author: Dickman, J.

text:
    Barbour v. The Bank.

      Equitable set-off of judgments.

    A manufacturing company, incorporated under the laws of Ohio, borrowed money of a National Bank, at a rate of interest in excess of that prescribed by section 5197, of the Revised Statutes of the United States, and gave its note to the bank for $5,000.00, payable at a future day. The bank, for the accommodation of the company, discounted from time to time, sundry promissory notes indorsed by the company to the bank in the ordinary course of business, and before maturity. Before the maturity of any of the notes, the company became insolvent, and a receiver was appointed, who took charge of all its proper y and assets. The receiver thereafter recovered a judgment against the bank for twice the amount of interest paid by it to the bank on the note for five thousand dollars, as and for the penalty provided for taking interest in excess of the rate prescribed by the Statute of the United States. Subsequently to the recovery of that judgment, the bank obtained two judgments in the same court in which the receiver brought his action, to-wit: one, for the balance due on the note for five thousand dollars, against the company and its sureties on the note, and one, against the company, for the amount due on the discounted promissory notes indorsed by the company to the bank.
    In an action to enjoin the collection of a balance due on the judgment in favor of the receiver, and for other relief, held:

    That after the appointment of the receiver, and the rendition of judgment on the respective claims of the company and the bank the judgments in favor of the bank, were, upon principles of equity, a proper subject of set-off against the judgment in favor of the receiver.
    (Decided January 31, 1893.)

      Error, to the Circuit Court of Seneca county.
    The original action was commenced in May, 1887, in the Court of Common Pleas of Seneca county, bjr The National Exchange Bank, of Tiffin, Ohio, one of the defendants in error, against The Ohio Shoe Company, Elizabeth O. Sneath, administratrix of Alfred G. Sneath, deceased, Rezin W. Sha whan, and Anson C. Barbour, receiver of The Ohio Shoe Company, the plaintiff in error.
    The record discloses the following state of facts:
    “On the 8th day of June, 1878, The Ohio Shoe Company, a manufacturing corporation organized under the laws of Ohio, having become insolvent, the plaintiffm error, Anson C. Barbour, wras appointed as receiver of the property of the corporation in an action brought against it by Alfred G. Sneath to subject its property to the payment of its debts; Sneath being liable as its surety upon a large part of its indebtedness then past due.
    “Immediately upon his appointment, Barbour, as such receiver, took charge and possession of all the property and assets of the corporation, and under the orders of the court, has been converting the same into money, and still holds the same, and the fund now in his hands is the only property or fund applicable to the payment of the debts of the corporation, and the same is insufficient to pay the debts in full; and the corporation is wholly insolvent; has long since abandoned its organization, and its stockholders are also insolvent.
    “ On the 8th day of June, 1881, Barbour, as such receiver, recovered a judgment against The National Exchange Bank of Tiffin, Ohio, for the sum of $6,655.80, in the Court of Common Pleas of Seneca county, Ohio, as and for the penalty against the bank, prescribed by section 5198 of the Revised Statutes of the United States, for taking interest in excess of the rate prescribed by law, from The Ohio Shoe Company. That judgment was reversed by the District Court of Seneca county, on the petition in error, filed therein by the bank, and upon petition in error to the judgment of reversal, filed in the Supreme Court by the receiver, against the bank, the judgment of the district court was reversed and the judgment of the common pleas in favor of the receiver was affirmed by the Supreme Court on the 26th da}^ of April, 1887. (Barbour v. National Exchange Bank, 45 Ohio St. 133). At the. time Barbour was so appointed receiver of The Ohio Shoe Company it was indebted to the bank in the sum of $5,000.00, which indebtedness was then evidenced by a promissory note for $5,000.00 dated April 17, 1878, payable ninety days after date, and signed by The Ohio Shoe Company, and Alfred G. Sneath and R. W. Shawhan, as its sureties. Said note was taken up at maturity and a new note for $5,000.00 dated July 20, 1878, payable ninety days after date, and signed by The Ohio Shoe Company and its said sureties, given in its stead. At the maturity of the last mentioned note, $2,500.00 was paid thereon, and a new note for $2,500.00, dated October 20, 1878, payable ninety days after date, and signed by The Ohio Shoe Company, and its sureties, was given in the renewal of the amount unpaid on said $5,000.00 note so lastly taken up, and on the 21st da}*- of Januar}-, 1879, said $2,500.00 note was taken up and the note for $2,500.00 dated January 21, 1879, paj^able ninet3r da3^s after date, and signed by The Ohio Shoe Company,-and Alfred G. Sneath and R. W. Shawhan, as its sureties, was given.
    “On the 25th day of June, 1881, the bank obtained a judgment for the sum of $2,857.38, in the common pleas of Seneca county, against The Ohio Shoe Company, and Alfred G. Sneath, and Rezin W. Shawhan, as its sureties, upon said note dated Januar3r 21, 1879, the judgment to bear interest at eight per cent, per annum. No execution was ever issued on the last named judgment, and at the time of the commencement of the action below, that judgment appeared to have been satisfied of record, said satisfaction having been entered by mistake, March 25, 1884.
    “On the 5th áscy of February, 1883, the bank, in the court of common pleas of Seneca couut3^, recovered another judgment against The Ohio Shoe Company, for the sum of $2,200.98, upon the liability of the corporation as indorser upon certain promisso^ notes, discounted by the bank prior to the appointment of the receiver, but upon ■which no cause of action accrued to the bank against The Ohio Shoe Company, as such indorser, until after the appointment of the receiver. A part of this judgment bore interest at eight per cent., and a part at six per cent, per annum.
    “After the judgment in favor of the receiver was affirmed by the Supreme Court, the bank filed a motion in the court of common pleas, in the action in which said judgment was rendered against it, to have said $2,200.98 judgment in its favor against The Ohio Shoe Company set off against the iudgment in favor of the receiver. The motion was heard in said court on the 6th of May, 1887, upon the evidence offered in support thereof, and the same was overruled and refused, and thereupon said court rendered final judgment upon the merits upon the question thus presented, in favor of the receiver and against the bank, refusing to allow the set-off. The bank excepted to the decision of the court on said motion, and took a bill of exceptions embodying all the evidence, and it is now prosecuting a petition in error in this court, (No. 2244 General Docket) to reverse the judgment so rendered against it on said motion.
    “Thereupon on the 18th dajr of May, 1887, the bank paid to the sheriff on the execution held by him on the judgment against it in favor of the receiver, the sum of $1,975.53, being the excess due on said judgment over the amount due to the bank from The Ohio Shoe Company, on both of said judgments in its favor, computing interest to that date on each of said judgments, and thereupon brought the action below in this case to enjoin the collection of the balance of the judgment in favor of the receiver against it; and praying that the erroneous entry of satisfaction of said judgment in favor of the bank, might be set aside and held for naught; and praying to have both of said judgments in its favor against The Ohio Shoe Company set off against the balance due to the receiver on said judgment against the bank.
    “The receiver demurred to the petition, and his demurrer being overruled, he answered, and as a second ground of defense, he- pleaded the judgment, refusing to allow the set-off in the original case, in bar, so far as the action related to the judgment for $2,200.98; and as a third ground of defense, set forth the fact that the $2,857.98 judgment was dormant at the time the action was brought.
    “The court of common pleas held that the second ground of defense was good and refused to allow the $2,200.98 judgment to be set off for that reason, but allowed the judgment for $2,857.98 as a set-off against the judgment in favor of the receiver. The case was appealed by both parties to the circuit court, and the circuit court set aside the erroneous satisfaction of said judgment in favor of the bank and against The Ohio Shoe Company, and rendered judgment in favor of the bank, and allowed both of the judgments in its favor against The Ohio Shoe Company, as a set-off against the judgment in favor of the receiver, and enjoined the collection of the judgment in favor of the receiver against the bank as prayed for.”
    A motion for a new trial was made by the receiver, and was overruled. The receiver excepted to the ruling, and prosecutes this proceeding to reverse the judgment of the circuit court.

