author: Williams, J.

text:
    The State ex rel. v. The W. U. M. Life Ins. Co.

      Mutual Life Insurance Companies — Powers of non-resident companies under Ohio -Laws — Sections 3630 and 3630e, Revised Statutes, construed — Quo Warranto.

    1. Corporations organized under section 3630, of the Revised Statutes, which do not comply with the laws regulating regular mutual lite insurance companies, have no power to issue policies guaranteeing any fixed amount to be paid at the death of the member, “ except such fixed amount shall be conditioned upon the same being realized from the assessments made on members to meet it; ” and those corporations so organized, which do comply with such laws, are authorized to issue endowment policies “ promising to pay to members during life any sum of money or thing of value.” Such Ohio corporations are not permitted to do business in another state upon substantially the same basis and limitations as they are in Ohio, when by the laws of such other state they are not permitted to issue such endowment policies, nor any policy of insurance so conditioned, nor any that does not specify the sum of money to be paid, and unconditionally obligate such corporation to pay the amount so specified, to the beneficiaries of such payment; and corporations organized on the assessment plan under the laws of such other stale, are not entitled to do business in this state.
    2. The business, which corporations of other states organized to insure lives of members on the assessment plan “ shall be permitted to do in this state,” under the provisions of section 3630e Revised Statutes, is that contemplated by section 3630, which does not include the business of insuring the lives of members for the benefit of others than their families and heirs. A corporation of another state, organized for insuring lives upon the plan of assessments upon its members, without other limitation than that the policy holder shall have an insurable interest in the life of the member, is not embraced within either of said sections.
    3. That clause of section 3630, of the Revised Statutes, which provides, that “ such company or association shall not be subject to the preceding sections of this chapter,” does not apply to corporations of other states organized for insuring the lives of members for the benefit of others than their families and heirs. Corporations of that class, are not entitled to transact any business of insurance in this state, until they procure from the superintendent of insurance, a certificate of authority so to do; nor can any person act as agent in this state for such company, until a license to do so is procured from the superintendent of insurance, as required by section 3604 Revised Statutes. Such licenses continue in force, unless suspended or revoked, until the first day of April, of the year next after the date of their issue, and no longer.
    4. When a foreign corporation doing business in this state, is exercising its franchises in contravention of the laws thereof, it may be ousted therefrom, by proceedings in quo warranto.
    (Decided March 4, 1890.)
    Quo Warranto. Tbe petition states, that tbe defendant is a corporation organized under the laws of the state of Michigan for the purpose of carrying on, upon the assessment or co-operative plan, the business of insuring the lives of its members, and of providing to its members indemnity for disability by accident; that since the 1st day of April, 1889, the defendant has exercised, and claims the right to exercise, in this state, the privilege and franchise of transacting the business of insuring lives upon the assessment plan, which it is not entitled to do, because neither it, nor any of its agents, obtained from the superintendent of insurance of this state the necessary certificate of authority or license to do business in this state, and also because, by the statutes of Michigan, corporations organized under the laws of Ohio, for the purpose of insuring the lives of members upon the assessment plan, are not permitted to do business in the state of Michigan upon the same basis and limitations as they are in this state, and the commissioner of insurance of the state of Michigan has refused, and still refuses to issue to such Ohio corporations, his certificate of authority to transact business in that state. The provisions of the Michigan statutes, upon the subject, are set out in the petition. Such of them as are deemed material to the decision of the case will be noticed in the opinion.
    The petition prays for a judgment of ouster against the defendant.
    The answer admits that the defendant was incorporated under the Michigan statute set forth in the petition; that it has exercised, and claims the right to exercise in .this state, the privilege and franchise referred to in the petition, and alleges that it is entitled to do so, because, it avers, that on the 9th day of June, 1886, it made application to the superintendent of insurance of this state for permission to carry on in the state of Ohio the business of life insurance, as contemplated in section 3630e of the Revised Statutes of Ohio, and that on the 13th day of September, 1886, the superintendent of insurance duly authorized the defendant to transact business in this state ; since which time the defendant has continuously prosecuted its business in this state as contemplated in section 3630 of the Revised Statutes. The answer further alleges, that Ohio corporations organized for the purpose of insuring their members upon the assessment plan, are not debarred by the laws of Michigan from transacting business in that state, and that the insurance commissioner of that state has not refused to issue certificates of authority to transact business in that state, to such Ohio corporations as can and will comply with the laws of the state of Michigan. It is also alleged in the answer, that the petition was filed at the insti gation of “ The People’s Mutual Benefit Association of Westerville, Ohio,” which corporation, on or about the 24th of October, 1888, made application to the insurance commissioner of Michigan for authority to do business in that state, but was refused such authority, because, upon examination, it was ascertained its business in part, was that of endowment insurance, which the laws of Michigan did not permit corporations organized on the assessment plan to do.
    The defendant also filed a supplemental answer (so called), which charges that the superintendent of insurance has embodied in the annual report which he is required to make to the general assembly, relating to the conduct and condition of all insurance companies doing business in this state, a statement to the effect that he has lawfully revoked the authority of the defendant to do business in Ohio after April 1, 1889, since which time it has been doing business in this state without authority of law; and that he "has omitted to make any statement in his report showing the condition of the defendant company. By this pleading it is sought to make the superintendent of insurance a party to the action, and enjoin him from making such report.
    The case is submitted upon demurrers to the answer and the supplemental answer.

      David K. Watson, attorney general, and R. A. Harrison, for plaintiff.

      O. D. Robertson, for defendant.
   Williams, J.

It is contended, in behalf of the plaintiff, that the defendant is not entitled to carry on its business of insurance in this state, and that it is therefore exercising its franchises here in contravention of law, because; 1. Ohio corporations organized under section 3630 of the Revised Statutes, are not permitted to do business in the state of Michigan, on substantially the same basis and limitations, as they are in Ohio; 2. The law under which the defendant is organized, authorizes it to engage in the business of insuring lives on the plan of assessments upon surviving members, without other restriction than that policy holders shall have an insurable interest in the lives of the members, which, companies organized for the mutual protection of its members within this state, are not permitted to do; and, 3. The defendant has failed to comply with the laws of this state, which require, that such corporations shall obtain annually, from the superintendent of insurance, a certificate of authority, and licenses to their agents, to do business in this state.

The business of life insurance, and the terms and conditions upon which foreign companies may be admitted to carry on that business, is regulated in this state by statute; and the right of the defendant to transact its business of in-insurance within the state, if possessed by it, must be derived, it is conceded, from section 3630c, Revised Statutes, which is as follows: “ Any corporation, company or association organized under the law of any other state to insure lives of members on the- assessment plan, and authorized to transact the business contemplated in section thirty-six hundred and thirty, shall be permitted to do such business, to wit: The business contemplated in section thirty-six hundred and thirty, in this state, by first complying with the laws of the state of Ohio, regulating corporations, companies or associations organized for the mutual protection of it members within this state, upon obtaining from the superintendent of insurance of this state a certificate of such compliance, which certificate shall not be granted until such foreign corporation, company or association shall have appointed an agent or attorney within this state upon whom service of process may be had. Provided, that the superintendent of insurance shall not be required to issue certificates to do business in Ohio to an agent of any such corporation, company or association organized in any state in which such Ohio corporations, companies or associations are not permitted to do business on substantially the same basis and limitations as they are in Ohio.”

In view of the proviso contained in this section, it becomes important to determine, upon what basis and limitations, Ohio corporations are permitted to do business in Ohio. These are ascertained by reference to sections 8630, and 3630c of the Revised Statutes. The former section is as follows:

“ Sec. 3630. A company or association may be organized to transact the business of life or accident insurance on the assessment plan, for the purpose of mutual protection and relief of its members, and for the payment of stipulated sums of money to the families or heirs of deceased members of such company or association, and may receive money either by voluntary donation or contribution, or collect the same by assessment on its members, and may accumulate, invest, distribute and appropriate the same in such manner as it may deem- proper; that all accumulations and accretions thereon shall be held and used as the property of the members and in the interest of the members, and shall not be loaned to, used, appropriated, or invested for the benefit of any officer or manager of such company or association; and, provided, that no company or association shall issue a certificate for a greater amount than such company or association shall be able to pay from the proceeds of one assessment; and such company or association shall not be subject to the preceding sections of this chapter.”

It is provided in section 8630e that, “No such corporation, company, or association issuing endowments, certificates or policies, or undertaking, or promising to pay to members during life any sum of money, or thing of value, or certificate, or policy guaranteeing any fixed amount to be paid at death, except such fixed amounts or endowments shall be conditional upon the same being realized from the assessments made on members to meet them, shall be permitted to do business in this state, until the}1- shall comply with the laws regulating regular mutual life insurance companies.”

