author: By BRYANT, PJ.

text:
    BANCROFT, Estate of, In re.
    Ohio Appeals, Tenth District, Franklin County.
    No. 6082.
    Decided May 12, 1959.
    Robert Dow Hamilton, Columbus, for himself.
    Bruno E. Voltollni, Columbus, for administrator.
    L. D. Agler, Columbus, for certain heirs.
   OPINION

By BRYANT, PJ.

The sole question to be decided by this court at this time arises upon a motion filed on behalf of J. Quinn Dorgan, administrator of the estate of Mae Bancroft, deceased, appellee herein. This motion seeks to reduce from law and fact to law only the appeal from the judgment and final order of the Probate Court of Franklin County filed by Robert Dow Hamilton, appellant herein. Mr. Hamilton, an attorney, was formerly attorney for the administrator.

In support of the motion to reduce the appeal, it is argued that the nuestions involved here have to do with the amount of attorney fees fixed by the said probate court after a hearing before the court.on the aDplication of the said administrator for a determination of such attorney fees. It is urged that such questions are not within the ten classes of cases described in §2501.02 R. C., which are authorized to be appealed on nuestions of law and fact and that all other classes of cases may be annealed only on questions of law. Further, it is claimed that this is iurisdictional and that this court has authority to hear the pending appeal only on the basis of an appeal on questions of law.

This is disputed by Mr. Hamilton, the appellant, who is acting as his own attorney In support of his right to an appeal on questions of law and fact, he contends that the issues in the court below fall squarely within the terms of the ninth class of actions which may be so appealed on questions of law and fact under the provisions of the said §2501.02 R. C„ and that his action below seeks as its primary and paramount relief the specific performance of a contract including the establishment of the existence of such contract and the restraint of the breach thereof.

It is of course well settled that executors and administrators have a right to an allowance for actual and necessary expenses and there is specific statutory authority for administrators and executors to expend estate funds for and receive credit for “reasonable” attorney fees. The rule is set forth in 22 O. Jur. (2d) 620, Executors and Administrators. Section 260. which provides in part as follows:

“The Code provides for the allowance to an executor or administrator of actual and necessary expenses, and specifically states that when an attorney has been employed in the administration of an estate, reasonable attorney fees paid by the executor or administrator shall be allowed as a nart of the expenses of administration.”

The statute directly in point is §2113.36 R. C., which provides in part as follows:

“* * * when an attorney has been employed in the administration of the estate, reasonable attorney fees paid bv the executor or administrator shall be allowed as a part of the expenses of administration. The court may at any time during administration fix the amount of such fees and. on application of the executor or administrator or the attorney, shall fix the amount thereof.”

In order to find the answer to the question, an examination of thp record in the probate court is required. Apparently the question of what fees should be paid for legal services was raised on July 25, 1958 for the first time when Mr. Hamilton was acting as attorney for the administrator. On that date he presented to the probate court and obtained approval thereof of an order authorizing and fixing fees for extraordinary compensation for himself at $2,000. This entry, which also included an allowance for the administrator was set aside by the probate court by an entry filed August 19, 1958, the court stating that “it was not in possession of all of the fact” in making the previous allowance of fees.

We note here that there appears to have been no appeal taken from the court’s order and entry of August 19, 1958 vacating and setting aside the previous allowance of fees. However, it did leave pending and undetermined the previous application of Attorney Hamilton for determination of legal fees. The file also contains a letter (carbon copy) from the administrator to the appellant terminating his services as attorney “Due to recent proceedings which have taken place in the Probate Court, over which I have had no control and for the best interests of those concerned * * *.”

New counsel for the administrator moved to set a new date for the hearing on the fixing of attorney fees, which was done and apparently a hearing was held, after which the probate court rendered its opinion fixing the total legal fees at $1,250, allowing $450 to Hamilton and $800 to his successor. This opinion said in part:

“This matter comes before the Court on the application for the allowance of fees to counsel and fiduciary herein.
“A former allowance of fees in this case was set aside on the ground that the Court was not in possession of all the facts in connection with the matter.
{i* * *
“Since the voiding of the order allowing attorneys’ fees heretofore made, it is the understanding of the Court that new counsel for the fiduciary has been selected.
“Under all of the circumstances the finding of the Court is that counsel fees for the complete administration of this estate are fairly worth $1,250.00 and that sum will be allowed.
“Inasmuch as Mr. Hamilton did perhaps not over one-third of the work that was necessary to bring the estate to a conclusion, the allowance made to him will be $450.00.
“To Mr. Voltolini, who will be compelled to close the estate, an allowance of $800.00 will be made.”

This decision was the subject of a journal entry filed in probate court on December 11, 1958, while the motion for rehearing and reconsideration thereof was overruled by journal entry filed December 31. 1958, from both of which an appeal was taken by the notice of appeal filed December 31, 1958.

It would appear then that the probate court upon request of the administrator conducted a hearing to determine the proper legal fees for legal services rendered by the former counsel for the administrator and that the appeal arises from what appears to have been the dissatisfaction of appellant with the amount allowed.

It is difficult to see how this can be called an action “seeking as a primary and paramount relief” and “specific performance of contracts, or the restraint of the breach thereof.” The reason is that the statute in question (§2113.36 R. C., supra), authorizes the payment of “reasonable attorney fees,” which refers to what the services reasonably are worth and not to any contract or agreement of the parties, which may have been entered into previously.

In the case of In re Estate of Hickok: The Toledo Trust Co. et al, Exrs. v. Hickok et al, 159 Oh St 282, the will authorized the executors to employ attorneys and “pay their reasonable compensation and expenses.” The statute then in effect, §10509-193 GC, authorized the payment of •‘reasonable attorney fees.” In the per curiam opinion, the court at page 284, says:

“It will thus be seen that both the will and the statute authorizing the payment out of the estate of attorney fees for services rendered in the administration of the estate provide for the payment of reasonable fees. Where, as here, a judicial determination is required to fix the amount to be thus paid, the determining factor is the reasonable value of the services. This determination cannot be arrived at in a controverted case solely by the application of a predetermined formula of percentages of inventory values.”

Reference to §2113.36 supra, R. C., indicate that the attorney fees allowed in such cases are those which are “reasonable.” The Supreme Court of Ohio appears to have determined the questions here involved by its holding, inferentially at least, that the standard to be followed when a court makes a determination of such fees, is the reasonable value thereof. That being the case it would appear that the questions here involved do not fall within the ninth branch of §2501.02, supra, R. C., or any other of the ten classifications. It follows therefore that the motion to reduce the appeal is well taken and must be sustained.

The rules of this court namely, Rule V, D provides as follows:

“Whenever an appeal on questions of law and fact is reduced to an appeal on questions of law, the Court shall forthwith make an order fixing the time, not exceeding thirty (30) days, for the presentation and filing of a bill of exceptions in the trial court (§2321.05 R. C.). If a bill of exceptions has been filed, it shall be refiled as of the date of the entry reducing the appeal to one on questions of law. Assignments of error and briefs shall thereafter be filed within the time prescribed by Rule VII A (2).”

It is the order of this court therefore that not to exceed thirty days from the filing of the journal entry in this case shall be fixed for the presentation and filing of the bill of exceptions in the court below with the assignments of errors and brief as prescribed in Rule VII A (2) of this court.

DUFFY, J, concurs.

MILLER, J, not participating.


source: Caselaw Access Project

license: Public Domain

text:
    ANDERS, Estate of, In re.
    Ohio Appeals, Tenth District, Franklin County.
    No. 6107.
    Decided July 21, 1959.
    Lawrence J. Burns, Columbus, for successor-administrator of estate.
    J. Harvey Crow, Urbana, for himself. '
   OPINION

By BRYANT, PJ.

On November 5, 1958, J. Harvey Crow of Urbana, Ohio, made application in Probate Court of Franklin County, Ohio, for appointment of himself as administrator of the estate of Loren Eugene Anders, deceased.

The application was approved, bond was set at $4,000, which was furnished by the United States Fidelity and Guaranty Company by Jack McKeevar, agent, and letters of authority were then and there issued to Crow. Under date of January 8, 1959, the said Probate Court approved a journal entry which recites the appointment and furnishing of a bond by Crow, states that said bond was signed by an agent not authorized to sign bonds in said court and that more than sixty days have elapsed without said bond being lawfully executed.

The entry then sets aside the previous entry of November 5, 1958, thereby removing Crow as administrator. It further names Lawrence J. Burns of Columbus, Ohio, as successor-administrator.

Under date of January 26, 1959, Crow filed a notice of appeal from the order of January 8, 1959, removing him as administrator stating the appeal is on questions of law and fact.

Under date of May 5, 1958, the said Burns filed a motion to dismiss the appeal on law and fact for the reason that the court lacks jurisdiction to hear this appeal as a law and fact case. Crow has filed a brief in opposition and has moved to strike the motion to dismiss of Burns from the files on two grounds — first, the alleged lack of a final order removing Crow and second, that Burns is not a party to the action.

Burns relies upon the case of Bernhard et al v. Irwin, 50 Abs 288, decided by the Second District Court of Appeals in 1947, the syllabus of which is as follows:

“1. An action to remove an administrator is not a chancery case and therefore an appeal on questions of law and fact will not lie from the judgment of the trial court.”

