author: Price, J.

text:
    Cramer v. The Southern Ohio Loan & Trust Company.

      Power of building and loan associations — To assess and collect from, members dues, fines, interest, etc. — Under section 8886-3, Revised Statutes — Said section a valid enactment — Section 26 of article 2 and section 2 of article 1 of Ohio constitution— Dues, fines, premiums, etc., not deemed usurp — Question of competitive bidding in securing loans.

    1. Section 3836-3, Revised Statutes, which confers power on building and loan associations “to assess and collect from members and depositors, such dues, fines, interest and premium on loans made, or other assessments as may be provided for in the constitution and by-laws,” — and which further provides, that “such dues, fines, premiums or other assessments, shall not be deemed usury, although in excess of the legal rate of interest,” — is a valid enactment, and is not in conflict with section 26 of article 2, nor with section 2 of article 1 of the constitution of Ohio.
    2. Under the provisions of said statute, the premium for a loan, if reasonable in amount, need not be ascertained by competitive bidding for precedence in obtaining the loan, but it may be fixed at a uniform rate by the constitution and by-laws of the association.
    (No. 8846
    Decided May 2, 1905.)
    Error to the Circuit Court of Paulding county.
    The defendant in error began a suit in the court of common pleas of Paulding county against the plaintiff in error and his wife (who is now deceased) to foreclose a mortgage on certain real estate in that county, and for a personal judgment against the husband.
    The petition alleges that plaintiff is a corporation under the laws of Ohio, and organized for the purpose of raising money to be loaned among its members, and that it is engaged in that -business; that on the twenty-fourth day of June, 1896, under an application in writing for. that purpose and submitted to said company, Cramer became a member of the company and a stockholder to the extent of seventeen shares of installment stock of class B, of one hundred dollars each share; that on the same day, he made application for a loan of $1,700 and offered as security for the same the mortgage in suit, an assignment of all fire insurance on the buildings and a transfer of the seventeen shares of stock; that the application contained, besides a description of the-real estate, several conditions with which he would comply; that acting on the application the company loaned to Cramer $1,700, and as security for which, he gave the mortgage, assigned the fire insurance and transferred the said shares of stock.
    It is alleged that Cramer, as one of the stipulations of the mortgage “agreed to pay monthly without demand therefor until said loan was fully repaid, as follows: 'the dues upon said seventeen shares of stock; the five per cent premium bid upon said $1,700; five per cent interest on said $1,700; and in addition thereto, to pay all fines, penalties and other charges which should become due against said shares, and all taxes, assessments, costs of insurance and other charges upon said premises, in accordance with the constitution and by-laws theretofore duly adopted by said company.’ ” The dues were fixed at $8.50 per month on the seventeen shares. The company alleged that Cramer failed to keep and perform the agreement made in his application and mortgage, so that on the fourteenth day of October, 1902, the sum due upon said loan, including principal, interest, premiums, fines incurred on said stock and cost of insurance paid by the company, according to the terms of the agreement, amounted to $2,787.35 and that Cramer had paid thereon in cash and dividends to be applied, only the snm of $1,391,83, leaving a balance dne at that date of $1,395.52. For this amount the petition prays judgment and foreclosure.
    The answer of Cramer admits that he obtained a loan from the Southern Ohio Loan & Trust Company for $1,700 and gave his mortgage to secure the same; admits that he has paid thereon the sum of $1,391.83, but he denies each and every other allegation of the petition.
    He further answered, “that section 3836-3 of the Eevised Statutes of Ohio, in so far as it presumes to authorize building and loan associations to collect dues, fines, interest and premiums in excess of the legal rate of interest, is unconstitutional, against the public policy of the said state of Ohio, and void. ’ ’
    He further claims in the answer, “that .any amount or sum of money exacted or attempted to be collected by the # * * company is usurious, and he claims the privilege of the usury statutes of the said state of Ohio.”
    For the purpose of a settlement, and for no other purpose, he tendered in the answer, the sum of $900; and he prays that “all amounts collected and heretofore paid in excess of the legal rate of interest, be credited to him as payments of that amount of principal, and if the amount found to be due is less than the amount here tendered, that the plaintiff be decreed to pay all costs after the date .of making of the said tender.”
    A jury was waived and the cause was heard and submitted to the court who made findings of fact in substance, that the plaintiff in that court, on the twenty-fourth day of June, 1896, was and at the time of the trial, a domestic building and loan association, duly organized and empowered under the laws of Ohio, as such associations are described and defined by section 1 of “an act to provide for the organization, regulation and inspection of building and loan associations, passed May 1, 1891 (88 O. L., 469).” Further, that on the twenty-fourth day of June, 1896, defendant purchased from said company seventeen shares of its installment stock of the par value of one hundred dollars each and became a member of said association, and that on the same day and as part of the same transaction, he made application to the association for a loan of $1,700 in all respects as stated in the petition, which loan was granted on July 24, 1896, and that sum was paid to Cramer, on the terms and conditions aforesaid, and that to secure the payment of the loan, he gave to the association his mortgage deed on the real estate described in the petition; and that the mortgage contained by reference thereto, all the provisions and agreements in the application for stock, and for the said loan. This mortgage was filed for record on the same day and recorded the succeeding day.
    The court found the terms and conditions of the mortgage to be as' above stated, but found that the premium mentioned in said application and mortgage was not fixed by any competitive bidding; but by the terms and provisions of the constitution and by-laws of said association, the said defendant and all other borrowers from said association of class B therein referred to, were required to pay interest on their respective loans at the rate of five per cent per annum, payable in equal monthly installments, together with a so-called premium at the uniform rate of five per cent per annum on said loan, in addition to said so-called interest. In addition to the findings it was conceded and agreed in open court at the trial that the application and mortgage were signed by Cramer, and that book Exhibit “C” is a true copy of the constitution and by-laws of the association and was such when the loan was negotiated and made, and that before the loan was made, Cramer had issued to him on his application, seventeen shares of stock class B, in said association, and that before he received his loan, he transferred said stock to the association.
    It was further conceded that if plaintiff’s contention in this case is sustained, and its basis of computation is correct, the amount due it would be $1,-480.89, but if the court should find the contract to be usurious and determine that the rate of interest to be charged is six per cent, computed on the basis of partial payments, then the amount due is $840.03 to December 10, 1902; but if the contract be usurious and the rate of interest the plaintiff should recover should be five per cent, then, computed on the basis of partial payments to the same date, the amount would be $646.68. The court found the contract and mortgage to be usurious, and decided that the statute entitled “an act to provide for the organization, regulation and inspection of building and loan associations, passed May 1, 1891 (88 O. L., 469), in so far as it allows any such company to assess and collect from members and depositors such dues, fines, interest and premium on loans made, or other assessments as may be provided in the constitution and by-laws,” and that “such dues, fines, premiums and other assessments, shall not he deemed usury, although in excess of the legal rate of interest.” is unconstitutional and void.

      The court also held that the plaintiff’s claim should be computed on the basis of $1,700 as a loan at six per cent interest, to be computed on the rule of partial payments for each payment, by which rule there was then due the sum of $981.67 to draw interest from the first day of the term of court. Judgment was rendered for that amount and foreclosure ordered.
    A motion for new -trial was overruled, and the casé taken on error to the circuit court where the judgment was reversed, and that court rendered a judgment in favor of the association for $1,480.89 with six per cent interest thereon from June 2, 1903, and ordered foreclosure of the mortgage.
    Cramer prosecutes error to reverse the judgment of the circuit court.

      Mr. Vance Brodnix, attorney for plaintiff in error,
    cited and commented upon the following authorities:

      State v. Association, 29 Ohio St., 92; Bates v. Association, 42 Ohio St., 655; State v. Association, 35 Ohio St., 258; Demland v. Association, 11 Circ. Dec., 249; 20 C. C. R., 223; Mykrantz v. Association, 10 Circ. Dec., 250; 19 C. C. R., 51; Palmer v. Tingle, 55 Ohio St., 423; Coal Co. v. Rosser, 53 Ohio St., 12; State v. Gardner, 58 Ohio St., 599; Covington Co. v. Cleymer (decided Jan. 14, 1903, in U. S. C. C.); 8 Ency. Law & Proced., 1040; Admrs. of Tracy v. Admrs. of Card, 2 Ohio St., 431; secs. 3183, 3236, 3836-1, 3836-3, Rev. Stat.; 64 O. L., 18; 88 O. L., 464.

