Case Name: Rathmell, Executor, v. Shirey et al, Trustee
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1899-04-25
Citations: 60 Ohio St. 187
Docket Number: 
Parties: Rathmell, Executor, v. Shirey et al, Trustee.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 60
Pages: 187–198

Head Matter:
Rathmell, Executor, v. Shirey et al, Trustee.
Deed, in escrow — To be delivered, to grantee on death of grantor— Title does not vest at date of first delivery — Rights of grantor's creditors.
An instrument for the conveyance of lands without substantia valuable consideration, deposited with a third person as an escrow to be by him delivered to the grantee on the death of the grantor, does not, by relation, vest the title in the grantee at the date of the first delivery to the prejudice of persons who thereafter, without knowledge of the instrument, extend credit to the grantor.
(Decided April 25, 1899.)
Error to the Circuit Court of Franklin county.
The cause was tried in the circuit court upon appeal from the court of common pleas. The plaintiff in error prayed for a decree-of the court setting aside a deed for one hundred acres of land made by his testator to the defendant, Thomas Rathmell, in trust for the defendant William C. Shirey and others, and an order for its sale for the payment of debts of his testator, alleging in his petition and amendments thereto the insufficiency of the assets of the testator to pay his debts; that the instrument in question was signed by the testator contemporaneously with the execution of his will and upon no consideration except that expressed, to-wit, love and affection for his son William and one dollar; that said instrument was not then, nor ever in the lifetime of the testator delivered to said trustee, but was delivered as an escrow to one Zeno C. Payne to be by him placed on record and delivered to said trustee after the death of said testator, the testator remaining in possession and control of the premises and paying-taxes thereon until his death, a portion of his debts being contracted after the signing of said instrument and credit being extended to him on account of his apparent ownership of said premises, and that said deed delivered to said trustee after the death of the plaintiff’s testator was fraudulently made and that it hinders, delays and defrauds his creditors. The answer admitted the insufficiency of the assets of the testator’s estate to pay his debts. On denial by the defendants of tbe plain biffs’ allegations as to the fraudulent character and effect of the instrument the cause was tried in the circuit court where upon request the conclusions of fact and law were separately stated as follows:
That on the fourth day of December, 1891, Lewis Shirey, then in full life, was seized of 160 acres of land i'n Hamilton township, Franklin county, Ohio, upon 60 acres of which there was a mortgage incumbrance of $1,500; that on said December 4, 1891, said Shirey executed a trust deed to Tnomas Rathmell for the remaining 100 acres thereof for the use of his son, William C. Shirey, for life, remainder to the children of William O. Shirey. That on the same day he executed his will disposing of 60 acres, the remainder of his land; the same being charged with the mortgage incumbrance aforesaid to his daughter, Margaret Thompson. That at the time of the execution of said deed, to-wit, December 4, 1891, he delivered the same to one Zeno C. Payne, his attorney, who made the following indorsement thereon in said Shirey’s presence, to-wit: “Deposited with me in escrow to be placed on record at the death of the grantor and delivered to the grantee therein named, Z. C. Payne.” At the time of said endorsement said Shirey instructed sai d Payne to place this deed on record at the time of his death and deliver the same to the' grantee therein named. That at the time of the execution of said deed and will in addition to the mortgage incumbrance of $1,500, Shirey was indebted to divers persons' in the sum of $500, which, in addition to the $1,500 mortgage incumbrance, remained unpaid at the time of his death, which occurred in February in 1895. Shirey *remained in possession and control of said realty, and paid the taxes thereon during his life time, and contracted subsequently to the execution of said deed other debts to the amount of about $1,325, said indebtedness of $1,325 remaining unpaid at the time of his death.
