author: Spear, J.

text:
    The City of Cincinnati et al. v. Guckenberger.

      Refunding bonded debt — Powers of sinking fund trustees — Contract by trustees for sale of bonds without advertisement and competitive bidding, is invalid — Sections 2709 and 2729a to 2729e Revised Statutes — Act of Ap> il 25,189S — Municipal law.

    1. A code of statutes relating to one subject, is presumed to be governed by one spirit and policy, and intended to be consistent and harmonious, and all of the several sections are to be considered in order to arrive at the meaning of any part, unless a contrary intent is clearly manifest.
    2. The duty of the sinking fund trustees of the city of Cincinnati, with respect to refunding the bonded debt of that city, is not governed wholly by sections 2729a, 27295, 2729d and 2729<? of the Revised Statutes, but the provisions of section 2709, and other kindred sections applying to the same subject, are to be considered.
    3. A contract by such trustees providing for the sale of bonds to raise money with which to refund the bonded debt, which fails to provide for^advertisement and opportunity for competitive bidding, is unauthorized and invalid.
    4. It is the duty of such trustees to use the means provided under authority of statute for paying the funded debt to the payment of interest as it matures, and a contract which results in the adding of interest to the principal, and refunding the amount so made up, is likewise unauthorized and invalid.
    5. Whether, under the act of April 25, 1898 (93 O. L., 672), (if that act be valid), the power to extend the time of payment of southern railway bonds, is devolved wholly upon the southern railway trustees to the exclusion of the sinking fund trustees ; or, whether, by the entire legislation on the subject, each board is given that power, and the one which first exercises it should be held'to have exhausted the power: Quere.

    (Decided June 6, 1899.)

      Error to the Circuit Court of Hamilton county.
    The action below was by George Guckenberger, a taxpayer of the city of Cincinnati, against the city and Messrs. Julius Dexter, Franklin Alter, Thornton M. Hinkle, Charles P. Taft, and J ulius F r eiberg, constituting the board of trustees of the sinking fund of the city. It was brought on behalf, not only of the plaintiff, but of all other taxpayers of the city, (the corporation counsel having refused to bring such action), for the purpose of obtaining an injunction to prevent the performance of a certain contract theretofore entered into between the trustees and Roberts & Company, a New York banking corporation. A copy of the contract is given in the petition, and is as follows:
    Agreement made this fifteenth day of June, 1898, between Roberts & Company, a corporation organized under the laws of the state of New York, and doing business in the city of New York, in the said state (hereinafter called the “bankers”), parties of the first part, and the trustees of the sinking fund of the city of Cincinnati, in the state of Ohio (hereinafter called the “trustees”), parties of the second part:
    Whereas, there are now outstanding approximately the following amounts of the following issues of bonds of the city of Cincinnati (hereinafter called the outstanding bonds), that is to say:
    Cincinnati Southern R. R. 7 per cent.
    bonds maturing in 1902, say.................... $494,000
    Cincinnati Southern R. R. 7 3-10 per
    cent, bonds maturing in 1902, say..... 7,644,000
    Cincinnati Southern R. R. 6 per cent,
    bonds maturing- in 1906, say.............. 2,890,000

      Cincinnati Southern R. R. 7 3-10 per
    cent, bonds maturing in 1906, say..... $1,860,000
    Cincinnati Southern R. R. 7 per cent.
    bonds maturing in 1908, say............... 835,000
    Cincinnati Southern R. R. 6 per cent.
    bonds maturing in 1909, say............... 895,000
    Funding Floating debt 7 per cent,
    bonds maturing in 1904,' say................. 992,000
    Total amount outstanding estimated at....................................................... $15,610,000
    And whereas, the trustees, by virtue of the powers now vested in them, and legislation hereafter to be had amending or supplementing the same, propose to refund the outstanding balances of the issues aforesaid, whatever the same may be, in Cincinnati consolidated sinking fund bonds (hereinafter called “refunding- bonds”), of the character described in sections 2729a and 27295 of the Revised Statutes of Ohio, or authorized by subsequent legislation; and
    Whereas, the bankers have proposed to purchase a sufficient number of said refunding bonds to refund said outstanding bonds upon the terms hereinafter stated:
    Now, therefore, this agreement witnesseth, that the trustees agree to sell and deliver to the bankers and the bankers ag’ree to buy and accept from the trustees, so many of the refunding bonds hereinafter described as can be lawfully issued and shall be necessary to be sold to provide for the refunding of the several issues of bonds abo^ve described, subject to the following reservations and conditions :
    I. All the refunding bonds to be tendered to and purchased by the bankers under this agreement shall be regularly and legally issued ; shall bear date the first day of January or of July of the year in which they are so purchased by the bankers ; shall be payable in the city and state of New York; shall bear interest at the rate of three and one half (3i) per centum per annum, payable semiannually; and shall become due fifty (50) years and be redeemable thirty (30) years from date. If coupon bonds, they shall be of the denominations of one hundred dollars, five hundred dollars, and one thousand dollars ($100, $500, $1,000), in such lots or portions as the bankers may designate. If registered bonds, they shall be of the denomination of one thousand dollars ($1,000) or such multiple thereof and in such lots or portions as the bankers may designate. The bankers may require that each delivery be made in coupon bonds or in registered bonds, or partly in coupon bonds and partly in registered bonds in such proportions as they may designate; and all such coupon bonds shall be exchangeable for registered bonds, at the demand of the holder thereof, if tendered in sums of one thousand dollars ($1,000) or a multiple thereof.
    II. For the refunding bonds thus to be purchased by the bankers they shall make payment at the time of delivery in the manner hereinafter provided, either in cash or in outstanding bonds of the issues to be refunded. If said payment be in cash, it shall be the par value of the bonds thus paid for, with accrued interest until the time of such payment. If such payment be in outstanding- bonds, the same shall be accepted by the trustees at prices which would 'yield or represent to the city of Cincinnati an annual return of three and one half (3i) per centum per annum upon the cost of said bonds to said city, said prices and said annual return to be figured in accordance with “Price’s Stock Values,” tbe number of days, months and years in such computation to be the unexpired term between the date of the delivery of said outstanding bonds by the bankers to the trustees and the date of the maturity thereof. As it is probable that the larger part of the outstanding bonds delivered by the bankers to the trustees will be delivered by them before maturity, and, therefore, at a premium over and above the par value of said bonds, such premium may, at the option of the trustees, be paid in cash, or in refunding bonds, or partly in each.
    III. The bankers may only purchase refunding bonds for cash within ninety (90) days next before the maturity of each of the issues first above mentioned, and then only to the amount of outstanding bonds maturing within said ninety (90) days. Unless enough bonds of any issue to be refunded have been delivered to the trustees prior to ninety days before the maturity of such issue to satisfy the trustees that means of payment of the outstanding bonds of such issue will be provided by the bankers in cash on or before maturity, the trustees shall be at liberty to take such proceeding to provide the required money as to them may seem necessary.
    All outstanding bonds above described as and when acquired by the bankers shall be by them promptly tendered to the trustees. Upon such tender by the bankers to the trustees of any of the outstanding bonds more than ninety (90) days before the maturity of the bonds so tendered, the trustees shall accept the bonds so tendered, and pay the par value thereof, and the premium, if any thereon, with refunding bonds and cash as above-provided.
    If the bankers shall fail to deliver said outstanding bonds under -this contract to the trustees in amounts and at times as follows, viz.: not less than five hundred thousand dollars ($500,000) on or before the first day of January, 1899; not less than one million dollars ($1,000,000) on or before the first day of July, 1899; not less than one million five hundred thousand dollars ($1,500,000) on or before the first day of January, 1900; not less than two million dollars ($2,000,000) on or before the first day of July, 1900; not less than two million five hundred thousand dollars ($2,500,000) on or before the first day of January, 1901; not less than three million dollars ($3,000,000) on or before the first day of July, 1901; and not less than three million five hundred thousand-dollars ($3,500,00.0,) on or before the first day of January, 1902; then, and upon any such failure, and at any time while the same continues, and notwithstanding a prior failure of similar nature may have been waived, the trustees may, at their option, terminate this contract by giving thirty days’ written notice to the bankers of their election so to do; and such termination shall absolutely discharge and put an end to this agreement and the rights and liabilities of all parties and their assigns thereunder, and shall release the bankers and their assigns from all damages and claims ‘for damages whatsoever upon or arising out of this contract or any part thereof.
    IV. In case the state of Ohio, shall, on or before the first day of July, 1900, enact legislation, authorizing the trustees to issue refunding bonds of said city of Cincinnati, maturing fifty (50) years after date without privilege of redemption at an earlier period, and payable both as to principal and interest in such kind of lawful money as the trustees may determine, for the purposes specified in section 2729a.of the Revised Statutes of Ohio, as the same now provides or may hereafter be amended, the trustees shall issue and deliver, and the bankers shall purchase and receive refunding bonds maturing fifty years after date as aforesaid, and payable as to both principal and interest in gold coin of the United States, of or equal to the present standard of weight and fineness, and in other respects of the same character as the bonds described in Article I., upon payment therefor in outstanding- bonds or cash of a premium of one per centum of the par value thereof, in addition to the par value and accrued interest from the date of the bonds until the time of such payment.
    V. All bonds deliverable by or to the trustees under this contract, shall be received and paid for in either the city of Cincinnati, or the city of New York, as may be elected by the bankers with reference to each delivery.
    VI. On or before the first day of January, 1899, the bankers shall present to the trustees evidence satisfactory to the trustees that a sufficient proportion of this contract has been executed by the bankers or their assigns approved by the trustees, or has been assigned to and assumed by assignees similarly approved whose responsibility is satisfactory to said trustees, to assure the provision for that portion of the debt described herein which matures in the year 1902.
    On or before the first day of January, 1904, the bankers shall present to the trustees evidence satisfactory to the trustees that the remaining part of this contract has been sufficiently executed by the bankers or their assigns approved by the trustees, or has been assigned to and assumed by assignees similarly approved whose responsibility is satisfactory to the trustees, to assure the provision for that portion of the debt described herein which matures after the first of January, 1904.
    If the bankers fail to present evidence satisfactory to the trustees in accordance with either of the two paragraphs hereof next preceding, then and in either such event, and at any time thereafter before such satisfactory evidence shall have been presented, the trustees may at their option terminate this contract by giving thirty days’ written notice of their election so to do to the bankers; and such termination shall absolutely discharge and put an end to this agreement and the rights and liabilities of all parties and their assigns thereunder and shall release the bankers and their assigns from all damages and claims for damages whatsoever upon or arising out of this contract or any part thereof.
    VII. The bankers may assign to responsible parties,, satisfactory to the trustees, this contract as to all of said bonds oi* any part or parts thereof, such assignees assumixig and agreeing to perform all the stipulations of the bankers herein to the extent of the interest assigned to them respectively. Copies of every such proposed assignment shall be forthwith filed with the president of the trustees, and no such assignment shall take effect until the same shall have beexi approved by the trustees.
    VIII. The trustees contract only in their official capacity, and in no event are they or axxy of them to be individually liable because hereof; and the bankers bind themselves, their successors and assigns.
    In witness whereof, hereto and to a duplicate hereof the parties of the first part have caused their name to be signed by William Edward Coffin, their general manager, thereunto duly authorized, and the parties of the second part have caused the same to be signed by Julius Dexter, their president, the day and year first above written.
    In presence of
    (Signed) Roberts and Company,
    By W. E. Coffin,
    General Manager.
    The Trustees of the Sinking
    Fund of the City of Cincinnati,
    By Julius Dexter,
    President.
    The petition charged that said contract is in contravention of the laws governing said corporation, the city of Cincinnati, and the board of trustees of the sinking fund thereunder, for that the same was made and entered into without the publication of any notice of the intention so to do by the said board of trustees of the sinking fund; and without inviting or receiving any proposals from any person other than the said Roberts & Company for the bonds proposed to be issued thereunder; and for that it is proposed to increase the bonded indebtedness of the city of Cincinnati in the sum of more than $3,000,000, a result which will ensue, if said contract is permitted to be performed; and for that by the terms of said contract, the said trustees of the sinking fund delegate their powers and duties with regard to the redemption of the indebtedness of the city of Cincinnati to the said corporation called Roberts & Company ; and for that the execution of any such contract is in excess of the powers of the board of trustees of the sinking fund of the city of Cincinnati; and for other reasons apparent upon the face of the said contract. Plaintiff says that if said refunding bonds were now advertised for sale and sold to the highest bidder, they would bring a large premium, viz.: not less than four per cent, of their face value. Plaintiff further says that the performance of said contract will work great and irreparable injury to the city of Cincinnati and to this plaintiff and to all other taxpayers of the said city. Wherefore plaintiff prays that the defendants be restrained and enjoined from executing or performing said contract, or any part thereof ; and that upon final hearing the said injunction be made perpetual and said contract declared to be null and void; and the said trustees directed to cancel the same, and for all other and further relief that may be just.
    To this petition a general demurrer was interposed, which was overruled by the court of common pleas, and final judgment entered against the defendants. On appeal to the circuit court a like judgment was rendered, and the plaintiffs in error ask here a reversal of this judgment.

