author: Bradbury, J.

text:
    Wangerien et al. v. Aspell et al.

      Practice in civil cases — Joint petition in error — Objection to, when considered — Building and Loan Associations — When may compromise with, and release a member — If done in good faith, will not be rescinded.

    1. Where a number of persons, against each of whom a several judgment has been rendered in the same action, join in a petition in error to this court, the objection to such joinder will not be considered by the court unless interposed before the cause is prepared and ready to be submitted on its merits.
    2. While good practice requires that all the parties to a judgment that is sought to be reversed by this court should be made parties herein, if their interests might be affected by any judgment this court might render in the cause; yet it is not in all cases necessary to give the court jurisdiction over the subject matter of the proceeding. It is sufficient for that purpose, if the party in whose favor the judgment was rendered, and who represents the absent parties, as the receiver does in this case, is before the court.
    3. A building and loan association, incorporated under the act of February 21, 1867 (64 Ohio Laws, 18), has power to compromise with a member and release him from further obligation to the corporation, whether the indebtedness arose from a loan or on a subscription for stock. And, where the parties to the compromise have acted in good faith, the transaction will not be rescinded because the released member was paid a greater sum of money than he would have received upon a pro rata distribution of the assets of the concern.
    (Decided April 29, 1890.)
    Tars action was brought by Michael Hilliard in the Court of Common Pleas of Cuyahoga county, in January, 1879, against the plaintiffs in error, and a large number of others, to enforce against them the liability alleged to have devolved upon them by statute as stockholders of “ The Forest City United Land & Building Association,” a corporation organized in March, 1867, under an act of the general assembly of the state of Ohio, passed February 21, 1867 (64 Ohio Laws, 18), and which, it was averred, had become insolvent. The association had been dissolved by a decree of the Court of Common Pleas of Cuyahoga county, rendered a short time before this action was begun, and a receiver appointed, who afterwards entered his appearance and became a party herein.
    The plaintiffs in error by answer set up, among other defenses, that before the claims arose which were sought to be enforced against them, they had ceased to be stockholders in, or members of, the said association, by reason of having severally surrendered their respective shares of stock for cancellation, under regulations adopted by the association for that purpose. This was denied by a reply. In the court of common pleas the cause was referred to James Lawrence, who made a finding in favor of the plaintiffs in error, which, though the printed record is somewhat obscure, seems to have been confirmed by that court. The cause was then taken to the district court on appeal, from which court, on the creation of the circuit court, it was transferred to the latter court, where it was referred to Charles F. Morgan, who took the testimony in writing and reported the same, together with his findings of facts and conclusions of law, to that court. The referee held as a matter of law, under the facts as he found them, that the plaintiffs in error remained stockholders of the association and were liable as such, and stated an account showing the sum each shareholder should pay, not merely to satisfy creditors, but upon an equitable adjustment of rights between the shareholders themselves, according to the principles upon which the account was taken. This report, in so far as it affected the plaintiffs in error, was approved and confirmed by the circuit court, whereupon a several judgment was rendered against each of the plaintiffs in error, in favor of the receiver, for the sum equitably due from him according to the finding of the referee. To this plaintiffs in error excepted and brought the proceedings to this court for review. Any further statement of facts necessary to understand the decision will be found in the opinion.

      J. JE. Ingersoll, for plaintiff in error.
    1. The building association had power and authority, under the laws of Ohio, and its charter, and the regulations made in accordance therewith, to buy up and cancel its shares, when it was solvent, and there were no creditors holding claims against it. Taylor v. Exporting Company, 6 Ohio 176; State v. Building Association, 35 Ohio St. 263; Sections 3249, 3251 and 3252 Revised Statutes; 1 Mora, on Corp., Sec. 491, 498 and 500; Thompson on Liability of Stockholders, Sec. 202; 1 Mora, on Corp., Sec. 434; Gelpke v. Blake, 19 Ia. 263; Slee v. Bloom, 19 Johns. 459; Bank v. Bruce, 17 N. Y. 507; Mora, on Corp., Sec. 20.
    2. It matters not though the association had no power or authority to buy the shares of plaintiffs in error — though the acts were ultra vires — yet, since they were completely executed by both parties, and allowed to stand for several years, neither the corporation nor its stockholders, nor subsequent creditors, can set aside the transactions. Sanderson v. Iron Co., 34 Ohio St. 442; Hays v. Gaslight Co., 29 Ohio St. 340; Mora. on Corp., Sec. 688; Bank v. Mathews, 98 U. S. 621; Railroad Co. v. Howard, 7 Wall. 393; Parish v. Wheeler, 22 N. Y. 494; Gas Company v. West, 50 Ia. 16; Nav. Co. v. Weed, 17 Barb. 378; 101 Pa. St., 204; 22 Cal., 221; 83 Ill., 141; 69 Mo., 224; Coppins v. Greenlees, 38 Ohio St. 275; 34 Ohio St., 442.
    3. After these plaintiffs in error had retired from all participation in the business, and had relinquished all claims to the assets of the corporation, and had ceased to be known on its records as stockholders, such persons as thereafter became creditors of the corporation, voluntarily took the corporation as their creditor, with such collateral liability, as the stockholders then existing would afford, and have no claim in law or equity against these plaintiffs in error. Brown, v. Hitchcock, 36 Ohio St. 678; Mora. on Corp., Sec. 841.

