author: By MATTHEWS, J.:

text:
    EMPLOYERS’ FIRE INSURANCE COMPANY, etc., Plaintiff-Appellant, v. UNITED PARCEL SERVICE OF CINCINNATI, INC., etc., Defendant-Appellee.
    Ohio Appeals, First District, Hamilton County.
    No. 7219.
    Decided February 20, 1950.

      Elmer E. Strasser, Cincinnati, for plaintiff-appellant.
    Leo J. Brumleve, Jr., Cincinnati, for defendant-appellee.
   OPINION

By MATTHEWS, J.:

This is an appeal from a judgment for the defendant-appellee rendered on a verdict which the court instructed the jury to return at the close of the evidence, on the motion of the defendant-appellee therefor.

The plaintiff and defendant are corporations; the former engaged in the business of insurance, and the latter, in the business of transporting and delivering packages and other merchandise.' Jenny, Inc. was engaged in dealing in and storing merchandise.

The plaintiff-appellant issued a policy to Arthur Oberhelman and his wife, whereby it insured them against loss of or damage to certain coats or wraps, including a certain “natural ranch mink coat,” and has succeeded to the rights of the insured.

The defendant entered into a contract with Jenny, Inc., to transport and deliver merchandise for it at a certain charge for each article, with perhaps a minimum weekly charge.

In February, 1943, Mrs. Oberhelman bought a mink fur coat from Jenny, Inc., and stored the coat with Jenny, Inc., on two occasions in 1944 and 1945, under a storage agreement fixing the value of the fur coat at $100.00 for the purpose of determining the storage charge, and limiting the liability of Jenny, Inc., in the event of loss or damage to it. A policy or contract was given Mrs. Oberhelman, evidencing these terms.

On April 9th, 1946, Mrs. Oberhelman and the manager of Jenny, Inc., entered into an oral agreement for the storage of six or seven coats, including the mink coat, upon the same terms that the fur coat was stored in 1944 and 1945, and Mrs. Oberhelman requested Jenny, Inc., to send for the articles. Jenny, Inc., thereupon instructed the defendant to go to the Oberhelman residence for the coats and transport them to the warehouse of Jenny, Inc. The defendant went to the Oberhelman residence, obtained the coats and delivered them to Jenny, Inc.’s warehouse. It is admitted that while this coat was “in the delivery truck of the defendant” some damage was done to it. The evidence shows that the damage resulted from some liquid, with which the fur coat came in contact, and that the exact nature of this liquid was unknown, but was of such a character that it permeated the pelt and the lining and that the effect could not be removed.

(1) It is urged that this judgment must be affirmed for lack of any proof of damage. In passing upon this contention, we must keep in mind the measure of damage for the loss of or damage to wearing apparel that had been used at the time of the loss or damage. The actual damage is not necessarily the difference in the market value before and after the loss or damage. It is said in 13 O. Jm\, at 144, that: “Where the property converted is of a strictly personal nature, and has little or no market value; the measure of damages for the conversion of such property is its reasonable value to the owner at the time of the conversion. In fact, it may be said that an almost universal exception to the market-value rule is applied in cases of property converted consisting of purely personal belongings, such as household goods, portraits, manuscripts, and the like. The courts refuse to subject this class of goods to market-value rule, not because they have no market value, but because such market value does not afford the plaintiff a fair and just compensation.”

The market value of used wearing apparel would be an uncertain guide in determining the compensation for its loss to the owner. It, of course, would be relevant evidence but could not be accepted as the yard-stick in determining the actual damage. On the subject of the measure of damages for conversion of wearing apparel, it is said in the annotation to Stack v. Gudgel, L. R. A., 1917 D. (- Okla. -, 158 Pac. 1144) 493, at 501, that: “In determining the damages for the loss or conversion of, or injury to, household goods, and wearing apparel, evidence of cost, in connection with wear and tear, the length of time they have been in use, their condition at the time of the loss or injury, the expense of replacing them with other goods of a similar kind and in a similar condition, and any other facts which will enable the jury to determine the worth of the goods to the owner at the time of the loss, is proper for the jury’s consideration.”

There was evidence that the fur coat was bought by Oberhelman in 1943 at a cost of $2028.85; that its replacement value or cost was fixed by a competent appraiser on July 6th, 1945, at $3500.00, and that at the time it was delivered to defendant it was in perfect condition, according to the testimony of Mrs. Oberhelman, who was the owner at the time. She was asked what its value was to her at the time, but an objection to the question was sustained, and no profert of the witness’ answer was made, although an exception to the ruling was noted. As already noted, it is our opinion that the reasonable value to the owner is the measure of damage. It is also our opinion that the owner is a competent witness, without other qualification, to testify to such value (17 O. Jur., 473; 20 Am. Jur., 751). The ruling on the objection cannot be held to be prejudicial error, in the absence of a profert.

However, we find that the evidence that we have recited, plus the testimony that it was worth not more than $700.00 in its damaged condition, was sufficient to require that the issue of the damages should be submitted to the jury. It is urged that the coat was bought two years before the damage and that the replacement value was fixed a year before that date, and that, therefore, they have no probative value. We do not agree. Taken together, they show a rising market value, and when taken in conjunction with the testimony that the coat was in perfect condition when delivered to defendant there is a basis for fixing the reasonable value to the owner.

(2) Next, it is urged that the defendant owed no duty to the plaintiff. It is said that the plaintiff was not a party to the contract whereby the defendant agreed to transport this fur coat — and that is true. And, certainly, no duty toward the owner of the coat arose from the mere entering into contractual relations between the defendant and Jenny, Inc. Upon receiving instructions from Jenny, Inc., to obtain this fur coat from Mrs. Oberhelman, the defendant could have declined to do so without incurring any liability to her, notwithstanding its breach of its contractual duty to Jenny, Inc. But the defendant did not decline to assume the task of transporting the coat. On the contrary, it accepted the custody of the coat from Mrs. Oberhelman for transportation. It is true that in so doing the defendant was acting as the representative of Jenny, Inc., and when it obtained' the fur coat, its delivery to it — the defendant — -was delivery to Jenny, Inc. But that legal aspect of the transaction does not destroy or justify disregard of the fact that the defendant came into proximity to the owner of the coat by seeking and obtaining the coat from her. And, by reason of that proximity, certain duties arose by mere operation of law. The defendant was charged by law with the duty to so act as not to injure the owner or his property through its wilful or negligent act. It is no answer that the defendant acted in a representative capacity at the time. “An agent is liable for his torts in the same manner as any other person.” 3 C. J. S., 129.

In considering whether an agent has brought himself within such proximity to a third person as to impose a duty upon him toward such third person, courts, particularly in earlier times, resorted to the distinction between misfeasance, malfeasance, and nonfeasance, and it has been frequently stated that the agent is liable to third persons for his misfeasance and malfeasance, but not for his nonfeasance. The difficulty with these terms as a criterion of the agent’s liability is that the terms themselves require definition to determine when nonfeasance ceases and misfeasance or malfeasance begins. In 3 C. J. S., 130, it is said: “An agent is personally liable to third persons for injury resulting from his mismeasanee or malfeasance, meaning by those terms the breach of a duty owed to third persons generally, independent of the particular duties imposed by his agency.— Accordingly, where an agent has entered upon an undertaking and neglects to perform a duty owed to his principal, if by this neglect he violates a duty he owes to a third person also, he is personally liable to the latter, his liability not being based on agency, but upon the ground that he is a wrongdoer or has failed in the common law obligation to use that which he controls so as not to injure another.” Injury in this connection, we understand, includes both physical and property damage.

This rule and the basis therefor is stated in Section 354 of the Restatement of the Law of Agency (Vol. 2) as follows:

“An agent who undertakes to act for the principal under such conditions that some action is necessary for the protection of the person of others or of their tangible things is subject to liability to such others for physical harm to them or to their things caused by his undertaking and subsequent negligent failure to act, if the need for action is so immediate or emergent that withdrawal from the undertaking is no longer possible without unreasonable risk to them, and the agent should so realize.”

When the defendant accepted the custody of this coat it knew that while it was in transit the only protection it would have would be such as it bestowed upon it and that its failure would result in damage.

The subject of the liability of an agent or independent contractor to a third person was under consideration in the case of Emery & Co. v. American Refrigerator Transit Co., (Io. -, 184 N. W. 750) 20 A. L. R. 86, and was discussed in great detail in both the opinion and the annotation. The syllabus to that case is:

“A refrigerator company which contracts with a railroad company to supervise the loading of fruit into cars and ice the cars so as to preserve the fruit is liable to the shipper for negligent performance of its undertaking to such an extent that the fruit is injured in transit.”

And in the annotation to this case at page 99 it is said:

“An agent who violates a duty which he owes to a third person is answerable to such person for the consequences whether it be an act of malfeasance, misfeasance or nonfeasance. Stated in this form there is probably no case to be found to the contrary. But the doctrine laid down by some textwriters, founded on Lord Holt’s dictum in Lane v. Cotton (1701) 12 Mod. 488, 88 Eng. Reprint, 1466, has caused much confusion in the decisions over a fictitious distinction between acts of malfeasance and misfeasance and those of nonfeasance.—
“If a servant owes a duty to a third person because of a contract with his master, there is no reason why he should not be liable for injury caused by its nonperformance.”

See, also: Mollino v. Ogden & Clarkson, 49 A. L. R., 518 (243 N. Y. 450, 154 N. E. 307).

But it is said that Henshaw v. Noble, 7 Oh St, 226, is authority for the proposition that “an agent is never responsible to a third party for damages sustained through his nonfeasance.” We do not so construe that case. No such proposition is stated in the syllabus, and a reading of the opinion reveals that what the court did was to reverse the judgment because the court in its charge made no distinction at all between the liability of the principal and agent. The agent was engaged to make an excavation. The building on the adjacent lot collapsed during the night when no work was being done, and fell into the excavation. The action was against the lessee of the lot on which the excavation was made, their contractors, architect, and a sub-contractor engaged to do the excavating. The court said at page 233 that: “On this subject we think the portions which we have copied from the charge of the court were calculated to mislead the jury. They convey the idea that negligence is always to be regarded as a misfeasance, as a positive wrong, which will subject the agent equally with his principal to liability.” The court did not enter final judgment for this agent, but remanded the case for a new trial.

