author: Okey, J.

text:
    Davis v. Cincinnati.
    In an action under section 626 of the Municipal Code (66 Ohio L. 254), to enforce an assessment for the construction of a sewer, it is error, where the proper defense is made, to render a personal judgment against one in possession of the property assessed, but having no other interest therein than as lessee for a term of ten years; he is not an “ owner” within the meaning of that section; and it will make no difference, in such action, that the lease provides for the payment by the lessee of all assessments upon the property.
    Error to the District Court of Hamilton County.
    On February 1, 1862, George H. Pendleton, Elliott H. Pendleton, Martha L. Dandridgo, and Anna 0. Schech, being the owners in fee of certain premises, situated on Court street and Gilbert avenue, in the city of Cincinnati, executed a lease for the same to Samuel Davis, Jr., for the term of ten years, at a rent of $600 a year, payable quarterly, and placed him in possession. It was stipulated in the lease that Davis should pay all taxes, charges and assessments of every kind, which were or thereafter should be assessed, taxed, charged and levied on the premises or any part thereof, or which should in any manner depend upon or grow out of the said lease, during the term therein granted. At the expiration of the term, February 1, 1872, Davis continued in possession of the premises, holding over under a verbal agreement with the owners in fee to give him another term of ten years upon'the same terms and conditions as those contained in the written lease. He remained in possession until judgment was rendered in this case, as hereinafter mentioned, and for aught that appears is still in possession.
    • On May 8, 1872, proceedings were commenced in the common council of the city of Cincinnati, with a view to the construction of sewers in certain streets, among others in that part of Court street upon which the property in question abuts. That sewer was constructed by J. IB. II. Nolte, under a contract with the city made January 26, 1871, and an assessment by the frontage, amounting to $739.82, was, on June 12,1871, levied on the property in question.
    The assessment not having been paid, the city, suing for Nolte, brought suit in the court of common pleas, on February 2, 1875, against Davis and the owners of the fee, to recover the same, ashing in the petition a personal judgment against them and an order for the sale of the premises. Davis denied that he was the owner of the premises, and claimed that he was not liable to a personal judgment. The cause was submitted to the court, and on request the "facts and conclusions of law were found. The facts so found were substantially as above set forth, and judgment was rendered-against Davis for $810.21, the amount of the assessment, penalty and interest, and the property assessed was ordered to be sold to satisfy the amount so found to be due. The court further found that the owners in fee were not liable to a personal judgment. On error, prosecuted by Davis, the district court affirmed the judgment, and this petition in error was filed by him to reverso the judgment of affirmance.

      E. A. Ferguson, for plaintiff in error:
    Davis is not personally liable for the assessment. Boers v. Barrett, 2 Superior Ct. 67; Lore v. Howard, 6 R. I. 116;
      Cross v. Railroad, 10 Gray,. 293; 8 Ohio, 106; 2 Swan’s Tenn. 301; Municipal Code of 1869, § 541.

      McGuffey, Morrill & Strunk, for tlie city, and Paxton (& Warrington, and F. K. Pendleton, for the owners in fee :
    Davis is personally liable, and the judgment against him was properly rendered. Blecker v. Ballon, 3 Wend. 262; Mayor v. Cushman, 10 Johns. 96; Oswald v. Gilfert, 11 Johns. 443; Sharp v. Elmore, 19 Wis. 121; Sharp v. Spier, 1 Hill, N. Y. 76 ; Astor v. Miller, 2 Paige, 68 ; Salisbury v. Hale, 12 Pick. 416 ; Holsam v. Abrams, 2 Duer, 435; Garner v. Hannah, 6 Duer, 262; Kearny v. Post, 1 Sandf. 105 ; Post v. Kearny, 2 Comst. 391; Buffalo v. Le Courteulx, 15 N. Y. 151; Bradbury v. Wright, Doug. 621; Giles v. Cooper, Carth. 125 ; Taylor’s L. & T. 15, 16, 39.
   Okey, J.

The single question is whether Davis was liable to a personal judgment for the assessment. The chapter on sewers in the municipal code (66 Ohio L. 119, §§ 612, 611), provided, among other modes for assessing the cost and expense of constructing main and local sewers, that it might be done according to frontage.

Section 629 of the same chapter was as follows: “ All assessments made under the provisions of this chapter shall be a lien on the lots or lands assessed. They shall be transferable, and may bo collected against the owner personally, or by enforcement of the lien upon the property subject thereto.”

The owner ” referred to in section 626 must, as a general rule, be one having a freehold estate in the premises asssssed: Perhaps exceptions to -the rule exist. See Rev. Stats. §§ 2733, 1181. The term owner ” does not, as a general rule, include the holders of chattels real. The assessment is on land, and it is an owner of land who is. liable to the personal judgment. We are clear that the term “ owner” does not include one having no other interest than as lessee for a term of ten years. Any other construction would lead to absurd consequences. A tenant holding for a month might be personally bound for permanent public improvements of the most expensive character.

Where a party is personally liable for an assessment, his liability is precisely commensurate with the lien upon the property. The only express exception to the rule that such party must be the owner of the fee, is found in section 511 of the municipal code, which, as amended in 1870 (G7 Ohio L. 80), is as follows: Where a special assessment is made on real estate subject to a life estate, such assessment shall bo payable by the tenant for life; but upon application by said life tenant to a court of proper jurisdiction, by action against the owners of the estate in fee, such court may apportion the cost of said assessment between said tenant for life and owner in fee, in proportion to the relative value of said improvement to their estates respectively, to be ascertained and determined by said court on principles of equity.” Other exceptions to the rule may exist, as already indicated.

But it is urged that here was a lease in which Davis expressly bound himself to pay all assessments, and that this lease had been renewed, so that it was in full force when the improvement was projected, and when the assessment became a lien upon the property; and that, in order to prevent circuity of action, a suit may be maintained by the city directly against Davis. But the liability to a personal judgment for an assessment of this character is statutory; such liability is confined to the owner of the property, and Davis, as we have seen, is not such owner.

We express no opinion upon the question whether, by foi'ce of the parol agreement between the owners of the fee and Davis, the liability of the latter to pay assessments did or did not continue after February 1,1872. But assuming that it continued to be, in all respects, the same that it had been during the preceding ten years, still the agreement between the parties cannot be considered in this statutory action. Whatever liability from Davis to the owners of the fee may exist, is a matter entirely between themselves, and with which the city and Nolte have no concern.

The judgment against Davis will be reversed, and the order of sale will be affirmed.

Judgment accordingly.


source: Caselaw Access Project

author: Boynton, J.

license: Public Domain

text:
    Bradley et al. v. Bauder.
    1. By tlie provisions of the act of May 11, 1878 (75 O. L. 436) an owner, residing in Ohio, of shares of stock in a foreign corporation, is required to list the same for taxation, notwithstanding the capital of the corporation is taxed in. the State where the corporation is located.
    2. The provisions of said act subjecting such shares of stock so owned to taxation in this State, are not in conflict with the constitution.
    Appear. Reserved in the District Court of Cuyahoga county.
    This action was brought to enjoin the auditor of the county of Cuyahoga from placing upon the duplicate for taxation, in pursuance of a direction from the Board of Equalization of the city of Cleveland, investments in the capital stock of corporations created in other States, owned by the plaintiffs, residents of this State.
    The corporations were railroad, mining, manufacturing and express companies, and each derived its franchises wholly from the State where it was located.
    The petitioji avers that their capital stock is all invested in real estate and other fixed property, situated in other States, where the same is annually listed and taxed, and where their entire business is transacted, and that no part of either is within this State, or subject to its jurisdiction.
    The defendant demurred to the petition for want of sufficient facts to constitute a cause of action.
    On appeal to the district court, a preliminary injunction was granted, and on plaintiffs’ motion the cause was reserved for decision by this court.

