source: Caselaw Access Project

author: Donahue,' J.

license: Public Domain

text:
    Rabe et al. v. The Board of Education of the Canton School District et al.

      Taxation—Limitation on tax rate—Sections 5649-2 to 5049~5b, General Code—Statutes in conflict repealed by implication—Basis of calculation established, how—Limitation of issuance of bonds— Amount of income from taxes to be levied—In anticipation of bond issue—To be determined, how.

    1. Sections 5649-2 to 5Ó49-5&, General Code, inclusive, limit the rate of taxes that can be levied in any taxing district for any and all purposes. Any statutes existing at the time of the passage of these sections, in direct conflict therewith and not specifically repealed thereby, are repealed by implication.
    2. These sections of the General Code furnish the basis of calculation for the issue of bonds in anticipation of income from taxes levied or to be levied.
    3. Bonds cannot be issued in anticipation of income from taxes levied or to be levied in an amount greater than the income to be anticipated thereby.
    4. In determining the amount of income from taxes levied or to be levied that may be anticipated by an issue of bonds by any taxing authority, the calculation must be based on the same proportion of the total maximum levy in any one taxing district as the proportion of the maximum levy it is authorized to certify to the budget commissioners is to the total maximum levies that all the taxing authorities within that taxing district are authorized to certify.
    (No. 14065
    Decided September 30, 1913.)
    Error to the Circuit Court of Stark county.
    The board of education of the Canton city school district passed a resolution on the first day of April, 1912, entitled “a resolution to provide for the issuance of bonds of the Canton city school district in the city of Canton, Ohio, for the purpose of obtaining and improving school property within that school district.”
    • This resolution declared, among other things, that these bonds were to be issued under authority of Section 7629, General Code.
    On the 22nd day of the same month the board of education elected to take certain properties for a high school site which it then held under option contracts at the aggregate price of $59,800. This, ■however, was not sufficient property for the purpose, and it became necessary to appropriate other property, which would bring the total cost up to about $100,000.
    On the 30th da/y of April, 1912, Thomas IT. Rabe, Emma Bucher, Caroline P. Bockius, Austin C. Brant, Clara B. Shanafelt, H. M. Geiger and Minna M. Portmann, taxpayers of the city school district of the city of Canton, filed a petition in the common pleas court of Stark county, on behalf of themselves and other taxpayers within that taxing district and on behalf of the Canton city school district, making the board of education and certain individual members and officers thereof parties defendant thereto, asking that the board of education be enjoined from entering into any contract for the purchase of this property or paying any money out of funds belonging to the school district for and on account of the purchase, and praying* further that the board of education be enjoined from issuing bonds in the sum of $110,000 or any other sum or amount whatever in pursuance of the resolution declaring the necessity of issuing and the purpose of the board of education to issue the same.
    On the trial in the common pleas court the temporary injunction theretofore allowed by that court was dissolved, and the petition of the plaintiffs dismissed. The cause was then appealed to the circuit court of Stark county, which court made and entered the following judgment: “It is therefore adjudged and decreed that the defendants be and they are hereby perpetually enjoined from purchasing said several tracts of real estate described in plaintiff’s petition, under said option contracts heretofore entered into with the owners of said property, because said money was not in fund and certified to be in fund and unappropriated for any other use, sufficient to pay the consideration for said properties; and it is further adjudged and decreed that the second cause of action in plaintiff’s petition be dismissed and that the tempo-' rary injunction heretofore granted herein restraining the defendants from selling said bonds in said second cause of action in plaintiffs’ petition described, be dissolved, set aside and held for naught, and the costs herein are adjudged against the defendants.”

      Error is prosecuted in this court by the plaintiffs in the original suit to reverse the judgment of the circuit court dismissing the second cause of action in the petition contained.
    No cross-petition has been filed by defendants in error seeking a reversal of the judgment of the circuit court enjoining the purchasing of the property.

      Messrs. McCarty & Mc'Clintock and Messrs. Welty & Alba%igh, for plaintiffs in error.

      Mr. John T. Blake; Mr. David E. Daniels; Mr. Ralph S. Ambler; Mr. Timothy S. Hogan, attorney general, and Mr. Clarence D. Laylin, for defendants in error.
   Donahue,' J.

Our attention is directed to the fact that since the rendition of the judgment of the circuit court, which is sought to be reversed by this proceeding in error, certain important changes have been made in the constitution and statutory laws of our state, and that these changes directly affect the questions here presented. It would seem unnecessary to say that this court cannot consider these amendments, except, perhaps, in so far as they might aid in the construction of the law as it existed at the time of the adoption of this resolution providing for an issue of bonds.

The authority of this board of education to issue these bonds must be determined solely with reference to the law as it then existed and without reference to what the law had been in the past or might be in the future. The board of education was neither required nor permitted to anticipate any change in the law.

The resolution adopted by the board of education of the Canton city school district, providing for the issue of bonds in the sum of $110,000, purports to issue the same under the authority conferred upon it by Section 7629, General Code. This section provides that the board of education may issue bonds in anticipation of income from taxes, levied or to be levied, from time to time, as occasion requires, in an amount not greater than would equal an aggregate of a tax at the rate of two mills for the year next preceding such issue. Section 7630, General Code, further limits the issue of bonds to an amount that can be provided for and paid with the tax levies authorized by Sections 7591 and 7592, General Code. Section 7591 authorizes a levy for all school purposes not to exceed twelve mills on the. dollar of the tax valuation. Section 7592 authorizes an additional levy of five mills for any number of consecutive years not exceeding five, in addition to this twelve-mill levy, when such additional levy is approved by a majority of the votes of the electors of the school district.

These sections were the law of Ohio when the g'eneral assembly passed Sections 5649-2 to 5649-6, General Code. These sections limit the rate of taxes that may be levied within any taxing district for all purposes to ten mills on the dollar of the tax valuation of the taxable property of any county, township, city, village, school district or other taxing district for that year, and such levies in addition thereto for sinking fund and interest purposes as may be necessary to provide for any indebtedness heretofore incurred or any indebtedness that may hereafter be incurred by a vote of the people. These sections, as they read at the time of the adoption of this resolution to issue bonds, also contain the further limitation that the total amount of taxes levied in the year 1911 or any year thereafter, for all purposes, shall not exceed in the aggregate, the total amount of taxes levied in the year 1910, plus six per cent, thereof for the year 1912, nine per cent, for the year 1913 and twelve per cent, thereof for any years thereafter, or, such less amount as may be produced by the levy of a maximum rate of ten mills on each dollar of the tax valuation of the taxable property in any county, township, city, village, school district or taxing" district, for that year, whether such taxes be levied- for the same or other purposes, except levies made for interest and sinking fund purposes. •

The legislature when it passed these sections of the General Code limiting the rate of taxes that might be levied in any one taxing district, did not specifically repeal Sections 7591 and 7592, General Code, but the effect of this later legislation upon these former statutes cannot be doubted. It is conceded in the brief of one of counsel for the board of education that this limitation is in direct conflict with the limitations provided in these former sections, and- that they are, therefore, repealed by implication. No other conclusion is possible. Sections 5649-2 et seq., at the time this resolution to issue bonds was adopted, in plain and unambiguous language peremptorily limited the rate of taxes that could be levied upon the tax valuation in any one taxing district for all state, county, city, village and school purposes combined, to ten mills on the dollar, excepting therefrom levies for sinking fund and interest purposes necessary to provide for any indebtedness theretofore .incurred or any indebtedness that might thereafter be incurred by a vote of the people, and excepting also from this limitation levies for emergencies mentioned in Sections '4450, 4451, 5629 and 7419, General Code, and further provided that an increased rate might be levied in such an amount that the aggregate levy would not exceed fifteen mills on the dollar in any taxing district, exclusive of the exceptions herein-before set forth, provided the proposition to levy such increased rate Avas submitted to the electors of the taxing district and a majority vote cast in favor thereof.

It is the duty of a court to harmonize and reconcile laws where possible. It is also the settled law of this state that an act of the legislature that fails to repeal in terms existing statutes on the same subject-matter must be held to repeal the same by implication if the later law is in direct conflict therewith. Goff et al., v. Gates et al., 87 Ohio St., 142.

