Case ID: ohio-st_59/html/0080-01.html
Source: Caselaw Access Project
Author: {"author": "Burket, 3.\n    ", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Wright et al. v. Franklin Bank et al.
    
      Lands held in trust — Not liable for debts of trustee — Attachment lien has preference over unrecorded mortgage — Requisites of valid mortgage — Deed of assignment for creditors — Sections 4106, 4138 and 4184, Revised Statutes,
    
    1. Lands held in trust cannot be sold.on execution for the payment of the debts of the trustee; and judgments ag-ainst such trustee are not liens upon such lands.
    2. Any vested interest in lands, whether held by legal or equitable title, may be attached and sold, as upon execution, to pay the debts of the owner.
    3. A mortgage upon an estate, or any interest therein, legal or equitable, to be valid as against third persons, must be signed, acknowledged, witnessed and recorded, as provided in sections 4106 and 4133, Revised Statutes.
    4. An attachment levied upon an equitable interest in real estate has preference over an unrecorded mortgage on such interest.
    5. A deed of assignment for the benefit of creditors, in due form, made and delivered in a sister state where the parties at the time resided, and conveying real estate situated in this state, takes effect from the time of its delivery, and has preference over an unrecorded mortgage upon such real estate.
    6. As against subsequent bona fide purchasers without notice, a deed of conveyance of lands duly executed, must be recorded as provided in section 4134, Revised Statutes, but such record is not required as against other parties.
    (Decided November 1, 1898.)
    Error to the Circuit Court of Hamilton county.
    The facts as disclosed by the record necessary to a full understanding of this case are as follows:
    In the year 1892, Thomas B. Youtsey and others became the owners of a tract of land in Hamilton county, Ohio, known as the Hyde Park Syndicate property.
    The interest of Mr. Youtsey in the property was somewhat greater than the undivided one-sixth part thereof. The legal title to the property was taken in the name of James E. Mooney, in trust for the persons composing the syndicate. As such trustee he had full power to sell, convey or lease the property, or any part thereof, at such times, to such persons, and upon such- terms as he might deem best.
    To enable Mr. Youtsey to pay for his interest in the property, the plaintiff in error, James C. Wright, executed as maker, for the accommodation of Mr. Youtsey, promissory notes, payable to the order of the latter, which were discounted by the First National Bank of Newport, Ky.,of which Mr. Youtsey was the cashier at the time, and of which the other plaintiff in error, George P. Wilshire, is now the receiver.
    The proceeds of the notes so discounted were applied by Mr. Youtsey to the payment of his proportion of the purchase money of the syndicate property.
    Prior to January 16, 1895, the total amount of the notes executed by Mr. Wright for the accommodation of Mr. Youtsey, and discounted and used by the latter in paying for his interest in the property mentioned, was'$14,650.00.
    January 16, 1895, to secure Mr. Wright, Mr. Youtsey executed and delivered to him the writing of which the following is a copy:
    “January 16, 1895.
    James C. Wright has in the First National Bank several notes payable to my order. All these notes were made by him for the purpose of enabling me to raise money with which to pay my interest in the Hyde Park Syndicate in Hamilton county, Ohio, and I have used said notes for that purpose. My interest in said syndicate is liable for the payment of said notes. The interest of said James C. Wright is that for the execution of said notes by him and all previous and subsequent similar ones he is to have from the profits of said venture, six thousand dollars. This does not include money loaned by him to me in said venture, for which he holds my notes.
    T. B. Youtsey. ”
    The notes attempted to be secured by said instrument, five in number and amounting to $14,-650.00, have never been paid.
    The First National Bank of Newport, Ky., ceased to do business after January 16, 1897, and January 21, 1897, the plaintiff in error, George P. Wilshire, was appointed its receiver and qualified as such.
    January 18, 1897, the defendant in error, The Franklin Bank, began an action in the common pleas court of Hamilton county, Ohio, against Thomas B. Youtsey, to recover $20,000.00, and in the same case, caused a writ of attachment to issue, and to be levied upon Youtsey’s equitable interest in the Hyde Park Syndicate property.
    January 19, 1897, by the confession of Mr. Youtsey, it obtained a judgment against him for the amount of its claim.
    January 21, 1897, Mr. Youtsey, who was a citizen of Kentucky, and a residentof Newport, Campbell county, in that state, executed a deed of assignment, for the benefit of his creditors, to the defendant in error, C. W. Nagel. This deed of assignment was recorded January 22,1897, in the ■county clerk’s office of Campbell county, Kentucky, and January 25, 1897, in the recorder’s office of Hamilton county, Ohio.
    