      T. H. Graham and Arnold Green, for defendants in error.
    1. There was a lack of proper parties, defendants in error, as well as a misjoinder of parties, plaintiffs in error. The case should be dismissed for want of proper parties. Smetters v. Rainey, 13 Ohio St. 568; Same v. Same, 14 Ohio St. 287.
    2. In the absence of statutory authority, a corporation' cannot purchase its stock except to save a debt or similar purpose. A person can become a stockholder in a corporation, only by subscribing to its capital stock, or by stepping into the shoes of one who has subscribed. Having become a stockholder, there is no way of ceasing to be one, except by transferring the stock to another, who steps into his shoes.
    The purchases of stock and the compromises-with borrowers, were all made in the calculation that the association would work out the scheme in a given number of years, which calculation was based on the erroneous theory that the association had the right to collect interest on the premiums bid by borrowers, as well as upon the money received by the borrower, and also that the premiums bid in the future would equal those in the past. The agreement — the constitution of the association, that prescribed the manner in which the association should conduct its business — was therefore broken and abandoned when the association entered upon the business policy of purchasing stock and compromising with borrowers. The result was a division of the capital of the corporation among some of the stockholders, to the exclusion of others. It was a division and distribution of its funds among its members in advance of the distribution at the winding up of the corporation. It refused to loan funds to its members. It practically trafficked in its own stock. This it could not lawfully do. State v. Building Association, 85 Ohio St. 258.
    8. The capital stock of a corporation is a trust fund, held in trust by it; (1) for its creditors, (2) for all of its stockholders. We maintain that trust funds may always be followed by the parties entitled thereto into the hands of the persons receiving them with knowledge of the trust. An ultra vires act of a corporation will not be upheld, unless the treating of the same as a nullity will operate as a fraud on the party who dealt with it, in good faith. In other words, it is only on the ground of estoppel such acts are to be upheld and treated as valid, and the authorities cited by counsel for plaintiffs in error, are based upon that principle.
   Bradbury, J.

No joint judgment was rendered in the circuit court against the plaintiffs in error, nor could any such judgment have been rendered, for the claim against each was several. A several judgment, therefore, was rendered against each of the plaintiffs in error, in favor. of the receiver of the association, for the amount found by the referee to be severally due from each of them as stockholders thereof. These plaintiffs in error joined in one, petition in error to this court, instead of each filing a separate petition, as it is contended they should have done ; and, for this reason, it is now insisted by defendants in error that the petition in error should be dismissed. It is no doubt true that the code of civil procedure does not permit, as a rule, persons to be joined as plaintiffs who are not united in interest, but it is not necessary to determine, in the case before us, whether or not the plaintiffs in error could join in obtaining the relief demanded, or if they could not, what remedy ought to have been applied if the objection had been promptly made, for the joinder affects no substantial right of the defendants in error, and the failure to interpose this objection for three years, and until the cause had been prepared and ready to be submitted on its merits, must be taken to constitute a waiver of any right they may have had in respect thereof. It would be a severe rule, indeed, that would visit with the penalty of dismissal at this late day a mistake so easily remedied, if the parties now complaining of it had pointed it out at an early stage of these proceedings in error.

The parties to this action in the courts below numbered about five hundred; they were all included in the petition in error filed in this' court, but no summons in error was issued thereon. The receiver, however, in whose favor the several judgments now sought to be reversed were rendered, entered his appearance. The appearance of all the outside creditors was also entered, as was that of a considerable number of the stockholders, yet, when all this was done, there remained a numerous body of the stockholders who are not before this court. Upon this ground the defendants who are before the court, on the authority of Smetters v. Rainey, 13 Ohio St. 568, and the same case, 14 Ohio St. 287, insist that as the statute of limitations has run in favor of those defendants who did not enter an appearance, the cause should be dismissed for want of proper parties. We think the principle underlying those cases — Smetters v. Rainey, supra— should not be extended; since that principle was announced, it has been generally criticised and its application limited whenever under consideration by this court: Bradford v. Andrews et al., 20 Ohio St. 220; Secor v. Witter, 39 Ohio St. 218; Bank v. Green, 40 Ohio St. 438.

Beyond doubt, good practice requires that, all parties to the judgment below, who may be affected in any way by the judgment of this court, should be before it, and serious inconvenience and embarrassment might result from their absence; but, if the court has acquired jurisdiction of the cause, the absence of parties who may be affected does not necessarily demand a dismissal thereof. The proper course to pursue in such case must depend upon the exercise of a sound discretion under all the circumstances before the court. In the case before us the judgment or decree was somewhat singular. A several judgment was rendered against each one of a large number of shareholders, not upon their statutory liability, but for money paid or distributed to them, severally, beyond the amounts which they were respectively entitled to receive upon a pro rata distribution of the. assets of the concern. These judgments aggregate over $46,000, while the debts to be paid and the costs altogether amount to a little more than $15,000, and the aggregate sjim of the judgments against the plaintiffs, does not very much, if at all, exceed $6,000; so that, if their defense is held good, there will still remain judgments for about $40,000 with which to pay $15,000. If the insolvency of some of those, against whom these judgments were rendered, was the ground upon which the seemingly excessive judgments were rendered, it is not sufficiently disclosed in the record. The judgment or decree of the circuit court, made no provision for the distribution of the surplus remaining in the hands of the receiver after the debts and costs were paid, and the case remains in that court for further proceedings in reference thereto, as well as for certain other matters not material to the enquiry before us. The discharge of the plaintiffs in error, therefore, will cause no inconvenience or embarrassment in the circuit court. That court will simply have before it eighteen less persons to whom to distribute this surplus, and a sum to distribute reduced by the aggregate amount of the judgment against these plaintiffs in error ; but if any inconvenience or embarrassment should ensue, the defendants who are before the court after this lapse of time must be deemed to have brought it on themselves, for they had ample time, before the statute of limitations had run, to move this court to require the plaintiffs in error to bring in all the defendants or obtain leave to do so themselves. The defendants, therefore, who are before the court, have no standing to require a dismissal of the petition in error, if the court obtained jurisdiction of the action.

That the parties before this court were such as to give it jurisdiction, is, we think, quite clear. The receiver, in whose favor the judgments sought to be reversed were rendered, and the creditors proper of the association, as well as a portion of the stockholders, have entered their appearance. Indeed, it would seem that, the form of the judgments are such that the appearance of the receiver alone, he being the party, and the only party, in whose favor the judgments were rendered, would be sufficient to give jurisdiction. He is the representative of the other parties and whatever rights they have must be worked out through him; he is the party to whom the judgments are payable; he only could enforce them, and, for these reasons, we think, he is the proper party to defend them in this proceeding.

