Opinion
Nos. 24692 and 24734
Decided November 27, 1934.
Banks and banking — Liquidation — Preferences — Depositor must have legal or equitable title — No valid claim for preference, when — Relation between bank and depositor becomes that of debtor and creditor, when — Deposit agreement considered in determining whether title passed to bank — Payment of interest not conclusive that title passed to bank — Depositor must be able to trace funds into bank's assets, when — Not necessary that particular dollars be followed in specie — Trust moneys may be deposited in bank's other departments, when — Section 710-165, General Code (108 Ohio Laws, pt. 1, 122) — Trust funds, in commercial department, not preferred.
1. In order to assert successfully a claim for preference in the distribution of the assets of an insolvent bank, a depositor must establish legal or equitable title to the deposits he has made. If title to the funds deposited has passed to the bank he becomes a creditor and, as such, has no valid claim for preference.
2. In determining whether title to funds deposited has passed to the depositary bank, regard must be had to the agreement under which the deposit is made, and to all the conditions and circumstances of the arrangement. The payment of interest on the deposit is a strong, though not conclusive, indication that title to the funds deposited has passed to the bank and that the relation between the bank and the depositor is that of debtor and creditor.
3. Before a depositor's claim for preference in the distribution of the assets of an insolvent bank may be allowed, he must be able to trace the fund to which he asserts title into the bank's assets at the time of closing. It is not necessary, however, that he follow in specie particular dollars deposited nor that he show that his deposits were converted into specific quantities of cash.
4. The provisions of Section 710-165, General Code, prior to the amendment effective June 14, 1933, authorized trust companies, in the absence of an express agreement to the contrary, to deposit trust moneys pending distribution or investment in any other department of the bank. As to such moneys, so deposited, the relation between the bank and the depositor was that of debtor and creditor. ( McDonald, Admr., v. Fulton, Supt. of Banks, 125 Ohio St. 507, approved and followed).
ERROR to the Court of Appeals of Montgomery county.
Two claims for preference in the distribution of the assets of the insolvent Union Trust Company of Dayton, Ohio, one asserted by the Escanaba Paper Company and the other by the University of Dayton, were argued in this court together. Both present the same general question, but the facts in the two cases are not identical.
In the first case, the Escanaba Paper Company, a Michigan corporation, opened an account in the year 1925, with the City Trust and Savings Bank of Dayton. The paper company was the obligor upon an issue of bonds secured by property of which the Old Colony Trust Company of Boston was trustee, and this account was established for the purpose of collecting and forwarding to the Old Colony Trust Company the periodical payments due on said bonds. The arrangement was in writing. The paper company, which already had a commercial account with the Dayton institution, addressed to it an offer in letter form, which offer was accepted. Letter and acceptance are as follows:
"Escanaba, Michigan, July 1, 1925.
"City Trust Savings Bank,
"Dayton, Ohio.
"Attention: Mr. Walter G. Davidson, President.
"Gentlemen:
"In connection with the issue of $612,000.00 general and refunding 6 1/2% bonds of this company, we agree to deposit with you on the first day of each month, beginning with June 1, 1925, a pro rata proportion of the annual interest on the bonds then outstanding, and on the first day of every month, beginning December 1, 1926, one-sixth (1/6th) of the principal of the bonds next maturing, so that the payment of all the bonds at maturity will be provided for by six equal monthly installment payments; such payments on account of interest and principal to be held by you, and forwarded to the Old Colony Trust Company, Boston, Mass., not later than the fifteenth day of May and November in each year.
"You agree to accept the deposits made by this company as a special deposit and expressly covenant and agree not to apply the same against any claims, indebtedness, or other obligations whatsoever of this company.
"You further agree to allow us interest on these deposits, at a rate of not less than 4% per annum.
"We reserve the right to change this arrangement at the end of any six months' period.
"Your acceptance of this letter will constitute an agreement between us.
"Yours very truly,
"Escanaba Paper Company,
"By Sidney Ferguson."
"Accepted:
"Walter O. Davidson, Pres.
"City Trust Savings Bank."
Thereupon an account was opened entitled:
" 'Trust Account.'"The City Trust and Savings Bank,
"Dayton, O., "In Account With "Escanaba Paper Co. "in trust for "Old Colony Trust Co., "Boston."After some years the City Trust Savings Bank was consolidated with the City National Bank under the name of City National Bank Trust Company, and this latter institution was, in turn, merged with the Dayton Savings Trust Company into the Union Trust Company of Dayton.
