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(162 N.E.)

pellee to secure the performance of the formed by appellants in repairing the equiporiginal contract. ment owned by Pfizenmayer & Harmon, including trucks, Ford cars, mixers, tractors, and tools.

[2] We cannot agree that appellee surety company, after becoming liable on its bond, can by the execution of a new contract, making the terms and conditions of the bond a part thereof, avoid liability for the payment of "all lawful claims of subcontractors, materialmen and laborers, for labor performed and material furnished in the carrying forward, performing, and completing of said contracts," as provided in such statutory bond; it being further provided in harmony with the statute that the surety company agrees and assents "that this undertaking shall be for the benefit of any materialmen or laborer having a just claim, as well as for the obligee."

Appellee surety company argues that appellants' action was not upon the bond. But such action was upon the contract made by the surety company with the state, of which contract the bond was a part, the same as if therein fully set forth.

We are constrained to hold that the surety company by its contract with the state of which the conditions of its bond are a part is liable for the lawful claims of subcontractors, materialmen, and laborers, for labor performed and material furnished in the carrying forward, performing, and completing of their contract.

Appellee surety company cites Miller v. State ex rel., 35 Ind. App. 379, 74 N. E. 260, to sustain its contention that there is no liability on the part of the principal contractor for any indebtedness incurred by the subcontractor in connection with the carrying on of the work which has been sublet. But that authority, as well as others cited by appellee, was before the enactment of the statute of 1919 above mentioned. In all probability the decisions in the cases cited by appellee surety company suggested the remedy enacted in 1919.

But appellee surety company well suggests that not everything that is furnished to a contractor who is engaged in the construction of a highway can be the basis of a claim under his bond. Appellants have not set out the bill of particulars which constitutes the basis of their claim against the surety company nor its substance, and appellee states that such bill of particulars is too voluminous to set out in whole, as it consists of charges for hundreds of items bearing date from October 30, 1923, to October 30, 1924, which it classifies in a general way as follows:

Repair parts for equipment, Ford parts described by number, bolts, nuts, set screws, tire casings, and inner tubes, bearings, skid chains, fan belts, radiators, brakelining, gaskets, spark plugs, washers, cylinder heads, gears, bushings, fenders, connecting rods, springs, piston rings, asbestos, timers, and rollers, and many other miscellaneous parts. (b) Items of labor, all of which was per162 N.E.-3

(c) Miscellaneous items, such as telephone calls, gas and oil, alcohol, semetol, and shellac.

Appellants have not challenged appellees' list and classification. We assume, therefore, that they are substantially correct.

[3, 4] It appears by the evidence that none of the repair parts mentioned above was furnished to the surety company; that all of them were furnished to Pfizenmayer & Har. mon, and that the surety company had no interest whatever in any of the equipment for which the repair parts were furnished and on which the repairs were made. It has been generally held that equipment sold to a contractor, even though it be used in the construction of the improvement, is not such material as comes within the meaning of the bond and statute, nor are repair parts for equipment nor repair work thereon such material or labor as comes within the contemplation of the bond. Such equipment necessarily is a part of the capital of the contractor, by the use of which he performs the work, not only on the improvement then in hand, but as well the work on other improvements both theretofore and thereafter. It does not become a part of the project. In Southern Surety Co. v. National Lumber Co., 73 Ind. App. 592, 122 N. E. 686, this court, speaking by Enloe, J., held that lumber used as an appliance is not such material as is furnished in the construction of the work, and was not the basis for a claim against the surety company upon its bond. Numerous authorities are there cited to sustain the decision of the court. The principle here involved is the same. The purpose of the statute is to furnish protection to those who furnish material or labor which enters into, or becomes a part of, or is naturally consumed in or about, the completion of the work involved. Other authorities to the same effect are: City of Alpena v. Title Guaranty Co., 159 Mich. 329, 123 N. W. 1126: Title Guaranty etc., Co. v. State ex rel., 61 Ind. App. 268, 109 N. E. 237. 111 N. E. 19; Standard Boiler Works v. National Surety Co., 71 Wash. 28, 127 P. 573, 43 L. R. A. (N. S.) 162.

None of the items above entered into and became a part of the work, or were consumed in its completion, unless it might be said that items, such as oil, gasoline, shellac, and telephone calls, might be so consumed. As to this we are not informed, as there is no evidence stating the purpose for which these items were used, and the court by its general finding has found that they were not used in the construction of the work involved. Had the court found otherwise, the circumstances might justify an inference by the court that would sustain its finding.

