author: Spear, O. J.

text:
    Markley v. Village of Mineral City.

      Municipal corporation — Cannot acqtdre land for purpose of donating same to corporation or person — For manufacturing plant— Land so conveyed cannot be recovered.

    1. A municipal corporation is without capacity to acquire land by purchase for the purpose of donating the same to a corporation or person as an inducement to build and operate manufacturing plants within the municipality.
    2. Corporate funds paid out in the attempted purchase of land for such purpose are unlawfully expended, and a deed purporting to convey such land is without legal effect.
    3. And where, for the purpose stated, a village has undertaken to purchase and acquire title to laud and to convey it to a person on consideration that he will build and operate manufactories within the village, and afterwards brings its action against such person to set aside the conveyance and obtain a reconveyance of the property, with possession thereof, a court of equity will not lend its aid to either party, but will leave them where they have placed themselves.
    (Decided May 10, 1898.)
    Error to the Circuit Court of Tuscarawas county.
    • The cause of the Village of Mineral City ag’ainst George J. Markley was tried in the circuit court of Tuscarawas county, on appeal from the common pleas, and it is to the judgment of the circuit court that error is prosecuted here by Markley.
    The purpose of the suit was to obtain a decree setting aside a deed of three acres of land which had been made by the Village to Markley, to require him to reconvey the premises to the Village, ■ and for possession of the property. In its petition the Village alleged in substance, that on the first day of March, 1893, it was seized of the land in question; that on that day the council attempted to pass a resolution to convey the real estate to Markley; that on ■ that day the village mayor and the clerk executed and delivered a deed for the premises to him, which was then delivered to the county recorder and recorded. The resolution was not properly passed; the defendant paid no consideration for the land, hut it was attempted to he conveyed to him as a donation to procure him to construct and operate manufacturing plants in accordance with an agreement to that effect of that date, a copy of which is attached to the petition; that the defendant has violated his contract in this that he has not constructed and operated such plants as agreed, and has thus forfeited any rights that he otherwise might have had. The mayor and the clerk were never legally authorized to convey the land; no ordinance was passed giving such authority, nor were any of the necessary legal steps taken to make such attempted conveyance effective. The agreement and alleged deed are illegal and void, and of no effect, and plaintiff is entitled to a reconveyance.
    Markley’s answer contained four defenses. The first admitted the passage of the resolution, and execution, delivery and recording of the deed; admitted the purpose of the deed; admitted the making of the agreement set up in the petition, but denied every other allegation. The second averred actual possession of the land in defendant on and ever since March 1, 1893; denied that the Village was ever seized of the land, or the owner of it; averred that it took from the heirs of one George Lechner, deceased, who were seized in fee simple, a deed of the land and purchased the same for the sole purpose and with the sole intent of donating the same to some person, corporation or association, to induce them to construct and operate manufacturing plants within the Village and not for the legitimate use of the Village, all of which was in violation of the Constitution and laws of Ohio and was ultra vires, and the deed to the Village is void and of no effect. The third averred in terms a compliance with his contract, and alleged that before the commencement of the suit, with full knowledge and acquiescence of the Village, he had expended other large sums, in all $38,000.00, in manufacturing plants, and was then operating them within the Village, and that plaintiff should be barred and estopped of its action. The fourth set up that since the commencement of the action the heirs of George Lechner, deceased (naming them), being the same persons from whom the village obtained its supposed title to the land, have conveyed to the defendant, by their duly executed quitclaim deeds, all their right, title, interest and estate, legal and equitable, in and to the real estate, and that, by virtue of said deeds, defendant is the owner in fee of the real estate, and is still in the occupancy and possession thereof.
    To the second, third and fourth defenses respectively, a demurrer was interposed and sustained.
    The cause was then tried on the issues made by the petition and first defense, which resulted in a finding and judgment as follows:
    “And the court being fully advised in the premises, and on consideration whereof, finds its conclusions of fact separate from its conclusions of law to be as follows: That prior to the 1st day of March, A. D., 1893, and before and at the date of the deed to the defendant for the real estate described in the plaintiff’s petition, the plaintiff had purchased, and then held said real estate, from the heirs of one George Lechner, deceased, who conveyed the same to the plaintiff in fee simple by their deed duly executed and delivered; that said conveyance to the plaintiff was for a valuable consideration, and that said purchase and conveyance by and to the plaintiff from the said Lechner’s heirs were made for the sole purpose and with the sole intent on the part of the plaintiff to donate said real estate to some person, corporation or association of persons, to induce the same to build and operate certain manufactories within said village. And the court further find that said premises are described as follows, to-wit: (Here follows description of premises.) And the court further find that the plaintiff is a municipal corporation duly organized under the laws of Ohio. And the court further find that on said 1st day of March, 1893, said Village of Mineral City, without authority of law thereto, executed and delivered to the defendant an alleged deed of conveyance for the aforesaid premises and that said conveyance was without lawful consideration.
    “And as conclusions of law, it is considered by the court that the said pretended deed of conveyance, in the petition described, from the said The Incorporated Village of Mineral City to said George J. Markley, be and the same is hereby set aside, vacated and declared to be of no force and effect in law to effect or convey the title of said premises to the defendant, and that the title of the said plaintiff to said premises be and the same is hereby confirmed, and it is ordered that a writ issue to the sheriff of Tuscarawas county to put the plaintiff in possession of said premises. And the court further consider that the plaintiff recover of the defendant its costs herein expended. To all and to each of which conclusions of law, orders, judgments and decrees the defendant excepts.”

      A. W. Patrick and Neeley <& Patrick, for plaintiff in error.
    Could the plaintiff below, at the dates stated in its amended petition, legally acquire title to, by deed of purchase, and hold real estate for the sole purpose, and with the sole intent on the part of the said plaintiff, of donating the same to some person, corporation, or association of persons, to induce the same to build and operate certain manufactories within the Village of Mineral City? We affirm that it could not.
    The powers of the legislature of Ohio on this subject are limited, and the legislature restrained by section 6, of article 8, of the Ohio Constitution of 1851. Bates’ Revised Statutes of Ohio, volume 3, page 3556. And has been construed by this court to apply to individuals, as well as joint stock companies, corporations and associations. Walker v. Cincinnati, 21 Ohio St., 54; FranklÁn Bank v. Commercial Bank, 36 Ohio St., 355; Wysearner et al. v. Atkinson et al., 37 Ohio St., 80.
    Acting under the limitations and restrictions contained in this section of the Constitution, the legislature of Ohio, by sub-section 34, of section 1692, of Bates’ Revised Statutes of Ohio, Volume 1, page 785, has limited the powers of municipal corporations to acquire by purchase and hold real estate for the legitimate use of the corporation only.
    It is clear that no express power is given to the plaintiff below by this sub-section to acquire, by purchase, real estate to be donated for the purpose set forth in said defense No. 2, and equally clear that no such implied power was intended by the legislature. Bavenna v. Penna. Co., 45 Ohio St., 118; Cooley on Constitutional Limitations, 233, 234; MinPu/rn v. Larue, 23 Howard (U. S.), 435; Bloom v. Xenia, 32 Ohio St., 465; City of St. Louis v. Bell Telephone Co., 9 Am. St. R., 370 (96 Mo., 623.); Chicago Gaslight Co. v. Peoples Gaslight Co., 2 Am. St. R.; 124 (121 111., 530) Dillon’s Municipal Corporations, Volume 1, section 457, pages 450 and 451 (3rd Ed.); Volume 2, section 936, page 936; Dillon’s Mu. Cor., Volume 1, section 89, on page 116 (3rd Ed.).
    The transactions set forth in the amended petition, between The Village of Mineral City and George J. Markley being toltra vires and void, at common law and in equity, the village cannot maintain its action against Markley, and Markley may rely upon such illegality as a defense; both parties being in pari delicto, the court will not aid either of them, but leave them where they illegally placed themselves. Dillon’s Municipal Corporations, section 458, pages 453 and 454 (3rd Ed.).
    The following authorities support our proposition. The State v. Buttles, 3 Ohio St., 309; The Boat'd of Education, etc. v. Thompson et al., 33 Ohio St., 321; The Commissioners v. Andrews, 18 Ohio St., 49; Kahn, Jr., v. Walton et al., 46 Ohio St., 195; Thomas v. Cronise, 16 Ohio, 54; Moore v. Adams et al., 8 Ohio, 375; Boll v. Baguet, 4 Ohio, 400; Bond v. Village of Madisonville, 2 O. C. C., 449, s. c. 1 Circ. Dec., 581.