Whatever powers such companies possess, are derived exclusively from the laws of this state, and the limitations and restrictions imposed upon them by those laws, both with respect to the classes of business they may transact, and the mode of doing it, operate upon them as well when doing business outside of the state, as within it. Their corporate capacity, in these respects, cannot be enlarged by the laws of any' other state in which they may be permitted to do business. By the plain provisions of these statutes, no company organized under section 3630, unless it complies with the laws regulating regular mutual life insurance companies, can issue any policy guaranteeing any fixed amount to' be paid at death, “ except such amount shall he conditional upon the same being realized from the assessments made on members to meet them.” In other words, the obligation of the policy, and the only one the company can thus contract, is to pay upon the death of the member, such sum, and only such, as may be realized from the assessments made on members to meet it. The policy does not create an. unconditional obligation to pay the. amount specified in it, nor has the company corporate power to issue such policy, or contract such obligation, in this state, or elsewhere. Then, those companies so organized, which do comply with the laws regulating mutual life insurance companies, are authorized to issue endowment policies, undertaking to pay members “ during life any sum of money or thing of value,” and policies guaranteeing a fixed amount to be paid at death. These are the basis and limitations upon which such companies are authorized to do business in Ohio, and the question to be determined here, is, whether they are permitted by the laws of Michigan, to do business there, upon substantially the same basis and limitations. It is not enough, that thej'be permitted there, to exercise some of their franchises, or transact a part only of the business they are authorized to do in Ohio, but they must there be permitted to do substantially the same business, upon substantially the same terms and conditions, as they are in Ohio. If by the laws of Michigan, any substantial limitation or restriction is placed upon such Ohio companies in regard to the character or extent of the business they may transact there, to which they are not subject in Ohio, it cannot be said that they are permitted to do business there, upon substantially the same basis and limitations as they are in Ohio.

By section 15, of the Michigan statute, under which it is 'admitted, by the answer, the defendant was reorganized, it is provided, that “ every policy or certificate, issued by any corporation in that state and doing business under that act, and promising a payment to be made upon a contingency of death, or of disability by accident, shall specify the sum of money it promises to pay upon such contingency insured against, and the number of days after satisfactory proof of the' happening of such contingency, at which such payment should be made; and that upon the occurrence of such contingency, unless the contract shall have been voided by fraud or by breach of its condition, the corporation shall be obligated to the beneficiaries of such payment, at the time, and to the amount specified in the policy or certificate; and that this indebtedness shall have’ priority over all indebtedness thereafter incurred, except as provided in case of the distribution of assets of an insolvent corporation.” And section 17 of the same act provides, that no corporation or association organized under the laws of any other state for the purpose of insuring lives or furnishing accident indemnity upon the co-operative assessment plan, shall be authorized to do business in Michigan, until it shall have obtained a certificate of authority from the commissioner of insurance of that state; and that no such certificate of authority shall be issued, unless the corporation or association applying therefor, “ has in force policies of insurance upon which the proceeds of one assessment will pay the highest amount insured upon each of the lives of the members for which the assessment is levied, the full amount agreed to be paid upon the death of any one member, and that it is paying, and for twelve months next preceding has paid, the highest amount named in its policies or certificates in full.”

Thus it appears, that by the laws of Michigan, every policy issued by a corporation in that state, “ promising a payment to be made upon a contingency of death,.....shall specify the sum of money it promises to pay,.....and upon the occurrence of such contingency,.....the corporation- shall be obligated to the beneficiaries of such payment,.....to the amount specified in the policy,” and no certificate of authority to do business in Michigan, shall be issued to any corporation or association organized under the laws of any other state, unless for the twelve months next preceding, it has paid, and is paying, the full amount named in its policies, nor unless it has in force, policies upon which the proceeds of one assessment will pay the highest amount insured upon the lives of the members for which the assessment is levied, the full amount agreed to be paid upon the death of any one member. While, as we have already seen, corporations organized under the Ohio statute, are not obligated to- pay the full amount specified in the policy, but only such sum as may be realized from assessments made on its members; and their policies must so provide. They are incapable of making any other contract, or issuing any policy of insurance not so conditioned, unless they comply with the laws regulating mutual life insurance companies, in which event, they ar'e permitted in Ohio to issue endowment policies.

It is admitted by the answer, that the laws of the state of Michigan do not permit endowment policies to be issued, or contracts of that kind to be made by corporations organized to do business on the assessment plan, and for that reason the commissioner of insurance of that state refused to issue his certificate of authority to an Ohio company organized under section 8680, to do business in that state.

Whether, therefore, the Ohio corporation does or does not comply with- the laws regulating regular mutual life insurance companies, it is not, in either event, permitted to do business in the state of Michigan, upon substantially the same basis and limitations as it is in Ohio.

Does the defendant come within the class of companies, which, under the provisions of section 3630, may be admitted to do business in this state ? It will be observed, that only companies organized under the laws of any other state to insure the lives of members on the assessment plan, and authorized to transact the business contemplated in section 3630, are entitled to do business in this state; and furthermore, that it is only the business contemplated in section 3630, that such companies shall be permitted to transact. The language of the statute is, “ any corporation, company or association, organized under the laws of any other state to insure lives of members on the assessment plan, and authorized to transact the business contemplated in section thirty-six hundred and thirty, shall be permitted to do such business, to wit: The business contemplated in section thirty-six hundred and thirty in this state,” upon the conditions therein specified. As often as the question has been presented, it has been held by this court that section 3630 does not contemplate or permit the business of insuring the lives of members otherwise than for the benefit of their families and heirs. In State v. Moore, 38 Ohio St., 7, it is decided that, “ A company of another state organized for insuring lives on the plan of assessment upon surviving members, without limitation, does not come under the class of companies provided for in section 3630. That section does not embrace companies insuring the fives of members for the benefit of others than their families and heirs.” And in State v. Moore, 39 Ohio St., 486, the relator, a New York corporation, organized on the assessment plan, and authorized by the law governing it, to issue policies payable to the legal representatives of the member, or to any beneficiary designated by such member, sought to compel, by mandaríais, the insurance commissioner of this state to issue to it the necessary certificate entitling it to do business in this state. But the wm was refused. Doyle, J., in the opinion, after quoting the above paragraph of the syllabus in State v. Moore, 38 Ohio St., 7, says: “ The principle thus announced must exclude the relator unless the law has been changed by subsequent legislation.” The legislation has not in this respect been changed. It is admitted by the pleadings, that the defendant is authorized by the law of its reorganization to issue policies on the lives of its members for the benefit of any person who has an insurable interest in such life. By section 15 of the Michigan statute, set out in the petition, it is provided, that corporations doing business under the act, shall not issue any policy “ upon a life in which the beneficiary has not an insurable interest; ” and it is further provided by the same section, that any member, “ shall have the right at any time, with the consent of such corporation or association, and with the consent of the beneficiary, if he be a creditor to make a change in his beneficiary,” within certain specified limits; and further, that “ such corporation shall not issue policies or certificates to beneficiaries as a creditor or creditors that do not state that they are for collateral security payable as the interest of such beneficiaries may appear, and in every such case said creditor or creditors shall only be entitled to such portion of the amount insured (not exceeding the face of the policy) as shall cover the indebtedness of the member to said creditor at the date of his death.” And section 17 of the same statute provides, that “ no corporation or association organized or doing business under or by virtue of the 'laws of any state, or territory of the United States, or District of Columbia, or foreign country, for the purpose of insuring lives, or furnishing accident indemnity upon the co-operative assessment plan, shall be authorized to do business in the state, until it shall have obtained a certificate of authority from the commissioner of insurance of this state, as hereafter provided. Nor, unless the state, or territory of the United States, or District of Columbia, or foreign country under whose laws such corporation or association is organized, shall extend the right to such corporations of this state, to do business in such state, territory of the United States, District of Columbia, or foreign country, upon similar conditions to those in this act prescribed.” The defendant is, therefore, not entitled to carry on its business in this state, and the superintendent of insurance may rightfully withhold from it, license and authority to do so.

It is alleged in the answer, that the superintendent of insurance, on the 13th day of September, 1886, authorized the defendant to transact business in this state ; but it is admitted, that neither the defendant, nor any agent of the defendant, has received any certificate or license from him since that date, and that it has continued to carry on its business in Ohio without other license or authority than that first granted it.