      P. P. Panney, for plaintiffs :
    1. No word in the constitution or laws expressly defines such interests as the subjects of taxation. If they are covered at all, it is only by general language, which it is completely settled must be restrained by construction to persons and things within the territorial limits of the State. Steamboat Ohio v.
      Stunt, 10 Ohio St. 582; Booth v. Hubbard, 8 Ohio St. 243; Stetson v. Bank, 2 Ohio St. 174; Woodward v. Railroad, 10 Ohio St. 122; Miller v. Ewer, 27 Me. 509 ; Farnum v. Blackstone, 1 Sumn. 46.
    2. The basis of taxation in this State is property alone, and property within the jurisdiction of the State. The residence of the owner is wholly immaterial. Exchange Bank v. Hines, 3 Ohio St. 1; City of Zanesville v. Richards, 5 Ohio St. 589 ; Carrier v. Gordon, 21 Ohio St. 605; People ex rel. Hoyt v. Com'rs of Taxes, 23 N. Y. 224.
    3. To tax property situated in other States, and there, rightfully subjected to taxation, is double taxation, and subjects, the same owner to a burden of taxation twice as large as that imposed upon property differently situated — and is a positive violation of the principle of equality ordained by the constitution. See authorities above cited.
    4. The statute itself defines “investments” in the stock of corporations as personal property (not debts or choses in action), from which no deductions can be made. Its actual situs —the place where the investment is made and remains — is the place of its rightful taxation, and if beyond our territorial limits cannot be legally taxed here. Story on Conflict of Laws, § 383; Railroad Co. v. Wheeler, 1 Bl. 286; Bank v. Earl, 13 Pet. 512; Tappan v. Bank, 19 Wall. 499; Railroad Co. v. Cary, 28 Ohio St. 211.
    5. It stands admitted by the pleadings that all the assets and property of these corporations consist of real estate and. fixed property in the States incorporating them, and that the-entire capital of each is invested therein; that upon all this property (and in one of the States the entire market value of the stock and franchises in addition), taxes are regularly levied and paid where it is situated. Under such circumstances there is no “ value in money ” to the shares of stock outside of the property in which they are invested. That property being, taxed “ in the name of the company ” — the trustee of the. shareholders — the “shares of the capital stock” in the hands of the shareholders is expressly exempted from further taxation by section 13 of the- act of-. 1878 (56; O. L. 175). It is now completely settled that “ the power of taxation of a State is limited to persons, property, and business witliin her jurisdictionand that “ all taxation must relate to one of these subjects.” Railroad Co. v. Pennsylvania, 15 Wall. 300; 3 Wall. 598; 18 Wall. 229; Tappan v. Bank, 19 Wall. 499. The first and the last of these subjects may be laid out of the present case — the first because such taxation is absolutely prohibited in this State, and the last, because it is conceded that no business is done in the State. And thus, the whole matter is reduced to the single question whether investments in real and fixed property in another State, held by a corporation there, and constituting its capital stock, and there paying full taxes according to its value — ai’e again subject to taxation in this State. If such property were held by the natural persons who compose the corporation, either by legal or equitable title, ixo one would pretend that it could be, although tlxe ownci’s continued to reside in this State. ■
    No single reason upon which taxation has been supposed to be foxxnded, would justify such an imposition. It would receive no protection from our laws, and would owe nothing for any protection. And yet, while the property remains exactly the same in nature and. kind, and the respective interests of the proprietors ixi it the same, because the State in which it is situated, the better to enable the proprietors to use and improve it, sees fit to confer upon them corporate unity and perpetual succession, and thereby more completely localizing both property and proprietors, and justly entitling itself to impose taxes upon it all for the franchises confen’ed and protection afforded —it is claiined that this very process brings it all, and its whole value, into Ohio for the purpose of- imposing another tax upon it here. When gross absurdity, instead of the “ perfeetioxx of human reason,” comes to be the foundation of jurisjxrudence, such a proposition may be maintained, and never before. Mechanics’ Bank v. Railroad, 13 N. Y. 627; Railroad v. Schuyler, 17 N. Y. 595 ; Maltby v. Railroad, 52 Penn. St. 140.

      Marvin, Laird & Oadwell, for defendant:
    I. We assume, that under the act of 1859, S. & 0. § 1439, residents of Ohio owning stock in foreign corporations, were rightfully called upon to return those stocks for taxation; and we arrive at this conclusion from the decision of this court in Worthington v. Sebastian, 25 Ohio St. 1. The act of 1878 (75 Ohio L. 438), under which this action was brought, does not take the case out of the ruling of the court in Worthington v. Sebastian.

    II. As to double taxation, see Farrington v. Tennessee, 95 U. S. 686-7; Curran v. Arkansas, 15 How. 304; Gordon v. Appeal Tax Court, 3 How. 133; People v. Commissioners, 4 Wall. 244; Van Allen v. Assessors, 3 Wall. 573; Queen v. Arnaud, 9 Ad. & E. N. S. 806; Bank Tax Cases, 2 Wall. 200; Angell & A. on Corp. §§ 556, 557; Union Bank v. State, 9 Yerg. (Tenn.) 490; McCulloch v. Maryland, 4 Wheat. 316 ; Wood v. Dummer, 3 Mass. 308; Bradley v. People, 4 Wall. 459 ; Queen v. Arnaud, supra ; National Bank v. Commonwealth, 9 Wall. 353; State v. Brannin, 3 Zab. (N. J.) 484.
    From these authorities we learn that these shares have no actual sitias, and hence fasten themselves to the situs of their owners.
    That these shares, belonging to residents of Ohio, cannot be taxed by another State. See 15 Wall. 300.
    Yet, that a State may tax both the property of a corporation and the shares held in such corporations by residents of this State (95 U. S. sxopra), and that this is not double taxation. Again, these stocks or shares have many of the inherent properties of chattel property; the owner, without consulting the company or , any member thereof, may pledge them as collateral security (Van Blascom v. Broadway Bank, 37 N. Y. 540; Markham v. Jaudon, 41 N. Y. 235-258), may sell them — ■ may dispose of them by will. Hying intestate they pass to the administrator rather than the heir, and by him may be sold to pay debts. They are subject to levy and execution. Herman on Ex. § 362. The property owned by a corporation may be real estate, yet the stockholder owns no part of it, and his shares are transferable without any of the formalities attending the transfer of real estate. Exp. Union Bank of Manchester, 12 Eq. Cases, 357, and cases there cited; Williams on Personal Property, 1 Am. ed. 6; 18 Am. L. Reg. 1, and cases there cited.

      Grcvrmis & Griswold, also for defendants, as opposed to the proposition:
    That shares of stock in foreign corporations owned by citizens of Ohio are not property within the meaning of the Constitution of the State, but simply evidence of title to property situate in foreign jurisdictions, cited Minot v. Railroad Co., 18 Wall. 206 ; Kirtland v. Hotchkiss, 42 Conn, 438.
   Boynton, J.

The sole question arising upon the demurrer to the petition, is whether the shares of stock in corporations' created in other States, which shares are owned by persons residing here, are taxable under our constitution and laws, where the capital stock of the corporation is invested in real and fixed property situated in the State in which the corporation exists, and where by the laws of such State the same is required to be listed for taxation.

The claim of the learned counsel for the plaintiffs is, that the right, in such case, to levy and collect a tax upon the shares of stock of such owner, finds no warrant either in the constitution or the. statute.

The constitutional power to tax shares of stock in foreign companies, owned by residents of Ohio, was directly involved in Worthington v. Sebastian, 25 Ohio St. 1, where it was held, that the duty imposed by the statute to tax such shares was neither in violation of the constitution of the State, nor of the United States.

The question arose under the act of 1859 (2 S. & 0. 1138); but the provisions of that act, in respect to property made-subject to taxation, were substantially the same as those of the act of 1878, under which the right in the present case is asserted to tax the shares of the plaintiffs in foreign compa-. nies.

The two acts being the same as respects the property subject to taxation, it follows that if that case was correctly determined, it is decisive of the present. A careful examination of the grounds on which it rests, satisfies us that the same was correctly decided.

No provision of the constitution is more explicit in its terms, or less open to construction, than that relating to the subject of taxation. "With few exceptions, in which a discretion is left to the' legislature to impose a tax or not, -the constitution imperatively enjoins the passage of laws ’taxing by a uniform rule “ all moneys, credits, investments in stocks, joint stock companies, or-otherwise ; and also all real and personal property, according to its true value in money.” Article 12, § 2.

To carry this provision into effect, it was provided by the act of 1818, and now by the Revised Statutes, that “ all property, whether real or personal, in this state, and whether belonging to individuals or corporations; and all moneys, credits, investments in bonds, stocks or otherwise, of persons residing in this state, shall be subject to taxation, except only such as may be expressly exempted therefrom.”

Thus, both the constitution and the statute expressly designate “investments in stocks” as one of the subjects of taxation, without any restriction or limitation as to the place or state where such “ stocks ” may be authorized or issued. And that the meaning of the term should admit of no doubt, it was declared “ to include all moneys invested in the capital or stock of any association, corporation, joint stock company, or other company, the capital or stock of which is or may be divided into shares, which are transferable by each owner, without the consent of the other partners or stockholders, for the taxation of which no.special provision is made by law, held by persons residing in this state, either for themselves or others.”

It was, moreover, provided by the 1st section of said act, defining the property subject to taxation, that the term “ personal property ” should, inter alia, be held “ to mean and include every share, portion or interest in the capital stock of a corporation;” and by section 13 of the act relating to the listing of property, it was further declared, that property of every description, moneys and credits, investments in bonds, stocks, joint stock companies, or otherwise, shall be listed in the name of the person who was the owner thereof on the day preceding the second Monday of April, in each year,” providing that “no person should be required to list for taxation any share or shares of the capital stock of any company, the capital stock of which is taxed in the name of such company.”

In view of these provisions, it is perfectly obvious that shares of stock in corporations, wherever located, owned by our citizens, are subject to taxation, except in cases falling within the operation of the proviso of section 13, unless the statute is open to constitutional objection. The proviso to the 13th section, exempting from taxation any share or shares of stock in any company, the capital stock of which is taxed in the name of the company, is a substitute for the same provision found in the first clause of section 59, of the act of 1859. It had, in that act, as in the act of 1878, no reference to shares of stock in foreign companies. It is only where the capital stock of the company is required to be taxed in Ohio, that the right to such exemption obtains. The puipose of the proviso ■was to exempt from taxation the shares of stock in corporations, where the state had exercised the right to tax the capital stock in the name of the company. No such tax could be imposed upon the property of foreign companies not situate within the state. The capital of the corporation is the property of the corporation, and it can only be taxed in the State where the property is located. It is very clearly settled, that the right of taxation is limited to persons, property and business within the jurisdiction of the State where the right is attempted to bo exercised. Railroad Company v. Pennsylvania, 15 Wall. 300. But investments in stocks in foreign companies, owned by residents here, being property within the state,, are not only made subject to taxation by the constitution, but, as we have seen, their taxation is expressly required by the statute.

But it is said, that because the capital of the company is invested in real and fixed property in the state where the corporation is located, and in which state, taxes upon the same are regularly levied and paid, a tax here upon the shares of stock of those residing here, is a tax upon the same property, and therefore results in double taxation.

The argument is : that the capital of the corporation is invested in property which is taxed in the name of the coloration, and that the shares in the capital stock, when owned by individuals, ooly represent proportions in the ownership of such property, and hence, to tax the shares is another mode of taxing the property of the corporation, and that a tax upon both, although the tax upon one is imposed by another state, violates the rule or principle of equality established by the constitution. This argument, however plausible it seems, hast never met with favor from the courts. Double taxation, in a legal sense, does not exist, unless the double tax is levied upon the same property within the same jurisdiction. Here the property owned by the plaintiffs is not only not the same as that owned by the corporation, but its situs, so far as shares of stock are capable of one, is in a different state.

