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Superior Court of Cincinnati.


enough to include certificates of indebtedness of other states and the United States, should not include certificates of indebtedness of this state, the certificates under discussion come within the constitutional injunction. It has been decided by our Supreme Court in Champaign County Bank v. Smith, 7 Ohio St., 43, that the constitutional term "investments in bonds," includes bonds of this state, unless issued before the present constitution, under a law exempting them from taxation and that taxation of bonds in this state not so exempted, was not an impairment of the contract of loan. The mere fact, then, that these certificates of indebtedness were issued by this state, does not take them out of the meaning of the constitution in its use of the term "investments in stocks.” They were issued under our present constitution, and are therefore, property upon which the legislature is enjoined to levy taxes. The property which the legislature may exempt is specifically named. No room is left for doubt that under the constitution any other exemption than of the kind of property thei ein named for exemption, would be in violation of this section. It would seem to follow that an express exemption of certificates of indebtedness of the state, they being included in the property which the legislature is required to tax, would be beyond the legislative powers to enact, and voili. A firtiori would the legislature be unable to bind succeeding legislatures by inserting such an exemption in a contract of the state with the citizen. Indeed, so carefully constructed is the constitution in regard to making tax exemption the term of a contract, that even as to property which the legislature is permitted to exempt from taxation, it cannot make the exemption except by general law, i. e., by a law affecting all property of the sanie kind throughout the state, and except in such a mauner as not to prevent its alteration or repeal by a succeeding legislature.

It is true that the constitution does not execute itself, and if the legislature simply sails in its constitutional duty to pass laws taxing any kind of property in article XII sec. 2, no tax can be coliected on it. But when instead of mere passive disobedience, it expressly enacts an exemption, it is void, and if under the general provisions of law the property is taxable, the exemption fails and the property must be returned. Such is the effect of the decision in Exchange Bank v. Hines and Zanesville v. Richards, supra. It follows from what has been said, that in 1856 the legislature had 10 power to incorporate in the contract of loan to the state a provision exempting that loan from taxation. In the construction of all laws, it is a well settled canon that if possible, the law must be so construed as to be within the constitutional power of the legislature to enact. Burt v. Rattle, 31 Ohio St., 116; Zanesville v. Richards, 5 Ohio St., 589. In construing the act of 1856 therefore, we are bound to presume that the legislature in its reference to the act of 1825 did not intend to import into the act of 1856, the exemption of the stock from taxation, when under the new constitution it had 110 such power of exemption.

It is said however by counsel, that these certificates are only evidences of stock exempt under the constitution of 1802; that though the legislature had no power io contract new debts and make them non-taxable in the hands of residents of this state, that they were not creating a new debt here, but were simply renewing or extending an old one on the same terins, and that because the state was without money to pay this debt when it becanie due to the amount of $2,300,000, as appears from the agreed statenient of facts, they were obliged to take this course. It sufficiently answers this argument to say that by the law of 1856 the legislature neither did nor did it intend to extend the old contract of indebtedness. The act is "for the payment of the debt" of 1825. It in effect provides that the certificates of that debt shall be redeemed with the money produced by the sale of the new certificates. Under that law the commissioners were authorized to get a premium upon the new certificates if they could. There is vothing in the act to show that new certificates were to be exchanged for old ones. No such power was given the commis. sioners. Much has been said about the term "redeem” and the distinction made in the laws and construction between paying the debt out of money in the treasury, and redeeming the debt by new loans. We find no difficulty upon this point. When the law provides that a certificate of indebtedness shall be redeenied in money, that is a payment as between the state and its debtor. It is an extinguishment of that contract. The holders of 1825 stock were not asked to forbear pressing their claim. They were not even given the option of taking the new stock in exchange for the old under the law. They were obliged to take what was due to them. If in fact exchanges of old stock for new were made, the legal effect of such an exchange is to be found in the law authorizing the issue of the new stock. Such exchange would be merely a payment of the old debt and a purchase of the new. The debt which was contracted to raise money to pay the old debt, was the same debt in so far as that they both represented the same benefit once enjoyed by the state, and the new debt may, in this sense, he said to be a mere continuance 88

Probasco v. Raine, Auditor.

of the old debt. But speaking of the debts as representing contractual relations between creditor and debtor, they are as separate and distinct as if they were made for wholly different purposes.

