text:
    Railway Co. et. al v. State ex rel.

      Corporations — How stockholders may vote stock — May be done by appointing trustee for that purpose — When such appointment does not create a voting trust — Election of directors— Validity of.

    1. Stockholders may place their stock in the hands of a depositary with direction to vote it as directed by a committee appointed by themselves, and subject to their control.
    2. The validity of the election of a director of a company does not depend upon what he may contemplate doing when elected.
    (Decided Dec. 20, 1892.)

      Ereor to the Circuit Court of Hamilton county.
    The suit below was a proceeding in quo warranto on the relation of the prosecuting attorney of the county against The Ohio & Mississippi Railway Co„ and James H. Smith, Edwards Whitaker and Edward H. R. Green, and sought to oust the company from the right and franchise of recognizing Smith, Whitaker and Green as directors of the company, — the averments being in substance that at an election for directors of the company, duly held on October 17, 1891, Sterritt McKim, Julius S. Walsh and D. Fahnestock were duly elected directors of the company for specified terms, by more than a majority of all the shares of stock, and all the bonds entitled to vote at said election, and were qualified to act as such.
    It is then averred, that notwithstanding the premises, “the defendant, The Ohio & Mississippi Railway Co., acting by a majority of its directors, including said James H. Smith, Edwards Whitaker and Edward Howland Robinson Green, and by its other officers and agents, has refused and still refuse in any manner to recognize said McKirn, Walsh and Fahnestock as directors of said company, or to permit them to act as such, although they and each of them have been at all times and still are duly qualified, ready, willing and desirous of performing all and singular the duties of their said offices; but on the contrary said company, acting by a majority of its directors, and by its other officers and agents, persists in recognizing and permitting said James H. Smith, Edwards Whitaker and Edward Howland Robinson Green, to act as directors in the place and stead of those so elected as aforesaid, in order to unlawfully perpetuate said directors, and said Smith, Whitaker and Green, and the officers and agents of said company chosen by them, in the management and control of the property and business of said company, in defiance of the wishes of said majority of stockholders who own and hold $19,000,000, face value of the stock of said company, out of a total of $24,000,000, face value, and intends and proposes to and will continue so to do during the term for which said McKim, Walsh and Fahnestock were so elected. ”

      The company answered; and its answer, after the same had been amended, was adopted by Smith, Whitaker and Green as their answer. The relator demurred; the demurred was sustained; and the defendants not desiring to plead further, a judgment was rendered ousting the company from continuing to permit or claiming the right to permit Smith, Whitaker and Green to act as its directors, and from preventing McELim, Walsh and Fahnestock from doing so during the'period for which they were elected. And also adjudged that Smith, Whitaker and Green be ousted from acting as directors of the company. The judgment was affirmed on error by the circuit court; and error is prosecuted in this court to reverse the judgment of both the lower courts.
    The questions arise upon the sufficiency of the answer, which, with the amendment and exhibits, reads as follows:
    ANSWER,

      “First Defense — This defendant, for its first defense to the action, says:
    “That, prior to October 8th, 1891, the holders of a majority of its capital stock surrendered their respective certificates of shares unto Messrs. Brown, Shipley & Co., of Eon-don, England, a firm doing business under that name, under an agreement in writing, a true copy of which is hereto attached, and made part hereof, marked Exhibit “A.” Upon the deposit of said certificates, the person making such deposit received from said Brown, Shipley & Co., a certificate for a corresponding number of shares, a copy of which is hereto attached, marked Exhibit “B,” and made part hereof.
    “Defendant further says, that prior to said annual meeting, the said Brown, Shipley & Co., duly surrendered all of the said certificates, so surrendered to them by said stockholders, and were themselves duly registered lipón the defendant’s books as apparent owners of said stock, and the registry continued unchanged until the date of said annual election, to-wit, November 19th 1891, and thereafter, and said Brown, Shipley & Co., have never held any stock or bonds in defendant company, other than the stock acquired as aforesaid.

      “ Defendant further says, that the committee referred to in the said agreement, set forth in Exhibit “A.” was composed of five persons, two -of whom were not, and are not, shareholders in the defendant, and by virtue of the said agreement, the said committee was authorized to cast the vote of the shares registered in the name of Brown, Shipley & Co., said Brown, Shipley & Co., having no interest in any of said stock, and having no right to vote the same except upon the direction of the said committee, acting by a majority of a quorum of its members, three constituting a quorum.
    “Defendant further says, that at the said annual election for 1891, certain persons appeared, claiming to hold the proxy of Brown, Shipley & Co., to vote the shares registered in their name, and presented a paper purporting to give them such power, and bearing a signature which purported to be that of Brown, Shipley & Co., and said persons tendered the vote of said shares, -which was objected to by certain shareholders duly registered and entitled to vote at said election, but said objection was over-ruled by the inspectors of election, and said vote received and counted by them in favor of said McKim, Walsh and Fahnestock; and the defendant says that no other vote was cast for said persons save one, and said vote of Brown, Shipley & Co., was so cast by the direction of said committee.
    “ Defendant further says, that said Smith, Whitaker and Green then were, and still are stockholders in defendant company, and entitled to hold the office of director therein, and at said election each of them received a large majority of'all the votes cast other than said vote of Brown, Shipley & Co., and defendant’s officers and directors being advised of the nature of the voting trust imposed upon Messrs. Brown, Shipley & Co., took the advice of counsel, and being advised that the said trust was wholly illegal and void, and having confidence in the opinion so given to them, declined to recognize the title of the said McKim, Walsh and Fahnestock to the office of director, and recognized the title of' Messrs. Smith, Whitaker and Green, who were duly elected if the vote cast in the name of Brown, Shipley & Co., was illegal.

      “ Second Defense — This defendant, for a second defense to the action, says: That it here repeats all the allegations of the first defense, and, in addition- thereto, alleges as follows:
    “That a large part of its stock was and is held in England, and that the said English shareholders formed the said committee, and created the said voting trust in Brown, Shiplejr & Co., and that, while the shareholders who entered into the said agreement supposed that its objects were only those set forth in the statements of ‘ conditions and purposes of deposit, ’ hereto annexed as ‘ Exhibit A, ’ a secret negotiation was opened between the said committee, or certain members thereof, and a representative of The Baltimore & Ohio Railroad Company, a corporation organized under the laws of Maryland, and owning and operating a line of railroad leading from Parkersbttrg, West Virginia, eastward, and controlling The Baltimore & Ohio Southwestern Railroad, a railroad leading from Parkersburg, West Virginia, to Cincinnati, Ohio, which said representative was also a director of this defendant, which negotiations resulted in an agreement between the said committee and The Baltimore & Ohio Railroad Company, acting by its said representative, whereby the entire capital stock of this defendant was to be delivered to a company to be called a ‘control company’ in the said agreement, which said control company was to become the owner thereof, and was to issue its own certificates in lieu thereof, and was to issue to the said Baltimore & Ohio Railroad Company $8,800,000 of stock in said control company, which said stock was to enjoy the power of voting at elections of said control company, to the exclusion of all other stock of said company, thus conferring upon the said Baltimore & Ohio Railroad Company the absolute control of the defendant company.
    “Upon the completion of said negotiations between the said committee and said individual director of this defendant, acting as above stated, for The Baltimore & Ohio Railroad Company, said English stockholders were called together in meeting in Eondon, and assented thereto, their said assent being procured by misrepresentations then and there made to them in reference to the physical condition of the defendant’s road, and the financial condition of the defendant company. It was a part of the said agreement that the said Baltimore & Ohio Railroad Company should have immediate control of the said Ohio & Mississippi Railroad, and the said committee, on October 14, 1891, issued its order to the president of this defendant to the effect that the defendant’s road should from said date be operated as a part of the system of railroad owned or operated by The Baltimore & Ohio Railroad Company. It was also a part of the agreement between the said committee and the said representative of The Baltimore & Ohio Railroad Company that at the said election of October, 1891, three persons, to be designated by the said The Baltimore & Ohio Railroad Company, should be elected by the vote of said committee as members of the board of directors of the defendant; and the said Baltimore & Ohio Railroad Company, by its said representative, designated said McKim, Walsh and Fahnestock, as persons to be so elected at said election, and said vote was tendered in pursuance of the said agreement.
    “This defendant states that it was advised by counsel that said agreement was, in all its parts, illegal and void, and that it was its duty to disregard the orders, and actions of said committee; and this defendant was further advised that said voting-trust was wholly illegal, and that it would be its duty to disregard any vote cast by it, and acting upon said advice, it refused to admit the said McKim, Walsh and Fahn-stock to membership in its board, and recognized and admitted the three candidates, who received all of the votes cast at said meeting of November 19, 1891, except those cast for said McKim, Walsh and Fahnestock, to wit; James H. Smith, Edwards Whitaker and Edward H. R. Green,
    “ And this defendant now alleges that said voting-trust was, and is, illegal and void, and that the attempt of the said committee to elect the said McKim, Walsh and Fahnestock, was part of a scheme to turn the control of the defendant’s property over to The Baltimore & Ohio Railroad Company, in defiance of the laws of this state, and in violation of the rights and interests of the stockholders of this defendant.

      “Wherefore this defendant prays to be 'hence'dismissed' with its costs.”
    “Exhibit ‘A.’

      “Form of Deposit of Common Shares, No. —.
    “Messrs. Brown, Shipley & Co., Founders’ Court, Eoth-bury, Eondon, E. C., Depositary for the Committee of the Shareholders of The Ohio & Mississippi Railway Company.

      “Shareholders’ Committee-. — Sir James J. Allport, Mr. John Morris, Mr. Joseph Price, Captain Francis Pavy, Mr. W. H. Beeman.
    “The holder of the under mentioned shares hereby deposits the same with the above mentioned committee, to be exchanged for certificates to bearer, issued by Messrs. Brown, Shipley & Co., on behalf of the committee, and for the purposes and subject to the conditions indorsed on such certificates, and also indorsed hereon. The holder of the shares to sign here, on'leaving the same for deposit:

      Name [in full).
    Signature.
    Address.
    Date.
    “ The certificate must be listed in numerical order, and lodged with Messrs. Brown, Shipley & Co., on behalf of the committee, on any day (except Saturdays) between 10 and 3 o’clock.