The main contention between the parties arises on that part of the report of the referee, wherein he held, that the plaintiffs in error remained stockholders of the association, and adjusted the rights of the parties on that theory, notwithstanding they had, nominally, at least, compromised with, and surrendered to, the association, the shares of stock Held by them. This holding was based upon the theory that the regulations adopted by the association, under which the' surrender of stock was made, was unauthorized, ultra vires and void, and that, notwithstanding the transaction which led to the surrender of the stock was completely executed, and the shares of stock, in fact, surrendered, yet, there was no equity in favor of the shareholders by which the transaction could be upheld. The material circumstances of the transaction are as follows: The capital stock of the concern was $400,000, which was divided into two thousand shares of two hundred dollars each; that the constitution of the concern provided that funds should be raised by monthly dues of one dollar per share, fines for non-payment of dues, and interest on loans advanced to members; and that it should continue in operation until sufficient funds should be realized to divide to each share two hundred dollars or its equivalent, at which time the association should be dissolved; that as money accumulated sufficient to redeem one or more shares it should be loaned from time to time to the member offering the highest premium therefor, and this in effect was a redemption in advance of the share or shares of stock upon which the loan was made. The borrower (so called) giving security for the payment of the interest on the money loaned, his monthly dues and fines that might be assessed against him, but not for the repayment of the money advanced to him, as its repajunent was not contemplated by the scheme of the ■ association. The constitution did not contain any provision authorizing its amendment, but authorized provision to be made by by-laws respecting shareholders who might withdraw from the association, and a by-law was adopted, at the time of adopting the constitution, providing for the withdrawal of members, which was never formally repealed, and which only differed from the regulations under which plaintiffs in error withdrew, by fixing a rate more advantageous to the association. This constitution and the by-laws, as originally adopted, were signed by each subscriber for stock. The association continued to loan its money (or more properly, to redeem its stock) to the person bidding the highest premium therefor, until January, 1871, at which time (January 2, 1871) the stockholders adopted a resolution authorizing the purchase, as it was called, but, in fact, the cancellation and retirement, of such shares of stock as could be had at a premium of twenty per cent, on the amount paid in; in like manner on January 16, 1872, the rate for retiring stock was fixed at thirty per cent.; on January 13, 1873, it was fixed at forty-five per cent, for sixty days, and forty per cent, for the balance of the year; and on January 5,1874, the rate was fixed at sixty per cent. These rates were fixed without any objection, so far as the record discloses, nor does it appear that they were the result of any device, trick or misrepresentation of any kind, or that those rates, in the apparent condition of the association at the time, were unduly favorable to those who wished to retire. It was under these resolutions that the shares of the plaintiffs in error were taken up and retired before the claims accrued for which they are sought to be held, and about four years before this action was commenced. The referee construed the transaction to be both a purchase of the stock by the association, and a division of its funds in advance of the time provided for by its constitution. This view we have not been able to adopt. The transaction was not' a purchase in the correct sense of that term. A purchase implies an acquisition of property, a change or transfer of ownership. Bouvier, 488. This was not within the contemplation of the parties to the transaction; it was not intended that the shares should be kept alive (so to speak) and remain the property of the association; on the contrary, the object sought was their extinguishment by retirement and cancellation, and we see no reason for imposing on the transaction any other character than that intended by the parties themselves. Nor did the parties intend a division of the funds of the concern in advance. The parties who went out expressly waived any right in the ultimate division contemplated by the constitution of the association, in consideration of receiving, at the time, a sum agreed upon by the parties. The object of the association was to reduce the number of shares among which final division should be made when the funds should be sufficient to divide two hundred dollars per share, and this cancellation of stock was a means, as they supposed, of hastening that day, for the rate at which stock should be cancelled was no doubt fixed somewhat below its real value, as the same was measured by the existing assets of the concern at the value put upon them by the association at the time.

The nature of the transaction must be determined by the understanding of the parties, and the situation as it appeared to them at the time it was entered into, and the fact that some years later, either through the mismanagement of those who remained in and participated in conducting its business) or for some other cause it turned out that the association retired these shares at too high a rate, does not affect the question. Therefore, we hold the transaction to be a compromise with shareholders and a retirement of their stock,- and the power to do this, we think, is incidental to all building and loan associations organized under the laws of this state. The expressed object of their creation is to afford means to build homes for their members. The law must be taken to have anticipated the exigencies that are likely to arise in the affairs of life. The membership in these associations • is usually quite numerous ; in this association it was’ over five hundred; its duration was to exceed eight years. A multitude of causes can be imagined Which would render it highly inconvenient, and many that would make it altogether impracticable, for some of this large number of shareholders to remain members until its existence should termi-' nate by a division of its assets according to its constitution; in such case they must either take the chances of a sale to some individual, or compromise with the association. The right of an association of this kind, to compromise with a member and release him, is declared in State v. Building Association, 35 Ohio St. 258, and we reiterate the doctrine there laid down.

