text:
    CONTRACTS OF GUARANTY.
    [Circuit Court of Lucas County.]
    National Bank of Commerce v. Frank W. Garn et al.
    Decided, February 7, 1902.

      Guaranty — Buie for Construction of Contracts of — Presumption against a Continuing Guaranty — Subsequent Transactions not Amounting to a Modification of — Payments of Later Loans — How to be Credited — Estoppel.
    1. A contract of guaranty is to be given that construction and effect whicb best accords with the apparent intention of the parties as manifested by the terms of the guaranty, taken in connection with the subject matter to which it relates and the circumstances accompanying the whole transaction, and should be construed as are all other contracts with the purpose of giving effect to the intention of the parties, and without straining the instrument beyond its obvious meaning for the purpose of enlarging the liability of the guarantors.
    2. Where there is still doubt as to whether the guaranty was intended to be a continuing guaranty, the presumption is that it was not so intended, and this presumption may be given effect.
    3. Subsequent transactions under or in pursuance of the contract, or with the contract in view, may be looked to for the purpose of discerning the interpretation the parties have themselves put upon its doubtful provisions.
    4. The guaranty in suit, which was by individual stockholders for the benefit of the corporation, should be restricted to the first $3,000 loaned, and not held to be a continuing guaranty.
    5. While estoppel may arise as to guarantors who solicited further loans for the corporation and are claiming to be entirely relieved from liability therefor, the terms of the original guaranty are not thereby extended.
    6. A bank is at liberty to make further loans to the party for whose benefit the guaranty was given and to discharge them without reference to the loans for which the guarantors became bound, and as a matter of law payments made upon subsequent loans need not be credited back upon the loans guaranteed.
    Parker, J.; Haynes, J., and Hull, J., concur.
    Heard on error.
   In the court of common pleas suit was brought by this plaintiff in error against this defendant in error, upon a certain written guaranty. A general demurrer to the second amended petition was sustained by the court; and the plaitniff, not desiring to plead further, judgment went against him, dismissing his petition, and adjudging the costs against him, and on account of that judgment he prosecutes error here.

So that it will be seen, the question is presented here, as it was below, upon the demurrer to the second amended petition. The question is whether the court erred in sustaining that demurrer. I do not know that it would be safe to undertake to paraphrase or abbreviate this petition. It is not very long, and I shall read it. (After the title.)

“The plaintiff. The National Bank of Commerce of Toledo, Ohio, a corporation organized under the banking laws of the United States, and doing business at Toledo, Ohio, for its cause of action against the said defendants, Frank W. Garn, Oliver B. Snider, Martin C. Trout and Andrew D. Stewart, says that on the tenth day of June, 1895, said defendants executed and delivered to the Ketcham National Bank of Toledo, Ohio, a written undertaking, a copy of which is as follows:
“Toledo, Ohio, June 10, 1895.
“Ketcham National Bank:
“We, the xindersigned, hereby jointly and severally guarantee to you the payment of any and all sums of money that may be loaned by you to the Carothers Publishing, Company, on request of F. W. Garn, treasurer, providing the amount of said loan shall not exceed in the aggregate $3,000.
“F. W. Garn,
“O. B. Snider,
“M. C. Trout,
“A. D. Stewart.
“Plaintiff says that subsequent to the execution and delivery of said guaranty, the Ketcham National Bank of Toledo, Ohio, changed its name to The National Bank of Commerce of Toledo, Ohio, under the provisions of the statutes of the United States; that the said Carothers Publishing Company, subsequent to the execution and delivery of said guaranty, changed its name to the Royal Publishing Company, under the provisions of the statutes of the state of Ohio; that said plaintiff is still the owner and holder of said contract; that subsequent to the execution and delivery of said contract the Ketcham National Bank loaned to the Carothers Publishing Company, on request of F. W. Garn, treasurer, the following sums of money-on the following dates, to-wit:
“September 13, 1895, $2,800; October 11, 1895, $3,800; April 22, 1897, $500; July 31, 1897, $600; August 8, 1897, $500.
“Plaintiff says that at the time said guaranty was given and said sums of money loaned as aforesaid, all said defendants were stockholders in said company; that the defendants, Frank W. Gam, Martin C. Trout and Oliver B. Snider, were members of the board of directors of said company and constituted a majority of said board, and were actively interested in the business in which said company was engaged. That the said defendant, Frank W1. Garn, at the time said guaranty was given and said money loaned, was treasurer and general manager of said company, and in full charge of its business, subject to the general supervision and control of said board of directors. That each and all of said defendants authorized the said F. W. Garn, as manager and treasurer of said company, to borrow of the plaintiff the aforesaid amounts and exe- ‘ euted the said notes therefor; that at' said time he and all of said defendants knew that said authorized loans were in excess of said $3,000; that all of said loans were so obtained by said company upon statements made by said treasurer showing that said company was financially solvent; that said statements were made by the authority and with the knowledge of said defendants and for the express purpose of procuring said loans in excess of said $3,000, and said loans were so made by said plaintiff relying upon the truthfulness thereof. The plaintiff says that said statements were false, and said company was at said times actually insolvent.
‘ ‘ That said defendant, Andrew Stewart, was a regular attendant on all stockholders’ meetings and knew the condition of said company, and knew that said company borrowed money from the plaintiff in the amounts above set forth, and in excess of said sum of $3,000 and authorized the same.
“Plaintiff says that said sums of money loaned-as above ' stated were secured by the several' promissory notes of said company; that said notes were given for short periods of time and successfully renewed; that payments were made by said company on said notes thus renewed up to the--day of September, 1898, on which date the following notes given by said company to secure said indebtedness were outstanding and unpaid, to-wit:
“Note of $475 dated July 2, 1898, due in ninety days.
“Note of $3,200 dated July 9, 1898, due in ninety days.
“Note of $2,200 dated July 19, 1898, due in ninety days.
“Note of $550 dated August 24, 1898, due in ninety dáys.
“Plaintiff further says that on or about the —— day of September, 1898, R. E. Rickenbaugh was appointed receiver by this court for the purpose of closing up the business in which said company was engaged; and that thereafter R. W. Kirkley was appointed receiver by this court for the purpose of collecting from stockholders of said company the amounts due from them by reason of their liability as stockholders of said company under the statutes of Ohio.
“Plaintiff says that its claim against said company, by reason of said indebtedness, was approved in said proceedings heretofore had in this court, and said claim was allowed, with interest to January 31, 1899, in the sum of $6,538.82. Plaintiff says that it has received from R. E. Rickenbaugh, receiver, the sum of $879.79, and from R. W. Kirkley, receiver, the further sum of $3,961.32, and which said sums were applied by plaintiff in payment of said loans so made as aforesaid in excess of said $3,000, the amount named in said guaranty executed by said defendants, and the balance of said payments were applied upon the indebtedness secured by said guaranty; and that there is still due and unpaid on said guaranteed indebtedness the sum of $1,697.71, with interest from January 3, 1899, for which amount plaintiff prays judgment against said defendants.”

Now, the questions debated and. to be decided turn upon the construction to be given to this written guaranty, and perhaps somewhat upon the transactions of the parties averred to have taken place in pursuance of the guaranty or subsequent to the guaranty.

It was contended on behalf of plaintiff in error that this is a continuing guaranty, which authorized the bank to loan to the company whatever it might please to loan without limit as to time or amount, but that the limit of the liability of the guarantors (being the only limit) was fixed at $3,000; and that therefore the guarantors would be liable to the extent of $3,000 for any balance remaining unpaid upon any loan or loans that might be made at any time or in any amounts subsequent to the execution and delivery of this guaranty.

On the other hand, it is contended that this is not a continuing guaranty, but is restricted; that it contains a condition that the amount of said loan or the aggregate of all loans, should not exceed $3,000, and that the violation of this authority would of itself operate to release the guarantors from all liability; and that if this is not true, it is at least true that the guarantors have not authorized a succession of loans exceeding in the aggregate $3,000, and have not agreed that they would be bound for any unpaid balance upon said loans, but that the restriction is that they will be bound for the first loan or loans aggregating three thousand dollars, and that any payments made upon that loan or which should be applied upon that loan in extinguishment of it, would extinguish their liability; and that there would be no liability attaching to them on account of subsequent loans.

By the diligence of counsel, we have been cited to a very great many authorities, which state principles and give illustrations bearing upon the questions in issue. It would be an almost endless task to review these authorities, and perhaps impossible to reconcile them, but we think that running through the approved authorities, there are certain principles about which there is no very great difference in the minds of the courts — certain well defined principles which may be applied here to a solution of these questions.