      January 23, 1897, the plaintiff in error, James C. Wright, began an action in the common pleas court of Hamilton county, Ohio, against Thomas B. Youtsey, to recover of him the sum of $25,717.81.
    Embraced in the sum sued for by Wright, and forming a part of his cause of action, was his claim against Mr. Youtsey for $14,650.00 and interest, the amount of the liability of Mr. Youtsey to Mr. Wright, as accommodation maker, of the five notes hereinbefore mentioned, the proceeds of which Mr. Youtsey had used in paying for his interest in the Hyde Park Syndicate property. By confession of Mr. Youtsey, Mr. Wright obtained a judgment against him immediately for the amount sued for, upon which an execution was issued forthwith and levied upon the interest of Mr. Youtsey in the Hyde Park Syndicate property which had been attached by the Franklin Bank.
    The day that the judgment was obtained and the execution levied, January 23, 1897, Mr. Wright began the action, from the judgment in which the petition in error in this case is prosecuted, against the Franklin Bank, Mr. Nagel, assignee, and others, to enforce and marshal the liens against Youtsey’s interest in the Hyde Park Syndicate property.
    In his petition and the amendment thereto Mr. Wright asserts and relies upon the lien which he claims to have obtained by virtue of the writing of January 16, 1895, signed by Mr. Youtsey and hereinbefore set out.
    The judgment which Mr. Wright obtained against Mr. Youtsey, he subsequently assigned to the First National Bank of Newport, and the plaintiff in error, George P. Wilshire, receiver of that hank, is entitled to the benefit of said assignment, and to the lien, if any, which Mr. Wright obtained by the above writing of January 16, 1895, and he was, therefore, by supplemental pleading, made a party to the action in the lower court and filed his answer and cross-petition, and he is before this court as one of the plaintiffs in error.
    Upon the hearing of the cause b.y the circuit court, it adjudged that the Franklin Bank had a superior lien upon Mr. Youtsey’s interest in the Hyde Park Syndicate property by reason of its attachment, and that C. W. Nagel, assignee of Mr. Youtsey for the benefit of his creditors, upon the sale of Mr. Youtsey’s interest, would be entitled to the balance of the proceeds of sale of the property, after the satisfaction of the claim of the Franklin Bank. The petition in error in this court is prosecuted to reverse the judgment of the circuit court.
    
      Mackoy <& loioman, for plaintiffs in error.
    The writing of January 16, 1895, signed by ' Youtsey, created an equitable lien upon his interest in the Hyde Park Syndicate property in favor of James C. Wright, and the words clearly express an intention on the part of Youtsey that Wright should have a lien from the date of the writing.
    It is an established rule that a writing or agreement must be construed so as to uphold and sustain it and not to make it nugatory. It must be held always that the parties to an agreement intended to accomplish something and not to do a vain thing.
    The question is always one of the intention of the parties. Jones on Mortgages, sections 162, 166 ; Bank v. Johnson, 47 Ohio St., 310; 3 Pomeroy’s Eq. Jur., section 1237; Peackham v. Haddock, 36 Ill., 38; Chadwick v. Clapp, 69 Ill., 119; Pinch v. Anthony, 8 Allen, 536; Eskridge v. Mc Clure, 2 Yerger, 84; Taliaferro's Ex’r v. Barnett, 37 Ark., 511; Mitchells. Wade, 39 Ark., 377.
    As the interest of Youtsey in the Hyde Park Syndicate property is equitable, the lien of the Frankin Bank, by virtue of its attachment, and of Nagel, assignee, under the deed of assignment to him, are also equitable.
    Neither the Franklin Bank, which is an attaching creditor, nor Nagel, assignee for the benefit of the creditors of Youtsey, is a purchaser for a valuable consideration, and therefore their rights and interests in and to the Hyde Park Syndicate property are not greater and can not rise higher than those of Youtsey himself. Haldeman v. H. & C. R. R. Co., 2 Handy, 101.
    Nagel, the assignee of Youtsey for the benefit of his creditors, is not a purchaser for valuable consideration. Hodgson v. Barrett, 33 Ohio St., 63; Morgan v. Kinney, 38 Ohio St., 610; Mannix, Assignee, v. Purcell, 46 Ohio St., 102.
    The rights of an assignee are not greater than those of his assignor, or the creditors of his assignor. Betz v. Snyder, 48 Ohio St., 492.
    The equitable lien of Wright, upon Youtsey’s interest in the Hyde Park Syndicate property, is older and more meritorious, and therefore superior to the lien of the Franklin Bank, and to the interest of Nagel, assignee, under the deed of assignment.
    As between equities the older will prevail, unless the junior be more meritorious. Hume v. Dixon, 37 Ohio St., 66.
    