      E. S. Souers, for defendant in error.
    In this case real estate was sought to be conveyed illegally, as it is admitted, and the corporation seeks in this proceeding to recover possession of the property just as it was, and have its title to the same quieted by the decree of the court.
    This proposition of itself we think is so well recognized that it needs no citation of authorities, and has never been questioned in a court of equity; but the plaintiff need not wholly rely on this. The statutes of Ohio provide in distinct terms for such cases in section 21 of the Revised Statutes of Ohio. But it is admitted in this case that the conveyance to Markley was void, and therefore he never had any title from the corporation; but his possession is because of such attempted conveyance and must be illegal. Section 2673c, Revised Statutes of Ohio; 18 Ohio St., 50; 10 O. C. C., 629; s. c. 5 Circ. Dee., 107.
    The plaintiff, the village as such has obtained a conveyance from the Lechner heirs for value; whatever the validity of that title might have been, it was an equitable one at least, and the doctrine could not be invoked against the village by George J. Markley, the defendant below, who holds under it. 7 American and English Encyclopedia of Law, 27; 39 Ohio St., 309.
    The grantee is estopped from denying the grant- or’s title. Addison on Contracts, Volume 2, 314; 29 Bulletin, 317; 25 Bulletin, 391; Addison on Contracts, Volume 1, section 253.
    Cases cited by plaintiff in error upon this proposition were decided before section 21 was amended as it now is, and are not applicable at all.
    The demurrer to the third defense of the answer was properly sustained, because the doctrine of estoppel cannot be invoked against the village. It, like the king, can do no wrong; it has no personal existence; its officers and agents may be procured to plunder and defraud, but the corporation itself as such, cannot do any wrong, and none can be imputed to it, and the party benefited by such plunder, fraud, or misconduct of any such officer or agent can in no way claim any benefits derived therefrom; he cannot retain what he obtained by collusion with such officer or agent. He is legally bound to know that they are exceeding their powers, and in this .case, while the defendant Markley claims to have invested large sums of money at said village, ib is not claimed that one dollar of it was invested in the improvement of these premises, and in fact he did not. Estoppel is a novel mode of supplying a total want of power. Board of Education v. Sinton, 41 Ohio St., 512.
    If estoppel could avail, the courts might be used to enforce any nefarious transaction. 19 Bulletin, 293. Estoppels do not work in favor of a breach of trust. 22 Bulletin, 150; 25 Bulletin, 391; 15 Fed. Rep., 707; 32N. E.,7; 33N. W., 333; 134N.Y., 532.
    The rule of in pari delicto is inapplicable to municipal corporations (56 F., 867), for the same reason already stated, that the village as such could not be guilty, and the guilt of its officers could not be imputed to it.
    A conveyance pendente lite is good between the parties to the conveyance, but can not vary the rights of the litigants. Bennett v. Williams, 5 Ohio, 461; Hamlin’s Lessee v. Bevans, 7 Ohio, Part I, 161.
   Spear, O. J.

The pleadings and findings of fact present this question: Had the Village power, by deed of purchase, to legally acquire title to and hold real estate for the sole purpose and with the sole intent of donating the same to procure the construction and operation of manufacturing plants within its limits?

Two sections of the constitution seem to bear upon the subject. One, section 6 of article 13, makes it the duty of the general assembly, in providing for the organization of municipalities, to restrict their power of contracting debts, and loaning their credit, so as to prevent the abuse of such power. The other, section 6 of article 8, expressly denies to the assembly power to authorize any such corporation to become a stockholder in any joint stock company, corporation or association whatever; or to raise money for, or loan its credit to, or in aid of, any such company, corporation or association. And that this interdict applies as well to the case of an individual, as to the aggregations named, is without question. It is intended to prevent the union of public and private capital in any enterprise whatever.

In considering the attitude of the Village in this controversy, we must look at the entire scheme that was proposed to be accomplished. The first step was to pay out money of the municipality in the purchase of land. The next was a donation of the land so acquired to some one willing to contract, and that person, in turn,, to construct and operate the manufacturing plants for the supposed benefit of the people. The Village was not to share as a partner in the enterprise, nor to loan its credit for that purpose, nor did it do so; but it did propose, by the wrongful use of corporate funds, to make a purchase, intending thereafter to make a gift of the property so to be acquired, both of which things it undertook to do. It cannot be doubted that the scheme taken as a whole was clearly violative of the spirit of the sections of the constitution cited. And, notwithstanding this, the proposition of the Village is that a court of equity should aid it in recovering that which it has undertaken to acquire by a scheme forbidden by law, and has parted with in compliance with a contract which it had no power to make.

It is to be borne in mind that we are dealing with the status and capacity, not of a natural person, but of a corporate one, a mere creature of the law, an artificial entity which, having no natural rights or powers, exists and operates only by virtue of the law of its creation. And we suppose it to be settled that our municipalities have such capacities and powers, and such only, as are expressly granted, and such as may be implied as essential to carry into effect those which are expressly granted, and that doubtful claims to power are resolved against the corporation. Cooley’s Con. Lim-, 231, 232; Minturn v. Larue, 23 U. S., 435; St. Louis v. Bell Telephone Co., 96 Mo., 623; I Dillon’s Mun. Corp., sections 89, 457; 2 Dillon’s Mun. Corp., section 936; Ravenna v. Penna. Co., 45 Ohio St., 118. So that, the question resolves itself into this: Has the power been clearly granted to villages to accept title to land for the express purpose of donating it for the encouragement of local improvements? If not, is such power to be implied as essential to carry into effect other clearly granted powers?

The right of a municipality to acquire property, is given by paragraph 33 of section 1692, Revised Statutes, in these words: “To acquire by purchase, or otherwise, and to hold real estate, or any interest therein, * * * for the use Qf the corporation, and to sell or lease the same.” Here is specific mention of the purpose for which land may be acquired. The controlling idea is that the property must be for the use of the corporation. This idea of use implies power to hold; it implies, beyond this, a jus disponendi, a power to deal with the property. If such power does not exist, then its attempted acquisition would be an idle performance. The two ideas are inseparable; if the municipality is without power to hold and dispose of the property, then, by the same token, it is without power to acquire. And we are necessarily confined, in treating- of the purpose of acquisition, to the express purpose, viz: ‘ ‘The use of the corporation,” for, applying the maxim, expressio unius est exclusio alte?‘ius, all other purposes are excluded. It would follow, therefore, that if the land be for the use of the municipality, for some legitimate corporate purpose, then power is given by the clause quoted to acquire it, and necessarily power to hold and dispose of it. But if it be not for the use of the corporation, that is, for a use to which the corporation may lawfully devote it, then this clause gives no capacity to receive or power to hold. Another paragraph of the same section gives power to accept bequests, but that is not involved here, and so far as we are aware, there is no general power given to acquire real estate except by the paragraph quoted. Not only, therefore, is there no clear expression of a purpose to give power to acquire and hold real estate for speculative purposes, but the provisions upon the subject, statutory and constitutional, clearly establish that no such power is intended. The chief function of a municipality being to regulate local governmental affairs because they may be dealt with better by the people interested than by a distant central power, we cannot assume a purpose to invest such corporation with the powers or capacities of individuals, or of private corporations, for objects not pertaining to municipal rule, since that would be to pervert the institution from its legitimate ends, and to require of it duties which it is not adapted satisfactorily to execute, and which are not necessary to enable it to discharge the appropriate functions and duties of local administration. It follows that no such power is to be implied as essential to carry into effect the power which is in terms given.

If we are right in these conclusions, then it results that the attempted purchase by the Village of the Lechner heirs, gave to the municipality no title to the land, either legal or equitable.

This being the situation, how does it leave the parties? Markley is in possession. The attempted deed of the Village gave him no title, but, on the other hand, the Village has no title to be restored. It cannot prevail except through the medium and with the aid of the illegal transaction to which it was a party, and hence it can have no standing in a court of equity because it asks affirmative relief under circumstances showing that it is itself in the wrong. The defendant is equally in pari delicto. The court will, therefore, refuse aid to either, but leave them where, by their illegal acts, they have placed themseLves. Thomas v. Cronise, 16 Ohio Rep., 54; The State v. Buttles, 3 Ohio St., 309; Commissioners v. Andrews, 18 Ohio St., 49; Board of Education v. Thompson, 33 Ohio St., 321; Kahn v. Walton, 46 Ohio St., 195.

It is insisted that Markley, having taken a deed from the Village, is estopped to deny the title of his grantor. But Markley does not attempt to stand on that title. He distinctly repudiates it. But if he did, the contract which the plaintiff itself pleads, and the finding of the circuit court, disclose fully the illegal character of the transaction.

Attention is called to section 21, Revised Statutes, and the proposition is advanced that the attempt of the Village to convey to Marldey maj be treated as an illegal loan or deposit of the property of the Village, which, by this section, it is authorized to recover back. The section cannot apply. We have already found that the land in question was not the property of the Village. The spirit, if not the letter, of this statute was violated by the act of the municipal officers in unlawfully paying the money of the Village to the Lechner heirs, not in their futile attempt to convey what the Village did not own.

The case of the Village seems to rest upon the proposition that the municipality, while it is not bound by the illegal acts of its officers, nevertheless may affirm in part what they did, and thus reap whatever benefit may result from their acts. The proposition is not tenable. Its weakness lies in the unfounded assumption that the illegality of the transaction consists wholly in the unauthorized acts of the agents. We have already found that the scheme could have no legal basis because of the inherent incapacity of the municipality to enter into it.

But it is insisted that to deny the relief sought by the Village would be to put it in the power of village authorities to make wrongful use of corporate funds, and then refuse relief to the wronged corporation. We think not; at least not necessarily so. If the vendors, at the time of the attempted conveyance to the Village, and the receipt by them of the alleged purchase money, were aware of the purpose of the village authorities in their attempt to acquire the property, no reason is perceived why an action may not he maintained to recover of them the money thus illegally appropriated, and failing that remedy, it is not impossible that the village officers who thus undertook to make unauthorized use of the village funds, may be liable. Of course, however, we do not undertake to decide these questions. They are not involved in this controversy, nor are the proper parties before us.

Judgment of the circuit court reversed and petition below dismissed.

Beversed.


source: Caselaw Access Project

author: Burket, J.

license: Public Domain

text:
    Straman, Admr., v. Rechtine et al.

