author: Burket, C. J.

text:
    Detlor et al. v. Holland.

      Conveyance of mining right in lands — Does not include gas and oil, when — Instrument granting right of land to produce gas and oil — Not lease of land — Rights claimed by grantee at expiration of grant — Rights of grantor.

    1. A conveyance of a mining- right in lands was made as follows: “do hereby grant, bargain, sell and convey to the said Michael L. Deaver, his heirs and assigns forever, all the coal of every variety and all the iron ore, fire clay and other valuable minerals in, on, or under the following described premises, * * * together with the right in perpetuity to the said Michael L. Deaver, or his assigns, of mining and removing such coal, ore or other minerals, and the said Michael L. ' Deaver, or his assigns, shall also have the right to the use of so much of the surface of the land as may be necessary for pits, shafts, platforms, drains, railroads, switches, sidetracks, etc., to facilitate the mining and removal of such coal, ore, or other minerals and no more. ” Held— That such deed did not convey title to the petroleum oil and natural gas in the lands described in the deed.
    2. A person in peaceable possession of real estate under a defective deed, may have his title quieted by action, as against a stranger who makes • claim to such real estate, but has no right or title thereto.

      3. A written instrument was duly executed as follows: “do hereby grant unto second party, their heirs and assigns, the sole right to produce petroleum and natural gas from the following named tract of land, * * * specifically granting to said second party for and during the term of ninety (90) days from this date and as much longer as oil or gas is found, operated and produced in paying quantities, with the exclusive right to drill and operate oil and gas wells.’’ Held— That such written instrument is not a lease of the lands, but only a grant of the sole right to produce petroleum and natural gas for the term mentioned; that the grant expired by its own limitation at the end of ninety days, unless within that time at least one well was drilled which produced oil or gas in paying quantities; and that upon failure to drill one paying well within ninety days, there was no right to drill thereafter.
    4. The term of the grant in such instrument having expired, and the grantees still claiming a right to drill under such grant, the grantor has a right to have his title quieted as against such claim, on the ground that the term of the grant has expired, without resorting to the law of forfeitures.
    5. Under such an instrument, the sum paid as a consideration for the grant, need not be returned in order to maintain an action to quiet title.
    6. Expenses incurred by the grantees in drilling wells on the lands after the expiration of the grant, and after notice not to drill such wells, can not be recovered from the grantor.
    7. Such grant being made to four persons jointly, a notice addressed to all of them, to the effect that the grant'has expired, and to keep off the premises, and served on one of them, is sufficient. In such case notice to one is notice to all. Baker v. Kellogg, 29 Ohio St., 663, followed and approved.
    (Decided February 1, 1898.)
    Error to the Circuit Court of Perry county.
    The action in the courts below was brought by Upton Holland, defendant in error, against William E. Detlor and others, plaintiffs in error, seeking to quiet title to eighty acres of land, the possession of which was in the plaintiff below, and the defendants below claimed some interest therein under two several oil and gas leases. The validity of one of the leases depends hpon the construction to be placed upon a conveyance of a mining right in the same lands.
    Issues were joined involving the questions disposed of in the opinion. The material facts of the case, as shown by the record, are as follows:
    Francis G. Deaver made a conveyance of a mining right in said lands to Michael L. Deaver as follows:
    “Do hereby grant, bargain, sell and convey to the said Michael L. Deaver, his heirs and assigns forever, all the coal of every variety and all the iron ore, fire clay and other valuable minerals in, on, or under the following described premises, * * * together with the right in perpetuity to the said Michael L. Deaver, or his assigns, of mining and removing such coal, ore, or other minerals, and the said Michael L. Deaver, or his assigns, shall also have the right to the use of so much of the surface of the land as may be necessary for pits, shafts, platforms, drains, railroads, switches, sidetracks, etc., to facilitate the mining and removal of such coal, ore, or other minerals and no more. ’ ’
    Afterward, Michael L. Deaver made and delivered an oil and gas lease of these lands to one James W. Taylor, claiming that he had title to the oil by virtue of the said mining right. James W. Taylor assigned this oil and gas lease to one of the defendants below, and said lease had not expired by limitation, at the commencement of this action.
    After granting said mining right, Francis G. Deaver died, leaving two sons, one of full age and the other a minor for whom a guardian was appointed in the state of Wisconsin, where they both resided.
    After the death of the father, the two sons by separate deeds conveyed the lands to Upton Hoiland, the plaintiff below. The deed from the son, who was a minor, is signed by himself and his guardian, but there is nothing to show any proceedings in any court authorizing the making of the deed, but Mr. Holland went into possession of the lands under said deeds, and has held the same ever since. The said conveyances and lease were all properly recorded.
    On the twenty-sixth day of May, 1893, Upton Holland and wife, and William E. Detlor and his associates, executed and entered into a written instrument as follows:
    “This lease made and entered into this twenty-sixth day of May, A. D. eighteen hundred and ninety-three, by and between Upton Holland, party of the first part, and W. E. Detlor, James P. Lang, Henry Rosier and William Rosier, parties of the second part, witnesseth, that in consideration of the covenants herein contained and by said second parties to be performed, do hereby grant ulito second party, their heirs and assigns, the sole right to produce petroleum and natural gas from the following named tract of land, situate in Monroe township, Perry county, Ohio, to-wit: The northeast quarter of the northeast quarter of section twenty-seven (27), township twelve (12), range fourteen (14), in said county, containing about forty acres (40), reserving five acres (5) around the buildings to be located by first party, and whereon there shall be no wells drilled by either party, specifically granting to said second party for and during the term of ninety (90) days from this date and as much longer as oil or gas is found, operated and produced in paying quantities, with the exclusive right to drill and operate oil and gas wells, to lay and operate pipe line, the necessary rights of way over premises: the use of enough land on which to preserve the products of such wells; to erect such buildings as may be necessary to carry on such work, the right of sufficient gas and water from the premises to run the necessary engine, reserving to first party all wells now on said premises, the right to remove all machinery, buildings and fixtures, belonging to them and the full rights to release and subdivide said premises.
    In consideration for which the second party covenants and agrees as follows: To use and occupy only so much of said lands as may be actually necessary for the purpose herein granted. 2d To complete one well in addition to the one already on said premises in ninety (90) days from said date, unavoidable casualties excepted, and to continue to complete one well each succeeding ninety (90) days thereafter until four (4) wells have been completed on said premises, provided that oil is found in paying quantities in such succeeding wells. 3d. To pay said party of the first part one hundred dollars ($100) upon the delivery of this lease and to pay said first party his attorney fees herein. 4th. To pay all increase taxes by reason of such oil operations and all damages to fences and growing crops. 5th. To deliver to first party in pipe lines free of charge the one-eighth part of all the oil they may produce and save from said premises. 6th. To pay first party for each well from which gas is obtained and marketed the sum of two hundred dollars ($200) per year, first payment to be made at Corning, Ohio, thirty (30) days after the sale of said gas and thereafter yearly in advance at the same place so long as sale of gas continues.