Sec. 2501.02 R. C., as amended October 4, 1955, contains an enumeration of ten classes of actions in which an appeal on questions of law and fact is permitted. It is then provided that in all other cases this court is authorized to proceed as in an appeal on questions of law only, said section reading in part as follows:

“In all cases not falling within the classes designated above the court of appeals shall have jurisdiction to proceed as in an appeal on questions of law only.”

It appears therefore that the motion to dismiss as an appeal on questions of law and fact must be sustained. The appeal on questions of law and fact will be dismissed, but the case will be retained as an appeal on questions of law only. It is therefore the order of the court in the event a bill of exceptions is required that it be presented and filed pursuant to Paragraph D, Rule V of the Rules and Regulations of the Courts of Appeals of Ohio in not more than thirty days from the date of the announcement of this opinion and that compliance be had with the provisions of the said Rule V D and Rule VII A (2) of the rules of this court.

The motion to strike filed on behalf of said Crow is hereby overruled.

DUFFY, J, concurs.

MILLER, J, not participating.


author: By McClelland, j.

text:
    MILLER, Estate of, In re.
    Probate Court, Franklin County.
    No. 128876.
    Announced July 18, 1950.
    Vorys, Sater, Seymour & Pease, Columbus, for executors.
    Key & Butler, Columbus, for widow.
   OPINION

By McClelland, j.

This is an action for a Declaratory Judgment filed by the Executors of the Estate of Frederick A. Miller, who died testate on May 6, 1948. Tile widow of the decedent elected to take under the statute of descent and distribution rather than under his will. As the decedent left two children, the widow is entitled to one-third of the net estate.

The sole question raised by the petition and the answer of the widow may be stated as follows:

“Is the widow entitled on distribution of the estate to one-third of the net estate undiminished by the federal estate tax, so that her one-third share will be free of the burden of any part of the federal estate tax, by virtue of the recent amendment to Section 812 of Title 26, United States Code Annotated, which became effective April 2, 1948, and which amendment is known as the “Marital deduction”?

If the answer to the above question is in the negative the widow’s share on distribution will be diminished by her proportionate share of the burden of the federal estate tax.

Counsel for the widow vehemently urge in their exhaustive brief that the question should be answered in the affirmative, while counsel for the executors claim that the question should be answered in the negative.

Apparently this is another case of first impression which this court is called upon to decide, dealing with our Ohio statutes of descent and distribution. Neither counsel nor the court have found any Ohio case dealing with the question raised in this estate, which estate amounts to over $2,000,000.00.

In the consideration of this question the nature of the federal estate tax must be borne in mind. The nature of the tax has been commented on innumerable times by both the Federal and State Courts. A good statement by our Supreme Court of the nature of the tax may be found in the case of Y. M. C. A. v. Davis, 106 Oh St 366 (1922), to wit:

“The federal statute involved denominates the federal legal charge as an ‘estate tax’ and that charge obviously becomes fixed immediately upon the death of a person having an estate subject to such tax. All the provisions of the act are consistent with this denomination.
“The language of the act, Section 401 (40 Stat, at L., 1096), clearly shows that the tax ‘is hereby imposed upon the transfer of the net estate,’ after all legal charges have been deducted, that is, charges imposed by law, together with such additional charges as provisions of the statute itself include in the ascertainment of the net estate.
“In short, it was the plain purpose to enact a revenue raiser, which should impose a charge or excise upon the decedent’s right to direct or control the transfer of his estate, either under his will, or under the law.
“It was therefore not an inheritance tax. It had no relation whatsoever, so far as herein involved, to any charge upon any devise or legacy, or the right of any person, natural or artificial, to take, hold or receive any portion of an estate.
“In this view of the case, the estate must be considered as a whole, without regard to the nature, character, or amount of the legacies or bequests.”

The nature of the tax has not changed since the above decision of our Supreme Court was rendered in 1922, and the amendment providing for the marital deduction did not change the nature of the tax. In enacting the marital deduction Congress merely added to the list of subsections to said section 812 one more subsection, which is designated subsection (e).

Section 810 imposes the tax on “the value of the net estate (determined as provided in section 812).” Section 812 carries the headnote “Net estate” and begins as follows:

“Section 812. For the purpose of the tax the value of the net estate shall be determined, in the case of a citizen or resident of the United States by deducting from the value of the gross estate—
“(a) Exemption. An exemption of $100,000.00 * * *”

Then follow four other subsections to the statute, designated as follows:

“(b) Expenses, losses, indebtedness, and taxes.
“(c) Property previously taxed.
“(d) Transfers for public, charitable, and religious uses.
“(e) Bequests, etc., to surviving spouse.
“(1) Allowance of marital deduction.”

Nowhere in the whole Section 812, as amended April 2, 1948, will be found any indication at all that Congress intended, in providing for the marital deduction, to exempt the surviving spouse up to the amount of the marital deduction, from sharing in the burden of the estate tax, as is contended by counsel for the widow. In fact, the structure of the amendment definitely shows that the original nature of the tax is preserved, and that the marital deduction was intended merely as an additional deduction from the gross estate and not as an exemption in favor of the surviving spouse alone. The amendment classifies the marital deduction along with the other four deductions listed in the statute.

The amendment itself even recognizes the fact that the surviving spouse would share the burden of the tax on the value of the interest in property passing to her for which the marital deduction is allowed, because subsection (e) (1) (E) provides in part, as follows:

“(E) Valuation of interest passing to surviving spouse. In determining for the purposes of subparagraph (A) (providing for marital deduction) the value of the interest in property passing to the surviving spouse for which a deduction is allowed by this subsection—
“(i) there shall be taken into account the effect which a tax imposed by this chapter, or any estate, succession, legacy, or inheritance tax, has upon the net value to the surviving spouse of such interest; and
“i.i.) where such interest or property is incumbered * * *.”

The words, “a tax imposed by this chapter,” in the above quoted subsection, refer to the tax imposed by Chapter 3, which is the chapter on “Estate Tax.” If Congress intended to exempt the surviving spouse, up to the amount of the marital deduction, from sharing in the burden of the estate tax, the above quoted subsection clearly controverts such intention. Furthermore, subparagraph (A), mentioned in the above quoted section, instead of exempting the share of the surviving spouse from the tax, specifically requires, before the marital deduction can be claimed, that the property passing to the surviving spouse must be in-eluded in the gross estate for the purpose of determining the tax. Sub-paragraph (A) reads as follows:

“For the purpose of the tax the value of the net estate shall be determined, * * * by deducting from the value of the gross estate—
“(e) (1) (A) An amount equal to the value of any interest in property which passes or has passed from the decedent to his surviving spouse, but only to the extent that such interest is included in determining the value of the gross estate.”

Reverting to Y. M. C. A. v. Davis, 106 Oh St 366, the case was affirmed by the United States Supreme Court, in 264 U. S. 47. The syllabi of that case reads as follows:

“1. The Estate Tax imposed by the Revenue Act of 1918, C. 18, 40 Stat. 1096, is not a succession tax upon the benefits received by devisees and legatees, but an excise or death duty upon the transfer of the decedent’s estate. P. 49.
“2. In providing that bequests to religious and charitable corporations shall be deducted in determining the value of the net estate upon which the tax is imposed, No. 403 (3), the act does not undertake to exempt the recipients of such charitable gifts from the burden of the tax if placed upon them by the will. P. 50.
“3. Hence, where the charitable gifts are residuary, and are duly taken into account in ascertaining the net taxable estate and the amount of the tax, the act offers no obstacle to charging the tax, with other costs and expenses, against the gross estate and satisfying specific devises and bequests in full before the charitable gifts are satisfied. Id.
106 Oh St 366, affirmed.”

While this case dealt with a charitable deduction before the marital deduction was introduced in the statute, the following quotation from the opinion in that case written by Chief Justice Taft, might be applied with equal force to the marital deduction. The quotation is as follows:

“Congress was thus looking at the subject from the standpoint of the testator and not from the immediate point of view of the beneficiaries. It was intending to favor gifts for altruistic objects, not by specific exemption of those gifts but by encouraging testators to make such gifts. Congress was in reality dealing with the testator before his death. It said to him ‘if you will make such gifts, we’ll reduce your death duties and measure them not by your whole estate but by that amount, less what you give.’ In No. 408 it is declared to be the intent and purpose of Congress that as far as it is practicable and unless otherwise directed by the testator, the tax is to be paid out of the estate before distribution.”
“There is nothing in subdivision (3) of No. 403 which exempts the recipients of altruistic gifts from taxation; it only requires a deduction of them in calculating the amount of the estate which is to measure the tax. It exempts the estate from a tax on what is thus deducted just as subdivision (4) exempts in terms the estate from taxation on its first $50,000; but this does not operate to exempt any legatee who may be entitled to the first $50,000 in the distribution, from deduction to contribute to the tax ultimately imposed, if by the law of the State, such should be its incidence.”

We come now to the question of how the share of the widow in this case is to be determined under the Ohio law. The widow elected to take under the statute of descent and distribution by virtue of §10504-55 GC, which section provides that

“In the event of election to take under- the statute of descent and distribution, such spouse shall take not to exceed one-half of the net estate.”

