Case ID: ohio-st_33/html/0116-01.html
Source: Caselaw Access Project
Author: {"author": "Scott, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Hopple v. Hipple.
    The trustees of Brown township, in Delaware county, pursuant to a vote of the electors thereof, in August, 1851, subscribed $17,000 to the capital stock of the Springfield, Mount Vernon and Pittsburg Railroad Company, and in April, 1853, issued and delivered to the railroad company township bonds in payment therefor. Prior to the township vote on the question, B., and other parties, with a view to secure a vote in favor of subscription, proposed to the trustees and the electors of the township, that they would indemnify the township against all loss arising from such subscription, by taking the stock to be subscribed for, and paying either to the trustees, or the holders of their bonds, the interest and principal thereof as it should become due. Subsequently, but before the subscription was made by the trustees, B., in pursuance of his proposition to indemnify, executed and delivered to the trustees his bond, referring in its recitals to his agreement to indemnify the township, and binding himself to pay to the trustees, or the holders of their bonds, the interest and principal to become due on $500 of the township bonds, providing that a corresponding amount of the stock subscription should be transferred to him by the trustees; and to secure his compliance with the terms of the bond he executed and delivered to the trustees a mortgage upon certain real estate, which he afterward sold and conveyed to H. H. A portion of the township bonds were negotiated and transferred to It. H. before maturity by the railroad company, with its guaranty of payment. Interest being in arrears on the bonds, R. H., by a proceeding in mandamus, sought to compel the trustees of the township to levy a tax for the payment thereof. In that proceeding the Supreme Court of the State held that the subscription and bonds of the township were wholly unauthorized by law, and were utterly void, and created no obligation in the hands of the railroad company, or of the holder. Upon the maturity of the township bonds, H. H., to whom the mortgaged premises had been conveyed by B., filed a petition, seeking to remove the cloud upon his title arising from B.’s mortgage. The holders of the township bonds were made defendants, and R. I-I., by answer and cross-petition, sought to subject the mortgaged premises to the satisfaction of the township bonds. Upon demurrer to this cross-petition — Held: 1. That the contract of B. was made only with Brown township, and had for its sole object the indemnity of the township against such liabilities as might arise from its subscription to the stock of the railroad company. 2. That the railroad company, having accepted the subscription and bonds of the township, with knowledge of its contract with B., the mortgagor, it can not be allowed to claim that it dealt with the township as the agent of B. 3. That no liability arose against the township by reason of its unauthorized subscription, or from its bonds, which were issued without authority; there has been no breach of the condition of the bond and mortgage given for its indemnity. 4. In the absence of any privity of contract between the mortgagor and the holders of the township bonds, the mortgagor is not estopped to deny the validity of the bonds.
    Error to the District Court of Delaware county.
    On the 21st day of March, in the year 1850, the general assembly of the State of Ohio passed an act entitled “ an act to incorporate the Springfield and Mansfield Railroad Company ” (48 Local Laws, 294).
    On the 25th day of March, in the year 1851, the general assembly of the State of Ohio passed another act entitled “an act to authorize special elections to decide the question of subscription to the Springfield and Mansfield Railroad, by counties and townships” (49 Ohio L. 548).
    Under the provisions of the last-named act, on or about the 17th day of June, 1851, the electors of Delaware county, State of Ohio, at a special election then held in said county, the question of subscription to the capital stock of said railroad being submitted to them, voted a subscription of $50,000 by said county, and on the 4th day of August, a. d. 1851, the commissioners of said county did subscribe for the said sum of $50,000 to the capital stock of said Springfield and Mansfield Railroad Company, and issued the bonds of said county in payment thereof.
    On the 17th day of June, a. d. 1851, in pursuance of the act above recited (49 Ohio L. 548) an election was held by the qualified electors of Brown township, in said county of Delaware, State of Ohio, to decide whether the trustees of said township should be authorized to subscribe for said township the sum of $17,000 to the capital stock of said Springfield and Mansfield Railroad Company. At that election, a majority of the qualified electors of said Brown township voted against making the subscription.
    On or about the 24th day of Juty a. d. 1851, George Baker (at that time the owner of the real estate in the petition of defendant in error described), and some thirty other persons, all of whom are made parties herein, and who were owners of real estate situated in said township of Brown, county of Delaware, signed and delivered to the trustees of said township a proposition in writing as follows:
    “ "Whereas, it is proposed by a vote of the qualified electors of the township of Brown, in the county of Delaware, to authorize the trustees of said township to subscribe $ — — to the capital stock of the Springfield and Mansfield Railroad Company, and, 'whereas, serious objections are entertained by some of the citizens of said township to the increase, by this means, of the burden of taxation already sufficiently onerous:”
    “ Now, therefore, we the undersigned, do hereby severally propose to the trustees of said township, and to the electors, that we will secure the payment of the principal and interest as each becomes due, of the several portions of the said amount so to be subscribed by said trustees, set opposite to the names of each of us on the paper, and severally to give security for the performance of this undertaking on our part, to the satisfaction of said trustees. Provided: that the said railroad be permanently located through the said township, so as to pass as near to the town of Eden on the south, as the section line running through the center of said township east and west, or within a quarter of a mile of said town on the north side thereof, and not otherwise.”