      Provided that if second party shall violate any of the conditions of this lease on their part to' be kept and performed, then this lease shall cease, terminate and be void at the option of the first party, and all moneys paid hereon be forfeited to the party of the first part.
    It is understood by the second party hereto that one M. JL. Deaver claiming the oil and gas under premises prior to this date leased the oil and gas to one J. W. Taylor, said second party accepts this lease knowing said fact and agrees to operate this land and not to recognize said Deaver claim, and to pay all royalty to said first party as herein stipulated, and protect said first party against any loss by reason of any litigation upon the part of said Deaver. In witness whereof, we, the first and second parties, have hereunto set our hands the day and year above written.”
    Said instrument was signed by all the parties, and was duly attested, and was acknowledged by the grantors, but was never recorded.
    After the expiration of ninety days, and after Mr. Holland had notified the grantees that the term of the grant had expired, they drilled one well on said lands, and thereafter drilled another ,well, but always refused to pay plaintiff below any royalty for oil produced, and denied his right to royalty, and claimed all the oil themselves under the James W. Taylor lease. All the wells were drilled without the consent of plaintiff below, and against his protest, both in writing and verbally. The grantees paid the one hundred dollars at the time the grant was delivered, and did not comply with any other condition of the lease. At the time said mining right was granted, petroleum oil was produced in small quantities within ten to twenty miles of these lands.
    : The cause was tried in the circuit court on appeal, and the court stated its findings of facts and conclusions of law separately, and rendered a decree in favor of the. plaintiff' below quieting his title to the lands as against the defendants below, and sustaining the right of the plaintiff below to the oil and gas in said lands.
    A motion for a new trial was made and overruled and exceptions taken, and a bill of exceptions containing all the evidence, was also allowed and made part of the record.
    Thereupon the defendants below filed their petition in this court, seeking the reversal of the judgment of the circuit court.

      Elwood Newberry; L. A. Tussing and W. B. Loomis for plaintiffs in error.
    This case was, according to the petition and the decree in the court below, an action in equity, wherein it was sought to set aside, rescind, or rather have “declared null and void,” the oil lease from defendant in error to plaintiffs in error on the sole ground of forfeiture for the breach of conditions in the lease; and all the rights of the defendants below under the lease were by the decree of the court forfeited by injunction and by other equitable relief. This certainly can not be done by the Chancellor. It amounts simply to an arbitrary forfeiture in equity in disregard of the rights of the lessees, stated in the answer. It is not disputed that the plaintiffs in error paid the $100, and drilled oil wells on the land. Justice v. Lowe, 26 Ohio St., 375; Bisham’s Principles of Equity, sec. 181; 10 Wend., 266; Coe v. R. R. Co., 10 Ohio St., 375; Hutcheson v. Heirs, 1 Ohio., 21; Robert v. New Eng. Life Lns. Co., 1 Disney, 362; Mathinet v. Giddings, 10 Ohio, 365; Adams v. Parnell, 11 O. C. C. Rep., 567 to 570; Eichenlaub v. Neil, 10 O. C. C. Rep., 427.
    The plaintiffs in error had drilled, and were operating, oil wells on the land, as shown by the testimony and the finding of facts, at great and continuing expense. Mr. Holland never offered to pay back the $100; and as matter of fact never notified the plaintiffs in error of his intention to rescind. The notice was served on one of the defendants only; and there is nothing- in the record to show that the others were in any way bound by it. Besides, said notice is not a notice of election to rescind at all; but is simply one “to keep off the premises.” There was therefore no notice served on defendants below. Seeds v. Simpson & Knox, 16 Ohio St., 321; Parmlee v. Adolph, 28 Ohio St., 10; Yeoman v. Lasley, 40 Ohio St., 190; Railroad Co. v. Steinfield, 42 Ohio St., 449; Saxton v. Seiberling, 48 Ohio St., 554; Ins. Co. v. Hull, 51 Ohio St., 270.
    Petroleum oil is a mineral; and it is of course a “valuable mineral” — a mineral to be considered the same as coal, clay, etc., when we are discussing property rights in reference thereto. Peart v. Price, 152 Pa. St., 277; Caldwell v. Fulton, 31 Pa. St., 475; Appeal of Stoughton, 88 Pa. St., 198; Westmoreland et al. v. De Witt et al., 130 Pa. St., 235; 109 Pa. St., 291.
    The question simply is, has the defendant in error any title to the petroleum oil under the deeds aforesaid made to him by the heirs of F. G. Deaver, deceased, assuming that said deed is of regular form?
    In the case of Sloan et al. v. Lawrence Furnace Co., 29 Ohio St., 568, it is clearly held that an exception of “all the minerals” can and does mean what it says — that all minerals are excepted. Hartwell v. Camman, 64 Am. Dec., 448; People's Gas Co. v. Tyner, 31 Am. St. Rep., 433; 24 Am. St. Rep., 554; Suffield v. Hue, 129 Pa, St., 94; Foster & Co. v. Runk, 109 Pa. St., 291; Plummer v. Hillside Coal & Iron Co., 160 Pa.St., 483; Brown v. Beecher et al., 120 Pa. St., 590; Wettengel v. Gormley, 160 Pa. St., 559; Gill v. Weston, 110 Pa. St., 313; Funk v. Halderman et al., 53 Pa. St., 229; 11 Minn., 137; Caldwell v. Fulton, 31 Pa. St., 475.