Notwithstanding this general power of building and loan associations, to compromise with their shareholders and release them from liability, it is not doubted that they can be limited by their own internal regulations, and this, it is contended, has been done by the constitution and by-laws adopted by this association. It is further contended that, as the constitution and by-laws of this association, after their adoption, were signed by all its stockholders, they became a part of the contract which could not be changed, as we understand counsel, except by unanimous consent. We do not perceive any ground to maintain that the constitution and by-laws are any more binding, because signed by the members, for, whether signed or not, they become the law of the association, binding upon all of its members, until altered or amended, and the circumstance that they were signed does not take away the right and power of amendment, which is incidental to all corporations.. Notwithstanding the statement in Waterman on Corporations, 234, and cases cited in support of it, we do not doubt that the constitution of a corporation may provide that it, or the by-laws, shall not be altered or amended without the consent of all, or some fixed proportion, of the members, in which case, an amendment or alteration, to be binding, must secure the assent of the stipulated number; but this constitution contained no such provision. It, in fact, contained no provision, whatever, in relation to its amendment; this omission, however, did not take from it the power to amend, with which it was clothed by the law of the state. Section 3253, Revised-Statutes. But, were this not so, it would not aid the defendants in error in this case, for the constitution in express terms provided “ that the by-laws of the society should make such provision as may be deemed expedient and proper with regard to shareholders who may for various causes withdraw from the society.” Accordingly, a by-law was, at the same time, adopted, providing that the holder of unredeemed shares might withdraw, and fixing the terms at five per cent, less than he had paid in, and his proportion of the losses and expenses. Thus it appears, not only that the constitution and by-laws did not deny the right of withdrawal, but on the contrary expressly recognized and provided for its being done.

The association having the power to compromise with its members and retire their stock, the only question that remains is whether this power was fairly and reasonably exercised or not. It is said that the power was not fairly and reasonably exercised, because the retiring members received too much, as the ultimate result proved; that is, the association fixed the rate of redemption too high. That cannot be allowed to be the test of the fairness of a transaction. The stockholders of the association at four successive annual meetings adopted a resolution, without dissent or opposition, fixing the rate at which any holder of unredeemed stock could, if he chose, retire from the concern. There is no suggestion that any undue influence, misrepresentation, ruse or device of any kind was employed to secure the adoption of these resolutions. There is no ground to suppose that these rates were fixed for any other reason than the general belief that the accumulations of the association warranted it. These standing rates were accepted by the plaintiffs in error (among others), and their respective shares of stock retired more than four years before this action was begun, during all which time they had no actual connection with the association or interfered in any way with the management of its concerns. Under these circumstances, we think the transaction must be deemed a fair one. It is not clear how the affairs of the association fell into such confusion; one potent cause, no doubt, was the decision of this court against its claim to charge interest on the premium bid by shareholders for precedence in obtaining money, and the resultant discouragement. The Forest City United Land and Building Association v. Gallagher et al., 25 Ohio St. 208. To hold, that in order to make a compromise with, and discharge of a member fair, it should appear at the ultimate winding up of the affairs of the concern, that too much had not been paid him, would be to defeat all efforts at compromise, for no member would care to withdraw upon such terms. He would be placed in this situation. If, in the end, it appeared, that the association had secured a good bargain, the transaction would stand; but if it had paid him too much, it could call for a readjustment of the accounts, if it saw proper so to do, either before or at the time of its final dissolution. This cannot be allowed. The power to compromise implies a power to bind both parties by the terms agreed upon, though they prove highly advantageous to one party and equally detrimental to the other, in the absence of fraud or some other recognized ground of equitable relief.

Judgment reversed, and judgment rendered for plaintiffs in error.


source: Caselaw Access Project

author: Spear, J.

license: Public Domain

text:
    Jayne’s ex’r’x v. Platt.

      Attachment — Undertaking under section 5545 — Nature of — Action upon such undertaking — When Sureties thereon concluded by judgment in favor of plaintiff in attachment — Practice.
    1. The undertaking authorized by section 5545, Eevised Statutes, to be given by a defendant in attachment, is intended to take the place of the attachment proceeding, and the property seized by virtue of the writ. It is the intent of the statute that the sureties in such undertaking shall be bound to the same extent (not in excess of the amount of the undertaking), as the property of the debtor, or the garnishees, would have been bound, had no undertaking been given, and the undertaking must be construed with reference to such intent.
    2. In an action upon such undertaking for the recovery of the amount of the judgment in favor of plaintiff and against the defendant in attachment, the sureties are concluded by tire judgment, and will not be heard, in the absence of fraud, collusion, or manifest mistake, to question its ' correctness, or inquire into the action of the court either upon a preliminary motion, or in rendering the final judgment.
    3. In an action commenced by P. against D., in the court of common pleas, the plaintiff asked a judgment for $5,500, upon a claim for money had and received by the defendant to and for the use of the plaintiff. A proper affidavit being filed, stating the same claim, an order of attachment was issued, which was superseded by the defendant giving an undertaking under section 5545 Eevised Statutes, with J. as his surety. Afterward, by leave of court, the plaintiff filed an amended petition, asking to recover a judgment for the same amount named in the original petition by reason of the collection by defendant, after dissolution of a partnership theretofore existing between the parties, of debts due the firm, which by agreement, he was obligated to apply in discharge of partnership debts,'but which he neglected to so apply, whereby the plaintiff was compelled to pay snch debts, and for compensation for time spent in collecting debts and settling claims against tlie firm, and asking that defendant be compelled to account, and be ordered to pay to plaintiff any balance in his hands, and for other equitable relief. Answer was filed, and, on trial, judgment was rendered for plaintiff. The judgment being unpaid, P. commenced an action against J., the surety, on the undertaking to recover the amount of the judgment.

      Held: (a) In such action on the undertaking, it will be presumed that the court, in passing upon the application for leave to file the amended petition, ascertained and found, that the claim declared upon in such amended petition, though stated in different form, was based upon the same facts and transactions as the claim stated in the original petition, (b) An answer by J., which alleges, in substance, the foregoing facts, and that when requested to sign such undertaking, the defendant made inquiry into the existence of the indebtedness set out in the original petition, and, upon ascertaining that none such existed, consented to execute said undertaking, and asks to be discharged from liability on the ground that the action in which the judgment for P. was rendered, was not the action in which the undertaking was given, does not state a defense.
    (Decided April 29, 1890.)
    Ekrob. to the Circuit Court of Cuyahoga county.
    Action below was by the defendant in error against Harris Jaynes and Andrew Jaynes to recover upon an undertaking in attachment. It was averred in the petition' that on the 25th of July, 1868, the plaintiff commenced in the Court of Common Pleas of Cuyahoga county, an action against Barney A. DeWolf, and caused an order of attachment to be issued, directed and delivered to the sheriff of said county, and that thereupon DeWolf caused an undertaking to be executed to the plaintiff by the defendants, as his sureties, in the sum of eleven thousand dollars, which was duly approved. The undertaking was to the effect that the defendant should perform the judgment of the court in said action; and thereupon the attachment was discharged. Afterward, at the May term, 1880, the plaintiff recovered a judgment against DeWolf for $5,689.85, and costs $73.93. The judgment is in full force, and wholly unsatisfied. Judgment was asked for $5,763,28, with interest from May 3,1880.
    The. undertaking was as follows:

