author: VOLLRATH, J.

text:
    MUNICIPAL BONDS — LIMITATION OF BONDING POWER.
    [Seneca (3d) Circuit Court,
    April Term, 1905.]
    Norris, Hurin and Vollratli, JJ.
    Wellington J. Griffith et al. v. Tiffin (City) et al.
    1. Limitation of Bonding Power.
    The bonding power of a municipal corporation under Lan. R. L. 4294, 4295, 4297 (R. S. 2835, 2835b, 2837), is fixed at the extreme limit of 8 per cent of all the taxable property listed for taxation, in such corporations. This, however, does not include bonds to be paid by special assessments upon abutting property.
    2. Determination of Limit of Bonded Indebtedness.
    In determining whether a municipal corporation has reached or exceeded the limit of its bonding capacity, the statute contemplates the aggregate bonded indebtedness whether issued before or since said enactments and if such aggregate equals or exceeds the extreme 8 per cent limit above noted, then no further bonds may be issued until said aggregate has been reduced below said limit.
    Error to Seneca common pleas court.
    W. S. Wagner and W. D. Pence, for plaintiff in error.
    Geo. M. Hoke and Dore & Dore, for defendant in error.
   VOLLRATH, J.

The plaintiff in error filed his petition in the lower court setting forth twelve separate causes of action and seeking to restrain the payment of bonds of the city of Tiffin heretofore issued, and to restrain the issuing of bonds known and designated as the Greenfield street paving bonds, — the latter being the subject of the twelfth cause of action.

The first eleven causes of action describe and set forth successive bond issues of said city, indicating the purpose for which issued, as well as their respective amounts, and contain averments with reference to the manner of issuing the same, tending to support the charge that said issues of bonds so described were illegally made. The aggregate sum of the bonds so issued as described in these eleven causes of action is $625,000. The amount of bonds sought to be issued as set forth in the twelfth cause of action and known as the Greenfield street paving bonds is $13,000. It further appears from the petition and in the first eleven causes of action as well as in said twelfth cause of action that the total taxable value of all property listed for taxation in said city of Tiffin is $4,000,690 and no more.

The facts set forth indicate that the city of Tiffin has at present a total bonded indebtedness amounting to a fraction more than 15 per cent of the taxable value of all property in said city listed for taxation.

A general demurrer was interposed by the city to this petition, and this demurrer was sustained by the lower court. Error is prosecuted here to reverse this action of the common pleas court.

The demurrer in question was general in its terms.

After said demurrer was sustained as aforesaid by the court of common pleas, upon application to the judges of this court at Chambers, a temporary restraining order was granted restraining the sale of the Greenfield street paving bonds until the issues raised herein'by the petition in error are finally determined.

The purposes for which municipal corporations may issue bonds are recited in Lan. R. L. 4294 (R. S. 2835), and include the object contemplated by the issue under consideration.

Said Lan. R. L. 4294 (R. S. 2835) further provides, that such bonds shall not exceed 1 per cent of the total taxable property of the corporation in any one year unless authorized by an affirmative vote of at least two-thirds of all the members of council elected or appointed thereto, and then the aggregate amount of all such bonds hereafter issued under the authority of said act shall never exceed 4 per cent of such taxable property, unless a greater amount be authorized by a vote of the electors of the corporation in accordance with the provisions of Lan. R. L. 4297 (R. S. 2837).

Laning R. L. 4295 (R. S. 2835b), as enacted April 25, 1904 (97 O. L. 520), qualifies the above as follows:

■ “Provided, further, that the limitations of 1 per cent and 4 per cent prescribed in Sec. [Lan. 4294] 2835 Eev. Stat., shall not be construed as affecting bonds issued under authority of said Sec. [Lan. 4294] 2835 upon the approval of the electors of the corporation; nor shall bonds which are to be paid for by assessments specially levied upon abutting property, be deemed as subject to the provisions of said section. ’ ’

Upon a comparison with the original Lan. R. L. 4294 (R. S. 2835), this supplementary section seems to do nothing more than eliminate the required two-third vote of the council in cases where an issue is actually authorized by a vote of the people, but it applies merely to Lan. R. L. 4294 (R. S. 2835), and the limitations of 1 per cent and 4 per cent therein contained, and in no wise affects the provisions of Lan. R. L. 4297 (R. S. 2837). .

Moreover, the peculiar nature of this supplementary section justifies the suspicion that it owes its enactment to an unfortunate oversight in some particular locality and which this supplementary section was intended to relieve.

Laning R. L. 4297 (R. S. 2837), as amended April 25, 1904 (97 O. L. 190), provides that the aggregate issue of 4 per cent authorized in Lan. R. L. 4294 (R. S. 2835) may be exceeded when authorized by the affirmative action of two-thirds of the council supported by the affirmative vote of two-thirds of the voters voting an election duly called for that purpose.

It will be noted that the excess over 4 per cent requires a two-thirds vote of the electors voting at such election while for the lessor aggregate authorized by Lan. R. L. 4294 (R. S. 2835) a bare majority seems sufficient.

Laning R. L. 4297 (R. S. 2837) further provides as follows:

“Provided, however, that no * * * municipal corporation shall hereafter create or assume an aggregate indebtedness of outstanding and unpaid bonds under the authority of this act in excess of 8 per cent of the total value of all property in such * * * municipal corporation, as listed and assessed for taxation.”

The word “assume” as used above is peculiar to Lan. R. L. 4297 (R. S. 2837). It is not found in Lan. R. L. 4294 (R. S. 2835). It was evidently inserted there for a purpose. What does it mean ? It cannot mean to create a new debt, for it is used in the alternative with the word “create,” to wit, “create or assume.” It may not mean to adopt or take up the debt of some other person or corporation, for that does not come within the scope of the powers conferred upon municipalities by law. It must, therefore, if it means anything, have reference only to the indebtedness of the corporation itself existing prior to the enactment of the 8 per cent limitation.

The proviso at the close of said Lan. R. L. 4297 (R. S. 2837), “that in cases where. * # * council of any * * * municipal corporation has heretofore passed a resolution or ordinance declaring it necessary to issue and sell bonds * * * for any of the purposes authorized by law, the provisions of this act limiting the aggregate amount of bonds to be issued shall not be construed to apply to the bonds provided for in such resolution or ordinance,” does not apply to the case at bar. That proviso seems to have reference to contemplated issues of bonds not yet issued at the date of said act, but provided for by resolutions prior to said enactment of April 25, 1904, and seeks to prevent such contemplated issues from becoming illegal even though excessive in amount, and invites the suspicion that it, too, was enacted to meet a special case. While, however, such previous' contemplated issues do not become illegal by reason of their antagonism to existing law, yet there is nothing in the act, properly construed to prevent their being included in a computation to determine whether a corporation has not reached or exceeded the extreme limit of its bonding power.

In view of the conclusions above noted we hold that the bonding power of a municipal corporation in the state of Ohio is, by the above acts, fixed at the extreme limit of 8 per cent of all the taxable property as listed for taxation in such corporation; that in determining whether a municipal corporation has reached or exceeded the extreme limit of its bonding capacity as above noted, all issues of bonds made by such corporation previous to said enactment, as well as those subsequently made, and remaining unpaid, must be considered, — in other words, the statute contemplates the aggregate bonded indebtedness of a municipal corporation whether issued before or since said enactment, and if such aggregate bonded indebtedness equals the extreme 8 per cent limit above noted, then no further bonds may be issued by said municipal corporation until said aggregate has been so far reduced as to place the contemplated issue within the limit prescribed, and it is only proper to add that within said limitations all the requirements of the statutes must be strictly followed.

It is evident from the averments of the twelfth cause of action that the present aggregate bonded indebtedness of the city of Tiffin is far in excess of the extreme 8 per cent limit permitted by law. That the contemplated issue of $13,000 of Greenfield street paving bonds as therein set forth would be far in excess of said extreme limit of 8 per cent above described and, upon the averments of the petition the same would therefore be improper and illegal.

With- reference to the first eleven causes of action described in the petition, it seems that the petitioner seeks therein to invalidate or declare void numerous issues of bonds of said city, together aggregating '$625,000 and issued for various purposes. It is not stated where the bonds are held nor are the bondholders themselves made parties to the i getion. The purpose of the issue of these bonds is also faultily set forth. (Jpon the whole, therefore, we are’of the opinion that so far as the first eleven causes of action are concerned, the averments are not sufficient to stand against a demurrer, and the action of the court below in sustaining said demurrer to said eleven causes of action is therefore approved and affirmed.

-With reference to the twelfth cause of action, however, in view of the premises above noted, we hold that the court of common pleas erred in sustaining said demurrer to said cause of action and said order of the court of common pleas sustaining said demurrer to said twelfth cause of action is therefore reversed. Judgment reversed accordingly at the costs of the defendant, the city of Tiffin, and case remanded to the court of common pleas for execution and further proceedings.

Norris and fiurin, JJ., concur.


source: Caselaw Access Project

author: GIFFEN, J.

license: Public Domain

text:
    NEGLIGENCE — STREET RAILWAYS — DAMAGES.
    [Hamilton (1st) Circuit Court,
    July 8, 1905.]
    Swing, Giffen and Dustin, JJ.
    (Judge Dustin of the second circuit sitting in place of Judge Jelke.)
    Cincinnati Traction Co. v. Nellie McKee.
    1. Plaintiff may Recover for Worry, Anxiety, etc., Resulting from Injury Caused by Defendant’s Negligence.
    In a suit for personal injuries resulting from defendant’s negligence, it is not erroneous to charge the jury that the plaintiff was entitled to recover damages for the resultant worry, anxiety and care concerning the consequences' of such injuries.
    2. One Failing to Use Ordinary Care in Leaving Inclined Railway Truck, Guilty of Contributory Negligence.
    In a suit- for damages for personal injuries, where it appears that the only negligence of defendant, an inclined railway company, was in throwing its gates open before a passenger truck was safely attached to the stationary platform at the top of the incline, and also discloses no reason why plaintiff could not, by the exercise of ordinary care, have observed the condition of the truck as to whether it was stationary or still moving, which would have avoided all injury, this is such contributory negligence as will bar a recovery.
    Error to Hamilton common pleas court.
    Kittredge & Wilby, for plaintiff in error.
    D. D. Woodmansee, for defendant in error.
   GIFFEN, J.