      Mortgage lien — Money loaned to pay off first lien — Loaner to have first lien — New mortgage defective — Loaner subrogated to rights of .first mortgagee — Rights of creditors against mortgagee— Dower interest of widow.

    1. Where money is loaned under an agreement that it shall be used in the payment of a lien on real estate, and it is so used, and the agreement is that the one who so loans the money shall have a first mortgage lien on the same lands to secure his money and through some defect in the new mortgage or oversight as to other liens, the money can not be made on the last mortgage, the mortgagee has a right to be subrogated to the lien which was paid by the money so by him loaned, when it can be done without placing greater burdens upon the intervening lienholders than they would have borne if the old mortgage had not been released, but not as against a bona fide lienholder who acquired his lien after the release of the old mortgage without notice of such agreement and payment.
    2. R. having made a mortgage on his real estate to an insurance company, his heir after his death, borrowed money from B. and paid the mortgage money to the insurance company, and gave B. a moi’tgage on the same lands to secure his money ; in borrowing the money, the heir assured B. that the money should be used to pay the insurance company’s mortgage, and it was so used; the heir also assured B. that all the debts of his father had been paid, and that there were no other liens upon the lands, which B. believed to be true ; other debts of R. having come to light, an administrator was appointed on his estate who filed a petition to sell said lands to pay debts : Held, that B. is entitled to be subrogated to the mortgage of the insurance company, and to have the release thereof set aside for his benefit and protection.
    3. R. and wife made a mortgage to M. and duly acknowledged the same before a notary public, who duly certified the acknowledgment of the wife, but by mistake omitted to certify the . acknowledgment of the husband, and R. having died intestate and insolvent before the mistake was discovered, and M. having after the death of R. accepted a new mortgage for her debt from the heir, and released the mortgage from R. and wife, to enable the heir to give a first mortgage to another party for borrowed money, and an administrator on the estate of R. having thereafter been appointed, who filed a petition to sell the lands to pay the debts of R : Held, that M. was entitled to have her mortgage reformed as to R., and to have the release thereof on the record set aside; but that said mortgage, when so reformed, is subject to the lien of general creditors of R. on the lands, and does not have priority over them: Held, further, that such mortgage isa valid charge in equity upon the dower interest of the widow in said lands, and that the balance due on the debt to M. after receiving her dividend as a general creditor from the administrator, should be paid out of the money value of the dower of the widow of R., and the remainder of such money value should be paid over to such widow.
    (Decided June 7, 1898.)
    Error to the Circuit Court of Putnam county.
    Anton Rechtine, being the owner of sixty acres of land in Putnam county, executed and delivered his mortgage deed (his wife joining with him) to The Northwestern Mutual Life Insurance Company, of Milwaukee, Wisconsin, of the date of April 26, 1889, for the sum of sixteen hundred dollars, which mortgage was duly recorded.
    Afterward, on the 21st day of June, 1889, he and his wife undertook to execute and deliver their mortgage deed of that date to Mary H. Moe for the sum of five hundred dollars, which was also duly recorded, but by mistake the notary public failed to certify that Anton Rechtine had signed and acknowledged the said mortgage and that the same was his free act and deed, but the acknowledgment of his wife was duly certified by the notary.
    Thereafter, on the 16th day of January, 1894, Anton Rechtine died intestate, leaving Elizabeth Rechtine his widow and four sons and three daughters, all of full age, his only heirs-at-law. The widow and six children conveyed the lands by deed to Ferdinand Rechtine, one of the sons, he agreeing to support his mother during her lifetime and to pay his brothers and sisters certain sums after her death.
    About a year after the death of the intestate, John H. Straman was duly appointed administrator of his estate, and in April, 1895, filed his petition in the court of common pleas of Putnam county to sell the sixty acres of land of which Anton Reehtine died seized.
    After the conveyance to Ferdinand, and before the appointment of the administrator, the insurance company began to clamor for the payment of the money then due on its mortgage, and threatened foreclosure. Thereupon Ferdinand borrowed $1,600 from William F. Brunning with which money he paid off the mortgage held by the insurance company and procured the same to be released of record, and stated to Mr. Brunning that there were no debts of the . estate unpaid -and no further liens upon the lands, except the mortgage of five hundred dollars to Mrs. Moe, and he procured Mrs. Moe to release her mortgage of record and take a new mortgage from him (Ferdinand) for the same sum on the same lands, subsequent to the mortgage given to Mr. Brunning and for the sole purpose of allowing the Brunning mortgage to be the first lien. So that, as Mr. Brunning understood and believed, his mortgage for $1,600 was the first and best lien on the lands.
    Mr. Brunning being made a defendant to the petition of the administrator to sell lands, filed his answer and cross-petition giving a minute and detailed statement of the facts as above given, and prayed to be subrogated to the lien and rights which the insurance company had in its mortgage before its release, and that the release of that mortgage might be set aside and the full force and effect of the mortgage restored for his protection.
    Mrs. Moe was also made a party defendant and in her cross-petition stated the facts as to her mortgage, and prayed that the old released mortgage be reformed and corrected so as to have the certificate of the notary public show a due execution and acknowledgment of the mortgage made to her by Anton Rechtine and wife, and that the release of the same be set aside and the full force and effect of the mortgage when reformed restored for her protection.
    The administrator averred in his petition that the widow was entitled to dower in the lands, and prayed that it be set off and assigned to her or her assigns; and the widow by answer and cross-petition prayed that the deed of conveyance be set aside and that dower be assigned to her.
    The case was tried upon the issues made in the pleadings, the testimony and the arguments of counsel, and the court made no separate findings of fact, but found generally that the facts stated in the said cross-petitions of Mr. Brunning, Mrs. Moe and the widow were true, and gave judgment that the lands he sold by the administrator according to law; that Mr. Brunning- be subrogated to the lien of the insurance company and have the first and best lien; that the mortgage of Mrs. Moe be reformed as prayed for and be the second lien, and that the value of the widow’s dower in the lands be ascertained and paid to her in money next after the payment of the two mortgages, and for the payment of taxes, costs, etc.
    The administrator filed motions for a new trial, one ground being that the findings, orders, judgment and decree are each and all contrary to law. The motions for a new trial were overruled and exceptions taken. The circuit court affirmed the judgment. Thereupon the administrator filed his petition in this court, seeking to reverse the judgments of both the circuit court and the court of common pleas.

      George Fritz, for plaintiff in error.
    The attention of the court is called to the similarity between section 6165 and section 6091 of the Revised Statutes of Ohio. '
    Section 6091 provides for the payment of liens against personal property of a decedent when it is sold by the administrator, and was construed by this court in the case of Kilbourne et al. v. Fay, Fxr., et al., 29 Ohio St., 264.
    Section 6165 provides for the payment of liens against real estate of a decedent when it is sold by the administrator, and is similar to section 6091.
    In Ohio we have a number of decisions upon questions similar to the issues in this ease.
    It has been held that the lien of an unrecorded real estate mortgage is inferior to a judgment lien. Holliday et al. v. Bank et al., 16 Ohio St., 533;
      Fosdick v. Ba/rr, 3 Ohio St., 471; Jackson and Buel v. Luce et al., 14 Ohio St., 514; White v. Denman et al., 1 Ohio St., 110.
    That the lien of an unrecorded real estate mortgage is inferior to the claims of an assignee for creditors. Erwin et al. v. Bhuey, Assignee, etc., 8 Ohio St., 510; Bloom et al. v. Moggie et al., 4 Ohio St., 45; Betz v. Bnyder, 48 Ohio St., 492.
    That the lien of an unfiled chattel mortgage is inferior to the claims of an administrator. . Kilbourne et col. v. Fay, Exr, et col., 29 Ohio St., 264; Whiteley v. Weber, Admr., 2 C. O. R., 336; s. c. 1 C. D., 517.
    Analogy between a judgment lien and a debt of a decedent.
    One is a lien on the land and the other the land is bound for the payment of. Notwithstanding the legal effect of each of them, if the land should be conveyed away, by the judgment debtor or the heir at law of a decedent and an attempt was made to subject the land to the payment of the debt, in either case it would be a good defense for the purchaser to allege and' prove that there was sufficient personal property out of which the debt could be made. Both are a general lien and in neither case can land be sold to satisfy the lien until after a return is made that there is no personal property out of which the debt can be made. Dili v. Priml/y, 12 Ohio St., 38.
    A death of a decedent operates as an assignment.
    An assignee and an administrator are each a trustee for creditors.
    Take away the creditors and there is no occasion for the appointment of either assignee or administrator. McDonald et al. v. Aten et al., 1 Ohio St., 293; Overturf, Admr., v. Dugan et al., 29 Ohio St., 230.

      Elizabeth Rechtine as widow of Anton Rechtine deceased, had a right to have dower assigned to her in the real estate of the decedent and had a right to have a homestead set off to her out of the real estate of the decedent.
    However, the widow is not seized of the land in which she has such right, she cannot bargain and sell it at law, it cannot be seized in execution by her creditor, she cannot mortgage or lease it, but she can release it to the tenant. 5 Am. and Eng. Encyclo. of Law, 1st Ed., 906.
    Now in this ease the widow did release all her rights in all this real estate to the owner of the fee, when she joined in the deed of all the other heirs at law to Ferdinand Rechtine and her deed should not be set aside upon the facts stated in her cross-petition herein and of course without such deed being set aside we contend it was error to allow her dower in any part of said real estate as against the creditors of her husband’s estate who are represented by the administrator plaintiff herein when said estate is insolvent.

