author: By the Court.

text:
    Myers v. The State.

      Contempt of court — What is — See. 5639, Rev. Stats, construed — Proceedings in contempt renewable o-n error.

    1. The furnishing by a correspondent for publication, and procuring to be published in a newspaper, an article containing statements regarding a judge then engaged in the trial of a cause, imputing to him conduct in respect to the case upon trial, which, if true, would render him an unfit person to preside at the trial of the cause, with knowledge on the part of the correspondent that such newspaper has a large circulation in the county where the trial is in progress, and with reasonable ground to believe that the same will, when published, be circulated in the court room and about the court-house during said trial, and there read, and which was, afterward, during the trial, circulated and read therein, is a contempt of court.
    2. Sucli act comes within the purview of section 5639, Revised Statutes which provides that, “A court, or judge at chambers, may punish, summarily, a person guilty of misbehavior in the presence of or so near the court or judge as to obstruct the administration of justice,” and may he punished summarily, and such punishment is within the discretion of the court trying the case.
    3. A proceeding to punish for contempt under -said section, including the question whether or not the court, in awarding punishment, has exercised a reasonable discretion, may be reviewed upon error. '

      4. The fact that the presiding judge is the subject of libel in the article which forms the basis of the contempt proceeding, does not render him incompetent to try the complaint.
    ■5. Upon such trial it is competent for such judge to take judicial notice of pertinent facts connected with the transaction which come within the cognizance of his own senses.

      8. It is not competent for him to take judicial notice of, and consider in his ■ deliberations, that the respondent had been guilty of another contempt of the same court, for which he had theretofore been tried and found guilty. And where it appears that the consideration of such facts may have influenced the exercise of discretion, in fixing the penalty, to the prejudice of the respondent, the proceeding will be reversed for such error.
    (Decided May 21, 1889.)
    Error to the Court of Commou Pleas of Franklin County.
    The plaintiff in error was tried at the April term, 1888, of the Court of Common Pleas of Franklin County, upon a charge of contempt, which offense consisted in the writing of a certain article, and causing it to be published in a daily newspaper published in the city of Cincinnati. At the time of the writing and publishing, there was upon trial in said court, a criminal indictment found at a previous term, against one Montgomery, upon a charge of changing and, altering the tally sheet of precinct A, thirteenth ward, of the city of Columbus, just after the state election of the year 1885. The plaintiff in error was jointly indicted with Montgomery, and the case was still pending against him. The article charged, among other things, in substance, that the grand jury which found the indictment referred to — the one upon which Montgomery was then being tried — was called by the judge of said court then presiding, for a special partisan purpose,” and “ never honestly drawn from the box”; that the presiding judge, co-operating with ■the clerk and prosecutor, had packed the grand jury, and that the writer had, in this manner, been indicted “ by rascally and infamous methods.”
    The newspaper had an extended circulation throughout the state, including the county of Franklin, and was freely circulated, sold and read about the court house and in the court room, all which was known to the plaintiff in error at the time of the writing and publishing. The article was, in fact, read on the day of its publication, by many persons in the court room, was much talked about within the bar of the court, and in the presence and hearing of the court.
    A written information was presented by counsel specially appointed by the court for that purpose, alleging against the plaintiff in error, the writing and publishing of the article in question, charging that the same was done by him to vilify, degrade and defame the court and its officers, including the grand jury, and to bring the court and its officers into contempt, and to obstruct the administration of justice in the cause upon trial, and that said acts were a contempt of court. An answer was filed by the respondent, which denied the jurisdiction of the court of the subject matter and of his person ; denied any intention to commit a contempt or to obstruct the administration of justice; alleged that the article was written by the respondent, who was and had been for years a correspondent of the newspaper, as an answer and comment upon a communication which shortly before had appeared in another newspaper also published in Cincinnati; that the article was written upon facts and information which had come to his knowledge, which he believed to be true; that the article was read, before its publication, to a member of the bar of Hamilton county, of high standing, who gave the opinion that the publication of it would not be a contempt of court, which was concurred iu by another lawyer of experience, and that the article was written under the influence of feelings engendered by his personal knowledge of the fact that a grievous and irreparable wrong was being ,done him in connection with the prosecution of the case referred to.
    A trial was had at which evidence was introduced by both parties. The court also took judicial notice of many matters, some of which are quoted in the opinion. The respondent was found guilty, and sentenced to pay a fine of two hundred dollars and costs, be imprisoned ninety days in the county jail, and stand committed until the fine and costs should be paid.

