author: By LEACH, J.

text:
    LICHTER, Plaintiff, v. LAND TITLE GUARANTEE & TRUST COMPANY et, Defendants.
    Common Pleas Court, Franklin County.
    No. 188523.
    Decided July 5, 1955.

      Steer, Strauss & Adair, Cincinnati, McClelland & Devennish, Columbus, for plaintiff.
    Arter, Hadden, Wykoff & Van Duzer, Cleveland, for defendant, The Land Title Guarantee and Trust Co.
    Porter, Stanley, Treffinger & Platt, Columbus, for The Land Title Guarantee and Trust Company.
    Dargusch & Caren, Columbus, for defendant, The Ohio National Bank.
    Squire, Sanders & Dempsey, Cleveland, for defendants, Ohio Turnpike Commission, Buckeye Union Casualty Co. and Fidelity and Deposit Co. of Maryland.
    Frank c. Dunbar, Jr., Columbus, for Ohio Turnpike Commission.
   OPINION

By LEACH, J.

HEARD ON DEMURRERS TO AMENDED PETITION.

In Steer and Adair v. The Land Title Guarantee and Trust Company and Ohio Turnpike Commission, decided May 19, 1953, 65 Abs 33, Hartex, J., of this court, in an action brought by a firm of attorneys as plaintiffs, declared that the performance of a contract of June 4, 1952, betweexx The Land Title Guarantee and Trust Coxnpaxxy and Ohio Turnpike Coxnmissioxx, called for the unlawful practice of law; that because the legal and proper activity of Land Title in the issuance of policies of title insurance or guaranty could not be effectively separated from the “illegal practice of law” phase of the contract, the entire contract became illegal and void. The amended petition irx that case had prayed inter alia “that the Court order defendant The Land Title Guarantee and Trust Company to pay back any sums received by it from defendant Turnpike Commission under said contract.” This request was rejected by Judge Harter, his opinion as to such reading:

“The amended petition further prays that this Court order the defendant, The Land Title Guarantee and Trust Company, to pay back any sums received by it from the Ohio Turnpike Commission under said contract. In equity and good conscience, the Land Title Guarantee and Trust Company should certainly do this since they (rather than the Turnpike Commission) were the ones guilty of over-reaching their corporate powers. There is, however, a procedural problem raised at this point. Plaintiffs do not sue as ‘taxpayers’ in this case. This is not, therefore, a so-called ‘Taxpayer’s Action.’ Even if it were a typical action by ‘taxpayers,’ as such, to interfere with or direct the acts, measures or proceedings of a public body or its officers or agents, there would still be legal obstacles to the granting of a ‘pay-back’ order. In the first place, this action is upon the ‘State of Ohio’ level — not the level of a municipality, or county, or township. There is substantial authority to the effect that a proceeding by a taxpayer to restrain an alleged uxxwarranted action of public officials cannot be maintained if the state itself is a necessary or proper party defendant, and this is so although the state is not a party to the record. See 52 American Jurisprudence— Taxpayers’ Actions. Section 6.

“In the second place, there is substantial authority for the proposition that a taxpayer cannot maintain an action to enjoin the wrongful expenditure of public funds, where such funds were not raised by taxation. The Ohio Turnpike funds were raised through the sale of bonds, not by taxation. Hence, these authorities might well become applicable, should this case be considered a true ‘taxpayer’s action.’ See 52 American Jurisprudence — Taxpayers’ Actions, Section 9.

“An annotation in 58 American Law Reports 588 indicates that there is a sharp difference of authority among the states as to the right of individual citizens to challenge the acts of state officials.

“It is this Court’s view that since there is such doubt on this procedural question, the doubt should be resolved by refusing to grant the extraordinary order for paying back all money received by the Land. Title Guarantee and Trust Company. In other words, it is our opinion that relief as drastic and harsh as that here requested should be granted only upon clear authority.”

In the instant action this same relief, denied by Judge Harter at the behest of attorneys as plaintiffs, is sought by the plaintiff herein (1) as a resident, elector, taxpayer, owner of an automobile, purchaser of gasoline and user of the public highways in the State of Ohio (Second Cause of Action), and (2) as the owner of five Ohio Turnpike Revenue Bonds. (First Cause of Action.) Plaintiff seeks to compel Land Title to repay the sum somewhat in excess of $250,000.00 received by it for the rendition of all of its services under its contract with the Turnpike Commission. Plaintiff also seeks an order compelling the Ohio National Bank, Trustee under a Trust Agreement of June 1, 1952, to restore to the Trust Fund an amount of money equal to that paid to Land Title. (Fourth Cause of Action.) Here plaintiff apparently sues both as a taxpayer and as a bond holder. Finally plaintiff seeks judgment against the individual members of the Turnpike Commission and their sureties on their official bonds, again apparently suing both as a taxpayer and as a bond holder. (Third Cause of Action.) Turnpike Commission is made a party defendant although no specific relief is asked against it, apparently on the theory that Turnpike Commission should act as a conduit for the return of the monies from Land Title to the Trust Funds held by Ohio National.

All of the defendants herein have filed demurrers to the several causes of action on the grounds (1) that the plaintiff has not legal capacity to sue and (2) that the amended petition does not state facts which show a cause of action. All of the defendants except Land Title also demur on the grounds (1) that there is a misjoinder of parties defendant and (2) that several causes of action are improperly joined.

I

Does the plaintiff as a resident, elector, taxpayer, owner of an automobile, purchaser of gasoline and user of the public highways in the State of Ohio have the legal capacity to bring or maintain this action? To the extent that plaintiff seeks to have returned to the funds of Turnpike Commission, in the hands of the Trustee, an amount of money equal to that paid to Land Title by Turnpike Commission through the Trustee, we believe that the Ohio law is well established that no such right exists.

As stated in 52 American Jurisprudence — Taxpayers’ Actions, Section 9, referred to by Judge Harter, the right of a taxpayer to maintain an action to enjoin the wrongful expenditure of public funds, where such funds were not raised for taxation, has been denied in a majority of cases. To this same effect see 131 A. L. R. 1230. Obviously, of course, where a person does not have the legal capacity to maintain an action to enjoin the wrongful expenditure of public funds, he does not have the legal capacity to maintain a suit for the recovery of money wrongfully expended.

That Ohio has adopted the majority rule in this respect is clear from the decision of the Ohio Supreme Court in the recent case of State ex rel. Masterson, a Taxpayer, v. Ohio State Racing Commission, 162 Oh St 366. There the plaintiff as a taxpayer sought to restrain the Racing Commission from expending funds or issuing permits for the conducting of horse racing in this state. The funds there involved had been appropriated by the General Assembly for that purpose. The appropriation, however,,was not from general tax revenues of the state but from “The State Racing Commission Fund” established by §3769.10 R. C. All of the income into such fund came from the taxes, fees and income due the State of Ohio “under the provisions of this act.” (The Racing Commission Act.) We quote from the Opinion of Weygandt, C. J., at page 369:

“From these provisions it is apparent that the respondent commission is not authorized to expend public funds in excess of the revenues it collects from a special class of taxpayers. It is clear, too, that no part of such expenditures can involve funds collected from taxpayers generally. Furthermore, the relator does not claim to be in the special class of taxpayers from whom these revenues are collected.

“Hence, as held by the lower courts, the relator taxpayer has no special interest in the funds here involved, and he lacks the legal capacity to institute this action.”

The first paragraph of the syllabus of the Masterson case reads as follows:

“In the absence of statutory authority, a taxpayer lacks legal capacity to institute an action to enjoin the expenditure of public funds unless he has some special interest therein by reason of which his own property rights are placed in jeopardy.”

The instant case appears to be a much stronger case for denying the capacity of a taxpayer to sue than was the Masterson case. There the fund in question was derived from taxation but taxation as to a special class of taxpayers. (Those persons placing bets at the racetrack). If plaintiff herein, as a general taxpayer, had no “special interest” in the funds there involved because such funds were derived from a special class of taxpayers, it should be obvious that plaintiff herein, as a “taxpayer” would have no “special interest” in the funds which were not derived at all from any type of taxation either general or special.

The fund in question here was derived solely from the sale of bonds. See §§5537.04 (F), 5537.08 and 5537.11 R. C.

Some reference has been made in the briefs to the question of whether the funds herein were “public money,” plaintiff asserting that they were and certain of defendants asserting that they were not. Presumably this issue was discussed because of the language of the first paragraph of the syllabus in Green v. Civil Service Commission, 90 Oh St 252, which held that a taxpayer may maintain an action to enjoin public officers from the commission of kcts in excess of legal authority “which contemplate the expenditure of public money.” While the Court in the Green case did refer to “public money,” it is clear from an examination of the opinion that they were speaking of public money derived from taxation.