      Messrs. Snook & Savage and Messrs. Waters & Bayliss, attorneys for defendant in error,
    cited and commented upon the following authorities:

      Thompson v. Kelly, 2 Ohio St., 647; Railway Co. v. North Twp., 1 Ohio St., 105; Loomis v. Spencer, 1 Ohio St., 153; Paris Twp. v. Cherry, 8 Ohio St., 564; Hagerman v. Association, 25 Ohio St., 186; Eversmann v. Schmidt, 53 Ohio St., 174; Morawetz on Corporations, par. 128; Cass v. Dillon, 2 Ohio St., 608; Railroad Co. v. Commissioners, 1 Ohio St., 77; State v. Kendle, 52 Ohio St., 356; State ex rel. v. Baker et al., 55 Ohio St., 1; State v. Nelson, 52 Ohio St., 97; State ex rel. v. Ferris, 53 Ohio St., 336; Fox v. Fox, 24 Ohio St., 335; Adler v. Whitbeck, 44 Ohio St., 539; Senior v. Ratterman, 44 Ohio St., 661; Marmet v. State, 45 Ohio St., 63; Kimbleawecz v. State, 51 Ohio St., 228; Cass Twp. v. Dillon, 16 Ohio St., 38; State v. Harris, 17 Ohio St., 608; State v. Wilksville Twp., 20 Ohio St., 288; State v. Richland Twp., 20 Ohio St., 362; Holst v. Roe, 39 Ohio St., 340; Anderson v. Brewster, 44 Ohio St., 576; Hagerty v. State, 55 Ohio St., 626; Probasco v. Raine, 50 Ohio St., 378; Bates v. Association, 42 Ohio St., 655; State v. Association, 29 Ohio St., 92; Lucas v. Association, 22 Ohio St., 339; Receiver v. Schmitt, 53 Ohio St., 174; Mykrantz v. Association, 10 Circ. Dec., 250; 19 C. C. R., 51; Palmer v. Tingle, 55 Ohio St., 423; Spies et al. v. Loan & Trust Co., 24 C. C. R., 40; Association v. Desnoyers, 26 O. C. C., 352; 2 O. L. R., No. 6, 337; Association v. Roberts, 4 Dec., 489; 5 N. P., 86; Thornton & Blackledge on B. & L. Associations, sec. 19; Am. & Eng. Ency. Law (2 ed.), 1054; McLaughlin v. Association, 62 Ind., 264; Shaffre v. Association, 64 Ind., 600; Vermont Co. v. Whithed, 2 N. D., 82 (35 Am. & Eng. Corp. Cas., 250); Association v. Lampson, 62 N. W. Rep., 544; Association v. Heimbach, 79 N. W. Rep., 609; Winget v. Association, 21 N. E. Rep., 12; International Co. v. Wall, 55 N. E. Rep., 431; Association v. Elbert, 54 N. E. Rep., 753; 1 Gav. & H. St., 406; sec. 4449, Burns’ Rev. Stat., 1894; sec. 3412, Horner’s Rev. Stat., 1897; Reeve v. Association, 18 L. R. A., 134; Bedford v. Association, 181 U. S., 227; Association v. Heidt, 43 L. R. A., 689; Floyd v. Loan & Invest. Co., 54 L. R. A., 536; Smoot v. Association, 41 L. R. A., 589; secs. 3836-1, 3836-3, Rev. Stat.; 88 O. L., 469; sec. 1, art. 2, Const. of Ohio; sec. 26, art. 2, Const. of Ohio; secs. 1 and 2, Bill of Rights.
   Price, J.

The amount in controversy between the parties is $499.22 — the difference between the judgment of the court of common pleas and that of the circuit court. This amount the plaintiff in error claims is all usury and should not be charged against him.

The Southern Ohio Loan & Trust Company is an Ohio corporation, organized under the provisions of section 3836-1, et seq., Revised Statutes of Ohio. That section provides: “A corporation for the purpose of raising money to be loaned among its members shall be known in this act as a building and loan association. Associations organized under the laws of this state shall be known in this act as ‘domestic’ associations, and those organized under the laws of other states or territories, as ‘foreign’ associations. Associations may be organized and conducted under the general laws of Ohio relating to corporations, except as otherwise provided in this act.”

While this company did not adopt a name directly indicating that it became and is a building and loan association, it organized as such and announced its purposes in the second article of the constitution as follows: “The Southern Ohio Loan & Trust Comr pany is a corporation organized for the purpose of raising money to he loaned among its members to aid them in the purchase and building of homes, and to provide the advantages usually expected from savings banks and other similar institutions. ’ ’ This article embraces in terms the definition of a building and loan association found in the above section of the statute. The name of the corporation so organized is not material, if it has the purposes and characteristics named in the statute and in its own constitution. This requirement seems to have been fully met, for we find it further provided in the same article: ‘All stock is paid for in cash, or in monthly installments, as provided for by the by-laws of this company.

“Whenever the amount of dues paid and dividends credited on any share shall equal the face value of said share, it shall be fully paid in and be considered to have fully matured, at which time it is subject to withdrawal, etc.”

Again from same article: “Annually on the first business day of January, so much of the earnings as may be necessary shall be set .aside to pay the current expenses of the company and the interest on deposits ; so much as shall be decided by the hoard of directors shall be reserved for the payment of contingent losses, and the residue shall be transferred as a dividend and credited to the shares of stock in force in proportion to their average monthly balances. * # *.”

Article ten of the by-laws provides that the funds of the company shall be loaned only to members on real estate security, and further, that the borrower, “shall in all cases receive the full amount applied for, for which he shall pay five per cent interest, and "bid five per cent premium per annum. Interest and premium must be paid in monthly installments, and .accompany the dues to the home office.”

The same article provides, that if a member neglects to make his payments according to the terms of Tiis mortgage and application, he shall be liable to an action at law for their recovery besides the principal, all dues, interest, premiums, cost of insurance, taxes, fines due and owing the company (association).

We have referred to so much of the constitution and by-laws of this association as seems necessary lo show that its organization and operation are ■clearly within the scope of section. 3861-1, supra. The clause in article 2 of the constitution of the corporation — “and to provide the advantages usually expected from savings banks and other similar institutions,” is not involved in this case. It is not assumed by it that general banking powers will be exercised, and in the present case it is apparent that such powers were not exercised. Dearborn v. Northwestern Savings Bank, 42 Ohio St., 617.

Therefore, we find, as did the lower court, that the •defendant in error, plaintiff in the foreclosure action, was and is a domestic building and loan association, •organized and empowered under the laws of Ohio as described and defined by the act of the legislature above named.

The plaintiff in error desired to borrow $1,700, and in order to obtain a loan of that sum, subscribed for seventeen shares of the stock in the association, and. thereby became one of its members. He signed a written application for the loan to the full par value of the shares, and according to the requirements of the association, found in its constitution and by-laws, he executed and delivered to it a mortgage on real estate described in tbe petition; and as further security. transferred back to the association the seventeen shares of stock. The constitution and by-laws were made part of the covenants and stipulations of the application and mortgage.

The condition of the mortgage now involved obligates Cramer to pay, (1) the sum of $8.50 per month, being the monthly dues on the seventeen shares of stock, to be credited as provided in the constitution and by-laws; (2) the interest due on $1,700 or money so advanced, payable monthly as specified in the same instruments; (3) the premium bid on said $1,700, or money so advanced, as specified in said constitution and by-laws; (4) all fines, penalties and other charges which said Cramer shall incur as a member of the association; (5) all rents, taxes, assessments, costs of insurance and other charges upon said premises in accordance with the constitution and by-laws.

"When we turn to the by-laws for the rates of interest and premium, we find the interest charged to be five per cent and the premium fixed at five per cent. The court below found, as we do, that the premium was not ascertained by competitive bidding, or, as sometimes called, at auction in open meeting of the members, and on that account it is claimed that the association determined an arbitrary or level' premium, which renders the contract usurious, when, such premium and interest are added together.

Here, it becomes necessary to examine the legislation of this state upon the authority committed to* such associations, and we find their first statutory' authority in the act of February 21, 1867 (64 O. L., 18). It authorized any number of persons not less: than five, to associate themselves together and become a corporation * * * ‘for the purpose of raising moneys to he loaned among its members for use in buying lots or houses, or in building or repairing houses, and such corporation shall be authorized and empowered to levy, assess and collect from its members such sums of money by rates of stated dues, fines, interest on loans advanced, and premiums bid by members for the right of precedence in taking loans as the corporation by its by-laws shall adopt. * * * Provided, that the dues, fines and premiums so paid, * * * although paid in addition to the legal rate of interest on loans taken by them, shall not be construed to make the loans so taken usurious, # # # 7

The act was amended in some respects May 5, 1868, and again May 9, 1868, but the feature of a competitive bidding was retained. Under these statutes, we have the cases of State ex rel. v. The Greenville Building & Saving Association, 29 Ohio St., 92; The State ex rel. v. The Oberlin Building & Loan Association, 35 Ohio St., 258; and Bates v. People’s Savings & Loan Association et al., 42 Ohio St., 655; and they decide, that under the statutes then in force, in order to save the premium from being obnoxious to our laws against usury, it must have been paid for precedence in obtaining the loan and at competitive bidding. Undergoing some changes subsequently, not important here, the statutes were re-cast in an act passed May 1, 1891 (88 O. L., 469), from which we have quoted in the earlier part of this opinion. Under the head of powers (section 3) it is now provided, “such corporation shall have power, * * * to assess and collect from members and depositors such dues, fines, interest and premium on loans made, or other assessments, as may be provided for in the constitution and by-laws. Such dues, fines, premiums or other assessments shall not be deemed usury, although in excess .of- the legal rate of interest * * Section 3836-3, Eevised Statutes.

The statute now in force, and which was in operation when- the - mortgage in suit was executed, omits the former requirement, or rather condition of competitive bidding as to the premium to be paid, and therefore, if the statute is valid, usury cannot be asserted as tainting the loan in question.

The legislature, we must assume, had a reasonable motive for this material change, for before that time, this court, in the cases cited under the former law, held, that if the premium was not bid for precedence in obtaining the loan, it was usurious, in case it and the interest exceeded the legal rate to be charged under the interest laws. We think a reason for the change in the statute may be readily found. Experience with competitive bidding did not tend to fairness-and equality among the members. The amounts -of premiums bidden at different times and by different borrowers were not uniform. At one time competition was stronger than at another, thus increasing the sum to be paid. There was opportunity at least for fictitious competition to run the premium .up. And whatever the premium, high or low, the dividends were the same to all. The member who paid a high rate of premium received no greater dividend than the one who paid the lowest.

