author: By THOMPSON, J.: SKEEL, PJ,

text:
    MASETTA, Plaintiff-Appellant, v. NATIONAL BRONZE & ALUMINUM FOUNDRY CO., Defendants-Appellees.
    Ohio Appeals, Eighth District, Cuyahoga County.
    No. 22390.
    Decided April 21, 1952.

      M. D. Barrisch, Edward Mamrack, Cleveland, for plaintiff-appellant.
    D. W. Hornbeck, J. H. Ritter, Cleveland, for defendantsappellees.
   OPINION

By THOMPSON, J.:

This case constitutes an appeal to this Court on questions of law from a judgment of the Common Pleas Court of Cuyahoga County granting defendant’s motion and dismissing plaintiff’s amended petition- on the ground that the Court had no jurisdiction over the action and subject matter.

The case is one of first impression in Ohio. The petition was filed in the Common Pleas Court and, after certain preliminary motions, an amended petition was filed by the plaintiff, Masetta, against defendant, The National Bronze & Aluminum Foundry Co., an Ohio corporation, allegedly engaged in the business of casting aluminum and other metal products.

Plaintiff in his amended petition asserted that the International'Union, United Auto Workers of America, A. F. L. was an unincorporated labor organization made up of members in the United States and Canada too numerous to mention and that the said organization through its Union Bocal 714 was the sole collective bargaining agent for employees in the bargaining unit- agreed upon between defendant and the Union. Plaintiff further declared that he was an employee of the defendant and a member in good standing and a duly elected officer of the Union and that he was bringing the action “in his own behalf and for .and on behalf of other employees, members of said Local Union and within said bargaining unit; that said employees are too numerous to bring into court and that it would be impracticable to do so and that he and said employees have a common interest in the subject matter in this cause of action.”

Plaintiff further asserted that under date of December 16, 1946, the defendant and plaintiff’s Union entered into a written collective bargaining agreement covering terms and conditions of employment, including all matters relating to hours,, wages and working conditions, effective September 15, 1946, and to continue in éffect from year to year unless changed by mutual consent, and that said agreement was in effect during the times mentioned in the amended petition. Plaintiff then referred to Article VI of the agreement setting forth seniority rights and privileges and quoted verbatim in his amended petition from seven paragraphs of that Article relating to such seniority rights.

Plaintiff , further alleged that the agreement provided for specific rates of pay and methods of payment and paid vacation terms, and declared that the agreement was for and on behalf of individual employees of the defendant and that the benefits inured to individual employees, including plaintiff.

Plaintiff further alleged that on January 23, 1948, without prior notice, defendant laid off plaintiff and the entire complement of maintenance and production employees constituting the bargaining unit and that, in direct violation of the agreement, within three weeks thereafter, defendant hired new workmen to replace plaintiff and other employees; that said action by defendant unlawfully deprived plaintiff and other employees of their rightful jobs and caused them to suffer irreparable injuries and loss of wages; that, unless restored to their position they would continue to suffer loss of wages, seniority, vacation bonuses, hourly rates and other benefits inuring under the agreement.

Plaintiff therefore prayed in his own behalf and in behalf of other employees having a common interest therein as follows: (1) that defendant be compelled to answer interrogatories attached to the amended petition; (2) that defendant be enjoined from further retention of its present complement of maintenance and production employees; (3) that defendant be enjoined (ordered) to restore plaintiff and other employees, constituting the bargaining unit, to their jobs with such full seniority benefits and’ other rights as would have accrued under the agreement if not breached by the defendant; (4) that defendant be ordered to account to plaintiff for all wages, bonuses, piece work, earnings and vacation monies due or which would have been due to plaintiff and the other employees for and' during the period since January 23, 1948. Plaintiff also prayed for damages against defendant corporation in the sum of $60,000.00.

To the foregoing amended petition, defendant filed an amended answer containing three defenses; (1) lack of jurisdiction; (2) that the collective bargaining agreement had terminated November 1, 1947; (3) that the agreement applied only to certain of the defendant’s employees and that no new employees were hired to take the jobs of plaintiff and other members of his Union who were laid off, and that after January 23, 1948, there were no maintenance and production jobs available for the type of work plaintiff and the other members of the Union performed when defendant was engaged in producing aluminum castings.

Defendant then alleged that in January, 1948, it went out of the business of casting aluminum and, up until July, 1950, had thereafter been engaged in experimental and development work on 'frozen mercury precision casting processes requiring employees with more education and" technical requirements than provided in the original agreement. The answer asserted that since July 1, 1950, defendant has not been engaged in any active business and has had no employees of any kind since that date.

Plaintiff’s reply consisted generally of a denial of the allegations of defendant’s answer.

Shortly after plaintiff’s reply, defendant filed its motion to dismiss plaintiff’s amended petition for the reason that the court had no jurisdiction over the action or subject matter thereof. The trial court granted the motion and, plaintiff not desiring to plead further, judgment was rendered for the defendant. It is from that judgment that appeal has been taken to this court on a question of law.

The one assignment of- error on the part of plaintiff appellant is that the trial court erred in dismissing plaintiff’s amended petition and in rendering judgment for the defendant.

The trial court, in granting defendant’s motion to dismiss for lack of jurisdiction of the subject of the action, based its decision on the consideration that plaintiff’s suit was not maintainable as a class action under §11257 GC and expressly 'stated that no opinion was being expressed as to rights of plaintiff and his co-workers under the Labor Management Relations Act.

We deem- it important, in reaching a decision in this case, to bear in mind the provisions of the National Labor Relations Act and the Labor Management Relations Act.

Analysis of the pleadings reveals that the present action is (1) in equity, (2) in a state court, (3) for specific enforcement of a collective bargaining agreement, (4) in behalf of plaintiff and other individual members of a union. It is not an action to prevent unfair labor practices. The latter action is one of which the National Labor Relations Board has jurisdiction where the employer, as here, is in an industry affecting commerce. 29 U. S. C. A. Sec. 158, It has been held that the Board’s jurisdiction is exclusive in such .instance and prevents consideration of such a case by a federal district court. United Brick & Clay Workers v. Robinson Clay Products Co. 64 Fed. Supp. 872 (1946); United Steel Workers v. Shakespeare Co. 84 Fed. Supp. 267 (1949). It is also apparent that this is not an action by a labor union against an employer for breach of a collective bargaining-agreement. Such an action may be brought in any district court of the United States having jurisdiction of the parties under 29 U. S. C. A. Sec. 185(a). Whether the conferral by Congress of jurisdiction upon the Federal District Courts in such cases signifies that this is the sole forum wherein a union may sue an employer engaged in interstate commerce has not been authoritatively decided. In Allen-Bradley Local v. Wisconsin Employment Relations Board, 237 Wis. 164, 295 N. W. 791 affirmed, 315 U. S. 740, the Wisconsin Supreme Court declared: “The determination of the field occupied respectively by the National and State Labor Relations Acts is a question of the most difficult and delicate nature presented to the courts of this country.” We find similar difficulty in many questions concerning the effect of the National Labor Relations Act and the Labor Management Relations Act on state court suits.

Our immediate concern is the effect of these acts on individual and class actions in a state court for specific enforcement of a collective bargaining agreement.

With' respect to class actions in the Federal Courts in Tisa v. Potofsky, 90 Fed. Supp. 175, the Federal District Court in New York declared as follows:

“The contention that the Labor Management Relations Act abolishes class actions in the federal courts by or against labor unions is based upon Sec. 301(b) of that Act, 29 U. S. C. A. Sec. 185(b) * * *. There is no inconsistency in permitting unions to sue and be sued in their common names and at the same time allowing them to sue and be sued by the device of the class action. * * *. Cf. Tunstall v. Board of Locomotive Firemen & Enginemen, 4 Cir. 1945, 148 F. (2d) 403. As this case indicates, if the class suit is to be considered abolished in this field, it can be only because of the clearly expressed mandate of Congress. I do not find such an intention in the language of 29 U. S. C. A. Sec. 185(b). In fact, the language used is expressly permissive: ‘may sue or be sued as an entity. * * *’ I reject defendant’s interpretation of the Labor Management Relations Act, and regard the class action as still available. The decision in Schatte v. International Alliance, D. C. S. D. Cal. 1949, 84 F. Supp. 669, 673, cited by the defendants, does, not conflict with this conclusion. To the extent that its dicta are inconsistent with the views here expressed, I find myself unable to follow it.”

NO appeal was taken from the foregoing decision which was a class action at law for damages for breach of a bargaining agreement and not an action in equity for specific performance. We find its logic persuasive with respect to class suits generally. It is our belief that the National Labor Relations Act and the Labor Management Relations Act have not sought to legislate as to the class suit or as to suits by individuals to enforce a collective bargaining agreement against an employer so as to exclude state action.

In a note in 18 A. L. R. (2) 352 entitled, “Right of Individual Employee to Enforce Collective Labor Agreement Against Employer” numerous cases are referred to, and the following statement occurs;

“Although the National Labor Relations Act, in its original form and as amended by the Labor Management Relations Act, recognizes the right of employees to bargain collectively through unions, it should be noted that no provision of the act confers upon an individual employee the right to enforce his rights under a collective labor agreement by court action.” This is certainly true with respect to the federal courts but that statement does not signify that previously existing rights of individuals in state courts are thereby taken away.