      Lutes & Lutes, for plaintiff in error.
    1. Should a judgment against a National Bank, for the penalty prescribed for its taking interest in excess of the rate prescribed by law, when recovered against it by a receiver of the insolvent corporation from which it took such excessive interest, be set off against judgments recovered by such bank against such insolvent corporation, upon causes of ac. tion which accrued to such bank against such insolvent corporation after the appointment of such receiver, where the effect of allowing such set-off, would be to prefer such bank over the other creditors of such insolvent corporation, in the distribution of its assets in the hands of such receiver? Section 5075, Revised Statutes; Section 5077, Id; Hade v. McVay, 31 Ohio St.; 231; Fuller v. Steiglitz, 27 Ohio St., 355; Stop's Eq. Jurisp., Secs. 1434, 1435; Bank v. Hemingray, 34 Ohio St., 381; Whitaker v. Busch, Ambler’s Reports, 407; Jordan v. Bank, 74 N. Y. 467; Baker v. Kinsey, 41 Ohio St., 403; Myers v. Davis, 22 N. Y. 489; Martin v. Kunzmuller, 37 N. Y. 396; Roberts v. Carter, 38 N. Y. 107; High on Receivers, Sections 249, 250, 251 and 252; Ramsey's Appeal, 2 Watts. 230; Diehl v. Friester, 37 Ohio St., 473; Blount v. Windley, 5 Otto. 173; Barbour v. National Exchange Bank, 45 Ohio St., 133; High on. Receivers, Section 250; Osgood v. Ogden, 4 Key’s (43 N. Y.) 70; Bank v. Trimble; 40 Ohio St., 629; Crocker v. Bank, 4 Dillon, 358; Thompson’s National Bank Cases, 317: Storm v. Weddel, 2 Sandf, Ch. 494; Barnett, Assignee v. Muncie National Bank, 8 Otto, 555; Oriental Bank v. Freeze, 6 Shep. (Me.) 109; Lucas v. Government National Bank, 78 Penn. St., 228; Overholt v. National Bank of Mt. Pleasant, 82 Penn. St., 490; Bank of Chambersburg v. Commonwealth, 2 Grant, 348; Rouse, Trustee, v. The Merchant's National Bank, 46 Ohio St., 493; Holmes v. Robinson, 4 Ohio, 90.
    2. When such bank refused to exercise the privilege which it had by way of jacus penitentim of applying the excessive interest so taken as a credit upon the indebtedness of such corporation upon which such interest was paid, before either of said judgments were rendered, is it not now bound by its election then made, and in equity estopped from asking to have its judgment against such corporation now set-off against the judgment in favor of the receiver? Duncan v. First National Bank of Mt. Pleasant, 11 Bank Mag., 787; Higley v. The First National Bank of Beverly, 26 Ohio St., 75; Love v. Freer, Wright’s Report, 412.
    3. Said bank having failed to make application for such set-off after such judgments were rendered, until after its judgment against said corporation became dormant by lapse of time, can it now) in the same action, ask to have the judgment in its favor revived against such insolvent corporation, and when so revived, have the same set-off against such judgment in favor of the receiver, where the effect of allowing such set-off, will not only prefer such bank over the other creditors, in the distribution of the assets of such insolvent corporation, in the hands of such receiver, but will also compel such receiver, out of the trust fund in his hands, to pay such bank interest on such judgment in its favor during such lapse of time, at a greater rate than such bank is required to pay during the same time, on such judgment in favor of such receiver?
    4. Is the refusal of the court to allow such set-off, upon motion made for that purpose, in the action in which such judgment in favor of said receiver was obtained, not a final judgment, and until reversed, a bar to a subsequent action brought for that purpose, when the facts stated in the petition, |in such subsequent action, are the same as those set forth in the motion made in the original action? Mayer v. Wick, 15 Ohio St., 548; Hyatt v. Bates, 35 Barb. 316; Holmes v. Remson, 7 Johns. Ch. 290; Diehl v. Friester, 37 Ohio St., 473; Simpson v. Hart, 1 Johns. Ch. 91.

      Brewer & Brewer and John McCauley, for defendant in error.
    The bank asks that these two judgments, which it held against the shoe company, should be set off against the judgment which Barbour, as the receiver and representative of the shoe company, had against the bank. Would anyone doubt this if The Ohio Shoe Company had not been put into the hands of a receiver, and it had obtained this judgment in its own name? Could, or did, the appointment of the receiver in any way change the rights of the parties as to the claims that were then in existence, or take from the bank any right which it might have ? It was not a party to the suit appointing the receiver. No new right was thereby secured to The Ohio Shoe Company, or its creditors, or any rights thereby taken away from the bank. The right to set off, counter-claim, or defense, is not impaired by any assignment. Sec. 4993 and Sec. 5077 Revised Statutes; 31 Ohio St., 231; Sec. 5075, Revised Statutes; Holmes v. Robinson, 4 Ohio, 90; Brooks v. Harris, 41 Ind. 390; Rix v. Nevins, 26 Vt., 384; Wright v. Mooney, 6 Ired. 22; Kimball v. Munger, 2 Hill, 364; 7 Wait’s Actions and Defenses, 526; Temple v. Scott, 3 Minn. 419; Simpson v. Hart, 14 Johnson, 63; Waterman on Set-off, 404, 473.

      It is not res 'judicata. A decision of a court of law on motion and affidavit is not such a res judicata as will conclude another court from inquiry into the case. Arden v. Patterson, 5 Johnson’s Chancery, 54; Simpson v. Hart, 14 Johnson, 62; Waterman on Set-off, 403, 466; 11 Cal. 93.
   Dickman, J.

The principal question that arises in determining the rights of the parties in the case at bar is, whether The National Exchange Bank is entitled to have the judgments it recovered against The Ohio Shoe Company set off against the judgment recovered against it by Barbour, as receiver of the shoe company.

At the time of the appointment of the receiver, on June 8th, 1878, the notes upon which the bank afterwards recovered judgments had not matured, and hence no cause of action thereon had then accrued.

The shoe company had not availed itself of the right under section 5198 of the Revised Statutes of the United States, to recover back, in an action in the nature of an action of debt, twice the amount of the interest paid to the bank. The right to the amount recoverable as and for a penalty against the bank had not then become vested. As said in Oriental Bank v. Freese, 18 Maine, 112. “When a party, by the statute provisions, becomes entitled to recover a judgment in the nature of a penalty, for a sum greater than that which is justly due to him, the right to the amount, which may be so recovered, does not become vested till after judgment.” And until there was a change in the nature of the cause of action of the shoe company, there could be no statutory set-off of the shoe company’s claim. Under section 5075 of the Revised Statutes, “A set-off can only be pleaded in an action founded on contract, and must be a cause of action arising upon contract, or ascertained by the decision of a court.” But in an action authorized by the national banking act of 1864, to recover back from the bank, as penalty, twice the amount of interest paid, the cause of such action does not arise upon contract within the meaning of section 5075, and, therefore, is not available as a set-off. Hade v. McVay, 31 Ohio St., 231. The receiver, therefore, could not have set-off the demand for twice the interest paid, against the claims of the bank, as such demand was not a cause of action arising upon contract; and the bank, it is contended, could not, as defendant,-have set off its claims against the demand of the receiver, in an action that was not founded on contract.

But, after the appointment of a receiver, the respective demands of the bank and shoe company were put into-judgment, and thereafter they stood on a level as subjects, of equitable set-off, whether arising on contract, or growing out of a forfeiture or penalty. The provisions of the statute relating to set-off, do not, in terms, apply to the set-off of one judgment against another; but doubtless those provisions will be applied whenever they are in their nature applicable, upon careful consideration of all the circumstances of the transaction out of which the judgments arise. Diehl v. Friester, 37 Ohio St., 473. In Holmes v. Robinson, 4 Ohio, 90, the court say: “The practice of setting off one judgment against another, between the same parties, and due, in the same rights, is ancient and well established.”' In Ramsey's Appeal, 2 Watts, 230, Gibson, C. J. observes: “Judgments are set off against each other not by force of the statute, but by the inherent powers of the courts immémorfelly exercised.” The practice of thus setting off one judgment against another is addressed to the discretion of the court; and being discretionary, the propriety of its exercise cannot be questioned on appeal. Davidson v. Geoghagan, 3 Bibb. 233; Scott v. Rivers, 1 Stew & Port. 24; Biirnssr. Thornburgh, 3 Watts, 78; Tolbert v. Harrison, 1 Bailey, 599; Coxe v. State Bank, 3 Halst. 172; Simpson v. Lamb, 40 Eng. L. & Eq. R. 59 (Q. B.); Chipman v. Fowle, 130 Mass. 352.

The doctrine is distinctly stated in Chandler v. Drew, 6 N. H. 469, that, when the mutual claims of parties have passed into judgments, it is the practice of courts to set off one judgment against another; that this practice does not rest upon any statute, but upon the general jurisdiction of courts over the suitors in them; and that it is an equitable-jurisdiction, frequently exercised. And, as before suggested, demands which in their nature cannot be made the subject ■of set-off, such as demands arising upon personal, torts, as ■soon as they are put into judgment, are placed upon the ■same legal footing as all other judgments, irrespective of the nature of the action in which they were recovered; or, in other words, all the peculiar features which may have ■characterized a claim are at once lost sight of, and merged when judgment is perfected on it, and the demand takes rank equally among all other judgments. Temple v. Scott, 3 Min. 419; Sampson v. Hart, 14 Johns. 63.

Such equitable considerations as are usually deemed sufficient by courts for setting off judgments against each other, exist, we think, in the present case. The judgments of the parties are subsisting and unsatisfied claims; they were rendered in the same court; the interests of virtually the same parties are involved; and the shoe company is conceded to be insolvent. In Diehl v. Friester, supra, it is said in the opinion of the court, “Even the fact that the judgments are in different courts, one for a tort and the other on contract, ■and some of the parties in one case were not parties in the other, does not necessarily afford an inseparable objection to ■such set-off.”

The insolvency of the party, against whom the set-off is claimed, is recognized in numerous authorities, as a sufficient ground for the exercise of the jurisdiction of a court of ■equity in allowing a set-off in cases not provided for by they statute, and that too, although the demands on both sides are not liquidated by judgment or decree, so as to authorize a set-off upon a summary application by motion.

In Lindsay v. Jackson, 2 Paige, 581, in which there is a review of authorities, the complainants, in May, 1831, gave to the defendants two negotiable promissory notes, for the sum of about $1,500 each, payable in six months, without interest. About the same time the defendants became indebted to the complainants, on an acceptance for $4,000, payable on the 13th of June. A few days before this acceptance became due, the defendants became insolvent, and stopped payment. In July, 1831, the complainants filed their bill in the cause to restrain the defendants from negotiating or transferring the notes; and praying that the amount-to become due thereon might be set off, or applied in part satisfaction of the $4,000 due on the acceptance. An injunction having been granted, according to the prayer of the bill, the vice-chancellor denied a motion for a dissolution of the same, and Chancellor Walworth affirmed the decision of the vice-chancellor. See also Gay v. Gay, 10 Paige, 369, referring to Lindsay v. Jackson.

In Pond v. Smith, 4 Conn. 302, the Supreme Court held that the insolvency of one of the parties was a sufficient ground for the interference of a court of chancery to offset mere legal demands against each other, although they were so situated as to be incapable of being set off at law; and that the complainant ought not to be left to pursue his legal remedy against the defendants, when, from their insolvency, no satisfaction of his demand could be thus obtained.