      Thomas McDougall; Lawrence Maxwell,, Jr.; J. B. Foraker, and F. G. Kinkead and Wade JT. Ellis, corporation counsel, for plaintiff in error.

      Peck, Shaffer dk Peck; Frederick Hertenstein, and R. A. Llarrison, for defendant in error.
   Spear, J.

In view ■ of the importance of the questions involved, and because of the large moneyed interests at stake, counsel were accorded unusual time for oral argument, and the court has been favored, besides, with elaborate briefs, covering every possible phase of the controversy. It will, however, be impracticable in the brief space accorded to an opinion, to review all of the various contentions of counsel and cover all the points brought to our attention. We will needs be content to state in such brief terms as we may the conclusions to which the court, after very full consideration, has arrived.

Powers of the sinking fund trustees- to deal with the debt of the city are statutory, and the controversy in this case largely turns upon the question of what statutes apply to the transaction in review. If, as is contended by plaintiffs in error, the contract is simply a refunding scheme, and controlled wholly by - sections 2729a, b, d, e, the question of the power of the trustees to enter into the contract is probably not a difficult one. Pertinent provisions of section 2729c; ar.e to the effect that “the sinking-fund commissioners * * * for the purpose of refunding- the bonded debt * * * at a lower, rate of interest, and for the purpose of buying- the fee simple of real estate held by the city under perpetual leases, wherein is secured to the city the option to buy the fee simple at a fixed price, and where the money to buy can be procured at a smaller rate of interest on the price than is represented by the stipulated rents, shall have power to make and issue the bonds of such city, with coupons or registered, due fifty years and redeemable thirty years from date, bearing interest at a rate not greater than five per centum per annum, payable semi-annually, to an aggregate amount not exceeding twenty-six millions of dollars, to be known as the-consolidated sinking fund bonds * * Section 27296 which provides for the lettering and numbering of bonds, etc., requires that “suchof the bonds provided for in the preceding section as may be intended and used for refunding bonded debt which is payable out of or chargeable upon a special fund or special source of revenue, or is secured in whole or in part by any pledge or lien, shall be so lettered and numbered as to show the debt to which it is applicable. The secretary of the trustees of the sinking fund shall keep separate accounts of the proceeds and application thereof of bonds used to refund such debts, and of the revenues and sinking fund applicable to each class of said bonds, unless and until otherwise provided by law. Purchasers of any bonds authorized by the preceding section shall not be held responsible for the application of purchase money. The property, credit, and revenues of the city issuing such bonds shall stand pledged alike for all the bonds issued, without priority of right of any part of the bonds so issued by reason of priority of the date or sale of the same, or for any other reason. ” Section 2729d provides that so long as the sinking fund of such city shall be insufficient to pay, when due, interest and principal of any and all outstanding bonds issued under section 2629a, the security and means of payment provided in section 2712, and certain other specified sections of the municipal code, shall not be impaired, but shall stand pledg-ed to the payment of the interest and principal of said bonds. And section 2729c: “The trustees of the sinking-fund * * * are authorized to employ a clerk * * * for a reasonable compensation, proportioned to service rendered, which shall be paid out of the sinking fund, and repaid to the sinking fund out of the general fund of the city not otherwise appropriated. Necessary expenses of the trustees of the sinking fund in issuing bonds, negotiatingthe refunding of the city debt, or other duties imposed by the four preceding sections, shall be paid from the sinking fund and repaid from the general fund of the city not otherwise appropriated.”

It is insisted ,by plaintiffs in error that these sections empower the trustees to refund the bonded debt, which includes each and all of the issues of bonds set forth in the contract, and, in order to accomplish it, authorize the trustees to make and issue bonds due fifty years, redeemable in thirty after date, with interest not to exceed five per. centum. This contract provides for the issue of bonds for the purpose 'stated, at three and one-half per centum. It specifically provides for the making and issuing of sufficient refunding’ bonds to retire each and all the outstanding issues enumerated in the contract, and it specially obligates the bankers to buy and accept from the trustees as many of the refunding 'bonds as may be necessary to provide for the refunding of the several issues of outstanding bonds. The contract was but an exercise of power to refund the outstanding issues enumerated in it; the purpose was to retire those issues at or before maturity by making and issuing refunding bonds, and it sought to accomplish this purpose solely by making and issuing refunding bonds of thepreci.se character authorized by section 2729a, and the contract if executed, will accomplish this purpose. Section 2729c, recognizes the existence of the power of the trustees, given by section 2729a, to negotiate with other persons for refunding the city debt and to enter into a contract for that purpose, and in direct terms gives authority for the payment of necessary expenses in negotiating and refunding. Compensation to bankers would be necessary expenses. The power to make the contract is, therefore, clear; it was proposed to be executed strictly according to law, and the validity of the contract cannot be legally assailed.

