Scofield v. Oil Co.

find that the oil company was, at a time when Cobb was a stockholder, indebted to the plaintiff; that the subsequent holders of the stock which had formerly been owned by Cobb were insolvent; that all of the solvent stockholders, other than Cobb, have paid their proportionate share of such indebtedness, and that the liability of Cobb must depend upon whether the plaintiff is still a creditor of the corporation. A judgment has been obtained, as herein before stated, by the plaintiff against the corporation, for $98,497.20 together with costs, and drawing interest from September 22, 1902. Except by contributions of stockholders, nothing has been paid upon this judgment. The judgment is still in full force and, as we hold, establishes the fact of the indebtedness to the amount of such judgment.

Without going into a discussion of the facts as to any indebtedness other than such as is shown by this judgment, we only say that viewing such evidence as we now view it, and considering the fact that plaintiff brought suit for only the amount recovered, we find that the amount of the indebtedness of the company to the plaintiff is fixed by said judgment. If it is said that this is not consistent with the finding of this court in the case before, the only answer we have to make is, that the court as now constituted would not find upon the facts as we found before.

It was suggested in argument that the defendant, Cobb, was not liable to respond in this action because of the wording of Lan. R. L. 5202 (R. S. 3258) as amended April 29, 1902. The section as amended reads:

"The stockholders of a corporation who are the holders of its shares at a time when its debts and liabilities are enforcible against them, shall be deemed and held liable, equally and ratably

*

and no stockholder who shall transfer his stock in good faith, and such transfer is made on the books of the company, or on the back of the certificate of stock properly witnessed or tendered for transfer on the books of the company prior to the time when such debts and liabilities are so enforcible, shall be held to pay any portion thereof."

Before the amendment the section read:

"The stockholders of a corporation which may be hereafter formed, and such stockholders as are now liable under former statutes, shall be deemed and held liable," etc.

Under the statute before the amendment the holding of the Supreme Court is, that the liability of the stockholder attaches at the time the debt is created, and is not discharged by the subsequent transfer of the stock. Brown v. Hitchcock, 36 Ohio St. 667.

Cuyahoga County.

In that case Judge White in the opinion discusses at considerable length the nature of the stockholders' liability, quoting from the decisions of other courts with approval, where it is held that the liability is in the nature of a contract made by the stockholder when he becomes such. Among such quotations is the following from Corning v. McCullough, 1 N. Y. (1 Comst.) 47, 59 [49 Am. Dec. 287]:

"It is virtually and in effect a liability upon a contract, and the mutual agreement of the parties."

Also from Hager v. Cleveland, 36 Md. 476:

"It is a debt under the statute, due from the stockholder to the creditor, springing out of, and coexistent with, the contract between the corporation and the creditor. It is clear that no act of the stockholder without the consent of the creditor, can exonerate him from the liability thus named."

In Hathorn v. Calef, 69 U. S. (2 Wall.) 10 [17 L. Ed. 776], it is said in the syllabus:

"A statute repealing a former statute, which made the stock of the stockholders in a chartered company liable to the corporation's debts, is as respects creditors of the corporation existing at the time of the repeal a law impairing the obligation of contracts, and void."

If, then, the amended section is construed to mean that the stockholder is liable only for such debts as have matured and upon which suits could be at once brought before the stock was transferred, it would be void as obnoxious to Sec. 16, Art. 8 of the constitution of 1802, which reads:

"No

be made," etc.

law impairing the validity of contracts, shall ever

We think, however, it was not the intention of the legislature by this amendment to restrict the liability of the stockholders to those debts which are due and collectible before the stock is assigned, but only to such as are incurred while the stock is held by such stockholder, and are enforcible when they become due, against the corporation, hence the liability of defendant, Cobb, is in no wise affected by this amendment of the statute.

We reach the conclusion, therefore, that the plaintiff is entitled to the rights of a creditor to the amount of his judgment; that Cobb is liable to him as a stockholder to the amount of his pro rata share of the stock held at the time the debt was contracted. This is 42-1700ths of the entire judgment. Decree will be entered accordingly.

