text:
    Hegler et al. v. Grove.

      Conveyance to creditor — To secure debt and liability — Such conveyance an equitable mortgage, when — Cannot be set aside as fraud on creditors, when — Section 5J/64, Revised Statutes — When judgment creditor may proceed against equitable assets.

    1. Where a conveyance is made by a debtor to a creditor to secure the latter in what he owes him, and for what he is liable for him as surety, and for such indorsements as he may make for him; and the conveyance is taken by the creditor in good faith for his own security and no other purpose, such conveyance is an equitable mortgage; and cannot be set aside as a fraud on creditors, though the motive of the grantor may have been to hinder and delay his creditors.
    2. In such case the remedy of a creditor is by a proceeding in aid of execution, under section 5464, Revised Statutes, to reach the equity of redemption, and have it applied' to the payment of his judgment. A judgment on which execution may issue is essential to the proceeding.
    (Decided November 27, 1900.)
    Rehearing on error to tlie Circuit Court of Jackson county.
    The suit was commenced in the common pleas court of Jackson county by Martin Grove to set aside certain conveyances made by Yeoman, in 1876, to Allen Hegler, on tbe ground that they were fraudulent as to creditors under sec. 6344, Revised Statutes, and also, by operation of law, created a trust in favor of all tbe creditors of Yeoman and Nitterbouse — Yeoman holding tbe legal title to one-balf of what was conveyed as trustee for Nitterbouse — under sec. 6343. A trial in tbe common pleas resulted in favor of Grove; and tbe case was appealed to tbe circuit court of tbe county. At a bearing upon tbe merits, tbe court, at the request of the parties, made a finding of the facts and its conclusion of law thereon; and which is as follows:
    1. The court find that on the 10th day of February, 1876, the said S. N. Yeoman, F. L. Nitterhouse and Allen Hegler were the joint owners of the real estate and coal rights described in the petition as amended; that the legal title thereof was held by said S. N. Yeoman in the name and for the use and benefit of said owners, each of whom owned the full one-third part thereof.
    2. That on said 10th day of February, 1876, the said S. N. Yeoman, with the consent of the said F. L. Nitterhouse, conveyed by deed in fee simple, the said real estate and coal rights to the said Allen Hegler, which said deed was duly signed and acknowledged by the said S. N. Yeoman; that the actual and only consideration for said deed, was and is expressed and set forth in the written agreement, made by all the said parties, and executed eotemporaneously with said deed, a copy of which is as follows:
    “Memorandum of an agreement, entered into this 10th day of February, 1876, by and between S. N. Yeoman and F. L. Nitterhouse, parties of the first part, and Allen Hegler, party of the second part, witnesseth: Whereas, the said Allen Hegler has become surety and indorser for the parties of the first part, upon certain promissory notes, and, whereas, said parties of the first part and said Allen Hegler are joint owners of several tracts of land, and the coal rights of certain other tracts of land, all known to them and others as the Pigeon Creek coal lands, and situate in Jackson county, Ohio, and deeded to S. N. Yeoman as trustee in trust for himself and said Nitterhouse and said Hegler. And said parties of the first part, wishing to indemnify said Hegler, and hold him harmless by reason of his certain commercial and business favors to them, and his said suretyship on the said promissory notes as aforesaid; the said S. N. Yeoman, by and with the consent of the said F. L. Nitterhou.se, as trustee holding the legal title to said lands this day conveyed the same to said Allen Hegler, viz:
    “First Tract: Being forty-one acres in section 4, township 7, R. 18, in fee.
    “Second Tract: Being twenty-one acres in section 83, township 8, R. 18, in fee.
    “Third Tract: Being 223 acres in sections 28 and 33, township 8, R. 18, in fee.
    “Fourth Tract: Being forty-one acres in section 32, township 8, R. 18, in fee.
    “Also the stone coal right to certain several other tracts of land in said conveyance described, together with the right to mine and remove the same.
    “Now the understanding existing between the parties hereto is this: Said Allen Hegler is to reconvey to said parties of the first part, or their heirs or assigns, their two-thirds interest in said lands and coal rights, when the said parties of the first part shall have secured him, the said Hegler, in other manner from loss by reason of his suretyship, and business and commercial favors as aforesaid. The understanding being, that said Hegler lias all and every right in and to said property necessary to indemnify him against any loss he may sustain as aforesaid. It is further understood and agreed between the parties hereto that said Hegler shall not sell or dispose of said lands and coal right, except for the benefit of all the parties hereto, and then only after consulting with the said S. N. Yeoman and F. L. Nitterhouse, and obtaining their consent to such disposition or sale of said lands and coal right.
    In testimony whereof, the said S. N. Yeoman and F. L. Nitterhouse and Allen Hegler have hereunto set their hands and seals the day and year above written.
    Signed and sealed S. N. Yeoman (Seal.)
    in presence of us: F. L. Nitterhouse (Seal.)
    T. D. McElwain Allen Hegler. (Seal.)
    G. Ogle.
    That but two copies of the said agreement were made, one of which was delivered to the defendant, Allen Hegler, who did not make known its existence, and the other copy was delivered to said S. N. Yeoman, who concealed its existence, until his death in July, 1890, when it was found sealed up in an envelope, indorsed in the handwriting of said Yeoman, as follows:
    “In case of my death, to be delivered to F. L. Nitterhouse, without opening, and if F. L. Nitterhouse be not living, then to my brother, Capt. J. A. O. Yeoman, without opening.” (To which said recitation in the foregoing finding of fact, of said action of said Yeoman with respect to said copy and the indorsement of said envelope, said Hegler excepts.) Nitterhouse being alive at the time of S. N. Yeoman’s death, said envelope and its contents were delivered to him, without opening, as directed on said envelope, and the existence' of said contract was also carefully con' cealed by said Nitterhouse until in May, 1893, when he revealed the same to plaintiff in a confidential con versation, and this was the first and only knowledge or information plaintiff had of the existence of this contract, or that said deed of February 10, 1876, was. not an absolute conveyance.
    3. That said deed and written agreement were executed and received by said parties respectively with intent to secure and indemnify the said Hegler against loss or damage by reason of his suretyship for-said S. N. Yeoman and F. L. Nitterhouse, and Yeoman and Nitterhouse, and their indebtedness to said Hegler to the full amount of said indebtedness secured by, and owing to said Hegler, and also for further indorsements and advances such as said Hegler might make to or on account of said Yeoman and Nitterhouse, and for the further purpose, on the part of said grantors, to place said real estate'beyond the reach of their creditors.
    4. That on said 10th day of February, 1876, the pre-existing liability of said Hegler for said Yeoman and Nitterhouse which he was subsequently compelled to pay, was the sum of $13,994.26, including the amount paid by him on said purchase money mortgage to said Sells, as shown in said report of said special master commissioner; that on said> day concurrently with said deed and agreement, said Hegler became further liable as indorser, upon notes for $8,000, to the First National Bank of Washington C. H., which were also secured by mortgage on real estate, and was. compelled to pay in the year 1884, on said liability, the sum of $1,327.13, making an aggregate of existing and concurrent liabilities as surety and indorser of $15,321.39; that subsequently said Hegler became further liable, as surety for said Yeoman and Nitterhouse, in the sum of $3,042.57, which he thereafter paid; and that in 1875, said Yeoman was indebted to. said Hegler in the sum of $1,000, the value of stock of said Hegler, in the Amazon Insurance Company, loaned by said Hegler to said Yeoman and never returned, and was indebted to said Hegler on said account, on said February 10, 1876, in said sum of fly-000; and the court find that the lands and property conveyed to said Hegler on said February 10, 1876, exceeded his then existing liabilities and his above-debt of $1,000, in the sum of $7,411.94.
    5. And the court further find that on the said 10th day of February, 1876, the value of said lands described in said deed of said Yeoman to said Hegler,. was the sum of $35,600, instead of the sum of $33,-065, as reported by said master, two-thirds of which belonged to said Yeoman and Nitterhouse, and that their interest therein at the time of said conveyance-thereof amounted to the sum of $23,733.33; and the court further find that said deed and written agreement were made between said parties, and said deed was in good faith accepted by said Hegler to secure the debts and liabilities then existing, for which said Hegler was liable as surety, and for debts and liabilities then owing to said .Hegler from said Yeoman and Nitterhouse, or either of them, and for all future indorsements of said Hegler for them, or future advances made by said Hegler to or for said Yeoman and Nitterhouse, or either of them, and as to said Hegler for no other purpose.
    6. That afterwards, to-wit, in the year 1878, said defendant Hegler, proceeded on said real estate, so conveyed to him, to open mines to coal deposits, and to develop the same and manage the operation and development thereof, and to render said lands and coal deposits productive and profitable.
    7. The court further find that on the 22nd day of March, 1875, said S. N. Yeoman and F. L. Nitterhouse, together with said plaintiff and Adalaski Smith, as sureties for them, executed and delivered to •the First National Bank of Washington, Ohio, their promissory note of said date, for the sum of $4,888, and interest thereon, that on the 19th day of January, 1876, suit was brought by said bank on said note against said Nitterhouse, plaintiff and Smith, and on the 4th day of March, 1876, judgment was recovered by said bank against said defendants in said action, for the sum of $5,268.88, and $6.50 costs; and that on the 30th day of June, 1877, plaintiff was compelled to pay to said bank, in satisfaction of said judgment, the sum of $6,086.05.
    On the 16th day of November, 1875, said Yeoman ■and Nitterhouse, together with said plaintiff as surety for them, executed and delivered to one Lenox Campbell, their promissory note of said date, for the sum of $5,000, and interest thereon; that on the 16th day ■of January, 1876, suit was brought on said note by said Campbell against said Yeoman and Nitterhouse, and on the 15th day of March, 1878, judgment was recovered for the sum of $5,964, and $-costs; and ■on the 15th day of March, 1878, said plaintiff herein paid, in satisfaction of said judgment, the sum of $6,005.25; on the-day of-, 1875, said Yeo-t man and Nitterhouse, together with said plaintiff herein, and said Allen Hegler, as sureties for said Yeoman and Nitterhouse, executed'and delivered to Edward and Peter Putnam their promissory note for the «urn of $-, and on the 14th day of March, 1879, said note being more than two years past due, said plaintiff paid to said Putnams in satisfaction of his liability thereon, the sum of $600.
    That prior to the 10th day of February, 1876, said Yeoman and Nitterhouse executed and delivered to Lenox Campbell their promissory note for the sum of $3,000; that on the-day of-, 1876, said note being past due, said Campbell commenced suit thereon in the court of common pleas of Fayette county, Ohio, against said Yeoman and Nitterhouse, and on the-day of January, 1877, recovered judgment against said Yeoman and Nitterhouse for the sum of $1,877.60, which said judgment has since been, to-wit, on the-day of-, 189 — , assigned to said plaintiff, who is the owner thereof. The court further find that each and every of said several judgments became dormant upon the expiration of five years from the respective dates of the recovery thereof, and that no proceeding or action for the revivor thereof, or of either of said several judgments, has ever been commenced or attempted, by said plaintiff, Martin Grove or by any other person.
    8. The court further find that on the 28th day of August, .1878, said S. N. Yeoman and F. L. Nitterhouse, each, filed their several petitions in voluntary bankruptcy, in the United States district court for the southern district of ‘Ohio, to be severally adjudged bankrupts, by virtue of the statutes of the United States', in that behalf; that such proceedings were thereupon had by said court on said several petitions, that said S. N. Yeoman and F. L. Nitterhouse were each severally adjudged to be bankrupts, and that afterwards, on the 13th day of February, 1879, said S. N. Yeoman and F. L. Nitterhouse 'were, each of them, by the decree of said United States district court, severally discharged from all their debts and liabilities made provable by said bankruptcy laws of the United States, existing and in force on said 28th day of August, 1878, and said adjudications, orders, decrees and discharges, so made and adjudged by said United States district court have each and every one of them continued and remained and now are, in full force, and Avholly unimpeached and unmodified; that, all of said debts, liabilities, and rights in action set up by said plaintiff herein were on said 28th day of August, 1878, provable claims against the estates in. bankruptcy of said S. N. Yeoman and F. L. Nitterhouse.
    9. The court further find that on said 10th day of' February, 1876, said S. N. Yeoman and F. L. Nitterhouse and Yeoman & Nitterhouse Avere, and each of' them was, insolvent, yet said firm was a going concern having general business credit.
    10. And the court further find that since said 10th day of February, 1876, said defendant Hegler has received from sales of part of said lands, rents, royalties, and profits from said real estate and coal rights, the sum of $102,994.53, as is set forth in said master’s report.
    11. That said defendant Hegler has expended and paid out in improvements, taxes, and should be allowed for clerk hire and on account of his own services and expenses during the said time, the sum of $20,940.90, as is shown in said master’s report and supplemental report.
    12. The court further find that said defendant,. Hegler, has been from and since said 10th day of Fébruary, 1876, in the open, exclusive, notorious and uninterrupted possession of said real estate, under and by virtue of said deed and agreement.
    13. That plaintiff, after the filing of his petition herein, gave notice of the pendency of this action, as. required by Section 6344 of the Revised Statutes of Ohio, and that no person has appeared and asked to be made a party hereto, or asked or proposed to make proof of any claim herein.