      Watts <£ Moore, for defendant in error — Brunning.
    The mortgage to the Northwestern Life Insurance Company was the first lien that attached, and no act of the heirs or the administrator except the payment of it could discharge such lien. The administrator discloses the fact that there was no personal estate, so that the real estate alone was bound for its payment, and whoever became-the grantee of such real estate took it encumbered and charged with the lien of the insurance company. When Ferdinand Rechtine took title from the heirs of Anton Rechtine for the real estate, it was encumbered by the mortgage lien of Tbe Northwestern Life Insurance Company, which he was bound to discharge or suffer the property to be sold for its payment. The indebtedness was due, and to meet the payment of the mortgage and protect the property from sale, the defendant Brunning, at the instance of Ferdinand Rechtine, paid to the Life Insurance Company the full amount of its mortgage, $1,600, and took the mortgage of Ferdinand Rechtine to secure the same.
    This did not prejudice the estate of Anton Rechtine, nor did it prejudice the creditors of his estate. The lien of The Northwestern Life Insurance Co. existed at the decease of Anton Rechtine. The mortgage of Ferdinand Rechtine was . substituted for it, at the time that the defendant Brunning furnished the money to discharge the former lien. So that the creditors of Anton Rechtine have no right to complain because of the substitution of the one lien for the other. They were deprived of no right whatever. It is well recognized by the common law, that in ease the debtor borrows money from a third party to pay a debt, he may subrogate the lender to the rights of the creditor; for by this change the rights of the other are not injuriously affected. In this case the borrowing was made to discharge the existing lien and was used in procuring its discharge. 2 Bouvier, 553.
    It will also be observed in this case that the payment of the mortgage to the insurance company and the payment of the money and execution of the new mortgage wére contemporaneous acts. Carr v. Oaldioell, 10 Cal., 380; Gilbert v. Gilbert, 39 Iowa, 657; Bidener v. Pavey, 77 Ind., 241; Johnson v. Barrett, 117 Ind., 551; Emmert v. Thompson, 49 Minn., 386. Gems v. Thieme, 93 N. Y., 225; Zells Appeals, 111 Pa. St., 532; Bakers. Ward, 7 Bush (Ky.), 240; Gaskillv. Wales, 36 N. J. Eq., 628; Wilton v. Mayberry, 75 Wisconsin, 191; Muir v. Berkshire, 52 Ind., 149; Sidenor v. Hawes, 37 Ohio St., 532; Sheldon on Subrogation, 13; Marsh v. Bice, IN. H., 167; Barker v. Ba/rker, 4 Pick., 505.
    The plaintiff in error does not distinguish between contribution and subrogation.
    The real estate of Anton Rechtine was encumbered for the full amount of the indebtedness to The Northwestern M utual Life Insurance Company by mortgage executed by himself and wife. Other parties who joined in the execution of the mortgage had no interest to convey and conveyed nothing. When the land was conveyed after the death of Anton Rechtine to Ferdinand Rechtine he took it subject to the mortgage. The real estate was primarily liable for the satisfaction of the mortgage. When Brunning furnished the money to satisfy the incumbrance of the insurance company, it was done upon the representation that the debts of the estate were paid, even requiring receipts to be exhibited and an affidavit to be made to that effect; also that the Moe mortgage should be deferred and Brunning should take the place of The Northwestern Insurance Company.

      Bailey c& Bailey and Handy c& Ogden, for Mrs. Moe’s Admr., defendant, in error.
    There can be no question but that the first mortgage to Mrs. Moe was valid as between the parties, and of course it created an equitable lien in favor of M rs. Moe as against all but subsequent grantees and subsequent lienholders. Sidell v. Maxwell, 4 Ohio St., 236; Fostick v. Barr, 3 Ohio St., 471;
      Gillv. Finney, 12 Ohio St., 38; Stewart v. Hopkins, 30 Ohio St., 502; Riley v. Rice, 40 Ohio St., 441; Building Association v. Clark, 43 Ohio St., 434.
    The first mortgage was subject to reformation. It cannot be doubted that it was subject to reformation. Counsel for plaintiff in error in an elaborate brief, claiming almost everything, does not claim that the mortgage was not subject to this action of the court.
    The power to reinstate. The power of a court of equity to reinstate this first mortgage does not seem to be questioned, but counsel insist that such decree cannot be made effective, as a new lien, that of general creditors, has attached in the meantime.
    No consideration for her release. There was no consideration for the release of the mortgage of Mrs. M03. It seems to have been assented to by her as an accommodation to some one she did not know. Why she did it she never knew. All that she asked was that she should not lose her' lien, that lien that she then held on the land. All this she was promised should be preserved to her. This she did not get. To refuse to her the relief she has asked in this case would be legalized robbery.
    Do not forget that no new rights intervened between the release of this first mortgage and the decree reinstating it. No principle of estoppel can be invoked against her.
    We especially call attention to Gilbert v. Gilbert, 29 Iowa, 657; Johnson v. Barrett, 117 Ind., 551; Gill v. Finney, Adrm\, 12 Ohio St., 38.
   Burket, J.

It is urged by plaintiff in error that Mr. Brunning has no right to be subrogated to the lien which the mortgage to the insurance company had before its release of record.

The material facts contained in the cross-petition of Mr. Brunning, and found to be true by the court of common pleas are, that after the death of Anton Rechtine, and after his debts had become liens upon his real estate in favor of his creditors, and after his son Ferdinand had received a conveyance of the lands from the widow and children, subject to the mortgage liens, the insurance company urged payment of its mortgage and threatened foreclosure; that Ferdinand Rechtine thereupon requested Mr. Brunning to loan him $1,600 with which, to pay off the insurance company’s mortgage, and agreed to give Mr. Brunning a first mortgage on the same lands to secure the loan, and assured him that all of his father’s debts had been paid, and that there was no other lien upon the lands, except the mortgage to Mrs. Moe for $500.00, and he agreed to obtain a release of that mortgage so that the mortgage to Mr. Brunningshould be the first and best lien. Mr. Brunning agreed to these terms, and made the loan of $1,600 .to Ferdinand Rechtine, and the mortgage to the insurance company was paid off with the money, and was released of record. A mortgage for the $1,600 was then made by Ferdinand Rechtine to Mr. Brunning on the same lands, and was duly recorded, the mortgage to Mrs. Moe' being released of record, so that Mr. Brunning as he understood and believed had the first lien on the lands.

Afterward it was ascertained that the debts owing by Anton Rechtine at his death, and which were a lien on those same lands, had not been paid, and therefore an administrator was appointed on his estate, and a petition filed in the court of common pleas to sell the lands. As the lien of the creditors of Anton Rechtine attached to the lands immediately upon his death, and as the lien of Mr. Brunning’s mortgage attached long after the death of Anton Rechtine, the proceeds of the sale of the lands would have to be applied to the payment of general creditors, and Mr. Brunning would get only such surplus as might be coming to Ferdinand after the settlement of the estate of his father. This would be compelling Mr. Brunning to contribute $1,600 of his own money without consideration, for the benefit of the general creditors of Anton Rechtine. This would be wrong, and should be avoided if it can be done without injuring the legal rights of others.

As matters stood after the death of Anton Rechtine, and up to the payment of the insurance company’s mortgage with the money of Mr. Brunning, the creditors were legally entitled to receive only the surplus after payment of the insurance mortgage. They contributed nothing toward paying that mortgage, and they are not entitled to be ben-’ efited by the payment made with the money supplied by Mr. Brunning for that purpose. To subrogate him to the lien of the insurance mortgage before its release, and to set aside that release, and restore its full force for his benefit, will protect him from loss, and will not put the general creditors into a worse condition than they were before Mr. Brunning loaned his money. Such subrogation will add no new burdens to the creditors: When their liens on the lands accrued, the lands were bound for the payment of the mortgage lien of $1,600, and it can make no difference to the creditors, whether payments is made to the insurance company or to Mr. Brunning.

Where money is loaned under an agreement to be used in the payment of a lien on real estate, and it is so used, and the agreement is that the one who loans the money shall have a first mortgage lien on the same lands to secure his money, and through some defect in the new mortgage, or oversight as to other liens, the money cannot be made on the last mortgage, the mortgagee has a right to be subrogated to the lien which the money supplied by him has paid, when it can be done without placing greater burdens upon the intervening lien-holders than they would have borne if the old mortgage had not been released. Mr. Brunning was, therefore, clearly entitled to be subrogated, and there was no error in so ordering. Sidener v. Pavey, 77 Ind., 241; Emmert v. Thompson, 49 Minn., 386; Johnsons. Barrett, 117 Ind., 551; Gilbert v. Gilbert, 39 Iowa, 657; Marsh v. Rice, N. H., 167; Harris on Subrogation, sections 736, 793; Carr v. Caldwell, 10 Cal., 380; see also Sheldon on Subrogation; Amick v. Woodworth, 58 Ohio St., 86; Joyce v. Dauntz, 55 Ohio St., 538.

A more difficult question arises as to the rights of the parties in the matter of the mortgage to Mrs. Mary H. Moe for the sum of $500.00.

Mrs. Moe released her first mortgage for the purpose of allowing the mortgage to Mr. Brunning to have priority, and as to him she is conclusively bound by her release, but as to all other parties she is free to assert and enforce whatever rights she may have.