The language of Charles A. Leach, J., late of this Court in Tax Limitation League v. Day, 15 O. O. 122, at page 125, succinctly states the issue involved herein:

“The question here involved is not so much a question of whether the funds arising from the proceeds of the converted coupons are or may be considered public funds for any purpose, or whether they may not — it being possible that under some statutory classifications for the particular purpose of that statute that they may be so considered. The real question here is whether they are public funds in the limited sense of whether or not a taxpayer, as such, has any interest therein, or any legal interest in their recovery.”

See also Hartnett v. Edmonston, 44 Oh Ap 304; State, ex rel. Shafer v. Merrill, 44 Oh Ap 347; Warm v. City of Cincinnati, 57 Oh Ap 43; Leasure v. Taylor, 32 Abs 395; Campbell v. Jaster, 25 Abs 16; State, ex rel. Fisher v. Sherman, 26 Abs 129; Russell v. State Bridge Commission, 16 O. O. 399 and State, ex rel. Johnson v. Washburn, 30 O. O. 435.

We believe it clear from all of these cases and especially from the Masterson case that plaintiff as a taxpayer does not have the legal capacity to maintain an action for the recovery into the funds of Turnpike Commission of the monies paid to Land Title or of an amount equal thereto.

We know of no authority by which plaintiff can maintain this action as a “resident” or as an “elector” and the briefs of plaintiff do not even discuss this question. Similar allegations in Russell v. State Bridge Commission, supra, were held to be insufficient to establish capacity to sue.

Plaintiff’s allegations that he is the “owner of an automobile,” “purchaser of gasoline” and “user of the public highways” in the State of Ohio, are in effect merely allegations that he pays the motor vehicle registration license tax and the gasoline tax. As heretofore stated, however, the fund in question was derived solely from the sale of bonds and none of the tax monies received by the State of Ohio from the sale of automobile licenses or from a gasoline tax, find their way into this fund.

Plaintiff has attempted to show damage to himself as a taxpayer by alleging that the date when Turnpike Project No. 1 will become a part of the Ohio State system of highways and free from tolls to plaintiff and other highway users will be delayed unless the money in question is returned by defendant Land Title to defendant Turnpike Commission; that by delaying the date when the system shall become the property of the State of Ohio, the likelihood is increased that such system will be in a worn-out condition at the time when it becomes State property and will require the expenditures of public funds to make repairs. The fact that the turnpike will be maintained by the Department of Highways when the turnpike bonds are fully paid off, does not affect the legal capacity of the plaintiff to maintain an action at this time. Plaintiff may or may not be a taxpayer when the turnpike is turned over to the Highway Department and, in any event, there is no showing that any delay in turning the turnpike over to the Highway Department would cause any additional expenditures of tax monies at any time. Purely from a taxpayer’s point of view, the longer the delay in turning the turnpike over to the Department of Highways, the less expenditure of tax funds will be necessary since until the turnpike is finally turned over to the Department of Highways, all maintenance and upkeep is paid for by Turnpike Commission from tolls paid by the users of the turnpike.

n

Does the plaintiff as the holder of five Ohio Turnpike Revenue Bonds have the legal capacity to maintain an action for the recovery of monies paid by Turnpike Commission to Land Title?

The petition alleges that plaintiff is the owner of five bonds for which he paid the sum of $1000.00 each; that the substance of said bonds is to the effect that Turnpike Commission will pay to the bearer thereof, subject to the terms of a “Trust Agreement” entered into on June 1, 1952, between Turnpike Commission and the Ohio National Bank of Columbus and the City National Bank of New York as co-trustees, from revenues of Turnpike Commission as authorized by §§5537.01 to 5537.23 R. C. The face value of said bonds, together with interest thereon at 314% per annum, payable semi-annually on or before June 1, 1992; that this action is brought under and by virtue of §5537.15 R. C.; that plaintiff brings this action not only on his own behalf but also on behalf of all holders of Turnpike Revenue Bonds; that the “Trust Agreement” provides that all payments of the cost of the turnpike shall be made from a fund to be known as the “Construction Fund”; that said “Construction Fund” consists of proceeds from the sale of the aforesaid Turnpike Revenue Bonds; that plaintiff and all holders of said Turnpike Revenue Bonds “have been damaged by the aforesaid expenditures of funds for the reason that the amount of funds available to pay the principal and interest due under the terms of said bonds has been diminished, and the likelihood of the necessity for the issuance of further bonds has been increased.”

It is the contention of the defendants that by the terms of the Trust Agreement plaintiff as the holder of five bonds of a total face value of $5000.00 out of a total issue of Three hundred Twenty-six Million Dollars is precluded from bringing this action.

Section 807 of the Trust Agreement, incorporated into the petition, reads as follows:

“Section 807. No holder of any of the outstanding bonds shall have any right to institute any suit, action, mandamus or other proceeding in equity or at law for the execution of any trust hereunder or the protection or enforcement of any right under this Agreement or any resolution of the Commission authorizing the issuance of bonds, or any right under the Turnpike Act or the laws of Ohio, unless such holder previously shall have given to the Trustee written notice of the event of default or breach of trust or duty on account of which such suit, action or proceeding is to be taken, and unless the holders of not less than ten per centum (10%) in principal amount of the bonds then outstanding shall have made written request of the Trustee after the right to exercise such powers or right of action, as the case may be, shall have accrued, and shall have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers herein granted or granted by the Turnpike Act or by the laws of Ohio, or to institute such action, suit or proceeding in its or their name, and unless, also, there shall have been offered to the Trustee reasonable security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused or neglected to comply with such request within a reasonable time; and such notification, request and offer of indemnity are hereby declared in every such case, at the option of the Trustee, to be conditions precedent to the execution of the powers and trusts of this Agreement or for any other remedy hereunder or under the Turnpike Act or the laws of Ohio. It is understood and intended that no one or more holders of the bonds hereby secured shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Agreement, or to enforce any right hereunder or under the Turnpike Act or the laws of Ohio with respect to the bonds or this Agreement, except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the benefit of all holders of the outstanding bonds and coupons.”

Since, as stated in the amended petition, plaintiff purports to bring his action as a bond holder under and by virtue of §5537.15 R. C., it is clear that in this action he is attempting to assert a “right under the Turnpike Act or the laws of Ohio” within the meaning of Section 807 and it is equally clear that the plain and unambiguous language of Section 807 would preclude the maintaining of this action in view of the fact that the holders of not less than 10% in principal amount of the bonds then outstanding have not made written request of the Trustees to bring such action.

The amended petition, however, alleges:

“16. That Section 807 of said Trust Agreement, a copy of which is attached hereto and made a part hereof, and marked ‘Exhibit B,’ purports to limit the right of plaintiff herein and other holders of such Ohio Turnpike Revenue bonds to remedy themselves and said Construction Fund against said acts on the part of defendants, but said provision of said Trust Agreement is invalid, illegal, void and of no effect insofar as it affects this action for the following reasons:

“a. Sec. 5537.12 R. C. (formerly §1213 GC), limits the restrictions which said trust agreement may place upon the individual right of action by Turnpike bondholders to those which are customary in trust agreements or trust indentures securing bonds or debentures of corporations.

“b. Said §5537.12 R. C., further provides that a provision of said Trust Agreement regarding the enforcement of rights and remedies of Turnpike bondholders must be reasonable and proper and not in violation of law. Said provision of said Section 807 of said Trust Agreement tends to deprive a court of equity of its ordinary, necessary and proper jurisdiction in matters such as the one contained in this action, and is therefore in violation of law.

“c. That plaintiff, when he purchased the certificates described in Paragraph 1 hereof, had no knowledge of the restrictions set forth in said Section 807; that said certificates and said Ohio Turnpike Revenue Bonds contain upon their face the following notation relative to a limitation on the rights of action of holders thereof:

“ ‘The holder of this bond shall have no right to enforce the provisions of the Agreement (Trust Agreement dated as of June 1, 1952, by and between the Commission and The Ohio National Bank of Columbus, Columbus, Ohio, as trustee), or to institute action to enforce the covenants therein or to take any action with respect to any event of default under the Agreement or to institute, appear in or defend any other suit or proceeding with respect thereto except as provided in the Agreement.’

“and plaintiff when he purchased said certificates had no notice of the actual extent of said restrictions.”

In paragraph 16 (c) plaintiff seeks to avoid the limitations contained in Section 807 of the Trust Agreement on the basis that he had no knowledge of the restrictions set forth in such agreement. This same paragraph, however, sets forth in full the language contained on the certificates which language certainly placed him on notice of the limitations contained in the Trust Agreement. The fact therefore that when he purchased such certificates he did not have knowledge of the actual extent of said restrictions is of no import. Sufficient notice having been given to him by the notation on the certificates, he is bound by such restrictions to the extent that they are legally enforceable. In this connection it might also be pointed out that the briefs of the plaintiff, although extensive, at no place assert that he is not bound by such restrictions to the extent legally enforceable.