See also, the following statement in the same note at page 353 as follows:

“Attention is called to the fact that suit by an individual employee is not the only remedy available to enforce a collective labor agreement against an employer, and that it may be enforceable by a suit brought by the contracting union or by a class suit brought by a member of the union.”

Three cases are cited in support of the foregoing statement: O’Jay Spread Co. v. Hicks, 195 S. E. 564 (Georgia, 1938): Faultless Caster Corp. v. United Electrical R & M Workers, 86 N. E. (2) 703 (Indiana Appellate 1949); Leveranz v. Cleveland Home Brewing Co. 24 Ohio N. P. (N. S.) 193 (1922).

The Georgia case is of interest because the Court, in holding that a class suit may be brought in equity on the part of individuals against an employer to enforce a collective bargaining agreement, expressly referred to the National Labor Relations Act in the following words:

“The fact that the National Labor Relations Act of July 5, 1935, 49 Stat. 447-450 and other prior federal labor acts, Title 29 U. S. C. A. See. 51-53, 101 et seq., 151 et seq., recognize the existence and rights as entities of unincorporated associations and labor organizations in dealings with employers and in specific relief through federal agencies as provided by such acts, would not operate to change, the rule just stated.”

For further consideration of questions growing out of the Labor Management Relations Act, see note in 17 ALR (2) 614 entitled: “Consideration of provision of Labor Management Relations Act conferring jurisdiction on federal district courts in actions for violations of contract between employer and labor organizations.

Having determined that nothing in the National Labor Relations Act nor in the Labor Management Relations Act specifically forbids the maintenance of individual or class actions generally in state court we reach the question whether such actions are cognizable by the Ohio Courts. It has long been recognized that an individual member of a union may sue in Ohio courts for damages for breach of a collective bargaining agreement. H. Blum & Co. v. Landau, 23 Oh Ap 426 (1926). This Court in the case cited declared that a contract between a manufacturer’s association and a union for the benefit of employees or members of the association could be enforced by an employee as a third party beneficiary although the employee’s name did not appear in the contract.

In deciding whether a class action, as distinguished from an individual suit, is maintainable in Ohio on the part of members of a labor union against the employer, we are called upon to consider the effect of §11257 GC which provides as follows:

“Sec. 11257 GC. One or more can sue or defend for ail. When the question is one of a common or general interest of many persons, or the ’parties are very numerous, and is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.”

The section quoted (former R. S. Sec. 5008) appearing substantially in its present form since 1853 (51 O. L. 57, Sec. 37) is a codification of the principle authorizing virtual representation. 6 Ohio St. Univ. L. J. 110 at 112. In Warren “Corporate advantages without incorporation” p. 543 it¡was stated as long ago as 1929 that more than half of the states have similar statutes. Under the principle of virtual representation it is recognized in Ohio as an exception to the rule that all persons having an interest in the subject matter of an equity suit must be made parties, that a few persons may sue or defend for themselves and all others similarly situated. The rule based on practicality and convenience is applicable to all civil actions which the Code substituted for former suits in equity and actions at law §11238 GC and 30 O. Jur. (Parties) Sec. 27, p. 738.

The most recent case in the Ohio Supreme Court to discuss the class suit and §11257 GC, is Davies v. Columbia Gas & Elec. Corp. 151 Oh St 417. The first paragraph of the syllabus states the holding of the Court as follows:

“(1) For a person 'to properly institute an action for the benefit of himself and others, pursuant to the provisions of §§11254, 11256 and 11257 GC, pertaining to class actions, the petition must disclose a common or identical interest between the plaintiff and those he assumes to represent with a right to recovery or redress based on the same essential facts.”

In the Davies case, it may be noted that the decision of the Court was that a class action would not lie in the case of a suit against five gas companies and certain other defendants brought by an individual plaintiff purporting to represent himself and some 700,000 other gas customers in which the relief sought was money damages as a result of dilution of gas and alleged overcharges. The Supreme Court pointed out that the damages in such action would depend on the proof of the alleged overcharges in each instance, that redress of various -customers against the numerous defendants would depend upon a large variety of factors and conditions in different localities, that there was no community of' interest among those comprising the class and that many whom plaintiff undertook to represent had no common or identical interest with him and might not be in accord with the relief which plaintiff sought. The circumstances differed greatly from the present case where the rights of plaintiff and other employees grow out of the same agreement and where the contract was entered into for the benefit of plaintiff and other employees, all of the class being members of the same union whose seniority rights had been allegedly violated and all of whom had been laid off. The allegations of the amended petition in the instant case assuredly indicate common, if not identical, interest in the relief sought.

One of the early Ohio Supreme Court cases interpreting §11257 GC (then R. S. 5008) was Platt v. Colvin, 50 Oh St 703 (1893) in which it was clearly recognized that the statute in question applies to actions of a legal, as well as to those of an equitable nature. That case permitted members, of an unincorporated joint stock company, about 1000 in number, and too numerous to be joined as plaintiffs, to sue through their president in his own behalf and ' in behalf of other stockholders to recover money stolen from the association. In Wheatley v. A. I. Root Co. 147 Oh St 127 (1946) under the same statute, a preferred stockholder was held authorized to maintain an action on behalf of himself and other preferred stockholders to enjoin a corporation from carrying out a proposed plan of recapitalization adversely affecting the preferred stockholders. In Haggerty v. Squire, Supt. of Ranks, 137 Oh St 207 (1940), the second paragraph of the syllabus reads as follows:

“2. Where a number of persons have separate and individual claims and rights of action against the same party, but all such claims arise from a common source and represent a like interest, the whole matter may be litigated in a single action brought by all of the claimants as co-plaintiffs or, in case the parties are numerous, making it impracticable to bring them all before the court, by one or more of them suing for himself or themselves and on behalf of the other claimants.”

It does not seem that the fact that in the instant case a court of equity may be required to adjudicate the separate and individual- claims of a number of members of a Union and that the claims with respect to compensation may differ in amount should be a reason to prevent maintenance of a' class suit under §11257 GC, where all of the rights sought to be enforced arise from a common source, to-wit, the same contract. Historically, one of the primary functions of a court of equity was to avoid multiplicity of actions and we believe an equity court is equipped to adjudicate the seniority and other rights here asserted.

The only case we have found directly in point in Ohio on the right to seek remedy in equity for specific enforcement of a labor contract by class action is the nisi prius case previously referred to and cited in 18 A. L. R. (2) 354. The case is Leveranz v. Cleveland Home Brewing Co. 24 N. P. (N. S.) 193 (1922). Although that case was decided prior to enactment of the National Labor Relations Act and Labor Management Relations Act, we have pointed out that in our opinion Congress by these measures showed no intent to take away previously existing rights to maintain in state courts either individual or class actions to enforce labor agreements. The reasoning in the case of Leveranz v. Cleveland Home Brewing Co. supra, commends itself to our judgment. Plaint-ifi in that case brought suit in behalf of himself and other members of a union to enjoin the defendant employer from violation of a labor contract. In discussing the right to maintain the action under §11257 GC, the court declared:

“Conceding that each of the employees in the instant case has a legal remedy by suit against his individual ■ employer, or by bringing many suits during the period of this contract, is such remedy adequate or of any value to such employee? We think not under the facts shown herein. Is there such a community of interest among the members of Local Union No. 52 as would justify a court in finding this action maintainable? This question involves a discussion as to whether or not such a contract as it is admitted was entered into by these parties, was of any value. It is self-evident that both of the parties to this contract in question deemed such a contract of great importance to them. * * *.

“It is contended by defendants that only the 40 men who are employed by these several breweries have any interest in this contract in question. We do not think this position is logical. While but 39 or 40 men are now employed, a much larger number may be employed during the life of the .contract, and any changes in the personnel of those employed would come, of course, from the other members of this local union. Those employed are not immune from sickness or death, or. perhaps from securing more desirable employment elsewhere. In the event of changes, other members of this union would be selected, but which ones no one can tell. It is possible, but hardly probable, that the entire membership might be called upon during the year. It would therefore seem as though the entire membership would have a beneficial interest in this contract, a substantial interest in having it enforced according to its terms. * * *

“If a court of equity cannot enjoin an attempted breach of such a contract, then the system of collective bargaining-may as well be abandoned, and such advantages as come to both the employer and employee by reason of such system, will be lost, as the legal remedy is wholly inadequate. The expense of obtaining it would render it valueless.”

We believe that any doubt as to jurisdiction in this case should be resolved in favor of permitting the door to be open to suits of this character in the state courts, in the absence of a clear and definite contrary declaration by the National Congress, and in the absence of judicial authority to the contrary.

If our finding of jurisdiction has the effect of disturbing the harmonious flow of movement of goods in interstate commerce in labor relations cases or upsets the contemplated pattern intended by Congress, we can merely suggest that such result is one for consideration by Congress rather than by this court.

The cause is remanded to the trial court with instructions to vacate the judgment dismissing the amended petition and for further proceedings according to law. Exe. Order see journal.

HURD, J, concurs.