While we hold that the surety company would be liable for such material furnished to the subcontractors as entered into and became a part of the work, or was consumed in the construction, we are compelled to hold that the items mentioned in appellants' bill of particulars are not such as will constitute a lawful claim against appellee surety company under its contract.

Judgment affirmed.

DAUSMAN, J., absent.

(118 Ohio St. 561)

MINERVA-CANTON TRANSIT CO. v. PUB-
LIC UTILITIES COMMISSION OF OHIO.
(No. 21048.)

Supreme Court of Ohio. May 23, 1928.
(Syllabus by the Court.)

1. Automobiles 106-Public Utilities Commission may revoke motor transportation company's certificate of public convenience and necessity for good cause (Motor Bus Law; Motor Transportation Act).

The Public Utilities Commission is authorized by law, "for a good cause," to revoke a certificate of public convenience and necessity theretofore issued by it to any motor transportation company.

2. Automobiles 106-Motor transportation company's failure to comply with provisions of law or rules of Utilities Commission for safety of traveling public warrants revocation of its certificate (Motor Bus Law).

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The failure of a motor transportation company to comply with the provisions of law or the rules and regulations prescribed by the Public Utilities Commission for the safety of the traveling public warrants the revocation of its certificate of public convenience and necessity.

Error to Public Utilities Commission.

Complaint before the Public Utilities Commission to revoke certificate theretofore issued to the Minerva-Canton Transit Company. To review an order revoking the certificate the Minerva-Canton Transit Company brings error. Affirmed. [By Editorial Staff.] George T. Poor and Walter W. Thomen, both of Columbus, for plaintiff in error. Edward C. Turner, Atty. Gen., and A. M. Calland, of Columbus, for defendant in

error.

MATTHIAS, J. This is a proceeding in error for review of an order of the Public Utilities Commission, wherein, upon complaint, and after hearing the commission revoked the certificate theretofore issued to the Minerva-Canton Transit Company, authorizing it to operate a motorbus line over a

triangular route between Canton and Minerva.

Numerous instances of violation of the motor bus law (Gen. Code, § 614-84 et seq.) and the rules and regulations of the commission were alleged in the complaint as grounds for the revocation of said certificate.

The commission found that the portion of the route extending from Minerva to Salineville, which had been granted as an extension to the route for which certificate had been originally granted, had never been operated; that the company had on several occasions materially changed its equipment without applying to, or procuring the consent of, the commission, and had failed to pay taxes upon the equipment as required by law; that equipment dedicated to said route was at various times operated on special trips; and that practically all the time during which it has held its certificate the company has failed to have on file insurance as required by law. During two periods the line was operated by receivers appointed by the courts, and the commission announced that it had difficulty in ascertaining what vehicles were utilized by the company in the operation of its route under such certificate because of the instability of the management of the company.

The record contains evidence which amply sustains the finding of the commission and warrants its action in revoking the company's certificate. This is particularly true with reference to the failure of the company to comply with the requirements to carry insurance on all busses in use and have the policies covering same on file with the commission, as required by law.

[1] Broad powers are conferred upon the commission by the Motor Transportation Act (Gen. Code. § 614-84 et seq.) in order that. the public convenience and necessity may be met by adequate transportation facilities. Like power and authority have been conferred upon the commission to supervise and regulate the service and require and enforce conformance to the law, and to its own rules prescribed under authority of law, for the purpose of protecting and safe-guarding the interests of the public.

[2] The default of the company in respect to insurance covered a considerable period of time, and is inexcusable. It was not only in disregard of the rules and regulations of the commission, but in direct violation of the law. Section 614-99, General Code. Power, full and complete, is conferred upon the commission to revoke any certificate upon good cause, after prescribed notice and an opportunity to be heard. It is not contended, and, of course, could not well be urged, that failure to comply with such requirement, which is exacted as a condition precedent to the issuance of any certificate of convenience and necessity, is not a good cause for the revocation of the certificate by the commission. It

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(162 N.E.)

is complained that such punishment is too drastic, because it appears that the company under present management is complying with the law and the rules and regulations prescribed thereunder. The provisions of law as well as the regulations of the commission designed for the safety of the traveling public should be enforced by the commission. It is well that motor transportation companies understand that compliance with such laws and regulations will be required and enforced. The order of the commission is lawful and reasonable, and is affirmed.

