author: Okey, J. OweN and JohNSON, JJ.,

text:
    Falk, Exp.
    1. The clause of the constitution, art. 2, § 26, providing that “ all laws of a general nature shall have a uniform .operation throughout the state,” is not directory, hut mandatory, and a statute in violation of it is void.
    2. A statute providing punishment for an act which is malum in se wherever committed, being a law of a general nature, cannot be made local on the ground that the inhibited act is a greater evil in a large city than in other parts of the state.
    2. Key. Stats. § 1924, which provides punishment by fine and imprisonment against any person found in a city of the first grade of the first class, or within four miles thereof, having burglar’s tools in his possession, is a law of a general nature within the inhibition of the constitution, art. 2, § 26, but being local in form and operation, it is void.
    Ei?,ROE to the District Court of Hamilton county.

      M. F. Wilson, for Falk.

      E. F. Bradstreet, contra.
   Okey, J.

On May 13, 1884, John Falk was convicted, in the police court of Cincinnati, of the offense of being found, on May 9, 1884, in a city of the first grade of the first class— Cincinnati — having in his possession burglar’s tools, and he was sentenced to imprisonment in the work-house for the space of twelve months, to pay a fine of one hundred dollars and costs, and stand committed until fine and costs were paid. The satutory provision under which he was convicted (Rev. Stats. § 1924) is as follows : “Any person found in any such city (of the first grade of the first class) or within- four miles of the corporate limits thereof, having in his possession any burglar’s tools, or implements of any kind commonly used by burglars in breaking or entering houses, shall be deemed guilty of a misdemeanor, and upon conviction thereof before any police court or other court of such city having competent jurisdiction thereof, shall be fined in a sum not less than twenty-five nor more than a hundred dollars, or be imprisoned in the city work-house for a period not less than ninety days nor more than twelve months, or both.” The statute further provides : “ The [police] court shall have jurisdiction of any offense under any ordinance of the city, and of any misdemeanor committed within the limits of the city, or within four miles thereof, to hear and finally determine the same, and impose the prescribed penalty; but cases in which the accused is entitled to a trial by jury, shall be so tried, unless a jury be waived.” Rev. Stats. § 1788.

On October 6, 1884, the district court of Hamilton county on application of Ealk, allowed a writ of habeas corpus, upon which he was brought before that court, but on final hearing, he was remanded to the custody of the superintendent of the work-house. Upon leave lie filed a petition in error in this court, and the only question presented is whether section 1924, above set forth, is or is not in conflict with the constitution, art. 2, § 26, which provides: All laws of a general nature shall have a uniform operation thoughout the state.”

The constitution contains, in the article relating to the legislative department, various provisions as to the forms to be observed in the passage of a bill, as to the structure of a bill, the number of members required to pass it, and the effect and operation of the bill when passed. All of these provisions legislators are morally bound to observe, and in some states it is held that the failure to observe any of them will be fatal to the validity of an act. Cooley’s Censt. Lim. 5 ed. 88-98. But in this state it is well settled that the failure of the general assembly to observe some of those provisions will not be attended, in the courts, with the same consequences that will follow the failure to observe other provisions. In other words, the courts of this state hold that some of those provisions are merely directory to the legislature, and an objection that they were not observed will be unavailing in the eojurts ; while other provisions are held to be mandatory, and a failure to observe them will render the statute void. Thus, the provisions as to the number of times a bill shall be read; that no bill shall contain more than one subject, which shall be clearly expressed in its title; and that if a law is amended, the old section or sections shall be expressly repealed, are among those which are held to be merely directory. Miller v. State, 3 Ohio St. 475; Pim. v. Nicholson, 6 Ohio St. 176; Lehman v. McBride, 15 Ohio St. 573; State v. Covington, 29 Ohio St. 102; Oshe v. State, 37 Ohio St. 494; State v. Cappeller, 39 Ohio St. 207. On the other hand, the provisions that the general assembly shall, except in certain specified cases, exercise no appointing power; that the legislature shall not authorize a county to become a stockholder in, raise money for, or loan its credit to a corporation; that money shall not be paid out of the treasury, without the consent of two-thirds of the members of each house, on any claim the subject matter of which shall not have been provided for by pre-existing law ; that all laws of a general nature shall have a uniform operation throughout the state ; that no special act conferring corporate powers shall be passed ; and some other provisions, have been held to be mandatory. Cass v. Dillon, 2 Ohio St. 607-617; Kelley v. State, 6 Ohio St. 269; State v. Kennon, 7 Ohio St. 546; Allbyer v. State, 10 Ohio St. 588; Fordyce v. Godman, 20 Ohio St. 1; State v. Cincinnati, 20 Ohio St. 18; Taylor v. Ross Co., 23 Ohio St. 22; State v. Davis, 23 Ohio St. 434; Exp. Van Hagan, 25 Ohio St. 426-431; State v. Mitchell, 31 Ohio St. 592; State v. Williams, 34 Ohio St. 218; McGill v. State, 34 Ohio St. 228-238; State v. Powers, 38 Ohio St. 54. Hence, the distinction seems to be, that those provisions relating to the structure of a bill, or the forms to be observed in the passage of a bill, are, as a general rule, merely directory; while provisions relating to the number of members required to pass a bill, or the effect and operation of a bill when passed, are usually regarded as mandatory.

The authorities having settled beyond controversy (see opinion of Scott, J., in Kelley v. State, and McIlvaine, J., in State v. Powers), that the constitutional provision requiring all laws of a general nature to have a uniform operation throughout the state is mandatory, and that a failure on the part of the legislature to observe it will be fatal to the validity of a statute, the sole question before us is whether the section quoted (§ 1924), which is confessedly, indeed palpably, local, is or is not of a general nature within the meaning of the con-stifcutional provision. And in this connection it is proper to refer to the origin of the constitutional provision in question. We find that it was suggested by a provision in the constitution of California, which provision, however, liad not been construed when our constitution was adopted : but the California constitution did not contain the words, “ throughout the state they were added to our constitution, on motion, while the provision was under consideration in the convention (2 Debates, 579); and the absence of those words was made the ground of decisions in California which would never have been made if the constitution of that state had contained those words. Looking, however, beyond this, to the evil which led to the adoption of the provision, Thurman, J., in Cass v. Dillon, 2 Ohio St. 607, 617, took occasion to remark: “ .The origin of this section is perfectly well known. The legislature had often made it a crime to do in one county, or even township, what it was perfectly lawful to do elsewhere, and had provided that acts, even for the punishment of offenses, should be in force, or not, in certain localities, as the electors thereof, respectively, might decide. It was to remedy this evil, and prevent its recurrence, that this section was framed.” And Boynton, J., in McGill v. State, 34 Ohio St. 228, 238, used this language: “By reference to the debates upon this clause of the constitution, in the convention that framed that instrument (vol. 2, 225), it will be seen that the legislation complained of, and against which it was sought to guard the future, was of a general character, concerning the general nature of which there could be little doubt. A general law, that land should not be sold upon execution for less than two-thirds of its appraised value, was excluded from operation in several counties by local enactment. There were different laws in different counties respecting the descent and distribution of intestate property. Some statutes defining legal offenses were excluded in their operation from a large part of the state; and different penalties for a violation of the same act were, in some instances, provided for different localities. These are samples of the legislation, to prevent which in the future, and the mischief resulting from it, this provision of the constitution was adopted.”

Finding the constitutional provision to bo mandatory, and that one of the principal evils which led to the adoption of the provision was the existence of local penal provisions general in character, it is proper to inquire as to the nature of the statutory provision in question here. And, first, it is to be observed that the provision is not a mere police regulation for the prevention of crime, but it prescribes punishment for an act, namely, being in possession of burglar’s tools in Cincinnati, or within four miles thereof, and declares it to be a criminal offense, and the provision is quite analogous to the provisions punishing the act of having possession of instruments for counterfeiting, or having possession of counterfeit money with intent to sell it. Secondly, there can be no conviction for the offense of having burglar’s tools in possession, unless it is shown by the state that the prisoner had such possession to aid him or another in the commission, not of any particular contemplated unlawful act, but any unlawful act when it might be thought a favorable opportunity was presented to commit it. Anderson v. State, 7 Ohio, 2 pt. 250; Birney v. State, 8 Ohio, 230; Miller v. State, 3 Ohio St. 475; Miller v. State, 5 Ohio St. 275; Crabtree v. State, 30 Ohio St. 382; Farrell v. State, 32 Ohio St. 456; Stern v. State, 53 Ga. 229; Farrell v. State, 45 Ind. 371; 1 Bishop on Or. §§ 301-310; Bishoja’s Stat. Or. § 1022. And hence, thirdly, the act inhibited by section 1924, is not merely immoral, but plainly vicious; it is one of a very serious and dangerous character; it is not merely malum prohibitum, but malum in se ; and it is a wrong to society, not merely in Cincinnati, not merely in cities, but in every county, in every township, in fact in each and every part of the state; and no reason can be given why it might not properly be made punishable by statute, throughout the whole state, as a criminal offense. Perhaps it is true that such acts may be a greater evil in large cities, possibly a greater evil in Cincinnati, than in any other part of the state. But the same thing may be truthfully said with respect to many, perhaps a majority of criminal offenses. Take the crime of arson. It is a grievous evil everywhere, and under some circumstances a most atrocious crime. It is an evil alike in town and country, but a far greater evil in a large compact city like Cincinnati than in a small village or bamlet or a sparse rural district. But does this reason, or any other with which it may be supplemented, afford any ground, in view of our constitution, for punishing arson under local law ? So, a person having possession of instruments for counterfeiting, or custody of a large quantity of counterfeit money, may be in a better position to carry on a nefarious business successfully, and therefore more likely to occasion harm, in a crowded city than in the rural portions of the state; but a general law upon the subject, applicable to the whole state, has effected all that can be done by legislation to remedy the evil. Other illustrations, equally pertinent, might be given; but it is sufficient to say, that if we must assume, merely because sect,ion 1924 was enacted, that the legislature had information showing that the necessity for such legislation with respect to Cincinnati was urgent, and therefore must be sustained, we would be compelled, on the same principle, to uphold local legislation on any and every subject, however general the nature and subject matter of such legislation might be. "We are not willing, nor are we permitted, to adopt any such rule of construction; and, indeed, to do so would be in effect to unsay what we have deliberately said as to the mandatory character of the constitutional provision we are considering.

