author: Johnson, J.

text:
    Pollitz et al. v. The Public Utilities Commission of Ohio.

      Consolidation of railroad corporations—Status of corporation formed by Ohio and other state companies — No power of contract of guaranty or credit of another company — Except by express authority of charter or statute—Power to acquire and sell bonds of another company — Sections 8683 and 8684, General Code — Organisation and powers of private corporations.

    1. A railroad corporation formed by the consolidation of an Ohio company with a company or companies of another state or states, under cooperative legislation in the different states, becomes one company, with a status in each state, possessing in Ohio all the rights, privileges and franchises, and subject to all the restrictions, disabilities and duties, of an Ohio railroad company in all that it does in this state.
    2. A corporation has no power to enter into contracts of guaranty, or suretyship, or otherwise lend its credit to another, unless expressly authorized by its charter or by statute, except where the power to do so is implied from its express powers as necessary and proper in the furtherance of its legitimate business.

      3. A railroad company, which has, in the proper exercise of its powers under Sections 8683 and 8684, General Code, and within the limitations expressed in those sections, purchased stock in another railroad company, and which has in good faith, for the protection of its interests as such stockholder, acquired bonds issued by such other company, has implied power, in order to sell such bonds for an adequate price, to guarantee their payment.
    4. A railroad corporation which is subject to the laws of Ohio has no authority, express or implied, to enter into a joint contract of guaranty, by which it jointly with other companies guarantees an entire issue or series of bonds, issued by another company, of which the Ohio company owns only a portion.
    (No. 15482
    Decided March 20, 1917.)
    Error to the Public Utilities Commission of Ohio.
    This was a proceeding before the public utilities commission brought by The New York Central Railroad Company.
    In its petition filed with the commission the company alleges:
    That it is a railroad corporation organized and existing under the laws of the states of New York, Pennsylvania, Ohio, Indiana, Illinois and Michigan, owning a railroad extending from New York to Chicago, with other main lines and branches.
    That the Toronto, Hamilton & Buffalo Railway Company is a railroad corporation organized and existing under the laws of the Dominion of Canada, owning a railroad extending from Waterford to Hamilton, and from Hamilton to Welland, with an extension from Hamilton towards Toronto, and an extension from Smithville to Port Maitland, all in the province of Ontario, and connecting with the railroad owned by The Canada Southern Railway Company, operated under lease by The Michigan Central Railroad Company, at Welland and Waterford, and with The Canadian Pacific Railroad, at Hamilton.
    That The Toronto, Hamilton & Buffalo Railway Company has an authorized capital stock of $5,500,000, divided into 55,000 shares of the par value of $100 each, of which 45,125 shares have been issued and are now outstanding, owned, in the amounts herein set forth, by the following railroad companies:
    The New York Central Railroad Company, 16,766 shares,
    The Michigan Central Railroad Company, 9,842 shares,
    The Canada Southern Railway Company, 6,271 shares,
    The Canadian Pacific Railway Company, 12,246 shares.
    That under date of August 1,1916, The Toronto, Hamilton & Buffalo Railway Company executed its consolidated mortgage as security for its fifty-year gold bonds to be issued to an amount not exceeding $10,000,000, of which, bonds to the amount of $2,000,000, designated Series A and bearing interest at the rate of 4¿ per cent, per annum, have been issued and sold jointly to The New York Central Railroad Company, The Michigan Central Railroad Company, The Canada Southern Railway Company and The Canadian Pacific Railway Company for $1,800,000, The New York Central Railroad Company contributing $450,000 of the purchasing price, The Michigan Central Railroad Company $225,000, The Canada Southern Railway Company $225,000, and The Canadian Pacific Railway Company $900,000. The proceeds of the sale of said bonds are to be, or have been, used to pay outstanding unfunded indebtedness of The Toronto, Hamilton & Buffalo Railway Company, representing expenditures incurred on capital account, and for the corporate capital purposes of said company.
    That the owners of Series A bonds intend to sell the same at the best price which can be obtained and use the proceeds to reimburse their respective treasuries for the moneys advanced to pay for the said bonds, and that in order to secure an adequate price it will be necessary for The New York Central Railroad Company, The Michigan Central Railroad Company, The Canada Southern Railway Company and The Canadian Pacific Railway Company to guarantee jointly and severally the payment of the principal and interest of said bonds as they become due.
    That the purchase of said bonds has not been capitalized by The New York Central Railroad Company by any issue of its own securities.
    Certain exhibits are attached to the petition. The petition prays for an order authorizing the applicant to join with The Michigan Central Railroad Company, The Canada Southern Railway. Company and The Canadian Pacific Railway Company in jointly and severally guaranteeing the payment of the principal and interest of said bonds as they come due.
    From the petition and conceded facts, it appears that the entire capital stock of The Toronto, Hamilton & Buffalo Railway Company is owned by The New York Central Railroad Company, The Canadian Pacific Railway Company, The Michigan Central Railroad Company and The Canada Southern Railway Company in the proportions stated. These companies and the T. H. & B. company have contracted that the line of the latter should continue to be worked and operated for the mutual benefit and advantage of all of said companies, subject to the powers of the board of railway commissioners for Canada.
    The applicant company owns a majority of the stock of the Michigan Central company, for which it in turn leases the line of the Canada Southern from the Detroit river to .the Niagara river, connecting with the T. H. & B. at Welland and Waterford, and with the Canadian Pacific at Hamilton. The cantilever bridge over the Niagara into New York state, where connection is made, is part of the leased line.
    By an act of the Canadian parliament, approved May 18, 1916, the acquisition of the T. H. & B. bonds by the applicant, the Michigan Central, the Canada Southern, and the Canadian Pacific, was sanctioned. In the act the contract itself is set out in haec verba. The T. H. & B. was authorized to issue its consolidated mortgage bonds not to exceed $10,000,000, and agreed to issue the same from time to time for its proper corporate purposes, with the consent of the four owning railroad companies, which “will jointly acquire the said bonds as and when issued, upon such terms as may be mutually agreed.”
    Article 6 of the agreement contains the following:
    “(b) That when and so often as any of said consolidated mortgage bonds are, with the consent of said other railway companies, parties hereto, issued by the Hamilton Company as herein provided, the said other railway companies will jointly acquire the said bonds as and when issued, upon such terms as may be mutually agreed;
    “(c) That upon the acquisition by the said other railway companies of the said consolidated mortgage bonds of the Hamilton Company, as in the preceding paragraph hereof provided, the same shall be disposed of for their joint account, and that in order to negotiate and sell the same to the best advantage, the said other railway companies will execute upon each of the bonds, as and when disposed of, their guaranty in the following form (or in such other form as they may agree upon) to-wit:
    “ ‘For value received, The Michigan Central Railroad Company, The Canada Southern Railway Company, The New York Central Railroad Company and The Canadian Pacific Railway Company do hereby jointly and severally guarantee the payment of the principal and interest of the within bond according to its tenor, to the legal holder thereof.’ ”
    Under the terms the owning companies agreed to contribute towards their common liability under the guaranty in the following proportions:
    The Michigan Central, 12-| per cent.,
    The Canada Southern, 12¿ per cent.,
    The New York Central, 25 per cent.,
    The Canadian Pacific, 50 per cent.
    And they agreed that they would not sell any part of their holdings of T. H. & B. stock, but would retain the same during the continuance of the agreement.
    On August 1, 1916, the T. H. & B. executed its consolidated mortgage securing its bonds for $10,000,000, and thereafter issued $2,000,000 of these bonds at per cent, and sold them to the owning companies, which bought them at 90 per cent, of their face, and contributed to the purchase price as follows:
    The Canadian Pacific, $900,000,
    The Michigan Central, $225,000,
    The Canada Southern, $225,000,
    The New York Central, $450,000.
    It further appears that the owners of these bonds desire to sell them in order to reimburse their treasuries for the moneys so advanced, and that to secure an adequate price therefor it is necessary to guarantee payment thereof jointly and severally, and that the New York Central has never capitalized such purchase by the issue of its own securities.