      The thing that the legislature of Ohio intended to and did. do, by section 4133, was to protect the legal title holder, viz: a person who was not required to resort to equity to procure the legal title. Stansell v. Roberts, 13 Ohio, 148; Mayhew v. Coombs, 14 Ohio, 428; Fosdick v. Barr, 3 Ohio St., 471; Bloom v. Noggle, 4 Ohio St., 45; Erwin v. Shuey, 8 Ohio St., 509 ; Ohio Valley Bank v. Iron Co., 30 W. L. B., 382; White v. Denman, 1 Ohio St., 110 ; Downer v. Bank, 39 Vt., 25 ; Wailes v. Cooper, 24 Miss., 208. In Kentucky, the law in force now and at the time of the decisions hereinafter mentioned, is Kentucky Statutes, section 497; Morton v. Robards, 4 Dana, 258; Bank of Ky. v. Vance's Admr., 4 Littell, 169; Swigert v. Bank of Ky., 17 B. Mon., 268; Forepaugh v. Arnold, 17 B. Mon., 625; Le Neve v. Le Neve, 3 Atk., 646; Van Meter v. McFadden et al., 8 B. Mon., 435; Kemper v. Campbell, 44 Ohio St., 216; Story on Eq. Jur., section 1231 ; Ewing v. Arthur, 1 Humphrey, 537; Legard v. Hodges, 1 Vesey, Jur., 477; Ex parte Arkins, 2 Younge & Collyer, 536 ; Union Bank of London v. Kent, 39 Ch. D., 238; In re Lady Way’s Trust, 2 De Gex, Jones & Smith, 365; Story’s Eq. Jur., section64d; Bispham’s Equity, 5th ed., section 624; Phillips v. Phillips, 4 De G., J. & F., 218; Pomeroy’s Eq. Jur., sections 385 and 386; Bispham Equity, section 43 ; Pomeroy on Eq. Jur., section 386.
    