To the end that these statements may not mislead, it is proper to say that the general assembly is clothed in the most general terms with legislative power, and this, unrestrained by other- provisions, would authorize the legislature to pass local penal statutes of every sort, and it will be seen that there is no inhibition against the passage of penal statutes which are local and even special in character. Hence, it may be that a statute punishing even with death any person who should break and enter the state treasury in Columbus, Chio, with intent to steal, or having so broken and entered, rob the treasurer of state, would not be subject to any constitutional objection, however objectionable it might be on the ground of propriety. And other and perhaps more apt illustrations of the principle may be readily suggested. On the other band, a statute, general in form, prohibiting the sale of liquors in the immediate vicinity of any college, would perhaps be regarded as a general and therefore valid enactment, in force thoughout the state, although every county does not contain a college. And this is consistent with everything I have stated.

Attention has been called to the fact that in State v. Brewster, 39 Ohio St. 653, 658, it was held that the power to classify municipal corporations expressly authorized by the constitution is addressed in a large degree to the conscience and judgment of the legislature, and “ that statutory provisions with respect to any such class are, for governmental purposes, general legislation” and not in conflict with the constitution. This we held to be a proper construction of art. 13, § 6, which is in no sense in conflict with art. 2, § 26. And in this connection it is proper to say, that in Morgan v. Nolte, 37 Ohio St. 23, we sustained the validity of a conviction under an ordinance of the city of Cincinnati, passed by virtue of Rev. Stats. §§ 1692, 2108, prescribing punishment by fine and imprisonment against any person who, being a known thief, should be found in that city; and, there being no general statute punishing the act of having possession of burglar’s tools, it is true, perhaps, that the substance of section 1924, if adopted in due form as an ordinance of the city of Cincinnati, under authority of sections 1692 and 2108, would be entirely valid. Nor does this militate against any thing I have said; for the constitutional provision we are considering would not, under such circumstances, have any application.

Rev. Stats. § 1924, is, for the reasons stated, in conflict with the const, art. 2, § 26, and therefore void. In saying so, we do not depart in the slightest degree from the rule that no judge should ever concur in holding a statute to be unconstitutional, unless he is satisfied that he is clearly right in so holding. 38 Ohio St. 219. But we do not undertake to lay down any rule, by the application of which it may be determined whether any law is or is not within the inhibition. We content ourselves by holding, that a statute providing punishment for an act which is malum in se wherever committed, is a law of a general nature, and to be valid under the const, art 2, § 26, must have a uniform operation throughout the state ; nor will the fact that the inhibited act maj be a greater evil in a large city than in other parts of the state, warrant a local statute punishing such offense; and that Rev. Stats. § 1924 is, therefore, unconstitutional.

Judgment reversed and prisoner discharged.

OweN and JohNSON, JJ.,

dissented as to the third point in the syllabus; OweN, J., on the ground that he does not regard the conclusion therein announced as sufficiently free from doubt to justify-him in declaring the act in question to be in violation of art. 2, § 26, of the constitution.


source: Caselaw Access Project

author: Owen, J.

license: Public Domain

text:
    The Citizens’ Savings Bank v. Blakesley.
    1. C. & Co., a partnership, engaged in private banking, gave a certificate of deposit to B. Thereafter they ceased doing a general banking business, and were immediately succeeded by a savings bank, incorporated under the act of February 26, 1873 (70 O. L. 44), which conducted its business in the former banking rooms of C. & Co., whose members were trustees of the bank — one its president, another its treasurer and cashier, who had full control of its business. B. presented his certificate at the bank, whoso cashier cancelled it with a stamp of C. & Co.; filed it with their redeemed certificates ; issued to B. a certificate of deposit of the bank in lieu of it, and charged the amount of it on the books of the bank to C. & Co., who had an unauthorized credit on the bank books (making a large credit balance in their favor), placed there by the president and cashier without the knowledge of the other trustees. This certificate was, from time to time, renewed by the cashier bjr like certificates, until the issuing of the one in suit. For two years prior to the issuing of the last named certificate the managing officers of the bank had, without the knowledge of the other trustees, in like manner redeemed, either by the bank's money or certificates, the cer tificates of C. & Co., who were ia fact "insolvent and debtor to the . bank, but in good credit. B. was not a party to, and had no knowledge of the fraud and bad faith, of the officers of the bank. Held: 1. The bank was liable to B. upon its certificate of deposit.
    2. Where a transaction with an incorporated banking association properly pertains to the business of such an association, neither the abuse or disregard of his authority by its managing officer or agent, nor his fraud or bad faith will be permitted to be shown in defense of such bank in an action against it by an innocent party, growing out of such transaction.
    ERROR. Reserved in the District Court of Hancock county.
    The original action was by the defendant in error, John Henry Blakesley, an infant, suing by bis next friend, against the plaintiff in error, for the amount of an alleged indebtedness represented by a certificate of deposit of the tenor following:
    “No. 24,882. CitizeNS Savings Bane, l Bindlay, Ohio, Jan. 23, 1878. j
    John Henry Blakesley has deposited in this Bank Five Hundred and Borty-one Dollars and Borty-one Cents, payable to the order of himself June 1st, 1878, in current funds on return of this certificate properly indorsed.
    $541.41. L. C. Carlin, Cash.”
    The cause was tried to the court, by which findings of fact and conclusions of law were stated, which occupy several pages of the printed record, but which, for the purpose of presenting the questions in controversy may be summarized as follows:
    On September 10, 1875, and for some time prior thereto, Parlee Carlin, Squire Carlin, and M. D. Sours, constituted a partnership styled “ Carlins & Co.,” doing business as private bankers in Bindlay, Ohio. On that date they issued to the plaintiff below a certificate of deposits of the following tenor :
    “ Citizens Bane. S. Carlin. P. Carlin. M. D. Sours.
    Carlins & Co. Bindlay, 0., Sept. 10, 1875.
    No. 22,240.
    John Henry Blakesley has deposited in this Bank Four Hundred Thirteen 28-100 Dollars in current funds, payable to the ordei’ of himself March 10, 1876, on return of this certificate properly indorsed.
    $413.28. CaeliNS & Co.”
    They continued to do business until Januai’y 31,1876, when they ceased, with an indebtedness of $180,000 evidenced by certificates of deposit, and were in fact insolvent, although their credit remained unimpaired, and they promptly redeemed their outstanding paper and continued business in the redemption of their obligations at their former banking house, until March 1878.
    On January 31,1876, the plaintiff in ei'ror assumed corporate powers under “ an act to incorporate savings and loan associations,” passed February 26, 1873, as amended March 1875. This corporation had thirteen trustees, among them the above named Parlee Carlin, Squire Cai’lin, and M. D. Sours, and L. C. Carlin, a son of Parlee Cai’lin, who were also trustees and stockholders. It continued to do business at the former banking house of Carlins & Co., with Parlee Carlin as president; M. D. Sours, treasurer and cashier, and L. C. Carlin assistant cashier, who conducted its business, until March 25,1878, when it ceased and proceeded to close its affairs as provided by the act of incorporation.
    By March 1,1876, Carlins &Co. had become debtor to the bank in the sura of $6,490.48. On that day Parlee Carlin, as president, and M. D. Sours as treasurer, entered on the books of the bank a credit to Carlins & Co. of sixty-five bonds of $1,000 each, made by Squire Carlin, and purporting to be secured by two unrecorded mortgages made to M. C. Whitely, and nineteen bonds of $1,000 each, made by Parlee Carlin and purporting to be secured by an unrecorded mortgage made by L. O. Carlin, amounting in all to $84,000. Two of these mortgages were never recorded and one of them not until nearly a year afterwards. None of these bonds or mortgages were ever indorsed or assigned to the bank, and the lands mortgaged were not worth more than the amount of the bonds. These credits were made without the knowledge or consent of any of the other trustees or stockholders of the bank, and were so entered upon its books as to appear as cash credits.
    Thereafter, Parlee Carlin and Sours continued to redeem the certificates of “ Carlins & Co.” with the money of the bank and its certificates of deposit issued by them therefor, and charged the amounts thereof to Carlins & Co. on the books of the bank, so that, on September 11, 1876, Carlins & Co. were debtors in fact to the bank in $39,000, although its books, by reason of the credits above mentioned, showed'a large balance in their favor.
    On March 14, 1876, Isaac Blakesley, the father of plaintiff below, who was also a trustee and stockholder of the bank, indorsed the certificate of Carlins & Co. above set forth, and presented it to Sours at the counter of the bank “ to be fixed.” Sours took it, canceled it with the firm stamp, filed it with the firm papers, then issued to the plaintiff below and delivered to Isaac Blakesley for him, a certificate of deposit of the bank for the amount of the canceled certificate and interest for six months at 8 per cent, included, and charged “ Carlins & Co. ” upon the books of the bank with the amount of the certificate so taken up. This was without' the knowledge or consent of the other trustees or stockholders, and was the customary manner of redeeming the certificates of Carlins & Co., from the organization of the corporation, except that, if the holder preferred, he was paid from the moneys of the bank.
    No money was actually deposited with the bank as recited by this last certificate. Carlins & Co. placed no money in the bank for the certificates taken up. They in fact had no money on deposit in the bank, and had no money provided to redeem such certificates, and if payment had been demanded it could only have been made with the money of the bank. This certificate was in the same manner returned and renewed, from time to time, until the date of the one in suit, which represents the amount of the last preceding certificate and the interest thereon. No money was actually deposited by the plainliff below. None was asked for. None was intended to be paid or passed between the bank and the plaintiff below.