Paragraph 16 (a), while alleging that §5537.12 R. C., limits the restrictions to those which are customary in trust agreements or trust indentures securing bonds or debentures of corporations, contains no allegation of fact which could be construed as indicating that the Trust Agreement in question in any way violated the provisions of §5537.12 R. C. The fact that the original petition had contained a broad allegation, ordered stricken as being a conclusion, to this general effect may not be considered in determining the demurrer to the amended petition. The effect of the order of the Court ordering the striking of such language from the original petition was to require the plaintiff to allege facts, as opposed to conclusions, if plaintiff desired to make such an allegation. This was not done.

Paragraph 16 (b) asserts that the provisions of Section 807 of the Trust Agreement tend to deprive a Court of Equity of its ordinary, necessary and proper jurisdiction in matters such as the one contained in this action and are therefore in violation of law. Defendants have cited many out of state cases which in general support the validity of restrictive provision as to the enforcement by court action of the rights of a bondholder, e. g.: Moore v. Tumwater Paper Mills Co., 181 Wash. 45, 42 Pac. 2nd, 29: Dietzel v. Anger, 8 Cal. 2d, 373, 65 Pac. 2d, 803; Lidgerwood v. Hale and Kilburn Corp., 47 Fed. 2d, 318; Muren v. Southern Coal and Mining Co., 177 M. App. 474, 160 S. W. 835; Crosthwaite v. Moline Plow Company, 298 Fed. 466 and Allan v. Moline Company, 14 Fed. 2nd, 912.

Plaintiff asserts that these cases are distinguishable from the instant case in that some involved action to foreclose the security and in others there was no request made to the trustees to sue on behalf of the bond holders by any bondholder. Plaintiff in turn refers to certain language of other out-of-state cases to the general effect that an individual bondholder has a right to bring an action on behalf of himself and all other bondholders where the trustee has put itself into a position where it cannot faithfully and competently discharge its duty as a fiduciary, even though the indenture contains a provision prohibiting suits by bondholders unless holders of a certain per cent, of bonds have requested the trustee to take action. Rabinowitz v. Kaiser Frazer Corp., 111 N. Y. S. 2d, 539, Campbell v. Hudson and Manhatten Railway Co., 102 N. Y. S. 2d, 878, Birn v. Childs Company, 37 N. Y. S. 2d, 689, 1st Natl. Bank v. Salisbury, 130 Mass. 303 and Florida National Bank of Jacksonville v. Jefferson Standard Life Insurance Co., 123 Fla. 525, 167 Southern, 78, 108 A. L. R. 77.

It is our opinion that the cases relied upon by the plaintiff are distinguishable from the issue presented in the instant case, first, because the amended petition alleged no facts which show that the Ohio National Bank as trustee has put itself into a position where it cannot faithfully and competently discharge its duties as a fiduciary and second, because the cases relied upon by the plaintiff involve fact situations where the obligation under a bond had ripened into a cause of action by virtue of the non-payment of the obligation by the corporation in question.

Plaintiff contends that the Ohio National Bank as trustee has been, in effect, guilty of fraud to such an extent as to disqualify it to continue to faithfully and competently discharge its duties as fiduciary because of the fact that it accepted from Turnpike Commission the requisitions signed by officers of the Turnpike Commission for payment to Land Title. Section 406 of the Trust Agreement provides that Turnpike Commission shall file with defendant Ohio National Bank as trustee the following papers among others:

“(a) A requisition, signed by an officer or employee of the Commission designated by resolution of the Commission for such purpose stating in respect of each payment to be made, among other things: ... (4) the purpose for which payment is to be made; (5) that the obligation is a proper charge against the Construction Fund . . .; (6) that there has not been filed with or served upon the Commission notice of any lien, right to lien, or attachment upon or claim affecting the right to receive payment of, any of the moneys payable to any of the persons, firms, or corporations named in such requisition which has not been released or will not be released simultaneously with such payment . . .”

Plaintiff asserts that on February 23, 1952, and upon diverse occasions thereafter, Paul W. Steer and Robert G. Adair, attorneys at law (plaintiffs in Case No. 185644 and attorneys for the plaintiff in the instant case) advised Turnpike Commission that the contract then proposed to be entered into and ultimately entered into with Land Title, required the practice of law by a corporation and hence was illegal and contrary to law; that on July 22, 1952, Mr. Steer and Mr. Adair filed Case No. 185,644 in this court, praying that the Court find that said title contract was illegal and contrary to law; that Judge Harter of this court subsequently declared said title contract to be illegal and void in its entirety; that such matters were, because of their nature, of a special interest to attorneys and title guarantee and trust companies and were discussed generally among such attorneys and persons associated with such companies; “that plaintiff is informed and believes that defendant Ohio National, through its officers, was informed by members of Commission, persons associated with Land Title, their attorneys, or any or all of them,” of the matters heretofore set forth; “that if said claims of illegality and suit set forth in said paragraphs were not known to defendant Ohio National, they should have been known to it by virtue of said publication, public interest and discussion and by reason of its being trustee as aforesaid.”

These allegations of the amended petition seek to impose upon the trustee a duty quite different from that imposed by the Trust Agreement to which it was a party. Section 406 of the Trust Agreement, contained in the supplement to the amended petition, requires the trustee, upon receipt of each requisition from Turnpike Commission to pay such item or to deliver to Turnpike Commission a check or draft for the payment thereof. Section 409 provides that the trustee may rely upon such requisition. Section 904 provides that the trustee shall not be responsible for the application of any of the proceeds of the bonds or other money deposited with them and paid out in accordance with the provisions of the agreement. Section 910 provides that the trustee “shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this agreement, upon any resolution, order, notice, request, consent, waiver, certificate, statement, affidavit, requisition, bond or other paper or document which it shall in good faith reasonably believe to be genuine and to have been adopted or signed by the proper board or person or to have been prepared and furnished pursuant to any of the provisions of this agreement * * *.” The amended petition contains no allegation to the effect that the requisition honored by the trustee was not genuine or that it had not been signed or adopted by the proper board or person.

Is the advice given by Attorneys Steer and Adair to Turnpike Commission on February 23, 1952, to the effect that the Title Contract would require the practice of law by a corporation and the filing of suit by these two attorneys on July 22, 1952, a “claim” within the meaning of Section 406 of the Trust Agreement? We do not believe so. Various cases have been cited by the parties as to the meaning of the word “claim.” The issue is not what does the word “claim” mean in the ordinary sense but what does it mean as contained in the language of Section 406 of the Trust Agreement. Here we believe that it plainly means a claim of a right to receive the whole or a part of the particular payment involved. It is a fundamental rule in the construction of a statute or an instrument that where any particular word is obscure or of doubtful meaning when taken by itself, this obscurity or doubt may be removed by reference to associated words. Here the associated words in Section 406 are “lien, right to lien, or attachment.”

It is apparent, therefore, that the allegations of the amended petition make no averments of facts which could be construed as bad faith on the part of the trustee. This being true, the plain language of the restrictions or limitations contained in Section 807 of the Trust Agreement may not be ignored or rewritten by this Court.

The briefs of the plaintiff state that he is not contending that a 10% limitation is invalid as to all cases but is merely contending that the limitation is too broad as to the type of causes of action which it purports to restrict. He contends that to the extent he seeks to replenish the funds of the Turnpike Commission, as contrasted with seeking recovery to be paid from the funds of Turnpike Commission, the restriction is invalid. In effect therefore he is asserting that any requirement that such actions be brought only upon request of a certain percentage of bondholders is invalid and that any bondholder would have the right to bring such action as a mere incident to his ownership of the bond. A similar contention was considered and rejected in the case of Allan v. Moline Plow Company, supra.

In considering the question of the validity of the limitation and whether it tends to deprive a court of equity of its ordinary, necessary and proper jurisdiction, we must consider the question of whether the limitation or restriction in some way unduly interferes with the rights of a bondholder which are inherent from the mere ownership of the bond. These rights ordinarily are to insist upon payment when due and to prevent the dissipation of any fund or any security pledged to the payment of such bonds. What fund is pledged to the payment of the bonds under the Turnpike Act? Sec. 5537.03 R. C. authorizes the Turnpike Commission to issue turnpike revenue bonds “payable solely from revenues.” Sec. 5537.11 R. C., provides that the bonds shall contain on their face a statement to the effect that they “are payable solely from revenues pledged for their payment.” Sec. 5537.12 R. C., provides that any trust agreement may pledge or assign the “tolls and other revenues to be received” but shall not convey or mortgage any turnpike project or any part thereof. Sec. 5537.01 R. C., defines “revenue” as meaning all tolls, rentals, gifts, grants, monies and all other funds and property coming into the possession or under the control of the Commission by virtue of §§5537.01 to 5537.23 inclusive, R. C., “except the proceeds from the sale of bonds issued under such sections.”