In the first place as to the general rule of construction. A contract of guaranty is to be given that construction and effect which shall best accord with the apparent intention of the parties as manifested by the terms of the guaranty, taken in connection with the subject-matter to which it relates and the circumstances accompanying the whole transaction. And in that respect it does not differ from any other contract. It is to be construed as any other contract should be construed, the purpose being to ascertain the intention of the parties, and to give that effect.

The guarantors should be held to every obligation reasonably and fairly embraced within the terms of their contract, construed in the light of the language used and the concomitant circumstances, but the instrument should not be strained beyond its obvious meaning for the purpose of enlarging the liability of the guarantors.

After the application of these general rules, where there is still doubt whether the guaranty was intended to be a continuing guaranty, the presumption that it was not so intended may be given effect, and may turn tbe scale.- That there is such presumption and that it has been recognized and approved as a rule by the Supreme Court of this state, appears from Birdsall v. Heacock, 32 Ohio St., 177. The question was whether a certain guaranty given by a father on account of his son authorizing the sale of lumber to the son should be regarded and enforced as a continuing guaranty or as a restricted guaranty. The syllabus reads:

“A letter addressed to a lumber merchant in the following language: ‘Please send my son the lumber he asks for, and it will be all right,’ is a guaranty that the lumber sold and delivered to the son, at the time of its presentation, will be paid for. »
“But such guaranty is not continuing, so as to make the guarantor liable for lumber subsequently purchased by the son from the same merchant. And payments afterward made by the principal, on account, will be applied in satisfaction of the first purchase, and consequent discharge of the guarantor’s liability.”

In the course of the opinion, Judge Scott, after discussing the question whether this should be regarded as a continuing or restricted guaranty, uses this language:

“Upon this subject, it has been well said, that ‘the chief difficulty lies in determining what interpretation should be put on a guaranty which is so worded that it may either extend to a series of sales or advances or be limited to the first. The better opinion would seem to be, that such an instrument should be confined to the immediate transaction, unless the language of the promise is sufficiently broad, to show that it was meant to reach beyond the present, and render the guarantor answerable for future credits. The tendency of decision in this country has, accordingly, been against construing guaranties as continuing, unless the intention of the parties is so clearly manifested as not to admit of a reasonable doubt.”

The language is quoted from 2 Am. Lead. Cas., 141, and a large number of cases are there cited in support of it.

It will be observed that this petition does not set forth the circumstances surrounding the transaction, the concomitants of the transaction, further than to state that these persons were members of this incorporated company, some being directors, and one the treasurer and general manager, and then it proceeds to state what was subsequently done in the way of making loans to the company through this treasurer and general manager, upon the authority of the board of directors. Now, subsequent transactions, not amounting to a modification of the contract and not part of the concomitant circumstances, can not be considered as a part of the circumstances under consideration in formulating the terms of the contract, and hence be looked to for the purpose of ascertaining the sense in which or the intent with which such terms were used.

Counsel for plaintiff in error cites us to Cambria Iron Co. v. Keynes, 56 Ohio St., 501, in which consideration was given by the courts, in construing a contract of guaranty, not to subsequent transactions between the principal and the person to whom the guaranty was extended, but the course of dealing which had previously gone on between the guarantor and the creditor; and the first clause of the syllabus reads:

“In construing a contract of guaranty,.the object should be to ascertain the intention of the parties; and, as in construing all contracts, the words employed by the parties should be construed in the light afforded by the circumstances surrounding them at the time it was made.”

The question there was as to the period of credit extended by the creditor. The previous course of dealing between the parties had been such that the period of credit did not exceed four months. Upon the note being executed and delivered into the hands of the creditor, further credit was given, and the time for the payment was extended, so that there became, not an extension of the time of giving credit by selling at a time subsequent to the time limited for giving credit, but an extension of timé for payment upon the goods sold within the time limited, and it was with reference to that previous course of dealing as throwing light upon the sense in which certain terms were employed that averments were made and testimony heard —I do not know but that it went off on demurrer — but at all events, consideration was given to the course of dealing between the parties prior to and concurrently with the execution of the written guaranty.

That there was any course of dealing between the principal and the creditors in the case at bar which would authorize us to look into the transactions to ascertain the sense in which the terms of the contract were used by the parties, is not disclosed by this petition. So far as appears by the petition this was the very first transaction that had ever taken place between the parties.

However, subsequent transactions under or in pursuance of the contract, or with the contract in view, may be looked to for the purpose of discerning the interpretation the parties have put upon doubtful provisions; and in looking into the petition for this purpose we believe that we are authorized to say that by soliciting this further credit to the company, the guarantors, directors and others interested in the company, have put it out of their power, have perhaps estopped themselves from claiming that they have been totally relieved from all obligation in consequence of credit having been given beyond the $3,000 stated; but we do not think we are authorized to say that by so doing they have extended the terms of their guaranty so that they would be bound thereon as upon a continuing guaranty for any balance that may remain due upon credits given beyond $3,000. In other words, we can not say that the plain limitation restricting the amount of the first $3,000 loaned, was not waived or enlarged by the subsequent authority given to the treasurer to borrow money; though we hold that the making of further 'loans did not at once and of itself amount to such a violation of the contract as absolutely released them as guarantors. But there was no agreement at all that they would be bound beyond $3,000; and therefore, that matter stands as if they had said in effect, “you may make these further loans, but you do it, not upon the faith of our guaranty, but upon the faith and responsibility of the company.”

We are of the opinion that under all of the circumstances set forth in the petition, the guarantors were not bound beyond the $3,000 first loaned. Now it appears from the petition that $3,000 and more was loaned, so that the guarantors became responsible to the extent of $3,000. It appears too that there is a balance due of $1,697.71; and plaintiff says that he has applied the remainder upon the part secured, leaving this balance, as he claims, of unsecured indebtedness.

The question, therefore, left for our determination is, whether or not this petition discloses that the $3,000 first loaned has been paid. If the petition discloses that it has been paid, then it does not state any cause of action against the guarantors. It shows that there was a liability of $3,000, arising upon loans exceeding $3,000, i. e., upon the first $3,000; and unless it discloses that this has been paid, there is a cause of action stated in the petition.

It was held in Birdsall v. Heacock, supra, that under circumstances like those there appearing, payments made by the principal on account will be applied in satisfaction of the first purchase, and the consequence will be a discharge of the guarantor’s liability; and it is urged by counsel for defendants in error that the payments which have been made here from time to time in the various ways shown by the petition, should be so applied, in discharge of the guarantor’s liability that, as a matter of law, they should and must be so applied; and that, notwithstanding the averments of the petition that they have been otherwise applied, the law will make the application in such a way as to work the discharge of the guarantors.

Whether the applications stated of these payments were made with or without authority from the principal debtor or guarantors is not stared in the petition. It is silent upon that subject. That the application has been made is all that is stated. I read on the subject of the application of payments, from an old edition of Brandt on Suretyship and Guaranty, Section 286:

“When the liability of a surety or guarantor is' for the debt of another, such liability, of course, ceases upon the payment of the debt. With reference to the application of payments, the general and well known rule is, that a debtor who owes several debts to the same creditor has the right at the time of making a payment to apply it to any one of the debts as he pleases. If he makes no appropriation of a general payment, the creditor may apply it as he sees fit. And where it is not appropriated by either the debtor or the creditor, the law will apply it according to the justice and equity of the case. The mere fact that there is a.surety for one of the debts will not make any difference in this rule, when a payment is made in the principal, where the principal debtor pays part of the principal sum due, and the whole of a highly usurious rate of interest stipulated for, the surety is bound by this application of payment. Where a mortgage or other security is given by a principal to secure several debts due one creditor, for one of which debts a surety is liable, and there is no agreement or anything to indicate the intent of the parties as to how the proceeds of the security shall be applied, the creditor may apply such proceeds to the payment of the debts, for which the surety is liable. When three notes are secured by a trust deed, and the two first due are also signed by a surety, the creditor may, after the maturity of all the notes, apply the proceeds of the trust premises to the payment of the note last due, on which there is no surety. The fact that he required sureties on the two first notes, was evidence that he was not satisfied with the security of the trust deed. Principal and surety were liable for a debt, and afterwards the principal obtained further advances from the creditor, at the same time depositing with him certain copper to secure his indebtedness, but without specifying what indebtedness. The principal failed, and the creditor, against the objection of the surety, applied the proceeds of the copper to the payment of the subsequent advances. 77eld: He might lawfully do so. As the principal made no application of the payment, the creditor had the right to apply it as he pleased, upon the ordinary principle which entitles a creditor in the absence of any direction from the debtor paying, to apply the money he receives to whichever of several debts arising he pleases.”