The claim of the defendant is, that when it obtained from the superintendent of insurance the certificate provided for in section 3630e, it was placed in all respects upon the same footing as companies organized under section 3630, and is, therefore, entitled to the benefit of the last clause of that section, which provides that “ such company or association shall not be subject to the preceding sections of this chapter.”

We regard the case of State v. Moore, 38 Ohio St., supra, decisive of this claim, adverse to the defendant. ’ The relator in that case claimed, that by reason of the clause referred to, in section 3630, and the provisions of the supplementary act of April 12, 1880, which enacted section 3630e, substantially as it is now, so far as it affects this question, it was exempt from the operation of section 3604, which was then, and is now, in the same chapter with section 3630. The statute under which the relator in that case was organized, authorized it to engage in the business of insuring lives on the plan of assessments upon its surviving members, without other restrictions than that the policyholders should have an interest in the lives of members ; and it was held, as before noticed, that such companies did not come within the provisions of section 3630, and that the relator was subject to the preceding sections of the chapter. In the opinion of the court, White, J., says: “ The character of the company or association authorized to do business under section 3630, is thus described in the section: ‘ A company or association may be organized for the purpose of mutual protection and relief of its members, and for the payment of stipulated sums of money, to the families or heirs of the deceased members of such company or association, and may receive money either by voluntary donation or contribution, or collect the same by assessment on its members.....and such association shall not be subject to the preceding section of the chapter.’ It is companies and associations of this character alone that are exempt from the operation of the preceding sections of the act; and this exemption is allowed on account of the limited nature of the life insurance they are authorized to assume, being confined to insurance for the benefit of the families and heirs of members.” We have already seen that the defendant is engaged in the business of insuring lives upon the plan of assessments upon surviving members without other restriction than that policy holders shall have an insurable interest in the lives of the members, and it is not, therefore, within the class of companies provided for in section 3630, and not exempt from the operation of the preceding sections of that chapter. One of these sections, 3604, provides, that “No company organized by act of congress, or under the laws of any other state of the United States, shall transact any business of insurance in this state until it procures from the superintendent of insurance a certificate of authority so to do; ” and it further provides, that no “ person or corporation shall act as agent for any such company in procuring applications for insurance, taking risks, or in any manner transacting the business of insurance, until such person or corporation procures from the superintendent of insurance a license so to do.” And by the provisions of section 3616, all licenses so granted “shall continue in force, unless suspended or revoked, until the first day of April of the year next after the date of their issue.” We are of the opinion that the license granted to the defendant and its agents on the 13th day of September, 1886, expired on the first day of April ensuing. and that since that time the defendant has been doing business in this state without authority of law.

The defendant, availing itself of the rule that the demurrer searches the record and reaches the first defective pleading, contends that the facts averred in the petition do not entitle the plaintiff to the relief demanded. It appears from the petition that the defendant is a corporation organized under the laws of the state of Michigan, and the contention of the defendant is, that quo warranto cannot be maintained against it, in this state, because it can be ousted of its franchises only by the sovereignty which bestowed them. Undoubtedly, the franchises which a state has conferred upon a corporation, cannot be taken from it by the act of another state, or by the judgment of its courts. Morawetz on Corp., sec. 659. The purpose of this action, however, is not to deprive the defendant of the franchises with which it has been invested by the laws of the state creating it, but to inquire into its authority to carry on its business in this state, and, if found to be exercising its franchises in this state in contravention of the laws thereof, to oust it therefrom. It is provided by section 6761 of the Revised Statutes, that the civil action of quo warranto, may be brought in the name of the state, against a corporation when it claims or has exercised “ a franchise, privilege or right in contravention of law.”

There can be no doubt of the power of the legislature to prescribe the terms and conditions upon which foreign corporations may be admitted to do business in this state. It was held in Western Union Telegraph Company v. Mayer 28 Ohio St., 521, that “Foreign corporations can exercise none of their franchises .or powers within this state, except by comity or legislative consent. That consent may be upon such terms and conditions as the general assembly under its legislative power may impose.” It was said by Johnson, J., in the opinion in that case, that foreign corporations “ may be excluded from the state altogether, or admitted on such terms as the state may prescribe.” Before exercising their franchises in this state, such corporations must, of course, comply with the conditions so imposed. Without such compliance, the exercise of their franchises in the state would be in contravention of the laws of the state, and as just noticed, section 6761, Revised Statutes, expressly authorizes the action of quo warranto to be brought by the state against a corporation which claims or has exercised a franchise or privilege in contravention of law. This statute is not limited to corporations organized under the laws of Ohio, but applies to corporations generally. If it had been intended to confine the application of the statute to domestic corporations, apt language for that purpose would doubtless have been employed. We hold that a foreign corporation which is carrying on its business, and making contracts in that behalf, in this state, is exercising therein its corporate franchises, from which, when exercised in contravention of the laws of the state, it may be ousted by proceedings in quo warranto.

The proper judgment in such case, is not to oust the corporation from the franchise of being a corporation, or from any of the franchises conferred on it by the law of its creation, but from the exercise of its franchises in this state.

Demurrers sustained, and judgment of ouster.


source: Caselaw Access Project

author: Minshall, C. J.

license: Public Domain

text:
    Barrick v. Gifford et al.

      Corporations — Stockholders—Statutory liability of — When may be enforced — When statute of limitations begins to run — Suit by one creditor for the benefit of all — When it saves the statute of limitations as against all— What stockholders liable.

    1. Where a corporation, possessed of property subject to levy and sale on execution, though not sufficient to pay all its debts, continues to transact its business, the right of a creditor to enforce the statutory liability of its stockholders does not accrue, until an execution, issued upon a judgment against it, has been returned unsatisfied for want of goods whereon to levy.
    2. Where, however, a company has become insolvent, and made an assignment of all its property for the benefit of its creditors, the right of the creditors, or any of them, then accrues to commence suit against the stockholders on their liability under the statute, without any prior proceeding against the company, and the statute of limitations begins to run from that time against the right of action.
    3. A suit commenced by one creditor on behalf of himself and all other creditors of an insolvent corporation to enforce the statutory liability - of its stockholders, is in the nature of a demand for all, and saves the running of the statute of limitations as against all the creditors who may come in and assert their claims before the final determination of the action.

      4. The owners of the stock in an insolvent corporation, who are such at the commencement of a creditor’s suit against its stockholders upon their individual liability, are liable for its debts; and this rule is not varied in favor of a particular stockholder, by the fact that his stock may have been issued to him by the company after the creation of the debts.
    (Decided March 4, 1890.)
    Error to the Circuit Court of Licking county.
    The original suit was commenced October 10, 1878. It was in the nature of a creditor’s bill, brought by The Toledo Iron Company against The Sunday Creek Coal & Iron Company, an insolvent corporation. It contained two causes' of action, one based on certain alleged unpaid subscriptions to the capital stock of the company, and one on the liability of its stockholders to creditors under the statute. Gifford was made a party, who, after recovering a judgment on his claim against the company, by leave of the court, filed an answer and cross-petition, August 30,1881, setting up his judgment and asking relief thereon as one of the creditors of the company. It, as did the petition of the Iron Company, contained two causes of action, one upon the alleged unpaid subscriptions of the stockholders, and the other upon their statutory liability. The ease having been heard and determined in the common pleas, Barrick and others of the stockholders, took an appeal to the circuit court from the judgment rendered in favor of Gifford on his answer and cross-petition. Issues of fact having been made by the pleadings between Gifford and the stockholders, the.court, having heard the case, found against Gifford on his first cause of action, and in his favor on the second, and rendered judgment accordingly.

      The only errors assigned arise upon the record of the second cause of action of Gifford. The facts requisite to an understanding of the points made, are stated in the opinion.

      J. Buckingham for the plaintiff in error, cited the following authorities:

      —Hawkins v. Furnace Co., 40 Ohio St. 507; Pomeroy’s Remedies &c., sec. 396; Umsted v. Buskirk, 17 Ohio St. 117; Wright v. McCormack, Id. 95; Brown v. Hitchcock, 36 Ohio St. 677; Coombs v. Watson, 32 Ohio St. 228; Terry v. Tubman, 92 U. S. 156; Warner v. Callender, 20 Ohio St. 195; Kenton v. McAlpine, 5 Fed. Rep. 737; Carroll v. Green, 92 U. S. 509; Thompson Stockholders Liab., secs. 200, 310, n.; Ang. & Ames on Corp., sec. 342; Whiting v. Sullivan, 7 Mass. 107; Chitty on Con., 25; Kerr on Fraud, 374; Goudy v. Gebhart, 1 Ohio St. 262; Bonewitz v. Bank, 41 Ohio St. 78; Ochiltree v. R. R., 21 Wall. 249; Thayer v. N. E. Mfg. Co., 108 Mass. 523: Hastings v. Brew, 76 N. Y. 9.