The capital of a corporation, whatever invested in, and the individual shares of stock, are distinct species of property. Farrington v. Tennessee, 95 U. S. 679. The owner of a share of stock owns no part of the capital of the company. Watson v. Spratley, 10 Exch. 236. The corporation is its sole owner, holding the same, it is true, in trust, for the purposes for which the corporation was created, and upon its winding up, for the benefit of creditors and shareholders. The ownership of a share of stock, so far as the property of the corporation is concerned, is but the ownership of the right to participate, from time to time, in the net profits of the business, and upon the dissolution of the corporation to a proportion of the assets after the payment of the corporate debts. It is personal property, which, upon the death of the owner, goes to his administrator, although the entire capital of the corporation may consist of real estate. The owner may sell or dispose of his stock at pleasure, and, in so doing, works no change or modification in the title to the corporate property. From this it would seem to result necessarily, that its situs, for purposes of taxation, when not otherwise provided by statute, is that of the domicil of the owner. That shares of stock may be separated from the person of the owner, by statute, and given a situs of their own, was held in Tappan v. Merchants' National Bank, 19 Wall. 490. But when not so separated, that their situs follows and adheres to the domicil of the owner, is supported by a great weight of authority. State v. Branin, 3 Zab. 484; City of Newark v. Assessor, 30 N. J. Law, 13; Barrington v. County Corners, 16 Pick. 572 ; Oliver v. Washington Mills, 11 Allen, 268; Whitesell v. County of Northampton, 49 Penn. St. 526 ; Cooley on Taxation, 16 ; Burroughs on Taxation, 188.

The same principle governs a chose in action ; for purposes of taxation, its situs is that of the domicil of the owner, although the debt is secured by a mortgage upon realty in another state, and by agreement of the parties expressly made subject to its laws. Kirtland v. Hotchkiss, 42 Conn. 426. See same case in 100 U. S. 491.

The constitutional power to tax shares of stock, owned by our citizens in corporations located without the state, does not depend on whether the capital of the corporation is or is not taxed in the state where the corporation is created. The power is the same, whether the capital of the corporation is there taxed or not; otherwise, the power of taxation conferred by the constitution would be made to depend upon the operation of laws of a foreign jurisdiction — a proposition so obviously ill founded that the moment it is stated its falsity becomes apparent.

In Dwight v. Mayor, 12 Allen, 316, the plaintiff, the owner .of shares in a foreign railroad corporation, sought a deduction from the tax upon his stock, by reason of the tax on the property of the corporation in the state where the same was located. The right to such deduction was denied, the court remarking that shares in a foreign railroad corporation held by citizens of this state are fully taxed here, and no deduction is made for any taxation to which the corporation is subject, in the states where they are located. So it is in regard to shares hold by our citizens in banks, insurance companies, and other moneyed corporations, situated in other states. Such shares, when held by our citizens, are here treated as so much personal estate, following the person of the owner, and taxable at their full value .in this commonwealth, regardless of what may be the foreign law as to taxation of the capital or any part of it elsewhere.”

This case is but one of a great number that hold the same doctrine.

The demurrer is sustained, the injunction vacated, and petition dismissed.


author: McIlvaine, C. J.

text:
    Richards et al. v. Doyle et al.
    M. and J. (the latter a married woman), owners,in remainder of a certain lot, join in a covenant, with the consent of R., the life tenant, to convey the whole estate to D. for a consideration, to be paid on condition that the vendors would grant the right of way over the premises to a railroad corporation. The right of way, in performance of the condition, having been granted, and D. being in default of payment, R. J. and the personal representative of M., who was then dead, commenced an action against D., making the heirs of M. and the husband of'J. parties defendants, to enforce specific performance of the contract. Held, that the coverture of J., the plaintiffs being able, ready and willing to convey a complete title to D. upon the payment of the purchase-money, is no defense to the action for specific performance.
    Error to the District Court of Franklin county.
    The original action was brought by plaintiffs in error, as vendors, to enforce the specific performance of a contract against Samuel Doyle, the purchaser.
    The contract was in writing, of which the following is a copy:
    “ This indenture, made and entered into this 12th day of February, A. D. 1872, between Samuel Doyle of the first part, and Margaret Morgan and Sophia Jones of the second part, witnesseth: that the said Samuel Doyle shall, upon the conditions following, purchase of the said parties of the second part the whole of lot number ten (10) of William Phelan’s Mount Pleasant Addition to the City of Columbus, Ohio, paying for the same five thousand dollars, one-third in hand and the balance in three equal annual payments: Provided, that the said parties of the second part shall first sign the right of way for the North Columbus Street Railway Company through said lot, and then if the City Council after such action shall confirm the right of way through said lot and on Kerr street, then the said party of the first part shall be held and firmly bound by these presents; otherwise they shall be null and void.
    “ The last payments mentioned above are to bear interest at the rate of eight per cent, per annum.
    “ Samuel Doyle, 7

      “ Margaret Morgan,
    “ Mary Richards,
    “ SopniA Jones.”
    At the date of the contract the title of said lot No. 10 was in Mary Richards for life, with remainder in fee in Margaret Morgan and Sophia Jones as tenants in common. Sophia Jones was then and still is a married woman. On the same day, and in compliance with said contract, Mary Richards, Margaret Morgan and Sophia Jones conveyed the right of way through said lot to the North Columbus Street Railway Company, and afterwards the city council of Columbus confirmed to said company the right of way.
    Samuel Doyle, who was the chief promoter of said railway, and owned five hundred shares of the capital stock of said company — the whole number of shares being five hundred and seven — under a contract with the company for the construction of the railway, and as lessee thereof for the term of ten years, took possession of the right of way so granted over said lot, being a strip one hundred feet in width and embracing about two-thirds of the entire lot, constructed the railroad thereon, and continued in the possession thereof until the commencement of the action.
    In the meantime Margaret Morgan died, leaving Mary Morgan, Jessie Morgan and Henry Morgan, her children and only heirs-at-law, and David Roberts was appointed administrator of her estate.
    The original action was commenced by Mary Richards, Sophia Jones and David Roberts, administrator of Margaret Morgan against Samuel Doyle and the heirs-at-law of Margaret Morgan. After the commencement of the action, E. A. Jones, the husband of Sophia, was made a party, and filed his answer affirming the contract and action of his wife, and averring bis readiness to join with bis wife in tbe execution of a proper deed of conveyance; in fact, a deed to Doyle, duly executed by Sophia Jones and her husband, was brought into court and deposited with tbe cleric to be delivered to Doyle upon bis compliance with tbe terms of said contract.
    Doyle resisted a decree for specific performance of tbe contract, chiefly on tbe ground of tbe coverture of Sophia Jones.
    Upon this state of facts, tbe court of common pleas dismissed tbe petition, and on proceedings in error, tbe district court affirmed tbe judgment of tbe court of common pleas.
    By this proceeding tbe plaintiffs seek a reversal of tbe judgments below.

      O. N. Olds, and Harrison (& Olds, for plaintiffs in error:
    Tbe coverture of Mrs. Jones was no defense to tbe action. Willetts v. Insurance Co., 45 N. Y. 45 ; L' Amoreux v. Could, 3 Selden, 349 ; Farley v. Palmer, 20 Ohio St. 223; Worsall v. Munn, 1 Selden, 229; Seagers s. Burns, 4 Minn. 141; Chamberlin v. Robertson, 31 Iowa, 408 ; Allen v. Berryhill, 27 Iowa, 534; 1 Cin. Sup. Ct. 161; Pilcher v. Smith, 2 Head. 208 ; 2 Cin. Sup. Ct. 402; Vance v. Nogle, 70 Pa. St. 176 ; Walker v. Coover, 65 Pa. St. 430; Fenelly v. Anderson, 1 Irish Ch. 706, 708 ; Hoggart v. Scott, 1 Russell & Mylne, 293; 7 Paige Ch. 77; 1 Story Eq. Jur. § 777; Wilson v. Tappan, 6 Ohio, 172; Brown v. Witter, 10 Ohio, 142; 2 Younge & Collyer C. C. 54. If it be conceded that tbe promise of Mrs. Jones was void because of her coverture, still tbe other two vendors, Mrs. Richards and Mrs. Morgan, were under no disability, and their promises were valid and binding and a consideration for tbe promise of Doyle. There was sufficient mutuality of contract between them and Doyle. Upon their failure to perform, Doyle could have enforced specific performance against them, with compensation for any defect of title, or be could have recovered damages at law. If they were unable, at the time of the contract, or before tbe commencement of this action, to convey a complete title to the land, Doyle knew of it, but be did not retire from tbe contract or offer to restore wliat lie bad received. He held what lie bad got, and afterward took and has ever since held possession under and in affirmance of the contract. He could not now place the vendors “ in statu, quo ” if he would, and he wouldn’t if he could. When Mrs. Jones and her husband executed their deed and deposited it as an escrow with the clerk, then, if not before, Mrs. Richards and the administrator of Mrs. Morgan were enabled to make a complete title and to fully perform, and were entitled to a decree. Doyle cannot and has not complained of the joinder of Mrs. Jones in the action, because it cannot prejudice him, and he is estopped by his contract from making such an objection.