In Collins v. Farquar, 4 Litt. 153, the Court of Appeals of Kentucky recognized the principle that the insolvency of the defendant will, in equity, give the court jurisdiction to decree a set-off of a demand against him, which might be recovered in an action at law, if he was solvent.

In White v. Wiggins, 32 Ala. 424, it was held, that one legal demand may be set off against another in equity, when the defendant is insolvent.

In Field v. Oliver, 43 Mo. 200, it was said by the court, that where the demand sought to be set off is certain and definite, and the insolvency of the adverse party is admitted) the chancellor has jurisdiction to retain the matter and give full and final redress by decreeing a set-off or any other relief consistent and proper in the case; that the rule is founded in reason and justice, and will be enforced when a proper case is made out justifying its application.

The same doctrine is declared in many other cases, but it is unnecessary to cite or collate them.

It is urged, however, that although as between the bank and the shoe company, the one might have set off its judgments against that of the other if there had been no receivership, yet, after the appointment of a receiver, the claims of creditors supervened, and such right on the part of the bank no longer existed. Granting that before and at the time of the receiver’s appointment, there was no right, under the statute, to set off the bank’s claims against that of the shoe company for excessive interest paid, in our view, an equitable set-off then existed which the appointment of a receiver did not impair. The rule, that an equitable off-set which the debtor of an insolvent corporation has at the time the corporation stops payment, is not altered by the appointment of a receiver, is well settled. Miller v. Receiver of Franklin Bank, 1 Paige, 444; Matter of the Receiver of the Middle District Bank, 1 Paige, 585. Any defense or set-off which the debtor might have urged in an action brought against him by the corporation itself, may still be made in an action brought against him by the receiver. High on Rec. § 318. The shoe company at and prior to the appointment of the receiver was insolvent, and if before the receivership the shoe company, while thus insolvent, had sued the bank to recover the penalty for taking excessive interest, and if the bank could not then have had the right of set-off under the statute, yet, on just and equitable grounds, and upon a proper valuation of the bank’s claims not matured, we think the bank would have been entitled to an equitable set-off against the claim of the shoe company. Nor would such an equity in favor of the bank have ceased to exist, because’ afterwards a receiver came in to wind up the affairs of the insolvent shoe company.

The argument, that by allowing the judgments to be set off, the fund for the benefit of the creditors of the shoe company will be thereby diminished, resulting in an inequality of distribution among the creditors, does not commend itself to us. Upon equitable grounds, we may apply the language of the vice-chancellor, in the matter of the Receivers of the Globe Insurance Company, 2 Edw. Ch. 625 : “ A set-off in such case is not a means of paying one debt in preference to other debts which the bankrupt or insolvent owes; for, to the extent of the demands set off or compensated, there was no debt—from the moment they were contracted, they extinguished each other. Hence, the operation of the set-off is, not to pay, but to ascertain a debt made up of the difference between the amounts of respective debits and credits.” So far as it concerns the diminution of the resources of the shoe company for the payment of its obligations, its assets for that purpose would be none the less by reason of a set-off of the bank’s judgments, than they would be if the bank, prior to the receivership, had exercised its right of voluntarily crediting on its claims twice the amount of interest it had received, and paying the balance.

Without attempting to determine the relations of the parties in the forum of conscience, it is quite manifest, that in a pecuniary point of view, the other creditors of the shoe company received no appreciable detriment from the dealings of the company with the bank. The shoe company recovered judgment for twice the interest it ever paid, and thus secured a clear gain equal to the amount of interest stipulated, and in addition, had substantially without charge the use of all the money borrowed of the bank. Instead of decreasing the assets of the shoe company, the transactions with the bank operated rather to increase the same.

After the judgment in favor of the receiver was affirmed by the Supreme Court, the bank filed its motion in the court of common pleas, in the action in which the judgment was rendered against it, to have the judgment for $2,200.98 in its favor against the shoe company set off against the judgment in favor of the receiver. That motion was overruled, and the court refused to allow the set-off. It is now contended that the decision of the court in overruling the motion was res judicata, and hence, that the circuit court, in the present case, erred in allowing the judgment to be set off. Whether the court of common pleas erred in overruling the motion of the bank, is a question now pending in this court on petition in error in another case—No. 2244 on the General Docket. The right of the bank, therefore, to set off against the judgment recovered by the receiver not only the judgment for $2,857.38, but also that for $2,200.98, is directly before us for determination. How far the adjudication of the court of common pleas on the motion of the bank to set off the judgment was conclusive upon the circuit court, we do not deem it necessary to decide in determining the rights of the parties to this action.

For the reasons stated, we are of the opinion that the judgment of the circuit court was right, and should be affirmed.

Judgment of affirmance.


source: Caselaw Access Project

author: Bradbury, J.

license: Public Domain

text:
    Commissioners v. Rosche Bros.

      Taxation—Constitutional law.

    The act entitled “an act to provide for refunding of taxes erroneously paid under section 2742, Revised Statutes of Ohio, in counties containing a city of the first grade of the first class,” passed April 16,1890 ( 87 Ohio Taws, 212), in so far as it imposes an obligation on the county of Hamilton, on account of past transactions, is retroactive and in conflict with section 28, of Article II> of the constitution of this state.
    The subject of the act is in no respect local, but is of general interest to all the inhabitants of this state, and special legislation thereon is prohibited by section 26, article II, of the constitution of this state, which requires all laws of a general nature to have “a uniform operation throughout the state.”
    (Decided January 24, 1893.)
    Error to the Circuit Court of Hamilton county.
    The defendants in error brought an action in the court of common pleas of Hamilton county to recover taxes that had been illegally assessed against them and which they had paid. They recovered a judgment in the court of common pleas, which was affirmed by the circuit court upon proceedings brought by plaintiffs in error for its reversal, and they now seek in this court a reversal of the judgments of both of said courts. The facts will be found in the opinion of the court.

      Spiegel & Bromwell, County Solicitors, for plaintiffs in error.
    I. The law does not apply to claims arising before the passage of the law under which this suit is brought. The well settled rule of interpretation is that an act of the legislature is always prospective in its operation, and never retrospective, unless made so by its terms, and when retrospective by its terms it can only be so in limited instances, and never where it disturbs vested rights.
    If, however, the act is retrospective as applying to cases before its passage, then we have the case of a piece of legislation, as already claimed, creating an obligation against Hamilton county, as a county, out of a claim not only illegal and dead at the time, but outlawed as well; out of a claim, too, wholly inequitable as against the county, which is sought to be made responsible for money paid as taxes to the city and to the state, while the county has received only ■g of the entire amount of the claim made against it.
    The legislature is restricted to the exercise of legislative power, and dare not invade the judicial branch of the government.
    The act upon its face requires the courts to find and decide that a voluntary act was an involuntary act; that in case of a voluntary payment, although it appears that a return was voluntarily made and the taxes voluntarily paid ' without protest, the court is required by the law to decide in a most arbitrary manner that such a payment was involuntary. Cooley on Constitutional Eimitations, 112, 113 and 114; Greenough v. Greenough, 11 Pa. St., 489, 494; Calhoun v. Lendin, 42 Geo. 405; Haley v. Philadelphia, 68 Pa. St., 45, 47; Mayor v. Horn, 26 Md., 104; Schooner Aurora Borealis v. Dobbie, 17 Ohio, 125, 127.
    II. Retrospective laws are forbidden by the Ohio Constitution, except: To carry into effect the manifest intention of parties. To cure omissions, defects and errors in instruments and proceedings. Ohio Constitution, art. 2, sec. 28. ?

      If the act of 1890, O. L. 87, page 212, is prospective,- it has, of course, no application to this suit, because it arose before the act was passed. If the act is retroactive, then plaintiffs cannot bring their suit thereunder, because the act does not come within the exception for which retroactive acts may be passed, as above shown.
    This suit, even if it were a valid claim for which recovery might have been had, became barred by the statute of limitation in one year after payment. Revised Statutes secs. 5848, 5849, 5850; Willoughby v. George, 5 Col. 80; Cooley on Constitutional Eimitations, 448; Sutherland on Statutory Construction, 626; Sedgwick on Construction of Statutory and Constitutional Eaw, 173; Story, Const., sec. 1399; Bond v. Bank, 5 Col. 83; Trustees v. McCaughly, 2 Ohio St., 153; Lewis v. McElvain, 16 Ohio, 355.
    III. This is a law of a general nature, relating to state, county and local taxation. Here is a discrimination in favor of one class of citizens, who have privileges in recovering taxes which they have paid, which is denied to a vast majority of the people of the state. If a law relating to state taxes, and to a blank provided by the State Auditor for use all over the state is a general law, then to be operative and valid it must have force throughout the whole state. General laws must have a uniform operation throughout the whole state. If a punishment is provided, or a privilege is granted, in which the whole state is interested, then it is a general law, and the operation must not by the act be confined to a peculiar locality, or to a limited number of persons. If it does, it is not a valid act. The subject matter of the act in question being taxes, all the citizens of the state are interested in it. The recovery of taxes erroneously paid is something of interest to all the people, as all the people have paid these erroneous taxes. And yet only a limited number are permitted to have the benefit of this act.
    Brief of Smith cf Martin, and Reemelin & Reemelin, for defendants in error.
    I. The first objection to the constitutionality of the act is quickly disposed of. In as much as the act itself is a new act, an independent act, and is not and does not purport to be the amendment of any preceding act, and has never had any judicial interpretation, it is very clear that it does not interfere with any thing the courts have done. It is not an amendment to chapter 13, division 7, section 5848 and 5852, inclusive, of the Revised Statutes. It is a new cumulative remedy to be interpreted by what it says and not by any thing contained in said chapter 13. Though the words “involuntary payment” are used, the act defines what facts constitute that “involuntary payment” to entitle the party to his relief.
    Counsel for plaintiff in error, in his brief, claims as one of the reasons why this statute in question is an interference with the power of the judiciary, upon the part of the legislature, that the error complained of was one that, the party could have guarded against, and was one that' heretofore under the statute could not be recovered for.
    The legislature has time and again exercised the very authority that counsel complains of, and it has, from time to time, enlarged the class of errors for which a recovery could be had under the statute. This has been the case under section 1038 of the Revised Statutes of Ohio. 31 Ohio St., 271.
    II. The act is not retroactive so as to bring it within the restrictions of the 28th section of the 2nd article of the constitution. Rairden v. Holden, 15 Ohio St., 210; Seeley v. Thomas, 31 Ohio St., 301, 307; Railroad v. Commissioners, 31 Ohio St., 345; Trustees of Green Township v. Campbell and others, 16 Ohio St., 11, 16; Miller & Swan v. Graham, 17 Ohio St., 1; Burgess et al. v. Norris, Treasurer, 25 Ohio St., 308, 316.
    For another reason this act is valid. It is an attempt to equalize taxation. The defendants in error have paid as taxes more than they ought to pay. It is right that it be' refunded. It could be done by a direct appropriation by the legislature, or by the more usual and proper way, as in this case, a new remedy through the usual tribunals. The State ex rel. Bates v. Richland Township, 20 Ohio St., 362; The State v. Hoffman, 35 Ohio St., 435, 443; The State v. Harris, 17 Ohio St., 608; Gager v. Prout et al, 48 Ohio St., 89,107; Shurges v. Carter, 114 U. S. 511.