But under §10503-4 GC, the statute of descent and distribution, the widow is limited to a one-third share. So, instead of the widow taking one-half of the net estate she takes one-third of the net estate, the decedent having left two children. Under our statutes governing administration and distribution of estates, the net estate for distribution is not determined until all claims and charges against the estate are satisfied; these include the costs and expenses of administration, funeral bill, statutory allowances to the surviving spouse, debts and taxes, including estate taxes. As to estate taxes being a charge against the estate see the case of Tax Commission v. Lamprecht, 107 Oh St 535, cited with approval In re Estate of Gatch, 153 Oh St 401.

That the estate tax is to be deducted from the estate before distribution is plainly indicated by the federal estate tax law itself. Section 822 provides that the executor shall pay the tax, and subsection (b) of section 826 contains the following language, to-wit:

“It being the purpose and intent of this subchapter (Subchapter A of Chapter 3, Estate Tax), that so far as is practicable and unless otherwise directed by the will of the decedent the tax shall be paid out of the estate before its distribution.” (Parenthesis ours.)

Counsel for the widow relies strongly on the case of In re Peters Will, 88 N. Y. Sup (2d) 142, decided by the Surrogate Court of Suffolk County and affirmed June 13, 1949, in a memorandum opinion by the New York Supreme Court, Appellate Division, 89 N. Y. Sup. (2d) 651, which is the only reported case, dealing with this marital deduction question, that counsel have been able to find. That case, however, turned upon a construction of a New York Statute of which Ohio has no counterpart. The statute is section 124, Decedent Estate Law, which carries the following headnote:

“Section 124. Apportionment of federal and estate taxes; executor or administrator to deduct taxes from distributive shares.”

The section provides that a proration of the (State and Federal) taxes shall be made in the proportion that the value of the benefits of each person bears to the total value of the benefits received by all the persons interested in the estate, with the following exception:

“except that in making such proration allowances shall be made for any exemptions granted by the act imposing the tax and for any deduction allowed by such act for the purpose of arriving at the value of the net estate:”

Accordingly, under this section the Surrogate Court ruled as follows:

“Inasmuch as the will does not otherwise direct, all estate taxes will have to be prorated among the persons interested in the estate in accordance with the provisions of Section 124. Decedent’s Estate Law. Petitioner’s portion (widow’s portion) of the estate tax on her intestate share will be in the proportion that the value thereof bears to the total value of said gross estate (reduced by funeral and administration expenses and debts of the decedent) with proper allowances for her exemption of $20,000.00 with respect to estate taxes payable to the State of New York and for her marital deduction with respect to the Federal Government.” (Parenthesis ours.)

The Surrogate Court interpreted the marital deduction as a benefit conferred upon the widow as an exemption or deduction against her share provided for in Section 124, Decedent’s Estate Law. This interpretation of the New York statute by the Surrogate must be born in mind when in his opinion he makes the following broad statement concerning the marital deduction:

“Its purpose is to allow a surviving spouse to take a certain portion of the estate free of Federal Estate taxes.”

Enterprising counsel for the widow have also cited us to an unreported case decided by Judge Klein of the Orphans Court of Philadelphia County, Pa., being the case of Estate of Marriott C. Morris, No. 40 of 1949, decided February 14, 1950. The decision was rendered on the audit of the account in that estate in which no argument was advanced against the ruling of the court. As in the New York Case, the question raised by Judge Klein involved an interpretation of a Pennsylvania statute, the wording of which is almost identical with that of the New York statute, in connection with the marital deduction. The Court, after calling attention to the fact that the Internal Revenue Code makes no provision for the apportionment of the federal estate tax says that the ultimate impact of the tax is determined by the law of the state and that, therefore, he must look to the Pennsylvania Tax Apportionment Act for the answer. Judge Klein approves and follows the Peters Case, Supra, in that Court’s construction of the New York Apportionment Statute and quotes with approval that court’s statement that the marital deduction is substantially in the same category as the charitable deduction allowed by Section 812 (d) U. S. C. A. The Court then calls attention to one of its own cases involving the charitable deduction which was affirmed by the Supreme Court, being the case of Harvey Estate, 350 Pa. 53 (1944) and quotes from its own opinion in that case a passage which the Supreme Court quoted with approval, to-wit:

“In determining the purpose of this act (Tax Apportionment Act), we must refer also to the Internal Revenue Act which it was enacted to execute and to whose terms it refers and partly adopts. Given this setting, it is unquestionable that the purpose of the Pennsylvania Act is to equitably apportion the burden of the tax. Therefore, in our opinion the application of the equitable doctrine of contribution demands that the tax be borne commensurately by those whose gifts contribute to the tax burden and conversely that there be eliminated from such burden all whose legacies do not in any way create or add to the tax * * * The act lacks an express direction to ‘thrust’ any of the tax upon the charities and, therefore, we cannot conceive that the Pennsylvania legislature intended to violate the spirit of the Federal Act, whose provisions allowing the deductions of the charitable legacies are practically written into the Pennsylvania Act.” (Parenthesis ours.)

There we have the reasoning of that court in its interpretation of the meaning of that State’s Tax Apportionment Act, as applied to the charitable deduction, approved by the Supreme Court. Judge Klein adopts the same reasoning in the Morris case, Supra, with reference to the marital deduction.

As Ohio does not have any Tax Apportionment Act, the New York and Pennsylvania eases cannot be considered as authoritative upon the question before us.

It is, therefore, our opinion that the marital deduction must be deducted from the gross estate, the same as the other deductions authorized by Section 812 U. S. C. A., before the federal estate tax may be determined, and that, after the tax is paid, the widow is entitled on distribution to one-third of the'net balance of the estate. This means that the widow must bear her proportionate share of the burden of the whole of the estate tax, and that the question poised at the beginning of this opinion must be answered in the negative.


text:
    CLAY et, Plaintiffs-Appellants, v. VIGOR et, Defendants-Appellees.
    Ohio Appeals, Tenth District, Franklin County.
    No. 6151.
    Decided May 26, 1959.
    John J. Chester, Robert P. Duncan, W. S. Lyman, Columbus, for plaintiffs-appellants.
    Earl W. Allison, Pros. Atty., Columbus, for Franklin County Recorder and Commissioners.
    Russell Leach, City Atty., Alba L. Whiteside, Asst. City Atty., Columbus, for Columbus City Clerk.
   OPINION

By BRYANT, PJ.

This is an appeal on questions of law. Agnes Cain, Columbus City Clerk, a defendant-appellee, has moved to dismiss the appeal upon the ground that the questions involved have become moot.

The action was begun in the Common Pleas Court of Franklin County with the filing of a petition to enjoin the annexation of Hanford Village, a municipal corporation, to the City of Columbus. Plaintiffs below were Fred Clay, a taxpayer and as Mayor of Hanford Village, and W. S. Lyman, Sr., as Solicitor of Hanford Village. Defendants below in addition to said City Clerk were Harry T. Vigor, C. P. Lauderbaugh and Henry A. Koontz, as Commissioners of Franklin County, and Raymond E. Schaefer, as Recorder of Franklin County.

Shortly after the filing of the petition, after a hearing thereon, a temporary restraining order was issued staying all proceedings in furtherance of said annexation until further order of the court. Subsequently the matter came on for hearing and was submitted to the court. The court decided in favor of the defendants and ordered the petition dismissed, this decision being entered on the journal of the court below without specific reference to the temporary restraining order. On behalf of the City Clerk it is said that at the time of the journal entry dismissing the petition and in the period immediately thereafter all of the steps required to be taken to complete the annexation were taken, it being the position of the counsel for the City Clerk that the defendants were free to act due to the failure of plaintiffs below to obtain an order continuing the injunction in effect during the appeal.

Counsel for plaintiffs below apparently do not deny that the steps to complete the annexation have been taken contending that if they have been, they have been in violation of court order made at the outset of the case in the court below. Four prior cases decided in the Court of Appeals of Franklin County are referred to as authority for the position taken on behalf of the City Clerk. They are Lamneck, J., v. Cain, No. 5334, 73 Abs 20, Markus (Markos) v. Cain, No. 5349, 78 Abs 560, 561. Jones v. Cain, No. 5361 and Naumovich v. Cain, No. 5514, 76 Abs 208. In the case of Miner v. Witt, City Clerk, 82 Oh St 237, decided in 1910, it was held that it is not the duty of courts to answer moot questions. The syllabus in that case reads as follows:

“It is not the duty of the court to answer moot questions, and when, pending proceedings in error in this court, an event occurs without the fault of either party, which renders it impossible for the court to grant any relief, it will dismiss the petition in error.”

In the cases of Lamneck, Jr., Markos and Jones, supra, a motion to dismiss because the issues had become moot was sustained. The court stated in a written opinion as follows:

“The only relief sought is to restrain an act that has been performed. Therefore the question presented has become abstract or purely academic. When such facts appear the question becomes moot. State, ex rel. Dickman v. Defenbacher, 151 Oh St 391; State, ex rel. Dickman v. Defenbacher, 158 Oh St 104.”