    Left by...
    .Shares, @ 6d. per share= £.
    “ N. B. — The power of attorney at the back of the share certificates must be duly executed in favor of Brown, Shipley & Co., of London.

      INDORSEMENT ON EXHIBIT “A.”

      Conditions and Purposes of Deposit, as indorsed upon the Certificate issued on behalf of the Committee.

    “1. This deposit is made for the purpose of authorizing the committee named upon the face hereof to arrange certain differences now existing between the preferred and common shareholders in reference to the cumulative rights of the preferred shareholders to certain dividends, and to readjust the affairs of the company generally in such manner as may seem to them best in the interests of the shareholders of the company.
    “2. By the deposit of the shares with Messrs. Brown, Bhipley & Co., of Eondon, or with Messrs. Brown, Bros. & Co., of New York, they or their assigns, (hereinafter called the depositary), or the committee, are vested with the same powers, in all respects, as to voting and otherwise, as if the committee or the depositary were the absolute owners and holders thereof; but no vote in respect of such shares shall be cast by the depositary, at any meeting of the shareholders, except in accordance with the previous instructions of the committee.
    “3. The genuineness of the shares deposited, in respect of which this certificate is issued, can not be guaranteed, and the committee reserve to themselves the right to call in this certificate upon returning to the holder thereof the shares so deposited by him in case the genuineness of such shares is disputed or doubtful.
    “4. .All proceedings of the committee — three of whom shall be a quorum — shall in case of difference be decided by a majority of the votes of the members of the committee present at a meeting.
    “5. In case of any vacancy occurring in the committee, the remaining members thereof are authorized from time to time to fill up such vacancy, and the person or persons so selected shall have the same powers as if he or they had been original members of the committee. Any member of the committee absent abroad or through illness may, with the consent of the other members of the committee, appoint a substitute, who shall represent 'him, and be able to exercise all his functions as a member of the committee during such absence.
    “6. No scheme of arrangement or readjustment agreed upon by the committee is to become binding until sanctioned by a vote of a majority of each class of certificate holders present at a meeting of each such class called by the committee for the purpose of considering the same; but when so sanctioned the committee shall be irrevocably empowered to carry out the same, when and in the manner they think best, and all the certificate holders of each class shall be definitely bound thereby.
    “7. Meetings of the certificate holders shall be convened and held upon such notice, and at such time and place, and generally in such manner and subject to such regulations as to voting (either in person or by proxy), and otherwise, as shall seem best to the committee.
    “8. Each member of the committee is'responsible only for the bona fide exercise of his judgment on the matters dealt with by the committee.
    “9. The depositary and the committee will re'cognize the bearer of this certificate as' the absolute owner of the shares thereon specified, and in case of the declaration and payment of any dividend upon such shares, the same shall be paid to the bearer of this certificate, and his receipt therefor shall be a full discharge to the payers thereof, notwithstanding any notice that they may have of the right, title, interest or claim of any person to, or in such shares or moneys. The committee shall give notice of their intention to distribute any such dividend, by advertisement, to be inserted twice in The Times, and at least one other Eondon daily paper.
    “10. A charge upon these shares at the rate of 6d. per share is to be paid to the depositary on deposit of the' shares to the order of the said committee for the the purpose of defraying the expenses of such a deposit, and of said committee, and must be paid by the holder of this certificate at the time of making such deposit.”

      Exhibit “B.”
    No. of Certificate, 18,544. 10 Shares.
    The Ohio & Mississippi Railway Company.
    Messrs. Brown, Shipley & Co,

      Certificate for Deposit of the Shares of the Common Stock of The Ohio & Mississippi Railway Company deposited tinder the conditions endorsed hereon.

    Committee: — Sir James J. Allport, Mr. John Morris, Mr. Joseph Price, Capt. Francis Pavy, Mr. W. H. Beeman.
    Certificate for Ten Shares for One Hundred Dollars each.
    Messrs. Brown, Shipley & Co. hereby certify that they have received one certificate of ten shares of the common stock of The Ohio & Mississippi Railway, of one hundred dollars each, which certificate is deposited subject to the conditions endorsed hereon, to which the holder hereof assents and is bound by the provisions thereof. The interest represented herein is transferable on the delivery of this certificate, subject to the terms and conditions endorsed thereon, and the bearer of this certificate is entitled to all rights arising from the deposit of such shares. The deposited securities have been carefully examined, but no responsibility for genuineness is undertaken by the issue of this certificate.
    Dated-189 — .
    “Amendment to second defense:
    “The defendant, The Ohio & Mississippi Railway Company, now comes, and for amendment to the second defense of its answer heretofore filed herein, and as a part of said defense, further says:
    “That for many years, to-wit: more than ten, prior to 1891, and throughout said year, a large majority of the stock of this defendant was owned and held in England, and prior to the time when any of said stock was deposited with said Brown, Shipley & Co., to-wit: November 6, 1890, the holders of a large amount of the preferred stock agreed with the holders of a large amount of the common stock, that a committee, consisting of two representatives of the preferred and two representatives of the common stockholders, with a fifth one as a neutral member, be appointed, with power to call in the shares of both classes, and issue, or cause to be issued, certificates against the same, with a view to bringing about an arrangement between the two •classes of shares, and in connection therewith to readjust the affairs of the defendant generally in such manner as should seem best, such arrangement to become binding when approved by a vote of a majority of each class of certificate holders.
    “Pursuant of said agreement between said two classes of certificate holders, the said Mr. John Morris and Mr. Joseph Price were appointed by-the preferred shareholders as representatives of the preferred shareholders, and Capt. Francis Pavy and Mr. Beeman by the common shareholders as representatives of the common shareholders, and Sir James J. Allport, was appointed by said preferred and common shareholders jointly as the fifth member.
    “The defendant further avers that the total amount of its preferred stock was and is about $4,035,000, and of its common stock about $20,000,000, and that the party holding the proxy of Brown, Shipley & Co. cast, as such proxy, 147,760 votes, and of said 147,760 shares so voted, 29,538 were preferred stock owned by preferred shareholders, and four-fifths, to-wit; 118,222 shares were common stock owned by common shareholders, and by said arrangement said preferred stock, representing 29,538 shares, voted by said committee, exercised the same power as said common stock, to-wit; said 118,222 shares.
    “Defendant further states that meetings of the shareholders who had deposited their stock with Brown, Shipley & Co., were called by said committee pursuant to said agreement, set out as Exhibit ‘A’ to this answer, on October 14, 1891, in Uondon, England, to consider the scheme hereinbe-fore referred to, and at said meeting on October 14, 1891, said scheme was approved by said stockholders. There were' separate meetings of preferred and common holders, and a resolution was introduced and carried by a vote of a majority of each class of certificate holders preset at each meeting, that the report of the committee setting out the plan for the reorganization of defendant be received and adopted. It was further resolved at said meetings at said time:
    “‘That the committee, with power to add to their number, be requested to continue their services in arranging and carrying out the details of the proposed plan with such modifications as they may think fit, and either with or without further reference to the shareholders, as the committee in their judgment and discretion may think best.’
    “Said meetings were adjourned at 12 o’clock, noon, on October 14, 1891, and said committee and said Brown Ship-ley & Co. thereafter acted in pursuance of the supposed authority on that day and theretofore given them, as stated in this answer.
    “Defendant states that when the transfers were made on its books from the original holders of said shares to Brown, Shipley & Co., it had no knowledge or advice of, the contract relations between said holders and Brown, Shipley & Co., or of the title of Brown, Shipley & Co., but the certificates were presented to its transfer agent in the usual way, and the transfer was made in the regular course of business without inquiry or knowledge as to its propriety-or legality.
    “And the defendant avers that said Smith, Whitaker, and Green each qualified as director and entered upon the discharge of his duty as hereinbefore stated.
    “Wherefore defendant prays that the petition of the plaintiff may be dismissed, and for such order as may be proper.”
    Since the commencement of the proceeding, it has been dismissed on behalf of the railway company; and is now prosecuted on behalf of the respondents below, Smith, Whitaker and Green.
    1. It is claimed as a first defense, that the arrangement whereby a large majority of the stockholders of The Ohio & Mississippi Railway Company placed their stock in the hands of Brown, Shipley & Co., to be held and voted as. provided in the conditions endorsed on the instrument acknowledging the receipt of the stock, constituted, “a voting trust,” and is therefore void as against public policy.
    2. That this arrangement was part of a plan to place the road in the hands of The Baltimore & Ohio Railroad Company, by the formation of a company in which that company should have a controlling interest.

      Ramsey, Maxivell & Ramsey, and Edward Barton, for plaintiff in error.

      Harmon, Colston, Goldsmith & Hoadley, Paxton & War-rington, and John C. Schwartz, for defendant in error.
   By the Court.

It does not appear that the ownership of the stock and its voting power were separated by the agreement under which the “shareholders committee” was appointed and the stock deposited with the depositary therein named, Brown, Shipley & Co.; and that agreement does not, therefore, constitute what is known as “a voting trust.” It was at most a convenient method by which distant and widely separated shareholders, became enabled indirectly to participate in the control and management of the company, and from which each could recede at any time and demand the return of his stock without violating any term of the agreement. The depositary is a proxy required to vote the stock as directed by the committee; and he and the committee both derived their power from the shareholders by the same instrument, and, in the end, effectuate their wishes. Such an arrangement differs widely from an agreement whereby the stock is placed in the hands of trustees who are invested with the power of voting it as their interests may dictate, irrespective of the wishes or direction of the owners. Such an agreement, as the latter, would be void as against the policy of our corporation law.

In .respect to the matter set up in the second defense, it is sufficient to say, that what a director'may contemplate doing when elected, cannot affect the validity of his election, if he is otherwise eligible to the place. When such agreement is made and entered into, it will be time enough to consider it, and pass upon the power of the company to make it. The power of the company to become a party to such an agreement has not been challenged by the state,. unless we regard the answer of the company, adopted by Smith, Whitaker and Green, as in the nature of a cross-petition in quo warranto-, which would not only be anomalous but without any authority of law. Quo warranto can be maintained only in the name of the state.