      R. A. Harrison, E. L. Taylor and T. E. Powell, for plaintiff in error:
    I. The court below had no power to issue the attachment against the defendant below and sentence him to be punished by fine and imprisonment.
    1. On the 2nd of March, 1831, congress passed “ An act declaratory of the law concerning contempt of court.” (4 U. S. Statutes at Large, 587). This act was enacted shortly after, the trial of the district judge of the United States for the state of Missouri, on an impeachment preferred against him in the United States Senate, for issuing an attachment against á member of the bar, for making a publication in relation to a suit which had been decided by the judge.. In 1834, the legislature of Ohio passed an act with the same title, by which the provisions of -the act of congress were made applicable to the several courts of this state. (1 S. & C. Stat. 258). The provisions of this act are still in force. (Rev. Stat. secs. 5639, 5640).
    This act defines and limits the jurisdiction of the courts of this state to issue attachments for contempt of court. It is a limitation upon the manner in which the power shall be exercised, and must be held to be a negation of all other modes of punishment.
    The question is, then, whether, under this act, the court below hád jurisdiction to arrest and inflict summary punishment upon the plaintiff in error for writing an article in fhe city of Cincinnati, and causing its publication in a newspaper printed and published in that city, concerning the conduct of the judge«in a case which was.on trial in said court in the city of Columbus.
    2. The history of this act, the time of its passage, its title and provisions, must be considered together, in order to ascertain its meaning and construction. These show that it was intended to be a prohibition of the exercise of summary jurisdiction over contempts, excepting only such as the first section of the act defines and provides may be punished summarily.
    3. When it was enacted, the act of congress had received that construction by the federal courts. (Ex parte Poulson,
      Hazzard’s Reg.,vol. 15, p. 380). When an act of congress is adopted in the legislation of one of the United States, its settled contemporaneous construction is deemed to accompany and form part of it. (See Cathart v. Robinson, 5 Pet. 264 ; McDonald v. Hovey, 110 U. S. 619).
    4. As the act defines and limits the extent to which the courts of this state can exercise jurisdiction over contempts, and the manner in which it shall be exercised, the question is, not whether authority exists in the courts of this state to punish contempt of court summarily, but the inquiry is, what is the extent of the power, and the mode in which it may be exercised, under the act.
    5. Arbitrary power is repugnant to the nature of our institutions. There are certain vital principles in our government which prevent the exercise of such power by any department, excepting to the limited extent absolutely demanded by imperious public necessity. Implied reservations of personal rights, arise from the essential nature of all free governments, without which the political compact could not exist. The power to punish summarily, being derived from necessity, the law' of necessity fixes its bounds. The necessity is limited to the preservation of order and decorum in court, and the enforcement of the mandates and decrees of the court. (See 2 Bishop’s Grim. Law, sec. 243).
    6. In this state, it is the legislature, not the court, which has the power to define ■ a crime and ordain its punishment. Contempt of court is a specific criminal offense, punished sometimes by indictment, and sometimes in a summary proceeding. In either mode of trial the adjudication against the offender is a conviction of a crime. (Passmore Williamson’s Case, 26 Penn. St. 18) ; and the imposition of a fine for a contempt is a judgment in a criminal case. (New Orleans v. Steamship Co., 20 Wallace, 387, 392). It follows that the legislature may define and limit the power to punish public or criminal contempts. If the authority of the legislature upon the subject be not unlimited, surely it must be conceded that it exists to the extent of providing that the power to punish by imprisonment and fine, in a summary manner, without the intervention of a jury, shall be exercised only when necessary : (1) to insure order and decorum in the presence of the courts : (2) to secure faithfulness on the part of their officers, and (3) to enforce obedience to their lawful orders, judgments and process; and that when a contempt is committed out of court, as the writing or publication of articles reflecting on the conduct of the judge, other legal remedies shall be pursued to redress the wrong. It is universally held that the jurisdiction of inferior courts of record, is limited to contempts committed in court. (The Queen v. Lefroy, L. R. 8, Q. B. 134). By the common law of England, libels on courts of superior jurisdiction were held to be contempts; but this did not apply to courts of inferior jurisdiction. But in England the power in such superior courts to punish for constructive contempt, originated in a fiction, and was for a purpose that has no analogy in our government. In the superior courts at West-minister, which represent the one superior court of the land, this power was coeval with the original constitution, and has always been exercised by them. These courts were originally carved out of the one supreme court, and are all divisions of the aula regis, where it is said the king in person, dispensed justice, and the power of committing for contempt was an emanation of the royal authority, for any contempt of court is a contempt of the king. The theory of the British government requiring royalty to be invested with an imaginary perfection, is diametrically opposed to the principles of our popular government; so that here, the power has not even a fiction for its support. (See Storey v. People, 79 Ill., 45).
    7. Said acts are founded upon the conviction, justified by experience, that it is unsafe to vest the power to punish, in a summary manner, contempts which consist of publications in newspapers, and the like; and that the exercise of arbitrary power, when imperious public necessity does not require it, is destructive of the legitimate object of its exercise, for the reason that nothing destroys authority so much as the exercise of power pressed too far, especially when the officer exercising it is, from the nature of the subject-matter of the proceeding and his relation thereto, under strong temptation to unduly strain or exercise his power. One of the maxims of the law is, a judge cannot punish a wrong done to himself. (12 Coke, 114). Another is, no one can be judge in his own case. (12 Coke, 13). No class of men can be safely entrusted with irresponsible power; so it is dangerous to entrust any class of officers with arbitrary power, especially in cases where they have a direct personal interest or feeling. In such cases precise limitations are needed; and the congress and the legislature, deeming any shred or remnant of undefined common law power to punish, dangerous, prohibited it; and in doing so have, in effect, enacted that no court of this state shall have power to fine and imprison for contempt of court when that contempt is committed out of court, as the writing or publication of articles reflecting on the conduct of the judge. The legislature provided other remedies for such proceedings. Such legislation has been sustained in New York and Pennsylvania. People v. Court of Oyer and Terminer, 101 N. Y. 245; Foster v. Commomoealth, 8 W. & S. 79. In the latter case, Chief Justice Gibson remarked : “ The end in view was to abolish the obnoxious process of attachment for contempt, in all but a few specified cases; not to narrow a libeler’s liability to punishment, by interdicting any procedure which allows him the benefit of trial by jury.-”
    8. Inasmuch as the courts of common pleas of this state derive their actual existence and jurisdiction from the general assembly, it follows that their power to punish contempts in a summary manner is under its control, and it may deprive the courts of the state of authority to punish in that manner outdoor publications, of any character. The legislature has abrogated the English common law distinction as to the power to punish contempts, between the superior and other courts of record. The fact that such power has nowhere been deemed necessary in inferior courts of record, shows that it is not necessary in superior courts, and but for the fiction that any contempt of such courts is contempt of the king, the distiction would never have had an existence at common law. Business cannot be conducted in any court unless the court can suppress disturbances, and the only means of doing that is by immediate punishment; and, therefore, the legislature expressly empower the courts, whether of superior or inferior jurisdiction, to inflict summary punishment for such contempts.
    9. As the tribunal to punish contempt in a summary manner will be the tribunal whose authority has been contemned, the power is necessarily limited, and the legislature may prescribe the mode of its exercise.
    10. The fundamental fallacy upon which the proceeding in the court below is founded, is the postulate, that the courts of common pleas .of this state have the inherent and absolute power to inflict summary punishment upon any person guilty ■of conduct of such a nature as by the common law of England is punishable as a contempt. This fallacy is based on the assumption that the undefined English common law power of courts of superior jurisdiction to punish as contempt, whatever such courts may adjudge to be contempt of their authority, vested absolutely in the several courts of common pleas of Ohio the moment the general assembly invested them with jurisdiction ; and that, therefore, it was not competent for the general assembly, either when it provided for their organization or afterward, to fix any limitation upon, nor to define, the undefined common law power of the superior courts of England to punish contempts, nor to regulate the mode of the exercise of such power.
    Although power to punish contempt may have vested in the courts of common pleas’ upon their organization, it was, nevertheless, competent for the general assembly, under the authority expressly' conferred upon it by the constitution (Art. IV, sec. 4), to “ fix by law the jurisdiction of the courts of common pleas, and the judges thereof,” to define their iurisdiction to punish for contempt and to prescribe the mode of its exercise.
    Courts of common pleas derive no jurisdiction from the constitution. Their entire jurisdiction is conferred upon them by the legislature. In this respect, the federal courts inferior to the supreme court and the courts of common pleas stand upon the same footing. The former derive their powers from the congress, and the latter derive theirs from the general assembly. The Supreme Court of the U. S. in Ex parte Robinson, (supra), held said act “ declaratory of the law of contempt,” to be valid. And this court has enforced the act of the legislature which was copied from the act of congress. Baldwin v. The State; Lowe v. The State, (supra). In Stevens v. The State, 3 Ohio St. 453, it was held, that the constitution confers no jurisdiction whatever upon the court of common pleas, in either civil or criminal cases; that it is made capable of receiving jurisdiction in all such cases, but can exercise none until conferred by law; and that the jurisdiction of the court of common pleas in any county may, after it has been conferred by law, be taken away by the genei’al assembly and vested in another court created by law. The constitution ordains that there shall be courts whose name shall be courts of common pleas, but that these courts shall have such jurisdiction as may be conferred by law. It would, therefore, be absurd to say that the general assembly simply because the constitution gives a name for a court, but whose jurisdiction is to be fixed by law, can not define and limit the power of such court to punish contempt in a summary manner, whereas it has authority to define and limit the power of other courts created and named by it, and whose jurisdiction in any county may be the same as that vested by law in the court of common pleas.
    11. The power to punish, summarily, for contempt of court, is, in its nature, an exception ,to the provisions of the constitution. It is a power to deprive a man of his liberty, without a jury and without a regular trial. It can not, therefore, be extended, in the least degree, beyond the limits which have been imposed by the statute. No implication, and no fancied necessity, can be permitted to add to the literal meaning of the words by which the legislature restricted this power. Lowe v. The State, 9 Ohio St. 337; Baldwin v. The State, 11 Ohio St. 681; Rutherford v. Holmes, 5 Hun. 317 ; Bachelder v. Moore, 42 Cal. 412.
    12. The phrase “misbehavior of any person or persons, in the presence of the said courts,” signifies, within the meaning of the statute, misbehavior by any person or persons who are in the room or place where and when the court is engaged in the transaction of business. If the legislature had not intended to use the phrase 'in that sense, the clause immediately following, viz.: “ or so near thereto as to obstruct the administration of justice,” would not have been inserted; for, if the word “presence” had been understood in any other sense than actual presence, that being its natural and ordinary signification, the latter clause would have been entirely superfluous. It is clear that the phrase “ in the presence of the court,” was used in the sense of the technical expression, in facie curiae; and contempts “in the face of the court” consist of wilful disturbances in the actual presence of the court. (4 Black. Com. 285). The first section of the act in terms excludes constructive presence, and provides for the punishment of direct contempts in the face of the court, or so near thereto as to obstruct the business of the court. .
    13. The phrase “or so near thereto as to obstruct the administration of justice,” was designed to provide for the summary punishment of any person guilty of disorderly behavioiso near the court room, when the court is in actual session, as to interrupt the business of the court.

      Baldwin v. The State, and Lowe v. The State, (before cited); The State v. Goff, Wright’s R. 78; The State v. Colter, Id., 481; Ex parte Robinson, 19 Wallace, 505; Judge Curtiss’ Lectures on the Jurisdiction of Federal Courts, p. 181; Terry, Ex parte, 128 U. S. 289.
    14. If the plain language of the first section of the act had not placed its meaning and effect beyond the reach of a quibble, the provisions of the second section as to the punishment of all other acts of contempt of court by indictment and a trial by jury, would have dispelled any doubt which might have been suggested. “ The obstruction of the administration of justice,” which the first section provides may be punished summarily, includes any such misbehavior “ in, or so near to the court,” while sitting, as interrupts the transaction of its-business; whereas “ the obstructing or impeding the administration of justice or the endeavor so to do,” which the second section provides shall be punished upon indictment found, embraces some act of corruption, or some force, or some threat, by which it is done, but which does not disturb the order and decorum of the court. These are not disturbed by the publication of aD article in a newspaper libeling the conduct of the judge in a cause, whether the same be pending or not at the time of the publication, and whether the judge, or a bystander in court, read the same to himself or not.
    15. The record shows that many of the facts upon which the court founded its sentence were supposed to be of such a nature that the court could take “judicial notice” of them. In acting upon this supposition the court erred. (Bliss on Code Pleading, secs. 177 to 199, inclusive, and cases there cited).

