought against it by the Platos on the policy, and judgment obtained against the company to reverse which, this proceeding in error is prosecuted.

On the part of the company it is urged that the company was never bpund by the policy. The policy remained in the office of Pomeroy until it was sent by him .to the insurance .company as hereinafter mentioned. Neither the Platos .or Steele paid the premium on the policy, nor was such premium tendered to the company or its agent' until after the destruction of the insured property, when Steele made tender of the proper amount, acceptance'of which was refused by Pomeroy.

It appears there had been a course of dealing extending ovér a a period of several years between Steele and Pomeroy, by which Steele, who was himself the agent of one or more insurance companies at North Amherst, would have Pomeroy issue policies to his customers when he could not in his own company carry the insurance, and then later a settlement would be had between Steele and Pomeroy, at which Steele would pay Pomeroy on such policies as he had written for Steele’s customers. This being true, the fact of nonpayment of premiums alone ought not to prevent the insured from recovery especially when no claim is made that Pomeroy retained the policy on account of such non-payment.

If Pomeroy had the conversation with Steele as he says he did, and in pursuance of what was then said, wrote this policy and reported it to his company he bound the company by its terms. See Machine Co. v. Insurance Co., 50 Ohio St. 549 [35 N. E. Rep. 1060]; see also New York Life Ins. Co. v. Babcock, 30 S. E. Rep. 273 [104 Ga. 67; 42 L. R. A. 88; 69 Am. St. Rep. 134]. This last was a life insurance case. The application was made to the agent, and by him forwarded to the company, the premium was paid at the time the application was left with the agent, the company accepted the risk and issued the policy and sent it to its agent. It remained in his hands until after the death of the assured. The court held that the company had bound itself.

It is true the premium there was paid. But what has already been said disposes of what we think as to the premium in this case. In that case the application had been sent to the company, because in life insurance the policies are not binding until the company has approved of the application, indeed the policies are not issued except as the company approves the application.

In this case the policy itself shows that Pomeroy was authorized to issue the policy, and it became valid upon the signature of the agent, providing of course the other things necessary to make it a contract took place. The fact that the policy had not been delivered to the assured in the case to which attention is called in New York Life Ins. Co. v. Babcock, supra, cuts no figure in the decision. . The court held the policy remaining in the hands of the agent did not affect the question of whether the contract of insurance was binding upon the company. To the same effect is the text of 16 Am. & Eng. Enc. Law (2 ed.) 855, and the authorities there cited.

It is urged ou the part of the insurance company that Pomeroy did not promise Steele he would insure this property in one of his companies ; but only that he would try to insure it. Pomeroy, who had full authority to bind the company by issuing the policy, immediately wrote a policy in the German company which he cancelled as he says by order of the company. The very fact of cancellation is evidence that in that company at least there was a contract by which until cancelled it was bound.

In Insurance Co. v. Maguire, 51 Ills. 347, this language is used : “ The very fact of an attempt at cancellation is an admission there was a policy capable of being cancelled.”

Upon the cancellation of this policy in the Freeport company, without any further conversation or communication with the assured or their agent, Pomeroy wrote the insurance involved in the present action. The policy provides for a cancellation by the company upon a five days’ notice. If this was not to take effect until Pomeroy should hear from the home office, why did he write it, why not submit the question of whether the company would carry the risk to the home office before writing the policy? This question in substance was asked in various forms of Mr. Pomeroy and no satisfactory answer was given. It seems clear the policy was written upon the understanding that the company should be bound by it until it should be cancelled, which could be done upon five days’ notice to the assured.

When this policy was reported by Pomeroy to the home office, the company notified him the company would not carry the risk at the rate stipulated, and he thereafter sent the policy to the home office, just how soon does not appear. And Mr. Pomeroy says he notified Steele that the company would not carry the risk, and he gives the conversation in which he says he gave this notice. Steele denies this. They are distinctly at issue about it.

If, as has been already stated the company became bound by the terms of the policy, then it remained in force until cancelled and notice of such cancellation must have been given to the assured, and the notice must have been at -least five days before the policy ceased to be valid.

The burden was upon the company to show that there had been such cancellation, if the policy was ever binding.

The jury must have found that no such notice was served upon the assured, and under the law as given by the court, none upon Steele. As to whether notice to Steele would have been sufficient it is unnecessary to discuss.