The provisions of Sections 5649-2 et seq., in reference to the rate that may be levied in any taxing district, are so clearly in conflict with the provisions of Sections 7591 and 7592, General Code, that these sections are necessarily repealed by implication. That being true, Section 7630, General Code, must fall Avith them, for that section provides only for the application of the limitation in these repealed sections to the issue of bonds under Section 7629, General Code. It is suggested in the brief of counsel for defendant in error that Section 7630, General Code, is not necessarily repealed, but that, on the contrary, the provisions of this later legislation, limiting the rate of taxes that may be levied in any taxing district, should be read into this section, instead of the specific sections named, to-wit, Sections 7591 and 7592, General Code. In answer to this it- is only necessary to suggest that a law cannot be amended in this way. If Sections 7591 and 7592, General Code, are no longer the law of Ohio, it necessarily follows that Section 7630, General Code, furnishes no rule for determining the rate of taxes levied or to be levied which may be anticipated by an issue of bonds under the provisions of Section 7629, General Code.

Our attention is called to the fact that the general assembly of Ohio passed an act amending' Sections 5649-3u, 5649-3&, 5649-3c, 5649-3d, 5649-3<? and Sections 5649-5a, S649-5&, General Code, relating to the maximum tax rate which may be levied in any one taxing district, on the same day it passed an act amending Sections 7620 and 7625, General Code; that the former act was approved June 2, 1911, and the latter act was approved June 7, 1911; that in the act amending Section 7625, Sections 7629 and 7630 are referred to, and that, therefore, if there is to be a repeal by implication, this act amending Sections 7620 and 7625, being the later act, Sections 5649-2 et seq., General Code, are the sections that are repealed by implication.

Section 5649-2 was passed May 10, 1910, and its provisions being in conflict with Sections 7591 and 7592, these statutes were necessarily repealed by implication.

Section 16 of Article II of the Constitution of Ohio provides that no law shall be revived or amended unless the act contains the entire act revived, or the section or sections amended, and the section or sections so amended shall be repealed. It therefore follows that if these statutes were repealed by implication by the passage of Sections 5649-2 et seq., General Code, and of this there can be no doubt, then they could not be revived, reenacted or amended by any method in direct conflict with the positive prohibition of the constitution. Sections 7591 and 7592, General Code, were not even referred to in the act amending Section 7625, General Code; but it is claimed that as that act refers to Section 7630, General Code, and Section 7630 in turn refers to Sections 7591 and 7592, General Code, it clearly indicates that the legislature of Ohio did not consider these sections repealed. The fact remains, however, that these sections were repealed by implication regardless of whether the general assembly recognized that fact or not.

It is claimed on behalf of the plaintiffs in error that the board of education has no authority to issue bonds under the provisions of Section 7629, without first submitting the question of issuing such bonds to a vote of the electors.

The history of this legislation is of very great importance in the consideration of this question. The first school code of Ohio was passed by the legislature on May 1, 1873. Section 1 of this code divided school districts into city districts of the first class, city school districts of thé second class, village districts, special districts and township districts, and this distinction was carefully observed in all the sections of the code. Section 61 of that code was the original of .Section 7625, General Code, and specifically applied to the board of education of any school district, except a city' school district of the first class. Section 56 of this code, a part of which is the original of Section 7629, General Code, provided that any board of education of any city district of the first class might issue bonds in anticipation of income from taxes levied or to be levied.

On the 25th day of April, 1904, the legislature of Ohio adopted a new code of laws for the government of the common schools of the state of Ohio. In this code, adopted in 1904, the distinction between the boards of education of the different school districts is eliminated. Section 3991, Revised Statutes, now Section 7625, General Code, reads: “When the board of education of any school district determines,” etc., while the original act read: “Whenever the board of education of any school district, except city districts of the first class, shall determine,” etc. Section 3994, Revised Statutes, now Section 7629, General Code, reads: “The board of education of any school district may issue bonds.” The original act read: “Any board of education of any city school district of the first class.”

It is insisted that these two sections as amended apply to every board of education of any school district in Ohio, and can now serve no separate or several purpose if a vote of the electors is necessary to authorize the issue of bonds under both sections; and that it clearly appears that the limitation in Section 7629, General Code, to the amount of bonds equal to the aggregate of a two-mill levy on the duplicate of the preceding year payable from taxes levied under the provisions of Sections ,7591 and 7592, General Code, means that to this extent the board of education has authority to issue bonds without submitting the question to a vote, but when bonds are to be issued in excess of this amount, and to be paid by a levy additional to the levies authorized by Sections 7591 and 7592, General Code, then a vote is required.

In view of the change in the wording of these sections from their original form in the school code of 1873, making the provisions of each section applicable to all boards of education of any school district in Ohio, it would appear that this is the only possible purpose in retaining both Sections 7625 and 7629, General Code. Unless this distinction does obtain the retention of these separate sections, applicable as amended to any and all boards of education, could serve no separate purpose whatever. The contention that the provisions in Section 7629, General Code, stipulating that the bonds issued under that statute must be issued subject to the restriction specified in Sections 7626 and 7627, General Code, which require that the issue of such bonds shall be submitted to the electors, because by the provisions of Section 7626, General Code, it is provided that “If a majority of the electors, voting on a proposition to issue bonds, vote in favor thereof, the board thereby shall be authorized to issue bonds for the amount indicated by the vote,” cannot be sustained-in view of the provisions of Section 7628, General Code. This section authorizes a tax levy in addition to the maximum levy authorized by Sections 7591 and 7592, General Code, for the purpose of providing for the payment of principal (and interest of the bonds issued under the authority of the next three preceding sections when the proposition to issue such bonds has been approved by a majority vote of the electors, while Section 7630, General Code, provides that the tax that may be levied for the payment of principal and interest of bonds issued under Section 7629, General Code, shall not exceed the levy authorized by Sections 7591 and 7592, General Code; so that if in both cases the question of the issue of bonds is to be submitted to- the electors, there would be no reason whatever for the separate provisions of Sections 7628 and 7630, General Code.

Conceding then the authority of the board of education to issue bonds under the provisions of this section, without first submitting the question of their issue to a vote of the electors of the school district, how stands this case? This school code of 1873 and its successor of 1904 were designed to cover the whole subject-matter. The sections therein were related to each other and mutually interdependent one upon the other. The provisions of Section 7629, General Code, were modified, aided and restricted by the provisions of Sections 7626, 7627, 7630, 7591 and 7592, General Code. These material parts of this code being no longer in force or effect, the whole plan and scheme is weakened and possibly destroyed.

If Section 7629, General Code, has survived the wreck of the plan provided by the school code of 1904, for the issuing of bonds by the board of education, it is not only bereft of its fellow sections of that code in reference to the same subject-matter, but it is deprived of the aid of their correlative provisions with reference not only to the issuing but to the retirement of bonds.

Section 7629, General Code, provides for the issue of bonds only in anticipation of income from taxes levied for the purposes named in that section. It is apparent from this provision that under no circumstances can bonds be issued under authority of this section in excess of the income to be anticipated arising from the levy of a tax, for the purposes named, within the limitations of law. This section contains a further provision—that the bonds issued thereunder shall not exceed an amount equal to the aggregate of a tax at the rate of two mills on the tax valuation for the year next preceding such issue. Section 7689, General Code, provides that the school year shall begin on the first day of September of each year and close on the 31st day of August of the succeeding year. This period is recognized as the fiscal year. These bonds were proposed to be issued in the fiscal year 1912. The evidence is uncontradicted that the total tax valuation for the fiscal year 1911 was $19,893,240. A levy of two mills upon the total tax duplicate would produce less than $40,000.

This section (7629) provides that “The board of education of any school district may issue bonds to obtain or improve public school property, and in anticipation of income from' taxes, for such purposes, levied or to be levied, from time to time, as occasion requires, may issue and sell bonds.”

This, of course, means that the income that may be ■ anticipated by the issue of bonds under the provisions of Section 7629, General Code, is the income arising from taxes, levied or to be levied, for the purposes named in the statute, and not to anticipate levies made for current expenses or any other purpose except the purposes specified.

