apply on his own debt to defendant, the Mat-itor, and as a result of that conference thew Addy Company; that said defendant Cramer agreed to take in consideration of company had not paid back the said sum of $7,000 an assignment of the account of the money to the Old Colony Smokeless Coal Western Malleables Company and the two Company, or otherwise accounted for the trade acceptances. This assignment was made money, and that, therefore, at the time of by Kresge, vice president, and W. T. Potthe issuance of the order of garnishment de- tinger, treasurer, of the Old Colony Smokefendant had in its possession moneys, prop-less Coal Company, Cramer giving his check erty and credits belonging to the Old Colony for $7,000 payable to the Old Colony SmokeSmokeless Coal Company. The petition less Coal Company as agent for the Dwale prayed that the defendant, the Matthew Ad-Coal Company and the Reliance Coal & Coke dy Company, be required to make full dis- Company. In addition there was an oral closure, and that judgment be rendered agreement that Cramer would turn the two against it in favor of the plaintiff. trade acceptances back to Kresge to be dis An answer was filed by the Matthew Ad-counted, upon condition that Kresge paid dy Company, which put in issue the aver- Cramer personally $2,000 and paid Cramer, ments of the petition. as attorney for the Matthew Addy Company, The record discloses that John H. Kresge, $7,500 to apply on the claim which the Matwho was associated with the Old Colony thew Addy Company had against Kresge. Smokeless Coal Company as its vice presi- The two trade acceptances, Cramer claims, dent and a member of its board of directors, were turned back in accordance with the was interested in the Dwale Coal Company agreement, and the same were discounted at and the Reliance Coal & Coke Company of an Ashland, Ky., bank, the Old Colony SmokeWest Virginia; that Kresge was individually less Coal Company being given a credit on indebted to the Matthew Addy Company in November 5, 1920, of $19,809.34, against a large sum of money. The Matthew Addy which account the Old Colony Smokeless Company had placed its claim for collection Coal Company, by J. H. Kresge, vice presiin the hands of Nelson B. Cramer, an attor- dent, and W. T. Pottinger, treasurer, gave ney at law, and Cramer had collected upon a check dated November 6, 1920, to J. H. said indebtedness about $40,000, leaving a Kresge personally. This check for $10,000 balance still due from Kresge to the Mat- was deposited by Kresge in the Citizens' Nathew Addy Company of approximately $75,- tional Bank of Cincinnati on November 9, 000. Cramer was still pursuing Kresge, and together with a check of $5,000 on the GuarImmediately prior to October 29, 1920, had anty Trust Company of New York, payable filed suits against Kresge and his companies to J. H. Kresge, dated November 8, 1920, in Kentucky. New Jersey, Wisconsin and and signed by Nelson B. Cramer, the balance elsewhere. The Wisconsin suit brought by in Kresge's account in the Citizens' National the Matthew Addy Steamship & Commerce Bank immediately prior to said November Corporation, an associated company of de- 9 being less than $200. fendant, was against the Old Colony Smokeless Coal Company and included a garnishment of a large account due the Old Colony Smokeless Coal Company from the Western Malleables Company. Kresge was in financial straits, and was doubtless considerably embarrassed by the several suits filed against him, and by the garnishment proceedings. He had two trade acceptances due the Old Col-ried the check with him in his pocketbook ony Smokeless Coal Company from the International Coal & Dock Company, each of which was in the sum of $10,000. These two trade acceptances, and the amount due from the Western Malleables Company in Wisconsin to Under date of November 9, Kresge gave the Old Colony Smokeless Coal Company, Cramer a check for $7,000 and received back seemed to be the most available assets that from him the check for $5,000 upon the GuarKresge could realize upon in order to meet anty Trust Company of New York. pressing claims, including pay rolls at coal This transaction, it is urged, gave a permines. The Old Colony Smokeless Coal Com-sonal profit of $2,000 to Cramer for thus tempany was the sales agent for the Dwale Coal porarily assisting Kresge in the handling of Company and the Reliance Coal & Coke Com- his various affairs. pany, whose pay rolls Kresge desired to meet. The trade acceptances that were discountand it seemed necessary in order to procure ed at the Ashland, Ky., bank it is claimed money for the pay rolls that the sales agency, furnished the source from which Kresge paid the Old Colony Smokeless Coal Company the $7,500 to the Matthew Addy Company, should produce the same. Kresge appealed and that the same were the property of the to Cramer, the attorney for his largest cred-Old Colony Smokeless Coal Company. It is On November 11, 1920, the Matthew Addy Company deposited a check given by John H. Kresge on the Citizens' National Bank of Cincinnati. This check is dated November 1, 1920, and Cramer testifies he received it' before the trade acceptances were turned back to Kresge, and that being about to depart on a business trip for New York he car and mailed the