    And, provided further, that said trustees shall agree and bind themselves to the subscribers severally, that all the dividends paid on said stock, shall be applied to the payment, first, of interest, and the remainder in satisfaction of so much' of the principal of the debt so to be contracted for said stock, and that they will assign and transfer said stock to each of us on request, as the same may be in whole or in part fully paid by us or either of us, including the amount paid by dividends as aforesaid. And, provided also, that the principal shall not become due, and payable, within a shorter time after said trustees shall have subscribed said stock, than twenty years. Provided, the township bonds be not issued until the road is in process o? construction through Brown township.”
    Subsequently to the delivery of this proposition on the 30th day of August, a. d. 1851, in accordance with the provisions of the statutes heretofore referred to, and of the proposition as above recited, an election was held by the qualified electors of said Brown township, Delaware county, and by a majority of the electors voting at that election it was decided to make a subscription to the capital stock of the Springfield and Mansfield Railroad Company. In accordance with the decision of a majority of said electors of Brown township, the trustees of said township, did afterward, on the-day of-, subscribe for three hundred and forty shares of the capital stock of said railroad company, of the value of fifty dollars per share, and all of the value of seventeen thousand dollars.
    After the passage of the acts of the general assembly above referred to, and after the proposition above set forth, and the election by the electors of Brown township, but prior to the subscription by the trustees of said Brown township, in pursuance of the law in that behalf provided, the name and title of the Springfield and Mansfield Railroad Companjr was changed to that of the Springfield, Mount Vernon, and Pittsburg Railroad Company, by virtue of a decree rendered in the Court of Common Pleas of Clai’k county, in the State of Ohio, oxx the 3d day of August, a. d. 1852.
    It is admitted by the pleadings ixi the action (the questions being preseixted on demurrer), that all of the terms and conditions of the proposition above x'ecited were kept, and performed by the trustees of said township, and that the railroad was located as thereixi required.
    Oxi the 7th day of March, a. d. 1853, George Baker (the owner of the property in the petition of Hiram Hippie, described), and the other parties to the foregoing proposition severally executed and delivered to the trustees of said Brown township, their several bonds under seal — in the words and figures as follows:
    “Know all men by these presents, that I (naming each obligor), am held and firmly bound unto the trustees of Brown township, Delaware county, Ohio, in the penal sum •of (naming the amount to be paid by each obligor), to the payment of which I hereby bind myself, scaled with my seal, and dated this 7th day of March, a. d. 1853.
    “ The condition of the above obligation is such that, whereas, heretofore, to-wit, on the 31st day of July, A. d. . 1851, an arrangement was made by and between the said trustees, of the one part, and the said (naming the obligor), and others, of the other part, in relation to the contemplated stock of said township in the Springfield and Mansfield Railroad Company (since changed to the name of the Springfield, Mount Yernon and Pittsburg Railroad Company), which arrangement was entered on the record of said trustees, to which reference is hereby made for greater certainty ; and whereas, by a vote of the legal voters of said township, had in pursuance of law, the said trustees were authorized to subscribe $17,000 of the capital stock of said company, in accordance with said arrangement; and whereas, the said (naming the obligor), has assumed the responsibility of saving the said trustees harmless from all demands, both for principal and interest on (naming the amount), of the bonds of said township, to be issued for said stock, on the terms and conditions in said arrangement stated.
    “ Now, if said (naming the obligor), shall pay, or cause to be paid, either to the holder or holders of said bonds, or to said trustees, the interest at the rate of seven per cent, per annum, on (naming the amount), of said bonds, as it shall become due thereon, and so much of the principal thereof (before it becomes due) as shall not be paid by div- • idends in a corresponding amount of said stock, then the amount of said stock, or any number of shares thus paid -shall be made over to the said (obligor of the bond), and the above obligations shall be void, otherwise of full force and intent in law.
    “ Given under my hand and seal, this 7th day of March, 1853.”
    (Signed.) (Name of Obligor.) [seal.]
    On the same day, to-wit, March 7, A. d. 1853, George Baker (the owner of the property in the petition of Hiram Hippie described) executed and delivered to the trustees of Brown township a mortgage on the said property, to secure the fulfillment, on his part, of the obligations of his said bond.
    “ The condition contained in said mortgage deed was, in substance, that, whereas, the said George Baker had that day executed and delivered to said trustees his bond in the peual sum of five hundred dollars, conditioned to pay, or cause to be paid, with interest at the rate of seven per cent, per annum (as it became due), five hundred dollars of the bonds of said township, to be issued in payment of $17,000 of the capital stock of the Springfield, Mount Vernon and Pittsburg Railroad Company, and so much of the principal thereof, before it became due, as shall not be sooner paid by advances on a corresponding amount of said stock, to be received by said trustees, in pursuance of the agreement in said writing obligatory mentioned; and it was further provided, that if the said George Baker should well and truly perform the condition of said bond, then the amount above-named of said stock, or any number of shares thus paid, should be made over to the said George Baker, and the above obligation should be void, otherwise to remain of full force in law.
    “ Now, if the said George Baker, his heirs or assigns, shall well and truly pay, or cause to be paid, the said amount of five hundred dollars, with interest at seven per cent., to the parties, and at the times, and in the manner in said bond specified, and shall in all respects fulfill the obligations by him in said bond or writing obligatory assumed, then this conveyance shall be void, otherwise of full force and effect in law.”
    