Now it is not the law of Ohio that an agent is never liable to third persons for injury caused by his nonfeasance. This is made clear by the case of Richards v. Stratton, 112 Oh St, 476, the first paragraph of the syllabus to which is:

“One who, through an agent of another, undertakes and enters upon a particular work, is required to exercise ordinary care in the manner cf executing it, and if he negligently injures another is liable for the damage sustained.” And, at page 481, the court quoted from Osborne v. Morgan,

130 Mass. 102, with approval, as follows:

“ ‘It is often said in the books that an agent is responsible to third persons for misfeasance only and not for nonfeasance. And it is doubtless true that if an agent never does anything towards carrying out his contract with his principal but wholly omits and neglects to do so, the principal is the only person who can maintain any action against him for the nonfeasance. But if the agent once actually undertakes and enters upon the execution of a particular work, it is his duty to use reasonable care in the manner of executing it so as not to cause any injury to third persons which may be the natural consequence of his acts; and he cannot, by abandoning its execution midway and leaving things in a dangerous condition, exempt himself from liability to any person who suffers injury by reason of his having so left them without proper safeguards. This is not nonfeasance, or doing nothing, but it is misfeasance, doing improperly.’ ” See, also: 2 O. Jur., 801.

So, we conclude that under the laws of Ohio, when the defendant accepted custody of the fur coat from its owner, it was charged with the duty of exercising care in its transportation, and that this duty was owing to the owner, and for neglect of that duty causing damage to the coat, it is liable to the owner.

(3) But, it is said that there is no evidence of negligence and it is true that the record is silent as to the circumstances under which the coat came in contact with the liquid, by which it was damaged. It is admitted that the damage occured while the coat was in defendant’s custody. The facts were peculiarly within the knowledge of the defendant. Under such circumstances, we think the law cast upon the defendant the duty of explanation, and, in the absence of such explanation, an inference arises that an explanation would be detrimental to defendant. The defendant was a bailee who returned goods in a damaged condition. A prima facie case of neglect arose requiring an explanation. 5 O. Jur., 124.

(4) The question naturally arises as to the extent of the defendant’s liability. It was the representative of Jenny, Inc., engaged in performing its contract, when the delict occurred. Jenny, Inc’s liability was limited to $100.00. Is defendant’s liability similarly limited? We are of the opinion that it is so limited. Section -347 of Restatement of the Law of Agency is: “An agent who is acting in pursuance of his authority has such immunities of the principal as are not personal to the principal.” Had the principal acted in person in carrying this coat and had been sued for the damage done, no matter what the form of action, its liability would have been limited to $100.00. When it engaged the defendant to get the coat for it, it clothed the defendant with all the authority and rights which it, the principal, had against the owner, including the right to have liability limited to $100.00. It was a defense pro tanto, available equally to Jenny, Inc., and any and all in possession of the coat under its authority.

For these reasons, the judgment is reversed and the cause remanded for further proceedings according to law.

ROSS, PJ, HILDEBRANT & MATTHEWS, JJ, concur in syllabus, opinion & judgment.


source: Caselaw Access Project

author: By MILLS, J.

license: Public Domain

text:
    RICE v. RINALDO.
    Common Pleas Court, Montgomery County.
    October 18, 1950.

      A. K. Meek, Dayton, for plaintiff.
    Landis, Ferguson, Bieser & Greer, Dayton, by Warren A. Ferguson, Dayton, for defendant.
   OPINION

By MILLS, J.

This cause comes on to be heard upon the demurrer of defendant to the first cause of action of the petition of plaintiff.

The first cause of action reads as follows: “Now comes the plaintiff and for her first cause of action against defendant says that the defendant at all times mentioned herein was an active, practicing dentist, and maintained a dental office for the extraction and repairing of teeth, at 614 Troy Street, Dayton, Ohio, and was duly licensed by the State of Ohio to practice such dentistry for the accommodation of the public, and was allowed to serve the public subject to the provisions of §12940 GC, prohibiting him from denying to a citizen, regardless of color or race the full enjoyment of the accommodations, advantages, facilities and privileges which were a part of or connected with his said profession or the conducting of his practice of dentistry.

“That on November 22, 1949, the plaintiff, who is a negro, and a citizen of Montgomery County, Ohio, had a cavity in one of her teeth and was suffering considerable pain on account thereof, and desired to have the tooth extracted, and went to the said office of the defendant to have her tooth extracted, and the defendant refused to pull her tooth, because of the fact that she is a negro, and because of her color and race the defendant denied to her the full enjoyment of the accommodations, advantages, facilities and privileges which were a part of or connected with his said profession or the conducting of his practice of dentistry, and thereby violated §12940 GC.
“Wherefore, plaintiff prays for judgment against the defendant by reason of the above facts, in the sum of $500.06 and her costs herein.”

Sec. 12940 GC reads as follows: “Whoever, being the proprietor or his employe, keeper or manager of an inn, restaurant, eating house, barber shop, public conveyance by air, land, or water, theater, store or other place for the sale of merchandise, or any other place of public accommodation or amusement, denies to a citizen, except for reasons applicable alike to all citizens and regardless of color or race, the full enjoyment of the accommodations, advantages, facilities or privileges thereof, or, being a person who aids or incites the denial thereof, shall be fined not less than fifty dollars nor more than five hundred dollars or imprisoned not less than thirty days nor more than ninety days, or both.”

It will be noted the statute specifically mentions proprietor and employe or keeper or manager, or an inn, restaurant, eating house, barber shop, public conveyance by air, land or water, theater, storeroom “or other place for the sale of merchandise or any other place of public accommodation or amusement denies to a citizen, etc.” Does a dentist come within the provision of the statute as “any other place of public accommodation?” This statute being of a penal nature should be interpreted strictly.

It is held in Youngstown Park & Falls Street Railway Company v. Tokus, etc., 4 Oh Ap 276:

“It is urged that this is a penal statute and should be strictly construed: that the maxim ejusdem generis should be applied in the construction of this statute; that where certain persons, objects or things are named and followed by general terms, the general terms should be construed to apply to objects, persons or things of similar or like kind.
“This is a well recognized rule of statutory construction which is intended to aid the court in determining the true meaning of the words used to limit or abridge the well defined meaning of the legislature gathered from the ordinary meaning of the words used in the statute, keeping in mind the object that the legislature had in its enactment.”

State v. Williams, 35 Mo. App. 541, refer to this rule as the rule for the construction of statutes, that where the particular words of a statute are followed by general, — as if, after the enumeration of classes of persons or things, it is added “and all others,” — the general words will be restricted in meaning to objects of the like kind with those specified.

Looking to the statute under which this action was brought, and looking at the evident Intent of the legislators, from the language of the statute itself, they were evidently intending to give every citizen equal rights in public places to which they were accustomed to go, either for accommodation or amusement. The question then is, is a dentist’s office or doctor’s office or surgeon’s office, or a law office one of public accommodation? Certainly they are not places of amusement.

It is true that in order to practice each profession a license must be secured from the state, after passing a satisfactory examination. A barber must be licensed for sanitary reasons. A dentist, doctor, surgeon or lawyer is licensed, presumably, upon his knowledge of the subjects of medicine, dentistry, surgery or law, whichever profession is in question. Yet each profession is so subject to specialization that you would not expect any one person to be equally proficient in all branches.

Unless each profession is named by the legislature in the Act, why should the intent of the legislature be so interpreted as to place them in the catagory of a place of public accommodation? Surely the legislature thought to mention barber shops. Was the profession of dentists, physicians, surgeons or lawyers — if they meant to include them — of less importance in each and every community of the State of Ohio, than a barber or barber shop? If that was the intent of the legislature, then every dentist, physician or surgeon, after long specialization in any particular line of the professions, might be required to accept and administer to anyone who might come into the office, and the innocent patient or client might suffer from lack of knowledge and skill of a practitioner, skilled in the particular specialized line. Should a dental surgeon be forced to administer to a certain patient outside of his specialized practice to the detriment of the patient, and thus subject himself to a suit for damages in a malpractice action? It has been argued that if such were the case, a surgeon who specialized in plastic surgery, could be forced to alter the facial appearance of a criminal and thus innocently aid and abet the one whom he would be obliged to use his knowledge and skill upon, to avoid identity and criminal prosecution.

The court held in Faulkner v. Solazzi, 79 Conn. 541, 65 A. 947, a barber shop is not a place of public accommodation because they were not specifically named in the statute, and the same is true in New York where it was held that a saloon or place where liquor is sold, where it is not specifically mentioned in the statute, is not a place of public accommodation.

It will not be denied that in either case there was less reason to hold that neither a barber shop or saloon was a place of public accommodation, than is a dental office, a physician’s office, or the office of a surgeon, a place for the benefit of the public.

The case of Limbaugh v. Watson, 12 Abs 150, heard by the Court of Appeals in the Fifth District, is an action for damages by a woman of the Caucasian race against a physician for breach of contract to attend her during a case of confinement. The court held: “A physician or surgeon is not obliged to respond to any and every call made upon him and is not liable under any circumstances unless he has entered into a contract to render such services.”

In view of all the above citations, the court will sustain defendant’s demurrer to plaintiff’s first cause of action of the petition, and order plaintiff to proceed to adduce evidence upon the second cause of action for breach of contract in damages for the failure to perform services.

Counsel will draw their entries accordingly.


author: By WOODS, Referee.

text:
    In re KABBAGE.
    United States District Court, Northern District of Ohio, Eastern Division.
    No. 65646.
    Decided September 26, 1950.
    Clair E. Whitmer, Akron, trustee.
    Karl J. Ertle, Cleveland, for Metropolitan Finance Co.
    Henry B. Johnson, Cleveland, for trustee.
    Louis A. Berry, Akron, for bankrupt.
   OPINION

By WOODS, Referee.