      III. The act in question is not a law of a general nature. The nature of a given statute, as being general or special, must depend in a measure upon the legislative purpose discernible in its enactment. People v. C. F. R. R. Co., 43 Cal., 433; State v. Shearer, 46 Ohio St., 277; Magill v. The State, 34 Ohio St., 228; The State v. The Judges, 21 Ohio St., 1; The State v. Covington, 29 Ohio St., 102.
    The act in question by an examination of it, shows that it is not one in regard to the refunder of taxes generally in the state of Ohio, or affecting the question of general taxation in that state. The money if paid back at all, is to be paid back by money in the county treasury of Hamilton county, “belonging to said county in the county treasury.”
    Hence, there is nothing in the statute or in the refunding of the money in which any other locality in the state of Ohio is interested, except the locality in which the money has been erroneously paid. It affects no state interests. It affects no state school fund. It affects no state institutions; in fact, it only affects the question of the expenditure of money, which arises, and is in the county treasury, from the taxes paid to' the county, not the state, by the citizens of the locality in which the act takes effect.
    Again the act is not a local or special act, for this reason; it is an act to provide for refunding of taxes erroneously paid in counties containing a city of the first grade of the first class. Any county in the state of Ohio that now contains a city of the first grade of the first class, or that may hereafter have a city of the first grade of the "first class within its limits, will come under the operation of this statute without any further legislation upon the part of the state or of the officials of said county, and therefore following the rule as laid down and by this court, in regard to statutes passed affecting cities of the first grade of the first class, the act' must be held to be a general statute and not a local statute. State v. Pugh, 43 Ohio St., 99; State v. Wall, 47 Ohio St., 499; State v. Smith, 48 Ohio St., 211.
    Brief of Foraker, Black & Bosworth, for defendants in error.

      I. The law applies to claims arising before its enactment, as well as to claims arising thereafter. No rule of law requires that the statute be given only prospective operation. It is remedial, and may, therefore, apply to past as well as future claims that come within its terms. Rairden v. Holden, 15 Ohio St., 207; Templeton v. Kramer, 24 Ohio St., 554; Peters v. McWilliams, 36 Ohio St., 155.
    II. The act is not aUegislative interference with the judiciary, because: 1. The words or term “ involuntary payment ” is not essential to the completeness or purpose of the statute. It is simply surplusage, and may be disregarded. 2. If it were otherwise, its use would not have the effect of making the act an interference with the judiciary, since “involuntary payment” is not a constitutional term. 3. The act in question does not interfere with the right of courts to construe and interpret an existing statute, to-wit; Section 5848, as claimed by the plaintiff in error.
    III. The law is not retroactive, because: 1. It does not take away or impair any vested rights acquired under preexisting laws. 2. It creates no new obligation, imposes no new duty, and creates no new disability. Rairden v. Holden, 15 Ohio St., 207. 3. The act creates no new liability, duty or obligation against the county, but merely provides a remedy, where none existed by law theretofore, for the enforcement of a just and equitable claim. 4. The law must be sustained, because in furtherance of equity, and even if retrospective as to operation, the statute is unobjectionable, because in furtherance of equity. Trustees v. McCaughy, 2 Ohio St., 153.
   Bradbury, J.

The defendants in error were tanners, engaged in the city of Cincinnati, in manufacturing leather from the skins of animals. In the years 1875, 1876, 1877 and 1878, the auditor of state provided blank forms to be used by the assessors in the several townships and wards of the municipalities of the state, to secure a uniform listing for those years, of the personal property within the state subject to taxation, and upon this form promulgated certain instructions to aid the assessing officers and property owners to determine what property should be listed and the proper method of listing it.

This form, with the instructions printed upon it, was provided and furnished to the county auditors of the several counties throughout the state. Among the instructions thus given by the auditor of state was the following: “Manufacturers must include the average value of raw material used and on hand in the manufactured and unmanufactured articles.” Pursuant to these instructions the defendants, in the years above named, listed not merely the average monthly value of the raw material “ purchased received or otherwise held,” to be used in manufacturing, but included also the average value of the raw material in manufactured articles on hand or in process of being manufactured. The defendants in error in the original action sought to recover the taxes that they had paid upon the raw material that was in the manufactured and partly manufactured articles on hand. These taxes were all paid, and all the assessments, except that of 1875, were made after it had been held by the Supreme Court Commission, that raw material in manufactured and partly manufactured articles was not taxable. Sebastian, Treas. v. Ohio Candle Co., 27 Ohio St., 459.

In 1881 the defendants in error, and a number of others in like situation, including Eckstein, Hill & Co., manufacturers of white lead, etc., filed claims with the county auditor of Hamilton count}'', for the refunder of the taxes thus paid by them respectively. Payment being refused, Eckstein, Hill & Co. brought an action in the Court of Common Pleas of Hamilton county against the county commissioners of that county to enforce their claim; they prevailed in that court; whereupon the county commissioners instituted proceedings in the District Court of Hamilton county to reverse the judgment of the court of common pleas. The district court reversed the judgment of the court of common pleas upon the ground that in law there was no right of recovery. Commissioners v. Eckstein, Hill & Co., 4 W. L. B. 989. Which judgment of the district court was afterwards affirmed by this court. In the year 1890, after these adverse decisions had been made, and relief denied to parties situated like the defendants in error, the General Assembly passed the following act. 87 Ohio Laws, 212.

“ That if in anjr county containing a city of the first grade of the first class, the com^ or state auditor has sent by any assessor to any person, firm or corporation a blank upon which to return property for taxation, under section 2742 of the Revised Statutes of Ohio, with instructions in said blank showing and directing such person, firm or corporation how the said return should be made of such property for taxation, which instructions have been erroneous and contrary to the said section 2742, and such person, firm or corporation has made return in accordance with such erroneous instructions, and by reason of following said erroneous instructions, said person, firm or corporation has returned for taxation, and paid taxes upon property which, under the said section 2742 should not have been listed, such listing and payment shall be held to be involuntary, and the court of common pleas of said county, in an action brought by any such person, firm or corporation against the county commissioners of said county, and upon lawful proof of any such involuntary payment, shall render judgment for the recovery of the amount of said payment, but without interest oncosts; and thereupon such county commissioners shall cause the same to be paid out of any unexpended funds belonging to said county in the county treasury. Provided, however, that no taxes so erroneously paid shall be so sued for and refunded by said county commissioners unless a claim in writing, duly verified by such person, firm or corporation, has been filed and presented therefor with the county auditor of such county within six years from the time of payment of such erroneous taxes.”

Upon this statute the defendants in error predicate their right to recover. The plaintiffs in error assail its constitutionality upon three distinct grounds, only two of which we think it necessary to consider; (1) its retroactive character and effect, and (2) that it is special legislation on a subject of a general nature.

However steadily we may keep in mind the general rule, that statutes should be construed to operate prospectively •only, when susceptible of that construction, there still remains little, if any, doubt, that the legislature intended the above quoted statute to operate retrospectively; and it is only little less certain that the object was to vitalize the •claims of the defendants in error, and of others in Hamilton county in like situation. At least the language of the statute is explicable upon no other hypothesis than that it was intended to operate upon past transactions; the only doubt in this respect is whether its operation should not be limited to past events, and its prospective operation denied altogether. The words of the statute uniformly refers to the past, in prescribing the circumstances that are to set it in operation. The language is, “ If any * * * auditor ‘has sent’ a blank with instructions, which instructions ‘have been’ erroneous, and a return ‘has been made’ accordingly,” etc., then a recovery may be had. The statute, therefore, should be held to be retroactive, and apply to the state of facts that constitutes the cause of action of the defendant in error.

However every statute that is designed to act retrospectively is not retroactive within the terms of section 28, of art. II, of the constitution of 1851, which forbids the general assembly of this state to pass “retroactive” laws. Whether a statute falls within the prohibiton of this provision of the constitution depends upon the character of the relief that it provides. If it creates a new right, rather than affords a new remedy to enforce an existing right, it is prohibited by this clause of the constitution of this state.

