REFUNDING STATE BONDS.

[Franklin Circuit Court,

September Term, 1888.]

Stewart, Shauck and Shearer, JJ.

#### *STATE OF OHIO v. ALBERT NETTER.

1. Construction of a Written Contract.

Such a construction should be given to a written contract as will harmonize with the manifest intention of the parties as gathered from the whole instrument and do justice to each of them; that will promote and not defeat the intention of the parties.

2. Regard had for Provisions of Statute Authorizing the Contract. ,

In construing a contract made by the state regard must be had to the provisions of the statute authorizing the contract, and the expressed purposes for which it was enacted.

Error to the Court of Common Pleas of Franklin county.

This was an action brought by the State of Ohio against Albert Netter, to recover from him a sum of money claimed to be due under and by virtue of a contract entered into between him and the sinking fund commissioners of the state, under authority granted by the act of April 17, 1885 (82 O. L., 139).

The contract is as follows:

“Whereas, The Commissioners of the Sinking Fund of Ohio, on the ninth day of February, 1886, advertised that they would receive sealed proposals on the 16th of March, 1886, from the holders of the Ohio six per cent. Canal Bonds *208outstanding and due and redeemable December 31, 1886, for the exchange of any portion or all of the certificates of said outstanding funded debt for the certificates of the funded debt authorized by an act of the general assembly of Ohio, passed April 17, 1885, and receive the surrender of said outstanding Canal •Bonds, and in lieu thereof deliver to said holders or holder of the same, certificates of the funded debt authorized by said act of April 17, 1885, by the issue of new bonds, as follows, to-wit:

“$250,000 payable July 1, 1891; $250,000 payable July 1, 1892; $250,000 payable July 1, 1893; $250,000 payable July 1, 1894; $250,000 payable July 1, 1895; $250,000 payable July 1, 1896; $250,000 payable July 1, 1897; $250,000 payable Julyl, 1898; $240,000 payable July 1, 1899; and,

“Whereas, Albert Netter, of Cincinnati, Ohio, did on the 16th day of March, 1886, in pursuance of said advertisement, make and present to the State Commissioners of the Sinking Fund, as aforesaid, the following proposition, to-wit:

‘To the Honorable Commissioners of the Sinking Fund:

“ ‘Gentlemen — I herewith propose to deliver to the Commissioners of the Sinking Fund the outstanding Ohio six per cent. Canal Bonds, and receive in exchange for the same the new bonds of the state to be issued in accordance with the terms of your advertisement, said bonds to bear interest at the rate of three per cent, per annum, and I will pay the state a premium of $21.35 for each $1,000 bond. Albert Netter.’

“And whereas, afterwards, to-wit: on the 24th day of March, 1886, said bid was, by said Sinking Fund Commissioners, at their office at Columbus, Ohio, duly accepted as the lowest and best bid for said exchange of bonds in pursuance of said act of the general assembly of Ohio, and of the advertisement for said exchange of bonds, and the contract for said exchange of bonds was thereupon duly awarded to said Netter.

“It is therefore mutually agreed and understood by and between the Commissioners of the Sinking Fund, acting in behalf of the state of Ohio, of the first part, and Albert Netter, of Cincinnati, Ohio, of the second part, as follows, to-wit:

“The said Albert Netter agrees and binds himself to deliver to the Commissioners of the Sinking Fund of Ohio, the outstanding Ohio six per cent. Canal Bonds, amounting in the aggregate to two million two hundred and forty-thousand dollars, face value, due and payable December 31, 1886, and receive in exchange for the same the new bonds of the state of Ohio to be issued and payable as hereinbefore specified.

“The new bonds of the state of Ohio to 'bear date July 1, 1886, and bear interest at the rate of three per cent, per annum, payable semi-annually, on the 1st days of July and January, in each and every year until their maturity; and the said Netter further agrees to pay to the Sinking Fund Commissioners a premium of ($21.35) twenty-one and thirty-five hundredths dollars for each oné thousand dollars ($1,000) of said new bonds to be issued as aforesaid.