      The plaintiff below and his father, Isaac Blakesley, who was his agent in all these transactions, had notice and knowledge that Carlins & Co. were closing up their business, and of the organization and incorporation of the bank, and, of course, that Isaac was one of its trustees and stockholders.
    As soon as the other trustees had knowledge that the credit of $84,000 had been given and entered upon the books of the bank, which was after the issuing of the last certificate to Blakesley, they repudiated the same and refused to accept the bonds, and the same was not used by or for the bank, nor did it secure any benefit therefrom.
    As a conclusion of law, from the facts so found, the court found that the transaction between the plaintiff and defendant and Carlins & Co., was in legal effect a payment of Carlins & Co.’s certificate of deposit by Carlins & Co. out of the funds of the bank and a deposit of money by the plaintiff in the bank, and that plaintiff was entitled to recover from the bank the sum prayed for in his petition, and rendered judgment accordingly ; to which error is assigned, as well as to the exclusion by the court.from its consideration of certain evidence, the effect of which is given in the foregoing statement of facts, as this court, in the opinion, deals with it as having been admitted.
    The case was reserved in the district court for disposition here.

      J. F. JBurhet, and Whiteley <$¡Bbpe, for plaintiff in error:
    The transaction was not authorized by the statute and was a violation of the specific powers granted by the charter. Bank v. Slemmons, 84 Ohio St. 142; 8 Wheaton, 388; 15 Ohio St. 69; 23 Am. Rep. 687 ; Manhattan Co. v. Lydig, 4 Am. Dec. 289; s. o., 4 Johnson, 376 ; Wyman v. Ilallowell Banlc, 14 Mass. 57 ; White'v. Westport Mf’g Co., 1 Peck. 215 ; 17 Mass. 29; 5 Ohio St. 61.
    When the act of incorporation prescribes a mode of contracting, that mode must be observed, or the instrument no more creates a contract than if the body had never been incorporated. In no state of the Union have these principles been-adhered to with more unyielding tenacity than in this (Ohio).
    So that there can be no recovery upon the certificate of deposit, much less upon an account stated for moneys deposited, as claimed in the amended petition in this case, upon which and the answer the case was tried. For no money was deposited, and no consideration or benefit received by the corporation to to be restored to plaintiff or to work an estoppel. Stark Bank v. Pottery Oo., 34 Yt. 144; 3 Neman, 309 ; 3 Comst. 344; 6 Cush. 408 ; 8 Mich. 526; 5 Nev. 224.
   Owen, J.

Divested of all circumstances from which fraud or bad faith may bo imputed to the transaction now under consideration, the following is a fair statement of the facts found by the court below:

Carlins & Co., a partnership, was engaged in private banking. It issued its certificate of deposit, in the usual course of business, to a depositor. Thereafter, the savings bank, a corporation, was organized and proceeded to do a banking business at the banking room of Carlins & Co., who proceeded to wind up their business by redeeming, at the counter of the savings bank, acting by its cashier, their outstanding certificates of deposit, either by cash or certificate of the bank as the holder should elect; Carlins & Co. being charged on the books of the bank with the amounts of the certificates redeemed. The depositor of Carlins & Co. above named, knowing these facts, presented, his certificate of deposit at the counter of the bank for redemption. The cashier of the bank received it; computed the interest upon it; canceled it with the firm stamp of Carlins & Co.; issued a certificate of deposit of the bank for the amount; delivered it to the holder of the redeemed certificate; charged the amount of it against Carlins & Co. on the books of the bank, upon which was an entry, as a cash credit to Carlins & Co., of $84,000, the account showing a large credit balance in favor of the latter.

The certificate so issued was, from time to time, renewed by the bank by its own certificate until the one in suit was issued.

Can the power of tbe bank to issue its certificate, in such a case, be seriously questioned ?

The power expressly conferred upon it by the law of its charter, was to receive on deposit for safe keeping, or making investments thereof, all sums of money that may be offered for that purpose” .... and to “purchase and sell promissory notes, drafts and bills of exchange, .... and transact such other business as properly pertains to the business of such associations not forbidden by the constitution and laws of this State.” JO O. L. 44, § 14.

The power to receive deposits carries with it the power to issue certificates therefor. Issuing, dealing in, buying and selling certificates of deposit, is one of the incidents of, and properly pertains to the business of banking. Receiving, at their request, the certificates of Carlins & Co. and issuing its own certificates or paying its money therefor, charging the amount of them against their credit on the bank books, was in itself harmless and'in the proper course of its business.

But it is maintained that the real transaction involved in this case, was characterized by circumstances of fraud and bad faith which call upon the court to leave the parties where it found them. These- circumstances are briefly as follows s The cashier of the bank was a member of Carlins & Co., and was acting at the same time, and in the same transaction, for the bank and for his own firm. The entries on the books of the bank, which appeared as a cash credit of $84,000, were unauthorized, and did not in fact represent cash deposits, and were not entitled to stand as cash credits. The other trustees and stockholders of the bank had no knowledge of the redemption at their bank of- the certificates of Carlins & Co., or of the transaction leading to the entry itself. The plaintiff 'below had knowledge that Carlins & Co. were closing up their business, and of the incorporation of the bank. Car-lins & Co. in fact had no money in the savings bank with which to redeem their certificates, but were debtors of the bank in the sum of $39,000 when the certificate in suit was issued. Promptly on discovering the real character of the $84,000 credit, but after the issuing of the last certificate to the plaintiff below, the trustees repudiated it and the transaction which led to it.

Do these circumstances so far characterize or qualify the transaction as to defeat the liability which would otherwise attach to the bank? If they do, it is so not by reason of want of authority in the officers of the bank, but by reason of their fraud and bad faith in the performance of their trust. But to give this effect to their acts, it is necessary so far to connect the plaintiff below with their fraudulent conduct as, practically, to make him a party to it, and thus, by the operation of the very familiar rule which requires a party seeking to enforce his rights or redress- his wrongs to go with clean hands into court, the law must refuse him relief. The plaintiff knew that the cashier of the bank was a member of Car-lins & Co.; that his certificate did not represent money actually deposited by him ; that upon the issuing of the bank certificate in lieu of that of Carlins & Co. the latter were charged with the amount of it on the books of the bank. But he also knew, at the time of the issuing of this last certificate, that for two years such had been the customary course of dealing at the bank. We are to suppose he knew (in the absence of knowledge of fraud or bad faith) that the officers in charge of the bank were acting within the due course of their employment and authority.

Corporations are liable for the acts of their servants, while engaged in the business of their employment, in the same manner and to the same extent that individuals are liable under like circumstances. Merchants’ Nat. Bank v. State Nat. Bank, 10 Wall. 604; Thayer v. Boston, 19 Pick. 511; Frankfort Bank v. Johnson, 24 Me. 490.

The trustees constituted the bank officers and clothed them with power to act for and bind the bank in all matters pertaining to its business. Those who create the trust, appoint the trustee, and clothe him with the power that enables him to mislead, ought, if there is misleading, to suffer rather than an innocent party. Farmers’ & Mech. Bank v. Butchers’ & Drovers' Bank, 16 N. Y. 133; Merchants Nat. Bank v. State Nat. Bank, 10 Wall. 604.

It is assumed in argument, however, that Blakesley is not an innocent party, that he was, in reality, a party to the fraud of the bank officers. Is this assumption justified by the facts? We have called attention to the facts within his knowledge. But he did not know that the credit of $84,000 to Carlins & Co. was unauthorized; that Carlins & Co. were in fact insolvent; that they had no money with which to redeem their outstanding certificates; nor that the other trustees of the bank were ignorant of the manner in which the affairs of the bank were being conducted. If these trustees succeeded in keeping themselves profoundly ignorant, for more than two years, of what was transpiring at their bank, it certainly was not the fault of Blakesley, and we know of no rule of law or of fair dealing which calls upon us to visit their neglect upon his head. True, Isaac Blakesley, the father and agent of the plaintiff below, was also a trustee of the bank, and while the court below was right in treating his knowledge as that of his principal, we are not to impute to the latter (an infant), notice or knowledge of any fact which his agent may be held, by legal construction or presumption, to have known as a trustee.

In our opinion, too much importance is given to the fact that these trustees were ignorant of the transactions of the officers of the bank. Parlee Carlin, the president, M. D. Sours, treasurer and cashier, and L. C. Carlin, assistant cashier, were supreme in the conduct of the daily business of the bank. They were the only officers or agents competent to speak for it or bind it in any of its business affairs. Notice to a trustee, not otherwise an officer, would have been no notice to the bank of any matter within the peculiar control of the officers in charge. Blakesley had good right to suppose that the facts within his knowledge were as well and fully known to the other trustees.

