Detroit Fidelity & Surety Co. v. Keys , 14 Ohio Law. Abs. 76 ( 1932 )

HORNBECK, J.

With the record in the state, heretofore briefly set forth, the parties by their counsel appeared in open court and there developed the occurrences upon which the controversy of the parties arises, Much informal discussion had taken place before a definite plan of action was agreed upon but finally, at the suggestion of the trial court, general demurrers' to the intervening petition of the Surety Company were filed by the receiver, the Bank and the Pittsburgh Plate Glass Company. The record will bear the interpretation, that the court was of opinion that he was determining questions incident to an order of distribution arising upon the statement of facts of counsel, and it is not at all unusual, that he would believe that he had by agreement of counsel determined these questions finally by his action on the hearing. However, we cannot escape the force and effect of the journal entry through which the court speaks and it is decisive that the action taken was a decision on the demurrers to the intervening petition of the surety company. The language of the entry:

“This day this cause came on to be heard upon the several demurrers of the receiver, the Pittsburgh Plate Glass Company and The Winters National Bank & Trust Company to the intervening petition of the Detroit Fidelity & Surety Company, and the same was submitted to the court;

Upon consideration, the court finds that said demurrers are each and «severally well taken and should be sustained, which is accordingly hereby done. Said surety company’s intervening petition is hereby dismissed; to all of which said The Detroit Fidelity & Surety Company, by its counsel, excepts.”

The error proceedings and the record which was made upon the hearing on the general demurrers to the original intervening petition require us to decide if the action of the trial court in sustaining the demurrers was correct.

The petition of the Surety Company, in so far as pertinent here, relied upon the averments that the receiver was appointed without notice to the Surety Company and that no notice was given to the Company of the default of the Contractor in completing its contracts and that, under its contract with the Contractor and because of his default the Surety Company was entitled to an equitable lien on funds assigned to it prior to the receivership proceedings, and, further, that the Bank was not entitled to an equitable lien on said funds nor to priority of lien over the Surety Company.

■ Assuming that the appointment of the receiver worked an involuntary default of the Contractor on its contract with the State, we do not believe that a failure of the Director of Highways .to notify the Surety Company of such default, as provided by §1209 GC, nor the failure to notify it of the appointment of the receiver, would under the averments of the intervening petition create an equitable lien in favor of the Surety Company on any money due or to become due the Contractor on its construction jobs. The amended intervening petition is much broader than the original intervening petition in setting out the facts and the conditions of the contract between the Surety Company and the Contractor, especially the assignment clause as a basis for subrogation and exoneration. The demurrers to the intervening petition were properly sustained.

Within ten days after the decision on the demurrers the Surety Company filed an amended intervening petition with the Clerk, as a matter of right, and at the same time a motion for leave to file an amended intervening petition.

Motion to strike the amended intervening petition was filed by the Bank and after counsel for the Surety Company had withdrawn its motion for leave the court sustained the motion to strike. Exceptions were noted to the action of the trial court in striking the amended intervening petition. In the entry upon the motion to strike, in part, the court finds that the claims of said Surety Company and the Bank were determined upon their merits by the former orders of the court on November 19, 1931, and that the rights and claims of said parties were thereby adjudicated and that “the motion to strike said intervening petition should be and is hereby sustained.” Judgment was entered accordingly.

The recitation in the second entry, just quoted, to the effect that the amended petition was ordered stricken because the matter set up had been theretofore determined on its merits as disclosed by the record, cannot control against the express terms of the journal entry reciting that the former action was merely a sustaining of the demurrers.

We are convinced that the court efred in determining that the action taken in the hearing of November 19, 1931, as exemplified by the journal entry, was a determination of the right of the Surety Company upon the merits.

It is not necessary to say that the learned trial court well knew the office of a motion to strike and that before trial had judicial discretion required a favorable attitude toward permitting an amendment to a petition so long as it is substantial, tendered in good faith with a purpose to state a cause of action. This discretion was not exercised because the court was convinced that the motion came too late after judgment.