SKEEL, PJ,

dissents for the reason that the allegations of the petition do not make out a class action and the parties must seek out their individual remedies.


source: Caselaw Access Project

author: By MARTIN, CJ.

license: Public Domain

text:
    WOOSTER RUBBER CO. v. COMMISSIONER OF INTERNAL REVENUE.
    United States Court of Appeals Sixth Circuit
    No. 11255.
    Decided June 8, 1951.

      John C. Johnston, Jr., Critchfield, Critchfield & Critchfield, Robert Critchfield, Wooster, for petitioner.
    Francis W. Sams, Theron Lamar Caudle, Ellis N. Slack, Washington, D. C., for respondent.
    Before MARTIN, McALLISTER and MILLER, Circuit Judges.
   OPINION

By MARTIN, CJ.

The petitioner seeks review of the decision of the Tax Court adjudging deficiencies in excess profits tax of the corporation for the fiscal years ended September 30, 1944, and 1945, in the amounts of $19,201.96 and $21,117.62 respectively.

The issue presented is the extent of the deductibility of contributions made by petitioner to a profit-sharing trust during the years 1944 and 1945. The Tax Court decided that the amounts paid by petitioner to the profit sharing trust exceeded the amounts called for by the instrument creating the plan, and that amounts so paid were not deductible under Section 23(p) (1) (C) of the Internal'Revenue Code,.Title 26, U. S. C., Section 23 (p) (1) (C).

Practically all pertinent facts have been, stipulated by the parties. The petitioner, Wooster Rubber Company, is an Ohio corporation engaged in the manufacture of molded rubber products and rubber household ware. Its books are kept and its income tax returns are made on an accrual basis. The corporation’s fiscal year ends September 30th.

On September 28, 1944, the Board of Directors of the petitioner authorized the creation of a profit-sharing plan. Pursuant to this authority, petitioner two days later entered into an agreement in writing with the National City Bank of Cleveland, as Trustee, whereby “The Wooster Rubber Company Profit Sharing Plan” was established. Only the relevant portions of this lengthy document will be quoted:

“Article II

“The Plan

“Section (4) — Contributions to Plan — Employees Shares—

“(a) Each year on, or within sixty (60) days after, each anniversary date (including the initial anniversary date), the Company will contribute to the Trustee hereunder for the purposes of this Plan and Trust a sum (1) Equal to fifteen (15%) per cent of the compensation otherwise paid or accrued during the Company’s fiscal year to the Participants and employees eligible to become Participants as of the anniversary date of the contribution. (2) In no event, however, shall the amount of the annual contribution by the Company s * * d. be in such an amount as to reduce by more than twenty-five (25%) per cent the net profits [as defined under sub-Paragraph (d) of Section (4) of this Article II] after deducting therefrom an annual dividend commitment equal to six (6%) per cent per share on the preferred stock, and Six ($6.00) Dollars per share on the common stock outstanding as of the beginning of the last taxable year prior to the anniversary date as to which the contribution is to be made, * * (d) For the purposes of this Agreement, the words ‘net profits’ shall mean the net earnings of the Company for each fiscal year ending September 30, as determined by the Company’s independent accountants. ‘Net earnings’ shall be determined by said accountants on an accrual basis by deducting from the Company’s gross earnings all current operating expenses, insurance, all state and local taxes and assessments, all Federal Taxes (including income, excess profits, declared value excess profits, and taxes on undistributed earnings, if any, and any Federal taxes levied or measured by income, now in effect or hereafter enacted), current repairs and maintenance, depreciation, inventory losses, together with such items as in a similar line of business and in accordance with proper accounting practice would be charged to expenses; provided, however, that for the purposes of determining the amount of the contribution to this Trust for any year, the amount of the contribution itself for such year shall not be included among the expenses.” (Emphasis supplied.)

This original plan was submitted to the Bureau of Internal Revenue for approval. Representatives of the Bureau advised petitioner that certain changes in the plan would be required as a prerequisite to the Bureau’s approval. Accordingly, on December 29, 1944, the Board of Directors of petitioner, by resolution, amended the Agreement and Declaration of Trust in several respects. We are concerned with only one amendment.

Article II, Section (4) (d) was amended by striking and substituting in lieu thereof the following:

“For the purposes of this Agreement, the words ‘net profits’ shall mean the net earnings of the Company for each fiscal year ending September 30 as determined by the Company’s independent accountants. ‘Net earnings’ shall be determined by said accountants on an accrual basis by deducting from the Company’s gross earnings all current operating expenses, insurance, all state and local taxes and assessments, all Federal taxes (including the amount shown on the original income tax return for the year in question of all income, excess profits, declared value excess profits, and taxes on undistributed earnings, if any, and any Federal taxes levied or measured by income now in effect or hereafter enacted), current repairs and maintenance, interest, depreciation and amortization, inventory losses, and other losses sustained during such fiscal year, together with such items as in a similar line of business and in accordance with proper accounting practice would be charged to expense; provided,’however, that gains realized upon the disposition of any property other than the stock in trade of the Company, or property held by the Company primarily for sale to customers in the ordinary course of its business, shall not be included in the gross earnings of the Company for such fiscal year; and, provided, further, that for the purposes of determining the amount of the contribution to this Trust for any year, the amount of the contribution itself for such year shall not be included among the expenses, but the amount of the contribution to the Pension Trust Plan shall be included among the expenses.” (Emphasis supplied.)

Under the resolution of the Board of Directors, the amendments were made retroactive to September 30,' 1944. On or about March 15, 1945, the Trust as thus amended was approved by the Commissioner of Internal Revenue as an exempt trust under the provisions of Section 165 (a) of the Internal Revenue Code.

Petitioner’s Board of Directors on August 29, 1945, by resolution further amended the Agreement and Declaration of Trust to delete in its entirety Section (4) (e), not relevant here. The plan as thus amended was again approved by the Commissioner and in this form constitutes the profit-sharing plan in effect for the petitioner’s fiscal years ended September 30, 1944, and - September 30, 1945.

The net earnings of petitioner before the contribution and taxes for the years in question were $281,413.18 in 1944 and $281,681.43 in 1945. The dividend requirement referred to in Article II, Section (4) (a) (2) (d) of the profit-sharing plan was $18,720.00 in each of the taxable years ending September 30, 1944 and 1945. The taxable year of the trust established under the plan coincided with the taxable year of the petitioner.

Petitioner made contributions to the plan of $40,082.22 for the year 1944 and $39,854.67 for 1945. In each year, the contribution equaled exactly fifteen per cent of the compensation otherwise paid or accrued during that year to all employees under the profit-sharing plan. The taxpayer claimed a deduction for the full amount of these contributions in computing its federal income and excess profits taxes for 1944 and 1945.

In ascertaining the amount deductible for contributions under Section 23 (p) (1) of the Internal Revenue Code, the Commissioner determined such contributions to be limited by Article II, Section. (4) (a) (2) (d) of the profit-sharing plan to the amount of $17,717.95 for the fiscal year ended September 30, 1944, and to $17,718.53 for the fiscal year ended September 30, 1945; thus disallowing $22,364.27 of the deduction for the 1944 contribution and $22,136.14 for the 1945 contribution.

On November 19, 1948, petitioner received from respondent a notice, which asserted the following claimed deficiencies in tax:

Income tax fiscal year ended September 30, 1944___$ 18.37

Excess profits tax fiscal year ended September 30, 1944_________________________________________ 19,201.96

Excess profits tax fiscal year ended September 30, 1945--------------------------------------------- 21,117.62

Total------------------------------------$40,337.95

Petitioner admitted a deficiency of $1,310.54 for the fiscal year ending in 1944, but contested the remaining portion attributable to the disallowance of a part of the contribution to the profit-sharing trust. It took the same position with respect to the year 1945 and admitted a deficiency of $5,128.19, but contested that portion of the deficiency resulting from the disallowance of its actual contributions to the profit-sharing plan.

The Tax Court, in an opinion reviewed by the eourt, upheld the Commissioner’s position and entered its decision holding a deficiency for 1944 of $18.37 in income tax and deficiencies in excess profits taxes for 1944 and 1945 in the amounts stated in the opening sentence of this opinion. Inasmuch as the only issue before the Tax Court was the extent of the deductibility of the contributions of the taxpayer to the profit-sharing plan, and inasmuch as the Commissioner conceded that the amounts contributed to the plan were reasonable, ordinary and necessary expenses of doing business, the area of contention was narrowed until it encompassed little more than interpretation of the language contained in Article II, Section (4) of the profit-sharing plan.

In the Tax Court, the Commissioner of Internal Revenue took the position that the company’s contribution under the formula is limited to fifteen per cent of the compensation otherwise paid or accrued to participants eligible under the plan and that it is further limited to twenty-five per cent of the company’s net profits after taxes and dividend commitments. In determining the amount allowable under the latter limitation, the Commissioner made his computations by use of an algebraic formula using two unknowns whereby the actual taxes due and the contribution are arrived at simultaneously.

On the other hand,’ the petitioner insisted that it was its intention from the outset that the plan should provide for payment of the maximum deductible contribution so long as payment of this amount would not reduce by more than twenty-five per cent the net profits which the company would have acquired, after taxes and dividend requirements, had no plan been in existence. Or, expressed another way, its contention was that it could properly pay into the plan fifteen per cent of the basic compensation of participating employees so long as these payments did not leave after the contribution, taxes and dividends, less than seventy-five per cent of the amount that would have been left, after taxes and dividends, had there been no plan at all.