Judgment affirmed.


source: Caselaw Access Project

author: By the; Court.

license: Public Domain

text:
    Railway Co. v. Construction Co.

      Practice — Pleading—Interrogatories attached to — Order of court as to answering — Effect and force of — Trial by jury — Right to, may be waived by party appearing, in absence of opposite party.

    1. An order of the court that interrogatories attached to a pleading be answered on or before a certain time, and, in default thereof, that the action stand dismissed, does not execute itself, and the action continues upon its docket until dismissed by the court.
    2. Section 5204, Revised Statutes, which provides, among other things, that in an action arising upon contract, trial by jury may be waived by the consent of the party appearing, when the opposite party fails to appear by himself or attorney, does not impair the right of trial by jury, and is therefore valid.
    3. Questions not made in the court of first instance nor assigned for error in the circuit court, will not be considered in this court.
    (Decided Dec. 23, 1892.)
    Error to the Circuit Court of Ross county.
    The Western Railway Construction Company commenced an action August 31, 1876, in the Court of Common Pleas of Ross county, against The Springfield, Jackson & Pom-eroy Railroad Company to recover $322,650.00 damages for an alleged breach of a written agreement entered into between the parties, October 22, 1875, under which the construction company had agreed to construct the road of the railroad company from Springfield, in Clark county, to Jackson, in Jackson county, Ohio. It is averred that the plaintiff commenced the work in November, 1875, and that certain estimates were made of the work done, some of which were paid and others not, and that on April 14, 1876, the defendant “wrongfully and without just cause or excuse cancelled the contract and attempted to discharge plaintiff from the obligations thereof, and refused to permit, and prevented the plaintiff from proceeding further with the work of constructing said railroad.”
    Issues of fact were made by the answer of the defendant and a reply of the plaintiff. To the answer were also appended certain interrogatories to be answered by certain officers of the plaintiff. A demurrer to these interrogatories having been overruled by the court, it made an order requiring them to be answered on or before Feb. 7, 18.85, and, in default thereof, ordered that the “action stand dismissed at plaintiff’s costs.” The defendant, claiming that these interrogatories had not been answered as required, made a motion to dismiss the action, which was overruled by the court. To which the defendant excepted, but did not prepare and tender a bill of exceptions setting forth the facts upon which the court acted. The case thus stood until the April term, 1886, at which, as appears from the record, on August 9, the defendant made default; and the plaintiff in open court waiving a jury, submitted the issues upon the pleadings and the evidence to the court, which on consideration found for the plaintiff; and, after deducting the sum of $122,000.00, the amount of a subscription of the plaintiff to the capital stock of the defendant, rendered judgment for the sum of $200,650.00, the balance of the damages assessed. At the same term a motion was made to set aside the judgment and to re-instate the action, which was overruled.
    On error the judgment was affirmed in the circuit court, the principal assignments relied on being, 1, that the court erred in overruling the motion to dismiss the action, under the order it had made, that if the interrogatories were not answered by the time fixed, the action should stand dismissed; 2, that the court erred in rendering judgment when by the terms of the .said order the cause stood dismissed; 3, that the court erred in trying the issues without submitting them to a jury.
    The same errors are assigned and relied on in this court. To'which has been added, by printing an additional part of the record and filing the same a short time before the day fixed for oral argument, an assignment that the contract sued on is illegal and void, made so, as claimed, by the agreement of the plaintiff to subscribe $122,000.00 to the capital stock of the defendant, to be paid for in the construction of the road under the agreement.

      R. A. Harrison and W. A. Hitchins, 'for plaintiff in error.

      Alfred Yaple and W. H. Woodrow, for defendant in error*
   By the; Court.

As no bill of exceptions was taken, setting forth the facts upon which the court acted in overruling the motion to dismiss the action on the ground that the interrogatories had not been answered as required, the ruling of the court upon the motion cannot be reviewed. The order as made could not execute itself. Whether the interrogatories had been answered, or whether the'plaintiff had been prevented' by unavoidable accident from complying with it in the time named, were questions that might have arisen on the motion, and would be for the consideration of the court before acting on it. If either was true the motion was properly overruled. Therefore, in the-absence of any showing in the record as to what the facts were, we are bound to presume that they were. sufficient to warrant the court in refusing to dismiss the action. This disposes of the second as -well as the first assignment. The record does not show that the action was dismissed, hence we cannot assume that the court committed the error assigned, that is to say, that it rendered judgment after the action had been dismissed.

Did the court err in trying the issues, instead of submitting them to a jury? We think it did not. Though the right of trial by jury is declared by our constitution to be inviolate, still it may be waived, and it is therefore competent to the legislature to provide the mode in which it- may be done, as if may regulate the exercise of any other right. Thus a trial may be had in a civil action before a justice of the peace without a constitutional jury, because the defeated party may obtain a jury by taking an appeal to the common pleas; and so the compensation of an owner for property taken for the use of a public road, may be assessed in the proceedings before the county commissioners, because, if not satisfied with the allowance made by the viewers, he may have his compensation assessed by a jury by taking an appeal to the probate court. In none of these and similar cases, has the right been regarded as impaired, though it can be secured only by taking an appeal. The inconvenience of being compelled to take an appeal has not been regarded as impairing the right, Section 5204, Revised Statutes, provides that in actions arising on contract, trial by jury may be waived, “ By the consent of the party appearing, when the other party fails to appear at the trial, by himself or attornéy.” All persons are presumed to know the law. The defendant is therefore presumed to have known, that by failing to appear, the plaintiff could, if it saw fit, waive the calling of a jury to try the .issues and submit them to the court, and to have consented that if it saw fit, it might do so. The requirement that it should attend and demand a jury if it required it, placed the defendant under no greater inconvenience than a party is placed who is required to take an appeal to secure a jury; in the latter case a bond is required.

Such has been the construction placed on the law from the time it was incorporated in the code in 1853; and we have no knowledge of this construction, or of the constitutionality of the statute, having been called in question prior to this time. The hardship suggested of a party being pre-rmnted by unavoidable accident from attending and demanding a trial by jury, is without weight; as, in such case, he would have the right to have the finding and judgment set aside and a new trial granted, whether the trial had been had before the'court or a jury.

The question as to the validity of the agreement between the plaintiff and the defendant, for the breach of which the suit below was commenced, was not presented or considered in the common pleas nor in the circuit court; nor, in this court, until a short time before the case was reached for oral argument; and, also, after the plaintiff in error had obtained an order for an abridgment of the printing of the record to such parts of it as raised the questions already considered. In view of these facts, and the established rule of the Court-not to consider questions unless assigned for error in the courts below, we decline to consider the question as to the validity of this contract; and express no opinion upon it.

Judgme'rit affirmed.


author: Ranney, J.

text:
    Phineas Freeman, survivor, etc. v. Levi Rawson.
    A mortgage of personal, property, with possession, and a power of disposition reserved to the mortgagor, is fraudulent and void as against his other creditors.
    If the power of disposition appear upon the face of the mortgage, or is fairly to be inferred from its provisions, it is the duty of the court so to declare it, without submitting the matter to the jury as a question of fact.
    If it does not so appear, but is so understood or agreed by the parties at the time the mortgage is executed, it is equally void; and such understanding or agreement may be shown by parol evidence, and may be proved by the conduct of the parties in relation to the subject matter of the mortgage, and other circumstances, as in other cases.
    In either case, when the fact is made to appear, the mortgage is fraudulent in law, irrespective of the intention of the parties.
    Whatever maybe the effect of the act of February 24, 1846 (Swan’s Rev. Stat. 315), requiring such mortgages to be deposited with the township cleric, in rebutting the presumption of fraud arising from leaving the property in the possession of the mortgagor, it has no effect to validate those in which such power of disposition is retained.
    Motion for new trial. Reserved in Cuyahoga county.

      The plaintiff sought to recover of the defendant damages for causing a store of goods, in the possession of Edward Rawson, a judgment debtor of the defendant, to be seized and sold upon execution.
    The damages claimed was the amount of a note which, with a mortgage on the goods to secure it, Edward Rawson had given to the plaintiff before the recovery of the judgments.
    The case was tried in the District Court, and the verdict being for the defendant, the plaintiff filed a motion for a new trial, on the grounds that the court misdirected the jury as to the law of the case, and that the verdict was against the law and the evidence.
    The instructions given to the jury, and the material facts in the case, are set forth in the opinion of the court.
    This motion was reserved for decision here.

      Tilden & Payne, for plaintiff.
    The Reporter finds no brief for plaintiff.

      Bishop, Backus and Noble, for defendant.
    I. Did the court err in its charge to the jury ?
    In this State, where there has been a mere retention of possession of the mortgaged property by the mortgagor, the rule of law has been uniform, or nearly so, as established in Sombeck v. Vanmetre, 9 Ohio Rep. 153. “ Where the vendor of goods retains possession of goods after sale, whether absolute or conditional, it is prima facie evidence of fraud, but the parties are permitted to show that the sale was still a bona fide sale.”
    Rut this has not been the rule of decision in this State, or any other, when the mortgagor still continues to use and enjoy the property as if no mortgage had been executed upon it.
    This court ought to. subject the claim of a mortgagee, who permits the mortgagor to use and enjoy the mortgaged chattel, to a most rigid scrutiny, and at least not relax any rule which has heretofore obtained in this and other States. See 2 Kent’s Com. (4th ed.) 532.

      The points directly involved under this head are—
    1st. Will an understanding between the parties to a chattel mortgage, at the time it is made, and which is not expressed in it, that the mortgagor may use and dispose of the property mortgaged, as his oion, render the mortgage fraudulent and void in laiu ?

    2d. May the jury ascertain that understanding from the conduct of the parties, and the circumstances surrounding the transaction ?

      Mrst. A secret understanding is as fatal, if not more so, than if the privilege had been secured by the instrument itself. Retaining possession merely, of the chattels mortgaged, is prima facie evidence of fraud in the original making of the deed, because it is evidence of a secret trust for the benefit of the mortgagor. 1 Smith’s Leading Cases, pages 39, 40, Twyne's case, and note.
    If such is the effect of merely retaining possession, why should not the secret understanding, which is evidenced by the conduct of the parties, have an equally fatal effect in rendering the mortgage void, as if written in it ? That it does have the same effect, is well settled by the authorities which we shall cite. That the mortgage is void when the power of sale and disposition is contained in it, we take to be too well settled, both in and out of this State, to be the subject of discussion here. Myers v. Qollins, 16 Ohio Rep. 547. We ask the attention of the court to this case particularly.

