Opinion
Decided December 11, 1933.
Assignment for creditors — Assignee to allow secured creditor's claim in full, disregarding security, when — Dividends from stock deductible — Collateral to be evaluated when assignee declares dividend.
Assignee for benefit of creditors held obligated to allow secured creditor's claims in full, disregarding mortgage and stock securities, after deducting payments and dividends received from stock; valuation of collateral being permissible when assignee declares dividend.
ERROR: Court of Appeals for Hamilton county.
Messrs. Peck, Shaffer Williams, for plaintiff in error.
Mr. Howard N. Ragland and Mr. William R. Collins, for defendant in error.
This case originated in the Court of Common Pleas, and was brought by the Western Bank Trust Company against Howard N. Ragland, assignee for the benefit of the creditors of John B. Swift, to compel the assignee to allow certain claims which plaintiff claimed to hold as a creditor of John B. Swift, assignor.
The amended petition sets forth two causes of action.
In the first cause the plaintiff bank alleged that it filed its claim against the assignee in the sum of $19,000, with interest, which was a good and valid claim, but that the assignee rejected the claim for the reason that the plaintiff bank held certain security for the same. The security was in the form of a mortgage on real estate.
The second cause of action declared upon a large claim, the amount being in excess of $300,000, for which the bank held stocks as collateral security. The allegation is that the assignee firs allowed the claim, subject to any credits to which his assignor might be entitled by reason of any payments of dividends on stock held by plaintiff as collateral, but later rejected the claim in toto, for the reason that he was unable to determine the exact amount, and therefore upon reconsideration rejected the entire claim.
The plaintiff asked that the assignee be required to allow the claims in full, without regard to any collateral security.
The amended answer prays that the plaintiff's amended petition be dismissed, at its costs.
The case was submitted on an agreed statement of facts, and the agreed statement of facts is in conformity to the facts alleged in the pleadings.
The issue then is: May the plaintiff bank in this action compel the assignee to allow the claims in full without regard to the collateral security held by it?
The trial court found the claims to be just claims in the amounts set forth. On the claim of $19,000, in the first cause of action, the trial court found $1,000 to have been paid. On the claim set forth in the second cause of action, the trial court found that $13,100 has been received by the plaintiff from the dividends on securities which it held as collateral.
In the judgment, it is ordered, adjudged, and decreed that the defendant allow the claim on the first cause of action, in the settlement of his trust, in the sum of $18,000, with interest to April 25, 1931, thus disregarding the mortgage security in the allowance of the claim.
The trial court further ordered, adjudged, and decreed that the defendant allow the second cause of action in the settlement of his trust in the sum of $310,143.78, subject, however, to a credit thereon of $13,100, dividends heretofore received, plus any amount realized by plaintiff from any sale of said security, and of an amount equal to the market value on the date of distribution of so much of said security as then remains unsold.
From that judgment, error is prosecuted to this court.
Under the issues made by the pleadings, it would seem that the proper procedure would have been for the trial court to order the allowance of the claims for the amount at the time unsatisfied and unpaid; the question of the amount of dividends to be considered when declared. This procedure is indicated in the case of State National Bank v. Esterly, Recr., 69 Ohio St. 24, 68 N.E. 582, the latter part of the syllabus in that case declaring that "this sum [the unpaid debt] may be ascertained at the time the dividend is declared, although the claim had formerly been proven and allowed for the full amount."
The prayer of the amended petition is that the assignee be required to allow the claims.
The prayer of the amended answer is that the amended petition be dismissed.
It would therefore seem, as above stated, that the trial court should have decreed the allowance of the claim in full on the second cause of action, as it did under the first cause of action. Any unpaid balance of the debt at the time of the declaration of dividends could then be ascertained with certainty.
In the argument and in the brief this point seems to have been waived, and we are asked to pass upon the rule of law relative to the consideration of collateral by the assignee at the time of filing the claim, as affecting the allowance of the claim.
Our conclusions herein are to the effect that the assignee may not take into consideration securities in allowing just claims.
While no authority has been suggested, and we know of none providing for valuation of collateral for the purpose of allowance of a claim, undoubtedly valuation of collateral may be had when the dividend is declared. If the bank holds the collateral unsold, the only way that the matter could be determined would be by a valuation of the unsold securities. In the Esterly case, supra, the question arose upon the distribution of dividends; the claim having been allowed for the full amount.
As above stated, the only relief sought in the amended petition is the allowance of the claims in full, the amount of which is undisputed. The amended answer prays that the amended petition be dismissed. We are of opinion that the trial court should have required the allowance of the claims in full, disregarding any collateral or other security — any collateral or other security to be ascertained at the time dividends are declared, and to be credited at that time.
The statutes required plaintiff to bring suit within thirty days after the claim was rejected. At that time it is admitted the amount of the claim was just and unpaid. If the claim is just, due, and unpaid, what remains for the assignee but to allow the claim as a just debt? This in nowise prevents the consideration of securities when dividends are declared. See State National Bank v. Esterly, supra.
It was held in Mannix, Assignee, v. Purcell, 46 Ohio St. 102, 19 N.E. 572, 2 L.R.A., 753, 15 Am. St. Rep., 562: "No higher or better right or title to any of this property passed to the assignee than the assignor held. His creditors acquired no new rights or remedies in or against it by force of the assignment. The assignee simply represents them and their rights, which he has undertaken to enforce by the plain processes appointed by statute. They do not, in any sense, stand to the assigned property in the relation of purchasers. The beneficiaries of the property which the assignee is now seeking to subject to the payment of the assignor's debts, are free to assert against the latter every right and claim which, before the assignment, they could have asserted against the assignor."
This proposition of law is cited with approval in the Esterly case.
Under this proposition of law, the bank might sue Swift on its claim. Swift resisting the claim might have set off the value of the collateral securities against the claim. The assignee at the time he declared dividends would have the right to set off the value of any securities held by the bank, and would be in a position at that time to know the amount received on the claim if the securities were sold, or the value thereof if unsold.
We do not see how the trial court or this court could make any binding decision as to the amount to be paid upon the claims from the assets of the estate until the matter has reached the point of distribution of dividends. When ready to pay, the assignee could then ascertain with certainty the amount due on the claim, as reduced by the collateral securities.
Our conclusion is that the order of the Court of Common Pleas should have been to allow the claims, reduced by the credits received in money from the payment of dividends from stocks held as collateral security at the time of the filing of the claims. We are of opinion that the case of State National Bank v. Esterly, supra, is sufficient authority for this conclusion. While in the Esterly case the only question before the court was the cash received from the sale of the collateral securities, the principle announced would cover the value of the securities as well as the cash amounts received from the sale.
The judgment of the Court of Common Pleas will be reversed, and, since the amounts of the claims are not disputed, judgment may be entered in this court, ordering the assignee to allow the claims, less dividends or payments received prior to the filing of the claims.
Judgment reversed.
CUSHING and ROSS, JJ., concur.