The defendant in error, as plaintiff in the court of common pleas, recovered a verdict against the plaintiff in error, as defendant, for personal injury sustained while a passenger on the inclined railway of the defendant leading to Mount Adams. The negligence charged in the petition is as follows:

“Plaintiff states that said truck was carried to the top of said incline, but before the same was safely attached to the stationary platform at the top of said incline, the gates were thrown open by defendant’s agents and employes, thereby inviting this plaintiff and other passengers to make their exit from said truck to the stationary platform, and out to Celestial street. Plaintiff states that as she, with others, was passing from said truck to said platform, the toe of her shoe was pressed between the truck and the platform by a sudden jerk made upon the truck, and by reason thereof her toes and foot were seriously mashed and disfigured, and permanently injured.”'

It is claimed by counsel for plaintiff in error that counsel for defendant in error, during the progress of the trial, at page 99 of the bill of exceptions, disclaims any negligence on the part of the traction company in suddenly jerking the truck, and that the only remaining allegation, that the gates were thrown open before the truck was safely attached, does not constitute actionable negligence.

The statement referred to, at page 99, is a part of the question addressed to the witness, and we do not understand that counsel thereby intended to disclaim all negligence on the part of the traction company in moving the truck after the gates were thrown open, whether done suddenly, unusually, or otherwise. But the court in its charge to the jury did withdraw all claims of negligence other than that pertaining to the opening of the gates at the time and in the manner described in the petition. We must assume, therefore, that the jury found that the traction company was negligent only in that particular.

That the allegation charges negligence, we entertain no doubt, but whether it contributed directly to the injury depends upon the other facts attending the primary act complained of. There was testimony tending to show that the truck had not quite reached the platform when the gates were thrown open; that plaintiff, while passing out, got her foot between the truck and the platform while the truck was moving. This appears to be the theory upon which the verdict of the jury is founded. Assuming all this to be true, and. granting that the defendant was negligent, the evidence discloses no reason why the plaintiff, by the exercise of ordinary care, could not have observed the condition of the truck, thereby avoiding all injuries. She herself testifies that, in passing out, she at no time looked down .or observed where she was stepping, but assumed, because the gates were open, that the passage way was entirely free from danger. This, of itself, is contributory negligence, which would not permit of recovery. Schaefler v. Sandusky, 33 Ohio St. 246 [31 Am. Rep. 533]; Pennsylvania Co. v. Rathgeb, 32 Ohio St. 66.

If, on the other hand; the truck, as averred in the petition, had reached the top of the incline, and by reason of its not being safely attached to the stationary platform, began to descend while the plaintiff was leaving, and then was pulled up again suddenly or otherwise, the question of contributory negligence should be left to the jury.

The jury, however, were not permitted, from the instruction of the court, to consider this theory of the case, and we must assume that they found the only negligence of the defendant to consist in throwing the gates open at the time and in the manner described in the petition, and that the plaintiff in no wise contributed to her injury, which, as we have shown, is clearly against the weight of the evidence.

The charge of the court that the plaintiff was entitled to recover compensation ■ for resulting worry, anxiety and care, about the consequences of the injury, is sustained by the case of Smith v. Bailway, 23 Ohio St. 10.

We find no other error, and the judgment will be reversed upon the ground that it is clearly against the weight of the evidence, and cause remanded for a new trial.

Dustin, J., concurs.

Swing, J., dissents from the holding that the plaintiff was guilty of contributory negligence in not observing where she was stepping.


author: JELKE, J.

text:
    CORPORATIONS — SALES.
    [Hamilton (1st) Circuit Court,
    March, 1905.]
    Jelke, Swing and Giffen, JJ.
    E. A. Kinsey et al. v. Mt. Auburn Cable Co. et al.
    1. Sale of Stock by Corporation below Par not Valid if Discriminating ur Favor of Certain Stockholders.
    The issuance and sale of stock by a corporation below .par will not be permitted, if the transaction affords an opportunity for those having control of the corporate finances to obtain such stock on terms more favorable than those offered to other stockholders and to the general public.
    2. Corporate Stock .may be Issued below Par to Preserve Corporate Life, but not to Float New or Doubtful Enterprises.
    A corporation may issue its stock at any price below par when such expedient is necessary to secure funds to preserve its corporate existence and to effect the purposes of its organization; but this doctrine must not be extended to the floatation and financing of corporations of doubtful stability and problematic success.
    3. Legality of Stock Issue Below Par Depends upon Bona Fide Character of Transaction.
    The question of the legality of an issuance of stock by a corporation below par depends upon the good faith of those participating in the transaction in question.
    Appeal from Hamilton common pleas court.
    C. B. Matthews and Edward Strong, for the appellants.
    Edward Colston, for the appellees.
   JELKE, J.

The Mt. Auburn Cable Company was incorporated under the laws of the state of Ohio, with a capital stock of $100,000. The purpose of this incorporation was to build a street railroad from Fourth street in Cincinnati through a portion of Mt. Auburn to Avondale. The construction of the road was begun in 1887, and completed for operation in June, 1888. On March 5, 1887, the capital stock of the company was increased to $300,000; of this $300,000, $174,000 was subscribed and paid for, so that in September, 1887, there was unissued in the treasury of the company $126,000 of this capital stock. At that time there was on hand a considerable quantity of machinery and material for the construction and equipment of the road; but the road became embarrassed for want of sufficient funds for its completion. There were outstanding at that time promissory notes and acceptances to Messrs. Henry Martin, David Sinton, Rudolph Wurlitzer, Marcus Warth, and other stockholders and directors of the company, to the amount of about $77,000. In addition there were Henry Martin’s acceptances of $19,000. There were other obligation — on contracts for material and equipment — bringing the total obligations on or about October 18, 1887, to the sum of $152,-731.44.

It appears that the holders of some of these claims were pressing for payment, and that in addition to the necessary liquidation of these outstanding claims some further money was needed to complete the road ready for operation.

It appears that after the transaction herein involved was consummated that there was actually raised the sum of $27,868.56 in addition to the funds used for the liquidation of the liabilities aforesaid.

It appears in evidence that the representatives of the Mt. Auburn Cable Eailway Company had made strenuous efforts to sell the bonds and treasury stock of the company, but whatever their efforts may have been, or at whatever terms they had offered these securities to the general public, they had been unsuccessful.

It appears that the bonds of the company had, at times, in one or two sales, sold as low as eighty cents on the dollar; but for the most part they had brought par at all times, and were finally assumed by the Cincinnati Street Eailway Company, and have at all times since then brought a substantial premium.

In September, 1887, the Cincinnati Traction & Construction Company was incorporated with a capital of $5,000, of which only 10 per cent was subscribed, and it does not appear how much, if any, of the sum subscribed was ever actually paid.

About this time the following arrangement was devised and entered into:

“Cincinnati, O., October 13, 1887.
“We, the undersigned, agree to purchase from the Cincinnati Traction & Construction Company, 180 first mortgage bonds of the Mount Auburn Cable Eailway Company, and 1,250 shares of stock of said company — par value of $100. Each of the undersigned to pay the sums of money set opposite our respective names for the purpose of making said purchase. Said money to be paid to the treasurer of the Cincinnati Traction & Construction Company, payments to be made as follows: The notes of the Mount Auburn Cable Eailway Company, held by any of us to be taken at their face value without interest, on account of said subscription and 33 1-3 per cent of the balance cash on completion of this paper, 33 1-3 per cent in thirty days thereafter and 33 1-3 per cent in sixty days thereafter. We to take respectively and in our proper proportions for the amounts hereto subscribed by us, the 180 first mortgage bonds and 1,250 shares of stock aforesaid. A condition of this pur■chase that the December, 1887, coupons are not to be presented for payment prior to January 1, 1888. This agreement not to be binding unless $180,000 is subscribed:
David Sinton ..........................................$ 23,000 00
Henry Martin ........................................ 66,000 00
Elijah Coombe ....................................... 8,000 00
Rudolph Wurlitzer .................................... 11,500 00
James M. Potter .................................. 4,500 00
Marcus Warth........................................ 12,500 00
Wm. F. Irwin........................................ 1,500 00
H. H. Coombe-........................................ 1,000 00
•Alb. ErkenbreCher ......................:.............. 11,500 00
A. E. Burkhardt...................................... 5,000 00
George Gerke ......................................... 2,000 00
William Means ....................................... 2,000 00
.John R. DeCamn...................................... 2.000 00
Edward. N. Roth...................................... 2,000 00
J. A. S. Gray......................................... 8,000 00
F. M. Joyce .......................................... 1,000 00
Samuel W. Ramp, Agent............................... 2,000 00
G. K. Duckworth ..................................... 2,000 00
John B. Deiters..................■..................... 1,000 00
Broderick & Bascom Rope Co., Jos. W. Wayne,............ 5,000 00
Louis Van Antwerp, per J. H. M.,....................... 5,000 00
Total.........................................$180,000 00
“Completed October 17, 1887.
"John H. Martin."