But it is maintained by the bank that the facts shown to have been within his knowledge were sufficient to put him upon inquiry, and that be is to be charged with the knowledge of such facts as by reasonably diligent inquiry be could have acquired. Let this be granted. Inquiry at the bank, of its officers, or even an inspection of its books, would have disclosed to him a large cash balance to the credit of Carlins & Co. Beyond this he would not be required to go. To have plied the officers of the bank with the inquiry if the credit entries in the books were fictitious or unauthorized, or if their conduct of its affairs was fraudulent, would have been an impertinence. But we are not able to see anything in his conduct or in the facts within his knowledge, to connect him with any fraud or bad faith in this transaction which should, for that reason, defeat his recovery.

The vital and decisive question, then, upon which must rest the determination of this controversy, is not one of the fraud or bad faith of the officers of the bank, but of their authority to act for and bind it. If Carlins & Co. had in fact had a cash credit at the bank against which to charge the amount of their certificates redeemed, would not this transaction have been utterly unassailable, and the bank liable upon this certificate ? It seems very clear to us that it would; and as we may treat the credit entries as genuine, in the absence of fraud or bad faith on the part of the plaintiff below; and as the subject of the transaction was within the course of the employment of the officers and of the business of the bank, we might safely rest our conclusion upon this view. If the contract is within the authority of the officers, and would be valid and bind the bank under any circumstances, an innocent party has a right to presume their existence, and the bank is estopped to deny them. Merchants’ Nat. Bank v. State Nat. Bank, supra. If the transaction properly pertains to the business of such associations,” the fraud or bad faith of the managing officers constitutes no defense as against an innocent party. The fact that the cashier of the bank was also a member of Cailins & Co. ought not to limit or qualify his authority as cashier, while dealing with a party acting in good faith and without knowledge of the fraud or bad faith of such cashier.

It is maintained further, however, that as the bank owed Blakesley nothing, and as he deposited nothing with it, this certificate is without consideration to support it, and for this reason cannot be enforced against the bank.

He surrendered his certificate against Carlins & Co. and with it his right to pursue them upon it. It was canceled, and he accepted in lieu of it that of the bank, which charged up the amount of it to Carlins & Co. Then it should not be forgotten that when the Carlins & Co. certificate was pre* sented, it was good. The credit of Carlins & Co. was then unimpaired. They were promptly redeeming their certificates with cash if the holders desired. These facts not only furnish sufficient consideration to uphold this certificate as the promise of the bank, but should estop it from asserting in defense that it is without consideration.

We are unaided in our consideration of this case by briefs or arguments from the defendant in error. Whether the conclusions of law stated by the court below in its findings are fully supported by the facts found, it is unprofitable to inquire, if in fact the judgment finally rendered by it is sustained by the facts.

We find, that it is, and accordingly affirm it.

Judgment affirmed.


author: McIlvaine, C. J.

text:
    Bates v. Peoples’ Savings and Loan Association, et al.
    1. The act of May 9, 1868, amending the act of May 5, 1868, commonly called the Building and Loan Association Act (S. & S. 194), which authorizes building and loan associations to receive deposits of money was not an act granting “ banking powers ” within the meaning of section 7, of article 13, of the constitution. Dea/rborn v. Northwestern Savings Bank, ante, approved and followed.
    2. A person who applies to a building and loan association for a loan of money, and deposits therewith a sum of money, however small, for the purpose of making himself eligible as a borrower, and thereby receives a loan, is estopped, when sued for the money by the association, from denying that he was, in fact, a depositor-of the association.
    3. Compensation for the use of money advanced by a building and loan association to a member or depositor, in excess of the rate of interest allowed by law, and not derived from dues, fines or premiums paid by the borrower for the right of precedence in taking said loan, is usurious. The premium which shall not be construed to make the loan usurious, under section 3, of the act of May 9,1868, is a premium bid by a member or depositor for the right of precedence in taking a loan, at a competitive sale of such right..
    4. A building and loan association, having taken security for a loan advanced," by mortgage on real estate, may for the purpose of protecting its security, pay taxes or assessments levied on such real estate, which appear on the tax duplicate to have been duly and legally assessed, and where the association has no knowledge or notice of any defect or illegality in the assessment. Payments so made are the first lien on the premises, and as between the mortgagor and mortgagee cannot be defeated by showing an illegality or irregularity in the assessment.
    5. In an action by such association to foreclose such mortgage, wherein its secretary and treasurer was made a party who prayed judgment in his own name for taxes so paid, and it appeared that the taxes were paid by him for the benefit of the association and with its money, a judgment for the plaintiff was rendered as well for the taxes so paid as for the foreclosure of its mortgage, without amending the petition so as to pray for relief on account of the taxes paid. Held: that the omission to so amend plaintiff’s petition was not a substantial prejudice to the mortgagor for which the judgment should be reversed.
    6. For error in including usury in the judgment, the same is reversed.
    ERROR to the District Court of Cuyahoga county.
    The original action was brought by the Peoples’ Savings and Loan Association, a corporation of the state of Ohio, organized under the act of May 5, 1868, commonly called the Building and Loan Association act, and the acts amenda-tory of and supplementary thereto (S. & C. 194-5), against Samuel H. Bates and others to recover judgment on a note, executed by said Bates, of which the following is a copy:
    “ OlevblaNd, Ohio, June 12, 1876.
    “ One year after date, I promise to pay to the order of The Peoples’ Saving & Loan Association twelve hundred dollars for value received,‘ with interest at the rate of eight per cent, per annum, and premium at the rate of two per cent, per annum, both payable semi-annually on ,the 15th days of June and December until paid, the principal- to become due on failure to pay the interest or premium punctually as above stipulated.
    $1,200.00. Samuel H. Bates.”
    —and to foreclose a mortgage on certain real estate given to secure the payment of said note and to marshal liens on said premises.
    A. L. "Withington, a defendant, by cross-petition, set up a claim for moneys paid for taxes and assessments upon said premises, as shown by the duplicate in the hands of the treasurer of the county for collection, to wit, certain moneys paid by him as purchaser at a delinquent tax sale, by the auditor of the county for which a certificate of sale was delivered by the auditor to him, and certain other moneys paid by him for other taxes and assessments subsequently levied and assessed on said premises, as shown by the duplicate of taxes in the hands of the treasurer of said county. The amount so paid, and which was alleged to be the first lien upon the premises, was $479.00.
    ' The defendant, S'. H. Bates, denied that he was a member of the plaintiff, and he denied that he was a depositor with the plaintiff within the meaning of said act. He also claimed that the statute referred to, which authorized the plaintiff to loan money to depositors, was of no effect, never having been submitted to the approval of the electors of the state, as required by section 7, article 13 of the constitution. He denied, as did one Bradley Bates, a defendant and subsequent judgment lien-holder, the right of Withingtonto assert a lien on account of the said taxes and assessments, and especially for a portion thereof which was alleged to have been illegally assessed.
    "W’ithington, by way of reply, admitted that the claim set forth in his cross-petition “ is founded upon a contract made in the name of this defendant for the benefit of another, to-wit: The Peoples’ Savings and Loan Association; and the said cross-petition asserts a claim for taxes actually paid without any claim for, the penalties allowed by law to an independent stranger to the property, at a tax sale.”
    It further appeared by the evidence that Withington was at that time the secretary and treasurer of the plaintiff, and that said taxes were paid by him with the money of the plaintiff, and for the purpose of preserving the security of its mortgage lien.
    It also appears from the record that previous to the loan in question, S. H. Bates had not been a member or depositor of the plaintiff; and the circumstances under which he became a depositor are thus stated by Withington, the secretary and treasurer Of the plaintiff
    “ On the 10th day of June, 1876, said S. H. Bates came into our place of business and said that he wanted to borrow some money to pay off a mortgage on his house and lot, and would give a mortgage to secure it. I explained to him that he would have to become a depositor before our rules would allow us to lend money to him. At his request, I wrote out for him an application to borrow money; said application is hereto annexed, marked Exhibit 1), which he signed and left with me ; that was the only bid he made. On June 12, 1876, he came in again, and I told him that the directors had decided to loan him the money he wanted and he then deposited $2.00 with us and executed the note, Exhibit 0, and on the 14th of June he executed the mortgage and we paid him the full sum of $1,200.”
    The following is a copy of Exhibit D :

      “ To the Peoples’ Saving and Loan Association :
    “I wish to obtain a loan of your Association of twelve hundred dollars on the following described property in the city of Cleveland, county of Cuyahoga, and state of Ohio, viz:
    “ Thirty-three feet from the north side of Sub-lot No. 68 back to a point, and twenty feet from the south side of Sub-lot No. 67 in Severance and Eolsom’s allotment, and being 53 feet front on Eulton street and about forty feet wide rear’, and about one hundred feet deep.

      “ Being a depositor in said Association, I bid for said loan at the rate of two (2) per cent, per annum premium, in addition to eight per cent, interest, said premium and interest to be paid semi-annually.
    “ S. H. Bates,
    Applicant.”
    The district court, to which the case had been taken by appeal, decreed in favor of the plaintiff for the full amount claimed under the said note and mortgage, and also for the amount so paid by Withington, its' secretary and treasurer, on account of taxes.

