Case Name: Brown v. Bank
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1884-01
Citations: 41 Ohio St. 445
Docket Number: 
Parties: Brown v. Bank.
Judges: Martin and Macaitley, JJ. dissent.
Reporter: Ohio State Reports, New Service
Volume: 41
Pages: 445–465

Head Matter:
Brown v. Bank.
B. was pressed by bwo judgment creditors. G. loaned to bim $22,000 of stock in a corporation. Pledging this to a bank, B. borrowed upon his own notes a sum equal to both judgments, and placed it in the hands of G.’s attorneys, with authority to buy the judgments for G. This being done, B., by writing, pledged to G. sundry collaterals, and also said judgments to secure the return of the borrowed stock, or its agreed value, with interest, by a day named. In case of default G. was empowered to put the collaterals to sale. Default occurred and sales were made. G., by B.’s express consent, was a bidder. He bought sundry collaterals, and also the judgments ; and afterwards assigned the larger judgment for value to M., who had notice of the foregoing* facts. Held:
1. G. did not hold the judgments as pledges, but as parcel of B.’s debt to him, which B. could pay by returning the stock within the stipulated time.
2. B. is not entitled to any credit for the sums at which G. bid in said judgments; or for the proceeds of G.’s sale of the decree to M.
3. M. cannot collect upon the judgment assigned to him, more than its proportion of B.’s unpaid debt to G„ as it was at the date of M.’s purchase, and the interest thereon.
Ebbob to the District Court of Lucas County.
On August 26,1876, Harriet O. Holmes, holding a decree in Lucas Common Pleas against Theophilus P. Brown for $13,605(^5-, on wliicb interest ran from October 18, 1875, was about to put the mortgaged premises to sale. The Merchants National Bank of Toledo, at the same time, was about to enforce an execution against Brown upon a judgment in its favor for over $7,000. To prevent sales thereunder, Brown borrowed of Wilson W. Griffith $22,000 (par) of the stock of the Milburn Wagon Company, and pledging said stock to the said bank as collateral to a new note for $22,000 made bjr him alone, received as discount on said note $21,538. This sum, with $222.53, proceeds of another note of Brown’s, was placed by the bank, with Brown’s consent, in the hands of Osborn & Swayne, attorneys. The following letter is their report of the application of these moneys:
Toledo, O., Aug. 28, 1876.
T. P. Bbown, Esq.,
cor. Monroe and Summit St., City.
■ Dear Sir — We beg to advise you of the following transactions made by us, for your account this day:
Received of Merchants National Bank of Toledo, proceeds of note for twenty-two thousand dollars,.....$21,588 00
Received of same, proceeds of note for $225, 222 53
$21,760 53
Paid Merchants National Bank amount due on judgment assigned at your request to W. W. Griffith as security, . . . $7,233 33
Paid Calvin Holmes amount due on judgment assigned to W. W. Griffith as collateral, . 13,808 65
Paid Osborn & Swayne amount due from Merchants National Bank, for taking judgment on cognovit for $7,000, ... 25 00
Paid Wilson W. Griffith as directed by you, 500 00
Paid Osborn & Swayne in matter between T. P. Brown and W. W. Griffith, ... 100 00
$21,666 98
Cash reserved to apply on settlement, . . 93 -58
Yours very truly,
Osbobn & Swayne.
The following receipt was taken byOsborn and Swayne:
Received of Osborn & Swayne, attorneys-at-law, the following described moneys and securities paid and delivered to us for account of Harriet O. Holmes.
First — A certified check of Wager Swayne on the Merchants National Bank of Toledo, Ohio, for $13,808.65, payable in New York Exchange.
Second — Note of T. P. Brown to Harriet O. Holmes, or order, for five hundred dollars, dated Toledo, Ohio, August 26th, 1876, and payable sixty days after date to the order of John D. Irving, and by said Irving duly endorsed.
Third — As collateral security, to the above, seven notes of John M. Bridenbaugh, dated Toledo, Ohio, October 28, 1875, each for the sum of one hundred and twenty-five dollars, and payable twelve, eighteen, twenty-four, thirty, thirty-six, forty-two and forty-eight months after date, to the order of T. P. Brown, which notes are by the said T. P. Brown duty endorsed.
Also a deed and mortgage from said John M. Bridenbaugh to secure the payment of the notes last above mentioned, which deed conveys to the said T. P. Brown lot number three hundred and fifteen (315), in T. P. Brown’s Addition to the City of Toledo, Ohio, and is by the said T. P. Brown assigned and transferred to Harriet O. Holmes, by endorsement upon said mortgage.