      Lorenzo English and J. W. Baldwin, for defendant Doyle:
    I. Such a contract as the one under consideration, entered into by a married woman, cannot be enforced against her in equity; she cannot be compelled to perform it specifically. Upon this subject the general rule is, that feme coverts cannot bind their interest in lands, except in the precise form prescribed by law. Therefore an agreement by a feme Covert, even with the assent of her husband, for the sale of her real estate, is void and cannot be enforced in chancery against her. 1 Hilliard on Vendors, 56, citing Dunlap v. Mitchell, 10 Ohio, 117 ; Butler v. Buckingham, 5 Day, 492; Clark v. Reins, 12 Grattan, 98; 2 Hilliard on Vendors, 225 ; Emery v. Wase, 8 Vesey, 505; Davis v. Jones, 4 Bos. & P. 267; Martin v. Mitchell, 2 Jac. & W. 413. See also 1 Roper H. & W. 547; 1 Bright, 191; McCann v. Jones, 1 Rob. 256; Evans v. Kingsberry, 2 Rand. 120; Watts v. Kinney, 3 Leigh, 272; 1 Sugden V. & P. 268; Mitchell v. Dunlap, 10 Ohio, 117; 10 Ohio, 305 ; Martin v. Dwelly, 6 Wend. 9 ; Butler v. Buckingham, 5 Day, 492 ; Bishop on Married Women, 421, 422, § 601; 52 Pa. St. 400 ; 1 Disney, 128 ; 49 Miss. 307; 5 Heiskell (Tenn.) 26 ; 25 N. J. Eq. 390; 29 Ark. 650 ; 29 Ind. 260 ; 15 Minn. 59.
    II. This contract not being binding upon one of the plaintiffs, Mrs. Jones, and unenforceable against her, is not binding upon, and cannot be enforced against Doyle on the principle of law that a contract must be obligatory upon both parties thereto, or it will bind neither’. Chitty on Contracts, 15, 16 ; 1 Hilliard on Vendors, 435; Bodine v. Glading, 21 Penn. St. 50 ; German v. Machin, 6 Paige, 288; Benedict v. Lynch, 1 Johns. Ch. 373 ; Boucher v. Van Buskirk, 2 A. K. Marshall, 346 ; Flight v. Bolland, 4 Russ. 298 ; 2 Story Eq. § 751, note ; Stoutenburgh v. Tompkins, 1 Stockt. 332. See Chancellor’s decision in ajrpendix to Hilliard on Vendors, 306; Armiger v. Clarke, Bunbury, 110; Lawrenson v. Butler, 1 Schoales & L. 18; 1 Stockt. 332; Fry on Specific Performance, 198, § 286 ; 2 Md. Ch. Dec. 401; 21 Pa. St. 50.
    III. Specific performance cannot be had of part of a contract ; and when one of the several plaintiffs or defendants, joint contractors, is not bound by the contract, specific performance cannot be decreed pro tcmto as to the parties and tlieir interests, that might otherwise be bound thereby. The court will not compel specific performance of a contract, unless it can execute the whole contract. Roffey v. Shallcross, 4 Madd. 227; Dalley v. Pullen, 3 Sim. 29; Price v. Griffith, 1 De G., M. & G. 80; Fry on Specific Performance, 202, 329, § 536, et seg.; 5 Ves. 846; 2 Johns. Ch. 23; 1 Pet. C. C. 380; 2 Wheat. 336.
   McIlvaine, C. J.

The general proposition, that courts of equity will not enforce the specific performance of an executory contract of a married woman, either for or against her, may be admitted. The general rule undoubtedly is, that the obligation of a contract must be reciprocal and mutual between the parties in order to entitle either to a decree for specific performance against the other party ; and a married woman, as a general rule, not haying capacity to bind herself to the performance of an executory contract, the party assuming to contract with her, is not, in law or iñ equity, obliged to perform such contract on his part.

To what extent, or under what circumstances, however, performance or part performance of a contract by a feme covert will raise such an equity in her favor, that specific performance will be decreed to her, is not so clearly settled. It would seem safe, however, oil the authorities, to say, that when a fame covert, in the performance of her contract, has so changed her condition that the rescission of the contract would not place her in statu quo, and the other contracting party is tendered full performance, or can be made secure in the benefits of his contract, ccpiity will not allow him to say that he is not bound to perform oil his part.

"While we are inclined to think, that upon the principle here suggested, the plaintiffs below were entitled to a decree in their favor, there is another view of the case which clearly shows that the courts below erred in refusing to grant the relief prayed for. Mrs. Morgan, one of the contracting parties, most clearly was bound to Doyle to convey to him the whole of the premises contracted for, upon the performance of the conditions named in the contract, and upon failure to do so, would have been liable for damages resulting from such breach of her contract. It would have been no defense for her or her representatives to have shown that the title to the whole of the lot was not in her, but that a part interest was in Mrs. Richards, who did not promise to convey, and that another interest was in Mrs. Jones, who by reason of her coverture was not bound by her contract to convey. That Mrs. Morgan could have been compelled to convey to the extent that the title was in her or under her control is not a matter of dispute, and for so much of the estate as she was unable to convey or procure to be conveyed she would have been liable to make compensation. As between Mrs. Morgan and Doyle, the purchaser, the contract did not lack either mutuality ©r consideration. Hence, when it was shown in the court below that the representative of Mrs. Morgan was able, willing and ready to transfer or to have others transfer to the purchaser the whole estate for which he had contracted, he should have been decreed to pay the purchase-money. That Mrs. Richards and Mrs. Jones, with her husband, were demanding the same relief, did not prejudice the purchaser. His right was to have the title for which he had contracted, his duty was to pay the purchase-money. All the parties in interest were before the court and would have been concluded by the decree. A decree for specific performance against the purchaser would have done ample aud complete justice. The denial of such decree left the vendors without adequate remedy.

Judgments of the district court and of the common pleas reversed, and decree for plaintiffs.


author: Johnson, J.

text:
    Bear v. Knowles.
    1. In proceedings in error, under the civil code, to reverse a judgment, the court must disregard any error or defect in the pleadings or proceedings which does not affect the substantial rights of the adverse party.
    2. The refusal of a court, in which a civil action is pending, to sustain a motion to separately state and number several causes of action which may be united in one petition, is not an error for which the final judgment will be reversed, unless it appears that by such refusal the adverse party has been deprived of a substantial right.
    Error to the District Court of Stark county.
    Hannah Knowles, the plaintiff below, brought her action against the plaintiff in error, to recover for injuries to her person and to her means of support, by reason of the intoxication of her husband, Hiram Knowles, caused by the unlawful sale of liquor to him by defendant below.
    The injury to her means of support is alleged to be caused by the intoxication, rendering him unable to perform his usual labor, whereby she was deprived of food, fuel, clothing, &c.
    The injury to her person arose from his beating and ill-treating her while so intoxicated
    The defendant moved the court to. compel the plaintiff to separately state and number her causes of action; and in argument claims that there are two causes of action ; one for injury to her person, and one to her means of support.
    This motion was overruled and the defendant excepted. He then answered to the merits, denying all the material allegations of the petition, except that she was the wife of ITiram Knowles.’
    The issue thus joined was tried by a jury, resulting in a verdict for the plaintiff.
    To set aside this verdict the defendant filed a motion for a new trial, alleging that there were errors at law occurring at the trial, and that the verdict was contrary to the evidence; but no bill of exceptions was taken on the overruling of this motion.
    The court rendered judgment on the verdict, and' on error to the district court this judgment was affirmed.
    To reverse this judgment this action is brought.

      S. Meyer c& Son and J. J. Pcwlter, for plaintiff in error.

      D. FordÁng and TP". <7. Pippin, for defendant in error.
   Johnson, J.

The record does not disclose any error occurring on the trial. The motion for a new trial was overruled, but no exception was taken by bill or otherwise. From this we are bound to assume that no error intervened to the prejudice of the defendant.

Nor is it apparent how he could have been prejudiced by the refusal of the court to require the plaintiff to separately state and number, her several causes of action.

For the purposes of this case, we may assume that the petition states more than one cause of action. On this assump-tion, these causes should have been separately stated and numbered, and the court of common pleas erred in not sustaining the motion.

Will error lie to reverse the final judgment upon the merits for this assumed error?

We think not. It is true the code requires causes of action, which may be united in one petition, to be separately stated and numbered; but unless it appears that the adverse party has been deprived of some substantial right, by the action of the court, it must be regarded as formal merely, and not prejudicial.

The Code, section 138 (R. S. 5115), requires that “the court, in every stage of an action, must disregard any error or defect in the pleadings or proceedings which does not affect the substantial rights of the adverse party, and no judgment shall be reversed or affected by reason of such error or defect.”

Here, there was a full trial upon the merits. So far as the record discloses, the plaintiff in error liad the benefit of every legal right to which he would have been entitled had his motion been granted. Had he been deprived of any such right, it should have been made to appear by exceptions made part of the record. If several causes of action, which cannot be joined, are stated in the petition, the vice can be reached'by demurrer; but where they may be joined, but are not separately stated and numbered, the defect is a formal one, to be reached by motion, and for which a demurrer will not lie.

That cases may arise in practice where a failure to separately state and number the causes of action may work prejudice, is possible. In such a case, when error does intervene which deprives a party of a substantial right, and that fact is disclosed by the record, error would lie to reverse the judgment.

It does not appear in this case that the plaintiff was deprived of any substantial right by the refusal of the court of common pleas to grant the motion. If it was an error to overrule this motion (and upon that we express no opinion), it is one that must be disregarded by the requirements of section 138 of the Code of Practice.

In the New York Code, there is the same provision as in ours (§ 140), requiring the causes to bo separately stated and numbered. In Goldburge v. Utley, 60 N. Y. 427, it was held that this section related simply to a question of practice, over which the court has. control; that the right is merely formal, and not substantial; and that an order denying this right is not reviewable oir error.