It is apparent therefore that the “construction fund” made up from the proceeds of the sale of bonds is not a fund which was pledged in payment to the bondholders herein. While we recognize that under the provisions of §5537.08 R. C., any surplus in this construction fund is deposited to the credit of the Sinking Fund for such bonds, nevertheless, under the language of the Turnpike Act monies in such “construction fund” are not pledged to the payment of the bonds.

It appears therefore that plaintiff, as a bondholder, is not seeking to enforce any specific right given to him either to collect on his obligation when due or to prevent the dissipation of property or funds pledged to the payment of such obligation.

It of course is true that §5537.12 R. C., authorizes the Trust Agreement to contain additional provisions for protecting and enforcing the rights and remedies of the bondholders as are reasonable and proper and not in violation of law, including covenants setting forth the duties of the Commission in relation to the acquisition of property and the construction, improvement, maintenance, repair, operation and insurance of the turnpike project or projects in connection with which bonds are authorized, the rate of toll to be charged and the custody, safeguarding and application of all monies and provisions for the employment of consulting engineers. These however do not appear to be rights which at common law would be considered to be inherent in the ownership of the bond itself. They are rights which exist only to the extent that the Trust Agreement so provides, and being such, obviously are subject to any limitations as to the right to enforce them contained in such Trust Agreement.

We conclude therefore that the provisions of the Trust Agreement do not deprive a court of equity of its ordinary, necessary and proper jurisdiction, as asserted in paragraph 16 (b) of the amended petition. Thus we conclude that plaintiff as a bondholder lacks the legal capacity to maintain this action.

Ill

It is apparent from what we have heretofore stated in this opinion that it is our conclusion that plaintiff as the holder of five Turnpike Revenue Bonds lacks the legal capacity to maintain the first cause of action which seeks recovery from Land Title of some $250,000.00 paid to it by Turnpike Commission under the contract of June 4, 1952; that as a taxpayer, resident, elector, etc. plaintiff lacks the legal capacity to maintain the second cause of action seeking the same recovery against Land Title; and that either as a bondholder or a taxpayer, etc., plaintiff lacks the legal capacity to maintain the fourth cause of action against defendant Ohio National.

In the third cause of action plaintiff seeks recovery against the individual members of Turnpike Commission on their bonds and judgment against their sureties. It would appear from the briefs that plaintiff believes that any monies paid by the individual members of the Turnpike Commission or their sureties for forfeiture of their bonds would be paid into the trust funds held by Ohio National. If this be true, our reasoning as to his lack of capacity to sue, either as a bondholder or as a taxpayer, would be equally applicable to the third cause of action.

Actually §5537.02 R. C., provides that each appointed member of the Commission, prior to the issuance of any Turnpike Revenue Bonds, “shall give a surety bond to the State in the penal sum of Twenty-five thousand dollars and the secretary-treasurer shall give a bond in the penal sum of Fifty thousand dollars, each surety bond to be conditioned upon the faithful performance of the duties of the office, to be executed by a surety company, authorized to transact business in the state, and to be approved by the Governor and filed in the office of the Secretary of State.”

It will be noted, of course, that the bond is given “to the State.” Thus it would clearly appear that any forfeiture of the bond or payment as the result of a breach of this condition would be to the State of Ohio. Here, of course, no tax money is involved and any payment thereunder would in no way benefit the plaintiff as a bondholder.

Plaintiff relied upon the case of Maryland Casualty Company v. McDiarmid, 116 Oh St 675. This was an action by an individual, who had received personal injuries at the hands of a policeman, on such policeman’s official bond. The case merely held that even though such a bond was not required by state law, where such an official bond was given, it came within the provisions of §11242 GC (now §2307.06 R. C.) which authorizes suit by “a person injured thereby.”

That case is entirely distinguishable from the instant case in that there is no showing that the plaintiff as a bondholder has been injured by any action of the members of the Turnpike Commission. As heretofore noted, there is no allegation that plaintiff has not been paid any existing obligation due on his bonds or that the monies pledged for the payment of such bonds has been in any way impaired by the action of the members of the Commission.

Sec. 2307.06 R. C., having no application to this case, it would appear that only the State of Ohio as obligee of the bonds can sue to recover thereon as “the real party in interest,” §2307.05 R. C. See 32 O. Jur. 1006; Reed v. Timberman, 65 Oh Ap 182, State, ex rel. Johnson v. Washburn, 30 O. O. 435; Russell v. State Bridge Commission, 16 O. O. 399; Hunter v. Commissioners of Mercer County, 10 Oh St 515, Kelly v. State, 25 Oh St 567, State v. Kelly, 32 Oh St 421, and Tax Limitation League v. Day, 15 O. O. 122.

We have previously indicated our belief that the petition does not allege facts which show that a “claim affecting the right to receive payment of any of the monies payable to any of the persons, firms or corporations named in such requisition which has not been released or will not be released simultaneously with such payment” had been filed with or served upon the Commission. Being of such opinion it would further appear that the petition does not state facts which show a breach of the condition of the bond, the bond being “conditioned upon the faithful performance of the duties of the office.”

It is our opinion therefore that plaintiff lacks capacity to sue the individual members of the Commission and their sureties for forfeiture of their official bonds and it is our further opinion that in any event no cause of action is stated against the individual members of the Commission or their sureties in such third cause of action.

IV

In view of the conclusions already reached in this decision, it is unnecessary for us to pass upon the remaining questions presented. For the reasons heretofore stated, however, we do conclude that, independently of the question of the capacity of the plaintiff to sue, no cause of action is stated against defendant Ohio National Bank. We believe that the reasons for this conclusion have been adequately stated heretofore.

It is not necessary therefore to pass upon the question of whether plaintiff does or does not stand in the same legal relationship as if suit had been brought by Turnpike Commission against Land Title for the recovery of the approximately $250,000.00, the question of whether payment made under mistake of law can be recovered in the absence of fraud, duress, compulsion or mistake of fact (See State, ex rel. Dickman v. Defenbacher, 151 Oh St 391, State, ex rel. Hunt v. Fronizer, 77 Oh St 7), the question of whether Turnpike Commission is or is not in “pari delicto” with Land Title insofar as the contract of June 4, 1952, is concerned, the question of misjoinder of parties defendant and the question of misjoinder of causes of action.

We are of the opinion, however, that plaintiff either as a taxpayer or as a bondholder, has not been injured by the contract held to be illegal in the case of Steer and Adair v. Land Title Guarantee and Trust Company and Ohio Turnpike Commission, 65 Abs 33. The persons actually injured by such illegal contract were attorneys at law and the general public. If, as held by Judge Harter, in Steer and Adair v. Land Title Guarantee and Trust Company and Ohio Turnpike Commission, supra, an order of repayment is in the nature of relief which could be characterized as “drastic and harsh,” upon application of attorneys at law who had an interest therein, it would appear to be even more drastic and harsh to be granted upon the request of persons whose only actual interest would be in the nature of obtaining a “wind-fall.”

The several demurrers filed by the several defendants to the amended petition are hereby sustained. It appearing to the Court from the very nature of the issues here involved that it would be impossible to file an amended petition on behalf of this plaintiff in the capacities in which he sues which would state a cause of action, the petition may be dismissed at the costs of the plaintiff. Entry may be prepared accordingly.


source: Caselaw Access Project

license: Public Domain

text:
    LICHTER, Plaintiff, v. LAND TITLE GUARANTEE & TRUST COMPANY et, Defendants.
    Common Pleas Court, Franklin County.
    No. 188523.
    Decided November 14, 1955.
   OPINION

By LEACH, J.

HEARD ON MOTION OF PLAINTIFF FOR LEAVE TO FILE AMENDED PETITION.

In our decision of July 6th, 1955, we sustained the several demurrers of the several defendants and ordered that the petition be dismissed at the costs of the plaintiff, expressing the opinion that from the very nature of the issues here involved, it would be impossible to file an amended petition on behalf of this defendant in the capacities in which he sues which would state a cause of action.

On July 25, 1955, plaintiff filed a motion for leave to amend the first cause of action set forth in his amended petition by adding certain language to paragraph 16-a thereof.

16-a of the petition now on file reads as follows:

“a. Sec. 5537.12 R. C. (formerly §1213 GC) limits the restrictions which said trust agreement may place upon the individual right of action by Turnpike bondholders to those which are customary in trust agreements or trust indentures securing bonds or debentures of corporations.”