      J. B. Bavies, for defendant in error, cited the following authorities:
    Thompson’s Liability of Stockholders, secs. 312, 313, 324; Cook on Stock and Stockholders, sec. 221; Thompson’s Liab. Stockh., 321, 291, 319, 293, 265, 317, 328; Cook on Stock and Stockholders, secs. 38, 39; Wright v. McCormick, 17 Ohio St. 87; Brown v. Hitchcock, 36 Ohio St. 667; Patterson v. Wyomissing, 40 Pa. St. 122; Stone v. Rockafeller, 29 Ohio St. 625; Terry v. Tubman, 92 U. S. 156; Morgan v. Lewis, 46 Ohio St. 1; Kerns v. Schoonmaker, 4 Ohio 331; Hawkins v. Furnace Co., 40 Ohio St. 507; Weekly Law Bulletin, Mar. 8, 1886, p. 165; Rey. Stat., sec. 4992; Brinkerhoof v. Bostwick, 99 N. Y. 185; Wehrman v. Reakirt, 1 C. S. C. Rep. 238; Carpenter v. Canal Co., 35 Ohio St. 307; Bonewitz v. Bank, 41 Ohio St. 78; Stanley v. Ogden, 2 Root 261; Kneeland on Attachment, sec. 73; Addison on Torts, 398; Barker v. Cory, 15 Ohio 9; Hastings v. Drew, 76 N. Y. 9.
   Minshall, C. J.

A number of errors are assigned, which, so far as they arise upon the record, we will proceed to notice.

It is first claimed that the action of Gifford against the stockholders on. their statutory liability was barred by the statute of limitations. There is no question as to the period of the limitation. The liability is one created by statute, and must, therefore, be commenced in six years from the time it accrues. Section 4981 Rev. Stats.; Hawkins v. Furnace Co., 40 Ohio St. 507.

It is then necessary to determine, first, when the right of action of Gifford against the stockholders accrued, and, second, whether it was commenced in the requisite time thereafter.

The action of the Coal & Iron Company was commenced; October 10, 1878. It was an action by it as a creditor “on behalf of itself and all other creditors of The Sunday Creek Coal & Iron Company,” against the company and its stockholders. Gifford was made a party, and the prayer was that an Tiecount be taken of the amount due it “ and the other creditors of said insolvent company.”

Gifford’s claim was based upon the right to the return of certain bonds, belonging to him, in the possession of the company. He demanded a return of the bonds June 15, 1874. The bonds not being returned, he afterwards commenced suit against the company in the common pleas of the county, and, • at the January term, 1881, recovered a judgment thereon for the sum of $8,863.05 for the conversion of the bonds. Thereafter on August 30, 1881, he, by leave of the court, filed his answer and cross-petition in this suit, setting up the recovery of his judgment, and his right as a creditor of the Coal & Iron Company to resort to the statutory liability of its stockholders for the satisfaction of the same. He, also, as a first cause of action, averred the existence of certain unpaid subscriptions to the capital stock of the company, and asked that they should be first applied to the payment of his claim. This was found against him by the court, and no recovery was allowed him thereon.. So that all the questions on error arise upon the cause of action against the stockholders upon their statutory liability.

Issues of fact were made by the answer of the plaintiff in error, Barrick, and other stockholders, and the replies of Gifford thereto. These issues were all found in favor of Gifford. So that it appears from the record, 1. That he was delayed in the recovery of his judgment against the company by the. opposition of Barrick and other stockholders. 2. That on December 23,1876, the company became insolvent and made an assignment of all its property for the benefit of its creditors. And 3. That up to this time it was the legal and equitable owner of a large amount of unincumbered property, subject to levy and sale on execution, amounting in value at times to more than a hundred thousand dollars, and at no time to less than twenty thousand dollars.

The liability of the stockholders under the statute is not a primary resource of the creditors. Wright v. McCormack, 17 Ohio St. 86. And it follows as a corollary from this, that, as a general rule, it can only be resorted to after the assets of the company have been exhausted. “ This rule,” says Mr. Cook, who has made the subject a special study, “is based upon the principle that the liability of the shareholder is not a primary resource of corporate creditors, and is not, therefore, to be resorted to if the assets of the corporation, including the assessments on the stock enforceable at common law, will suffice to pay the debts.” Cook, Stock and Stockholders, § 219. See, also, to the same effect, Thompson’s Liability of Stockholders, §§ 312, 313 and 324.

But this rule does not require that, in all eases, a judgment must be recovered against the corporation, and an execution issued and returned no goods, before the creditor has the right to proceed against'stockholders on their statutory liability. The law does not require the doing of a vain thing, and, therefore, where the company has become wholly insolvent, has ceased to do business and assigned all its property to a trustee for the benefit of its creditors, the suit to enforce their statutory liability may be commenced against the stockholders by the creditors, without any of them first recovering a judgment against the company and having an execution issued and returned unsatisfied. Morgan v. Lewis, 46 Ohio St. 1; Thompson, Liability of Stockholders, § 321.

But it is claimed on the authority of Hawkins v. Furnace Co., 40 Ohio St. 507, that insolvency, in the sense that the company is indebted in a sum greater than its assets, is sufficient, and that the right of action in favor of creditors against stockholders upon their statutory liability, then accrues, although the company is possessed of property subject to levy and sale on execution, and continues to do business. We do not so understand this case. The question in the case arose upon a demurrer to the petition, which simply averred that ‘‘in the course of its business the company became largely involved in debt, and became insolvent in the year 1860.” And it is said in the opinion by Martin, J., “ Whether a judgment debtor only can', in analogy to a creditor’s bill, maintain the action, is a question that lias not been argued before us, and upon which we express no opinion. The theory of the petition is, that when the company is insolvent and the debt is due, the action accrues. This theory is the more favorable one for the plaintiff in considering the demurrer, and we adopt it.” Now it is plain that what is here meant is, that the court adopts the theory of the plaintiff as the one most favorable to him on the demurrer to his petition, and not that it adopts it as the true rule in determining when the cause of action accrues. If, however, by the term “ insolvent,” as used in this ease, is simply meant the want of assets by a corporation sufficient to pay all its debts, notwithstanding it has property subject to levy and sale on execution, and continués to do business, then it is not approved. Such a rule would be not only uncertain, but deceptive to the creditor. The right to commence the action would be a matter of speculation. It could not be determined before bringing the action and taking an account, whether the company was indebted in a sum greater than its assets would pay or not. A rule of certainty, applicable to such cases, should be adopted. The true rule, and. that which is usually adopted where the company lias property and continues to do business, is to require the creditor first to obtain a judgment against the corporation and cause an execution to be issued, and if it is returned not levied for want of goods, then the creditor has the right to commence suit against the stockholders upon their individual liability, and tbe statute of limitations begins to run against the right of action from that time, and not earlier.

So long as the company is possessed of corporate property and continues to transact its business, the stockholders should be regarded as estopped from averring that the right of action against them as individuals, accrued, by reason of the insolvency of the company, at a period earlier than the return of an execution unsatisfied, issued upon the judgment of a creditor of the company. Stockholders have the means of knowing the condition of their company much better than creditors, and if the company continues to do business upon an insolvent basis, it should be regarded as permitted by the stockholders, as the directors and ofBcers of the company derive their authority from, and are the agents of the stockholders.

We, therefore, conclude that, in this case, the right of the creditors of the Coal & Iron Company, to sue its stockholders upon their statutory liability, accrued, when the company made an assignment of all its property and ceased to do business on December 23, 1876, and not earlier. Thompson, Liability of Stockholders, § 293.

The next question is, was it arrested by the commencement of judicial process within the limitation of the statute ? A suit in the nature of a creditor’s bill is the proper proceeding to be adopted by creditors of an insolvent corporation, seeking to enforce the statutory liability of its stockholders. Umsted v. Buskirk, 17 Ohio St. 113. And, when such suit is commenced, no creditor can acquire priority, or institute a separate suit for the enforcement of such liability in his own behalf. Wright v. McCormack, 17 Ohio St. 86. So that it necessarily follows, that the effect of commencing the suit by one creditor, is to save the running of the statute of limitations, not only as against the claim of the one filing it, but, also, as against the claim of every creditor of the corporation who comes into the action before its final determination. And this is the general rule. “ A bill filed by one creditor, as plaintiff, in behalf of himself and others, will prevent the statute from running against any of the creditors, who came in under the decree. Every creditor has, after the filing of a bill, an inchoate interest in the suit, to the extent of its being considered as a demand, and to prevent his being shut out, because the plaintiff had not obtained a decree within the six years.” Angelí Lim. 6th ed. p. 346, § 331. See, also, Sterndale v. Hankinson, 1 Simons Ch. 393; Brinkerhoff v. Bostwick, 99 N. Y. 185; Angell Lim., § 167.