Also a memorandum of title to the above premises, made by Messrs. Lenderson & Lang.
Also policy of insurance number 7816, issued November 1st, 1875, by the Phoenix Insurance Company, of Hartford, Conn., to the said John M. Bridenbaugh, insuring the dwelling on said lot for seven hundred dollars, which policy is, by endorsement thereon made, payable to the said Harriet 0. Holmes or order, in the event of loss.
Upon payment of said note for $500, the collaterals above mentioned are to be returned to said Osborn & Swayne.
Harriet O. Holmes,
August 28th, 1876. By C. Holmes, Agent.
The assignments were in the following forms:
Harriet O. Holmes, v. Theophiltts P. Brown, et al. Lucas County Common Pleas.
Judgment against defendant, T. P. Brown, with order of sale, $13,605.71. Interest from October 18th, 1875.
Judgment v. defendant, T. P. Brown, also for costs. For value, I hereby assign to Wilson W. Griffith, the aforesaid judgment, and order of sale, and all my rights therein.
The said Griffith to save me harmless and free from payment of all costs hereinbefore made, and also from any that may hereinafter accrue. The said Griffith shall have the right to enforce said judgment and order of sale in my name, but at his own costs.
Harriet O. Holmes,
By C. Holmes, Agent.
Toledo, O., August 28, 1876.
In consideration of the sum of seven thousand two hundred and thirty-three and 33-100 dollars this day, paid to the Merchants National Bank of Toledo, Ohio, by Osborn & Swayne, attorneys-at-law, said bank does hereby sell, assign and transfer to Messrs. Osborn & Swayne, attorneys-at-law, as trustees to whom it may concern, the judgment rendered in May last by Lucas County Court of Common Pleas in favor of said bank and against Theophilus P. Brown for the sum of seven thousand dollars, hereby authorizing said Osborn & Swayne or their assigns to proceed in the name of this bank to the enforcement and collection of said judgment.
The Merchants National Bank of Toledo, Ohio, by “ Chas. C. Doolittle, Cashier.
The following agreement was made on the same day:
This agreement, made at Toledo, Ohio, this twenty-eighth day of August, A. d. 1876, by and between Wilson W. Griffith, party of the first part, and Theophilus P. Brown, party of the second part, witnesseth:
First — -The said Wilson W. Griffith, in consideration of the covenants hereinafter set forth, on the part of said Brown, has this day loaned said Brown twenty-two thousand dollars (par), of the stock of the Milburn Wagon Company, of Toledo, Ohio.
Second — -.The said Brown, in consideration of the premises, hereby covenants to return the same to the said Griffith, at the expiration of sixty days, and also to pay said Griffith for the use of said stock, a sum of money equal to eight per centum per annum on the par value thereof. And if the said stock shall be returned to said Griffith by said Brown, at a day later than the expiration of sixty days, as above mentioned, then the said Brown is to pajr the said Griffith at the rate of eight per cent, per annum on the par value of said stock, for the time the same is detained by him after the expiration of the sixty days.
Third — To secure the return of the said stock, the said Brown has deposited with Osborn & S wayne, attorneys, for the said Griffith, the following securities, to wit: An assignment to said Griffith by Harriet O. Holmes — née Hall — of the judgment and decree rendered in her .favor against said Brown, in the court of common pleas of Lucas county, Ohio, at the October term of said court, A. d. 1875; also a note and mortgage of Francis A. Brown and T. P. Brown, for five thousand dollars, dated Toledo, Ohio, July 24th, 1876, payable six months after date, to the order of John D. Irving, and endorsed by the payee thereof; also a certain note and mortgage of Marion A. and H. 0. Hahn, for five thousand dollars, accompanied by policies of insurance, and lately in the custody of the Merchants National Bank of Toledo, Ohio; also fifteen thousand dollars, more or less, par value, of the shares of the Dorr Street Railroad, in Toledo, Ohio, being the same stock which was lately in the custody of the Merchants National Bank of Toledo, Ohio; also three bonds of five hundred dollars each, issued by the Toledo Carriage and Variety Company, 'being the same bonds lately in the custody of the said Merchants Bank; also an assignment by the Merchants National Bank of a certain judgment recovered by said Bank against. said Brown, for seven thousand dollars.
