author: Dickman, J.'

text:
    McFadden et al. v. Leeka et al.

      Contribution among partners for indebtedness created by one partner without consent of the other partners.

    1. An unincorporated association was formed under a specific name, for the purpose of erecting a building and carrying on the business of slaughtering hogs. The capital stock was fixed at $10,000 (afterwards increased), consisting of one thousand shares, of ten dollars each. All the original, but none of the increased stock, was subscribed or guaranteed, and the company was then organized with the adoption of a constitution and by-laws. The officers of the company consisted of five directors, a president, secretary and treasurer. The constitution made it the duty of the directors to have charge of the business of the company, to carry out the objects for which it was organized, and to see that the interests of the stockholders and company were protected; but, by one of the by-laws, the directors were forbidden to adopt plans of buildings, or make contracts, or create indebtedness, beyond the available capital of the company. By the constitution, each stockholder was to have one vote for each share of stock, and the shares were made transferable on the books of the company. The by-laws provided for the holding of regular meetings, and the calling of extra meetings of the stockholders.

      Held: That the association was a copartnership.
    2. Where the directors, in violation of the above mentioned article of the by-laws, incurred an indebtedness beyond the available capital of the company, they were not entitled to indemnity or contribution from other stockholders who did not assent, expressly or by necessary implication, to the creation or payment of any of such indebtedness.
    3: Stockholders, who were notified to attend meetings called by the directors to consider the matter of paying off such unauthorized indebtedness, cannot be held to have assented to the creation or payment of any of the indebtedness, because they failed to attend such meetings.
    (Decided October 20, 1891.)
    Error to the Circuit Court of Highland county.
    On the 5th day of September, 1874, there was a meeting of delegates from various subordinate granges of the Order of Patrons of Industry, held at the village of New Vienna, Clinton county, Ohio, for the purpose of making an effort to organize a company to build a slaughter and pork-packing house. At that meeting the following article of agreement was adopted:
    “We, the undersigned, do hereby agree to form ourselves into an association to be known as The Union Slaughter and Pork-packing Company of New Vienna, Clinton county, Ohio, and to pay the sum annexed to our names respectively, for the purpose of building a brick slaughter and pork-packing house in or near said village, provided the whole amount of capital stock, viz.: ten thousand dollars, which shall consist of one thousand shares of ten dollars each, shall be subscribed.' All subscriptions to be by shares and transferable on the books of the company. Each stockholder shall have one vote for each share of stock by him or her held, provided all levies or dues thereon have been paid.
    “ When the whole amount of capital stock shall have been subscribed, the stockholders shall meet and elect five directors, who shall be members of the Order of Patrons of Husbandry in good standing. °
    “ Said directors shall hold their office for one year, or until their successors are elected, and shall organize by electing a president, secretary and treasurer.
    “ And said pork-house, when built, shall be controlled and managed exclusively by the Patrons of Husbandry.
    “ Provided further, the money herein subscribed shall be paid in upon the call of the directors, after the 1st of March, 1875, in such sums as in their judgment may seem necessary.”
    The whole amount of the capital stock, to wit: 110,000, was thereafter subscribed or guaranteed, and on the 4th day of March, 1875, at a meeting of the stockholders of the company held at New Vienna, a constitution and by-laws for the government of the company were adopted by the stockholders ; and five directors were elected in pursuance of the provisions of the original article of agreement and the constitution, to manage the business of the company.
    A copy of the constitution and by-laws, as amended in respect to the name and capital stock of the company, is as follows:
    “ CONSTITUTION.
    PREAMBLE.
    Whereas it has become necessary for the farming community to unite in one common effort to protect themselves from the powerful combinations of men and money, and the urgent and unnatural channels of commerce, to which we, as producers, are now subject, do adopt the following constitution and by-laws:
    ARTICLE i.
    This association shall be known as The Union Pork-house Company of New Vienna, Clinton County, Ohio.

      ARTICLE II.
    The object of this company shall be to erect a slaughter and pork-packing house, and to carry on the business of slaughtering hogs, under such rules and regulations as are provided in this constitution.
    ARTICLE III.
    . Section 1. The capital stock of this company shall be fifteen thousand dollars, to consist of fifteen hundred shares of ten dollars each, which shall be transferable on the books of the company.
    Section 2. Each stockholder shall have one vote for each share of stock by him or her held, provided all assessments thereon have been paid.
    ARTICLE IV.
    All stockholders and officers of this company shall be members of the Order of Patrons of Husbandry.
    ARTICLE V.
    . Section 1. The officers of this company shall consist of five directors, who shall hold their office for one year or until their successors are elected and qualified.
    Section 2. Said directors shall organize from their own number by electing a president, secretary and treasurer. In the absence of either of the officers, the board may choose one of their own number to fill the vacancy.
    ARTICLE VI.
    It shall be the duty of the directors to have charge of the business of this company, and to carry out the objects for which it was organized, as provided in this constitution and by-laws, and to see that the interests of the stockholders and company are protected.
    ARTICLE VII.
    It shall be the duty of the president to preside at all the meetings of the company and directors, to see that the provisions of this constitution and by-laws are duly observed and enforced, inspect and announce the result of all ballotings, and perform such other duties as usually pertain to said office.

      . ARTICLE VIH.
    It shall be the duty of the secretary to keep a correct record of all the business transacted at all meetings of the company and directors, issue all notices required, keep a record of the number and amount of all orders issued on the treasurer, and perform such other duties pertaining to his office as may be required.
    ARTICLE IX.
    It shall be the duty of the treasurer to receive and take care of all money belonging to the company, to pay out the same on the written order of the directors, which order shall be signed by the president and secretary, to keep an account of all money received and expended, and to make a report at each regular meeting and oftener if required.
    ARTICLE X.
    All the vacancies in the office of director shall be filled by special election, twenty days notice being given.
    ARTICLE XI.
    This constitution may be altered or amended at any regular meeting by a two-thirds vote of all stock represented at said meeting. .
    BY-LAWS.
    ARTICLE I.
    This company shall hold regular meetings semi-annually, on the first Thursday of March and September.
    ARTICLE II.
    Section 1. The election of directors shall be held annually, on the first Thursday of March.
    Section 2. All elections shall be by ballot, and the majority of all votes polled shall be necessary to a choice.
    Section 8. The stockholders of this company shall have the privilege of voting by proxy, provided said authority be conferred in writing.
    ARTICLE III.
    The board of directors shall have power:
    1st. To call extra meetings of the stockholders, when necessary.
    2d. To build, or cause to be built, in or near the town of New Vienna, Clinton county, Ohio, one slaughter and one packing house, said packing house to be built of brick and stone, and covered with a fire-proof roof, and made as near fire-proof in other respects as practicable, and to be completed and furnished' with necessary fixtures on or before , the first day of November, 1875.
    3d. To purchase the necessary material for said buildings, and to employ competent workmen to build the same.
    4th. To select one of their own number, or employ a suitable stockholder of this company, to superintend the work on said buildings.
    5th. To employ a competent person to superintend the slaughter house when in operation.
    6th. To employ a guard for said buildings and contents, when in their judgment it shall be necessary.
    7th. To select a bank of deposit for the funds of the com-pany.
    8th. To have control of the packing house when completed, with'power to rent or lease the same to any responsible member or members of the Order of Patrons of Husbandry, or other parties.
    ARTICLE XV.