The language sought to be added to paragraph 16-a is as follows:

“Trust agreements or trust indentures securing bonds or debentures of corporations customarily restrict the individual right of action by bondholders only regarding suits for the foreclosure of the indenture in question, or for actions upon or in respect to the indenture or for actions which affect, disturb or prejudice the lien of the indenture in question. Such trust agreements do not customarily restrict bondholders from the enforcement of ordinary equitable rights under the common law to protect the trust res equitably and ratably for the benefit of all bondholders. To the extent that said Section 807 purports to restrict the rights of Turnpike bondholders to ‘enforce any right . . . under . . . the laws of Ohio’ it is more restrictive than such customary indentures.”

Memorandum in support of such motion has been filed by the plaintiff and briefs in opposition thereto have been filed by all defendants. An oral hearing at which all parties were represented by counsel also was held on August 15, 1955.

In our decision of July 6, 1955, at page 12, with reference to paragraph 16-a, we stated that such paragraph contained no allegation of fact which could be construed as indicating that the trust agreement in any way violated the provisions of §5537.12 R. C. Plaintiff asserts that the proposed amendment would contain such an allegation of fact.

All parties are in agreement as to the fact that after a demurrer is sustained to a petition an amended petition cannot be filed as a matter of right, that leave to file such an amended petition must be sought and that the matter is one resting in the sound discretion :.f the Court.

Sec. 2309.60 R. C., provides as follows:

“If a demurrer is sustained, the adverse party may amend if the defect thus can be remedied, with or without costs as the court directs.

Thus the issue presented to the Court at this time is whether the proposed amendment would remedy the defect in the petition now on file. Stated another way, would a petition so amended be subject to the same demurrers sustained in our decision of July 6, 1955, as to the petition now on file? If so, it would follow that the “defect” is not “remedied” within the purview of the language of §2309.60 R. C., and that such leave to file an amended petition should be denied.

Defendants contend that the proposed new language is no different in legal effect than language contained in the original petition stating that “The provisions of said section 807 of said Trust Agreement are greatly more restrictive than is so customary,” language ordered stricken by another Branch of this Court as being a conclusion of law.

This brings us to a consideration of the language of §5537.12 R. C. This statute provides that in the discretion of the Turnpike Commission any bonds may be secured by a trust agreement between the Commission and a corporated trustee and further provides:

“Any such trust agreement may set forth the rights and remedies of the bondholders and of the trustee, and may restrict the individual right of action by bondholders as is customary in trust agreements or trust indentures securing bonds or debentures of corporations. Such trust agreement may contain such other provisions as the commissipn deems reasonable and proper for the security of the bondholders.”

In all of the briefs filed prior to our July 6, 1955 decision it seemed to have been assumed that this language would permit the Turnpike Commission to restrict the individual right of action of bondholders only to the extent that as a factual matter private corporations “customarily” have adopted the same type of restriction. We are now confronted with the specific question as to whether this is the correct interpretation of §5537.12 R. C.

It must be remembered that this is a separate and distinct issue from the question of whether a corporation may lawfully adopt such a restriction on the right of an individual bondholder to sue. This separate issue in effect has been presented by the language of paragraph 16-b of the petition, asserting that such an agreement “tends to deprive a Court of Equity of its ordinary, necessary and proper jurisdiction,” and is “therefore in violation of law.” This separate contention was discussed and rejected at page 12 et seq. of our prior decision.

Thus plaintiff in effect contends that even though a private corporation might lawfully adopt a restriction similar to that adopted by the Turnpike Commission, if as a matter of fact from an evidentiary standpoint, private corporations do not “customarily” adopt similar restrictions, the Turnpike Commission is without authority under §5537.12 R. C., to adopt such. After careful consideration we do not agree that this is the correct interpretation of §5537.12 R. C.

I'- will be noted that the statutory language does not state that the Commission may restrict the individual right of action by bondholders “to the extent that .such” is customary in trust agreements of corporations. It merely states that the Commission may restrict the individual right of action by bondholders as is customary in trust agreements of corporations. From a careful reading of the entire language of the section, we believe that the language “as is customary in trust agreements * * * of corporations” is merely language of description and not of limitation.

Even if we assume, however, that such language is language of limitation, we are presented with the question of what is meant by “customary.” Does it mean “customary” in the factual sense of the total number of corporations in existence (in Ohio, in the United States, or in the world) which have adopted such restrictions? If so, it would appear that the parties and the Court would be presented with an insurmountable problem from the standpoint of evidence. In a matter of the over-all importance of the Turnpike Act, we cannot conclude that the General Assembly had any such intention.

Assuming, as heretofore stated, that the language is restrictive, we believe that the word “customary” must be construed in the sense in which used as synonymous with “lawful.” In other words, if corporations generally may lawfuly adopt such restrictions, it would appear that such restrictions would be “customary” whether actually adopted by a substantial number or percentage of existing corporations or not.

We conclude, therefore, that the issue attempted to be presented by the amendment of paragraph 16-a in essence is the same issue as that presented by paragraph 16-b and heretofore discussed and rejected in our decision of July 6, 1955. In that connection some reference should be made to the contention of the plaintiff that the Court has misconstrued the effect of the holding of Allan v. Moline Plow Company, 14 Fed. 2d, 912, as referred to at page 332 of our previous decision. While that case obviously is not on all-fours with the instant case, the Court therein rejected the contention that the restriction was applicable only to suits against the issuing corporation and did not apply to a creditor’s bill. In support of our conclusions stated at page 332 thereof, we perhaps should make reference to the case of Dietzel v. Anger, 8 Cal. 2d, 373, 65 Pac. 2d, 803, and Meyer v. Lowry and Company, 19 N. Y. S. 2d, 835. The Dietzel case involved a suit by bondholders, not against the issuing corporation, but against stockholders to enforce proportional stockholder liability. There, as in this case, the suit did not involve the depletion of the assets of the corporation but instead an effort to increase them. Nevertheless, based upon the “no action” provision of the trust indenture, the right to sue was denied. In the Meyer case the Court pointed out that the instrument itself made no distinction between the trustee and third persons and stated that a single bondholder should not be granted the right to sue third persons and outsiders.

Incidentally it should again be pointed out that while it is difficult to conceive exactly what relief is sought by the plaintiff against Turnpike Commission, nevertheless Turnpike Commission was sued by the plaintiff as a party defendant in this case, despite the “no action” provisions of the Trust Indenture.

In the over-all consideration of this case we believe that one other aspect thereof should be discussed. In our decision of July 6, 1955, we stated that in view of the conclusions reached therein, it was not necessary to pass upon the question of whether plaintiff does or does not stand in the same legal relationship as if this suit had been brought by Turnpike Commission against Land Title for the recovery of the approximately $250,000.00, the question of whether payment made under mistake of law can be recovered in the absence of fraud, duress, compulsion or mistake of fact and the question of whether Turnpike Commission was or was not in “pari delicto” with Land Title insofar as their contract of June 4, 1952, was concerned.

At the oral hearing counsel for plaintiff in effect conceded that in the present suit plaintiff stands in the same legal position, no better and no worse, than Turnpike Commission would stand in, had Turnpike Commission been the party plaintiff in this action. In any event we so conclude as a matter of law.

As stated in the Per Curiam opinion of the Supreme Court in State, ex rel. Dickman v. Defenbacher, 151 Oh St 393, 395:

“In the absence of fraud, duress, compulsion or mistake of fact, money, voluntarily paid by one person to another on a claim of right to such payment, cannot be recovered merely because the person who made the payment mistook the law as to his liability to pay * * *.

“This rule is applicable to the payment of public funds to private persons by governmental authorities.”

The petition contains no allegations of fact which would indicate the presence of any fraud, duress, compulsion or mistake of fact. Instead the simple issue presented is whether payment made under mistake of law can be recovered. Plaintiff contends that since such payment by Turnpike Commission to Land Title represented, in part, payment for legal services, illegally rendered by a corporation, such corporation should be punished for such activity by an order to repay the sum received. While the illegal practice of law by a corporation is not to be condoned by the courts, we conclude that the holding of the Supreme Court in State, ex rel. Dickman v. Defenbacher would preclude such recovery. To contend, as was contended by the plaintiff, that Turnpike Commission and Land Title were not in “pari delicto” is merely to state the presence of “fraud, duress or compulsion.” There are no facts alleged in the petition indicating the presence of fraud, duress or compulsion and we may assume, and in fact such is alleged in the petition, that Turnpike Commission entered into the contract with its eyes wide open on the question of whether the contract might not call for the illegal practice of law by Land Title. To say that under such a situation Land Title is the sole “culprit” is to ignore the facts alleged in the petition.