Thereupon the following contract was entered into:

“October 18, 1887.
“1. Mount Auburn Cable Railway Company.
“2. Cincinnati Traction &' Construction Company.
“1,250 shares .stock of $100 each.
“180 first mortgage bonds, December, 1897, coupons attached.
“Party of the first part to correspond with contractors, etc., to receive all materials and issue its acceptance therefor.
“Second party to meet all acceptances as they mature, and hold first party free and harmless from any and all damages or expense by reason thereof.
“Party of second part agrees to assume the full obligations; to complete the unexecuted and partially executed contracts herein mentioned, and perform the labor specified:
“1. To complete the eight miles single track cable railway between southern terminus of Fourth and Sycamore, and the northern terminus of Rockdale and Main avenues, using material of Mount Auburn Cable Railway Company on hand and unused, free of expense to said second party doing said work, in a good and workmanlike manner similar to the construction already begun by the first party and to its entire satisfaction restoring the streets to as good a condition as before being opened.
“2. To complete the contract between first party and Lane & Bodley.
“3. To assume the existing contract between first party and Brill Car Company for six grips and six coaches.
“4. To assume balance due on contract with L. Sehreiber Sons for street vault at power house.
“5. To assume the cash payment when due on the contract between first party and Broderick & Bascom Company.
“8. To furnish six grips and attachments complete as per plans and specifications at an expense not to exceed $2,500.
“7. To assume and pay all outstanding acceptances as of date fifteenth of September, 1887, reimbursing Henry Martin for all of same taken by him since that — total amount of same being $19,000.
“8. To furnish six grips and attachments complete as per plans and specifications of first party.
“9. To pay all expenses of draughting, pattern making, office rent, etc., not to exceed $1,000.
“10. To complete all boulder pavement repairs required, not to exceed $200.
“11-, To assume and pay the promissory notes of the Mount Auburn Cable Railway Company, amounting to $77,000, which were executed to certain stockholders of said company, returned the collateral security attached to them to the first party.
“ (Signed) The Mount Auburn Cable Railway Co.,
“Henry Martin, President,
“Wm, T. Irwin, Secretary.
“October 18, 1887.
“ (Signed) The Cincinnati T. & C. Co.,
“Sam W. Ramp, Treasurer.-”

After this arrangement was consummated, the road was finished and put in operation. It does not appear that the Cincinnati Traction & Construction Company ever actually did anything. There was no change in the persons directing and managing the completion and construction of the road, and that the same people and the same policy prevailed. The fact of the matter was and we do find, that the Cincinnati Traction & Construction Company was a mere fiction, and served no substantial purpose in effecting the things that were herein done. In fact, its presence and the part which it played, became almost a badge of fraud and created the gravest doubt and suspicion as to the good faith of those lending themselves to this arrangement. Page 89 of Journal No. 2, shows an entry made by Arch Irwin, the bookkeeper of the company, and a son of William F. Irwin, a director of the company and its secretary, which entry was dated October 1, 1889, made as follows:

“Construction Ac.
“To Cincinnati Traction & Construction Co., Dr.
“To amount of stock issued to purchasers of first mortgage bonds, as a bonus for purchasing them at par, $126,000.”

There is some dispute as to the authorization of this entry, but it seems to have been made in the usual course of business, and. so far as the testimony shows, it seems to be in accord with the understanding of all parties interested and as a necessary and only way of balancing the funds of the company. The verity of this entry was never challenged until the construction of the transaction became important in determining the issue herein involved.

After the road was in operation, there were a second and third issue of mortgage bonds,' so that finally there were outstanding $180,000 first mortgage bonds, $22,000 second mortgage bonds and $137,000 third mortgage bonds. Nearly all of these bonds were issued to and held by the same persons who had acquired $180,000 first mortgage bonds and the $126,000 stock under the agreement aforesaid. In fact, nearly all the money at any time put up or invested in this enterprise, was put up and invested by those who had originally gone into the enterprise and had had faith in it, and who after they had made a considerable investment had of necessity to put in more to sustain the enterprise and secure their earlier investment.

The burden of carrying this enterprise seems at all times to have been about where it belonged.

In 1893 a receiver was appointed by the court of common pleas of Hamilton county, Ohio, in an action to foreclose, the third mortgage bonds of the cable company.

In 1895 the receiver sold the road and its property under order of the court for $350,000 to David Sinton, trustee for bondholders; in 1896 said David Sinton sold it to the Cincinnati Street Railway’ Company for $400,000, the first mortgage bond issue, $200,000, and the second mortgage bonds outstanding, $20,000, being assumed as part thereof. In addition to the mortgage bonds, the referee found that there were unsecured debts amounting to $126,904.04, of which the following amounts were claimed by persons who subscribed and were parties to the agreement of October 18, 1887, aforesaid. Finally, on the report of the referee, the common pleas court made an assessment of .4975 per cent on the stockholders, as follows:

Elijah Coombe, 10 shares ..............................$ 497 50

H. H. Coombe, 10 shares............................... 497 50

Chas. Cowie, 10 shares..........■....................... 497 50

Jno. B. Dieters, 17 shares.............................. 845 75

Jas. A. S. Gray, 25 shares.............................. 1,243 75

Cath. N. Hauck, Extrix., 50 shares...................... 2,487 50

Alfred Hill, 110 shares ................................ 5,472 50

Jacob Menderson, 25 shares............................ 1,243 75

Henry Martin, 793 shares..........'.................... -39,452 50

.Neva W. Martin, Trust., 1 share......................... 49 75

Jas. M. Potter, 38 shares.............:................. 1,890 50

Lou. M. Porter, Extrx., 5 shares.............'............ 248 75

Chas. E. Page, 10 shares............................... 497 50

David Sinton, 277 shares .............................. 13,781 00

Hy. P. Smith, 50 shares................................ 2,487 50

Lewis Seasongood, 180 shares........................... 8,955 00

Theo. Sengstak, 170 shares................■............. 8,457 50

Eleanor Tatum, 10 shares.............................. 497 50

Fred Yogeler, 50 shares................................ 2,487 50

Marcus Warth, 232 shares ............................. 11,542 00

Rudolph Wurlitzer, 255 shares......................... 12,686 25

Jno. W. Wayne, 34 shares.............................. 1,691 50

Total shares, 2,362. Total.......................$117,510 50

And entered up several judgments against such stockholders accordingly. To this entry Lewis Seasongood prosecuted his separate appeal to this court, his contention being that as against the claim of David Sinton, Joseph Wayne and others, aggregating $84,903.71, should be set off, their liability in that amount to contribute to the funds of the corporation on account of the $126,000 of its capital stock for which they paid nothing, and which they received as a bonus for taking its first mortgage bonds.

Two questions are thus here presented:

First, one of fact, whether the subscription of this $126,000 of capital stock and the consideration therefor are so interwoven with the sale and issue of the $180,000 of bonds that it can not be ascertained what separable price, if any, was paid for the stock, and so that it can not be said that nothing was paid for the stock; and

Second, a mixed question of law and fact, whether this $126,000 of capital stock was subscribed and issued under circumstances justifying in law its being given by the corporation as a bonus or being sold by the corporation at a price far below its face or par value.

' On the first issue of fact we find that said stock was given by the corporation as a “bonus” in the sale of the bonds, and whether they .were issued for absolutely nothing or for a consideration, the consideration, if any, was so small and insignificant to make as the same legal inquiry pertinent and the same principles of law applicable.

On the second question as to the circumstances under which a corporation may lawfully issue its capital stock as fully paid up at a price much below par, we are guided by a consideration of the following cases:

Fogg v. Blair, 139 U. S. 118 [11 Sup. Ct. Rep. 476; 35 L. Ed. 104]:

“It is the settled doctrine of this court, as well as of the supreme court of Missouri, that unpaid subscriptions to the stock of a corporation constitute a trust fund for the benefit of creditors, which may not be given away or disposed of by it, without consideration or fraudulently, to the prejudice of such creditors. * * *
“While it was competent for a railroad corporation in Missouri, exercising good faith, to use its bonds and stock in payment for the construction of its road, it could not rightfully, at least as against creditors or stockholders, issue its stock to contractors as full paid, without getting some fair or reasonable equivalent for it. What was such an equivalent depends primarily upon the actual value of the stock at the time it was contracted to be issued, and upon the compensation which, under all the circumstances, the contractors were equitably entitled to receive for the particular work undertaken or done by them. * * * the corporation, by its directors, could sell or dispose of its assets to the prejudice of creditors and stockholders under such circumstances, on such terms and at such prices as indicated, upon the face of the transaction, that they were being squandered recklessly or fraudulently in disregard of the trust committed to them.

Clark v. Bever, 139 U. S. 96, 97 [11 Sup. Ct. Rep. 468; 35 L. Ed. 88]:

“That whether a stockholder in law or in fact, owed to the corporation any sum on the stock held by him, was left by the statute to be determined in each case, upon its own circumstances, and in accordance with the principles of general law touching the rights and liabilities of creditors and stockholders. _
“While the capital stock of a corporation, especially its unpaid subscriptions, is a- trust fund sub modo for the benefit of its general creditors, a corporation — no statute forbidding — may in good faith sell or dispose of its stock to creditors iñ discharge of their debts
“The principle reaffirmed that when the interest of the public or of a stranger is to be affected by any transaction between the stockholders owning a corporation, and the corporation itself, such transaction is subject to rigid scrutiny, and if found to be infected with anything unfair towards such third person, calculated to injure him, or designed intentionally and inequitably to screen the stockholder from loss at the expense of the general creditor, it will be disregarded or annulled so far as it inequitably affects him. Therefore, when the interest of creditors requires, those holding shares in a corporation, purporting to be, but which are shown not to have been, paid for to the extent of their face value, should be held liable to pay for such shares unless it appears that they acquired the stock under circumstances that did not give creditors and other stockholders just ground for complaint.”

Handley v. Stutz, 139 U. S. 417 [11 Sup. Ct. Rep. 530; 35 L. Ed. 227]:

“When a stockholder in a corporation who assents to an increase in the capital stock of the corporation and its gratuitous distribution among the shareholders, receives such stock as full paid stock, an obligation arises to pay for it in full, when called upon to do so by creditors whose debts are subsequent to the authorization of the increase; but this equity does not exist in favor of a creditor, whose debt was contracted prior to such authorization.
“An active corporation, finding its original capital impaired by loss or misfortune, may, for the purpose of recuperating itself, and of producing new conditions for the successful prosecution of its business, issue new stock and put it upon the market, and sell it for the best price that can be obtained; and in such case no such trust in favor of a creditor arises against the purchaser who, in good faith, buys for less than par. ’ ’

Camden v. Stuart, 144 U. S. 104 [12 Sup. Ct. Rep. 585; 36 L. Ed. 363]:

“The trust arising in favor of creditors by subscriptions to the stock of a corporation can not be defeated by a stimulated payment of such subscription, nor by any device short of an actual payment in good faith; and it was not intended by anything said in Clark v. Bever, 139 U. S. 96; Fogg v. Blair, 139 U. S. 118, or Handley v. Stutz, 139 U. S. 417, to overrule this principle, or qualify it in any way, but only to draw a line beyond which the court was unwilling to go in affixihg a liability upon those who had purchased stock of the corporation, or had taken it in good faith in satisfaction of their demands.
'“Applying this rule to the testimony and mass of figures in this ease, the court affirms the judgments of the court below against stockholders in these cases, whose subscriptions for their stock in the corporation, defendant in error in No. 643, were shown to be in part unpaid.”