Notwithstanding this limitation in this written guaranty, it was competent for the company to borrow money from the bank. It was competent for the bank to give credit to the company and competent for the company to discharge such indebtedness by paying it; and to pay it without reference to the fact that it was indebted to the bank upon certain other loans, on account of which these guarantors had become bound; and we hold that payments made by the debtor company to the bank on other loans would not necessarily, as a matter of law, be credited— would not be required to be credited — upon the loan on account of which these guarantors were hound.

The ease differs somewhat from the case of a general open account, like that in Birdsall v. Heacock, supra; for the general rule is that where there is a general open account, and payments are made thereon generally (as in that case), the application shall be made upon the oldest item of the account. We know of no reason why this debtor, company may not have gone to the bank and made any of these loans of hundreds and thousands of dollars and agreed to pay them, either at a date subsequent to that at which the first loan became due and payable, or at an earlier date, and actually have paid them when they matured or at some other time, without regard to the fact that there was another indebtedness existing upon which the guarantors were bound, and without offering such guaranty.

The petition discloses no direction from anybody as to the application to be made of payments, but states that payments were made and that the creditor bank applied the payments as stated, upon the unsecured indebtedness. It does not appear from the petition that the bank violated any rights of the guarantors in so doing. It is possible that it did. It is possible that some reason existed why those payments should have been applied and why a court of law or equity even now would require that they should be applied upon the first indebtedness; but that reason is not disclosed in the petition, and if it exists, it must be brought forward by an answer.

The petition sets forth that the debtor company failed; that the bank proved up its claim for $6,538.82 upon these several notes of $475, $3,200, $2,200, and- $550 which were given in extension — or some of them were — of' the balance due upon the first $3,000 borrowed, and upon the other amounts first bor- , rowed, making up the $8,200. Of the property which went into the hands of the receiver of the company, the bank received as its distributive share, $879.79; of that which went into the hands of the receiver who was appointed in the proceedings to enforce statutory liability of the stockholders of the insolvent company, it received as its share upon these claims, the sum of $6,839.82.

The question arises whether the petition discloses a state of facts which would require the application of the money thus received in any particular way, or requires that it should go into any particular channel. We think it does.

In Bank v. Cheney (unreported), the court held that where there were various claims presented on behalf of the bank, upon some of which Mr. Cheney was surety, and upon others of which he was not, and there was a dividend paid to the bank upon their several claims, it was not competent for the bank to apply that dividend in such a way as to extinguish the unsecured claims presented and allowed, and leave the. claims upon which Mr. Cheney was surety without any payment having been made thereon. Our view of the matter, without any authorities being presented at that time, was that the different claims should pro rate; that the court had allowed these different claims, and that the dividends were upon the different claims, and that when the dividends were paid, the application should be made pro rata upon the different claims, and we enforced that rule. In looking into the case, we find authority in support of that ruling, although we found none at that time.

In 7 Bingham, 489, I read the syllabus:

“The defendant guaranteed plaintiffs against debts to be contracted by L. M. to the extent of 400 pounds. L. M. became indebted to plaintiffs to .the amount of 625 pounds, upon which by a composition with his creditors, he paid them 8 shillings 7 cents on the pound, leaving due to the plaintiffs out of their whole claim 336 pounds. The defendants being sued for that sum upon their guaranty — Held: That they were entitled to deduct from it 171 pounds, 13 shillings and 4 pence, the amount of the dividend of 8 shillings 7 cents on the pound upon 400 pounds. ’ ’

The matter is very well argued out by Kirdle, Chief-Justice, and the reasoning is very satisfactory to us. I do not take time to read it.

I call attention to another decision in line with that, in 5 Moore & P., 327. I will not stop to read it, but will simply say that the same doctrine is announced and applied.

So that we hold that the amounts received from these receivers upon this balance of indebtedness of nearly $5,000 should be applied pro rata upon the different claims presented and allowed; not only that received from the receiver of the insolvent company, but that received from the other receiver, who had collected from the stockholders on account of their statutory liability. We do not understand that the latter fund should be treated differently from any other to which the creditors might resort. We do not understand that the- bank had any peeuliar or special interest in that fund that these guarantors can not as well assert for their benefit — that these guarantors would not be subrogated to in the event they discharged the indebtedness, and sought relief against the debtor; and therefore we hold that both of these funds should be treated, as a matter of law, as having been applied in that way.

E. W. Tolerton, for plaintiff in error.

G. P. Voorhees, for defendant in error.

Nevertheless, it is not apparent that that would extinguish this indebtedness. It might still leave a balance of the first $3,000 unpaid. That balance may turn out to be as great as the balance claimed in the petition, or it may be less, or there may be nothing remaining unpaid of the first $3,000 loaned. This may depend upon the amount, if anything, of the first $3,000 loaned carried into these renewal notes. The transaction in the way of loans and payments and applications of payments up to the making of these last notes, are not set forth specifically in detail, but the petition avers that there is a balance of the secured indebtedness carried into these renewal notes and yet unpaid, and therefore we are of the opinion that the petition states a good cause of action, and that the court of common pleas erred in sustaining this demurrer.

The judgment will be reversed and the cause remanded.


source: Caselaw Access Project

license: Public Domain

text:
    LIS PENDENS.
    [Circuit Court of Cuyahoga County.]
    Leslie M. Green v. Perry S. Green.
    Decided, February 10, 1902.

      Lis Pendens — A Case Ceases to be, When — Following a Dismissal, Doctrine of, Applicable During the Remainder of the Term.

    1. A case is Us pendens during the entire term during which the court renders a judgment dismissing the petition.
    2. A suit for divorce and alimony and to enjoin the transfer of property was dismissed. A motion for a rehearing was filed before the end of the term, and at a subsequent term this motion was heard and the prayer of the petition granted. Held: That the suit was lis pendens from the dismissal until the filing of the motion for a rehearing, and the case did not cease to be in court until the plaintiff obtained the relief sought.
    Caldwell, J.; Hale, J., and Marvin, J., concur.
    Heard on appeal.
   It is unnecessary to state the facts in this case in full. The plaintiff, Leslie M. Green, brought an action in the court of common pleas for divorce and alimony against her husband, Perry S. Green, and undertook to tie up certain property by injunction which she claimed had been unlawfully transferred from her husband and that he was the true owner of the same. She failed to obtain either divorce or alimony, and she was dismissed out of court. A motion for a new trial was overruled, and, at the same term, she filed a motion for a rehearing. The motion was granted, and she obtained her divorce and "alimony upon the rehearing.

Either after the first judgment in the ease and the time of filing the motion for a rehearing, or just before the first judgment, this property in question was transferred by the one who held the title to the same; and, notwithstanding such transfer, she now seeks to fasten upon it her right to subject the same to the payment of her alimony; and the only question in the case is this: There was a judgment against her and she was dismissed entirely out of court, and so remained until at the same term she filed her motion for a rehearing, which motion was heard after the term, and granted, and she obtained her relief sought. Was the case Us pendens between the time of the dismissal of her petition by the court and the time when the motion for a rehearing was filed? In other words, was the case in court during the period?

It is not denied in this case by the defendant but that the court of common pleas had jurisdiction over its records and judgments during the term at which they are made. In fact, it is too well settled in this state to any longer be a question of controversy. Huntington v. Finch, 3 Ohio St., 445; Knox Co. Bank v. Doty, 9 Ohio St., 505; Kelly v. Stanbery, 13 Ohio, 408; Niles v. Parks, 49 Ohio St., 370; Huber Mfg. Co., v. Sweny, 57 Ohio St., 169; Ash v. Marlow, 20 Ohio, 119, 131.

Nor is it contended in this case by the defendant that it made any difference whether the court acted upon the motion for rehearing at the same term in which the plaintiff was dismissed out of court, or at a subsequent term, provided the motion was filed, as it was in this case, at the same term.

The only question is: Was the case pending in such a manner in the interim above named, that it can now be said to be lis pendens during that time?

We have been cited to a number of eases, none of them, however, being directly in point on the question in the case before us for determination. In some of them it has been held that a bill of review filed and on a hearing of the same a new trial granted, that between the time of the first judgment and the filing of a bill of review, the case was not Us pendens. But, upon an examination of these cases, we find that in none of them was the bill of review filed at the same term of court; and the courts seem to differ upon the question, under the facts just stated.

There is a difference of opinion when the one acquiring an interest in the subject of the litigation after the original de- ' cree is entered and before the bill of review is filed, takes title subject to such final action as may be had under any bill of review which may be subsequently filed.

Among the decisions confirming that purchasers, before the bill is filed, are, nevertheless, bound by the result thereof, are many of those that have been cited. And courts differ as to this question, where an appeal is taken or error is prosecuted, and the title changes after the judgment and before an appeal is prosecuted or error is taken.

The case of Ludlow v. Kidd, 3 Ohio, 541, 544, has been criticised upon the supposition that the court meant to say that after the judgment, one who purchases is not bound by lis pendens, notwithstanding that the case is thereafter brought into court under a bill of review.

None of these cases are, in their facts, like the question before us, nor is the principle the same in that the question in our ease is determined entirely by determining whether a case remains in court during the term at which judgment is given or refused and until the end of such term.

In contemplation of law a term of court is but one day, and all judgments are supposed to be of that one day; and yet this fiction must give way where two acts of the court are drawn in question as to which is prior, and then the question is determined by the facts to be established by evidence.

The eotu’t retains control over its entries during the term is undisputed, and this is equivalent, in our judgment, to saying that the case remains pending in the court during the term at which the judgment is rendered. A court certainly can not adjudicate in a case not in its court; and when the law says that a court may modify its judgment during the term, it must mean that it may modify it in a case that is pending.

But this does not answer the entire question: Is it pending in such a manner as to become lis pendens? In other words, is it notice during the entire term, or only until the time that judgment is rendered. It is claimed that any one seeing the record of the court, will see that all matters in the ease have been adjudicated and are at an end. But this latter conclusion would be wrong, for they are not at an end and do not terminate before the close of the term.

It has been held that when a judgment is set asidé at the same term, the case stands in court as though it had never been tried. 27 Ark., 295; Stannard v. Hubbell, 25 N. E. Rep., 1084 (123 N. Y., 520).

And in Ludlow v. Kidd, supra, if the Supreme Court had found a ease establishing this doctrine just announced^ evidently from the opinion it must be concluded the court would not have concluded as it did in that ease.

Cases fairly in point on this question are not numerous, and, in fact, we have found but one that fairly decides the exact question before us, and that is Cornell University v. Parkinson, 53 Pac. Rep., 138 (59 Kansas, 365). The district court, in disposing of the ease, used this language on page 140:

. “The first rule to be considered is this: That the court has absolute control of its decrees and judgments during the term at which they are rendered. They are, as expressed by some writers, within the breast of the judge during the term. This is a wholesome provision of the law and necessary to the administration of justice. In the hurry of business and confusion incident to a term of court, it often becomes necessary to correct during the term the mistakes that have been made; and these can be corrected at any time during the term, and the term is only one day, in law; and persons who purchase property upon decrees must understand that rule, and purchase with reference to it.” * * *

And the court concluded that there was no estoppel of record in that case; that is by the mere entry of the judgment, as the judgment does not become final until the term adjourns; that is final in the sense that it is beyond the control of the court that pronounces the decree. In that case, the court found an element of estoppel which prohibited in equity the party seeking to obtain relief. So that, notwithstanding the purchase was made lis pendens, the other party was debarred from taking advantage of the same.

It has been held that if an appeal is prosecuted in a case before the end of the term at which the judgment was rendered, or proceedings in error are had before the end of the term, and although the jurisdiction of the appellate court may have attached, yet the trial court is not thereby barred from changing its judgment during the term. Blum v. Wettermark, 58 Tex., 125; Grubbs v. Blum, 62 Tex., 426.

J. F. Clark, for plaintiff.

White, Johnson, McCaslin & Cannon, for defendant.

Our conclusion in this ease is, that the ease was Us pendens during the entire term in which the court rendered the judgment dismissing the petition, and the motion haying been filed at that term, the transfer of the property was made while the case was yet in court, and that it never ceased to be in court until the plaintiff obtained the relief that she sought in her petition, and that the plaintiff is entitled to the judgment that she seeks.


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    JUDICIAL NOTICE OF ORDINANCES.
    [Circuit Court of Ashtabula County.]
    Albert Strauss v. Village of Conneaut.
    Decided, January Term, 1902.

      Sunday — Prosecution for Keeping Place of Business open on — Courts will Take Judicial Notice of Ordinance — What it Must Contain— Need not he Included in Bill of Exceptions.

    1. In a prosecution for the violation of a municipal ordinance, a municipal court will take judicial notice of the existence of the ordinance.
    2. A court of review occupies the same relation to the ordinance as the municipal court, and where one against whom a penalty has been assessed for the violation of an ordinance seeks to have the judgment reversed, the reviewing court will also take judicial notice of the ordinance under which the conviction was had.
    3. An ordinance prohibiting common labor or the opening of places of business on Sunday is invalid if works of necessity or charity are not excepted therefrom, and a judgment of conviction under such an ordinance will be set aside.
    Cook, J.; Burrows, J., and Laubie, J., concur.
    Heard on error.
   Strauss was convicted before the police justice for a violation of an ordinance of the village of Conneaut for keeping his place of business open on Sunday.

The ordinance provides “that it shall be unlawful for any person over fourteen years of age to engage in common labor or to open or cause to be opened any building or place for the transaction of business on the first day of the week, commonly called Sunday.

The ordinance further provides in a separate section that its provisions do not extend to persons who conscientiously observe the seventh day of the week as the Sabbath, and who do in fact on that day abstain from the doing of the things prohibited by the ordinance, but does not exempt works of necessity and charity.

Strauss, by his counsel, filed a motion for a new trial, which was overruled by the police justice, and six days were given to prepare, have allowed and file a bill of exceptions, which was done.

Application was made to the court of common pleas to file a petition in error, which was granted by the court. Thereupon the village, by its counsel, filed a motion to strike the bill of exceptions from the files for the reason that the ploice justice had no authority to allow six days to prepare and file a bill of exceptions. The motion was sustained and the petition in error was dismissed by the common pleas court.

The ground of error relied upon is that the ordinance under which Strauss was tried and convicted is invalid for the reason that it does not except works of necessity and charity. The question was not passed upon by the court below for the reason that the ordinance was included in the bill of exceptions, and the bill being stricken from the files, that question, as it was claimed, was not before the court. The. principal argument before us has been as to whether or not the common pleas court erred in striking the bill of exceptions from the files for the reason that the police justice had no authority to give time for the filing of a bill of exceptions.

As to whether or not a municipal court, in a prosecution for a violation of an ordinance, has the power to extend the time after judgment for the filing of a bill of exceptions has been much controverted. In two circuits, the sixth and eighth, it has been decided it has no such power, while in the second it is held that it has. As we view the case it is not necessary for us to determine this question, for the reason that this court will take judicial notice of the provisions of the ordinance under whch the accused was convicted, and its incorporation in the bill of exceptions was unnecessary.

Upon the trial in the municipal court the police justice must have considered the ordinance under which the charge was made independent of whether it was introduced in evidence or not. It was not necessary in the affidavit to aver the existence the contents of the ordinance, nor was it necessary to prove the same. Courts of general jurisdiction will not take judicial notice of municipal ordinances in original actions brought upon the ordinance, but in actions in the municipal court in a criminal prosecution for a violation of the ordinance the jurisdiction of the court depends upon the ordinance under which the prosecution is had. The ordinance is the foundation of the prosecution.

The question has not been determined by our Supreme Court, and so far as we know by any circuit court of this state. While there is a diversity of holding in the other states (17 Am. & Eng. Enc. Law, 2d Ed., 937), we think the better opinion is that municipal courts will take judicial notice of the ordinances of municipalities in actions to enforce the same, and that it is not necessary to introduce the ordinance in evidence. Solomon v. Hughes, 24 Kans., 211; Downing v. Miltonvale, 14 Pac. Rep., 281 (36 Kans., 740); Moundsville v. Velton, 13 S. E. Rep., 373 (35 W. Va., 217); Laporte City v. Goodfellow, 47 Ia., 572; Incorporated Town of Scranton v. Danenbaum, 80 N. W. Rep., 221 (Ia).

If the municipal court takes judicial notice of the ordinance under which the conviction is had, the reviewing court must do the same, otherwise the accused would be without remedy. It not being necessary to introduce the ordinance in evidence, the record would be barren of the ordinance, and however invalid the ordinance might be, the accused could not have determination of the reviewing court upon its validity. The reviewing court occupies the same position as the municipal court in relation to the ordinance; what was law before it is law in the reviewing court, and what was fact before it is fact before the reviewing court. The law need not be averred and proven while the facts should be. One is taken judicial notice of; the other must come before it by a bill of exceptions. Hanley v. Donoghue, 116 U. S., 1 (6 S. Ct. Rep., 242); Moundsville v. Velton, 13 S. E. Rep., 373 (35 W. Va., 217); Downing v. Miltonvale, 14 Pac. Rep., 231 (36 Kans., 740); Keck v. Cincinnati, 4 Dec., 324; 17 Am. & Eng. Enc. Law (2d Ed.), 938.

Parker & Smith, for plaintiff in error.

A. M. Cox, for defendant in error.

This holding in no way conflicts with the decision in Toledo v. Libbie, 19 C. C., 704, 705. That ease was an original action brought in the common pleas court, and that court could not, under the well settled rules of law, take judicial notice of the ordinance, but held that it must be plead and proved, and, therefore, the circuit court upon review could not consider the ordinance, it not being attached to the bill of exceptions. In that case it was said, however, that “city courts and mayors of villages take judicial notice of the ordinances of their respective municipal corporations.”

The ordinance in this case is attached to the record and is certified by the police justice as the ordinance under which the conviction was had, and counsel concede that to be so; it shows that no exception is made of works of necessity and charity. However necessary it might have been for the accused to open his store, or whatever charitable purpose it was to subserve, could not have been shown under the ordinance. It must, therefore, be held invalid. Such is the distinct holding in Canton v. Nist, 9 Ohio St., 439. The judgments of the common pleas court and of the police justice are reversed and the accused is discharged at costs of defendant in error. Case remanded to common pleas court for execution.


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    INJURY TO BRAKEMAN FROM USE OF A DEFECTIVE CAR..
    [Circuit Court of Lucas County.]
    Michigan Central Railway Co. v. William Butler.
    Decided, January 13, 1902.

      Negligence — Brakeman Seizes Defective Grab Iron and Falls Beneath Gar — Defect in Iron not Noticed by Car Inspector — Construction Given to Rule by Employes with Knowledge of Employer — Varying Degrees of Danger as between Customary Methods — Circumstantial and Corroborative Testimony.

    1. "Where an employe went about his work in the customary manner, and did not assume a hazard that a person of ordinary prudence engaged in the same work would avoid, he can not be regarded as guilty of negligence, notwithstanding he did not adopt the safest course open to him.
    2. It can not be assumed that a rule was violated, and contributory negligence predicated on such violation, where it appears from ■the evidence that by the general or uniform practice of employes, which practice seems to have been known to the employer, the rule was not regarded as applicable to a situation such as the one in which the accident occurred.
    3. Chalk marks indicating that a car was out of repair, but which were not readily noticeable to a brakeman operating the car in the yards at night, do not amount to notice to such brakeman of the defective condition of the car; and were such not the case, the notice would not go beyond the defect which the inspector discovered when he marked the car to some other defect which he did not discover.
    4. The failure of a car inspector to discover that a grab iron or hand hold was not properly fastened, indicates a failure to thoroughly inspect the car, and the operation of such a ear constitutes under Section 2365-21 prima facie negligence.

    5. Testimony to the effect that a person who has been subpoenaed as a witness was heard to make a certain statement is corroborated to a certain extent by the failure to put the person alleged to have made the statement on the stand.
    Parker, J.; Haynes, J., and Hull, J., concur.
    Heard on error.
   William Butler, a yard switchman, in the employ of the Michigan Central Railroad Company, was injured on May 4, 1900, at about 10 p. m., while in the line of his duty attempting to mount a flat car for the purpose of setting a brake upon it. He fell upon the track and the wheels of a car passed over his right leg, crushing it, making necessary the amputation thereof just below the knee-joint. In the court below he recovered a judgment for $7,500.

The negligent act complained of was having a car in service with a defective grab-iron on the end thereof, which Butler claims gave way as he put his hand and part of his weight upon it in an attempt to spring upon the car.

It appears that Butler had been at work for the ■ company at its North Toledo yards that evening, coupling and uncoupling cars that were being shifted by the yard engine to the vavious tracks in the yards; that just before the accident the engine had pushed two flat cars eastward upon what is called the “short repair track” of the company. That the foremost car was empty and the second car was loaded with defective car wheels. There was no eye-witness to the accident other than Butler. He testifies that as these cars came upon the short repair track he was a short distance eastward of the point wherp said track diverges from the other tracks, and south of said track. That he started to intercept the cars and mount them and set brakes upon them. That because of car wheels upon the ground between him and the short repair track, he was obliged to pass a short distance to the westward, and as he came to said track, the forward or east end of the forward car, which was the empty car, had passed him, so he continued westward until he came opposite to the opening between the two ■ cars, when he stepped between them, and, placing his right hand upon the grab-iron, which was upon the west end of the east car, and his left hand upon the platform of the approaching or westward car, he attempted to spring or throw his body so as to seat himself upon the forward ear, and, in so doing, he threw his weight partly upon this grab-iron, as before stated, when it gave way, with the result stated.

The evidence shows that the grab-iron, which consisted of an iron rod about three-quarters of an inch in diameter and eighteen inches long, was placed upon the end of the car to aid trainmen in coupling and uncoupling cars, but that it was not unusual to make the use of it, which Butler attempted on '.this occasion, and that this manner of mounting the ears was not considered especially hazardous. That this grab-iron was securely fastened at the inner or northern end, but the outer or southern end had not been fastened except by being placed behind a certain plate bolted on the southwest corner and west end of the car — slipped or dropped between this plate and the end beam of the car — where it could not be dislodged by pulling down or pulling outward toward the west, but might be easily dislocated by lifting about five inches and then pulling an inch or so to the westward.

" An inspector of cars in the service of the company testifies that at about 2 o’clock a. m. of the same day he inspected this ear and found the forward journal on the south side cut, and the western end sill somewhat broken, and he then put three “Xs” upon the car, with chalk, which was the usual manner of indicating to the trainmen that the ear was defective, a “cripple,” and was to be set upon the repair track for repair; and he says that at that time he observed that the grab-iron was in position, though he admits that the method described of fastening the southern end was defective, and that he overlooked this defect, which we think he would have discovered if he had observed due care.

Now counsel for the company contend that the plaintiff has failed to establish that the accident happened in the way he describes it, and says that it is fairly inferable from the evidence that he attempted to mount the eastern car at the southeast corner thereof, where there was a stirrup, a hand-hold and a brake staff, affording safer and more convenient means of mounting the car, and that he slipped and fell, through no defect in the car and no fault of the company.

This conclusion ‘is urged, first, upon the ground that that would be the most natural and ordinary way to mount the car; and, second, because, it is said, the grab-iron, if in place, could not be dislodged by the movement attempted, since that would cause a pressing down upon and not a. lifting up of the grab-iron; and, third, because a close inspection of the second or westward ear failed to disclose a particle of blood upon any of the wheels, while particles of blood, though infinitesimal, were found upon the second wheel westward from the east end of the forward car, indicating that that wheel passed over the leg.

Of these in their order: First, under the circumstances related by Butler of the east end of the forward car having passed him before he came near enough to mount it, and especially in view of the fact that it was his purpose, as he says, to set the brake upon the eastern end of the westward or loaded, car, whereby he could better control both cars, it is not apparent that it would have been more natural or convenient to mount at the southeastern corner of the eastern car; and it is shown by the testimony of many witnesses upon the subject, that the difference in the two methods, in point of ease, convenience or safety, was not great; that is, the employes in this line of service discerned no great difference, and the method attempted was not unusual.

Second. While the inspector at 2 a. m. observed the grab-iron in position, and Butler testifies that at the time he took hold of it it seemed to be in position, it is evident, if credit is to be given to the account of Butler of what happened, that the end had become dislodged from its position behind the plate, though the nearly horizontal position of the iron may have been preserved. This might easily happen in the twenty hours intervening between the inspection and the accident. The evidence shows that the fastening at the north end was so tight that the horizontal position of the iron might have been maintained though the south end were not behind the plate.

Third. Butler was not removed from the track until both cars had passed beyond him. Even if three of the wheels of the front car passed over his leg, four wheels of the hind ear must have done so also, so that if blood should have spurted and lodged upon any car wheel, it is difficult to see why some sign of blood could not be found upon the wheels of the hind car. But the examiners thereof found no blood on the wheels of the hind ear, which certainly ran over the leg whether the accident happened as related by Butler or as conjectured by the company. In view of these facts and of the extremely insignificant quantity found, which might have come from a scratch or abrasion of a hand in taking off the wheel, or a slight bleeding of the nose of some employe, or might have come from some animal (for the experts can not say that it was human blood, or how long it had been upon the wheel), or from any one of a multitude of causes not improbable, we think that this and the other circumstances mentioned are not sufficient to over-" come the positive statement of Butler; at least they are not sufficient to require the jury to disregard the testimony of Butler or to authorize us to say that the verdict is contrary to tho weight of the evidence. Besides, Butler’s account has some corroboration in the testimony of the car inspector who says that twenty-five minutes after the accident happened he found this grab-iron hanging down, the south end having become entirely liberated from its fastening behind the plate and the north end only being attached, and one Gayes Orr, an employe, also testifies to this grab-iron hanging down soon after the accident.

It is also urged on behalf of the company that Butler was guilty of negligence in adopting the method he attempted to pursue to mount the car. I have said enough on that point to indicate our views that the jury was not required to come to that conclusion. If he went about his work in a usual and customary way and did not take a hazard that a person of ordinary care and prudence would avoid, he was not guilty of negligence even though he did not take the very safest course open to him. The jury had a right to give some consideration to the circumstances, making it impracticable for Butler to carefully consider or deliberate upon the shades of difference in point of safety between the different usual and customary methods open to him.

It is also urged on behalf of the company that Butler acted in violation of rule No. 26, governing employes, which ■ appears upon page 97 of the record and reads as follows:

“Jumping on or off cars or engines in motion to couple or uncouple them, and all similar imprudences are forbidden. Every employe is required to exercise the utmost caution to avoid injury to himself or fellow employes, especially in coupling, switching or other movements of cars and trains.”

It is not claimed that this rule is strictly applicable to the case in hand, but it is said this imprudence upon the part of Butler was similar to the imprudence which is expressly prohibited, namely, the jumping on or off cars or engines in motion, to couple or uncouple them. But it seems by the evidence that by the practice of the employes, which seems to have been known to the employer, the general or uniform practice of employes, this rule was not regarded as applicable to a situation like that which we have under consideration; hence we can not say that this rule was violated.

Counsel for the railroad company also urges that under the circumstances this was an assumed hazard or risk. I can not better state his claim and proposition than by reading it from his brief.

“We submit that the verdict and judgment was contrary to law. That even if the plaintiff was injured in the manner in which he claims to have been. — the car having been by the company inspected, the defect having been found, and the car marked for the repair track to be repaired, all in the usual and customary method and 'manner of giving notice or warning to those who were to perform service upon it — that Butler in attempting to perform service upon it, without objection and complaint as to the method and custom of giving such notice and warning, assumed the risk and peril of the service.
“We submit that the judgment should have been in favor of the plaintiff in error, upon the ground that there was no legal negligence proven against the company; in other words, that the company having inspected this car and found it to be defective and marked it for the repair track, which was the known, customary and usual notice and warning to those who were handling it before they performed any particular service upon it to look to see if it was fit to perform service on; that attempting to perform some particular service at some particular point on the car, without making some investigation and examination to see to its condition, whether safe or not, he took upon himself and assumed the risk and peril of the service.”

Section 2365-21, Revised Statutes, makes the use of -the defective car prima facie evidence of knowledge of the defect. This prima facie case is not overcome in this case by proof of lack of knowledge and lack of opportunity to obtain knowledge of the defect. The car inspector had discovered a defect in this car, and, in onr judgment, by tbe exercise of ordinary care, he would have discovered this defect.

Did the marking of the car give Butler such notice of the defect as to put him in the position of assuming the risk incident to operating the car? As a rule the employe does not assume the risk of using defective machinery or appliances; but if he have knowledge of the defect and risk and continues to use the defective machinery and appliances without objection and without a promise by the employer to remedy the defect, he will be held to have assumed the risk. So, if his employment requires him to take charge of and operate defective machinery, etc., and he is aware, or by the exercise of reasonable diligence and' prudence may be made aware that he is operating such defective machinery or appliances, he will be held to have assumed the risk. The ease of The Chicago & Northwestern Railway Co. v. Ward, 61 Ill., 130, is a case of that character.

Does the ease at bar fall within this class? Butler says that he was not in fact aware of this defect, or of any defect in the car. That he had not observed the three “X’s” marked with chalk by the inspector on the end of the car, and that his attention had not been drawn thereto in any way. These marks were on the west end of the empty car, where, after night, . though a bright night, and though he had his lantern in his hand, he might not have readily observed them. He could not see them until the car passed him and he had turned to go between the ears to mount the ear. The fact that the car was being set in on the repair track did not necessarily indicate to Butler that it was a defective ear, designed for repairs, for that track was used for the loading and unloading of car wheels and other parts of cars, as well as for repairs; and Butler testifies that he heard the yardmaster tell the conductor, shortly before the accident, to run these two ears upon this track, unload the loaded car and then load both cars with car wheels, and this testimony has some corroboration in the fact that the yardmaster, who was subpoensed as a witness, was not put upon the witness stand to dispute it. It is also shown that the words: “Set on short repair track for wheels” were chalked upon this * car, and that these words indicated that it was to be set in there to be loaded with wheels; so that, under all the circumstances, we can not say that Butler was guilty of lack of ordinary care or diligence in failing to discover that this was a defective car or that he was chargeable with knowledge of that fact so that he should be held to have assumed the risk of going upon and operating the car. That it was his duty at that time and place to mount the ear and set the brake is unquestionable and conceded.

But, assuming that he was bound to know what the “XXX”' would convey to him, i. e., that this was a defective car, of knowledge of what defect would he thereby become chargeable? The only defects discovered by the ear inspector, whose duty it was to detect defects, were those in a journal of one wheel and a break in the west end sill, though this grab-iron was in immediate proximity to the defect in the end sill.

We are of the opinion that if Butler was chargeable at all with constructive notice of defects in the car, because the car had been marked with “XXX”, it would be of such defects only as had been discovered by the car inspector, and on account of which he had thus marked the car for repairs. That such notice would not reach beyond the information that Butler would have gained if he had gone to the inspector for information as to the reason of his putting the “XXX” on the car. To hold otherwise, might, we think, afford the railroad company a simple and yet effective, though unfair, method of nullifying Section 3365-21, Revised Statutes, for they might mark all ears “defective,” on account of actual, suspected or possible defects, and thereby throw the risk, under the doctrine of assumption of risks, upon the employe, and wholly escape the responsibility designed to be fixed by this statute.

And, under the circumstances, we can not see that Butler was guilty of negligence in failing to discover this defect which had been overlooked by the car inspector.

The case of New Orleans & N. E. R. Co. v. Clements, 40 U. S. App., 465, is a case in many of its aspects like the one under consideration, and I read the statement of the case as given upon pages 466 and 467.

“This is an action to recover damages for personal injuries, brought by E. T. Clements against the New Orleans & Northeastern Railroad Company, a corporation created under the laws of the state of Louisiana, and tried before the circuit court and a jury, in which a verdict and judgment were rendered against the defendant for $12,500. There was a motion by the railroad company for a new trial, which was overruled, and thereupon a writ of error was sued out. The defendant in error, Clements, was an employe of plaintiff in error in its Meridian yards, in the capacity of night yard foreman. It was his duty to place cars coming into Meridian on tracks or sidings where they belonged, according to the course of business of the company. The company had certain inspectors in the yard, whose duty it was to inspect all ears as they came in, and it was Clements’ duty to handle such cars after they had been inspected. He had an engine ,and crew under him to assist in handling these cars. On the night of October 15, 1897, a train of flat or gondola ears, loaded with gravel, consigned to Meridian, reached Meridian on the Alabama Great Southern Railroad about 9 o’clock p. m. These cars were immediately inspected by the inspectors, and about 11 p. m. Clements proceeded to place the cars on their proper track. For this purpose he had the engine coupled to the cars, and on signal by him the engine pulled the ears forward. Clements, having first cut the cars intended to be moved from other ears to which they were coupled, started forward the way the cars were moving-walking along the south side, of the cars. Noticing that a brake on one of the ears — a flat ear belonging to the Alabama Great Southern Railroad Company — was “set up,” and that the car was jerking along impeded by the brake, he, in pursuance of his duty, climbed on front of the adjoining car in order to let the brake off. Having reached the platform of the connecting ear, the cars then being slowly moving, he turned and stepped from that car forward to the end of the next car, where the brake was, at the same time reaching forward and taking hold of the brake wheel. The wheel of the brake came off, and Clements fell backward and against the end of the car from which he had just stepped, and thence to the ground, on the right side of the train — the side opposite to that from which he had climbed — and his left hand fell across the rail and was run over, and so injured that it had to be and was amputated. It transpired that the nut which belongs on the top of the brake rod was absent, and there was evidence that it had been off a day or two. This nut is for the purpose of holding the brake wheel on, and the brake wheel came off because of the absence of this nut. The action was predicated upon the alleged negligence of the company in not properly inspecting the ear, the plaintiff alleging that he was exercising due care. The railroad company, in defense of the action, denied the alleged negligence, and also denied that the plaintiff was in the exercise of due care, and pleaded certain rules of the company which it claimed made it the duty of Clements to inspect the brake wheel, and averred that Clements had ample time and opportunity to so inspect said brake as to have discovered said defect and thus guard himself against injury, and that plaintiff was guilty of contributory negligence.”

In the opinion by Judge Pardee, there appear quotations from a number of cases in point, but I shall confine my reading to his language in closing, at pages 473 and 474. Pie says:

“In the light of these decisions, we understand the law to be that, as to patent defects in machinery furnished by railroad companies for the employes to use, the railroad companies are insurers- in all cases where the employe, by reason of his employment or the circumstances of the case, has no full opportunity, before using the machinery in question, to observe and note the patent defect; and the rule is the same with regard to all defects that can be discovered on proper examination and inspection.
“In the present case the defendant in error was not called -upon by his duty to make any particular inspection of the cars turned over to him after the regular inspection. As to the particular defect which resulted in his injury, the proof is clear that although the defect was patent, and could and would have been readily noticed by any employe called ordinarily to use the same, the defendant was called upon to use it at night, in an emergency, and without opportunity to examine or inspect the same. It may be, as counsel for plaintiff in error argued, that he knew that the ear had lately come in from another road; that after he reached the platform of the car he could, with the slightest movement of his hand, or instantaneous movement of his lantern, have discovered the condition of the brake (that is, the absence of the nut); and that upon that discovery he could have used the brake (“let it off”) in such a way that he would not have been injured. But the trouble is, he had no opportunity to examine the condition of the brake with his hand, or by any movement of the lantern. In the line of his duty, he was climbing on top of the car as it was moving, and he reached for and caught the brake to support himself preparatory to using the same; and to say, under such circumstances, that he should have made a preliminary inspection, is contrary to both reason and authority.”

E. D. Potter, for plaintiff in error.

Cole, Whitlock & Cooper and Hamilton & Kirby, for defendant in error.

As I have said, the plaintiff recovered a verdict and judgment for $7,500. It is urged on behalf of the railroad company that this was excessive. I do not wish to discuss that, but will simply say that we have given it very carefui consideration, both in connection with the tables which show what annuity this sum would purchase, he being forty years of age, and in connection with the testimony as to his condition and the probabilities of his being able to earn something in the future and also after considering the testimony as to his expenses, his pain and suffering, and the embarrassment, hindrance and mortification due to being crippled in this way, and after full consideration of all these and other matters bearing upon the question, we conclude that this amount is not so large as to indicate prejudice or passion on the part of the jury; neither is it demonstrable that, by mistake, the jury has made a wrong estimate which we should correct by requiring a remittitur. Finding no error in the record, the judgment of the court of common pleas will be affirmed.


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    TRADE SECRETS.
    [Circuit Court of Muskingum County.]
    The National Tube Company v. Eastern Tube Co. et al.

    Decided, 1902.

      Trade Secrets — Definition of — Rule Applicable to Employes in Possession of Trade Secrets — Individuality of a Pattern or Product not a Trade Secret, When — Equity—Injunction—Damages.
    1. A trade secret is a plan or process, tool, mechanism or compound, known only to its owner and such employes as it is necessary to confide it, in order to apply it to the uses for which it is intended; when discovered in any honest manner, the person making the discovery has the right of use.

      2. An employe bas no right to sell a trade secret evolved by his employer, nor to sell his services to another with the added value of his secret; but if the employe himself evolved the idea, the employer does not own it and can claim no further interest in it than the product of the skill, industry and intelligence of the workman. '
    3. Where the combined skill and experience of employes of a tube mill applied through a number of years results in a certain individuality in the construction of patterns and castings, such individuality does not amount to a trade secret from the use of which another may be enjoined.
    4. But where the patterns themselves are wrongfully abstracted from the mill to which they belong for use in another mill, equity will enjoin such use.
    5. An employe who effects such wrongful removal of patterns is the agent and vice principal of the company for whose benefit the patterns were wrongfully procured.
    6. Jurisdiction will not be taken by a court of equity of an inquiry as to the amount of damages sustained, except where such an inquiry is incidental to other relief and for the purpose of dis-ground for which relief was sought has vanished, jurisdiction of the cause will not be retained for the purpose of assessing dam-posing of the entire controversy in one court; if the principal ages.
    Donahue, J.; Douglass, J., and Voorhees, J., concur.
    Heard on appeal.

       Affirmed by the Supreme Court without report December 8, 1903.

   This is an action filed in this court for an injunction to restrain the defendant company from using certain patterns and machinery, east therefrom, in and about its tube works in this city. The pleadings are long, and I shall not undertake to read them, but the issue, as we understand it, is this: The plaintiff claims that, during the time of the building of this defendant company’s plant, a certain Harry Nuttall was in the employ of the plaintiff company; that the mill of the plaintiff had been dn operation for something like twenty years, and in the course of that operation, had perfected, through the various stages of evolution, certain patterns that were strictly individual and distinct from the patterns of all other tube mills; that the shape and construction of these patterns were a trade secret; that about the time the defendant company was building its plant, it took into its employment the said Harry Nuttall, who was then in the employ of the plaintiff; that he was then in confidential relation, and in a position of authority with the plaintiff, and that he wrongfully, fraudulently and secretly took and carried away the patterns of the plaintiff, and had certain castings made for the use and benefit of the defendant company; that he could not have secured these patterns except by reason of his confidential employment; and plaintiff asks this court to enjoin the defendant company from the use of the castings made from these patterns; that a receiver be appointed to take charge of these castings and destroy them, and that damages may be assessed.

The defendant admits the taking and the use of patterns, the confidential relations of Nuttall, substantially as pleaded, but denies that the patterns were a trade secret and avers that these and like patterns were and are in common use; that artisans in that line of business had full knowledge of the character of the machinery and of the patterns and could easily and readily reproduce them, and that if any advantage was derived by it from the use of the patterns, it was not more than the saving of time and expense necessary to reproduce the same.

The first proposition, which must necessarily be conceded by the defendant, is that the plaintiff had a property right in these patterns, i. e., in the thing itself .; whether in the idea of the thing is another proposition, but in the pattern, the article itself, plaintiff had a property right.

The second proposition that must also be conceded, is that the use by Nuttall was wrongful and in breach of his confidential relations with the plaintiff. The acceptance of employment and salary from two rival concerns at the same time is, at least, deserving of censure. “No man can serve two masters; either he will love the one and hate the other or he will hold to the one and despise the other.” We take it counsel will not care to dispute the authority in support of this proposition. No man in the confidential employment of a master, or of two masters, can be permitted to take the property of one without his consent and use it for the benefit of another. That is wrongful, whether the property be a trade secret or not.

The questions here presented are important in any view we take of it. The necessity of good faith and honest, fair dealing, is the very life and spirit of the commercial world. It is absolutely necessary that it should be protected and enforced by courts, and, on the other hand, it is a serious proposition for a court to lay forcible hand by injunction upon a large concern of this character, in which hundreds of thousands of dollars are invested and a large number of men are employed, an’d thereby, for the time, destroy its usefulness to owners, employes and the public, and it ought not to be done if relief can be had in any other way. It should be done only when the necessities of the case demand such stringent measures.

But if these patterns are trade secrets, then it can not be permitted that the defendant company here should have the benefit of the same, or of any of the castings made from the same, when the patterns were procured in the reprehensible manner charged and admitted; but if they are not trade secrets, if the idea of these patterns -is known generally to the world, or at least to the people interested in that kind and character of business, then it can not be a trade secret, and plaintiff is not entitled to any protection as to the idea.

A trade secret is a plan or process, tool, mechanism, or compound, known only to its owner and those of his employes to whom it is necessary to confide it, in order to apply it to the uses for which it is intended. It is not protected by patent, for the secret then is made public, and the inventor is protected by letters patent from infringement thereof; while, as soon as anyone fairly and honestly discovers a trade secret, either by examination of the manufactured products sold or offered for sale to the public, or in any other honest way, that person discovering it has full right to use the same. That is the risk the owner takes, and if he would have further protection, he must seek it in a patent. We believe that is the correct definition and the correct law of trade secrets, and we will not stop to cite authorities in support of it, because we believe none are necessary.

The question of defendant company’s knowledge of the conduct of Nuttall is not, in the opinion of this court, of serious concern. He was an employe of the defendant corporation, charged with certain duties and possessed of certain powers to discharge these duties, and assisting in procuring these patterns was a part of his duties. Therefore, he was the agent and vice principal of the defendant, and his knowledge was defendant’s knowledge, though defendant actually had no knowledge whatever of the transaction, and we are free to say that we do not believe that the elective officers of this corporation, i. e., the directors and the officers selected therefrom, had any knowledge whatever of the procuring of these patterns in this way or of the uses to which they were to be put; but the very fact that they had no such knowledge shows that they had delegated that power, authority and duty to Nuttall, and relying upon him, they were giving no further attention to it. Therefore, his acts, for all the purposes of this case, are the acts and conduct of the defendant company.

If the patterns then are trade secrets, the injunction must be( allowed and relief given as fully prayed for, for there is no contention but that Nuttall wrongfully used these patterns for defendant’s use and benefit.

Now, what is the evidence upon this important question ? The evidence seems to fairly demonstrate the fact that these mills had a certain individuality; that this individuality was the growth of experience, the evolution, as it were, of the tools and machinery used in and about the concern. One of the witnesses for the plaintiff — and I want to refer to one only (Mr. Bray) —has this to say (I read from page 165), being inquired of as to the several men who possessed the requisite knowledge and skill to reproduce a mill of this kind, he having said that there are such men:

‘ ‘ Q. Then these mills and the construction of them is a matter of purchase in the market, and there are a number of men in this country, at this time, who can do it ? A. It is a question of engaging a competent engineer and a man to do the work.
“Q. The advantage of taking this pattern, you say, was a matter of several months time? A. Yes, sir.”

Now, at another place, he says that he can make a mill, and these other men can make a mill, approximately like the Pennsylvania Tube Works mill. The same can be said of the bricks in the walls of the buildings of this city. Each brick is approximately like the other, but there is no brick exactly like another brick. It is not possible, in the affairs of men, to reproduce any article more than approximately like another. The word “approximately” is subject to wide differences of meaning and shades of meaning. It may be exactly alike, so far as the human senses can determine, and on the other hand it may have a difference that we can determine by the ordinary senses, and yet be substantially the same; but we think that testimony of Mr. Bray is the strongest evidence in the record that the plaintiff has offered to this court, upon which it asks us to stop a mill in which there are invested, as we have said, hundreds of thousands of dollars, and in which there are a great many men employed. The balance of the evidence is all to the same effect. That there was some care taken of these patterns and some intention of keeping them from the public generally, there can be little doubt; but a trade secret, as we said a moment ago, is a secret, known only to the owner or proprietor of it and such of his employes to whom it is necessary to communicate the secret, in order that he may use them to advantage. It does not mean that, when I employ a man who has skill, knowledge, and experience in a particular line, ask him to furnish me the knowledge, and employ him because of his knowledge and experience, and he then supplies me an article, or does for me that which his skill, knowledge, and experience enable him to do, the idea or ideas he evolves become the property of the employer as a trade secret. That is not the idea at all. The trade secret must be in the mind of the man who discovers it, and he must be using that secretly, and the communication to his employe must be made for the purpose of better enabling that employe to discharge his duties as such. Then the fact that he communicated it to that employe does not permit the employe to sell it in the market or to sell his services in the market, where he can, with the_ added value of that secret; but if the employe himself knew the thing, if he is the one who brought the knowledge to the employer, the only property interest that the employer can claim is the product of his skill, the industry, and the intelligence of that workman, i. e., he owns the pattern, but he does not own the idea. If he would own the idea, he must contract not only for the services of this man but that he- may have the idea that shall be developed through his experiments. In other words, the natural rule of right is this: That a man shall have the benefit of all his intelligent thought and enterprise, of all that he may discover by industry and ingenuity, and unless he contracts to sell some other man that idea, he may use it for his own benefit or for the benefit of any employer he may afterward find service with.

Therefore, if these mill owners desire to cripple a man’s enterprise and his energy and intelligence, to hamper him in his future employment by requiring that he shall not give to that future employer the benefit of his skill or the things that he has developed for the former master, they must contract to that effect. Nothing but a specialty would control the natural rule of right in that case.

That was not done here. These patterns, whatever they were, were the result of the combined knowledge of men in the employ of the master. It is not even contended in this case that the corporation or the men constituting the corporation had any ideas on the subject themselves, but they went into the market, where skill, knowledge, and experience were to be bought, and they bought the use, but they did not buy the brain of their employes. All they can claim then is the product of the labor of these men, and that amount to the patterns and nothing more.

To illustrate, here are draughtsmen first required, then pattern makers, then the skilled mechanics of the mill. These three working together produce a certain individuality in a certain mill. This is natural, but that individuality can be transferred to another plant to-morrow by the draughtsmen, the pattern makers and the skilled mechanics resigning their employment with this master and taking service with another. There is no question about that, under the laws of this state or under the laws of any state. Therefore, we believe that if there was an individuality in these patterns, it was not a trade secret. We believe further, that these patterns could be reproduced by a skilled workman; that is to say, there would be no functional differences whatever. There might be a flange here or a flare there, but the idea, the central, main idea has been in use, to the common knowledge of man, for at least seventeen years, according to the evidence. So, therefore, we find that there was no trade secret here, nothing that this court could protect, as a property right, in a secret.

It is contended further, on the part of the plaintiff, that there was such confidential- relation existing between the defendant, Nuttall, and the plaintiff company, at the time that he procured these patterns, that a court of equity ought to enjoin from the use and benefits of the same. We think plaintiff is right in that contention. We believe this is a violation of his plain common duty to his master, such that a court of equity ought to reach out and stop by injunction. But stop what? Why, stop the use of these patterns, not the use of the idea, because we have now held that there is no property in the idea. Harry Nuttall, by his delinquency to his master, by his fraudulent conduct, by his breach of confidential relations, gave to this defendant company the patterns for eastings. He did not give to them an idea that belonged to the plaintiff. If he had, this court would not hesitate a moment to grant the injunction prayed for, and to order every one of these castings broken, because, in such event, the company must bear the loss; it acted at its own peril; but he gave to this company the use of these patterns, and when he did that, if we had been called upon to enjoin it from using them, and to enjoin him from using them, we would have done so without hesitation; but when this action was planted, the use was over, the thing was accomplished that they sought to accomplish. Therefore, while the contention of plaintiff’s counsel is right as to the law, the application of it is wrong, because it goes no further than to the thing that Nuttall’s wrongful conduct gave to the defendant company, and he gave them only the use of these patterns. Now that exhausts the inquiry as to the question of an injunction being granted in this ease.

That there has been a wrong committed here and that plaintiff has a remedy is equally certain. On the one hand, it is contended tbat the plaintiff should be sent out of court into another forum for that relief, and again it is urged that we should retain this case for relief, even though an injunction is not granted. We do not agree with this theory of counsel. An inquiry as to damage is the merest incident of a court of equity. It is simply because it is incidental to some other relief that a court of equity will take jurisdiction of it at all. It is because the experience of man has proven it to be better to dispose of a whole controversy in one court, if it can be done; but when the main reason for which the aid of a court of equity is sought has vanished, as we hold it has in this ease, under our theory of it, there is no reason why we should retain it for the assessment of damages. The question of damages must be determined in some other forum, and with an order so that the question shall not be res adjudicata against this- plaintiff, and so that it shall have a right to inquire as to damages in a suit at law, this petition is dismissed at the costs of the plaintiff and a motion for a new trial will be overruled, statutory time given for bill of exceptions, and thirty days for finding of facts. That will be the order and judgment of the court.

Sullivan & Cromwell and Garfield, Garfield & Howe, for plaintiff.

F. A. Durban and Willis F. McCook, for defendants.