      Second. If such may be the inference, as that before named, in case of merely retaining possession, why not,, if the circumstances and conduct of the parties warrant it, infer that, at the time of making the mortgage, there was a secret arrangement wholly inconsistent with the object of it, as if it appeared upon the face ? Such must be the inevitable effect. See Gfriswold v. Shelden, 4 Comstock 592; 1 Grreenl. Ev., sec. 207; 6 Adolphus & Ellis 475 ; Thompson v. Blanchard, 4 Com. R. 309.
    The following authorities sustain the charge of the court: B.ohlins v. Parker, 3 Mete. Rep. 119; Somerville v. Morton, 4 Yerg. 541; Shurtleff v. Willard, 19 Pick. 212; 1 Smith’s Leading Cases 69; Swift et'al. v. Thompson, 9 Conn. Rep. 63; Patton v. Smith, 5 Conn. Rep. 196.
    If the right of sale and disposition by the mortgagor, as owner, appears upon the face of the mortgage, then it is the province of the court to declare the mortgage fraudulent; but if the right does not so appear, but is one of evidence aside from the mortgage, then it becomes a question of fact for the jury. Griswold v. Shelden, 4 Comstock’s Rep. 580 — 587; Mdgell v. Mart, 13 Barb. 380; Wood v. Lowry, 17 Wend. 492.
    A judgment creditor whose execution is levied, stands on similar ground with a bona fide purchaser, and has the same right to hold the property of his debtor. Dipper Ghmton v. McLaughlin, 2 Wend. Rep. 597.
    In Indiana it is clearly the law, that any use of the property mortgaged by the mortgagor, inconsistent with the deed, renders it fraudulent per se. Jordon v. Turner, 3 Blackf. 309.
    In Kentucky the conclusion is, in case of mortgages of personal property, that non-delivery is not a fraud in law. Yet it will, even before forfeiture, be competent evidence of fraud, in fact, for the jury. 1 Smith’s Leading Cases 54 ; McGowen v. May, 5 Littell 239. Possession after forfeiture certainly may be evidence of fraud, and combined with other circumstances, or even alone, may be satisfactory to a jury. 1 Smith’s Lead. Cases 54, and J. J. Marshall 223 — 227.
    In Virginia, in the case of Land v. Jeffries, 5 Randolph 211, Green, J., says: “ Possession and use, inconsistent with the terms and professed objects of the deed, makes the deed, per se, fraudulent and void; since it proves an original fraudulent intent in malcing the deed, and avoids it ab initio.” 1 Smith’s Lead. Cases 49, 50. This applies to mortgages as well as absolute deeds. Ib.
    The Virginia rule is the rule in the Federal courts. 1 Smith’s Lead. Cases, pages 47 and 48, and cases there cited.
    But we regard this case as substantially disposed of, in Oollins v. Myers, 16 O. R. 547.
    See also O’ Qonnell v. Cruise, Handy’s Superior Court (of Cincinnati) Rep., Vol. 1, No. 2, p. 167, in which it is held that the mortgagor, remaining in possession of a store of goods, renders the mortgage void.
    II. The verdict was not against the testimony.
    The circumstances and conduct of the parties were such as to justify the inference by the jury, that there was an understanding between the plaintiff and E. Rawson, when the mortgage was executed, that the mortgagor should still continue to use and dispose of the mortgaged property, as the owner.
    The verdict of the jury ought to stand for another reason— because the defendant stands in the light of a creditor, $6000 of whose debt was contracted while the mortgagor was dealing with the mortgaged property, as aforesaid. In such cases, the mortgagee must be postponed to the execution creditor, whose debt is thus contracted. In law, the mortgagee is treated as having, by his conduct, caused the defendant to give the execution debtor credit. 1 Greenl. Ev., sec. 207 ; Gregg v. Wells, 10 Adolphus & Ellis 90 ; Bennyer v. Seifer, 6 Wend. 436; Thompson v. Blanchard, 4 Comstock 303 ; Griswold v. Sheldon, lb. 580 ; Bussey v. Binton, 4 Mass. 407. See close of opinion of the court. 1 Cow. & Hill’s Notes 200.
    Again: The defendant is in the same condition of a bona fide purchaser, and is entitled to the same protection, and the plaintiff’s mortgage is of no avail against either. Oollins v. Myers, 16 Ohio Rep. 554; Griswold v. Sheldon, 4 Comstock 589.
    As to the effect of depositing the mortgage for record. It has been maintained that the recording of the mortgage of the plaintiff is a substitute for change of possession, and will render the mortgage good even in this case.
    That is not the design of the registry law. The depositing of the mortgage in the recorder’s office, merely enables the mort= gagee to give evidence tending to sustain the mortgage, where he does not take possession, when it would be otherwise void. It does not, of itself, rebut any of the presumptions of law derived from continued possession and exercise of acts of ownership over the property by the mortgagor. 17 Wend. 492 — 496 ; Wood v. Lowry, 4 Comstock 580. And see also 3 Mete. 119, and 9 Conn. 63, before referred to; they were all cases where the mortgages had been recorded.
   Ranney, J.

Both the plaintiff and defendant were the creditors of one Edward Rawson, who, at the time to which this controversy relates, was the owner of a store of goods in the city of Cleveland, valued at about $15,000. On the 9th of March, 1853, being then indebted to the plaintiff in the sum of $519.29, he gave his promissory note, at 90 days, for the amount, secured by a mortgage upon these goods. Before the maturity of this note, the defendant recovered large judgments against Rawson, and proceeded to levy upon, and sell, all the goods included in the mortgage. The right of the plaintiff to recover depends upon the validity of his mortgage. It is claimed to be void as against the other creditors of the mortgagor, because he was permitted to remain in possession, and, with the assent of the mortgagee, to go on and sell the mortgaged property, and deal with it as his own, after the mortgage was executed. That he did in fact remain in possession, keep his store open, add to the stock, and retail the goods, down to the time the executions were levied, is not disputed. It is unnecessary to refer particularly to the evidence given, to show that this was done with the concurrence of the agents of the mortgagee. It is enough to say, that if the case was placed upon the proper ground in the instructions to the jury, it was such as fully satisfies us with the verdict given for the defendant. The court charged the jury, that while it was true, that a stipulation contained in a chattel mortgage, or fairly to be inferred from its provisions when taken in connection with the subject matter to which it related, allowing the mortgagor to sell or dispose of the mortgaged property as his own, would render it fraudulent and void as against his other creditors ; that, in the opinion of the court, no such power was given by the terms of this mortgage, nor could the same be fairly inferred from it. But if the jury should be satisfied, from all the circumstances surrounding the transaction, including the conduct of the parties or their agents at the time, and since the execution and delivery of the mortgage, that, at the time it was executed, it was understood between them that the mortgagor should continue to exercise such power of disposition, the mortgage would be equally fraudulent and void as though the stipulation had been contained in it.

The courts of this State have never been embarrassed with the question, which has so much distracted those of some other States, as to the effect of leaving mortgaged property in the possession of the mortgagor.

In New Tort, particularly, the contest has been of long continuance, and of a character, as said by a learned author, not calculated “ to elevate the dignity of the courts, or exalt the confidence of the community in the certainty of the law.”

In this State, the uniform holding has been, that it is a badge of fraud, but not conclusive, and subject to be rebutted by evidence showing some good, honest and sufficient reason why the possession was not changed. Hombeck v. Vanmetre, 9 O. R. 153; Collins v. Myers, 16 O. R. 547. Without arrogating to ourselves the credit of having placed beyond the reach of criticism a question upon which learned judges have so essentially differed, we still think that the rule adopted recommends itself for its general convenience, and is better calculated than any other to attain the ends of justice. When viewed in the light of a court of equity, a mortgage is a mere security for the debt. The retention of possession, therefore, by the mortgagor, is not absolutely inconsistent with the nature and objects of the conveyance. But, while the right of the creditor to take such security is undoubted, he ought to be required to exercise it in such manner as not to injure others; and as all experience proves that men get credit upon what they possess and apparently own, and as such a conveyance gives the legal right to possession, he ought not to be permitted to expose creditors and purchasers to the hazards of fraud and deception, without giving some, good and substantial reason for leaving the property in the hands of the debtor.

Although the law will not conclusively presume a secret trust in favor of the mortgagor, from the fact that he is left in possession of the property; yet, where such a trust is established, it inexorably stamps the transaction as fraudulent, and avoids the mortgage. As stated by Richardson, C. J., in Coburn v. Pickering, 3 N. H. Rep. 415: “ Where the question is, was there a secret trust ? it is a question of fact; but where the fact of a secret trust is admitted, or in any way established, the fraud is an inference of law, which a court is bound to pronounce.” The mortgage must be precisely what it purports and professes to be, and must operate an absolute surrender of the property for the security of the mortgagee. The creditor has the right to secure himself, but he has no right to hold his lien upon the property, and stipulate for advantages to the mortgagor, to the prejudice of other creditors. He must deal with an eye single to his own indemnity, and with just deference to the rights of others; and every attempt to secure the use of the property, under cover of the mortgage, to the mortgagor, must be held to destroy it. Now, what possible arrangement could be more directly inconsistent with the nature and purposes of the conveyance, or could more palpably secure to the mortgagor all the beneficial uses of the property, than the power to use and dispose of it for his own benefit ? It is simply and plainly saying that, as between the parties, the mortgagor’s enjoyment of, and dominion over it, shall be no less than before; while it is put beyond the reach of other creditors.