      And the court, as well upon the admitted facts in the pleadings herein as upon the foregoing conclusions of fact, conclude as law:
    1. That said deed is not a trust in the hands of said defendant, Hegler, but was and is constructively fraudulent, for that although received and acted upon by said Hegler, in good faith, and with no fraudulent purpose, it operated to conceal the fact of the equitable interest of said Yeopian and Nitterhouse in said real estate from their creditors; and to the extent that said real estate so conveyed by said Yeoman to said Hegler exceeded in value the amount of the security and indemnity provided for by said agreement executed cotemporaneously with said deed, said conveyance is constructively fraudulent.
    2. That the said discharges in bankruptcy of said Yeoman and Nitterhouse, do not, nor does either of them constitute a defense to the action, as against either or all of said defendants, and that said plaintiff was on said 10th day of'February, 1876, and still is, a creditor of S. N. Yeoman and F. L. Nitterhouse.
    3. That said conveyance and agreement were and are not a conditional sale to said Hegler of said real ■estate, but constituted a mortgage in equity; not an agreement to assume and pay debts of said grantors, ■or either of them, but to secure subsisting liabilities and further advances, all of which said Hegler is entitled to have first paid out of the proceeds, rents and profits of said real estate now in his hands.
    4. That the two-thirds interest in said real estate so conveyed, and which was the property of said Yeoman and Nitterhouse prior to said conveyance, should be ordered to be sold as upon execution, and the proceeds applied in payment:

      First: Of the taxes charged against said real estate, and the costs of this action, including a fee to the said T. S. Hogan, special master commissioner, .of $700, which sum the court find to be his reasonable compensation, together with the fees of said stenographer, as reported by said master;
    Second: The amount of plaintiff’s said claim,, which the court find amounted on the first day of this term of this court to the sum of $33,050.60.”
    Error is prosecuted to this court for the reversal of the judgment of the circuit court.

      Mills Gardner and John Logan, for plaintiffs in error.
    Was Grove at the commencement of suit a creditor of Yeoman and Nitterhouse, within the meaning of the statute, providing that transfers made by a debtor with intent to hinder, delay, or defraud creditors, “shall be declared void at the suit of any creditor?”' Section 6344, Rev. Stat.
    It has been uniformly held that the statute, now Section 4196, Revised Statutes, declaring such transfers “utterly void,” means void only as to creditors. Burgett v. Burgett, 1 Ohio, 469; Tremper v. Barton, 18 Ohio, 418.
    In 8 Am. & Eng. Encyl. Law (2d ed.), 239, a creditor is defined, “One who has a right to recover money of another on any account whatever.”
    Bouvier’s Law Dictionary defines a creditor as “one who has a right to require the fulfillment of an obligation or contract.”
    The courts have uniformly required a plaintiff to show that he comes within this definition, as a predicate for suit to annul a fraudulent transfer. He must disclose a clear right of action in force to warrant a court in treating him as a creditor; he must have a right which could be enforced at law against the debtor making the grant. Fuller v. Bean, 30 N. H., 181; Edwards v. McGee, 31 Miss., 143; Brinkerhoff v. Smith, 57 Ohio St., 610; Hart v. Hart, 5 Watts, 106; Bump on Fr. Conv. (4th ed.), Sec 501.
    The bankruptcy act of 1867, expressly vested in the assignees all property conveyed or disposed of by the bankrupts in fraud of creditors. Sections 5046, 5114 and 5115, U. S. Rev. Stat.
    Whatever view state courts may have -expressed as to the effect of the provisions named, the Supreme Court of the United States has definitely and finally settled the construction; and the construction given by that court to federal statutes is universally accepted as binding upon the state courts. Keene v. Mould, 16 Ohio, 12; Mount v. Manhatton Co., 41 N. J. Eq., 215; Lee v. Citizens Bank, 2 C. S. C. R., 298; First National Bank v. Chapman, 9 C. C., 79, 4 Circ. Dec., 252; Glenny v. Langdon, 98 U. S., 20; Trimble v. Woodhead, 102 U. S., 647; Moyer v. Dewey, 103 U. S., 301.
    Recognizing the conclusive effect of these final adjudications by the Supreme Court, we refer to the following cases decided in many of the states, where it was sought to enforce rights which passed under the act to assignees in bankruptcy. Buckingham v. Buckingham, 36 Ohio St., 68; McCartin v. Peery, 39 N. J. Eq., 201; Mount v. Manhatton Co., 41 N. J. Eq., 211; Peery v. Carnes, 86 Mo., 656; Voorhees v. Carpenter, 127 Ind., 304; Burton v. Peery, 146 Ills., 72, 112; Hale v. Christy, 24 Neb., 746; Lowell of Bankruptcy, Section 317; Carr v. Hilton, 1 Curtis C. C., 230.