“ In such a proceeding,” says Morawetz, “ the proceeds of the liability of all the shareholders are regarded as a fund to be distributed ratably among all the creditors. Every creditor is entitled to come in and share in the distribution, whether he has previously obtained a judgment or not. Those creditors whose claims against the corporation are disputed may establish their claims before a master in chancery or referee, or in such' other way as the court may direct.” Morawetz Priv. Corp., § 884.

An examination of the amended petition of the Iron Company, filed April 1, 1881 (the original petition filed Oct. 10, 1876, not being printed), shows that it was in fact a creditor’s bill. It purported to be, and was brought by the plaintiff “on behalf of itself and all other creditors of the Coal & Iron Company; ” and asked for an account on behalf of itself “ and the other creditors of said insolvent company.” Hence as Gifford’s cause of action against the stockholders first accrued in 1876, it was not barred when the suit was begun. And this would be so, even if it were held that, as to him, it was not commenced until he filed his cross-petition, which was August 10, 1881.

It is also claimed as a defense, that, after the assignment by the company and the acceptance of his trust by the assignee, an agreement was entered into by the assignee, Gifford and the other creditors, that the unpaid subscriptions averred bjr Gifford in his first cause of action to be due, should not be collected or required by the assignee to be paid; and that by reason of this agreement Gifford lost his right to enforce payment under the statutory liability, on the ground that he had thereby released a primary fund, and to which he might have resorted for the payment of his claim. We shall not consider the question of law intended to be raised by this defense, for the reason that there is no positive averment that there were any unpaid subscriptions to be collected. The judgment of the court was against Gifford on his first cause of action ; in other words, it found against the existence of any such subscriptions ; so that there was nothing to release by the alleged agreement, and the rights of the defendant were in no way affected thereby. In order to have raised the question, the defendant should have averred that there were such unpaid subscriptions, and that they were released by the agreement. But this has not been done.

It is also claimed that the court erred in sustaining a demurrer to the sixth defense of the defendant’s answer. It reads as follows:

“ That 200 of the 400 shares which the defendant in said second cause of action is alleged to be the owner, had not been issued or sold by the said The Suuday Creek Coal & Iron Company, nor was the legal or equitable owner or holder thereof, at the time said last named company assumed and agreed with said The Sunday Creek Cóal & Iron Mining & Transportation Company to pay and perform the said contract between said last named company and said Gifford, but was first sold and issued by the said The Sunday Creek Coal & Iron Company several years after it so assumed to pay Gifford, but was so sold and issued before the said Gifford made his said demand for the return of the bonds of June 15, 1874.

“ Wherefore he says he is not liable to said Gifford in respect of said last named 200 shares.”

The Sunday Creek Coal & Iron Company grew out of the prior company named in the defense, and seems to have acquired the property and assumed the obligations of that company. The obligation to Gifford in regard to these bonds was one of them. The bonds had been received from him as an accommodation, no consideration being paid for the loan. The obligation assumed by the bailee was to cut off the coupons as they matured, sell them and remit the proceeds to Gifford, and return the bonds on thirty days’ notice. The obligation arose ex locato, and no liability beyond this accrued to Gifford as against the company until, upon demand, it refused to return the bonds, which was June 15, 1884; so that, as a matter of law and fact, the liability of the company for the conversion accrued to Gifford after Barrick became the owner of all his stock.

But in holding the facts pleaded insufficient to constitute a defense, we do not place our decision on this ground. Whilst there are some resemblances between the stockholders of a corporation and the members of a partnership, there are few that are real, and no inferences can be drawn therefrom as to the rights of creditors against stockholders upon their individual liability. Taylor Priv. Corp., § 716. A new member of a firm is not, in the absence of agreement, liable for the debts of the firm contracted before he became a member. The addition of a new member makes a new firm. A change, however, in the stockholders of a corporation has no legal effect upon its status. It remains, through all changes in the personnel of its stockholders, the same legal entity, possessed of the sajne rights, and subject to the same liabilities. When one purchases stock in a corporation, he acquires a fractional interest in the capital stock and assets of the company, proportionate to the amount of his stock. If there is a surplus, he acquires an equivalent interest in it, and is entitled to dividends when they are earned; but if there should happen to be a deficiency, the maxim applies, qui sentit eommodum sentiré debet et onus, and is, therefore, required to contribute his share to the discharge of the common burden. The application of this principle is not varied by the time when the owner acquired his stock. The right with the correlative duty is an incident of the stock. There is no difference in this regard, between the opinion of the majority and that of the minority in the case of Brown v. Hitchcock, 36 Ohio St. 667. In both, it is held, that the individual liability of stockholders to creditors, is to be discharged primarily by those who are the owners of the stock at the time the right to assert it accrues. But in the opinion of the majority it was held, that, in the case of the insolvency of an existing owner, a person from whom the insolvent existing owner obtained the stock by assignment, either mediately or immediately, may be made liable for such debts as may have been contracted while he remained owner —the minority holding that the obligation attached exclusively to those who are holders of the stock at the winding up of the company, or when the right is asserted by creditors.

If, then, an existing stockholder is solvent, it is immaterial, so far as his liability to creditors is concerned, when he became the owner of the stock, or from whom he acquired it. As such stockholder he is individually liable for the debts of the company to the extent limited by the statute. Such liability attaches to every share of stock issued by a company; the stock and the liability go together, so that whoever owns the stock must sustain the burthen when the company becomes insolvent.

The plaintiff in error relies upon Bonewitz v. The Bank, 41 Ohio St. 78. No such question arose in that case. All that was there decided is, that a finding that two of the stockholders did notown stock at^the time the indebtedness of the plaintiff accrued, did not authorize a judgment in their favor releasing them from liability. This was right, and determined the question before the court. The additional remark, that, “ if the finding had been, that the stock they held when the action was commenced had not been sold by the corporation until after the debt of the plaintiff had accrued, the judgment would have been proper,” was simply a misleading statement outside of the case, and no way necessary to its determination.

Judgment affirmed,


author: Dickman, J.

text:
    Vrooman v. Powers.

      Nuncupative Wills.

    1. Where a verbal will is reduced to writing, and subscribed by two witnesses, one of whom is a legatee thereunder, and the other is his wife, the husband is not a competent, disinterested witness, within the meaning of section 5991 of the Revised Statutes, and the will is invalid.
    2. The two witnesses to a verbal will must be competent, disinterested witnesses at the time of their attestation, and their disqualification as witnesses, by reason of interest under the will, cannot be removed by a renunciation of-such interest at the time the will is admitted to probate, or at the trial of an issue to contest the validity of the will.
    3. Section 5925 of the Revised Statutes, as to the effect of a witness being á devisee or legatee under the will, is not applicable to verbal wills.
    (Decided March 18, 1890.)
    Error to the Circuit Court of Cuyahoga county.

      Alvord, Alvord £ Baptiste, for plaintiff in error, cited the following authorities:
    Rev. Stats., secs. 5991, 5240, 5925; Schouler on Wills, sec. 350; Rev. Stats., sec. 5241; Schouler on Wills, sec. 353; Jackson v. Woods, 1 Johns. Cases. 163; Jackson v. Durland, 2 Johns. Cases 314; Winslow v. Kimball, 25 Me. 493; 1 Redfield on Wills, 258; 16 Am. Dec., p. 564; 64 Id. 532; 1 Redfield on Wills, p. 256-7; 1 Schouler on Wills, sec. 351; Brayfield v. Brayfield, 3 Harr. & J. 208.