Fourth — Whereas, certain portions of the property covered by the judgment and decree first above mentioned, have been sold and contracted to be conveyed by the said T. P. Brown, to divers parties, it is hereby mutually stipulated that all contracts in writing now existing on the part of said T. P. Brown, for the sale of portions of the premises covered by said judgment may be carried out by him, and the said Osborn & Swayne, attorneys, shall release such portions of said premises from the operation of said judgment, upon receiving for account of the said Griffith such part of the consideration for such contracts as has not yet been paid, provided, that if such payments are, by the terms of said contract, payable in notes, the same shall be secured by mortgage lien not inferior to the lien of said judgment and decree.
■ Fifth — In case the said stock shall not be returned promptly at the expiration of said sixty days, together with all dividends which may meantime have been paid upon the shares, the said Griffith may then or at any time thereafter declare this contract to be evidence of a matured indebtedness equal to the par value of so much of said stock as shall not have been returned, with twenty per cent, premium thereon, the same being the value of said stock as mutually agreed, together with the amount due to said Griffith for the use of said stock under this agreement, and all dividends which may in the meantime have been declared upon said stock. And the said Griffith shall thereupon be at liberty to sell and dispose of, to the highest bidder, at public auction, and upon five days’ advertisement in one or more of the daily papers of the city of Toledo, any or all of the securities above described, and to apply the proceeds of said sale in satisfaction of said debt, or the said Griffith may, at his option, proceed to enforce by process of law the mortgages, judgments and decrees above set forth, or any or all of them, and to apply the proceeds thereof in satisfaction of the said debt.
Sixth — The said Brown is to pay the reasonable charges of the attorneys above mentioned, and also their charges against the Merchants National Bank for services in the matter of the loan heretofore made by said bank to said Brown, and in default of payment by said Brown, the said Griffith is authorized to pay the same from the. proceeds of sales of the securities above mentioned.
Witness our hands the day and year above written.
(Signed) Wilson W. Griffith.
T. P. Brown.
Brown did not return the stock, and the following letters passed:
Toledo, O., February 6,1877.
T. P. Brown, Esq.,
Dear Sir — Please take notice that in default of the return to me of the certificate of stock in the Milburn Wagon Company, of the par value of twenty-two thousand dollars, loaned to you by me on the twenty-eighth of August, 1876, I have this day exercised my right under our contract of that date, and hereby declare you indebted to me as follows under said contract:
Agreed -value of said stock, at one hundred and twenty dollars per share, $22,000 at $120, . $26,400
Eight per cent, per annum on the par value of said stock, from Aug. 28, ’76, to Feb. 6, ’77, 777.25
$27,177.25
Unless the amount is immediately paid, I shall find myself compelled to resort to a sale of the hypothecated securities.
Yours very truly,
W. W. Griffith.
Messrs. Osborn & Swaxne,
Gentlemen — In the matter of certain personal securities deposited with you as collateral to an agreement dated August 28, 1876, between W. W. Griffith and myself, I hereby request that if Mr. Griffith shall consent, you proceed immediately as trustees and agents for me, to sell and dispose of said securities at public sale, upon the notice specified in said contract, and apply the proceeds of such sale on my indebtedness to him, and I hereby consent that said Griffith, by himself or agent, may appear as a bidder at said sale.
Yours very truly,
T. P. Brown.
Pursuant to a notice, given “ as specified in said contract,” Osborn & Swayne, on February 28, 1877, sold to Griffith the Holmes decree for $5,000; the bank judgment for $3,000 ; five mortgage notes made by one McCloud to Brown — aggregating $18,714.06, for $2,500; the $5,000 note and mortgage, made by Brown and wife to Irving, for $1,000; and three Toledo Carriage and Variety Company bonds of $500 each, for $300. They credited the total $11,800 on-Brown’s debt to Griffith. Afterwards the following paper was written on the back of the contract of August 28, 1876, and executed:
“ The rights and liabilities of the parties under this contract, have this day been adjusted by the said Griffith returning to the said Brown, the Dorr Street Railroad stock and the Toledo Carriage and Variety bonds therein referred to, the said Brown surrendering to the said Griffith all right, title and interest whatever in the' remaining securities therein mentioned, and the said Griffith releasing said Brown from all further liability, by reason of said contract or any indebtedness thereunder arising.
T. P. Brown.
Toledo, O., Nov. 12, 1877. W. W. Griffith.”