      T. M. Potter and Donahue, Spencer & Donahue, for defendant in error.
    As to the contention of plaintiffs in error that Holland is not the owner of this oil and gas, we respectfully insist that they are estopped from making any such defense.
    A tenant is not permitted to dispute the title of his landlord, and when the relation of landlord and tenant is once established by an express act of the parties, the only objection that a tenant can make to his landlord’s title is, that it expired since the making of the lease, or had been transferred by sale on execution, or by operation of law. 3 Ohio, 59-295 ; Bank v. Flour Co., 41 Ohio St., 552; Ensel v. Levi & Bro., 46 Ohio St., 255; Pa. Co. v. Platt et al., 47 Ohio St., 366; 2 Johns, Cas., 233; 1 Rawle, 408; 14 Johns, 224; 32 Mich., 518; 28 Ark., 158; 44 Md., 581; 57 Barb., 148; 61 Pa. St., 491; 58 Barb., 545; 38 Ia., 341; 18 Wall., 436.

      This is even a stronger case than the ones cited, for the reason that -plaintiffs in error expressly agreed to protect Holland against Denver’s claim. They at that time being the owner of that claim. Saltus v. Bedford Co., 133 N. Y., 499; 31 N. E., 519; Hyatt v. Ingalls et al., 124 N. Y., 93; 26 N. E., 285.
    Another presumption, we think obtains, that this deed ,was made by proper authority, and, if not so made, has been duly ratified by Thomas N. Deaver, since arriving at full age; and we think the burden of showing the contrary was upon the plaintiff in error. Perkins v. Dibble, 10 Ohio, 434; Lewis v. Bank, 12 Ohio, 132; Klein et al. v. Wayne et al., 10 Ohio St., 223 ; Ilers v. Ins. Co., 2 W. L. B., 333; Clark v. State, 12 Ohio 483; White v. Richmond, 16 Ohio, 5; Iron Co. v. Street, 19 Ohio, 300; Templeton v. Kramer, 24 Ohio St., 554; Brackman v. Hall, 1 Dis., 539.
    This is an action to quiet title. The plaintiff in his petition says: That he is the owner and in possession of certain real estate, and that the defendants claimed some interest in said real estate under and by virtue of the written contract of lease between himself and the defendants, and it is to quiet against this claim that this action is brought. Their answer not only claims title to the oil under the Holland lease, but also under the lease from Deaver, and this Deaver lease' they were the owners of at the time they took the lease from Holland, and expressly agreed in their contract with Holland that they would protect him against any and all claims of that character, and then being the owners of said claim admitted it was inferior to Holland’s title. Dunham & Short v. Kirkpatrick, 101 Pa. St., 36; Schuylkill Navigation Co. v. Moore, 2 Wh., 477; Stoughton’s Appeal, 7 Norris, 198; Gibson v. Taylor, 5 Watts, 34; Armstrong v. Lake Champlain Granite Co., 42 N. E. Rep., 186; Willis v. Natural Gas Co., 130 Pa. St., 232.
    As to written and verbal notice. This provision was in the lease for the sole benefit of the defendant in error. Woodland Oil Co. v. Crawford, 55 Ohio St., 161; Edmunds et al. v. Mounsey, 44 N. E. Rep., 196.
    As to the further objection that he has not returned the money they expended in drilling upon these premises, we think it hardly needs an answer. Their time had expired upon this lease. He had elected to end it, and had done so verbally and in writing. 6 W., 427; 2 Story’s Equity, section 779; 2 Kent’s Com., 334; 8 Wheat. 1; 2 Pomeroy, sections, 592, 745, 753, 762.
   Burket, C. J.

If the title to the oil in the land in dispute, passed to Michael L. Deaver under the conveyance of the mining right from Francis G. Deaver, it is clear that plaintiffs in error acquired a right to the oil under the James W. Taylor lease; but if the title to the oil did not vest in Michael L. Deaver under that conveyance, the James W. Taylor oil lease vested no right to the oil in plaintiffs in error, and they would be driven to some other defense.

The conveyance in question, is what is usually known as a mining- right, and grants and conveys all the coal of every variety, and all the iron ore, fire clay and other valuable minerals in, on, or under the said lands. Do the words “other valuable minerals” include petroleum oil? The deed of the mining right was made in February, 1890, and it must be construed in the light of the oil developments as they then existed in the vicinity of the lands.

Francis G. Deaver, the grantor in the mining right, resided in Wisconsin, and there is nothing to show that he had any knowledge of the existence of oil in or near these lands. Oil was then produced in small quantities within from ten to twenty miles of the lands, but there is nothing to show that the parties to the conveyance had any knowledge thereof.