The only relief sought in the petition in the court below was an injunction restraining said Commissioners, said Recorder, the City of Columbus and said city Clerk “restraining them from proceeding further and taking further action in the annexation of Hanford Village to the City of Columbus.”

In light of what has been said, it would appear that the annexation proceedings were carried to their final completion after the journ? ■ entry of the court below dismissed the petition.

We have been unable to find and, it has not been pointed out to us. where any affirmative steps were taken by plaintiffs below to enjoin or restrain the completion of the annexation.

It would appear therefore that the motion to dismiss is well taken and must be sustained.

DUFFY, J, concurs.

MILLER, J, not participating.


author: By LITTLETON, J. By WHITAKER, J.

text:
    L. B. SMITH, INC., a Corporation, v. UNITED STATES. WOLF COMPANY, a Corporation, v. UNITED STATES.
    United States Court of Claims.
    Nos. 50439, 50440.
    Decided October 2, 1956.

      Robert V. Smith, Washington, D. C., for plaintiffs. Robert P. Smith, Joseph W. Kiernan, Smith, Ristig & Smith, Washington, D. C., were on the briefs.
    John F. Wolf, Washington, D. C., with whom was George Cochran Doub, Asst. Atty. Geni., for defendant. Herbert M. Canter, Washington, D. C., was on the brief.
    Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN and LARAMORE, Judges.
   OPINION

By LITTLETON, J.

The plaintiffs, L. B. Smith, Inc., and The Wolf Company, a wholly owned subsidiary of the Smith Corporation, are Pennsylvania corporations engaged, among other things, in the acquisition and resale of supplies and equipment from war contractors’ termination inventories. They brought this suit under the Fifth Amendment to the Constitution alleging that property was taken from them by the United States without due process of law and without the payment of just compensation.

The property alleged to have been taken was 18 fork lift trucks which were originally part of the termination inventory under a contract between Aetna Standard Engineering Company and the United States. It is plaintiffs’ position that on December 6. 1945, they had consummated with Aetna contracts of sale under which plaintiffs on that day acquired title to the 18 trucks, and that subsequently, defendant took the trucks and turned them over to the Reconstruction Finance Corporation (hereinafter sometimes referred to as the R. F. C.) for the use of the Reserve Moving & Erecting Company without making payment therefor to the plaintiffs. It is defendant’s position that when it took the trucks in question, title thereto was not in the plaintiffs under the facts and circumstances of record in this case. This is the issue.

On August 14, 1945, the Government terminated a contract between itself and the Aetna Standard Engineering Company, an Ohio corporation engaged in the production of war materials for the Government under contracts with various governmental agencies. The terminated contract in question was for the manufacture of model 19 HT Ross fork lift trucks, such manufacture being in accordance with a license agreement entered into between the Ross Carrier Company of Benton Harbor, Michigan, and the Aetna Company.

The contract between Aetna and the Government provided in the usual form in part:

“Article 12. Termination at the Option of the Government. * * * (b) After receipt of a Notice of Termination and except as otherwise directed by the contracting officer, the contractor shall * * * (6) transfer title and deliver to the Government in the manner, to the extent and at the times directed by the contracting officer fi) the fabricated or unfabricated parts, work in process, completed work, supplies and other material produced as a part of, or acquired in respect of the performance of the work terminated in the Notice of- Termination, and (ii) the plans, drawings, information and other property which, if the contract had been completed, would be required to be furnished to the Government: (7) use his best efforts to sell in the manner, to the extent, at the time, and at the price or prices directed or authorized by the con-trading officer, any property of the types referred to in subdivision (6) of this paragraph provided, * * (Emphasis supplied.)

Procedures for the termination of such war contracts, including the disposition of termination inventories, are governed by the Contract Settlement Act of 1944, 41 U. S. C. A. §101, the Surplus Property Act of 1944, 50 U. S. C. A. Appendix, §1611, and the Joint Termination Regulations issued November 1, 1944, as amended.

Pursuant to §12 (b) of the Contract Settlement Act, supra, Aetna filed with the Army Quartermaster Corps., the contracting agency, a Termination Inventory Schedule, which schedule included, among other things, approximately 100 substantially completed fork lift trucks all but 22 of which were subsequently disposed of by declaring them to various Government agencies by the last week of November, 1945. The Termination Inventory Schedule tendered title to the Government as of the date of its submission but, as to the remaining 22 trucks, title was not accepted by the Government at any time prior to December 6, 1945.

A Mr. Carroll was designated by Aetna as Termination Officer and was charged with the task of liquidating the inventory. The United States Joint Termination Regulations (hereinafter sometimes referred to as JTR) §442(1) empowered him as the duly authorized representative of the war contractor, Aetna, to sell any of the termination inventory at cost, without the approval of the contracting officer of the Government. While the contracting officer could at any time revoke or restrict the contractor’s authority to make sales, JTR §432.4, there is no proof in the record that this was done at any time with respect to the 18 trucks in question. Sales at less than inventory cost required the prior approval of the contracting officer. It is easily understandable why the United States would desire that contractors dispose of their large inventories.

Efforts by Aetna after termination to dispose of the remaining 22 trucks were unsuccessful and it was decided by the contracting officer that'they should be advertised in order to invite bids for their sale. The advertisements, appearing in selected newspapers, on November 16, and November 19, 1945, stated in part:

“Sale of Termination Inventory
“22 Ross Fork Lift Trucks Model 19 HT
“These trucks are complete ready for use with following exceptions:
“Painted Prime Coat only, Tool Kit, 2 Lifting Forks, Carriage Rack, Lamp Guards
“All parts necessary to complete trucks are available in Termination Inventory.
“Sealed bids in duplicate for all or part of above trucks will be accepted by AETNA-STANDARD ENGINEERING CO., Youngstown, Ohio, until' noon Nov. 26, 1945. Bids should be marked on outside of mailing envelope sealed by bid dept.
“The right is reserved to reject any and all bids.
“Material will be sold FOB Plant location as is.
“Prospective bidders may inspect material at the AETNA-STANDARD ENGINEERING CO., Ellwood City, Penna, between hours of 9:00 A. M. and 4:00 P. M. Nov. 17 through 23. For further details consult Lt. H. H. Melcher at Aetna-Standard Engineering Co.
“All sales shall be made in accordance with Joint Termination Regulations.”

The call for 'bids was unsuccessful in that the offers were for less than inventory cost, or, in some cases, for no more than scrap value Four of the trucks, however, were subsequently sold to the Koppers Company by December 1, 1945, for $3,500* each, the sale being negotiated by H. G. Coffey, vice president of Aetna though the purchase orders were processed by Mr. Carroll, the Termination Officer, as was the custom and proper procedure.

Mr. Smith, president of both plaintiffs', after learning of the Government’s advertisement, advised Aetna, through Termination Officer Carroll. on November 28, 1945, that he wanted to buy all of the trulks and. after inspecting- them, offered Aetna $2,260 each which was approximately $1,000 below cost. The contracting officer of the Army Quartermaster Corps would not approve the acceptance of this below-cost offer whereupon Mr. Smith, in the name of L. B. Smith, Inc., placed on December 1, 1945, a definite order by telephone for 10 of the 18 trucks at inventory cost of $3,264.04 each, but requested that Carroll hold up processing the order until further instructions as he wanted time to negotiate with the contracting officer of the United States for all 18 trucks at less than inventory cost. Carroll accepted the order but agreed to withhold formal processing. Pursuant to this telephone understanding, Smith mailed his written order for the trucks dated December 1, 1945, which was received by Aetna on December 3, 1945. At the same time the order was placed for the trucks, Smith made a separate agreement with Carroll to completely assemble the trucks for not more than S200 per truck. Completion involved little more than putting on the forks, painting them and various other very minor items. These transactions were not made known to the contracting officer or his representatives at the plant, Lt. Melcher and his assistant Lt. Chosy. On December 3. 1945, Smith telegraphed a firm offer to the attention of Lt. Chosy for the entire 18 trucks for approximately $2,550 per truck which order was subsequently rejected by Chosy on December 5, 1945. On the morning of December 6, 1945, Smith notified Carroll to go ahead with his orders of December 1, 1945, for the ten trucks at inventory cost, and the separate order for their completion, and at the same time he placed an order for the remaining eight trucks for the Wolf Company at the inventory cost. A separate verbal order for the completion of these eight trucks at a cost not to exceed $200 per truck was also placed at that time. Written acknowledgments were immediately issxted by Aetna and processing was commenced. On December 6, the sales were listed on the daily memorandum of sales by Aetna which was transmitted to Lt. Melcher and the contracting officer. This memorandum also included the sales of the aforementioned four trucks to the Koppers Company.

As far back as early November, 1945, the Reconstruction Finance Corporation indicated an interest in the trucks but met with some difficulty in getting proper authorization from R. F. C. headquarters for probable acquisition until December 5, 1945, when Lt. Melcher was advised by telephone by a representative of the Reserve Moving & Erecting Company, which had a storage contract with the R. F. C. at one of the latter’s nearby depots, that authorization for declaration of the 18 trucks to the R. F. C. for the use of the Reserve Moving & Erecting Company had come through. An R. F. C. request number was given to Melcher at that time for forwarding to the Jeffersonville Quartermaster Depot to have the declaration of the trucks to the R. F. C. effectuated. The next day, December 6, after an inspection of the trucks by representatives of the R. F. C. and the Reserve Moving & Erecting Company, and after office hours, an agreement was reached between those representatives and the vice president of Aetna, Mr. Coffey, for the completion of the trucks at $50 each. It seems obvious that the trucks had already been sold at that time.