      Robison Rogers, and B. O. White, for defendant in error, cited the following authorities:

      Winslow v. Kimball, 25 Me. 493; Anstey v. Dowsing, 2 Stra. 1254; Lyon v. Hamer, 73 Me. 56; Insurance Co. v. Stevens, 48 Ill. 31; Ryan v. Devereux, 26 U. C. Q. B. 100; Pease v. Allis, 110 Mass. 157; Dickinson v. Dickinson, 61 Pa. St. 401; Sullivan v. Sullivan, 106 Mass. 476; 1 Redfield on Wills, 188, 189, 257, 258; 1 Woerner, Law of Administration, p. 72; Abbott’s Law Die. “ Disinterested; ” Woodword v. Dominick, 3 Strobb. 591; Frink v. Pond, 46 N. H. 125;
      Patten v. Tallman, 27 Me. 17; Morton v. Ingram, 11 Ired. 368; Higgins v. Carlton, 28 Md. 117, 140; Stewart v. Harriman, 56 N. H. 25; Haws v. Humphry, 9 Pick. 350; 1 Schouler on Wills, sec. 351; 1 Woerner on Administration, pp. 79, 80, 81; 1 Redf. on Wills, chap. 6, see. 2; 1 Jarman on Wills, ’97, 98, and notes.
   Dickman, J.

Mary A. Powers, the wife of the defendant in error, George O. Powers, died on the 13th day of December, 1881, leaving issue one child, Orris Irving Powers, who thereafter, and before this suit was begun, died aged six months. It was claimed that Mary A. Powers in her last sickness, made a verbal will, which was, on the 19th day of December, 1881, reduced to writing, and subscribed by Orris D. Vrooman and his wife Emma J. Vrooman as witnesses. The alleged verbal will was presented to and admitted to probate by the Probate Court of Cuyahoga county. By the terms of the will, Orris D. Vrooman, Joseph Vrooman, Albert K. Vrooman and Adiram Vrooman, the plaintiffs in error, brothers of Mary A. Powers, and Orris Irving Powers are named as the several legatees of Mary A. Powers. Suit was brought by George O. Powers, in the court of common pleas, against the plaintiffs in error, to set aside the will, on the ground, among others, that it was not subscribed by two competent, disinterested witnesses. The case was tried in the court of common pleas in May, 1884, and by verdict and- judgment of the court, the will was set aside. The defendants appealed, and on February 15, 1887, the case was tried in the circuit court, and it was found by the verdict and judgment rendered therein, that the paper purporting to be the last will of Mary A. Powers, was not her last will. During the trial in the circuit court, a written renunciation of all interest under the will, made and signed February 13, 1887, by Orris D. Vrooman and Emma J. Vrooman, the two witnesses to the alleged verbal will, w'as filed in that court, which renunciation, on being offered in evidence, was ruled out by the court.

The court, among other matters, charged the jury as follows: “ That if they should find from the evidence that one of said, witnesses to said will, Orris D. Vrooman, was the brother of the testatrix and one of the residuary legatees mentioned in said alleged will, and that said Emma J. Vrooman was at the time the wife of'the said Orris D. Vrooman, the said witnesses to said will were not, within the meaning of the statute of Ohio, competent, disinterested witnesses to said will, and because of that fact, said will would not be the valid verbal will of the said Mary A. Powers.”

It is contended in behalf of the plaintiffs in error, that the circuit court erred, first, in charging the jury that Orris D. Vrooman and Emma J. Vrooman, under the conditions above stated, would not be competent and disinterested witnesses, within the meaning of the statute; and second, in refusing to allow the paper containing their renunciation of interest to be put in evidence.

I. It is provided by section 5991, of the Revised Statutes that: “A verbal will, made in the last sickness, shall be valid in respect to personal estate, if reduced to writing, and subscribed, by two competent disinterested witnesses, within ten days after the speaking of the testamentary words; and if it be proved, by said witnesses, that the testator was of sound mind and memory, and not under any restraint, and called upon some person present, at the time the testamentary words were spoken, to bear testimony to said disposition as his will.” The statute requires that both the witnesses shall be competent and ■ disinterested, and not one only. In our judgment, Orris D. Vrooman did not meet the requirement of the statute as to competency and disinterestedness. He had a sufficiently immediate, beneficial interest in the will to disqualify him from becoming a subscribing witness thereto. The alleged will provided that a certain sum of money in the hands of her brother, Orris D. Vrooman, belonging to the testatrix, if not used for her sickness and incidental expenses, should be placed where her son could have it on arriving at the age of twenty-one years; and that, if he died before the age of twenty-one years, the money should go to her brothers; and that, whatever funds were to come from her mother’s estate were to go .in the same manner. One of the witnesses, therefore, being incompetent and disqualified by reason of interest, there was not a compliance with the statutory requirement that the two witnesses to the verbal will should be competent and disinterested, and the will, in consequence, cannot be held to be valid. We find no error in the charge of the court.

I,t is urged however, that if there was a disqualification of interest in one or both of the witnesses, it was removed by the operation of section 5925 of the Revised Statutes, which provides that: “ If a devise or bequest is given to a person who is a witness to the will, and the will cannot otherwise be proved than by the testimony of such witness, the devise or bequest shall be void, and the witness shall be competent to give testimony of the execution of the will, in like manner as if such devise or bequest had not been made.” This section, when considered in connection with the preceding sections of the chapter, including section 5916, is clearly applicable only to duly executed written wills. Section 5916 requires that: “ Every last will and testament (except nuncupative wills hereinafter provided for) shall be in writing, and signed at the end thereof by the party making the same . . . . and shall be attested and subscribed in the presence of such party by two or more competent witnesses,” etc. The sections immediately following, embracing section 5925, are so connected by obvious reference to a will in writing, as to preclude the idea of applying the last mentioned section to nuncupative wills, which, b}' the statute, are assigned to a separate and distinct class, and are subject to different requisites and conditions. Section 5925 in providing that “ the witness shall be competent to give testimony of the execution of the will,” evidently refers to the full, legal formalities of a signature by the testator, and an attestation by competent witnesses who -subscribe in the testator’s presence, and not, as in a nuncupative will, to the testator’s speaking testamentary words in his last sickness, which are to be reduced to writing, and subscribed by competent disinterested witnesses, within ten days after the words are spoken.

II, The renouncement and release by Orris D. Vrooman of all' right and interest, was not filed until more than five years after the verbal will is alleged to have been made. Such a release did not remove his disqualification as a witness. The statute contemplates the verbal will as made in the last sickness. Within ten days after the speaking of the testamentary words, the will must be reduced to writing, and subscribed by two witnesses who are then competent and disinterested.

The rule, it is said, which reason should now pronounce the; .universal one, is, that the competency of witnesses, like that-of the testator, is tested by one’s status at the time when the .will was executed. Schouler on Wills, § 351. In Patten v. Tallman, 27 Me. 27, the court say: “ The competency of an attesting witness is not to be determined upon the state of facts existing at the time, when the will is presented for probate, but upon those existing at the time of the attestation.”

In Morton v. Ingram, 11 Ind. 368, it was held, that a person named as executor, is not competent as an attesting witness to a will of personalty: and that his subsequent renunciation and release will not make him so; and that he must be disinterested at the time of attestation. In Huse v. McConnel, 2 Jones’ Law (N. C.) 455, the court remark: “It is well settled that an attesting witness to a will must be competent at the time of attestation, and that no subsequent release, where the objection is one of interest, can restore competency.”

In Workman v. Dominick, 3 Strobh. 589, it was held that, “ credible ” means competent; and the competency of the witness must be referred to the time of attestation. Frost, J., said: “ This point is settled. It is affirmed by all the elementary writers. ... If the witnesses do not possess, at the time of the execution of the will, the quality required, it cannot afterwards be supplied. If any of them be not then credible, by reason of a benefit he may take by the instrument,' he cannot' be made credible by a future release..... The will would be absolutely in the power of the witness. If he consents to release, the will is established; if he refuses, the will is annulled. It is in his power to set up the estate to auction between the legatees and next of kin, and sell it to the highest bidder. And thus being first bribed by an interest in the will to make it, he is open to another bribe to vacate it.”

See Stewart v. Harriman, 56 N. H. 25; Hawes v. Humphrey, 9 Pick. 350; Higgins v. Carlton, 28 Md. 115; Pease v. Allis, 110 Mass. 157; Allison v. Allison, 4 Hawks, 141; Tucker v. Tucker, 5 Ired. 161; Greenl. Ev., § 691. The rule laid down in the above citations acquires additional force and significance, when applied to the attestation and establishment of verbal wills. The rule, it is true, in its application to wills in writing, is controlled by section 5925 of the Revised Statutes, but that section, as we have before observed, is not applicable to nuncupative wills.

Judgment affirmed.


text:
    Cincinnati v. Whetstone.

      Street improvement — Interest on damages.