In this proceeding, Clair E. Whitmer, trustee in bankruptcy of this estate, filed his petition to sell an undivided one-fifteenth interest in certain real property situated in Summit County, Ohio. To this, the counsel for the Metropolitan Finance Company filed a motion to dismiss the trustee’s petition to sell on April 26, 1950, urging that since the interest in land sought to be sold by the trustee had been registered under the Torrens Act of the State of Ohio, as provided in §8572-1 et sequi GC, and because the trustee had not filed notice as provided in the Torrens Act with the recorder of Summit County, that the motion of the Metropolitan Finance Company should be sustained.

This motion was overruled and the trustee directed to file a notice of his appointment with the recorder of Summit County, which was done on May 18, 1950, as appears in the Certificate of the recorder; and on May 22, 1950, this court ordered that the sale of the real estate go forward, transferring any lien of the Metropolitan Finance Company to the fund realized from the sale of said one-fifteenth interest.

Thereafter at the hearing on the claim of lien on the fund of the Metropolitan Finance Company, the question was submitted upon an agreed statement of facts. Therein it appears that the voluntary petition in bankruptcy was filed September 29,1948, the Metropolitan Finance Company secured judgment in Summit County in two suits on January 28, 1949, and certificates of such judgments were filed immediately against Land Title Registration Certificate No. 16969 of the Registered Title Division of the Recorder of Summit County in accordance with the provisions of the Torrens Act of the State of Ohio.

Apparently, the counsel for the Metropolitan Finance Company has become confused because he believes he has a lien on the real property by judgment, and if so, this can in no way effect the right of the trustee in bankruptcy who has ownership in the real estate which belongs to bankrupt under the Bankrupt Act.

Counsel overlooks the Section 70 sub. a (5) of the Bankruptcy Act, 11 U. S. C. A. Section 110, sub. a(5), which provides that the trustee of the estate of a bankrupt is vested1, by law with the “property, including rights of action, which, prior to the filing of the petition he could by any means have-transferred or which might have been levied upon and sold under judicial process against him * * Thus, where the-bankrupt holds as tenant in common, his trustee is invested with title of the undivided interest of the bankrupt, since the-bankrupt could have conveyed the same. 4 Collier on Bankruptcy, 14 Ed. Page 1040. From this, it would appear that the trustee in bankruptcy is the only person who can transfer any interest in this bankrupt estate and apparently the language of the Torrens Act contemplates such action. All that is necessary is that the trustee in bankruptcy file with the recorder papers showing his appointment as trustee in bankruptcy.

If there should be any question as to the priority right of the trustee over that of the lien claimant who has a judgment obtained in a State Court and reliance is had upon the filing under the Torrens Act, attention is called to the provisions of the Bankruptcy Act as follows:

Section 21, sub. (g), 11 U. S. C. A. Section 44, sub. g: “A certified copy of the petition with the schedules omitted, of the decree of adjudication or of the order approving the trustee’s bond may be recorded at any time in the office where conveyances of real property are recorded, in every county where the bankrupt owns or has an interest in real property. Such certified copy may be recorded by the bankrupt, trustee, receiver, custodian, referee, or any creditor, and the cost of such recording shall be paid out of the estate of the bankrupt as part of the expenses of administration. Unless a certified copy of the petition, decree, or order has been recorded in such office, in any county wherein the bankrupt owns or has an interest in real property in any State whose laws authorize such recording, the commencement of a proceeding under this Act shall not be constructive notice to or affect the title of any subsequent bona fide purchaser or lien or of real property in such county for a present fair equivalent value and without actual notice of the pendency of such proceeding: Provided, however, That where such purchaser or lienor has given less than such value, he shall nevertheless have a lien upon such property, but only to the extent of the consideration actually given by him. The exercise by any court of the United States or of any State of jurisdiction to authorize or effect a judicial sale of real property of the bankrupt within any county in any State whose laws authorize the recording aforesaid shall not be impaired by the pend-ency of such proceeding unless such copy be recorded in such county, as aforesaid, prior to the consummation of such judicial sale: Provided, however, That this subdivision shall not apply to the county in which is kept the record of the original proceedings under this Act.”

Thus, in the Bankruptcy Act itself, this last clause beginning, “provided however,” is applicable to the situation presented by the claim of the Finance Company and completely negatives and denies any priority to a lien claimant under a Torrens Act recording as against any other claimant. That is to say, the Bankruptcy Act is supreme as to who shall share in property of the bankrupt.

An order may be entered denying any claim of the Metropolitan Finance Company because of the said judgments sought to be enforced against this trustee in bankruptcy.


author: By THE COURT:

text:
    STATE ex JENKINS, Plaintiff, v. HOUCHIN et, Defendants.
    Ohio Appeals, Second District, Franklin County.
    No. 3885.
    Decided January 26, 1946.
    Hon. Hugh S. Jenkins, Atty. Geni., Paul T. Key, Special Counsel, Columbus, for plaintiff.
    Forrest F. Smith, Columbus, for defendants.
   OPINION

By THE COURT:

This is an action in quo warranto in which a motion has been filed for temporary injunction. Actions in quo warranto fall within the exclusive jurisdiction of the Supreme Court and the Court of Appeals. Article IV, Sections 2 and 6, Ohio Constitution; §12311 GC. We recognize the principle of law that under certain circumstances the Court may grant ancillary injunctive relief in an action of quo warranto pending disposition of a case on the merits. State v. Board, 70 Oh St, 341.

Should the Court grant a temporary injunction in the instant case? The motion is addressed to the sound discretion of the Court. Because of the nature of the relief sought, the Court should exercise its discretion sparingly and cautiously. The relief should be granted only when refusal would result in serious and irreparable injury. No facts are alleged in the petition or presented to this Court, from which the Court can reasonably conclude that irreparable injury would result by refusing to sustain the motion. In the petition the following allegation is made:

“Said defendants are threatening to and will, unless restrained, dissipate and waste the assets of said corporation.”

This allegation in the petition is a conclusion of the petitioners and no facts are set forth in support thereof. Under circumstances such as are found in this case, it is apparent that the business of the corporation must be conducted by one particular group of officers. The business of the corporation should not be thrown into a state of confusion by two sets of officers attempting to conduct its affairs. Usually ancillary injunctive relief is granted to preserve the status quo or to place one particular group in charge of the operation of the corporation until the principal issue is determined. This has been achieved by the Common Pleas Court of Franklin County in issuing a temporary restraining order in an action pending in that Court. Under the protection of the Common Pleas Court order, the persons who have been conducting the business of the corporation over a period of many years have been placed in charge of its affairs. The control of the business has not been changed. If this Court were to sustain the motion, it would result in removing the officers who have been conducting the business of the corporation and placing in charge of its affairs another set of officers. To do so would not be in the exercise of sound discretion.

Furthermore, the provisions of §11877 GC, do not permit

the Court to grant injunctive relief until there is first filed an affidavit showing that the plaintiff is entitled to such relief. True, §348 GC permits the Attorney General of the State to file his petition without being verified. However, this Court is of the opinion that the,Attorney General is amenable to the provisions of §11877 GC in the same manner as any other litigant, as there are no exceptions, and if he seeks ancillary injunctive relief in this case, the requisite affidavit must be filed. However, this Court rests its judgment on the discretionary power of the Court to grant or not to grant ancillary injunctive relief in any given case.

. Taking this view of the matter, we do not reach for determination the question of the alleged conflict of jurisdiction between this Court and the Court of Common Pleas of Franklin County.

Accordingly, the motion for temporary injunction is overruled.

HORNBECK, PJ, WISEMAN and MILLER, JJ, concur.


author: By WOODS,

text:
    WRIGHT INDUSTRIES, INC., In re: KEARNEY v. NATIONAL BRASS & COPPER CO., INC. et.
    United States District Court Northern District of Ohio, Eastern Division.
    No. 65749.
    Decided September 6, 1950.

      Murray A. Nadler, Youngstown, for trustee.
    Ross E. Diser, Youngstown, for National. Brass & Copper Co., Inc.
    Riddle & Riddle, Lisbon, for bankrupt.
   OPINION

By WOODS,

Referee in Bankruptcy.

Graham Kearney, trustee of Wright Industries, Inc., bankrupt, filed his petition to sell personal property of bankrupt and marshal liens, and thereupon an order to show cause was issued upon lien claimants to appear and set up whatever claims they had.

National Brass & Copper Co., Inc. answered by filing its “first response,” admitting all the allegations of fact in trustee’s petition, which alleged a loan of $50,000 to bankrupt in December of 1946, secured by chattel mortgage. Further answering in its “second response” said respondent asks affirmative relief, claiming a first and best lien on all items of personalty described in the three mortgages, in the' amount of $34,100, with interest, and that said chattels be sold and the proceeds first applied to its lien.

The Firestone Bank, Lisbon, Ohio, answered, stated it loaned $15,000 to bankrupt on September 6, 1946, taking its note for said amount, secured by chattel mortgage of bankrupt to G. L. Hephner as trustee for said bank, and recited that said Hephner, as such trustee, took chattels of bankrupt into his possession pursuant to another contract of the same date, claiming a first lien thereby in the amount of $8,259.41 with interest, and asking that in the event of sale free of said mortgage such lien be transferred to the fund.

The trustee in bankruptcy filed replies to said answers, denying the validity of any of the chattel mortgages to effect liens against the trustee, i. e. the three mortgages to the National Brass & Copper Co., Inc. and the one to Hephner, trustee for the Firestone Bank, are invalid, and that the attempt of Hephner, trustee, to seize and hold chattels of bankrupt, i. e. several hundred electric fans, was void and of no effect, and asks that Hephner be ordered to surrender said fans to the bankrupt estate.