      After the hearing the commission made the following order: “Ordered that said The New York Central Railway Company be and it hereby is authorized, in so far as this Commission may grant said authority, to join with said The Michigan Central Railroad Company, The Canada Southern Railway Company and The Canadian Pacific Railway Company in guaranteeing the payment of the principal and interest of said bonds of The Toronto, Hamilton & Buffalo Railway Company, Series A, amounting to $2,000,000, as they become due, by executing upon each of said bonds the following guaranty: 'For value received The New York Central Railroad Company, The Michigan Central Railroad Company, The Canada Southern Railway Company, and The Canadian Pacific Railway Company hereby jointly and severally guarantee the payment of the principal and interest of the within bond, according to its tenor to the legal holder thereof.’ ”
    On January 6, 1917, “James Pollitz, as holder of 120 shares of stock of The New York Central Railroad Company, and Clarence H. Venner, as holder of 375 shares of stock of The New York Central and Hudson River Railroad Company and 14 shares of stock of The Lake Shore and Michigan Southern Railway Company” (the two last-named companies being constituents of the applicant’s consolidated corporation), filed their application for a rehearing before the public utilities commission upon the grounds:
    “First: That the applicant is not lawfully organized, being an illegal consolidation and without a lawful board of directors.
    “Secondly: That the applicant lacks the corporate power and is wholly unauthorized by any law or statute to guarantee the bonds of The Toronto, Hamilton & Buffalo Railway Company, or to enter into the obligation of guaranty contemplated by the application and order.
    “Thirdly: That the applicant, by its ownership and control of parallel and competing lines, is a monopoly, doing business in violation of the laws and statutes of the state of Ohio, of the other states wherein its lines run, and of the United States, and that its application is in furtherance of such violation.
    “Fourthly: That the application is insufficient upon its face.
    “Fifthly: That upon the evidence herein the application cannot be lawfully granted.
    “Sixthly: That the Commission erred in grant-' ing the application.”
    This application was overruled and this proceeding is brought to set aside the order of the commission.

      Messrs. Henry, Fauver, McGraw & Thomsen, for plaintiffs in error.

      Mr. Joseph McGhee, attorney general, and Mr. S. H. West, for defendant in error.
   Johnson, J.

The application was based upon the provisions of Section 614-53, General Code, viz.: “A public utility or a railroad, * * * may, when authorized by order of the commission, and not otherwise, issue stocks, bonds, notes and other evidences of indebtedness, payable at periods of more than twelve months after date thereof, when necessary for the acquisition of property, the construction, completion, extension or improvement of its facilities * * * or for the reimbursement of moneys actually expended * * * for any of the aforesaid purposes.”

It is said that the commission was not certain whether the guaranty referred to in the application is an evidence of indebtedness, and that this doubt caused the inclusion in the order of the words “in so far as this commission may grant said authority.” A bond is an evidence of indebtedness, and the written guarantee which the New York Central requests authority to make on the bond, to be signed by it, would, if valid, thereby become an evidence of the indebtedness of the applicant on the bond. But the company could not incur any indebtedness, and the commission could not authorize the issuance of any evidence of indebtedness, except of such as the company was legally empowered to create against itself. Such consent would not be necessary as to an evidence of indebtedness for any purpose not named in the above section. For example, by the negotiation and transfer by endorsement of commercial paper taken in the course of its ordinary business operations and not included in the purposes specified in the section above named. The commission is an administrative board with supervisory powers which do not extend beyond those granted by statute. It cannot confer corporate power or enable the doing of things beyond the scope of that power.

Section 8683, General Code, enacts: “A private corporation may also purchase, or otherwise acquire, and hold shares of stock in other kindred but not competing private corporations, domestic or foreign. This shall not authorize the formation of a trust or combination for the purpose of restricting trade or competition.” Section 8684 provides that no corporation shall employ its stocks, means, assets, or other property, directly or indirectly, for any other purpose than to accomplish the legitimate objects of its creation.

It was held in Mannington v. Hocking Valley Rd. Co., 183 Fed. Rep., 133, that the provisions of Section 8683, General Code, apply to railroad companies. The limitations and safeguards provided in the sections above referred to are clear and explicit. The company had no authority whatever to purchase the stock in the absence of express statutory provisions, and then only under the circumstances and within the limitations set out in the statute. The applicant company was within its powers in the acquisition and holding of the stock of the T. H. & B. company, provided it did not in doing so violate any of the limitations expressed in Sections 8683 and 8684, General Code.

As shown in the statement, the applicant is a consolidated company organized and existing under the laws of the six states named, but we think it clear that the power, rights and duties of the company within the state of Ohio must be determined by the laws of this state.

Section 9Ó29, General Code, concerning consolidated companies, provides: “When the agreement is made and perfected, as provided in the next preceding section, and it or a copy thereof filed with the secretary of state, the several companies parties thereto shall be deemed and taken to be one company, possessing within this state all the rights, privileges, and franchises, and subject to all the restrictions, disabilities, and duties, of a railroad company.”

In Ashley et al. v. Ryan, 49 Ohio St., 504, the court had under consideration the status of a consolidated company. It was there held that the provisions of our statute (Section 176, General Code), requiring the payment of a fee for filing articles of agreement of incorporation, and also of consolidation, apply to articles of agreement of consolidation between an Ohio company and a company or companies of another state. It is said in the opinion, at page 529: “Many diffi-' culties have been suggested, as arising, if a Company, formed by the consolidation of an Ohio compány with a company of another state, should be held to be a new corporation. * * * But it seems pretty well settled, upon principle at least, that where formed under co-operative legislation of the different states, it becomes a corporation in each state where its road is located. It is a legal entity residing and doing business in different states, with a status in each, derived from and determined by the laws of that state. * * * The stockholders of the company in the other states, must be presumed to know what the Ohio law is in this regard.”

In Peik v. Chicago & Northwestern Ry. Co., 94 U. S., 164, it is said, at page 177: “In this way, Wisconsin in effect said to the Illinois companies, ‘You may consolidate your interest with those of the named companies in this State, and form one corporation in the two States; but, in so doing, you must, in Wisconsin, be subject to our laws.’ ”

In Attorney General v. N. Y., N. H. & H. Rd. Co., 198 Mass., 412, the railroad company was created by charters from Massachusetts and Connecticut, operating a railroad in both states, having the same capital stock to cover its property in both states. It is there said (page 422): “Powers and franchises of a general character, whose effect upon the corporation would not be merely local, but would work changes in its relations to private persons and to the public authority in both States-alike, stand differently. It is not easy to maintain that under these statutes there is implied authority to the corporation to receive such powers from either State alone and hold them in such a way that they will have full effect in both States. If any such general powers can be so granted and held without legislative action in both States, it seems plain that they are only such as are not in conflict with the laws or the declared public policy of the State which does not grant them. Massachusetts cannot grant this corporation franchises to be enjoyed and exercised in Connecticut, which.are contrary to the laws of Connecticut; for the corporation in each State is a domestic corporation, and as such it is governed by the laws of the State of its creation in all that it does within that State.”

The fact that the consolidated company is a new corporation does not deprive the various states of their jurisdiction over it nor render it less subject to their laws. Like every other corporation it has its domicile. It is not a corporation at large. Its privileges in each state are those conferred by the laws of that state and its obligations in each state are those created by the laws of that state.

The position of the applicant company is that having legally acquired stock in the T. H. & B. company, and having in pursuance of the right of a legally constituted stockholder of that company joined in the purchase of its bonds for the protection of its interests, and the interests of its stockholders, it is, as a necessary incident, authorized in order to “reimburse itself for the money so ■expended” to sell and guarantee the bonds purchased.

By the provisions of Section 9039, General Code, a consolidated railroad company may take, hold, pledge or otherwise dispose of, under such terms as the directors prescribe, the stock and bonds of any other company acquired upon consolidation or received by virtue of any purchase or lease or operating contract. The manifest purpose of this section is to enable the consolidated company to do every proper thing with reference to the “stock and bonds” of any of its .constituent companies, which the constituent companies themselves could have done. In such a case the consolidated company holds all of the assets of the constituent company that has been merged with it. Having permitted the consolidation, the provisions of this statute were simply in pursuance of wise, business and public policy.

In this case a different question is presented. There has been no consolidation with the T. H. & B. company. Its identity and separate entity are still maintained, and the other companies referred to, as well as the New York Central, hold stock in it.

It is not claimed by the applicant that it has the power to guarantee these bonds by express statutory provision, but that the power to guarantee them is fairly incident to its right to sell them after it has legally acquired them.

In the case In re New York Car Wheel Works, 141 Fed. Rep., 430, it was held that “An indorsement by a corporation of notes of another corporation is hot an accommodation in a legal sense and void as ultra vires, but is a guaranty, based on a valuable consideration, and valid, where the indorsing corporation at the time owned all the stock of the other,” and in Railroad Co. v. Howard, 7 Wall., 392, the United States supreme court held that a railroad company owning bonds of cities and counties given to it in aid of the construction of its road could properly sell them and guarantee their payment. In Broadway Natl. Bank v. Baker, 176 Mass., 294, it is held that guaranties of payment of bonds taken by a loan and trust company in the ordinary course of its business, made in connection with their sale, are not ultra vires, and are binding.