Lt. Melcher notified his superiors of this transaction on December 7, 1945, and also under that date received from an R. F. C. warehousing official a letter confirming the arrangements of December 6, 1945, this letter stating in part:

“Confirming arrangements made with you by a representative of this office on 6 December 1945, it is understood that you will declare surplus to RFC * * * 18 Ross Fork Lift Trucks * * * presently located at Ellwood City, Pa. plant of Aetna Standard Engineering Co.”

The official declaration was made on December 11, 1945, and sent to Aetna with a transmittal letter dated December 21, 1945, and received by Aetna on December 26. While Mr. Carroll had knowledge of the previous interest of the R. F. C. in the trucks, he was not informed in any way of the happenings of December 5 and 6 between Lt. Melcher, the R. F. C. and the Reserve Moving & Erecting Company. All the trucks were subsequently picked up by or delivered to the R. F, C. — three being picked up by them on December 20, 1945, and the remaining 15 being received by them on January 2, 1946.

Plaintiff, L. B. Smith, Inc., previously sued Aetna for breach of contract and was denied recovery by the Ohio courts their decision stating that while the Quartermaster Corps ordered the delivery of the trucks to the R. F. C. after a contract was entered into by the plaintiff and Aetna, the trucks had remained part of Aetna’s terminal inventory until actually delivered to the purchaser, and that until then they were subject to the paramount right of the Government to appropriate them. L. B. Smith, Inc. v. Aetna Standard Engineering Co., 86 Oh Ap 418, 42 O. O. 16, 92 N. E. (2d), 818, appeal dismissed 152 Oh St 452, 40 O. O. 482, 89 N. E. (2d), 476. This decision is difficult to understand but it was apparently based on the Contract Settlement Act, supra, and the Joint Termination Regulations which provide that the contracting officer may (under certain circumstances) require any item of termination inventory to be transferred to the Government.

Aetna, as defendant in that case, admitted in its answer that it had accepted and acknowledged the order of the Smith company on December 6, 1945, but pleaded in avoidance of any contract liability that the contract was subject to the authority of the United States Government to dispose of the inventory. It was plaintiff’s position, rejected by the Ohio courts, that when the contract between Aetna and it was executed, title passed to the plaintiff and, therefore, the trucks were not part of Aetna’s termination inventory when Aetna, in compliance with Government orders, delivered the trucks to the R. F. C.

Plaintiffs here contend that under valid contracts entered into between them and Aetna, title to the trucks passed to them on the morning of December 6, 1945, and the trucks were, therefore, no longer part of the termination inventory of the Aetna company subject to appropriation by the contracting agency, the Army Quartermaster Corps. We think plaintiffs are right in this. Plaintiffs also contend that the subsequent declaration and delivery to the R. F. C. constituted a deprivation of property without due process of law and without payment of just compensation in contravention of the Fifth Amendment of the Constitution of the United States. We also think they are correct in this contention. They seek to be justly compensated for the property so taken and claim that just compensation is the difference between the contract price and the retail market value of the trucks as of the day of the taking, less the cost of completing them. ,

The defendant, on the other hand, takes the position that title to the trucks never passed to the plaintiffs arguing that the agreements between Smith and Aetna were no more than contracts to sell trucks in a “deliverable state” rather than a contract of sale and relies on the Uniform Sales Act in force in Ohio at that time to support its contention. Defendant argues that since something had to be done to the trucks they were not in a deliverable state and, therefore, title to the goods could not pass until that thing was done to them. Defendant contends in the alternative that the contract between Aetna and the Government incorporated in it the provisions of the Contract Settlement Act of 1944, supra, reserving the rights of the Government to take possession of any termination inventory of a war contractor, and that so long as the trucks remained in possession of Aetna they were part of the termination inventory subject to those governmental rights. The defendant, in effect, argues that an authorized sale by the war contractor can pass title to the purchaser only by delivery.

Thirdly, defendant contends that the terms of the advertisement inviting bids, to wit, the trucks would be sold “F. O. B. Plant location as is,” precludes passage of title until the trucks were delivered to the carrier.

The controlling factor in this case is whether or not title to the trucks in question passed to the plaintiffs prior to their declaration by the contracting officer of the Quartermaster Corps to the R. F. C. If, as determined by existing principles of law relating to sales and passage of title, there was a passage of title to the plaintiffs there was a taking by the Government of property without due process and without just compensation and this is so despite the decision by the Ohio courts holding that the trucks remained part of the termination inventory of the war contractor, Aetna, until actually delivered to the purchaser. L. B. Smith, Inc. v. Aetna Standard Engineering Co., supra.

The terms of the Contract Settlement Act, supra, and the Joint Termination Regulations governing the disposition of termination inventories make no mention of a requirement to actually deliver to the purchaser before an item can be considered as severed from termination inventory. In fact, quite the contrary is true. Section 101 of the act declares its purpose in detail and subsection (e) states as one of the purposes “to assure the expeditious removal from the plants of prime contractors and subcontractors of termination inventory not to be retained or sold by the contractor.” (Emphasis supplied.)

Section 112 relating to removal and storage of termination inventory and providing for the filing of a schedule of inventory on hand after termination of the contract by the Government declares in subsection (c) that

“Within sixty days after the submission of any such statement by a war contractor, or such shorter period as may be prescribed under this chapter, or within such longer period as the war contractor may agree, the Government agency concerned (1) shall arrange, upon such terms and conditions as may be agreed, for the storage by the war contractor on his own premises or elsewhere of all such claimed termination inventory which the war contractor does not retain or dispose of, except * * (Emphasis supplied.)

Section 412.2(2) of the Joint Termination Regulations sets forth the government’s policy relating to contractor inventory:

“(2) The policy of the Government is to encourage war contractors to retain for use at the best price obtainable as large amounts as possible of all types of contractor inventory for their manufacturing, construction, maintenance, or repair purposes. The policy of the Government also is to authorize sales by war contractors under circumstances which will yield the best price obtainable by competitive bidding, or by negotiation in certain cases.” (Emphasis supplied)

The scope of the war contractor’s authority to sell is set forth in §442(1) of the Joint Termination Regulations:

“(1) War contractors may retain or sell any contractor inventory at cost, without the approval of the contracting officer or the next higher tier contractor.” (Emphasis supplied.)

Thus it can be seen that it was the clearly declared policy of the Government to permit the war contractor to sell or retain any part of his termination inventory without prior approval if the sale, or retention, was at inventory cost or higher. That authorized sales are binding upon the Government and cannot be repudiated or rejected by it is explicitly provided for by the regulations as follows:

“§432.5 Finality of authorized dispositions. — Authorized retentions or sales of contractor inventory which meet the requirements of this Section IV, including dispositions which do not require the approval of the contracting officer, will be accepted by the Government as final and conclusive, in the absence of fraud.” (Emphasis supplied.)

The act and the regulations do not provide that stock remains part of the termination inventory until actual delivery to the purchaser as here contended by defendant and as held by the Ohio court in its decision in the case hereinbefore cited, but on the contrary the Act and regulations consistently refer to sales by the war contractor and make it plain that he has the power to sell. Those enactments conclusively indicate that Aetna had the power and authority to sell the trucks here m question unless that power was previously revoked. The record clearly shows that this authority was neither revoked nor limited prior to the dealings between Aetna and the plaintiffs, and since the authority could not be revoked' retroactively, JTR §432.4, Aetna clearly had the authority to sell the trucks out of termination inventory at the time of the transactions between it and plaintiffs. A search of the legislative history of the Contract Settlement Act, supra, does not disclose any contrary intent on the part of Congress.

The Ohio court in holding as it did relied on section 12(e) of the Contract Settlement Act, supra, and section 432.3(2) of the Joint Termination Regulations and pointed out that the provisions of those sections permit the Government to take possession of any contractor inventory if they so desire. Those sections, however, obviously refer to that which is contractor or termination inventory. If there has been a sale within the purview of existing law and by virtue of that sale there has been a passage of title, as there was here, the item of inventory sold cannot logically remain part of the war contractor’s termination inventory since it is owned by someone else. The Ohio court erroneously interpreted the law and regulations.

While delivery of the subject matter of a sale is in some instances necessary to pass title, it is not the only way of doing so. The words sell and sales used consistently throughout the Contract Settlement Act, supra, and the Joint Termination Regulations are legal words of art and, as such, should be given their proper legal meaning by application of existing rules.