This is an opinion of the majority of the court only.

Hale, J., does not concur.

Winch, J., concurs.

Emmert v. Elyria.

ESTOPPEL-INJUNCTION-MUNICIPAL CORPORATIONS

PARTIES.

[Lorain (8th) Circuit Court, May 8, 1905.]

Marvin, Winch and Henry, JJ.

JOHN W. EMMERT, JR. V. ELYRIA (CITY) ET AL.

1. TAXPAYER ESTOPPED FROM QUESTIONING ACTION OF COUNCIL, WHEN. An objection that the action of the municipal council in allowing the board of public service to exercise its discretion in choosing the material to be used in making a public improvement, was an unwarrantable delegation of its legislative authority, cannot be successfully raised by a taxpayer who, together with all others whom he represents, had watched, without objection or protest. the improvement to its completion. A fortiori when the material actually used was authorized by the council. Laning R. L. 3611 (B. 1536-220), examined, and held to support this conclusion.

2. CERTIFICATE OF AUDITOR FILED BEFORE CONTRACT LET, IS IN TIME. The certificate of the municipal auditor that sufficient money is in the city treasury to pay for the proposed improvement, is in time if filed before the contract for the improvement is let. Braman v. Elyria, 26 O. C. C. 731, approved and followed.

3. FALSE CERTIFICATE OF AUDITOR DOES NOT INVALIDATE CONTRACT, WHEN. The fact that the certificate filed by the municipal auditor, as required by Sec. 45 of the new municipal code (Lan. R. L. 3999; B. 1536-205), to the effect that sufficient money to pay for a proposed improvement is in the city treasury, was in fact false, is not sufficient to sustain the charge of fraud and thereby invalidate the contract made for the improvement, when it appears that the parties in good faith, and relying upon the advice of the city solicitor, honestly believed it to be true. A fortiori, when the section referred to is fairly open to the construction placed upon it by the parties.

APPEAL from Lorain common pleas court.

D. J. Nye, for plaintiff.

E. G. & H. C. Johnson, W. B. Johnston and F. H. Stevens, for defendants:

Construction of Lan. R. L. 4000 (97 O. L. 44). Slingluff v. Weaver, 66 Ohio St. 621 [64 N. E. Rep. 574]; Tracy v. Card, 2 Ohio St. 431; Johnson v. State, 42 Ohio St. 207; Cross v. Armstrong, 44 Ohio St. 613 [10 N. E. Rep. 160]; Terrill v. Auchauer, 14 Ohio St. 80; Toledo & O. C. Ry. v. Jump, 50 Ohio St. 651 [35 N. E. Rep. 1054]; Moore v. Given, 39 Ohio St. 661; McCormick v. Alexander, 2 Ohio 65; Lancaster (City) v. Miller, 58 Ohio St. 558 [51 N. E. Rep. 52].

Estoppel. Findlay v. Pendleton, 62 Ohio St. 80 [56 N. E. Rep. 649]; Tone v. Columbus, 39 Ohio St. 281 [48 Am. Rep. 438]; Mott v. Hubbard, 59 Ohio St. 199 [53 N. E. Rep. 47]; Bank of Chillicothe v.

23 O. C. C. Vol. 27

Lorain County.

Chillicothe (Mayor), 7 Ohio (pt. 2) 31 [30 Am. Dec. 185]; Larwell v. Savings Fund Soc. 40 Ohio St. 274; Randolph Co. v. Post, 93 U. S. 502 [23 L. Ed. 957]; Moore v. New York (Mayor), 73 N. Y. 238 [29 Am. Rep. 134]; Horstman v. Railway, 12 Dec. 756; Cleveland v. Bank, 16 Ohio St. 236 [88 Am. Dec. 445]; 16 Am. & Eng. Enc. Law (2 ed.) 356; Knorr v. Miller, 3 Circ. Dec. 297 (5 R. 609); Columbus v. Bohl, 13 Dec. 569.