    It shall be the duty of the directors to patronize the members of the Order of Patrons of Husbandry, when purchasing material for, or employing labor on, said buildings, provided said material and labor can be procured from said persons on as reasonable terms as from other parties.
    ARTICLE v.
    The capital stock shall be paid into the hands of the treasurer on the call of the directors, but in no case shall a call be made for more than twenty per cent, at one time, nor oftener than once in thirty days, and twenty days’ notice shall be given.
    ARTICLE VI.
    The treasurer shall give bond and security for the sum of ten thousand dollars.
    •article vn.
    The officers of this company shall be paid two dollars per day for time actually spent in its services, and all necessary traveling expenses when on business of the company.
    ARTICLE VIII.
    The directors of this company shall not adopt plans of buildings or make contracts or create indebtedness beyond the available capital of this company.
    ARTICLE IX.
    These by-laws may be altered or amended at any regular meeting by a two-thirds vote of all the stock represented at said meeting.”
    In May, 1875, the directors bought of one Trueman Peale, for a consideration of $600, certain lands, and received a deed therefor, for the purpose of erecting thereon the proposed slaughter and pork-packing house.
    On the 6th day of December, 1875, the directors — having before that time been thereto authorized by a resolution passed by the stockholders — conveyed, by their deed of that date duly made and delivered, the said lands to Christopher Lewis in trust for the company, and thereafter caused the slaughter and pork-packing house to be thereon erected.
    In erecting the building, the directors exhausted all the moneys that had been collected from subscribers to the capital stock, and borrowed large sums upon their own responsibility, beyond the available capital of the company.
    They obtained a mortgage on the slaughter and pork-packing house premises from Lewis, the trustee, to indemnify them against loss on account of the indebtedness which they had thus incurred, foreclosed the mortgage, and bought in the property at foreclosure sale.
    After the directors, to wit: the defendants in error, Jonathan Leeka, Thomas Jeffs, Joshua W. Johnson, Josiah Polk and Charles B. Edwards, had bought in the property and applied the purchase-money upon the indebtedness which they had created, there still remained a large balance, for which they brought suit in the Court of Common Pleas of Highland county, against the plaintiffs in error, H- W. McFadden and others, all stockholders of The Union Pork-House Company. In the court of common pleas judgment was rendered in favor of the plaintiffs in error. The defendants in error thereupon appealed to the district court, and judgment was there rendered -against the plaintiffs in error. The supreme court reversed the judgment of the district court, and the ease was sent to the circuit court for a re-trial. In November, 1888, the case was tried in the circuit court, and judgment was there rendered against the plaintiffs in error, and this proceeding is brought to reverse the judgment of the circuit court.
    The circuit court made the following findings of fact and conclusions of law therefrom, to wit:
    “ 1. That the plaintiffs and defendants named in the petition formed a copartnership in the name and for the purposes therein set forth.
    “ 2. That the capital stock was fixed at the sum of $10,000, and this sum was to be raised by subscriptions ■ of so-called shares of stock. Each share was $10 and each member subscribed the number of shares he was willing to take, and that no work was to be done or money expended until the $10,000 of stock had been raised by subscription or guaranty.
    “ 3. That all of the stock was subscribed or guaranteed before the organization of the company.
    “ 4. That only the sum of $8,500 of this stock was ever collected.
    “ 5. That by the constitution and by-laws of the partnership, which were agreed to and adopted by the members, for the government of the partnership the right and authority to prepare plans for, purchase the necessary material, employ workmen and construct a slaughter and packing house was' conferred upon a board of directors, consisting of stockholders of the partnership or company, and the business of the concern was carried on by them.
    “6. That these directors were also authorized to and. did appoint one of their members superintendent of the work and building. The plaintiff, C. B. Edwards, was such superintendent.
    “ 7. That it was provided in said by-laws that the board of directors shall not adopt plans of building or make contracts or create indebtedness beyond the available capital of the company.
    “ 8. That the constitution and by-laws, so far as they related to the powers and duties of the directors, and the limitation forbidding them to adopt plans of building or make contracts or create indebtedness beyond the available capital of the company, were never changed, amended or altered.
    “ 9. That the subscribers organized on the 4th day of March, 1875, by adopting said constitution and by-laws and electing a board of directors to manage the business of the company.
    “10. That the directors of the company secured a site, adopted plans of building, and caused to be built thereon the pork-packing house mentioned in the petition.
    “11. That the directors, between the time they began work and the first day of December, 1875, incurred liabilities to the amount of twelve thousand four hundred and sevenJiine dollars and forty-two cents ($12,479.42), and they had collected up to that time the sum of $7,255. That the amount of liabilities was $5,224.42' in excess of the amount at the time collected, and was $3,979.42 more than was ever collected.
    “ 12. That the debt or liability created prior to the first day of December, 1875, was beyond the available capital of the company.
    “18. That this additional indebtedness was created by the directors without consultation with other stockholders and was first brought to the attention of the other stockholders, at a called meeting of stockholders held on the first day of December, 1875.
    “ 14. That by the provisions of the by-laws two regular meetings of the stockholders were to be held each year, to wit, on the first Thursdays of March and September, and the directors were empowered to call extra meetings when1 necessary.
    “ 15. That at the called meeting of stockholders on December 1, 1875, a resolution was adopted authorizing the directors to finish the building exclusive of fixtures and to borrow money to pay off the indebtedness. A postal card notice of which meeting, correctly addressed, was mailed to each shareholder.
    “ 16. That at a regular meeting begun on March 2, and adjourned to March 16, 1876, the capital stock of said company was increased to $15,000, but no additional stock was ever obtained, or any sum subscribed beyond the original $10,000.
    “ 17. At said meeting in March, 1876, the total number of shares voting was 270|.
    “18. That the total cost of said pork-house site and building alone was $14,800, and the total expenditure by the directors was $15,875, being for building, insurance and taxes. The indebtedness created by the directors was in excess of the capital stock paid in or subscribed.
    “ 19. That the plaintiffs were all stockholders of the company, and they borrowed the money sued for in this action upon their individual credit, and the board of directors used the same in payment of the indebtedness which had been created in the construction of the building, paying taxes and insurance.
    “ 20. That at a meeting of the stockholders on the 23d day of December, 1876, the trustee, to whom had been made the title to the property, was authorized to execute and deliver to the plaintiffs the mortgage in the petition described to secure them from loss on account of their individual liability on said indebtedness.
    “ 21. That the plaintiffs paid the notes mentioned in said mortgage, and that afterward suit was commenced by them in Court of Common Pleas of Clinton county against C. Lewis, the trustee, as mortgagor, to foreclose said mortgage, and that the bringing of said suit and the service of summons upon him was made known at a meeting of the stockholders.
    “ 22. That none of the stockholders, save said C. Lewis, were made parties to said action in Clinton county, and no summons was issued to any one save said Lewis.

      “ 23. That the Clinton county court found the amount due plaintiffs under said mortgage, and ordered the sale of the real estate to satisfy the same, and after having been appraised and twice offered for sale, and not sold for want of bidders, it was again appraised and bid in by plaintiffs at the sum of $3,333J, being two thirds the appraised value. Said sale was afterwards confirmed and deed made to plaintiffs.
    “ 24. That after applying said sum of $3,333-^-, the proceeds of the sale, there remains unpaid of said indebtedness the sum of $4,867.96, with interest at 6 per cent, from October 15, 1878.
    “ 25. That all of the capital stock which was paid in was expended in the purchase of ground and the erection of said pork-house, and the only assets of said company are the shares of stock remaining unpaid in whole or in part.
    “ 26. That there' was an impression prevailing among the stockholders that only the sum of $10,000 would be used in the business of the concern, but that there was no contract or agreement to that effect.
    “ 27. That the indebtedness to-the plaintiffs was incurred by the board of directors without the knowledge or authority of a large number of the answering defendants.
    “ 28. That after the completion of the pork-house it was accepted at a meeting of the stockholders.
    “ 29. No action was taken by any of the defendants at any meeting of stockholders by which any formal protest was made; but some of the stockholders did express their dissatisfaction on account of the creation of the debt.
    “ 30. As to the notices of regular and called meetings the court finds that printed notices were put in the post-office directed to each stockholder. The contents of these notices are not fully known, except as to the meetings held March 2 and September 26,1876. The first of these notices informed the stockholders that an election of directors would be held, and that each stockholder would be entitled to one vote for each share of stock. The second was of a called meeting, and informed the stockholders that the matter of meeting the indebtedness and completing the house would be considered; also an opportunity would be given stockholders to dispose of stock. ■
    “ 31. The court finds that H. W. McFadden had notice of all tíre' meetings, was never present at any meeting when the indebtedness was made known or talked of; that he learned about the indebtedness at Antioch and never attended any meetings after he heard of it, and he at times expressed his dissatisfaction at the creation of the debt.
    “32. That Pleasant Betterton never voted nor had the right to vote at any meeting. He received notices of the meetings.
    “33. That James West never attended any meetings of stockholders, and never expressly assented to the creation or payment of any of the indebtedness, but had notices of all meetings.
    “ 34. That Alfred Johnson never attended any of the meetings, and never expressly assented to any indebtedness and never heard of the debt until the commencement of this suit. Had notices of meetings.
    “35. That W. Harvey West attended but one meeting and got his certificate of stock. There was no quorum and no business transacted. Never knew of debt until about time suit was begun. Received notice of meetings.
    “ 36. That Samuel West never attended but one meeting. Never expressly assented to any indebtedness. Never present when subject of indebtedness discussed. Had notices of all meetings.
    “37. Samuel Polk attended meeting when indebtedness was made known; at another meeting where vote was taken by stock, he voted against paying indebtedness, and he never expressly assented to it.
    “ 38. That the defendants named in the supplemental petition as insolvent, or as having died, leaving no estate, are persons from whom, or their legal representatives, nothing can be made by legal process.
    “39. That George Moon, as executor of Simeon Moon, joined in the original answer and in the amended and sub-, stituted answer filed in this action.