      J. T. Holmes, for defendant in error.
    The article was a gross libel, and no word of regret on account of the writing or publication thereof has escaped the respondent or his counsel.
    It was written and published pending the tally sheet trial after careful deliberation by its author. The fundamental doctrine of causation and liability appplies. 1 Bishop’s Crim. L. sec. 641.
    No pleadings are necessary in such a proceeding. Rev. Stats, secs. 5639, 5640; Steube v. The State, 3 C. C. Rep. 383.
    It is claimed that the publication did not affect or interfere with the administration of justice. No one can measure, or weigh, or know, its effect on the administration of justice.

      We hnoio the jury disagreed. Reg. v. Wilkinson, 41 Up. Can. Q. B. 42.
    Under the statute, no allegation of such interference is requisite. Misbehavior in the presence of the court completes the offense.
    Sec. 5639 is not as good English as the act of 1834, S. & C. 258, or as the Federal Act of March 2, 1831.
    These are eonstitutional courts, bringing into being with them inherent power to punish such a contempt summarily.
    The general assembly did not create them and cannot, therefore, destroy or limit their right of self-defense, their power of self-protection, in this respect. State v. Morrill, 16 Ark 384, Dandridge case, 2 Va. Cas. 409; Bayard v. Passmore. 3 Yates (Pa.) 438 ; Rex v. Clement, 4 B. & A. 233; Tenny’s case, 23 N. H. 166; Oswald’s case, 1 Dall. 343; State v. Matthews, 37 N. H. 450 ; Cossart v. State, 14 Ark 539; Hawes’ Jurisdiction of Courts, sec. 8; Chandler v. Nash, 5 Mich 409; Rowe v Rowe, 58 Mich. 353; Streeter v. Patton, 7 Mich 341; State v. Frew & Hart, 24 W. Va 416; Arnold v. Com., 80 Ky. 300; Little v. State, 90 Ind. 338; People v. Wilson, 64 Ill. 195; Ex parte Rohinson, 19 Wall. 513; State v. Woodfin, 5 Ind. 199; Neel v. State, 9 Ark. 259; Ex parte Adams, 25 Miss. 893; Bishop’s Stat. Cr., sec. 137, 1st Ed; 1 Thomp. on Tr., secs. 125-128; Holman v. State, (Ind.) 5 N. E. Rep. 557; Cheadle v. State, 110 Ind. 301; Mr. Wirt in Peck’s case, 497, 500—501; Cartwright’s case, 114 Mass. 230; Sturoc’s case, 48 N. H. 428; Darby’s case, 3 Wheeler’s Cr., Cas. 1; Tyler’s case, 64 Cal. 434; Harwell v. State, 10 Lea 544; Storey v. People, 79 Ill. 47; Stimson’s Am. Stat. L. sec. 582; Watt v. Lightwood, 2 R. H. L. 361; Middlebrook v. State, 43 Conn. 257; Cheeseman case, 46 N. J. L. 137; State v. Myers, 19 Law Bulletin, 302-315.
    That the power to punish summarily may be hastily or arbitrarily exercised is not an argument to disprove its existence or the necessity of its being lodged in the courts. Ex parte Terry, 128 U. S. 289-314; Bradley v. Fisher, 13 Wall. 350; Mr. Wirt in Peck’s case, 497; Cheeseman case, 46 N. J. L. 137; Reg. v. Wilkinson, 41 Up. Can. Q. B. 42.
    The ordained and necessary instrumentalities of courts are under the same protection. 4 Bl. 126
    The olfenso of respondent was in the presence of the court and was designed to obstruct the administration of justice.

    See. cases and authorities supra; also, Harston’s Code, secs. 1211, 1212; Sinnott v. State, 2 Lea 281; State v. Doty, 32 N. J. L. 403; Com. v. Feely, 2 Va. Cas. 1; Hollingsworth v. Duane, Wall. 77—102; Bronson’s case, 12 Johns. 460; U. S. v. Patterson, 26 Fed. Rep. 509 ; U. S. v. Carter, 3 Cr. C. C. 423; Onslow v. Whalley, 12 Cox’s Cr. Cas. 358; Skipworth v. De

      Castro, Id. 371; Johnson’s case, 20 Q. B. 68; U. S. v. Emerson, 4 Cr. C. C. 188; State v. Garland, 25 La. Ann. 533; Rex v. Wigley, 32 E. C. L. 415; Davis v. Sharon, 1 Cr. C. C. 287; U. S. v. Schofield, Id. 130; Blight v. Fisher, Pet. C. C. 41; Bridges v. Sheldon, 7 Fed. Rep. 19; Stewart’s case, 3 Scam. 395; 2 Bishop’s Cr. L. sec. 259, 7th Ed.
    Corrupt approach to a juror, or similar act, though many miles from the court house, would be punishable summarily under section 5639 or not at all, as a contempt.
    It is argued that the offense is punishable criminally and to punish as for contempt, would violate the maxim “ nemo bis vexari.” This is in the face of all authority. To claim that an assault and battery of a judge while, holding court can be punished by indictment only is to shock the universal sense of decency and order in the administration of justice.
    1 Bishop’s Cr. L. sec. 1067, 7th Ed; Reg. v. Martin, 5 Cox’s Cr. Cas. 356 ; Cartwright’s case, supra.

      Baldwin v. State, 11 Ohio St. 681, is not fully reported and the files show that the charge made was not under the section of the statute now in question.
    Summary punishment for contempt, is not an infringement of the state constitution which guarantees to the citizen trial by j ury.
    Wall. C. C. 77; 32 N. J. L. 403; 4 Paige, 397; 23 Minn. 411; 7 Biss. C. C. 329; 12 Iowa, 208; 37 N. H. 450; 4 Eng. 259 ; 128 U. S. 289; Cooley on Const. Prov. 390, n. 3; 13 Neb. 446; 24 Tex. 12 ; 4 Ark. 257.
    A mere disclaimer of all intention of contempt does not purge the contempt or relieve the party from the consequences of the act committed by him. Watson v. Savings Bank, 5 S. C. 189; Wartman v. Wartman, Taney’s C. C. 362; State v. Garland, 25 La. Ann. 532; People v. Freer, 1 Caine’s Rep. 518 ; In re Wooley, 2 Ky. 95; Terry’s case, 36 Fed. Rep. 419; Rapalje on Contempts, secs. 49 and 121 and notes. See 9 Fed. Rep. 316; 64 Ill. 195; 24 W. Va. 467; Henry v. Ellis, 49 Iowa.
    The court properly took judicial notice of what occurred under the presiding judge’s five senses, pending the tally sheet trial and tbe proceeding before him, resulting in the punishment of respondent as a witness therein. There is no rule of law requiring an abjuration of such knowledge .under the circumstances.
    The power to punish such contempt summarily inheres in the court, coming into existence at the same moment, and is not conferred on the court, nor carl it be taken away, by the general assembly.
    It is not a part of jurisdiction, technically speaking, under the constitution.
    In this view the Steven’s case, 3 Ohio St. 453, cuts no figure.
    It is contended in behalf of plaintiff in error, that he was entitled by way of defense, to show the truth of his scandalous charges, and 10 Ohio St. 548 and 3 Johns. Cas. 337, are cited to sustain the proposition. Neither case even leans that way, and the line of authority the other way is unbroken.
    For the first time in the history of this cause, counsel in argument move to our ground. “ The statutory enactments on the subject have not changed the law; ” in other words, they are “declaratory of the law concerning contempts.”
    The power in question is sanctioned by immemorial law.
    Counsel say “jurisdiction is power and power is jurisdiction. They are one and the same thing as applied to the courts.” Again, it is said the “courts derive all their powei’s from the act of the general assembly.”
    These positions are untenable.
    The general assembly does not derive its power to punish contempt' from its own act but the power inheres in the body under the constitution. So, with courts established by the organic law. Where the general assembly has power to create a court it may, if not restrained by the constitution,'destroy such court’s power to defend itself and leave it an object of contempt, but not otherwise. 7 Ohio St. 333.