But it is contended by defendant in error that other sections of the statutes relate to the subject in controversy and are necessarily involved in its consideration. Attention is specially called to sections 2709, 2729g (2) and h (2). The first named section provides: “Whenever any municipal corporation issues its bonds, it shall first offer them at par and accrued interest to the trustees or commissioners, in their official capacity, of the sinking fund, or, in case there are no such trustees or commissioners, to the officer or officers of such corporation having charge of its debts, in their official capacity, and only after their refusal to take all or any of such bonds at par and interest, bona fide for and to be held for the benefit of such corporation, sinking fund or debt, shall such bonds, or as many of them as remain, be advertised for public sale. In no case shall the bonds of the corporation be sold for less than their par value ; nor shall such bonds when so held for the benefit of such sinking fund or debt, be sold, except when neeessarjr to meet the requirements of such fund or debt. All sales of bonds, other than to the sinking fund, by any municipal corporation, shall be to the highest and best bidder, after thirty days’ notice in at least two newspapers of general circulation in the county where such municipal corporation is situated, setting forth the nature, amount, rate of interest and length of time the bonds have to run, with time and place of sale. Additional notice may be published outside of such county by order of the corporation council. Provided, however, when any such bonds have been once so advertised and offered for public sale, and the same, dr any part thereof, remain'unsold, then said bonds, or as many as remain unsold, may be sold at private sale at not less than their par value, under the direction of the mayor and the officers and agents of the corporation by whom said bonds have been, or shall be prepared, advertised and offered at public sale. Provided further, that when it shall appear to the trustees or council of any municipal corporation to be for the best interests of such corporation to renew or refund any bonded indebtedness of such corporation which shall not have matured, and thereby reduce the rate of interest thereon, such trustees or council shall have authority to issue for that purpose new bonds, with semi-annual interest coupons attached, and to exchange the same with the holder or holders of such outstanding' bonds, if such holder or holders shall consent to make such exchange and to such reduction of interest. But the rate per annum of interest on any such new bonds thus issued imexchange by any city of the first class, or by any city of the first or second grade of the second class, shall not exceed four and one-half per cent., and by any other city shall not exceed five per cent., and by other municipalities shall not exceed five and one-half per cent., such new bonds shall not in any case be so issued in an amount in excess of such outstanding bonded indebtedness so to be renewed or refunded, and may be in such denominations and payable at such time or times and at such, place as may be determined by such .trustees or council.” Section 2729y (2) reads that “in any city wherein trustees of the sinking fund have been appointed under the provisions of section 2715, Revised Statutes, such trustees in addition to their other powers, shall have the power to make and issue for the purpose hereinafter specified in section 2729A the bonds of their city, with coupons or registered, running- for such length of time, not exceeding fifty years, as the trustees may determine, and bearing interest at a rate not greater than four per centum per annum, payable, semi-annually. Such bonds shall be known as the--consolidated sinking fund bonds * *. The bonds shall be signed by the mayor of the city, countersigned by the auditor or corresponding-officer, and have affixed the seal * * *. Such bonds shall be sold as provided in section 2709, Revised Statutes.” (Section 2715 is the section which authorizes the appointment of the board of sinking fund trustees, parties herein.) And section 2729A (2): “The purpose for which alone the bonds provided by section 2729y may be made, issued, and sold shall be the renewal or extension of existing bonded debt of the city which from any reason the trustees of the sinking fund of such city are unable to pay at maturity. The bonds authorized by section 2729g shall never, for any city, aggregate in outstanding -amount more than what m&y at any time be unpaid of the bonded debt of such city now outstanding and hereafter lawfully authorized to be issued, it being the object of section 27295 to provide only bonds for renewal or extension of legally existent bonded debt which at maturity is not paid and extinguished; and to that end the power herein and by section 2729b conferred is a continuing power, and includes renewal of bonded debt now existing, hereafter lawfully created by said cities respectively, for which the trustees of the sinking- fund act, and extends to one or more renewals of any of the bonds issued hereunder ; but nothing herein shall be construed to excuse said trustees from levying and applying taxes for sinking fund and the earnings from investment thereof, as now provided and required by law.”

If the provisions of these sections are to enter into the consideration, it is manifest that the proper solution of the question at issue becomes more difficult. Objections based upon these sections made by defendant in error are: 1. That the contract provides for sale of municipal bonds without advertisement and without calling for or receiving competitive bids for the same. 2. The contract provides for the purchase of outstanding bonds at a premium to be paid in new bonds, the result of which will be to increase the principal of that part of the funded indebtedness of the city covered by the contract to the extent of some three million dollars, which increase is not only not authorized by statute, but is expressly forbidden. 3. It provides for the sale of bonds at much less than their real value.

The sections referred to all relate to the same general subject, viz.: the government of municipal corporations, being part of Title XII, formerly entitled “Municipal Code.” They relate, also, to the same special subject, viz., the management of the finances of municipal corporations, and are found under the same division which is entitled “Finance and Taxation.” Section 2709 is part of Chapter 2, headed “Power to Borrow Money and Issue Bonds,” and the other sections are parts of Chapter 3, headed “Sinking Fund,” and are amendments to the original code. But they are to be treated as part of the entire statute, the same as though enacted at the same time, and, applying the general rule that a code of statutes relating to one subject, being governed by one spirit and policy, is intended to be consistent and harmonious, in order to arrive at the meaning of any part the whole should be considered. True, it is not uncommon to find in legislation special provisions intended to supplant or supersede, for the special subject matter, some general provision on the same general subject, but such instances are expected to be so marked, either by force of the language itself, or by necessary implication as to the purpose to be accomplished, as that the meaning shall be plain. Do these sections furnish evidence of any such purpose? They all relate to the management of the finances of municipal corporations and are, therefore, as before stated, to be considered as in pari materia. Does the language of sections 2729a, b, cl, e, ■ show a purpose to authorize a departure from the requirements of section 2709 with respect to the disposition of bonds of a municipality? That the sale of bonds is contemplated by those sections seems entirely clear. The purpose of 2729a is two-fold; one to enable the trustees to refund the bonded debt, the other to enable them to buy the fee simple of real estate held by the city under perpetual leases. A purchase implies the use of money. The obtaining of money implies a parting with something of value. This imports a sale. The bonds are to produce that which will enable the trustees to buy, i. e., money. This is further shown by one paragraph of 27295, viz.: “Purchasers of any bonds authorized by the preceding section shall not be held responsible for the application of purchase money.” A refunding might be accomplished without a sale; a purchase, such as is here provided for, could not be. The legislature might have authorized a refunding without a sale of bonds, but no distinction is made by these sections between the mode of obtaining means for the accomplishment of one result and the mode required for the other; the authority of the trustees applicable to both is : “shall have power to make and issue the bonds of the city.” A sale being required and no method of conducting it having been provided, it follows that we look to other sections for that detail, and it is given in section 2709, by the requirement of a sale to the highest and best bidder after thirty days’ notice by advertisement in newspapers. And as the language of section 2729g (2) indicates no intent to waive or change this direction as to publicity, but rather emphasizes that purpose, we must conclude that the requirement to advertise is obligatory on the sinking fund trustee's, whenever sales are to be made.

Let us now see what the contract provides in this respect. Can there be doubt that the draftsman understood he was providing for a sale of bonds? In one of the preliminary paragraphs, the fact is expressed that the bankers have proposed to purchase bonds, and in the first paragraph of the stipulation the trustees agree to sell and deliver to the bankers, and they agree to buy and accept, so many of the refunding bonds as shall be necessary to be sold, and the idea of a sale is expressed no less than five times in subsequent paragraphs of the contract. An option is given the bankers to" make payment for refunding bonds either in cash or in outstanding bonds of the issue to be refunded, which, by a later provision, is limited to a period of ninety days before the maturity of the bonds. But, within that time, the purchase may be for cash, and the amount is not limited save that it may not exceed the amount of outstanding bonds maturing within said ninety days. It seems needless to refine on this phase of the case. Whether all the bonds issued by the trustees be sold, or some sold and some exchanged, can make no material difference in the legal effect of the transaction. In either aspect the contract provides for a sale of bonds by the trustees, and the conditions of publicity and competition are wholly wanting. In our view this renders the contract open to one of the vital objections urged against it, and upon this ground we hold ii to be unauthorized.