There was no certain standard and the rights of members thus varied with the seasons, or the financial stress in which the borrower might be found. The old law defeated the principle of mutuality .which is the basic principle of such associations. Now, all borrowers are treated as upon a common level, and the premium is uniform and all fare alike in that respect, and of course share alike in the dividends to be credited. Therefore the present law is not-vicious, as declared by one of our circuit courts-, but on the contrary it is fair and is sanctioned by the rule of mutuality.

We do not judge these associations by the operation and powers of banking institutions. A member of the former sustains a' relation of mutuality to each and all of the other members. If he becomes a borrower, he is at the same timé one of the lenders. In making a loan, it is not contemplated that the principal debt will be' repaid in bulk, but in installments of dues, interest, dividends and perhaps premiums. When these amount to the sum borrowed, the mortgage is cancelled, the stock returned to the borrower which he may hold free of liens, or he may withdraw from the association under its rules for that purpose. Therefore, the relation of debtor and creditor, it may be said, does not strictly exist.

In Licking County Saving, Loan & Building Association v. Bebout’s Admr., 29 Ohio St., 252-4, Gilmore, J., says: “The object of these associations, and the powers with which they are clothed, on becoming incorporated, are expressed in very general terms in the statute authorizing their incorporation. Each association, when incorporated, is left at liberty to adopt such a scheme or plan for-working out and accomplishing its object as the members of the association may, by its by-laws provide, and so long as these do not violate any of the provisions of the statute, nor transcend the powers granted, they will be binding and obligatory upon and between the members and the association.”-

In Eversmann, Receiver, v. Schmitt, 53 Ohio St., 174, this court stated in the syllabus: “1. The members of a building association, whether borrowers or non-borrowers, have a mutual interest in its affairs; and, sharing alike in its earnings, must assist alike in bearing its burdens.

“2. A borrowing member is one who receives in advance the par value of his shares, and agrees in consideration of' such advance, to pay the weekly dues on the shares,, and the interest on the loan, until the dues paid and the dividend declared and not paid, are equal to the par value of his shares. He then ceases to be a member and is entitled to a cancellation of the mortgage given to secure the obligations arising from the loan.”

In the opinion, on page 184, Minshall, J., uses this language: “Unlike other corporations for profit, a share in a building association has, at the inception, only a nominal value. Its value is expected to increase by the lapse of time and the success of the association. It is contrary to the- purpose ■ and genius of a building association that a share in if should be paid up at the time of the subscription. This is done by the payment of small dues, and the crediting, at stated times, of the earnings in the way of dividends. When the aggregate dues with-the credited earnings equal the par value of the shares of stock, it is paid up, and the owner, for that share, ceases to be a stockholder. ’ ’

We deem these illustrations of the operation of such associations sufficient to show the subject of the legislation we are considering and that bidding a premium for preference in obtaining a loan, is not essential to avoid our statutes against usury. The law no longer requires it in order to suspend those statutes.

Therefore, the claim of plaintiff in error, that he should pay no more than six per cent on his loan is not sustained.

But it is urged that if our present statute authorizes an arbitrary rate of premium without competitive bidding, and the usury laws are suspended from .operation on such associations, the statute is unconstitutional. This claim is urgently made, but in terms somewhat general and indefinite. It will now be- seen that the foregoing discussion of the nature and characteristics of building and loan associations has an added value; and at the outset of what we shall say, we suggest the difficulty of perceiving what the matter of bidding a premium for preference in obtaining a loan, has to do with the constitutional question. Under the statutes in force prior to the present enactment, numerous cases came to this court involving a construction of the powers and operations of various building and loan associations. We have cited some of them. The constitutional validity of the former acts has never been seriously questioned in this court, and while other questions as to the powers and rights of said corporations were •thoroughly and ably argued by eminent counsel, it seems that it did not occur to any of them that the associations were proceeding under an invalid law. This suggestion is not conclusive of the question, but the incident is forcible at this day of the life of such institutions. And we are unable to see what the absence from the statute of the clause requiring competitive bidding of premiums, can add to the constitutional argument against the existing law. Its validity or invalidity does not play or turn on the presence or absence of that clause. Tbe arguments made here could have been aimed as well at all the former legislation on the same subject.

But wherein is the law unconstitutional?

The counsel say the law violates section 26- of article 2, which requires that “all laws of a general nature, shall have a uniform operation throughout the state * * *.” But counsel fail to enlighten us upon this proposition, and it is not even suggested where the point of conflict exists. It cannot be disputed that the statute is general in its terms, and that its nature and objects are general, providing as it does for the organization and operation of corporations to be known as building and loan associations ; — those organized under the laws of this state to be known as “domestic” associations, and those organized under the laws of another state or territory, to be known as “foreign” associations. It is available in any county, city or village of the state, and beyond doubt it has uniform operation throughout the state. As said in State ex rel. v. Spellmire, 67 Ohio St., 86: “With us, uniform operation throughout the state'means universal operation as to territory; it fakes in the whole state. And as to persons and things, it means universal as to all persons and things in the same condition or category. When a. law is available in every part of the state as to all persons and things in the same condition or category, it is of uniform operation throughout the state.”

This clear statement of the rule disposes of this branch of the contention, as no one will gainsay that the law in question is available in- every part of the state.

■ However, it is is more seriously and confidently asserted, that the legislation confers special privileges on these associations which tend to the creation of a privileged class of corporations, and therefore the statute conflicts with section 2 of article 1 of our constitution. It provides that “all political power is inherent in the people. Government is instituted for their equal protection and benefit, and they have the right to alter, reform, or abolish the same, whenever they may deem it necessary; and no special privileges or immunities shall ever be granted that may not be altered, revoked, or repealed by the general assembly.”

The seed of the evil, said to be inhibited by a part of this section, is supposed to consist of the following clause in section 3836-3, supra: “such dues, fines, premiums or other assessments shall not be deemed usury, although in excess of the legal rate of interest.” This statute applies peculiarly, and perhaps alone to building and loan associations, leaving other corporations and persons subject to the statutes against usury.

It is asserted that the legislation unlawfully discriminates in favor of these building and loan associations, and against all others, whereby all do not have the equal protection and benefit of our laws.

This question is not raised by the state, but by a member of the association, whose relation thereto we have already described; and his right to do so in this collateral manner, may well be doubted. He is. a part of the association and equally with the other members, amenable to the constitution and by-laws, adopted, all of which were incorporated in and became a part of his contract with the association.

However, we are not averse to a brief consideration of the point raised.

The organization of building and loan associations being authorized under a general law, we find the limitations upon their powers and the grant of their authority in few and simple rules. The major part of the government of their internal affairs is placed within the hands of the associations themselves, and the mutual rights of the borrowing and non-borrowing stockholders are to be worked out according to their own regulations, of course being supervised by limitations set by the statute. The law creating these associations can confer upon them such reasonable and ample powers for their successful operation, as the general assembly may deem necessary, within the purposes and scope of their organization, and in doing this the legislature may classify the subjects upon which the powers are conferred and yet keep within constitutional limits.

As touching the precise question under consideration, we have no adjudication of this court; but similar provisions to ours are found in the constitutions of nearly all of the states of the union, and we avail ourselves of some of the decisions of other states, where the present question was considered.

In Iowa Savings & Loan Association v. Heidt, 43 L. R. A., 689 (Iowa), it is held that, “Statutes exempting building and loan associations from the operation of the usury laws are not unconstitutional.” On page 692, in the opinion of the court, by Waterman, J., it is said: “First it is said that the building and loan law of the state is unconstitutional, because it is class legislation. Some of the arguments advanced in support of this claim assail rather the policy of such statutes than the power to enact them. In theory, these institutions are profit-sharing. The amounts directly paid for the use of money, go indirectly to the benefit of the stockholders, through the increase in the value of their shares.' "Where the loans are confined to shareholders, we can see good reason for exempting such associations from the operation of the usury laws. That the constitutional power exists to so make the exemption, we think is without serious doubt.”

In Zenith B. & L. Association v. Heimbach et al., 79 N. W. Rep., (Minn.), 609-11, the supreme court of that state say: “It has been assumed by this-court in several cases, that the provisions of the statute exempting building associations from the operation of our usury laws were constitutional, but the question was not directly raised or decided. In this case the defendant urges that such statutes are class legislation, and therefore unconstitutional. The operation of building and loan associations proper, when they adhere to the basic principles of their organization, differ so radically from ordinary loan-transactions as to afford a proper basis for classification, and to justify the legislature in making a separate class of them; hence a statutory exemption of them from the operation of usury laws is constitutional. This proposition is sustained on principle and the great weight of authority, and we hold the statutes here in question constitutional. ’ ’

In November, 1899, the supreme court of Indiana, in the case of International B. & L. Association No. 2 v. Wall et al., 55 N. E. Rep., 431, held that: “The act of 1875, authorizing building associations, when loanable funds are on hand, to make loans to that member who shall take the same upon the terms most favorable to the company, and declaring that premiums, fines and interest on premiums should not be deemed usurious, does not contravene constitution, article 1, section 23, and article 4, section 22, which-prohibit the granting of special privileges and the passage of special laws relating to interest, since, under the essential nature of the contract, the member stands in the dual relationship of lender and borrower.