Since the plaintiffs’ place of business is located in Pennsylvania and Aetna’s in Youngstown, Ohio, it must first be determined whether the laws of Ohio or Pennsylvania apply. The Federal courts follow the rule that the nature, validity and interpretation of contracts are to be governed by the law of the state where the contracts are made or are to be performed. People’s Outfitting Co. v. United States, 58 F. (2d), 847, 74 Ct. Cl., 419, modified 2 F. Supp., 847, 77 Ct. Cl., 297; Mutual Life Ins. Co. of New York v. Cohen, 179 U. S., 262, 21 S. Ct., 106, 45 L. Ed., 181; Bank of United States v. Donnally, 8 Pet., 361, 8 L. Ed., 974; Smith v. Union Bank, 5 Pet., 518, 8 L. Ed., 212. This statement of the law is also reflected in the conflict of law rules laid down by both the Pennsylvania and Ohio courts, Alropa Corporation v. Kirchwehm, 1941, 138 Oh St 30, 19 O. O. 484, 33 N. E. (2d), 655, appeal dismissed 313 U. S., 549, 61 S. Ct., 1120, 85 L. Ed., 1514; McCormick v. Taft, 1938, 61 Oh Ap 200, 12 O. O. 454, 22 N. E. (2d), 510; First Nat. Bank in Greensburg v. M. & G. Conroy, Inc., D. C. W. D. Pa. 1952, 102 P. Supp., 494; Faron v. Penn Mutual Life Ins. Co., 3 Cir., 1949, 176 F. (2d), 290; Chicago Pneumatic Tool Co. v. Ziegler, 3 Cir., 1946, 151 F. (2d), 784; and is indicative of the Restatement’s declarations on the problem. Restatement, Conflict of Laws §§328, 332, 334, 339. Since the last act in the consummation of the alleged contracts, the acceptance, was done at the Aetna company’s location in Ohio, the laws of the state of Ohio must govern the rights of the parties.

At the time of the transactions in question the Uniform Sales Act was in force in Ohio and its provisions must govern in determining the intentions of the parties to the contracts and whether title to property that was the subject matter of the contracts passed to the purchaser. Secs. 8398 and 8399 GC, §§1315.19 and 1315.20 R. C.

The defendant in its contention that the agreements by Aetna to complete the trucks before delivery to the plaintiffs were part of the contracts to sell the trucks relies on Rules 2 and 4 of the Uniform Sales Act in support of its claim that title to the trucks did not pass to the plaintiffs on December 6, 1945, or at any other time. Sec. 8399 GC, §1315.20 R. C., Rules 2 and 4. Those rules state:

“Rule 2. When there is a contract to sell specific goods and the seller is bound to do something to the goods, for the purpose of putting them into a deliverable state, the property does not pass until such thing be done.
“Rule 4. (1) When there is a contract to sell unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made.”

After taking into consideration all the negotiations and discussions relevant to the sale and completion of the trucks in question, we are of the opinion (1) that the trucks were in a deliverable state when the contract for their sale was executed; (2) that there were two contracts entered into by each of the plaintiffs with Aetna — one for the sale of the trucks and one for their assembly or completion; and, (3) that, therefore, Rules 2 and 4 above do not apply to this case.

The advertisement for the sale of the trucks which appeared in various newspapers is the beginning point of the negotiations and its contents must be considered in determining the scope of any contract, or contracts eventually executed. The advertisement showed the conditions under which Aetna would be willing to sell the goods, to wit, “SALE OF TERMINATION INVENTORY * * * 22 Ross Fork Lift Trucks Model 19 HT * * * These trucks are complete ready for use with the following exceptions: * * * Sealed bids in duplicate for all or part of above trucks will be accepted by * * * Material will be sold FOB Plant location as is * * (Emphasis supplied.) Thus, the publication notifled those desiring to purchase that the trucks were not then completed or assembled and invited bids on the trucks in their partially completed state. Bids were not sought on completed trucks. Thus, the trucks in their partially completed state were the subject of all negotiations. If a contract was consummated, as we hold it was, the partially completed trucks were what was intended by the parties to be delivered. Therefore, for the purpose of these sales, the trucks were in a deliverable state even though they were only about 98% of the finished product that would have resulted had they continued on through the ordinary manufacturing stages to completion, Since the trucks were in a deliverable state and, hence, not unascertained or future goods, Rules 2 and 4 above are inapplicable.

Pursuant to the above advertisement, Mr. Smith began negotiations with Aetna, through Mr. Carroll, and subsequently made agreements with Aetna for the purchase of all 18 trucks at inventory cost price and executed purchase orders to that effect. This was enough. All discussions that Mr. Smith had with Aetna’s representatives concerned the price of the trucks and did not involve negotiations for the cost of completing them, at least until a purchase price for the trucks themselves was agreed upon. The purchase price agreed to was $3,264.04 per truck and purchase orders to that effect were issued by plaintiffs for the trucks. Aetna issued like processing orders. The Government had no further right to intervene. After this agreement on the cost of the trucks was reached, a subsequent agreement was made as to the amount it would cost plaintiffs to have the trucks completed by Aetna, it not to be in excess of $200 per truck. The plaintiffs issued separate purchase orders to have the work done and Aetna issued separate processing orders. The cost of completing the trucks was not recorded on plaintiffs’ orders nor on Aetna’s processing orders as the exact figure was not known. If it so desired the plaintiffs could have bought the parts from Aetna and completed the trucks themselves but they preferred to contract with Aetna to have them completed.

Inasmuch as Aetna invited bids for the trucks in their partially completed state — as is — and since separate orders were placed and accepted— one for the purchase of the trucks and one for their completion — the only conclusion possible is that the intent of the parties was for there to be two contracts, one for the sale of the trucks and one for their completion after such sale.

Rule 1 of the Uniform Sales Act provides that, unless a different intention appears, when there is an unconditional contract to sell specific goods, in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment, or the time of delivery, or both, be postponed. Sec. 8399 GC, §1315.20 R. C., Rule 1.

When the plaintiffs and Aetna entered into their contracts for the purchase of the trucks in question there were no conditions to delay the effectuation of the contract and no intentions were expressed as to when title to the trucks would pass. The goods were in a deliverable state and there can be no doubt that the subject matter of the contract was specific as there were only 18 trucks all to be allocated to the plaintiffs’ orders. By application of the above Rule 1 to the instant case it must be held that title passed the moment the minds of the parties met on the morning of December 6, 1945.

Added weight is given to this conclusion by the terms, “F. O. B. Plant location,” contained in the advertisement which carries with it a connotation that the goods would not have to be moved from the plant for title to pass. In effect, it states that the purchasers would be responsible for the goods from the moment the contract is executed and would be responsible for removing them from the plant. Designations relating to shipment appearing on the purchase and processing orders are only shipping instructions and were not part of the contract as orally entered into and therefore have no bearing on the passage of title as contended by the defendant. A similar situation arose in Sadler Machinery Co. v. Ohio Nat., Inc., 6 Cir., 202 F (2d), 887, 51 O. O. 323, where the parties orally agreed to the terms of a sale and the memorandum of the contract contained the notation “F. O. B. Cars Upper Sandusky, Ohio.” The court there held that the terms appearing in the memorandum of the contract had no bearing on the question of when title should pass and meant only that the seller was to load the machines for shipment without expense to the buyer.

It is held, therefore, that since Carroll had full authority to contract for Aetna and while acting for it entered into a valid contract of sale involving passage of title to the plaintiffs prior to the time the trucks were declared to the R. F. C. by the Army Quartermaster Corps, the trucks were not part of the termination inventory of Aetna at the time of the declaration. Subsequent acquisition of the trucks by the R. F. C. was a taking of the property of plaintiffs without due process of law and without just compensation.

The only problem remaining is that of just compensation.

Under the Fifth Amendment a property owner is entitled to receive just compensation for property appropriated by the sovereign. Olson v. United States, 1934, 292 U. S., 246, 54 S. Ct., 704, 78 L. Ed., 1236. Just compensation has been held to be the monetary equivalent of the property taken, and the determination of that amount which shall be such equivalent has been held to be a judicial function. Monongahela Navigation Co. v. United States, 1893, 148 U. S., 312, 325-328, 13 S. Ct., 622, 37 L. Ed., 463. The owner is entitled to be put in as good a position pecuniarily as it would have occupied if its property had not been taken. United States v. New River Collieries, 1923, 262 U. S., 341, 343, 43 S. Ct., 565, 67 L. Ed., 1014; Seaboard Airline Ry. Co. v. United States, 1922, 261 U. S., 299, 43 S. Ct., 354, 67 L. Ed., 664 and cases cited.