      “ Andrew Platt, plaintiff, v. Barney A. DeWolf, defendant. 1 V ) In the Court of Common Pleas, Cuyahoga county, Ohio.
    We bind ourselves to the said plaintiff, Andrew Platt, in the sum of $11,000, that the said defendant, Barney A. DeWolf, shall perform the judgment of the court in this action.
    Cleveland, July 25th, 1868.
    Harris Jaynes,
    Andrew Jaynes.”
    Defendant, Harris Jaynes filed a separate answer, in which, among other things, it was averred that the action so com-' menced by Platt against DeWolf, and in which the attachment was issued and the undertaking executed, was one at law upon a cause of action stated in the petition to be for money had and received by said DeWolf to and for the use of the plaintiff, amounting to $5,500, for which sum, with interest from July 24, 1868, plaintiff prayed judgment, and no other or further claim or ground of recovery was alleged in said petition. No judgment was rendered upon said cause of action, but some time after said undertaking was executed, plaintiff filed an amendéd petition by which he wholly abandoned the action originally stated, and instead thereof stated one in equity to obtain an accounting between co-partners, and an adjudication of partnership liabilities growing out of a partnership business formerly conducted by plaintiff and defendant and one Porter, and afterward by plaintiff and defendant. Under the issues joined by the amended petition, and answer, the cause was referred to a master to take and state an account between the parties, who reported that DeWolf had received and collected an amount in excess of the sum collected by Platt, which, together with the amount due said Platt for services rendered, amounted to upwards of $11,000, one half - of which Platt was entitled to; whereupon the court rendered judgment for Platt against DeWolf for $5,689.35, which was the only judgment rendered in the ease. Defendants, when requested to enter into the undertaking, instituted careful inquiry into the existence of the indebtedness set out in the original petition, and upon ascertaining that none such existed, consented to execute such undertaking; that the amended petition was filed without his knowledge or consent; was a petition seeking equitable relief, and contained'the statement of a cause of action wholly foreign to that stated in the original petition.
    A copy of the original and ramended petitions was made part of the answer. In the amended petition it was stated, that Porter, Platt and DeWolf were partners prior to September, 1866, when Porter .retired, the other two continuing the business until May 9, 1868, under the same articles of' co-partnership, which were set out. It was therein provided that the parties were to contribute to the capital equally, but if they did not, those who furnished more than their share, were to receive interest on the excess: The amended petition further stated that the firm of Platt & DeWolf was dissolved May 9, 1868; that Platt had contributed substantially the whole capital; that there was due him at dissolution, $6,431.56; the firm debts, aside from this, were $17,248.54; that $15,350 of this, was for money borrowed from a bank which was secured by Platt by a deposit of bonds; that the profits had been large, of which DeWolf had drawn out more than his share; that by agreement at time of dissolution, both parties had bound themselves to apply all dues and assets collected to the payment of debts, and to no other use, and that the excess of time occupied by one more than the other in collecting and settling debts should be paid for; that DeWolf had received after the 9th of May, 1868, a large sum of money, derived from the assets of the firm, but, instead of paying the debts had used a large part thereof in his own business, in violation of said agreement, and that plaintiff had been obliged to relieve his securities by paying all that part of the indebtedness not paid by a receiver, appointed in another action between the parties, and had spent much more time in settling and collecting, than the defendant for which he was entitled to compensation. ' He claimed due from defendant $5,500, with interest from July 29, 1868, and also prayed that defendant might be compelled to come to an accounting, and be ordered to pay plaintiff any balance found in his hands belonging to plaintiff, and for further relief.
    The plaintiff demurred to the answer of Harris Jaynes on the ground that it did not state facts sufficient to constitute a defense. On hearing in the common pleas, the demurrer was overruled, and, reply being filed, the case was tried and judgment rendered for defendant. In the circuit court the judgment of the common pleas was reversed for error in overruling the demurrer and rendering judgment. To reverse the judgment of the circuit court this proceeding in error is brought.