      J. H. Collins, for defendant in error.
    I. At common law the publication made by plaintiff in error, is a contempt, clear and unquestioned. In the matter of

      Sturve, 48 N. H. 428 ; Respublica v. Oswald, 1 Am. Dec. 246 ; Respublica v. Passmore, 2 Am. Dec. 388, and note ; State ex rel. De Buys v. Judges Civil District Court, 32 La. Am. 1261 ; Cooley on Torts, 424; People v. Wilson, 64 Ill. 221; Hollingsworth v. Duane, Wall. C. C. 77; Bronson’s case, 12 Johns. 460; State v. Morrill, 16 Ark. 384; Stuart v. People, 3 Scam. 405; 2 Bishop’s Crim. Law, § 259 ; In re Cheltenham, etc., R’y, L. R. 8 Eq. 580; Daw v. Eley, L. R. 7 Eq. 49 ; Littler v. Thomson, 2 Beav. 129; In re Crawford, 13 Am. Jur. 955 ; Regina v. Ounslaw, L. R. 9 Q. B. 219; s. c., Cox C. C. 358; 5 Eng. Rep. 443; Regina v. Skipwith, L. R. 9 Q. B. 219 ; s. c., 5 Eng. Rep. 456; Regina v. O’Dougherty, 5 Cox C. C. 348; Anonymous, 2 Atk. 469 ; State v. Frew, 24 W. Va. 416 ; Matter of Moore, 63 N. C. 397 ; Tenny’s case, 23 N. H. 162; Stovey v. People, 79 Ill. 45; Ex parte Van Hook, 3 City Hall Rec. 54; Ex parte Spooner, 5 Id. 109 ; Dunham v. State, 6 Ia. 245; Ex parte Hickey, 4 Smedes & M. 751; People v. Freer, 1 Cainas, 484; Henry v. Ellis, 49 Iowa, 205; Morrison v. Moat, 4 Edw. Chan. 25.
    II. Even with the strict and limited construction claimed for section 5639, Revised Statutes, the information makes a case thereunder.
    Misbehavior, according to Bouvier, is “ improper or unlawful conduct.” The attorneys for the plaintiff in error not only concede that his conduct was improper and unlawful, but they go beyond this and assert that it was criminal, and so infamous that he cannot be punished therefor, except upon the presentment of a grand jury.
    But was it “ in the presence of or so near the court or judge as to obstruct the administration ofjustice”?
    If the act did, in fact, obstruct the administration ofjustice, it would seem to follow logically, that he was near enough to the court to perform the act. But it is insisted that he was in Cincinnati, and what he did was done there, and that, therefore, he was not near enough to come within the provisions of the statute. In the case of Robbins v. State, 8 Ohio St. 157, it is held, that if the prisoners delivered poison to his victim in Shelby county, to be taken by her in Marion county, and that she there swallowed it,; or if it had been sent to her there by the prisoner for the purpose of being given to her; and if she, having received it from him, should swallow it, by which death ensued, in either case the defendant would be guilty of administering poison in Marion county. Suppose Myers, being in Cincinnati, had, by any means whatever, sent or procured dynamite or other destructive agencies, to have been so used in the court house in Franklin county, as to destroy life, it would not be pi’etended that he might not be charged with being present in the county of Franklin and in the court house, and so using the destructive articles as to commit murder, although in point of fact he was not personally present, but was in Cincinnati.
    In the present case Allen Olds Myers was a defendant in a criminal prosecution; was jointly indicted with one Robert B. Montgomery; a separate trial had been granted, and Mr. Montgomery was being tried, and while so being tried the article here charged was written by Mr. Myers in the city of Cincinnati; was printed in the Cincinnati Enquirer with the full knowledge on the part of Myers that it would be read by thousands of persons in the city of Columbus, and by scores in the court house and court room, during this trial; and its. purpose was to prejudice the public and the officers of the court against the judge presiding at that trial, and for the purpose of influencing the action of the court by unduly overawing and scandalizing it.
    If, in the cases suggested, it would have been perfectly proper and legal to have charged Allen Olds Myers with being' present and administering poison, although personally in Cincinnati, what reason can be suggested against the application of the same rule to the case at bar? It was an attempt on the part of Myers to poison the mind of- the public, and it was his intention to destroy the moral influence of the court by exploding in the court room the publication referred to.
    That an attempt to degrade the court and thus destroy its power and influence amounts to an obstruction of the administration of justice, is fully sustained by the authorities already cited, and in the light of these authorities can not even be questioned.
    III. A liberal construction should be given to statutes which declare and limit punishable causes for contempt. State v. Galloway and Rhea, 5 Caldwell, 326.
    IV. The courts have inherent power to punish contempts, outside of any and all legislative authority. Little v. State, 90 Ind. 338; Underwood v. Duffee, 15 Mich. 361; Chandler v. Nash, 5 Mich. 409; Shoultz v. McPheeters, 79 Ind. 373; United States v. Hudson, 7 Cranch, 32; Sanders v. State, 85 Ind. 318; Cavanaugh v. Smith, 84 Ind. 380; Nealis v. Dicks, 72 Ind. 374; Neel v. State, 9 Ark. 259; Clark v. People, Breese, 340; Ex parte Smith, 28 Ind. 47; Brown v. Brown, 4 Ind. 627; State v. Mathews, 37 N. H. 450; Com. v, Dandridge, 2 Vir. cases, 408; Ex parte Biggs, 64 N. C. 202; Cartwright case, 114 Mass. 238; 4 Blk. Com. 284-288; Acta Canc. 200, 264, 321, 373, 642, 753, 755; The King v. Almon, Wilmot, 243, 254; Clarke’s Praxis, tit. 62; Mass. Col. Laws (ed. 1672), 36 ; Anc. Chart. (o.); Thwing v. Dennie, Quincy, 338; 6 Dane Ab. 528 ; Folger v. Hoogland, 5 Johns. 235; Ex parte Kearney, 7 Wheat. 38; Durant v. Supervisors, 1 Woolworth, 377; Winslow v. Nayson, 113 Mass. 411; McDermott v. Clary, 107 Mass. 501; Rex v. Ossulston, 2 Stra. 1107; S. C. Nom.; The King v. Pierson, Andr. 310; Spalding v. People, 7 Hill, 301; S. C., 10 Paige, 284; 4 Howard, 21; State v. Woodfire, 5 Ired. 199; State v. Williams, 2 Speers, 26.
   By the Court.

The article was a libel upon the presiding judge, but that alone did not form the basis of the information. The intention of the publication was to insult and intimidate the judge, degrade the court, destroy its power and influence, and thus to bring it into contempt; to inflame the prejudices of the people against it; to lead them to believe that the trial then being conducted was a farce and an outrage, which had its foundation in fraud and-wrong on the part of the judge and other officers of the court, and, if communicated to the jury, to prejudice their minds, and thus prevent a fair and impartial trial. Besides, the tendency was, when read by the judge, to produce irritation, and, to a greater or less extent, render him less capable of exercising a clear and impartial judgment. It therefore tended directly to obstruct the administration of justice in reference to the case on trial, and its publication was a contempt of court. The fact that, before its publication, a professional opinion was given that the publication would not be a contempt, does not change the essential character of the defamatory article, nor relieve the respondent of responsibility for its origin and dissemination. Neither was he justified in resorting to such means to right any real or imaginary wrong to himself in respect to the finding of the indictment. A plea' in abatement would have searched the record and caused the indictment to be set aside, if found by an illegal body, or procured by improper means.

The publication came within sec. 5639, Rev. Stats., which reads: “A court, or judge at chambers, may punish summarily, a person guilty of misbehavior in the presence of or so near the court or judge as to obstruct the administration of justice.” It is true that the article was not written, nor was it' circulated by the respondent, in the presence of the court. Indeed, it was written in the city of Cincinnati, though dated at Columbus. But the publication was in the court room, as well as elsewhere. It was intended to have effect, and did have effect, in the court house at Columbus, and the writer was just as much responsible for that effect as though he had in the court room itself, and while the trial was progressing, circulated and read aloud the article, or uttered the libelous words verbally. The acts were thus done, if not in the very presence of the court, at least so near thereto as to obstruct its business. For violation of the foregoing section of the statute the punishment is within the discretion of the court. Section 5645, which provides for the punishment by fine of not more than five hundred dollars, and imprisonment for not more than ten days, applies to offenses covered by section 5640, but not to the preceding one above quoted. The discretion here given is a sound, reasonable discretion, and its exercise in a case of this kind is reviewable. It, therefore, becomes unimportant to consider the question much argued, viz: whether or not the legislature may interfere with the inherent® power of courts to punish for contempt. And, as the court had power to try summarily, the form of the complaint is not a material question.

Though the libel was, in large part, against the presiding judge, that fact did. not disqualify him from trying the proceeding in contempt. It was not the libel against the judge which constituted the offense for which the respondent was liable as for a contempt of court. The offense consisted in the tendency of his acts to prevent a fair trial of the cause then pending in the court. It is this offense which constitutes the contempt, and for which he could be punished summarily ; and the fact that in committing this offense, he also libeled the judge, and may be proceeded against by indictment therefor, is no reason why he may not and should not be punished for the offense against the administration of justice.