The same court in the month preceding, in Security Savings & Loan Association v. Elbert et al., 54 N. E. Rep., 753, made a similar holding from which we need not quote.

In Archer v. Baltimore B. & L. Association, 30 S. E. Rep., 241, the supreme court of appeals of West Virginia held: “2. Building associations are authorized to adopt by-laws fixing a minimum premium at which to award loans to their members, such premiums ‘to be- deducted from the loans in advance, or paid in periodical installments.

. “3. Section 26 C. 54 code, in so far as it exempts building associations from the operation of the general law in relation to usury, is not unconstitutional. ’ ’ The opinion of the court in that case is a valuable contribution to the law of such associations.

We cite as bearing upon both provisions of our constitution said to have been violated in this case, Vermont Loan and Trust Co. v. Whithed, 2 N. D., 83. The case is a thorough discussion of each of the* grounds contended for by the plaintiff in error, and is in harmony with the other cases from which we have quoted.

In Peoples B. & L. Association v. Billing et al., 104 Mich., 186-191, the supreme court of Michigan say: “It is contended that the statute authorizing the formation -of building and loan associations is class legislation and unconstitutional. This contention is not supported by the authorities. On the contrary, such legislation has been upheld in a number of the states, while we have found but a single authority sustaining the contention of defendant’s counsel, — the case of Association v. Johnson, 88 Ky., 191. We think the reasoning of the authorities which sustain the constitutionality of such statutes is in. accord with sound principle and the previous holdings of this court. As was said in Holmes v. Smythe, 100 Ill., 413: “The statute under which the association was organized is a general law, applicable to all the citizens of the state who choose to bring themselves within the relations and circumstances provided for by it.”

Each of the above cases cites others for its support, until the array of authority is almost unbroken and truly formidable. Most -of them are modern decisions, and made in the light of rapidly increasing financial business and needs of our people. We are fully satisfied that our statute which is assailed in this case contravenes no provision of our constitution.

The judgment of the circuit court is affirmed.

Judgment affirmed.

Davis, C. J., Shauck, Crew, Summers and Spear, JJ.. concur.


source: Caselaw Access Project

author: Shauck, J.

license: Public Domain

text:
    Little, Treas. v. The United Presbyterian Theological Seminary.

      Endowment fund of college — Exempt from taxation, when — Sixth subdivision of section 2782, Revised Statutes — Valid law — • Under section 2 of article 12, constitution.

    1. The sixth subdivision, of section 2732, Revised Statutes, is ' within the authority which is conferred upon the general assembly by section 2 of article 12 of the constitution.
    2 It exempts from taxation an endowment fund of a college which belongs exclusively to it, and which is devoted solely to deriving an income for its support.
    (No. 9020
    Decided May 2, 1905.)
    Error to the Circuit Court of Greene county.
    The seminary brought suit against the treasurer in the court of common pleas for a decree perpetually enjoining him from the collection of a tax upon its endowment fund. A copy of its petition follows:
    “The plaintiff, The United Presbyterian Theo-. logical Seminary of Xenia, Ohio, is a corporation duly incorporated under the laws of the state of Ohio.
    “The said United Presbyterian Theological Seminary of Xenia, Ohio, is an educational institution for the training of young men for the gospel ministry, free and open to all upon the same conditions and is controlled and managed by synods of the United Presbyterian Church of North America.
    “The said institution has a large endowment, income from which it is authorized to use in carrying out its objects and purposes aforesaid. The plaintiff has invested and loaned the endowment fund so held by it and has used the income and revenue therefrom to pay its professors and expenses incidental to the institution. No part of the income from the fund has been or is diverted into private use or profit. Said institution is one of purely public charity.
    “The said defendant, Asa Little, is the duly elected and qualified treasurer of Greene county, state of Ohio, having given bond as such and is in the discharge of the duties of said office.
    “The plaintiff further says that the auditor of said Greene county has illegally and unlawfully entered and placed upon the duplicate for taxation the said endowment fund of the plaintiff in the sum of $77,590.00, and has without authority of law, directed the defendant, as treasurer of said county, to charge and collect from plaintiff upon said property the sum of twenty-four hundred and forty-four dollars ($2,444.00), taxes for the year 1903.
    “The defendant intends and threatens to enforce the collection of the said sums and amounts unlawfully demanded as aforesaid, and to impose penalties against plaintiff and to illegally seize or distrain plaintiff’s property therefor, to the great and irreparable damage and injury of plaintiff.
    “Wherefore plaintiff prays that a temporary restraining order may issue against said defendant and that upon a hearing the said defendant may be forever enjoined from demanding and collecting from plaintiff said taxes on said endowment fund or any part thereof and for such other and further relief to which plaintiff may be entitled to in law or equity.”
    In the court of common pleas a general demurrer to the petition was sustained and the seminary not desiring to plead further, its petition was dismissed. On appeal to the circuit court the demurrer was overruled and the treasurer not desiring to plead further a perpetual injunction was granted in accordance with the prayer of the petition.

      Mr. Charles F. Howard and Mr. Charles W. Whitmer, attorneys for plaintiff in error.
    In the consideration of this case three questions' are involved:
    First: Is. section 2732, Revised Statutes, constitutional?
    Second: If said section is constitutional, did the defendant in error bring itself within the limitation of the exemption therein provided?
    Third: Is the fund, and the income from the fund alleged to be invested and loaned, exempt under the sixth subdivision of section 3732?
    The part of this section we maintain to be unconstitutional is subdivision sixth, exempting all moneys and credits belonging to such institutions., and is in violation of section 2, article 12 of the Constitution of Ohio.
    The above section of the constitution provides., amongst other things, that personal property to an amount not exceeding in value two hundred dollars., for each individual, may by general laws be exempted from taxation.
    We submit that the section of the statutes above referred to goes beyond the provisions of section 2, article 12 of the Constitution and after excepting from taxation institutions of purely public charity,, undertakes to exempt all moneys and credits belonging to such institutions, without regard to the. amount.
    Moneys and credits are certainly personal property, and all the personal property that is authorized to be exempted is an amount not exceeding in value two hundred dollars for each individual; and taking the most liberal view of the matter, and conceding that such institutions have the same rights as individuals, the limit of exemption authorized by the constitution for personal property being two hundred dollars, it seems to us that the limit that could in .iany event be claimed by this institution would be two hundred dollars.
    Conceding for the sake of the argument that this statute is constitutional and that the legislature had the power to make the exemption, has the defendant in error brought itself within the provisions thereof? We submit not.
    Laws exempting property from taxation must be strictly construed. Cincinnati College v. State, 19 Ohio, 110; Lima v. Association, 42 Ohio St., 128; Lee v. Sturges, 46 Ohio St., 159; State ex rel v. Cappeller, 6 W. L. B., 339; Library Association v. Pelton, 36 Ohio St., 258; Sturges v. Carter, 114 U. S., 521 (5 O. F. D., 428); Montgomery v. Wyman, 130 Ill., 17; Railway v. Thomas, 132 U. S., 174; People v. Cook, 148 U. S., 397; Railway v. Maryland, 51 U. S., 376; Delaware Railroad Tax, 85 U. S., 206; Bailey v. Maguire, 89 U. S., 215; Railway v. Missouri, 122 U. S., 561; Railway v. New Orleans, 143 U. S., 192; Indianapolis v. Grand Lodge, 25 Ind., 518; Bank v. Billings, 29 U. S., 514; Gilfillan v. Canal Co., 109 U. S., 401; (?) 23 Wall., 527; Railway v. Supervisors, 93 U. S., 595.
    Intent to confer immunity from taxation must be clear beyond a reasonable doubt, for as in the case of a grant nothing can be taken against the state by presumption or inferred. Railway Co. v. Maguire, 87 U. S., 46; Railway Co. v. Gaines, 97 U. S., 697; Tennessee v. Whitworth, 117 U. S., 139; Railway Co.
      v. Missouri, 152 U. S., 301; New York v. Cook, 148 U. S., 397; Lima v. Association, 42 Ohio St., 128.
    Exemptions from taxation should he confined to the clear and strict terms of the law. Matlock et al. v. Auditor, 13 O. D. Re., 2; Crumpaker v. Railway Co., 4 West, 655.
    Section 2732, Revised Statutes, amongst other things, provides that all moneys and credits appropriated solely to sustain and belonging exclusively to such institutions shall be exempt.

    Applying the rule that exemptions should be confined to the clear and strict terms of the law, we find that the first part of this section exempts all buildings together with the land actually occupied by such institutions not leased or otherwise used with a view to profit shall be exempt. Two conditions exist under the statute when such buildings become liable for taxation.
    First: When leased.
    Second: When otherwise used for profit.
    The words, “With a view to profit,” are omitted in the latter part of this section for the obvious reason that if appropriated solely to sustain the institution and belonging exclusively to said institutions and military organizations, they could use it in no other way and for no other purpose. If the legislature had intended .to exempt moneys and credits,, the income of which is used solely to sustain such: institutions, they would have said so. The legislature evidently had. in mind only the moneys and credits actually appropriated for such purpose, and nothing more. That the legislature did not intend to exempt either real or personal property used with a view to profit is very clear. Applying the rule of strict construction to this statute, it is evident that 310 exemption exists unless three things are made to appear:
    First: There must be an actual appropriation of the fund.
    Second: That appropriation must be for a specific purpose, namely, to sustain the institution.
    Third: The money and credits must belong ex-' clusively to said institution. ,
    The fact as alleged in the petition that the income is used solely to pay its professors, and the expenses incidental to the institution, will make no difference. To be exempt the fund itself must be so used.
    Government cannot discriminate between the uses which individuals and institutions will make of the proceeds of their business, and determine that this society or individual make a more worthy distribution of the proceeds of his or its business than the other. The legislature could not without a flagrant violation of the principles of equity make such a distinction. Cincinnati College v. State, 19 Ohio, 110; Gerke v. Purcell, 25 Ohio St., 229; Association v. Pelton, 36 Ohio St., 258; Humphreys v. Sisters, 29 Ohio St., 201; Kendrick v. Farquhar, 8 Ohio, 189; Association v. Brooks, 4 Circ. Dec., 478; 8 C. R. R., 439; Burrows on Taxation, 130; Trustees v. Boston, 120 Mass., 212; Men’s Soc. v. Mayor, 3 Mich., 172.