This is going farther than the case at bar requires us to go. Ye simply hold that a final judgment will not be reversed for such an error, unless it appears of record that the refusal to grant the motion affected the substantial rights of the adverse party in a manner prejudicial to him on the merits. "We have not undertaken to determine what unlawful sales of intoxicating liquors constitute one, and what several causes of action, which should be separately stated and numbered.

In deciding this case, we have taken the construction of the petition insisted on by plaintiff in error, that there are two causes of action, one for injury to means of support, and one to the person, which should have been separately stated and numbered.

Judgment affirmed.


author: White, J.

text:
    Madden v. Railway Co.
    A railway companjr, in consideration of the grant of a right of way for its road, through the lands of the plaintiff and of two other adjoining proprietors, agreed to make such culverts and crossings as might be necessary to enable the parties “ to reasonably occupy their lands, to carry off surplus water, &c.and that upon the hillside of said road a sufficient drain should be made and kept open “for the discharge of the drainage.” The company built a culvert across its road south of and below said lands, with which the drain on the hillside of the road was connected, and through which the drainage from the lands of the plaintiff -was discharged. — Held, that the culverts and the drain form necessary parts of the plan or means agreed on for. draining the lands of the plaintiff on the hillside of the railroad, and that for damages caused to such lands by the obstruction of the drain, the company is liable, although the obstruction may not have been on the lands of either of the parties granting the right of way.
    Error to the District Court of Muskingum county.
    The original action was brought by Hugh Madden against The Cincinnati & Muskingum Yalley Railway Company, to recover for the breach of an agreement entered into between the parties.
    The agreement is evidenced by writing as follows :
    “ Whereas, the Cincinnati and Muskingum Yalley Railway Company, a corporation of the State of Ohio duly organized, are about to locate their line of railroad through the counties of Muskingum and Coshocton; now the undersigned, to aid said projected public work, and in consideration of one dollar ($1) to each of us in hand paid, do hereby severally agree with the company, in case said road shall be located through or upon any lands owned by us respectively, to convey on demand to the company the rights of way on the located line over such land one hundred feet wide, and in the meantime wo respectively permanently license the company to enter upon, survey, use and occupy such located line and roadway over said lands, with like right as if said conveyance had been made; it being understood, however, that the parties hereto reserve the right to use and occupj'- so much of said one hundred feet as the railway company do not require, from time to time, for the maintenance and operation of its said roadway; and it being further understood that said railway company shall make such culverts and crossings as may be necessary to enable the parties hereto to reasonably occupy their lands, to carry off surplus waters, &c., to give all necessary crossings. We hereby agree, for the considerations heretofore set forth, to grant to the C. and M. Y. Railway Oo. the right of way through our lands, upon the further condition, .however, that the road shall be constructed upon its present location ; that no material shall be borrowed from the river side of said line, and that upon the hill side of said line a sufficient drain shall be madefor the discharge of the drainage; and further, that a guard bank shall be built extending from the railway embankment along the division line between H. Madden and Gr. W. Adams to the river bank, and also that a crossing shall be made over the railway near the middle of my place.
    “Hugh Madden,
    “ C. Mattingly,
    “Henry Munson.”
    Before this instrument was delivered to the company, throe additional propositions were added. The second only is material in the present proceeding, and is as follows :
    “ 2. As to the dram or ditch on the west side of railroad: Said drain shall be made within the bounds of the road, and as close up to the fill for the road-bed as it can with safety thereto be made, and shall be kept open and in good condition perpetually by said railroad company or its assigns. Said drain shall be made by the ISth October, 1870.”
    The instrument first named, and the additional propositions were delivered to and accepted by the railroad company as constituting the agreement between the parties; and the railroad company entered upon the premises therein described, and constructed its road under said agreement.
    The parties being at issue as to the breaches of the agreement alleged by the plaintiff, the bill of exceptions shows that, “ the plaintiff, to maintain the° issue on his part, offered evidence tending to prove that the ditch, mentioned in the petition, commenced or had its head on land a few rods north of the north line of plaintiff’s said land, and at the foot of rising land; that said ditch ran southwardly along the west side of the said road to plaintiff’s south line, thence in the same direction . along the side of said roadway, over the land of Henry Munson and the land of Christopher Mattingly and the land of William Tatham, formerly the land of Elias Ellis; about 600 feet south of said Tatham’s noiih line, said ditch passed eastwardly under the road-bed of said railroad, by a culvert or wagon way, and thence eastwardlv some 110 rods on said Tatham’s land to the river, the same being the only outlet for any of the water of said ditch. Also, that before the location of said railroad, a ditch to drain the same lands, which should ho drained by the ditch mentioned in the petition,'was dug over the said lands of plaintiff and Munson and Mattingly and Ellis, the Ellis land being the same now owned by said Tatham; that the head of said ditch was near where the head of defendant’s said ditch is located, and the outlet of said ditch was near or at the place where the ditch of defendant has its outlet to the river; that the said ditch first dug was made at the joint expense and under the joint agreement of all the owners of the lands traversed by the same, and was to he and was kept open under said agreement, and jointly by all the owners of said land, but did not completely drain plaintiff’s said lands. And that said ditch was so opened and was kept open when defendant’s road was located over said lands, and the same was filled' up and destroyed by defendant, whose road traversed and crossed said ditch, in the construction of its said road. Also tending to prove that the ditch of defendant, mentioned in the-petition, became and was obstructed (by reason of earth, gravel, &c., earned into said ditch by Beach run, mostly through a channel cut by said Tatham on his own land, after said ditch, in petition mentioned, had been cut by said defendant; said ditch so cut by Tatham was for a drain or natural water-course^ over theretofore and in that direction running), on the said land of said Tatham, lying south of and adjoinipg the said land of the said Mattingly, which obstructions were north of the point where said ditch passed under the said railroad, and that defendant permitted said obstructions to remain, unreasonably, in said ditch, interrupting and preventing the flow of water along and through said ditch, and thereby preventing the flow of water through said ditch from the said land of plaintiff: and that by reason of said obstructions, &c., in said ditch on the land of said Tatham, and the water so by said obstructions held and detained upon the said land of plaintiff, plaintiff’s property was damaged to a large amount.”
    The evidence being closed, the court, among other things, charged the jury as follows: “The plaintiff charges that the defendant has violated its contract in several particulars, one of which is permitting the ditch, mentioned in the petition, to become and remain obstructed; such obstructions preventing the flow of water tliroiigh the ditch, and so ¡preventing the draining of plaintiff’s land. My reading of this contract differs from that of some of the counsel. Three men signed this contract. Plaintiff was entitled to all the covenants in the contract. The railroad company vras bound to dig a ditch over the lands of these three men who signed this contract; to dig a ditch deep enough and wide enough to carry off surplus water, and defendant was bound to keep the ditch open. Defendant was bound to dig and keep open such a ditch along the "west side of the roadway, over the lands of these three men. But defendant vras not bound to dig or keep open any ditch on any other land. Defendant might stop the ditch at the south line of the lands of these three men; it was not bound to furnish an outlet for the water; the contract does not require it to do so. Therefore, if the ditch was continued further south and to the river, and it became obstructed on the land of Tatham (lying south of the lands of the three men who signed this contract), and such obstructions were, by defendant, permitted to remain unreasonably, and they did prevent the drainage of plaintiff’s land, and did damage plaintiff’s land, crops and other property, defendant is not liable to plaintiff for such damages in this action. Plaintiff cannot complain of obstructions to said ditch, if the obstructions were located on Tatliam’s land, because the terms of this contract do not extend beyond the lands of those who signed it, Madden, Munson and Mattingly.”
    This part of the charge was duly excepted to. There was a verdict for the plaintiff; and a motion for a new trial interposed by him having been overruled, judgment was rendered on the verdict. ’
    The judgment was affirmed by the district court. The object of the present jietition in error is the reversal of these judgments, on the ground that the court erred in the construction of the agreement in the part of the charge above quoted.

      W. II. Ball, for plaintiff in error.

      O'Neill & Goddard and M. M. Granger, for defendants in error.
   White, J.

Thé court erred, in our opinion, in the construction of the agreement.

The stipulation that the “ railway company shall make such culverts and crossings as may be necessary to enable the parties hereto to reasonably occupy their lands, to carry off surplus waters, &c.;” aud the stipidation that upon the hillside of said line a sufficient drain shall be made for the discharge of the drainage,” form necessary parts of the plan or means agreed on for draining the lands of the plaintiff on the hill or west side of the railroad. A ditch or drain on the west side of the railroad, although kept open and in good condition perpetually,” as provided for in the agreement, would not accomplish the purpose of carrying off the surplus water and draining the lands. For this purpose a culvert was also necessary, to carry the water accumulating in the ditch across the railroad towards the river.

No particular place was specified in the agreement for the location of the culverts ; and their location would seem to be immaterial, as respects the draining of the plaintiff’s lands, provided that,- in connection with the ditch, they carried off all the surplus water.

But if the company saw proper to make the culvert on the lands of Tatham, below the lands of the plaintiff and the lands of the other parties to the contract, it became the duty of the company, under the agreement, to keep the ditch open to the culvert, so that the drainage from plaintiff’s land might be discharged through it.

