Case Name: Jones et al. v. Kirbreth
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1892-05-10
Citations: 49 Ohio St. 401
Docket Number: 
Parties: Jones et al. v. Kirbreth.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 49
Pages: 401–414

Head Matter:
Jones et al. v. Kirbreth.
Insolvent banking company — Draft delivered for collection — Payment in full out of company’s assets — Jurisdiction—Res judicata.
P. the owner, on or about August 20, 1857, delivered for collection to a banking company a draft dated August 14,1857, payable in thirty days after date. On August 24, 1857, the banking company failed, and on that day credited P. with the amount of the draft. On the 26th of September, 1857, the banking company made an assignment of all its property, in trust for the benefit of its creditors. On the day of its failure, one of its creditors attached the draft and other property in the possession of the banking company. At maturity the draft was paid, and the proceeds were accounted for by the sheriff to the attaching creditor. Several months after the assignment, the trustee under the assignment had an adjustment with the attaching creditor, of his claim against the banking company, whereby, the company was credited on its indebtedness to the attaching creditor, with the proceeds of the draft, and the attachment of the draft and other property was released. In an action in the Superior Court of Cincinnati by the Trustee against F. for money alleged to be due on account, F. set up, by the way of cross petition, an indebtedness of the trust estate to him, on the draft, and recovered judgment for the amount claimed. By the terms of the judgment, it was “considered by the court, that'the defendant recover of the plaintiff, as trustee, the sum of $-” being the full amount, with interest, of the draft. An execution was issued on the judgment, and levied on the individual property of the trustee. On motion the court quashed the execution. An action was brought in the court of common pleas against the trustee, to recover the full amount of the judgment, out of the money and other assets in his hands as trustee.
Held: 1. The court of common pleas had jurisdiction of the subject-matter of the action.
2. The banking company, could not, by crediting, on the day of its failure, the owner with the amount of the draft before its maturity and collection, place him in the position of a general creditor of the company, entitled to receive only dividends out of its assets in the hands of the trustee.
3. The relation between the owner of the draft and the banking company with which it was lodged for collection, was that of principal and agent; and a trust character was impressed upon the draft and its proceeds, which forbade their application, with the company’s or trustee’s acquiescence, as a credit in payment of a debt of the company.
4. The judgment rendered for the owner of the draft in the Superior Court was not an adjudication that estopped him from obtaining equitable relief in the court of common pleas.
(Decided May 10, 1892.)
Ek-8.or to tbe Circuit Court of Hamilton county.
Kittredge & Wilby, and Matthews & Cleveland, for plaintiff in error.
I. Tbe common pleas court bad jurisdiction of the subject-matter of this action. Conger v. Atwood, 28 Ohio St., 184; Gandolfo v. Walker, 15 Ohio St., 251, 278; Gilbert v. Sutliff, 3 Ohio St., 129; David v. Davis, 11 Ohio St., 386 ;
II. Fosdiclc is not a creditor of tbe Trust Company. Revised Statutes of Ohio, sec. 6352.
The deposit of paper for collection creates the relation of principal and agent between the depositor and the bank. Thomson v. Gloucester City Sav. Inst., 8 Atl, Rep, 97 (New Jersey Chan.); Levi v. Bank, 5 Dill. 104, 110.; First Nat. Bank v. Bank of Monroe, 33 Fed. Rep. 408, 411.
This relation can not be terminated and the relation of debtor and creditor substituted without the consent of the depositor. Bank v. Bank, 76 Indiana, 561.
The agency and authority to collect the draft or credit its proceeds had therefore terminated, and the entry of the amount of the draft to the credit of Fosdick on his account, whether made on the 24th of August, the day of the failure, or afterwards, is without effect upon the relation of Fosdick to the said Trust Company with reference to the Dows draft, and could not create him a creditor of the Trust Company therefor. In re Armstrong, 33 Fed. Rep., 405, and authorities there cited.
III. The statute of limitations is not well pleaded.
It is not suggested in the pleadings, nor was it suggested on the trial, nor in argument, what limitation, or the expiration of what number of years, was a bar to the plaintiff’s right to recover. No proof of any time elapsed was offered. A sufficient answer to this attempt to plead the statute of limitations would be that the Superior Court has rendered judgment in our favor upon our claim, which of itself disposes forever of any objection to it on the ground of lapse of time.