      The effect of this doctrine is sought to be avoided on the theory that a right in the assignee having become barred by the two years’ limitation in Section 5057, U. S. Rev. Stat., creditors of the bankrupts could then subject the property by action in their own name.
    . This theory misconceives the effect of the provision. Section 5057 provides that such action by an assignee shall not be maintainable, unless brought within two years from the time when the cause of action accrued for such assignee.
    Recurring to the decisions of the Supreme Court, we find the law declared to be that this limitation begins to run against the assignee from the time of his appointment. Bank v. Sherman, 101 U. S., 403.
    This statute is merely a statute of limitations; and not of restriction upon the jurisdiction of the federal courts. Upton v. McLaughlin, 105 U. S., 640.
    That to be available as a defense, it must be pleaded. Bailey v. Glover, 88 U. S. (21 Wall.), 342; Rosenthal v. Walker, 111 U. S., 185.
    If, moreover, the right of action is barred as against a trustee, it is equally barred against the cestui que trust. Meeks v. Olpherts, 100 U. S., 564; Trimble v. Woodhead, 102 U. S., 647.
    Plaintiff misconceives statute 6343. It prescribes a remedy, but creates no right. The bankruptcy act of 1867 being in force, under which the debtors assigned, clearly the remedies of creditors were furnished by the federal statute, which superseded the’ state law on the subject. Loveland on Bankruptcy,, p. 19; Lowell on Bankruptcy, pp. 5, 6.
    The reply further argues that the alleged preference to Hegler had become unassailable because six months had intervened before the bankruptcy, and under Section 5129, U. S. Rev. Stat., the assignees of Yeoman and Nitterhouse were precluded from avoiding the preference.
    It is idle to discuss this proposition, because under the state law, the preference was unimpeachable. Cross v. Carstens, 49 Ohio St., 548.
    What right has Grove to ask the state court to substitute a preference to him for that given by the bankrupts to Hegler?
    The court held the transaction an equitable mortgage. If it was an equitable mortgage, then it is not subject to be annulled because the property mortgaged was worth more than the debt secured.
    If the deed and agreement of February 10, 1876, constituted an equitable mortgage, the equitable estates of the mortgagors could not be subjected to pay their general creditors’ claims in an action under Sections 6343 and 6344.
    The only remedy to a creditor, was a proceeding in aid of execution under Section 5464.
    But Grove was not an execution creditor of Yéoman and Nitterhouse. He had no judgment upon which execution could issue; for, the bankruptcy aside, his judgments had become dormant at the expiration of five years from their respective dates, and continue dormant.
    This equitable mortgage, taken by Hegler in good faith, must be upheld as a mortgage; it cannot be constructively fraudulent; it has only the attributes of a legal mortgage taken in good faith for indemnity. Lowell on Bankruptcy, Sec. 314; Kemper v. Campbell, 44 Ohio St., 210.
    Now what remedy have creditors of the mortgagor of such an incumbrance? Certainly not to annul the mortgage as fraudlent, when taken in good faith, and for value. The creditor’s remedy is no greater than that of the grantor. Wright v. Franklin Bank, 59 Ohio St., 80.
    Yeoman and Nitterhouse were competent to release their equity by parol; and answer that they did so release. Shaw v. Walbridge, 33 Ohio St., 1.
    And plaintiff avers that the assignees in bankruptcy with full knowledge elected- not to take charge of the property. Sparhawk v. Yerkes, 142 U. S., 1; Atkinson v. Tomlinson, 1 Ohio St., 237; Hanes v. Tiffany, 25 Ohio St., 549; Blandy v. Benedict, 42 Ohio St., 295; Marshall v. Stewart, 17 Ohio, 356.

      Van Deman & Chaffin and J. M. MeCillivray, for defendant in error.
    . Was Grove a creditor within the meaning of Sections 6343 and 6344?
    We contend that he is, and comes within the definition quoted by counsel from Bouvier, viz.: “Grove has the right to require the fulfillment of the obligation” of Yeoman and Nitterhouse to apply the property they owned, when they went into bankruptcy, toward the payment of their existing debts.
    But the word “creditor” also has a broader definition. The American Encyclopaedic Dictionary says he is “one who has given credit to another.”
    The authorities cited by counsel do not support his assertion that the creditor “must have a right which could be enforced at law against the debtor.” Fuller v. Bean, 30 N. H., 181; Hart v. Hart, 5 Watts, 106; Edwards v. McGee, 31 Miss., 143.
    True, the case of Brinkerhoff v. Smith, 57 Ohio St., 610, does discuss the necessity for the attacking creditor to set forth the nature of his- claim, etc., so that issue may be joined. But there is not one syllable in the opinion in that case, or in either of the other cases cited, inconsistent with our contention in this.
    Counsel has not stated the law as to debts barred by the statute of limitations or discharged in bankruptcy. The debts themselves are not paid or satisfied. It is only the remedy that is suspended, or denied. Root v. Espy, 93 Ind., 511; Fowler v. Wood, 1 S. E. (Sup. Ct. S. C.), 597.
    The effect of a discharge is to release the personal liability only. It does not affect liens upon the bankrupt’s property. Lovelaud’s Work on Bankruptcy, Sec. 285.
    The principle is the same as when a claim is barred by the statute of limitation that does not destroy the debt, but simply denies to you a legal right to enforce it, but it may still be the basis for an equitable action. Gary v. May, 16 Ohio, 66; Welsh v. Childs, 17 Ohio St., 320.
    Counsel for plaintiff in error seems to have studiously avoided discussing the case that is before the court. They persist in discussing an “action to set aside a conveyance on the ground of fraud.” We insist that is not the action upon which we rely, and which the facts found establish. On the contrary it is clearly an action to declare a trust in Hegler, because of the inadequacy of consideration, the secret interest reserved in the grantors, and the fact that Hegler accepted it not only for himself, but for the benefit of others. And in such cases the courts of the states and the United States have held, where the conveyance was made more than six months before bankruptcy, that no right in the property in question passes to the assignee but the only persons who can question it, and. have it declared, are the then creditors of the person making such conveyance.
    . The petition seeks to recover on the ground of “an assignment in trust,” and upon the finding of facts, the court will clearly see that the conveyance did come under that class.
    We think the principle of all the well-considered cases will supjJort our contention. Fowler v. Wood, 1 S. E., 597 (Sup. Ct. S. C.).
    Before cited, “fraud is a necessary element to give the trustees in bankruptcy a right of action.' Insolvency of itself, or the fact that the property conveyed constituted more in value than the grantor could rightfully withdraw from the reach of creditors, does not vest such right of action in the trustee.” Loveland on Bankruptcy, p. 299; Vason v. Estes, 1 S. E., 163 (Sup. Ct. Ga., 87); Champion v. Buckingham, 42 N. E., 498 (Sup. Ct. Mass.); Metropolitan Nat. Bank v. Rogers, 53 Fed. Rep., 776 (C. C. A., U. S. 3rd Cir., Penn.); Blythe v. Thomas, 45 Fed. Rep., 784, (U. S. Dis. Ct. S. C.); Gunther v. Green, 8 Ab. Pr., 191; Matthews v. Westphal, 48 Fed. R., 664 (Cir. Ct., Iowa); Burton v. Perry, 34 N. E., 60 (Ill. Sup.); Bean v. Brookmire, First Dil., 25; Dutcher v. Wright, 94 U. S., 553; Ebersole & McCarty v. Adams, 10 Bush, 83 (Ky.); Seaver v. Spink, 65 Ills., 441; Fisher v. Allen, 13 Grat., 13.
    In Ohio the right of this plaintiff to maintain this suit is very clearly sustained by the case of Card v. Walbridge, 18 Ohio, 411; Mayer v. Evans, 91 U. S., 503 (L. C. Ed., 377).
    Again, in case of voluntary conveyance made more than six months before bankruptcy, and without actual fraud, it was held that the assignee in bankruptcy could not recover. Warren v. Moody, 122 U. S., 132, 138; Vetterlein v. Barnes, 124 U. S., 169; Adams v. Collier, 122 U. S., 382 (L. C. Ed., 1207).
    The conveyance in this case was not given by Yeoman and Nitterhouse, or received by Hegler for the sole purpose of securing Hegler upon debts due him. Was it then a trust within the provisions of Sec. 6343, Rev. Stat.? Of this we think there can be no question.
    In Dickson v. Rawson, 5 Ohio St., 218, the court says when the conveyance is for the benefit of one or more creditors, with a reservation to the grantor, it does come under Sec. 6343. Substantially the same statute has existed since 1838. Swan and Critchfield, page 712. Note.
    True, the court says in Atkinson v. Tomlinson, 1 Ohio St., 237, that a creditor may in good faith, and for the sole purpose of securing himself, take property, etc. And this was affirmed in Floyd v. Smith, 9 Ohio St., 546.
    And the same principle had formerly been declared in Brown v. Webb, 20 Ohio, 389, and subsequently Bagaley v. Waters, 7 Ohio St., 359; Justice v. Uhl, 10 Ohio St., 170.
    But from the finding of facts in this case it is clear that this conveyance was not taken for such sole purpose. The secret manner in which the trust was created, the care with which knowledge of it was guarded, forbid that the rule laid down in the case above referred to could apply in this.
    But the doctrine of some of those cases is scarcelv the law of Ohio now. At least to be followed a case would have to come squarely under it, the tendency being less to support the preference, and more to protect the unsecured creditor.