Judgment reversed and cause remanded for a new t/rial.


text:
    Insurance Co. v. Bonner.
    In consideration of tie payment in cash of $130.75 and of a premium note of $91, and a like payment each year thereafter for ten years, a policy was issued on the life of B. for $5,000, payable at his death, after deducting any balance of the year’s premiums and all notes given for premiums. If default should be made in the payment of any premium, or of the interest on any premium notes, the company was to be liable only for as many tenth parts of the amount insured as there had been complete annual premiums paid. After payment of six annual premiums by cash and notes, and the interest thereon due at the sixth payment, default was made in paying the seventh annual premium, and byfailingto pay the annual interest on prior premium notes, and the policy was forfeited for such default. The principal of the notes, remaining unpaid by dividends, was to be paid by deducting the balance due thereon from the amount due on the policy when it became payable, and the interest thereon was to be paid annually or the policy was to be forfeited. These notes were secured by a lien on the policy under authority to loan part of the premiums thereon to the policy holder. — Held,
    1. The notes are in the nature of a permanent loan to the policy holder, to be paid out of dividends to be declared, or by deduction from tlie policy when it became payable.
    2. The payment of the annual cash premiums and the giving annually of these notes, which were in legal effect annual loans of part of the premiums, constituted as many complete annual payments; and the payment of said notes in cash was unnecessary to constitute such payments.
    3. The amount remaining due on said notes, after crediting the dividends made at the time of forfeiture, together with the annual interest due thereon at the time the policy becomes payable, should be deducted from-the amount due on such policy.
    4 By the forfeiture, for non-payment of the further annual premiums, and for non-payment of the annual interest due on prior premium notes, the right of the policy holder to share in future dividends was lost.
    This was an action by defendant in error, as the assignee of a policy of insurance, issued by the plaintiff in error, a mutual insurance company incorporated under the laws of Wisconsin, on the life of Stephen P. Bonner, who died December 22, 1874.
    From the pleadings and exhibits it appears, that on October 27, 1865, the policy was 'issued on the application of Mary Bonner, a sister of Stephen P. Bonner, the assignor of plaintiff below, at which time she paid $136.75, and gave the note of the assured for $91,’ making the total premium $227.75 for one year, for which a policy of $5,000' was issued on what is called the ten-year plan.
    At the beginning of each successive year, the second, third, fourth, fifth and sixth years’ premiums were paid by payments of a like amount of cash, and by the notes of the assured for $91 each, except that at some time during these six years, the cash part of the premium was paid semi-annually in advance. The material parts of this policy are as follows :
    - “ The Northwestern Mutual Life Insurance Come any.
    “ Number, 13,161; age, 29; amount, $5,000; premium, $227.75.
    “ By this policy of assurance, in consideration of the representation made to them in the application for this policy, and of the sum of one hundred and thirty-six dollars and seventy-five cents, to them in hand paid by Mary Bonner, sister of Stephen P. Bonner, physician, and of the annual premium note of ninety-one dollars and — cents, and the annual cash premium of one hundred and thirty-six dollars and seventy-five cents, to be paid at or before noon on or before the twenty-seventh day of October, in every year during the first ten years of the continuance of this policy, do assure the life of Stephen P. Bonner of Oincinnati, in the county of Hamilton, state of Ohio, for the sole use of the said Mary Bonner, in the amount of five thousand dollars, for the term of his natural life. And the said company do hereby promise and agree to pay the said sum assured, at their office, to the said assured, or her executors, administrators or ássigns, in ninety days after due notice and proof of death of the said person whose life is hereby assured (the balance of the year’s premium and all notes given for premiums, if any, being first deducted therefrom), and in case of the death of the said assured before the death of the said person whose life is assured, the amount of the said insurance shall be payable to the heirs at law of said Stephen P. Bonner. And the said company further • promise and agree that if default shall be made 'in the payment of. any premium, they will pay, as above agreed, as many tenth parts of the original sum insured as there shall have been complete tmnual premiums paid at the time of such default.”
    The 2d, 3d and 6 th conditions are :
    “ 2d. If the said premiums, or the interest upon any note given for pi'emiums, shall not be paid on or before the days above mentioned for the payment thereof, at the office of the company, or to agents when they produce receipts signed by the president or secretary, then, in every such case the company shall not be liable for the payment of the whole sum assured, and for such part only as is expressly stipulated above.
    “ 3d. In every case where this policy shall cease and determine or become null and void, for other reasons than nonpayment of premiums, all payments thereon shall be forfeited to this company.
    -x- -x- -x- * «-
    “ 6th. This policy shall not take effect and become binding on the company until the mshpremium shall be actually paid to the company or to some person authorized to receive it during the lifetime of the person whose life is assured.”
    The applicant, in answer to the question as to the “ sum to be assured, and what kind of policy; premium, how paid, .whether all cash or part note; annually, semi-annually or quarterly ? ” answered; “ $5,000 annually; ten years; cash and note.” *

    On October .27, 1870, when the sixth payment on the annual plan became due, the following premium receipt was presented and paid, and the last note there termed, “ Annual Loan Note, No. 6, $91,” was given as follows :
    “ Northwestern 'Mutual Life Insurance Company, General Office, Milwaukee, Wisconsin. prem, Cash prem. for six months, . . . $69 60 Interest on Loan Notes, 16 47 Total cash, $86 07 Note Annual Loan No. 6, ". . . $91 00 Premium, as above, received this 27th day of Oct., 1870. John F. Johnson, Agent. (Per A. Hagemeyer.) Policy No. 13,161, insuring the life of Stephen P. Ponner, is herefyy made binding for sine months from the 27th day of Oetober, 1870, provided payment, as per mai’gin, is made in due time, and the receipt is countersigned by J. F. Johnson, agent at Cincinnati. Aug. Gaylord, Secretary.”.
    This payment continued the policy to April 27, 1871, when another receipt for half cash premium, then paid, was given, as follows:

      “Northwestern Mutual Life Insurance Company, Home Office, Milwaukee, Wisconsin. Cash prem. for six months, . . ,. $69 60 Interest on Loan Notes,--$69 60 Note Total cash, . Annual Loan No....... Premium, as above, received this 27th clay of April, 1871. J. E. Johnson, Agent. Policy No. 13,161, insuring the lire of Stephen P. Bonner, is her Ay made binding for six months, from the 27th day of April, 1871, provided payment, as per margin, is made in due time, and the receipt is by J. F. John-countersigned son, ., agent at Cincinnati. Aug. Gaylord, Secretary.” \

    From this, it appears, that the cash payment and interest on loan notes, $16.47,and a sixth “Loan Note of $91,” was given, for which said policy on the life of Stephen Bonner “ is hereby made binding for six months from April 27th, 1871;” i. e., to October 27, 1871.
    The first and second premium notes are here copied. The others are the same as No. 2.

      Exhibit “_S.” Note No. 1.
    “$91.00. Cincinnati, October 27, 1865.
    “ For value received, I promise to pay to the Northwestern' Mutual Life Insurance Company, ninety-one dollars, with interest at the rate of seven per cent, per annum, which interest shall be paid annually, or the policy be forfeited / this note, being given for part of the premium on policy No. 13,161, is to remain a lien upon said policy until the death of Stephen P. Bonner, when it shall be deducted from the amount of said policy, unless sooner paid. The di/oidends on the policy are\ to be applied to the payment of the note.

    “ S. P. Bonner.”

      Exhibit “ O.” Note No. 2.
    “91.00. Milwaukee, October 27, 1866.
    “For value received, I promise to pay to the Northwest eral Mutual Life Insurance Company", ninety-one dollars, with in-\

      terest at the rate of seven per cent, per annum, which interest shall be paid wivnualh/, or the policy be forfeited; this note being gi/ven for part of the premium on policy No. 13,161, is to remam a lien upon said policy until it becomes due by limitation, or by the death of Stephen P. Bowner, of Cincinnati, when the note shall be deducted from the said policy unless sooner paid.
    “ The dividends on the policy are to be applied to the payment of the note.”

      “ S. P. Bonner.”
    The payment made April 21,1811, was the last made. On October 21, 1811, there was due, by the terms of the policy, $136.15 cash, and another loan note of $91, and one year’s interest on balance due on previous notes, but default was then made, and no payments have, since been made.
    Dividends were made on this policy, one in 1868, on the business of 1865 ($111.53), and one in 1869, on the business of 1866 ($108.25), which paid off premium notes Nos. 1 and 2, and all of No. 3, except $53.22, leaving that balance, and the third, fourth, fifth and sixth notes unpaid at the time default was made, and also one year’s interest, $22.83, due thereon from October 21, 1810, to October 21, 1811.
    "When default was made, October 21, 1811, the company, claiming the right so to do, declared the policy forfeited, as to eight-tenths thereof. This was done on its interpretation of the second condition of the policy providing for a forfeiture.
    The plaintiff below claims, that by the payments made, and by the terms of the policy and the premium receipts, it was a .’paid-up policy for six years, and therefore that only four-tenths was subject to forfeiture.
    The controversy is, whether the payment of the cash premiums and the notes constitute six “complete annual premiums,” or whether the j>remium notes must also be paid in cash.
    The plaintiff in error claims that, inasmuch as only two of these notes were paid, only two complete annual payments were made.

      Erom tbe evidence it appears that, in 1871, a third dividend was made, of §35.96, which was credited on the balance due on -Qia principal of the third note. If this dividend should have been credited on the witerest then due on all the notes, there would have been no default at that date, as to interest on prior premium notes.
    It also appears, that by the non-payment of interest on these notes, the insrued was not entitled to dividends. Notwithstanding this, the company declared dividends on a two-tenths policy in the years 1872, 1873, 187J and 1875, payable in cash, which were not applied in payment of either notes or interest, or otherwise paid. The court below gave a judgment for six-tenths of the face of the policy, less the balance due on premium notes without interest, and without any credits for the subsequent dividends. Of this the plaintiff in error complains.