For the reasons above stated, it is the opinion of the Court that a petition, amended as sought to be amended by the motion for leave to amend the amended petition filed July 25, 1955, would not state a cause of action, that the “defect” held to exist in our decision of July 6, 1955, is not “remedied” by the proposed amendment within the purview of §2309.60 R. C. Leave to so amend, therefore, is denied. Entry may be prepared accordingly.


author: By THE COURT.

text:
    LICHTER, Plaintiff-Appellant, v. LAND TITLE GUARANTEE AND TRUST CO., etc., et, Defendants-Appellees.
    Ohio Appeals, Second District, Franklin County.
    No. 5432.
    Decided April 23, 1956.
    Steer, Strauss & Adair, Cincinnati, McClelland & DeVennish, Columbus, for plaintiff-appellant.
    Arter, Hadden, Wykoff & VanDuzer, Cleveland, Porter, Stanley, Trefflnger & Platt, Columbus, Squire, Sanders & Dempsey, Cleveland, Frank C. Dunbar, Jr., Columbus, for defendants-appellees.
   OPINION

By THE COURT.

Submitted upon motion of the defendants-appellees, James W. Shocknessy, O. L. Teagarden, A. J. Allen, J. Gordon McKay, Samuel O. Linzell, Theodore J. Kauer, Buckeye Union Casualty Co. and Fidelity & Deposit Company of Maryland, seeking an order dismissing the appeal as to the aforesaid appellees for the reason that the plaintiff has abandoned his appeal from the order of the Court of Common Pleas sustaining the demurrers of said defendants, dismissing the action as to said defendants and rendering judgment against plaintiff in favor of said defendants.

The record discloses that there are other parties to this action, but as to these appellees the cause of action stated against them is found in the third cause of action of the amended petition. The notice of appeal is general and purports to include the order sustaining the several demurrers filed by all of the defendants. However, in his brief the plaintiff states that his “appeal is only taken as to the first and fourth causes of action” (p. 2). Again at page 20 the appellant’s brief contains the following statement: “* * * the second and third causes of action are, in effect, dismissed as no appeal has been taken from the demurrer sustaining them.”

It therefore appears that the appeal has been abandoned as to these appellees and the motion is sustained.

MILLER, PJ, HORNBECK, J, concur.

WISEMAN, J, not participating.


author: By HORNBECK, J.

text:
    LICHTER, Plaintiff-Appellant, v. LAND TITLE GUARANTEE AND TRUST CO., etc., et, Defendants-Appellees.
    Ohio Appeals, Tenth District, Franklin County.
    No. 5432.
    Decided March 4, 1957.
    Steer, Strauss & Adair, Charles Tobias, of Counsel, Cincinnati, McClelland & DeVennish, Joseph DeVennish, of Counsel, Columbus, for plaintiff-appellant.
    Arter, Hadden, Wykoff & VanDuzer, Cleveland, Clinton M. Horn, of Counsel, Porter, Stanley, TrefRnger & Platt, Raymond H. Trefifinger, Bruce G. Lynn, of Counsel, Columbus, for defendant-appellee, The Land Title Guarantee and Trust Company.
    Ruth Lloyd Wilkins, General Counsel, Columbus, Squire, Sanders & Dempsey, L. E. Oliphant, Jr., of Counsel, Cleveland, for defendant-appellee, Ohio Turnpike Commission.
    Bricker, Marburger, Evatt & Barton, John M. Caren, of Counsel, Columbus, for defendant-appellee, The Ohio National Bank.
    (HORNBECK, J, of the Second District, sitting by designation in the Tenth District.)
   OPINION

By HORNBECK, J.

This is an appeal from a judgment of the Common Pleas Court dismissing the amended petition of plaintiff after sustaining demurrers thereto and denying the motion of plaintiff for leave to file an amendment to the first cause of action of the amended petition.

Each defendant demurred to the four causes of action set out in the amended petition on the grounds that plaintiff has not legal capacity to bring or maintain the action against the defendant, and, that the amended petition does not state facts sufficient to show a cause of action against the defendant. Other demurrers asserted misjoinder of parties defendant and misjoinder of causes of action. The Court did not pass on these last two demurrers but sustained the first two. The appeal is prosecuted to the judgment only as affected by the sustaining of the demurrer to the first cause of action, to the fourth cause of action of the amended petition and to the refusal of the Court to grant plaintiff’s motion for leave to file an amendment to the fourth cause of action of the amended petition.

Hereinafter in this opinion we refer to the defendant, The Land Title Guarantee and Trust Company, as Land Title Co., defendant, The Ohio National Bank of Columbus as Ohio National, and defendant, The Ohio Turnpike Commission as the Commission.

Plaintiff, in his first cause of action, seeks relief against defendants, Land Title and Ohio National, as a holder of five $1000.00 bonds of the Ohio Turnpike, in behalf of all bondholders. Plaintiff prays that defendant, Land Title, be held primarily liable for the return of $250,000.00 paid to it by the Commission through its Trustee, defendant, Ohio National, by reason of the performance by Land Title of a contract declared by the Common Pleas Court of Franklin County to be void because part of the services rendered thereunder constituted the practice of law by a corporation.

The fourth cause of action alleged a breach of duty on the part of the Trustee, The Land Title, in that it illegally honored a requisition of the Commission for the payment of the funds in question to the defendant, The Land Title. The motion for leave to amend was filed after the Court had decided the demurrers. We will state the subject matter of this motion hereinafter.

We have been favored with the opinions of Judge Leach in the Common Pleas Court on all grounds of the demurrer to the amended petition and on the motion for leave to amend. These opinions disclose careful and detailed examination and consideration of every aspect of the respective claims of the parties. We are in accord with the conclusions reached by Judge Leach on the matters for adjudication here and might well affirm on these opinions. However, inasmuch as counsel have fully and comprehensively argued this appeal both by brief and oral presentation, we comment, as briefly as possible, upon so much of the issues as we deem to be dispositive of the appeal.

Plaintiff asserts his rights to institute the action on behalf of all bondholders of the Turnpike Bonds, the Trustee, defendant, The Ohio National, having refused to institute the suit. Although plaintiff holds bonds of the value of only $5000.00 in an issue of $326,000,000.00, he claims the right to sue for all bondholders under the general rule that a bondholder may prosecute such a suit, 54 Am. Jur. 57, and also by authority of statute, §5537.15 R. C., which statute is pleaded in the amended petition. This statute, after recognizing the general rule as to the right of a bondholder to institute an action or suit on behalf of all bondholders, carries this language:

“■* * * except to the extent the rights given by such sections” (to holders of bonds by §§5537.01 to 5537.23 inclusive, R. C.), “may be restricted by such trust agreement, * * *.”

Sec. 5537.12 R. C., stating what may be contained in a trust agreement between the Commission and its trustee, inter alia provides:

“* * * Any such trust agreement may set forth the rights and remedies of the bondholders and of the trustee, and may restrict the individual right of action by bondholders as is customary in trust agreements or trust indentures securing bonds or debentures of corporations. Such trust agreement may contain such other provisions as the commission deems reasonable and proper for the security of the bondholders. * * *”

Pursuant to this authority there was carried into the trust agreement between the Commission and its Trustee, The Ohio National, certain sections, one of which, insofar as applicable, reads:

“Section 807: — No holder of any of the outstanding bonds shall have any right to institute any suit, action, mandamus or other proceeding in equity or at law for the execution of any trust hereunder * * * or any right under the Turnpike Act or the laws of Ohio, unless such holder previously shall have given to the Trustee written notice of * * * breach of trust or duty on account of which such suit, action * * * is to be taken, and unless the holders of not less than ten per centum (10%) in principal amount of the bonds then outstanding shall have made written request of the Trustee after the right to exercise such powers or right of action, * * *, shall have accrued, * * *; and such notification, request *• * * are hereby declared in every such case, at the option of the trustee, to be conditions precedent to the execution of the powers and trusts of this Agreement or for any other remedy hereunder or under the Turnpike Act or the laws of Ohio. It is understood and intended that no one or more holders of the bonds hereby secured shall have any right in any manner whatever by his or their action * * * to enforce any right hereunder or under the Turnpike Act or the laws of Ohio with respect to the bonds or this agreement, except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided. * * *” (Emphasis ours.)

Inasmuch as plaintiff represents less than ten per centum of the Turnpike Bonds outstanding, it is clear that unless the conditions precedent to the institution of suit as set out in Section 807 are invalid, he has not the capacity to maintain this action.

Plaintiff asserts that the foregoing restrictions on the right of a bondholder to sue are either inapplicable or invalid, that the restrictions tend to deprive a court of its ordinary, necessary and proper jurisdiction.

At the time that the demurrer to the amended petition was decided it was the claim of plaintiff that he had no notice of the conditions in Section 807 precedent to his right to institute suit. He may not be heard to assert this lack of notice or knowledge of these prerequisite qualifications of a bondholder to institute an action for the benefit of bondholders because upon the bonds issued to him, upon which he claims his right to proceed, are carried the terms of Section 807, which we have quoted.