      W. C. Bogers, for plaintiff in error:
    I. The law under which the defendant in error was incorporated is unconstitutional. Const, ar't. 13, § 7. Eor a definition of banking see Bouvier’s Law Die. ; McCullough Com. Diet. 24; Webster’s and Worcester’s dictionaries; 2 New Am. Cyclopedia, 572. ' Boone, in his Law of Corporations, section 212, defines banks as “ of three kinds, viz : banks of deposit, banks of discount and banks of circulation,” citing numerous authorities. The words bank and bankers are found defined in the same way in the following cases: Bank v. Collector, 3 Wall. 498 ; Oulton v. Sawings Institute, 17 Wall. 118; N. Y. State Loan, &c. Co. v. Helmer, 77 N. Y. 64; ■ Warren v. Shook, 91 U. S. 704 ; Curtis v. Leavitt, 15 N. Y. 157; Bominger v. Keyes, 73 Ind. 377; Bank v. Baldwin, 23 Minn. 203-5 ; State v. Hel/ines, 3 N. J. L. 606 (Penn. 1057); City of New Orleans v. N. 0. Sawings Institute, 52 La. An. 531; and see Bank v. Baker, 15 Ohio St. 77; Medus. v. OolUer, 16 Ohio St. 607 ; Shinkle v. Bank, 22 Ohio St. 517, 524; 35 Ohio St. 263.
    A word of general use among all people, such as “ banking,” when used in a constitution, is not to receive its narrowest legal use, though such a construction of the word may sometimes be proper in a statute; but in a constitution it is to receive its broadest popular use: that we understand to be the true manner of construing constitutional provisions. See Cooley Cons. Limitations, 72, 80. Words are to be construed in their ordinary meaning; and in Field v. People, etc., 2 Scam. (Ill.) 79, the court says : “ A constitution is a limit of power to a legislature, though a grant of power to the other departments of government; and a legislature therefore cannot exercise any power not expressly granted to them.” If we look to the debates on banking when the constitution was formed, for an interpretation, the examination will prove very unsatisfactory. 1 Debates, 707, 709; 2 Id. 417, 796, 850.
    The bank had no legal right to make the loan or take the mortgage. S. & C. 809, § 90; Rev. Stats. § 3266. To do so was not merely an act in excess of power, but an absolute illegality, and was clearly within the following decisions: Humphrey v. Mooney, 5 Col. 282; 12 Cent. L. Jour. 386; Piche v. Py. Go., 9 Exch. L. R. 262 ; Keene v. Coleman, 39 Pa. St. 302; Hurlburt v. Britain, 2 Doug. (Mich.) 191; Thomas v. Py. Go., 101 U. S. 71; Bank of Wooster v. Stevens, 1 Ohio St. 233 ; Strauss v. Eagle Insurance Go., 5 lb. 59; Huber v. German Gong. Church, 16 lb. 371 ; Franklin Bank v. Comil Bank, 86 lb. 855 ; Kilbreth v. Bates, 38 lb. 187. Nor is the plaintiff in error estopped from setting up this defense. 1 Bates’ Ohio Dig. 272, § 114; 11 Ohio, 487, 492 ; 8 Ohio 257; 20 Ohio 283 ; 38 Ohio St. 349, 357; Tone v. Columbus, 39 Ohio St. 281.
    II. Bates was not a depositor at the time of making the loan, nor at the time of signing the note. He did not bid ; there was no competition. That he afterwards handed the secretary two dollars did not make him a depositor within the meaning, of the statute.
    III. The decree includes usurious interest. Building Association v. Wilook, 24 Conn. 147; 58 Me. 569; 19 W. Ya. 676 ; 30 Pa. St. 470 ; 16 Rich. Eq. (S. C.) 135; 75 N. C. 292. V

      IY. As against any one we had a right to show that the whole or a large part of the amounts sought to be recovered from these lands as taxes and assessments, were illegal. S. & 0. 1591, § 42; Id. 1416, § 114; 19 Ohio, 324; 105 TJ. S. 422 ; 106 U. S. 196 ; 38 Ohio St. 517; Williams v. Townsend, 31 N. Y. 411. The doctrine of caveat emptor applies to tax sales and taxes. Blackwell on Tax Titles, 65; Oooley on Taxation, 326, 328, 329, 351, 375 ; 17 Mich. 218 ; 30 Md. 139 ; 3 Ohio, 232; 30 Ohio St. 598 ; 27 Ohio St. 527.

      R. P. Ra/nney, for defendant in error,
    urged that the act under which the defendant was incorporated was not in conflict with section 7 of article 13 of the constitution, and in determining whether this is so, it is proper to consider contemporaneous exposition (Sedgwick on Stat. and Const. Con. 251, 487; Stewart v. Laird, 1 Cranch, 299; Rogers v. Goodman, 2 Mass. 477; Packard v. Richardson, 17 Mass. 143; Moers v. City of Reading, 21 Pa. St. 188); and made and argued the following points.
    1. “ Banking powers,” as used in the constitution, includes all banking powers. A construction that would make it read as if the words were"any banking power” would contradict the plural form of expression, and would make all provisions' for the use and investment of the funds of insurance companies and other corporations, invalid.
    3d. When the constitutional convention sat, there existed' in the state three systems of banking, or banks incorporated by the State, all authorized to issue notes to circulate as money, which were the only moneyed corporations then, or at any time before, incorporated by the State.
    2. The identical and operative words of the section — banking powers — before the adoption of the constitution, had been held by the supreme court of the state, when found in a charter, not to import an exclusion from any of the uses of or dealings in money, except only issuing notes or bills to circulate as money. 14 Ohio, 6.
    4th. It is evident, from the proceedings of that body, that the only thing complained of as liable to abuse in the future, or needing any additional safeguard, was this faculty of issuing a circulating medium. 1 Convention Debates, 708, 709; 2 Id. 344, 345, 346, 392, 393, 395.
    5th. It was announced from this bench, by the then Chief Justice, who had long served in every department of the stale government, that this section had no wider extent, and was only applicable to corporations having that special privilege. 14 Ohio, 6; 3 Ohio St. 31.
    6th. The general assembly has, for a long number of years, upon its own sole authority, provided for the organization of associations, not having that faculty, whose main purpose has been to furnish safe depositories for small sums upon interest; which laws have been from time to time, and- repeatedly, amended, compiled and revised, and stand unimpeached upon the statute books to this day ; and under which have grown up a large number of associations, having the custody, in the aggregate, of very large sums of money.
    7th. During all this time, every department of the state government has dealt with and treated these associations as valid and subsisting corporations of the State; and has taken no step (which their legal duty would otherwise have required) to arrest their operations or prevent their increase. In the hundreds’ of cases which have been decided in this, and the inferior courts, judgments have been rendered, liens have been adjusted, and sales of land made and confirmed.
    8th. Upon any fair construction of the several acts under which these institutions are organized (and especially that of 1868, which defines the powers of the defendant in error), no banking power, as anywhere understood in the commercial world, is conferred upon any of them.
    9th. This constitutional provision, brought from Illinois here, and from here taken to Kansas, and being almost literally the same in the constitution of each of the three states, has been subjected to a full judicial examination in the highest courts of the first and last of these states; where it was directly decided that the provision applied only to banking corporations, authorized to issue a paper currency ; and laws, never submitted for approval, were upheld, although confessedly investing the corporations organized under them with some powers usually exercised by banks. 93 Ill. 191; 20 Kan. 440.
    If any additional circumstance could be added, in the nature of things, to show what was intended by this provision, I know not what it could be. It is as plain as any proposition can be made, that the provision here, as in Illinois and Kansas, was intended to apply only to such corporations as were then, or ever had been in this state, invested with the special privilege of issuing a paper currency ; and was not intended to take from the general assembly the right to regulate all other phases of dealing in money, as other business interests might be regulated, either through the agency of corporations or otherwise as experience should dictate. Much less was it ever intended to disable that body from promoting a great public policy, by providing safe places of deposit for the small sums which the working class can command, which with the repeated accumulations and interest upon them, in a few years, have enabled them to secure comfortable homes. Quite a number of such institutions existed under special, charters, in the larger cities of the State, at the very moment the constitution was framed and adopted. To suppose that they were intended to be brought within the great vortex of the banking problem is simply absurd.