      The facts of this case bring it in principle under the following cases: Shultz v. Brown, 3 C. C., 609, 2 Circ. Dec., 353; Farmers’ National Bank v. Miller, 9 C. C., 111, 6 Circ. Dec., 1; Bradsford v. Beyer, 17 Ohio St., 389; Loudenback v. Foster, 39 Ohio St., 203; Gashe v. Young, 51 Ohio St., 376; Lee v. Hennick, 52 Ohio St., 177; Maas v. Miller, 58 Ohio St., 483; Wambaugh v. Ins. Co., 59 Ohio St., 228.
    If counsel is correct in their contention that the deed and contract together constituted a mortgage, then we submit under the finding of facts there is no question as to our right to have this transaction declared an assignment. Is it not then on all fours with the case of Pendery v. Allen, 50 Ohio St., 121.
    If this then constituted a trust in Hegler, it was for the benefit of the then creditors of Yeoman and Nitterhouse, and the statute of limitation could not affect the right of Grove, or any other then creditor, unless he neglected to sue, and have the trust declared for a period of more than four or ten years after he had knowledge of the fact that he was a cestui que trust. Section 4982, Rev. Stat.; Gary v. May, 16 Ohio, 66; Fisher v. Mossman, 11 Ohio St., 42; Carlisle v. Foster, 10 Ohio St., 198.
    There is no finding of fact that warrants the conclusion that Yeoman and Nitterhouse ever did release their equity to Hegler, and if the testimony given in the case by Nitterhouse was before the court, it would be clearly seen that they never did; hence, there is no application for the case of Shaw v. Walbridge, 33 Ohio St., 1.
    But suppose they had done so, that would in no respect affect the right of their creditors. The fraudulent grantor cannot recover back the property by him conveyed in fraud of creditors, but that does not affect tlie right of his creditors to recover it, and we think that is the principle applicable here.
    That the transaction of February 10, 1876, made Hegler a trustee for Yeoman and Nitterhouse, with a ■duty upon him to account, and right in them to demand an accounting is hardly debatable.
    Said paper was not an absolute sale as in Bagaley v. Waters, 7 Ohio St., 359, because Yeoman and Nitterhouse were “wishing to indemnify said Hegler and Bold him harmless by reason of his certain commercial and business favors to them, and his said suretyship on said promissory notes.”
    That there was a trust created cannot be questioned from the fact that it was given merely as an indemnity. It was to be reconveyed upon giving other security and the following clause: “Said Hegler shall not sell or dispose of said land and coal rights except for the benefit of all parties hereto, and then only after consulting with the said S. N. Yeoman and F. L. Nitterhouse and obtaining their consent to such disposition or sale of said lands and coal rights.”
    The idea of limiting a disposal of real estate by its purchaser, except with the consent, and for the benefit of the sellers, is absolutely repugnant to every idea of a sale, and can only be harmonized with the idea that notwithstanding such sale, the sellers retained a beneficial interest which the purchaser was to protect and account for in the event of a sale. Section 6343, Rev. Stat.
    The deed and contract being contemporaneous acts, and relating to the same subject matter, must be construed together, and the contract attaches a condition to the deed. Barney v. Dimmitt, W. 44; Slutz v. Desenberg, 28 Ohio St., 371; Wilson v. Giddings, 28 Ohio St., 554.

      This contract attaches a trust, and conditions as to alienation, the trust, as expressed, being for the grantors. Brown v. Webb, 20 Ohio, 389, 390.
    In the deed and contract Yeoman and Nitterhouse reserved to themselves a beneficial interest in the estate conveyed. This, when coupled with power of' sale, necessitated an accounting, made Hegler a trustee for himself, Yeoman and Nitterhouse, and Section 6343 seized upon and controlled it; and whether this, is merely a reservation of an interest by Yeoman and Nitterhouse, with right to an accounting of the balance, after paying himself, or the arrangement extended to other creditors, as we claim it did, it can make no difference. Bloom v. Noggle, 4 Ohio St., 45; Harkrader v. Leiby, 4 Ohio St., 602; Dickson v. Rawson, 5 Ohio St., 218; Justice v. Uhl, 10 Ohio St., 170, 177; Hyde v. Olds, 12 Ohio St., 591; Pendery v. Allen, 50 Ohio St., 121; Brinkerhoff v. Smith, 57 Ohio St., 610; Maas v. Miller, 58 Ohio St., 483; Wambaugh v. Ins. Co., 59 Ohio St., 228; Loudenback v. Foster, 39 Ohio St., 203; Mayer v. Hellman, Assignee, 91 U. S., 496; Warren v. Moody, 122 U. S., 132; Adams v. Collier, 122 U. S., 382.
   Minshall, J.

The principal question, and the one we shall consider jus, whether Grove had the right to maintain the action. We shall not consider the question, whether, by the discharge in bankruptcy given Yeoman and Nitterhouse in February, 1879, he ceased to be a creditor of theirs. Under the circumstances-of the case there is some doubt",on that question. It seems that the assignee in bankruptcy, with his ah tention called to the facts, declined to take any steps in the matter; and that this left it to creditors to take such steps for the purpose of subjecting the. interest of the grantors in the property to the satisfaction of their claims as, by law they might, irrespective of the proceedings in bankruptcy. The question here is whether, at the instance of Grove as a creditor, the conveyance could be set aside, under section 6344, Revised Statutes, as having been made to defraud creditors; or whether under section 6343, it could be declared to have been made in trust in contemplation of insolvency to prefer one or more creditors. The court finds that the deed was in good faith accepted by Hegler to secure the debts and liabilities-for which he was liable as surety for the grantors, and debts and liabilities owing by them to him, and for all further indorsements made by him for them. On this, finding of facts the court was certainly right in holding, that, as a matter of law, the deed did not create-a trust in the hands of Hegler within the meaning of’ section 6343. The property was not conveyed to him in trust to prefer one or more creditors, but simply for the purpose of securing himself. It was, it is true, a preference to himself, but such a preference is. permitted by our laws where the creditor deals with an eye singe to himself. Atkinson v. Tomlinson, 1 Ohio St., 237; Dickson v. Rawson, 5 Ohio St., 218; Justice v. Uhl, 10 id., 170; Harkrader v. Leiby, 4 id., 602; Bloom v. Noggle, 4 id., 45. The fact that the deed was to secure him as surety on indorsements or otherwise, does not bring it within the principle on which Pendery v. Allen, 50 Ohio St., 121, was decided. In that case Emerson was to pay a debt on which he-was not surety, and it was this stipulation that brought the couveyance within the provisions of section 6343.

But the court found as a matter of fact that the deed was made by Yeoman and Nitterhouse for the-purpose, on their part, to place their property beyond the.reach of their creditors; and from this it is concluded as a matter of law that it was constructively fraudulent as to Hegler, for the reason stated in the conclusion of law, “that although received and acted on by Hegler in good faith, and with no fraudulent purpose, it operated to conceal the fact of the equitable interest of Yeoman and Nitterhouse in said real estate,” and so was within section 6344. We do not think this is a legitimate conclusion so far as Hegler is concerned. He, by the finding of fact, is exonerated from auy fraud whatever in the matter. His purpose was solely to obtain security for himself. This he could do though he thereby obtained a preference. Cross v. Carstens, 49 Ohio St., 548. And the fact that the deed was absolute on its face, though in equity a mortgage, does not affect his rights as such equitable mortgagee, no fraud being designed. Kemper v. Campbell, 44 Ohio St., 210. The motive of the mortgagors cannot affect him or his rights, where his own purpose was an honest one, and he did not participate in that of the other party.

The facts, then, as found do not make a case for proceedings by a creditor under either of the sections referred to, and under which the proceedings were had. Hegler was simply an equitable mortgagee in-possession, and he could have beeen called on to account as such. And he was in fact so treated by the court. But the proceeding was not one of that character. It was a proceeding under sections 6343 and 6344 of the law in regard to insolvent debtors. And herein, we think, the error lies. Grove’s remedy, if any, was under section 5464, Revised Statutes, which provides, that “When a judgment debtor has not personal or real property subject to levy on execution sufficient to satisfy the judgment, any equitable interest which he has in real estate, as mortgagor, mortgagee, or otherwise, shall be subject to the payment of the judgment, by action.” In a case on review it might be proper to disregard the form of proceeding, where a judgment has been rendered that might properly have been rendered in another form of proceeding. But this can only be so, where, in such other form, such relief might have been proper on the facts proved. Exit that is not so in this case. All the judgments held by Grove had become dormant; and no execution was or could have been issued upon any of them at the commencement of the proceeding below, as none of them had been revived; and a judgment on which an execution has been, or at least may be, issued is essential to a.proceeding in aid of execution.

Without going into other questions argued on the rehearing, we are now of the opinion, for the reason just given, that the circuit court erred in rendering judgment against the plaintiff in error, Hegler, and that its judgment should be reversed, and the petition of the plaintiff below dismissed.

Judgment accordingly.


source: Caselaw Access Project

author: Shauok, C. J.

license: Public Domain

text:
    In re Gilbert D. Preston.

      Weighing of coal before screening — Contracts between miners- and operators — Invalidity of act of March 9, 1898 — Constitutional law.

