Bank One of Milford, N.A. v. Bardes ( 1986 )

Per Curiam.

In two related propositions of law, appellants urge that the failure to record a trust instrument does not, by virtue of R.C. 5301.03, operate to divest a trustee of his interest in real estate, and that R.C. 5301.03 is a notice statute which does not protect judgment creditors who have not relied upon the existence and/or ownership of the subject real estate in the extension of credit. We agree.

In Marital Trust of Casto v. Lungaro (1986), 22 Ohio St. 3d 298, syllabus, we held that “R.C. 5301.03 does not prevent the owner of an equitable interest created by an oral trust in real property from asserting a prior interest in that property against a judgment creditor of the trustee.” As here, Casto involved the interest asserted by a judgment creditor of the trustee as an individual, and not in his capacity as trustee. As here, in Casto, no trust instruments had been recorded; indeed, the alleged trust in Casto was oral.

In Casto, we observed at 300 that “* * * R.C. 5301.03 is a notice statute. It provides that certain language in a deed or mortgage which purports to create an equitable interest will not be sufficient to notify other parties of limitations on the grantee’s or mortgagee’s powers. Noncompliance with the statute does not defeat the creation of an equitable interest; it simply prevents enforcement of that interest against the parties named in the statute. Those parties include ‘* * * bona fide purchasers, mortgagees, lessees, and assignees for value * * *,’ but not judgment creditors.” (Emphasis sic.) That language applies equally here. The only arguable difference between Casto and the instant case is that in Casto, the purported trustee had not recorded any transfer to himself as trustee, whereas here, Bardes has recorded a deed in which he is so designated. But that factual distinction does not, in our view, cause judgment creditors to somehow come within the purview of the protections extended by R.C. 5301.03.

We hasten to note, however, that our characterization of R.C. 5301.03 does not end the appropriate inquiry. Having erroneously found that R.C. 5301.03 was dispositive of the cause, the trial court stated: “The second theory advanced by the plaintiffs is that the alleged trust was never created and, therefore, the court should render a decision in their favor. Although the court has some questions as to whether or not the defendant did create a trust under the laws of the State of Ohio, the court does not feel the need to make that determination as it applies to the farms in question in Brown County, Ohio.” Thus, the validity of the alleged trust at issue in this case has not yet been determined.

Accordingly, we reverse the judgment of the court of appeals, and remand the cause to the trial court for determination of whether Bardes does, in fact, have an enforceable equitable interest in the subject real estate and, if so, the nature and extent of that interest.

Judgment reversed and cause remanded.

Celebrezze, C.J., Sweeney, Locher, C. Brown and Wright, JJ., concur. Holmes and Wright, JJ., concur separately. Douglas, J., concurs in judgment only.