IV. The plea of res adfidicata can not be maintained. The judgment that is claimed by Kilbreth to bar the plaintiff’s recovery in this cause is that of the Superior Court of General Term.
The parties are the same, and the claim is that the judgment in that case concludes this. That can not be unless the subject matter and the real question necessarily determined in that case, were identical with this. We say “necessarily determined, ” for that is the test. Monday v. Vail, 34 N. J. U. (5 Vroom) 418, 422; Campbell v. Consalus, 25 N. Y. 613; People v. Johnson, 38 N. Y. 63; Spoors v. Coen, 44 Ohio St., 497, 502; Davüv. Brown, 94 U. S. 423, 428; Bur ton v. Barlow, 55 Vt. 434,437; Packet Co. v. Sickles, 5 Wall. 580, 592; Russell v. Place, 94 U. S. 606; Cromwell v. Sac., 94 U. S. 351; Lore v. Truman, 10 Ohio St., 45, 53; Revised Statutes of Obio, sec. 6726; Yeoman v. Las ley, 40 Ohio St., 339.
Harmon, Colston, Goldsmith & Hoadly, for defendant in error.
I. The Court of Common Pleas had no jurisdiction of the subject matter of the action.
This was a suit to compel the payment in full of this claim, out of the fund arising from the assets of The Ohio Rife Insurance & Trust Company, on the ground that that company, and Mr. Kilbreth as its trustee, had wrongfully received credit therefor in the settlement of their account with Brown Brothers. Whatever be the form, it is substantially an action to establish a preference in the distribution of those assets, and of such proceedings the probate court has exclusive jurisdiction. Sayler v. Simpson; 45 Ohio St., 141.
II. The second defense pleaded is not correctly stated by counsel, who seem entirely to miss the point. It is not that Fosdick was a creditor of the Trust Company, for he was not until, by his answer to the amended petition in the case of Kilbreth v. Fosdick, he elected to accept the credit on the books of The Ohio Rife Insurance & Trust Company, set out in “Exhibit A” to said amended petition, but that the proceeds of this draft never came into Mr. Kilbreth’s hands as trustee; and the whole argument which counsel has built up out of his failure to state this defense correctly, must fall to the ground.
The cases cited by counsel for plaintiff in error do not establish any other rule than this, that where a draft, endorsed for collection only, at the day of the assignment or of the appointment of the receiver, is in the hands of the bank or its agents, uncollected, or where, as in the Fidelity Bank cases, it is shown that, from the time when the collection of such a draft was made, up to the date of the assignment, the collect ing bank was continuously indebted to the transmitting bank, in a sum larger than the amount of the collection, then the proceeds are regarded as having come to the hands of the receiver, but not otherwise. Such was the decision in Commercial Bank v. Armstrong, 39 Fed. Rep. 684, where the court, passing on a somewhat similar state of facts, held that the plaintiff could recover only such portions of the property as he could tráce into the possession of the bank’s receiver, either in their original or in some substituted form. In cases, however, where the creditor of the Fidelity Bank, having received the plaintiff’s paper for collection, had applied the same to the payment of debts to them from the Fidelity Bank, then, and in such case, the funds were not traced to the possession of the receiver.
In the case at bar, under the facts shown, neither this draft nor any portion of its proceeds can be traced to the hands of Mr. Kilbreth or his predecessors in the trust. The case could be no stronger if Brown Brothers, instead of obtaining the draft by legal process and then applying it to the payment of the debt due from the Trust Company to them, had received the draft direct from the Trust Company, for collection, and had used it in the same way. In both cases alike Fosdick might have followed his draft into the hands of Brown Brothers. In the latter case he might have treated the Trust Company as his debtor, and proved his debt. In neither case can he claim that he has traced the proceeds into the hands of Kilbreth, as trustee.