In Jones on Corporate Bonds and Mortgages (3 ed.), Section 283, it is said: “It is within the corporate powers of a railroad to guarantee bonds taken and held by it in the usual course of its business.” And in 1 Elliott on Railroads (2 ed.), Section 481: “Thus, where it [the railroad company] has power to issue bonds of its own it also has implied power to guaranty the bonds of another railroad company, properly taken in payment of a debt, in order to enable it to sell them for an adequate price or to use them in payment of its own debt. And it may be safely said, we think, as a general rule, that such a guaranty may be valid, without an express grant of authority to make it, if it is supported by a valuable consideration of a kind that the guarantor company has authority to receive and invest in.”

In Arnot et al. v. Erie Ry. Co., 67 N. Y., 315, the Erie railway had agreed to guarantee the payment of interest on certain bonds of another railroad company, in consideration of the latter constructing a railroad connecting the railroads of the two companies and agreeing to conduct the business between the roads on joint account The other railroad company issued its bonds on which The Erie Railway Company endorsed its guaranty. The Erie company later came into possession of .these bonds, a part of which were transferred to Arnot. It was held that the guaranty was additional security .for the same debt evidenced by the bonds, and passed with them to a purchaser. The court say: “It is undisputed that Arnot’s claim was a valid one and that the defendant had become legally liable to pay it. It could pay it in cash or could give its own obligation to pay it. Instead of giving its own obligation, it could give the' obligation of another which it owned, and guarantee its payment.” In 7 Rul. Case Law, 604, it is said: “A railway company which has received municipal aid bonds may transfer them to raise money, and, if it is deemed expedient, guarantee their payment as a means of augmenting their credit in the market.” In Marbury v. Kentucky Union Land Co., 62 Fed. Rep., 335, it was held that a land company which had the right to effect consolidation with a railroad company necessarily had the power to acquire the stock of such railroad company and guarantee its bonds, thus accomplishing all that a complete consolidation could accomplish with less risk and responsibility. In the opinion it is said at page 344: “If now, as already said, this permits the land company to part with complete control over its own business, and to risk all its property in the business of railroading, it is difficult to •see why there should not be included in such a power, as part of, or less than, the whole, the right to acquire the stock in a railroad company, and. to guaranty its bonds. * * , * It seems to us that-the purchase of the stock and guaranties can be supported on the ground that, even if they did not constitute a consolidation, they were legitimate steps towards a consolidation. They involved the exercise of a power similar to, but less extensive than, that of consolidation, and may fairly be said to have been included in it, as the part is included in the whole.”

A number of cases are cited by the plaintiffs in error in support of the proposition that the guaranty by one corporation of the debts of another embarks its capital in an enterprise not contemplated by its charter and tends to divert its property from the legitimate uses of the company; that such a diversion of its funds is ultra vires and any stockholder may object to the transaction.

In 33 Cyc., 455, it is said: “As a general rule a railroad company * * * has no power to enter into any contract or indorsement by which it becomes a guarantor or surety, or otherwise lends its credit to another person or company, even though it may derive some benefit from the guaranty, except in so far as it is expressly authorized to do so by its charter or other statute, and except where the power to do so is implied from the company’s general powers, as being necessary and proper to enable it to accomplish the objects for which it was created, and in the conduct of its business.” See also 7 Rul. Case Law, 603.

In Louisville, New Albany & Chicago Ry. Co. v. Louisville Trust Co., 174 U. S., 552, it is held:

“Under a statute authorizing the board of directors of a railroad corporation, upon the petition of a majority of its stockholders, to direct the execution by the corporation of a guaranty of negotiable bonds of another corporation, a negotiable guaranty executed by order of the directors, and signed by the president and secretary and under the seal of the first corporation, upon each of such bonds, without the authority or assent of the majority of its stockholders, is void as to a purchaser of such bonds with notice of the want of such authority or assent; but is valid as to a purchaser in good faith and without such notice.” In the opinion it is said by Mr. Justice Gray, at page 567: “A railroad corporation, unless authorized by its act of incorporation or by other statutes to do so, has no power to guarantee the bonds of another corporation; and such a guaranty, or any contract to give one, if not authorized by statute,. is beyond the scope of the powers of the corporation, and strictly ultra vires, unlawful and void, and incapable of being made good by ratification or estoppel.”

We think that in view of the express statutory provision of Ohio which confers upon corporations the authority to “purchase, or otherwise acquire, and hold shares of stock in other kindred but not competing private corporations, domestic or foreign,” pursuant to which the applicant acquired stock in the T. H. & B. company, applicant was authorized, as incident to the larger power, to purchase bonds of the T. H. & B. company, if in its judgment, acting in good faith, such a transaction would safeguard and further its interests as a stockholder; and, having legally acquired the bonds, it may, upon reason and authority, dispose of them in the ordinary manner dictated by business prudence and practice. It must be remembered that at all times the good faith and the character of the transaction, as to being fraudulent or otherwise illegal, may be inquired into in a proceeding in a court of competent jurisdiction.

In the conduct of the negotiation, it would seem to be clear, that, if it would promote a more advantageous transaction to the holding company to guarantee to a purchaser the bonds so held by it, it might legally do so.

In 1 Clark & Marshall on Private Corporations, 490, it is said: “A corporation may guaranty the payment of bonds, notes and other evidences of debt owned by it, in order to negotiate or sell the same.” See cases cited.

There is no statute in .Ohio prohibiting it and we think it is in keeping with the public policy indicated by statutory enactments upon kindred features. The Central Ohio Natural Gas & Fuel Co. v. The Capital City Dairy Co., 60 Ohio St., 96.

Therfe is, however, a more serious feature of this case. The guaranty proposed, and permitted by the order of the commission, is joint and several on the part of the applicant, the Canadian Pacific and the Michigan Central, which also assumes the obligations of the Canada Southern, not only of the $500,000 face value of the bonds owned by the applicant, but of the entire $2,000,000 owned by all the companies. That is to say, it is proposed that the applicant shall, not only guarantee the bonds owned by it, which it has acquired in the manner above described, and which we think it may legally do, but that it shall go further and guarantee $1,500,000 of bonds owned by the other companies. The applicant Ohio company could not aid or assist the other companies in the purchase of-the stock. Such rights are regulated by Section 8806 et seq., General Code, and it is not claimed that the requirements of these sections have been complied with.

It is true that in the contract between the parties, which is included in the act of the Canadian parliament, shown in the statement, the liability of each of the companies on the contractors’ guarantee, as between themselves, is fixed. It provides that this liability shall be, as to each, in proportion to the ' amount of bonds purchased by it. But nevertheless as to the purchaser or purchasers of the bonds, the New York Central would be liable on the guaranty for a very much larger portion of the bonds than it owned.

It is said by counsel for the defendant in error: “There is nothing wrong, unusual or dangerous about this. * * * The commission' was the judge of the possible risk which the applicant would run by executing the guaranty. Under any normal conditions the chances that the Central will have to pay any part of the obligations which the Canadian Pacific and Michigan Central have assumed, amounting to $1,500,000, are nil. When two such properties become unable to pay, all other railroad securities will probably be worthless, so that there is nothing but a theoretical point made by the suggestion that the Central is lending its credit to those roads.” These are suggestions to be taken into consideration by any person or corporation duly authorized, which is solicited to bind itself or himself for the debt of another. But it cannot be that the commission is authorized to enter upon speculative fields such as suggested. Corporate authority—legal capacity to act—does not depend upon and vary with the probabilities of particular transactions. It is not a question of safety — it is a question of power.

The authorities cited by the defendant in error only justify the guaranty by a corporation of debts (which are not originally incurred by it) under the conditions and within the limitations we have above pointed out.

In 3 Cook on Corporations (7 ed.), Section 775, it is said: “One of the most important and yet difficult branches of railroad and corporation law is the question whether one railroad corporation may guarantee the bonds or dividends of another railroad corporation. The power of a railroad corporation in this respect is much more restricted than that of a trading or manufacturing corporation, because the former is a quasi-public corporation and its powers are strictly construed. Moreover, the location of its railroad is specified in the charter, and the guaranty of the bonds or dividends on the stock of another railroad corporation is much the same as buying the stock of the latter, which is not legal, unless expressly authorized by the charter or the statutes of the state. A railroad corporation has no implied power to guarantee the bonds or dividends on the stock of another railroad corporation.” In the same section it is said: “The power of a railroad company to consolidate with or purchase the railroad of another company does not give power to guarantee the bonds of the latter company without such a consolidation or purchase.”