■Counsel for defendant in error not only concede this proposition, but also recognize the necessity of providing first a levy for a fund sufficient to meet the current expenses of the elementary schools in that district already established, before a levy should be made for the purpose of purchasing a site for another high school. In the calculations submitted to this court, the necessary levy to meet these current expenses is deducted from the amount of the total levy the board of education is authorized to make for all purposes, and after this is done then the controversy arises as to whether the board of education, under the limitation of Section 5649-2 et seq., can levy a specific tax in a sum sufficient to pay the interest and provide a sinking fund for the retirement of bonds in the sum of $110,000 for the purpose of obtaining a high school site.

Counsel for defendants in error base their calculation on the calendar year, bút their calculation of current expenses is for the fiscal year; so that one or the other must be rejected. If the calendar year is to be taken, then there is no evidence in this record upon which to base a calculation of the current expenses for the maintenance of the schools. Mr. Lane, who was the clerk and treasurer of the board of education, testifies as follows (page 57 of the record) :

“Q. Your fiscal year begins September 1 and ends August 31 of each year? A. Yes, sir.
“Q. The difference between your receipts and expenses is $3,243.64? A. Yes, sir; about that.”

Mr. Lane is in position to know the exact financial condition of this board of education at the end of the fiscal year, and there is nothing in this record that refutes this positive evidence upon this important question. It is clear that this balance would not be sufficient to provide a sinking fund for the payment of principal and interest on the amount of bonds proposed to be issued.

Even if this amount were sufficient, it appears that the evidence of Mr. Lane is predicated upon a levy of four and one-tenth mills, and there is no certainty that this board of education can levy that amount in the future. In this case there was no vote of the electors authorizing an increased levy, so that as the law then provided the total levy for all purposes in this taxing district, exclusive of a levy for sinking fund and interest purposes, to provide for any indebtedness theretofore incurred or any indebtedness that may hereafter be incurred by a vote of the people, could not exceed ten mills on the dollar 'of the tax valuation. The taxing authorities are authorized to certify to the budget commissioners levies aggregating fifteen mills on the dollar of the tax valuation, and in case that is done it is the positive duty of the budget commissioners to reduce that amount to ten mills on the dollar. The only reasonable basis on which to estimate the amount of income that may be anticipated by an issue of bonds is the proportion of the maximum levy the taxing authority proposing to issue the bonds may certify to the budget commissioners to the total maximum levies that may be certified by all the taxing authorities in that district. The total maximum rate that can be certified by a board of education to the budget commissioners is five mills, which is just one-third of the total maximum that can be certified to the budget commissioners by all the taxing authorities in any taxing district. This court has held in the case of The State, ex rel. City of Toledo, v. Sanzenbacher, 84 Ohio St., 506-507, that the budget commissioners are not required to reduce the levies certified to them in proportion to the amount that each taxing authority •is authorized to levy, but that in making such reduction they should give due regard to this proportion. Therefore, a rate determined in accordance with this proportion is not a fixed and certain rate that may be levied by the board of education in any and all events, yet it does furnish a reasonable basis and the only reasonable basis upon which a bond issue can be predicated.

If all the taxing authorities within any one taxing district were to issue bonds in anticipation of taxes to be levied at the maximum rate that they are authorized to certify to the budget commissioners, without reference to the fact that it is the <luty of the budget commissioners to reduce the total- amount of the tax levy certified to them to ten mills on the dollar of the tax valuation, it would follow that bonds would be issued..largely in excess of the income to be anticipated from taxes levied or to be levied, for it is not possible that all of these taxing authorities may levy the maximum rate they are authorized to certify to the budget commissioners. Some years, by reason of the forbearance of some taxing authorities to levy their total maximum rate, the other taxing authorities may levy more than' their proportionate share thereof, and some years, because of the urgent necessity and the equities of the situation, the budget commissioners may not strictly observe this proportion in' reducing the levies certified to them to a total of ten mills on the dollar, and may permit a levy in excess of this proportion. Other years, for the same reasons, it may reduce the levy of any one taxing authority below this proportion. The fact that it may levy more this year than its proportionate share will not justify the assumption that it may continue to levy such rate, or any rate in excess thereof, for the number of years such bonds may run. On the contrary, the most that reasonably can be anticipated is that the annual rate it may be permitted to levy, one year with another, during the time such bonds may run, will average its fair proportion of the total tax rate that may be levied in that taxing' district. Any rate above that proportion depends upon too many conditions and uncertainties, while on the other hand it is highly improbable that the average levy for the years these bonds are to run will fall below this proportion. It is apparent from the evidence in this case that a levy of three and one-third mills will not meet the current expenses of this school .district, much less provide for the payment of these bonds and interest at maturity. Upon this proposition there is no conflict of evidence.

It is said that in this calculation the future financial condition of the school district need not be taken into consideration, for the increase in the tax duplicate will certainly equal the increase in the expenditures for school purposes made necessary by the increase in population.

Section 7644, General Code, requires that each board of education shall establish a sufficient number of elementary schools to provide for the free education of the youth of school age within the district, and that these elementary schools must be continued at least thirty-two weeks in each school year.

Section 7663, General Code, provides that the board of education may establish one or more high schools, whenever it deems the establishment of such school or schools proper or nécessary for the convenience of the pupils attending them, or for the conduct and welfare of the educational interests of the district.

These bonds are proposed to be issued for the purpose of purchasing a high-school site, but under the mandatory provisions of Section 7644, General Code, it is the duty of the board of education to provide for the establishment of a sufficient number of elementary schools and to continue such schools for at least eight months in the school year, and where a high school has already been established it is certainly the duty of the board of education to provide for the continuing of that school before establishing another one, so that in estimating the amount of bonds that should be issued for this purpose the future imperative needs of the schools of this district must be taken into account.

The enormous increase of the tax duplicate in the fiscal year 1912 over the fiscal year 1911 is not likely to occur again, at least not in the near future, and yet if it had not been for this phenomenal increase within that time, this board of education would not now have sufficient funds to meet its current expenses. There is now a large bonded indebtedness that must be paid within the next eighteen years, and to that amount must be added the enormous amount of interest that will accrue on these bonds. The record (page 135) shows that it will require $318,068.06 to retire the bonds coming due within the next nine years. The levy to provide for the retirement of these bonds now comes within the limitations of Section 5Ó49-5&, as amended February 27, 1913. Counsel for the board of education in the opening pages of their brief inform us that for many' years a new high-school building has been considered necessary in this district, and of late years the need became so pressing, due to the crowded condition of the schools, that the board of education decided to acquire a site for a large modern high-school building". This statement shows the increasing demands upon the funds of this school district. The very purpose for which these bonds are to be 'issued necessarily requires a large increase in the current expenses. It is hardly reasonable to .suppose that the tax duplicate will increase with such rapidity as to permit the purchase of this site, the erection of such a building as may be required and . the maintenance thereof. It would seem to be. not only proper but necessary to take into account the future demands upon the school funds for school purposes. in connection with the probable increase of the tax duplicate in determining just what income may be anticipated by the issue of bonds for the purchase of school property without detriment, to the future imperative needs of the schools of that school district. This, of course, is a question for the determination of the board .of education in the first instance, and a court of equity would not for this reason interfere to restrain the issue of these bonds, except for an abuse of discretion, and if the judgment of the board of education is' acquiesced in by the taxpayers of that school district and the bonds have been issued in good' faith, it would then be too late to challenge its decision in this particular.

At this time, under the amendment to the Constitution (Section 11, Article XII) which provides that no bonded indebtedness of the state or any political subdivision 'thereof shall be incurred or renewed, unless in the legislation under which such indebtedness is incurred or renewed provision is made-for levying and collecting annually by taxation an amount sufficient to pay the interest on said bonds and provide for a sinking fund for their final redemption at maturity, it is of the utmost importance that at the time of the incurring of such indebtedness the other needs of the political subdivision proposing to issue the bonds should be taken into account, for this levy must continue during the term of the bonds in an amount sufficient to pay the interest and provide a sinking fund for their final redemption, even though the amount should exhaust the entire income available from taxation and without regard to thé current expenses. ' In other words, under this provision of the constitution, the payment of interest and the retirement of bonds are to be provided for first, and the current expenses become a secondary consideration. This amendment, however, has no application to this case.

