This is an appeal on questions of law and fact from a judgment of the Common Pleas Court of Pike County, Ohio. The cause is submitted to this court upon a transcript of the evidence taken in the trial of the case in the Common Pleas Court.
The action is on a promissory note dated February 2, 1955, in the sum of $31,754.30, given by the defendant William H. Smith, hereinafter referred to as Smith, and to foreclose a mortgage executed by Smith to secure the note.
The defendants The Portsmouth Times, Basic Construction Materials, and the Jackson Sand & Mining Company in their cross-petitions claim to be judgment creditors of the defendant Smith. The defendants Holbrook, Nash, and John Blake and Floyd Blake referred to as H & N, filed a joint answer and cross-petition claiming the sum of $12,467.66 due on contracts of November 29 and December 8, 1954, with the defendant Smith, and the Piketon Development Company, to which Smith had deeded lot No. 121, of the Rittenour Addition to the village of Piketon, for labor and materials furnished in the construction of a dwelling house on such lot. These defendants also claim the sum of $11,000 for labor and materials furnished in the erection of a dwelling house on lot 146 of the addition, which lot Smith conveyed to the Piketon Development Corporation, and they further allege that Piketon Development Corporation had executed a mortgage to the cross-petitioners covering lots Nos. 121 and 146 to secure the indebtedness and that plaintiff has security on lots other than 121 and 146, out of which he can satisfy his claim. The prayer of this cross-petition is for judgment in the sum of $24,218.66, plus interest, that the lots be sold and that these defendants be paid such amount from the proceeds of sale. In an amended answer these defendants further claim that they contracted to and did build a house on lot 147 of the addition, upon which there is due them the sum of $10,176, for which they hold a mortgage executed June 13,1956, the same as on the other two numbered lots.
The plaintiff in his reply to said answer and cross-petition denies any knowledge of any agreement or agreements between Smith and H & N Construction Company as alleged in its cross-petition. The following brief statement of' facts as shown by the record is sufficient to understand the questions to be determined in this case: plaintiff was the owner of the three lots, Nos. 121, 146, and 147, of the Rittenour Addition to the village
Smith had financial difficulties and, in order to avoid pressure from his creditors, organized a corporation known as the Piketon Development Corporation, of which he was president and the principal stockholder and his wife was secretary. Smith executed deeds for all the lots received from plaintiff, including lots Nos. 121, 146 and 147, to the Piketon Development Corporation. Smith’s financial situation did not improve and he abandoned the project and removed to Denver, Colorado, where he now resides.
Service of summons on the petition was obtained by publication. Subsequent to the filing of the petition, on June 13, 1956, the Piketon Development Corporation executed a second mortgage to H & N on these three lots to secure the amount due H & N for the erection of houses on the lots. There was no
It is the contention of the plaintiff that since there was no service of summons on the cross-petition of H & N any judgment rendered thereon is void. With this contention we agree. It is held in the first paragraph of the syllabus in Southward v. Jamison, 66 Ohio St., 290, 64 N. E., 135:
“So long as a cross-petition in an action is strictly confined to ‘matters in question in the petition,’ the summons issued on the petition would be sufficient notice to sustain a judgment rendered on the cross-petition; but when the cross-petition sets up matters which are not drawn ‘in question in the petition,’ and seeks affirmative relief against a codefendant, of a nature different from that sought in the petition, a summons to the party to be charged, issued on the petition, will not confer jurisdiction to render judgment on the cross-petition, especially when the cross-petition is filed after the defendant thereto is in default for answer to the petition, and á summons on the cross-petition in such case is necessary.”
The cross-petition of H & N clearly sets up matters not drawn in question in the petition and seeks affirmative relief from the codefendant, Smith, on a second mortgage which had not been executed when the petition was filed. On this authority the court was without jurisdiction to render judgment on the cross-petition of H & N. However, as held in Preston, Trustee, v. Brown, 35 Ohio St., 18, the court is not precluded from treating the cross-petition as properly in the case, for the purpose of considering and awarding the defendant compensation, in equity, for valuable improvement upon the land.
It is undisputed that the plaintiff in writing agreed with Smith to accept $1,423.94 and ‘ ‘ at any time payment is made in said amount I hereby agree to release one lot from said mortgage.” H & N, while constructing the houses on the lot, had knowledge of this agreement between plaintiff and Smith. The trial court found from conflicting evidence that the plaintiff knew that H «fe N was erecting houses on these lots and thus enhancing their value. An appellate court is required to give
“In an action in equity for the recision of a contract, heard upon a transcript of the evidence in the court below where there is some uncertainty as to the weight of the evidence, an appellate court will accept the conclusions of the trial court which saw the witnesses face to face, and had better opportunity to judge of their credibility.”
See, also, 3 Ohio Jurisprudence (2d), 665, Section 713.
Whether on the theory of unjust enrichment or estoppel, the plaintiff having agreed to accept this certain amount for the release of each lot and H & N having made the improvement with knowledge of the agreement between plaintiff and Smith and having relied thereon, it would be unjust and inequitable for the plaintiff to be permitted to accept the benefits of the enhanced value of the lots to the detriment of H & N, who acted in good faith. H & N are not in this case as judgment creditors, but may not be excluded from asserting their claim for compensation for expenses in enhancing the value of the premises.
In considering the issues in this case we make no distinction between Smith and the Piketon Development Corporation. They are for all practical purposes one and the same person. The conveyance of the lots by Smith on February 22, 1955, to the corporation was simply a conveyance from himself to himself. Smith was the corporation and the corporation was Smith.
In determining the priority of liens as between H & N, The Portsmouth Times, Basic Construction Materials, and the Jackson Sand & Mining Company, the record discloses that these creditors made no objection to the construction of the houses on the lots by H & N and should not now, in equity, be allowed to benefit by the expenditures made by H & N in increasing the value of the lots.
The judgment of the lower court is that the plaintiff recover judgment against Smith in the sum of $26,058.54, with five per cent interest from February 2, 1955; that a decree and foreclosure issue and the property be sold; that from the proceeds of sale of the three lots plaintiff first be paid the sum of $1,423.94 as to each lot and that H & N be next paid from the sale of lot
For the reasons above set forth, in our opinion, the judgment of the lower court is fair and equitable to all parties concerned, and an entry similar to that journalized in the lower court may be drawn and submitted for approval by this court.
Judgment accordingly.