author: By MURPHY, District Judge.

text:
    WARNER v. REPUBLIC STEEL CORP.
    United States District Court S. D. New York.
    Decided March 13, 1952.

      Bondy & Schloss and Kleeberg, Greenwald & Lifflander. New York City (Norman P. S. Schloss, I. Russell Stein and Jacob Greenwald, New York City, of counsel), for plaintiff.
    Pruitt, Desvernine & Coursen, New York City (H. Preston Coursen, New York City, of counsel), for defendant.
   OPINION

By MURPHY, District Judge.

This is a suit for an accounting of some three million dollars in assets which were transferred in Ohio in 1925 by Jonathan Warner to the Trumbull Steel Company, a corporation of which Warner was founder and president. The plaintiff as administratrix of the estate of Warner, her deceased husband, commenced this action in March, 1945. Defendant is a successor by purchase to Trumbull, which was dissolved in 1928.

Jurisdiction is based upon diversity of citizenship; plaintiff is a resident of Pennsylvania; defendant, Republic Steel Corporation, is incorporated in New Jersey and since April 11, 1930, has been authorized to do business and has maintained an office in New York. Both plaintiff and Warner, it was stipulated were never residents of New York.

Jonathan Warner was president and a director of Trumbull Steel Company which was organized in Ohio in 1912 and dissolved in 1928. He was an experienced and shrewd businessman who had dominated the affairs of Trumbull until within a'few weeks of its acceptance of his resignation as president and director on September 1, 1925.

Warner was 68 years of age when he died in Philadelphia, Pennsylvania, on May 5, 1934. Upon his death a Charles LeMaistre was appointed his administrator. Later in 1940 Clara Warner, the plaintiff, became administratrix de bonis non. In 1942, ancillary letters of administration were issued to her by the Surrogate of the County of New York, New York. She brings this action under these ancillary letters.

The crucial facts in this action occurred in Ohio in August, 1925, during the course of transactions between Warner and John T. Harrington. The background leading to these transactions is important.

Prom the organization of Trumbull and until its dissolution, John T. Harrington and the law firm of which he was a member, were his general counsel. Harrington was also a personal acquaintance of Warner.

On July 25, 1925, Trumbull entered into an agreement with the National City Company of New York relating to the issuance by Trumbull of $17,500,000 in debentures which the National City Company underwrote and agreed to distribute on stipulated terms. In connection with this underwriting Warner furnished the National City Company with earnings statements and balance sheets of Trumbull up to May 31, 1925, prepared by the accounting firm of Ernst & Ernst. These debentures were offered to the public by the National City Company by means of a circular which included a statement of earnings reflecting the financial affairs of Trumbull. On the day these debentures were offered to the public in early August, 1925. the vice-president of the National City Company who had charge of the underwriting received telephone calls from two bankers, one in New York and the other in Pittsburg. As a result of these, the vice-president immediately communicated with Warner and repeated what these bankers bad reported, viz., that they had examined the circular and noted that the bank loans of Trumbull were stated to be in excess of $16,000,000 whereas they had recently received statements of Trumbull from Warner which showed that the bank loans were only $10,000,000. . The vice-president then sent his assistant to Warner at the Trumbull office in Warren, Ohio, and Warner offered his explanation of the discrepancy.

Despite the acceptance of these explanations, the National City Company retained the accounting firm of Arthur Anderson and Company to investigate Trumbull’s affairs. After its investigation the Anderson Company orally reported to National City Company that the balance sheet of Trumbull, which had been submitted by Warner in connection with the debenture issue, had over-stated Trumbull’s inventory by approximately $3,000,000 and that the Trumbull books showed that expenses for repairs and maintenance had been improperly capitalized. The effect of the latter was an overstatement of earnings by approximately $5,000,000. Thereafter the agreement between the National City Company and Trumbull for the underwriting- of the $17,500,000 debenture issue was rescinded and National City was reimbursed by Trumbull for expenses incurred in connection therewith. This cancellation took the form of a letter from Trumbull to National City of August 31, 1925.

An appraisal of the physical assets of Trumbull was made by the American Appraisal Company by spot-check on August 14 and 15, 1925. On September 23, 1925, the appraisers reported that Trumbull’s inventory had been overstated by some $3,000,000.

The crux of the case and the most controverted facts arise from transactions between Warner and Harrington during the latter part of August, 1925. These transactions have been testified to directly only by the plaintiff. Warner died in 1934 and Harrington in 1932.

The plaintiff worked for Warner as a stenographer commencing in 1911 in Warren, Ohio. Subsequently she became his secretary and did most of her work at his home. She has retained,'"and exhibited during the course of the trial, all of her stenographic notebooks from 1911 to and including 1925. She had kept a personal diary for Warner. In August 1925, she had been his secretary; a year later she became his wife.

Leaving aside the question of the competency of the plaintiff (concededly the only person “interested” in the estate) as a witness, cf. N. Y. Civil Practice Act, § 347, Mrs. Warner testified that on August 13, 1925, Warner told her to lay out some securities for Harrington. This she did by taking them from the safe, making a list and handling them to Warner. On the same day, Warner wrote to his daughter, Elizabeth Clarke, asking for securities which he had once given to her, stating, “I may need the Trumbull Steel especially,” and promising to see her, “as soon as I can get this mess straightened out.”

Plaintiff further testified that on some day between August 17 and 20, 1925, Warner told her to bring him a book in which he kept an inventory of all stock owned by him. As she brought it to him, she overheard Harrington, while pointing his finger at Warner, say, “John, if you ever dare mention that paper, I personally will see that you go to jail.” Harrington stopped when the plaintiff entered the room, her testimony continued, then said, “You don’t understand, seem to understand, that you are in a serious position at Trumbull. I am your friend and I thin£ I am about the only one that can help you John, you may even be facing jail, and I don’t know why I have to keep repeating these things but you certainly knew it was illegal to give bonus stock. Well, all that stock will have to be returned or somebody is going to have to pay for it; and that running account of yours is absolutely illegal. We are going to have the accountant go over it, but it certainly looks as if you are going to owe the company some money, maybe a large amount of money; and you sold that Sheet & Tube stock and paid your own personal loan with it. That belonged to the Trumbull Steel Company.” According to the plaintiff, Harrington continued, “You also gave a false statement to the National City Bank.” When Warner replied that he had used Ernst & Ernst’s statement, Harrington said, according to the plaintiff, “Well, the American Appraisal over the past week have made an actual physical inventory and that statement is all wrong; and you knew that it is a very serious matter to make false representations to banks. You could go to jail for that. Why, John, right at this minute there is talk up at the Trumbull Steel Company of indicting you, and with all this uproar, it isn’t even safe for you to leave this house. If you are sensible, you will get some extra police protection.” Warner then gave Harrington the stock inventory book and Harrington “priced” various stocks in an attempt to estimate the total. Warner also handed over to Harrington four life insurance policies.

Plaintiff’s testimony is that on August 22nd Warner gave Harrington some stock certificates which Warner had obtained from his daughter, Mrs. Clarke, and which Harrington appraised. The plaintiff also testified that she was shocked when Harrington demanded the deeds to Warner’s city and farm properties. She told Warner, according to her testimony, that he did not know whether he owed Trumbull anything or not. But Warner said that he trusted Harrington, and Harrington advised her: “I have told Warner to give over practically everything he owns to Trumbull Steel until they know where he stands on these bonus matters. We don’t know what he owes and we won’t know until they go over the books and find out just what condition everything is in. I assure you that I am going to see he is not charged for anything he should not be charged for.” Harrington also promised, according to the plaintiff: “If the auditors prove there is a debt, we will have to sell enough of these securities to pay off the debt. I assure you that ever penny will be accounted for. Now if they find Mr. Warner does not owe anything, there won’t be any harm done. Trumbull Steel Company is going to turn over .stuff over [sic] to him. You don’t have to worry about this house. Nothing is going to happen to the house.” Harrington also advised payment for remodeling work being done on the premises. “Warner wants the work finished, he will be back before long.” With respect to the expenses of running the farm, Harrington advised payment of bills for a couple of months, “if you want to, but just carry on everything as you have been doing.” Plaintiff then offered proof of checks for remodeling and other work on the farm, one of which was dated August 20th and cleared the bank on August 27th. This check, plaintiff says, was handed to the remodeler on August 24th. Deeds and bills of sale for Warner’s properties were also dated August 24th and describe the grantee as “Harrington, trustee.” These will be more fully described below.

On August 23rd, plaintiff testified that she confronted Harrington in the presence of Warner and his housekeeper, Miss Palmer, with a rumor that Harrington would leave Warner “naked as the day he was born” and that she would be out of a job. Harrington, she testified, said that if Warner did not trust him and wanted it all written down, Warner had better get someone else to look after the matter. Warner, she testified, said that he did not want to offend Harrington, and Harrington reiterated his promise, “if there isn’t anything to all this and the auditors do not prove a debt, everything is going to be returned to Warner. Mr. Warner will get everything else back.”