The same argument as to a renewal of this debt is made in another form. The old certificates of 1825 were non-taxable, not because of any provision in the constitution of 1851 which exempted them, for they were within the terms of the injunction upon the legislature as to what property it should tax, but because the exemption was part of the contract of their issue, and as to them the new constitution was a law impairing the obligation of a contract and could not apply. Now, it is said that as no renewal of a debt extinguishes it, except by express agreement, the creditor has a contract right to rely on the terms of the old debt until payment, and therefore, no inatter what limitations there are upon the power of the legislature to issue non-taxable securities under this constitution, it would be an impairment of his original contract to tax these certificates, and so illegal under the constitution of the United States. Of course, this argument tails for the salle reason as the one just considered, because so far as the creditor under the act of 1825 is concerned, his certificate is redeemed in money, and that debt is no more. But even if it could be said that a creditor under the act of 1825, who had bought the same amount of stock under the act of 1856 with the money paid him on his old stock, had renewed his old debt, no such case is presented at bar, because theie is no evidence that the certificates owned by the plaintiff were ever owned by any person who had owned stock of 1825. So far as appears, plaintiff's assignor first invested his money under the law of 1856. Clearly, then, he can have no reliance on the contract of 1825.

We have been pressed with the argument that this debt was the same debt in another view of this case. Counsel in an able and exhaustive brief, have reviewed the history of the construction of internal improvements within the state, from 1825 down to recent years, and have demonstrated how sacred has been the credit of the state, thus pledged to pay off the debts incurred for public works, in the eyes of succeeding legislatures. It has been shown that the plan for the payment of that debt has been preserved, and all sorts of expedients resorted to for the purpose of creating a fund to reduce it. The commissioners of the sinking fund created by the constitution, were merely the successors of the commissioners of the canal fund. It was a feature of loans under the old constitution for this canai building, that evidences of such loans should not be taxed, but we can find nothiug in the new constitution wliich authorizes a continuance of that feature in the new loans to be contracted to redeem the old indebtedness, but on the contrary, in article XII, sec. 2. we find an express prohibition of it. It is argued in this connection, that this canal stock comes within the exemption of that section, as being public property used exclusively for a public purpose.". But this argument has been completely answered by Judge Scott in the case of the Chanipaign County Bank v. Smith, 7 Ohio St., 23, where state bonds were held to be taxable unles; exempt by the law authorizing their issue' under the constitution of 1802. Certainly state bonds could only be issued for a public purpose, but they were taxed because when held by individuals they were the property, not of the state and so public property, but of the individual holding them. So with this canal stock, although it represented a transaction of the utmost good to the state, as property, it was the private property of the plaintiff, and as subject to taxation as any other of his investments.

It should be noted that on April 1, 1856, 53 0. L., 51, the taxing law of 1852 was so amended as not to require investments in certificates of the public debt of the state to be listed for taxation. Whether this law in its application to state debts, created after the constitution of 1851, resulted in a mere failure to tax them ---and was thus beyond the power of courts to correct, or was an express exemp: tion which was void, it is not necessary to decide, bwrcause that law was repealed by the act of April 12, 1858, 55 (). L...128, and has never been reenacted.

In sec. 2737 Rev. Stat. under the sixteenth subdivision, the return of a taxpayer is required to state the monthly average, amount or value for the time he held or controlled the same within the preceding year, of all moneys, credits or other effects within that time invested in or converted into bonds or other securities of the United States or this state, not taxed, to the extent he may hold or control such bonds or securities on said day preceding the second Monday in April; and any indebtedness created in the purchase of such bonds or securities shall not be deducted from the credits under the 14th item of this section. Here is said to be a recoguition by the legislature of the non-taxable character of state bonds and stocks. This part of sec. 2737 first appeared in an act passed in 1868 (65 (). Jr., 39) at a time when bonds issued before 1851 and

Superior Court of Cincinnati.