same back to Cincinnati, either to the defendant company, or to some employé in his office to be delivered to the Matthew Addy Company. (147 N.E.) claimed that Kresge had authority from the [thew Addy Company knew that it was getOld Colony Smokeless Coal Company to deal ting Old Colony Smokeless Coal Company with the trade acceptances and the account money? We have examined the record and receivable in the manner he did. This is de- fail to find such evidence. The circumstance, nied by the plaintiff in error. Cramer denies that the $7,500 check was deposited by the any knowledge of the source from which the Matthew Addy Company in the Citizens' Na$7,500 paid to the Matthew Addy Company tional Bank of Cincinnati on November 11, came, but avers that if Kresge was guilty of two days after Kresge had deposited $15,000 any wrongful use of the property of the Old to his own account in the same bank, is not Colony Smokeless Coal Company it was after such that a reasonable inference can be the trade acceptances in question had been drawn therefrom that the Matthew Addy turned back to him, and that he, Cramer, Company was a party to the alleged manipuwas in ignorance from what source the mon-lations of the Old Colony Smokeless Coal ey was to come to meet the check thereto- Company's funds by Kresge and Cramer. fore given him for the $7,500 for the Mat- This check was received by the Matthew thew Addy Company. Addy Company from its attorney, Cramer, and, while Cramer may have had knowledge of the condition of the account of Kresge, we cannot charge such knowledge to the Matthew Addy Company unless we make it chargeable with Cramer's knowledge, a point which is discussed in the next proposition. Failing to find that the record discloses any evidence, or reasonable inference to be drawn therefrom, which tends to show knowledge on the part of the Matthew Addy Comrany of the fraud complained of, we reach the conclusion that the Matthew Addy Company was innocent of fraud, if such existed, [2, 3] This brings us to the second propo As a result of these manipulations the plaintiff in error claims that the Old Colony Smokeless Coal Company became insolvent, and that plaintiff in error is thereby unable to collect its claim against such company; that the $7,500 which was paid to the Matthew Addy Company was in fact the property of the Old Colony Smokeless Coal Company, and should not have been used by Kresge to pay his individual debts; that, therefore, the Matthew Addy Company has no legal right or title to that amount, it being in truth and fact the property of the Old Colony Smokeless Coal Company. The defendant in error, the Matthew Addy Com-sition: Is the knowledge of Cramer, the atpany, denies all knowledge of the source of the money it received from its attorney, and elaims to be an entirely innocent recipient thereof, and, as a creditor of Kresge, that it had the right to accept and retain the same. Upon the issues as made by the pleadings and the record, disclosing in substance the foregoing facts, a motion was made at the close of the testimony for plaintiff in error for a directed verdict in favor of defendant in error, the Matthew Addy Company. This motion the judge of the court of common pleas sustained, and rendered judgment accordingly. Error was prosecuted to the court of appeals, where the judgment was affirmed. Error is now prosecuted to this court to reverse said judgment. Walter K. Sibbald and Stuart R. Ducker, both of Cincinnati, for plaintiff in error. Julius R. Samuels and Nelson B. Cramer, both of Cincinnati, for defendant in error. DAY, J. The two points upon which this controversy turns are, first, whether or not there was any evidence entitling the plaintiff in error to have its case submitted to the jury; and, second, whether the knowledge of Nelson B. Cramer, attorney for the defendant in error, is to be imputed to the defendant in error and it thus be chargeable therewith. [1] As to the first point: Is there any evidence, or a reasonable inference which can be drawn from all the evidence submitted in the record, tending to show that the Mat torney for the Matthew Addy Company, to be imputed to it and it thus be chargeable therewith? Of course the general rule is that notice to an agent is notice to his principal, and this doctrine applies to the relation of attorney and client, and an attorney's notice or knowledge of facts affecting the rights of his client will be considered notice to the client. There are, however, exceptions to this general rule, and among them is that when the attorney engages in a transaction in his own interest, and under circumstances that would lead him not to impart the knowledge thus obtained to his principal, the presumption that the knowledge thus gained should be imputed to his client does not always prevail. In the case of Union Square Bank v. Hellerson, decided by the Supreme Court of New York, 90 Hun, 262, 35 N. Y. S. 871, the facts were that in an action brought by the bank upon a promissory note the defendant Charles Hellerson interposed a defense to the effect that he indorsed the note for the accommodation of the maker, the defendant Hammersen, and solely for the purpose of having it deposited with Fromme Bros., lawyers; that it was expressly agreed that the note