“It is further agreed by and between the parties that the said two million two hundred and forty thousand dollars of Canal Bonds shall be delivered to said Sinking Fund Commissioners on or before the 1st day of January, 1887, if practicable, but in case any part of said two million two hundred and forty thousand dollars of bonds are withheld by the owners or holders thereof, so that the party of the second part cannot get possession or control of the same on or before the said 1st day of January, 1887, then the said second party shall at said date pay to the Commissioners of the Sinking Fund of Ohio, at the American Exchange National Bank in the city and state of New York, the par value of said outstanding Canal Bonds, and receive therefor the new bonds of the state of Ohio, *209as provided and in accordance with the act of the general assembly of Ohio, hereinbefore referred to, and advertisements made thereunder.

“It is further agreed that the said Netter, as security for the faithful and full performance of this contract, shall forthwith deposit with the Commissioners' of the Sinking Fund of Ohio, the sum of fifty thousand dollars, evidenced by the certificate of deposit of the Citizen’s National Bank of Cincinnati, Ohio, of date, March 23, 1886, and numbered 1498, properly assigned and made payable to said Commissioners of the Sinking Fund; the same, however, upon the completion of this contract, to be returned to the said Netter or his assigns.

“In the event, however, of the said Netter failing to comply witNhis said contract as aforesaid, said deposit, to the extent that may be necessary to fully indemnify the state for any loss it may sustain on account of such failure, to become and remain absolutely the property of the state of Ohio.

“And the party of the first part hereby agrees to and with the party of the second part that they will forthwith give notice -to the holders of said outstanding Canal Bonds, by publication or otherwise, that the state of Ohio will redeem on the 31st day of December, 1886, all the said outstanding six per cent. Canal Bonds, and that the interest on the same shall cease at the said date.

“It is further agreed by and between said parties that whenever said Netter shall deliver any of said outstanding six per cent. Canal Bonds to the said Commissioners of the Sinking Fund, he shall be entitled to receive the full interest at six per cent, per annum thereon to the maturity of said bonds, to-wit: December 31, 1886, and he shall pay at said time, to the Commissioners of the Sinking Fund, the interest at three per cent, per annum, on the new bonds received in exchange tip to and including the 31st day of December, 1886.

“In witness whereof the said parties, the Commissioners of the Sinking Fund of the state of Ohio, and the said Albert Netter, have hereunto signed their names at the office of the Sinking Fund Commissioners, in the city of Columbus, Ohio, this 24th day of March, A. D. 1886.

Emil Kiesewetter, *Auditor of State and President.*J. S. Robertson, *Secretary of State.*J. A. Kohler, *A ttorney- General.*Albert Netter. “ *Commissioners of the Sinking Fund.*

"The foregoing contract is hereby, this 24th day of March, 1886, approved.

“J. B. Foraker, *Governor.”*

The petition avers that the Sinking Fund Commissioners fully performed their part of this contract, and then proceeds as follows:

“That prior to the 31st day of December, 188'6, said Albert Netter, defendant, delivered to the said Commissioners of the Sinking Fund, the certificates of the funded debt of the state of Ohio, bearing six per cent, interest, and payable on the 31st day of December, 1886, of the face value of four hundred and eighteen thousand, four hundred and twenty-five dollars, and received from said commissioners in exchange for the same, in accordance with the terms of said contract, the new bonds or certificates of the funded debt of the state of Ohio, bearing date July 1, 1886, of the face value of four hundred and eighteen thousand, four hundred and twenty-five dollars.

"That prior to and on the 1st day of January, 1887, the said Albert Netter, defendant, wholly failed to deliver the remainder of said certificates of the funded. debt of the'State of Ohio, payable on the 31st day of December, 1886, and amounting to the face value of one million, eight hundred and twenty-one thousand, five ............ *210hundred and seventy-five dollars, to said Commissioners of the Sinking Fund of the state of Ohio, for exchange, as provided in the contract herein set forth, but that such certificates were on said 1st day of January, 1887, held and owned by persons other than said Albert Netter, and that they were by them presented to the American Exchange National Bank of New York city, where the same were payable on said 1st day of January, 1887, and on subsequent days, and the payment of principal and interest thereon demanded by such holders and owners.