      Boynton, Hale Horr, for plaintiff in error.
    1. We claim that the change, or substitution in the action, discharged the surety in the undertaking, because it radically changed his liability without his consent. Ide v. Churchill, 14 Ohio St. 371; Smith v. Huseman, 30 Ohio St. 662; Hall v. Williamson, 9 Ohio St. 23; Meyers v. Parker, 6 Ohio St. 501; Sites v. Haverstick, 23 Ohio St. 623; Butler v. Kneeland, Id. 196; Life Ins. Co. v. Sutphin, 35 Ohio St. 360.
    The statute, see. 5114, old code, 137, does not authorize an independent cause of action to be substituted for the one sought to be amended. Spice v. Steinruck, 14 Ohio St. 213; Reeder v. Sayer, 70 N. Y. 181; Nash on Pleading, 313-314 et seq.; Bates on Pleading, 165, Commissioners v. Andrews, 18 Ohio St. 49; Pomeroy on Remedies, sec. 566; Board of Supervisors v. Becker, 34 Wis. 378; Rutledge v. Vannister, 8 Bush. 354; McGrath v. Balser, 6 B. Mon. 141. The two .causes of action were in “irrepressible conflict.” Niel v. Greenleaf, 26 Ohio St. 570; Dias v. Bonnell's Exr., 24 Wend. 9; Chitty on Contracts, 556; Bartlett v. Diamond, 14 M. & W. 49; Pardoe v. Price, 16 M. & W. 451; Arnold v. Angell, 62 N. Y. 508; Thomas v. Thomas, 5 Exch. 28; Conilli- and v. Eaton, 139 Mass. 105; Ryder v. Wilcox, 103 Mass. 30; Armitage v. Winterbottom, 1 Scott N. R. 23; Paine v. Thatcher, 25 Wend. 450.
    2. The judgment against DeWolf, the defendant in the attachment action, is not conclusive of the sureties’ liability. State v. Jennings, 14 Ohio St. 73; Westerhaven v. Clive, 5 Ohio 136; State v. Colerick, 3 Ohio 487; Secrist v. Barber, 17 Ohio St. 431; Hall v. Williamson, 9 Ohio St. 23; Ingersoll v. Parker, 6 Ohio St. 501; Smith v. Hinsman, 30 Ohio St. 662; Smead v. Chrisfield, 1 Handy 573; Andre v. Fitzhugh et al., 18 Mich. 93; Willis v. Crocker, 1 Pick. 204; Brigham v. Este, 2 Pick. 425; Langly v. Adams, 40 Me. 125; Clough v. Monroe, 34 N. H. 381; Young v. Broadbent, 23 Ia. 539; Robeson v. Thompson, 9 N. J. L. 97; Moulton v. Chapin, 28 Me. 505; Warren v. Lord, 131 Mass. 560; Tucker v. White, 5 Allen 322; Richards v. Storrer, 114 Mass. 101; Quellen v. Arnold, 12 Nev. 234; Jaycox v. Chapman, 10 Benedict 517; Mann v. Brewer, 7 Allen 202; Kellogg v. Kimball, 142 Mass. 128: Wood v. Denny, 7 Gray 540; Haven v. Snow, 14 Pick. 33; Wight v. Hale, 2 Cush. 493; Haynes v. Morgan, 3 Mass. 210; 1 Tidd’s Practice, 242; Wilks v. Adcock, 8 T. R. 27; Wheelright v. Jutting, 7 Taunt. 304; Thompson v. Macirone, 5 D. & R. 619; Furness v. Need, 63 Md. 1; Lumpkin v. Collier, 69 Mo. 170; Fullerton v. Campbell, 25 Pa. St. 346; Wapples on Attachment, 409; Drake on Attachment, sec. 285; Fairchild v. Baldwin, 12 Pick. 388; Ayer v. Smith, 3 Cranch 437; Ward v. Washington, 4 Cranch 232; Clark v. Foxcroft, 7 Green, 1, 296; Christal v. Kelly, 88 N. Y. 285; Leonard v. Speidel, 104 Mass. 356; Ruder v. Sayer, 70 N. Y. 181.
    3. But the surety in the undertaking had the right to treat the law affecting its validity by any amendment to the cause' of action, as settled in this state by the decision in Spice v. Steinruck, 14 Ohio St. 214. Alcott v. Supervisors, 16 Wall. 690; Sweeny v. Easter, 1 Wall. 175; Havemeyer v. Iowa Co., 3 Wall. 294; Douglas v. County of Pike, 101 U. S. 677; Harris v. Jex, 55 N. Y. 421; Shelby v. Guy, 11 Wheat. 367; Louisiana v. Pilsbury, 105 U. S. 294; Anderson v. Santa Anna, 116 U. S. 356; Taylor v. Ypsilanti, 105 U. S. 60; County of Ralls v. Douglass, Id. 728; City v. Lamson, 9 Wall. 477; Boyd v. Alabama, 94 U. S. 645; Thompson v. Lee

      County, 3 Wall. 327; Brown v. Mayor, 63 N. Y. 239; Jessup v. Carnegee, 80 N. Y. 441; Cooley's Const. Lim., 474, 477; Dillon’s Mun. Corp., 46; Paine v. Thatcher, 25 Wend. 450; Montgomery v. Henry, 10 Mich. 20.

      Samuel H. Williamson, for defendant in error.
    1. The amendment to the petition was proper and did not change the cause of action. Goble v. Howard, 12 Ohio St. 165; Rainsford v. Rainsford, 57 Barb. 58; Coffee v. Brian, 4 Bing. 54; Brierly v. Cripps, 7 Car. & Payne 74; Trustees v. Odlin, 8 Ohio St. 293; Pease v. Barber, 3 Cain’s Reports 266; Assurance Co. v. Towle, 65 Wis. 247; sec. 5096, Revised Statutes.
    2. If the cause of action was somewhat changed, the amendment might be allowed, and, if allowed, the signers of the undertaking are liable for the amount of the judgment. Sec. 5114, Revised Statutes; Brown v. Leigh, 49 N. Y. 78; Abbott’s Practice Rep., 193; North v. La Flesh, 73 Wis.—; Alber v. Froelich, 39 Ohio St. 245.
    3. Whether the amendment was propérly allowed or not, the judgment of the court against the defendant is conclusive in an action on the undertaking to release the attachment. Myers v. Smith, 29 Ohio St. 120; Holt v. Whittier, 31 Ohio St. 475; Bentley v. Dorcas, 11 Ohio St. 398; Kellogg v. Kimball, 142 Mass. 128; Imbusch v. Farwell, 1 Black. (U. S.) 566; Churches v. Barker, 18 N. Y. 463; United States v. Mosley, 7 Sawyer 265; Christal v. Kelly, 88 N. Y. 285; Slosson v. Ferguson, 31 Minn. 448; Sutro v. Bigelow, 31 Wis. 527; Harra v. Int. Pet. Co., 23 Ohio St. 622. Indeed it may well be considered an established principle, that whenever a surety has contracted with reference to the conduct of one of the parties in some suit or proceeding in court, he is, in the absence of fraud and collusion, concluded by the judgment.
    4. The amended answer of the defendant below, did not State a defense, because it showed that he had not been injuriously affected by the amendment of the petition.
   Spear, J.