Order affirmed.

MARSHALL, C. J., and DAY, ALLEN, KINKADE, ROBINSON, and JONES, JJ.,

concur.

(118 Ohio St. 564).

STANDARD SANITARY MFG. CO. v.
GEORGE et al. (No. 20798.)
Supreme Court of Ohio. May 9, 1928.
On Rehearing June 6, 1928.

(Syllabus by the Court.)

Husband and wife 171(12)—Mortgagor, knowingly permitting mortgagee to extend credit to husband on faith of mortgage, cannot question validity of mortgage executed under husband's duress.

A mortgagor, who has executed her mortgage deed under the duress of her husband, which duress was unauthorized by and unknown to her mortgagee, and who has thereafter silently and knowingly permitted her mortgagee to extend credit to her husband or her husband's firm, upon the faith of such mortgage, will not be heard to question the validity of her execution thereof up to the extent such credit has been extended upon the faith of such mortgage.

petitioned for a foreclosure of the mortgage. Katherine George admitted the execution of the mortgage. The trial court denied cancellation and decreed foreclosure of the mortgage. Appeal was prosecuted to the Court of Appeals. That court referred the case to a referee to try and determine the issues and report his findings of fact and conclusions of law separately. The referee found against the defendant in error Katherine George on the issue of coercion and duress, and for the Standard Sanitary Manufacturing Company upon its cause of action for a foreclosure of the mortgage. The report of the referee was heard by the Court of Appeals upon the motion of the Standard Sanitary Manufacturing Company for a confirmation of the report, and upon exceptions filed by Katherine George. That court held that the contract of guaranty and the mortgage deed had been obtained by duress and coercion, and decreed cancellation of both. Error is prosecuted here.

A. B. Cook and Sanborn & Nacey, all of Cleveland, for plaintiff in error.

Beckerman & Felsman, Sawyer, Cummings, Mook, Strong & Douglas, and Duffey & Duffey, all of Cleveland, for defendants in error.

ROBINSON, J. The first question that presents itself to the court in the consideration of this case is whether the record discloses that degree of proof essential to warrant a court of equity in canceling a mortgage deed. Frate v. Rimenik, 115 Ohio St. 11,

152 N. E. 14.

The duress relied upon in this case was an alleged threat by the Standard Sanitary Manufacturing Company to prosecute Stillman A. George for making a false financial statement for the purpose of securing credit, the securing of credit on such statement, and the sending of such statement through the United

Error to Court of Appeals, Cuyahoga Coun- States mail service, and was based upon a conty.

Action by Katherine George and others against the Standard Sanitary Manufacturing Company, in which defendant filed a cross-petition. Decree for plaintiffs by Court of Appeals, and defendant brings error. Re versed and rendered.-[By Editorial Staff.]

The defendant in error Katherine George brought an action against the plaintiff in error, the Standard Sanitary Manufacturing Company, in the court of common pleas of Cuyahoga county, to cancel a certain contract and a certain mortgage deed executed by her to it, to secure a past indebtedness of and future credit for the Maskell-George Company, alleging that the contract and mortgage deed were procured by duress. The Standard Sanitary Manufacturing Company, by answer, denied the duress, and cross

versation between Mr. Moeller, who was Manufacturing Company, and Stillman A. credit manager of the Standard Sanitary George, husband of Katherine George, a conversation between Mr. George and Mr. Goodwin, who was resident manager of the Standard Sanitary Manufacturing Company,

and certain conversations between Stillman A. George and Katherine George.

The evidence upon the subject of the conversation between Mr. Moeller and Mr. George and Mr. Goodwin and Mr. George consisted of the evidence of Mr. Moeller, Mr. George, Mr. Goodwin, and Mr. Morganstern, who was the attorney of Katherine George. Mr. George's testimony upon the subject of the conversation was:

"A. Well, he says, 'Your account is getting too large. You owe us about $23,000, and we got to have something paid on it; it's got to

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

be taken care of.' And I told him I would pay it as fast as I could, and he said, "That won't do,' he said, 'we have got to have this thing straightened out.' And I said, 'Well, I'll refer to our accounts receivable, and I will get them in as fast as I could, and do the best I could in the matter;' and he says, 'Well, we have got to have some security.' I says, 'I haven't any security I can give you, outside of some life insurance and some lots out on Beacom street;' and he says, "That won't do,' he says, 'we've got to have better security.' I says, 'I don't know what I can give you.' He says, 'Well,' he says, 'there's your homes.' I says, 'Well, I never could get the wife to sign up any more on homes.' And he says, 'Well, they're in your statements; it's part of your assets, and we have extended your credit on .the strength of those.'