When the demurrer on the ground of lack of capacity to sue was sustained, there was no averment that the proviso of Section 807 just quoted, was not proper or such as customarily carried in trust indentures and agreements. It must be borne in mind, if the provision as to notice of holders of bonds- of the percentage of value essential to the institution of a bondholders’ suit is valid, that alone would support the holding that plaintiff had not the capacity to sue. It is difficult to find that notice -to the Trustee by the holders of bonds of the percentage requisite to suit affects the ordinary or proper jurisdiction of a court of equity. If the requisite amount was so inordinate or so great as to shock the conscience of the Court, it might be held to affect its jurisdiction. The great weight of authority supports the right to incorporate the condition which we are considering as an essential to the authority to maintain bondholders action in trust agreements. The exceptions to this right are cases of fraud, adverse interest of trustee or manifest breach of trust.

Plaintiff cites Perry v. The Darlington Fireproofing Co., 76 Oh Ap 101. The limitation there pronounced on restrictive provisions of a mortgage in the so-called “no action clauses” was, no doubt, made with respect to the facts developed in that case. Judge Sherick at page 104 of the opinion recognized the general rule, as announced in the annotation in 108 A. L. R. 88, 90, that:

“Reasonable restrictions on the right of action of an individual holder of one or more of a series of corporate bonds or other obligations, either in respect of the obligation or the security or of both, have generally been held to be valid and enforceable.”

He continues by citing from the text, at page 94 of the annotation, wherein it is said that such restrictions must be strictly construed because in conflict with the common law and that they are effective only when clear and free from doubt. He cites in support of the general rule, 19 Corpus Juris Secundum, 758, Section 1163, and 13 Am. Jur. 851, Section 863. Limitations in excess of the number required as a prerequisite to suit in the indenture here, are supported in Allan v. Moline Plow Co., 14 F. 2d, 912; Relmar Holding Co. v. Paramount Publix Corporation, 236 N. Y. S. 76; Levy v. Paramount Publix Corporation, 266 N. Y. S. 271; Kelly v. Prudence Co., 259 N. Y. S. 59; Frobisher v. Tudor Corp., 114 N. J. Eq. 470, 168 Atl. 855, contra Hoyt v. E. I. DuPont de Nemours Powder Co. (N. J.) 102 Atl. 666. In Dietzal v. Anger, 8 Cal. 2d 373, 65 Pac. 2d 803, it is said that the great majority of cases hold the restrictive provisions valid on the theory that bondholders have, by agreement among themselves, imposed a condition precedent to the exercise of the right of anyone of them to sue individually.

Plaintiff claims in his briefs that defendant Trustee acted in bad faith by honoring requisitions of the Commission for payments to Land Title, in that the Trustee knew that the statement of the Commission was false; that there had not been filed with it notice of a “claim affecting the right to receive payment of any of the monies payable to any of the corporations named in such requisition which has not been released or will not be released simultaneously with such payment.” The pleading of plaintiff in the fourth cause of action of the amended petition is;

“33. That the matters set forth in paragraphs 11, 12 and 13 of this petition were reported upon at length in the public press throughout Ohio and as a consequence became matters of public interest and information; that said matters were, because of their nature, of a special interest to attorneys and title guarantee companies, and were discussed generally among such attorneys and persons associated with such companies; that plaintiff is informed and believes that defendant, Ohio National, through its officers, was informed by member of Commission, persons associated with Land Title, their attorneys, or any or all of them, of the matters set forth in paragraphs 11, 12 and 13.”

Paragraph 13 is without significance because it refers to the order entered in the first suit at which time payment had been made to the Land Title and in which suit the trial judge had refused to require the Land Title to repay the money which it had received under its contract with the Commission. Paragraphs 11 and 12 relate to the advice which the attorneys in the first case gave to certain defendants, other than the Ohio National, as to the illegality of the contract between Land Title and the Commission, and paragraph 12 relates to the institution of the first action.

Assuming that Ohio National had knowledge that the contentions, advice and action in the first suit constituted a “claim” which was contrary to the statement made by the Commission in its requisition to the Ohio National, its action on the requisitions and failure to sue because of its knowledge was not an illegal act on its part as pleaded, much less an indication of bad faith. The first suit was not lis pendens as to Ohio National because not a claim against any specific property. Ohio National was in contractual relations with the Commission and under legal obligation to act upon requisitions properly certified by the Commission.

Plaintiff, after the sustaining of the demurrers to the amended petition, moved to amend the first cause of action thereof, by stating:

“Trust agreements or trust indentures securing bonds or debentures of corporations customarily restrict the individual right of action by bondholders only regarding suits for the foreclosure of the indenture in question, or for actions upon or in respect to the indenture or for actions which affect, disturb, or prejudice the lien of the indenture in question. Such trust agreements do not customarily restrict bondholders from the enforcement of ordinary equitable rights under the common law to protect the res equitably and ratably for the benefit of all bondholders. To the extent that said section 807 purports to restrict the rights of turnpike bondholders to ‘enforce any right . . . under the laws of Ohio’ it is more restrictive than such customary indentures.” (Emphasis ours.)

The court tested the proposed amendment as upon demurrer and rejected the contention of plaintiff that the language of Section 807, “as is customary in trust agreements * * * of corporations” is a limitation precluding the enforcement of such language and held that it is restrictive only. Frankly, we do not know what this language means. It is our opinion, however, that it is nothing more than a recognition, parenthetical in character, that it is customary in trust agreements to restrict the individual rights of bondholders as to suits derivative in character. Usages are presumed to be reasonable and the person attacking them has the burden of showing their unreasonableness, 55 Am. Jur. 312, Section 51.

Without respect to the true meaning of the language under consideration the trial judge did not err in overruling the motion for leave to amend for two reasons. One, there is no claim in the assignment of the errors that the Court abused its discretion in overruling the motion. Two, plaintiff in his original petition had pleaded substantially as in the proposed amendment and on motion it had been stricken as a conclusion of law. The proposed amendment did not conform to the court’s ruling. It sets up no facts upon which the averment is predicated that the restriction in the indenture is more restrictive than is customary in such indentures.

The second ground of the demurrers is that the amended petition does not state a cause of action. The reason assigned in support of the demurrer is that the money paid to the defendant, Land Title, for services performed by it under the void contract with the Commission was paid under a mistake of law.

We, as did Judge Leach, agree with this contention. He discusses and considers it at length and cites and comments on several cases which support his position. Plaintiff attempts to distinguish the facts he pleads from those found in the cited cases, in that, in them, one of the parties, the payee, in the transaction was innocent and here, Land Title, at least, was not in that status.

We are especially familiar with the case of State, ex rel. Dickman v. Defenbacher, 151 Oh St 391, which this Court reviewed. The difference upon which plaintiff relies is found in the facts in the Defenbacher case because there the party to which the money was paid was innocent of any knowledge of the illegality of the legislation under which the payment was made. However, it is evident from the per curiam in the Defenbacher case that notwithstanding any illegality of the appropriations and disbursements involved in the controversy, it held that the money might not be recovered. The controlling principle announced by the Court, without qualification, respecting liability for repayment of payments made by mistake of law, is announced at page 395 of the Defenbacher opinion.

“In the absence of fraud, duress, compulsion or mistake of fact, money, voluntarily paid by one person to another on a claim of right to such payment, cannot be recovered merely because the person who made the payment mistook the law as to his liability to pay. 31 O. Jur. 333, et seq., Section 162, et seq., and cases cited in the notes.”

“In the instant case there is no claim of fraud, duress, compulsion or mistake of fact as to the payment made; there is merely the claim that the law forbade such payments. Under the circumstances described, no recovery amounts disbursed may be had.”

We are not unmindful of the equities that are to be found in, the plaintiff’s case. It is anomalous that the maxim “Ignorance of the law excuses no one” should be employed to protect a culpable party who urges such principle in exoneration of his liability. But we are bound by the Defenbacher case which is the last word of our Supreme Court and we certainly cannot say and, of course, would not say, that it departs from the general rule that “Mistake of law is not a ground of equity jurisdiction,” 30 C. J. S. 378, Par. 47.

On this appeal, the test is not only whether the Court erred in any particular assigned, but, whether such error was prejudicial to the plaintiff. Upon this test, if we had found any error established, we would be met with the impact of Judge Harter’s opinion and the judgment thereon in the action wherein Steer and Adair were the parties-plaintiffs and the Land Title and the Commission were the parties defendants. We recognize that the parties-plaintiffs were different than in this case and that res judicata could not be given application. But, the Land Title was a party and the substantive right upon which plaintiff proceeds in this case was the same as in the former case, viz., the invalidity of the contract between Land Title and the Commission because of the illegal practice of law in its performance and the relief sought was to compel the return by Land Title of the money paid to it. Both issues were decided and carried into the judgment. The first, in favor of the plaintiff. The second, in favor of the defendant, denying the right of plaintiffs to compel the return by Land Title to the Commission of the money paid to Land Title. Prom this judgment, neither party prosecuted an appeal and it remains a subsisting judgment, unreversed and unmodified.