At best the situation presented by this record is an unfortunate one, but the law of this state, as it existed at the time this resolution was adopted, must be applied to the case at hand. The court recognizes the difficulties with which this board of education must contend in order to furnish the beneficence of education to the youth of that school ■district, but the court is no more the master of the situation than is the board of education itself. It can, only interpret and apply the law given it by the legislature to the questions here presented. Some method of relief must be arrived at other than one not only in violation but in defiance of law. This is a matter that demands the early attention of the lawmaking power of this state.

That part of the judgment of the circuit court refusing an injunction, restraining the board of education from issuing these bonds, is reversed for the reasons above stated, and an injunction will be allowed as prayed for in the petition.

Judgment modified and judgment for plaintiffs in error.

Nichols, C. J., Shauck, Johnson, Wanamaker, Newman and Wilkin, JJ., concur.


author: Newman, J.

text:
    Weir et al. v. The Snider Saw Mill Co.

      Sale of real estate—In partition proceeding—Is judicial sale, when— Rights of bona fide purchaser—Under Section 8543, General Code—Rule of caveat emptor—Purchaser of real estate entitled to timber standing thereon—Although timber sold previous to real estate purchase—When timber sale not filed in recorder’s office' md purchaser without notice.

    1. A sale of real estate in a partition proceeding, under order o-f the court, is a judicial sale, and a bona fide purchaser at such sale is within the protection of the provisions of Section 8543, General Code.
    2. The rule of caveat emptor, applicable to judicial sales, does not charge a purchaser at such sale with knowledge of the existence of an instrument conveying the real estate, or a part thereof, where the instrument has not been recorded or filed for record in the office of the recorder, and where the holder of the same has taken no step to put one on notice of its existence.
    3. At a sale of real estate made in a partition proceeding, under order of the court, the purchaser acquires title to the standing timber thereon, although said timber had been sold by the person from whom the parties to the partition proceeding acquired title to the real estate by descent, and said sale of timber had been evidenced by a written instrument, but where said instrument had neither been recorded nor filed for record in the office of the recorder, and where the purchaser at the sale in the partition proceeding had no notice of the sale of said timber.
    (No. 13351
    Decided October 7, 1913.)
    Error to the Circuit Court of Perry county.
    Plaintiffs in error, who were plaintiffs in the common pleas court, brought an action against defendant for damages claimed to have been sustained by them by reason of defendant’s unlawful and forcible entry upon their land and for the cutting down, carrying away and manufacturing into lumber and converting to its own use a large amount of timber. The land of plaintiffs is described in the petition, and defendant is charged with having committed the acts mentioned on or about the first day of September, 1909.
    Defendant filed an answer in which it alleged that for many years prior to December 24, 1908, one Anthony Weible was the owner in fee simple of the real estate described in the petition, and continued to be such owner until his decease February 13, 1909; that on the 24th day of December, 1908, the said Anthony Weible sold to one Omer Snider, who was then and has been ever since a member of defendant company, all the timber on the real estate described in the petition, which lay north of a certain public road, for a valuable consideration paid by Snider, and the said Snider, as and for a receipt for said money and for a conveyance of said timber, received from said Weible a written paper and conveyance, which reads as follows:
    “The Snider Saw Mill Company,
    “Manufacturers and Dealers in Hardwood Lumber.
    “Special Bills Cut to Order.
    “Somerset, Ohio, 12-24-08.
    “Received of Omer Snider $75.00 for all timber north of road on my farm.
    “Anthony Weible;”
    that the timber sold to Snider was purchased from him by defendant, and said written contract of purchase was by him immediately transferred and delivered to it and that it has ever since the payment of said money and the execution of said receipt and transfer been the owner of said timber, being the timber referred to in the petition which defendant is charged with cutting and removing; that the said Weible died intestate on the 13th day of February, 1909, and his real estate descended to his heirs; that he did not at his death own said timber, nor did it descend to his heirs, and that they acquired no title thereto or interest therein by reason of his death; that after the death of said Weible, one of his heirs, to whom said real estate descended, filed in the probate court of Perry county, Ohio, his petition for partition of said real estate, making all the heirs at law of said Weible defendants; that néither said Omer Snider nor the defendant was made party to the action; that thereafter such proceedings were had in said case that commissioners were appointed by the court to make partition of said real estate among the heirs of said Weible, and said commissioners, not being able to divide the same, returned an appraisement, and, thereupon, the court ordered a sale thereof by the sheriff, and the sheriff, after due advertisement, sold the same at partition sale on May 22, 1909, at public auction, and plaintiffs became the purchasers thereof at said sale, which sale was confirmed by the court, and that said purchase constituted plaintiffs’ sole and only title to said real estate; that said Weible did not own said timber at the time of his decease, and that his heirs at law did not inherit' it, and had no interest therein or claim thereto, and that plaintiffs, by their purchase at said partition sale, acquired only the title and ownership in said real estate which said heirs of Weible acquired by inheritance, and that plaintiffs have not and never had any right, title, interest or ownership in said timber.
    Defendant, further answering the petition, denied each and every allegation therein contained, except such as was specially pleaded or expressly admitted to be true by its answer. Plaintiffs filed a motion in the trial court in which they asked to have stricken from the answer, as incompetent, irrelevant and immaterial, the allegations thereof relating to the ownership of the real estate in question by Weible, the salé of the timber to Snider, the assignment of the receipt to defendant, the death of Weible, the partition proceedings and the purchase of the real estate by plaintiffs; the matter asked to be stricken out being the whole of the answer, except the admission that the defendant was a corporation and a denial of such allegations of the petition as were not admitted to be true by the answer.
    This motion was sustained by the common pleas court. Defendant then made application for a rehearing of said motion, which was denied, and the case was tried to a jury upon the issue joined by the petition and that part of the answer remaining after the matter above referred to was stricken out, and resulted in a verdict for plaintiffs. A motion for a new trial was filed and overruled, judgment rendered on the verdict and error prosecuted to the circuit court of Perry county by defendant, The Snider Saw Mill Company.

      The circuit court reversed the judgment of the common pleas court, upon the sole ground that the trial court erred in sustaining the motion of the plaintiffs below to strike from the answer the matters and things set out in the motion, and .remanded the cause to the court of common pleas, with directions to overrule the motion of plaintiffs below and, thereupon, to proceed according to law.
    Error is prosecuted to this court by plaintiffs in error to reverse the judgment of the circuit court and to affirm the judgment of the court of common pleas.

      Messrs. Donahue Spencer, for plaintiffs in error.

      Mr. John Ferguson, for defendant in error.
   Newman, J.

The question presented by the. record for our determination is whether plaintiffs in error, the purchasers of the real estate of Weible at the sale in the partition proceeding, acquired title to the timber which had been sold by Weible to Snider and by him transferred to defendant in error. This question is raised by the motion to strike from the answer certain' allegations relating to the sale of the timber and to the partition proceeding.

It cannot be claimed seriously that the sale of the timber in the case at. bar was not a sale of an interest in land. The case of Hirth v. Graham, 50 Ohio St., 57, is in point, in which it is held that a sale of standing timber, whether or not the parties contemplate its immediate severance and removal by the vendee, is a contract concerning an interest in lands, within the meaning of the statute of frauds. This case is followed and approved in Clark v. Guest, 54 Ohio St., 298.

Section 8543, General Code, is as follows: “All other deeds and instruments of writing for the conveyance or incumbrance of lands, tenements, or hereditaments, executed agreeably to the provisions of this chapter, shall be recorded in the office of the recorder of the county in which the premises are situated, and until so recorded or filed for record, they shall be deemed fraudulent, so far as relates to a subsequent bona fide purchaser having, at the time of purchase, no knowledge of the existence of such former deed or instrument.”