    The act of March 9, 1898 (93 O. L., 33), “to provide for the weighing of coal before screening,” having no other object, than to prevent the malting of contracts between operators and miners, whereby the former shall become bound to make, and the latter entitled to receive, compensation having regard to the skill and care of the miner, is repugnant to the bill of rights as an unwarrantable invasion of the-right to make contracts.
    (Decided November 27, 1900.)
    In Habeas Corpus.
    The petitioner is deprived of his liberty under the-following charge: “Being then and there the operator of a certain coal mine situated within said county, and having then and there under his employ a miner who was mining and sending to the surface coal under-said employment at ton rates, to-wit, one William Brown, did, knowingly and purposely pass the output of coal so mined by said miner as aforesaid, over-a screen, whi&h took away a part of the value thereof, before the same had been weighed and credited to said employe sending the same to the surface, and before the same was accounted for at the legal rate of weights fixed by the laws of Ohio.” The prosecution is founded on the act of March 9, 1898 (93 O. L., 33), entitled “An act to provide for the weighing of coal before screening.” The provisions of the act are as follows: Section 295a. “It shall be unlawful for any mine owner, lessee or operator of coal mines in this state, employing miners at bushel or ton rates, or-other quantity, to pass the output of coal mined by said miners over any screen or other device which shall take any part from the value thereof, before the same ;shall have been weighed and duly credited to the employe sending the same to the surface, and accounted for at the legal rate of weights fixed by the laws of Ohio.” Section 295b. “The provisions of this act -shall also apply to the class of workers, engaged in mineg wherein the mining is done by machinery, known as loaders; whenever the workmen are under •contract to load by the bushel, ton, or any quantity, the settlement of which is had by weight, the output shall be weighed in accordance with the provisions of this act.” Section 295c provides the penalty for the violation of this act.

      Arnold, Morton & Irvine and T. A, Jones, for petitioner.
    The act of March 9, 1898, commonly called the “screen law,” infringes, we think, the vested rights .granted this petitioner under the state and federal constitutions, in that it divests him of his inalienable right of “acquiring, possessing and protecting property.” It denies him the guaranty that his private property “shall be held inviolate.” It deprives him of property “without due process of law.” And it affects his individual right of contract.
    We find that the weight of judicial authority is distinctly in favor of holding all such acts unconstitutional and void.
    The following decisions are reported denying the constitutionality of acts for weighing coal before screening. Commonwealth v. Brown, 8 Pa. Sup. Ct., 339; In re House Bill 203, 21 Col., 27; Harding v. The

      People, 160 Ill., 459; Millett v. The People, 117 Ill., 294; Ramsey v. The People, 142 Ill., 380.
    The following authorities we think show that the constitutionality of the acts providing for the weighing of coal before screening. State of Kansas v. Wilson, 58 Pac. Rep., 981; State v. Coal Co., 36 W. Va., 802; Morse v. Stoeker, 1 Allen, 150; State v. Glenn, 7 Jones L., 321.
    The screen law cannot possibly be justified as a police measure. To be classified as such it must meet, the requirements of that class of legislation. It must, relate to the general health, morals or safety of the public. This law does not affect either. It does not. affect the general welfare in any possible way. It must be conceded that, if valid, the law will affect the use of the employer’s property.
    A similar law was passed by the legislature of Illinois, requiring the output to be weighed in the miner’s car. Harding v. The People, 160 Ill., 459; State v. Goodwill and State v. Miner, 33 W. Va., 179; State v. Coal and Coke Co., 33 W. Va., 188.
    What constitutes a proper police power? How-may a state step in and regulate the business of the-citizen or limit his right to contract as he pleases? Godcharles v. Wigeman, 113 Pa. St., 431; Austin v. Murray, 16 Pick., 121; People v. Marx, 99 N. Y., 307; People v. Hawkins, 157 N. Y., 1; Frorer v. People, 141 Ill., 171.
    The following authorities we think show that the' business of coal mining is not in any way affected with a public use. State v. Loomis, 115 Mo., 313; Holden v. Hardy, 37 L. R. A., 103 (14 Utah).
    The right of contract and the power to make a contract is “property” within the meaning of state and federal organic law. Palmer v. Tingle, 55 Ohio St., 423; Ritchie v. People, 155 Ill., 98; Low v. Printing Co., 41 Neb., 127; Commonwealth v. Perry, 155 Mass., 117; Application of Jacobs, 98 N. Y., 106; Allgeyer v. Louisiana, 165 U. S., 578; Leep v. Railway Co., 58 Ark., 407.
    The act of March, 1898, is a species of class legis-. lation and does not operate uniformly upon all in the business of coal mining, nor uniformly throughout the state. Article 1, Section 2, of the state constitution; Article 2, Section 26. So also by the terms of' the 14th amendment , to the national constitution. No other industry save that of coal mining is affected by this law. One class of persons only has been selected for the paternal protection of the state. As we have indicated, the only purpose that this act can have is. to provide a scheme whereby people may make contracts on the basis of information resulting from the operation of the law. The same reasons could as well apply to' other branches of industry. Laws of a similar tendency might as well be enacted regulating industries other than that of coal mining. They could be enacted for the purpose of regulating ore or limestone mining, but all such legislation is against the .‘spirit and policy of the constitution. Cooley’s Const. Limt., 6th ed., p. 484.
    The so called “scrip acts” in Ohio and other states, are, in reference to their constitutionality, governed by the same principles as the “screen acts.” We not only refer to the decision of the Supreme Court of Ohio upon the scrip law, as an authority precedent •that the screen law is unconstitutional, but by comparison it will be seen that where there is a difference in the decisions of the supreme courts of the different states upon the constitutionality of these respective acts, that in some states both the screen law and scrip laws are held constitutional, while in other states, more numerous, they hold these laws to be unconstitutional. Marsh v. Poston, 35 W. L. B., 327; 1 Unrep. Cas., 448; 54 Ohio St., 681.
    The only state of which we are aware in which it is held that the so called scrip laws are constitutional, is Kansas. State v. Haun, 7 Kan. App., 509.
    We, of course, should refer to the decision of the Supreme Court of West Virginia in the case of the State v. Coal Company, 36 W. Va., 802, in which it is held that the so called scrip law is constitutional. But as to tins decision, it was by an evenly divided court, and when we consider it in connection with the decision of the same court in the case of State v. Goodwill, 33 W. Va., 179, we do not see how any weight can be attached to the former decision.
    In the following cases the so called scrip laws or similar laws have been held.unconstitutional. In re House Bill No. 147, 23 Col., 504; Frorer v. People, 141 Ill., 171; Showalter v. Ehlan, 5 Pa. Sup. Ct., 242; State v. Coal Co., 8 Pickle (Tenn.), 81.
    We have reserved for separate consideration the Ohio decisions bearing upon the questions under discussion. Coal Co. v. Rosser, 53 Ohio St., 12; State v. Nelson, 52 Ohio St., 88.
    The Supreme Court, in the unreported case of State v. Lake Erie Iron Co., 33 Bull., 6; 1 Unrep. Cas., 254, held what is known as the semi-monthly payment law to be unconstitutional.
    We also cite in support of our contention in this case the decisions in the following cases. State v. Gardner, 58 Ohio St., 599; State v. Ferris, 53 Ohio St., 314; Cow v. Railway Co., 1 N. P., 213, 2 Dec. 594: Marmet v. State, 45 Ohio St., 63.
    In the. case of the Wheeling Bridge & Terminal Railway Co. v. Gilmore, 8 C. C., 658, 4 Circ. Dec., 366, the circuit court in Belmont county holds unconstitutional the act of 1890, as amended 1891, providing that employes shall be paid for every hour they work in excess of ten, and that the same is in conflict with sections 1 and 19 of article 1 of the constitution of Ohio, and section 1 of the fourteenth amendment to the constitution of the United States.

      Darnel J. Ryan; W. T. Letois; J. M. Sheets, attorney general; J. E. Todd and Smith W. Bennett, for respondent.
    As to the ground that this is class legislation, we refer to the State v. Nelson, 52 Ohio St., 88.
    In this state, and in all other states, the legislatures have established classified cities and towns, and have passed, and are passing, laws general in form, but which in fact refer to one class, and these laws have always been upheld in Ohio and elsewhere as valid and not obnoxious to the objection of class legislation or non-uniformity.
    This act in question certainly has a uniform operation wherever the kind of business said to be regulated is transacted, and all persons similarly situated in all parts of the state are affected in the same way. Budd v. New York, 143 U. S., 517.
    After all, the real question in controversy in this case, and as appears to us the only ground which may admit of argument, is the fifth specification, which challenges the validity of this act, upon the ground that it is beyond the power of the legislature in-the exercise of what is known as police power, to pass such a law. In proceeding to a discussion of the limits of the police power, we call the attention of the court to a decision of this court in Crawford v. Wick, 18 Ohio St., 190.