In arriving at the amount of its contribution, petitioner computed the income and excess profits taxes on its net profits as though there were no plan in existence. Then the taxes so computed along with dividend requirements were deducted from net profits to arrive at a figure representing what the net profits, after taxes and dividends, would have been in the absence of the profit-sharing plan. Under taxpayer’s formula, the net profits of the company, after the contribution, actual taxes, and dividends, must be at least seventy-five- per cent of such figure,

The actual computations, made by petitioner and respondent for the taxable year ended September 30, 1945, of the maximum amount required to be contributed by the terms oí the agreement and Declaration of Trust are set forth in the margin.

Though all the facts heretofore stated were stipulated and were found by the Tax Court, petitioner introduced at the hearing the testimony of four of its officers and employees for the purpose of establishing the company’s intention in setting up the plan. All four, witnesses testified that it was the taxpayer’s intention from the outset that the contribution should be determined in the manner followed by petitioner. A fifth witness, the trust officer of the trustee bank, testified that this was also his understanding concerning the instrument.

Respondent produced one witness, a revenue agent assigned to the Pension Trust Division of the Cleveland Revenue Agent’s Office, who testified with respect to the approval of the Wooster Rubber Company plan. The substance of his testimony was that, in approving the plan, his office interpreted the words of the instrument to call for a different method of computation from that adopted by the petitioner. He then pointed out that his construction provided for the method insisted upon by the Commissioner.

The Tax Court filed findings of fact which were based primarily on stipulations between the parties with the exception of the last finding, which was sharply disputed: “The Agreement and Declaration of Trust under which petitioner made contributions to its profit-sharing plan required that $17,717.95 be contributed by petitioner for the taxable year ended September 30, 1944, and $17,718.53 be contributed by petitioner for the taxable year ended September 30, 1945” (14 T. C. 1192).

The court, in its opinion, after holding that the only interpretation of the plan possible was that urged by the Commissioner, asserted that approval by the Commissioner of an employees’ trust as tax exempt under section 165(a) is a prerequisite to allowance as a deduction under Section 23 (p) (1) (C) of an employer’s contributions to such a trust. The court then said: “To qualify as tax exempt under section 165(a), the employees’ trust must be part of a plan designed and applied to, enable the employees or their beneficiaries to share in the profits of their employer’s trade or business according to a predetermined formula. Regulations 111, section 29.165-1; Lincoln Electric Company Employees’ Profit Sharing Trust v. Commissioner of Internal Revenue, 14 T. C. 598. If the provisions of the plan are approved, the trust set up under it is exempt from tax, and under section 165 (b) the contributions made to the trust are taxable to the employees benefited only when distributed or made available to them. The profit-sharing plan to which petitioner made payments was exempt under section 165(a) but we have held that only part of the payments made by petitioner were to or under a plan as envisaged by sections 165(a) and 23 (p) (1) (C) and approved by the Commissioner. Only such payments as were actually called for by the predetermined formula contained in the Agreement and Declaration of Trust are deductible under section 23 (p) (1) (C) * *

On its petition for review in this court, the taxpayer makes two broad assignments of error: (1) That the Tax Court erred in the light of the evidence adduced in failing to hold that the language used in Article II, Section 4, of the Declaration of Trust, as amended, required the petitioner to make contributions to its profit sharing trust of $40,082.22 in the fiscal year ending September 30, 1944, and $39,854.67 for the fiscal year ending September 30, 1945; and (2) that the Tax Court erred in failing to hold that when an employer has established a profit-sharing trust and has consistently made contributions thereto pursuant to the interpretation given the trust instrument by the employer, the trustee, and the beneficiaries, and when the trust instrument so interpreted constitutes an exempt trust under Section 165(a) of the Internal Revenue Code, the full amount of the contribution shall be allowed as a deduction from income so long as the' amount of the contribution does not exceed any of the expressed limitations of Section 23 (p) (1) (C) of the Internal Revenue Code.

The Commissioner contends that the instrument setting forth the profit-sharing plan is clear, unambiguous, and permissive only of the interpretation put upon it by the Tax Court; and that, this being true, payments made by taxpayer in excess of the amounts called for its formula were not made pursuant to tlie plan, were altogether voluntary, and therefore not deductible.

Section 23 (p) (1) (C) allows a deduction from net income in the taxable year of amount paid (within fifteen per cent limitation) into a profit-sharing trust, “if such taxable year ends within or with a taxable year of the trust with respect to which the trust is exempt under Section 165(a)” of the Internal Revenue Code. In Treasury Regulations 111, Sec. 29.165-1, the Commissioner has interpreted Section 165(a) to require a definite, predetermined formula for computing the amount of the contribution.

Inasmuch as the Commissioner has conceded that payments do not exceed the fifteen per cent limitation of Section 23 (p) (1) (C), that the payments are ordinary, reasonable and necessary expenses of doing business, and that under his interpretation of its strictures the plan is exempt under Section 165(a), the only question for our determination is whether the Tax Court correctly construed the language of the plan.

The employees’ profit-sharing trust agreement, having been formulated and executed and its provisions carried out in Ohio, is to be interpreted in conformity with the law of that state. Hopkins v. Commissioner of Internal Revenue, 6 Cir., 144 F. 2d 683, 688, 158 A. L. R. 1301. See also Commissioner of Internal Revenue v. Lewis, 3 Cir., 141 F. 2d 221; Bedford v. Commissioner of Internal Revenue, 2 Cir., 150 F. 2d 341; Newton Trust Co. v. Commissioner of Internal Revenue, 1 Cir., 160 F. 2d 175.

Under the rule in Ohio, the syllabus alone is considered to be binding law. The first syllabus in Walbridge v. Toledo Trust Co., 63 Oh Ap 358, 16 O. O. 85, 23 N. E. 2d 980, 981, declares that “in the construction of a written trust, the intention of the settlor must be ascertained not merely from an examination of the language used in the entire trust instrument, but also from an examination and consideration of all facts and circumstances leading up to and surrounding the execution of it.”

It is generally recognized that when any provision in a trust instrument is ambiguous, extraneous evidence may be considered to ascertain the settlor’s intention. See Rand v. Helvering, 8 Cir., 116 F. 2d 929, 932.

The language of the formula in the present controversy seems to us to be ambiguous. Neither construction urged is so clearly responsive to the mandates of the instrument as to indicate that either expresses the only possible meaning attributable to the language of the plan.

The circumstances surrounding the formulation of the profit-sharing plan and the trust instrument support the insistence that the officer's and directors of the company intended to provide the method of computation which petitioner used. Upon the hearing, the petitioner called four witnesses who attended the meetings out of which evolved the profit-sharing plan. They had all been active in its formulation. These witnesses were, respectively, the company’s president and general manager, its secretary-treasurer, its auditor, and a professional consultant for profit-sharing and group plans. All of them testified positively that, in setting up the plan, it was their intention that the company should pay to the trustee fifteen per cent of the basic compensation of covered employees, so long as payment of this amount did not reduce by more than twenty-five per cent the net profits, after taxes and dividends, that the company would have had if no plan had been in existence. The secretary-treasurer of petitioner, who had charge of the computations under the plan, testified that in “their” opinion the amendments re-quired by respondent did not alter the method of computing the contribution. The testimony of these witnesses was uncontradicted. There was no evidence of any intention on the part .of petitioner to adopt a different formula for the computation of the amount of the contribution when it made the amendments insisted upon by the Commissioner.

Additional persuasive evidence of the intention of the petitioner is found in its acts subsequent to the execution of the Declaration of Trust.

As was said by Circuit Judge (now Mr. Justice) Minton: “There is no doubt that settlor’s subsequént acts are of great significance in construing an ambiguous trust instrument.” Helfrich’s Estate v. Commissioner of Internal Revenue, 7 Cir., 143 F. 2d 43, 46. See also. Potter v. Madison Willow Craft Co., 6 Cir., 73 F. 2d 406, 408; Holyoke Water Power Co. v. American Writing Paper Co., 1 Cir., 68 F. 2d 261, 265.

In Courtright v. Scrimger, 110 Oh St, 547, 144 N. E. 294, the Supreme Court of Ohio thus wrote in a syllabus: “Where words used in a contract are susceptible of more than one meaning, and the signatories to the contract have by acts done in carrying out the terms thereof placed their own interpretation upon the meaning of the words, courts will adopt the interpretation which the signatories to the contract have themselves made.” See to same effect a recent opinion of the Supreme Court of Ohio in State ex rel. Burgess & Niple v. Linzell, 153 Oh St, 545, 552, 42 O. O. 27, 93 N. E. 2d 9, 12, wherein it was said that where “words used in a contract are reasonably susceptible of more than one interpretation and the parties to such contract have by their acts and conduct in the performance of the contract over a reasonable period of time mutually adopted one of those interpretations, the interpretation so adopted will be given to those words.” ■

Uncontradicted evidence indicates that on September 30, 1944, its directors knew approximately what the profit for the taxpayer company would be for the year ending that day, fnd in estimating the amount to be deposited with the trustee they selected the sum of $30,000 with the understanding that the balance would be paid when the exact amount could be determined. Such action does not harmonize with an intention to contribute an amount not to exceed $17,717.95. Moreover, at the time of the Tax Court hearing, this same method of computation had been used consistently for the entire five years the plan had been in operation. Further evidence of petitioner’s intent is disclosed by the fact that the plan, as interpreted by the taxpayer formed an integral part of the collective bargaining contract between petitioner and the United Rubber Workers, C. I. O.

