Case Name: Gashe v. Young
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1894-05-22
Citations: 51 Ohio St. 376
Docket Number: 
Parties: Gashe v. Young.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 51
Pages: 376–390

Head Matter:
Gashe v. Young.
Agent— When becomes trustee — Resulting trusts — Preferring creditors— When becomes assignment in trust.
1. An agent wlio acquires property for a consideration furnished by his principal, and takes the title in his own name, holds it as trustee for the principal; and, in general, when the title to property purchased is taken to one or more persons, and the consideration, or an aliquot part thereof, is paid by another, a trust results in favor of the latter.
2. Where a debtor executes a conveyance of his real estate, or an assignment of his personal property to certain of his creditors and the agent of another jointly, in consideration that his- in debtedness to those creditors shall be canceled, a trust arises in favor of the creditor to whose agent the conveyance or assignment is made; and when it is so made, in contemplation of insolvency, and with the intent to prefer such creditors to the exclusion of others, it constitutes an assignment in trust to trustees, within the purview of section 6343, of the Revised Statutes, and by virtue of that section inures to the equal benefit of all the creditors, in proportion to the amount of their respective claims.
(Decided May 22, 1894.)
Error to the circuit court of Lucas county.
The original action was brought in the court, of common pleas of Lucas county, by William A. Gashe, against Charles L. Young and George W. Miller, who had been partners doing business in the firm name of Young & Miller, and John S. Eck, John W. Hughes, John E. Potts, and B. Ellis Bullock. The petition alleges that on the 23d day of April, 1889, Young & Miller, in contemplation of insolvency, and with the intent to hinder, delay and defraud the plaintiff, who was then their creditor, assigned and transferred all of their personal property, and conveyed all of their real estate to their co-defendants, in trust, to pay certain alleged indebtedness of Young & Miller to the J. E. Potts Salt and Lumber company, and some other specified creditors, with the design to give them preference over the plaintiff, and other creditors. The prayer of the petition is, that the transfer and conveyance of the property so made be adjudged to inure to the equal benefit of all the creditors of Young & Miller, and administered accordingly.
An answer was filed by Eck, Hughes and Potts, which denies that the property was transferred and conveyed to them with intent to hinder, delay or defraud the plaintiff, or any other creditor of Young & Miller, or in trust for any purpose whatever, and avers that the defendants purchased the property ‘ ‘for a good consideration, equal in value to that of said property, and thereby acquired the absolute title to, and interest therein, free from any trust, and with no agreement or liability to account therefor.”
The plaintiff prevailed in the court of common pleas, and the cause was taken, on appeal, to the circuit court, which made a finding of the facts as follows:
“That on the 22d day of April, 1889, and for a long time prior thereto, Charles L. Young and George A. Miller were partners, doing a general lumber business in the city of Toledo, Lucas county, Ohio, under the firm name of Young & Miller, and that they were, on and prior to said date, the owners of a large stock of lumber, notes, accounts, horses and wagons, used in carrying on said lumber business, and other property, consisting of seven (7) shares of stock in a corporation known as the Acmetonia Tanning Company, 100 shares of stock in a corporation known as the Automatic Car Heating-Company, together with a small amount of real estate, all of the value of about forty thousand dollars.
“That said Young & Miller were on the said22d day of April, 1889, insolvent, and that the debts owing by said firm largely exceeded the value of their property, real and personal.
“That at said time Young and Miller were indebted to the defendant, John W. Hughes, in the sum of about nine thousand dollars ($9,000), to John S. Eck in the sum of about eight thousand dollars ($8,000), and to the J. E. Potts Salt and Lumber Company, a corporation organized and ex- i sting under the laws of the state of Michigan, in the amount of more than seventy thousand dollars ($70,000).
“That the indebtedness to the J. E. Potts Salt & Lumber Company was largely for lumber, which had been sold by the company to the firm of Young and Miller, and for which the promissory notes of the firm had been given to the said company.
“At the date of the transfer hereinafter mentioned, the defendant, John E. Potts, was a director of the corporation above mentioned, and its general manager.
“Young & Miller were also indebted to the plaintiff, Gashe, in the sum of eighteen hundred forty-five and seventy-two one hundredth dollars ($1,-845.72), and they were also indebted to the other cross-petitioners, who filed cross-petitions in said cause (after due publication of notice as provided in section 6344, Revised Statutes), in the following amounts:
“To William A. Gashe and Frank Redding in the sum of $474.75.
“To Frank Redding in the sum of $421.62.
“To Dolsen, Chapin & Co. in the sum of $1,430.61.
“To Tousey & Turner in the sum of $640.30.
“To D. EL Trombley in the sum of $624.15.