It was held in Northside Ry. Co. v. Worthington, 88 Tex., 562, that two corporations, though each may incidentally be benefited, have no implied power to borrow a sum of money to be divided between them, and each become surety for the other to the amount received by such other. And see 10 Cyc., 1179, and cases cited.

The contract, included in the act of the Canadian parliament by which the proposed transaction is sanctioned, prescribed the exact terms of the joint and several guaranty to be signed by each.

It is not doubted that the parties viewed the whole arrangement as one which would be best accomplished by the joint action of the companies interested, and it is very probable that in this instance that may be true. But that would not justify one of the contracting parties in going beyond its legal capacity in any essential and material element of the transaction.

Attention is called by counsel for defendant in error to the statute of Pennsylvania, effective April 23, 1903, which authorizes a railroad company existing under the laws of that state to own, sell and guarantee the bonds “of any corporation of this commonwealth or elsewhere engaged in the business of transportation.” As we have seen,' this statute could not be effective to authorize such an act on the part of a company which was controlled by the Ohio statutes touching anything done by it in this state. But we remark that it is significant that it was regarded as necessary or advisable by the legislature of Pennsylvania to expressly grant this authority. Does it not carry the implication that in Pennsylvania, under the general rule and in the absence of express statutory authority, the company would have no such power? The same inquiry may be made touching the suggestions concerning the'statutory provisions that are cited with reference to the state of New York.

The contract provides for the acquisition of the entire $10,000,000 of bonds of the Toronto; Hamilton & Buffalo company whenever issued, on such terms “as may be mutually agreed,” and for the disposition of them by joint and several guaranty of the companies, as shown. A railroad company is a gM£m-public corporation with rights and privileges different from and in excess of those of others, and subject to obligations directly to the public.

There is general agreement as to the chief grounds upon which rests the principle that corporations are not permitted to contract beyond the legal limits of their powers—the interest of the public that the corporation shall not transcend the authority conferred on it by law, and the interest of the stockholders that the company and its property shall not be subjected to risks not provided for in its charter and not contemplated or undertaken by them when they subscribed for the company’s stock.

Each of the companies that desire to accomplish the proposed arrangement is presumed to know the contractual powers of each of the others.

We think that the applicant has the right, implied from and incidental to the exercise of powers conferred by express statutory provisión in Ohio, to sell bonds which it may acquire from the Hamilton company under the circumstances set out, and to guarantee such bonds as part of the transaction, in order to sell to the best advantage. But we think it has no authority to go beyond that, and guarantee bonds which it does not own.

A different rule would permit the entering upon enterprises with resultant obligations not at all contemplated by any legal provision. Carried to its logical result, the company by such undertakings could, for considerations wholly insufficient or wholly speculative, risk its assets to the detriment of its creditors and shareholders. The state hqs made provision for the creation of railroad corporations, and, in recognition of their great service in the development of the resources of the country and the promotion of its progress, has from time to time extended and enlarged-their powers, subject to such regulations as were deemed to be wise. Additional extensions and regulations will doubtless be made by the state as experience shall dictate.

It having created an administrative agency with supervisory powers, the public and the stockholders have a right to expect that approval, will be given only to such acts as do not exceed powers expressiy granted or fairly implied.

If the proposed plan can be modified so that each company shall hold its portion of the bonds in severalty and guarantee that portion, it would, in view of the undoubted financial strength of each, present a situation in which a proper order could be made.

The order will be modified so as to permit the accomplishment of such a plan, if desired.

Order modified.

Nichols, C. J., Wanamaker, Newman, Jones, Matthias and Donahue, JJ., concur.


source: Caselaw Access Project

author: Matthias, J.

license: Public Domain

text:
    The Lithograph Building Company v. Watt.

      Authority for execution of lease of realty — Acknowledgment and recording of power of attorney — Requirements of Sections 8513 and 8536, General Code — Execution of lease by agent invalid, when — Ratification by principal of unauthorized act of agent — Effect of possession under defective lease.

    1. Under the provisions of Section 8512, General Code, a power of attorney to authorize the execution of a lease of any estate or interest in real property for a period of five years is required to be acknowledged by the principal, and under the provisions of Section 8536, General Code, it is required to be recorded.
    2. The validity of such lease, as between the parties thereto, is not affected by the fact that such power of attorney was not recorded, but the want of acknowledgment thereof renders a lease executed by the agent invalid for want of authority to execute it.
    3. A lease, defectively executed, will in equity be treated as a • contract to make a lease, but if executed by one acting as agent not actually authorized by the owner to enter into such contract, the instrument is ineffective as a contract to make a lease and not enforceable against the owner.
    4. Generally, a ratification by the principal of the act of an agent not authorized in the manner and form required by statute must be by action of the character required to confer authority originally, and, if an agent be not authorized in the manner and form required by statute to execute a lease for real property, knowledge of his principal that the tenant is in possession and paying rent is not in and of itself sufficient to work either a ratification or estoppel.

      5. The knowledge of the agent that he has overstepped the bounds of his authority cannot be imputed to the principal, and no ratification results from the acceptance of rents where a principal had no knowledge at the time that the agent had exceeded his authority in making the lease.
    6. Possession taken and rents paid under a defectively executed lease creates a tenancy from year to year, or month to month, dependent upon the terms as to payment of rentals, and the lessor, by instituting an action for accrued rentals or for the purpose of ejecting the lessee for nonpayment of rentals, is not thereby estopped to question the validity of such lease.
    (No. 15165
    Decided March 20, 1917.)
    Error to the Court of Appeals of Cuyahoga county.
    The Lithograph Building Company, plaintiff in error, on January 30, 1912, entered into a contract in writing with The Guardian Savings & Trust Company, whereby the latter company was constituted the trustee of the former with reference to certain property in the city of Cleveland, known as the Lithograph Building, and was given the “full management and control thereof, with power to collect the rents and income therefrom, to pay the taxes, insurance premiums and other fixed charges incident thereto and to make all necessary repairs and to do all other things which second party [The Guardian Savings & Trust Company] deems necessary or advisable in the proper management of said property.”
    It was stipulated that such contract should continue for a period of one year from the date thereof, and thereafter until terminated by either of the parties, upon sixty days’ notice in writing served upon the other, setting forth the intention to terminate the same. Such contract was in writing, but was neither acknowledged nor recorded.
    The Guardian Savings & Trust Company, assuming to act under the authority thus vested, on May 31, 1913, executed a lease to A. J. Watt for a term of five years, covering a portion of said premises, which lease contained a stipulation as follows: “That the lessee will surrender possession of the within demised premises and relieve the lessor of all liability under this lease upon receipt of written notice from the lessor, one year prior to the time when possession is desired.”
    The Lithograph Building Company, on or about April 24, 1914, notified Watt.in writing to vacate said premises at the expiration of a year thereafter. On the expiration of the year, Watt having refused to vacate the premises, The Lithograph Building Company instituted a proceeding in forcible entry and detainer in the municipal court. Thereupon Watt, the defendant in error, instituted an independent action in the court of common pleas of Cuyahoga county, averring in his petition that there was an agreement between the parties that if at any time the city of Cleveland should purchase the building and acquire possession the lessor reserved the right to cancel the lease and demand possession by giving the lessee one year’s notice in writing, but that by a mutual mistake of the parties the written instrument did not correctly state their agreement in that particular. He therefore prayed for an order of the court enjoining the prosecution of the forcible entry and detainer action, and a reformation of his lease, so that instead of the paragraph in said lease, reading “that lessee will surrender possession of the within demised premises and relieve the lessor of all liability under this lease upon receipt of written notice from the lessor, one year prior to the time when possession is desired,” there be inserted the following provision, “it is understood and made a part of this lease that the City of Cleveland, is the owner of the ground on which said Lithograph Building is situated and that the lessor reserves the right to cancel the within lease' and demand possession of the within demised premises, by giving to the lessee one year’s notice in writing, in the event that the City purchases the building and requires the possession of the same.”
    The court of common pleas granted the injunction and entered a decree reforming the- lease as prayed, and that decree was affirmed by the court of appeals.

      Messrs. Tolles, Hogsett, Ginn & Morley, for plaintiff in error.

      Mr. Allison M. Gibbons, for defendant in error.
   Matthias, J.