Judge Story defines a retrospective, or retroactive law, as follows: “ Upon principle, every statute, which takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability in respect to transactions or considerations already past, must be deemed retrospective.” The Society, etc. v. Wheeler, 2 Gall. 104-139. This definition was approved by this court in Rairden et al. v. Holden. 15 Ohio St., 207. It was also adopted by the Supreme Court of the United States in Sturges v. Carter, 114 U. S. 511.

The statute under consideration, when tested by these principles, operates retroactively in its application to the claim of defendants in error. The last payment of the taxes that they sought to recover, was made more than nine years before the law was passed. The property had been listed and the taxes thereon paid voluntarily. They interposed no objection or protest to the payment, nor was any threat or offer made by the county treasurer to compel payment by summary or other process provided by statute for that purpose. For money paid under these circumstances the well settled law of this state, as it then stood, and remained up to the time of the passing of this statute, forbid a recover}'. Mays v. Cincinnati, 1 Ohio St., 268; Marietta v. Slocomb, 6 Ohio St., 471; Wilson v. Pelton, 40 Ohio St., 306; Whitbeck, Treas. v. Minch, 48 Ohio St., 210. Nor did the circumstances under which it was listed constitute such an error as might be corrected, and a refunding order drawn by the county auditor by virtue of sec. 1038, Revised Statutes, for the excess that was thus paid. State v. Commisioners, 31 Ohio St., 271; State ex rel. v. Cappellar, 5 W. L. B., 833. Therefore when the defendants in error voluntarily, though erroneously, listed their property, and voluntarily paid the taxes assessed upon it, neither by statute nor by any principle of the common law as administered in Ohio, was an obligation imposed upon the county of Hamilton to refund the money received. If such an obligation had existed, the forms of procedure then provided by our system of practice, were ample to afford complete relief. The obstacle in the way of the defendants in error was not inadequate methods of procedure, but the absence of a law vesting in them a right of recovery. This want the statute under consideration attempted to supply.

This statute, it is contended, is remedial, and remedial statutes may be retroactive. It is remedial no doubt, in that enlarged sense of that term, where it is employed to designate laws made to supply defects in, or pare away hardships of, the common law, but not remedial in the sense of providing a more appropriate remedy than the law before afforded, to enforce an existing right or obligation. The statute under consideration provided no new method of procedure; it simply imposed upon Hamilton county an obligation towards these plaintiffs in error that did not attach to the transaction when it occured. In attempting to accomplish this result the legislature transcended its constitutional powers.

Counsel contend that the statute is in furtherance of natural justice, and that the clause of the constitution under consideration does not prohibit retroactive laws of that character. Lewis, trustee v. McElvain, 16 Ohio, 347; Trustees v. McCaughy, 2 Ohio St., 152; Acheson v. Miller, 2 Ohio St., 203; Burgett et al. v. Norris, 25 Ohio St., 308.

To uphold a statute on this ground, where it seeks to create a liability upon a past transaction, where none existed when it occured, if it can be done at all, the natural justice of the object sought to be accomplished should be indisputable. In the case before us no misconduct is chargeable to the officials of Hamilton county. If the defendants in error are to be held free from negligence, and to have been innocently misled, it was the result of the erroneous instructions sent out by the auditor of state. The money that they now seek to recover from the county was voluntarily paid to the treasurer who was bound to receive it. Without notice of any claim to its repayment by defendants in error, he distributed to the city of Cincinnati and the state, their respective proportions of the fund. Under these circumstances the natural justice of requiring the tax payers of Hamilton county to refund, the entire sum is a question upon which minds may differ.

2. The subject of the statute under consideration is the right of the tax payer, who has paid taxes upon property exempt from taxation, to recover from the public the money thus paid, and its object is to ameliorate the supposed harshness of the existing law in this particular. The rights of the tax payer in this respect should be uniform throughout the state, which result can be attained only by a statute designed to operate impartially upon every person -who may bring himself within its beneficient provisions.

True, this court has held that a law is not necessarily one of a general nature, because it relates to a general subject. State ex rel. v. Shearer, 46 Ohio St., 275. In that case the subject of the statute was the erection of certain territory in Stark county into a special school district, a' matter purely local in that, the wisdom of the statute depended upon the peculiar situation of the territory thus set apart, in respect, not only to the location of its parts to each'other, but with reference to the location of the whole of it to the territory by which it was surrounded.

If circumstances can be conceived to exist which would warrant special legislation authorizing a tax payer of one county only to recover from the public taxes that he had erroneously paid, they are not shown in this instance.

It was the duty of the auditor of state to send to each ■county in the state the same instructions for listing property that he sent to every other county therein, and, in the absence of anything in the record to the contrary, it will be presumed that he did so. If these insructions were erroneous, they operated equally throughout the state, and were as likely to cause manufacturers, in counties having no city of the first grade of the first class, to fall into errors in listing their propertj'- for taxation, as they were to cause those manufacturers who resided, or did business", within a county that contained such city; nor did the former any more than the latter have a claim against their respective counties for the refunding of the taxes voluntarily paid on property, erroneously listed by reason of such instructions. And whatever amelioration of the hardships of the existing law in this respect, that the legislature in its wisdom deemed just and right, should have been extended to the whole people of the state without regard to the county boundaries. Otherwise there might be as many different laws on the subject as there are counties within the state, and an action to recover taxes ¡paid in one county could be maintained upon a state of facts that in an adjoining countjr would be wholly inadequate for that pnrpose. This want of uniformity in the laws prescribing the rights and obligations of the inhabitants of the state was the very mischief that section 26 of article II, was designed to prevent. We therefore hold that a statute, like the one under consideration, the object of which is to alter the existing law respecting the right of a tax payer to demand and recover from the public, money erroneously, or mistakingly, paid by him, contravenes section 26, of article II, of the constitution of 1851, unless it is given a uniform operation throughout the state.

The view this court adopts on the power of the general assembly to pass the act upon which the defendants in error predicate their right of action, disposes of the case and renders any consideration of the other questions discussed by counsel unnecessary.

Judgment of the circuit and that of the court of common pleas reversed, and petition dismissed.


author: Spear, C. J.

text:
    Brass & Iron Works Co. v. Payne.

      Partnership—Good will and firm name are property— When retiring partner may be enjoined from using.

    1. The good will of a partnership is a part of the property of the firm; and where a partnership is dissolved, one of the partners transferring to the others all his interest in the firm business and assets with the understanding that they are'to succeed to the business of the old firm, such sale carries with it the seller’s interest in the good will.
    2. Of this goodwill is the firm name; and where the contract of sale reserves to the retiring partner no rights with respect to the firm name, he cannot lawfully use it in a business of a like kind, carried on by him in the vicinity subsequent to such dissolution.
    3. In a proper case a court of equity will perpetually enjoin such unlawful use of the name by the retiring partner.
    (Decided January 31, 1893.)

      Error to the Circuit Court of Seneca county.
    The facts are stated in the opinion.

      Burket & Burket, and J. M. Bever, for plaintiff in error.

      A. L. Brewer, for defendant in error.
   Spear, C. J.

For three years prior to August 4,1888, Walter S. Payne, the defendant, and Nicholas Portz and Charles Foster, were partners, carrying on the business of brass and iron works, and foundry and machine shops, at Fostoria, in the county of Seneca, under the firm name of Walter S. Pajme & Co. The firm had expended about one hundred dollars per year in advertising, and had built up a considerable trade. On the above date an agreement of dissolution was entered into, Payne thereby selling to the other two his entire interest in the firm business and assets. Portz and Foster were to continue in occupancy of the old stand, were to close up the business of the old firm, receive the debts due to, and pay the debts due by, the old firm, and have the use of the firm name for the period of sixty days, or until the 'formation of a corporation within that time for the continuance of the business at the same place. A corporation was subsequently organized bj1- them, in conjunction with three others, under the corporate name of “The Brass & Iron Works Co.,” to which company Portz and Foster transferred all the right and privilege derived from Payne under the contract of dissolution, as well as all their own interest in. the firm of Walter S. Payne & Co., and the business was thereafter conducted at the old stand by The Brass & Iron Works Co. as the successor of the old firm of Walter S. Payne & Co.

After so selling his interest, Payne started and carried on for sixty days, as Walter S. Pa3me, a business similar to that which had been carried on by the old firm, in the meantime purchasing stock and supplies from his former partners at a discount of ten per cent, in excess of discount allowed to other purchasers, which privilege was provided for in the contract of dissolution. After sixt3r days from the dissolution Payne started at a place three blocks from the old stand under the name of Walter S. Payne & Co., and, in various ways, advertised his business as conducted by Walter S. Payne & Co., so as to lead the public to understand that his was a continuation of the old firm, though he did riot seek to take advantage of the pecuniary responsibility of the former firm.

Other facts appear in the record, but the foregoing are believed to be sufficient for an understanding of the point of law involved in the case.

The action below was for injunction to prevent defendant from using the firm name of Walter S. Payne & Co., at Fostoria, in connection with business similar to that carried on by the plaintiff. It was not asked that Payne cease to use his own name alone. The court of common pleas, upon trial, found for the plaintiff. Payne appealed to the circuit court, which court dissolved the injunction and dismissed the petition.

The single question of law presented by the record is whether or not, where a partnership is dissolved, one partner transferring to the others all his interest in the firm business and assets, with the understanding that the others are to succeed to the business of the old firm, and carry it on at the old stand, but not to use the old firm name beyond a specified time, the retiring member can lawfully use that name in a similar business thereafter carried on by him in the vicinity.

