Case ID: ohio-st_31/html/0107-01.html
Source: Caselaw Access Project
Author: {"author": "Welch, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Dudley M. Keen, Trustee, v. Isaac Hall.
    A debtor assigned all his personal property for the benefit of creditors, and1 also executed to the assignee a mortgage upon real estate for their bene efit; the debtor subsequently sold part of the mortgaged property to a third person, who agreed to pay a part of the purchase-money by assuming and paying to the assignee a specified sum, which the assignee had agreed to take for a release of the mortgage lien upon the part sold ; the assignee accordingly released the mortgage lien upon the record, and took the purchaser’s note for the specified amount: Held, that the real consideration of the note was the release oHthe mortgage lien, and' the fact that the debtor had failed and refused to execute his contract of sale, was no good defense to an action upon the note by the assignee against the purchaser.
    Motion for leave to file a petition in error to reverse the judgment of the District Court of Allen county.
    This was an action by plaintiff in error against the defendant in error, upon the defendant’s promissory note, which reads as follows :
    “ Lima, Ohio, June 10, 1874.
    “ $605. One year after date, I promise to pay Dudley M. Keen, as trustee of Waltz & Harpster, six hundred and five dollars, with eight per cent, interest, value •ree’d. Isaac Hall.”
    By his answer the defendant alleged in substance that •on the day of the date of the note, he purchased of Waltz & Ilarpster a certain tract of land, which is described in the answer, at the sum of $4,000, and that in part payment •of this sum he agi’eed to assume and pay to the plaintiff, .as trustee of Waltz & Ilarpster, the said sum of $605, and that he accordingly, on the same day, and in part fulfillment of his agreement, made the note in question to the plaintiff. He further alleges, that before the time agreed upon for the conveyance of the land to him by Waltz & Harpster, they became bankrupt, and their property all passed to the assignee in bankruptcy; that they utterly failed and refused to fulfill their said agreement, and the same was afterwards rescinded by the parties.
    A demurrer to this auswer was overruled by the court.
    The plaintiff then replied, alleging, among other things, that prior to the sale of the land and the execution of the note, Waltz & Harpster, by an arrangement with their creditors, had appointed the plaintiff trustee for the creditors, and made an assignment to him, as such trustee, of all their personal property and effects, and also executed to him, as such trustee, a mortgage upon their real estate, including the tract of land so sold to the defendant; that prior to the sale, defendant negotiated with the plaintiff to know upon what terms he would release this tract of land' from the mortgage lien, and it was agreed between them that it should be released for the said sum of $605, in case-the defendant made the purchase; that the note was accordingly executed in pursuance of this -agreement, and that, upon its execution, and in consideration of it, the-plaintiff, at the defendant’s request, entered upon the record of mortgages a release of this tract of land from the mortgage.
    The ease was submitted to a jury upon this state of pleadings, and upon the trial the plaintiff, after proving his. said appointment as trustee, and the execution of the assignment and mortgage to him as such trustee, offered to prove the other facts alleged in the reply. In other words,, he offered to prove that the real consideration of the note-sued upon was the release of the land from the mortgage, and that the note was executed and the release made in fulfillment of an agreement previously made between the-plaintiff and defendant. The court rejected the evidence as being incompetent, and instructed the jury, among other things, that the plaintiff’s action was “ in right of the contract” of Waltz & Harpster with defendant; that the plaintiff, having admitted by the pleadings that the note-was given in part execution of that contract, and alleged “ certain other considerations,” which the court had ruled, from the jury, they “should give no consideration” to these other matters ; that the plaintiff’s right to recover-would “ depend upon performance by Waltz & Harpster” of their contract with Hall, and the fact that Keen was-trustee “.in no way enlarged his right of recovery;” that if Waltz & Harpster were ready and offered to perform their contract, and Hall failed to perform on his part, then the plaintiff was entitled to recover; otherwise, he was not entitled to recover.
    To these rulings and instructions the plaintiff’ excepted.. A verdict was. returned for the defendant, and judgment entered thereon. On error to the district court, the judgment was affirmed, and the plaintiff now seeks to reverse the judgment of both courts.
    
      Cunningham § Brotherton, for the motion.
    
      Hughes $ Robb, contra.
   Welch, C. J.

It is quite clear to us that the rulings and instruction of the court upon the trial were erroneous. They seem to us to be based upon a misconception of the relation of the parties and the real consideration of the note. The rights of Keen, as trustee for the benefit of creditors, were in no way dependent upon those of Waltz & Harpster, as vendors of the land. True, Keen is denominated in the note as trustee of Waltz & Harpster.” In a sense, he is their trustee, not only because he is of their appointment, but also because he is responsible to them for any part of the trust funds remaining after payment of creditors. In the transaction out of which the note grew, Keen represented the creditors as distinct from Waltz & Harpster. The trust fund was put into the hands of Keen for the very purpose of placing it beyond the control of Waltz & Harpster. They can not assign property for the benefit of creditors, and take it back at pleasure, and without the consent of creditors. The real consideration of the note was the release of the mortgage by Keen., The giving of the note and the release were a matter between Keen and Hall. It was the mere substitution of one fund for another—the note for the mortgage lien. Until the trust is performed, the fund belongs to Keen. Waltz & Harpster were consulted as to the amount to be paid for the lien. The only effect of their assent to the transaction was to prevent them'from making Keen account for the mortgage fund, on the ground that it had been sold for less than its value. Surely this assent gave them no right to the fund or to the note which represented it. The note is as valid in'the hands of Keen as it would have been had it been given to the creditors in payment of their debts and in consideration of their release of the debts. The right of action on the note is in Keen, and not in Waltz & Harpster, as the rulings and instruction of the court seem virtually to place it. The court really excluded from the jury all the material allegations of the reply, so that its rulings and instruction were equivalent to the sustaining of a demurrer to the reply, thus leaving no issue for the jury to try. We think the matter set up in the reply is the gist •of the case, and that the court erred in excluding its consideration from the jury.

The judgments of both courts must be reversed, and the cause remanded for a new trial.

Judgment accordingly.