The trial court decreed the reformation of the lease involved in this proceeding, which had been executed by The Guardian Savings & Trust Company as the agent of the plaintiff in error. The instrument as written leased to Watt, plaintiff below, defendant in error here, a portion of the building belonging to The Lithograph Building Company, plaintiff in error, for a term of five years, and contained the following clause: “That the lessee will surrender possession of the within demised premises and relieve the lessor of all liability under this lease upon receipt of written notice from the lessor, one year prior to the time when possession is desired.”

The trial court found that said instrument did not accomplish the purpose of the parties and decreed that the same should be corrected and reformed by inserting instead of the paragraph above written the following: “It is understood and made a part of this lease that the city of Cleveland, is the owner of the ground on which said Lithograph Building is situated, and that the lessor reserves the right to cancel the within lease and demand possession of the within demised premises, by giving to the Lessee one year’s notice in writing in the event that the City purchase the building and require possession of the same.”

It is contended by plaintiff in error that The Guardian Savings & Trust Company was without authority to bind it by the execution of the lease here in question and that therefore such reformation was erroneously decreed.

The only authority of The Guardian Savings & Trust Company to act as the agent of the plaintiff in error with reference to the control or management of its building or any part thereof was conferred upon it by a power of attorney, or trust agreement so-called, the essential portions of which are sét out in the statement preceding this opinion. Assuming to act under authority thereby conferred The Guardian Savings & Trust Company executed the lease in question. The power of attorney was not acknowledged, and neither it nor the lease in question was recorded. The decree of reformation was apparently based upon the assumption that the execution of such lease was validly authorized, or upon a finding that it had been ratified by the plaintiff in error; or upon the ground that the agent had full power to make such lease, though the authority therefor was defectively executed, and that the instrument while void as a lease was good in equity as a contract to make a lease.

The plaintiff below did not seek the enforcement of a contract to make a lease. On the contrary the petition assumes the validity of the lease and that it was executed in pursuance of proper authority legally conferred. The decree of the court does not contemplate the enforcement of specific performance of a contract to execute a lease, but seems to have proceeded upon the theory that the lease was based upon valid authority, and reformation was directed to meet the terms to which it was found the agent had assented.

The provisions of Section 8512, General Code, require that a power of attorney for the conveyance, mortgage, or lease of any estate or interest in real property, shall be signed, attested, acknowledged, and certified in the same manner as deeds, mortgages, and leases. And- Section 8536, General Code, requires that it be recorded.

Looking to Section 8510, General Code, to ascertain the requirements with reference to leases, we find that, a lease of any interest in real property must be signed and acknowledged by the lessor; but under the provisions of Section 8517, General Code, such requirements are confined to leases executed for a term of more than three years. Under the plain provisions of these statutes a lease for five years is required to be acknowledged and recorded, and a power of attorney to authorize the execution of such a lease is also required to be acknowledged and recorded. However, failure to observe the requirements of these statutes with reference to the recording of such instruments does not in any wise affect the validity thereof as between the parties thereto. (Wright et al. v. Franklin Bank et al., 59 Ohio St., 80.) But it is held in the case of Richardson v. Bates, 8 Ohio St., 257, that, in an action upon an indenture leasing land for 'five years, to recover of lessees upon their covenants to pay rent, the answer, setting up the fact that the indenture was not attested nor acknowledged by the lessor, and therefore did not convey the term, and that the lessees were not indebted for any rent under the indenture, stated facts sufficient to constitute an equitable, and therefore a perfect, defense. In that case the judge rendering the opinion says, at page 264: “We have seen, by>the provision of the statute, the form prescribed for the execution of a valid lease, of such a term as this assumes to pass, must have the same requisites as an instrument to convey the fee of the land. If then this instrument as set forth entitled the plaintiff to recover, one executed in a similar manner purporting to convey a fee simple in land, should entitle a plaintiff to recover in an action for the title and possession of the lands; but that would be utterly inconsistent, as well with the uniform adjudications in this state, as with the plain provision of the statute.” The rule here stated was later applied by this court in the case of Toussaint Shooting Club v. Schwartz et al., 84 Ohio St., 440.

This lease is of no more or greater validity than the instrument authorizing its execution; the same formalities are required in the execution of both. If a lease for five years is invalid if not acknowledged, so also is a lease for such term, though acknowledged, if executed by an agent whose authority is derived only from a power of attorney not acknowledged by the lessor. Bocock et al. v. Pavey et al., 8 Ohio St., 270.

It is contended, however, that the present case is ruled by the decision of Diehl v. Stine et al., 1 C. C., 515, 1 C. D., 287, later affirmed by this court without opinion. It is quite apparent from an examination of the record of that case that the controlling question there was whether a valid power of attorney had been executed authorizing the making of a deed conveying certain land. The case was heard by the circuit court upon appeal, which found that the power of attorney was executed in all respects as required by law, and that having been executed in conformity to law neither of the parties executing it nor their heirs could defeat the title of the grantee by proof that such power of attorney was not recorded. That decision does not. support the contention of the defendant in error in this case that acknowledgment of such power of attorney by the lessor is not essential to its validity. The court not only did not hold that in its form and manner of execution the power of attorney there in question was lacking in any formality required by statute, but on the contrary expressly found that it was properly and legally executed, and based its decision upon that finding.

It is further contended by the defendant in error that the terms of the power of attorney in question in this case were broad enough to confer authority upon The Guardian Savings & Trust Company as the agent of The Lithograph Building Company to execute this lease, and that the same having been executed in pursuance of the authority vested, and the defendant in error having taken possession thereunder, such instrument must be treated at least as a contract to execute a lease, and, hence, enforceable in equity. If we assume that the power actually conferred upon the agent was sufficient to authorize it to execute such lease, then notwithstanding its defective execution the lease negotiated in pursuance of authority actually conferred would be treated in equity as a contract to make a lease. That proposition is well supported both by principle and authority, and, indeed, has not been questioned in this case.

As we have seen, however, the proposition rests upon the assumption that the agent did actually possess authority to execute such lease, although the. instrument by which it was sought to confer the authority was defectively executed. The Guardian Savings & Trust Company was constituted the agent of The Lithograph Building Company with reference to certain property known as The Lithograph Building, and was given the “full management and control thereof, with power to collect the rents and income therefrom, to pay the taxes, insurance premiums and other fixed charges incident thereto and to make all necessary repairs and to do all other things which second party [The Guardian Savings & Trust Company] deems necessary or advisable in the proper management of said property.”

It is to be observed that no authority is specifically conferred to execute a lease. Certain powers are enumerated, and specified acts are authorized. It is from the language above quoted, if at all, that authority to execute the lease in question in this case must be derived. It is worthy of note that the contract of agency provided that such agency should continue a year, and thereafter could be terminated by either party upon sixty days’ written notice to the other; but if the building was sold within a year the contract of agency was to immediately terminate. The record discloses that'at the time such agreement was entered into and the relation of principal and agent created there was no occasion for the execution of any lease for any portion of the building for the year 1912, and that it was subsequent to the expiration of that year, and during the period when the authority of the agent must be regarded as only temporary, and when its term of management was uncertain, that it executed the lease to the defendant in error for a term of five years. It is significant, too, that nowhere in the enumeration of the powers delegated to the agent is any express power conferred to execute any lease whatever, and the very general terms employed are relied upon as conferring sufficient authority to warrant the agent to execute a lease upon the premises for a period of five years notwithstanding the omission to observe the formalities required by the statute to accomplish the legal vesting of- such authority. The .very omission to so execute such power of attorney as to legally authorize the making of a five-year lease seems sufficient evidence <jf the intent of the owner to withhold from the agent such authority. Had the owner desired to confer it, presumably the method required by law would have been followed, and it should not now be held to have granted a power which it seems to have intended to withhold. If from the terms of this contract the agent’s authority may be inferred to warrant the execution of a five-year lease, why may it not also authorize the agent to bind the owner by a lease for ten or fifteen or twenty-five years ?

In the absence of evidence establishing authority in the agent to execute the instrument in question, it cannot in equity be decreed an enforceable contract to make a lease. A defectively executed instrument, either a lease or a deed, when made by the owner, may be enforced against him as a contract to make a lease or deed for the reason that it is his contract. If, however, such instrument be made by one wrongfully assuming to act as agent of the owner, or by one who is such agent, but without actual authority to enter into such a contract, then the instrument cannot be held to be good as a contract to make a lease or deed, and enforceable as such against the owner. The principle is well established that persons accepting a lease of' real property executed by the agent of the owner are bound to ascertain whether he has authority to execute such a lease. The knowledge of the agent that he has overstepped the bounds of his authority cannot be imputed to the principal. Clement et al. v. Young-McShea Amusement Co., 70 N. J. Eq., 677.