should never be used as a legal obligation of Hellerson, and that the bank, Fromme Bros., the attorneys, and one Manning, the bank's assignor, ́each had notice of such facts; and that the transfer of the note by Manning to the bank was without valuable consideration, and with notice of its di version from the purpose for which it was in- er of the property after the executors had dorsed by Hellerson. Upon the trial of the action it appeared that Fromme Bros. were prosecuting a claim of the bank against John B. Manning, and that at the same time Hammersen was purchasing a brewery of Manning, in which latter transaction Fromme Bros. were acting as attorneys for Hammersen. The note was transferred before maturity by Hammersen to Manning to pay for the brewery, and by Manning to the bank, which thereupon sur rendered certain shares of stock which it held as collateral for its claim. Hammersen testified that he told Mr. Fromme that Hellerson was an accommodation indorser, but his testimony did not show that he told Mr. Fromme that the note was not to be used: "Held, that, as in the transaction relative to the brewery, Fromme [the attorney] was not acting for the plaintiff [bank], but for Hammersen, whatever knowledge Fromme acquired in that transaction from Hammersen as to the nature of Hellerson's indorsement could not be imputed to the plaintiff [the bank]: and that the plaintiff was entitled to recover." The above case is not dissimilar in fact and principle from the case at bar, for as the court points out in its opinion, Fromme, the attorney, in the transaction relative to the securing of the note, was not acting for the bank, but in the interest of Hammersen, even though the bank ultimately got the proceeds of the note. In the opinion at page 215 (35 N. Y. S. 873) the court says: "It is clear that in this part of the transaction Fromme was acting, not as the attorney for the bank, but for Hammersen. He was attending to Hammersen's business, and not that of the bank, and whatever knowledge he had in regard to the origin of the note could not be imputed to the bank, because he was not acting for the bank. He did not receive the notes upon the part of the bank, but, on the contrary, received them for the purposes of the transaction with Manning, handed them over to Manning, and Manning took them to the bank which received them without any notice of this remarkable agreement, that these indorsements were made simply for child's play. "We think that, under these circumstances, there was no foundation for the claim that Fromme's knowledge, if he had any, as to this remarkable contract in regard to these indorsements, was to be imputed to the bank." In the case of Melms v. Pabst Brewing Co., 93 Wis. 153, 66 N. W. 518, 57 Am. St. Rep. 899, the facts were that executors of an estate, acting through an attorney, indirectly sold the property in question to one of their number, which was in direct violation of a statute which prohibited such procedure, and was also fraudulent as to creditors of the decedent. The attorney who handled the deal, and who knew of the infirmity of the title passed by such sale made in violation of the statute, also represented the purchas sold the property indirectly to one of their number. By reason of the statute, the title taken by the Pabst Brewing Company was a voidable one, but could be avoided by the latter purchaser only it if had, or was charged with, knowledge of the infirmity. The argument was advanced that inasmuch as its attorney had notice of the infirmity of the title the property was taken with knowledge or notice of that fact, and undoubtedly the attorney did have notice or knowledge, as the sale to the defendant was made five months after the illegal sale, and what he knew five months before he undoubtedly knew five months later. However, the court in that case held that the defendant was not charged with the notice that its attorney had, and although the court recognized the general rule that a client is bound by notice that its attorney has it decided the case as an exception to the general rule. At page 169 of the opinion (66 N. W. 523), the court said: "The whole doctrine of imputed notice to the client or principal rests upon the ground that the attorney or agent has knowledge of something, material to the particular transaction, which it is his duty to communicate to his principal. Wyllie v. Pollen, 3 De Gex, J. & S. 601. And notice of it will not be imputed to the client where it would be a breach of professional confidence to make the communication; and where the interest in, or the relation of the attorney to, the previous transaction is such as would be sufficient to induce him to withhold the information, the presumption of its communication is rebutted. The client will not be charged with notice of a fraud or wrong to which his attorney was a party while enployed by another, and which it is quite certain he would conceal. Kettlewell v. Watson, 21 Ch. Div. 707." See, also, 4 A. L. R. 1618; Benedict, Ex'r, v. Arnoux, 154 N. Y. 715, 49 N. E. 326; Olyphant v. Phyfe, 48 App. Div. 1, 62 N. Y. S. 688. A good statement of the rule is found in Allen v. South Boston Rd. Co., 150 Mass. 200, at page 206 (22 N. E. 919, 5 L. R. A. 716, 15 Am. St. Rep. 185): "The general rule