Another objection urged by defendant in error is that the contract unlawfully increases the bonded indebtedness of the city. Waiving the question whether the contract, if carried out, would result in an increase of the bonded debt beyond the maximum authorized by statute, of twenty-six millions, it seems reasonably clear that in the sense that the city is required to pay interest on an increased sum, the objection of increase is well founded. That is, the interest is to be added, thus eonstitutingadditional principal. The objection to this is that it is a departure from the duty enjoined by statute. We think the point well taken. Section 2712 gives authority to levy an annual tax for the extinguishment of the bonds and funded debt of the municipality, and section 2723 enjoins upon the trustees the duty to provide for the payment of all interest on the city bonded debt. This duty is regarded as so important that the trustees are empowered to use not only the money in their possession, but any securities as well; and all means raised for payment of the funded debt are pledged to that exclusive purpose. (2712 and 2729a.) Besides, our statutes, in many provisions, forbid the increase of municipal debts without express authority therefor. In view of all the provisions on the subject, it may be safely affirmed that the policy of our law is to prevent, rather than encourage, the accumulation of municipal debt which would prove a continuing burden on the people. This purpose is advanced by the payment of interest as it accrues, but is defeated if the interest is added to the principal. Provision being thus made by statute for raising by taxation sufficient revenue to pay the interest on bonded municipal debt, and the obligation to provide for its payment imposed, it is clearly the duty of the city officials upon whom devolves the care of these financial interests to avail themselves of this power, and perform this duty, and thus prevent the increase of the city bonded debt. Another objection urged against the contract is that it is an attempt to exercise power by the sinking fund trustees which, by the act of April 25, 1898 (93 O. L., 672), supplementary to the act of May 4, 1869, known as the Southern Railway act, is devolved on the board of railway trustees. The proposition is ably argued, pro and con, and has been considered. It presents a question of much doubt and of no little difficulty. But inasmuch as its disposition is not essential to a decision of the case, and as no act of the railway trustees is before the court for adjudication, the point is not decided.

Many other objections are advanced, but a review of them would unduly add to the length of this opinion. Our holding is that the contract is invalid because it provides for sales of municipal bonds by the trustees without publicity and without opportunity for competitive bids, and because it provides for the refunding of accrued interest instead of for its payment.

Judgment affirmed.


source: Caselaw Access Project

author: By the Court.

license: Public Domain

text:
    Miller et al. Exrs. v. B. & O. R. R. Company.

      Filing of written assignment of judgment not constructive notice of assignment.

    The filing of a written assignment of a judgment with the clerk of the court in which the judgment was rendered, and the entry of the same by the clerk upon the appearance docket of the court, do not constitute notice to others of the assignment.
    (Decided June 6, 1899.)
    Error to the Circuit Court of Licking county.
    In an action brought by one Eli Hull against The Shawnee & Iron Point Coal and Iron Company, an attachment was issued and garnishee process served on The Baltimore & Ohio Railroad Com•pany, defendant in error. The company filed an answer, as garnishee, in which, by mistake and misinformation of its agent and attorney, it denied being indebted to the iron company, although, in fact it was indebted at the time. A judgment was rendered in the cause in favor of Hull and against the iron company for $2,344.50, and costs. Shortly after the rendition oí this judgment, Hull, for a valuable consideration, made an assignment in writing of a portion of the judgment to one A. B. Clark (of whom plaintiffs in error are executors), which assignment, soon thereafter was left with the clerk of the court wherein the judgment was rendered, and by him copied on the appearance docket in the case.
    A few days after the rendition of the judgment in favor of Hull, a suit was commenced in the same court by The Shawnee & Iron Point Coal and Iron Company against the defendant in error, and others, in which it was charged that the defendant, The Baltimore & Ohio Railroad Company, was indebted to plaintiff in a large sum. The company answered, admitting its indebtedness, but averred that other persons, including the said Eli Hull, claimed an interest in the fund, and they were brought in. Such subsequent proceedings were had in the case that an order of court was duly entered finding that of the sum due from the Baltimore & Ohio Railroad Company to The Shawnee & Iron Point Coal and Iron Company, there should be paid to Eli Hull, by virtue of his attachment, the sum of $2,081.30 and costs, $11.00, and ordered payment of the same, and that such pay-. ment should work a full discharge of the Baltimore & Ohio Company. This amount was at once paid to Hull. No actual notice of the assignment from Hull to Clark was given in any way to the Baltimore & Ohio Company, and it had no notice of such assignment, or of such assignment having been left with the clerk or copied on the appearance docket, at 'the time of such payment to Hull, unless the leaving of such paper and its entry upon the docket were notice.

      The case was brought by the executors of Clark to recover ag’ainst The Baltimore & Ohio Company for a false return in the attachment proceedings at the suit of the said Hull against The Shawnee & Iron Point Coal and Iron Company, the right of action being based upon the assignment of a part of the Hull judgment hereinbefore described.

      J. A. Flory and Charles W. Miller, for plaintiffs in error.
    The main and possibly the only question in this was the payment of the money by the railroad company to Hull after the assignment had been made to Clark and others, a good payment so as to release the defendant from liability to the assignees and owners of the Hull judgment in the case of Hull v. Coal Co.

    We claim this is no defense. Clark and the other assignees of the judgment of Hull against the Coal Co. were not parties to the action of the Coal Co. v. The B. & O. R. R. Co. in which the money was paid out, and anything the court did in that case does not bind them. Childs v. Childs, 10 Ohio St., 339; Stewart v. Johnson, 30 Ohio St., 24; Hillinger v. Bates, 43 Ohio St., 437 ; Miller v. Atherton, Supreme Court of Ohio (not reported), 51 Ohio St., 623; Kniseley v. Evans, 34 Ohio St. 158.
    The attachment in the hands of the railroad company of its indebtedness to the coal company, by Hull, was in effect, what the Supreme Court says, “ a legal assignment ” of the indebtedness of the railroad company, to the Coal Co. to Hull. Alsdorf v. Reed, 45 Ohio St., 653 ; Secor v. Whetter, 39 Ohio St., 218.

      And the right to enforce all liens and remedies to collect it went to Hull, and by the assignment of Hull to Clark all his right to and in the judgment, and all rights and remedies he had to enforce it against the garnishee went to Clark. Whitman v. Keith, 18 Ohio St., 134; Holmes v. Gardner, 50 Ohio St., 167; Alsdorf v. Reed, 45 Ohio St., 653; Edwards v. Edwards, 24 Ohio St., 411; Pratchet v. Marsh, 52 Ohio St., 494.
    The remaining and only question is, was the payment of money to Hull by the railroad company, the defendant, without actual notice of the assignment by Hull to Clark such as released it from liability to Hull’s assignee, or in other words was it chargeable with notice of the assignment by the filing of the written assignment with the clerk of the court and its entry in full upon the appearance docket of the attachment case? We claim it was chargeable with such notice and rights of Clark for the following reasons:

      First — By the entry of the assignment upon the appearance docket.

      Second — By the filing of the original assignment with the clerk as a paper in the case.

      Third — -Because it was guilty of negligence in not looking at the papers and appearance docket in the original case in which its liability to Hull became fixed, and falsely answering therein that it was not indebted to the coal company before paying the money to Hull.

      Fourth — Because the B. & O. R. R. Co. had no ■ right to pay the money to any person without first having truthfully answered in the original attachment case and obtained an order of the court in that case to pay the money into court, in that case, for the benefit of the party owning the judgments therein. Faleys Appeal, 76 Penn. St., 43; Edridge v. Haslett's Administrator, etc., 38 Penn. St., 17.
    That the assignment placed upon the appearance docket was notice of Clark’s interest in it to the garnishee who by the service of the notice of garnishment upon it became a party to the action as hereafter shown, is well settled. Fisher v. Knox, 53 Am. Dec., 503; Norton v. Miller, 44 Penn. St., 258; Campbell's Appeal, 72 Penn. St., 641; Chapman v. Seeley, 9 Cir. C., 179; 4 Cir. Dec., 395.
    The holding of the court below that the statute did not authorize an assignment to be entered upon the records and therefore was not notice to the railroad company is too narrow construction to be given to the statutes.
    In Ohio the judgment is regarded as a “legal claim.” The assignment of it, is not the assignment of only an equitable claim, but is the assignment of the thing itself, the legal title and legal claim, which can be put on the claim itself (18 Ohio St., 143) and if a party is not chargeable with notice of what it contains, what is it notice of?'
    As to the second ground. The written assignment itself was filed with the clerk of the court with the papers. This was authorized by Revised Statutes sections 4958, 4960 to 4965.
    As to the fourth point. This point was entirely ignored by the court in its finding and decisions below. The court took no notice of the position occupied by the railroad company in the original attachment suit of Hull v. The Coal Co., as settled by the above authorities,

      J. II. Collins and Kibler do Kibler, for defendant in error.

      Was the entry of the assignment on the appearance docket constructive notice of the assignment? We insist it is not. Section 4598 provides what shall go on the appearance docket. Section 4957 provides that'the clerk shall keep at least five books, to be called the appearance docket, etc.
    There is no statute which makes any other entry on the appearance docket notice. In fact no entry at all, other than the names of the parties, except the date of the issue of the summons or other mesne process or order, and the date of the return of such writ or order. The language as to the latter is, that such “entry shall be evidence of such service.”
    It is only by force of a statute that any record of a court or office shall be notice of any act or fact. There is no statute which requires the assignment of a judgment to be entered upon the appearance docket, or any record, and there is no statute which says that such entry, if made, or a copy of it, shall be notice to any person or notice at all.
    The definition of constructive notice, is given in section 37, Wade on the Law of Notice.
    It was, therefore, the duty of the assignee to give personal notice to the judgment debtor, or any party concerned, if he claims the money, or any part of it, by virtue of the assignment; otherwise the judgment debtor or other party collaterally liable, may safely pay to the plaintiff in the judgment. Such personal notice is so easy to be given that it is singular, if there was a bona fide assignment of the judgment in question, that the notice was not given. Such assignee has no legal or equitable right to put a party in jeopardy or even inconvenience, by failure to give actual notice.