This brings us to the question of ratification. It is disclosed by the record that The Guardian Savings & Trust Company, as the agent of plaintiff in error, executed leases on portions of said building to four other tenants shortly prior to the execution of the lease to defendant in error, two of which contained the clause sought to be inserted in the lease in question here by the action for reformation, and two of which did not contain that clause and were substantially the same as the lease of the defendant in error. None of said leases was recorded, and it appears from the record that neither the plaintiff in error nor any of its officers had any knowledge of the fact of the execution of such leases, nor of the terms they contained, until the agency of The Guardian Savings & Trust Company was terminated in September, 1913, when all of the leases were turned over to the plaintiff in error; and it further appears from the record that prior - to April 24, 1914, neither the plaintiff in error nor any of its officers had any knowledge that there was any claim or contention of the defendant in error that his lease did not contain the terms agreed upon by himself and The Guardian Savings & Trust Company, at which time that claim was first asserted by the defendant in error in response to a notice to vacate at the expiration of a year in accordance with the terms of the lease as written.

It is contended by the defendant in error that the acceptance of rent by plaintiff in error constituted a ratification of the act of its agent in executing such lease and binds plaintiff in error as fully and completely as though the agent had been fully authorized in the premises. The proposition is well established that before the principal can be held to ratify the unauthorized acts of his agent it must appear that he had knowledge of all material facts. This proposition, amply supported by text-writers and courts, is quite aptly stated in 2 Corpus Juris, 500, as follows: “The acceptance of rents under an unauthorized lease, with full knowledge of the facts, may constitute a ratification ; but no ratification results from the acceptance of rents where the principal repudiates the unauthorized lease but allows the lessee to remain as tenant from month to month, or where the principal had no knowledge at the time- that the agent had exceeded his authority in making the lease.”

The lease as written, though for a term of five years, reserves to the owner the right to terminate the same upon giving a written notice one year prior to the time when possession is desired, and its right to do so is unconditioned. As thus written it was a lease from year to year at the option of the owner. That was the lease which came to the attention of the plaintiff in error, and it was only that lease, if any,- which it ratified. There was no acquiescence at any time by plaintiff in error, so far as the record discloses, that might possibly be construed as a ratification of any contract except as written and brought to the attention of the plaintiff in error.

The principle is so well established as to be no longer open to question that a parol ratification does not validate a transaction required by statute to be in writing. (Richardson v. Bates, supra; Clement v. Young-McShea Amusement Co., supra, and Judd v. Arnold et al., 31 Minn., 430.) In the case last referred to it is said by the court: “A ratification by the principal of the not properly authorized act of the agent must be an act of the character required for original authority. Where that must be in Writing, the ratification must also be in writing. * * * To permit an oral ratification would, in many cases, let in the very evils which the statute aims to exclude. The evidence of oral ratification by plaintiff of the lease executed by Arnold [the agent] was therefore of no effect. Of course, a principal may, by his acts or declarations, lay the basis for an estoppel as to the due authority of the assumed agent. But, in a case like this, to make the assent and acquiescence of the principal, and the acts of the lessees in reliance thereon, operate as an estoppel as to the authority of the assumed agent to execute the lease, it is essential that she should have known what sort of lease the agent had assumed to execute in her name.”

In the case of Clement v. Young-McShea Amusement Co., supra, it was held in substance that when an agent executes a contract beyond the scope of his authority the principal will not ordinarily be deemed to have'ratified it, or to be estopped from repudiating it, unless he appears to have had actual or constructive notice of its terms; and, further, that if an agent be not authorized in the manner required by statute to execute a lease for real property, knowledge of his principal that the tenant is in possession and paying rent is not sufficient to work either ratification or estoppel. *

If the lease were entirely void it does not follow that the tenant in possession would be relieved from any obligation to pay rent, for the tenancy of the lessee would be subject to all the provisions of the lease except its duration. Possession taken and rent paid under a parol lease for years creates a tenancy from year to year. 24 Cyc., 1030; B. & O. Rd. Co. v. West, 57 Ohio St, 161, and Gladwell v. Holcomb et al., 60 Ohio St., 427.

A further claim of ratification of this lease is based upon the action taken by the plaintiff in error in instituting the original proceeding seeking to eject the defendant in error from its building, and it is also urged that plaintiff in error estopped itself from asserting the invalidity of the lease by demanding rent subsequent to the decree of reformation in the court below, and also by an action to eject the defendant in error on the ground of nonpayment of rent, instituted subsequent to the decree of reformation. It is quite apparent from the record that the action of the "plaintiff in error, including the institution of the proceeding referred to, has been entirely consistent with a ratification and acceptance of the lease as written and as it came to its attention, and it does not appear from the record that the plaintiff in error has at any time assumed an attitude inconsistent with repudiation of a lease other than the written lease presented to it, which, as we have seen, is substantially a lease only from year to year.

The following language used by Johnson, J., in Spengler v. Sonnenberg et al., 88 Ohio St., 205, is applicable to this case: “Here the purchaser was bound to know the extent of the agent’s authority. The contract made by the agent exceeded that authority, and the principal repudiated it as soon as he learned that it had been made. The case contains none of the elements which must be present before the application of the doctrine of estoppel can be insisted upon. There was no conduct or representation by the owner upon which the purchaser relied. Nothing whatever was done by the purchaser which was induced by the silence of the owner with knowledge of the facts.”

The principle, that a claim made or position taken in a former action or judicial proceeding will estop the party from making an inconsistent claim or from taking a conflicting position in a subsequent action or judicial proceeding to the prejudice of the adverse party, is entirely inapplicable here, for the reason that the attitude assumed and the action taken by the plaintiff in error have been consistent with the lease as written and consistent with the claim that the lease as sought to be reformed was unauthorized.

In our opinion, therefore, the decree of reformation was unwarranted, and the judgments of the court of appeals and the common pleas court are reversed, and judgment is rendered for plaintiff in error.

Judgments reversed.

Nichols, C. J., Wanamaker, Newman, Jones, Johnson and Donahue, JJ., concur.


author: Jones, J.

text:
    Patterson v. The State of Ohio.

      Charge of criminal conspiracy — For larceny of specific, separately owned automobiles — Each theft a distinct and separate offense — Acquittal for one offense — Defendant not twice in jeopardy — By trial for theft of another—Criminal law — Evidence.