      We insist, as a proposition of law, that the exercise of the police power in a state, is full and complete in the legislature thereof, and subject to no restrictions except those which may be found in the constitution of the United States and of the state itself; that a court will not usurp the powers of the legislature by declaring an act invalid upon any broad ground of justice, or upon the ground that particular hardship is in the act before them, or upon other mere equitable considerations, and that the court is silent before the express will of the people (the written law), and if the court thinks the law a hard one it is not for them to say it is void for that reason.
    It had been recognized for a long time prior to the independence of the United States, that the legislative branch of government had ample authority to make regulations for the conduct of certain kinds of business among the citizens; and these United States, that is the people thereof, were and are possessed with the same powers. As has been many times said, this particular power referred to is a power inherent in every government, and that under these powers the government may regulate the conduct of its citizens toward each other and the manner in which they shall use their property when such regulation becomes necessary for the public good.- And so we say, that in the state of Ohio the legislature, as the representative of, and in expressing the will of, the people, has the same power of regulation which has existed since governments have existed and which are not expressly surrendered in the constitution of the state or of the United States. Munn v. Illinois, 94 U. S., 113 (24 Law Ed., 77.)
    The common law of police power as now in vogue is, as we have seen, not a new force, but is now more often called into action as conditions have so wondrously changed, and its repeated assumption in .these later days only substantiates the claim made for it, that it accommodates itself to meet the requirements of an ever-growing, progressive age.
    We now desire to call the attention of the court to instances of the exercise by the legislature of this power in several of the states of the Union, and to the fact that the Supreme Court of the United States has recognized the right of a state legislature to the exercise of this power in similar cases to the case at issue. Jones v. Illinois, 110 Ill., 590; Holden v. Hardy, 169 U. S., 366; Barbier v. Connolly, 113 U. S., 27; Budd v. New York, 143 U. S., 517; Davis v. State, 68 Ala., 58; Sawyer v. Davis, 136 Mass., 239; Brechbill v. Randall, 102 Ind., 528; 55 Md., 97; Hancock v. Yaden, 23 N. E., 253; Palmer v. State, 39 Ohio St., 236; Kansas v. Wilson, 58 Pac. Rep., 981; State v. Coal Company, 36 W. Va., 802.
    The law making power of the state can do any legislative act not prohibited by the constitution. The statutory provision or regulation of any business which is required to insure peace and quietude to the community and to secure the general welfare is within the legislative authority.
    Before taking up the decisions of other states we desire to cite to the court the amount of legislation enacted in Ohio for the supervi ion and government of mine owners for the inspection of their mines and the prevention of casualties and protection of their employes.
    This is to show that the state of Ohio has taken under its general supervision this vocation, for the purpose of securing the safety of employes by requiring ventilation and inspection of mines, and governmental reports thereof, and that the defendant, therefore, must submit to such regulations as the sovereign, the state, thinks conducive to public health, public morals and public security. All of chapter 9, title 3, Revised Statutes of Ohio, embracing sections 290 to 306, inclusive, were enacted for the purpose aforesaid and all the restrictions therein required in the business of mining are directly in harmony with the character of the legislation embraced within the act in question.
    We also in this connection desire to refer the court to sections 4444, 4444a, 4445 and 4446, Revised Statutes of Ohio, where it is plainly designated as to what the contents of a bushel for measuring coal, stone and lime shall be, and that where facilities can be had all sales of coal shall be by weight and 2,000 pounds avoirdupois shall constitute a ton thereof, and also the liability of persons selling coal in violation of these provisions. These statutes have existed upon our statute books for more than twenty years and have never been questioned. The power embodied in them has been called into question in other states and fully sustained.
    By the express enumerations of powers given to cities and villages in the statutes of Ohio, under section 1692, in subdivision 16 thereof, the express authorization is given to councils to provide by ordinances for the regulating of the weighing and measuring of hay, wood and coal and other articles exposed for sale; so that every citizen of a city or village where such an office has been created by ordinance, can demand as a matter of right from any person selling to him a ton of coal, a certificate of weight that there are 2.000 pounds avoirdupois in the ton purchased by such person. Stokes v. City of New York, 14 Wend., 87; Munn v. Illinois, 94 U. S., 113.
    The inspection and regulation of weights and measures have always been regarded as proper subjects of police supervision and the mere fact that it may' to some extent interfere with the right of contract is no objection to it. First Blackstone Com., 274.
    In the case of Crawford v. Wick, supra, the public policy of the state was announced. Such public policy is back of, or the foundation of, the legislation in question. Frisbie v. U. S., 157 U. S., 160; U. S. v. Joint Traffic Ass’n, 171 U. S., 505; Wilson v. State, decided by the court of appeals of Kansas, May 19, 1898, construing chapter 188 of the Kansas laws of 1893. This statute is very similar to the one passed by the Ohio legislature, which is here objected to as being unconstitutional. Yates v. Milwaukee, 12 Wis., 673; Wilson v. State, 53 Pacific Reporter, 375.
    The following cases also sustain the proposition contended for: Boston Beer Co. v. Mass., 97 U. S., 25; Holden v. Hardy, 169 U. S., 366; Munn v. Illinois, 94 U. S., 113; Stokes v. New York, 14 Wend., 87; Eaton v. Kegan, 114 Mass., 433; Charleston v. Rodgers, 2 McCord, 495; Smith v. State, 90 Tenn., 575.
    It might not be improper to call attention, in a casual way, to the rules governing courts in passing on the constitutionality of legislative acts. Article 2, Section 1, of the constitution provides: “The legislative power of this state shall be vested in a general assembly, which shall consist of a senate and house of representatives.”
    Here then the whole legislative power vests in the legislature, and is . supreme, except when limited by some other provision of the constitution. Ohio ex

      rel. v. Covington, 29 Ohio St., 102; 1 Story on the Constitution, Sec. 426; Palmer v. Tingle, 55 Ohio St., 423.
   Shauok, C. J.

There is no authority for the detention of the petitioner unless the act of the general assembly set out in the statement of the case is constitutionally valid.

That the constitution gives inviolability to the right to make contracts, and that the legislature may deny the right only when it is required for the general welfare, and when it is promotive of public health or morals, are propositions established by familiar authorities and admitted by the attorney general.- We have, therefore, to consider only the purpose of this enactment and the nature of the contract which it assumes to forbid. Its purpose is to terminate the rights heretofore universally recognized in this state, and often exercised, of determining by contracts voluntarily entered into between miners and operators the mode in which the basis of compensation to be made by the latter to the former should be ascertained. Counsel for the state expressly disclaim any authority in the legislature to determine the price to be paid for mining coal, and it is true that no such authority is assumed in this act. By the method of payment heretofore in use, in which compensation was determined upon the basis of screened coal, miners have become entitled to receive and operators have become bound to make, compensation having regard to the skill and care exercised by the miner in the prosecution of his work. The effect of the act is that the total compensation to be paid by an operator is to be determined by agreement, but that it must be paid to miners without discrimination on account of their skill and care. Why the general assembly selected this class of laborers for discrimination — why they are deemed less entitled than others to compensation which encourages merit by rewarding it — we do not know, nor inquire. For, however unjust to this class of laborers the act may be, we can inquire only whether the general assembly had power to pass it. It is suggested as the basis of the act, that frauds may be perpetrated in the screening and weighing of coal under the contracts heretofore entered into. To this suggestion it is sufficient to answer that if such danger exists it may well justify appropriate legislation for the prevention of such fraud. But this legislation does not seek to prevent fraud nor to provide for the health or safety of those engaged in mining. Its sole purpose is to establish a uniform standard of compensation among those upon whom it operates. That is, so far as skill and care are concerned, it estaN lishes a uniform standard of earning capacity. The standard thus to be established for all must sarily be that of the least efficient, since their efficiency can not be increased by legislation. To withhold from merit its reward, may be a favorite object of socialism, but it is inimical to the individual rights which are preserved by the constitution. Acts not distinguishable from this in any substantial respect have been held repugnant to similar constitutional provisions. In re House Bill, etc., 21 Col., 27; Commonwealth v. Brown, 8 Pa. Superior Ct., 339; Millett v. The People, 117 Ill., 294; Ramsey v. The People, 142 Ill., 380. We are aware that divided courts have reached the opposite conclusion. The State v. Coal Co., 36 W. Va., 802, and State v. Wilson, 61 Kans., 32. But in both cases what we regard as the correct view is expressed in the dissenting opinions. The views which prevailed in the cases lastly cited seem to be entertained by those whose minds have not become entirely' divorced from the view once urged, but long since abandoned, that constitutional limitations are mere admonitions to the general assembly, and that they do not serve to annul legislative enactments inconsistent with their provisions.

This act may be invalid for other reasons, but our decision is placed upon the ground that it is an unwarranted invasion of the rights of miners and operators to make contracts by which the former shall be entitled to receive, and the latter obliged to make compensation according to the value of the service rendered and received.

Petitioner discharged.


author: By the Court:

text:
    The State of Ohio ex rel. Walton et al. v. Hermann et al., Commissioners Water Works of the City of Cincinnati.

      Board of public works — Authority of, to make contracts — Discretion of board not controlled by mandamus.

    A statute which confers upon a board of public officers authority to make a contract "with the lowest and best bidder,” confers upon the board a discretion with respect to. awarding the contract which can not be controlled by mandamus.
    (Decided November 27, 1900.)
    In Mandamus. Application for alternative writ.
    The relators allege that the defendants, who were the commissioners of waterworks for the city of Cincinnati, took all necessary preliminary steps as required by the statute for the making of a contract for the construction of a tunnel to be used in supplying said city with water. Tbe engineer’s approximate estimate was $662,-943. Pursuant to due and legal advertisement for bids, the relators filed a proposal to do tbe work specified for tbe sum of $655,950, and tbe defendant, The W. J. Gawne Go., for $659,230. Tbe petition also contains averments tending to show the ability and competency of tbe relators to perform tbeir work, and that with respect to ability and competency, they were better bidders than tbe W. J. Gawne Co. They allege that they proposed, by tbe giving of bond, and in all other respects, to comply with tbe requirements of tbe statute, that tbe defendants rejected tbeir bid and awarded tbe contract to tbe W. J. Gawne Go., and they pray for a writ of mandamus compelling tbe commissioners to award tbe contract to them.

      John G. Healey and Malcom MoAvoy, for relators..