      Sayler <& Sayler, for plaintiff in error :
    1. The construction of that clause of the policy which makes the giving of the note a recognition that so much of the premium has not been paid, brings this contract of insurance within the chartered powers of the company. A construction that makes the giving of the note a payment of the premium, takes it out of the chartered powers of the company, and thereby causes the trustees and agents of the company to commit a breach of trust. Nowhere in the charter are the trustees allowed to receive notes in payment of premiums. They can receive notes for loans made to those insured, as evidence of the indebtedness of the assured for so much of the premium loaned. Railroad Co. v. Kelley, 5 Ohio St. 180; 11 Ohio St. 96; 8 Ins. Law Jour. 70; 11 Wis. 307; Angell & Ames on Corp., § 111; Green’s Brice’s Ultra Tires, 610, 611.
    2. The giving of the. note is not a payment of that part of the premium, unless it is so expressly understood and agreed at the time of the transaction. The giving of a note does not pay the debt or obligation. The most that can be claimed for it is the extension of the debt or obligation to the date of the maturity of the note. 16 Md. 396 ; 18 Cal. 330; 12 Cal. 317; 1 Hill, 516; 1 N. H. 281; 1 Doug. (Mich.) 507; 5 Day, 511; 9 Johns. 310; 3 E. D. Smith, 507; 1 Cowen, 359 ; 11 Johns. 409 ; 15 Johns. 241; 27 Ala. 244; 30 Mo. 263 ; 2 Parsons on N. & B. 153, note d ; 5 Ohio, 353 ; 4 Ohio St. 60 ; 15 Ohio St. 159.
    But even in those states where the taking of a note is held to be the payment of the debt, it is held that the note must be a “ negotiable ” note. Not such a note as was given in the case at bar. Greenwood v. Curtis, 4 Mass. 93 ; Maneely v. McGee, 6 Mass. 143; Trustees, &c. v. Kendrick, 12 Me. 318; Bartlett v. Mayo, 33 Me. 518; Jose v. Baker, 37 Me. 465 ; Follett v. Steele, 16 Vt. 30; Farr v. Stevens, 26 Vt. 299. Outside of the policy and notes there is no evidence in this case as to any agreement of any kind that these notes should be received as payment of so much premium. What the contract was must be gathered from the terms of the application, policy, notes, charter, and receipts, and from these it must elea/rly appear, as held in Merrick v. Boury, 4 Ohio St. 60, that it was expressly agreed that these notes should be taken in payment, and as payment of the premium. There is nothing in all these to show that these notes were taken “ as payment ” of the premium — much, less does it appear “ clearly” that there was an “ express agreement ” between Bonner and the company, that these notes were to -be taken “ as payment ” of the premium. The company, then, can only carry that amount of insurance for which it has received payment, and which premiums are yielding and bearing compound interest. It can only carry that sum of insurance for which the premiums have been paid —absolutely, completely paid. Eor that alone is the sum of money that produces compound interest. Erom the nature of the business this is self-evident. But, in order to have the matter distinctly understood, the policy provides “ that if default shall be made in the payment of any premium, they will pay . . . . as many tenth parts of the original sum as there shall have been complete annual premiums paid at the time of such default.” The -policy does not say that the company will pay as many tenth parts as there have been premiums settled, or received, or adjusted by giving notes for part of tlie premium unpaid.
    The forfeiture clause in tbe note must be construed with tbe clauses of the policy referring to tlie same subject-matter, and must be held to mean tbe same as tbe analogous clauses in tbe policy.
    Thus construed, what do these clauses of the policy and notes mean ? They distinctly say, “ that should Bonner at any time make default in the payment of the premium, or of the interest of any note given for premiums, that then the company “ shall not be liable for the payment of the whole sum assured,” but that the company shall be liable, “ and will pay as many tenth parts of the original sum insured as there shall have been complete annual premiums paid at the time of such default.”
    As regards the payment of the premiums, see 1 Disney, 364; 24 Ohio St. 67; 34 Ohio St. 222; Bliss on Life Ins. 272, § 178; May on Ins. 406, § 341; 3 Hill, 161; 8 H. L. Cas. 745; 2 C. B. (N. S.) 257; 2 Big. L. & A. 497; 8 Vroom, 487; 1 Big. L. & A. 336 ; 44 N. Y. 284; 23 N. Y. 516 ; 103 Mass. 254; 8 Ga. 534 ; 4 Big. L. & A. 483.
    As regards the payment of interest on the notes, see 3 Central L. Jour. 354, 375; Bliss on Life Ins. 253 ; May on Ins. 406; 1 Disney, 355; 2 Disney, 106; 12 East, 133; 3 Hill, 161; 100 Mass. 500; 43 N. Y. 283; 8 H. of L. 745; 8 Vroom, 487 ; 4 Vroom, 487, and cases there cited ; 8 Ins. L. J. 544; 2 Woods, 547; 35 Iowa, 582; 42 Iowa, 239; 39 Wis. 111; 39 Wis. 121; 19 Mich. 451; 2 Tenn. Ch. 727; 6 Ins. L. J. 426; 5 Id. 875.

      Ma/nnix ds Oosgrave, for defendant in error:
    1. The cash paid and note given each year, as required by the terms of the policy, constituted a complete annual premium. 2 Parsons on Contracts, § 486 ; May on Ins. 412; 40 Iowa, 357; 39 Wis. 398; 23 Minn. 491; 4 Mo. App. 386; 7 Ins. Law. Jour. 50; 6 Id. 368; 55 Ga. 111; 95 U. S. 269.
    2. But if annual payment of interest on a note were necessary to constitute tlie note a payment of premium gyro tanto,
      and to prevent partial forfeiture, it was the duty of the company to apply the dividends to such payment. 2 Parsons on Contracts, § 631, and rióte a to § 632; 17 Ohio St. 22; 1 Mo. App. 228; 2 Tenn. Oh. 744; 8 Ins. Law Jour. 349; 67 Me. 85, 438.
    3. Forfeitures are not favored by the law; and if the policy contains repugnant conditions, preference must be given to those which are in favor of the assured, and will prevent a forfeiture, which is to be enforced only when there is the clearest evidence that that is what was meant by the stipulations of the parties. Among the many authorities which might be cited in support of the proposition, in addition to those already cited bearing upon the subject, we coniine ourselves to-the following, believing, however, that this case does not properly involve any question of forfeiture: May on Ins. §§ 175, 342; Bliss on Ins. §§ 404, 405 ; Union Central Life Ins. Co. v. Pottker, 33 Ohio St. 459; Montgomery v. Phœnix Mutual Life Ins. Co., 14 Bush, 51; Ins. Co. v. Norton, 96 U. S. 242; Rann. Home Ins. Co., 59 N. Y. 387; Hoffman v. Ætna, Ins. Co., 32 N. Y. 413; Linden v. Hepburn, 3 Sandf. 670; Doe v. Dixon, 9 East, 16 (New ed. 5, p. 23); Bennett v. Eufaula Home Ins. Co., 46 Ala. 11; McAllister v. N. E. Mutual life, 101 Mass. 558.
   Johnson, J.

The company issuing this policy was purely mutual. By its charter: “Sec. 3. The corporation hereby created shall have the power to insure the lives of its respective members, and to make all and every insurance appertaining to, or connected with, life risks, and to grant and purchase annuities.”

“ Sec. 4. Persons who shall hereafter insure with the said corporation, and also their heirs, executors, administrators, and assigns, continuing to be insured in said corporation as hereinafter provided, shall thereby .become members thereof during the period they shall remain insured by such corporation, and no longer.”

The corporate powers were vested in a board of trustees, to be elected from among the members.

Prior to 1863, the premiums were to be invested in bonds secured by mortgages on unincumbered real estate, worth twice the amount loaned; or the trustees might invest not exceeding one-half the premiums, in the public stocks of the United States, the state of Wisconsin, or of any incorporated city thereof.

There was then no authority to loan to policy-holders any part of premiums on their policies.

To remedy this, and to enable the company to loan to policyholders part of their annual premiums, in case they desired thus to borrow, instead of paying all cash, the charter was amended March 23, 1863, as follows:

Seo. 11. The trustees shall have power to invest a certain portion of the premiums received, not to exceed one-half thereof, in public stocks of the United States or of this state, or of any incorporated city of this state, mid the company may loam, to policy-holders in said compamy, from time to time, sums not exceeding one-hedf of the armual premiums on theim policies, upon notes to loe secured loy the policy of the person to whom the loans may loe made.”

Under this amendment the policy was issued. This power was valuable to the company, as thereby its business could be greatly increased by loaning to the insured not exceeding one-half the premium, instead of • requiring all to be paid in cash.

The applicant was given the option to .pay in this method. When asked how the premium should be paid, whether all cash' or part note, she answered that she would pay by “ cash and note,” and the contract -was made accordingly.

The sixth condition of the.policy is, “This policy shall not take effect and become binding until the cash premium shall be actually paid.” The distinction between that part of the premium payable in cash, and that part paid by note, as well as the effect of non-payment of either, is shown by this clause, as well as in the following, found in the body of the policy:

And the said company do hereby promise and agree to pay the said sum assured, at their office, to the said assimed, or her executors, administrators or assigns, in ninety days after due notice and proof of death of the said person whose life is hereby assured (the balance of the year's premium a/nd all notes given for premñwns, if amj, being first deckbated therefrom), and in case of the death of the said assured before the death of the said person whose life is assured, the amount of the said insurance shall be payable to the heirs at law of said Stephen P. Bonner.”

These premium notes are in the nature of a permanent loan. If not paid by dividends they remain as loans payable, “ when the policy becomes due by limitation, or by the death of Stephen P. Bonner.”

All notes given for premiums remaining unpaid by dividends, as well as the balance of the year’s premium, are to be deducted from the amount due on the policy. There is no personal obligation to pay these notes. They are, as designated in the annual renewal receipts ; “ Loan notes.” The renewal receipts are themselves a contract to keep the policy binding, when the cash premium and the interest is paid, and the annual loan note is given for the future year. To determine the real character of this contract, we must look to the act of incorporation of the company, with its amendments in force when it was made, with the object sought by that amendment, as well as to the application, the policy, the notes and to the premium receipts renewing the policy from year to year.