That decision is not inconsistent with any other case on this point. In Bank v. Bank, 76 Ind., 561, the facts were, in brief, these: The plaintiff bank had deposited in the Cook County Bank a draft endorsed for collection only; this draft had been, by the Cook County Bank, sent to the defendant for collection. Defendant, after the failure of the Cook County Bank, collected the draft and applied the proceeds to the payment of the debt due from the Cook County Bank to it. It was held that plaintiff might follow its draft and compel the defendant, which.had received it with notice that it was plaintiffs property, to account for its pro ceeds. So here Fosdick might have followed his draft and compelled Brown Brothers to account for its proceeds.
In re Armstrong, 33 Fed. Rep., 405, is, in its facts, exactly like those parts of Commercial Bank v. Armstrong, where it was held that the funds were traced to the hands of the receiver; while Bankv. Bank, ib. 408, is similar in all respects both as to facts and results, to Bank v. Bank. 76 Ind.
Levi v. Bank, 5 Dill. 104, is a case in which it was held, and properly held, that the plaintiff’s draft, in a substituted form, was traced, in specie, into the possession of the receiver. The language of the court, as applied to the facts of that case, is entirely correct, but it does not cover the case at bar.
The same is true of the case of Thomson v. Savings Institution, 8 Atl. Rep. 97.
In Bank v. Austin, 48 Fed. Rep., 25, the collection was made before the failure of the bank, and the money mingled with the general stock of the insolvent bank’s funds which came into the hands of the receiver. It was held that the money was not traced into the receiver’s hands so as to entitle the plaintiff to a preference.
III. The Statute of Rimitations is well pleaded. It can not be essential that defendant should say, in his answer, what statute he relies on, when no motion is made to require him to make his answer more definite in that respect, but the answer is replied to by a general denial.
IV. The plea of res judicata makes a good defense. The defendant relies not alone on the judgment quoted by plaintiff, but upon the judgment which is found on page 26 of the record, and the record of which case shows that the judgment was a judgment based on this claim as a debt of The Ohio Rife Insurance & Trust Company.

Opinion:
DicemAN, J.
The original action was commenced on the 9th day of January, 1886, in the Court of Common Pleas of Hamilton county, by Frank J. Jones and Wood Fosdick, as executors of Samuel Fosdick, deceased, the plaintiffs in error, against James P. Kilbreth, trustee of The Ohio Rife Insurance & Trust Company, the defendant in error, to collect out of moneys and other assets in the hands of Kil-breth as trustee, the amount of a judgment for $7,007.34 recovered by Samuel Fosdick against Kilbreth, as trustee, in the Superior Court of Cincinnati.
The Ohio Rife Insurance & Trust Company, a corporation duly organized under the laws of Ohio, and engaged in the city of Cincinnati, Ohio, and in the city of New York, in the business of banking, receiving money on deposit, and paying the same upon the drafts or checks of depositors, became insolvent and closed its doors for the transaction of business on the 24th day of August, 1857, and on the 2fith day of September, 1857, made an assignment of all its property and assets in trust for its creditors, to certain trustees who accepted and entered upon the duties of their trust. Thereafter, on or about the 1st day of January, 1859, under an order of court, James P. Kilbreth was appointed, and qualified as trustee for the creditors of the Trust Company, and took charge of its property and assets in trust for the uses and purposes for which the first appointed trustees had held and administered the same.
In January, 1878, Kilbreth, as trustee, brought an action in the Superior Court of Cincinnati against Samuel Fosdick, then in life, wherein he sought to recover of him a sum of money upon an account alleged to be due the trust estate.
In that action Fosdick denied the indebtedness, and set up, by way of cross-petition, an indebtedness of the trust estate to him on a certain draft hereinafter described, and asked judgment therefor. At the June term, 1881, of the Superior Court, judgment was rendered for Fosdick against Kilbreth in the following words: "Whereupon it is considered by the court that the defendant recover of the plaintiff, as trustee, the sum of seven thousand and seven and 34-100 dollars with interest from the first day of this term, and his costs herein expended, taxed at $-." Upon the death of Fosdick thereafter, this judgment was revived in the names of the plaintiffs in error, as executors of his last will and testament. On this judgment Fosdick or his represen tatives, never drew any dividends out of the assets of the Trust Company, although many dividends we redeclared, and paid to the creditors of the company.