Griffith and one John Milburn had executed the following agreement:
“ This agreement made at Toledo, Ohio, this 10th day of November, A. D. 1877, by and between Wilson W. Griffith, of the 'first part, and John Milburn, of the second part, witnesseth:
Said Wilson W. Griffith, in consideration of the sale and transfer to him of certain shares of stock in the Milburn Wagon Company, representing thirty-two thousand five hundred dollars par value of said capital stock, has sold and transferred to said John Milburn, the following securities, to wit: Five notes of John L. McCloud^ secured by mortgage, and further described as follows:
One promissory note of John L. McCloud to Theóphilus P. Brown, for thirty-seven hundred and twenty-eight dollars, dated at Toledo, Ohio, May 23d, 1876, and payable two years after date, with eight per cent, interest, payable annually. Said note is secured by mortgage, which mortgage is recorded in Vol. 66, page 178 and following, Lucas county Record of Mortgages.
One promissory note of John L. McCloud to Theophilus P. Brown, for thirty-eight hundred and two and 56-100 dollars, dated at Toledo, Ohio, May 23d, 1876, and payable two years after date, with interest at eight per cent., payable annually. Said note is secured by mortgage, which mortgage is recorded in Vol. 66, page 175 and following, Lucas county Record of Mortgages.
One promissory note of John L. McCloud to Theophilus P. Brown, for thirty-seven hundred and twenty-eight dollars, dated at Toledo, Ohio, May 23d, 1876, and payable three years after date, with interest at eight per cent., payable annually. Said note is secured by mortgage recorded in Vol. 66, page 176 and following, Lucas county Record of Mortgages.
One promissory note of John L. McCloud to Theophilus P. Brown, for thirty-seven hundred and twenty-eight dollars, dated at Toledo, Ohio, May 23d, 1876, and payable four years after date, with interest at eight per cent, payable annually. Said note is secured by mortgage recorded in Vol. 65, page 135 and following, Lucas county Record of Mortgages.
One promissory note of John L. McCloud to Theophilus P. Brown, for the sum of thirty-seven hundred and twenty-eight dollars, dated at Toledo, Ohio, May 23d, 1876, and payable five years after date, with interest at eight per cent., payable annually. Said note is secured by mortgage recorded in Vol. 65, page 133 and following, Lucas county Record of Mortgages.
Also a certain judgment rendered on the 19th day of May, A. d. 1876, by the court of common pleas, Lucas county, Ohio, in Cause No. 14409, in favor of the Merchants National Bank of Toledo, and against Theophilus P. Brown.
Also a certain judgment rendered on the 18th day of October, 1875, by the court of common pleas of Lucas county, Ohio, in favor of Harriet O. Holmes, and against Theophilus P. Brown, in Cause No. 12738.
Also a certain deed of mortgage from Theophilus P. Brown to Harriet O. Hall, recorded June 12th, 1868, in Yol. 26 of Mortgages, pages 460 and 461, Lucas county Records of Mortgages, together with two promissory notes secured thereby, dated Toledo, Ohio, May 30th, 1868, each for the sum of six thousand six hundred and sixty-six and 67-100 dollars.
The above notes and mortgages are the subject matter of the proceedings in which the decree last above mentioned was obtained; Said notes have, however, been transferred, and the mortgage assigned to said Griffith by Harriet O. Holmes (late Hall), and are now assigned by said Griffith to John Milburn.
“ Also a certain note of Frances A. and Theophilus P. Brown, for five thousand dollars, to John D. Irving, dated Tpledo, Ohio, July 24th, 1876, and payable six months after date, to the order of John D. Irving; the said note being endorsed in blank, by John D. Irving, and further secured by a deed of mortgage from said Frances A. and Theophilus P. Brown to said John D. Irving, recorded September 11th, 1876, in vol. 65, page 585, of Lucas county Record of Mortgages.
“ All of the above securities are transferred by the said Griffith to the said John Milburn, without recourse or other representation or warranty of title. Nevertheless, the said Griffith having purchased the securities above mentioned at public sale to satisfy an indebtedness of the said T. P. Brown to the said Griffith, the rights of said Griffith in regard to said indebtedness so far as the said securities were taken to satisfy the same, are hereby transferred to the said Milburn, should any contingency arise whereby the title to said securities should be possibly called in question.