      Mr. C. H. Kyle and Mr. C. C. Shearer, attorneys for defendant in error.
    1. Institution for education of young men for minIstry, a purely public charity. An institution for the education of young men for the gospel ministry, and open to all, is a “purely public charity,” within the meaning of section 2, article 12 of the constitution of Ohio.

      2. Collegiate endowment funds exempt from taxation. The endowment fund of such institution, which is loaned, and the interest used solely for the salaries of the professors and expenses necessarily incident to such educational' work, is a “credit” within the meaning of section 2732, Revised Statutes, and is exempt from taxation.
    Two questions arise:
    First: Is the plaintiff, under its allegations of fact, as to its objects and purposes, really an “institution of purely public charity,” within the meaning of section 2, article 12 of the constitution of Ohio ?
    This is conceded by counsel; but that concession not being conclusive of the law, we are cited to authorities which seem to settle the matter beyond controversy. Gerke v. Purcell, 25 Ohio St., 229.
    To the same effect are the holdings in Meyers v. Akins, 4 Circ. Dec., 425 (8 R., 228); Sowers v. Cyrenius, 39 Ohio St., 29 (48 Am. Rep., 418); Mannix v. Purcell, 46 Ohio St., 102 (19 N. E. Rep., 572; 2 L. R. A., 753; 15 Am. St. Rep., 562); Davis v. Association, 57 Ohio St., 257 (49 N. E. Rep., 401); McIntire Poor School v. Manufacturing Co., 9 Ohio, 203 (34 Am. Dec., 436).
    Second: Is this fund, the principal of which is not touched, hut is loaned, and the interest only used for the purposes of the institution, exempt from taxation?
    Upon this question issue is taken. Defendant claims that while the fund itself, if reduced to money and kept in the treasury for use as needed, would not be taxable, the moment it is placed at interest and becomes a source of profit, it is analogous to the leasing of real estate for business purposes, and, following the doctrine of Cincinnati College v. State, 19 Ohio, 110, it becomes taxable.
    Inasmuch as the rental of real estate only was involved, the case (19 Ohio, 110) was necessarily decided upon a construction of section 3, subdivision 3 of the act then in force on the subject (44 O. L., 86).
    The learned judge who rendered the opinion, not satisfied with the undoubtedly correct conclusion to which the court had arrived as to subdivision 3 of the act in question, ventured to go beyond the single question then before that tribunal, and gave his individual views of what would be the construction of subdivision 4 of the act.
    But this construction of subdivision 4 is a mere dictum, and wholly obiter, as is expressly conceded by the judge, since he had previously stated that subdivision 3 was “the only one that we think could be supposed to have any bearing on this case. ” We, therefore, are not bound by it as an expression of the law by the Supreme Court.
    Such a fund when loaned cannot better be defined than to call it a “credit,” and such we believe was the purpose of the legislature in so using it.
    We also think it would be contrary to the policy of the state to hold otherwise.
    The ordinance of 1787, announces as the policy of the northwest territory, that, “Religion, morality, and knowledge being necessary to good government and the happiness of mankind, schools and the means of education shall forever be encouraged. ’ ’
    The constitution of 1802 reasserts this policy, and emphasizes it by introducing the word “essentially” before “necessary,” making it read, in section 3, article 8, “Religion, morality and knowledge being essentially necessary to good government.”

      And the constitution of 1851, section 7, article 1, in similar, hut somewhat less felicitious language, makes the same announcement.
    The consequence has been that a large number of educational institutions have been founded and liberally endowed, upon the faith of this wise state policy, and up to the present case, no attempt has been made, so far as the court is aware, to place the burdens of taxation upon them, except as to real estate diverted from educational use.
    Institutions of purely public charity may by general laws be exempt from taxation. 3 Rev. Stat., page 3731; art. 22, sec. 2, Const, of Ohio.
    The defendant in error is an institution of purely public charity, under article 12, section 2 of the constitution. Humphreys v. Sisters, 29 Ohio St., 201; Association v. Pelton, 36 Ohio St., 253.
    Laws have been passed as provided by the constitution, exempting institutions of purely public charity. Section 2732, Revised Statutes.
    Under section six alL “moneys” and “credits” appropriated solely to sustain and belonging to institutions of public charity are exempt from taxation.
    For the purposes of taxation we have these terms defined in section 2730, Revised Statutes.
    These terms “moneys” and “credits,” are as broad when applied to the exemptions of property .as they are when applied to the listing of property.
    The endowment fund of plaintiff is exempt from taxation. Mannix v. Purcell, 46 Ohio St., 102; Davis v. Association, 57 Ohio St., 257; Sowers v. Cyrenius, 39 Ohio St., 29.
   Shauck, J.

The seminary claims that its endowment fund is exempt from taxation under the provisions of section 2732 of the Revised Statutes, and that view was taken by the circuit court. Counsel for the treasurer challenge that interpretation of the section as well as its constitutional validity. The section describes the property which is exempt from taxation and the present discussion involves the sixth subdivision of the section which is:

“All buildings belonging to institution[s] of purely public charity, and all buildings belonging to and used exclusively for armory purposes by lawfully organized military organizations which are and shall continue to be fully armed and equipped at their own expense and by law made subject to all calls of the governor for troops in case of war, riot, insurrection or invasion together with the road [land] actually occupied by such institutions, and that owned and used as sites for such armory buildings of said military organizations not leased or otherwise used with a view to profit, and all moneys and credits appropriated solely to sustain and belonging exclusively to said institutions and military organizations.”

The constitutional authority for the exemption is found in section 2 of article 12 of the constitution which prescribes the general rule of uniformity of taxation as well as the subjects of taxation which may be omitted from its operation.

It provides “Laws shall be passed taxing by a uniform rule all moneys, credits, * * *; but * # # institutions of purely public charity # * * may, by general laws, be exempted from taxation; and all such laws shall be subject to alteration' or repeal * # *.”

While the section employs mandatory terms in prescribing the general rule of uniformity of taxation, it does not by force of its own terms provide any exceptions to that rule, but merely authorizes the general assembly to provide by general laws for the exemption of property of the. designated character. It is settled in Gerke et al. v. Purcell, 25 Ohio St., 229, and in cases following it, that an institution, such as the petition alleges the seminary to be, is “an institution of purely public charity” within the meaning of this section of the constitution. Since the particular authority conferred upon the general assembly is to exempt such institutions without limit or qualification, and since within the contemplation of taxing provisions the institution must consist wholly of its property, there appears to be no ground whatever for the constitutional point, raised by counsel for the treasurer. It must, however, be admitted that the meaning of the statute is not so clear as is that of the constitutional provision. The general assembly is not required to exercise all the power of exemption which is conferred, and some doubt has been raised respecting the extent to which it has seen fit to exercise it. It is said that in the court of common pleas the demurrer in the present case was sustained upon the supposed authority of the Cincinnati College v. The State, 19 Ohio, 110, where it was decided that where the assets of a similar institution are in lands which are leased, the lands are taxable although the rents are devoted wholly to the maintenance of the institution in the same manner as is the interest derived from the loaning of an endowment fund. The inability of the judge of the court of common pleas to find a philosophical reason why the land should be subject to taxation in one case and the fund exempt in the other starts sympathy. The consideration suggested may have influenced this court to decide in Davis, Auditor, v. The Cincinnati Camp Meeting Association, 57 Ohio St., 257, that “Where an association, organized and conducted for the purpose of a purely public, charity, as a camp meeting, under the supervision and control of some church, owns real estate devoted exclusively to the same use; and thereon provides privileges for the comfort and convenience of those who may attend the meeting, the fact that it makes charges for the use of these privileges, does not subject its property, nor the privileges so provided, to taxation under the laws of this state.” No attention was there given to the change in the language of the statute since the decision of the College v. The State. But that change was considered in the Cleveland Library Association v. Pelton, Treasurer, 36 Ohio St., 253, where it was held that the rented portion of the land of an institution- of that character is not within the exemption, although the rents are used for the purposes of maintenance. In all the cases cited conclusive effect was intended to be given to the terms of the statute without consideration of the reasons for its discriminations. The observation that the reason of the law is its life, so frequently helpful in the determination of questions' arising at common law, must have a restricted application to the interpretation of statutes. In the discharge of the duty of interpretation it is not required or permitted to courts to go beyond the plain meaning of the language which the legislature has used to express its intention. Assuming the correctness of the decisions cited with respect to the taxability of land belonging to such institutions and leased for income to be devoted to their maintenance, it is entirely clear that the legislature has deliberately prescribed a different rule with respect to an endowment'to be loaned for an income to be devoted to that purpose. There can be no conceivable condition of such a fund in which it is not either “money” or “credits” appropriated solely to sustain, and belonging exclusively to, such institution, and by the unambiguous terms of the statute it is exempt from taxation. When counsel for the treasurer ask us to follow the judge of the court of common pleas to the consideration of the sufficiency of the supposed reasons for the discrimination they invite us to an inquiry which is not open to us. The judgment of the circuit court will be affirmed.