      “40. That William Pond was not a subscriber to the capital stock of said company or a member thereof.
    “ 41. That Isaac R. Allison was a subscriber to the capital stock of said company to the amount of five (5) shares.
    “42. That Eh Powell is the administrator of Alpheus Powell, Samuel H. Moon is. the executor of Asa Moon, Collins Thompson is the administrator of John J. Achor, and C. N. Carey is the representative and liable for the share of D. M. Carey, deceased, defendants, and that this action should be revived and proceed against them as such representatives respectively, and from its foregoing findings of fact the court, as its conclusions of law, finds and holds:
    Conclusions of Law. .
    “ 1. That the purposes for which said company was formed have wholly failed, and that said copartnership is insolvent, and that there are no available assets except the amounts unpaid upon the subscriptions of solvent stockholders.
    “ 2. That there is due and owing the plaintiffs upon their claim against said company, including interest to this date, the sum of seventy-eight hundred and twenty-one dollars and seventeen cents ($7,821.17).
    “ 3. That plaintiffs are entitled to a judgment against each of said solvent stockholders who has not paid his subscription to said capital stock for the amount remaining unpaid, with interest thereon from April 2, 1879, amounting in all to $1,309.16.
    . “ 4. That after the amounts due upon said unpaid subscriptions have been applied to the payment of said sum of $7,821.17, the remainder, together with the costs of this action, should be paid by all the solvent members of said co-partnership in the proportion of the number of shares held by each to the whole amount of said indebtedness unpaid with costs taxed at $575.07, amounting in all to $7,087.08; that is to say, by the plaintiffs and all of the defendants who are solvent, and the representatives of those who have died leaving estates out of which said amounts may be collected, including Eli Powell, as administrator of Alpheus Powell, Samuel H. Moon, as executor of Asa Moon, Collins Thompson, as administrator of John J. Achor, and C. N. Carey, as representative of D. M. Carey, against each of .whom this action is hereby ordered to stand revived and proceed in their names as such representatives respectively. It is therefore ordered and adjudged that each of the following named defendants pay the sum found due upon unpaid subscription to said capital stock within thirty days from this date, or that, in default thereof, execution issue as upon judgments at law for money only, which defendants and amounts due from each are as follows, to wit.”
    Here follows first, a list of all persons who have never paid their original subscriptions, and second, a list of all the solvent stockholders, including plaintiffs in error, together with' the amount of the judgments rendered against them respectively.

      Alphonso Hart, for plaintiffs in error.

      Steel vf Hough, and Ulrio Sloahe, for defendants in error.
   Dickman, J.'

The unincorporated association known as The Union Pork-house Company, is to be regarded as merely a copartnership, and subject to the rules governing that branch of the law. It did not lose its real nature as a partnership because certain of its members were constituted directors, and its members were called stockholders, and a constitution and by-laws were adopted, and the number of its members was large. It might be deemed expedient to appoint directors to act as the special agents for managing the affairs of the company, instead of leaving each member, as in an ordinary partnership, to act as a general agent for the transaction of business in the ordinary way. The company, too, might be a partnership, although its capital stock be divided into shares, which, by the articles of association, are made transferable on the books of the company. The constitution and by-laws adopted by the shareholders are analogous to articles of copartnership, and are of equal binding force in fixing the relations of the shareholders to each other, and in shaping and governing the business of the company. The company or partnership involved in the present inquiry, was organized with a capital stock of $10,000 (afterwards increased to $15,000), consisting of one thousand shares of ten dollars each, transferable on the books of the company. All the original stock was subscribed or guaranteed before the organization of the companj'-, but no additional stock was ever subscribed beyond the original. $10,000, and of the amount subscribed, only' the sum of $8,500 was ever collected.

The constitution of the company made it the duty of the directors to have charge of the company’s business, to carry out the objects for which the company was organized, and to see that the interests of the stockholders and company were protected. And by article 8th of the by-laws it is provided that “ the directors of the company shall not adopt plans of buildings, or make contracts, or create indebtedness beyond the available capital of the company.” This provision, so obviously designed for the protection of the stockholders against an unauthorized and extravagant expenditure of money by the directors, has never been repealed, amended, changed or modified, and still remains in full force.

The directors purchased land, and caused a slaughter and pork-packing house to be erected thereon. Between the time they began work and the first day of December, 1875, as appears from the findings of fact, they had incurred liabilities to the amount of twelve thousand four hundred and seventy-nine dollars and forty-two cents. They had collected up to that date only the sum of seven thousand two hundred and fifty-five dollars, and had thus created a debt or liability beyond the available capital of the company. And this additional indebtedness had been created, contrary to one of the by-laws, without consultation with other stockholders, and was first brought to the attention of the other stockholders at a called meeting held on the first day of December, 1875.

Subsequently to the last named day, the total cost of the land and building alone reached the sum of fourteen thousand eight hundred dollars; and the total expenditure by the directors, including insurance and taxes, amounted to fifteen thousand eight hundred and seventy-five dollars.

By reason of such expenditure in excess of the capital stock paid in or subscribed, it was found by the circuit court, that after applying the proceeds of sale on the foreclosure of the mortgage made to the directors on the company’s real estate, there was due and owing to them the sum of seven thousand eight hundred and twenty-one dollars and seventeen cents, and that after the amounts due upon the unpaid subscriptions of solvent stockholders have been applied to the payment of that sum, the remainder should be paid by all the solvent members of the copartnership, including the directors, each contributing in the proportion of the number of shares held by each to the whole amount of such indebtedness.

The solvent shareholders should doubtless be held to pay the amount of their unpaid subscriptions. Their obligation to pay the amount of their shares as capital, may be treated as assets like other legal claims belonging to the company. But such unpaid subscriptions were not, as it proved, available capital of the company, upon which the directors might rely in making contracts and incurring liabilities. Available capital, like “ available means,” is a term well understood to be any assets that can be readily converted into money. Brigham v. Tillinghast, 13 N. Y. 215.

When the directors, finding they were able to collect only eight thousand and five hundred dollars of the stock, proceeded to contract an indebtedness largely in excess of the available capital of the company, and in disregard of a plain provision of an unchanged by-law, their action, as between the partners, was binding only uuon those who either assented beforehand" to the creation of the indebtedness or ratified it after it was incurred. In general, the act of one or more partners in contravention of the partnership articles in a substantial point, cannot, as among the members of the firm, bind the non-assenting partners.

One of the most obvious duties and obligations of all partners is, strictly to conform themselves to all the stipulations contained in the partnership articles. In respect to the extent of the partnership as stated in the articles, courts of equity construe the articles strictly, and do not permit the business to be extended by any of the partners without the consent of all of them. Story, Part., §§ 178, 193. In the management of the interior concerns of the partners among themselves, the weight of authority is in favor of the power of a majority of the firm, acting in good faith, to bind the minority in the ordinary transactions of the partnership, and when all have been consulted. 3 Kent’s Com., 45. But unless special provision in the articles of association be made to the contrary, this right of the majority does not extend to the right to set aside, or materially change any of the articles of the partnership. In effecting such a change, or in substantially violating any of the articles, it is essential that all should unite; otherwise, it is not obligatory upon them. Colly. Part., 3d Am. ed., 182. In no case can the majority bind the minority inter sese to anything expressly stipulated against in the contract, or which is not fairly within the scope of the partnership business, and that cannot be considered within its scope which in any respect is subversive of the fundamental agreement. Abbott v. Johnson, 32 N. H. 9; 1 Wood’s Colly. Part., § 155, p. 285 n.