non-taxable were still outstanding, to which this language might properly apply. See the speech of Mr. Perkins in the Constitutional Convention of 1851, 2 Const. Debates, 109-111; also report of the auditor of state, 2 Const. Debates, 282284; also report of the auditor of state, 51 O. L., 41-42. It cannot be contended that the legislature intended this language to operate as an exemption. It was plainly a provision to prevent an evasion of personal tax by the purchase and temporary hoiding of bonds non-taxable. When it appears otherwise, as it does, that there are now no such non-taxable state bonds, it is apparent that this is a provision of law which was effective as to state bonds, when enacted, and which by revi. sion has simply been continued in the statute until after the time when it could have any application to such bonds. The provision is now in fact applicable only to bonds of the United States. Finally it is said that the construction put upon the tax laws by the executive departinent of the state in practically exempting ihis stock from taxation for thirty years ought to weigh with the court and control its decision so as to be in harunony with such action. The same argument was made in the case of the Western Ins. Co. v. Rattermann recently decided by the Supreme Court. That case was stronger than this one at bar in this regard. For there the auditor of state had given his opinion that the stock in question there was not taxable. The syllabus of the opinion of the court is decisive of the question against the argument of the counsel. It is as follows : “A construction, by officers having the enforcement of the tax laws of Ohio since the enactment thereof, to the effect that under such laws shares held by residents of Ohio of stock of foreign railroad corporations having property in this state on which they pay taxes, and of consolidated railroad companies, are not taxable iu Ohio, does not bind the successors of such officers, nor the state, in the proper assessment and collection of taxes upon such shares,” 46 O. S., 153; Vicksburg & Shreveport R. R. Co. v. Dennis, 116 U. S., 665.

Under section 2781 as amended, (83 Ohio L., 82) the power of the county auditor to place upon the duplicate personal property for five years passed is limited to cases where a person has made a false statement or return for taxation, and it is claimed that the plaintiff believing, as he did, that the stock was not taxable, can not be said to have made a false return. It is to be observed that the duty of making the return is on the tax-payers. Section 2736, Rev. Stat. If he assumes to decide that property is not taxable without offering to return the same, and he makes a mistake in law, his return is false, however free he may be, as he undoubtedly was in this case, from moral blame in making such statement. The maxim that ignorance of the law excuses no one must apply here. There were no acts done or opinions rendered by state or county officials which could in any way estop the state from assessing as upon a false return. Delaware Div. Canal Co. v. Commonwealth, 50 Pa. St., 399.

We hold on the whole case:

Ist. That under the Constitution of 1851, art. 12, sec. 2, there was no power in the legislature to exempt from taxation stocks or bonds of the state issued after the adoption of that constitution and held by residents of this state.

2d." That in view of this want of power the act of 1856, under which these stocks were issued, can not be construed to include in its provisions the tax exemption clause of the act of 1825, although without the constitutional objection such might be its construction.

3d. That so far as stockholders were concerned, the stock of 1825 was paid and extinguished, and the stock of 1856 was a new contract, taxation of which in no respect impaired its obligation.

4th. That taxation of the stock in the hands of plaintiff, an individual, a resident of this state, is not taxation of public property devoted solely to public uses.

5th. That we can not follow an erroneous construction of taxing officials evidenced only by their enaction.

6th. That good faith in a tax return, which does not state truly the taxable personal property held by the taxpayer because of a mistake of law honestly entertained, does not prevent it from being a false return within section 2781, when only inaction on the part of the taxing officials is shown.

The decree will be for the defendant, and the temporary injunction granted will be dissolved.

Peck and Moore, JJ., concur.'
Isaac M. Jordan, Jackson A. Jordan and Aaron F. Perry, for plaintiff.
W. L. Avery and L. W, Goss, for defendant,



Commercial Gazette Co. v. Healy.



(Superior Court of Cincinnati, General Term, January, 1889.)

COMMERCIAL GAZETTE Co. v. MICHAEL HEALY. In an action of daniages for libel, the defendant may offer evidence of the truth of

the publication, in mitigation of damages, and if the jury find the publication to be true, they may reduce the damages to a nominal suin.



The action below was brought by Healy to recover damages for an alleged libel concerning him published in the newspaper of the company The answer admitted the publication, but denied all other allegations of the petition. The case was tried to a jury and a verdict rendered against the defendant below in a substantial amount, and a judgment was entered upon the verdict.