      This doctrine is well settled that, where notice is given, the debtor cannot make any new arrangement with the assignor so as to prejudice the rights of the assignee. Therefore, if the debtor pay the assignor, or procure his release of the debt, after notice of the assignment, it will not affect the rights of the assignor. Swan’s Treatise, 393; 3 John, 425 ; 13 Mass., 304; 1 John’s cases, 411; 11 John, 47; Patterson v. Wilkins, Wright, 501.
    The converse of the above proposition is this: that until notice is given, the debtor may pay the assignor, or may procure his release, for it is done innocently so far as the debtor is concerned. 16 Am. & Eng. Ency., 757, etc. ; 1 Am. & Eng. Ency., 840; Freeman on Judgments (last ed.), 426; 40 La. Ann., 273; 39 Minn., 382 ; 48 Pa. St., 70.
    Section 426, Freeman on J udgments : The claim made by plaintiff in error, that the filing of the original assignment of the judgment with the clerk of the common pleas court was a sufficient notice of the assignment to bind the defendant in error, is met by 40 La. Ann., 273 ; 48 Pa. St., 70 ; Bury v. Hartman, 4 S. & R., 178.
    Circumstances that might excite suspicion, not amounting- to bad faith, in the purchase of notes, are no defense. Kitchen v. Loudenback, 3 C. C. R., 228; s. c. 2 Circ. Dec., 129; Johnson v. Way, 27 Ohio St., 374; Kitchen v. Loudenback, 48 Ohio St., 177.
    Notice should be given to the debtor to keep him for binding the pledgee making payments to the pledgor. William v. Ingersoll, 89 N. Y., 518.
    Between the assignee of a chose in action and the debtor, the rights of the parties are determined by the time the debtor had notice, not by the time of assignment. Miller v. Kreter, 76 Pa., 78 ; 18 Eng. & Am. Ency., note 5, top 642.

      The statute makes certain records constructive notice equivalent to actual notice.
    ■ As to deeds, etc., section 4134. As to Us pendens, section 5055.
    As to real estate judgments operate to charge third persons with notice, as per section 5056.
    As to liens of judgments appealed from, section 5236. As to liens of judgment from first day of term, section 5375.
    The law governing the assignment of claims and choses in action is the same in effect as the law relating to the assignment of a judgment. Wade on the Law of Notice, sections 431, 432, 434, 435, 440; Weakly v. Hall, 13 Ohio, 167.
   By the Court.

The contention of plaintiffs in error is that the filing of the assignment with the clerk of the court and the copying of that paper on the appearance docket constituted notice of the assignment to The Baltimore & Ohio Railroad Company, upon the ground that the assignment was a paper in the case, and that the garnishee was so far a party in the action as to be bound to take notice of its filing and recording. We think not. The case was concluded by the entry of final judgment, and whether or not the garnishee was bound to take notice of all papers filed in the case, no such duty devolved upon it to keep watch of the files and the docket to see whether or not the judgment in favor of Hull had been transferred to another. The payment to Hull having been made by the defendant in error in good faith, and without notice of the assignment, was a valid payment and discharg’ed the debt.

Judgment affirmed.


text:
    Hubbard, Treasurer, v. Topliff.

      County treasurer ts not “a party in any trust capacity” — Must give bond on appeal — Sections 5227 and 5228 Revised Statutes.

    A ®ounty treasurer is not “a party in any trust capacity” within the meaning of section 5228, Revised Statutes, and he cannot appeal from the court of common pleas to the circuit court without giving an undertaking as required by section 5227, Revised Statutes.
    (Decided June 6, 1899.)
    Error to the Circuit Court of Cuyahoga county.
    The defendant in error, Isaac N. Topliff, commenced an action in the court of common pleas against the county treasurer, seeking to enjoin the collection of certain taxes averred to have been illegally assessed against him. The judgment of the court was in favor of the plaintiff below, defendant in error here.
    Thereupon the treasurer gave notice of appeal to the circuit court, but gave, no appeal bond, claiming that as he was a county officer who had given an official bond and was appealing in the interest of his trust as such officer, he was not required to file an appeal bond in order to perfect his appeal. The original papers, together with certified copies of the docket and journal entries, were duly filed in the circuit court, and in that court a motion was filed to dismiss the appeal upon the ground that the appellant had filed no appeal bond.
    The motion was sustained and the appeal dismissed, to which the treasurer, by his counsel, excepted, and caused to be allowed and signed a bill of exceptions containing a copy of the official bond of the county treasurer, which bond is in the usual form as required by statute.
    Thereupon the county treasurer filed his petition in error in this court, seeking to reverse the judgment of the circuit court in dismissing said appeal.'

      P. H. Kaiser, for plaintiff in error.

      Boynton & Horr, for defendant in error.
   By the Court.

Appeals from the court of common pleas to the circuit court are controlled by sections 5227 and 5228, Revised Statutes, and not by section 6408.

Said section 5228 reads as follows: “A party in any trust capacity, who has given bond in this state with sureties according to law, shall not be required to give bond and security to perfect an appeal; and in such case the clerk of the common pleas court, at the expiration of thirty days from the entering of such judgment or order upon the journal of the court, shall, if not otherwise directed, make a transcript, which, together with the papers and pleadings filed in the cause he shall transmit to the clerk of the circuit court as in other cases of appeal. ’ ’

• Before the revision of the statutes in 1880, the right of appeal from a court of common pleas without bond was limited to executors, administrators and guardians, and by that revision the right of appeal without bond was given to “a party in any trust capacity.” An executor, administrator, guardian, assignee or trustee clearly acts in a trust capacity, while a treasurer, auditor, sheriff and other public officers act in an official capacity, and had it been the intention of the general assembly to extend the statute to appeals taken by officers, that intention would have been clearly expressed in the statute. We therefore hold that in order to perfect an appeal from the court of common pleas to the circuit court by a public officer it is necessary that an appeal bond be given as provided in section 5227, Revised Statutes.

Judgment affi/rmed.


author: Shauck, J.

text:
    Stuts, Administrator, v. Strayer, Administrator.

      Surety’s liability — not discharged by independent contract between principal parties, when.

    To discharge a surety from liability because of a variation in the contract without his consent, it is indispensable that the variation be in the terms of the contract by which the surety is bound. He will not be discharged by. an independent contract between the principal parties, though it may be contemporaneous and relate to the same subject, without varying the terms of the contract of the surety
    (Decided June 6, 1899.)
    Error to the Circuit Court of Logan county.
    Plaintiff in error brought suit in the common pleas court against the defendant in error to recover a balance on two promissory notes endorsed by the payee to his intestate. The notes differ only in amounts and dates of maturity, and the following is a copy of one of them :
    $213.00. Degrape, O., October 25, 1879.
    Eighteen months after date we, or either of us, promise to pay Jonathan Thatcher or order, Two Hundred and Thirteen Dollars, value received, with interest at 6 per cent, per annum. Payable at the Farmers and Merchants’ Bank, Degraff, Ohio.
    Dan S. Spellman,

      W. M. Strayer,
    A. J. Lippencott.
    The question for decision here arises on the second defense in the answer of Strayer’s administrator, which is as follows :
    2. For a second defense said defendant says that he is informed and he believes and avers the truth to be that said notes described in the petition were given by said Dan S. Spellman, principal, to Jonathan Thatcher, the payee named therein, as part consideration for the purchase of a printing press and newspaper outfit in DeGraff, Ohio; that by their contract the said notes were to be' drawn as said notes are set out in the petition, except that they were to bear interest at the rate of 8 per cent, per annum after maturity; that said notes were drawn as they are set out in the petition and signed by said Spellman, and at his request signed by said W. M. Strayer and A. J. Lippencott as his sureties, and in that form tendered to said Jonathan Thatcher, the payee therein named. Said Jonathan Thatcher then and there refused to accept said notes because they did not conform to the contract as aforesaid and did not call for interest thereon at 8 per cent, per annum after maturity. The said Dan S. Spellman and Jonathan Thatcher then and there, in the presence of said George Stuts, now deceased, or his authorized agent, without the knowledge or consent of said W. M. Strayer, this defendant’s testate, modified and altered said contract and notes by an additional paper then and there made and delivered with said notes by said Dan S. Spellman to said Jonathan Thatcher, by which paper it was agreed that said principal maker thereof should pajr interest on each and both of said notes from the date of maturity respectively until paid at the rate of 8 per cent, per annum. ■ A eopy of said agreement in writing is hereto attached, marked “Exhibit A,” and made part of this answer.
    Said paper writing was then and there in the presence of said George Stuts, deceased, or his authorized agent, attached to said notes, and they were then and there sold and assigned by said Jonathan Thatcher to said George Stuts, now deceased.
    Defendant further says that his intestate, W. M. Strayer, had no knowledge of said alteration of said contract at the time it was made or before the delivery of said notes to said Thatcher, or before the sale or delivery to said George Stuts, now deceased; and said alteration was a material one which avoided the said contract and surety-ship of said Strayer.
    To this defense the plaintiff interposed a demurrer which, in the court of common pleas, was sustained. The cause was tried at the October term, 1895, of the common pleas court, and the trial resulted in a verdict and judgment for the plaintiff for the amount claimed. This judgment was reversed by the circuit court at its February term, 1896, for the reason that the court of common pleas had erred in sustaining the demurrer to said second defense. Later proceedings were had in the case in the common pleas and circuit courts, but they are not material to the point to be decided nor to the judgment to be rendered.