“ The judgment above mentioned in favor of the said Harriet 0. Holmes, against T. P. Brown, which now stands upon the records of Lucas county common pleas as having been assigned and transferred to Wilson W. Griffith, is to be assigned and transferred to Osborn & Swayne as trustees. The said Osborn & Swayne are to hold said judgment as trustees, first, to secure to the Merchants’ National Bank of Toledo, Ohio, the re-payment of a certain promissory note for the sum of six thousand dollars, made to the said bank by Henry J. Raffensperger and John Milburn, dated Toledo, Ohio, November 10th, 1877, and payable four months after date, to the said Merchants National Bank of Toledo, or order.
“ After payment of said note, the said Osborn & Swayne shall transfer said judgment upon the records of said court to the said John Milburn, and in the event that said judgment is resorted to for the payment of said note, then the proceeds of said judgment, after the payment of said note and the proper charges, of said trustees for the collection thereof, are to be paid over to said John Milburn; the said John Milburn is, however, to be at liberty in the meantime to order execution upon said judgment, whenever he sees fit.
John Milburn, 1 L „ W. W. Griffith. )
Another mortgage creditor of Brown, to wit: The Toledo Savings Bank and Trust Company, sued in Lucas common pleas, making Brown and his wife, Milburn, Griffith, The Merchants National Bank of Toledo, and others, defendants. In this action, on January 3, 1878, Brown filed an answer and cross-petition against Milburn, Griffith, and The Merchants National Bank. He charged that the Holmes decree and the bank judgment were actually paid by him on August 28th, 1876, and that the subsequent transactions between himself and Griffith, and Griffith’s dealings with the collaterals placed in his hands, had fully paid his debt to Griffith; that said defendants were proceeding to collect said judgments without right, and he prayed an injunction against them. He also asked that the note and mortgage of himself and wife to John D. Irving, for $5,000, be ordered to be delivered up to him.
Griffith and The Merchants National Bank filed an answer, reply and cross-petition, averring' that on the 26th day of August, A. D. 1876, Harriet 0. Holmes, with the consent and „ at the request of Brown for a valuable consideration, paid by Griffith, assigned and conveyed said judgment and her interest in said liens and property by virtue thereof, to said Wilson W. Griffith, to have and'to hold the same as security for the payment of certain indebtedness, due from said Brown to said Griffith, and for the return of certain stock of the Milburn Wagon Company, loaned by said Griffith to said Brown; and afterwards, on the 25th day of February, A. d. 1877, for a good and valuable consideration, and by the consent and at the request of said Brown, said judgment and interest were assigned’ and conveyed to said Griffith, to have and to hold the same for his own use and benefit; and he then became the absolute owner thereof, free from all trusts whatever; and after-wards, on the-day of November, 1877, for a good and valuable consideration, said Griffith assigned and conveyed said judgment and interest to John R. Osborn and Wager Swayne, to have and to hold the same in trust. First. To secure .the payment of $6,000 and interest thereon, from the 10th day of March, A. d. 1878, at eight per cent, per annum, which has since become, and now is due to said bank, upon a promissory note, a copy of which is hereto attached, executed by Henry J. Raffensperger and John Milburn, and no part of which has been paid. Second. To have and to hold said judgment and interest for the sole rise and benefit of said Milburn after the payment of said note — nothing has been paid upon said judgment, and there is due thereon, to the said Osborn & Swayne, as trustees, and said bank and Milburn, as cestui que trusts, as aforesaid, the sum of $13,722^5- and interest thereon, from the 15th day of October, 1875.
They deny that said Brown ever - placed any property or money in the hands of said Osborn & Swayne for the payment of said judgment, and that he was ever entitled to have the same, or the mortgage upon which the same was founded, can'celled or discharged.
They asked to be allowed to sell said lots and lands for the payment of said judgments.
Brown’s reply stated:
That the said promissory note referred to in said answer and cross-petition for $6,000, and of which a copy is alleged to be attached to said answer and cross-petition, and on which-it is therein alleged there is due to said Merchants National Bank, from said Henry J. Raffensperger and John Milburn, the said sum of $6,000, and interest thereon, at the rate of eight per cent, per annum, from the 15th day of March, A. d. 1878, was so executed and delivered by said makers thereof to said bank, wholly and solely for a loan or discount, on said 10th day of November, A. d. 1877, made to them by said bank.
