CASES IN THE SUPREME COURT OF OHIO. TOLEDO AND OHIO CENTRAL RAILWAY COMPANY V. BOWLER AND BURDICK COMPANY. [57 OHIO STATE, 38.] CARRIERS-LIABILITY FOR GOODS AS BAGGAGE.— While a carrier of passengers is not obliged to accept anything but ordinary baggage as baggage, yet, if without extra compensation, and knowing that it is not personal baggage, he permits it to be treated, and carried as such, he is liable for its loss through negligence. CARRIERS-LIABILITY FOR MERCHANDISE CARRIED AS BAGGAGE.-If a carrier of passengers, for the purpose of obtaining patronage, and with actual knowledge of all the material facts, waives its right to refuse merchandise which it is requested to carry as baggage, or to make an additional charge commensurate with the increased risk, and carries it as baggage, it cannot, after a loss has occurred, assert an immunity from liability because of such right. Action to recover the value of merchandise in trunks and cases which the railway company had received and undertaken to carry as baggage of the salesmen of plaintiffs, who were passengers on the company's train. The trunks and cases were destroyed in a collision. Judgment for defendant in the trial court. This judgment was reversed by the circuit court. Defendant appealed by writ of error. Doyle & Lewis, Taylor, Taylor & Taylor, and Bargar & Bargar, for the plaintiff in error. Powell & Minahan and Gilbert & Hills, for the defendants in error. 55 SHAUCK, J. Much of the doctrine maintained by counsel for the carrier is established law. The 56 obligation of the carrier to carry the baggage of a passenger is limited to those articles which are for his personal comfort and convenience. Nor is the carrier bound to inspect a trunk presented by a passenger as baggage to see whether it contains articles of merchandise. In the absence of knowledge to the contrary, it may rely upon the passenger's implied representation that its liability will be limited to baggage. Since it does not owe the duty of inquiring as to the contents of such trunks as are so presented, it cannot be charged with the knowledge which inquiry might have elicited. Nor can the liability of the carrier be extended by the fraud and deceit of the passenger. A claim founded on his own fraud and deception would be as bad in law as it is in morals. But it does not appear from these records that any of these views were denied by the common pleas court of Franklin county, or by either of the circuit courts. It cannot be said that one is deceived or defrauded with respect to facts which are made known to him in any way. In two of these cases the jury were instructed that to charge the carrier with liability for the merchandise as baggage, it was necessary to show that its agents knew the character of the contents of the trunks when they received and checked them. In the other case, the evidence tended to show that the agent had such knowledge. The instruction given placed upon the plaintiff the burden of proving such knowledge. The instruction was not that the carrier would be liable if its agents might have known that the trunks contained merchandise, or if they had reason to know; for that would have defined a rule too uncertain of application. The charge required that 57 the evidence, circumstantial and direct, must affirmatively show that the carrier's agents knew that merchandise was received to be carried as baggage. That such knowledge fixes upon the carrier the same liability for merchandise accepted to be carried as baggage as though it were baggage, is generally, though not universally, held. The general rule upon the subject of waiver as affecting the liability of the carriers was stated by Mr. Justice Field in Hannibal R. R. Co. v. Swift, 12 Wall. 262, as follows: "If at any time reasonable ground existed for refusing to receive and carry passengers for transportation, and their baggage and other property, the company was bound to insist upon such ground if desirous of avoiding responsibility. If not thus insisting, it received the passengers and their baggage and other property, its liability was the same as though no ground for refusal had ever existed." In 3 Wood on Railroads, page 1806, it is said: "While a carrier is not obliged to accept anything but ordinary baggage as baggage, yet if, without extra compensation, and knowing that it is not personal baggage, he permits it to be treated and carried as such, he is liable for its loss." The same doctrine was declared and applied in Jacobs v. Tutt, 33 Fed. Rep. 412, and in numerous cases cited in the briefs. Nothing opposed to this view is held in Humphrey v. Perry, 148 U. S. 627, relied on by counsel for the company; for not only does the court, by distinguishing Jacobs v. Tutt, 33 Fed. Rep. 412, recognize that case as correctly decided, but in the opinion it is stated as a reason for the conclusion that the carrier was not liable for the value of merchandise received to be carried as 58 baggage that the witness "testified to no fact from which the inference could be drawn that the agent had actual knowledge that the trunk contained a stock of jewelry." Nor is the view stated in conflict with the cases in which it is held that the carrier does not become liable for merchandise received as baggage merely because it had frequently so received it, nor merely because of the peculiar appearance of the trunks or cases in which it was contained; for fraud cannot be practiced upon a carrier so frequently as to create a cause of action against it, nor is proof of a circumstance which tends to show knowledge, or which might excite a suspicion, necessarily equivalent to proof of actual knowledge. Concerning the effect of such circumstances it was said by this court in Johnson v. Way, 27 Ohio St. 374, as a reason for rejecting the ancient rule that there could be no recovery upon a negotiable instrument, void between the original parties, if the holder had acquired it under circumstances calculated to excite suspicion: "Circumstances which