"A. On the strength of their being in the statement. And I told him the homes were in our wives' names, and that Mrs. George had put one home into the place and mortgag d another, and I knew she wouldn't go any farther."

That was all the evidence of Mr. George upon that subject. The rest of his testimony related to conversations between him and his wife, Katherine George, and between him and his, or his wife's attorney, Mr. Morganstern.

The testimony of Mr. Moeller and Mr. Goodwin of the conversation with Mr. George was to the same effect as the testimony of Mr. George, and further disclosed that the Standard Sanitary Manufacturing Company had, through both Mr. Moeller and Mr. Goodwin, in the same conversation, informed Mr. George that, unless a blanket mortgage for $25,000 was executed to it on the homes of Mrs. Maskell and Mrs. George, no more credit would be extended to the Maskell George Company; that the credit of the Maskell-George Company was thereupon suspended, and was not resumed until after the execution of the mortgage by Mrs. George.

The testimony of Mr. Morganstern was to the same effect, and to the further effect that he secured the consent of the Standard Sanitary Manufacturing Company to accept two $10,000 mortgages, one on each of the homes, in place of the blanket mortgage of $25,000 on both the homes, which was done, and that he had exacted of the Standard Sanitary Manufacturing Company the delivery to him of the financial statements as a condition precedent to the delivery of the executed mortgage deed, and had agreed to return the statements to the Standard Sanitary Manufacturing Company in the event that the title should, upon examination, prove defective, but to be disposed of as he saw fit when and in the event that title should be approved.

There is no other evidence in the record upon the subject of the threat, unless the evidence of Mr. George that he told his wife and told her attorney that the Standard Sanitary Manufacturing Company, through Mr. Moeller and Mr. Goodwin, had threaten

ed him with criminal prosecution, be considered as competent to prove that such threat had, in fact, been made. Such evidence was competent for the purpose of proving the coercion of Mrs. George by Mr. George, but was not competent to prove that such threats had been made by the representatives of the Standard Sanitary Manufacturing Company, and did not tend to prove such fact.

Mrs. George then must rest her case on this issue upon such an inference, if any, as may be drawn from the delivery by the Standard Sanitary Manufacturing Company of the financial statements to her attorney at his request, with instruction by the Standard Sanitary Manufacturing Company that such statements be returned to it in the event that the title to the property be not approved.

We doubt whether an inference of a threat of criminal prosecution, unaided by evidence of any other fact tending to prove such a threat, could reasonably be drawn from such circumstance; but, even if it could, and even if the evidence of the conversations between Mr. George and Mrs. George, and between Mrs. George and Mr. Morganstern, were competent to prove this issue, which it is not, the inference is so remote and the testimony of Mr. George so at variance with his own testimony of what actually was said, and so at variance with the testimony of Mr. Moeller, Mr. Goodwin, and Mr. Morganstern, that the proof of such threat by the Standard Sanitary Manufacturing Company cannot be said to have been established by even a preponderance of the evidence, much less by clear and convincing proof, for there is nothing disclosed by this record which would tend to impair the credibility of Mr. Moeller, Mr. Goodwin, or Mr. Morganstern, while Mr. George's evidence of what was actually said, and what he told his wife was said, tends to discredit his whole testimony. The interest of Mr. George does not appear to be any less than the interest of Mr. Goodwin and Mr. Moeller, and the record discloses no interest of Mr.

Morganstern; and it must be remembered that the Court of Appeals weighed this evidence upon the transcript of the referee, and did not have the benefit of seeing and hearing the witnesses any more than this

court has.