The main proposition embraced in the instructions under consideration has been very clearly and satisfactorily settled in this State, by the case of Collins v. Myers, 16 O. R. 547. It was there held, that a mortgage of personal property, where the mortgagor retains possession of the property mortgaged, with the power of sale, is void as against subsequent purchasers and execution creditors. It is quite unnecessary to attempt to add to the reasons assigned for that decision; and we therefore content ourselves with saying, that we fully agree with the court that made it, that “ such a mortgage is no certain security upon specific property; it all depends upon the honesty and good faith of the debtor; and as he might dispose of it to a creditor at will, to satisfy a debt, we see no reason why a creditor might not seize it against his will, for the same object.” And that “ to hold such a mortgage valid, would enable a debtor to do business upon a capital, within the limits of the mortgage debt, at the will of the mortgagee; ” and would furnish a complete shelter under which a man could carry on trade for his own benefit, completely protected against the payment of his debts, and placed wholly beyond the reach of creditors.” It is true, that the power of disposition in that case was inferred from the provisions of the mortgage. But we think no sound distinction, either upon principle or authority, can be taken between such a case, and one where the agreement or understanding exists outside of the mortgage, at the time it is executed. Indeed, to admit such a distinction, would be to divest the principle of all vitality, and furnish a perfectly easy and facile mode of evading it altogether.

The rule is adopted for the protection of creditors and purchasers ; but what protection could it afford to them, if the same mischievous conduct was allowed, in pursuance of a parol arrangement, between the parties to the fraud ?

The mortgage is attacked for fraud by persons not parties to it, and who are defrauded, and upon no principle can they be debarred from showing that the whole arrangement had that effect. 1 Greenl. Ev., sec. 284.

In Worrall v. Smith, 1 Camp. R. 332, the assignment was absolute, of the household furniture and stock in trade of a publican ; and although a servant of the assignee was immediately put into the house, yet as the debtor was allowed to carry on the business as usual, Lord Ellenborough held the assignment fraudulent and void as against creditors.

In Paget v. Perchard, 1 Esp. R. 205, which was also an assignment of the furniture, liquors, etc., of the keeper of a public house, it appeared that the assignees had taken immediate possession, but had permitted the assignor, on the evening of the same day, to sell liquors in the usual way of her trade, and to receive the money, for which she had not. accounted. Lord Kenyon said, “ the allowing her to execute acts of ownership, after having parted with all her property, by the bill of sale, was inconsistent with such situation, and a sufficient evidence of fraud as against bona fide executions; ” and directed a -nonsuit.

The mortgage, in Robbins v. Parker, 3 Met. R. 119, was of “ all the hay, grain and produce” standing on the mortgagor’s farm, at the time it was made. It contained no stipulation allowing the mortgagor to use or consume the property; but it was contended that the property, in its nature, was subject to be consumed in its use, and was intended to be so consumed by the mortgagor, and that the mortgage was, therefore, colorable and fraudulent as against creditors. Judge Wilde, after stating that such property might be mortgaged without imputation of fraud, provided it was not to be used, and could be kept without damage until the mortgage debt became payable, says: “ But if the articles mortgaged are perishable, and cannot be so kept, or if they are mortgaged under an agreement or understanding that they may be used and consumed by the mortgagor (as the understanding of the parties seems to have been in the present case), then we think the transaction must be considered as collusive and fraudulent against creditors. No other reasonable inference from the conduct of the parties to the mortgage can be made. The mortgagor used and consumed the property in the same manner as he would have done if no mortgage had been made ; and this with the knowledge of the mortgagee, and without objection on his part.”

In the case of Dipper v. McLaughlin, 2 Wend. R. 597, one Stephens had mortgaged his stock of goods, which were afterwards seized upon execution.

The court say: Stephens’ whole stock in trade was mortgaged, and the mortgagor was permitted to sell it without rendering any account. This state of things continued after the mortgage became forfeited, from 1st January, 1825, till August, 1827, without any possession taken, or accounting of the parties, or any knowledge of these circumstances by any one, except by one person who drew, and by another who witnessed, the mortgage.

“A judgment creditor whose execution is levied, stands on similar ground with a bona fide purchaser, and has the same right to hold the property of his debtor.

“ To sanction a transaction like this, would open a door to frauds innumerable, and to an extent incalculable.”

The case of Wood v. Lowry, 17 Wend. R. 492, was very similar in its circumstances, and the court held the mortgage void; remarking, that no mortgage or bill of sale was ever upheld under such circumstances, and that the judge would have been well warranted in instructing the jury that the transaction was fraudulent and void in law.

The last case in New York is that of Griswold v. Sheldon, 4 Com. R. 580, which was also a mortgage upon a stock of goods, left in the possesion of the mortgagor, and upon which he was permitted to deal; and although the members of the court differed very materially, upon several questions in the case, they were unanimous upon the only question material to the present inquiry. Chief Justice Bronson, who expressed the views of one half the court, was of the opinion that the mortgage, upon its face, allowed the mortgagor to deal with the property as though he were the owner ; and added, that no one would pretend that such a mortgage could stand against creditors and purchasers. But he considers the question in another point of view, and says: “ If the intention to allow Burdick” (the mortgagor) “ to dispose of the mortgaged property cannot be gathered from the face of the deed, still the goods were left in his possession, and he was, in fact, allowed to deal with them as owner, and allowed to dispose of them as a merchant to his customers, from the date of the conveyance down to the time of the levy. Such a transaction the law always has, and I trust always will, pronounce a fraud upon creditors and purchasers.

“ There would be no hope of maintaining honesty and fair dealing, if the court should allow a mortgagee and vendee to succeed in a claim to personal property, against creditors and purchasers, after he had not only left the property in the possession of the debtor, but had allowed him to deal with it as his own.”

Mullett, J., in whose opinion the balance of the court concurred, admits that, if the mortgage “ contained a provision allowing the mortgagor to retain possession of the goods, and sell and dispose of them at pleasure, it would not be a mortgage, dr create any lien on the property as against subsequent purchasers, and perhaps creditors; but no such provision appears on the face of the paper, and if it required a resort to other evidence to prove it, the question became one of fact for the jury to decide.”

Erom the considerations and authorities we have adduced, we are of opinion that these conclusions necessarily follow: That a mortgage of personal property, with possession, and a power of disposition reserved to the mortgagor, is fraudulent and void as against his other creditors. If the power of disposition appear upon the face of the mortgage, or is fairly to be inferred from its provisions, it is the duty of the court so to declare it, without submitting the matter to the jury as a question of fact. If it does not so appear, but is so understood or agreed by the parties at the time the mortgage is executed, it is equally void; and such understanding or agreement may be shown by parol evidence, and may be proved by the conduct of the parties in relation to the subject matter of the mortgage, and other circumstances, as in other cases. And that in either case, where the fact is made to appear, the mortgage is fraudulent in law, irrespective of the intention of the parties. •

Our attention has been called to the act of Eeb. 24, 1846, requiring such mortgages to be deposited with the township clerk. It is only necessary now to say, that whatever may be the effect of that act in rebutting the presumption of fraud arising from leaving the property in the possession of the mortgagor (upon which a variety of opinions will be found to exist), it has no effect to validate those in which such power of disposition is retained.

The motion for a new trial must be overruled, and judgment entered on the verdict.


author: Bartley, J.

text:
    Justin Morrison and Alexander Morrison v. Robert B. Bailey and Leonard F. Burgess.
    The characteristics distinguishing a check from a bill of exchange, stated and explained.
    A check is always payable on presentation and demand, and is not entitled to days of grace.
    A draft for money, in the usual form of a check, but payable on a future specified day, is a bill of exchange and entitled to days of grace.
    Whether days of grace are to be allowed on a draft in the form of a check, depends upon the question whether the instrument is payable on demand, or at a future day.
    The usage of banks in any particular place, to regard drafts upon them, payable at a day certain after date, as chocks, and not entitled to days of grace, is inadmissible to control the rules of law in relation to such paper.
    Reserved in the Cuyahoga county, on a motion for new trial.
    This suit was brought on the instrument set out in the opinion of the court. On the trial in the District Court, which was at the October term thereof, 1854, the intervention of a jury was waived, and the cause submitted to the court, on the issue joined, upon the following agreed statement of facts: .
    It is agreed between the parties that the evidence consists of the instrument signed by said Bailey, and drawn on Wicks, Otis & Brownell, for the payment of $300 to Burgess or order, on the 13th of July, 1853, dated Cleveland, Ohio, June 30th, 53and indorsed by Burgess; which paper was, in due form, presented for payment on the 16th of July, 1853, and protested for nonpayment; and notice given on the same day.
    And the evidence consists, further, of the following statements of witnesses, which, it is agreed, shall be taken and considered as if given in court, on the trial of this cause.

      Defendants’ Testimony. — Mr. Eoot, of Merchants’ Bank, a banker for seven years; II. A. Hurlbut, of the Bank of Commerce, a banker for three or four years; Parker Handy, of same bank, and a banker for eight or ten years; T. P. Handy, of Commercial Branch Bank, a banker for fifteen or twenty years; A. C. Brownell, of Wicks, Otis & Brownell, a banker for four years, and Dr. Wick, President of City Bank for four years, testify that it had been their custom, and the custom of the banks and bankers in Cleveland, to present for payment, and pay such a paper as sued on, on the day named, without grace.
    T. P. Handy would further say, that such custom had prevailed about five years; that nine years ago it was different, and grace allowed.
    W. H. Stanley, of Forest City Bank, a banker for some years, testifies that the usage had been to treat such paper as without grace; but had known one exception, where the drawer of the paper had no funds, and where he told the bearer that he supposed the paper was entitled to grace — which he did in order to put the man off, to favor the credit of the drawer; when in fact the custom, and as he supposed the law, to be the other way. This paper was not paid till after grace. His impression was that it was then paid, though not certain.
    J. L. Severance, Teller of Commercial Branch Bank, a banker for ten or fifteen years, testifies, that to treat such a paper as not having grace, has been the custom in Cleveland; has known three or four exceptions where grace was given. These exceptions were occasioned through a new book-keeper not being acquainted with said custom. Up to within two or three years, it had been the custom of the banks to treat such paper as entitled to grace; it may have been fiv'e years.
    T. C. Severance, Cashier of Commercial Bank; been a banker for many years; custom generally qot to give or ask grace; have been exceptions to the rule — but remembers of but one instance, of Mygatt & Brown not presenting such a draft till after grace. That the custom has been nearly universal with banks and bankers of Cleveland, with occasional exceptions, to treat such paper as without grace; which exceptions have been in the presentment. We, and the banks generally, have never claimed grace.
    The above testimony, as to custom, objected to by plaintiffs, and received subject to exception.