The mortgage from Anton Rechtine and Elizabeth Rechtine, his wife, to Mrs. Moe was perfect as to the wife, but was defective as to the husband, because his name was left out of the certificate of acknowledgment by mistake of the notary public before whom the mortgage was in fact duly acknowledged by both husband and wife as found by the court. This clearly entitled Mrs. Moe to have the mortgage reformed as to the husband, and as to his wife no reformation was necessary, as the notary correctly certified her acknowledgment. As to the wife, therefore, the mortgage was properly admitted to record, it being made after the passage of the statute allowing married women to execute deeds and mortgages without joining with their husbands, and the mortgage bound whatever interest Mrs. Rechtine had in the lands.

As to Anton Rechtine, the mortgage not having been acknowledged, it was defective and was not entitled to record, and the record thereof was a nullity, and was notice tono one and bound no one. What then was the legal effect of reforming the mortgage as to the husband after his death?

In the case of Van Thorniley v. Peters, 26 Ohio St., 471, this court held that: 11A defective mortgage when reformed will not affect the lien of a judgment rendered between the date of the execution and the reformation of the mortgage.”

It has also been held that a defective mortgage when reformed will not 'affect the rights which general creditors have acquired under an assignment of the mortgagor for the benefit of his creditors, and. it has also been held that an unrecorded mortgage cannot affect the rights of general creditors in such assignment cases.

Can the reformation of a defective mortgage, after the death of the mortgagor, affect the rights or liens which general creditors acquired at the death of the mortgagor? In the case of Ramsdall v. Craighill, 9 Ohio R., 197, this court held that: ‘ ‘The debts of a deceased person are a lien on the land of which he died seized, in default of personal assets, whether devised or cast by descent, which can only be removed by the payment of the debts, or the lapse of time. ’ ’ The rule of this case has been universally approved and followed ever since. Sheldon v. Newton, 3 Ohio St., 494; Overturf v. Dugan, 29 Ohio St., 230. The exact nature of this lien has never been determined, but that to creditors it is a valuable right, cannot be doubted. It is of the same character and nature as the lien or trust in favor of creditors in cases of assignments for their benefit. In assignment cases the title to property passes to the assignee by the act of the owner, the assignor; and in the case of deceased persons the title to the personal property passes to the administrator by operation of law upon the death of the owner, and the real estate vests in the heir, burdened with the debts of the ancestor, subject to be sold by the administrator for the payment of his debts; and the property is held by the assignee in the one case, and by the administrator in the other, in trust for the creditors; and the creditors in either case can only work out the payment of their claims through the said trustees. The process of execution to obtain payment of their claims, is the action taken by the assignee or administrator under the statutes and orders of the court, while in cases of judgment liens the process is by the action of the sheriff under an execution placed in his hands. But in all cases of liens the creditors obtain their money by enforcing the lien, either by causing the trust to be executed, or by execution at law.

In Kilbourne v. Fay, 29 Ohio St., 264, it is said on page 279, that the rights of creditors can be asserted through an assignee for their benefit, as they can be.by judgment and execution against the property; and on the next page it is said, that the analogy between the duties of an assignee and an administrator of an insolvent estate, is perfect. That being so it follows that the rights of creditors can be asserted through an administrator as fully and effectually, but not always as speedily, as by judgment and execution against property. This being so the lien of creditors upon property of a deceased person is of as high a grade as the lien for the benefit of creditors in cases of assignment, or the lien of judgment creditors. While the process of enforcing such different liens is not the same in all cases, the liens themselves are equal in right, and one cannot shove aside, or supersede the other.

It appears in the record that the estate of Anton Rechtine is insolvent, and his creditors having obtained a valid lien on his real estate at his death, by operation of law, and the mortgage to Mrs. Moe being then and for more than a year thereafter, so defective as not to be entitled to record, it cannot now, upon being reformed, be made to take effect as against creditors so as to become prior in right to their lien. This inevitably follows from our recording acts. Section 4133, Revised Statutes, provides that mortgages “shall take effect from the time the same are delivered to the recorder of the proper county for record.” This means that they shall so take effect as to third parties, including creditors. As between the parties to the mortgage no record is required, and as between them, when the mortgage is executed and delivered, the lien becomes perfect.

In a careful review of the force and effect of our recording acts by Williams, C. J., in Betz v. Snyder, 48 Ohio St., 492, I find the following:

“It has been held by this court, as often as the question has been presented, and it has been made in a variety of forms, as well as in numerous cases, that mortgages of real property have no effect, either at law or in equity, until they are delivered to the recorder of the proper county for record, as against third persons acquiring a legal interest in, or lien upon the property. * * * It (the recording statute) was designed to protect the persons who might acquire legal interests in, or liens upon the property.”

In the case at bar the creditors, at the death of Mr. Rechtine, acquired a legal lien upon the lands in question, and the mortgage of Mrs. Moe, when reformed, could not displace that lien, and get in so as to obtain money which would otherwise go to the creditors.

It is urged that the doctrine of the case of Gill v. Pinney, 12 Ohio St., 38, which gave preference to a mortgage recorded shortly after the death of the mortgagor, over his general creditors, would give the mortgage to Mrs. Moe, when reformed, a preference over general creditors. This does not logically follow. In the Gill case the mortgage was perfect, and at common law passed the legal title after condition broken, and upon which ejectment could have been maintained; but the Moe mortgage was not a completed instrument under our statutes requiring mortgages to be signed, attested and duly acknowledged, and under' such a defective mortgage the legal title would not pass, and ejectment could not be maintained at common law upon such defective mortgage without the aid of a court of equity to first reform the mortgage. In the Gill case the mortgagee could himself do all that was required, simply by causing his mortgage to he recorded; while in the Moe case the .mortgagee had to first call in the aid of a court of equity to reform her mortgage, and thereby give it legal force and effect, so as to encumber the legal title.

While the lien in favor of creditors is usually said to be a general lien, this court held it to be a specific lien in Sheldon v. Newton, 3 Ohio St., 494. But even if such lien is general, and that in favor of a mortgagee specific, it does not follow that a later specific lien can displace an earlier general lien. In the Gill case it is said that the general lien of creditors “must be limited to the ■ property which passes, and to that, in the condition in which it passes. If the lands descend to the heir charged with an incumbrance created by the act of the ancestor, the lien of the general creditors must attach to it in the same condition. ’ ’ But in the case at bar there was no present subsisting lien on the lands in favor of Mrs. Moe at the time the general lien of the creditors attached. The defective mortgage had not then ripened into a subsisting lien on the lands. True it amounted to a contract for a lien, but it was not a lien in and of itself. Carr v. Williams, 10 Ohio R., 305; White v. Denman, 16 Ohio R., 59, and Williams v. Spriggs, 6 Ohio St., 585. While it could be reformed, and thereby made a lien, it could not when reformed and made a lien, have priority over the earlier general lien of the creditors.

Judge McIllvaine, in Kilbourne v. Fay, 29 Ohio St., 280, seems to doubt whether the same conclusion would have been reached in the Gill case, if our statute had declared unrecorded mortgages absolutely void as against creditors, and that doubt seems to be well founded. Section eight of our Deeds Act has been materially chang-ed since the decision of the Gill case, and it was accordingly held in Betz v. Snyder, 48 Ohio St., 502, that a mortgage which has no effect is no better than a void one, for a void mortgage is simply without effect.

If the Gill case is still sound law under our present statutes, it must be confined to the exact facts of that case, and cannot be extended, because it already encroaches somewhat upon the logical construction of our recording acts.

We, therefore, hold that the Moe mortgage when reformed, acquired no preference over the general creditors, and that in the distribution of the fund arising from the sale of the interest of Anton Rechtine in the lands at the time of his death, Mrs. Moe must stand and be treated as a general creditor only, having no preference over other general creditors.

After the death of Anton Rechtine, Mrs. Moe held her mortgage, duly executed, acknowledged and recorded, against the interest of Mrs. Rechtine in the lands of which her husband died seized, and if the lands had then been sold by the administrator to pay debts, her mortgage would have been a charge in equity against the dower interest of Mrs. Rechtine. Black v. Kuhlman, 30 Ohio St., 196. Having released her mortgag-e to enable Mr. Brunning to have a first lien, and having received no consideration for such release, and Mrs. Rechtine having paid nothing for such release, and her new mortgage proving worthless, owing to the mistake of all the parties as to the effect of the transactions among them, it is only just and right that Mrs. Moe should have the release of her first mortgage set aside, and that the full force and effect of that mortgage should be restored for her benefit and protection. This leaves Mrs. Rechtine and Mrs. Moe where they stood at the death of M-r. Reehtine, and does no injury to the legal rights of Mrs. Rechtine, in fact places her where she placed herself when she executed the mortgage to Mrs. Moe, and at the same time protects the legal and equitable rights of Mrs. Moe.

Upon the facts found to be true by the court of common pleas, that court did not render the proper order of distribution, and therein committed an error of law, and the circuit court erred in affirming the judgment.

The distribution of the proceeds of the sale, after payment of costs, taxes and expenses of sale, should be as follows:

1. Pay the $1,600.00 and interest due to Mr. Brunning.

2. Ascertain and set aside the money value of the dower estate of Mrs. Rechtine.

3. Distribute the remainder among the general creditors, including Mrs. Moe. Should there not be sufficient to pay Mrs. Moe in full, whatever may be due her after receiving her dividend from the administrator, should be paid out of the money value set aside for Mrs. Rechtine, and the balance of such money value then left, should be paid over to Mrs. Rechtine.