“To J. E. & D. E. Bailey in the sum of $970.11.
“The Toledo Consolidated Railway Company in the sum of $128.17.
“To James W. Myers, as sureties of Gashe & Redding, $1,353.49, and
“To John T. Kerruish in the sum of $1,222.04.
“The firm of Young & Miller were also, at the time of said transfer, indebted to the Merchants’ National bank, of the City of Toledo, to the extent of several thousand dollars, to one Eleanor Young-in the sum of one hundred and sixty dollars ($160.00), and to one J. C. Miller in the sum of $564.00.
“On the 22d day of April, John E. Potts (who lived at Detroit, Michigan), Eck, Hughes, and Young- & Miller, met in a building known as Memorial hall, and talked over the situation, with a view of the adjustment of the claims of the first mentioned parties, Potts, however, representing and acting for the J. E. Potts Salt & Lumber Company.
“It was at first proposed by Young that a stock company of some kind be formed, and that the claims of the three creditors present be contributed as part of the stock; that Young & Miller should put in the firm property, and that the business should proceed in that way.
“ This proposition was rejected by said Potts, then acting- for the said J. E.' Potts Salt & Lumber Company as aforesaid, and by said John S. Eck and John W. Hughes, and thereupon at the instance of the last named parties an arrang-ement and agreement was then and there made by and between said parties, by the terms of which said Young & Miller sold to the said John E. Potts Salt & Lumber Company, John S. Eck and John W. Hughes jointly, the property mentioned in certain schedules numbered one (1), two (2), and three (3), which property embraced substantially all the property of said Young & Miller, both real and personal, iucluding- the stock of lumber, horses, wagons, stocks and real estate, together with other property belonging to the members of the firm as individuals.
‘ ‘As a consideration for the foregoing sale and transfer, the said John E. Potts, acting for and on behalf of the said John E. Potts Salt & Lumber Company, and being thereunto duly authorized by said Company, agreed that the said indebtedness of Young & Miller to the said J. E. Potts Salt & Lumber Company should be canceled, the said John W. Hughes agreed that the indebtedness to himself should be canceled: and the said John S. Eck made the same agreement with respect to the amount due him from said Young & Miller.
“The said Potts, Hughes and Eck, said Potts acting as aforesaid, further agreed to pay the said Merchants’ National Bank to apply on the indebtedness of Young & Miller, the sum of seven thousand dollars ($7,000): . To defendant B. Ellis Bullock, the sum of one thousand dollars ($1,000), a certain note of four hundred dollars ($400), which had been heretofore indorsed by said John S. Eck, and a note of one J. C. Miller, for the sum of $564.
“Promissory notes were given to the bank and to Bullock for said amounts, signed by Potts, Hughes and Eck, due in oné year; and said notes were thereafter paid and taken up by the firm of John W. Hughes & Co., constituted as hereinafter mentioned.
“That said transfer of said property was made in writing, at the date of said agreement, on the back of three separate schedules containing a detailed description to said property.
“On the back of the first schedule, which was known as No. 1, and which contained an itemized description and inventory of the stock of lumber, horses and wagons, and other personal property used in carrying on said lumber business, said transfer was in the words and figures following: '
“Toledo, Ohio, April 22, 1889.
“For value received, we hereby sell, transfer and turn over to J. E. Potts, J. S. Eck and John W. Hughes, all and singular, the lumber, chattels and property described in the foregoing schedule.
“Young & Miller.
“On schedule known as No. 2, which was a schedule and inventory of the bills and accounts receivable, said transfer was as follows: ■
“Toledo, Ohio, April 22, 1889.
“For value received, we hereby sell, and assign to J. E. Potts, J. S. Eck and John W. Hughes, all our right, title and interest in and to the accounts nlentioned in the foregoing schedule,' except the account against W.. H. Hartman for $1,084.34, which we sell and assign to B. E. Bullock.
“Young & Miller.
^ “On schedule No. 3, which was a schedule and description of the real estate belonging to George A. Miller, and of Young & Miller, and which schedule contained also a statement and description of the shares of stock above mentioned, the following words and figures appear:
“For value received, I agree to execute and dedeliver to J. E. Potts, J. S. Eck and J. W. Hughes, deeds for the real estate herein described as lot 4, Calkins’ addition, and lot 2, block 29, Segur’s addition to Toledo, subject to incumbrances thereon, and upon the further payment of the above named parties of one note $400, endorsed by John S. Eck, and the notes of J. C. Miller, aggregating $564, total, $964.
“George A. Miller.
“For value received, we hereby agree to convey by deed to J. E. Potts, J. S. Eck and J. W. Hughes, lot 460, Glassboro addition to Toledo, O.