Said mining right grants in perpetuity, the right “of mining and removing such coal, ore or other minerals, * * * with the right to the the use of so much of the surface of the land, as may be necessary for pits, shafts, platforms, drains, railroads, switches, sidetracks, etc., to facilitate the mining and removal of such coal, ore or other minerals, and no more. The incidents here granted are all such as are peculiarly applicable to the mining of minerals in place, and not to such as are in their nature of a migratory character, such as oil or gas. Nothing is said about derricks, pipe lines, tanks, the use of water for drilling, or the removal of machinery used in drilling or operating oil or gas wells.

A rule of construction in such' cases, which seems correct, is found in the following from The Law of Mines and Mining in the United States by Barringer and Adams, page Í31. “In determining what is included in a lease, the familiar rules of construction are applied. The grant is construed most strongly against the grantor. The whole contract must be considered in arriving at the meaning of any of its parts. Terms are to be understood in their plain, ordinary, and popular sense, unless they have acquired a particular tech ideal sense by the known usage of the trade. They are to be construed with reference to their commercial and their scientific import. This rule is of especial importance when the question arises whether a specific mineral is included in a general designation.”

The words “other minerals,” or ‘‘other valuable minerals,” taken in their broadest sense, would include petroleum oil; but the question here is, did the parties intend to include such oil in the mining right? Taking all the terms of the conveyance in the light of the surrounding circumstances, and in view of the above rule of construction, and upon authority of the case of Dunham & Short v. Kirkpatrick, 101 Pa. St., 36, we conclude that the title to the oil did not pass under said conveyance, but remained in the owner of the soil, and upon his death passed to his heirs.

There is nothing to show that it was the intention of the parties that oil should be included in the word “minerals,” and the easements granted in connection with the mining right, are not applicable to producing oil, and show that oil was not intended to be included in the conveyance. If it had been, apt words would have been used to express such intention.

In the next place it is urged by plaintiffs in error, that the deed from the minor son and his guardian, is not sufficient to pass title to one-half of the land to defendant in error, and that therefore he is not the owner of that half, and has no right to have his title quieted thereto.

This might possibly be so as between the minor son and the defendant in error, but as between the defendant in error and a stranger, such title, when strengthened with possession, is sufficient to support an action for the quieting of the title he has, even though such title should be only possessory. In an action to quiet title, if. the plaintiff shows peaceable possession under a conveyance, even though defective, and the defendant shows no title or right, the plaintiff is entitled to have his title quieted as against such defendant and those claiming under him.

It is also urged that the remedy sought by plaintiff below, was by way of forfeiture of the rights of the defendants below under the written instrument, and that a forfeiture should be first established by action at law, and not by an equitable action to quiet title.

The contract between the parties in this case was not a lease of the lands, but only a grant of the sole right to produce petroleum and natural gas for and during- the term of ninety days from that date, and as much longer as oil or gas should be found, operated and produced in paying quantities; and the parties to whom the grant was made covenanted to complete one well, in addition to the one already on said premises, in ninety days from said date, unavoidable casualties excepted. There were no casualties, hence the covenant was to complete one additional well in ninety days, the term of the grant.

No additional well was drilled, or attempted to be drilled within ninety days, and therefore at the expiration of that time the grant terminated by its own limitation. If one paying well had been completed within the ninety days, the grant would have been extended “as much longer as oil or gas is found, operated and produced in paying quantities. ’ ’ But where no well is drilled within the time ■ limited by the grant, the period of the grant is not extended by the words, “and as much longer as oil or gas is found, operated and produced in paying quantities, ” and in such cases all rights to drill cease at the expiration of the time limited in the grant, in this case at the expiration of ninety days.

The plaintiffs in error having acquired no right to the oil under the James W. Taylor lease, and the grant to them for the production of oil having expired by its own limitation at the end of ninety days, they had no right whatever, as against the defen dant in er ror; and as they claimed some right, he was entitled to have his title quieted as against such unfounded claim, not by way of forfeiting the grant, but by reason of the expiration thereof by its own limitation.

With this view of the case, the petition is broad enough to entitle the plaintiff below to have his title quieted without a resort to the law of forfeiture, although it would seem that under the terms of the instrument, all the rights of the plaintiffs in error were forfeited by reason of the nonperformance of the covenants and conditions contained in the instrument.

It is further urged that the plaintiff below should pay back the one hundred dollars paid to him when the grant or lease was delivered. This sum was paid for the grant for the term of ninety days, and the grantees enjoyed the term without interruption, and the grantor has the right to retain and enjoy the price he received therefor. It is not a case of rescission or forfeiture, but of expiration of the term of the grant.

Again it is urged that the plaintiff below should be compelled to pay to the defendants below the amounts expended by them in drilling wells on the land after the expiration of the grant, and after notice to them not to drill any wells on the land.

The defendants below drilled the wells on the lands of the plaintiff against his will, and after full notice from him not to drill, and in such case they drilled at their peril, and at their own expense, and are not entitled to be reimbursed by the owner of the land.

Some objection is made to the form of the notice and its service. The notice was addressed to all the defendants below, and was served by delivery to one of them on the premises at the well which had been drilled at the time the grant was made, and informed them that the lease expired that day, and notified them to keep off the premises. This was sufficient, and showed that he relied upon expiration of term, and not upon forfeiture.

The grant wa's to all four of the defendants below jointly, and a notice to one joint contractor is binding- upon all. Baker v. Kellogg, 29 Ohio St., 663.

There is no error in the record, and the judgment should therefore be affirmed.