      Healy de Brannan and Burch <& Johnson, for Franklin Bank.
    A long line of decisions in Ohio has established the principle that such an instrument as that held by plaintiff in error has no effect as against a subsequent deed, mortgage, assignment for benefit of creditors, judgment, or attachment. The cases are: Stansell v. Roberts, 13 Ohio, 149; Mayham v. Coombs, 14 Ohio, 428; Holliday v. Franklin Bank, 16 Ohio, 534; White v. Denman, 1 Ohio St., 110 ; Fosdick v. Barr, 3 Ohio St., 471; Bloom v. Noggle, 4 Ohio St., 46 ; Erwin v. Shuey, 8 Ohio St., 510; Bercaw v. Cookerill, 20 Ohio St., 163; ha Therniley v. Peters, 26 Ohio St., 471; Building Ass'n v. Clark, 43 Ohio St., 427.
    Aside from the express language of section 4106, it is well settled that equitable estates are within the operation of the recording acts. While it is true that there are some earlier cases, among which are the Kentucky cases cited by Mr. Mackoy, in which it is held that equitable estates were not governed by the registry laws, the modern rule is almost universally to the contrary. Webb on Record Titles, sections 19 and 36, and 2 Pomeroy on Eq. Jur., section 649 and notes ; Bank v. Clapp, 76 N. C., 482; Mann v. Alexander, 9 Ark., 112; Haskell v. Sevier, 25 Ark., 152.
    It was held in Graves v. Graves, 6 Gray, 391, that an attaching creditor of an equity of redemption, takes precedence of a previous assignment of the equity which, though recorded, was not acknowledged, and was therefore improvidently admitted to registration. United States Ins. Co. v. Shriver, 3 Md. Chan., 381; Digman v. McCullom, 47 Mo., 372; Tarbell v. West, 86 N. Y., 280; 5 Ohio Hisi Prius, 61.
    Under the statutes and decisions in Ohio, relating to attachments, an attaching creditor obtains a lien at law upon the attached property, even though it be an equitable estate in land. Section 5555, Revised Statutes; Carty v. Festermacher, 14 Ohio St., 457; Bank v. Nash, 1 Handy, 153 ; Finnett v. Burt, 2 Handy, 202.
    The suit brought by Mr. Wright against Youtsey, in which the judgment for money was recovered, was wholly inconsistent with, and contradictory of, the existence of any trust in favor of Wright. Youtsey could not be at the same time a trustee of this land for Wright and a debtor to Wright for the money expended in the purchase of land; and the suit was brought by Mr. Wright, treating Youtsey not as a trustee of the land for Wright, but as a debtor to Wright, and upon that theory a judgment for money was recovered against Youtsey. When a man imposes a lien upon his own property for the benefit of another person, the former does not become a trustee for the latter; he does not hold the land in trust for the other, but holds the land for himself, charged with a lien in favor of the other person.
    
      Gustavus II. Wald; Chm-les B. Wilby and Z, J. Crawford, for defendant, C. W. Nagel, Assignee.
    Mr. Mackoy in- his argument uses the term “ equitable mortgage ” in several different senses which should be discriminated one from another. In his brief he adopts the language of Jones on Mortgages, section 162: “Whatever the form of a contract may be, if it is intended thereby to create a security, it is an equitable mortgage.” That however is not the law in Ohio unless the instrument claimed to be an equitable mortgage has been executed and recorded as prescribed by our statutes. An “ equitable mortgage ” in this sense is not, properly speaking, a mortgage, but a contract to give a mortgage,® which contract equity will specifically enforce. Bloom v. Noggle, 4 Ohio Sfc., 46; Bank v. Johnston, 47 Ohio St., 306; Dodd v. Bartholomew, 44 Ohio St., 171; Hurd v. Robinson, 11 Ohio St., 232; Strang v. Beach, 11 Ohio St., 283.
    The recording or delivering for record (of a mortgage) is part of the execution; and hence before that act is done the instrument is not a mortgage. Holliday v. Franklin Bank, 16 Ohio, 536; Mayham v. Coombs, 14 Ohio, 435; Fosdick v. Barr, 3 Ohio St., 471.
    Why these propositions should be true of mortgages of the legal estate, and untrue of mortgages of the equitable estate is not readily seen. White v. Denman, 1 Ohio St., 110; Jones on Mortgages, section 476 and 138. White & Tudor’s L. C. in Eq., 4th Am. ed., vol. 2, pt. 1, 203-4, Lincoln B. & L. Assn. v. Hass, 10 Neb., 581; Laughlin v. Braley, 25 Kan., 147; Christian v. Am. F. Land Mort. Co., 92 Ala., 130.
    The reasons for holding mortgages of an equitable title or interest to be within the registry-act are, however, stronger in Ohio than in any other state, by reason of the changes made by the legislature in the language of the act. The precise point contended for by Mr. Maekoy, has, so far as we can discover, been raised but three times before this court, and in cases none of which he cites. Of these the first is Paine v. Mason, 7 Ohio St., 198; Philly v. Danders, 11 Ohio St., 490; Churchill v. Little, 23 Ohio St., 301.
    In all these cases the contention of counsel was based, and in the case last cited the decision of the court rested, upon the ground that the operation of the statute was limited by its own terms, verbis ypsissimis, to instruments conveying, affecting or incumbering land in law.
    