And that said alleged judgment and decree against this defendant so recovered by said Holmes, and alleged to have been transferred to said Griffith, together with the alleged lien of the same on the real estate in said answer and cross-petition set forth, were so transferred by said Griffith, at the instance of said Milburn, to said Osborn & Swayne, cotemporaneously with the making of said loan to and discount for said Raffensperger and Milburn, for the purpose of devoting and appropriating the real estate alleged to be embraced in and covered by said judgment, decree and mortgage, to the securing to said bank of said debt of $6,000, at the same time the same accrued to said bank; and said trustees and said bank have ever since been, and now are, claiming their lien on said real estate, to secure to said hank said debt of $6,000 and interest, as aforesaid, wholly under and by virtue of said alleged transfer on said 10th day of November, 1877.
That said taking and holding, through said trustees by said bank of said judgment and decree, or mortgage, or the lien, the same as any of them might be upon said real estate, or any of it, was then, has ever since been, and now is, unlawful; and the said trustee and the said bank have no right, legal or equitable, to hold or enforce said judg ment, decree or mortgage, against this defendant or said real estate.
The common pleas dismissed Brown’s cross-petition. He appealed to the district court. That court found and decreed as follows:
“ That ths said Brown has no equities as alleged in his said answer and cross-petition. That the answer and cross-petition of said Griffith and The Merchants’ National Bank, and the allegations therein contained, are true, and that the judgment in said pleadings mentioned in favor of said Holmes, formerly Hall, against the said Theophilus P. Brown is unpaid, and in full force and effect to and for the amount of $6,000, and interest thereon, from the 10th day of November, A. D. 1877, according to the terms thereof.
“ It is therefore considered by the court that the injunction heretofore granted in this case be, and the same hereby is, vacated and dissolved, and that the said Griffith and said Merchants National Bank go hence without day and recover their costs in this case taxed at-, and execution issue therefor.”
His motion for a new trial having been overruled, Brown took a bill of exceptions presenting all the evidence, and here asks a reversal of the action of the district court.
John H. Doyle, for plaintiff in error.
Dodge & Raymond, for defendant in error.

Opinion:
Granger, C. J.
In so far as the finding of the trial court negatived Brown's charges of fraud, deceit, or bad faith, it is supported by the evidence. But a serious question remains touching the nature and extent of Griffith's interest in the Holmes decree, in the bank judgment, and in the Irving mortgage.
Prior to the payments made on August 28, 1876, by the hands of Osborn & Swayne, Brown sustained no relation to the Holmes decree, or to the judgment in favor of the bank, except that of the debtor whose property could be sold under them. Mrs. Holmes could sell her decree at her own pleasure; her vendee taking all of her rights therein. Griffith could have paid her off, and, taking her assignment, would thereby have become Brown's judgment creditor. But the judgment would, in such case, be the debt itself, and not a collateral security. Griffith did not have the money to so buy. He loaned stock to Brown upon the latter's promise to return it in sixty days, etc. For the time being the stock was Brown's. He pledged it to secure his own note to the bank; but as part of the arrangement the bank was directed to place the proceeds of his notes in the hands of Osborn & Swayne to be paid to his judgment creditors, and he authorized these attorneys to accept a transfer of the decree to Griffith, and of the judgment to themselves as trustees, instead of receipts in full cancelling both. If Griffith had pledged his stock and raised the money on his own note, the sums paid upon the decree and the judgment would have been his money, and the transfer of the decree would have made him its absolute owner. The papers then executed by Brown and Griffith, taken literally, treat the money*as Brown's, treat Brown as having, by the payment, become the owner of judgment and decree; and state that he had deposited with Osborn & Swayne, for Griffith, assignments of both as collateral security for the fulfilment of his contract with Griffith. If such were indeed the fact, what did Griffith take by such deposit ? A pledgor transfers to his pledgee the pledgor's rights in the thing pledged as a security. The right of a judgment debtor (who has paid the judgment against himself in full) in the judgment so paid is simply a right to have it cancelled, or released, or entered satisfied. Such a right cannot be pledged. It is not a thing capable of transfer to another. Its purchaser cannot take anything. If an attempt be made to pledge it to a party having notice that it has been paid, and the pledgee, after default, puts the supposed pledge to sale, and by consent of the pledgor buys it in himself, what does he buy and hold? Simply the right of the pledgor in the pledge, released from the lien of the pledgee ; not a right to collect the judgment (for the judgment debtor — the pledgor — had no right to collect anything on the judgment), but only the right to treat it as a paid, judgment.