“Young & Miller.
“For value received, we agree to pay a note of about $160.00, given by Eleanor Young and endorsed by Young & Miller, due about April 29, 1889, held by Keeler, Holcomb & Co., bankers.
“J. W. Hughes & Co.
“ That subsequently deeds were made and executed by George A. Miller, and Young & Miller to said John E. Potts, John S. Eck and John W. Hughes, conveying to them said above described real estate, and the notes above mentioned, amounting to $964.00, were taken up by Potts, Hughes and Eck, and surrendered to Young & Miller.
“Nogeneral assignment for the benefit of creditors was at any time made by said Young & Miller, nor by either of the members of said firm. And in all the transactions in this finding of facts set forth, so far as the said John E. Potts appears to have acted therein, he acted for and in behalf of the said. J. E. Potts Salt & Lumber Company, and by its authority, and not for himself; and all such acts and transactions were in fact the transactions of said Salt and Lumber .Company.
“That said sale was made and consummated as aforesaid, in good faith, and with the intent and for the purpose of paying and satisfying the indebtedness of the said Young & Miller to said purchasers, and while the same operated as a preference to said creditors, no actual fraud entered into the transaction, nor was intended by either .of the parties thereto.
‘ ‘ It was agreed between Potts, acting’ as aforesaid, Hughes and Eck, at the time of the transfer of said property or immediately prior thereto, that a partnership should be formed, consisting- of said Potts, Eck and Hughes, for the purpose of disposing of the property obtained by them of Young & Miller as aforesaid, said partnership to transact the business under the name of J. W. Hughes & Co.
“The said Young & Miller were in no manner connected with said arrangement, nor did they participate in the discussions relating thereto. Potts acting as aforesaid, and Hughes' and Eck at once took possession of the property so sold and transferred, began collecting the accounts, replenished the stock of dumber by adding’ largely to the same, and in fact engaged in the conduct of a general lumber business.
“It was agreed between Potts, Eck & Hughes at the time of the transfer, that out of the proceeds of the sale of the property obtained from Young & Miller, the indebtedness of Young & Miller to John W. Hughes and John S. Eck should first be paid in full, and that the remainder arising from such sale should be paid to John E. Potts as the agent and general manager of the J. E. Potts Salt & Lumber Company. The said Young & Miller were in no manner parties to this agreement.
“At the time of said transfer, the notes which had been given by Young & Miller to the J. E. Potts 'Salt & Lumber Company were outstanding in the hands of parties to whom they had been transferred by the company, and as said notes became due they were taken up by said J. W. Hughes & CompanjT' with funds furnished and provided by the J. E. Potts Salt & Lumber Company for that purpose, and after being taken up in the manner described, they were returned by said J. W. Hughes & Company to the Salt & Lumber Company, and have since been in its possession.
“That the plaintiff, William A. Gashe, on the first day of May, 1889, recovered a judgment against defendants, Young & Miller, as in said petition set forth, upon which judgment, execution was issued and returned unsatisfied for want of property on which to levy as therein alleged; and that on the 22d day of April, 1889, said plaintiff being at the time a creditor of the said Young & Miller, the said Young & Miller then being insolvent, and having no other property real or personal, with which to pay their debts, or any part thereof, but acting in good faith, and for the sole purpose of satisfying and canceling the said indebtedness due to the said John W. Hughes, John S. Eck and the J. E. Potts Salt & Lumber Company, sold, transferred and conveyed to them the property in plaintiff’s petition set forth and described; the naked legal title, in so far as the said J. E.. Potts Salt & Lumber Company is concerned, being taken to said John E. Potts, its duly authorized agent in that behalf, and general manager.
“While said transfer operated to prefer said creditors, no fraudulent preference was intended, nor did any actual fraud enter into the transaction.”
Upon the facts so found, the court held that Hughes, Eck and Potts did not become trustee^, and rendered judgment against the plaintiff, who prosecutes error here to reverse that judgment.
J. H. Southard and G. W. Kinney, for plaintiff in error.
The sole question under the finding of facts in this case is, was the assignment by Young & Miller of their property to Eck, Potts & Hughes made in trust to a trustee or trustees, in contemplation of insolvency, with intent to prefer one or more of their creditors. We claim that it was, and that it comes within the provisions of section 6343 of the Revised Statutes of Ohio. Dickson et al. v. Rawson et al., 5 Ohio St., 223; Bagaley v. Waters, 7 Ohio St., 360.
Henry S. Bunker, for defendants in error.
Clearly from the finding of facts this is not a case that comes within the provisions of either sections 6343 or 6344 of the Revised Statutes of the state of Ohio.