In Davies v. Hawkins, 3 Maule & Sel. 488, a company was formed for brewing ale, and by deed they confided the conduct of the business to two persons, who were to be trustees of the company. General quarterly meetings of the company were to be held. It was resolved by the King’s Bench, that one person only could not be appointed at a general quarterly meeting in place of the two originally appointed under the deed, unless such alteration was made with the consent of all the subscribers. Lord Ellenbokough said, that “ a change had been made in the constitution of this company, which could not be made without the consent of the whole body of the subscribers. It was such a substituted alteration in its constitution as required the consent of all.”

The right of contribution and indemnity between parties grows, in a large measure, ‘out of the agency of the partner seeking reimbursement. Each member, as an agent of the firm, is entitled to be indemnified by the firm, against liabilities bona fide incurred by him while pursuing the authority conferred upon him by the agreement entered into between himself and his copartners; but he has no right to claim contribution from .the other members of the firm, for liabilities incurred in disregard of the authority thus reposed in him. It devolves upon agents and trustees who seek indemnity from their principals and cestuis que trustent, to show that they have not acted contrary to their instructions, for on principle they will not he entitled to any indemnity or reimbursement for losses and expenses incurred while so acting. And this rule has been applied to directors of companies. In The Worcester Corn Exchange Company’s Case, 3 De Gex, Mac. & G. 180, a company was organized for the purpose of building a corn exchange. The deed of settlement of the company limited the amount of each shareholder’s subscription, and authorized the directors to create new shares, and to raise the money hy borrowing, under certain restrictions. The capital of the company being expended, and more money being required, the directors advanced money themselves, and expended it in payment of debts of the company. They also, hut in excess of their powers, borrowed money of a bank which had notice of the company’s deed. It was held that the directors were not entitled to charge the shareholders, either in respect of the advances, or in respect of the bank debt, beyond the amount of the capital which each shareholder had agreed to subscribe. And this decision is. pronounced to be, “ strictly in conformity with the sensible rule that agents are not entitled to any indemnity from their principals in respect of unauthorized expenditures.” 1 Wood’s Colly. Part., 495.

But we are reminded that the constitution and by-laws of The Union Pork-house Company provide, by article 11 of the one and article 9 of the other, that either the constitution or by-laws “ may be altered or amended at any regular meeting by a two-thirds vote of all stockholders represented at said meeting.” And it is urged in argument, that notwithstanding article 8 of the by-laws restraining the action of the directors has never been altered or amended, yet, the shareholders, at certain extra but not regular meetings, by a vote sufficient to alter or amend that section, virtually assented to and ratified the acts of the directors in creating an indebtedness beyond the available capital of the company, by authorizing them to borrow money and directing a mortgage on the company’s property to idemnify them against loss. But the object of a change in the by-laws is not to be attained by an indirect, irregular, and unauthorized method, calculated to mislead the shareholders. The shareholders had the right to rely upon the inviolability of the constitution and by-laws, unless changed in the manner prescribed. Until the by-laws to restrict the directors in the expenditure of money should be changed in the mode provided, to wit: by a two-thirds vote of all the stock represented at a regular meeting, of which due notice had been given, and held on the first Thursda}r of March or September, the directors would be confined within the bounds of the available capital of the company, and in transgressing those bounds, would, we think, be entitled to no contribution or reimbursement from non-assenting shareholders or partners who had paid their subscriptions. If it is proposed to make an alteration in the partnership articles by an agreement which shall be binding on all parties, notice of the proposed change and of the time and place at which it is to be taken into consideration ought to be given to all partners. Const v. Harris, 1 T. & R. 496. For, even if the change is one which it is competent for a majority to make against the assent of the minority, all are entitled to be heard upon the subject; and unless all have an opportunity of opposing the change, those who object to it will not be bound by the others. 2 Lind. Part., 2d Am. ed., 410.

Recurring, however, to the court’s findings of fact in reference to the extra meeting of December 1st, 1875, when a resolution was adopted authorizing the directors to finish the building and borrow money to pay off the indebtedness; and the extra meeting of September 26th, 1876, when the matter of paying off the indebtedness, and completing the building was considered; and the extra meeting of December 28d, 1876, when the trustee was authorized to execute and deliver a mortgage to secure the directors from loss on account of their individual liability on the indebtedness, it does not appear how many shares of stock were represented at any one of those meetings, or whether any resolution was adopted by a two-thirds vote, or whether any notice was ever given to any shareholder, informing him that an alteration or amendment of any of the by-laws would be taken into consideration.

Furthermore, where a member of a firm materially violates the articles of copartnership, and claims contribution and indemnity from his copartners for the losses and expenses to which he has thereby been subjected, it will be incumbent upon him to show assent or ratification of his acts by his copartners before he can recover of them. In the findings of fact it is not disclosed that the plaintiffs in error, or any of them, ever expressly assented to the creation or payment of any of the indebtedness contracted by the directors. Indeed, the court evidently did not regard such assent necessary to bind the other shareholders. For, the court found, that a stockholder who was never present at any meeting when the indebtedness was made known or talked of, who never attended any meeting after he heard of the indebtedness, and who expressed his dissatisfaction at the creation of the debt; that a stockholder who never attended any of the meetings, never heard of the indebtedness until the commencement of the original action, and never expressly assented to it; and that a stockholder who attended a meeting when the indebtedness was made known, but voted against paying it, and never expressly assented to it, should each, nevertheless, be holden to contribute toward the reimbursement of the directors. The fact that the shareholders received notice of the meetings and failed to attend, seems to have been deemed adequate to bind them. But, the directors having disregarded an important article of the bylaws, essential to the safety and protection of the company, and thereby created an indebtedness beyond the company’s available capital, a shareholder who did not see fit upon notice, to attend a meeting called by those directors to consider their own neglect of duty, should not therefore be concluded by the action of those stockholders present who ratified the unauthorized acts of the directors.

In our view the conclusions of law, and the decree of the circuit court are not altogether sustained by the facts as found by the court; and those of the plaintiffs in error who did not, in any other manner than by failure to attend the meetings of the stockholders when notified, assent expressly or by necessary implication, to the creation or payment of any of the indebtedness incurred by the directors, should not be required to contribute toward the payment of such indebtedness, after paying the amount due upon their respective subscriptions. We think, therefore, that a judgment should be rendered for the plaintiffs in error upon the facts found, in conformity with the foregoing opinion of the court.

Judgment accordingly.


source: Caselaw Access Project

author: Bradbury J.

license: Public Domain

text:
    Blackwell v. Insurance Co.

      Policy — Clause in that transfer shall forfeit — Taking in of partner does not forfeit — Assured may recover for loss of his interest, after partnership formed.

    1. A provision in a policy of fire insurance, to the effect that a sale or transfer of the property insured shall forfeit the policy, does not become operative to avoid the policy, unless the entire interest of the assured • in the property insured is sold or transferred.
    2. If the property insured consists of the stock of goods of a merchant doing business alone, the taking in-by him of a partner in the business is not such a sale or transfer by him of his entire interest in the property as will avoid the policy.
    3. Where the policy has not been assigned or transferred, and the property thus insured is destroyed or damaged by fire, after the partnership had been formed and had assumed the management of the business,' the assured may maintain an action on the policy in his own name to recover the damages sustained by him on account of the injury done to his share of the property. .
    (Decided October 20, 1891.)
    Erbob to the Superior Court of Cincinnati.
    The plaintiff in error brought an action in the Superior Court of Cincinnati against the defendant in error, upon a policy of insurance issued by it to him upon a stock of dry goods, notions, etc., owned by him in said city.
    The defendant admitted issuing the policy and the loss of the goods by fire, and set up in bar of a recovery for the loss, that the policy contained a provision that it should become “ null and void ” if the property insured should be sold or transferred by the assured; and averring that, in violation of this condition, after the policy was issued and before the fire, he sold and transferred the goods and business to a firm composed of himself and one Horman, and that at the time of the loss the goods were owned, and the business was conducted, by said firm, by which sale and transfer the policjr became forfeited and void.
    The plaintiff interposed a demurrer to this defense, and upon its being overruled, declined to plead further and suffered judgment to be entered against him. This judgment was affirmed by the Superior Court in general term ; whereupon this proceeding was brought to reverse both judgments.