Judgment affi/i^med.


source: Caselaw Access Project

author: Williams, J.

license: Public Domain

text:
    Besuden v. Besuden.

      Chattel mortgages — When void as against assignee in insolvency— Mortgagee creditor may prove claim as general creditor.

    1. Where chattel mortgages are void as against an assignee in • insolvency of the mortgagor, the creditors to whom they were given may prove their claims as general creditors, and as such, share in the fund arising from the sale of the assigned property, pro rata with other creditors of that class.
    2, A creditor to whom such a mortgage was given, is not entitled, on the ground of its priority before the assignment over another such mortgage, to appropriate any part of the dividend applicable to the debt proven by the holder of the latter mortgage: but the right of each to his dividend as a general creditor is unaffected by the mortgages.
    (Decided February 1, 1898.)
    Appeal was taken to the court of common pleas, from an order of the probate court, of Hamilton county, directing the distribution of a fund in the hands of the assignee of P. Wilson’s Sons & Co., an insolvent copartnership. In the appellate court the cause was submitted upon an agreed statement of facts concerning the matter in dispute, which is as follows:
    “The firm of P. Wilson’s Sons & Co. was a partnership, consisting of Chas. P. Wilson, John Wilson, Herman Besuden, and William II. Besuden, and having its place of business in Cincinnati, Ohio. The firm made an assignment in June, 1892, to F. Jelke, Jr. All of said partners lived in Cincinnati township, except Wm. H. Besuden, who lived in Millcreek township, Hamilton county, Ohio, On the 22d day of December, 1890, said firm made a chattel mortgage for $20,000.00, and one for $10,000.00, to Edwin Besuden•, and on the--day of June, 1892, it made a third chattel mortgage, for $25,000.00, to Henry Besuden; all of which mortgages were on the same property covered by the plant, machinery, tools, fixtures, stock, etc., of said firm. All of said mortgages were properly filed in the recorder’s office of Hamilton county; but none were filed or recorded with the clerk of Millcreek township. When the mortgage for $25,000.00 was made to Henry Besuden, said Henry Besuden had actual notice and knowledge of the prior mortgages which had been given to Edwin Besuden, which said notice was also had by all the general creditors of the firm; and all of said mortgages were received and given for money advanced to the firm at the time of the execution of said mortgages. It is further agreed that the property covered by said mortgages was sold by this assignee, and out of the fund realized therefrom a dividend of ten per cent, was ordered to be paid to all the creditors ox said firm. ’ ’
    The common pleas rendered the following judgment: “This cause came on this day to be heard and was submitted to the court on the transcript from the probate court of this county, the original papers in the case and the evidence, and on consideration thereof the court find the chattel mortgages on their stock, machinery, and fixtures, in Cincinnati, Ohio, given by the firm of P. Wilson’s Sons & Co. to Edwin Besuden, dated December 22, 1890, and filed oh the--in Cincinnati township, Hamilton county, Ohio, where three members of the firm reside, but never filed in Millcreek township, Hamilton county, Ohio, where the fourth member of the firm resided, and the chattel mortgage given by said firm on the same property to Henry Besuden, dated June, 1892, and filed on June, 1892, also in Cincinnati township, Hamilton county, Ohio, but never filed in Millcreek township, Hamilton county, Ohio, are all void; and that said Henry Besuden and other creditors had notice of the said existing mortgages to Edwin Besuden; and that said Henry Besuden and Edwin Besuden are each entitled to share equally and ratably with all other genera] creditors of said firm of P. Wilson’s Sons & Co. in the distribution of the fund in the hands of the assignee for the benefit of creditors of said firm of P. Wilson’s Sons & Co., which fund is the proceeds of said property covered by said chattel mortgages; and that said Edwin Besuden is entitled to no priority over said Henry Besuden in such distribution. It is therefore ordered that said assignee pay to said Henry Besuden on his claim the same dividend of 10 per cent, which has been paid to Edwin Besuden and to the other general creditors of the firm of P. Wilson’s Sons & Co. It is further ordered that the clerk of this court made out and filed in said probate court a transcript of the proceedings and judgment herein; to which said order the said Edwin Besuden excepts.”
    This judgment was affirmed by the circuit court; and error is presented here by Edwin Besuden, against Henry Besuden.

      Wright & Wright, for plaintiff in error.
    The first proposition is that a subsequent mortgagee with actual notice of a prior incumbrance is not a mortgagee in good faith, and consequently is not protected by the statute. Paine v. Mason, 7 Ohio St., 198; Day v. Munson, 14 Ohio St., 488; Sanger v. Eastwood, 19 Wend., 514; Gregory v. Thomas, 20 Wend., 19.

      Where a second mortgagee has notice of a prior mortgage, the latter will have preference, though not registered. Herman, sections 91, 145 and 152.
    The distinction, therefore, between creditors and subsequent mortgagees is plain. Creditors are not affected by notice (Houk v. Condon, 40 Ohio St., 574), but mortgagees are.
    It is a well recognized principle that a chattel mortgage is good against the mortgagor, although not recorded, and also good as against creditors until they obtain a lien by levy or attachment. Haynes v. Tiffany, supra; Kilbourne v. Fay, 29 Ohio St., 264; Freeman v. Rawson, 5 Ohio St., 10; Cass v. Rothman, 42 Ohio St., 380; Stephenson v. Colopy, 48 Ohio St., 247.
    A creditor at large, procuring a mortgage of his debtor’s property, can not claim as a creditor, or in the double capacity of creditor and purchaser, but only as purchaser. Tate v. Liggatt, 2 Leigh (84), 91; Tolbert v. Horton, 31 Minn., 318; Fox v. Wildes, 1 Mich., 321.
    The equity of the case is with the elder mortgage. Adams’s Equity, page 354 (star page 151).
    When equities are equal the oldest will prevail. Gronning v. Behn, etc., 10 B. Monroe (Ken.), 383 at 386.
    There is no doubt but that Edwin Besuden’s mortgage is prior to Henry Besuden’s, because the latter had notice of the former. Paine v. Mason, 7 Ohio St., 198.
    This must be obvious. If I have a chattel mortgage, a creditor of the mortgagor can not take the - mortgaged property from me without bringing suit and attaching it, or getting a judgment and levying execution. Wilson v. Leslie, 20 Ohio, 161; Kilbourne v. Fay, 29 Ohio St., 264.