might excite the suspicion of one man might not attract the attention of another. It is a rule which business men cannot act upon in the ordinary affairs of life with any certainty that they are safe." It was nevertheless held that good faith required the holder to act upon his knowledge. It is true that in cases not distinguishable from those before us, the supreme court of Massachusetts has exempted the carrier from liability for the merchandise, holding that notwithstanding its knowledge of the character of the articles to be carried, it is liable only according to the terms of 59 its contract, and that the articles of merchandise were carried at the risk of the passenger. If we were inclined to adopt this view instead of that which obtains generally, we should find difficulty in distinguishing United States Exp. Co. v. Backman, 28 Ohio St. 144, where a common carrier of freight was charged with the consequences of its knowledge that the value of the freight exceeded that which was stated in the bill of lading. It would not seem practicable in this respect to distinguish between the carriage of freight and the carriage of baggage, nor between knowledge of the value of the articles carried and knowledge of their character. In one case as clearly as in the other, considerations of public policy justify the conclusion that if the carrier, for the purpose of obtaining patronage, and with actual knowledge of all the material facts, waives its right to refuse merchandise which it is requested to carry as baggage, or to make an additional charge commensurate with the increased risk, it cannot, after a loss has occurred, assert an immunity from liability because of such right. Regarding other points raised by counsel for the company, it seems sufficient to say that they present no prejudicial error. Judgment affirmed. CARRIERS-LIABILITY FOR ARTICLES RECEIVED AS BAGGAGE.-If articles are presented to a carrier by a passenger who demands their transportation as his luggage, and the carrier is informed by the passenger, or has knowledge from the outward appearance of the articles, that they are not usually carried as baggage, but receives and carries them as such, he is answerable for them as baggage, although he was not bound to receive them as such: Kansas City etc. Ry. Co. v. McGahey, 63 Ark. 344; 58 Am. St. Rep. 111, and note: Railway Co. v. Berry, 60 Ark. 433; 46 Am. St. Rep. 212, and note; Oakes v. Northern etc. R. R. Co., 20 Or. 392; 23 Am. St. Rep. 126, and note. Merchandise is not baggage, but if there is no concealment on the passenger's part, and a carrier receives and treats as baggage a package which he knows to be merchandise, he is held liable in case of loss, although no extra compensation was charged for its transportation: Monographic note to Hutchings v. Western etc. R. R., 71 Am. Dec. 160, 161; note to Blumantle v. Fitchburg R. R. Co., 34 Am. Rep. 380. GATES V. TIPPECANOE STONE COMPANY. [57 OHIO STATE, 60.] CORPORATIONS FORMED BY PARTNERS-FRAUD UPON CREDITORS-LIABILITY ON SUBSCRIPTIONS.-If partners, under agreement, capitalize their partnership property at twice its value, organize a corporation with a capital stock of that amount, transfer such property to it at this estimated value, and, in payment of the property, issue to themselves paid-up corporate stock to an amount equal to such estimated value, make themselves officers of the corporation, continue the partnership business in the AM. ST. REP., VOL. LXIII,—↓ɔ corporate name, and subsequently become insolvent, such transaction is a fraud on subsequent innocent creditors of the corporation, although no evil intent accompanied the transaction, and the difference between the actual and inflated value of the property sa conveyed must be deemed unpaid subscriptions upon the stock issued in this way whenever necessary to protect the rights of such corporate creditors. Day, Lynch & Day, and R. A. Harrison, for the plaintiff in error. D. A. Hollingsworth and W. A. Bateman, for the defendants in error. 72 BRADBURY, J. The only question which this opinion will consider relates to the liability of James H. McLain upon his subscription to the capital stock of the Tippecanoe Stone Company. The court of common pleas held him liable and its holding was sustained by the circuit court. This holding rests upon a finding of fact made by a referee to whom the cause was, by order of the court of common pleas referred, with direc tions to hear the evidence and report his findings of fact made thereon, separate from his conclusions of law. A brief reference to so much of this finding as relates to the question now under consideration will be made. McLain, William Thornburg, and Oscar Townsend, in the year 1887, owned and were operating, as partners, a certain stone quarry, stone sawmills, etc., at Tippecanoe, Harrison county, in this 73 state; McLain owning one-half, the two other partners each one-fourth. The fair value of partnership property was $37,500. The partners entered into an agreement among themselves to capitalize this property at an estimated value of $75,000, organize a corporation with a capital stock of $75,000, transfer the property to it at this estimated value, and in payment of the property issue to themselves paid-up corporate stock to an amount equal to this estimated value. Accordingly, steps were taken to accomplish this end, which resulted in the incorporation of the Tippecanoe Stone Company, under the laws of this state with a capital of $75,000. At once, upon the completion of its organization, the partnership property was transferred to the corporation at the price previously fixed, and in exchange therefor, the entire stock of the corporation was issued to the partners, or their assignees, as fully paid up. The business was conducted by the corporation for about two and one-half years, when it became insolvent, and by force of an assignment under the insolvent laws, passed into the hands of Thomas A. Latto as trustee for the benefit of creditors, who |