The instrument of writing by which Weible conveyed the timber in question was not recorded or filed for record in the office of the recorder of the county, nor is there any claim that plaintiffs had knowledge of the existence of the instrument, nor any claim that the purchaser or his transferee took possession or did any act or took any step which would put one on notice that they, or either of them, had any interest in or title to the timber at the time of the purchase of. the real estate by the plaintiffs at the sale made in the partition proceeding.

In Morris v. Daniels, 35 Ohio St., 406, Judge McIlvaine, in passing upon a statute similar to Section 8543, in which the phrase "bona fide purchaser” was used, says a subsequent purchaser will not be protected against a prior unrecorded deed, unless the purchase be made in good faith, for a valuable consideration and without knowledge, at the time, of the existence of the former deed.

In the case at bar, the purchase by plaintiffs was made in good faith, for a valuable consideration and without knowledge, at the time, of the instrument executed by Weible.

It appears from that part of the answer which was stricken out on motion that the sale of the real estate in question was made by the sheriff ■under order of the court in a partition proceeding, which sale was confirmed by the court. It was a sale made by a court of competent jurisdiction in a pending proceeding by an officer authorized by law for that purpose, and confirmation was necessary. The sale in question was, therefore, a judicial sale, a distinguishing feature of which, as has been held by this court, is that it must be confirmed by the court before it will be complete.

But a bona fide purchaser at a judicial sale is entitled to the same protection, under the provisions of Section 8543, General Code, as a purchaser at private sale. This was the holding of this court in Sternberger & Willard v. Ragland, 57 Ohio St., 148, where it was held that a bona fide purchaser at a judicial sale, without notice of an unrecorded deed, is within the protection of Section 4134, Revised Statutes, now Section 8543, General Code.

We appreciate the fact that the rule of caveat emptor applies to judicial sales, but the rule does not charge a purchaser with knowledge of an ■unrecorded instrument affecting the title of the existence of which instrument he had no knowledge, nor where possession is not taken thereunder.

In the case of Arnold v. Donaldson, 46 Ohio St., 73, which is cited by defendant in support of its contention, it is laid • down as a rule that the maxim caveat emptor is applied in all its force in judicial sales, but it is stated by the court in that case that in the absence of fraud the buyer buys at his own risk as to title. In Vattier v. Lytle’s Executors, 6 Ohio, 478, one of the earlier cases in which the rule of caveat emptor is discussed, the court follows and approves a case in which it is laid down that if there is fraud, that will affect the sale by sheriffs as well as all other sales.

By force of the provisions of Section 8543, an instrument for the conveyance of land, until it is recorded in the office of the recorder or filed for record, is deemed fraudulent, so far as it relates to a subsequent bona ñde purchaser having, at the time of the purchase, no knowledge of the existence of such instrument. Can it be said, then, that in the case at bar there was an absence of fraud? The failure on the part of the defendant or its predecessor to record or file for record the instrument under which it was claiming title, so far as it affected the title of plaintiffs in error—the bona ñde purchasers—under the plain provisions of Section 8543, rendered the instrument fraudulent.

It is contended by counsel for defendant in error that Weible, in his lifetime, after he had sold the timber to Snider, could not have asserted any right to the timber growing on the land north of the road running through the farm and described in the petition, that only such title as Weible himself had descended to his heirs, and only such title as the heirs had would pass by the sale in the partition suit. This seems to have been the ground upon which the circuit court based its decision in holding that the allegations set out in the answer constituted a good defense.

In support of their contention, counsel rely upon the case of Tabler v. Wiseman, 2 Ohio St., 208. In that case the whole of a tract of land, of which the intestate died seized, had been assigned to his widow as her dower. The question for determination was whether his heirs, who were remainder-men, could maintain a proceeding in partition during the lifetime of the widow. The rights of an innocent purchaser were in no way involved. We fail to see the applicability of the law of that case to the facts in the case at bar.

It is true that the instrument executed by Weible was enforcible as between him and defendant. It was enforcible against the heirs of Weible also, although it was neither recorded nor filed for record, for the reason that these heirs could not avail themselves of the provisions of Section 8543, for they were not bona ñde purchasers. But as to plaintiffs, they were purchasers at a judicial sale and bona fide purchasers, and were protected by the provisions of this section. Had Weible, after the execution of the written instrument and upon the failure of Snider to have it recorded or to file it for record, sold the land at private sale to a bona ñde purchaser, without knowledge of the existence of the instrument, the same would have been wholly unavailable against the purchaser. If the heirs of Weible had made a disposition of the property to a purchaser for value, and without knowledge of the existence of the instrument, defendant could have made no claim thereto. In either event, it could be claimed with as much force as is claimed in the case at bar that neither Weible nor his heirs could dispose of a greater interest in the land than they themselves actually owned. But such a doctrine is not sound, and, if carried into effect, would nullify wholly the provisions of Section 8543 ahd afford no protection to a bona fide purchaser of real estate having no knowledge of outstanding claims.

For the reasons we have given, we are of the opinion that the matter stricken from the answer of the defendant was immaterial and irrelevant and did not constitute a defense, and that the common pleas court committed no error in sustaining the motion. This being the only error found by the circuit court in reversing the judgment of the common pleas court, we conclude that the judgment of the circuit court should be reversed and that of the common pleas court affirmed.

Judgment of circuit court reversed and that of common pleas court affirmed.

Shauck, Johnson, Wanamaker and Wilkin, JJ., concur. Nichols, C. J., and Donahue, J., not participating.


author: Wanamaker, J.

text:
    The First National Bank of New Bremen v. Burns et al.

      Negotiation of commercial paper-—Policy of law to protect innocent holder—Corporation can act only through agent—Knowledge of agent is knowledge■ of corporation, when—Bank officer acting as individual and as manager of bank—In purchase of note from himself by the bank—Manager’s knowledge as man also knowledge of bank—Law of agency.

    1. It is the policy of the law in all negotiations of commercial paper, both in the interest of honest business and good morals, to protect the rights of all innocent holders for value and before maturity, and this equally whether such innocent holder be an individual or a corporation.
    2. A corporation can act only through its .officers and agents, and the knowledge of such officers and agents in the transaction of the corporation’s business within the scope of their authority become at once the knowledge of the corporation without any actual or presumptive communication from agent to principal.
    3. Where the officer is acting both for himself as an individual and as manager of a banking corporation in the purchase of a note from himself by the bank and his action in that behalf is adopted and ratified by the bank, the manager’s knowledge as a man is equally his knowledge as manager of the bank. He cannot unknow as manager what he knows as man. To hold otherwise would be to promote fraud rather than prevent it.
    (No. 13464
    Decided October 7, 1913.)
    Error to the Circuit Court of Darke county.
    On or about the 15th day of September, 1910, The First National Bank of New Bremen, Ohio, brought suit against the Burnses on three several promissory notes which said Burnses had executed and delivered to one Julius Boesel, on July 10, 1908.

      Said banking corporation alleged that it had purchased from said Julius Boesel, the payee, certain notes for value and before maturity.
    The answers of said defendants alleged want of consideration; that they were induced and procured to sign said promissory notes by the fraud of said Boesel, the payee; that said Boesel was' at the times in question the president and one of the active managers of said bank, and that the bank had full notice and knowledge of such fraud and want of consideration at the time said notes were transferred and endorsed by said Boesel to said bank.
    The bank by reply denied all the averments of said answers charging fraud and want of consideration, and claimed the rights of an innocent purchaser for value in due course and before maturity.
    Upon these issues the case was brought to trial in the common pleas court before a jury, and the plaintiff, at the close of the evidence, moved the court to arrest the case from the jury and for judgment on the ground that there was no evidence •tending to show that plaintiff was not an innocent holder of said promissory notes in due course, for value and before maturity.
    It was, however, admitted at the time, and the bill of exceptions taken so certifies, that there was some evidence offered by the defendants tending to support all the averments of their answers, as to fraud and want of consideration, and the only question raised by the motion was whether or not there was any evidence tending to show notice and knowledge of the bank as to fraud and want of consideration in procuring the Burnses to execute and. deliver said notes to said Boesel. It was-admitted' at the. time that the only knowledge that the'bank had in this behalf was the knowledge of Boesel, so that the question then before the court upon" that motion was in short this: Was the knowledge of Boesel acquired in connection with, the making of the notes in question such knowledge as should be in law charged upon The First National Bank of New Bremen?
    If this question is answered in the affirmative, the motion should have been overruled and the case submitted to the jury. If upon the other hand it is answered in the negative, the court as a matter of law should have sustained the motion and rendered judgment in favor of the bank.
    The court of ■ common pleas did sustain said motion and rendered judgment accordingly.
    The circuit court reversed said judgment and remanded the case to the court of common pleas for further proceedings according to law.
    ' These proceedings in error are now before this court to reverse the judgment of the circuit court and affirm the judgment of the court of common pleas.
    ■ Mr. Thomas J. Hughes and Mr. D. W. Bowman, for plaintiff in error.