      Plaintiffs’ Testimony. — It is further agreed that the following witnesses, as to the custom, called by plaintiffs, testify as follows:
    George Mygatt, of the firm of Mygatt & Brown, bankers of Cleveland, testifies that he has been a banker for thirty years, in Norwalk, Painesville and Cleveland; in the City Bank of Cleveland for two years, and in the next succeeding and the last three years, as a private banker. That he does not know what has been the general custom in Cleveland as to such paper; but that it has been his invariable custom, whenever engaged in banking business, to treat such paper as entitled to grace, both in presenting them for payment and in paying them.
    George Williams, a banker for twenty years, testifies that he concurs with George Mygatt in his above statement, and believes it has been the general custom of bankers and banks in Cleveland, to treat such paper, when payable to order instead of bearer, as entitled to grace; that he does not now remember of any particular instance, without referring to his books, but that such is his recollection of the course of business in Cleveland for many years, and presumes he has had forty instances where such paper was treated with grace.
    It is agreed that the above was all the evidence, or agreed statement of evidence, offered on the trial; that the only question is, whether such a paper was entitled to grace.
    And it is further agreed, that all the parties to the paper were residents of Cleveland, and that the drawees were bankers, and that the paper was discounted by plaintiffs on the day it was drawn and indorsed. It is further agreed, that the signatures of R. B. Bailey and L. E. Burgess to the paper in question, are the signatures of defendants, respectively.
    The court, on this submission, found for the plaintiffs, and assessed their damages. Whereupon the defendants moved for a new trial, upon the ground, that the finding of the court was contrary to the law and the evidence, etc.; and the court reserved the case, on this motion, for decision by the Supreme Court.

      Willey Gary, for plaintiff,
    cited — Chitty on Bills, p. 1, sec. 1, p. 511, 50, 52, 322; Bayley on Bills, p. 1, sec. 1; Byles on Bills, p. 1, sec. 1, p. 71; Story on Prom. Notes, p. 614, sec. 487; Story on Bills 51; Chitty, Jr. 24 — 26 ; 21 Wend. 337; 6 Hill 174 ; 4 Yerg. (Tenn.) Rep.; Little’s (Ky.) Rep.; Blackford (la.) Rep.; Swan’s Statutes, pp. 587, 588, sec. 1; Bowen et al. v. Newell et al., 4 Selden 190.

      S. B. if B. J. Prentiss, for defendant Burgess,
    cited — Story on Prom. Notes, secs. 487, 488, 489, 490, 493, 496 ; 3 Kent’s Com. (6th Ed.), p. 75,104, note c ; Bx parte Brown, 2 Story’s Rep. 502; Bowen v. Newell, 5 Sandford’s Rep. 326; The Mohawk Bank v. Broderick <f Powell, 10 Wend. 304; S. C., 13 Wend. 133; Smith v. Janes, 20 Wend. 192; Salter v. Burt, 20 Wend. 205; Murray v. Judah, 6 Cow. 490; Holcombe’s Lead. Cases upon Com. Law, 264, 274, note; B,enner v. The President, Directors <f Go. of the Bank of Columbia, 9 Wheat. 581; 5 Cond. Rep. 690; Mills v. The Bank of the U. States, 11 Wheat. 431; Bank of Washington v. Triplett <f Neale, 1 Pet. 25; Bank of Columbia v. Magruder, 6 Harr. & J. 180; Pearce v. Butler, 14 Mass. 303; Whitwell v. Johnson, 17 Mass. 452 ; Hartford Bank v. Stedman, 3 Conn. 489 ; Wood v. Gorl, 4 Mete. 203; Little v. Phoenix Bank, 2 Hill 425.
   Bartley, J.

This suit was brought against Bailey, as drawer, and Burgess, as indorser, of a paper, of which the following is a copy:

$300. Cleveland, O., June 30th, 1853.
Wicks, Otis & Brownell: Pay to L. P. Burgess, on the 13th day of July, ’53, or order, three hundred dollars.
R. B. BAILEY.
Indorsed by L. P. Burgess.

The paper was presented to Wicks, Otis & Brownell, for payment, on the 16th day of July, 1853; payment refused, and notice of nonpayment given on that day.

It is claimed, on the part of the defense, that presentment was not made, and notice given, in due time. And the question for determination is, whether this instrument, upon which suit is brought, is, or is not, entitled to- days of grace; and this depends upon the question, whether the instrument is a check eo nomine, or a bill of exchange, subject to the rules and usages governing ordinary bills of exchange.

The distinction between a bill of exchange and a check, although much confused, in some respects, by the apparently inconsistent language of some of the adjudicated cases, as well as of some of the elementary writers bearing upon it, is founded in the difference in the nature of these two classes of commercial paper. Checks, being drafts or orders for immediate payment of money, have come into such common use as to supersede, in frequent payments of considerable amounts, not only gold and silver coin, but even bank notes. And with their general use, certain usages have grown up peculiar to that class of instruments, and which have become engrafted on the commercial law of the country. A check is subject to many of the rules which regulate the rights and liabilities of parties to hills of exchange, and so nearly resembles the latter class of instruments, that some authors have defined a check to be, in substance and in legal effect, an inland bill of exchange, payable on demand. But, as Judge Story well said, in the matter of Brown, 2 Story’s Rep. 502, although a check nearly resembles a bill of exchange, yet nullum simile est idem.” By statute, in Ohio, all bills made negotiable are entitled to three days grace in the time of payment. (Revised Stat. 576.) But days of grace, in the time of payment, would be inconsistent with the nature and purpose of a check, which requires no acceptance, and is always payable immediately on presentment.

These two classes of commercial paper, although in many respects similar, are to be distinguished in the following particulars, to wit:

1st. A cheek is drawn upon an existing fund, and is an absolute transfer or appropriation, to the holder, of so much money in the hands of the drawee; whereas a bill of exchange is not always, or necessarily, drawn upon actual funds in the hands of the drawee, but very frequently drawn in anticipation of funds, or upon a previously arranged credit.

2d. The drawer of a check is always the principal; whereas the drawer of a bill frequently stands in the position of a mere surety.

3d. As between the holder of a check and an indorser, demand of payment within due time is essential to the liability of the latter. Where the parties reside in the same place, the holder should present the check on the day it is received, or within business hours of the following day; and when payable at a different place from that in which it is negotiated, the check should be forwarded by mail on the same, or the next succeeding day, for presentment. Rut days of grace being allowed to bills of exchange, the time for demanding payment of a bill is different.

4th. As between the holder and drawer, however, mere delay in presenting a check in due time for payment, would not discharge the latter, unless he had been injured thereby, and then only to the extent of his loss; but a different rule, in this respect, prevails in case of a bill of exchange.

5th. A check requires no acceptance, and, when presented, the presentment is for payment.

6th. It is not protestable, or in other words, protest is not requisite to hold either the drawer or an indorser.

Prom these distinguishing characteristics, arising out of the nature of these two classes of instruments, it follows, that a check is always payable on presentation and demand; and that, if a draft for money be in the usual form of a check, except that it is payable on a specified day in future, it is a bill of exchange, and entitled to days of grace. This is the result of the doctrine of the most recent and well considered authorities having a bearing upon this subject. Bowen et al. v. Newell et al., 4 Selden Rep. 190 ; Brown v. Lusk, 4 Yerger’s Rep. 240 ; Daniels v. Kyle et al., 1 Kelley’s (Ga.) Rep. 304; Woodruff v. Merchants’ Bank, 25 Wend. 673; 6 Hill 174; Chitty on Bills 512 and 515 ; Ryles on Bills 71; Story on Prom. Notes, secs. 489, 490 and 491; 3 Kent’s Com. 104.

It is also settled, in Woodruff v. Merchants’ Bank, and Bowen v. Newell, above referred to, that any supposed usage of banks in any particular place to regard drafts upon them, payable at a day certain after date, as checks, and not entitled to days of grace, is inadmissible to control the rules of the law in relation to such paper.

Motion for new trial overruled and judgment for the plaintiffs.


author: Thurman, C. J.

text:
    The Lessee of John Bishop et al. v. Benjamin McMullen et al.
    There is no inflexible rule for running the open or lost lines of a survey. Each case depends on its own circumstances.
    This is an action of ejectment, brought in Logan county, and reserved for decision by this court. It was submitted upon an agreed statement of facts, accompanied by a plat. The material facts are stated in the opinion of the court, from which a plat may easily be drawn. It is therefore deemed unnecessary to engrave the plat.

      Wm. Lawrence, for the plaintiff.
    It is the duty of the court to construe the survey. 4 T. B. Monroe 34, 63 ; 1 U. S. Dig. 474, sec. 14.
    The primary and chief rule of construction is to ascertain the intention of the locator, or surveyor, who made the survey. Lyon v. Boss, 1 Bibb 466 ; 7 Bet. 171; Preston v. Bowman, 2 Bibb 493, 495 — 8 ; 4 Dana 322; Calvert v. Fitzgerald, 6 Littell’s Select Cases 391; Blake v. Talbott, 6 Mon. 182. .
    There is no universal rule of construction; the determination of every case depends upon circumstances. 6 Wheat. 580; Preston v. Bowman, supra; 2 Greenleaf’s Cruise, vol. 4, 379, notes.
    The court will always, where it is possible, preserve parallel lines to a survey where the calls are parallel. Massie v. Watts,
      6 Cranch 148 ; 2 Bibb 498 — 8 ; Holmes v. Trout, 7 Pet. 171; Pearson v. Baker, 4 Dana 323 ; Balston v. McLung, 2 Dana; 4 J. J. Marsh. 278 ; 3 Bibb, index, 557, and cases cited; 1 Greenleaf’s Ev., secs. 277, 283, 292, 295.
    Distance often prevails over course. Preston v. Bowman, supra; Blight v. Axtell, 4 J. J. Marsh. 278.
    A line, as found, is a contemporaneous explanation of “ the intention of the surveyor.” 1 Greenleaf’s Ev., sec. 283; 13 Pick. 267; 12 Mass. 469; lb. 207; Cowen & Hill’s Notes to Phillips on Ev., note 939, p. 1363.
    The plan of fixing a lost corner by the intersection of courses of called .lines, is only resorted to when diagonal corners alone are left to guide. But where three corners of a square survey are known to exist, as in this case, the rule is to square the survey by running parallel lines. 2 Bibb 493 — 495 ; Wishart v. Oosby, 1 A. K. Marsh. 382; Thornley v. Ohurehill, 4 Mon. 29 ; Johnson v. Grabar, 5 Dana 543; Blight v. Axtell, 4 J. J. Marsh. 278 ; 4 Dana 325; 6 Lit. Select Cases 391.