Counsel have thoroughly presented their respective claims of the law of this case on the action of the court in sustaining the motion to strike treated as a general demurrer to the amended petition. The motion was not so considered below. Nor does the action there taken present a situation where after adverse ruling the losing party desiring to plead no further reserves the error assigned and permits judgment to be entered against him.

. It is the further claim of plaintiff in error that the court erred in ordering the amended intervening petition stricken from the files because the Surety Company had a right by law, under §§11360, 11361 and 11365, GC, to file the amended intervening petition.

Sec 11360, GC, provides:

“At any time before the answer is filed plaintiff may amend his petition without leave or prejudice to the proceeding. Notice of such amendment shall be served upon the defendant or his attorney.”

Sec 11361, GC, provides:

“Within ten days after a demurrer is filed the adverse party may amend, without leave, on payment of costs since filing the defective pleading.”

Sec 11365, GC, provides:

“If the demurrer be sustained the adverse party may amend if the defect thus can be remedied with or without costs as the court directs. It shall be no objection to such amendment that it changes the action from law to equity or vice versa, if its basis, essential facts and final object remain the same.”

We are met at the outset with the necessity of construing §§11360, 11361 and 11365, GC. It appears that the Surety Company withdrew its motion for leave to file its amended petition, filed in the Common Pleas Court, and elected there to stand upon its right to file independent of leave of the court. It maintains its right so to do in this court. To support its position we are cited to the foregoing sections.

Although the trial court erred in the reason assigned for sustaining the motion to strike, if the action taken was proper, though founded upon an untenable reason, it must be supported. If the Surety Company had the right to file its amended intervening petition then it may have been prejudiced by the court striking it from the files although if was not good on demurrer because it had the further right within the discretion of the court to amend and to attempt to state a cause of action. Further, the amended intervening petition challenged the validity and priority of the claim of the Bank as an equitable lien and, if the finding of the court fixing the rights of the Bank was an interlocutory order the Surety Company had the further right to have that question adjudicated as between it and the Bank. Kelley et v Stanbery et, 130, 421 N.C. Conville v Lee, 31 Oh St, 451.

Unless the Surety Company had the right independent of leave to file its amended petition it cannot be heard to complain of the action of the trial court because the court was not called upon to exercise its discretion whether or not the amended petition should be filed.

Sec 11361, ».GC, can have no application because the amended petition was filed eleven days after the filing of the demurrer. The time limit fixed in the section is ten days. §11360, GC, standing alone, would authorize the filing of the amended petition “at any time before the answer is filed;” no answer was filed. But this section must be considered in conjunction with §11365, GC, which clearly contemplates leave of the court to file an amended petition. Hence, there arises an apparent conflict and inconsistency in the terms of the sections. They must be construed in pari materia. The necessity of leave of the court to file an amended petition appears in two particulars in §11365 GC: (1) “If the defect thus can be remedied.” (2) “With or without costs, as the court directs.” Neither of these questions can be determined without discretionary action on the part of the court.

Although the question must have arisen many times in procedural practice in Ohio, we do not find an adjudication on the subject. We are agreed that reading the sections together, §11360 GC has application only where, after the filing of the original petition and prior to the filing of an amended petition, no action of an opposing party has intervened challenging the sufficiency of the petition; that §11365 GC is exclusive, and controlling after demurrer has been filed to a petition and has been sustained. Thus, no amended petition can be filed as a matter of right after demurrer thereto has been interposed and sustained by the court. This is the only intepretation which will give full scope and effect to all of the language of §§11360 and 11365 GC. As there was no leave of the court the Surety Company had no right independent of leave to file the amended intervening petition, it was filed without authority of law. The court was, therefore, correct in sustaining the motion to strike it from the files.

In this view of the case it becomes unnecessary to consider the further question, extensively briefed by counsel, raising the sufficiency of the amended intervening petition against a motion to strike treated as a general demurrer. The event which would require the trial court and this court to pass upon this question would arise if leave had been invoked under §11365 GC which action was not sought by the Surety Company,

The judgment of the trial court will be affirmed.

The motion of the Bank to dismiss the error proceedings will be overruled.

ALLREAD, PJ, and KUNKLE, J, concur.