This court in Dore v. United States, 1951, 97 F. Supp., 239, at page 243, 119 Ct. Cl., 560, at page 581, presents a statement of the principles involved in determining the amount that constitutes just compensation wherein, it states as follows:

“In determining what is ‘just compensation,’ each case must be decided upon its individual facts; no formula, no rigid rules exist for determining what is ‘just compensation’ under all circumstances and in all cases. [Cf. United States v. Commodities Trading Corp., 339 U. S., 121, 123, 70 S. Ct., 547, 94 L. Ed., 707; Lord Manufacturing Co. v. United States, 84 F. Supp., 748, 114 Ct. Cl., 199; Monongahela Navigation Co. v. United States, 148 U. S., 312, 13 S. Ct., 622, 37 L. Ed., 463; Kimball Laundry Co. v. United States, 338 U. S., 1, 69 S. Ct., 1434, 93 L. Ed., 1765.] Courts are guided to their conclusions by certain broad principles, well known, often quoted, and often difficult of application in specific instances. * * * It is held, generally, that just compensation is the value of the property in a free open market [United States v. Miller, 317 U. S., 369, 63 S. Ct., 276, 87 L. Ed., 336], and that the value is determined as of the date of taking [Brooks-Scanlon Corp. v. United States, 265 U. S., 106, 44 S. Ct., 471, 68 L. Ed. 934], Gain to the taker is held immaterial, loss to the owner being considered a good measure of value. [United States v. Miller, supra.] * * * When there is a free market at time and place of taking, the prevailing price therein is just compensation. [United States v. New River Collieries Co., 262 U. S., 341, 43 S. Ct., 565, 67 L. Ed., 1014].
“When the market upon which a commodity is bought and sold is a controlled market, there exists a strong presumption that the controlled price, fixed pursuant to law, is fair and equitable and that such price is the proper measure of just compensation within the meaning of the Fifth Amendment. This is so because' the basic price control legislation enacted in 1942 [Emergency Price Control Act of 1942, 56 Stat. 23, 24, 50 U. S. C. A. Appendix, §901 et seq.] * * * empowered the Price Administrator to establish such maximum prices as would in his judgment be generally fair and equitable and would effect the purposes of the Act, as stated therein * * (Emphasis supplied.)

Plaintiffs contend that because at the time of the taking there was a controlled market, the measure of just compensation should be the OPA ceiling price on the date of the taking which was $5,200 per truck. The defendant contends that there was a free open market because bidders were offering below the cost price of the very trucks in question and the plaintiffs themselves had offered less than the OPA price they now seek to recover herein and also because sales had actually been made for less than the OPA ceiling.

It is conceded that there can be a market below the OPA ceiling, but simply because bidders were offering less than the maximum price permitted by the OPA would not in our opinion change the market from controlled to uncontrolled, nor would proof of sales at less than the maximum price. This proof might tend to indicate that the market value was not equal to the maximum price permitted and might go toward rebutting the OPA ceiling as the measure of just compensation, but the market would still be controlled since there is a price above which the goods could not be sold.

As the taking of plaintiffs’ property occurred during a period when a controlled market existed, there is a rebuttable presumption, indeed, a strong presumption, that the controlled OPA price is the proper measure of just compensation. Such price will stand unless the defendant has overcome the presumption as strengthened by the evidence. We hold on all the evidence that the defendant has not done so in this case.

The only evidence offered by defendant to rebut the above presumption was evidence of four contemporaneous sales to Koppers Company of four trucks at $3,500 per truck, slightly in excess of cost, and of bids by the plaintiffs and others at less than cost and the OPA ceiling. Defendant feels the sales to the Koppers Company establish the price at which the trucks could have been sold on the market at that time and, therefore, is proof of the prevailing market value. Those sales cannot be held to be indicative of the then current market value as they were not ordinary market transactions. They resulted from the efforts of a war contractor to get rid of termination inventory as rapidly as possible so there could be final settlement with the Government on the terminated contract and a subsequent reconversion to peacetime production. In other words, the sales were for less than could have been obtained on the open market by a company with the proper sales facilities and business contacts putting forth their best effort to get the best possible price for their product.

The plaintiffs undoubtedly had such facilities and contacts as they were primarily sales organizations. It is reasonable to conclude that; Aetna did not have good sales outlets for the trucks because they had never manufactured them before their contract with the Army and had never sold them to civilian purchasers. The sales by Aetna to Koppers under these circumstances would not establish the prevailing market value, nor do we think that the bids at prices less than cost are evidence of market value. The record shows that none of these bids were accepted and no trucks were sold at less than cost. Market value is established by actual sales, not by unaccepted offers.

A more nearly accurate indication of the market value at that time would be the price at which the Government contracted to purchase the trucks from Aetna, this being $4,542 per truck. We cannot reason, as the defendant insists we should, that market value was $3,500, which was just about the cost of manufacturing, when the Government contracted to buy for $4,542. If this was so, the Government was paying over $1,000 more per truck than they were worth on the market. It seems obvious that the Government was not paying more than the trucks were worth and this is borne out by the fact that the OPA set a ceiling price of $5,200 per truck on them. That ceiling, however, sets the maximum price at which the items could be sold at retail or otherwise. It does not follow, though, that the price of $4,542 per truck paid by the Army was the market value of the trucks in view of the fact that this was the price which the Government negotiated for the purchase of a large number of trucks. We think that the sales to the Army must be considered to have been on the basis of wholesale since 450 trucks were involved in that contract. Individual sales on the market would necessarily be for more per unit than the per unit cost to the purchaser of 450 units.

Plaintiff, L. B. Smith, Inc., two months after the date of the taking, contracted to purchase two trucks identical to the ones in question from the Ross Carrier Company. They had to wait several months for delivery and were required to pay the $5,200 per truck ceiling price for them. Though this sale did not take place at the time of the taking, it certainly indicates that the market for these trucks did not decrease. At any rate, the purchase is sufficiently contemporaneous with the date of the taking to strengthen the already “strong presumption” in favor of the OPA ceiling being the proper measure of just compensation.

Just compensation must take into consideration the purpose for which the property is to be used by the owner. The plaintiffs were, among other things, in the business of buying from war contractors’ termination inventory and reselling at a profit. They contracted to buy the trucks in question with the intention of reselling them at a profit and did so only after a survey of market conditions and a determination that the prevailing price was in line with the OPA ceiling. Just compensation must, therefore, allow for the profit that could be had if the goods were sold at prevailing market prices.

In United States v. New River Collieries, supra, the court held that the cost, profit or loss of the owner does not tend to prove market price or value at the time of the taking and permitted recovery by the plaintiff of the cost plus that profit which could have been realized, based on prevailing market prices had the Government not taken the plaintiff’s property. In the case at hand, had the Government not taken the plaintiffs’ property, it is highly probable they could have sold it for the prevailing OPA ceiling prices. That, then, would be the prevailing market price and the proper measure of just compensation.

Because the defendant did not offer sufficient evidence to rebut the presumption in favor of the OPA ceiling price of $5,200 per truck and because we think the record established that the plaintiffs could have sold the trucks for that price had an effort been expended in that regard, Alpirn v. United States, 1953, 113 F. Supp., 681, 126 Ct. Cl., 142, and for the reasons outlined above, we must conclude that the OPA ceiling price of $5,200 per truck is the proper measure of just compensation and the plaintiffs are entitled to that amount, as adjusted by a deduction for the contract cost price and completion costs of $50 per truck, plus interest at the rate of 4% per annum from the date of the taking, which date is the date of the declaration of the trucks to the R. F. C., December 11, 1945. Agreements between R. F. C. representatives and Lt. Melcher on December 6, 1945, did not constitute a declaration as Lt. Melcher on his own had no authority to declare the property surplus. This authority was vested in his superiors. Action by the superiors was not taken until December 11 when they issued a written declaration of surplus which purportedly transferred the trucks in question to the Reconstruction Finance Corporation.

Completion costs are determined to be $50 despite the fact that the plaintiffs’ contracts with Aetna provided that the cost was not to be in excess of $200, because Aetna actually completed the trucks for $50 per truck for R. F. C.

Accordingly, judgment will be entered for the plaintiff L. B. Smith, Inc. in the amount of $18,859.60 plus interest at the rate of 4% per annum from December 11, 1945, and for The Wolf Company for $15,-087.68 plus interest at the rate of 4% per annum from December 11, 1945.

It is so ordered.

LÁRAMORE and MADDEN, Judges, concur.

DISSENTING OPINION

By WHITAKER, J.

I cannot agree on the amount allowed as just compensation, in view of the inability of the contractor to sell these trucks to anyone for more than the inventory cost, although much effort was put forth to do so.

Of the 100 trucks in the inventory all but 22 were taken by various Government agencies; but the majority opinion states, “Efforts by Aetna after termination [which was on August 14, 1945] to dispose of the remaining 22 trucks were unsuccessful,” and so it was decided to publicly advertise them for sale in selected newspapers. This was done on November 16 and 19, but no bids for as much as the cost price of $3,264.04 were received.

Later, however, 4 were sold to the Koppers Company for $3,500 each. This left 18. Plaintiff made several offers for these at less than cost, but, so far as the record shows, no other offers were received until the offer of the Reconstruction Finance Corporation on December 6.

The OPA price was a ceiling price, not a floor price. It set the top limit for what an article could be sold, but there was no assurance that this price could be obtained. In war time, prices were high, but when the war was over, many prices dropped sharply. These trucks must have been the sort of materials that were in great demand during the war, but for which there was not a widespread peacetime use; otherwise better bids for these trucks would have been received.

The Government paid $4,542 each for 78 of these trucks, but was not willing to pay this price for the 22, but finally agreed to pay the invoice price of $3,264.04 for them. Should we now require it to pay more? Plaintiffs were also willing to pay this price, thinking they could sell them at a profit. It is reasonable to suppose they could have, in view of the Government’s purchase of the 78 at $4,542. They should not be deprived of this profit.