      Stanton & Allison, for defendants.
    Survey No. 3230, can have no effect in determining this question.
    It is a universal rule, that where there is no conflict between course and distance, the courses and distances called for must govern, unless a monument compels a change. Huston v. McArthur, 7 O. R. (Pt. 2) 61; McQoy v. Galloway, 3 O. R. 284; Avery’s Lessee v. Baum, Wright-576 ; lb. 171; Smith v. Miller, 2 Wheat. 316; Lessee of Nelson v. Hall, 1 McLean 519 ; Bryan v. Beckley, Littell’s Select Cases 91; Wishart v. Oosby, 1 A. K. Marsh. 382; Martin v. Simpson, Harper 454; LHmmett v. Lashbrook, 2 Dana 2; Qowan v. Pauntleroy, 2 Bibb 261; Mercer v. Bates, 4 J. J. Marsh. 343; Thornberry v. Ohurehill, 4 T. B. Mon. 29.
    Except under peculiar circumstances, distance yields to course. Bryan v. Beckley, supra; Pearson v. Baker, 4 Dana 323.
    That construction is to prevail which is most against the party claiming under an uncertain survey.' Pearson v. Baker, supra; Preston v. Bowman, 2 Bibb 498, S. C.; 6 Wheat. 581.
    A title founded upon a doubtful hypothesis, ought not to succeed against the possession alone, where the party claiming under the doubtful title is plaintiff. Preston v. Bowman, and Thorn-berry v. Churchill, supra; Lessee of Muhlenberg v. Florence, 5 O.R. 248.
   Thurman, C. J.

The plaintiff claims under survey No. 3228; the defendants under No. 9679. The former was first patented, and if the land in controversy is a part of it, the plaintiff is entitled to recover; otherwise not. The case is decided by fixing the east line of the survey.

By the agreed case, it appears that surveys Nos. 3226, 3228 and 3230, were made on the same day — June 1, 1798 — and by the same surveyor, for one Smith, the owner. They are each, according to their respective calls, of the same size and form, namely, one mile square; and the southern boundary of 3226 is the northern boundary of 3228, and the southern boundary of the latter is the northern boundary of 3230. The three surveys, taken as a whole, form, then, according to their calls, a rectangle three miles long by one mile wide; No. 3228 being the middle survey. The corners at the termini of the eastern three mile boundary — to wit, the N. E. corner of 3226 and the S. E. corner of 3230 — are standing; and in a straight line connecting them, is found the S. E. corner of 3226, which is the N. E. corner of 3228. But a part only of this three mile boundary was actually run and marked, to wit: the northern mile thereof, being the eastern boundary of 3226; leaving the other two miles — the eastern boundary of 3228 and 3230 — unsurveyed. Nor was the southern boundary of 3228 surveyed, nor the S. E. corner thereof marked. Hence arises the question upon which the case turns, namely: how shall this S. E. corner be fixed ? for that once fixed, the eastern boundary of the survey becomes thereby fixed.

On the part of the plaintiff, it is contended that the open lines of 3228 should be run parallel to the surveyed lines thereof, and the corner fixed at their intersection; thereby preserving the square form of the survey. Or, that the corner should be placed in a straight line between the standing corners at the termini of the three-mile boundary, which would make the survey very nearly a square.

Eor the defendants, it is claimed that the open lines shall be run from the known corners of 3228, the courses called for in the patent, making a proper allowance for the variation of the compass, as ascertained by resurveys generally, and the corner fixed at their intersection when thus run.

If the east line be run parallel to the west line, the survey, at its S. E. corner, will be projected about four poles east of the three-mile straight line before mentioned. If it be run, as claimed by the defendants, the corner will be thirteen poles west of that line. So that, if either of these modes be adopted, the three-mile boundary will not be a straight line.

The lines actually surveyed exceed, by a few poles, the distances called for; but if the survey be closed as claimed by the defendant, its southern boundary will be three poles short of the distance called for. If closed by running the east line parallel to the west line, the southern boundary will be fourteen poles longer than called for; if the corner be placed in the three-mile straight line, the excess in the southern boundary will be ten poles.

The defendants rely on the general doctrine, that where a corner of a survey and the two lines running to it were never marked, or have become lost and cannot be proved, the survey is to be closed by running from the known corners the courses called for in the patent, making the proper allowance for the variation of the compass. But here arises an important inquiry, namely: Is the variation of the compass to be ascertained by resurveys generally, in the neighborhood, or by a resurvey of the lines of the particular survey that were actually run at its date ? If the former variation be applied in this case, the defendants will prevail; if the latter, the ease is with the plaintiff.

Now, in our judgment, there is no inflexible rule on this subject, but the circumstances of each case must determine which of these variations shall be applied. An inflexible rule was once established by statute, to wit, that the variation, ascertained from an existing line of the particular survey, should govern (2 Chase 996, sec. 7), but this law was wisely repealed; for although it prescribed a rule that in many, perhaps most, cases would be correct, yet there are cases in which it would be wrong. Eor the lines of a survey may have been run at different times; or with different instruments; or by different surveyors, differing in accuracy; or a mistake may have occurred, either in running a line or making a note of its bearing; or the circumstances of the case may plainly show that the particular variation is not the true one to be applied. Besides, the statute was defective in prescribing the variation, as found upon any known line, for the variation is often different upon different lines, though run at the same time; and to ascertain it by resurveying any one line— instead of getting the average variation of all the lines actually run at the date of the original survey — was to let the surveyor, by accident or design, prefer one variation to another, wholly irrespective of the circumstances of the case.

In the case before us, the three surveys were made on the same day, June 1, 1798, and, according to the record and patents, their eastern and western boundaries then bore N. 20° W. from the magnetic meridian — surveys in the Virginia Military District being run by that meridian. The magnetic meridian in this part of the country then bore to the east of the true meridian, but they have been approximating ever since; so that the variation is now, according to the agreed case, from a degree to a degree and a half less than it was in 1798 — say a degree and a quarter. It would result from these premises, that the boundaries above mentioned ought now to bear N. 18|° W.; but instead of this, the eastern boundary of 3226 is found to bear N. 21§ W., and the western boundary of- 3228, N. 221/4 W. This discrepancy would give room to suspect that there is a mistake in the resurvey, which forms a part of the agreed case, were it not that both the resurveyed lines have a more westerly bearing than the patent calls, whereas their present departure should be less. Be this however as it may, we have nothing but the agreed case upon which to found our decision.

In determining which variation to adopt, we think that all three of the surveys — made on the same day, by the same surveyor, and for the same owner — may properly be looked at.

In view then of all the facts, we are of the opinion, that the S. E. corner of 3228 should be fixed in a straight line, drawn from the known N. E. corner of that survey to the S. E. corner of 3230.

To do this, will be to apply the variation as found upon the actually-run eastern boundary of 3226, and will make the eastern boundary of the three surveys a straight line — which it was the evident intention of the locator to do.

It will preserve the rectangular form of the survey better than would the mode contended for by the defendants.

It will give to its southern boundary a length nearly coinciding with that of its northern boundary; while the defendants’ mode would curtail the length called for in the patent.

Nor can it be objected, with reason, that our mode takes the variation of a single line — the eastern boundary of 3226 — while the variation of the other resurveyed line — the western boundary of 3228 — is different; for there is nothing in the case to show that the variation of the latter more nearly corresponds with the average variation of all the originally surveyed lines. The presumption, we think, from the facts stated, is the contrary. But, as before said, each case must depend on its own circumstances; and hence the average variation is not always the true one to be applied. It is obviously important to have certain rules for cases of this sort; but an inflexible rule is impossible without often defeating the locator’s intention, and working injustice.

Judgment for the plaintiff.


author: Kennon, J.

text:
    Valentine Nicholson v. Israel Pim et al.
    Where a bill in chancery is filed to recover the consideration paid on a contract for the purchase of real estate, after the contract of sale has been rescinded by the consent of both parties, and also to recover the value of the corn, wheat and potatoes growing on the land at the time of the rescission of the contract, and of hay taken off the land and in stack; and where the amount of the claim is to be reduced by the value of the use and occupation and injuries to the premises done by the purchasers, the respondent, alter answering to the merits and submitting his defense to the court, comes too late to object to the jurisdiction of the court, upon the ground that the complainant had a plain and adequate remedy at law.
    Where money is paid upon the purchase of real estate, and the contract is afterward rescinded by consent of the parties, upon an agreement that it shall be left to the honor of the vendor to pay back such part of the purchase money as shall be just and equitable, and he afterward refuses to pay any, a court will compel him to pay so much thereof as he, in justice and equity, ought to have paid.
    In Chancery. Reserved in Champaign county.
    The facts are stated in the opinion of the court.

      J. I). Burnet, and S. §• R. Mason, for complainant.
    The rescinding agreement created such an obligation, on the part of Pim, as can be enforced against him in a court of equity. Bryant v. Blight, 5 Mees. & Weis. 114; Jewry v. Bush, 5 Taunt. 302; Parsons on Cont., vol. 1, 538, and notes.
    The original contract being rescinded, and it being left to Pim —to his own sense of honor and justice — to refund and pay to complainant the amount which ought to be refunded and paid to him; the law implies a promise, on the part of Pim, to make the complainant a just and reasonable compensation for the money advanced and labor done, under the rescinded contract. Gcillet, Adm’r of Clemens, v. Maynard, 5 Johns. R. 85, 87, 88; Towers v. Barret, 1 Term Rep. 133 ; Van Bps v. Corporation of Schenectady, 12 Johns. Rep. 436 — 441; Addison on Cont. 213; Chitty on Cont. (8th Am. ed.) 540; James v. Cotton, 7 Bing. 266; 5 M. &. P. 26.