“That on said 1st day of January, 1887, the said Commissioners of the Sinking Fund tendered to said Albert Netter, defendant, the remainder of the new bonds or certificates of the funded debt of the state of Ohio, bearing date of July 1, 1886, and a certificate of deposit, for the sum of fifty thousand dollars, bearing date of March 23, 1886, numbered .1498, and issued by the Citizen’s National Bank of .Cincinnati, Ohio, which had been given to said Commissioners by said Albert Netter, defendant, as security for the faithful performance of the contract hereinbefore set forth by said Netter, and demanded from said Netter the payment of the sum of one million, eight hundred and sixty thousand, four hundred and sixty-five dollars.

“That said Netter refused to receive said bonds and said certificates of deposit and to pay said sum of one million, eight hundred and sixty thousand, four hundred and sixty-fiye dollars, but did offer to take said bonds and said certificate of deposit, and pay to said Commissioners of the Sinking Fund, the sum of one million, eight hundred and thirty-three thousand, one hundred and forty dollars.

“That said Commissioners of the Sinking Fund, in order to save the paper of the state from being dishonored, and to secure the funds with which to pay its certificates of indebtedness which were being presented for payment, complied with the demands of said Netter and delivered said bonds or certificates of the funded debt of the state, bearing date of July 1, 1886, and amounting to one million, eight hundred and twenty-one thousand, five hundred and seventy-five dollars, with interest at three per cent, for the six months, and said certificate of deposit, to said Netter, and received from him the sum of one million, eight hundred and thirty-three thousand, one hundred and forty-two dollars, but at the same time protested that the amount due the state of Ohio from said Netter under and on account of said contract was one million, eight hundred and sixty thousand; four hundred and sixty-five dollars, and said Netter has ever since that time neglected and refused, and still neglects and refuses to pay the balance of $27,323.00.

“Wherefore the plaintiff asks judgment against the defendant for the sum of twenty-seven thousand, three hundred and twenty-three dollars, with interest from the 1st day of January, A. D. 1887.”

To this petition an answer was filed which is as follows:

“Defendant admits the making of the contract as alleged in the petition, and that prior to January 1, 1887, defendant only delivered under said contract, certificates to the amount named in the petition, and the same were exchanged, as in said contract provided, leaving still outstanding the amount in the petition stated; but defendant says that by the terms of said contract he was bound to so procure and deliver all o’f said certificates, only if it should be practicable to do so, and that although he used due diligence in the premises, it was not practicable to procure and deliver any more thereof within said time than he did so deliver, because many of the owners and holders of the remaining certificates lived in distant and foreign countries, and others refused to- part with the same before maturity. And it was stipulated in said contract, that “in case any part of said two million, two hundred and forty thousand dollars of bonds are withheld by the owners or holders thereof, so that 'the party of the second part cannot get possession or control of the same, on or before the said first day pf Janm ' *211ary, 1887, then the said second party shall at said date pay to the Commissioners of the Sinking Fund of Ohio, at the American Exchange National Bank, in the city and state of New York, the par value of said outstanding canal bonds, and receive therefor the new bonds of the state of Ohio, as provided and in accordance with the act of the general assembly of Ohio, hereinbefore referred to and the advertisement made thereunder.”

“Defendant according to the said provision of said contract, did on' January 3, 1887, (January 1 being a legal holiday, January 2 being Sunday, and said bank being closed on both of said days) duly tender to the proper and duly authorized officers and agents of plaintiffs the sum of one million, eight hundred and thirty-three thousand, one hundred and forty-two dollars ($1,833,142.00), being the par value of all the said certificates then so outstanding, together with the agreed premium on the new bonds, which plaintiff was entitled to receive under said contract, to-wit: twenty-one dollars and thirty-five cents ($21.35) per thousand dollars face value, and said officers and agents thereunto so duly authorized, having postponed action with defendant’s assent until January 4, 1887, received said sum of money so tendered, and delivered to defendant said new bonds of the same face value as said outstanding certificates, and forthwith applied the money so received from defendant to the payment of said outstanding certificates. Said new bonds or certificates of indebtedness were in the form hereto attached, marked “Exhibit A,” and made part hereof, the blanks being appropriately filled in each.

' “And defendant says he has fully performed said contract on his part.”

“EXHIBIT A.” — (Form of Bond.)