      Mr. John C. Clark; Mr. Geo. W. Mannix, Jr., and Mr. T. C. Miller, for defendants in error.
   Wanamaker, J.

It is agreed by the parties that the sole • question in this case is: Was the knowledge of Boesel as an individual the knowledge of Boesel as president and manager of the bank?

Counsel for the bank put the question1 very clearly in their brief, to-wit: “The record discloses1 that it is conceded that the plaintiff was a national1 bank; that Julius Boesel, the payee of the notes, was its president and active manager; that he sold and discounted the notes to the bank, and1 that in so doing he acted for himself personally as indorsee and also for the bank as its president and manager; that no other officer or person connected with the bank had anything to do with the purchase of said notes and did not know thereof and had no notice or knowledge of any facts that would invalidate said notes in the hands of said Boesel; and further that the bank purchased said notes for value and before maturity, and was an innocent holder in1 due course, unless the knowledge of¡ 'Boesel was in law to he imputed to the hank.

“The record discloses that the bank did not concede the fraud or want of consideration' alleged; only that the evidence offered by defendants tended to support the allegation of the answer on these issues,” and therefore made such issues a matter for determination by the jury, unless the knowledge of Boesel could not be imputed to the bank when the bank purchased the notes of said Boesel.

Counsel on both sides have been more than usually diligent in searching the cases more or less1 analogous to the case at bar. The results of their inquiry together with the research of the court disclose a rather wide diversity of opinion. Asr to cases of this character it is unnecessary as it' probably is impossible to attempt to reconcile-alt the numerous decisions. The question is largely a new one in Ohio.

A corporation can act only through its officers and agents, and the cases all agree on the elementary proposition that the acts of the agent within the scope of his agency are at once the acts of his principal, and obviously the knowledge of such agent in the doing of such act bec'omes the knowledge of his principal.

This general rule is admitted and adopted by practically all the courts, and if it shall apply in this case the acts and knowledge of Boesel, as president and active manager of the bank and hence its agent in purchasing said notes from Boesel the individual, become and are the acts and knowledge of the bank.

It is claimed, however, by plaintiff in error that this rule is no more generally recognized than certain well-known exceptions to the rule coming under a peculiar state of facts which plaintiff in error contends are identical with the state of facts in this case, to-wit, that notice or knowledge on the part of the agent will not be imputed to the principal where the agent’s relations to the subject-matter, his previous conduct, or his adverse interests render it certain that he will not disclose such knowledge. In such cases the presumption is that the agent will conceal any fact which might be detrimental to his own interest. This doctrine is sustained in Mechem on Agency, Section 721 et seq.; Koehler v. Dodge, 31 Neb., 328; Buffalo County Natl. Bank v. Sharpe, 40 Neb., 123; Benton v. German-American Natl. Bank, 122 Mo., 332; Merchants’ Natl. Bank v. Lovitt, 114 Mo., 519, 21 S. W. Rep., 825; Bank of Overton v. Thompson, 118 Fed. Rep., 800, 56 C. C. A., 554; and numerous other cases cited in the notes.

The doctrine of this exception was very aptly and fully stated in one of the leading cases, Innerarity v. Merchants’ Natl. Bank, 139 Mass., 332, as follows: “While the knowledge of an agent is ordinarily to be imputed to the principal, it would appear now to be well established that there is an exception to the construction or imputation of notice from the agent to the principal in case of such conduct by the agent as raises a clear presumption that he would not communicate the facts in controversy, as where the communication of such a fact would necessarily prevent the consummation of a fraudulent scheme which the agent was engaged in perpetrating.”

Mechem in his excellent work on agency lays down the rule in the following apt and accurate language: “It is a general rule, settled by an unbroken current of authority, that notice to an agent while acting within the scope of his authority and in reference to a matter over which his authority extends, is notice to the principal.

“In respect to this rule two important elements will be noticed. The first of these is that the notice or knowledge, which will affect the principal, is that only which is possessed by the agent while he is agent, and while he is acting within the scope of his authority. * * *
“The second element is that the notice or knowledge, which shall be imputed to the principal, is that only which relates to the subject-matter of that agent’s authority, or, in other words, is that only' which. relates to the business or transaction in reference to which that agent is authorized to act by and for the principal.
“Two general theories prevail as to the foundation upon which this rule is based, and the results, of these respective theories are not entirely alike.. The first finds the reason of the rule in the legal-identity of the agent with the principal, in the fact •that the agent, 'while keeping within the scope of his authority, is, as to the matter embraced within it, for the time being the principal himself, or, at all events, the alter ego of the principal—the principal’s other self. Whatever notice or knowledge, then, reaches the agent under these circumstances, in law. reaches the principal. .* * *
“The other theory is based upon tlie rule that it is the duty of the agent to disclose to his principal, all notice or knowledge which he may possess and which is necessary for the principal’s protection' or. guidance. This duty the law presumes the agent to have performed, and, according to" the view now being considered, imputes to the principal whatever notice or knowledge the agent then possessed, whether he has in fact disclosed it or not.”

Mechem goes on to say: “The theory based upon the legal identity of' the parties, and limiting the application of the rule to such notice or knowledge as was acquired during the agency, was at first adopted in the English courts, and has since been followed'by the. courts of many of the United States. The other theory, however, based upon the duty of the agent to disclose to his .principal all knowledge and information possessed by the agent in relation to the subject-matter of the agency, and therefore charging the principal with it, has since been firmly established by the English courts, and has been adopted by the supreme court of the United States, and by many of the states.”

In determining the rule of law that shall apply in this case, in the interest of sound morals, the public welfare and honest business, this court has a most important duty to perform.

To-day probably ninety per cent, of the country’s business is conducted or controlled by the corporation. It is not only a business convenience but a business necessity. Its business cannot be conducted by the invisible, intangible, incorporeal body known in the law, but must be conducted by its officers and agents as known to the public.

The agent when duly authorized to act stands in the shoes of his principal for the purposes of the corporation as the principal must be held to stand in the shoes of the agent for the protection of the public.

There is a full and complete merger of identity, a oneness in action and knowledge, of principal and agent. If there be- that legal identity as to the act of the agent in behalf of his principal, it must follow by a parity of reason and right that there be that same legal identity as to the agent’s acquired knowledge in the doing of the principal’s act, and, if so, why should there be either occasion or duty on the part of the agent to communicate the knowledge to his principal—which knowledge by virtue of said identity between agent and principal the principal must be conclusively presumed to have? Or, as Mechem has said: “Whatever*^ notice or knowledge, then, reaches the agent under these circumstances [matters within the scope of his authority], in law reaches the principal.” Boesel as manager of the bank cannot unknow what Boesel the man all the while knew.

This case is distinguishable from many of those cited in the plaintiff in error’s brief, for several reasons.

The agency of Boesel as president and active manager of the bank is admitted; second, what he did as such agent was fully authorized by the bank. This is conclusively established by the fact that the bank at no time repudiated the transaction or questioned the agent’s. authority, but on the contrary continued to hold said notes, brought suit upon them and is now prosecuting error for a reversal of the judgment below.

Again. In this case it is admitted not only that Boesel as president and active manager of the bank was fully authorized as such to purchase the notes, but that no other person, officer, committee or board of directors needed to take any action whatsoever to complete such purchase.

Again. This is a case in contract, whereas many of the cases cited are those of tort.

