Hamilton v. First Natl. Bank

On the 4th day of September, 1927, Emanuel M. Ridenour made his promissory note, payable to the order of the First National Bank of Pandora, Ohio, in the sum of $2,200, and with that note he deposited with the bank as collateral security for the payment of the note, or any other liability of the payee due or to become due, or that may be hereafter contracted, a promissory note for $16,000, made by Chauncey and Claudia Eagy, payable to said Ridenour, the due date of this latter note being March 1, 1930; and in this contract of collateral suretyship it was agreed that the Pandora bank had the right to claim for additional security should this security decline, and it had full power and authority to collect any moneys that might become due on such security, or to sell and assign and deliver the whole or any part thereof, or any substitute therefor, on any conditions thereto, at public or private sale at the option of the bank, and, after deducting all legal or other costs and expenses for collection, sale, and delivery, to apply the residue of the proceeds of such sale or sales to pay any, either, or all of the liabilities to the bank, as the bank should deem proper, returning the overplus to said Ridenour; and it was further agreed that the bank, or any person in its behalf, might purchase at any of such sales. There was another note given to said bank in the sum of $1,800 by said Emanuel M. Ridenour.

Thereafter Emanuel M. Ridenour died, and the plaintiff was duly appointed and qualified as the executor of his estate.

Both of the obligations of Emanuel M. Ridenour to the bank are past due, but the collateral security note is not yet due.

The executor demanded of the bank the possession of this collateral security note, conceding that the bank had a lien for the full amount of its claim on this note, but claiming the right to administer the same as a part of the assets of the Emanuel M. Ridenour estate, and this action was brought in the court of common pleas to enjoin the transfer or sale of the collateral security and any further collections on the same by the Pandora bank. And, from the judgment below, appeal is here taken.

There is no question of fact presented to us. It becomes solely a question of whether, under these circumstances, the executor is entitled by law to recover possession of this collateral security now in the hands of the Pandora bank, without first discharging the obligations due to the bank from the estate of Emanuel M. Ridenour.

We have no direct authority in Ohio for the support of this claim made by the executor in this case, but the case of Lingler v. Wesco, Admr., reported in 79 Ohio State, at page 225, 86 N.E. 1004, 21 L.R.A. (N.S.), 182, 128 Am. St. Rep., 714, is urged upon us as enouncing a principle applicable to the facts involved here. In that case, a chattel mortgage was given to secure an obligation of the mortgagor, but the possession of the chattels mortgaged was retained by the mortgagor, who died without paying off his obligation, and his administrator, upon qualification, took possession of all of his property including the chattels covered by this mortgage. In an action brought by the mortgagee to replevin the mortgaged goods, the court therein held that replevin would not lie against such administrator then in possession of the goods under such circumstances, but that the interest of the mortgagee in the property is transferred to the fund arising from the sale by the administrator.

Judge Price, in his opinion, as the opening premise upon which this judgment is founded, states that there is nothing in the petition to indicate that the chattel mortgage involved in that case conferred any special powers, such as power to sell or make other disposition of the mortgaged property. And then at page 236 of 79 Ohio State (86 N.E. 1006), he further says that the "petition discloses no duty on the part of the mortgagee in respect to such property. It does not appear that he was authorized by the mortgage to sell at either public or private sale, nor does it appear what shall be done with the proceeds in case a sale should be made." This, at least, is an intimation that, had there been some special powers conferred upon the mortgagee by the mortgage, the judgment would be otherwise than there pronounced.

In the case at bar, however, the collateral security contract does give special powers and authority and explicit directions regarding the surplus resulting from any sale of the property. Also, in the case at bar, the collateral security is found in the hands of the creditor at the death of the debtor.

By the debtor's own contract, made during his lifetime, the rights of the bank are defined. It is not claimed by the plaintiff that had Emanuel M. Ridenour lived he could have demanded the possession of this collateral security under any circumstances other than the discharge of his obligation to the bank. His executor has no higher or greater rights than the deceased. While the plaintiff may now have the general ownership of this property, yet this is subject to the conditions of the pledge, and, until a redemption is consummated, he would have no higher rights than the decedent, whose place he now takes. To hold otherwise would be to create a new and different contract between the bank and its debtor. The petition must therefore be dismissed.

Petition dismissed.

JUSTICE and CROW, JJ., concur.