On the 13th day of February, 1884, an execution was issued upon the judgment in favor of Samuel Fosdick. No goods and chattels being found whereon to levy, the sheriff levied upon certain lots of land situated in Hamilton county, and owned by and standing in the name of James P. Kilbreth. Kilbreth filed a motion in the case to quash the execution. The motion was reserved to the general term of the Superior Court, and at the November term thereof, 1884, was sustained; the execution was quashed, and entry was made upon the records of the court, as follows:
"This cause came on for hearing at the general term of said court, to-wit: the November, 1884 term thereof, on the motion of the plaintiff to quash the writ of execution issued in the court below, and the levy made under said writ, the-hearing of said motion having been reserved to the general term of said court, upon the pleadings and record of the judgment of the court below, and the execution and return thereto, and this court sitting in general term being fully advised in the premises, doth order and adjudge that said motion be and the same is hereby granted, and said execution and the levy thereunder are hereby quashed and set aside; and it is further ordered and adjudged that no further writ of execution issue, save and excepting for the amount of dividends heretofore declared upon claims against The Ohio Eife Insurance & Trust Company, and for such other sums as may hereafter be declared as dividends upon said claims, and upon application to the court, in special term, and the cause is remanded to special term for further proceedings."
The cause of action in favor of Samuel Fosdick, in the suit in the Superior Court, arose out of the collection of a certain draft, the property of F'osdick, dated August 14,1857, payable thirty days after date, and drawn on David Dows & Co., New York, for f> 2,883.86, which sum, with interest, madeup' the amount of $7,007.34, for 'which Fosdick recovered judgment. On or about tlie 20th day of August, 1857, Fosdick. sent or delivered this draft to The Ohio Rife Insurance &. Trust Company tor collection. The draft was accepted by the drawees and was paid at maturity. But, on the 24th day of August, 1857, before the draft was collected, the firm of Brown Brothers & Co., of the city of New York, creditors of The Ohio Rife Insurance & Trust Company, brought suit against that company in the county and state of New York, and issued an attachment therein, directed to the sheriff of the county, by virtue of which; the sheriff levied upon the draft and other property in the hands of the Trust Company, and took the same from the possession of the Trust Company, and collected the amount due on the draft, and accounted for the proceeds to Brown Brothers & Co.
Subsequently to the failure of The Ohio Rife Insurance & Trust Company, to-wit, after August 24th, 1857, Kilbreth, as trustee, had an adjustment with Brown Brothers & Co. of their claim against the Trust Company, by the terms of which adjustment the attachment above mentioned was released, and a credit was given to the Trust Company by Brown Brothers & Co., on the indebtedness to them of the Trust Company, of the proceeds of the draft drawn on Dows & Co., for two thousand eight hundred and eighty-three and 86-100 dollars.
• In the original action, the plaintiffs in error, claiming that the proceeds of the draft on Dows & Co. were traceable into the assets of The Ohio Rife Insurance & Trust Company, asked that Kilbreth might be adjudged and decreed to pay in full the judgment recovered by Eosdick in the Superior Court, out of the money in his hands as trustee, with such other relief as . might be e-quitable and proper in the premises. The court of common pleas found the equity of the case in favor of the defendant, and gave judgment accordingly. The plaintiff appealed to the circuit court, and that court also found in favor of the defendant, and dismissed the plaintiff's petition. A motion for a new trial was made by the plaintiffs and overruled, to which ruling of the court they excepted, and presented their bill of exceptions embodying all the evidence offered by the parties, or either of them, on the hearing of the case, which was allowed and made part of the record. This proceeding in error is prosecuted to reverse the judgment of the circuit court.
It is urged in behalf of the defendant in error, that the court of common pleas had no jurisdiction of the subject-matter of the action. The contention is that the action is substantially one to establish a preference in the distribution of the assets of the Trust Company, and that of such proceedings the probate court has exclusive jurisdiction. If Fosdick, so far as the draft was concerned, was not a creditor of the Trust Company, the question of preference among creditors does not arise. The real question seems to be whether the Trust Company having received the draft on Dows & Co. for a specific purpose, there was not a wrongful application by the Trust Company of the proceeds of the draft, to extinguish a portion of that company's indebtedness to the firm of Brown Brothers & Co.