Plaintiff’s attempt to make something out of the point that in the case of Bagaley v. Waters, 7 Ohio St., page 360, that the petition in that case contained no allegations of any secret trust. We take it, that in the case at bar the fact as to whether such allegation is contained in the petition of plaintiff or not cuts no figure.
The real point is, was there a trust, secret or otherwise, created in favor of other creditors by the agreement between the parties for the sale and purchase of the Young & Miller stock.

Opinion:
Williams, J.
By section 6343, of the Revised Statutes, it is declared that: "All assignments in trust to a trustee or trustees, made in contemplation of insolvency, with the intent to prefer one or more creditors, shall inure to the equal benefit of all creditors, in proportion to the amount of their respective claims; and the trust arising under the same ' shall be administered in conformity with the provisions of this chapter. ' '
That the transfer, by Young & Miller, of their property, was made when they were insolvent, in contemplation of insolvency, and with the intent to prefer some of their creditors, is admitted by the pleadings, and established by the finding of facts; and the only question in the case is, whether the property, in the hands of those to whom it was transferred, was impressed with a trust. The statute does not make it essential to the establishment of the trust that it be expressed in the instrument of assignment. It is sufficient if it arise out of the agreement of the parties, or appear from the nature of the transaction. It is shown by the facts found, that when Young & Miller made the transfer of their property to Potts, Eck and Hughes, one of the creditors for whose claim it was designed to provide, and thus give it preference, was an incorporated company, called "The J. E. Potts Salt & Lumber Company," of which Mr. Potts was a director, with authority to represent it in the transaction; and, that by the ag'reement for the transfer, and as part of the consideration therefor, the claim of the company, as well as those held by Eck, and by Hughes against Young & Miller, were to be canceled. The real estate was conveyed directly to Potts, Eck and Hughes, and written assignments of "the personal property were executed to them. They took immediate possession of all the property, and at the same time entered into an agreement between themselves to dispose of it, and apply the proceeds, first to the payment in full of "the in debtedness of Young & Miller to Eck and Hughes," and pay the remainder to John E. Potts as agent and general manager of the Salt and Lumber company. The indebtedness of Young & Miller to the company was evidenced by their promissory notes, which at the time of the transfer of the property were outstanding in the hands of parties to whom they had been assigned, but were afterward taken up, and are still held by the company. They do not appear to have been canceled, or surrendered to Young & Miller. Upon this state of facts, it seems clear that a trust was raised in behalf of the company, which it could, by appropriate action, enforce against the property, and those to whom it was transferred. It is a familiar rule, that an agent who acquires property with the means of his principal, or for a consideration moving from the principal, and takes the title in his own name, holds it in trust for the principal; and, in general, when property is purchased in the name of one person, and the consideration, or an aliquot part thereof, is paid by another, a trust in the property results in favor of the latter. In so far as the title to the R property, real and personal, transferred by Youing & Miller, was vested in Potts, he was undoubtedly a trustee for the corporation he represented, and which furnished a definitely ascertained part of the consideration; and certainly he is none the less a trustee because the title was taken in his name and the names of two others with the consent of the company. The relation of Potts, ahd of the corporation to the transaction, is fully shown by the arrangement to which those others were parties. The real estate was conveyed to the three persons, Potts, Eck and Hughes, as tenants in common, and the personal property transferred to them jointly. They each, thus became seized of the whole and every part of the property, and it was so held by them charged with the trust in favor of the Salt and Lumber company; so that, they all became trustees for the company, and could be compelled by it to make a proper application of the property to the company's claim, or account for the proceeds, and their administration of the trust, if the transfer did not fall within the operation of section 6343, which requires the trust to be administered for the equal benefit of all the creditors, in accordance with the provisions of the statute governing the administration of assignments of insolvent debtors. The trust relation to the company, of the defendants who received the property, is recognized by the agreement they entered into at the time the property was transferred to them, to the effect that they would dispose of it, and apply part of the proceeds to the indebtedness of Young & Miller to the company. Being thus trustees for the creditor, they were trustees of the debtors who chose to invest them with the title to the property for the benefit of the creditor; and being trustees for one creditor, the statute makes them trustees for all, and requires the trust to be administered for the benefit of all, notwithstanding the transfer of the property was made in good faith, and without actual intention to hinder or defraud any of the creditors.
We do not find it necessary to decide whether a trust was created in favor of the other creditors whose claims were assumed, by these persons who received the property, as a part of the consideration for its transfer. The case, in the feature we have considered, is plainly distinguished from Bagaley v. Waters, 7 Ohio St., 360, and the doctrine of that case should not be extended.
Judgment reversed.