      Joseph W. O'Hara, for plaintiff in error.
    I. Defendant contends that Blackwell is not the proper party to sue. This is really a question of pleading, and could only arise under the strict common law procedure. Our code requires the real party in interest to sue. The contract was made with Blackwell; he paid the premium, and is the party entitled to the benefit of the policy. It is well settled that any person who has an interest in property may insure the same; and this includes partners. Wood on Fire .Ins., secs. 257j 267, 283, 287, 292 and 306; Converse v. Citi

      zens Ins. Co., 10 Cush. 37; Manhattan Ins. Co. v. Webster, 59 Pa. St. 227.
    II. Counsel-for the company mainly rely upon the condition in the policy against alienation, and claim that the transfer of a partnership interest in the property to Horman avoids the policy. The rule is too .well settled to admit of doubt, that as long as the insured retains any interest in the property, he may recover to the extent of that interest. Wood on Fire Ins., sec. 311; Jackson v. Mass. Mut. Fire Ins. Co., 40 Mass. 418; VanDeusen v. Peoples Ins. Co., 1 Rob. N. Y. 55; West Ins. Co. v. Halfstein, 40 Pa. St. 289; Gordon v. Mass. Fire Ins. Co., 2 Pick. 249; Coml. Ins. Co. v. Spankneble, 52 Ills. 53; Hobbs v. Memphis Ins. Co., 1 Sneed (Tenn.) 444; May on Ins., see. 381; Phillips on Ins., sec. 208.
    The decisions of the courts in these cases always turn upon the construction to be given to the language in the condition. In the case at bar the language is the broadest known to the law ; in fact it is nothing more than a declaration of the undisputed principle than when the insured parts with all his interest in the property he cannot recover, nor can his assignee or transferee. The reasonable and proper rule on this subject is laid down in the case of West v. Citizens' Ins. Co., 27 Ohio St. 1; also Dix v. Mercantile Ins. Co., 22 Ill. 277; The Hartford Ins. Co. v. Ross, 23 Ind. 179; Stetson v. Mass. Mut. Fire Ins. Co., 4 Mass. 330; Cowan v. Iowa State Ins. Co., 40 Iowa 551; Scanlon v. Union Ins. Co., 4 Biss. 511.
    But great reliance is placed by the company’s counsel upon two decisions, which they claim are conclusive of the question and override the two decisions above referred to by us. These are: Malley v. Atlantic Ins. Co., 51 Conn. 322; and Drennan v. London Assurance Co., 20 Fed. Rep. 657. But we submit that not only do these cases not overrule the others, but they are not in conflict with them at all.
    Counsel contend that by the introduction of a stranger, the risk of the company is increased, and this is really the foundation of its claim to a forfeiture. On the contrary, the risk is diminished in the ease at bar. As only Blackwell’s interest can be recovered, and as he is still in the firm and in control of the property, what possible danger or increase of risk is there beyond that which the company was willing to incur when it took the policy? As a partner, Blackwell is in possession and is seized per my et per tout of every part and parcel of the property of the firm, and has his interest in and right of control over every piece of goods and merchandise in the store; and should anjr portion be lost or destroyed he would suffer loss to the extent of his interest therein. It is more against his interest, so far as any claim against the company is concerned, to have the property burned than it was at first, for the reason that he cannot recover as much.
    But upon an analysis of the case it will be seen that no stranger is introduced into any contract relation with the company, nor into any proprietary interest in the property insured that can in any way affect the insurer. It is admitted that Horman has no rights whatever against the company, in any event. The question then is narrowed down to the issue whether if the party insured places another in chai’ge of the property insured he defeats his rights to a recovery.

      Ramsey, Maxwell Ramsey, for defendant in error.
    Brief of Lawrence Maxwell, Jr.

    The objections to plaintiff’s action are two.
    1. Fie was not the owner of the property at the time of the loss. But it is said that he' retained some interest in the property and is entitled to recover to the extent of that in- . terest. What interest ? The property belonging to the firm. For the conversion of the property, the firm could alone have sued. The damage from loss of the property by fire is to the firm. Blackwell has no ascertainable interest in this particular property of the firm. Whether he has any interest in any of the firm property depends upon the state of accounts between himself and his partner after the firm debts are paid. If this action is allowed to proceed to the jury, it necessarily involves a settlement of the partnership accounts, if it be true that the plaintiff, notwithstanding the transfer of the property to the firm, nevertheless retained a separate, ascertain-. able and insurable interest therein.
    Whether the firm can sue and recover upon this policy, is not now the question; that depends upon whether Blackwell transferred the policy to the firm with the assent of the defendant.
    2. But the policy expressly provided that if during its existence the owner should sell or transfer the property insured, the policy should become null and void.
    It is insisted that the sale and transfer of the property by Blackwell to the firm, was not a sale and transfer within the meaning of the terms as used in the policy, and the cases of Scanlon v. Union Fire Ins. Co., 4 Biss. 511, and Cowan v. Iowa State Ins. Co., 40 Iowa 551, are cited.
    Of the latter case, the Supreme Court of Connecticut in the later case of Malley v. Atlantic Ins. Co., 51 Conn. 222, at page 251, says: “ It is true that the case of Cowan v. Iowa State Ins. Co., 40 Iowa 511, determines that the sale of the property by the insured to a firm of which he is a member is not such a change of. title as works forfeiture. We believe this decision is contrary to the weight of reason and precedent.” The Supreme Court of Connecticut held that such a sale and transfer made the policy void. The dissenting opinion is not upon this point; but upon the ground that the evidence showed that the partnership pleaded in that case had not been consummated at the time of the fire. The judges all concurred in holding that the transfer to a firm composed of the assured and another person, would avoid the policy.
    The other case cited by counsel for the plaintiff, being a brief report of the charge of Judge Drummond to the jury without showing any argument or consideration of the question upon either principle or authority, is overruled in the later case of Drennan v. London Assurance Corporation, 20 Fed. Rep. 657, a case argued by distinguished counsel and decided by Mr. Justice Miller of the Supreme Court of the United States. With him sat either the district or circuit judge; the report does not state which.
    ■ West v. Citizens Insurance Co., 27 Ohio St. 1, recognizes the distinction pointed out so forcibly by Mr. Justice Miller in the foregoing case. West v. Citizens Insurance Company was the case of a retiring partner; but Johnson, J., in delivering the opinion of the court was careful to point out the distinction between such a case and a case where a new partner is taken in. At page 11, he says: “ A mere change of interest or ownership among partners, where no stranger is introduced, and no addition made to the number of insured, a mere assignment of his interest, by one partner to the other, is obviously not within the principle or motives on which the condition is founded.” Later, on the page, he says : “ The chief reason for requiring such a stipulation is to guard against the introduction of a stranger, who may not possess the fidelity or watchfulness required by the insurers.” Later, on page 12, he says: “ The retiring partner no longer had a motive to endanger the insurer; no stranger was introduced; no one but those with whom the contract was made was left in control.”

      Biggs v. Insurance Co., 88 N. C. 141, is also direct authority in support of the proposition that the introduction of a partner avoids the policy.
    The stipulation of the policy at bar is unmeaning if it be held, as claimed by opposite counsel, to prohibit nothing but an absolute sale of the entire interest of the assured. No stipulation would be necessary to cover such a case. The right of the assured would cease as matter of law.
   Bradbury J.

The record in this case raises two questions, both of which must be determined in favor of the plaintiff in error, to entitle him to relief.

1. Did the act of the assured, who before was a sole trader, in receiving a partner, constitute a sale and transfer of the insured property, within the meaning of the policy, and the policy thereby rendered void ?