The statute clearly authorizes, as did the common law, courts to punish summarily, as contempts, acts calculated to obstruct their business. They could not be maintained without such power, nor could litigants obtain a fair consideration of their causes in a court where the jury or judge should be subject, during the trial, to influences in respect to the case upon trial, ■calculated to impair their capacity to act impartially between the parties. Nor is there serious danger to the citizen in its ■exercise. Power must be lodged somewhere, and that it is possible to abuse it is no argument against its proper exercise. But we think the danger more imaginary than real. The judgments of all inferior courts are subject to review. We have an untrammeled press, which, in legitimate ways, may properly exert a powerful influence upon public opinion. All judges are liable to impeachment for any misdemeanor in office. Our entire j udiciary is elective, and all courts are thus easily within the reach of the people. These checks can, we think, be relied upon to prove an adequate protection to the citizen against any arbitrary or unreasonable use of the discretion thus given to the courts.

In considering and disposing of the case the court took judicial notice, without knowledge on the part of the respondent that it would be done, of many matters, among them the following :

That said respondent left the city of Columbus for his home in Cincinnati, Ohio, on or about the 29th day of February, 1888, under his promise to counsel for the state in the-said trial, then pending, to return as a witness upon a telegram at any time one might be sent him; that he received such-telegraphic notice and answered it on the 5th day of March,, 1888, that he would attend as such witness on the following day ; that instead of so attending, he purposely went beyond the limits of the state of Ohio to evade the service of process of any kind from this court upon him, and so remained until the end of the trial aforesaid; that said respondent attended said trial and drew his pay as a witness for said defendant from said 24th day of January, 1888, until the first day of March, 1888, and then absented himself without leave and in violation of the order of -the court, until said trial ended, and has-since, to-wit: on the 7th day of April, 1888, been tried and adjudged by this court in contempt and fined for such absence and has paid such fine and costs.”

It was competent for the court to take judicial notice of pertinent facts connected with the transaction which came within the cognizance of his own senses. But when the court assumed to take judicial notice of the facts which formed the ground of a previous jmoeeeding for contempt against respondent, and of his being adjudged guilty, we think, the court erred. If the facts were competent to be taken into consideration, which is, at least, very questionable, they were the subject of evidence, and could not be judicially noticed. Proof of a previous like offense is not competent evidence save in a small class of cases where guilty knowledge is a necessary element to be shown by the state, and such proof was not necessary in this case. Beyond this, the proceeding there noticed could have been heard before any other judge of the court, and had it been, the impropriety of taking judicial- notice of what was proven, and of the result, would be apparent to every one; and it is none the less so from the fact that the proceeding may have been heard by the j ndge who tried the case in review. The consideration of this incompetent matter was calculated to have a potent influence in determining the sentence imposed. In a case where the penalty is limited by statute, and the sentence is the lowest allowed by law, and where, upon the whole record, the punishment seems justified, a reviewing court might not feel it a duty to disturb the judgment for an error of the character referred to. But in a case where the penalty is discretionary, and it appears, as in this •case, upon the whole record that the punishment is severe, and the court cannot say that the incompetent matter did not affect the degree of punishment inflicted, we feel compelled to reverse the judgment and remand the cause for further proceedings.

Judgment accordingly.


source: Caselaw Access Project

author: Williams, J.

license: Public Domain

text:
    Rouse, Trustee v. Merchants’ National Bank.

      Corporations — When cannot create valid preferences — Assignments by.

    A corporation for profit, organized under the laws of this state, after it has become insolvent, and ceased to prosecute the objects for which it was created, cannot, by giving some of its creditors mortgages on the corporate property to secure antecedent debts without other consideration; create valid preferences in their behalf over the other creditors, or over a general assignment thereafter made for the benefit of creditors.
    (Decided June 18, 1889.)
    The T. J. Nottingham Manufacturing and Supply Company, a corporation organized under the laws of this state, and located in Cincinnati, being unable to meet its liabilities, on the 25th day of June, 1884, made an assignment to F. W. Browne for the benefit of its creditors. The assignment was duly filed in the probate court, and thereafter, Browne was removed, and George L. Rouse appointed trustee to administer the assignment. The Merchant’s National Bank of Cincinnati, claiming to be a creditor of the corporation, and that the debt due it was secured by a chattel mortgage upon the property assigned, presented its claim to the trustee for allowance, and the same having been rejected'by him the original action was brought by the bank in the Superior Court of Cincinnati, to compel the trustee to allow the claim in the settlement of the trust, and to establish the priority of the mortgage lien. The petition of the bank alleges that the corporation, being indebted to it in the sum of six thousand dollars on six promissory notes particularly described, on the 25th day of June, 1884, “ by a resolution of its board of directors duly passed, authorized T. J. Nottingham, its president, to execute and deliver to this plaintiff a chattel mortgage upon all its property on the premises occupied by it at the south-east corner of Plum and Pearl streets, in the city of Cincinnati, O., and thereupon a chattel mortgage was regularly drawn and executed convoying said property to the plaintiff to secure the payment of the six promissory notes as hereinbefore set forth. And said T. J. Nottingham, in executing said chattel mortgage, signed the name of said company by him as its president, after the schedule of the property conveyed by said mortgage, but not in the place where such signing is usually done; but said execution and signature was made at said place for the sole purpose of authenticating the execution of said instrument A copy of which mortgage is herewith filed and made a part hereof. Plaintiff further states that it, through its officers, made the affidavit on-said mortgage required by the statutes of Ohio, as to the amount due thereon, and that said claim was just, and said chattel mortgage was thereupon filed in the recorder’s office of Hamilton county, Ohio, as required by law, on the said 25th day of June, 1884, at 2:28 p. m. Plaintiff further says that the said T. J. Nottingham Manufacturing and Supply Company, after the execution and delivery of said chattel mortgage, conveyed the property described therein to one F. W. Browne, in trust for its creditors, and by order of the probate court of Hamilton county the defendant was afterwards appointed trustee for said creditors in the jfiace of said Browne, and said Rouse took possession of said property as such trustee, and has converted a large part of it into money, and has now in his hands therefrom sufficient to, pay the sum duo this plaintiff; and plaintiff says that its claim, duly verified according to law, has been presented to said Rouse, and payment thereof refused, and the said claim, both upon the said notes and mortgage, rejected. Plaintiff therefore asks a judgment against the said George L.. Rouse for the allowance of said plaintiff^ claim, and that the said mortgage was validly executed, and is valid, and for the sum of $6,000 and interest, and for costs.”
    The trustee answered, denying the indebtedness of the corporation to the bank and the due execution of the chattel mortgage, and alleging that the notes described in the chattel mortgage were given by T. J. Nottingham to the plaintiff to raise money for his own individual use; that th'e plaintiff knew that fact when the loans were made to him, and that the endorsement which he gave of the company upon the notes, was without any authority whatever, as the plaintiff well knew.
    The answer further avers that the board of directors of the company had no authority to order a chattel mortgage to be given to the plaintiff to secure the individual debt of T. J. Nottingham; that the chattel mortgage was attempted to be executed with several other chattel mortgages, for the purpose of giving the bank and others a preference over general creditors, and was procured from the board of directors, and the order for the same was procured,* by said T. J. Nottingham, who well knew that the debt due the bank was his own individual debt, which he was thus attempting to have the the company prefer out of its assets over its own general creditors; that an assignment for the general benefit of creditors, under the insolvent laws of Ohio, was duly executed, and delivered to F. W. Browne as assignee at the same time, and before the mortgage set up in the petition was attempted to be executed by the said T. J. Nottingham; that the assignment was duly delivered to said Browne by the company for the general benefit of creditors; that the mortgage was never delivered to the bank, but after its attempted or pretended ex■ecution, was delivered in an unfinished condition to the said F. W. Browne, the assignee, who caused it to be filed in the recorder’s office in Hamilton county, and a few minutes thereafter caused the deed of assignment, which was then in his hands, to be filed in the probate court of Hamilton county ; and the defendant alleges that said chattel mortgage is void and in fraud of the rights of the general creditors.
    The case was heard upon the pleadings and evidence, and then reserved to the general term for decision, where, at the request of counsel, the court stated its findings of fact and con■clusions of law separately as follows:
    “That on the 23d day of June, 18,84, the T. J. Nottingham Manufacturing and Supply Company, defendant, being insolvent, resolved to make a general assignment of its property for the benefit of its creditors, and resolved to give a mortgage on the same property to the plaintiff, and other mortgages to other creditors, which mortgages should have preference over the assignment, and appointed F. W. Browne assignee.
    “ The deed of assignment was executed and delivered to the said F W. Browne, who drew all the instruments and acted as attorney for the company in the whole matter as well'as assignee, on the 24th of June. Before the execution of the •assignment, the mortgage was drawn, but a blank was left therein for the insertion of the amount secured by it. Next day, the 25th of June, the mortgage was completed and executed, and immediately thereafter the other mortgages were ■completed and executed, the whole being done at one sitting.
    “ The property was described in the body of the mortgage as 'the goods and chattels described in the schedule hereunto annexed,’ and was signed, not at the close of the body of the mortgage, but at the end of the schedule, and the signature was there affixed for the purpose of authenticating and executing the mortgage. A copy of the mortgage is hereto annexed and made part of this finding; and, upon request of the defendant, it is further found that the other mortgages executed were signed both at the close of the body of the mortgage and at the close of the schedule. On the 25th of June, the completed mortgage was filed in the recorder’s office of Hamilton county, where chattel mortgages executed in Cincinnati by residents thereof are required by law to be filed, and on the same day, .an hour or two later, the assignment was filed with the judge of the probate court.
    “The amount due the plaintiff on the first day of this term, secured by said mortgage, is $6,542.41; F. W. Browne, assignee, was removed, and George L. Rouse, defendant, was appointed trustee in his place. The property has been sold, and the proceeds are in the hands of said trustee. The plaintiff presented his claim to said trustee, and demanded its allowance and payment, all of which the said trustee refused.
    “ As conclusion of law the court finds that the mortgage is a valid instrument, and has preference over the assignment, .and the plaintiff is entitled to the payment thereof from the proceeds of the mortgaged property.
    “ To all of which findings the defendant then and there ex-cepted, and thereupon the defendant made and filed a motion to set aside the said findings, and for a new trial, which motion was by the court overruled, to which action of the court the defendant then and there excepted.
    “ It is therefore considered by the court that the plaintiff recover from the said trustee, from the said proceeds in his hands, $6,542.41, with interest at six per cent, per annum from the ■first day of February, 1886, and that the costs of this action be paid from said proceeds, and that this judgment be certified to the probate court.”
    The present proceeding in error is prosecuted here, to reverse the foregoing judgment of the superior court.