It is agreed that the arrangement made with the City Trust Savings Bank was carried into the merger with the Union Trust Company and that the case is largely controlled by the agreement above set forth.
The Union Trust Company had a commercial department and a trust department. Deposits under the agreement in question were, from time to time, made by the paper company with the trust department, which in turn, deposited them with the commercial department to an account called: "Uninvested Trust Funds". On the dates fixed in the agreement, the stated amounts were forwarded to the Old Colony Trust Company of Boston.
On October 31, 1931, the business and property of the Union Trust Company were taken over for liquidation by Ira J. Fulton, Superintendent of Banks for the state of Ohio. On that date there was standing to the credit of the paper company on the books of the insolvent institution the sum of thirty-eight thousand, one hundred and forty-seven dollars and eighty-four cents ($38,147.84). This amount was derived from the following sources: two checks totaling fifteen thousand, one hundred and twenty dollars ($15,120.00), drawn by the paper company upon its commercial account with the Union Trust Company, deposited with the trust department and by the trust department deposited again in the commercial department; three checks drawn upon other banks and deposited with the trust department and by it put into the commercial department; accrued interest of three hundred and forty-seven dollars and eighty-four cents ($347.84).
At the time the bank was taken over for liquidation, there was cash in its vaults in excess of two hundred and nineteen thousand, six hundred and eighty-two dollars and forty-two cents ($219,682.42) which was the balance to the credit of the trust department on its uninvested trust funds account with the commercial department. The cash in the vaults was also greater in amount than the total of all claims for preference.
Fifty per cent. of the paper company's claim has been paid it, along with other creditors, without prejudice to its claim for preference.
Turning now to the claim of the University of Dayton, it appears that on November 1, 1930, the university conveyed to the Union Trust Company certain real estate in trust to secure an issue of bonds. Under the terms of the trust deed the university was required to deposit with the Union Trust Company, from time to time, such sums as were required for the periodical payments on principal and interest.
Among other provisions the deed of trust contained the following:
"To have and to hold all and singular the said real estate, with the appurtenances, unto the party of the second part as trustee, its successors and assigns forever.
"The conveyances hereof are nevertheless in trust for the purpose of securing the payments, equally and retably, without priority or preference, and without regard to date or dates of issue or maturities, on a total authorized issue of three hundred thousand dollars ($300,000.00) first mortgage serial gold bonds. * * *
"Said series of bonds, and each and all of the successive installments of interest thereon, shall be payable by the party of first part and parties of third part, by a deposit of the requisite funds with The Union Trust Company of Dayton in the city of Dayton, Ohio, at least thirty (30) days prior to maturity or the due date thereof, without deduction for bank exchange. * * *
"Said The Union Trust Company of Dayton shall be entitled to charge, and the party of the first part and party of the third part will pay for its services in acting as payment agent one-tenth of one per cent. (1/10 of 1%) of the principal and premium of all series of bonds redeemed before maturity thereof; one-tenth of one per cent. (1/10 of 1%) of the principal of all series of bonds paid at maturity, and one-fourth of one per cent. (1/4 of 1%) of the face amount of all coupons on series of bonds paid when due. All series of bonds paid or redeemed, and all coupons thereon paid out of the respective deposits therefor at said The Union Trust Company of Dayton, shall, upon surrender thereof for such payment or redemption be cancelled by said trust company and returned to the party of third part.
"With respect to any coupons not presented when due, bonds called for redemption not presented with their requisite coupons on the date fixed for redemption, or bonds not presented at maturity, said The Union Trust Company of Dayton shall hold the funds deposited for the payment or redemption thereof in special trust, but without drawing interest, for the respective owners thereof until the expiration of the period of limitation in such case made and provided by the laws of the state of Ohio with respect to such bonds and/or coupons, at which time said funds then remaining unclaimed shall be paid to party of third part. * * *
"When the obligors on the bonds issued hereunder shall have deposited with said The Union Trust Company of Dayton for the benefit of the holders of all of the bonds issued and then outstanding hereunder funds sufficient for the payment or redemption thereof (in the case of redemption by compliance with all of the conditions of Article I, Section. '1' hereof), together with funds for the payment of all interest accrued thereon to the date of payment or date fixed for redemption (as the case may be), such deposit shall be taken to constitute payment so far as the release of the mortgage and collateral security, if any, may be concerned, and it shall be the duty of the mortgage trustee, notwithstanding the fact that some of the bonds may not have been presented for payment out of the deposit so made (no other default existing), nevertheless to execute deeds, assignments or other instruments releasing such security, containing recitals of the fact of such deposits with the payment agent under the bonds, and such deeds, assignments, and/or other instruments containing such recitals, shall constitute a valid extinction of the lien hereof. * * *
"The mortgage trustee shall be entitled to reasonable and proper compensation for any and all services it may perform in the discharge of the trusts created by this instrument and such compensation shall constitute a lien on the mortgaged property, prior in rank to the lien of the bonds secured hereby. If the mortgage trustee shall suffer any damage or liability in the administration of the trust created by this indenture, it shall be indemnified for the same out of the mortgaged property, and shall have a lien therefor prior in rank to the lien of the bonds secured hereby."