Attention is called to the case of White v. Ins. Co., 95 Fed. Rep. 161, upon the question as to whether notice to an insurance broker who effected the insurance is sufficient notice to bind the assured. But whether that be so or not, we are not satisfied that the jury were wrong in finding that no notice was served upon either the assured or upon Steele of the cancellation of the policy; that being so that no notice was served, the policy remained in force and it entitled the assured to recover as it did recover in this case. We are not prepared to say the jury found wrong on that fact, and hence the judgment is affirmed.


author: VOORHEES, J.

text:
    LIFE INSURANCE — COMPROMISE-FRAUD.
    [Fairfield (5th) Circuit Court,
    September Term, 1901.]
    Douglass, Voorhees and Donahue, JJ.

       Manhattan Life Ins. Co. v. Joseph Burke.
    1. Petition Sufficient as Against Demurrer.
    A petition in an action by the assignee of a life insurance policy, setting up the contract of insurance, the assignment for a valuable consideration, the assent of the company issuing the policy to the assignment, demand upon and payment by the assignee of the annual premium,, and the death of the insured, is sufficient as against a demurrer, no other facts intervening to defeat recovery.
    2. Affirmative Defense — Burden of Proof — Fraud.
    A defense in such action that the policy was taken out by the plaintiff in the name of the assignor upon an agreement that the latter should apply therefor and the former pay the premium thereon and that an assignment thereof should be made, etc., and that it was amere wagering policy, is an affirmative defense, the burden of proving which rests upon the defendant. Therefore, no evidence having been offered in favor of such defense, it will be considered as withdrawn notwithstanding no formal withdrawal appears in the record, especially where such fact is conceded in argument on review and the trial court in its charge substantially so stated.
    3. Fraudulent Compromise — Refunder Unnecessary.
    Where a party is entitled to a specific sum of money, as for instance the proceeds of a life insurance policy, and is fraudulently induced to. compromise or to accept a lesser sum, it is not necessary that he tender or return the amount so received in order to maintaiu an action to recover under the policy. Insurance Co. v. Hull, 51 O. S., 270, followed.
    Heard on Error.

       For decision of the court of common pleas, see Burke v. Manhattan Life Ins Co., 12 Dec. 37.

   VOORHEES, J.

Plaintiff’s action below was founded upon a contract of insurance issued upon the life of one George Messmore for five thousand dollars. The policy is dated October 25, 1897. This was the date it was issued to Messmore. On November 24, Messmore assigned the policy to the plaintiff, the defendant company assenting to the assignment to the plaintiff, and afterwards demanded and received from the plaintiff the annual premium on the policy, after it had been thus assigned to the plaintiff.

On February 13, 1899, the said George Messmore, the original insured in the policy, died. The petition then sets forth facts constituting a cause of action in favor of the plaintiff, who had held the policy from Messmore by assignment and for a valuable consideration.

In passing upon the petition, briefly, we have no doubt as to its sufficiency against a demurrer, and if the allegations are true the plaintiff would be entitled to recover from this company, no other facts intervening to prevent his recovery, except as stated in the petition.

The company in its answer interposes two defenses.

The first defense is in the nature of an affirmative one and based upon the ground that the plaintiff has no right to recover upon this policy, because the company says it was not issued in the regular way ; that the “ policy was taken out by the plaintiff in the name of Messmore for his own sole use and benefit, it being understood and agreed between them at the time that said Messmore would apply for said policy in his name, and ostensibly for his benefit; that the plaintiffs -would pay the premium on said policy, and that in the event of the death of said Mess-more said insurance money, secured by said policy should be received and held by the plaintiff. Plaintiff paid the premium on said policy, and for the purpose of carrying out said scheme, caused said Messmore, simultaneously with the issuing of said policy, to deliver the same and a written assignment thereof to the plaintiff; all of which was done. Plaintiff had no insurable interest in the life of said Messmore, and although the fact was then unknown to the defendant, said policy was a mere wagering policy taken out by the plaintiff on the life of said Messmore.” This is the nature of the first defense.

The company interposed a second defense, which is another affirmative one and proceeds upon the ground that the plaintiff having brought his suit upon the policy can not recover, because, after his rights had ripened, there was a compromise entered into whereby the plaintiff by agreement with the defendant received and accepted two thousand dollars in full satisfaction of the policy. This alleged compromise agreement is in writing and a copy of it is embodied in the answer. That is the second defense.

The plaintiff replied denying the allegations of the first defense as well as the allegations of the second defense.

The case then came on for trial and we are to look at the issues that were really tried to the jury and that are now before the court for review.