    Where a city, in making a street improvement, changes the established grade of the street, and damages are thereby sustained by the owner of an abutting lot, who, in good faith, has erected buildings thereon with a view to the established grade, and the city, before commencing and after the completion of the improvement, fails to assess the damages thus sustained, such owner, in an aclion against the city to recover compensation for the injury to his property by reason of the improvement, is entitled to interest on the amount of compensation awarded, from and after the actual change of the established grade, and it is not error in the court to so charge the jury.
    (Decided March 25, 1890.)
    Error to the Circuit Court of Hamilton county.
    The original action was commenced in the Court of Com mon Fleas of Hamilton, county, by the defendants in error, Marion G. Whetstone and John L. Whetstone, as trustees under the will of Richard A. Whetstone, deceased, against the city of Cincinnati. The plaintiffs in their petition alleged, that Richard A. Whetstone was, in his lifetime, seised of a perpetual leasehold estate in a tract of land on the north side of Eighth street, in the city of Cincinnati, with a frontage of 104 feet on that street, and extending back with the same width in rear as in front, to a depth of 56 feet; and that he was also seised in fee simple of a lot of land immediately adjoining the leasehold estate upon the west, and being 13£ feet in front upon Eighth street, and running back the same width as in front, 56 feet. Richard A. Whetstone, by his last will and testament; it is alleged, devised the said premises to the plaintiffs, to be held by the same tenure by which he had held the premises, but in trust for divers purposes, in the will specified and set forth.
    The plaintiffs further alleged, that in the years 1872 and 1873, and for many years previously, Eighth street in front of said premises was a public highway of the city of Cincinnati, in the charge and lawful custody of the municipal authorities of said city, the grade of which had long before that time been established, and said street had been graded, and paved to said grade, and in use for many years as such highway.
    The plaintiffs further alleged, that before the year 1872, there had been erected, and there still continued to be on the premises, valuable and permanént improvements, con-' sisting of a brick warehouse and paint shop, frame stable and brick cooper shop, all connected with and adjoining a linseed oil mill, and used in the business of making and selling linseed oil, which was carried on in and upon said premises by tenants of the plaintiffs, who paid rental for the use thereof, and which improvements were erected with reference to said grade, and entirely conformable thereto.
    And it was further averred by the plaintiffs, that in the years 1872 and 1873, disregarding the rights of the plaintiffs, and against their protest and written notice and claim, the city of Cincinnati changed said established grade, and reconstructed said street at a grade much higher than before, and so as to fill and elevate said street in front of said premises at the west end thereof about seven feet, and at the east end thereof about ten feet, by piling large quantities of earth thereon, and was proceeding to fill the same directly against the said buildings of the plaintiffs, and would have crashed and destroyed the same, to the loss of the plaintiffs of many thousand dollars, but for the active efforts and expenditures of the plaintiffs for their own protection, who, between March 15, 1873, and May 31, 1873, expended in the construction-of necessary retaining walls to save said buildings from o'Vérthrow and destruction, the sum of $1,008.22.
    The plaintiffs further alleged, that by the reconstruction and change of grade of said" street, great damage had been done to their buildings; that the first story, which was before upon the level of, and conveniently accessible to the Said street, had been converted into a basement or cellar,.largely below the level of the street, and the cellar into a sub-cellar, and thereby they had been subjected to. a heavy loss, viz.: - in the sum of many thousand dollars, in the deterioration and lessening of the value of the said buildings and improvements, in addition to said money expenditure — in all, to the damage of the plaintiffs in the sum of ten thousand dollars, for which, with interest from August 1, 1873, 'they asked judgment. 1
    The answer to the petition was a general denial.
    -The court, in its general charge to the jury, among other instructions gave the following:
    “Your inquiry, according to the damages of this case;1-is to relate to the date of the change of grade in 1872 and -1873. If the plaintiffs sustained any injury by reason of the change of grade, it occurred at that time, and in determining the measure of damages, by the difference between the valúe of the improvements before the change of grade, and the value of the improvements after the change, you are to con'si'der the values of that time. And, if you find for- the plaintiffs in that regard, and having assessed a reasonable and just compensation therefor, then, you will consider the question of interest on the amount of damages found for the plaintiffs, and on that question I will instruct you, that if you find the plaintiffs are entitled to damages, then that they should be allowed interest thereon, from the date of the injury to their improvements up to the first day of this term, to wit: the 7th day of January, 1884. But, in order to save the question as to the right of the plaintiff to recover interest, I will request of you to separately find the amount of compensatory damages and the amount of interest.” ....

      “ It is for you gentlemen to say, taking into consideration all the testimony on the subject, whether, under the circumstances, a retaining wall was reasonably necessary to protect the plaintiff’s buildings and improvements, and if a wall was necessary, then whether the wall which was constructed was such a retaining wall as was reasonably necessary. ■ And if you find that the wall was reasonably necessary, and the wall constructed there was a reasonable wall for the purpose, then the plaintiffs should recover for the fair and reasonable cost of such wall. All these questions are questions appealing directly to your sound judgment and discretion in view of the testimony, and if on this question as to a retaining wall, you find for the plaintiffs, then they will be entitled to recover interest on the fair and reasonable cost of the retaining wall from the time of its completion up to the first day of this term, to wit: the 7th day of January, 1884.”
    . An exception to the foregoing portion of the charge was reserved and noted.
    The jury, on the issue joined, found for the plaintiffs, and assessed their damages at $4,897.00. Under order of the court, the jury found separately the amount of compensatory damages, and the amount of interest, as follows:
    For injury to buildings and improvements, $2,250 00
    Amount of interest allowed on the above, . 1,485 00
    Amount for retaining wall, 700 00
    Amount of interest allowed on the above,. 462 00
    $4,897 00

      Judgment was rendered for the amount of the verdict.
    A motion for a new trial was filed, overruled, and exception taken. A petition in error was then filed in the circuit court, and on hearing, that court affirmed the judgment of the court of common pleas. This proceeding in error is prosecuted to reverse the judgment of the circuit court, and the judgment of the court of common pleas.

      Goppock, Cox Gallagher, Horstman, Hadden, Foraker & Galvin, for plaintiff in error.
    We maintain, that the question of interest on the amount plaintiffs were found to be damaged, should have been left to the discretion of the jury, and it was their province alone to determine whether or not interest should have been allowed. Lawrence R. R. v. Cobb, 35 Ohio St. 94; Hogg v. Z. & C. Mfg. Co., 5 Ohio 410; Chicago v. Allcock, 86 Ill. 384; 3 Sunderland on Damages, 383; Walrath v. Redfield, 18 N. Y. 457; Garrett v. Ry. Co., 36 Ia. 124; Ry. Co. v. Johnston, 74 Ill. 83; Insurance Co. v. Penn. Ry. Co., 11 Hun, 182; McIlvain v. Wilson, 12 N. H. 478; Green v. Garcia, 3 La. Ann. 702; Orr v. Mayor, 64 Barb. 106; Willing v. Consequar, Pet. C. C. Rep. 172; Gilpin v. Consequar, Id. 86; Beals v. Guernsey, 8 J. R. 444; West v. Weyer, 46 Ohio St. 66.

      Harmon, Colston, Goldsmith $ Hoadly, for defendants in error.
    In this case we claim that interest is one of the elements of compensation that must be tallen into the computation. Railroad Co. v. Cobb, 35 Ohio St. 94; Crawford v. Delaware, 7 Ohio St. 469; Railway v. Cumminsville, 14 Ohio St. 523; Railway Co. v. Lawrence, 38 Ohio St. 41; Railway Co. v. Ball, 5 Ohio St. 575; Railway Co. v. Campbell, 4 Ohio St. 585; Railway Co. v. Gardner, 45 Ohio St. 322; Railway Co. v. Koblentz, 2 Ohio St. 334; Railway Company v. Miller, 125 Mass. 1; Railway Co. v. Burson, 61 Pa. St. 369.
   Dickman, J.

Among the errors assigned by the city, the only one relied upon in argument is the alleged error of the court in charging the jury that thej" should, allow interest on the damages to which they might find the plaintiffs entitled. It is contended that in actions sounding in damages, the jury may allow interest or not, as they shall determine ; that if interest is awarded it is a part of the damages, and being an element of damages, its allowance is a matter of discretion for the jury. It is conceded that if the jury had, of their own motion, given interest by way of damages, the verdict would not have been unauthorized; but it is urged that while interest may be allowed in the discretion of the jury, it was error to instruct them to allow it as a matter of law. If the defendants in error were, as a matter of right, entitled to interest on the amount of compensation found due them for injury to buildings and improvements, and for the construction of necessary retaining walls, they should not be prejudiced by the court’s instructing the jury that such amount should carry interest.