The first of these bonds matured in November, 1931, and to meet the requirements thereof, together with interest requirements, on October 27, 1931, the university drew a check in the sum of thirteen thousand, seven hundred and sixty-nine dollars and eighty-three cents ($13,769.83) upon its checking account in the Union Trust Company in favor of the trust department thereof. After the deduction of $19.83, the trust company's fee for redeeming bonds and paying coupons, the balance, thirteen thousand, seven hundred and fifty-dollars ($13,750.00) was deposited with the said trust department.
In accordance with the practice described in the case of the paper company, the amount of this check was deposited by the trust department with the commercial department in the uninvested trust funds account.
On October 31, 1931, the bank passed into the hands of the state authorities.
The university seeks to have the entire amount of this deposit paid to it in full.
Petitions and answers in both cases were filed in the Common Pleas Court of Montgomery county, and in both cases judgments were rendered upholding the claims for preference. Error was prosecuted in both cases to the Court of Appeals and both judgments were sustained. Motions to certify were granted by this court in both cases.
Mr. John W. Bricker, attorney general, Mr. Hubert A. Estabrook and Mr. Rowland H. McKee, for plaintiff in error.
Messrs. McMahon, Corwin, Landis Markham and Mr. Irvin G. Bieser, for defendant in error in cause No. 24692.
Messrs. Murphy Murphy, for defendants in error in cause No. 24734.
The claimants in these cases can prevail on one ground only, that they are owners of the funds they claim, either in law or in equity. They cannot prevail as preferred creditors. They fall within none of the classes of creditors which the law prefers in the distribution of an insolvent's assets, and must therefore fail if they occupy the position of creditors at all.
Were they owners? Did they continue to own the funds deposited by them in the trust department of the bank, or had title passed from them in exchange for the bank's obligation to pay to them or to their designees equivalent sums?
Both, of course, assert that title, at least title in equity, never passed.
In the Escanaba Paper Co. case it is urged that the* deposits in question were put by the bank into what was designated a "Trust Account"; that each month's deposit consisted of a single check and that check for a uniform amount, to be applied by the bank to a single specific purpose, payment of interest and principal on the bonds; that this account was never used as a checking account nor for any purpose other than accumulating and forwarding the bond requirements to the Old Colony Trust Company of Boston. In addition, this claimant urges the provisions of the contract under which the deposits were made, i. e., "such payments on account of the interest and principal to be held by you, and forwarded to the old Colony Trust Co., Boston, Mass., not later than the fifteenth day of May and November in each year.
"You agree to accept the deposits made by this company as a special deposit and expressly covenant and agree not to apply the same against any claims, indebtedness, or other obligations whatsoever of this company." (Italics ours.)
To negative the inference of retention of title which the foregoing provision might be said to raise, the plaintiff in error urges the clause in the contract which provides:
"You [the bank] further agree to allow us interest on these deposits, at a rate of not less than 4% per annum."
While the circumstances pointed out by the paper company might well be harmonized with the creation of a trust and the retention of the equitable title to the deposits, in our opinion they fall short of proving that such trust was actually created. The agreement that the money was "to be held" and forwarded to Boston on certain days might just as well have been carried out by the bank's taking title to the deposits and forwarding an equivalent each time to the Boston institution. The agreement not to apply the deposits against any claims, indebtedness or other obligations of this company is, at most, an agreement to relinquish the rights of set-off, for the protection of the bondholders. That this was the purpose intended is especially indicated by the fact that the bank agreed to refrain from applying said funds against "claims of" the paper company as well as against its indebtedness and obligations. And the agreement to "accept the deposits * * * as a special deposit", together with the fact that such deposits were entered on the books in a "Trust Account", lose most of their apparent significance when considered in connection with the clause: "You further agree to allow us interest on these deposits, at a rate of not less than 4% per annum." (Italics ours.)