Affirmed.

Davis, C. J., Price, Crew, Summers and Spear, JJ., concur.


author: Davis, C. J.,

text:
    The Dayton & Union Railroad Company v. The Dayton & Muncie Traction Company.

      Appropriation proceedings — Section 6432, Revised Statutes — Motion for new trial to he made, when — Section 5305, Revised Statutes — Time for filing Mil of exceptions where motion for , new trial overruled — Court procedure.

    1. Although it may not be necessary to file a motion for a new trial at the time of the hearing of the preliminary questions in an appropriation proceeding, under section 6420, Revised Statutes, in order to bring upon the record errors occurring upon such hearing; yet if such errors come within any of the causes for a new trial as defined in section 5305, Revised Statutes, the aggrieved party may include the same in a motion for a new trial to be filed within ten days after the verdict is rendered in such appropriation proceedings, as provided in section 6432, Revised Statutes. Weaver v. Columbus, Shawnee & Hocking Talley Railway Co., 55 Ohio St., 491, approved and followed.
    2. If such motion for a new trial should be overruled, the time for filing a hill of exceptions must he reckoned from the date of the overruling of the motion for a new trial.
    (No. 8839
    Decided May 2, 1904.)
    Error, to the Circuit Court of Darke county.
    On the thirteenth day of July, 1903, the defendant in error filed a petition in the probate court of Darke county to appropriate the right to cross the tracks and right of way of the plaintiff in error with the track of the defendant in error, and the right to maintain such crossing; and the time for the hearing of the preliminary matters in the case was fixed at July 20, 1903, at which time it was continued by agreement to July 23, 1903. On July 23, 1903, the plaintiff in error filed an answer to the petition. On the same day the preliminary hearing was begun and it was concluded, and the finding of the probate court thereon was made, on August 10,1903. To the findings, orders and judgment of the probate court made at that time the plaintiff in error excepted. The case was tried by the court and jury on August 25, 1903, and on that day a verdict was rendered for the plaintiff in error in the sum of $25.00. On September 3, 1903, the plaintiff in error filed a motion for new trial, which is as follows:
    The defendant, The Dayton & Union Railroad Company, moves the court to set aside its findings and judgment made and entered on the hearing and trial heretofore had on the preliminary and jurisdictional questions in this case, and to set aside the verdict of the jury heretofore rendered, and to grant a new trial herein for the reasons following:

      ' First: Because the said findings and judgment rendered and entered on said preliminary hearing and trial on the said jurisdictional of questions is against the weight of the evidence, and is not supported by the evidence.
    Second: Because the said findings and judgment rendered on said preliminary hearing and trial is contrary to and against the law of the case.
    Third: Because the said findings and judgment rendered on the hearing and trial on said jurisdictional questions should have been in favor of this defendant instead of in favor of the plaintiff.
    Fourth: Because the court admitted evidence on the said hearing and trial against the objection of this defendant to which admission of the evidence this defendant at the time excepted.
    Fifth: Because the court refused to admit evidence' offered by this defendant on said hearing and trial to which refusal this defendant at the time ■ excepted.
    Sixth: Because of newly discovered evidence material for this defendant which this defendant by the exercise of reasonable diligence could not have discovered and produced on the said hearing and trial.
    Seventh: Because the said verdict is not supported by sufficient evidence.
    . Eighth: Because the said verdict is contrary to the evidence and the law of the case.
    This motion was heard and overruled on September 12, 1903; and on the ninth day of October, 1903, the plaintiff in error filed its bill of exceptions. A petition in error having been filed in the court of common pleas, that court affirmed the judgment of the probate court; and on the hearing of a petition in error in the circuit court, that court found and adjudged “that no motion for a new trial was filed nor bill of exceptions allowed, signed and filed by-said plaintiff in error in the probate court of Darke county, Ohio, within the proper time from and after the decision of said probate court upon the hearing of the preliminary and jurisdictional questions had in said appropriation proceedings in said court and the court do therefore ignore and refuse to consider all the evidence contained in said bill of exceptions so taken at the hearing of said preliminary and jurisdictional questions.”
    For this and other alleged errors the plaintiff in error seeks the reversal of the judgments against it in the courts below.

      Mr. R. M. Nevin; Mr. John C. Clark and Mr. C. B. Heiserman, attorneys for plaintiff in error,
    cited and commented upon the following authorities:

      State ex rel. v. The Judges, 69 Ohio St., 372; Railway Co. v. Telegraph Co., 68 Ohio St., 306; In re George, 3 Circ. Dec., 104; 5 C. C. R., 207, 215; Railway v. Railway, 77 Pa. St., 173; Railway v. Railway, 116 Ind., 582; Railroad v. Railroad, 72 Mich., 208; In re St. Paul, etc., 37 Minn., 164; Railway Co. v. City, 4 Circ. Dec., 602; 7 C. C. R., 293; National Docks, etc. v. United Companies, 53 N. J. Law, 223; Railway v. City, 139 Ind., 490; Minnear v. Holloway, 56 Ohio St., 148.

      Messrs. Anderson, Bowman & Anderson, attorneys for defendant in error,
    cited and commented upon the following authorities:

      Ide v. Churchill, 14 Ohio St., 372; Westfall v. Dungan, 14 Ohio St., 276; Minnear v. Holloway, 56 Ohio St., 151; Everett v. Sumner, 32 Ohio St., 562; Spangler v. Broivn, 26 Ohio St., 389; Turner v. Turner, 17 Ohio St., 449; Randall v. Turner, 17 Ohio St., 262; Railway Co. v. Railway Co., 3 Circ. Dec., 493; 6 C. C. R., 383; Railway Co. v. Railway Co., 3 Circ. Dec., 566; 6 C. C. R., 535; Railway Co. v. Railway Co., 26 O. C. C., 1; 4 C. C. R., 329; Railroad Co. v. Cable Co., 68 Ohio St., 306; Cable Co. v. Railroad Co., 11 Dec., 52; 8 N. P., 121; Railroad Co. v. Cable Co., 12 Circ. Dec., 522; 22 C. C. R., 555; State v. The Judges, 69 Ohio St., 372; Railway Co. v. Railroad Co., 48 O. L. B., 245; Railroad Co. v. Lohe, Admr., 68 Ohio St., 101; Bridge Co. v. Iron Co., 59 Ohio St., 179; State v. Traction Co.’s, 64 Ohio St., 272; secs. 5305, 5307, 6411 and 6420, Rev. Stat.; act of May 10, 1902 (95 O. L., 530).
   Davis, C. J.,

The only assignment of error which we have found it necessary to consider is that concerning the refusal of the circuit court to consider that part of the bill of exceptions which contains the testimony taken on the hearing of the preliminary and jurisdictional questions.

We have recently held, in Railroad Co. v. Tod et al., ante, 156, that the findings of the probate judge on the hearing of the preliminary questions in an appropriation proceeding are reviewable on error; and that the time within which a petition in error may be filed must be computed from the final judgment of the probate court, either dismissing the petition or confirming the verdict of the jury. This is upon the theory that the hearing of the preliminary, or what are often called the jurisdictional, questions is a constituent part of the case and not a separate or independent proceeding. Hence it was held in that case that it is not necessary to make a motion for a new trial of the preliminary questions, that is, separately from a new trial of the whole case; and it was also held in that connection and upon that theory that if no motion for a new trial is filed in the case, the time within which a bill of exceptions on such hearing should be taken should he computed from the day on which said questions are determined; but if a motion for a new trial is filed the time should be computed from the time such motion is overruled. This is strictly in accord with section 5301, Bevised Statutes (96 O. L., 16), as amended and in force at the time of the trial of this appropriation proceeding.

A new trial, if granted, goes to the whole case. If must be retried from the beginning and upon all the issues of fact which are involved in the case. This results from the unity of a proceeding in appropriation. It may be that a sharp conflict of testimony has arisen on the preliminary hearing and the defeated party may think that the finding of the probate judge is not sustained by the weight of the evidence or that he has not rightly applied the law to the evidence. He need not make a motion for a new trial, then and there, of that part of the case; but he may, and if he desires to do so, properly should, bring the evidence upon the record and all the questions in regard to it, by a motion for a new trial within ten days after the verdict. Counsel are wrong in their contention, at this point, that the motion for a new trial is specifically limited by section 6432, Bevised Statutes, to a re-examination of the issues of fact determined by the verdict. This section limits only the time within which such motion may be filed. Section 6436 provides that “a new trial shall be granted for cause only” and that when it is granted it ‘ ‘ shall take place in the same court where the first trial was had, and shall he conducted in accordance with the provisions of this chapter for the first trial, so far as the same are applicable.” We construe the word “trial” here as we construed the same word in section 6438, in State v. Judges, 69 Ohio St., 372, that it means a rehearing of the case from the beginning.