      Now, for the benefit of those creditors who have not g-ot any lien on the property, the law says the assignee may represent them, as though they had. 29 Ohio St., 279.
    It might be observed that Jones cm Chattel Mort., sections 240, criticises Kilbourne v. Fay.

    The latest cases in New York hold that one not having a judgment or execution is not a creditor within the meaning of the statute, which declares that the omission to file a chattel mortgage makes it void as against creditors of the mortgagee, and subsequent purchasers, or mortgagees in good faith. Jones’ Chat. Mort., section 245; Jones v. Graham, 77 N. Y., 628; Kenealy Nat. Union Bank, 23 Hun., 494; Hayman v. Jones, 7 Hun., 238.
    This view is also held in other recent cases: Overstreet v. Manning, 67 Tex., 657; Grace v. Wade, 45 Tex., 522, 527; Ranson v. Schmeler, 13 Neb., 77 Cameron v. Marion, 26 Kansas, 612; Gill v. Pinery, 12 Ohio St., 38.
    Therefore it is that the assignee protects the rights of those who have no lien, or who have not got hold of the property by legal process. As to those who have a lien, their rights are not altered by the assignment, and, as Edwin Besuden is first, he must remain so. Tate v. Liggett & Matthews, Liggett & M. v. Morgan et al., 2 Leigh, 91.
    This case illustrates the difference between creditors and sub-purchasers and shows 'that Henry Besuden' is not of that class of creditors who acquire any right by virtue of the assignment; in speaking of “the seeming exceptions to this rule,” et seq., the court plainly means to dis-^ tinguish between creditors who acquire a lien by operation of law, by virtue of the assignment, and those creditors who acquire their liens by contract made by themselves — the latter take as subsequent purchasers and are not entitled to the protection of the statute. Shirley v. Long, 6 Raw., 735.

      F. G. Roelker, for defendant in error.
    The fair interpretation of the decisions under section 4150 of the Revised Statutes, is simply that a second mortgagee shall not be allowed to assert the lien of his second mortgage as against the first mortgagee where he had notice of such first mortgage. But there is not a word in the statute or in decisions to the effect that the first mortgagee shall be subrogated to the rights of the second mortgagee as a general creditor, and this is exactly what counsel for plaintiff in error ask to have done.
    Neither mortgagee having any lien whatever on the fund, it is held by the assignee in trust for the general creditors, and the statute of assignments declares that it shall be distributed equally between all creditors. Section 4150, Revised Statutes.
    Henry Besuden occupies a twofold position. He is both a creditor and holder of a chattel mortgage which has been set aside.
    There is only one interpretation consistent with the obligation of the court to maintain the whole statute, and that is to say to him: As you are not a mortgagee in good faith, even if you held a valid chattel mortgage, you can not assert a mortgage lien against this specific property in preference to the first mortgage, but to you as a creditor this first mortgage is void, and in the general distribution you may share as a creditor. Section 6351.
    There being no privity of contract between the parties, there can be no question of subrogation. for that is applied only in favor of one who has actually performed the obligations of another and thereby entitled himself to the rights and advantages incident to the discharge of such obligations.
    We do not claim to stand in a better position with a defective mortgage than with a valid mortgage with notice.
    The reasoning of Tolbert v. Horton, 31 Minn., 518; is directly in our favor.
    In Ohio the assignee makes it necessary. for the creditor to first obtain judgment and execution before setting aside the mortgage.

      Fox v. Wildes, 1 Mich., 321, decides that a mortgagee, to set aside a fraudulent conveyance under Ch. I, Tit. 6, part 2, Revised Statutes 1838, must first issue execution and levy on the property frauduently conveyed, that is, while he cannot set it aside as a mortgagee, hé may do so asa creditor, having first gone through the proper legal process. Southard v. Benner, 72 N. Y., 424; Jones v. Graham, 77 N. Y., 628.
    It is respectfully submitted that the plain interpretation of section 4150 limits the rights of the first mortgagee topreventingthe second mortgagee with notice from asserting his mortgage lien against the first mortgagee, but does not give him a right to the dividends of the general' creditor whose second mortgage has been declared void.
   Williams, J.