2. If it was not such a sale as to render the policy void, may the plaintiff maintain an action on the policy in his own name to recover for the loss ?

There is some conflict among the authorities upon the first question. It is discussed by May in his work on Insurance, and by the courts of a number of the states; notably in Dix et al. v. The Mercantile Insurance Co., 22 Ill. 272; Finley et al. v. The Lycoming County Mutual Ins. Co., 30 Penn. St. 311; The Hartford Fire Ins. Co. v. Ross et al., 23 Ind. 179; The Western Mass. Ins. Co. v. Riker et al., 10 Mich. 279; Drennan et al. v. London Assurance Corp., 20 Fed. Rep. 657; Malley v. Atlantic Ins. Co., 51 Conn. 222; Scanlon v. The Union Fire Ins. Co., 4 Biss. 511; Cowan v. The Iowa State Ins. Co., 40 Iowa 551; Hathaway v. State Ins. Co., 64 Iowa 229; Keeler v. Niagara Fire Ins. Co., 16 Wis. 523; Wood v. Rutland Ins. co., 31 Vt. 552.

An examination of the cases above cited will disclose that the conditions in the policies, where forfeiture for alienation was sustained, were materially different from the one involved in this action, except perhaps in the cases in 30 Penn. St. 311, and that in 16 Wis. 523, where the language of the condition was very similar to that now under consideration. In the other cases sustaining the forfeiture, the condition contained a provision forfeiting the policy, not merely for a “ sale or transfer ” of the property, but in case of “ a change of title ” or the sale of “ any undivided interest therein ” (23 Ind. 179); in case of a “change of title” (10 Mich. 279); “ or any change took place in the title or possession ” (51 Conn. 222; 20 Fed. Rep. 657) ; and therefore they cannot be rightfully claimed as direct authorities for the insurance company in the case at bar. In the case in 40 Iowa, 551, the condition against alienation was very similar to those above quoted, but the Supreme Court of Iowa held “that nothing less than a sale of the entire interest of the party insured would defeat the policy.” This doctrine was maintained by Drummond, J., in 4 Biss. 411.

Heretofore this precise question has not been before this court, and in the conflict of authorities respecting it, we feel at liberty to adopt that rule upon the subject which most nearly accords with the policy of our decisions and the presumed intention of the parties. It is the policy of this court to strictly construe those clauses in an insurance policy which forfeit the indemnity provided for the assured. West et al. v. The Citizens' Insurance Company, 27 Ohio St. 1. In this case, on page 10, Johnson, J., refers with approval and in the following language to the views on the subject contained on page 74 of May on Insurance: “Exceptions in a policy should be strictly construed, and where there are two interpretations equally fair, that which gives the greater indemnity should prevail.” And on page 13 (27 Ohio St.) the same learned jurist says: “Stipulations in a contract providing for disabilities or forfeitures, are to receive, when the intent is doubtful, a strict construction against those for whose benefit they are introduced.”

Let us recur to the exact words of forfeiture as they are set forth in the defendant’s answer. “If.....said assured should sell or transfer the property thereby insured, that said policy should become null and void.” It was competent for the policy to provide, expressly, that a sale of a part of the property or of an interest therein should avoid the policy; this they did not do. The absence of a specific provision to that effect when it could have been so easily inserted, together with the rule before referred to that conditions which defeat a policy should be construed strictly against the forfeiture, leads us to hold that a sale of the entire interest of the party insured was necessary to avoid the policy.

In a strict legal sense, perhaps, wherever one engaged in business alone, takes a partner into his business, or a firm receives a new member, or a member goes out, the transaction results in the formation of a new concern, accompanied by a sale and transfer of all the property of the old establishment to the new one; but it is at least doubtful whether this strict legal result is contemplated by the business world generally. That the parties in the case before us intended the policy should be avoided, in case the assured received a partner into his business, is uncertain; that the plaintiff understood the transaction to be a sale of an undivided half of the property and business to Horman, rather than a sale of the whole of it to a firm composed of himself and Horman, is quite probable. It was competent for the parties to provide in unambiguous terms that, if the assured received into the business, without the consent of the insurer, a partner, the policy should become void. This was not done, and we think the principles already announced require us to hold that the sale and transfer resulting from the reception of a partner did not avoid the policy.

Notwithstanding the transaction the plaintiff retained a substantial and insurable interest in the property covered by the policy, while to avoid the policy on account of the provision against alienation it should have divested him of his eutire interest.

The defendant contends that this construction disregards the rule that, in construing an instrument, effect should be given to all its parts ; and that to hold that the plaintiff must divest himself of his entire interest to avoid the policy renders the provision against alienation nugatory, because, if the policy contained no such provision, yet he could not recover for a loss that occurred after he had sold his entire interest, as in that event he suffered no injury, and the contract of insurance is one of indemnity. Whether the construction we have adopted renders the provision against alienation nugatory or not, or whether circumstances may not arise under which it might be operative, we do not deem it necessary to inquire, for the rule thus urged upon our consideration is only one of many rules applied by courts to ascertain the meaning of the words adopted by parties to express their intentions, and in many instances it readily yields to other rules of construction, as we think it should in the case now under consideration.

The remaining question presents no difficulty. Section 4993, Revised Statutes, requires an action to be brought in the name of the real party in interest. Here the plaintiff, alone, is interested in the policy of insurance set forth by him in his petition; the contract it contains is to indemnify him; he can recover, of course, only to the extent he has been damaged; but, as no question is before us as to its proper measure, it will not receive consideration.

Judgment reversed.


author: Speak, J.

text:
    Brown v. Coal Company.

      Error — Proceedings in — Bill of Exceptions — Limitations on proceedings in error.

    The action below was for specific performance of a real contract. After a trial'upon the merits at the January term, 1890, of the circuit court, judgment was rendered for the defendant upon all the issues made in the pleadings, and journal entry showing disposition of the merits of the cause was duly entered February 24, 1890. On February 26, a motion for a new trial was filed by plaintiff. March 6, 1890, a bill of exceptions was allowed and filed. No action was asked by' plaintiff on his motion for new trial during the January term, nor was any action of the court had. At the September term following the motion was heard and overruled, to which plaintiff excepted, but no bill of exceptions was taken, nor was any finding of facts made by the court. On April 3, 1891, a petition in error was filed in this court, and service duly made.

      Held: 1. The proceeding in error, as regards the judgment rendered at . January term, was commenced too late. If the plaintiff’s case in error were in other respects well founded, a review of the judgment could not now be had in this court, more than six months having elapsed between the date of the judgment and the commencement of the error proceeding.
    2. The record does not present the question desired to be raised upon the overruling of the motion. To authorize a review by this court of the action of the circuit court in overruling a motion for a new trial at a term subsequent to the term at which judgment is rendered, the error complained of must be shown either by a bill of exceptions taken to the order overruling the motion, or by a finding of facts by the court.
    (Decided October 20, 1891.)
    Motion by defendant to dismiss petition in error filed by plaintiff to the judgment of tbe Circuit Court of Franklin County.

      The facts are sufficiently stated in the syllabus.

      O. P. L. Butler, Jr., for the motion.

      Benj. P. Martz, contra.

   Speak, J.

Two grounds are urged in support of the motion to dismiss, (1) That the judgment on the merits cannot be reviewed because .the statute of limitations had cut off the right to prosecute error at the time the petition in error was filed; and (2) That the overruling of the motion for the new trial cannot be reviewed because no bill of exceptions was taken to the overruling of the motion.

The act in force and applying to the case is the act of March 28,1889, (section 6723, Revised Statutes,) which provides that “No proceedings to reverse, vacate, or modify a judgment or final order shall be commenced unless within six months after the rendition of the judgment or making of the final order complained of.” More than thirteen months elapsed between the rendition and entering of the judgment in the circuit court and the filing of the petition in error in this court. On the face of things the petition came too late for a review of the judgment on the merits.

We are entirely in accord with the proposition of counsel that a party must, before appealing to a reviewing court, exhaust his remedies in the court below where the evidence was heard, and that, where a motion for a new trial is necessary, his remedies are not exhausted until that court has refused a new trial on his motion.

But this is very far from saying that a party may have a final judgment reversed upon a bill of exceptions taken at the trial term where the court was not at that term asked to grant a new trial.