Hence, if the money that was paid to Mrs. Holmes was Brown's money, the payment took all life and force from her decree; she had nothing that she could transfer to any one. Brown's request that she assign it to Griffith, and her compliance, had precisely the same effect (no more) as Brown's own assignment of the decree, made after the payment, would have had. Brown's pledge of the decree to Griffith, who knew of the payment, was valueless, because it placed in Griffith's attorney's hands a thing that had no value. The fact that that thing was, with Brown's consent, bid in by Griffith, and that Brown thereafter released to Griffith all Brown's rights in it, could not give it any value. All contracts to pledge, sell, buy and release, rights in "nothing," where both parties know the facts that make it " nothing," are powerless to create value in the " nothing."
So, if the trial court had held Griffith to the letter of the contract, Brown was entitled to an injunction forbidding the collection of any money on the decree. But Brown was asking equity to aid him, and therefore he must do equity.' Equity looks through form and deals with substance, whenever settled construction, or statutory enactment, has not made " form " matter of substance;
The transactions of August, 1876, were parcels of one whole. Brown could not obtain the money without Griffith's help. The loan of the stock was made upon the condition that the money to be obtained from the bank should be placed in the hands of Griffith's lawyers, and used by .them to get from Mrs. Holmes an assignment of the decree to Griffith. All parties intended that Griffith should have a valuable interest in a live decree; a decree capable of being enforced as such. Equitj', therefore, must and will give effect to that intent. This can only be done by treating the money paid' to Mrs. Plolmes as Griffith's money, and treating Griffith as a purchaser of her rights in the decree. As Brown could not pledge Mrs. Holmes' rights, the language of the paper of August 28th, 1876, cannot apply to this transfer from Mrs. Holmes, either as making it a pledge, or as affecting Griffith's right to sell the decree. The trial court seems to have perceived this equity of Griffith; but it failed to see its effect upon the so called sale of the judgment as a pledge. It is true that a purchaser at such sale, without notice, would have taken Brown's rights (which as we have seen were " nothing ") and also Griffith's; he would have owned the decree as Mrs. Holmes owned it. But that would not result from Brown's consent, however evidenced, but from Griffith's actual ownership of the decree, and his consent to the sale, which would estop him from thereafter setting up any title to the decree.
As essential to such holding as to Griffith's equity, it follows, that the account between him and Brown, at the close of the transaction of August 28, 1876, stood thus: Griffith had loaned to Brown $22,000 of stock; Brown had advanced to Griffith in money, $21,760.53. Of this $600 was paid to Griffith and his attorneys, and $25 to the lawyers of the bank. Waiving and not deciding the question of usury, Brown was, on the morning of August 29, 1876, indebted to Griffith as follows :
On the Holmes decree, $13,808.65
On the bank judgment, 7,233.33
For balance on said stock, 958.02
Total, $22,000.00
Brown had a right to pay both judgments and the balance of $958.02, by returning the stock within the time stated in their agreement. If he failed to do so he had agreed to pay Griffith interest on the whole debt at 8 per cent, and count the stock as worth 20 per cent, premium.
Another necessary result of the recognition of Griffith's equity, was that he held the decree and judgment as owner; and not as collateral security. They werepareel of Brown's debt to him, and not pledges securing that debt.
This follows inevitably the holding that the money paid to Mrs. Holmes and to the bank, was Griffith's money, and not Brown's.
The trial courts, in effect, found that, on August 29, 1876, Brown owed
To the bank on his notes, . $22,225.00
To Griffith for the stock, . 22,000.00
On the decree and judgment, . . . 21,041,98
Total, $65,266.98
Brown in fact then owed
To the bank on his notes, $22,225.00
To Griffith on decree and judgment, 21,041.98
To Griffith balance on stock, 958.02
Total, . . $44,225.00
As before stated this debt to Griffith could be paid in stock before default, and bore no interest until default.
Another necessary result of the recognition of Griffith's equity, is that Brown is not entitled to credit for the $5,000 bid, on February 28,1877, by Griffith for the decree; nor for the $3,000 bid for the bank judgment. Under the holding as to his equity, Griffith owned both decree and judgment before, at the time of and after said so-called sale. The sale was a nullity so far as concerned the judgment and decree.
Brown's release of all Ms rights in the judgment and decree made on November 12, 1877, as already stated, passed nothing: He had no rights as to decree and judgment except to pay the balances due upon them.