The case of Sayler v. Simpson, 45 Ohio St. 141, is referred to as determining the exclusive jurisdiction of the probate court. In that case, the contest was between mortgagees and unsecured creditors, over the distribution of a fund in the hands of the assignee, arising from the sale of personal property in which the assignor confessedly had a property interest, although, at the time of the sale, the personal property was subject to separate mortgages given to secure separate indebtness to each of several creditors. But, as said in Lindemann v. Ingham, 36 Ohio St. 15, "the act regulating assignments does not undertake to invest the assignee with property which did not belong to the assignor;" and in the case at bar, it is not claimed that the Dows & Co. draft represented by the judgment for $7,007. 34, belonged to the assignor, the Trust Company. . On the contrary, it is contended that the draft never formed any part of the trust estate and never came within the administration of the assignment, and that the representatives of Fosdick are invoking equitable relief to obtain possession of his own property wrongfully placed in the trust estate. If the Trust Company, as an agent of the owner, received from him the draft for collection only, with an obligation to account for and pay over the proceeds to him, a fiduciary relation with the owner was thereby established, and if his representatives trace the proceeds into the hands of the Trust Com pany, and seek to impress upon the propertj in its substituted form a trust-character, the court of common pleas would not be without jurisdiction to afford equitable relief by declaring and enforcing the trust. Gilbert v. Sutliff, 3 Ohio St. 129; Carter v. Lepsey, 70 Ga. 417; Commercial bank v. Armstrong, 39 Fed. Rep. 684.
II. Again, it is contended that the relation between Fos-dick and the Trust Company was that of debtor and creditor, and that he was entitled, by virtue of that relation, to receive on the judgment he recovered in the Superior Court nothing more than pro rata dividends as other creditors of the insolvent company, The draft on Dows & Co. did not become due until about the middle of September, 1857, and therefore, was not paid by the drawees until after the 24th of August, 1857, when the Trust Company became insolvent and ceased to do a banking business. It is said that on the day of its failure, the Trust Company credited the amount of that draft to Fosdick as a depositor, and thereby became his debtor, and placed him upon the footing of an ordinary creditor entitled only to dividends when declared by the trustee of the company. But, as the Trust Company had failed before the draft was collected, and received the benefit of it after failure, in the form of a_credit by Brown Brothers & Co., its agency to make itself a general debtor to Fosdick, by crediting him with the proceeds of the draft, had terminated. -
In Levi v. Bank, 5 Dill. 109, 110, it is said by the court, "When the money was received;-and not before, the agency of the defendant bank to collect terminated, and its authority to credit the amount to the plaintiffs and to make itself an absolute debtor therefor would then arise, provided it was still a going concern; but inasmuch as before it received the money it had failed, its agency to constitute itself a general creditor for the amount had ceased to exist. It would hold the amount as the agent of the plaintiffs, or in trust for it, subject to any balance due it from the plaintiffs. * Fhe force of the argument of the defendants' counsel, that the defendant bank, on the very day of its failure, and when it was in articulo mortis, had the right, by a credit in advance of collection, or by its unauthorized act in receiving the check and in procuring its certification, to terminate, without the plaintiffs' consent, the agencv, and to constitute itself the actual debtor for the amount, against the plaintiffs' will and against their interest, I must confess I nave been unable to perceive." See also the case In re Armstrong, 38 Fed. Rep., 405, and authorities there cited, in which the above doctrine is enunciated. Indeed, the rule seems to be well settled, that after a bank has suspended, it ought not to receive payments upon business paper previously deposited with it for collection, in such a manner that the money so received by it will, pass into its general assets, and the owner of the paper be placed in the position of one of its creditors, entitled only to take his dividend; and proceeds received after the bank becomes insolvent, will be held in trust, and may be recovered in full. Morse Bk. § 248 a.