A reasonable profit, it would seem, would be from 25 percent to 33 1/3 percent. Twenty-five percent would amount to $816; 33 1/3 percent, to $1,088. I think just compensation to the plaintiffs would be the average of the two, or $952 per truck. From this is to be deducted the cost of putting the trucks in condition, of $50 per truck, leaving a balance of $902. On this, of course, plaintiffs are entitled to interest for delay in payment, which should be at four percent per annum.

JONES, Chief Judge, joins in the foregoing dissent.

      . The term “contractor inventory” as distinguished from termination inventory is a much broader classification though it includes termination inventory. JTR §411.3,

      . The Wolf Company’s written purchase order received by Aetna subsequent to the telephone conversation during which the contract was made provided “Shipping Instructions later.” L. B. Smith’s written order provided for shipment via the Pennsylvania Railroad. Each of these statements was inserted on the respective processing orders by Aetna. Aetna also inserting thereon “F. O. B. Cars-Colleet.”

      . This price was slightly more than cost which was $3,264.04 per truck.


author: By MERRICK, J.

text:
    FINEMAN, Plaintiff, v. CENTRAL NATIONAL BANK OF CLEVELAND, Executor et, Defendants.
    Probate Court, Cuyahoga County.
    No. 574741.
    Decided October 14, 1959.
    Ellis V. Rippner, Lester J. Farber, Cleveland, for plaintiff.
    Charles Cohen, for defendants.
   OPINION

By MERRICK, J.

This is an action for declaratory judgment, asking construction of certain language contained in the will of the testator and the distribution of the fund involved.

The will contains the following language:

* * * “Termination. As such time as my son, Roland H. Fineman, shall be divorced from his present wife, Ray Fineman, or at such time as his present wife, Ray Fineman, shall be deceased, this trust shall terminate and the Trustee shall distribute the entire then existing trust estate, including any undistributed income, as follows: ■
“Five Thousand Dollars ($5000) thereof to my niece, Ruth Fineman, if she is then living;
“The balance thereof, or said existing trust estate, if said Ruth Fineman is not then living, to my said son, Roland H. Fineman.”

It has been stipulated that there was no divorce action pending between the testator’s son and his wife at the time of the making of this will, or at any time thereafter. The estate is substantial and the amount which might pass into the trust might exceed one hundred thousand dollars.

Any effort to interpret or construe the language of this will would necessarily lead to the conclusion that a divorce of the son from his wife would cause a vesting of a large sum of money in and for the taking by the son.

It has long been the established law in the State of Ohio, that a condition in a will by which an inducement is offered to a married person to obtain a divorce, or to live separate and apart from the other spouse, is contrary to public policy, and held to be invalid. Page on Wills, Lifetime Edition, Volume 3, page 812.

The leading case in Ohio on this question is Moores v. Gwynne, 15 O. C. C. (N. S.) 31. This is from the then Circuit Court of Jefferson County and was decided in the year 1911 and the doctrine laid down therein remains unreversed to this date. It has been followed and cited on numerous occasions. A careful reading of this case discloses a situation identical to the one in the instant case. It provided for the termination of a trust and the payment over of the corpus upon the legal separation or divorce of the cestui que trust. The court held the provision in the will to be void.

Whether such provision in a will is void is to be determined by the circumstances existing at the time of its execution. The primary reason such a clause is void is that it is against public policy, because it places a reward, benefit or price upon divorce or domestic separation. Under some circumstances the surrounding facts might very well warrant a testator in placing such a contingency in his will. By carefully wording the language, it could be made apparent that the testator was making some provision or establishing some safeguard in the bequest or devise in the event of divorce. Certainly a man could provide that a certain allowance should be increased or a payment accelerated in the event that a daughter should be divorced and lose some means of support; or in the event a pending divorce case resulted in a final disposition that might be a handicap to the future support or well being of the devisee. The test seems to be whether the provision in the will provides a premium or reward in the event of divorce. If it appears from the whole will that it was the purpose of the testator to provide some support or maintenance for one who might suffer economically from the divorce, then no divorce has been encouraged and the clause would be valid. 40 CYC 1703.

A case in point is found in the citation of Pickering v. Cleveland Trust Co., etc., 3 Abs 243. This is in the local Court of Appeals district and must be considered as precedent by this Court. The first syllabus reads as follows:

“When a legacy is in restraint of marriage, or is an inducement to procure legal separation, it is void as against public policy.”

In the aforementioned case, the court distinguishes between clauses rewarding separation and divorce and those affording protection and sustenance in the event of such an eventuality.

The plain language of the will in the instant case places a premium upon the marital separation. There being no language which could in any way change or modify this interpretation, the judgment of this Court is that the clause in question is void as against public policy.

Resolving these conclusions, it is the finding of this Court that the provision for termination upon divorce is void. Therefore the income and principal payments shall be made as otherwise provided in the testamentary trust and the remainder vests in Roland H. Fineman, subject to the life interest of Lillian Fineman.

Counsel for the Executor may prepare a journal entry according to this opinion.


author: Per CURIAM:

text:
    BAILEY, Relator, v. CUYAHOGA COUNTY BOARD OF ELECTIONS, Respondent.
    Ohio Appeals, Eighth District, Cuyahoga County. '

    No. 25054.
    Decided September 23, 1959.
    R. F. Belovich, for relator.
    John T. Corrigan, Pros. Atty., for respondents.
   OPINION

Per CURIAM:

The relator, Waldo Bailey, instituted this proceeding in this court against respondent, Board of Elections of Cuyahoga County. In his petition he alleges that he has been and is now, and at all times mentioned herein, was a duly qualified elector in the municipality of North Royalton, County of Cuyahoga and State of Ohio; that he is eligible to vote and file his petition as a candidate for the office of Mayor of the City of North Royalton, Ohio.

He alleges further that on August 19, 1959, he did file his nominating petitions with the Board of Elections, as evidenced by the receipt of thé Board of Elections, No. D6799, dated August 19, 1959. He also alleges that he filed a total of one hundred and forty-nine (149) signers on his nominating petitions, whereas only seventy-three (73) were required to nominate him for the office of Mayor.

He further alleges that on September 12, 1959, he received a form letter from the Board of Elections advising him that his petitions for Mayor were being declared void because:

“you have failed to sign the acceptance of the nomination.”

He further alleges that a hearing was had before the Board of Elections on September 18, 1959, at which time he was advised that his nominating petitions were void because he did not sign the acceptance on the front of said petition indicating that he had accepted the nomination.

He further alleges that the action of the defendant, The Board of Elections, in the refusal to allow the petitions to be certified is the failure of the Board of Elections to perform an official duty, and the action of the said defendant, the Board of Elections, in so refusing, is arbitrary, illegal and a gross abuse of discretion, without authority of law, and a clear disregard of the applicable provisions of the Law of Ohio pertaining to a legal acceptance.

The relator’s prayer is that a peremptory writ of mandamus issue, ordering the Board of Elections of Cuyahoga County, to certify the nominating petitions of the relator as being satisfactory and to notify the printer to have his name placed on the ballot for the coming election as a candidate for the office of Mayor in the City of North Royalton, County of Cuyahoga, State of Ohio, on November 3, 1959, for the term beginning January 1, 1960.

The facts in this case are not in dispute, having been stipulated by counsel in. open court. The evidence consists .of six nominating petitions filed by the relator, the receipt given to the relator by a clerk of the Board of Elections, and the letter sent to the relator by the respondent. The facts are that these nominating petitions were filed on August 19, 1959, by the relator in person, at which time he paid a filing fee of $30.00 and got a written receipt showing the payment thereof. The facts also are that the petitions were cheeked on the following day. August 20, and were found to contain more than the required number of signatures thereon, but for some unexplained reason, the respondent failed to notify relator of the claimed deficiency with respect to his signature of acceptance until after the filing date had expired, said date being some two weeks after discovery of such claimed deficiency. It is also stipulated by the parties that when relator appeared on August 19, delivered the petitions and paid his filing fee, he asked the clerk who accepted the petitions and the filing fee if there was something further that he should sign and was told “no” by the clerk at the desk and was also told that nothing further was required of him. The facts further are that the petitioner had attached his signature to the petitions twelve times, in other words, two on each petition, signifying his desire and intention to become a candidate for the office of Mayor, which was told the respondent at the hearing before them. Hence, there could be no doubt as to the acceptance of his nomination.

The evidence of the original signatures on the petitions twelve times announcing his candidacy, together with the fact that in answer to a specific question, namely, that he was told there was nothing further for him to sign, shows 1) that he was misled by the Board of Elections and 2) that there was substantial compliance by him of his acceptance of the nomination, and the mere adding of his signature at the exact place designated for such acceptance under these circumstances would amount to a formality without adding anything intrinsic to the matter of his acceptance of the candidacy for Mayor of North Royalton.

In view of the clear facts surrounding this transaction between Waldo Bailey and the Board of Elections, it is our conclusion that the relator substantially complied with all requirements of the law when filing his petition with the respondent and that the respondent, because of its action in the matter, is estopped from claiming a defect in the petition as filed.

Consequently, a peremptory writ of mandamus as prayed for is allowed. Order see journal.

HURD, PJ, KOVACHY, J, concur.

SKEEL, J (not participating).