      Lincoln, Stephens & Lincoln, for plaintiff in error.

      We claim that an insolvent corporation, which has quit its business, cannot make a valid preference. ,The capital stock ■and property of an insolvent corporation is held to be a trust fund, pledged to the payment of the debts of the corporation, ■and that its creditors become the beneficiaries thereunder. Morawitz on Corporations, 1 Ed., sec. 575; Field on Corpojations, sec. 365; 2 Waterman on Corporations, sec. 208;
      Bank of Pittsburgh v. Mfg. Co., 19 Law Bull. 254; Wood v. Dummer, 3 Mason, 308; Morawitz on Corporations, sec. 581; Robins v. Embry, 1 S. & M. Ch. Rep. 263; Wait on Insolvent Corporations, secs. 162, 654.

      Watson, Burr & Livesay and Albery & Albery, also for plaintiff in error.

      John W. Herron, for defendant in error.
    The individual liability of the stockholders of an insolvent corporation, constitute a trust fund for the creditors. So far, this court has already decided; but it has never applied the same character to the general assets. Insolvent corporations have given mortgages and sold their property without the consent of its creditors. If such assets are a trust fund for the creditors, no one, with knowledge of the insolvency of a corporation, could buy such assets, or deal with the officers of the corporation in reference to them. Whitwell v. Warner et al., 20 Vt. 444; Savings Bank v. Bates, 8 Conn. 505; Catlin v. Eagle Bank, 6 Conn. 233; Ringo v. Trustees, 13 Ark. 563; Wilkinson v. Bauerle, 41 N. J. Ch. 635; Vail v. Jamison, 41 N. J. Ch. 648; Bridge Co. v. Douglas, 12 Bush 73; Morawitz on Corporations, sec. 582.
   Williams, J.

The general question for decision in this case, is, whether a corporation for profit, organized under the laws of this state, can, in the disposition of the corporate property, after it has become insolvent, and ceased to further prosecute the objects for which it was created, prefer some of its creditors over others.

•The claim of the plaintiff in error is, that when the corporation becomes insolvent and ceases to carry on business, its property and assets constitute a trust fund for the benefit of its creditors, and the directors in possession of the corporate property, being trustees for all the creditors, cannot lawfully dispose of it otherwise than for the equal benefit of all the corporate creditors. The defendant in error, on the other hand contends, that when not restricted by the law of their creation, or prevented by the operation of some bankrupt or insolvent- law, insolvent corporations may, the same as natural persons, make preferences among their creditors.

Decisions of courts will be found, maintaining each of these diverse positions. The precise question has not been decided in this state, and in view of the conflict of authority elsewhere, we are at liberty to adopt that rule, which best harmonizes with the policy and legislation of the state, rests upon the sounder reason, as we conceive it to be, and coincides with our sense of justice and right.

The right of the individual debtor to prefer one creditor to another, though at the time insolvent, rests upon his complete dominion over, and consequent unrestricted power of disposition of his property. And the cases which hold that insolvent corporations are entitled to make preferences among their creditors, attribute to them, the same unlimited control over their property that is possessed by individuals over theirs. In Catlin v. Eagle Bank of New Haven, 6 Conn. 233, which is the leading case in this country maintaining the right of an insolvent corporation to prefer one or more of its creditors over others, the decision is distinctly placed upon the ground that the particular corporation was invested with the control, and power to dispose of the corporate property, as fully and to the same extent that natural persons have with respect to their property. Hosmer, C. J., in the opinion in that case, says: “ If the corporation, so far as regards its right to manage and dispose of its property, has power analagous with that which is vested in an individual, the plaintiff’s bill is wholly destitute of merits. * * * The cases of an individual and of a corporation in the matter under discussion, it appears to me, are not merely analagous, but identical; and I discern no reason for the slightest difference between them.” And again he says that “ no express trust was created on the happening of the bank’s insolvency; but the charter, on every fair principle of construction, conferred on the corporation the entire control of its property, as well after, as before this event. * * * “The insolvent banking corporation is just as much a trustee of the creditors, and no more, as the insolvent individual is the trustee of his creditors. The relation of creditor and debtor exists in both cases; but from this relation no trust arises.”

We have not the charter of the corporation in question in that case before us, but we assume that the learned judge was correct in saying that by every fair construction, it conferred upon the corporation the entire control of its property after its insolvency; if so, no fault need be found with his conclusion, that it might, like any individual, prefer some of its creditors over others.

Corporations generally do not possess such amplified powers, and especially,, those created under the laws of this state. In this state, corporations have not the same powers and capacities as natural persons, but are authorized for specified and defined purposes. They are clothed with those attributes only, with which the law, under which they are created, invests them, and can exercise no powers, not expressly conferred, or necessary to carry into effect those in terms granted.

Since the constitution of 1851, it has been the settled policy of this state, to afford adequate protection to the creditors of corporations. That constitution contains the provision that dues from corporations shall be secured by such individual liability of the stockholders, and other means, as may be prescribed by law; but in all cases, each stockholder shall be liable, over and above the stock by him or her owned, and any amount unpaid thereon, to a further sum, at least equal in amount to such stock.” Legislation, under this constitution, has been shaped to fully effectuate the constitutional guarantee. All corporations organized for profit, are required to have a capital stock, fifty per cent, of which must be subscribed, and at least ten per cent, paid in, before the organization can be effected ; and the stockholders are made liable, in addition to their stock, to an amount equal to the stock held by them, to secure the payment of the debts of the corporation. This liability, it has uniformly been held by this court, is a security exclusively for the benefit of the creditors of the corporation, over which the corporation has no control ; and, moreover, the security is for the equal benefit of all the creditors. The suit to enforce it must be by all the creditors, and against all the stockholders; and no creditor can acquire priority over the others, with respect to it. And, while power is conferred on corporations to reduce their capital stock, it is expressly provided that the rights of creditors shall not be affected, nor in any way impaired. The corporate powers, business and property of the corporation, must be exercised, conducted and controlled by a board of directors, all of whom must be stockholders; and, as a still further guarantee for creditors, the powers of corporations over their property, its use and disposition, are so circumscribed by positive statute that no corporation can employ its stock, means, assets or other property, directly or indirectly,’ for any other purpose whatever, than to accomplish the legitimate objects of its creation. The extent of the powers expressly conferred on them are, to sue and be sued, contract and be contracted with, and acquire and convey such real and personal estate as may be necessary or convenient to carry into effect the objects of the incorporation, to make and use a common seal, and do all needful acts to carry into effect the objects for which they are created. It is obvious, that the corporate property, can not with propriety be said to be owned by the corporation, in the sense of ownership as applied to property belonging to natural persons. The latter may without restriction, acquire and dispose of property for any lawful purpose, while both the power of acquisition and disposition of the former, are limited to the special objects already mentioned. The corporate property is in reality a fund set apart to be used only in the attainment of the objects for which the corporation was created, and it can not lawfully be diverted to any other purpose. As soon as acquired, it becomes impressed with the character of a trust fund for that purpose, and the shareholder or creditor may interpose to prevent its diversion from the objects of the incorporation, injurious to him. Taylor on Private Corporations, sec. 34.