    1. Where the accused has engaged with another in a criminal conspiracy or plan having for its purpose the larceny of specific automobiles belonging to separate owners, and in pursuance of such plan the confederate steals such automobiles at divers times and places, each theft constitutes a distinct and separate offense, and an acquittal of one does not place him twice in jeopardy on the trial of the other.
    2. Upon the trial of the accused upon an indictment for the larceny of W’s automobile, where the state relies for conviction upon proof of such criminal plan to steal various automobiles, belonging to W, C, and others, and offers evidence of such criminal plan and the larcenies of cars other than charged in the indictment, the fact that the accused at a former trial had been acquitted of the larceny of C’s car does not conclude the state from proving that such plan embraced the larceny of C’s car, although the evidence offered at such second trial was substantially the same as that produced by the state on the former trial which resulted in a verdict of acquittal. Nor can the record of such former acquittal be offered by the accused either as a bar to the offense charged in the second indictment or as an adjudication of fact that the accused was innocent of the theft of C’s car, and that the criminal plan did hot embrace the larceny thereof.
    3. Where evidence relating to the larceny of C’s car committed in pursuance of such criminal plan is offered by the state, such evidence is competent. And where the accused objected to such evidence solely because he had been tried and acquitted of such larceny but made no objection otherwise and made no request that the same should be limited to the purpose of proving such plan, he cannot in a court of error complain that the trial court erred in not limiting such evidence to the purpose stated.
    (No. 15377
    Decided March 20, 1917.)
    Error to the Court of Appeals of Lorain county.
    At the April, 1915, term of the Lorain county common pleas court plaintiff in error, Guy W. Patterson, was indicted for the offense of grand larceny for stealing an automobile, the personal property of one J. G. Wherry, and at a subsequent term of that court he was tried and convicted of that offense. The court of appeals sustained the conviction, and error is prosecuted to this court to procure a reversal of these judgments.
    Although the accused was prosecuted for the theft, the state relied for conviction upon testimony tending to show that he was an aider and abettor, within the purview of Section 12380, General Code. The testimony adduced by the state tended to show that one L. J. Wood, a convicted criminal, was the actual thief. Wood testified that he became acquainted with the defendant Patterson in the spring of 1914; that he and Patterson engaged in a scheme to steal automobiles, which were to be delivered to the defendant at his place of business or receiving-station, in Cleveland, Ohio; that pursuant to this plan, early in May, 1914, Wood accompanied Patterson in one of the latter’s automobiles on a trip through Lorain county and that during this trip the accused “spotted” or pointed out several cars which Wood was to purloin and deliver to the accused; that upon the trip in question the accused pointed out for the purpose of theft the automobile named in the indictment belonging to Dr. Wherry, another belonging to Dr. L. A. Wood, and still another owned by one J. H. Conry, all located in the town of Elyria; and that upon the same trip the accused also pointed out for the purpose of theft a Cadillac car which was the property of one Mrs. H.' K. Clock. L. J. Wood further testified that in pursuance to the arranged plan he stole the several c.ars, at various times between the latter part of July and early part of December, 1914, and delivered the Wherry, Wood and Clock cars into the possession of the defendant.
    It was not claimed by the state that the accused was actually in Lorain county when these cars were stolen, the state predicating its case upon an alleged conspiracy between Patterson and Wood. On this phase of the case the evidence relating to the various cars was so commingled that separation thereof was almost impossible. However, the testimony of several witnesses for the state was confined exclusively to the theft of the Clock car. Wood’s testimony was corroborated in many features by evidence tending to show not only that the car numbers had been removed but the cars themselves so changed as to make identification almost impossible.
    Upon the trial of the accused for stealing the Wherry car it developed that the accused had theretofore been tried and acquitted . for stealing the Clock car, one of the cars embraced in the scheme or plan referred to. While the witness Wood was upon the stand for the state the defendant objected to any conversation relating to the Clock car, for the reason that the defendant had been tried and acquitted of that charge. The court overruled this objection. There was no plea of former jeopardy introduced formally in the case, but as a part of his defense the accused offered the record of his indictment, trial and acquittal on the charge of larceny of the Clock car. The court refused to accept the record so tendered as evidence, to which action of the court the defendant excepted. The record so proffered and excluded disclosed that at the January, 1915, term of the Lorain county common pleas court the accused had been indicted, tried and acquitted of the charge of grand larceny for stealing the Clock automobile, and it was not disputed by the state that the automobile named in the latter indictment was the same car alleged to have been stolen under the common plan or scheme embraced in the evidence tendered by the state at the present trial.

      Mr. W. H. Boyd and Mr. G. A. Resek, for plaintiff in error.

      Mr. C. F. Adams, prosecuting attorney; Mr. F. A. Stetson, assistant prosecuting attorney, and Mr. G. B. Findlay, for defendant in error.
   Jones, J.

As the larcenies of the Clock and Wherry cars, though committed at different periods, were consummated under a conspiracy or a common plan embodying the theft of both, it is now claimed for the accused that his acquittal of the charge of theft in the former case is conclusive upon the state as an “estoppel by way of res adjudicata,” and that the state cannot now develop the criminal plan and theft of the Clock car upon the subsequent trial for the larceny of the Wherry car. In support of this proposition counsel for the plaintiff in error have cited a number of authorities. Among others they cite the two following cases as establishing the principle which they desire to apply in the instant case: Mitchell v. State, 140 Ala., 118, and Commonwealth v. Feldman, 131 Mass., 588.

At the outset counsel for the accused concede that their client cannot avail himself in this case of the constitutional guarantee of not being twice placed in jeopardy for the same offense. The thefts of the Clock and. Wherry cars were distinct offenses, and evidence necessary to support the second indictment involving the larceny of the Wherry car would not necessarily have been sufficient to warrant a conviction for the larceny of the Clock car under the first indictment. The only protection vouchsafed to the accused in criminal cases is that he shall not be twice placed in jeopardy for the same offense. There is no guarantee, either by constitution or by statute, that evidence offered upon the trial of the accused for a different offense, of which he was convicted or acquitted, may not be offered to prove a distinct but related offense. If the contention of the accused should be upheld — that the state is concluded by the verdict of acquittal for the larceny of the Clock car — its effect would be to allow an alleged adjudication of fact to be utilized as a guise for a plea of former jeopardy. It is urged by the accused that if he should be charged with committing a dozen specific offenses, growing out of a single conspiracy, the law should award him some protection on the trial of the twelfth offense, if he had theretofore been tried and found not guilty as to the first eleven. In answer to that it may be said e converso that if he were acquitted on the first trial for one of the offenses that acquittal would at least operate as a partial immunity for the accused in the trial of the other eleven cases. The operative effect of former adjudications are mutual, and it is difficult to conceive why, if an acquittal operates as an adjudication, a conviction could not be offered by the state to prove the conspiracy and theft as established and conclusive facts. To deny the state the right to prove distinct offenses as part of a conceived and deliberate plan or conspiracy to steal, rob or murder would be to grant the accused an immunity not contemplated either by our constitution or statute.

Let us assume that an aider and abettor engages with another in a conspiracy to kill, and that pursuant to such scheme two men are assassinated, what logical or legal reason can there be for using the acquittal of the aider and abettor in one case as conclusive upon the state in a subsequent criminal case for a. separate offense contemplated in the criminal plan? And especially is this in point where the evidence of conspiracy and theft relating to the Clock and Wherry cars was so intermingled that it was almost impossible to separate it. But why should a former acquittal be conclusive as an adjudication of the facts involved therein upon a second trial for a separate and distinct offense resulting from the plan or scheme under which both offenses were committed? On the former trial the witnesses for the state may have committed perjury resulting in such acquittal, or may have absented themselves from the state. The acquittal may have resulted from an erroneous charge, misconduct of counsel or jury, lack of proof upon a single material element, or • from other causes. Can it reasonably be urged, either from the standpoint of law or good morals, that the state should be concluded by such an acquittal, or that it is in any wise estopped from marshaling its competent evidence upon a subsequent trial for another offense, proving a, common scheme or plan to steal specified automobiles, followed, in fact, by the theft of each?

Where separate and distinct offenses are sought to be shown by the state as having some relation to the offense on trial, showing motive, scienter and the like, testimony tending to prove the offense charged is not rendered incompetent by reason of the fact that it also tends to prove such separate and distinct offenses. (Brown v. The State of Ohio, 26 Ohio St., 176.) This rule of competency is also applicable when such other offenses are the result of a common scheme or plan embracing the commission of two or more crimes, including the crime charged, and which are so related to each other that proof of one tends to establish the others. Tarbox v. The State, 38 Ohio St., 581; Jackson v. State, Id,., 585, and Reed v. The State of Ohio, 15 Ohio, 217.

There may be cases in our criminal jurisprudence where a conviction may be utilized as res adjudicata of the issues involved and concluded by the verdict. Thus, where the state imposes a higher penalty for the commission of a second offense, the state may offer the first conviction as a conclusive fact on the second trial. So in indictments for perjury it has been held in some jurisdictions, though seriously questioned in others, that the prisoner may offer the record of his former acquittal on an issue to which such perjury relates. Neither can the state carve a single identical offense into two offenses and impose two punishments for one and the same offense. The state cannot blow hot and cold in criminal cases and occupy inconsistent attitudes by securing separate punishments for the same identical act, as was attempted in Griffith v. The State, of Ohio, 93 Ohio St., 294, 298. There the defendant had been convicted at a former trial of the embezzlement of certain moneys, and at a subsequent trial the state attempted to prosecute the accused for obtaining a part of the same identical money by false pretense. Under the facts stated, the act charged was either embezzlement or obtaining money by false pretense. There was but one offense committed and the accused could not be punished twice therefor by the' inconsistent attitude taken by the state. As was stated by the court in that case, if both embezzlement and the charge of obtaining money under false pretense had been contained in the indictment it would be the duty of the court to instruct the jury that the accused could not be found guilty of both crimes with reference to the same money or property; and the rule would have been the same had the accused been charged with these two crimes in separate indictments. So, after securing a conviction for rape with consent, the state cannot, for the same identical act, thereafter predicate an offense upon an indictment charging the accused with rape without consent, and thus secure a second punishment therefor. This feature of the case is exemplified in Hughes v. Commonwealth, 131 Ky., 502.

It may be in instances of this kind that the record of the former conviction may not establish the identity of the two offenses, the offense tried and the one charged, but in this state, by virtue of Section 13630, General Code, the accused is authorized to offer evidence aliunde to establish identity.