Nor does a judgment which disposes of all the issues become an interlocutory one because of the fact that the losing party files a motion for a new trial after the judgment is rendered and entered, and allows the term to close without asking action of the court upon his motion. Neither can action at the next term in overruling the motion have that effect.

The fact that the plaintiff could not prosecute error until he had exhausted his remedies in the trial court, and that that was not done until the September term, is urged as a reason why he should now be allowed to maintain his action here. This is equivalent to saying that because the opportunity to so exhaust his remedies was not improved at the proper time, therefore the operation of the statute of limitations should be postponed until such time as he might see fit to ask action on his motion. The claim is without substance. We cannot assume that the motion was ordered continued at the January term, inasmuch as the journal entry fails to show any such order. On the contrary, the presumption is that the plaintiff allowed it to go by default. Whether or not it would make any difference if the court had ordered a continuance of the motion we need not inquire. It suffices to say that it was plaintiff’s right to ask for a disposal of his motion at that time, and that he chose not to insist upon that right. He is in no position now to complain of the court for not doing what he did not demand or ask it to do ; nor can his position in any way be improved because of his own indifference. The language of the statute is plain. It requires no construction. No such proceeding “shall be commenced unless within six months after the rendition of the judgment.” Clearly this court cannot now be asked to review the judgment rendered at the January term.

As to the other point it is enough to say that the action of the circuit court at the September term, 1890, in overruling the motion for a new trial cannot be inquired into by this court in the absence both of a bill of exceptions to that ruling and of a finding of facts by the court. It seems to be claimed that no bill of exceptions was necessary because a bill was taken at the- trial term. We do not so understand the rule.' The distinction between the office of a bill of exceptions taken at the judgment term, containing the party’s exceptions to alleged errors occurring during the trial, and of a bill taken to the order overruling a motion for new trial at a subsequent term, is well recognized in practice. It is pointed out in Coleman v. Edwards, 5 Ohio St. 55; in Morgan v. Boyd, 13 Ohio St. 271; and in Dayton v. Hinsey, 32 Ohio St. 258, and need not be repeated here. The journal entry overruling the motion contains no finding of facts, nor does it show in any way upon what the court acted. A defeated party who desires to prosecute error to the overruling of his motion for new trial, must preserve his exceptions by a bill of exceptions, or procure a finding of facts by the court. Error will not be presumed.

Motion sustained.


author: Williams, C. J.

text:
    Weyer et al. v. Watt, Ex’r.

      Executors and administrators — When, and how authority of to represent the estate terminated — Duties of, as to unadministered assets.

    1. The authority of an executor or administrator to represent the estate, unless terminated in one of the modes provided by statute, continues until the estate is fully settled.
    2. The probate court, for good cause, may remove an executor or administrator, or accept his resignation. But while choses in action, or other assets belonging to the estate, remain in his hands unadministered, his authority to administer the same is not extinguished by an order, made upon what purports to be the settlement of his final account, directing that he be discharged from his trust.
    (Decided October 20, 1891.)
    Error to the Circuit Court of Allen county.
    On the 12th day of January, 1887, William Watt, in his representative capacity as executor of the last will and testament of Daniel Cloore, commenced an action in the Court of Common Pleas of Allen county, against Harrison Weyer and John H. Camp, to recover a balance alleged to be due on a promissory note executed by them to tbe plaintiff’s testator. The petition is in the usual form, and contains all the aver-merits necessary to entitle the plaintiff to judgment. Camp •made default. Weyer answered, alleging in substance, that on the 2d day of February, 1886, the plaintiff filed in the probate court, his final account as executor, which, after due notice and hearing, was on the 1st day of March, 1886, confirmed; whereupon, the court ordered that the plaintiff be discharged from his trust, and that he make distribution of the uncollected assets, among the legatees and distributees of the estate; which, it is averred, was accordingly done. The allegations of the answer were controverted by reply. A.trial upon the issues thus joined, resulted in a judgment for the plaintiff. A motion for a new trial filed by Weyer, having been overruled, he presented his bill of exceptions ■which was duly allowed. It is shown by the bill of exceptions, that Weyer, to maintain the issues on his part, gave in evidence the record of the Probate Court of Allen county containing the plaintiff’s account, called his final account, and the proceedings of the court with respect to it, from which it appears, that the court, having found upon the hearing of the account, that the executor “ had well and faithfully discharged his duties, and paid out to the proper person, or persons, all moneys coming to his possession as executor,” ordered that the account be made final, and said “ executor discharged from his said trust,” and that he “ distribute among the legatees and distributees of the estate of said decedent all the uncollected assets of said estate.” The defendant Weyer, examined the plaintiff as a witness, who testified, that he made no distribution of the notes reported b3>" him in his final account to be uncollectible, among the heirs of the deceased, and that the note in suit was still a part of the assets of the estate in his possession. Upon this proof, the court gave judgment for the plaintiff. This judgment was affirmed by the circuit court. The present proceeding in error is prosecuted in this court to reverse both judgments below.

      Prophet JEastman, for plaintiff in error.
    1. The defendant in error filed his second and final account, and asked the court to be discharged, and the court ordered his discharge as the executor of the last will and testament of Daniel Cloore, deceased. This would be equivalent to his resignation and its acceptance. Sec. 6015, Revised Statutes.
    These orders of the probate court remain in full force. In fact the probate court did not have the power to modify them. Johnson, executor, v. Johnson, et al., 26 Ohio St. 257.
    Excepting for appeal, error, or irregularity, the proceedings of the probate court must not be disturbed. Ramsey v. McGregor, et al., 1 C. S. C. R. 327.
    The court had the power to make the orders. The power of the defendant in error to proceed to collect this note by suit or otherwise had been taken from him by his own request, and that order still stands in full force. Sec. 6189, as amended, 77 Vol. O. L., page 77. Such a£ order has so far the form and effect of a judgment that it may be enforced by execution. McLaughlin v. McLaughlin, 4 Ohio St. 508; 78 Vol. O. L., page 76; sec. 6195, Revised Statutes.
    The sole and only purpose of sec. 6190, Revised Statutes, is to allow the executor or administrator to perpetuate the 'evidence of distribution. Swearingen v. Morris, 14 Ohio St. 424.
    Under sec. 6015 and 6016, the court would certainly be authorized to appoint another person as administrator de honis non, with the will annexed, of Daniel Cloore, deceased, if in his opinion the estate had not been 'fully administered upon. If, after the discharge of an executor, there are uncollectible assets, his successor is the proper party to receive them. Matter of Soutter, 6 N. Y. St. Repr. 531; The Complete Digest, 1887, part first, 1168.
    It may be claimed that there is no evidence of the consent of the distributees as to a distribution of assets uncollected. The probate courts of this state are, in the fullest sense, courts of record. They belong to the class whose records import absolute verity, that are competent to decide on their own jurisdiction, and to exereise it without setting forth the facts and evidence on which it is rendered. Shroyer v. Richmond, et al., 16 Ohio St. 455.

      Walter B. Richie, for defendant in error.
    The question in this case is:
    Can an executor, after filing what he terms a final account, sue upon and collect a note, unpaid and due the estate.
    The plaintiff in error maintains, that having filed an account, termed a final account, that the executor cannot afterward bring suit to recover upon a note which is assets of the estate. In the light of the following authorities, as well as upon principle, when the purpose of the administration act is considered, I submit that the decision of the lower court is in accord with law. McAfee v. Phillips, 25 Ohio St. 374; Taylor v. Thorn, admr., 29 Ohio St. 569; American Law of Administration, 1255; Paff v. Kinney, 1 Bradf. 1.
   Williams, C. J.

It was established on the trial, that before the commencement of the action, the plaintiff, as the executor of the last will and testament of Daniel Cloore, deceased, had filed in the probate court, an account called his final account, upon the settlement of which, that court found, that the plaintiff had faithfully executed his trust and paid over to the proper persons all moneys which had come to his hands, and ordered that he distribute, to the legatees and distributees entitled to receive them, all the uncollected assets of the estate, and, that he be discharged from his trust. He did not, however, make such distribution; and among the uncollected assets which so remained in his hands, was the note, executed by the defendants to the testator, upon which the action was founded.