In construing a trust instrument, weight should be accorded the interpretation placed by the parties upon the language used in the instrument. Helvering v. McCormack, 2 Cir., 135 F. 2d 294, 297; Claiborne-Reno Co. v. E. I. DuPont de Nemours & Co., 8 Cir., 77 F. 2d 565, 568. The Supreme Court of Ohio has stated: “It is an established doctrine of law that where private citizens have made a contract and their conduct under that contract has given construction to its terms, the court in construing tjae same will give great weight to the construction given it by the parties themselves, especially if the language is in any wise ambiguous.” State ex rel. Weinberger v. Miller, 87 Oh St, 12, 33, 99 N. E. 1078, 1081, 44 L. R. A., N. S., 712.

An indication of the intention of the settlor of a trust is the interpretation put on that instrument by the trustee, for presumably a trustor in setting up a trust will make his wishes and purposes known to his trustee. Huntington National Bank v. Commissioner of Internal Revenue, 6 Cir. 90 F. 2d 876, 878. Compare Otoe County National Bank v. Delany, 8 Cir., 88 F. 2d 238, 244.

The trust officer of the National City Bank of Cleveland, trustee under the plan, testified that in his opinion the method of computation outlined in the profit-sharing plan of the petitioner fell into a classification formula designed to protect profits from reduction by more than a given percentage.

It would seem unlikely that petitioner would voluntarily have contributed more than twice the amount called Jjjpr by the formula contained in the plan despite the fact that seventy-two cents of every dollar so contributed would be borne by the government. There is in this case no evidence or hint of any attempt on the part of petitioner to avoid the payment of taxes lawfully due from it. The money has been paid over in good faith to the trust fund for the benefit of the employees, and the adoption by this court of the construction urged by the Commissioner would' have the effect of causing petitioner to pay tax on account of money expended for reasonable, ordinary and necessary business expenses.

Finding as we do that the instrument creating the profit-sharing plan was ambiguous, we think the Tax Court should have considered evidence adduced by petitioner which bore on its intention concerning the" method of. computing ■ the amount of the contribution to the trust. ' The petitioner’s witnesses were qualified and unimpeached; and no evidence was offered in contradiction of their sworn statements. In such circumstances, their testimony should have been accepted. Chesapeake & Ohio Railway Company v. Martin, 283 U. S. 209, 218, 51 S. Ct., 453, 75 L. Ed. 983; Wright-Bernet v. Commissioner of Internal Revenue, 6 Cir., 172 F. 2d 343, 346; Capitol-Barg Dry Cleaning Co. v. Commissioner of Internal Revenue, 6 Cir., 131 F. 2d 712, 715.

That respondent, in approving the plan for exemption under Section 165(a) and Regulations 111, Section 29.165-1, ascribed a different meaning to the words of the plan is of no evidentiary value in establishing the intention of the settlor of the trust, for respondent was not a party to the transaction.

There is no dispute in regard to the exemption of petitioner’s plan, except as to the formula requirements; it has been stipulated that the challenged contributions do not exceed the fifteen per cent limitation of Section 23 (p' (1) (C); and the plan, interpreted according to petitioner’s inr tent, is plainly qualified for exemption under Section 165(a). For these reasons, the Tax Court should have allowed deductions in the full amount of the contributions for the years in question.

The decision of the Tax Court is reversed and the case is remanded with instructions that a decision be entered assessing against the petitioner deficiencies which were stipulated by the parties to be correct should the taxpayer prevail; such deficiencies being, in excess profits taxes of $1,310.54 for the fiscal year ended September 30, 1944, and $5,128.19 in excess profits taxes for the fiscal year ended September 30, 1945.

      . Rev. Act 1942, Sec. 162 (b); I. R. C., Sec. 23. Deductions from Gross Income, “(p) Contributions of an employer to an employees’ trust or annuity plan and compensation under a deferred-payment plan. — (1) General Rule. If contributions are paid by an employer to or under a stock bonus, pension, profit-sharing, or annuity plan, or if compensation is paid or accrued on account of any employee under a plan deferring the receipt of such compensation, such contributions or compensation shall not be deductible under subsection (a) but shall be deductible, if deductible under subsection (a) without regard to this subsection, under this subsection but only to the following extent: * * * (C) In the taxable year when paid, if the contributions are paid into a stock bonus or profit-sharing trust, and if such taxable year ends within or with a taxable year of the trust with respect to which the trust is exempt under Section 165(a), in an amount not in excess of 15 per centum of the compensation otherwise paid or accrued during the taxable year to all employees under the stock bonus or profit-sharing plan. * * * The term ‘stock bonus or profit-sharing trust,’ as used in this subparagraph, shall not include any trust designed to provide benefits upon retirement and covering a period of years, if under the plan the amounts to be contributed by the employer can be determined actuarially as provided in subparagraph (A). If the contributions are made to two or more stock bonus or profit-sharing trusts, such trusts shall be considered a single trust for the purposes of applying- the litigations in this subparagraph.”

      . See. 165 (a), I. R. C., Rev. Act of 1942, C. 619, Sec. 162(a). 56 Stat. 862, 26 U. S. C. Section 165(a). “(a) Exemption from tax. A trust forming' part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive ' benefit of his employees or their beneficiaries shall not be taxable under this supplement and no other provision of this supplement shall apply with respect to such trust or to its beneficiary — (1) if contributions are made to the trust by such employer, or employees, or both, for the purpose of distributing to such employees or their beneficiaries the corpus and income of the fund accumulated by the trust in accordance with’such plan; (2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust, for any part of the corpus or income to be (-within the taxable year or thereafter) used for, diverted to, purposes other than for the exclusive benefit of his employees or their beneficiaries; (3) if the trust or two or more trusts, or the trust or trusts and annuity plan or plans are designated by the employer as constituting pa^-ts of a plan intended" to qualify under this subsection which benefits either—
      “(A) 70 per centum or more of all the employees, or 80 per centum or more of all the employees who are eligible to benefit under the plan if 70 per centum or more of all the employees are eligible to benefit under the plan, excluding in each case employees who have been employed not more than a minimum period prescribed by the plan, not exceeding five years, employees whose customary employment is for not more than twenty hours in any one week, and employees whose customary employment is for not more than five months in any calendar year, or
      “(B) such employees as qualify under a classification set up by the employer and found by the Commissioner not to be discriminatory in favor of employees who are officers, shareholders, persons whose principal duties consist in supervising the work of other employees, or highly compensated employees; and
      “(4) if the contributions or benefits provided under the plan do not discriminate in favor of employees who are officers, shareholders, persons whose principal duties consist in supervising the work of other employees, or highly compensated employees.
      “(5) A classification shall not be considered discriminatory within the meaning of paragraphs (3) (B) or (4) of this subsection merely because it excludes employees the whole of whose remuneration constitutes ‘wages’ under section 1426(a) (1) (relating to the Federal Insurance Contributions Act) or merely because it is limited to salaried or clerical employees. Neither shall a plan be considered discriminatory within the meaning of such provisions merely because the contributions or benefits of or on behalf of the employees under the plan bear- a uniform relationship to the total compensation, or the basis or regular rate of compensation, of such employees, or merely because the contributions or benefits based on that part of an employee’s remuneration which is excluded from ‘wages’ by Section 1426(a) (1) differ from the contributions or benefits based on employee’s remuneration not so excluded, or differ because of any retirement benefits created under State or Federal law.
      “(6) A plan shall be considered as meeting the requirements of paragraph (3) of this subsection during the whole or any taxable year of the plan if on one day in each quarter it satisfied such requirements.”

      . (a) Petitioner’s computation:
      Net income before taxes and contribution .......$281,681.43
      Less: Taxes on $281.681.43 -.$204,846.45
      Dividend commitment -. 18,720.00 $223,566.45
      58,114.98
      Less: 25% ........................................................ 14,528.70

       The actual Federal tax expense would be $167,486.90, based on taxable income of' $281,681.43 less deductible contribution of $51,888.29.
      Amount to be retained by company after contributions are determined ................................$43,586.24
      Maximum contribution Which will leave the company $43,586.24: 14,528.74 X 100/28 (since the tax rate would be 72%_________________$ 51,388.29
      (b) Respondent’s computation:
      Formula for contribution “C”: ,
      C = .25(281,681.43 — T — 18,720)
      Formula for excess profits tax “T”:
      T = [(281,618.43 — C) 80% — 20,340.37]90%
      C = 17,718.53
      T = 171,746.96
      Net income 'before taxes and contribution ........$281,681.43
      Less: Net excess profits tax ....$171,746.96
      Income tax .................... 20,340.37
      Dividend commitment - 18,720.00 210,807.33
      Net profit for limitation under profit-sharing
      plan...........................................................................$ 70,874.10
      Maximum contribution under 25% limitation ..$ 17,718.53

      . The only change material to the calculation provisions of the plan was in Article II, Section 4, in which “all federal taxes (including income, excess profits, declared value excess profits * * *)” was amended to “all federal taxes (including the amount shown on the original income tax return for the year in question of all income, excess profits, declared value excess profits * * *).” Other provisions remained substantially the same.


text:
    MORRIS, Plaintiff-Appellant, v. JOHNSON, Defendant-Appellee.
    Ohio Appeals, Second District, Franklin County.
    No. 4398.
    Decided September 29, 1950.