Rickerson Roller-Mill Co. v. Foundry & Machine Co. 75 Fed. Rep. 554 [23 C. C. A. 302; 43 U. S. App. 452]:

‘£T. Corporations — Issue of Stock — Sale. Below Par, — When a corporation, not for the purpose of restoring its capital, impaired by losses in business, but for the purpose of providing new capital to carry on or extend its business, issues and sells stock at less than its par value, the purchasers. of such stock take the same subject to the contingency that, in the event of the insolvency of the corporation, they would be liable to creditors, who had become such in ignorance of the terms of their purchase, for the difference between the price actually paid for the stock and its par value. Handley v. Stutz, 11 Sup. Ct. Rep. 530; 139 U. S. 417, distinguished.
,“2. Same — Rights of Creditors. — In the absence of statutory or charter provisions, however, a corporation may agree with a subscriber to its stock to receive less than the par value therefor; and a creditor of the corporation, who becomes such with knowledge of such an agreement between the corporation and the subscriber, cannot require the subscriber, upon the insolvency of the corporation, to pay his stock in •full.”

Peter v. Manufacturing Co. 56 Ohio St. 181 [46. N. E. Rep. 894];

“The directors and managing officers of a corporation for profit should be held to strict good faith in all dealings between themselves and'the corporation. Where, however, the corporation is deeply in debt and pressed for money to continue its business; where a large proportion of its capital stock remains - unsubscribed, a great part of which was created by an unauthorized increase of the same, for which such directors and managing officers were chiefly responsible, though acting in good faith and in the belief that their action was regular; where such directors and managing officers believe the only practicable means of obtaining money to relieve the necessities of the corporation is by disposing of this stock; where accordingly they make diligent but unsuccessful efforts to dispose of the stock at par;-where they offer it at a large discount to all its stockholders and generally to others without, takers, such directors and managing 'officers and some others without intending to secure personal advantage, but with a view to aid the corporation, take parts of the stock at the discount price, either paying cash therefor, or cancelling debts due to them from the corporation, and they do not afterwards derive any profit on account of such stock, bad faith should not be imputed to them, either in respect to such increase of capital stock or their acquisition of it.”

All of these cases have been digested and considered by Clark & Marshall on Corporations, who sum them up with the following comment:

“Sections 1246-1247. Fraud is the Only True Basis of this Doctrine.- — Some of the courts, including the Supreme Court of the United States, in its earlier opinion, have based this doctrine upon the ground that the subscribed capital stock of a corporation is in equity a trust fund for the payment of its debts, and that no agreement between a corporation and its stockholders can affect the right of creditors to so treat it. It is now practically settled, however, that this is not the basis of the doctrine, for neither the unpaid subscriptions of a corporation nor its other assets are in any proper sense a trust fund for creditors. The true and only ground of the doctrine is fraud. Any arrangement between the stockholders of a corporation and the corporation, by which the former are to pay nothing at all, or less than par, either in money or property, for shares of stock which are issued and represented to the public as being full-paid, is clearly a fraud upon persons who deal with the corporation on the faith of such representation, and it requires the application of no new principle to enable a court of equity to prevent creditors from being defrauded by compelling the stockholders to make their representation good. Creditors not defrauded can not complain.”

Clark & Marshall, Priv. Corp. (“Watered Stock”), page 1242:

“400. Issue to Directors or Other Officers. — The rule that the directors and managing officers of a corporation are to be held to strict good faith in all dealings between themselves and the corporation applies as well when they issue stock to themselves as in other cases. If they act in bad faith and obtain a profit or advantage not enjoyed by other stockholders, they may be called to account, or the transaction may be set aside.
“They may purchase stock, however, if they act in good faith, and they will incur no liability to the corporation or the other stockholders, in the absence of a statute, even when they purchase stock at less than par, where it appears that they acted in good faith and in the interest of the company, particularly where they have obtained no profit or advantage for themselves from the transaction. In a late Ohio case, in which stockholders of a corporation who had paid par for their stock sought to hold the directors and managing officers and others liable upon 'stock taken by them at less than par for the difference between what they paid and the par value, it appeared that the corporation at the time, and before the stock was taken, was deeply in debt, and pressed for money to continue its business; that a large part of its capital stock remained unsubscribed, a great part of which was created by an unauthorized increase of the same, for which the directors and managing officers were chiefly responsible, ■ though acting in good faith, and in the belief that their action was regular; that the directors and managing officers believing that the only practical means of obtaining money to relieve the necessities of the corporation was by disposing of this stock, and after having made diligent but unsuccessful efforts to dispose of it at par, offered it at a large discount to all of its stockholders, and generally to others, without intending to secure any personal advantage, but with a view to aid the corporation, took parts of the stock at the discount price, either paying cash therefor, or cancelling debts due to them from the corporation, but did not then or after-wards derive any benefit on account of the stock. Under these circumstances it was held that bad faith was not imputable to them with respect either to such increase of the stock or their acquisition of it;, that, on the corporation becoming insolvent, the difference between the discount price and the par value of the stock thus purchased should not be regarded as assets of the corporation, as between thoáe who> bought at a discount and those who did not; and that the holders of previously issued stock, for which they had paid par, should not be allowed to assert the invalidity of the issue of the discounted stock without consenting that its purchasers be placed in statu quo.”

Clark & Marshall, “Priv. Corp.” (“Watered Stock”) page 1250:

“(b) Issue of Stock for Cash at a Discount. — The doctrine that the issue of watered or fictitiously paid up stock is a fraud upon persons who become creditors of the corporation in reliance upon its capital stock clearly applies when the original stock of a corporation is issued for cash as paid-up, under an agreement that payment in full shall not be required. Even in the absence of express statutory or constitutional provisions, as well as where there are such provisions, a ■court of • equity, or other court having jurisdiction of winding up proceedings, will disregard the agreement and enforce full payment foi* the stock so far as may be necessary to satisfy the claims of the creditors of the corporation who have dealt with it in reliance on the stock being full paid; and by statute in some jurisdictions a creditor may proceed at law.
“When stock is issued to subscribers for less than its par value in cash, the right of creditors to compel full payment can not be defeated by showing that there was no actual fraudulent intent in the .transaction.
■“(c) Issue of Stock as a Gratuity. — In a New York case, where 'a corporation had issued paid-up stock as a gratuity, it was held that a judgment creditor of the corporation, on its becoming insolvent, could not maintain a suit in equity to compel the stockholder to pay for the stock contrary to his agreement with the corporation. ‘The liability of a shareholder to pay for his stock,’ said the court, ‘does not arise out of his relation, but depends upon his contract, express or implied, or upon some statute, and in the absence of either of these grounds of liability, we do not perceive how a person to whom shares have been issued as a gratuity has, by accepting them, committed any wrong ■upon creditors, or made himself liable to pay the nominal face of the shares as upon a subscription or contract.’ It does not appear, from the report of this case, whether the creditor was such after it was issued, and in reliance on its being in fact full-paid. If the former, then the decision is clearly a sound one, but if the latter, it is contrary to the prevailing rule.
“As we have seen, it is the ground of fraud, and not on the ground of contract, that persons to whom stock has been issued as full-paid, when it is not so in fact, are held liable to creditors, and the reason for the doctrine, therefore applies as well where the stock is issued as a gratuity as where it is issued for cash at a discount. In the former <case, the holder does not agree to pay 'anything; in the latter he does not agree to pay anything further than what he has paid. It has repeatedly been held, therefore, that if a corporation issues its stock as full-paid without receiving any consideration, and particularly when it does so in violation of an express charter, statutory or constitutional provision, and the stock is falsely held ont to the public as being full-paid, the transaction, even when binding upon the corporation and consenting stockholders, operates as a fraud upon persons who subsequently deal with the corporation and become creditors on the faith of its capital stock being full-paid, and a court of equity, or, in some jurisdictions, by statute, a court of law, will compel full payment for the stock, if necessary for the satisfaction of their claims.”

It appears from an examination of these authorities that the whole, question turns upon a question of the good faith of those participating in the transaction, and in this connection it is to' be noted that those who put through this transaction and got whatever of benefit supposedly there might have been in it, were those that were the directors, dominant stockholders and the leaders in control of the affairs of the corporation, and they are those who are held to the strictest accountability and whose conduct is subject to the'closest scrutiny as against the rights of everybody whose interests were directly or indirectly in their custody. It is said that if objection on this account could be made it could only be made by subsequent creditors and not by stockholders — the situation of Mr. Seasongood. But this defense on the part of Mr. Seasongood is not sought to be interposed as against the creditors other than those making up the $84,903.71 of claims, who are interested in not urging this claim against themselves on their unpaid subscription. It is not reasonable to suppose that they would urge this claim to their own detriment and hence the right to urge the same must pass to and be asserted by those who would be interested and benefited if the claim prevails.

In examining the good faith of the transaction of October, 1887, one is impressed by the small amount of cash the company received in addition to its indebtedness already outstanding; and for all of which these parties were directly or indirectly under the burden, that is, by holding the notes or acceptances of the company, or were liable on the statutory stock liability for its general indebtedness; in comparison with the vast amount of securities of the company issued, to wit, $180,000 first mortgage bonds and $126,000 of its capital stock.

These parties parted with so little new money.

They safeguarded themselves for all the money actually invested by taking bonds secured by mortgage on all the property bought by their money so furnished .to the corporation and then sought to speculate on the future earning capacity of the enterprise on terms more favorable than the other shareholders had received and more favorable than they would have been willing to accord to the public.

Again, while it appears that efforts had been made to sell the stock and bonds of this company at home and abroad in the general market, and that these efforts had been thwarted probably by the malicious intervention of rivals, yet there was nothing in this that ought not to have been anticipated by those who originally subscribed for the stock, and who were certainly familiar with all the conditions surrounding this enterprise. The record does not show that the arrangement which was finally entered into was ever offered in the general market or to the public, and it is extremely doubtful whether those who finally entered into this arrangement would have consented that "outsiders should have subscribed and taken this stock and these bonds on any such terms.

It is urged by counsel for Mr. Seasongood, that the eases of Peter v. Manufacturing Co. and Handley v. Stutz, supra, are not applicable because the Mount Auburn Cable Railway Company was not a going or active corporation at the time of this transaction.

An examination of the eases and a comparison of the cases of Fogg v. Blair and Richerson Roller-Mill Co. v. Foundry & Machine Co., supra, show that this is an element entitled to great weight in consideration, but is not altogether determinative, but it is indeed an element to be considered in ascertaining whether such a crisis was present which could not or ought not to have been foreseen and anticipated as a natural burden upon those already having invested in the enterprise, as to justify thiS' transaction as a means to save its life.