      West <& West, for plaintiff in error.

      Roioenstine & Huston and A. Jay Miller, for defendant in error.
   Shauck, J.

The judgment recovered by the plaintiff at the October term, 1895, of the common pleas court should have been affirmed by the circuit court unless the facts alleged in the second defense are sufficient in law to defeat a recovery. Whether they are sufficient or not was, and continues to be, the only question of substance in the case. Those facts, briefly stated, are that the notes described in the petition were executed by the principal and his sureties in consideration of the purchase of chattels sold by the payee to the principal; that by their terms they were to bear but six per cent, interest after their maturity, instead of eight per cent, as required by the contract of sale, and that at the time of the delivery of the notes the principal, in response to the demands of the payee, executed his individual separate obligation in writing to pay the higher rate agreed upon after maturity, and that this was done without the knowledge of the surety. In support of the judgment of the circuit court it is said that the two instruments, being contemporaneous and having relation to the same contract of sale, are to be construed together, and being so construed there appears to be a change in the contract. Althoug’h these contracts are contemporaneous they are not between the same parties. By the second instrument the principal debtor assumed an independent obligation to' pay the interest required. by the original contract of sale and not embraced in the terms of the note executed by the principal and sureties, without in any manner attempting to effect a change in the contract to which the sureties were parties. The general rule upon the subject as stated in Brant on Surety-ship (section 378) is familiar and accurate: “Any agreement between the creditor and principal which varies essentially the terms of the contract by which the surety is bound without the consent of the surety, will release him from responsibility. ” The condition that to discharge the surety the variation must be in “the terms of the contract by which the surety is bound” is indispensable.

The judgment of the circuit court at its February term, 1896, is reversed, and that of the common pleas court at its October term, 1895, is affirmed.


text:
    Mosier et al. v. Parry.

      Construction of contract — Vendor contracts to sell property to vendees who agree to form corporation — Corporation not formed — Contract treated as between individuals entering into it — Not co-partners — Contract law.

    1. Where the language of a contract is of doubtful import, it is proper to ascertain the circumstances which surrounded the parties at the time it was made, the object intended to he accomplished, and the construction which the acts of the parties show they gave to their agreement, in order to give proper construction to the words they have used in the instrument, and to determine its legal effect.
    2. Where one who is the owner of certain tools and machinery connected with a stone quarry, located upon lands in his possession in which he has an interest as purchaser, enters into a contract with a number of others whereby the parties agree to form a corporation to operate the quarry and such owner, as party of the second part, agrees to sell his property rights and interests at a stipulated price, and take his pay therefor partly in cash and partly in stock of the corporation to be organized, and the property and rights are thereupon turned over to the parties of the first part, who retain possession and operate such quarry, and such corporation is not in fact organized, but the effort to organize it is abandoned, the contract will be treated not as one between the vendor and a corporation, but between the individuals who entered into it.
    3. Whether or not the parties to such contract would, as to strangers, be regarded as sustaining the relation of co-partners, such relation will not be held to exist between such vendor and the other parties to the contract.
    4. If otherwise the vendor be entitled to maintain an action at law against them for the purchase price of the property and rights so sold and delivered, the form of the contract will not prevent such action.
    (Decided June 13, 1899.)
    Error to the Circuit Court of Richland county.
    Leonard L. Parry, defendant in error, brought action in the court of common pleas of Richland county against A. M. Mosier, M. D. Harter, L. F. Harrington, B. F. Platt, W. L. Leonard, M. B. Bushnell, George W. Snyder, and W. A. Van Frank, as partners doing business under the firm name of the Mansfield Improvement Company, and individually, to recover for an alleged breach by them of a contract, a copy of which is as follows:
    “Memorandum of an agreement made this twenty-first day of September, A. D. 1893, by and between the following named persons: A. M. Mosier, M. D. Harter, L. F. Harrington, B. F. Platt, ~W. L. Leonard, M. B. Bushnell, George W. Snyder and W. A. Van Frank, individually and as a partnership doing business under the name of The Mansfield Improvement Company, and A. J. Twitchell and L. L. Parry, witnesseth:
    “That whereas the said parties hereto desire to organize a joint stock company to be incorporated under the laws of the state, to be located and have its principal place of business at Mansfield, in said state of Ohio, to be known as The Mansfield Stone and Sand Company, said company to be organized for the purpose of conducting the business of quarrying and selling stone and sand, also of working deposits of shale and selling the same.
    “Said incorporated company is to be organized with a capital stock of $50,000; fifty per cent, of each dollar of stock is to be paid up.
    “Said incorporated cbmpany is to be organized as soon as possible, and the business for which it is organized is to be pushed forward as rapidly as possible until said company is put upon a working basis.
    “It is hereby agreed by and between all parties hereto thair the twelve acre tract of land now occupied by L. L. Parry, lying in the southeast quarter of section 15, township 21, range 18, together with all the developments and improvements made thereon by the said Parry, shall be conveyed to said corporation by deed in fee simple.
    The said L. L. Parry shall be allowed and paid for his interest therein as follows: The sum of six thousand dollars, which is to be paid by said company to be formed to said L. L. Parry, which he agrees to dispose of as follows, to wit:
    Said $6,000 to be divided into two sums, $3,600 thereof, which said Parry is owing on said land, to said Improvement Company; said new company shall pay as follows: $1,400 cash down; the remaining $2,200 it is expected the members of said Improvement Company will take in stock of said company to be formed, and George W. Snyder, M. B. Bushnell, B. F. Platt and W. L. Leonard hereby agree to accept their portions thereof in stock, the interest of the other members of said Improvement Company in said $2,200 to be paid in stock or money as may be hereafter determined. The balance of said $6,000, to wit, the sum of $2,400, said new company is to pay in capital stock, to wit, the sum of $4,800 in the capital stock of said company, which said Parry hereby agrees to dispose of as follows, to wit: To turn the same over to the several members of the said Mansfield Improvement Company, in consideration that they make no charge of interest against said sum of $3,600 owing said Improvement Company from said Parry.
    Further, that the said L. L. Parry is to be employed by said corporation to be formed as superintendent at a salary of sixty dollars per month for the first six months, said employment to date from the time when said property is turned over by said Parry to said company.
    It is further agreed by the parties hereto that the said L. L. Parry is to receive and to be paid as a compensation for the work done on said tract of land, and the development already made by him thereon, the sum of $6,000 in the capital stock of said new corporation to be formed.
    Further, that the said L. L. Parry is to receive and be paid for all machinery and tools owned or used by him belonging to said quarry as per an itemized list thereof hereto attached marked exhibit “A,” the sum of three thousand dollars, to be paid in cash; provided, however, that the said Parry shall pay or cause to be paid all debts or claims owing thereon, or liens or claims against the same or any part of them, or if not so paid said company shall have the right to pay the same and deduct the amount so paid from said amount to be paid Parry as aforesaid, and pay him the balance thereof. The said incorporated company to be formed is to pay to B. F. Platt and Charlotte Spice the sum of one thousand dollars as consideration for right of way for switch or railroad track across the lands of said Platt and Spice, as contracted for by said L. L. Parry with said Platt.
    Said company is also to pay to A. J. Twitchell, W. L. Leonard and L. L. Parry the sum of one thousand dollars as consideration for damages to lots owned by them abutting on the north side of Vine street in the city of Mansfield, occasioned by the running- of said proposed switch or railroad track along the north line of said street, or in lieu thereof said corporation shall have the option of ■the purchase of said lots at the agreed price of $3,142.00 with interest from the date of this agreement.
    It is understood and agreed that this contract shall not invalidate the contract for the purchase of land by said Parry from the said Mansfield Improvement Company until said proposed company is fully organized and the consideration herein stipulated for are paid according to the terms thereof, and when so paid and performed said Parry shall immediately turn over to said company all property herein stipulated to be sold by him. And the making- of this contract shall not be considered in any way as an admission of the validity or invalidity of said contract between said Parry and said improvement company and shall not in any event be taken and considered as 'such.
    It is further stipulated and agreed between all parties hereto that each and every person hereto shall give his utmost personal attention to the immediate formation of said proposed corporation and perfecting the organization of the same, and for this purpose each person of this agreement pledges his hearty co-operation. It is understood and agreed by all parties hereto that said company shall be fully organized within thirty days from the date of this agreement.
    In testimony whereof said parties have hereunto set their hands on this twenty-first day of September, A. D. 1893.
    Mansfield Improvement Company,
    By W. L. Leonard, Trustee.
    A. M. Mosier.
    Michael D. Harter.
    L. F. Harrington.
    B. F. Platt.
    W. L. Leonard.
    M. B. Bushnell.
    Geo. W. Snyder.
    A. J. Twitchell.
    Leonard L. Parry.