The record rather clearly discloses that Mr. George represented to his wife and represented to Mr. Morganstern that the Standard Sanitary Manufacturing Company had informed him that he was criminally liable, both for making a false statement for the purpose of securing credit, and for having transmitted such statement through the mails, and that Mrs. George was influenced by such statements and by her fear for her husband's reputation and liberty. The record does not disclose that the Standard Sanitary Manufacturing Company had notice or knowledge of such representation by Mr. George, nor that ·

(162 N.E.)

it in any way authorized Mr. George to use such pressure upon Mrs. George, or by subsequent action or inaction ratified it. That fact may not have any significance in determining whether Mrs. George executed the mortgage of her own free will, but it has significance in determining whether or not she may now assert the coercion of her by her husband against the Standard Sanitary Manufacturing Company, after it, with her knowledge and her silent acquiescence, has relied upon the security of such mortgage, and has changed its position and extended credit to the extent of many thousands of dollars.

The record discloses that, if Morganstern, by virtue of his holding the financial statements until the first mortgage deed was executed, became the trustee, for that purpose, of the Standard Sanitary Manufacturing Company, his trust terminated upon the 6th day of May, 1925, when the mortgage was approved by the attorney for the Standard Sanitary Manufacturing Company. The record discloses that thereafter, on June 15, 1925, by reason of the fact that the MaskellGeorge Company, which had theretofore been a partnership had become incorporated, it became necessary to substitute a new mortgage deed for the purpose of extending the credit to the corporation instead of to the partnership, and that Mrs. George executed that mortgage after the Standard Sanitary Manufacturing Company had surrendered all control over the financial statements, and that, if they were not in her possession, they were in the possession of her attorney, and, if retained from her by him, they were retained for some purpose other than the purpose of the Standard Sanitary Manufacturing Company. The record further discloses that subsequent thereto still a third mortgage of the same purport was executed by Mrs. George, to take the place of the second mortgage, and all this occurred after much time for deliberation and after she had had the advice of her own personal counsel; that in July the financial statements were destroyed by her attorney; that on the 29th day of September, 1925, the Maskell-George Company went into bankruptcy, and thereafter, on the 29th day of October, 1925, this action was begun; that, in the meantime, the indebtedness of $23,000, which had existed at the time of the execution of the first mortgage, had been paid off, and additional credit extended and indebtedness incurred approximating $30,000; and that no notice of the fact that the three mortgages executed by Mrs. George were executed by her unwillingly was communicated to the Standard Sanitary Manufacturing Company until a month after the MaskellGeorge Company had gone into bankruptcy and had ceased to have any use for the credit that was afforded them by reason of the several mortgages.

The legal question presented by this record, then, is: Will a mortgagor who has been coerced by her husband into executing a mortgage to a third party for her husband's benefit, which third party neither authorized nor knew of such coercion, be heard to question her execution of such mortgage after she has knowingly and silently permitted the mortgagee to extend credit to her husband or his firm, on the faith of such mortgage, up to and in excess of the face of the mortgage?

While she disclaimed any interest in, or desire to secure future credit to, her husband's firm, her own evidence clearly discloses that she knew at all times that the several mortgages provided for such crédit, and knew that the credit which had been withdrawn shortly prior to the execution of the first mortgage was immediately thereafter extended to the Maskell-George Company by the Standard Sanitary Manufacturing Company, upon the faith of such mortgage. She knew she had executed each mortgage unwillingly as well the day she executed them as she knew it six months later, when she filed this action. Approximately two months elapsed between the execution of the first and second mortgages; and, while she then knew that the sole purpose of the execution of the second mortgage was to transfer the credit then being extended to the Maskell-George Company from such company as a partnership to such company as a corporation, she made no protest to the Standard Sanitary Manufacturing Company, but by such second execution further invited it to continue to extend such credit, and, without protest to it, she executed still a third mortgage, for the purpose of correcting an error in the second mortgage.

The fact that she may have refrained from repudiating her execution of the mortgages, including the mortgage here sought on the one hand to be canceled and on the other hand to be foreclosed, through fear that her husband might be punished criminally, will not excuse her silence to the prejudice of the mortgagee, unless the mortgagee be shown to have participated in the creation of such fear or to have had knowledge of its existence. Of the two innocent parties, Katherine George and the Standard Sanitary Manufacturing Company, the mortgagee, she, by executing the mortgage, created the situation which induced the mortgagee to extend credIt, to its prejudice; by her silence, when it was her duty to speak, she induced the mortgagee, on the faith of the situation created by her, to part with its goods. She failed to exercise her privilege of repudiation when it would not have prejudiced the mortgagee and would have prejudiced her husband's business. She cannot be heard to exercise it now, when it will advantage her to the prejudice of the mortgagee.

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