Opinion
No. 645
Decided April 9, 1946.
Trust for benefit of creditors — Powers of trustee — Sale of trust property — Acceptance of promissory note in payment — Duty of person accepting trustee's note — Presumption sale to be made for cash — Transfer of legal title to note by endorsement.
1. A person accepting a note, the maker of which is a trustee, is obligated to learn the authority and power of the trustee to execute such a note.
2. If the instrument authorizing a trustee to make a sale is silent as to the manner of sale, whether for cash or on credit, the presumption is that it shall be made for cash.
3. A trustee for benefit of creditors, acting under a trust deed giving the trustee absolute control of the trust property during the life of the trust and power to administer the property so as to accomplish the purposes of the trust, has authority to sell the property of the trust and, where a custom prevails, take a negotiable promissory note for the purchase price, endorse and transfer the legal title to the note and thereby give to the transferee the right to sue on the note in its own name.
APPEAL: Court of Appeals for Darke county.
Mr. George W. Porter, for appellee.
Mr. Walter F. Rhynard, for appellant.
This is an appeal from a money judgment in favor of plaintiff, based on a directed verdict after the submission of the evidence of both parties upon trial of the cause.
Plaintiff's action was upon a promissory note dated December 13, 1930, payable to the order of Allen Foureman of Greenville, Ohio, for the sum of $91.30, signed by W.B. Albright and endorsed to plaintiff bank by C. Foureman, trustee of Allen Foureman.
The issue joined raised the question of the legal right of plaintiff to maintain its action on the note under the facts and particularly upon the endorsement of C. Foureman, trustee of Allen Foureman, who, on the date the note was given, was acting as trustee of Allen Foureman under a trust deed made by Allen Foureman to Cornelius Foureman.
Defendant by answer set up several defenses, the effect of all of which was to question the validity of the note and particularly its ownership under the endorsement appearing thereon. The trial judge directed a verdict. The motion for new trial and the assignment of errors raise substantially the same questions as set up in the answer of defendant, all of which go to the ultimate question of the right of the bank to maintain its action on the note under the facts appearing.
We are of opinion that there is but one legal question of consequence presented, namely, the right of the trustee to sell the personal property for the purchase price of which the note in question was given and to take the note therefor instead of cash. The plaintiff bank was obligated to learn the authority and power of the trustee to take the note and to make the endorsement. Holmes, Booth Hayden v. Hayes, 52 Ohio St. 617; Stone v. Davenport, 1 W.L.B., 102, 7 Dec. Rep., 83; Mutual Mfg. Co. v. Divine, 21 O.D. (N.P.), 802, 9 N.P. (N.S.), 602; Anglo-South American Bank v. Star Drilling Machine Co., 20 O.D. (N.P.), 200, 9 N.P. (N.S.), 449.
By the terms of the trust instrument, it fairly appears that Allen Foureman transferred the legal title to real estate and personal property, therein described, to Alonzo Foureman for the purpose of paying the creditors of Allen Foureman, and to accomplish this the trustee was given absolute control of the property during the life of the trust and power to administer the property so as to accomplish the purposes of the trust. It is obvious that the trustee was given power to sell either privately or by vendue the personal property if thereby he could better assure the payment of the creditors of the maker of the trust. Ordinarily, it may be said that if an instrument is silent as to the manner of sale, whether cash or on credit, it shall be made for cash. 1 Restatement of the Law of Agency, 166, Section 71. However, here was an instrument authorizing the management, control and sale of farm property which was sold at public auction. It is testified and undenied that it was customary practice at such sales to accept notes for the purchase price of personal property. It is probable then, that by implication, this instrument authorized such a form of sale which was in accord with the business practice in the vicinity in which the sale was conducted.
Under all the circumstances appearing and in the light of the trust instrument, we are not prepared to say that the trial judge held erroneously on this determinative question.
The judgment will be affirmed.
Judgment affirmed.
WISEMAN and MILLER, JJ., concur.