It is conceded by the plaintiff in error that both of his chattel mortgages, as well as that of the defendant in error, are void as against the assignee, because they were not filed as required by law. His contention is that, inasmuch as his mortgages were prior'to Henry’s, he is entitled to appropriate on the debt secured by them its pro rata share of so much of the fund as would' otherwise be applicable to the debt- due Henry. This would exclude the latter from participation in the fund. The grounds on which it • is sought to sustain this contention are, (1) that while the mortgages of the plaintiff in error are void as to the general, creditors of the mortgagor, they are good as against the subsequent mortgage made to Henry, because he had notice of their existence when his mortgage was received; and, (2) that, by so accepting his mortgage, the latter- impliedly agreed not to assert any claim to the property, or the fund arising, from its sale, until the two prior mortgages should be satisfied. Neither ground is tenable. If Henry were asserting- any claim under his mortgage, or if it were necessary to maintain the mortgage in order to establish his' right to share in the fund, that right might be subject to, or controlled by the relative positions and legal operation of the conflicting mortgages. But the mortgages all being void, both Henry and the plaintiff in error occupy the position of general or unsecured creditors, and each sustains that relation to the fund, and that only. The invalidity of their mortgages does not destroy the validity of the debts due them, nor affect their rights as general creditors; but as such, they stand upon an equality with each other, and with all unsecured creditors. The mode of distribution to such creditors by the assignee of the insolvent debtor, is regulated by law, which secures to each an equal pro rata share in the fund. The mortgages of Edwin Besuden being void, are none the less inoperative against Henry as a general creditor, than they are as against all other creditors of the same class, and are equally ineffectual to control the distribution to him, or diminish his right in the fund. His dividend accrues to him as a general creditor, independent of the mortgage, and not in virtue of it, and consequently, he is under no obligation to surrender it to Edwin who also shares in the fund as a general creditor simply, and takes nothing by virtue of his mortg-ag’e. Nor, did the mortgages give rise to an implied contract that Henry would surrender his dividend in the fund to Edwin. At most, the former was simply a second mortgagee, while the mortgages subsisted as liens. This would ordinarily be sufficient to enable the first mortgagee, as between the mortgages, to enforce the application of the property to the payment of his debt, leaving the surplus, if any, for the second mortgagee. This right arises by operation of law, from the relative positions of the mortgages, and not from any implied contract between the mortgagees, and extends no further than to secure priority of the first mortgage over the second where rights under them are involved. Rights of the second mortgagee which do not depend on his mortgage, or in the assertion of which the mortgage is not relied upon, are not affected by its subordinate relation to another mortgage on the same property. Unquestionably t'he second mortgagee may renounce or abandon his mortgage and sue on the debt; and, after judgment, levy execution on the mortgaged property. In such a ease he acquires the rights of an execution creditor, and the question of priority then becomes one between him as such creditor, and the prior mortgagee, unaffected by the fact that he had held a second mortgage; and if he thereby lawfully obtains a prior lien, he cannot be deprived of it upon any theory of implied agreement arising from the mortgage which had been previously made to him. Certainly there can be no implied agreement that he would not enforce collection of his debt by judgment and execution against any property of the debtor which could be lawfully reached by such process; nor does the law imply an agreement that he would relinquish or assign to a prior mortgagee the fruits of his proceeding, or of any that he might lawfully pursue. An assignment for the benefit of the creditors of an insolvent debtor is the equivalent, for the protection of their rights against prior mortgages, to the levy of executions on the property at the suit of each of the creditors, and operates as the seizure of the property by legal process in behalf of each and all of the creditors from the date of the assignment. Hence, if the mortgages are invalid as against execution creditors, they are so for all the purposes of the assignment, and as against all who were creditors at the time it took effect. They can have no influence whatever on the distribution of the fund arising from the sale of the assigned property. Both the plaintiff and defendant in error are therefore entitled to their respective dividends, as general creditors, in the fund here in controversy.

The cases cited by counsel for the plaintiff in error are not applicable to this question, but relate to priorities as between conflicting mortgages upon which the parties relied, and by which their rights were controlled.

Judgment affirmed.


author: Shauck, J.

text:
    Smith et al v. The Sloss Marblehead Lime Company.

      Breach oj contract — Action to recover — Measure of damages — Rule as to averment or evidence of injury.