Provision of the constitution of Ohio, adopted A. D. 1851. — Article 7. The faith of the state being pledged for the payment of its public debt, in order to provide therefor, there shall be created a sinking fund, which shall be sufficient to pay the accruing interest on such debt, and annually to reduce the principal thereof by a sum not less than one hundred thousand dollars, increased yearly, and each and every year by compounding, at the rate of six per cent, per annum.

Article 8. The auditor of state, secretary of state and attorney-general, are hereby created a board of commissioners, to be styled, The Commissioners of the Sinking Fund.

FUNDED DEBT OF THE STATE OF OHIO.

No......... ............ Dollars.

OFFICE OF THE ¡

COMMISSIONERS OF THE SINKING FUND. '

Columbus, Ohio, ............18...

This is to certify that the STATE OF OHIO

is indebted to ..................................................or assigns in the sum of

OHIO CANAL STOCK.

This bond is issued in accordance with the provisions of an act of the general assembly, entitled “An act to provide for refunding at a lower rate of interest so much of the funded debt of the state as becomes payable December 31, 1886,” passed April 17, 1885, and is redeemable on the first day of July........, at the agency of the state in the City of New York, with interest from the first day of July, 1886, at the rate of three.(3) per centum per annum, payable semi-annually on the first days of January and July in each *212year at the same place. This debt is recorded in this office and is transferable only in person or by lawful attorney upon the books of the Commissioners of the Sinking Fund.

In testimony whereof, this bond has been signed at the office of the Commissioners of the Sinking Fund, at Columbus aforesaid, [Seal of Ohio.] by the president thereof, countersigned by the secretary of state, who has also registered and certified the same and affixed the Great Seal of the state hereto, and has been certified to be valid and in due form by the attorney-general of the state. Countersigned and registered

Secretary of State. Auditor of State, and Pres’t of the

Comm’rs of the Sinking Fund.

OFFICE OF THE ATTORNEY-GENERAL.

, - Columbus, Ohio,............. 18...

It is hereby certified that this obligation is in due form of law and valid.

..................... Attorney-General.

Although this answer recites that the defendant fully performed the contract on his part, it shows upon its face that the defendant did not pay the face of the outstanding.canal bonds, and the premium that he agreed to pay by the sum of $27,323.63. This is easily determined by an arithmetical calculation. This amount equals the interest upon the balance of the new bonds from July 1, 1886, to January 1, 1887, at 3 per cent, per annum. Indeed, this answer is, in effect, a demurrer to the petition, except so far as it alleges that.it was not practicable for the defendant to procure the balance of the old bonds. To this answer a demurrer was filed, which was overruled by the court below, for the reason that the petition did not state a cause of action, and judgment was rendered for the defendant, which judgment we are asked to reverse.

*

 For common pleas decision, see 9 Ohio Dec. R. 000 (s. c., 20 B., 151).

The judgment was affirmed by the Supreme Court, Bradbury dissenting; no report, June 11, 1889. It was dismissed by the Supreme Court for want of preparation, April 21, 1891.

Stewart, J.

The determination of the questions here made, it is conceded, depends upon the construction to be given to the contract between the parties and their rights and duties under it.

We are not left without rules to govern us in the construction of this contract, for our supreme court has at different times had occasion to pass upon the question, and the rules which they have given are not only authoritative but consonant with reason.

Among them are the following: “The first general maxim of interpretation is that it is not allowable to interpret what has no need of interpretation. When a writing is worded in clear and precise terms, when its meaning is evident and tends to no absurd conclusion, there can be no reason for refusing to admit the meaning which it naturally presents.” Lawler v. Bent, 7 O. S., 340.

“That construction must be given to a contract which will harmonize with the meaning of the parties and secure justice .to each of them.” Stein v. Steamboat, 17 O. S., 471, 476; Mintier v. Mintier, 28 O. S., 307.

Looking at this contract, what was the intention of the parties? It was to make an exchange of the old canal bonds of the state for the new bonds, in accordance with the act of April 17, 1885 (82 O. L., 139). That act provided that the Sinking Fund Commissioners might make that exchange by receiving the surrender of the old certificates and delivering to the holder, in lieu thereof, an equal number, and amount of the certificates of the funded debt authorized by the act.