      Charles J. Hunt; J. B. Frinkel; Wade H. Ellis and Ellis G. Kinkead, contra.
   By the Court:

Tbe question is -whether tbe statute under which the defendants are acting requires them to award a contract of this character to tbe lowest bidder, or gives to them a discretion to determine that a bidder not tbe lowest may nevertheless be tbe best. Tbe question is to be resolved by a construction of tbe phrase “lowest and best bidder,” occurring in tbe eighth subdivision of section 2435-7, which requires that “said commissioners .shall enter into a contract with tbe lowest and best bidder upon his giving bond,” etc. In the case of Boren & Guckes v. Commissioners, 21 Ohio St., 311, it was held that a statute which required that the “contract shall be awarded to, and made with, the person or persons who shall offer to perform the labor and furnish the materials at the lowest price and give good and sufficient bond, etc.,” denied to the commissioners any discretion to determine that any but the lowest bidder was the best bidder. In the case of The State ex rel v. Commissioners, 36 Ohio St., 326, it was held that a statute which required a contract to be awarded “to the lowest and best bidder,” conferred upon the commissioners a discretion which the court would not control by mandamus. With these decisions in mind the general assembly passed the act whose provisions are now the subject of contention. We must presume that when the words which had been construed to confer a discretion upon the commissioners were deliberately chosen by the legislature, it was with the intention that that discretion should be conferred.

Writ refused.


author: Minshall, J.

text:
    The City of Zanesville v. The Zanesville Telephone & Telegraph Co.

      Powers of government — Co-ordinate branches essential feature Probate courts belong to judicial department — Not legislative or administrative — Section 8J/S1, Revised Statutes— Requiring probate court to direct mode of telephone companies in cities — Constitutional law.

    1. The distribution of the powers of government into three coordinate branches, executive, legislative and judicial, is an essential feature of our system of constitutional government; and prohibits the confusion of these powers by conferring upon one branch powers that belong to another, un■less necessarily incidental to the powers conferred by the constitution.
    2. The probate courts of the several counties of the state be long to its judicial department and can not be authorized to exercise powers that are legislative or administrative in character, except as the same may be incident to their judicial powers.

      3. Section 3461, Revised Statutes, requiring probate courts to direct the mode in which a telegraph or telephone company-may use the streets and alleys of a city or village, when the municipal authorities and the company are unable to agree, is legislative, and not judicial, in character, and is therefore unconstitutional.
    (Decided October 16, 1900.)
    Error to the Circuit Court of Muskingum county.

      Charles G. Griffiths, city solicitor, and Dwrbcm & McDermott, for plaintiff in error.
    First. Did the legislature intend by section 3461, Rev. Stat., to take away from the municipalities, the control of their streets, so far as their use by telegraph and telephone companies is concerned, and give that control to the probate court?
    The intention of the legislature will be gathered from all the sections of the statutes relating to this subject, together with a due reference to what it was proposed to accomplish by the legislation.
    Our contention is that the legislature had in mind the mere passing through a city by a telegraph or telephone company, and did not have in mind the occupation by a telephone or telegraph company of all the streets and alleys of a city. The telephone company, in this case, seeks to have the probate court fix the mode in which it shall use all the streets, alleys, and public ways of the city of Zanesville, and it claims the right to have the court do that, because it has failed to agree with the city as to how it shall use the streets; or, in other words, it has refused to use the streets in the way in which the municipal authorities think would best subserve the public interests.
    The municipality is charged by law with the duty ■of keeping the streets in repair and free from nuisanee, and it is liable to one injured by reason of its: failure so to do. Therefore, is it not unreasonable to. suppose the legislature intended to take the control of the streets of a city from the municipality and give' it over, to any extent whatever, to another department or branch of the state government?
    In other words, if the legislature had intended that a telegraph or telephone company, failing to agree-with the municipality on the way in which it should occupy the streets, should have the right to apply to. the probate court and secure the privilege, it would have provided by statute, that a telegraph or telephone company might use the streets, alleys and public ways of any city upon such terms as it and the-municipal authorities might agree, and in case they failed to agree, upon such terms as the probate court, might fix, in a proceeding instituted for that purpose. The legislature not having so spoken, but having used the language of section 3461, that statute, will have-to be construed so as to give effect to all parts of the-section, and when this is done, we submit that it cannot be held to mean one sweep-net application for the-right to use all the streets and alleys of a city. Suburban L. & Power Co. v. Boston, 26 N. E. Rep., 447 Keasby on Electric Wires, p. 38.
    Second. If the legislature, by section '3461, Rev. Stat., intended what the defendant in error contends, is the meaning of that section, is it not unconstitutional, because, to the extent of the use of the streets-by a telegraph and telephone company, it deprives the-inhabitants of local self-government. State v. County Commissioners, 54 Ohio St., 333.
    Section 3461, Rev. Stat., is unconstitutional because it seeks to impose on the judiciary of the state, duties which are clearly legislative.

      The decision of this question depends upon the provisions of the constitution of Ohio, and the character of the duties sought to be imposed upon the probate court by section 3461. In passing, we desire to say that, the proceeding contemplated by section 3461 is not an appropriation or condemnation proceeding. That is provided for by other sections of the statutes, and in such a proceeding, the right to and in the property of another is secured; but by the proceeding in this case, simply the mode of use is to be fixed by the court. Article 1, section 2, of the constitution; Article 3, section 1; Article 4, section 1; Section 8,-6 Am. & Eng. Ency. Law, 2nd ed., p. 1006.
    That the powers of one department shall not be exercised or conferred upon either of the others, is universally held to be not only within the spirit, but substantially within the letter of the constitution. State v. Baughman, 38 Ohio St., 455; State ex rel. v. Peters, 43 Ohio St., 629.
    There is no positive and specific prohibition in the constitution of Ohio against conferring on any one branch of the government, the duty of another and coordinate branch. It is well settled, however, that the mere distribution of powers between the three departments is of itself such prohibition. Kilbourn v. Thompson, 103 U. S., 168; Cooley on Constitutional Limitations, p. 250; Appeal Norwalk St. Ry. Co., 37 Atlantic, 1085; Western Union Tel. Co. v. Myatt, 98 Fed. Rep., 335.
    The general rule, that the legislature cannot delegate its powers, and certainly not to another branch or department of the state government, will not be seriously controverted. We have, in Ohio, numerous decisions recognizing the rule that, one department of the state government must not encroach upon the functions and within the sphere of one of the other departments. State ex rel. v. Peters, 43 Ohio St., 629; State ex rel. v. Hawkins, 44 Ohio St., 98; DeCamp v. Archibald, 50 Ohio St., 618; Cooley on Constitutional Limitations, p. 250; Fleming v. Trowsdale, 85 Fed., 189; Cooley on Constitutional Limitations, p. 110; Dash v. Van Cleet, 7 Johnson, 498; Todd’s Case, 13 Howard, 51.
    Now in the case at bar, it is sought to compel the probate court to fix the mode of use by the telephone company, of all the streets, alleys, and public places of the city of Zanesville. In other words, the probate court is to lay down police regulations, for the government of the conduct of the telephone company in the streets, for all future time. If this duty can be imposed upon the probate court, upon mere failure of' the council to agree, then it could be imposed upon the probate court in the first instance, and if it could be thus imposed as to telephone and telegraph companies, it could be imposed as to street railroads,, steam railroads, and all other companies or corporations using or seeking to use the streets of a municipality; and then we have the spectacle of the probate court, practically laying down regulations governing the use of the public highways within the municipality by public corporations. It seems clear that this, would be a legislative act. Telegraph Co. v. New York, 38 Fed., 552; People v. Squire, 107 N. Y., 593;, Keasby on Electric Wires, p. 7; Hoboken Co. v. Hoboken, 35 N. J. L., 208; 27 Indiana, p. 394.
    On the proposition that prescribing the mode and manner in which public corporations may occupy the streets of a municipality is the exercise of a legislative power and in the nature' of a police regulation. Dillon on Municipal Corporations, Secs. 656, 698;, Tiedeman Mun. Cor., Secs. 289, 297; Western Union Tel. Co. v. Philadelphia, 12 Atlantic, 144.
    The case of the Norwalk Street Railway Co., 37 Atlantic, p. 1080, is very like the case at bar.

      S. M. Winn and A. J. Andrews, for defendant in error.
    We contend that this judgment of the probate court was clearly erroneous and consequently that the judgment of the common pleas court affirming was also clearly erroneous. Section 3461 has been on the statute books unchanged for more than thirty years, the benefits of its provisions claimed and enforced without challenge throughout the state. After this long-lapse of time the probate court of this county took it upon itself to hold this law unconstitutional. After this long acquiescence we say that it is too late for an inferior court to entertain this question. State ex rel. v. Bader, 7 Circ. Dec., 1, 4, 13 C. C., 15.
    The Supreme Court of the United States in the case of Stuart v. Laird, 5 U. S. (1 Cranch. ), 299, at page 309, speaking of a constitutional question raised in the case, say: “To this objection, which is of recent date, it is sufficient to observe that practice and acquiescence under it for a period of several years, affords an irresistible answer and has, indeed, fixed the construction..” Prigg v. Commonwealth, 41 U. S. (16 Pet.), 621; Sec. 1, Art. 2, Ohio constitution; Baker v. Cincinnati, 11 Ohio St., 534; Bloom v. Xenia, 32 Ohio St., 461; State ex rel. v. Evans, 1 Ohio St., 437; Cass v. Dillon, 2 Ohio St., 607; Lehman v. McBride, 15 Ohio St., 573; Cleveland v. Wick, 18 Ohio St., 303; State v. Frame, 39 Ohio St., 399; Ireland v. Palestine, 19 Ohio St., 369; Western Union Tel. Co. v. Mayer, 28 Ohio St., 521.