We understand that the corporation is justified in issuing its stock at any price it can obtain for the purpose of securing funds to preserve its corporate life and to prosecute the business and ends of an active corporation, but we do not understand that this expedient is to be resorted to to assist in the birth of financial cripples.

Not to hold resort to such extreme expedients within strictest limit and closest scrutiny would open floodgates to a deluge of stock-watering in the creation and flotation of ill-conceived enterprises.

It would pave the way for the old desire for a chance at the profits, at the same time securing the investment from the hazard of loss.

We do not mean to say that the gentlemen who participated in this transaction were conscious of committing fraud in a sense involving moral turpitude, but that they were astute in taking care of themselves without a sufficient regard to the rights and future liabilities of others to a degree not tolerated by a court of equity.

. It is claimed that there should be restitution by Henry Martin of $16,000, which seems to have been showered upon him almost against his protest. It may be that Henry Martin had performed services, but if he had voluntarily made the corporation a present of this service, and wanted no compensation therefor and made no claim, the money so paid to him was substantially a -present and at no time was this company or its directors (of whom Henry Martin was one) in a position to be generous at the expense of its creditors, or shareholders innocently suffering through them. Further, there are claims on the assessments' against John J. Broderick, James D. Bascom, Isador Blumenthal, James W. Frost, R. W. Healy, Fred Koettler and William Means, aggregating in all 169 shares, which have never been properly or duly prosecuted. The conclusion we have reached on the unpaid stock subscriptions is sufficient to relieve appellant from assessment; we are, therefore, of opinion that such appellant is entitled to a decree discharging him from liability.

Swing, J., concurs.

Giffen, J., dissents from the finding and judgment.


author: PER CURIAM.

text:
    NEGLIGENCE.
    [Hamilton (1st) Circuit Court,
    May, 1905.]
    Jelke, Swing and Giffen, JJ.
    Great China Tea Co. v. Norfolk & Western Ry.
    In Action for Negligence, Case will be Taken from Jury if Plaintiff Negligent, without Regard to Conduct of Defendant.
    In an action for damages for negligence on tbe part of a railroad company, where it appears that the negligence of the driver of a wagon was the direct cause of an accident at a crossing, testimony as to the speed of the train which struck the wagon can have no effect on the question of the driver’s negligence, and the case will therefore be taken from the jury.
    Error to Hamilton common.pleas court..
    Moulinier, Bettman & Hunt, for plaintiff in error:
    Negligence of the railroad. 2 Thompson, Negligence 1873; Lake Shore é M. S. By. v. Johnston, 25 O. C. C. 41.
    Contributory negligence. Thompson, Negligence 1888; Clev. C. <& C. By. v. Crawford, 24 Ohio St. 631 [15 Am. Dec. 633]; Marietta & C. By. v. Picksley, 24 Ohio St. 654, 667; Thompson, Negligence 1626-1645; Packard v. Traction Co. 12 C. D. 822 (22 R. 578) ; Balt. & O.

      By. v. Van Horn, 12 C. D. 106 (21 R. 337) ; Reed v. Railway, 74 Iowa 188 [37 N. W. Rep. 149]; Peck v. Railway, 25 Utah 21 [69 Pac. Rep. 153]; Grand Trunk Ry. v. Ives, 144 U. S. 408 [12 Sup. Ct. Rep. 679; 36 L. Ed. 485]; Winstanley v. Railway, 72 Wis. 375 [39 N. W. Rep. 856]; Chicago & N. W. Ry. v. Netolicky, 67 Fed. Rep. 665 [14 C. C. A. 615; 32 U. S. App. 168]; Strong v. Railway, 61 Cal. 326; Greany v. Railway, 101 N. Y. 419 [5 N. E. Rep. 425]; Goodenough v. Railway, 55 N. J. Law 326 [27 Atl. Rep. 931]; Wheeling & L. E. Ry. v. Suhrwiar, 12 C. D. 809(22 R. 560) ; Oleson v. Railway, 143 Ind. 405 [42 N. E. Rep. 736; 32 L. R. A. 149]; McCrory v. Railway, 31 Fed. Rep. 531; Massoth v. Canal Co. 64 N. Y. 524; Puff v. Railway, 71 Hun 577 [24 N. Y. Supp. 1068].
    Hollister & Hollister and W. A. DeCamp, for defendant in error.
   PER CURIAM.

The testimony at the latter trial of this case in the court of common pleas is substantially the same as it was at the first trial, the judgment which this court set aside. Norfolk & W. Ry. v. Tea Co. 26 O. C. C. 547.

The testimony of the driver of the wagon is identical, because it is in the form of a deposition, and that form was used a,t both trials.

At the second trial there was some additional testimony offered on the subject of the speed of the train. In the opinion, per Swing, J., of this court, at page 548, it is said:

“White was absolute master of his movements; there was no impending danger confronting him, and his horses were entirely under his control, and he voluntarily placed himself in the position where the collision occurred; in doing this he was clearly negligent. It matters not whether the railway company did not ring a bell or was running at a higher rate of speed than twenty miles an hour, which is the usual rate of speed of trains at that point; it is clear that the negligence of the tea company was the cause of the accident, and not the negligence of the railway company.”

We are of opinion that the additional testimony on the subject of the speed of the railway train does not affect the question of the negligence of the driver, White.

We are of opinion that the negligence of the driver, White, was the direct cause of the accident whatever may have been the conduct of the railway company.

The court helow was justified in arresting this case from the jury, and the judgment herein will be affirmed.


author: DONAHUE, J.

text:
    CARRIERS — CUSTOM—DAMAGES—VERDICT.
    [Richland (5th) Circuit Court,
    January Term, 1905.]
    Voorhees, Donahue and McCarty, JJ.

      Pullman Co. v. B. W. Willett.
    1. Evidence of Custom to Show Agency, is Admissible in Suit upon Specialty.
    In a suit upon a specialty, evidence of a party’s uniform custom of transacting business with the public generally with, reference to the matter in dispute introduced for the purpose of showing an agent’s authority to make the contract in question in behalf of his principal is admissible.
    2. Relation of Principal and Agent between Sleeping Car Company and Railroad Ticket Agent Shown by Custom.
    An agency is sufficiently proved if it be shown that the principal has led the public to believe that the same exists, and this may be done by a continued course of business transactions consisting in recognizing and fulfilling contracts made on behalf of the principal; hence, the agency of a railroad ticket agent to reserve berths of a sleeping car company for passengers on a train may be proved by evidence showing prior ratifications by such company of reservations made under similar circumstances by such agents.
    3. Damages Recoverable for Breach of Contract Causing Mental Anguish, when Accompanied by Physical Suffering.
    For the breach of a contract to reserve a drawing room in a sleeping car for the plaintiff and his wife, compensatory damages for the mental anguish and humiliation suffered by the plaintiff by reason thereof may be recovered, where the evidence shows that plaintiff also suffered physical inconvenience, discomfort and pain, resulting from the same cause.
    4. Verdict for ?125 not Excessive for Breach of Contract to Furnish Proper Accommodations in Sleeping Car.
    A verdict of $125 is not excessive in a suit for damages caused by defendant’s breach of contract in failing to provide a drawing room in a sleeping car for plaintiff and his wife, the consequence of which was to compel them to ride in the porter’s apartment and to make two changes from one coach to another during the night, in view of the fact that they were on their wedding trip and that plaintiff was deprived of the comforts, conveniences and privacy naturally desired under such circumstances.
    5. Demand for Return of Railroad Tickets not a Waiver of Right of Action for Breach op Contract by Sleeping Car Company.
    In an action for breach of contract by a sleeping car company in failing to provide a berth for the plaintiff, the fact that he demanded his railroad ticket from the conductor of the train upon learning that suitable accommodations could not be procured, which request was refused, is not such a waiver of his rights as will operate to relieve the company from its liability.
    Error to Richland common pleas court.

      Cummings, McBride & Wolfe, for plaintiff in error:
    Recovery for mental suffering: Spade v. Railway, 168 Mass. 285 [47 N. E. Rep. 88; 38 L. R. A. 512; 60 Am. St. Rep. 393] ; Walsh v. Railway, 42 Wis. 23 [24 Am. Rep. 376]; Peay v. Telegraph Co. 64 Ark. 538 [43 S. W. Rep. 965; 39 L. R. A. 463]; Morgan v. Pacific Co. 95 Cal. 510 [30 Pac. Rep. 603; 17 L. R. A..71; 29 Am. 'St. Rep. 143]; Chapman v. Telegraph Co. 88 Ga. 763 [15 S. E. Rep. 901; 17 L. R. A. 430; 30 Am. St. Rep. 183]; West v. Telegraph Go. 39 Kan. 93 [17 Pae. Rep. 807; 7 Am. St. Rep. 530]; Western Union Tel. Co. v. Ferguson, 157 Inch 64 [60 N. E. Rep. 674, 1080; 54 L. R. A. 846]; Francis v. Telegraph Co. 58 Minn. 252 [59 N. W. Rep. 1078; 25 L. R. A. 406; 49 Am. St. Rep. 507]; Connelly v. Telegraph Co. 100 Ya. 51 [40 S. E. Rep. 618; 56 L. R. A. 663; 93 Am. St. Rep. 919]; Chase v. Telegraph Co. 44 Fed. Rep. 554 [10 L. R. A. 464]; Crawson v. Telegraph Co. 47 Fed. Rep. 544;<2h/Zer v. Telegraph Co. 54 Fed. Rep. 634; Kester v. Telegraph Co. 55 Fed. Rep. 603; Gahan v. Telegraph Co. 59 Fed. Rep. 433.
    Kerr & La Dow, for defendant in error:
    The contract. Pullman Palace Car Co. v. Nelson, 22 Tex. Civ. App. .223 [54 S. W. Rep. 624]; Pullman Palace Car Co. v. Booth, 28 S. W. Rep. 719 (Tex. Civ: App.) ; 3 Thompson, Negligence (2 ed.) Sec. 3612, p. 972; Pullman Palace Car Co. v. King, 99 Fed. Rep. 380 [39 C. C. A. 573],
    As to breach of contract. Mann Boudoir Car Co. v. Dupre, 54 Fed. Rep. 646 [4 C. C. A. 540; 13 U. S. App. 183; 21 L. R. A. 289]; Braun v. Webb, 65 N. Y. Supp. 668; Braun v. Webb, 62 N. Y. Supp. 1037; Aiken v. Railway, 118 Ga. 118 [44 S. E. Rep. 828; 90 Am. St. Rep. 107]; Quinby v. Vanderbilt, 17 N. Y. 306 [72 Am. Dec. 469]; '3 Thompson, Negligence Secs. 3610, 3611, p. 972; Duval v. Car Co. 62 Fed. Rep. 265 [10 C. C. A. 331; 23 U. S. App. 527; 33 L. R. A. 715]; Nevin v. Car Co. 106 111. 222 [46 Am. Rep. 688] and authorities'cited; 3 Thompson, Negligence Sec. 2568, p. 36; Sec. 2574; Pullman’s Palace Car Co. v. King, 99 Fed. Rep. 380 [39 C. C. A. 573] ; Murdock v. Railway, 137 Mass. 293 [50 Am. Rep. 307], Mental suffering. Smith v. Railway, 23 Ohio St. 10; 8 Am. & Eng. Enc. Law (2 ed.) 668.