The judgment of the circuit court will be reversed, and proceeding to render such judgment as the circuit court should have rendered, the judgment of the court of common pleas will be so modified as to reach the result above indicated.

Judgment reversed.


author: Williams, J.

text:
    City of Greenville v. Anderson et al.

      City Clerk — Drawing warrant for larger amount than council allowed — Violation of official duty — Negligent payment by treasurer does not relieve clerk's sureties.

    I. It is a violation of the official duties of a city clerk to draw his warrant on the treasury for the payment of any’ claim that has not been allowed by the council, or for a larger amount than has been so allowed, obtain the money thereon and appropriate it, or part of it, to his own use; or to drawhis warrant for a valid claim that has been allowed, payable to the creditor or bearer, and then, instead of delivering it to the creditor, present it himself for payment, obtain the money and convert it to his own use; and for any loss sustained by the city in consequence of such malfeasance of the clerk, the sureties on his official bond are liable.

      ‘¿. Negligence on the part of the treasurer in paying such warrants does not excuse the official misconduct of the clerk, nor relieve his sureties from liability.
    (Decided June 7, 1898.)
    Error to the Circuit Court of Darke county.
    Suit was brought by the city of Greenville on the official bond of Charles B. Elliott as clerk of that city, to recover damages for alleged breaches of the bond. The amended petition contains thirteen causes of action, each of which charges the clerk with a misappropriation of the funds of the city, and a violation of his official duty in obtaining the same.
    Elliott failed to plead, and judgment was rendered against him for the amount claimed. His sureties, L. C. Anderson and Thomas E. Teal, filed general demurrers to the several causes of action, but afterwards withdrew those to the third, twelfth and thirteenth, and allowed judgment to be taken thereon against them. The demurrers to the other causes of action were sustained, and final judgment rendered in favor of the sureties. That judgment having been affirmed by the circuit court, error is prosecuted by the city to this court. The breaches of the bond alleged in the first, second, fifth, and seventh causes of action, relate to transactions of the same nature, and are charged in substantially the same way; so that a decision upon the sufficiency of anyone of them will determine the questions arising upon the others.
    The first cause of action is as follows: “The said plaintiff, the city of Greenville, is a municipal corporation, duly organized under the laws of the state of Ohio, and is situate in the county of Darke in said state. The said Charles B. Elliott, one of the defendants above named, was duly elected clerk of said city of Greenville, Ohio, on the 17th day of April, A. D. 1893, and as such clerk said Charles B. Elliott did on the 20th day of April, A. D. 1893, enter into a bond to the said plaintiff, the city of Greenville, Ohio, in the sum of one thousand dollars, with said defendants, Thomas E. Teal and L. C. Anderson, as sureties, which bond and the sureties thereon were duly approved by the mayor of said city of Greenville, Ohio, on the 20th day of April, A. D. 1893, and was duly filed and recorded as required by law. And the defendant, Charles B. Elliott, took the oath of office as such clerk of said city, and entered upon the discharge of the duties of said office on said 20th day of April, A. D. 1893, and continued in the occupancy of said office from said date, until the 21st day of May, A. D. 1894. A copy of said bond is filed in this case, and marked “Exhibit A.” Said bond was conditioned, that: “Whereas, the said Charles B. Elliott was, on the 17th day of April, A. D. 1893, duly elected and qualified as clerk of said city of Greenville, Ohio, for the period of two years, and until his successor is duly elected and qualified. Now, if the said Charles B. Elliott shall well and faithfully perform the duties of the office of said clerk of the said The City of Greenville, Ohio, during his continuance in said office for said term, then this obligation will be void, otherwise it will be and remain in full force and effect.” The said plaintiff says that the said defendant, Charles B. Elliott, while acting as such clerk, failed, neglected and refused to do and perform the duties of his said office, in this: That on or about the 28th day of August, A. D. 1893, he, the said C. B. Elliott, as said city clerk, without any authority, knowingly and willfully issued a warrant or order upon the city treasurer of said city of Greenville, being warrant No. 4045, payable to The Variety Iron Co. or bearer, out of the Water Works Fund, in the sum of $1,696.27. That said order or warrant was endorsed “C. B. Elliott.” That said C. B. Elliott presented said warrant or order, so indorsed, and received from the treasurer of said city the said sum of $1,696.27. And that of said amount he sent to the said Variety Iron Company the sum of $1,476.27, and appropriated to his own use the sum of $220. The council of said city of Greenville, Ohio, had, shortly before said August 28th, A. D. 1893, passed an ordinance ordering the payment to said The Variety Iron Company, of the sum of $1,476.27, and had directed said city clerk to issue a warrant on the city treasurer for said sum, payable to said The Varietjr Iron Company, which sum of $1,476.27 was the amount then due and owing from said city of Greenville to said The Variety Iron Company, upon a contract theretofore made by said city and said The Variety Iron Company. That said city council did not order the" said. clerk to issue an order or warrant on the city treasurer of said city payable to said The Variety Iron Company for any other sum at said date than said $1,476.27. That said C. B. Elliott did not deliver said warrant so drawn in favor of The Variety Iron Company, to it or to any one else for it, and did not deliver any warrant for the payment of said sum of $1,476.-27 to said The Variety Iron Company, as it was his duty to do. That by reason of the failure and neglect of the said Charles B. Elliott, as such city clerk, faithfully and properly to perform his said duties as such clerk, the said city of Greenville suffered loss and damage in the sum of $220.00.”
    In the fourth cause of action it is alleged that the clerk, in his official character, drew an order on the city treasurer, for an amount actually due to a creditor of the city, payable to the creditor or bearer, but instead of delivering it to the creditor, presented it for payment, received the money on it, and appropriated it to his own use; and the sixth cause of action charges him with having made the same use of an order which he drew payable to a company, or bearer, to which the city was not indebted.
    The eighth, ninth, tenth and eleventh causes of action, charge the clerk with having wrongfully inserted various claims in ordinances passed by the city council, making appropriations for the payment of claims, after the ordinances were passed, and fraudulently concealing his action by omitting to read over the claims so inserted, and thereafter drawing warrants on the treasurer for such claims, payable to bearer, receiving payment himself and converting the money to his own use. These various transactions are set forth in detail, but it is not deemed necessary to state them here with more particularity.

      II. G. Dershem; George A. Jobes and A. G. Robeson,, for plaintiff in error.
    The demurrer of- the defendants below, L. C. Anderson and T. E. Teal, to the several causes of action contained in the amended petition should not have been sustained.
    The condition of the bond is in strict compliance with the terms of the statutes in reference to the form of official bonds. Revised Statutes, sections 1707, 1738 and 1739.
    The allegation of the petition is, that the bond was duly approved by the mayor of the city, and was duly filed and recorded as required by law.
    The management and control of the finances of the city of Greenville are in charge of its council. Revised Statutes, section 1678. The duties of the clerk are designated in sections 1755-1764.
    The condition of the bond in the case at bar is broad and sweeping. It is that the said Elliott “shall well and faithfully perform the duties of the office of city clerk.” The terms of the bond except nothing-; they include everything. They include every duty which was prescribed for the officer by the statute in force at the time the bond was given, as well as every duty which might have been added to the office after the execution of the bond.
    The liability of an officer and the sureties upon his official bond is fixed by the terms of the bond taken in connection with the statute imposing liability. State v. Harper, 6 Ohio St., 607.
    And where the condition of the official bond is that the officer shall faithfully perform the duties of his office, any official misconduct of the officer is a breach of the condition of such bond, for ■which an action lies against the officer and his sureties.' Ohio v. Jennings, 4 Ohio St., 418.
    An official act does not mean that which was lawfully done, but whatever was done under color or by virtue of the office. WilKamston v. Willisi 15 Gray, 427.
    The object of a bond is to make sureties responsible for the due performance of his official acts. Turner v. Sisson, 137 Mass., 191; Cflancy v. Kenworthy et al., 74 la., 740; Lammon v. Feusier, 111 U. S., 17; People v. Treadway, 17 Mich., 480; Van Valkenbergh v. Paterson, 47 N. J. L., 146; Commonwealth v. Stambaugh et al., 164 Pa. St., 437; Marquette County v. Ward, 50 Mich., 174-176; Lowell v. Parker, 10 Metf., 309; Tieman v. ILaio, 49 la., 312; State v. Flinn, 3Blackf.,72; Warrens-burg v. Miller, 77 Mo., 56; Bank v. Birch, 130 N. Y., 221; Purcell v. Bear Creek, 138 111., 524; People v. Bartell, 138 111., 323; State v. Wright, 50 Conn., 580; Wilkesbarre v. Rockafelloio, 171 Pa. 177.
    It was further contended by the defendants’ counsel that all of the matters complained of as acts of the city clerk in the improper discharge of his duty were not the occasion of the loss of the money to the city, but that they were only the remote, not the immediate, causes of such losses. That the immediate cause of the losses were the payments by the treasurer of the city of these warrants to a person other than the payee named therein. And that, therefore, the damage was caused by the negligence of the treasurer, which the plaintiff was asking these sureties of the clerk to make good.