is, that notice to an agent, while acting for his principal, of facts affecting the character of the transaction, is constructive notice to the principal. Suit v. Woodhall, 113 Mass. 391; National Security Bank v. Cush Mass. 188; The Distilled Spirits, 11 Wall. 356. man, 121 Mass. 490; Sartwell v. North, 144 There is an exception to this rule when the agent is engaged in committing an independent fraudulent act on his own account, and the facts to be imputed relate to this fraudulent act. It is sometimes said that it cannot be presumed that an agent will communicate to mitted on his own account in transacting the his principal acts of fraud which he has combusiness of his principal, and that the doctrine of imputed knowledge rests upon a presumption that an agent will communicate to his principal (147 N.E.) whatever he knows concerning the business he is engaged in transacting as agent. It may be doubted whether the rule and the exception rest on any such reasons. It has been suggested that the true reason for the exception is that an independent fraud committed by an agent on his own account is beyond the scope of his employment, and therefore knowledge of it, as matter of law, cannot be imputed to the principal, and the principal cannot be held responsible for it. On this view, such a fraud bears some analogy to a tort willfully committed by a servant for his own purposes, and not as a means of performing the business intrusted to him by his master. Whatever the reason may be, the exception is well established. Kennedy v. Green, 3 Myl. & K. 699; Espin v. Pemberton, 3 De G. & J. 547; Rolland v. Hart, L. R. 6 Ch. 678; In re European Bank, L. R. 5 Ch. 358; Cave v. Cave, 15 Ch. D. 639; Kettlewell v. Watson, 21 Ch. D. 685, 707; Innerarity v. Merchants' National Bank, 139 Mass. 332; Dillaway v. Butler, 135 Mass. 479; Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268; Howe v. Newmarch, 12 Allen, 49." Now, the scope of the employment with which Cramer was intrusted by the Matthew Addy Company was the collection of its claim against Kresge. He had pursued that employment with considerable success, and then, upon Kresge's solicitation, sought to make a personal profit entirely in his own self-interest by entering into the agreement with Kresge with reference to the Old Colony Smokeless Coal Company's assets. This plan by which Cramer was to profit to the sum of $2,000, at least, and as a result of which Kresge was to secure money for himself, with a part of which he was to pay not only the Matthew Addy Company, but his own personal claims and pay rolls of his subsidiary companies, was surely no part of the employment of Cramer by the Matthew Addy Company. The record does not disclose any authority for the $7,000 purchase of any of the Old Colony Smokeless Coal Company's assets. The knowledge which Cramer obtained of the affairs of Kresge and the Old Colony Smokeless Coal Company was obtained long after the employment of Cramer by the Matthew Addy Company, and this knowledge was used by Cramer in his own interest, and to further his own personal profit as well as Kresge's. The fact that he pursued the agency with which he had been intrusted by the Matthew Addy Company within the scope of that employment, and secured a further collection from Kresge to be applied upon the debt that Kresge owed his principal, the Matthew Addy Company, does not bind the principal in the transaction outside the scope of that employment, the transaction involving a $7,000 investment and a resale of assets thus secured, by which the attorney was to make a purely personal profit, entirely in his own interest and apart from his client's authority, with an accompanying depletion of the resources of Kresge, the debtor, to the extent of at least $2,000. Even conceding all that the plaintiff in error claims as to the transaction of Cramer and Kresge with reference to the Old Colony Smokeless Coal Company's property, we fail to find that as a matter of law the knowledge so gained by Cramer in the transaction, which was for his own personal profit and self-interest, and outside the scope of his employment by the Matthew Addy Company, and relating to a transaction purely between himself and Kresge, should be imputed to the Matthew Addy Company. At least we can find nothing in this record that justifies the client under the circumstances disclosed, imputing the knowledge of the attorney to nor are we able to find that the title to mon or ey, or the proceeds of a check, which are received by an innocent creditor to be applied upon his debtor's claim, can be followed into such creditor's hands unless knowledge, either actual or constructive, of the fraudulent transaction from which such moneys checks come, can be traced to such creditor. Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268, 273, 17 N. E. 496, 9 Am. St. Rep. 698; Nickerson v. English, 142 Mass. 267, 268, 8 N. E. 45; Thacher v. Pray, 113 Mass. 291, 18 Am. Rep. 480; Lime Rock Bank v. Plimpton, 17 Pick. (34 Mass.) 159, 28 Am. Dec. 286. ion that the court of common pleas in directEntertaining these views, we are of opining a verdict and entering judgment in favor of the Matthew Addy Company was right, and that the judgment of the court of appeals in sustaining the same should be af firmed. Judgment affirmed. MATTHIAS, KINKADE, and ROBINSON, MARSHALL, C. J., dissents. been certified by the county auditor to the HAMMOND, County Treasurer, v. WINDER. defendant as county treasurer" for collection. (No. 18224.) In the meantime no effort had been made (Supreme Court of Ohio. March 10, 1925.) by the plaintiff below, defendant in error (Syllabus by the Court.) 