On August 24th, plaintiff testified she turned over deeds to Warner’s properties to Harrington’s law office, engaged extra police protection for Warner and received from Harrington a list of securities which had been turned over to him. On August 25th, plaintiff made a complete list of all securities turned over. On August 26th Warner left Warren, Ohio, never to return.

It is upon these conversations that plaintiff principally relies for her claim against defendant. In passing, it should be noted that plaintiff made no notes or memoranda concerning these conversations although she made and retained notes and diary for the entire period of her employment with Warner.

What happened to the transferred assets and the participants after these conversations, for purposes of this decision, should be briefly described. As to the assets, as already noted, the American Appraisal Company made a spot check on August 14th and 15th indicating a $3,000,000 shortage in Trumbull. The auditors from Ernst & Ernst estimated in September that Warner owed Trumbull more than $3,000,000. On September 23rd, the Trumbull Board of Directors issued a statement that Warner turned over 59,012 shares of common stock of Trumbull and personal holdings worth $1,533,618.82 in “payment by Mr. Warner of his personal indebtedness * * * estimated by the Auditors at $3,040,000.00.” This statement was published in a Youngstown newspaper and called to Warner’s attention the following month by his son-in-law, Edward Clarke. The statement indicated that the holdings would be carried in the name of a trustee to faciliate disposal. The ledgers of Trumbull carried them as “the Warner Trust Fund.” Most of these holdings were liquidated in 1925 and 1926 and the proceeds turned over to Trumbull in cash. In 1928, Trumbull was dissolved upon purchase of its assets by Republic Iron & Steel Company. In 1930, the latter was succeeded by the present defendant. On neither of these occasions is there evidence of any reference to the Warner-Harrington transactions. The defendant continued liquidation of the assets remaining from these transactions — collecting the surrender value of four insurance policies in 1932, selling a painting in 1935, and receiving sundry liquidating dividends in 1936, 1939 and 1948. It still has on hand some worthless shares.

Harrington executed a declaration of trust dated August 24, 1925, in connection with receipt of deeds from Warner describing himself as trustee for Trumbull solely. In December, 1925, he became president of Trumbull. In late 1925 or early 1926, he called the plaintiff several times, according to her testimony, offering her a job and expressing doubt whether Warner would ever return because Warner owed Trumbull too much. In disposing of Warner’s real property, Harrington described himself in August 1926 as trustee for Trumbull and is similarly referred to in a quitclaim deed to correct an erroneous description executed by Warner himself in France on November 18, 1926. But whoever the beneficiary, Harrington was not an entirely faithful trustee. With Stevens, a codefendant in this action who has settled plaintiff’s claim against him, Harrington fraudulently appropriated certain stock for $20,000 which was worth many time that amount. Harrington died in 1932.

Warner left Ohio on August 26, 1925 for his daughter’s home in Hyannisport, Massachusetts. He kept in touch with the plaintiff in Ohio by mail. In October he fulfilled his pledge to a local community chest and made a contribution to a local church in Ohio. He indicated to plaintiff that he “will be glad to get back.” The announcement of Trumbull of “the payment by Mr. Warner of his personal indebtedness as is disclosed by the recent audit” as it appeared in the Youngstown Vindicator of September 24th, was exhibited to Warner by his son-in-law, Clarke, in the latter part of October. Clarke testified that Warner remarked that they must have added on quite a bit of interest to create such a large indebtedness. Warner spent some time in New York with his daughter, visited Europe from February to May, 1926 with her family and returned to Europe again on October 9th. A month later he married the plaintiff in France and on November 18th executed there the corrective quitclaim deed already mentioned which described Harrington as trustee for Trumbull. While in Europe Warner, in order to avoid disclosing his whereabouts, received his mail by a circuitous route and on November 24, 1930 a letter from his daugter advised him not to sue because he was fortunate to be where he was. In May, 1931, he returned to the United States, took up residence in comparative poverty in Philadelphia and died there on May 5, 1934. Warner never returned to Ohio since his departure on August 26, 1925, and never asserted a claim against anyone arising out of his transactions with Harrington.

The plaintiff, sole survivor of the triumvirate in the transactions of August, 1925, moved out of Warner’s house on September 17, 1925 and took furniture and records to his son-in-law’s home in Ohio. She continued her correspondence with Warner. A week after Warner’s departure for Europe on October 9, 1926, she followed, and married him in France the next month. Six weeks after his death in 1934, she returned to- Ohio to visit her sister at Girard. Her sister, she reports advised her not to go to Youngstown because she might get shot. Three times in 1937 plaintiff wrote without reply to defendant concerning Warner’s rights arising out of his transactions with Harrington: On August 14th and 20th to vice-president Gillies and on November 8th to chairman-of-the-board Girdler. In 1940, she consulted a lawyer in Cleveland, Ohio, about a possible refund of income taxes paid by Warner on the bonus stock of Trumbull which was turned over to Harrington on the theory that if Warner had wrongfully received the stock then he was not liable for taxes on it. In September, 1941, she commenced ■ an action against the Cleveland Trust Company to recover certain bonds previously delivered to the company by Warner. The trust company offered in evidence a direction to it signed by Warner and dated Hyannisport, September 18, 1925, authorizing delivery to Harrington. This action was discontinued by the plaintiff. On April 6, 1942, plaintiff commenced an action in Ohio against the present defendant, Republic Steel, alleging a trust, which action was dismissed for want of prosecution in 1944. Plaintiff then came to New York where she commenced the present action in March, 1945, against defendant Republic Steel and Stevens. Her claim against Stevens has been settled.

This action arising from transactions in August, 1925, was commenced nineteen years and seven months later. The principal question suggests itself: whether or not this action is barred by the passage of time. Since the applicable statute of limitations may depend upon the legal basis of plaintiff’s claim, i. e. upon its legal characterization, the transaction should be examined in the light of all its conceivable characterizations.

The troublesome question of choice of the governing statute of limitations in a suit in the Federal courts where jurisdiction is based upon diversity of citizenship has been authoritatively resolved. The common law conflict-of-laws rule regarded the ordinary statute of limitations as procedural and consequently required application of the forum’s own statute to the exclusion of any other. Restatement, Conflict of Laws § § 603, 604 (1934). The continental courts on the other hand, have generally viewed statutes of limitation as substantive. The latter rule has been considered more harmonious with factors significant for choice of governing law in a conflicts situation, Le Roy v. Crowninshield, C. C., D. Mass. 1820, 15 Fed. Cas. No. 8,269, page 362, 2 Mason, 151. per Story, J., and so, as Justice Holmes reminds us, courts have been willing to depart from the common law view of the statute as procedural and affecting the remedy only and not the right “in cases where it has been possible to escape from that qualification by a reasonable distinction.” Davis v. Mills, 194 U. S. 451, 454, 24 S. Ct. 692, 693, 48 L. Ed. 1067. See note, Cheatham, Goodrich, Griswold & Reese, Cases and Materials on Conflict of Laws (1951) pp. 377-378. In the Federal courts the problem of choice of an applicable statute of limitations had been complicated by the added dilemma posed by possible differences between Federal and State common law principles of conflict-of-laws. After almost a century under a.different rule, it is now settled that a Federal court having jurisdiction of a suit upon the basis of diversity of citizenship, must follow the rules of the courts of the State in which it sits on common law as well as on statutory matters. Erie Ry. Co. v. Tompkins, 304 U. S. 64, 58 S. Ct. 817, 82 L. Ed. 1188. The Erie principle controls also actions in equity, Ruhlin v. New York Life Ins. Co., 304 U. S. 202, 58 S. Ct. 860, 82 L. Ed. 1290. It also requires application of the confiictof-laws rule of the State in which the Federal court sits, Klaxon Co. v. Stentor Electric Mfg. Co., 313 U. S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477, as well as the proper statute of limitations of such State. Guaranty Trust Co. v. York, 326 U. S. 99, 65 S. Ct. 1464, 89 L. Ed. 2079.

At one time the New York rule on periods of limitations in cases before its courts with contracts in other States was a judge-made one which required application of the internal law of the forum. Ruggles v. Keeler, 1808, 3 Johns. 263, 3 Am. Dec. 482 per Chancellor Kent; Miller v. Brenham, 1877, 68 N. Y. 83. The legislature in effect overruled the latter case by adoption of a statute in the same year which “borrowed” the internal period of limitation of the state of which defendant was a resident at the time the action accrued. N. Y. Code of Civil Procedure, § 390, effective May 1, 1877. Through a series of amendments, Id. § 390a, added by N. Y. Laws, 1902, c. 193; Civil Practice Act, § 13; N. Y. Laws 1943, c. 516, this statutory conflict-of-laws principle has assumed the form in which it applies to the present case. As in most other states [see N. Y. Law Revision Commission, “Study relating to Application of Foreign Periods of Limitations (1943) Appendix A, pp. 65-85], the New York statute is a rule of alternate reference: for a cause of action which arises outside the state either the statute of limitations of the forum is applied or that of the state where the cause of action arose whenever the latter period is shorter than the corresponding New York period.