      It has been suggested above that such is not the case. The prime, efficient cause of the loss and damage suffered by the city was the unlawful and improper issuing of warrants for the payment of money by the city clerk upon the treasurer. The treasurer paid out no money of the city, except upon the warrant of its clerk. Revised Statutes, section 2690. What the treasurer did may have been negligent and careless.
    But the carelessness, negligence and misfeasance of one are not available as a defense for the sureties on the official bond of another, if their principle has been guilty of a violation of the duties of his office. This is surely the weight of authority in this country. The Bocvrd of Supervisors v.' Otis, 62 N. Y., 88; Hart v. The United States, 95 U. S., 318; Minor v. Bank, 1 Peters, 69; Waseca v. Shehan, etal., 42 Minn., 57. The negligence of one state officer will not release the sureties of another. Commonwealth v. Tate, 89 Ky., 587.
    A concealment of previous defalcations of the cashier of a bank by its directors is, in the absence of fraud, no defense to the sureties on the bond of the cashier. Bostwiek, Receiver, v. Van Voorhis, 91 N. Y. 353.
    Knowledge of the misapplication of funds of a society by its treasurer, re-electing him, and failing to notify the sureties on his bond, does not avoid their liability thereon. Roper v. Trustees, 91 111., 518.
    A case that ought to be decisive of the present case is Campbell v. The People, 154 111., 595.
    An action on the official bond of a treasurer can not be defeated by the settlements at stated periods with the county commissioners. Bush v. Johnson County, 32 L. R. A., 223,'(Neb.)
    It may be that the city treasurer of Greenville was not bound to pay any of the orders so presented to him, as alleged in this ease. It may have been gross carelessness in the management of the public business so to carry it on. But in view of all the cases above cited, and many others, his acts and methods can not excuse the improper official acts of the city clerk.
    Had it not been for the improper issuing of the warrants, it is difficult to see how the public would have lost its money. These things are derelictions of duty, not of the city treasurer, but of the city clerk. All of these things are clearly within the terms of the condition of his bond, “well and faithfully to perform the duties of the office of clerk.” Tapley v. Ma/rtin, 116 Mass., 275; United States v. Xirlcpatrich, 9 Wh., 720 ; Manley v. Atchison, 9 Kan., 358; Detroit v. IFe&er, 26 Mich., 284.
    It was argued that the warrants being made payable to a payee “or bearer,” while it gave them the appearance of negotiable papers, yet they were not negotiable, and that therefore the treasurer should not have paid them to any person except the payee or his order. That he must have known that Charles B. Elliott was not such payee, and had no orders from the payee. And that having so redeemed these orders, the plaintiff in error should have alleged that it had made a settlement with the treasurer, and that it had allowed him credit for the full amount of each and all of the orders.
    To say the least of this argument it is going a long way round to find an excuse for the benefit of the defendants. It is not the business of a petition to set out matters that may be pleaded in an answer as a defense. The element of defense in such a statement is that the city has been saved free and harmless from any loss. This is as much a part of a defense to the causes of action contained in the amended petition as would be the plea of payment in a suit upon a promissory note.
    In an action on an official bond, non-payment need not be averred in the petition. As against a demurrer, it is sufficient to allege the giving of the bond, its condition, and a breach of the condition. Mason v. Montgomery, Wright, 722; Bush v. Critchfield, 4 Ohio St., 103 ; State v. Caffee, 6 Ohio, 150; Building Association v. Gummings, 45 Ohio, St., 664; Martin v. Bolenbaugh, 42 Ohio St., 508; Cutridge v. Yanatta, 27 Ohio St., 366; Slagle v. Entrekin, 44 Ohio St., 640; State v. McClane, 2 Blackf., 292; Clark v. Russell, .2 Day, Conn., 112; State v. Cross, 6 Ind., 387; Ventura County v. Clay, 114 Cal., 242; 1 Kinkead PL, 45; Fox v. By. Co., 86 la., 368; Hansen v. Anderson, 90 Wis., 195, Feuchter v. Keyl, 48 Ohio St., 369.

      Anderson á¡ Bowman, for defendants in error.
    Whether a cause of action was stated 'against defendants in error as such sureties on the bond in controversy depends upon the condition thereof. The bond, as plead, is conditioned that Elliott “shall well and faithfully perform the duties of said clerk of the city of Greenville, O.”
    The bond was executed under section 1738 of the Revised Statutes.
    The general duties of a city clerk are defined by sections 1755 to 1764, inclusive.
    As section 2690 provides that no claim against a municipal corporation shall be paid by the treasurer except upon the warrant of the clerk, it would follow that the issuing of warrants in favor of 'claimants against the city was one of his duties prescribed by law.

      The several causes of action are substantially alike so far as the legal phases of the case are involved. The first cause of action contained in amended petition will suffice.
    In one or two causes of action he collected without indorsing his name on the back thereof.
    Th & failure of Elliott to account for the $200 is the basis of the recovery against the sureties on his official bond. This failure to account constitutes his alleged liability to the plaintiff in error. While a personal liability may be stated against Elliott for his failure to account for and turn over this money, we insist that no liability is stated against the defendants in error, because (1) the money sued for did not come into the hands of Elliott as such city clerk.
    The payees named in the warrants were the owners of the claims against the city and in whose favor the same were directed to be drawn by the city council. The loss was occasioned by their illegal payment. Elliott’s connection with the warrants as city clerk ceased when he drew the same in favor of the payee as directed by the ordinance.
    He undertook, however, to be the disbursing officer of the corporation or representative of the payee. He indorsed his name — individually, not officially- — on the back of the warrant, presented the same as such individual to the city treasurer for payment collected the amount called for thereon, and as such disbursing officer of the city, or agent of the payee, failed to remit or account for all the moneys thus coming into his possession. The city in thus permitting him to act as its paymaster and share the duties of the city treasurer, made him its agent or official 'in that capacity, and can not now complain if he did not account faithfully for the money it thus placed in his hands. This» however, was no part of his duty as city clerk. 1Vo statute enjoined upon him any such duty.

    There is no provision of the statute that a single dollar of the city funds shall come into his hands as such city clerk. It was not therefore, one of the duties of his office which the defendants in error as sureties on his bond undertook that he should faithfully perform. They are responsible only for his official misconduct or neglect; not for his general good behavior. His duties were statutory, and it cannot be supposed that the sureties contemplated any other than the statutory duties connected with his office, especially in view of the fact that the penalty of the bond was fixed by the city council at $1,000, and that one of its own members without bond could discharge his duties in his absence. The law, we think, in this connection is well settled. Dawson v. The State, 38 Ohio St., 3 ; The Detroit Savings Bank v. Zeigler, 49 Mich., 157; Hawkins et al. v. Thomas, 28 N. E. Rep., 157 ; Carpenters. Sloan, 20 Ohio, 327; State v. Newton, 26 Ohio St., 265; Heidt v. Minor, 89 Cal., 115; Fritch Bros. v. Douglass, 12 C. C. Rep., 359 ; s. c. 5 Circ. Dec., 695; San Bernardino County v. Davidson, 112 Cal., 503; The Peoples. Pennock, 60 N. Y., 421; Ortons. City of Lincoln, 156 111., 499; State s. Medary, 17 Ohio, 564 ; Wilkesbarre s. Bockafellow et al., 171 Pa., 177, 188; City of Lafayette s. James et al., 92 Ind., 240; Carey et al. v. State, 34 Ind., 105; Jenkins, Adm., s. Lemonds, 29 Ind., 294; Scott s. The State ex rel., 46 Ind., 203; McLendon s. The State, 92 Tenn., 520; Gerber s. Ackley, 37 Wis., 44; Brandt on Suretyship, section 451.

      The sureties are not liable because the money sought to be recovered was paid by the city to a person without authority to receive the same. Sections 1768, 1767, 1793, 1769.
    This holding of the circuit court was upon the ground that, in view of the law prescribing his duties, the payment to Elliott, under the circumstances disclosed in the amended petition, constituted not only gross carelessness upon the part of the city treasurer, but the same was at his peril. Armstrong v. The National Bank, 46 Ohio St., 512 ; State ex rel. v. Lewis, 6 Ohio, 221; Dodge v. National Exchange Bank, 30 Ohio St., 2.
    With the exception, probably of the case of Campbell v. The People, 154 111., 595, in all of the cases cited by counsel for plaintiff in error, the principal had failed to account for moneys that had come into his hands in his official capacity and as a part of the duties of his office, and which his sureties had guaranteed he should faithfully pay over and account for. Crickets. The State, 18.Ohio St., 9. The same may be said oE the case of Lewis v. State ex rel., 57 Ohio St., 189.
    We insist however, that it should not be forgotten that these defendants in error are defending as sureties, and as such are entitled to the application in their favor of the very familiar and firmly established rule, that sureties are always favorite subjects of legal protection ; that all doubts should be resolved in their favor; that there is no construction, no equities against sureties; that sureties cannot be held to do what the bond did not require them to do, and that sureties cannot be held unless their liability is clearly shown. Raymond et al. v. Whitney et al., 5 Ohio St., 201; The State v. Medary et al., 17 Ohio, 554; Hall v. Williams, Executor, 9 Ohio St., 17; Lang v. Pike, 27 Ohio St., 498; The Board of Education v. Thompson, 33 Ohio St., 321; Thompson v. Massee, 41 Ohio St., 307; Railway Co. et al. v. Burke et al., 54 Ohio St., 98; The Ordina/ry v. Cooley, 1 Vroom, (N. J. L.) 179.
   Williams, J.