      The statute then in force was the act of June 1, 1831, 29 O. L., 346, S. & C., 458. In 1887, (Revised Statutes 4106,84 O. L., 132-3) the statute was amended to read as follows: “A deed, mortgage or lease of any estate or interest in real property shall be signed by the grantor, mortgagor or lessor in the presence of two witnesses, etc.” These changes in the language of the act cannot for a moment be supposed to be other than intentional and deliberate; the legislature is presumed to have acted with a full knowledge of the decisions of the Supreme Courton the subject. Buckley v. Stephens, 29 Ohio St., 620.
    It is true, as stated by Mr. Mackoy, that the deed of assignment made to Nagel was not, and could not be filed for record in the probate court of Hamilton county. Revised Statutes, section 6335, requiring deeds of assignment to be filed in the probate court of the county, of the residence of the assignor, relates, and can only relate, to assignments made by residents of Ohio. It is impossible to suggest any probate court in Ohio, in which this assignment made by a resident of Kentucky should have been filed under the requirements of the statute. It is conceded that the deed of assignment to Nagel complied with all the requirements of the laws of Ohio as to conveyance of lands. Under it, therefore, Nagel succeeded to all the rights of his grantor, in trust for creditors. Assignments for benefit of creditors, made by nonresidents covering real estate in Ohio, have, if the deed of assignment complied with the requirements of our statutes as to conveyances, always been given full effect and force by this court. Sortwell v. Jewett, 9 Ohio, 180; Johnson v. Sharp, 31 Ohio St., 611.
    
      It is true, also, that the deed of assignment to Nagel was not “filed for record in the recorder’s office of Hamilton county, Ohio, until January 25, 1897, two days after Wright had begun his suit to enforce and marshal liens. ” But equally true it is, that as to Wright, the,deed of assignment need never to have been recorded at all. Deeds have to be recorded only as against subsequent purchasers for value, a position not claimed, and which could not be claimed for right. Irvin v. Smith, 17 Ohio, 226; Betz v. Snyder, 48 Ohio St., 492.
    That mortgages void against creditors, are void against an assignee for creditors, is a proposition conclusively established by the decision of this court. Irwin v. Shuey, 8 Ohio St., 509; Straman v. Rechtine, 40 Bull., 74.
   Burket, 3.

The defendants in error do not seem to contend that the body of the writing1 of January 16, 1895, signed by Mr. Youtsey, is insufficient in form to create a lien upon his interest in the syndicate property, and for the purposes of this case it may be conceded to be so.

To properly dispose of this case it is necessary to consider the principles of law applicable to the subject matter in hand generally which we now proceed to do.

It has been held by this court that where an owner of land contracts to sell the same to another person, such vendor holds the title in trust for the purchaser, to the extent that the purchase money has been paid. Churchill v. Little, 23 Ohio St., 308; Manley v. Hunt, 1 Ohio Rep., 257; Minns v. Morse, 15 Ohio, 569; Lefferson v. Dallas, 20 Ohio St., 68 ; Butler v. Brown, 5 Ohio St., 211.

It has also been held that lands held in trust for another cannot be levied upon and sold upon execution against the trustee to pay his debts; and judgements against the trustee are not liens upon the lands held by him in trust for another. Manley v. Hunt, 1 Ohio Rep., 257.

In that ease the court say : “It would be productive of much mischief to make trust estates liable to judgments against the trustees. Such a principle never has been, and we trust never will be recognized in this state.”

That case was followed and approved in Butler v. Brown, 5 Ohio St., 215.

From these holdings it follows that lands held in trust cannot be taken in execution against the trustee for the payment of his debts. But lands held subject to liens, whether legal or equitable, may be taken under execution or attachment and sold with the liens resting thereon ; or if no purchaser can be found, the liens, including the executions and attachments, maybe marshaled and the proceeds of the sale distributed according to the rights of the parties.

Lands held in trust for another are thus preserved for the beneficial owner free from the debts of the trustee, but lands burdened with liens are liable to be seized in execution for the payments of the holder’s debts. This difference between trusts and liens reconciles many cases which otherwise seem in conflict.