Since defendant Republic Steel Corporation has been authorized to do business and has maintained an office in New York sine 1930, it is considered a New York resident for purposes of this statute. McConnell v. Carribean Petroleum Co., 278 N. Y. 189, 15 N. E. 2d 573. Since neither the plaintiff, Clara

Warner, nor the deceased, Jonathan Warner, were residents of New York at any time when the cause of action under consideration may have arisen as it is alleged to have done in the State of Ohio, so as to come within the exception mentioned in § 13, N. Y. C. P. A. supra, note 1, governing law in this case is supplied by either the New York period of limitation or that of Ohio, whichever is shorter.

The statutory periods of limitation are similar in New York and Ohio so far as they apply in this case. Actions for conversion must be commenced within three years, Civil Practice Act, § 49 (7), ones based upon contract obligations and fraud must be commenced within six years, Id. § 48 (1), (5) and other actions, including ones based upon trusts within ten years in New York, Id. § 53; Rhinelander v. Farmers’ Loan & Trust Co., 172 N. Y. 519, 65 N. E. 499. In Ohio the periods are the same except that for actions based upon fraud the period is four instead of six years, §§11224, subds. 3, 4,11227 GC. In determining whether or not the barrier of time affects the right to relief in this action, plaintiff’s cause must surmount both the Ohio and New York hurdles.

Is there a conceivable characterization of these facts that will enable the plaintiff to surmount these periods of limitation? Plaintiff urges that an express trust was created. Several alternative arrangements of the parties in the tripartite trust relationship are intimated: Harrington as trustee with Warner as settlor and beneficiary; or Harrington as trustee with Warner as settlor and Trumbull as beneficiary; or Harrington as trustee with Warner as settlor and both Warner and Trumbull as beneficiaries; or finally Trumbull as trustee with Harrington as its designee or agent and Warner as both settlor and beneficiary. This last collocation is the one suggested by plaintiff as most favorable to her cause since clearly Republic could never be trustee of an express trust for Warner unless Trumbull had been such a trustee at some time to which Republic became successor on one theory or another. So it may be assumed, without deciding or considering that such is by any means the case, that Trumbull was trustee of an express trust with Warner its creator and beneficiary, and Harrington a designee or agent of Trumbull. The applicable period of limitation under this view of the transactions is ten years. N. Y. Civil Practice Act, § 53, supra, note 2; §11227 GC, supra, note 3. It may be that once a trustee has accepted the trust, he cannot thereafter disclaim. Restatement of the Law of Trusts, § 102(2); Brennan v. Wilson, 71 N. Y. 502. But under an assumption that an express trust exists, “a positive and open renunciation and repudiation by [the alleged trustee] of the trust * * * matured the cause of action here and set the statute of limitations running against it.” Woolley v. Stewart, 222 N. Y. 347, 354, 118 N. E. 847, 849, reversing Id., 169 App. Div. 678, 685, 155 N. Y. S. 169, 174. See also Lammer v. Stoddard, 103 N. Y. 672, 9 N. E. 328; Spallholz v. Sheldon, 216 N. Y. 205, 110 N. E. 431; Bankers Trust Co. v. Dennis, 256 App. Div. 495, 10 N. Y. S. 2d 710, affirmed 282 N. Y. 635, 25 N. E. 2d 981. It may also be the case that repudiation necessary to make the period of limitation begin to run cannot be established by a showing of mere lapse of time, cf. Matter of Meyer’s Estate, 98 App. Div. 7, 90 N. Y. S. 185, affirmed 181 N. Y. 553, 74 N. E. 1120, but that an open assumption of ownership by the trustee or denial of rights of the beneficiary made known to the latter is necessary. Cf. Reitz v. Reitz, 80 N. Y. 538; Hartford Life Insurance Co. v. Douds, 103 Oh St 398, 136 N. E. 274. In the instant case, there is sufficient evidence to indicate that the statute of limitations began to run more than ten years before the commencement of this action.

The transactions giving rise to the alleged secret oral trust took place between Harrington and Warner some time in August, 1925, according to the plaintiff. After an estimate of Warner’s alleged indebtedness had been reported to Trumbull, the minutes of a board meeting at which Harrington was present on September 23, 1925, set forth a statement of Trumbull’s condition which refers to “the payment by Ex-President Warner of his personal indebtedness to the Company.” The minutes also direct that the statement be mailed to all shareholders and both the plaintiff and Warner were shareholders at the time. The statement was also published in a Youngstown newspaper. There is, in addition, uncontradicted testimony of Warner’s son-in-law that Warner was shown a copy of this statement as it was published in the Youngstown “Vindicator” of September 24th in the latter part of October, 1925. It seems futile to argue that this statement is consistent with the existence of a trust for Warner’s benefit and not with one that excludes such arrangement. Nowhere does Trumbull consider itself a trustee for anyone. Indeed Harrington is named trustee “because this facilitates disposal and transfer.” The beneficiary is solely Trumbull for the entire amount excluding any notion that Warner might share in a possible surplus. “(T)he Company stock turned in was taken at the same price as that at which it had been charged to Mr. Warner when issued and the other holdings, including the real estate, were taken at figures agreed upon by local business men familiar with their values as conservative. It is planned at the earliest possible moment these holdings will be sold and the proceeds turned over to the Company in cash.” [Emphasis supplied.] Elsewhere the statement recites and accepts the auditors’ estimate of $3,040,000 as the amount of Warner’s indebtedness to Trumbull. The ledgers of Trumbull subsequently carried the transaction in accordance with this statement:

The deeds covering the transfer of real property by Warner in the transaction under consideration are also in open repudiation of an express trust with Warner as beneficiary. On August 24,1925, Warner executed a warranty deed to Harrington covering a parcel of land in Trumbull county. This deed described Harrington “as trustee” with no indication of the identity of the beneficiary. Exactly one year later Harrington and Trumbull conveyed the same property to another person in a deed that recited:

“Whereas, at and prior to the 24th day of August, 1925, Jonathan Warner was indebted to the Trumbull Steel Company * ’ ' in a large sum of money, and in part payment of the same, did on said date convey the premises * * * to John T. Harrington, as trustee for the said Trumbull Steel Company * * ”; and

“Whereas, said John T. Harrington, as trustee, and the Trumbull Steel Company, as cestui que trust, are now desirous of conveying the premises to Hugh W. Bonnell.

“Now, therefore, we, John T. Harrington and the Trumbull Steel Company as cestui que trust * * * ¿lo « * * sell and convey the following described premises:”

In connection with this deed of August 24, 1925, Warner himself executed a quitclaim deed to correct an erroneous description on November 18, 1926, while he was in France. This deed stated: “Jonathan Warner, widower, the grantor, for divers good causes and considerations thereunto moving, and especially for the sum of one dollar ($1.00) and other good and valuable considerations, received to his full satisfaction of John T. Harrington, trustee for the Trumbull Steel Company, * * * grantee, has given, granted, remised, released and forever quitclaimed and does by these presents * * * quitclaim unto the said grantee * * * all such right and title as he, the said grantor, has or ought to have in and to the following described piece or parcel of land:”

Covering this real estate, Harrington also executed a declaration of trust on August 24, 1925, describing himself as “grantee to hold in trust for the benefit of the Trumbull Steel Company and its successors,” and declaring, “that I am nominated and named as grantee in said conveyances upon and in behalf of the Trumbull Steel Company as trustee, solely, and I do not claim to have any title or interest in said land or any portion thereof by virtue of said conveyance to my own use or benefit but solely to the use and benefit of said The Trumbull Steel Company and its successors.”

These open declarations of public record, all of them available to Warner and some of them brought to his attention, characterize the Harrington-Warner transactions as a transfer of property by Warner to Trumbull in consummate satisfaction of Warner’s indebtedness to the company with Harrington as trustee for Trumbull. This is clearly at odds with the plaintiff’s theory that Trumbull was trustee of this property, or at least the surplus after payment of Warner’s indebtedness, for Warner. To these declarations must be added open and equally adverse acts by the alleged trustee and its agent, some of which were within the knowledge of Warner and the plaintiff: the liquidation of the transferred assets, the major portion of which occurred in 1925 and 1926; and the disappearance of the alleged trustee Trumbull with the sale of its property and assets to Republic Iron & Steel Company pursuant to an agreement of April 26, 1928, which makes no mention of the alleged trust. In determining that all of these acts and writings amounted to open repudiation by the trustee of the trust, if one existed, for purposes of commencement of the statute of limitations, consideration must also be given to the total absence of any similar declarations in support of the trust urged by plaintiff. Indeed, from August, 1925, until his death on May 5, 1934, there is absolutely no evidence that Warner asserted a claim of any character against Trumbull, Harrington, Republic Iron & Steel Company, the defendant or anyone else with respect to his transactions with Harrington in 1925. This was so although he lived in comparative poverty for three years prior to his death with no evidence of infirmity of body or mind.