The questions presented here involve the applicability and interpretation of Federal and State statutes, so that the language of the statutes becomes important.

Bankruptcy Act, Section 67, sub. d, 11 U. S. C. A. Section 107, sub. d reads as follows:

“(2) Every transfer made and every obligation incurred by a debtor within one year prior to the filing of a petition in bankruptcy * * * is fraudulent * * *.
“(d) as to then existing and future creditors, if made or incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay or defraud either existing or future creditors. * * *
“(5) For the purposes of this subdivision d, a transfer shall be deemed to have been made at the time when it becomes so far perfected that no bona-fide purchaser from the debtor and no creditor could thereafter have acquired any rights in the property so transferred superior to the rights of the transferee therein, but, if such transfer is not' so perfected prior to the filing of a petition in bankruptcy * * *, it shall be deemed to have been made immediately before the filing of such petition.”

Bankruptcy Act, Section 70, sub. e, 11 U. S. C. A. Section 110, sub. e.

“(1) A transfer made or suffered or obligation incurred by a debtor adjudged a bankrupt under this Act which, under any Federal or State law applicable thereto, is fraudulent as against or voidable for any other reason by any creditor of the debtor, having a claim provable under this Act, shall be null and void as against the trustee of such debtor.
“(2) All property of the debtor affected by any such transfer shall be and remain a part of his assets and estate, discharged and released from such transfer and shall pass to, and every such transfer or obligation shall be abided by the trustee for the benefit of the estate. The trustee shall reclaim and recover such property or collect its value from and avoid such transfer or obligation against whomever may hold or have received it, except a person as to whom the transfer or obligation specified in paragraph (1) of this subdivision e is valid under applicable Federal or State laws.”

Sec. 8618 GC. “Every gift, grant, or conveyance of lands, tenements, hereditaments, rents, goods or chattels, and every bond, judgment or execution, made or obtained with intent to defraud creditors of their just and lawful debts or damages * * * shall be utterly void and of no effect.”

Sec. 11104 GC. “A sale, conveyance, transfer, mortgage or assignment, made in trust or otherwise, by a debtor * * * in contemplation of insolvency and with a design to prefer one or more creditors to the exclusion in whole or in part of others, and a sale, conveyance, transfers mortgage or assignment made, or judgment procured * * * in any manner, with intent to hinder, delay or defraud creditors, shall be void as to creditors of such debtor, or debtors at the suit of any creditor or creditors. * * *”

Sec. 11105 GC. “The provisions of the next preceding section shall not apply unless the person or persons to whom such sale, conveyance transfer, mortgage or assignment is made, knew of such fraudulent intent on the part of such debtor or debtors, nor shall anything in such section contained vitiate or affect any mortgage made in good faith, to secure any debt or liability created simultaneously with such mortgage

Sec. 8560 GC. “A mortgage, or conveyance intended to operate as' a mortgage, of goods and chattels, which is not accompanied by an immediate delivery, and followed by an actual and continued change of possession of the things mortgaged, shall be absolutely void as against the creditors of the mortgagor * * * unless the mortgage, or a true copy thereof, be forthwith deposited as directed in the next succeeding section.”

The mortgage of bankrupt to Hephner, trustee, of December 2, 1946, filed February 18, 1947, described the property sought to be covered thereby as follows: “All of the inventory consisting of supplies, raw materials, products in work or completed owned by Wright Industries, Inc., all machinery and equipment owned by Wright Industries, Inc., all replacements thereof and additions thereto hereafter delivered' by said Wright Industries, Inc. to said Trustee and thereby subjected to the lien hereof as fully and completely as if originally listed herein.”

The mortgage failed to recite the place of business of either the mortgagor or mortgagee, or the place where the mortgaged property was located.

This mortgage was cancelled when Wright Industries, Inc. executed and delivered to Hephner, trustee, the chattel mortgage dated December 2, 1947 (filed for record December 9, 1947, Ex. B), said substituted mortgage described the property sought to be covered exactly like the mortgage dated December 2, 1946 and also failed to recite the place of either the mortgagor or mortgagee, or the place where the mortgaged property was located.

The evidence is undisputed that Hephner as trustee did not take possession of said goods, did not tag it in any manner, did not segregate it from the other goods of Wright Industries, Inc. but Wright Industries, Inc. was permitted to use and sell the goods for its own account. New inventory was purchased by Wright Industries, Inc. but Hephner as trustee did not take possession of this new inventory nor was it delivered to Hephner as trustee. The Corporation used and sold this new inventory as its own, without any regard to Hephner, trustee of National. In fact as it changed and added to its products, the nature of its inventory changed. From its sales it is obvious that the inventory changed over many, many times. Outside of a few items, no one could tell how much or what items it had on hand June 12, 1948 that was supposedly covered by the mortgage dated June 2,1946 or December 1947.

The trustee in bankruptcy relies upon Section 70, sub. c for the basis of his claim that the two successive chattel mortgages to Hephner, trustee, are void. Hereafter the applicability of the same ■ statutes to the National mortgage of June 12, 1948 will be considered: A discussion of the applicable rule is found in 7 O. Jur. page 346.

Section 70, sub. c reads as follows: “* * * The trustee, as to all property in the possession or under the control of the bankrupt at the date of bankruptcy or otherwise coming into the possession of the bankruptcy court, shall be deemed vested as of the date of bankruptcy with all the rights, remedies, and powers of a creditor then holding a lien thereon by legal or equitable proceedings, whether or not such a creditor actually exists * *

The trustee in bankruptcy may rely upon Section 70, sub. c for the nature and basis of his claim to the chattels sought to be covered by the Hephner mortgages. Section 70, sub. c heretofore quoted confers upon the trustee “by force of law” the status of the ideal or “perfect” creditor, irreproachable and without notice armed with every right and power which is conferred by the law of the State upon its most favored creditor. Such hypothetical status depends for meaning upon the substantive law which it does not explicitly indicate, but which it incorporates by reference. Hence the trustee’s powers in every case governed by this portion of Sec. 70, sub. c, are those which the State law would allow to a supposed creditor of the bankrupt, who had at the date of bankruptcy completed the process for the perfection of a lien upon property in the bankrupt’s or the Court’s possession. Whether a trustee is entitled to such a status, and the conditions under which he may attain it, are federal questions covered by the Bankruptcy Act, but the extent of the trustee’s rights, remedies and powers as a lien creditor, are measured by the substantive law of the jurisdiction governing the property in question — that is, in this case the law of the State of Ohio. The foregoing follows a discussion of this subject in Collier on Bankruptcy, 14th Ed., Vol. 4, p. 1261 et seq. See also Remington on Bankruptcy, Vol. 4, Chap. XXX-A, Secs. 1599-1601.

Since the amendment by the Chandler Act of 1938, this section, which was formerly in Sec. 47, sub. a(2), is now recast as a part of Sec. 70,- sub. c of the Bankruptcy Act, and is sometimes called the “strong arm clause in Sec. 70c.” This right of the trustee in the Bankruptcy Act, as so amended, is discussed in Commercial Credit Company, Inc. v. Davidson, 5 Cir., 1940, 112 F. 2d 54, 42 Am. Bankr. Rep., N. S., 688; Janney v. Bell, 4 Cir., 1940, 111 F. 2d 103, 42 Am. Bankr. Rep., N. S., 360; Robbins v. Bostian, 8 Cir., 1943, 135 F. 2d 298, 53 Am. Bankr. Rep., N. S., 20.

Section 70, sub. c specifies that the trustee’s lien is deemed vested as of the date when the petition in bankruptcy is filed with respect to all property within the scope of its terms. So, generally speaking, liens properly perfected prior to the date of bankruptcy will be superior to that of the trustee under Sec. 70, sub. c; those not so perfected or perfected subsequently to bankruptcy will be subordinated thereto, and as Collier adds, it must constantly be borne in mind that this is a matter upon which Section 70, sub. c normally defers to the State law, supra, p. 1270.

Improper or defective recordation' is just as ineffective as no recordation at all from the standpoint of constructive notice to third parties.

In Ohio where a chattel mortgage failed to recite the residence or place of business of either the mortgagor or the mortgagee, such was held invalid against the mortgagor’s trustee in Osborn v. Wells, 6 Cir., 69 F. 2d 970, when this Referee was affirmed by District Judge West and the Court of Appeals, showing the view the Federal Courts took of failure to comply with Ohio recording statutes.

Syl. 1. “General rule that a chattel mortgage to be valid against creditors must describe the mortgaged property with sufficient definiteness to enable third parties to identify property subject to mortgage lien, is in force in Ohio.

“2. Chattel mortgage which failed to recite residence or place of business of either mortgagor or mortgagee, or place where mortgaged property was located, held void as against mortgagor’s trustee in bankruptcy, though name of mortgagor contained the name of a city.”

The evidence offered fails to show that the chattels seized by Hephner were the same chattels upon which the mortgage had been given. What Hephner, trustee, did was to seize certain chattels and think that he was taking possession under his mortgage. Of course they were not the chattels previously mortgaged as the same had disappeared or been consumed and the lien so asserted by Hephner, trustee, is of no value.

There are many cases in the books and authorities under the Ohio law showing the necessity of compliance with statutory provisions if a valid lien is to be obtained by chattel m’ortgage. Early in Ohio it was held that in order to effect a lien, there must be compliance with the provisions of the Recording Acts. Where the statute provided for an affidavit to be written on the mortgage and signed by mortgagee, and the notary or

officer taking the oath failed to sign, it was held that' the statute had not been complied with and there was no lien. Benedict v. Peters, 58 Oh St, 527, 51 N. E., 37. In that case Judge Minshall said, 58 Oh St, at page 534, 51 N. E., at page 38: “Creditors examining the records for such liens are'not required to go beyond the record for the purpose of learning whether an instrument on which there is no duly certified sworn statement required by the statute can be shown to have been properly executed in this regard.”