The question is, did the amended answer state a defense to the plaintiff’s action ?

Plaintiff in error seeks a reversal of the judgment of the circuit court sustaining the demurrer, on the ground that the judgment rendered against DeWolf and in favor of Platt, was not rendered in the action in which the undertaking sued upon.was given. In other words, that the amended petition was so different from the original as to make a new action, and that, therefore, the liability of the surety was changed without his consent, whereby, upon well settled principles, he was discharged.

To sustain this contention the plaintiff in error must be prepared to show (1), that he can be permitted to inquire into the judgment rendered in favor of Platt and against DeWolf, and (2) that upon such inquiry it will appear that the action in which the judgment was rendered was not the action in which the undertaking was given. Failure to establish either of these propositions is fatal to the claim.

Was the judgment of the court of common pleas in favor of Platt, conclusive in an action on the undertaking to release the attachment?

We think an examination of section 5545, the statute under which the undertaking is permitted, will suggest an answer to the question. That section provides not only for the giving of the undertaking and specifies its character, but defines the effect of it when given. The condition must be “ to the effect that the defendant shall perform the judgment of the court.” On the giving of the undertaking “ the attachment shall be discharged, and restitution made of any property taken under it, or the proceeds thereof.” The undertaking “ shall also discharge the liability of a garnishee in the action, for any property of the defendant in his hands.”

By so giving an undertaking the defendant in attachment is enabled to supersede the proceedings under the writ of attachment, and substitute for the security afforded the plaintiff by a seizure of property, either directly, or in the hands of a garnishee, the personal stipulation and liability of the sureties in the undertaking that “ the defendant shall perform the judgment of the court.” Of course this implies the judgment in the action. In the undertaking here the words “in this action ” were added, but they neither enlarged nor limited the import of the statute.

The undertaking is purely in the interest of defendant. It is given to enable him to regain and retain full use of his property attached, or to be attached, and the undertaking takes the place, for all the purposes of the case, of that property, as well as of the attachment itself. Having thus placed himself in the attitude of a substitute for the attachment and for the property, it would seem to follow that the surety is affected by whatever would have affected the property, and liable to respond upon his undertaking, under the same circumstances, and, within the limit of his undertaking, to the same extent, that the property could have been subjected, or the liability-of the garnishee enforced. If the subsequent action of the court is such as to have the effect of releasing the property attached and discharging the attachment, or of discharging the garnishee from liability, had no undertaking been given, then the surety could, with reason, claim release, but if, whatever may be done, by way of amendment of pleadings, or otherwise, would not have that effect, then it is difficult to see what reasonable claim to release can be urged. The undertaking is to be construed in connection with the existing law, pursuant to which it is made, and with regard to the object sought to be accomplished by the statute authorizing it. This object, as we have seen, is to enable the defendant to substitute for the attachment a security which should be available to the plaintiff upon the recovery of a judgment. Surely the legislature did not intend that the security afforded the plaintiff by his attachment, might be impaired by enabling the defendant to substitute security of less value, or of less efficacy.

In the case under consideration the attachment entitled the plaintiff to charge in the hands of the garnishee named in the affidavit, the moneys and credits belonging to DeWolf, and subject them to the payment of his debt. If no undertaking had been given, the plaintiff could and would, have availed himself of that mode of satisfaction. By giving the undertaking, the sureties enabled the defendant to obtain a valuable benefit in the possession and control of the moneys and credits sought to be reached by the process of garnishment. And, in legal effect, they made the liability of the garnishees their liability, and thus consented to stand in the place of the garnishees, and to become themselves liable, not exceeding the amount named in the undertaking, to the same- extent, and under the same circumstances, as the garnishees would have been, had no undertaking been given. It cannot, with reason, be claimed that the filing of the amended petition could have the effect of discharging the attachment, or releasing the garnishees. The case made in the new pleading, though different in its form of statement from that in the original, was not, necessarily, a case based upon different facts. Whether it was or not, was a matter proper to be inquired into when the application to file the amended petition was being considered, and it will be presumed that the court, in passing upon the application, ascertained and found, that the claim declared upon in such amended petition, though stated in different form, was based upon the same facts and transactions as the claim stated in the original petition. Nor did the form of either exclude the right to an attachment. Each was an action for money. Lord Mansfield denominated the action for money had and received “ a kind of equitable action.” The early authorities held that “ where money is due ex cequo bono, it may be recovered in an action for money had and received.” None doubted that it is for the recovery of money. And, since the decision in Goble v. Howard, 12 Ohio St. 165, no doubt has existed that, in this state, one partner, in an action against his copartner, after dissolution of the firm, to recover what is claimed to be due, may have an order of attachment as in other civil actions for money. The only person who could have interposed a legal objection to the ruling of the court in allowing the amended pleading to be filed was the defendant in the case, and he only by a proceeding in error to reverse. No such proceeding was instituted, and the final judgment stands as conclusive against him. It is, we think, in the absence of allegations of fraud, collusion, or manifest mistake, equally conclusive against the sureties in the undertaking. They are liable for the amount of the judgment irrespective of its legal merits, because such is the nature of their contract. They cannot, any more than could a surety for a plaintiff in attachment, or in replevin, go behind the judgment and allege that, for errors committed, it is contrary to law. Any other construction of the statute would defeat its obvious purpose. Nor can it be said that such result could not have been in contemplation of the parties, for, whatever they may allege otherwise, in signing the undertaking, these sureties must be presumed to have done-so with knowledge of the statute, and of the power of the court to allow amendments to the pleadings. If they acted on a mistaken idea of the meaning of the statute, or of practice in the courts, and were thereby misled to their injury, it is their misfortune.