The method provided by statute by which the accused may secure for himself the protection desired is by entering his plea in bar and adducing evidence showing that the offense on trial is the same as that of which he had been acquitted. However, this would not have availed the defendant in this case, because it is conceded that the two offenses are not the same.

The view here taken denying the conclusive effect of former acquittals in cases of this character is supported by many authorities. In some of them the question is raised by a plea of former jeopardy, and in others by tendering that issue upon a plea of not guilty.

The case of State v. Barnes, 26 S. Dak., 268, is exactly in point. According to the claim of the state Barnes had engaged in a plan with two other defendants by which the latter were to steal horses and turn them over to Barnes for disposal. Under this scheme the two confederates, at separate times, stole horses belonging to one Devine and others belonging to one Muhlhausen. Barnes was placed upon trial for the theft of the Devine horses and acquitted. Latér he was placed on trial under another indictment for the theft of the Muhlhausen horses, stolen under the alleged conspiracy and delivered to Barnes. He then interposed his plea of former acquittal in the Devine case, contending “that the acquittal upon the charge of stealing the Devine horses was of necessity an acquittal of the present charge, for the reasons that the conversations testified to in this case, and which it is claimed connect the defendant with the theft of the Muhlhausen horses, are identically the same ones involved in the Devine case, and that, therefore, an acquittal in the Devine case was a complete adjudication between the state and the defendant as to these conversations.” The' testimony relating to the criminal conspiracy, claimed to connect the defendant with the theft, was identical with that in the former indictment. The court held that under the provisions of the constitution and the state code the record of the former acquittal was not a bar, inasmuch as the two offenses were distinct, and in the opinion the court says, at page 271: “The record fails to disclose upon what grounds the trial court advised a verdict of acquittal in the Devine case, whether owing to failure of evidence in relation to the actual theft or failure of evidence to connect defendant therewith, and it does not appear but that such advice was based upon some question of law not connected with the evidence? If the defendant had been convicted of the Devine theft, such conviction could certainly not have been pleaded in bar herein. Supposing there had been such a conviction in the Devine case followed by an acquittal in this case, could it be claimed that such acquittal should free defendant from the former judgment of conviction? Certainly not, and the mere fact that the charge upon which he was acquitted was tried first can have no different result so far as the other charge is concerned.”

In the case of State v. Norman, 135 Ia., 483, 487, the same question was presented. The defendant had been accused of larceny committed on the premises of one McKern. The state offered testimony tending to show that the defendant had also about the ,same time committed larceny upon premises adjoining that of McKern; whereupon, on the trial, the defendant proffered a plea of former acquittal and offered to prove that he had been acquitted of the crime of stealing such property from the neighboring premises. The court refused to receive the offered evidence and submit the plea of former acquittal to the jury. The supreme court of the state of Iowa affirmed this action of the trial court.

In the case of McCartney v. State, 3 Ind., 353, the accused was indicted for uttering a forgery. In order to show the defendant’s criminal intent the court permitted evidence to be offered showing that at the time the bill was passed he uttered other counterfeit bills on the same bank. It appeared that the defendant had been acquitted of passing one of these bills to which the evidence related. In the opinion the court said, at page 354: “We can see no reason why the fact that indictments had been found, or that convictions or acquittals had been had upon them, should affect the admissibility of such utterings. Neither the indictments, nor the records of conviction or acquittal, need be, nor, it strikes Us, * * * should be, given in evidence.”

The principle here announced is supported by the following authorities: State v. Robinson et al., 16 N. J. L., 507; Bell v. State, 57 Md., 108; State v. Houston, 1 Bailey (S. C.), 300, and State v. Jesse, 3 Dev. & Bat., 98.

The principle contended for by the state we think is supported by the case of Bainbridge v. The State of Ohio,.30 Ohio St., 264. Bainbridge was formerly indicted for delivering milk to be manufactured into cheese, with intent to defraud. The state predicated its case upon an offense committed September 1, 1872, and offered evidence tending to show that the defendant took skimmed milk to the factory at various times between the latter part of June, 1872, and the 10th of September following. The defendant was acquitted. At a later term the defendant was again placed on trial for similar offenses, charged, in various counts, as having been committed on July 15, 1872, August 1, 1872, and August 9, 1872. On this second trial the state again offered evidence tending to show that the defendant had carried skimmed milk to the factory between June and the 10th of September, 1872, which evidence related to the same transactions and times covered by the former trial. The defendant contended that since his acquittal upon the former trial resulted from evidence which the state utilized in its second trial, he was twice placed in jeopardy. The court held that this position was not legally sound because the offenses named in the two indictments were distinct from the offenses covered in the former indictment, and after announcing that the true test determining whether the plea of former acquittal is a bar in any particular case Judge Day said: “That this has always been the general rule as to a prima facie case, is not denied. Where but one crime has been committed it may be regarded as a conclusive test. But where more than one crime of the same kind has been committed by the same person, on the same day, and under the same circumstances, it can not be conclusively applied without making the conviction or acquittal of one offense operate as an immunity to another. And the same remark is true when different offenses of the same kind occur under the same circumstances on different days. This rule has, therefore, always been subject to a fundamental rule, equally ancient, that the plea ‘must be upon a prosecution for the same identical act and crime.’ ”

Complaint is now made by plaintiff in error that the trial court erred in not limiting the evidence relating to the theft of the other cars solely to the purpose of showing the criminal conspiracy or plan entered into by the accused. It is one of our fundamental rules of procedure that when the competency of evidence is challenged the attention of the court should be called to the error committed, a ruling obtained thereon, and an exception taken thereto. This rule has been repeatedly enforced since the early decision in the case of Geauga Iron Co. v. Street, 19 Ohio, 300. Our code defines an exception as an objection to the decision of the court, and requires the exception to be taken at the time the decision is made. This method of procedure has been adhered to by this court, save in exceptional instances of misconduct of counsel, and in cases where the statute provides that a general exception to the charge of the court is sufficient to challenge any prejudicial error therein without specification.

The evidence of the state relating to the plan or conspiracy in question was very voluminous, and throughout its entirety may be found reference to the theft of cars other than that included in the indictment. This testimony was competent not only as tending to prove the criminal scheme, but as corroborative of the witness Wood who testified thereto. The record discloses that counsel for the accused objected to the testimony solely because of the fact that accused had been acquitted of the theft of the Clock car, and made no other objection, or any suggestion that the testimony should be limited as now claimed. The duty devolved upon counsel to request or apprise the court that the testimony should be thus limited, and to obtain the decision of the court upon the legal question presented. Since the evidence was competent, it was just as important that they should indicate the particular feature of their objection, as it was in the case of The State of Ohio v. Lasecki, 90 Ohio St., 10. Counsel should not be allowed in a court of error to avail themselves of an exception of which the court was not apprised. An opportunity should be given the court to avoid the commission of error upon trial. The reason therefor is well stated in the case of Adams v. The State of Ohio, 25 Ohio St., 584, 587, as follows: “These rules, it is said, have their foundation in a just regard to the fair administration of justice, which requires that when an error is supposed to have been committed there should be an opportunity to correct it at once, before it has had any consequences; and does not permit the party to lie by, without stating the ground of his objection, and take the chances of success on the grounds on which the judge has placed the cause, and then, if he fails to succeed, avail himself of an objection which, if it had been stated, might have been removed.”

It would be a sufficient compliance by the court if during its admission it admonished the jury as to the effect of evidence relating to similar offenses, or if it later so limited such evidence in its general charge.

In The State of Ohio v. Davis, 90 Ohio St., 100, the record disclosed that there was a misdirection in the charge of the court in limiting the testimony relating to other similar offenses; and an exception was properly taken.

In Baxter v. The State of Ohio, 91 Ohio St., 167, it appears that when evidence of other offenses was received, it was received over the objection of the defendant, whose counsel stated in open court, in the hearing of the jury, that such evidence could not be received for any other purpose than to prove the specific criminal intent alleged in the indictment; and this was held a sufficient objection to the competency of that evidence save for the purpose claimed.

Counsel for plaintiff in error urge that the court committed error in its general charge, and furthermore that the case should be reversed because of misconduct of one of counsel for the state in his argument to the jury.

From an examination of the record in respect to these alleged errors we are unable to find that any error committed was so prejudicial to the defendant below as to require a reversal of this case.

The judgment of the court of appeals is affirmed.

Judgment affirmed.

Newman, Matthias and Donahue, JJ., concur.