      John Robert Jones, Lloyd E. Bilger, Columbus, for plaintiff-appellant.
    Wiles & Doucher, Columbus, for defendant-appellee.
   OPINION

By THE COURT.

We have read the entire record, carefully considered the assignments of error and questions discussed in briefs of counsel.

We are of the opinion that evidence as to skid marks was properly admitted and that there is sufficient evidence to support the judgment.'

We believe the trial court was correct in finding that the negligence of the defendant had wholly terminated at the timé the plaintiff got out of his automobile and walked around to the rear thereof and attempted to disengage the rear bumper of his automobile and the front bumper of the defendant’s automobile and in doing, so suffered injury to his finger; and that the negligence of the plaintiff was the proximate cause of his injury.

Judgment affirmed.

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


author: By SCHNEIDER, J:

text:
    STATE, Plaintiff, v. HAMM, Defendant.
    Common Pleas Court, Hamilton County.
    No. 62963.
    Decided February 8, 1952.
    C. Watson Hover, Pros. Atty., Robert N. Ziegler, Leonard Kirschner, Asst. Pros. Attys., Cincinnati, for plaintiff.
    Loyal S. Martin, Cincinnati, for defendant.
   OPINION

By SCHNEIDER, J:

Defendant was found guilty by a jury of manslaughter in the second degree and the cause is now before the Court on a motion for new trial which sets out fifteen grounds of error. Oral arguments were presented and three of the grounds specifically urged were:

1. Error in permitting the defendant on cross-examination to be asked certain questions regarding his prior conviction of offenses;

2. Misconduct of the Prosecuting Attorney;

3. That there was a failure of proof that death of decedent occurred as the proximate result of a violation by defendant of any statute regulating the operation of his motor vehicle which he was operating at the time.

As to this last claim, it was already announced that in the opinion of the Court there was sufficient evidence of a direct and circumstantial nature to present a question of fact for the jury.

As to the claim of misconduct on the part of the Prosecuting Attorney, the Court has carefully read the transcript of the record of cross-examination of defendant and has reviewed other incidents complained of by counsel for defendant, and while the Court agrees that the Prosecuting Attorney deliberately and improperly repeated questions, the competency, relevancy and materiality of which once had been passed upon, the Court is unable to say that this constituted misconduct or that the jury was unduly influenced thereby or that defendant failed to receive a fair trial under the rulings and instructions of the Court.

We come now to consider the claim of error in permitting defendant to be cross-examined as .to former convictions.

The simple question involved is whether conviction in a Magistrate’s or Mayor’s Court on an affidavit based upon the provisions of a municipal ordinance is proper to be shown if such offense is also a crime defined by statutes enacted by the Legislature.

There is no direct authority, that this Court can find, in Ohio, on this question. The Court has reviewed the cases of Coble v. State, 31 Oh St 190; Harper v. State, 106 Oh St 481; Kornreich v. Industrial Fire Insurance Company, 132 Oh St 78 and other cases referred to therein.

In State v. Carter, 75 Oh Ap 545, the Court of Appeals of Cuyahoga County held it error for the trial court to refuse to permit a witness called by the State to be asked whether he had been convicted of a felony or a misdemeanor, and, in the opinion, commented as follows:

“Whether, under modern trends whereby the cities in Ohio have the right of home rule under charters adopted by the people upon constitutional authority, conviction' of a crime, defined by the ordinances of such city which have the effect of law and not just simple police regulations as earlier considered, should be excluded as a means of challenging the credibility of a witness, presents a serious question. At least the reason why such a conviction could not be shown does no longer exist.”

It is well settled that a witness may not be cross-examined as to convictions under city ordinances punishing acts which are not defined and punished as crimes by the Legislature. (Coble v. State, supra). The Harper case supports this view but does not decide the point here involved.

In the Kornreich case, (a civil proceeding) the Court reiterates the doctrine asserted in the case of Wagner v. State, 115 Oh St 136, to the effect that a party may be asked, for the purpose of reflecting upon his credibility whether he had been convicted of treason, a felony or an offense “crimen falsi” as recognized in the common law and, as obiter dictum in the opinion, the Court said that it would be most unfair to a witness to ask him “whether or not he had been convicted of assault and battery” inasmuch as assault and battery in nowise reflects upon credibility.

In the trial of civil cases §11493 GC provide^:

“All persons are competent witnesses * * *” thereby removing the disability, under common law, of persons with a criminal record.

In the trial of criminal cases, the language of our statute is clear, (§13444-2 GC), namely;

“No person shall be disqualified as a witness in a criminal prosecution by reason of his conviction of crime * * * but such conviction may be shown for the purpose of affecting the credibility of such witness.”

Sec. 12372 GC, classifies offenses in this State as “felonies” and “misdemeanors.”

Sec. 3628 GC, enumerates one of the powers of Municipal corporations as follows:

“To make the violation of ordinances a misdemeanor and to provide for the punishment thereof, etc.”

It would seem therefore to this Court that a person who has been prosecuted in a Municipal Court under provisions of an ordinance duly enacted under authority of law by said Municipality, punishing an act which is also defined and punished by State statute, is in no different position, from the standpoint of his vulnerability as a witness, than would be the person who was prosecuted for the same act under a State statute in some Court outside of a Municipality. Any other interpretation would place an unfair burden upon persons convicted in territory other than Municipal corporations.

The question addressed to the witness in the instant case after he denied prior conviction for a State or Federal offeree is whether he had been convicted of operating a motor vehicle while drunk. Accepting the interpretation decreed in the Kornreich case, this Court is of the opinion that such offense is in a different classification than that of assault and battery; is in fact a' “crimen falsi,” and well within the category of “high crimes and misdemeanors,” being the language used in Harper v. State, supra, at page 484.

The motion for new trial will be overruled.


author: Per CURIAM.

text:
    STATE, Plaintiff-Appellant, v. WESTERN UNION TELEGRAPH CO., Defendant-Appellee.
    Ohio Appeals, Second District, Franklin County.
    No. 4366.
    Decided March 7, 1950.
    Herbert S. Duffy, Atty. Geni., Kenneth B. Johnston, Asst. Atty. Geni., Columbus, for plaintiff-appellant.
    Vorys, Sater, Seymour & Pease, Carl H. Tangeman, of counsel, Columbus, John H. Waters, Geni. Atty., William G. H. Acheson, Asst. Geni. Atty., New York City, for defendantappellee.
    Walter R. McDonald, Austin L. Roberts, Jr., Washington, D. C., for National Ass’n of Railroads and Utilities Commissioners, amicus curiae.
   OPINION

Per CURIAM.

This is a law appeal from the Court of Common Pleas for Franklin County, Ohio. Two errors are assigned both of which - are directed to the order of the Court in overruling the demurrer to the answer filed by the defendant. Therefore the same legal questions are presented here as were before the trial court.

We have examined the lengthy and well considered opinion of Judge Gessaman and are in full accord with the legal principles and conclusions therein announced. We think the authorities cited therein are sufficient to support the judgment; hence no good purpose would be served by a further discussion by the Court.

We find no error in the record and the judgment is ordered affirmed.

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


author: By PINE, J.

text:
    YOUNGSTOWN SHEET & TUBE COMPANY et v. SAWYER.
    U. S. District Court, District of Columbia.
    Civil Nos. 1550-52, 1635-52, 1539-52, 1647-52, 1732-52, 1700-52, 1549-52, 1581-52, 1624-52, 1625-52.
    Decided April 29, 1952.

      John J. Wilson, John C. Gall, J. E. Bennett, Youngstown, for Youngstown Sheet and Tube Company and The Youngstown Metal Products Company.
    Hogan & Hartson, by Edmund L. Jones and Howard Boyd; Gall, Lane and Howe, by John C. Gall; Jones, Day, Cockley and Reavis, by Luther Day and T. F. ■ Patton, for Republic Steel Corporation.
    James C. Peacock, Randolph W. Childs, and Edgar S. Mc-Kaig, for E. J. Lavino & Company.
    Breed, Abbott & Morgan, by Joseph P. Tumulty, Jr., and Charles H. Tuttle, for Armco Steel Corporation.
    Cravath, Swaine & Moore, by Bruce Bromley, Wilmer & Broun, by E. Fontaine Broun, for Bethlehem Steel Company.
    Jones, Day, Cockley & Reavis, Cleveland, by Sturgis Warner; H. Parker Sharp; Reed, Smith, Shaw & McClay, by John C. Bane, Jr., and Walter J. McGough, for Jones & Laughlin Steel Corporation.
    Davis, Polk, Wardwell, Sunderland & Kiendle; Covington & Burling, by John Lord Kiendl, by John W. Davis and Theodore O’Brian and Howard C. Westwood; and Roger M. Bloubh, for United States Steel Company.
    Holmes Baldridge, Asst. Atty Geni, of the United States, and Marvin Taylor, Asst. Atty. Geni, of the United States, for defendant.
   OPINION

By PINE, J.