The condition of the bond sued on is, as required by statute, that the clerk shall faithfully perform the duties of his office during the term for which he was chosen; and, in order to ascertain whether there has been a breach of. that condition, rendering the sureties liable for the damages claimed, it is necessary to inquire into the duties of the officer, and determine whether a violation of them, resulting in such damages, is shown in either of the causes of action in question. These duties, which are prescribed in various provisions of the statutes, may, so far as they are relevant to the case, be summarized as follows: In cities having no auditor, (and there appears to be no provision for such an officer in cities of the grade and class to which the plaintiff belongs), the duties of that officer are devolved on the clerk, who is thus required to keep separate accounts of the several funds of the municipality, the amounts belonging to each, the unpaid claims against each fund, and the balance standing to its credit, and not to allow any fund' to be overdrawn, or drawn upon except for the specific use for which it is appropriated. He is moreover required to examine all vouchers presented for the purpose of obtaining warrants on the treasury, and in case there is no fund out of which a voucher can be lawfully paid, or if, for any cause it should not be approved, it is made his duty to give immediate notice of" the fact to the proper authority for the allowance of claims against the city ; and, if he shall approve any voucher which should not be paid, the statute provides that “he and his sureties shall be individually liable.” Revised Statutes, sections 1762, 1765. By section 1768, the city treasurer is made the custodian of the municipal funds, and he is required to disburse the same on the order of such officer as may be authorized by law or ordinance to issue orders therefor; and, by a provision of section 2690, no claim against the corporation can be paid by the treasurer except upon the warrant of the clerk or auditor. Appropriations of the municipal funds can only be made by ordinance, which must contain an explicit statement of the purpose for which the ‘appropriation is made; and the clerk is charged with the duty of making and keeping accurate records of the proceedings of the council, and of all resolutions and ordinances passed by it. He is given the custody of the books, records and ordinances,and required to keep and preserve them in his office. Revised Statutes, sections 1693, 1755, 1762.

It will thus be seen that the law designed to make the office of city clerk a substantial safeguard against encroachments on the treasury of the city, and any misappropriation of the public moneys. No claim can properly reach the treasury for payment except through the city clerk, and with his official sanction; and he is charged with the important duty of protecting the city from the payment, out of its public funds, of any but just and valid claims for whose payment the council has made the necessary appropriation and allowance. It is a palpable violation of his official trust to aid in the procurement of those funds in any other way, or for any other use. His sureties stand for his official integrity in this respect, and are liable for losses resulting from his official dishonesty. When, therefore, the defendant Elliott drew fraudulent warrants on the plaintiff’s treasury for amounts greater than were due to the creditors in whose favor th’ey were drawn, and greater than had been authorized by the council, obtained from the treasury' the whole amount represented by the warrants, and appropriated the excess to his own use, he grossly misused his official position to perpetrate frauds on the city, whose loss so occasioned is within the obligation of his bond. It was manifest unfaithfulness to official duty, against the consequences of which the sureties undertook to indemnify the plaintiff. So, also were the fraudulent alterations of the claim ordinances passed by the council, thus falsifying the records which it was his duty to carefully and accurately keep and preserve, by inserting unauthorized claims, and thereafter drawing warrants therefor on the treasury, receiving the money on them, and converting it to his own use.

It is argued in support of the demurrers, that the grounds of complaint made in the petition are the alleged failures of Elliott to properly account for and pay over the moneys he wrongfully obtained from the treasury, which, it is urged, were his individual delinquencies, and not official defaults for which his sureties are answerable, because neither the receipt nor disbursement of the moneys pertained to his office. And cases are cited which hold that sureties on official bonds, conditioned that the principal should faithfully account for and pay over all moneys received by him, are not liable for any misappropriation of money which came to his hands otherwise than by virtue of his office. The principle is elementary. The obligation of sureties must be found in the instrument by which they are bound, and cannot be enlarged beyond its terms. But there was no. failure of Elliott to account for and pay over the moneys he wrongfully received, except his failure to cover them back into the treasury. His wrong was in the means employed to obtain the money ; and while these were violations of law, they were nevertheless official acts. If the acts of an officer are to be regarded as unofficial whenever they are illegal, an official bond could serve no useful purpose, for there can be no breach so long as he performs his duties according to law. It is only when some duty has been omitted, or disregarded, or improperly or illegally performed, that a liability can arise. The drawing of warrants on the treasury for the payment of claims out of the public funds was in the line of Elliott’s duties as city clerk. His authority and duty was to draw only such warrants as were for valid claims which had been allowed by the city council; and, as has already been seen, it was equally his duty to withhold his official approval from all other classes of claims. These duties he violated when he drew and signed, in his official character, the unauthorized and fictitious warrants upon which he received the money. These warrants were issued under color of his office, bore his official authentication, purported to be legal and valid vouchers, and were presented and paid as such. They were the means by which he obtained the money; and the object of his bond was to afford indemnity against such official misconduct.

It is said, however, that the treasurer was at fault in paying the warrants to Elliott; that, though payable to bearer, they were non-negotiable except by endorsement of the payee; and, that the treasurer was negligent in not requiring such indorsement. Conceding that the treasurer was misled by the form of the warrants, they were so drawn by the clerk to enable him to obtain the money on them ; and thefaultwas none thelesshis because the device succeeded. And if the treasurer was negligent in paying them in that form, his negligence was but a contributing cause of the loss suffered by the city, the primary wrong which brought it about being their fraudulent issue by the clerk. No excuse can be found in the negligence of the treasurer for the malfeasance of the clérk, nor can it affect the liability of the sureties on his official bond. Cricket v. State, 18 Ohio St., 9; Campbell v. People, 154 Ill., 595; People v. Treadway, 17 Mich., 480.

We are of opinion that the plaintiff is entitled to recover upon each of the causes of action stated in the amended petition, not exceeding in the aggregate the penalty of the bond; and the courts below erred in sustaining the demurrers.

Judgment reversed.


author: Shauck, J.

text:
    Coons v. Clifford et al.

      Independent notes — Different payees and different dates of execution and maturity — Secured by mortgage — Payees participate in mortgage avails proportionately — No priority op lien.

    On foreclosure of a mortgage executed by a principal debtor to his sureties for their indemnity with respect to independent notes previously executed to different payees and having different dates of execution and maturity, the payees of such notes are entitled by subrogation to participate in the proceeds of the sale in proportion to the sums respectively due them, there being no priority of lien incident to the note of earlier maturity.
    (Decided June 7, 1898.)
    Error to the Circuit Court of Hancock county.
    This cause having been appealed from the common pleas court to the circuit court, was tried on the pleadings and the evidence. The facts appearing therefrom, and from the findings of the court, are as follows:
    L. C. Smith and William McKinnis, with their wives, executed to A. L. Davis, J. G. Mills and C. F. Gruel their mortgage on lot number 1272, in Findlay, to indemnify the mortgagees, as sureties for the mortgagors, on two promissory .notes previously executed, one held by Vincent H. Coons, plaintiff in error, on which Davis and Gruel were sureties, which became due May 3, 1891; the other, on which Davis and Mills were sureties, being held by Isabella Clifford, the defendant in error, which became due August 14, 1891.
    The parties herein, as holders of the notes, claim to be entitled to resort to the indemnity given by the principal debtors to their sureties; and the mortgaged premises having been sold, and the proceeds of sale, after satisfying prior liens, found to be insufficient to pay the amount of the two notes in full, it was claimed on behalf of Coons that he was entitled to be paid in full before distribution to Mrs. Clifford. Other facts appearing’ in the record are not material to the point decided.
    In the circuit court it was adjudged that the parties here were entitled to resort to the mortgage given by the principal debtors to their sureties upon the notes, and that the holders thereof were entitled to the proceeds of sale in proportion to the amounts respectively due them. To this Coons excepted. He now seeks such modification of the judgment as shall accord to his claim priority to that of Mrs. Clifford.

      Mehan & Coons, for plaintiff in error.

      A. Zugschwert, for defendant in error.
   Shauck, J.

The only question deemed entitled to consideration in this report relates to the soundness of the contention of the plaintiff in error, that because of the earlier maturity of the note held by him he is entitled to full payment out of the proceeds of the sale of the property mortgaged to indemnify the sureties of the mortgagors, before Mrs. Clifford is entitled to any portion thereof. The proposition is said to be supported by the decisions of this court in The Bank of the U. S. v. Covert et al., 13 Ohio, 240, and Winters & Son v. The Franklin Bank of Cincinnati, 33 Ohio St., 250.

These cases should be regarded as placing it beyond controversy in this state, that where a single indebtedness is made the consideration for several notes, from the debtor to the creditor, maturing at different dates, and secured by the same mortgage, and the notes are held by different persons at the time of foreclosure, priority of lien belongs to the note first maturing, unless a different intention is expressed by the parties. The statement of the rule shows that it arises from a consideration of the intention of the parties, as it may be inferred from the transaction. It seems to have no other foundation.

While the rule thus defined should be adhered to as a rule of property, it should not be extended to cases not within its reason. The mortgage in the case before us was given to secure conditional liabilities, upon wholly distinct debts, due originally to different parties and contracted at different times, and we are not able to infer from the transaction any intention that priority of lien should exist in favor of the holder of the note first maturing. The rule established in the cases above cited is followed in Indiana; but in that state its application to a single mortgage, given to secure obligations to different parties, maturing at different dates, has been denied. Shaw et al. v Newsome et al., 78 Ind., 335.

Judgment affirmed.