      ~W. A. Van Frank.”
    In his petition plaintiff averred that he was, at the making of the contract, possessed of the tract of land described therein, and had opened and was working a valuable stone quarry thereon, and had made contracts with divers parties for a right of way for a switch from the main track of N. Y., P. & O. railway to said quarry; also the owner of a large quantity of tools and machinery used in and about said quarry. All of which property rights, contracts and developments defendants were desirous of being possessed of. and to effect that purpose entered into said contract. And, in consideration of plaintiff selling and transferring to defendants said land, they agreed to pay him $6,000, Hie sum of $3,600 to be paid to the Mansfield Improvement Company, in payment of that amount due from plaintiff to said company on the purchase price of the land, and the balance, $2,400 to be paid in the capital stock of The Mansfield Stone and Sand Company, which stock plaintiff agreed to transfer to the said Mansfield Improvement Company,'in consideration that the company should charge no interest on the $3,600 aforesaid.
    And in consideration of the work done by plaintiff on the stone quarry, and the development thereof by him and his property rights, the defendants agreed to issue to him $6,000 of the capital stock of said Mansfield Stone and Sand Company, said stock to be paid up, and to pay him the further sum of $3,000 in cash.
    Said stocks have never been issued. Plaintiff has done all he is required to do under the contract and has at all times been ready and willing, and has frequently urged the defendants to comply with the terms of the contract and to carry the same into effect. But the defendants have wholly failed, neglected and refused to pay plaintiff said moneys and stocks as in said contract provided.
    Wherefore, plaintiff prays judgment against defendants for $3,000 and interest from September 21, 1893; also that an account be taken of the value of said $6,000 of the capital stock, and that he be paid the full value thereof, and for all other proper relief.
    The defendants, by their answer, admitted the making of the contract, but denied all other allegations of the petition.
    At the trial, plaintiff, after offering some testimony tending to prove his claim, offered to show that the property in question was taken possession. of by the Mansfield Improvement Company and parties defendant in the .ease, and that they ever since have held said property as their own, but the court refused to permit the introduction of said testimony, and, construing the contract to be one with a corporation not yet in existence and therefore void, directed a verdict for defendant. The circuit court held that the trial court erred in rejecting the evidence offered regarding the defendants’ taking possession of the property, and in so directing the jury, and, construing the contract to be one between promoters, and that de-, fendants were individually liable, reversed the judgment of the common pleas.

      Cummings <& McBride, for plaintiffs in error.
    A study of this contract shows conclusively that this defendant in error intended to look to the proposed corporation as his paymaster and never intended to look to the promoters individually. He was a promoter himself. He entered into the scheme to form this corporation. He was one of the signers of the contract. He entered into the work of creating a something that was to be his paymaster when formed. In all cases where the question of liability of promoters is held and discussed the contract was with- a stranger; but in the case at bar it is made with one of - their own number, who is and was fully cognizant of all the facts and knew with whom he was contracting and to whom he must look for his pay, if he received any. In every sentence in the contract where pay is mentioned, the new company is expressly named as paymaster. His signing of this contract signified his acceptance of its terms and his acceptance of the new company as paymaster. He expressly says that he looks to the new company and not to the promoters individually for his pay.
    The question of the liability of promoters is an open one in Ohio, and we must then be governed by the text writers and decisions of other states. Clark on Corporations, 112, 113; Carmody v. Powers, 60 Mich., 26; 16 Am. Law Rev., 281.
    This party says as plainly as language can express it that he agrees to look to some other fund for his pay. The contract that he signs says that his paymaster is the new company. He certainly will not be permitted to repudiate his own contract so far as his interest is concerned and insist on its enforcement so far as the other parties to it are concerned. The law compels him to be consistent. He cannot blow “ hot and cold.” Beach on Contracts, Vol. 2, section 1031; Kelner v. Baxter, L. R. 2, C. P., 174; Melhado v. Posto, Algre & C. R. Co. L. R. 9, C. P., 503; Kerridge v. Hesse, 9 Car. & P. P., 200; Landman v. Entwistle, 7 Ex., 632; 21 L. J. Ex., 208.
    When persons accept a contract which they then believe and intend to be with a corporation, the members or stockholders of the supposed corporation cannot be held liable, as partners or otherwise, without giving to the contract an effect which no one supposed or intended it to have when made. Pittsburgh Mining Co. v. Spooner, 17 Am. St., note 162; Planters’ Bank v. Padgett, 69 Ga., 159; Merchants’ Bank v. Stone, 38 Mich., 779; Blanchard v. Caull, 44 Cal., 440.
    The petition in this ease is based upon nothing more than an offer to contract. It is distinctly stated in the contract that it is proposed to form a corporation. When the company is formed it will do certain things. It is making an offer to perform something in the future whenever it has a legal existence. It never secured a legal existence, therefore the contract is void for want of mutuality. D. W. V. & X. T. Co. v. Coy, 13 Ohio St., 84.
    The circuit court in deciding this case did what the Supreme Court said it could not do, look at the purpose of the party.
    In the case at bar the court can only inquire whether the defendants have incurred a legal obligation. This is to be determined from the contract. Who did Parry intend to be his paymaster? Phillips Academy v. Davis, 6 Am. Dec., 162.
    These authorities dispose of the question of mutuality of the contract.
    Could the defendant in error maintain this action in the court below? We claim he could not. Parry and Twitchell are both parties of the second part. There is no averment in the petition that one has assigned to the other.
    Sections 4993, 5005, 5006 and 5007 of the Revised Statutes 'of Ohio provide who must be joined as plaintiffs. Bastges v. O'Neill, 13 Ohio St., 72; Ballard v. Collier, 8 Ohio St., 43; Masters v. Freeman, 17 Ohio St., 323.
    Promoter can not sue a promoter.
    In the case at bar, the contract says, that all parties hereto are desirous of forming a corporation. This makes every one who signed the contract a promoter.
    It is a familiar proposition of law that one partner can not maintain an action at law against one or more or all of his co-partners for anything due him on account of the partnership business. The remedy is in equity. Thompson on Corp., Vol. 1, section429; Thompson on'Corp., Vol. 3, section2969.

      These parties to this contract all being desirous of forming a corporation, are each and all promoters. That being the case, this action, under the authorities above cited, can not be maintained.
    It was the duty of the court to construe this contract. It would have been error to submit the construction to jury. Monnett v. Monnett, 46 Ohio St., 30.
    Contracts are construed by the intention of the parties gathered from the whole contract. McCoy v. Bixbee, 6 Ohio, 310; Kelley v. Mills, 8 Ohio, 325; Stein v. Prairie Rose, 17 Ohio St., 471.
    Each expression should receive the obvious meaning which the context and whole instrument require to make each consistent with the whole and carry out the object of the parties. Railroad Co. v. Railroad Co., 44 Ohio St., 287.
    In constructing a contract the situation and relation of tbe parties, the object sought to be obtained, and the subject matter, are indispensable aids to gathering the intention. Chamberlain v. Painesville & Hudson R. R., 15 Ohio St., 225.
    The petition does not allege that Parry was the owner of anything, but that he was in possession of certain described real estate. Garner v. McCullough, 48 Mo., 318; Lewis v. White, 16 Ohio St., 444; Pomeroy on Remedies, 597, 603.

      W. S. Kerr and Twitchell & Hartman, for defendant in error.
    . The first important consideration and the feature which completely refutes the argument of counsel for plaintiff in error, is that the contract itself provides that it is between the parties hereto and excludes any idea that the stipulations were between the parties and a company to be formed.