By Executive Order 10340, promulgated April 8, 1952, the President of the United States directed defendant to take possession of such plants of companies named in a list attached thereto as he deemed necessary in the interests of national defense, to operate them or arrange for their operation and to prescribe the terms and conditions of employment under which they should be operated. The plaintiffs are among those named in the list.

In the recitals of the Executive Order, the President stated that a controversy had arisen between certain companies producing and fabricating steel and certain of their workers represented by the United Steel Workers of America, C. I. O., regarding terms and conditions of employment; that the controversy had not. been settled through the processes of collective bargaining or through the efforts of the Government, and a strike had been called for April 9, 1952; that a work stoppage would immediately jeopardize and imperil our national defense and the defense of those joined with us in resisting aggression; and that in order- to insure the continued availability of steel it was necessary that the United States take possession of and operate the plants.

By virtue of this Executive Order defendant issued his Order No. 1 bearing the same date, stating that he deemed it necessary in the interest of national defense that possession be taken of the plants of the companies named in a list attached to his order, including the plants of plaintiffs, and that therefore he did take possession of the same, effective April 8, 1952. By the same order, he designated the president of each company as operating manager for the United States until further notice, and directed him to operate the plants of such company, subject to defendant’s supervision. Telegraphic notification to this effect was given to the president of each company.

Plaintiffs thereupon brought these actions praying for declaratory judgments and injunctive relief, and tnere are now before me for decision motions for temporary injunctions seeking to restrain the defendant from taking any action under the authority of the Executive Order. These motions were combined for hearing and have been fully heard. Voluminous briefs have been filed and considered. At the hearing, plaintiff United States Steel limited its motion to a preservation of the status quo in respect of terms and conditions of employment.

Plaintiffs contend that defendant’s acts under the Executive Order resulting in the seizure of their plants are without authority of law and constitute an illegal invasion of their property and rights, and that they are entitled to preliminary injunctions to restrain defendant from acting thereunder, particularly in the light of his threat to make changes in terms and conditions of employment. The basis of plaintiffs’ contention is that there is no constitutional or statutory right in the President to issue the Executive Order, and there being none, defendant acting thereunder is acting without legal authority and his acts are illegal and contrary to law. Plaintiff Lavino has urged an additional reason, namely, that it has been improperly included among the plants seized.

Defendant contends in his Opposition to the motions that the breakdown of. collective bargaining negotiations “created an immediately impending national emergency because interruption of steel manufacture for even a brief period would seriously endanger the well-being and safety of the United States in a critical situation”; that the President has “inherent power in such a situation to take possession of the steel companies in the manner and to the extent which he did by his Executive Order”; that the courts are without power to negate Executive action of the President by enjoining it; that the courts will not interfere in advance of a full hearing on the merits except upon a showing that the damage to flow from a refusal of a temporary injunction is irreparable and outweighs the harm which would result from its issuance; and that, since the right of the companies to recover all damages resulting from the taking has been recognized by Supreme Court decisions, there is no showing that the companies’ legal remedy is inadequate or that their injury is irreparable.

Before proceeding to a discussion of the points of law involved herein, it should be said that the merits of the controversy between plaintiffs and the United Steel Workers of America, C. I. O., are not before the Court for adjudication. Further, it should be noted that, although there is no law of the-case rule in interlocutory orders in this jurisdiction, these cases are in a materially different posture than they were when Judge Holtzoff of this court refused a temporary restraining order in respect of several of them.

The' fundamental issue is whether the seizure is or is not authorized by law. In my opinion,8this issue should be decided first, and that I shall now do.

There is no express grant of power in the Constitution authorizing the President to direct this seizure. There is no grant of power from which it reasonably can be implied. There is no enactment of Congress authorizing it. On what, then, does defendant rely to sustain his acts? According to his briefs, reiterated in oral argument, he relies upon the President’s “broad residuum of power” sometimes referred to as “inherent” power under the Constitution, which, as I understand his counsel, is not to be confused with “implied” powers as that term is generally understood, namely, those which are reasonably appropriate to the exercise of a granted power.

This contention requires a discussion of basic fundamental principles of constitutional government, which I have always understood are immutable, absent a change in the framework of the Constitution itself in the manner provided therein. The Government of the United States was created by the ratification of the Constitution. It derives its authority wholly from the powers granted to it by the Constitution, which is the only source of power authorizing action by any branch of Government. It is a government of limited, enumerated and delegated powers. The office of President of the United States is a branch of the Government, namely, that branch where the executive power is vested, and his powers are limited along with the powers of the two other great branches or departments of Government, namely, the legislative and the judicial.

The President therefore must derive this broad “residuum of power” or “inherent” power from the Constitution itself, more particularly Article II thereof, which contains the grant of Executive power. That Article provides that the Executive power shall be vested in the President; that he shall swear that he will faithfully execute the office of President and will to the best of his ability preserve, protect, and defend the Constitution of the United States (Sec. 1); that he shall be commander in chief of the army and-navy of the United States (Sec. 2); and that he shall take care that the laws be faithfully executed (Sec. 3). These are the only sections which have any. possible relevancy, and their mere enumeration shows the utter fallacy of the defendant’s claim. Neither singly nor in the aggregate do they grant the President, expressly or impliedly, as that term has hereinabove been defined, the “residuum of power” or “inherent” power which authorizes him, as defendant claims, to take such action as he may deem to be necessary, including seizure of plaintiffs’ properties, whenever in his opinion an emergency exists requiring him to do so in the public interest. Instead, in Congress is lodged, within Constitutional limitations, the power “to provide for the common defense and general welfare” (Art. I, Sec. 8).

The non-existence of this “inherent” power in the President has been recognized by eminent writers, and I cite in this connection the unequivocal language of the late Chief Justice Taft in his treatise entitled “Our Chief Magistrate and His Powers” (1916) wherein he says: “The true view of the Executive function is, as I conceive it, that the President can exercise no power which cannot be fairly and reasonably traced to some specific grant of power or justly implied and included within such express grant as proper and necessary to -its exercise.

“Such specific grant must be either in the Federal Constitution or in an Act of Congress passed in pursuance thereof. There is no undefined residuum of power which he can exercise because it seems to him to be in the public interest, and there is nothing in the Neagle case and its definition of a law of the United States, or in other precedents, warranting such an inference. The grants of Executive power are necessarily in general terms in order not to embarrass the Executive within the field of action plainly marked for him, but his jurisdiction must be justified and vindicated by affirmative constitutional or statutory provision, or it does not exist.”

I stand on that as a correct statement of the law. Defendant, realizing the untenable position in which that statement places him, attempts to weaken it by referring to statements made by Chief Justice Taft in Myers v. United States, 272 U. S. 52, 164 (1923), wherein the Court sustained the President’s authority to remove a postmaster appointed with the advice and consent of the Senate, but all that the Court held was that Article II granted the President “the executive power of the Government i. e., the general administrative control of those executing the laws, including the power of appointment and removal of executive officers — a conclusion confirmed by his obligation to take care that the laws be faithfully executed.”

I see in that decision nothing inconsistent with his previous pronouncements, in that he traces the authority to a specific power granted to the President; but apparently fearing that someone might read certain obiter in the Myers case as contrary thefeto, as defendant now does', the Supreme Court in Humphrey’s Executor v. United States, 295 U. S. 602, 626 (1935), in a unanimous opinion written by Mr. Justice Sutherland, removed any doubt with respect thereto, in the following language: “In the course of the opinion of the Court [in the Myers case], expressions occur which tend to sustain the Government’s contention, but these are beyond the point involved and, therefore, do not come within the rule of stare decisis. Insofar as they are out of harmony with the views here set forth, these expressions are disapproved.” And the view set forth in that opinion was that the President had no power to remove a member of the Federal Trade Commission by reason of- the fact that he was a member of a quasi-legislative and quasi-judicial agency of government and not a purely executive officer as was Myers.

This would seem to dispose of defendant’s contention that the Supreme Court differed from the hereinabove quoted views of Chief Justice Taft.

But defendant goes further and says there is no lack of judicial recognition of this “flexible executive power” to seize property without authority of a statute, and he cites, in support of this statement, the following cases: Roxford Knitting Co. v. Moore & Tierney, C. C. A. N. Y., 265 Fed. 177, 179; but that ease involved power exercised under a war statute. Employers Group of Motor Freight Carriers, Inc. et al. v. National Labor Board et al., 79 U. S. App. D. C. 105, 107, 111, 143 F. 2d 145, 147, 151; but that likewise involved a war statute, and no rights had been taken or threatened to be taken which required review of the Board’s order. Alpirin et al. v. Huffman et al., D. C. Nebr., 49 F. Supp. 337; but that likewise was under a statute authorizing the President during the national emergency to make requisitions. United States v. Pewee Coal Co., Inc., 341 U. S. 114, where there was a non-statutory seizure during World War II, and where compensation was allowed; but he neglected to state that the legality of the seizure was not in issue in the case (88 F. Supp. 426). These cases are therefore not apposite.