What effect had Griffith's release (in the same paper) of Brown " from all further liability by reason of said contract, or any indebtedness thereunder arising ? "
This must be construed in the light of the facts and circumstances. These plainly show that the words " all further liability" did not apply to either decree or judgment. The indebtedness referred to by said paper of November 12, 1877, is the indebtedness described in Griffith's letter of February 6, 1877. That letter, and Brown's reply, show that both parties supposed that Brown then owed Griffith $27,177.25, besides owing the decree, the judgment, and the other collaterals. The credits reported to Brown, after the sale of February 28, 1877, were expressly stated to be credits on indebtedness other than the decree and judgment. And the "all further liability" released by the paper of November 12, 1877, was, (all of it,) other than the decree and judgment.
In short, the credit of the $8,000 was nothing but imaginary proceeds of the sale of two " nothings; " Griffith's release of November 12, 1877, was the surrender of an imaginary "further liability;" and Brown's surrender of his rights in the judgment and decree was a surrender of imaginary rights.
A recognition of Griffith's equitable right to be treated as purchaser of the rights of Mrs. Holmes, and of the bank, necessarily involves a recognition of the imaginary value— the nothingness of all of said subsequent transactions touching the judgment and decree, as between Brown and Griffith. Thus the credits of $5,000 and $3,000 to Brown should be cancelled; Griffith's rights in judgment and decree must remain unaffected by the sale of February 28, 1877, or by the release of November 12, 1877, and Brown's surrender of his rights in judgment and decree should be treated as a transfer of nothing.
If good faith was observed, and the facts as to the. sale of February 28, 1877, Brown's antecedent consent and subsequent ratification of that sale, -were as found by the trial courts, Brown is entitled to credit on his indebtedness to Griffith, as we have stated it, for the proceeds of sales made that day of all so-called collaterals, that were, in fact and law, the subject of pledge; — and Griffith, from and after such sale, was absolute owner of such collaterals. He is not bound to account to Brown for profits thereafter made by him out of such collaterals so bought by him ; nor for the proceeds of any sale of either judgment or decree. As soon as Griffith sold either of them to a third party Brown ceased to owe him a sum equal to the actual amoúnt then due upon the judgment or decree, so sold, and became indebted in that sum to the purchaser from Griffith. Brown is not entitled to any credit for any part of the consideration received by Griffith for his sale of the decree to Milburn. As owner of the decree Griffith could sell it at his own pleasure, and Brown has no right to inquire into that consideration.
The note and mortgage of Francis A. Brown and T. P. Brown to John D. Irving, for $5,000, bore date July 24, 1876. The note was payable six months after date to the order of Irving, and was indorsed in blank by him. Both were in possession of T. P. Brown on August 28, 1876, and were by him delivered to Griffith's attorney as his pledge to secure his debt to Griffith.
Under these facts the law presumes that the signatures of Mrs. Brown and of Irving were for T. P. Brown's accommodation. See Erwin v. Shaffer, 9 Ohio St., 48. Griffith was bound to take notice of this presumption. Unless the sale of February 1877 passed to the purchaser of this note and mortgage the indebtedness of Brown to Griffith secured by it, such purchaser took only Brown's rights in the note and mortgage. But Brown could not call upon his accommodation co-maker, or indorser, to pay to him anything on the note or mortgage. The purchaser at the sale of February 1877, if he then bought only this note and mortgage, could not collect anything on them because Brown could not. Such a pledge must lose vitality or value, so soon as it becomes separated from the indebtedness it was pledged to secure. As it happened — Griffith, the nominal purchaser, owned that indebtedness, and when he assigned to Milburn he expressly assigned to him a share of that indebtedness. Thus, in fact, the pledge was not separated from the debt secured by it. Without repeating the reasoning touching the judgment, it is sufficient to here say that neither Mil-burn, nor Griffith, can treat this mortgage, or note, as an independent debt; it does not add a single cent to Brown's liabilities. So soon as his indebtedness to Griffith shall have been paid Brown will be entitled to a surrender of the Irving mortgage and note. The credit of $1,00.0 proceeds of sale of this mortgage and note, as of February 28, 1877, should be cancelled for the reasons stated while treating of the $8,000 supposed proceeds of the sale of the decree and judgment.
Milburn stands in Griffith's shoes. He can enforce collection on decree, or mortgage, or both of whatever balance is actually due from Brown upon it, under the views herein before stated. If that sum exceeds the amount of the interest of the bank in said judgment, the excess will belong to Milburn. An account should be taken to ascertain what sum, if any, is due and unpaid upon each of said judgments; whether there was anything due to Griffith from Brown besides said judgments; and a decree should be made securing to each party his rights upon the principles hereinbefore stated.
Judgment reversed.
Martin and Macaitley, JJ. dissent.