In 5 Ohio Jurisprudence, 379, Section 86, it is said: "A special deposit is created where the money is left for safekeeping, and the identical thing is to be returned to the depositor."
In American Law Institute Restatement of the Law of Trusts, Tentative Draft No. 1, page 44, Section 15, Comment h, it is said: "If money is deposited in a bank for a special purpose, the bank is a trustee or bailee of the money if, but only if, it is the understanding of the parties that the money deposited is not to be used by the bank for its own purposes."
In 6 Corpus Juris, 1086, Section 3, it is said: "If by the contract there is no obligation to restore the specific article, but the bailee is at liberty to return either money or other goods of equal value, there is a transmutation of property, and the obligation created is a debt and not a bailment."
Without citing the authorities which might be marshalled to support these statements, we raise at once the inquiry whether the bank was bound to keep the funds in question segregated from its other assets, or whether it might use them as its own, subject only to the obligation to respond with an equivalent upon a proper call.
Referring again to the American Law Institute Restatement of the Law of Trusts, Tentative Draft No. 1, page 41, Section 15, Comment g:
"If there is an understanding between the parties that the person to whom money is paid shall pay 'interest' thereon (at a fixed or at the current rate, and not merely such interest as the money, being invested, may earn) the relationship is practically always a debt and not a trust. Interest is paid for the use of the money, and if the payee pays interest he is, in the absence of a definite understanding to the contrary, entitled to use the money for his own purposes. It is theoretically possible of course for a trustee to pay 'interest' from his own funds, but in the absence of a clear agreement to that effect such an intention would not be found."
This we believe to be a fair statement of the law.
In McDonald, Admr., v. Fulton, Supt. of Banks, 125 Ohio St. 507, 511, 182 N.E. 504, 83 A. L. R., 1107, 1110, it is said: "It is to be observed that deposit in an interest bearing account is directed, which of course contemplates use of the fund by the bank."
See also: Doty v. Ghinger, 166 Md. 426, 171 A. 40 (1934); Missouri Mutual Assn. v. Holland Banking Co., 220 Mo. App., 1256, 290 S.W. 100 (1927); Old Colony Trust Co., Recr., v. Puritan Motors Corp., 244 Mass. 259, 138 N.E. 321 (1923); Sam v. Ludtke (Tex.Civ.App.), 203 S.W. 98 (1918); Blair v. Follansbee, Admr., 67 Ill. App. 144 (1896); Price v. Dawson, 111 Mich. 279, 69 N.W. 650 (1896); Budd v. Walker, Exr., 113 N.Y., 637, 21 N.E. 72 (1889); Pittsburgh National Bank of Commerce v. McMurray, 98 Pa. 538 (1881).
Claimant suggests in argument that the bank was willing to pay interest for the privilege of handling this fund on a non-profit basis because it enjoyed other profitable relationships with the paper company. That company did indeed carry a commercial account with the bank. But it had that account before this "Trust Account" was opened, and we find no convincing proof that retention of the commercial account depended upon the allowance of this interest.
Quoting again the foregoing sentence from the Restatement of the Law of Trusts: "It is theoretically possible of course for a trustee to pay 'interest' from his own funds, but in the absence of a clear agreement to that effect such an intention would not be found."
Finding, as we do, that no trust was created, but that the title to funds deposited by the Escanaba Paper Company passed to the bank, it is unnecessary in the Escanaba Paper Co. case to advert to the further contentions of the plaintiff in error that such funds could not be traced into cash in the vaults, and that the case is ruled by the provisions of Section 710-165 of the General Code.
These further contentions become of greater moment, however, when we turn to consider the claim of the University of Dayton.
That the parties intended to create a trust in that case is clear beyond question. Their rights and duties were set forth in an elaborate "Mortgage Deed of Trust" which conveyed to the bank the legal title of the property given to secure the bonds, provided in detail for the periodical payment of the money required for interest and bond maturities, and further provided that for its services in the handling of this money the bank should be paid a percentage fee to come out of such funds themselves.
If, as we have said, these claimants must, to succeed, establish ownership of the funds in question, it follows, as a corollary, that, before their claims for preference can be allowed, they must be able to trace the funds to which title is asserted into the assets of the bank at the time of closing.