A second possible characterization of this action for purposes of the statute of limitations is one for an accounting-based upon fraud which by some theory or other \ypuld make Trumbull and its successor Republic constructive trustees for Warner’s benefit. Again alternatives are presented. The alleged fraud might have consisted of a supposed misrepresentation by Harrington to Warner that Trumbull would act as trustee for Warner of certain assets. The consequence of this, it is urged, made Trumbull and the defendant as its successor constructive trustees. Or the fraud in this hypothesis arose from a series of alleged misrepresentations made by Harrington to Warner which induced the latter to transfer property to Trumbull, with similar consequences of imposition of a constructive trust on Trumbull and the defendant. So again it may be postulated, without deciding or considering that such is at all the case in this action, that such misrepresentations were made. The applicable period of limitation under this assumption is six years in New York, Civil Practice Act, § 48(5) supra, note 2, and four years in Ohio §11224 (3) if., GC, supra, note 3. In both jurisdictions, the cause of action does not accrue and so presumably the statute of limitations does not begin to run until “'discovery by the plaintiff, or the person under whom he claims, of the facts constituting the fraud,” Civil Practice Act, § 48(5), supra, or “until the fraud is discovered,” §11224 GC, supra. If this theory of plaintiff’s cause of action as constructive trust rests upon something-other than fraud, then a ten year period of limitations under general statutory provisions, already discussed in connection with the assumption that an express trust was created, would be applicable without any discovery requirement, Civil Practice Act § 53, supra, note 2; §11227 GC, supra, note 3.

It should be noted that plaintiff has abandoned at the close of trial this characterization of the action as one of constructive trust based upon fraud. Nevertheless assuming that such is the nature of the transactions, it is clear under the statutes of limitation in both Ohio and New York that the cause accrued at the time of discovery. If the fraud was that mentioned in the first alternative, viz. that Trumbull would act as trustee for Warner, then the evidence already considered as sufficient for open repudiation in connection with a theory of express trust would also suffice to establish discovery. If the fraud consisted of a series of misrepresentations calculated to induce Warner to transfer his property to Trumbull, under the second alternative, Warner might well have been aware of such fraud at the time the statements were made. The representations by Harrington to him that Warner had made false statements to the National City Company in connection with a debenture issue for Trumbull, or that Warner had illegally issued and accepted Trumbull money and shares of stock, were certainly matters about which no one was better informed at the moment than Warner himself who had made the statements and issued and received the shares and money. For Warner had been the dominant figure in the affairs of Trumbull for over thirteen years. The same is true of the plaintiff who at the time was Warner’s personal secretary and had been acquainted with his transactions for many years. Moreover, according to a pencilled note introduced by plaintiff as written by Warner, Warner apparently admits discovery of fraud. “H. [supposedly Harrington, according to plaintiff] said he would look after me and he certainly did not. If I had gotten a lawyer, he could not have done what he did, because it was done in this fraudulent way.” There is no date on this note, but even assuming that it had been written on the last day of his life in 1934, an action based upon fraud in 1945 would be barred. In addition, the plaintiff herself asserts that she made inquiry of defendant without reply as early as 1937 concerning her rights arising out of the Harrington-Warner transactions, which was longer than both the four and six year periods of limitation before the commencement of this action. Moreover “discovery” contemplated in New York and Ohio statutes is measured by an external standard and not merely a subjective one so that the term includes not only actual discovery but also a situation where discovery should have been made. “(W)here the circumstances are such as to suggest to a person of ordinary intelligence the probability that he had been defrauded, a duty of inquiry arises, and if he omits that inquiry when it would have developed the truth, and shuts his eyes to the facts which call for investigation, knowledge of the fraud will be imputed to him. He will be held, for the purposes of the statute of limitations, to have actually known what he might have known and ought to have known.” Higgins v. Crouse, 147 N. Y. 411, 416, 42 N. E. 6, 7. See also Dumbadze v. Lignante, 244 N. Y. 1, 154 N. E. 645; Sielcken-Schwarz v. American Factors, 265 N. Y. 239, 192 N. E. 307; Bohm Bros. & Co. v. Cunningham, 7 Ohio Dec. Rep. '382; Talmadge v. United States Shipping Board, 2 Cir., 54 F. 2d 240. And the burden of proving when the fraud was discovered as well as that it had not been discovered rests upon the plaintiff, and not the defendant. Shultz v. Manufacturers & Traders Trust Co., D. C., 40 F. Supp. 675, 686; Mason v. Henry, 152 N. Y. 529, 539, 46 N. E. 837.

Finally, if the action be characterized as one for breach of contract or conversion, there is no claim that it would not be barred after six years under the New York statute and after six or four years under the Ohio one, the periods of limitation running from the alleged wrongful acts in 1925. N. Y. Civil Practice Act, § 48(1), (4); §§11222, 11224(2) GC.

The question of whether any of these periods of limitation are suspended by duress is raised by plaintiff who alleges that Warner was in fear of criminal prosecution in 1925 and subsequently refrained from assertion of any claim because of this fear. It must be seriously doubted whether under the New York period of limitation duress would have the effect of suspension. The statute, although making explicit provision for certain disabilities of the plaintiff which are excluded from computation of the time to commence the action, Civil Practice Act, § 43, omits any reference to this one. As the court said in Piper v. Hoard, 107 N. Y. 67, 71, 13 N. E. 632, 634, “I am unable to see how it could stop the running of the statute of limitations. The law provides for no such disability. We cannot add it to the statute. The new wrong might possibly give a new right 'of action, but could not suspend the existence of the old one.” But even assuming that duress in a proper case might toll the statute of limitations, cases collected, Chatfield v. City of Seattle, 198 Wash. 179, 88 P. 2d 582, 121 A. L. R. 1294, no such situation is presented here. If there was duress, as alleged, and we do not make a finding that such was the case, and it arose from a threat by Harrington, it could not have survived Harrington’s death in 1932. If it arose from sources other than Harrington, it certainly could not have survived Warner’s death in 1934 which left the plaintiff, who was aware of all of these transactions and alleged misrepresentations, free to assert any claim at that time. In short, if there was duress, it ceased at a time beyond the longest period of limitation possible in this action.

In considering this action barred by passage of time, we are not resting on technical ground unrelated to the merits involved. The statute of limitations is a legislative sanction for dismissal of an action because of claimant’s inaction. “The policy of statutes of limitation is to encourage promptness in the bringing of actions, that the parties shall not suffer by loss of evidence from death or disappearance of witnesses, destruction of documents, or failure of memory.” Missouri, Kansas & Texas Ry. Co. v. Harriman, 227 U. S. 657, 672, 33 S. Ct. 397, 57 L. Ed. 690, quoted in Greenhill v. Delano, No. 1, 193 App. Div. 842, 845, 184 N. Y. S. 617, 619. Such has been the case in this action. It was commenced more than nineteen and a half years after the questioned transactions. Practically everyone who might bear witness to what then occurred, except the plaintiff herself, have died: Warner and Harrington, the principal participants; Fillius, an attorney for Warner; Blyth, the accountant in charge of the audit; seven of the eight members of the Trumbull board of directors at the time; the two members of Trumbull’s advisory committee. Many records, reports and correspondence of the accounting firm, the National City Company and the deceased participants have been destroyed or are missing because of the passage of time. And this action is brought against a defendant which did not appear upon the scene until three years after the transactions in question as successor by purchase to Trumbull.

This disposition of the controversy makes unnecessary a determination of several other questions of law: Is the action barred by laches? Is the plaintiff a competent witness in testifying to transactions or communications between the principal participants in her presence? Were the alleged misrepresentations ones of fact or law, and if the latter, are they actionable? Were bonuses of stock and money from Trumbull to Warner illegal, and if they were, was any question about their validity barred by time limitation in 1925? May a corporation become trustee of an express trust without formality of acceptance of the trust by its board of directors? And if it might, may another corporation, its successor by purchase, assume the obligations of trustee without formal action with respect to the trust?

Judgment for the defendant.

      . C. P. A. “§ IS. Limitation where cause of action arises outside of the state.
      “Where a cause of action arises outside of this state, an action cannot be brought in a court of this state to enforce such cause of action after the expiration of the time limited by the laws either of this state or of the state or country where the cause of action arose, for bringing an action upon the cause of action, except that where the cause of action originally accrued in favor of a resident of this state, the time limited by the laws of this state shall apply.” (Clevenger’s 1946).

      . C. P. A. “§48 (1) (5) : Actions to be commenced within six years.
      “The following' actions must be commenced within six years after the cause of action has accrued:
      “1. An action upon a contract obligation or liability express or implied, except a judgment and except as provided by section forty-seven and section forty-seven-a. * * *
      “5. An action to procure a judgment on the ground of fraud. The cause of action in such a case is not deemed to have accrued until the discovery by the plaintiff, or the person under whom he claims, of the facts constituting the fraud. * * *”
      “The following actions must be commenced within three years after the cause of action has accrued. * * *
      “7. An action to recover damages for an injury to property, except in the case where a different period is expressly prescribed in this article. * * *”
      C. P. A. “§ 49 (7) : Actions to be commenced within three years.
      C. P. A. “§ 53: Limitation where none specially prescribed.
      “An action, the limitation of which is not specifically prescribed in this article, must be commenced within ten years after the cause of action accrues.”

      . Ohio General Code, § 11224 (3) (4) :
      “An action for either of the following cases, shall be brought within four years after the cause thereof accrued: * * *

        “3. For relief on the ground of fraud;
      “4. For an injury to the rights of plaintiff not arising on contract nor hereinafter enumerated.
      “If the action be for trespassing underground or injury to mines, or for the wrongful taking of personal property, the cause thereof shall not accrue until the wrongdoer is discovered; nor if it be for fraud, until the fraud is discovered.” Ohio General Code, § 11227:
      “An action for relief not hereinbefore provided for, shall be brought within ten years after the cause thereof accrued.”

      . “Statement of the Condition of the Trumbull Steel Company, at the close of business July 31, 1925, as shown by the books of the company after giving effect to the recent appraisal of the Company’s plant by the American Appraisal Company, the recent inventory of the Company’s supplies, spares, raw material, furnished products and goods in process by the same Company and the payment by Ex-President Warner of his personal indebtedness to the Company. ® * *
      “There are two items in the statement that need explanation: the $1,533,618.82 item in the name of John T. Harrington, Trustee, on the Assets side and the 59,012 common share item ‘With Trust-tee’ on the Liabilities side. These two items represent the payment by Mr. Warner of his personal indebtedness as first disclosed by the recent audit. This indebtedness was estimated by the Auditors at $3,040,000.00. Mr. Warner turned over to the Trustee all his holdings in the Company, namely, the 59,012 shares of common stock mentioned together with all of his other personal holdings, estimated to be worth the $1,533,618.82 above mentioned — these included his two residences in Youngstown and Trumbull County together with the contents thereof. In making the adjustment, the Company stock turned in was taken at the same price as that at which it had been charged to Mr. Warner when issued and the other holdings, including the real estate, were taken at figures agreed upon by local business men familiar with their values as conservative. It is planned that at the earliest possible moment these holdings will be sold and the proceeds turned over to the Company in cash. They are now being carried in the name of a Trustee rather than that of the Company because this facilitates disposal and transfer.”

      . “Important
      “I did not even get or hire or see a lawyer. H. said he would look after me and he certainly did not. If I had gotten a lawyer, he could not have done what he did, because it was done in this fraudulent way: All papers signed were done under duress and with a promise to return to me, but it was done for the sole purpose of getting something cheap and with the thought of later getting farm for himself, I really believe the farm cost H. nothing at all. H. unneedfully (?) did all to frighten directors to obey him, with the object of getting much for himself later, at a low or no cost price. H. told Miss Palmer he was looking out and protecting me.”


source: Caselaw Access Project

author: By LYBARGER, J.

license: Public Domain

text:
    STATE, ex rel., ACME AUTO RADIATOR COMPANY, Relator, v. BURKE et, Respondents.
    Common Pleas Court, Cuyahoga County.
    No. 635737.
    Decided October 16, 1952.
    Morley, Stickle, Keeley & Murphy, Andrew Pangrace, Cleveland, for relator.
    Joseph H. Crowley, Director of Law, Joseph H. Smith, Cleveland, for respondents.
   OPINION

By LYBARGER, J.

This is an action in mandamus brought on the information of Acme Auto Radiator Co., against certain officials and the City of Cleveland, (hereinafter called “City”). Acme alleges in its amended petition that it is a taxpayer, and that a contract for services and material required for repairing auto radiators for the Department of Public Service of the City was awarded to another company and not to Acme which was the lowest responsible bidder. It alleges that the awarding of the contract, under an “arbitrary, artificial and inaccurate method of evaluating bids,” was “arbitrary, capricious, a gross abuse of discretion and was illegal.”

To the amended petition the City demurs on the grounds that (1) Acme does not have legal capacity to sue, and (2) the petition does not state facts sufficient to constitute a cause of action. The City does not question that Acme was a responsible bidder and that the form of its bid was in good order. This presents for decision the question of whether or not a taxpayer, who is also an unsuccessful bidder, may by mandamus challenge the awarding of a contract on the ground of abuse of discretion.

Sec. 12287 GC, makes it clear that “the person bringing an action in mandamus must be a party beneficially interested in the relief sought.” In State, ex rel Brophy v. City of Cleveland, 141 Oh St, at page 521, 26 O. O. at page 88, the court said:

“Where no legal right of a person can be affected by the failure of public officials to act in any given matter, he has no such beneficial interest as will permit him to maintain an action in mandamus against them to require official action in such matter.”

In State ex rel Brophy the relator was neither a resident nor taxpayer of the respondent city. He was acting merely as agent for others and had no pecuniary interest in the outcome of the action.

The Supreme Court in the case of State, ex rel. Stanley v. Cook, 146 Oh St, 348, 32 O. O. 419 summed up the law in Syllabus 2 as follows:

“In the absence of a showing that the relator has a beneficial interest, either as an individual, taxpayer, or as a citizen, in obtaining a peremptory writ of mandamus, such writ will not be granted.”

Whether or not an unsuccessful bidder, merely as such, has such a beneficial interest as to enable him to demand relief by mandamus is a moot question which, in view of Acme’s pleading in the amended petition, this court is not called on to decide. Acme states it is a taxpayer in the City of Cleveland, and by this allegation indicates that suit is now brought in its capacity of taxpayer. Obviously a taxpayer is beneficially interested in having bids awarded to the lowest responsible bidder since money thus saved inures to the benefit of the city treasury and therefore to taxpayers. The cases are numerous which indicate the right of a person as a taxpayer to ask for mandamus, and they do not prescribe any manner in which such capacity must be alleged or described in the relator’s petition.

The court holds that since Acme in its amended petition has indicated that it brings suit as a taxpayer in -the respondent city, it has legal capacity to sue for a writ of mandamus.

Does the petition state facts sufficient to constitute a cause of action?

The Municipal Code of the City provides (Section 225) that:

“No purchase shall be awarded without the approval of the Board of Control, and only to the lowest responsible bidder.”

This provision gives to the Board of Control discretion to examine and evaluate bids and then, in the proper exercise of its discretion, to award contracts. Now official discretion, properly exercised, cannot be controlled by mandamus. It hardly need be observed that courts will require that officers or boards put to use in a proper case the discretion with which they are vested; but courts will not prescribe what result they are to arrive at in so doing. State, ex rel. Grenward v. Zangerle, 135 Oh St, 533, 14 O. O. 417; State, ex rel. Spratley v. Jones, 149 Oh St, 381, 37 O. O. 67. “The lawful discretion vested in an individual, officer, or corporation cannot be destroyed, controlled, or limited by the writ of mandamus.” 25 O. Jur., page 1003.

At the same time the presence of fraud, bad faith, or abuse of discretion creates an exception to the rule just stated. State, ex rel. v. Zangerle, above cited. Where, in the exercise of discretion, an officer or board is guilty of a clear dereliction of duty the remedy of mandamus is available to correct the abuse. See the cases cited in 25 O. Jur., page 1006-7 note 13.

Now in its amended petition Acme sets forth the conclusion that the City in awarding the contract in question was guilty of “a gross abuse of discretion.” It sustains this charge with allegations to the effect that the City grouped the automobiles to be serviced under the manufacturers’ names. Vehicles in such groups varied from one in the smallest (there were 18 such groups) to 467 cars in the largest. There was considerable variance in the number of units in the groups and also in the cost of the services to be rendered. Acme alleges that in evaluating the bids the City merely computed the average cost of service and parts of one vehicle in each group, regardless of whether the group contained 467 vehicles or only one vehicle. Acme alleges that in spite of -the fact that it was lowest bidder on 742 of the 987 sub-groups on which bids were taken, and that its total bid was $3750 less in the aggregate than that of the only other bidder, still it lost the contract due to the arbitrary, artificial and inaccurate manner in which the City computed the bids.

The court is of the opinion that the language used by Acme in the amended petition is adequate to cast doubt on the method used by the City in evaluating bids. In effect Acme says in its narration of the facts on which it bases the charge of abuse of discretion, that the City used an unusual and unfair yardstick in measuring bids, with a result that was detrimental to the taxpayers as well as to the low bidder. If this is true then Acme should have a right to test out the issue by suing for a writ of mandamus. It is not, however, lor this court to pass on the merits of the claim. The court is of the opinion that the amended petition states facts sufficient to constitute a cause of action.'

The demurrer of the City is overruled. Respondents except.


author: By HORNBECK, PJ.

text:
    STATE, Plaintiff-Appellee, v. JACKSON, Defendant-Appellant. STATE, Plaintiff-Appellee, v. CENTOFENTI, Defendant-Appellant.
    Ohio Appeals, Second District, Franklin County.
    Nos. 4594, 4595.
    Decided October 4, 1951.

      Ralph J. Bartlett, Pros. Atty., Henry L. Holden, Joseph J. Poorman & Edmund B. Paxton, Asst. Pros. Attys., Columbus, for plaintiff-appellee.
    Mayer & Mayer, Columbus, for defendant-appellant, Stanley Jackson.
    David C. Stradley, Columbus, for defendant-appellant, Centofenti.
   OPINION

By HORNBECK, PJ.

The appeals are separate and the charges upon which the appellants were convicted and sentenced were separately made. However, the bill of exceptions which is made up by an agreed .statement of the court and counsel discloses that it was the theory of the State, supported by the conviction of the defendants, that they were jointly guilty of the offense as charged. The appeals were presented jointly in this court, although the cases are briefed separately. Each appellant urges that the court erred in overruling his motion to dismiss at the close of the State’s testimony and that the sentence and judgment were contrary to law and against the weight of the evidence. Appellant Jackson specifically assigns that the court erred in dismissing his motion to dismiss for the reason that the prosecution failed to establish the corpus delicti, and appellant, Centofenti, assigns as error that the court considered facts not in evidence as shown by the court’s statement in rendering judgment. Both claim the judgment is against the weight of the evidence. We shall discuss the assignments generally as they relate to both appeals and if necessary, specifically as related to the separate appeals.

Upon the second assignment of error of appellant, Centofenti, that the court considered facts not in evidence as shown by the court’s statement we find no exemplification of this claim in the record or in the agreed statement of fact. However, it is asserted that the court made the observation that he acted upon the testimony of police officers, and that this could not be correct because the incriminating testimony as against both defendants came from one police officer only. If the statement was made by the trial judge, as set out in the brief of counsel for Centofenti, it could not be held to be erroneous because, in part, the trial judge may have properly relied upon the testimony of both police officers, although one only testified as against defendant, Centofenti.

It is urged and briefed extensively that the judgment is not supported by the weight of the evidence because of the admitted intoxicated condition of one or both defendants, and because it did not appear that Centofenti at any time expressed admitted that he had any part in the commission of the crime charged and that upon the whole the State’s case is so weak as that it did not afford support for the conviction.

The cause was tried to a judge in the absence of a jury. It is presumed that the judge knew the law controlling the admissibility and probative effect of the testimony offered, and the burden of proof which rested upon the State, and that with respect to all of these matters he acted in a valid and proper manner.

It is not necessary to cite authority to counsel in this case to support the proposition that the credibility of the testimony of the witnesses and the weight to be accorded to their testimony was primarily for the trial judge. So considering the evidence as stipulated we find that there was support in fact and in law for the conviction of both defendants. In this connection it follows, that we hold that the corpus delicti was established; that the offense charged, namely, the breaking and entering in the night season of a certain building in Franklin County, with intent to commit a felony in said building was committed by some person or persons. The owner of the drug store in which it was claimed there was an attempted entrance testified to physical facts tending to support the claim that there had been an attempt to enter the building in the night season on the date set out in the charge. Another witness heard a crash of glass which under the circumstances could be found to have been the glass which was broken in the building of the prosecuting witness. These facts together with others appearing establish the body of the crime. The proximity of the defendants to the place where the attempted entrance must have been made was established in part by the witness who heard the glass crash, by an unknown person who cried, “There they go,” and by the apprehension of the defendants in the vicinity where the drug store was located.

The conviction of the defendants may be supported under the rule as announced in Breese v. State, 12 Oh St 146, and the law as stated in Geiger v. State, 70 Oh St 400. One policeman, Officer Rath, testified that when the defendants were apprehended they were together and at that time when in his presence and in the immediate presence of each other he inquired of them why they broke into the drug store and one of them answered, “I don’t know but I think it was because we wanted to get some wine.” Although the defendant who made the statement is not identified the language employed by the officer at the time was a direct accusation against both defendants of the commission of the offense charged. One of them, if we believe the officer, as the trial judge had the right to do, made the statement which was an admission of the charge made against him. It was clearly the obligation of the other to speak then and deny the admission. His silence under the situation which required him to speak may be considered as an admission against interest of the material elements of the offense charged. There was some corroboration as against the defendant Jackson of further admission by him upon the testimony of Sergeant Beck.

It is asserted on behalf of Centofenti that this latter testimony was not admissible against him. It is obvious from the record that the trial judge recognized this fact, so stated and manifestly acted upon his ruling.

We recognize the hazard of convicting a defendant where a material element of the offense is established upon nothing more than an admission by silence. Both defendants have criminal records which, no doubt, affected their credibility. If they were not believed nothing remained to refute the statements of the police officers. It is highly probable that the trial judge accorded the defendants every consideration to which they were entitled.

The judgments will be affirmed.

WISEMAN and MILLER, JJ, concur.


author: Per CURIAM:

text:
    HENINGER, Appellant, v. AKRON (City), Appellee.
    Ohio Appeals, Ninth District, Summit County.
    No. 4204.
    Decided October 10, 1951.

      W. J. Laub, John R. Quine, Clyde F. Berry, Akron, for appellant.
    Roy E. Browne, Dir. of Law, John R. White, Asst. Dir. of Law, Akron, for appellee.
   OPINION

Per CURIAM:

A contract has been awarded by the City of Akron to the Michie City Publications Co., Inc., for the “codification, printing and review” of its ordinances. H. Clyde Heninger, in his capacity of taxpayer of the city, instituted the present action in the Court of Common Pleas of Summit County, in which he sought to enjoin the performance of the same. The appeal to this court, on questions of law, is from the judgment denying the relief sought.

1. It is claimed by the appellant that “council is wanting in power to authorize such contract,” on the ground that the city charter directs the director of law to “codify the ordinances immediately upon the taking effect of this charter and at least once every five years thereafter”; and even though council by ordinance authorized the awarding of a contract for the work, it “may not set aside by ordinance what the electors of the city have established by charter, and it is powerless to relieve the director of law of a charter-imposed duty by providing a substitute to perform such duty.”

We need not go far to find support for the proposition that the work of codifying and reviewing city ordinances, clarifying them into groups, deleting those which are obsolete and unnecessary in view of later legislation of the same subject, the preparation of footnotes, etc., requires the services of experts, who, because of their specialty, are capable of exercising skill and aptitude. Nor is authority wanting to support the power of a municipal corporation, in the absence of a positive prohibition by law, to contract with experts, to assist a duly elected or appointed official of the city in the performance of a specialized service for the preservation of the city’s interests.

As we view the wording of the charter provision directing the director of law to codify the ordinances, we construe it to mean that such work shall be performed by him or pursuant to his direction and control; and if the circumstances are such as make it advantageous to the interests of the city for the director to engage specialists under his direction to help him perform his duties, such engagement may be made within the language of the charter.

The evidence presented was sufficient for the trial court to find a full compliance with the foregoing summary of the law.

2. It is next claimed that the “specifications unlawfully restrict competitive bidding.”

It is observed that the ordinance passed by council, which authorized the contract, specifically enjoined the purchasing agent to advertize for bids. While specialized services of the kind in question (exclusive of the printing and binding) ordinarily are not subject to the laws requiring competitive bidding (State, ex rel. Doria v. Ferguson, Aud., 145 Oh St 12; City of Cleveland v. Lausche, Mayor, 71 Oh Ap 273; Hordin v. City of Cleveland, 77 Oh Ap 491), nevertheless, council acted within its authority in making such requirement, and accordingly the provision must be observed. The record indicates the advertizing for bids.

It is asserted that the following restrictive provisions in the specifications for bidders are so unreasonable and unfair that they exclude competitive bidding. They are:

“9. The successful bidder must be able to prove that he or it is regularly engaged in the work of setting type and printing and binding legal publications similar to the one provided for in these specifications, and that he or it has successfully completed and delivered at least one similar legal publication of such nature.”

“12. The bidder shall state and give full details as to his or its ability, experience and knowledge of codifying ordinances or statutes, and shall furnish a list of governmental units of 100,000 to 500,000 population for which such services have previously been rendered.”

The purpose of specification “9” appears to be directed to the qualification of a bidder to manually and mechanically produce a book (not prepare its contents) of the kind contemplated. In consideration of the charge that it is unreasonable and unfair, we determine that the city has the right to protect itself from the bids of inexperienced, irresponsible or incompetent persons; and that such a provision is not unfair or unreasonable and does not unduly restrict competition among qualified bidders.

The purpose of specification “12” appears to be directed to the ascertainment of the experience and ability of the bidder to perform the expert labor of codifying the ordinances

In this expert field, it would appear to be the part of wisdom to confine bidders to persons of capacity and experience, to insure the most skillful workmanship. The provision of the specifications under attack was designed to accomplish this purpose.

As we view the judgment from which the appeal was taken, in the light of the record before us, we cannot say that such judgment is manifestly against the weight of the evidence, nor is it contrary to law. It will be affirmed.

Judgment affirmed.

HUNSICKER, PJ, DOYLE, J, STEVENS, J, concur.


author: By McCALLISTER, J.

text:
    FAULKNER, Estate of, In re.
    Probate Court, Greene County.
    Decided April 14, 1952.
    J. M. Burtch, Jr., J. Ralston Werum, Asst. Attys. Geni.. Columbus, for Department of Taxation.
    Wm. A. Miller, Xenia, for Faulkner Estate.
   OPINION

By McCALLISTER, J.

This matter is before this court by virtue of exceptions filed by the Department of Taxation to an inheritance tax determination holding certain transactions tax exempt.

The decedent, James W. Faulkner, on February 2, 1949, about two and one-half years prior to his death, transferred by deeds two farms to two different grantees. These grantees were not related to the decedent; they were sons *of a former tenant of decedent. Both deeds conveyed absolute fee simple titles. At the same time that the deeds were executed each grantee and wife made a separate contract with the decedent agreeing to pay the sum of $1000.00 per year for the life of decedent and the sum of $600.00 per year for the decedent’s wife if she survived him. In addition to the aforesaid sums each grantee also agreed to indemnify the decedent for any gift, inheritance, or estate tax assessed against the decedent or his estate. The inheritance tax return shows each farm to be valued at about $21,000.00, and the sums to be paid decedent and wife to be worth about $7,800.00 for each farm. At the time the farms were conveyed decedent was 83 years old and his wife was 72. Decedent died testate on or about October 26. 1951, leaving his wife a life estate; there were small legacies to nieces and nephews and to some non-relatives; remainder was given to a niece and nephew. This will was made January 19, 1951. The total value of decedent’s estate, exclusive of the farms, was $52,000.00.

The Department of Taxation excepted on the ground that said transfers were made “in contemplation of death, and'or intended to take effect in possession or enjoyment at or after death”; §5332, par. 3, sub-par. (a) and (b) GC. The exceptor presented no testimony, but offered the tax determination and then rested.

The Estate presented the testimony of Sam Bone, father of the two grantees of the farms. He testified that he had been a tenant of decedent for about 40 years and that as far back as 1937 the decedent indicated a desire to give the farms to him, but that this was not done because decedent did not want to incur the gift tax. The two grantees were contacted about the proposed gifts to them about two weeks before the deeds were executed in February of 1949.

As to transfers made more than two years before death. the authorities hold that the burden of proof is placed on the Department of Taxation. The department has failed to meet this proof as concerns these transfers being made “in contemplation of death.” See O. Jur., Vol. 38, page 1249, and cases cited therein.

The question as to these transfers “intended to take effect in possession or enjoyment at or after death” is not so easily disposed of, as there seems to be no reported case from Ohio.

The two cases cited by the Department of Taxation are clearly different on the facts. Brandeth’s Estate, 62 N. E., 563, involved a transfer of stock by donor reserving to himself, by separate agreement, dividends for life and voting rights to said stock. Todd’s Estate, 85 Atlantic, 845, involved advancements by donor of amounts devised by will, the donor taking back notes to cover the amounts advanced. Both cases held that the gifts did not take effect until death of donor and so were taxable. The following case, cited in the brief for decedent’s estate in Krause’s Estate, 325 Pa., 479, 191 A. 162, and involved the following situation: donor made a gift of $35,000.00 to a college and in return received from the college a writing which bound the college “to pay the donor a life annuity of six (6%) percent in semi-annual payments, and the sum so given to be considered as an executed gift, without any account or liability therefor.” The court held that the gift was not taxable because there was an executed gift to the college and it could do with it as it pleased, and that the college, not the fund, was liable for the payments to the donor. There are a number of cases from other states which are in accord with the principle announced in the Krause case. In substance they hold that where there is a completed gift and an agreement by the donee to pay a sum of money to the donor for life, such gift is not taxable if the property given is not bound to produce the money to be paid to the donor, the obligation to pay being a personal one of the donee. Some of the cases are more comprehensive on their facts but they all support the principle stated above. They may be found as follows: In re Honeyman, 98 N. J. Eq., 638, 129 A. 393; In re Edgerton, 54 N. Y. Supp., 700, 52 N. E., 1124; In re Thorne, 60 N. Y. Supp., 419; Hirsch v. U. S., 35 Fed. Ind., 982; In re Seaich, 240 N. Y. Supp., 524; In re Hamilton (Wisc.), 259 N. W., 433; People v. Missionary Society (Ill.), 173 N. E., 132; In re Galpin, 295 N. Y. Supp., 192; In re Case (Wash.), 70 Pac. 2nd., 806; Fidelity Trust Co. v. Martin (N. J.), 192 A. 74; 49 A. L. R. 885; 67 A. L. R. 1253.

Referring to the facts of the case at issue, we find two instruments; one, an absolute deed in fee simple for each farm; the other, an agreement or promise to pay, one of which is set out as follows:

“Promise to Pay Money

“WHEREAS, James W. Faulkner and Elizabeth E. Faulkner, husband and wife, have this day conveyed a farm of 160 acres in Military Survey No. 1731, in Caesarscreek Township, Greene County, Ohio, to the undersigned, Paul H. Bone and Hazel L. Bone, husband and wife, by deed of gift, and the Parties thereto agree that the reasonable present value of said farm is One Hundred ($100.00) Dollars per acre or a total of Sixteen Thousand ($16,000.00) Dollars, and

“WHEREAS, the said James W. Faulkner and Elizabeth E. Faulkner, the grantors, desire to reserve a rental from said farm for and during their natural lives and the lifetime of the survivor of them, and the said Paul H. Bone and Hazel L. Bone, the grantees, have accepted the conveyance of said farm without any other consideration than the reserved rental or annual payments to be made hereunder, and acknowledge that said farm was conveyed without any other consideration whatsoever and as a deed of gift to them, and

“WHEREAS, it is the belief of both Parties to said undertaking that said transfer is made free of any gift, inheritance or estate taxes whatsoever, but there remains the possibility that such gift, inheritance or estate taxes may hereafter be assessed against such transfer and against James W. Faulkner and/or Elizabeth E. Faulkner, and it is the intention of the grantees that such premises be received by them subject to reimbursing the grantors for any such tax or levy when and if the same may be made;

“NOW, THEREFORE, We, Paul H. Bone and Hazel L. Bone, jointly and severally, in consideration of the premises, do hereby promise to pay to James W. Faulkner the sum of One Thousand ($1,000.00) Dollars per year so long as the said James W. Faulkner shall live, said annual payments to be made in semi-annual installments of Five Hundred ($500.00) Dollars each on the first day of July and the first day of January in each calendar year beginning on July 1, 1949, and continuing to the death of the said James W. Faulkner; the last semi-annual installment shall be .pro rated in proportion to the number of days from the date the preceding installment was due to the date of death in proportion to the whole semiannual term; we, jointly and severally, further promise to pay to Elizabeth E. Faulkner, if she survives her said husband, James W. Faulkner, the sum of Six Hundred ($600.00) Dollars per year, payable in semi-annual installments of Three Hundred Dollars each on the first day of each January and July, the first of such payments beginning on the first of such dates following the date of the death of James W. Faulkner; should the said Elizabeth E. Faulkner predecease the said James W. Faulkner, then no payments whatsoever shall be made to Elizabeth E. Faulkner; the last semi-annual payment due to Elizabeth E. Faulkner shall be pro rated in the proportion as hereinbefore provided for the last payment due to James W. Faulkner.

“We, jointly and severally,' do hereby covenant with the said James W. Faulkner and Elizabeth E. Faulkner that we will indemnify and save harmless the said James W. Faulkner and Elizabeth E. Faulkner from any levy of any gift tax, inheritance tax or estate tax which may be levied or assessed them, or either of them, by virtue of the conveyance of the farm hereinbefore described to us, and that the indemnity or payment provided for in this paragraph shall be in addition to the rents promised to be paid in the preceding paragraph.

“IN WITNESS WHEREOF, we have hereunto subscribed our hands to duplicate copies hereof at Xenia, Ohio, this 2nd day of February, 1949.