      It. A. Harrison and W. W. Boynton, also for defendant,
    contended that section 7 of art. 12 of the constitution applies only to banking which proposes to issue paper money.
    I. What is banking ? See the argument of Daniel Webster in the case of Bank of the United States v. Primrose, published in the 6th volume of his Works, pages 106-127 et seq. • Bank of Sonora v. Fairbanks, 52 Cal. 196; Dmidson v. Lanier, 4 Wall: 447, and see O. L. I. & T. Oo. v. Debolt, 16 How. 438; 3 Ohio St. 31; 14 Ohio, 6. 1. In ascertaining the meaning of the constitution it is needful to look at the liistorical facts and surroundings, and find the intention of its framers. Kennedy v. Geis, 25 Mich. 83 ; Gronise v. Gronise, 54 Pa. St. 255; Story on Const. § 400; 10 Minn. 108 ; 22 Wend. 396; 7 Tex. App. 210; 5 Md. 337, 350 ; 37 Ohio St. 590, 643 ; 1 Ohio, 469, 479, 480; 10 Ohio, 513, 515 ; 15 Ohio, 338, 341 ; 1 Ohio St. 511, 543; 3 Ohio St. 80, 85. (a.) The statutory history prior to the present constitution. 2 Chase 865, § 5; Id. 904, § 2; Id. 1070, 1072; Swan’s Stats. 139, 140, 141, 145; 1 S. & C. 117, 152, 154, and see Exchange Ban% v. Iline, 3 Ohio St. 31. (5.) The proceedings of the constitutional convention (for references thereto see citations in argument of Mr. Ranney).
    2. The signification which we attribute to the word “ associations,” as used in section 7, appears from the following facts and considerations: (1.) When the constitution was adopted, the word associations was in common use in many statutes relating to banking, in its unrestricted meaning. (2.) It has such meaning in every other provision of the constitution in which it is used. (3.) It was severed from its relation to the word corporations in the constitution of Illinois, from which the provision under examination was taken; the framers of our constitution rejecting the very word, viz.: corporations, that would have conveyed the exact meaning intended, if only a corporate association was meant. The words in the Illinois constitution were “ corporations or associations with banking powers.” (4.) The meaning we attribute to it, is its ordinary meaning. (5.) Any other meaning would leave it in the power of the legislature to. restore to individuals and associations of individuals authority to issue and lend their bills to circulate as money. At common law, banking was open to individuals to be exercised by them at their pleasure. Attorney-General v. Utica Insurance Go., 2 Johns. Ch. 377; approved in State v. Qrcmmlle Alexandrian Society, 11 Ohio, 1.
    3. What results, then, from what we maintain to be the genuine'meaning of the word “ associations ?” Obviously, that the term “banking powers,” as used in the constitution, signi-' fies the making, issuing, lending and circulating their notes and bills as currency, and the doing of other business merely incidental thereto. Otherwise, the purpose must be imputed to the framers of the constitution and to the people who adopted it, of prohibiting all unincorporated associations and individuals from exercising their right to lend money, or buy or sell promissory notes or bills of exchange, or receive money on deposit, unless authorized by an act of the legislature; and an act, too, which, in order to take effect, shall have been submitted to a vote of the people and been approved by a majority of the electors of the state. An imputation of a purpose to thus fetter, if not destroy, the exercise of such important rights upon which the commercial prosperity of the State depends, —and which, during the .entire history of the State, has been substantially without governmental interference, — is, it is submitted, utterly inadmissible. We repeat, clearly, no such cheek upon the commercial interests of the state was intended.
    II. The plaintiffs in error are estopped from denying the power of the defendant in error. 27 Ohio St. 343 ; 11 Ohio, St. 516 ; 17 Ohio, 407 ; 29 Ohio, St. 330, 340 ; 11 Cush. 285 ; 38 Mich. 779 ; 6 Cow. 23 ; 4 Allen, 406 ; Bigelow on Estoppel 424; Morawetz on Corp. §§ 142, 143,' 144, 145; 98 U 621 ; Angelí and Ames on Corp. § 94; Tone v. Oolumbus, 39 Ohio St. 281.

      Robinson <& White, also for defendant in error on questions not argued by co-counsel:
    1. As to what constitutes a depositor, see Gatline v. Savings Bank, 7 Conn. 495; 25 Ohio St. 203; Endlich’s Law of Building Associations, § 76; 24 Conn. 147.
    2. The association, having a lien on the premises of Bates, stood in a legal position to pay the taxes thereon, and when so paid, such amount of taxes would operate a lien on the premises in preference to all others. Revised Statutes, § 2853; Godfrey v. Watson, 3 Atk. ; Mix v. Hotchkiss, 14 Conn. 32; Williams v. Hilton, 35 Me. 547; Page v. Foster, 7 N. H. 302.

      On the sale of the land for delinquent taxes the lien of the state for taxes then due was transferred to the purchaser at such sale, and if the sale was invalid on account of any irregularity in the proceedings of any officer having any duty to perform in regard thereto, the purchaser was still entitled to receive from the owner the amount of taxes, penalty and interest legally due thereon, and all taxes paid by the purchaser subsequent to the sale, and the land was bound therefor. Revised Statutes of Ohio, § 2880 ; 29 Ohio St. 498.
    Bates’ premises were certainly subject to taxation. The plaintiffs in error have never sought to ascertain the amount legally assessable and taxable thereon, and have never offered to refund that amount to the defendants in error. These taxes and assessments stood charged upon Bates’ land, ac cording to the tax duplicate, which was regular and correct on its face. This duplicate in the hands of the treasurer was his warrant for demanding and collecting these taxes and assessments. Iloglen v. Cohan, 30 Ohio St. 443; 7 Ohio St. 42. Without any offer, tender, or attempt to pay the legal impositions upon these premises, the plaintiffs in error cannot now complain that the lienholder paid them. Southard v. Dorrington, 19 Nebraska 119; Williams v. Hilton, 35 Me. 547 ; 62 Illinois 381 ; Jones on Mortgages, § 1134, and cases cited.
    Bradley Bates, holding a judgment lien attaching after the taxes became delinquent and the premises sold, stands in no better position to question the validity of the defendant’s tax claims than the owner himself. Qillett v. Webster, 15 Ohio, 623.
    Standing by for years, seeing his taxes paid by the lien-holder without warning him of any fault in the taxes and assessments, and making no effort to ascertain the amount ilegally chargeable on the premises which he occupies and enjoys, it is too late now for him to compel the association to take the risk of illegality. The defense against these tax claims is barred by the plainest principles of equitable es-toppel.

      W. G. Rogers in reply :
    1. The term “ bank ” and banking has not received a uniform construction by our courts. 3 Ohio St. 31, 37; Id. 71; 15 Ohio St. 87.
    2. The debates in the constitutional convention are very unsafe guides for an interpretation of the constitution. 3 Ohio St. 46.
    3. As to the intention of the framers of the constitution. If the intention was to prohibit but one feature of the many in banking, — viz., the issuing of its own notes for circulation, unless authorized by vote of the people, — how readily it must have occurred to the able jurists framing this section, that the language they were using was quite too broad and comprehensive. How naturally would the suggestion have arisen, simply prohibit associations with power to issue their own notes for circulation, until the people confer the authority by direct vote. 'We submit that such random, loose, wild and inappropriate use of words cannot be attributed to such solemn fundamental organic law. See Green v. Graves, 1 Doug. (Mich.) 356.
    4. An examination of all the statutes, general and local, prior to the adoption of the constitution, shows that about twenty-four acts were passed in that time concerning savings banks alone, and about one hundred and sixteen in the same time concerning banks of issue, of deposit and of discount. That is to say, about one sixth of the banking acts passed in that time were devoted exclusively to deposit banks. Such examination also shows that in every charter of any bank since about 1825 the three different banking powers were specifically conferred on each issue bank.
    As a result of the various legislation we had in existence in Ohio when the constitution was adopted six different kinds of banks, — viz., the State Bank and its branches ; the independent banks; the free banks; banks of deposit, such as the Ohio Life Insurance and Trust Company, the largest of its kind Ohio ever had; savings banks with stock, such as the Fairfield Co. Savings Institute (incorporated 46 vol. 248); and savings banks without stock, such as the Society for Saving at Cleveland. A close scrutiny of the statute book does not aid their interpretation of the constitutional clause.
    5. At th'e time of the adoption of the constitution, and immediately prior thereto, there was in Ohio a very strong feeling, of jealousy of all corporations. And this jealousy was especially strong against corporations dealing in money, that is, banks. Some say it was this jealous feeling that led to the constitutional convention being called. The desire to pnt some cui’b on such corporations was undoubtedly a strong factor. At this day it is hard for us to recall to our minds the intense feeling then existing on that subject.
    . Counsel claim the evil of a depreciated currency was the only evil sought to be cured by this clause. The history of that time contradicts the assertion; and the plain and obvious meaning of the language carries us further. If it was found that our construction did not remedy that evil, there might be more force in the argument. But it is not so. The language is clearly broader and the mischief more extended than to allow óf a halt here. - The entire system of conferring corporate powers was changed. Special charters were prohibited. Banking corporations, even without the power of issuing paper money, are peculiarly liable to abuse. Great jealousy, as before said, was then felt of the immense power wielded by large aggregations of capital, controlled by moneyed corporations, which secure the confidence of communities, and absorb in their vaults all the money, the vital element of business and commercial activity. Such, they deemed, demanded a jealous circumspection, and the power of creating such corporations they decided should be firmly retained by the people.
    Our construction, on the other hand, protects the depositor as well as the bill-holder. The disastrous failure of the Ohio Life Insurance and Trust Company, bringing ruin to so many Ohio homes, happened later, it is true ; but at least one member of the convention, Judge Holt (2 Debates, 393) foretold such failures. The most disastrous bank failures in the United States have been of deposit banks. The effect of the failure of issue banks is so widely diffused — few have more than one bill of it — that tbe injury done is not great. It is the depositors wlio are the sufferers. This state had in every act, before 1851, put a limit to the amount of the bills banks might issue, and had required security’for their redemption. There was no complaint then, on those grounds. But a deposit bank, with a capital perhaps of less than ten thousand dollars, might obtain deposits of half a million or more, and when the cashier and president took their trip to Canada, what adequate remedy had the depositors ? The liability of the stockholders would be but nominal. It is difficult to see any ground for such unjust discrimination, for such inviduous distinction against the chief sufferers from any bank failure, whether it be of an issue or a deposit bank.
    6. The California and Kansas cases are not' wholly in point. The wording, as well as meaning of their constitutions is different from ours. Section 34 of article 4 of the California constitution expressly says that banks of discount are not included in the prohibition of the preceding section, and Judge Brewer, in the Kansas case (p. 461) says: “ Currency banks only, are intended to be covered,” thereby showing his definition of banks agrees with ours.
    Our clause being taken, with verbal improvements, from that of Illinois, Judge Ranney wishes us to follow the decision "of the 93d Illinois. "With all due deference we would suggest, contemporánea expositio est optima etfortissima in lege. And we find in HincTdey v. Bellville, 43 Ill. 1S3, decided in 1867, construing a charter given in 1850, two years after the adoption of that Illinois constitution, as follows: Sylla. — “The term banker includes all business of a money-changer ; and this court understand the term money-changer in the same sense as defined by ‘Webster ’ (Noah): ‘ A broker who deals in money or'exchanges.’ ”
    Reference is also made to the opinion of Taney, C. J. (in 16 IIow. 416), but Judge Taney is careful to add that Grier, J., alone, agrees with his opinions, and Catón, Daniel, Campbell, Wayne, Curtiss and McLean, JJ., all dissent from bis grounds and reasonings. Taney, O. J., was probably misled by tbe rash and ill-considered dictum of Mr. Webster, cited by our learned opponents. And McLean, the Ohio judge, same case (p. 449), in effect gives the same definition as Noah Webster, saying: “ The privilege of issuing bills of circulation which terminated in 1843, can have no effect upon the question of taxation. That company still exercised, under its charter, its banking powers as a bank of deposit, and did a much larger business than any bank of the state. After 1843 its dividends were taxed as other banks. It was in fact a bank, and discounted, and was the principal bank in the state.” As authorities not before cited, giving definitions of the word u bank,” see Baker v. State, 54 Wis. 377; First National Bank v. Ocean National Bank, 60 N. T. 288.
   McIlvaine, C. J.