In the Innerarity case, supra, largely relied on by plaintiff in error, B. was merely a director of the bank. The loan in question was not made by B. He had no authority to make it, but it was passed upon and approved by a board of directors, who, as such board, it was claimed, had no knowledge of the fraud, though B. was present as a member of such board. In an action for tort or wrongful conversion, the knowledge of B. was not imputed to the bank. So that this case may be distinguished by these two facts: First, B. was not fully authorized in and of himself to make the loan; second, the action was one in tort.

As to the second leading case, urged by plaintiff in error, Bank of Overton v. Thompson, supra, it may be said that Thompson and Hardinger were engaged in a partnership transaction, using the bank as their depository. Hardinger appropriated the moneys of the partnership entirely to his Own use, and suit was brought to recover from the bank for the partnership money wrongfully converted by Hardinger. This not only sounded in tort but was a transaction in which the bank was merely acting as bailee or agent of the parties. It surely does not come within the facts of the case at bar, where we have the bargain and sale of a note, by contract, by a duly authorized agent of the banking corporation.

Manifestly, in a case sounding in tort there would be no presumption in law that the wrongful act of the agent was the act of the principal unless actual authority to do the act was proven or a subsequent ratification after all the facts and circumstances of the act were known. No man is presumed to do wrong. There is in fact, in law and in good morals a reason for the distinction that there may not be that legal identity between principal and agent in a case of tort that there is in a case of contract.

In a case of contract, as in the case at bar, there is no need of communicating knowledge, because the principal in law is already conclusively presumed to have that knowledge. The principal’s liability does not depend upon the agent’s duty to communicate, or the likelihood that he will communicate, his knowledge to the principal, but upon the fact that the agent is the alter ego of the principal, acting for the principal, and knows that his acts and knowledge ipso facto become the knowledge and acts of the principal.

This doctrine of liability based upon the legal identity of the parties is in the main sustained by a number of cases: Messick & Co. et al. v. Roxbury & Wilcox, 1 Handy, 190, 191; Craige et al. v. Hadley, 99 N. Y., 131, in which the following is a part of the opinion: “Notice to an agent of a bank entrusted with the management of its _ business is notice to the corporation in transactions conducted by such agent acting for the corporation, in the scope of his authority, whether the -knowledge of the agent was acquired in the course of the particular dealing or on some prior occasion.”

In Holden v. New York & Erie Bank, 72 N. Y., 286, the court in speaking of the duties of the chief managing officer of a bank say: “As a matter of fact, whatever knowledge, information or notice, Ganson had in either of these capacities [managing officer of the bank, individual, or executor], he carried with him into his exercise of the other. As agent of the bank, he' owed it a duty in every transaction in which the bank took a part, under his observation. Hence, as á matter of law, whatever notice of facts he had .in any capacity, which were material in the performancé by him on the part of the bank in any transaction,' .became notice tó the bank, his principal, as it was his duty to give it notice thereof in that matter. It is the rule, that the knowledge of the agent is the knowledge of his principal, and notice to the agent of the existence of material facts is notice .thereof to the principal, who is taken. to know everything about a. transaction which his agent in it knows.”

National Security Bank v. Cushman, 121 Mass., 490: “If a director of a bank, who acts for the bank in discounting a note, has knowledge that the note was procured by fraud, the bank is affected •with his knowledge.”

Even in the Innerarity case, supra, the court in its opinion uses this language: “A bank or other corporation can act only through agents, and it is generally true that, if a director who has knowledge of the fraud or illegality of the transaction, acts for the bank, as in discounting a note, his act is that of the bank, and it is affected by his knowledge.”

In First National Bank v. Blake, 60 Fed. Rep., 78: “A large number of cases are cited in support of this view, and it is well settled that an officer or agent, dealing with a corporation or his principal on his own account, is not presumed to communicate knowledge which it would be to his interest to conceal, and the corporation or principal is not chargeable with such knowledge. But there is no room for the application of this principle where the agent is the sole representative of both parties in the transaction. If Cornish was the sole representative of the bank in the transaction with himself, there was no one from whom information could have been concealed, or to whom it could have been communicated. If he was the sole representative of each party, each must have had equal knowledge.”

To the same effect is Brobston v. Penniman, 97 Ga., 527. Latter case distinguished in English-American Loan & Trust Co. v. Hiers, 112 Ga., 823.

To hold otherwise would open the widest possible door for all sorts of fraud; the more atrocious and aggravated the fraud the less the likelihood of fixing the liability upon the principal. Why? Because the agent would be the less likely to communicate the fact to the principal. Such a holding has no place in sound business or good morals and ought not to be encouraged by our courts.

There was clear error in the trial court sustaining the motion, and the judgment of the circuit court reversing the judgment of the' court of common pleas is hereby affirmed and the cause remanded to the court of common pleas for a new trial and for such other and further proceedings as are agreeable to law.

Judgment affirmed.

Johnson, Donahue, Newman and Wilkin,, JJ., concur. Nichols, C. J., and Shauck, J., not participating.


author: Donahue, J.

text:
    The State of Ohio v. McCoy.

      IIndictment charging shooting with intent to kill, etc.—Includes lesser offenses of assault, etc.—Court in charge to jury omits mention of certain lesser offenses—Of which accused may be found guilty—Judgment of conviction not reversible for courts omission, when—General exception to charge of trial court— Does not raise question of error, when—Criminal law.

    1. An indictment charging, in separate counts, shooting with intent to kill and shooting with intent to wound includes the lesser offenses of assault and battery and assault, and upon the trial of the accused upon such an indictment the jury may find the accused not guilty of shooting with intent to kill and not guilty of shooting with intent to wound, but guilty of assault and battery or an assault only.
    2. Where, upon the trial of a person charged by indictment with shooting with intent to kill and shooting with intent to wound, the court properly charges the jury upon all the issues in the case, except that it inadvertently omits to charge that the defendant might, if the evidence warrants, be found not guilty of shooting with intent to kill and not guilty of shooting with intent to wound, but guilty of assault and battery, and the court’s attention is not called to this omission, and no request to give such a charge is made, a judgment of conviction of the accused of shooting with intent to wound should not be reversed for such inadvertent omission of the court to so charge.
    3. A general exception to the charge of a trial court does not raise any question of error as to the omission of the court to give further correct instruction, but presents only questions of errors of law existing in the charge as given. (Columbus Railway Co. v. Ritter, 67 Ohio §t., S3, approved and followed.)
    (No. 14061
    Decided October 7, 1913.)
    Error to the Circuit Court of Jackson county.
    Albert McCoy was indicted by the grand jury at the January term, 1912, of the court of common pleas of Jackson county, Ohio. The indictment contained two counts, shooting with intent to kill and shooting with intent to wound. He was tried at the September term following and found guilty of shooting with intent to wound, as charged in the second count of the indictment. A motion for a new trial was overruled and the defendant sentenced. Error was then prosecuted by the defendant in the circuit court of Jackson county, which court at its December term, 1912, reversed the judgment of the common pleas court for the reason as stated in its journal entry, “because the general charge was misleading and failed to instruct the jury as to the lesser, degree of assault and battery.” The circuit court found no other or further error in the charge except the omission of the trial court to charge that the defendant under this indictment might be found not guilty of shooting with intent to kill and not guilty of shooting with intent to wound, but guilty of assault and battery, and for this reason, and this reason only, the circuit court held the general charge misleading.
    The state of Ohio now prosecutes this proceeding in error in this court to reverse the judgment of the circuit court.

      Mr. Charles H. Jones, for plaintiff in error. •

      Mr. R. R. Lively, for defendant in' error. •
   Donahue, J.

The record in this case presents but' one question. It is not contended that the charge as given is incorrect in any particular except in the omission of the court, to inform the jury that under this indictment it might find the defendant not guilty of shooting with intent to kill and not guilty of shooting with intent to wound but guilty of assault and battery. The defendant did not specifically request such a charge to be given, nor did he specifically except to the charge as given, but did except to the charge generally. It is now the settled law of this state that an indictment charging shooting with intent to kill or shooting with intent to wound, or both of these offenses, includes the lesser offenses of assault and battery and assault. Stewart v. State, 5 Ohio, 241; White v. State, 13 Ohio St., 569; Heller v. State, 23 Ohio St., 582; Marts v. State, 26 Ohio St., 162; State v. Johnson, 58 Ohio St., 417; Lindsey v. State, 69 Ohio St., 215.