It must also be remembered that the office of a motion for a new trial is not confined to a review of a finding on the evidence. It may not be necessary to make a motion for a new trial in order to obtain a review of errors of law occurring at the trial or in a decision by the court, where the sufficiency or weight of the evidence is not involved; yet the party aggrieved is expressly authorized by section 5305, Revised Statutes, to again bring those matters to the attention and review of the trial court by a motion for a new trial. This court has held after careful consideration that if such a motion for a new trial should be overruled, the time for filing a bill of exceptions should be computed from the day that the motion for a new trial was overruled, and not from the date at which the error so complained of was committed. Weaver v. Columbus, Shawnee & Hocking Valley Railway Co., 55 Ohio St., 491. The following remarks in the opinion in that case, by Bradbury, J., are so pertinent to this case that we repeat them here.

“It may be true that some of the rulings of the trial court do not require a motion for new trial to bring them into the record. If, as to them, none is made, the period within which a bill of exceptions must be filed begins to run from the ruling complained of. It is to this condition of those questions that this limitation applies. Where, however, the party excepting chooses to avail himself of the right granted by sections 5305, 5307 and 5308, Revised Statutes, to include the ground of error in a motion for a new trial, he re-submits the question, and the error should be regarded as arising out of the action of the court in overruling the motion for a new trial. This construction of the sections of the statute is necessary, or the party excepting in many instances would be debarred from the exercise of the valuable privilege by the provisions of sections 5305, 5307 and 5308, Revised Statutes, of a rehearing of the question in the trial court under circumstances more favorable to its deliberate consideration than attended the first investigation. This is the prime object to be obtained by a motion for new trial and we think this object should not be defeated by placing a strict construction on the section of the statute that relates primarily to the time and manner of taking bills of exceptions.”

The judgment of the circuit court will therefore be vacated and the cause remanded to the circuit court with instructions to consider all of the bill of exceptions.

Remanded.

Shauck, Price and Summers, JJ., concur.


author: Spear, J.

text:
    Sisler, Auditor, v. Foster.

      Owner of promissory notes — Gives possession and title to another in trust — To avoid taxation — Oounty auditor mil not he enjoined from placing same on tax duplicate.

    The maxim that one who seeks the aid of a court-of equity must come with clean hands has especial application to a case where the owner of promissory notes has, without valuable consideration, placed the legal title to the same in another by an instrument in writing purporting to be a deed of trust, but which, if given full effect, would avoid the payment of taxes upon the property at the place of such party’s residence. And where the conduct of the party, taken in connection with the terms of the instrument, indicates a purpose to retain in himself the full and actual control of the property, and he does in fact maintain such exclusive control, and also shows unmistakably that the real purpose of the transaction was to escape the payment of taxes in the taxing district where he resides, the court will refuse ' to enjoin the county auditor from placing such property on the duplicate for taxation.
    (No. 8718
    Decided May 23, 1905.)
    Error to the Circuit Court of Summit county.
    The action below was begun March 14,1902, in the common pleas of Summit by the defendant in error, Horace B. Foster, against the plaintiff in error as county Auditor, to procure an injunction preventing the Auditor from placing on the tax duplicate, for taxation for the years 1896, 1897, 1898, 1899, 1900 and 1901, certain personal assets, consisting of moneys, credits, stocks, securities, and rights in action, amounting in the aggregate to forty-five thousand dollars in value, or over. The Auditor answered by general denial. At the October term, 1902, the cause was tried on its merits in the common pleas, resulting in a finding and judgment against the plaintiff below and dismissing his petition. From this judgment an appeal was taken to the circuit court where, at the April term, 1903, the cause was again tried on its merits, resulting in a judgment in favor of the plaintiff and perpetually enjoining the Auditor from entering any of the property on the duplicate for taxation. A special finding of facts was made by the circuit court and a bill of exceptions taken. The Auditor brings error.

      Mr. H. M. Hagelbarger and Mr. R. M. Wanamaker, attorneys for plaintiff in error,
    cited and commented upon the following authorities:

      Spangler v. City of Cleveland, 43 Ohio St., 526; Grimstone v. Carter, 3 Paige (N. Y.), 421; 24 Am. Dec., 230; 1 Cooley on Taxation (3 ed.), 769; Holly Springs Co. v. Supervisor, 52 Miss., 281; State v. Assessor, 37 La. Ann., 850; Jones v. Seward County, 10 Neb., 154; Dixon County v. Halstead, 23 Neb., 697; Mitchell v. Commissioners, 9 Kan., 344; Bank v. Maher, 19 Blatchf., 175; Shotwell v. Moore, 6 O. F. D., 500; 129 U. S., 590; Crowder v. Riggs, 153 Ind., 158; Durham v. State, 6 Ind. App., 23; Patrick v. Littell, 36 Ohio St., 79; 27 Am. & Eng. Eney. Law (1 ed.), 319; Gaither v. Williams, 57 Md., 625; Myers v. Seaberger, 45 Ohio St., 232; Sommers v. Boyd, Treas., 48 Ohio St., 660; Mitchell v. Leavenworth County, 91 U. S., 206; Poppleton v. Yamhill County, 8 Ore., 337; Waller v. Jaeger, 39 Ia., 228; Ransom v. City of Burlington, 11 Ia., 77; secs. 2734, 2735 and 2736, Rev. Stat.

      Messrs. Grant & Sieber, attorneys for defendant in error,
    cited and commented upon the following authorities:

      Pelton v. Transportation Co., 37 Ohio St., 450; O’Callaghan’s Executors v. City of Owensboro, 64 S. W. Rep., 619; Ford v. Osborne, 45 Ohio St., 3; Devries’ Estate v. Hawkins, 97 N. W. Rep., 792; Van Cott v. Prentice et al., 104 N. Y., 45; Martin v. Funk, 75 N. Y., 134; Boone v. Bank, 84 N. Y., 83; Davis v. Hey, 125 Mass., 590; Stone v. Hackett, 12 Gray, 227; Minor v. Rogers, 40 Conn., 512; Perry on Trusts, see. 98; Hill on Trustees, 130; 4 Kent’s Commentaries, 305, 336, 337; Ellison v. Ellison, 6 Ves., 662; Morgan v. Malleson, L. R. 10 Eq. Cas., 475; Milroy v. Lord, 4 De G. F. & J. Ry., 264; Ray v. Simmons, 11 R. I., 266; Richardson v. Richardson, L. R. 3 Eq. Cas., 684; Gilman, Admr. v. McArdle, 99 N. Y, 451; Brabrook v. Savings Bank, 104 Mass., 228; Jones v. Lock, L. R. 1 Ch., 25; Pye’s Case, 18 Ves., 140; Wheatley v. Purr, 1 Keen, 551; Myers v. Seaberger, 45 Ohio St., 232; Sommers v. Boyd, Treas., 48 Ohio St., 648; Brown v. Hoble, 42 Ohio St., 405; Shotwell v. Moore, 6 O. F. D., 500; 129 U. S., 590; Mitchell v. Commissioners, 91 U. S., 206; Waller v. Jaeger, 39 la., 228; Ransom v. City of Burlington, 82 N. W. Rep., 427; Cooley on Taxation, 202; Dillon on Municipal Corporations, sec. 604; Fowler v. St." Joseph, 37 Mo., 228; Neenan v. Smith, 50 Mo., 525; Motz v. Detroit, 18 Mich., 495; secs. 2734, 2735 and 2737, Rev. Stat.
   Spear, J.

From the finding of facts and the testimony shown by the hill of exceptions the following pertinent and controlling facts appear:

April 9, 1886, the defendant in error, Foster, was a resident of the village of Hudson, Summit county, Ohio, which village was in the township of Hudson, .and, has remained such resident all of the time since that date. At that time his children were Jessie E. Foster, of full age, Horace Wood Foster, four years of age, and Marie Josephine Foster, about two years of age, all living with the father in the village of Hudson, and the last two named continued to so live until the commencement of the action below, save that Horace Wood was absent from home two to three years. Jessie E. was married in the year 1889 to Wm. B. Parmelee, and has resided with him in the township of Hudson, outside of the village, since 1891. On the date first named the plaintiff below, Foster, being the owner of certain notes and mortgages of the value of about thirty-one thousand dollars, executed an instrument of writing of which the following is a copy:

“Know all men by these presents that I, H. B. Foster, of Hudson, Summit county, Ohio, for the consideration of one dollar received to my full satisfaction of Mrs. E. S. Merrill of the city of Brooklyn, in the state of New York, and for the faithful execution by her of the trusts hereinafter fully expressed, do give, grant, bargain, sell, transfer, set over and assign to her, her heirs and assigns, in trust the several notes and mortgages enumerated and described in the schedule hereto attached marked ‘Schedule A, H. B. Foster’ and made a part hereof, and to have and to hold the above granted and transferred notes and mortgages unto the said Elizabeth S. Merrill, her heirs and assigns forever in the trust and confidence and not otherwise herein fully stated and set forth, to-wit:

“First: To regularly collect and when received to at once pay over the interest, income and profits thereof in equal shares to the following named persons, to-wit: Mrs. Caroline Wilcox, my sister, and Jessie E. Foster, Horace Wood Foster and Marie Josephine Foster, my. three children, during the term of their several lives, except as otherwise herein provided.

“Second: At the death of either, leaving no issue surviving, or legal representatives of such issue, to pay over in like manner said income, interest and profits to the survivors or survivor of them.

“Third: At the death of either of them leaving issue or the legal representatives of issue, surviving, to pay over in like manner to such issue or their legal representatives such share of said income, rents, interest and profits as the deceased cestui que trust herein named would have been entitled to, had he or she not deceased.