The statute under which the plaintiff was organized authorized it to loan money among members and depositors of such corporation, thereby, by plain implication, authorizing it to receive deposits of money. The receiving of deposits is claimed to be a banking power, and inasmuch as this statute was not submitted to the electors of the state for their approval, as required by section 7, article 13 of the constitution, it is claimed that it is without force or effect. A similar question was submitted to this court in Dearborn v. Northwestern Savings Bank (ante, page 617), in connection' with which this case was fully argued and submitted. In that case it has been x-esolved that “ associations with banking powers,” as used in the section of the constitution referred to, relates only to banks of issue. This ruling is conclusive against the claim made in this case as above set forth.

The loan made by plaintiff to S. H. Bates, as evidenced by the note and mortgage sued on, can be maintained as within the power of the plaintiff corporation only on the assumption that the defendant Bates was, at the time the loan was made, a depositor of the plaintiff.

The fact is, that at the time the loan was made, the defendant deposited with the plaintiff the sum of two dollars. Whether this deposit would be considered as colorable merely, and an evasion of the statute, in an action by the state to punish the usurpation of a franchise not granted by the charter of the plaintiff, we need not now inquire. It is enough for us now to say that the defendant, who acquiesced in the form and manner of the deposit, as the means whereby he realized the money loaned, and became in fact the debtor of the plaintiff, who was managing a trust fund for the benefit of its members, should not be heard to deny that he was a depositor.

• Was the loan usurious ? Section 2 of the act of May 5, 1868, as amended May 9, 1868, reads as follows: “ Such corporation shall be authorized and empowered to levy, assess and collect from its members such sums of money, by rates of stated dues, fines, interest on loans advanced, and premiums bid by members or depositors for the right of precedence in taking loans, as the corporation by its by-laws shall adopt; also, to acquire, hold, incumber and convey all such real estate and personal property as may be legitimately pledged to it on such loans, or may otherwise be transferred to it in the due course of its business; provided that the dues, fines and premiums so paid by members or depositors of such corporation, although paid in addition to the legal rate of interest on loans taken by them," shall not be construed to make the loans so taken usurious.”

The rate of “ interest on loans advanced” is six per cent, per annum, as regulated by the statute on interest. The parties, however, to a bond, bill, promissory note or other instrument of writing for the forbearance or payment of money at any future time, may stipulate therein for the payment of interest upon the amount thereof, at any rate not exceeding eight per cent, per annum. If a rate exceeding 'that allowed by law be stipulated for, it is settled, that the parties must be remitted to the rate of six per cent, per annum. McClelland v. Sorter, 39 Ohio St. 12.

The rate of interest stipulated for in the note sued on is in excess of the highest rate allowed by law, unless the “ premium at the rate of two per cent, per annum ” is not, under section 2, above quoted, to be regarded as interest. The provision of the statute is, that such corporation may collect from its members stated dues, fines, interest on loans advanced, and premiums bid by members cmd depositors for the right of precedence in taking loans f &c., provided that the dues, fines and premiums so paid by members or depositors of such corporation, although paid in addition to the legal rate of interest on loans taken by them, shall not be construed to make the loans so taken usurious.” The premium named in the note is unlike the premium named in the statute. It was1 not measured or ascertained by competitive bidding among the members and depositors, as we understand the statute to require. It was, in fact, a part of the price named by the lender to bo paid by the borrower for the use of the money loaned. The assent of the borrower to pay the price required, did not make him a bidder within the meaning of this statute. Calling the excess above the highest legal rate a premium did not change the nature of the transaction. It was usurious.

The court below also gave judgment in favor of the plaintiff for $603.00 (which was declared to be the first lien on the premises), on account of taxes and assessments appearing upon the tax duplicate of the county as having been duly assessed against the mortgaged premises and paid during the existence of plaintiff’s lien, by Withington, its treasurer, with the moneys of the plaintiff and for its benefit, for the purpose of protecting its mortgage security. During the trial, defendant offered testimony tending to show that a portion of the taxes and assessments so paid was illegally assessed against the property, which testimony was rejected by the conrt. The rejection of this testimony is assigned for error.

Section 2853 of Revised Statutes reads as follows : “ Any person having a lien upon real estate may pay the taxes thereon in so far as the .same are a lien upon such real estate, and the amount of taxes so paid shall, from the time of payment, operate as a lien upon such real estate, in preference to all other liens, and the money so paid may also be recovered by action for money paid to his use against the person or persons legally liable for the payment of such taxes.”

The record shows that the taxes and assessments appeared on the duplicate to have been regularly and legally assessed, and that the plaintiff had no knowledge or notice of any defect or illegality in the assessment. The statute only gives a á lienholder the right to pay taxes and thus save his security in so far as the taxes are a lien upon the real estate. Hence the question fairly arises, was the plaintiff bound to inquire as tO' the legality of the taxes, beyond the appearances of the duplicate, and as to defects of which he had no knowledge or notice. This question is not free from doubt. But, inasmuch as the owner of the real estate, under like circumstances, would be justified in paying the taxes, and might afterwards, under the statute, upon discovering an illegality in the assessment, recover them back from the county without being held to the consequences of having made voluntary payment, so we think the lienor should be justified in making the payment to protect his lien, although he has no right to recover them back from the county in case of a subsequent discovery of illegality in the assessment. In the latter case, the payment by the lienor should be considered as payment by the owner, and the right to recover back wonld attach to the owner. Such holding does not nullify the limitation in the statute upon the right of a lienor to save his security by a payment of taxes, but leaves the same with ample scope for operation. If the owner has no knowledge of illegality in the assessment, or if he has such knowledge, and does not communicate it to his mortgagee, wo think the statute should be so construed as to authorize the latter to protect his lien by making payment of the taxes appearing on the duplicate to have been regularly and legally assessed.

Another question, as to pleading, has been raised. The plaintiff has not prayed for judgment on account of taxes paid. "Withington has prayed for judgment therefor in his own name. The record shows that the judgment for taxes paid (without penalties) was properly denied to Withington, and although no amendment was made to plaintiff’s petition, judgment was rendered in favor of plaintiff for the amount so paid. An amendment should have been made to plaintiff’s petition, but as ’Withington has undoubtedly assented to all that was done, and as the defendant has suffered a mere techinal prej u-dioe, we would not reverse the judgment for such error.

For including usurious interest in the judgment for flamtiff, the judgment is reversed and cause remanded.


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    National Mutual Aid Association v. Gonser.

      Mutual protection and relief association insurance — Right of assured to bequeath proceeds of certificate of membership to stranger.