Section 13692, General Code, provides, among other things, that “When the indictment charges an offense including different degrees, the jury may find the defendant not guilty of the degree charged and guilty of an inferior degree thereof.”

Section 13675, General Code, regulates the procedure in the trial of criminal cases. Paragraph 7 of that section requires that after the argument is concluded and before proceeding with other business the court shall forthwith charge the jury. This statute was passed after the decision of this court in the case of Jones v. State, 20 Ohio, 34, and the conclusion reached in that case was predicated upon the fact that there was then no rule of law requiring the court of its own motion to instruct the jury. For that reason that case has no application to the case at bar, . because Section 13675, General Code, now makes it the duty of the trial court to charge the jury forthwith upon the conclusion of the argument, and this of course means that the court shall charge upon all the issues in the case. The doctrine announced in the case of B. & O. Railroad Co. v. Lockwood, 72 Ohio St., 586, adds nothing to the force of this statute, for any fair construction of the language used in this section means just what was held in that case. True, the decision reached there was predicated upon the statement that “The code of civil procedure carefully distinguishes issues of fact which may be tried by a jury and issues of law or fact which must be tried by the court.” But undoubtedly the rule would apply to 'criminal as well as to civil cases. Therefore, it is now a settled rule of practice in this state that it is the duty of the trial court, both in criminal and civil cases, to separately and definitely state to the jury the issues they are to try, accompanied by such instruction as to each issue as the nature of the case may require. Measured by this rule this charge is defective in that it fails to definitely cover all the issues in the case. It is equally a settled rule of practice in this state that where the charge as given is free from prejudicial error but fails to cover all the questions involved in the case, such failure is not a ground for reversal unless it was called to the attention of the court and further instructions requested and refused, provided the jury is not misled by the charge as given. Columbus Railway Co. v. Ritter, 67 Ohio St., 53; Schryver v. Hawks and Bierce, 22 Ohio St., 309; Smith v. P. Ft. W. & C. Railway Co., 23 Ohio St., 10; Pretzinger v. Pretzinger, 45 Ohio St., 452; Rolling Mill Co. v. Corrigan, 46 Ohio St., 283.

It does not appear how the jury could have been misled by this charge. The court did give a correct charge covering the offense of shooting with intent to wound, and the defendant was found guilty of that offense. That he might, under such an indictment, be found guilty of assault and battery, would in no wise aid the jury in determining his guilt or innocence of the charge of shooting with intent to wound. It may occur in actual practice that a jury, seeking to avoid a disagreeable duty, might be inclined to find the defendant guilty of a lesser crime than the evidence warrants, but there is no justification in law for the jury so doing, and the presumption is that the .jury does its duty in that respect and proceeds in the orderly consideration of the cause submitted, and that it is only when it determines that the accused is not guilty either of shooting with intent to kill or not guilty of shooting with intent to wound that it comes to the consideration of his guilt or innocence of the lesser offenses, included in this indictment. In such event it would seem that it would be to the interest of the accused and to the prejudice of the state for the trial court to neglect to charge that the accused might be found guilty of assault and battery, for if the jury determine that he is guilty’of neither of the major offenses charged it would not then consider his guilt or innocence of the included offense of assault and battery, but would pass to the consideration of the next lesser offense of assault only.

This court, however, did hold in the case of Beaudien v. The State of Ohio, 8 Ohio St., 634, 635, that it was error prejudicial to the accused for the court to charge the jury upon the trial of an indictment for murder in the first degree that if the jury should find the defendant guilty of the homicide it must find him guilty of murder in the first degree. The charge in that case, however, peremptorily limited the authority of the jury to determine the grade of the homicide. Upon a plea of not guilty and a trial upon the issues so joined by the averments of the indictment and such plea, it is the province of the jury, not the court, to determine the grade of the offense, and in such case the court cannot deny to the jury the power of rendering such verdict as its judgment and conscience may dictate. Adams v. State, 29 Ohio St., 412. The charge, therefore, as given was clearly erroneous and not merely an omission to give a correct charge pertinent to the issue, and we think this court very properly held that such peremptory limitation of the jury’s right and authority to fix the degree of the homicide was prejudicial to the defendant. In this case the charge as given contained no such error, and while the court should have given the further charge in relation to assault and battery, yet mere failure to give further proper instructions is not the equivalent of the giving of an erroneous charge, nor is it the equivalent of a refusal to give a proper charge when requested.

Counsel for the accused did not call the court’s attention to its omission to charge in reference to assault and battery. He did not even specifically except to the charge for that reason.

In the case of Columbus Railway Co. v. Ritter, supra, Judge Price in the opinion calls attention to the duty of counsel as well as to the duty of the court, and among other things very pertinently says: “The court may neglect or omit to fully instruct upon some important issue or issues in the case, and in that event, comes the duty of counsel, in order that full and complete justice be done, to call the attention of the court to such omission and request the further charge desired.” Any other rule than this would be a positive hindrance to the administration of justice. Undoubtedly it is the duty of a trial court to afford the accused a fair and impartial trial, and to that end should carefully and fully charge upon every issue in the case. But there are some responsibilities resting upon counsel. It is his duty to aid the court in the administration of justice, and he cannot be permitted to take advantage of his own wrong or his own dereliction. When a court makes a fair and honest effort to charge the jury fully and correctly on all the issues in the case but unintentionally and inadvertently omits to charge with reference to some issue, and particularly an issue that has not been prominent in the trial of the cause, counsel may not sit by in silence without making any effort whatever to secure such charge to be given and then demand a reversal of the judgment by reason of such mere inadvertance or oversight of the court.

However that may be, this record does not present to this court the questions sought to be made by counsel for defendant in error. It is a well-settled rule of practice in this state that a general exception to the charge as given does not present to the reviewing court any errors of the trial court in failing to give further instructions.

Section 11561, General Code, provides that '“A general exception taken to a charge of a court shall apply to all errors of law which exist in such charge .that are material and prejudicial to the substantial right of the party excepting.” Prior to the enactment of this statute it was uniformly held that where exceptions were taken to a general charge, unless the party excepting pointed out specifically the part or proposition of the charge excepted to, or the ground of his exception, a reviewing court was not bound to take notice of the exceptions. Adams v. State, 25 Ohio St., 584; Marietta & Cincinnati Railway Co. v. Strader & Co., 29 Ohio St., 448; Adams v. State, 29 Ohio St., 412; P. Ft. W. & C. Railway Co. v. Probst, 30 Ohio St., 104; Western Insurance Co. v. Tobin, 32 Ohio St., 77.

Section 11561, General Code, changes this established rule of practice only to the extent and only in the particulars mentioned. In the case of Railway Company v. Ritter, supra, this court held that by the clear and unambiguous language of this section (11561, General Code), a general exception taken to any charge of the court applies only to errors of law which exist in such charge and does not reach an omission or failure to give further correct instructions. The second proposition of the syllabus in that case fully and emphatically disposes of this question and leaves no chance for further contention in reference thereto. That paragraph of the syllabus reads as follows: “A general exception to the charge of the court as now permitted by Section 5298, Revised Statutes [Section 11561, General Code], is effectual only as to errors oi law existing in the charge as given, and does not bring in review on error, an omission or failure to give further proper instructions.”

In the case of the State of Ohio v. Schiller, 70 Ohio St., 1, Judge Crew in discussing this question, page 8, uses this language: “The only exception taken or noted by counsel for defendant, is a general exception to the charge as a whole. It is a familiar and very general rule of practice, applicable alike to criminal and civil causes, that mere partial non-direction, or incomplete instruction, as to a particular matter or issue, does not of itself constitute reversible error, in the absence of a request for more specific and comprehensive instructions upon the particular point or issue involved.” This, we think, is a proper statement of the law and is dispositive of this case.

Judgment of the circuit court reversed and judgment of the common pleas court affirmed.

Shauck, Johnson, Wanamaker, Newman and Wilkin, JJ., concur. Nichols, C. J., not participating.