1. Taxation ~453, 493(1)-Remedy of one affected by tax commission's increase in value of separately owned coal stated. When the state tax commission acting under sections 5612 to 5614, inclusive, General Code, has certified to the county auditor an increase in the aggregate values of separately owned coal in taxing districts, as a class, one affected by the increase has a complete administrative remedy furnished him by sections 5609 and 5610, General Code (107 O. L. 43, 44), whereby valuations on specific parcels may be revised or corrected. Under those sections the fact may be determined whether the added valuations placed by the auditor on the specific parcels of property have been increased beyond their true value in money. 2. Taxation 609-Taxpayer must pursue administrative and judicial remedies before attempting to enjoin collection. Such taxpayer must pursue the administrative remedies so provided. Failing to do so, he cannot avail himself of the provisions of section 12075, General Code, by seeking to enjoin the collection of taxes resulting from the increased valuations. Error to Court of Appeals, Perry County. Action by John H. Winder, as receiver, etc., against Charles W. Hammond, County Treasurer of Perry County, to enjoin collection of certain taxes. Judgment for plaintiff was affirmed on appeal to Court of Appeals, and defendant brings error. Reversed and judgment entered for defendant.-[By Editorial Staff.] On or about October 15, 1917, upon the request of the state tax commission, the coun ty auditor of Perry county transmitted to the commission an abstract of the real and personal property of the taxing districts in his county, showing the valuations of the classes of real property appearing on the tax lists in his office. On November 20, 1917, the tax commission determined that the classes of property were properly assessed at their true value except the class consisting of separately owned coal, which the commission determined to be assessed at less than its true value, and ordered the assessment of that class of property, separately owned coal, increased by 40 per cent., which the county auditor was directed to add to the valuations of such coal on the auditor's tax lists. This the county auditor did prior to December 1, 1917, "at which time," as alleged in the petition, "plaintiff discovered that said addition had been made by said county auditor upon the tax lists and duplicate and the same had here, to avail himself of the statutory remedies, if any, given him to contest the valuations certified by the tax commission to the county auditor. Consequently, no complaint having been filed, there was none to lay before the board of revision, and no proceedings whatever were had before that board, or by appeal to the tax commission of Ohio. On January 14, 1918, the defendant in error brought his action against the county treasurer under section 12075, General Code, seeking to restrain the collection of the increased taxes on the treasurer's duplicate, placed thereon in accordance with the finding of the state tax commission, and based on such increased valuations. This case was formerly before this court and reported in 100 Ohio St. 433, 126 N. E. 409, 24 A. L. R. 318, where the facts pleaded more fully appear. That decision having reversed and remanded the cause to the Court of Appeals, that court, on September 22, 1923, found the following fact, which provides the mined and found that the several tracts concrux of the present controversy: It detersisting of separately owned coal upon which increases in valuation were made were on the tax duplicate at their true value in money before the increases ordered by the tax commission were made, and held that the increases ordered by the tax commission of Ohio were illegal, null, and void, for the reason that such action violated the constitutional provisions relative to the valuation of property for taxation. The Court of Appeals perpetually enjoined the county treasurer from collecting such increased taxes, whereupon the county treasurer instituted proceedings in of the Court of Appeals. error to this court to reverse the judgment C. C. Crabbe, Atty. Gen., William J. Meyer and W. E. Benoy, both of Columbus, and Vincent Tague, Pros. Atty., of New Lexington, for plaintiff in error. Wm. Burry, of Chicago, Ill., W. O. Henderson, of Columbus, John T. Pyle, of New Lexington, J. R. Fitzgibbon, of Newark, and F. H. Game, of Columbus, for defendant in error. JONES, J. This was an action in injunction seeking to restrain the county treasurer from collecting increases in the valuation of seperately owned coal lands certified to the county auditor by the tax commission of Ohio. The suit was begun in the court of common pleas and appealed to the Court of Appeals, which determined that the separately owned coal tracts, increased by the state For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes |