Case ID: ohio-st_16/html/0463-01.html
Source: Caselaw Access Project
Author: {"author": "White, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Glidden, Murphin & Co. et al. v. John B. Taylor et al.
    -A husband, who had failed in a manufacturing business, commenced business anew with the money of his wife, with her consent, and carried on the business, professedly as her agent, for years, making large profits therefrom. A principal source of the profits was the personal services and skill of the husband. The wife gave no personal attention to the business. There was no contract between her and her husband as to his compensation ; and no accounts were kept between the parties. Part of the proceeds of the business was applied to the support of the family, part used by the-husband, and part invested in real and personal property in the name of the wife. In a suit by the creditors of the husband, to subject the property so purchased to the payment of his debts: Held—
    1. The wife can not claim the whole of the property as profits arising from her separate money.
    2. Where she thus suffers her money to be employed by the husband, and blended with his earnings, so that it can not be separated, the most favorable position she can be allowed to assume is that of a preferred creditor in equity, and, as such, entitled to her money and interest.
    Error to tbe district court of Darke county.
    January 13,1857, Glidden, Murpbin & Co., recovered a judgment in tbe court of common pleas of Darke county, against John B. Taylor and Samuel D. Taylor, partners under the firm name of Taylor & Brother, for the sum of $556.75 and costs.
    January 21, 1862, the judgment being in force, execution was issued thereon, and returned unsatisfied for want of property whereon to levy.
    ^March 14,1862, Glidden, Murphin & Co. filed their petition against John B. Taylor and Martha D. Taylor, his wife, and Samuel D. Taylor, in the court of common pleas, to subject to the payment of their claims a certain foundry and machine-shop premises, and a house and lot in Greenville, in Darke county—property purchased by John B. Taylor with his own money, but in his wife’s name, to whom he had fraudulently caused the legal title to be conveyed, with intent- to hinder and delay his creditors in the collection of their claims, as alleged in the petition.
    Allen & Meeker, claiming to have a lien on the property for a small amount, joined, as plaintiffs, with Glidden, Murphin & Co. Taylor and wife answered separately, denying the alleged fraud, and that he had any interest in the property, and averring in effect that the money paid on the same belonged to the wife.
    The case was appealed to the district court, and there tried in April, 1864.
    To maintain the issue on their part the plaintiffs called John B. Taylor as a witness, among others; and, as his testimony makes the most favorable case for his wife, the decision here, on error, is confined to the case thus made. His testimony shows, substantially, the following facts:
    John B. Taylor and Samuel D. Taylor, under the firm name of Taylor & Brother, carried on business as machinists in a certain foundry and machine-shop, hereinafter referred to, in the village of Greenville, in Darke county, previous and up to about the year 1854, when the firm became insolvent in consequence of one of its principal debtors—the Greenville and Miami Railroad Company— failing to make payment.
    At the time the firm suspended business it had on hand, at the foundry, a quantity of castings, car-wheels, tools, and other property, which the firm subsequently mortgaged to sundry of its creditors to secure about $800. Among the mortgages thus given was one to Winner & Erizell, to secure their claim of between $300 and $400; this mortgage being the first lien. The mortgaged property remained at the foundry somewhat neglected, and portions of *it were wasted and carried off from time to time, and other portions were sold by John B. Taylor for the support of his family, until the year 1857, when, at the request of Erizell, a member of the firm of Winner & Erizell, the two Taylors, John and Samuel, executed a power of attorney for the confession of a judgment in favor of Winner & Erizell upon their claim secured by mortgage on the property as stated. Judgment was accordingly taken against Taylor & Brother in the common pleas of Darke county, and execution issued thereon and levied on the mortgaged property, and the same was sold by the sheriff to W. A. Weston for $400. Immediately after bidding off the property, Weston told John B. Taylor that he might take it, as his agent, and dispose of the same to the best advantage, and pay him (Weston) the $400, and give the residue of the property to Martha D. Taylor, John B. Taylor’s wife.
    Portions of the property were disposed of by John B. Taylor, and, at the end of six months, of the proceeds, he refunded the $400 to Weston, and, by the time it was all disposed of, the additional sum of $1,200 was realized therefrom. Some part of the-$1,200 was consumed by John B. Taylor’s family, as he was in no> business for two or three years previous to the sale to Weston, and! also for about the same time thereafter.
    The property was not salable, and some of it could not be used except by the Greenville and Miami Railroad Company, and, in consequence of a compromise of a portion of a judgment John B. Taylor held against that company, he made an advantageous sale to it of $500 worth of the property.
    In the year 1859 or 1860, Taylor, as such agent, sold a part of the property to N. W. Aikens, who then owned the foundry and machine-shop, and the ground on which they stood, for about $450,. and took a note and moi;tgage on the foundry and machine-shop premises in favor of Weston, for the amount, and also for a prior debt-of some $200 which Aikens owed Weston.
    Subsequently, in April, 1860, John B. Taylor, acting for his wife,, purchased, in her name, the foundry and machine-shop premises' for about $300, subject to the liens thereon, ^amounting to about $1,000, and paid a part of the liens, to the amount of about $450, as follows: Weston, who resided in Dayton, on being notified by John B. Taylor of the purchase, and-at his request, gave credit, to that amount, on the note and mortgage Aikens had given him, and which was one of the liens on the property. The $300 more was paid to Aikens in bells and other articles manufactured at the-foundry, and in small notes received for articles sold at the foun-, dry during the period of about three months previous, when the-business was carried .on, under an arrangement made between Aikens and John B. Taylor, in the name of Aikens and Martha D„ Taylor, wife of John B. Taylor. The remainder of the purchase money, except about $300 paid the first winter out of the proceeds-of the business carried on in the name of Martha D. Taylor, to-whom Aikens had sold out his interest in the foundry, remained unpaid at the time of the trial.
    On the purchase of the foundry property in April, 1860, John B.- Taylor, as the agent and trustee of his wife, started business in the machine-shop, and thereafter, to the time of the trial, carried on the business of manufacturing sugar-cane mills and other kinds of machinery, and repairing machinery. The business was carried on in the name of his wife, and with her capital, acquired by" her as before stated.
    In the prosecution of the business, John B. Taylor, as agent and ttrustee of his wife-, had the entire management, superintendence, ¡and control of the same; he, being a skilled mechanic, worked at ithe business himself, employed hands, purchased stock, and directed sail things connected therewith. His own services were worth $2 .per day. His wife was never the owner of any property of any kind, and had no capital in the business or in the building in which it was conducted, except the profits or proceeds given her .by Weston.
    There was no formal agreement between Taylor and his wife, as ■.to his services or as to the disposition of the proceeds of the business. As her agent and trustee, he received the proceeds, supported ■himself and family therewith, spent what money he desired to, .and with the surplus, purchased, in the name of his wife, a dwelling-house and lot in Greenville for $2,580, in January, 1862, subject to an annuity of *$41, charged thereon in lieu of dower, in favor of the widow of Solomon Schlenker. He paid the first and ■second payments, of $1,000, each, of the purchase money. The '.third and last payment, amounting to about $1,000, remains unpaid.
    Out of the further proceeds of the business he improved these •premises to the extent of some $300, by placing in the lot a fountain, flower vases, and other ornaments and improvements, which ■were principally manufactured at'the shop in the prosecution of ■■the business.
    Out of the proceeds of the business he purchased, and at the time of trial held, a note for some $1,600, then worth $1,200 or 41,300.
    The entire accumulation of the business, since its commence■ment in 1860, amounted to six or seven thousand dollars above expenses, most of it after the year 1860; not more than $500 above =a living and expenses, was realized in that year.
    At the time of the purchase of the foundry property from Aikens it was not valuable, but had become so since. A short time before the purchase of Aikens it had been sold for less than he was to get.
    About the time the plaintiff’s attorney was endeavoring to levy ¿an' execution issued on their judgment, on the furniture of John B. Taylor, he executed to Weston a chattel mortgage on the furni-ture, to secure a debt of $175 he owed to Weston. The furniture was valuable.
    Taylor told his wife, in the commencement of the business, that he would do the best he could, support the family, spend what money he desired, and invest the residue for her benefit, in her name.
    The defendants offered no evidence.
    The district court found the equities of the case to be with Mrs. Taylor, and that she rightfully, and without fraud as to John B. Taylor’s creditors, was the holder and owner of the real estate mentioned, and therefore dismissed the petition.
    The plaintiffs moved for a new trial, on the grounds (1) that the court found and adjudged against the weight of the evidence, and (2) erred in dismissing the petition. This motion was overruled ■and exception taken.
    *To reverse the judgment of the district court the present petition in error was filed.
    
      Al'kn & Corbin, for plaintiffs in error:
    1. The evidence shows that the alleged gift by Weston to Mrs. Taylor was a mere subterfuge to prevent her husband’s creditors from levying on the property.
    2. Admitting the gift to be bona fide, under the laws of Ohio at that time, the property vested in the husband immediately, subject to the claim of Weston, and the claims of creditors of the husband. And the interest in the real estate in which the proceeds were invested, also became liable for the payment of debts.
    3. The house and lot, and the foundry property in part, was paid •for by the proceeds of the foundry biisiness, carried on by JohnB. Taylor. Those proceeds resulted from his labor and skill, and not from the propei’ty purchased by Weston, and although the wife of Taylor, as the legal owner of the foundry property, might be entitled to rents for the use of it, she had no right to the proceeds of the business as against the creditors of her husband. On the contrary, until the passage of a'recent statute, the husband was entitled to the earnings of the wife. On this point see Gage v. Dauchy, 28 Barb. 623.
    4. Taylor calls himself the agent or trustee of his wife. The facts show what he was. At law, a married woman is incapable of carrying on business in her own name and right. And, it seems to us, she can not, either in law or equity, be allowed to carry on business of the character it was in this case—the principal capital being the husband’s labor and skill—to the detriment of his creditors. In a business in which her labor and skill would enter largely, she might employ her husband as a clerk, and receive the proceeds of the business; but then, were the profits greatly in excess of the expenses, and of the cost of maintaining the family, as-to the creditors the court would hold her accountable for her husband’s wages at least, and would not permit her to control his earn- ■ ings. 2 Story’s Eq. 855, sec. 1387.
    5. Upon the question of the interest of the husband in *property purchased with his funds in his wife’s name, see also Head v . Gregg, 12 Barb. 655.
    6. The statute of 1861, by the words “which may have come toller by gfift,” etc., refers to property acquired after the passage of .the act. The legislature never intended to relieve men from the-payment of their honest debts when they had ample means to pay them, on the flimsy ground that they held such means as the mere-agent and instrument of their wives.
    We submit that the property acquired by John B. Taylor, whether the proceeds of what he saved through Weston, or the proceeds of his own labor and skill, should be applied to the payment, of the claim of the plaintiffs.
    
      Wilson & Knox, for Taylor and wife:
    1. The sale made to Weston by the sheriff can not be impeached.. There was no collusion between Weston and Taylor. The price-was sufficient for that sort of property, much of it being designed-for a specific purpose, and not being salable. The sale was open, and public.
    2. The purchase being fair, .it was not material to creditors of' Taylor & Brother what disposition Weston might make of the property. He had a right to give it to Mrs. Taylor. Even if he had given it all to her, there could have been no fraud upon creditors. And it would not have been per se fraudulent, had he-given it to her to place it out.of the reach of creditors. He had a right to do so.
    3. There was no fraud in the manner in which Weston directed the property to be disposed of. He might make Taylor his agent-He did, in effect, though informally, make him the trustee of Mrs. 'Taylor, as to the surplus. There was no more fraud in this, than. it would have been for Weston to have sold the property himself, .and handed the surplus to Mrs. Taylor.
    4. There was no fraud in the manner in which the surplus was invested. Taylor was not bound to convert his wife’s property to his own use. She had a right to insist that it should be invested in her name. 2 Story’s Eq. Jurisp., 746, secs. 1378,1380. As trustee appointed by Weston, it was *Taylor’s duty to invest the fund in his wife’s name, and so as to be most profitable under his management. There was no fraud in making the investment in a foundry and machine-shop as most profitable, rather than in a farm -or otherwise. And if, by the superior skill and knowledge of a trustee, the trust property is made extra profitable, he can not claim a share of the profits.
    5. There was no fraud on the creditors of Taylor & Brother in the trustee of Mrs. Taylor investing the profits of her property in her name and for her use. The husband may be trustee for the wife. She may verbally appoint him agent or trustee. It is no ■objection that the personal services of the husband entered into the concern, and may have rendered it more profitable. Creditors do not own the persons of their debtor. They can not compel him to ■work for them.. They can not command his skill, brain, and muscle. A husband may carry on the wife’s farm, and the income .be all hers. Why not a foundry and machine-shop ? The profits being large, can make no difference. If there would have been no fraud in small profits, large profits can not make the business fraudulent. Prosperity is not criminal. The .wife has the right to -control the profits of her own property. She can compel her husband to invest them as she desires. The old doctrine that she ■could only so manage her property through a third person as trustee, has long since been exploded. 2 Story’s Eq. Jurisp. secs. 1380, 1389, 1390, 1392, 1393; 3 Barb. 110; 4 Barb. 407; 9 Ohio St. 554. ■
    6. If there have been profits, and part resulted from the labor and skill of Taylor and part from the invested capital of his wife, what shall be the rule of division? The law furnishes no rule, and neither has judicial decisions. Business customs have never worked ■out any measure of apportionment. The utmost that has been -done has been to pay the wages of labor and skill, at so much per •day or per annum, and if profit results it belongs to capital. Without this start and capital of his wife, Taylor’s labor and skill,, employed by another man, would only have barely supported his family in ordinary comfort. This is the usual fate of mere labor and skill. If Mrs. Taylor had accomplished for herself the *same-results by a third person, such would be the legal rule. The mere fact that Taylor is the husband, does not change this rule, unless-his moral responsibility to his creditors is greater than to his family. No man can so contend in this enlightened age.
    7. As to the act of April 3,1861. It secures to a married woman-“the rents and issues” of real estate “belonging to her at marriage, or which may have come to her during coverture, by conveyance, gift, etc., or by purchase with her separate money or means.” It' also secures to her “the increase and profits” of personal property, “including rights in action,” which she held at the time of marriage, or which “ may have come to her during coverture by gift, etc.,, or by purchase with her separate money or means.” The provisions of this act are comprehensive enough to cover the facts in this-case.
   White, J.

The distinction between the general property of the-wife and her separate estate is plainly marked; though the determining, in particular cases, to which class the property in controversy belonged, has given rise to many nice discriminations.

The goods, personal chattels, and estate of which the wife was-actually beneficially possessed at the time of marriage, in her own right, and such other goods and personal chattels as came to herdüring marriage, belonged to the first class. These, at common law, vested absolutely in the husband.

The separate property of a wife is that of which she has the exclusive control, independent of her husband, and the proceeds of which she may dispose of as she pleases; and its character as such,, in the absence of any statute on the subject, must be imparted to it by the instrument or title by which it is held. Petty v. Malier, 14 B. Mon. 246; 2 Bright’s Husband and Wife, 206, 210; 2 Story’s Eq. Jurisp., secs. 1381-1383; Clancy’s Husband and Wife, 262, 267.

Before proceeding further, it is proper to notice the fact, that the-counsel of the defendants in error claim that this case is governed by the act of April 3, 1861, “concerning the rights and liabilities-of married women” (58 Ohio L. 54); while the counsel for the-plaintiffs in error insist that the rights of the parties remain the same as if that act had not been passed.

*The effect of the statute seems to be, to impress upon the property therein referred to, of married women, and which, without the aid of the statute, would not have been their separate property, that legal character.

If, before the passage of the act, the money given by Weston to Mrs. Taylor, and the other property in controversy, or the means with which it was purchased, were not her separate property, it is difficult to perceive how that act, as against her husband or his existing creditors, could make it so. Their rights would have been vested; and section five of the act provides, that it “ shall not affect any rights which may have become vested in any person at the taking effect thereof.”

In New York, it was held by the court of appeals, in Westervelt, Ex’r, v. Gregg, that the husband had a vested interest in a legacy which was bequeathed to his wife prior to the act of 1848, of that state, for the more effectual protection of the property of married women, although the legacy was not reduced to possession when the act took effect. And as the act contained no saving clause in favor of existing rights, it was declared that the legislature had not the power to deprive the husband of his rights to such legacy, and make it the sole and separate property of the wife; and that, so far as the act purported to do so, it violated the provision of the constitution of the state, declaring that no person shall be deprived of “property without due process of law.” 2 Neman, 203.

But we are not called upon, in this case, to examine the facts critically, with the view of determining the strict rights of the parties in respect to the money given to Mrs. Taylor.

The only question we have to determine is, whether the court erred in refusing a new trial, and in dismissing the plaintiffs’ petition.

For the purposes of this question, we assume the case to be, in the aspect most favorable to Mrs. Taylor, viz: that the money was either her separate property, or, at least, that the husband might, in view of the manner in.which it was acquired, and as against existing creditors, lawfully settle it on his wife, for her sole and separate use.

In this view of the case, the first question that arises is, as to the legal character of the transactions by which the real ^estate in controversy, and which the plaintiffs seek to subject to the .payment of their judgment, was acquired.

Can this property be truly said to be the product or result of the investment of the money given to Mrs. Taylor by Mr. Weston?

It seems to us rather that it is the product of the manufacturing business established and carried on by the husband.

In the prosecution of this business, he had its entire management and control. Being skilled in the business, he worked at it himself, employed the hands, purchased stock, and superintended it in all its branches. True, it was carried on in the name of the wife, and Mr. Taylor assumed to be acting only as her agent and trustee.” This is the only feature that distinguishes it from ordinary cases of men carrying on business on their own account.

While courts of equity permit the husband to become trustee or agent of his wife, and, frequently, will charge him with that relaagainst his will, yet, they have invariably had a scrupulous regard to the rights of creditors, and have been the more scrutinizing, in view of the increased danger to creditors from property arrangements between husband and wife,' arising from the peculiar and confidential nature of the marriage relation. Equity penetrates to the substance of a transaction, and is governed by it, not its form. In a proper case, if there be no trustee appointed by the parties, it creates one; and, upon the same principle, if the character of trustee or agent be assumed, in an improper case, equity disregards it.

Disrobing, then, the transactions of all matters of form, and looking at the naked facts, it appears that Mr. Taylor, being skilled in the business, established a manufactory for the manufacture and repair of various, kinds of machinery, which was conducted under 'his sole charge for several years; that under his energetic, skillful, .and prudent management, the business was profitable; that after applying so much of the profits as was necessary to keep up the •establishment, he applied the remainder to the purchase, in his wife’s name, of the -real estate described in the petition, and to the purchase of a note of sixteen hundred dollars, said, at the time of the *the trial, to be worth twelve or thirteen hundred dollars ; that the entire accumulations from the business, above expenses, amounted to six or seven thousand dollars; and that in establishing and conducting the business, he had used the money of Mrs. Taylor, his wife.

The foregoing is the substance of the transaction; and the ques tion is whether the title of Mrs. Taylor to the property thus acquired, is, in equity, unimpeachable by the plaintiffs, who are ante-cedent creditors of the'husband?

The property in controversy can, in no just sense, be said to be •either the income, increase, or profits. of the money given to Mrs. 'Taylor.

The money was used by the husband in carrying on the business, :and from the profits made therefrom the purchases were made; and it is pertinently argued by Mrs. Taylor’s counsel that there is no rule in such a case for the division of the profits. The consequence claimed, on her behalf, is that she should hold the whole of the property against the creditors, or, at the furthest, that the creditors ■should be allowed only what would be fair wages to the husband as an employe of the wife.

In regard to the last part of this claim, it may be remarked that -no such relation as employer and employe for wages was stipulated for, or contemplated between, the husband and wife. The testimony ■of Taylor, himself, is that “he told his wife, in the commencement •of the business, that he would do the best he could; support the family, spend what money he desired, and invest the residue for her benefit, in her name.” To this, she made no objection; and, in •speaking of the manner in which he did act, he says “ that he received the proceeds of the business, supported his family and himself therewith, spent what money he desired to, and with the surplus purchased ” the property,

It is further to be noted that the difficulty of making a division is in no way attributable to the creditors. They are entitled to have the property of the husband appropriated to the payment of his debts; and if the wife authorizes or permits her money to be so mixed with the products of the business and industry of her husband that it can not be separated, *this furnishes no reason why she should gain and the creditors lose thereby.'

Without entering into an exposition of the consequences that would follow the adoption of a rule sustaining the present claim of Mrs Taylor, it is sufficient to say, that we are satisfied that sound public policy, and the settled principles of law and equity alike forbid its adoption; and that where a wile thus suffers her own money to be employed by her husband, and blended with his earnings so that it can not be separated, though the business may be conducted in her name, the most favorable attitude she could be allowed to assume, in a controversy with his creditors, is that of a-creditor in equity. At law she can, of course, have no standing as-a creditor.

The arrangement between the husband and wife, whereby he undertook to carry on business in her name and for her exclusive-benefit, was, in effect, an attempt to make a voluntary settlement of the products of his skill and industry in favor of his wife-; and the purchase of the property, and its conveyance to her, was but the carrying out of the arrangement.

The principle of the arrangement would be the same whether it embraced property which he had already acquired, or only his future acquisitions; and, if the arrangement be valid as against creditors for the period of about four years that elapsed from the time of its date to the time of the trial, it may be continued during the joint lives of the parties, if they so elect; and if the husband should survive the wife, no good reason is perceived why, if he should choose to do so, he might not prolozzg the arrangement for the benefit of her legal representatives.

It has been uniformly held that a voluntary settlement by an insolvent is void as against antecedent creditors, without regard to the intention with which it was made. Upon this principle the conveyance in question can not be upheld against the plaintiffs. 2 Bright’s Husband and Wife, 111, chap. 2.

The only remaining question, in this aspect of the case, is as to-the extent of the equity of the wife in the property. As the plaintiffs are, in equity, seeking to divest her of the *title, she is, as against them, entitled to the extent of her right to protection; and, as we have already remarked, the most favorable position she can claim to occupy is that of a creditor in equity of her husband, and as such entitled to her money and interest.

The judgment-will be reversed, and a new trial granted, and the cause remanded for further proceedings,

Scott, C. X, and Bay, Welch, and Brinkerhoee, XT., concurred.