      Affirmed without report, Pullman Co. v. Willett, 72 Ohio St. 690.

   DONAHUE, J.

This proceeding in error is brought to reverse the judgment of the common pleas court .in an action in that court, wherein B. W. Willett sued the Pullman Company for damages for breach nf contract.

The petition avers that the defendant company entered into a contract with the plaintiff, by the terms of which he was to be furnished a drawing room on one of the defendant’s cars, for the use of himself and wife, from Shelby, Ohio, to New York, which car was attached to a train on the Clev. C. C. & St. L. Railway Company’s lines; that in pursuance of said agreement he then purchased transportation over said company’s line to New York; that said defendant company failed and neglected to keep its contract in that behalf to furnish him with said drawing room, and that he and his bride, he having just been married on that day, were compelled to occupy the porter’s apartment from Shelby to Cleveland, and at Cleveland, at 1:45 a. m., they were compelled to change to another car in which they obtained a berth to Buffalo, and at 5 a. m. they were compelled to change again to a chair ear, in which latter ear they remained until they reached New York.

He avers that by reason of such failure on the part of said company he suffered physical pain, inconvenience, humiliation, mental anguish and suffering, to his damage in the sum of $1,999, for which he prays judgment.

The effect of the defendant’s answer is to deny that any such contract was made as relied upon in plaintiff’s petition, and upon the issue joined the cause was tried to a jury, resulting in a verdict for plaintiff for $125 and judgment thereon.

The record discloses that a conversation over the telephone was given in evidence by the plaintiff, over the objection of the defendant, and this is assigned as error. It is perhaps true that there ought to have been a little more certainty as to the identification of the speaker in this telephone communication, but Mr. Willett says, “I received a telephone message that he had word from the main office that they had this reservation for me for that train” It does clearly appear from the evidence admitted just prior to this answer, that he referred to Mr. Close, who was acting in some capacity in the railway office at Shelby. True, he does not say how he knew it was Mr. Close, but the evidence all taken together does show that-he did testify that it was Mr. Close that was talking, although he used the pronoun “he.” If counsel desired to show that he could not be certain as to the identity of the individual talking, then it was the duty of counsel to cross-examine him upon this point, and show by this cross-examination that he did-not know and could not know with any degree of certainty as to the identity of the person speaking. But as it now stands the record discloses that he swore positively that it was Mr. Close, and therefore the conversation was admissible. But this telephone communication has very little if anything to do with the issue in this case. It is merely cumulative evidence at most, and as there is no conflict of evidence in this record we should not hold it prejudicial error, even though it were erroneously admitted.

There was also a telegram admitted in evidence, over the objection of counsel for defendant, signed by the initials W. J. L., and the evidence shows that these initials were the initials of Warren J. Lynch, general passenger agent of the Big Four.

It is contended, first, that this was not the original telegram, that the original was in the telegraph office at Cincinnati, and that this paper offered in evidence was a mere copy. This telegram was not sent directly to Mr. Willett, but was handed him by Mr. Close, either as representing Mr. Lynch or the Pullman Company, or the railway company, whichever it may determine to be, but to all intents and purposes, so far as Mr. Willett is concerned, it is the original telegram that was handed him and the one upon which he had a right to rely, for this telegram may bind the Pullman Company no matter whether it was a true copy of the one on file in Cincinnati or not. So that we think the telegram was properly admitted in evidence so far as this objection is concerned. But, it is urged, that there is no evidence showing any authority on' the part of Lynch, Close or any other railway official to bind the Pullman Coinpany. It is in evidence, however, that this was the usual and customary manner of procuring apartments on the Pullman Company’s cars at Shelby, Ohio, and that these railway agents were in the habit in the usual course of business of making such contract for and on behalf of the Pullman Company, and that Mr. Willett had theretofore transacted the same character of business with these agents, and the Pullman Company had always ratified their authority and fulfilled the contract made by them. So that if this evidence is competent, then it would appear that there is some evidence touching the authority of these railway officials to contract for the Pullman Company.

It is insisted by the plaintiff in error that the admission of this evidence of custom was prejudicial error, and if that be true, then, of course, all conversations with Mr. Close, either over the telephone or otherwise and the admissions of the .telegram, would be error, because of the failure of the plaintiff below to show authority on the part of these individuals to speak and act for the Pullman Company.

It is contended that plaintiff- sues upon a specialty and that therefore he cannot recover under a custom, but must prove the contract averred in the petition. It does not appear that this custom has been shown for the purpose of showing the terms of the contract, but on the contrary only for the purpose of showing the authority of these agents to make the contract on the part of the Pullman Company. If the Pullman Company had been transacting business through the railway officials at Shelby, Ohio, or through Mr. Lynch, the general passenger agent of the railway company, then, whether there was any such contract of agency between these parties or not, would not be important, for if a person holds out another to the public as his agent he is bound by the acts of that individual, whether he in fact be such agent or not, and the public dealing with such agents are not required to first determine the nature and extent of their authority. It is sufficient if the alleged principal has by his conduct induced the public to deal with such person as his agent, and this inducement may be by overt act or words, or by long continued course of business transaction in ratifying, indorsing and fulfilling contracts of such persons made by them on behalf of such principal.

We therefore think this evidence, was properly admitted and did show the authority of, these railway officials to' enter into this contract for and on behalf" of the Pullman Company, and therefore the conversations with these persons and telegram were properly admitted in evidence.

It is further contended that the court erred in its charge in not clearly and fully stating the issue to the jury: This assignment of error we do not think is well taken. It does appear from the charge that the jury was fairly and fully instructed as to the issue joined.

It is further contended that the court erred in its charge touching the rule of damages, in stating that plaintiff could recover' for the mental anguish suffered or endured by reason of such breach of contract. We think this is the correct rule in this case. The plaintiff does show, by his evidence, that he suffered physical inconvenience and discomfort and the consequent physical pain attendant thereon is sufficient to support his claim for compensatory damages, which includes damages for mental suffering and humiliation, although it is true that without such basis of recovery, mental anguish alone would not be sufficient to support the action.

It is further contended that the damages awarded were excessive. We think not. The peculiar circumstances of this ease were, properly matter for the consideration of the jury. The damages for the deprivation of the comforts, conveniences and privacy for which he had contracted and agreed to pay are not to be measured by the amount to be paid therefor. He could have had cheaper accommodations had he so desired, but that he wanted these accommodations under -the circumstances of this case was but natural and commendable, and we do not think that the record fails to show any damages, but, on the contrary, it fully sustains the verdict and would, in our opinion, sustain even a larger verdict had the jury, thought proper to fix a larger amount.'

Some complaint is made that he demanded his tickets from the railroad conductor, instead of the Pullman conductor. This was certainly the proper person upon whom to make demand for the return of his railway tickets, because that conductor was the one who had those tickets and was representing the railroad company, and the Pullman Company had nothing to do with that contract, so that if the railroad company would not return the tickets there was nothing left for him to do but to accept the accommodations offered by the Pullman Company, in place of the accommodations that it had contracted to furnish him. This company might have reduced these damages very much by procuring the railway company to return to him his railroad tickets at Cleveland, so that he might stop over there until a later train, but this was not done, on the contrary, the railroad company refused so to do.

Finding no error in this record to the prejudice of plaintiff in error, the judgment of the common pleas court is affirmed, with cost, but Without penalty, and the cause, remanded for execution.

Exceptions of plaintiff in error noted.

Voorhees and McCarty, JJ., concur.


author: SWING, J.

text:
    DEPOSITIONS — EVIDENCE.
    [Hamilton (Ist) Circuit Court,
    July 1, 1905.]
    Jelke, Swing and Giffen, JJ.
    J. H. Schoepf, Ex Parte.
    Witness before Notary must Reply to Questions and Produce Papers, etc., when.
    In a proceeding to take a deposition before a notary public, the witness must reply to the questions asked him and produce books and documents demanded, unless it be shown that a matter of privilege is involved, or that the questions are in fact frivolous, or that the documentary evidence or information in question was prepared or procured exclusively for use as matter of defense in the action brought by the party for whom the deposition is being taken.
    Error to Hamilton common pleas court.
    Kittredge & Wilby, Outcalt & Foraker, Paxton & Warrington and E. G. Kinkead, for the petitioner.