    In an action to recover for the breach of a contract to deliver stone, the difference between the contract price and the market price at the time and place of delivery required by the contract may be recovered without averment or evidence of special injury resulting from the breach.
    (Decided Febuary 1, 1898.)
    Error to the Circuit Court of Cuyahoga county.
    The plaintiffs in error brought suit in the court of common pleas against the Lime Company upon the following original petition filed April 20, 1893:
    “Plaintiffs, complaining of the defendant, The Sloss Marblehead Lime Company, say, that it is a corporation duly organized and existing’ under and by virtue of the laws of the state of Ohio, and as such was engaged in quarrying, manufacture and sale of stone; that on or about March 1, 1893, the defendant agreed with the plaintiffs to furnish and provide the plaintiffs with five thousand cords of pier' stone, so-called, and did then and there sell the plaintiffs said five thousand cords of stone to be delivered during the year 1893, at defendant’s dock at Marblehead, f. o. b. vessel, at the rate and price of one dollar and seventy-five cents ($1.75) a cord, but disregarding its promise and agreement in that behalf, the defendant, although requestéd by the plaintiffs, wholly refuses and declines to fulfill and perform its agreement aforesaid.
    That the plaintiffs are under contract and agreement with the government of the United States to build and construct for it a pier in the harbor of the city of Cleveland, Ohio, and are compelled in the performance of said contract to use stone in amount to five thousand cords, and by reason of the failure and refusal of the defendant to perform its contract and agreement, as aforesaid, plaintiffs have been compelled to contract for and purchase stone elsewhere; that they have been unable to purchase stone of the kind and character which they purchased of defendant at a price less than two dollars and seventy-five cents ($2.75) a cord, and that the defendant by its failure and refusal to perform the contract and agreement aforesaid, so made and entered into with the plaintiffs, has caused the plaintiffs to expend the sum of five thous- and ($5,000) dollars, over and above the price agreed upon between the parties hereto, to the damage of plaintiffs five thousand ($5,000) dollars for which amount the plaintiffs pray judgment against the defendant.”
    June 5, 1893, the Lime Company filed the following answer:
    “Now comes the defendant, The Sloss Marble-head Lime Company, and for answer to the plaintiff’s petition admits that it is a corporation existing under the laws of said state, and as such was engaged in the quarrying, manufacture and sale of stone, but as to each and every of the remaining allegations of said petition it says that the same are not true, wherefore it denies said allegations and each of them.”
    March 6, 1895, the plaintiffs filed the following supplemental petition:
    “Now come the plaintiffs and by way of supplemental petition say, that since the 19th day of April, 1893, by reason of the failure and refusal of the defendant to perform its contract and agreement to deliver stone as alleged in the. petition, they, the said plaintiffs, have received and paid for under the contract which they were compelled to make for the purchase of stone elsewhere alleged in the petition, the amount of four thousand five hundred eighty-four and 12-100 cords of pier stone at and for the price of two and 75-100 ($2.75) dollars per cord.
    And plaintiffs say, that by reason of the failure of the defendant to deliver the said pier stone in accordance with said agreement of the defendants to deliver, and of the plaintiffs to receive the same, at and for the price of one and 75-100 ($1.75) dollars per cord, they have been compelled to, and have bought the said four thousand five hundred eighty-four and 12-100 cords of pier stone, and have paid therefor the sum of twelve thousand, six hundred six and 33-100 ($12,606.33) dollars; and plaintiffs say that said price of two and 75-100 ($2.75) dollars per cord was the lowest market price at which they could obtain said stone after the refusal and failure of the defendants to perform their said contract to furnish stone as-alleged in the petition. Wherefore plaintiffs pray judgment against the defendants in the sum of $4,584.12, with interest thereon from the first day of July,. A. D. 1893.”
    And on the said 6th day of March, 1895, the Lime Company answered said supplemental petition as follows:
    “Defendant for answer to the supplemental petition, filed herein, says it denies each and every allegation therein contained.”
    March 8, 1895, the cause was tried to a jury, the trial resulting in a verdict in favor of the plaintiffs for $4,584.12 Within three days a motion for a new trial was filed by defendant upon the grounds, among others, that the court erred in its charge to the jury and that the verdict was contrary to the evidence. This motion was overruled, and a judgment followed the verdict. A bill of exceptions was taken containing all the evidence offered upon the trial, and a petition in error was filed in the circuit court, one of the assignments of error being’ that the common pleas court erred in overruling’ the motion for a new trial.
    The circuit court reversed the judgment and remanded the cause to the court of common pleas for a new trial for the reason as shown by its journal entry, “that inasmuch as the evidence did not show that plaintiffs in error knew when said contract was made that the defendant had a contract with the United States government under which the stone was to be used, the rule of damages given to the jury under which they could give special damages, was error, and this cause is remanded to said court of common pleas for a new trial.”

      Goulder & Holding, for plaintiffs in error.

      J. E. Ingersoll and S. H. Tolles, for defendant in error.
   Shauck, J.

The record does not justify the assumption that the defendant did not know, when the contract was made, that the plaintiffs had u contract with the government under which the stone was to be used. There was clear and direct testimony that the plaintiffs were making the purchase for the erection of a pier under a contract with the government and that the amount of stone to be delivered under the contract of purchase was to be determined by the requirement of the contract with the government. Knowledge of this fact is implied in the conversations which formed the contract. Indeed, the evidence shows that the negotiations which led to the contract were introduced by a representative of the Lime Company who was prompted by knowledge that the government had awarded to the plaintiffs the contract for the construction of the pier.

Moreover, no instruction was given to the jury which would authorize the assessment of special damages. The instruction in this regard was:

“The damages the plaintiffs are entitled to recover, if you find in their favor, is the difference between what they were to pay, to-wit, $1.75 per cord, and the market value or what they could go into the market and buy the same stone — substantially the same stone, at that time and place, for. The difference between what the market price was and what they had agreed to pay would be the measure of damages, and that amount the plaintiffs should have in your verdict, if you find for the plaintiffs.”

No other measure of damages was defined by the court to the jury, nor did the jury award damages in excess of the difference between the contract price and the market price as they were shown by the evidence offered by the plaintiffs.

The damages defined in the charge and awarded by the jury are general, because they are such as are presumed in law to have accrued from the breach of the. contract. They would have accrued if the' stone had been purchased for use in another place or to be resold. They are not special, because they do not, to any extent depend upon the terms of the purchaser’s contract with the government. They compensated the purchasers for no detriment sustained in consequence of stipulations in their contract with the government, nor reimbursed them for any lost advantage offered by the terms of that contract. Sedgwick on Damages, section 1261, Sutherland on Damages, sections 419-20.

It seems clear, therefore, that the judgment of the circuit court cannot be sustained upon the ground stated in its entry. But counsel for the defendant contend that the judgment of reversal entered by the circuit court should be affirmed because the petition upon which the recovery was had in the common pleas does not state a cause of action, although that was not stated as a ground of reversal in the circuit court. It is important to observe, in this connection, that no motion was filed to require the allegations of the petition to be made more definite and certain. Nor was its sufficiency tested by demurrer. The trial was had upon the issues joined on the allegations of the original petition and the supplement thereto. Taken together the allegations set up a contract executed March 1, 1893, for stone to be delivered during the year 1893, and not performed by March, 1895. The evidence showed without contradiction that before the suit was brought the Lime Company had sold its quarries and thus disabled itself to perform the contract with the plaintiffs if it had entered into the contract alleged. Whether it had entered into such contract or not was the subject of real contention upon the trial. The finding that the contract alleged in the petition was entered into does not seem to be affected by any error, and the defendant’s repudiation of the contract and rendering itself unable to perform constitute a sufficient breach.

Jxidgment of the circuit court reversed and that of the common pleas affirmed.