    .1. A certificate of membership issued by an association organized under the provisions of the Revised Statutes, section 3630, “for the purpose of mutual protection and relief of its members, and for the payment of stipulated sums of money to the families or heirs of the deceased members,” which by its terms is made payable to the assured member, “or any person designated by his will, or his heirs, if no person is designated herein, or by will,” within ninety days after proof of death of the assured member, does not authorize such member, by testamentary appointment, to constitute a person a beneficiary of such insurance, who is not of the family of the assured, or may not, upon his death, become his heir.
    2. A bequest by an assured member of such a company, of the proceeds of his certificate of membership to a stranger or a creditor, does not constitute such legatee an “ heir” of the testator, in the statutory sense of that term.
    Error to the District Court of Holmes county.
    The action below was by the defendant in error, Absalom B. Gonser, against the plaintiff in error, an association formed for the “ mutual protection and relief of its members, and for the payment of stipulated sums of money to the families and heirs of the deceased members,” under the authority of the legislation embodied in the Revised Statutes, section 3630, and having its principal office in the city of Columbus, Ohio.
    On the 30th day of July, 1879, this association executed and delivered to one Wilhelm, Kebaugh, a resident of Holmes county, in this State, a certificate of membership, whereby it undertook, upon sufficient consideration and in the following terms, to “ assure the life of William Kebaugh in the amount of such sum as will equal seventy-five per cent, of the amount collected of the assessments made for the payment thereof, but not to exceed $2,000. And the said association does hereby promise and agree to pay the amount of said claim at its office in Columbus, Ohio, in conformity with the rules and regulations of the association, to William Kebaugh, or any person designated by his will, or his heirs, if no person is designated herein, or by will, within ninety days after due notice and proof of death of said party, whose life is hereby assured.”
    This certificate was by its terms assignable by the consent of the association indorsed thereon.
    Kebaugh accepted this certificate and remained a member of the association until his de-ath.
    On the 26th day of December, a. d. 1879, Kebaugh duly made and published his .last will. Qn the 16th day of December, 1880, he died. On the 27th day of December, 1880, his will was duly probated in and by the Probate Comd of Holmes county. By the 3d day of January, 1881, full proofs of the death of the assured were duly made to the association.
    The dispositive parts of the will are as follows:
    “ Item I. I, Wilhern Kebaugh, of Millersburg, Holmes county, Ohio, being of sound mind and memory, do make ,and publish this my last will and testament, hereby revoking all other wills or codicils made by me. And I further state that I have assigned to Absalom B. Gonser, of said county, my certificate of life insurance No. 500, in the National Mutual Aid Association, of Columbus, Ohio, issued the 30th day of July, 1879, for two thousand dollars, upon the valuable consideration that the said Gonser has often befriended me with kindness and kindly offices, without which it would have often been difficult for me to have lived in comfort, and also for money received from him from time to time, during the last ten years, aggregating the sum of over eight hundred dollars, all of which was fully released and canceled by him at the time of the .assignment of said certificate.
    “And now, for the purpose of fully complying with the rules and regulations of said association, with which I have been made acquainted by the agent thereof, and of the requirements of said certificate, and for the purpose of placing it beyond doubt that my said friend shall have the full benefit of said certificate and the proceeds thereof, when payable according to its terms. I make this my last will and testament, in reference only thereto, not intending, however, to make a disposition of any other property or means belonging to me, and if I should at any time hereafter dispose of my other property and means by will, it is my iutention the same shall not, by general descriptive words or otherwise, have any effect upon the bequest herein made.
    “ Item II. I do hereby bequeath to Absalom B. Gonser, of Millersburg, Ohio, who has long been my friend, all my right, title, and interest in and to certificate ‘No. 500,’ in the National Mutual Aid Association of Columbus, Ohio, certificate on the life of Wilhelm Kebaugh, of Millersburg, Ohio, in favor of himself, issued the 30th day of July, 1879, and all proceeds which may hereafter become due by the terms of said certificate, the application on which it is based and by the rules and regulations of said association. Said certificate is issued for the sum not exceeding two thousand dollars; the said Absalom B. Gonser is to have the full benefit of said insurance, and I hereby designate him, to whom all the proceeds thereof are to be paid thereunder at my decease, and under the rules of said association, and said association relinquishing all and every claim thereto by the execution hereof and the assignment hereinbefore referred to.”
    Kebaugh died solvent, requiring no part of the proceeds of his certificate to pay his debts or costs of administering his estate.
    At the time- of his death the association had outstanding and in force more than six thousand certificates of membership, liable to be assessed by it in the sum of $6,000, for the payment of his certificate. No part of any claim under this certificate has been paid.
    The petition of Gonser in the court below states the foregoing facts, has annexed thereto a copy of the will of Kebaugh as a part of it, and concludes with a prayer that the amount due-him on the certificate may be found, the liability of the defendant determined, and that he may have judgment against the defendant for the sum of $2,000, with interest, or for such sum as may be found due him on the certificate, with interest. The facts recited in the will are not substantively averred in the body of the petition.
    The defendant below demurred to this petition for alleged insufficiency of the facts stated therein.
    This demurrer was overruled, and judgment rendered as prayed for in the petition. This judgment was affirmed by the District Court on error; to reverse which judgments the present proceeding is prosecuted.
    The overruling of this demurrer and rendering judgment upon the petition are assigned as ground of reversal.

      M. A. Daugherty, for plaintiff in error.

      D. 8. Uhl and Critchfield tif Huston, for defendant in error.
   Owen, J.

Did the trial court err in overruling the demurrer to the petition and rendering judgment thereon against the defendant below ?

That the plaintiff in. error had no power to issue certificates of membership, payable upon the death of an insured member, to a person not an heir or of the family of a deceased 'member, and that such a certificate is void, is too well established to admit of controversy. The State v. The Central Ohio Mutual Relief Association, 29 Ohio St. 399; The State v. Moore, 38 Ohio St. 7; The State v. The Standard Life Association, 38 Ohio St. 281; The State v. People’s Mut. Ben. Association, 42 Ohio St. 579.

By the terms of the certificate before us the death claim was made payable to the assured, Wilhelm Xebaugh, “ or any person designated by his will, or his heirs, if no person is designated herein, or by will.”

If the assured may designate the beneficiary of the insurance by testamentary appointment (a question the determination of which is not necessary in the case before us), it is very clear that such beneficiary must be either a member of his family, or one who, upon his death, may be his heir. There is no averment in the petition that Gonser was a member of the family of the assured, or that he is his heir. It is maintained by him, however, that the recitals of the will disclose such relations between him and the assured as entitle him to be regarded by the court as a member of the family of the assured.

This calls upon us to accept the mere recitals of the will as a substitute for substantive averments of fact in the petition, and would do violence to the rule of pleading which requires the facts relied upon by a party to be stated in his pleading, either by direct averment or by pertinent reference. Neither is done iu the case before us.

It is further maintained that the assured constituted Gonser his heir by testamentary appointment.

If this view is tenable, it is in the power of each insured member, by will, to constitute him a beneficiary of, the insurance who is not permitted by the company’s charter to share in its benefits. The terms of the will indicate that its purpose was to give effect to a prior assignment of the policy to which the company had not given its assent. This court has already held, in The State v. People's Mutual Benefit Association, supra, that such an association has no power to issue certificates payable to a named beneficiary, “ or assigns,” as this would authorize the creation of a class of beneficiaries neither contemplated nor authorized by the company’s charter.

If an insured member may, by testamentary appointment, constitute one a beneficiary who is neither a member of his family, nor may, upon his death, become his heir, he may thereby accomplish all the practical effects of an assignment of his policy, and thus defeat one of the declared objects of the statute.

But if we were at liberty to regard the recitals of this will as equivalent to substantive averments of fact in the petition, we could ascribe to Gonser no other relation than that of a creditor of the testator; and, as we have already seen, creditors are not of the class who may be created beneficiaries of such insurance. '

It is further maintained by Gonser that as this company was organized, among other objects, for the “ mutual protection and relief of its members,” the assured member had the right, in his life-time, and for his own “protection and relief,” to make such use or disposition of the policy, either by hypothecation, by assignment, or by will, as would best yield such result. This argument involves the presupposition that Wilhelm Kebaugh, the assured member, is the party for whose benefit this policy was issued. It is in no sense an endowment policy. True, it is in terms made payable “ to Wilhelm Kebaugb, or any person designated,” etc., but it is expressly made payable “within ninety days after due notice and pYoof of” his death. It is clear that this policy contemplated that its benefits were destined to accrue to the person designated by the will of the assured, orto his heirs,if no such designation were made. It follows that, to entitle himself to recover upon this policy, Gonser must bring himself within the operation of the second declared purpose of the statute, to wit: “ for the payment of stipulated sums of money to the families or heirs of the deceased members of such company.” Gonser’s petition fails to bring him within either designation.

It is further maintained, in support of the petition, that the company, by the terms of its policy, authorized Kebaugh to make this will, and that it is thereby estopped to deny its liability.

Assuming that it was within the power of the company to issue a certificate in this form, and that the assured member was vested with the power, by testamentary appointment, to designate the beneficiary, this power ought, by every consideration of public policy and of sound construction, to heve been so exercised as to effectuate and not defeat the objects of the company’s charter. If the language of the certificate be capable of two constructions, one of which is consistent with the statute and the other at war with it, it is our plain duty so to construe it as to give it effect according to the true intent and purpose of the law. If, then, Kebaugh was by the policy vested with power to appoint, by will, the beneficiary under it, the law plainly directed him to select such beneficiary from his family or heirs, and Gonser, being but a stranger, or, at best, a creditor, is in no position to profit by Kebaugh’s perversion or abuse of the power of appointment with which the policy invested him.

This is no case for the application of the principle of estoppel. This court has held that a contract by such a company “ to pay, in case of a member’s death, ‘ to himself or assigns,’ ‘ to his estate,’ ‘ to his executors or administrators,’ or to any person, whether a relation or not, who is not of his family or heirs, is against public policy, and void.” The State v. The Standard Life Association, 38 Ohio St. 282.

The moment that the certificate before us is brought, by construction, within the view contended for by ■ Gonser, that moment it falls as a vain and void thing, and considerations of graver moment than those of mere private right or contract, call upon us to leave the parties to it where we find them.

We are not called upon, in the present case, to determine or discuss whether any or what claim the heirs of Kebaugh may have under this policy. It is sufficieut for the disposition of the case that we find and declare that Gonser has failed, by the averments of his petition, to show himself entitled to recover upon it.

The court of’ common pleas erred in overruling the demurrer to the petition and entering judgment thereon, and the district court erred in affirming such judgment.

Judgment reversed.

Okey, J., took no part in the decision of this case.