Since the statutory provisions with reference to execution of a chattel mortgage are intended to protect third persons, including a trustee in bankruptcy under Sec. 70, sub. c., the chattel mortgage, as against them, must be executed in strict compliance with the statutory requirements. National Cash Register Co. v. Friedlander, 7 Ohio N. P. 170, 4 Ohio Dec. 347; Columbus Merchandise Co. v. Kline, 6 Cir., 248 F. 296.

If a chattel mortgage is executed or filed defectively, the lien of a subsequent execution upon such property is superior to that of such prior mortgage, even though the judgment creditor had notice of such mortgage. Houk v. Condon, 40 Oh St, 569. Misspelling of the name of the mortgagor so as to mislead subsequent mortgagees and purchasers does not constitute notice. Baker v. Coffman, 24 Ohio N. P., N. S., 259.

Defect in the form of or omission in the content of an instrument justifies the court in concluding that the filing of such an imperfect instrument is the legal effect of non-recordation. In re Schilling Press, D. C., 52 F. Supp. 569, 55 Am. Bankr. Rep., N. S., 257, affirmed Schilling v. Rockmore, 2 Cir., 141 F. 2d 643, 152 A. L. R. 1094; 55 Am. Bankr. Rep., N. S., 279; Timmer v. Talbot, D. C., 19 F. Supp. 687, 36 Am. Bankr. Rep., N. S., 84.

On June 12, 1948, Wright executed its new mortgage and factors lien direct to National, which new mortgage sought to correct the deficiencies of the prior mortgages. It gave the place of business of the mortgagor and the mortgagee, the location of the chattels, but instead of describing accurately the goods and chattels on hand in December 1946 or December 1947, it described and listed the chattels on hand on June 12, 1948 and later on October 22, 1948 when said chattels were moved to another location, a new, mortgage was executed and delivered setting forth the new location of said assets.

Counsel for National urges that the mortgages of December 1946 and 1947, although not creating a valid lien in law, on the after acquired property did create an equitable lien, since the new mortgage was executed in good faith, equity should be done and complete that which was intended to be done. This, the trustee cannot agree with for two reasons: First, the Chandler Act struck down the doctrine of equitable liens, and second, National comes into Court with dirty hands and the axiom of “he who seeks equity must do equity” applies.

When we state that the Chandler Act struck down the doctrine of equitable liens, we mean that prior to the Chandler Act, one who had an agreement for a lien and pursuant to said agreement a legal lien was created, some Courts held that the legal lien so created dates back to the day the equitable lien arose.

Sec. 67, sub. d(5) and Sec. 70, sub. e(2) of the Bankruptcy Act now lays down the law that the transfer takes effect at the time “when it [becomes] so far perfected that no * * * creditor could thereafter have acquired any rights in the property so transferred superior to the rights of the transferee therein.” In our case that would be on June 14, 1948, the date when the new mortgage and factors lien was filed. Prior to said time, any creditor with judgment could levy on said property and secure a superior right in said property to the transfer of National or Hephner as trustee for National.

It will be further noted that Sec. 70, sub. e (1) gives the trustee the right to strike down any lien if same is fraudulent or voidable under any applicable Federal as well as State law.

The Federal law applicable is found in Sec. 67, sub. d. The State law applicable is §8618, §11104 and §11105 GC.

There is no dispute over the fact that the property sought to be covered by the liens of June, 1948 was the property of Wright Industries, Inc.; nor that a voluntary petition in bankruptcy was filed by Wright Industries, Inc. herein on November 12, 1948; that the chattel mortgage and factors lien in issue were filed with the Recorder of Columbiana County on June 14, 1948 and October 22, 1948; nor that the trustee represents creditors of the bankrupt who were creditors at the time of said transfer (June 1948) and said creditors filed provable claims herein and said claims were allowed. Thus, the only elements under Sec. 67 at issue are (a) was the debtor insolvent on June 12, 1948, and did National have probable cause to believe them insolvent, and (b) was the transfer made with actual intent to hinder, delay or defraud creditors (c) within one year of Bankruptcy.

Enough of the Bankruptcy Law has been cited to establish the point that if the evidence proves the elements of Section 67, sub. d of the Bankruptcy Act, the mortgage in question is void as against the trustee without any reference to the Ohio law on the subject. It will be noted that Section 70, sub. e gives the trustee the right to strike down any lien if same is fraudulent or voidable under any applicable Federal as well as State law.

Probably the proof is sufficient to void the mortgage under the Federal law but in this connection an examination of the Ohio law on the same subject, since either is available to the trustee, shows this mortgage fails to create a valid lien in a bankruptcy proceeding.

Under §8618 GC, the transfer to be void must be made or obtained “with intent to defraud creditors”; knowledge by the grantee, of such intent, is immaterial; Ursak v. Sivanick, 56 Oh Ap, 434, 9 O. O. 317, 10 N. E. 2d 1017; City Trust & Savings Bank v. Weaver, 68 Oh Ap, 323, 22 O. O. 529, 40 N. E. 2d 953.

Under §§11104 and 11105 GC, a transfer “made in trust or otherwise * * * in contemplation of insolvency and with a design to prefer [and] with intent to hinder, delay or defraud creditors, shall be void.” To avail one’s self of said section, proof must be established that the transferee had knowledge of the fraudulent intent. However, it will appear Section 70 of the Bankruptcy Act has been interpreted that any transfer avoided under State law will be so held in the Bankruptcy Court and the rule of the State Courts there followed.

The Supreme Court of the United States held in Stellwagen v. Clum, 6 Cir., 245 U. S. 605, 38 S. Ct. 215, 62 L. Ed. 507, 41 Am. Bankr. Rep., 1, that the Bankruptcy Act did not suspend the right of the trustee under the statutes of Ohio to challenge a transaction for the common benefit of bankrupt’s creditors. This has been followed by the Court of Appeals of this circuit in Irwin v. Maple, 6 Cir., 252 F. 10, 41 Am. Bankr. Rep. 532, where these 'two sections of the Ohio statutes as to fraudulent conveyance were construed by the Court. Judge Warrington considered many of the Ohio cases which have been urged in petitioners brief and there held that under §11104 GC the trustee was empowered to take possession of all assets and administer for the equal benefit of the creditors. This was the rule followed by this Referee in Re Sheir et al., 16 Am. Bankr. Rep., N. S., 589.

Brief of counsel for National admits (page 19) insolvency of bankrupt on June 12, where it is stated, “of course, the corporation was upon June 12, 1948, unable to pay its debts as they matured and was therefore insolvent within the meaning of §11104 GC.”

The rule was early established in Ohio, in Mitchell v. Gazzam, 12 Ohio 315, 316, at page 336 by the Supreme Court interpreting assignment statutes, now §11104, §11105 GC, to the effect that “a design to prefer a creditor over others constitutes a preference under the statute.” At page 336 of 12 Ohio the Court said: “If, in contemplation of insolvency, and with a design to prefer one creditor over another, the debtor assigns his property to such creditor, or any other person, in trust, to satisfy the debt of such creditor designed to be preferred, and to account for the application of the property so transferred, or the residue after the payment of such debt, it matters not what may have been the manner or form of such transfer, the court would look to the substance of the thing done, and hold such creditors or other person receiving such transfer, a trustee for all the creditors. The Court will not require fraud to be proven against the assignee. A mere design on the part of the debtor, in contemplation of insolvency, will bring such assignment within the statute. The statute will not permit a debtor in failing circumstances in contemplation of insolvency, to interpose between himself and his creditors a trustee to secure a preference to some creditors over others. The situation of the debtor making the assignment, and the design with which he made it, must be gathered from all the circumstances in the case. It is the motive, design, and situation of the assignor, that give character to the assignment, and bring it within the operation of the statute.”

This rule was applied by Judge Westenhaver in the Western Division of this District in Lyons, Trustee v. Riker, 1939, 29 Ohio Law Rep. 324, where he quotes from Stellwagen v. Clum, supra, and Irwin v. Maple, supra, to the effect that the Bankrutpcy Court will follow the rule of the State Court in such cases. Judge Westenhaver said: “* * * That Smith was insolvent within the definition of insolvency given to this section. Insolvency in this law means an inability to pay debts as they become due in the ordinary course of daily transactions, and if, from such a deranged state of his affairs and a sense of inability to meet his moneyed engagements, the debtor transfers property to a creditor, he is regarded as having done so in contemplation of insolvency. Cincinnati Equipment Co. v. Degnan [6 Cir.], 184 F. 834, 840; Mitchell v. Gazzam, 12 Ohio 315, 316. This was Smith’s situation, and all the facts surrounding the execution of the mortgage show that he acted in view thereof and with the intent to secure his existing indebtedness to Riker as well as to obtain a new loan of $800. Likewise, Riker had knowledge of facts such as must charge him with knowledge of Smith’s insolvency in this sense and having participated in that intent to create a preference. Riker knew that Smith was hard up and short of cash. It is fairly inferable that he knew that by reason thereof Smith was unable at that time to pay his debts in the usual course of his daily transactions. He knew that Smith was unable to pay his debt when it matured. He knew Smith’s willingness to agree to pay a commission of $375 for a new cash loan of $800. These facts and other attendant circumstances produce the conviction that Riker participated in Smith’s forbidden intent, despite their present disclaimers.”

The second syllabus of the case as reported, is — “But while such mortgage is not void as a preference, because of fraud-, it is voidable as a preference as to preexisting indebtedness.”

The Court goes on to allow a valid lien for $800, new money furnished at the time of the mortgage and denies lien for all of the old pre-existing debt. In like situations the lien was allowed for new money by Judge Warrington in Irwin v. Maple, supra, and by this Referee in Re Sheir et al., supra.

In the case at bar there was no new money, only past consideration for the mortgage executed on June 12,1948 by bankrupt to the National Brass and Copper Company, so the claim of lien must fail.