Lands held by a properly executed, but unrecorded deed, are also free from the debts of the grantor, whether attempted to be reached in an assignment for the benefit of creditors made by him, or upon an attachment, judgment or execution against him. The title under such a deed is good as against everything except a subsequent bona fide purchaser without notice.

By section 5374, Revised Statutes, lands and tenements including vested interests therein, are made subject to the payment of debts, and liable to be taken on execution and sold at judicial sale; and by virtue of section 5555, Revised Statutes, lands and tenements, whether held by legal or equitable title, are made liable to be seized and sold under attachment for the payment of debts.

To make the statutes as to real estate, and all interests therein, consistent, the General Assembly in 1887, so amended sections 4106, 4133 and 4134, Revised Statutes, as to require deeds and mortgages of any estate or interest in real property to be signed by the grantor or mortgagor, and acknowledged before a proper officer in the presence of two witnesses, and to be recorded in the office of the recorder of the county. Mortgages so executed, whether on an estate in real property or on only an interest therein, take effect from the time of the delivery to the recorder, and deeds so executed, conveying the estate or only an interest therein, that is, an equity, take effect from delivery, except as against subsequent bona fide purchasers without notice, and as against such the deed must be also recorded.

These amendments of the statutes require all instruments in the nature of a mortgage, either legal or equitable, to be signed, acknowledged, witnessed and recorded; and until so signed, acknowledged, witnessed and delivered for record, the same are without effect as to third persons.

The statutes on this subject before the amendments of 1887, were substantially different from the present acts, and the decisions of this court construing those statutes are not always applicable to the statutes as now enacted.

Coming now to this case, it is clear that the paper signed by Mr. Youtsey was intended to create only a lien in favor of Mr. Wright,- and not a trust. The paper cannot be construed to create both a lien and a trust, as they are the opposites of each other. In a trust the property is held for another, while in the case of a lien it is held by the holder for himself, but burdened with a charge, commonly called a lien, in favor of another. The law applicable to liens must therefore rule this case, and not the law applicable to trusts.

Neither does this case depend upon the law of purchasers for value, but upon the law of the priority of an attachment or deed of assignment for the benefit of creditors, over a defective unrecorded mortgage. By virtue of section 5555, Revised Statutes, the interest in the syndicate property, even though it was only an equity, could be attached and sold as upon execution, and the purchaser would receive a g’ood title to such interest in the syndicate, and the Franklin Bank and the assignee under the deed of assignment would receive the proceeds of the sale without the aid of a court of equity. Should there be no bidder, the liens could be marshaled and the proceeds of the sale distributed, but the lien of the attachment and the conveyance under the deed of assignment, would remain in full force as legal rights fastened upon the estate held by an equitable title, and would both have preference over the defective and unrecorded mortgage held by Mr. Wright. If Mr. Wright’s paper had been acknowledged, witnessed and recorded it would have operated as a legal mortgage upon an estate held by an equitable title, and would have taken priority over the attachment and deed of assignment; but as the case stands his paper created no charge or lien, legal or equitable, upon the interest in the syndicate property, as against third parties asserting legal rights.

The deed of assignment was executed and delivered in the state of Kentucky, where all the parties resided, and conveyed property in Hamilton county in this state. Such a deed could not be filed with the probate judge and take effect from the time of its delivery to him as required by section 6335, Revised Statutes. The deed in this case was in due form and took effect from the time of its delivery to the assignee. Johnson v. Sharp, 31 Ohio St., 611.

This was two days before the suit to marshal liens was commenced, and therefore, no question of Us pendens ari ses in this case. True the deed of assignment was not recorded in the office of the recorder of Hamilton county until two days after the commencement of the action to marshal liens, but such record is only necessary as to subsequent bona fide purchasers without notice, and there is no such purchaser in this case. The deed of assigment, therefore, passed title from its delivery.

Much reliance is placed by counsel for plaintiff in error upon the case of Kemper v. Campbell, 44 Ohio, St., 210, but that case is in full accord with the views here expressed. There is no error in the record.

Judgment afivrmed.