Paul H. Bone

Hazel L. Bone”

The promise to pay pertaining to the other farm conveyed is the same in substance as the above. Now you will note that the prefatory statements in the “promise to pay money” agreement (paragraph 2) states that James W. Faulkner and Elizabeth E. Faulkner, the grantors, desire to reserve a rental from said farm for and during their natural lives, and the lifetime of the survivor of them; in the same paragraph the phrase “reserved rental or annual payments” is also used; and the word “rents” is used in the next to last line of the last paragraph of said agreement. The use of the word “rent” or “rental” has caused this court to look at the agreement from “its four corners” so to speak to determine if the money to be paid Faulkner and wife was bound to come out of the farms conveyed, thereby depriving the donee of an interest therein. The common law recognized “ground rent” as an incorporeal hereditament. It appears to this court that “ground rent” could be created only by deed. An annuity is considered a charge against a person to pay a sum of money. While the agreements in form speak of “rent” or “rental payments” yet the courts must look to the substance of such matters; the words used to describe the payments are not of themselves decisive as to this matter. Now it appears in the case at issue that while the deeds and agreements were executed as one transaction and so must be construed together, yet a fee simple title is recognized by the authorities as good against the “whole world.” The deeds to the two donees in this case permitted them to sell, mortgage, give away, commit waste, or to operate the farms in any way they saw fit, without hindrance, consent, or notice to the donor. In fact there was nothing more for the donor to do, nothing more that he could do in regard to the farms. If there had been default in the annual payments, the donor would have to hold the donees personally liable, but not the farms. The language in the agreement binds the donees personally, but does not in any way create an interest in, or a charge against the farms. The donees could pay the donor out of farm income if the donees so desired, but were not required to do so by the agreement; conversely, if the farms did not produce sufficient income, the agreements bound the donees to make payments just the same. Actually the payments amounted to an annuity in favor of the donor and his wife.

Therefore, this court holds that:

1. Said transfers were not made in contemplation of death.

2. Said transfers were not made or intended to take effect in possession or enjoyment at or after such death.

Exceptions of Department of Taxation are hereby overruled.


author: By SKEEL, PJ.:

text:
    STATE, Plaintiff-Appellee, v. JOHNSON, Defendant-Appellant.
    Ohio Appeals, Eighth District, Cuyahoga County.
    No. 22455.
    Decided May 19, 1952.

      F. T. Cullitan, Pros. Atty., Theodore Williams, Asst. Pros. Atty., Cleveland, for plaintiff-appellee.
    M. A. Picciano, Cleveland, for defendant-appellant.
   OPINION

By SKEEL, PJ.:

This appeal comes to this court on questions of law from a judgment of the Common Pleas Court finding the defendant guilty of carrying a concealed weapon, to-wit, a revolver.

On March 25, 1949, the defendant was being driven toward the city of Cleveland; the place where the arrest was made was in Cuyahoga County on State Route No. 43, in Bedford Township. The automobile was being used by the defendant in the course of his employment as manager of his uncle’s farm. The driver of the automobile failed to stop at a point where a school bus had stopped to discharge school children. The arresting officer, who was following the school bus, directed the driver of defendant’s automobile to stop. The defendant at that time was in the back seat of the automobile. As soon as the automobile stopped, the driver moved over to the right and the defendant got in behind the wheel and then alighted through the left doorway and walked toward the approaching officer. The officer passed by the defendant, and upon looking into the automobile found a loaded revolver under a coat on the front seat. The defendant’s arrest followed.

Upon trial, the State introduced a written statement claimed to have been made by the defendant, in which he stated that he was sitting on the front seat next to the driver and that the pistol was on the front seat next to his left side; that when the officer stopped them, he slid over to the driver’s side and opened the door and that the revolver fell to the pavement. He then picked it up and threw it back into the car. He also stated that he had been the victim of a shooting attack and was carrying the gun for his protection. Shortly after making the foregoing statement, the evidence of the state is to the effect that defendant asked to amend or correct the first statement as follows:

“With regard to the position of myself in my car, I wish to state now that I was in the back seat with Buster. Willie Hill was in the driver’s seat and Juanita in the front seat. With regard to the pistol, I wish to say that the pistol was lying on the floor of the car under the front of the driver’s seat. When I opened the door, I reached down and picked up the pistol with intentions of throwing it back further under the seat. It hit something and fell onto the pavement. I picked it up and threw it back into the car.”

The defendant presented himself as a witness in his own defense. He denied making a voluntary written statement. He testified that he had the revolver with him and kept it on the floor of the car on the right hand side of the front seat where he could reach it by falling to the floor.

The defendant testified that for ten years he had been what was known as a “checker” in a policy or numbers game which he admitted was illegal and in violation of law; that he continued in such illegal business until after being shot as a result of which his hand was injured in such a way that he could not do the work assigned to him; that some time in January, 1949, he was employed by his uncle to help manage his uncle’s farm on Canal Road and was engaged in that business at the time of his arrest, although he did testify that he tried to work for the numbers game a week or two in May, 1949.

The defendant testified that he was requested to and did talk with the director of public safety at the city of Cleveland and to the County Prosecutor late in 1947, and on many occasions thereafter in reference to some police officers participating in the proceeds of the numbers game in Cleveland and that in July, he testified as a state’s witness in the trial of Lt. Molnar; that before and after he testified he received many warnings to “stop talking” and threats which he understood to mean that his personal safety was in danger if he continued to give help to Director Sutton and the County Prosecutor. On December 28th, at about 3 o’clock A. M., while he was escorting a lady friend to her door, he was shot by an unknown assailant, whereby his right hand was badly injured, resulting in the loss of a finger. He was released from the prison ward of the hospital (having been sent there for his personal protection) about January 15, 1949. The Director of Public Safety thereafter provided him with police protection from late afternoon until early morning. Such protection was considered necessary for his personal safety under the circumstances. Such protection was still being provided on the day of his arrest.

The undisputed facts show that the defendant did have a revolver with him in the automobile, carried in such a way as to justify a finding that it was concealed within the meaning of the statute (§12819 GC) prohibiting carrying concealed weapons. His defense of justification must come within the provisions of §13448-4 GC which provides:

“Upon the trial of an indictment or information for carrying a concealed weapon, the jury shall acquit the defendant if it appear that he was at the time engaged in a lawful business, calling or employment, and that the circumstances in which he was placed justified a prudent man in carrying such weapon for the defense of his person, property or family.”

On this question the court charged the jury as follows:

“It is up to the jury to determine by the greater weight of the evidence in just what circumstances the defendant was placed. Did he have a good reason to carry a revolver because of the danger he was involved in, in his lawful business? The term ‘prudent’ as used in the law refers to a man who is cautious, circumspect or discreet.

“The court instructs you that telephone calls, threats and involvements, whatever may be their purport, is no defense whatever to carry a concealed weapon unless actually in connection with his lawful business. The defendant must first establish by a preponderance of the evidence that at the time he was carrying the weapon he was engaged in a lawful business, or employment, or calling.

“Third: The law goes one step further and states the purpose for which one in a lawful business under certain circumstances may carry a revolver, or pistol, namely for the defense of his person, property or family. * * †

“Now to summarize this point as to justification, under the statute, before you can acquit the defendant on a charge of carrying a concealed weapon on the ground of justification under the statute, you must find all three of the following points:

“One: That the defendant was engaged in a lawful business at the time; and

“Second: That the circumstances in which he was placed in connection with his lawful business justified a prudent man in carrying such weapon; and

“Third: That he carried it for defense of his person, property or family.” (Emphasis added.)

The defendant claims the following errors:

1. The trial court erred in overruling the motions of the defendant Matthew Johnson made at the close of the plaintiff’s case in chief and again at the close of the entire case for a directed verdict in favor of the defendant and for his discharge.

2. The verdict and the judgment of the trial court is not only manifestly against the weight of the evidence but is contrary thereto.

3. The trial court erred in its charge to the jury

4. The trial court erred in overruling the defendant’s motion for new trial.

Justification for carrying a concealed weapon, under the statute (supra) requires the defendant to establish, by the greater weight of the evidence:

1. That the defendant was engaged in a lawful business, calling or employment.

2. That the circumstances in which he was placed was such as would justify a prudent man to carry a weapon for the defense of his person, property or family.

These elements are separate and distinct requirements. A defendant charged with carrying a concealed weapon is not entitled to claim justification unless he is engaged in a lawful pursuit. This provision is a restriction as to the class of persons who may claim such defense in a carrying concealed weapon’s case.

The court’s charge, as above quoted, requiring the defendant to show that the circumstances which he claimed to justify carrying a concealed weapon must have been associated or connected with his business, goes beyond the requirements of the statute.

The evidence in this case is undisputed that the source of the claimed danger which the defendant advanced in justification of carrying a concealed weapon came about as a result of giving assistance to the law enforcing officers of the city and county and could in no way be associated with the defendant’s business, whether such business be lawful or unlawful. The court’s instructions under the undisputed facts on the subject of justification required the jury to find the defendant guilty if they found he did carry a concealed weapon. Such charge therefore, constituted prejudicial error.

Whether or not the defendant was, at the time in question, engaged in a lawful business is a disputed question of fact. The jury may have found the defendant guilty because he failed to maintain the burden imposed upon him by law upon this issue. If that were so, then the judgment should be sustained. But, since the two issue rule has no application in criminal cases an error prejudicial to the rights of the defendant committed in submitting one of the issues presented in a criminal case to the jury requires a reversal of the judgment.

For the foregoing reasons, we overrule the defendant’s first two claims of error and sustain claims of error numbers 3 and 4 and remand the cause for further proceedings. Exceptions noted. O. S. J.

HURD, J, THOMPSON, J, concur.