Finally counsel for National urges that since equity regards as done, that which ought to be done, that if possession is taken under the power vested in a chattel mortgage covering after acquired property before the rights of other creditors intervene, equity will protect the lien so perfected by taking possession and will substitute the execution and delivery of the June 1948 mortgage and factor’s lien for possession. He relies for aid on Francisco v. Ryan, 54 Oh St, 307, 43 N. E. 1045, 56 Am. St. Rep. 711 and Boyer v. M. D. Knowlton Co., 85 Oh St, 104, 97 N. E. 137, 38 L. R. A., N. S., 224.

It is significant that no question of good faith is raised in the first case and in the second, 85 Oh St, at page 119, 97 N. E. at page 139, the Court says “There is no evidence to sustain the charge of fraud.” And at page 316 of 54 Oh St, 43 N. E. at page 1048, Judge Williams said: “Those of equitable cognizance, applying the maxim that equity regards that as done which ought to be done, hold that under such a mortgage a lien attaches to, the property as soon as it comes to the mortgagor’s ownership; while at law it has been held that it creates no present lien, nor one as the property is acquired, but as between the parties it operates only as contracts for a lien, which may be made effectual for. the benefit of the mortgagee by possession lawfully obtained of the property, not only as against the mortgagor himself, but also as against any subsequent legal process issued against him, or disposition attempted to be made by him.”

So the conclusion must be that the Ohio Law furnishes no aid to National’s position, and if the evidence establishes that the mortgage and' factor’s lien of June 1948 was made in contemplation of insolvency and with a design to prefer it over the other creditors, and with the intent to hinder, delay or defraud creditors, which fact was known to National, then said mortgage and factor’s lien are void under the Ohio Law.

The leading case on the question of fraud in bankruptcy proceedings in Pepper v. Litton, 1939, 308 U. S. 295, 60 S. Ct. 238, 84 L. Ed. 281, 41 Am. Bankr. Rep., N. S., 279, where the Supreme Court has spoken and in the syllabus says of the conduct of a director or stockholder of an insolvent corporation:

“The power of the bankruptcy court to disallow or subordinate claims upon equitable grounds, even claims which have been reduced to judgment, exists with respect to claims presented against an officer, director or stockholder against a. bankrupt corporation; since a director or a controlling stockholder is a fiduciary accountable to creditors as well as stockholder, his contracts with the corporation will be sustained only upon proof of their inherent fairness from the viewpoint, of the corporation and those interested therein, and in bankruptcy the fiduciary obligation of such a claimant is-enforceable by the trustee.
“The fact that the dominant stockholder of a bankrupt corporation perfected a judgment lien against the bankrupt’s assets more than four' months before bankruptcy (upon, a salary claim which the bankruptcy court finds should not be allowed) is no obstacle to equitable relief where that lien was but a step in a general fraudulent plan.
“The four months’ provision of the Bankruptcy Act is certainly not a statutory limitation on equitable defenses arising out of a breach of fiduciary duties by one who seeks allowance of a claim.”

The finding must be that the mortgages to Hephner, trustee for the Firestone Bank, and the mortgage to the National Brass and Copper Company, Inc., fail to establish a lien on the chattels of this bankrupt.

An order may be entered denying liens of all cross-petitioners and claims are to be allowed as general claims.

ON PETITION FOR REVIEW OF AN ORDER

By JONES, CJ.

This is a petition for review of an order of the Referee in Bankruptcy that the mortgage and factor’s lien of the petitioner were invalid as against the claim of the trustee.

The Referee held that (1) the mortgage and lien were fraudulent, transfers under Section 67, sub. d(2) (d) of the Bankruptcy Act; (2) the mortgage and lien were preferences under Ohio law; and (3) the mortgage and lien were fraudulent conveyances under Ohio law.

It is sufficient to state that the Referee’s holding that the mortgage and lien were fraudulent conveyances under the Bankruptcy Act is adequately, supported by that part of the record upon which the Referee’s ruling was based. Since the Referee’s finding is one of fact, the Court is not able to say that he was clearly in error in his interpretation of the evidence; but rather, is justified in concluding the ruling of the Referee is correct.

Thus it is unnecessary to consider petitioner’s contention as to the second and third holdings set forth above.

The petition for review will be denied and dismissed and .the report of the Referee approved and confirmed.


author: By SCHMIDT, J.

text:
    CLIPPINGER et, v. WOOD et.
    Common Pleas Court, Hamilton County.
    No. A-119593.
    Decided December 18, 1950.
    Taft, Stettinius & Hollister and Walter K. Sibbald, Cincinnati, for plaintiffs.
    Leo A. Burke, Cincinnati, for defendant Ollie R. Wood.
   OPINION

By SCHMIDT, J.

The defendant Ollie R. Wood has filed two motions to dismiss the petition which contests the will of Walter W. Clippihger, deceased. The motions are based on these grounds:

1. That the Western Bank and Trust Company, appointed by the Probate Court of Hamilton County, as Administrator with the Will Annexed, was not validly appointed because letters of appointment were issued without requiring the bank to give bond and that consequently no legal appointment of an administrator was made within six months from, the date of the probate of the will.

2. That the Probate Court has not, within six months after probate, appointed a testamentary trustee, and therefore since the will creates a trust and names a trustee, there is a defect in the necessary parties defendant in this action since no validly appointed trustee has been made party defendant.

The appointment of the administrator with the will annexed without bond is attacked and claimed to be null and void because of §10506-4 GC, which as amended in 1935, requires that

“Every fiduciary shall, prior to the issuance of his letters, file in the Probate court in which the letters are to be issued, a bond * * V’

If this section stood alone its requirements of a bond as a preliminary condition to the appointment of a trust company fiduciary would be beyond doubt.

However, §710-161. GC, which, although prior in enactment to §10506-4 GC, has never been expressly repealed, states that

“* * * no bond or other security * * * shall be required from any * * * trust company for or in respect of any trust, nor when appointed executor, administrator *•* *” etc.

It is argued that the intention of the legislature was to repeal §710-161 GC insofar as it conflicted with the subsequent enactment now contained in §10506-4 GC. There is some support for this view and it has been accepted by the Attorney General of Ohio. See Opinion of Attorney General, No. 631, Volume 29, page 792.

However, the Probate Court of Hamilton County has consistently ruled that no bond is required in connection with the appointment of a fiduciary such as is involved here. In fact, the Probate Court overruled a motion in the administration proceedings involved in this case challenging the validity* of the appointment of the bank as administrator without bond.

Although the rulings of the Probate Court are not required to be followed here, this Court considers that the opinion of the Probate Judge in this important matter of statutory construction concerning fiduciary appointments rests upon an extensive knowledge of and experience in probate law and procedure and therefore that ruling should be adhered to.

In the event that the judgment of the Probate Court does npt represent the proper interpretation of these conflicting statutory provisions, the correction can best be made by the Appellate Courts, thus avoiding a conflict of views between this court and the Probate Court.

Furthermore, there is a serious doubt whether the present motion does not involve a collateral attack on the judgment of the Probate Court, thus barring the door to further inquiry by this court into the validity of the appointment. But this question need not be passed upon since the court .for the reasons above stated, believes that the validity of the appointment of the fiduciary should be sustained.

As to the second point raised, the court considers that no appointment of a testamentary trustee was necessary within the six months period because no trust res had yet been segregated or had come into existence as a trust entity requiring any action by trustees. Therefore, an appointed trustee was not, in this court’s opinion, a necessary party defendant to this action.

For the reasons herein stated, the motions to dismiss are overruled.


text:
    REICHMAN, Plaintiff-Appellant, v. DRAKE, Defendant-Appellee.
    Ohio Appeals, First District, Hamilton County.
    No. 7415.
    Decided May 7, 1951.

      Cors, Scherer, Hair & Hartsock, Cincinnati, for plaintiff-appellant.
    Milton D. Tobin, for defendant-appellee.
   OPINION

By MATTHEWS, J.:

On September 10th, 1935, the defendant’s husband took possession of premises known as 410 Walnut Street in the City of Cincinnati as a lessee of The Thomas J. Emery Memorial Estate. He continued as such lessee until his death in 1938. Thereupon, the. defendant became lessee of the premises. In 1944, the parties entered into a new lease for a term of five years commencing on June 10th, 1944, and expiring on June 19th, 1949. On June 11th, 1948, The Thomas J. Emery Memorial Estate, the lessor, notified the defendant, the lessee, in writing, that the lease would not be renewed at its expiration. The lessee requested the lessor to renew the lease, and, as a result of such request, the lessor, on September 14th, 1948, again notified her that the lease “would not be renewed at its expiration date, viz., June 9th, 1949.” Although defendant during the time from September 14th, 1948 to June 9th, 1949 tried to get the lessor to recede from its position not to renew the lease, there is no claim or evidence that the lessor did so or gave the defendant any basis for thinking that it would or might do so. Nor did the plaintiff give defendant any right to expect that she would be permitted to hold over.

In the meantime, The Thomas J. Emery Memorial Estate, the lessor, on February 4th, 1949, leased or contracted to lease these premises to the plaintiff for a term of five years, commencing on the 1st day of July, 1949, and expiring on June 30th, 1954. This lease or agreement contained a provision that possession would be given when the defendant vacated the premises. The defendant was informed of this lease or agreement to lease within a day or so of its execution.

The defendant did not vacate the premises on June 9th, 1949, and The Thomas J. Emery Memorial Estate instituted proceeding's in forcible entry and detainer against her. The defendant did not vacate the premises until on or about November 1st, 1949.

This action was filed on July 14th, 1949, while defendant was still in possession of the premises, to recover the damages sustained by reason of the defendant’s refusal to vacate the premises and permit him to take possession on July 1st, 1949.

At the trial, on the conclusion of the plaintiff’s evidence, the defendant moved for an instructed verdict. This motion was granted. On the verdict thus returned, judgment was entered. It is from that judgment that this appeal was taken.

The first question presented is whether the facts set forth present a case for submission to the jury to assess such damages as the law permits for the failure and refusal of the defendant to vacate the premises on the expiration of her lease. In other words, did her failure to vacate violate any right of the plaintiff?