      J. U. James, and B. Stanton, for defendants.
   Kennon, J.

The case stands in this court upon the bill and amendment, answer of Pirn, and testimony.

Two questions are presented for the determination of this court. The first is, does the complainant make a case which entitles him to relief in any court; and the second is, if so, can he have that relief in a court of chancery ?

The solution of the first question depends entirely upon the evidence on file in the case.

The complainant was a member of an association calling themselves a “ Community.” He and his associates, in the spring of 1844, contracted with Pirn (the only defendant who has answered), to purchase from him five hundred acres of land in Champaign county, upon which they contemplated establishing their “ Community.” By the article of agreement, they were to pay Pirn for the land the sum of $15,000, in the manner following, that is to say: one half on or before the 1st of July, 1844, three thousand dollars in one year from the date of the article, and the balance in two years, with interest on all the payments, from the first of April, 1844. The article of agreement was dated the 17th of March, 1844.

The complainant and his associates were put into possession of the premises on the 1st of April of that year. Nicholson, out of his own funds, paid to Pirn on the contract $3,000, and another member of the association paid $200; making in all $3,200 paid on the contract. The association proceeded to make such improvements on the property as they deemed most calculated to promote their own interest. They repaired the fences; cleared out and put under cultivation portions of the land, partially overgrown with hazel bushes; planted an orchard of choice fruit trees; repaired, to some extent, the mills on the premises; planted about fifteen acres of corn, twelve in one field and three in another; sowed about twenty acres of wheat; planted a considerable quantity of ground in potatoes; gathered and put up the hay on about fifty acres of the land. — All this was done before October, 1844. The Community failed to complete the first payment, of $7,500. About the first of October a difficulty arose between Pirn and the society. He wanted his money, and they were unable to pay. A meeting took place between Pim, on the one part, and Nicholson, and some other members of the Community, on the other, at which it was agreed that the articles of agreement, and other papers connected with the contract, should be delivered up to Pim, and be burned, and that possession of the premises should be restored to Pita; all of which was done about the month of October, 1844 — the Community having been in possession of the premises about six months.

Pim retained, and appropriated to his own use, a large portion of the corn, some of the potatoes, the wheat in the ground, and all the hay grown on the fifty acres. These articles are proved to be of the value of about $500, which, with some other benefits which, it is claimed by the complainant, the defendant derived from the labor of the Community, amount in all, including the payment made, to about the sum of $4,000.

It is claimed, on behalf of the respondent, that the property was greatly damaged by waste, and otherwise; and the testimony tends to prove that the defendant did sustain some damages in this respect, but how much would be very difficult to determine from the evidence on file in the case. Indeed, the damages thus sustained are, to a great extent, a mere matter of opinion, and the witnesses differ very widely in their estimates. How much ought to be deducted from the complainant’s claim, if any thing, for these damages, and for the use of the premises for six months, the court will not, without a reference, undertake to determine. Nor will it determine what amount the complainant ought to recover, until the coming in of the report of a Master. Enough, however, we think is shown in the case to warrant us in saying, that the complainant is entitled to a remedy, either in chancery or at law; unless it is true, as claimed by the respondent, that all these matters were fully settled at the time the article was delivered up, and the possession restored to the respondent.

The respondent undoubtedly received of the complainant and one of his associates, $3,200 in cash, the hay before mentioned, as well as the wheat, corn and potatoes; and it is equally true, that his premises were occupied by them only about six months. If, after the receipt of this money and personal property by Pim (the respondent), the original contract had been simply rescinded, and the possession restored to the respondent, and nothing had been said about the purchase money, the law would give to complainant a remedy to recover back the money paid on the contract, less the value of the use and occupation of the premises, and such other proper set-offs and reductions as ought to be made, so as to put the parties in the same situation in which they were before the making of the contract.

But did the parties themselves settle these claims at the time the contract was rescinded and possession restored ? If they did, and that fact appears from the evidence, the bill ought to be dismissed for want of merits.

To determine this question we must look to the testimony. It may be premised, that it appears from the evidence, that one of the articles of faith of the association was to suffer wrong rather than go to law, and that the defendant Pim was acquainted with that fact. That at the time the contract was rescinded, Pim said, if they wanted law, he would give them enough of it; and when it was proposed that the contract should be rescinded, and that he should pay back what he himself thought just and equitable, he said that was consistent with their professed principles, and he would accept of that proposition. This proposition, taken literally, was truly a favorable one to him, if in justice he owed any thing, and if he was to be the sole judge as to the amount, if any thing, which he himself would pay. There is some doubt, from the evidence, as to what were the terms upon which the contract was rescinded. The depositions of several witnesses are taken upon this point — one of whom was present when the contract was destroyed, and heard what took place between the parties. From his first deposition, it might be fairly inferred, that whether any thing should be paid back, -was a matter entirely within- the discretion of Pim; although, in a second deposition, he makes the case a little stronger for the complainant. This witness, upon cross-examination by defendant, gives his idea of how he thinks the matter was understood by Nicholson and Pim. He says he then supposed, from what took place, that Pim never intended to pay any thing, and that Nicholson (who was opposed to law) expected that he would pay something.

Another witness (Jacob Borton) says, in substance, that after the contract of rescission had been made, Nicholson, Pim, and others, came to him and said the contract was rescinded, and related to him the terms of rescission, before the papers were destroyed, viz: That “ the Community had agreed to give up to Pim all the premises purchased, all the crops, and improvements which had been added and cultivated on the premises, and leave it to the honor and conscience of Pim to refund and pay such an amount of the purchase money advanced, value of the crops, etc., as would be just and equitable.” After this statement to the witness, of the terms of the rescinding contract, and to which the witness understood Pim to assent, the written contract of sale was burned; and, shortly after, Pim went into possession.

The depositions of other witnesses were taken on this same point; from which, we think, we are fully justified in finding; that complainant and respondent both understood that something was justly due to complainant, and that he would pay that amount, whatever it might be.

If the amount to be paid was left to Pirn’s sense of honor and justice — to the court of his own conscience — it became a part of the rescinding contract, and raises the question, whether such contract had any obligatory force; whether Pim was bound to pay any thing, if he chose not to do so.

In the case of Bryant v. Flight, 5 Meeson and Welsby 114, the principle seems to be settled, that courts will hold such contracts binding; and if the party refuses to pay any thing, or what is right, courts will compel the party to do that which he ought to have done.

In that case, A agreed to enter into the service of B, and wrote him a letter, as follows: “ I agree to enter into your service, as weekly manager, commencing next Monday; and the amount of payment I am to receive, I leave entirely with you.” A did serve B for six weeks. The court held that the contract implied that A was to be paid something, at all events, for the service he had performed; and that the jury, on a quantum meruit count, might ascertain what B, acting bona fide, would or ought to have paid. Other authorities support the same doctrine. And if no authorities could be found supporting such doctrine, still we would have no hesitation in saying that, in a case like the present, where the complainant must have understood, and where Pim himself must have known, that the complainant understood that he was to receive something, and he refuses to pay any thing, we would substitute the court or a jury in his place and do that which, in justice ai.d equity, he ought to have done. So that we are satisfied, in this case, that the complainant had a claim against the respondent Pim, which he is entitled to recover, either in a court of law or equity; and that his own determination to pay nothing, is not binding on complainant.

And this brings us to the question, whether the complainant is in the right court. That he might have brought and sustained an action at law, I have no doubt; but it does not follow that he may not also have a remedy in a court of chancery.

There is no demurrer to the bill as amended. The case stands on bill and answer.

The bill shows that various items, of what might then be subject matter of the action of account, are claimed, and that these claims are liable to be reduced by use and occupation, and in various other ways. The whole case is one which could be much better settled by a master in chancery than by a jury ; more time could be taken by him, and item after item examined, with more accuracy than in the trial by jury. A court of chancery would be well adapted to do full and ample justice to the parties.

The determination of this case necessarily involves matters of account; and no objection is taken to the jurisdiction until the case comes into this court. The defendant answers to the merits; testimony is taken ; and now the respondent objects to the jurisdiction of this court, because the complainant has a plain and adequate remedy at law.

In the case of J. & D. Ludlow v. Simond, New York cases in error, vol. 2, p. 1, Chief Justice Kent, in delivering the opinion of the court, says chancery has concurrent jurisdiction, with courts of law, in matters of account. Whether this jurisdiction originally arose from the necessity of obtaining a discovery, by the oath of the defendant, or in order to prevent a multiplicity of suits, is perhaps not material to inquire; since it has become well settled, in cases where that necessity does not exist, and where no difficulty would attend the remedy at law. And again, at page 53, he says: I know not of any rule limiting the cognizance of courts of chancery to one species of accounts more than another, or to matters of account against persons in any particular relation. Its jurisdiction extends to all matters of account between individuals, in whatever relation they may stand to each other. Nor is it necessary that the responsibility of the defendant should be established before you file the bill for an account. In most cases that responsibility, as well as the stating of the account, will be a point for litigation.

Justice Thompson, in the case above referred to, says: “ I am inclined to think the respondent comes too late with an objection to the jurisdiction of the court, he having answered and contested the merits, the subject matter being within the jurisdiction of the court. This appears to me to be a reasonable rule, and calculated to save expenses. It is a good general principle, that where a party objects to the jurisdiction of the court, he ought to do it at the earliest opportunity.” See same, page 40. Chief Justice Kent, in the same case, page 56, says: But admitting the grounds, in the first instance, not to have been sufficient to have sustained the bill, the respondent comes too late to object to the jurisdiction of the court, after having put in an answer to the merits of the cause. By answering in chief, instead of demurring, he submitted his defense to the cognizance of the court, and equity will and ought, in such case, to retain the cause, provided the court be competent to grant the relief, and has jurisdiction of the subject matter, as it manifestly had in this case — the controversy being upon a matter of personal contract and of account.” In support of this last position, Kent cites various authorities.

That case was very like the one under consideration, in many of its features.

After a careful consideration of the authorities, we are led to the conclusion, that both questions made by respondent must be determined in favor of the complainant.