By the express terms of the last receipt, dated April 27, 1871, the policy was made binding for its face to October 27, 1871.

Had Bonner died at any time after the policy took effect, under the 6th condition, and before default made, it is clear that the whole policy would have been payable, less all premium notes then unpaid by dividends.

When default was made October 27, 1871, the right to declare a forfeiture arose under the 2d condition of the policy. It is there provided that:

“ 2d. If the said premiums, or the interest upon a/ny note given for premiums, shall not be paid on or before the days above mentioned for the payment thereof, at the office of the company, or to agents when they produce receipts signed by the president or secretary, then, in every such case, the company shall not be liable for the payment of the whole sum assured, and for such part only as is expressly stipulated above.” The right thus reserved arises, “ if the said premiums or the interest on any note given for premiums shall not be paid.” This excludes the idea that a right of forfeiture exists for the non-payment of the notes themselves. Forfeitures are not favored, and if the policy contains doubtful or repugnant conditions, preference will be given, other considerations being equal, to that construction which will prevent a forfeiture. If, therefore, this policy was in force for its face, down to October 27, 1871, what right of forfeiture vested in the company upon default made? The default consisted in failing to pay the cash premium, and give the premium note for the seventh year, and in failing to pay the past year’s interest, on the unpaid premium notes or “ annual loans ” remaining unpaid by dividends. This interest amounted to $22.83, and if the dividend declared that year, of $35.96, should have been applied on the interest, there would have been no default, except for the premium for the seventh year.

The forfeiture operated to relieve the company of “the whole sum assured,” but left the policy binding for, “ as many tenths of the original sum insured as there shall have been complete annual premiums paid, at the time of the default.”

These provisions are utterly inconsistent with the idea, that a failure to pay the pri/ncipal of the notes would authorize a forfeiture to any extent. The words “ said premiums,” in this clause, cannot include the “ loan notes,” for there was no personal obligation to pay them. The failure to pay the interest on these notes is made a cause of forfeiture, but a failure to pay these notes is not. ' They were loans, not to be paid except by dividends, or by deduction from the policy when due.

The application, the terms of the policy and of the premium notes, as well as the stipulation of the company on the margin of the premium receipts, considered in connection with the power to loan part of the premium to the policy-holder, leave no room to doubt the real character of this contract.

It was an agreement to pay an annual premium, part in cash, and part by note, which were to be regarded as loans payable out of dividends, or out of the policy when it became due. Its legal effect was the same as if the whole premium had been paid in cash, and then the amount for which the note was given borrowed back. It is true, as a general rule, that giving a note is only a conditional payment of a debt, but if it is given and accepted as payment, it is otherwise. These premium notes, or annual loan notes, as they are called, are not, in legal effect,, notes, but rather receipts for money borrowed, with an obligation to pay interest thereon, and to allow any balance unpaid thereon by dividends to be deducted from the policy, when it became payable. They are not negotiable, nor payable at any fixed time, nor for any certain amount, nor by the maker personally, but in a special mode. They are in the nature of loans to the assured, which he was under ño personal obligation to repay, and were only to be repaid by the company itself out of dividends, or out of the policy. This is shown by the policy, where it provides for part cash and part note; in the application, where the election is made to pay in “ cash and note;” in the 6th condition, where it is provided that the policy shall take effect when the “cash premium shall be actually paid;” and finally, in the clause requiring the unpaid notes to be deducted from the amount due on the policy.

We cannot better enforce the argument in support of this conclusion, than to quote from the opinion of Mr. Justice Swayne in Insurance Co. v. Dutcher, 95 U. S. 269, a case involving the same principles, but where the policy was much more favorable to the company than here.

There the policy was issued in consideration of a sum paid, and a like payment annually for ten years, on a day named, with the right to share in the profits. On the death of the assured, the policy, less the balance of the year’s premiums and all indebtedness, was to be paid. If the premium should not be paid on the day fixed, or any note given in part payment of premium, the policy to become void. After two annual payments by the insured, the company was to issue a paid-up policy for as many tenths as there had been complete annual premiums paid in cash.

These notes were in the nature of permanent loans, payable out of dividends, and at each time of payment in this mode, receipts were given, as in this case, showing payment in full for the year. After four annual payments thus made, and while there was still a balance dire on the four premium notes, Mrs. Dutcher demanded a paid-up policy, but the company refused unless she would first pay the balance due on the premium notes in cash.

The learned justice says :

“ But it is said the policy declares that the amount of the paid-up policy should be determined by the sum of the premiums ‘ paid in cash.’

“ To this there is an obvious, and, we think, a conclusive answer. The part of the annual premium, for which a note was to be given, was in substance and effect a loan of so much money by the company to the assured. It was so described in the receipt of the company for the premium, and in the contract of the parties.

“ If the money had been actually paid to the company, and the next moment loaned back, and the note then taken, there would not have been room even for a quibble upon the subject.

“ Why go through such a ceremony ? Why not go directly, as was done, to the end in view ? The intent which animated the conduct of the parties determines its character. The receipt and contract both show that the transaction was regarded by both parties as a payment of money to one and a loan back to the other, for which the note was taken. The receipt was for the full amount of the premium. _ The note and loan were mentioned by way of memorandum, as a distinct matter. The law never requires an idle thing to be done. It would clearly have been this, and nothing else, if the assured had actually handed over the money and note with one hand, and, eo mstcmti, with the other taken back the money.

“The company had the power to waive the actual production and payment of the money, and to receive a note bearing interest as the same thing. It has exercised this power, and is estopped to deny the consequence. Where a surety, by giving his note, extinguishes the liability of his co-surety, he can maintain an action against the co-surety for money paid; because the effect is the same that would have been wrought by the actual payment of the money.”

That this was the construction placed upon this policy by the company itself is evident from the fact that, on policies subsequently issued, the provision as to the liability of the company for as many tenths as there shall have been complete annual premiums paid, was qualified by adding to that clause this limitation : “ But in order to secure such proportion of • the policy, all premium notes must lye taheh up, or the interest thereon lyepand annually in cash, on the 'date of the annual maturity of the premiiom, until the notes are canceled liy returns of the surplus, or the whole policy will lye forfeited.” Hull v. N. W. M. Life Ins. Co., 39 Wis. 397; Ohde v. The Same, 40 Iowa, 357; Symonds v. The Same, 23 Minn. 491; Little v. The Same, 7 Ins. Law Jour. 50.

If, as was held in the Hull case, that the dividend declared in 1871, of $35.96, should have been applied on the interest then due on the previous notes, there was then no default in payment of interest on premium notes, for which a forfeiture could be declared.

This case'differs from that in this respect, — there the dividends were to be applied to the principal and interest of the notes, while here the interest is to be paid ainnualljj' in cash, and the dividends are to be applied on the notes.

Holding, as we do, that the giving of these premium notes was in effect a payment of the premium, and also a loan of that amount to the policy holder, the right to have a paid-up. policy for as many tenths as were thus paid became fixed, and that no subsequent default in the payment of interest on these notes would divest this right; the question of the application of this third dividend to the interest then due, instead of upon the note, becomes immaterial, in determining how many complete annual payments were made. The interest then due, as well as the subsequently-accruing interest on these notes, if not paid, followed the notes; and the amount due thereon when the policy became payable should be deducted from the $3,000 due. on the policy.

The failure to pay the interest due October 27, 1871, on the previous notes, gave to the company tbe right to declare the policy forfeited as to the intime, but it did not defeat the right of the assured to a paid-up policy for the six annual payments actually made as provided for, before such failure.

The court below so adjudged, but refused to allow any deduction for unpaid interest on the balance due on these premium notes.

The reason given is, that from the time the insured ceased to pay interest to his death, the company, under its rules and under its construction of the policy, cut him off from the benefit of dividends as to four-tenths of the policy, in part represented by these notes; and that if the company was entitled to interest, he would be equally entitled to dividends on these four-tenths, which would exceed the interest.

These notes stipulated for the payment of interest annually on the premium notes, or the policy should be forfeited. The policy provides that if it be not paid on or before the days named, the company shall be liable only for as many tenths as there were complete annual payments. This liability was, as we have found, for six annual payments, out of which must be deducted all notes given for premiums unpaid by dividends. This is the whole extent of its liability after forfeiture. The complete annual payments save only as many tenths of the policy. The contract was one of mutual covenents. In consideration of the payments of the annual premiums in cash and notes, and the annual payment of interest in cash on the notes, the company agree to keep the party insured, and to pay an equitable share of the profits in dividends from time to time. The payment of this interest is a vital part of this contract; its non-payment forfeits the policy, and but for the clause limiting the forfeiture, default in such payment would forfeit the whole policy.

Prompt payment of interest is also essential to the successful prosecution of the business, and to enable the company to make and declare dividends. The assured has agreed that if there is a failure to pay this interest, the policy shall be forfeited, except as to the tenths paid for.

It would be inequitable to allow the assured • to remain in default for interest due, and yet participate in the dividends declared after the policy is forfeited, which are fruits of prompt payments by other policy holders. By the very nature of the contract, the annual payment of interest was a condition precedent, to entitle the policy holder to future dividends.

We hold, therefore, that there were six complete annual payments of premiums made prior to October 27, 1871, and that the failure to pay further premiums, or the interest annually due on the balance of the notes remaining unpaid after the application of the first three dividends, forfeited said policy, except as to six-tenths thereof, and all right to future dividends thereon. We hold, further, that the unpaid interest on these notes, computed according to their terms, became part of the amount due on the notes, to be deducted from the amount found due on the policy.

As the court below erred in not allowing interest on tbe balance due on these unpaid premium notes, tbe judgment is reversed, and tbe cause is remanded for proceedings according to the foregoing opinion.