      Similar mortgages were executed and delivered by the other obligors, in the several bonds aforesaid, to secure the performance by them severally of the conditions of their respective bonds; and all the mortgages were duly recorded.
    On the 20th day of April, A. D. 1858, the trustees of Brown township made and delivered to the Springfield, Mount Vernon and Pittsburg Railroad Company the bonds or writings obligatory of the said township, some for $500 each, and some for $1,000 each, amounting in all to the sum of $17,000, in payment of the subscription made by said trustees.
    By due course of assignment and transfer, and for a valuable consideration, the plaintiff in error became and is now the owner of five of the bonds of said township of Brown, together with the coupons thereunto attached; and the defendant, William A. Collard, by the same means, and for a like valuable consideration, became and is now the owner of seven of said bonds, and the coupons attached thereto. -The bonds issued by the township were of the tenor following:
    “United States oe America, State oe Ohio. $500.
    “ Township of Brown, in Delaware county, seven per cent. loan.
    
    
      “ Be it known, that the township of Brown, in Delaware county, in the State of Ohio, owes to the Springfield, Mount Vernon and Pittsburg Railroad Co. five hundred dollars, which sum the said township of Brown promises to pay to the said Springfield, Mount Vernon and Pittsburg Railroad Company, or its assigns, at the office of the treasurer of said township, on the first day of October, a. d. 1871, and to pay the interest thereon, at the rate of seven per centum per annum, semi-annually, the first payment to be made on the first day of January, a. d. 1853, and on each first day of January and July thereafter. The said township of Brown, however, reserving to the said township the right to pay the amount hereby secured to be paid, any time after the first day of October, a. d. 1860, at their option, they giving notice of the said day of payment at least six months previous thereto, by advertisement published not less than four consecutive weeks, in a newspaper published in the county of Delaware aforesaid; and after the day of payment so advertised the interest thereon shall cease.
    “ This obligation is issued in part payment of a subscription of three hundred and forty shares, of fifty dollars each, to the capital stock of the said Springfield, Mount Yernon and Pittsburg Railroad Company, made by the said township of Brown, in pursuance of the provisions of several acts of tbe general assembly of the State of Ohio, and of a vote of the qualified electors of said township of Brown, taken in pursuance thereof.
    “ In testimony whereof, the trustees of said Brown township, aforesaid, have hereunto set their hands and seals this 20th day of April, a. d. 1853. [Signed by the trustees, and attested by the township clerk.] ”
    In 1862, the plaintiff in error sued out of the Supreme Court of Ohio a mandamus against the trustees of said Brown township, to compel them to levy a tax to pay the interest on said bonds, and the court in that case decided that the trustees of said township had no authority to issue the same. See Hopple v. Brown Township, 13 Ohio St. 311.
    These bonds of Brown township became due October 1, 1871. About the 18th day of October, 1871, and shortly after the bonds became due, the defendant in error, Iliram Hippie (who had purchased the real estate so mortgaged by his grantor, George Baker), together with a large number of other persons, who had also executed their bonds and mortgages to the trustees of said township, as aforesaid, filed their several petitions in the Court of Common Pleas of Delaware county, asking the court to cancel the mortgages given by them, and alleging, as a reason, that the bonds of Brown township, which had been issued by said trustees, were void, and issued without any authority of law, and asking that the plaintiff in error, and others holding said bonds, should be made parties, and show their title to tbe same. To these several petitions, the plaintiff in error, Hopple, and other parties holding said bonds, filed their answers and cross-petitions, setting forth the foregoing facts, and alleging that they were the owners and holders of the bonds and mortgages of the parties aforesaid, as well as the holders of the bonds of said Brown township, and asking a decree for the sale of the mortgaged premises, to pay off the individual bonds of these parties, given to secure the payment of the bonds of Brown township aforesaid. To these answers and cross-petitions, the defendant in error, Hiram Hippie, demurred, and the court of common pleas sustained the demurrer, and granted the relief which he asked for. This action of the common pleas was afterward affirmed by the district court, on proceedings in error. Plaintiff in error now asks a reversal of the judgments of both the courts below.
    