We assume it to be settled law that, upon a sale by one partner of all his interest in the joint property and effects, to the others, who are to continue the business, his interest in the good will of the concern goes with the sale, unless stipulated otherwise. Good will is defined in Churton v. Douglas, Johnson’s (Eng.) Chy. 174, as “ every advantage that has been acquired by the old firm in carrying on its business, whether connected with the premises in which the business was previously carried on, or with the name of the late firm.” Of this good will the firm name is an important part. It is in the nature of property, and is so treated by courts of equhy. So that, when the retiring partner sells his entire interest, he parts with his interest in the firm name. Whether or not the purchasers acquire an unconditional right to use the firm name may depend upon circumstances. As, for instance, if use of the firm name by them ■ would lead to a belief on the part of the public that the retiring partner is still associated with them, to his injury, such use might be enjoined. McGowan & Co. v. McGowen, 22 Ohio St. 370. But this does not affect the rule as above stated. Parsons on Part. *409; Bates on Part. §669; High on Injunction, §1080, 1345.

Having parted with his interest in the firm name, upon what principal should the seller be permitted to so use it as to work an injury to the purchasers? What right has he to derogate from his own grant ? He may carry on a like business in the immediate vicinity, and may solicit the patronage of old customers, both by advertisement and private solicitation, so long as he does not mislead customers into the belief that he is carrying on business as the successor of the old •firm, but this does not involve an appropriation of anything which he once possessed, but has, for a valuable consideration, sold. To do this is an essentially different thing from appropriating to his own use that which he has parted with to others, to-wit: the good disposition which customers entertain toward the house by the particular name or firm, and which may induce them to continue their custom. In the one case he is but taking advantage of that which belongs to him; in the other he is interfering with that which he has sold. He may use his own, but he may not use that which is not his own. And that the use by the retiring partner of the former firm name in a similar business would tend to draw customers from the other to himself, and thus work an injury, would seem too plain to need argument in its support. It seems equally clear that in a matter of this kind, where the injury is an interruption of business, causing a diminution of it, it is difficult to establish damage to a high degree of certainty, and by direct proof. Hence, in order to entitle the purchasing partners to the interposition of a court of equity to forbid a continuance of the wrong, it is not necessary, nor important, that they first show, by proof, special pecuniary damage.

Can it make any difference that, in the present case, the contract of dissolution did not authorize the plaintiff to usé the old firm name beyond a specified time? We think not. When Payne withdrew, his partners took his entire interest. They were to receive all the claims and assets of the old firm, were to pay all its debts, and were to continue the same business at the old stand. In other words, by whatever name they might be known, they were to be, and were in law, the successors of the old firm. This gave them the right to identify their business as the business formerly carried on by Walter S. Payne & Co. For every purpose save the right, after expiration of the limited time, to use the old firm name, they were the owners of the good will, and were entitled to be protected from the wrongful use of the old firm name by the defendant. 17 Am. & Eng. Ency. of Raw, 1189; Churton v. Douglas, supra; Mossop v. Mason, 18 Grant’s Ch’y 453; Hudson v. Osborne, 39 L. J. Ch’y, 79 ; Shackle v. Baker, 14 Vesey, Jr., 469, note ; Smith v. Cooper, 5 Abb. N. Cas. 274; Adams v. Adams, 7 do 292; Myers v. Kalamazoo Buggy Co., 54 Mich. 215; Hoxie v. Chaney, 143 Mass. 592.

Upon the admitted facts and the facts found, the plaintiff was entitled to a prepetual injuction, restraining the defendant from using, in his business at Fostoria, the name of Walter S. Payne & Co., and from holding himself out as the successor of said firm of Walter S. Payne & Co. In refusing this relief, we think, the circuit court erred. The judgment will, therefore, be reversed, and judgment entered for plaintiff in conformity with this opinion.

Judgment reversed.


author: By the Court.

text:
    State ex rel. Wasson v. Taylor.

      Quo warranto— When pj'ivate individual map bring— When not— When Attorney General or Prosecuting Attorney may bring.

    Motion for leave to file petition in Quo Warranto.

    This motion is made for leave to file a petition in quo warranto to oust the defendant, who is the secretary of state, from exercising the duties and franchises of state supervisor of elections, under the act of April 18,1892 (89 Ohio Raws, 455), upon the ground that the provisions of that statute conferring upon the secretary of state, the powers and duties of supervisor of elections, is unconstitutional.

      A.J. Thomas and H. R. Smith, for the motion.
   By the Court.

Section 6764, of the Revised Statutes, provides that “ A person claiming to be entitled to a public office unlawfully held and exercised by another may, by himself or an attorney at law * * * bring an action therefor.” We are unable to find, in the statute, any authority for the bringing of an action of quo warranto by or on the relation of a private individual except in the cases provided for in the section above mentioned.

Other actions in quo warranto must be commenced by and on the relation of the attorney-general, or a prosecuting attorney, who is required to commence such action only when directed by the governor, supreme court, or general assembly, or when upon complaint, or otherwise, he has good reason to believe that a case can be established by the proof. Revised Statutes, section 6762.

Treating the motion as an application to the court to direct the attorney-general to commence the action desired, the established rule is, that the court will exercise its power in that behalf, only “when something relating to the court or its business, renders it necessary or advisable.” Thompson v. Watson, 48 Ohio St. 552.

The action sought by the motion does not come within that class of cases.

Motio?i overruled.


author: Minsharr, J.

text:
    Pendery et al. v. Allen et al.

      Property pledged as indemnity— When inures to benefit of creditor — When mortgage, so given, in contemplation of insolvency, is an assignment in trust, tinder section 6343, Revised Statutes.

    1. It is a general principle that where property is pledged as indemnity by one debtor to another, jointly or severally liable with him for the same debt, the security so pledged inures to the benefit of the creditor, who has the right in equity to have the property so pledged applied to the payment of his debt, if it is not paid.
    2. And this principle applies to the case where a stranger in consideration of indemnity agrees to pay the debt of another; the creditor in such case may adopt the promise, and, as an incident, is entitled in equity to the securities pledged, if his debt is not paid.
    3. Where the indemnity so given is in the nature of a mortgage on property, given by a debtor in contemplation of insolvency to secure creditors, other than the party indemnified, the mortgage is, within the meaning of § 6343, Revised Statutes, an assignment in trust for such other creditors, and inures to the benefit of all the creditors of the mortgagor, in proportion to their respective demands. Bagley & Co. v. Waters, 7 Ohio St., 539, distinguished.
    (Decided January 31, 1893.)
    Error to the Circuit Court of Hamilton county.
    'The original action was commenced in the Court of Common Pleas of Hamilton county by Israel H. Pendery against A. C. Allen, E. P. Allen, Eowe Emerson and others, under section 6344, Revised Statutes, to set aside certain conveyances, alleged to be fraudulent, made by the Allens to certain of their creditors. Judgment was rendered for the defendants, dismissing the petition, and an appeal was taken to the circuit court; where the case was again heard upon the merits and the petition dismissed.
    Among the conveyances claimed to be fraudulent, was a mortgage that had been executed by E. P. Allen on certain real estate to Eowe Emerson to secure two notes amounting to $18,500, which it was alleged was without adequate consideration, and therefore fraudulent as to other creditors. During the progress of the trial, leave was given to amend the petition by adding an averment, that this mortgage was made in contemplation of insolvency by E. P. Allen “for the purpose of securing a debt upon which he, Emerson, was surety to J. and G-. N. Rowe for $8,000.00, and to secure a debt of said Edward P. Allen to The Merchants’ National Bank for $10,500.00, on which Emerson was not surety, and that Emerson thereby became a trustee for all the creditors of said Edward P. Allen.”
    With respect to this mortgage, the court found the facts as follows:
    “Said mortgage described in said petition was executed by said Edward P. Allen to said Rowe Emerson; at the time it was executed said Edward P. Allen and Albert C. Allen were insolvent, and were 'jointly indebted to C. J. Rowe in the sum of $6,000 on a note dated May 18, 1885, due in six months, and to Geo. N. Rowe on a note dated May 18, 1885, for $2,000, due in six months, in all to the Rowes in the sum of $8,000, for the payment of which sum Rowe Emerson was a surety.
    “Said E. P. Allen and A. C. Allen were also indebted to The Merchants’ National Bank on notes as follows;
    “ May 1st, ninety days................................... $1,500 00
    “ 12th, three months.............................. 2,000 00

      “ 19th, sixty days................................... 2,000 00
    “ 19th, ninety days................................ 2,000 00
    “ 19th, four months................................ 1,500 00
    “ 23rd, three months.............................. 1,500 00
    In all the sum of $10,500.00, for the payment of which notes Rowe Emerson was in no way liable.
    “Said mortgage was to secure two notes •
    The first for..................................................$ 8,000 00
    The second for............................................ 10,500 00
    “The purpose in the execution of said two notes and mortgage was to provide for the payment of said debts to said Rowes and to said Merchants’ National Bank. Both were executed by Edward P. Allen to said Rowe Emerson, dated July 16, 1885, and due in six months from date.

      ‘‘The consideration of the $8,000 note was the assuming by Emerson and his agreement to pay the above two notes aggregating $8,000 owing by E. P. Allen and A. C. Allen to Geo. N. Rowe and C. J. Rowe, on which Emerson was a surety.
    “The consideration of the $10,500 was the assuming by Emerson, and his agreement to pay the above six notes of E. P. Allen and A. C. Allen to The Merchants’ National Bank, aggregating $10,500, on which Emerson was in no way liable.
    “Emerson did pay to Rowe said $8,000.00, and to The Merchants’ National Bank said $10,500.00 on the above several notes as they matured.
    “The court also finds that at the time said mortgage to Emerson was executed, said Edward P. Allen .was indebted to said plaintiff and to said defendants who filed cross-petitions, and is still indebted to them in the amounts claimed by them respectively , as follows:
    Israel H. Pendery..........................................$1,000 00
    R. H. Andrews, (guardian).............................. 500 00
    Gideon G. Palmer......................................... 600 00
    Conrad Jacoby............................................... 2,000 00
    H. Vorhees................................................. 1,500 00
    Remus Gilliard............................................. 400 00
    C. Wolf........................................................ 2,000 00
    with interest on all of said claims as claimed in the pleading.
    “The court, therefore, as a conclusion of law, finds that said mortgage was not given to hinder, delay or defraud said creditors of Edward P. Allen, nor did said Emerson thereby become a trustee for said creditors, and that said creditors are not entitled to the relief prayed for by them in their pleadings; and that said petition and amendment thereto, and said cross-petition should be dismissed.”
    The agreement between the parties touching the mortgage of Allen to Emerson, is in writing, and is here inserted, though not incorporated in the finding of the court beyond its legal effect, since it has been inserted in the briefs on both sides, and commented on by the attorneys.