      O. S. Bryant and C. B. Wilby, contra:
    Questions asked in taking a deposition, provided they are not foreign to the subject-matter of the suit, and,, provided that their answers are not privileged and would not be injurious to the witness, must be answered though the answers would not be admissible if offered to the jury in the trial of the ease. Shaw v. Installation Co. 9 Dec. Re. 809 (17 Bull. 274) ; State v. Cost, 10 Dec. Re. 619 (22 Bull. 250) ; DeCamp v. Archibald, 50 Ohio St. 618 [35 N. B. Rep. 1056; 40 Am. St. Rep. 692]; Jennings, Ex parte, 60 Ohio St. 319 [54 N. B. Rep. 262; 71 Am. St. Rep. 720]; Ranh, In re, 65 Ohio St. 128 [61 N. E. Rep. 701]; McKee, Ex parte, 18 Mo. 599; Munford, Ex parte, 57 Mo. 603; Livingston, Ex parte, 12 Mo. App. 80.
    Aside from the question of personal privilege, if incompetency is ever an excuse for refusing to answer questions, on the taking of a deposition, it is so only where the answers are incompetent because irrelevant and not where they are incompetent because hearsay. Bradley, In re, 71 N. H. 54 [51 Atl. Rep. 264],
    The petitioner in error should answer the question as to who was the division superintendent at the time of the accident. Shaw v. Installation Co. 9 Dec. Re. 809 (17 Bull. 274).
    The reports called for should be produced. Livingston, Ex parte, 12 Mo. App. 80.
    These reports are not privileged. Woolley v. Railway, L. R., 4 C. P. 602; Parr v. Railway, 24 L. T. (N. S.) 558; Southwark, etc. Water Co. v. Quick, 38 L. T. (N. S.) 28; Cassey v. Railway, L. R., 5 C. P. 146; Collins v. Omnibus Co. 68 L. T. (N. S.) 831; Skinner v. Railway, L. R., 9 Ex. 298; Cook v. Tramway Co. 54 J. P. 263; Bradley, In re, 71 N. H. 54 [51 Atl. Rep. 264]; 3 Taylor, Evidence 1186; Jenkins v. Putnam, 106 N. Y. 272 [12 N. E. Rep. 613].
    These reports are such papers as may become evidence on the trial of the ease. Thayer's Preliminary Treatise on Evidence 265, 266; 2 Wharton, Evidence Sec. 1176; Mechem, Agency Sec. 714; Northwestern Union Packet Co. v. Clough, 87 IT. S. 528 [22 L. Ed. 406]; Vicksburg <& Meridian Ry. v. O’Brien, 119 II. S. 99 [7 Sup. Ct. Rep. 118; 30 L. Ed. 299]; Knarston v. Insurance Go. 1-40 Cal. 57 [73 Pae. Rep. 740],
    ’ The reports are admissible evidence against the company. Rogers v. New York & Brooklyn Bridge, 11 App. Div. 141 [42 N. Y. Sup. 1046]; Rogers v. New York & Brooklyn Bridge, 159 N. Y. 556 [54 N. E. Rep. 1094] ; Patterson v. United Artisans, 43 Or. 333 [72 Pac. Rep. 1095];
      Meyer v. Insurance Go. 104 Cal. 381 [38 Pac. Rep. 82]; Knarston v. Insurance Co. 140 Cal. 57 [73 Pac. Rep. 740]; Vicksburg & Meridian By. v. Putman, 118 U. S. 545 [7 Sup. Ct. Rep. 1; 30 L. Ed. 257]; Hardy v. Boom Co. 52 Mich. 45 [17 N. W. Rep. 235]; The Soeway, L. R., 10 Prob. Div. 137.
    An admission made by an agent, whether part of the res gestae or not, is binding against his principal provided he had authority to make it. Balt. & O. By. v. Campbell, 36 Ohio St. 647 [38 Am. Rep. 617]; Morse v. Bailway, 72 Mass. (6 Gray) 450; Lane v. Bailway, 112 Mass. 455; Green v. Bailway, 128 Mass. 221 [35 Am. Rep. 370]; Kirk-stall Co. v. Bailway, L. R., 9 Q. B. 463.
    These reports in the event of the death of the persons making them, might become admissible as entries made in the regular course of business. Stephens Dig. Evid. (Ohio ed.) Art. 27, p. 132 and cases cited.
   SWING, J.

Josephine Pace brought an action in the court of common pleas of Hamilton county, Schoepf, Ex parte, 16 Dec. 17, against the Cincinnati Traction Company. While this action was pending she sought to take the deposition of J. H. Schoepf, an officer of said defendant company, before Charles E- Tenney, notary public in and for said county. The witness appeared and was sworn, and was asked.to give the name of the conductor in charge of the ear on which Mrs. Pace was injured. He was also asked whether he knew the name of the conductor of the sam? ear; he was also asked whether there were any persons on the car other than the conductor and the motorman; he was also asked whether there were any persons present at the time of the accident other than the conductor, the motorman, and the plaintiff; he was also asked whether he had in his possession any books, letters, or other papers showing that there was present at the time of the accident,' other than the plaintiff, the motorman, and the conductor, showing the names of the persons, if there were any such; he was also asked who was the superintendent of that portion of the line on which the accident occurred at the time of the accident.

All these questions by direction of his counsel he refused to answer,, and thereupon the notary ordered him to answer, and the witness refusing, the notary ordered him committed as for contempt.'

This action was brought in the court of common pleas on habeas corpus for the discharge of Mr. Schoepf.

On the trial of the case in the court of common pleas, that court refused to discharge the prisoner and remanded him to the custody of the sheriff of Hamilton county until such time as he shall answer the questions, who was the division superintendent in May, 1902, of the division to which the College Hill Main street line belonged, and until he produced the reports which he had been asked to bring; to all of which the prisoner excepted.

The first proposition of the syllabus in the case of DeCamp v. Archibald, 50 Ohio St. 618 [35 N. E. Rep. 1056; 40 Am. St. Rep. 692], is as follows:

“"Where the question propounded involves no question of privilege on the part of the witness, it is his duty to answer, if ordered by the notary to do so. The question of its competency is a matter for the determination of the court on the trial of the action in which the evidence is taken; and if he refuses to do so, when ordered, he may be committed as a contumacious witness.”

The syllabus in the case of Jennings, Ex parte, 60 Ohio St. 319 [54 N. E. Rep. 262; 71 Am. St. Rep. 720], is as follows:

“A witness whose deposition is being taken before an officer may refuse to testify to facts not relevant to the issues in the case in which the deposition is to be read, if the disclosure of such irrelevant facts would be injurious to the business of the witness; and, if imprisoned by the officer for such refusal, he may be discharged on habeas corpus. ’ ’

The second proposition of the syllabus in Rauh, In re, 65 Ohio St. 128 [61 N. E. Rep. 701], is as follows:

“A subpoena issued by a notary public for a witness to attend and testify in a deposition before the notary public may contain a clause directing the witness to bring with him any book, writing or other thing under his control, which he may be compelled to produce as evidence, and for disobedience of such a subpoena the notary public has power to punish the witness for contempt, by imprisonment.”

It is not claimed in this case that the questions asked of the witness would tend in any way to injure him in his business or personally; neither is it claimed that the questions were frivolous. We think it was not clearly shown that the papers asked of the witness to be produced were made exclusively for the purpose of defense in the action against the company by Mrs. Pace. It probably is true that information received and papers prepared by a party or his agent in preparation for the suit should not be compelled to be given over to the opposite party, as it would seem that this would be an abuse of the power conferred by the statute to take depositions. Whether the questions are relevant or competent, cannot be decided by the attorney or officer taking the deposition; -such matters can only be passed upon by the court when the case is on trial; otherwise, the very purpose of the statute in authorizing the 'taking of depositions would "be defeated.

The notary public was right in ordering the witness to answer the questions and produce the reports called for.

Jelke and Giffen, JJ„ concur.


author: WALTERS, J.

text:
    RAILROADS — NEGLIGENCE.
    [Pike (4th) Circuit Court,
    May Term, 1905.]
    Jones, Walters and Cherrington, JJ.
    Norfolk & Western Ry. v. C. A. Vallery.
    Railroad not Excluded ebom Constructing Cattle Guards at Public Crossing within Yards unless Public Necessity Requires Crossing to be Kept open, etc. .
    A railroad company which fails to construct and maintain cattle guards at a street crossing within its switch and depot grounds must, in order to relieve itself from liability to the owner of horses which strayed upon the track over such crossing and were killed, show that the necessity of the public required that cattle guards should not be constructed at the crossing in question. It is not sufficient to show merely that the necessity of*the company and of its employes required that the street should be kept open and no cattle guards constructed.
    Error to Pike common pleas court.
   WALTERS, J.

The defendant in error by his petition against the defendant below, the Norfolk & Western Company, alleges that the railway company was a corporation operating its road through the village of Piketon, Pike county, and that the railway company did not have erected either fences or cattle guards north of its depot at Piketon, nor south thereof, and that the pláintiff in March, 1904, was the owner of two horses that strayed from his premises, and by reason of the defective fences and cattle guards upon the railroad, his horses strayed thereon and proceeded down the track of the Norfolk & Western railway to a point south of the depot where they were run down and killed.

The defendant admits it is a corporation and operating a railroad and denies every other allegation, and further says that said horses entered upon the right of way at a public station yard which was necessarily uninclosed in order that the public as well as the railroad could get to and from the station building in loading and unloading cars, and in using its side tracks and yards, and that said horses were killed within the limits of said yards and depot grounds.

A trial was had in the court of common pleas, before a jury and a verdict returned for the plaintiff therein.

There is but one error relied upon, by the plaintiff in error, upon which it seeks to reverse the judgment of the lower court, and that is the alleged error appearing upon the record in the form of a charge requested by the defendant below to be given to the jury before argument.

The statute of the state, Lan. R. L. 5288 (R. S. 3324), required the railroad to fence, also requires them to build a cattle guard at all crossings, road crossings, street crossings, and other crossings without any exception whatever; and hence includes all streets, lanes and alleys in the village. The Supreme Court however, in the case of Railway v. Newbrander, 40 Ohio St. 15, wrote into this statute an exception, occurring from the necessities of the railroad and the public, and its employes.

In the first subdivision of the syllabus the Supreme Court makes use of this language:

“This statute may be construed as allowing exceptions required by public necessity and convenience and the proper use of a station yard by the company. ’ ’

The second subdivision of the syllabus is as follows:

“When the company is relieved from this requirement, for the above reasons, it is its duty to construct and maintain cattle guards across its roadway and grounds at the first points from the highway which will not interfere with the necessities and convenience of the public and the company.”

Such instructions were asked on behalf of the defendant company below, as would require the jury to bring a verdict for the defendant, if the jury found from the evidence that either one of three things existed: necessity of the public, necessity of the employes of the railroad company, or necessity of the company.

In the ease already alluded to, if the railroad company was relieved from performing this duty only on this requirement, and the company required that the depot grounds and yards remain open and unobstructed, the matter that counsel for th’e defendant raised, that if the defendant’s testimony showed that from the necessity of the railroad employes that this road should be kept open, and that no cattle guards should be used where it is alleged these horses passed over, that that was sufficient, and that it was not necessary for the jury to find that it was a necessity to the public or to the company.