The plaintiff in error insists, however, that unless the check drawn upon the commercial department of the bank and deposited in its trust department can be traced into the cash found in the bank's vaults at the time of its suspension, the claim for preference must fail. It is pointed out that the university at the beginning of the transaction had a checking account, was a creditor of the bank for a given sum; that it drew its check upon that account, which check it deposited with the trust department; that the bank's books thereupon showed the acknowledgment of a lesser obligation to the university upon the checking account and a correspondingly greater one by the trust department; that the subsequent transfer of this credit by the trust department back to the commercial department only continued the same process, and that in the end there had been neither an augmentation of the cash in the hands of the bank, nor an exchange of the value, represented by the check, for title to any actual money. On the contrary, it is insisted that the net result of this entire series of acts was to leave the bank under a duty in personam to pay the number of dollars called for by the check (less the amount of its commission).
One cannot, it is pointed out, be a trustee of his own duty.
This line of argument at first blush seems logically impeccable. Yet, in its implications it clearly "proves too much." Followed out as relentlessly as the plaintiff in error would have us follow it here, it would lead to a situation where a bank, acting as trustee, would have to perform its duties with physically segregated quantities of cash, to which ownership in equity could definitely attach. Such a course, while actually possible, is practically never pursued because of its inconvenience. Instead, checks and other instruments are frequently treated "as if" they were cash, or tangible property, and the law, we believe, permits some latitude in this respect. The university in this case could have cashed its check at the commercial department for dollars and could have put those dollars into the trust account. But was it bound to do so?
"Under modern banking conditions, the rule as stated should be held to apply to cash items received by a bank under a trust agreement as well as to cash so received. Such an item for all practical purposes differs not at all from currency. It increases the cash funds of the bank just as much as does a deposit of currency. If the bank cashes it and covers the proceeds into its vaults, the augmentation, of course, is apparent. If, however, the bank treats the cash item as its own and uses it for other banking purposes, such as payment of debts or creating credits in other banks, the cash in the vaults of the bank is relieved to that extent; and, where a trust with respect to a cash item is involved, it must be presumed that the intention was that cash remaining in the vaults of the bank is to be substituted under the trust. There is no more reason, in such case, for refusing to declare a trust on the funds remaining than there would be to refuse to do so because the bank had paid out the identical currency which the cestui que trust had placed in its possession. In other words, we think that a cash item, which is accepted by a bank as cash and fulfills for it the functions of cash, must be treated as cash in determining whether the cash remaining in the bank is subject to a trust because of the commingling of trust funds." Schumacher v. Harriett, 52 F.2d 817, 819, 82 A. L. R., 1, 6.
"Applying these rules, there can be no doubt but there was an express demand on one side, and consent on the other, that this check should be placed to the credit of the plaintiffs as a deposit. The legal effect of the transaction was precisely the same as though the money had been first paid to the plaintiffs and then deposited." American Exchange National Bank v. Gregg, 138 Ill. 596, 600, 28 N.E. 839, 32 Am. St. Rep., 171, 174.
"Where, therefore, the holder of a check, or other genuine instrument representing a fixed sum, delivers it to a bank and receives an unqualified credit as for a definite sum of money, the transaction is equivalent to an actual deposit of so much cash as of the date of the credit." Wasson, Treasurer, v. Lamb, Assignee, 120 Ind. 514, 517, 22 N.E. 729, 16 Am. St. Rep., 342, 345, 6 L.R.A., 191, 192.
If the reasoning of these courts is correct it would seem to follow that a trust may be established without tracing the check deposited into actual cash in the vaults. If the value represented by the check can be followed through the bank's books into assets belonging to the bank when it is closed, the requirements of the modern law are satisfied.
In 5 Ohio Jurisprudence, 509, Section 182, it is said:
"Under earlier holdings the mingling of trust funds, with money of the trustee, was held to defeat the owner's title and compel him to stand as a mere unsecured creditor, upon the theory that money was not earmarked, and therefore could not be recovered in specie. But this view seems no longer to obtain in Ohio. It is not, the courts say, the identical dollars that may be pursued, any more than it is the identical grains of wheat put in a warehouse or elevator that the depositor may follow, but the equivalent in dollars; the rule now is that, where a bank mingles trust money with its own funds, money paid out from such funds for its own purposes will be presumed to have been paid from its own money and not from the trust fund, in a situation where the mingled fund has not been reduced at any time below the amount of the trust fund; this presumption rests upon the idea that the amounts drawn out from time to time were of moneys which the bank had a right to expend in its own business, and that the balance which remained included the trust fund, which the bank had no right to use, and the use of which would have been a violation of its trust, which will not be presumed in the absence of evidence to that effect." Smith et al., Trustees, v. Fuller et al., Assignees, 86 Ohio St. 57, 99 N.E. 214, L.R.A. 1916C, 6, Ann. Cas., 1913D, 387; Orme and Okey, Receivers, v. Baker, 74 Ohio St. 337, 78 N.E. 439, 113 Am. St. Rep., 968.