The custody and control of the property, and the management of the business of the corporation, are confided to a board of directors chosen by the shareholders. Into the hands of these officers, through whom alone corporations can act, the shareholders surrender their funds, and entrust the management of the affairs and property of the corporation to them. ÍA relation of trust and confidence, therefore, arises between the ¡stockholders and directors of a corporation, out of which grow ¡the duties of the latter, to so administer the trust as will best ¡promote the interests of the former, to pay them their appropriate dividends from time to time, and upon the termination of the corporation, to distribute to them their respective shares bf the corporate property, after the payment of its debts and liabilities. These duties are eminently of a fiduciary nature. fit is now so well established as to be no longer a subject of controversy, that the relation of trustee and cestui que trust subsists between the directors and shareholders. And, since the directors, as such trustees, represent and act for all the shareholders, they cannot lawfully favor any particular shareholder or class of shareholders; but every authority and power possessed by them, must be exercised for the benefit of all [alike. Otherwise, no corporation could endure. If the directors and officers of a corporation were allowed, in the conduct of the business, and disposition of the property, to favor one or more shareholders to the detriment of the others, the minority would be the prey of the majority ^ for, it would then be within the power of the majority to combine and elect the officers, who in turn should manage the whole business and apply the whole corporate property for the benefit of the majority, and thus practically confiscate the entire property interest of the minority. Corporations would thus become traps for the unwary, and legalized instruments of fraud. The doctrine that the directors are trustees for the shareholders, and for the equal benefit of all, it is obvious, is essential to the existence of corporations.

But, it is the right of the creditors, equally with the shareholders, to have the corporate property applied to the purposes for which the corporation was created, and this includes the payment of the corporate indebtedness contracted in the prosecution of its business. The rights of the creditors to the •corporate property, so far as it is necessary to meet tbeir demands, are superior to those of stockholders.

In Perry on Trusts, sec. 242, the relative rights of'the creditors and shareholders are thus defined : “ A corporation holds its property in trust, first to pay its creditors, and second to distribute to its stockholders pro rata. If therefore a corporation should dissolve, and divide its property among its shareholders without first paying its debts, equity would enforce the claims of its creditors by'converting all persons, except bona fide purchasers for value, to whom the property had come, into trustees, and would compel them to account for the property and contribute to the payment of the debts of the corporation to the extent of its property in their hands.”

It is now firmly established, that the property and assets of a corporation are a trust fund for the payment of its debts, especially- in case of its insolvency. Since the case of Wood v. Dummer, 3 Mason, 311, where Mr. Justice Story is said to have first formulated the doctrine, it has been generally accepted, and is sustained by the highest authority. Mr. Justice Swayne announces it with great clearness, in Sanger v. Upton, 91 U. S. 56, 60, as follows : “ The capital stock of an incorporated company is a fund set apart for the payment of its debts. It is a substitute for the personal liabilities which subsists in private co-partnerships. When debts are incurred, a contract arises with the creditors that, it shall not be withdrawn or applied, otherwise than upon their demands, until such demands are satisfied. The creditors have a lien upon it in equity. If diverted, they may follow it as far as it can be traced, and subject it to the payment of their claims, except as against holders who’have taken it bona fide for a valuable consideration, and without notice. It is publicly pledged to those who deal with the corporation, for their security.” In Curran v. State of Arkansas, 15 How. 312, Mr. Justice Curtis said on this subject: “The capital and debts of banking and other moneyed corporations, constitute a trust fund and pledge for the payment of its creditors and stockholders, and a.court of equity will lay hold of the fund, and see that it be duly collected and applied.” And in Upton, assignee v. Tribilcock, 91 U. S. 45, 47, Mr. Justice Huut thus lays down the doctrine : “ The capital stock of a moneyed corporation is a fund for the payment of its debts. It is a trust fund, of which the directors are the trustees! It is a trust to be managed for the benefit of its shareholders during its life, and for the benefit of its creditors in the event of its dissolution. This duty is a sacred one, and can not be disregarded. Its violation will not be undertaken by any just-minded man, and will not be permitted by the courts.” The doctrine is sustained by many authorities: 2 Story’s Eq. sec. 1252; Pomeroy’s Eq., sec. 1046; Taylor on Private Corp., sec. 654, 655; Haywood v. The Lincoln Lumber Co., 64 Wis. 639. It was held by this court, as early as Taylor v. Miami Exporting Co., 5 Ohio, 165, where the opinion of Mr. Justice Story in Wood v. Dummer, supra, is quoted with approbation, and it is more distinctly announced in the later case of Gooden v. The Canal Co., 18 Ohio St. 182, where it is said to be “ well settled that the property of a corporation is a trust fund in the hands of its directors, for the benefit of its creditors and stockholders.”

It being established that the corporate property is a trust fund for the benefit of the corporate creditors, it follows, that after the insolvency of the corporation is ascertained, and the objects of its creation are no longer pursued, the managing board of directors then having the custody of the property,, become trustees thereof for the creditors; and this relation, necessarily forbids any discrimination between the beneficiaries, in the distribution or application of the fund. The due execution of the trust, demands absolute impartiality toward the cestui que trustent. They mu'st be treated alike, and no preference can be made among them, without a direct violation of the duties arising from the relation. It would seem clear, that, if the corporate property constitutes a fund for the creditors, it is as much so for one creditor as for another, and that the directors in possession, are without authority to dispose of it in disregard of the rights of any creditor. They can no more discriminate between creditors in such case, than they could, before the insolvency of the corporation, between the shareholders. The objects for which the corporation was created being no longer prosecuted, and the occasion, for the exercise by the board of directors, of the power of control and disposition of the property for such purpose having ceased, there remains no purpose to which its assets can lawfully be devoted, except to the payment of the-'debts. In equity the corporate property becomes the property of the creditors, and their equities are equal. Every creditor, who became such by parting with his money, property or other thing of value to the corporation, contributed to the accomplishment of its purposes, and augmented its corporate fund; and when the fund is no longer demanded for the purposes of the corporation, the rights of the creditors become fixed instantly and equally; for each, having contributed to the1 common fund, has an interest in it, in proportion to his claim, equally with every other creditor. This interest is sometimes called the equitable lien of the creditor on the corporate prop - erty, which enables him to follow it, even after it has left the hands of the directors, wherever it can be found, except in the possession of bona fide purchasers for value, and subject it to the payment of the corporate indebtedness. It would seem to’ result as a necessary consequence, that insolvent corporations which have ceased to carry on business, can not, by pledge or mortgage of the corporate property to some of the creditors, in payment or security of antecedent debts, without other consideration, create valid preferences in their favor over others; and this is the view maintained by the more recent writers on the subject.

In the last edition of Taylor on Private Corporations, it is said: “ When corporations become insolvent, the duty of the directors toward its creditors becomes even stricter and more iuq>erative; for, under such circumstances, the rights of creditors are paramount, and it has become probable that they will be somewhat damaged; and the plain duty of directors who control the funds from which corporate debts are paid, is to see that the loss is as small as possible. Moreover, since, upon the insolvency of the corporation, the rights of unsecured creditors are equal, it would seem to be unlawful, even in the ab■sence of a statute expressly forbidding it, for directors to make preferences among them.” (Sec. 759). And, in sec. 668, it is further said : “ To allow an insolvent corporation to make an •assignment of its property, giving preferences to a portion of its creditors over the others, is unjust, as well as utterly repugnant to the doctrine that corporate property is a trust fund, on the ■credit of which persons contract with the corporation. If such property constitutes such a fund, it is clearly held in trust for ■the benefit of one creditor just as much as another, and to prefer one creditor to another is evidently .beyond the authority of the trustee. This view is far from being unsupported by •direct authority.”