During the progress of the trial, evidence was offered by defendant below for the purpose of mitigating the damages, tending to show the truth of the statements contained in the article complained of, and at the close of the evidence counsel for the company requested the court, to charge the jury "that if from a fair preponderance of the evidence, the publication appeared to them to be true, they might in view thereo render a verdict for nominal damages only,” which charge the court declined to give, and this action by the court is, among other thivgs, assigned as error, and a reversal of the judgment asked on account thereof.

In the general charge the court instructed the jury as follows:

“If there is not a complete justification for the publication, yet, if the publication appears to you, from a fair preponderance or weight of the evidence, to be true, or if the defendant was actuated by good faithi and a careful reasonable regard for the peace and welfare of the plaintif, and had reasonable cause for believing in the truth of the statement made, and what an honest, reasonable, careful man, having respect for the reputation and good will of his neighbor, would have done under like circumstances, then you may consider all that in mitigation of damages-that is, by way of reduction of the amount of what you might have found if the elements of good faith, as stated, were missing in the matter." The court also instructed the jury as to compensatory and exemplary damages, and the facts which must be shown to give rise to a claim for either.

It is claimed by counsel for plaintiff below that there was no error in the refusal of the special charge above set forth, and that the same ground is substantially covered by the portion of the general charge quoted.

It seems to be the law of Ohio that if the libelous statements be shown by way of mitigation to be true, the jury may reduce the damages to a nominal sunı, and the company had the right to have that proposition stated to the jury. Van Derveer v. Sutphin, 5 Ohio St., 293; Halstead v. Schemp, 8 Dec. Re., 204.

A careful analysis of the general charge leads to the conclusion that the jury were, in effect, thereby instructed that if they found the libel. ous statements to be true they would be authorized to exclude exemplary damages from their estimate-and impliedly, that even if the statements

Superior Court of Cincinuati.


were true, the plaintiff below would be entitled to substantial damages by way of compensation.

If the publication be found true, that fact would ordinarily defeat a claim to exemplary damages in toto, but it may also mitigate the claim to compensatory damages to such an extent as to leave the plaintiff only the right to a nominal sum.

The judgment will have to be reversed for the error involved ic the refusal to give the special charge asked, and the case remanded for a new trial.

TAFT and MOORE, JJ., concur.
T. M. Hinkle, for plaintiff.
Follett, Hyman & Kelley, for defenuant.



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[Superior Court of Cincinnati, Special Term.) CHARLES RAYMOND, TRUSTEE, V. SPRING GROVE, AVONDALE & CIN

CINNATI RY. CO. ET AL. 1. A trustee, holding bonds for the benefit of others, cannot maintain an action of

deceit 10 recover damages suffered by his cestuis que trustent by reason of a deception, practiced upon them in connection with their purchase of the bonds,

nor cau le maintain an equitable action on the ground of fraud in such case. 2. When persons are elected directors of a railway corporation by the votes of sub

scribers to the capital stock who were not authorized to vote because they had not paid any installment upon their stock subscriptions, Rev. Stat. 3545, and the persons so selected putered upon the discharge of their duties without objection from any one connected with the corporation, the validity of such election cannot be inquired into collaterally in an action by a creditor of the

corporation. 3. Railway companies have general power to issue bonds secured by mortgage, anıl

where such bonds are issued in excess of the amount aliowed by law, there can be no recovery on the bonds, against the individual stockholders and directors

who caused the issue. 4. Where a mortgage to secure certain bonds contains a clause liiniting the effect

of the contract contained, in the bond, is to matters not pertinent to the mort-
gage, a holder of such bonds will not be presumed to have notice of such claust
merely by reason of a general reference to the "terms and conditions" of the
mortgage, contained in ile bonds.
This case came on to be heard on general demurrer to petition.

The petition sets forth the organization of the Cincinnati Northern Railway Co., with the names of its stockholders and directors; that it was indebted and in need of money for the completion of its line, and that the persons named as its stockholders and directors, in order to raise money for that purpose, combined together and incorporated a company called the Spring Grove, Avordale & Cincinnati Railway Company for the ostensible purpose of constructing and operating a line of railway from Avondale to Venice, in Butler county, but in reality to make use of the corporate powers so secured to raise money or the use of the Northern Railway Company. That with such purpose they took out articles of incorporation for a company, with a capital stock of $1,000,000 which they, the same persons named as stockholders of the Northern Company, immediately proceeded to subscribe, the names and amounts

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