In the instant case the proceeds of the check deposited by the university can be traced through the books of the bank into an account in the commercial department called "Uninvested Trust Funds." At the time the bank closed there was cash in its vaults more than sufficient to cover the entire uninvested trust funds account, and more than the aggregate of all preferred claims. There is no claim that the cash at any time was less than the aggregate of the uninvested trust funds. In our opinion, therefore, the difficulties of tracing in this case would not be insuperable.
During the entire period of this transaction, however, Section 710-165 of the General Code of Ohio read as follows:
"No property or securities received or held by any trust company in trust shall be mingled with the investments of the capital stock or other properties belonging to such trust company or be liable for its debts or obligations. Moneys pending distribution or investment may be treated as a deposit in the trust department, or may be deposited in any other department of the bank, subject in other respects to the provisions of law relating to deposit of trust funds by trustees and others."
As we have already seen, the proceeds of the check in question were deposited by the trust department to its credit in the commercial department of the bank and so remained until the bank was taken over for liquidation.
In McDonald, Admr., v. Fulton, Supt. of Banks, supra, decided by this court on June 8, 1932, the Cummings Trust Company having in its possession as administrator the funds of an estate, deposited said funds in its commercial department; the trust company failed, and McDonald, who was appointed administrator de bonis non in place of the insolvent institution, claimed a preference over general depositors in the distribution of the assets. The essential facts are, therefore, on all fours with those in the instant case. Section 710-165 of the General Code, as set forth above, was then in force, and this court, considering its effect upon the facts in the McDonald case, held:
"1. The provisions of Section 710-165, General Code, authorize a bank organized under the laws of this state, with powers of a trust company, to make a general deposit of money received by it as trustee and held temporarily pending investment or distribution, in the commercial or other department of such bank, unless otherwise expressly provided by the trust agreement creating and controlling such trust.
"2. As to such funds the relation of the bank and trustee is as debtor and creditor, and funds thus deposited may be used by the bank in its general business as other assets.
"3. The rights of the trustee, with reference to the funds so deposited, are no greater than or different from those of other general depositors, and upon liquidation of the bank they all share proportionately in the distribution of the assets."
Section 710-165, General Code, as it stood in 1931, must be read into the contract under which the deposit of the University of Dayton was made. The effect of the statute, as it then read, has been determined by this court in the McDonald case. That the statute has since been amended can be of no concern to us here.
As construed in the McDonald case, that statute authorized the bank to put these funds into the commercial department unless in the trust agreement there was an express provision to the contrary. We have been able to find no such express provision. Such funds, when so deposited in the commercial department "may be used by the bank in its general business as other assets." In such case there can be no preference in distribution.
We are unable to perceive the force of the suggestion in the brief of the defendants in error that, Section 710-165, General Code, as thus construed, contravenes the provisions of Section 26, Article II of the Constitution of Ohio: "All laws, of a general nature, shall have a uniform operation throughout the state." The statute applies in terms to all trust companies. As stated in Dillon v. City of Cleveland, 117 Ohio St. 258, 272, 158 N.E. 606: "It is settled beyond argument that Section 26 of Article II permits reasonable classifications, and the section is not violated if laws have a uniform operation upon all subjects within a class thus reasonably established."
Had the amendment of Section 710-165, General Code, become effective in time to have applied to the transaction in the case of the University of Dayton the result might have been otherwise. We must, however, take the law as the Legislature gave it. Under the law as it stood in 1931 there could be no preference.
For the foregoing reasons the judgment of the Court of Appeals in each of the cases here considered must be reversed.
Judgments reversed.
STEPHENSON, MATTHIAS and WILKIN, JJ., concur.
ZIMMERMAN, J., concurs in the judgment in cause No. 24692, but dissents from the judgment in cause No. 24734.
WEYGANDT, C.J., and JONES, J., dissent.