A taxpayer is not entitled to relief where he seeks to compel the city to do what is manifestly inequitable and unjust. Friedman v. Cincinnati, 13 Dec. 404; Fergus v. Columbus, 8 Dec. 290 (6 N. P. 82); Crawford v. Madigan, 13 Dec. 494; Pugh v. Electric Light Co. 10 Circ. Dec. 573 (19 R. 594); Kellogg v. Ely, 15 Ohio St. 64; Tone v. Columbus, 39 Ohio St. 281 [48 Am. Rep. 438]; Mott v. Hubbard, 59 Ohio St. 199 [53 N. E. Rep. 47]; Prince v. Boston, 148 Mass. 285 [19 N. E. Rep. 218]; State v. Bader, 7 Circ. Dec. 1 (13 R. 15); Tracy v. Card, 2 Ohio St. 431; Pollock v. Speidel, 27 Ohio St. 86.

Plaintiff's petition is sufficient to entitle him to an injunction. Sloane v. Railway, 3 Circ. Dec. 674 (7 R. 84); Ampt v. Cincinnati, 15 Dec. 237.

HENRY, J.

This is an appeal from the Lorain county common pleas court. Plaintiff, as a resident taxpayer of the city of Elyria, in said county, having applied in vain to the city solicitor to bring suit, commenced this action to enjoin the further payments to the Barber Asphalt Company on its contract of July 7, 1904, with said city for the improvement of Middle avenue. Said contract is claimed to be void because:

First. The ordinance failed to specify definitely the kind of material to be used.

Second. Because no plans and specifications were on file as provided by the ordinance.

Third. Because no valid nor seasonable certificate as required by Sec. 45 of the municipal code (Lan. R. L. 3999; B. 1536-205), was filed by the city auditor, showing that there was sufficient money then available, in the city treasury for said improvement.

Fourth. Because, to the knowledge of the asphalt company, when it entered into said contract there was in fact no sufficient amount of money then available for said purpose.

The evidence shows that the ordinance of the city of Elyria passed May 10, 1904, orders the construction of a pavement on Middle avenue in accordance with the prior ordinance passed April 12, 1904. The ordinance of May 12, 1904, specifically describes in detail the kind and

Emmert v. Elyria.

other particulars of the improvement, and also orders the pavement to be constructed in accordance with the plans, specifications, etc., therein adopted.

Section 6 of said ordinance of April 12, 1904, reads as follows:

"That the plans, specifications, profiles, estimates heretofore prepared by the city engineer and now on file in the office of the board of public service be and the same are hereby approved."

The resolution of necessity passed March 22, 1904, provided for "brick, asphalt, or other material as may be hereafter determined."

Said ordinance of April 12, 1904, also adopts the plans and specifications which were at that time on file.

It is true that these proceedings did not decisively specify the kind of material to be used, but allowed the board of public service to exercise its discretion in choosing one of the materials named. This, it is claimed, was an unwarrantable delegation by council of its legislative authority. But council having at least authorized the use of the material that was in fact adopted, we cannot now, at the suit of plaintiff, brought after he and all whom he represents, had watched this contract to its completion, give countenance to the claim that such authority was invalidated merely because the board was sought to be invested with a discretion whereby it might have chosen some other material. The advantages to be derived by the city from competitive bidding are plainly enhanced by clothing the board with a latitude of choice as to materials, end the legislature has, in some measure, at least, set the seal of its approval upon the practice, in Sec. 60 of the municipal code, as amended April 21, 1904 (97 O. L. 123; Lan. R. L. 3611; B. 1536-220). This section provides that special assessments theretofore or thereafter made shall not be invalidated by this practice; and, under the circumstances here, we hold that the contract in this case is also unaffected thereby.

The evidence further shows that there was no sufficient warrant in fact for the allegations of the petition that plans and specifications of the improvement were not regularly on file, and we find the contrary to be true.

It also appears from the evidence, that a certificate was made by the auditor in due form, showing that there was sufficient money in the city treasury to pay for the improvement, but that such certificate was not made until after the council proceedings were all had and the contract for the improvement was about to be let. We deem it unnecessary now to discuss the objection to which this situation gives rise, inasmuch as this court expressly held at a recent term in this county, in the case