Now what right had the plaintiff? It is undisputed that he and The Thomas J. Emery Memorial Estate had executed a written document in the form of a lease giving to the plaintiff a leasehold for five years from July 1st, 1949, containing a provision that possession was to be given when the premises were vacated by the existing tenant. In 32 Am. Jur., 51, it is stated that: “The fact that the term of the lease is to commence in futuro does not prevent the agreement from being a present demise.”

And at page 78 of 32 Am. Jur., the universally recognized rule is stated that: “A leasehold estate, however, such as a term for years may be created at common law to commence in futuro, for in such a case a present interest vests, called an ‘interesse termini,’ although not an interest in possession until the lessee enters into possession.”

Johnston v. Corson Gold Mining Co., 15 L. R. A. (n. s.) 1079, (157 Fed. 145), involved a lease similar in many respects to the terms of the lease in the case at bar. It was held as stated in the first paragraph of the syllabus that: “A provision in a lease that, if the lessor cannot deliver possession as contemplated, delay in delivery of possession will not work an abridgement of the term, but shall operate to defer the date of its commencement, does not change the character of the conveyance from an executed to an executory contract.” And at page 1083, the Court said: “A lease to commence in futuro is grantable. Whitney v. Allaire, 1 N. Y. 3055; Becar v. Flues, 64 N. Y. 518. The lessee acquired an interest in the term which he could assign, and from which he could maintain ejectment without any further act on his part, if possession was withheld after his right of entry became completed.” See, also, 32 Am. Jur., 50, et seq.

The court held that as the plaintiff had an adequate remedy at law by ejectment, an action in equity to remove cloud, etc., could not be maintained against one in possession of the leasehold.

In November or December, 1949, a new lease was entered into between the plaintiff and The Thomas J. Emery Memorial Estate, providing for the commencement of the term at the time when the plaintiff obtained possession of the premises. Both copies of the lease or agreement of February 4th, 1949, were destroyed, and, for that reason, the parties to this action were forced to rely on oral testimony as to its terms. However, the parties were in agreement as to its essential terms, and we conclude that it was a lease transferring to the plaintiff a leasehold estate in the premises as distinguished from a contract for a lease, creating contractual rights, but conveying no estate in the land.

As will appear later, we do not consider the distinction between a lease and an agreement for a lease as material in this case. In either event,, the plaintiff would have rights created thereby, which could not be violated with impunity. We think the authorities warrant the statement that even assuming that no lease or agreement for a lease had been consummated, and that the parties had not concluded their negotiations, a third person could not maliciously interfere and prevent the negotiations resulting in a contract without incurring liability. And the fact that the parties substituted a new lease for the old one would have no effect upon a cause of action already accrued.

We next inquire whether the action of the defendant constituted an infringement of the plaintiff’s rights, for which the law affords a remedy. Of course, no contract existed between the plaintiff and defendant, and, therefore, no action ex contractu could exist. But plaintiff had rights, tangible or intangible — property rights — recognized by law Did defendant’s conduct constitute an infringement of those rights? If so, his conduct was a wrong creating a cause of action ex delicto.

In 4 Restatement of the Law of Torts, Section 766, the law is summarized as follows:—

“Except as stated in Section 698, one who, without privilege to do so, induces or otherwise purposely causes a third person not to (a) perform a contract with another, or (b) enter into or continue a business relation with another is liable to the other for the harm caused thereby.”

Section 698 referred to in this rule relates. to contracts and other relations looking forward to marriage, and is irrelevant to this situation.

That the defendant did interfere in the relation between the plaintiff and The Thomas J. Emery Memorial Estate is clear from the evidence and her continued wrongful possession of the premises made her interference effective. She made it impossible for the lessor to place the lessee in possession on July 1st, the commencement date of the term, as contemplated by the parties thereto.

The rule deduced from the decided cases on the subject of prevention of performance of a contract is stated in 30 Am, Jur., 71 and 72, as follows:

“The weight of authority supports the rule that an action will lie against a person who, otherwise than in the legitimate exercise of his own rights, procures a breach of any contract, even though it is not a contract of employment. The theory of this doctrine is that the right to perform a contract and to reap the profits resulting from such performance, and also the right to performance by the other party, are property rights which entitle each party to protection, and to seek compensation by action in tort for any injuries to such contract.”

And, at page 83, the rule applicable to rights arising against one who prevents entering into a contract is stated to be: “The act of maliciously inducing a person not to enter into a contract with another, which he would otherwise have entered into, is actionable if damages result, according to a view which may now be said to prevail. A cause of action will usually be recognized where a party would receive a contract except for the malicious, fraudulent and deceitful acts of a third person, the right to make contracts without interference being one which the courts will protect.”

See, Leibovitz v. Central Nat’l Bank, 75 Oh Ap, 25.

The defendant testified that she had no ill-will, spite, or malice toward the plaintiff and the plaintiff conceded that the defendant was not actuated by ill-will toward him. On this factual basis it is urged upon the court that malice is an essential element of a cause of action in this category, and that the record shows the absence of this essential element. That contention presents the question of what is meant by the term “malice” in this connection. This subject is discussed in 30 Am. Jur., 75 and 76, where it is stated that:—

“Malice, in some form, is generally implied from the act of interference with contract relations, and is declared to be an essential ingredient in such cases. The lack of scientifically accurate terminology, however, has militated against clearness upon this point, both in conception and discussion. Thus, the word ‘malice’ which, in its technical legal sense, is the intentional doing of a harmful act without legal justification or excuse, or, in other words, the wilful violation of a known right, is sometimes used in the sense of ill will, or even as denoting a desire to harm irrespective of the presence or absence of ill will. The malice, however, which makes one liable for procuring a breach of contract is malice in its legal sense, and whether a wrongdoer’s motive in interfering is to benefit himself or to gratify his spite by working mischief to another is immaterial; malice in the sense of ill will or spite is not essential. In other words, many courts hold that ‘malice’ or ‘ill will,’ as those words are commonly understood, is not necessary in order to sustain an action for inducing a breach of contract, but that ‘malice,’ in this connection, denotes unjustified interference with the contractual relationship. It is not necessary to prove actual malice against a defendant in order to establish a cause of action against him for knowingly procuring the breach of a third person’s contract with the plaintiff.”

It will be seen that personal ill-will, spite, or hatred is not an, essential element in this cause of action. In this, as in most actions in tort, it might become important in the event it was sought to recover punitive damages. Its significance, however, is limited to its effect on the amount of the recovery.

We conclude that the plaintiff proved that the defendant’s conduct violated his property rights, leaving only the question of whether there is any evidence of damage. We examine the record to determine that question. Before doing so, we should determine the rule or measure of damages in this sort of a case. As already noted, the defendant, with full knowledge of the facts and without even a prima facie claim of right, prevented the lessor from delivering possession of the leased premises to the plaintiff, notwithstanding her knowledge that the plaintiff was preparing to take possession and was relying upon her to vacate the premises. Under such circumstances it wpuld appear that the defendant could not be viewed by the law in any more favorable situation than the lessor would be if it had arbitrarily refused to deliver possession to the lessee. A lessor in that situation would be required to pay at least nominal damages and such actual damages as was in the reasonable contemplation of the parties as a consequence of the breach. In 32 Am. Jur., 54, it is said:

“While there is authority to the effect that only nominal damages can be recovered for a breach of the proposed lease by the proposed lessor of his agreement to give a lease, provided the proposed lessor acts in good faith in entering the agreement, according to the great weight of authority in the-United States, the proposed lessee is entitled to recover as general damages the actual value of his bargain as shown by the excess, if any, of the actual rental value of the premises over the agreed rent. This, however, is not necessarily the extent of his right of recovery; under special circumstances warranting it, damages may also be recovered for losses that are the natural, direct, and necessary consequences of the breach where they are capable of being estimated by reliable' data, and are such as should reasonably have been contemplated by the parties. Thus, where there was a wilful refusal on the part of the proposed lessor to give possession, special damages consisting of expenses incurred by the lessee in preparing to remove to and occupy the premises have been held recoverable.”

In Herron Co. v. Jones, 28 Oh Ap, 190, at 196, it is said:

“The measure ,of damages appears settled by practically all the authorities to be ‘the difference between the rent agreed upon and the market value of the term, plus any special damages alleged and proved.’ ”

In 15 Am. Jur., 545, it is stated that:

“As a general rule the reasonable and necessary expenses incurred in good faith, in anticipation of performance, or in part performance, of a contract, may be recovered as a part-of the damages for its breach, especially where the breach consists in preventing performance.”

As this case must be reversed and remanded for a new trial, we do not deem it necessary or helpful to determine what particular items of damage are recoverable. That will depend on what items are shown to have been within the contemplation of the parties and to have been the natural result-of the defendant’s wrongful acts. It is clear from the record that the plaintiff suffered some actual damage within this rule.

For these reasons, we are of the opinion that the court erred in sustaining the defendant’s motion for an instructed verdict, and in overruling the plaintiff’s motion for a new trial.

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

HILDEBRANT, PJ, MATTHEWS, J, concur in syllabus, opinion & judgment.

ROSS, J, not participating.


author: By WEBER, J.

text:
    LOCKLAND (City) et v. SHAVER et.
    Common Pleas Court, Hamilton County.
    No. A-121859.
    Decided December 28, 1950.
    Charles M. Gowdy, Cincinnati, for City of Lockland.
    G. Cornelius White, Cincinnati, for Village of Lincoln Heights.
    Harry M. Jansen, Cincinnati, for City of Reading.
    Philip J. Schneider and David Tarbell, Cincinnati, for defendants.
   OPINION

By WEBER, J.