*213By sec. 2 of the act the authority is given to the commissioners to sell and dispose of the new bonds at not less than théir par value, and to apply the proceeds to the redemption of the outstanding certificates payable December 31, 1886.

This being the intention of the parties, they have provided how this exchange shall be made by the following provisiofi of the contract:

> “It is further agreed by and between said parties, that whenever said Netter shall deliver any of said outstanding six per cent, canal bonds to the said Commissioners of the Sinking Fund, he shall be'entitled to receive the full interest at six per cent, per annum thereon to the maturity of said bonds, to-wit: December 31, 1886, and he shall pay at said time to the Commissioners of the Sinking Fund, the interest at three per cent, per annum on the new bonds received in exchange up to and including the 31st day of December, 1886.”

The meaning of this paragraph is not a matter of dispute between the parties, and if the defendant had procured and delivered to the commissioners all the old bonds no question could have arisen, between them,

What would have been the practical result, between the parties, if this provision had been carried out?

The privilege of making this exchange remained to the defendant up to and including January 1, 1887. For the purpose of illustration, we may use the following figures, which show that on January 1/ 1887, the defendant would have turned over to the commissioners the balance of the old

bonds ......................................................$1,821,575.00

And the interest at 3 per cent, on the new bonds................ 27,323.62

And the premium........................................... 38,890.63

Total................................................$1,887,789.25

And would have received from the commissioners—

New bonds.................................................$1,821,575.00

Interest on old bonds..................................... 54,647.25

Total...............................................$1,876,222.25

The result of the exchange would have been that notwithstanding the new bonds bear date July 1, 1886, and draw interest at 3 per cent, per annum payable semi-annually, the state would only have been required to pay out the face of the old certificates and the interest thereon to December 31, 1886. In other words that the new bonds, although delivered to the defendant, would draw interest from the treasury of the state only from January 1, 1887.

But as it turned out, the defendant could not procure the old certificates, and it is claimed that the settlement is to be made under another provision of the contract, which reads as follows:

> “But in case any part of said two million, two hundred and forty thousand dollars of bonds are withheld by the owners or holders thereof, so that the party of the second part cannot get possession or control of the same on or before the said 1st day of January, 1887, then the said second party shall at said date pay to the Commissioners of the Sinking Fund of Ohio, at the American Exchange National Bank in the city and state of New York, the par value of said outstanding Canal Bonds, and receive therefor the new bonds of the state of Ohio, as provided and in accordance with the act of the general assembly of Ohio hereinbefore referred to and advertisements made thereunder.”

This is undoubtedly a part of the contract which we are to look to in determining the rights of the parties, but in order to arrive at the intention of the *214parties we must look at the whole contract. Much stress is laid upon the allegation of the answer that it was hot practicable for the defendant to procure these bonds, and therefore it is claimed that that contingency having arisen, another mode of settlement was provided. But it must be borne in mind that these provisions of the contract were made for the defendant’s benefit, in order that he might not lose his rights under the contract by a failure to fulfill it literally. But it was clearly not intended to give him any advantage by reason'of his failure to perform literally. Nor is it of any moment that the new bonds are spoken of in the contract as bonds' bearing date July 1, 1886, and to bear interest at the rate of three per cent, per annum, etc. These allegations are mere descriptions of the bonds which were prepared in order to make the exchange of bonds between July 1, 1886, and December 31, 1886, and did not constitute an agreement by the commissioners that in any event interest would be payable thereon from July 1, 1886. Nor do we think there is anything in the claim of counsel that the construction claimed for this contract by the state would lead to absurd and unjust results in case the state defaulted in its interest on June 30, 1886, and when the bonds fell due December 31, 1886, there would be a year’s interest thereon. If that emergency had arisen, then the defendant would have received his year’s interest on the bonds he offered for exchange, and would only be chargeable with six months’ interest on the new bonds. But it is further claimed that because nothing is said in this part of the contract about interest, and it is specifically provided for in another part of the contract, viz; that part which provides for an exchange of the bonds, a clear inference arises that the accrued interest was not to be taken .into account in cases of bondsj delivered after January 1, 1887; that the maxim *expressio tmius est exclusion alterius,*applies with full force, and hence the defendant, was to receive bonds-with six months’ accrued interests to the amount of the face of the old bonds in return for the payment by him to the state of the face of the old bonds. But this maxim does not apply when upon the face of the whole instrument a different intention can be ascertained. Lowry v. Barelli, 21 O. S., 324.