Shirey died February, in 1895, leaving defendant, Crissie Shirey, his widow, and said son and daughter surviving him. Said trust deed was, immediately upon Shirey’s death, placed on record in the recorder’s office of Franklin county, Ohio, and then handed to Thomas Rathmell, the grantee therein named, who, immediately upon Shirey’s death and in execution of the trust created by said trust deed, entered into and took possession as such trustee of said 100 acres of land, and is now and has. been continuously since the death of said Lewis Shirey in possession thereof. That said 60 acres of land devised to Margaret Thompson by said will have bepn sold bv plaintiff and the proceeds of said sale are not more than sufficient to pay said mortgage indebtedness of $1,500 with in terest, widow’s dower in said 60 acres and costs of sale. No provision for the widow was made either in the deed of trust or in the will. At the time of the execution of said deed the grantor, Shirey, did not retain property clearly and beyond doubt sufficient to pay his existing indebtedness; and of which indebtedness about $700 (being unsecured debts) is and remains unpaid, and that unless said 100 acres of land or some part thereof, be sold, the general creditors of said Lewis Shirey will receive nothing on their claim, as cost of administration, costs of last sickness and funeral and the mortgage indebtedness of $1,500 with interest, and widow’s dower and allowance, having consumed the proceeds of said 60 acres of land and all the personal estate of said Lewis Shirey. That said Lewis Shirey in the execution of said deed acted in perfect good faith and without any intentional fraud. That said Lewis Shirey when contracting said debts subsequent to the execution of said trust deed was guilty óf no misrepresentations whatever, credit having’ been extended to him without any inquiry or investigation by the persons so lending him credit as to how much land or property he then owned, said creditors having knowledge that said Shirey was in the possession and control of 160 acres of land and without knowledge that he made said trust deed. UpoD the foregoing facts the court finds the law to be as follows, to-wit:
First- — That said trust deed passed the title to said grantee, Thomas Rathmell, trustee, as of the date of its first delivery, to-wit, December 4, 1893, subject to the dower estate of Crissie Shirey.
Second — There was no intentional fraud in the execution and delivery of said deed, and that the same is valid as to the deb Is of Lewis Shirey created after December 4, 1891.
Thwd — That said conveyance is void as against the debts existing at the time of its execution.
Fourth — That plaintiff is entitled to sell so much of said 100 acres of land as may be necessary to pay the outstanding debts of Lewis Shirey existing December 4, 1891, with the accrued interest thereon. To each and all of which findings of fact so made by the court as aforesaid, and each and every conclusion of law thereon the plaintiff excepts.
A bill of exceptions was taken embodying all of the evidence, and this petition in error prays for the reversal of the judgment of the circuit court because its findings of fact are not supported by the evidence and because its conclusions of law were not justified by the facts found.
Frank Rathmell and F. Berry Jewett, for plaintiff in error.
At the time of the execution of the deed the following memorandum was placed on it: ‘ ‘Deposited with me in escrow to be placed on record at the death of the grantor and delivered to the grantee therein named. Z. C. Payne.”
Shirey further expressed his purpose and intention of this deed by designating it as an escrow in his will.
This uncontradicted testimony agrees with the circumstances and Shirey’s conduct makes it clear that he intended the deed as an escrow and not a deed present. This fact is disclosed by the record and should have been found as one of the material facts in the case.
All the creditor witnesses testify that their credit was extended on the belief that he was the owner of 160 acres; that they had no knowledge of any secret deed and would not have given credit with that knowledge.
The finding of the court states this fact only in part while it • states that credit was extended on the knowledge that Shirey was in possession and control of 160 acres, and without the knowledge that he had made a trust deed. It omits the fact, as the bill discloses, that they believed him the owner of 160 acres and would not have extended credit with the knowledge that he had made such a deed. Sturgeon v. Hall, Assignee, 8 O. C. C., 269; 4 Circ. Dec., 457 ; Levi v. Daniels, 22 Ohio St., 38.
The deed that Shirey executed and placed in the hands of Payne to be recorded at his death and delivered to the grantee, was an escrow, and not a deed present. Sixth Am. Eng. Ency., 857; Devlin on Deeds, p. 312.
Material distinction has been drawn by the courts and law writers between escrow and deeds present. This distinction they say generally depends on the words and purposes expressed and the circumstances in the case. The intention to deliver a paper not to take effect presently but at a future time, will largely control in determining whether it be an escrow or a deed present. Tiedeman on Real Prop., section 815; 34 N. Y., 92.
If the deed be expressly delivered as an escrow, to be delivered at a future time, it is not a present conveyance. 6 Am. Eng. Ency., page 865; 3 Washburn on Real Prop., 5th ed., page 320; Stone v. Duvall, 77 Ill., 475; The State Bank v. Evan Evans, 3 Green (N. Y.), 155.
The term escrow evinces more clearly and distinctly than any other the actual intention of the parties. Clark v. Gifford, 10 Wend (N. Y.), 310. Such, a conveyance does not take effect until the time of the second delivery. No title passes until the event happens upon which it is to be delivered. 2 Mass., 455; Devlin on Deeds; 6 Am. Eng. Ency., page 870; Jackson v. Catlin, 2 Johns (N. Y.), 248; Blair v. St. Louis Ry. Co., 24 Fed. Rep., 539.