      It is as follows:
    “ Whereas, B. P. Allen is jointly indebted with A. C. Allen, in the sum of eight thousand dollars ($8,000) to C. J. Rowe and G. N. Rowe, of Cincinnati, Ohio, and is liable also upon six certain promissory notes held and owned by The Merchants’' National Bank, in amounts and maturing as follows: (Six notes amounting to $10,500 in the aggre-
    gate). And is wholly unable to pay any of the said notes or indebtedness as the same shall become due.
    “ And whereas, for the purpose of making some arrangement by which said indebtedness may be provided for and secured, the said E. P. Allen has this day executed and delivered his two promissory notes to Rowe Emerson, one in the sum of $8,000 and the other in the sum of $10,500, dated July 16th, 1885, and maturing six months after date, and has also executed a mortgage to said Emerson, in which his wife, Sarah S. Allen has joined, to secure the payment of said notes, wherein and whereby said E. P. Allen conveyed all his real estate.

      “Now, therefore, be it known, that in consideration of the premises, and the execution of said promissory notes in the sum of $8,000 and $10,500, and the execution and delivery of said mortgage to said Rowe Emerson, as aforesaid, the said Rowe Emerson does now hereby promise and agree with said E. P. Allen, that he will hold said E. P. Allen free and discharged from further liability upon said indebtedness to said Rowe and to the said Merchants’ National Bank of Cincinnati, and from all further liability upon the notes representing such indebtedness, and said Emerson will provide for the payment or settlement of said indebtedness, as far as E. P. Allen is concerned, at the maturity of the notes representing said indebtedness.

      “In witness whereof, the said Rowe Emerson has hereunto set his hand this 16th day of July, 1885.
    “ Rowe Emerson.”

      Joseph W. O'Hara, and Oliver B. Jones, for plaintiffs in error.
    The issue is fairly presented on the facts, whether or not the mortgage from Allen to Emerson operates as an assignment for the benefit of creditors under the statutes of Ohio. The provisions of the statute applicable to such transactions are as follows:
    Sec. 6343. “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 trusts under the same shall be administered in accordance with the provisions of this chapter.”
    And sec. 6344, which provides in substance, that all transfers to hinder, delay or defraud creditors, shall be declared void at the suit of any creditor, and shall operate and be administered as assignments for the benefit of creditors.
    These provisions are substantially the same as appear in the statutes ever since 1835, and have been before this court in numerous cases where they have been fully and carefully construed and interpreted.
    It being admitted that Edward P. Allen was insolvent, and made the mortgage in question to Emerson in contemplation of insolvency, the only fact necessary to be shown in order to bring this action within sections 6343 and 6344 of the statutes is, that the transfer was made to Emerson in trust with the intent to prefer another creditor. And although the circuit court, as a conclusion of law, has found that this element does not exist, nevertheless, we claim that it clearly appears from the record, and the circuit court erred in so finding.
    We do not rest soley upon the claim, that the statute applies simply because in contemplation of insolvency Allen may have -undertaken to prefer Emerson over his other creditors, for a debt which he might have actually owed him; or even to prefer and indemnify him against a liability which Emerson had theretofore assumed as surety for Allen. The rule as we claim it, and which seems to us clearly to apply to the case at bar, is fully stated in Dixon v. Rawson, 5 Ohio St., 218; Harkrader v. Leiby, 4 Ohio St., 602; Bloom v. Noggle, 4 Ohio St., 45.
    The purpose of the mortgage, in such cases, is to protect the mortgagee. It is not an assignment or transfer, in trust, for its primary object is to protect the mortgagee. Allen was not released by the bank, hence it parted with nothing; it lost no rights, but simply acquired other and additional security for the payment of its claim against Allen. So far as the bank is concerned, the agreement, notes and mortgage all constitute one transaction, and show an intent to secure and prefer the claim of one person through the medium of another, who thereby necessarily becomes a trustee for that purpose.
    The case of Bagaly v. Waters, 7 Ohio St., 359, is relied upon by the circuit court in support of its decision, and will be cited by opposing counsel as conclusive of the question at issue. But there the transaction was a sale outright, and the court is careful to make this distinction.
    But that case also differs from the one at bar, in the fact that there the grantee directly assumed and agreed to pay the debts referred to in the instrument; and the court lays stress upon this personal liability and makes it the main ground for holding that there was no trust. Krumbaugh v. Kugler, 3 Ohio St., 549; Thompsons. Thompson, 4 Ohio St., 353.
    But neither insolvency nor default in Emerson are necessary to create the trust. It attaches immediately on the execution of the mortgage. Dixon v. Rawson, 5 Ohio St., 218.
    The transfer which creates the trust may be in any form ; it may be a general'assignment specifying the terms; by deed, silent as to terms; by judgment confessed; by an attachment on the grounds of fraud, or by mortgage. We need only cite authorities as to creating such a trust by mortgage. Harkrader v. Leiby, 4 Ohio St., 602; Bump on Fraud, page 334; Hunnewell v. Scarborough, 1 Disney, 427; Hyde v. Olds, 12 Ohio St., 591; Woof v. Robb, 19 Ohio St., 216; Hoffman v. Mackall, 5 Ohio St., 131.

      Edward Richie, and Reuben Tyler, for Rowe Emerson, defendant in error.
    I. Unless there was a trust created by the transaction between E. P. Allen and Rowe Emerson, there was nothing therein wdiich brings it within the provision of section 6343 of the Revised Statutes. Doremus, et al. v. O'Hara, et al., 1 Ohio St., 45; Atkinson et al. v. Tomlinson et al., 1 Ohio St., 237; Dickson v. Rawson, 5 Ohio St., 218; Bagaly & Co. v. Waters et al., 7 Ohio St., 360.
    II. In the transaction between E. P. Allen and Rowe Emerson, there was no trust created, either express or implied.
    Emerson agreed absolutely and unconditionally to pay certain indebtedness of said E. P. Allen’s, maturing at different dates, but all long before the maturity of the notes made by Allen to Emerson. This agreement to pay-said indebtedness was without reference to the amount of the value of the real estate mortgaged, or to the amount that might be realized from said mortgage, or the sale of the property mortgaged.
    Before the agreement was made, Allen was liable for all the Rowe notes and the notes in the Merchants’ National Bank, in all $18,500; after said agreement was made, Emerson was liable for them and Allen was not, as between him and Emerson.
    It became Emerson’s individual indebtedness, not as surety, but as principal. He was not to hold the mortgage as trustee for the bank, and pay the bank what he might receive from the sale of the mortgaged premises or any part thereof. It made no difference whether the mortgage was ever paid or foreclosed, or whether Emerson ever realized anything out of it or not. The contract of Emerson was not secured by the mortgage. Both Allen and the bank were entitled to enforce the contract, but the bank had no interest, right or title to the mortgage, or the notes secured thereby.
    In an action to enforce the contract, either by the bank or by E. P. Allen, Emerson could not set up as a defense the fact that the mortgage notes had not been paid. And such action could have been maintained in law, without resort to a court of equity'-.
    Emerson was not bound to account to the bank for the proceeds of said mortgaged property. It made no difference to the bank whether Emerson ever got anything out of the mortgage or not.
    It was entitled, under the contract between E. P. Allen and Emerson, to have all the notes held by it, paid long be fore the mortgage became due and the mortgage notes payable.
    Emerson paid full and present consideration for the notes and mortgage made to him by E. P. Allen. His position is just the same as if he had paid off all said notes before the mortgage was made to him. He undertook to pay them, and did pay them, before the maturity of the mortgage notes. His obligation to pay said notes was complete upon the delivery of the mortgage and notes to him, by E. P. Allen, in compliance with the terms of the contract between them.
    The mortgage was made to secure the indebtedness of E. P. Allen to Eowe Emerson, and no one else. Emerson had a complete right to secure himself, and paid full value for the mortgage at the time it was executed and delivered.
    ' The Rowes and the bank had a right to look to Emerson for their money, not by virtue of the mortgage, but by virtue of the contract made by Emerson with Allen. It made no difference to them about the payment of the mortgage or the value of the mortgaged premises.
   Minsharr, J.

The mortgage from Edward P. Allen to Emerson, having been made in contemplation of insolvency, the question is, whether, within the meaning of section 6348, Revised Statutes, it should be held to be an assignment to Emerson in trust to secure the claim of the bank as well as his own liability as surety of the Allens. .We think that such was its character, and that the court erred in dismissing the petition as amended. That an assignment in trust for the benefit of one or more creditors of an insolvent debtor may be made b}' the execution of a mortgage, is settled by the decisions of this court. Harkrader v. Leiby, 4 Ohio St. 602; Bloom v. Noggle, Id. 45, 56; Hyde v. Olds, 12 Ohio St. 591. A creditor may secure himself by taking a mortgage ; but in doing so he must deal with an eye single to his own interests; if he attempts to extend the lien beyond the necessity of his own indemnity, and secure the debt of any other creditor, the mortgage is in substance and legal effect an assignment within the meaning of §6343, Revised Statutes, and the mortgagee being a trustee for such other creditors, under the statute becomes a trustee for all the creditors of the mortgagor. Bloom v. Noggle, supra. Whether a grantee or transferee of' any kind is to be regarded as such trustee “depends,” as said in Dickson v. Rawson, 5 Ohio St. 218, 222, “upon the question whether, by the terms of the instrument or by necessary implication, he is liable to account to the preferred creditor for the property in his hands, and for the manner in which he disposes of it. If a court of chancery, at the instance of the creditor, would compel him thus to account, the character of the transfer, and his own position, are thereby determined; and the statute then steps in and enlarges the trust, and makes it inure to the benefit of all the creditors, and distributes the fund to all, in proportion to their respective demands.”