He next cites general language from the works of Alexander Hamilton, Vol. 4, page 438, but it is far from convincing when read in context. He thereafter cites In re Neagle, 135 U. S. 1, involving a habeas corpus proceeding brought by Neagle, a United States Marshall who killed David S. Terry in defense of Judge Stephen A. Field, but that case traced the source of power in the Executive to Article II, Sec. 3, requiring that he shall “take care the laws be faithfully executed.” He also cites the Prize Cases, 2 Black 635, 17 L. Ed. 459, but that simply upheld the validity of President Lincoln’s blockade of southern ports and was predicated upon the existence of a state of war, which is not claimed by defendants to exist. He also cites In re Debs, 158 U. S. 564, concerning the dispatch of troops by President Cleveland in a labor dispute, for the purpose of enforcing the faithful execution of the laws of the United States and the protection of its property and removing obstructions to interstate commerce and the United States mail. There, again, the authority is traced to an express grant of power.

These cases therefore do not support his contention bat refute it. He next refers to seizures by former presidents, some during war and several shortly preceding a war without the authority of statute, but it is difficult to follow his argument that several prior acts apparently unauthorized by law, but never questioned in the courts, by repetition clothe a later unauthorized act with the cloak of legality. Apparently, according to his theory, several repetitive, unchallenged, illegal acts sanctify those committed thereafter. I disagree.

Defendant also contends that the Executive has an inherent power in the nature of eminent domain, which justifies his action. The power of eminent domain' is a Congressional power. As stated by the Supreme Court in Hooe v. United States, 218 U. S. 323, 326, “The taking of private property by an officer of the United States for public use, without being authorized, expressly Or by necessary implication, to do so by some act of Congress, is not the act of the Government.” The President therefore does not have the power of eminent domain, and the cases defendant cites do not disclose that he has anything in the nature of such powers. Instead, they relate to the right of the Government to take and destroy property in connection with military operations. They set forth the stringent requirements for the exercise of this right and hold that,- in some instances, there is an obligation, “upon the general principle of justice,” to pay therefor. United States v. Pacific R R., 120 U. S. 227. These cases have no application to the issue here involved, and there is no merit to this point.

Defendant also quotes from the autobiography of President Theodore Roosevelt at page 388-389, wherein he states that it was “not only his right but his duty [as President] to do anything that the needs of the Nation demanded unless such action was forbidden by the Constitution or by the laws”; and that he “acted for the public welfare * * * acted for the ■common well-being of all our people, whenever and in whatever manner was necessary unless prevented by direct constitutional or legislative prohibition.” That is defendant’s only support for his position and for his “Stewardship” theory of the office of President, but with all due deference and respect for the great President of the United States, I am obliged to say that his statements do not comport with our recognized theory of government, but with a theory with which our government of laws and not of men is constantly at war.

Enough has been said to show the utter and complete lack of authoritative support for defendant’s position. That there may be no doubt as to what it is, he states it unequivocally when he says in his brief that he does “not perceive how Article II [of the Constitution] can be read * * * so as to limit the Presidential power to meet all emergencies,” and he claims that the finding of the emergency is “not subject to judicial review.” To my mind this spells a form of government alien to our Constitutional government of limited powers. I therefore find that the acts of defendant are illegal and without authority of law.

I shall next turn to defendant’s claim that the courts are without power to negate executive action of the President. Defendant relies on the case of Mississippi v. Johnson, 4 Wall. 475, where the Supreme Court held that the Judiciary would not attempt to control the President. But in this case the President has not been sued. Charles Sawyer is the defendant, and the Supreme Court has held on many occasions that officers of the Executive Branch of the Government may be enjoined when their conduct is unauthorized by statute, exceeds the scope of constitutional authority, or is pursuant to unconstitutional enactment. Larson v. Domestic and Foreign Commerce Corp., 337 U. S. 682. Land v. Dollar, 330 U. S 731, Philadelphia Co. v. Stimson, 223 U. S. 605. Lee v. United States, 106 U. S. 186. There is no doubt, therefore, that the defendant is subject to an injunction, and the President not only is not a party but he is not an indispensable party to this action, as held in Williams v. Fanning, 332 U. S. 490. Hynes v. Grimes Packing Co., 337 U. S. 86. I find this point no bar to plaintiff’s claim to relief.

Taking up the next point, namely, that the courts will not interfere in advance of a full hearing on the merits except upon a showing that the damage to flow from a refusal of a temporary injunction is irreparable and that such damage would result from its issuance, I first find as a fact, on the showing made and without burdening this opinion with a recital of facts, that the damages are irreparable. As to the necessity for weighing the respective injuries and balancing the equities, I am not sure that this conventional requirement for the issuance of a.preliminary injunction is applicable to a case where the Court comes to a fixed conclusion, as I do, that defendant’s acts are illegal. On such premise, why are the plaintiffs to be deprived of their property and required to suffer further irreparable damage until answers to the complaints are filed and the cases are at issue and are reached for hearing on the merits? Nothing that could be submitted at such trial on the facts would alter the legal conclusion I have reached.

But assuming I am required to balance the equities what is the situation in which I find this case? I am told by defendant of the disastrous effects of our defense efforts and economy if an injunction should be granted, because it would automatically be followed by a crippling strike; and I am asked to weigh that damage against the incalculable and irreparable injuries to plaintiffs’ multi-billion-dollar industry, if I should refuse to issue it.

Assuming the disastrous effects on the defense effort envisioned by the defendant, that can come about only in case of a strike, and that presupposes that the United Steel Workers will strike notwithstanding the damage it will cause our defense effort. It also presupposes that the Labor Management- Relations Act, 1947, is inadequate when it has not yet been tried, and is the statute provided by Congress to meet just such an emergency. And it further presupposes as defendant apparently does, that, this statute being inadequate, Congress will fail in its duties, under the Constitution, to legislate immediately and appropriately to protect the nation from this threatened disaster. I am unwilling to indulge in that assumption, because I believe that our procedures under the Constitution can stand the stress and strains of an emergency today, as they have in the past, and are adequate to meet the test of emergency and crisis.

Under these circumstances I am of the opinion that, weighing the injuries and taking these last-mentioned .considerations into account, the balance is on the side of plaintiffs. Furthermore, if I consider the public interest from another viewpoint, I believe that the contemplated strike, if it came, with all its awful results, would be less injurious to the public than the injury which would flow from a timorous judicial recognition that there is some basis for this claim to unlimited and unrestrained Executive power, which would be implicit in a failure to grant the injunction. Such recognition would undermine public confidence in the very edifice of government as it is known under the. Constitution.

The remaining claim of defendant is that plaintiffs have a plain, adequate, and complete remedy by a suit in the Court of Claims for damages, and therefore equity can not take cognizance of the case. The records show that monetary recovery would be inadequate; but aside from that, the seizure being unauthorized by law, there could be no recovery under an implied contract, and there can be none under the Federal Tort Claims Act. This Act expressly provides that any claim based upon an act of an employee of the Government in the execution of a regulation, whether or not it be valid, is excepted from its terms.

For the foregoing reasons I am of the opinion that preliminary injunctions restraining defendant from acting under the purported authority of Executive Order 10340 should bo issued in favor of all plaintiffs except the United States Steel Company. That company verbally limited its motion to one for a preliminary injunction to restrain defendant from making any changes in the terms and conditions of employment. That I am unwilling to issue because of its stultifying implications. I could not consistently issue such an injunction which would Contemplate a possible basis for the validity of defendant’s acts, in view of my opinion hereinabove expressed, and moreover, a preliminary injunction should maintain the status quo as of the date of the wrongful acts complained of. If the United States Steel Company wishes to withdraw its verbal amendment and proceed on the. basis of its original motion, leave will be granted for that purpose, and the same injunction issued to it as to the other plaintiffs.

Counsel will submit, with all due speed, orders in accordance herewith.

      . McCulloch v. Maryland, 4 Wheat, 316, 4 L. Ed. 579.

      . McCulloch v. Maryland, supra; Dorr v. United States, 195 U. S. 138, 140, 49 L. Ed. 128; Graves v. New York ex rel O’Keefe, 306 U. S. 466, 477, 83 L. Ed. 927; Scott v. Sandford, 60 U. S. 393, 19 How. 401, 15 L. Ed. 691.

      . Ex parte Quirin, 317 U. S. 1, 25; Ex parte Milligan, 4 Wall. 2, 136-137, 18 L. Ed. 281; Liehter v. United States, 334 U. S. 742, 779. Amendment IX to the Constitution provides that the enumeration therein, of certain rights, shall not be construed to deny or disparage others retained by the people, and Amendment X provides that the powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

      . The Supplemental Memorandum of defendant, received April 29, 1952, after argument, states that he does not go beyond claiming “that the President possesses the constitutional power and duty to take action in a grave national emergency such as existed here.” This statement relates his claim to the instant case, but does not change his general basic claim as above set forth, which he necessarily must assert to sustain his defense herein.

      . Expedition of a hearing on the merits has been opposed by defendant.

      . Hooe v. United States, supra; United States v. North American Transportation & Trading Co., 253 U. S. 330, 64 L. Ed. 935.

      . 28 U. S. C. A. 1346b.

      . See Old King Cole Co. v. United States, S. D. Iowa, 88 F. Supp. 124; Jones v. United States, S. D. Iowa, 89 F. Supp. 980.