The fiction of relation back to the first delivery is allowed in cases of necessity to give the deed validity, if the fiction be not required for such purpose, it is not admitted, and the deed operates according to the truth of the ease from the second delivery. 4 Kent Com., page 454.
The court erred in holding such a deed valid as to debts created after its execution, December 4, 1891.
Such a deed will not be enforced to the prejudice of the rights of creditors. 5 Ohio, 127; Rice on L. R. Prop., 392; Devlin on Deeds, section 283a; Rosseau v. Bleau, 131 N. Y., 177; Platt v. Platt, 105 N. Y., 488.
The lands of the decedent are charged with his debts; no circuity of conveyance, no collusion or arrangement among the holders of the estate, will free the land from the burden of the debts of the ancestor. 6 Ohio, 227; 8 Ohio, 217; 29 Ohio St., 230; 32 Ohio St., 358.
In Crooks v. Crooks, 34 Ohio St., 610, the court expressly states that such deed (namely, a deed delivered to a third person to be by him delivered to the grantee at the grantor’s death, without reserving to himself any control over the instrument), that such deed will not be enforced in equity to the prejudice of the rights of creditors. Wait on Fraudulent Conveyances, section 101; 16 Ohio, 438; 8 Am. Eng. Ency., pages 753-759; 21 Ohio St., 295; 2 Ohio St., 374; Bump on Fraudulent Conveyances, 315, 316.
Such a deed set aside for prior creditors, subsequent creditors will participate. A voluntary conveyance may be impeached by a subsequent creditor on the ground that it was made in fraud of existing creditors; but to do so he must show either that actual fraud was intended or that there were debts still outstanding which he (the grantor) owed at the time he made it. Toney v. McGehee, 38 Ark., 427; Wait on Fraudulent Conveyances, section 97; Clafflin v. Mess, 30 N. J. Eq., 211; 1st Storey Eq. Jur., section 361; Pope v. Wilson, 7 Ala., 390; Smith v. Greer, 3 Hamp. (Tenn.), 118. Subsequent creditors prorate with antecedent creditors. Wait on Fraudulent Conveyances, section 104; Hoke v. Henderson, 3 Dev., 312; Silverman v. Greaser, 21 W. Va., 553; 8 Am. & Eng. Ency., pages 735-759.
John J. Grosbie, for defendants in error.
Shirey was not seized of the one hundred acres at the time of his death. The circuit court found, as a conclusion of law, “That said trust deed passed the title to said grantee, Thomas Rathmell, trustee, as of the date of its first delivery, to-wit: December 4, 1891, subject to the dower estate of Crissie Shirey. ”
Does the record fairly tend to support this conclusion? If so, this court will not weigh the evidence on this point. Fortman v. Goepper, 14 Ohio St., 562; Turner v. Turner, 17 Ohio St., 449.
However, we are confident that the evidence not only tends to support this conclusion, but that it clearly and unquestionably warrants it.
Shirey in his will, says: “Having disposed of one hundred acres of my land by deed of even date herewith,” etc. Here is Shirey’s most solemn declaration as to what he had done with the one hundred acres. He has conveyed it — disposed of it by deed. This alone ought to be conclusive.
If Shirey did not want this trust instrument to take effect until his death, why did he execute a deed at all? Why did he not devise it to Rathmell? The fact that he did not include the one hundred acres in his will, made on the same day, certainly warrants the inference, that he wished the deed to take effect before his death.
It is true in the will occurs the word “escrow,” but in the same paragraph will be found the word “deed” occurring twice. But the terms used by Mr. Shirey on December 4, 1891, should not alone determine his intent on that occasion.
The instrument was delivered to Payne to be recorded after the death of Shirey — to await the mere lapse of time. Devlin on Deeds, section 319; Prutzman v. Baker, 30 Wisc., 651; Foster v. Mansfield, 3 Metc., 412; Hathaway v. Payne, 34 N. Y., 92.
Payne became on December 4, 1891, trustee of the grantee in said trust deed. Ruggles v. Lawson, 13 Johnson, 285; Ball v. Forman, 37 Ohio St., 139.
Shirey, on delivering the deed to Payne, reserved no control over it.