But if we should apply to this undertaking the strictest rules of construction, it is difficult to see how the contention of plaintiff in error could be maintained. The language is : “perform the judgment of the court in this action.” Admittedly, these words mean the action then pending. An action includes the formal proceedings attendant upon the demand of a right made by one party of another, which is properly said to terminate at judgment. The view of counsel seems to confuse “ cause of action ” with “ action,” and to seek to substitute for the proceeding itself, the right upon which it is based. Beyond all question, the judgment was rendered in the action in which the undertaking was given, unless the filing of the amended petition itself made a new action. No other action was commenced, and none other prosecuted. And a fair interpretation, as well in accordance with the language as with the sense of the obligation, would hold the term “this action” to mean the suit then pending between the parties.

We have not overlooked the many cases in this state and elsewhere, cited by the learned counsel for plaintiff in error in his brief. But we cannot agree that they require a reversal of the judgment. The question turns upon a construction of our statute, and that is not controlled by the decisions of courts of other states. Many of the Ohio cases cited are actions on official bonds. In State v. Colerick, 3 Ohio, 487, where, in a suit upon a sheriff’s bond against the sureties, the record of a judgment against the principal alone had been admitted, this court say: “ Where the sureties have notice of the suit, and may, or do make defense, the judgment against the principal is conclusive against them. Where such notice is not given, the judgment against the principal is prima fade only. It may be impeached for collusion, or for mistake. But, until so impeached, it is sufficient to entitle the plaintiff to recover the amount for which it is rendered.” A somewhat careful examination of Ohio cases fails to discover one where the court has held to the contrary of this. It is true that in the opinion in State v. Jennings, 14 Ohio St. 73, the judge states his opinion, based upon authority to be, that where sureties have no notice of the action against the principal they may “ not merely attack the judgment for fraud or collusion, but open up the inquiry into the merits,” though he intimates that the decisions which establish the rule “ may be subject to just criticism, and questionable as to the principle on which they rest.” The action was one against a constable and his sureties on his bond, and, at the trial, the record of the judgment previously rendered against the constable alone was rejected. The facts hardly called for a holding to the extent indicated in the opinion, and in the syllabus the case’of State v. Colerick, supra, is cited and followed. But whatever the law may now be in such cases, a distinction, we think, is to be taken between them and the case we are considering. In general, the obligation in official bonds is that the surety will be responsible in case the officer fails to faithfully discharge the duties of the office. The question in issue, in an action on the bond against the sureties, is, has there been dereliction of official duty within the meaning of the bond, and has the party complaining been damnified ? In this class of cases the question is different. It is: Did the plaintiff recover judgment, and for what amount, and did the defendant satisfy it? Proof that a judgment was rendered for the plaintiff in attachment which the defendant has not satisfied, shows a breach of the bond. And of such judgment,'it would seem, that the record itself is not only the best, but the only evidence, and, until impeached for fraud, collusion, or manifest mistake, ought to be held conclusive.

Tlie precise question here presented has not been before this court heretofore. But some of the cases referred to by counsel for defendant in error in his brief, we think, bear upon the case before us. Bently et al. v. Dorcas et al. 11 Ohio St. 898, was an action against sureties upon a bond given for appeal from the judgment of the court of common pleas to the district court. The answer alleged, among other defenses pleaded, that the decree in the district court on appeal was rendered upon a different and distinct liability from that sustained by the common pleas, and upon a ground not made in the pleadings, and such a decree, it was urged in this court, could not have been in contemplation of the parties, and should not be regarded as within the terms of their contract. But the court, speaking by the opinion, held that they were not at liberty, in that proceeding, to say that the district court erred, but were bound .to assume that the decree of that court was properly made; that if the decree was prejudicial to any of the parties, their remedy was by a direct proceeding to reverse or modify, and as no such step had been taken, the court must regard the decree as valid and correct, and must decide only on its legal effect on the liability of the parties who had executed the bond.

In Braiden v. Mercer, 44 Ohio St. 339, the question presented was whether or not, in an action upon a guardian’s bond for recovery of amount found due the wards upon a final settlement of the guardian’s account in the probate court, the sureties were concluded by the judgment. The court held that they were, and that, in the absence of fraud and collusion, they could not be heard to question its correctness, or to demand a rehearing of the accounts. In the opinion, the learned Chief Justice uses language which seenis to have application here: “ By their bond the sureties contract with reference to the action of a court and that their principal will obey its order and conform to such action. Can they say they are strangers to such proceeding ? Upon their principal’s failure to obey the order of the court there is clearly a breach of the bond. The relation they assume to such court and its action so far makes them privy to the proceedings affecting their principal as to deny to them the right, when called to answer for the breach of the bond, to call in question the grounds upon which the court based its action, and to have the same case re-tried.....Indeed it may well be considered an established principle, that whenever a surety has contracted with reference to the conduct of the parties in some suit or proceeding in court, he is, in the absence of fraud and collusion, concluded by the judgment.” And, in support, cites a long list of cases.

The Supreme Court of Wisconsin, in Sutro v. Bigelow, 31 Wis. 527, in a well considered opinion, construes the statute of that state, which is similar, in substance, to section 5545, giving to it the same construction hereinbefore placed upon that section. See, also, Hanna & Finley v. Int. Pet. Co., 23 Ohio St. 622; Methodist Church v. Booker, 18 N. Y. 463; U. S. v. Mosely, 7 Sawyer (U. S. C. C.), 265; and Inbusch v. Farwell, 1 Black. 566. Also, Lathrop v. Southworth, 5 Mich. 448; Towle v. Towle, 46 N. H. 434; Heard v. Lodge, 20 Pick. 58, and Shepard v. Pebbles, 38 Wis. 373.

In this case the allowance by the trial court of an amendment to the petition, if wrong, was but an error, and was valid until reversed. No claim of fraud, collusion, or mistake in the proceedings is made by plaintiff in error, and, we think he was bound by the judgment rendered against DeWolf, and cannot be heard here to call it in question. We agree with the circuit court that the answer did not state a defense; and, finding no error in the judgment of that court, the same is

Affirmed.