      There is then no warrant for the statement of counsel that Parry looked to some other fund for payment. So far as we can learn from the contract, he looked to the parties hereto and to none other.
    Plaintiff’s in error were promoters of the new corporation, and it becomes important, therefore, to ascertain the legal rule of liability as to persons standing in such relation.
    The question is a new one in this state. The case cited by counsel, viz: The D. W. V. & X. T. Co. v. Coy, 13 Ohio St., 84, decides no issue in this case.
    The rule as to the liability of persons contemplating the formation of a corporation, with reference to matters relating to such corporation when formed, is laid down in Carmody v. Powers, 60 Mich., 26; 26 N. W., 801. This decision is especially valuable as a precedent for the reason . that 'the facts on which it is based are almost identical with those in the case at bar. Hersey v. Tulley (Colo. App.) 44 Pac., 854.
    In some of the cases cited, the promoters are held liable as partners. But in the majority of cases the liability is said to rest on the law of agency; the promoters being held agents of an undisclosed principal; Accordingly, persons dealing with them may, on the incorporation of the company and its ratification of the contracts made in its behalf, elect to have their remedy either against the individuals, or against the corporation. Roberts Mfg. Co. v. Schlick, (Minn.), 64 N. W., 826.
    Even though the contract is made in behalf of the proposed corporation, and the corporation is afterward formed and ratifies the contract of its promoters, yet the latter are primarily liable, and the creditor may elect to have his remedy against either. Kelner v. Baxter, L. R. 2 C. P., 174 (cited Beach, Corp., 159); Queen City Furniture Co. v. Crawford, (Mo.) 30 S. W., 163; Martin v. Fewell, 79 Mo., 401; Johnson v. Corser, 34 Minn., 355; Huslett v. Worthspoon, 2 Rich. Eq., 395; Beach on Private Corporations, section 159.
    The rule is similarly stated by other text-book writers. Clark on Corp., section 47; Cook on Stock and Stockholders, 1 ed., section 233; Spelling on Private Corp., section 838; Wait, Insolv. Corp., section 71.
    Prom a study of these authorities it would seem to be the undoubted rule of law, that, in order that a promoter may relieve himself from liability on a contract entered into prior to the organization of the company, three things must concur:
    1. The contract must have been made in behalf of the proposed corporation.
    2. The corporation must have been formed and have ratified the contract of its promoters.
    3. The creditor, after such ratification, must have agreed to look to the corporation for the performance of his contract.
    If a single one of these elements be lacking, then the promoters would be liable personally.
    In the case at bar none of these elements are present. The contract was not made in behalf of the proposed corporation, The Mansfield Stone and Sand Co., and, as the latter never came into existence, it follows, of course, that Parry could never have agceed to look to it for the performance of his contract.
    In the case of Hersey v. Tulley, 44 Pac., 854, the plaintiff was distinctly and explicitly informed that the work was to be done for the proposed corporation, and he charged it on his books to the proposed corporation, and yet it was held that the promoters were personally liable.
    It is further held that even where the plaintiff agreed to look to the corporation alone, the latter must have assumed the liability, in order to relieve the promoters. Beach on Corp., section 159; citing Whitewell v. Warner, 20 Vt., 425.
    But the contract in the case at bar does not purport to be signed in behalf of the proposed corporation but is signed by the promoters, as individuals and as a partnership. ,
    Suppose The Mansfield Stone and Sand Co., had actually been formed, and the money and stocks mentioned in the contract duly tendered Parry, and, thereupon Parry had refused to fulfill his part of the engagement. Who would have been the proper plaintiff in an action to enforce this contract against him?
    The answer to this question will be found in the cases of Penn Match Co. v. Hapgood, 141 Mass., 145; 7 N. E., 22; Abbott v. Hapgood, 150 Mass., 248 ; 22 N. E., 907.
    It is argued that Parry was a promoter himself, and that he entered into the scheme to form this corporation along with the other signers of the contract. This claim rests entirely on a single sentence of a contract: “The parties hereto desire to organize a joint stock company, etc.’: McCoy v. Bixbee, 6 Ohio, 313; Railroad Co. v. Railroad Co., 44 Ohio St., 287.
   Spear, J.

The courts below regarded the case as turning upon the construction of the contract. If it were a contract between Parry and a corporation, anticipated but not yet in existence, there ®ould be no recovery. If, on the other hand, it were a contract between individuals, there might be, if the testimony warranted it; and that is the principal question argued here. '

It seems to be conceded, at least it is to us apparent, that the contract is confusing, and that, unless light may be thrown upon its meaning by surrounding circumstances, the intention of the parties in several important respects, will remain in doubt. But, reading the instrument in the light of the situation of the parties at the time and of the object to be accomplished, we may be aided in reaching a satisfactory construction. How> then, were the parties situated, and what did they undertake to do? Prior to the making of the contract Parry had purchased of the Mansfield Improvement Company, (a partnership composed of the plaintiffs in error) a tract of land on which he had developed a stone quarry. He had also bought and placed on the ground a quantity of quarrying* machinery, and had contracted for a right of way for a railroad switch leading to the quarry. He had possession under a contract of purchase. A deed had been executed by the trustees of the company and placed in the hands of a third person. But the company obtained possession of the deed, and when, afterwards, a tender of money and securities was made by Parry, in accordance with the terms of the contract, and the deed demanded, it was refused. Subsequently, plaintiffs in error, desiring to repurchase the property, together with the improvements and machinery owned by Parry, and form a corporation for its management, induced this contract to be executed. The property mentioned in the contract was turned over by Parry to the plaintiffs in error, and they have since remained in the possession of it. Some steps were taken looking to the formation of the contemplated corporation, but the organization was not perfected and so never had legal existence.

The contention of plaintiffs in error is that the contract, so far as payment was concerned, was one between Parry and the anticipated corporation, and that he never intended to look to the promoters individually. The contract itself hardly justifies this conclusion. It purports to be between the plaintiffs in error, individually, and as a partnership, and A. J. Twitehell and L. L. Parry. After a provision agreeing to form an incorporated company, “it is agreed by and between all the parties hereto” that the land and improvements shall be conveyed to the corporation. It then provides that Parry shall be allowed and paid for his interest in the property $6,000. This is to be paid by the new company, but it does not purport to be the agreement of the new company; it is in terms the agreement of the parties. j^Then “it is further agreed by the parties hereto” that Parry is to receive and be paid, as compensation for work and development already made, $6,000 in the capital stock of the new corporation, and for machinery and tools owned and used by him belonging to the quarry, the sum of $3,000, etc.: all the stipulations are, and purport to be, by the parties. Nor is the construction contended for aided by the conduct of the parties. Parry turned over the property, improvements and machinery to the plaintiffs. in error and they accepted, and have continued to occupy and use the same, a course of conduct not consistent with the idea of reliance by Parry on the new corporation for his pay. In the light of all the surroundings and of the conduct of the parties, we think the language of this instrument imports a contract between the parties, and not a contract assuming to bind a corporation yet to be formed, and that, as treated by the parties, it means that plaintiffs in error assumed responsibility for the payment of the consideration for the property which they accepted and have retained, and that Parry relied upon that assumption. Upon the face of the paper, it is true, the obligation for payment of compensation, and for the formation of the new company, appear to rest upon Parry as well as upon the others. But, in essence, and reality, they were adversary parties. Parry had something of value to sell; the others wished to possess themselves of it. He agreed to sell at a stipulated price, and all agreed that he should be paid in a certain manner, to-wit: by money and corporate stock through an agency to be created, viz: a corporation. They had the power and ability to form and perfect such corporate agency; Parry did not. They failed to create the agency, and thus violated their contract. How different does it leave the parties than if there had been no stipulation for a new company? We confess we see no difference in essence. They now propose having thus failed to do what their agreement required, to hold on to Parry’s property without making him any compensation whatever. The position smacks of fraud; at least a court of justice can hardly be expected to sanction it. And looking at this instrument from the standpoint of the parties when it was made, and giving due effect to the purpose of each, and treating. the transaction as the parties treated it by their conduct before as well as after the making of the paper, and continuously to the time of trial, it seems but just to hold that the plaintiffs in error accepted the interest and property rights of Parry with the obligation imposed as to the payment of the stated compensation, and should not now be permitted to interpose the thin film of an unorganized corporation between themselves and the performance of that obligation.

But it is further claimed that this action cannot be maintained because, the purpose of forming a corporation having been abandoned,' these parties, Parry included, became partners, and one partner cannot sue co-partners at law. No such question séems to have been made directly by pleading, nor in any way in the trial court; but if it had been so made we do not see how it could have been maintained. The proposition of law is correct, and, as to outside parties, perhaps might have application here. But looking this contract through and through, and construing it in the light of the situation, it cannot reasonably be concluded that Parry understood, or ought to have understood,that, in any event, he was forming a co-partnership with the plaintiffs in error. His position as vendor excluded the idea that he desired to take in a number - of partners in the management of the business, and the fact of yielding to plaintiffs in error absolute and exclusive possession of the property is wholly inconsistent with any idea of retaining a joint interest as co-partner.

It is insisted also that Parry cannot maintain this action alone; that he and Twitch ell are both parties of the second part, and there is no averment that one has assigned to the other. This proposition overlooks the fact that Twitchell has no interest in the property which Parry contracted to sell, and which plaintiffs in error have possession of. His presence as plaintiff, therefore, was not necessary and would have been a misjoinder.

Other propositions of error are urged. W e do not think any well taken. The judgment of the circuit court reversing that of the common pleas will be

Affi/t'mecL.