■ The difference sought to be made in construing this contract between a settlement made December 31, 1886, and one made January 1, 1887, is not apparent to us, as whatever were the duties of the state as to the payment of interest, the contract provides that the settlement between these parties is to be made January 1, 1887. At that time the new bonds are to be issued in place of the old ones, and the provision in case the bonds are not procured, which is a provision in the defendant’s interest, cannot under any rule of construction be held to give him an advantage. It is clear that there was but one result to be attained by this contract, which was the refunding of the old debt. To accomplish that two methods were provided. One by exchange, and the other by payment. In each, the result was to be the same, and it seems clear to us that’ the settlement provided for January 1, 1887, was to be made as if made December 31, 1886. If the state paid the interest on the old bonds, it was not to pay interest on the new bonds. To assume the construction of this contract claimed by the defendant would result in this, that the court must find that in the event the defendant exchanged the bonds as he agreed to do, he would receive no interest on the new bonds, but in case he failed for any reason so to do, he would receive interest; that is, if he parted with his money he received no interest, but if he kept his. money in his pocket the state would pay him three per cent, interest on it.

Or, in another aspect of the case we must find that the commissioners, who were to dispose of bonds at not less than their par value, agreed to dispose of bonds with six months’ accrued interest at their face.

In effect, putting a premium on a failure to fulfill a contract.

Under the provisions of this contract the bonds were not to be disposed *215of except by exchange of old bonds or by payment therefor, January 1, 1887; at that date they were to be exchanged for an. equal amount ánd number of the old bonds, or to be paid for in money. In either event the state was to receive the par value of the new bonds.

D. K. Watson, Attorney-General, and Geo. K. Nash, for plaintiff.

Harmon, Colston, Goldsmith & Hoadly and Paxton & Warrington, for defendant. \

• These were the plain provisions of the statute, under which this contract was made.

Again, it seems to us that the construction contended for by defendant is unreasonable. The object to be attained was the exchange of bonds, the cancellation of the old bonds and the issuing of new bonds in their place, not the issuing of new bonds while the old ones were outstanding. The advertisement of the commissioners and the proposal of the defendant show that as well as the plain provisions of the contract subsequently made.

This manifest intention of the parties can be carried out by giving effect to each and every part of the contract according to the ordinary signification of the words used, and it would be manifestly against reason to adopt a construction that would tend to defeat rather than promote the object of the parties. Chamberlain v. Railroad, 15 O. S., 225, 246.

Giving then to the words “par value” in the provision of the contract last quoted their usual signification, requires the defendant to pay to the state for the old bonds exactly what he would have paid if he had bought them from other parties; the obligation of’ the state to pay the interest thereon to him would remain, and his obligation to pay back the interest upon the new bonds would remain, and he would receive the new bonds in accordance with the contract and the act of the general assembly.

If, however, the interest upon the old bonds was not to be taken into account, and settlement was to be made as if made by the defendant with the state as the holder of the old bonds, with all the interest paid thereon, then we must find what will accomplish the intention of the parties. This can be done, and done only, by the defendant paying to the state the face of the old bonds with the premium and receiving new bonds drawing interest from the 1st day of January, 1887.

Thus, whichever clause of the contract is used as a basis for this settlement, the same result will be attained and the manifest intention of the parties as gathered from the whole contract will be carried out.

In conclusion, we are satisfied that in the settlement made by the parties, the defendant should have paid to the state the face of old bonds' and the premium on the new bonds, and received in exchange therefor‘new bonds with a cancellation entered upon them of the interest from July 1, 1886, to January 1, 1887. And whatever amount the defendant paid to the state less than that, the state was entitled to recover from him.

We do not consider that in this case any question can arise as to an estoppel, or as to whether the rights of the state under this contract are- any greater than those of a citizen of the state. ' -

It follows from these conclusions that the court below erred in overruling the demurrer to this answer, and the judgment will therefore be reversed and -the cause remanded with instruction to the court below to sustain the demurrer.