Opinion
No. A-99701.
1948-02-17
24 EAST SIXTH STREET CORPORATION v. CO-OPERATIVE PURE MILK ASS'N.
Rendigs & Fry and Herbert E. Ritchie, both of Cincinnati, for the demurrer. Harry Kasfir and Orville Troy, both of Cincinnati, for defendant.
Action by 24 East Sixth Street Corporation against the Co-operative Pure Milk Association to recover judgment for certain amount against defendant on its guarantee as surety for prompt payment of all rent and performance of all covenants and agreements of lease by plaintiff to a third party. On demurrer by plaintiff to second defense of defendant's amended answer.
Demurrer overruled.Rendigs & Fry and Herbert E. Ritchie, both of Cincinnati, for the demurrer. Harry Kasfir and Orville Troy, both of Cincinnati, for defendant.
MACK, Judge.
Plaintiff's second amended petition alleges that it is the owner of premises at 24 East Sixth Street, Cincinnati, and that it entered into a renewal lease with Kirschner Restaurants, Inc., as lessee, for the entire second floor of said premises and for certain basement storage space and use of elevator, halls and stairways for one year from October 1, 1944, and from year to year thereafter unless terminated as provided in such lease.
It is further alleged that the defendant, Co-operative Pure Milk Association, executed its guaranty whereby it became surety for the prompt payment of all rent and the performance of all the covenants and agreements of said lease, and that it would pay all damage that may be occasioned by non-performance of such lease.
It is further alleged that said Kirschner Restaurants, Inc., gave notice of the termination of said lease on July 31, 1945; that said lessee failed to make repairs and to deliver possession as required by the lease; that by reason thereof plaintiff has been damaged in the sum of $12,001.49 for which plaintiff prays judgment against defendant.
To such second amended petition defendant filed its second amended answer. As a first defense there is a denial of failure on the part of Kirschner Restaurants, Inc. to perform the terms of its lease.
As a second defense defendant alleges it is a co-operative agricultural association under the laws of Ohio and after stating in detail the purposes of defendant corporation, defendant alleges that it was outside of the power of defendant corporation to execute the guaranty referred to in the second amended petition and that it was ultra vires and outside the corporate powers of defendant to become surety on the lease of another corporation.
To such second defense of said amended answer a demurrer is filed and the following provision of the General Corporation Act of Ohio is relied upon, viz.:
‘No limitation on the exercise of the authority of the corporation shall be asserted in any action between the corporation and any person, except by or on behalf of the corporation against a director or an officer or a person having actual knowledge of such limitation.’ (112 Ohio Laws, 9 et seq., G. C. Sec. 8623-8).
In the consideration of the matter involved herein it is well to bear in mind the following expression of our Supreme Court per Stephenson, J., contained in Cleveland v. Public Utilities Commission, 130 Ohio St. 503, at page 510, 200 N.E. 765, at page 769:
‘Words contained in a legislative enactment are given their plain, usual, and ordinarily accepted meaning, unless and until it is made manifest that a different meaning was intended by the enacting body. This proposition is fundamental and needs no citatory authority.’
In the case of List v. Burley Tobacco Growers' Co-operative Association, 114 Ohio St. 361, 151 N.E. 471, our Supreme Court in a lengthy opinion by Marshall, C. J., held that a co-operative association is not a trust in restraint of trade and that contracts in restraint of trade are not illegal except when unreasonable in character; also that when such contracts are incident and ancillary to some lawful purpose and are not unreasonable in their scope and operation they are not illegal.
In the subsequent cases of Earley v. Co-operative Pure Milk Association, 115 Ohio St. 185, 152 N.E. 390, and Stark County Milk Producers' Association v. Tabeling, 129 Ohio St. 159, 194 N.E. 16, 98 A.L.R. 1393, the statutes as to co-operative associations were held not to be violative of the laws prohibiting an illegal trust or combination in restraint of trade and particularly in the latter case a co-operative milk association was held not to violate such laws.