      Hoadly, Johnson § Colston, and William H. Pugh, for plaintiff in error.
    
      Reid § Powell and J. Hippie, for defendants in error.
   Scott, J.

The bondholders who, by their cross-petition in the court below, claim an interest in the mortgage in question, were not parties thereto. Baker, through whom the defendant in error derives title to the premises, was the mortgagor, and Brown township, as a municipal corporation, was the mortgagee. All the transactions connected with the giving of the mortgage were between the mortgagor and mortgagee, and did not purport to affect the rights or interests of other persons. The proposition submitted by Baker and the other mortgagors to the township trustees shows upon its face that the purpose in contemplation was nothing more than indemnity to the township against the increased burdens of taxation which might arise from a subscription on behalf of the township to the capital stock of the railroad company. The object to be accomplished was the removal of objections to a vote in favor of subscription, by taking upon themselves the obligations of payment, which might arise from subscription. In pursuance of this proposition, Baker and the other mortgagors subsequently executed their bonds to the township trustees, in which they recite, among other things, that they “ have assumed the responsibility of saving said trustee's harmless from all demands, both for principal and interest, on ” such portion of the township bonds as they severally agree with the township to become responsible for. The condition of defeasance stated in the bonds is, in substance, that the obligors shall severally pay, or cause to be paid, either to the holder or holders of said bonds, or to said trustees, the interest on the amount by them severally assumed, as it shall become due thereon, and so much of the principal as shall not be paid by dividends on a corresponding amount of stock, and upon such payment then the said amount of stock, or any number of shares thus paid, shall be made over to the obligors severally, and the above obligation shall be void. The mortgages in question were given to secure the performance by the obligors of their covenants contained in these bonds.

These bonds and mortgages were evidently executed, delivered, and accepted by the parties thereto, under the belief that a majority of the electors of Brown township could, by their votes upon that question, confer upon the trustees of the township full power and authority to bind the township by a subscription on its behalf to the capital stock of the railroad company. But this belief rested bn a misapprehension and misconception of existing laws. At the suit of Hopple, tb.e plaintiff in error liere, against the trustees of Brown township, it has been adjudged by the Supreme Court of this state, that the contingency upon which Brown township might subscribe to the capital stock of the railroad company never arose; and that the proceedings of the voters of the township, and of the township trustees, were without authority of law, and that the writings purporting to be the bonds of the township are void, and created no obligation in the hands of the company or of the present holders.” Hopple v. The Trustees of Brown Township, 13 Ohio St. 311.

As between plaintiff in error and Brown township, it is, then, res adjudieata, that the township bonds, on behalf of which he claims the mortgage in question to be a security, are absolutely null and void. Neither interest nor principal has ever become or can become due thereon. And, as between the parties to the mortgage, we think it clear that there neither has been nor can be any breach of its condition of defeasance.

With full knowledge of all the facts relating to the undertaking of the mortgagors (as the cross-petition shows), the railroad company dealt only with the trustees, who professed to act solely on behalf of their township, and not in the name or by the authority of the mortgagors, in making the subscription and issuing the bonds. There is, therefore, no room for the claim that in making the subscription and issuing the township bonds the trustees 'were the mere agents of the mortgagors. They were not dealt with in that capacity, and there was no undisclosed principal in the case. The contracts evidenced by the subscription and the bonds, could not have been entered into with the mortgagors as principals acting, directly for themselves, and what they could not do directly, per se, they could not do indirectly, per alium. The written obligations of the mortgagors clearly show that it was no part of their purpose to induce the railroad company to accept a subscription from the township. The willingness of the company to accept a township subscription seems to be taken for granted in all quarters.

The only difficulty to be overcome, was the unwillingness of the electors of the township to sanction a subscription by-their votes, and, to obviate this difficulty, was the sole purpose of the arrangement made between the mortgagors and the township. No obligations were assumed for the benefit of the railroad company, or the holders of the bonds which the township might issue. The contract was with and for the security of the township alone, and was in effect an agreement to purchase from the township such stock as it might acquire in virtue of its subscription.

To this agreement the railroad company was not a party, and was wholly unaffected by its stipulations; and we can perceive no right which it had to rely upon that agreement as a security for the payment of the subscriptions which it accepted from the township. The bonds which it accepted in payment of the subscription contained no reference whatever to any such security, and they were put upon the market and negotiated upon the sole guaranty of the railroad company, before the mortgages in question were even filed for record.

In the total absence of any privity of contract between the mortgagors and the plaintiff in error, or other holders of the township bonds, we can perceive no grounds, legal or equitable, upon which the cross-petitions, in the court below, can be sustained.

But it is claimed that defendant in error is estopped to deny the validity of the township bonds. We are unable to perceive the grounds upon which such an estoppel can be legally predicated. The pleadings show no equitable estoppel arising from matters in pais. The mortgagors were parties neither to the stock subscription made by the township trustees, nor to the bonds which they assumed to have power to issue. The contract of the mortgagors with the township, no doubt, was based on the supposition' that, by force of statutes previously enacted, the trustees could be authorized, by the vote of the township, to subscribe to the stock of the railroad company! And the subscription of the trustees was accepted by the railroad company on the same supposition. But, in fact, there was no law purporting to authorize such subscription under the circumstances and at the time when it was made. A county subscription had been previously authorized and made, and the statute gave no color of authority for an additional subscription by the township.

Of the laws relating to its corporate powers, the railroad company was, at least, as much bound to take notice as were other parties. The power of the township trustees to subscribe to its stock was a question of law, upon which it had no right to rely upon the opinion of parties with whom it had no direct dealings. And if, as has been held, the township of Brown, with whom alone the railroad company contracted, is not estopped to deny the validity of its unauthorized subscription, and of its equally unauthorized bonds, we see no grounds upon which parties who never contracted with the company can be so estopped.

Had the township trustees made no question as to the validity of the bonds which they issued, and, having paid them, were now seeking to enforce the mortgages in question for their indemnity, a very different case would be presented, and it might well be held that, as against the township, the mortgagors would be estopped to deny the validity of the township bonds, and of their own contracts of indemnity. But as against others, who were not parties to these contracts, and had no right to rely upon them, we think no such estoppel can arise.

We think the court of common pleas did not err in sustaining the demurrer to the cross-petition of plaintiff in error, and that its judgment was, therefore, properly affirmed by the district court.

Johnson, Chief Judge, dissented.