In Plaintiff’s brief, this significant statement is made:

“Plaintiff would admit that if he has no cause of action against defendant Land Title, he has no cause of action against defendant Commission.”

It might also be urged, that if he has no cause of action against Land Title for the repayment of the money received by it under the illegal contract, as held by the former judgment, he has no cause of action against the defendant Trustee, The Ohio National.

We find no error assigned well made. The judgment will be affirmed.

FETREE, PJ, MILLER, J, concur.


author: By SKEEL, PJ.

text:
    LIVINGSTONE, Plaintiff-Appellee, v. REBMAN et, Defendants-Appellants.
    Ohio Appeals, Eighth District, Cuyahoga County.
    No. 24287.
    Decided February 14, 1958.
    Newton & Hewgley, for plaintiff-appellee.
    Levin & Levin, Frank K. Levin, for defendants-appellants.
   OPINION

By SKEEL, PJ.

This appeal comes to this court on questions of law from a judgment entered by the Common Pleas Court of Cuyahoga County for the plaintiff on defendants’ petition, filed after term, seeking to vacate a judgment by confession on a cognovit note. The allegations of the petition are that the plaintiff on December 11, 1956, obtained judgment against the defendants on the warrant of attorney provision of a promissory note without service of summons, in the amount of $10,592.50, with interest at six per cent; that the judgment obtained was taken for more than was due and obtained by fraud practiced by the plaintiff, and that the defendants have a good defense as shown by the tendered answer. The note is for the suim of $9500.00, and is dated January 6, 1955. The allegations of the answer are that the defendants did not execute the note upon which judgment was taken and that sometime in 1954, they did sign a note for $9500.00, without cognovit provisions and without interest, which was given as part of an agreement whereby the plaintiff and another (John Ponyicky, Sr.) were to obtain for the defendants a mortgage loan on a recreational development of defendants at 5300 Oberlin Road, Black River Township, Lorain County, Ohio, in an amount between $150,000 and $200,000. That if the plaintiff and his associate were unable to procure such mortgage loan for the defendants, the note would be returned and “there would be nothing due” thereon. It is also alleged that the plaintiff and his associate failed to negotiate such mortgage loan and that said plaintiff refused, upon demand, to return the note. With the tendered answer, the defendants filed separate affidavits in which they say that the note upon which judgment was taken was not signed or executed by them and further allege (as is set out in the answer) that they signed a note for $9500.00 in 1954 for the purpose of employing the services of the plaintiff to negotiate a mortgage to finance their recreational development, and that nothing is due on said note because the plaintiff was unable to carry out his part of the agreement.

The defendants categorically deny that their respective signatures, appearing on the note, were subscribed by them. In other words, they charge “forgery.” It is upon this claim, and no other, that the allegations of the petition of the defendants are based, the claim being that the judgment was taken for more than was due and was also procured by fraud. Their evidence in chief was confined completely to the issue of the genuineness of their respective signatures appearing on the note.

The plaintiff’s evidence (which included several signatures of the defendants, which were admitted to be genuine, which signatures the defendants did not attempt to distinguish from the signatures on the note) included the testimony of the plaintiff and another that the note was signed by the defendants in their presence. The plaintiff also testified that he performed legal services for the defendants for which services there was an agreed fee to be paid of $12,000, $2500 of which was paid before the note here in question was signed (dated January 6, 1955, in the sum of $9500.00), which note represented the debt due for the balance of the services. Two checks of the defendant, Theresa Rebman, were introduced into evidence showing the twenty-five hundred dollar payment. The first check for $1,000, was dated December 10, 1954, bearing the notation “For Retainer Fee for 5200 Oberlin Avenue — Rebman Recreation Center,” and the second check was dated December 20, 1954, for $1500, bearing notation “Proff. (Professional) Service on Oberlin Ave. Bldg., Lorain, Ohio,” both notations and the body of each check having the inescapable appearance of being in the same handwriting. These checks were produced by the defendants while plaintiff was being examined both on direct and cross-examination which shows clearly the legal services were contracted for by them. The plaintiff also testified that the legal services for which defendants signed the note here in question were not concerned with securing a loan.

The defendant, Domonik Rebman, when called for rebuttal, said he did not make an agreement with plaintiff in September or October 1954 for legal services other than to obtain a mortgage loan or engage plaintiff to negotiate with the contractor or subcontractors before issuing the check dated December 10, 1954.

This defendant then testified:

“A. He wanted $2500 for his legal work, and he want that money ahead. He won’t do nothing before that. And we make agreement to give him the check, $1,000 now, and $1500 about five or ten days later, because he want the pay for his work before he started.

“Q. How much did he say he wanted to be paid for his legal services, other than getting the mortgage loan?

“MR. NEWTON: Objection.

“A. $2500.00.

“Q. Did he say that $2500 was just a retainer, or was that all of the money?

“A. That all.

“Q. On the same day, tell us what else was done on that day between you and Mr. Livingstone.

“A. Well—

“MR. NEWTON: On what date, please?

“MR. ARNOLD LEVIN: December 10, 1954.

“A. Well I will tell you, Mr. Livingstone did not talk. Mr. Ponyicky was doing the talking.

“Q. Did you give him another note that day?

“MR. NEWTON: ’54?

“MR. ARNOLD LEVIN: December 10, 1954.

“Q. The day you gave him that $1,000 check?

“A. Yes. That is the day I gave him the $9500 note.

“Q. What did it say on it?

* *

“Q. What did it say on it?

“A. Nothing. Just the month was on it, $9500. And I signed it, my wife signed it, and my son signed it, witness, and Mr. Ponyicky signed it, witness.

“Q. Now did it look anything like Defendants’ Exhibit A?

“A. No.

“Q. Did it have any printing, such as it is on this?

“A. No printing. It was a plain note.

“Q. Do you know who wrote it out?

“A. Was nothing on it. Just the month.

<<* * *

“Q. The one you signed, did it — did it say “cognovit note’’ on the side, like this?

“A. Nothing. Just plain.

“Q. What was the $9500 note given for?

“A. The $9500 was for the mortgage loan, if he going to get that mortgage between 150—

“MR. NEWTON: Objection.

“THE COURT: He may answer.

“A. Or 200 thousand dollars. If that mortgage, he going to get — he going to get that percentage out of it, $9500.

“Q. And did you agree to pay him anything for getting a mortgage loan, if he wasn’t successful in getting it?

“A. Nothing. Nothing. That is what was the agreement right between us.

“MR. ARNOLD LEVIN: That is all.”

It is clear from the record, therefore, that the note, if indeed there was such a note, which the defendants admitted signing, was to be evidence of a debt for services for procuring a loan which was not procured and for which the plaintiff in this action makes no claim. It is also clear that the subject of the allegations in both the answer and affidavits herein referred to are concerned with the matter of procuring a loan and not other legal services. These allegations are not concerned with the note upon which judgment was taken in this case. The note here under consideration was alleged to have been given for professional services and the only denial that there was a contract for such services is the testimony of the defendant, above set out, confined in point of time to December 10, 1954, and before, while the note here in controversy is dated January 6, 1955, and the contract about which it is claimed the services were performed between the defendants, as owners, and The Yates Construction Company to complete the recreation center, is dated January 7, 1955. A note presupposes consideration until an affirmative defense, such as payment or fraud, is presented. In attempting to vacate a judgment under such circumstances what needs to be shown is prima facie proof supporting the defense. But the defense which is presented here is that the note is a forgery upon which the defendants are not bound. Either such claim is true or is not true. The same proof is required on the motion as on the merits. It must follow, therefore, that even though the rule be as just stated, a trial judge is not required in all events to give credence to the incredible in determining the issue on the motion.

In the case of Alliance First National Bank v. Spies, 158 Oh St 499, 110 N. E. (2d) 483, the court, in effect, held that on the trial of a motion to vacate a judgment after term, a court may disbelieve the testimony of an interested party. It is clear that is exactly what happened in this case on the trial of defendants’ motion to vacate a judgment after term on authority of §2325.01 et seq, R. C. The court must have found that there was no credible evidence that the signatures of the defendants on the note in question were forged. This being so, there was, therefore, no other question presented, and the facts, as determined by the court, required that the petition to vacate the judgment be denied. The judgment-is, therefore, affirmed. Exceptions noted.

HURD, and KOVACHY, JJ, concur.