This is an action brought by the plaintiffs, the city of Lockland, the village of Lincoln Heights and the city of Reading to enjoin the recorder of Hamilton County, Ohio, from making a record, of the petition, plat and transcript of the proceedings before the trustees of Sycamore Township of the incorporation of the Village of Evendale and from certifying the same as provided by law. On May 17, 1950 the trustees of Sycamore Township ordered and declared said territory incorporated as the Village of Evendale. All of said papers relating to said incorporation were delivered on May 18, 1950 by said trustees to the Recorder of Hamilton County, Ohio, for record. A petition for an injunction was filed on May 26, 1950, that is, within ten days after delivery of said papers to the Recorder of Hamilton County. Said petition was filed under authority of §3526 GC and related sections, with reference to the incorporation of villages.

Sec. 3531 GC reads in part as follows:

“* * *, but no injunction shall be brought, as herein provided in case of filing the transcript with the county commissioners, unless the action be instituted within ten days from the filing of the papers by the trustees with the county recorder, * * *.”

Sec. 3532 GC reads in part as follows:

“* * *, any person interested may make application by petition to the court of common pleas * * *, setting forth the errors complained of, or the inaccuracy of the boundaries, or that the limits of the proposed corporation are unreasonably large or small, or that it is not right, just, or equitable that the prayer of the petition * * * be granted, * * * and praying an injunction restraining the recorder from so making the record and certifying the transcript.”

An amended petition was filed adding the agents of the incorporation as parties defendant. It also sets forth that there was error in the proceedings in that printed notices of the election were not posted in three or more public places, as required by §3527 GC; it also detailed the respects in which the territory incorporated is unreasonably large and detailed the respects in which the incorporation is not right, just, or equitable.

Upon a full hearing there was undisputed evidence that notices were posted as required by law. There was no complaint and no evidence that there was error in the proceedings in any other respect. There was undisputed evidence that at the time the question of incorporation was submitted to the voters of the territory to be incorporated there were ninety-eight registered electors in said territory, that seventy-nine voted at the election, seventy-eight for and one against incorporation.

The first question to be decided is whether the three municipal corporations are proper plaintiffs, that is, whether they qualify under §3532 GC as “persons interested.” The statutory law of municipal corporations is found under Title 12. Division 1, Chapter 2 of said title provides for the manner in which villages shall be created. See. 4677 GC provides for the interpretation of said title 12 and said section is captioned “Enlarged Meaning of Certain Words” and reads in part as follows:

“In the interpretation of this title, unless the context shows that another sense was intended, * * * the word ‘municipality’ shall mean a municipal corporation; ‘person’ includes a private corporation.”

It will be noticed that the definition of the word “municipality” as meaning a municipal corporation is immediately followed by a definition of the word “person” which expressly includes a private corporation. The maxim expressio unius est exclusio alterius is particularly applicable. The word “person” as used in §3532 GC excludes a municipal corporation. '

The basis of the claim of the plaintiffs that they are- interested parties is concisely stated in their brief in the following language:

“The granting of this incorporation will pre-empt the possible expansion and growth' of all the plaintiff corporations as the village of Evendale will include all the contiguous territory which lies along, their boundaries.”

This is also the basis of the claim that the territory included in the village of Evendale is unreasonably large and its incorporation is not right, just, or equitable. In support of this claim evidence was offered that the present population of Evendale is small and scattered; that most of the land is agricultural and is adapted for and has been zoned for industrial use; that there are at present three or four large industries and that the per capita tax. duplicate of Evendale will be many times the per capita tax duplicate of each of the plaintiffs, particularly of Lincoln Heights; and further that Lincoln Heights will be deprived of an opportunity to acquire in the future suitable industrial space and convenient access to rail road ¡facilities.

It is the opinion of the court that the word “interest” as used in the statute means that some legal right, title or interest of a resident of the territory newly incorporated, or perhaps, as held in the case of Hall y. Siegriest, 13 O. Dec. 46, of a resident of the part of the township remaining after such incorporation, will be adversely affected by the incorporation. None of the plaintiffs has such an interest. Approval of the claims of the plaintiffs in this case would be a holding that whenever the residents of certain territory desired to incorporate it as a village or annex it to another municipality, neighboring municipalities can require the court to reserve to each municipality, according to its speculative future needs, such part of said territory as will tend to equalize the per capita tax valuation of all the municipalities. No such principle is expressly or impliedly contained in the statutes.

For the above reasons the court holds that none of the plaintiffs is qualified (as a person interested) to maintain this suit.

It is therefore ordered, adjudged and decreed that the injunction be denied, that the amended petition be dismissed and that the Recorder of Hamilton County, Ohio, record and certify, according to the provisions of law, all the documents pertaining to the incorporation of the Village of Evendale which have been delivered to the Recorder by the Trustees of Sycamore Township.


author: By DAVIES, J.

text:
    RUSSELL, Estate of, In re.
    Probate Court, Hamilton County.
    No. 171743.
    Decided March 29, 1951.
    Erastus S. Allen, Cincinnati, for widow of Alfred Russell, deceased.
    Frank J. Richter, Assistant U. S. District Attorney, Cincinnati, for United States of America.
    Frank A. Gallagher, Gilbert A. Horn, Chicago, 111., for Department of Agriculture.
   OPINION

By DAVIES, J.

The testimony in this case shows that before his death on June 28, 1948, Alfred Russell, while employed by the Bureau of Agricultural and Industrial Chemistry of the United States Department of Agriculture, at Peoria, Illinois, discovered a method of making a substance which resembles Lignin, which invention might lead to the manufacture, synthetically, of a product having the actual chemical composition of Lignin, which might or might not be usable in facilitating the growth of certain plant life.

The administrator has listed in the inventory of Mr. Russell’s estate an item designated as “Invention entitled New Class of Polymeric Materials and Processes for Producing Them. Patent Application Serial No. .50234, filed September 18, 1948, before the Commissioner of Patents, U: S. Patent Office,’-’ which item has been appraised at $1000.00. The United States of America has filed a motion to strike that item from the inventory for the alleged reason that this invention is the property of the United States and not of the decedent. The Government claims ownership of the invention because of a contract of employment of Mr. Russell by the Government, under the terms of which, the Government alleges, any invention made by him would belong to the Government. The administrator contends that the employment contract does not establish such ownership of the invention in the Government. Neither the Government nor Mr. Russell during Mr. Russell’s lifetime made an application for the granting of a patent on the invention.

The right to obtain a patent, which is purely a statutory right, is limited to the person who has made or discovered the invention. This person, characterized as “any person” alone has the right of applying for and obtaining the patent.

R. S. 4886, 35 USC 31. “Inventions patentable. Any person who has invented or discovered any new and useful art, machine, manufacture or composition of matter * * * may upon payment of the fees required by law and other due proceedings had, obtain a patent therefor.”

As to the due proceedings, R. S. 4892, 35 USC 35 requires:

“The applicant shall make oath that he does verily believe himself to be the original and first inventor or discoverer of the art, machine, manufacture, composition, or improvement, or of the variety of plant, for which he solicits-a patent;”

The exception to this right to obtain a patent is found in R. S. 4896, 35 USC 46, which is as follows:

R. S. 4896, 35 USC 46. “Death or insanity of inventor. When any person, having'made any new invention or discovery for which a patent might have been granted, dies before a patent is granted the right of applying for and obtaining the patent shall devolve on his executor or administrator, in trust for the heirs at law of the deceased, in case he shall have died intestate * * (Italics ours.)

As shown by the inventory, Mr. Russell’s administrator filed, on'September 18, 1948,-a patent application before the Commissioner of Patents, U. S. Patent Office, covering Mr. Russell’s invention. Such patent has not yet been granted.

Under these circumstances, we do not believe that the Probate Court is authorized, or at present able, to determine who is the owner of the invention and patent rights of the “New Class of Polymeric Materials and Processes for Producing Them” listed as one item in the decedent’s inventory.

We arrive at this conclusion because the law provides that when any person (including and not excluuding a person who worked in any capacity for the United States Government), having made any new invention or discovery for which a patent might have been granted, dies before the patent is granted, the right of applying for and obtaining the patent devolves upon his executor or administrator. As noted, under the statute, not only is the right of applying for the patent exclusively restricted to the administrator of the deceased inventor, but the right of obtaining the patent also devolves upon the administrator..

How can this or any other court determine the property rights of adverse parties in a “patent” which has not been granted? Until a patent is granted, the representative of the decedent and the Government, in the instant case, can have, only a prospective or conditional property right in the contemplated patent, and the invention and the patent application have been listed and appraised in the inventory as a single item. We do not feel that it would be advantageous to the Government, even if, upon proper motion, the court would separate the questioned item into two items (the invention and the pending patent), and then attempt to determine the ownership of the invention separate from the ownership of the’ anticipated “patent” of the invention, because the real value of the invention to either party will be established when a patent has been granted on the invention, and, as noted, only the administrator of the deceased inventor, in the present case, has a right of applying for and obtaining such a patent. If this court undertook to separate the item in the inventory listing the value of the invention and the pending patent application, and then attempted to determine which party, the administrator or the Government, owns the invention,' how, if the court should find that the Government owns the invention, would it be possible for the Government to secure a patent?

Recapitulating, it strikes us that the Government, in asking the court to determine the ownership of the invention and the patent (as the inventory now stands), or, if it would ask the court to separate the item in the inventory and determine the ownership of the invention alone, is faced with a legal dilemma. As indicated, on one horn of the dilemma, the court cannot determine the ownership of a patent which has not been granted. And, on the other hand, if, upon proper motion, the court would find that the decedent had no interest in the invention, then the Government would be in the predicament of not being able to get a patent on the invention, and, likewise, if the decedent did not have an interest in the invention, his administrator could not make an application for and obtain a patent.

When and if a patent is granted to the administrator for his decedent’s invention, such administrator, as a representative of the decedent’s estate, will have, for the first time, a recorded property right, which may be merely legal, equitable, or both, in the patent granted. At that time, the question of the ownership in the patent can be submitted to a court of competent jurisdiction for final determination.

We conclude, therefore, that the Government’s motion to strike the item relating to the invention and the pátent is prematurely brought and will be overruled.