The question therefore arises whether the defendants in error, as owners of abutting property, and entitled to compensation for the injury caused by the change of the established grade of the street, are also entitled, as a matter of right, to interest on the amount of compensation found due from the date of the injury, and during the time the compensation was withheld.

This is not an action ex delicto, in which damages are claimed for trespass or injury to real property, and is not to. be governed, therefore, by the decisions in actions of tort, cited in argument, and which hold that unless the jury in their discretion give interest under the name of damages, it is not in accordance with legal principles to allow it on unliquidated claims, sounding in damages. Those decisions, it is said in 2 Sedgwick on Damages, 383, note e, are few in number, and cannot be considered of more than local authority, and are at variance with the general rule which now prevails. In Parrot v. The Knickerbocker Ice Co., 46 N. Y. 361, which was an action brought to recover damages caused by a collision between a sailing vessel and a steamer, the court said that in cases of trover, replevin and trespass, interest on the value of propertjr unlawfully taken, or converted, is allowable by way of damages, for the purpose of complete indemnity of the party injured; and that it is difficult to see why, on the same principle, interest on the value of property lost or destroyed, by the wrongful or negligent act of another, may not be included in the damages. Indeed, it is evident from the general course of decision, that where one has lost his property, or the use of it, directly through the act of the defendant, the principle of adequate compensation will give interest as a necessary incident.

In making the public improvement of Eighth street, the municipality was in the exercise of a legitimate corporate power. The council had the care, supervision and control of all public highways and streets within the city limits, with the duty imposed of keeping the same .open and in repair, and with authority to ■ grade, change established grades, reconstruct streets, and make pavements and other improvements to facilitate travel and transportation. But, while the city had the right to improve the street by changing the established grade, there was a co-existing right of the owners of abutting property, who had made improvements on their lots in reference to such established grades. It is well settled by the decisions in -Ohio, that if the grade of a street has been established by the corporation, and the owner of a lot in good faith erects buildings thereon, with a view to the established grade, and the corporation after-wards, for the convenience of the public, alters the grade in such a manner as to substantially and materially injure the buildings, and cause the avenue to the place of business of the lot owner, and his use of the street as an incident to his permanent structures, to be blocked up and taken from him, it is as positive and substantial aii injury to private property, and as direct an invasion of private right incident to a lot, as if the erections upon the lot were taken for public use, and it comes manifestly within the spirit of the constitution, which requires compensation for property taken for public use. The easement in the street appendant to the lot is held to be as much property as the lot itself. And the decisions in Ohio in this regard, although different from those which prevail in some other states, are said by Chief Justice Gibson, in O'Connor v. Pittsburgh, 18 Pa. St. 189, to be “founded in natural justice.” See Crawford v. Delaware, 7 Ohio St. 459; Street Railway v. Cumminsville, 14 Ohio St. 523; Youngstown v. Moore, 30 Ohio St. 133; Railway Co. v. Lawrence, 38 Ohio St. 41.

The city, by the improvement of the street and the alteration of the established grade, virtually appropriated property rights of the defendants in error, the benefit and enjoyment of which as they then existed, depended upon the continuance of the grade as then established. “Where compensation is to be made for property, and delay has occurred in obtaining payment, interest is a recognized ele•ment in assessing the value.” White, J., in Gest v. Cincinnati, 26 Ohio St. 280. For damage to the abutting property, ■by reason of the street improvement, the property owners were entitled to full compensation, which should have been promptly made; and if there was not a prompt reparation, it was proper, as an additional means of making the owners whole, to instruct the jury to award interest on the eompensation while withheld- The injury for which full compensation was due, is referable to the time of the change of the grade in 1872 and 1873; and the interest in controversy represents what the property owners might have received, for the use of the compensation allowed, had the same been paid without delay.

In Sutherland on Damages, it is said: “ It being an accepted principle that land taken for public use should be valued, and damages ascertained, as of the date of the taking, payment is then legally due, unless a statute designate some other time; and on general principles, interest should be given from the time when the principal should be paid; or, in other words, from the time the land owner was éntitled to compensation.” The principle, that compensation for property taken by the public, shall either be paid at the time it is taken, or paid with interest, or with a fair allowance for the use of the property during the time it is withheld, was declared by the court in Railway Co. v. Koblentz, 21 Ohio St. 334, in which, at the trial of the cause in the- common pleas, the court instructed the jury to allow interest on the compensation, from the time the company took possession of the defendant’s land.

The Delaware, Lackawanna & Western Railroad Co. v. Burson, 61 Pa. St. 369, was a case in which proceedings were commenced in the court of common pleas, for the assessment of damages for injury done by the railroad company, in locating and constructing a railroad through the land of Deborah Burson. Thompson, C. J., in delivering the opinion of the court said: “ Nor was there error in charging the jury to allow interest. If the plaintiff was entitled to compensation by reason of her property being taken at a particular time, she was certainly entitled to interest as a compensation for its wrongful detention. The company as well as the plaintiff could have had the damages assessed as soon as they pleased after locating the road, and it was no reason for withholding compensation that its amount was unknown or unascertained. As the company was the party to pay, it ought to have had the amount ascertained, and paid it; failing to do so, it has no right to complain at having to meet an incident of the delay in the shape of interest.”

In Parks v. Boston, 15 Pick. 198, the jury, in a highway case, were instructed by the judge, that the complainant was entitled to recover the value of the land at the time when it was taken, with interest from that time, subject to a reasonable deduction if he were consequentially benefited by the widening of the street, or with additional damages if he were consequential^ damnified by the taking of a part of his land and thereby injuring the residue. “It is not,” declared Chief Justice Shaw, “strictly speaking an action for damages ; but rather a valuation or appraisement of an incumbrance created on the plaintiff’s estate, for the use of the public. It is the purchase of a public easement, the consideration for which is settled by such appraisement only because the parties are unable to agree upon it. The true rule would be, as in the case of other purchases, that the price is due and ought to be paid, at the moment the purchase is made, when credit is not specially agreed on. And if a piepowder court could be called on the instant and on the spot, the true rule of justice for the public would be, to pay the compensation with one hand, whilst they appty the axe with the other; and this rule is departed from only because some time is necessary, by the forms of law, to conduct the inquiry; 'and this delay must be compensated by interest.”

In making street improvements, the statute contemplates that there shall be no unnecessary delay in compensating owners for damages to abutting property. By section 2304, of the Revised Statutes, when it is deemed necessary by a city to make a public improvement, twenty days’ written notice of the resolution to make the improvement must be served upon the owners of the abutting property; and by section 2315, any such owner claiming that he will sustain damages by reason of the improvement, must within two weeks after service of such notice, file a claim in writing, setting forth the amount of damages claimed. By section 2316, it is provided that, at the expiration of the time limited for filing claims for damages, the council shall determine whether it will proceed with the proposed improvement or not, and whether the claims for damages shall be. judicially inquired into before commencing, or after the completion of the proposed improvement. Proceedings for the assessment of damages before commencing the improvement are prescribed by the statute. And by section 2321, in all cases where the council determines to assess the damages after the completion of any improvement, it is required that within ten days after the completion of such improvement written application shall be made to the court of common pleas, or probate court of the county, to assess the amount of damages in each particular case.

The defendants in error, and other property owners, within the time required by law, filed their claims for damages. On August 29, 1873, the city passed an ordinance to assess a special tax on real estate bounding on Eighth street, to pay the cost and expense of the improvement, but, the record shows no assessment of damages sustained by the owners of abutting lots by reason of the improvement, and there was, in effect, a taking of property for public use without compensation. Had the damages been assessed before commencing the improvement, the city might have paid the amount assessed, and no claim for interest would then have arisen. Or, if there had been an assessment of the damages within ten days after the completion of the improvement, there would have been a legal.obligation on the part of the city to take steps for the prompt payment of the compensation awarded, and upon failure to do so, the property owners would have been entitled to interest on the compensation as long as it was withheld. In the case at bar, the injury to the defendants in error resulted from the change of the established grade of Eighth street, with a view to which grade they had erected the buildings on the abutting lots. Their damages were properly measured by the condition of their property immediately after the change in the grade of the street, and the long neglect, which is conceded, to estimate and pay those damages, should be compensated by interest.

To prevent their buildings from being crushed and destroyed by the fill of earth made in the street, in front of the'premises, to a height of eight feet above the former curb of the street, the defendants in error found it necessary to construct a retaining wall. It was proper, we think, to instruct the jury to allow interest on the reasonable cost of such wall, from the time of its completion.

Judgment affirmed.