Therefore at that moment the title to the one hundred acres of land passed from Lewis Shirey forever. Ball v. Foreman, 37 Ohio St., 132. The following cases are also directly in point: Mitchell v. Ryan, 3 Ohio St., 377; Black v. Hoyt, 33 Ohio St., 203; Crooks v. Crooks, 34 Ohio St., 610; Wheelwright v. Wheelwright, 2 Mass., 452.
It is not even intimated by any party, witness or lawyer interested in this ease that Lewis Shirey when he made this trust deed intended to defraud anybody. The record shows that when he executed the deed, besides personal property, he retained real estate (being- the sixty acres) valued at from $3,900 to $4,500. That is to say, he retained at least $4,000 in property to pay debts amounting to but $2,000. This does not look like the conduct of a man with an intent to defraud creditors.
We submit the creditors of Lewis Shirey, who became such after December 4, 189 L, cannot successfully assail this deed, whether it be valid as against Shirey’s creditors of December 4, 1891, or not, and because, among other reasons, there was no actual intent on the part of Lewis Shirey to defraud any of his creditors whatsoever. It may truthfully be said this is admitted by all. Bump on Fraudulent Conveyances, section 292; Crumbaugh v. Kugler, 2 Ohio St., 374; Evans v. Lewis, 30 Ohio St., 11; McCall, Adm’r, v. Pixley, 48 Ohio St., 385; Webb’s Adm’r v. Roff, 9 Ohio St., 431; 2 Pomeroy’s Eq. Juris., 973 and notes.
Section 6139 Bates’ Annotated Statutes of Ohio, authorize an executor to recover possession of and sell only lands that have been conveyed with intent to defraud. The circuit court has found there was no intent to defraud any creditor. In fact, neither the petition in this case nor any of the amendments thereto aver that there was an intent to defraud, and therefore states no cause of action under this section. This executor has no right to sell these lands unless it can be found in some statute, and he cannot expect relief under any statute unless by averments in his pleadings he shows himself entitled to such relief.

Opinion:
Si-iauck, J.
The case presented permits us to assume, without deciding, that in view of the facts found by the circuit court there was such a delivery of the deed as wohld give it effect as against the heirs at law of the grantors, 'and that as to them .the deed would, by relation, take effect at the date when the instrument was delivered as an escrow. We have to determine whether it was effective to pass the title to the grantee discharged of debts of the grantor contracted between December, 1891, when the instrument was delivered as an escrow and February, 1895, when upon his death if was delivered to the grantee, as was held by the circuit court.
Delivery being essential to the efficacy of a deed, it is obvious that the title does not actually pass until that which was an escrow becomes a deed by virtue of its delivery as such, or at least, until the satisfaction of the conditions prescribed for its final delivery. Accordingly the general rule is that the title does not pass until the second delivery, or until the conditions prescribed therefor are satisfied. It would not be practicable to cite all the cases in which the general rule is so stated. Many of them are' collected by Mr. Devlin in a note to section 328 of his work on deeds. To this rule there is a well-recognized exception. The rule and the exception are thus stated by Chancellor Kent: "Generally an escrow takes effect from the second delivery and is to be considered as the deed of the party from that time; but this general rule does not apply when justice requires a resort to fiction. The relation back to the first delivery, so as to give the deed effect from that time, is allowed in cases of necessity, to avoid injury to the operation of the deed from events happening between the first and second delivery . But if the fiction be not required for any such purpose, it is not admitted and the deed operates according to the truth of the case, from the second delivery. It is a general principle of law that in all cases where it becomes necessary for the purposes of justice that thé true time when any legal proceeding took place should be ascertained, the fiction of law introduced for the sake of justice is not to prevail against the fact." 4 Com., 454.
Whatever terms may be employed in stating the exception, the relation back to the first delivery is always to accomplish, and never to defeat, justice. Bearing in mind the purpose of! this exception and the fact that the deed before us.was without any substantial consideration, it is quite apparent that the conclusion of the circuit court that the relation back should be allowed to cut off the claims of those who gave credit to the testator between the first and second deliveries, and without knowledge of the instrument, is erroneous. That conclusion derives no support from Crooks v. Crooks, 34 Ohio St., 610, or Ball v. Foreman, 37 Ohio St., 132, where the title was held to pass as of the date of the first delivery for purposes clearly within the exception as above stated.
The judgment of the circuit court will be so modified as to order the plaintiff in error to sell so much of the land in controversy as may be necessary for the payment of all the debts of the testator.
Judgment accordingly.