The claim of the defendant on the trial, was that the order of the probate court discharging the plaintiff from his trust and directing the distribution of the uncollected assets, terminated his authority as executor, and consequently, he WAS without legal capacity to maintain the action. And it is upon this ground, that the reversal of the judgments below is asked.

The modes in which the authority of executors and administrators may be terminated, as well as their powers and duties from the time of their appointment to the final completion of their trusts, are prescribed and regulated by statute; and so is the jurisdiction which the courts of probate have over them and their conduct, and in the settlement of their accounts. It becomes necessary, therefore, to examine some of the provisions of the statute, in order to determine the correctness of the proposition relied on by the plaintiff in error. Section 6015 of the Revised Statutes provides, that “ The court issuing letters testamentary or appointing an administrator, may, if it thinks fit, and upon good cause shown, receive the resignation of such exécutor or administrator, and appoint an administrator in his place.” It is provided by section 6017, that “ The probate court may at any time remove an executor or administrator,” for any of the various causes therein enumerated, “ and if there be no other executor or administrator to discharge the trust, the court may commit the administration of the estate not already administered to some other person or persons, in like manner as if the executor.or administrator so removed were dead.” Provision is made by sec. 6018, for the appointment of an' administrator with the will annexed, when a sole executor shall die without having fully administered the estate, and also, for the appointment of an administrator de bonis non, upon the happening of a like event to the administrator of an estate. Further provision is made, by section 6019, for the revocation of letters of administration, when, after they have been granted, a will is duly proved. (Section 6091.) And when an unmarried woman is an executrix or administratrix and marries, her authority is extinguished. (Section 6022.)

Unless the authority of the executor or administrator be terminated in some one of the ways pointed out in the foregoing provisions of the statute, it is his duty to continue the administration of the estate, until it shall be entirely settled. It is one of the conditions of the executor’s bond, that he shall administer according to law and to the will of the testator, all of his goods, chattels, rights and credits.” (Section 5996.) One of the duties enjoined upon him is, to collect the assets within one year from the date of his bond, or such further time as the probate court may allow, not exceeding five years; but the office of the executor does not cease, “ with the time allowed by law or the court for the collection of the assets.” (Section 6067.) He is required to file and settle accounts of his administration, in the proper court, at the end of eighteen months from the date of his bond, and from time to time thereafter until the estate is fully administered. (Section 6175.) Full administration is accomplished, only when all the assets have been converted into money, the proceeds applied to the payment of the debts, and the balance, if any, distributed to the legatees, or other proper distributees, unless a. different disposition of specific property is made by the will. In the conversion of the assets into money, the executor is required to sell the personal property belonging to the estate, except promissory notes, and other rig'hts in action which can be collected. (Section 6074). Provision is made by which such choses in action as cannot be collected, may, under the order of the court, be compounded, or sold, or filed with the court for the benefit of the creditors or legatees who will sue for the same, the creditors having the preference if they apply before the final settlement' of the estate. (Section 6077.) And, if after the debts have all been paid, the executor still has in his hands uncollected notes or other rights in action belonging to the estate, he may, with the approval of the court and the assent and agreement of the persons entitled to their proceeds, distribute the same in kind, to such of the distributees as will receive them, in lieu of the proceeds. (Section 6189.)

The primary duty of the executor with respect to the choses in action, is to collect them; and he is relieved of that duty, only when he has otherwise disposed of them in one of the modes above mentioned. It is not shown by the record, that the plaintiff below had disposed of the note sued oii by him, in either of those modes. He had not distributed it to any one entitled to its proceeds, nor had any distributee of the estate agreed to receive it; nor, had he sold it, of filed it with the probate court for the creditors or distributees. On the contrary, it appears, that he still retained the nóte; and his duty, therefore remained, so long as he continued to-be executor, to collect the .same by suit, or otherwise, and account for the proceeds. Any settlement made before that is done, whatever he, or the probate court may call it, is not his final settlement.

The only further inquiry, then, is whether' the plaintiff, at the commencement of the action, had ceased to be executor; and that, depends entirely upon the legal effect of the order of the probate court discharging him from the trust. Under our legislation, as we have already seen, an executor or administrator may be removed by the probate court, for cause, or he may resign his trust, with the consent oh the court. But we find no power conferred upon that court to discharge an executor or administrator from his trust, upon the settlement of what is called a final account, and thus extinguish his authority as trustee. Unless, therefore, the order of the probate court operated as a removal of the plaintiff from his trust, or as a resignation of it by him, his authority as executor continued, notwithstanding the order, and he might properly bring the action he’did. Obviously, the order had no such operation, and was not intended to have. It is based upon the finding that the plaintiff had faithfully discharged all his duties, and paid out all moneys which came to his hands; in other words, that he had fully administered the estate. A resignation, as well as a removal, implies that the trust is unfinished, that the administration is incomplete. Hence, the statute provides, that when either occurs, further administration may be granted as in the case of the death of the executor or administrator. This, doubtless would have been done, if what took place in the probate court, had been regarded as a resignation <$• removal of the plaintiff.

It is not contended that the proceeding in the probate court, was under, or in conformity- with section 6190 of the Revised Statutes, which provides for perpetuating the evidence of distributions made by executors and administrators, by filing accounts of such distributions, with the vouchers taken, and having them allowed and recorded. The account filed by the plaintiff, was not of that description; nor, does the order of the court purport to be made with reference to such an account. Besides, it is well settled, that the only purpose of that section is to enable the executor or administrator to perpetuate the evidence of his payments, and make that evidence conclusive against those who signed the receipts, unless objected to by them, within the time limited by it. Negley v. Gard, 20 Ohio 310; Swearingen v. Morris, 14 Ohio St. 424.

The record of the probate court, which the defendant introduced in evidence on the .trial, fails to show, we think, either a resignation or removal of the plaintiff, or a termination otherwise, of his authority as executor.

Judgment affirmed.


author: By the Court.

text:
    Thompson v. Watson, Att’y Gen’l.

      Mandamus — Quo Warranto — Duties of Attorney General in — Australian Ballot Law.

    Motion for mandamus.

      James IT. Thompson, in person.

      David K. Watson, Attorney General, in person.
   By the Court.

The plaintiff’s petition alleges that he is an elector of this state, and that the act of the general assembly, passed April 80, 1891, commonly known as the new, or Australian Ballot Law, in some of its provisions, which are pointed out, is in conflict with the constitution of the state. It also alleges, that %e plaintiff requested the attorney-general to commence an action in quo warranto in this court to test the constitutionality of the statute referred to, and that he declines and refuses to do so. The petition prays in the alternative, either, for a writ of mandamus to compel the attorney-general to institute the action, or if that remedy be denied, then that the court may direct the action to be brought by him.

It is clear the writ of mandamus cannot be awarded. The proper use of that writ is to command the “performance of an act which the law specially enjoins as a duty resulting from an office, trust, or station.” ■ Revised Statutes, sec. 6741. It is not contended that the law has made it the duty of the attorney-general to commence an action in quo warranto to test the constitutionality of a statute, when requested by any person who may have, or claims to have, an interest in the question. He may, in a proper case, upon his own relation, bring, such action, or he may bring it on leave of the court, or a judge in vacation, on the relation of another person. Revised Statutes, section 6763. He does not ask leave to bring the action, and an application of another person to him to bring it on his own relation is addressed to his discretion, the exercise of which, the court cannot control. If he refuses, it must be presumed that his refusal is based upon sufficient cause.

Nor do we deem it proper, in a case like this, to direct the attorney-general to bring the action. Section 6762 of the Revised Statutes, provides that the attorney-general, when directed by the governor, supreme court or general assembly, shall commence the action in quo warranto. But we think the power of the court under this section should, as a general rule, be exercised only when something relating to the court, or its business, renders it necessary or advisable. It was not designed, we apprehend, that the court should be called upon to exercise its authority to direct an action to be brought by the attorney-general to test the constitutionality of legislation whenever a citizen, who feels aggrieved, should request it. Other modes are open to him, as they are to the plaintiff in this case, for bringing such legislation before the courts.

Motion overruled.