      The defendant city is but the creature of the legislature (whose power it is contesting in this case). The legislature has full power to change, modify, restrict or take away entirely any and all powers conferred bn defendant — could even repeal its charter and invest other agents of the state therewith. Can the stream arise above its source? Is the creature greater than its creator? The constitution does not execute itself. Hendershot v. State, 44 Ohio St., 208.
    The constitutionality of an act depends upon its effect, not on its form. State v. Hipp, 38 Ohio St., 199; Hixson v. Burson, 54 Ohio St., 470.
    But it is said by counsel for defendant that inasmuch as the state government is divided into three co-ordinate departments — legislative, executive and judicial — that this law is unconstitutional because it pertains to the judiciary and the powers named in said section are legislative and not judicial.
    The control of the streets, alleys, highways, etc., is by section 2640 confided by the legislature to the •council of the municipality, but that council is by the same power (the legislative) by the express provisions ■of section 3461, etc., so limited and modified as to put said streets and public highways in certain contingencies named under the control of the probate judge, and to that extent take it away from the council. A law may be defined to be a controlling regulation — a rule of being or conduct, established by an authority able to enforce its will — the mode or order according to Which an agent or power acts.
    We affirm the powers Vested in the probate court by section 3461 are within the province of the judiciary. They are in fact strictly judicial. State v. Harmon. 31 Ohio St., 250; State ex rel. v. Hawkins, 44 Ohio St., 98; Musser v. Adair, 55 Ohio St., 466; Ohio ex rel. v. Covington, 29 Ohio St., 102; State ex rel. v. Guilbert, 56 Ohio St., 575; State v. Kendle, 52 Ohio St., 346; State ex rel. v. Peters, 43 Ohio St., 629; Doan v. Biteley, 49 Ohio St., 596; McLaughlin v. McLaughlin, 4 Ohio St., 511; State ex rel. v. Telephone Co., 36 Ohio St., 296; State ex rel. v. Railroad Co., 36 Ohio St., 434.
    That the legislature intended to, and understood it not only had the power, but had in the contingency named in section 3461, divested the city council of exclusive control of the streets and public ways and grounds of the city is perfectly apparent from the express provisions of section 3471a (92 O. L., 204-5) by which electric light companies are expressly made subject to municipal control alone.
    The legislature has given telegraph and telephone companies the right to use the streets and highways for certain purposes (it is indeed a public necessity essential to the transmission of intelligence) and for those purposes they have just as good right to the use thereof as any pedestrian.
    We claim that the duties enjoined upon the probate court under favor of section 3461 are within the purview of all the decisions of our Supreme Court clearly judicial when so enjoined by the legislature, and are sure that no case can be found in this state to the contrary. Here are two public corporations, both receiving their charters from the state of Ohio.
   Minshall, J.

The question presented in this case concerns the constitutional validity of section 3461, Revised Statutes. The section reads as follows:

“When any lands authorized to be appropriated to the use of a company are subject to the easement of a street, alley, public way, or other public use, within the limits of any city or village, the mode of use shall be such as shall be agreed upon between the municipal authorities of the city or village and the company; and if they cannot agree, or the municipal authorities unreasonably delay to enter into any agreement, the probate court of the county, in a proceeding instituted for the purpose, shall direct in what mode such telegraph line shall be constructed along such street, alley, or public way, so as not to incommode the public in the use of the same; but nothing in this section shall be so construed as to authorize any municipal corporation to demand or receive any compensation for the use of a street, alley, or public way, beyond what may be necessary to restore the pavement to its former state of usefulness.”

The section as enacted related to telegraph companies, but was subsequently made applicable to telephone companies.

Under favor of the section just quoted, the Zanesville Telephone and Telegraph Company commenced a proceeding in the probate court of the county, averring its corporate capacity and right to use the streets and alleys of the city in locating its line therein, and averring that the city had unreasonably failed to agree with it in regard to the use of its streets and alleys, and asking the court to take action under this section and to fix the mode of use of all streets, etc., to be appropriated to the use of the company, subject to its easement therein. The matter was heard; but the court finally dismissed the petition on the ground that the power sought to be conferred on the court by this section- is not judicial. The matter was taken on error to the court of common pleas and the judgment was affirmed. It was then taken on error to the circuit court, where the judgment of the common pleas was reversed and the cause remanded to the probate court for further proceedings. Error is prosecuted here to reverse the judgment of the latter court.

If the power conferred on the probate court by section 3461 is legislative or administrative, and not judicial, in character, it'cannot be maintained that the section is a valid one. The distribution of the powers of government, legislative, executive and judicial, among three co-ordinate branches, separate and independent of each other, is a fundamental feature, of our system of constitutional government. In the preservation of these distinctions is seen, by many able jurists, the preservation of all the rights, civil and political, of the individual, secured by our free form of government; and it is held that any encroachment by one upon the other, is a step in the direction of arbitrary power. In Dash v. Van Kleeck, 7 John., 477, it is said by Kent, C. J.: “It is a well settled axiom that the union of these two powers (the legislative and judicial) is tyranny. Theorists and practical statesmen concur in this opinion.” See further, 1 Bl. Comm., 269; Spirit of Laws, bk. 11, c. 6; Kilbourn v. Thompson, 103 U. S., 191. And the very fact that the powers of government are so distributed by the constitution is regarded as, of itself, a prohibition against the power of one department being conferred on another, though such express language is not found in the instrument. The probate court belongs to the judicial department of our state government, so that the question at once arises, what is the nature of the power conferred by this section on the probate courts of the several counties of the state? Is it judicial power? If not, the section cannot be supported as a valid one.

The power conferred is invoked where any lands authorized to be appropriated to the use of a company are subject to the easement of a street, etc., within the limits of a city or village; and the mode of use cannot be agreed upon by the municipal authorities and the company, or the former unreasonably delays -to enter into an agreement. In such case the probate court, in a proceeding instituted for the purpose, is required to direct in what mode such telegraph (or telephone) line shall be constructed in the streets, etc., of the city. It must be manifest that this section does not confer the right upon a company to use the streets of the city. It recognizes the fact that the streets and alleys belong to the city and are primarily within its control; and provides a mode by which the company may acquire the right to use the same. First, by agreement with the city; and if this cannot be obtained, then the probate court is empowered, in a proceeding commenced by the company, to direct the mode in which the streets maybe used by the company. We fail to perceive that any judicial power is here conferred on the court. It is either legislative or administrative, most probably the former in so far as it prescribes the mode of use; but neither of these powers is judicial in character. It is true that courts do exercise certain administrative powers. They may appoint receivers and master commissioners and some of their other officers; but these powers are only such as are properly incidental to their powers as a court. They have also at times been authorized to make appointments in other departments; and when they act, their appointments have, in some instances, been sustained; but it has never been held that they could be compelled to make such appointments; for the reason that such appointments are not judicial in character. In this case the court is not required to hear and determine a disputed right upon issues joined between the parties and to apply the law to the facts as they are found. This is the essential and distinctive feature of judicial power. We quote in this connection the appropriate language of Judge Cooley: “That which distinguishes a judicial from a legislative act is, that the one is a determination of what the existing law is in relation to some existing thing already done or happened, while the other is a predetermination of what the law shall be for the regulation of future cases falling under its provisions.” Constitutional Limitations, 108. Further on he says: “An-ordinance regulating a street is a legislative1 act beyond the control of the judicial power of the state.” The Supreme Court of Connecticut, in The Norwalk Street Railway Company’s Appeal, 69 Conn., 576, has recently passed on the question presented in this case. A statute of the state gave to a street railway company the right to appeal to the superior court of the state, when the municipal authorities failed for a limited time to exercise their powers'to regulate the location and construction of street railways within their limits. The court held, in an elaborate and well reasoned opinion, that, “The power of regulating the location and operation of street railways, given to the local municipal authorities by a statute of the state, clearly falls without the limits of the judicial department. Nor can the exercise of such power become a judicial, function, merely because a statute of the state gives to the railway company a right of appeal to the superior court or any judge thereof, when the municipal authorities fail to exercise their power within a limited time. Such ‘appeal’ is not a process to invoke judicial power, but is merely an application to tbe court or judge, acting in the place or stead of tbe municipal authorities, to exercise a legislative function.” See also the following cases: Hayburn's Case, 2 Dall., 409; U. S. v. Ferreira, 13 How., 40; 10 Minn., 78.

In the case before us tbe company presented an ordinance embodying a mode of use as it desired it, tbe city presented one on tbe same subject, but differing in its terms from that of tbe company; arid, not being-able to agree, tbe company filed its petition in tbe probate court. Consequently all tbe court could do would be to prescribe an ordinance for tbe city regulating tbe mode in which the company might use its streets. It seems then too clear for argument that tbe power invoked is none other than tbe power, by ordinance, to regulate tbe use of tbe city’s streets and alleys by tbe company. A power primarily in the city, legislative in character, but lost to it and conferred on tbe probate court by its failure to act in a reasonable time.

Tbe judgment of the circuit court will be reversed, and that of tbe common pleas and probate courts will be affirmed, except that tbe judgment for costs in the latter court will be reversed, Norton v. McLeary, 8 Ohio St., 205.

Judgment accordingly.

On rehearing tbe judgment was affirmed. See s. c. 64 Ohio St., 67.