It should not be overlooked that the statutes of Ohio authorizing the incorporation of co-operative agricultural associations were passed March 28, 1923, and were approved by the Governor April 13, 1923 (110 Ohio Laws, 91 to 101). G. C. Sections 10186-1 to 10186-30.
By the Act passed February 16, 1927, and approved March 8, 1927, the General Corporation Laws of Ohio were revised, consolidated and codified (112 Ohio Laws, 9 to 58). G. C. Sections 8623-1 to 8623-138. Said Section 8623-8 above quoted is part of said Act.
Before the enactment of the General Corporation Law in 1927 the Supreme Court in the lengthy opinion of Pollitz v. Public Utilities Commission, announced as Syllabus 2 the following principle of law, 96 O.S. 49, 117 N.E. 149, L.R.A.1918B, 166, viz.:
‘A corporation has no power to enter into contracts of guaranty, or suretyship, or otherwise lend its credit to another, unless expressly authorized by its charter or by statute, except where the power to do so is implied from its express powers as necessary and proper in the furtherance of its legitimate business.’
InUnione Fratellanza Oratinese v. Picciano, 129 Ohio St. 466, 196 N.E. 155, the Supreme Court in an opinion by the Chief Justice held that the Corporation Act of 1927 did not abolish the doctrine of ultra vires with respect to fraternal benefit societies incorporated not for profit under Section 9462 et seq. of the General Code.
On behalf of plaintiff it is sought to distinguish this case upon the ground that fraternal benefit societies are governed by code provisions contained under different headings than ‘Co-operative Agricultural Associations.’ This Court is unable to adopt that distinction in view especially of the language of Chief Justice Weygandt at page 469 of 129 Ohio St., at page 157 of 196 N.E.:
‘The purpose clause of the defendant corporation expressly states that it is incorporated under Section 9462, General Code, and the kindred sections relating to fraternal benefit societies. It is not contended that the defense of ultra vires is abolished by any of these sections. This court is therefore of the view that, under proper circumstances, this defense is still available to such incorporated fraternal benefit societies.’
Examination of the provisions of the Act authorizing the incorporation of co-operative agricultural associations reveals that the fourth section of said Act (Section 10186-4) sets forth the powers of such corporation specifically limiting such powers to those set forth and as a final sentence stated:
‘and in addition, any other rights, powers and privileges granted by the laws of this state to ordinary corporations, except such as are inconsistent with the express provisions of this act; and to do any such thing anywhere.’
Likewise, it should not be overlooked that Section 20 of such Act (Section 10186-20) provided:
‘Any provisions of law which are in conflict with this act shall be construed as not applying to the associations herein provided for.’
Likewise, by Section 28 of said Act (Section 10186-28) it is stated:
‘The provisions of the general corporation laws of this state and all powers and rights thereunder, shall apply to the association organized hereunder, except where such provisions are in conflict with or inconsistent with the express provisions of this act.’
This Court is clearly of opinion that the right of guaranteeing the performance of the provisions of a lease made by lessor to a third party or corporation is not one of the powers conferred upon co-operative agricultural associations under the provisions of General Code Section 10186-4 and any such power or right which other corporations have under the General Corporation laws of this State ‘ are in conflict with or inconsistent with the express provisions of [said] act.’
In the reply brief of plaintiff it is stated that while the instrument as framed in the petition is one of guaranty, it is in fact an agreement to answer for the debt or default of another, and that it is not an indemnity agreement but a contract that, for its own purposes, namely the marketing of its member's product through a restaurant corporation it would unqualifiedly cause the rent to be paid. However, there is no suggestion whatsoever in the petition that defendant was marketing its member's products through a restaurant corporation.
Whether, in event the instrument was for the purpose stated, the defense of ultra vires would be available is therefore not involved in this case and no opinion is expressed by this Court with reference thereto.
Finally, in the opinion of this Court, in view of the Legislature of Ohio having by express provisions authorized the incorporation of co-operative agricultural associations and having prescribed all the powers and limitations of such corporations, the provisions of the General Corporation Act subsequently passed should not be held to amend any of such provisions unless expressly provided.
It follows from all the foregoing that the demurrer to the second defense of the amended answer herein should be overruled.