If counsel for the plaintiff in error is correct in their construction, there is error in this record, otherwise there is not.

The facts disclosed by the record are, that the horses escaped from his farm some three miles from the railroad without any negligence on his part, and that they took the railroad at the crossing on the public road known as the Jackson Hill crossing. And some of the testimony tends to show that these horses after passing over this Jackson Hill crossing, passed down the railroad as was evidenced by the witnesses’ testimony, that they tracked the horses down the railroad to the place where they were injured below the depot and killed. There is other testimony tending to show that the horses passed over this Jackson Hill crossing and into the village of Piketon coming onto the railroad at another point.

The question therefore to decide is, under the facts in the case, whether or not it is necessary for the railroad in order to relieve itself of liability upon its switeh and depot grounds that these three elements be shown as have been presented in an instruction to the jury.

In Thornton, Railroad Fences and Private Crossings 158, the author quotes from an Iowa supreme court ease, in which the court says:

“The theory of exemption from the statute requiring fences has always been founded upon the relation of the company to the public and not to any other construction. ’ ’

Again the Supreme Court of Indiana has been quoted on page 161:

“These exceptions have been made not to advance the private interests of the railroad corporations, but to promote the public good by enabling the corporation to discharge their duty to the public. These exceptions exist only in cases where public necessity is shown.”

There is quoted another citation and the author comes to the conclusion himself that the exceptions given from the decisions are the constructions alluded to, and hence, made on behalf of the public. But as I have already quoted from our Supreme Court, the three elements are necessary to complete the exception, and hence, there seems to be a mutuality of interests required on behalf of the public and railroad company.

But then it is not alone the employes that are considered, nor the company, but the public. Hence, it would seem from these observations that the railroad company when it proves in a case as in this ease, that it was necessary to have the road open and to have the cattle guard away from this public highway, as a matter of necessity for the employes, then the railroad company only had proved one of the elements necessary to its complete exoneration; and in coming to that conclusion the rest seems easy.

This construction did not embody the three elements. The public was put in, but not included with the other two elements. The record discloses that the railroad company did prove that it was necessary that the cattle guard should be constructed so far away from persons using the road to serve the interest of the employes, that it was necessary for them to work on the trains without having the cattle guards that the testimony showed existed there.

The question was properly presented to the jury by the court below, the court giving very full instructions to the jury in-regard to cattle guards and fences. Instructing the jury to find where the horses came upon this track, if the three elements existed, the company would not be held liable, and ■ Our Supreme Court has determined in the case of Railway v. Newbrander, supra, that it is a fact for the jury to determine, and that it is necessary for the railroad to construct and maintain cattle guards at the first point below crossing that will not interfere with the public, if it does so interfere at the crossing. In this case, the defendant introduces evidence pointing only to one of these propositions.

Now according to the evidence, the depot at Piketon is about at a point equidistant from the cattle guard on the north and the cattle guard on the south, according to the testimony below and above the two crossings about half a mile or a little over. The testimony further discloses that from the water tank to the Jackson Hill crossing, is a distance between five and six hundred feet. That the space between the depot is the only space the public uses for loading and unloading, and the driving of vehicles for the purpose of taking merchandise there, and for removing the same therefrom. Below the depot, the testimony shows that below Narrow street, it is not used for the purpose of receiving or discharging freight. But now that was all before the jury. These distances, the amount of side track, the amount of freight track on the west side, the location of the south crossing, the cattle guards, the locatioh of the Jackson Hill road, and the cattle guard north of that, the whole topographical situation there, with reference to these tracks and side tracks, and depot and buildings were all before the jury. They must determine and did determine these questions of fact and, therefore, we cannot say that there was error in the court refusing the jury said instruction. It is therefore the judgment of this court, that the judgment of the lower court be affirmed.

Jones and Cherrington, JJ., concur.


author: HENRY, J.

text:
    BILLS AND NOTES.
    [Cuyahoga (8th) Circuit Court,
    June 26, 1905.]
    Marvin, Winch and Henry, JJ.
    J. B. Livingston et al. v. Fidelity & Dep. Co.
    Conversion of Checks Payable to Fictitious Payee by Corporate Officer, an Embezzlement Sufficient to Charge Fidelity Company on Bond, when.
    Defalcations by the secretary of a Building and loan association which were , accomplished by his recommendation of loans to fictitious property holders, the indorsement of the checks issued by the board of directors in pursuance of such purpose with 'such fictitious names, and the subsequent conversion >of the funds obtained therefrom to his own use, are embezzlements within the purview of the statute, sufficient to charge a surety company on a fidelity Bond applicable only to embezzlement or larceny perpetrated within the scope of an officer’s duties.
    Error to Cuyahoga common pleas court.
    S. W. Bennett and Smith, Taft & Arter, for plaintiff in error.
    Hoyt, Dustin & Kelley, for defendant in error.
   HENRY, J.

This proceeding in error is prosecuted by the trustees of the Guarantee Savings & Loan Co., against the Fidelity & Deposit Co. of Mary-' land, to reverse the judgment of the Cuyahoga common pleas court. The parties here stand in the same relation as they stood below. The error complained of is the finding of that court that the petition fails to state facts sufficient to constitute a cause of action.

The corporation of which plaintiffs in error are trustees was organized under the building and loan laws of Ohio, and its officers and employes were bonded by the defendant in error, which is a surety company, organized under the laws of Maryland.

Among the officers and employes whose fidelity was thus guaranteed by the blanket bond issued by the surety company to the local corporation, was the latter’s secretary, Jacob A. Blodt, who served as such for' five years, beginning June 1, 1896, and ending August 8, 1901, and who, after swindling his company to the extent of $209,100, committed suicide. The action below was commenced to recover, on his last annual bond, the full limit thereof, $10,000. The provisions of the bond make it applicable to Blodt’s defalcation, if it amounts to embezzlement or larceny, and was .perpetrated’ within the direct scope of his duties as secretary; but not otherwise.

Blodt’s plan of operation was to buy cheap vacant lots in Cleveland under divers fictitious names, and in the same names to apply to his company for loans wherewith to erect buildings thereon. His board of directors granted the loans, on his recommendation, and issued checks therefor to the order of the fictitious applicants. Blodt was entrusted with these checks, and it was his duty to see to their application to the intended purposes, according to the usual custom of building and loan associations.' Blodt, however, collected or deposited the cheeks for his own behoof, after endorsing them in the names of the fictitious payees.

The surety company claims that this scheme did not amount to either a larceny or an embezzlement of either checks or moneys.

It is argued that the checks were worthless, because the payees were fictitious, and that therefore such checks could not be the subject of either crime. And it is further argued that under Lan. R. L. 6281 (B. 3836-4), the treasurer was the exclusive custodian of the association’s moneys, and that such moneys could not lawfully be transferred from his custody to that of the secretary. There could be, it is claimed, no embezzlement of such moneys by the secretary under Lan. R. L. 10449 (R. S. 6842), because they did not ‘ come into his possession by virtue of his appointment or employment as such officer, ’ ’' neither was there a larceny of such moneys under the rule laid down in Kellogg v. State, 26 Ohio St. 15.

It is not clear that Blodt might not lawfully have had possession of moneys of the association, if transferred to him from the treasury by the board of directors for specific purposes] in view of the broad provisions of the last two paragraphs Lan. R. L. 6279 (B. 3836-3), and in view of the equally broad implications of Lan. R. L. 6302 (B. 3836-25). But a majority of the court are unwilling to hold, under the facts alleged in the petition, that such a transference of the mere custody of moneys actually took place in this case. There can be no doubt, however, that the checks were lawfully in his possession as secretary. Were they 6f value, within the meaning of Lan. R. L. 10449 and 10450 (R. S. 6842 and 6843) defining embezzlement?

People v. Royce, 106 Cal. 173 [37 Pac. Rep. 630], is a similar case, in this, that the defendant there was convicted of embezzlement of a draft which was claimed by him, in his defense, to have been void and without value, because money was thereby sought to be made payable, out of the treasury of the United States, to a person other than the one authorized by law to receive payment. But the accused, having actually obtained the cash thereon, converted it to his own use; and the court held that he was thereby estopped from saying that it was not a valid draft.

We therefore hold that, under the like circumstances set forth in the petition below, the cheeks, which Blodt cashed, or collected, and converted to his own use, were things of value, and that he was guilty of embezzlement, within the meaning of our statutes, and of the bond sued on in this case.

The demurrer to the petition should have been overruled, and the judgment below is therefore reversed and the cause remanded.


text:
    EVIDENCE — DEEDS.
    [Hamilton (1st) Circuit Court,
    May 27, 1905.]
    Jelke, Swing and Giffen, JJ.
    John A. Hartman et al. v. Midland Trac. Co. et al.
    1. Deed of Doubtful Import may be Explained by Parol Evidence.
    Where a recital in a deed is of doubtful import, it will open the door for the admission of parol evidence to explain it.
    2. Deed will be Reformed if not Expressing Intention of Parties as Disclosed by Reading in Connection with Option.
    A deed reciting that land is c'onveyed in trust for interurban railway purposes, pursuant to a written option and proposal, which, when read in connection with such option, furnishes strong proof that the parties did not intend to convey all the land described in the deed, will be reformed by a court of chancery.
    Dempsey, Mallon & Vordenberg, for plaintiffs.
    Gordon, Granger & DeWitt and C. W. Baker, for defendants.
   PER CURIAM.

The deed from the plaintiffs to the defendant, the Provident Savings Bank & Trust Company, trustee, contains a recital that the land described is conveyed “in trust for interurban railway purposes, pursuant to written option and proposal, executed in duplicate on August 9, 1902,” and when read in connection with such option discloses a mistake against which equity will grant relief. Bispham, Pr. of Eq. See. 470.

If it be said that this construction is too liberal and that the recital is of doubtful import, it nevertheless opens the door to the admission of parol evidence, which, in this case, clearly shows that the intention of the parties is not expressed in the deed.

The addition of ten feet of ground to that described in the option without any other consideration, together with the resulting injury to the residue of the premises, including the dwelling house, furnish strong proof that the parties could not have intended to convey all the land described in the deed.

A like decree to that rendered by the common pleas court may be entered in this court.