“Fourth: To reassign to said H. B. Foster or his assigns, the several notes and mortgages herein described, upon demand made in writing made for that purpose at any time during the natural life of said H. B. Foster.

“Fifth. The said H. B. Foster reserves to himself and his assigns for and during the term of his natural life the right to control the distribution of the issues, income, rents and profits of all said notes and mortgages, and taken upon himself the payment of all costs and expenses involved in the collection thereof, and also reserves to himself the right to modify and change any and all the terms of this trust at any time during his natural life.

“Sixth: If this trust is not revoked or changed in the life of said H. B. Foster, then the said trustee, her successors, heirs and assigns are to distribute (only the issues, income, interest, rents and profits) but none of the principal of said trust fund, to any of the said cestui que trustent or their heirs until such cestui que trust shall arrive at the age of thirty years, and then only so much of his or her share of said principal, as in the judgment of the said trustee, her successors, etc., the best interest of said cestui que trust may require.

‘‘ Seventh: That all funds shall be invested in the same manner and with the same securities required by law in case of the investment of moneys of minor wards in hands of guardians.

“Eighth: That the compensation allowed to said trustee, her heirs, successors and assigns, shall in no case exceed one per cent, per annum on the principal hereof, and there shall be no charge in the lifetime of said H. B. Foster.

“Witness my hand and seal this ninth day of April, A. D. 1886.

[Seal] “H. B. Foster.”

[Here follows a list of notes and mortgages aggregating in value $31,010.00.]

This was three days before “the day preceding the second Monday of April,” the date which, under section 2736, Revised Statutes, determines the return of property for taxation. The trustee named, Mrs. Merrill, was a lady sixty-five years of age, a sister of defendant in error’s first wife, and an aunt of the daughter, Jessie E. Mrs. Merrill was at the time a resident of the city of Brooklyn, New York, and so remained continuously until her decease in 1902. The securities named in the paper executed April 9, 1886, were immediately forwarded to Mrs. Merrill and remained in her possession for about three years. During that time no taxes were paid thereon. She did not receive any payment upon any note at any time. She simply held the notes until, by direction of Foster, she returned them to him, and he has retained possession, at his office in the village, all of those notes and all renewal notes, ever since. Afterwards, in 1893, at the direction of Foster, she, in some way, appointed Parmalee (the son-in-law) her agent to look after the notes, but Parmelee does not remember that there was any paper between him and Mrs. Merrill. Parmelee did not have possession of the notes at any time, they remaining as before stated, continuously in the possession of Foster. While working for Foster, about his office in the village of Hudson, Parmelee figured and indorsed interest on some of the notes, turning all the amounts so received over to Foster. He kept no account of these payments, and for any work that he did with respect to the notes was paid by Foster. Parmelee listed the notes for taxation in the township outside of the village. He paid no taxes, however, but the taxes on the property so listed were always paid by Foster. Parmelee made no report of his transactions or collections in connection with the notes or mortgages to Mrs. Merrill. Mrs. Merrill did not personally indorse any of the notes or mortgages. Her name appearing upon any was placed there by Mrs. Parmelee by virtue of a power of attorney from Mrs. Merrill, prepared and sent to her by Foster, and all such indorsements were made at the request of Foster. He also ordered and directed the satisfaction- and cancellation of notes and mortgages from time to time, reloaned and reinvested, at his own instance, and without consultation with the alleged trustee, the sums so collected and mingled them with other securities. Small sums were from time to time advanced from said collections to the minor children for education, wearing apparel, etc., but he made no report of receipts or expenditures to either Mrs. Merrill or Parmelee, nor did he credit up to the several beneficiaries or to either of them, their proportionate share of the money.

It was found by the circuit court that in 1893 or -4, Foster executed a writing to Parmelee, embracing the same terms and conditions as the one executed in 1886 to Mrs. Merrill, save that the amount was ten thousand dollars and the beneficiaries were the two-younger children only, but it should not escape attention that neither Foster nor Parmelee, when on the witness stand, could give any intelligent account of such a paper. These notes were listed for taxation by Parmelee in the township, but the taxes were paid by Foster out of money received on the notes, Parmelee made some collections on the notes and indorsed payments thereon, but at once turned over such money to Foster, who reloaned it and reinvested it, keeping the aggregate up to ten thousand dollars. Foster, in all respects, treated and dealt with the second fund substantially as he had with the larger fund. The alleged trusteeship of Parmelee continued until April 7,1900, when one Dittriek succeeded by virtue of a paper of that date. This date is significant. It was also just before “the day preceding the second Monday of April.” The property has been listed in the township, as before, and all taxes paid by Foster, as before. The rate of taxation in the village has been about double that in the township outside of the village.

Upon the facts so established relating to the notes and mortgages enumerated in the first “deed of trust,” the circuit court found, among the findings-of fact, that “all of the dealings of said Foster in connection with said notes and mortgages, as specified in the foregoing findings, were done as agent of said Mrs. Merrill or said Parmelee,” and then followed as conclusion of law a judgment in favor of plaintiff below perpetually enjoining tbe Auditor from entering any of tbe property named in tbe petition for taxation, and awarding costs against bim.

In treating the question of Foster’s agency with respect to bis dealings with tbe securities as a question of fact we tbink tbe learned circuit court erred. Tbe facts being established, it became a question of law. This distinction, however, is not so important as is tbe question of tbe correctness of tbe conclusion. In either aspect we tbink tbe conclusion erroneous. Tbe reverse was tbe actual situation. To make this apparent it is only necessary to ascertain tbe real purpose of tbe transaction. That purpose on tbe part of Foster was plainly to retain absolute control of tbe property, and although, by an ingeniously framed paper, tbe control was apparently vested in another, or others, tbe real control, and during nearly tbe entire time, tbe actual manual possession, was in Foster, tbe object to be accomplished being to effect such an apparent change of ownership and control as would result in tbe avoidance of tbe payment of taxes in tbe village wholly, and for some three years in tbe township as well. This purpose, running all through tbe transaction from beginning to end, is so palpably apparent that it would seem like a waste of effort to take space to further discuss it. The true result as to agency is, we tbink, the exact reverse of that held by tbe circuit court. Instead of Foster being tbe agent of Mrs. Merrill or Parmelee, Foster was the principal and tbe others bis agents, indeed mere puppets in bis bands. With this result as# to the situation of the parties, what, follows? Poster has come to a court of equity to seek its aid in carrying out a plausible and artfully devised scheme by which his property might escape its just burden of taxation in the taxing district where he lived, and where, for a portion of the time,, all of the persons named as cestui que trustent lived,, and the remainder of the time the most of them, the corpus of the property itself being all the time, save when out of the state, in Poster’s actual possession,, within that taxing district and protected by its laws. The listing in the township by Parmalee of the notes-assigned to Mrs. Merrill was entirely unauthorized upon any theory. Section 2735, Revised Statutes? Myers v. Seaberger, 45 Ohio St., 232. And, upon the finding of the circuit court as to Poster’s agency, it was clearly his duty, under the same section of the statutes, to list the property in the village of Hudson. Manifestly it is the duty of a court of equity to look through the disguises which parties seek to put on to escape their share of the public-burdens and act upon the real situation. It is hardly worth while to discuss the legal condition of the notes during their possession by Mrs. Merrill, for the action of Poster subsequently shows that, whatever was his original intention, he,, by his conduct, notwithstanding the attempt to observe some formalities, effectually revoked all authority conferred upon her, a right which the paper itself reserves to-him. Nobody seems to doubt that the real purpose-of Poster was to prevent this property being taxed in the village. The claim is that he had the right-to do this. It is not doubted that the owner of property may change its form, as from the stock of a foreign to that of a domestic corporation, or from personal to real, to avoid taxation, or that he may, provided the transaction is not a mere shift, change from money which is taxable to United States securities which are not, or he may change his residence for the purpose of avoiding taxation. In any such case the motive does not concern anyone else, or the public. But we have no such case here. When a party seeks affirmative relief in equity his motives may always be inquired into for the purpose of determining whether his ease is entitled to favorable consideration. If we are correct in our diagnosis of defendant in error’s case it is entirely clear that his claim cannot be sustained. This conclusion would seem not to need the support of the authorities. But it has abundant support, both by opinions of text-writers and by decisions. Out of a great number we cite the following: 1 Cooley on Taxation, 770;

Holly Springs Savings & Ins. Co. v. Marshal County, 52 Miss., 281; Jones-v. Commissioners, 10 Neb., 154; Mitchell v. Commissioners, 9 Kan., 344; Albany City National Bank v. Maher, Rcr., 19 Blatch., 175; Mitchell v. Commissioners, 91 U. S., 206; Shotwell v. Moore, 45 Ohio St., 632; Shotwell v. Moore, 129 U. S., 590; Durham v. The State, 6 Ind. App., 23; Poppleton v. Yamhill County, 8 Ore., 337; Ransom v. Burlington, 111 Ia., 77.

The transactions respecting the attempted trust to Parmelee and Dittrick come within the same condemnation. Poster was all the time the man behind the scenes.

At the hearing in this court counsel for plaintiff in error disclaimed any desire to prevent credit being given for taxes actually paid. It seems but fair that such credit should be made, and it is the opinion of this court that it should be. The judgment of the circuit court will be reversed, tbe injunction dissolved, and the petition below dismissed.

Reversed.

Davis, C. J.. Shauck, Price, Crew and Summers, JJ., concur.