The first defense that the defendant company interposed being an affirmative one, the burden of proof rested upon the company to make good the claims that were urged there as a defense to the plaintiff’s right to recover. While there is no formal paper that we have been able to find withdrawing that first defense from the jury, yet it is conceded in the argument, and it was conceded on the trial and the court in its charge to the jury so stated, that the defendant company offered no proof whatever in support of this first defense. The case went to the jury upon the petition which stated the cause of action was this policy issued to Messmore and assigned by Messmore to the plaintiff, and the second defense interposed by the company, that the plaintiff’s cause of action, his rights under that policy of insurance and contract, had been fully settled with the company by the payment of the two thousand dollars.

These were the issues that were submitted to the jury. They were the issues that were tried, and the case went to the jury the same as if the first defense had been out of the way. There was no defense urged upon the court or the consideration of the jury except whether the rights of the plaintiff under this contract were settled by the agreement that was made by the plaintiff with the company.

The plaintiff comes back with a reply and says that this alleged settlement was obtained by fraud. He says the agreement wherein the plaintiff was induced to receive two thousand dollars upon this policy upon his cause of action was .obtained from him by fraud, by the fraudulent arts, representations and practices of the defendant. If the signature of the plaintiff to this paper writing, whereby he released the company from all obligation under the policy, was obtained by fraud, it was not a settlement. If this contract was obtained as claimed in the reply then this paper writing would be no defense to the plaintiff’s cause of action. Fraud vitiates all transactions. If it was fraudulently obtained, it would stand as if no compromise had been made.

And if this question raised by the reply is out of the way; if the question that the compromise was obtained by the fraudulent arts, representations and practices of the defendant company, how then stands the issue submitted to the jury?

The plaintiff’s cause of action is founded upon his contract of insurance. If the plaintiff is entitled to recover (the other question to which I have referred being out of the way), his right to recover is upon his contract; and if he is entitled to recover upon his contract, he is entitled to recover more than two thousand dollars. The contention of the defendant company, and their whole contention, rests upon the question whether or not, when the plaintiff accepted two thousand dollars, he received it in compromise in full of his claim. It contends that if he received that sum in full of his claim, and now seeks to repudiate the agreement, he must refund and restore the money thus received, before he can have any standing in court. That is the whole vital question in the case.

It is a question of law. There is no trouble about the .facts in this case.

There is no question, from the way the issues are presented, that if this alleged compromise were an illegal proceeding, that the plaintiff is not bound to return and restore the money that was received. If that were a condition precedent to bringing this action to recover the balance that not being done, he could not maintain the action. It is not claimed that money received was tendered back or offered to the defendant company.

But was it necessary to tender this money hack? That is the real question involved and the only question in the case. '

It is claimed the defendant company that the doctrine of the Ohio cases would not apply to this case, because they cannot reach beyond a claim of fraud or duress, wherein it strikes the contract so that it is absolutely void.

We think Insurance Co. v. Hull, 51 Ohio St., 270, [37 N. E. Rep. 1116 ; 46 Am. St. Rep. 571], does not go to that extent, but that it does recognize the doctrine that where a party is entitled to recover a specific sum of money, as in this case, (there being no defense to this plaintiff’s right to recover upon this policy except that there was a compromise and that the plaintiff should refund his two thousand dollars before bringing suit) — the plaintiff, if he is entitled to recover, would have an action for the full face value of the policy. The only reason the defendant company seeks to prevent his recovery is, that he compromised for two thousand dollars. If that agreement fails, by reason of the fraud of the defendant company, by its agents, then his right reverts to his original claim upon his contract of insurance for five thousand dollars, and his right to recover the full amount is restored to him, and he is not bound to restore or return this money that he received Irom the company. It was owing to him, and he had a right to the entire sum if there was no legal compromise. If that compromise was obtained by fraud, then his right rests upon the contract of insurance according to the face of the policy.

That being the legal question, the vital question in the case, we .think it is clearly séttled in the case of Insurance Co. v. Hull, supra.

In the case before the court, the verdict of the jury was for the balance due after deducting the amount paid under the alleged compromise from the face of the policy, together with interest, and the answers to the interrogatories are in harmony with the general verdict.

It being the view of the court that the law as announced in this case in Insurance Co. v. Hull, supra, is applicable to this action, the judgment of the common pleas is affirmed with costs, but without penalty.

Judgment affirmed.


author: DAY, J.

text:
    MUNICIPAL CORPORATIONS -WORKHOUSES — NEGLIGENCE.
    [Muskingum (5th) Circuit Court,
    October Term, 1901.]
    Norris, Day and Mooney, JJ.
    (Of the third circuit, sitting in place oí Douglass, Voorhees and Donohue, JJ., o the fifth circuit.)
    Robert Green v. Muskingum Co. (Comrs.) et al.
    1. Governmental Powers.
    The power conferred on municipalities to preserve the peace and protect persons and property by the arrest of offenders and their commitment and detention in jails or workhouses, is of a public or governmental nature, in which the sovereign state exercises its functions through the aid of a municipality.
    2. Municipality not Liable for Negligence in Workhouse.
    A municipal corporation is not liable in an action for negligence to a person who is injured while operating a defective machine in a workhouse to which he has been sentenced at hard labor upon conviction of an offense against the ordinances of a city, or the statutes of the state. The non-liability of the municipality rests upon the same reason as does that of the sovereign exercising like powers.
    Heard on Error.
    McHenry & O’Neal, for plaintiff in error,
    cited :
    Section 2107a to 2107v Rev. Stat.; Toledo v. Cone, 41 O. S. 149; Wood on Master and Servant, 459; Blake v. Ferris, 5 N. Y. 49; Dayton v. Pease, 4 O. S. 80.
    C. C. Lemert, for defendants.
   DAY, J.

The plaintiff disclaims any right of action against the county commissioners, who were made parties under the impression that they were liable, and the case, so far as that board is concerned, is dismissed.

The petition avers that, plaintiff is a minor and brings this action by his next friend, who says, in substance, that the city of Zanesville and Muskingum county, jointly, own and conduct a workhouse at Zanes-ville, where persons convicted of offenses against the ordinances of the city, or the statutes of the state ol Ohio, are confined at hard labor, on sentence of a competent court; that, on January 20, 1900, the minor plaintiff was confined in this workhouse on an order of commitment from the mayor’s court of said city, and he was required by the officers and employees of said workhouse, in charge thereof, to labor in a broom factory operated therein, and was required to work at a machine which he was not physically able to operate in safety; that the machine was defectively constructed, all of which the city authorities knew; that, on said January 20, the plaintiff while so employed, under compulsion of the defendant city, through its officers and agents in charge of said machine and works, because of his physical weakness and the negligence and iailure of the defendants to furnish proper machinery, and because of their negligence in furnishing said defective machinery and permitting it to remain out of repair, without fault on his part, the plaintiff got caught in said machine and was seriously injured in his person, to his damage in the sum of five thousand dollars, for which he prays judgment against the city.

The lower court sustained a demurrer to the petition, and plaintiff, not desiring to amend his petition or further plead, the petition was dismissed at the cost of plaintiff. Plaintiff prosecutes error and seeks a reversal of the judgment and judgment overruliug the demurrer to the petition.

But a single question is presented. Does the petition state a cause of action in the plaintiff’s favor and against the city of Zanesville?

The petition, possibly, states a case against the persons whose active and affirmative acts and conduct were so negligent as to directly and proximately occasion plaintiff a serious injury without any fault of his own, but it is not believed that it states a cause of action entitling him to relief against the municipal corporation, the city of Zanesville, while the city, as we think clearly appears, was in the discharge of a wholly governmental duty as the duly constituted agency of the great public, the state of Ohio, and concerning which the city has no liability.' It cannot be doubted that the power conferred on municipalities, to preserve the peace and protect persons and property by the arrest of offenders and their commitment and detention in jails and workhouses, is of a public or governmental nature, in which the sovereign state exercises its functions through the agency of the municipality. In such case, the non-liability of the municipality rests upon the same reason as does that of the sovereign exercising like powers.

In Western College v. Cleveland, 12 Ohio St. 375, 377, Judge Gholson says that—

“ There is a distinction between those powers delegated to municipal corporations to preserve the peace and protect persons and property, whether to be exercised by legislation or the appointment of proper officers, and those powers and privileges which are to be exercised for the improvement of the territory comprised within the limits of the corporation, and its adaptation to the purposes of residence or business, As to the first, the municipal corporation represents the state — discharging duties incumbent on the state; as to the second, the municipal corporation represents the pecuniary and proprietary interests of individuals. As to the first responsibility for'acts done, or omitted, is governed by the same rule of responsibility which applies to like delegations of power; as to the second, the rules which govern the responsibility of individuals are properly applicable.”

This language of Judge Gholson is quoted with approval in Frederick v. Columbus, 58 Ohio St. 538, 546, 547 (51 N. E. Rep. 1097), and in this last named case, the court, through Judge Minshall, p. 548, quotes from a similar decision of Hayes v. Oshkosh, 33 Wis. 314, and says:

“ The decision is fully supported by the authorities, and the decisions in the other states of the union. There is, in fact, a remarkable unanimity on the subject.”

We think the lower court did well to sustain the demurrer- and dismiss the petition, and we affirm its judgment with costs but without penalty. There will be a judgment for costs, execution is awarded, and cause remanded for execution.