The record plainly discloses that the Dows &'Co. draft was placed with the Trust Company for collection. It is true, that while in the Trust Company's hands, it was attached by a creditor, and when paid at maturity by the drawees, the proceeds were accounted for by the sheriff to the attaching creditor. But the Trust Company received the full benefit of the draft. It went to pay a portion of its indebtedness. The Company and trustee might have opposed its application by the attaching creditor, as being the property of another, but they did not see fit so do do. On the contrary, Kilbreth, as a trustee, made an adjustment with Brown Brothers & Co., by which the firm's attachment was released, and the proceeds of the draft were applied in part payment of the Trust Company's indebtedness. The estate of the Trust Company was thereby increased to the extent of the amount of the draft, for the benefit of all its creditors. But, the creditors could not, with a show of equity, ask that the proceeds of a draft, clearly indentified as not the property of the Trust Company but of Fosdick, be applied to swell the trust fund for their benefit. To all intents and purposes, the proceeds of the draft went into the assets of the Trust Company — as much so, as if the Company had first collected the draft, and then paid over its canteáis to Brown Brothers & Co. The paper was im pressed with a trust when received for collection, and its proceeds, bearing the same impress, are traceable and identifiable as having been used by the Trust Company in place of its own assets to pay a specific creditor. "Where the rightful owner is in pursuit of trust funds, he need not point out the very goods or bills or coin. He does all the law requires if he shows that the goods or bills or coin came to the hands of the defendant impressed with a trust to his knowledge. In every such case the holder must respond either in the article taken or its value." Thomson v. Gloucester City Sav. Inst., 8 Atl. Rep. 97, (N. J. Chancery.)
If upon the maturity and payment of the Dows & Co. draft in the middle of September, 1857, the proceeds thereof were credited to the Trust Company before the date of its assignment for the benefit of creditors, that fact would not release the assignee from the performance of a trust impressed upon the paper or.its proceeds prior to the assignment. The general assignee of a debtor in failing circumstances stands in the same condition as the dedtor himself; he is deemed to possess the same equities only as the debtor himself would possess. Sto. Eq. Jur..§ 1228; First Nat. Bank v. Mastin Bank, 2 McCrary, 438.
When paper is deposited for collection, the relation between the depositor and bank is that of principal and agent. If an agent for that special purpose, collects or sells the paper of his principal, he becomes a fiduciary, and will hold the proceeds in trust for the principal; and if the agent fails, there will be no reason why his general creditors should invade such proceeds to satisfy their claims, if the principal can trace or ascertain his property in the substituted form. Whether, in a given case, the proceeds have been sufficiently traced and identified, must rest in the judgment of the chancellor who is called upon to declare the proceeds subject to a distinct trust. In the case at bar, we think, that in the light of undisputed facts, and upon equitable principles, the proceeds of the Dows & Co. draft should be deemed held in trust for the estate of Samuel Eosdick, and payable in full out of the assets of the Trust Company.
III. But it is urged that the claim of the plaintiffs in error has been adjudicated against them by the Superior Court, in the judgment at general term quashing the execution, and also in the judgment at special term. The execution was levied upon real estate, the individual property of James P. Kilbreth, but in the decision of the motion to set aside and quash, the only question directly involved and necessarily tried and determined was, whether the judgment was against Kilbreth individually. The court held that the judgment was not against him individually, and for that reason quashed the execution. But no other controversy was properly concluded by the decision of the motion.
The judgment rendered at the special term was, "that the defendant recover of the plaintiff, as trustee, the sum of seven thousand and seven dollars and thirty-four cents, with interest" etc. If it was thereby designed that execution should issue only for the amount of dividends declared or to be declared upon claims against the Trust Company, the form of judgment prescribed by statute would naturally be suggested, that the assignee or trustee "allow the claim in settlement of his trusts." The judgment contains no limitation or qualification as to the amount to be paid by Kilbreth "as trustee." By its terms, it may apply to a trustee who, in his representative or fiduciary capacity, has come into the possession of property or money found upon legal inquiry to belong to a particular claimant, and not subject to dividend among creditors of the insolvent. Conger v. Atwood, 28 Ohio St. 184.
The purpose of the suit at bar is to obtain equitable relief in aid of the judgment recovered in the Superior Court, upon which there was a failure to realize anything by levy of execution. It is claimed that a trust attached to the proceeds of the Dows & Co. draft, which were wrongfully placed in the trust estate, and which cannot be reached without the interposition of a court of equity. In seeking equitable relief in such case, we do not think that the plaintiffs in error are estopped by the judgment rendered in favor of Samuel Fosdick in the Superior Court. In our opinion therefore, the judgment of the circuit court should be reversed, and the cause, remanded for further proceedings.
Judgment accordingly.