What then was the character of the mortgage from Allen to Emerson ? On its face it secured an absolute obligation to pay two notes, one of 8,000, and the other of 10,500 dollars. The court, however, found that the consideration for the 8,000 dollar note was the promise of Emerson to pay an indebtedness of the maker in that sum to the Rowes, and for which Emerson was surety; and that the consideration for the $10,500 dollar note was the promise of Emerson to pay an indebtedness of the maker in that sum to the bank, and for which he was in no way previously liable. Hence, aside from the promise of Emerson to pay the Rowes and the bank the amounts named, there was no consideration for the mortgage, and it would have been void as against creditors, under §6344, Revised Statutes, and the court would have been required to set it aside, as prayed for by the plaintiff in his original petition. The promise, however, of the mortgagee to pay these debts furnished a sufficient consideration for the promise .of the mortgagor, evidenced by the notes, and took the mortgage out of the operation of the section just referred to. But what was the nature of this promise? Allen was not actually indebted to Emerson in any sum, and would not be until Emerson should perform his promise by paying Allen’s indebtedness to the creditors named. It is therefore evident that the promise of Allen, evidenced by the notes, was a promise of repayment to Emerson of the amounts he should pay for Allen on his indebtedness to the creditors named; and that the mortgage was designed to secure the performance of this promise of repayment. Without making these, payments, Emerson would have had no right in equity to foreclose the mortgage. So that it was simply a mortgage of indemnity given Emerson to secure him in the performance of his promise to pay certain creditors of Allen; and, as we shall show, inured in equity to the benefit, not only of the Rowes to whom he was a debtor, as the surety of Allen by an express promise, but, also, to the bank, since by promising to pay its claim in consideration of the execution of the mortgage, the promise became obligatory upon the acceptance of the mortgage, and the bank had the right to adopt the promise and enforce it to the extent it would, had the promise been made directly to it. Thompson v. Thompson, 4 Ohio St. 333; Emmitt v. Brophy, 42 Id. 82. In other words, upon the acceptance of the mortgage, Emerson, by reason of his promise to pay these creditors, stood in the relation of a surety for the Allens, not only upon their indebtedness to the Rowes, but also to the bank.

It is a well settled rule in equity, that where a surety for his own indemnity takes a collateral securtiy from his principal, such security is regarded in equity as a trust for the better security of the debt, and chancery will compel the execution of the trust for the benefit of the creditor. Story’s Eq. §502, and cases cited; Vail v. Foster, 4 N. Y. 312; Kelly v. Herrick. 131 Mass. 373; Green v. Dodge, 6 Ohio 80: Fastman v. Foster, 8 Met. 19; Paris v. Hulett, 26 Vt. 308; Chamberlain v. Railroad, Co., 92 U. S. 299; 306 ; Heath v. Hand, 1 Paige, 329.

The rule is not limited, but applies as well to • one standing in the situation of a surety, as to one standing strictly and formally in that relation. Thus in Curtis v. Tyler, 9 Paige, 432, where the owner of a mortgage had assigned the same and covenanted with the assignee that it was due and ■collectible, and subsequently took the bond of a third person as a further security for the payment of the amount due upon such mortgage, it was held by Chancellor War-worth, that the assignee of the mortgage was, in equity, entitled to the collateral bond for the security of the mortgage debt, on the principle, that where a surety or one standing in the situation of a surety for the payment of a debt, receives a security for his indemnity, the principal creditor is in equity entitled to the full benefit of that security; and it makes no difference, as he said, that such principal creditor did not act upon the credit of such security in the first instance, or even know of its existence. And he cited the case of Ex parte Perject, Mont. Bank. Rep. 25, w7here it was decided by the vice-chancellor of England that the endorser of a bill of exchange had an equitable claim to property deposited with the drawee as security against the payment of the bills accepted by him. So in Kramer & Rahm’s Appeal, 37 Penna. St. 71, where one King residing in Pittsburgh, agreed to accept paper to be drawn on him by one Baker, in consideration of pig metal to be shipped him, for his better security, took a judgment-note on which a judgment was obtained and a levy made, from which money was realized by a sale of the property, it was decided that the holders of the acceptances were entitled to the benefit of the security taken by King, although at the time of taking the acceptances they had no knowledge of the existence of the security; citing and relying on Curtis v. Tyler, and emphasizing the fact that the rule as there stated and applied, includes all standing in the situation of surety, and not merely such as technically occupy that relation. Thompson, J., in delivering the opinion, said, “The authorities place the principle upon the ground that as.the security is a trust created for the better securing of the debt, it attaches to it, and hence it is that it may be made available by the creditor, although unknown to him at the time of the purchase of the security, for which it may have been given as an indemnity. The effect of such a transaction is the placing of means in the hands of the surety by the principal debtor to meet liability on account of his contract of suretyship. It is consequently a trust for that specific purpose, and equity will control the legal title to it in the hands of the surety, so that it may be applied to the object intended, viz., the payment of the debt to the holder.” And so in Grant v. Ludlow's Adm’r, 8 Ohio St. 1, 20, it was held, upon the same principle, that where an agent, employed by his principal, to take security from a debtor of the principal, so negligently conducted himself in taking the securit}' as to become liable to the principal, and thereupon took a mortgage from the debtor to indemnify himself against such liability, such mortgage inured in equity to the benefit of the principal, and could be enforced by him against a subsequent mortgagee of the same propertjc

These cases and the principle upon which they proceed, make it clear, as we think, that Emerson in accepting the mortgage as indemnity against loss in the performance of his promise to pay the bank, became, within the meaning of § 6343, Revised Statutes, an assignee of the property covered by the mortgage in trust for the benefit of the bank; and, as a consequence of the provisions of that section, held it in trust for all the creditors of Allen according to the amount of their respective demands. The fact that a surety has the right to take indemnity by way of mortgage from his principal, is of no avail, so far-as he assumes the indebtedness to the bank. For this indebtedness he was not previously liable as surety; and, as said by the judge delivering the opinion in Bloom v. Noggle, the statute cannot be evaded by assuming a liability as surety for the insolvent debtor, as part of the transaction by which the mortgage is given. He might safely have secured his liability for Allen to the Rowes; but, having gone beyond this, and accepted a mortgage intended to secure another creditor, he became by force of the statute, a trustee for all, and in respect to all the property covered by the mortgage. Harkrader v. Leiby, 4 Ohio St., 602, 613. And his liability in this regard is to be determined not by subsequent events, but by the nature of the transfer at the time it was made. If by its terms, or necessary implication, it made him liable to account to another creditor of the debtor, it is an assignment in trust within the meaning of the statute. Dickson v. Rawson, 5 Ohio St., 218, 224.

We are, however, confronted with the case of Bagaley & Co. v. Waters, 7 Ohio St., 359. But that case is plainly distinguishable from the case before us. There, Asa B. Waters being insolvent, made an absolute sale of certain property to his brother, Israel I. Waters, in consideration of his agreement to pay certain named creditors of the grantor. The decision was placed on the ground that the sale was an absolute one, conferring on the purchaser the right to dispose of the property as his own, subject to no trust whatever in favor of the preferred creditors. In this view of the case it is hard to find any objection to the decision. It was upon this ground that the judge, delivering the opinion, distinguished the case from the previous decisions of the court on the same subject. Referring to these cases, he said: “ In each of them it will be found that the assignee held the property as mortgagee, or otherwise, in part at least, merely to secure other creditors besides himself, or was to account for a residuum to the assignor. Such instruments might well be declared assignments in trust.” In the case before us there was not an absolute sale. The debtor executed two notes and secured them by mortgage. The only consideration, as we have shown, for these notes, was the promise of the mortgagee to pay the Rowes and the bank, and the court found as a matter of fact, that, “ The purpose in the execution of said two notes and mortgage was to provide for the payment of said debts to said Rowe and said bank.” We have shown, if any thing can be established by reason and authority, that a security so taken, inures to the benefit of the creditor, and that he may hold the person receving it as a trustee, bound in equity to account for it. But, in addition to this, the debtor retained an interest in the property. He still remained liable on his indebtedness to the Rowes and the bank, and hence, as mortgagor, had the right to have the property applied to the payment of these creditors, in exoneration of himself; and, if not so applied, had the right to have the mortgage delivered up and cancelled; and, of this right, the creditors whose debts were to be paid, could have availed themselves, on the ground that the property was subject to a trust in favor of their debtor, which in equity inured to their use. So that, viewed in any light, Emerson, by accepting the mortgage, became, under the terms of the agreement, a trustee of the property for the creditors he promised to pay, which the statute enlarges into a trust for the benefit of all the creditors of the insolvent.

Judgment reversed, and judgment for the plaintiff in error; and catise remanded to the court of common pleas to carry this judgment into execution.

CASES ARGUED AND DETERMINED IN THE SUPREME COURT OF OHIO, .JANUARY TERM, 1893. Hon. JOSEPH P. BRADBURY, Chief Justice. Hon. ERANKLIN J. DICKMAN, j Hon. THAD. A. MINSHALL, Hon. MARSHALL J. WILLIAMS, [ Judges. Hon. JACOB E. BURKET, Hon. WILLIAM T. SPEAR, J