Mr. Morawitz, in his excellent work on private corporations, referring to the cases which hold that corporate preferences are valid, says:

“ This doctrine, in the opinion of the writer, is wholly indefensible on principle. The capital provided for the security of the creditors of a corporation is a fund held for the benefit of all the creditors equally. That the unsecured creditors of a corporation are entitled to an equal distribution of the common security, has often been recognized by the courts of equity in adjusting the rights of creditors among themselves, and in relation to the company’s shareholders. After a corporation has become insolvent, and has ceased to carry on business, the rights of its creditors become fixed. If a corporation, whose assets are not sufficient to satisfy all of its creditors in full, can prefer certain creditors, leaving others unpaid, this must be by virtue of a power reserved by implication to the company and its agents. But this power can not justly be included in the genera] powers of management which a corporation must necessarily possess over its property, in order to carry on its business and further the purposes for which the company was formed. The purposes of a corporation are not furthered in any manner, by giving it or its agents the power, after the company has become insolvent and has ceased to carry on business, and after its shareholders have lost their interests in the corporate estate, to prefer a portion of the creditors, according to interest • or mere whim, and to pay their claims in full, leaving the •others wholly without redress. The doctrine that an insolvent corporation may prefer certain creditors at the expense of others, seems to have been first started in Catlin v. Eagle Bank, (6 Conn. 233), a case in which the fundamental rule that the assets of an insolvent corporation constitute a trust fund pledged for the security of creditors was denied. It- is a doctrine which is at variance with the whole theory of the law concerning the rights of creditors of insolvent corporations, .and is contrary to the plainest principles of justice.” (2 Morawitz, Corporations, sec. 803).

And in a very recent work on insolvent corporations it is said : The practical working of the rule sustaining corporate preferences is monstrous. The unpreferred creditors have •only a myth or shadow left to which resort can be had for payment of their claims; a soulless, fictitious, unsubstantial entity that can be neither seen nor found. The capital and assets of the corporation, the creditors’ trust fund, may, under this rule, be carved out and apportioned among a chosen few, usually the family connections or immediate friends of the •officers making the preference. This rule of law is entitled to take precedence among the many reckless absurdities to be met with in cases affecting corporations, as being a manifest ti’avesty upon natural justice.” (Wait on Insolv. Corporations, § 162). Elsewhere we have deprecated the right which is recognized in a number of cases, of insolvent corporations to make preferential assignments. It would seem to be an idle waste ■of words to designate the capital and assets of a corporation as a trust fund for the benefit and security of creditors in the •event of dissolution or insolvency, if one of the first principles -of the law of trusts — equality of distribution — could be openly violated, and the effects of the bankrupt company apportioned .among a favored few.” (Ib., § 654).

Without extending the discussion, we are of opinion that when a corporation for profit, organized under the laws of this state, becomes insolvent and ceases to carry on its business or further pursue the purposes of its creation, the corporate property constitutes a trust fund for the equal benefit of the corporate creditors, in proportion to the amounts of their respective claims; and that it cannot then, by pledge or mortgage of the property to some of its creditors as security for antecedent debts, without other consideration, create valid preferences in their behalf, over the other creditors, or over an assignment, thereafter made for the benefit of creditors.

Instead of the individual liability of the stockholders being-a ground of objection to this conclusion, it furnishes an additional reason in its support. It is well settled tha* the corporate property is the primary fund for the payment of the debts, of the corporation, and the statutory liability of the stockholder is a security to be resorted to only when the payment of its debts can not be enforced against its property; and it was held in Harpold v. Stobart, decided at this term, that stockholders who have assigned their stock to an insolvent, assignee, are. liable only for such portion of the debts existing while they were such stockholders, as is equal to. the proportion which their stock bears to- the stock held by all stockholders liable for the same debts. Admit the-power of the board of directora of an insolvent corporation to make preferences among its creditors, and it must follow that they may prefer any they choose to select, for that purpose. This would be wholly inconsistent with the trust relation subsisting between the directors and shareholders, for since different stockholders, or classes of stockholders may be liable for different debts, and not all for the same debts, if the directors could apply the corporate property to some of its debts leaving others entirely unprovided for, they would be at liberty to select the debts for which particular stockholders alone were liable, and appropriate all of the property to their satisfaction, leaving the other stockholders to respond to the full extent of their statutory liability, for the remaining debts. The directors would in this way, be enabled to apply the whole corporate property to their own exoneration.

Whether an insolvent corporation, which is still a going concern, and in good faith engaged in the prosecution of its business, may borrow money, or contract, or procure an extension of other bona fide indebtedness, and convey or pledge the corporate property in security thereof, is a question not involved in this case, and upon which we here express no opinion.

It appears from the finding of facts in this case, that the •directors of the corporation declared its insolvency, and directed by the same resolution, the execution of an assignment for the benefit of its creditors, and of the preferential mortgages to the bank, and other creditors. It does not appear, that, there had been any agreement between the mortgagees and the corporation that such mortgages should be given, nor, that they were given for any other consideration than the antecedent indebtedness of the corporation to the creditors receiving them. Being merely voluntary mortgages to secure pre-existing debts, without other consideration, they can not prevail against the equitable rights of the corporate creditors. Lewis v. Anderson, 20 Ohio St. 281.

Counsel have argued at length, and with great ability, another question sufficiently raised on the record, and that is, whether, in view of the facts found by the court below that the execution of the assignment for the benefit of creditors, and the preferential .mortgages, was directed by the same resolution, and were in fact executed at the same time, the several instruments may not be treated as constituting together an assignment in trust, with intent to prefer the mortgagees, and so inure to the equal benefit of all creditors. The determination of this question not being necessary to the decision of the case, no opinion is expressed upon it.

Other questions presented in the argument, and considered by the court, do not call for further report.

No serious objection is made here to so much of the judgment of the court below as establishes the amount of the plaintiff’s claim, and requires the assignee to allow the same in the administration of his trust, and to that extent the judgment is affirmed. But the judgment establishing the validity of the mortgage, and giving it priority over the assignment, is reversed, and judgment will be entered upon that branch of the case for the trustee.

Judgment accordingly.

        Ante, page 397.


text:
    Sayler, Assignee, and W. & F. Livingstone et al. v. Simpson et al.
    Error to the Circuit Court of Plamilton County.

      Sayler & Sayler, for Sayler, assignee.

      Bateman & Harper, and Kittridge & Wilby, for W. & F. Livingstone and Munson Brothers.

      Thomas McDougal and Avery & Holmes, for defendants in. error.
   This case presents the same question that is decided in the preceding one of Rouse v. The Bank, and was heard with it-Following that decision, the judgments of the circuit court and court of common pleas are reversed and cause remanded for further proceedings.


text:
    The State ex rel. Ensign v. Root, Aud’r.

      Sheriff’s fees for venire for jury — Section 1230, Rev. Stats., construed.

    (Decided June 18, 1889.)
    Error to the Circuit Court of Lorain County.
    P. IT. Boynton, for plaintiff in error.

      E. G. Johnson, for defendant in error.
   By the Court.

Section 1230, Rev. Stats. (77 Ohio L. 116), relating to compensation to sheriffs, which provides that they shall receive for serving and returning venire for petit or grand jury, traveling fees included, to be paid by the county, four dollars and fifty cents; or summoning a jury, to be allowed on each issue, including traveling fees, forty cents; summoning a special jury, including traveling fees, four dollars and fifty cents,” authorizes payment by the county of four dollars and fifty cents to the sheriff for the service and return of each venire for a regular petit jury, or a grand jury, or a special jury, but does not authorize payment by the county for the service and return of a special venire for jurors to fill up the panel.

Judgment affirmed.


text:
    Julian v. The State.

      Juries — Drawing of — Section 5167, Mev. Stats., construed.

    (Decided June 18, 1889.)
    Motion for leave to file petition in error to the Court of Common Pleas of Stark County.

      Charles T. Upham, for the motion.

      D. K. Watson, Att’y-Gen., and John Welty, contra.

   By the Court.

Section 5167, Rev. Stats., as amended February 22, 1889 (86 Ohio L. 51), relating to the drawing of grand and petit juries, which provides that the first fifteen drawn shall be summoned as grand jurors, and those named as the remainder shall be summoned as petit jurors, and in case of challenge, inability to serve, or other cause, it becomes necessary to fill the panel, the whole of the number of persons so summoned as petit jurors shall be first exhausted before resorting to other means to fill the same,” gives a rule for the filling of the panel for a petit jury, but does not relate to the filling of the panel for a grand jury. The latter is governed,, as heretofore, by sec. 5171, Rev. Stats.

Motion overruled.